From e6a66f5d47731d54ba48e78dd7a5cb9056487560 Mon Sep 17 00:00:00 2001 From: Siddharth Date: Sun, 5 May 2024 07:18:58 +0530 Subject: [PATCH] Inference obtained from LLM --- API_jsontotxt.py | 63 + API_request.py | 58 - feature_extraction.py | 91 ++ lemmatization.py | 60 + requirements.txt | 3 +- src/analysis/llm_analysis.py | 59 + src/analysis/output_combine.py | 45 + .../pre-analysis_combined/AAPL_combined.txt | 1095 +++++++++++++++++ .../pre-analysis_combined/GOOGL_combined.txt | 249 ++++ .../pre-analysis_combined/MSFT_combined.txt | 1052 ++++++++++++++++ .../full-submission_features.json | 20 + .../full-submission_features.json | 21 + .../full-submission_features.json | 21 + .../full-submission_features.json | 19 + .../full-submission_features.json | 18 + .../full-submission_features.json | 19 + .../full-submission_features.json | 18 + .../full-submission_features.json | 1 + .../full-submission_features.json | 1 + .../full-submission_features.json | 1 + 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manage API rate limit + +def make_request(text): + prompt = """Generate a detailed financial analysis for the provided data. Please structure your response in a clear and organized manner...""" + headers = { + "Authorization": f"Bearer {OPENROUTER_API_KEY}", + "Content-Type": "application/json" + } + data = json.dumps({ + "model": "mistralai/mistral-7b-instruct:free", + "messages": [{"role": "user", "content": text + prompt}], + "max_tokens": 4000 # Control the maximum output length + }) + response = requests.post(API_URL, headers=headers, data=data) + if response.status_code == 200: + return response.json() + else: + print(f"Failed to fetch data: {response.status_code}, {response.text}") + return None + +def save_response(response, output_path): + os.makedirs(output_path.parent, exist_ok=True) # Ensure the output directory exists + with open(output_path, 'w', encoding='utf-8') as f: + if 'choices' in response and len(response['choices']) > 0: + text = response['choices'][0].get('message', {}).get('content', '') + f.write(text) + print(f"Response saved to {output_path}") + +def process_json_files(): + input_path = Path(CLEANED_TEXT_DIR) + output_path_root = Path(OUTPUT_DIR) + + for path in input_path.rglob('*.json'): + relative_path = path.relative_to(input_path) + output_path = output_path_root / relative_path + output_path = output_path.with_suffix('.txt') # Ensure the file extension is .txt for plain text + + # Check if the response file already exists + if not output_path.exists(): + print(f"Processing file: {path}") + with open(path, 'r', encoding='utf-8') as file: + data = json.load(file) + text_content = ' '.join([str(value) for key, value in data.items() if isinstance(value, str)]) + response = make_request(text_content) + if response: + save_response(response, output_path) + time.sleep(REQUEST_INTERVAL) # Respect the API rate limit + else: + print(f"Skipping {path} as output already exists.") + +if __name__ == '__main__': + process_json_files() diff --git a/API_request.py b/API_request.py deleted file mode 100644 index a2bd2c7..0000000 --- a/API_request.py +++ /dev/null @@ -1,58 +0,0 @@ -import os -import requests -import json -from pathlib import Path -import time - -# Constants -API_URL = "https://openrouter.ai/api/v1/chat/completions" -OPENROUTER_API_KEY = 'API-KEY-HERE' # Secure this in your environment or a config file -CLEANED_TEXT_DIR = 'src/data/cleaned-sec-edgar-filings' -OUTPUT_DIR = 'src/data/output-responses' -REQUEST_INTERVAL = 60 # seconds to wait between requests to manage API rate limit - -def make_request(text): - prompt = """ - "Please provide a comprehensive financial analysis including year-over-year growth, key financial ratios, and a detailed discussion on expenses and revenue sources. Compare these figures to industry averages and discuss any significant deviations." - """ - headers = { - "Authorization": f"Bearer {OPENROUTER_API_KEY}", - "Content-Type": "application/json" - } - data = json.dumps({ - "model": "mistralai/mistral-7b-instruct:free", - "messages": [{"role": "user", "content": text + prompt}] - }) - response = requests.post(API_URL, headers=headers, data=data) - if response.status_code == 200: - return response.json() - else: - print(f"Failed to fetch data: {response.status_code}, {response.text}") - return None - -def save_response(response, filename): - """Save the response data to a JSON file.""" - os.makedirs(OUTPUT_DIR, exist_ok=True) # Ensure the output directory exists - file_path = os.path.join(OUTPUT_DIR, filename) - with open(file_path, 'w', encoding='utf-8') as f: - json.dump(response, f, indent=4) - print(f"Response saved to {file_path}") - -def process_text_files(): - pathlist = Path(CLEANED_TEXT_DIR).rglob('*.txt') # Find all .txt files recursively - for path in pathlist: - file_path = str(path) - print(f"Processing file: {file_path}") - with open(file_path, 'r', encoding='utf-8') as file: - text_content = file.read() - - response = make_request(text_content) - if response: - print("Received response:", response) - # Create a filename from the path to save the response - response_filename = f"{path.stem}_response.json" - save_response(response, response_filename) - time.sleep(REQUEST_INTERVAL) # Respect the API rate limit - -if __name__ == '__main__': - process_text_files() diff --git a/feature_extraction.py b/feature_extraction.py new file mode 100644 index 0000000..96e17ac --- /dev/null +++ b/feature_extraction.py @@ -0,0 +1,91 @@ +import os +import re +from pathlib import Path +import json + +# Define the input and output directories +input_dir = 'src/data/processed-numeric-contexts' +output_dir = 'src/data/feature' + +def extract_features(text): + """ Extracts financial terms and their contextual data from the text """ + features = {} + # Define patterns for each feature of interest + patterns = { + 'revenue': r'\brevenue\b[\s\S]{0,500}', + 'expenses': r'\bexpenses\b[\s\S]{0,500}', + 'net_income': r'\bnet income\b[\s\S]{0,500}', + 'assets': r'\bassets\b[\s\S]{0,500}', + 'liabilities': r'\bliabilities\b[\s\S]{0,500}', + 'equity': r'\bequity\b[\s\S]{0,500}', + 'cash_flow': r'\bcash flow\b[\s\S]{0,500}', + 'operating_margin': r'\boperating margin\b[\s\S]{0,500}', + 'gross_margin': r'\bgross margin\b[\s\S]{0,500}', + 'ebitda': r'\bebitda\b[\s\S]{0,500}', + 'accumulated_depreciation': r'\baccumulated depreciation\b[\s\S]{0,500}', + 'capital_expenditure': r'\bcapital expenditure\b[\s\S]{0,500}', + 'debt': r'\bdebt\b[\s\S]{0,500}', + 'share_repurchase': r'\bshare repurchase\b[\s\S]{0,500}', + 'dividend_payout': r'\bdividend payout\b[\s\S]{0,500}', + 'financial_ratios': r'\b(debt-to-equity ratio|return on equity)\b[\s\S]{0,500}', + 'earnings_per_share': r'\bearnings per share\b[\s\S]{0,500}', + 'tax_rate': r'\btax rate\b[\s\S]{0,500}', + 'segment_revenue': r'\bsegment revenue\b[\s\S]{0,500}', + 'geographic_information': r'\bgeographic\b[\s\S]{0,500}', + 'investment_gains_losses': r'\b(investment gains|investment losses)\b[\s\S]{0,500}', + 'regulatory_changes': r'\bregulatory changes\b[\s\S]{0,500}', + 'legal_issues': r'\blegal issues\b[\s\S]{0,500}', + 'accrued_liabilities': r'\baccrued liabilities\b[\s\S]{0,500}', + 'common_stock': r'\bcommon stock\b[\s\S]{0,500}', + 'capital_stock': r'\bcapital stock\b[\s\S]{0,500}', + 'subsequent_events': r'\bsubsequent events\b[\s\S]{0,500}', + 'noncurrent_assets': r'\bnoncurrent assets\b[\s\S]{0,500}', + 'fair_value_measurements': r'\bfair value measurements\b[\s\S]{0,500}', + 'level_1_assets': r'\blevel 1 assets\b[\s\S]{0,500}', + 'level_2_assets': r'\blevel 2 assets\b[\s\S]{0,500}', + 'level_3_assets': r'\blevel 3 assets\b[\s\S]{0,500}', + 'debt_securities': r'\bdebt securities\b[\s\S]{0,500}', + 'bank_deposits': r'\bbank deposits\b[\s\S]{0,500}', + 'corporate_debt': r'\bcorporate debt\b[\s\S]{0,500}', + 'government_bonds': r'\bgovernment bonds\b[\s\S]{0,500}', + 'mortgage_backed_securities': r'\bmortgage-backed securities\b[\s\S]{0,500}', + 'asset_backed_securities': r'\basset-backed securities\b[\s\S]{0,500}', + 'hedging_activities': r'\bhedging activities\b[\s\S]{0,500}', + 'foreign_exchange_contracts': r'\bforeign exchange contracts\b[\s\S]{0,500}', + 'designated_hedging': r'\bdesignated hedging\b[\s\S]{0,500}', + 'nondesignated_hedging': r'\bnondesignated hedging\b[\s\S]{0,500}', + 'cash_flow_hedges': r'\bcash flow hedges\b[\s\S]{0,500}', + 'derivative_instruments': r'\bderivative instruments\b[\s\S]{0,500}', + 'geographic_concentration_risk': r'\bgeographic concentration risk\b[\s\S]{0,500}' + } + + for key, pattern in patterns.items(): + matches = re.findall(pattern, text, re.IGNORECASE) + if matches: + features[key] = ' '.join(matches) + return features + +def process_files(): + """ Process each file in the directory, extract features, and save them in a structured format """ + for root, dirs, files in os.walk(input_dir): + for file in files: + if file.endswith('.txt'): + file_path = os.path.join(root, file) + with open(file_path, 'r', encoding='utf-8') as f: + text = f.read() + + features = extract_features(text) + + # Define the output path + relative_path = os.path.relpath(root, input_dir) + output_path = os.path.join(output_dir, relative_path) + os.makedirs(output_path, exist_ok=True) + + output_file_path = os.path.join(output_path, f'{Path(file).stem}_features.json') + with open(output_file_path, 'w', encoding='utf-8') as f: + json.dump(features, f, indent=4) + + print(f'Features extracted and saved for {file}') + +if __name__ == '__main__': + process_files() diff --git a/lemmatization.py b/lemmatization.py new file mode 100644 index 0000000..e88b6f0 --- /dev/null +++ b/lemmatization.py @@ -0,0 +1,60 @@ +import nltk +import os +from nltk.tokenize import word_tokenize +from nltk.stem import WordNetLemmatizer +from pathlib import Path +import re + +# Ensure you have the necessary NLTK resources downloaded +nltk.download('punkt') +nltk.download('wordnet') + +def process_text(text): + """Apply lemmatization to the text.""" + tokens = word_tokenize(text) + lemmatizer = WordNetLemmatizer() + lemmatized = [lemmatizer.lemmatize(token) for token in tokens] + return ' '.join(lemmatized) + +def extract_numeric_contexts(text, window_size=5): + """Extract context windows around numeric data in the text.""" + tokens = word_tokenize(text) + numeric_contexts = [] + numeric_regex = r'\d+[\d,]*\.?\d*' + + for i, token in enumerate(tokens): + if re.match(numeric_regex, token): + left_context = tokens[max(i - window_size, 0):i] + right_context = tokens[i + 1:min(i + window_size + 1, len(tokens))] + context = left_context + [token] + right_context + numeric_contexts.append(' '.join(context)) + + return ' '.join(numeric_contexts) + +def process_files(input_dir, output_dir): + """Process files from input_dir and save processed contexts to output_dir, mirroring the directory structure.""" + input_path = Path(input_dir) + for path in input_path.rglob('*.txt'): + relative_path = path.relative_to(input_path) + output_path = Path(output_dir) / relative_path + + print(f"Processing file: {path}") + with open(path, 'r', encoding='utf-8') as file: + text_content = file.read() + + # Process text to get lemmatized and extract numeric contexts + lemmatized_text = process_text(text_content) + contexts = extract_numeric_contexts(lemmatized_text) + + # Ensure the output directory exists + output_path.parent.mkdir(parents=True, exist_ok=True) + with open(output_path, 'w', encoding='utf-8') as file: + file.write(contexts) + print(f"Processed contexts saved to {output_path}") + +# Define paths +CLEANED_TEXT_DIR = 'src/data/cleaned-sec-edgar-filings' +OUTPUT_DIR = 'src/data/processed-numeric-contexts' + +if __name__ == '__main__': + process_files(CLEANED_TEXT_DIR, OUTPUT_DIR) diff --git a/requirements.txt b/requirements.txt index 5a3f49a..d3d3b30 100644 --- a/requirements.txt +++ b/requirements.txt @@ -3,4 +3,5 @@ flask sec_edgar_downloader matplotlib plotly -bs4 \ No newline at end of file +bs4 +nltk \ No newline at end of file diff --git a/src/analysis/llm_analysis.py b/src/analysis/llm_analysis.py new file mode 100644 index 0000000..030ff9b --- /dev/null +++ b/src/analysis/llm_analysis.py @@ -0,0 +1,59 @@ +# import requests +# import json +# from pathlib import Path + +# # Constants +# API_URL = "https://openrouter.ai/api/v1/chat/completions" +# OPENROUTER_API_KEY = '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' + +# INPUT_DIR = 'src/analysis/pre-analysis_combined' +# CSV_OUTPUT_DIR = 'src/analysis/csv' +# CODE_OUTPUT_DIR = 'src/analysis/code' +# TEXT_OUTPUT_DIR = 'src/analysis/text' + +# def make_api_call(text_content): +# prompt = f""" +# Analyze the financial data provided and give a json file containing csv,python and text: +# 1. Generate a CSV file with key financial metrics for plotting. +# 2. Provide Python code for creating plots and animations based on the CSV. +# 3. Provide key financial insights in text format that can be displayed on a web page. +# """ +# headers = { +# "Authorization": f"Bearer {OPENROUTER_API_KEY}", +# "Content-Type": "application/json" +# } +# data = json.dumps({ +# "model": "nousresearch/nous-capybara-7b:free", +# "messages": [ +# {"role": "user", "content": text_content + prompt} +# ] +# }) +# response = requests.post(API_URL, headers=headers, json=data) +# return response.json() + +# def save_output(data, output_path, file_type): +# Path(output_path).mkdir(parents=True, exist_ok=True) +# file_path = Path(output_path) / f"{file_type}.txt" +# with open(file_path, 'w', encoding='utf-8') as file: +# file.write(data) +# print(f"Output saved to {file_path}") + +# def process_files(): +# input_path = Path(INPUT_DIR) +# for text_file in input_path.rglob('*.txt'): +# print(f"Processing: {text_file}") +# with open(text_file, 'r', encoding='utf-8') as file: +# text_content = file.read() + +# response = make_api_call(text_content) +# if response: +# # Assuming the API returns a structured JSON with keys for different types of outputs +# if 'csv' in response: +# save_output(response['csv'], CSV_OUTPUT_DIR, text_file.stem) +# if 'code' in response: +# save_output(response['code'], CODE_OUTPUT_DIR, text_file.stem) +# if 'text' in response: +# save_output(response['text'], TEXT_OUTPUT_DIR, text_file.stem) + +# if __name__ == '__main__': +# process_files() diff --git a/src/analysis/output_combine.py b/src/analysis/output_combine.py new file mode 100644 index 0000000..b6112ce --- /dev/null +++ b/src/analysis/output_combine.py @@ -0,0 +1,45 @@ +import os +from pathlib import Path + +# Define the directory containing the output text files +output_dir = Path('src/data/output-responses') +combined_dir = Path('src/analysis/pre-analysis_combined') +combined_dir.mkdir(exist_ok=True) # Ensure the combined directory exists + +def combine_firm_files(): + # Dictionary to hold combined texts for each firm + firm_texts = {} + + # Traverse through all text files in the output directory + for file_path in output_dir.rglob('full-submission_features.txt'): + # Debugging: Print the path to see what's being captured + print(f"Current file path: {file_path}") + print(f"Path parts: {file_path.parts}") + + # Extract the firm name based on the file structure + # src/data/output-responses//.../full-submission_features.txt + # Ensure this index corresponds correctly to the firm name part in the path + if len(file_path.parts) >= 5: # Check there are enough parts + firm_name = file_path.parts[3] # Index where the firm name appears, adjusted if needed + else: + continue # Skip if the path is not deep enough to contain a firm name + + # Read the content of the file + with open(file_path, 'r', encoding='utf-8') as file: + text = file.read() + + # Append the text to the corresponding firm's entry in the dictionary + if firm_name in firm_texts: + firm_texts[firm_name] += "\n" + text + else: + firm_texts[firm_name] = text + + # Write combined texts to new files, one per firm + for firm_name, text in firm_texts.items(): + combined_file_path = combined_dir / f"{firm_name}_combined.txt" + with open(combined_file_path, 'w', encoding='utf-8') as file: + file.write(text) + print(f"Combined file created for firm {firm_name}: {combined_file_path}") + +if __name__ == '__main__': + combine_firm_files() diff --git a/src/analysis/pre-analysis_combined/AAPL_combined.txt b/src/analysis/pre-analysis_combined/AAPL_combined.txt new file mode 100644 index 0000000..5cbe218 --- /dev/null +++ b/src/analysis/pre-analysis_combined/AAPL_combined.txt @@ -0,0 +1,1095 @@ + Financial Overview: + +* Total revenue for 2017 was $ 228,433,000,277, an increase of 54% from the previous year. +* Net income for 2017 was $ 53,046,000,816, a decrease of 49% from the previous year. +* Gross margin for 2017 was 38%, an increase of 2% from the previous year. + +Operational Efficiency: + +* Operating margin for 2017 was 19%, lower than the industry average but an improvement from the previous year. +* Cost of sales decreased by 48% to $ 192,079,451,004, while operating expenses increased by 50% to $ 77,674,021,060, resulting in a net decrease in operating income. + +Liquidity and Solvency: + +* Current ratio for 2017 was 4.6:1, still above the industry average but slightly lower than the previous year. +* Quick ratio for 2017 was 4.2:1, a slight decrease from the previous year. +* Debt-to-equity ratio for 2017 was 0.2:1, largely due to cash holdings and lower than the industry average. +* Interest coverage ratio for 2017 was 60.5:1, a significant improvement from the previous year. + +Cash Flow Analysis: + +* Cash flow from operations for 2017 was $ 17,434,000,136, largely due to higher sales and better inventory management. +* Cash flow from investing activities for 2017 was $ 3,226,486,467, mainly driven by capital expenditures and stock buybacks. +* Cash flow from financing activities for 2017 was $ -4,422,366,439, primarily due to interest and taxes payments and dividend payouts. + +Investment and Future Outlook: + +* Apple Inc. has made significant investments in research and development in recent years, including the development of new products and technologies such as AR and VR. +* Management has announced plans to invest $ 20 billion in content and software development by 2021, with the goal of expanding Apple’s ecosystem across various platforms and markets. +* The company is expected to continue to face intense competition from both established players and new entrants in various markets, particularly in areas such as smartphones, PCs, and streaming services. + +Risks and Opportunities: + +* One key risk facing Apple is its dependence on a few key products, such as the iPhone and MacBook, which could negatively impact revenue growth and profitability if industry trends shift. +* Another potential risk is increased geopolitical tensions and trade disputes, which could negatively impact the company’s global operations and profit margins. +* However, Apple also has several emerging opportunities in areas such as healthcare, augmented reality, and autonomous driving, which could provide new revenue streams and growth opportunities in the future. + Financial Overview: + + + +- Total revenue increased 24% from $ 217.9 billion in 2016 to $ 270.2 billion in 2017. + +- Net income increased 13% from $ 7.8 billion in 2016 to $ 8.8 billion in 2017. + +- Gross profit increased 20% from $ 139.3 billion in 2016 to $ 166.2 billion in 2017. + +- Gross margin increased by 0.2 percentage points from 62.3% in 2016 to 62.5% in 2017. + + + +Noteable trends include the continued growth in service revenue, driven by Apple's cloud-based services such as iTunes and the App Store. However, the company also faced a decline in hardware sales, particularly in the Mac and iPad segments. Additionally, Apple saw a significant increase in expenses related to research and development, as well as foreign currency risks due to declining exchange rates. + + + +Operational Efficiency: + + + +- Operating margin trended downwards by 2 percentage points from 22.6% in 2016 to 20.6% in 2017, falling below the industry average. + +- Point-of-sale equipment sales represented around 3% of total revenue, significant but relatively muted compared to more traditional retail sources. + + + +Cost management effectiveness was overall good, with a focus on using automation to reduce costs and improve efficiency. However, labor costs increased by 8.2% in 2017, driven by higher wages and benefits. + + + +Liquidity and Solvency: + + + +- Current ratio increased from 1.1:1 in 2016 to 2.6:1 in 2017, indicating a significant improvement in liquidity. + +- Quick ratio also improved from 0.9:1 in 2016 to 1.4:1 in 2017, demonstrating strong control over current assets. + +- Debt-to-equity ratio decreased from 43.3% in 2016 to 32.5% in 2017, indicating a reduction in debt. + +- Interest coverage ratio increased from 5.9:1 in 2016 to 6.6:1 in 2017, indicating an increase in safety. + + + +Cash Flow Analysis: + + + +- Cash flow from operations increased from around $ 110.5 billion in 2016 to $ 120.4 billion in 2017, reflecting higher operating profits. + +- Cash flow from investing increased from $ 6.6 billion in 2016 to $ 8.8 billion in 2017, driven by increased spending on property, plant, and equipment. + +- Cash flow from financing decreased from $ 38.8 billion in 2016 to $ 26.3 billion in 2017, as the company repaid a portion of its long-term debt. + + + +Investment and Future Outlook: + + +- The company plans to continue investing in its services platform, with a focus on expanding payment options and enhancing the overall customer experience. + +- Apple has also announced plans to invest in advancing its artificial intelligence capabilities, including the acquisition of AI startup Dnora. + +- Management expects net sales to grow 20-25% year-over-year, driven by increasing sales of Mac, iPad, iPhone, and iPhone-related services. + + + +Risks and Opportunities: + + + +- Key risks facing the company include the ongoing trade tensions with China, which could impact its supply chain and inflate manufacturing costs. Additionally, increased competition from other smartphone manufacturers, such as Samsung and Microsoft, could also impact sales. + +- Emerging opportunities include the expansion of Apple's payment platform and the continued growth of its services division. Additionally, the company's ongoing research and development efforts in areas such as artificial intelligence and virtual reality could lead to significant breakthroughs and new revenue streams. + financial statement analysis: + + + +1. Financial Overview: + + + +- Revenue: total revenue for 2019 was $ 243,574 million, an increase of 4.4% from the previous year. + +- Net Income: net income for 2019 was $ 83,071 million, an increase of 6.7% from the previous year. + +- Gross Margin: gross margin for 2019 was 37.7%, an increase of 1.1% from the previous year. + + + +2. Operational Efficiency: + + + +- Operating Margin: operating margin for 2019 was 5.9%, which is lower than the industry average. + +- Cost Management Effectiveness: while cost management initiatives were in place, the company faced challenges in controlling costs, particularly related to research and development expenses. + + + +3. Liquidity and Solvency: + + + +- Current Ratio: the current ratio for 2019 was 1.1, indicating that the company had enough short-term assets to cover its short-term liabilities. + +- Quick Ratio: the quick ratio for 2019 was 0.8, indicating that the company had enough current assets or inventories to cover its short-term liabilities without counting accounts receivable. + +- Debt-to-Equity Ratio: the debt-to-equity ratio for 2019 was 0.88, which is higher than the industry average. + +- Interest Coverage Ratio: the interest coverage ratio for 2019 was 3.36, indicating that the company had enough earnings before interest and taxes (EBIT) to cover its interest expenses. + + + +4. Cash Flow Analysis: + + + +- Cash from Operations: the company generated $ 43,828 million in cash from operations. + +- Cash from Investing: the company used $ 68,337 million in cash from investing activities. + +- Cash from Financing: the company received $ 2,280 million in cash from financing activities. + +- Cash Holdings: at the end of 2019, the company had $ 5,582 million in cash and cash equivalents. + + + +5. Investment and Future Outlook: + + + +- Investments: the company did not make any major investments during the year. + +- Mergers and Acquisitions: the company did not engage in any mergers or acquisitions during the year. + + + +6. Risks and Opportunities: + + + +- Key Risks: key risks faced by the company include political and economic instability, changes in consumer preferences, and technological advancements that could make the company's products obsolete. + +- Opportunities: opportunities for the company include expanding into new markets, expanding its product offerings, and investing in artificial intelligence to enhance its products and services. + Financial Overview: + +* Apple Inc.'s total revenue for 2020 was $ 274.5 billion, representing a year-over-year increase of 5.1%. +* The company's net income for 2020 was $ 113.1 billion, representing a year-over-year increase of 37.3%. +* The gross margin for 2020 was 38.5%, compared to 39.0% in 2019. + +Operational Efficiency: + +* Apple Inc.'s operating margin in 2020 was 30.8%, which is above the industry average. +* The company's operating margin has decreased compared to 2019, primarily due to increased operating expenses. + +Liquidity and Solvency: + +* The company's current ratio was 1.7:1 and quick ratio was 1.6:1 in 2020, indicating a decent level of liquidity. +* Apple Inc.'s debt-to-equity ratio was 0.73, indicating that the company relies heavily on debt financing. +* The interest coverage ratio was 57.0 in 2020, which is well above the industry average. + +Cash Flow Analysis: + +* The company's cash flow from operations was $ 66.5 billion in 2020, indicating a strong operational performance. +* The company's cash flow from investing was negative $ 10.1 billion, primarily due to capital expenditures. +* The company's cash flow from financing was $ 89.3 billion, indicating strong net cash inflow. + +Investment and Future Outlook: + +* Apple Inc. made several key investments in development and deployment of new products. +* The company's management outlook became more optimistic in 2020, citing strong sales performance and solid execution on product launches. + +Risks and Opportunities: + +* The ongoing COVID-19 pandemic poses risks to global supply chains and demand, particularly for the company's consumer products. +* Rapid technological changes in various fields provide emerging opportunities for the company's continued growth. + 1. **Financial Overview**: + + - In fiscal year 2021, Apple Inc. generated a total revenue of $274.5 billion, representing a 19% increase compared to the previous year. + - The company's net income was $97.3 billion, a 42% increase from the 2020 net income of $68.5 billion. + - The gross margin for Apple remained strong at 42.4%, a slight decrease from the 43.1% achieved in fiscal year 2020. + +2. **Operational Efficiency**: + + - Operating margin for Apple was 21.2%, a decrease from 22.2% in the previous year. This can be attributed to increased operating expenses, particularly in the Research and Development segment. + - When compared to industry standards, Apple's operating margin is higher than the average for technology companies but lower than some of the high-performing e-commerce and retail sectors. + - Cost management effectiveness appears to be reasonably effective, with total operating expenses increasing at a rate lower than revenue growth. + +3. **Liquidity and Solvency**: + + - Apple's current ratio was 1.4, indicating the company has sufficient short-term assets to cover short-term liabilities. + - The quick ratio, which excludes inventory from current assets, was 0.9, suggesting the company has sufficient liquid assets to cover short-term liabilities. + - The debt-to-equity ratio was 1.6, indicating the company has relatively high levels of debt compared to shareholder's equity. + - Interest coverage ratio was 91.1, signifying the company's ability to meet its interest payments. + +4. **Cash Flow Analysis**: + + - Cash flow from operations was $82.2 billion, a decrease of 26% from the previous year, mainly driven by the lower gross margin. + - Investing cash flow was $19.6 billion, an increase of 35% from the previous year, largely due to investments in property, plant, and equipment. + - Financing cash flow was $72.6 billion, an increase of 74% from the previous year, mainly due to the net increase in long-term debt. + +5. **Investment and Future Outlook**: + + - In 2021, Apple made several major investments, such as expanding its production capacity in India and the United States, investing in research and development, and acquiring AR/VR company Next Reality. + - Management expects continued growth, driven by the release of new products, including the Apple Watch Series 7, AirPods Max, and the M1 chip-based MacBook Pro and MacBook Air. + - The company anticipates continuing investment in its data centers, sustainable energy initiatives, and other strategic projects. + +6. **Risks and Opportunities**: + + - Key risks for Apple include global supply chain disruptions, currency fluctuations, increasing competition from other technology companies, and regulatory risks related to antitrust and privacy concerns. + - Emerging opportunities for the company include continued growth in the services segment, expanding market share in China and India, and exploring new markets and technologies, such as augmented reality and 5G networks. + Apple Inc. Overview + +* Revenue: + + 2022: $274,528 million + + 2021: $274,521 million + + 2020: $274,557 million + + YoY growth rate: -4.4% +* Net Income: + + 2022: $91,537 million + + 2021: $91,537 million + + 2020: $91,049 million +* Gross Margin: + + 2022: 38.1% + + 2021: 37.8% + + 2020: 37.3% + +Operational Efficiency + +* Operating Margin Trends: + + 2022: 38.1% + + 2021: 37.8% + + 2020: 37.3% +* Comparison to Industry Standards: + + Apple's operating margin is higher than the industry average for consumer electronics companies. + +Cost Management Effectiveness + +* Controlling costs through keen pricing strategies and efficiency efforts has helped maintain a healthy profit margin. + +Liquidity and Solvency + +* Current Ratio: + + 2022: 1.6 + + 2021: 1.7 + + 2020: 1.4 +* Quick Ratio: + + 2022: 1.2 + + 2021: 1.3 + + 2020: 1.1 +* Debt-to-Equity Ratio: + + 2022: 0.11 + + 2021: 0.12 + + 2020: 0.13 +* Interest Coverage Ratio: + + 2022: 2.0 + + 2021: 2.1 + + 2020: 2.1 + +Cash Flow Analysis + +* Cash Flow from Operations: + + 2022: $86,555 million + + 2021: $89,052 million + + 2020: $89,543 million +* Cash Flow from Investing: + + 2022: $5,626 million + + 2021: $7,926 million + + 2020: $3,704 million +* Cash Flow from Financing: + + 2022: $22,306 million + + 2021: $33,525 million + + 2020: $4,975 million + +Investment and Future Outlook + +* Major Investments: + + Apple continues to invest in research and development, which is expected to drive future growth initiatives. +* Mergers and Acquisitions: + + Apple recently acquired a startup focused on augmented reality technology, indicating potential expansion into new markets. +* Management's Outlook and Future Growth Initiatives: + + Apple is focused on continued innovation, expanding into new markets, and increasing sales through its powerful brand and loyal customer base. + +Risks and Opportunities + +* Key Risks: + + competition from rival tech companies and changing consumer preferences pose potential risks. + + shifts in global economic conditions and regulatory changes could impact Apple's sales and profitability. +* Emerging + +Apple Inc. | 2022 Form 10-K | 26 Opportunities: + + Expansion into emerging markets, particularly China and India, presents significant growth opportunities. + + The ongoing development of new technologies, such as 5G and artificial intelligence, could open up new product lines and business models. + + Possible acquisitions of smaller companies with complementary technologies could enhance Apple's position in the market. + +Actionable Insights: + +* Apple's overall financial performance was strong, with notable growth in revenue despite a slight decrease in net income. Maintaining tight cost control is crucial to maintaining the company's healthy profit margin. +* The rapid expansion of the company's business in Asia, particularly China, presents significant growth opportunities. Staying abreast of changing technological trends and consumer preferences will be essential for sustained success. +* Apple's strong balance sheet and cash holdings position the company for future growth, while investments in research and development are likely to drive innovation and new business opportunities. + 7. **Financial Overview**: + +* Total revenue for 2023 was $ 305,336 million, down 5.6% compared to the previous year. The year-over-year decline can be attributed to increased competition in the smartphone market and reduced demand for Mac products, which currently represent a smaller proportion of Apple’s revenue. +* Net income for 2023 came in at $ 19,080 million, 55.6% lower than the previous year primarily due to the lower revenue. +* The gross margin in 2023 was 35.5%, a 15.6% decrease compared to the prior period. +* It is important to note that the global economic conditions, geopolitical tensions, and supply chain disruptions continue to pose significant challenges for businesses, including Apple, and could impact their future financial performance. + 1. **Financial Overview**: +- Total revenue: $X million in FY 2023, up 12% from $X million in FY 2022. +- Net income: $X million in FY 2023, up 15% from $X million in FY 2022. +- Gross margin: 55%, down 1% from 56% in FY 2022. + +Notable trends include the steady growth in both revenue and net income, despite a slight decline in gross margin. This may indicate increased competition or operational inefficiencies. + +2. **Operational Efficiency**: +- Operating margin: X%, down 1% from X% in FY 2022. +- Cost management effectiveness: Improved due to cost-cutting measures and increased automation. + +The decline in operating margin should be closely monitored, as this may impact overall profitability. While cost management efforts have improved, further optimization may be necessary to offset declining gross margin. + +3. **Liquidity and Solvency**: +- Current ratio: X, down from X in FY 2022. +- Quick ratio: X, down from X in FY 2022. +- Debt-to-equity ratio: X, up from X in FY 2022. +- Interest coverage ratio: X, down from X in FY 2022. + +While liquidity has decreased slightly, the company remains in a stable financial position. An increase in the debt-to-equity ratio and a decline in the interest coverage ratio could indicate a need for more efficient use of debt financing or increased profitability to maintain solvency. + +4. **Cash Flow Analysis**: +- Cash flow from operations: X, up 10% from X in FY 2022. +- Investing cash flow: X, down 5% from X in FY 2022. +- Financing cash flow: X, down 20% from X in FY 2022. + +A significant increase in cash flow from operations suggests effective cost management and increased sales, while a decrease in investing and financing cash flows implies a reduction in capital expenditures and debt financing. + +5. **Investment and Future Outlook**: +- Major investments: Expansion of overseas operations and development of new product lines. +- Mergers/acquisitions: None announced. + +Management's outlook for future growth includes continued expansion into new markets and diversification of product offerings. In order to achieve these goals, the company will need to maintain strong financial performance and effectively allocate resources. + +6. **Risks and Opportunities**: +- Risks: Increased competition, market shifts, regulatory changes, technological disruption. +- Opportunities: Emerging markets, product innovation, strategic partnerships, customer segmentation. + +To mitigate potential risks, the company should closely monitor market trends and maintain a diverse product portfolio. Pursuing new opportunities in emerging markets, as well as leveraging technological advancements, could facilitate long-term growth. + 1. **Financial Overview** + +- Total revenue for FY2021 was $X million, representing a year-over-year growth rate of X%. +- Net income for FY2021 was $X million, representing a YoY growth rate of X%. +- Gross margin decreased slightly from X% in FY2020 to X% in FY2021. +- Notable trends include increased operating expenses due to raw material price fluctuations and higher labor costs. There was also a decline in capital expenditures compared to the previous year. + +2. **Operational Efficiency** + +- Operating margin for FY2021 was X%, below industry standards of X%. +- Cost management was effective in controlling input costs, but saw challenges in managing distribution and logistics due to supply chain disruptions caused by the pandemic. +- The company could improve operational efficiency by streamlining production processes and investing in automation technologies to reduce labor costs and improve quality control. + +3. **Liquidity and Solvency** + +- Current ratio for FY2021 was X.x:1, indicating adequate liquidity to meet short-term obligations. +- Quick ratio for FY2021 was X.x:1, confirming that current assets can cover short-term obligations quickly. +- Debt-to-equity ratio increased from X:1 in FY2020 to X:1 in FY2021, indicating higher leverage. +- Interest coverage ratio decreased from X:1 in FY2020 to X:1 in FY2021, indicating lower profitability in servicing interest on debt. + +4. **Cash Flow Analysis** + +- Cash flow from operations generated $X million, X% higher than the previous year. +- Cash flow from investing reduced by $X million, primarily due to decreased capital expenditures. +- Cash flow from financing decreased by $X million, driven by lower net income and increased dividend payments. +- Net cash decreased from $X million in FY2020 to $X million in FY2021, indicative of weakening liquidity. + +5. **Investment and Future Outlook** + +- The company invested $X million in R&D during FY2021, focused on developing new products and refining existing processes. +- No major acquisitions or mergers were made in the past fiscal year. +- Management anticipates growth in demand for its products and services due to increasing consumer spending and trade policies that favor domestic producers. Future initiatives include expanding its product line and strengthening partnerships with distributors. + +6. **Risks and Opportunities** + +- Key risks include supply chain disruptions, increasingly competitive market conditions, and rising labor costs. These could negatively impact profitability and narrow operational margins. +- Emerging opportunities include expanding into new markets, investing in technology to enhance production efficiencies, and exploring innovative partnerships to create shared value for stakeholders. + 1. Financial Overview: + +- Total Revenue for Fiscal Year 2021: $100 million, up 12.5% from the previous year. +- Net Income for Fiscal Year 2021: $15 million, up 10% from the previous year. +- Gross Margin for Fiscal Year 2021: 45%, down 2% from the previous year. + +The company has consistently grown its revenue and net income over the past several years. However, the gross margin has decreased due to increased production costs and higher energy prices. + +2. Operational Efficiency: + +- Operating Margin for Fiscal Year 2021: 10%, down 3% from the previous year. +- Comparison to Industry Standard: The operating margin is lower than the average for the industry, which suggests that the company could improve efficiency by reducing operating expenses. + +The company has shown limited progress in improving its operational efficiency. Management should focus on reducing overhead costs, optimizing production processes, and investing in automation to increase efficiency and improve profitability. + +3. Liquidity and Solvency: + +- Current Ratio for Fiscal Year 2021: 2.5, up 7% from the previous year. +- Quick Ratio for Fiscal Year 2021: 2.0, down 3% from the previous year. +- Debt-to-Equity Ratio for Fiscal Year 2021: 1.5, up 5% from the previous year. +- Interest Coverage Ratio for Fiscal Year 2021: 5.0, up 20% from the previous year. + +The company has a steady cash position, with an increased current ratio and quick ratio. However, the debt-to-equity ratio has increased, indicating that the company is taking on more debt to finance its operations. The interest coverage ratio has also improved significantly due to higher net income. + +4. Cash Flow Analysis: + +- Cash Flow from Operations: $30 million, up 10% from the previous year. +- Cash Flow from Investing: ($5 million), down 50% from the previous year. +- Cash Flow from Financing: $25 million, up 30% from the previous year. + +The company has generated strong cash flows from its operations, but there have been significant investments in capital equipment and property. The negative cash flow from investing suggests that the company is investing heavily to expand its production capacity, which may have negatively impacted cash holdings in the short term. + +5. Investment and Future Outlook: + +- Major Investments: In 2021, the company completed the acquisition of a new manufacturing facility in Europe. Management expects to invest in additional facilities and technologies to support growth over the next three years, with a focus on expanding production capacity and improving efficiency. + +Management's outlook for the future is optimistic, with expectations for continued revenue growth and profitability. The company plans to expand into new markets and develop new products to capitalize on emerging opportunities in the industry. + +6. Risks and Opportunities: + +- Key Risks: The company faces several risks, including rising energy prices, fluctuations in raw material costs, and supply chain disruptions. Additionally, there is regulatory risk associated with changes in trade policies and environmental regulations. +- Emerging Opportunities: The company has significant growth opportunities in emerging markets, particularly in Asia and South America. Additionally, the development of new technologies and product innovation can provide additional revenue streams and competitive advantages in the industry. + Financial Overview: + +- Total revenue for the year was $x.xx million, a x% increase from the previous year. +- Net income amounts to $x.xx million, a x% change from the previous period. +- Gross margin stands at x%, showing a x% decline compared to the previous year. + + +Operational Efficiency: + +- Operating margin has dropped from x% in the previous year to x% in the current period, falling short of industry standards by x%. +- Cost management effectiveness has decreased by x%, resulting in increased expenses. + +Liquidity and Solvency: + +- Current ratio is x:1, up from x:1 in the previous year, indicating strong liquidity. + +- Quick ratio stands at x:1, a decrease from x:1 in the previous year, suggesting some improvement in liquidity. + +- Debt-to-equity ratio is x:1, showing an increase from x:1 in the previous period. +- Interest coverage ratio is x:1, a decline from x:1 in the previous year, indicating poor solvency. + + + +Cash Flow Analysis: + +- Cash flow from operations was $x.xx million in the current year, an increase of x% from the previous year. + +- Investing saw $x.xx million in outflows, compared to $x.xx million in the previous year. + +- Financing showed a net inflow of $x.xx million, up from $x.xx million in the prior year. + + + +Investment and Future Outlook: + +- There were no major investments, mergers, or acquisitions during the year. + +- Management outlines a focus on organic growth, while exploring strategic partnerships. + + + +Risks and Opportunities: + +- Fluctuating market conditions pose a significant risk. + +- Technological advancements and changing consumer behaviors may present opportunities for innovation and growth. + + + +Note: The specific figures and comparisons used in the analysis will depend on the company being analyzed. It is recommended to research and gather accurate data for the company being examined. + 1. Financial Overview: + +* Total revenue for the revenue of the current fiscal year was generated, while the revenue in the template was $32,811,292. +* Net income for the company in the current fiscal year was $7,303,398, down from $10,247,684 in the template year. +* Gross margin for the current fiscal year was $8,242,447, while the template year's gross margin was $7,195,602. +* Year-over-year gross margin growth was achieved at approximately 11.5%. + +2. Operational Efficiency: + +* The company's operating margin (operating income divided by net sales) was 24.8% in the current fiscal year, an increase from 21 as in the template year. +* Operating performance is above industry standards for similar-sized companies. +* Cost management over the past fiscal year was effective, considering revenue growth has outpaced cost increases, leading to a favorable operating margin. + +3. Liquidity and Solvency: + +* Current ratio for the current fiscal year was high at 2.60, indicating strong liquidity. +* Quick ratio (current assets minus current liabilities divided by current assets) for the current fiscal year was 2.26, also indicating appropriate liquidity. +* Debt-to-equity ratio for the current fiscal year was 0.60, reflecting a relatively low debt level compared to equity. +* Interest coverage ratio for the current fiscal year was 3.27, indicating adequate debt servicing capacity. + +4. Cash Flow Analysis: + +* Cash flow from operations for the current fiscal year was $12,269,971, indicating positive cash generation from core business activities. +* Cash flow from investing for the current fiscal year was $-2,887,236, reflecting significant capital expenditures, such as purchases of property, plant, and equipment. +* Cash flow from financing for the current fiscal year was $20,831,738, primarily driven by interest earnings and proceeds from equity issuance. +* Significant changes in cash holdings include an increase in cash and cash equivalents during the year, resulting in a positive net increase in cash and cash equivalents. + +5. Investment and Future Outlook: + +* No significant investments, mergers, or acquisitions were announced in the past fiscal year. +* Management forecasts revenue growth to continue and anticipates further improvements in gross margin and operating efficiency through cost management initiatives. +* Future growth initiatives include enhancing product innovation, expanding market presence in targeted segments, and optimizing supply chain operations. + +6. Risks and Opportunities: + +* Key risks facing the company include competition in the technology market, product obsolescence, fluctuating exchange rates, and economic downturns. +* Emerging opportunities include expanding into emerging markets, capitalizing on technological advancements, and entering new product segments. + Financial Overview: + +* Total revenue was $ 174.8 billion in Q2 2020 and $ 178.6 billion in Q2 2019 for 3.0% YoY revenue growth. +* Net income was $ 96.1 billion in Q2 2020 and $ 95.8 billion in Q2 2019 for -6.3% YoY revenue growth. +* Gross margin was 46.1% in Q2 2020 and 47.7% in Q2 2019 for -1.6% YoY revenue growth. +* Key trends include increased revenue growth and gross margin, with a decrease in net income. + +Operational Efficiency: + +* Operating margin was 10.6% in Q2 2020 and 10.7% in Q2 2019 for slight decrease YoY. +* Operating productivity improved by 2.7%, indicating effective cost management. + +Liquidity and Solvency: + +* Current ratio increased from 9.2 in Q2 2019 to 9.4 in Q2 2020, indicating improvement in liquidity. +* Debt-to-equity ratio decreased from 0.6 in Q2 2019 to 0.5 in Q2 2020, indicating stability in solvency. + +Cash Flow Analysis: + +* Cash from operations was $ 59.1 billion in Q2 2020 and $ 60.1 billion in Q2 2019 for slight decrease YoY. +* Cash from investing increased from $ 3.3 billion in Q2 2019 to $ 11.1 billion in Q2 2020 due to the acquisition of BP assets and other investments. +* Cash from financing increased from $ 45.1 billion in Q2 2019 to $ 70.3 billion in Q2 2020 due to a refund of dividends paid in Q1 2020. +* The acquisition of BP assets had a significant impact on cash holdings, resulting in increased liquidity and solvency. + +Investment and Future Outlook: + +* BP Aviation Holdings (BP) was acquired for $ 11.1 billion in Q2 2020, representing a significant investment. +* Mergers and acquisitions are expected to continue as part of the company's growth strategy. +* Management highlights their focus on maintaining a disciplined financial approach and generating returns for shareholders. + +Risks and Opportunities: + +* Key risks include the impact of the COVID-19 pandemic on the global economy and supply chain disruptions. +* The potential for increased competition in the oil and gas industry presents a challenge. +* Emerging opportunities include investing in low-carbon emissions technologies and exploring new markets for refined petroleum products. + Financial Overview: + +* Total Revenue: The company generated total revenue of $ 27.9 billion in 2021. This represents a 23.2% increase in revenue compared to the previous year. +* Net Income: The net income of the company in 2021 was $ 5.3 billion, resulting in a 12.1% growth from the previous year. +* Gross Margin: The company's gross margin was 39.9% in 2021, down 0.1% from the previous year. + +Operational Efficiency: + +* Operating Margin: The operating margin decreased to 21.4% in 2021, representing a 0.8% year-over-year decline. The figure is below industry standards. +* Growth Rates: Restaurant slow-growth rate has been declining to 3% from previous year, which is below industry standard of 6.5% + +Liquidity and Solvency: + +* Current Ratio: Current ratio of the company was 0.6, increasing 0.1 from the previous year. +* Quick Ratio: N/A +* Debt-to-Equity Ratio: Debt-to-equity ratio of the company was 0.4, decreasing from 0.5 in the previous year. Interest Coverage Ratio: The company has no interest coverage. + +Cash Flow Analysis: + +* Free Cash Flow from Operations: Free cash flow from operations generated was $ 4.4 billion, up $ 1.3 billion from the previous year, representing a 42.5% increase. +* Free Cash Flow from Investing: Free cash flow from investing was $ 186 million, decreasing by $ 731 million from the previous year, representing a 71.0% decline. +* Free Cash Flow from Financing: Free cash flow from financing was $ 2.7 billion, resulting in a decline of 13.2% from the previous year. +* Cash Changes: The company increased its cash holdings by $ 4.4 billion compared to the previous year, representing a 391.4% increase. + +Investment and Future Outlook: + +* Major Investments: Apple plans to invest $ 90 billion in 2021, including developing new technologies, expanding more retail stores, and launching new products. +* Mergers and Acquisitions: The company made no significant mergers or acquisitions during the year. +* Future Growth Initiatives: Apple plans to launch new products such as the Apple Watch and AirPods Max, and expand its services such as Apple Card and Apple Fitness. + +Risks and Opportunities: + +* Key Risks: The company faces risks related to the ongoing trade war between the US and China. The company also faces risks related to cybersecurity threats. +* Opportunities: The company has opportunities to expand its product offerings and enter new markets, such as the automotive industry and healthcare + Financial Overview +-------- + +* Total revenue: $ 255.1 billion ( +* Net income: $ 9.5 billion ( +* Gross margin: 37.1% ( + +Operational Efficiency +-------------------- + +* Operating margin: 22.5% ( +* Industry average operating margin: 11.3% ( + +Liquidity and Solvency +---------------------- + +* Current ratio: 0.29 ( +* Quick ratio: 0.28 ( +* Debt-to-equity ratio: 0.50 ( +* Interest coverage ratio: 7.9 ( + +Cash Flow Analysis +------------------ + +* Cash from operations: $ 110.3 billion ( +* Cash from investing: $( 4.3 ) billion ( +* Cash from financing: $ 40.0 billion ( + +Investment and Future Outlook +------------------------------ + +* Major investments: +*mergers, or acquisitions: Not mentioned +*Summarize management’s outlook and future growth initiatives: Not mentioned + +Risks and Opportunities +---------------------- + +* Key risks facing the company and potential impacts: Not mentioned + Financial Overview: + + + +- Total revenue: XYZ Inc. generated $1.5 billion in revenue in fiscal year 2021, representing a 7% year-over-year increase from $1.4 billion in 2020. + +- Net income: The company's net income for fiscal year 2021 was $100 million, an improvement of 36% compared to $70 million in 2020. + +- Gross margin: XYZ Inc.'s gross margin in 2021 was 25%, up 2% from the previous year's 23%. This increase can be attributed to better cost management and efficient production processes. + + + +Operational Efficiency: + + + +- Operating margin: XYZ Inc.'s operating margin for 2021 was 7%, below the industry average of 9%. This can be attributed to higher operating expenses including labor and materials costs. + +- Cost management: Despite operating expenses increasing by 3% in 2021, XYZ Inc. managed to improve its gross margin. This shows effective cost management by the company. + + + +Liquidity and Solvency: + + + +- Current ratio: The company's current ratio increased from 2.5 in 2020 to 2.8 in 2021, indicating improved liquidity position. + +- Quick ratio: XYZ Inc.'s quick ratio remained unchanged from the previous year at 1.9. + +- Debt-to-equity ratio: The company's debt-to-equity ratio increased slightly from 0.3 in 2020 to 0.4 in 2021, indicating a higher debt level. + +- Interest coverage ratio: XYZ Inc.'s interest coverage ratio improved from 1.2 in 2020 to 1.6 in 2021, showing better ability to meet interest payments. + + + +Cash Flow Analysis: + + + +- Cash flow from operations: XYZ Inc. generated $500 million in cash flow from operations in 2021, representing a 17% increase from $425 million in 2020. + +- Cash flow from investing: The company invested $200 million in capital expenditures, resulting in a negative net cash used in investing activities. + +- Cash flow from financing: XYZ Inc. issued $100 million in new debt and repurchased $50 million in stock, resulting in a net increase in long-term debt and a net decrease in stockholders' equity. + + + +Investment and Future Outlook: + + + +- Investments: In 2021, XYZ Inc. invested $200 million in capital expenditures, including the expansion of its production facilities and the development of new products. + +- Mergers and acquisitions: The company did not engage in any major mergers or acquisitions during the year. + +- Outlook: Management's outlook for the future is positive, with plans to continue expanding into new markets and product segments. The company expects to maintain its focus on cost management and improve operational efficiency. + + + +Risks and Opportunities: + + + +- Key risks: Operational risks related to supply chain disruptions and labor shortages, as well as financial risks related to interest rate fluctuations and economic downturns. + +- Potential impacts: Disruptions in supply chains could lead to production delays and higher costs, while economic downturns could impact demand for products and services. + +- Emerging opportunities: Technological advancements in automation and robotics could improve production efficiency and reduce costs, opening up new opportunities for growth and expansion. + 1. **Financial Overview** +* Total revenue for the year ended September 24, 2005 was $ 51,208 million, representing a year-over-year growth rate of 42.8%. +* Net income for the year ended September 24, 2005 was $ 3,740 million. +* Gross margin for the year ended September 24, 2005 was 32.2%. + +Notable trends include the substantial year-over-year growth in revenue, indicating strong demand for Apple products and services. The relatively low gross margin may be due to higher manufacturing costs or increased marketing expenses. + +2. **Operational Efficiency** +* Operating margin for the year ended September 24, 2005 was 9.2%, below the industry average. +* Cost management effectiveness for the year ended September 24, 2005 is not explicitly discussed in the provided data. + +The low operating margin may suggest inefficiencies in production or distribution processes, which may need to be addressed to improve profitability. + +3. **Liquidity and Solvency** +* Current ratio for the year ended September 24, 2005 was 1.1, indicating a moderately healthy level of liquidity. +* Quick ratio for the year ended September 24, 2005 was also 1.1, suggesting that Apple has a solvent balance sheet. + +Debt-to-equity ratio for the year ended September 24, 2005 was 0.4, indicating that Apple has a relatively low debt-to-equity ratio. Interest coverage ratio for the year ended September 24, 2005 was 45.8, suggesting that Apple was solvent in terms of its interest payments. + +4. **Cash Flow Analysis** +* Cash flow from operations for the year ended September 24, 2005 was $ 9,418 million, representing a significant increase from the previous year. +* Cash flow from investing for the year ended September 24, 2005 was $ -9,483 million. +* Cash flow from financing for the year ended September 24, 2005 was $ 2,097 million. + +The significant increase in cash flow from operations may indicate increased profitability, but the negative cash flow from investing and positive cash flow from financing suggest that Apple's investments and financing activities had a net impact on cash holdings. + +5. **Investment and Future Outlook** +There are no specific mentions of major investments, mergers, or acquisitions in the provided data. Apple's management outlook and future growth initiatives are not explicitly discussed. + +6. **Risks and Opportunities** +The provided data does not explicitly discuss any key risks facing the company or emerging opportunities in the market or through technological advancements. + 1. Financial Overview: + +* Total revenue for the year was $274,220 million, an increase of 6.6% compared to the previous year. +* Net income for the year was $71,999 million, an increase of 33.9% compared to the previous year. +* Gross margin for the year was 27.7%, an increase of 0.1% compared to the previous year. + +2. Operational Efficiency: + +* Operating margin decreased by 1% in comparison to the previous year. +* The company has exhibited strong growth in recent years, with a net income growth of over 30% in the last calendar year. + +3. Liquidity and Solvency: + +* Current ratio for the year was $1,288,901 million, indicating a healthy liquidity position. +* Quick ratio for the year was $1,145,641 million, further indicating good liquidity management. +* The company’s debt-to-equity ratio remained relatively low at 0.69, indicating a strong cost management position. +* Interest coverage ratio for the year was 6.94, which is above the industry average. + +4. Cash Flow Analysis: + +* Cash flow from operations was $127.12 million, indicating a significant influx of cash from operation of the business. +* Investing cash flow was $408.59 million, which includes major investments such as acquisitions or property, plant, and equipment purchases. +* Financing cash flow was $859,082 million, primarily driven by financing activities such as stock deals, debt issuance, or investment fund raising. +* Cash at the beginning of the year was $826,351 million, and cash at the end of the year was $1,319,683 million, indicating an increase in cash holdings over the year. + +5. Investment and Future Outlook: + +* The company is continuing its focus on investing in research and development, which is expected to contribute to growth in future years. +* There have been no major mergers or acquisitions announced in recent times. +* Management expects continued growth in revenue and profit in the future, driven by market expansion and innovation. + +6. Risks and Opportunities: + +* The company may face risks related to increased competition from other players in the market and changes in consumer preferences. +* Emerging opportunities include continued technological advancements in Apple products and services, as well as potential for growth in new markets such as China and other emerging economies. + Financial Overview +--------------- + +| Key Financial Figures | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Total Revenue | $ 84,084,000 | $ 77,278,000 | 10.7% | +| Cost of Goods Sold | $ 59,910,000 | $ 54,552,000 | -5.1% | +| Gross Margin | 44.1% | 29.9% | -123.5% | +| Operating Income |)$ 25,106,000 | $ 20,964,000 | -15.5% | +| Net Income | $ 20,264,000 | $ 14,891,000 | -28.6% | +| Gross Margin | 40.7% | 25.5% | -55.2% | + +Key takeaways: + +* The company experienced a significant increase in revenue, with a 10.7% YoY growth rate in 2021, compared to a 29.9% downward trend in 2020. +* The gross margin consistently remained positive throughout the period, with a gradual decline from 44.1% in 2021 to 40.7% in 2022, representing a 10.9% decrease. +* The company's operating and net income had fluctuated significantly in recent years, with positive growth in 2021 (-15.5%) and a considerable loss in 2022 (-28.6%). This trend highlights the need for better cost management and revenue growth. + +Operational Efficiency +---------------------- + +| Key Metrics | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Operating Margin | 29.9% | 21.8% | 37.7% | +* The operating margin showed a substantial increase, from 21.8% in 2020 to 29.9% in 2021, representing a 37.7% growth rate. This trend indicates better operational efficiency and cost control. + +Liquidity and Solvency +---------------------- + +| Key Ratios | 2021 | 2020 | YoY Growth Rate | +* Current Ratio: The current ratio increased from 1.5 in 2020 to 1.5 in 2021, with no growth rate to compare. +* Quick Ratio: The quick ratio remained stable at 1.0 in both years. +* Debt-to-Equity Ratio: The debt-to-equity ratio increased from 0.5 in 2020 to 0.5 in 2021, with no growth rate to compare. +* Interest Coverage Ratio (EBITDA): The interest coverage ratio (EBITDA) decreased from 5.7 in 2020 to 3.5 in 2021, representing a 37.3% decline. + +Cash Flow Analysis +------------------ + +| Key Cash Flow Metrics | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Cash from Operations | $ 28,515,000 | $ 27,579,000 | 3.2% | +| Cash from Investing | $ 0 | $ 0 | 0% | +| Cash from Financing | $ 0 | $ 0 | 0% | +| Net Increase + 1. Financial Overview: +* Apple Inc. reported total revenue of $ 260.5 billion for the fiscal year ended September 26, 2009, representing an increase of 17.8% compared to $ 217.7 billion in the previous fiscal year. +* Net income for the current fiscal year was $ 32.4 billion, which is a 15.9% increase from the previous year's net income of $ 27.7 billion. +* The gross margin for the company in the current year was 35.5%, compared to 30.7% in the previous year. +1. Operational Efficiency: +On the operational efficiency front, Apple's operating margin increased by 11.5 percentage points from 14.3% in the previous year to 25.8% in 2009, indicating significant improvement. The operating margin is above the industry average, demonstrating the company's ability to generate costs effectively. +1. Liquidity and Solvency: +Apple maintained a healthy liquidity position, with a current ratio of 1.45 and a quick ratio of 1.29 at the end of September 2009. These ratios indicate that the company had enough current assets to meet its short-term liabilities without needing to convert any long-term assets. The company's debt-to-equity ratio was 0.63, and the interest coverage ratio stood at 20.2 times, indicating that the company was financially stable. +1. Cash Flow Analysis: +Apple generated positive cash flow from operations, investing, and financing activities during the fiscal year ended September 26, 2009. The operating cash flow stood at $ 24.9 billion, investing cash flow was $ 68.6 billion, and financing cash flow was $ 65.7 billion. The company also experienced an increase in cash holdings, which indicates its strong financial position. +1. Investment and Future Outlook: +During the fiscal year 2009, Apple made several significant investments, including $ 2 billion in research and development, and the acquisition of iPhone-maker Quanta Communications for $ 7.7 billion. The company's future growth initiatives include expanding its retail stores, further developing its mobile devices, and potentially entering new markets such as the healthcare industry. +1. Risks and Opportunities: +Some key risks facing Apple include intense competition from other technology companies, macroeconomic factors affecting consumer demand, and supply chain disruptions due to component shortages or other unforeseen events. There are also opportunities for the company to continue innovating and expanding its product offerings, particularly in the areas of artificial intelligence, augmented reality, and virtual reality. +In summary, Apple's financial performance in 2009 was strong, with significant improvements in operational efficiencies, liquidity, and solvency. The company maintained a healthy cash flow position and made strategic investments, while also facing potential risks and opportunities for future growth. + Financial Overview: + +* For the fiscal year ending September 25, 2010, Apple's total revenue increased by approximately 12% compared to the same period in 2009. +* Apple's net income decreased by approximately 4% compared to the previous year. +* The gross margin for the fiscal year ending September 25, 2010, was 39%. indicating that AirPods contributed to this loss. + +Operational Efficiency: + +* Apple's operated margin for the fiscal year ending September 25, 2010, was approximately 33%. slightly down compared to industry standards. +* Apple's cost management effectiveness during the past fiscal year is 65 Table of Contents Azure management effectiveness is 65 Table of Contents Azure effective stock-based compensation of approximately $ 1.3 billion , compared to $ 1.1 billion for the same period last year, primarily due to additional employee tax benefit of around $ 230 million. + +Liquidity and Solvency: + +* Apple's current ratio as of September 25, 2010, was 1.49:1 . +* Apple's quick ratio as of September 25, 2010, was 1.36:1 more than the most 52% of sales + +Cash Flow Analysis: + +* Apple generated cash from operations that exceeded cash used in investing and financing during the fiscal year ending September 25, 2010. +* Apple's cash holdings increased by approximately $ 2.2 billion during the fiscal year ending September 25, 2010. + +Investment and Future Outlook: + +* Apple announced its transition to M1 chips, which should lead to increased power efficiency and performance. +* Apple's CEO, Tim Cook, has expressed his confidence in continued growth through innovation and product updates. + +Risks and Opportunities: + +* One key risk facing Apple is intense competition from other smartphone and tablet manufacturers . +* Emerging opportunities include expanding into new markets such as China and continued technological advancements in manufacturing, such as the implementation of flexible OLED displays. + 5. + +Apollo, the Harvard Business Review's case study on 3D printing + +In the world of manufacturing, additive manufacturing still represents a long tail of potential. Despite its hype, only a small number of 3D printing processes are able to manufacture objects at scale. In addition, these processes often lack the precision and performance of conventional manufacturing processes. + +Nevertheless, there are a few companies that are making an impression in additive manufacturing, one of which is Apollo, a small U.S.-based 3D printing company founded in 2002. + +According to its website, Apollo offers 3D printing services in a variety of materials, including metals, ceramics, plastics, and composites. Its customers include major manufacturers, medical device companies, and research institutions. + +Last year Apollo received a patent for a new 3D printing process that uses a laser to fuse metal strips together. This process allows for the creation of high-strength, complex structures that are difficult to achieve with traditional manufacturing methods. + +One of the most promising applications of this new process is in the medical device industry. The U.S. Food and Drug Administration (FDA) has approved for use in medical devices made with Apollo's 3D printing process, which opens up new opportunities for the company to grow its business in this area. + +Hidden trend in global pharmaceutical industry: increasing demand for personalized medicine + +Personalized medicine is an emerging field in healthcare that aims to create tailored treatments for individual patients based on their unique genetic makeup and other factors. This approach has the potential to improve patient outcomes, reduce side effects from treatments, and ultimately lead to more cost-effective healthcare. + +However, one of the challenges facing the personalized medicine industry is the high cost of data storage and analysis required to generate personalized treatment plans. + +To address this challenge, many pharmaceutical companies and healthcare providers are investing in big data technologies, such as machine learning algorithms and distributed computing systems, to help analyze large amounts of patient data quickly and efficiently. + +Another trend to emerge in the global pharmaceutical industry is the increasing use of bioprinting and 3D printing technologies for drug development and testing. + +Advancements in bioprinting and 3D printing technologies allow pharmaceutical companies to create miniaturized models of human tissues and organs, enabling them to test drug compounds on living cells without the need for animal testing. + +Despite these technological advancements, the pharmaceutical industry is still facing significant challenges, such as the need for increased collaboration and partnerships among different stakeholders, the regulatory hurdles associated with developing new drugs, and the rising cost of developing and bringing drugs to market. + +To overcome these challenges, pharmaceutical companies must continue investing in new technologies and collaboration strategies, while also developing innovative business models that capture the value of personalized medicine and other emerging healthcare trends. + 1. Financial Overview: + +- Total Revenue: Total revenue for the fiscal year ended September 29, 2012, was $ 152.4 billion, representing an increase of 13.4% compared to the previous fiscal year. Net Operating Income (NOI) stood at $ 55.3 billion, a growth of 12.5% over the previous year, and net interest expense (NIE) was $ 4.3 billion, down 4.0% from the previous year. + +2. Operational Efficiency: + +- The operating margin of 37.9% is above the industry average of 28%. The consolidated gross margin shows an increase of 16.2% over the previous year, primarily driven by growth in Service Nirbhik helped increase the Gross Profit by $ 322 million in one year, which constituted about 18% of the increase in Gross Profit. The number of customers served has been consistently increasing and this increased between Sep 2011 to Sep 2012 stood at around 371,000. + +- The Company also utilizes modern techniques such as Electric Vehicles (EVs) in their service fleet. They installed EVs in their fleet and started to increase EV usage in 2013. Their plan is to reduce the number of fleet vehicles gradually and replace them with EVs. + +3. Liquidity and Solvency: + +- The current ratio stands at 5.88:1, indicating the Company's ability to meet short-term obligations. + +- The quick ratio also indicates that the Company has sufficient quick assets to cover current liabilities. + +- The debt-to-equity ratio is at 1.11:1, which shows higher leverage compared to the industry. + +- The interest coverage ratio stands at 1.67x, indicating a positive cash flow from operations which can cover the interest expense. + +4. Cash Flow Analysis: + +- The net cash provided by operating activities is $ 24.7 billion, up 24.9% from the previous year. + +- The net cash provided by investing activities is $ 1.4 billion, up 67.6% from the previous year. + +- The net cash generating capability is $ 25.4 billion, a 38.3% increase from the previous year. + +- The net cash used in financing activities was shown to be $ 40.7 billion, which is about $ 10.2 billion more than the net cash generated from operating and investing activities. + +5. Investment and Future Outlook: + +- The Company registered no major acquisitions during the period. The Company invested $ 5.6 billion in research and development activities during the FY 2018-19. + +- Management is focused on expanding its product portfolio and offering related services to drive its growth. It is also focused on expanding its presence in emerging markets. + +6. Risks and Opportunities: + +- Key risks facing the Company include political instability, political unrest, and increasing competition in the market. + +- There are also challenges related to the changing climate due to global warming and environmental degradation. The Company needs to find sustainable solutions to mitigate these risks and capitalize on opportunities in the constantly evolving market. + Financial Overview +------------- + +Key Financial Figures +-------------------- + +### Apple Inc. (AAPL) - Financial Highlights (2015) + +* Total Revenue: + + 2015 - $ 236.4 billion $ + + 2014 - $ 201.8 billion $ + + 2013 - $ 182.7 billion $ +* Net Income: + + 2015 - $ 51.9 billion $ + + 2014 - $ 11.1 billion $ + + 2013 - $ 10.2 billion $ +* Gross Margin: + + 2015 - 39.3% $ + + 2014 - 38.3% $ + + 2013 - 37.5% $ + +Financial Growth and Trends +--------------------------- + +During the past fiscal year (2015), Apple Inc. reported its highest-ever revenue and net income. compared to the prior year, total revenue grew +13.0% and net income grew +409.3%. Both revenue and net income outperformed industry averages. + +Gross margin was a standout metric for Apple in 2015, reaching an impressive +39.3%. This was an improvement from 2014's gross margin rate of +38.3%. Gross margin exceeded industry averages by 7.0% and 6.8% for 2015 and 2014, respectively. + +Operational Efficiency +---------------------- + +Operating Margin Trends +---------------------- + +Operating Margin Performance compared with Industry Average: + +1. 2015: Apple: +34.0% (industry average: +9.3%) +2. 2014: Apple: +32.0% (industry average: +4.8%) + +Operating Margin has been consistently above industry standards, indicating stronger financial performance and strategic business initiatives compared to competitors. + +Cost Management Effectiveness +-------------------------------- + +Cost of Goods Sold (COGS) as a percentage of total revenue for last three years has declined, demonstrating cost management effectiveness: + +1. 2015: Apple: 36.8% (2014: 34.6% | 2013: 38.7%) + +Indicating cost management efficiency, Operating Expenses decreased from $106.85 billion in FY2014 to $83.74 billion in FY2015 ($106.85 billion | FY2013). Apple's total costs declined +21.4% from $ 126.51 billion in 2013 to $ 100.45 billion in 2015, with gross costs declining from $ 89.92 billion in 2013 to $ 80.34 billion in 2015 ($ 89.92 billion | FY2014). + +Liquidity and Solvency +----------------------- + +Liquidity and Solvency Metrics: + +| Metric | 2015 | 2014 | 2013 | +| --- | --- | --- | --- | +| Current Ratio | 3.11 | 2.13 | 1.70 | +| Quick Ratio | 1.85 | 1.12 | 0.91 | +| Debt-to-Equity Ratio | 1.09 | 2.01 | 1.37 | +| Interest Coverage Ratio | 181.2 | 21.0 | 10.2 | + +Apple's liquidity and solvency ratios indicate a relatively healthy financial position compared to its peers. The current ratio increased from the previous year by 48.0% ($ 3.11 billion Creekside | 2014 $ - table | S-7 than 2014). Similarly, quick ratio also increased +174.1%; however, it remained below 1.0 compared to 1.12 in 2013. Apple's debt + Financial Overview: + + + +- Total revenue for 2015 was $ 184.4 billion, an increase of 9.4% compared to $ 167.8 billion in 2014. This marks a consistent growth over the years. + +- Net income for 2015 was $ 39.1 billion, an increase of 9.8% compared to $ 36.0 billion in 2014. This growth indicates a significant increase in the company's earning capacity. + +- Gross margin for 2015 was 40.6%, an improved figure from 37.6% in 2014. This geographic scope of line item for each Segment in 2015, 2014 and 2013 (in million) for each Segment : + + + +2013 2014 2015 + +----- ------ ------ + +Americas $ 80,504 82,317 94,689 + +Europe, the Middle East and Africa $ 21,711 25,203 31,050 + +Asia $ 175,014 207,597 251,480 + + + +- Gross margin in 2015 was significantly higher than the expected figure due to strong sales in International markets, especially in Asia. + + + +- Gross margin in 2015 was 3.0% higher than that of 2014. This indicates an improvement in gross profit margins, suggesting a successful sales strategy. + + + +- Operating margin in 2015 was 9.5%, a 43.4% increase from 5.2% in 2014. This reflects the company's effective cost management and operating control over expenditure over the past year. + +- Interest income from continuing operations, as well as term debt interest and dividend income were the principal sources of interest income for the company in 2015, accounting for $ 11.7 billion and $ 10.6 billion, respectively. + +- During 2015, the company invested $ 37.9 billion in its core business activities, $ 9.2 billion in property, plant and equipment, and $ 3.8 billion in restricted cash. These figures indicate that the company has been investing heavily in its business, which is a potential driver for future growth. + +- Apple Inc. also repurchased stock worth $ 30.0 billion in 2015, which shows the company's commitment to returning excess capital to its shareholders in the form of buybacks. This is a positive sign for the company's future financial health. + + + +Operational Efficiency: + + + +- Operating margin in 2015 shows an improvement over the previous year, indicating a successful cost management strategy and an effective control over operating expenses. + +- The net interest expense as a percentage of revenue increased in both 2015 and 2014, indicating a growing interest expense burden on the company. However, this was offset by an increase in interest income from continuing operations, as well as term debt interest and dividend income. + +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. + +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. + +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. + +- The cost of goods sold (COGS) as a percentage of revenue decreased from 46.2% in 2014 to 45.2% in 2015, indicating effective cost control measures. + +- Expenditures related to research and development accounted for $ 10.7 billion or 5.7% of total operating expenses in 2015, which is generally considered a significant investment in the company's intellectual property portfolio and future growth potential. + 1. Financial Overview: + + * Total Revenue: $226.8 billion (2016), $205.2 billion (2015) + + Year-over-year growth rate: 8.6% + + Gross Margin: 38.2% (2016), 38.3% (2015) + + The company's gross margin has remained relatively stable over the past two years, despite the growth in total revenue. This indicates the company's ability to effectively manage its costs and generate healthy profits in all areas of its business. +2. Operational Efficiency: + The company's operating margin has decreased compared to the previous year. This could be due to increased operating expenses or higher fixed costs. Operating expenses now account for 55.2% of total revenue, while fixed costs are 8.1%. +3. Liquidity and Solvency: + * Current Ratio: 5.4 (2016), 5.0 (2015) + * Quick Ratio: 3.7 (2016), 3.9 (2015) + * Debt-to-Equity Ratio: 3.4 (2016), 2.3 (2015) + * Interest Coverage Ratio: 109.1 (2016), 124.1 (2015) + + Overall, the company's liquidity and solvency remain solid, with high current and quick ratios. However, the debt-to-equity ratio has increased, which means the company has more debt than equity. This increase is related to the company's expansion and financing activities. The interest coverage ratio has also decreased, which may indicate higher interest costs. +4. Cash Flow Analysis: + * Cash flow from operations: $89.9 billion (2016), $81.5 billion (2015) + * Cash flow from investing: $23.1 billion (2016), $14.1 billion (2015) + * Cash flow from financing: -$18.1 billion (2016), $17.4 billion (2015) + + The company shows a decrease in cash flow from operations, which might j \ No newline at end of file diff --git a/src/analysis/pre-analysis_combined/GOOGL_combined.txt b/src/analysis/pre-analysis_combined/GOOGL_combined.txt new file mode 100644 index 0000000..ecca0c3 --- /dev/null +++ b/src/analysis/pre-analysis_combined/GOOGL_combined.txt @@ -0,0 +1,249 @@ + Financial Overview: + +1.Total revenue: + + + +For the fiscal year ended December 31, 2017, Google's total revenue was $162,901 million, an increase of 14.2% from $139,053 million in the previous year. This was mainly driven by growth in the Other revenue segment, which saw a 33.0% increase from $6,399 million to $8,387 million. + + + +2.Net income: + + + +Google's net income for the fiscal year ended December 31, 2017 was $10,905 million, $1,015 million above the previous year's net income of $9,890 million. This resulted in a net income margin of 6.9%, compared to an industry average of 2.8%. The increase in net income was primarily due to the growth in Other revenue, which greatly offset the increase in Operating expenses. + + + +3.Gross margin: + + + +Google's gross margin for the fiscal year ended December 31, 2017 was 65.7%, a slight decline from 66.7% in the previous year. This change was mainly due to the increase in Operating expenses, which rose from a percentage of sales of 34.9% in the previous year to 35.9% in the current year. The decrease in gross margin was partially compensated by increasing the Other revenue segment from 43.5% to 45.5% of sales. + + + +Operational Efficiency: + +1.Operating margin: + + + +Google's operating margin for the fiscal year ended December 31, 2017 was 21.5%, lower than the industry average of 23.3%. The decline in the operating margin was mainly due to the increase in net selling, general, and administrative expenses, which rose from a percentage of sales of 15.4% in the previous year to 16.2% in the current year. This increase was partially offset by the growth in Other revenue, which rose from a percentage of sales of 43.5% in the previous year to 45.5% in the current year. + + + +2.Cost management effectiveness: + + + +Google's cost management effectiveness can be assessed by analyzing the relationship between net selling, general, and administrative expenses and net income. The company's G&A expenses as a percentage of net income increased from 33.0% in the previous year to 35.9% in the current year. This indicates that the increase in these expenses was not as efficiently managed as an increase in net income. However, the increase in Other revenue helped to mitigate this inefficiency. + + + +Liquidity and Solvency: + +1.Current ratio: + + + +Google's current ratio was 1.6, indicating that the company had a 6-month liquidity position, which is in line with industry standards. The increase in current assets, $135,155 million, was driven mainly by the increase in inventory, $5,637 million. + + + +2.Quick ratio: + + + +Google's quick ratio was 1.1, indicating that the company had a 4-month liquidity position, which is below industry standards. The increase in inventory, $5,637 million, was a significant contributor to this decrease in liabilities, which are financial instruments that will or may be converted into cash quickly. + + + +3.Debt-to-equity ratio: + + + +Google's debt-to-equity ratio was 0.6, indicating that the company's debt totaled 60% of its equity, which is higher than industry standards. This reflects the company's heavy reliance on debt financing, which increased from $89,210 million in + Financial Overview: + + + +- Total revenue for Alphabet Inc. was $20.88 billion in 2016, up from $20.46 billion in 2015. This represents a year-over-year growth rate of 4.6%. + +- Net income for Alphabet Inc. was $9.40 billion in 2016, up from $7.03 billion in 2015. This represents a year-over-year growth rate of 36.7%. + +- Gross margin for Alphabet Inc. was 84.5% in 2016, compared to 80.9% in 2015. + + + +Operational Efficiency: + + + +- Operating margin for Alphabet Inc. improved from 28.1% in 2015 to 31.6% in 2016, indicating improved operational efficiency. + +- This is significantly higher than the industry average, which + Financial Overview: + +* Total Revenue: + + In 2017, Alphabet generated $128.2 billion in revenue, which represents an increase of 10.2% compared to 2016. +* Net Income: + + Alphabet's net income for 2017 was $9.9 billion, down 9.9% from 2016. +* Gross Margin: + + Gross margin in 2017 was 81.9%, up 0.6% from 2016. + +Operational Efficiency: + +* Operating margin for 2017 was 45.4%, down 2.3% from 2016. +* While the effort to control costs has been a focus in recent years, there were significant deviations from expected figures in 2017. + +Liquidity and Solvency: + +* Current Ratio for 2017 was 3.94, down 0.14 from 2016. +* Quick Ratio for 2017 was 2.78, down 0.19 from 2016. +* Debt-to-Equity Ratio for 2017 was 1.40, down 0.05 from 2016. +* Interest Coverage Ratio for 2017 was 237.00, down 7.52 from 2016. + +Cash Flow Analysis: + +* Cash flow from operations in 2017 was $90.5 billion, up 216.4% from 2016. +* Cash flow from investing in 2017 was $16.9 billion, down 20.0% from 2016. +* Cash flow from financing in 2017 was -$11.7 billion + Sure, I can help you with that. Here is an example of a financial analysis for Alphabet Inc. based on the information you provided: + +1. Financial Overview: +* Revenue: Alphabet Inc. generated total revenue of $120.6 billion and $130.9 billion in the fiscal year ending December 31, 2018, and 2017, respectively (a decrease of 10.3%). +* Gross Margin: The gross margin remained relatively stable at 39.3% in 2018 and 40.0% in 2017. +* Net Income: The net income for the fiscal year ending December 31, 2018, was $32.3 billion, a decrease of 8.4% from the previous year ending Dec 31, 2017 ($36.7 billion). +1. Operational Efficiency: +* The operating income for Alphabet Inc. saw a decrease of 6.4% from $67.9 billion in 2017 to $63.6 billion in 2018. +* However, the operating margin slightly improved from 47.4% in 2017 to 47.1% in 2018. +* Operational efficiency remains strong, and Alphabet Inc. has been able to improve its cost management effectiveness in recent years, leading to an increase in gross profit margins. +1. Liquidity and Solvency: +* Alphabet Inc. maintains a strong liquidity position, with a current ratio of 6.1x in 2018, compared to 4.9x in 2017, indicating an improvement in short-term liquidity. +* The quick ratio remained unchanged at 3.1x in 2018 and 2017, demonstrating consistent liquidity in the form of quick assets (current assets minus current liabilities). +* The company's debt-to-equity ratio decreased from 3.6x in 2017 to 2.7x in 2018, indicating a decrease in reliance on external funding. +* The interest coverage ratio increased from 3.8x in 2017 to 4.2x in 2018, demonstrating that the company has been able to generate sufficient earnings to cover its interest expenses. +1. Cash Flow Analysis: +* The company's cash flow from operations increased from $21.7 billion in 2017 to $23.9 billion in 2018, indicating an improvement in cash generation. +* Cash from investing increased from $1.6 billion in 2017 to $9.7 billion in 2018, mainly due to capital expenditures related to infrastructure developments. +* Cash from financing decreased from $4.7 billion in 2017 to $4.0 billion in 2018, mainly due to lower proceeds from equity issuances. +* However, the cash holdings did increase from $18.5 billion in 2017 to $22.8 billion in 2018, indicating an improvement in cash management. +1. Investment and Future Outlook: +* Alphabet Inc. has been making significant investments in various areas, including search engine innovation, cloud computing, and advertising. +* The company has also been exploring new opportunities, such as self-driving cars, health-related projects, and internet of things (IoT) devices. +* Alphabet Inc.'s management outlook for the future remains optimistic, with plans to continue investing in research and development to drive growth. +1. Risks and Opportunities: +* Key risks facing the company include regulatory challenges, cybersecurity threats, and increased competition. +* Potential impacts of these risks include limitations on growth, increased costs, and loss of market share. +* Emerging opportunities in the market or through technological advancements could include expansion into emerging markets, growth in artificial intelligence and machine learning, and new revenue streams. + +Overall, Alphabet Inc. has shown strong financial performance in recent years, with + 1. Financial Overview: + + - In 2019, Alphabet generated total revenue of $161,902 million, a significant increase of 38.5% from 2018. + - Net income for Alphabet in 2019 was $22,463 million, a 56.1% increase compared to 2018. + - Gross margin in 2019 was 49.9%, an improvement of 0.5% from the previous year. + +2. Operational Efficiency: + + - Alphabet's operating margin increased to 20.6% in 2019 from 16.6% in 2018, surpassing the industry standard. + - The company's cost management effectiveness remained strong, with operating expenses as a percentage of revenue decreasing from 50.5% in 2018 to 40.1% in 2019. + +3. Liquidity and Solvency: + + - Current ratio for Alphabet in 2019 was 3.5:1, indicating adequate liquidity. + - The quick ratio for the company in 2019 was 2.9:1, reflecting a slightly lower level of liquidity compared to the current ratio. + - Alphabet's debt-to-equity ratio increased from 0.8:1 in 2018 to 1.6:1 in 2019, indicating an increase in debt levels. + - The interest coverage ratio for the company in 2019 was 37.8:1, well above the industry standard, indicating strong solvency. + +4. Cash Flow Analysis: + + - Cash flow from operations for Alphabet in 2019 was $29,609 million, a 43.6% increase from the previous year. + - Investing cash flow for the company in 2019 was $20,820 million, an increase of 201.7% compared to 2018. + - Financing cash flow for Alphabet in 2019 was $11,270 million, a decrease of 52.8% from the previous year. + +5. Investment and Future Outlook: + + - In 2019, Alphabet invested heavily in research and development, with capital expenditures totaling $16,983 million, a 14.7% increase from the previous year. + - The company also made significant acquisitions, including a $1.7 billion acquisition of Ingage to enhance its point of care services for patients. + - Alphabet's management expects continued growth through its diverse portfolio of products and services, including its cloud computing, search, advertising, and smart home offerings. + +6. Risks and Opportunities: + + - Key risks facing Alphabet include regulatory scrutiny, ongoing competition in the search and advertising markets, and the potential for technological disruptions in various sectors. + - Emerging opportunities for the company include expansion into new markets, such as healthcare and enterprise, as well as continued innovation in artificial intelligence, virtual and augmented reality, and smart home technology. + 1. **Financial Overview** +- Revenue: Alphabet Inc.’s revenue for the year-ended December 31, 2021, was $191.9 billion, up $37.4 billion or 23.4% compared to the previous year. +- Net Income: The company's net income for the same period was $40.7 billion, up $18.7 billion or 108.8% compared to the previous year. +- Gross Margin: The gross margin for the company was 85.9%, up from 80.4% compared to the previous year. + +2. **Operational Efficiency** +- Operating Margin Trends: The operating margin trend for the company has been increasing over the past few years due to strong revenue growth and effective cost management. In 2021, the operating margin was 36.9%, up from 33.9% compared to 2020. +- Industry Standards: The company's current operating margin is above industry standards, indicating a high level of operational efficiency. +- Cost Management Effectiveness: Cost management has been an area of focus for the company in recent years, leading to reduced costs and increased profitability. + +3. **Liquidity and Solvency** +- Current Ratio: The current ratio for the company was 0.9, indicating that the company has enough current assets to cover its short-term liabilities. +- Quick Ratio: The quick ratio for the company was 0.7, which is below the industry average but still indicates sufficient liquidity to meet short-term obligations. +- Debt-Equity Ratio: The company's debt-equity ratio was 0.5, which is lower than the industry average, indicating a strong balance between debt and equity financing. +- Interest Coverage Ratio: The company's interest coverage ratio was 24.8, which is above the industry average, providing a strong cushion against debt payments. + +4. **Cash Flow Analysis** +- Cash Flow from Operations: The company generated $99.2 billion in cash flow from operations in 2021, up from $70.0 billion compared to 2020. +- Cash Flow from Investing: The company generated $14.1 billion in cash flow from investing in 2021, down from $19.6 billion compared to the previous year. +- Cash Flow from Financing: The company generated $3.7 billion in cash flow from financing in 2021, up from $2.0 billion compared to the previous year. + +5. **Investment and Future Outlook** +- Major Investments: The company has been investing heavily in several areas, including search engines, cloud computing, smart homes, and virtual reality. +- Mergers and Acquisitions: In 2021, the company made several acquisitions, including Fitbit, which will help strengthen its position in wearable technology. +- Management Outlook and Future Growth Initiatives: The management has a strong outlook for the future due to the growing adoption of Google's products and services in various areas. The company is also focused on developing new technologies, entering new markets, and enhancing its existing business line. + +6. **Risks and Opportunities** +- Key Risks: The company faces several risks, including regulatory uncertainty, antitrust challenges, cybersecurity threats, and increased competition in certain markets. +- Potential Impacts: Any adverse impact on the company's business, particularly from clients or governments, could result in revenue declines. +- Emerging Opportunities: The company's dominance in the search engine market presents growth opportunities, particularly in the areas of cloud computing, search advertising, and video streaming. The company's digital advertising platform remains a significant area of growth, with the increasing adoption of mobile devices and the rise of social media platforms. + Financial Overview: + +- Total Revenue in 2021 was up 46.4% compared to the same period in 2020. +- Net Income in 2021 was up 45.6% compared to the same period in 2020. +- Gross Margin in 2021 was up 44.9% compared to the same period in 2020. + +Operational Efficiency: + +- Operating Margin in 2021 remained constant compared to the same period in 2020. +- Cost Management Effectiveness in 2021 was strong, with a reduction in operating expenses of 5.9%. + +Liquidity and Solvability: + +- Current Ratio in 2021 was down 19.3% compared to the same period in 2020. +- Quick Ratio in 2021 was down 21.1% compared to the same period in 2020. +- Debt-to-Equity Ratio in 2021 was up 64.4% compared to the same period in 2020. +- Interest Coverage Ratio in 2021 was up 10.8% compared to the same period in 2020. + +Cash Flow Analysis: + +- Cash Flow from Operations in 2021 was up 40.6% compared to the same period in 2020. +- Cash Flow from Investing in 2021 was down 65.1% compared to the same period in 2020. +- Cash Flow from Financing in 2021 was down 4.8% compared to the same period in 2020. + +Investment and Future Outlook: + +- No major investments, mergers, or acquisitions were disclosed in the report. +- Management's outlook for the future includes continuing its focus on innovation and growth in the digital technology space. + +Risks and Opportunities: + +- Key risks facing the company include increased competition, rapid technological advancements, and geopolitical uncertainties. +- Emerging opportunities in the market or through technological advancements include continued growth in the digital technology space and expansion into new markets. + Table of Contents +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS \ No newline at end of file diff --git a/src/analysis/pre-analysis_combined/MSFT_combined.txt b/src/analysis/pre-analysis_combined/MSFT_combined.txt new file mode 100644 index 0000000..b64dc98 --- /dev/null +++ b/src/analysis/pre-analysis_combined/MSFT_combined.txt @@ -0,0 +1,1052 @@ + Financial Overview: + +- Total revenue for XYZ Inc. in the fiscal year 2021 was $10.2 million, representing a 7% increase from the previous year. + +- Net income for XYZ Inc. in the fiscal year 2021 was $2.4 million, representing a 30% increase from the previous year. + +- Gross margin for XYZ Inc. in the fiscal year 2021 was 32%. + +Operational Efficiency: + +- Operating margin for XYZ Inc. in the fiscal year 2021 was 24%, above the industry average of 20%. + +- Cost management effectiveness shows improvement over the past fiscal year as operational expenses decreased by 8%. + +Liquidity and Solvency: + +- Current ratio for XYZ Inc. in the fiscal year 2021 was 2.8, indicating sufficient current assets to meet short-term obligations. + +- Quick ratio for XYZ Inc. in the fiscal year 2021 was 2.0, also indicating sufficient current assets to meet short-term obligations. + +- Debt-to-equity ratio for XYZ Inc. in the fiscal year 2021 was 1.3, below the industry average of 2.0. + +- Interest coverage ratio for XYZ Inc. in the fiscal year 2021 was 5.8, indicating sufficient EBIT to cover interest expenses. + +Cash Flow Analysis: + +- Cash flow from operations for XYZ Inc. in the fiscal year 2021 was $1.2 million, representing a 20% increase from the previous year. + +- Cash flow from investing for XYZ Inc. in the fiscal year 2021 was -$1.8 million, mainly due to the purchase of intangible assets and long-term investments. + +- Cash flow from financing for XYZ Inc. in the fiscal year 2021 was $4.2 million, mainly due to the increase in net income and reinvestment of earnings. + +Investment and Future Outlook: + +- XYZ Inc. announced a major investment in research and development during the fiscal year 2021, aimed at developing new products and expanding market share. + +- Management's outlook for the future growth initiatives includes strategic partnerships, geographic expansion, and product diversification. + +Risks and Opportunities: + +- Key risks facing XYZ Inc. include trade tensions, increased competition, and supply chain disruptions. + +- Emerging opportunities in the market include growth in the e-commerce sector and technological advancements such as artificial intelligence and robotics. + 1. Financial Overview: + +- Total revenue for the fiscal year was $XXX million, representing a year-over-year growth rate of XX%. +- Net income for the period was $XXX million, up XX% from the previous year. +- The gross margin was XX%, an improvement of XX% from the previous year. + +Notable trends include a consistent increase in revenue and net income with a positive gross margin trend. However, there has been no significant change in the operating margin. + +2. Operational Efficiency: + +- The operating margin remained relatively stagnant at XX%, which is slightly below industry standards. +- Cost management was effective, leading to a reduction in the cost of goods sold by XX%. + +3. Liquidity and Solvency: + +- The current ratio was X.XX, indicating good liquidity. +- The quick ratio was X.XX, also indicating good liquidity. +- The debt-to-equity ratio was X.XX, which is within acceptable levels. +- The interest coverage ratio was X.XX, indicating that the company has the ability to meet its interest payments. + +4. Cash Flow Analysis: + +- Cash flow from operations was net positive at XX million, mainly due to the increase in revenue and effective cost management. +- Investing expenditures totaled XX million, which was mostly related to growth initiatives. +- Financing activities resulted in a net inflow of XX million, due to the issuance of new debt and equity. + +5. Investment and Future Outlook: + +- The company recently acquired XYZ for $XXX million, which is expected to bolster their market share. +- Management plans to expand into new markets and introduce new products, aiming for a 10% growth rate in the next fiscal year. + +6. Risks and Opportunities: + +- Economic downturns could impact demand for the company's products or services. +- Fluctuations in raw material prices could impact costs and margins. +- Increasing competition in the market could impact revenue growth. +- Emerging technologies, such as automation and sustainability initiatives, could create new opportunities for the company to innovate and increase efficiency. + 78 PART II Item 7 Other Supplementary Information We describe other information related to us and our business below: + + + + +79 PART II Item 8 Item 8 of Form 10-K certain information is required to be disclosed under law or regulation ( Part II , Item 8 of Form 10-K ) Item 8 of Form 10-K ) including: + + + + +80 PART II Item 9 Item 9 of Form 10-K certain information is required to be disclosed under law or regulation ( Part II , Item 9 of Form 10-K ) Item 9 of Form 10-K ) , such as: + + + + +81 PART II Item 10 Item 10 of Form 10-K report on environmental matters, including the following: + + + + +82 PART II Item 11 Item 11 of Form 10-K report on mining matters, including the following: + + + + +83 PART II Item 12 Item 12 of Form 10-K report on geologic, geotectonic, hydrologic or other natural disasters, including the following: + + + + +84 PART II Item 13 Item 13 of Form 10-K report on material investments in property, plant, and equipment, and intangibles, including the following: + + + + +85 PART II Item 14 Item 14 of Form 10-K report on environmental or long-lived assets, including the following: + + + + +86 PART II Item 15 Item 15 of Form 10-K statement of physical objective and whole ore reserve and metal/substance that the company has proven to be recoverable, indicating the percentages and reserve at the beginning and end of each period and reserves that were became unproven during each period. + +87 Part II Item 16 Item 16 of this Form 10-K) Management Compensation 16 PART II Item 16 16 + +88 We filed under the Securities Act of 1933, and the Securities Exchange Act of 1934, in fulfillment of the annual reporting requirement. 16 PART II Item 16 is our report about our executive compensation for officers and directors. 16 PART II Item 16 of Form 10-K) The 16th item, Part 2 of Form 10-K under the Securities and Exchange Commission, provides the requirements and regulations to which we must comply when it comes to compensating our officers and directors. + Financial Overview: + + + +"The financial year 2021-2022 marked significant growth for the company. Total revenue increased by 22% from the previous year, reaching $10.5M. Net income also experienced an increase of 15%, resulting in a net profit of $1.9M. This was a positive development given the challenging economic environment. + + + +Gross profit margin improved by 2%, reflecting better cost management and pricing strategies. Year-over-year growth in gross profit margin was driven by improved operational efficiencies and higher sales volumes across all product categories. + + + +One notable trend was the increase in online sales, which grew by 40% YoY. This shift towards e-commerce has accelerated due to the pandemic, and the company is paying close attention to capitalize on this trend. + + + +Overall, the 2021-2022 financial year was marked by robust financial performance. However, the company is facing some challenges in managing supply chain disruptions and rising input costs, which could impact future financial results." + + + +Operational Efficiency: + + + +"The operational efficiency of the company has improved significantly over the past fiscal year. Operating margin increased by 2%, which is above the industry average of 2%. This improvement can be attributed to better cost management, improved pricing strategies, and higher sales volumes across all product categories. + + + +In terms of cost management, the company has implemented several measures, such as streamlining inventory management processes and reducing waste in production, which has led to a decrease in overhead costs. The company has also been focusing on improving labor productivity by investing in training and development programs for employees." + + + +Liquidity and Solvency: + + + +"The company has maintained a strong liquidity position, with a current ratio of 3.5:1 and a quick ratio of 2.7:1. These ratios indicate that the company has ample cash reserves to meet short-term liquidity needs. However, it's worth noting that the company's inventory levels have been increasing, which could impact liquidity in the future if not managed effectively. + + + +In terms of solvency, the company's debt-to-equity ratio has decreased from the previous year, while interest coverage ratio has been maintained at a comfortable level. These developments suggest that the company has a strong solvency position, but it's still important to closely monitor the company's debt levels given the increasing input costs." + + + +Cash Flow Analysis: + + + +"The company has generated strong cash flows from operations, investing, and financing. Net cash provided by operating activities increased by 25%, driven by higher profitability and improved working capital management. Net cash generated from capital expenditures and investments was $1M, which was used to fund expansion projects and capitalize on new growth opportunities. + + + +Financing activities resulted in an inflow of cash, as the company issued new debt and equity financing. The net increase in cash from financing activities was $2M, which brought the total cash holdings to $5M. However, the company experienced a significant decrease in cash holdings primarily due to increased investments in the business. + + + +Overall, the company has a healthy cash position, with cash holdings of $5M, which provides a cushion to absorb any unexpected expenditures." + + + +Investment and Future Outlook: + + + +"The company is heavily invested in growth initiatives, including the expansion of its e-commerce platform and the launch of new products. The company has also been exploring potential M&A opportunities to expand its market share and leverage its expertise in the industry. Management believes that these initiatives will drive growth and enhance the company's competitive position in the market. + + + +Furthermore, the company is focused on improving its operational efficiencies and reducing costs, which will enable it to generate higher profits and increase shareholder returns. + + + +Overall, the company's outlook is optimistic, with a strong focus on growth and operational excellence." + + + +Risks and Opportunities: + + + +"The company is facing several risks, including supply chain disruptions, rising input costs, and increased competition in the market. These challenges could impact the company's financial performance and growth prospects. However, the company is well-positioned to navigate these risks given its strong liquidity position and operational efficiencies. + + + +There are also several emerging opportunities for the company, including the growth of e-commerce and the adoption of new technologies that could enhance its products and services. The company needs to continually innovate and invest in research and development to stay ahead of the competition and capitalize on these opportunities." + 1. **Financial Overview**: + + - Total revenue for the company was $XXX million in 2021, up from $XXX million in 2020. + - The net income for the company was $XXX million in 2021, representing a healthy increase from the $XXX million achieved in 2020. + - Gross margin for the year came in at X%, showing a slight decline compared to the Y% recorded in 2020. + - Year-over-year revenue growth rate stands at X%. + + Notable trends: + - Increase in revenue due to successful expansion into new markets and product offerings. + - Margins may have been negatively impacted by higher operating costs. + + +2. **Operational Efficiency**: + + - Operating margin for the company was X%, remaining stable compared to the Y% recorded in 2020. + - This falls short of the industry standard of Z% for companies in this segment. + - Cost management was reasonably effective in controlling expenses throughout the year. + + +3. **Liquidity and Solvency**: + + - Current ratio stands at X, indicating sufficient short-term liquidity. + - Quick ratio, which accounts for inventory and accounts receivable, is at X. This suggests adequate operational flexibility. + - Debt-to-equity ratio was Z, showing a healthy balance between debt financing and equity financing. + - Interest coverage ratio, which measures a company's ability to meet its interest payments, was Y. This is within the industry norm. + + +4. **Cash Flow Analysis**: + + - Net cash from operations was X, driven by increased revenue and better management of costs. + - Net cash used in investing activities was Y, mainly due to investments in capital equipment and working capital. + - Net cash used in financing activities was Z, reflecting issuance of new shares and payment of dividends. + + Significant changes: + - Large inflow of cash from operations, contributing to increased net cash holdings. + + +5. **Investment and Future Outlook**: + + - The company plans to invest heavily in R&D to develop new products and innovate in existing markets. + - Potential mergers or acquisitions to expand into complementary market segments are under consideration. + - Management is bullish about growth prospects, with plans to increase market share and revenue by X% in the coming year. + + +6. **Risks and Opportunities**: + + Key risks: + - Fluctuations in currency exchange rates could impact imports/exports and profit margins. + - Economic downturn could lead to reduced consumer demand and impact sales. + + Emerging opportunities: + - Growing demand for eco-friendly products presents a significant opportunity. + - Expansion into emerging markets, particularly technology-driven sectors, could generate substantial growth. + Financial Overview: + + + +- Total revenue for the company increased by 9% YoY to $2.5 billion. This growth was driven by strong sales across all product categories. + +- Net income saw a 15% YoY increase to $500 million. This growth was largely due to improved cost management practices, resulting in higher profit margins. + +- Gross margin expanded to 35%, up from 32% in the previous year. This was primarily due to increased product pricing and better control over production costs. + + + +Operational Efficiency: + + + +- Operating margin increased by 10% YoY to 12%. This growth was driven by improved cost control measures, such as sourcing cost savings and streamlining supply chain processes. + +- Industry standards for operating margins in this sector typically range between 8-10%. While the company's operating margin is above these standards, it could benefit from further cost reduction initiatives to improve its competitive edge. + + + +Liquidity and Solvency: + + + +- Current ratio increased by 5% YoY to 2.0. This ratio measures the company's ability to cover its short-term liabilities with short-term assets. + +- Quick ratio also increased by 5% YoY to 1.5. This ratio eliminates some of the less liquid assets from the current ratio, providing a more accurate measure of liquidity. + +- Debt-to-equity ratio decreased by 5% YoY to 1.2. This ratio measures the relative proportions of debt and equity financing in the company. + +- Interest coverage ratio increased by 20% YoY to 3.5. This ratio measures the company's ability to cover interest payments on its debt with earnings before interest and taxes. + + + +Cash Flow Analysis: + + + +- Cash from operations increased by 10% YoY to $900 million. This was driven by strong sales growth and improved cost control measures. + +- Investment expenditures decreased by 5% YoY to $50 million. This decrease was primarily due to lower capital expenditures on property, plant, and equipment. + +- Financing activities accounted for a net cash inflow of $1.4 billion, driven by increased equity financing and repayment of debt. + +- The company's cash holdings increased by $1.0 billion YoY, primarily driven by lower capital expenditures and higher equity financing. + + + +Investment and Future Outlook: + + + +- The company did not make any major investments, mergers, or acquisitions in the past fiscal year. + +- Management's outlook for the future is optimistic, with plans to expand into new markets and launch new products. The company also intends to continue improving cost control measures to boost profitability. + + + +Risks and Opportunities: + + + +- One major risk facing the company is increased competition in the market, both from established players and new entrants. + +- The company could also face challenges related to pricing pressure and supply chain disruptions, which could impact revenue growth. + +- Emerging technologies, such as automation and artificial intelligence, could present both opportunities and risks for the company. While these technologies could improve efficiency and reduce costs, they could also lead to job displacement and increased regulation. + + + +Overall, the company is in a strong financial position, with improving profitability and cash flow. However, there is room for further cost reduction initiatives to enhance its competitive edge. The company should carefully monitor the impact of external risks and market disruptions, while also leveraging emerging technologies to enhance its operations and stay ahead of the competition. + Financial Overview: + +* In 2022, Microsoft Corporation reported total revenue of $ 147.68 billion, a year-over-year growth of 30.4%. Net income was $ 16.71 billion, a year-over-year growth of 29.8%. Gross margin was 67.2%, an improvement from 65.0% in the previous fiscal year (2021). +* In 2021, Microsoft Corporation reported total revenue of $ 104.18 billion, a year-over-year growth of 18.8%. Net income was $ 15.50 billion, a year-over-year growth of 25.5%. Gross margin was 63.9%, a decrease from 65.0% in the previous fiscal year (2020). + +Operational Efficiency: + +* Operating margin increased from 24.7% in 2021 to 28.0% in 2022. This represents a year-over-year improvement of 15.3%. +* Microsoft performed well in cost management compared to industry standards. + +Liquidity and Solvency: + +* Current ratio increased from 6.4:1 in 2021 to 7.9:1 in 2022. This represents a year-over-year improvement of 26.1%. +* Quick ratio increased from 6.0:1 in 2021 to 7.3:1 in 2022. This represents a year-over-year improvement of 22.1%. +* Debt-to-equity ratio decreased from 1.0:1 in 2021 to 0.9:1 in 2022. This represents a year-over-year improvement of 10%. +* Interest coverage ratio increased from 3.5 times in 2021 to 4.2 times in 2022. This represents a year-over-year improvement of 17.2%. + +Cash Flow Analysis: + +* Cash flow from operations increased from $ 30.99 billion in 2021 to $ 40.20 billion in 2022. This represents a year-over-year increase of 31.7%. +* Cash flow from investing activities decreased from $ -2.75 billion in 2021 to -$ 3.41 billion in 2022. This represents a year-over-year decrease of 23.6%. +* Cash flow from financing activities decreased from $ 1.24 billion in 2021 to $ 0.97 billion in 2022. This represents a year-over-year decrease of 23.6%. +* The company's cash and cash equivalents increased from $ 12.61 billion in 2021 to $ 15.68 billion in 2022. + +Investment and Future Outlook: + +* Microsoft did not make any major investments in 2022. +* Microsoft announced a $100 billion increase in its dividend payout and a $65 billion stock buyback in 2022, reflecting its strong financial position and commitment to ongoing growth. + +Risks and Opportunities: + +* Microsoft faces competition from other technology giants such as Google and Apple, as well as emerging players like cloud-based technology companies. +* Microsoft also depends heavily on sales from its flagship product, Windows, as well as Office. The company faces challenges in its legacy product business, particularly as it shifts away from traditional licensing models. +* On the other hand, Microsoft has several growth opportunities, including its cloud-based products such as Azure, its acquisition of LinkedIn, and its emerging technologies like metaverse and autonomous vehicles. + Financial Overview: + + Total revenue for the company increased by 10.5% from the previous fiscal year, reaching $1 million. Net income improved by 12.8% to $382,000. Gross margin expanded by 1.2% to 32.2%. + + + +Notable trends include a consistent focus on innovation, which has allowed the company to differentiate itself from competitors and drive revenue growth. + + + +Operational Efficiency: + +The operating margin has remained stable over the past fiscal year at 22%. This is slightly lower than industry standards, indicating potential areas for improvement in cost management. + + + +The company has demonstrated effective cost management throughout the year. It has successfully launched new products while maintaining profitability. + + + +Liquidity and Solvency: + +The current ratio increased by 2.7% to 4.5, indicating an improvement in the company's liquidity position. The quick ratio also improved by 1.5% to 2.7. These figures suggest that the company has sufficient liquidity to meet its short-term obligations. + + + +The debt-to-equity ratio increased by 7.7% to 0.8, indicating that the company's debt has grown compared to its equity levels. This suggests that the company may need to consider refinancing its debt in the future. + + + +The interest coverage ratio increased to 4.1, indicating that the company has been able to cover its interest expenses. This is an improvement compared to the previous year's figure of 3.1. + + + +Cash Flow Analysis: + +The company generated cash flow from operations of $250,000, a 41.2% increase from the previous year. This is largely due to the growth in revenue and effective cost management. The company also invested $150,000 in capital equipment, resulting in a net increase in cash holdings of $100,000. + + + +Investment and Future Outlook: + +The company announced the launch of two new product lines in Q2, which are expected to drive additional revenue growth in the coming fiscal year. The company has also haven + Financial Overview: + +- Total Revenue: The company generated $X million in total revenue for the fiscal year, which represents a Y% increase compared to the previous year. + +- Net Income: The company reported a net income of $X million, up X% from the previous year. + +- Gross Margin: The gross margin increased from X% to Y% due to cost reduction initiatives and price adjustments. + + + +Operational Efficiency: + +- Operating Margin: The operating margin decreased from X% to Y% over the past fiscal year, which is below industry standards. + +- Cost Management: While the company implemented cost-saving measures, it failed to meet its initial goals, resulting in higher expenses than expected. + + + +Liquidity and Solvency: + +- Current Ratio: The current ratio improved from X to Y, which indicates better liquidity management. + +- Quick Ratio: The quick ratio decreased from X to Y, indicating less liquidity than expected. + +- Debt-to-Equity Ratio: The debt-to-equity ratio rose from X to Y, indicating an increase in debt and a decrease in equity. + +- Interest Coverage Ratio: The interest coverage ratio worsened from X to Y, indicating a decrease in the company's ability to meet interest obligations. + + + +Cash Flow Analysis: + +- Cash Flow from Operations: The cash flow from operations declined from X to Y, which may indicate operational inefficiencies or lower sales. + +- Cash Flow from Investing: There were no significant investments made during the year, resulting in no impact on cash flow. + +- Cash Flow from Financing: The cash flow from financing increased due to less borrowing and higher net income. + +- Changes in Cash Holdings: The company's cash holdings decreased from X to Y due to increased operating expenses. + + + +Investment and Future Outlook: + +- Investments: The company did not make any major investments in the past fiscal year. + +- Mergers and Acquisitions: The company was in talks to acquire another company, but the deal fell through. + +- Management Outlook and Future Growth Initiatives: The management expects to focus on cost reduction and revenue growth in the coming year. It plans to introduce new products and penetrate new markets through digital marketing strategies. + + + +Risks and Opportunities: + +- Risks: The company faces risks such as increased competition, fluctuating exchange rates, and supply chain disruptions. + +- Opportunities: The company can leverage technology to improve operational efficiency and reduce costs. It can also explore international markets and expand its product offerings. + 1. Financial Overview: + +* For the fiscal year ended June 30, 2021, Microsoft's total revenue was $ 162.8 billion, a 5.8% decrease from $ 166.8 billion the previous year. +* The company's net income for the same period was $ 25.3 billion, representing a 30.1% increase from $ 20.2 billion the previous year. +* In terms of gross profit margin, Microsoft improved to 63.1% from 59.9% the previous year. +* In terms of revenue growth, the company outperformed the industry average of 4.3%. +* Key financial figures for Microsoft for the fiscal year ended June 30, 2021: + + discrepancy reported by the FASB and the state of California on the effective tax rate for fiscal year ended June 30, 2003. Invitation to commence. Personal liability of shareholders For each stockholder declared eligible to participate in the stock for which a Participating Stock was surrendered, the Subsidiary shall be responsible for reissuing a new stock having a par value of $ 0.001, designated as the property of such Shareholder. The KSC shall immediately deliver to the Subsidiary such Participating Stock, and the Subsidiary shall immediately deliver to the Shareholder a new stock having a par value of $ 0.001, designated as the property of such Shareholder. Reacquisition Price. Except in the circumstances constituting deferred issuance rights, the Reacquisition Price of a Participating Stock shall be the price (the "Acquisition Price") at which such Participating Stock was issued to the Shareholder, plus a premium of $ 0.01 per share of Common Stock representing payment for the Participating Stock, subject to adjustment for Accrued Triggering Dividend and Accrued Triggering Expenses. Many + Part I of Contents +================== + +### 1. Part I: General Information + +The Table of Contents summarizes the information provided in the within Registration Statement for the Initial Public Offering of Microsoft Corporation's Common Stock. This includes: + +* Securities Information: Discusses information about the securities being offered, including the number of shares, price range, minimum investment amount, product characteristics, and distribution. +* Financial Information: Presents a summary of the company's financial status over the past three years, including income statements, balance sheets, cash flow statements, and key financial ratios. +* Operational Information: Information about the company's management, products, and services, competitors, strategic partnerships, and organizational structure. +* Risk Independent Directors and Decision Making Process: Information about the company's board of directors, including their qualifications, independence from management, and decision-making process. +* Additional Information: Explanation of other aspects related to the securities and the issuance, including legal disclosures and any amendments to SEC filings. + +### 2. Part II: Industry Analysis + +* Industry Overview: An overview of the software industry, including market size, growth rate, and major competitors. +* Industry Trends and Analysis: Discusses trends and analysis in the software industry, including e-commerce trends, emerging technologies, and potential opportunities. +* Industry Opportunities and Threats: Presents detailed information about opportunities and threats facing the industry, such as the impact of economic factors, changes in market trends, and competitive landscape. + +Part III of Contents +==================== + +### 1. Part III: Business Description + +* Business Description: Presents an overview of Microsoft Corporation's business model, mission, operations, strategy, and history. +* Products and Services: A detailed description of Microsoft's products and services, including Windows, Office, Xbox, and cloud computing. +* Market and Customer Analysis: Analyzes the size and scope of the target market, competitors, and target customers. +* Financial Plan and Projections: Presents assumptions, projections, and forecasts on income statements, balance sheets, cash flow statements, and key financial ratios. + +Part IV of Contents +=================== + +### 1. Part IV: Financial Information + +* Revenue Summary: An overview of Microsoft Corporation's revenue, including year-over-year growth rates, key financial ratios, and product breakdowns. +* Operating Expenses: A detailed analysis of Microsoft's operating expenses, including product development costs, marketing and sales, and research and development. +* Net Income Summary: A comprehensive summary of Microsoft's net income, including year-over-year growth rates and a breakdown of major revenue and expense items. + +Part V of Contents +=================== + +### 1. Part V: Use of Proceeds + +* Description of Proceeds Title: An overview of how the proceeds from the offering will be used, including working capital, corporate strategy, research and development, and other initiatives. +* Additional Information on Management's Decision Making Process: Explanation of the process used to make investment decisions, including financial analysis and expert input. +* Dilution Information: A detailed analysis of potential dilution resulting from the offering, including assumptions and projections. + +Conclusion +========== + +Microsoft Corporation's Registration Statement provides significant information about the company's financial status, business model, products and services, market and customer analysis, and future plans. This information can help investors make informed decisions about investing in Microsoft Corporation. Key takeaways include: + +* Microsoft Corporation has a strong financial position, with consistent growth over the past three years and projected income growth for the next several years. +* Microsoft Corporation's products and services are market-leading, with significant competitive advantages in the software industry. +* Microsoft Corporation's strategic focus on cloud computing and enterprise software solutions positions the company well for future growth and success. + I can help you with your homework. However, I would need more specific information about the data you are working with and what you want me to analyze. For example, which is the company that you want me to analyze and what is the purpose of the analysis? + + Part II, Item 8 +Announced +April 27, 2005 1.18 +2.07 +1.26 +2.04 +179 +200 +148 +203 +1.15 +2.04 +0.25 +0.15 +1.81 +2.46 +1.01 +0.02 +145 +234 +133 +233 +178 +182 + +Table of Contents + Microsoft Announces Second Quarter 2011 Financial Results + +Microsoft Corp. announced its second quarter 2011 financial results. Total revenue for the quarter was $ 26.4 billion, an increase of 5.1% year-over-year (YOY). Net income for the quarter was $ 6.9 billion, compared to $ 5.5 billion in the same period last year. The gross margin for the quarter was 25.2%, up from 24.0% in the same period last year. + +During the quarter, Microsoft’s Service & Other segment saw revenue growth of 21.2% YOY, driven by continued strong demand for the company’s cloud and enterprise services. The company’s Productivity & Server segment also saw strong revenue growth of 11.4% YOY, driven by continued demand for its productivity, server, and software offerings. The gaming segment saw revenue growth of 79.0% YOY, as it benefited from the strong sales of Xbox 360 game hardware and associated services. + +Microsoft's operating margin for the quarter was 20.2%, up from 19.3% in the same period last year. This improvement was primarily due to higher margins in the company’s Service & Other segment, which offset lower margins in the Productivity & Server segment. + +Microsoft's debt-to-equity ratio for the quarter was 0.09:1, up from 0.08:1 in the same period last year. The company's interest coverage ratio was 6.4:1, up from 5.2:1 in the same period last year, indicating that the company was able to meet its interest expense obligations with ease. + +The company generated $ 8.1 billion in cash from operations, $ 6.1 billion in cash from investing, and $ 4.2 bill + + Financial Overview + +* Microsoft generated $169.4 billion in total revenue for fiscal year 2021, representing a 16.8% increase from the previous year. +* The company's net income for fiscal year 2021 was $65.3 billion, which represents an increase of 63.6% from the previous year. +* Microsoft's gross margin remained unchanged from the previous year at 35.5%. + +Operational Efficiency + +* Microsoft's operating margin increased to 24.1% in fiscal year 2021, up from 22.9% in the previous year. This represents a strong improvement in efficiency. +* The operating margin trend for Microsoft compares favorably to industry standards, indicating that Microsoft is effectively managing its costs and generating strong profits. + +Liquidity and Solvency + +* Microsoft's current ratio increased from 4.2 to 5.5 in fiscal year 2021. This increase indicates that the company has stronger liquid holdings than in the previous year. +* Microsoft's quick ratio also improved from 3.7 to 4.6 in fiscal year 2021. This increase indicates that the company has strong liquid holdings and is well-positioned to meet short-term obligations. +* Microsoft's debt-to-equity ratio remained relatively consistent at 1.4 in fiscal year 2021, indicating that the company maintains a healthy balance between debt and equity financing. +* Microsoft's interest coverage ratio increased from 57.6 to 103.2 in fiscal year 2021. This increase indicates that the company is able to make interest payments on its debt without any difficulty. + +Cash Flow Analysis + +* Microsoft generated $56.0 billion in cash flows from operations in fiscal year 2021, up from $47.1 billion in the previous year. This represents a strong improvement in operating cash flows. +* Microsoft generated $10.3 billion in cash flows from investing in fiscal year 2021, which is lower than the previous year, indicating that Microsoft is not currently making significant investments. +* Microsoft generated $8.5 billion in cash flows from financing in fiscal year 2021, which is lower than the previous year, indicating that the company is not currently issuing or repurchasing significant amounts of stock. + +Investment and Future Outlook + +* Microsoft announced a $100 billion share repurchase plan in 2020, which is expected to continue into 2021. This represents a significant investment in the company's future growth. +* Microsoft continues to invest in research and development, with a focus on artificial intelligence and cloud computing. The company expects to continue to innovate and expand its product offerings. + +Risks and Opportunities + +* The COVID-19 pandemic has created challenges for Microsoft, particularly in terms of remote work and supply chain disruptions. The company has made arrangements to accommodate remote work and is closely monitoring supply chain logistics. +* Microsoft faces competition from other technology companies, such as Google and AMD. The company is focused on innovation and differentiation to maintain its market position. +* Microsoft has opportunities to further expand its cloud computing and AI offerings. The company continues to invest in these areas to capitalize on emerging trends in the market. + Introduction + +In this analysis, we will elaborate on Microsoft's financial performance for the year ending June 30, 2011. We will first summarize the key results, then dive into the company's operational efficiency and liquidity. Next, we will assess the cash flow analysis and discuss investment and future outlook. Finally, we will identify risks and opportunities for the company. + +Financial Overview +------------------ + +### Key Results + +* Revenue for the year ending June 30, 2011 was $ 22.3 billion, which represents a 9.3% increase over the previous year. +* Net income for the year was $ 7.5 billion, up 150.4% from the previous year. +* The gross margin for the company was 42.4%, an increase of 1.7 percentage points from the previous year. + +### Year-over-Year Growth Rates + +* Revenue growth rate: 9.3% +* Net income growth rate: 150.4% + +### Notable Trends + +* The Windows server and tools business witnessed significant growth, driven by increasing adoption rates of the cloud-based services. +* Services revenue, which includes Windows Live, Xbox Live, Skype, and Bing, grew 26.4%, reflecting the company's successful diversification strategy. + +Operational Efficiency +---------------------- + +### Operating Margin Trends + +* The operating margin for the year was 32.2%, an increase of 7.2 percentage points from the previous year. This translates to a net operating income of $ 7.5 billion. +* The operating margin is higher than the industry standard. + +### Cost Management Effectiveness + +* Microsoft's cost management strategy has been effective, with a decrease in operating expenses from the previous year. + +Liquidity and Solvency +----------------------- + +### Current and Quick Ratios + +* The current ratio was 3.1, indicating that the company has sufficient current assets to cover its current liabilities. +* The quick ratio was 2.2, suggesting that the company has maintained a healthy level of liquidity. + +### Debt-to-Equity and Interest Coverage Ratios + +* The debt-to-equity ratio was 0.6, which implies a moderate level of debt. +* The interest coverage ratio was 4.9, indicating that the company has a sufficient level of EBITDA to cover interest expenses. + +Cash Flow Analysis +------------------ + +### Cash Flow from Operations + +* The company generated a positive cash flow from operations, indicating that it was able to generate more cash than it spent on operating activities. + +### Cash Flow from Investing + +* The company spent $ 23.7 billion on property, plant, and equipment, as well as $ 1.1 billion on patents, copyrights, trademarks, and other intangibles. +* This represents a decrease of 4.7% from the previous year, indicating that the company is actively managing its capital expenditures. + +### Cash Flow from Financing + +* Cash received from financing activities included $ 15.0 billion in proceeds from issuing common stock and $ 0.4 billion in proceeds from issuing long-term debt. +* The company returned $ 7.4 billion in capital to shareholders through dividends and share repurchases. + +Investment and Future Outlook +----------------------------- + +### Major Investments + +* In 2007, Microsoft launched the Server and Tools Solutions Platform, which includes major investments in the development of new cloud services. +* In 2010, Microsoft launched several new products, such as theSurface, Bing Maps, and the Nokia Lumia. + +### Mergers and Acquisitions + +* In 2007, Microsoft acquired Skype for $ 8.5 billion. +* In 2010, Microsoft acquired Danger Mobile phone business. + +### Future Growth Initiatives + +* Microsoft continues to invest in cloud-based services and is currently working on + Financial Overview +---------------- + +Key Financial Figures +---------------------- + +* Total revenue: $24.9 billion +* Net income: $20.4 billion +* Gross margin: 41.3% +* Year-over-year growth rates: + + Revenue growth: 13.1% + + Net income growth: 26.1% + + Gross margin growth: 7.5% + +Notable Trends and Deviations +-------------------------------- + +* Gross margin expansion from 33.5% in 2010 to 41.3% in 2011 and 41.4% in 2012 (outperforming industry average) +* Focus on high-margin products, such as acquisition of LinkedIn and Bing search engine +* Investment in cloud computing technology and services + +Operational Efficiency +----------------------- + +Operating Margin Trends +----------------------- + +* Improved operating margin from 8.2% in 2010 to 11.6% in 2011 and further to 11.9% in 2012 (outperforming industry average) +* Focus on improving efficiency across all segments, notably Windows and Windows Server +* Focus on portfolio management, divesting from low-margin businesses, and investing in high-growth areas + +Cost Management Effectiveness +------------------------------ + +* Effective cost management initiatives, resulting in lower operating expenses and higher operating profit margins +* Improved working capital management, particularly in accounts receivable and accounts payable +* Continued focus on supply chain optimization and reducing lead times + +Liquidity and Solvency +---------------------- + +Current and Quick Ratios +------------------------- + +* Current ratio improved from 2.2 to 2.8, demonstrating improved liquidity +* Quick ratio improved from 1.9 to 2.1, indicating better operational liquidity + +Debt-to-Equity and Interest Coverage Ratios +------------------------------------------ + +* Debt-to-equity ratio decreased from 1.7 to 1.4, indicating lower financing costs +* Interest coverage ratio improved from 3.1 to 3.9, demonstrating better financial stability + +Cash Flow Analysis +------------------ + +Cash flow from operations, investing, and financing +-------------------------------------------------- + +* Cash flow from operations improved by $3.1 billion to $11.4 billion, driven by higher net income +* Cash flow from investing decreased by $1.1 billion, primarily due to the impact of the LinkedIn acquisition +* Cash flow from financing decreased by $3.1 billion, reflecting lower operating cash flows and increased interest payments + +Significant changes in cash holdings +-------------------------------------- + +* Increased cash holdings reduced the company's, net long-term investments decreased from $6.8 billion to $3.6 billion +* Net cash and cash equivalents increased from $4.7 billion to $7.1 billion + +Investment and Future Outlook +------------------------------ + +Major investments, mergers, or acquisitions +------------------------------------ + +* Acquisition of LinkedIn in Q1 2012 for $26.2 billion +* Advertising and marketing expenditures increased + +Management's outlook and future growth initiatives +-------------------------------------------------- + +* Focus on cloud computing and enterprise services revenue streams +* Investment in cloud-based technologies and services +* Expansion of not-for-profit partnerships + +Risks and Opportunities +----------------------- + +Key risks facing the company +---------------------------- + +* Competition from other cloud computing players such as Amazon, Google, and VMware +* Economic downturns, which could impact demand for Azure and other cloud-based services +* Integration risks related to the acquisition of LinkedIn + +Potential impacts +------------------- + +* Stringent enforcement of data privacy regulations could lead to additional regulatory and compliance costs +* Emergence of new cloud technologies, which could impact Microsoft's market position + 0 + +COPYRIGHT 2021 KAGGLE, Inc. unaufnahme,sgz + Financial Overview: + +* Revenue: Microsoft reported total revenue of $ 22.074 billion in the fiscal year ended June 30 , 2014, an increase of 12% from $ 21,863 million in the previous year. +* Net Income: Microsoft incurred a loss of $ 1,143 million in the fiscal year ended June 30 , 2014, compared to a profit of $ 5,520 million in the previous year. +* Gross Margin: Microsoft’s gross margin was 61.5%, up significantly from 54.2% in the previous year. + +Operational Efficiency: + +* Microso dific Efficiency: Microsoft’s operating margin improved to 41.5% from 33.6% in the previous year. This improvement can be attributed to cost management effectiveness, as well as sales growth. +* Comparison to Industry Standards: Microsoft’s operating margin is above the industry average, indicating operational efficiency. + +Liquidity and Solvency: + +* Current Ratio: Microsoft’s current ratio stands at 17.09 times, indicating strong liquidity. +* Quick Ratio: Microsoft’s quick ratio is 12.55 times, indicating strong liquidity. +* Debt-to-Equity Ratio: Microsoft’s debt-to-equity ratio is 0.80 times, indicating solvency. +* Interest Coverage Ratio: Microsoft’s interest coverage ratio stands at 0.9 times, indicating solvency. + +Cash Flow Analysis: + +* Cash from Operations: Microsoft generated $ 14.9 billion in cash from operations during the fiscal year. +* Cash from Investing: Microsoft invested $ 5.4 billion during the fiscal year, which resulted in a net cash outflow from investing activities. +* Cash from Financing: Microsoft generated $ 1.7 billion in cash from financing, with $ 1.1 billion coming from the issuance of common stock and $ 572 million from the sale of debt securities. + +Investment and Future Outlook: + +* Major Investments: Microsoft announced complex integration and productivity initiatives in 2014, which are expected to drive long-term growth. These initiatives include improvements to Office 365, the Windows Phone platform, and user experience across all of Microsoft’s products. +* Mergers and Acquisitions: Microsoft acquired several companies during the year, including Skype in 2011 and the mobile elron communication systems provider BMC Communications in 2013. +* Future Growth Initiatives: Management continues to prioritize cloud computing and mobile devices as key growth areas. The company is investing heavily in the development of Azure, its cloud platform, and the expansion of its gaming and entertainment offerings. + +Risks and Opportunities: + +* Key Risks: Microsoft faces intense competition from various companies, including Google, Amazon, and Apple. The company must continue to innovate and adapt to changing market conditions and consumer preferences. +* Emerging Opportunities: The growth of the cloud computing and mobile device markets presents significant opportunities for Microsoft. The company has already begun to make strides in these areas, with acquisitions such as Skype and Nokia highlighting this focus. + Microsoft Corporation's 2015 Annual Report contains extensive financial data and information about the company's operations and financial performance. + +The report begins with an overview of Microsoft's business strategy and operations, highlighting key achievements and initiatives for the year. The report also provides an overview of the industry in which Microsoft operates, including trends and challenges. + +The financial section of the report includes detailed financial information such as income statements, balance sheets, and cash flow statements. Microsoft's revenue for the year was $ 89,297 million, with net income of $ 26,021 million. The report also includes information on Microsoft's debt, equity, and retained earnings. + +Aside from the financial information, the report also includes disclosures regarding various risks and uncertainties that Microsoft faces, including risks such as changes in market conditions, competitive risks, and risks related to its foreign operations. Microsoft's risk management practices are also discussed in the report. + +Overall, Microsoft Corporation's 2015 Annual Report provides valuable insights into the company's financial performance and operations, as well as the risks and uncertainties associated with its business. + Sure, I'd be happy to help you with that. Based on the provided data, Microsoft has several important financial metrics that can be analyzed, including revenue, profitability, liquidity, and shareholder equity. + +1. Revenue: Microsoft's revenue for the fiscal year ended June 2016 was $ 93.2 billion, compared to $ 78.9 billion in the previous year. This represents a 19.5% increase in revenue, which is a significant growth. The growth was primarily driven by the Intelligent Cloud segment, which saw revenue growth of 35%. +2. Earnings before interest, taxes, depreciation and amortization (EBITDA): For the fiscal year ended June 2016, Microsoft's EBITDA was $ 31.9 billion, representing a 27% increase from the previous year's $ 25.7 billion. This is a strong indication of Microsoft's ability to generate profits. +3. Net income: For the fiscal year ended June 2016, Microsoft's net income was $ 13.9 billion, which is a 66.2% increase from the previous year's $ 8.3 billion. This represents a strong increase in profitability. +4. Return on equity (ROE): Microsoft's ROE for the fiscal year ended June 2016 was 28.1%. This is a good indication of Microsoft's ability to generate profits from shareholder equity. The ROE was driven by both revenue growth and profit growth. +5. Liquidity: Microsoft's current ratio for the fiscal year ended June 2016 was 3.3, which is a good indication of its liquidity. The current ratio measures a company's ability to meet its short-term obligations using its current assets. +6. Shareholder equity: Microsoft's total shareholder's equity for the fiscal year ended June 2016 was $ 30.8 billion, which is a 15.7% increase from the previous year's $ 26.6 billion. This represents a good increase in shareholder's equity + +In summary, Microsoft has exhibited strong revenue growth, profitability, and liquidity in the fiscal year ended June 2016. This is evident from the increase in EBITDA and net income, along with the healthy current ratio and shareholder’s equity. Additionally, the ROE is also within a healthy range. Overall, Microsoft appears to be in a strong financial position, with potential for continued growth. + Sure, I can help you with that! Based on the data provided, here is a summary of Microsoft's financial performance for the fiscal year ended June 30, 2017: + +Microsoft's revenue for the fiscal year ended June 30, 2017 was $ 110,031 million. This represents a decrease of 5.9% compared to the $ 116,320 million generated in the previous fiscal year. Contributing to this decrease was the shift to cloud-based subscription revenue in the Software and Services segment. + +Operating income for the fiscal year was $ 34,653 million, representing a increase of 13.5% compared to the $ 30,596 million generated in the previous fiscal year. This was driven by increased revenue recognition in the Software segment for subscriptions as well as increased revenue in the Services segment for cloud and server services. + +Net income for the fiscal year was $ 22,077 million, representing a increase of 13.5% compared to the $ 19,095 million generated in the previous fiscal year. This was driven by the increased operating income in the current period, as well as a decline in interest expenses and a decrease in tax expense. + +In terms of cash flow, Microsoft generated a net operating cash inflow of $ 25,843 million. This represents a 22.8% increase compared to the $ 21,168 million generated in the previous fiscal year. This was driven by the increase in Net Income for the period, as well as improved gross margins. However, this was offset by an increase in capital expenditures and a decline in Investing cash outflow related to property, plant and equipment. + +In terms of future growth prospects, Microsoft has continued to shift its focus towards cloud-based subscription revenue. The company has also been investing heavily in its AI and cloud technologies, which are expected to drive future growth. Additionally, Microsoft has been expanding its presence in emerging markets, such as the Middle East and Africa. + +Overall, Microsoft's financial performance for the fiscal year ended June 30, 2017 was solid, driven by increased revenue recognition in the Software segment and improved gross margins. However, there is still room for improvement in reducing costs and generating cash outside of operating activities. + Microsoft Corporation provided financial disclosures in its Form 10-K Annual Report for the fiscal year ended June 30, 2018. Here is a summary of the financial information presented in the financial statements: + +Revenue and Net Income +======================= + +Microsoft's revenue for the year ended June 30, 2018 was $ 122.9 billion $ 120.3 billion $ 115.6 billion, a 2.6% increase from the year ended June 30, 2017, and a 4.9% increase from the year ended June 30, 2016. The increase in revenue is primarily attributable to higher sales of the Personal Computing and Intelligent Cloud segments. + +Microsoft's net income for the year ended June 30, 2018 was $ 45.6 billion $ 43.4 billion $ 38.2 billion, a 10.7% increase from the year ended June 30, 2017, and a 18.7% increase from the year ended June 30, 2016. The increase in net income is primarily attributable to higher net sales across all segments. + +Cash Flows and Debt +==================== + +Microsoft generated positive operating cash flows of $ 71.8 billion $ 70.4 billion $ 63.7 billion for the year ended June 30, 2018, a 4.8% increase from the year ended June 30, 2017, and a 11.7% increase from the year ended June 30, 2016. The increase in operating cash flows was driven by higher net sales across all segments. + +Microsoft also generated positive free cash flows of $ 46.2 billion $ 45.0 billion $ 41.6 billion for the year ended June 30, 2018, a 5.2% increase from the year ended June 30, 2017, and a 8.1% increase from the year ended June 30, 2016. The increase in free cash flows is primarily due to higher operating cash flows. + +Microsoft's total long-term debt was specified as $ 41.0 billion $ 38.5 billion $ 35.1 billion at June 30, 2018, a 4.5% increase from the year ended June 30, 2017, and a 14.2% increase from the year ended June 30, 2016. The increase in long-term debt was primarily due to higher long-term debt issues. + +Stockholder Equity +================== + +Microsoft's stockholder equity for June 30, 2018 was specified as $ 150.6 billion $ 141.4 billion $ 137.8 billion, a 8% increase from the year ended June 30, 2017. The increase in stockholder equity was primarily due to the context of $ 53.0 billion $ 51.0 billion $ 50.6 billion of net income minus stockholder equity distributed. + +Judgment +========= + +There is not enough context provided in the pre-generated data to indicate any judgments about Microsoft Corporation. + +Conclusion +========== + +In summary, Microsoft Corporation reported a 2.6% increase in revenue and a 10.7% increase in net income for the year ended June 30, 2018, from the year ended June 30, 2017. The company generated positive operating and free cash flows and had a total long-term debt of $ 41.0 billion at June 30, + 1. Item 102 - Common Stock + +Cash Dividends Paid: + +11 + +In millions + +7 + +9 + +10 + +8. Stock-Based Compensation Expense + +3 + +9 + +7 + +9. Dividend Expense + +2144 + +31483 + +584 + +4792 + +5. Stock Options + +452030 + +3403930 + +2432950 + +6. Restricted Stock Units + +140365 + +84200 + +95845 + +7. Stock Appreciation Rights + +17177 + +1110 + +420 + +Total Stock-Based Compensation Expense + +Yes + +Yes + +Yes + +8. Stock Conversion Exercise + +B + +C + +A + +Total Stock Conversion Exercise + +Yes + +Yes + +Yes + +9. Additionally Paid in Conversion of Preferred Stock + +D + +E + +F + +Total Additional Paid in Conversion of Preferred Stock + +No + +No + +Yes + 60 PART II Item 7 Liquidity . 60 PART II Item 7 Liquidity + +A. Current Assets + +1. Cash and Cash Equivalents: The Company had $ 164.4 billion of cash and cash equivalents, $ 16.5 billion and $ 123.0 billion, respectively, at June 30, 2020 and June 30, 2019. +2. Accounts Receivable: The Company's accounts receivable, net, were $ 5.7 billion at June 30, 2020, and $ 14.8 billion at June 30, 2019. +3. Inventory: The Company's inventory was $ 20.6 billion at June 30, 2020, and $ 22.9 billion at June 30, 2019. +4. Prepaid Expenses: The Company's prepaid expenses were $ 5.9 billion at June 30, 2020, and $ 5.3 billion at June 30, 2019. +5. Other Current Assets: The Company's other current assets were $ 106.0 billion at June 30, 2020, and $ 98.6 billion at June 30, 2019. + +B. Current Liabilities + +1. Current Liabilities: The Company's current liabilities were $ 27.1 billion at June 30, 2020, and $ 35.7 billion at June 30, 2019. +2. Long-Term Liabilities + +C. Long-Term Liabilities + +1. Property, Plant, and Equipment, Net: The Company's property, plant, and equipment, net, were $ 295.3 billion at June 30, 2020, and $ 293.3 billion at June 30, 2019. +2. Intangible Assets, Net: The Company's intangible assets, net, were $ 186.7 billion at June 30, 2020, and $ 181.1 billion at June 30, 2019. + +D. Total Assets: + +1. The Company's total assets were $ 483.3 billion\*\*\* ($ 483.7 billion) at June 30, 2020 (\*\*\*\) and June 30, 2019 (\*\*\**), respectively. +2. The Company's total equity of $ 143.4 billion ($ 152.5 billion) at June 30, 2020 (\*\\%) and June 30, 2019 (\*\%), respectively. + +Notes accompany the above key financial ratios. + +\*\*\*Excludes depreciation, amortization, and accumulated depreciation, net of initial investment. \*\**Excludes accumulated depreciation, net of initial investment. + +61 PARTI . Item 61 . EARNINGS PER SHARE (EPS) +Earnings Per Share (EPS) is the net income for a company for a + In response to the request, please generate a detailed financial analysis for the provided data of Microsoft Corporation’s financial statements for the fiscal year ended June 30, 2021. + +I. Summary Information + +* Microsoft Corporation reported revenue of $ 44,281 million and operating income of $ 61,271 million for the fiscal year ended June 30, 2021. +* The company's net income for the fiscal year was $ 46,381 million. + +II. Balance Sheet + +a. Assets + +* Microsoft's total assets reported for the fiscal year were $ 75,278 million. + +b. Liabilities and Equity + +* Microsoft's total liabilities reported for the fiscal year were $ 32,775 million. +* Microsoft's total equity reported for the fiscal year was $ 42,512 million. + +III. Income Statement + +* Microsoft reported revenue of $ 44,281 million for the fiscal year ended June 30, 2021, an increase of 2.6% over the same period in the previous year. +* Microsoft reported operating income of $ 61,271 million for the fiscal year, an increase of 34.0% over the similar period in the previous year. +* Microsoft reported net income of $ 46,381 million for the fiscal year, an increase of 7.7% over the same period in the previous year. + +IV. Carefully analyze the financial statements of Microsoft Corporation for the fiscal year ended June 30, 2021, and provide a detailed business plan. + +V. Implement a comprehensive market research and financial analysis to identify potential areas for growth and expansion. This should include an evaluation of Microsoft's market position, competition, and trends within the technology industry. The analysis should also include an assessment of Microsoft's strengths, weaknesses, opportunities, and threats (SWOT analysis). + PART II Item 8 Revenue + +We made upgrades to our Azure Dynamics 365 ERP spiritual disciplines, and play with the Pinnacle offering to promote Pinnacle Energy Management (s) . + +a Revenue as of December 31, 2021, $ 32.109 million $ 28.110 million $ 29.454 million a Revenue as of December 31, 2020, $ 29.383 million $ 29.383 million $ 29.380 million a Revenue per share for the fiscal years 2020 and 2021 $ 9.91/share $ 9.90/share $ 10.26/share . + +a Revenue from Azure Dynamics 365 ERP center of gravity in the last quarter of the quarter ended December 31, 2021 $ 29.380 million $ 29.380 million $ 29.380 million a Revenue for Azure Dynamics 365 ERP from for fiscal years 2020 and 2021 $ 26.670 million $ 29.380 million $ 23.109 million . + +a Revenue per available share for the quarter ended December 31, 2021 $ 9.90/share $ 9.90/share Shares outstanding, December 31, 2021 $ 309,200,000 shares outstanding, December 31, 2020 $ 309,200,000 shares outstanding, December 31, 2001 $ 309,200,000 shares outstanding, December 31, 2000 $ 309,200,000 shares outstanding, December 31, 1999 $ 309,200,000 shares outstanding, December 31, 1998 $ 69,701,000 shares outstanding, December 31, 1997 $ 69,701,000 shares outstanding, December 31, 1996 $ 47,790,000 shares outstanding, December 31, 1995 $ 47,790,000 shares outstanding, December 31, 1994 $ 47,790,000 shares outstanding, December 31, 1993 $ 63,367,000 shares outstanding, December 31, 1992 $ 48,372,000 shares outstanding, December 31, 1991 $ 32,447,000 shares outstanding, December 31, 1990 $ 22,087,000 shares outstanding, December 31, 1989 $ 52,243,000 shares outstanding. \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-17-000070/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-17-000070/full-submission_features.json new file mode 100644 index 0000000..0948d24 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-17-000070/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue revenue . Apple Inc. | 2017 Form 10-K | 21 Item Apple Inc. | 2017 Form 10-K | 21 Item 7 . | 2017 Form 10-K | 21 Item 7 . Management \u2019 Form 10-K | 21 Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk in Part II , Item 8 of this Form 10-K. All It revenue from Digital in the fourth quarter of 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2017 Form 10-K | 23 Product Apple Inc. | 2017 Form 10-K | 23 Product Performance iPhone | 2017 Form 10-K | 23 Product Performance iPhone The following and unit sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( \u201c ASU 2014-09 606 ) ( \u201c ASU 2014-09 \u201d ) , which amends for revenue recognition . ASU 2014-09 is based on principle that following standard related to ASU 2014-09 : ASU No . 2016-08 2014-09 : ASU No . 2016-08 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Principal versus Agent Agent Considerations ( \u201c ASU 2016-08 \u201d ) ; ASU No ) Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Identifying Performance Obligations and Licensing ( \u201c ASU 2016-10 \u201d ) ; ASU No ) ; ASU No . 2016-12 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Narrow-Scope Improvements and Practical Expedients ( \u201c ASU 2016-12 \u201d ) ; and ASU ; and ASU No . 2016-20 , Technical Corrections and Improvements Corrections and Improvements to Topic 606 , Revenue from Contracts with with Customers ( \u201c ASU 2016-20 \u201d ) . The Company T revenue 7,548 8,080 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 Current revenue 7,548 8,080 Commercial paper 11,977 8,105 Current portion of long-term 7,548 8,080 Commercial paper 11,977 8,105 Current portion of long-term debt Current portion of long-term debt 6,496 3,500 Total current liability 100,814 portion of lo revenue , non-current 3,500 Total current liability 100,814 79,006 Deferred revenue , non-current 2,836 79,006 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Other non-current 2,836 2,930 Long-term debt 97,207 75,427 Other non-current liability 40,415 2,836 2,930 Long-term debt 97,207 75,427 Other non-current liability 40,415 36,074 97,207 75,427 Other non-current liability 40,415 36,074 Total liability 241 revenue ( 283 ) Accounts payable 9,618 1,837 5,001 Deferred revenue ( 626 ) Accounts payable 9,618 1,837 5,001 Deferred revenue ( 626 ) 1,837 5,001 Deferred revenue ( 626 ) ( 1,554 ) 1,042 revenue ( 626 ) ( 1,554 ) 1,042 Other current and 626 ) ( 1,554 ) 1,042 Other current and non-current liability current and non-current liability ( 154 ) ( 2,033 ) 9,058 liability ( 154 ) ( 2,033 ) 9,058 Cash generated by 154 ) ( 2,033 ) 9,058 Cash generated by operating activity Cash generated by operating activity revenue estimate . Apple Inc. | 2017 Form 10-K | 45 Software Apple Inc. | 2017 Form 10-K | 45 Software Development Costs | 2017 Form 10-K | 45 Software Development Costs Research and can be found in Note 9 , \u201c Benefit Plans . that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , \u201c Income Taxes \u201d security . Apple Inc. | 2017 Form 10-K | 46 The Apple Inc. | 2017 Form 10-K | 46 The following table | 2017 Form 10-K | 46 The following table show the diluted earnings per sha revenue 1,521 1,717 Basis of capital asset 1,230 2,107 Deferred revenue 1,521 1,717 Deferred asset 1,230 2,107 Deferred revenue 1,521 1,717 Deferred cost sharing 667 1,230 2,107 Deferred revenue 1,521 1,717 Deferred cost sharing 667 667 1,521 1,717 Deferred cost sharing 667 667 Share-based compensation 703 601 1,717 Deferred cost sharing 667 667 Share-based compensation 703 601 Other sharing 667 667 Share-based compensation 703 601 Other 834 788 Total 667 667 Share-based compensation 703 601 Other 834 Revenue $ ( 662 ) $ ( 865 ) ( 662 ) $ ( 865 ) Cost of sale ( ) Cost of sale ( 654 ) ( 130 ) Other sale ( 654 ) ( 130 ) Other income/ ( expense expense ) , net ( 638 ) 111 Interest rate contract , net ( 638 ) 111 Interest rate contract Other income/ ( expense ) , net 2 12 ( 1,952 ) ( expense ) , net 2 12 ( 1,952 ) ( 872 , net 2 12 ( 1,952 ) ( 872 ) Unrealized 12 ( 1,952 ) ( 872 ) Unrealized ( gain ) expense ) , net ( 99 ) 87 Total amount reclassified , net ( 99 ) 87 Total amount reclassified from AOCI r Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2017 ) $ 18,000 for calendar year 2017 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 earnings . Apple Inc. | 2017 Form 10-K | 63 Restricted Apple Inc. | 2017 Form 10-K | 63 Restricted Stock Units | 2017 Form 10-K | 63 Restricted Stock Units A summary activity and related information for 2017 , 2016 and 2015 revenue from Digital in the fourth quarter of 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of Apple and third-party accessory . Note 12 \u2013 Selected Quarterly Financial Information of the four quarter of 2017 and 2016 ( in million four quarter of 2017 and 2016 ( in million , except Quarter Second Quarter First Quarter 2017 : Net sale $ 52,579 2017 : Net sale $ 52,579 $ 45,408 $ 52,896 $", + "expenses": "Expenses Operating expense for 2017 , 2016 and 2015 were Operating expense for 2017 , 2016 and 2015 were a follows for 2017 , 2016 and 2015 were a follows ( dollar dollar in million ) : 2017 Change 2016 Change 2015 Research million ) : 2017 Change 2016 Change 2015 Research and development : 2017 Change 2016 Change 2015 Research and development $ 11,581 2015 Research and development $ 11,581 15 % $ 10,045 25 Research and development $ 11,581 15 % $ 10,045 25 % $ 11,581 15 % $ 10,045 25 % $ 8,067 Percenta", + "net_income": "Net income $ $ 233,715 $ 182,795 $ 170,910 Net income $ 48,351 $ $ 170,910 Net income $ 48,351 $ 45,687 $ 53,394 $ Net income $ 48,351 $ 45,687 $ 53,394 $ 39,510 $ $ 48,351 $ 45,687 $ 53,394 $ 39,510 $ 37,037 Earnings $ 45,687 $ 53,394 $ 39,510 $ 37,037 Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 $ : Basic $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.21 $ 9.28 $ 6.49 $ 5. net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 5.6 billion , which included a a one-time payment of $ 1.9 billion related to a multi-year in investing activity of $ 46.4 billion during 2017 consisted primarily of $ 46.4 billion during 2017 consisted primarily of cash used and maturity , of $ 33.1 billion and cash used to plant and equipment of $ 12.5 billion . Cash used in in financing activity of $ 17.3 billion during 2017 consisted primarily of $ 17.3 billion dur net income and to net income of $ 20.1 billion . Cash used in in investing activity of $ 46.0 billion during 2016 consisted primarily of $ 46.0 billion during 2016 consisted primarily of cash used and maturity , of $ 30.6 billion and cash used to plant and equipment of $ 12.7 billion . Cash used in in financing activity of $ 20.5 billion during 2016 consisted primarily of $ 20.5 billion during 2016 consisted primarily of cash used repurchase common stock of $ 29.7 billion , cash used to and dividend equiv Net income $ Provision for income tax 15,738 15,685 19,121 Net income $ 48,351 for income tax 15,738 15,685 19,121 Net income $ 48,351 $ 15,685 19,121 Net income $ 48,351 $ 45,687 $ 53,394 Earnings Net income $ 48,351 $ 45,687 $ 53,394 Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 Diluted : Basic $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 $ 9.22 Shares 9.28 Diluted $ 9.21 Net income $ , 2016 September 26 , 2015 Net income $ 48,351 $ , 2015 Net income $ 48,351 $ 45,687 $ 53,394 Other Net income $ 48,351 $ 45,687 $ 53,394 Other comprehensive income/ $ 48,351 $ 45,687 $ 53,394 Other comprehensive income/ ( loss tax effect of $ ( 77 ) , $ 8 and ( 77 ) , $ 8 and $ 201 , respectively , $ 8 and $ 201 , respectively 224 75 ( and $ 201 , respectively 224 75 ( 411 ) Change $ 201 , respectively 224 75 ( 411 ) Change in , respectively 224 75 ( 411 ) Change in unrealized gains/losses e Net income \u2014 $ 87,152 $ 1,082 $ 111,547 Net income \u2014 \u2014 53,394 111,547 Net income \u2014 \u2014 53,394 \u2014 53,394 Other comprehensive income/ income \u2014 \u2014 53,394 \u2014 53,394 Other comprehensive income/ ( loss ) \u2014 \u2014 \u2014 ( 1,427 ) ( 1,427 ) Dividends \u2014 ( 1,427 ) ( 1,427 ) Dividends and dividend equivalent equivalent declared \u2014 \u2014 ( 11,627 ) \u2014 ( 11,627 ) ( 11,627 ) \u2014 ( 11,627 ) Repurchase of common stock Repurchase of common stock ( 325,032 ) \u2014 ( 36,026 ) ( 325,032 ) \u2014 ( 36,026 ) \u2014 ( 36,026 ) ( 36,026 ) \u2014 ( 36,026 ) Share-based Net income \u2014 27,416 92,284 ( 345 ) 119,355 Net income \u2014 \u2014 45,687 119,355 Net income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ ( loss loss ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent declared equivalent declared \u2014 \u2014 ( 12,188 ) \u2014 ( 12,188 ) ( 12,188 ) \u2014 ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29,000 ) \u2014 ( 29,000 ) ( 29,000 ) \u2014 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 48,351 128,249 Net income \u2014 \u2014 48,351 \u2014 48,351 Other comprehensive income/ income \u2014 \u2014 48,351 \u2014 48,351 Other comprehensive income/ ( loss ) \u2014 \u2014 \u2014 ( 784 ) ( 784 ) Dividends \u2014 ( 784 ) ( 784 ) Dividends and dividend equivalent equivalent declared \u2014 \u2014 ( 12,803 ) \u2014 ( 12,803 ) ( 12,803 ) \u2014 ( 12,803 ) Repurchase of common stock Repur Net income Operating activity : Net income 48,351 45,687 53,394 Adjustments to reconcile activity : Net income 48,351 45,687 53,394 Adjustments to reconcile net : Net income 48,351 45,687 53,394 Adjustments to reconcile net income activity : Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense : Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense 4,840 Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense 4,840 4, net income for 2017 , 2016 and 2015 ( net income in million share in thousand ) : 2017 2016 2015 Numerator : Net in thousand ) : 2017 2016 2015 Numerator : Net income thousand ) : 2017 2016 2015 Numerator : Net income $ Numerator : Net income $ 48,351 $ 45,687 $ 53,394 Denominator Net income $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,217,242 5,470,820 5,753,421 Effe Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1 Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 ", + "assets": "Assets The s capital expenditure were $ 14.9 billion during 2017 . The were $ 14.9 billion during 2017 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2018 , which includes product tooling repurchase . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of ASSETS September 30 , 2017 September 24 , 2016 ASSETS : Current , 2017 September 24 , 2016 ASSETS : Current asset : Cash and cash equivalent $ 20,289 $ 20,484 Short-term marketable security cash equivalent $ 20,289 $ 20,484 Short-term marketable security 53,892 46,671 $ 20,484 Short-term marketable security 53,892 46,671 Accounts receivable , le 20,484 Short-term marketable security 53,892 46,671 Accounts receivable , le allowance , le allowance of $ 58 and $ 53 , respectively of $ 58 and $ 53 , respe Assets indefinite lived intangible asset during 2017 , 2016 and 2015 . intangible asset during 2017 , 2016 and 2015 . For purpose during 2017 , 2016 and 2015 . For purpose of testing each reporting unit . In 2017 and 2016 , the Company unit . In 2017 and 2016 , the Company \u2019 s fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than asset or liability . Level 3 \u2013 Inputs that are generally liability . Apple Inc. | 2017 Form 10-K | 48 The Apple Assets The asset balance a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 2016 Gross Carrying Amount Accumulated in million ) : 2017 2016 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 7,507 $ ( 5,309 ) $ asset $ 7,507 $ ( 5,309 ) $ 2,198 $ 8,912 $ ( 5,309 ) $ 2,198 $ 8,912 $ ( 5,806 5,309 ) $ 2,198 $ 8,912 ", + "liabilities": "Liabilities ( \u201c ASU 2016-01 \u201d ) , which update The Company will adopt ASU 2016-01 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition , the adoption of ASU 2016-01 is not expected to have financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments \u2013 Credit \u2013 Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( \u201c ASU 2016-13 \u201d ) , which modifies The Company will adopt ASU 2016-13 in it fir LIABILITIES AND SHAREHOLDERS Total asset $ 375,319 $ 321,686 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 25,744 22,027 Deferred revenue 7, Liabilities , net $ 33,783 $ 27,010 Other Non-Current Liabilities 2017 2016 $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liability $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liability $ 31,504 2016 Deferred tax liability $ 31,504 $ 26,019 Other non-current liability tax liability $ 31,504 $ 26,019 Other non-current liability 8,911 10,055 $ 26,019 Other non-current liability 8,911 10,055 Total other non-current liability 26,019 Other non-current liability 8,911 10,055 Tot", + "equity": "Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplement Equity | 2017 Form 10-K | 18 Purchases of Equity Securities by the three month ended September 30 , 2017 wa a follows month ended September 30 , 2017 wa a follows ( in the Plans or Programs ( 1 ) July 2 , 2017 Programs ( 1 ) July 2 , 2017 to August 5 1 ) July 2 , 2017 to August 5 , 2017 2 , 2017 to August 5 , 2017 : Open market 2017 to August 5 , 2017 : Open market and privately market and privately negotiated purchase 10,076 $ 148.87 10,076 August 6 privately negotiated purchase 10,076 $ 148.87 10,07 equity $ Total shareholder \u2019 equity $ 134,047 $ 128,249 $ 119,355 $ \u2019 equity $ 134,047 $ 128,249 $ 119,355 $ 111,547 $ $ 134,047 $ 128,249 $ 119,355 $ 111,547 $ 123,549 ( $ 128,249 $ 119,355 $ 111,547 $ 123,549 ( 1 ) $ 119,355 $ 111,547 $ 123,549 ( 1 ) Includes current $ 111,547 $ 123,549 ( 1 ) Includes current and long-term of term debt . ( 2 ) Excludes non-current deferred revenue revenue . Apple Inc. | 2017 Form 10-K | 21 Item Apple Inc. | 2017 Form 10-K | 21 Item 7 . | 2017 Form 10-K | 21 Item 7 . Equity Awards Total 2017 $ 12,769 $ 15,000 $ Equity Awards Total 2017 $ 12,769 $ 15,000 $ 18,001 $ Total 2017 $ 12,769 $ 15,000 $ 18,001 $ 1,874 $ $ 12,769 $ 15,000 $ 18,001 $ 1,874 $ 47,644 2016 $ 15,000 $ 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 $ 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 11,561 $ 47,644 EQUITY liability : Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 Current revenue 7,548 8,080 Commercial paper 11 equity 134,047 634 Total shareholder \u2019 equity 134,047 128,249 Total liability and shareholder Total shareholder \u2019 equity 134,047 128,249 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 375,319 $ 321,686 See accompanying Notes \u2019 equity $ 375,319 $ 321,686 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 41 Apple Apple Inc. | 2017 Form 10-K | 41 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 41 Apple Inc. CONSOLIDATED STATEMENTS OF Amount Balances a of September equity including transfer pricing adjustment \u2014 748 \u2014 \u2014 748 Balances a adjustment \u2014 748 \u2014 \u2014 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 27,416 92,284 a of September 26 , 2015 5,578,753 27,416 92,284 ( 345 of September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net income \u2014 27,416 92,284 ( 345 ) 119,355 Net income equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Balances a adjustment \u2014 379 \u2014 \u2014 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 31,251 96,364 a of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 2016 5,336,166 equity including transfer pricing adjustment \u2014 620 \u2014 \u2014 620 Balances a adjustment \u2014 620 \u2014 \u2014 620 Balances a of September 30 620 Balances a of September 30 , 2017 5,126,201 $ 35,867 a of September 30 , 2017 5,126,201 $ 35,867 $ 98,330 of September 30 , 2017 5,126,201 $ 35,867 $ 98,330 $ 30 , 2017 5,126,201 $ 35,867 $ 98,330 $ ( 150 2017 5,126,201 $ 35,867 $ 98,330 $ ( 150 ) $ 35,867 $ 98,330 $ ( 150 ) $ 134,047 See accompanying $ ( 150 ) $ 134,047 See accompanying Notes to Consolidated Statements . Apple equity tax benefit from equity award 627 407 749 Payments for tax benefit from equity award 627 407 749 Payments for tax related from equity award 627 407 749 Payments for tax related to settlement of equity award ( 1,874 ) ( 1,570 ) ( award ( 1,874 ) ( 1,570 ) ( 1,499 ) Payments ) ( 1,570 ) ( 1,499 ) Payments for dividend and dividend and dividend equivalent ( 12,769 ) ( 12,150 ) ( equivalent ( 12,769 ) ( 12,150 ) ( 11,561 ) Repurchases ) ( 12,150 ) ( 11,561 ) Repurchases of common stock Repurchases equity award of $ 620 million , $ 379 million $ 620 million , $ 379 million and $ 748 million $ 379 million and $ 748 million in 2017 , 2016 and $ 748 million in 2017 , 2016 and 2015 , 748 million in 2017 , 2016 and 2015 , respectively , in 2017 , 2016 and 2015 , respectively , which were stock . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the significant 2017 and September 24 , 2016 , the significant component of ( i Equity Dividends Amount ( in million ) 2017 : Fourth quarter $ 0.63 2017 : Fourth quarter $ 0.63 $ 3,252 Third quarter 0.63 Fourth quarter $ 0.63 $ 3,252 Third quarter 0.63 3,281 Second 0.63 $ 3,252 Third quarter 0.63 3,281 Second quarter 0.57 2,988 $ 3,252 Third quarter 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.57 3,042 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.57 3,042 Total quarter 0.57 2,988 First quarter 0.57 3,042 Total cas equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award", + "cash_flow": "cash flow $ 20,289 $ 20,484 $ 21,120 Supplemental cash flow disclosure : income tax , net $ 11,591 $ 10,444 $ 13,252 Cash , net $ 11,591 $ 10,444 $ 13,252 Cash paid for $ 11,591 $ 10,444 $ 13,252 Cash paid for interest $ Cash paid for interest $ 2,092 $ 1,316 $ 514 See for interest $ 2,092 $ 1,316 $ 514 See accompanying Notes $ 2,092 $ 1,316 $ 514 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 43 Apple Apple Inc. | 2017 Form 10-K | 43 Apple Inc. Notes | 2017 Form 10-K | Cash Flow Hedges recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale and a gain of $ 606 million in other income/ ( expense ) , net for 2017 . The Company record all fair value a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange", + "gross_margin": "Gross Margin Gross margin for 2017 , 2016 and 2015 wa Gross margin for 2017 , 2016 and 2015 wa a follows for 2017 , 2016 and 2015 wa a follows ( dollar dollar in million ) : 2017 2016 2015 Net sale $ in million ) : 2017 2016 2015 Net sale $ 229,234 million ) : 2017 2016 2015 Net sale $ 229,234 $ 2016 2015 Net sale $ 229,234 $ 215,639 $ 233,715 Cost Net sale $ 229,234 $ 215,639 $ 233,715 Cost of sale $ 229,234 $ 215,639 $ 233,715 Cost of sale 141,048 131,376 $ 233,715 Cost of sale 141,048 131,376 140,089 Gro Gross margin $ 88,186 Cost of sale 141,048 131,376 140,089 Gross margin $ 88,186 $ 131,376 140,089 Gross margin $ 88,186 $ 84,263 $ 93,626 Gross Gross margin $ 88,186 $ 84,263 $ 93,626 Gross margin percentage $ 88,186 $ 84,263 $ 93,626 Gross margin percentage 38.5 % $ 93,626 Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage decreased Gross margin percentage decreased in 2017 compared to 2016 due prim gross margin during 2017 compared to 2016 . Gross margin during 2017 compared to 2016 . Gross margin percentage decreased Gross margin percentage decreased in 2016 compared to 2015 due primarily decreased in 2016 compared to 2015 due primarily to the effect service . Apple Inc. | 2017 Form 10-K | 26 The Apple Inc. | 2017 Form 10-K | 26 The Company anticipates | 2017 Form 10-K | 26 The Company anticipates gross margin during the first quarter of 2018 to be between 38.0 % of 2018 to be between 38.0 % and 38.5 Gross margin 88,186 233,715 Cost of sale 141,048 131,376 140,089 Gross margin 88,186 84,263 Cost of sale 141,048 131,376 140,089 Gross margin 88,186 84,263 93,626 141,048 131,376 140,089 Gross margin 88,186 84,263 93,626 Operating expense : 131,376 140,089 Gross margin 88,186 84,263 93,626 Operating expense : Research 140,089 Gross margin 88,186 84,263 93,626 Operating expense : Research and expense : Research and development 11,581 10,045 8,067 Selling , general : Research and development 11,581 10,045 8,0 Gross margin $ $ 45,408 $ 52,896 $ 78,351 Gross margin $ 19,931 $ $ 78,351 Gross margin $ 19,931 $ 17,488 $ 20,591 $ Gross margin $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basi Gross margin $ $ 42,358 $ 50,557 $ 75,872 Gross margin $ 17,813 $ $ 75,872 Gross margin $ 17,813 $ 16,106 $ 19,921 $ Gross margin $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 75,076 61,245 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 41,293 ) ( 34,235 ) Total amortization ( 41,293 ) ( 34,235 ) Total property , plant and equipment , net $ 33,783 $ 27,010 Other Non-Current Liabilities , net $ 33,783 $ 27,010 Other Non-Current Liabilities 2017 2016 $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liability $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liabilit", + "capital_expenditure": "capital expenditure were $ 14.9 billion during 2017 . The were $ 14.9 billion during 2017 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2018 , which includes product tooling repurchase . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of 1.20 % and maturity genera", + "debt": "debt \u2014 Total term debt ( 1 ) $ 103,703 $ 78,927 debt ( 1 ) $ 103,703 $ 78,927 $ 55,829 $ 1 ) $ 103,703 $ 78,927 $ 55,829 $ 28,987 $ $ 103,703 $ 78,927 $ 55,829 $ 28,987 $ 16,960 Other $ 78,927 $ 55,829 $ 28,987 $ 16,960 Other long-term obligation $ 55,829 $ 28,987 $ 16,960 Other long-term obligation ( 2 16,960 Other long-term obligation ( 2 ) $ 40,415 $ 36,074 obligation ( 2 ) $ 40,415 $ 36,074 $ 33,427 $ 2 ) $ 40,415 $ 36,074 $ 33,427 $ 24,826 $ $ 40,415 $ 36,074 $ 33,427 $ 24,826 $ 20,208 Total $ debt . ( 2 ) Excludes non-current deferred revenue revenue . Apple Inc. | 2017 Form 10-K | 21 Item Apple Inc. | 2017 Form 10-K | 21 Item 7 . | 2017 Form 10-K | 21 Item 7 . Management \u2019 Form 10-K | 21 Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk debt and C $ 2.5 billion of Canadian dollar-denominated term Canadian dollar-denominated term debt during 2017 . Fiscal 2016 Highlights Net debt during 2017 . Fiscal 2016 Highlights Net sale declined 8 2016 Highlights Net sale declined 8 % or $ 18.1 billion declined 8 % or $ 18.1 billion during 2016 compared to or $ 18.1 billion during 2016 compared to 2015 , primarily billion during 2016 compared to 2015 , primarily driven by a in Services . In April 2016 , the Company announced an of the program f debt and A $ 1.4 billion of Australian dollar-denominated term Australian dollar-denominated term debt during 2016 . Apple Inc. | 2017 2016 . Apple Inc. | 2017 Form 10-K | 22 Sales Apple Inc. | 2017 Form 10-K | 22 Sales Data The | 2017 Form 10-K | 22 Sales Data The following table unit sale by product for 2017 , 2016 and 2015 ( by product for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million and unit in thousand ) : 2017 Change 2016 Change 2015 Net thousand ) : 2017 Chang debt $ 11,977 $ 8,105 $ 8,499 Total term debt $ 103,703 8,499 Total term debt $ 103,703 $ 78,927 $ 55,829 Working term debt $ 103,703 $ 78,927 $ 55,829 Working capital $ $ 103,703 $ 78,927 $ 55,829 Working capital $ 27,831 $ $ 55,829 Working capital $ 27,831 $ 27,863 $ 8,768 Cash Working capital $ 27,831 $ 27,863 $ 8,768 Cash generated by $ 27,831 $ 27,863 $ 8,768 Cash generated by operating activity generated by operating activity $ 63,598 $ 65,824 $ 81,266 Cash operating activity $ 63,598 $ 65,824 debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . During 2016 , $ 3.9 billion . During 2016 , cash generated by operating by operating activity of $ 65.8 billion wa a result of wa a result of $ 45.7 billion of net income and to net income of $ 20.1 billion . Cash used in in investing activity of $ 46.0 billion during 2016 consisted primarily of $ 46.0 billion during 2016 consisted primarily of cash used and maturity , debt of $ 2.5 billion , partially offset by debt , net of $ 25.0 billion . Capital Assets The s capital expenditure were $ 14.9 billion during 2017 . The were $ 14.9 billion during 2017 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2018 , which includes product tooling repurchase . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had $ , the Company ha debt 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt $ 104,021 61,391 Total term debt $ 104,021 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 2 , \u201c Financial Instruments \u201d Financial Instruments \u201d and Note 6 , \u201c Debt . \u201d Capital Return Program In May 2017 , the Company \u2019 s capital return program from $ 250 billion to $ 300 billion $ 250 billion to $ 300 billion debt $ Years Total Term debt $ 6,500 $ 18,083 $ 18,047 $ Term debt $ 6,500 $ 18,083 $ 18,047 $ 61,391 $ $ 6,500 $ 18,083 $ 18,047 $ 61,391 $ 104,021 Operating $ 18,083 $ 18,047 $ 61,391 $ 104,021 Operating lease 1,223 $ 18,047 $ 61,391 $ 104,021 Operating lease 1,223 2,295 1,904 61,391 $ 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing $ 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing purchase 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing debt a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 to increase by 2017 and September 24 , 2016 to increase by $ 376 2016 to increase by $ 376 million and $ 271 million $ 376 million and $ 271 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , \u201c Debt . \u201d , typically for up to 12 month . However , the exp debt Current portion of long-term debt 6,496 3,500 Total current liability 100,814 portion of long-term debt 6,496 3,500 Total current liability 100,814 79,006 6,496 3,500 Total current liability 100,814 79,006 Deferred revenue , non-current 3,500 Total current liability 100,814 79,006 Deferred revenue , non-current 2,836 79,006 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Other non-current 2,836 2,930 debt 97,207 75,427 Other non-current liability 40,415 2,836 2,930 Long-term debt 97,207 75,427 Other non-current liability 40,415 36,074 97,207 75,427 Other non-current liability 40,415 36,074 Total liability 241,272 193,437 75,427 Other non-current liability 40,415 36,074 Total liability 241,272 193,437 Commitments liability 40,415 36,074 Total liability 241,272 193,437 Commitments and contingency Shareholders 40,415 36,074 Total liability 241,272 193,437 Commitments and contingency Shareholders \u2019 debt , net 28,662 24,954 27,114 Repayments of term term debt , net 28,662 24,954 27,114 Repayments of term debt debt , net 28,662 24,954 27,114 Repayments of term debt ( Repayments of term debt ( 3,500 ) ( 2,500 ) \u2014 debt ( 3,500 ) ( 2,500 ) \u2014 Change in commercial in commercial paper , net 3,852 ( 397 ) 2,191 Cash paper , net 3,852 ( 397 ) 2,191 Cash used in net 3,852 ( 397 ) 2,191 Cash used in financing activity used in financing activity ( 17,347 ) ( 20,483 ) ( activity ( 17,347 ) ( 20,483 ) ( 17,7 debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2017 Form 10-K | 47 Allowance Apple Inc. | 2017 Form 10-K | 47 Allowance for Doubtful | 2017 Form 10-K | 47 Allowance for Doubtful Accounts The building is the lesser of 30 year or the remaining life property and equipment wa $ 8.2 billion , $ 8.3 billion $ 8.2 billion , $ 8.3 billion and $ 9.2 billion $ 8.3 billion and $ 9.2 billion during 2017 , debt 67 ( $ 167 Foreign currency debt 67 ( 258 ) ( 71 Foreign currency debt 67 ( 258 ) ( 71 ) Total 67 ( 258 ) ( 71 ) Total $ 67 $ ( 71 ) Total $ 67 $ ( 258 ) $ Total $ 67 $ ( 258 ) $ 96 Gains/ ( $ ( 258 ) $ 96 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 1,958 $ 885 $ 4,092 Interest exchange contract $ 1,958 $ 885 $ 4,092 Interest rate contract $ 1,958 $ 885 $ 4,092 Interest rate contract ( 2 4,092 Interest rate contract ( 2 ) ( 11 ) ( contract ( 2 ) ( 11 ) ( 17 ) Total ) ( 11 ) ( 1 debt $ 810 $ ( 341 ) $ debt $ 810 $ ( 341 ) $ ( 337 ) ( 341 ) $ ( 337 ) Apple Inc. | 2017 337 ) Apple Inc. | 2017 Form 10-K | 52 The Apple Inc. | 2017 Form 10-K | 52 The following table | 2017 Form 10-K | 52 The following table show the derivative instrument a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 2016 Notional Amount Credit Risk in mil Debt Commercial Form 10-K | 57 Note 6 \u2013 Debt Commercial Paper The repurchase . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the Company 2017 and September 24 , 2016 , the Company had $ , the Company had $ 12.0 billion and $ 8.1 billion $ 12.0 billion and $ 8.1 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 1.20 % a of September 30 1.20 % a of September 30 , 2017 and 0.45 % a of September 30 , 2017 an Debt As of Term Debt As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had outstanding aggregate principal amount of $ 104.0 billion ( collectively the \u201c term debt a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 : Maturities 2017 2017 and September 24 , 2016 : Maturities 2017 2016 Amount 24 , 2016 : Maturities 2017 2016 Amount ( in million , 2016 : Maturities 2017 2016 Amount ( in million ) mil debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2018 17.0 billion : Floating-rate note 2018 2018 $ 2,000 1.10 % billion : Floating-rate note 2018 2018 $ 2,000 1.10 % 1.10 Floating-rate note 2018 2018 $ 2,000 1.10 % 1.10 % $ note 2018 2018 $ 2,000 1.10 % 1.10 % $ 2,000 2018 $ 2,000 1.10 % 1.10 % $ 2,000 1.10 % 1.10 % 1.10 % $ 2,000 1.10 % 1.10 % Fixed-rate % 1.10 % $ 2,000 1.10 % 1.10 % Fixed-rate 1.000 % $ 2,000 1.10 % 1.10 % Fixed-rate 1.000 % \u2013 1.10 % 1.10 % Fixed debt issuance of 1.08 % \u2013 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2019 12.0 billion : Floating-rate note 2019 2019 1,000 1.61 % 1.61 billion : Floating-rate note 2019 2019 1,000 1.61 % 1.61 % : Floating-rate note 2019 2019 1,000 1.61 % 1.61 % 2,000 Floating-rate note 2019 2019 1,000 1.61 % 1.61 % 2,000 0.86 2019 2019 1,000 1.61 % 1.61 % 2,000 0.86 % \u2013 1,000 1.61 % 1.61 % 2,000 0.86 % \u2013 1.09 % 1.61 % 1.61 % 2,000 0.86 % \u2013 1.09 % Fixed-rate % 2,000 debt issuance of 0.85 % \u2013 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2019 27.3 billion : Floating-rate note 2019 \u2013 2020 1,549 1.56 % : Floating-rate note 2019 \u2013 2020 1,549 1.56 % \u2013 1.87 Floating-rate note 2019 \u2013 2020 1,549 1.56 % \u2013 1.87 % note 2019 \u2013 2020 1,549 1.56 % \u2013 1.87 % 1,781 2020 1,549 1.56 % \u2013 1.87 % 1,781 0.87 % \u2013 1.56 % \u2013 1.87 % 1,781 0.87 % \u2013 1.87 % % \u2013 1.87 % 1,781 0.87 % \u2013 1.87 % Fixed-rate % 1,781 0.87 % \u2013 1.87 % Fixed-rate 0.350 % \u2013 debt issuance of 0.28 % \u2013 4.51 % 2016 debt issuance of $ 24.9 2016 debt issuance of $ 24.9 billion : Floating-rate note 2019 24.9 billion : Floating-rate note 2019 \u2013 2021 1,350 1.45 % : Floating-rate note 2019 \u2013 2021 1,350 1.45 % \u2013 2.44 Floating-rate note 2019 \u2013 2021 1,350 1.45 % \u2013 2.44 % note 2019 \u2013 2021 1,350 1.45 % \u2013 2.44 % 1,350 2021 1,350 1.45 % \u2013 2.44 % 1,350 0.91 % \u2013 1.45 % \u2013 2.44 % 1,350 0.91 % \u2013 1.95 % % \u2013 2.44 % 1,350 0.91 % \u2013 1.95 % Fixed-rate % 1,350 0.91 % \u2013 1.95 % Fixed-rate 1.100 % \u2013 debt issuance of $ 10.0 2017 debt issuance of $ 10.0 billion : Floating-rate note 2019 10.0 billion : Floating-rate note 2019 500 1.39 % \u2014 \u2014 billion : Floating-rate note 2019 500 1.39 % \u2014 \u2014 % : Floating-rate note 2019 500 1.39 % \u2014 \u2014 % Floating-rate \u2014 \u2014 % Floating-rate note 2020 500 1.51 % \u2014 \u2014 \u2014 % Floating-rate note 2020 500 1.51 % \u2014 \u2014 % % Floating-rate note 2020 500 1.51 % \u2014 \u2014 % Floating-rate \u2014 \u2014 % Floating-rate note 2022 1,000 1.81 % \u2014 \u2014 \u2014 % Floating-rate note 2022 1,000 1.81 % \u2014 \u2014 % % Floating-rat debt issuance of $ 1.0 2017 debt issuance of $ 1.0 billion : Fixed-rate 4.300 % $ 1.0 billion : Fixed-rate 4.300 % note 2047 1,000 4.30 : Fixed-rate 4.300 % note 2047 1,000 4.30 % \u2014 \u2014 Fixed-rate 4.300 % note 2047 1,000 4.30 % \u2014 \u2014 % 4.300 % note 2047 1,000 4.30 % \u2014 \u2014 % Third \u2014 \u2014 % Third quarter 2017 debt issuance of $ 7.0 2017 debt issuance of $ 7.0 billion : Floating-rate note 2020 7.0 billion : Floating-rate note 2020 500 1.38 % \u2014 \u2014 billion : Floating-rate note 2020 500 1.38 % \u2014 \u2014 % : Floating-rate debt issuance of \u20ac2.5 of \u20ac2.5 billion : Fixed-rate 0.875 % note 2025 1,469 3.03 : Fixed-rate 0.875 % note 2025 1,469 3.03 % \u2014 \u2014 Fixed-rate 0.875 % note 2025 1,469 3.03 % \u2014 \u2014 % 0.875 % note 2025 1,469 3.03 % \u2014 \u2014 % Fixed-rate % \u2014 \u2014 % Fixed-rate 1.375 % note 2029 1,469 3.37 % Fixed-rate 1.375 % note 2029 1,469 3.37 % \u2014 \u2014 Fixed-rate 1.375 % note 2029 1,469 3.37 % \u2014 \u2014 % 1.375 % note 2029 1,469 3.37 % \u2014 \u2014 % Third \u2014 \u2014 % Third quarter 2017 debt issuance of $ 1.0 2017 debt issuance of $ 1.0 billion : Fixed-r debt issuance of debt issuance of C $ 2.5 billion : Fixed-rate 2.513 % $ 2.5 billion : Fixed-rate 2.513 % note 2024 2,017 2.66 : Fixed-rate 2.513 % note 2024 2,017 2.66 % \u2014 \u2014 Fixed-rate 2.513 % note 2024 2,017 2.66 % \u2014 \u2014 % 2.513 % note 2024 2,017 2.66 % \u2014 \u2014 % Fourth \u2014 \u2014 % Fourth quarter 2017 debt issuance of $ 5.0 2017 debt issuance of $ 5.0 billion : Fixed-rate 1.500 % $ 5.0 billion : Fixed-rate 1.500 % note 2019 1,000 1.54 : Fixed-rate 1.500 % note 2019 1,000 1.54 % \u2014 \u2014 Fixed-rate 1.500 % note 201 debt 104,021 78,384 Unamortized premium/ ( discount % Total term debt 104,021 78,384 Unamortized premium/ ( discount ) issuance cost , net ( 225 ) ( 174 ) Hedge net ( 225 ) ( 174 ) Hedge accounting fair value accounting fair value adjustment ( 93 ) 717 Less : Current value adjustment ( 93 ) 717 Less : Current portion of portion of long-term debt ( 6,496 ) ( 3,500 ) Total debt ( 6,496 ) ( 3,500 ) Total long-term debt $ ) Total long-term debt $ 97,207 $ 75,427 To manage interest long-term debt $ 97,20 debt for 2017 , 2016 and 2015 , term debt for 2017 , 2016 and 2015 , respectively . for 2017 , 2016 and 2015 , respectively . The future s Notes a of September 30 , 2017 are a follows a of September 30 , 2017 are a follows ( in ( in million ) : 2018 $ 6,500 2019 8,863 2020 million ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 $ 6,500 2019 8,86 debt 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt $ 104,021 61,391 Total term debt $ 104,021 As of September 30 , $ 104,021 As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the fair 2017 and September 24 , 2016 , the fair value of Notes , based on Level 2 input , wa $ 106.1 2 input , wa $ 106.1 billion and $ 81.7 billion $ 106.1 billion and $ 81.7 billion , respectively . Note billion , respectively . Note 7 ", + "share_repurchase": "share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company \u2019 stock , of which $ 166 billion had been utilized a been utilized a of September 30 , 2017 . The remaining a of September 30 , 2017 . The remaining $ 44 2017 . The remaining $ 44 billion in the table represents repurchase program a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion and raising it quarterly it quarterly dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share beginning in May per share beginning in May 2017 . During 2017 , the in May 2017 . During 2017 , the Company spent $ , the Company spent $ 33.0 billion to repurchase share of and dividend equivalent of $ 12.8 billion . Additionally , the , the Company issued $ 24.0 billion of U.S. dollar-denominated term t share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion and raising it quarterly it quarterly dividend from $ 0.52 to $ 0.57 per share from $ 0.52 to $ 0.57 per share beginning in May per share beginning in May 2016 . During 2016 , the in May 2016 . During 2016 , the Company spent $ , the Company spent $ 29.0 billion to repurchase share of and dividend equivalent of $ 12.2 billion . Additionally , the , the Company issued $ 23.9 billion of U.S. dollar-denominated term t share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company \u2019 quarterly cash dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share , beginning with during the third quarter of 2017 . The Company intends to Directors . As of September 30 , 2017 , $ 166 As of September 30 , 2017 , $ 166 billion of 30 , 2017 , $ 166 billion of the share repurchase under plan complying with Rule 10b5-1 under the Exchange Act . capital return program in August 2 Share Repurchase Program In May 2017 , the Company \u2019 s share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company \u2019 stock , of which $ 166 billion had been utilized a been utilized a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the instrument . Apple Inc. | 2017 Form 10-K | 60 The Apple Inc. | 2017 Form ", + "earnings_per_share": "Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 $ : Basic $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.21 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.21 $ 8.31 6.49 $ 5.72 Diluted $ 9.21 $ 8.31 $ 9.22 $ 5.72 Diluted $ 9.21 $ 8.31 $ 9.22 $ 6.45 $ $ 9.21 $ 8.31 $ 9.22 $ 6.45 $ 5.68 Cash $ 8.31 $ 9.22 $ 6.45 $ 5.68 Cash dividend declared $ 9.22 $ 6.45 $ 5.68 Cash dividend declared per share divide earnings per share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted per share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,6 Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 Diluted : Basic $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 $ 9.22 Shares 9.28 Diluted $ 9.21 $ 8.31 $ 9.22 Shares used in $ 9.21 $ 8.31 $ 9.22 Shares used in computing earnings earnings per share : Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 per share : Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,28 earnings per share for 2017 , 2016 and 2015 ( per share for 2017 , 2016 and 2015 ( net income for 2017 , 2016 and 2015 ( net income in million share in thousand ) : 2017 2016 2015 Numerator : Net in thousand ) : 2017 2016 2015 Numerator : Net income thousand ) : 2017 2016 2015 Numerator : Net income $ Numerator : Net income $ 48,351 $ 45,687 $ 53,394 Denominator Net income $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average share outstanding Denomina earnings per share Weighted-average diluted share 5,251,692 5,500,281 5,793,069 Basic earnings per share $ Basic earnings per share $ 9.27 $ 8.35 $ 9.28 Diluted per share $ 9.27 $ 8.35 $ 9.28 Diluted earnings per $ 9.27 $ 8.35 $ 9.28 Diluted earnings per share $ Diluted earnings per share $ 9.21 $ 8.31 $ 9.22 Potentially per share $ 9.21 $ 8.31 $ 9.22 Potentially dilutive security $ 9.21 $ 8.31 $ 9.22 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.36 Apple $ 2.07 $ 1.67 $ 2.10 $ 3.36 Apple Inc. | $ 1.67 $ 2.10 $ 3.36 Apple Inc. | 2017 Form $ 3.36 Apple Inc. | 2017 Form 10-K | 68 Fourth Apple Inc. | 201 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.28 ( $ 1.67 $ 1.42 $ 1.90 $ 3.28 ( 1 ) $ 1.42 $ 1.90 $ 3.28 ( 1 ) Basic and $ 1.90 $ 3.28 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2017 Form 10-", + "tax_rate": "tax rate for 2017 , 2016 and 2015 were tax rate for 2017 , 2016 and 2015 were a follows for 2017 , 2016 and 2015 were a follows ( dollar dollar in million ) : 2017 2016 2015 Provision for income in million ) : 2017 2016 2015 Provision for income tax million ) : 2017 2016 2015 Provision for income tax $ Provision for income tax $ 15,738 $ 15,685 $ 19,121 Effective income tax $ 15,738 $ 15,685 $ 19,121 Effective tax rate $ 15,738 $ 15,685 $ 19,121 Effective tax rate 24.6 % $ 19,121 Effective tax rate 24.6 tax rate 24.6 % 25.6 % 26.4 % The Company rate 24.6 % 25.6 % 26.4 % The Company \u2019 s s effective tax rate for 2017 , 2016 and 2015 differ tax rate for 2017 , 2016 and 2015 differ from the for 2017 , 2016 and 2015 differ from the statutory federal federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2017 compared to 2016 wa due rate in 2017 compared to 2016 wa due to a different lower effective tax rate in 2016 compared to 2015 wa due rate in 2016 compared to 2015 wa due pr tax rate of 12.5 % . As of September % . As of September 30 , 2017 , U.S. income As of September 30 , 2017 , U.S. income tax have a cumulative total of $ 128.7 billion of such earnings . is estimated to be $ 42.2 billion . As of September billion . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , $ 252.3 2017 and September 24 , 2016 , $ 252.3 billion and 24 , 2016 , $ 252.3 billion and $ 216.0 billion $ 252.3 billion and $ 2 tax rate ( 35 % in 2017 , 2016 rate ( 35 % in 2017 , 2016 and 2015 ) 35 % in 2017 , 2016 and 2015 ) to income in 2017 , 2016 and 2015 ) to income before provision provision for income tax for 2017 , 2016 and 2015 , income tax for 2017 , 2016 and 2015 , is a for 2017 , 2016 and 2015 , is a follows ( dollar in million ) : 2017 2016 2015 Computed expected tax in million ) : 2017 2016 2015 Computed expected tax $ million ) : 2017 2016 2015 Computed expected tax $ 22,431 2015 Computed expected tax $ 22,431 $ tax rate $ 15,738 $ 15,685 $ 19,121 Effective tax rate 24.6 % $ 19,121 Effective tax rate 24.6 % 25.6 % 26.4 % Effective tax rate 24.6 % 25.6 % 26.4 % The Company rate 24.6 % 25.6 % 26.4 % The Company \u2019 s from equity award of $ 620 million , $ 379 million $ 620 million , $ 379 million and $ 748 million $ 379 million and $ 748 million in 2017 , 2016 and $ 748 million in 2017 , 2016 and 2015 , 748 million in 2017 , 2016 and 2015 , respectively , in 2017 , 2016 and 2015 , respectively , which were stock . ", + "geographic_information": "Geographic Data During 2017 , the Company \u2019 s international net sale accounted for 37 % and 63 % , accounted for 37 % and 63 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , \u201c Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Geographic a those described in Note 1 , \u201c Summary of Significant information by reportable segment for 2017 , 2016 and 2015 ( reportable segment for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Americas : Net in million ) : 2017 2016 2015 Americas : Net sale million ) : 2017 2016 2015 Americas : Net sale $ Americas : Net sale $ 96,600 $ 86,613 $ 93,864 Operating Net sale $ 96,600 $ 86,613 $ 93,864 Operating income $ $ 96,600 $ 86,613 $ 93,864", + "common_stock": "Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 0.875 2022 1.375 % Notes due 2024 0.875 % Notes due 2025 1.375 % Notes due 2024 0.875 % Notes due 2025 1.625 2024 0.875 % Notes due 2025 1.625 % Notes due 2026 0.875 % Notes due 2025 1.625 % Notes due 2026 2.000 2025 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 20 common stock were and outstanding a of October 20 , 2017 . DOCUMENTS INCORPORATED a of October 20 , 2017 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2018 annual meeting of shareholder ( of shareholder ( the \u201c 2018 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2018 10-K where indicated . The 2018 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the common stock . In August 2017 , the purchase period for ASR ended and an additional 4.5 million share were delivered and retired . In total , 20.1 million share were delivered under average repurchase price of $ 149.20 . ( 3 ) In of $ 149.20 . ( 3 ) In August 2017 , ( 3 ) In August 2017 , the Company entered into to purchase up to $ 3.0 billion of the Company \u2019 an up-front payment of $ 3.0 billion , the financial institution which will end in November 2017 . The total number of period . Apple Inc. | 2017 Fo common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2017 S & P , a right reserved . Copyright \u00a9 2017 Dow Jones & Co. All All right reserved . September 2012 September 2013 September 2014 September reserved . September 2012 September 2013 September 2014 September 2015 September September 2012 September 2013 September 2014 September 2015 September 2016 September September 2013 September 2014 September 2015 September 2016 September 2017 Apple September 2014 September 2015 September common stock of $ 32.9 billion , cash used to and dividend equivalent of $ 12.8 billion and cash used to repay term debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . During 2016 , $ 3.9 billion . During 2016 , cash generated by operating by operating activity of $ 65.8 billion wa a result of wa a result of $ 45.7 billion of net income and to net income of $ 20.1 billion . Cash used in in investing activity of $ 46.0 billion d common stock of $ 29.7 billion , cash used to and dividend equivalent of $ 12.2 billion and cash used to repay term debt of $ 2.5 billion , partially offset by debt , net of $ 25.0 billion . Capital Assets The s capital expenditure were $ 14.9 billion during 2017 . The were $ 14.9 billion during 2017 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2018 , which includes product tooling repurch common stock Repurchase of common stock ( 325,032 ) \u2014 ( 36,026 ) ( 325,032 ) \u2014 ( 36,026 ) \u2014 ( 36,026 ) ( 36,026 ) \u2014 ( 36,026 ) Share-based compensation \u2014 3,586 36,026 ) Share-based compensation \u2014 3,586 \u2014 \u2014 3,586 Common stock compensation \u2014 3,586 \u2014 \u2014 3,586 Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) \u2014 37,624 ( 231 ) ( 609 ) \u2014 ( 840 ) ( 609 ) \u2014 ( 840 ) Tax benefit from equity including transfer pricing adjustment \u2014 748 \u2014 \u2014 748 Balances common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29,000 ) \u2014 ( 29,000 ) ( 29,000 ) \u2014 ( 29,000 ) Share-based compensation \u2014 4,262 29,000 ) Share-based compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) \u2014 37,022 ( 806 ) ( 419 ) \u2014 ( 1,225 ) ( 419 ) \u2014 ( 1,225 ) Tax benefit from equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Bala common stock Repurchase of common stock ( 246,496 ) \u2014 ( 33,001 ) ( 246,496 ) \u2014 ( 33,001 ) \u2014 ( 33,001 ) ( 33,001 ) \u2014 ( 33,001 ) Share-based compensation \u2014 4,909 33,001 ) Share-based compensation \u2014 4,909 \u2014 \u2014 4,909 Common stock compensation \u2014 4,909 \u2014 \u2014 4,909 Common stock issued , net share withheld for employee tax 36,531 ( 913 ) ( 581 for employee tax 36,531 ( 913 ) ( 581 ) \u2014 36,531 ( 913 ) ( 581 ) \u2014 ( 1,494 ) ( 581 ) \u2014 ( 1,494 ) Tax benefit from equity including transfer pricing adjustment \u2014 620 \u2014 \u2014 620 Bala common stock 555 495 543 Excess tax benefit issuance of common stock 555 495 543 Excess tax benefit from of common stock 555 495 543 Excess tax benefit from equity tax benefit from equity award 627 407 749 Payments for tax benefit from equity award 627 407 749 Payments for tax related from equity award 627 407 749 Payments for tax related to settlement of equity award ( 1,874 ) ( 1,570 ) ( award ( 1,874 ) ( 1,570 ) ( 1,499 ) Payments ) ( 1,570 ) ( 1,499 ) Payments for dividend and dividend and dividend equi common stock Repurchases of common stock ( 32,900 ) ( 29,722 ) ( stock ( 32,900 ) ( 29,722 ) ( 35,253 ) Proceeds ) ( 29,722 ) ( 35,253 ) Proceeds from issuance of of term debt , net 28,662 24,954 27,114 Repayments of term term debt , net 28,662 24,954 27,114 Repayments of term debt debt , net 28,662 24,954 27,114 Repayments of term debt ( Repayments of term debt ( 3,500 ) ( 2,500 ) \u2014 debt ( 3,500 ) ( 2,500 ) \u2014 Change in commercial in commercial paper , net 3,852 ( 397 ) 2,191 Cash paper , net 3,852 ( 397 ) common stock open market common stock repurchase 134,832 $ 18,001 2016 : Fourth common stock repurchase 134,832 $ 18,001 2016 : Fourth quarter 28,579 stock repurchase 134,832 $ 18,001 2016 : Fourth quarter 28,579 $ 18,001 2016 : Fourth quarter 28,579 $ 104.97 $ 3,000 Third : Fourth quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 $ 97.00 104.97 $ 3,000 Third quarter 41,238 $ 97.00 4,000 Second quarter 3,000 Third quarter 41,238 $ 97.00 4,000 Second qu common stock open market common stock repurchase 167,567 $ 17,000 Note 8 \u2013 common stock repurchase 167,567 $ 17,000 Note 8 \u2013 Comprehensive Income repurchase 167,567 $ 17,000 Note 8 \u2013 Comprehensive Income Comprehensive income available-for-sale . Apple Inc. | 2017 Form 10-K | 61 The Apple Inc. | 2017 Form 10-K | 61 The following table | 2017 Form 10-K | 61 The following table show the statement line item , for 2017 and 2016 ( in million item , for 2017 and 2016 ( in million ) : Components Financial Statement Common Stock 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s Certificate ", + "hedging_activities": "Hedging Activities ( \u201c ASU 2017-12 \u201d ) . ASU 2017-12 2017-12 \u201d ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition . Restricted Cash In November 2016 , the FASB issued ASU FASB issued ASU No . 2016-18 , Statement of Cash Flows of Cash Flows ( Topic 230 ) : Restricted Cash ( Restricted Cash ( \u201c ASU 2016-18 \u201d ) , which enhances The Company will adopt ASU 2016-18 in it first quarter of i", + "cash_flow_hedges": "Cash Flow Hedges recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale and a gain of $ 606 million in other income/ ( expense ) , net for 2017 . The Company record all fair value a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contra" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-18-000145/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-18-000145/full-submission_features.json new file mode 100644 index 0000000..c2933ef --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-18-000145/full-submission_features.json @@ -0,0 +1,21 @@ +{ + "revenue": "revenue from Digital . Services net sale in 2018 included a favorable one-time item favorable one-time item of $ 236 million in connection with the . Services net sale in 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of AirPods accessory . Apple Inc. | 2018 Form 10-K | 23 Product Apple Inc. | 2018 Form 10-K | 23 Product Performance iPhone | 2018 Form 10-K | 23 Product Performance iPhon Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( \u201c ASU 2014-09 606 ) ( \u201c ASU 2014-09 \u201d ) , which amends for revenue recognition . ASU 2014-09 is based on principle that clarify the guidance in ASU 2014-09 . ASU 2014-09 and it in ASU 2014-09 . ASU 2014-09 and it related ASUs are in it first quarter of 2019 utilizing the full retrospective transition statement . Apple Inc. | 2018 Form 10-K | 29 Liquid Revenue Apple Inc. | 2018 Form 10-K | 32 Revenue Recognition Net | 2018 Form 10-K | 32 Revenue Recognition Net sale consist result . Apple Inc. | 2018 Form 10-K | 33 Valuation Apple Inc. | 2018 Form 10-K | 33 Valuation and Impairment | 2018 Form 10-K | 33 Valuation and Impairment of Marketable typically for period up to 150 day . If there is that ha a greater than 50 % likelihood of being realized settlement . Apple Inc. | 2018 Form 10-K | 34 Management Apple Inc. | 2018 Form 10-K | 34 Management belie revenue 7,543 7,548 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 Term revenue 7,543 7,548 Commercial paper 11,964 11,977 Term debt 8,784 6,496 7,543 7,548 Commercial paper 11,964 11,977 Term debt 8,784 6,496 Total paper 11,964 11,977 Term debt 8,784 6,496 Total current liability 116,866 11,964 11,977 Term de revenue Non-current liability : Deferred revenue 2,797 2,836 Term debt 93,735 97,207 liability : Deferred revenue 2,797 2,836 Term debt 93,735 97,207 Other revenue 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 40,415 93,735 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 140,458 45,180 40 revenue ( ) 1,055 Accounts payable 9,175 8,966 2,117 Deferred revenue ( 44 1,055 Accounts payable 9,175 8,966 2,117 Deferred revenue ( 44 ) 8,966 2,117 Deferred revenue ( 44 ) ( 626 ) ( revenue ( 44 ) ( 626 ) ( 1,554 ) Other ) ( 626 ) ( 1,554 ) Other current and non-current Other current and non-current liability 38,490 1,125 ( 1,906 ) Cash current and non-current liability 38,490 1,125 ( 1,906 ) Cash generated non-current liability 38,490 1,125 ( 1,906 ) Cash generated by operating Cash generated by o revenue expense . Apple Inc. | 2018 Form 10-K | 44 Share-Based Apple Inc. | 2018 Form 10-K | 44 Share-Based Compensation The | 2018 Form 10-K | 44 Share-Based Compensation The Company generally can be found in Note 8 , \u201c Benefit Plans . During the first quarter of 2018 , the Company adopted the ASU \u201d ) No . 2016-09 , Compensation \u2013 Stock Compensation \u2013 Stock Compensation ( Topic 718 ) : Improvements to Employee Payment Accounting ( \u201c ASU 2016-09 \u201d ) , which modified Cash Flows . Beginning in 2018 , the revenue 1,141 1,521 Basis of capital asset 137 1,230 Deferred revenue 1,141 1,521 Deferred asset 137 1,230 Deferred revenue 1,141 1,521 Deferred cost sharing \u2014 137 1,230 Deferred revenue 1,141 1,521 Deferred cost sharing \u2014 667 1,521 Deferred cost sharing \u2014 667 Share-based compensation 513 703 Unrealized sharing \u2014 667 Share-based compensation 513 703 Unrealized loss 871 \u2014 \u2014 667 Share-based compensation 513 703 Unrealized loss 871 \u2014 Other compensation 513 703 Unrealized loss 871 \u2014 Other 797 834 Total Unr Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,500 for calendar year 2018 ) $ 18,500 for calendar year 2018 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 activity and related information for 2018 , 2017 and 2016 , related information for 2018 , 2017 and 2016 , is a for 2018 , 2017 and 2016 , is a follows : ) Balance a of September 26 , 2015 101,467 $ 85.77 a of September 26 revenue from Digital . Services net sale in 2018 included a favorable one-time item favorable one-time item of $ 236 million in connection with the . Services net sale in 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of AirPods and third-party accessory . Note 11 \u2013 Selected Quarterly Financial Information of the four quarter of 2018 and 2017 ( in million four quarter of 2018 and 2017 (", + "expenses": "Expenses Operating expense for 2018 , 2017 and 2016 were Operating expense for 2018 , 2017 and 2016 were a follows for 2018 , 2017 and 2016 were a follows ( dollar dollar in million ) : 2018 Change 2017 Change 2016 Research million ) : 2018 Change 2017 Change 2016 Research and development : 2018 Change 2017 Change 2016 Research and development $ 14,236 2016 Research and development $ 14,236 23 % $ 11,581 15 Research and development $ 14,236 23 % $ 11,581 15 % $ 14,236 23 % $ 11,581 15 % $ 10,045 Percent", + "net_income": "Net income $ $ 215,639 $ 233,715 $ 182,795 Net income $ 59,531 $ $ 182,795 Net income $ 59,531 $ 48,351 $ 45,687 $ Net income $ 59,531 $ 48,351 $ 45,687 $ 53,394 $ $ 59,531 $ 48,351 $ 45,687 $ 53,394 $ 39,510 Earnings $ 48,351 $ 45,687 $ 53,394 $ 39,510 Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 $ : Basic $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 11.91 $ 8.35 $ 9.28 net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billion . Cash generated by by investing activity of $ 16.1 billion during 2018 consisted primarily of $ 16.1 billion during 2018 consisted primarily of proceeds from of purchase , of $ 32.4 billion , partially offset by plant and equipment of $ 13.3 billion . Cash used in in financing activity of $ 87.9 billion during 2018 consisted primarily of $ 87.9 billion during 2018 consisted primarily of cash used re net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 4.9 billion , which included a a one-time payment of $ 1.9 billion related to a multi-year in investing activity of $ 46.4 billion during 2017 consisted primarily of $ 46.4 billion during 2017 consisted primarily of cash used and maturity , of $ 33.1 billion and cash used to plant and equipment of $ 12.5 billion . Cash used in in financing activity of $ 18.0 billion during 2017 consisted primarily of $ 18.0 billion dur Net income $ Provision for income tax 13,372 15,738 15,685 Net income $ 59,531 for income tax 13,372 15,738 15,685 Net income $ 59,531 $ 15,738 15,685 Net income $ 59,531 $ 48,351 $ 45,687 Earnings Net income $ 59,531 $ 48,351 $ 45,687 Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 Diluted : Basic $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 $ 8.31 Shares 8.35 Diluted Net income $ , 2017 September 24 , 2016 Net income $ 59,531 $ , 2016 Net income $ 59,531 $ 48,351 $ 45,687 Other Net income $ 59,531 $ 48,351 $ 45,687 Other comprehensive income/ $ 59,531 $ 48,351 $ 45,687 Other comprehensive income/ ( loss tax effect of $ ( 1 ) , $ ( 77 1 ) , $ ( 77 ) and $ 8 , ( 77 ) and $ 8 , respectively ( 525 ) $ 8 , respectively ( 525 ) 224 75 Change in , respectively ( 525 ) 224 75 Change in unrealized gains/losses respectively ( 525 ) 224 75 Change in unrealized gains/losses on ex Net income $ ( 345 ) $ 119,355 Net income \u2014 \u2014 45,687 119,355 Net income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ ( loss loss ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent declared dividend equivalent declared at $ 2.18 per share or RSU \u2014 or RSU \u2014 \u2014 ( 12,188 ) \u2014 ( 12,188 ) ( 12,188 ) \u2014 ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 48,351 128,249 Net income \u2014 \u2014 48,351 \u2014 48,351 Other comprehensive income/ income \u2014 \u2014 48,351 \u2014 48,351 Other comprehensive income/ ( loss ) \u2014 \u2014 \u2014 ( 784 ) ( 784 ) Dividends \u2014 ( 784 ) ( 784 ) Dividends and dividend equivalent dividend equivalent declared at $ 2.40 per share or RSU \u2014 or RSU \u2014 \u2014 ( 12,803 ) \u2014 ( 12,803 ) ( 12,803 ) Net income \u2014 \u2014 Net income \u2014 \u2014 59,531 \u2014 59,531 Other comprehensive income/ income \u2014 \u2014 59,531 \u2014 59,531 Other comprehensive income/ ( loss ) \u2014 \u2014 \u2014 ( 3,026 ) ( 3,026 ) Dividends \u2014 ( 3,026 ) ( 3,026 ) Dividends and dividend equivalent dividend equivalent declared at $ 2.72 per share or RSU \u2014 or RSU \u2014 \u2014 ( 13,735 ) \u2014 ( 13,735 ) ( 13,735 ) \u2014 ( 13,735 ) Repurchase of common stock Repurchase of common stock ( 405,549 ) \u2014 ( 73,056 ) ( 405,549 ) \u2014 ( 73,056 ) \u2014 ( 73,056 ) ( 73,056 ) \u2014 ( 73,056 ) Share-based compensati Net income Operating activity : Net income 59,531 48,351 45,687 Adjustments to reconcile activity : Net income 59,531 48,351 45,687 Adjustments to reconcile net : Net income 59,531 48,351 45,687 Adjustments to reconcile net income activity : Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense : Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense 5,340 Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense 5,340 4, net income for 2018 , 2017 and 2016 ( net income in million share in thousand ) : 2018 2017 2016 Numerator : Net in thousand ) : 2018 2017 2016 Numerator : Net income thousand ) : 2018 2017 2016 Numerator : Net income $ Numerator : Net income $ 59,531 $ 48,351 $ 45,687 Denominator Net income $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 4,955,377 5,217,242 5,470,820 Effect of diluti Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91 Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1", + "assets": "Assets The s capital expenditure were $ 16.7 billion during 2018 . The were $ 16.7 billion during 2018 . The Company anticipates utilizing Company anticipates utilizing approximately $ 14.0 billion for capital expenditure during billion for capital expenditure during 2019 , which includes product tooling repurchase . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of ASSETS September 29 , 2018 September 30 , 2017 ASSETS : Current , 2018 September 30 , 2017 ASSETS : Current asset : Cash and cash equivalent $ 25,913 $ 20,289 Marketable security 40,388 cash equivalent $ 25,913 $ 20,289 Marketable security 40,388 53,892 Accounts 25,913 $ 20,289 Marketable security 40,388 53,892 Accounts receivable , net $ 20,289 Marketable security 40,388 53,892 Accounts receivable , net 23,186 53,892 Accounts receivable , net 23,186 17,874 Inventories 3,956 4,855 Vendor Accounts rece Assets | 2018 Form 10-K | 53 Deferred Tax Assets and Liabilities and Liabilities As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the significant 2018 and September 30 , 2017 , the significant component of ( in million ) : 2018 2017 Deferred tax asset : in million ) : 2018 2017 Deferred tax asset : Accrued liability and other reserve $ 3,151 $ 4,019 Basis of capital other reserve $ 3,151 $ 4,019 Basis of capital asset 137 assets/ Total deferred tax liability 776 36,562 Net deferred tax assets/ ( assets/ ( liability ) $ 5,834 $ ( 27,588 ) Deferred ) $ 5,834 $ ( 27,588 ) Deferred tax asset and Tax Positions As of September 29 , 2018 , the total As of September 29 , 2018 , the total amount of unrecognized tax benefit wa $ 9.7 billion , of which $ billion , of which $ 7.4 billion , if recognized , rate . As of September 30 , 2017 , the total As of September 30 , 2017 , the total amount of unrecognized tax benefit wa $ 8.4 ", + "liabilities": "Liabilities ( \u201c ASU 2016-01 \u201d ) , which update The Company will adopt ASU 2016-01 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition , the adoption of ASU 2016-01 is not expected to have financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments \u2013 Credit \u2013 Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( \u201c ASU 2016-13 \u201d ) , which modifies The Company will adopt ASU 2016-13 in it fir LIABILITIES AND SHAREHOLDERS Total asset $ 365,725 $ 375,319 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 55,888 $ 44,242 Other current liability Accounts payable $ 55,888 $ 44,242 Other current liability 32,687 30,551 $ 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 32,687 30,551 Deferred Liabilities | 2018 Form 10-K | 51 Other Non-Current Liabilities 2018 2017 | 51 Other Non-Current Liabilities 2018 2017 Long-term tax payable $ 51 Other Non-Current Liabilities 2018 2017 Long-term tax payable $ 33,589 2017 Long-term tax payable $ 33,589 $ 257 Deferred tax liability tax payable $ 33,589 $ 257 Deferred tax liability 426 31,504 $ 257 Deferred tax liability 426 31,504 Other non-current liability 11,165 257 Deferred tax liability 426 31,504 Other non-current liability 11,165 8,654 426 31,504 Oth Liabilities and Liabilities As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the significant 2018 and September 30 , 2017 , the significant component of ( in million ) : 2018 2017 Deferred tax asset : in million ) : 2018 2017 Deferred tax asset : Accrued liability and other reserve $ 3,151 $ 4,019 Basis of capital other reserve $ 3,151 $ 4,019 Basis of capital asset 137 4,019 Basis of capital asset 137 1,230 Deferred revenue 1,", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 35 Item 8 . Financial Statements About Market Risk 35 Item 8 . Financial Statements and Supplement EQUITY liability : Accounts payable $ 55,888 $ 44,242 Other current liability Accounts payable $ 55,888 $ 44,242 Other current liability 32,687 30,551 $ 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 Term revenue 7,543 7,548 Commercial equity ) Total shareholder \u2019 equity 107,147 134,047 Total liability and shareholder Total shareholder \u2019 equity 107,147 134,047 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 365,725 $ 375,319 See accompanying Notes \u2019 equity $ 365,725 $ 375,319 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 40 Apple Apple Inc. | 2018 Form 10-K | 40 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 40 Apple Inc. CONSOLIDATED STATEMENTS OF Amount Balances a of September 26 , 2015 equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Balances a adjustment \u2014 379 \u2014 \u2014 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 31,251 96,364 a of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 , 2016 5,336,166 31,251 96,364 634 128,249 Net income \u2014 \u2014 2016 5,336,166 equity including transfer pricing adjustment \u2014 620 \u2014 \u2014 620 Balances a adjustment \u2014 620 \u2014 \u2014 620 Balances a of September 30 620 Balances a of September 30 , 2017 5,126,201 35,867 98,330 a of September 30 , 2017 5,126,201 35,867 98,330 ( 150 of September 30 , 2017 5,126,201 35,867 98,330 ( 150 ) September 30 , 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 30 , 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 Cumulative 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 Cumulative effect of 35,867 98,330 ( 150 ) 134 equity award ( 2,527 ) ( 1,874 ) ( award ( 2,527 ) ( 1,874 ) ( 1,570 ) Payments ) ( 1,874 ) ( 1,570 ) Payments for dividend and dividend and dividend equivalent ( 13,712 ) ( 12,769 ) ( equivalent ( 13,712 ) ( 12,769 ) ( 12,150 ) Repurchases ) ( 12,769 ) ( 12,150 ) Repurchases of common stock Repurchases of common stock ( 72,738 ) ( 32,900 ) ( stock ( 72,738 ) ( 32,900 ) ( 29,722 ) Proceeds ) ( 32,900 ) ( 29,722 ) Proceeds from issuance of of term debt , net 6,969 28,662 24,954 Repayments of term term Equity . Apple Inc. | 2018 Form 10-K | 52 Provision Apple Inc. | 2018 Form 10-K | 52 Provision for Income | 2018 Form 10-K | 52 Provision for Income Taxes and provision for income tax for 2018 , 2017 and 2016 , income tax for 2018 , 2017 and 2016 , consisted of for 2018 , 2017 and 2016 , consisted of the following ( in million ) : 2018 2017 2016 Federal : Current in million ) : 2018 2017 2016 Federal : Current $ million ) : 2018 2017 2016 Federal : Current $ 41,425 2016 Federal : Current $ 41,425 $ 7, Equity Share Equity Share Repurchase Program During 2018 , the Company repurchased 405.5 2018 , the Company repurchased 405.5 million share of it common it common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award", + "cash_flow": "cash flow $ 25,913 $ 20,289 $ 20,484 Supplemental cash flow disclosure : income tax , net $ 10,417 $ 11,591 $ 10,444 Cash , net $ 10,417 $ 11,591 $ 10,444 Cash paid for $ 10,417 $ 11,591 $ 10,444 Cash paid for interest $ Cash paid for interest $ 3,022 $ 2,092 $ 1,316 See for interest $ 3,022 $ 2,092 $ 1,316 See accompanying Notes $ 3,022 $ 2,092 $ 1,316 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 42 Apple Apple Inc. | 2018 Form 10-K | 42 Apple Inc. Notes | 2018 Form Cash Flow Hedges transaction . Apple Inc. | 2018 Form 10-K | 48 Net Apple Inc. | 2018 Form 10-K | 48 Net Investment Hedges | 2018 Form 10-K | 48 Net Investment Hedges The effective As a result , during 2018 , the Company recognized a recognized a gain of $ 20 million in net sale , , a gain of $ 85 million in cost of sale and a loss of $ 198 million in other income/ ( ) , net . During 2017 , the Company recognized a recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale a", + "gross_margin": "Gross Margin Gross margin Gross Margin Gross margin for 2018 , 2017 and 2016 wa Gross margin for 2018 , 2017 and 2016 wa a follows for 2018 , 2017 and 2016 wa a follows ( dollar dollar in million ) : 2018 2017 2016 Net sale $ in million ) : 2018 2017 2016 Net sale $ 265,595 million ) : 2018 2017 2016 Net sale $ 265,595 $ 2017 2016 Net sale $ 265,595 $ 229,234 $ 215,639 Cost Net sale $ 265,595 $ 229,234 $ 215,639 Cost of sale $ 265,595 $ 229,234 $ 215,639 Cost of sale 163,756 141,048 $ 215,639 Cost of sale 1 Gross margin $ 215,639 Cost of sale 163,756 141,048 131,376 Gross margin $ 101,839 Cost of sale 163,756 141,048 131,376 Gross margin $ 101,839 $ 141,048 131,376 Gross margin $ 101,839 $ 88,186 $ 84,263 Gross Gross margin $ 101,839 $ 88,186 $ 84,263 Gross margin percentage $ 101,839 $ 88,186 $ 84,263 Gross margin percentage 38.3 % $ 84,263 Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin increased in % Gross ma gross margin percentage during 2018 . Apple Inc. | 2018 2018 . Apple Inc. | 2018 Form 10-K | 26 Gross Apple Inc. | 2018 Form 10-K | 26 Gross margin increased | 2018 Form 10-K | 26 Gross margin increased in 2017 26 Gross margin increased in 2017 compared to 2016 due primarily increased in 2017 compared to 2016 due primarily to a shift and gross margin percentage during 2017 . The Company anticipates gross during the first quarter of 2019 to be between 38.0 % of 2019 to be between 38.0 % and 38.5 % . be betwe Gross margin 101,839 215,639 Cost of sale 163,756 141,048 131,376 Gross margin 101,839 88,186 Cost of sale 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expense : 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expense : Research 131,376 Gross margin 101,839 88,186 84,263 Operating expense : Research and expense : Research and development 14,236 11,581 10,045 Selling , general : Research and development 14,236 11, Gross margin $ $ 53,265 $ 61,137 $ 88,293 Gross margin $ 24,084 $ $ 88,293 Gross margin $ 24,084 $ 20,421 $ 23,422 $ Gross margin $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Gross margin $ $ 45,408 $ 52,896 $ 78,351 Gross margin $ 19,931 $ $ 78,351 Gross margin $ 19,931 $ 17,488 $ 20,591 $ Gross margin $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basi", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 90,403 75,076 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 49,099 ) ( 41,293 ) Total amortization ( 49,099 ) ( 41,293 ) Total property , plant and equipment , net $ 41,304 $ 33,783 Apple Inc. | , net $ 41,304 $ 33,783 Apple Inc. | 2018 Form $ 33,783 Apple Inc. | 2018 Form 10-K | 51 Other Apple Inc. | 2018 Form 10-K | 51 Other Non-Current Liabilities | 2018 Form 10-K | 51 Other Non-Current Liabilities 2018 2017 | 5", + "capital_expenditure": "capital expenditure were $ 16.7 billion during 2018 . The were $ 16.7 billion during 2018 . The Company anticipates utilizing Company anticipates utilizing approximately $ 14.0 billion for capital expenditure during billion for capital expenditure during 2019 , which includes product tooling repurchase . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of 2.18 % and maturity genera", + "debt": "debt portion of term debt $ 93,735 $ 97,207 $ 75,427 $ term debt $ 93,735 $ 97,207 $ 75,427 $ 53,329 $ $ 93,735 $ 97,207 $ 75,427 $ 53,329 $ 28,987 Other $ 97,207 $ 75,427 $ 53,329 $ 28,987 Other non-current liability $ 75,427 $ 53,329 $ 28,987 Other non-current liability $ 45,180 28,987 Other non-current liability $ 45,180 $ 40,415 $ 36,074 $ non-current liability $ 45,180 $ 40,415 $ 36,074 $ 33,427 $ $ 45,180 $ 40,415 $ 36,074 $ 33,427 $ 24,826 Apple $ 40,415 $ 36,074 $ 33,427 $ 24,826 Apple Inc. debt and C $ 2.5 billion of Canadian dollar\u2013denominated term Canadian dollar\u2013denominated term debt during 2017 . Apple Inc. | 2018 2017 . Apple Inc. | 2018 Form 10-K | 22 Sales Apple Inc. | 2018 Form 10-K | 22 Sales Data The | 2018 Form 10-K | 22 Sales Data The following table unit sale by product for 2018 , 2017 and 2016 ( by product for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million and unit in thousand ) : 2018 Change 2017 Change 2016 Net thousand ) : 2018 Change 20 debt $ 11,964 $ 11,977 $ 8,105 Total term debt $ 102,519 8,105 Total term debt $ 102,519 $ 103,703 $ 78,927 Working term debt $ 102,519 $ 103,703 $ 78,927 Working capital $ $ 102,519 $ 103,703 $ 78,927 Working capital $ 14,473 $ $ 78,927 Working capital $ 14,473 $ 27,831 $ 27,863 Cash Working capital $ 14,473 $ 27,831 $ 27,863 Cash generated by $ 14,473 $ 27,831 $ 27,863 Cash generated by operating activity generated by operating activity ( 2 ) $ 77,434 $ 64,225 activity ( 2 ) $ 77,434 $ 64,225 $ 66 debt of $ 6.5 billion , partially offset by debt , net of $ 7.0 billion . During 2017 , $ 7.0 billion . During 2017 , cash generated by operating by operating activity of $ 64.2 billion wa a result of wa a result of $ 48.4 billion of net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 4.9 billion , which included a a one-time payment of $ 1.9 billion related to a multi-year in investing activity of $ 46.4 billion during 2017 consisted primarily of $ 46.4 billion d debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . Capital Assets The s capital expenditure were $ 16.7 billion during 2018 . The were $ 16.7 billion during 2018 . The Company anticipates utilizing Company anticipates utilizing approximately $ 14.0 billion for capital expenditure during billion for capital expenditure during 2019 , which includes product tooling repurchase . As of September 29 , 2018 , the Company As o Debt . \u201d \u201d Capital Return Program During 2018 , the Company repurchased 405.5 2018 , the Company repurchased 405.5 million share of it common it common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company \u2019 debt $ 8,797 2023 Total Term debt $ 8,797 $ 18,933 $ 17,978 $ Term debt $ 8,797 $ 18,933 $ 17,978 $ 58,485 $ $ 8,797 $ 18,933 $ 17,978 $ 58,485 $ 104,193 Operating $ 18,933 $ 17,978 $ 58,485 $ 104,193 Operating lease 1,298 $ 17,978 $ 58,485 $ 104,193 Operating lease 1,298 2,507 1,838 58,485 $ 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing $ 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing purchase 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufactu debt a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 to increase by 2018 and September 30 , 2017 to increase by $ 399 2017 to increase by $ 399 million and $ 376 million $ 399 million and $ 376 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 5 , \u201c Debt . \u201d , typically for up to 12 month . However , the , t debt 8,784 6,496 7,543 7,548 Commercial paper 11,964 11,977 Term debt 8,784 6,496 Total paper 11,964 11,977 Term debt 8,784 6,496 Total current liability 116,866 11,964 11,977 Term debt 8,784 6,496 Total current liability 116,866 100,814 8,784 6,496 Total current liability 116,866 100,814 Non-current liability : Deferred 6,496 Total current liability 116,866 100,814 Non-current liability : Deferred revenue Non-current liability : Deferred revenue 2,797 2,836 Term debt 93,735 97,207 liability : Defer debt 93,735 97,207 Other revenue 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 40,415 93,735 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 140,458 45,180 40,415 Total non-current liability 141,712 140,458 Total liability 258,578 241,272 40,415 Total non-current liability 141,712 140, debt , net 6,969 28,662 24,954 Repayments of term term debt , net 6,969 28,662 24,954 Repayments of term debt debt , net 6,969 28,662 24,954 Repayments of term debt ( Repayments of term debt ( 6,500 ) ( 3,500 ) ( debt ( 6,500 ) ( 3,500 ) ( 2,500 ) Change ) ( 3,500 ) ( 2,500 ) Change in commercial paper commercial paper , net ( 37 ) 3,852 ( 397 ) , net ( 37 ) 3,852 ( 397 ) Cash used ( 37 ) 3,852 ( 397 ) Cash used in financing used in financing activity ( 87,876 ) ( 17,974 ) ( activity ( 87,876 ) ( 17 debt $ 4 $ 67 $ ( 258 currency debt $ 4 $ 67 $ ( 258 ) Gains/ 4 $ 67 $ ( 258 ) Gains/ ( Losses ) Foreign exchange contract $ ( 482 ) $ 1,958 $ 885 $ ( 482 ) $ 1,958 $ 885 Interest rate contract 482 ) $ 1,958 $ 885 Interest rate contract 1 ( $ 885 Interest rate contract 1 ( 2 ) ( 11 Interest rate contract 1 ( 2 ) ( 11 ) Total 1 ( 2 ) ( 11 ) Total $ ( 481 11 ) Total $ ( 481 ) $ 1,956 $ 874 $ ( 481 ) $ 1,956 $ 874 Gains/ ( Losses 481 ) $ 1,956 $ 874 Gains/ ( Losses ) on Foreign exchange contract $ ( 16 debt 1,363 810 ( 341 ) Total $ \u2014 Fixed-rate debt 1,363 810 ( 341 ) Total $ Fixed-rate debt 1,363 810 ( 341 ) Total $ 1,530 $ ( 341 ) Total $ 1,530 $ 810 $ ( 341 ) Total $ 1,530 $ 810 $ ( 341 ) The 1,530 $ 810 $ ( 341 ) The following table show derivative instrument a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 2017 Notional Amount Credit Risk Debt Commercial Paper The . As of both September 29 , 2018 and September 30 of both September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the Company 2018 and September 30 , 2017 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 2.18 % a of September 29 2.18 % a of September 29 , 2018 and 1.20 % a of September 29 , 2018 and 1.20 % a of September 29 , 2018 and 1.20 % a of September 30 1.20 % a of September 30 , 2017 Debt As | 2018 Form 10-K | 55 Term Debt As of September Term Debt As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had outstanding aggregate principal amount of $ 104.2 billion ( collectively the \u201c term debt a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 : Maturities ( 2018 and September 30 , 2017 : Maturities ( calendar year Maturities ( calendar year ) 2018 2017 Amount ( in million ( calend debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note \u2014 $ \u2014 \u2014 % $ 2,000 1.10 % Fixed-rate 2.400 % \u2014 \u2014 % $ 2,000 1.10 % Fixed-rate 2.400 % \u2013 $ 2,000 1.10 % Fixed-rate 2.400 % \u2013 3.850 % note % Fixed-rate 2.400 % \u2013 3.850 % note 2023 \u2013 2043 % \u2013 3.850 % note 2023 \u2013 2043 8,500 2.44 % 3.850 % note 2023 \u2013 2043 8,500 2.44 % \u2013 3.91 % note 2023 \u2013 2043 8,500 2.44 % \u2013 3.91 % note 2023 \u2013 2043 8,500 2.44 % \u2013 3.91 % 12,500 2043 8,500 2.44 % \u2013 3.91 % 12,500 1.08 % \u2013 2.44 % \u2013 3.91 % 12,500 debt issuance of 1.08 % \u2013 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2019 12.0 billion : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 billion : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 % : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate note 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate 2.100 % 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate 2.100 % \u2013 % 1,000 1.61 % Fixed-rate 2.100 % \u2013 4.450 % note % Fixed-rate 2.100 % \u2013 4.450 % note 2 debt issuance of 1.61 % \u2013 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2019 27.3 billion : Floating-rate note 2019 \u2013 2020 1,507 1.87 % : Floating-rate note 2019 \u2013 2020 1,507 1.87 % \u2013 2.64 Floating-rate note 2019 \u2013 2020 1,507 1.87 % \u2013 2.64 % note 2019 \u2013 2020 1,507 1.87 % \u2013 2.64 % 1,549 2020 1,507 1.87 % \u2013 2.64 % 1,549 1.56 % \u2013 1.87 % \u2013 2.64 % 1,549 1.56 % \u2013 1.87 % % \u2013 2.64 % 1,549 1.56 % \u2013 1.87 % Fixed-rate % 1,549 1.56 % \u2013 1.87 % Fixed-rate 0.350 % \u2013 debt issuance of 0.28 % \u2013 4.51 % 2016 debt issuance of $ 24.9 2016 debt issuance of $ 24.9 billion : Floating-rate note 2019 24.9 billion : Floating-rate note 2019 \u2013 2021 1,350 2.48 % : Floating-rate note 2019 \u2013 2021 1,350 2.48 % \u2013 3.44 Floating-rate note 2019 \u2013 2021 1,350 2.48 % \u2013 3.44 % note 2019 \u2013 2021 1,350 2.48 % \u2013 3.44 % 1,350 2021 1,350 2.48 % \u2013 3.44 % 1,350 1.45 % \u2013 2.48 % \u2013 3.44 % 1,350 1.45 % \u2013 2.44 % % \u2013 3.44 % 1,350 1.45 % \u2013 2.44 % Fixed-rate % 1,350 1.45 % \u2013 2.44 % Fixed-rate 1.100 % \u2013 debt issuance of 1.13 % \u2013 4.78 % 2017 debt issuance of $ 28.7 2017 debt issuance of $ 28.7 billion : Floating-rate note 2019 28.7 billion : Floating-rate note 2019 \u2013 2022 3,250 2.41 % : Floating-rate note 2019 \u2013 2022 3,250 2.41 % \u2013 2.84 Floating-rate note 2019 \u2013 2022 3,250 2.41 % \u2013 2.84 % note 2019 \u2013 2022 3,250 2.41 % \u2013 2.84 % 3,250 2022 3,250 2.41 % \u2013 2.84 % 3,250 1.38 % \u2013 2.41 % \u2013 2.84 % 3,250 1.38 % \u2013 1.81 % % \u2013 2.84 % 3,250 1.38 % \u2013 1.81 % Fixed-rate % 3,250 1.38 % \u2013 1.81 % Fixed-rate 0.875 % \u2013 debt \u2013 4.30 % First quarter 2018 debt issuance of $ 7.0 2018 debt issuance of $ 7.0 billion : Fixed-rate 1.800 % $ 7.0 billion : Fixed-rate 1.800 % note 2019 1,000 1.83 : Fixed-rate 1.800 % note 2019 1,000 1.83 % \u2014 \u2014 Fixed-rate 1.800 % note 2019 1,000 1.83 % \u2014 \u2014 % 1.800 % note 2019 1,000 1.83 % \u2014 \u2014 % Fixed-rate % \u2014 \u2014 % Fixed-rate 2.000 % note 2020 1,000 2.03 % Fixed-rate 2.000 % note 2020 1,000 2.03 % \u2014 \u2014 Fixed-rate 2.000 % note 2020 1,000 2.03 % \u2014 \u2014 % 2.000 % note 2020 1,000 2.03 % \u2014 \u2014 % Fixed-rate debt 104,193 104,021 Unamortized premium/ ( discount % Total term debt 104,193 104,021 Unamortized premium/ ( discount ) issuance cost , net ( 218 ) ( 225 ) Hedge net ( 218 ) ( 225 ) Hedge accounting fair value accounting fair value adjustment ( 1,456 ) ( 93 ) Less adjustment ( 1,456 ) ( 93 ) Less : Current portion portion of term debt ( 8,784 ) ( 6,496 ) Total debt ( 8,784 ) ( 6,496 ) Total non-current portion of portion of term debt $ 93,735 $ 97,207 To manage interest term debt $ 93,735 $ 97,207 debt for 2018 , 2017 and 2016 , term debt for 2018 , 2017 and 2016 , respectively . for 2018 , 2017 and 2016 , respectively . Apple Inc. respectively . Apple Inc. | 2018 Form 10-K | 56 The Apple Inc. | 2018 Form 10-K | 56 The future principal | 2018 Form 10-K | 56 The future principal payment for s Notes a of September 29 , 2018 are a follows a of September 29 , 2018 are a follows ( in ( in million ) : 2019 $ 8,797 2020 10,183 2021 million ) : 2019 $ 8,797 2020 10,183 2021 8,750 2022 ) : 2019 $ 8,79 debt 2022 8,583 2023 9,395 Thereafter 58,485 Total term debt $ 104,193 58,485 Total term debt $ 104,193 As of September 29 , $ 104,193 As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the fair 2018 and September 30 , 2017 , the fair value of Notes , based on Level 2 input , wa $ 103.2 2 input , wa $ 103.2 billion and $ 106.1 billion $ 103.2 billion and $ 106.1 billion , respectively . Note billion , respectively . Note 6", + "share_repurchase": "share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion and raising it quarterly it quarterly dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share beginning in May per share beginning in May 2017 . During 2017 , the in May 2017 . During 2017 , the Company spent $ , the Company spent $ 33.0 billion to repurchase share of and dividend equivalent of $ 12.8 billion . The $ 210 12.8 billion . The $ 210 billion share repurchase program wa in the third quar Share Repurchase Program During 2018 , the Company repurchased 405.5 2018 , the Company repurchased 405.5 million share of it common it common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company \u2019 stock . The remainin", + "earnings_per_share": "Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 $ : Basic $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 11.91 $ 8.35 $ 9.28 $ 6.49 Diluted $ 11.91 $ 9.21 9.28 $ 6.49 Diluted $ 11.91 $ 9.21 $ 8.31 $ 6.49 Diluted $ 11.91 $ 9.21 $ 8.31 $ 9.22 $ $ 11.91 $ 9.21 $ 8.31 $ 9.22 $ 6.45 Cash $ 9.21 $ 8.31 $ 9.22 $ 6.45 Cash dividend declared $ 8.31 $ 9.22 $ 6.45 Cash dividend declared per shar earnings per share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted per share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,1 Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 Diluted : Basic $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 $ 8.31 Shares 8.35 Diluted $ 11.91 $ 9.21 $ 8.31 Shares used in $ 11.91 $ 9.21 $ 8.31 Shares used in computing earnings earnings per share : Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 per share : Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 earnings per share for 2018 , 2017 and 2016 ( per share for 2018 , 2017 and 2016 ( net income for 2018 , 2017 and 2016 ( net income in million share in thousand ) : 2018 2017 2016 Numerator : Net in thousand ) : 2018 2017 2016 Numerator : Net income thousand ) : 2018 2017 2016 Numerator : Net income $ Numerator : Net income $ 59,531 $ 48,351 $ 45,687 Denominator Net income $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average basic share : Weighted-ave earnings per share Weighted-average diluted share 5,000,109 5,251,692 5,500,281 Basic earnings per share $ Basic earnings per share $ 12.01 $ 9.27 $ 8.35 Diluted per share $ 12.01 $ 9.27 $ 8.35 Diluted earnings per $ 12.01 $ 9.27 $ 8.35 Diluted earnings per share $ Diluted earnings per share $ 11.91 $ 9.21 $ 8.31 Cash per share $ 11.91 $ 9.21 $ 8.31 Cash Equivalents and $ 11.91 $ 9.21 $ 8.31 Cash Equivalents and Marketable Securities building is the lesser of 30 year or the remaining life property and equipment w Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.89 Fourth $ 2.91 $ 2.34 $ 2.73 $ 3.89 Fourth Quarter Third $ 2.34 $ 2.73 $ 3.89 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 201 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.36 ( $ 2.07 $ 1.67 $ 2.10 $ 3.36 ( 1 ) $ 1.67 $ 2.10 $ 3.36 ( 1 ) Basic and $ 2.10 $ 3.36 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2018 Form 10-", + "tax_rate": "tax rate for 2018 , 2017 and 2016 were tax rate for 2018 , 2017 and 2016 were a follows for 2018 , 2017 and 2016 were a follows ( dollar dollar in million ) : 2018 2017 2016 Provision for income in million ) : 2018 2017 2016 Provision for income tax million ) : 2018 2017 2016 Provision for income tax $ Provision for income tax $ 13,372 $ 15,738 $ 15,685 Effective income tax $ 13,372 $ 15,738 $ 15,685 Effective tax rate $ 13,372 $ 15,738 $ 15,685 Effective tax rate 18.3 % $ 15,685 Effective tax rate 18.3 tax rate 18.3 % 24.6 % 25.6 % On December rate 18.3 % 24.6 % 25.6 % On December 22 , % 25.6 % On December 22 , 2017 , the U.S. % On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a federal income tax rate of 24.5 % for 2018 ( the rate of 24.5 % for 2018 ( the \u201c 2018 blended for 2018 ( the \u201c 2018 blended U.S. tax rat tax rate for 2018 wa lower than the 2018 2018 wa lower than the 2018 blended U.S. tax rate due s effective tax rate for 2017 and 2016 were lower than tax rate for 2017 and 2016 were lower than the historical federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2018 compared to 2017 wa due rate in 2018 compared to 2017 wa due primarily to the due primarily to the lower 2018 blended U.S. tax rate , lower effective tax rate in 2017 compared to 2016 wa due rate in 2017 compar tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a for income tax by $ 1.5 billion during 2018 . This by $ 1.5 billion during 2018 . This increase wa composed increase wa composed of $ 2.0 billion related to the remeasurement asset and liability and $ 1.2 billion associated with the deemed partially offset by a $ 1.7 billion impact the deemed repatriation Staff Accounting B tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a for income tax by $ 1.5 billion during 2018 . This by $ 1.5 billion during 2018 . This increase wa composed increase wa composed of $ 2.0 billion related to the remeasurement asset and liability and $ 1.2 billion associated with the deemed partially offset by a $ 1.7 billion impact the deemed repatriation earnings . Of the tax rate ( 24.5 % in 2018 ; 35 rate ( 24.5 % in 2018 ; 35 % in 2017 24.5 % in 2018 ; 35 % in 2017 and 2016 2018 ; 35 % in 2017 and 2016 ) to income 35 % in 2017 and 2016 ) to income before provision provision for income tax for 2018 , 2017 and 2016 , income tax for 2018 , 2017 and 2016 , is a for 2018 , 2017 and 2016 , is a follows ( dollar in million ) : 2018 2017 2016 Computed expected tax in million ) : 2018 2017 2016 Computed expected tax $ million ) : 2018 2017 2016 Computed expected tax $ 17,890 2 tax rate $ 13,372 $ 15,738 $ 15,685 Effective tax rate 18.3 % $ 15,685 Effective tax rate 18.3 % 24.6 % 25.6 % Effective tax rate 18.3 % 24.6 % 25.6 % The Company rate 18.3 % 24.6 % 25.6 % The Company \u2019 s . Prior to adopting ASU 2016-09 in the first quarter of in the first quarter of 2018 , the Company reflected net , which amounted to $ 620 million and $ 379 million $ 620 million and $ 379 million in 2017 and 2016 and $ 379 million in 2017 and 2016 , respectively . 379 million in 2017 and 2016 , respec", + "geographic_information": "Geographic Data During 2018 , the Company \u2019 s international net sale accounted for 37 % and 63 % , accounted for 37 % and 63 % , respectively , of The Company also offer a 90-day limited warranty on the service . Employees As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had approximately , the Company had approximately 132,000 full-time equivalent employee . Apple employee . Apple Inc. | 2018 Form 10-K | 6 Available Apple Inc. | 2018 Form 10-K | 6 Available Information The Geographic a those described in Note 1 , \u201c Summary of Significant purpose . Apple Inc. | 2018 Form 10-K | 62 The Apple Inc. | 2018 Form 10-K | 62 The following table | 2018 Form 10-K | 62 The following table show information information by reportable segment for 2018 , 2017 and 2016 ( reportable segment for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Americas : Net in million ) : 2018 2017 2016 Americas : Net sale million ) : 2018 2017 2016 A", + "common_stock": "Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 0.875 2022 1.375 % Notes due 2024 0.875 % Notes due 2025 1.375 % Notes due 2024 0.875 % Notes due 2025 1.625 2024 0.875 % Notes due 2025 1.625 % Notes due 2026 0.875 % Notes due 2025 1.625 % Notes due 2026 2.000 2025 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 20 common stock were and outstanding a of October 26 , 2018 . DOCUMENTS INCORPORATED a of October 26 , 2018 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2019 annual meeting of shareholder ( of shareholder ( the \u201c 2019 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2019 10-K where indicated . The 2019 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2018 Standard & Poor \u2019 s right reserved . Copyright \u00a9 2018 S & P Dow Jones All right reserved . September 2013 September 2014 September 2015 September reserved . September 2013 September 2014 September 2015 September 2016 September September 2013 September 2014 September 2015 September 2016 September 2017 September September 2014 September 2015 September 2016 September 2017 September 2018 Apple September 2015 September 2016 Sept common stock of $ 72.7 billion , cash used to and dividend equivalent of $ 13.7 billion and cash used to repay term debt of $ 6.5 billion , partially offset by debt , net of $ 7.0 billion . During 2017 , $ 7.0 billion . During 2017 , cash generated by operating by operating activity of $ 64.2 billion wa a result of wa a result of $ 48.4 billion of net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 4.9 billion , which included a a one-time payment of $ 1.9 billion related common stock of $ 32.9 billion , cash used to and dividend equivalent of $ 12.8 billion and cash used to repay term debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . Capital Assets The s capital expenditure were $ 16.7 billion during 2018 . The were $ 16.7 billion during 2018 . The Company anticipates utilizing Company anticipates utilizing approximately $ 14.0 billion for capital expenditure during billion for capital expend common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company \u2019 stock . The remaining $ 29.0 billion repurchased during 2018 wa $ 29.0 billion repurchased during 2018 wa in connection with the under plan complying wi common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29,000 ) \u2014 ( 29,000 ) ( 29,000 ) \u2014 ( 29,000 ) Share-based compensation \u2014 4,262 29,000 ) Share-based compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) \u2014 37,022 ( 806 ) ( 419 ) \u2014 ( 1,225 ) ( 419 ) \u2014 ( 1,225 ) Tax benefit from equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Bala common stock Repurchase of common stock ( 246,496 ) \u2014 ( 33,001 ) ( 246,496 ) \u2014 ( 33,001 ) \u2014 ( 33,001 ) ( 33,001 ) \u2014 ( 33,001 ) Share-based compensation \u2014 4,909 33,001 ) Share-based compensation \u2014 4,909 \u2014 \u2014 4,909 Common stock compensation \u2014 4,909 \u2014 \u2014 4,909 Common stock issued , net share withheld for employee tax 36,531 ( 913 ) ( 581 for employee tax 36,531 ( 913 ) ( 581 ) \u2014 36,531 ( 913 ) ( 581 ) \u2014 ( 1,494 ) ( 581 ) \u2014 ( 1,494 ) Tax benefit from equity including transfer pricing adjustment \u2014 620 \u2014 \u2014 620 Bala common stock Repurchase of common stock ( 405,549 ) \u2014 ( 73,056 ) ( 405,549 ) \u2014 ( 73,056 ) \u2014 ( 73,056 ) ( 73,056 ) \u2014 ( 73,056 ) Share-based compensation \u2014 5,443 73,056 ) Share-based compensation \u2014 5,443 \u2014 \u2014 5,443 Common stock compensation \u2014 5,443 \u2014 \u2014 5,443 Common stock issued , net share withheld for employee tax 34,334 ( 1,109 ) ( 948 for employee tax 34,334 ( 1,109 ) ( 948 ) \u2014 34,334 ( 1,109 ) ( 948 ) \u2014 ( 2,057 ) ( 948 ) \u2014 ( 2,057 ) Balances a of September ) Balances a of September 29 , 2018 4,754,986 $ 40 common stock 669 555 495 Payments for tax issuance of common stock 669 555 495 Payments for tax related of common stock 669 555 495 Payments for tax related to settlement of equity award ( 2,527 ) ( 1,874 ) ( award ( 2,527 ) ( 1,874 ) ( 1,570 ) Payments ) ( 1,874 ) ( 1,570 ) Payments for dividend and dividend and dividend equivalent ( 13,712 ) ( 12,769 ) ( equivalent ( 13,712 ) ( 12,769 ) ( 12,150 ) Repurchases ) ( 12,769 ) ( 12,150 ) Repurchases of common stock Repurchases of common stock ( 72,738 ) ( 32,9 common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company \u2019 stock . The remaining $ 29.0 billion repurchased during 2018 wa $ 29.0 billion repurchased during 2018 wa in connection with the under plan complying wi Common Stock 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s Certificate ", + "fair_value_measurements": "Fair Value Measurements | 2018 Form 10-K | 45 Fair Value Measurements The Company observable market data . Note 2 \u2013 Financial Instruments Cash , investment category a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 11,575 $ \u2014 $ \u2014 $ $ \u2014 $ \u2014 $ 11,575 $ 11,575 $ \u2014 $ $ \u2014 $ 11,575 $ 11,575 ", + "hedging_activities": "Hedging Activities ( \u201c ASU 2017-12 \u201d ) . ASU 2017-12 2017-12 \u201d ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition statement . Apple Inc. | 2018 Form 10-K | 28 Income Apple Inc. | 2018 Form 10-K | 28 Income Taxes In | 2018 Form 10-K | 28 Income Taxes In October 2016 28 Income Taxes In October 2016 , the FASB issued ASU FASB issued ASU No . 2016-16 , Income Taxes ( Topic , Income Taxes", + "cash_flow_hedges": "Cash Flow Hedges transaction . Apple Inc. | 2018 Form 10-K | 48 Net Apple Inc. | 2018 Form 10-K | 48 Net Investment Hedges | 2018 Form 10-K | 48 Net Investment Hedges The effective As a result , during 2018 , the Company recognized a recognized a gain of $ 20 million in net sale , , a gain of $ 85 million in cost of sale and a loss of $ 198 million in other income/ ( ) , net . During 2017 , the Company recognized a recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale and a ga" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-19-000119/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-19-000119/full-submission_features.json new file mode 100644 index 0000000..dd0317a --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-19-000119/full-submission_features.json @@ -0,0 +1,21 @@ +{ + "revenue": "revenue 5,522 5,966 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 Term revenue 5,522 5,966 Commercial paper 5,980 11,964 Term debt 10,260 8,784 5,522 5,966 Commercial paper 5,980 11,964 Term debt 10,260 8,784 Total paper 5,980 11,964 Term debt 10,260 8,784 Total current liability 105,718 5,980 11,964 Term debt revenue Accounts payable ( 1,923 ) 9,175 8,966 Deferred revenue ( 625 payable ( 1,923 ) 9,175 8,966 Deferred revenue ( 625 ) 9,175 8,966 Deferred revenue ( 625 ) ( 3 ) ( revenue ( 625 ) ( 3 ) ( 593 ) Other ) ( 3 ) ( 593 ) Other current and non-current current and non-current liability ( 4,700 ) 38,449 1,092 Cash generated non-current liability ( 4,700 ) 38,449 1,092 Cash generated by operating liability ( 4,700 ) 38,449 1,092 Cash generated by operating activity Cash generated by operating activity 69, Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( \u201c ASU 2014-09 606 ) ( \u201c ASU 2014-09 \u201d ) , and additional clarify the guidance in ASU 2014-09 ( collectively the \u201c new in the first quarter of 2019 , the Company classified the and Services net sale for 2018 and 2017 were reclassified to net sale for 2018 and 2017 were reclassified to conform to reclassified to conform to the 2019 presentation . Financial Instruments In In the first quarter of 2019 , the Company adopted FASB adopted FA Revenue Recognition Net sale service . Apple Inc. | 2019 Form 10-K | 36 For Apple Inc. | 2019 Form 10-K | 36 For the sale | 2019 Form 10-K | 36 For the sale of third-party Deferred Revenue As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the Company 2019 and September 29 , 2018 , the Company had total total deferred revenue of $ 8.1 billion and $ 8.8 billion $ 8.1 billion and $ 8.8 billion , respectively . As respectively . revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 6 % within two-to-three year and % within two-to-three year and 1 % in greater than three significant product and service for 2019 , 2018 and 2017 were and service for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( in ( in million ) : 2019 2018 2017 iPhone ( 1 in million ) : 2019 2018 2017 iPhone ( 1 ) million ) : 2019 2018 2017 iPhone ( 1 ) $ 2019 2018 2017 iPhone ( 1 ) $ 142,381 $ 164,888 revenue recognized in billion of revenue recognized in 2019 that wa included in deferred deferred revenue a of September 29 , 2018 , $ 5.8 a of September 29 , 2018 , $ 5.8 billion of 29 , 2018 , $ 5.8 billion of revenue recognized in billion of revenue recognized in 2018 that wa included in deferred deferred revenue a of September 30 , 2017 , and $ a of September 30 , 2017 , and $ 6.3 billion , 2017 , and $ 6.3 billion of revenue recognized in billion of revenue recognized in 2017 that wa included in d revenue a of September 24 , 2016 . The Company a of September 24 , 2016 . The Company \u2019 s each reportable segment in Note 11 , \u201c Segment Information and and Geographic Data \u201d for 2019 , 2018 and 2017 . Data \u201d for 2019 , 2018 and 2017 . Apple Inc. for 2019 , 2018 and 2017 . Apple Inc. | 2019 2017 . Apple Inc. | 2019 Form 10-K | 37 Note Apple Inc. | 2019 Form 10-K | 37 Note 3 \u2013 | 2019 Form 10-K | 37 Note 3 \u2013 Financial Instruments Form 10-K | 37 Note 3 \u2013 Financial Instruments Cash , investment category a revenue 1,372 1,141 liability and other reserve 5,389 3,151 Deferred revenue 1,372 1,141 Share-based reserve 5,389 3,151 Deferred revenue 1,372 1,141 Share-based compensation 749 513 5,389 3,151 Deferred revenue 1,372 1,141 Share-based compensation 749 513 Unrealized revenue 1,372 1,141 Share-based compensation 749 513 Unrealized loss \u2014 871 1,372 1,141 Share-based compensation 749 513 Unrealized loss \u2014 871 Other 749 513 Unrealized loss \u2014 871 Other 697 797 Total deferred Unrealized loss \u2014 871 Other 697 Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,000 for calendar year 2019 ) $ 19,000 for calendar year 2019 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 up to a maximum of 6 % of the employee \u2019 activity and related information for 2019 , 2018 and 2017 , related information for 2019 , 2018 and 2017 , is a for 2019 , 2018 and 2017 , is a follows : ) Balance a of September 24 , 2016 99,089 $ 97.54 a of September 24 ", + "expenses": "Expenses Operating expense for 2019 , 2018 and 2017 were Operating expense for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 Change 2018 Change 2017 Research million ) : 2019 Change 2018 Change 2017 Research and development : 2019 Change 2018 Change 2017 Research and development $ 16,217 2017 Research and development $ 16,217 14 % $ 14,236 23 Research and development $ 16,217 14 % $ 14,236 23 % $ 16,217 14 % $ 14,236 23 % $ 11,581 Percent", + "net_income": "Net income $ $ 229,234 $ 215,639 $ 233,715 Net income $ 55,256 $ $ 233,715 Net income $ 55,256 $ 59,531 $ 48,351 $ Net income $ 55,256 $ 59,531 $ 48,351 $ 45,687 $ $ 55,256 $ 59,531 $ 48,351 $ 45,687 $ 53,394 Earnings $ 59,531 $ 48,351 $ 45,687 $ 53,394 Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 $ : Basic $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 11.89 $ 9.27 $ 8 net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 billion . Cash generated by by investing activity of $ 45.9 billion during 2019 consisted primarily of $ 45.9 billion during 2019 consisted primarily of proceeds from of purchase , of $ 57.5 billion , partially offset by plant and equipment of $ 10.5 billion . Cash used in in financing activity of $ 91.0 billion during 2019 consisted primarily of $ 91.0 billion during 2019 consisted primarily of cash used rep net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billion . Cash generated by by investing activity of $ 16.1 billion during 2018 consisted primarily of $ 16.1 billion during 2018 consisted primarily of proceeds from of purchase , of $ 32.4 billion , partially offset by plant and equipment of $ 13.3 billion . Cash used in in financing activity of $ 87.9 billion during 2018 consisted primarily of $ 87.9 billion during 2018 consisted primarily of cash used re Net income $ Provision for income tax 10,481 13,372 15,738 Net income $ 55,256 for income tax 10,481 13,372 15,738 Net income $ 55,256 $ 13,372 15,738 Net income $ 55,256 $ 59,531 $ 48,351 Earnings Net income $ 55,256 $ 59,531 $ 48,351 Earnings per share $ 55,256 $ 59,531 $ 48,351 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 Diluted : Basic $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 $ 9.21 Shares 9.27 Di Net income $ , 2018 September 30 , 2017 Net income $ 55,256 $ , 2017 Net income $ 55,256 $ 59,531 $ 48,351 Other Net income $ 55,256 $ 59,531 $ 48,351 Other comprehensive income/ $ 55,256 $ 59,531 $ 48,351 Other comprehensive income/ ( loss , net of tax ( 408 ) ( 525 ) 224 tax ( 408 ) ( 525 ) 224 Change in unrealized 408 ) ( 525 ) 224 Change in unrealized gains/losses on fair value of derivative ( 661 ) 523 1,315 Adjustment for of derivative ( 661 ) 523 1,315 Adjustment for net ( derivative ( 661 ) 523 1, net income 23 382 ( 1,477 ) Total included in net income 23 382 ( 1,477 ) Total change net income 23 382 ( 1,477 ) Total change in unrealized gains/losses on derivative instrument ( 638 ) 905 ( 162 ) derivative instrument ( 638 ) 905 ( 162 ) Change in ( 638 ) 905 ( 162 ) Change in unrealized gains/losses fair value of marketable security 3,802 ( 3,407 ) ( 782 of marketable security 3,802 ( 3,407 ) ( 782 ) Adjustment 3,802 ( 3,407 ) ( 782 ) Adjustment for net ( and included in net income 25 1 ( 64 ) Total net income 25 1 ( 64 ) Total change net income 25 1 ( 64 ) Total change in unrealized unrealized gains/losses on marketable security 3,827 ( 3,406 ) ( 846 on marketable security 3,827 ( 3,406 ) ( 846 ) Total 3,827 ( 3,406 ) ( 846 ) Total other comprehensive income/ comprehensive income/ ( loss ) 2,781 ( 3,026 ) ( 784 ( loss ) 2,781 ( 3,026 ) ( 784 ) Total 2,781 ( 3,026 ) ( 784 ) Total comprehensive income $ ) Total comprehensive income $ 58,037 $ 56,505 $ 47,567 See comprehensive income $ 58,037 $ 56,505 Net income 55,256 earnings : Beginning balance 70,400 98,330 96,364 Net income 55,256 59,531 : Beginning balance 70,400 98,330 96,364 Net income 55,256 59,531 48,351 70,400 98,330 96,364 Net income 55,256 59,531 48,351 Dividends and dividend 98,330 96,364 Net income 55,256 59,531 48,351 Dividends and dividend equivalent 96,364 Net income 55,256 59,531 48,351 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,129 ) ( 13,735 ) ( declared ( 14,129 ) ( 13,735 ) ( 12,803 ) Common Net income Operating activity : Net income 55,256 59,531 48,351 Adjustments to reconcile activity : Net income 55,256 59,531 48,351 Adjustments to reconcile net : Net income 55,256 59,531 48,351 Adjustments to reconcile net income activity : Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense : Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense 6,068 Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense 6,068 5, net income for 2019 , 2018 and 2017 ( net income in million share in thousand ) : 2019 2018 2017 Numerator : Net in thousand ) : 2019 2018 2017 Numerator : Net income thousand ) : 2019 2018 2017 Numerator : Net income $ Numerator : Net income $ 55,256 $ 59,531 $ 48,351 Denominator Net income $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 4,617,834 4,955,377 5,217,242 Effect of diluti Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 3.05 1 ) : Basic $ 3.05 $ 2.20 $ 2.47 $ : Basic $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.18 2.47 $ 4.22 Diluted $ 3.03 Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91", + "assets": "Assets The | 2019 Form 10-K | 23 Capital Assets The Company \u2019 s capital expenditure were $ 7.6 billion during 2019 , which were $ 7.6 billion during 2019 , which included product tooling repurchase . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had $ , the Company had $ 6.0 billion of Commercial Paper outstanding a weighted-average interest rate of 2.24 % and maturity generally le month . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company Assets and in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading \u201c Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , \u201c Commitments and Contingencies in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , \u201c Commitments and Contingencies materially adversely affected . Item 7A . Quantitativ ASSETS September 28 , 2019 September 29 , 2018 ASSETS : Current , 2019 September 29 , 2018 ASSETS : Current asset : Cash and cash equivalent $ 48,844 $ 25,913 Marketable security 51,713 cash equivalent $ 48,844 $ 25,913 Marketable security 51,713 40,388 Accounts 48,844 $ 25,913 Marketable security 51,713 40,388 Accounts receivable , net $ 25,913 Marketable security 51,713 40,388 Accounts receivable , net 22,926 40,388 Accounts receivable , net 22,926 23,186 Inventories 4,106 3,956 Vendor Accounts rece Assets and and Liabilities As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the significant 2019 and September 29 , 2018 , the significant component of ( in million ) : 2019 2018 Deferred tax asset : in million ) : 2019 2018 Deferred tax asset : Amortization : Amortization and depreciation $ 11,433 $ 137 Accrued liability and and depreciation $ 11,433 $ 137 Accrued liability and other reserve Accrued liability and other re assets/ Total deferred tax liability 11,595 776 Net deferred tax assets/ ( assets/ ( liability ) $ 8,045 $ 5,834 Deferred tax asset liability ) $ 8,045 $ 5,834 Deferred tax asset and liability settled . Apple Inc. | 2019 Form 10-K | 45 Uncertain Apple Inc. | 2019 Form 10-K | 45 Uncertain Tax Positions | 2019 Form 10-K | 45 Uncertain Tax Positions As of Tax Positions As of September 28 , 2019 , the total As of September 28 , 2019 , the total amount of unrecognized tax benefit wa $ 15.6 billion , of whi", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 338,516 $ 365,725 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 46,236 $ 55,888 Other current liability Accounts payable $ 46,236 $ 55,888 Other current liability 37,720 33,327 $ 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 37,720 33,327 Deferred r Liabilities ( \u201c ASU 2016-01 \u201d ) , which update . The adoption of ASU 2016-01 did not have a material In the first quarter of 2019 , the Company adopted FASB adopted FASB ASU No . 2016-16 , Income Taxes ( Topic , Income Taxes ( Topic 740 ) : Intra-Entity Transfers of Than Inventory ( \u201c ASU 2016-16 \u201d ) , which requires . The Company adopted ASU 2016-16 utilizing the modified retrospective transition , the Company recorded $ 2.7 billion of net deferred tax other non-current asset by $ 128 million , and increa Liabilities | 2019 Form 10-K | 43 Other Non-Current Liabilities 2019 2018 | 43 Other Non-Current Liabilities 2019 2018 Long-term tax payable $ 43 Other Non-Current Liabilities 2019 2018 Long-term tax payable $ 29,545 2018 Long-term tax payable $ 29,545 $ 33,589 Other non-current liability tax payable $ 29,545 $ 33,589 Other non-current liability 20,958 15,325 $ 33,589 Other non-current liability 20,958 15,325 Total other non-current liability 33,589 Other non-current liability 20,958 15,325 Total other non Liabilities As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the significant 2019 and September 29 , 2018 , the significant component of ( in million ) : 2019 2018 Deferred tax asset : in million ) : 2019 2018 Deferred tax asset : Amortization : Amortization and depreciation $ 11,433 $ 137 Accrued liability and and depreciation $ 11,433 $ 137 Accrued liability and other reserve Accrued liability and other reserve 5,389 3,151 De", + "equity": "Equity Securities 15 Item 6 . Selected Financial of Equity Securities 15 Item 6 . Selected Financial Data 17 6 . Selected Financial Data 17 Item 7 . Management \u2019 Selected Financial Data 17 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 18 Item 7A . Quantitative and Results of Operations 18 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplement EQUITY liability : Accounts payable $ 46,236 $ 55,888 Other current liability Accounts payable $ 46,236 $ 55,888 Other current liability 37,720 33,327 $ 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 Term revenue 5,522 5,966 Commercial pa equity ) Total shareholder \u2019 equity 90,488 107,147 Total liability and shareholder Total shareholder \u2019 equity 90,488 107,147 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 338,516 $ 365,725 See accompanying Notes \u2019 equity $ 338,516 $ 365,725 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 31 Apple Apple Inc. | 2019 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 28 , 2019 S equity , equity , beginning balance $ 107,147 $ 134,047 $ 128,249 Common beginning balance $ 107,147 $ 134,047 $ 128,249 Common stock and $ 107,147 $ 134,047 $ 128,249 Common stock and additional paid-in paid-in capital : Beginning balance 40,201 35,867 31,251 Common stock issued capital : Beginning balance 40,201 35,867 31,251 Common stock issued 781 : Beginning balance 40,201 35,867 31,251 Common stock issued 781 669 35,867 31,251 Common stock issued 781 669 555 Common stock withheld 31,251 Common s equity award ( 2,002 ) ( 1,778 ) ( award ( 2,002 ) ( 1,778 ) ( 1,468 ) Share-based ) ( 1,778 ) ( 1,468 ) Share-based compensation 6,194 5,443 ( 1,468 ) Share-based compensation 6,194 5,443 4,909 Tax benefit from 1,468 ) Share-based compensation 6,194 5,443 4,909 Tax benefit from equity ) Share-based compensation 6,194 5,443 4,909 Tax benefit from equity award transfer pricing adjustment \u2014 \u2014 620 Ending balance 45,174 40,201 35,867 \u2014 \u2014 620 Ending balance 45,174 40,201 35,867 Retained earnings : \u2014 620 En equity award ( 1,029 ) ( 948 ) ( award ( 1,029 ) ( 948 ) ( 581 ) Common ) ( 948 ) ( 581 ) Common stock repurchased ( ) Common stock repurchased ( 67,101 ) ( 73,056 ) ( repurchased ( 67,101 ) ( 73,056 ) ( 33,001 ) Cumulative ) ( 73,056 ) ( 33,001 ) Cumulative effect of change of change in accounting principle 2,501 278 \u2014 Ending balance 45,898 change in accounting principle 2,501 278 \u2014 Ending balance 45,898 70,400 2,501 278 \u2014 Ending balance 45,898 70,400 98,330 Accumulated other comprehensive 278 \u2014 Endi equity equity , ending balance $ 90,488 $ 107,147 $ 134,047 Dividends ending balance $ 90,488 $ 107,147 $ 134,047 Dividends and dividend $ 90,488 $ 107,147 $ 134,047 Dividends and dividend equivalent declared per share or RSU $ 3.00 $ 2.72 $ 2.40 See or RSU $ 3.00 $ 2.72 $ 2.40 See accompanying Notes $ 3.00 $ 2.72 $ 2.40 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 32 Apple Apple Inc. | 2019 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 32 Apple Inc. CO equity award ( 2,817 ) ( 2,527 ) ( award ( 2,817 ) ( 2,527 ) ( 1,874 ) Payments ) ( 2,527 ) ( 1,874 ) Payments for dividend and dividend and dividend equivalent ( 14,119 ) ( 13,712 ) ( equivalent ( 14,119 ) ( 13,712 ) ( 12,769 ) Repurchases ) ( 13,712 ) ( 12,769 ) Repurchases of common stock Repurchases of common stock ( 66,897 ) ( 72,738 ) ( stock ( 66,897 ) ( 72,738 ) ( 32,900 ) Proceeds ) ( 72,738 ) ( 32,900 ) Proceeds from issuance of of term debt , net 6,963 6,969 28,662 Repayments of term term d equity award ( 639 ) ( 675 ) \u2014 award ( 639 ) ( 675 ) \u2014 Other 65 537 ( 675 ) \u2014 Other 65 537 ( 65 ) Provision 675 ) \u2014 Other 65 537 ( 65 ) Provision for \u2014 Other 65 537 ( 65 ) Provision for income tax Provision for income tax $ 10,481 $ 13,372 $ 15,738 Effective income tax $ 10,481 $ 13,372 $ 15,738 Effective tax rate $ 10,481 $ 13,372 $ 15,738 Effective tax rate 15.9 % $ 15,738 Effective tax rate 15.9 % 18.3 % 24.6 % Effective tax rate 15.9 % 18.3 % 24.6 % The Company rate 15.9 % 18.3 % 24.6 % The Compan Equity Share Share Repurchase Program On April 30 , 2019 , the Company Program On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company \u2019 stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . During 2019 a of September 28 , 2019 . During 2019 , the 28 , 2019 . During 2019 , the Company repurchased 345.2 2019 , the Company repurchased 345.2 million share of it equity . RSUs granted under the 2014 Plan generally vest over four . RSUs granted under the 2014 Plan reduce the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award u", + "cash_flow": "cash flow $ 50,224 $ 25,913 $ 20,289 Supplemental cash flow disclosure : income tax , net $ 15,263 $ 10,417 $ 11,591 Cash , net $ 15,263 $ 10,417 $ 11,591 Cash paid for $ 15,263 $ 10,417 $ 11,591 Cash paid for interest $ Cash paid for interest $ 3,423 $ 3,022 $ 2,092 See for interest $ 3,423 $ 3,022 $ 2,092 See accompanying Notes $ 3,423 $ 3,022 $ 2,092 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 33 Apple Apple Inc. | 2019 Form 10-K | 33 Apple Inc. Notes | 2019 Form Cash Flow Hedges wa a gain of $ 777 million for 2019 , and of $ 777 million for 2019 , and wa recognized in relates . Apple Inc. | 2019 Form 10-K | 40 The Apple Inc. | 2019 Form 10-K | 40 The Company record | 2019 Form 10-K | 40 The Company record all derivative fair value a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 Fair Value of Derivatives Des", + "gross_margin": "Gross Margin Products | 2019 Form 10-K | 20 Gross Margin Products and Services and gross margin percentage for 2019 , 2018 and 2017 were margin percentage for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 2018 2017 Gross margin : in million ) : 2019 2018 2017 Gross margin : Products million ) : 2019 2018 2017 Gross margin : Products $ Gross margin : Products $ 68,887 $ 77,683 $ 70,197 Services : Products $ 68,887 $ 77,683 $ 70,197 Services 29 gross margin 77,683 $ 70,197 Services 29,505 24,156 17,989 Total gross margin $ $ 70,197 Services 29,505 24,156 17,989 Total gross margin $ 98,392 17,989 Total gross margin $ 98,392 $ 101,839 $ 88,186 Gross gross margin $ 98,392 $ 101,839 $ 88,186 Gross margin percentage $ 98,392 $ 101,839 $ 88,186 Gross margin percentage : Products Gross margin percentage : Products 32.2 % 34.4 % 35.7 % percentage : Products 32.2 % 34.4 % 35.7 % Services 63.7 Products 32.2 % 34.4 % 35.7 % Services 63.7 % 60.8 34.4 % 35.7 % gross margin percentage % Total gross margin percentage 37.8 % 38.3 % 38.5 % gross margin percentage 37.8 % 38.3 % 38.5 % Products Gross percentage 37.8 % 38.3 % 38.5 % Products Gross Margin Products gross margin percentage decreased during 2019 compared to 2018 due primarily decreased during 2019 compared to 2018 due primarily to lower iPhone Products gross margin increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to a favorable gross margin percentage gross margin increased during 2019 and 2018 due primarily to margin increased during 2019 and 2018 due primarily to higher Services gross margin percentage increased during 2019 and 2018 due primarily to percentage increased during 2019 and 2018 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2019 , 2018 and 2017 were Operating expense for 2019 , 2018 and 2017 were a follows for 2019 , 2018 a Gross margin 98,392 Total cost of sale 161,782 163,756 141,048 Gross margin 98,392 101,839 cost of sale 161,782 163,756 141,048 Gross margin 98,392 101,839 88,186 161,782 163,756 141,048 Gross margin 98,392 101,839 88,186 Operating expense : 163,756 141,048 Gross margin 98,392 101,839 88,186 Operating expense : Research 141,048 Gross margin 98,392 101,839 88,186 Operating expense : Research and expense : Research and development 16,217 14,236 11,581 Selling , general : Research and development 16,217 14,236 Gross margin $ $ 53,809 $ 58,015 $ 84,310 Gross margin $ 24,313 $ $ 84,310 Gross margin $ 24,313 $ 20,227 $ 21,821 $ Gross margin $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Gross margin $ $ 53,265 $ 61,137 $ 88,293 Gross margin $ 24,084 $ $ 88,293 Gross margin $ 24,084 $ 20,421 $ 23,422 $ Gross margin $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 95,957 90,403 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 58,579 ) ( 49,099 ) Total amortization ( 58,579 ) ( 49,099 ) Total property , plant and equipment , net $ 37,378 $ 41,304 Apple Inc. | , net $ 37,378 $ 41,304 Apple Inc. | 2019 Form $ 41,304 Apple Inc. | 2019 Form 10-K | 43 Other Apple Inc. | 2019 Form 10-K | 43 Other Non-Current Liabilities | 2019 Form 10-K | 43 Other Non-Current Liabilities 2019 2018 | 4", + "capital_expenditure": "capital expenditure were $ 7.6 billion during 2019 , which were $ 7.6 billion during 2019 , which included product tooling repurchase . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had $ , the Company had $ 6.0 billion of Commercial Paper outstanding a weighted-average interest rate of 2.24 % and maturity generally le month . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had outstanding aggregate principal amount of $ 101.7 billion ( collectively", + "debt": "debt portion of term debt $ 91,807 $ 93,735 $ 97,207 $ term debt $ 91,807 $ 93,735 $ 97,207 $ 75,427 $ $ 91,807 $ 93,735 $ 97,207 $ 75,427 $ 53,329 Other $ 93,735 $ 97,207 $ 75,427 $ 53,329 Other non-current liability $ 97,207 $ 75,427 $ 53,329 Other non-current liability $ 50,503 53,329 Other non-current liability $ 50,503 $ 48,914 $ 44,212 $ non-current liability $ 50,503 $ 48,914 $ 44,212 $ 39,986 $ $ 50,503 $ 48,914 $ 44,212 $ 39,986 $ 38,104 Apple $ 48,914 $ 44,212 $ 39,986 $ 38,104 Apple Inc. debt $ 5,980 $ 11,964 $ 11,977 Total term debt $ 102,067 11,977 Total term debt $ 102,067 $ 102,519 $ 103,703 Working term debt $ 102,067 $ 102,519 $ 103,703 Working capital $ $ 102,067 $ 102,519 $ 103,703 Working capital $ 57,101 $ $ 103,703 Working capital $ 57,101 $ 15,410 $ 28,792 Cash Working capital $ 57,101 $ 15,410 $ 28,792 Cash generated by $ 57,101 $ 15,410 $ 28,792 Cash generated by operating activity generated by operating activity $ 69,391 $ 77,434 $ 64,225 Cash operating activity $ 69, debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . During 2018 , $ 7.0 billion . During 2018 , cash generated by operating by operating activity of $ 77.4 billion wa a result of wa a result of $ 59.5 billion of net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billion . Cash generated by by investing activity of $ 16.1 billion during 2018 consisted primarily of $ 16.1 b debt of $ 6.5 billion , partially offset by of term debt of $ 7.0 billion . Apple Inc. | billion . Apple Inc. | 2019 Form 10-K | 23 Capital Apple Inc. | 2019 Form 10-K | 23 Capital Assets The | 2019 Form 10-K | 23 Capital Assets The Company \u2019 s capital expenditure were $ 7.6 billion during 2019 , which were $ 7.6 billion during 2019 , which included product tooling repurchase . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had $ , the Company had $ 6.0 billion of Co Debt . \u201d Capital Return Program On April 30 , 2019 , the Company Program On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company \u2019 stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . During 2019 a of September 28 , 2019 . During 2019 , the 28 , 2019 . During 2019 , the Company repurchased 345.2 2019 , the Company repurchased 345.2 million share of it comm debt $ 10,270 2024 Total Term debt $ 10,270 $ 18,278 $ 19,329 $ Term debt $ 10,270 $ 18,278 $ 19,329 $ 53,802 $ $ 10,270 $ 18,278 $ 19,329 $ 53,802 $ 101,679 Operating $ 18,278 $ 19,329 $ 53,802 $ 101,679 Operating lease 1,306 $ 19,329 $ 53,802 $ 101,679 Operating lease 1,306 2,413 1,746 53,802 $ 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing $ 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing purchase 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Ma debt . Apple Inc. | 2019 Form 10-K | 26 The Apple Inc. | 2019 Form 10-K | 26 The Company \u2019 | 2019 Form 10-K | 26 The Company \u2019 s investment the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , a hypothetical 2019 and September 29 , 2018 , a hypothetical 100 basis , 2018 , a hypothetical 100 basis point increase in interest would result in debt a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 to increase by 2019 and September 29 , 2018 to increase by $ 325 2018 to increase by $ 325 million and $ 399 million $ 325 million and $ 399 million on an annualized basis , typically for up to 12 month . However , the , the Company estimate with 95 % confidence , a maximum in fair value of $ 452 million a of September 28 452 million a of September 28 , 2019 , compared to debt 10,260 8,784 5,522 5,966 Commercial paper 5,980 11,964 Term debt 10,260 8,784 Total paper 5,980 11,964 Term debt 10,260 8,784 Total current liability 105,718 5,980 11,964 Term debt 10,260 8,784 Total current liability 105,718 115,929 10,260 8,784 Total current liability 105,718 115,929 Non-current liability : Term 8,784 Total current liability 105,718 115,929 Non-current liability : Term debt Non-current liability : Term debt 91,807 93,735 Other non-current liability 50,503 liability : Term deb debt , net 6,963 6,969 28,662 Repayments of term term debt , net 6,963 6,969 28,662 Repayments of term debt debt , net 6,963 6,969 28,662 Repayments of term debt ( Repayments of term debt ( 8,805 ) ( 6,500 ) ( debt ( 8,805 ) ( 6,500 ) ( 3,500 ) Proceeds ) ( 6,500 ) ( 3,500 ) Proceeds from/ ( Repayments commercial paper , net ( 5,977 ) ( 37 ) 3,852 net ( 5,977 ) ( 37 ) 3,852 Other ( 105 5,977 ) ( 37 ) 3,852 Other ( 105 ) \u2014 37 ) 3,852 Other ( 105 ) \u2014 \u2014 Cash used used in financing activity ( 90,976 ) ( debt paper 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 85,383 7,240 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,7 debt paper 2,573 \u2014 \u2014 2,573 1,663 910 \u2014 Corporate debt security 2,573 \u2014 \u2014 2,573 1,663 910 \u2014 Corporate debt security 123,001 910 \u2014 Corporate debt security 123,001 152 ( 2,038 ) 121,115 \u2014 Corporate debt security 123,001 152 ( 2,038 ) 121,115 \u2014 debt security 123,001 152 ( 2,038 ) 121,115 \u2014 25,162 95,953 123,001 152 ( 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security ( 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security 946 \u2014 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security 946 \u2014 ( \u2014 25,162 95,953 Muni debt security $ 28,151 $ 28,167 $ 56,318 Unrealized debt security $ 28,151 $ 28,167 $ 56,318 Unrealized loss $ $ 28,151 $ 28,167 $ 56,318 Unrealized loss $ ( 138 56,318 Unrealized loss $ ( 138 ) $ ( 143 ) ( 138 ) $ ( 143 ) $ ( 281 ) ( 143 ) $ ( 281 ) 2018 Continuous Unrealized Losses ) $ ( 281 ) 2018 Continuous Unrealized Losses Less than Continuous Unrealized Losses Less than 12 Months 12 Months or Greater Losses Less than 12 Months 12 Months or Greater Total Fair value of marketable security $ 126 debt $ ( 58 ) $ 4 $ 67 $ ( 58 ) $ 4 $ 67 Gains/ ( Losses 58 ) $ 4 $ 67 Gains/ ( Losses ) reclassified Foreign exchange contract $ ( 116 ) $ ( 482 ) ( 116 ) $ ( 482 ) $ 1,958 Interest rate $ ( 482 ) $ 1,958 Interest rate contract ( 7 1,958 Interest rate contract ( 7 ) 1 ( 2 ) rate contract ( 7 ) 1 ( 2 ) Total $ ( 7 ) 1 ( 2 ) Total $ ( 123 2 ) Total $ ( 123 ) $ ( 481 ) ( 123 ) $ ( 481 ) $ 1,956 Gains/ ( $ ( 481 ) $ 1,956 Gains/ ( Losses ) on : Foreign exchange contract $ 1,020 $ ( 168 ) $ contract $ 1 debt ( $ \u2014 Fixed-rate debt ( 2,068 ) 1,363 810 Total $ Fixed-rate debt ( 2,068 ) 1,363 810 Total $ ( 3,086 debt ( 2,068 ) 1,363 810 Total $ ( 3,086 ) 1,363 810 Total $ ( 3,086 ) $ 1,530 $ 810 $ ( 3,086 ) $ 1,530 $ 810 The following table 3,086 ) $ 1,530 $ 810 The following table show the derivative instrument a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in mill Debt Commercial Form 10-K | 46 Note 6 \u2013 Debt Commercial Paper The repurchase . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the Company 2019 and September 29 , 2018 , the Company had $ , the Company had $ 6.0 billion and $ 12.0 billion $ 6.0 billion and $ 12.0 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 2.24 % and 2.18 % a Paper wa 2.24 % and 2.18 % a of September 28 2.18 % a of September 28 , 201 Debt $ ( 37 ) $ 3,852 Term Debt As of September Term Debt As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had outstanding aggregate principal amount of $ 101.7 billion ( collectively the \u201c term debt a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 : Maturities ( 2019 and September 29 , 2018 : Maturities ( calendar year Maturities ( calendar year ) 2019 2018 Amount ( in million ( calendar year debt issuance : Floating-rate note debt issuance : Floating-rate note 2020 \u2013 2022 $ 4,250 2.25 : Floating-rate note 2020 \u2013 2022 $ 4,250 2.25 % \u2013 note 2020 \u2013 2022 $ 4,250 2.25 % \u2013 3.28 % 2020 \u2013 2022 $ 4,250 2.25 % \u2013 3.28 % $ $ 4,250 2.25 % \u2013 3.28 % $ 7,107 1.87 % % \u2013 3.28 % $ 7,107 1.87 % \u2013 3.44 % \u2013 3.28 % $ 7,107 1.87 % \u2013 3.44 % Fixed-rate $ 7,107 1.87 % \u2013 3.44 % Fixed-rate 0.350 % \u2013 % \u2013 3.44 % Fixed-rate 0.350 % \u2013 4.650 % note % Fixed-rate 0.350 % \u2013 4.650 % note 2019 \u2013 2047 % \u2013 4.650 % note 2019 \u2013 debt issuance : 0.28 % \u2013 4.78 % 2019 debt issuance : Fixed-rate 1.700 2019 debt issuance : Fixed-rate 1.700 % \u2013 2.950 % note : Fixed-rate 1.700 % \u2013 2.950 % note 2022 \u2013 2049 % \u2013 2.950 % note 2022 \u2013 2049 7,000 1.71 % 2.950 % note 2022 \u2013 2049 7,000 1.71 % \u2013 2.99 % note 2022 \u2013 2049 7,000 1.71 % \u2013 2.99 % note 2022 \u2013 2049 7,000 1.71 % \u2013 2.99 % \u2014 2049 7,000 1.71 % \u2013 2.99 % \u2014 \u2014 % Total \u2014 % Total term debt 101,679 104,193 Unamortized premium/ ( discount % Total term debt 101,679 104,193 Unamortized premium/ debt ( 10,260 ) ( 8,784 ) Total debt ( 10,260 ) ( 8,784 ) Total non-current portion of portion of term debt $ 91,807 $ 93,735 To manage interest term debt $ 91,807 $ 93,735 To manage interest rate risk operation . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the carrying 2019 and September 29 , 2018 , the carrying value of net investment hedge wa $ 1.0 billion and $ 811 million $ 1.0 billion and $ 811 million , respe debt for 2019 , 2018 and 2017 , term debt for 2019 , 2018 and 2017 , respectively . for 2019 , 2018 and 2017 , respectively . Apple Inc. respectively . Apple Inc. | 2019 Form 10-K | 47 The Apple Inc. | 2019 Form 10-K | 47 The future principal | 2019 Form 10-K | 47 The future principal payment for s Notes a of September 28 , 2019 are a follows a of September 28 , 2019 are a follows ( in ( in million ) : 2020 $ 10,270 2021 8,750 2022 million ) : 2020 $ 10,270 2021 8,750 2022 9,528 2023 ) : 2020 $ 10,2 debt 2023 9,290 2024 10,039 Thereafter 53,802 Total term debt $ 101,679 53,802 Total term debt $ 101,679 As of September 28 , $ 101,679 As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the fair 2019 and September 29 , 2018 , the fair value of Notes , based on Level 2 input , wa $ 107.5 2 input , wa $ 107.5 billion and $ 103.2 billion $ 107.5 billion and $ 103.2 billion , respectively . Note billion , respectively . Note ", + "share_repurchase": "Share Repurchase Program On April 30 , 2019 , the Company Program On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company \u2019 stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . During 2019 a of September 28 , 2019 . During 2019 , the 28 , 2019 . During 2019 , the Company repurchased 345.2 2019 , the Company repurchased 345.2 million share of it common it common stock share repurchase arrangement share repurchase arrangement dated February 2019 , which settled in August , which settled in August 2019 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2019 , 2018 and 2017 ( common stock for 2019 , 2018 and 2017 ( in thousand for 2019 , 2018 and 2017 ( in thousand ) : ( in thousand ) : 2019 2018 2017 Common stock outstanding in thousand ) : 2019 2018 2017 Comm", + "earnings_per_share": "Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 $ : Basic $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 11.89 $ 9.27 $ 8.35 $ 9.28 Diluted $ 11.89 $ 11.91 8.35 $ 9.28 Diluted $ 11.89 $ 11.91 $ 9.21 $ 9.28 Diluted $ 11.89 $ 11.91 $ 9.21 $ 8.31 $ $ 11.89 $ 11.91 $ 9.21 $ 8.31 $ 9.22 Cash $ 11.91 $ 9.21 $ 8.31 $ 9.22 Cash dividend declared $ 9.21 $ 8.31 $ 9.22 Cash dividend declared earnings per share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted per share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,9 Earnings per share $ 55,256 $ 59,531 $ 48,351 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 Diluted : Basic $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 $ 9.21 Shares 9.27 Diluted $ 11.89 $ 11.91 $ 9.21 Shares used in $ 11.89 $ 11.91 $ 9.21 Shares used in computing earnings earnings per share : Basic 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 per share : Basic 4,617,834 4,955,377 5,217,242 Diluted 4, earnings per share for 2019 , 2018 and 2017 ( per share for 2019 , 2018 and 2017 ( net income for 2019 , 2018 and 2017 ( net income in million share in thousand ) : 2019 2018 2017 Numerator : Net in thousand ) : 2019 2018 2017 Numerator : Net income thousand ) : 2019 2018 2017 Numerator : Net income $ Numerator : Net income $ 55,256 $ 59,531 $ 48,351 Denominator Net income $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average basic share : Weighted-ave earnings per share Weighted-average diluted share 4,648,913 5,000,109 5,251,692 Basic earnings per share $ Basic earnings per share $ 11.97 $ 12.01 $ 9.27 Diluted per share $ 11.97 $ 12.01 $ 9.27 Diluted earnings per $ 11.97 $ 12.01 $ 9.27 Diluted earnings per share $ Diluted earnings per share $ 11.89 $ 11.91 $ 9.21 The per share $ 11.89 $ 11.91 $ 9.21 The Company applies $ 11.89 $ 11.91 $ 9.21 The Company applies the treasury . Potentially dilutive security representing 15.5 million share of common stock dilute earnings per share for 2019 because their effect would have building is the lesser of 30 year or the remaining life property and equipment wa $ 11.3 billion , $ 9.3 billion $ 11.3 billion , $ 9.3 billion and $ 8.2 billion $ 9.3 billion and $ 8.2 billion during 2019 , 2018 and $ 8.2 billion during 2019 , 2018 and 2017 , 8.2 billion during 2019 , 2018 and 2017 , respectively . during 2019 , 2018 and 2017 , respectively . Non-cash investing current liability of $ ( 2.9 ) billion and $ 3.4 2.9 ) billion and $ 3.4 bil Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 3.05 1 ) : Basic $ 3.05 $ 2.20 $ 2.47 $ : Basic $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.18 2.47 $ 4.22 Diluted $ 3.03 $ 2.18 $ 2.46 $ 4.22 Diluted $ 3.03 $ 2.18 $ 2.46 $ 4.18 Fourth $ 3.03 $ 2.18 $ 2.46 $ 4.18 Fourth Quarter Third $ 2.18 $ 2.46 $ 4.18 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 201 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.89 ( $ 2.91 $ 2.34 $ 2.73 $ 3.89 ( 1 ) $ 2.34 $ 2.73 $ 3.89 ( 1 ) Basic and $ 2.73 $ 3.89 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2019 Form 10", + "tax_rate": "tax rate for 2019 , 2018 and 2017 were tax rate for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 2018 2017 Provision for income in million ) : 2019 2018 2017 Provision for income tax million ) : 2019 2018 2017 Provision for income tax $ Provision for income tax $ 10,481 $ 13,372 $ 15,738 Effective income tax $ 10,481 $ 13,372 $ 15,738 Effective tax rate $ 10,481 $ 13,372 $ 15,738 Effective tax rate 15.9 % $ 15,738 Effective tax rate 15.9 tax rate 15.9 % 18.3 % 24.6 % Statutory federal rate 15.9 % 18.3 % 24.6 % Statutory federal income tax Statutory federal income tax rate 21.0 % 24.5 % 35.0 % income tax rate 21.0 % 24.5 % 35.0 % On December rate 21.0 % 24.5 % 35.0 % On December 22 , % 35.0 % On December 22 , 2017 , the U.S. % On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , tax rate of 24.5 % for 2018 ( the rate of 24.5 % for 2018 ( the \u201c 2018 blended for 2018 ( the \u201c 2018 blended U.S. tax rate \u201d s effective tax rate for 2019 wa lower than the statutory s effective tax rate for 2018 wa lower than the 2018 2018 wa lower than the 2018 blended U.S. tax rate due s effective tax rate for 2019 wa lower compared to 2018 2019 wa lower compared to 2018 due primarily to a lower federal income tax rate in 2019 and the impact of the impact of the Act in 2018 , partially offset by high tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a effect of the Act during 2019 , in accordance with the Staff Accounting Bulletin No . 118 . Provision for Income Taxes provision for income tax for 2019 , 2018 and 2017 , income tax for 2019 , 2018 and 2017 , consisted of for 2019 , 2018 and 2017 , consisted of the following ( in million ) : 2019 2018 2017 Federal : Current tax rate ( 21 % in 2019 ; 24.5 rate ( 21 % in 2019 ; 24.5 % in 2018 21 % in 2019 ; 24.5 % in 2018 ; 35 2019 ; 24.5 % in 2018 ; 35 % in 2017 24.5 % in 2018 ; 35 % in 2017 ) to 2018 ; 35 % in 2017 ) to income before provision provision for income tax for 2019 , 2018 and 2017 , income tax for 2019 , 2018 and 2017 , is a for 2019 , 2018 and 2017 , is a follows ( dollar in million ) : 2019 2018 2017 Computed expected tax in million ) : 2019 2018 2017 Computed expected tax $ million ) : 2019 2018 2017 Compute tax rate $ 10,481 $ 13,372 $ 15,738 Effective tax rate 15.9 % $ 15,738 Effective tax rate 15.9 % 18.3 % 24.6 % Effective tax rate 15.9 % 18.3 % 24.6 % The Company rate 15.9 % 18.3 % 24.6 % The Company \u2019 s market value . Prior to 2018 , the Company reflected net , which amounted to $ 620 million in 2017 . Deferred to $ 620 million in 2017 . Deferred Tax Assets and and Liabilities As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018", + "geographic_information": "Geographic Data \u201d for 2019 , 2018 and 2017 . Data \u201d for 2019 , 2018 and 2017 . Apple Inc. for 2019 , 2018 and 2017 . Apple Inc. | 2019 2017 . Apple Inc. | 2019 Form 10-K | 37 Note Apple Inc. | 2019 Form 10-K | 37 Note 3 \u2013 | 2019 Form 10-K | 37 Note 3 \u2013 Financial Instruments Form 10-K | 37 Note 3 \u2013 Financial Instruments Cash , investment category a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , Geographic a those described in Note 1 , \u201c Summary of Significant purpose . Apple Inc. | 2019 Form 10-K | 53 The Apple Inc. | 2019 Form 10-K | 53 The following table | 2019 Form 10-K | 53 The following table show information information by reportable segment for 2019 , 2018 and 2017 ( reportable segment for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Americas : Net in million ) : 2019 2018 2017 Americas : Net sale million ) : 2019 2018 2017 A", + "common_stock": "Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 \u2014 LLC 1.000 % Notes due 2022 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 \u2014 LLC 1.375 % Notes due 2024 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 \u2014 LLC 0.875 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 \u2014 LLC 1.625 % Notes due 2026 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % No common stock were and outstanding a of October 18 , 2019 . DOCUMENTS INCORPORATED a of October 18 , 2019 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2020 annual meeting of shareholder ( of shareholder ( the \u201c 2020 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2020 10-K where indicated . The 2020 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the common stock . In August 2019 , the purchase period for ASR ended and an additional 6.9 million share were delivered and retired . In total , 62.0 million share were delivered under average repurchase price of $ 193.69 . Apple Inc. | 2019 193.69 . Apple Inc. | 2019 Form 10-K | 15 Company Apple Inc. | 2019 Form 10-K | 15 Company Stock Performance | 2019 Form 10-K | 15 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 28 , 2019 . The graph year ended Septemb common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2019 Standard & Poor \u2019 s right reserved . Copyright \u00a9 2019 S & P Dow Jones All right reserved . September 2014 September 2015 September 2016 September reserved . September 2014 September 2015 September 2016 September 2017 September September 2014 September 2015 September 2016 September 2017 September 2018 September September 2015 September 2016 September 2017 September 2018 September 2019 Apple September 2016 September 2017 Sept common stock and dividend equivalent of $ 14.1 billion . Apple Inc. | billion . Apple Inc. | 2019 Form 10-K | 18 Products Apple Inc. | 2019 Form 10-K | 18 Products and Services | 2019 Form 10-K | 18 Products and Services Performance Beginning in the first quarter of 2019 , the Company classified the and Services net sale for 2018 and 2017 were reclassified to net sale for 2018 and 2017 were reclassified to conform to reclassified to conform to the 2019 presentation . The following table net sale by category common stock of $ 66.9 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to repay term debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . During 2018 , $ 7.0 billion . During 2018 , cash generated by operating by operating activity of $ 77.4 billion wa a result of wa a result of $ 59.5 billion of net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billi common stock of $ 72.7 billion , cash used to and dividend equivalent of $ 13.7 billion and cash used to repay term debt of $ 6.5 billion , partially offset by of term debt of $ 7.0 billion . Apple Inc. | billion . Apple Inc. | 2019 Form 10-K | 23 Capital Apple Inc. | 2019 Form 10-K | 23 Capital Assets The | 2019 Form 10-K | 23 Capital Assets The Company \u2019 s capital expenditure were $ 7.6 billion during 2019 , which were $ 7.6 billion during 2019 , which included product tooling repurchase . As of September common stock for $ 67.1 billion , including 62.0 million $ 67.1 billion , including 62.0 million share delivered under a share delivered under a $ 12.0 billion ASR dated February 2019 12.0 billion ASR dated February 2019 , which settled in August , which settled in August 2019 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Exchange Act . Exchange Act . On April 30 , 2019 , the Company . On April 30 , 2019 , the Company also announced quarterly cash dividend from $ 0.73 to $ 0.77 per share Common stock and $ 107,147 $ 134,047 $ 128,249 Common stock and additional paid-in paid-in capital : Beginning balance 40,201 35,867 31,251 Common stock issued capital : Beginning balance 40,201 35,867 31,251 Common stock issued 781 : Beginning balance 40,201 35,867 31,251 Common stock issued 781 669 35,867 31,251 Common stock issued 781 669 555 Common stock withheld 31,251 Common stock issued 781 669 555 Common stock withheld related Common stock issued 781 669 555 Common stock withheld related to settleme Common stock withheld related settlement of equity award ( 1,029 ) ( 948 ) ( award ( 1,029 ) ( 948 ) ( 581 ) Common ) ( 948 ) ( 581 ) Common stock repurchased ( ) Common stock repurchased ( 67,101 ) ( 73,056 ) ( repurchased ( 67,101 ) ( 73,056 ) ( 33,001 ) Cumulative ) ( 73,056 ) ( 33,001 ) Cumulative effect of change of change in accounting principle 2,501 278 \u2014 Ending balance 45,898 change in accounting principle 2,501 278 \u2014 Ending balance 45,898 70,400 2,501 278 \u2014 Ending balance 45,898 70,400 98,330 Accu common stock 781 669 555 Payments for tax issuance of common stock 781 669 555 Payments for tax related of common stock 781 669 555 Payments for tax related to settlement of equity award ( 2,817 ) ( 2,527 ) ( award ( 2,817 ) ( 2,527 ) ( 1,874 ) Payments ) ( 2,527 ) ( 1,874 ) Payments for dividend and dividend and dividend equivalent ( 14,119 ) ( 13,712 ) ( equivalent ( 14,119 ) ( 13,712 ) ( 12,769 ) Repurchases ) ( 13,712 ) ( 12,769 ) Repurchases of common stock Repurchases of common stock ( 66,897 ) ( 72,7 common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 30 year or the remaining life property and equipment wa $ 11.3 billion , $ 9.3 billion $ 11.3 billion , $ 9.3 billion and $ 8.2 billion $ 9.3 billion and $ 8.2 billion during 2019 , 2018 and $ 8.2 billion during 2019 , 2018 and 2017 , 8.2 billion during 2019 , 2018 and 2017 , respectively . during 2019 , 2018 and 2017 , respectively . Non-cash investing current liability of $ ( 2.9 ) billion and $ 3.4 common stock for $ 67.1 billion , including 62.0 million $ 67.1 billion , including 62.0 million share delivered under a share delivered under a $ 12.0 billion accelerated share repurchase arrangement share repurchase arrangement dated February 2019 , which settled in August , which settled in August 2019 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2019 , 2018 and 2017 ( common stock Common stock outstanding in thousand ) : 2019 2018 2017 Common stock outstanding , thousand ) : 2019 2018 2017 Common stock outstanding , beginning stock outstanding , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased outstanding , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased ( , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased ( 345,205 5,336,166 Common stock repurchased ( 345,205 ) ( 405,549 ) ( repurchased ( 345,205 ) ( 405,549 ) Common stock issued , share withheld for employee tax 33,455 34,334 36,531 Common stock outstanding withheld for employee tax 33,455 34,334 36,531 Common stock outstanding , for employee tax 33,455 34,334 36,531 Common stock outstanding , ending stock outstanding , ending balance 4,443,236 4,754,986 5,126,201 Note 8 \u2013 outstanding , ending balance 4,443,236 4,754,986 5,126,201 Note 8 \u2013 Comprehensive , ending balance 4,443,236 4,754,986 5,126,201 Note 8 \u2013 Comprehensive Income balance 4,443,236 4,754,986 5,126", + "corporate_debt": "Corporate debt paper 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 85,383 7,240 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,7 Corporate debt paper 2,573 \u2014 \u2014 2,573 1,663 910 \u2014 Corporate debt security 2,573 \u2014 \u2014 2,573 1,663 910 \u2014 Corporate debt security 123,001 910 \u2014 Corporate debt security 123,001 152 ( 2,038 ) 121,115 \u2014 Corporate debt security 123,001 152 ( 2,038 ) 121,115 \u2014 debt security 123,001 152 ( 2,038 ) 121,115 \u2014 25,162 95,953 123,001 152 ( 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security ( 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security 946 \u2014 2,038 ) 121,115 \u2014 25,162 95,953 Municipal security 946 \u2014 ( \u2014 25,162 95,953 Muni", + "hedging_activities": "Hedging Activities ( \u201c ASU 2017-12 \u201d ) . ASU 2017-12 2017-12 \u201d ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition , the adoption of ASU 2017-12 is not expected to have . Financial Instruments In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments \u2013 Credit \u2013 Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( \u201c ASU 2016-13 \u201d ) ,", + "cash_flow_hedges": "Cash Flow Hedges wa a gain of $ 777 million for 2019 , and of $ 777 million for 2019 , and wa recognized in relates . Apple Inc. | 2019 Form 10-K | 40 The Apple Inc. | 2019 Form 10-K | 40 The Company record | 2019 Form 10-K | 40 The Company record all derivative fair value a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 Fair Value of Derivatives Designated" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-20-000096/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-20-000096/full-submission_features.json new file mode 100644 index 0000000..080b0cc --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-20-000096/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue 6,643 5,522 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 Term revenue 6,643 5,522 Commercial paper 4,996 5,980 Term debt 8,773 10,260 6,643 5,522 Commercial paper 4,996 5,980 Term debt 8,773 10,260 Total paper 4,996 5,980 Term debt 8,773 10,260 Total current liability 105,392 4,996 5,980 Term debt 8,773 revenue 2,081 4,062 ) ( 1,923 ) 9,175 Deferred revenue 2,081 ( 625 1,923 ) 9,175 Deferred revenue 2,081 ( 625 ) ( 3 9,175 Deferred revenue 2,081 ( 625 ) ( 3 ) Other 2,081 ( 625 ) ( 3 ) Other current and non-current Other current and non-current liability 8,916 ( 4,700 ) 38,449 Cash and non-current liability 8,916 ( 4,700 ) 38,449 Cash generated by liability 8,916 ( 4,700 ) 38,449 Cash generated by operating activity Cash generated by operating activity 80,674 69,391 77,434 Investing activity : generate Revenue Recognition Net sale service . Apple Inc. | 2020 Form 10-K | 38 For Apple Inc. | 2020 Form 10-K | 38 For the sale | 2020 Form 10-K | 38 For the sale of third-party Deferred Revenue As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had total total deferred revenue of $ 10.2 billion and $ 8.1 billion $ 10.2 billion and $ 8.1 billion , respectively . As respectively revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 8 % within two-to-three year and % within two-to-three year and 2 % in greater than three significant product and service for 2020 , 2019 and 2018 were and service for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( in ( in million ) : 2020 2019 2018 iPhone ( 1 in million ) : 2020 2019 2018 iPhone ( 1 ) million ) : 2020 2019 2018 iPhone ( 1 ) $ 2020 2019 2018 iPhone ( 1 ) $ 137,781 $ 142,381 revenue recognized in billion of revenue recognized in 2020 that wa included in deferred deferred revenue a of September 28 , 2019 , $ 5.9 a of September 28 , 2019 , $ 5.9 billion of 28 , 2019 , $ 5.9 billion of revenue recognized in billion of revenue recognized in 2019 that wa included in deferred deferred revenue a of September 29 , 2018 , and $ a of September 29 , 2018 , and $ 5.8 billion , 2018 , and $ 5.8 billion of revenue recognized in billion of revenue recognized in 2018 that wa included in d revenue a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company \u2019 s each reportable segment in Note 11 , \u201c Segment Information and and Geographic Data \u201d for 2020 , 2019 and 2018 . Data \u201d for 2020 , 2019 and 2018 . Apple Inc. for 2020 , 2019 and 2018 . Apple Inc. | 2020 2018 . Apple Inc. | 2020 Form 10-K | 39 Note Apple Inc. | 2020 Form 10-K | 39 Note 3 \u2013 | 2020 Form 10-K | 39 Note 3 \u2013 Financial Instruments Form 10-K | 39 Note 3 \u2013 Financial Instruments Cash , investment category a revenue 1,638 1,372 liability 2,038 \u2014 Deferred revenue 1,638 1,372 Other 2,409 2,174 Total 2,038 \u2014 Deferred revenue 1,638 1,372 Other 2,409 2,174 Total deferred Deferred revenue 1,638 1,372 Other 2,409 2,174 Total deferred tax asset revenue 1,638 1,372 Other 2,409 2,174 Total deferred tax asset 19,336 2,174 Total deferred tax asset 19,336 20,387 Less : Valuation allowance Total deferred tax asset 19,336 20,387 Less : Valuation allowance ( Less : Valuation allowance ( 1,041 ) ( 747 ) Total allowance ( 1 Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,500 for calendar year 2020 ) $ 19,500 for calendar year 2020 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 up to a maximum of 6 % of the employee \u2019 activity and related information for 2020 , 2019 and 2018 , related information for 2020 , 2019 and 2018 , is a for 2020 , 2019 and 2018 , is a follows : ) Balance a of September 30 , 2017 390,284 $ 27.58 a of September 30", + "expenses": "Expenses Operating expense for 2020 , 2019 and 2018 were Operating expense for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 Change 2019 Change 2018 Research million ) : 2020 Change 2019 Change 2018 Research and development : 2020 Change 2019 Change 2018 Research and development $ 18,752 2018 Research and development $ 18,752 16 % $ 16,217 14 Research and development $ 18,752 16 % $ 16,217 14 % $ 18,752 16 % $ 16,217 14 % $ 14,236 Percent", + "net_income": "Net income $ $ 265,595 $ 229,234 $ 215,639 Net income $ 57,411 $ $ 215,639 Net income $ 57,411 $ 55,256 $ 59,531 $ Net income $ 57,411 $ 55,256 $ 59,531 $ 48,351 $ $ 57,411 $ 55,256 $ 59,531 $ 48,351 $ 45,687 Earnings $ 55,256 $ 59,531 $ 48,351 $ 45,687 Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 $ : Basic $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 3.28 $ 3.00 $ 2.32 $ 2. net income , to net income of $ 17.6 billion and an increase in asset and liability of $ 5.7 billion . Cash used in in investing activity of $ 4.3 billion during 2020 consisted primarily of $ 4.3 billion during 2020 consisted primarily of cash used plant and equipment of $ 7.3 billion and cash paid for cash acquired , of $ 1.5 billion , partially offset by of purchase , of $ 5.5 billion . Cash used in in financing activity of $ 86.8 billion during 2020 consisted primarily of $ 86.8 billion during 2020 con net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 billion . Cash generated by by investing activity of $ 45.9 billion during 2019 consisted primarily of $ 45.9 billion during 2019 consisted primarily of proceeds from of purchase , of $ 57.5 billion , partially offset by plant and equipment of $ 10.5 billion . Cash used in in financing activity of $ 91.0 billion during 2019 consisted primarily of $ 91.0 billion during 2019 consisted primarily of cash used rep Net income $ Provision for income tax 9,680 10,481 13,372 Net income $ 57,411 for income tax 9,680 10,481 13,372 Net income $ 57,411 $ 10,481 13,372 Net income $ 57,411 $ 55,256 $ 59,531 Earnings Net income $ 57,411 $ 55,256 $ 59,531 Earnings per share $ 57,411 $ 55,256 $ 59,531 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 Diluted : Basic $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 $ 2.98 Shares 3.00 Diluted $ 3.28 $ Net income $ , 2019 September 29 , 2018 Net income $ 57,411 $ , 2018 Net income $ 57,411 $ 55,256 $ 59,531 Other Net income $ 57,411 $ 55,256 $ 59,531 Other comprehensive income/ $ 57,411 $ 55,256 $ 59,531 Other comprehensive income/ ( loss translation , net of tax 88 ( 408 ) ( 525 net of tax 88 ( 408 ) ( 525 ) Change 88 ( 408 ) ( 525 ) Change in unrealized gains/losses in fair value of derivative 79 ( 661 ) 523 Adjustment value of derivative 79 ( 661 ) 523 Adjustment for net derivative 79 ( 661 ) 523 Adj net income ( 1,264 ) 23 382 Total change net income ( 1,264 ) 23 382 Total change in unrealized income ( 1,264 ) 23 382 Total change in unrealized gains/losses gains/losses on derivative instrument ( 1,185 ) ( 638 ) 905 instrument ( 1,185 ) ( 638 ) 905 Change in unrealized 1,185 ) ( 638 ) 905 Change in unrealized gains/losses on value of marketable debt security 1,202 3,802 ( 3,407 ) Adjustment of marketable debt security 1,202 3,802 ( 3,407 ) Adjustment for debt security 1,202 3,802 ( 3,407 ) Adjustment net income ( 63 ) 25 1 Total change net income ( 63 ) 25 1 Total change in unrealized income ( 63 ) 25 1 Total change in unrealized gains/losses gains/losses on marketable debt security 1,139 3,827 ( 3,406 ) Total on marketable debt security 1,139 3,827 ( 3,406 ) Total other debt security 1,139 3,827 ( 3,406 ) Total other comprehensive income/ comprehensive income/ ( loss ) 42 2,781 ( 3,026 ) Total income/ ( loss ) 42 2,781 ( 3,026 ) Total comprehensive loss ) 42 2,781 ( 3,026 ) Total comprehensive income Net income 57,411 earnings : Beginning balance 45,898 70,400 98,330 Net income 57,411 55,256 : Beginning balance 45,898 70,400 98,330 Net income 57,411 55,256 59,531 45,898 70,400 98,330 Net income 57,411 55,256 59,531 Dividends and dividend 70,400 98,330 Net income 57,411 55,256 59,531 Dividends and dividend equivalent 98,330 Net income 57,411 55,256 59,531 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,087 ) ( 14,129 ) ( declared ( 14,087 ) ( 14,129 ) ( 13,735 ) Common Net income Operating activity : Net income 57,411 55,256 59,531 Adjustments to reconcile activity : Net income 57,411 55,256 59,531 Adjustments to reconcile net : Net income 57,411 55,256 59,531 Adjustments to reconcile net income activity : Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense : Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense 6,829 Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense 6,829 6, net income for 2020 , 2019 and 2018 ( net income in million share in thousand ) : 2020 2019 2018 Numerator : Net in thousand ) : 2020 2019 2018 Numerator : Net income thousand ) : 2020 2019 2018 Numerator : Net income $ Numerator : Net income $ 57,411 $ 55,256 $ 59,531 Denominator Net income $ 57,411 $ 55,256 $ 59,531 Denominator : Weighted-average $ 57,411 $ 55,256 $ 59,531 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 17,352,119 18,471,336 19,821,510 Effect of dil Net income $ $ 22,680 $ 22,370 $ 35,217 Net income $ 12,673 $ $ 35,217 Net income $ 12,673 $ 11,253 $ 11,249 $ Net income $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings per share $ 11,253 $ 11,249 $ 22,236 Earnings per share ( 1 22,236 Earnings per share ( 1 ) : Basic $ 0.74 1 ) : Basic $ 0.74 $ 0.65 $ 0.64 $ : Basic $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 0.64 $ 1.26 Diluted $ 0.73 Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 0.76 1 ) : Basic $ 0.76 $ 0.55 $ 0.62 $ : Basic $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 0.62 $ 1.05 Diluted $ 0.76", + "assets": "ASSETS September 26 , 2020 September 28 , 2019 ASSETS : Current , 2020 September 28 , 2019 ASSETS : Current asset : Cash and cash equivalent $ 38,016 $ 48,844 Marketable security 52,927 cash equivalent $ 38,016 $ 48,844 Marketable security 52,927 51,713 Accounts 38,016 $ 48,844 Marketable security 52,927 51,713 Accounts receivable , net $ 48,844 Marketable security 52,927 51,713 Accounts receivable , net 16,120 51,713 Accounts receivable , net 16,120 22,926 Inventories 4,061 4,106 Vendor Accounts rece assets/ ) : Marketable security ( 2 ) $ 16,270 Fixed-rate debt security ( 2 ) $ 16,270 Fixed-rate debt ( 3 ) $ 16,270 Fixed-rate debt ( 3 ) $ ( 21,033 ) ( 3 ) $ ( 21,033 ) Cumulative hedging adjustment included increases/ ( decrease ) $ 493 Fixed-rate debt carrying amount ( increase ) /decreases $ ( 1,541 ) ( 1 ) Gains $ ( 1,541 ) ( 1 ) Gains and loss related Statements of Operations . ( 2 ) The carrying amount of Consolidated Balance Sheet . ( 3 ) The carrying amount of derivative instrument a of Sep Assets | 2020 Form 10-K | 46 Deferred Tax Assets and Liabilities and Liabilities As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the significant 2020 and September 28 , 2019 , the significant component of ( in million ) : 2020 2019 Deferred tax asset : in million ) : 2020 2019 Deferred tax asset : Amortization : Amortization and depreciation $ 8,317 $ 11,645 Accrued liability and and depreciation $ 8,317 $ 11,645 Accrued ", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 323,888 $ 338,516 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 42,296 $ 46,236 Other current liability Accounts payable $ 42,296 $ 46,236 Other current liability 42,684 37,720 $ 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 42,684 37,720 Deferred re Liabilities , net $ 36,766 $ 37,378 Other Non-Current Liabilities 2020 2019 $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable $ 28,170 2019 Long-term tax payable $ 28,170 $ 29,545 Other non-current liability tax payable $ 28,170 $ 29,545 Other non-current liability 26,320 20,958 $ 29,545 Other non-current liability 26,320 20,958 Total other non-current liability 29,545 Other non-current liability 26,320 20,958 Total Liabilities and Liabilities As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the significant 2020 and September 28 , 2019 , the significant component of ( in million ) : 2020 2019 Deferred tax asset : in million ) : 2020 2019 Deferred tax asset : Amortization : Amortization and depreciation $ 8,317 $ 11,645 Accrued liability and and depreciation $ 8,317 $ 11,645 Accrued liability and other reserve Accrued liability and other re Liabilities Financial Statement Line Items 2020 Right-of-use asset : Operating lease lease Other non-current asset $ 8,570 Finance lease Property , plant plant and equipment , net 629 Total right-of-use asset $ 9,199 629 Total right-of-use asset $ 9,199 Lease liability : Operating lease lease Other current liability $ 1,436 Other non-current liability 7,745 Finance $ 1,436 Other non-current liability 7,745 Finance lease Other current liability Finance lease Other current liability 24 Other non-current liab", + "equity": "Equity Securities 17 Item 6 . Selected Financial of Equity Securities 17 Item 6 . Selected Financial Data 19 6 . Selected Financial Data 19 Item 7 . Management \u2019 Selected Financial Data 19 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 28 Item 8 . Financial Statements About Market Risk 28 Item 8 . Financial Statements and Supplement EQUITY liability : Accounts payable $ 42,296 $ 46,236 Other current liability Accounts payable $ 42,296 $ 46,236 Other current liability 42,684 37,720 $ 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 Term revenue 6,643 5,522 Commercial pape equity ) Total shareholder \u2019 equity 65,339 90,488 Total liability and shareholder Total shareholder \u2019 equity 65,339 90,488 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 323,888 $ 338,516 See accompanying Notes \u2019 equity $ 323,888 $ 338,516 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 33 Apple Apple Inc. | 2020 Form 10-K | 33 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 33 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 26 , 2020 Sep equity , equity , beginning balance $ 90,488 $ 107,147 $ 134,047 Common beginning balance $ 90,488 $ 107,147 $ 134,047 Common stock and $ 90,488 $ 107,147 $ 134,047 Common stock and additional paid-in paid-in capital : Beginning balance 45,174 40,201 35,867 Common stock issued capital : Beginning balance 45,174 40,201 35,867 Common stock issued 880 : Beginning balance 45,174 40,201 35,867 Common stock issued 880 781 40,201 35,867 Common stock issued 880 781 669 Common stock withheld 35,867 Common stoc equity award ( 2,250 ) ( 2,002 ) ( award ( 2,250 ) ( 2,002 ) ( 1,778 ) Share-based ) ( 2,002 ) ( 1,778 ) Share-based compensation 6,975 6,194 ( 1,778 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 1,778 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 45,174 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 45,174 40,201 6,975 6,194 5,443 Ending balance 50,779 45,174 40,201 Retained earnings : 6,194 5,443 Ending balance 50,779 45,174 40,201 Retain equity award ( 1,604 ) ( 1,029 ) ( award ( 1,604 ) ( 1,029 ) ( 948 ) Common ) ( 1,029 ) ( 948 ) Common stock repurchased ( ) Common stock repurchased ( 72,516 ) ( 67,101 ) ( repurchased ( 72,516 ) ( 67,101 ) ( 73,056 ) Cumulative ) ( 67,101 ) ( 73,056 ) Cumulative effect of change change in accounting principle ( 136 ) 2,501 278 Ending balance accounting principle ( 136 ) 2,501 278 Ending balance 14,966 45,898 principle ( 136 ) 2,501 278 Ending balance 14,966 45,898 70,400 ) 2,501 278 Ending balance 1 equity equity , ending balance $ 65,339 $ 90,488 $ 107,147 Dividends ending balance $ 65,339 $ 90,488 $ 107,147 Dividends and dividend $ 65,339 $ 90,488 $ 107,147 Dividends and dividend equivalent declared per share or RSU $ 0.795 $ 0.75 $ 0.68 See or RSU $ 0.795 $ 0.75 $ 0.68 See accompanying Notes $ 0.795 $ 0.75 $ 0.68 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 34 Apple Apple Inc. | 2020 Form 10-K | 34 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 34 Apple Inc. CO equity award ( 3,634 ) ( 2,817 ) ( award ( 3,634 ) ( 2,817 ) ( 2,527 ) Payments ) ( 2,817 ) ( 2,527 ) Payments for dividend and dividend and dividend equivalent ( 14,081 ) ( 14,119 ) ( equivalent ( 14,081 ) ( 14,119 ) ( 13,712 ) Repurchases ) ( 14,119 ) ( 13,712 ) Repurchases of common stock Repurchases of common stock ( 72,358 ) ( 66,897 ) ( stock ( 72,358 ) ( 66,897 ) ( 72,738 ) Proceeds ) ( 66,897 ) ( 72,738 ) Proceeds from issuance of of term debt , net 16,091 6,963 6,969 Repayments of term term d equity award ( 930 ) ( 639 ) ( award ( 930 ) ( 639 ) ( 675 ) Other ) ( 639 ) ( 675 ) Other ( 58 ) ( 675 ) Other ( 58 ) 65 537 Provision for ) Other ( 58 ) 65 537 Provision for income tax Other ( 58 ) 65 537 Provision for income tax $ Provision for income tax $ 9,680 $ 10,481 $ 13,372 Effective income tax $ 9,680 $ 10,481 $ 13,372 Effective tax rate $ 9,680 $ 10,481 $ 13,372 Effective tax rate 14.4 % $ 13,372 Effective tax rate 14.4 % 15.9 % 18.3 % Effective tax rate 14.4 % 15.9 % 18.3 % Apple Inc. rat Equity Share Repurchase Program As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company \u2019 program , of which $ 168.6 billion had been utilized . had been utilized . During 2020 , the Company repurchased 917 2020 , the Company repurchased 917 million share of it common it common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 equity . RSUs granted under the 2014 Plan generally vest over four . RSUs granted under the 2014 Plan reduce the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 1.54 billion share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award ", + "cash_flow": "cash flow $ 39,789 $ 50,224 $ 25,913 Supplemental cash flow disclosure : income tax , net $ 9,501 $ 15,263 $ 10,417 Cash , net $ 9,501 $ 15,263 $ 10,417 Cash paid for $ 9,501 $ 15,263 $ 10,417 Cash paid for interest $ Cash paid for interest $ 3,002 $ 3,423 $ 3,022 See for interest $ 3,002 $ 3,423 $ 3,022 See accompanying Notes $ 3,002 $ 3,423 $ 3,022 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 35 Apple Apple Inc. | 2020 Form 10-K | 35 Apple Inc. Notes | 2020 Form 10-", + "gross_margin": "Gross Margin Products | 2020 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2020 , 2019 and 2018 were margin percentage for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 2019 2018 Gross margin : in million ) : 2020 2019 2018 Gross margin : Products million ) : 2020 2019 2018 Gross margin : Products $ Gross margin : Products $ 69,461 $ 68,887 $ 77,683 Services : Products $ 69,461 $ 68,887 $ 77,683 Services 35 gross margin 68,887 $ 77,683 Services 35,495 29,505 24,156 Total gross margin $ $ 77,683 Services 35,495 29,505 24,156 Total gross margin $ 104,956 24,156 Total gross margin $ 104,956 $ 98,392 $ 101,839 Gross gross margin $ 104,956 $ 98,392 $ 101,839 Gross margin percentage $ 104,956 $ 98,392 $ 101,839 Gross margin percentage : Products Gross margin percentage : Products 31.5 % 32.2 % 34.4 % percentage : Products 31.5 % 32.2 % 34.4 % Services 66.0 Products 31.5 % 32.2 % 34.4 % Services 66.0 % 63.7 32.2 % 34 gross margin percentage % Total gross margin percentage 38.2 % 37.8 % 38.3 % gross margin percentage 38.2 % 37.8 % 38.3 % Products Gross percentage 38.2 % 37.8 % 38.3 % Products Gross Margin Products Products gross margin increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher Products gross margin percentage decreased during 2020 compared to 2019 due primarily decreased during 2020 compared to 2019 due primarily to the weakness Services gross marg gross margin percentage increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2020 , 2019 and 2018 were Operating expense for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 Change 2019 Change 2018 Research million ) : 2020 Change 2019 Change 20 Gross margin 104,956 Total cost of sale 169,559 161,782 163,756 Gross margin 104,956 98,392 cost of sale 169,559 161,782 163,756 Gross margin 104,956 98,392 101,839 169,559 161,782 163,756 Gross margin 104,956 98,392 101,839 Operating expense : 161,782 163,756 Gross margin 104,956 98,392 101,839 Operating expense : Research 163,756 Gross margin 104,956 98,392 101,839 Operating expense : Research and expense : Research and development 18,752 16,217 14,236 Selling , general : Research and development 18,752 1 Gross margin $ $ 59,685 $ 58,313 $ 91,819 Gross margin $ 24,689 $ $ 91,819 Gross margin $ 24,689 $ 22,680 $ 22,370 $ Gross margin $ 24,689 $ 22,680 $ 22,370 $ 35,217 Net $ 24,689 $ 22,680 $ 22,370 $ 35,217 Net income $ $ 22,680 $ 22,370 $ 35,217 Net income $ 12,673 $ $ 35,217 Net income $ 12,673 $ 11,253 $ 11,249 $ Net income $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings per share $ 11,253 $ 11,249 $ 22,236 Earnings per share ( 1 22,236 Earnings per share ( 1 ) : Gross margin $ $ 53,809 $ 58,015 $ 84,310 Gross margin $ 24,313 $ $ 84,310 Gross margin $ 24,313 $ 20,227 $ 21,821 $ Gross margin $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 103,526 95,957 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 66,760 ) ( 58,579 ) Total amortization ( 66,760 ) ( 58,579 ) Total property , plant and equipment , net $ 36,766 $ 37,378 Other Non-Current Liabilities , net $ 36,766 $ 37,378 Other Non-Current Liabilities 2020 2019 $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable", + "debt": "debt portion of term debt $ 98,667 $ 91,807 $ 93,735 $ term debt $ 98,667 $ 91,807 $ 93,735 $ 97,207 $ $ 98,667 $ 91,807 $ 93,735 $ 97,207 $ 75,427 Other $ 91,807 $ 93,735 $ 97,207 $ 75,427 Other non-current liability $ 93,735 $ 97,207 $ 75,427 Other non-current liability $ 54,490 75,427 Other non-current liability $ 54,490 $ 50,503 $ 48,914 $ non-current liability $ 54,490 $ 50,503 $ 48,914 $ 44,212 $ $ 54,490 $ 50,503 $ 48,914 $ 44,212 $ 39,986 Apple $ 50,503 $ 48,914 $ 44,212 $ 39,986 Apple Inc. debt $ 4,996 $ 5,980 $ 11,964 Total term debt $ 107,440 11,964 Total term debt $ 107,440 $ 102,067 $ 102,519 Working term debt $ 107,440 $ 102,067 $ 102,519 Working capital $ $ 107,440 $ 102,067 $ 102,519 Working capital $ 38,321 $ $ 102,519 Working capital $ 38,321 $ 57,101 $ 15,410 Cash Working capital $ 38,321 $ 57,101 $ 15,410 Cash generated by $ 38,321 $ 57,101 $ 15,410 Cash generated by operating activity generated by operating activity $ 80,674 $ 69,391 $ 77,434 Cash operating activity $ 80,6 debt of $ 12.6 billion and net repayment of of commercial paper of $ 1.0 billion , partially offset by of term debt of $ 16.1 billion . During 2019 , $ 16.1 billion . During 2019 , cash generated by operating by operating activity of $ 69.4 billion wa a result of wa a result of $ 55.3 billion of net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 billion . Cash generated by by investing activity of $ 45.9 billion during 2019 consisted primarily of $ 45.9 debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . Debt The Company repurchase . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had $ , the Company had $ 5.0 billion of Commercial Paper outstanding a weighted-average interest rate of 0.62 % and maturity generally le arrangement . Apple Inc. | 2020 Form 10-K | 25 As Apple Inc. | 2020 Form 10-K | 25 As of September | 2020 Form 10-K | 25 Debt . \u201d Return Program As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company \u2019 program , of which $ 168.6 billion had been utilized . had been utilized . During 2020 , the Company repurchased 917 2020 , the Company repurchased 917 million share of it common it common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billi debt $ 8,750 2025 Total Term debt $ 8,750 $ 20,958 $ 21,029 $ Term debt $ 8,750 $ 20,958 $ 21,029 $ 55,341 $ $ 8,750 $ 20,958 $ 21,029 $ 55,341 $ 106,078 Leases $ 20,958 $ 21,029 $ 55,341 $ 106,078 Leases 1,622 3,097 $ 21,029 $ 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 $ 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase obligati debt a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 to increase by 2020 and September 28 , 2019 to increase by $ 218 2019 to increase by $ 218 million and $ 325 million $ 218 million and $ 325 million on an annualized basis , typically for up to 12 month . However , the , the Company estimate with 95 % confidence , a maximum in fair value of $ 551 million a of September 26 551 million a of September 26 , 2020 , compared to debt security 1,202 3,802 ( 3,407 ) Adjustment of marketable debt security 1,202 3,802 ( 3,407 ) Adjustment for debt security 1,202 3,802 ( 3,407 ) Adjustment for net ( included in net income ( 63 ) 25 1 Total change net income ( 63 ) 25 1 Total change in unrealized income ( 63 ) 25 1 Total change in unrealized gains/losses gains/losses on marketable debt security 1,139 3,827 ( 3,406 ) Total on marketable debt security 1,139 3,827 ( 3,406 ) Total other debt security 1,139 3,827 ( 3,406 ) Total other debt 8,773 10,260 6,643 5,522 Commercial paper 4,996 5,980 Term debt 8,773 10,260 Total paper 4,996 5,980 Term debt 8,773 10,260 Total current liability 105,392 4,996 5,980 Term debt 8,773 10,260 Total current liability 105,392 105,718 8,773 10,260 Total current liability 105,392 105,718 Non-current liability : Term 10,260 Total current liability 105,392 105,718 Non-current liability : Term debt Non-current liability : Term debt 98,667 91,807 Other non-current liability 54,490 liability : Term debt debt , net 16,091 6,963 6,969 Repayments of term term debt , net 16,091 6,963 6,969 Repayments of term debt debt , net 16,091 6,963 6,969 Repayments of term debt ( Repayments of term debt ( 12,629 ) ( 8,805 ) ( debt ( 12,629 ) ( 8,805 ) ( 6,500 ) Repayments ) ( 8,805 ) ( 6,500 ) Repayments of commercial paper commercial paper , net ( 963 ) ( 5,977 ) ( net ( 963 ) ( 5,977 ) ( 37 ) Other ) ( 5,977 ) ( 37 ) Other ( 126 ) ( 37 ) Other ( 126 ) ( 105 ) \u2014 Other ( 126 ) ( 105 ) \u2014 Cash used in used in financ debt paper 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 76,937 8,041 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 debt security 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 \u2014 \u2014 19,687 58,909 Mun debt paper 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 85,383 7,240 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,7 debt $ 15 $ ( 58 ) $ debt $ 15 $ ( 58 ) $ 4 Gains/ ( $ ( 58 ) $ 4 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 1,553 $ ( 116 ) $ contract $ 1,553 $ ( 116 ) $ ( 482 ) ( 116 ) $ ( 482 ) Interest rate contract ( ) Interest rate contract ( 8 ) ( 7 ) 1 contract ( 8 ) ( 7 ) 1 Total $ 1,545 8 ) ( 7 ) 1 Total $ 1,545 $ ( 7 ) 1 Total $ 1,545 $ ( 123 ) $ Total $ 1,545 $ ( 123 ) $ ( 481 ) ( 123 ) $ ( 481 ) The amount excluded from wa a loss of $ 168 million for 2020 . Apple of $ 168 million for debt $ ( 1,018 ) $ 167 Fixed-rate debt ( 1,114 ) $ 167 Fixed-rate debt ( 1,114 ) ( 2,068 ) 1,363 debt ( 1,114 ) ( 2,068 ) 1,363 Total $ ( 1,114 ) ( 2,068 ) 1,363 Total $ ( 123 ) ) 1,363 Total $ ( 123 ) $ ( 3,086 ) ( 123 ) $ ( 3,086 ) $ 1,530 2020 Carrying $ ( 3,086 ) $ 1,530 2020 Carrying amount of hedged ( 3,086 ) $ 1,530 2020 Carrying amount of hedged assets/ ) : Marketable security ( 2 ) $ 16,270 Fixed-rate debt security ( 2 ) $ 16,270 Fixed-rate debt ( 3 ) $ 16,270 Fixed-rate debt ( 3 ) $ ( 21,0 debt carrying amount ( increase ) /decreases $ ( 1,541 ) ( 1 ) Gains $ ( 1,541 ) ( 1 ) Gains and loss related Statements of Operations . ( 2 ) The carrying amount of Consolidated Balance Sheet . ( 3 ) The carrying amount of derivative instrument a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , 2019 ( in million ) : ( in million ) : 2020 2019 Notional Amount Credit Risk in million ) : 2020 Debt Commercial Paper and repurchase . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had $ , the Company had $ 5.0 billion and $ 6.0 billion $ 5.0 billion and $ 6.0 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 0.62 % and 2.24 % a Paper wa 0.62 % and 2.24 % a of September 26 2.24 % a of September 26 , 2020 and September 28 a of September 26 , 202 Debt As | 2020 Form 10-K | 48 Term Debt As of September Term Debt As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had outstanding aggregate principal amount of $ 106.1 billion ( collectively the \u201c term debt a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 : Maturities ( 2020 and September 28 , 2019 : Maturities ( calendar year Maturities ( calendar year ) 2020 2019 Amount ( in million ( calend debt issuance : Effective Interest Rate 2013 \u2013 2019 debt issuance : Floating-rate note debt issuance : Floating-rate note 2021 \u2013 2022 $ 2,250 0.60 : Floating-rate note 2021 \u2013 2022 $ 2,250 0.60 % \u2013 note 2021 \u2013 2022 $ 2,250 0.60 % \u2013 1.39 % 2021 \u2013 2022 $ 2,250 0.60 % \u2013 1.39 % $ $ 2,250 0.60 % \u2013 1.39 % $ 4,250 2.25 % % \u2013 1.39 % $ 4,250 2.25 % \u2013 3.28 % \u2013 1.39 % $ 4,250 2.25 % \u2013 3.28 % Fixed-rate $ 4,250 2.25 % \u2013 3.28 % Fixed-rate 0.375 % \u2013 % \u2013 3.28 % Fixed-rate 0.375 % \u2013 4.650 % note % Fixed-rate 0.375 % debt \u2013 4.78 % First quarter 2020 debt issuance of \u20ac 2.0 2020 debt issuance of \u20ac 2.0 billion : Fixed-rate 0.000 % \u20ac 2.0 billion : Fixed-rate 0.000 % \u2013 0.500 % note : Fixed-rate 0.000 % \u2013 0.500 % note 2025 \u2013 2031 % \u2013 0.500 % note 2025 \u2013 2031 2,341 0.03 % 0.500 % note 2025 \u2013 2031 2,341 0.03 % \u2013 0.56 % note 2025 \u2013 2031 2,341 0.03 % \u2013 0.56 % note 2025 \u2013 2031 2,341 0.03 % \u2013 0.56 % \u2014 2031 2,341 0.03 % \u2013 0.56 % \u2014 \u2014 % Third \u2014 \u2014 % Third quarter 2020 debt issuance of $ 8.5 2020 debt issuance of $ 8.5 billion : debt issuance of $ 5.5 2020 debt issuance of $ 5.5 billion : Fixed-rate 0.550 % $ 5.5 billion : Fixed-rate 0.550 % \u2013 2.550 % note : Fixed-rate 0.550 % \u2013 2.550 % note 2025 \u2013 2060 % \u2013 2.550 % note 2025 \u2013 2060 5,500 0.60 % 2.550 % note 2025 \u2013 2060 5,500 0.60 % \u2013 2.59 % note 2025 \u2013 2060 5,500 0.60 % \u2013 2.59 % note 2025 \u2013 2060 5,500 0.60 % \u2013 2.59 % \u2014 2060 5,500 0.60 % \u2013 2.59 % \u2014 \u2014 % Total \u2014 % Total term debt 106,078 101,679 Unamortized premium/ ( discount % Total term debt 106,078 101,679 Unamortized prem debt ( 8,773 ) ( 10,260 ) Total debt ( 8,773 ) ( 10,260 ) Total non-current portion of portion of term debt $ 98,667 $ 91,807 To manage interest term debt $ 98,667 $ 91,807 To manage interest rate risk note . As of September 28 , 2019 , a portion As of September 28 , 2019 , a portion of the a carrying value of $ 1.0 billion wa designated a a Japanese yen\u2013denominated note matured during 2020 and the associated net investment Financial Instruments section of Note 3 , \u201c Financial Instruments . . The Co debt for 2020 , 2019 and 2018 , term debt for 2020 , 2019 and 2018 , respectively . for 2020 , 2019 and 2018 , respectively . The future s Notes a of September 26 , 2020 , are a a of September 26 , 2020 , are a follows ( ( in million ) : 2021 $ 8,750 2022 9,569 2023 million ) : 2021 $ 8,750 2022 9,569 2023 11,389 2024 ) : 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 : 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 2025 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 2025 10,914 $ 8,750 2022 9,56 debt 2024 10,115 2025 10,914 Thereafter 55,341 Total term debt $ 106,078 55,341 Total term debt $ 106,078 As of September 26 , $ 106,078 As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the fair 2020 and September 28 , 2019 , the fair value of Notes , based on Level 2 input , wa $ 117.1 2 input , wa $ 117.1 billion and $ 107.5 billion $ 117.1 billion and $ 107.5 billion , respectively . Apple respectively . Apple Inc. | ", + "share_repurchase": "Share Repurchase Program As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company \u2019 program , of which $ 168.6 billion had been utilized . had been utilized . During 2020 , the Company repurchased 917 2020 , the Company repurchased 917 million share of it common it common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billion November share repurchase arrangement ( \u201c ASR \u201d ) and 64 million share delivered under a share delivered under a $ 6.0 billion May 2020 ASR . a $ 6.0 billion May 2020 ASR . The Company \u2019 under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2020 , 2019 and 2018 ( common stock for 2020 , 2019 and 2018 ( in thousand for 2020 , 2019 and 2018 ( in thousand ) : ( in thousand ) : 2020 2019 2018 Common stock outstanding in thousan", + "earnings_per_share": "Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 $ : Basic $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 3.28 $ 3.00 $ 2.32 $ 2.09 Diluted $ 3.28 $ 2.97 2.32 $ 2.09 Diluted $ 3.28 $ 2.97 $ 2.98 $ 2.09 Diluted $ 3.28 $ 2.97 $ 2.98 $ 2.30 $ $ 3.28 $ 2.97 $ 2.98 $ 2.30 $ 2.08 Cash $ 2.97 $ 2.98 $ 2.30 $ 2.08 Cash dividend declared $ 2.98 $ 2.30 $ 2.08 Cash dividend declared per share divide earnings per share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted per share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 18,471,336 19,821,51 Earnings per share $ 57,411 $ 55,256 $ 59,531 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 Diluted : Basic $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 $ 2.98 Shares 3.00 Diluted $ 3.28 $ 2.97 $ 2.98 Shares used in $ 3.28 $ 2.97 $ 2.98 Shares used in computing earnings earnings per share : Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 per share : Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 Earnings Per Share | 2020 Form 10-K | 36 Earnings Per Share The following diluted earnings per share for 2020 , 2019 and 2018 ( per share for 2020 , 2019 and 2018 ( net income for 2020 , 2019 and 2018 ( net income in million share in thousand ) : 2020 2019 2018 Numerator : Net in thousand ) : 2020 2019 2018 Numerator : Net income thousand ) : 2020 2019 2018 Numerator : Net income $ Numerator : Net income $ 57,411 $ 55,256 $ 59,531 Denominator Net income $ 57,411 $ 55,256 $ 59,531 Denominator : Weighted-average $ earnings per share Weighted-average diluted share 17,528,214 18,595,651 20,000,435 Basic earnings per share $ Basic earnings per share $ 3.31 $ 2.99 $ 3.00 Diluted per share $ 3.31 $ 2.99 $ 3.00 Diluted earnings per $ 3.31 $ 2.99 $ 3.00 Diluted earnings per share $ Diluted earnings per share $ 3.28 $ 2.97 $ 2.98 The per share $ 3.28 $ 2.97 $ 2.98 The Company applies $ 3.28 $ 2.97 $ 2.98 The Company applies the treasury . Potentially dilutive security representing 62 million share of common stock diluted earnings Earnings per share $ 11,253 $ 11,249 $ 22,236 Earnings per share ( 1 22,236 Earnings per share ( 1 ) : Basic $ 0.74 1 ) : Basic $ 0.74 $ 0.65 $ 0.64 $ : Basic $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.25 Apple $ 0.73 $ 0.65 $ 0.64 $ 1.25 Apple Inc. | $ 0.65 $ 0.64 $ 1.25 Apple Inc. | 2020 Form $ 1.25 Apple Inc. | 2020 Form 10-K | 57 Fourth Apple Inc. | 20 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 0.76 1 ) : Basic $ 0.76 $ 0.55 $ 0.62 $ : Basic $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.61 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.61 $ 1.05 ( $ 0.76 $ 0.55 $ 0.61 $ 1.05 ( 1 ) $ 0.55 $ 0.61 $ 1.05 ( 1 ) Basic and $ 0.61 $ 1.05 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2020 Form 10", + "tax_rate": "tax rate for 2020 , 2019 and 2018 were tax rate for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 2019 2018 Provision for income in million ) : 2020 2019 2018 Provision for income tax million ) : 2020 2019 2018 Provision for income tax $ Provision for income tax $ 9,680 $ 10,481 $ 13,372 Effective income tax $ 9,680 $ 10,481 $ 13,372 Effective tax rate $ 9,680 $ 10,481 $ 13,372 Effective tax rate 14.4 % $ 13,372 Effective tax rate 14.4 % tax rate 14.4 % 15.9 % 18.3 % Statutory federal rate 14.4 % 15.9 % 18.3 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 24.5 % income tax rate 21 % 21 % 24.5 % The Company rate 21 % 21 % 24.5 % The Company \u2019 s effective tax rate for both 2020 and 2019 wa lower than rate for both 2020 and 2019 wa lower than the statutory s effective tax rate for 2020 wa lower compared to 2019 2020 wa lower compared to 2019 due primarily to a one-time of the Treasury in December 2019 in connecti tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a provision for income tax for 2020 , 2019 and 2018 , income tax for 2020 , 2019 and 2018 , consisted of for 2020 , 2019 and 2018 , consisted of the following ( in million ) : 2020 2019 2018 Federal : Current in million ) : 2020 2019 2018 Federal : Current $ million ) : 2020 2019 2018 Federal : Current $ 6,306 2018 Federal : tax rate ( 21 % in 2020 and 2019 rate ( 21 % in 2020 and 2019 ; 24.5 % 21 % in 2020 and 2019 ; 24.5 % in 2018 in 2020 and 2019 ; 24.5 % in 2018 ) to 2019 ; 24.5 % in 2018 ) to income before provision provision for income tax for 2020 , 2019 and 2018 , income tax for 2020 , 2019 and 2018 , is a for 2020 , 2019 and 2018 , is a follows ( dollar in million ) : 2020 2019 2018 Computed expected tax in million ) : 2020 2019 2018 Computed expected tax $ million ) : 2020 2019 2018 Computed expected tax $ 14,089 tax rate $ 9,680 $ 10,481 $ 13,372 Effective tax rate 14.4 % $ 13,372 Effective tax rate 14.4 % 15.9 % 18.3 % Effective tax rate 14.4 % 15.9 % 18.3 % Apple Inc. rate 14.4 % 15.9 % 18.3 % Apple Inc. | 2020 18.3 % Apple Inc. | 2020 Form 10-K | 46 Deferred Apple Inc. | 2020 Form 10-K | 46 Deferred Tax Assets | 2020 Form 10-K | 46 Deferred Tax Assets and Liabilities and Liabilities As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ", + "geographic_information": "Geographic Data \u201d for 2020 , 2019 and 2018 . Data \u201d for 2020 , 2019 and 2018 . Apple Inc. for 2020 , 2019 and 2018 . Apple Inc. | 2020 2018 . Apple Inc. | 2020 Form 10-K | 39 Note Apple Inc. | 2020 Form 10-K | 39 Note 3 \u2013 | 2020 Form 10-K | 39 Note 3 \u2013 Financial Instruments Form 10-K | 39 Note 3 \u2013 Financial Instruments Cash , investment category a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , Geographic a those described in Note 1 , \u201c Summary of Significant information by reportable segment for 2020 , 2019 and 2018 ( reportable segment for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Americas : Net in million ) : 2020 2019 2018 Americas : Net sale million ) : 2020 2019 2018 Americas : Net sale $ Americas : Net sale $ 124,556 $ 116,914 $ 112,093 Operating Net sale $ 124,556 $ 116,914 $ 112,093 Operating income $ $ 124,556 $ 116,914 ", + "common_stock": "Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 \u2014 LLC 1.000 % Notes due 2022 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 \u2014 LLC 1.375 % Notes due 2024 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 \u2014 LLC 0.000 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 \u2014 LLC 0.875 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % No common stock were and outstanding a of October 16 , 2020 . DOCUMENTS INCORPORATED a of October 16 , 2020 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2021 annual meeting of shareholder ( of shareholder ( the \u201c 2021 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2021 10-K where indicated . The 2021 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Common Stock Split On August 28 , 2020 , the Company Split On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , restricted . Holders As of October 16 , 2020 , there were As of October 16 , 2020 , there were 22,797 shareholder , 2020 , there were 22,797 shareholder of record . Purchases the three month ended September 26 , 2020 wa a follows month ended September 26 , 2020 wa a follows ( in the Plans or Programs ( 1 ) June 28 , 2020 Progr common stock . In August 2020 , the purchase period for ASR ended and an additional 3 million share were delivered and retired . In total , 64 million share were delivered under average repurchase price of $ 94.14 . Apple Inc. | 2020 94.14 . Apple Inc. | 2020 Form 10-K | 17 Company Apple Inc. | 2020 Form 10-K | 17 Company Stock Performance | 2020 Form 10-K | 17 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 26 , 2020 . The graph year ended September 26 common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2020 Standard & Poor \u2019 s right reserved . Copyright \u00a9 2020 S & P Dow Jones All right reserved . September 2015 September 2016 September 2017 September reserved . September 2015 September 2016 September 2017 September 2018 September September 2015 September 2016 September 2017 September 2018 September 2019 September September 2016 September 2017 September 2018 September 2019 September 2020 Apple September 2017 September 2018 Sept common stock and dividend equivalent of $ 14.1 billion . On August 28 14.1 billion . On August 28 , 2020 , the Company . On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , RSU split . Apple Inc. | 2020 Form 10-K | 20 Products Apple Inc. | 2020 Form 10-K | 20 Products and Services | 2020 Form 10-K | 20 Products and Services Performance The net sale by category for 2020 , 2019 and 2018 ( by category for 2020 , 2019 and 2018 ( dollar in common stock of $ 72.4 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to redeem term debt of $ 12.6 billion and net repayment of of commercial paper of $ 1.0 billion , partially offset by of term debt of $ 16.1 billion . During 2019 , $ 16.1 billion . During 2019 , cash generated by operating by operating activity of $ 69.4 billion wa a result of wa a result of $ 55.3 billion of net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 bi common stock of $ 66.9 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to repay term debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . Debt The Company repurchase . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had $ , the Company had $ 5.0 billion of Commercial Paper outstanding a weighted-average interest rate of 0.62 % and maturity generally le arrangement . A common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billion November 2019 ASR and a $ 10.0 billion November 2019 ASR and 64 million share billion November 2019 ASR and 64 million share delivered under a share delivered under a $ 6.0 billion May 2020 ASR . a $ 6.0 billion May 2020 ASR . The Company \u2019 under plan complying with Rule 10b5-1 under the Exchange Act . Act . As of September 26 , 2020 , the Company As o Common stock and $ 90,488 $ 107,147 $ 134,047 Common stock and additional paid-in paid-in capital : Beginning balance 45,174 40,201 35,867 Common stock issued capital : Beginning balance 45,174 40,201 35,867 Common stock issued 880 : Beginning balance 45,174 40,201 35,867 Common stock issued 880 781 40,201 35,867 Common stock issued 880 781 669 Common stock withheld 35,867 Common stock issued 880 781 669 Common stock withheld related Common stock issued 880 781 669 Common stock withheld related to settlemen Common stock withheld related settlement of equity award ( 1,604 ) ( 1,029 ) ( award ( 1,604 ) ( 1,029 ) ( 948 ) Common ) ( 1,029 ) ( 948 ) Common stock repurchased ( ) Common stock repurchased ( 72,516 ) ( 67,101 ) ( repurchased ( 72,516 ) ( 67,101 ) ( 73,056 ) Cumulative ) ( 67,101 ) ( 73,056 ) Cumulative effect of change change in accounting principle ( 136 ) 2,501 278 Ending balance accounting principle ( 136 ) 2,501 278 Ending balance 14,966 45,898 principle ( 136 ) 2,501 278 Ending balance 14,966 45,8 common stock 880 781 669 Payments for tax issuance of common stock 880 781 669 Payments for tax related of common stock 880 781 669 Payments for tax related to settlement of equity award ( 3,634 ) ( 2,817 ) ( award ( 3,634 ) ( 2,817 ) ( 2,527 ) Payments ) ( 2,817 ) ( 2,527 ) Payments for dividend and dividend and dividend equivalent ( 14,081 ) ( 14,119 ) ( equivalent ( 14,081 ) ( 14,119 ) ( 13,712 ) Repurchases ) ( 14,119 ) ( 13,712 ) Repurchases of common stock Repurchases of common stock ( 72,358 ) ( 66,8 Common Stock Split On August 28 , 2020 , the Company Split On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , restricted of the first quarter of 2020 , the Company adopted the ASU \u201d ) No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( \u201c ASU 2016-02 842 ) ( \u201c ASU 2016-02 \u201d ) , and additional update the guidance in ASU 2016-02 ( collectively , the \u201c , the Company recorded $ 7.5 billion of right-of-use ( \u201c \u201d ) asset and $ common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 40 year or the remaining life property and equipment wa $ 9.7 billion , $ 11.3 billion $ 9.7 billion , $ 11.3 billion and $ 9.3 billion $ 11.3 billion and $ 9.3 billion during 2020 , 2019 and $ 9.3 billion during 2020 , 2019 and 2018 , 9.3 billion during 2020 , 2019 and 2018 , respectively . during 2020 , 2019 and 2018 , respectively . Non-cash investing current liability of $ ( 2.9 ) billion and $ 3.4 common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billion November 2019 accelerated share a $ 10.0 billion November 2019 accelerated share repurchase arrangement ( \u201c ASR \u201d ) and 64 million share delivered under a share delivered under a $ 6.0 billion May 2020 ASR . a $ 6.0 billion May 2020 ASR . The Company \u2019 under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act o common stock for 2020 , 2019 and 2018 ( common stock for 2020 , 2019 and 2018 ( in thousand for 2020 , 2019 and 2018 ( in thousand ) : ( in thousand ) : 2020 2019 2018 Common stock outstanding in thousand ) : 2020 2019 2018 Common stock outstanding , thousand ) : 2020 2019 2018 Common stock outstanding , beginning stock outstanding , beginning balance 17,772,945 19,019,943 20,504,805 Common stock repurchased outstanding , beginning balance 17,772,945 19,019,943 20,504,805 Common stock repurchased ( , beginn Common stock repurchased ( 917,270 20,504,805 Common stock repurchased ( 917,270 ) ( 1,380,819 ) ( repurchased ( 917,270 ) ( 1,380,819 ) ( 1,622,198 ) Common ) ( 1,380,819 ) ( 1,622,198 ) Common stock issued , share withheld for employee tax 121,088 133,821 137,336 Common stock outstanding withheld for employee tax 121,088 133,821 137,336 Common stock outstanding , for employee tax 121,088 133,821 137,336 Common stock outstanding , ending stock outstanding , ending balance 16,976,763 17,772,945 19,019,943 N", + "corporate_debt": "Corporate debt paper 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 76,937 8,041 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 debt security 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 \u2014 \u2014 19,687 58,909 Mun Corporate debt paper 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 12,433 \u2014 \u2014 12,433 5,193 7,240 \u2014 Corporate debt security 85,383 7,240 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 \u2014 Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,7", + "hedging_activities": "Hedging Activities ( \u201c ASU 2017-12 \u201d ) . ASU 2017-12 2017-12 \u201d ) . ASU 2017-12 expands component and fair value . The Company adopted ASU 2017-12 utilizing the modified retrospective transition the Company recorded a $ 136 million increase in accumulated other can be found in Note 9 , \u201c Benefit Plans . . \u201d Apple Inc. | 2020 Form 10-K | 36 Earnings Apple Inc. | 2020 Form 10-K | 36 Earnings Per Share | 2020 Form 10-K | 36 Earnings Per Share The following diluted earnings per share for 2020 , 2019 and 2018 ( per sha" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-21-000105/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-21-000105/full-submission_features.json new file mode 100644 index 0000000..bb75a46 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-21-000105/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue 7,612 6,643 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 Term revenue 7,612 6,643 Commercial paper 6,000 4,996 Term debt 9,613 8,773 7,612 6,643 Commercial paper 6,000 4,996 Term debt 9,613 8,773 Total paper 6,000 4,996 Term debt 9,613 8,773 Total current liability 125,481 6,000 4,996 Term debt 9,613 8,7 revenue 1,676 2,081 ( 1,923 ) Deferred revenue 1,676 2,081 ( 625 ) Other 1,923 ) Deferred revenue 1,676 2,081 ( 625 ) Other current Deferred revenue 1,676 2,081 ( 625 ) Other current and non-current Other current and non-current liability 5,799 8,916 ( 4,700 ) Cash current and non-current liability 5,799 8,916 ( 4,700 ) Cash generated non-current liability 5,799 8,916 ( 4,700 ) Cash generated by operating Cash generated by operating activity 104,038 80,674 69,391 Investing activity : generated by opera Revenue Recognition Net sale authority . Apple Inc. | 2021 Form 10-K | 36 Deferred Apple Inc. | 2021 Form 10-K | 36 Deferred Revenue As | 2021 Form 10-K | 36 Deferred Revenue As of September Deferred Revenue As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had total total deferred revenue of $ 11.9 billion and $ 10.2 billion $ 11.9 billion and $ 10.2 billion , respectiv revenue le than a year , 26 % within one-to-two year , % within one-to-two year , 8 % within two-to-three year and % within two-to-three year and 2 % in greater than three significant product and service for 2021 , 2020 and 2019 were and service for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( in ( in million ) : 2021 2020 2019 iPhone ( 1 in million ) : 2021 2020 2019 iPhone ( 1 ) million ) : 2021 2020 2019 iPhone ( 1 ) $ 2021 2020 2019 iPhone ( 1 ) $ 191,973 $ 137,781 revenue recognized in billion of revenue recognized in 2021 that wa included in deferred deferred revenue a of September 26 , 2020 , $ 5.0 a of September 26 , 2020 , $ 5.0 billion of 26 , 2020 , $ 5.0 billion of revenue recognized in billion of revenue recognized in 2020 that wa included in deferred deferred revenue a of September 28 , 2019 , and $ a of September 28 , 2019 , and $ 5.9 billion , 2019 , and $ 5.9 billion of revenue recognized in billion of revenue recognized in 2019 that wa included in d revenue a of September 29 , 2018 . The Company a of September 29 , 2018 . The Company \u2019 s each reportable segment in Note 11 , \u201c Segment Information and and Geographic Data \u201d for 2021 , 2020 and 2019 . Data \u201d for 2021 , 2020 and 2019 . Apple Inc. for 2021 , 2020 and 2019 . Apple Inc. | 2021 2019 . Apple Inc. | 2021 Form 10-K | 37 Note Apple Inc. | 2021 Form 10-K | 37 Note 3 \u2013 | 2021 Form 10-K | 37 Note 3 \u2013 Financial Instruments Form 10-K | 37 Note 3 \u2013 Financial Instruments Cash , investment category a revenue 5,399 1,638 5,895 4,934 Lease liability 2,406 2,038 Deferred revenue 5,399 1,638 Tax liability 2,406 2,038 Deferred revenue 5,399 1,638 Tax credit carryforwards 4,262 2,406 2,038 Deferred revenue 5,399 1,638 Tax credit carryforwards 4,262 797 5,399 1,638 Tax credit carryforwards 4,262 797 Other 1,639 1,612 Total 1,638 Tax credit carryforwards 4,262 797 Other 1,639 1,612 Total deferred credit carryforwards 4,262 797 Other 1,639 1,612 Total deferred tax asset carryforwards 4,262 797 Other 1,639 1 Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,500 for calendar year 2021 ) $ 19,500 for calendar year 2021 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 up to a maximum of 6 % of the employee \u2019 activity and related information for 2021 , 2020 and 2019 , related information for 2021 , 2020 and 2019 , is a for 2021 , 2020 and 2019 , is a follows : ) Balance a of September 29 , 2018 368,618 $ 33.65 a of September 29", + "expenses": "Expenses Operating expense for 2021 , 2020 and 2019 were Operating expense for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 Change 2020 Change 2019 Research million ) : 2021 Change 2020 Change 2019 Research and development : 2021 Change 2020 Change 2019 Research and development $ 21,914 2019 Research and development $ 21,914 17 % $ 18,752 16 Research and development $ 21,914 17 % $ 18,752 16 % $ 21,914 17 % $ 18,752 16 % $ 16,217 Percent", + "net_income": "Net income $ Provision for income tax 14,527 9,680 10,481 Net income $ 94,680 for income tax 14,527 9,680 10,481 Net income $ 94,680 $ 9,680 10,481 Net income $ 94,680 $ 57,411 $ 55,256 Earnings Net income $ 94,680 $ 57,411 $ 55,256 Earnings per share $ 94,680 $ 57,411 $ 55,256 Earnings per share : Basic per share : Basic $ 5.67 $ 3.31 $ 2.99 Diluted : Basic $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 $ 2.97 Shares 2.99 Diluted $ 5.61 $ Net income $ , 2020 September 28 , 2019 Net income $ 94,680 $ , 2019 Net income $ 94,680 $ 57,411 $ 55,256 Other Net income $ 94,680 $ 57,411 $ 55,256 Other comprehensive income/ $ 94,680 $ 57,411 $ 55,256 Other comprehensive income/ ( loss translation , net of tax 501 88 ( 408 ) Change , net of tax 501 88 ( 408 ) Change in of tax 501 88 ( 408 ) Change in unrealized gains/losses fair value of derivative instrument 32 79 ( 661 ) Adjustment value of derivative instrument 32 79 ( 661 ) Adjustment for derivat net income 1,003 ( 1,264 ) 23 Total in net income 1,003 ( 1,264 ) 23 Total change in income 1,003 ( 1,264 ) 23 Total change in unrealized gains/losses unrealized gains/losses on derivative instrument 1,035 ( 1,185 ) ( 638 on derivative instrument 1,035 ( 1,185 ) ( 638 ) Change 1,035 ( 1,185 ) ( 638 ) Change in unrealized gains/losses of marketable debt security ( 694 ) 1,202 3,802 Adjustment for debt security ( 694 ) 1,202 3,802 Adjustment for net ( security ( 694 ) 1,202 3,802 Adjustment for net ( gain i net income ( 273 ) ( 63 ) 25 income ( 273 ) ( 63 ) 25 Total change in 273 ) ( 63 ) 25 Total change in unrealized gains/losses on marketable debt security ( 967 ) 1,139 3,827 Total other debt security ( 967 ) 1,139 3,827 Total other comprehensive income/ security ( 967 ) 1,139 3,827 Total other comprehensive income/ ( comprehensive income/ ( loss ) 569 42 2,781 Total comprehensive income income/ ( loss ) 569 42 2,781 Total comprehensive income $ ( loss ) 569 42 2,781 Total comprehensive income $ 95,249 2,7 Net income 94,680 earnings : Beginning balance 14,966 45,898 70,400 Net income 94,680 57,411 : Beginning balance 14,966 45,898 70,400 Net income 94,680 57,411 55,256 14,966 45,898 70,400 Net income 94,680 57,411 55,256 Dividends and dividend 45,898 70,400 Net income 94,680 57,411 55,256 Dividends and dividend equivalent 70,400 Net income 94,680 57,411 55,256 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,431 ) ( 14,087 ) ( declared ( 14,431 ) ( 14,087 ) ( 14,129 ) Common Net income Operating activity : Net income 94,680 57,411 55,256 Adjustments to reconcile activity : Net income 94,680 57,411 55,256 Adjustments to reconcile net : Net income 94,680 57,411 55,256 Adjustments to reconcile net income activity : Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense : Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense 7,906 Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense 7,906 6, net income for 2021 , 2020 and 2019 ( net income in million share in thousand ) : 2021 2020 2019 Numerator : Net in thousand ) : 2021 2020 2019 Numerator : Net income thousand ) : 2021 2020 2019 Numerator : Net income $ Numerator : Net income $ 94,680 $ 57,411 $ 55,256 Denominator Net income $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 16,701,272 17,352,119 18,471,336 Effect of dil", + "assets": "ASSETS September 25 , 2021 September 26 , 2020 ASSETS : Current , 2021 September 26 , 2020 ASSETS : Current asset : Cash and cash equivalent $ 34,940 $ 38,016 Marketable security 27,699 cash equivalent $ 34,940 $ 38,016 Marketable security 27,699 52,927 Accounts 34,940 $ 38,016 Marketable security 27,699 52,927 Accounts receivable , net $ 38,016 Marketable security 27,699 52,927 Accounts receivable , net 26,278 52,927 Accounts receivable , net 26,278 16,120 Inventories 6,580 4,061 Vendor Accounts rece assets/ ( liability in million ) : 2021 2020 Hedged assets/ ( liability ) and non-current marketable security $ 15,954 $ 16,270 Current and non-current marketable security $ 15,954 $ 16,270 Current and non-current term debt non-current term debt $ ( 17,857 ) $ ( 21,033 ) ( 17,857 ) $ ( 21,033 ) The gain and loss adjustment were not material in 2021 , 2020 and 2019 . not material in 2021 , 2020 and 2019 . Accounts Receivable in 2021 , 2020 and 2019 . Accounts Receivable Trade Receivables . As of both S Assets | 2021 Form 10-K | 41 Deferred Tax Assets and Liabilities and Liabilities As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the significant 2021 and September 26 , 2020 , the significant component of ( in million ) : 2021 2020 Deferred tax asset : in million ) : 2021 2020 Deferred tax asset : Amortization : Amortization and depreciation $ 5,575 $ 8,317 Accrued liability and and depreciation $ 5,575 $ 8,317 Accrued li", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 351,002 $ 323,888 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 54,763 $ 42,296 Other current liability Accounts payable $ 54,763 $ 42,296 Other current liability 47,493 42,684 $ 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 47,493 42,684 Deferred re Liabilities , net $ 39,440 $ 36,766 Other Non-Current Liabilities 2021 2020 $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payable $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payable $ 24,689 2020 Long-term tax payable $ 24,689 $ 28,170 Other non-current liability tax payable $ 24,689 $ 28,170 Other non-current liability 28,636 26,320 $ 28,170 Other non-current liability 28,636 26,320 Total other non-current liability 28,170 Other non-current liability 28,636 26,320 Total Liabilities and Liabilities As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the significant 2021 and September 26 , 2020 , the significant component of ( in million ) : 2021 2020 Deferred tax asset : in million ) : 2021 2020 Deferred tax asset : Amortization : Amortization and depreciation $ 5,575 $ 8,317 Accrued liability and and depreciation $ 5,575 $ 8,317 Accrued liability and other reserve Accrued liability and other rese Liabilities Financial Statement Line Items 2021 2020 Right-of-use asset : Operating Financial Statement Line Items 2021 2020 Right-of-use asset : Operating lease lease Other non-current asset $ 10,087 $ 8,570 Finance lease Property non-current asset $ 10,087 $ 8,570 Finance lease Property , plant plant and equipment , net 861 629 Total right-of-use asset $ and equipment , net 861 629 Total right-of-use asset $ 10,948 629 Total right-of-use asset $ 10,948 $ 9,199 Lease liability : right-of-use asset $ 10,94", + "equity": "Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management \u2019 [ Reserved ] 19 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar EQUITY liability : Accounts payable $ 54,763 $ 42,296 Other current liability Accounts payable $ 54,763 $ 42,296 Other current liability 47,493 42,684 $ 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 Term revenue 7,612 6,643 Commercial pape equity ) Total shareholder \u2019 equity 63,090 65,339 Total liability and shareholder Total shareholder \u2019 equity 63,090 65,339 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 351,002 $ 323,888 See accompanying Notes \u2019 equity $ 351,002 $ 323,888 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 31 Apple Apple Inc. | 2021 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 25 , 2021 Sep equity , equity , beginning balance $ 65,339 $ 90,488 $ 107,147 Common beginning balance $ 65,339 $ 90,488 $ 107,147 Common stock and $ 65,339 $ 90,488 $ 107,147 Common stock and additional paid-in paid-in capital : Beginning balance 50,779 45,174 40,201 Common stock issued capital : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 880 45,174 40,201 Common stock issued 1,105 880 781 Common stock withheld 40,201 Common s equity award ( 2,627 ) ( 2,250 ) ( award ( 2,627 ) ( 2,250 ) ( 2,002 ) Share-based ) ( 2,250 ) ( 2,002 ) Share-based compensation 8,108 6,975 ( 2,002 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 2,002 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 50,779 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 50,779 45,174 8,108 6,975 6,194 Ending balance 57,365 50,779 45,174 Retained earnings : 6,975 6,194 Ending balance 57,365 50,779 45,174 Retain equity award ( 4,151 ) ( 1,604 ) ( award ( 4,151 ) ( 1,604 ) ( 1,029 ) Common ) ( 1,604 ) ( 1,029 ) Common stock repurchased ( ) Common stock repurchased ( 85,502 ) ( 72,516 ) ( repurchased ( 85,502 ) ( 72,516 ) ( 67,101 ) Cumulative ) ( 72,516 ) ( 67,101 ) Cumulative effect of change in accounting principle \u2014 ( 136 ) 2,501 Ending balance 5,562 principle \u2014 ( 136 ) 2,501 Ending balance 5,562 14,966 45,898 136 ) 2,501 Ending balance 5,562 14,966 45,898 Accumulated other comprehensive ) 2,501 Ending bala equity equity , ending balance $ 63,090 $ 65,339 $ 90,488 Dividends ending balance $ 63,090 $ 65,339 $ 90,488 Dividends and dividend $ 63,090 $ 65,339 $ 90,488 Dividends and dividend equivalent declared per share or RSU $ 0.85 $ 0.795 $ 0.75 See or RSU $ 0.85 $ 0.795 $ 0.75 See accompanying Notes $ 0.85 $ 0.795 $ 0.75 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 32 Apple Apple Inc. | 2021 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 32 Apple Inc. CONSO equity award ( 6,556 ) ( 3,634 ) ( award ( 6,556 ) ( 3,634 ) ( 2,817 ) Payments ) ( 3,634 ) ( 2,817 ) Payments for dividend and dividend and dividend equivalent ( 14,467 ) ( 14,081 ) ( equivalent ( 14,467 ) ( 14,081 ) ( 14,119 ) Repurchases ) ( 14,081 ) ( 14,119 ) Repurchases of common stock Repurchases of common stock ( 85,971 ) ( 72,358 ) ( stock ( 85,971 ) ( 72,358 ) ( 66,897 ) Proceeds ) ( 72,358 ) ( 66,897 ) Proceeds from issuance of of term debt , net 20,393 16,091 6,963 Repayments of term term Equity 185 \u2014 Level 2 ( 2 ) : Equity security 1,527 2 ) : Equity security 1,527 \u2014 ( 564 ) 963 Equity security 1,527 \u2014 ( 564 ) 963 \u2014 963 \u2014 1,527 \u2014 ( 564 ) 963 \u2014 963 \u2014 U.S. Treasury ( 564 ) 963 \u2014 963 \u2014 U.S. Treasury security 22,878 963 \u2014 U.S. Treasury security 22,878 102 ( 77 ) 22,903 \u2014 U.S. Treasury security 22,878 102 ( 77 ) 22,903 3,596 Treasury security 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency equity award ( 2,137 ) ( 930 ) ( award ( 2,137 ) ( 930 ) ( 639 ) Other ) ( 930 ) ( 639 ) Other ( 300 ) ( 639 ) Other ( 300 ) 111 214 Provision for ) Other ( 300 ) 111 214 Provision for income tax Other ( 300 ) 111 214 Provision for income tax $ Provision for income tax $ 14,527 $ 9,680 $ 10,481 Effective income tax $ 14,527 $ 9,680 $ 10,481 Effective tax rate $ 14,527 $ 9,680 $ 10,481 Effective tax rate 13.3 % $ 10,481 Effective tax rate 13.3 % 14.4 % 15.9 % Effective tax rate 13.3 % 14.4 % 15.9 % App Equity Share Repurchase Program As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company wa authorized to purchase up to $ 315 billion of the Company \u2019 Program \u201d ) . During 2021 , the Company repurchased 656 2021 , the Company repurchased 656 million share of it common it common stock for $ 85.5 billion , including 36 million $ 85.5 billion , including 36 million share delivered under a share delivered under a $ 5.0 billion accelerated share repurchase agreement agreement entere", + "cash_flow": "cash flow $ 35,929 $ 39,789 $ 50,224 Supplemental cash flow disclosure : income tax , net $ 25,385 $ 9,501 $ 15,263 Cash , net $ 25,385 $ 9,501 $ 15,263 Cash paid for $ 25,385 $ 9,501 $ 15,263 Cash paid for interest $ Cash paid for interest $ 2,687 $ 3,002 $ 3,423 See for interest $ 2,687 $ 3,002 $ 3,423 See accompanying Notes $ 2,687 $ 3,002 $ 3,423 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 33 Apple Apple Inc. | 2021 Form 10-K | 33 Apple Inc. Notes | 2021 Form 10-", + "gross_margin": "Gross Margin Products | 2021 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2021 , 2020 and 2019 were margin percentage for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 2020 2019 Gross margin : in million ) : 2021 2020 2019 Gross margin : Products million ) : 2021 2020 2019 Gross margin : Products $ Gross margin : Products $ 105,126 $ 69,461 $ 68,887 Services : Products $ 105,126 $ 69,461 $ 68,887 Services gross margin 69,461 $ 68,887 Services 47,710 35,495 29,505 Total gross margin $ $ 68,887 Services 47,710 35,495 29,505 Total gross margin $ 152,836 29,505 Total gross margin $ 152,836 $ 104,956 $ 98,392 Gross gross margin $ 152,836 $ 104,956 $ 98,392 Gross margin percentage $ 152,836 $ 104,956 $ 98,392 Gross margin percentage : Products Gross margin percentage : Products 35.3 % 31.5 % 32.2 % percentage : Products 35.3 % 31.5 % 32.2 % Services 69.7 Products 35.3 % 31.5 % 32.2 % Services 69.7 % 66.0 31.5 % 32 gross margin percentage % Total gross margin percentage 41.8 % 38.2 % 37.8 % gross margin percentage 41.8 % 38.2 % 37.8 % Products Gross percentage 41.8 % 38.2 % 37.8 % Products Gross Margin Products Products gross margin increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher Products gross margin percentage increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to a different Services gross margi gross margin percentage increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2021 , 2020 and 2019 were Operating expense for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 Change 2020 Change 2019 Research million ) : 2021 Change 2020 Change 20 Gross margin 152,836 Total cost of sale 212,981 169,559 161,782 Gross margin 152,836 104,956 cost of sale 212,981 169,559 161,782 Gross margin 152,836 104,956 98,392 212,981 169,559 161,782 Gross margin 152,836 104,956 98,392 Operating expense : 169,559 161,782 Gross margin 152,836 104,956 98,392 Operating expense : Research 161,782 Gross margin 152,836 104,956 98,392 Operating expense : Research and expense : Research and development 21,914 18,752 16,217 Selling , general : Research and development 21,914 ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 109,723 103,526 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 70,283 ) ( 66,760 ) Total amortization ( 70,283 ) ( 66,760 ) Total property , plant and equipment , net $ 39,440 $ 36,766 Other Non-Current Liabilities , net $ 39,440 $ 36,766 Other Non-Current Liabilities 2021 2020 $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payable $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payabl", + "debt": "Debt As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had outstanding aggregate principal amount of $ 118.1 billion ( collectively the \u201c \u201d ) , with $ 9.6 billion payable within 12 month $ 9.6 billion payable within 12 month . Future interest payment with the Notes total $ 39.5 billion , with $ 2.9 39.5 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 25 , 2021 , the Company As of Sep debt a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 to increase by 2021 and September 26 , 2020 to increase by $ 186 2020 to increase by $ 186 million and $ 218 million $ 186 million and $ 218 million on an annualized basis , typically for up to 12 month . However , the exposure . Apple Inc. | 2021 Form 10-K | 26 To Apple Inc. | 2021 Form 10-K | 26 To provide an | 2021 Form 10-K | 26 To provide an assessment of , the Compa debt security ( 694 ) 1,202 3,802 Adjustment for debt security ( 694 ) 1,202 3,802 Adjustment for net ( security ( 694 ) 1,202 3,802 Adjustment for net ( gain included in net income ( 273 ) ( 63 ) 25 income ( 273 ) ( 63 ) 25 Total change in 273 ) ( 63 ) 25 Total change in unrealized gains/losses on marketable debt security ( 967 ) 1,139 3,827 Total other debt security ( 967 ) 1,139 3,827 Total other comprehensive income/ security ( 967 ) 1,139 3,827 Total other comprehensive income/ ( comprehensive debt 9,613 8,773 7,612 6,643 Commercial paper 6,000 4,996 Term debt 9,613 8,773 Total paper 6,000 4,996 Term debt 9,613 8,773 Total current liability 125,481 6,000 4,996 Term debt 9,613 8,773 Total current liability 125,481 105,392 9,613 8,773 Total current liability 125,481 105,392 Non-current liability : Term 8,773 Total current liability 125,481 105,392 Non-current liability : Term debt Non-current liability : Term debt 109,106 98,667 Other non-current liability 53,325 liability : Term debt 109,1 debt , net 20,393 16,091 6,963 Repayments of term term debt , net 20,393 16,091 6,963 Repayments of term debt debt , net 20,393 16,091 6,963 Repayments of term debt ( Repayments of term debt ( 8,750 ) ( 12,629 ) ( debt ( 8,750 ) ( 12,629 ) ( 8,805 ) Proceeds ) ( 12,629 ) ( 8,805 ) Proceeds from/ ( Repayments ) commercial paper , net 1,022 ( 963 ) ( 5,977 paper , net 1,022 ( 963 ) ( 5,977 ) Other 1,022 ( 963 ) ( 5,977 ) Other ( 129 ) ( 5,977 ) Other ( 129 ) ( 126 ) ( Other ( 129 ) ( 126 ) ( 105 ) Cas debt paper 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 83,883 863 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 debt security 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 \u2014 \u2014 12,327 72,531 Municipal securit debt paper 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 76,937 8,041 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 debt security 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 \u2014 \u2014 19,687 58,909 Mun debt non-current term debt $ ( 17,857 ) $ ( 21,033 ) ( 17,857 ) $ ( 21,033 ) The gain and loss adjustment were not material in 2021 , 2020 and 2019 . not material in 2021 , 2020 and 2019 . Accounts Receivable in 2021 , 2020 and 2019 . Accounts Receivable Trade Receivables . As of both September 25 , 2021 and September 26 of both September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had no no customer that individually r Debt Commercial Paper and repurchase . As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had $ , the Company had $ 6.0 billion and $ 5.0 billion $ 6.0 billion and $ 5.0 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 0.06 % and 0.62 % a Paper wa 0.06 % and 0.62 % a of September 25 0.62 % a of September 25 , 2021 and September 26 a of September 25 , 202 Debt As | 2021 Form 10-K | 44 Term Debt As of September Term Debt As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had outstanding aggregate principal amount of $ 118.1 billion ( collectively the \u201c term debt a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 : Maturities ( 2021 and September 26 , 2020 : Maturities ( calendar year Maturities ( calendar year ) 2021 2020 Amount ( in million ( calend debt issuance : Effective Interest Rate 2013 \u2013 2020 debt issuance : Floating-rate note debt issuance : Floating-rate note 2022 $ 1,750 0.48 % \u2013 : Floating-rate note 2022 $ 1,750 0.48 % \u2013 0.63 % Floating-rate note 2022 $ 1,750 0.48 % \u2013 0.63 % $ $ 1,750 0.48 % \u2013 0.63 % $ 2,250 0.60 % % \u2013 0.63 % $ 2,250 0.60 % \u2013 1.39 % \u2013 0.63 % $ 2,250 0.60 % \u2013 1.39 % Fixed-rate $ 2,250 0.60 % \u2013 1.39 % Fixed-rate 0.000 % \u2013 % \u2013 1.39 % Fixed-rate 0.000 % \u2013 4.650 % note % Fixed-rate 0.000 % \u2013 4.650 % note 2022 \u2013 2060 % \u2013 debt \u2013 4.78 % Second quarter 2021 debt issuance : Fixed-rate 0.700 2021 debt issuance : Fixed-rate 0.700 % \u2013 2.800 % note : Fixed-rate 0.700 % \u2013 2.800 % note 2026 \u2013 2061 % \u2013 2.800 % note 2026 \u2013 2061 14,000 0.75 % 2.800 % note 2026 \u2013 2061 14,000 0.75 % \u2013 2.81 % note 2026 \u2013 2061 14,000 0.75 % \u2013 2.81 % note 2026 \u2013 2061 14,000 0.75 % \u2013 2.81 % \u2014 2061 14,000 0.75 % \u2013 2.81 % \u2014 \u2014 % Fourth \u2014 \u2014 % Fourth quarter 2021 debt issuance : Fixed-rate 1.400 2021 debt issuance : Fixed-rate 1.400 % \u2013 2.850 % note : Fixe debt 118,063 106,078 Unamortized premium/ ( discount % Total term debt 118,063 106,078 Unamortized premium/ ( discount ) issuance cost , net ( 380 ) ( 314 ) Hedge net ( 380 ) ( 314 ) Hedge accounting fair value Hedge accounting fair value adjustment 1,036 1,676 Less : Current portion accounting fair value adjustment 1,036 1,676 Less : Current portion of portion of term debt ( 9,613 ) ( 8,773 ) Total debt ( 9,613 ) ( 8,773 ) Total non-current portion of portion of term debt $ 109,106 $ 98,667 To mana debt $ 109,106 $ 98,667 To manage interest rate risk . The Company recognized $ 2.6 billion , $ 2.8 billion $ 2.6 billion , $ 2.8 billion and $ 3.2 billion $ 2.8 billion and $ 3.2 billion of interest expense on on it term debt for 2021 , 2020 and 2019 , term debt for 2021 , 2020 and 2019 , respectively . for 2021 , 2020 and 2019 , respectively . The future s Notes a of September 25 , 2021 , are a a of September 25 , 2021 , are a follows ( ( in million ) : 2022 $ 9,583 2023 11,391 2024 million ) : 20 debt 2025 10,914 2026 11,408 Thereafter 64,565 Total term debt $ 118,063 64,565 Total term debt $ 118,063 As of September 25 , $ 118,063 As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the fair 2021 and September 26 , 2020 , the fair value of Notes , based on Level 2 input , wa $ 125.3 2 input , wa $ 125.3 billion and $ 117.1 billion $ 125.3 billion and $ 117.1 billion , respectively . Apple respectively . Apple Inc. | ", + "share_repurchase": "Share Repurchase Program As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company wa authorized to purchase up to $ 315 billion of the Company \u2019 Program \u201d ) . During 2021 , the Company repurchased 656 2021 , the Company repurchased 656 million share of it common it common stock for $ 85.5 billion , including 36 million $ 85.5 billion , including 36 million share delivered under a share delivered under a $ 5.0 billion accelerated share repurchase agreement agreement entered into in May 202", + "earnings_per_share": "Earnings per share $ 94,680 $ 57,411 $ 55,256 Earnings per share : Basic per share : Basic $ 5.67 $ 3.31 $ 2.99 Diluted : Basic $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 $ 2.97 Shares 2.99 Diluted $ 5.61 $ 3.28 $ 2.97 Shares used in $ 5.61 $ 3.28 $ 2.97 Shares used in computing earnings earnings per share : Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 per share : Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 earnings per share for 2021 , 2020 and 2019 ( per share for 2021 , 2020 and 2019 ( net income for 2021 , 2020 and 2019 ( net income in million share in thousand ) : 2021 2020 2019 Numerator : Net in thousand ) : 2021 2020 2019 Numerator : Net income thousand ) : 2021 2020 2019 Numerator : Net income $ Numerator : Net income $ 94,680 $ 57,411 $ 55,256 Denominator Net income $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average basic share : Weighted-ave earnings per share Weighted-average diluted share 16,864,919 17,528,214 18,595,651 Basic earnings per share $ Basic earnings per share $ 5.67 $ 3.31 $ 2.99 Diluted per share $ 5.67 $ 3.31 $ 2.99 Diluted earnings per $ 5.67 $ 3.31 $ 2.99 Diluted earnings per share $ Diluted earnings per share $ 5.61 $ 3.28 $ 2.97 Apple per share $ 5.61 $ 3.28 $ 2.97 Apple Inc. | $ 5.61 $ 3.28 $ 2.97 Apple Inc. | 2021 Form $ 2.97 Apple Inc. | 2021 Form 10-K | 34 The Apple Inc. | 2021 Form 10-K | 34 The Company applies | 2021 Form 1 earnings per share for 2019 because their effect would have building is the lesser of 40 year or the remaining life property and equipment wa $ 9.5 billion , $ 9.7 billion $ 9.5 billion , $ 9.7 billion and $ 11.3 billion $ 9.7 billion and $ 11.3 billion during 2021 , 2020 and $ 11.3 billion during 2021 , 2020 and 2019 , 11.3 billion during 2021 , 2020 and 2019 , respectively . during 2021 , 2020 and 2019 , respectively . Noncash investing other current liability of $ 2.9 billion during 2019 . Restricted of $ 2.9 ", + "tax_rate": "tax rate for 2021 , 2020 and 2019 were tax rate for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 2020 2019 Provision for income in million ) : 2021 2020 2019 Provision for income tax million ) : 2021 2020 2019 Provision for income tax $ Provision for income tax $ 14,527 $ 9,680 $ 10,481 Effective income tax $ 14,527 $ 9,680 $ 10,481 Effective tax rate $ 14,527 $ 9,680 $ 10,481 Effective tax rate 13.3 % $ 10,481 Effective tax rate 13.3 % tax rate 13.3 % 14.4 % 15.9 % Statutory federal rate 13.3 % 14.4 % 15.9 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company \u2019 s s effective tax rate for 2021 wa lower than the statutory s effective tax rate for 2020 wa lower than the statutory s effective tax rate for 2021 wa lower compared to 2020 2021 wa lower compared to 2020 due primarily to higher tax by a one-time adjustment in 2020 of U.S. forei tax rate ( 21 % in 2021 , 2020 rate ( 21 % in 2021 , 2020 and 2019 ) 21 % in 2021 , 2020 and 2019 ) to income in 2021 , 2020 and 2019 ) to income before provision provision for income tax for 2021 , 2020 and 2019 , income tax for 2021 , 2020 and 2019 , is a for 2021 , 2020 and 2019 , is a follows ( dollar in million ) : 2021 2020 2019 Computed expected tax in million ) : 2021 2020 2019 Computed expected tax $ million ) : 2021 2020 2019 Computed expected tax $ 22,933 2019 Computed expected tax $ 22,933 $ tax rate $ 14,527 $ 9,680 $ 10,481 Effective tax rate 13.3 % $ 10,481 Effective tax rate 13.3 % 14.4 % 15.9 % Effective tax rate 13.3 % 14.4 % 15.9 % Apple Inc. rate 13.3 % 14.4 % 15.9 % Apple Inc. | 2021 15.9 % Apple Inc. | 2021 Form 10-K | 41 Deferred Apple Inc. | 2021 Form 10-K | 41 Deferred Tax Assets | 2021 Form 10-K | 41 Deferred Tax Assets and Liabilities and Liabilities As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 ", + "geographic_information": "Geographic Data \u201d for 2021 , 2020 and 2019 . Data \u201d for 2021 , 2020 and 2019 . Apple Inc. for 2021 , 2020 and 2019 . Apple Inc. | 2021 2019 . Apple Inc. | 2021 Form 10-K | 37 Note Apple Inc. | 2021 Form 10-K | 37 Note 3 \u2013 | 2021 Form 10-K | 37 Note 3 \u2013 Financial Instruments Form 10-K | 37 Note 3 \u2013 Financial Instruments Cash , investment category a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 ( in million 2021 and September 26 , Geographic a those described in Note 1 , \u201c Summary of Significant . \u201d Apple Inc. | 2021 Form 10-K | 49 The Apple Inc. | 2021 Form 10-K | 49 The Company evaluates | 2021 Form 10-K | 49 The Company evaluates the performance information by reportable segment for 2021 , 2020 and 2019 ( reportable segment for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Americas : Net in million ) : 2021 2020 2019 Americas : Net sale million ) : 2021 2020 2019 Amer", + "common_stock": "Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 \u2014 LLC 1.000 % Notes due 2022 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 \u2014 LLC 1.375 % Notes due 2024 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 \u2014 LLC 0.000 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 \u2014 LLC 0.875 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % No common stock were and outstanding a of October 15 , 2021 . DOCUMENTS INCORPORATED a of October 15 , 2021 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2022 annual meeting of shareholder ( of shareholder ( the \u201c 2022 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2022 10-K where indicated . The 2022 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the common stock . In August 2021 , the purchase period for ASR ended and an additional 5 million share were delivered and retired . In total , 36 million share were delivered under average repurchase price of $ 137.20 . Apple Inc. | 2021 137.20 . Apple Inc. | 2021 Form 10-K | 18 Company Apple Inc. | 2021 Form 10-K | 18 Company Stock Performance | 2021 Form 10-K | 18 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 25 , 2021 . The graph year ended September 2 common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2021 Standard & Poor \u2019 s right reserved . Copyright \u00a9 2021 S & P Dow Jones All right reserved . September 2016 September 2017 September 2018 September reserved . September 2016 September 2017 September 2018 September 2019 September September 2016 September 2017 September 2018 September 2019 September 2020 September September 2017 September 2018 September 2019 September 2020 September 2021 Apple September 2018 September 2019 Sept common stock and dividend equivalent of $ 14.5 billion . Apple Inc. | billion . Apple Inc. | 2021 Form 10-K | 20 Products Apple Inc. | 2021 Form 10-K | 20 Products and Services | 2021 Form 10-K | 20 Products and Services Performance The net sale by category for 2021 , 2020 and 2019 ( by category for 2021 , 2020 and 2019 ( dollar in for 2021 , 2020 and 2019 ( dollar in million ) dollar in million ) : 2021 Change 2020 Change 2019 Net million ) : 2021 Change 2020 Change 2019 Net sale by : 2021 Change 2020 Chan Common stock and $ 65,339 $ 90,488 $ 107,147 Common stock and additional paid-in paid-in capital : Beginning balance 50,779 45,174 40,201 Common stock issued capital : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 880 45,174 40,201 Common stock issued 1,105 880 781 Common stock withheld 40,201 Common stock issued 1,105 880 781 Common stock withheld related Common stock issued 1,105 880 781 Common stock withheld related to Common stock withheld related settlement of equity award ( 4,151 ) ( 1,604 ) ( award ( 4,151 ) ( 1,604 ) ( 1,029 ) Common ) ( 1,604 ) ( 1,029 ) Common stock repurchased ( ) Common stock repurchased ( 85,502 ) ( 72,516 ) ( repurchased ( 85,502 ) ( 72,516 ) ( 67,101 ) Cumulative ) ( 72,516 ) ( 67,101 ) Cumulative effect of change in accounting principle \u2014 ( 136 ) 2,501 Ending balance 5,562 principle \u2014 ( 136 ) 2,501 Ending balance 5,562 14,966 45,898 136 ) 2,501 Ending balance 5,562 14,966 45,898 Accumulated o common stock 1,105 880 781 Payments for tax issuance of common stock 1,105 880 781 Payments for tax related of common stock 1,105 880 781 Payments for tax related to settlement of equity award ( 6,556 ) ( 3,634 ) ( award ( 6,556 ) ( 3,634 ) ( 2,817 ) Payments ) ( 3,634 ) ( 2,817 ) Payments for dividend and dividend and dividend equivalent ( 14,467 ) ( 14,081 ) ( equivalent ( 14,467 ) ( 14,081 ) ( 14,119 ) Repurchases ) ( 14,081 ) ( 14,119 ) Repurchases of common stock Repurchases of common stock ( 85,971 ) common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 40 year or the remaining life property and equipment wa $ 9.5 billion , $ 9.7 billion $ 9.5 billion , $ 9.7 billion and $ 11.3 billion $ 9.7 billion and $ 11.3 billion during 2021 , 2020 and $ 11.3 billion during 2021 , 2020 and 2019 , 11.3 billion during 2021 , 2020 and 2019 , respectively . during 2021 , 2020 and 2019 , respectively . Noncash investing other current liability of $ 2.9 billion during common stock for $ 85.5 billion , including 36 million $ 85.5 billion , including 36 million share delivered under a share delivered under a $ 5.0 billion accelerated share repurchase agreement agreement entered into in May 2021 , bringing the total utilization under the Program to $ 254.1 billion a of September 25 254.1 billion a of September 25 , 2021 . The Program a of September 25 , 2021 . The Program doe not under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange common stock for 2021 , 2020 and 2019 ( common stock for 2021 , 2020 and 2019 ( in thousand for 2021 , 2020 and 2019 ( in thousand ) : ( in thousand ) : 2021 2020 2019 Common stock outstanding in thousand ) : 2021 2020 2019 Common stock outstanding , thousand ) : 2021 2020 2019 Common stock outstanding , beginning stock outstanding , beginning balance 16,976,763 17,772,945 19,019,943 Common stock repurchased outstanding , beginning balance 16,976,763 17,772,945 19,019,943 Common stock repurchased ( , beginn Common stock repurchased ( 656,340 19,019,943 Common stock repurchased ( 656,340 ) ( 917,270 ) ( repurchased ( 656,340 ) ( 917,270 ) ( 1,380,819 ) Common ) ( 917,270 ) ( 1,380,819 ) Common stock issued , share withheld for employee tax 106,363 121,088 133,821 Common stock outstanding withheld for employee tax 106,363 121,088 133,821 Common stock outstanding , for employee tax 106,363 121,088 133,821 Common stock outstanding , ending stock outstanding , ending balance 16,426,786 16,976,763 17,772,945 Note 9 ", + "corporate_debt": "Corporate debt paper 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 83,883 863 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 debt security 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 \u2014 \u2014 12,327 72,531 Municipal securit Corporate debt paper 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 11,226 \u2014 \u2014 11,226 3,185 8,041 \u2014 Corporate debt security 76,937 8,041 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 Corporate debt security 76,937 1,834 ( 175 ) 78,596 \u2014 debt security 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 76,937 1,834 ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security ( 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 \u2014 19,687 58,909 Municipal security 1,001 22 \u2014 \u2014 19,687 58,909 Mun" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-22-000108/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-22-000108/full-submission_features.json new file mode 100644 index 0000000..e131521 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-22-000108/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue 7,912 7,612 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 Term revenue 7,912 7,612 Commercial paper 9,982 6,000 Term debt 11,128 9,613 7,912 7,612 Commercial paper 9,982 6,000 Term debt 11,128 9,613 Total paper 9,982 6,000 Term debt 11,128 9,613 Total current liability 153,982 9,982 6,000 Term debt 11,128 revenue Accounts payable 9,448 12,326 ( 4,062 ) Deferred revenue 478 1,676 ( 4,062 ) Deferred revenue 478 1,676 2,081 Other current and 4,062 ) Deferred revenue 478 1,676 2,081 Other current and non-current ) Deferred revenue 478 1,676 2,081 Other current and non-current liability Other current and non-current liability 5,632 5,799 8,916 Cash generated by current and non-current liability 5,632 5,799 8,916 Cash generated by operating and non-current liability 5,632 5,799 8,916 Cash generated by operati Revenue Net sale disaggregated significant product and service for 2022 , 2021 and 2020 were and service for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( in ( in million ) : 2022 2021 2020 iPhone ( 1 in million ) : 2022 2021 2020 iPhone ( 1 ) million ) : 2022 2021 2020 iPhone ( 1 ) $ 2022 2021 2020 iPhone ( 1 ) $ 205,489 $ 191,973 iPhone ( 1 ) $ 205,489 $ 191,973 $ 137,781 Mac 1 ) $ 205,489 $ 191,973 $ 137,781 Mac ( 1 $ 205,489 $ 191,973 $ 137,781 Mac ( 1 ) 40,177 191,9 revenue recognized in billion of revenue recognized in 2022 that wa included in deferred deferred revenue a of September 25 , 2021 , $ 6.7 a of September 25 , 2021 , $ 6.7 billion of 25 , 2021 , $ 6.7 billion of revenue recognized in billion of revenue recognized in 2021 that wa included in deferred deferred revenue a of September 26 , 2020 , and $ a of September 26 , 2020 , and $ 5.0 billion , 2020 , and $ 5.0 billion of revenue recognized in billion of revenue recognized in 2020 that wa included in d revenue a of September 28 , 2019 . The Company a of September 28 , 2019 . The Company \u2019 s each reportable segment in Note 11 , \u201c Segment Information and and Geographic Data \u201d for 2022 , 2021 and 2020 , Data \u201d for 2022 , 2021 and 2020 , except in for 2022 , 2021 and 2020 , except in Greater China proportion of net sale in 2022 and 2021 . As of net sale in 2022 and 2021 . As of September 24 2021 . As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and S revenue of $ 12.4 billion and $ 11.9 billion $ 12.4 billion and $ 11.9 billion , respectively . As respectively . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company expects 64 2022 , the Company expects 64 % of total deferred revenue le than a year , 27 % within one-to-two year , % within one-to-two year , 7 % within two-to-three year and % within two-to-three year and 2 % in greater than three year . Apple Inc. | 2022 Form 10-K | 37 Note Apple Inc. | 2022 Form 10-K | 37 No revenue 5,742 5,399 6,515 5,895 Lease liability 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized liability 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized loss 2,913 53 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized loss 2,913 53 Tax revenue 5,742 5,399 Unrealized loss 2,913 53 Tax credit carryforwards 6,962 5,742 5,399 Unrealized loss 2,913 53 Tax credit carryforwards 6,962 4,262 2,913 53 Tax credit carryforwards 6,962 4,262 Other 1,596 1,639 Total 53 Tax credit carryforwards 6,962 4,262 O Revenue Code . Under the 401 ( k ) Plan , limit . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 up to a maximum of 6 % of the employee \u2019 activity and related information for 2022 , 2021 and 2020 , related information for 2022 , 2021 and 2020 , is a for 2022 , 2021 and 2020 , is a follows : ) Balance a of September 28 , 2019 326,068 $ 42.30 a of September 28 , 2019 326,068 $ 42.30 RSUs granted of September 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 28 , 2019 326,0", + "expenses": "Expenses Operating expense for 2022 , 2021 and 2020 were Operating expense for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 Change 2021 Change 2020 Research million ) : 2022 Change 2021 Change 2020 Research and development : 2022 Change 2021 Change 2020 Research and development $ 26,251 2020 Research and development $ 26,251 20 % $ 21,914 17 Research and development $ 26,251 20 % $ 21,914 17 % $ 26,251 20 % $ 21,914 17 % $ 18,752 Percent", + "net_income": "Net income $ Provision for income tax 19,300 14,527 9,680 Net income $ 99,803 for income tax 19,300 14,527 9,680 Net income $ 99,803 $ 14,527 9,680 Net income $ 99,803 $ 94,680 $ 57,411 Earnings Net income $ 99,803 $ 94,680 $ 57,411 Earnings per share $ 99,803 $ 94,680 $ 57,411 Earnings per share : Basic per share : Basic $ 6.15 $ 5.67 $ 3.31 Diluted : Basic $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 $ 3.28 Shares 3.31 Diluted $ 6.11 $ Net income $ , 2021 September 26 , 2020 Net income $ 99,803 $ , 2020 Net income $ 99,803 $ 94,680 $ 57,411 Other Net income $ 99,803 $ 94,680 $ 57,411 Other comprehensive income/ $ 99,803 $ 94,680 $ 57,411 Other comprehensive income/ ( loss , net of tax ( 1,511 ) 501 88 Change in of tax ( 1,511 ) 501 88 Change in unrealized gains/losses tax ( 1,511 ) 501 88 Change in unrealized gains/losses on fair value of derivative instrument 3,212 32 79 Adjustment for net value of derivative instrument 3,212 32 79 Adj net income ( 1,074 ) 1,003 ( 1,264 ) net income ( 1,074 ) 1,003 ( 1,264 ) Total change ( 1,074 ) 1,003 ( 1,264 ) Total change in unrealized unrealized gains/losses on derivative instrument 2,138 1,035 ( 1,185 ) Change gains/losses on derivative instrument 2,138 1,035 ( 1,185 ) Change in derivative instrument 2,138 1,035 ( 1,185 ) Change in unrealized gains/losses of marketable debt security ( 12,104 ) ( 694 ) 1,202 security ( 12,104 ) ( 694 ) 1,202 Adjustment for net 12,104 ) ( 694 ) 1,202 Adjustment for net income 205 ( 273 ) ( 63 in net income 205 ( 273 ) ( 63 ) Total 205 ( 273 ) ( 63 ) Total change in unrealized on marketable debt security ( 11,899 ) ( 967 ) 1,139 security ( 11,899 ) ( 967 ) 1,139 Total other comprehensive 11,899 ) ( 967 ) 1,139 Total other comprehensive income/ ( income/ ( loss ) ( 11,272 ) 569 42 Total comprehensive loss ) ( 11,272 ) 569 42 Total comprehensive income $ ) ( 11,272 ) 569 42 Total comprehensive income $ 88,531 42 Total comprehensive income $ 88,531 $ 95,249 $ 57,453 See Net income 99,803 ) : Beginning balance 5,562 14,966 45,898 Net income 99,803 94,680 : Beginning balance 5,562 14,966 45,898 Net income 99,803 94,680 57,411 5,562 14,966 45,898 Net income 99,803 94,680 57,411 Dividends and dividend 14,966 45,898 Net income 99,803 94,680 57,411 Dividends and dividend equivalent 45,898 Net income 99,803 94,680 57,411 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,793 ) ( 14,431 ) ( declared ( 14,793 ) ( 14,431 ) ( 14,087 ) Common ) ( 14,431 Net income Operating activity : Net income 99,803 94,680 57,411 Adjustments to reconcile activity : Net income 99,803 94,680 57,411 Adjustments to reconcile net : Net income 99,803 94,680 57,411 Adjustments to reconcile net income activity : Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense : Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense 9,038 Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense 9,038 7, net income for 2022 , 2021 and 2020 ( net income in million share in thousand ) : 2022 2021 2020 Numerator : Net in thousand ) : 2022 2021 2020 Numerator : Net income thousand ) : 2022 2021 2020 Numerator : Net income $ Numerator : Net income $ 99,803 $ 94,680 $ 57,411 Denominator Net income $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 16,215,963 16,701,272 17,352,119 Effect of dil", + "assets": "ASSETS September 24 , 2022 September 25 , 2021 ASSETS : Current , 2022 September 25 , 2021 ASSETS : Current asset : Cash and cash equivalent $ 23,646 $ 34,940 Marketable security 24,658 cash equivalent $ 23,646 $ 34,940 Marketable security 24,658 27,699 Accounts 23,646 $ 34,940 Marketable security 24,658 27,699 Accounts receivable , net $ 34,940 Marketable security 24,658 27,699 Accounts receivable , net 28,184 27,699 Accounts receivable , net 28,184 26,278 Inventories 4,946 6,580 Vendor Accounts rece assets/ ( liability in million ) : 2022 2021 Hedged assets/ ( liability ) and non-current marketable security $ 13,378 $ 15,954 Current and non-current marketable security $ 13,378 $ 15,954 Current and non-current term debt non-current term debt $ ( 18,739 ) $ ( 17,857 ) ( 18,739 ) $ ( 17,857 ) Accounts Receivable Trade Receivables arrangement . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivables , Assets and and Liabilities As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the significant 2022 and September 25 , 2021 , the significant component of ( in million ) : 2022 2021 Deferred tax asset : in million ) : 2022 2021 Deferred tax asset : Amortization : Amortization and depreciation $ 1,496 $ 5,575 Accrued liability and and depreciation $ 1,496 $ 5,575 Accrued liability and other reserve Accrued liability and other ", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 352,755 $ 351,002 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 64,115 $ 54,763 Other current liability Accounts payable $ 64,115 $ 54,763 Other current liability 60,845 47,493 $ 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 60,845 47,493 Deferred re Liabilities , net $ 42,117 $ 39,440 Other Non-Current Liabilities 2022 2021 $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payable $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payable $ 16,657 2021 Long-term tax payable $ 16,657 $ 24,689 Other non-current liability tax payable $ 16,657 $ 24,689 Other non-current liability 32,485 28,636 $ 24,689 Other non-current liability 32,485 28,636 Total other non-current liability 24,689 Other non-current liability 32,485 28,636 Total Liabilities As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the significant 2022 and September 25 , 2021 , the significant component of ( in million ) : 2022 2021 Deferred tax asset : in million ) : 2022 2021 Deferred tax asset : Amortization : Amortization and depreciation $ 1,496 $ 5,575 Accrued liability and and depreciation $ 1,496 $ 5,575 Accrued liability and other reserve Accrued liability and other reserve 6,515 5,895 Liabilities Financial Statement Line Items 2022 2021 Right-of-use asset : Operating Financial Statement Line Items 2022 2021 Right-of-use asset : Operating lease lease Other non-current asset $ 10,417 $ 10,087 Finance lease Property non-current asset $ 10,417 $ 10,087 Finance lease Property , plant plant and equipment , net 952 861 Total right-of-use asset $ and equipment , net 952 861 Total right-of-use asset $ 11,369 861 Total right-of-use asset $ 11,369 $ 10,948 Lease liability : right-of-use asset $ 11", + "equity": "Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management \u2019 [ Reserved ] 19 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar EQUITY liability : Accounts payable $ 64,115 $ 54,763 Other current liability Accounts payable $ 64,115 $ 54,763 Other current liability 60,845 47,493 $ 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 Term revenue 7,912 7,612 Commercial pape equity 50,672 163 Total shareholder \u2019 equity 50,672 63,090 Total liability and shareholder Total shareholder \u2019 equity 50,672 63,090 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 352,755 $ 351,002 See accompanying Notes \u2019 equity $ 352,755 $ 351,002 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 31 Apple Apple Inc. | 2022 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 24 , equity , equity , beginning balance $ 63,090 $ 65,339 $ 90,488 Common beginning balance $ 63,090 $ 65,339 $ 90,488 Common stock and $ 63,090 $ 65,339 $ 90,488 Common stock and additional paid-in paid-in capital : Beginning balance 57,365 50,779 45,174 Common stock issued capital : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 1,105 50,779 45,174 Common stock issued 1,175 1,105 880 Common stock withheld 45,174 Common equity award ( 2,971 ) ( 2,627 ) ( award ( 2,971 ) ( 2,627 ) ( 2,250 ) Share-based ) ( 2,627 ) ( 2,250 ) Share-based compensation 9,280 8,108 ( 2,250 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 2,250 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 57,365 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 57,365 50,779 9,280 8,108 6,975 Ending balance 64,849 57,365 50,779 Retained earnings/ ( 8,108 6,975 Ending balance 64,849 57,365 50,779 Retai equity award ( 3,454 ) ( 4,151 ) ( award ( 3,454 ) ( 4,151 ) ( 1,604 ) Common ) ( 4,151 ) ( 1,604 ) Common stock repurchased ( ) Common stock repurchased ( 90,186 ) ( 85,502 ) ( repurchased ( 90,186 ) ( 85,502 ) ( 72,516 ) Cumulative ) ( 85,502 ) ( 72,516 ) Cumulative effect of change accounting principle \u2014 \u2014 ( 136 ) Ending balance ( 3,068 136 ) Ending balance ( 3,068 ) 5,562 14,966 Accumulated other Ending balance ( 3,068 ) 5,562 14,966 Accumulated other comprehensive income/ balance ( 3,068 ) 5,562 equity equity , ending balance $ 50,672 $ 63,090 $ 65,339 Dividends ending balance $ 50,672 $ 63,090 $ 65,339 Dividends and dividend $ 50,672 $ 63,090 $ 65,339 Dividends and dividend equivalent declared per share or RSU $ 0.90 $ 0.85 $ 0.795 See or RSU $ 0.90 $ 0.85 $ 0.795 See accompanying Notes $ 0.90 $ 0.85 $ 0.795 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 32 Apple Apple Inc. | 2022 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 32 Apple Inc. CONSO equity award ( 6,223 ) ( 6,556 ) ( award ( 6,223 ) ( 6,556 ) ( 3,634 ) Payments ) ( 6,556 ) ( 3,634 ) Payments for dividend and dividend and dividend equivalent ( 14,841 ) ( 14,467 ) ( equivalent ( 14,841 ) ( 14,467 ) ( 14,081 ) Repurchases ) ( 14,467 ) ( 14,081 ) Repurchases of common stock Repurchases of common stock ( 89,402 ) ( 85,971 ) ( stock ( 89,402 ) ( 85,971 ) ( 72,358 ) Proceeds ) ( 85,971 ) ( 72,358 ) Proceeds from issuance of of term debt , net 5,465 20,393 16,091 Repayments of term term Equity 185 \u2014 Level 2 ( 2 ) : Equity security 1,527 2 ) : Equity security 1,527 \u2014 ( 564 ) 963 Equity security 1,527 \u2014 ( 564 ) 963 \u2014 963 \u2014 1,527 \u2014 ( 564 ) 963 \u2014 963 \u2014 U.S. Treasury ( 564 ) 963 \u2014 963 \u2014 U.S. Treasury security 22,878 963 \u2014 U.S. Treasury security 22,878 102 ( 77 ) 22,903 \u2014 U.S. Treasury security 22,878 102 ( 77 ) 22,903 3,596 Treasury security 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency equity award ( 1,871 ) ( 2,137 ) ( award ( 1,871 ) ( 2,137 ) ( 930 ) Other ) ( 2,137 ) ( 930 ) Other ( 86 ) ( 930 ) Other ( 86 ) ( 300 ) 111 Other ( 86 ) ( 300 ) 111 Provision for income 86 ) ( 300 ) 111 Provision for income tax $ Provision for income tax $ 19,300 $ 14,527 $ 9,680 Effective income tax $ 19,300 $ 14,527 $ 9,680 Effective tax rate $ 19,300 $ 14,527 $ 9,680 Effective tax rate 16.2 % $ 9,680 Effective tax rate 16.2 % 13.3 % 14.4 % Effective tax rate 16.2 % 13.3 % 14.4 % Deferred Tax rate Equity Share Equity Share Repurchase Program During 2022 , the Company repurchased 569 2022 , the Company repurchased 569 million share of it common it common stock for $ 90.2 billion under a share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . Shares share of common stock for 2022 , 2021 and 2020 ( common stock for 2022 , 2021 and 2020 ( in thousand for 2022 , 2021 and 2020 ( in thousand ) : ( in thousand ) : 2022 2 equity plan . Item 9C . Disclosure Regarding Foreign Jurisdictions applicable . PART III Item 10 . Directors , Executive Officers filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2022 , in connection day after September 24 , 2022 , in connection with the for the Company \u2019 s 2023 annual meeting of shareholder ( of shareholder ( the \u201c 2023 Proxy Statement \u201d ) , herein by reference . Item 11 . Executive Compensation The information will be included in the 2023 Pr", + "cash_flow": "cash flow $ 24,977 $ 35,929 $ 39,789 Supplemental cash flow disclosure : income tax , net $ 19,573 $ 25,385 $ 9,501 Cash , net $ 19,573 $ 25,385 $ 9,501 Cash paid for $ 19,573 $ 25,385 $ 9,501 Cash paid for interest $ Cash paid for interest $ 2,865 $ 2,687 $ 3,002 See for interest $ 2,865 $ 2,687 $ 3,002 See accompanying Notes $ 2,865 $ 2,687 $ 3,002 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 33 Apple Apple Inc. | 2022 Form 10-K | 33 Apple Inc. Notes | 2022 Form 10-", + "gross_margin": "Gross Margin Products | 2022 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2022 , 2021 and 2020 were margin percentage for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 2021 2020 Gross margin : in million ) : 2022 2021 2020 Gross margin : Products million ) : 2022 2021 2020 Gross margin : Products $ Gross margin : Products $ 114,728 $ 105,126 $ 69,461 Services : Products $ 114,728 $ 105,126 $ 69,461 Service gross margin 105,126 $ 69,461 Services 56,054 47,710 35,495 Total gross margin $ $ 69,461 Services 56,054 47,710 35,495 Total gross margin $ 170,782 35,495 Total gross margin $ 170,782 $ 152,836 $ 104,956 Gross gross margin $ 170,782 $ 152,836 $ 104,956 Gross margin percentage $ 170,782 $ 152,836 $ 104,956 Gross margin percentage : Products Gross margin percentage : Products 36.3 % 35.3 % 31.5 % percentage : Products 36.3 % 35.3 % 31.5 % Services 71.7 Products 36.3 % 35.3 % 31.5 % Services 71.7 % 69.7 35.3 gross margin percentage % Total gross margin percentage 43.3 % 41.8 % 38.2 % gross margin percentage 43.3 % 41.8 % 38.2 % Products Gross percentage 43.3 % 41.8 % 38.2 % Products Gross Margin Products Products gross margin increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to a different gross margin percentage increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to a different Services gross margin in gross margin percentage increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to improved leverage in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2022 , 2021 and 2020 were Operating expense for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 Change 2021 Change 2020 Research million ) : 2022 Change 2021 Cha Gross margin 170,782 Total cost of sale 223,546 212,981 169,559 Gross margin 170,782 152,836 cost of sale 223,546 212,981 169,559 Gross margin 170,782 152,836 104,956 223,546 212,981 169,559 Gross margin 170,782 152,836 104,956 Operating expense : 212,981 169,559 Gross margin 170,782 152,836 104,956 Operating expense : Research 169,559 Gross margin 170,782 152,836 104,956 Operating expense : Research and expense : Research and development 26,251 21,914 18,752 Selling , general : Research and development 26,", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 114,457 109,723 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 72,340 ) ( 70,283 ) Total amortization ( 72,340 ) ( 70,283 ) Total property , plant and equipment , net $ 42,117 $ 39,440 Other Non-Current Liabilities , net $ 42,117 $ 39,440 Other Non-Current Liabilities 2022 2021 $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payable $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payabl", + "debt": "Debt As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had outstanding aggregate principal amount of $ 111.8 billion ( collectively the \u201c \u201d ) , with $ 11.1 billion payable within 12 month $ 11.1 billion payable within 12 month . Future interest payment with the Notes total $ 41.3 billion , with $ 2.9 41.3 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 24 , 2022 , the Company As of S debt a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 to increase by 2022 and September 25 , 2021 to increase by $ 201 2021 to increase by $ 201 million and $ 186 million $ 201 million and $ 186 million on an annualized basis , typically for up to 12 month . However , the exposure . Apple Inc. | 2022 Form 10-K | 26 To Apple Inc. | 2022 Form 10-K | 26 To provide an | 2022 Form 10-K | 26 To provide an assessment of , the Compa debt security ( 12,104 ) ( 694 ) 1,202 security ( 12,104 ) ( 694 ) 1,202 Adjustment for net 12,104 ) ( 694 ) 1,202 Adjustment for net ( gain and included in net income 205 ( 273 ) ( 63 in net income 205 ( 273 ) ( 63 ) Total 205 ( 273 ) ( 63 ) Total change in unrealized on marketable debt security ( 11,899 ) ( 967 ) 1,139 security ( 11,899 ) ( 967 ) 1,139 Total other comprehensive 11,899 ) ( 967 ) 1,139 Total other comprehensive income/ ( income/ ( loss ) ( 11,272 ) 569 42 Total comprehensive loss ) debt 11,128 9,613 7,912 7,612 Commercial paper 9,982 6,000 Term debt 11,128 9,613 Total paper 9,982 6,000 Term debt 11,128 9,613 Total current liability 153,982 9,982 6,000 Term debt 11,128 9,613 Total current liability 153,982 125,481 11,128 9,613 Total current liability 153,982 125,481 Non-current liability : Term 9,613 Total current liability 153,982 125,481 Non-current liability : Term debt Non-current liability : Term debt 98,959 109,106 Other non-current liability 49,142 liability : Term debt debt , net 5,465 20,393 16,091 Repayments of term term debt , net 5,465 20,393 16,091 Repayments of term debt debt , net 5,465 20,393 16,091 Repayments of term debt ( Repayments of term debt ( 9,543 ) ( 8,750 ) ( debt ( 9,543 ) ( 8,750 ) ( 12,629 ) Proceeds ) ( 8,750 ) ( 12,629 ) Proceeds from/ ( Repayments ) commercial paper , net 3,955 1,022 ( 963 ) Other commercial paper , net 3,955 1,022 ( 963 ) Other ( , net 3,955 1,022 ( 963 ) Other ( 160 ) ( 963 ) Other ( 160 ) 976 754 Cash used ) Other ( 160 debt paper 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 87,148 690 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 debt security 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 ( \u2014 9,023 70,427 Municipal security 921 \u2014 ( 35 ) 886 Munici debt paper 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 83,883 863 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 debt security 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 \u2014 \u2014 12,327 72,531 Municipal securit debt\u2013related foreign currency transaction is 20 year . The Company may derivative instrument a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 were a follows 2022 and September 25 , 2021 were a follows ( in ( in million ) : 2022 2021 Derivative instrument designated a in million ) : 2022 2021 Derivative instrument designated a accounting : Foreign exchange contract $ 102,670 $ 76,475 Interest rate contract exchange contract $ debt non-current term debt $ ( 18,739 ) $ ( 17,857 ) ( 18,739 ) $ ( 17,857 ) Accounts Receivable Trade Receivables arrangement . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company \u2019 cellular network carrier accounted for 44 % and 42 % of accounted for 44 % and 42 % of total trade receivables trade receivables a of September 24 , 2022 and September 25 a of Debt Commercial Form 10-K | 44 Note 7 \u2013 Debt Commercial Paper and repurchase . As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the Company 2022 and September 25 , 2021 , the Company had $ , the Company had $ 10.0 billion and $ 6.0 billion $ 10.0 billion and $ 6.0 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 2.31 % and 0.06 % a Paper wa 2.31 % and 0.06 % a of September 24 0.06 % a of September 24 , 202 Debt a of September 26 , 2020 . Term Debt The Company term debt a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 : Maturities ( 2022 and September 25 , 2021 : Maturities ( calendar year Maturities ( calendar year ) 2022 2021 Amount ( in million ( calendar year ) 2022 2021 Amount ( in million ) million ) Effective Interest Rate 2013 \u2013 2021 debt issuance : Effective Interest Rate 2013 \u2013 2021 debt issuance : Floating-rate note debt \u2013 4.78 % Fourth quarter 2022 debt issuance : Fixed-rate 3.250 2022 debt issuance : Fixed-rate 3.250 % \u2013 4.100 % note : Fixed-rate 3.250 % \u2013 4.100 % note 2029 \u2013 2062 % \u2013 4.100 % note 2029 \u2013 2062 5,500 3.27 % 4.100 % note 2029 \u2013 2062 5,500 3.27 % \u2013 4.12 % note 2029 \u2013 2062 5,500 3.27 % \u2013 4.12 % note 2029 \u2013 2062 5,500 3.27 % \u2013 4.12 % \u2014 2062 5,500 3.27 % \u2013 4.12 % \u2014 Total term debt % \u2014 Total term debt 111,824 118,063 Unamortized premium/ ( discount \u2014 Total term debt 111,824 118,063 Unamortized premiu debt ( 11,128 ) ( 9,613 ) Total debt ( 11,128 ) ( 9,613 ) Total non-current portion of portion of term debt $ 98,959 $ 109,106 To manage interest term debt $ 98,959 $ 109,106 To manage interest rate risk . The Company recognized $ 2.8 billion , $ 2.6 billion $ 2.8 billion , $ 2.6 billion and $ 2.8 billion $ 2.6 billion and $ 2.8 billion of interest expense on on it term debt for 2022 , 2021 and 2020 , term debt for 2022 , 2021 and 2020 , respectively . for 2022 , 2021 and 2020 , respectively . Apple debt 2026 11,209 2027 9,631 Thereafter 59,290 Total term debt $ 111,824 59,290 Total term debt $ 111,824 As of September 24 , $ 111,824 As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the fair 2022 and September 25 , 2021 , the fair value of Notes , based on Level 2 input , wa $ 98.8 2 input , wa $ 98.8 billion and $ 125.3 billion $ 98.8 billion and $ 125.3 billion , respectively . Note billion , respectively . Note 8 \u2013", + "share_repurchase": "Share Repurchase Program During 2022 , the Company repurchased 569 2022 , the Company repurchased 569 million share of it common it common stock for $ 90.2 billion under a share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . Shares share of common stock for 2022 , 2021 and 2020 ( common stock for 2022 , 2021 and 2020 ( in thousand for 2022 , 2021 and 2020 ( in thousand ) : ( in thousand ) : 2022 2021 2020 Common stock outstand", + "earnings_per_share": "Earnings per share $ 99,803 $ 94,680 $ 57,411 Earnings per share : Basic per share : Basic $ 6.15 $ 5.67 $ 3.31 Diluted : Basic $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 $ 3.28 Shares 3.31 Diluted $ 6.11 $ 5.61 $ 3.28 Shares used in $ 6.11 $ 5.61 $ 3.28 Shares used in computing earnings earnings per share : Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 per share : Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 earnings per share for 2022 , 2021 and 2020 ( per share for 2022 , 2021 and 2020 ( net income for 2022 , 2021 and 2020 ( net income in million share in thousand ) : 2022 2021 2020 Numerator : Net in thousand ) : 2022 2021 2020 Numerator : Net income thousand ) : 2022 2021 2020 Numerator : Net income $ Numerator : Net income $ 99,803 $ 94,680 $ 57,411 Denominator Net income $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average basic share : Weighted-ave earnings per share Weighted-average diluted share 16,325,819 16,864,919 17,528,214 Basic earnings per share $ Basic earnings per share $ 6.15 $ 5.67 $ 3.31 Diluted per share $ 6.15 $ 5.67 $ 3.31 Diluted earnings per $ 6.15 $ 5.67 $ 3.31 Diluted earnings per share $ Diluted earnings per share $ 6.11 $ 5.61 $ 3.28 The per share $ 6.11 $ 5.61 $ 3.28 The Company applies $ 6.11 $ 5.61 $ 3.28 The Company applies the treasury method . Apple Inc. | 2022 Form 10-K | 35 Restricted Apple Inc. | 2022 Form 10-K | 35 Restricte", + "tax_rate": "tax rate for 2022 , 2021 and 2020 were tax rate for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 2021 2020 Provision for income in million ) : 2022 2021 2020 Provision for income tax million ) : 2022 2021 2020 Provision for income tax $ Provision for income tax $ 19,300 $ 14,527 $ 9,680 Effective income tax $ 19,300 $ 14,527 $ 9,680 Effective tax rate $ 19,300 $ 14,527 $ 9,680 Effective tax rate 16.2 % $ 9,680 Effective tax rate 16.2 % 1 tax rate 16.2 % 13.3 % 14.4 % Statutory federal rate 16.2 % 13.3 % 14.4 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company \u2019 s s effective tax rate for 2022 wa lower than the statutory s effective tax rate for 2021 wa lower than the statutory s effective tax rate for 2022 wa higher compared to 2021 2022 wa higher compared to 2021 due primarily to a higher Department of the Treasury in 2022 , and lower tax rate ( 21 % in 2022 , 2021 rate ( 21 % in 2022 , 2021 and 2020 ) 21 % in 2022 , 2021 and 2020 ) to income in 2022 , 2021 and 2020 ) to income before provision provision for income tax for 2022 , 2021 and 2020 , income tax for 2022 , 2021 and 2020 , is a for 2022 , 2021 and 2020 , is a follows ( dollar in million ) : 2022 2021 2020 Computed expected tax in million ) : 2022 2021 2020 Computed expected tax $ million ) : 2022 2021 2020 Computed expected tax $ 25,012 2020 Computed expected tax $ 25,012 $ tax rate $ 19,300 $ 14,527 $ 9,680 Effective tax rate 16.2 % $ 9,680 Effective tax rate 16.2 % 13.3 % 14.4 % Effective tax rate 16.2 % 13.3 % 14.4 % Deferred Tax rate 16.2 % 13.3 % 14.4 % Deferred Tax Assets and and Liabilities As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the significant 2022 and September 25 , 2021 , the significant component of ( in million ) : 2022 2021 Deferred tax asset : in million ) : 2022 2021 De", + "geographic_information": "Geographic Data \u201d for 2022 , 2021 and 2020 , Data \u201d for 2022 , 2021 and 2020 , except in for 2022 , 2021 and 2020 , except in Greater China proportion of net sale in 2022 and 2021 . As of net sale in 2022 and 2021 . As of September 24 2021 . As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the Company 2022 and September 25 , 2021 , the Company had total total deferred revenue of $ 12.4 billion and $ 11.9 billion $ 12.4 billion Geographic information by reportable segment for 2022 , 2021 and 2020 ( reportable segment for 2022 , 2021 and 2020 ( in million for 2022 , 2021 and 2020 ( in million ) : ( in million ) : 2022 2021 2020 Americas : Net in million ) : 2022 2021 2020 Americas : Net sale million ) : 2022 2021 2020 Americas : Net sale $ Americas : Net sale $ 169,658 $ 153,306 $ 124,556 Operating Net sale $ 169,658 $ 153,306 $ 124,556 Operating income $ $ 169,658 $ 153,306 $ 124,556 Operating income $ 62,683 $ $ 124,556 Operati", + "common_stock": "Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 \u2014 LLC 1.000 % Notes due 2022 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 \u2014 LLC 1.375 % Notes due 2024 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 \u2014 LLC 0.000 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 \u2014 LLC 0.875 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % No common stock were and outstanding a of October 14 , 2022 . DOCUMENTS INCORPORATED a of October 14 , 2022 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2023 annual meeting of shareholder are this Annual Report on Form 10-K where indicated . The Registrant Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 24 , 2022 TABLE OF CONTENTS Year Ended September 24 , 2022 TABLE OF CONTENTS P common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2022 Standard & Poor \u2019 s right reserved . Copyright \u00a9 2022 S & P Dow Jones All right reserved . September 2017 September 2018 September 2019 September reserved . September 2017 September 2018 September 2019 September 2020 September September 2017 September 2018 September 2019 September 2020 September 2021 September September 2018 September 2019 September 2020 September 2021 September 2022 Apple September 2019 September 2020 Sept common stock and dividend equivalent of $ 14.8 billion . COVID-19 The COVID-19 future . Apple Inc. | 2022 Form 10-K | 20 Products Apple Inc. | 2022 Form 10-K | 20 Products and Services | 2022 Form 10-K | 20 Products and Services Performance The net sale by category for 2022 , 2021 and 2020 ( by category for 2022 , 2021 and 2020 ( dollar in for 2022 , 2021 and 2020 ( dollar in million ) dollar in million ) : 2022 Change 2021 Change 2020 Net million ) : 2022 Change 2021 Change 2020 Net sale by : 2022 Change 2 Common stock and $ 63,090 $ 65,339 $ 90,488 Common stock and additional paid-in paid-in capital : Beginning balance 57,365 50,779 45,174 Common stock issued capital : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 1,105 50,779 45,174 Common stock issued 1,175 1,105 880 Common stock withheld 45,174 Common stock issued 1,175 1,105 880 Common stock withheld related Common stock issued 1,175 1,105 880 Common stock withheld rela Common stock withheld related settlement of equity award ( 3,454 ) ( 4,151 ) ( award ( 3,454 ) ( 4,151 ) ( 1,604 ) Common ) ( 4,151 ) ( 1,604 ) Common stock repurchased ( ) Common stock repurchased ( 90,186 ) ( 85,502 ) ( repurchased ( 90,186 ) ( 85,502 ) ( 72,516 ) Cumulative ) ( 85,502 ) ( 72,516 ) Cumulative effect of change accounting principle \u2014 \u2014 ( 136 ) Ending balance ( 3,068 136 ) Ending balance ( 3,068 ) 5,562 14,966 Accumulated other Ending balance ( 3,068 ) 5,562 14,966 Accumulated other comprehe common stock Repurchases of common stock ( 89,402 ) ( 85,971 ) ( stock ( 89,402 ) ( 85,971 ) ( 72,358 ) Proceeds ) ( 85,971 ) ( 72,358 ) Proceeds from issuance of of term debt , net 5,465 20,393 16,091 Repayments of term term debt , net 5,465 20,393 16,091 Repayments of term debt debt , net 5,465 20,393 16,091 Repayments of term debt ( Repayments of term debt ( 9,543 ) ( 8,750 ) ( debt ( 9,543 ) ( 8,750 ) ( 12,629 ) Proceeds ) ( 8,750 ) ( 12,629 ) Proceeds from/ ( Repayments ) commercial paper , net 3,955 1 common stock for $ 90.2 billion under a share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . Shares share of common stock for 2022 , 2021 and 2020 ( common stock for 2022 , 2021 and 2020 ( in thousand for 2022 , 2021 and 2020 ( in thousand ) : ( in thousand ) : 2022 2021 2020 Common stock outstanding in thousand ) : 2022 2021 2020 Common stock outstanding , thousand ) : 2022 2021 2020 Common stock outstanding , beginning s Common stock repurchased outstanding , beginning balance 16,426,786 16,976,763 17,772,945 Common stock repurchased ( , beginning balance 16,426,786 16,976,763 17,772,945 Common stock repurchased ( 568,589 17,772,945 Common stock repurchased ( 568,589 ) ( 656,340 ) ( repurchased ( 568,589 ) ( 656,340 ) ( 917,270 ) Common ) ( 656,340 ) ( 917,270 ) Common stock issued , share withheld for employee tax 85,228 106,363 121,088 Common stock outstanding withheld for employee tax 85,228 106,363 121,088 Common stock Common stock outstanding , ending stock outstanding , ending balance 15,943,425 16,426,786 16,976,763 Note 9 \u2013 outstanding , ending balance 15,943,425 16,426,786 16,976,763 Note 9 \u2013 Benefit , ending balance 15,943,425 16,426,786 16,976,763 Note 9 \u2013 Benefit Plans balance 15,943,425 16,426,786 16,976,763 Note 9 \u2013 Benefit Plans 2022 Employee Note 9 \u2013 Benefit Plans 2022 Employee Stock Plan In the In the second quarter of 2022 , shareholder approved the Apple shareholder approved the Apple Inc. 2022 Employee Sto", + "corporate_debt": "Corporate debt paper 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 87,148 690 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 debt security 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 ( \u2014 9,023 70,427 Municipal security 921 \u2014 ( 35 ) 886 Munici Corporate debt paper 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 2,639 \u2014 \u2014 2,639 1,776 863 \u2014 Corporate debt security 83,883 863 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 Corporate debt security 83,883 1,242 ( 267 ) 84,858 \u2014 debt security 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 83,883 1,242 ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security ( 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 267 ) 84,858 \u2014 12,327 72,531 Municipal security 967 14 \u2014 \u2014 12,327 72,531 Municipal securit", + "derivative_instruments": "Derivative Instruments Cuts and Jobs Act of 2017 ( the \u201c Act \u201d determined . Apple Inc. | 2022 Form 10-K | 36 Segment Apple Inc. | 2022 Form 10-K | 36 Segment Reporting The | 2022 Form 10-K | 36 Segment Reporting The Company report described elsewhere in this Note 1 , \u201c Summary of Significant management reporting purpose . Note 2 \u2013 Revenue Net sale disaggregated significant product and service for 2022 , 2021 and 2020 were and service for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( in Derivative Instruments and Hedging The , typically for up to 12 month . To protect the hedge . As of September 24 , 2022 , the maximum As of September 24 , 2022 , the maximum length of debt\u2013related foreign currency transaction is 20 year . The Company may derivative instrument a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 were a follows 2022 and September 25 , 2021 were a follows ( in ( in million ) : 2022 2021 Derivative instrument design" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-23-000106/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-23-000106/full-submission_features.json new file mode 100644 index 0000000..6bc1d3f --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-23-000106/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue 8,061 7,912 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 Term revenue 8,061 7,912 Commercial paper 5,985 9,982 Term debt 9,822 11,128 8,061 7,912 Commercial paper 5,985 9,982 Term debt 9,822 11,128 Total paper 5,985 9,982 Term debt 9,822 11,128 Total current liability 145,308 5,985 9,982 Term debt 9,822 Revenue The Form 10-K | 33 Note 2 \u2013 Revenue The Company recognizes retains . Apple Inc. | 2023 Form 10-K | 34 Net Apple Inc. | 2023 Form 10-K | 34 Net sale disaggregated | 2023 Form 10-K | 34 Net sale disaggregated by significant significant product and service for 2023 , 2022 and 2021 were and service for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( in ( in million ) : 2023 2022 2021 iPhone ( 1 in million ) : 2023 2022 2021 iPhone ( 1 ) million ) : 2023 2022 2021 iPhon revenue recognized in billion of revenue recognized in 2023 that wa included in deferred deferred revenue a of September 24 , 2022 , $ 7.5 a of September 24 , 2022 , $ 7.5 billion of 24 , 2022 , $ 7.5 billion of revenue recognized in billion of revenue recognized in 2022 that wa included in deferred deferred revenue a of September 25 , 2021 , and $ a of September 25 , 2021 , and $ 6.7 billion , 2021 , and $ 6.7 billion of revenue recognized in billion of revenue recognized in 2021 that wa included in d revenue a of September 26 , 2020 . The Company a of September 26 , 2020 . The Company \u2019 s each reportable segment in Note 13 , \u201c Segment Information and and Geographic Data \u201d for 2023 , 2022 and 2021 , Data \u201d for 2023 , 2022 and 2021 , except in for 2023 , 2022 and 2021 , except in Greater China sale . As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the Company 2023 and September 24 , 2022 , the Company had total total def revenue of $ 12.1 billion and $ 12.4 billion $ 12.1 billion and $ 12.4 billion , respectively . As respectively . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company expects 67 2023 , the Company expects 67 % of total deferred revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 7 % within two-to-three year and % within two-to-three year and 1 % in greater than three than three year . Note 3 \u2013 Earnings Per Share The diluted earnings per share for revenue 4,571 5,742 Capitalized research and development 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized development 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized loss 2,447 2,913 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized loss 2,447 2,913 Lease revenue 4,571 5,742 Unrealized loss 2,447 2,913 Lease liability 2,421 2,400 4,571 5,742 Unrealized loss 2,447 2,913 Lease liability 2,421 2,400 Other loss 2,447 2,913 Lease liability 2,421 2,400 Other 2,343 3,407 Total 2,447 2,913 Lease liabi", + "expenses": "Expenses Operating expense for 2023 , 2022 and 2021 were Operating expense for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 Change 2022 Change 2021 Research million ) : 2023 Change 2022 Change 2021 Research and development : 2023 Change 2022 Change 2021 Research and development $ 29,915 2021 Research and development $ 29,915 14 % $ 26,251 20 Research and development $ 29,915 14 % $ 26,251 20 % $ 29,915 14 % $ 26,251 20 % $ 21,914 Percent", + "net_income": "net income wa and net income wa $ 97.0 billion during 2023 . The wa $ 97.0 billion during 2023 . The Company \u2019 s s total net sale decreased 3 % or $ 11.0 billion decreased 3 % or $ 11.0 billion during 2023 compared to or $ 11.0 billion during 2023 compared to 2022 . The billion during 2023 compared to 2022 . The weakness in foreign Significant announcement during fiscal year 2023 included the following : First the following : First Quarter 2023 : \u2022 iPad and iPad ; \u2022 Next-generation Apple TV 4K ; and \u2022 MLS Net income $ Provision for income tax 16,741 19,300 14,527 Net income $ 96,995 for income tax 16,741 19,300 14,527 Net income $ 96,995 $ 19,300 14,527 Net income $ 96,995 $ 99,803 $ 94,680 Earnings Net income $ 96,995 $ 99,803 $ 94,680 Earnings per share $ 96,995 $ 99,803 $ 94,680 Earnings per share : Basic per share : Basic $ 6.16 $ 6.15 $ 5.67 Diluted : Basic $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 $ 5.61 Shares 5.67 Diluted $ 6.13 Net income $ , 2022 September 25 , 2021 Net income $ 96,995 $ , 2021 Net income $ 96,995 $ 99,803 $ 94,680 Other Net income $ 96,995 $ 99,803 $ 94,680 Other comprehensive income/ $ 96,995 $ 99,803 $ 94,680 Other comprehensive income/ ( loss , net of tax ( 765 ) ( 1,511 ) 501 tax ( 765 ) ( 1,511 ) 501 Change in unrealized 765 ) ( 1,511 ) 501 Change in unrealized gains/losses on fair value of derivative instrument 323 3,212 32 Adjustment for net value of derivative instrument 323 3,212 32 Adjustment for net net income ( 1,717 ) ( 1,074 ) 1,003 income ( 1,717 ) ( 1,074 ) 1,003 Total change in 1,717 ) ( 1,074 ) 1,003 Total change in unrealized gains/losses gains/losses on derivative instrument ( 1,394 ) 2,138 1,035 Change in derivative instrument ( 1,394 ) 2,138 1,035 Change in unrealized gains/losses instrument ( 1,394 ) 2,138 1,035 Change in unrealized gains/losses on value of marketable debt security 1,563 ( 12,104 ) ( 694 marketable debt security 1,563 ( 12,104 ) ( 694 ) Adjustment 1,563 ( 12,104 ) ( 694 ) net income 253 205 ( 273 ) Total included in net income 253 205 ( 273 ) Total change net income 253 205 ( 273 ) Total change in unrealized gains/losses on marketable debt security 1,816 ( 11,899 ) ( 967 marketable debt security 1,816 ( 11,899 ) ( 967 ) Total 1,816 ( 11,899 ) ( 967 ) Total other comprehensive income/ income/ ( loss ) ( 343 ) ( 11,272 ) 569 ) ( 343 ) ( 11,272 ) 569 Total comprehensive income 343 ) ( 11,272 ) 569 Total comprehensive income $ 96,652 569 Total comprehensive income $ 96,652 $ 8 Net income Beginning balance ( 3,068 ) 5,562 14,966 Net income 96,995 99,803 balance ( 3,068 ) 5,562 14,966 Net income 96,995 99,803 94,680 ) 5,562 14,966 Net income 96,995 99,803 94,680 Dividends and dividend 5,562 14,966 Net income 96,995 99,803 94,680 Dividends and dividend equivalent 14,966 Net income 96,995 99,803 94,680 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,996 ) ( 14,793 ) ( declared ( 14,996 ) ( 14,793 ) ( 14,431 ) Common ) ( 14,793 ) ( 14,431 ) Common st Net income Operating activity : Net income 96,995 99,803 94,680 Adjustments to reconcile activity : Net income 96,995 99,803 94,680 Adjustments to reconcile net : Net income 96,995 99,803 94,680 Adjustments to reconcile net income activity : Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense : Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense 10,833 Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense 10,833 net income for 2023 , 2022 and 2021 ( net income in million share in thousand ) : 2023 2022 2021 Numerator : Net in thousand ) : 2023 2022 2021 Numerator : Net income thousand ) : 2023 2022 2021 Numerator : Net income $ Numerator : Net income $ 96,995 $ 99,803 $ 94,680 Denominator Net income $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-average $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 15,744,231 16,215,963 16,701,272 Effect of dil", + "assets": "ASSETS September 30 , 2023 September 24 , 2022 ASSETS : Current , 2023 September 24 , 2022 ASSETS : Current asset : Cash and cash equivalent $ 29,965 $ 23,646 Marketable security 31,590 cash equivalent $ 29,965 $ 23,646 Marketable security 31,590 24,658 Accounts 29,965 $ 23,646 Marketable security 31,590 24,658 Accounts receivable , net $ 23,646 Marketable security 31,590 24,658 Accounts receivable , net 29,508 24,658 Accounts receivable , net 29,508 28,184 Vendor non-trade receivables 31,477 Accounts assets/ ( liability in million ) : 2023 2022 Hedged assets/ ( liability ) and non-current marketable security $ 14,433 $ 13,378 Current and non-current marketable security $ 14,433 $ 13,378 Current and non-current term debt non-current term debt $ ( 18,247 ) $ ( 18,739 ) ( 18,247 ) $ ( 18,739 ) Accounts Receivable Trade Receivables Trade Receivables As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivable Assets 2023 2022 Deferred tax asset $ : Other Non-Current Assets 2023 2022 Deferred tax asset $ 17,852 2022 Deferred tax asset $ 17,852 $ 15,375 Other non-current asset tax asset $ 17,852 $ 15,375 Other non-current asset 46,906 39,053 $ 15,375 Other non-current asset 46,906 39,053 Total other non-current asset 15,375 Other non-current asset 46,906 39,053 Total other non-current asset $ Total other non-current asset $ 64,758 $ 54,428 Other Current Liabilities non-current asset $ 64,758 $ 54,428 Other C Assets | 2023 Form 10-K | 40 Deferred Tax Assets and Liabilities and Liabilities As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the significant 2023 and September 24 , 2022 , the significant component of ( in million ) : 2023 2022 Deferred tax asset : in million ) : 2023 2022 Deferred tax asset : Tax : Tax credit carryforwards $ 8,302 $ 6,962 Accrued liability and credit carryforwards $ 8,302 $ 6,962 Accrued liability an", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 352,583 $ 352,755 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 62,611 $ 64,115 Other current liability Accounts payable $ 62,611 $ 64,115 Other current liability 58,829 60,845 $ 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 58,829 60,845 Deferred re Liabilities non-current asset $ 64,758 $ 54,428 Other Current Liabilities 2023 2022 $ 54,428 Other Current Liabilities 2023 2022 Income tax payable $ 54,428 Other Current Liabilities 2023 2022 Income tax payable $ 8,819 2022 Income tax payable $ 8,819 $ 6,552 Other current liability tax payable $ 8,819 $ 6,552 Other current liability 50,010 54,293 $ 6,552 Other current liability 50,010 54,293 Total other current liability 6,552 Other current liability 50,010 54,293 Total other current liability $ Total oth Liabilities current liability $ 58,829 $ 60,845 Other Non-Current Liabilities 2023 2022 $ 60,845 Other Non-Current Liabilities 2023 2022 Long-term tax payable $ 60,845 Other Non-Current Liabilities 2023 2022 Long-term tax payable $ 15,457 2022 Long-term tax payable $ 15,457 $ 16,657 Other non-current liability tax payable $ 15,457 $ 16,657 Other non-current liability 34,391 32,485 $ 16,657 Other non-current liability 34,391 32,485 Total other non-current liability 16,657 Other non-current liability 34,391 Liabilities and Liabilities As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the significant 2023 and September 24 , 2022 , the significant component of ( in million ) : 2023 2022 Deferred tax asset : in million ) : 2023 2022 Deferred tax asset : Tax : Tax credit carryforwards $ 8,302 $ 6,962 Accrued liability and credit carryforwards $ 8,302 $ 6,962 Accrued liability and other reserve Accrued liability and other reserve 6,365 Liabilities Financial Statement Line Items 2023 2022 Right-of-use asset : Operating Financial Statement Line Items 2023 2022 Right-of-use asset : Operating lease lease Other non-current asset $ 10,661 $ 10,417 Finance lease Property non-current asset $ 10,661 $ 10,417 Finance lease Property , plant plant and equipment , net 1,015 952 Total right-of-use asset $ and equipment , net 1,015 952 Total right-of-use asset $ 11,676 952 Total right-of-use asset $ 11,676 $ 11,369 Lease liability : right-of-use asset ", + "equity": "Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management \u2019 [ Reserved ] 19 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar EQUITY liability : Accounts payable $ 62,611 $ 64,115 Other current liability Accounts payable $ 62,611 $ 64,115 Other current liability 58,829 60,845 $ 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 Term revenue 8,061 7,912 Commercial pape equity ) Total shareholder \u2019 equity 62,146 50,672 Total liability and shareholder Total shareholder \u2019 equity 62,146 50,672 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 352,583 $ 352,755 See accompanying Notes \u2019 equity $ 352,583 $ 352,755 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 30 Apple Apple Inc. | 2023 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 30 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 30 , 2023 Sep equity , equity , beginning balance $ 50,672 $ 63,090 $ 65,339 Common beginning balance $ 50,672 $ 63,090 $ 65,339 Common stock and $ 50,672 $ 63,090 $ 65,339 Common stock and additional paid-in paid-in capital : Beginning balance 64,849 57,365 50,779 Common stock issued capital : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 1,175 57,365 50,779 Common stock issued 1,346 1,175 1,105 Common stock withheld 50,779 Commo equity award ( 3,521 ) ( 2,971 ) ( award ( 3,521 ) ( 2,971 ) ( 2,627 ) Share-based ) ( 2,971 ) ( 2,627 ) Share-based compensation 11,138 9,280 ( 2,627 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 2,627 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 64,849 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 64,849 57,365 11,138 9,280 8,108 Ending balance 73,812 64,849 57,365 Retained earnings/ ( 9,280 8,108 Ending balance 73,812 64,849 57,365 equity award ( 2,099 ) ( 3,454 ) ( award ( 2,099 ) ( 3,454 ) ( 4,151 ) Common ) ( 3,454 ) ( 4,151 ) Common stock repurchased ( ) Common stock repurchased ( 77,046 ) ( 90,186 ) ( repurchased ( 77,046 ) ( 90,186 ) ( 85,502 ) Ending ) ( 90,186 ) ( 85,502 ) Ending balance ( 214 85,502 ) Ending balance ( 214 ) ( 3,068 ) 5,562 balance ( 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive income/ ( ) : Beginning balance ( 11,109 ) 163 ( 406 ) Beginning equity , equity , ending balance $ 62,146 $ 50,672 $ 63,090 Dividends ending balance $ 62,146 $ 50,672 $ 63,090 Dividends and dividend $ 62,146 $ 50,672 $ 63,090 Dividends and dividend equivalent declared per share or RSU $ 0.94 $ 0.90 $ 0.85 See or RSU $ 0.94 $ 0.90 $ 0.85 See accompanying Notes $ 0.94 $ 0.90 $ 0.85 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 31 Apple Apple Inc. | 2023 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 31 Apple Inc. CONSOL equity award ( 5,431 ) ( 6,223 ) ( award ( 5,431 ) ( 6,223 ) ( 6,556 ) Payments ) ( 6,223 ) ( 6,556 ) Payments for dividend and dividend and dividend equivalent ( 15,025 ) ( 14,841 ) ( equivalent ( 15,025 ) ( 14,841 ) ( 14,467 ) Repurchases ) ( 14,841 ) ( 14,467 ) Repurchases of common stock Repurchases of common stock ( 77,550 ) ( 89,402 ) ( stock ( 77,550 ) ( 89,402 ) ( 85,971 ) Proceeds ) ( 89,402 ) ( 85,971 ) Proceeds from issuance of of term debt , net 5,228 5,465 20,393 Repayments of term term d equity security 442 12 ( 26 ) 428 fund and equity security 442 12 ( 26 ) 428 \u2014 equity security 442 12 ( 26 ) 428 \u2014 428 \u2014 442 12 ( 26 ) 428 \u2014 428 \u2014 Subtotal 923 ( 26 ) 428 \u2014 428 \u2014 Subtotal 923 12 ( 428 \u2014 428 \u2014 Subtotal 923 12 ( 26 ) 909 \u2014 428 \u2014 Subtotal 923 12 ( 26 ) 909 481 \u2014 Subtotal 923 12 ( 26 ) 909 481 428 \u2014 923 12 ( 26 ) 909 481 428 \u2014 Level 2 12 ( 26 ) 909 481 428 \u2014 Level 2 ( ( 26 ) 909 481 428 \u2014 Level 2 ( 1 909 481 428 \u2014 Level 2 ( 1 ) : U.S. 428 \u2014 Level 2 ( 1 ) : U.S. Treasury security ) : U.S. equity award ( 1,120 ) ( 1,871 ) ( award ( 1,120 ) ( 1,871 ) ( 2,137 ) Foreign-derived ) ( 1,871 ) ( 2,137 ) Foreign-derived intangible income deduction intangible income deduction \u2014 ( 296 ) ( 1,372 ) Other \u2014 ( 296 ) ( 1,372 ) Other ( 192 ) ( 1,372 ) Other ( 192 ) 456 ( 300 ) ) Other ( 192 ) 456 ( 300 ) Provision for ( 192 ) 456 ( 300 ) Provision for income tax Provision for income tax $ 16,741 $ 19,300 $ 14,527 Effective income tax $ 16,741 $ 19,300 $ 14,527 Effective tax rate $ 16,741 $ 19,300 $ 14, Equity Share Equity Share Repurchase Program During 2023 , the Company repurchased 471 2023 , the Company repurchased 471 million share of it common it common stock for $ 76.6 billion , excluding excise tax the Inflation Reduction Act of 2022 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2023 Form 10-K | 44 Shares Apple Inc. | 2023 Form 10-K | 44 Shares of Common | 2023 Form 10-K | 44 Shares of Common Stock The share of common stock for 2023 , 2022", + "cash_flow": "cash flow $ 30,737 $ 24,977 $ 35,929 Supplemental cash flow disclosure : income tax , net $ 18,679 $ 19,573 $ 25,385 Cash , net $ 18,679 $ 19,573 $ 25,385 Cash paid for $ 18,679 $ 19,573 $ 25,385 Cash paid for interest $ Cash paid for interest $ 3,803 $ 2,865 $ 2,687 See for interest $ 3,803 $ 2,865 $ 2,687 See accompanying Notes $ 3,803 $ 2,865 $ 2,687 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 32 Apple Apple Inc. | 2023 Form 10-K | 32 Apple Inc. Notes | 2023 Form ", + "gross_margin": "Gross Margin Products | 2023 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2023 , 2022 and 2021 were margin percentage for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 2022 2021 Gross margin : in million ) : 2023 2022 2021 Gross margin : Products million ) : 2023 2022 2021 Gross margin : Products $ Gross margin : Products $ 108,803 $ 114,728 $ 105,126 Services : Products $ 108,803 $ 114,728 $ 105,126 Servi gross margin 114,728 $ 105,126 Services 60,345 56,054 47,710 Total gross margin $ $ 105,126 Services 60,345 56,054 47,710 Total gross margin $ 169,148 47,710 Total gross margin $ 169,148 $ 170,782 $ 152,836 Gross gross margin $ 169,148 $ 170,782 $ 152,836 Gross margin percentage $ 169,148 $ 170,782 $ 152,836 Gross margin percentage : Products Gross margin percentage : Products 36.5 % 36.3 % 35.3 % percentage : Products 36.5 % 36.3 % 35.3 % Services 70.8 Products 36.5 % 36.3 % 35.3 % Services 70.8 % 71.7 36. gross margin percentage % Total gross margin percentage 44.1 % 43.3 % 41.8 % gross margin percentage 44.1 % 43.3 % 41.8 % Products Gross percentage 44.1 % 43.3 % 41.8 % Products Gross Margin Products Products gross margin decreased during 2023 compared to 2022 due to decreased during 2023 compared to 2022 due to the weakness in gross margin percentage increased during 2023 compared to 2022 due to increased during 2023 compared to 2022 due to cost saving and Services gross margin increased during 2023 compar gross margin percentage decreased during 2023 compared to 2022 due to decreased during 2023 compared to 2022 due to higher Services cost in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2023 , 2022 and 2021 were Operating expense for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 Change 2022 Change 2021 Research million ) : 2023 Change 2022 Change 2021 Resea Gross margin 169,148 Total cost of sale 214,137 223,546 212,981 Gross margin 169,148 170,782 cost of sale 214,137 223,546 212,981 Gross margin 169,148 170,782 152,836 214,137 223,546 212,981 Gross margin 169,148 170,782 152,836 Operating expense : 223,546 212,981 Gross margin 169,148 170,782 152,836 Operating expense : Research 212,981 Gross margin 169,148 170,782 152,836 Operating expense : Research and expense : Research and development 29,915 26,251 21,914 Selling , general : Research and development 29,", + "accumulated_depreciation": "accumulated depreciation a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : ( in million ) : 2023 2022 Land and building $ in million ) : 2023 2022 Land and building $ 23,446 2022 Land and building $ 23,446 $ 22,126 Machinery , equipment and building $ 23,446 $ 22,126 Machinery , equipment and internal-use , equipment and internal-use software 78,314 81,060 Leasehold improvement 12,839 11 Accumulated depreciation ( 70,884 , plant and equipment 114,599 114,457 Accumulated depreciation ( 70,884 ) 114,599 114,457 Accumulated depreciation ( 70,884 ) ( 72,340 ) Total depreciation ( 70,884 ) ( 72,340 ) Total property , plant and equipment , net $ 43,715 $ 42,117 Depreciation expense on , net $ 43,715 $ 42,117 Depreciation expense on property , plant and equipment wa $ 8.5 billion , $ 8.7 billion $ 8.5 billion , $ 8.7 billion and $ 9.5 billion $ 8.7 billion and $ 9.5 billion during 2023 , 2022 and $ 9.5 billio", + "debt": "Debt As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had outstanding aggregate principal amount of $ 106.6 billion ( collectively the \u201c \u201d ) , with $ 9.9 billion payable within 12 month $ 9.9 billion payable within 12 month . Future interest payment with the Notes total $ 41.1 billion , with $ 2.9 41.1 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 30 , 2023 , the Company As of Sep debt 100 fair value $ 3,089 $ 4,022 Term debt 100 basis point 3,089 $ 4,022 Term debt 100 basis point , all tenor in annual interest expense $ 194 $ 201 Foreign Exchange Rate interest expense $ 194 $ 201 Foreign Exchange Rate Risk The the Company estimate , with 95 % confidence , a maximum in fair value of $ 669 million and $ 1.0 billion $ 669 million and $ 1.0 billion a of September 30 1.0 billion a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 a debt security 1,563 ( 12,104 ) ( 694 marketable debt security 1,563 ( 12,104 ) ( 694 ) Adjustment 1,563 ( 12,104 ) ( 694 ) Adjustment for net ( and included in net income 253 205 ( 273 ) Total included in net income 253 205 ( 273 ) Total change net income 253 205 ( 273 ) Total change in unrealized gains/losses on marketable debt security 1,816 ( 11,899 ) ( 967 marketable debt security 1,816 ( 11,899 ) ( 967 ) Total 1,816 ( 11,899 ) ( 967 ) Total other comprehensive income/ income/ ( loss ) ( 343 ) ( debt 9,822 11,128 8,061 7,912 Commercial paper 5,985 9,982 Term debt 9,822 11,128 Total paper 5,985 9,982 Term debt 9,822 11,128 Total current liability 145,308 5,985 9,982 Term debt 9,822 11,128 Total current liability 145,308 153,982 9,822 11,128 Total current liability 145,308 153,982 Non-current liability : Term 11,128 Total current liability 145,308 153,982 Non-current liability : Term debt Non-current liability : Term debt 95,281 98,959 Other non-current liability 49,848 liability : Term debt debt , net 5,228 5,465 20,393 Repayments of term term debt , net 5,228 5,465 20,393 Repayments of term debt debt , net 5,228 5,465 20,393 Repayments of term debt ( Repayments of term debt ( 11,151 ) ( 9,543 ) ( debt ( 11,151 ) ( 9,543 ) ( 8,750 ) Proceeds ) ( 9,543 ) ( 8,750 ) Proceeds from/ ( Repayments commercial paper , net ( 3,978 ) 3,955 1,022 Other ( , net ( 3,978 ) 3,955 1,022 Other ( 581 ) net ( 3,978 ) 3,955 1,022 Other ( 581 ) ( ) 3,955 1,022 Other ( 581 ) ( 160 ) 976 Other ( 581 ) ( 160 ) debt 608 \u2014 \u2014 608 \u2014 608 \u2014 Corporate debt security 76,840 608 \u2014 Corporate debt security 76,840 6 ( 5,956 ) 70,890 \u2014 Corporate debt security 76,840 6 ( 5,956 ) 70,890 20 debt security 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 \u2014 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 \u2014 ( 20 12,627 58,243 Municipal security 628 \u2014 debt paper 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 87,148 690 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 debt security 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 ( \u2014 9,023 70,427 Municipal security 921 \u2014 ( 35 ) 886 Munici debt\u2013related foreign currency transaction is 19 year . The Company may derivative instrument a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 were a follows 2023 and September 24 , 2022 were a follows ( in ( in million ) : 2023 2022 Derivative instrument designated a in million ) : 2023 2022 Derivative instrument designated a accounting : Foreign exchange contract $ 74,730 $ 102,670 Interest rate contract exchange contract $ debt non-current term debt $ ( 18,247 ) $ ( 18,739 ) ( 18,247 ) $ ( 18,739 ) Accounts Receivable Trade Receivables Trade Receivables As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company \u2019 cellular network carrier accounted for 41 % and 44 % of accounted for 41 % and 44 % of total trade receivables trade receivables a of September 30 , 2023 and September 24 a Debt Commercial Paper The repurchase . As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the Company 2023 and September 24 , 2022 , the Company had $ , the Company had $ 6.0 billion and $ 10.0 billion $ 6.0 billion and $ 10.0 billion of commercial paper outstanding \u2019 s commercial paper wa 5.28 % and 2.31 % a paper wa 5.28 % and 2.31 % a of September 30 2.31 % a of September 30 , 2023 and September 24 a of September 30 , 2 Debt The | 2023 Form 10-K | 43 Term Debt The Company ha term debt a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 : Maturities ( 2023 and September 24 , 2022 : Maturities ( calendar year Maturities ( calendar year ) 2023 2022 Amount ( in million ( calendar year ) 2023 2022 Amount ( in million ) million ) Effective Interest Rate 2013 \u2013 2022 debt issuance : Effective Interest Rate 2013 \u2013 2022 debt issuance : Fixed-rate 0.000 debt issuance : Fixed-rate 0.000 % \u2013 4.650 % note : Fixed-rate 0.000 % \u2013 4.650 % note 2024 \u2013 2062 % \u2013 4.650 % note 2024 \u2013 2062 $ 101,322 0.03 4.650 % note 2024 \u2013 2062 $ 101,322 0.03 % \u2013 note 2024 \u2013 2062 $ 101,322 0.03 % \u2013 6.72 % 2024 \u2013 2062 $ 101,322 0.03 % \u2013 6.72 % $ $ 101,322 0.03 % \u2013 6.72 % $ 111,824 0.03 % % \u2013 6.72 % $ 111,824 0.03 % \u2013 4.78 % \u2013 6.72 % $ 111,824 0.03 % \u2013 4.78 % Third $ 111,824 0.03 % \u2013 4.78 % Third quarter 2023 debt \u2013 4.78 % Third quarter 2023 debt issuance : Fixed-rate 4.000 202 debt issuance : Fixed-rate 4.000 % \u2013 4.850 % note : Fixed-rate 4.000 % \u2013 4.850 % note 2026 \u2013 2053 % \u2013 4.850 % note 2026 \u2013 2053 5,250 4.04 % 4.850 % note 2026 \u2013 2053 5,250 4.04 % \u2013 4.88 % note 2026 \u2013 2053 5,250 4.04 % \u2013 4.88 % note 2026 \u2013 2053 5,250 4.04 % \u2013 4.88 % \u2014 2053 5,250 4.04 % \u2013 4.88 % \u2014 Total term debt \u2014 Total term debt principal 106,572 111,824 Unamortized premium/ ( discount Total term debt principal 106,572 111,824 Unamortized premium/ ( discount ) issuance cost , net ( 356 ) ( 374 ) Hedg debt 105,103 1,363 ) Total term debt 105,103 110,087 Less : Current portion ) Total term debt 105,103 110,087 Less : Current portion of portion of term debt ( 9,822 ) ( 11,128 ) Total debt ( 9,822 ) ( 11,128 ) Total non-current portion of portion of term debt $ 95,281 $ 98,959 To manage interest term debt $ 95,281 $ 98,959 To manage interest rate risk . The Company recognized $ 3.7 billion , $ 2.8 billion $ 3.7 billion , $ 2.8 billion and $ 2.6 billion $ 2.8 billion and $ 2.6 billion of interest exp debt for 2023 , 2022 and 2021 , term debt for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . The future s Notes a of September 30 , 2023 , are a a of September 30 , 2023 , are a follows ( ( in million ) : 2024 $ 9,943 2025 10,775 2026 million ) : 2024 $ 9,943 2025 10,775 2026 12,265 2027 ) : 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 : 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 2028 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 2028 7,800 $ 9,943 2025 10, debt 2027 9,786 2028 7,800 Thereafter 56,003 Total term debt principal $ Total term debt principal $ 106,572 As of September 30 , $ 106,572 As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the fair 2023 and September 24 , 2022 , the fair value of Notes , based on Level 2 input , wa $ 90.8 2 input , wa $ 90.8 billion and $ 98.8 billion $ 90.8 billion and $ 98.8 billion , respectively . Note billion , respectively . Note 1", + "share_repurchase": "Share Repurchase Program During 2023 , the Company repurchased 471 2023 , the Company repurchased 471 million share of it common it common stock for $ 76.6 billion , excluding excise tax the Inflation Reduction Act of 2022 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2023 Form 10-K | 44 Shares Apple Inc. | 2023 Form 10-K | 44 Shares of Common | 2023 Form 10-K | 44 Shares of Common Stock The share of common stock for 2023 , 2022 and 2021 ( common stock for 2", + "earnings_per_share": "Earnings per share $ 96,995 $ 99,803 $ 94,680 Earnings per share : Basic per share : Basic $ 6.16 $ 6.15 $ 5.67 Diluted : Basic $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 $ 5.61 Shares 5.67 Diluted $ 6.13 $ 6.11 $ 5.61 Shares used in $ 6.13 $ 6.11 $ 5.61 Shares used in computing earnings earnings per share : Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 per share : Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 Earnings Per Share The diluted earnings per share for 2023 , 2022 and 2021 ( per share for 2023 , 2022 and 2021 ( net income for 2023 , 2022 and 2021 ( net income in million share in thousand ) : 2023 2022 2021 Numerator : Net in thousand ) : 2023 2022 2021 Numerator : Net income thousand ) : 2023 2022 2021 Numerator : Net income $ Numerator : Net income $ 96,995 $ 99,803 $ 94,680 Denominator Net income $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-average $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-ave earnings per share Weighted-average diluted share 15,812,547 16,325,819 16,864,919 Basic earnings per share $ Basic earnings per share $ 6.16 $ 6.15 $ 5.67 Diluted per share $ 6.16 $ 6.15 $ 5.67 Diluted earnings per $ 6.16 $ 6.15 $ 5.67 Diluted earnings per share $ Diluted earnings per share $ 6.13 $ 6.11 $ 5.61 Approximately per share $ 6.13 $ 6.11 $ 5.61 Approximately 24 million $ 6.13 $ 6.11 $ 5.61 Approximately 24 million restricted stock $ 6.11 $ 5.61 Approximately 24 million restricted stock unit ( diluted earnings per share for 2023 because their effect would have antidilutive . Apple Inc. | 2023 Form 10-K | 35 Note Apple Inc. | 2023 Form 10-K | 35 Note 4 \u2013 | 2023 Form 10-K | 35 Note 4 \u2013 Financial Instruments Form 10-K | 35 Note 4 \u2013 Financial Instruments Cash , investment category a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : ( in million ) : 2023 Adjusted Cost Unrealized Gains ", + "tax_rate": "tax rate for 2023 , 2022 and 2021 were tax rate for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 2022 2021 Provision for income in million ) : 2023 2022 2021 Provision for income tax million ) : 2023 2022 2021 Provision for income tax $ Provision for income tax $ 16,741 $ 19,300 $ 14,527 Effective income tax $ 16,741 $ 19,300 $ 14,527 Effective tax rate $ 16,741 $ 19,300 $ 14,527 Effective tax rate 14.7 % $ 14,527 Effective tax rate 14.7 tax rate 14.7 % 16.2 % 13.3 % Statutory federal rate 14.7 % 16.2 % 13.3 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company \u2019 s s effective tax rate for 2023 and 2022 wa lower than tax rate for 2023 and 2022 wa lower than the statutory s effective tax rate for 2023 wa lower compared to 2022 2023 wa lower compared to 2022 due primarily to a lower Department of the Treasury in 2022 , partially offset by tax rate ( 21 % in 2023 , 2022 rate ( 21 % in 2023 , 2022 and 2021 ) 21 % in 2023 , 2022 and 2021 ) to income in 2023 , 2022 and 2021 ) to income before provision provision for income tax for 2023 , 2022 and 2021 , income tax for 2023 , 2022 and 2021 , is a for 2023 , 2022 and 2021 , is a follows ( dollar in million ) : 2023 2022 2021 Computed expected tax in million ) : 2023 2022 2021 Computed expected tax $ million ) : 2023 2022 2021 Computed expected tax $ 23,885 2021 Computed expected tax $ 23,885 $ tax rate $ 16,741 $ 19,300 $ 14,527 Effective tax rate 14.7 % $ 14,527 Effective tax rate 14.7 % 16.2 % 13.3 % Effective tax rate 14.7 % 16.2 % 13.3 % Apple Inc. rate 14.7 % 16.2 % 13.3 % Apple Inc. | 2023 13.3 % Apple Inc. | 2023 Form 10-K | 40 Deferred Apple Inc. | 2023 Form 10-K | 40 Deferred Tax Assets | 2023 Form 10-K | 40 Deferred Tax Assets and Liabilities and Liabilities As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022", + "geographic_information": "Geographic Data \u201d for 2023 , 2022 and 2021 , Data \u201d for 2023 , 2022 and 2021 , except in for 2023 , 2022 and 2021 , except in Greater China sale . As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the Company 2023 and September 24 , 2022 , the Company had total total deferred revenue of $ 12.1 billion and $ 12.4 billion $ 12.1 billion and $ 12.4 billion , respectively . As respectively . As of September 30 , 2023 , the Company Geographic information by reportable segment for 2023 , 2022 and 2021 ( reportable segment for 2023 , 2022 and 2021 ( in million for 2023 , 2022 and 2021 ( in million ) : ( in million ) : 2023 2022 2021 Americas : Net in million ) : 2023 2022 2021 Americas : Net sale million ) : 2023 2022 2021 Americas : Net sale $ Americas : Net sale $ 162,560 $ 169,658 $ 153,306 Operating Net sale $ 162,560 $ 169,658 $ 153,306 Operating income $ $ 162,560 $ 169,658 $ 153,306 Operating income $ 60,508 $ $ 153,306 Operati", + "common_stock": "Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.375 % Notes due 2024 \u2014 LLC 1.375 % Notes due 2024 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 \u2014 LLC 0.000 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 \u2014 LLC 0.875 % Notes due 2025 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 \u2014 LLC 1.625 % Notes due 2026 \u2014 The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % No common stock were and outstanding a of October 20 , 2023 . DOCUMENTS INCORPORATED a of October 20 , 2023 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2024 annual meeting of shareholder are this Annual Report on Form 10-K where indicated . The Registrant Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 30 , 2023 TABLE OF CONTENTS Year Ended September 30 , 2023 TABLE OF CONTENTS P common stock and dividend equivalent of $ 15.0 billion . Macroeconomic Conditions Macroeconomic condition . Apple Inc. | 2023 Form 10-K | 20 Segment Apple Inc. | 2023 Form 10-K | 20 Segment Operating Performance | 2023 Form 10-K | 20 Segment Operating Performance The following sale by reportable segment for 2023 , 2022 and 2021 ( reportable segment for 2023 , 2022 and 2021 ( dollar in for 2023 , 2022 and 2021 ( dollar in million ) dollar in million ) : 2023 Change 2022 Change 2021 Net million ) : 2023 Chang Common stock and $ 50,672 $ 63,090 $ 65,339 Common stock and additional paid-in paid-in capital : Beginning balance 64,849 57,365 50,779 Common stock issued capital : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 1,175 57,365 50,779 Common stock issued 1,346 1,175 1,105 Common stock withheld 50,779 Common stock issued 1,346 1,175 1,105 Common stock withheld related Common stock issued 1,346 1,175 1,105 Common stock withhel Common stock withheld related settlement of equity award ( 2,099 ) ( 3,454 ) ( award ( 2,099 ) ( 3,454 ) ( 4,151 ) Common ) ( 3,454 ) ( 4,151 ) Common stock repurchased ( ) Common stock repurchased ( 77,046 ) ( 90,186 ) ( repurchased ( 77,046 ) ( 90,186 ) ( 85,502 ) Ending ) ( 90,186 ) ( 85,502 ) Ending balance ( 214 85,502 ) Ending balance ( 214 ) ( 3,068 ) 5,562 balance ( 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive income/ ( ) : Beginning bal common stock Repurchases of common stock ( 77,550 ) ( 89,402 ) ( stock ( 77,550 ) ( 89,402 ) ( 85,971 ) Proceeds ) ( 89,402 ) ( 85,971 ) Proceeds from issuance of of term debt , net 5,228 5,465 20,393 Repayments of term term debt , net 5,228 5,465 20,393 Repayments of term debt debt , net 5,228 5,465 20,393 Repayments of term debt ( Repayments of term debt ( 11,151 ) ( 9,543 ) ( debt ( 11,151 ) ( 9,543 ) ( 8,750 ) Proceeds ) ( 9,543 ) ( 8,750 ) Proceeds from/ ( Repayments commercial paper , net ( 3,978 ) 3, common stock for $ 76.6 billion , excluding excise tax the Inflation Reduction Act of 2022 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2023 Form 10-K | 44 Shares Apple Inc. | 2023 Form 10-K | 44 Shares of Common | 2023 Form 10-K | 44 Shares of Common Stock The share of common stock for 2023 , 2022 and 2021 ( common stock for 2023 , 2022 and 2021 ( in thousand for 2023 , 2022 and 2021 ( in thousand ) : ( in thousand ) : 2023 2022 2021 Common stock outst Common stock outstanding , thousand ) : 2023 2022 2021 Common stock outstanding , beginning stock outstanding , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased outstanding , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased ( , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased ( 471,419 16,976,763 Common stock repurchased ( 471,419 ) ( 568,589 ) ( repurchased ( 471,419 ) ( 568,589 ) ( 656,340 ) Common ) ( 568,589 ) ( 656,340 ) C Common stock outstanding withheld for employee tax 78,055 85,228 106,363 Common stock outstanding , for employee tax 78,055 85,228 106,363 Common stock outstanding , ending stock outstanding , ending balance 15,550,061 15,943,425 16,426,786 Note 11 \u2013 outstanding , ending balance 15,550,061 15,943,425 16,426,786 Note 11 \u2013 Share-Based , ending balance 15,550,061 15,943,425 16,426,786 Note 11 \u2013 Share-Based Compensation balance 15,550,061 15,943,425 16,426,786 Note 11 \u2013 Share-Based Compensation 2022 Employee No", + "corporate_debt": "Corporate debt 608 \u2014 \u2014 608 \u2014 608 \u2014 Corporate debt security 76,840 608 \u2014 Corporate debt security 76,840 6 ( 5,956 ) 70,890 \u2014 Corporate debt security 76,840 6 ( 5,956 ) 70,890 20 debt security 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 \u2014 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 \u2014 ( 20 12,627 58,243 Municipal security 628 \u2014 Corporate debt paper 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 718 \u2014 \u2014 718 28 690 \u2014 Corporate debt security 87,148 690 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 Corporate debt security 87,148 9 ( 7,707 ) 79,450 \u2014 debt security 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 87,148 9 ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security ( 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 7,707 ) 79,450 \u2014 9,023 70,427 Municipal security 921 \u2014 ( \u2014 9,023 70,427 Municipal security 921 \u2014 ( 35 ) 886 Munici" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-95-000016/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-95-000016/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-95-000016/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000320193-96-000023/full-submission_features.json b/src/data/feature/AAPL/10-K/0000320193-96-000023/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000320193-96-000023/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000912057-00-053623/full-submission_features.json b/src/data/feature/AAPL/10-K/0000912057-00-053623/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000912057-00-053623/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0000912057-99-010244/full-submission_features.json b/src/data/feature/AAPL/10-K/0000912057-99-010244/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/AAPL/10-K/0000912057-99-010244/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001047469-02-007674/full-submission_features.json b/src/data/feature/AAPL/10-K/0001047469-02-007674/full-submission_features.json new file mode 100644 index 0000000..8326a42 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001047469-02-007674/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue it first fiscal quarter of 2003 . Consumer , Education and Business Oriented Application Software iMovie\u2122 2 , the Company 's easy-to-use added special effect . iMovie 2 is currently preinstalled on all 's Macintosh system . iDVD\u2122 2 is consumer oriented software that consumer DVD player . iDVD 2 simplifies DVD authoring by including and drag-and-drop simplicity . iDVD 2 is currently preinstalled on all Company introduced iPhoto\u2122 in January 2002 . Designed exclusively for Mac Macintosh system . I Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial in Financial Statements . SAB 101 , a amended , summarizes . Additionally , certain customer 19 incentive program require management to requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is asset are considered to be 20 impaired , the impairment to identified . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had $ , the Company had $ 85 million in go revenue Macintosh portable system grew by 92,000 unit or 10 % in grew by 92,000 unit or 10 % in 2002 reflecting a unit or 10 % in 2002 reflecting a general trend in towards portable system . During 2002 , portable Macintosh system represented , portable Macintosh system represented 33 % of total system sale of total system sale versus 31 % in 2001 and 20 sale versus 31 % in 2001 and 20 % in 2000 31 % in 2001 and 20 % in 2000 . Growth 2001 and 20 % in 2000 . Growth in this area . iBook unit sale increas revenue by approximately $ 138 million . Additionally , actual during the first quarter of 2001 approximately $ 122 million of quarter of 2001 approximately $ 122 million of charge associated with for the first quarter of 2001 would have been approximately 21 2001 would have been approximately 21 % , and gross margin gross margin for all of 2001 would have been approximately 27 2001 would have been approximately 27 % . As a percentage margin increased each quarter a 2001 progressed reaching 30 % during Revenue Service ( federal income tax return through 1997 . Substantially all IRS audit audit issue for year through 1997 have been resolved . Management Recent Accounting Pronouncements In June 2001 , the Financial Accounting Standards Board issued SFAS No . 143 , Accounting for Asset Retirement asset . SFAS No . 143 requires that the fair value provision of SFAS No . 143 for the first quarter of first quarter of it fiscal 2003 . Management doe not expect adoption of SFAS No . 143 to have a material im Revenue Recognition , third and fourth quarter of 2002 , the Company incurred substantial of Mac OS X version 10.2 ( code-named `` Jaguar `` a developer beta in May 2002 and prior to release of the Company capitalized approximately $ 13.3 million of development cost associated cost associated with development of 56 Jaguar . Amortization of this on a straight-line basis over 3 year . In addition , . In addition , during 2002 , the Company also began , amounted to approximately $ 6 million during the fir revenue 253 184 marketing and sale program 136 131 Deferred revenue 253 184 Accrued program 136 131 Deferred revenue 253 184 Accrued warranty and related 136 131 Deferred revenue 253 184 Accrued warranty and related cost Accrued warranty and related cost 69 87 Other current liability 196 warranty and related cost 69 87 Other current liability 196 227 69 87 Other current liability 196 227 Total accrued expense $ 87 Other current liability 196 227 Total accrued expense $ 747 227 Total accrued expense $ 7 Revenue Service federal income tax return through 1997 . Substantially all IRS audit audit issue for year through 1997 have been resolved . The tax return for fiscal year 1998 through 2000 . Management belief for fiscal year 1998 through 2000 . Management belief that adequate from tax examination . Note 7\u2014Shareholders ' Equity Stock Repurchase Plan Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock period of time . During 2000 , the Company re", + "expenses": "Expenses and equipment $ 621 $ 564 66 Accrued Expenses ( in equipment $ 621 $ 564 66 Accrued Expenses ( in million Expenses ( in million ) 2002 2001 Accrued compensation and employee ( in million ) 2002 2001 Accrued compensation and employee benefit compensation and employee benefit $ 93 $ 88 Accrued marketing and employee benefit $ 93 $ 88 Accrued marketing and sale program Accrued marketing and sale program 136 131 Deferred revenue 253 184 marketing and sale program 136 131 Deferred revenue 253 184 Ac Expenses allocated to corporate these two store wa $ 1 million in 2002 . Summary wa $ 1 million in 2002 . Summary information by operating ( in million ) : 2002 2001 2000 Americas : Net in million ) : 2002 2001 2000 Americas : Net sale million ) : 2002 2001 2000 Americas : Net sale $ Americas : Net sale $ 3,088 $ 2,996 $ 4,298 Operating Net sale $ 3,088 $ 2,996 $ 4,298 Operating income $ $ 3,088 $ 2,996 $ 4,298 Operating income $ 280 $ $ 4,298 Operating income $ 280 $ 133 $ 614 Depreciation Operating in", + "net_income": "Net income ( $ 7,983 $ 6,134 $ 5,941 Net income ( loss ) income ( loss ) $ 65 $ ( 25 ) $ ) $ 65 $ ( 25 ) $ 786 $ 601 $ ( 25 ) $ 786 $ 601 $ 309 Earnings 25 ) $ 786 $ 601 $ 309 Earnings ( loss $ 786 $ 601 $ 309 Earnings ( loss ) per common share : Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 $ 2.10 $ ( 0.07 ) $ 2.42 $ 2.10 $ 1.17 Diluted 0.07 ) $ 2.42 $ 2.10 $ 1.17 Diluted $ 0.18 $ 2.42 $ 2.10 $ 1.17 Diluted $ 0.18 $ ( 2.10 $ 1.17 Diluted $ 0.18 $ ( 0.07 ) $ Diluted $ 0.18 $ ( 0.07 ) $ 2.18 $ 1 net income of approximately $ 12 million for the first quarter for the first quarter of 2001 . The $ 17 million of 2001 . The $ 17 million gross transition adjustment wa wa comprised of a $ 23 million favorable adjustment for the derivative . SFAS No . 133 also required the Company to during the first quarter of 2001 , the before tax effect unrealized loss of approximately $ 13 million . Interest and Other and other income wa $ 112 million in fiscal 2002 , $ 112 million in fiscal 2002 , compared to $ 217 Net income tax of $ 5 \u2014 12 \u2014 Net income ( loss income ( loss ) $ 65 $ ( 25 ) $ ) $ 65 $ ( 25 ) $ 786 Earnings ( $ ( 25 ) $ 786 Earnings ( loss ) per accounting change : Basic $ 0.18 $ ( 0.11 ) $ Basic $ 0.18 $ ( 0.11 ) $ 2.42 Diluted $ $ ( 0.11 ) $ 2.42 Diluted $ 0.18 $ ( ) $ 2.42 Diluted $ 0.18 $ ( 0.11 ) $ Diluted $ 0.18 $ ( 0.11 ) $ 2.18 Earnings ( $ ( 0.11 ) $ 2.18 Earnings ( loss ) per common share : Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.18 $ Net income 786 786 Foreign currency translation \u2014 income : Net income 786 786 Foreign currency translation \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 ( 17 ) ( 17 ) Change \u2014 ( 17 ) ( 17 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 \u2014 155 155 Total comprehensive income 924 \u2014 \u2014 \u2014 \u2014 155 155 Total comprehensive income 924 Common 155 155 Total comprehensive income 924 Common stock issued under stock and purchase plan \u2014 \u2014 7,632 85 \u2014 \u2014 \u2014 85 purchase plan \u2014 \u2014 7,632 85 \u2014 \u2014 \u2014 85 Conversion 7,632 85 \u2014 \u2014 \u2014 85 Conversion of Series A preferred Series A preferr Net income ( loss ) 65 65 Foreign currency translation \u2014 income ( loss ) 65 65 Foreign currency translation \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 5 5 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 5 5 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 17 ) ( 17 ) Change \u2014 ( 17 ) ( 17 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 ( 15 ) ( 15 ) Total \u2014 ( 15 ) ( 15 ) Total comprehensive income ( comprehensive income ( loss ) 38 Amortization of acquisition-related deferred stock \u2014 \u2014 \u2014 \u2014 \u2014 4 \u2014 4 Common stock issued \u2014 \u2014 \u2014 4 \u2014 4 Common stock issued under stock and purch Net income ( Net income ( loss ) 65 ( 25 ) 786 Cumulative ( loss ) 65 ( 25 ) 786 Cumulative effect of ) 65 ( 25 ) 786 Cumulative effect of accounting change net of tax \u2014 ( 12 ) \u2014 Adjustments to reconcile activity : Depreciation and amortization 118 102 84 Provision for deferred : Depreciation and amortization 118 102 84 Provision for deferred income Depreciation and amortization 118 102 84 Provision for deferred income tax for deferred income tax ( 34 ) ( 36 ) 163 tax ( 34 ) ( 36 ) 163 Loss on disposition net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 million , all of which wa reclassified to earnings during 2001 . Management doe not believe application of SFAS No . 133 will significantly alter the Company gain or loss on the 53 derivative instrument is reported a defined in SFAS No . 133 . Inventories Inventories are stated th Net income ( $ 6 $ 21 $ 24 Net income ( loss ) in fiscal period prior to 2002 follows ( in million , per share amount ) : 2002 2001 2000 Net income ( share amount ) : 2002 2001 2000 Net income ( loss amount ) : 2002 2001 2000 Net income ( loss ) ) , a reported $ 65 $ ( 25 ) $ reported $ 65 $ ( 25 ) $ 786 Add : $ ( 25 ) $ 786 Add : goodwill amortization $ goodwill amortization $ \u2014 $ 16 $ 21 Net income ( $ \u2014 $ 16 $ 21 Net income ( loss ) ) , a adjusted $ 65 $ ( 9 ) $ adjusted $ 65 $ ( 9 ) $ 807 Basic earnin Net income ( Net sale $ 5,370 $ 7,994 Net income ( loss ) ( loss ) $ ( 44 ) $ 767 Basic earnings $ ( 44 ) $ 767 Basic earnings ( loss ) per common share $ ( 0.13 ) $ 2.35 Diluted earnings $ ( 0.13 ) $ 2.35 Diluted earnings ( loss ) per common share $ ( 0.13 ) $ 2.11 Note 5\u2014Special $ ( 0.13 ) $ 2.11 Note 5\u2014Special Charges Restructuring Actions 0.13 ) $ 2.11 Note 5\u2014Special Charges Restructuring Actions 2002 Restructuring Note 5\u2014Special Charges Restructuring Actions 2002 Restructuring Actions During fiscal 2 net income 32 ( 84 ) ( 272 in net income 32 ( 84 ) ( 272 ) Change 32 ( 84 ) ( 272 ) Change in unrealized gain on available-for-sale security $ ( 17 ) $ ( 267 ) ( 17 ) $ ( 267 ) $ 155 The tax $ ( 267 ) $ 155 The tax effect related to on available-for-sale security wa $ 10 million , $ 157 million $ 10 million , $ 157 million , $ ( 91 157 million , $ ( 91 ) million for fiscal 2002 91 ) million for fiscal 2002 , 2001 , and 2000 million for fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , net income wa $ 10 million , $ 35 million $ 10 million , $ 35 million and $ 94 million $ 35 million and $ 94 million for fiscal 2002 , $ 94 million for fiscal 2002 , 2001 , and 2000 million for fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . The following ( in million ) : 2002 2001 Cumulative effect of adopting in million ) : 2002 2001 Cumulative effect of adopting SFAS of adopting SFAS No . 133 $ \u2014 $ 12 Changes . 133 $ \u2014 $ 12 Changes in fair value of in fair value of net income ( 19 ) ( 53 ) Change income ( 19 ) ( 53 ) Change in unrealized gain gain on derivative $ ( 15 ) $ 4 The tax $ ( 15 ) $ 4 The tax effect related to of adopting SFAS No . 133 wa $ ( 5 ) . 133 wa $ ( 5 ) a of September 29 5 ) a of September 29 , 2001 . The tax a of September 29 , 2001 . The tax effect related of derivative wa $ ( 2 ) million and $ ( ) million and $ ( 19 ) million for fiscal 2002 19 ) million for fiscal 2002 and 2001 , respectively . million for fiscal 2002 and 2001 , respectively Net income ( share amount ) : 2002 2001 2000 Net income ( loss amount ) : 2002 2001 2000 Net income ( loss ) loss ) \u2014as reported $ 65 $ ( 25 ) $ reported $ 65 $ ( 25 ) $ 786 Net income $ ( 25 ) $ 786 Net income ( loss ) ) \u2014pro forma $ ( 164 ) $ ( 396 ) ( 164 ) $ ( 396 ) $ 483 Net income $ ( 396 ) $ 483 Net income ( loss ) common share\u2014as reported Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.18 $ ( ) $ 2.42 Diluted $ 0.18 $ ( 0.07 ) $ Diluted $ 0.18 $ ( 0 Net income $ ( 0.07 ) $ 2.18 Net income ( loss ) share\u2014pro forma Basic $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) $ 1.49 Diluted $ $ ( 1.15 ) $ 1.49 Diluted $ ( 0.46 ) $ 1.49 Diluted $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) $ 1.38 Note 10\u2014Commitments $ ( 1.15 ) $ 1.38 Note 10\u2014Commitments and Contingencies Lease 1.15 ) $ 1.38 Note 10\u2014Commitments and Contingencies Lease Commitments The lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ 0.11 Diluted $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 2001 0.13 ) $ 0.09 $ 0.11 $ 0.11 2001 Net sale $ 0.09 $ 0.11 $ 0.11 2001 Net sale $ 1,450 0.09 Net income ( loss income ( loss ) $ 66 $ 61 $ 43 $ loss ) $ 66 $ 61 $ 43 $ ( 195 $ 66 $ 61 $ 43 $ ( 195 ) Earnings 61 $ 43 $ ( 195 ) Earnings ( loss ) common share : Basic $ 0.19 $ 0.17 $ 0.12 $ : Basic $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 ) Diluted 0.17 $ 0.12 $ ( 0.58 ) Diluted $ 0.19 $ ( 0.58 ) Diluted $ 0.19 $ 0.17 $ 0.12 $ ) Diluted $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 ) Basic 0.17 $ 0.12 $ ( 0.58 ) Basic and diluted earnings for the fourth quarter of 200 Net income for for the first quarter of 2002 included a restructuring charge , net of tax , $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 million related to non-current investment , and first quarter of 2001 included after-tax net gain related to non-current investment of $ 1 million , $ 8 million $ 1 million , $ 8 million , $ 4 million $ 8 million , $ 4 million , and $ 41 4 million , and $ 41 million , respectively . Net for the third quarter ", + "assets": "Assets ( Statement 144 ) , which supersedes both supersedes both SFAS No . 121 , Accounting for the Impairment of APB Opinion No . 30 ( Opinion 30 ) , No . 30 ( Opinion 30 ) , Reporting the Results ) . SFAS No . 144 retains the fundamental provision in provision in SFAS No . 121 for recognizing and measuring impairment associated with SFAS No . 121 . For example , SFAS example , SFAS No . 144 provides guidance on how a sale . SFAS No . 144 retains the basic provision of the basic provision of Opinion ASSETS September 28 , 2002 September 29 , 2001 ASSETS : Current , 2002 September 29 , 2001 ASSETS : Current asset : Cash and cash equivalent $ 2,252 $ 2,310 Short-term investment 2,085 cash equivalent $ 2,252 $ 2,310 Short-term investment 2,085 2,026 Accounts 2,252 $ 2,310 Short-term investment 2,085 2,026 Accounts receivable , le $ 2,310 Short-term investment 2,085 2,026 Accounts receivable , le allowance , le allowance of $ 51 and $ 51 , respectively of $ 51 and $ 51 , respectively 565 466 Inventori Assets : $ 5,742 $ 5,363 $ 7,983 Long-Lived Assets : United States Assets : United States $ 561 $ 498 $ 387 Japan United States $ 561 $ 498 $ 387 Japan 2 3 $ 561 $ 498 $ 387 Japan 2 3 5 Other $ 498 $ 387 Japan 2 3 5 Other Foreign Countries 498 $ 387 Japan 2 3 5 Other Foreign Countries 69 $ 387 Japan 2 3 5 Other Foreign Countries 69 77 3 5 Other Foreign Countries 69 77 52 Total Long-Lived Assets 5 Other Foreign Countries 69 77 52 Total Long-Lived Assets $ Other Foreign Countries 69 77 52 Total Long-Liv Assets $ 632 52 Total Long-Lived Assets $ 632 $ 578 $ 444 Information Long-Lived Assets $ 632 $ 578 $ 444 Information regarding net $ 632 $ 578 $ 444 Information regarding net sale by ( in million ) : 2002 2001 2000 Net Sales : in million ) : 2002 2001 2000 Net Sales : Power million ) : 2002 2001 2000 Net Sales : Power Macintosh Macintosh ( a ) $ 1,380 $ 1,664 $ 2,747 PowerBook a ) $ 1,380 $ 1,664 $ 2,747 PowerBook 831 813 $ 1,380 $ 1,664 $ 2,747 PowerBook 831 813 948 iMac $ 1,664 $ 2,747 PowerBook 83", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 6,298 $ 6,021 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 911 $ 801 Accrued expense 747 Accounts payable $ 911 $ 801 Accrued expense 747 717 Total 911 $ 801 Accrued expense 747 717 Total current liability 1,658 $ 801 Accrued expense 747 717 Total current liability 1,658 1,518 747 717 Total current liability 1,658 1,518 Long-term debt 316 317 717 Total current liability 1,658 1,518 Long-term debt 316 317 Deferred liability 1,658 1,518 Long-", + "equity": "equity $ 2,696 $ 2,057 $ 2,647 Shareholders ' equity $ 4,095 2,647 Shareholders ' equity $ 4,095 $ 3,920 $ 4,107 $ ' equity $ 4,095 $ 3,920 $ 4,107 $ 3,104 $ $ 4,095 $ 3,920 $ 4,107 $ 3,104 $ 1,642 A $ 3,920 $ 4,107 $ 3,104 $ 1,642 A net loss $ 4,107 $ 3,104 $ 1,642 A net loss before tax and equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . Net gain before tax and equity investment of $ 75 million , $ 367 million $ 75 million , $ 367 million , $ 230 million $ 3 Equity Investments As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held investment combined carrying value of $ 39 million . These investment , pre-tax impairment loss of $ 50 million related to two of in the fourth quarter of 2002 . As a result , result , a of September 28 , 2002 , the Company a of September 28 , 2002 , the Company had no fair value is other-than-temporary , 21 requiring an impairment loss be sale in thousand ) : 2002 Change 2001 Change 2000 Americas t equity and equipment , net 621 564 Non-current debt and equity investment Non-current debt and equity investment 39 128 Acquired intangible asset 119 debt and equity investment 39 128 Acquired intangible asset 119 76 39 128 Acquired intangible asset 119 76 Other asset 131 110 128 Acquired intangible asset 119 76 Other asset 131 110 Total asset 119 76 Other asset 131 110 Total asset $ 6,298 119 76 Other asset 131 110 Total asset $ 6,298 $ 131 110 Total asset $ 6,298 $ 6,021 LIABILITIES AND SHAREHOLDERS EQUITY liability : Accounts payable $ 911 $ 801 Accrued expense 747 Accounts payable $ 911 $ 801 Accrued expense 747 717 Total 911 $ 801 Accrued expense 747 717 Total current liability 1,658 $ 801 Accrued expense 747 717 Total current liability 1,658 1,518 747 717 Total current liability 1,658 1,518 Long-term debt 316 317 717 Total current liability 1,658 1,518 Long-term debt 316 317 Deferred liability 1,658 1,518 Long-term debt 316 317 Deferred tax liability 229 1,658 1,518 Long-term debt 316 317 Def equity ) Total shareholder ' equity 4,095 3,920 Total liability and shareholder Total shareholder ' equity 4,095 3,920 Total liability and shareholder ' and shareholder ' equity $ 6,298 $ 6,021 See accompanying note ' equity $ 6,298 $ 6,021 See accompanying note to consolidated to consolidated financial statement . 49 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 28 , 2002 2002 2001 2000 year ended September 28 , 2002 2002 2001 2000 Net sale ended September 28 , 2002 2002 2 equity investment 25 340 372 Cash used for sale of equity investment 25 340 372 Cash used for business of equity investment 25 340 372 Cash used for business acquisition used for business acquisition ( 52 ) \u2014 \u2014 Other ( ) \u2014 \u2014 Other ( 7 ) ( 36 ) ( Other ( 7 ) ( 36 ) ( 34 ) Cash ) ( 36 ) ( 34 ) Cash generated by ( for ) investing activity ( 252 ) 892 ( 972 ) investing activity ( 252 ) 892 ( 972 ) Financing : ( 252 ) 892 ( 972 ) Financing : Proceeds from from issuance of common stock 105 42 85 Cash used f Equity Investments the three year ended September 28 , 2002 , the Company year ended September 28 , 2002 , the Company ha made restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment test a of October 1 , 2001 , and August a of October 1 , 2001 , and Equity combined fair value wa $ 39 million and $ 128 million $ 39 million and $ 128 million a of September 28 128 million a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company aft Equity Stock Repurchase Plan Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock period of time . During 2000 , the Company repurchased a Company repurchased a total of 2.55 million share of it common at a cost of $ 116 million . During the fourth During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average p equity investment totaling $ 49 million ; a restructuring charge a restructuring charge of $ 4 million ; an in-process research development charge of approximately $ 1 million ; and the reversal a portion of a previous 87 executive compensation expense resulting in a favorable impact of $ 2 million . Net income for for the first quarter of 2002 included a restructuring charge , net of tax , $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 mill Equity by shareholder 44,867 $ 29.75 7,497 ( 1 ) Equity compensation 44,867 $ 29.75 7,497 ( 1 ) Equity compensation plan not plan not approved by shareholder 64,563 $ 27.07 1,221 ( 2 approved by shareholder 64,563 $ 27.07 1,221 ( 2 ) Total by shareholder 64,563 $ 27.07 1,221 ( 2 ) Total equity 64,563 $ 27.07 1,221 ( 2 ) Total equity compensation plan ) Total equity compensation plan 109,430 $ 28.17 8,718 ( 1 equity compensation plan 109,430 $ 28.17 8,718 ( 1 ) This compensation plan 109,430 $ 28.17 8,", + "cash_flow": "cash flow ( b ) 4 1 2 Annual operating cash flow $ Annual operating cash flow $ 89 $ 185 $ 868 ( cash flow $ 89 $ 185 $ 868 ( a ) $ 89 $ 185 $ 868 ( a ) Based on period . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had $ , the Company had $ 4.337 billion in cash , cash from the end of fiscal 2001 . The primary source of and short-term investment in fiscal 2002 were $ 89 million in in fiscal 2002 were $ 89 million in cash generated by by operating activity and $ 105 mil cash flow $ 2,252 $ 2,310 $ 1,191 Supplemental cash flow disclosure : the year for interest $ 20 $ 20 $ 20 Cash for interest $ 20 $ 20 $ 20 Cash paid for $ 20 $ 20 $ 20 Cash paid for income tax income tax , net $ 11 $ 42 $ 47 Noncash , net $ 11 $ 42 $ 47 Noncash transaction : $ 11 $ 42 $ 47 Noncash transaction : Issuance of preferred stock $ \u2014 $ 76 $ 74 Issuance of common $ \u2014 $ 76 $ 74 Issuance of common stock in with acquisition $ \u2014 $ 66 $ \u2014 See accompanying note to consolidated financial statement . 52", + "gross_margin": "gross margin percentage ) : 2002 2001 2000 Net sale $ margin percentage ) : 2002 2001 2000 Net sale $ 5,742 percentage ) : 2002 2001 2000 Net sale $ 5,742 $ 2001 2000 Net sale $ 5,742 $ 5,363 $ 7,983 Cost Net sale $ 5,742 $ 5,363 $ 7,983 Cost of sale $ 5,742 $ 5,363 $ 7,983 Cost of sale 4,139 4,128 $ 7,983 Cost of sale 4,139 4,128 5,817 Gross margin $ 7,983 Cost of sale 4,139 4,128 5,817 Gross margin $ 1,603 Cost of sale 4,139 4,128 5,817 Gross margin $ 1,603 $ 4,128 5,817 Gross margin $ 1,603 $ 1,235 $ 2,1 Gross margin $ 1,603 $ 1,235 $ 2,166 Gross margin percentage $ 1,603 $ 1,235 $ 2,166 Gross margin percentage 28 % $ 2,166 Gross margin percentage 28 % 23 % 27 % Gross margin percentage 28 % 23 % 27 % Gross margin percentage 28 % 23 % 27 % Gross margin increased to % Gross margin increased to 28 % of net sale in % of net sale in 2002 from 23 % in 2001 net sale in 2002 from 23 % in 2001 . As 2002 from 23 % in 2001 . As discussed below , below , gross margin in 2001 wa unusually low resulting from from negativ gross margin of 2 % experienced in the first in the first quarter of 2001 . As a percentage of gross margin declined during fiscal 2002 from 31 % in the declined during fiscal 2002 from 31 % in the first quarter the first quarter down to 26 % in the fourth quarter remain under pressure throughout fiscal 2003 in light of weak economic regarding anticipated gross margin in 2003 and the general demand for demand for personal computer during 2003 are forward-looking . Gross margin account anticipated change in Gross margin declined to 23 % of net sale in % of net sale in 2001 from 27 % in 2000 net sale in 2001 from 27 % in 2000 . This 2001 from 27 % in 2000 . This decline resulted primarily from gross margin of negative 2 % experienced during the first during the first quarter of 2001 compared to 26 % gross quarter of 2001 compared to 26 % gross margin for the for the same quarter in 2000 . In addition to lower net sale , first quarter 2001 margin were negatively impacted by decreased revenue by approximately $ 1 gross margin gross margin for all of 2001 would have been approximately 27 2001 would have been approximately 27 % . As a percentage margin increased each quarter a 2001 progressed reaching 30 % during quarter a 2001 progressed reaching 30 % during the fourth quarter reflects the favorable impact during 2001 of declining component cost , three fiscal year ended September 28 , 2002 are a follows year ended September 28 , 2002 are a follows ( in except for percentage ) : 2002 2001 2000 Research and developmen gross margin than the 39 Company 's other Macintosh system in these market fell to 21 % of the Company 's 's total net sale in 2002 from 26 % in 2001 net sale in 2002 from 26 % in 2001 . This 2002 from 26 % in 2001 . This drop reflects decline sale in these market of 15 % and 14 % , market of 15 % and 14 % , respectively , in , respectively , in fiscal 2002 compared to 2001 . These in fiscal 2002 compared to 2001 . These development are consistent in Part I , Item 1 of this Form 10-K under Item 1 of this Fo Gross margin 1,603 7,983 Cost of sale 4,139 4,128 5,817 Gross margin 1,603 1,235 Cost of sale 4,139 4,128 5,817 Gross margin 1,603 1,235 2,166 4,139 4,128 5,817 Gross margin 1,603 1,235 2,166 Operating expense : 4,128 5,817 Gross margin 1,603 1,235 2,166 Operating expense : Research 5,817 Gross margin 1,603 1,235 2,166 Operating expense : Research and expense : Research and development 446 430 380 Selling , general : Research and development 446 430 380 Selling , general , Research and development 446 430 3 Gross margin $ $ 1,429 $ 1,495 $ 1,375 Gross margin $ 381 $ $ 1,375 Gross margin $ 381 $ 391 $ 409 $ Gross margin $ 381 $ 391 $ 409 $ 422 Net $ 381 $ 391 $ 409 $ 422 Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ Gross margin $ $ 1,475 $ 1,431 $ 1,007 Gross margin $ 437 $ $ 1,007 Gross margin $ 437 $ 434 $ 385 $ Gross margin $ 437 $ 434 $ 385 $ ( 21 $ 437 $ 434 $ 385 $ ( 21 ) Net 434 $ 385 $ ( 21 ) Net income ( loss income ( loss ) $ 66 $ 61 $ 43 $ loss ) $ 66 $ 61 $ 43 $ ( 195 $ 66 $ 61 $ 43 $ ( 195 ) Earnings 61 $ 43 $ ( 195 ) Earnings ( loss ) common share : Basic $ 0.19 $ 0.17 $ 0.12 $ : Basic $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 ) Diluted 0.17 $ 0.12 $ ( 0.58 ) Diluted $ 0.19 $ ( 0.58 ) D", + "accumulated_depreciation": "Accumulated depreciation 184 192 Leasehold improvement 281 186 1,057 960 Accumulated depreciation and 192 Leasehold improvement 281 186 1,057 960 Accumulated depreciation and amortization Leasehold improvement 281 186 1,057 960 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 436 ) ( 396 ) Net amortization ( 436 ) ( 396 ) Net property , plant plant , and equipment $ 621 $ 564 66 Accrued Expenses and equipment $ 621 $ 564 66 Accrued Expenses ( in equipment $ 621 $ 564 66 Accrued Ex", + "capital_expenditure": "capital expenditure of and capital expenditure of $ 174 million . The Company belief existing operation over the next 12 month . Lease Commitments As Lease Commitments As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had total noncancelable operating lease of $ 464 million , $ 209 million $ 464 million , $ 209 million of which related to existing operating lease range from 1 to 12 year . Subsequent lease range from 1 to 12 year . Subsequent to September year . Subsequent to September capital expenditure in 2002 of $ 174 million , expenditure in 2002 of $ 174 million , $ 106 million $ 174 million , $ 106 million wa for retail store 's Retail segment and $ 68 million wa for corporate infrastructure it will utilize approximately $ 160 million for capital expenditure during million for capital expenditure during 2003 , approximately $ 77 million during 2003 , approximately $ 77 million of which is expected Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million ", + "debt": "debt $ $ 6,803 $ 5,161 $ 4,289 Long-term debt $ 316 $ $ 4,289 Long-term debt $ 316 $ 317 $ 300 $ Long-term debt $ 316 $ 317 $ 300 $ 300 $ $ 316 $ 317 $ 300 $ 300 $ 954 Total $ 317 $ 300 $ 300 $ 954 Total liability $ $ 300 $ 300 $ 954 Total liability $ 2,203 $ $ 954 Total liability $ 2,203 $ 2,101 $ 2,696 $ Total liability $ 2,203 $ 2,101 $ 2,696 $ 2,057 $ $ 2,203 $ 2,101 $ 2,696 $ 2,057 $ 2,647 Shareholders $ 2,101 $ 2,696 $ 2,057 $ 2,647 Shareholders ' equity $ 2,696 $ 2,057 $ 2,647 Shareholders ' Debt The in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note . The The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note pay semiannually and mature on February 15 , 2004 . Purchase Commitments mature on February 15 , 2004 . Purchase Commitments with Contract typically cover period ranging from 1 to 3 month . The period ranging from 1 to 3 month . The Company also requirement for period ranging f Debt and of these investment wa $ 39 million , $ 128 million $ 39 million , $ 128 million , and $ 786 128 million , and $ 786 million a of the end of the end of fiscal 2002 , 2001 , and 2000 end of fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . The Company in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 2 of Notes this Form 10-K at Note 2 of Notes to Consolidated Financial For much of the past 3 year , demand for the that took place on debt to floating-rate debt and market interest rate , during 2002 the Company entered into and realizing a gain of $ 6 million . During 2001 the $ 6 million . During 2001 the Company closed out all realizing a gain of $ 17 million . Both the gain . Both the gain in 2001 and 2002 were deferred , the gain in 2001 and 2002 were deferred , recognized in swap outstanding a of September 30 , 2000 , had a a of September 30 , 2000 , had a weighted-average receive a weighted-average receive rate of 5.50 % an debt and equity and equipment , net 621 564 Non-current debt and equity investment Non-current debt and equity investment 39 128 Acquired intangible asset 119 debt and equity investment 39 128 Acquired intangible asset 119 76 39 128 Acquired intangible asset 119 76 Other asset 131 110 128 Acquired intangible asset 119 76 Other asset 131 110 Total asset 119 76 Other asset 131 110 Total asset $ 6,298 119 76 Other asset 131 110 Total asset $ 6,298 $ 131 110 Total asset $ 6,298 $ 6,021 LIABILITIES AND S debt 316 317 717 Total current liability 1,658 1,518 Long-term debt 316 317 Deferred liability 1,658 1,518 Long-term debt 316 317 Deferred tax liability 229 1,658 1,518 Long-term debt 316 317 Deferred tax liability 229 266 316 317 Deferred tax liability 229 266 Total liability 2,203 2,101 317 Deferred tax liability 229 266 Total liability 2,203 2,101 Commitments liability 229 266 Total liability 2,203 2,101 Commitments and contingency Shareholders 229 266 Total liability 2,203 2,101 Commitments and Debt and Equity Investments the three year ended September 28 , 2002 , the Company year ended September 28 , 2002 , the Company ha made restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment test a of October 1 , 2001 , and August a of October 1 , debt to floating-rate debt and defined in SFAS No . 133 for fair value hedge of rate swap . During fiscal 2001 , the Company closed out realizing a gain of $ 17 million . This gain wa asset swap a of September 30 , 2000 , of $ a of September 30 , 2000 , of $ 5.7 million , 2000 , of $ 5.7 million wa deferred and then then recognized in income in 2001 a part of the SFAS of the SFAS No . 133 transition adjustment effective on October transition adjustment effective on October 1 , 2000 . The Company eff debt to floating-rate debt . defined in SFAS No . 133 for fair 63 value hedge No . 133 for fair 63 value hedge of debt instrument interest rate swap during fiscal 2002 until the Company closed out out the position in late 2002 due to prevailing market interest a realized gain of $ 6 million . This gain wa debt . Long-Term Debt During 1994 , the Company issued $ , the Company issued $ 300 million aggregate principal amount of million aggregate principal amount of 6.5 % unsecured note in a The note we Debt 2002 and September 29 , 2001 . Non-Current Debt and Equity combined fair value wa $ 39 million and $ 128 million $ 39 million and $ 128 million a of September 28 128 million a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Comp", + "tax_rate": "tax rate for 2002 wa 25 % compared to tax rate for 2002 wa 25 % compared to the higher allowance . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had deferred and tax credit of $ 369 million before being offset against asset . As of September 28 , 2002 , a valuation As of September 28 , 2002 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the of the valuation allowance . 32 The Internal Revenue Service ( federal income tax return thro tax rate ( 35 % in 2001 , 2000 rate ( 35 % in 2001 , 2000 , and 1999 35 % in 2001 , 2000 , and 1999 ) to 2001 , 2000 , and 1999 ) to income ( loss ( in million ) : 2002 2001 2000 Computed expected tax in million ) : 2002 2001 2000 Computed expected tax ( million ) : 2002 2001 2000 Computed expected tax ( benefit tax ( benefit ) $ 30 $ ( 18 ) $ ) $ 30 $ ( 18 ) $ 382 State tax $ ( 18 ) $ 382 State tax , net of , net of federal effect 7 ( 7 ) 15 Indefinitely of federal effect 7 ( 7 ) 15 Indefinitely invest tax rate 25 % $ 306 Effective tax rate 25 % 30 % 28 % Effective tax rate 25 % 30 % 28 % The Internal rate 25 % 30 % 28 % The Internal Revenue Service federal income tax return through 1997 . Substantially all IRS audit audit issue for year through 1997 have been resolved . The tax return for fiscal year 1998 through 2000 . Management belief for fiscal year 1998 through 2000 . Management belief that adequate from tax examination . Note 7\u2014Shareholders ' Equity Stock Repurchase Plan Stock Repurchase Plan I", + "geographic_information": "Geographic Data . `` 2 Hardware Products The Company offer in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors During the third quarter of 2002 , the Company introduced and and shipped Xserve\u2122 , a 1U rack-mount server designed for simple Xserve delivers high-speed networking , 15 gigaflops of computational power , service and support program including 4-hour onsite response , 24x7 technical including 4-hour onsite response , 24x7 technical support , AppleCare\u00ae geographic marketplace . Approximately 57 % of the Company 's 's net sale in fiscal 2002 came from sale to customer tariff and antidumping penalty . 12 Information regarding financial data by in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors The Company also offer a 90-day warranty for Apple geographic operating segment , during 2002 Japan showed growth in unit 's iMac unit sale increased 85 % in 2002 . However sale increased 85 % in 2002 . However , in the in iMac unit shipment in 2002 versus 2001 wa primarily the unit shipment in 2002 versus 2001 wa primarily the result of in the first quarter of 2001 discussed above . Additionally , comparative basis generally worsened a 2002 progressed reflecting particularly poor economic unit sale in Japan fell 47 % and 46 % , Japan fell 47 % and 46 % , Geographic be significant . 81 Note 11\u2014Segment Information and Geographic Data The Significant Accounting Policies in Note 1 , except a described below the Retail segment were $ 106 million in 2002 and $ were $ 106 million in 2002 and $ 92 million in million in 2002 and $ 92 million in 2001 . Operating and $ 92 million in 2001 . Operating income for all the twelve-month period ended September 28 , 2002 and September 29 period ended September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2", + "common_stock": "Common Stock Issued and Outstanding a of December 6 , 2002 PART I The a of December 6 , 2002 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . Item 1. Business Company this Form 10-K . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , inform common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour common stock period of time . During 2002 and 2001 , the Company time . During 2002 and 2001 , the Company repurchased no during the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . Since inception of to repurchase a total of 6.55 million share of it common at a cost of $ 217 million . Non-Current Deb Common stock issued under stock and purchase plan \u2014 \u2014 7,632 85 \u2014 \u2014 \u2014 85 purchase plan \u2014 \u2014 7,632 85 \u2014 \u2014 \u2014 85 Conversion 7,632 85 \u2014 \u2014 \u2014 85 Conversion of Series A preferred Series A preferred stock ( 74 ) ( 74 ) 9,000 stock ( 74 ) ( 74 ) 9,000 74 \u2014 \u2014 74 ) ( 74 ) 9,000 74 \u2014 \u2014 \u2014 \u2014 ) ( 74 ) 9,000 74 \u2014 \u2014 \u2014 \u2014 Common stock repurchased \u2014 \u2014 ( 2,553 ) ( 116 ) \u2014 \u2014 ( 2,553 ) ( 116 ) \u2014 \u2014 \u2014 ( ) \u2014 \u2014 \u2014 ( 116 ) Tax benefit related to stock option \u2014 \u2014 \u2014 110 \u2014 \u2014 \u2014 110 Balances \u2014 110 \u2014 \u2014 \u2014 110 Balances a of September 30 110 Bala common stock connection with acquisition \u2014 \u2014 2,403 66 \u2014 ( 13 ) with acquisition \u2014 \u2014 2,403 66 \u2014 ( 13 ) \u2014 \u2014 2,403 66 \u2014 ( 13 ) \u2014 53 Amortization of \u2014 ( 13 ) \u2014 53 Amortization of acquisition-related deferred stock \u2014 \u2014 \u2014 \u2014 \u2014 2 \u2014 2 Common stock issued \u2014 \u2014 \u2014 2 \u2014 2 Common stock issued under stock and purchase plan \u2014 \u2014 3,660 42 \u2014 \u2014 42 Conversion purchase plan \u2014 \u2014 3,660 42 \u2014 \u2014 42 Conversion of \u2014 3,660 42 \u2014 \u2014 42 Conversion of Series A preferred Series A preferred stock ( 76 ) ( 76 ) 9,182 stock ( 76 ) ( 76 ) 9,182 76 Common stock issued \u2014 \u2014 \u2014 4 \u2014 4 Common stock issued under stock and purchase plan \u2014 \u2014 8,037 105 \u2014 \u2014 105 Tax purchase plan \u2014 \u2014 8,037 105 \u2014 \u2014 105 Tax benefit \u2014 8,037 105 \u2014 \u2014 105 Tax benefit related to stock stock option \u2014 \u2014 \u2014 28 \u2014 \u2014 \u2014 28 Balances \u2014 28 \u2014 \u2014 \u2014 28 Balances a of September 28 28 Balances a of September 28 , 2002 \u2014 $ \u2014 a of September 28 , 2002 \u2014 $ \u2014 358,959 $ , 2002 \u2014 $ \u2014 358,959 $ 1,826 $ 2,325 $ \u2014 $ \u2014 358,959 $ 1,826 $ 2,325 $ ( 7 \u2014 358,959 $ 1,826 $ 2,325 $ ( 7 ) $ 1,826 $ 2,325 $ ( 7 ) $ ( 49 ) common stock 105 42 85 Cash used for issuance of common stock 105 42 85 Cash used for repurchase of common stock 105 42 85 Cash used for repurchase of common stock \u2014 \u2014 ( 116 ) Cash generated by ( used for ) financing activity 105 42 ( 31 ) Increase for ) financing activity 105 42 ( 31 ) Increase ( financing activity 105 42 ( 31 ) Increase ( decrease ) cash and cash equivalent ( 58 ) 1,119 ( 135 ) cash equivalent ( 58 ) 1,119 ( 135 ) Cash and ( 58 ) 1,119 ( 135 ) Cash and cash equivalent end of the year $ 2, common stock in with acquisition $ \u2014 $ 66 $ \u2014 See accompanying note to consolidated financial statement . 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple of September . Fiscal year 2002 and 2001 were each 52-week . Fiscal year 2002 and 2001 were each 52-week year . 2002 and 2001 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it the first quarter of fiscal 2000 . Al common stock common stock beginning in July 2000 . The bond carried an an annual coupon rate of 2 % and pay a total total yield to maturity of 5 % if redeemed at their in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . Prior to a of September 30 , 2000 . Prior to it sale in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . With the a of September 30 , 2000 . With the adoption of adoption of SFAS No . 133 on October common stock period of time . During 2000 , the Company repurchased a Company repurchased a total of 2.55 million share of it common at a cost of $ 116 million . During the fourth During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . The Company engaged stock repurchase plan in fiscal 2002 . Sin common stock . During 2001 , the remaining 75,750 preferred During 2001 , the remaining 75,750 preferred share were converted into preferred share were converted into 9.2 million share of the Company Company 's common stock . 75 Comprehensive Income The following table ( in million ) : 2002 2001 2000 Unrealized gain on in million ) : 2002 2001 2000 Unrealized gain on available-for-sale million ) : 2002 2001 2000 Unrealized gain on available-for-sale security gain on available-for-sale security $ 13 $ 30 $ 2 common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour common stock outstanding at the end of 2002 that were not included in be antidilutive . At September 29 , 2001 , the Company . At September 29 , 2001 , the Company had option Company had option to purchase 97.2 million share of it common diluted loss per share for 2001 because the effect would have antidilutive . Options to purchase 2.5 million share of common stock outstanding at the end of 2000 that were not included in would be antidilutive . Note 13\u2014Related Party Transactions Mr. Jerome York MicroWareho Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 360,000 share outstanding under the Director NASDAQ rule . During fiscal 2002 , William V. Campbell , the Company in fiscal year 2002 served on the Compensation Committee Committee . During fiscal year 2002 , Mr. Jobs served a director of Gap in September 2002 . Mr. Drexler resigned a CEO of Gap in September 2002 and resigned a a 94 2002 and resigned a a 94 director of Gap in October director of Gap in Octo Common Stock were Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Lord , Abbett & Co 29,381,015 ( 2 ) 7.56 % Abbett & Co 29,381,015 ( 2 ) 7.56 % Steven P. Co 29,381,015 ( 2 ) 7.56 % Steven P. Jobs 23,810,002 7.56 % Steven P. Jobs 23,810,002 ( 3 ) 6.22 % Steven P. Jobs 23,810,002 ( 3 ) 6.22 % Fred D. Jobs 23,810,002 ( 3 ) 6.22 % Fred D. Anderson 602,672 6.22 % Fred D. Anderson 602,672 ( 4 ) * William Fred D. Anderson 602,672 ( 4 ) * William V. Campbell ) * William V. Campbell 80,502 ( 5 ) * Tim Common Stock which of stock option . ( 4 ) Includes 600,000 share of . ( 4 ) Includes 600,000 share of Common Stock which of stock option . ( 5 ) Includes 80,000 share of . ( 5 ) Includes 80,000 share of Common Stock which exercise of stock option . 95 ( 6 ) Includes 250,000 stock option . 95 ( 6 ) Includes 250,000 share of 95 ( 6 ) Includes 250,000 share of Common Stock which of stock option . ( 7 ) Includes 60,000 share of . ( 7 ) Includes 60,000 share of Common Stock which of stock option . ( 8 ) Include Common Stock which Mr. Levinson hold indirectly and 20,000 share of Common Stock which of stock option . ( 9 ) Includes 1,050,000 share of . ( 9 ) Includes 1,050,000 share of Common Stock which of stock option . ( 10 ) Includes 1,050,000 share of . ( 10 ) Includes 1,050,000 share of Common Stock which . * Represents le than 1 % of the issued and information , a of September 28 , 2002 , concerning share a of September 28 , 2002 , concerning share of common compensation plan approved by shareholder 44,867 $ 2 common stock reserved Employee Stock Purchase Plan , 360,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 4,989,890 share available for issuance under available for issuance under the 1998 Executive Officer Stock Plan . not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) Reflects sh", + "derivative_instruments": "Derivative Instruments Activities . SFAS No . 133 established accounting and reporting standard tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type net income of approximately $ 12 million for the first quarter for the first quarter of 2001 . The $ 17 million of 2001 . The $ 17 million gross transition adjustment wa wa comprised of a $ 23 million favorable adjustment for the derivative . SFAS No . 133 also required the Company to during t Derivative Instruments Activities , a of October 1 , 2000 . SFAS No a of October 1 , 2000 . SFAS No . 133 2000 . SFAS No . 133 establishes accounting and reporting standard application of SFAS No . 133 will significantly alter the Company the investment process . During 1994 , the Company issued $ , the Company issued $ 300 million aggregate principal amount of million aggregate principal amount of 6.5 % unsecured note in a The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note p Derivative Instruments Activities . SFAS No . 133 establishes accounting and reporting standard definition . SFAS No . 133 requires that all derivative be tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 millio" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001047469-03-041604/full-submission_features.json b/src/data/feature/AAPL/10-K/0001047469-03-041604/full-submission_features.json new file mode 100644 index 0000000..3e2f594 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001047469-03-041604/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial because the Company legally retains 20 a portion of the risk the Company may be required 21 to record additional write-down which requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is ( SFAS ) No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . As a result , and requires that : ( 1 ) goodwill be allocated to which it relates ; ( 2 ) the Company estimate the revenue Macintosh portable system grew by 92,000 unit or 10 % in grew by 92,000 unit or 10 % in 2002 reflecting a unit or 10 % in 2002 reflecting a general trend in towards portable system . During 2002 , portable Macintosh system represented , portable Macintosh system represented 33 % of total system sale of total system sale versus 31 % in 2001 and 20 sale versus 31 % in 2001 and 20 % in 2000 31 % in 2001 and 20 % in 2000 . Growth 2001 and 20 % in 2000 . Growth in this area . iBook unit sale increas Revenue Service tax return for the year 1998 through 2000 , and the for the year 1998 through 2000 , and the Company ha issue for year prior to 1998 have been resolved . Management Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on Ju Revenue Arrangements with Multiple . EITF Issue No . 00-21 provides guidance on how to of EITF Issue No . 00-21 apply to revenue transaction entered fiscal period beginning after June 15 , 2003 . Additionally , beginning after June 15 , 2003 . Additionally , in August . Additionally , in August 2003 , the EITF reached consensus on EITF Issue No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 , `` Software Revenue Recognition . EITF Issue No . 03-5 provides guidance on dete Revenue and 63 expense for these subsidiary are ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial Company 's historical experience . 64 Generally , the Company doe pursuant to SFAS No . 86 , Computer Software to be third and fourth quarter of 2003 , the Company incurred substantial of Mac OS X version 10.3 ( code-named `` Panther `` a developer beta in June 2003 , and prior to release in the first quarter of 2004 . Therefore , during 2003 2004 . Ther revenue $ 368 $ 170 Accrued Expenses 2003 2002 Deferred revenue $ 368 $ 2003 2002 Deferred revenue $ 368 $ 240 Accrued marketing and Deferred revenue $ 368 $ 240 Accrued marketing and distribution 124 240 Accrued marketing and distribution 124 136 Accrued compensation and employee Accrued marketing and distribution 124 136 Accrued compensation and employee benefit Accrued compensation and employee benefit 101 93 Accrued warranty and related compensation and employee benefit 101 93 Accrued warranty and Revenue Service tax return for the year 1998 through 2000 and proposed certain for the year 1998 through 2000 and proposed certain adjustment . issue for year prior to 1998 have been resolved . Management such resolution occurs . Note 7\u2014Shareholders ' Equity CEO Restricted Stock Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company entered into award for the purchase of 27.5 million share of the Company granted to Mr. Jobs in 2000 and 2001 . Mr. Jobs Mr. Jobs in", + "expenses": "Expenses 2003 other asset $ 150 $ 170 Accrued Expenses 2003 2002 Deferred 150 $ 170 Accrued Expenses 2003 2002 Deferred revenue $ 368 $ 170 Accrued Expenses 2003 2002 Deferred revenue $ 368 $ 2003 2002 Deferred revenue $ 368 $ 240 Accrued marketing and Deferred revenue $ 368 $ 240 Accrued marketing and distribution 124 240 Accrued marketing and distribution 124 136 Accrued compensation and employee Accrued marketing and distribution 124 136 Accrued compensation and employee benefit Accrued compensation Expenses allocated a of September 27 , 2003 . Expenses allocated to corporate these three store were $ 6 million and $ 1 million $ 6 million and $ 1 million in fiscal 2003 and $ 1 million in fiscal 2003 and 2002 , respectively . million in fiscal 2003 and 2002 , respectively . 96 Summary and 2002 , respectively . 96 Summary information by operating segment ( in million ) : 2003 2002 2001 Americas : Net in million ) : 2003 2002 2001 Americas : Net sale million ) : 2003 2002 2001 Americas : Net sale $ Ame", + "net_income": "Net income ( $ 5,363 $ 7,983 $ 6,134 Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) $ 69 $ 65 $ ( 25 ) $ 786 $ 601 $ ( 25 ) $ 786 $ 601 Earnings ( loss 25 ) $ 786 $ 601 Earnings ( loss ) per common share : Basic $ 0.19 $ 0.18 $ ( 0.07 : Basic $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.42 $ 2.10 $ ( 0.07 ) $ 2.42 $ 2.10 Diluted $ 0.19 0.07 ) $ 2.42 $ 2.10 Diluted $ 0.19 $ 0.18 2.42 $ 2.10 Diluted $ 0.19 $ 0.18 $ ( 0.07 2.10 Diluted $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 net income during 2003 of approximately $ 2 million during 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied Derivatives The adoption of SFAS 133 during 2001 resulted in a adoption of SFAS 133 during 2001 resulted in a favorable cumulative-effect type adjustment of approximately $ 12 million , net of a tax effect of approximately $ 5 million . Further information related adoption of SFAS Nos . 133 , 143 and 150 and SFAS Nos . 133 , 143 Net income ( of income tax 1 \u2014 12 Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) Earnings 69 $ 65 $ ( 25 ) Earnings ( loss ) accounting change : Basic $ 0.19 $ 0.18 $ ( 0.11 : Basic $ 0.19 $ 0.18 $ ( 0.11 ) Diluted 0.19 $ 0.18 $ ( 0.11 ) Diluted $ 0.19 $ ( 0.11 ) Diluted $ 0.19 $ 0.18 $ ( 0.11 ) Diluted $ 0.19 $ 0.18 $ ( 0.11 ) Earnings 0.19 $ 0.18 $ ( 0.11 ) Earnings ( loss ) common share : Basic $ 0.19 $ 0.18 $ ( 0.07 : Basic $ 0.19 $ 0.18 $ ( 0.07 ) Diluted 0.19 $ 0.18 $ Net income Net income ( loss ) 69 65 ( 25 ) Cumulative income ( loss ) 69 65 ( 25 ) Cumulative effect loss ) 69 65 ( 25 ) Cumulative effect of accounting , net of tax ( 1 ) \u2014 ( 12 ) ( 1 ) \u2014 ( 12 ) Adjustments to reconcile net Depreciation , amortization and accretion 113 114 100 Stock based compensation , amortization and accretion 113 114 100 Stock based compensation expense amortization and accretion 113 114 100 Stock based compensation expense 16 100 Stock based compensation expense 16 5 2 Non-cash res net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 million , all of which wa reclassified to earnings during 2001 . Management doe not believe application of SFAS No . 133 will significantly alter the Company component are recognized in current 61 earnings . For derivative instrument defined in SFAS No . 133 . Inventories Inventor Net income ( share amount ) : 2003 2002 2001 Net income ( loss amount ) : 2003 2002 2001 Net income ( loss ) loss ) \u2014as reported $ 69 $ 65 $ ( 25 \u2014as reported $ 69 $ 65 $ ( 25 ) Add 69 $ 65 $ ( 25 ) Add : Stock-based employee ) , net of tax 15 5 2 Deduct : Stock-based , net of tax 15 5 2 Deduct : Stock-based employee net of tax 15 5 2 Deduct : Stock-based employee compensation , net of tax ( 181 ) ( 234 ) ( tax ( 181 ) ( 234 ) ( 373 ) Net ) ( 234 ) ( 373 ) Net loss\u2014pro forma $ Net loss\u2014pro forma $ ( 97 ) Net income ( loss common share\u2014as reported Basic $ 0.19 $ 0.18 $ ( 0.07 reported Basic $ 0.19 $ 0.18 $ ( 0.07 ) Diluted 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Net 0.19 $ 0.18 $ ( 0.07 ) Net loss per common share\u2014pro forma Basic $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) Diluted $ ( 0.27 1.15 ) Diluted $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) Earnings Per Common Share pe Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) Denominator 69 $ 65 $ ( 25 ) Denominator ( in thousand ) : Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive : Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive option Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive option and option and dilutive restricted stock 2,835 6,763 \u2014 Denominator for diluted and dilutive restricted stock 2,835 6,763 \u2014 net income ( loss ) 19 ( 19 ) ( 53 ( loss ) 19 ( 19 ) ( 53 ) Cumulative 19 ( 19 ) ( 53 ) Cumulative effect of adopting of adopting SFAS No . 133 \u2014 \u2014 12 Change in No . 133 \u2014 \u2014 12 Change in unrealized gain on on derivative instrument $ ( 5 ) $ ( 15 ) ( 5 ) $ ( 15 ) $ 4 The tax $ ( 15 ) $ 4 The tax effect related to of adopting SFAS No . 133 wa $ ( 5 ) . 133 wa $ ( 5 ) a of September 29 5 ) a of September 29 , 2001 . The tax a of September 29 , 2001 . The tax effect related value of derivative wa $ 11 millio Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02 ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) 2002 0.05 $ 0.04 $ ( 0.02 ) 2002 Net sale $ 0.04 $ ( 0.02 Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ 0.11 Diluted $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Basic 0.13 ) $ 0.09 $ 0.11 $ 0.11 Basic and diluted $ 0.09 $ 0.11 $ 0.11 Basic and diluted ear Net income ( Net income ( loss ) 100 during the second and first second and first quarter of 2003 included restructuring charge , net of tax , of $ 2 million and $ 18 million $ 2 million and $ 18 million , respectively . Net for the first quarter of 2003 included an after-tax unfavorable cumulative-effect of SFAS No.143 of $ 2 million . Net loss for for the fourth quarter of 2002 included the following item , certain equity investment totaling $ 49 million ; a restructuring charge a restructuring charge o Net income for for the first quarter of 2002 included a restructuring charge , of tax , of $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 million related to non-current investment related to non-current investment . 101 REPORT OF INDEPENDENT AUDITORS The and subsidiary a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , and the 2003 and September 28 , 2002 , and the relat", + "assets": "ASSETS September 27 , 2003 September 28 , 2002 ASSETS : Current , 2003 September 28 , 2002 ASSETS : Current asset : Cash and cash equivalent $ 3,396 $ 2,252 Short-term investment 1,170 cash equivalent $ 3,396 $ 2,252 Short-term investment 1,170 2,085 Accounts 3,396 $ 2,252 Short-term investment 1,170 2,085 Accounts receivable , le $ 2,252 Short-term investment 1,170 2,085 Accounts receivable , le allowance , le allowance of $ 49 and $ 51 , respectively of $ 49 and $ 51 , respectively 766 565 Inventori Assets Including September 27 , 2003 $ 7.2 Long-Lived Assets Including Goodwill and the three year ended September 27 , 2003 , the Company year ended September 27 , 2003 , the Company ha made restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment tes Assets 2003 inventory $ 56 $ 45 76 Other Current Assets 2003 2002 45 76 Other Current Assets 2003 2002 Vendor non-trade receivables $ 76 Other Current Assets 2003 2002 Vendor non-trade receivables $ 184 2002 Vendor non-trade receivables $ 184 $ 142 Other current asset non-trade receivables $ 184 $ 142 Other current asset 125 133 $ 142 Other current asset 125 133 Total other current asset 142 Other current asset 125 133 Total other current asset $ Total other current asset $ 309 $ 275 Property , Plant Assets 2003 and equipment $ 669 $ 621 Other Assets 2003 2002 Non-current 669 $ 621 Other Assets 2003 2002 Non-current deferred tax asset $ 621 Other Assets 2003 2002 Non-current deferred tax asset $ Non-current deferred tax asset $ 60 $ 70 Non-current debt and tax asset $ 60 $ 70 Non-current debt and equity investment Non-current debt and equity investment 5 39 Capitalized software development cost debt and equity investment 5 39 Capitalized software development cost , software development cost , net Assets life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The Company ceased at the beginning of fiscal 2002 when it adopted SFAS No it adopted SFAS No . 142 . The following table summarizes in million ) : September 27 , 2003 September 28 , ) : September 27 , 2003 September 28 , 2002 Gross September 27 , 2003 September 28 , 2002 Gross Carrying Amount , 2003 September 28 , 2002 Gross Carrying Amount Accumulated Amortization Goodwill ( a ) $ 85 \u2014 $ 85 $ 85 ) $ 85 \u2014 $ 85 Assets : $ 6,207 $ 5,742 $ 5,363 Long-Lived Assets : United States Assets : United States $ 635 $ 561 $ 498 Japan United States $ 635 $ 561 $ 498 Japan 19 2 $ 635 $ 561 $ 498 Japan 19 2 3 Other $ 561 $ 498 Japan 19 2 3 Other Foreign Countries 561 $ 498 Japan 19 2 3 Other Foreign Countries 60 $ 498 Japan 19 2 3 Other Foreign Countries 60 69 2 3 Other Foreign Countries 60 69 77 Total Long-Lived Assets 3 Other Foreign Countries 60 69 77 Total Long-Lived Assets $ Other Foreign Countries 60 69 77 Total Lon Assets $ 714 77 Total Long-Lived Assets $ 714 $ 632 $ 578 98 Long-Lived Assets $ 714 $ 632 $ 578 98 Information regarding $ 714 $ 632 $ 578 98 Information regarding net sale 714 $ 632 $ 578 98 Information regarding net sale by ( in million ) : 2003 2002 2001 Net Sales : in million ) : 2003 2002 2001 Net Sales : Power million ) : 2003 2002 2001 Net Sales : Power Macintosh Macintosh ( a ) $ 1,237 $ 1,380 $ 1,664 PowerBook a ) $ 1,237 $ 1,380 $ 1,664 PowerBook 1,299 831 $ 1,237 $ 1,380 $ 1,664 PowerBook ", + "liabilities": "Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of LIABILITIES AND SHAREHOLDERS Total asset $ 6,815 $ 6,298 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 1,154 $ 911 Accrued expense 899 Accounts payable $ 1,154 $ 911 Accrued expense 899 747 Current 1,154 $ 911 Accrued expense 899 747 Current debt 304 \u2014 $ 911 Accrued expense 899 747 Current debt 304 \u2014 Total expense 899 747 Current debt 304 \u2014 Total current liability 2,357 304 \u2014 Total current liability 2,357 1,658 Long-term debt \u2014 316 \u2014 Total current liability 2,357 1,658 Long-term debt Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Company to acquire 1.5 million share of it common an average price of $ ", + "equity": "equity $ 2,101 $ 2,696 $ 2,057 Shareholders ' equity $ 4,223 2,057 Shareholders ' equity $ 4,223 $ 4,095 $ 3,920 $ ' equity $ 4,223 $ 4,095 $ 3,920 $ 4,107 $ $ 4,223 $ 4,095 $ 3,920 $ 4,107 $ 3,104 Net $ 4,095 $ 3,920 $ 4,107 $ 3,104 Net gain before $ 3,920 $ 4,107 $ 3,104 Net gain before tax related and equity investment of $ 10 million , $ 75 million $ 10 million , $ 75 million , $ 367 million $ 75 million , $ 367 million , and $ 230 367 million , and $ 230 million were recognized in 2003 230 millio equity investment of $ 42 million wa 19 recognized in of $ 42 million wa 19 recognized in 2002 . In million wa 19 recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 26 million , $ 30 million $ 26 million , $ 30 million , $ 8 million $ 30 million , $ 8 Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of $ 16.64 pe EQUITY liability : Accounts payable $ 1,154 $ 911 Accrued expense 899 Accounts payable $ 1,154 $ 911 Accrued expense 899 747 Current 1,154 $ 911 Accrued expense 899 747 Current debt 304 \u2014 $ 911 Accrued expense 899 747 Current debt 304 \u2014 Total expense 899 747 Current debt 304 \u2014 Total current liability 2,357 304 \u2014 Total current liability 2,357 1,658 Long-term debt \u2014 316 \u2014 Total current liability 2,357 1,658 Long-term debt \u2014 316 Deferred 2,357 1,658 Long-term debt \u2014 316 Deferred tax liability and other l equity ) Total shareholder ' equity 4,223 4,095 Total liability and shareholder Total shareholder ' equity 4,223 4,095 Total liability and shareholder ' and shareholder ' equity $ 6,815 $ 6,298 See accompanying note ' equity $ 6,815 $ 6,298 See accompanying note to consolidated to consolidated financial statement . 56 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 27 , 2003 2003 2002 2001 year ended September 27 , 2003 2003 2002 2001 Net sale ended September 27 , 2003 2003 2 equity derivative to 60 manage potential disposition of non-current Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Equity by the Company wa $ 5 million and $ 39 million $ 5 million and $ 39 million a of September 27 39 million a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , respectively . 2003 and September 28 , 2002 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after equity investment Non-current debt and equity investment 5 39 Capitalized software development cost debt and equity investment 5 39 Capitalized software development cost , software development cost , net 28 19 Other asset 57 42 development cost , net 28 19 Other asset 57 42 Total net 28 19 Other asset 57 42 Total other asset $ 28 19 Other asset 57 42 Total other asset $ 150 42 Total other asset $ 150 $ 170 Accrued Expenses 2003 other asset $ 150 $ 170 Accrued Expenses 2003 2002 Deferred 150 $ 170 Accr Equity CEO Restricted Stock Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company entered into award for the purchase of 27.5 million share of the Company granted to Mr. Jobs in 2000 and 2001 . Mr. Jobs Mr. Jobs in 2000 and 2001 . Mr. Jobs retained option Jobs retained option to purchase 60,000 share of the Company 's stock granted in August of 1997 in his capacity a a a restricted stock award of 5 million share of the Company restricted stock award of $ 74.75 equity investment totaling $ 49 million ; a restructuring charge a restructuring charge of $ 4 million ; an in-process research development charge of approximately $ 1 million ; and the reversal a favorable impact of $ 2 million . Net income for for the first quarter of 2002 included a restructuring charge , of tax , of $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 million related to non-current investment related to non-current investment equity in 2003 , changed it method of of accounting for goodwill in 2002 , and changed it method accounting for hedging activity in 2001 . /s/ KPMG LLP Mountain Mountain View , California October 14 , 2003 102 Item 9 , California October 14 , 2003 102 Item 9 . Changes California October 14 , 2003 102 Item 9 . Changes in 14 , 2003 102 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Based ( a defined in Rules 13a-14 ( c ) and 15d-14 13a-14 ( c ) and 15 equity-based . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan `` ) and 800,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 370,000 share outstanding under the Director Directors also receive a $ 50,000 annual retainer paid in quarterly until his resignation in November 2002 at which time Mr. Drex Equity by shareholder 19,507,624 $ 18.75 29,142,907 ( 1 ) Equity compensation 19,507,624 $ 18.75 29,142,907 ( 1 ) Equity compensation plan not plan not approved by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 approved by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 ) Total by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 ) Total equity 43,343,560 $ 19.29 20,689,245 ( 2 ) Total equity compensation plan Total equity compensation plan ( 3 ) 62,851,184 $ 19.12 49,832,152 compensation plan ( 3 ) 62,851,1", + "cash_flow": "cash flow ( c ) 82 77 73 Annual operating cash flow $ Annual operating cash flow $ 289 $ 89 $ 185 ( cash flow $ 289 $ 89 $ 185 ( a ) $ 289 $ 89 $ 185 ( a ) DSO is inventory . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company 's cash short-term investment portfolio totaled $ 4.566 billion , an increase of , an increase of $ 229 million from the end of from the end of fiscal 2002 . The Company 's short-term lower market interest rate during 2003 , the Company ha elected increa cash flow $ 3,396 $ 2,252 $ 2,310 Supplemental cash flow disclosure : the year for interest $ 20 $ 20 $ 20 Cash for interest $ 20 $ 20 $ 20 Cash paid for $ 20 $ 20 $ 20 Cash paid for income tax income tax , net $ 45 $ 11 $ 42 Noncash , net $ 45 $ 11 $ 42 Noncash transaction : $ 45 $ 11 $ 42 Noncash transaction : Issuance of $ \u2014 $ \u2014 $ 76 Issuance of common stock in $ \u2014 $ \u2014 $ 66 See accompanying note to consolidated to consolidated financial statement . 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONS cash flow of $ 9.5 million would be required to to fulfill these obligation . 62 As of the date of the Company recorded a $ 6 million long-term asset retirement liability future cash flow of $ 9.5 million and it present value it present value of $ 6 million at September 29 , $ 6 million at September 29 , 2002 , is being million at September 29 , 2002 , is being accreted over tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect d", + "gross_margin": "Gross Margin Gross margin for three fiscal year ended September 27 , 2003 are a follows year ended September 27 , 2003 are a follows ( in gross margin percentage ) : 2003 2002 2001 Net sale $ margin percentage ) : 2003 2002 2001 Net sale $ 6,207 percentage ) : 2003 2002 2001 Net sale $ 6,207 $ 2002 2001 Net sale $ 6,207 $ 5,742 $ 5,363 Cost Net sale $ 6,207 $ 5,742 $ 5,363 Cost of sale $ 6,207 $ 5,742 $ 5,363 Cost of sale 4,499 4,139 $ 5,363 Cost of sale 4,499 4,139 4,128 Gross margin $ 5,363 Cost of sale 4 Gross margin $ 1,708 Cost of sale 4,499 4,139 4,128 Gross margin $ 1,708 $ 4,139 4,128 Gross margin $ 1,708 $ 1,603 $ 1,235 Gross Gross margin $ 1,708 $ 1,603 $ 1,235 Gross margin percentage $ 1,708 $ 1,603 $ 1,235 Gross margin percentage 27.5 % $ 1,235 Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin decreased to % Gross margin decreased to 27.5 % of net sale in % of net sale in 2003 from 27.9 % of net net sa gross margin during 2003 were partially offset by the remain under pressure throughout fiscal 2004 in light of weak economic G5 and other product during 2004 . The foregoing statement regarding 's expected gross margin during 2004 , general demand for personal . Gross margin increased to 27.9 % of net sale in % of net sale in 2002 from 23.0 % in 2001 net sale in 2002 from 23.0 % in 2001 . Gross 2002 from 23.0 % in 2001 . Gross margin in 2001 2001 . Gross margin in 2001 wa unusually low resulting from from n gross margin of 2 % experienced in the first in the first quarter of 2001 . As a 31 percentage of 2001 . As a 31 percentage of net sale , gross margin declined during fiscal 2002 from 31 % in the declined during fiscal 2002 from 31 % in the first quarter the first quarter down to 26 % in the fourth quarter three fiscal year ended September 27 , 2003 are a follows year ended September 27 , 2003 are a follows ( in except for percentage ) : 2003 2002 2001 Research and development for percentage ) : 2003 2002 2 Gross margin 1,708 5,363 Cost of sale 4,499 4,139 4,128 Gross margin 1,708 1,603 Cost of sale 4,499 4,139 4,128 Gross margin 1,708 1,603 1,235 4,499 4,139 4,128 Gross margin 1,708 1,603 1,235 Operating expense : 4,139 4,128 Gross margin 1,708 1,603 1,235 Operating expense : Research 4,128 Gross margin 1,708 1,603 1,235 Operating expense : Research and expense : Research and development 471 446 430 Selling , general : Research and development 471 446 430 Selling , general , Research and development 471 446 4 Gross margin $ $ 1,545 $ 1,475 $ 1,472 Gross margin $ 456 $ $ 1,472 Gross margin $ 456 $ 428 $ 418 $ Gross margin $ 456 $ 428 $ 418 $ 406 Net $ 456 $ 428 $ 418 $ 406 Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02 Gross margin $ $ 1,429 $ 1,495 $ 1,375 Gross margin $ 381 $ $ 1,375 Gross margin $ 381 $ 391 $ 409 $ Gross margin $ 381 $ 391 $ 409 $ 422 Net $ 381 $ 391 $ 409 $ 422 Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ ", + "accumulated_depreciation": "Accumulated depreciation 74 67 Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and 67 Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and amortization Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 505 ) ( 436 ) Net amortization ( 505 ) ( 436 ) Net property , plant plant , and equipment $ 669 $ 621 Other Assets 2003 and equipment $ 669 $ 621 Other Assets 2003 2002 Non-current 669 $ 621 Other Assets 2", + "capital_expenditure": "capital expenditure for capital expenditure and $ 26 million for the repurchase of existing operation over the next 12 month . Debt The Company in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note that were that were originally issued in 1994 . The note , which semiannually , were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note , , along with approximately $ 4 million of unamortized deferred gain , are due in February 2 capital expenditure were $ 164 million during fiscal 2003 , $ 164 million during fiscal 2003 , $ 92 million of during fiscal 2003 , $ 92 million of which were for 's Retail segment and $ 72 million of which were primarily it will utilize approximately $ 160 million for capital expenditure during million for capital expenditure during 2004 , approximately $ 85 million during 2004 , approximately $ 85 million of which is expected Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 mil", + "debt": "debt ( $ 6,021 $ 6,803 $ 5,161 Long-term debt ( including current including current maturity ) $ 304 $ 316 $ 317 $ maturity ) $ 304 $ 316 $ 317 $ 300 $ $ 304 $ 316 $ 317 $ 300 $ 300 Total $ 316 $ 317 $ 300 $ 300 Total liability $ $ 317 $ 300 $ 300 Total liability $ 2,592 $ $ 300 Total liability $ 2,592 $ 2,203 $ 2,101 $ Total liability $ 2,592 $ 2,203 $ 2,101 $ 2,696 $ $ 2,592 $ 2,203 $ 2,101 $ 2,696 $ 2,057 Shareholders $ 2,203 $ 2,101 $ 2,696 $ 2,057 Shareholders ' equity $ 2,101 $ 2,696 $ 2,057 S Debt The Company in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note that were that were originally issued in 1994 . The note , which semiannually , were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note , , along with approximately $ 4 million of unamortized deferred gain , are due in February 2004 and therefore have been classified current debt a of September 27 , 2003 . The Company a of September 27 , 2 debt to floating-rate debt and market interest rate , during 2002 the Company entered into and realizing a gain of $ 6 million . During 2001 the $ 6 million . During 2001 the Company closed out all realizing a gain of $ 17 million . Both the gain . Both the gain in 2002 and 2001 were deferred , the gain in 2002 and 2001 were deferred , recognized in Monte Carlo simulation to generate 3000 random market price path . to the Company 's foreign 53 exchange portfolio due to adverse , the Company estimate debt 304 \u2014 $ 911 Accrued expense 899 747 Current debt 304 \u2014 Total expense 899 747 Current debt 304 \u2014 Total current liability 2,357 304 \u2014 Total current liability 2,357 1,658 Long-term debt \u2014 316 \u2014 Total current liability 2,357 1,658 Long-term debt \u2014 316 Deferred 2,357 1,658 Long-term debt \u2014 316 Deferred tax liability and other liability and other non-current liability 235 229 Total liability 2,592 2,203 and other non-current liability 235 229 Total liability 2,592 2,203 Commitments liability 235 229 debt . The Company 's 70 accounting policy for these instrument currency instrument a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 ( in million 2003 and September 28 , 2002 ( in million ) : in million ) : September 27 , 2003 September 28 , ) : September 27 , 2003 September 28 , 2002 Notional September 27 , 2003 September 28 , 2002 Notional Principal Fair , 2003 September 28 , 2002 Notional Principal Fair Value Credit hedge debt to floating-rate debt and defined in SFAS No . 133 for fair value hedge of rate swap . During fiscal 2001 , the Company closed out realizing a gain of $ 17 million . This gain wa asset swap a of September 30 , 2000 , of $ a of September 30 , 2000 , of $ 5.7 million , 2000 , of $ 5.7 million wa deferred and then then recognized in income in 2001 a part of the SFAS of the SFAS No . 133 transition adjustment effective on October transition adjustment effective on October 1 , 2000 . The Company eff debt to floating-rate debt . defined in SFAS No . 133 for fair value hedge of interest rate swap during fiscal 2002 until the Company closed out out the position in late 2002 due to prevailing market interest resulted in a realized gain 73 of $ 6 million . realized gain 73 of $ 6 million . This gain wa in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note that were that were originally issued in 1994 . The note , which semiannually , we debt a of September 27 , 2003 . As of a of September 27 , 2003 . As of September 27 2003 . As of September 27 , 2003 and September 28 As of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , the carrying 2003 and September 28 , 2002 , the carrying amount of rate swap , wa $ 304 million and $ 316 million $ 304 million and $ 316 million , respectively , while the fair value wa $ 302 million and $ 299 million $ 302 million and $ 299 million , respectively . The market value Debt 2003 and September 28 , 2002 . Non-Current Debt and Equity by the Company wa $ 5 million and $ 39 million $ 5 million and $ 39 million a of September 27 39 million a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , respectively . 2003 and September 28 , 2002 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Compan debt and tax asset $ 60 $ 70 Non-current debt and equity investment Non-current debt and equity investment 5 39 Capitalized software development cost debt and equity investment 5 39 Capitalized software development cost , software development cost , net 28 19 Other asset 57 42 development cost , net 28 19 Other asset 57 42 Total net 28 19 Other asset 57 42 Total other asset $ 28 19 Other asset 57 42 Total other asset $ 150 42 Total other asset $ 150 $ 170 Accrued Expenses 2003 other asset $ 150 $ 17", + "tax_rate": "tax rate for 2003 wa 26 % compared to tax rate for 2003 wa 26 % compared to the higher provided . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had deferred and tax credit of $ 452 million before being offset against sheet . As of September 27 , 2003 , a valuation As of September 27 , 2003 , a valuation allowance of a valuation allowance of $ 30 million wa 35 recorded against of $ 30 million wa 35 recorded against the deferred tax valuation allowance . On April 10 , 200 tax rate ( 35 % in 2003 , 2002 rate ( 35 % in 2003 , 2002 , and 2001 35 % in 2003 , 2002 , and 2001 ) to 2003 , 2002 , and 2001 ) to income ( loss ( in million ) : 2003 2002 2001 Computed expected tax in million ) : 2003 2002 2001 Computed expected tax ( million ) : 2003 2002 2001 Computed expected tax ( benefit tax ( benefit ) $ 32 $ 30 $ ( 18 benefit ) $ 32 $ 30 $ ( 18 ) State 32 $ 30 $ ( 18 ) State tax , net net of federal effect ( 4 ) 7 ( 7 ) federal effect ( 4 ) 7 ( 7 ) Indefinitely invested ( 4 ) tax rate 26 15 ) Effective tax rate 26 % 25 % 30 % Effective tax rate 26 % 25 % 30 % On April rate 26 % 25 % 30 % On April 10 , % 30 % On April 10 , 2003 , the Internal % On April 10 , 2003 , the Internal Revenue Service tax return for the year 1998 through 2000 and proposed certain for the year 1998 through 2000 and proposed certain adjustment . issue for year prior to 1998 have been resolved . Management such resolution occurs . Note 7\u2014Shareholders ' Equity CEO Restricted Stock Restricted Stock Award ", + "geographic_information": "geographic marketplace . Approximately 58 % of the Company 's 's net sale in fiscal 2003 came from sale to customer in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and The Company also offer a 90-day basic warranty for Apple software backlog often increase in anticipation 13 of or immediately following new . Employees As of September 27 , 2003 , Apple and As of September 27 , 2003 , Apple a geographic operating segment , during 2002 Japan showed growth in unit 's iMac unit sale increased 85 % in 2002 . However sale increased 85 % in 2002 . However , in the in iMac unit shipment in 2002 versus 2001 wa primarily the unit shipment in 2002 versus 2001 wa primarily the result of in the first quarter of 2001 a discussed above . Additionally comparative basis generally worsened a 2002 progressed reflecting particularly poor economic . Retail The Company opened 25 new retail store during 2003 25 new Geographic Data The Japan . As of September 27 , 2003 , the Retail As of September 27 , 2003 , the Retail segment currently Significant Accounting Policies in Note 1 , except a described below the Retail segment were $ 92 million , $ 106 million $ 92 million , $ 106 million , and $ 92 106 million , and $ 92 million in 2003 , 2002 and $ 92 million in 2003 , 2002 , and 2001 92 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Operating income For the year ended Septemb", + "common_stock": "Common Stock Issued and Outstanding a of December 5 , 2003 PART I The a of December 5 , 2003 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , informa common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at common stock common stock a of September 27 , 2003 . Off-Balance Sheet a of September 27 , 2003 . Off-Balance Sheet Arrangements The support to the Company . 39 Lease Commitments As of September Lease Commitments As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had total operating lease of approximately $ 600 million , $ 354 million $ 600 million , $ 354 million of which related to existing operating lease range from 1 to 12 year . Subsequent lease range from 1 to 12 year . Su common stock connection with acquisition \u2014 \u2014 2,403 66 \u2014 ( 13 ) with acquisition \u2014 \u2014 2,403 66 \u2014 ( 13 ) \u2014 \u2014 2,403 66 \u2014 ( 13 ) \u2014 53 Amortization of \u2014 ( 13 ) \u2014 53 Amortization of deferred stock compensation \u2014 \u2014 \u2014 \u2014 \u2014 2 \u2014 2 Common stock issued \u2014 \u2014 \u2014 2 \u2014 2 Common stock issued under stock under stock plan \u2014 \u2014 3,660 42 \u2014 \u2014 \u2014 42 stock plan \u2014 \u2014 3,660 42 \u2014 \u2014 \u2014 42 Conversion 3,660 42 \u2014 \u2014 \u2014 42 Conversion of Series A preferred Series A preferred stock ( 76 ) ( 76 ) 9,182 stock ( 76 ) ( 76 ) 9,182 76 \u2014 \u2014 76 ) ( 76 ) 9,182 Common stock issued \u2014 \u2014 \u2014 4 \u2014 4 Common stock issued under stock under stock plan \u2014 \u2014 8,037 105 \u2014 \u2014 \u2014 105 stock plan \u2014 \u2014 8,037 105 \u2014 \u2014 \u2014 105 Tax 8,037 105 \u2014 \u2014 \u2014 105 Tax benefit related to stock stock option \u2014 \u2014 \u2014 28 \u2014 \u2014 \u2014 28 Balances \u2014 28 \u2014 \u2014 \u2014 28 Balances a of September 28 28 Balances a of September 28 , 2002 \u2014 $ \u2014 a of September 28 , 2002 \u2014 $ \u2014 358,959 $ , 2002 \u2014 $ \u2014 358,959 $ 1,826 $ 2,325 $ \u2014 $ \u2014 358,959 $ 1,826 $ 2,325 $ ( 7 \u2014 358,959 $ 1,826 $ 2,325 $ ( 7 ) $ 1,826 $ 2,325 $ ( 7 ) $ ( 49 ) ( 7 ) $ ( 49 Common stock issued \u2014 \u2014 \u2014 5 \u2014 5 Common stock issued under stock under stock plan \u2014 \u2014 9,299 128 \u2014 ( 75 ) stock plan \u2014 \u2014 9,299 128 \u2014 ( 75 ) \u2014 \u2014 9,299 128 \u2014 ( 75 ) \u2014 53 Settlement of \u2014 ( 75 ) \u2014 53 Settlement of forward purchase agreement purchase agreement \u2014 \u2014 ( 1,531 ) ( 35 ) \u2014 \u2014 ( 1,531 ) ( 35 ) \u2014 \u2014 \u2014 ( ) \u2014 \u2014 \u2014 ( 35 ) Tax benefit related to stock option \u2014 \u2014 \u2014 7 \u2014 \u2014 \u2014 7 Balances \u2014 7 \u2014 \u2014 \u2014 7 Balances a of September 27 7 Balances a of September 27 , 2003 \u2014 $ \u2014 a of September 27 , 2003 \u2014 $ \u2014 366,727 $ , 2003 \u2014 $ common stock 53 105 42 Cash used for issuance of common stock 53 105 42 Cash used for repurchase of common stock 53 105 42 Cash used for repurchase of repurchase of common stock ( 26 ) \u2014 \u2014 Cash generated Cash generated by financing activity 27 105 42 Increase ( decrease generated by financing activity 27 105 42 Increase ( decrease ) by financing activity 27 105 42 Increase ( decrease ) in in cash and cash equivalent 1,144 ( 58 ) 1,119 Cash and cash equivalent 1,144 ( 58 ) 1,119 Cash and cash equivalent 1,14 common stock in $ \u2014 $ \u2014 $ 66 See accompanying note to consolidated to consolidated financial statement . 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple of September . Fiscal year 2003 , 2002 and 2001 were . Fiscal year 2003 , 2002 and 2001 were each 52-week year 2003 , 2002 and 2001 were each 52-week year . 2002 and 2001 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to al common stock outstanding at the end of 2003 and 2002 , respectively , the end of 2003 and 2002 , respectively , that were be antidilutive . At September 29 , 2001 , the Company . At September 29 , 2001 , the Company had option Company had option to purchase 97.2 million share of it common diluted loss per share for 2001 because the effect would have basis is also disclosed . 68 Note 2\u2014Financial Instruments The carrying also disclosed . 68 Note 2\u2014Financial Instruments The carrying amount of short-term invest common stock common stock beginning in July 2000 . The bond carried an an annual coupon rate of 2 % and paid a total total yield to maturity of 5 % if redeemed at maturity in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . With the a of September 30 , 2000 . With the adoption of adoption of SFAS No . 133 on October 1 , 2000 No . 133 on October 1 , 2000 , the Company 133 on October 1 , 2000 , the Company wa required . Included in the $ 17 million gross SFAS No common stock on the date Total amortization of approximately $ 13 million ha been included in , and administrative expense in 2003 and will continue to be be included at approximately $ 6.2 million per quarter through March million per quarter through March 2006 . The 5 million restricted through March 2006 . The 5 million restricted share have been Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company e common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 27 , 2003 common stock . During 2001 , the remaining 75,750 preferred During 2001 , the remaining 75,750 preferred share were converted into preferred share were converted into 9.2 million share of the Company ( in million ) : 2003 2002 2001 Unrealized gain on in million ) : 2003 2002 2001 Unrealized gain on available-for-sale million ) : 2003 2002 2001 Unrealized gain on available-for-sale security gain on available-for-sale security $ 1 $ 13 $ 30 Unrealized available-for-sale security $ 1 $ 13 $ 30 Unrealized gain common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 6,697,368 share were issued to employee an exercise price of $ 22.76 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 370,000 share outstanding under the Director Directors also receive a $ 50,000 annual retainer paid in quarterly until his resignation in November 2002 at which time Mr. Drexler Committee . No person who 108 wa an employee of the the Company in fiscal year 2003 served on the Compensation Committee of the Company . Item 12 . Security Ownership of Certain certain information a of October 31 , 2003 ( the `` a Common Stock were Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Lord , Abbett & Co. 34,864,239 ( 2 ) 9.49 % Abbett & Co. 34,864,239 ( 2 ) 9.49 % Steven P. Co. 34,864,239 ( 2 ) 9.49 % Steven P. Jobs 5,060,002 9.49 % Steven P. Jobs 5,060,002 ( 3 ) 1.38 % Steven P. Jobs 5,060,002 ( 3 ) 1.38 % Fred D. Jobs 5,060,002 ( 3 ) 1.38 % Fred D. Anderson 1,152,672 1.38 % Fred D. Anderson 1,152,672 ( 4 ) * William Fred D. Anderson 1,152,672 ( 4 ) * William V. Campbell ) * William V. Campbell 90,502 ( 5 ) Common Stock which of stock option . ( 4 ) Includes 1,150,000 share of . ( 4 ) Includes 1,150,000 share of Common Stock which of stock option . ( 5 ) Includes 90,000 share of . ( 5 ) Includes 90,000 share of Common Stock which exercise of stock option . 109 ( 6 ) Includes 800,000 stock option . 109 ( 6 ) Includes 800,000 share of 109 ( 6 ) Includes 800,000 share of Common Stock which of stock option . ( 7 ) Includes 70,000 share of . ( 7 ) Includes 70,000 share of Common Stock which of stock option . ( 8 ) Common Stock which of stock option . ( 9 ) Includes 1,400 share of . ( 9 ) Includes 1,400 share of Common Stock which Dr. Levinson hold indirectly and 30,000 share of Common Stock which of stock option . ( 10 ) Includes 1,600,000 share of . ( 10 ) Includes 1,600,000 share of Common Stock which . * Represents le than 1 % of the issued and the Table Date . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , r common stock reserved Employee Stock Purchase Plan , 310,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 24,830,784 share available for issuance under available for issuance under the 2003 Employee Stock Plan . It not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) On October 22 , ", + "derivative_instruments": "Derivative Instruments Activities . SFAS No . 133 established accounting and reporting standard definition . SFAS No . 133 required the Company to adjust during the first quarter of 2001 , the before tax effect unrealized loss of approximately $ 13 million . Interest and Other and other income decreased $ 29 million or 26 % to decreased $ 29 million or 26 % to $ 83 million or 26 % to $ 83 million during 2003 . The to $ 83 million during 2003 . The decrease is primarily and short-term investment fell to 1.89 % in 2003 Derivative Instruments Activities . SFAS No . 133 establishes accounting and reporting standard definition . SFAS No . 133 requires that all derivative be tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 million , a" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001047469-04-035975/full-submission_features.json b/src/data/feature/AAPL/10-K/0001047469-04-035975/full-submission_features.json new file mode 100644 index 0000000..10ead02 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001047469-04-035975/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue growth of 316 % and accounted for 19 316 % and accounted for 19 % of the Company 's total net sale in fiscal 2004. iPod \u00ae In July 2004 2004. iPod \u00ae In July 2004 , the Company introduced the navigation , and up to 12 hour of battery life . The iPod is available in 20GB and 40GB model . The is available in 20GB and 40GB model . The iPod 's Company formed an alliance with 5 Founder Technology Group Corporation , desktop PCs . In October 2004 , the Company introduced the U2 iPod hold up to 5,000 so Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The 's result of operation . 25 Allowance for Doubtful Accounts The requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is which the carrying value of 26 the asset exceeds their fair ( SFAS ) No . 142 , Goodwill and Other Intangible and requires that : ( 1 ) goodwill be allocated to which it relates ; ( 2 ) the Company estimate the goodwill relates ; and ( 3 ) the Company determine the 's esti Revenue Recognition , which Recognition , which supercedes SAB 101 , Revenue Recognition in Financial in Financial Statements . SAB 104 clarifies existing guidance regarding revenue ( EITF ) No . 00-21 . The adoption of SAB . The adoption of SAB 104 did not have a material operation or financial position . 41 In December 2003 , the position . 41 In December 2003 , the Financial Accounting Standards No . ( FIN ) 46R , a revision to FIN , a revision to FIN 46 , Consolidation of Variable Interest Variable Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The over the maintenance term . 68 Shipping Costs The Company 's pursuant to SFAS No . 86 , Computer Software to be During the fourth quarter of 2004 , the Company incurred substantial of Mac OS X version 10.4 ( code-named `` Tiger `` by public demonstration in August 2004 and subsequent release of a first half of calendar year 2005 . Therefore , during the during the fourth quarter of 2004 , the Company capitalized approximately the Compan revenue $ 544 $ 150 Accrued Expenses 2004 2003 Deferred revenue $ 544 $ 2004 2003 Deferred revenue $ 544 $ 368 Accrued marketing and Deferred revenue $ 544 $ 368 Accrued marketing and distribution 147 368 Accrued marketing and distribution 147 124 Accrued compensation and employee Accrued marketing and distribution 147 124 Accrued compensation and employee benefit Accrued compensation and employee benefit 134 101 Accrued warranty and related compensation and employee benefit 134 101 Accrued warranty an Revenue Service for all year prior to 2001 and proposed certain adjustment . such resolution occurs . Note 7\u2014Shareholders ' Equity Restricted Stock Units Restricted Stock Units During fiscal 2004 , the Company 's Board Directors approved the grant of 2.515 million restricted stock unit to Company ha recorded the $ 64.4 million value of these restricted a straight-line basis over the 4 year requisite service period . amortization will be approximately $ 4.0 million , of which approximately , of which ap", + "expenses": "Expenses 2004 other asset $ 191 $ 150 Accrued Expenses 2004 2003 Deferred 191 $ 150 Accrued Expenses 2004 2003 Deferred revenue $ 544 $ 150 Accrued Expenses 2004 2003 Deferred revenue $ 544 $ 2004 2003 Deferred revenue $ 544 $ 368 Accrued marketing and Deferred revenue $ 544 $ 368 Accrued marketing and distribution 147 368 Accrued marketing and distribution 147 124 Accrued compensation and employee Accrued marketing and distribution 147 124 Accrued compensation and employee benefit Accrued compensation ", + "net_income": "Net income ( $ 5,742 $ 5,363 $ 7,983 Net income ( loss ) income ( loss ) $ 276 $ 69 $ 65 $ loss ) $ 276 $ 69 $ 65 $ ( 25 $ 276 $ 69 $ 65 $ ( 25 ) $ 69 $ 65 $ ( 25 ) $ 786 Earnings ( $ ( 25 ) $ 786 Earnings ( loss ) per common share : Basic $ 0.74 $ 0.19 $ 0.18 $ : Basic $ 0.74 $ 0.19 $ 0.18 $ ( 0.07 $ 0.74 $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.71 $ 0.19 ) $ 2.42 Diluted $ 0.71 $ 0.19 $ 0.18 $ 2.42 Diluted $ 0.71 $ 0.19 $ 0.18 $ ( 0.07 $ 0.71 $ 0.1 net income during 2003 of approximately $ 2 million during 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied Recent Accounting Pronouncements In December 2003 , the Securities and Exchange ( SAB ) No . 104 , Revenue Recognition , which Recognition , which supercedes SAB 101 , Revenue Recognition in Financial in Financial Statements . SAB 104 clarifies existing guidance regarding revenue ( EITF ) No . 00-21 . The adoption of SAB . The ad Net income $ 276 1 \u2014 Net income $ 276 $ 69 $ 65 Earnings Net income $ 276 $ 69 $ 65 Earnings per common $ 276 $ 69 $ 65 Earnings per common share before accounting change : Basic $ 0.74 $ 0.19 $ 0.18 Diluted : Basic $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Earnings 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Earnings per common $ 0.71 $ 0.19 $ 0.18 Earnings per common share : common share : Basic $ 0.74 $ 0.19 $ 0.18 Diluted : Basic $ 0. Net income \u2014 \u2014 \u2014 65 \u2014 65 Change in foreign \u2014 \u2014 \u2014 65 \u2014 65 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 5 5 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 5 5 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 17 ) ( 17 ) Change \u2014 ( 17 ) ( 17 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 ( 15 ) ( 15 ) Total \u2014 ( 15 ) ( 15 ) Total comprehensive income 38 15 ) Total comprehensive income 38 Amortization of deferred stock compensation deferred stock compensation \u2014 \u2014 4 \u2014 \u2014 4 Common stock \u2014 \u2014 4 \u2014 \u2014 4 Common stock issued under stock st Net income \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 31 31 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 31 31 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 12 ) ( 12 ) Change \u2014 ( 12 ) ( 12 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 ( 5 ) ( 5 ) Total \u2014 ( 5 ) ( 5 ) Total comprehensive income 83 5 ) Total comprehensive income 83 Amortization of deferred stock compensation deferred stock compensation \u2014 \u2014 15 \u2014 \u2014 15 Write-off of \u2014 \u2014 15 \u2014 \u2014 15 Write-off of deferred stock com Net income \u2014 \u2014 \u2014 276 \u2014 276 Change in foreign \u2014 \u2014 \u2014 276 \u2014 276 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 5 ) ( 5 ) Change \u2014 ( 5 ) ( 5 ) Change in unrealized loss tax \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 296 \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 296 Issuance 12 12 Total comprehensive income 296 Issuance of restricted stock unit of restricted stock unit \u2014 64 ( 64 ) \u2014 \u2014 stock unit \u2014 64 ( 64 ) \u2014 \u2014 \u2014 Adju Net income Operating Activities : Net income 276 69 65 Cumulative effect of Activities : Net income 276 69 65 Cumulative effect of accounting : Net income 276 69 65 Cumulative effect of accounting change net of tax \u2014 ( 1 ) \u2014 Adjustments to reconcile Depreciation , amortization and accretion 150 113 114 Stock-based compensation expense , amortization and accretion 150 113 114 Stock-based compensation expense 33 amortization and accretion 150 113 114 Stock-based compensation expense 33 16 113 114 Stock-base Net income\u2014as reported share amount ) : 2004 2003 2002 Net income\u2014as reported $ amount ) : 2004 2003 2002 Net income\u2014as reported $ 276 2002 Net income\u2014as reported $ 276 $ 69 $ 65 Add income\u2014as reported $ 276 $ 69 $ 65 Add : Stock-based $ 276 $ 69 $ 65 Add : Stock-based employee compensation income , net of tax 33 15 5 Deduct : Stock-based , net of tax 33 15 5 Deduct : Stock-based employee net of tax 33 15 5 Deduct : Stock-based employee compensation , net of tax ( 141 ) ( 181 ) ( tax ( 141 ) ( 181 ) ( 234 Net income ( loss loss ) \u2014pro forma $ 168 $ ( 97 ) $ forma $ 168 $ ( 97 ) $ ( 164 ) ( 97 ) $ ( 164 ) Net income per common common share\u2014as reported Basic $ 0.74 $ 0.19 $ 0.18 Diluted reported Basic $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Net 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Net income ( $ 0.71 $ 0.19 $ 0.18 Net income ( loss ) common share\u2014pro forma Basic $ 0.45 $ ( 0.27 ) $ Basic $ 0.45 $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.4 Net income $ 276 1 \u2014 Net income $ 276 $ 69 $ 65 Denominator Net income $ 276 $ 69 $ 65 Denominator ( in $ 276 $ 69 $ 65 Denominator ( in thousand ) , excluding unvested restricted stock 371,590 360,631 355,022 Effect of dilutive excluding unvested restricted stock 371,590 360,631 355,022 Effect of dilutive option unvested restricted stock 371,590 360,631 355,022 Effect of dilutive option , stock unit and restricted stock 15,721 2,835 6,763 Denominator for diluted unit and restricted stock 15,721 2,835 6,7 net income ( 4 ) ( 23 ) 32 income ( 4 ) ( 23 ) 32 Change in unrealized 4 ) ( 23 ) 32 Change in unrealized gain/loss on on available-for-sale security $ ( 5 ) $ ( 12 ) ( 5 ) $ ( 12 ) $ ( 17 ) ( 12 ) $ ( 17 ) The tax effect related on available-for-sale security wa $ 4 million , $ 6 million $ 4 million , $ 6 million , and $ 10 6 million , and $ 10 million for fiscal 2004 , $ 10 million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respect net income wa $ 1 million , $ ( 8 1 million , $ ( 8 ) million and $ 10 8 ) million and $ 10 million for fiscal 2004 , $ 10 million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . The following ( in million ) : 2004 2003 2002 Changes in fair in million ) : 2004 2003 2002 Changes in fair value million ) : 2004 2003 2002 Changes in fair value of value of derivative $ ( 21 ) $ ( 24 ) ( 21 ) $ ( 24 ) $ 4 Adjustment for $ ( 24 ) net income 33 19 ( 19 ) Change included in net income 33 19 ( 19 ) Change in net income 33 19 ( 19 ) Change in unrealized gain/loss gain/loss on derivative instrument $ 12 $ ( 5 ) $ instrument $ 12 $ ( 5 ) $ ( 15 ) ( 5 ) $ ( 15 ) The tax effect related value of derivative wa $ 10 million , $ 11million and $ 10 million , $ 11million and $ ( 2 ) $ 11million and $ ( 2 ) million for fiscal 2004 2 ) million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.28 $ 0.16 $ 0.13 $ : Basic $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.12 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.12 $ 0.17 2003 $ 0.26 $ 0.16 $ 0.12 $ 0.17 2003 Net Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02 ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Basic 0.05 $ 0.04 $ ( 0.02 ) Basic and diluted earnings , Net income ( second and first quarter of 2003 included restructuring charge , net of tax , of $ 2 million and $ 18 million $ 2 million and $ 18 million , respectively . Net for the first quarter of 2003 included an after-tax unfavorable cumulative-effect of SFAS No.143 of $ 2 million . 102 REPORT OF of $ 2 million . 102 REPORT OF INDEPENDENT REGISTERED PUBLIC Company ) a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , and the 200", + "assets": "ASSETS September 25 , 2004 September 27 , 2003 ASSETS : Current , 2004 September 27 , 2003 ASSETS : Current asset : Cash and cash equivalent $ 2,969 $ 3,396 Short-term investment 2,495 cash equivalent $ 2,969 $ 3,396 Short-term investment 2,495 1,170 Accounts 2,969 $ 3,396 Short-term investment 2,495 1,170 Accounts receivable , le $ 3,396 Short-term investment 2,495 1,170 Accounts receivable , le allowance , le allowance of $ 47 and $ 49 , respectively of $ 47 and $ 49 , respectively 774 766 Inventori Assets Including September 25 , 2004 $ 8.2 Long-Lived Assets Including Goodwill and the three year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 the Company had , and September 28 , 2002 the Company had no material restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and O Assets Total inventory $ 101 $ 56 Other Current Assets 2004 2003 $ 56 Other Current Assets 2004 2003 Vendor non-trade receivables $ 56 Other Current Assets 2004 2003 Vendor non-trade receivables $ 276 2003 Vendor non-trade receivables $ 276 $ 184 Other current asset non-trade receivables $ 276 $ 184 Other current asset 209 125 $ 184 Other current asset 209 125 Total other current asset 184 Other current asset 209 125 Total other current asset $ Total other current asset $ 485 $ 309 79 Property , curre Assets 2004 and equipment $ 707 $ 669 Other Assets 2004 2003 Non-current 707 $ 669 Other Assets 2004 2003 Non-current deferred tax asset $ 669 Other Assets 2004 2003 Non-current deferred tax asset $ Non-current deferred tax asset $ 86 $ 60 Capitalized software development tax asset $ 86 $ 60 Capitalized software development cost , software development cost , net 25 28 Other asset 80 62 development cost , net 25 28 Other asset 80 62 Total net 25 28 Other asset 80 62 Total other asset $ 25 28 Other asse Assets life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The Company ceased at the beginning of fiscal 2002 when it adopted SFAS No it adopted SFAS No . 142 . The following table summarizes in million ) : September 25 , 2004 September 27 , ) : September 25 , 2004 September 27 , 2003 Gross September 25 , 2004 September 27 , 2003 Gross Carrying Amount , 2004 September 27 , 2003 Gross Carrying Amount Accumulated Amortization Goodwill ( a ) $ 80 \u2014 $ 80 $ 85 ) $ 80 \u2014 $ 80 Assets : $ 8,279 $ 6,207 $ 5,742 Long-Lived Assets : U.S. $ Long-Lived Assets : U.S. $ 637 $ 635 $ 561 Japan : U.S. $ 637 $ 635 $ 561 Japan 52 19 $ 637 $ 635 $ 561 Japan 52 19 2 Other $ 635 $ 561 Japan 52 19 2 Other Countries 72 635 $ 561 Japan 52 19 2 Other Countries 72 60 $ 561 Japan 52 19 2 Other Countries 72 60 69 52 19 2 Other Countries 72 60 69 Total Long-Lived Assets 19 2 Other Countries 72 60 69 Total Long-Lived Assets $ 2 Other Countries 72 60 69 Total Long-Lived Assets $ 761 69 Total Long-Li Assets $ 761 $ 714 $ 632 100 Long-Lived Assets $ 761 $ 714 $ 632 100 Information regarding $ 761 $ 714 $ 632 100 Information regarding net sale 761 $ 714 $ 632 100 Information regarding net sale by ( in million ) : 2004 2003 2002 Net Sales : in million ) : 2004 2003 2002 Net Sales : Power million ) : 2004 2003 2002 Net Sales : Power Macintosh Macintosh ( a ) $ 1,419 $ 1,237 $ 1,380 PowerBook a ) $ 1,419 $ 1,237 $ 1,380 PowerBook 1,589 1,299 $ 1,419 $ 1,237 $ 1,380 PowerBook 1,589 1,299 831 iMac $ 1,23", + "liabilities": "Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of LIABILITIES AND SHAREHOLDERS Total asset $ 8,050 $ 6,815 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 899 Current 1,451 $ 1,154 Accrued expense 1,229 899 Current debt \u2014 304 $ 1,154 Accrued expense 1,229 899 Current debt \u2014 304 Total 1,229 899 Current debt \u2014 304 Total current liability 2,680 2,357 \u2014 304 Total current liability 2,680 2,357 Deferred tax liability and 304 Total current liability 2, Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Company to acquire 1.5 million share of it common an average price of $ ", + "equity": "Equity Securities In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Since inception of the ha repur equity $ 2,203 $ 2,101 $ 2,696 Shareholders ' equity $ 5,076 2,696 Shareholders ' equity $ 5,076 $ 4,223 $ 4,095 $ ' equity $ 5,076 $ 4,223 $ 4,095 $ 3,920 $ $ 5,076 $ 4,223 $ 4,095 $ 3,920 $ 4,107 Net $ 4,223 $ 4,095 $ 3,920 $ 4,107 Net gain before $ 4,095 $ 3,920 $ 4,107 Net gain before tax related and equity investment of $ 4 million , $ 10 million $ 4 million , $ 10 million , $ 75 million $ 10 million , $ 75 million , and $ 367 75 million , and $ 367 million were recognized in 2004 367 million wer equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , $ 30 million $ 26 million , $ 30 million , and $ 8 30 million , and $ 8 mi Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of $ 16.64 pe EQUITY liability : Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 899 Current 1,451 $ 1,154 Accrued expense 1,229 899 Current debt \u2014 304 $ 1,154 Accrued expense 1,229 899 Current debt \u2014 304 Total 1,229 899 Current debt \u2014 304 Total current liability 2,680 2,357 \u2014 304 Total current liability 2,680 2,357 Deferred tax liability and 304 Total current liability 2,680 2,357 Deferred tax liability and other liability and other non-current liabilit equity ) Total shareholder ' equity 5,076 4,223 Total liability and shareholder Total shareholder ' equity 5,076 4,223 Total liability and shareholder ' and shareholder ' equity $ 8,050 $ 6,815 See accompanying note ' equity $ 8,050 $ 6,815 See accompanying note to consolidated to consolidated financial statement . 60 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 25 , 2004 2004 2003 2002 year ended September 25 , 2004 2004 2003 2002 Net sale ended September 25 , 2004 2004 2 Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Company to acquire 1.5 million share of it common an average price of $ 16.64 per s Equity and expense . In fiscal 2004 , the Company sold all investment in public company . 77 EarthLink In January 2000 , . 77 EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after January 4 , 2001 , into approximately 7.1 million , 2001 , into approximately 7.1 million share of EarthLink common During the first quarter of 2003 , the Company sold 2,580,000 2003 , the Company sold equity investment reflected sheet . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had no consolidated balance sheet . Note 3\u2014Consolidated Financial Statement Details ( in ( in million ) Inventories 2004 2003 Purchased part $ 1 in million ) Inventories 2004 2003 Purchased part $ 1 $ 2004 2003 Purchased part $ 1 $ 2 Work in process Purchased part $ 1 $ 2 Work in process \u2014 4 2 Work in process \u2014 4 Finished good 100 50 Total process \u2014 4 Finished good 100 50 Total inventory Equity Restricted Stock Units Restricted Stock Units During fiscal 2004 , the Company 's Board Directors approved the grant of 2.515 million restricted stock unit to Company ha recorded the $ 64.4 million value of these restricted a straight-line basis over the 4 year requisite service period . amortization will be approximately $ 4.0 million , of which approximately , of which approximately $ 0.5 million will be included in cost of sale ; $ 1.3 million will be included in ; and the remaining $ 2.2 mi equity in 2003 and changed it method of of accounting for goodwill in 2002 . /s/ KPMG LLP Mountain Mountain View , California October 12 , 2004 103 Item 9 , California October 12 , 2004 103 Item 9 . Changes California October 12 , 2004 103 Item 9 . Changes in 12 , 2004 103 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Based the Securities Exchange Act of 1934 , a amended ( Exchange were effective a of September 25 , 2004 to ensure that a of Septemb equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan `` ) and 800,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 440,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly the Company in fiscal year 2004 served on the Compensation Committee Equity Compensation Plan Information information , a of September 25 , 2004 , concerning share a of September 25 , 2004 , concerning share of common compensation plan approved by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 approved by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity compensation 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity compensation plan not plan not approved by shareholder 33,286,253 $ 20.25 \u2014 Total equity approved by equity compensation plan Total equity compensation plan ( 2 ) 55,279,165 $ 21.07 14,072,423 compensation plan ( 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ( 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ) This 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ) This number 55,279,165 $ 21.07 14,072,423 ( 1 ) This number includes 2,047,911 1 ) This number includes 2,047,911 share of common stock reserved Employee Stock Purchase Plan , 240,000 share available for issuance under available for issuance under the 1997 Director Sto Equity Securities Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Quantitative and Qualitative Disclosures Disclosures About Market Risk Item 8 . Financial Statements and Supplementary REGISTERED PUBLIC ACCOUNTING FIRM Item 9 . Changes in and Disagreements Accounting and Financial Disclosure Item 9A . Controls and Procedures PART and Procedures PART III Item 10 . Directors and Executive Officers Officers of the R", + "cash_flow": "cash flow ( c ) 76 82 77 Annual operating cash flow $ Annual operating cash flow $ 934 $ 289 $ 89 ( cash flow $ 934 $ 289 $ 89 ( a ) $ 934 $ 289 $ 89 ( a ) DSO is inventory . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had $ , the Company had $ 5.464 billion in cash , cash , an increase of $ 898 million over the same balance at the end of fiscal 2003 . The principal component of by operating activity of $ 934 million and proceeds of $ million and proceeds of $ 427 mill cash flow of approximately $ 12 million would be required to other obligation of approximately $ 24 million are primarily related to vendor , are located near 45 major seismic fault . Because the second half of calendar 2000 for personal computing product . advantage over competing platform . 46 The Company is currently focused continue to pursue one-to-one ( 1:1 ) learning solution in education education . The Company 's 1:1 learning solution are a complete a central server . These 1:1 learning solution cash flow $ 2,969 $ 3,396 $ 2,252 Supplemental cash flow disclosure : the year for interest $ 10 $ 20 $ 20 Cash for interest $ 10 $ 20 $ 20 Cash paid ( $ 10 $ 20 $ 20 Cash paid ( received ) tax , net $ ( 7 ) $ 45 $ 11 $ ( 7 ) $ 45 $ 11 See accompanying note 7 ) $ 45 $ 11 See accompanying note to consolidated to consolidated financial statement . 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple of September . Fiscal cash flow of $ 9.5 million would be required to the Company recorded a $ 6 million long-term asset retirement liability future cash flow of $ 9.5 million and it present value it present value of $ 6 million at September 29 , $ 6 million at September 29 , 2002 , is being million at September 29 , 2002 , is being accreted over tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect during the first quarter of 2003 of approximately $ cash flow hedge . 89 The following table summarizes the ( in million ) : 2004 2003 2002 Unrealized gain ( in million ) : 2004 2003 2002 Unrealized gain ( loss million ) : 2004 2003 2002 Unrealized gain ( loss ) on available-for-sale security $ ( 4 ) $ 1 $ 13 $ ( 4 ) $ 1 $ 13 Unrealized loss on 4 ) $ 1 $ 13 Unrealized loss on derivative investment loss on derivative investment ( 4 ) ( 16 ) ( investment ( 4 ) ( 16 ) ( 11 ) Cumulative ) ( 16 ) ( 11 ) Cumulative foreign currency translation Cumulative foreig", + "gross_margin": "gross margin percentage ) : 2004 2003 2002 Net sale $ margin percentage ) : 2004 2003 2002 Net sale $ 8,279 percentage ) : 2004 2003 2002 Net sale $ 8,279 $ 2003 2002 Net sale $ 8,279 $ 6,207 $ 5,742 Cost Net sale $ 8,279 $ 6,207 $ 5,742 Cost of sale $ 8,279 $ 6,207 $ 5,742 Cost of sale 6,020 4,499 $ 5,742 Cost of sale 6,020 4,499 4,139 Gross margin $ 5,742 Cost of sale 6,020 4,499 4,139 Gross margin $ 2,259 Cost of sale 6,020 4,499 4,139 Gross margin $ 2,259 $ 4,499 4,139 Gross margin $ 2,259 $ 1,708 $ 1,6 Gross margin $ 2,259 $ 1,708 $ 1,603 Gross margin percentage $ 2,259 $ 1,708 $ 1,603 Gross margin percentage 27.3 % $ 1,603 Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin declined in Gross margin declined in fiscal 2004 to 27.3 % of net declined in fiscal 2004 to 27.3 % of net sale from % of net sale from 27.5 % of net sale in % of net sale in 2003 . The Company 's gross 's gross margin during fiscal 2004 de gross margin during 2005 , general demand for personal , including continued industry wide 35 global pricing pressure , increased . Gross margin decreased to 27.5 % of net sale in % of net sale in 2003 from 27.9 % of net net sale in 2003 from 27.9 % of net sale in % of net sale in 2002 . This decline in gross Company beginning in late fiscal 2002 a a result of continued first three fiscal quarter of 2003 , and increased air freight new Power Mac G5 and 15-inch PowerBook , both of which shipping in volume du gross margin during 2003 were partially offset by the three fiscal year ended September 25 , 2004 are a follows year ended September 25 , 2004 are a follows ( in except for percentage ) : 2004 2003 2002 Research and development for percentage ) : 2004 2003 2002 Research and development $ percentage ) : 2004 2003 2002 Research and development $ 489 2002 Research and development $ 489 $ 471 $ 446 Percentage and development $ 489 $ 471 $ 446 Percentage of net $ 489 $ 471 $ 446 Percentage of net sale 6 446 Perc Gross margin 2,259 5,742 Cost of sale 6,020 4,499 4,139 Gross margin 2,259 1,708 Cost of sale 6,020 4,499 4,139 Gross margin 2,259 1,708 1,603 6,020 4,499 4,139 Gross margin 2,259 1,708 1,603 Operating expense : 4,499 4,139 Gross margin 2,259 1,708 1,603 Operating expense : Research 4,139 Gross margin 2,259 1,708 1,603 Operating expense : Research and expense : Research and development 489 471 446 Selling , general : Research and development 489 471 446 Selling , general , Research and development 489 471 4 Gross margin $ $ 2,014 $ 1,909 $ 2,006 Gross margin $ 634 $ $ 2,006 Gross margin $ 634 $ 559 $ 530 $ Gross margin $ 634 $ 559 $ 530 $ 536 Net $ 634 $ 559 $ 530 $ 536 Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.28 $ 0.16 $ 0.13 $ : Basic $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.26 $ 0.1 Gross margin $ $ 1,545 $ 1,475 $ 1,472 Gross margin $ 456 $ $ 1,472 Gross margin $ 456 $ 428 $ 418 $ Gross margin $ 456 $ 428 $ 418 $ 406 Net $ 456 $ 428 $ 418 $ 406 Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02", + "accumulated_depreciation": "Accumulated depreciation 79 74 Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and 74 Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and amortization Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 591 ) ( 505 ) Net amortization ( 591 ) ( 505 ) Net property , plant plant , and equipment $ 707 $ 669 Other Assets 2004 and equipment $ 707 $ 669 Other Assets 2004 2003 Non-current 707 $ 669 Other Assets 2", + "capital_expenditure": "capital expenditure were $ 176 million during fiscal 2004 , $ 176 million during fiscal 2004 , $ 104 million of during fiscal 2004 , $ 104 million of which were for 's Retail segment and $ 72 million of which were primarily it will utilize approximately $ 240 million for capital expenditure during million for capital expenditure during 2005 , approximately $ 125 million during 2005 , approximately $ 125 million of which is expected general information technology infrastructure . 43 Stock Repurchase Plan In July St", + "debt": "debt ( $ 6,298 $ 6,021 $ 6,803 Long-term debt ( including current maturity ) $ \u2014 $ 304 $ 316 $ 317 $ $ \u2014 $ 304 $ 316 $ 317 $ 300 Total $ 304 $ 316 $ 317 $ 300 Total liability $ $ 316 $ 317 $ 300 Total liability $ 2,974 $ $ 300 Total liability $ 2,974 $ 2,592 $ 2,203 $ Total liability $ 2,974 $ 2,592 $ 2,203 $ 2,101 $ $ 2,974 $ 2,592 $ 2,203 $ 2,101 $ 2,696 Shareholders $ 2,592 $ 2,203 $ 2,101 $ 2,696 Shareholders ' equity $ 2,203 $ 2,101 $ 2,696 Shareholders ' equity $ 5,076 2,696 Shareholders ' equ debt swap of approximately $ 23 million wa fully amortized a notes ' maturity in February 2004 . Provision for Income Taxes for the year ended September 25 , 2004 wa approximately 28 year ended September 25 , 2004 wa approximately 28 % . 25 , 2004 wa approximately 28 % . The Company 's federal income tax rate of 35 % due primarily to certain such earnings are intended to 40 be indefinitely reinvested outside the the U.S. As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company debt of $ 300 million and purchase of property , and equipment of $ 176 million . The Company 's liquid investment . Approximately $ 3.2 billion of this cash , American Jobs Creation Act of 2004 , and may decide to existing operation over the next 12 month . Debt In February month . Debt In February 2004 , the Company retired $ , the Company retired $ 300 million of debt outstanding in outstanding in the form of 6.5 % unsecured note . The note were originally issued in 1994 and were sold at 99.9925 debt to floating-rate debt . market interest rate , during 2001 and 2002 the Company entered rate , during 2001 and 2002 the Company entered into and position realizing gain of $ 23 million . The gain were Monte Carlo simulation to generate 3000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 3.2 million a of September 25 3.2 million a of September 25 , 2004 compared to a a of September 25 , 2004 compared to a maximum one-day maximum one-da debt \u2014 304 $ 1,154 Accrued expense 1,229 899 Current debt \u2014 304 Total 1,229 899 Current debt \u2014 304 Total current liability 2,680 2,357 \u2014 304 Total current liability 2,680 2,357 Deferred tax liability and 304 Total current liability 2,680 2,357 Deferred tax liability and other liability and other non-current liability 294 235 Total liability 2,974 2,592 and other non-current liability 294 235 Total liability 2,974 2,592 Commitments liability 294 235 Total liability 2,974 2,592 Commitments and conting debt ( 300 ) \u2014 \u2014 Proceeds from from issuance of common stock 427 53 105 Cash used for issuance of common stock 427 53 105 Cash used for repurchase of common stock 427 53 105 Cash used for repurchase of of common stock \u2014 ( 26 ) \u2014 Cash generated by Cash generated by financing activity 127 27 105 Increase ( decrease generated by financing activity 127 27 105 Increase ( decrease ) by financing activity 127 27 105 Increase ( decrease ) in cash and cash equivalent ( 427 ) 1,144 ( 58 ) cash equivalent ( 42 debt to floating-rate debt . market interest rate , during 2001 and 2002 the Company entered rate , during 2001 and 2002 the Company entered into and position realizing gain of $ 23 million which were deferred over debt . As of September 25 , 2004 and September 27 As of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , the Company 2004 and September 27 , 2003 , the Company had no outstanding . Debt In February 2004 , the Company retired $ , the Company retired $ 300 mil debt outstanding in outstanding in the form of 6.5 % unsecured note . The note were originally issued in 1994 and were sold at 99.9925 1994 and were sold at 99.9925 % of par for an effective yield to maturity of 6.51 % . As of September % . As of September 27 , 2003 , the carrying As of September 27 , 2003 , the carrying amount of rate swap , wa $ 304 million , respectively , while the fair value wa $ 302 million . The fair value market value a of September 27 , 2003 . Non-Current Debt a of Septembe Debt and Equity and expense . In fiscal 2004 , the Company sold all investment in public company . 77 EarthLink In January 2000 , . 77 EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after January 4 , 2001 , into approximately 7.1 million , 2001 , into approximately 7.1 million share of EarthLink common During the first quarter of 2003 , the Company sold 2,580,000 2003 , the C", + "earnings_per_share": "earnings per share . 56 Item 7A . Quantitative and per share . 56 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 25 , 2004 , approximately $ As of September 25 , 2004 , approximately $ 180 million , 2004 , approximately $ 180 million of the Company 's had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 27 , 2003 , $ 629 As of September 27 , 2003 , $ 629 million of 27 , 2003 , $ 629 million of the Company earnings per share . 71 The following table set forth For the Years Ended September 25 , 2004 September 27 , Years Ended September 25 , 2004 September 27 , 2003 September September 25 , 2004 September 27 , 2003 September 28 , , 2004 September 27 , 2003 September 28 , 2002 Numerator September 27 , 2003 September 28 , 2002 Numerator ( in , 2003 September 28 , 2002 Numerator ( in million ) Income before accounting change $ 276 $ 68 $ 65 Cumulative accounting change $ 276 $ 68 $ 65 Cumulative effect of $ 276 $ 68 $ 6 earnings per share 387,311 363,466 361,785 Basic earnings per diluted earnings per share 387,311 363,466 361,785 Basic earnings per share earnings per share 387,311 363,466 361,785 Basic earnings per share before share before accounting change $ 0.74 $ 0.19 $ 0.18 Cumulative accounting change $ 0.74 $ 0.19 $ 0.18 Cumulative effect of $ 0.74 $ 0.19 $ 0.18 Cumulative effect of accounting change share after accounting change $ 0.74 $ 0.19 $ 0.18 Diluted accounting change $ 0.74 $ 0.19 $ 0.18 Diluted earnings per $ 0 earnings per share before share before accounting change $ 0.71 $ 0.19 $ 0.18 Cumulative accounting change $ 0.71 $ 0.19 $ 0.18 Cumulative effect of $ 0.71 $ 0.19 $ 0.18 Cumulative effect of accounting change share after accounting change $ 0.71 $ 0.19 $ 0.18 Potentially accounting change $ 0.71 $ 0.19 $ 0.18 Potentially dilutive security $ 0.71 $ 0.19 $ 0.18 Potentially dilutive security , including stock , to purchase approximately 4.4 million , 50.8 million , purchase approximately 4.4 million , 50.8 million ,", + "tax_rate": "tax rate of 35 % due primarily to certain such earnings are intended to 40 be indefinitely reinvested outside the the U.S. As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had deferred and tax credit of $ 647 million before being offset against asset . As of September 25 , 2004 , a valuation As of September 25 , 2004 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the for all year prior to 2001 and proposed certain adjustment . Liabilit tax rate ( 35 % in 2004 , 2003 rate ( 35 % in 2004 , 2003 , and 2002 35 % in 2004 , 2003 , and 2002 ) to 2004 , 2003 , and 2002 ) to income before provision ( in million ) : 2004 2003 2002 Computed expected tax in million ) : 2004 2003 2002 Computed expected tax $ million ) : 2004 2003 2002 Computed expected tax $ 134 2002 Computed expected tax $ 134 $ 32 $ 30 State expected tax $ 134 $ 32 $ 30 State tax , $ 134 $ 32 $ 30 State tax , net of net of federal effect ( 5 ) ( 4 ) 7 effect ( 5 ) ( 4 ) 7 Indefi tax rate $ 107 $ 24 $ 22 Effective tax rate 28 % $ 22 Effective tax rate 28 % 26 % 25 % Effective tax rate 28 % 26 % 25 % The Internal rate 28 % 26 % 25 % The Internal Revenue Service for all year prior to 2001 and proposed certain adjustment . such resolution occurs . Note 7\u2014Shareholders ' Equity Restricted Stock Units Restricted Stock Units During fiscal 2004 , the Company 's Board Directors approved the grant of 2.515 million restricted stock unit to Company ha recorded the $ 64.4 million value of th", + "geographic_information": "geographic marketplace . Approximately 59 % of the Company 's 's net sale in fiscal 2004 came from sale to customer include component obtained from foreign 15 supplier , can be adversely in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and The Company also offer a 90-day basic warranty for Apple service . Employees As of September 25 , 2004 , Apple and As of September 25 , 2004 , Apple and i geographic operating may be found in Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and . `` Americas During fiscal 2004 , net sale in the in the Americas segment grew 26 % or $ 838 million grew 26 % or $ 838 million compared to fiscal 2003 838 million compared to fiscal 2003 . The increase in net increase in net sale during 2004 wa primarily attributable to the Retail segment , which had 84 store in t Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of U.S. and Japan during fiscal 2004 . Other operating segment include a those described in Note 1 , `` Summary of Significant the Retail segment were $ 104 million , $ 92 million $ 104 million , $ 92 million and $ 106 million $ 92 million and $ 106 million for 2004 , 2003 and $ 106 million for 2004 , 2003 and 2002 , 106 million for 2004 , 2003 and 2002 , respectively . for 2004 , 2003 and 2002 , respectively . Operating income ", + "common_stock": "Common Stock Issued and Outstanding a of November 19 , 2004 PART I The a of November 19 , 2004 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , infor common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Since inception of the ha repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an common stock common stock a of September 25 , 2004 . The Company a of September 25 , 2004 . The Company did not the fourth quarter of fiscal 2004 . Item 6 . Selected of fiscal 2004 . Item 6 . Selected Financial Data The read in conjunction with Item 7 , `` Management 's Discussion related note thereto included in 22 Item 8 of this Form thereto included in 22 Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 25 , 2004 ( In million year ended Se common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at common stock common stock a of September 25 , 2004 . Off-Balance Sheet a of September 25 , 2004 . Off-Balance Sheet Arrangements and firm commitment a of September 25 , 2004 and excludes amount a of September 25 , 2004 and excludes amount already recorded Payments Due in Less Than 1 year Payments Due in 1-3 1 year Payments Due in 1-3 year Payments Due in 4-5 1-3 year Payments Due in 4-5 year Payments Due in More Payments Due in More Than 5 year Operating Leases $ 617 5 year Operating Leases $ 617 $ 89 $ 170 Common stock \u2014 \u2014 4 \u2014 \u2014 4 Common stock issued under stock stock issued under stock plan 8,037 105 \u2014 \u2014 \u2014 105 issued under stock plan 8,037 105 \u2014 \u2014 \u2014 105 Tax 8,037 105 \u2014 \u2014 \u2014 105 Tax benefit related to stock related to stock option \u2014 28 \u2014 \u2014 \u2014 28 Balances \u2014 28 \u2014 \u2014 \u2014 28 Balances a of September 28 28 Balances a of September 28 , 2002 358,959 $ 1,826 a of September 28 , 2002 358,959 $ 1,826 $ ( of September 28 , 2002 358,959 $ 1,826 $ ( 7 28 , 2002 358,959 $ 1,826 $ ( 7 ) $ 358,959 $ 1,826 $ ( 7 ) $ 2,325 $ ( $ ( 7 Common stock \u2014 \u2014 5 \u2014 \u2014 5 Common stock issued under stock stock issued under stock plan 9,299 128 ( 75 ) \u2014 issued under stock plan 9,299 128 ( 75 ) \u2014 \u2014 stock plan 9,299 128 ( 75 ) \u2014 \u2014 53 Settlement ( 75 ) \u2014 \u2014 53 Settlement of forward purchase agreement of forward purchase agreement ( 1,531 ) ( 35 ) \u2014 agreement ( 1,531 ) ( 35 ) \u2014 \u2014 \u2014 ( ) \u2014 \u2014 \u2014 ( 35 ) Tax benefit related to related to stock option \u2014 7 \u2014 \u2014 \u2014 7 Balances \u2014 7 \u2014 \u2014 \u2014 7 Balances a of September 27 7 Balances a of September 27 , 2003 366,727 $ 1,926 a Common stock \u2014 \u2014 33 \u2014 \u2014 33 Common stock issued under stock stock issued under stock plan 24,796 427 \u2014 \u2014 \u2014 427 issued under stock plan 24,796 427 \u2014 \u2014 \u2014 427 Tax 24,796 427 \u2014 \u2014 \u2014 427 Tax benefit related to stock related to stock option \u2014 99 \u2014 \u2014 \u2014 99 Balances \u2014 99 \u2014 \u2014 \u2014 99 Balances a of September 25 99 Balances a of September 25 , 2004 391,444 $ 2,514 a of September 25 , 2004 391,444 $ 2,514 $ ( of September 25 , 2004 391,444 $ 2,514 $ ( 93 25 , 2004 391,444 $ 2,514 $ ( 93 ) $ 391,444 $ 2,514 $ ( 93 ) $ 2,670 $ common stock 427 53 105 Cash used for issuance of common stock 427 53 105 Cash used for repurchase of common stock 427 53 105 Cash used for repurchase of of common stock \u2014 ( 26 ) \u2014 Cash generated by Cash generated by financing activity 127 27 105 Increase ( decrease generated by financing activity 127 27 105 Increase ( decrease ) by financing activity 127 27 105 Increase ( decrease ) in cash and cash equivalent ( 427 ) 1,144 ( 58 ) cash equivalent ( 427 ) 1,144 ( 58 ) Cash and ( 427 ) 1,144 ( 58 ) Cash and common stock for the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively , , and September 28 , 2002 , respectively , were excluded basis is also disclosed . 72 Note 2\u2014Financial Instruments The carrying also disclosed . 72 Note 2\u2014Financial Instruments The carrying amount of short-term investment a of September 25 , 2004 common stock , valued at approximately $ 2 million , that were previously adjustment also included approximately $ 3 million to adjust the original ) : Fiscal Years : 2005 $ 6 2006 3 2007 Fiscal Years : 2005 $ 6 2006 3 2007 2 2008 Years : 2005 $ 6 2006 3 2007 2 2008 1 : 2005 $ 6 2006 3 2007 2 2008 1 2009 2005 $ 6 2006 3 2007 2 2008 1 2009 1 $ 6 2006 3 2007 2 2008 1 2009 1 Thereafter 6 2006 3 2007 2 2008 1 2009 1 Thereafter 4 2006 3 2007 2 2008 1 2009 1 Thereafter 4 Total 3 2007 2 2008 1 2009 1 Thereafter 4 common stock of $ 14.95 on the date of the which amount to approximately $ 6.2 million per quarter , ha administrative expense beginning in March 2003 and will continue to be to be included through March 2006 . The 5 million restricted through March 2006 . The 5 million restricted share have been Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 25 , 2004 common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 6,697,368 share were issued to employee an exercise price of $ 22.76 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Cour Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 440,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly the Company in fiscal year 2004 served on the Compensation Committee ii ) served a a 109 director of another entity , of the Company . Item 12 . Security Ownership of Certain certain information a of November 10 , 2004 ( the `` a of November 10 , 2004 ( the `` Table Date belief beneficially hold m Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . Security Ownership of 5 95014 . Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Private Capital Management , Inc. 20,457,156 ( 2 ) 5.10 % Management , Inc. 20,457,156 ( 2 ) 5.10 % Steven P. Inc. 20,457,156 ( 2 ) 5.10 % Steven P. Jobs 5,060,002 5.10 % Steven P. Jobs 5,060,002 ( 3 ) 1.26 % Steven P. Jobs 5,060,002 ( 3 ) 1.26 % Fred D. Jobs 5,060,00 Common Stock that of stock option . ( 4 ) Includes 100,000 share of . ( 4 ) Includes 100,000 share of Common Stock that of stock option . ( 5 ) Includes 80,000 share of . ( 5 ) Includes 80,000 share of Common Stock that of stock option . ( 6 ) Includes 10,000 share of . ( 6 ) Includes 10,000 share of Common Stock that exercise of stock option . 110 ( 7 ) Includes 1,350,000 stock option . 110 ( 7 ) Includes 1,350,000 share of 110 ( 7 ) Includes 1,350,000 share of Common Stock that of stock option . ( 8 ) Inc Common Stock that Dr. Levinson hold indirectly and 40,000 share of Common Stock that of stock option . ( 9 ) Includes 150,000 share of . ( 9 ) Includes 150,000 share of Common Stock that of stock option . ( 10 ) Includes 1,500,000 share of . ( 10 ) Includes 1,500,000 share of Common Stock that of stock option . ( 11 ) Includes 10,000 share of . ( 11 ) Includes 10,000 share of Common Stock that of stock option . ( 12 ) Includes 4,956,148 share of . ( 12 ) Includes 4,956,148 share of Common Stock that . * Rep common stock reserved Employee Stock Purchase Plan , 240,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 14,299,512 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 2,515,000 share of restricted stock unit not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 St" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001047469-07-009340/full-submission_features.json b/src/data/feature/AAPL/10-K/0001047469-07-009340/full-submission_features.json new file mode 100644 index 0000000..9dbfef9 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001047469-07-009340/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "Revenue Recognition , SAB `` ) No . 104 , Revenue Recognition . The have been met . During 2007 , the Company began shipping accordance with SOP No . 97-2 . The Company recognizes the basis over the currently estimated 24-month economic life of these product such incentive , the Company 38 would be required to record requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is are identified and recorded . 39 Warranty Costs The Company provides pursuant to SOP revenue per store revenue per store wa $ 23.1 million , compared to $ million , compared to $ 22.9 million in 2006 and $ to $ 22.9 million in 2006 and $ 21.7 million in million in 2006 and $ 21.7 million in 2005 . The and $ 21.7 million in 2005 . The current year increase 's net sale increased by 42 % to $ 3.3 billion by 42 % to $ 3.3 billion during 2006 compared to to $ 3.3 billion during 2006 compared to 2005 . Retail billion during 2006 compared to 2005 . Retail segment Mac unit segment Mac unit sal Revenue Recognition . SAB `` ) No . 104 , Revenue Recognition , for have been transferred . For 61 most of the Company 's accordance with SOP No . 97-2 . If a multiple-element arrangement Company applies EITF No . 00-21 , Revenue Arrangements with Multiple from the SOP No . 97-2 deliverable . If the Company Company applies SOP No . 97-2 to the software and software-related . , SAB No . 104 ) to the deliverable outside scope of SOP No . 97-2 . Revenue on arrangement that value of the specified upgrade 6 revenue\u2014current $ 1,410 $ 1,238 Accrued Expenses 2007 2006 Deferred revenue\u2014current $ 1,410 $ 2007 2006 Deferred revenue\u2014current $ 1,410 $ 718 Deferred margin on Deferred revenue\u2014current $ 1,410 $ 718 Deferred margin on component sale Deferred margin on component sale 545 324 Other accrued tax liability margin on component sale 545 324 Other accrued tax liability 488 324 Other accrued tax liability 488 388 Accrued marketing and distribution Other accrued tax liability 488 388 Accrued marketing and dist revenue\u2014non-current $ 830 $ 3,053 Non-Current Liabilities 2007 2006 Deferred revenue\u2014non-current $ 830 $ 2007 2006 Deferred revenue\u2014non-current $ 830 $ 383 Deferred tax liability Deferred revenue\u2014non-current $ 830 $ 383 Deferred tax liability 619 381 $ 383 Deferred tax liability 619 381 Other non-current liability 67 383 Deferred tax liability 619 381 Other non-current liability 67 14 619 381 Other non-current liability 67 14 Total non-current liability $ 381 Other non-current liability 67 14 Total non Revenue Service ( tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In such resolution occurs . In 2007 and 2006 , the Company occurs . In 2007 and 2006 , the Company recorded tax recorded tax benefit of $ 63 million and $ 20 million $ 63 million and $ 20 million , respectively , due in the U.S . Note 6\u2014Shareholders ' Equity Preferred Stock The treasury stock method . During 2 Revenue Code do not comply with Section 409A . Because Apple doe not for the officer . Section 280G of the Internal Revenue Code the level specified in Section 280G . The named executive officer on the table on page 113 a severance or change of calculated in accordance with SFAS 123R . The Committee belief , expense associated with them . 106 E. Fiscal 2007 Compensation Decisions them . 106 E. Fiscal 2007 Compensation Decisions 1 . No E. Fiscal 2007 Compensation Decisions 1 . No Equity Grants or or Sal revenue officer at the maximum of 100 % of base salary , the payout matrix on page 105 . The specific payment amount Summary Compensation Table at page 108 . Compensation Committee Report ( . Compensation Committee Report ( 1 ) The Compensation Committee ha NASDAQ listing standard . ( 1 ) SEC filing sometimes `` Analysis section of this Form 10-K. Based upon this review and be included in this Form 10-K and the Company 's Proxy 's Proxy Statement for it 2008 Annual Meeting of Shareholders , Albert A. G Revenue Code Section 409A . ( 5 ) This Code Section 409A . ( 5 ) This amount represents a in the amount of $ 379 for an iPhone given by than Mr. Jobs . ( 6 ) This amount represents a to Mr. Fadell . ( 7 ) This amount represents ( Fadell 's account under it 401 ( k ) plan in in the amount of $ 13,500 ; and ( ii ) in the amount of $ 379 for an iPhone given by in the amount of $ 73 for an iPod given to Executive Officers in fiscal year 2007 . The primary element of The primary element of each 108 Named Ex", + "expenses": "Expenses 2007 other asset $ 1,222 $ 1,238 Accrued Expenses 2007 2006 Deferred 1,222 $ 1,238 Accrued Expenses 2007 2006 Deferred revenue\u2014current $ 1,410 $ 1,238 Accrued Expenses 2007 2006 Deferred revenue\u2014current $ 1,410 $ 2007 2006 Deferred revenue\u2014current $ 1,410 $ 718 Deferred margin on Deferred revenue\u2014current $ 1,410 $ 718 Deferred margin on component sale Deferred margin on component sale 545 324 Other accrued tax liability margin on component sale 545 324 Other accrued tax liability 488 324 Other Expenses allocated a of September 29 , 2007 . Expenses allocated to corporate of high-profile store were $ 39 million , $ 33 million $ 39 million , $ 33 million , and $ 31 33 million , and $ 31 million for the year ended for the year ended September 29 , 2007 , September 30 year ended September 29 , 2007 , September 30 , 2006 29 , 2007 , September 30 , 2006 , and September 2007 , September 30 , 2006 , and September 24 , , 2006 , and September 24 , 2005 respectively . 86 , and September 24 , 2005 respect", + "net_income": "Net income $ $ 13,931 $ 8,279 $ 6,207 Net income $ 3,496 $ $ 6,207 Net income $ 3,496 $ 1,989 $ 1,328 $ Net income $ 3,496 $ 1,989 $ 1,328 $ 266 $ $ 3,496 $ 1,989 $ 1,328 $ 266 $ 57 Earnings $ 1,989 $ 1,328 $ 266 $ 57 Earnings per common $ 1,328 $ 266 $ 57 Earnings per common share : common share : Basic $ 4.04 $ 2.36 $ 1.64 $ : Basic $ 4.04 $ 2.36 $ 1.64 $ 0.36 $ $ 4.04 $ 2.36 $ 1.64 $ 0.36 $ 0.08 Diluted $ 2.36 $ 1.64 $ 0.36 $ 0.08 Diluted $ 3.93 $ 1.64 $ 0.36 $ 0.08 Diluted $ 3.93 $ 2.27 0.36 $ 0.08 Di Net income $ Provision for income tax 1,512 829 480 Net income $ 3,496 for income tax 1,512 829 480 Net income $ 3,496 $ 829 480 Net income $ 3,496 $ 1,989 $ 1,328 Earnings Net income $ 3,496 $ 1,989 $ 1,328 Earnings per common $ 3,496 $ 1,989 $ 1,328 Earnings per common share : common share : Basic $ 4.04 $ 2.36 $ 1.64 Diluted : Basic $ 4.04 $ 2.36 $ 1.64 Diluted $ 3.93 $ 4.04 $ 2.36 $ 1.64 Diluted $ 3.93 $ 2.27 2.36 $ 1.64 Diluted $ 3.93 $ 2.27 $ 1.55 Shares 1.64 Diluted $ 3.93 $ 2.27 $ 1.55 Shares used Net income \u2014 \u2014 \u2014 1,328 \u2014 1,328 Change in foreign \u2014 \u2014 \u2014 1,328 \u2014 1,328 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,343 \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,343 Issuance 8 8 Total comprehensive income 1,343 Issuance of stock-based compensation award of stock-based compensation award \u2014 7 ( 7 ) \u2014 \u2014 compensation award \u2014 7 ( 7 ) \u2014 \u2014 \u2014 Stock-based \u2014 Stock-based compensation \u2014 \u2014 47 Net income \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 1 ) ( 1 ) Total \u2014 ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 Net income \u2014 \u2014 \u2014 3,496 \u2014 3,496 Change in foreign \u2014 \u2014 \u2014 3,496 \u2014 3,496 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 51 51 Change in unrealized loss \u2014 \u2014 \u2014 \u2014 51 51 Change in unrealized loss on \u2014 \u2014 \u2014 \u2014 ( 7 ) ( 7 ) Change \u2014 ( 7 ) ( 7 ) Change in unrealized loss \u2014 \u2014 \u2014 \u2014 ( 3 ) ( 3 ) Total \u2014 ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation \u2014 251 \u2014 income 3,537 Stock-based compensation \u2014 251 \u2014 \u2014 \u2014 251 Common \u2014 251 \u2014 \u2014 \u2014 251 Common stock issued Net income Operating Activities : Net income 3,496 1,989 1,328 Adjustments to reconcile Activities : Net income 3,496 1,989 1,328 Adjustments to reconcile net : Net income 3,496 1,989 1,328 Adjustments to reconcile net income Depreciation , amortization and accretion 317 225 179 Stock-based compensation expense , amortization and accretion 317 225 179 Stock-based compensation expense 242 amortization and accretion 317 225 179 Stock-based compensation expense 242 163 225 179 Stock-based compensation expens Net income $ 1,328 Add : 2005 Net income $ 1,328 Add : Stock-based employee compensation income , net of tax 45 Deduct : Stock-based employee compensation , net of tax ( 118 ) Net income\u2014pro forma $ ) Net income\u2014pro forma $ 1,255 Net income per common share per common share Basic $ 1.64 Diluted $ 1.55 Net income Basic $ 1.64 Diluted $ 1.55 Net income per common share\u2014pro common share\u2014pro forma Basic $ 1.55 Diluted $ 1.47 Further information Basic $ 1.55 Diluted $ 1.47 Further information regarding stock-b Net income $ 3,496 $ 1,989 $ 1,328 Denominator Net income $ 3,496 $ 1,989 $ 1,328 Denominator ( in $ 3,496 $ 1,989 $ 1,328 Denominator ( in thousand ) , excluding unvested restricted stock 864,595 844,058 808,439 Effect of dilutive excluding unvested restricted stock 864,595 844,058 808,439 Effect of dilutive security unvested restricted stock 864,595 844,058 808,439 Effect of dilutive security 24,697 808,439 Effect of dilutive security 24,697 33,468 48,439 Denominator for diluted Effect of dilutive secur net income ( 2 ) ( 12 ) 1 income ( 2 ) ( 12 ) 1 Change in unrealized 2 ) ( 12 ) 1 Change in unrealized gain on on derivative instrument $ ( 3 ) $ ( 1 ) ( 3 ) $ ( 1 ) $ 8 The tax $ ( 1 ) $ 8 The tax effect related to value of derivative wa $ 1 million , $ ( 8 1 million , $ ( 8 ) million , and $ million , and $ ( 3 ) million for 2007 , ( 3 ) million for 2007 , 2006 , and 2005 ) million for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . The tax to net income wa $ 2 million , $ Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.14 2006 $ 1.01 $ 0.9 Net income $ $ 1,325 $ 1,297 $ 1,564 Net income $ 542 $ $ 1,564 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.65 Basic $ 0.62 $ 0.54 $ 0", + "assets": "Assets the next 12 month . 50 Capital Assets The Company 's capital asset purchase were $ 822 million during 2007 , consisting were $ 822 million during 2007 , consisting of $ 294 2007 , consisting of $ 294 million for retail store facility retail store facility and $ 528 million for real estate acquisition enhancement . Of the $ 822 million in total capital asset total capital asset purchase during 2007 , $ 87 million were purchase during 2007 , $ 87 million were not yet paid paid for a of September ASSETS September 29 , 2007 September 30 , 2006 ASSETS : Current , 2007 September 30 , 2006 ASSETS : Current asset : Cash and cash equivalent $ 9,352 $ 6,392 Short-term investment 6,034 cash equivalent $ 9,352 $ 6,392 Short-term investment 6,034 3,718 Accounts 9,352 $ 6,392 Short-term investment 6,034 3,718 Accounts receivable , le $ 6,392 Short-term investment 6,034 3,718 Accounts receivable , le allowance , le allowance of $ 47 and $ 52 , respectively of $ 47 and $ 52 , respectively 1,637 1,252 Inven Assets accordance with SFAS No . 144 , Accounting for the Impairment for the Impairment of Long-Lived 60 Assets and for Long-Lived Assets record any material impairment during 2007 , 2006 , and 2005 material impairment during 2007 , 2006 , and 2005 . SFAS 2007 , 2006 , and 2005 . SFAS No . 142 2005 . SFAS No . 142 , Goodwill and Other Intangible test on or about August 31 of each year . The intangible asset impairment charge in 2007 , 2006 , or 2005 impairment charge in 2007 , 2006 , or 2005 . The 200 Assets 2007 2006 Vendor non-trade receivables $ ) Other Current Assets 2007 2006 Vendor non-trade receivables $ 2,392 2006 Vendor non-trade receivables $ 2,392 $ 1,593 NAND flash memory non-trade receivables $ 2,392 $ 1,593 NAND flash memory prepayment 417 1,593 NAND flash memory prepayment 417 208 Other current asset 996 NAND flash memory prepayment 417 208 Other current asset 996 469 417 208 Other current asset 996 469 Total other current asset 208 Other current asset 996 469 Total other current ass Assets 2007 and equipment $ 1,832 $ 1,281 Other Assets 2007 2006 Long-term 1,832 $ 1,281 Other Assets 2007 2006 Long-term NAND flash memory $ 1,281 Other Assets 2007 2006 Long-term NAND flash memory prepayment NAND flash memory prepayment $ 625 $ 1,042 Non-current deferred tax memory prepayment $ 625 $ 1,042 Non-current deferred tax asset 88 1,042 Non-current deferred tax asset 88 \u2014 Capitalized software development cost software development cost , net 83 21 Other asset 426 175 development cost , net 8 Assets The life over period ranging from 2 to 10 year . The period ranging from 2 to 10 year . The following table in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 Gross September 29 , 2007 September 30 , 2006 Gross Carrying Amount , 2007 September 30 , 2006 Gross Carrying Amount Accumulated Amortization and amortizable acquired technology $ 276 $ ( 77 ) $ technology $ 276 $ ( 77 ) $ 199 $ 181 $ ( 77 ) $ 199 $ 181 $ ( 42 77 ) $ 199 $ 181 $ ( 42 ) $ 199 $ 18", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 25,347 $ 17,205 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 3,053 Total 4,970 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 6,443 4,329 3,053 Total current liability 9,299 6,443 Non-current liability 1,516 778 3,053 Total current liability 9,299 6,443 Non-current li Liabilities 2007 accrued expense $ 4,329 $ 3,053 Non-Current Liabilities 2007 2006 Deferred 4,329 $ 3,053 Non-Current Liabilities 2007 2006 Deferred revenue\u2014non-current $ 830 $ 3,053 Non-Current Liabilities 2007 2006 Deferred revenue\u2014non-current $ 830 $ 2007 2006 Deferred revenue\u2014non-current $ 830 $ 383 Deferred tax liability Deferred revenue\u2014non-current $ 830 $ 383 Deferred tax liability 619 381 $ 383 Deferred tax liability 619 381 Other non-current liability 67 383 Deferred tax liability 619 381 Other no", + "equity": "equity $ 4,088 $ 2,976 $ 2,594 Shareholders ' equity $ 14,532 2,594 Shareholders ' equity $ 14,532 $ 9,984 $ 7,428 $ ' equity $ 14,532 $ 9,984 $ 7,428 $ 5,063 $ $ 14,532 $ 9,984 $ 7,428 $ 5,063 $ 4,223 35 $ 9,984 $ 7,428 $ 5,063 $ 4,223 35 Item 7 $ 7,428 $ 5,063 $ 4,223 35 Item 7 . Management 7,428 $ 5,063 $ 4,223 35 Item 7 . Management 's 5,063 $ 4,223 35 Item 7 . Management 's Discussion and other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 o EQUITY liability : Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 3,053 Total 4,970 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 6,443 4,329 3,053 Total current liability 9,299 6,443 Non-current liability 1,516 778 3,053 Total current liability 9,299 6,443 Non-current liability 1,516 778 Total liability 9,299 6,443 Non-current liability 1,516 778 Total l equity Accumulated other comprehensive income 63 22 Total shareholder ' equity 14,532 22 Total shareholder ' equity 14,532 9,984 Total liability and shareholder Total shareholder ' equity 14,532 9,984 Total liability and shareholder ' and shareholder ' equity $ 25,347 $ 17,205 See accompanying Notes ' equity $ 25,347 $ 17,205 See accompanying Notes to Consolidated to Consolidated Financial Statements . 55 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 29 , 2007 2007 2006 200 equity instrument . In January 2005 , the Securities and Exchange ) issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R eliminates the ability to account `` ) Opinion No . 25 , Accounting for Stock Issued award under SFAS No . 123R , consistent with that used disclosure under SFAS No . 123 , Accounting for Stock-Based Compensation Compensation . SFAS No . 123R prohibits recognition of a deferred adoption of SFAS No . 123R Equity . 75 The Internal Revenue Service ( tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In such resolution occurs . In 2007 and 2006 , the Company occurs . In 2007 and 2006 , the Company recorded tax recorded tax benefit of $ 63 million and $ 20 million $ 63 million and $ 20 million , respectively , due in the U.S . Note 6\u2014Shareholders ' Equity Preferred Stock The treasu Equity ( 2.92 year . 80 Note 6\u2014Shareholders ' Equity ( Continued ) Continued ) As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had 4.7 2007 , the Company had 4.7 million RSUs outstanding with a grant-date fair value of $ 249 million that were excluded from value of RSUs granted during 2007 , 2006 , and 2005 RSUs granted during 2007 , 2006 , and 2005 wa $ 2007 , 2006 , and 2005 wa $ 88.51 per share , and 2005 wa $ 88.51 per share , $ 70.92 88.51 per share , $ 70.92 per s Equity , , rapidly changing market . 3 . Elements of Compensation Not following : \u2022 Employment contract 100 \u2022 Cash bonus other than will fully vest in March 2008 ) \u2022 Perquisites or personal the value of equity award 4 . CEO Compensation Apple 's Jobs , currently hold approximately 5.5 million share of Apple common . Since rejoining Apple in 1997 , Mr. Jobs ha never equity grant wa awarded in 2003 , and vested in full and vested in full in 2006 . Mr. Jobs currently hold equity award . In fiscal 2007 , equity award represented approximately 85 % of their target total target total compensation in fiscal 2007 . This compare to approximately . This compare to approximately 70 % at Apple 's peer peer company . \u2022 Fiscal 2004 equity award vested 50 % Fiscal 2004 equity award vested 50 % on the second anniversary grant date ; the remaining 50 % will vest on the grant date . \u2022 Fiscal 2006 equity award do not vest not vest at all until 2010 , when they vest in Long-Term Focus . Since fiscal 2004 , all equity Equity Overhang from Equity Plans at 12.9 % . Overhang ( granted overhang to decline from approximately 14.5 % at the end of at the end of fiscal 2005 to approximately 12.9 % at of fiscal 2005 to approximately 12.9 % at the end of at the end of fiscal 2007 . Frequency and Size of the mix of total compensation 103 \u2022 The officer 's experience Apple 's common stock . 4 . The Minor Role of annual base salary of $ 1 since rejoining Apple in 1997 1 since rejoining Apple in 1997 . \u2022 The fiscal 2007 1997 . \u2022 equity compensation `` at the 75 th percentile . `` Furthermore the named executive officer . 7 . Tax and Accounting Considerations of Compensation Expense . Section 162 ( m ) of the place a limit of $ 1,000,000 on the amount of compensation an officer of Apple from 1983 to 1987 and an Apple of Apple from 1983 to 1987 and an Apple subsidiary from and an Apple subsidiary from 1987 to 1991 . For this Apple subsidiary from 1987 to 1991 . For this reason , or vote on any Section 162 ( m ) -related matter Equity Grants or or Salary Changes In fiscal 2007 , the Committee did not at the beginning of fiscal 2007 had significant retention value , at the end of fiscal 2007 are shown on the Outstanding Equity Awards table on page 110 and 111 . Based on table on page 110 and 111 . Based on a review officer were appropriate for fiscal 2007 without a salary increase . without a salary increase . 2 . 2007 Performance-Based Cash Incentive salary increase . 2 . 2007 Performance-Based Cash Incentive Plan Payments P Equity Compensation ( $ ) ( 2 ) ( g ) Change P. Jobs Chief Executive Officer 2007 1 \u2014 \u2014 \u2014 \u2014 Jobs Chief Executive Officer 2007 1 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 1 Timothy D. Cook Chief Operating D. Cook Chief Operating Officer 2007 700,014 \u2014 6,943,426 \u2014 700,000 Cook Chief Operating Officer 2007 700,014 \u2014 6,943,426 \u2014 700,000 \u2014 Operating Officer 2007 700,014 \u2014 6,943,426 \u2014 700,000 \u2014 13,750 ( 2007 700,014 \u2014 6,943,426 \u2014 700,000 \u2014 13,750 ( 3 ) \u2014 6,943,426 \u2014 700,000 \u2014 13,750 ( 3 ) 8,357,190 Peter \u2014 700,000 \u2014 13,750 ( 3 ) Equity Awards Executive Officers for fiscal year 2007 . Estimated Future Payouts Under \u2014 Timothy D. Cook \u2014 0 350,000 700,000 \u2014 \u2014 \u2014 Timothy D. Cook \u2014 0 350,000 700,000 \u2014 \u2014 \u2014 \u2014 D. Cook \u2014 0 350,000 700,000 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Peter Oppenheimer \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 \u2014 Peter Oppenheimer \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 \u2014 Peter Oppenheimer \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Ronald B. Johnson \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 Ronald B. Johnson \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 \u2014 B. Johnson \u2014 0 300,000 600,000 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Tony Fadell Equity Awards at Executive Officers a of September 29 , 2007 , including the a of September 29 , 2007 , including the vesting date a of that date . 109 Option Awards Name ( a \u2014 \u2014 Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 \u2014 \u2014 \u2014 Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 \u2014 \u2014 23.72 Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 \u2014 \u2014 23.72 11.73 B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 \u2014 \u2014 23.72 11.73 2/14/2009 5/21/2002 1,150,000 150,000 \u2014 \u2014 23.72 11.73 2/14/200 Equity \u2014 \u2014 Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 \u2014 Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( 3 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( 3 ) 46,041,000 300,000 ( 2 ) ( 3 ) 46,041,000 46,041,000 \u2014 \u2014 2 ) ( 3 ) 46,041,000 46,041,000 \u2014 \u2014 \u2014 \u2014 ) ( 3 ) 46,041,000 46,041,000 \u2014 \u2014 \u2014 \u2014 Totals \u2014 \u2014 \u2014 \u2014 Totals 600,000 92,082,000 \u2014 \u2014 Peter Oppenheimer \u2014 \u2014 \u2014 Totals 6 Equity Compensation ( $ ) ( 4 ) ( g ) Total h ) William V. Campbell 50,000 \u2014 476,200 \u2014 \u2014 4,783 William V. Campbell 50,000 \u2014 476,200 \u2014 \u2014 4,783 530,983 Millard 50,000 \u2014 476,200 \u2014 \u2014 4,783 530,983 Millard S. Drexler 50,000 \u2014 476,200 \u2014 \u2014 4,783 530,983 Millard S. Drexler 50,000 \u2014 4,783 530,983 Millard S. Drexler 50,000 \u2014 378,400 \u2014 \u2014 7,462 Millard S. Drexler 50,000 \u2014 378,400 \u2014 \u2014 7,462 435,862 Albert 50,000 \u2014 378,400 \u2014 \u2014 7,462 435,862 Albert A. Gore , \u2014 378,400 \u2014 \u2014 7,462 435,862 Albert A. Gore , Jr. Albert A. Equity by shareholder 37,597,439 $ 54.75 74,851,763 ( 1 ) Equity compensation 37,597,439 $ 54.75 74,851,763 ( 1 ) Equity compensation plan not plan not approved by shareholder 12,153,315 $ 10.38 \u2014 Total equity approved by shareholder 12,153,315 $ 10.38 \u2014 Total equity compensation plan Total equity compensation plan ( 2 ) 49,750,754 $ 43.91 74,851,763 compensation plan ( 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ( 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ) This 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ) This num Equity Securities Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Quantitative and Qualitative Disclosures Disclosures About Market Risk Item 8 . Financial Statements and Supplementary TO CONSOLIDATED FINANCIAL STATEMENTS Item 9 . Changes in and Disagreements Accounting and Financial Disclosure Item 9A . Controls and Procedures Item . Controls and Procedures Item 9B . Other Information PART III Other Information ", + "cash_flow": "cash flow $ Annual operating cash flow $ 5,470 $ 2,220 $ 2,535 As cash flow $ 5,470 $ 2,220 $ 2,535 As of September $ 5,470 $ 2,220 $ 2,535 As of September 29 , $ 2,535 As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had $ , the Company had $ 15.4 billion in cash , cash , an increase of $ 5.3 billion over the same balance at the end of September 30 , 2006 . The principal end of September 30 , 2006 . The principal component of by operating activity of $ 5.5 billion , procee cash flow of $ 24 million would be required to Other outstanding obligation were $ 50 million a of September 29 50 million a of September 29 , 2007 , primarily related a of September 29 , 2007 , primarily related to Internet cost related to the $ 100 store credit the Company offered to the Company 's September 2007 price reduction . Indemnifications The or operating result . Item 7A . Quantitative and Qualitative Disclosures issuer . The Company 's 52 general policy is to limit investment . As of Septemb cash flow $ 9,352 $ 6,392 $ 3,491 Supplemental cash flow disclosure : income tax , net $ 863 $ 194 $ 17 See , net $ 863 $ 194 $ 17 See accompanying Notes $ 863 $ 194 $ 17 See accompanying Notes to Consolidated to Consolidated Financial Statements . 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple 's fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the first quarter of fis", + "gross_margin": "Gross Margin Gross margin margin percentage ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Net September 30 , 2006 September 24 , 2005 Net sale $ , 2006 September 24 , 2005 Net sale $ 24,006 $ , 2005 Net sale $ 24,006 $ 19,315 $ 13,931 Cost Net sale $ 24,006 $ 19,315 $ 13,931 Cost of sale $ 24,006 $ 19,315 $ 13,931 Cost of sale 15,852 13,717 $ 13,931 Cost of sal Gross margin $ 13,931 Cost of sale 15,852 13,717 9,889 Gross margin $ 8,154 Cost of sale 15,852 13,717 9,889 Gross margin $ 8,154 $ 13,717 9,889 Gross margin $ 8,154 $ 5,598 $ 4,042 Gross Gross margin $ 8,154 $ 5,598 $ 4,042 Gross margin percentage $ 8,154 $ 5,598 $ 4,042 Gross margin percentage 34.0 % $ 4,042 Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage of % Gross margin percentage of 34.0 % in Gross margin percentage of 29.0 % in 2006 remained flat percentage of 29.0 % in 2006 remained flat compared to 2005 2006 remained flat compared to 2005 . The Company experienced more for percentage ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Research September 30 , 2006 September 24 , 2005 Research and development , 2006 September 24 , 2005 Research and devel Gross margin 8,154 sale ( 1 ) 15,852 13,717 9,889 Gross margin 8,154 5,598 ( 1 ) 15,852 13,717 9,889 Gross margin 8,154 5,598 4,042 15,852 13,717 9,889 Gross margin 8,154 5,598 4,042 Operating expense : 13,717 9,889 Gross margin 8,154 5,598 4,042 Operating expense : Research 9,889 Gross margin 8,154 5,598 4,042 Operating expense : Research and : Research and development ( 1 ) 782 712 535 Selling and development ( 1 ) 782 712 535 Selling , general development ( 1 ) 782 712 535 Selling , general , ( 1 ) 782 7 Gross margin $ $ 5,410 $ 5,264 $ 7,115 Gross margin $ 2,090 $ $ 7,115 Gross margin $ 2,090 $ 1,995 $ 1,849 $ Gross margin $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted Gross margin $ $ 4,370 $ 4,359 $ 5,749 Gross margin $ 1,412 $ $ 5,749 Gross margin $ 1,412 $ 1,325 $ 1,297 $ Gross margin $ 1,412 $ 1,325 $ 1,297 $ 1,564 Net $ 1,412 $ 1,325 $ 1,297 $ 1,564 Net income $ $ 1,325 $ 1,297 $ 1,564 Net income $ 542 $ $ 1,564 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.6", + "accumulated_depreciation": "Accumulated depreciation 106 94 Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and 94 Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and amortization Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,009 ) ( 794 ) Net amortization ( 1,009 ) ( 794 ) Net property , plant plant , and equipment $ 1,832 $ 1,281 Other Assets 2007 and equipment $ 1,832 $ 1,281 Other Assets 2007 2006 Long-term 1,832 $", + "debt": "debt ( $ 11,516 $ 8,039 $ 6,817 Long-term debt ( including current $ \u2014 $ \u2014 $ 304 Total liability $ 10,815 $ $ 304 Total liability $ 10,815 $ 7,221 $ 4,088 $ Total liability $ 10,815 $ 7,221 $ 4,088 $ 2,976 $ $ 10,815 $ 7,221 $ 4,088 $ 2,976 $ 2,594 Shareholders $ 7,221 $ 4,088 $ 2,976 $ 2,594 Shareholders ' equity $ 4,088 $ 2,976 $ 2,594 Shareholders ' equity $ 14,532 2,594 Shareholders ' equity $ 14,532 $ 9,984 $ 7,428 $ ' equity $ 14,532 $ 9,984 $ 7,428 $ 5,063 $ $ 14,532 $ 9,984 $ 7,428 $ 5,063 $", + "earnings_per_share": "earnings per share . 65 The following table set forth Three fiscal year ended September 29 , 2007 2007 2006 2005 year ended September 29 , 2007 2007 2006 2005 Numerator ( ended September 29 , 2007 2007 2006 2005 Numerator ( in September 29 , 2007 2007 2006 2005 Numerator ( in million 29 , 2007 2007 2006 2005 Numerator ( in million ) ) : Net income $ 3,496 $ 1,989 $ 1,328 Denominator Net income $ 3,496 $ 1,989 $ 1,328 Denominator ( in $ 3,496 $ 1,989 $ 1,328 Denominator ( in thousand ) , excluding unvested restric earnings per share 889,292 877,526 856,878 Basic earnings per diluted earnings per share 889,292 877,526 856,878 Basic earnings per share earnings per share 889,292 877,526 856,878 Basic earnings per share $ Basic earnings per share $ 4.04 $ 2.36 $ 1.64 Diluted per share $ 4.04 $ 2.36 $ 1.64 Diluted earnings per $ 4.04 $ 2.36 $ 1.64 Diluted earnings per share $ Diluted earnings per share $ 3.93 $ 2.27 $ 1.55 Potentially per share $ 3.93 $ 2.27 $ 1.55 Potentially dilutive security $ 3.93 $ 2.27 $ 1.55 Potentially earnings per share . 90 REPORT OF INDEPENDENT REGISTERED PUBLIC Company ) a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , and the 2007 and September 30 , 2006 , and the related consolidated the three-year period ended September 29 , 2007 . These consolidated period ended September 29 , 2007 . These consolidated financial statement and subsidiary a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 ", + "tax_rate": "tax rate of 35 % due primarily to certain a tax benefit of $ 63 million due to the settlement the U.S. As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had deferred and tax credit of $ 1.1 billion before being offset against asset . As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 a valuation allowance 2007 and September 30 , 2006 a valuation allowance of $ a valuation allowance of $ 5 million wa tax rate ( 35 % in 2007 , 2006 rate ( 35 % in 2007 , 2006 , and 2005 35 % in 2007 , 2006 , and 2005 ) to 2007 , 2006 , and 2005 ) to income before provision ( in million ) : 2007 2006 2005 Computed expected tax in million ) : 2007 2006 2005 Computed expected tax $ million ) : 2007 2006 2005 Computed expected tax $ 1,753 2005 Computed expected tax $ 1,753 $ 987 $ 633 State expected tax $ 1,753 $ 987 $ 633 State tax , $ 1,753 $ 987 $ 633 State tax , net of , net of federal effect 140 86 ( 19 ) Indefinitel tax rate $ 1,512 $ 829 $ 480 Effective tax rate 30 % $ 480 Effective tax rate 30 % 29 % 27 % Effective tax rate 30 % 29 % 27 % The Company rate 30 % 29 % 27 % The Company 's income stock option transaction were $ 398 million , $ 419 million $ 398 million , $ 419 million , and $ 428 419 million , and $ 428 million in 2007 , 2006 and $ 428 million in 2007 , 2006 , and 2005 428 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively , and were of Shareholders ' Equity . 75 Th", + "geographic_information": "geographic marketplace . Approximately 60 % of the Company 's Company 's net sale in 2007 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , `` Segment Information and The Company also offer a 90-day basic warranty for it service of it major market . 12 Backlog In the Company 's . Employees As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had approximately , Geographic Financial Statements of this Form 10-K. Americas During 2007 , net this Form 10-K. Americas During 2007 , net sale in the the Americas segment increased $ 2.2 billion , or 23 % $ 2.2 billion , or 23 % , compared to 2006 23 % , compared to 2006 . The main source of MacBook , introduced in May 2006 and updated in May 2007 2006 and updated in May 2007 , a well a the Pro , introduced in January 2006 and updated in June 2007 2006 and updated in June 2007 . Sales of iMacs grew new iMac introduced in Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of . Other operating segment include 84 Asia-Pacific , which includes Australia a those described in Note 1 . The Company evaluates the the Retail segment were $ 294 million , $ 200 million $ 294 million , $ 200 million , and $ 132 200 million , and $ 132 million for 2007 , 2006 and $ 132 million for 2007 , 2006 , and 2005 132 million for 2007 , 2006 , and 2005 respectively . 2007 , 2006 , and 2005 respectively . From the establ", + "common_stock": "Common Stock Issued and Outstanding a of November 2 , 2007 The Business section a of November 2 , 2007 The Business section and other this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . The Company assumes no law . PART I Item 1. Business Company Background Apple Inc. 's fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the informati Common stock \u2014 \u2014 47 \u2014 \u2014 47 Common stock issued under stock stock issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 Tax 52,132 547 \u2014 \u2014 \u2014 547 Tax benefit from employee stock employee stock plan award \u2014 428 \u2014 \u2014 \u2014 428 Balances \u2014 428 \u2014 \u2014 \u2014 428 Balances a of September 24 428 Balances a of September 24 , 2005 835,019 3,564 ( a of September 24 , 2005 835,019 3,564 ( 61 ) of September 24 , 2005 835,019 3,564 ( 61 ) 3,925 September 24 , 2005 835,019 3,564 ( 61 ) 3,925 \u2014 , 2005 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 ( 307 ) ( 48 ) \u2014 ( 307 ) \u2014 ( 355 ) ( 307 ) \u2014 ( 355 ) Stock-based compensation \u2014 163 355 ) Stock-based compensation \u2014 163 \u2014 \u2014 \u2014 163 Deferred \u2014 163 \u2014 \u2014 \u2014 163 Deferred compensation \u2014 ( 61 163 Deferred compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 Common stock stock issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 Tax 24,818 318 \u2014 \u2014 \u2014 318 Tax Common stock issued under stock share withheld for employee tax 17,066 364 \u2014 ( 2 ) withheld for employee tax 17,066 364 \u2014 ( 2 ) \u2014 tax 17,066 364 \u2014 ( 2 ) \u2014 362 Tax benefit \u2014 ( 2 ) \u2014 362 Tax benefit from employee stock employee stock plan award \u2014 398 \u2014 \u2014 \u2014 398 Balances \u2014 398 \u2014 \u2014 \u2014 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 $ 5,368 a of September 29 , 2007 872,329 $ 5,368 $ \u2014 of September 29 , 2007 872,329 $ 5,368 $ \u2014 $ 29 , 2007 872,329 $ 5,368 $ \u2014 $ 9,101 $ $ 5,368 $ \u2014 $ 9,1 common stock 365 318 543 Excess tax benefit issuance of common stock 365 318 543 Excess tax benefit from of common stock 365 318 543 Excess tax benefit from stock-based tax benefit from stock-based compensation 377 361 \u2014 Repurchases of common benefit from stock-based compensation 377 361 \u2014 Repurchases of common stock Repurchases of common stock ( 3 ) ( 355 ) \u2014 stock ( 3 ) ( 355 ) \u2014 Cash generated by Cash generated by financing activity 739 324 543 Increase in cash generated by financing activity 739 324 543 common stock for the year ended September 29 , 2007 , September 30 year ended September 29 , 2007 , September 30 , 2006 29 , 2007 , September 30 , 2006 , and September 2007 , September 30 , 2006 , and September 24 , , 2006 , and September 24 , 2005 , respectively , , and September 24 , 2005 , respectively , were excluded basis is also disclosed . 66 Note 2\u2014Financial Instruments Cash , also disclosed . 66 Note 2\u2014Financial Instruments Cash , Cash Equivalents in million ) : September 29 , 2007 September 30 , ) common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 29 , 2007 . Comprehensive Income a of September 29 , 2007 . Comprehensive Income Comprehensive income ( in million ) : 2007 2006 2005 Unrealized loss on in million ) : 2007 2006 2005 Unrealized loss on available-for-sale million ) : 2007 2006 2005 Unrealized loss on available-for-sale security on available-for-sale common stock upon receive an option to acquire 10,000 share of common stock ( date of grant . Rule 10b5-1 Trading Plans Certain of the into trading plan pursuant to 78 Rule 10b5-1 ( c ) plan pursuant to 78 Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee 's to a maximum of $ 25,000 in any calendar year . any calendar year . During 2007 , the Company common stock , in February 2006 , September 2006 and January in February 2006 , September 2006 and January 2007 , respectively , September 2006 and January 2007 , respectively , and the 's independent money manager of 2,200 , 1,400 98 and 2,600 money manager of 2,200 , 1,400 98 and 2,600 share of manager of 2,200 , 1,400 98 and 2,600 share of the 2,200 , 1,400 98 and 2,600 share of the Company 's 's common stock in April 2006 , June 2006 and July in April 2006 , June 2006 and July 2007 , respectively , June common stock split in 2005 , vested in full in vested in full in March 2006 . After a portion of Mr. Jobs received the remaining 5,426,447 share . Due in large split ) increased from $ 7.47 on the March 2003 grant $ 7.47 on the March 2003 grant date to $ 64.66 2003 grant date to $ 64.66 on the March 2006 vesting $ 64.66 on the March 2006 vesting date\u2014more than an eight-fold stock price increased from $ 64.66 per share in March 2006 64.66 per share in March 2006 to $ 189.95 per share in March 2006 to $ 189.9 common stock . 4 . The Minor Role of annual base salary of $ 1 since rejoining Apple in 1997 1 since rejoining Apple in 1997 . \u2022 The fiscal 2007 1997 . \u2022 The fiscal 2007 average base salary for the have not increased since October 2005 , except for a promotion-related Apple 's target payout of 50 % of base salary is target bonus payouts range from 100 % to 160 % of range from 100 % to 160 % of base salary . \u2022 The maximum payout of 100 % for exceptional performance is than peer company , where 3 time the tar common stock on September 28 , 2007 , the last stock on September 28 , 2007 , the last trading day trading day of fiscal year 2007 ) . ( 2 ) year 2007 ) . ( 2 ) The unvested portion of in it entirety on March 24 , 2008 . ( 3 entirety on March 24 , 2008 . ( 3 ) The 24 , 2008 . ( 3 ) The unvested portion of in it entirety on March 24 , 2010 . ( 4 entirety on March 24 , 2010 . ( 4 ) The 24 , 2010 . ( 4 ) The unvested portion of to vest in two ( 2 ) substantially equal installment on substantially equal install common stock during fiscal year 2007 . These grant were made : Mr. Campbell , $ 476,200 ; Mr. Drexler , $ ; Mr. Drexler , $ 378,400 ; Mr. Gore , $ ; Mr. Gore , $ 300,300 ; Dr. Levinson , $ ; Dr. Levinson , $ 448,000 ; and Mr. York , and Mr. York , $ 476,200 . See footnote ( 1 476,200 . See footnote ( 1 ) for the assumption used value these award . ( 4 ) The amount reported in of Directors Equipment Program . 113 Compensation of Directors The form . Under the Company 's 1997 Director Stock Option Plan ( gran common stock reserved Employee Stock Purchase Plan , 370,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 67,456,659 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 4,675,000 restricted stock unit ha been stock unit granted after April 2005 count against the share available number excludes share under the 1990 Stock Option Plan that wa Plan that wa terminate common stock underlying average exercise price of $ 3.42 per share . No additional certain information a of September 29 , 2007 ( the `` a of September 29 , 2007 ( the `` Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 872,328,972 share of the Company 's reached at Apple Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , California 95014 . 115 Security Ownership of Cupertino , California 95014 . 115 Security Ownership of 5 % . 115 Security Ownership of 5 % Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 56,583,870 ( 2 ) 6.49 % Outstanding Fidelity Investments 56,583,870 ( 2 ) 6.49 % Steven P. Investments 56,583,870 ( 2 ) 6.49 % Steven P. Jobs 5,546,451 6.49 % Steven P. Jobs 5,546,451 * William V. Campbell 112,900 5,546,451 * William V. Campbell 112,900 ( 3 ) * Timothy William V. Campbell 112,900 ( 3 ) * Timothy D. Cook ) * Timothy D. Cook 13,327 ( 4 ) * Millard Timothy D. Cook 13,327 ( 4 ) * Millard ", + "fair_value_measurements": "Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement measurement . SFAS No . 157 is effective for fiscal year fiscal year beginning after November 15 , 2007 and is required beginning after November 15 , 2007 and is required to be the first quarter of fiscal 2009 . Although the Company will application of SFAS No . 157 , management doe not currently operating result . In June 2006 , the FASB issued FASB ( `` FIN `` ) 48 , Accounting for Uncertainty in of FASB Statement No . 10", + "derivative_instruments": "Derivative Instruments which the hedged transaction affect 59 earnings . The ineffective portion building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 249 million , $ 180 million $ 249 million , $ 180 million , and $ 141 180 million , and $ 141 million during 200" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001047469-97-006960/full-submission_features.json b/src/data/feature/AAPL/10-K/0001047469-97-006960/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001047469-97-006960/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001104659-05-058421/full-submission_features.json b/src/data/feature/AAPL/10-K/0001104659-05-058421/full-submission_features.json new file mode 100644 index 0000000..04bd245 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001104659-05-058421/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue or financial performance . 15 Environmental Laws Compliance with federal . Employees As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had approximately , the Company had approximately 14,800 full-time equivalent employee and an equivalent employee and an additional 2,020 temporary employee and contractor . s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendmen Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The become due and payable . 28 The Company record reduction to the write-down are recorded . 29 The Company accrues necessary reserve requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is ( SFAS ) No . 109 , Accounting for Income Taxes American Jobs Creation Act of 2004 , which , if implemented operation and financial position . 30 Net Sales Net sale and in thousand ) : September 24 , 2005 C revenue and unit growth during 2004 compared to 2003 of approximately growth during 2004 compared to 2003 of approximately 26 % and compared to 2003 of approximately 26 % and 33 % , of approximately 26 % and 33 % , respectively . Unit of portable system accounted for 51 % of all Macintosh system all Macintosh system sold during 2004 compared to only 42 % during 2004 compared to only 42 % during 2003 . The to only 42 % during 2003 . The Company belief that also yielded positive result in 2004 over 2003 Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The the gross amount billed . 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( for general release to customer 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( pursuant to SFAS No . 86 , Computer Software to be In the fourth quarter of 2004 , the Company began incurring with Mac OS X version 10. revenue\u2014current $ 501 $ 191 Accrued Expenses 2005 2004 Deferred revenue\u2014current $ 501 $ 2005 2004 Deferred revenue\u2014current $ 501 $ 342 Accrued marketing and Deferred revenue\u2014current $ 501 $ 342 Accrued marketing and distribution 221 342 Accrued marketing and distribution 221 147 Accrued compensation and employee Accrued marketing and distribution 221 147 Accrued compensation and employee benefit Accrued compensation and employee benefit 167 134 Accrued warranty and related compensation and employee ben revenue\u2014non-current $ 281 Continued ) Non-current Liabilities 2005 2004 Deferred revenue\u2014non-current $ 281 $ 2005 2004 Deferred revenue\u2014non-current $ 281 $ 202 Deferred tax liability Deferred revenue\u2014non-current $ 281 $ 202 Deferred tax liability 308 113 $ 202 Deferred tax liability 308 113 Other non-current liability 12 202 Deferred tax liability 308 113 Other non-current liability 12 8 308 113 Other non-current liability 12 8 Total non-current liability $ 113 Other non-current liability 12 8 Total no", + "expenses": "Expenses 2005 other asset $ 338 $ 191 Accrued Expenses 2005 2004 Deferred 338 $ 191 Accrued Expenses 2005 2004 Deferred revenue\u2014current $ 501 $ 191 Accrued Expenses 2005 2004 Deferred revenue\u2014current $ 501 $ 2005 2004 Deferred revenue\u2014current $ 501 $ 342 Accrued marketing and Deferred revenue\u2014current $ 501 $ 342 Accrued marketing and distribution 221 342 Accrued marketing and distribution 221 147 Accrued compensation and employee Accrued marketing and distribution 221 147 Accrued compensation and employ", + "net_income": "Net income ( $ 6,207 $ 5,742 $ 5,363 Net income ( loss ) income ( loss ) $ 1,335 $ 276 $ 69 $ loss ) $ 1,335 $ 276 $ 69 $ 65 $ $ 1,335 $ 276 $ 69 $ 65 $ ( 25 $ 276 $ 69 $ 65 $ ( 25 ) Earnings 69 $ 65 $ ( 25 ) Earnings ( loss ) common share : Basic $ 1.65 $ 0.37 $ 0.10 $ : Basic $ 1.65 $ 0.37 $ 0.10 $ 0.09 $ $ 1.65 $ 0.37 $ 0.10 $ 0.09 $ ( 0.04 $ 0.37 $ 0.10 $ 0.09 $ ( 0.04 ) Diluted 0.10 $ 0.09 $ ( 0.04 ) Diluted $ 1.56 $ ( 0.04 ) Diluted $ 1.56 $ 0.36 $ 0.09 $ ) Diluted $ 1.56 $ 0.36 $ 0.09 $ 0.09 $ $ 1. Net income during million . Net income during 2005 benefited by $ 81 million during 2005 benefited by $ 81 million from the reversal of of tax , of $ 1 million and $ 12 million $ 1 million and $ 12 million were recognized in 2003 12 million were recognized in 2003 and 2001 , respectively . were recognized in 2003 and 2001 , respectively . Item 7 2001 , respectively . Item 7 . Management \u2019 s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item Net income $ 1,335 $ \u2014 1 Net income $ 1,335 $ 276 $ 69 Earnings Net income $ 1,335 $ 276 $ 69 Earnings per common $ 1,335 $ 276 $ 69 Earnings per common share before accounting change : Basic $ 1.65 $ 0.37 $ 0.09 Diluted : Basic $ 1.65 $ 0.37 $ 0.09 Diluted $ 1.56 $ 1.65 $ 0.37 $ 0.09 Diluted $ 1.56 $ 0.36 0.37 $ 0.09 Diluted $ 1.56 $ 0.36 $ 0.09 Earnings 0.09 Diluted $ 1.56 $ 0.36 $ 0.09 Earnings per common $ 1.56 $ 0.36 $ 0.09 Earnings per common share : common share : Basic $ 1.65 $ 0.37 $ 0.10 Diluted Net income \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 31 31 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 31 31 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 12 ) ( 12 ) Change \u2014 ( 12 ) ( 12 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 ( 5 ) ( 5 ) Total \u2014 ( 5 ) ( 5 ) Total comprehensive income 83 5 ) Total comprehensive income 83 Amortization of deferred stock compensation deferred stock compensation \u2014 \u2014 15 \u2014 \u2014 15 Write-off of \u2014 \u2014 15 \u2014 \u2014 15 Write-off of deferred stock com Net income \u2014 \u2014 \u2014 276 \u2014 276 Change in foreign \u2014 \u2014 \u2014 276 \u2014 276 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 5 ) ( 5 ) Change \u2014 ( 5 ) ( 5 ) Change in unrealized loss tax \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 296 \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 296 Issuance 12 12 Total comprehensive income 296 Issuance of restricted stock unit of restricted stock unit \u2014 64 ( 64 ) \u2014 \u2014 stock unit \u2014 64 ( 64 ) \u2014 \u2014 \u2014 Adju Net income \u2014 \u2014 \u2014 1,335 \u2014 1,335 Change in foreign \u2014 \u2014 \u2014 1,335 \u2014 1,335 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,350 \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,350 Issuance 8 8 Total comprehensive income 1,350 Issuance of restricted stock unit stock unit , net \u2014 7 ( 7 ) \u2014 \u2014 , net \u2014 7 ( 7 ) \u2014 \u2014 \u2014 Amortization deferred stock compensation \u2014 \u2014 40 \u2014 \u2014 40 Common stock \u2014 \u2014 40 \u2014 \u2014 40 Co Net income Operating Activities : Net income 1,335 276 69 Cumulative effect of Activities : Net income 1,335 276 69 Cumulative effect of accounting : Net income 1,335 276 69 Cumulative effect of accounting change of tax \u2014 \u2014 ( 1 ) Adjustments to reconcile net Depreciation , amortization and accretion 179 150 113 Stock-based compensation expense , amortization and accretion 179 150 113 Stock-based compensation expense 42 amortization and accretion 179 150 113 Stock-based compensation expense 42 33 150 113 S Net income\u2014as reported share amount ) : 2005 2004 2003 Net income\u2014as reported $ amount ) : 2005 2004 2003 Net income\u2014as reported $ 1,335 2003 Net income\u2014as reported $ 1,335 $ 276 $ 69 Add income\u2014as reported $ 1,335 $ 276 $ 69 Add : Stock-based $ 1,335 $ 276 $ 69 Add : Stock-based employee compensation income , net of tax 38 33 15 Deduct : Stock-based , net of tax 38 33 15 Deduct : Stock-based employee net of tax 38 33 15 Deduct : Stock-based employee compensation , net of tax ( 114 ) ( 141 ) ( tax ( 114 ) Net income ( loss loss ) \u2014pro forma $ 1,259 $ 168 $ ( 97 \u2014pro forma $ 1,259 $ 168 $ ( 97 ) Net 1,259 $ 168 $ ( 97 ) Net income per common common share\u2014as reported Basic $ 1.65 $ 0.37 $ 0.10 Diluted reported Basic $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Net 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Net income ( $ 1.56 $ 0.36 $ 0.09 Net income ( loss ) common share\u2014pro forma Basic $ 1.56 $ 0.23 $ ( 0.13 forma Basic $ 1.56 $ 0.23 $ ( 0.1 Net income $ 1,335 $ \u2014 1 Net income $ 1,335 $ 276 $ 69 Denominator Net income $ 1,335 $ 276 $ 69 Denominator ( in $ 1,335 $ 276 $ 69 Denominator ( in thousand ) , excluding unvested restricted stock 808,439 743,180 721,262 Effect of dilutive excluding unvested restricted stock 808,439 743,180 721,262 Effect of dilutive option unvested restricted stock 808,439 743,180 721,262 Effect of dilutive option , stock unit and restricted stock 48,341 31,442 5,670 Denominator for diluted unit and restricted stock 48 net income \u2014 ( 4 ) ( 23 ) Change \u2014 ( 4 ) ( 23 ) Change in unrealized gain/loss security $ \u2014 $ ( 5 ) $ ( 12 ) ( 5 ) $ ( 12 ) The tax effect related on available-for-sale security wa $ 4 million and $ 6 million $ 4 million and $ 6 million for 2004 and 2003 and $ 6 million for 2004 and 2003 , respectively . 6 million for 2004 and 2003 , respectively . The tax in net income wa $ 1 million and $ ( 8 1 million and $ ( 8 ) million for 2004 and ( 8 ) million for 2004 and 2003 , respectively . ) million for 2004 a net income 1 33 19 Change in unrealized included in net income 1 33 19 Change in unrealized gain/loss in net income 1 33 19 Change in unrealized gain/loss on gain/loss on derivative instrument $ 8 $ 12 $ ( 5 derivative instrument $ 8 $ 12 $ ( 5 ) The 8 $ 12 $ ( 5 ) The tax effect related of derivative wa $ ( 3 ) million , $ 10 3 ) million , $ 10 million , and $ 11 10 million , and $ 11 million for 2005 , 2004 and $ 11 million for 2005 , 2004 , and 2003 11 million for 2005 , 2004 , and 2003 , respectively net income wa $ ( 2 ) million , $ ( ) million , $ ( 13 ) million , and $ million , and $ ( 7 ) million for 2005 , ( 7 ) million for 2005 , 2004 , and 2003 ) million for 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . 84 NOTES and 2003 , respectively . 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8\u2014Employee Benefit Plans 2003 Employee Stock ) Note 8\u2014Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employe Net income $ $ 1,044 $ 968 $ 996 Net income $ 430 $ $ 996 Net income $ 430 $ 320 $ 290 $ Net income $ 430 $ 320 $ 290 $ 295 Earnings $ 430 $ 320 $ 290 $ 295 Earnings per common $ 320 $ 290 $ 295 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.50 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.50 $ 0.37 0.36 $ 0.37 Diluted $ 0.50 $ 0.37 $ 0.34 $ 0.37 Diluted $ 0.50 $ 0.37 $ 0.34 $ 0.35 2004 $ 0.50 $ 0.37 $ 0.34 $ 0 Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.14 $ 0.08 $ 0.06 $ : Basic $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.08 Basic $ 0.13 $ 0.08 $ 0.06 $ 0.08 Basic an", + "assets": "ASSETS September 24 , 2005 September 25 , 2004 ASSETS : Current , 2005 September 25 , 2004 ASSETS : Current asset : Cash and cash equivalent $ 3,491 $ 2,969 Short-term investment 4,770 cash equivalent $ 3,491 $ 2,969 Short-term investment 4,770 2,495 Accounts 3,491 $ 2,969 Short-term investment 4,770 2,495 Accounts receivable , le $ 2,969 Short-term investment 4,770 2,495 Accounts receivable , le allowance , le allowance of $ 46 and $ 47 , respectively of $ 46 and $ 47 , respectively 895 774 Inventori Assets Including Goodwill three fiscal year ended September 24 , 2005 , the Company year ended September 24 , 2005 , the Company had no restructuring action described in Note 5 of these Notes to Consolidated Statements . SFAS No . 142 , Goodwill and Other Intangible test on or about August 30 of each year . The intangible asset impairment charge in 2005 , 2004 , or 2003 impairment charge in 2005 , 2004 , or 2003 . The 2005 , 2004 , or 2003 . The Company established reporting purpose of testing goodwil Assets 2005 2004 Vendor non-trade receivables $ ) Other Current Assets 2005 2004 Vendor non-trade receivables $ 417 2004 Vendor non-trade receivables $ 417 $ 276 Other current asset non-trade receivables $ 417 $ 276 Other current asset 231 209 $ 276 Other current asset 231 209 Total other current asset 276 Other current asset 231 209 Total other current asset $ Total other current asset $ 648 $ 485 Property , Plant current asset $ 648 $ 485 Property , Plant , and , Plant , and Equipment 2005 2004 Land Assets 2005 and equipment $ 817 $ 707 Other Assets 2005 2004 Non-current 817 $ 707 Other Assets 2005 2004 Non-current deferred tax asset $ 707 Other Assets 2005 2004 Non-current deferred tax asset $ Non-current deferred tax asset $ 183 $ 86 Capitalized software development tax asset $ 183 $ 86 Capitalized software development cost , software development cost , net 38 25 Other asset 117 80 development cost , net 38 25 Other asset 117 80 Total net 38 25 Other asset 117 80 Total other asset $ 38 25 Other Assets The life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The following table in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 Gross September 24 , 2005 September 25 , 2004 Gross Carrying Amount , 2005 September 25 , 2004 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Goodwill $ 69 $ \u2014 $ 69 $ $ 69 $ \u2014 $ 69 $ 80 $ \u2014 $ $ \u2014 $ 69 $ 80 $ \u2014 $ 80 Other $ 80 $ \u2014 $ 80 Other acquired intangible asset 5 80 Other Assets ( ) : Fiscal Years : 2006 $ 10 2007 8 2008 Fiscal Years : 2006 $ 10 2007 8 2008 5 2009 Years : 2006 $ 10 2007 8 2008 5 2009 1 : 2006 $ 10 2007 8 2008 5 2009 1 2010 2006 $ 10 2007 8 2008 5 2009 1 2010 1 $ 10 2007 8 2008 5 2009 1 2010 1 Thereafter 10 2007 8 2008 5 2009 1 2010 1 Thereafter 2 2007 8 2008 5 2009 1 2010 1 Thereafter 2 Total 8 2008 5 2009 1 2010 1 Thereafter 2 Total expected 2008 5 2009 1 2010 1 Thereafter 2 Total expected annual 2009 1 2010 1 Thereafter 2 Total expected annual amorti Assets : $ 13,931 $ 8,279 $ 6,207 Long-Lived Assets : U.S. $ Long-Lived Assets : U.S. $ 738 $ 637 $ 635 Japan : U.S. $ 738 $ 637 $ 635 Japan 63 52 $ 738 $ 637 $ 635 Japan 63 52 19 Other $ 637 $ 635 Japan 63 52 19 Other Countries 112 637 $ 635 Japan 63 52 19 Other Countries 112 72 $ 635 Japan 63 52 19 Other Countries 112 72 60 63 52 19 Other Countries 112 72 60 Total Long-Lived Assets 52 19 Other Countries 112 72 60 Total Long-Lived Assets $ 19 Other Countries 112 72 60 Total Long-Lived Assets $ 913 60 Assets $ 913 $ 761 $ 714 95 Long-Lived Assets $ 913 $ 761 $ 714 95 NOTES TO $ 913 $ 761 $ 714 95 NOTES TO CONSOLIDATED FINANCIAL 913 $ 761 $ 714 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11\u2014Segment Information and Geographic Data ( ( in million ) : 2005 2004 2003 Net Sales : in million ) : 2005 2004 2003 Net Sales : Desktops million ) : 2005 2004 2003 Net Sales : Desktops ( Desktops ( a ) $ 3,436 $ 2,373 $ 2,475 Portables a ) $ 3,436 $ 2,373 $ 2,475 Portables ( b $ 3,", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 11,551 $ 8,050 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 1,200 Total 1,779 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 2,651 1,705 1,200 Total current liability 3,484 2,651 Non-current liability 601 323 1,200 Total current liability 3,484 2,651 Non-current liabi Liabilities 2005 2004 Deferred revenue\u2014non-current $ 281 Continued ) Non-current Liabilities 2005 2004 Deferred revenue\u2014non-current $ 281 $ 2005 2004 Deferred revenue\u2014non-current $ 281 $ 202 Deferred tax liability Deferred revenue\u2014non-current $ 281 $ 202 Deferred tax liability 308 113 $ 202 Deferred tax liability 308 113 Other non-current liability 12 202 Deferred tax liability 308 113 Other non-current liability 12 8 308 113 Other non-current liability 12 8 Total non-current liability $ 113 Other non-curr", + "equity": "Equity Securities None . 25 Item 6 . Selected Financial Securities None . 25 Item 6 . Selected Financial Data The read in conjunction with Item 7 , \u201c Management \u2019 s note thereto included in Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 24 , 2005 ( In million year ended September 24 , 2005 ( In million , except and per share amount ) 2005 2004 2003 2002 2001 Net per share amount ) 2005 2004 2003 2002 2001 Net sale share amount ) 2005 equity $ 2,592 $ 2,203 $ 2,101 Shareholders \u2019 equity $ 7,466 2,101 Shareholders \u2019 equity $ 7,466 $ 5,076 $ 4,223 $ \u2019 equity $ 7,466 $ 5,076 $ 4,223 $ 4,095 $ $ 7,466 $ 5,076 $ 4,223 $ 4,095 $ 3,920 Net $ 5,076 $ 4,223 $ 4,095 $ 3,920 Net gain before $ 4,223 $ 4,095 $ 3,920 Net gain before tax related and equity investment of $ 4 million , $ 10 million $ 4 million , $ 10 million , and $ 75 10 million , and $ 75 million were recognized in 2004 75 million were recognized in 2004 , 2003 , and 2001 were re equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , and $ 30 26 million , and $ 30 million were recognized in 2004 30 million Equity Method of nullifies certain requirement of EITF 03-1 , The Meaning of Other-Than-Temporary . FSP Nos . FAS 115-1 and FAS 124-1 include guidance . FAS 115-1 and FAS 124-1 include guidance for evaluating and . FSP Nos . FAS 115-1 and FAS 124-1 also require . FAS 115-1 and FAS 124-1 also require other-than-temporary impaired debt . FSP Nos . FAS 115-1 and FAS 124-1 are effective . FAS 115-1 and FAS 124-1 are effective for fiscal year fiscal year beginning after December 15 , 2005 . Although the be equity instrument . SFAS No instrument . SFAS No . 123R eliminates the ability to account APB ) Opinion No . 25 , Accounting for Stock Issued prospective method . In January 2005 , the SEC issued SAB SEC issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R will be effective for the the first quarter of fiscal 2006 . The Company expects the adoption of SFAS No . 123R will result in a reduction common share of approximately $ EQUITY liability : Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 1,200 Total 1,779 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 2,651 1,705 1,200 Total current liability 3,484 2,651 Non-current liability 601 323 1,200 Total current liability 3,484 2,651 Non-current liability 601 323 Total liability 3,484 2,651 Non-current liability 601 323 Total liabili equity ) Total shareholder \u2019 equity 7,466 5,076 Total liability and shareholder Total shareholder \u2019 equity 7,466 5,076 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 11,551 $ 8,050 See accompanying note \u2019 equity $ 11,551 $ 8,050 See accompanying note to consolidated to consolidated financial statement . 60 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 24 , 2005 2005 2004 2003 year ended September 24 , 2005 2005 2004 2003 Net sale ended September 24 , 2005 2005 Equity Balances a of September 28 , 2002 717,918 $ 1,826 a of September 28 , 2002 717,918 $ 1,826 $ ( of September 28 , 2002 717,918 $ 1,826 $ ( 7 28 , 2002 717,918 $ 1,826 $ ( 7 ) $ 717,918 $ 1,826 $ ( 7 ) $ 2,325 $ ( $ ( 7 ) $ 2,325 $ ( 49 ) $ ) $ 2,325 $ ( 49 ) $ 4,095 Components of $ ( 49 ) $ 4,095 Components of comprehensive income : Net income \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign \u2014 \u2014 \u2014 69 \u2014 69 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 31 31 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 31 31 Cha Equity and SFAS No . 143 . Long-Lived Assets Including Goodwill three fiscal year ended September 24 , 2005 , the Company year ended September 24 , 2005 , the Company had no restructuring action described in Note 5 of these Notes to Consolidated Statements . SFAS No . 142 , Goodwill and Other Intangible test on or about August 30 of each year . The intangible asset impairment charge in 2005 , 2004 , or 2003 impairment charge in 2005 , 2004 , or 2003 . The 2005 , 2004 , or 2003 . The Company establishe equity . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , the Company 2005 and September 25 , 2004 , the Company had a a net gain of $ 673,000 and a net loss of a net loss of $ 1.8 million , respectively , included U.S. interest rate . During 2001 and 2002 , the Company rate . During 2001 and 2002 , the Company entered into a realized gain of $ 23 million . These gain were and wa repaid in February 2004 . As of September 2 Equity Preferred Stock The Preferred Stock The Company ha 5 million share of authorized preferred share of preferred stock . 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7\u2014Shareholders \u2019 Equity ( Continued ) ) Restricted Stock Units During 2005 and 2004 , the Company Stock Units During 2005 and 2004 , the Company \u2019 s Directors approved the grant of 230,000 and 5.03 million restricted stock the grant of 230,000 and 5.03 million restricted stock unit , The Company ha recor Equity ( Continued ) ( in million ) : 2005 2004 2003 Unrealized gains/ ( in million ) : 2005 2004 2003 Unrealized gains/ ( loss million ) : 2005 2004 2003 Unrealized gains/ ( loss ) on available-for-sale security $ ( 4 ) $ ( 4 ) ( 4 ) $ ( 4 ) $ 1 Unrealized gains/ $ ( 4 ) $ 1 Unrealized gains/ ( loss ) loss ) on derivative investment 4 ( 4 ) ( 16 on derivative investment 4 ( 4 ) ( 16 ) Cumulative 4 ( 4 ) ( 16 ) Cumulative foreign currency translation foreign currency translation \u2014 ( 7 ) ( 20 ) Accumul equity in 2003 . /s/ KPMG LLP Mountain Mountain View , California November 29 , 2005 98 REPORT OF , California November 29 , 2005 98 REPORT OF INDEPENDENT REGISTERED California November 29 , 2005 98 REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of September 24 , 2005 , based on a of September 24 , 2005 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reaso equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan \u201d ) and 1,600,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 740,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly independent \u201d director under the 107 applicable NASDAQ rule . There Equity by shareholder 42,365,700 $ 23.27 62,791,724 ( 1 ) Equity compensation 42,365,700 $ 23.27 62,791,724 ( 1 ) Equity compensation plan not plan not approved by shareholder 30,827,565 $ 10.27 \u2014 Total equity approved by shareholder 30,827,565 $ 10.27 \u2014 Total equity compensation plan Total equity compensation plan ( 2 ) 73,193,265 $ 17.79 62,791,724 compensation plan ( 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ( 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ) This 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ) This num", + "cash_flow": "cash flow ( c ) 62 76 82 Annual operating cash flow $ Annual operating cash flow $ 2,535 $ 934 $ 289 ( cash flow $ 2,535 $ 934 $ 289 ( a ) $ 2,535 $ 934 $ 289 ( a ) DSO is inventory . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had $ , the Company had $ 8.261 billion in cash , cash , an increase of $ 2.797 billion over the same balance balance at the end of 2004 . The principal component of by operating activity of $ 2.535 billion and proceeds of $ billion and proceeds cash flow of approximately $ 14 million will be required to other obligation of approximately $ 4 million are primarily related to provision under which the Company 44 could be subject to cost affected by these event . 45 The market for personal computer overall Company gross margin . 46 The Company also face increased continue to pursue one-to-one ( 1:1 ) learning solution in education learning solution in education . 1:1 learning solution typically consist of a central server . These 1:1 learning solut cash flow $ 3,491 $ 2,969 $ 3,396 Supplemental cash flow disclosure : for interest $ \u2014 $ 10 $ 20 Cash paid ( $ \u2014 $ 10 $ 20 Cash paid ( received ) income tax , net $ 17 $ ( 7 ) $ net $ 17 $ ( 7 ) $ 45 See accompanying $ ( 7 ) $ 45 See accompanying note to consolidated to consolidated financial statement . 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple of September . Fiscal year 2005 , 2004 , and 2003 . Fiscal year cash flow hedge . 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( is also disclosed . Note 2\u2014Financial Instruments The carrying amount of in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 Cash September 24 , 2005 September 25 , 2004 Cash $ 127 , 2005 September 25 , 2004 Cash $ 127 $ 200 25 , 2004 Cash $ 127 $ 200 U.S. Treasury and 2004 Cash $ 127 $ 200 U.S. Treasury and Agency security U", + "operating_margin": "operating margin percentage . 53 The Company expects it quarterly prepay a total of $ 1.25 billion under these agreement . , where the majority of 54 the Company \u2019 s key in foreign exchange rate . 55 Further information related to the in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading \u201c Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 2 this Form 10-K at Notes 1 and 2 of Notes to 10-K at Notes 1 and 2 of Notes to Consolidated Finan", + "gross_margin": "Gross margin $ 6,207 Cost of sale 9,888 6,020 4,499 Gross margin $ 4,043 Cost of sale 9,888 6,020 4,499 Gross margin $ 4,043 $ 6,020 4,499 Gross margin $ 4,043 $ 2,259 $ 1,708 Gross Gross margin $ 4,043 $ 2,259 $ 1,708 Gross margin percentage $ 4,043 $ 2,259 $ 1,708 Gross margin percentage 29.0 % $ 1,708 Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin increased in % Gross margin increased in 2005 to 29.0 % of gross margin during 2005 increased due to more favorable in the first quarter of 2006 primarily a a result of fluctuation in exchange rate . 37 The Company order component for . Gross margin declined in 2004 to 27.3 % of net margin declined in 2004 to 27.3 % of net sale from % of net sale from 27.5 % of net sale in % of net sale in 2003 . The Company \u2019 s \u2019 s gross margin during 2004 declined due to an increase transitioned during the beginning of 2004 , higher warranty cost on freight and duty cost during 2 gross margin . 46 The Company also face increased continue to pursue one-to-one ( 1:1 ) learning solution in education learning solution in education . 1:1 learning solution typically consist of a central server . These 1:1 learning solution and other strategic numerous risk . In June 2005 , the Company announced it the end of calendar year 2007 . This transition is subject with other industry that have 47 experienced increased demand for their during the second half of 2004 and the first quarter of and the Gross margin 4,043 6,207 Cost of sale 9,888 6,020 4,499 Gross margin 4,043 2,259 Cost of sale 9,888 6,020 4,499 Gross margin 4,043 2,259 1,708 9,888 6,020 4,499 Gross margin 4,043 2,259 1,708 Operating expense : 6,020 4,499 Gross margin 4,043 2,259 1,708 Operating expense : Research 4,499 Gross margin 4,043 2,259 1,708 Operating expense : Research and expense : Research and development 534 489 471 Selling , general : Research and development 534 489 471 Selling , general , Research and development 534 489 4 Gross margin $ $ 3,520 $ 3,243 $ 3,490 Gross margin $ 1,035 $ $ 3,490 Gross margin $ 1,035 $ 1,044 $ 968 $ Gross margin $ 1,035 $ 1,044 $ 968 $ 996 Net $ 1,035 $ 1,044 $ 968 $ 996 Net income $ $ 1,044 $ 968 $ 996 Net income $ 430 $ $ 996 Net income $ 430 $ 320 $ 290 $ Net income $ 430 $ 320 $ 290 $ 295 Earnings $ 430 $ 320 $ 290 $ 295 Earnings per common $ 320 $ 290 $ 295 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 Gross margin $ $ 2,014 $ 1,909 $ 2,006 Gross margin $ 634 $ $ 2,006 Gross margin $ 634 $ 559 $ 530 $ Gross margin $ 634 $ 559 $ 530 $ 536 Net $ 634 $ 559 $ 530 $ 536 Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.14 $ 0.08 $ 0.06 $ : Basic $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.0", + "accumulated_depreciation": "Accumulated depreciation 81 79 Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and 79 Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and amortization Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 664 ) ( 591 ) Net amortization ( 664 ) ( 591 ) Net property , plant plant , and equipment $ 817 $ 707 Other Assets 2005 and equipment $ 817 $ 707 Other Assets 2005 2004 Non-current 817 $ 707 Other Assets 2", + "capital_expenditure": "capital expenditure were $ 260 million during 2005 , $ were $ 260 million during 2005 , $ 132 million of million during 2005 , $ 132 million of which were for s Retail segment and $ 128 million of which were primarily it will utilize approximately $ 390 million for capital expenditure during million for capital expenditure during 2006 , approximately $ 210 million during 2006 , approximately $ 210 million of which is expected Stock Repurchase Plan In July 1999 , the Company \u2019 s to repurchase up to $ 500 million of", + "debt": "debt ( $ 6,815 $ 6,298 $ 6,021 Long-term debt ( including current $ \u2014 $ \u2014 $ 304 $ 316 $ 317 Total $ \u2014 $ 304 $ 316 $ 317 Total liability $ $ 304 $ 316 $ 317 Total liability $ 4,085 $ $ 317 Total liability $ 4,085 $ 2,974 $ 2,592 $ Total liability $ 4,085 $ 2,974 $ 2,592 $ 2,203 $ $ 4,085 $ 2,974 $ 2,592 $ 2,203 $ 2,101 Shareholders $ 2,974 $ 2,592 $ 2,203 $ 2,101 Shareholders \u2019 equity $ 2,592 $ 2,203 $ 2,101 Shareholders \u2019 equity $ 7,466 2,101 Shareholders \u2019 equity $ 7,466 $ 5,076 $ 4,223 $ \u2019 equity debt swap of approximately $ 23 million wa fully amortized a note \u2019 maturity in February 2004 . Provision for Income Taxes for the year ended September 24 , 2005 wa approximately 26 year ended September 24 , 2005 wa approximately 26 % . 24 , 2005 wa approximately 26 % . The Company \u2019 federal income tax rate of 35 % due primarily to certain deferred tax asset wa $ 67 million . In addition , the Company recorded a $ 25 million reduction of the valuation in the future . $ 14 million of the valuation al debt . FSP Nos . FAS 115-1 and FAS 124-1 are effective . FAS 115-1 and FAS 124-1 are effective for fiscal year fiscal year beginning after December 15 , 2005 . Although the beginning after December 15 , 2005 . Although the Company will of FSP Nos . FAS 115-1 and FAS 124-1 , management . FAS 115-1 and FAS 124-1 , management doe not currently financial position . In November 2004 , the FASB issued SFAS FASB issued SFAS No . 151 , Inventory Costs , which ( ARB ) No . 43 , Chapter 4 , Inventory No . 43 debt \u2014 ( 300 ) \u2014 Proceeds from issuance from issuance of common stock 543 427 53 Cash used for issuance of common stock 543 427 53 Cash used for repurchase of common stock 543 427 53 Cash used for repurchase of common stock \u2014 \u2014 ( 26 ) Cash generated by financing Cash generated by financing activity 543 127 27 Increase ( decrease generated by financing activity 543 127 27 Increase ( decrease ) by financing activity 543 127 27 Increase ( decrease ) in in cash and cash equivalent 522 ( 427 ) 1,144 Cash", + "earnings_per_share": "earnings per share . 56 Item 7A . Quantitative and per share . 56 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 24 , 2005 , approximately $ As of September 24 , 2005 , approximately $ 287 million , 2005 , approximately $ 287 million of the Company \u2019 had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 25 , 2004 , $ 180 As of September 25 , 2004 , $ 180 million of 25 , 2004 , $ 180 million of the Company \u2019 earnings per share : 2005 2004 2003 Numerator ( in earnings per share : 2005 2004 2003 Numerator ( in million per share : 2005 2004 2003 Numerator ( in million ) Income before accounting change $ 1,335 $ 276 $ 68 Cumulative accounting change $ 1,335 $ 276 $ 68 Cumulative effect of $ 1,335 $ 276 $ 68 Cumulative effect of accounting change net of tax \u2014 \u2014 1 Net income $ 1,335 $ \u2014 1 Net income $ 1,335 $ 276 $ 69 Denominator Net income $ 1,335 $ 276 $ 69 Denominator ( in $ 1,335 $ 276 $ 69 Denominator ( in thousand ) earnings per share 856,780 774,622 726,932 Basic earnings per diluted earnings per share 856,780 774,622 726,932 Basic earnings per share earnings per share 856,780 774,622 726,932 Basic earnings per share before share before accounting change $ 1.65 $ 0.37 $ 0.09 Basic accounting change $ 1.65 $ 0.37 $ 0.09 Basic earnings per $ 1.65 $ 0.37 $ 0.09 Basic earnings per share after share after accounting change $ 1.65 $ 0.37 $ 0.10 Diluted accounting change $ 1.65 $ 0.37 $ 0.10 Diluted earnings per $ 1.65 $ 0.37 $ 0. earnings per share before share before accounting change $ 1.56 $ 0.36 $ 0.09 Diluted accounting change $ 1.56 $ 0.36 $ 0.09 Diluted earnings per $ 1.56 $ 0.36 $ 0.09 Diluted earnings per share after share after accounting change $ 1.56 $ 0.36 $ 0.09 Potentially accounting change $ 1.56 $ 0.36 $ 0.09 Potentially dilutive security $ 1.56 $ 0.36 $ 0.09 Potentially dilutive security representing approximately Potentially dilutive security representing approximately 12.4 million , 8.7 million , representing approxima", + "tax_rate": "tax rate of 35 % due primarily to certain deferred tax asset wa $ 67 million . In addition , the Company recorded a $ 25 million reduction of the valuation in the future . $ 14 million of the valuation allowance goodwill . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had deferred and tax credit of $ 767 million before being offset against asset . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 20 tax rate ( 35 % in 2005 , 2004 rate ( 35 % in 2005 , 2004 , and 2003 35 % in 2005 , 2004 , and 2003 ) to 2005 , 2004 , and 2003 ) to income before provision ( in million ) : 2005 2004 2003 Computed expected tax in million ) : 2005 2004 2003 Computed expected tax $ million ) : 2005 2004 2003 Computed expected tax $ 636 2003 Computed expected tax $ 636 $ 134 $ 32 State expected tax $ 636 $ 134 $ 32 State tax , $ 636 $ 134 $ 32 State tax , net of net of federal effect ( 19 ) ( 5 ) ( effect ( 19 ) ( 5 ) ( 4 tax rate $ 480 $ 107 $ 24 Effective tax rate 26 % $ 24 Effective tax rate 26 % 28 % 26 % Effective tax rate 26 % 28 % 26 % During 2005 rate 26 % 28 % 26 % During 2005 , the 28 % 26 % During 2005 , the Company reversed certain during the fourth quarter of 2005 , the Company recorded a deferred tax asset wa $ 67 million . The Company also Company also recorded a $ 14 million credit to income tax for all year prior to 2002 and proposed certain adjustment . such resolution occurs . Note 7\u2014Shareholders \u2019 Equ", + "geographic_information": "geographic marketplace . Approximately 60 % of the Company \u2019 \u2019 s net sale in 2005 came from sale to customer in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , \u201c Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 15 Environmental Laws Compliance with federal . Employees As of September 24 , 2005 , the Company As of September 24 , 2005 , the Compan geographic operating may be found in Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , \u201c Segment Information and Data . \u201d Americas During 2005 , net sale in the in the Americas segment grew 64 % or $ 2.6 billion grew 64 % or $ 2.6 billion compared to 2004 . $ 2.6 billion compared to 2004 . The increase in net increase in net sale during 2005 wa primarily attributable to the Retail segment , which had 117 store in the U.S. and a Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , \u201c Summary of Significant the Retail segment were $ 132 million , $ 104 million $ 132 million , $ 104 million , and $ 92 104 million , and $ 92 million for 2005 , 2004 and $ 92 million for 2005 , 2004 , and 2003 92 million for 2005 , 2004 , and 2003 respectively . 2005 , 2004 , and 2003 respectively . Operating income for included in corporate expense . 92 NOTES TO CONSOLIDATED FINANCIAL STATEMENT Geographic Data ( For the year ended September 24 , 2005 , September 25 year ended September 24 , 2005 , September 25 , 2004 24 , 2005 , September 25 , 2004 , and September 2005 , September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 , this resulted , and September 27 , 2003 , this resulted in the corporate expense of approximately $ 435 million , $ 213 million $ 435 million , $ 213 million , and $ 106 213 million , and $ 106 million , respectively . Second For the year ended September Geographic Data ( ( in million ) : 2005 2004 2003 Americas : Net in million ) : 2005 2004 2003 Americas : Net sale million ) : 2005 2004 2003 Americas : Net sale $ Americas : Net sale $ 6,590 $ 4,019 $ 3,181 Operating Net sale $ 6,590 $ 4,019 $ 3,181 Operating income $ $ 6,590 $ 4,019 $ 3,181 Operating income $ 798 $ $ 3,181 Operating income $ 798 $ 465 $ 323 Depreciation Operating income $ 798 $ 465 $ 323 Depreciation , amortization $ 798 $ 465 $ 323 Depreciation , amortization , and amortization , and a Geographic Data ( ( in million ) : 2005 2004 2003 Segment operating income in million ) : 2005 2004 2003 Segment operating income $ million ) : 2005 2004 2003 Segment operating income $ 1,661 2003 Segment operating income $ 1,661 $ 989 $ 620 Retail operating income $ 1,661 $ 989 $ 620 Retail manufacturing margin $ 1,661 $ 989 $ 620 Retail manufacturing margin ( a manufacturing margin ( a ) 435 213 106 Corporate expense , margin ( a ) 435 213 106 Corporate expense , net ( a ) 435 213 106 Corporate expense Geographic Data ( ( in million ) : 2005 2004 2003 Net Sales : in million ) : 2005 2004 2003 Net Sales : Desktops million ) : 2005 2004 2003 Net Sales : Desktops ( Desktops ( a ) $ 3,436 $ 2,373 $ 2,475 Portables a ) $ 3,436 $ 2,373 $ 2,475 Portables ( b $ 3,436 $ 2,373 $ 2,475 Portables ( b ) 2,839 2,475 Portables ( b ) 2,839 2,550 2,016 Total Macintosh net Portables ( b ) 2,839 2,550 2,016 Total Macintosh net sale ( b ) 2,839 2,550 2,016 Total Macintosh net sale 6,275 2,016 Total Macintosh net sale 6,275", + "common_stock": "Common Stock Issued and Outstanding a of November 18 , 2005 PART I The a of November 18 , 2005 PART I The Business section this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , informati common stock had repurchased a total of 13.1 million share at a cost at a cost of $ 217 million . The Company ha repurchase it common stock during 2005 or 2004 . The Company common stock during 2005 or 2004 . The Company wa authorized up to an additional $ 283 million of it common stock common stock a of September 24 , 2005 . On February a of September 24 , 2005 . On February 28 , , 2005 . On February 28 , 2005 , the Company . On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 Common stock \u2014 \u2014 5 \u2014 \u2014 5 Common stock issued under stock stock issued under stock plan 18,598 128 ( 75 ) \u2014 issued under stock plan 18,598 128 ( 75 ) \u2014 \u2014 stock plan 18,598 128 ( 75 ) \u2014 \u2014 53 Settlement ( 75 ) \u2014 \u2014 53 Settlement of forward purchase agreement of forward purchase agreement ( 3,062 ) ( 35 ) \u2014 agreement ( 3,062 ) ( 35 ) \u2014 \u2014 \u2014 ( ) \u2014 \u2014 \u2014 ( 35 ) Tax benefit related to related to stock option \u2014 7 \u2014 \u2014 \u2014 7 Balances \u2014 7 \u2014 \u2014 \u2014 7 Balances a of September 27 7 Balances a of September 27 , 2003 733,454 $ 1,926 Common stock \u2014 \u2014 33 \u2014 \u2014 33 Common stock issued under stock stock issued under stock plan 49,592 427 \u2014 \u2014 \u2014 427 issued under stock plan 49,592 427 \u2014 \u2014 \u2014 427 Tax 49,592 427 \u2014 \u2014 \u2014 427 Tax benefit related to stock related to stock option \u2014 99 \u2014 \u2014 \u2014 99 Balances \u2014 99 \u2014 \u2014 \u2014 99 Balances a of September 25 99 Balances a of September 25 , 2004 782,887 $ 2,514 a of September 25 , 2004 782,887 $ 2,514 $ ( of September 25 , 2004 782,887 $ 2,514 $ ( 93 25 , 2004 782,887 $ 2,514 $ ( 93 ) $ 782,887 $ 2,514 $ ( 93 ) $ 2,670 $ Common stock \u2014 \u2014 40 \u2014 \u2014 40 Common stock issued under stock stock issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 Tax 52,132 547 \u2014 \u2014 \u2014 547 Tax benefit related to stock related to stock option \u2014 453 \u2014 \u2014 \u2014 453 Balances \u2014 453 \u2014 \u2014 \u2014 453 Balances a of September 24 453 Balances a of September 24 , 2005 835,019 $ 3,521 a of September 24 , 2005 835,019 $ 3,521 $ ( of September 24 , 2005 835,019 $ 3,521 $ ( 60 24 , 2005 835,019 $ 3,521 $ ( 60 ) $ 835,019 $ 3,521 $ ( 60 ) $ 4, common stock 543 427 53 Cash used for issuance of common stock 543 427 53 Cash used for repurchase of common stock 543 427 53 Cash used for repurchase of common stock \u2014 \u2014 ( 26 ) Cash generated by financing Cash generated by financing activity 543 127 27 Increase ( decrease generated by financing activity 543 127 27 Increase ( decrease ) by financing activity 543 127 27 Increase ( decrease ) in in cash and cash equivalent 522 ( 427 ) 1,144 Cash and cash equivalent 522 ( 427 ) 1,144 Cash and cash equivalent 5 Common Stock Split On February 28 , 2005 , the Company Split On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per defined a hedge in SFAS 133 , Accounting for Derivative Instruments in fair value of the 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( the asset , which are 30 year for building , up for building , up to 5 year for equipment , and shorte common stock for the year ended September 24 , 2005 , September 25 year ended September 24 , 2005 , September 25 , 2004 24 , 2005 , September 25 , 2004 , and September 2005 , September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 , respectively , , and September 27 , 2003 , respectively , were excluded a cash flow hedge . 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( is also disclosed . Note 2\u2014Financial Instrumen common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 3.1 million share of it common common stock in September of 2003 at an average price of an average price of $ 8.32 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 11.41 . Other than this forward repurchase it common stock since 2000 . Since inception of the had repurchased a total of 13.1 million share common stock common stock a of September 24 , 2005 . 83 NOTES a of September 24 , 2005 . 83 NOTES TO CONSOLIDATED September 24 , 2005 . 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7\u2014Shareholders \u2019 Equity ( Continued ) ( in million ) : 2005 2004 2003 Unrealized gains/ ( in million ) : 2005 2004 2003 Unrealized gains/ ( loss million ) : 2005 2004 2003 Unrealized gains/ ( loss ) on available-for-sale security $ ( 4 ) $ ( 4 ) ( 4 ) $ ( 4 ) $ 1 Unrealized gains/ $ ( 4 ) $ 1 Unreal common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 13,394,736 share were issued to employee an exercise price of $ 11.38 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company \u2019 s Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 Trad Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 740,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly independent \u201d director under the 107 applicable NASDAQ rule . There acquisition by any person of 50 % or more of the annual base salary . Item 12 . Security Ownership of Certain certain information a of October 31 , 2005 ( the \u201c a of October 31 , 2005 ( the \u201c Table Date belief beneficially hold mo Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . 108 Security Ownership of Cupertino , CA 95014 . 108 Security Ownership of 5 % . 108 Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 58,552,916 ( 2 ) 6.97 % Outstanding Fidelity Investments 58,552,916 ( 2 ) 6.97 % Barclays Global Investments 58,552,916 ( 2 ) 6.97 % Barclays Global Investors 55,223,982 Common Stock that of stock option . ( 6 ) Includes 210,000 share of . ( 6 ) Includes 210,000 share of Common Stock that of stock option . ( 7 ) Excludes 600,000 restricted stock . ( 7 ) Excludes 600,000 restricted stock unit . ( restricted stock unit . ( 8 ) Includes 170,000 share of . ( 8 ) Includes 170,000 share of Common Stock that of stock option . ( 9 ) Consists of 40,000 share ( 9 ) Consists of 40,000 share of Common Stock that of stock option . ( 10 ) Includes 2,100,000 share of . ( 10 ) Includes 2,1 Common Stock that of stock option and excludes 500,000 restricted stock unit . ( restricted stock unit . ( 11 ) Includes 2,000 share of . ( 11 ) Includes 2,000 share of Common Stock that Dr. Levinson hold indirectly and 90,000 share of Common Stock that of stock option . ( 12 ) Includes 382,500 share of . ( 12 ) Includes 382,500 share of Common Stock that of stock option and excludes 500,000 restricted stock unit . 109 500,000 restricted stock unit . 109 ( 13 ) Excludes 500,000 stock unit . 109 ( 13 ) Exclu Common Stock that of stock option . ( 15 ) Includes 5,870,796 share of . ( 15 ) Includes 5,870,796 share of Common Stock that option . Does not include 4.4 million of restricted stock unit . * Represents le than 1 % of the issued and information , a of September 24 , 2005 , concerning share a of September 24 , 2005 , concerning share of common two-for-one stock split in February 2005 . ( a ) Number compensation plan approved by shareholder 42,365,700 $ 23.27 62,791,724 ( 1 approved by shareholder 42,365,700 common stock reserved Employee Stock Purchase Plan , 440,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 58,517,424 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 5,260,000 share of restricted stock unit stock unit granted after April 2005 count against the share available not include share under the 1990 Stock Option Plan that wa Plan that wa terminated i", + "derivative_instruments": "Derivative Instruments in fair value of the 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( the asset , which are 30 year for building , up for building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 141 million , $ 126 million $ 141 million , $ 126 million" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001104659-06-084288/full-submission_features.json b/src/data/feature/AAPL/10-K/0001104659-06-084288/full-submission_features.json new file mode 100644 index 0000000..5fb7584 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001104659-06-084288/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue or financial performance . 19 Environmental Laws Compliance with federal . Employees As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had 17,787 2006 , the Company had 17,787 full-time equivalent employee and an equivalent employee and an additional 2,399 temporary equivalent employee and contractor s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to re revenue pursuant to applicable accounting 50 standard , including American Institute SOP \u201d ) No . 97-2 , Software Revenue Recognition , SAB \u201d ) No . 104 , Revenue Recognition . The debt , the general economic 51 environment , the financial condition requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is accordance with SFAS No . 123R . Under the provision of provision of SFAS No . 123R , stock-based compensation cost is BSM model requires various highly 5 revenue per store per store increased to $ 23.6 million compared to $ 22.4 23.6 million compared to $ 22.4 million during 2005 and $ to $ 22.4 million during 2005 and $ 15.6 million in million during 2005 and $ 15.6 million in 2004 . The and $ 15.6 million in 2004 . The current year increase with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other reported operating income of $ 198 million during 2006 a compared of $ 198 million Revenue Recognition , SAB \u201d ) No . 104 , Revenue Recognition . The is recognized a revenue . 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( pursuant to SFAS No . 86 , Computer Software to be been immediately expensed . In 2004 , the Company began incurring with Mac OS X version 10.4 Tiger ( \u201c Tiger \u201d by public demonstration in August 2004 and the subsequent release of The Company capitalized approximately $ 29.7 million and $ 4 revenue\u2014current $ 746 1 ) Deferred revenue\u2014current $ 746 $ 501 Accrued warranty and Deferred revenue\u2014current $ 746 $ 501 Accrued warranty and related cost Accrued warranty and related cost 284 188 Accrued marketing and distribution warranty and related cost 284 188 Accrued marketing and distribution 298 188 Accrued marketing and distribution 298 221 Accrued compensation and employee Accrued marketing and distribution 298 221 Accrued compensation and employee benefit Accrued compensation and employee be revenue\u2014non-current 355 tax liability $ 381 $ 308 Deferred revenue\u2014non-current 355 281 Other 381 $ 308 Deferred revenue\u2014non-current 355 281 Other non-current liability 14 $ 308 Deferred revenue\u2014non-current 355 281 Other non-current liability 14 12 355 281 Other non-current liability 14 12 Total non-current liability $ 281 Other non-current liability 14 12 Total non-current liability $ 750 12 Total non-current liability $ 750 $ 601 96 NOTES TO non-current liability $ 750 $ 601 96 NOTES TO CONSOLIDATED F", + "expenses": "Expenses 2006 other asset $ 1,238 $ 303 Accrued Expenses 2006 2005 As 1,238 $ 303 Accrued Expenses 2006 2005 As Restated ( 1 $ 303 Accrued Expenses 2006 2005 As Restated ( 1 ) 2006 2005 As Restated ( 1 ) Deferred revenue\u2014current $ 746 1 ) Deferred revenue\u2014current $ 746 $ 501 Accrued warranty and Deferred revenue\u2014current $ 746 $ 501 Accrued warranty and related cost Accrued warranty and related cost 284 188 Accrued marketing and distribution warranty and related cost 284 188 Accrued marketing and distrib", + "net_income": "Net income $ $ 8,279 $ 6,207 $ 5,742 Net income $ 1,989 $ $ 5,742 Net income $ 1,989 $ 1,328 $ 266 $ Net income $ 1,989 $ 1,328 $ 266 $ 57 $ $ 1,989 $ 1,328 $ 266 $ 57 $ 42 Earnings $ 1,328 $ 266 $ 57 $ 42 Earnings per common $ 266 $ 57 $ 42 Earnings per common share : common share : Basic $ 2.36 $ 1.64 $ 0.36 $ : Basic $ 2.36 $ 1.64 $ 0.36 $ 0.08 $ $ 2.36 $ 1.64 $ 0.36 $ 0.08 $ 0.06 Diluted $ 1.64 $ 0.36 $ 0.08 $ 0.06 Diluted $ 2.27 $ 0.36 $ 0.08 $ 0.06 Diluted $ 2.27 $ 1.55 0.08 $ 0.06 Diluted $ 2.27 $ Net income during million . Net income during 2005 benefited by $ 81 million during 2005 benefited by $ 81 million from the reversal of net of tax of $ 1 million wa recognized in 2003 1 million wa recognized in 2003 . ( 1 ) See recognized in 2003 . ( 1 ) See the \u201c Explanatory preceding Part I , Item 1 and Note 2 , \u201c , Item 1 and Note 2 , \u201c Restatement of Consolidated Financial Statements of this Form 10-K. 47 ( 2 ) The Statements of this Form 10-K. 47 ( 2 ) The Selected this Form 10-K. 47 ( 2 ) The Select Net income \u2014 \u2014 Net income $ 69 $ ( 12 ) $ income $ 69 $ ( 12 ) $ 57 $ 65 $ ( 12 ) $ 57 $ 65 $ ( 23 12 ) $ 57 $ 65 $ ( 23 ) $ 57 $ 65 $ ( 23 ) $ 42 Earnings ( $ ( 23 ) $ 42 Earnings ( loss ) per accounting change : Basic $ 0.09 $ ( 0.01 ) $ Basic $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.06 Diluted $ $ ( 0.03 ) $ 0.06 Diluted $ 0.09 $ ( ) $ 0.06 Diluted $ 0.09 $ ( 0.01 ) $ Diluted $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.01 ) Net income Provision for income tax 179 189 195 266 Net income $ for income tax 179 189 195 266 Net income $ 542 income tax 179 189 195 266 Net income $ 542 $ 195 266 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 Net income Provision for income tax 49 153 145 133 Net income $ for income tax 49 153 145 133 Net income $ 428 income tax 49 153 145 133 Net income $ 428 $ 145 133 Net income $ 428 $ 319 $ 288 $ Net income $ 428 $ 319 $ 288 $ 293 Earnings $ 428 $ 319 $ 288 $ 293 Earnings per common $ 319 $ 288 $ 293 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 0.36 $ Net income income tax 48 1 49 153 \u2014 153 Net income $ 48 1 49 153 \u2014 153 Net income $ 430 $ \u2014 153 Net income $ 430 $ ( 2 ) $ income $ 430 $ ( 2 ) $ 428 $ 320 $ ( 2 ) $ 428 $ 320 $ ( 1 2 ) $ 428 $ 320 $ ( 1 ) $ 428 $ 320 $ ( 1 ) $ 319 Earnings per $ ( 1 ) $ 319 Earnings per common share : common share : Basic $ 0.52 $ \u2014 $ 0.52 $ $ 0.52 $ \u2014 $ 0.52 $ 0.39 $ \u2014 $ $ \u2014 $ 0.52 $ 0.39 $ \u2014 $ 0.39 Diluted $ 0.39 $ \u2014 $ 0.39 Diluted $ 0.50 $ ( \u2014 $ 0.39 Diluted $ 0.50 $ ( 0.01 ) $ Diluted $ 0.50 $ ( 0.01 ) $ 0.49 $ 0.37 Net income $ 145 134 ( 1 ) 133 Net income $ 290 $ ) 133 Net income $ 290 $ ( 2 ) $ income $ 290 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 293 Earnings per $ ( 2 ) $ 293 Earnings per common share : common share : Basic $ 0.36 $ \u2014 $ 0.36 $ $ 0.36 $ \u2014 $ 0.36 $ 0.37 $ \u2014 $ $ \u2014 $ 0.36 $ 0.37 $ \u2014 $ 0.37 Diluted $ 0.37 $ \u2014 $ 0.37 Diluted $ 0.34 $ \u2014 \u2014 $ 0.37 Diluted $ 0.34 $ \u2014 $ 0.34 $ $ 0.34 $ \u2014 $ 0.34 $ 0.35 $ \u2014 $ $ \u2014 $ 0.34 $ 0.35 $ \u2014 $ 0.35 Shares $ 0.35 $ \u2014 $ Net income $ Provision for income tax 829 480 104 Net income $ 1,989 for income tax 829 480 104 Net income $ 1,989 $ 480 104 Net income $ 1,989 $ 1,328 $ 266 Earnings Net income $ 1,989 $ 1,328 $ 266 Earnings per common $ 1,989 $ 1,328 $ 266 Earnings per common share : common share : Basic $ 2.36 $ 1.64 $ 0.36 Diluted : Basic $ 2.36 $ 1.64 $ 0.36 Diluted $ 2.27 $ 2.36 $ 1.64 $ 0.36 Diluted $ 2.27 $ 1.55 1.64 $ 0.36 Diluted $ 2.27 $ 1.55 $ 0.34 Shares 0.36 Diluted $ 2.27 $ 1.55 $ 0.34 Shares used in $ 2.27 Net income \u2014 \u2014 \u2014 266 \u2014 266 Change in foreign \u2014 \u2014 \u2014 266 \u2014 266 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 13 13 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 5 ) ( 5 ) Change \u2014 ( 5 ) ( 5 ) Change in unrealized loss tax \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 286 \u2014 \u2014 \u2014 \u2014 12 12 Total comprehensive income 286 Issuance 12 12 Total comprehensive income 286 Issuance of stock-based compensation award of stock-based compensation award \u2014 63 ( 63 ) \u2014 \u2014 compensation aw Net income \u2014 \u2014 \u2014 1,328 \u2014 1,328 Change in foreign \u2014 \u2014 \u2014 1,328 \u2014 1,328 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 7 7 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,343 \u2014 \u2014 \u2014 \u2014 8 8 Total comprehensive income 1,343 Issuance 8 8 Total comprehensive income 1,343 Issuance of stock-based compensation award of stock-based compensation award \u2014 7 ( 7 ) \u2014 \u2014 compensation award \u2014 7 ( 7 ) \u2014 \u2014 \u2014 Stock-based \u2014 Stock-based compensation \u2014 \u2014 47 Net income \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized loss \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized loss on \u2014 \u2014 \u2014 \u2014 ( 1 ) ( 1 ) Total \u2014 ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 Net income Operating Activities : Net income 1,989 1,328 266 Adjustments to reconcile Activities : Net income 1,989 1,328 266 Adjustments to reconcile net : Net income 1,989 1,328 266 Adjustments to reconcile net income Depreciation , amortization and accretion 225 179 150 Stock-based compensation expense , amortization and accretion 225 179 150 Stock-based compensation expense 163 amortization and accretion 225 179 150 Stock-based compensation expense 163 49 179 150 Stock-based compensation expense 163 4 Net income $ 1,328 1 ) Net income $ 1,328 $ 266 Add : Stock-based Net income $ 1,328 $ 266 Add : Stock-based employee compensation income , net of tax 45 43 Deduct : Stock-based employee , net of tax 45 43 Deduct : Stock-based employee compensation , net of tax ( 118 ) ( 148 ) Net tax ( 118 ) ( 148 ) Net income\u2014pro forma $ ) Net income\u2014pro forma $ 1,255 $ 161 Net income per income\u2014pro forma $ 1,255 $ 161 Net income per common share per common share Basic $ 1.64 $ 0.36 Diluted $ 1.55 share Basic $ 1.64 $ 0 Net income per 0.36 Diluted $ 1.55 $ 0.34 Net income per common share\u2014pro common share\u2014pro forma Basic $ 1.55 $ 0.22 Diluted $ 1.47 forma Basic $ 1.55 $ 0.22 Diluted $ 1.47 $ 0.21 1.55 $ 0.22 Diluted $ 1.47 $ 0.21 ( 1 ) 0.22 Diluted $ 1.47 $ 0.21 ( 1 ) See Note $ 1.47 $ 0.21 ( 1 ) See Note 2 , ( 1 ) See Note 2 , \u201c Restatement of Consolidated can be found in Note 9 . Earnings Per Common Share stock method . Under the 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of S Net income $ 1,989 $ 1,328 $ 266 Denominator Net income $ 1,989 $ 1,328 $ 266 Denominator ( in $ 1,989 $ 1,328 $ 266 Denominator ( in thousand ) , excluding unvested restricted stock 844,058 808,439 743,180 Effect of dilutive excluding unvested restricted stock 844,058 808,439 743,180 Effect of dilutive option unvested restricted stock 844,058 808,439 743,180 Effect of dilutive option , unit and unvested restricted stock 33,468 48,439 31,596 Denominator for diluted and unvested restricted stock 33,468 48, Net income $ 480 107 ( 3 ) 104 Net income $ 1,335 $ ) 104 Net income $ 1,335 $ ( 7 ) $ income $ 1,335 $ ( 7 ) $ 1,328 $ 276 $ ( 7 ) $ 1,328 $ 276 $ ( 10 7 ) $ 1,328 $ 276 $ ( 10 ) $ 1,328 $ 276 $ ( 10 ) $ 266 Earnings per $ ( 10 ) $ 266 Earnings per common share : common share : Basic $ 1.65 $ ( 0.01 ) $ Basic $ 1.65 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 0.36 Diluted $ $ ( 0.01 ) $ 0.36 Diluted $ 1.56 $ ( ) $ 0.36 Diluted $ 1. net income \u2014 \u2014 ( 4 ) Change in unrealized gain/loss gain/loss on available-for-sale security $ 4 $ \u2014 $ ( 5 4 $ \u2014 $ ( 5 ) The tax effect related available-for-sale security wa $ ( 2 ) million , zero , , zero , and $ 4 million for 2006 , 2005 and $ 4 million for 2006 , 2005 , and 2004 4 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . The tax in net income wa $ 1 million for 2004 . 102 wa $ 1 million for 2004 . 102 NOTES TO CONSOLIDATED 1 million for 2004 . 102 NOTES net income ( 12 ) 1 33 Change in net income ( 12 ) 1 33 Change in unrealized gain/loss income ( 12 ) 1 33 Change in unrealized gain/loss on on derivative instrument $ ( 1 ) $ 8 $ 12 $ ( 1 ) $ 8 $ 12 The tax effect 1 ) $ 8 $ 12 The tax effect related to of derivative wa $ ( 8 ) million , $ ( ) million , $ ( 3 ) million , and $ ) million , and $ 10 million for 2006 , 2005 and $ 10 million for 2006 , 2005 , and 2004 10 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . net income wa $ 8 million , $ ( 2 8 million , $ ( 2 ) million , and $ million , and $ ( 13 ) million for 2006 , ( 13 ) million for 2006 , 2005 , and 2004 ) million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the \u201c 2003 Plan \u201d ) is a , option granted under the 2003 Plan generally expire 7 to the 2003 Plan gene Net income Provision for income tax 179 189 195 266 Net income $ for income tax 179 189 195 266 Net income $ 542 income tax 179 189 195 266 Net income $ 542 $ 195 266 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 Net income Provision for income tax 49 153 145 133 Net income $ for income tax 49 153 145 133 Net income $ 428 income tax 49 153 145 133 Net income $ 428 $ 145 133 Net income $ 428 $ 319 $ 288 $ Net income $ 428 $ 319 $ 288 $ 293 Earnings $ 428 $ 319 $ 288 $ 293 Earnings per common $ 319 $ 288 $ 293 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 0.36 $ Net income income tax 48 1 49 153 \u2014 153 Net income $ 48 1 49 153 \u2014 153 Net income $ 430 $ \u2014 153 Net income $ 430 $ ( 2 ) $ income $ 430 $ ( 2 ) $ 428 $ 320 $ ( 2 ) $ 428 $ 320 $ ( 1 2 ) $ 428 $ 320 $ ( 1 ) $ 428 $ 320 $ ( 1 ) $ 319 Earnings per $ ( 1 ) $ 319 Earnings per common share : common share : Basic $ 0.52 $ \u2014 $ 0.52 $ $ 0.52 $ \u2014 $ 0.52 $ 0.39 $ \u2014 $ $ \u2014 $ 0.52 $ 0.39 $ \u2014 $ 0.39 Diluted $ 0.39 $ \u2014 $ 0.39 Diluted $ 0.50 $ ( \u2014 $ 0.39 Diluted $ 0.50 $ ( 0.01 ) $ Diluted $ 0.50 $ ( 0.01 ) $ 0.49 $ 0.37 Net income $ 145 134 ( 1 ) 133 Net income $ 290 $ ) 133 Net income $ 290 $ ( 2 ) $ income $ 290 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 293 Earnings per $ ( 2 ) $ 293 Earnings per common share : common share : Basic $ 0.36 $ \u2014 $ 0.36 $ $ 0.36 $ \u2014 $ 0.36 $ 0.37 $ \u2014 $ $ \u2014 $ 0.36 $ 0.37 $ \u2014 $ 0.37 Diluted $ 0.37 $ \u2014 $ 0.37 Diluted $ 0.34 $ \u2014 \u2014 $ 0.37 Diluted $ 0.34 $ \u2014 $ 0.34 $ $ 0.34 $ \u2014 $ 0.34 $ 0.35 $ \u2014 $ $ \u2014 $ 0.34 $ 0.35 $ \u2014 $ 0.35 Shares $ 0.35 $ \u2014 $ ", + "assets": "ASSETS : Current asset Cash and cash equivalent $ 6,392 $ 3,491 Short-term investment 3,718 cash equivalent $ 6,392 $ 3,491 Short-term investment 3,718 4,770 Accounts 6,392 $ 3,491 Short-term investment 3,718 4,770 Accounts receivable , le $ 3,491 Short-term investment 3,718 4,770 Accounts receivable , le allowance , le allowance of $ 52 and $ 46 , respectively of $ 52 and $ 46 , respectively 1,252 895 Inventories and $ 46 , respectively 1,252 895 Inventories 270 165 Deferred $ 46 , respectively 1,252 Assets Including September 30 , 2006 $ 14.7 Long-Lived Assets Including Goodwill and accordance with SFAS No . 144 , Accounting for the Impairment three fiscal year ended September 30 , 2006 , the Company year ended September 30 , 2006 , the Company had no restructuring action described in Note 6 of these Notes to Consolidated Statements . SFAS No . 142 , Goodwill and Other Intangible test on or about August 30 of each year . The intangible asset impairment charge in 2006 , 2005 , or 2004 impairment c Assets 2006 2005 Vendor non-trade receivables $ ) Other Current Assets 2006 2005 Vendor non-trade receivables $ 1,593 2005 Vendor non-trade receivables $ 1,593 $ 417 NAND flash memory non-trade receivables $ 1,593 $ 417 NAND flash memory prepayment 208 417 NAND flash memory prepayment 208 \u2014 Other current asset 469 208 \u2014 Other current asset 469 231 Total other current asset \u2014 Other current asset 469 231 Total other current asset $ Total other current asset $ 2,270 $ 648 95 NOTES TO current asset $ 2,27 Assets 2006 and equipment $ 1,281 $ 817 Other Assets 2006 2005 As 1,281 $ 817 Other Assets 2006 2005 As Restated ( 1 $ 817 Other Assets 2006 2005 As Restated ( 1 ) 2006 2005 As Restated ( 1 ) Long-term NAND flash memory NAND flash memory prepayment $ 1,042 $ \u2014 Non-current deferred tax Non-current deferred tax asset \u2014 148 Capitalized software development cost , software development cost , net 21 38 Other asset 175 117 development cost , net 21 38 Other asset 175 117 Total net 21 38 Other asset 175 117 Assets The life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The following table in million ) : September 30 , 2006 September 24 , ) : September 30 , 2006 September 24 , 2005 Gross September 30 , 2006 September 24 , 2005 Gross Carrying Amount , 2006 September 24 , 2005 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Goodwill $ 38 $ \u2014 $ 38 $ $ 38 $ \u2014 $ 38 $ 69 $ \u2014 $ $ \u2014 $ 38 $ 69 $ \u2014 $ 69 Acquired $ 69 $ \u2014 $ 69 Acquired technology 181 ( 42 \u2014 $ 69 Acq Assets ( ) : Fiscal Years : 2007 $ 24 2008 21 2009 Fiscal Years : 2007 $ 24 2008 21 2009 18 2010 Years : 2007 $ 24 2008 21 2009 18 2010 14 : 2007 $ 24 2008 21 2009 18 2010 14 2011 2007 $ 24 2008 21 2009 18 2010 14 2011 13 $ 24 2008 21 2009 18 2010 14 2011 13 Thereafter 24 2008 21 2009 18 2010 14 2011 13 Thereafter 49 2008 21 2009 18 2010 14 2011 13 Thereafter 49 Total 21 2009 18 2010 14 2011 13 Thereafter 49 Total $ 2009 18 2010 14 2011 13 Thereafter 49 Total $ 139 2010 14 2011 13 Thereafter 49 Total ", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 17,205 $ 11,516 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 1,708 Total 3,390 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 3,487 3,081 1,708 Total current liability 6,471 3,487 Non-current liability 750 601 1,708 Total current liability 6,471 3,487 Non-current liab LIABILITIES AND 11,551 ( 35 ) $ 11,516 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 1,779 $ \u2014 $ 1,779 Accrued $ 1,779 $ \u2014 $ 1,779 Accrued expense 1,705 3 1,708 \u2014 $ 1,779 Accrued expense 1,705 3 1,708 Total current liability $ 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 3 3 1,708 Total current liability 3,484 3 3,487 Non-current liability 601 1,708 Total current liability 3,484 3 3,487 Non-current Liabilities 2006 accrued expense $ 3,081 $ 1,708 Non-Current Liabilities 2006 2005 Deferred 3,081 $ 1,708 Non-Current Liabilities 2006 2005 Deferred tax liability $ $ 1,708 Non-Current Liabilities 2006 2005 Deferred tax liability $ 381 2005 Deferred tax liability $ 381 $ 308 Deferred revenue\u2014non-current 355 tax liability $ 381 $ 308 Deferred revenue\u2014non-current 355 281 Other 381 $ 308 Deferred revenue\u2014non-current 355 281 Other non-current liability 14 $ 308 Deferred revenue\u2014non-current 355 281 Other non-cu", + "equity": "Equity Securities Affiliated Purchasers None . Item 6 . Selected Financial Data The balance sheet a of September 24 , 2005 and the consolidated a of September 24 , 2005 and the consolidated statement of the fiscal year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 have been restated 2005 and September 25 , 2004 have been restated a set a set forth in the 2006 Form 10-K . The data forth in the 2006 Form 10-K . The dat equity $ 2,976 $ 2,594 $ 2,205 Shareholders \u2019 equity $ 9,984 2,205 Shareholders \u2019 equity $ 9,984 $ 7,428 $ 5,063 $ \u2019 equity $ 9,984 $ 7,428 $ 5,063 $ 4,223 $ $ 9,984 $ 7,428 $ 5,063 $ 4,223 $ 4,100 Net $ 7,428 $ 5,063 $ 4,223 $ 4,100 Net gain before $ 5,063 $ 4,223 $ 4,100 Net gain before tax related and equity investment of $ 4 million and $ 10 million $ 4 million and $ 10 million were recognized in 2004 10 million were recognized in 2004 and 2003 , respectively . were recognized in 2004 and 2003 , r equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . Net charge related to Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , and $ 30 26 million , and $ 30 million were recognized in 2004 30 million were recognized in 2004 , 2003 , and 2002 were recognized in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . In 2003 2002 , respectively . In 2003 , settlement of the Company in a gain of $ 6 million EQUITY liability : Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 1,708 Total 3,390 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 3,487 3,081 1,708 Total current liability 6,471 3,487 Non-current liability 750 601 1,708 Total current liability 6,471 3,487 Non-current liability 750 601 Total liability 6,471 3,487 Non-current liability 750 601 Total liabili equity \u2014 Total shareholder \u2019 equity 9,984 7,428 Total liability and shareholder Total shareholder \u2019 equity 9,984 7,428 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 17,205 $ 11,516 ( 1 ) \u2019 equity $ 17,205 $ 11,516 ( 1 ) See Note $ 17,205 $ 11,516 ( 1 ) See Note 2 , ( 1 ) See Note 2 , \u201c Restatement of Consolidated to Consolidated Financial Statements . 73 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 30 , 2006 2006 2005 2004 year ended September 30 , 2006 2006 Equity As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Balances a of September ) Balances a of September 27 , 2003 a previously reported a of September 27 , 2003 a previously reported 733,454 $ , 2003 a previously reported 733,454 $ 1,926 $ ( 62 a previously reported 733,454 $ 1,926 $ ( 62 ) $ 733,454 $ 1,926 $ ( 62 ) $ 2,394 $ ( $ ( 62 ) $ 2,394 $ ( 35 ) $ ) $ 2,394 $ ( 35 ) $ 4,223 Adjustments to $ ( 35 ) $ 4,223 Adj equity \u2014 85 ( 22 ) ( 63 \u2019 equity \u2014 85 ( 22 ) ( 63 ) \u2014 85 ( 22 ) ( 63 ) \u2014 \u2014 Balance a \u2014 Balance a of September 27 , 2003 a restated 733,454 a of September 27 , 2003 a restated 733,454 $ 2,011 27 , 2003 a restated 733,454 $ 2,011 $ ( 84 2003 a restated 733,454 $ 2,011 $ ( 84 ) $ 733,454 $ 2,011 $ ( 84 ) $ 2,331 $ ( $ ( 84 ) $ 2,331 $ ( 35 ) $ ) $ 2,331 $ ( 35 ) $ 4,223 Components of $ ( 35 ) $ 4,223 Components of comprehensive income : Net income \u2014 \u2014 \u2014 266 \u2014 266 Change in foreign \u2014 \u2014 \u2014 266 \u2014 266 Change equity instrument . In January 2005 , the SEC issued SAB SEC issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R eliminates the ability to account \u201d ) Opinion No . 25 , Accounting for Stock Issued award under SFAS No . 123R , consistent with that used disclosure under SFAS No . 123 , Accounting for Stock-Based Compensation permitted by SFAS No . 123R and accordingly prior period have impact of SFAS No . 123R . The modified EQUITY liability : Accounts payable $ 1,779 $ \u2014 $ 1,779 Accrued $ 1,779 $ \u2014 $ 1,779 Accrued expense 1,705 3 1,708 \u2014 $ 1,779 Accrued expense 1,705 3 1,708 Total current liability $ 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 3 3 1,708 Total current liability 3,484 3 3,487 Non-current liability 601 1,708 Total current liability 3,484 3 3,487 Non-current liability 601 \u2014 Total current liability 3,484 3 3,487 Non-curren equity 7,466 ( 38 ) 7,428 Total shareholder \u2019 equity 7,466 ( 38 ) 7,428 Total liability and equity 7,466 ( 38 ) 7,428 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 11,551 ( 35 ) $ 11,516 \u2019 equity $ 11,551 ( 35 ) $ 11,516 89 NOTES 11,551 ( 35 ) $ 11,516 89 NOTES TO CONSOLIDATED FINANCIAL ( 35 ) $ 11,516 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2\u2014Restatement of Consolidated Financial Statements ( : Fiscal Year Ended September 24 , 2005 Fiscal Year Ended Equity 1998 $ 26 $ ( 27 Shareholders \u2019 Equity 1998 $ 26 $ ( 27 ) $ 1998 $ 26 $ ( 27 ) $ \u2014 $ ( ) $ \u2014 $ ( 1 ) 1999 36 ( 32 \u2014 $ ( 1 ) 1999 36 ( 32 ) ( $ ( 1 ) 1999 36 ( 32 ) ( 6 1 ) 1999 36 ( 32 ) ( 6 ) ( 36 ( 32 ) ( 6 ) ( 2 ) 2000 ) ( 6 ) ( 2 ) 2000 56 ( 43 6 ) ( 2 ) 2000 56 ( 43 ) ( ) ( 2 ) 2000 56 ( 43 ) ( 15 2 ) 2000 56 ( 43 ) ( 15 ) ( 56 ( 43 ) ( 15 ) ( 2 ) 2001 ) ( 15 ) ( 2 ) 2001 81 ( 49 15 ) ( 2 ) 2001 81 ( 49 ) ( ) ( 2 ) 2001 81 ( 49 ) ( 28 2 ) 2001 81 ( 49 ) ( 28 ) 4 81 ( 49 ) ( 28 ) 4 2002 105 equity . 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7\u2014Income Taxes ( Continued ) The tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In such resolution occurs . In 2006 , the Company recorded a a tax benefit of $ 20 million due to the settlement in the U.S . Note 8\u2014Shareholders \u2019 Equity Preferred Stock The the treasury stock method . 2.47 m Equity ( Continued ) Continued ) Upon vesting during 2006 , the restricted stock award The total share withheld of 4.6 million wa based on the closing stock price of $ 64.66 . The remaining share net taxing authority were approximately $ 296 million . The net-share settlement Stock Repurchase Plan In July 1999 , the Company \u2019 s to repurchase up to $ 500 million of it common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ Equity ( Continued ) ( in million ) : 2006 2005 2004 Changes in fair in million ) : 2006 2005 2004 Changes in fair value million ) : 2006 2005 2004 Changes in fair value of fair value of derivative $ 11 $ 7 $ ( 21 of derivative $ 11 $ 7 $ ( 21 ) Adjustment 11 $ 7 $ ( 21 ) Adjustment for net loss included in net income ( 12 ) 1 33 Change in net income ( 12 ) 1 33 Change in unrealized gain/loss income ( 12 ) 1 33 Change in unrealized gain/loss on on derivative instrument $ ( 1 ) $ 8 $ 12 $ ( 1 ) $ 8 $ 1 Equity ( Continued ) \u2019 Equity ( Continued ) 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company \u2019 s wa approved by shareholder in 1998 . Pursuant to the Director granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( date of grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a a Equity ( Continued ) Intrinsic Value Balance at September 27 , 2003 91,660 126,024 $ Balance at September 27 , 2003 91,660 126,024 $ 9.54 Restricted at September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock Granted , 2003 91,660 126,024 $ 9.54 Restricted Stock Granted ( 5,030 9.54 Restricted Stock Granted ( 5,030 ) \u2014 \u2014 Options Granted \u2014 \u2014 Options Granted ( 36,394 ) 36,394 $ 11.48 Options Options Granted ( 36,394 ) 36,394 $ 11.48 Options Ca Equity ( Continued ) restricted stock that vested during 2006 wa 10 million , which that vested during 2006 wa 10 million , which had a a fair value of $ 646.6 million . The grant-date fair stock that fully vested during 2006 wa $ 7.48 per share vested during 2006 wa $ 7.48 per share . For the For the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan \u201d ) and 1,600,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 760,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly committee of another company . 129 Arrangements with Named Executiv Equity by shareholder 34,827,183 $ 30.03 57,290,691 ( 1 ) Equity compensation 34,827,183 $ 30.03 57,290,691 ( 1 ) Equity compensation plan not plan not approved by shareholder 18,137,049 $ 10.19 \u2014 Total equity approved by shareholder 18,137,049 $ 10.19 \u2014 Total equity compensation plan Total equity compensation plan ( 2 ) 52,964,232 $ 23.24 57,290,691 compensation plan ( 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ( 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ) This 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ) This num", + "cash_flow": "cash flow . In August 2006 , the Company received a the Company \u2019 s Form 10-Q for the quarter ended July for the quarter ended July 1 , 2006 ( the \u201c quarter ended July 1 , 2006 ( the \u201c Third Quarter the \u201c Third Quarter Form 10-Q \u201d ) , the Company set forth in Marketplace Rule 4310 ( c ) ( 14 4310 ( c ) ( 14 ) and wa therefore subject Stock Market . On October 24 , 2006 , the NASDAQ . On October 24 , 2006 , the NASDAQ Listing Qualifications filing the Third Quarter Form 10-Q , and any required restatement cash flow ( c ) 89 62 76 Annual operating cash flow $ Annual operating cash flow $ 2,220 $ 2,535 $ 934 ( cash flow $ 2,220 $ 2,535 $ 934 ( 1 ) $ 2,220 $ 2,535 $ 934 ( 1 ) See the $ 2,535 $ 934 ( 1 ) See the \u201c Explanatory preceding Part I , Item 1 and Note 2 , \u201c , Item 1 and Note 2 , \u201c Restatement of Consolidated Financial Statements of this Form 10-K. ( a ) DSO is inventory . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had $ , the Company had $ 10.11 billion in cash , cash flow of approximately $ 19 million will be required to other obligation of approximately $ 39 million are primarily related to or result of operation . 69 Item 7A . Quantitative and of operation . 69 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 30 , 2006 , approximately $ As of September 30 , 2006 , approximately $ 921 million , 2006 , approximately $ 921 million of the Company \u2019 had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 yea cash flow $ 6,392 $ 3,491 $ 2,969 Supplemental cash flow disclosure : $ \u2014 $ \u2014 $ 10 Cash paid ( received ) income tax , net $ 194 $ 17 $ ( 7 , net $ 194 $ 17 $ ( 7 ) ( 194 $ 17 $ ( 7 ) ( 1 ) See $ ( 7 ) ( 1 ) See Note 2 , ( 1 ) See Note 2 , \u201c Restatement of Consolidated to Consolidated Financial Statements . 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple of September . Fiscal year 2005 and 2004 were each 52-week . cash flow and it 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( asset retirement liability for fiscal 2006 and 2005 ( in million liability for fiscal 2006 and 2005 ( in million ) : retirement liability a of September 25 , 2004 $ 8.2 Additional a of September 25 , 2004 $ 8.2 Additional asset retirement September 25 , 2004 $ 8.2 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 2.8 ", + "gross_margin": "gross margin . 22 The personal computer industry ha continue to pursue one-to-one ( 1:1 ) learning solution in education learning solution in education . 1:1 learning solution typically consist of a wireless network . These 1:1 learning solution and other strategic execute profitably on large strategic 23 arrangement . Failure to do of operation . In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new system wa completed in August 2006 , and it transition for Xserv gross margin percentage on requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company \u2019 result and financial condition . 25 Final assembly of product sold owner may seek to limit 26 the Company \u2019 s access at all . In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new system wa completed in August 2006 , and it transition for Xserve wa completed in November 2006 . The Company depends on software developer to develop or 2 Gross margin of sale 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 sale 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 ( 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 ( 1 4,139 3 4,142 Gross margin 1,708 ( 1 ) 1,707 1,603 4,142 Gross margin 1,708 ( 1 ) 1,707 1,603 ( 3 margin 1,708 ( 1 ) 1,707 1,603 ( 3 ) 1,600 1,708 ( 1 ) 1,707 1,603 ( 3 ) 1,600 Total 1 ) 1,707 1,603 ( 3 ) 1,600 Total operating expense 1,707 1,603 ( 3 ) 1,600 Total operating expense 1,709 15 ) 1,600 Total operating expense 1,709 15 1,724 Gross margin $ 8,279 Cost of sale 13,717 9,889 6,022 Gross margin $ 5,598 Cost of sale 13,717 9,889 6,022 Gross margin $ 5,598 $ 9,889 6,022 Gross margin $ 5,598 $ 4,042 $ 2,257 Gross Gross margin $ 5,598 $ 4,042 $ 2,257 Gross margin percentage $ 5,598 $ 4,042 $ 2,257 Gross margin percentage 29.0 % $ 2,257 Gross margin percentage 29.0 % 29.0 % 27.3 % Gross margin percentage 29.0 % 29.0 % 27.3 % ( 1 percentage 29.0 % 29.0 % 27.3 % ( 1 ) See 29.0 % 27.3 % ( 1 ) See the \u201c Explanatory preceding Part I , Item 1 Gross margin percentage of . Gross margin percentage of 29.0 % in 2006 remained flat percentage of 29.0 % in 2006 remained flat a compared to remained flat a compared to 2005 . The Company experienced more in the first quarter of 2007 primarily a a result of change , there is a 59 risk the Company will forecast Gross margin percentage increased in 2005 to 29.0 % of net percentage increased in 2005 to 29.0 % of net sale from % of net sale from 27.3 % of net sale in % of net sale in 2004 . The Company \u2019 s \u2019 s gross margin during 2005 increased due to more favorable for percentage ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 2005 2004 As 24 , September 25 , 2006 2005 2004 As Restated ( , September 25 , 2006 2005 2004 As Restated ( 1 September 25 , 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Research and development $ ) Research and development $ 712 $ 535 $ 491 Percentage Gross margin sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research and : Research and development ( 1 ) 179 175 176 18 Gross margin sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 968 2,476 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense : 2,495 Gross margin 1,035 1,044 968 995 Operating expense : Research Gross margin 1,035 1,044 968 995 Operating expense : Research and : Research and development ( 2 ) 147 145 120 123 and development Gross margin 2 ) 2,643 \u2014 2,643 2,476 \u2014 2,476 Gross margin 1,035 2,643 \u2014 2,643 2,476 \u2014 2,476 Gross margin 1,035 \u2014 1,035 2,476 \u2014 2,476 Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 2,476 Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense : 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense : Research and : Research and development ( 2 ) 147 \u2014 147 145 and development ( 2 ) 147 \u2014 147 145 \u2014 145 ( 2 ) 147 \u2014 147 145 \u2014 145 Selling , 2 ) 147 \u2014 147 145 \u2014 145 Se Gross margin 2 ) 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 ) 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 \u2014 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 \u2014 968 2,494 1 2,495 Gross margin 968 \u2014 968 996 ( 1 2,495 Gross margin 968 \u2014 968 996 ( 1 ) 995 Gross margin 968 \u2014 968 996 ( 1 ) 995 Operating 968 \u2014 968 996 ( 1 ) 995 Operating expense : 968 996 ( 1 ) 995 Operating expense : Research and : Research and development ( 2 ) 119 1 120 123 and development ( 2 ) 119 1 120 123 \u2014 123 development ( 2 ) 119 1 120 123 Gross margin 5,598 sale ( 2 ) 13,717 9,889 6,022 Gross margin 5,598 4,042 ( 2 ) 13,717 9,889 6,022 Gross margin 5,598 4,042 2,257 13,717 9,889 6,022 Gross margin 5,598 4,042 2,257 Operating expense : 9,889 6,022 Gross margin 5,598 4,042 2,257 Operating expense : Research 6,022 Gross margin 5,598 4,042 2,257 Operating expense : Research and : Research and development ( 2 ) 712 535 491 Selling and development ( 2 ) 712 535 491 Selling , general development ( 2 ) 712 535 491 Selling , general , ( 2 ) 712 535 4 Gross margin 1 ) 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ) 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ( 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ( 1 6,020 2 6,022 Gross margin 4,043 ( 1 ) 4,042 2,259 6,022 Gross margin 4,043 ( 1 ) 4,042 2,259 ( 2 margin 4,043 ( 1 ) 4,042 2,259 ( 2 ) 2,257 4,043 ( 1 ) 4,042 2,259 ( 2 ) 2,257 Operating 1 ) 4,042 2,259 ( 2 ) 2,257 Operating expense : 4,042 2,259 ( 2 ) 2,257 Operating expense : Research and : Research and development ( 1 ) 534 1 535 489 and dev Gross margin sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research and : Research and development ( 1 ) 179 175 176 18 Gross margin sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 968 2,476 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense : 2,495 Gross margin 1,035 1,044 968 995 Operating expense : Research Gross margin 1,035 1,044 968 995 Operating expense : Research and : Research and development ( 2 ) 147 145 120 123 and development Gross margin 2 ) 2,643 \u2014 2,643 2,476 \u2014 2,476 Gross margin 1,035 2,643 \u2014 2,643 2,476 \u2014 2,476 Gross margin 1,035 \u2014 1,035 2,476 \u2014 2,476 Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 2,476 Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense Gross margin 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense : 1,035 \u2014 1,035 1,044 \u2014 1,044 Operating expense : Research and : Research and development ( 2 ) 147 \u2014 147 145 and development ( 2 ) 147 \u2014 147 145 \u2014 145 ( 2 ) 147 \u2014 147 145 \u2014 145 Selling , 2 ) 147 \u2014 147 145 \u2014 145 Se Gross margin 2 ) 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 ) 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 \u2014 2,275 \u2014 2,275 2,494 1 2,495 Gross margin 968 \u2014 968 2,494 1 2,495 Gross margin 968 \u2014 968 996 ( 1 2,495 Gross margin 968 \u2014 968 996 ( 1 ) 995 Gross margin 968 \u2014 968 996 ( 1 ) 995 Operating 968 \u2014 968 996 ( 1 ) 995 Operating expense : 968 996 ( 1 ) 995 Operating expense : Research and : Research and development ( 2 ) 119 1 120 123 and development ( 2 ) 119 1 120 123 \u2014 123 development ( 2 ) 119 1 120 123", + "accumulated_depreciation": "Accumulated depreciation 94 81 Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and 81 Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and amortization Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 794 ) ( 664 ) Net amortization ( 794 ) ( 664 ) Net property , plant plant , and equipment $ 1,281 $ 817 Other Assets 2006 and equipment $ 1,281 $ 817 Other Assets 2006 2005 As 1,281 $ 817 Other Assets 2006", + "capital_expenditure": "capital expenditure were $ 657 million during 2006 , consisting were $ 657 million during 2006 , consisting of $ 200 2006 , consisting of $ 200 million for retail store facility s Retail segment , $ 263 million for real estate acquisition data center , and $ 194 million for corporate infrastructure , it will utilize approximately $ 675 million for capital expenditure during million for capital expenditure during 2007 , including approximately $ 360 2007 , including approximately $ 360 million for expansion of the ", + "debt": "debt ( $ 8,039 $ 6,817 $ 6,305 Long-term debt ( including current $ \u2014 $ \u2014 $ 304 $ 316 Total liability $ $ \u2014 $ 304 $ 316 Total liability $ 7,221 $ $ 316 Total liability $ 7,221 $ 4,088 $ 2,976 $ Total liability $ 7,221 $ 4,088 $ 2,976 $ 2,594 $ $ 7,221 $ 4,088 $ 2,976 $ 2,594 $ 2,205 Shareholders $ 4,088 $ 2,976 $ 2,594 $ 2,205 Shareholders \u2019 equity $ 2,976 $ 2,594 $ 2,205 Shareholders \u2019 equity $ 9,984 2,205 Shareholders \u2019 equity $ 9,984 $ 7,428 $ 5,063 $ \u2019 equity $ 9,984 $ 7,428 $ 5,063 $ 4,223 $ $ debt , the general economic 51 environment , the financial condition requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is accordance with SFAS No . 123R . Under the provision of provision of SFAS No . 123R , stock-based compensation cost is BSM model requires various highly 52 judgmental assumption including volatility , preceding Part I , Item 1 and in Note 2 , Item 1 and in Note 2 , \u201c Restatement of Consolidated Financial Statements of this Form 10 debt swap of approximately $ 23 million wa fully amortized a note \u2019 maturity in February 2004 . Provision for Income Taxes for the year ended September 30 , 2006 wa approximately 29 year ended September 30 , 2006 wa approximately 29 % . 30 , 2006 wa approximately 29 % . The Company \u2019 federal income tax rate of 35 % due primarily to certain a tax benefit of $ 20 million due to settlement of a net benefit of $ 20 million resulting from the dividend American Jobs Creation Act of 2004 ( \u201c AJCA \u201d ) below debt \u2014 \u2014 ( 300 ) Proceeds from issuance of from issuance of common stock 318 543 427 Excess tax benefit issuance of common stock 318 543 427 Excess tax benefit from of common stock 318 543 427 Excess tax benefit from stock-based tax benefit from stock-based compensation 361 \u2014 \u2014 Repurchases of common Repurchases of common stock ( 355 ) \u2014 \u2014 Cash generated Cash generated by financing activity 324 543 127 Increase ( decrease generated by financing activity 324 543 127 Increase ( decrease ) by financing ", + "earnings_per_share": "earnings per share . 32 Item 1B . Unresolved Staff per share . 32 Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company \u2019 Ireland . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company leased approximately , the Company leased approximately 3.6 million square foot of space lease are for term of 5 to 15 year and generally for term of 5 to 15 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 a earnings per share 877,526 856,878 774,776 Basic earnings per diluted earnings per share 877,526 856,878 774,776 Basic earnings per share earnings per share 877,526 856,878 774,776 Basic earnings per share $ Basic earnings per share $ 2.36 $ 1.64 $ 0.36 Diluted per share $ 2.36 $ 1.64 $ 0.36 Diluted earnings per $ 2.36 $ 1.64 $ 0.36 Diluted earnings per share $ Diluted earnings per share $ 2.27 $ 1.55 $ 0.34 Potentially per share $ 2.27 $ 1.55 $ 0.34 Potentially dilutive security $ 2.27 $ 1.55 $ 0.34 Potentially ", + "tax_rate": "tax rate of 35 % due primarily to certain a tax benefit of $ 20 million due to settlement of a net benefit of $ 20 million resulting from the dividend American Jobs Creation Act of 2004 ( \u201c AJCA \u201d ) below . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had deferred and tax credit of $ 739 million before being offset against asset . As of September 30 , 2006 and September 24 As of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , a valuation tax rate ( 35 % in 2006 , 2005 rate ( 35 % in 2006 , 2005 , and 2004 35 % in 2006 , 2005 , and 2004 ) to 2006 , 2005 , and 2004 ) to income before provision ( in million ) : 2006 2005 2004 As Restated ( in million ) : 2006 2005 2004 As Restated ( 1 million ) : 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Computed expected tax $ ) Computed expected tax $ 987 $ 633 $ 129 State expected tax $ 987 $ 633 $ 129 State tax , $ 987 $ 633 $ 129 State tax , net tax rate $ 829 $ 480 $ 104 Effective tax rate 29 % $ 104 Effective tax rate 29 % 27 % 28 % Effective tax rate 29 % 27 % 28 % ( 1 rate 29 % 27 % 28 % ( 1 ) See 27 % 28 % ( 1 ) See Note 2 , ( 1 ) See Note 2 , \u201c Restatement of Consolidated stock option transaction were $ 419 million , $ 428 million $ 419 million , $ 428 million ( a restated ( million ( a restated ( 1 ) ) , and $ ) ) , and $ 83 million ( a restated ( million ( a restated ( 1 ) ) in 2006 , ( 1 ) ) in 2006 , 2005 , and 2004 ) ) in 2006 , 2005", + "geographic_information": "geographic marketplace . Approximately 60 % of the Company \u2019 \u2019 s net sale in 2006 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in the Notes to Consolidated Financial Statements at Note 11 , \u201c Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 19 Environmental Laws Compliance with federal . Employees As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had 17 geographic operating may be found in Note 11 , \u201c Segment Information and Financial Statements of this Form 10-K. Americas During 2006 , net this Form 10-K. Americas During 2006 , net sale in the the Americas segment increased $ 2.7 billion , or 41 % $ 2.7 billion , or 41 % , compared to 2005 41 % , compared to 2005 . The main factor for with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other MacBook and MacBook Pro during 2006 . Th Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , \u201c Summary of Significant the Retail segment , capital 109 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11\u2014Segment Information and Geographic Data ( the Retail segment were $ 200 million , $ 132 million $ 200 million , $ 132 million , and $ 104 132 million , and $ 104 million for 2006 , 2005 and $ 104 million for 2006 , 2005 , and 2004 104 million for 2006 , 2005 , and Geographic Data ( of these store were $ 33 million , $ 31 million $ 33 million , $ 31 million , and $ 16 31 million , and $ 16 million for the year ended for the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , and September 25 , 2004 , respectively.Summary information , and September 25 , 2004 , respectively.Summary information by operating ( in millio Geographic Data ( ( in million ) : 2006 2005 2004 As Restated ( in million ) : 2006 2005 2004 As Restated ( 1 million ) : 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Segment operating income $ ) Segment operating income $ 2,906 $ 1,661 $ 989 Retail operating income $ 2,906 $ 1,661 $ 989 Retail manufacturing margin $ 2,906 $ 1,661 $ 989 Retail manufacturing margin ( a manufacturing margin ( a ) 663 435 213 Other corporate expense margin ( a ) 663 435 2 Geographic Data ( ( in million ) : 2006 2005 2004 Net sale : in million ) : 2006 2005 2004 Net sale : Desktops million ) : 2006 2005 2004 Net sale : Desktops ( Desktops ( a ) $ 3,319 $ 3,436 $ 2,373 Portables a ) $ 3,319 $ 3,436 $ 2,373 Portables ( b $ 3,319 $ 3,436 $ 2,373 Portables ( b ) 4,056 2,373 Portables ( b ) 4,056 2,839 2,550 Total Macintosh net Portables ( b ) 4,056 2,839 2,550 Total Macintosh net sale ( b ) 4,056 2,839 2,550 Total Macintosh net sale 7,375 2,550 Total Macintosh net sale 7,375 6,", + "common_stock": "Common Stock Issued and Outstanding a of December 13 , 2006 The Business section a of December 13 , 2006 The Business section and other this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement under Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . The Company assumes no Explanatory Note In this Form 10-K , Apple Computer , Inc. balance sheet a of September 24 , 2005 , and the a of September 24 , 2005 , and the related consolidated the fisc common stock of $ 355 million in conjunction with net-share the impact of the $ 1.25 billion prepayment for NAND flash investment . As of September 30 , 2006 , approximately $ As of September 30 , 2006 , approximately $ 4.1 billion , 2006 , approximately $ 4.1 billion of the Company \u2019 existing operation over the next 12 month . Capital Expenditures The total capital expenditure were $ 657 million during 2006 , consisting were $ 657 million during 2006 , consisting of $ 200 2006 , consisting of $ 200 million common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 30 , 2006 . Off-Balance Sheet a of September 30 , 2006 . Off-Balance Sheet Arrangements and firm commitment a of September 30 , 2006 and excludes amount a of September 30 , 2006 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in Common stock \u2014 \u2014 46 \u2014 \u2014 46 Common stock issued under stock stock issued under stock plan 49,592 427 \u2014 \u2014 \u2014 427 issued under stock plan 49,592 427 \u2014 \u2014 \u2014 427 Tax 49,592 427 \u2014 \u2014 \u2014 427 Tax benefit related to stock related to stock option \u2014 83 \u2014 \u2014 \u2014 83 Balances \u2014 83 \u2014 \u2014 \u2014 83 Balances a of September 25 83 Balances a of September 25 , 2004 782,887 $ 2,582 a of September 25 , 2004 782,887 $ 2,582 $ ( of September 25 , 2004 782,887 $ 2,582 $ ( 101 25 , 2004 782,887 $ 2,582 $ ( 101 ) $ 782,887 $ 2,582 $ ( 101 ) $ 2,59 Common stock \u2014 \u2014 47 \u2014 \u2014 47 Common stock issued under stock stock issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 issued under stock plan 52,132 547 \u2014 \u2014 \u2014 547 Tax 52,132 547 \u2014 \u2014 \u2014 547 Tax benefit related to stock related to stock option \u2014 428 \u2014 \u2014 \u2014 428 Balances \u2014 428 \u2014 \u2014 \u2014 428 Balances a of September 24 428 Balances a of September 24 , 2005 835,019 $ 3,564 a of September 24 , 2005 835,019 $ 3,564 $ ( of September 24 , 2005 835,019 $ 3,564 $ ( 61 24 , 2005 835,019 $ 3,564 $ ( 61 ) $ 835,019 $ 3,564 $ ( 61 ) $ 3, Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 ( 307 ) ( 48 ) \u2014 ( 307 ) \u2014 ( 355 ) ( 307 ) \u2014 ( 355 ) Stock-based compensation \u2014 163 355 ) Stock-based compensation \u2014 163 \u2014 \u2014 \u2014 163 Deferred \u2014 163 \u2014 \u2014 \u2014 163 Deferred compensation \u2014 ( 61 163 Deferred compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 Common stock stock issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 Tax 24,818 318 \u2014 \u2014 \u2014 318 Tax common stock 318 543 427 Excess tax benefit issuance of common stock 318 543 427 Excess tax benefit from of common stock 318 543 427 Excess tax benefit from stock-based tax benefit from stock-based compensation 361 \u2014 \u2014 Repurchases of common Repurchases of common stock ( 355 ) \u2014 \u2014 Cash generated Cash generated by financing activity 324 543 127 Increase ( decrease generated by financing activity 324 543 127 Increase ( decrease ) by financing activity 324 543 127 Increase ( decrease ) in in cash and cash equiv Common Stock Split On February 28 , 2005 , the Company Split On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per SFAS \u201d ) No . 133 , Accounting for Derivative Instruments nature of the hedge , 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 30 , 2006 . Comprehensive Income a of September 30 , 2006 . Comprehensive Income Comprehensive income ( in million ) : 2006 2005 2004 Unrealized loss on in million ) : 2006 2005 2004 Unrealized loss on available-for-sale million ) : 2006 2005 2004 Unrealized loss on available-for-sale security security $ \u2014 $ ( 4 ) common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 13,394,736 share were issued to employee an exercise price of $ 11.38 per share , which is associated with this transaction . 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8\u2014Shareholders \u2019 Equity ( Continued ) \u2019 Equity ( Continued ) 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company \u2019 s wa approved by shareho Common Stock upon receive an option to acquire 10,000 share of Common Stock ( date of grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee \u2019 to a maximum of $ 25,000 in any calendar year . limited to a total of 1 million share per offering period per offering period . During 2006 Common Stock in June 2006 and August 2006 . 126 in June 2006 and August 2006 . 126 Item 11 . 2006 and August 2006 . 126 Item 11 . Executive Compensation August 2006 . 126 Item 11 . Executive Compensation Information Regarding Award ( $ ) ( 1 ) Securities Underlying Options * $ ) Steven P. Jobs 2006 1 \u2014 \u2014 ( 2 ) Steven P. Jobs 2006 1 \u2014 \u2014 ( 2 ) 2006 1 \u2014 \u2014 ( 2 ) \u2014 \u2014 Chief Executive \u2014 \u2014 Chief Executive Officer 2005 1 \u2014 \u2014 \u2014 \u2014 \u2014 Chief Executive Officer 2005 1 \u2014 \u2014 \u2014 \u2014 2004 1 \u2014 \u2014 \u2014 \u2014 2004 1 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 2004 1 \u2014 Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 760,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly committee of another company . 129 Arrangements with Named Executive Officers granted on or after January 1 , 2005 , will , or after January 1 , 2005 , will , unless otherwise acquisition by any person of 50 % or more of the other officer prior to January 1 , 2005 generally provide that prior to J Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . 130 Security Ownership of Cupertino , CA 95014 . 130 Security Ownership of 5 % . 130 Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 57,162,311 ( 2 ) 6.65 % Outstanding Fidelity Investments 57,162,311 ( 2 ) 6.65 % AllianceBernstein LP Investments 57,162,311 ( 2 ) 6.65 % AllianceBernstein LP 48,637,731 Common Stock that of stock option . ( 5 ) Includes 220,000 share of . ( 5 ) Includes 220,000 share of Common Stock that of stock option . ( 6 ) Excludes 600,000 unvested restricted . ( 6 ) Excludes 600,000 unvested restricted stock unit . restricted stock unit . ( 7 ) Includes 40,000 share of . ( 7 ) Includes 40,000 share of Common Stock that Mr. Drexler hold indirectly and 180,000 share of Common Stock that of stock option . ( 8 ) Consists of 60,000 share ( 8 ) Consists of 60,000 share of Common Stock that Common Stock that of stock option and excludes 450,000 unvested restricted stock unit . restricted stock unit . ( 10 ) Includes 2,000 share of . ( 10 ) Includes 2,000 share of Common Stock that Dr. Levinson hold indirectly and 100,000 share of Common Stock that of stock option . ( 11 ) Excludes 450,000 unvested restricted . ( 11 ) Excludes 450,000 unvested restricted stock unit . restricted stock unit . ( 12 ) Excludes 400,000 unvested restricted . ( 12 ) Excludes 400,000 unvested restricted stock unit . un Common Stock that declined to participate in the 1997 Director Stock Option Plan . Stock Option Plan . ( 14 ) Includes 40,000 share of . ( 14 ) Includes 40,000 share of Common Stock that of stock option . ( 15 ) Includes 3,063,371 share of . ( 15 ) Includes 3,063,371 share of Common Stock that option . Does not include 2.7 million unvested restricted stock unit . * Represents le than 1 % of the issued and information , a of September 30 , 2006 , concerning share a of September 30 , 2006 , concerning share o common stock reserved Employee Stock Purchase Plan , 400,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 54,593,466 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 3,410,000 restricted stock unit ha been stock unit granted after April 2005 count against the share available not include share under the 1990 Stock Option Plan that wa Plan that wa terminated in Common Stock underlying average exercise price of $ 4.30 per share . No additional the assumed plan . Item 13 . Certain Relationships and Related and Related Transactions In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 202,000 in expense pursuant to the to the Reimbursement Agreement during 2006 . In 2006 , the Agreement during 2006 . In 2006 , the Company entered into of Pixar . On May 5 , 2006 , The Walt . On May 5 , 2006 , The Walt Disn common stock were 132 exchanged for Disney \u2019 s arrangement with Pixar from September 25 , 2005 through May 5 Pixar from September 25 , 2005 through May 5 , 2006 25 , 2005 through May 5 , 2006 wa le than 2005 through May 5 , 2006 wa le than $ 1 2006 wa le than $ 1 million . Item 14 . $ 1 million . Item 14 . Principal Accountant Fees and LLP , during fiscal year 2006 and 2005 . Audit and during fiscal year 2006 and 2005 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2006 2005 Audit Fees $ 7,912,700 Aud", + "fair_value_measurements": "Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement measurement . SFAS No . 157 is effective for fiscal year fiscal year beginning after November 15 , 2007 and is required beginning after November 15 , 2007 and is required to be the Company beginning in the 66 first quarter of fiscal 2009 66 first quarter of fiscal 2009 . Although the Company will application of SFAS No . 157 , management doe not currently financial position . In June 2006 , the FASB issued FASB ( \u201c FIN \u201d ) ", + "derivative_instruments": "Derivative Instruments nature of the hedge , 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 180 million , $ 141 million $ 180 million" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-08-224958/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-08-224958/full-submission_features.json new file mode 100644 index 0000000..0dcd6a8 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-08-224958/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "Revenue Recognition , SAB \u201d ) No . 104 , Revenue Recognition . The accordance with SOP No . 97-2 . The Company recognizes the basis over the currently estimated 24-month economic life of these product later of the date at 38 Table of Contents which the requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is are identified and recorded . 39 Table of Contents Warranty Costs pursuant to SOP No . 97-2 , the Company recognizes warranty SFAS \u201d ) No . 123 ( revis revenue per store increased to $ 29.9 million for 2008 , compared to $ 29.9 million for 2008 , compared to $ 23.1 2008 , compared to $ 23.1 million in 2007 . Retail to $ 23.1 million in 2007 . Retail Mac net sale Mac unit sale grew by 42 % and 47 % , grew by 42 % and 47 % , respectively , during % , respectively , during 2008 compared to the 2007 , during 2008 compared to the 2007 , due primarily to strong Air , introduced in January 2008 . Net sale of iPods which wa upgraded in June 2008 , and a highe revenue per store revenue per store wa $ 23.1 million , compared to $ million , compared to $ 22.9 million in 2006 . The to $ 22.9 million in 2006 . The increase in Retail Retail segment net sale during 2007 compared to 2006 wa due sale during 2007 compared to 2006 wa due primarily to stronger reported operating income of $ 1.3 billion during 2008 a compared of $ 1.3 billion during 2008 a compared to operating income to operating income of $ 875 million and $ 600 million $ 875 million and $ 600 million revenue during % increase in revenue during 2008 . The Company continues to for R & D increased 10 % or $ 70 million increased 10 % or $ 70 million to $ 782 million $ 70 million to $ 782 million in 2007 compared to to $ 782 million in 2007 compared to 2006 . The million in 2007 compared to 2006 . The increase in R R & D headcount in 2007 to support expanded R & in the first quarter of 2007 and the capitalized software development SG & A increased $ 798 million or 27 % to increased $ 798 million or 27 % revenue 5,642 1,040 ) Accounts payable 596 1,494 1,611 Deferred revenue 5,642 1,139 ) Accounts payable 596 1,494 1,611 Deferred revenue 5,642 1,139 319 596 1,494 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 1,494 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 612 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 612 973 5,642 1,139 319 Other liability 1,279 612 973 Cash generated by 1,139 319 Other liability 1,279 612 973 Cash generated by operating 319 Other li Revenue Recognition , SAB \u201d ) No . 104 , Revenue Recognition , for s one-year limited warranty . 60 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( accordance with SOP No . 97-2 . If a multiple-element arrangement Company applies EITF No . 00-21 , Revenue Arrangements with Multiple from the SOP No . 97-2 deliverable . If the Company Company applies SOP No . 97-2 to the software and software-related . , SAB No . 104 ) to the deliverable outside sco Revenue on arrangement that the maintenance term . In 2007 , the Company began shipping accordance with SOP No . 97-2 . As such , the basis over the currently estimated 24-month economic life of these product are expensed a incurred . 61 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( pursuant to SOP No . 97-2 , the Company recognizes warranty pursuant to SFAS No . 86 , Computer Software to be have been expensed . During 2008 , the Company capital revenue\u2014current $ 4,853 $ 1,222 Accrued Expenses 2008 2007 Deferred revenue\u2014current $ 4,853 $ 2008 2007 Deferred revenue\u2014current $ 4,853 $ 1,391 Deferred margin on Deferred revenue\u2014current $ 4,853 $ 1,391 Deferred margin on component sale Deferred margin on component sale 681 545 Accrued marketing and distribution margin on component sale 681 545 Accrued marketing and distribution 329 545 Accrued marketing and distribution 329 288 Accrued compensation and employee Accrued marketing and distribution 329 revenue\u2014non-current $ 3,029 Continued ) Non-Current Liabilities 2008 2007 Deferred revenue\u2014non-current $ 3,029 $ 2008 2007 Deferred revenue\u2014non-current $ 3,029 $ 849 Deferred tax liability Deferred revenue\u2014non-current $ 3,029 $ 849 Deferred tax liability 675 619 $ 849 Deferred tax liability 675 619 Other non-current liability 746 849 Deferred tax liability 675 619 Other non-current liability 746 67 675 619 Other non-current liability 746 67 Total non-current liability $ 619 Other non-current liability ", + "expenses": "Expenses 2008 other asset $ 1,935 $ 1,222 Accrued Expenses 2008 2007 Deferred 1,935 $ 1,222 Accrued Expenses 2008 2007 Deferred revenue\u2014current $ 4,853 $ 1,222 Accrued Expenses 2008 2007 Deferred revenue\u2014current $ 4,853 $ 2008 2007 Deferred revenue\u2014current $ 4,853 $ 1,391 Deferred margin on Deferred revenue\u2014current $ 4,853 $ 1,391 Deferred margin on component sale Deferred margin on component sale 681 545 Accrued marketing and distribution margin on component sale 681 545 Accrued marketing and distribut Expenses allocated a of September 27 , 2008 . Expenses allocated to corporate of high-profile store were $ 53 million , $ 39 million $ 53 million , $ 39 million , and $ 33 39 million , and $ 33 million for the year ended for the year ended September 27 , 2008 , September 29 year ended September 27 , 2008 , September 29 , 2007 27 , 2008 , September 29 , 2007 , and September 2008 , September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 respectively . 83 , and September 30 , 2006 respect", + "net_income": "Net income $ $ 19,315 $ 13,931 $ 8,279 Net income $ 4,834 $ $ 8,279 Net income $ 4,834 $ 3,496 $ 1,989 $ Net income $ 4,834 $ 3,496 $ 1,989 $ 1,328 $ $ 4,834 $ 3,496 $ 1,989 $ 1,328 $ 266 Earnings $ 3,496 $ 1,989 $ 1,328 $ 266 Earnings per common $ 1,989 $ 1,328 $ 266 Earnings per common share : common share : Basic $ 5.48 $ 4.04 $ 2.36 $ : Basic $ 5.48 $ 4.04 $ 2.36 $ 1.64 $ $ 5.48 $ 4.04 $ 2.36 $ 1.64 $ 0.36 Diluted $ 4.04 $ 2.36 $ 1.64 $ 0.36 Diluted $ 5.36 $ 2.36 $ 1.64 $ 0.36 Diluted $ 5.36 $ 3.93 1. Net income $ Provision for income tax 2,061 1,512 829 Net income $ 4,834 for income tax 2,061 1,512 829 Net income $ 4,834 $ 1,512 829 Net income $ 4,834 $ 3,496 $ 1,989 Earnings Net income $ 4,834 $ 3,496 $ 1,989 Earnings per common $ 4,834 $ 3,496 $ 1,989 Earnings per common share : common share : Basic $ 5.48 $ 4.04 $ 2.36 Diluted : Basic $ 5.48 $ 4.04 $ 2.36 Diluted $ 5.36 $ 5.48 $ 4.04 $ 2.36 Diluted $ 5.36 $ 3.93 4.04 $ 2.36 Diluted $ 5.36 $ 3.93 $ 2.27 Shares 2.36 Diluted $ 5.36 $ 3.93 $ 2.27 Share Net income \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign \u2014 \u2014 \u2014 1,989 \u2014 1,989 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 19 19 Change in unrealized gain on tax \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized gain \u2014 \u2014 \u2014 \u2014 4 4 Change in unrealized gain on \u2014 \u2014 \u2014 \u2014 ( 1 ) ( 1 ) Total \u2014 ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 Net income \u2014 \u2014 \u2014 3,496 \u2014 3,496 Change in foreign \u2014 \u2014 \u2014 3,496 \u2014 3,496 Change in foreign currency translation translation \u2014 \u2014 \u2014 \u2014 51 51 Change in unrealized loss \u2014 \u2014 \u2014 \u2014 51 51 Change in unrealized loss on \u2014 \u2014 \u2014 \u2014 ( 7 ) ( 7 ) Change \u2014 ( 7 ) ( 7 ) Change in unrealized gain \u2014 \u2014 \u2014 \u2014 ( 3 ) ( 3 ) Total \u2014 ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation \u2014 251 \u2014 income 3,537 Stock-based compensation \u2014 251 \u2014 \u2014 \u2014 251 Common \u2014 251 \u2014 \u2014 \u2014 251 Common stock issued Net income \u2014 \u2014 \u2014 4,834 4,834 Change in foreign currency income \u2014 \u2014 \u2014 4,834 4,834 Change in foreign currency translation \u2014 \u2014 \u2014 \u2014 ( 11 ) ( 11 ) Change \u2014 ( 11 ) ( 11 ) Change in unrealized loss \u2014 \u2014 \u2014 \u2014 ( 63 ) ( 63 ) Change \u2014 ( 63 ) ( 63 ) Change in unrealized gain tax \u2014 \u2014 \u2014 \u2014 19 19 Total comprehensive income 4,779 \u2014 \u2014 \u2014 \u2014 19 19 Total comprehensive income 4,779 Stock-based 19 19 Total comprehensive income 4,779 Stock-based compensation \u2014 513 \u2014 income 4,779 Stock-based compensation \u2014 513 \u2014 \u2014 \u2014 513 Common \u2014 513 Net income Operating Activities : Net income 4,834 3,496 1,989 Adjustments to reconcile Activities : Net income 4,834 3,496 1,989 Adjustments to reconcile net : Net income 4,834 3,496 1,989 Adjustments to reconcile net income Depreciation , amortization and accretion 473 317 225 Stock-based compensation expense , amortization and accretion 473 317 225 Stock-based compensation expense 516 amortization and accretion 473 317 225 Stock-based compensation expense 516 242 317 225 Stock-based compensation expens Net income amount ) : 2008 2007 2006 Numerator : Net income $ Numerator : Net income $ 4,834 $ 3,496 $ 1,989 Denominator Net income $ 4,834 $ 3,496 $ 1,989 Denominator : Weighted-average $ 4,834 $ 3,496 $ 1,989 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 881,592 864,595 844,058 Effect of dilutive : Weighted-average share outstanding 881,592 864,595 844,058 Effect of dilutive security Weighted-average share outstanding 881,592 864,595 844,058 Effect of net income 12 ( 2 ) ( 12 in net income 12 ( 2 ) ( 12 ) Change 12 ( 2 ) ( 12 ) Change in unrealized gain gain on derivative instrument $ 19 $ ( 3 ) $ instrument $ 19 $ ( 3 ) $ ( 1 ) ( 3 ) $ ( 1 ) The tax effect related of derivative wa $ ( 5 ) million , $ 1 5 ) million , $ 1 million , and $ ( million , and $ ( 8 ) million for 2008 , ( 8 ) million for 2008 , 2007 , and 2006 ) million for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . The tax net income wa $ ( 9 ) million , $ 2 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.14 Basic $ 1.01 $ 0.", + "assets": "Assets The capital asset purchase were $ 1.1 billion during 2008 , consisting were $ 1.1 billion during 2008 , consisting of $ 389 2008 , consisting of $ 389 million for retail store facility retail store facility and $ 702 million for real estate acquisition Company anticipates utilizing approximately $ 1.5 billion for capital asset purchase for capital asset purchase during 2009 , including approximately $ 400 2009 , including approximately $ 400 million for Retail facility and Retail facility and a ASSETS September 27 , 2008 September 29 , 2007 ASSETS : Current , 2008 September 29 , 2007 ASSETS : Current asset : Cash and cash equivalent $ 11,875 $ 9,352 Short-term investment 12,615 cash equivalent $ 11,875 $ 9,352 Short-term investment 12,615 6,034 Accounts 11,875 $ 9,352 Short-term investment 12,615 6,034 Accounts receivable , le $ 9,352 Short-term investment 12,615 6,034 Accounts receivable , le allowance , le allowance of $ 47 in each period 2,422 1,637 $ 47 in each period 2,422 1,637 Invento Assets accordance with SFAS No . 144 , Accounting for the Impairment record any material impairment during 2008 , 2007 , and 2006 material impairment during 2008 , 2007 , and 2006 . 59 2008 , 2007 , and 2006 . 59 Table of Contents 2007 , and 2006 . 59 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( Continued ) SFAS No . 142 , Goodwill and Other Intangible test on or about August 31 of each year . The intangible asset impairment charge in 2008 , 2 Assets 2008 2007 Vendor non-trade receivables $ : Other Current Assets 2008 2007 Vendor non-trade receivables $ 2,282 2007 Vendor non-trade receivables $ 2,282 $ 2,392 Deferred cost under non-trade receivables $ 2,282 $ 2,392 Deferred cost under subscription accounting\u2014current Deferred cost under subscription accounting\u2014current 1,931 247 NAND flash memory prepayment cost under subscription accounting\u2014current 1,931 247 NAND flash memory prepayment 475 247 NAND flash memory prepayment 475 417 Other curr Assets 2008 and equipment $ 2,455 $ 1,832 Other Assets 2008 2007 Deferred 2,455 $ 1,832 Other Assets 2008 2007 Deferred cost under subscription $ 1,832 Other Assets 2008 2007 Deferred cost under subscription accounting\u2014non-current cost under subscription accounting\u2014non-current $ 1,089 $ 214 Long-term NAND flash subscription accounting\u2014non-current $ 1,089 $ 214 Long-term NAND flash memory prepayment Long-term NAND flash memory prepayment 208 625 Deferred tax assets\u2014non-current 138 NAND flash memory pre assets\u2014non-current 138 88 208 625 Deferred tax assets\u2014non-current 138 88 Capitalized software development cost 625 Deferred tax assets\u2014non-current 138 88 Capitalized software development cost , software development cost , net 67 83 Other asset 433 212 development cost , net 67 83 Other asset 433 212 Total net 67 83 Other asset 433 212 Total other asset $ 67 83 Other asset 433 212 Total other asset $ 1,935 212 Total other asset $ 1,935 $ 1,222 Accrued Expenses 2008 other asset $ 1,935 $ 1,222 Accrued E Assets The life over period ranging from 1 to 10 year . The period ranging from 1 to 10 year . The following table asset balance a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million ) : ( in million ) : 2008 2007 Gross Carrying Amount Accumulated in million ) : 2008 2007 Gross Carrying Amount Accumulated Amortization and amortizable acquired technology $ 308 $ ( 123 ) $ techno", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 39,572 $ 25,347 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 4,310 Total 5,520 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 9,280 8,572 4,310 Total current liability 14,092 9,280 Non-current liability 4,450 1,535 4,310 Total current liability 14,092 9,280 Non-curr Liabilities 2008 2007 Deferred revenue\u2014non-current $ 3,029 Continued ) Non-Current Liabilities 2008 2007 Deferred revenue\u2014non-current $ 3,029 $ 2008 2007 Deferred revenue\u2014non-current $ 3,029 $ 849 Deferred tax liability Deferred revenue\u2014non-current $ 3,029 $ 849 Deferred tax liability 675 619 $ 849 Deferred tax liability 675 619 Other non-current liability 746 849 Deferred tax liability 675 619 Other non-current liability 746 67 675 619 Other non-current liability 746 67 Total non-current liability $ 619 O liabilities\u2014Unremitted earnings Net deferred tax asset 2,144 1,053 Deferred tax liabilities\u2014Unremitted earnings of liabilities\u2014Unremitted earnings of subsidiary : 1,234 803 Net deferred tax asset earnings of subsidiary : 1,234 803 Net deferred tax asset $ Net deferred tax asset $ 910 $ 250 As of September tax asset $ 910 $ 250 As of September 27 , $ 250 As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company ha tax tax effected amount of $ 47 million . The Company released a valuati", + "equity": "equity $ 7,221 $ 4,088 $ 2,976 Shareholders \u2019 equity $ 21,030 2,976 Shareholders \u2019 equity $ 21,030 $ 14,532 $ 9,984 $ \u2019 equity $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item 7 . $ 9,984 $ 7,428 $ 5,063 Item 7 . Management \u2019 $ 7,428 $ 5,063 Item 7 . Management \u2019 s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. EQUITY liability : Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 4,310 Total 5,520 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 9,280 8,572 4,310 Total current liability 14,092 9,280 Non-current liability 4,450 1,535 4,310 Total current liability 14,092 9,280 Non-current liability 4,450 1,535 Total liability 14,092 9,280 Non-current liability 4,450 1, equity Accumulated other comprehensive income 8 63 Total shareholder \u2019 equity 21,030 63 Total shareholder \u2019 equity 21,030 14,532 Total liability and shareholder Total shareholder \u2019 equity 21,030 14,532 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 39,572 $ 25,347 See accompanying Notes \u2019 equity $ 39,572 $ 25,347 See accompanying Notes to Consolidated to Consolidated Financial Statements . 54 Table of Contents CONSOLIDATED STATEMENTS Three fiscal year ended September 27 , 2008 2008 2007 equity award ( 124 ) ( 3 ) ( award ( 124 ) ( 3 ) ( 355 ) Cash ) ( 3 ) ( 355 ) Cash generated by financing Cash generated by financing activity 1,116 739 324 Increase in cash generated by financing activity 1,116 739 324 Increase in cash and by financing activity 1,116 739 324 Increase in cash and cash in cash and cash equivalent 2,523 2,960 2,901 Cash and cash cash and cash equivalent 2,523 2,960 2,901 Cash and cash equivalent and cash equivalent 2,523 2,960 2,901 Cash and cash equivalent , end of the Equity Equity , \u201d and Note 7 , \u201c Stock-Based Compensation . accordance with SFAS No . 109 , Accounting for Income Taxes to be realized . During 2008 , the Company adopted the ( \u201c FIN \u201d ) 48 , Accounting for Uncertainty in of FASB Statement No . 109 . FIN 48 change the No . 109 . FIN 48 change the accounting for uncertainty financial statement . Under FIN 48 , the Company may recognize that ha a greater than 50 % likelihood of being realized realized upon settlement . FIN 48 also provides guidance on t Equity . On October 3 , 2008 , the Tax . On October 3 , 2008 , the Tax Extenders and Minimum Tax Relief Act of 2008 wa signed into law . tax benefit of approximately $ 42 million in the first quarter first quarter of fiscal year 2009 to account for the retroactive the research credit extension . 72 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 5\u2014Income Taxes ( Continued ) FIN Taxes ( Continued ) FIN 48 In the first quarter of In the first quarter of 2008 , the Company adopted FIN , the Comp Equity Preferred Stock The Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company \u2019 s s Board of Directors granted 10 million share of restricted stock CEO that vested on March 19 , 2006 . The amount vested on March 19 , 2006 . The amount of the period . Upon vesting during 2006 , the 10 million share vesting during 2006 , the 10 million share of restricted stock a fair value of $ 646.6 million and had grant-date fair grant-date fair value of $ 7.48 per share . Equity ( Continued ) three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Changes in fair in million ) : 2008 2007 2006 Changes in fair value million ) : 2008 2007 2006 Changes in fair value of fair value of derivative $ 7 $ ( 1 ) $ derivative $ 7 $ ( 1 ) $ 11 Adjustment for $ ( 1 ) $ 11 Adjustment for net gains/ ( and included in net income 12 ( 2 ) ( 12 in net income 12 ( 2 ) ( 12 ) Change 12 ( 2 ) ( 12 ) Change in u Equity ( Continued ) at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee \u2019 to a maximum of $ 25,000 in any calendar year . limited to a total of 3 million share . As of share . As of September 27 , 2008 , approximately 6.2 As of September 27 , 2008 , approximately 6.2 million share 27 , 2008 , approximately 6.2 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 15,500 for calendar year 2008 ) $ Equity ( Continued ) three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( Intrinsic Value Balance at September 24 , 2005 58,957 73,221 $ Balance at September 24 , 2005 58,957 73,221 $ 17.79 Restricted at September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock unit , 2005 58,957 73,221 $ 17.79 Restricted stock unit granted ( Restricted stock unit granted ( 2,950 ) \u2014 \u2014 Options granted \u2014 \u2014 Options Equity ( Continued ) three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( Intrinsic Value Balance at September 24 , 2005 5,030 $ 14.21 Balance at September 24 , 2005 5,030 $ 14.21 Restricted stock at September 24 , 2005 5,030 $ 14.21 Restricted stock unit 24 , 2005 5,030 $ 14.21 Restricted stock unit granted 1,475 14.21 Restricted stock unit granted 1,475 $ 70.92 Restricted stock unit stock unit granted 1,475 $ 70.92 Restricted stock unit vested ( Restrict", + "cash_flow": "cash flow $ Annual operating cash flow $ 9,596 $ 5,470 $ 2,220 As cash flow $ 9,596 $ 5,470 $ 2,220 As of September $ 9,596 $ 5,470 $ 2,220 As of September 27 , $ 2,220 As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had $ , the Company had $ 24.5 billion in cash , cash , an increase of $ 9.1 billion from September 29 , $ 9.1 billion from September 29 , 2007 . The principal billion from September 29 , 2007 . The principal component of by operating activity of $ 9.6 billion cash flow of $ 28 million would be required to to fulfill these obligation . 50 Table of Contents Other Obligations Other outstanding obligation were $ 471 million a of September 27 471 million a of September 27 , 2008 , which related a of September 27 , 2008 , which related to advertising During the first quarter of 2008 , the Company adopted the adopted the provision of FIN 48 . The Company had historically with the adoption of FIN 48 the Company ha reclassified gross Sheet . As of September 27 , 2008 cash flow $ 11,875 $ 9,352 $ 6,392 Supplemental cash flow disclosure : income tax , net $ 1,267 $ 863 $ 194 See , net $ 1,267 $ 863 $ 194 See accompanying Notes $ 1,267 $ 863 $ 194 See accompanying Notes to Consolidated to Consolidated Financial Statements . 57 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1\u2014Summary of Significant Accounting Policies Apple s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the first quarter of fiscal yea", + "gross_margin": "Gross Margin three fiscal year ended September 27 , 2008 , are a year ended September 27 , 2008 , are a follows ( gross margin percentage ) : 2008 2007 2006 Net sale $ margin percentage ) : 2008 2007 2006 Net sale $ 32,479 percentage ) : 2008 2007 2006 Net sale $ 32,479 $ 2007 2006 Net sale $ 32,479 $ 24,006 $ 19,315 Cost Net sale $ 32,479 $ 24,006 $ 19,315 Cost of sale $ 32,479 $ 24,006 $ 19,315 Cost of sale 21,334 15,852 $ 19,315 Cost of sale 21,334 15,852 13,717 Gross margin $ 19,315 Cost of sale 21,334 Gross margin $ 11,145 Cost of sale 21,334 15,852 13,717 Gross margin $ 11,145 $ 15,852 13,717 Gross margin $ 11,145 $ 8,154 $ 5,598 Gross Gross margin $ 11,145 $ 8,154 $ 5,598 Gross margin percentage $ 11,145 $ 8,154 $ 5,598 Gross margin percentage 34.3 % $ 5,598 Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage wa percentage wa relatively flat in 2008 a compared to 2007 . in 2008 a compared to 2007 Gross margin percentage of . Gross margin percentage of 34.0 % in 2007 increased significantly percentage of 34.0 % in 2007 increased significantly from 29.0 % in 2007 increased significantly from 29.0 % in 2006 . The significantly from 29.0 % in 2006 . The primary driver of compared to level achieved during 2008 and 2007 , and anticipates level achieved during 2008 and 2007 , and anticipates gross margin gross margin level of about 30 % in 2009 . This of about 30 % in 2009 . This expected decline is in Par Gross margin 11,145 sale ( 1 ) 21,334 15,852 13,717 Gross margin 11,145 8,154 ( 1 ) 21,334 15,852 13,717 Gross margin 11,145 8,154 5,598 21,334 15,852 13,717 Gross margin 11,145 8,154 5,598 Operating expense : 15,852 13,717 Gross margin 11,145 8,154 5,598 Operating expense : Research 13,717 Gross margin 11,145 8,154 5,598 Operating expense : Research and : Research and development ( 1 ) 1,109 782 712 Selling and development ( 1 ) 1,109 782 712 Selling , general development ( 1 ) 1,109 782 712 Selling , gene Gross margin $ $ 7,464 $ 7,512 $ 9,608 Gross margin $ 2,739 $ $ 9,608 Gross margin $ 2,739 $ 2,600 $ 2,474 $ Gross margin $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1. Gross margin $ $ 5,410 $ 5,264 $ 7,115 Gross margin $ 2,090 $ $ 7,115 Gross margin $ 2,090 $ 1,995 $ 1,849 $ Gross margin $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted", + "accumulated_depreciation": "Accumulated depreciation 122 106 Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and 106 Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and amortization Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,292 ) ( 1,009 ) Net amortization ( 1,292 ) ( 1,009 ) Net property , plant plant , and equipment $ 2,455 $ 1,832 Other Assets 2008 and equipment $ 2,455 $ 1,832 Other Assets 2008 2007 Defer", + "debt": "debt $ $ 17,205 $ 11,516 $ 8,039 Long-term debt $ \u2014 $ $ \u2014 Total liability $ 18,542 $ 10,815 $ 7,221 $ Total liability $ 18,542 $ 10,815 $ 7,221 $ 4,088 $ $ 18,542 $ 10,815 $ 7,221 $ 4,088 $ 2,976 Shareholders $ 10,815 $ 7,221 $ 4,088 $ 2,976 Shareholders \u2019 equity $ 7,221 $ 4,088 $ 2,976 Shareholders \u2019 equity $ 21,030 2,976 Shareholders \u2019 equity $ 21,030 $ 14,532 $ 9,984 $ \u2019 equity $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item", + "earnings_per_share": "earnings per share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted per share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 774,776 Cash 844,058 808,439 743,180 Diluted 902,139 earnings per share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 per share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) Includes 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) Includes stock-based Diluted 902,139 889,292 877,526 ( 1 ) Includes stock-based compensation expense : C earnings per share 902,139 889,292 877,526 Basic earnings per diluted earnings per share 902,139 889,292 877,526 Basic earnings per share earnings per share 902,139 889,292 877,526 Basic earnings per share $ Basic earnings per share $ 5.48 $ 4.04 $ 2.36 Diluted per share $ 5.48 $ 4.04 $ 2.36 Diluted earnings per $ 5.48 $ 4.04 $ 2.36 Diluted earnings per share $ Diluted earnings per share $ 5.36 $ 3.93 $ 2.27 Potentially per share $ 5.36 $ 3.93 $ 2.27 Potentially dilutive security $ 5.36 $ 3.93 $ 2.27 Potentially earnings per share . 87 Table of Contents REPORT OF Company ) a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and the 2008 and September 29 , 2007 , and the related consolidated the three-year period ended September 27 , 2008 . These consolidated period ended September 27 , 2008 . These consolidated financial statement and subsidiary a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 an", + "tax_rate": "tax rate were 30 % for the year ended for the year ended September 27 , 2008 and September 29 year ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and 29 2008 and September 29 , 2007 , and 29 % for 29 , 2007 , and 29 % for the year ended for the year ended September 30 , 2006 . The Company year ended September 30 , 2006 . The Company \u2019 s federal income tax rate of 35 % due primarily to certain the U.S. As of September 27 , 2008 , the Company As of September 27 , 200 tax rate ( 35 % in 2008 , 2007 rate ( 35 % in 2008 , 2007 , and 2006 35 % in 2008 , 2007 , and 2006 ) to 2008 , 2007 , and 2006 ) to income before provision three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( ( in million ) : 2008 2007 2006 Computed expected tax in million ) : 2008 2007 2006 Computed expected tax $ million ) : 2008 2007 2006 Computed expected tax $ 2,414 2006 Computed expected tax $ 2,414 $ 1,753 $ 987 State expected tax $ 2,414 $ 1,753 $ 9 tax rate $ 2,061 $ 1,512 $ 829 Effective tax rate 30 % $ 829 Effective tax rate 30 % 30 % 29 % Effective tax rate 30 % 30 % 29 % The Company rate 30 % 30 % 29 % The Company \u2019 s stock option transaction were $ 770 million , $ 398 million $ 770 million , $ 398 million , and $ 419 398 million , and $ 419 million in 2008 , 2007 and $ 419 million in 2008 , 2007 , and 2006 419 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively , and were \u2019 Equity . On October 3 , 2008 , the", + "geographic_information": "geographic marketplace . Approximately 57 % of the Company \u2019 \u2019 s net sale in 2008 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , \u201c Segment Information and date of purchase by the 11 Table of Contents original end-user The Company also offer a 90-day basic warranty for it service . Employees As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had approximatel Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , \u201c Summary of Significant to the segment . Advertising 82 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 9\u2014Segment Information and Geographic Data ( the Retail segment were $ 389 million , $ 294 million $ 389 million , $ 294 million , and $ 200 294 million , and $ 200 million for 2008 , 2007 and $ 200 million for 2008 , 2007 , and 2006 200 million for 2008 , 2007 , and 2006 respectively Geographic Data ( three fiscal year ended September 27 , 2008 is a follows year ended September 27 , 2008 is a follows ( in ( in million ) : 2008 2007 2006 Americas : Net in million ) : 2008 2007 2006 Americas : Net sale million ) : 2008 2007 2006 Americas : Net sale $ Americas : Net sale $ 14,573 $ 11,596 $ 9,415 Operating Net sale $ 14,573 $ 11,596 $ 9,415 Operating income $ $ 14,573 $ 11,596 $ 9,415 Operating income $ 4,051 $ $ 9,415 Operating income $ 4,051 $ 2,949 $ 1,899 Depreciation Operating incom Geographic Data ( three fiscal year ended September 27 , 2008 is a follows year ended September 27 , 2008 is a follows ( in ( in million ) : 2008 2007 2006 Segment operating income in million ) : 2008 2007 2006 Segment operating income $ million ) : 2008 2007 2006 Segment operating income $ 8,756 2006 Segment operating income $ 8,756 $ 5,792 $ 3,569 Other operating income $ 8,756 $ 5,792 $ 3,569 Other corporate expense $ 8,756 $ 5,792 $ 3,569 Other corporate expense , net net ( a ) ( 1,965 ) ( 1,141 ) ( ) Geographic Data ( three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( ( in million ) : 2008 2007 2006 Net sale : in million ) : 2008 2007 2006 Net sale : Desktops million ) : 2008 2007 2006 Net sale : Desktops ( Desktops ( a ) $ 5,603 $ 4,020 $ 3,319 Portables a ) $ 5,603 $ 4,020 $ 3,319 Portables ( b $ 5,603 $ 4,020 $ 3,319 Portables ( b ) 8,673 3,319 Portables ( b ) 8,673 6,294 4,056 Total Mac net Portables ( b ) 8,673 6,294 4,056 Total Mac net sale ( b ) 8", + "common_stock": "Common Stock Issued and Outstanding a of October 24 , 2008 DOCUMENTS INCORPORATED BY a of October 24 , 2008 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2009 Annual Meeting of Shareholders , to be held on February 25 , 2009 , are incorporated held on February 25 , 2009 , are incorporated by reference this Annual Report on Form 10-K where indicated . Table of this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) \u2014 repurchased ( 4,574 ) ( 48 ) \u2014 ( 307 ) ( 48 ) \u2014 ( 307 ) \u2014 ( 355 ) ( 307 ) \u2014 ( 355 ) Stock-based compensation \u2014 163 355 ) Stock-based compensation \u2014 163 \u2014 \u2014 \u2014 163 Deferred \u2014 163 \u2014 \u2014 \u2014 163 Deferred compensation \u2014 ( 61 163 Deferred compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 compensation \u2014 ( 61 ) 61 \u2014 \u2014 \u2014 Common stock stock issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 issued under stock plan 24,818 318 \u2014 \u2014 \u2014 318 Tax 24,818 318 \u2014 \u2014 \u2014 318 Tax Common stock issued under stock share withheld for employee tax 17,066 364 \u2014 ( 2 ) withheld for employee tax 17,066 364 \u2014 ( 2 ) \u2014 tax 17,066 364 \u2014 ( 2 ) \u2014 362 Tax benefit \u2014 ( 2 ) \u2014 362 Tax benefit from employee stock employee stock plan award \u2014 398 \u2014 \u2014 \u2014 398 Balances \u2014 398 \u2014 \u2014 \u2014 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 5,368 \u2014 a of September 29 , 2007 872,329 5,368 \u2014 9,101 63 of September 29 , 2007 872,329 5,368 \u2014 9,101 63 14,532 September 29 , 2007 872,329 5,368 \u2014 9,101 Common stock issued under stock share withheld for employee tax 15,888 460 \u2014 ( 101 ) withheld for employee tax 15,888 460 \u2014 ( 101 ) \u2014 tax 15,888 460 \u2014 ( 101 ) \u2014 359 Issuance of \u2014 ( 101 ) \u2014 359 Issuance of common stock in connection with an asset acquisition 109 21 \u2014 \u2014 \u2014 21 with an asset acquisition 109 21 \u2014 \u2014 \u2014 21 Tax 109 21 \u2014 \u2014 \u2014 21 Tax benefit from employee stock employee stock plan award \u2014 770 \u2014 \u2014 \u2014 770 Balances \u2014 770 \u2014 \u2014 \u2014 770 Balances a of September 27 770 Balances a of September 27 , 2008 888,326 $ 7, common stock 483 365 318 Excess tax benefit issuance of common stock 483 365 318 Excess tax benefit from of common stock 483 365 318 Excess tax benefit from stock-based tax benefit from stock-based compensation 757 377 361 Cash used to benefit from stock-based compensation 757 377 361 Cash used to net from stock-based compensation 757 377 361 Cash used to net share share settle equity award ( 124 ) ( 3 ) ( award ( 124 ) ( 3 ) ( 355 ) Cash ) ( 3 ) ( 355 ) Cash generated by financing Cash generated by financi common stock for the year ended September 27 , 2008 , September 29 year ended September 27 , 2008 , September 29 , 2007 27 , 2008 , September 29 , 2007 , and September 2008 , September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 , respectively , , and September 30 , 2006 , respectively , were excluded basis is also disclosed . 64 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 2\u2014Financial Instruments Cash , Cash Equivalents short-term investment a of September 27 , 2008 and Sept common stock upon receive an option to acquire 10,000 share of common stock ( under the Director Plan expire 10 year after the grant date date . As of September 27 , 2008 , approximately 290,000 As of September 27 , 2008 , approximately 290,000 share were 27 , 2008 , approximately 290,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans The following executive trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act ", + "fair_value_measurements": "Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement value measurement . In February 2008 , the FASB issued FASB \u201d ) No . FAS 157-1 , Application of FASB Statement of FASB Statement No . 157 to FASB Statement No . to FASB Statement No . 13 and Other Accounting Pronouncements That Classification or Measurement under Statement 13 and FSP No . FAS and FSP No . FAS 157-2 , Effective Date of FASB of FASB Statement No . 157 . FSP 157-1 amends SFAS No . 157 . FSP 157-1 amends SFAS N", + "derivative_instruments": "Derivative Instruments of FASB Statement No . 133 , which requires company to for under SFAS No . 133 , Accounting for Derivative Instruments statement . SFAS No . 161 also requires company to disclose position . SFAS No . 161 is effective for fiscal year interim period beginning after November 15 , 2008 and is required beginning after November 15 , 2008 and is required to be the second quarter of fiscal 2009 . Although the Company will application of SFAS No . 161 , management doe not currently three fiscal year end Derivative Instruments value hedge , the net 58 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1\u2014Summary of Significant Accounting Policies ( building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 363 million , $ 249 million $ 363 million , $ 249 million" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-09-214859/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-09-214859/full-submission_features.json new file mode 100644 index 0000000..06b28e6 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-09-214859/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue includes the portion product \u2019 s currently estimated 24-month economic life , a well handset unit sale in both 2009 and 2008 , which generated sale in both 2009 and 2008 , which generated significant amount product and service increased $ 696 million or 21 % during increased $ 696 million or 21 % during 2009 compared to million or 21 % during 2009 compared to 2008 . The % during 2009 compared to 2008 . The increase wa due \u2019 s geographic segment during 2009 compared to the same period to the sam revenue per store decreased to $ 25.9 million for 2009 from $ to $ 25.9 million for 2009 from $ 29.9 million in million for 2009 from $ 29.9 million in 2008 . The from $ 29.9 million in 2008 . The Retail segment \u2019 s net sale grew by 53 % during 2008 compared to grew by 53 % during 2008 compared to 2007 , due % during 2008 compared to 2007 , due in large part opening . The Company opened 50 new retail store during 2008 50 new retail store during 2008 , bringing the total number number of open store to 2 revenue per store increased to $ 29.9 million for 2008 from $ to $ 29.9 million for 2008 from $ 23.1 million in million for 2008 from $ 23.1 million in 2007 . As from $ 23.1 million in 2007 . As measured by the reported operating income of $ 1.4 billion during 2009 , a of $ 1.4 billion during 2009 , a compared to operating to operating income of $ 1.3 billion and $ 875 million $ 1.3 billion and $ 875 million during 2008 and 2007 and $ 875 million during 2008 and 2007 , respectively . 875 million during revenue in % increase in revenue in 2009 . The Company continues to for R & D increased 42 % or $ 327 million increased 42 % or $ 327 million to $ 1.1 billion $ 327 million to $ 1.1 billion in 2008 compared to to $ 1.1 billion in 2008 compared to 2007 . These billion in 2008 compared to 2007 . These increase were due an increase in headcount in 2008 and higher stock-based compensation expense stock-based compensation expense . In 2008 , $ 11 million of . In 2008 , $ 11 million of software development c revenue during % increase in revenue during 2008 . Selling , General and & A expenditure increased $ 388 million or 10 % to increased $ 388 million or 10 % to $ 4.1 billion or 10 % to $ 4.1 billion in 2009 compared to to $ 4.1 billion in 2009 compared to 2008 . These billion in 2009 compared to 2008 . These increase are due SG & A increased $ 798 million or 27 % to increased $ 798 million or 27 % to $ 3.8 billion or 27 % to $ 3.8 billion in 2008 compared to to $ 3.8 billion in 2008 compared to 2007 . T Revenue Arrangements Software Elements , and ASU 2009-13 , Revenue Recognition ( Topic , Revenue Recognition ( Topic 605 ) : Multiple-Deliverable Revenue Arrangements . As summarized in ASU 2009-14 , ASC Topic 985 ha ASU 2009-14 , ASC Topic 985 ha been amended to remove . As summarized in ASU 2009-13 , ASC Topic 605 ha ASU 2009-13 , ASC Topic 605 ha been amended ( 1 605 ha been amended ( 1 ) to provide updated guidance the consideration allocated ; ( 2 ) to require an entity selling price ; and ( 3 ) t revenue 10,305 4,853 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 Total expense 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 14,092 10,305 4,853 Total current liability 19,282 14,092 Deferred revenue - non-current 4,853 Total current liability 19,282 14,092 Deferred revenue - non-current 4,485 14,092 Deferred revenue - non-current 4,485 3,029 Other non-current liability 2,252 Deferr revenue - non-current 4,485 3,029 Other non-current liability 2,252 1,421 4,485 3,029 Other non-current liability 2,252 1,421 Total liability 26,019 18,542 3,029 Other non-current liability 2,252 1,421 Total liability 26,019 18,542 Commitments liability 2,252 1,421 Total liability 26,019 18,542 Commitments and contingency Shareholders 2,252 1,421 Total liability 26,019 18,542 Commitments and contingency Shareholders \u2019 , no par value ; 1,800,000,000 share authorized ; 899,805,500 and ; 1,800,000,000 sha revenue 6,908 ) 81 Accounts payable 92 596 1,494 Deferred revenue 6,908 5,642 81 Accounts payable 92 596 1,494 Deferred revenue 6,908 5,642 1,139 92 596 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 596 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 184 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 184 ) 5,642 1,139 Other liability ( 184 ) 1,279 612 Cash generated Other liability ( 184 ) 1,279 612 Cash generated by operating liability ( 184 ) 1,279 612 Cash generat", + "expenses": "Expenses 2009 other asset $ 3,651 $ 1,935 Accrued Expenses 2009 2008 Income 3,651 $ 1,935 Accrued Expenses 2009 2008 Income tax payable $ $ 1,935 Accrued Expenses 2009 2008 Income tax payable $ 439 2008 Income tax payable $ 439 $ 502 Accrued marketing and tax payable $ 439 $ 502 Accrued marketing and distribution 359 502 Accrued marketing and distribution 359 329 Accrued compensation and employee Accrued marketing and distribution 359 329 Accrued compensation and employee benefit Accrued compensation an Expenses allocated a of September 26 , 2009 . Expenses allocated to corporate of high-profile store were $ 65 million , $ 53 million $ 65 million , $ 53 million and $ 39 million $ 53 million and $ 39 million for 2009 , 2008 and $ 39 million for 2009 , 2008 and 2007 , 39 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Summary information the three year ended September 26 , 2009 is a follows year ended September 26 , 2009 is a follows ( in ( in million ) : 2009 ", + "net_income": "Net income $ $ 24,006 $ 19,315 $ 13,931 Net income $ 5,704 $ $ 13,931 Net income $ 5,704 $ 4,834 $ 3,496 $ Net income $ 5,704 $ 4,834 $ 3,496 $ 1,989 $ $ 5,704 $ 4,834 $ 3,496 $ 1,989 $ 1,328 Earnings $ 4,834 $ 3,496 $ 1,989 $ 1,328 Earnings per common $ 3,496 $ 1,989 $ 1,328 Earnings per common share : common share : Basic $ 6.39 $ 5.48 $ 4.04 $ : Basic $ 6.39 $ 5.48 $ 4.04 $ 2.36 $ $ 6.39 $ 5.48 $ 4.04 $ 2.36 $ 1.64 Diluted $ 5.48 $ 4.04 $ 2.36 $ 1.64 Diluted $ 6.29 $ 4.04 $ 2.36 $ 1.64 Diluted $ 6.29 $ Net income $ Provision for income tax 2,280 2,061 1,512 Net income $ 5,704 for income tax 2,280 2,061 1,512 Net income $ 5,704 $ 2,061 1,512 Net income $ 5,704 $ 4,834 $ 3,496 Earnings Net income $ 5,704 $ 4,834 $ 3,496 Earnings per common $ 5,704 $ 4,834 $ 3,496 Earnings per common share : common share : Basic $ 6.39 $ 5.48 $ 4.04 Diluted : Basic $ 6.39 $ 5.48 $ 4.04 Diluted $ 6.29 $ 6.39 $ 5.48 $ 4.04 Diluted $ 6.29 $ 5.36 5.48 $ 4.04 Diluted $ 6.29 $ 5.36 $ 3.93 Shares 4.04 Diluted $ 6.29 $ 5.36 $ 3.93 Net income \u2014 \u2014 3,496 \u2014 3,496 Change in foreign income \u2014 \u2014 3,496 \u2014 3,496 Change in foreign currency translation currency translation \u2014 \u2014 \u2014 51 51 Change in unrealized loss translation \u2014 \u2014 \u2014 51 51 Change in unrealized loss on tax \u2014 \u2014 \u2014 ( 7 ) ( 7 ) Change \u2014 ( 7 ) ( 7 ) Change in unrealized gain tax \u2014 \u2014 \u2014 ( 3 ) ( 3 ) Total \u2014 ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation \u2014 251 \u2014 income 3,537 Stock-based compensation \u2014 251 \u2014 \u2014 251 Common stock compensa Net income \u2014 \u2014 4,834 4,834 Change in foreign currency Net income \u2014 \u2014 4,834 4,834 Change in foreign currency translation translation \u2014 \u2014 \u2014 ( 11 ) ( 11 ) Change \u2014 ( 11 ) ( 11 ) Change in unrealized loss tax \u2014 \u2014 \u2014 ( 63 ) ( 63 ) Change \u2014 ( 63 ) ( 63 ) Change in unrealized gain of tax \u2014 \u2014 \u2014 19 19 Total comprehensive income 4,779 tax \u2014 \u2014 \u2014 19 19 Total comprehensive income 4,779 Stock-based 19 19 Total comprehensive income 4,779 Stock-based compensation \u2014 513 \u2014 income 4,779 Stock-based compensation \u2014 513 \u2014 \u2014 513 Net income \u2014 \u2014 5,704 \u2014 5,704 Change in foreign income \u2014 \u2014 5,704 \u2014 5,704 Change in foreign currency translation translation \u2014 \u2014 \u2014 ( 54 ) ( 54 ) Change \u2014 ( 54 ) ( 54 ) Change in unrealized loss of tax \u2014 \u2014 \u2014 118 118 Change in unrealized gain tax \u2014 \u2014 \u2014 118 118 Change in unrealized gain on of tax \u2014 \u2014 \u2014 12 12 Total comprehensive income 5,780 tax \u2014 \u2014 \u2014 12 12 Total comprehensive income 5,780 Stock-based 12 12 Total comprehensive income 5,780 Stock-based compensation \u2014 707 \u2014 income 5,780 Stock-based compensation \u2014 Net income Operating Activities : Net income 5,704 4,834 3,496 Adjustments to reconcile Activities : Net income 5,704 4,834 3,496 Adjustments to reconcile net : Net income 5,704 4,834 3,496 Adjustments to reconcile net income Depreciation , amortization and accretion 703 473 317 Stock-based compensation expense , amortization and accretion 703 473 317 Stock-based compensation expense 710 amortization and accretion 703 473 317 Stock-based compensation expense 710 516 473 317 Stock-based compensation expens Net income amount ) : 2009 2008 2007 Numerator : Net income $ Numerator : Net income $ 5,704 $ 4,834 $ 3,496 Denominator Net income $ 5,704 $ 4,834 $ 3,496 Denominator : Weighted-average $ 5,704 $ 4,834 $ 3,496 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 893,016 881,592 864,595 Effect of dilutive : Weighted-average share outstanding 893,016 881,592 864,595 Effect of dilutive security Weighted-average share outstanding 893,016 881,592 864,595 Effect of net income ( 78 ) 12 ( 2 ) net income ( 78 ) 12 ( 2 ) Change in ( 78 ) 12 ( 2 ) Change in unrecognized gains/losses gains/losses on derivative instrument $ 12 $ 19 $ ( 3 derivative instrument $ 12 $ 19 $ ( 3 ) 78 12 $ 19 $ ( 3 ) 78 Table of Contents 19 $ ( 3 ) 78 Table of Contents The tax of derivative wa $ ( 60 ) million , $ ( ) million , $ ( 5 ) million and $ 1 5 ) million and $ 1 million for 2009 , 2008 and $ 1 million for 2009 , 2008 and 2007 , 1 million for 2009 , 2008 and 2007 , respectively . for 2 net income wa $ 54 million , $ ( 9 54 million , $ ( 9 ) million and $ 2 9 ) million and $ 2 million for 2009 , 2008 and $ 2 million for 2009 , 2008 and 2007 , 2 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the \u201c 2003 Plan \u201d ) is a including executive officer . The 2003 Plan permit the granting of , o Net income $ $ 3,023 $ 2,971 $ 3,532 Net income $ 1,665 $ $ 3,532 Net income $ 1,665 $ 1,229 $ 1,205 $ Net income $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings per common $ 1,229 $ 1,205 $ 1,605 Earnings per common share : common share : Basic $ 1.85 $ 1.38 $ 1.35 $ : Basic $ 1.85 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.85 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.82 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.82 $ 1.35 1.35 $ 1.81 Diluted $ 1.82 $ 1.35 $ 1.33 $ 1.81 Diluted $ 1.82 $ 1.35 $ 1.33 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 ", + "assets": "Assets The capital asset purchase were $ 1.1 billion during 2009 , consisting were $ 1.1 billion during 2009 , consisting of $ 369 2009 , consisting of $ 369 million for retail store facility retail store facility and $ 775 million for real estate acquisition Company anticipates utilizing approximately $ 1.9 billion for capital asset purchase for capital asset purchase during 2010 , including approximately $ 400 2010 , including approximately $ 400 million for Retail facility and Retail facility and a ASSETS September 26 , 2009 September 27 , 2008 ASSETS : Current , 2009 September 27 , 2008 ASSETS : Current asset : Cash and cash equivalent $ 5,263 $ 11,875 Short-term marketable security cash equivalent $ 5,263 $ 11,875 Short-term marketable security 18,201 10,236 $ 11,875 Short-term marketable security 18,201 10,236 Accounts receivable , le 11,875 Short-term marketable security 18,201 10,236 Accounts receivable , le allowance , le allowance of $ 52 and $ 47 , respectively of $ 52 and $ 47 , respect Assets record any material impairment during 2009 , 2008 and 2007 . material impairment during 2009 , 2008 and 2007 . The Company during 2009 , 2008 and 2007 . The Company doe not test on or about August 31 of each year . The intangible asset impairment charge in 2009 , 2008 and 2007 . impairment charge in 2009 , 2008 and 2007 . The Company in 2009 , 2008 and 2007 . The Company established reporting to each reporting unit . 61 Table of Contents The Company each element based on the 62 Table of Content Assets : Cash equivalent $ 1,608 $ 2,516 $ \u2014 $ Cash equivalent $ 1,608 $ 2,516 $ \u2014 $ 4,124 Short-term $ 2,516 $ \u2014 $ 4,124 Short-term marketable security \u2014 18,201 4,124 Short-term marketable security \u2014 18,201 \u2014 18,201 Long-term marketable security marketable security \u2014 18,201 \u2014 18,201 Long-term marketable security \u2014 10,528 18,201 Long-term marketable security \u2014 10,528 \u2014 10,528 Other current asset marketable security \u2014 10,528 \u2014 10,528 Other current asset \u2014 37 10,528 Other current asset \u2014 37 \u2014 37 Other a Assets 2009 2008 Deferred cost under subscription : Other Current Assets 2009 2008 Deferred cost under subscription accounting subscription accounting - current $ 3,703 $ 1,931 Vendor non-trade receivables - current $ 3,703 $ 1,931 Vendor non-trade receivables 1,696 2,282 $ 1,931 Vendor non-trade receivables 1,696 2,282 Inventory component prepayment - 1,931 Vendor non-trade receivables 1,696 2,282 Inventory component prepayment - current Inventory component prepayment - current 309 475 Other current Assets Table of Contents Other Assets 2009 2008 Deferred cost under subscription of Contents Other Assets 2009 2008 Deferred cost under subscription accounting subscription accounting - non-current $ 1,468 $ 1,089 Inventory component prepayment - non-current $ 1,468 $ 1,089 Inventory component prepayment - non-current Inventory component prepayment - non-current 844 208 Deferred tax asset - component prepayment - non-current 844 208 Deferred tax asset - non-current Deferred tax asset - non-current 259", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 53,851 $ 39,572 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 Total expense 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 3,376 3,719 Deferred revenue 10,305 4,853 Total curr Liabilities \u2013 Including 60 Table of Contents an amendment of FASB Statement No . 115 ) , which allows company building is the lesser of 30 year or the remaining life property and equipment wa $ 577 million , $ 363 million $ 577 million , $ 363 million and $ 249 million $ 363 million and $ 249 million during 2009 , 2008 and $ 249 million during 2009 , 2008 and 2007 , 249 million during 2009 , 2008 and 2007 , respectively . during 2009 , 2008 and 2007 , respectively . Asset Retirement asset retirement liabil Liabilities $ 31,282 $ \u2014 $ 32,951 Liabilities : Derivative liability $ Derivative liability $ \u2014 $ 25 $ \u2014 $ 25 Total $ 25 $ \u2014 $ 25 Total liability measured at fair fair value $ \u2014 $ 25 $ \u2014 $ 25 ( $ 25 $ \u2014 $ 25 ( a ) The total the related carrying amount . 72 Table of Contents The following Balance Sheet a of September 26 , 2009 ( in million a of September 26 , 2009 ( in million ) : in million ) : September 26 , 2009 Quoted Prices in ) : September 26 , 2009 Quoted Prices in Active Markets for Identical Instru Liabilities $ 31,282 $ \u2014 $ 32,951 Liabilities : Other current liability current liability $ \u2014 $ 25 $ \u2014 $ 25 Total $ 25 $ \u2014 $ 25 Total liability measured at fair fair value $ \u2014 $ 25 $ \u2014 $ 25 ( $ 25 $ \u2014 $ 25 ( a ) The total related carrying amount . Note 4 \u2013 Consolidated Financial Statement Details statement detail a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : ) : Other Cu Liabilities 2009 accrued expense $ 3,376 $ 3,719 Non-Current Liabilities 2009 2008 Deferred 3,376 $ 3,719 Non-Current Liabilities 2009 2008 Deferred tax liability $ $ 3,719 Non-Current Liabilities 2009 2008 Deferred tax liability $ 966 2008 Deferred tax liability $ 966 $ 675 Other non-current liability tax liability $ 966 $ 675 Other non-current liability 1,286 746 $ 675 Other non-current liability 1,286 746 Total other non-current liability 675 Other non-current liability 1,286 746 Total other non-current", + "equity": "equity $ 10,815 $ 7,221 $ 4,088 Shareholders \u2019 equity $ 27,832 4,088 Shareholders \u2019 equity $ 27,832 $ 21,030 $ 14,532 $ \u2019 equity $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ 7,428 Item $ 21,030 $ 14,532 $ 9,984 $ 7,428 Item 7 . $ 14,532 $ 9,984 $ 7,428 Item 7 . Management \u2019 $ 9,984 $ 7,428 Item 7 . Management \u2019 s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form EQUITY liability : Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 Total expense 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 14,092 10,305 4,853 Total current liability 19,282 14,092 Deferr equity Accumulated other comprehensive income 84 8 Total shareholder \u2019 equity 27,832 8 Total shareholder \u2019 equity 27,832 21,030 Total liability and shareholder Total shareholder \u2019 equity 27,832 21,030 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 53,851 $ 39,572 See accompanying Notes \u2019 equity $ 53,851 $ 39,572 See accompanying Notes to Consolidated to Consolidated Financial Statements . 55 Table of Contents CONSOLIDATED STATEMENTS ) Three year ended September 26 , 2009 2009 2008 2007 y equity award ( 82 ) ( 124 ) ( award ( 82 ) ( 124 ) ( 3 ) Cash ) ( 124 ) ( 3 ) Cash generated by financing Cash generated by financing activity 663 1,116 739 ( Decrease ) generated by financing activity 663 1,116 739 ( Decrease ) /increase by financing activity 663 1,116 739 ( Decrease ) /increase in cash and cash equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent , end of the year $ 5,263 $ Equity to be realized . During 2008 , the Company adopted FASB ( \u201c ASC \u201d ) 740 , Income Taxes ( formerly FASB Financial Interpretation No . 48 , Accounting for Uncertainty in in Income Taxes \u2013 an 64 Table of Contents interpretation of of FASB Statement No . 109 ) , which changed the that ha a greater than 50 % likelihood of being realized upon settlement . See Note 6 , \u201c Income Taxes \u201d the three year ended September 26 , 2009 ( in thousand year ended September 26 , 2009 ( in thousand , except per shar Equity Compensation \u201d of this Form 10-K , which summarizes the activity income related to derivative . 70 Table of Contents Accounts Receivable \u2019 s customer accounted for 16 % of trade receivables a trade receivables a of September 26 , 2009 and two of a of September 26 , 2009 and two of the Company \u2019 s customer accounted for 15 % and 10 % , accounted for 15 % and 10 % , respectively , of trade receivables a of September 27 , 2008 . The following a of September 27 , 2008 . The following table summariz equity security Municipal security \u2014 504 \u2014 504 Marketable equity security 61 \u2014 \u2014 504 Marketable equity security 61 \u2014 \u2014 61 Derivative asset equity security 61 \u2014 \u2014 61 Derivative asset \u2014 37 \u2014 \u2014 61 Derivative asset \u2014 37 \u2014 37 Total asset measured Derivative asset \u2014 37 \u2014 37 Total asset measured at fair measured at fair value $ 1,669 $ 31,282 $ \u2014 $ fair value $ 1,669 $ 31,282 $ \u2014 $ 32,951 Liabilities $ 31,282 $ \u2014 $ 32,951 Liabilities : Derivative liability $ Derivative liability $ \u2014 $ 25 $ \u2014 $ 25 Total $ 25 equity by approximately $ 78 million in the year ended in the year ended September 26 , 2009 . The aggregate year ended September 26 , 2009 . The aggregate change in the two year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( : Balance a of September 30 , 2007 $ 475 Increases a of September 30 , 2007 $ 475 Increases related to September 30 , 2007 $ 475 Increases related to tax position taken during a prior period 27 Decreases related to tax position during a prior per Equity and the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Net unrealized gains/losses in million ) : 2009 2008 2007 Net unrealized gains/losses on million ) : 2009 2008 2007 Net unrealized gains/losses on available-for-sale gains/losses on available-for-sale security $ 48 $ ( 70 ) $ security $ 48 $ ( 70 ) $ ( 7 ) ( 70 ) $ ( 7 ) Net unrecognized gain on unrecognized gain on derivative instrument 31 19 \u2014 Cumulative fo equity compensation program change , the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( Intrinsic Value Balance at September 30 , 2006 3,410 $ 39.62 Balance at September 30 , 2006 3,410 $ 39.62 Restricted stock at September 30 , 2006 3,410 $ 39.62 Restricted stock unit 30 , 2006 3,410 $ 39.62 Restricted stock unit granted 1,320 39.62 Restricted stock unit granted 1,320 $ 88.51 Restricted stock unit stock unit granted 1,320 $ 88.51 Restricted stock unit vest equity compensation program change , the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Cost of sale in million ) : 2009 2008 2007 Cost of sale $ million ) : 2009 2008 2007 Cost of sale $ 114 2007 Cost of sale $ 114 $ 80 $ 35 Research of sale $ 114 $ 80 $ 35 Research and development $ 114 $ 80 $ 35 Research and development 258 185 $ 35 Research and development 258 185 77 Selling , general 35 Research and development 258", + "cash_flow": "cash flow $ Annual operating cash flow $ 10,159 $ 9,596 $ 5,470 As cash flow $ 10,159 $ 9,596 $ 5,470 As of September $ 10,159 $ 9,596 $ 5,470 As of September 26 , $ 5,470 As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had $ , the Company had $ 34.0 billion in cash , cash , an increase of $ 9.5 billion from September 27 , $ 9.5 billion from September 27 , 2008 . The principal billion from September 27 , 2008 . The principal component of by operating activity of $ 10.2 bil cash flow of $ 32 million would be required to Other outstanding obligation were $ 356 million a of September 26 356 million a of September 26 , 2009 , which related a of September 26 , 2009 , which related to advertising obligation . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had gross unrecognized tax benefit of $ 971 million and an additional $ million and an additional $ 291 million for gross interest and tax benefit by between $ 105 million and $ 145 million $ 10 cash flow $ 5,263 $ 11,875 $ 9,352 Supplemental cash flow disclosure : income tax , net $ 2,997 $ 1,267 $ 863 See , net $ 2,997 $ 1,267 $ 863 See accompanying Notes $ 2,997 $ 1,267 $ 863 See accompanying Notes to Consolidated to Consolidated Financial Statements . 58 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 \u2013 Summary of Significant Accounting During the first quarter of 2009 , the Company reclassified $ , the Company reclassified $ 2.4 billion of certain fixed-income securit cash flow hedge during 2009 , 2008 and 2007 . flow hedge during 2009 , 2008 and 2007 . The Company during 2009 , 2008 and 2007 . The Company had an net investment hedge of $ 2 million and $ 1 million $ 2 million and $ 1 million , net of tax \u201d ) a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . The ineffective a net gain of $ 133 million on foreign currency forward duri", + "gross_margin": "Gross Margin Gross margin the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( gross margin percentage ) : 2009 2008 2007 Net sale $ margin percentage ) : 2009 2008 2007 Net sale $ 36,537 percentage ) : 2009 2008 2007 Net sale $ 36,537 $ 2008 2007 Net sale $ 36,537 $ 32,479 $ 24,006 Cost Net sale $ 36,537 $ 32,479 $ 24,006 Cost of sale $ 36,537 $ 32,479 $ 24,006 Cost of sale 23,397 21,334 $ 24,006 Cost of sale 23,397 21,334 15,852 Gross margin $ 24,006 Cost of sa Gross margin $ 13,140 Cost of sale 23,397 21,334 15,852 Gross margin $ 13,140 $ 21,334 15,852 Gross margin $ 13,140 $ 11,145 $ 8,154 Gross Gross margin $ 13,140 $ 11,145 $ 8,154 Gross margin percentage $ 13,140 $ 11,145 $ 8,154 Gross margin percentage 36.0 % $ 8,154 Gross margin percentage 36.0 % 34.3 % 34.0 % Gross margin percentage 36.0 % 34.3 % 34.0 % The gross percentage 36.0 % 34.3 % 34.0 % The gross margin percentage The gross margin percentage in 2009 wa 36.0 % compared to margin percentage in 2009 w gross margin level gross margin level of about 34 % in the first quarter in the first quarter of 2010 . This expected decline is in Part I , Item 1A , \u201c Risk Factors \u201d the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( except for percentage ) : 2009 2008 2007 Research and development for percentage ) : 2009 2008 2007 Research and development $ percentage ) : 2009 2008 2007 Research and development $ 1,333 2007 Research and development $ 1,333 $ 1,109 $ 782 Perc Gross margin 13,140 24,006 Cost of sale 23,397 21,334 15,852 Gross margin 13,140 11,145 Cost of sale 23,397 21,334 15,852 Gross margin 13,140 11,145 8,154 23,397 21,334 15,852 Gross margin 13,140 11,145 8,154 Operating expense : 21,334 15,852 Gross margin 13,140 11,145 8,154 Operating expense : Research 15,852 Gross margin 13,140 11,145 8,154 Operating expense : Research and expense : Research and development 1,333 1,109 782 Selling , general : Research and development 1,333 1,109 782 Selling , general and Gross margin $ $ 8,337 $ 8,163 $ 10,167 Gross margin $ 3,614 $ $ 10,167 Gross margin $ 3,614 $ 3,023 $ 2,971 $ Gross margin $ 3,614 $ 3,023 $ 2,971 $ 3,532 Net $ 3,614 $ 3,023 $ 2,971 $ 3,532 Net income $ $ 3,023 $ 2,971 $ 3,532 Net income $ 1,665 $ $ 3,532 Net income $ 1,665 $ 1,229 $ 1,205 $ Net income $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings per common $ 1,229 $ 1,205 $ 1,605 Earnings per common share : common share : Basic $ 1.85 $ 1.38 $ 1.35 $ : Basic $ 1.85 $ Gross margin $ $ 7,464 $ 7,512 $ 9,608 Gross margin $ 2,739 $ $ 9,608 Gross margin $ 2,739 $ 2,600 $ 2,474 $ Gross margin $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1.", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 4,667 3,747 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,713 ) ( 1,292 ) Net amortization ( 1,713 ) ( 1,292 ) Net property , plant , plant and equipment $ 2,954 $ 2,455 73 Table of and equipment $ 2,954 $ 2,455 73 Table of Contents Other equipment $ 2,954 $ 2,455 73 Table of Contents Other Assets Table of Contents Other Assets 2009 2008 Deferred cost under subscription of Contents Other Assets 2009 2008 Deferred", + "debt": "debt $ $ 25,347 $ 17,205 $ 11,516 Long-term debt $ \u2014 $ $ \u2014 Total liability $ 26,019 $ 18,542 $ 10,815 $ Total liability $ 26,019 $ 18,542 $ 10,815 $ 7,221 $ $ 26,019 $ 18,542 $ 10,815 $ 7,221 $ 4,088 Shareholders $ 18,542 $ 10,815 $ 7,221 $ 4,088 Shareholders \u2019 equity $ 10,815 $ 7,221 $ 4,088 Shareholders \u2019 equity $ 27,832 4,088 Shareholders \u2019 equity $ 27,832 $ 21,030 $ 14,532 $ \u2019 equity $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ 7,428 Item $ 21,030 $ 14,532 $ 9,984 $ debt security at 59 Table of Contents the time with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term During the second quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 815 , Derivatives and Hedging ( referenced a SFAS No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 ) , which requires additional on these derivative instrument during 2009 , 2008 and 2007 . derivative in", + "earnings_per_share": "earnings per share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted per share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 856,878 Cash 864,595 844,058 808,439 Diluted 907,005 earnings per share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 per share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes to 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes to Consolidated to Consolidated Financial Statements . 56 earnings per share . 88 Table of Contents Report of Apple Inc. a of September 26 , 2009 , and the a of September 26 , 2009 , and the related consolidated of Apple Inc. at September 26 , 2009 , and the Inc. at September 26 , 2009 , and the consolidated result financial reporting a of September 26 , 2009 , based on a of September 26 , 2009 , based on criterion established and our report dated October 27 , 2009 expressed an unqualified report dated October 27 , 2009 expressed an unqualified opinion thereon San Jose ", + "tax_rate": "tax rate were 29 % , 30 % and rate were 29 % , 30 % and 30 % for % , 30 % and 30 % for 2009 , 2008 % and 30 % for 2009 , 2008 and 2007 , 30 % for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The Company federal income tax rate of 35 % due primarily to certain the U.S. As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had deferred and tax credit of $ 3.2 billion before being offset against certain deferred liability of $ 1.8 billion for pre tax rate ( 35 % in 2009 , 2008 rate ( 35 % in 2009 , 2008 and 2007 ) 35 % in 2009 , 2008 and 2007 ) to income in 2009 , 2008 and 2007 ) to income before provision the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( ( in million ) : 2009 2008 2007 Computed expected tax in million ) : 2009 2008 2007 Computed expected tax $ million ) : 2009 2008 2007 Computed expected tax $ 2,795 2007 Computed expected tax $ 2,795 $ 2,414 $ 1,753 State expected tax $ 2,795 $ 2,41 tax rate $ 2,280 $ 2,061 $ 1,512 Effective tax rate 29 % $ 1,512 Effective tax rate 29 % 30 % 30 % Effective tax rate 29 % 30 % 30 % The Company rate 29 % 30 % 30 % The Company \u2019 s stock plan award of $ 246 million , $ 770 million $ 246 million , $ 770 million and $ 398 million $ 770 million and $ 398 million in 2009 , 2008 and $ 398 million in 2009 , 2008 and 2007 , 398 million in 2009 , 2008 and 2007 , respectively , in 2009 , 2008 and 2007 , respectively , which were common stock . On October 3 , 200 tax rate . On May 27 , 2009 , the United . On May 27 , 2009 , the United States Court tax benefit by approximately $ 86 million and decreased shareholder \u2019 \u2019 equity by approximately $ 78 million in the year ended in the year ended September 26 , 2009 . The aggregate year ended September 26 , 2009 . The aggregate change in the two year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( : Balance a of September 30 , 2007 $ 475 Increases a of September 30 , 2007 $ 475 Increase", + "geographic_information": "geographic marketplace . Approximately 54 % of the Company \u2019 \u2019 s net sale in 2009 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , \u201c Segment Information and The Company also offer a 90-day basic warranty for it service condition or operating result . 12 Table of Contents Employees As Contents Employees As of September 26 , 2009 , the Company As of S geographic segment during 2009 compared to the same period to the same period in 2008 . The Company belief this above , net sale during 2009 were negatively impacted by certain \u2022 Mac net sale declined 3 % during 2009 compared to sale declined 3 % during 2009 compared to 2008 , although % during 2009 compared to 2008 , although Mac unit sale Mac unit sale increased by 7 % over the same period Mac unit sold decreased by 10 % during 2009 compared to decreased by 10 % during 2009 compared to 2008 , due % duri Geographic a those described in Note 1 , \u201c Summary of Significant segment includes net sale to 85 Table of Contents third party the Retail segment were $ 369 million , $ 389 million $ 369 million , $ 389 million and $ 294 million $ 389 million and $ 294 million for 2009 , 2008 and $ 294 million for 2009 , 2008 and 2007 , 294 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The Company had opened a total of 11 high-profile store a of September high-profile store a", + "common_stock": "Common Stock Issued and Outstanding a of October 16 , 2009 DOCUMENTS INCORPORATED BY a of October 16 , 2009 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2010 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-lookin Common stock compensation \u2014 251 \u2014 \u2014 251 Common stock issued under stock share withheld for employee tax 17,066 364 ( 2 ) \u2014 withheld for employee tax 17,066 364 ( 2 ) \u2014 362 employee tax 17,066 364 ( 2 ) \u2014 362 Tax benefit 364 ( 2 ) \u2014 362 Tax benefit from employee stock employee stock plan award \u2014 398 \u2014 \u2014 398 Balances a award \u2014 398 \u2014 \u2014 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 5,368 9,101 a of September 29 , 2007 872,329 5,368 9,101 63 14,532 of September 29 , 2007 872,329 5, Common stock compensation \u2014 513 \u2014 \u2014 513 Common stock issued under stock share withheld for employee tax 15,888 460 ( 101 ) \u2014 withheld for employee tax 15,888 460 ( 101 ) \u2014 359 employee tax 15,888 460 ( 101 ) \u2014 359 Issuance of 460 ( 101 ) \u2014 359 Issuance of common stock in connection with an asset acquisition 109 21 \u2014 \u2014 21 Tax with an asset acquisition 109 21 \u2014 \u2014 21 Tax benefit acquisition 109 21 \u2014 \u2014 21 Tax benefit from employee stock employee stock plan award \u2014 770 \u2014 \u2014 770 Balances a award \u2014 770 \u2014 \u2014 770 Bala Common stock compensation \u2014 707 \u2014 \u2014 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) \u2014 withheld for employee tax 11,480 404 ( 11 ) \u2014 393 employee tax 11,480 404 ( 11 ) \u2014 393 Tax benefit 404 ( 11 ) \u2014 393 Tax benefit from employee stock transfer pricing adjustment \u2014 ( 78 ) \u2014 \u2014 ( 78 78 ) \u2014 \u2014 ( 78 ) Balances a of September ) Balances a of September 26 , 2009 899,806 $ 8,210 a of September 26 , 2009 899,806 $ 8,210 $ 19,538 of September 26 , 2009 899,806 $ 8,210 $ 19,538 $ 26 common stock 475 483 365 Excess tax benefit issuance of common stock 475 483 365 Excess tax benefit from of common stock 475 483 365 Excess tax benefit from stock-based tax benefit from stock-based compensation 270 757 377 Cash used to benefit from stock-based compensation 270 757 377 Cash used to net from stock-based compensation 270 757 377 Cash used to net share share settle equity award ( 82 ) ( 124 ) ( award ( 82 ) ( 124 ) ( 3 ) Cash ) ( 124 ) ( 3 ) Cash generated by financing Cash generated by financi common stock share of common stock for 2009 , 2008 and 2007 , common stock for 2009 , 2008 and 2007 , respectively , for 2009 , 2008 and 2007 , respectively , were excluded basis is also disclosed . 65 Table of Contents Note 2 65 Table of Contents Note 2 \u2013 Financial Instruments Cash , marketable security a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : in million ) : Septemb common stock . On October 3 , 2008 , the Tax . On October 3 , 2008 , the Tax Extenders and Minimum Tax Relief Act of 2008 wa signed into law . a tax benefit of $ 42 million in the first quarter in the first quarter of 2009 to account for the retroactive Positions As discussed in Note 1 , \u201c Summary of Significant for uncertain tax position in 2008 . Under these new principle than not that a tax 76 Table of Contents position will benefit that is greater than 50 percent likely of being realized to retained ear common stock upon receive an option to acquire 10,000 share of common stock ( date . As of September 26 , 2009 , approximately 240,000 As of September 26 , 2009 , approximately 240,000 share were 26 , 2009 , approximately 240,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans As of October Trading Plans As of October 16 , 2009 , executive officer As of October 16 , 2009 , executive officer Timothy D. trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Secur", + "subsequent_events": "Subsequent Events ( formerly SFAS \u201d ) No . 165 , Subsequent Events ) , during the third quarter of 2009 . The Company ha evaluated statement were issued on October 27 , 2009 . Financial Instruments issued on October 27 , 2009 . Financial Instruments Cash Equivalents investment in debt security at 59 Table of Contents the time with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term During the second quarter of 2009 , the Company adopted", + "fair_value_measurements": "Fair Value Measurements and SFAS \u201d ) No . 157 , Fair Value Measurements ) value measurement . In February 2008 , the FASB issued supplemental fiscal year beginning after November 15 , 2008 for all non-financial beginning after November 15 , 2008 for all non-financial asset and in the first quarter of 2010 . Although the Company will operating result . In December 2007 , the FASB issued FASB the FASB issued FASB ASC 805 , Business Combinations ( formerly referenced a SFAS No . 141 ( revised 2007 ) , No . 141 ( revised Fair Value Measurements and referenced a SFAS No . 157 , Fair Value Measurements ) During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 825 , Financial Instruments ( formerly referenced a SFAS No . 159 , The Fair Value Option and Financial Liabilities \u2013 Including 60 Table of Contents an amendment of FASB Statement No . 115 ) , which allows company building is the lesser of 30 year or the remaining life property and equipment wa $ 577 million , $ 363 million $ 577 million , $ 363 mil Fair Value Measurements Measurements \u201d of this Form 10-K , 69 Table of Contents of this Form 10-K , 69 Table of Contents for additional Balance Sheets a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : in million ) : September 26 , 2009 Fair Value of ) : September 26 , 2009 Fair Value of Derivatives Designated : Foreign exchange contract $ 27 $ 10 $ 37 Derivative exchange contract $ 27 $ Fair Value Measurements The restriction and credit risk . 71 Table of Contents The Company fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than asset or liability . Level 3 \u2013 Inputs that are generally recurring basis a of September 26 , 2009 ( in million a of September 26 , 2009 ( in million ) : in million ) : September 26 , 2009 Quoted Prices in ) : September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Othe", + "derivative_instruments": "Derivative Instruments of FASB Statement No . 133 ) , which requires additional on these derivative instrument during 2009 , 2008 and 2007 . derivative instrument during 2009 , 2008 and 2007 . The net during 2009 , 2008 and 2007 . The net gain or During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 820 , Fair Value Measurements and referenced a SFAS No . 157 , Fair Value Measurements ) During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 825 , Fi" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-10-238044/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-10-238044/full-submission_features.json new file mode 100644 index 0000000..82d3d93 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-10-238044/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue or financial performance . 9 Table of Contents Environmental Laws . Employees As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had approximately , the Company had approximately 46,600 full-time equivalent employee and an equivalent employee and an additional 2,800 full-time equivalent temporary employee and s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendme revenue . 26 Table of Contents Item 7 26 Table of Contents Item 7 . Management \u2019 s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is system ; application software for 27 Table of Contents the Mac and accompanying note . Note 1 , \u201c Summary of Significant Financial Statements in this Form 10-K describes the significant accounting policy bundled with har revenue iPhone handset unit sale totaled 20.7 million during 2009 , which sale totaled 20.7 million during 2009 , which represents an increase which represents an increase of 9.1 million or 78 % during increase of 9.1 million or 78 % during 2009 compared to million or 78 % during 2009 compared to 2008 . This % during 2009 compared to 2008 . This growth is attributed demand for iPhones . iPhone 3GS wa released in the U.S. in the U.S. on June 19 , 2009 and in many U.S. on June 19 , 2009 and in many other revenue per store increased to $ 34.1 million in 2010 , compared to $ 34.1 million in 2010 , compared to $ 26.2 2010 , compared to $ 26.2 million in 2009 . The to $ 26.2 million in 2009 . The Retail segment represented . The Retail segment represented 15 % and 16 % of segment represented 15 % and 16 % of the Company \u2019 s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . Retail net Retail net sale decreased $ 636 million or 9 % during decreased $ 636 million or 9 revenue per store decreased to $ 26.2 million for 2009 from $ to $ 26.2 million for 2009 from $ 34.6 million in million for 2009 from $ 34.6 million in 2008 . The from $ 34.6 million in 2008 . The Retail segment reported reported operating income of $ 2.4 billion during 2010 and $ of $ 2.4 billion during 2010 and $ 1.7 billion during billion during 2010 and $ 1.7 billion during both 2009 and $ 1.7 billion during both 2009 and 2008 . The increase billion during both 2009 and 2008 . The increase in Retai revenue in % increase in revenue in 2009 . Selling , General and & A expense increased $ 1.4 billion or 33 % to increased $ 1.4 billion or 33 % to $ 5.5 billion or 33 % to $ 5.5 billion in 2010 compared to to $ 5.5 billion in 2010 compared to 2009 . This billion in 2010 compared to 2009 . This increase wa due & A expense increased $ 388 million or 10 % to increased $ 388 million or 10 % to $ 4.1 billion or 10 % to $ 4.1 billion in 2009 compared to to $ 4.1 billion in 2009 compared to 2008 . This billio revenue 2,984 2,053 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 Total expense 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 11,506 2,984 2,053 Total current liability 20,722 11,506 Deferred revenue \u2013 non-current 2,053 Total current liability 20,722 11,506 Deferred revenue \u2013 non-current 1,139 11,506 Deferred revenue \u2013 non-current 1,139 853 Other non-current liability 5,531 Deferred reve revenue 1,217 ) 289 Accounts payable 6,307 92 596 Deferred revenue 1,217 521 289 Accounts payable 6,307 92 596 Deferred revenue 1,217 521 718 6,307 92 596 Deferred revenue 1,217 521 718 Other liability 778 92 596 Deferred revenue 1,217 521 718 Other liability 778 ( 596 Deferred revenue 1,217 521 718 Other liability 778 ( 161 1,217 521 718 Other liability 778 ( 161 ) 1,664 Cash 718 Other liability 778 ( 161 ) 1,664 Cash generated by liability 778 ( 161 ) 1,664 Cash generated by operating activity Cash g Revenue Recognition iPod touch beginning in June 2010 , the Company ha indicated a straight-line basis over the 24-month estimated life of each of in the third quarter of 2010 in conjunction with the announcement with the announcement of iOS 4 , the Company \u2019 s an advertising component . iOS 4 support iAd , the Company Apple TV sold is $ 10 . The Company \u2019 s each iPhone sold through the 52 Table of Contents Company \u2019 \u2019 s second quarter of 2010 wa $ 25 . Beginning quarter of 2010 wa $ 25 . Beginning in Revenue Code through the 2015 annual meeting of shareholder . shareholder . As of September 25 , 2010 , approximately 62.5 As of September 25 , 2010 , approximately 62.5 million share 25 , 2010 , approximately 62.5 million share were reserved for for future issuance under the 2003 Plan . 71 Table of under the 2003 Plan . 71 Table of Contents 1997 Employee . 71 Table of Contents 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company \u2019 s Board of Directors approved the 1997 Emp", + "expenses": "Expenses 2010 and equipment $ 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related cost warranty and related cost $ 761 $ 577 Deferred margin on related cost $ 761 $ 577 Deferred margin on component sale Deferred margin on component sale 663 225 Accrued compensation and employee margin on component sale 663 225 Accrued compensation and employee benefit Accrued compensation an", + "net_income": "Net income $ $ 37,491 $ 24,578 $ 19,315 Net income $ 14,013 $ $ 19,315 Net income $ 14,013 $ 8,235 $ 6,119 $ Net income $ 14,013 $ 8,235 $ 6,119 $ 3,495 $ $ 14,013 $ 8,235 $ 6,119 $ 3,495 $ 1,989 Earnings $ 8,235 $ 6,119 $ 3,495 $ 1,989 Earnings per common $ 6,119 $ 3,495 $ 1,989 Earnings per common share : common share : Basic $ 15.41 $ 9.22 $ 6.94 $ : Basic $ 15.41 $ 9.22 $ 6.94 $ 4.04 $ $ 15.41 $ 9.22 $ 6.94 $ 4.04 $ 2.36 Diluted $ 9.22 $ 6.94 $ 4.04 $ 2.36 Diluted $ 15.15 $ 6.94 $ 4.04 $ 2.36 Diluted Net income $ Provision for income tax 4,527 3,831 2,828 Net income $ 14,013 for income tax 4,527 3,831 2,828 Net income $ 14,013 $ 3,831 2,828 Net income $ 14,013 $ 8,235 $ 6,119 Earnings Net income $ 14,013 $ 8,235 $ 6,119 Earnings per common $ 14,013 $ 8,235 $ 6,119 Earnings per common share : common share : Basic $ 15.41 $ 9.22 $ 6.94 Diluted : Basic $ 15.41 $ 9.22 $ 6.94 Diluted $ 15.15 $ 15.41 $ 9.22 $ 6.94 Diluted $ 15.15 $ 9.08 9.22 $ 6.94 Diluted $ 15.15 $ 9.08 $ 6.78 Shares 6.94 Diluted $ 15.15 $ Net income 0 0 6,119 0 6,119 Change income : Net income 0 0 6,119 0 6,119 Change in : Net income 0 0 6,119 0 6,119 Change in foreign Net income 0 0 6,119 0 6,119 Change in foreign currency income 0 0 6,119 0 6,119 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 28 ) in foreign currency translation 0 0 0 ( 28 ) ( foreign currency translation 0 0 0 ( 28 ) ( 28 translation 0 0 0 ( 28 ) ( 28 ) Change 0 ( 28 ) ( 28 ) Change in unrealized loss security , net of tax 0 0 0 ( Net income 0 0 8,235 0 8,235 Change income : Net income 0 0 8,235 0 8,235 Change in : Net income 0 0 8,235 0 8,235 Change in foreign Net income 0 0 8,235 0 8,235 Change in foreign currency income 0 0 8,235 0 8,235 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 14 ) in foreign currency translation 0 0 0 ( 14 ) ( foreign currency translation 0 0 0 ( 14 ) ( 14 translation 0 0 0 ( 14 ) ( 14 ) Change 0 ( 14 ) ( 14 ) Change in unrealized loss security , net of tax 0 0 0 11 Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gain translation 0 0 0 7 7 Net income Operating activity : Net income 14,013 8,235 6,119 Adjustments to reconcile activity : Net income 14,013 8,235 6,119 Adjustments to reconcile net : Net income 14,013 8,235 6,119 Adjustments to reconcile net income Depreciation , amortization and accretion 1,027 734 496 Stock-based compensation expense , amortization and accretion 1,027 734 496 Stock-based compensation expense 879 amortization and accretion 1,027 734 496 Stock-based compensation expense 879 710 734 496 Stock-based compensation e Net income amount ) : 2010 2009 2008 Numerator : Net income $ Numerator : Net income $ 14,013 $ 8,235 $ 6,119 Denominator Net income $ 14,013 $ 8,235 $ 6,119 Denominator : Weighted-average $ 14,013 $ 8,235 $ 6,119 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 909,461 893,016 881,592 Effect of dilutive : Weighted-average share outstanding 909,461 893,016 881,592 Effect of dilutive security Weighted-average share outstanding 909,461 893,016 881,592 Effect net income ( 73 ) ( 222 ) 12 income ( 73 ) ( 222 ) 12 Change in unrecognized 73 ) ( 222 ) 12 Change in unrecognized gains/losses on on derivative instrument $ ( 253 ) $ ( 18 ) ( 253 ) $ ( 18 ) $ 19 The tax $ ( 18 ) $ 19 The tax effect related to value of derivative wa $ 97 million , $ ( 135 97 million , $ ( 135 ) million and $ ( ) million and $ ( 5 ) million for 2010 , ( 5 ) million for 2010 , 2009 and 2008 , ) million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The net income wa $ 43 million , $ 149 million $ 43 million , $ 149 million and $ ( 9 149 million and $ ( 9 ) million for 2010 , ( 9 ) million for 2010 , 2009 and 2008 , ) million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the \u201c 2003 Plan \u201d ) is a including executive officer . The 2003 Plan permit the granting Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 Net income $ $ 3,983 $ 3,627 $ 4,507 Net income $ 2,532 $ $ 4,507 Net income $ 2,532 $ 1,828 $ 1,620 $ Net income $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings per common $ 1,828 $ 1,620 $ 2,255 Earnings per common share : common share : Basic $ 2.82 $ 2.05 $ 1.82 $ : Basic $ 2.82 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.82 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.77 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.77 $ 2.01 1.82 $ 2.54 Diluted $ 2.77 $ 2.01 $ 1.79 $ 2.54 Diluted $ 2.77 $ 2.01 $ 1.79 ", + "assets": "Assets s capital expenditure were $ 2.6 billion during 2010 , consisting were $ 2.6 billion during 2010 , consisting of approximately $ , consisting of approximately $ 404 million for retail store facility retail store facility and $ 2.2 billion for other capital expenditure payment for capital expenditure during 2010 were $ 2 billion . expenditure during 2010 were $ 2 billion . The Company anticipates Company anticipates utilizing approximately $ 4.0 billion for capital expenditure during billion for ASSETS September 25 , 2010 September 26 , 2009 ASSETS : Current , 2010 September 26 , 2009 ASSETS : Current asset : Cash and cash equivalent $ 11,261 $ 5,263 Short-term marketable security cash equivalent $ 11,261 $ 5,263 Short-term marketable security 14,359 18,201 $ 5,263 Short-term marketable security 14,359 18,201 Accounts receivable , le 5,263 Short-term marketable security 14,359 18,201 Accounts receivable , le allowance , le allowance of $ 55 and $ 52 , respectively of $ 55 and $ 52 , respectiv Assets record any significant impairment during 2010 , 2009 and 2008 . significant impairment during 2010 , 2009 and 2008 . The Company during 2010 , 2009 and 2008 . The Company doe not test on or about August 31 of each year . The intangible asset impairment charge in 2010 , 2009 and 2008 . impairment charge in 2010 , 2009 and 2008 . The Company in 2010 , 2009 and 2008 . The Company established reporting three to ten year . 56 Table of Contents Fair Value Contents Fair Value Measurements During 2009 Assets : Cash equivalent $ 2,753 $ 6,818 $ 0 $ Cash equivalent $ 2,753 $ 6,818 $ 0 $ 9,571 Short-term $ 2,753 $ 6,818 $ 0 $ 9,571 Short-term marketable security $ 6,818 $ 0 $ 9,571 Short-term marketable security 0 14,359 $ 9,571 Short-term marketable security 0 14,359 0 14,359 Long-term marketable 9,571 Short-term marketable security 0 14,359 0 14,359 Long-term marketable security Short-term marketable security 0 14,359 0 14,359 Long-term marketable security 0 marketable security 0 14,359 0 14,359 Lon Assets : Cash equivalent $ 1,608 $ 2,516 $ 0 $ Cash equivalent $ 1,608 $ 2,516 $ 0 $ 4,124 Short-term $ 1,608 $ 2,516 $ 0 $ 4,124 Short-term marketable security $ 2,516 $ 0 $ 4,124 Short-term marketable security 0 18,201 $ 4,124 Short-term marketable security 0 18,201 0 18,201 Long-term marketable 4,124 Short-term marketable security 0 18,201 0 18,201 Long-term marketable security Short-term marketable security 0 18,201 0 18,201 Long-term marketable security 0 marketable security 0 18,201 0 18,201 Lon", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 75,183 $ 47,501 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 Total expense 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 5,723 3,852 Deferred revenue 2,984 2,053 Total curre Liabilities $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities : Foreign $ 46,675 $ 0 $ 49,560 Liabilities : Foreign exchange contract : Foreign exchange contract $ 0 $ 606 $ 0 $ exchange contract $ 0 $ 606 $ 0 $ 606 64 $ 0 $ 606 $ 0 $ 606 64 Table of $ 606 $ 0 $ 606 64 Table of Contents September 606 $ 0 $ 606 64 Table of Contents September 26 64 Table of Contents September 26 , 2009 Quoted Prices in of Contents September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant O Liabilities $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities : Foreign $ 31,282 $ 0 $ 32,951 Liabilities : Foreign exchange contract : Foreign exchange contract $ 0 $ 25 $ 0 $ exchange contract $ 0 $ 25 $ 0 $ 25 ( $ 0 $ 25 $ 0 $ 25 ( a ) $ 25 $ 0 $ 25 ( a ) The total Balance Sheet a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Quoted Prices in Liabilities $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities : Other $ 46,675 $ 0 $ 49,560 Liabilities : Other current liability : Other current liability $ 0 $ 606 $ 0 $ current liability $ 0 $ 606 $ 0 $ 606 65 $ 0 $ 606 $ 0 $ 606 65 Table of $ 606 $ 0 $ 606 65 Table of Contents September 606 $ 0 $ 606 65 Table of Contents September 26 65 Table of Contents September 26 , 2009 Quoted Prices in of Contents September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other O Liabilities $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities : Other $ 31,282 $ 0 $ 32,951 Liabilities : Other current liability : Other current liability $ 0 $ 25 $ 0 $ current liability $ 0 $ 25 $ 0 $ 25 ( $ 0 $ 25 $ 0 $ 25 ( a ) $ 25 $ 0 $ 25 ( a ) The total related carrying amount . Note 4 \u2013 Consolidated Financial Statement Details statement detail a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2 Liabilities 2010 accrued expense $ 5,723 $ 3,852 Non-Current Liabilities 2010 2009 Deferred 5,723 $ 3,852 Non-Current Liabilities 2010 2009 Deferred tax liability $ $ 3,852 Non-Current Liabilities 2010 2009 Deferred tax liability $ 4,300 2009 Deferred tax liability $ 4,300 $ 2,216 Other non-current liability tax liability $ 4,300 $ 2,216 Other non-current liability 1,231 1,286 $ 2,216 Other non-current liability 1,231 1,286 Total other non-current liability 2,216 Other non-current liability 1,231 1,286 Tot", + "equity": "equity $ Total shareholder \u2019 equity $ 47,791 $ 31,640 $ 22,297 $ \u2019 equity $ 47,791 $ 31,640 $ 22,297 $ 14,531 $ $ 47,791 $ 31,640 $ 22,297 $ 14,531 $ 9,984 ( $ 31,640 $ 22,297 $ 14,531 $ 9,984 ( a ) $ 22,297 $ 14,531 $ 9,984 ( a ) The Company the five year ended September 25 , 2010 . Long-term obligation year ended September 25 , 2010 . Long-term obligation excludes non-current excludes non-current deferred revenue . 26 Table of Contents Item 7 26 Table of Contents Item 7 . Management \u2019 s Discussion o EQUITY liability : Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 Total expense 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 11,506 2,984 2,053 Total current liability 20,722 11,506 Deferred equity 47,791 77 Total shareholder \u2019 equity 47,791 31,640 Total liability and shareholder Total shareholder \u2019 equity 47,791 31,640 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 75,183 $ 47,501 See accompanying Notes \u2019 equity $ 75,183 $ 47,501 See accompanying Notes to Consolidated to Consolidated Financial Statements . 47 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 29 , 2007 872,329 $ 5,368 a of September 29 , 2007 872,329 $ 5,368 $ 9,100 of September 29 , 2 equity award ( 406 ) ( 82 ) ( award ( 406 ) ( 82 ) ( 124 ) Cash ) ( 82 ) ( 124 ) Cash generated by financing Cash generated by financing activity 1,257 663 1,116 Increase/ ( decrease generated by financing activity 1,257 663 1,116 Increase/ ( decrease ) by financing activity 1,257 663 1,116 Increase/ ( decrease ) in in cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent , end of the year $ Equity Compensation \u201d of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 6 , \u201c Income Taxes \u201d Taxes \u201d of this Form 10-K for additional information . Earnings security had been issued . 54 Table of Contents Potentially dilutive the three year ended September 25 , 2010 ( in thousand year ended September 25 , 2010 ( in thousand , except per share amount ) : 2010 2009 2008 Numerator : Net share amount ) : 2010 2009 2008 Num Equity Compensation \u201d of this Form 10-K , which summarizes the activity \u2019 s customer accounted for 15 % and 12 % of accounted for 15 % and 12 % of trade receivables a trade receivables a of September 25 , 2010 and one of a of September 25 , 2010 and one of the Company \u2019 s customer accounted for 16 % of trade receivables a trade receivables a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company \u2019 s cellular network carrier accounted for 64 % and 51 % of accounted for 64 % and 51 equity 0 17,442 Municipal security 0 1,917 0 1,917 Marketable equity security 17,442 Municipal security 0 1,917 0 1,917 Marketable equity security 132 Municipal security 0 1,917 0 1,917 Marketable equity security 132 0 0 1,917 Marketable equity security 132 0 0 132 Foreign exchange 1,917 Marketable equity security 132 0 0 132 Foreign exchange contract Marketable equity security 132 0 0 132 Foreign exchange contract 0 equity security 132 0 0 132 Foreign exchange contract 0 107 0 132 Foreign exchange co equity 0 9,786 Municipal security 0 504 0 504 Marketable equity security 9,786 Municipal security 0 504 0 504 Marketable equity security 61 Municipal security 0 504 0 504 Marketable equity security 61 0 0 504 Marketable equity security 61 0 0 61 Foreign exchange 504 Marketable equity security 61 0 0 61 Foreign exchange contract Marketable equity security 61 0 0 61 Foreign exchange contract 0 equity security 61 0 0 61 Foreign exchange contract 0 37 0 61 Foreign exchange contract 0 37 0 37 Total asset 6 Equity and s other comprehensive income consists 70 Table of Contents of foreign the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Net unrealized gains/losses in million ) : 2010 2009 2008 Net unrealized gains/losses on million ) : 2010 2009 2008 Net unrealized gains/losses on marketable gains/losses on marketable security $ 171 $ 48 $ ( 70 marketable security $ 171 $ 48 $ ( 70 ) Net 171 $ 48 $ ( 70 ) Net unrecognized ", + "cash_flow": "cash flow $ Annual operating cash flow $ 18,595 $ 10,159 $ 9,596 As cash flow $ 18,595 $ 10,159 $ 9,596 As of September $ 18,595 $ 10,159 $ 9,596 As of September 25 , $ 9,596 As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had $ , the Company had $ 51 billion in cash , cash , an increase of $ 17 billion from September 26 , $ 17 billion from September 26 , 2009 . The principal billion from September 26 , 2009 . The principal component of by operating activity of $ 18.6 bill cash flow $ 11,261 $ 5,263 $ 11,875 Supplemental cash flow disclosure : income tax , net $ 2,697 $ 2,997 $ 1,267 See , net $ 2,697 $ 2,997 $ 1,267 See accompanying Notes $ 2,697 $ 2,997 $ 1,267 See accompanying Notes to Consolidated to Consolidated Financial Statements . 49 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 \u2013 Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company \u2019 s fiscal year 201 cash flow hedge during 2010 , 2009 and 2008 . flow hedge during 2010 , 2009 and 2008 . The Company during 2010 , 2009 and 2008 . The Company had an net investment hedge of $ 9 million and $ 2 million $ 9 million and $ 2 million , net of tax \u201d ) a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . The ineffective a net loss of $ 123 million and $ 133 million $ 123 million Cash flow hedge , 2010 September 26 , 2009 Cash flow hedge : Foreign Foreign exchange contract $ ( 267 ) $ 338 $ 115 $ ( 267 ) $ 338 $ 115 $ 370 Other 267 ) $ 338 $ 115 $ 370 Other income and $ 338 $ 115 $ 370 Other income and expense $ income and expense $ ( 175 ) $ ( 97 ) ( 175 ) $ ( 97 ) Net investment hedge : : Foreign exchange contract ( 41 ) ( 44 ) 0 contract ( 41 ) ( 44 ) 0 0 Other income 41 ) ( 44 ) 0 0 Other income and expense ) ( 44 ) 0 0 Other income and expense 1 0 Other income and expense 1 ", + "gross_margin": "gross margin percentage in 2009 consistent with that experienced by since it inception totaled $ 2.2 billion through the end of billion through the end of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Retail As of September 25 , 2010 , the Retail segment had the Retail segment had approximately 26,500 full-time equivalent employee and had and related facility of $ 1.7 billion . The Company would condition and operating result . 37 Table of Contents Gross Margin the three year ended Septem gross margin percentage ) : 2010 2009 2008 Net sale $ margin percentage ) : 2010 2009 2008 Net sale $ 65,225 percentage ) : 2010 2009 2008 Net sale $ 65,225 $ 2009 2008 Net sale $ 65,225 $ 42,905 $ 37,491 Cost Net sale $ 65,225 $ 42,905 $ 37,491 Cost of sale $ 65,225 $ 42,905 $ 37,491 Cost of sale 39,541 25,683 $ 37,491 Cost of sale 39,541 25,683 24,294 Gross margin $ 37,491 Cost of sale 39,541 25,683 24,294 Gross margin $ 25,684 Cost of sale 39,541 25,683 24,294 Gross margin $ 25,684 $ 25,683 24,294 Gross Gross margin $ 25,684 $ 17,222 $ 13,197 Gross margin percentage $ 25,684 $ 17,222 $ 13,197 Gross margin percentage 39.4 % $ 13,197 Gross margin percentage 39.4 % 40.1 % 35.2 % Gross margin percentage 39.4 % 40.1 % 35.2 % The gross percentage 39.4 % 40.1 % 35.2 % The gross margin percentage The gross margin percentage in 2010 wa 39.4 % compared to margin percentage in 2010 wa 39.4 % compared to 40.1 % wa 39.4 % compared to 40.1 % in 2009 . This compared to 40.1 % in 2009 . This decline in gross The gross mar gross margin level gross margin level of about 36 % in the first quarter in the first quarter of 2011 . This expected decline is in Part I , Item 1A , \u201c Risk Factors \u201d the three year ended September 25 , 2010 , are a year ended September 25 , 2010 , are a follows ( except for percentage ) : 2010 2009 2008 Research and development for percentage ) : 2010 2009 2008 Research and development $ percentage ) : 2010 2009 2008 Research and development $ 1,782 2008 Research and development $ 1,782 $ 1,333 $ 1,109 Pe Gross margin 25,684 37,491 Cost of sale 39,541 25,683 24,294 Gross margin 25,684 17,222 Cost of sale 39,541 25,683 24,294 Gross margin 25,684 17,222 13,197 39,541 25,683 24,294 Gross margin 25,684 17,222 13,197 Operating expense : 25,683 24,294 Gross margin 25,684 17,222 13,197 Operating expense : Research 24,294 Gross margin 25,684 17,222 13,197 Operating expense : Research and expense : Research and development 1,782 1,333 1,109 Selling , general : Research and development 1,782 1,333 1,109 Selling , gene Gross margin $ $ 15,700 $ 13,499 $ 15,683 Gross margin $ 7,512 $ $ 15,683 Gross margin $ 7,512 $ 6,136 $ 5,625 $ Gross margin $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 Gross margin $ $ 9,734 $ 9,084 $ 11,880 Gross margin $ 5,105 $ $ 11,880 Gross margin $ 5,105 $ 3,983 $ 3,627 $ Gross margin $ 5,105 $ 3,983 $ 3,627 $ 4,507 Net $ 5,105 $ 3,983 $ 3,627 $ 4,507 Net income $ $ 3,983 $ 3,627 $ 4,507 Net income $ 2,532 $ $ 4,507 Net income $ 2,532 $ 1,828 $ 1,620 $ Net income $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings per common $ 1,828 $ 1,620 $ 2,255 Earnings per common share : common share : Basic $ 2.82 $ 2.05 $ 1.82 $ : Basic $ 2.82 $ ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 7,234 4,667 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 2,466 ) ( 1,713 ) Net amortization ( 2,466 ) ( 1,713 ) Net property , plant , plant and equipment $ 4,768 $ 2,954 Accrued Expenses 2010 and equipment $ 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related cost warranty and related", + "capital_expenditure": "capital expenditure were $ 2.6 billion during 2010 , consisting were $ 2.6 billion during 2010 , consisting of approximately $ , consisting of approximately $ 404 million for retail store facility retail store facility and $ 2.2 billion for other capital expenditure payment for capital expenditure during 2010 were $ 2 billion . expenditure during 2010 were $ 2 billion . The Company anticipates Company anticipates utilizing approximately $ 4.0 billion for capital expenditure during billion for capital expenditure d", + "earnings_per_share": "earnings per share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted per share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 877,526 Total 881,592 864,595 844,058 Diluted 924,712 earnings per share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 per share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes to 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 earnings per share . 82 Table of Contents Report of Apple Inc. a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , and the 2010 and September 26 , 2009 , and the related consolidated of Apple Inc. at September 25 , 2010 and September 26 Inc. at September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , and the 2010 and September 26 , 2009 , and the consolidated result financial reporting a of September 25 , 2010 , base", + "tax_rate": "tax rate were 24 % , 32 % and rate were 24 % , 32 % and 32 % for % , 32 % and 32 % for 2010 , 2009 % and 32 % for 2010 , 2009 and 2008 , 32 % for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The Company federal income tax rate of 35 % due 39 Table of rate of 35 % due 39 Table of Contents primarily to lower effective tax rate in 2010 a compared to 2009 is in 2010 a compared to 2009 is due primarily to an the U.S. As of September 25 , 2010 , the Company As of September 2 tax rate ( 35 % in 2010 , 2009 rate ( 35 % in 2010 , 2009 and 2008 ) 35 % in 2010 , 2009 and 2008 ) to income in 2010 , 2009 and 2008 ) to income before provision the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( ( in million ) : 2010 2009 2008 Computed expected tax in million ) : 2010 2009 2008 Computed expected tax $ million ) : 2010 2009 2008 Computed expected tax $ 6,489 2008 Computed expected tax $ 6,489 $ 4,223 $ 3,131 State expected tax $ 6,489 $ 4,22 tax rate $ 4,527 $ 3,831 $ 2,828 Effective tax rate 24 % $ 2,828 Effective tax rate 24 % 32 % 32 % Effective tax rate 24 % 32 % 32 % The Company rate 24 % 32 % 32 % The Company \u2019 s stock plan award of $ 742 million , $ 246 million $ 742 million , $ 246 million and $ 770 million $ 246 million and $ 770 million in 2010 , 2009 and $ 770 million in 2010 , 2009 and 2008 , 770 million in 2010 , 2009 and 2008 , respectively , in 2010 , 2009 and 2008 , respectively , which were benefit that is greater than 50 % tax rate . 69 Table of Contents The aggregate the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( ( in million ) : 2010 2009 2008 Beginning Balance $ in million ) : 2010 2009 2008 Beginning Balance $ 971 million ) : 2010 2009 2008 Beginning Balance $ 971 506 2009 2008 Beginning Balance $ 971 506 $ 475 Increases related 2008 Beginning Balance $ 971 506 $ 475 Increases related to Balance $ 971 506 $ 475 Increases related to tax position taken during a prior year", + "geographic_information": "geographic marketplace . Approximately 44 % of the Company \u2019 \u2019 s net sale in 2010 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , \u201c Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 9 Table of Contents Environmental Laws . Employees As of September 25 , 2010 , the Company As of geographic segment during 2009 compared to the same period to the same period in 2008 . The Company belief this above , net sale during 2009 were negatively impacted by certain sale of iPods decreased $ 1.1 billion or 12 % during decreased $ 1.1 billion or 12 % during 2009 compared to billion or 12 % during 2009 compared to 2008. iPod unit % during 2009 compared to 2008. iPod unit sale decreased by iPod unit sale decreased by 1 % during 2009 compared to decreased by 1 % during 2009 compared to 2008 . Net Geographic a the Middle East and 78 Table of Contents Africa . operates Apple retail store in 11 country , including the U.S. a those described in Note 1 , \u201c Summary of Significant the Retail segment were $ 392 million , $ 369 million $ 392 million , $ 369 million and $ 389 million $ 369 million and $ 389 million for 2010 , 2009 and $ 389 million for 2010 , 2009 and 2008 , 389 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The Company had opened a total of 15 h", + "common_stock": "Common Stock Issued and Outstanding a of October 15 , 2010 DOCUMENTS INCORPORATED BY a of October 15 , 2010 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2011 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-lookin Common stock 6,047 Stock-based compensation 0 513 0 0 513 Common stock issued Stock-based compensation 0 513 0 0 513 Common stock issued under compensation 0 513 0 0 513 Common stock issued under stock share withheld for employee tax 15,888 460 ( 101 ) 0 withheld for employee tax 15,888 460 ( 101 ) 0 359 employee tax 15,888 460 ( 101 ) 0 359 Issuance of 15,888 460 ( 101 ) 0 359 Issuance of common stock 460 ( 101 ) 0 359 Issuance of common stock in connection with an asset acquisition 109 21 0 0 21 Tax with Common stock 8,321 Stock-based compensation 0 707 0 0 707 Common stock issued Stock-based compensation 0 707 0 0 707 Common stock issued under compensation 0 707 0 0 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) 0 withheld for employee tax 11,480 404 ( 11 ) 0 393 employee tax 11,480 404 ( 11 ) 0 393 Tax benefit 11,480 404 ( 11 ) 0 393 Tax benefit from employee 404 ( 11 ) 0 393 Tax benefit from employee stock , including transfer pricing adjustment 0 ( 78 ) 0 0 transfe Common stock 13,890 Stock-based compensation 0 876 0 0 876 Common stock issued Stock-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from employee 703 ( 197 ) 0 506 Tax benefit from employee stock , including transfer pricing adjustment 0 879 0 0 879 common stock 912 475 483 Excess tax benefit issuance of common stock 912 475 483 Excess tax benefit from of common stock 912 475 483 Excess tax benefit from stock-based tax benefit from stock-based compensation 751 270 757 Taxes paid related benefit from stock-based compensation 751 270 757 Taxes paid related to from stock-based compensation 751 270 757 Taxes paid related to net settlement of equity award ( 406 ) ( 82 ) ( award ( 406 ) ( 82 ) ( 124 ) Cash ) ( 82 ) ( 124 ) Cash generated by financing Cash ge common stock share of common stock for 2010 , 2009 and 2008 , common stock for 2010 , 2009 and 2008 , respectively , for 2010 , 2009 and 2008 , respectively , were excluded with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term the hedged item attributable to 55 Table of Contents the hedged on these derivative instrument during 2010 , 2009 and 2008 . derivative instrument during 2010 , 2009 and 2008 . The net during 2010 , 2009 a", + "fair_value_measurements": "Fair Value Measurements During 2009 , the Company adopted the During the first quarter of 2010 , the Company adopted the . Business Combinations In December 2007 , the FASB issued a disclosure requirement . In April 2009 , the FASB amended this in the first quarter of 2010 and applied these principle to after the first quarter of 2010 . The adoption of the condition or operating result . 57 Table of Contents Note 2 57 Table of Contents Note 2 \u2013 Financial Instruments Cash , marketable security a of September 25 , 2010 Fair Value Measurements Measurements \u201d of this Form 10-K , for additional information on Balance Sheets a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Fair Value of ) : September 25 , 2010 Fair Value of Derivatives Designated : Foreign exchange contract $ 62 $ 45 $ 107 Derivative exchange contract $ 62 $ 45 $ 107 Derivative liability ( $ 62 $ 45 $ 1 Fair Value Measurements The fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than asset or liability . Level 3 \u2013 Inputs that are generally recurring basis a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Quoted Prices in ) : September 25 , 2010 Quoted Prices in Active Markets for Identical" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-11-282113/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-11-282113/full-submission_features.json new file mode 100644 index 0000000..02016e5 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-11-282113/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue . 24 Item 7 . Management \u2019 deferred revenue . 24 Item 7 . Management \u2019 s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is iPod touch . In January 2011 , the Company opened the software and online service . 25 The Company us a variety and Thailand Flooding On March 11 , 2011 , the northeast Flooding On March 11 , 2011 , the northeast coast of revenue . The Company opened 40 new retail store during 2011 40 new retail store during 2011 , 28 of which were retail store during 2011 , 28 of which were outside the , ending the year with 357 store open compared to 317 357 store open compared to 317 store at the end of store at the end of 2010 . As of September 24 2010 . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had a Company had a total of 245 U.S. retail store and 112 245 U.S. retail store and 112 internationa revenue per average revenue per store increased 27 % to $ 43.3 million increased 27 % to $ 43.3 million in 2011 compared to to $ 43.3 million in 2011 compared to $ 34.1 million in 2011 compared to $ 34.1 million in 2010 . The to $ 34.1 million in 2010 . The Retail segment represented . The Retail segment represented 13 % and 15 % of segment represented 13 % and 15 % of total net sale of total net sale in 2011 and 2010 , respectively . net sale in 2011 and 2010 , respectively . Retail net Retail net sal revenue . The Company opened 44 new retail store during 2010 44 new retail store during 2010 , 28 of which were retail store during 2010 , 28 of which were outside the , ending the year with 317 store open compared to 273 317 store open compared to 273 store at the end of store at the end of 2009 . With an average of . With an average of 288 store and 254 store opened average of 288 store and 254 store opened during 2010 and and 254 store opened during 2010 and 2009 , respectively , store opened during revenue per store increased to $ 34.1 million in 2010 , compared to $ 34.1 million in 2010 , compared to $ 26.2 2010 , compared to $ 26.2 million in 2009 . The to $ 26.2 million in 2009 . The Retail segment represented . The Retail segment represented 15 % and 16 % of segment represented 15 % and 16 % of the Company \u2019 s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . The Retail reported operating income of $ 3.3 billion during 2011 compared to of $ 3.3 billio revenue per store during 2011 compared to 2010 . The store during 2011 compared to 2010 . The Retail segment reported reported operating income of $ 1.7 billion during 2009 . The of $ 1.7 billion during 2009 . The increase in Retail in Retail operating income during 2010 compared to 2009 wa attributable income during 2010 compared to 2009 wa attributable to higher overall segment since inception totaled $ 2.8 billion through the end of billion through the end of 2011 . As of September 24 2011 . As of S revenue 4,091 2,984 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 Total expense 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 20,722 4,091 2,984 Total current liability 27,970 20,722 Deferred revenue \u2013 non-current 2,984 Total current liability 27,970 20,722 Deferred revenue \u2013 non-current 1,686 20,722 Deferred revenue \u2013 non-current 1,686 1,139 Other non-current liability 10,100 Deferred revenue \u2013 non-current 1,686 1,139 Other non-current liability 10,100 5,531 1,686 1,139 Other non-current liability 10,100 5,531 Total liability 39,756 27,392 1,139 Other non-current liability 10,100 5,531 Total liability 39,756 27,392 Commitments liability 10,100 5,531 Total liability 39,756 27,392 Commitments and contingency Shareholders 10,100 5,531 Total liability 39,756 27,392 Commitments and contingency Shareholders \u2019 , no par value ; 1,800,000 share authorized ; 929,277 and ; 1,800,000 share auth revenue 1,654 713 ) Accounts payable 2,515 6,307 92 Deferred revenue 1,654 1,217 ) Accounts payable 2,515 6,307 92 Deferred revenue 1,654 1,217 521 2,515 6,307 92 Deferred revenue 1,654 1,217 521 Other current and 6,307 92 Deferred revenue 1,654 1,217 521 Other current and non-current 92 Deferred revenue 1,654 1,217 521 Other current and non-current liability Other current and non-current liability 4,495 778 ( 161 ) Cash current and non-current liability 4,495 778 ( 161 ) Cash generated non-current lia revenue and recognizes it ratably over 36 month . Shipping Costs For any software development cost during 2011 and 2010 . In 2009 development cost during 2011 and 2010 . In 2009 , the 2011 and 2010 . In 2009 , the Company capitalized $ , the Company capitalized $ 71 million of cost associated with of Mac OS X Version 10.6 Snow Leopard ( \u201c Mac during the fourth quarter of 2009 . The capitalized cost are software development cost wa $ 30 million , $ 48 million $ 30 million , $ 48 million and $ 25 million", + "expenses": "Expenses 2011 and equipment $ 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component sale margin on component sale $ 2,038 $ 663 Accrued warranty and component sale $ 2,038 $ 663 Accrued warranty and related cost Accrued warranty and related cost 1,240 761 Accrued tax 1,140 658 warranty and related cost 1,240 761 Accrued tax 1,140 658 Accrued cost 1,240 761 Accrued tax 1,140 6", + "net_income": "Net income $ $ 42,905 $ 37,491 $ 24,578 Net income $ 25,922 $ $ 24,578 Net income $ 25,922 $ 14,013 $ 8,235 $ Net income $ 25,922 $ 14,013 $ 8,235 $ 6,119 $ $ 25,922 $ 14,013 $ 8,235 $ 6,119 $ 3,495 Earnings $ 14,013 $ 8,235 $ 6,119 $ 3,495 Earnings per common $ 8,235 $ 6,119 $ 3,495 Earnings per common share : common share : Basic $ 28.05 $ 15.41 $ 9.22 $ : Basic $ 28.05 $ 15.41 $ 9.22 $ 6.94 $ $ 28.05 $ 15.41 $ 9.22 $ 6.94 $ 4.04 Diluted $ 15.41 $ 9.22 $ 6.94 $ 4.04 Diluted $ 27.68 $ 9.22 $ 6.94 $ 4.04 Net income $ Provision for income tax 8,283 4,527 3,831 Net income $ 25,922 for income tax 8,283 4,527 3,831 Net income $ 25,922 $ 4,527 3,831 Net income $ 25,922 $ 14,013 $ 8,235 Earnings Net income $ 25,922 $ 14,013 $ 8,235 Earnings per common $ 25,922 $ 14,013 $ 8,235 Earnings per common share : common share : Basic $ 28.05 $ 15.41 $ 9.22 Diluted : Basic $ 28.05 $ 15.41 $ 9.22 Diluted $ 27.68 $ 28.05 $ 15.41 $ 9.22 Diluted $ 27.68 $ 15.15 15.41 $ 9.22 Diluted $ 27.68 $ 15.15 $ 9.08 Shares 9.22 Diluted Net income 0 0 8,235 0 8,235 Change income : Net income 0 0 8,235 0 8,235 Change in : Net income 0 0 8,235 0 8,235 Change in foreign Net income 0 0 8,235 0 8,235 Change in foreign currency income 0 0 8,235 0 8,235 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 14 ) in foreign currency translation 0 0 0 ( 14 ) ( foreign currency translation 0 0 0 ( 14 ) ( 14 translation 0 0 0 ( 14 ) ( 14 ) Change 0 ( 14 ) ( 14 ) Change in unrealized gains/losses security , net of tax Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gains/losses translation 0 Net income 0 0 25,922 0 25,922 Change income : Net income 0 0 25,922 0 25,922 Change in : Net income 0 0 25,922 0 25,922 Change in foreign Net income 0 0 25,922 0 25,922 Change in foreign currency income 0 0 25,922 0 25,922 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 12 ) in foreign currency translation 0 0 0 ( 12 ) ( foreign currency translation 0 0 0 ( 12 ) ( 12 translation 0 0 0 ( 12 ) ( 12 ) Change 0 ( 12 ) ( 12 ) Change in unrealized gains/losses security , n Net income Operating activity : Net income 25,922 14,013 8,235 Adjustments to reconcile activity : Net income 25,922 14,013 8,235 Adjustments to reconcile net : Net income 25,922 14,013 8,235 Adjustments to reconcile net income Depreciation , amortization and accretion 1,814 1,027 734 Share-based compensation expense , amortization and accretion 1,814 1,027 734 Share-based compensation expense 1,168 amortization and accretion 1,814 1,027 734 Share-based compensation expense 1,168 879 1,027 734 Share-based Net income amount ) : 2011 2010 2009 Numerator : Net income $ Numerator : Net income $ 25,922 $ 14,013 $ 8,235 Denominator Net income $ 25,922 $ 14,013 $ 8,235 Denominator : Weighted-average $ 25,922 $ 14,013 $ 8,235 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 924,258 909,461 893,016 Effect of dilutive : Weighted-average share outstanding 924,258 909,461 893,016 Effect of dilutive security Weighted-average share outstanding 924,258 909,461 893,016 Effe net income 450 ( 73 ) ( 222 in net income 450 ( 73 ) ( 222 ) Change 450 ( 73 ) ( 222 ) Change in unrecognized gains/losses gains/losses on derivative instrument $ 542 $ ( 253 ) $ instrument $ 542 $ ( 253 ) $ ( 18 ) ( 253 ) $ ( 18 ) The tax effect related of derivative wa $ ( 50 ) million , $ 97 50 ) million , $ 97 million and $ ( 135 97 million and $ ( 135 ) million for 2011 , ( 135 ) million for 2011 , 2010 and 2009 , ) million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respecti Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per common $ 7,308 $ 5,987 $ 6,004 Earnings per common share : common share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Basic $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6 Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 ", + "assets": "ASSETS September 24 , 2011 September 25 , 2010 ASSETS : Current , 2011 September 25 , 2010 ASSETS : Current asset : Cash and cash equivalent $ 9,815 $ 11,261 Short-term marketable security cash equivalent $ 9,815 $ 11,261 Short-term marketable security 16,137 14,359 $ 11,261 Short-term marketable security 16,137 14,359 Accounts receivable , le 11,261 Short-term marketable security 16,137 14,359 Accounts receivable , le allowance , le allowance of $ 53 and $ 55 , respectively of $ 53 and $ 55 , respect Assets record any significant impairment during 2011 , 2010 and 2009 . significant impairment during 2011 , 2010 and 2009 . The Company during 2011 , 2010 and 2009 . The Company doe not intangible asset impairment charge in 2011 , 2010 and 2009 . impairment charge in 2011 , 2010 and 2009 . The Company in 2011 , 2010 and 2009 . The Company established reporting fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than the asset or liability . 5", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 116,371 $ 75,183 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 Total expense 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 9,247 5,723 Deferred revenue 4,091 2,984 Total Liabilities 2011 accrued expense $ 9,247 $ 5,723 Non-Current Liabilities 2011 2010 Deferred 9,247 $ 5,723 Non-Current Liabilities 2011 2010 Deferred tax liability $ $ 5,723 Non-Current Liabilities 2011 2010 Deferred tax liability $ 8,159 2010 Deferred tax liability $ 8,159 $ 4,300 Other non-current liability tax liability $ 8,159 $ 4,300 Other non-current liability 1,941 1,231 $ 4,300 Other non-current liability 1,941 1,231 Total other non-current liability 4,300 Other non-current liability 1,941 1,231 Tot", + "equity": "equity $ Total shareholder \u2019 equity $ 76,615 $ 47,791 $ 31,640 $ \u2019 equity $ 76,615 $ 47,791 $ 31,640 $ 22,297 $ $ 76,615 $ 47,791 $ 31,640 $ 22,297 $ 14,531 ( $ 47,791 $ 31,640 $ 22,297 $ 14,531 ( a ) $ 31,640 $ 22,297 $ 14,531 ( a ) The Company the five year ended September 24 , 2011 . Long-term obligation year ended September 24 , 2011 . Long-term obligation exclude non-current exclude non-current deferred revenue . 24 Item 7 . Management \u2019 deferred revenue . 24 Item 7 . Management \u2019 s Discussion ot EQUITY liability : Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 Total expense 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 20,722 4,091 2,984 Total current liability 27,970 20,722 Defe equity ) Total shareholder \u2019 equity 76,615 47,791 Total liability and shareholder Total shareholder \u2019 equity 76,615 47,791 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 116,371 $ 75,183 See accompanying Notes \u2019 equity $ 116,371 $ 75,183 See accompanying Notes to Consolidated to Consolidated Financial Statements . 44 CONSOLIDATED STATEMENTS OF SHAREHOLDERS \u2019 Amount Balances a of September 27 , 2008 888,326 $ 7,177 a of September 27 , 2008 888,326 $ 7,177 $ 15,129 of September 27 , 2008 8 equity 404 ( 11 ) 0 393 Tax benefit from equity award , including transfer pricing adjustment 0 ( 78 ) 0 0 transfer pricing adjustment 0 ( 78 ) 0 0 ( 78 adjustment 0 ( 78 ) 0 0 ( 78 ) Balances 0 ( 78 ) 0 0 ( 78 ) Balances a 78 ) 0 0 ( 78 ) Balances a of September ) Balances a of September 26 , 2009 899,806 8,210 23,353 a of September 26 , 2009 899,806 8,210 23,353 77 31,640 of September 26 , 2009 899,806 8,210 23,353 77 31,640 Components September 26 , 2009 899,806 8,210 23,353 77 31,640 Components of equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Balances including transfer pricing adjustment 0 879 0 0 879 Balances a transfer pricing adjustment 0 879 0 0 879 Balances a of pricing adjustment 0 879 0 0 879 Balances a of September adjustment 0 879 0 0 879 Balances a of September 25 879 Balances a of September 25 , 2010 915,970 10,668 37,169 a of September 25 , 2010 915,970 10,668 37,169 ( 46 of September 25 , 2010 915,970 10,668 37,169 ( 4 equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 $ 13,331 a of September 24 , 2011 929,277 $ 13,331 $ 62,841 of September 24 , 2011 929,277 $ 13,331 $ 62,841 $ 24 equity tax benefit from equity award 1,133 751 270 Taxes paid related benefit from equity award 1,133 751 270 Taxes paid related to from equity award 1,133 751 270 Taxes paid related to net settlement of equity award ( 520 ) ( 406 ) ( award ( 520 ) ( 406 ) ( 82 ) Cash ) ( 406 ) ( 82 ) Cash generated by financing Cash generated by financing activity 1,444 1,257 663 ( Decrease ) generated by financing activity 1,444 1,257 663 ( Decrease ) /increase by financing activity 1,444 1,257 663 ( Decrease ) /inc Equity Compensation \u201d of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , \u201c Income Taxes \u201d Taxes \u201d of this Form 10-K for additional information . Earnings the three year ended September 24 , 2011 ( in thousand year ended September 24 , 2011 ( in thousand , except per share amount ) : 2011 2010 2009 Numerator : Net share amount ) : 2011 2010 2009 Numerator : Net income amount ) : 2011 2010 2009 Numerator : Net income Equity Compensation \u201d of this Form 10-K , which summarizes the activity arrangement . As of September 24 , 2011 , there were As of September 24 , 2011 , there were no customer no customer that accounted for 10 % or more of the \u2019 s customer accounted for 15 % and 12 % of accounted for 15 % and 12 % of total trade receivables trade receivables a of September 25 , 2010 . The Company a of September 25 , 2010 . The Company \u2019 s cellular network carrier accounted for 52 % and 64 % of accounted for 52 % and 6 equity award of $ 1.1 billion , $ 742 million $ 1.1 billion , $ 742 million and $ 246 million $ 742 million and $ 246 million in 2011 , 2010 and $ 246 million in 2011 , 2010 and 2009 , 246 million in 2011 , 2010 and 2009 , respectively , in 2011 , 2010 and 2009 , respectively , which were benefit that is greater than 50 % likely of being realized the Consolidated Balance Sheets . 63 As of September 24 , . 63 As of September 24 , 2011 , the total As of September 24 , 2011 , the total amount of unrecogn Equity and are recorded a an element 64 of shareholder \u2019 equity but tax , a of September 24 , 2011 , September 25 a of September 24 , 2011 , September 25 , 2010 24 , 2011 , September 25 , 2010 , and September 2011 , September 25 , 2010 , and September 26 , , 2010 , and September 26 , 2009 ( in million , and September 26 , 2009 ( in million ) : ( in million ) : 2011 2010 2009 Net unrealized gains/losses in million ) : 2011 2010 2009 Net unrealized gains/losses on million ) : 2011 2010 2009 Net unrealiz", + "cash_flow": "cash flow $ Annual operating cash flow $ 37,529 $ 18,595 $ 10,159 Cash cash flow $ 37,529 $ 18,595 $ 10,159 Cash , cash $ 37,529 $ 18,595 $ 10,159 Cash , cash equivalent and and marketable security increased $ 30.6 billion or 60 % during increased $ 30.6 billion or 60 % during 2011 . The billion or 60 % during 2011 . The principal component of by operating activity of $ 37.5 billion , which wa partially plant and equipment of $ 4.3 billion , payment for acquisition of intangible asset of $ 3.2 billion an cash flow $ 9,815 $ 11,261 $ 5,263 Supplemental cash flow disclosure : income tax , net $ 3,338 $ 2,697 $ 2,997 See , net $ 3,338 $ 2,697 $ 2,997 See accompanying Notes $ 3,338 $ 2,697 $ 2,997 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 \u2013 Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company \u2019 s cash flow hedge and net 56 investment hedge are recorded in flow hedge of approximately $ 290 million and a net deferred flow hedge of approximately $ 252 million , net of tax in AOCI a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . Deferred gain hedged transaction a of September 24 , 2011 are expected to a of September 24 , 2011 are expected to occur within discontin cash flow hedge during 2011 , 2010 and 2009 . flow hedge during 2011 , 2010 and 2009 . The Company during 2011 , 2010 and 2009 . The Company \u2019 s not significant a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . The ineffective a net loss of $ 158 million , $ 123 million $ 158 million , $ 123 million and $ 133 million $ 123 million and $ 133 million on foreign currency Cash flow hedge , 2011 September 25 , 2010 Cash flow hedge : Foreign : Foreign exchange contract $ 153 $ ( 267 ) $ contract $ 153 $ ( 267 ) $ ( 704 ) ( 267 ) $ ( 704 ) $ 115 Other income $ ( 704 ) $ 115 Other income and expense $ income and expense $ ( 213 ) $ ( 175 ) ( 213 ) $ ( 175 ) Net investment hedge : : Foreign exchange contract ( 43 ) ( 41 ) 0 contract ( 43 ) ( 41 ) 0 0 Other income 43 ) ( 41 ) 0 0 Other income and expense ) ( 41 ) 0 0 Other income and expense 1 0 Other income and expense 1 1 Tot", + "gross_margin": "Gross Margin Gross margin for the three year ended September 24 , 2011 , are a year ended September 24 , 2011 , are a follows ( gross margin percentage ) : 2011 2010 2009 Net sale $ margin percentage ) : 2011 2010 2009 Net sale $ 108,249 percentage ) : 2011 2010 2009 Net sale $ 108,249 $ 2010 2009 Net sale $ 108,249 $ 65,225 $ 42,905 Cost Net sale $ 108,249 $ 65,225 $ 42,905 Cost of sale $ 108,249 $ 65,225 $ 42,905 Cost of sale 64,431 39,541 $ 42,905 Cost of sale 64,431 39,541 25,683 Gross margin $ 42,905 C Gross margin $ 43,818 Cost of sale 64,431 39,541 25,683 Gross margin $ 43,818 $ 39,541 25,683 Gross margin $ 43,818 $ 25,684 $ 17,222 Gross Gross margin $ 43,818 $ 25,684 $ 17,222 Gross margin percentage $ 43,818 $ 25,684 $ 17,222 Gross margin percentage 40.5 % $ 17,222 Gross margin percentage 40.5 % 39.4 % 40.1 % Gross margin percentage 40.5 % 39.4 % 40.1 % The gross percentage 40.5 % 39.4 % 40.1 % The gross margin percentage The gross margin percentage in 2011 wa 40.5 % , compared margin percentage in 201 gross margin percentage in 2010 wa 39.4 % compared to margin percentage in 2010 wa 39.4 % compared to 40.1 % wa 39.4 % compared to 40.1 % in 2009 . This compared to 40.1 % in 2009 . This year-over-year decline in compared to level achieved during 2011 , largely due to a in Part I , Item 1A , \u201c Risk Factors \u201d the three year ended September 24 , 2011 , are a year ended September 24 , 2011 , are a follows ( except for percentage ) : 2011 2010 2009 Research and development for percentage ) : 2011 2010 2009 Rese Gross margin 43,818 42,905 Cost of sale 64,431 39,541 25,683 Gross margin 43,818 25,684 Cost of sale 64,431 39,541 25,683 Gross margin 43,818 25,684 17,222 64,431 39,541 25,683 Gross margin 43,818 25,684 17,222 Operating expense : 39,541 25,683 Gross margin 43,818 25,684 17,222 Operating expense : Research 25,683 Gross margin 43,818 25,684 17,222 Operating expense : Research and expense : Research and development 2,429 1,782 1,333 Selling , general : Research and development 2,429 1,782 1,333 Selling , gene Gross margin $ $ 28,571 $ 24,667 $ 26,741 Gross margin $ 11,380 $ $ 26,741 Gross margin $ 11,380 $ 11,922 $ 10,218 $ Gross margin $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per common $ 7,308 $ 5,987 $ 6,004 Earnings per common share : common share : Basic $ 7.13 $ 7.89 $ 6.49 $ Gross margin $ $ 15,700 $ 13,499 $ 15,683 Gross margin $ 7,512 $ $ 15,683 Gross margin $ 7,512 $ 6,136 $ 5,625 $ Gross margin $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 11,768 7,234 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 3,991 ) ( 2,466 ) Net amortization ( 3,991 ) ( 2,466 ) Net property , plant , plant and equipment $ 7,777 $ 4,768 Accrued Expenses 2011 and equipment $ 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component sale margin on componen", + "capital_expenditure": "capital expenditure were $ 4.6 billion during 2011 , consisting were $ 4.6 billion during 2011 , consisting of approximately $ , consisting of approximately $ 614 million for retail store facility retail store facility and $ 4.0 billion for other capital expenditure including product tooling and manufacturing 37 process equipment , real estate payment for capital expenditure during 2011 were $ 4.3 billion , expenditure during 2011 were $ 4.3 billion , of which $ billion , of which $ 612 million relates to retail s capital expenditure during billion for capital expenditure during 2012 , including approximately $ 900 2012 , including approximately $ 900 million for retail store facility store facility and approximately $ 7.1 billion for product tooling and software and enhancement . During 2012 , the Company expects to Company expects to open about 40 new retail store , approximately firm commitment a of September 24 , 2011 and excludes amount a of September 24 , 2011 and excludes amount already recorded Payments Due in Less ", + "debt": "debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term no fair value hedge in 2011 , 2010 and 2009 . value hedge in 2011 , 2010 and 2009 . The net in 2011 , 2010 and 2009 . The net gain or for all period presented . 52 Property , Plant and Equipment building is the lesser of 30 year or the remaining life property and equipment wa $ 1.6 billion , $ 815 million $ 1.6 billion , $ 815 million and $ 606 million $ 815 million an", + "earnings_per_share": "earnings per share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted per share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 889,292 Total 893,016 881,592 864,595 Diluted 936,645 earnings per share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 per share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes to 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes to Consolidated to Consolidated Financial Statements . 43 earnings per share . 75 Report of Ernst & Young Apple Inc. a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , and the 2011 and September 25 , 2010 , and the related consolidated in the period ended September 24 , 2011 . These financial period ended September 24 , 2011 . These financial statement are of Apple Inc. at September 24 , 2011 and September 25 Inc. at September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ,", + "tax_rate": "tax rate were approximately 24.2 % , 24.4 % and were approximately 24.2 % , 24.4 % and 31.8 % for % , 24.4 % and 31.8 % for 2011 , 2010 % and 31.8 % for 2011 , 2010 and 2009 , 31.8 % for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The Company federal income tax rate of 36 35 % due primarily to income tax rate of 36 35 % due primarily to certain the U.S. As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had deferred and tax credit of $ 3.2 tax rate ( 35 % in 2011 , 2010 rate ( 35 % in 2011 , 2010 and 2009 ) 35 % in 2011 , 2010 and 2009 ) to income in 2011 , 2010 and 2009 ) to income before provision the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( ( in million ) : 2011 2010 2009 Computed expected tax in million ) : 2011 2010 2009 Computed expected tax $ million ) : 2011 2010 2009 Computed expected tax $ 11,973 2009 Computed expected tax $ 11,973 $ 6,489 $ 4,223 State expected tax $ 11,973 $ 6 tax rate $ 8,283 $ 4,527 $ 3,831 Effective tax rate 24.2 % $ 3,831 Effective tax rate 24.2 % 24.4 % 31.8 % Effective tax rate 24.2 % 24.4 % 31.8 % The Company rate 24.2 % 24.4 % 31.8 % The Company \u2019 s from equity award of $ 1.1 billion , $ 742 million $ 1.1 billion , $ 742 million and $ 246 million $ 742 million and $ 246 million in 2011 , 2010 and $ 246 million in 2011 , 2010 and 2009 , 246 million in 2011 , 2010 and 2009 , respectively , in 2011 , 2010 and 2009 , respectively , which were benefit that", + "geographic_information": "Geographic Data . \u201d 2 Products The Company offer a and application . In October 2011 , the Company launched iPhone , the Company launched iPhone 4S , it latest version of and application . In March 2011 , the Company introduced iPad , the Company introduced iPad 2 , it second-generation iPad . or from third party . 3 The iPod touch , based and Windows-based computer . iTunes 10 is the latest version of Mac App Store In January 2011 , the Company opened the Store . iCloud In October 2011 , the Company laun geographic market . Approximately 39 % of the Company \u2019 \u2019 s net sale in 2011 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements in Note 8 , \u201c Segment Information and The Company also offer a 90-day basic warranty for it service is often reduced once customer 8 believe they can obtain sufficient . Employees As of September 24 , 2011 , the Company As of September 2 geographic segment . During 2011 , the combined net sale Store and iBookstore wa $ 5.4 billion , representing an increase , representing an increase of 33 % compared to 2010 . of 33 % compared to 2010 . The Company belief this product and service accounted for 6 % of the Company \u2019 s total net sale for 2011 . Partially offsetting the positive iPod net sale of $ 821 million or 10 % during of $ 821 million or 10 % during 2011 compared to million or 10 % during 2011 compared to 2010 . Similarly % during 2011 Geographic operates Apple retail store in 11 country . Each reportable operating a those described in Note 1 , \u201c Summary of Significant the Retail segment were $ 612 million , $ 392 million $ 612 million , $ 392 million and $ 369 million $ 392 million and $ 369 million for 2011 , 2010 and $ 369 million for 2011 , 2010 and 2009 , 369 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The Company had opened a total of 19 high-profile store a of September high-profile", + "common_stock": "Common Stock Issued and Outstanding a of October 14 , 2011 DOCUMENTS INCORPORATED BY a of October 14 , 2011 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2012 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-lookin Common stock 8,321 Share-based compensation 0 707 0 0 707 Common stock issued Share-based compensation 0 707 0 0 707 Common stock issued under compensation 0 707 0 0 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) 0 withheld for employee tax 11,480 404 ( 11 ) 0 393 employee tax 11,480 404 ( 11 ) 0 393 Tax benefit 11,480 404 ( 11 ) 0 393 Tax benefit from equity 404 ( 11 ) 0 393 Tax benefit from equity award , including transfer pricing adjustment 0 ( 78 ) 0 0 transfer pr Common stock 13,890 Share-based compensation 0 876 0 0 876 Common stock issued Share-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Bala Common stock 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 common stock 831 912 475 Excess tax benefit issuance of common stock 831 912 475 Excess tax benefit from of common stock 831 912 475 Excess tax benefit from equity tax benefit from equity award 1,133 751 270 Taxes paid related benefit from equity award 1,133 751 270 Taxes paid related to from equity award 1,133 751 270 Taxes paid related to net settlement of equity award ( 520 ) ( 406 ) ( award ( 520 ) ( 406 ) ( 82 ) Cash ) ( 406 ) ( 82 ) Cash generated by financing Cash generated by financing activity 1,44 common stock share of common stock for 2011 , 2010 and 2009 , common stock for 2011 , 2010 and 2009 , respectively , for 2011 , 2010 and 2009 , respectively , were excluded would have been antidilutive . 51 Financial Instruments Cash Equivalents and debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term no fair value hedge in 2011 , 2010 and 2009 . value hedge in 2011 , 2010 and 2009 . The net in 2011 , 2010 and 2009 . The net gai" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-12-444068/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-12-444068/full-submission_features.json new file mode 100644 index 0000000..b92b9c6 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-12-444068/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue . 24 Table of Contents Item 7 24 Table of Contents Item 7 . Management \u2019 s Discussion Results of Operations This Item 7 , \u201c Management \u2019 s other part of this Form 10-K contain forward-looking statement , within Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is a a leading innovator i revenue embedded software upgrade right . 30 Table of Contents Fiscal Year Table of Contents Fiscal Year 2012 versus 2011 Net sale during Contents Fiscal Year 2012 versus 2011 Net sale during 2012 increased versus 2011 Net sale during 2012 increased $ 48.3 billion or sale during 2012 increased $ 48.3 billion or 45 % compared increased $ 48.3 billion or 45 % compared to 2011 . or 45 % compared to 2011 . Several factor contributed positively including the addition of a 14 th week in the first in the firs revenue average revenue per store increased 19 % to $ 51.5 million increased 19 % to $ 51.5 million in 2012 compared to to $ 51.5 million in 2012 compared to $ 43.3 million in 2012 compared to $ 43.3 million in 2011 . Net to $ 43.3 million in 2011 . Net sale in the the Retail segment increased $ 4.3 billion or 44 % during increased $ 4.3 billion or 44 % during 2011 compared to billion or 44 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The increase in net sale . The Company open revenue per average revenue per store increased 27 % to 34 Table of store increased 27 % to 34 Table of Contents $ 43.3 34 Table of Contents $ 43.3 million in 2011 compared to Contents $ 43.3 million in 2011 compared to $ 34.1 million in 2011 compared to $ 34.1 million in 2010 . The to $ 34.1 million in 2010 . The Retail segment represented . The Retail segment represented 13 % and 15 % of segment represented 13 % and 15 % of the Company \u2019 s total net sale in 2011 and 2010 , respectively . net sale in revenue 5,953 4,091 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 Total expense 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 27,970 5,953 4,091 Total current liability 38,542 27,970 Deferred revenue - non-current 4,091 Total current liability 38,542 27,970 Deferred revenue - non-current 2,648 27,970 Deferred revenue - non-current 2,648 1,686 Other non-current liability 16,664 Deferr revenue - non-current 2,648 1,686 Other non-current liability 16,664 10,100 2,648 1,686 Other non-current liability 16,664 10,100 Total liability 57,854 39,756 1,686 Other non-current liability 16,664 10,100 Total liability 57,854 39,756 Commitments liability 16,664 10,100 Total liability 57,854 39,756 Commitments and contingency Shareholders 16,664 10,100 Total liability 57,854 39,756 Commitments and contingency Shareholders \u2019 , no par value ; 1,800,000 share authorized ; 939,208 and ; 1,800,000 share revenue 2,824 1,610 ) Accounts payable 4,467 2,515 6,307 Deferred revenue 2,824 1,654 ) Accounts payable 4,467 2,515 6,307 Deferred revenue 2,824 1,654 1,217 4,467 2,515 6,307 Deferred revenue 2,824 1,654 1,217 Other current and 2,515 6,307 Deferred revenue 2,824 1,654 1,217 Other current and non-current 6,307 Deferred revenue 2,824 1,654 1,217 Other current and non-current liability Other current and non-current liability 2,552 4,495 778 Cash generated by current and non-current liability 2,552 4,495 revenue between 48 Table of Contents these deliverable the three year ended September 29 , 2012 , the Company year ended September 29 , 2012 , the Company \u2019 s device have ranged from $ 5 to $ 25 . Revenue from $ 5 to $ 25 . Revenue allocated to such product \u2019 s technological feasibility 49 Table of Contents ha been were expensed a incurred during 2012 , 2011 and 2010 . a incurred during 2012 , 2011 and 2010 . Advertising Costs during 2012 , 2011 and 2010 . Advertising Costs Advertising cost . Advertisi Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 17,000 for calendar year 2012 ) $ 17,000 for calendar year 2012 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 114 million , $ 90 million $ 114 million , $ 90 million and $ 72 million $ 90 million and $ 72 million in 2012 , 2011 and $ 72 million in 2012 , 2011 and 20 revenue embedded software upgrade right . 73 Table of Contents Note 9 73 Table of Contents Note 9 \u2013 Selected Quarterly Financial Information of the four quarter of 2012 and 2011 ( in million four quarter of 2012 and 2011 ( in million , except Quarter Second Quarter First Quarter 2012 Net sale $ 35,966 $ Quarter 2012 Net sale $ 35,966 $ 35,023 $ 39,186 $ Net sale $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross margin $ $ 35,023 $ 39,186 $ 46,333 Gross margin $ 14,401 ", + "expenses": "Expenses Operating Expenses Operating expense for 2012 , 2011 , and 2010 Operating expense for 2012 , 2011 , and 2010 are a 2012 , 2011 , and 2010 are a follows ( in except for percentage ) : 2012 2011 2010 Research and development for percentage ) : 2012 2011 2010 Research and development $ percentage ) : 2012 2011 2010 Research and development $ 3,381 2010 Research and development $ 3,381 $ 2,429 $ 1,782 Percentage and development $ 3,381 $ 2,429 $ 1,782 Percentage of net $ 3,381 $ 2,429 $ 1,782 Perce Expenses 2012 and equipment $ 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related cost warranty and related cost $ 1,638 $ 1,240 Accrued tax 1,535 related cost $ 1,638 $ 1,240 Accrued tax 1,535 1,140 Deferred 1,638 $ 1,240 Accrued tax 1,535 1,140 Deferred margin on component $ 1,240 Accrued tax 1,535 1,140 Deferred margin on component sale Deferred margin on component sale", + "net_income": "Net income $ $ 65,225 $ 42,905 $ 37,491 Net income $ 41,733 $ $ 37,491 Net income $ 41,733 $ 25,922 $ 14,013 $ Net income $ 41,733 $ 25,922 $ 14,013 $ 8,235 $ $ 41,733 $ 25,922 $ 14,013 $ 8,235 $ 6,119 Earnings $ 25,922 $ 14,013 $ 8,235 $ 6,119 Earnings per share $ 14,013 $ 8,235 $ 6,119 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 $ : Basic $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 44.15 $ 15.41 $ 9.22 $ Net income $ Provision for income tax 14,030 8,283 4,527 Net income $ 41,733 for income tax 14,030 8,283 4,527 Net income $ 41,733 $ 8,283 4,527 Net income $ 41,733 $ 25,922 $ 14,013 Earnings Net income $ 41,733 $ 25,922 $ 14,013 Earnings per share $ 41,733 $ 25,922 $ 14,013 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 Diluted : Basic $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 $ 15.15 Shares 15.41 Di Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gains/losses translation 0 Net income 0 0 25,922 0 25,922 Change income : Net income 0 0 25,922 0 25,922 Change in : Net income 0 0 25,922 0 25,922 Change in foreign Net income 0 0 25,922 0 25,922 Change in foreign currency income 0 0 25,922 0 25,922 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 12 ) in foreign currency translation 0 0 0 ( 12 ) ( foreign currency translation 0 0 0 ( 12 ) ( 12 translation 0 0 0 ( 12 ) ( 12 ) Change 0 ( 12 ) ( 12 ) Change in unrealized gains/losses security , n Net income 0 0 41,733 0 41,733 Change income : Net income 0 0 41,733 0 41,733 Change in : Net income 0 0 41,733 0 41,733 Change in foreign Net income 0 0 41,733 0 41,733 Change in foreign currency income 0 0 41,733 0 41,733 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 15 ) in foreign currency translation 0 0 0 ( 15 ) ( foreign currency translation 0 0 0 ( 15 ) ( 15 translation 0 0 0 ( 15 ) ( 15 ) Change 0 ( 15 ) ( 15 ) Change in unrealized gains/losses security , n Net income Operating activity : Net income 41,733 25,922 14,013 Adjustments to reconcile activity : Net income 41,733 25,922 14,013 Adjustments to reconcile net : Net income 41,733 25,922 14,013 Adjustments to reconcile net income activity : Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense : Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense 1,740 Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense 1,740 1,168 1,814 Net income amount ) : 2012 2011 2010 Numerator : Net income $ Numerator : Net income $ 41,733 $ 25,922 $ 14,013 Denominator Net income $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 934,818 924,258 909,461 Effect of dilutive : Weighted-average share outstanding 934,818 924,258 909,461 Effect of dilutive security Weighted-average share outstanding 934,818 924,258 909,461 E net income ( 399 ) 450 ( 73 ) net income ( 399 ) 450 ( 73 ) Change in ( 399 ) 450 ( 73 ) Change in unrecognized gains/losses on derivative instrument $ ( 530 ) $ 542 $ ( $ ( 530 ) $ 542 $ ( 253 ) The ) $ 542 $ ( 253 ) The tax effect related value of derivative wa $ 73 million , $ ( 50 73 million , $ ( 50 ) million and $ 97 50 ) million and $ 97 million for 2012 , 2011 and $ 97 million for 2012 , 2011 and 2010 , 97 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share : Basic per share : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8. Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per share $ 7,308 $ 5,987 $ 6,004 Earnings per share : Basic per share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Basic $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $", + "assets": "Assets The s capital expenditure were $ 10.3 billion during 2012 , consisting were $ 10.3 billion during 2012 , consisting of $ 865 2012 , consisting of $ 865 million for retail store facility retail store facility and $ 9.5 billion for other capital expenditure product tooling and manufacturing process 37 Table of Contents equipment , payment for capital expenditure during 2012 were $ 8.3 billion . expenditure during 2012 were $ 8.3 billion . The Company anticipates Company anticipates utilizing appr ASSETS September 29 , 2012 September 24 , 2011 ASSETS : Current , 2012 September 24 , 2011 ASSETS : Current asset : Cash and cash equivalent $ 10,746 $ 9,815 Short-term marketable security cash equivalent $ 10,746 $ 9,815 Short-term marketable security 18,383 16,137 $ 9,815 Short-term marketable security 18,383 16,137 Accounts receivable , le 9,815 Short-term marketable security 18,383 16,137 Accounts receivable , le allowance , le allowance of $ 98 and $ 53 , respectively of $ 98 and $ 53 , respectiv Assets record any significant impairment during 2012 , 2011 and 2010 . significant impairment during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company doe not indefinite lived intangible asset during 2012 , 2011 and 2010 . intangible asset during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company established reporting each reporting unit . In 2012 and 2011 , the Company unit . In 2012 and 2011 , the Company \u2019 s Europe reportable operating segment . ", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 176,064 $ 116,371 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 Total expense 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 11,414 9,247 Deferred revenue 5,953 4,091 Liabilities 2012 accrued expense $ 11,414 $ 9,247 Non-Current Liabilities 2012 2011 Deferred 11,414 $ 9,247 Non-Current Liabilities 2012 2011 Deferred tax liability $ $ 9,247 Non-Current Liabilities 2012 2011 Deferred tax liability $ 13,847 2011 Deferred tax liability $ 13,847 $ 8,159 Other non-current liability tax liability $ 13,847 $ 8,159 Other non-current liability 2,817 1,941 $ 8,159 Other non-current liability 2,817 1,941 Total other non-current liability 8,159 Other non-current liability 2,817 1,94", + "equity": "Equity Securities and Affiliated Purchasers None . 22 Table of Contents Company Stock , the S & P 500 Composite Index , the S . The graph assumes $ 100 wa invested in each of , the S & P 500 Composite Index , the S the market close on September 30 , 2007 . Data point close on September 30 , 2007 . Data point on the price performance . * $ 100 invested on 9/30/07 in stock * $ 100 invested on 9/30/07 in stock or index , . Fiscal year ending September 30 . Copyright \u00a9 2012 S September 30 . Copyright \u00a9 20 equity $ Total shareholder \u2019 equity $ 118,210 $ 76,615 $ 47,791 $ \u2019 equity $ 118,210 $ 76,615 $ 47,791 $ 31,640 $ $ 118,210 $ 76,615 $ 47,791 $ 31,640 $ 22,297 ( $ 76,615 $ 47,791 $ 31,640 $ 22,297 ( a ) $ 47,791 $ 31,640 $ 22,297 ( a ) The Company declared a dividend of $ 2.65 per share in the fourth in the fourth quarter of 2012 . ( b ) The the five year ended September 29 , 2012 . Long-term obligation year ended September 29 , 2012 . Long-term obligation exclude non-current exclude non-current defe EQUITY liability : Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 Total expense 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 27,970 5,953 4,091 Total current liability 38,542 27,97 equity Accumulated other comprehensive income 499 443 Total shareholder \u2019 equity 118,210 443 Total shareholder \u2019 equity 118,210 76,615 Total liability and shareholder Total shareholder \u2019 equity 118,210 76,615 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 176,064 $ 116,371 See accompanying Notes \u2019 equity $ 176,064 $ 116,371 See accompanying Notes to Consolidated to Consolidated Financial Statements . 44 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 26 , 2009 89 equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Balances including transfer pricing adjustment 0 879 0 0 879 Balances a transfer pricing adjustment 0 879 0 0 879 Balances a of pricing adjustment 0 879 0 0 879 Balances a of September adjustment 0 879 0 0 879 Balances a of September 25 879 Balances a of September 25 , 2010 915,970 10,668 37,169 a of September 25 , 2010 915,970 10,668 37,169 ( 46 of September 25 , 2010 915,970 10,668 37,169 ( 4 equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 13,331 62,841 a of September 24 , 2011 929,277 13,331 62,841 443 76,615 of September 24 , 2011 929,277 13,331 62,8 equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including transfer pricing adjustment 0 1,151 0 0 1,151 Balances a transfer pricing adjustment 0 1,151 0 0 1,151 Balances a of pricing adjustment 0 1,151 0 0 1,151 Balances a of September adjustment 0 1,151 0 0 1,151 Balances a of September 29 1,151 Balances a of September 29 , 2012 939,208 $ 16,422 a of September 29 , 2012 939,208 $ 16,422 $ 101,289 of September 29 , 2012 939,208 $ 16,422 $ 101,289 $ 29 , 2012 939,208 $ 16,422 equity tax benefit from equity award 1,351 1,133 751 Dividends and dividend benefit from equity award 1,351 1,133 751 Dividends and dividend equivalent from equity award 1,351 1,133 751 Dividends and dividend equivalent right dividend equivalent right paid ( 2,488 ) 0 0 Taxes paid right paid ( 2,488 ) 0 0 Taxes paid related to paid ( 2,488 ) 0 0 Taxes paid related to net settlement of equity award ( 1,226 ) ( 520 ) ( award ( 1,226 ) ( 520 ) ( 406 ) Cash ) ( 520 ) ( 406 ) Cash ( used in /generated by f Equity Compensation \u201d of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , \u201c Income Taxes \u201d Taxes \u201d of this Form 10-K for additional information . Earnings method , an increase in 50 Table of Contents the fair diluted earnings per share for 2012 , 2011 , and 2010 per share for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in thousand , except per share amount ) : 2012 2011 2010 Numerator : Net share amount ) : Equity Compensation \u201d of this Form 10-K , which summarizes the activity arrangement . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had two had two customer that represented 10 % or more of total one of which accounted for 14 % and the other 10 14 % and the other 10 % . As of September % . As of September 24 , 2011 , there were As of September 24 , 2011 , there were no customer no customer that accounted for 10 % or more of the cellular network carrier accounted for 6 equity award of $ 1.4 billion , $ 1.1 billion $ 1.4 billion , $ 1.1 billion and $ 742 million $ 1.1 billion and $ 742 million in 2012 , 2011 and $ 742 million in 2012 , 2011 and 2010 , 742 million in 2012 , 2011 and 2010 , respectively , in 2012 , 2011 and 2010 , respectively , which were stock . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , the significant 2012 and September 24 , 2011 , the significant component of ( i Equity and and Stock Repurchase Program In 2012 , the Board of Directors , quarterly dividend of $ 2.65 per share . On July per share . On July 24 , 2012 , the Board . On July 24 , 2012 , the Board of Directors declared a dividend of $ 2.65 per share to shareholder of close of business on August 13 , 2012 . The Company business on August 13 , 2012 . The Company paid $ . The Company paid $ 2.5 billion in conjunction with this with this dividend on August 16 , 2012 . No dividend dividend on August 16 , ", + "cash_flow": "cash flow $ Annual operating cash flow $ 50,856 $ 37,529 $ 18,595 As cash flow $ 50,856 $ 37,529 $ 18,595 As of September $ 50,856 $ 37,529 $ 18,595 As of September 29 , $ 18,595 As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had $ , the Company had $ 121.3 billion in cash , cash , an increase of $ 39.7 billion or 49 % from of $ 39.7 billion or 49 % from September 24 , or 49 % from September 24 , 2011 . The principal % from September 24 , 2011 . The principal component of cash flow $ 10,746 $ 9,815 $ 11,261 Supplemental cash flow disclosure : income tax , net $ 7,682 $ 3,338 $ 2,697 See , net $ 7,682 $ 3,338 $ 2,697 See accompanying Notes $ 7,682 $ 3,338 $ 2,697 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 \u2013 Summary of Significant Accounting presentation . Refer to Note 8 , \u201c Segment Information and Data \u201d of this Form 10-K . The Company \u2019 s s fiscal year is the 52 o cash flow hedge and net 55 Table of Contents investment hedge flow hedge of approximately $ 240 million and a net deferred deferred gain of approximately $ 290 million , net of tax in AOCI a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . Deferred gain hedged transaction a of September 29 , 2012 are expected to a of September 29 , 2012 are expected to occur within disc cash flow hedge during 2012 , 2011 and 2010 . flow hedge during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company \u2019 s not significant a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . The ineffective instrument wa not significant during 2012 , 2011 and 2010 , not significant during 2012 , 2011 and 2010 , respectively . during 2012 , 2011 and Cash flow hedge , 2012 September 24 , 2011 Cash flow hedge : Foreign Foreign exchange contract $ ( 175 ) $ 153 $ 607 $ ( 175 ) $ 153 $ 607 $ ( 704 175 ) $ 153 $ 607 $ ( 704 ) Other 153 $ 607 $ ( 704 ) Other income and expense income and expense $ ( 658 ) $ ( 213 ) ( 658 ) $ ( 213 ) Net investment hedge : : Foreign exchange contract ( 5 ) ( 43 ) 0 contract ( 5 ) ( 43 ) 0 0 Other income 5 ) ( 43 ) 0 0 Other income and expense ) ( 43 ) 0 0 Other income and expense 3 0 Other income and expense 3 1 Total $ ( ", + "gross_margin": "gross margin than it 17 Table of Contents indirect sale adversely affecting gross margin . 18 Table of Contents The Company component . As of September 29 , 2012 , a significant As of September 29 , 2012 , a significant portion of in country with differing statutory 19 Table of Contents tax rate of these examination . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company \u2019 California . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company ow Gross Margin Gross margin for 2012 , 2011 and 2010 are Gross margin for 2012 , 2011 and 2010 are a follows for 2012 , 2011 and 2010 are a follows ( in gross margin percentage ) : 2012 2011 2010 Net sale $ margin percentage ) : 2012 2011 2010 Net sale $ 156,508 percentage ) : 2012 2011 2010 Net sale $ 156,508 $ 2011 2010 Net sale $ 156,508 $ 108,249 $ 65,225 Cost Net sale $ 156,508 $ 108,249 $ 65,225 Cost of sale $ 156,508 $ 108,249 $ 65,225 Cost of sale 87,846 64,431 $ 65,225 Cost of sale 87,846 64,431 39,5 Gross margin $ 65,225 Cost of sale 87,846 64,431 39,541 Gross margin $ 68,662 Cost of sale 87,846 64,431 39,541 Gross margin $ 68,662 $ 64,431 39,541 Gross margin $ 68,662 $ 43,818 $ 25,684 Gross Gross margin $ 68,662 $ 43,818 $ 25,684 Gross margin percentage $ 68,662 $ 43,818 $ 25,684 Gross margin percentage 43.9 % $ 25,684 Gross margin percentage 43.9 % 40.5 % 39.4 % Gross margin percentage 43.9 % 40.5 % 39.4 % The gross percentage 43.9 % 40.5 % 39.4 % The gross margin percentage The gross margin percenta gross margin percentage in 2011 wa 40.5 % , compared margin percentage in 2011 wa 40.5 % , compared to 39.4 40.5 % , compared to 39.4 % in 2010 . This compared to 39.4 % in 2010 . This year-over-year increase in compared to level achieved during 2012 , and the Company anticipates anticipates gross margin of about 36 % during the first quarter during the first quarter of 2013 . Expected future decline in including the first quarter of 2013 , are forward-looking and could in Part I , Item 1A of this Form 10-K Gross margin 68,662 65,225 Cost of sale 87,846 64,431 39,541 Gross margin 68,662 43,818 Cost of sale 87,846 64,431 39,541 Gross margin 68,662 43,818 25,684 87,846 64,431 39,541 Gross margin 68,662 43,818 25,684 Operating expense : 64,431 39,541 Gross margin 68,662 43,818 25,684 Operating expense : Research 39,541 Gross margin 68,662 43,818 25,684 Operating expense : Research and expense : Research and development 3,381 2,429 1,782 Selling , general : Research and development 3,381 2,429 1,782 Selling , gene Gross margin $ $ 35,023 $ 39,186 $ 46,333 Gross margin $ 14,401 $ $ 46,333 Gross margin $ 14,401 $ 14,994 $ 18,564 $ Gross margin $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share : Basic per share : Basic $ 8.76 $ 9.42 $ 12.4 Gross margin $ $ 28,571 $ 24,667 $ 26,741 Gross margin $ 11,380 $ $ 26,741 Gross margin $ 11,380 $ 11,922 $ 10,218 $ Gross margin $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per share $ 7,308 $ 5,987 $ 6,004 Earnings per share : Basic per share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Ba", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 21,887 11,768 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 6,435 ) ( 3,991 ) Net amortization ( 6,435 ) ( 3,991 ) Net property , plant , plant and equipment $ 15,452 $ 7,777 Accrued Expenses 2012 and equipment $ 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related cost warranty and re", + "capital_expenditure": "capital expenditure were $ 10.3 billion during 2012 , consisting were $ 10.3 billion during 2012 , consisting of $ 865 2012 , consisting of $ 865 million for retail store facility retail store facility and $ 9.5 billion for other capital expenditure product tooling and manufacturing process 37 Table of Contents equipment , payment for capital expenditure during 2012 were $ 8.3 billion . expenditure during 2012 were $ 8.3 billion . The Company anticipates Company anticipates utilizing approximately $ 10 billion for capital expenditure during billion for capital expenditure during 2013 , including approximately $ 850 2013 , including approximately $ 850 million for retail store facility store facility and approximately $ 9.15 billion for other capital expenditure software and enhancement . During 2013 , the Company expects to Company expects to open about 30 to 35 new retail store to open about 30 to 35 new retail store , with Stock Repurchase Program In March 2012 , the Board of Directors , quarterly dividend of $ 2.65 per s", + "debt": "debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term Company had no fair value 51 Table of Contents hedge in Table of Contents hedge in 2012 , 2011 and 2010 . Contents hedge in 2012 , 2011 and 2010 . The net in 2012 , 2011 and 2010 . The net gain or building is the lesser of 30 year or the remaining life property and equipment wa $ 2.6 billion , $ 1.6 billion $ 2.6 billion , $ 1.6 billion and $ 815 million $ 1.6 billion ", + "share_repurchase": "share repurchase ( to purchase up to $ 2 billion of the Company \u2019 \u2019 s common stock during 2013 . The total number of tax , a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Net unrealized gains/losses on in million ) : 2012 2011 Net unrealized gains/losses on marketable gains/losses on marketable security $ 731 $ 130 Net unrecognized gains/losses market", + "earnings_per_share": "Earnings per share $ 14,013 $ 8,235 $ 6,119 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 $ : Basic $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 44.15 $ 15.41 $ 9.22 $ 6.94 Diluted $ 44.15 $ 27.68 9.22 $ 6.94 Diluted $ 44.15 $ 27.68 $ 15.15 $ 6.94 Diluted $ 44.15 $ 27.68 $ 15.15 $ 9.08 $ $ 44.15 $ 27.68 $ 15.15 $ 9.08 $ 6.78 Cash $ 27.68 $ 15.15 $ 9.08 $ 6.78 Cash dividend declared $ 15.15 $ 9.08 $ 6.78 Cash dividend earnings per share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted per share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 902,139 Total 909,461 893,016 881,592 Diluted 945,355 Earnings per share $ 41,733 $ 25,922 $ 14,013 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 Diluted : Basic $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 $ 15.15 Shares 15.41 Diluted $ 44.15 $ 27.68 $ 15.15 Shares used in $ 44.15 $ 27.68 $ 15.15 Shares used in computing earnings earnings per share : Basic 934,818 924,258 909,461 Diluted 945,355 936,645 per share : Basic 934,818 924,258 909,461 Diluted 945,355 93 earnings per share for 2012 , 2011 , and 2010 per share for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in thousand , except per share amount ) : 2012 2011 2010 Numerator : Net share amount ) : 2012 2011 2010 Numerator : Net income amount ) : 2012 2011 2010 Numerator : Net income $ Numerator : Net income $ 41,733 $ 25,922 $ 14,013 Denominator Net income $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average share outstanding Denominator : Weigh earnings per share Weighted-average diluted share 945,355 936,645 924,712 Basic earnings per share $ Basic earnings per share $ 44.64 $ 28.05 $ 15.41 Diluted per share $ 44.64 $ 28.05 $ 15.41 Diluted earnings per $ 44.64 $ 28.05 $ 15.41 Diluted earnings per share $ Diluted earnings per share $ 44.15 $ 27.68 $ 15.15 Potentially per share $ 44.15 $ 27.68 $ 15.15 Potentially dilutive security $ 44.15 $ 27.68 $ 15.15 Potentially dilutive security representing 1.0 15.15 Potentially dilutive security representing 1.0 m Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share : Basic per share : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 13.87 Fourth $ 8.67 $ 9.32 $ 12.30 $ 13.87 Fourth Quarter Third $ 9.32 $ 12.30 $ 13.87 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2011 Net sale $ 28,270 $ Earnings per share $ 7,308 $ 5,987 $ 6,004 Earnings per share : Basic per share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Basic $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.43 Basic $ 7.05 $ 7.79 $ 6.40 $ 6.43 Basic and diluted $ 7.79 $ 6.40 $ 6.43 Basic and diluted earnings per diluted earnings per share . 74 Table of Contents Report of Apple Inc. a of September 29 ", + "tax_rate": "tax rate of these examination . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company \u2019 California . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company owned or Company owned or leased approximately 17.3 million square foot of building . Of that amount approximately 10.9 million square foot wa leased space , which includes approximately 4.1 million square foot related to owned building space , approximately 2.6 million square foot tha tax rate were approximately 25.2 % , 24.2 % , were approximately 25.2 % , 24.2 % , and 24.4 % , 24.2 % , and 24.4 % for 2012 , 2011 , and 24.4 % for 2012 , 2011 , and 2010 24.4 % for 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . The Company federal income tax rate of 36 Table of Contents 35 % of 36 Table of Contents 35 % due primarily to certain the U.S. As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had deferred and tax credit of $ 4.0 bi tax rate ( 35 % in 2012 , 2011 rate ( 35 % in 2012 , 2011 and 2010 ) 35 % in 2012 , 2011 and 2010 ) to income in 2012 , 2011 and 2010 ) to income before provision provision for income tax for 2012 , 2011 , and 2010 income tax for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Computed expected tax in million ) : 2012 2011 2010 Computed expected tax $ million ) : 2012 2011 2010 Computed expected tax $ 19,517 2010 Computed expected tax $ 19,517 $ 11,973 tax rate $ 14,030 $ 8,283 $ 4,527 Effective tax rate 25.2 % $ 4,527 Effective tax rate 25.2 % 24.2 % 24.4 % Effective tax rate 25.2 % 24.2 % 24.4 % The Company rate 25.2 % 24.2 % 24.4 % The Company \u2019 s tax effect of the difference 61 Table of Contents between the from equity award of $ 1.4 billion , $ 1.1 billion $ 1.4 billion , $ 1.1 billion and $ 742 million $ 1.1 billion and $ 742 million in 2012 , 2011 and $ 742 million in 2012 , 2011 and 2010 , 742 million in 2012 , 2011 and 2010 , respectively , i tax rate . 62 Table of Contents The aggregate interest and penalty , for 2012 , 2011 , and 2010 penalty , for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Beginning Balance $ in million ) : 2012 2011 2010 Beginning Balance $ 1,375 million ) : 2012 2011 2010 Beginning Balance $ 1,375 $ 2011 2010 Beginning Balance $ 1,375 $ 943 $ 971 Increases Beginning Balance $ 1,375 $ 943 $ 971 Increases related to $ 1,375 $ 943 $ 971 Increases related to tax posit", + "geographic_information": "Geographic Data . \u201d 2 Table of Contents Products The and application . In September 2012 , the Company launched iPhone , the Company launched iPhone 5 , it latest version of and application . In March 2012 , the Company launched the iPad , and in October 2012 , the Company announced it to be available in November 2012 . In addition to the iPod shuffle is a flash-memory- 3 Table of Contents based iPod iOS device . In September 2012 , the Company released iOS , the Company released iOS 6 , the latest versio Geographic Data During 2012 , the Company \u2019 s international net sale accounted for 39 % and 61 % , accounted for 39 % and 61 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 8 , \u201c Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated C geographic segment . During 2011 , net sale for the Store and iBookstore wa $ 5.4 billion , representing an increase , representing an increase of 33 % compared to 2010 . of 33 % compared to 2010 . The Company belief this product and service accounted for 6 % and 8 % of accounted for 6 % and 8 % of the Company \u2019 s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . Partially offsetting iPod net sale of $ 821 million or 10 % during of $ 821 million or 10 % during 2 Geographic operates Apple retail store in 13 country , including the U.S. a those described in Note 1 , \u201c Summary of Significant administrative cost . Prior to 2012 , the Company allocated to marketing activity . Beginning in 2012 , the Company no longer corporate expense and reclassified $ 102 million and $ 75 million $ 102 million and $ 75 million of such cost from to Retail segment expense for 2011 and 2010 , respectively . segment expense for 2011 and 2010 , respectively . The Company the Retail segme", + "common_stock": "common stock were and outstanding a of October 19 , 2012 . DOCUMENTS INCORPORATED a of October 19 , 2012 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2013 annual meeting of shareholder ( of shareholder ( the \u201c 2013 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2013 10-K where indicated . The 2013 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c common stock beginning in 2013 . The repurchase program is it will utilize approximately $ 45 billion of domestic cash to firm commitment a of September 29 , 2012 and excludes amount a of September 29 , 2012 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 4,414 5 Years Operating lease $ 4,414 $ 516 $ 1,098 Common stock 13,890 Share-based compensation 0 876 0 0 876 Common stock issued Share-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Bala Common stock 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 Common stock ) Share-based compensation 0 1,740 0 0 1,740 Common stock issued Share-based compensation 0 1,740 0 0 1,740 Common stock issued under compensation 0 1,740 0 0 1,740 Common stock issued under stock share withheld for employee tax 9,931 200 ( 762 ) 0 withheld for employee tax 9,931 200 ( 762 ) 0 ( employee tax 9,931 200 ( 762 ) 0 ( 562 ) 9,931 200 ( 762 ) 0 ( 562 ) Tax benefit ( 762 ) 0 ( 562 ) Tax benefit from equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including tr common stock 665 831 912 Excess tax benefit issuance of common stock 665 831 912 Excess tax benefit from of common stock 665 831 912 Excess tax benefit from equity tax benefit from equity award 1,351 1,133 751 Dividends and dividend benefit from equity award 1,351 1,133 751 Dividends and dividend equivalent from equity award 1,351 1,133 751 Dividends and dividend equivalent right dividend equivalent right paid ( 2,488 ) 0 0 Taxes paid right paid ( 2,488 ) 0 0 Taxes paid related to paid ( 2,488 ) 0 0 Taxes p common stock share of common stock for 2012 , 2011 and 2010 , common stock for 2012 , 2011 and 2010 , respectively , for 2012 , 2011 and 2010 , respectively , were excluded debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term Company had no fair value 51 Table of Contents hedge in Table of Contents hedge in 2012 , 2011 and 2010 . Contents hedge in 2012 , 2011 and 2010 . The net in 2012 , 2011 and 2010 . The net gain or building common stock beginning in 2013 . The repurchase program is of share . In August 2012 , the Company entered into Company entered into a Rule 10b5-1 compliant accelerated share repurchase ( to purchase up to $ 2 billion of the Company \u2019 \u2019 s common stock during 2013 . The total number of tax , a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Net unrea Common Stock 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended of the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee Stock Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee Stock Purchase , effective a of March 8 , 2010 . 10-Q 10.1 a of March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-13-416534/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-13-416534/full-submission_features.json new file mode 100644 index 0000000..e7cb1ff --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-13-416534/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue or financial performance . 8 Table of Contents Employees As Contents Employees As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had approximately , the Company had approximately 80,300 full-time equivalent employee and an equivalent employee and an additional 4,100 full-time equivalent temporary employee and employee and contractor . Approximately 42,800 of the total full-time equivalent s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports revenue . 24 Table of Contents Item 7 24 Table of Contents Item 7 . Management \u2019 s Discussion Results of Operations This Item 7 , \u201c Management \u2019 s other part of this Form 10-K contain forward-looking statement , within Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and government customer revenue per store decreased to $ 50.2 million in 2013 , compared to $ 50.2 million in 2013 , compared to $ 51.5 2013 , compared to $ 51.5 million in 2012 . The to $ 51.5 million in 2012 . The growth in net growth in net sale during 2012 wa driven primarily by increased following the launch of iPhone 4 and iPhone 5 , strong of iPhone 4 and iPhone 5 , strong demand for the third generation iPad and iPad 2 , and higher Mac net in the Retail segment during 2012 compared to the Company \u2019 . With an average o revenue average revenue per store increased 19 % to $ 51.5 million increased 19 % to $ 51.5 million in 2012 compared to to $ 51.5 million in 2012 compared to $ 43.3 million in 2012 compared to $ 43.3 million in 2011 . The to $ 43.3 million in 2011 . The Retail segment \u2019 s operating income wa $ 4.0 billion , $ 4.6 billion $ 4.0 billion , $ 4.6 billion and $ 3.1 billion $ 4.6 billion and $ 3.1 billion during 2013 , 2012 and $ 3.1 billion during 2013 , 2012 , and 2011 3.1 billion during 2013 , 2012 , and revenue per store during 2012 . Gross Margin Gross margin Gross Margin Gross margin for 2013 , 2012 and 2011 are Gross margin for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in gross margin percentage ) : 2013 2012 2011 Net sale $ margin percentage ) : 2013 2012 2011 Net sale $ 170,910 percentage ) : 2013 2012 2011 Net sale $ 170,910 $ 2012 2011 Net sale $ 170,910 $ 156,508 $ 108,249 Cost Net sale $ 170,910 $ 156,508 $ 108,249 Cost of sale $ 170,910 $ 156,508 $ 108,249 C revenue 7,435 5,953 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 Total expense 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 38,542 7,435 5,953 Total current liability 43,658 38,542 Deferred revenue \u2013 non-current 5,953 Total current liability 43,658 38,542 Deferred revenue \u2013 non-current 2,625 38,542 Deferred revenue \u2013 non-current 2,625 2,648 Long-term debt 16,960 0 Deferred reven revenue 1,459 1,391 ) Accounts payable 2,340 4,467 2,515 Deferred revenue 1,459 2,824 ) Accounts payable 2,340 4,467 2,515 Deferred revenue 1,459 2,824 1,654 2,340 4,467 2,515 Deferred revenue 1,459 2,824 1,654 Other current and 4,467 2,515 Deferred revenue 1,459 2,824 1,654 Other current and non-current 2,515 Deferred revenue 1,459 2,824 1,654 Other current and non-current liability Other current and non-current liability 4,521 2,552 4,495 Cash generated by current and non-current liability 4,521 2,55 revenue 1,475 other reserve $ 1,892 $ 1,346 Deferred revenue 1,475 1,145 Basis 1,892 $ 1,346 Deferred revenue 1,475 1,145 Basis of capital asset $ 1,346 Deferred revenue 1,475 1,145 Basis of capital asset and of capital asset and investment 1,020 451 Share-based compensation 458 411 capital asset and investment 1,020 451 Share-based compensation 458 411 Other investment 1,020 451 Share-based compensation 458 411 Other 1,029 947 Total 1,020 451 Share-based compensation 458 411 Other 1,029 947 Total defe Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 17,500 for calendar year 2013 ) $ 17,500 for calendar year 2013 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 135 million , $ 114 million $ 135 million , $ 114 million and $ 90 million $ 114 million and $ 90 million in 2013 , 2012 and $ 90 million in 2013 , 2012 and", + "expenses": "Expenses Operating expense for 2013 , 2012 and 2011 are Operating expense for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in except for percentage ) : 2013 Change 2012 Change 2011 Research percentage ) : 2013 Change 2012 Change 2011 Research and development : 2013 Change 2012 Change 2011 Research and development $ 4,475 2011 Research and development $ 4,475 32 % $ 3,381 39 Research and development $ 4,475 32 % $ 3,381 39 % $ 4,475 32 % $ 3,381 39 % $ 2,429 Percentage 4,47 Expenses 2013 and equipment $ 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related cost warranty and related cost $ 2,967 $ 1,638 Accrued tax 1,200 related cost $ 2,967 $ 1,638 Accrued tax 1,200 1,535 Deferred 2,967 $ 1,638 Accrued tax 1,200 1,535 Deferred margin on component $ 1,638 Accrued tax 1,200 1,535 Deferred margin on component sale Deferred margin on component s", + "net_income": "Net income $ $ 108,249 $ 65,225 $ 42,905 Net income $ 37,037 $ $ 42,905 Net income $ 37,037 $ 41,733 $ 25,922 $ Net income $ 37,037 $ 41,733 $ 25,922 $ 14,013 $ $ 37,037 $ 41,733 $ 25,922 $ 14,013 $ 8,235 Earnings $ 41,733 $ 25,922 $ 14,013 $ 8,235 Earnings per share $ 25,922 $ 14,013 $ 8,235 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 $ : Basic $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 39.75 $ 28.05 $ net income , to net income of $ 10.2 billion and an increase in asset and liability of $ 6.5 billion . Cash used in in investing activity of $ 33.8 billion during 2013 consisted primarily of $ 33.8 billion during 2013 consisted primarily of net purchase of marketable security of $ 24.0 billion and cash used to plant and equipment of $ 8.2 billion . Cash used in used in financing activity during 2013 consisted primarily of cash used repurchase common stock of $ 22.9 billion and cash used to dividend equiva net income and to net income of $ 9.4 billion , partially offset by asset and liability of $ 299 million . Cash used in used in investing activity during 2012 of $ 48.2 billion consisted activity during 2012 of $ 48.2 billion consisted primarily of net of marketable security of $ 38.4 billion and cash used to plant and equipment of $ 8.3 billion . Cash used in used in financing activity during 2012 of $ 1.7 billion consisted activity during 2012 of $ 1.7 billion consisted primarily of cash dividend equiva Net income $ Provision for income tax 13,118 14,030 8,283 Net income $ 37,037 for income tax 13,118 14,030 8,283 Net income $ 37,037 $ 14,030 8,283 Net income $ 37,037 $ 41,733 $ 25,922 Earnings Net income $ 37,037 $ 41,733 $ 25,922 Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 Diluted : Basic $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 $ 27.68 Shares 28.05 Net income $ , 2012 September 24 , 2011 Net income $ 37,037 $ , 2011 Net income $ 37,037 $ 41,733 $ 25,922 Other Net income $ 37,037 $ 41,733 $ 25,922 Other comprehensive income/ $ 37,037 $ 41,733 $ 25,922 Other comprehensive income/ ( loss of tax effect of $ 35 , $ 13 and $ of $ 35 , $ 13 and $ 18 , respectively , $ 13 and $ 18 , respectively ( 112 ) $ 18 , respectively ( 112 ) ( 15 ) ( respectively ( 112 ) ( 15 ) ( 12 ) Change ) ( 15 ) ( 12 ) Change in unrecognized gains/losses expense ) of $ ( 351 ) , Net income $ ( 46 ) $ 47,791 Net income 0 0 25,922 ) $ 47,791 Net income 0 0 25,922 0 25,922 Other $ 47,791 Net income 0 0 25,922 0 25,922 Other comprehensive 47,791 Net income 0 0 25,922 0 25,922 Other comprehensive income/ Net income 0 0 25,922 0 25,922 Other comprehensive income/ ( income 0 0 25,922 0 25,922 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 489 489 Share-based income/ ( loss ) 0 0 0 489 489 Share-based compensation ( loss ) 0 0 0 489 489 Share-based compensation 0 Net income 24 , 2011 929,277 13,331 62,841 443 76,615 Net income 0 , 2011 929,277 13,331 62,841 443 76,615 Net income 0 0 2011 929,277 13,331 62,841 443 76,615 Net income 0 0 41,733 62,841 443 76,615 Net income 0 0 41,733 0 41,733 Other 443 76,615 Net income 0 0 41,733 0 41,733 Other comprehensive 76,615 Net income 0 0 41,733 0 41,733 Other comprehensive income/ Net income 0 0 41,733 0 41,733 Other comprehensive income/ ( income 0 0 41,733 0 41,733 Other comprehensive income/ ( loss comprehensive income/ Net income 29 , 2012 939,208 16,422 101,289 499 118,210 Net income 0 , 2012 939,208 16,422 101,289 499 118,210 Net income 0 0 2012 939,208 16,422 101,289 499 118,210 Net income 0 0 37,037 101,289 499 118,210 Net income 0 0 37,037 0 37,037 Other 499 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive income/ Net income 0 0 37,037 0 37,037 Other comprehensive income/ ( income 0 0 37,037 0 37,037 Other comprehensive income/ ( loss comprehensiv Net income Operating activity : Net income 37,037 41,733 25,922 Adjustments to reconcile activity : Net income 37,037 41,733 25,922 Adjustments to reconcile net : Net income 37,037 41,733 25,922 Adjustments to reconcile net income activity : Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense : Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense 2,253 Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense 2,253 1,740 3,277 Net income amount ) : 2013 2012 2011 Numerator : Net income $ Numerator : Net income $ 37,037 $ 41,733 $ 25,922 Denominator Net income $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 925,331 934,818 924,258 Effect of dilutive : Weighted-average share outstanding 925,331 934,818 924,258 Effect of dilutive security Weighted-average share outstanding 925,331 934,818 924,258 E Net income $ $ 13,024 $ 16,349 $ 21,060 Net income $ 7,512 $ $ 21,060 Net income $ 7,512 $ 6,900 $ 9,547 $ Net income $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings per share $ 6,900 $ 9,547 $ 13,078 Earnings per share ( a a ) : Basic $ 8.31 $ 7.51 $ 10.16 $ : Basic $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10.09 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10 Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share ( a a ) : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8.67 $ 9.32 ", + "assets": "Assets The s capital expenditure were $ 7.0 billion during 2013 , consisting were $ 7.0 billion during 2013 , consisting of $ 499 2013 , consisting of $ 499 million for retail store facility retail store facility and $ 6.5 billion for other capital expenditure payment for capital expenditure during 2013 were $ 8.2 billion . expenditure during 2013 were $ 8.2 billion . 35 Table of were $ 8.2 billion . 35 Table of Contents The Company Company anticipates utilizing approximately $ 11.0 billion for capita ASSETS September 28 , 2013 September 29 , 2012 ASSETS : Current , 2013 September 29 , 2012 ASSETS : Current asset : Cash and cash equivalent $ 14,259 $ 10,746 Short-term marketable security cash equivalent $ 14,259 $ 10,746 Short-term marketable security 26,287 18,383 $ 10,746 Short-term marketable security 26,287 18,383 Accounts receivable , le 10,746 Short-term marketable security 26,287 18,383 Accounts receivable , le allowance , le allowance of $ 99 and $ 98 , respectively of $ 99 and $ 98 , respe Assets record any significant impairment during 2013 , 2012 and 2011 . significant impairment during 2013 , 2012 and 2011 . The Company during 2013 , 2012 and 2011 . The Company doe not any impairment charge related to 55 Table of Contents goodwill or indefinite lived intangible asset during 2013 , 2012 and 2011 . intangible asset during 2013 , 2012 and 2011 . The Company during 2013 , 2012 and 2011 . The Company established reporting each reporting unit . In 2013 and 2012 , the Company unit . In 2013", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 207,000 $ 176,064 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 Total expense 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 13,856 11,414 Deferred revenue 7,435 Liabilities 2013 accrued expense $ 13,856 $ 11,414 Non-Current Liabilities 2013 2012 Deferred 13,856 $ 11,414 Non-Current Liabilities 2013 2012 Deferred tax liability $ $ 11,414 Non-Current Liabilities 2013 2012 Deferred tax liability $ 16,489 2012 Deferred tax liability $ 16,489 $ 13,847 Other non-current liability tax liability $ 16,489 $ 13,847 Other non-current liability 3,719 2,817 $ 13,847 Other non-current liability 3,719 2,817 Total other non-current liability 13,847 Other non-current liability 3,7", + "equity": "Equity Securities 22 Item 6 . Selected Financial of Equity Securities 22 Item 6 . Selected Financial Data 24 6 . Selected Financial Data 24 Item 7 . Management \u2019 Selected Financial Data 24 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 25 Item 7A . Quantitative and Results of Operations 25 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 42 Item 8 . Financial Statements About Market Risk 42 Item 8 . Financial Statements and Supplement equity $ Total shareholder \u2019 equity $ 123,549 $ 118,210 $ 76,615 $ \u2019 equity $ 123,549 $ 118,210 $ 76,615 $ 47,791 $ $ 123,549 $ 118,210 $ 76,615 $ 47,791 $ 31,640 ( $ 118,210 $ 76,615 $ 47,791 $ 31,640 ( a ) $ 76,615 $ 47,791 $ 31,640 ( a ) Long-term obligation exclude non-current deferred revenue . 24 Table of Contents Item 7 24 Table of Contents Item 7 . Management \u2019 s Discussion Results of Operations This Item 7 , \u201c Management \u2019 s other part of this Form 10-K contain forward-looking statement , wit Equity Awards Total 2012 $ 2,488 $ 0 $ Equity Awards Total 2012 $ 2,488 $ 0 $ 0 $ Total 2012 $ 2,488 $ 0 $ 0 $ 56 $ $ 2,488 $ 0 $ 0 $ 56 $ 2,544 2013 $ 0 $ 0 $ 56 $ 2,544 2013 10,564 13,950 $ 0 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 0 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total $ $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total $ 13,052 2,544 2013 10,564 13,950 9,000 1,082 34, EQUITY liability : Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 Total expense 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 38,542 7,435 5,953 Total current liability 43,658 equity 123,549 499 Total shareholder \u2019 equity 123,549 118,210 Total liability and shareholder Total shareholder \u2019 equity 123,549 118,210 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 207,000 $ 176,064 See accompanying Notes \u2019 equity $ 207,000 $ 176,064 See accompanying Notes to Consolidated to Consolidated Financial Statements . 47 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 25 , 2010 915,970 $ 10,668 a of September 25 , 2010 915,970 $ 10,668 $ 37,169 of Sep equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 13,331 62,841 a of September 24 , 2011 929,277 13,331 62,841 443 76,615 of September 24 , 2011 929,277 13,331 62,8 equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including transfer pricing adjustment 0 1,151 0 0 1,151 Balances a transfer pricing adjustment 0 1,151 0 0 1,151 Balances a of pricing adjustment 0 1,151 0 0 1,151 Balances a of September adjustment 0 1,151 0 0 1,151 Balances a of September 29 1,151 Balances a of September 29 , 2012 939,208 16,422 101,289 a of September 29 , 2012 939,208 16,422 101,289 499 118,210 of September 29 , 2012 939,208 16,422 101,289 499 118,210 Net Sep equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 1,232 Balances a of September 28 1,232 Balances a of September 28 , 2013 899,213 $ 19,764 a of September 28 , 2013 899,213 $ 19,764 $ 104,256 of September 28 , 2013 899,213 $ 19,764 $ 104,256 $ 28 , 2013 899,213 $ 19,764 equity tax benefit from equity award 701 1,351 1,133 Taxes paid related benefit from equity award 701 1,351 1,133 Taxes paid related to from equity award 701 1,351 1,133 Taxes paid related to net settlement of equity award ( 1,082 ) ( 1,226 ) ( award ( 1,082 ) ( 1,226 ) ( 520 ) Dividends ) ( 1,226 ) ( 520 ) Dividends and dividend equivalent dividend equivalent right paid ( 10,564 ) ( 2,488 ) 0 paid ( 10,564 ) ( 2,488 ) 0 Repurchase of common 10,564 ) ( 2,488 ) 0 Repurchase of common stock ( Repurchase equity award of $ 643 million , $ 1.4 billion $ 643 million , $ 1.4 billion and $ 1.1 billion $ 1.4 billion and $ 1.1 billion in 2013 , 2012 and $ 1.1 billion in 2013 , 2012 and 2011 , 1.1 billion in 2013 , 2012 and 2011 , respectively , in 2013 , 2012 and 2011 , respectively , which were stock . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , the significant 2013 and September 29 , 2012 , the significant component of ( i Equity Preferred period presented a follows : 2013 Dividends Per Share Amount ( million ) First quarter $ 2.65 $ 2,486 Second quarter $ First quarter $ 2.65 $ 2,486 Second quarter $ 2.65 2,490 $ 2,486 Second quarter $ 2.65 2,490 Third quarter $ 3.05 2,486 Second quarter $ 2.65 2,490 Third quarter $ 3.05 2,789 2.65 2,490 Third quarter $ 3.05 2,789 Fourth quarter $ 3.05 2,490 Third quarter $ 3.05 2,789 Fourth quarter $ 3.05 2,763 3.05 2,789 Fourth quarter $ 3.05 2,763 $ 10,528 The Company 2,789 Fourth q", + "cash_flow": "cash flow $ 14,259 $ 10,746 $ 9,815 Supplemental cash flow disclosure : income tax , net $ 9,128 $ 7,682 $ 3,338 See , net $ 9,128 $ 7,682 $ 3,338 See accompanying Notes $ 9,128 $ 7,682 $ 3,338 See accompanying Notes to Consolidated to Consolidated Financial Statements . 49 Table of Contents Notes to to Consolidated Financial Statements Note 1 \u2013 Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company \u2019 s fiscal year 201 cash flow in AOCI a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , respectively . 2013 and September 29 , 2012 , respectively . Deferred gain rate transaction a of September 28 , 2013 are expected to a of September 28 , 2013 are expected to occur within are expected to occur within 12 month and five year , discontinued cash flow hedge during 2013 , 2012 and 2011 . flow hedge during 2013 , 2012 and 2011 . The Company during 2013 Cash flow hedge , 2013 September 29 , 2012 Cash flow hedge : Foreign : Foreign exchange contract $ 891 $ ( 175 ) $ contract $ 891 $ ( 175 ) $ 676 $ 607 $ ( 175 ) $ 676 $ 607 Other income/ ( 175 ) $ 676 $ 607 Other income/ ( expense ) ) , net $ ( 301 ) $ ( 658 ) ( 301 ) $ ( 658 ) Interest rate contract 12 658 ) Interest rate contract 12 0 ( 6 ) 0 ) Interest rate contract 12 0 ( 6 ) 0 Other rate contract 12 0 ( 6 ) 0 Other income/ ( 12 0 ( 6 ) 0 Other income/ ( expense ) ( expense ) , net 0 0 Net investmen cash flow . The Company recognized $ 136 million of interest expense for for the year ended September 28 , 2013 . As of year ended September 28 , 2013 . As of September 28 2013 . As of September 28 , 2013 , the aggregate As of September 28 , 2013 , the aggregate unamortized discount \u2019 s Notes wa $ 40 million . Future principal payment s Notes a of September 28 , 2013 , are a a of September 28 , 2013 , are a follows ( ( in million ) : 2014 $ 0 2015 0 2016 million ) : 2014 $ 0 2015 0 2016 2,500 2017 ) : 20", + "gross_margin": "Gross Margin Gross margin Gross Margin Gross margin for 2013 , 2012 and 2011 are Gross margin for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in gross margin percentage ) : 2013 2012 2011 Net sale $ margin percentage ) : 2013 2012 2011 Net sale $ 170,910 percentage ) : 2013 2012 2011 Net sale $ 170,910 $ 2012 2011 Net sale $ 170,910 $ 156,508 $ 108,249 Cost Net sale $ 170,910 $ 156,508 $ 108,249 Cost of sale $ 170,910 $ 156,508 $ 108,249 Cost of sale 106,606 87,846 $ 108,249 Gross margin $ 108,249 Cost of sale 106,606 87,846 64,431 Gross margin $ 64,304 Cost of sale 106,606 87,846 64,431 Gross margin $ 64,304 $ 87,846 64,431 Gross margin $ 64,304 $ 68,662 $ 43,818 Gross Gross margin $ 64,304 $ 68,662 $ 43,818 Gross margin percentage $ 64,304 $ 68,662 $ 43,818 Gross margin percentage 37.6 % $ 43,818 Gross margin percentage 37.6 % 43.9 % 40.5 % Gross margin percentage 37.6 % 43.9 % 40.5 % The gross percentage 37.6 % 43.9 % 40.5 % The gross margin percentage The gross margin perce gross margin in 2013 compared to 2012 wa driven margin in 2013 compared to 2012 wa driven by multiple factor s service policy and other 32 Table of Contents warranty cost certain product , including iPad 2 and iPhone 4 ; and including iPad 2 and iPhone 4 ; and unfavorable impact from The gross margin percentage in 2012 wa 43.9 % , compared margin percentage in 2012 wa 43.9 % , compared to 40.5 43.9 % , compared to 40.5 % in 2011 . This compared to 40.5 % in 2011 . This year-over-year increase in during the Gross margin 64,304 108,249 Cost of sale 106,606 87,846 64,431 Gross margin 64,304 68,662 Cost of sale 106,606 87,846 64,431 Gross margin 64,304 68,662 43,818 106,606 87,846 64,431 Gross margin 64,304 68,662 43,818 Operating expense : 87,846 64,431 Gross margin 64,304 68,662 43,818 Operating expense : Research 64,431 Gross margin 64,304 68,662 43,818 Operating expense : Research and expense : Research and development 4,475 3,381 2,429 Selling , general : Research and development 4,475 3,381 2,429 Selling , Gross margin $ $ 35,323 $ 43,603 $ 54,512 Gross margin $ 13,871 $ $ 54,512 Gross margin $ 13,871 $ 13,024 $ 16,349 $ Gross margin $ 13,871 $ 13,024 $ 16,349 $ 21,060 Net $ 13,871 $ 13,024 $ 16,349 $ 21,060 Net income $ $ 13,024 $ 16,349 $ 21,060 Net income $ 7,512 $ $ 21,060 Net income $ 7,512 $ 6,900 $ 9,547 $ Net income $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings per share $ 6,900 $ 9,547 $ 13,078 Earnings per share ( a a ) : Basic $ 8.31 $ 7.51 $ 10.16 $ : Basic $ Gross margin $ $ 35,023 $ 39,186 $ 46,333 Gross margin $ 14,401 $ $ 46,333 Gross margin $ 14,401 $ 14,994 $ 18,564 $ Gross margin $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share ( a a ) : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basi", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 28,519 21,887 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 11,922 ) ( 6,435 ) Net amortization ( 11,922 ) ( 6,435 ) Net property , plant , plant and equipment $ 16,597 $ 15,452 Accrued Expenses 2013 and equipment $ 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related cost warranty ", + "capital_expenditure": "capital expenditure were $ 7.0 billion during 2013 , consisting were $ 7.0 billion during 2013 , consisting of $ 499 2013 , consisting of $ 499 million for retail store facility retail store facility and $ 6.5 billion for other capital expenditure payment for capital expenditure during 2013 were $ 8.2 billion . expenditure during 2013 were $ 8.2 billion . 35 Table of were $ 8.2 billion . 35 Table of Contents The Company Company anticipates utilizing approximately $ 11.0 billion for capital expenditure during billi capital expenditure during 2014 , including approximately $ 550 2014 , including approximately $ 550 million for retail store facility store facility and approximately $ 10.5 billion for other capital expenditure software and enhancement . During 2014 , the Company expects to Company expects to open about 30 new retail store , with outside of the U.S. During 2014 , the Company also expects also expects to remodel approximately 20 of it existing store . In the third quarter of 2013 , the Company issued $ , the Comp", + "debt": "debt $ $ 116,371 $ 75,183 $ 47,501 Long-term debt $ 16,960 $ $ 47,501 Long-term debt $ 16,960 $ 0 $ 0 $ Long-term debt $ 16,960 $ 0 $ 0 $ 0 $ $ 16,960 $ 0 $ 0 $ 0 $ 0 Long-term $ 0 $ 0 $ 0 $ 0 Long-term obligation ( $ 0 $ 0 $ 0 Long-term obligation ( a ) obligation ( a ) $ 20,208 $ 16,664 $ 10,100 $ a ) $ 20,208 $ 16,664 $ 10,100 $ 5,531 $ $ 20,208 $ 16,664 $ 10,100 $ 5,531 $ 3,502 Total $ 16,664 $ 10,100 $ 5,531 $ 3,502 Total liability $ $ 10,100 $ 5,531 $ 3,502 Total liability $ 83,451 $ $ 3,502 T debt outstanding during 2012 and 2011 and accordingly did debt outstanding during 2012 and 2011 and accordingly did not incur and effective tax rate for 2013 , 2012 and 2011 are tax rate for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in ( in million ) : 2013 2012 2011 Provision for income in million ) : 2013 2012 2011 Provision for income tax million ) : 2013 2012 2011 Provision for income tax $ Provision for income tax $ 13,118 $ 14,030 $ 8,283 Effective income tax debt $ $ 16,597 $ 15,452 $ 7,777 Long-term debt $ 16,960 $ $ 7,777 Long-term debt $ 16,960 $ 0 $ 0 Working Long-term debt $ 16,960 $ 0 $ 0 Working capital $ $ 16,960 $ 0 $ 0 Working capital $ 29,628 $ $ 0 Working capital $ 29,628 $ 19,111 $ 17,018 Cash Working capital $ 29,628 $ 19,111 $ 17,018 Cash generated by $ 29,628 $ 19,111 $ 17,018 Cash generated by operating activity generated by operating activity $ 53,666 $ 50,856 $ 37,529 Cash operating activity $ 53,666 $ 50,856 $ 37,529 Cash used in $ 5 debt of $ 16.9 billion . During 2012 , $ 16.9 billion . During 2012 , cash generated from operating from operating activity of $ 50.9 billion wa a result of wa a result of $ 41.7 billion of net income and to net income of $ 9.4 billion , partially offset by asset and liability of $ 299 million . Cash used in used in investing activity during 2012 of $ 48.2 billion consisted activity during 2012 of $ 48.2 billion consisted primarily of net of marketable security of $ 38.4 billion and cash used to pla debt , debt , which included $ 3.0 billion of floating-rate note . aggregate notional amount of $ 3.0 billion , which , in aggregate principal amount of $ 17.0 billion , $ 2.5 billion $ 17.0 billion , $ 2.5 billion is due in 2016 2.5 billion is due in 2016 and $ 14.5 billion is due in 2016 and $ 14.5 billion is due in 2018 14.5 billion is due in 2018 through 2043. Dividend and Stock is due in 2018 through 2043. Dividend and Stock Repurchase Program In the third quarter of 2013 , the Company raised i debt $ Years Total Long-term debt $ 0 $ 2,500 $ 6,000 $ Long-term debt $ 0 $ 2,500 $ 6,000 $ 8,500 $ $ 0 $ 2,500 $ 6,000 $ 8,500 $ 17,000 Operating $ 2,500 $ 6,000 $ 8,500 $ 17,000 Operating lease 610 $ 6,000 $ 8,500 $ 17,000 Operating lease 610 1,200 1,056 8,500 $ 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase $ 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase obligation 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase obligation 18,616 Operating lease 610 1,200 1 debt , debt , which included $ 3.0 billion of floating-rate note . aggregate notional amount of $ 3.0 billion , which , in will have to adjust local 42 Table of Contents currency product , typically for up to 12 month . However , the , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 201 million a of September 28 201 million a of September 28 , 2013 compared to a a of September 28 , 2013 compared to a maximum one-day in fair value of $ 200 million a of September 29 200 debt 16,960 0 Deferred revenue \u2013 non-current 2,625 2,648 Long-term debt 16,960 0 Other non-current 2,625 2,648 Long-term debt 16,960 0 Other non-current liability 20,208 2,625 2,648 Long-term debt 16,960 0 Other non-current liability 20,208 16,664 16,960 0 Other non-current liability 20,208 16,664 Total liability 83,451 57,854 0 Other non-current liability 20,208 16,664 Total liability 83,451 57,854 Commitments liability 20,208 16,664 Total liability 83,451 57,854 Commitments and contingency Shareho debt , net 16,896 0 0 Cash generated by/ long-term debt , net 16,896 0 0 Cash generated by/ ( debt , net 16,896 0 0 Cash generated by/ ( used in ) financing activity ( 16,379 ) ( 1,698 ) 1,444 activity ( 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease ) in in cash and cash equivalent 3,513 931 ( 1,446 ) Cash cash and cash equivalent 3,513 931 ( 1,446 ) Cash and cash equivalent 3,513 931 ( 1,446 ) Cash and cash equivalent end of the year $ 14,259 $ 10,746 $ debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term portion of the gain or 54 Table of Contents loss on no fair value hedge in 2013 , 2012 and 2011 . value hedge in 2013 , 2012 and 2011 . The net in 2013 , 2012 and 2011 . The net gain or building is the lesser of 30 year or the remaining life property and equipment wa $ 5.8 billion , $ 2.6 billion $ 5.8 billion , $ 2.6 billion and $ 1.6 billion $ 2.6 billion and $ 1.6 b Debt In May \u2013 Long-Term Debt In May 2013 , the Company issued floating- aggregate principal amount of $ 17.0 billion ( collectively the \u201c the Notes a of September 28 , 2013 , are a a of September 28 , 2013 , are a follows : Rate Floating-rate note , due 2016 $ 1,000 0.51 % Floating-rate note , due 2016 $ 1,000 0.51 % Floating-rate note , , due 2016 $ 1,000 0.51 % Floating-rate note , due % Floating-rate note , due 2018 2,000 1.10 % Fixed-rate 0.45 Floating-rate note , due 2018 2,000 1.10 % Fixed-rat", + "share_repurchase": "share repurchase authorization to $ 60 billion and raising it quarterly it quarterly dividend to $ 3.05 per common share beginning in common share beginning in May 2013 . During 2013 , the in May 2013 . During 2013 , the Company utilized $ , the Company utilized $ 23.0 billion to repurchase common share and paid dividend of $ 10.5 billion or $ 11.40 per $ 10.5 billion or $ 11.40 per common share . In return program , in May 2013 the Company issued $ 17.0 2013 the Company issued $ 17.0 billion of note with varyi share repurchase program that in the fourth quarter of 2012 . During the fourth quarter Company paid dividend of $ 2.5 billion or $ 2.65 per $ 2.5 billion or $ 2.65 per common share . 26 2.65 per common share . 26 Table of Contents Sales Data unit sale by product during 2013 , 2012 and 2011 ( by product during 2013 , 2012 and 2011 ( dollar in during 2013 , 2012 and 2011 ( dollar in million and unit in thousand ) : 2013 Change 2012 Change 2011 Net thousand ) : 2013 Change 2012 Change 2011 Net Sales by : 2013 Cha share repurchase program to be completed by December 2015 . The Company \u2019 s under plan complying with Rule 10b5-1 of the Exchange Act . Act . Beginning in August 2012 through December 2015 , the in August 2012 through December 2015 , the Company anticipates it it will utilize approximately $ 100 billion to pay dividend and unit , of which $ 37.1 billion had been utilized through had been utilized through September 28 , 2013 . The following utilized through September 28 , 2013 . The following table present net s", + "earnings_per_share": "Earnings per share $ 25,922 $ 14,013 $ 8,235 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 $ : Basic $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 39.75 $ 28.05 $ 15.41 $ 9.22 Diluted $ 39.75 $ 44.15 15.41 $ 9.22 Diluted $ 39.75 $ 44.15 $ 27.68 $ 9.22 Diluted $ 39.75 $ 44.15 $ 27.68 $ 15.15 $ $ 39.75 $ 44.15 $ 27.68 $ 15.15 $ 9.08 Cash $ 44.15 $ 27.68 $ 15.15 $ 9.08 Cash dividend declared $ 27.68 $ 15.15 $ 9.08 Cash earnings per share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted per share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 907,005 Total 924,258 909,461 893,016 Diluted 931,662 Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 Diluted : Basic $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 $ 27.68 Shares 28.05 Diluted $ 39.75 $ 44.15 $ 27.68 Shares used in $ 39.75 $ 44.15 $ 27.68 Shares used in computing earnings earnings per share : Basic 925,331 934,818 924,258 Diluted 931,662 945,355 per share : Basic 925,331 934,818 924,258 Diluted 931,662 94 earnings per share for 2013 , 2012 , and 2011 per share for 2013 , 2012 , and 2011 ( in 2013 , 2012 , and 2011 ( in thousand , except per share amount ) : 2013 2012 2011 Numerator : Net share amount ) : 2013 2012 2011 Numerator : Net income amount ) : 2013 2012 2011 Numerator : Net income $ Numerator : Net income $ 37,037 $ 41,733 $ 25,922 Denominator Net income $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average share outstanding Denominator : Weigh earnings per share Weighted-average diluted share 931,662 945,355 936,645 Basic earnings per share $ Basic earnings per share $ 40.03 $ 44.64 $ 28.05 Diluted per share $ 40.03 $ 44.64 $ 28.05 Diluted earnings per $ 40.03 $ 44.64 $ 28.05 Diluted earnings per share $ Diluted earnings per share $ 39.75 $ 44.15 $ 27.68 Potentially per share $ 39.75 $ 44.15 $ 27.68 Potentially dilutive security $ 39.75 $ 44.15 $ 27.68 Potentially dilutive security representing 4.2 27.68 Potentially dilutive security representing 4.2 m Earnings per share $ 6,900 $ 9,547 $ 13,078 Earnings per share ( a a ) : Basic $ 8.31 $ 7.51 $ 10.16 $ : Basic $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10.09 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10.09 $ 13.81 Fourth $ 8.26 $ 7.47 $ 10.09 $ 13.81 Fourth Quarter Third $ 7.47 $ 10.09 $ 13.81 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2012 Net sale $ 35,966 $ Quarter 20 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share ( a a ) : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 13.87 ( $ 8.67 $ 9.32 $ 12.30 $ 13.87 ( a ) $ 9.32 $ 12.30 $ 13.87 ( a ) Basic and diluted earnings per share . 78 Table of Contents REPORT OF Apple Inc. a of September 28 , 2013 and September 2", + "tax_rate": "tax rate for 2013 , 2012 and 2011 are tax rate for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in ( in million ) : 2013 2012 2011 Provision for income in million ) : 2013 2012 2011 Provision for income tax million ) : 2013 2012 2011 Provision for income tax $ Provision for income tax $ 13,118 $ 14,030 $ 8,283 Effective income tax $ 13,118 $ 14,030 $ 8,283 Effective tax rate $ 13,118 $ 14,030 $ 8,283 Effective tax rate 26.2 % $ 8,283 Effective tax rate 26.2 % 25.2 % 24.2 % tax rate 26.2 % 25.2 % 24.2 % The Company rate 26.2 % 25.2 % 24.2 % The Company \u2019 s federal income tax rate of 35 % due primarily to certain the U.S. As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had deferred and tax credit of $ 4.2 billion , and deferred tax deferred tax liability of $ 16.5 billion . Management belief it tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining tax rate of 12.5 % . As of September % . As of September 28 , 2013 , U.S. income As of September 28 , 2013 , U.S. income tax have a cumulative total of $ 54.4 billion of such earnings . estimated to be approximately $ 18.4 billion . As of September billion . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , $ 111.3 2013 and September 29 , 2012 , $ 111.3 billion and 29 , 2012 , $ 111.3 billion and $ 82.6 billion $ 111.3 billio tax rate ( 35 % in 2013 , 2012 rate ( 35 % in 2013 , 2012 and 2011 ) 35 % in 2013 , 2012 and 2011 ) to income in 2013 , 2012 and 2011 ) to income before provision provision for income tax for 2013 , 2012 and 2011 , income tax for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Computed expected tax in million ) : 2013 2012 2011 Computed expected tax $ million ) : 2013 2012 2011 Computed expected tax $ 17,554 2011 Computed expected tax $ 17,554 $ 19,5 tax rate $ 13,118 $ 14,030 $ 8,283 Effective tax rate 26.2 % $ 8,283 Effective tax rate 26.2 % 25.2 % 24.2 % Effective tax rate 26.2 % 25.2 % 24.2 % The Company rate 26.2 % 25.2 % 24.2 % The Company \u2019 s tax effect of the difference 64 Table of Contents between the from equity award of $ 643 million , $ 1.4 billion $ 643 million , $ 1.4 billion and $ 1.1 billion $ 1.4 billion and $ 1.1 billion in 2013 , 2012 and $ 1.1 billion in 2013 , 2012 and 2011 , 1.1 billion in 2013 , 2012 and 2011 , respectively , tax rate . 65 Table of Contents The aggregate interest and penalty , for 2013 , 2012 and 2011 , penalty , for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Beginning Balance $ in million ) : 2013 2012 2011 Beginning Balance $ 2,062 million ) : 2013 2012 2011 Beginning Balance $ 2,062 $ 2012 2011 Beginning Balance $ 2,062 $ 1,375 $ 943 Increases Beginning Balance $ 2,062 $ 1,375 $ 943 Increases related to $ 2,062 $ 1,375 $ 943 Increases related to t", + "geographic_information": "Geographic Data During 2013 , the Company \u2019 s international net sale accounted for 39 % and 61 % , accounted for 39 % and 61 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , \u201c Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Geographic operates Apple retail store in 13 country , including the U.S a those described in Note 1 , \u201c Summary of Significant the Retail segment were $ 495 million , $ 858 million $ 495 million , $ 858 million and $ 612 million $ 858 million and $ 612 million for 2013 , 2012 and $ 612 million for 2013 , 2012 and 2011 , 612 million for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . The Company depreciation and amortization wa $ 6.8 billion , $ 3.3 billion $ 6.8 billion , ", + "common_stock": "common stock were and outstanding a of October 18 , 2013 . DOCUMENTS INCORPORATED a of October 18 , 2013 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2014 annual meeting of shareholder ( of shareholder ( the \u201c 2014 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2014 10-K where indicated . The 2014 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of of Contents Apple Inc. Form 10-K For the Fiscal Year Ended th common stock beginning in 2013 . In April 2013 , in 2013 . In April 2013 , the Company \u2019 s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion . The Company \u2019 under plan complying with Rule 10b5-1 of the Exchange Act . Exchange Act . The $ 37.1 billion represents the remaining amount the authorized repurchase program . 22 Table of Contents Company Stock , the S & P 500 Index , the S & . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & common stock of $ 22.9 billion and cash used to dividend equivalent right of $ 10.6 billion , partially offset by of long-term debt of $ 16.9 billion . During 2012 , $ 16.9 billion . During 2012 , cash generated from operating from operating activity of $ 50.9 billion wa a result of wa a result of $ 41.7 billion of net income and to net income of $ 9.4 billion , partially offset by asset and liability of $ 299 million . Cash used in used in investing activity during 2012 of $ 48.2 billion consisted activity common stock . In April 2013 , the Company \u2019 s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion , of which $ billion , of which $ 23.0 billion had been utilized a been utilized a of September 28 , 2013 . The share a of September 28 , 2013 . The share repurchase program to be completed by December 2015 . The Company \u2019 s under plan complying with Rule 10b5-1 of the Exchange Act . Act . Beginning in August 2012 through December 2015 , the in August 2012 through De Common stock 489 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 Common stock ) Share-based compensation 0 1,740 0 0 1,740 Common stock issued Share-based compensation 0 1,740 0 0 1,740 Common stock issued under compensation 0 1,740 0 0 1,740 Common stock issued under stock share withheld for employee tax 9,931 200 ( 762 ) 0 withheld for employee tax 9,931 200 ( 762 ) 0 ( employee tax 9,931 200 ( 762 ) 0 ( 562 ) 9,931 200 ( 762 ) 0 ( 562 ) Tax benefit ( 762 ) 0 ( 562 ) Tax benefit from equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including tr common stock Repurchase of common stock ( 46,976 ) 0 ( 22,950 ) common stock ( 46,976 ) 0 ( 22,950 ) 0 ( ( 46,976 ) 0 ( 22,950 ) 0 ( 22,950 ) ) 0 ( 22,950 ) 0 ( 22,950 ) Share-based compensation ( 22,950 ) 0 ( 22,950 ) Share-based compensation 0 2,253 ( 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common stock ) Share-based compensation 0 2,253 0 0 2,253 Common stock issued Share-based compensation 0 2,253 0 0 2,253 Common stock issued under Common stock issued under stock share withheld for employee tax 6,981 ( 143 ) ( 444 for employee tax 6,981 ( 143 ) ( 444 ) 0 6,981 ( 143 ) ( 444 ) 0 ( 587 ) 143 ) ( 444 ) 0 ( 587 ) Tax benefit ( 444 ) 0 ( 587 ) Tax benefit from equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 common stock 530 665 831 Excess tax benefit issuance of common stock 530 665 831 Excess tax benefit from of common stock 530 665 831 Excess tax benefit from equity tax benefit from equity award 701 1,351 1,133 Taxes paid related benefit from equity award 701 1,351 1,133 Taxes paid related to from equity award 701 1,351 1,133 Taxes paid related to net settlement of equity award ( 1,082 ) ( 1,226 ) ( award ( 1,082 ) ( 1,226 ) ( 520 ) Dividends ) ( 1,226 ) ( 520 ) Dividends and dividend equivalent dividend equ common stock ( Repurchase of common stock ( 22,860 ) 0 0 Proceeds from common stock ( 22,860 ) 0 0 Proceeds from issuance of stock ( 22,860 ) 0 0 Proceeds from issuance of long-term of long-term debt , net 16,896 0 0 Cash generated by/ long-term debt , net 16,896 0 0 Cash generated by/ ( debt , net 16,896 0 0 Cash generated by/ ( used in ) financing activity ( 16,379 ) ( 1,698 ) 1,444 activity ( 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease ) in in cash and cash common stock share of common stock for 2013 , 2012 and 2011 , common stock for 2013 , 2012 and 2011 , respectively , for 2013 , 2012 and 2011 , respectively , were excluded debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term portion of the gain or 54 Table of Contents loss on no fair value hedge in 2013 , 2012 and 2011 . value hedge in 2013 , 2012 and 2011 . The net in 2013 , 2012 and 2011 . The net gain or building is the less common stock beginning in 2013 . In April 2013 , in 2013 . In April 2013 , the Company \u2019 s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion , of which $ billion , of which $ 23.0 billion had been utilized 67 23.0 billion had been utilized 67 Table of Contents a of of Contents a of September 28 , 2013 . The Company a of September 28 , 2013 . The Company \u2019 s under plan complying with Rule 10b5-1 of the Securities Exchange Act the Securities Exchange Act of 1934 , common stock in 2013 . In the first quarter In the first quarter of 2013 , 2.6 million share were first quarter of 2013 , 2.6 million share were initially delivered the Company . In April 2013 , the purchase period for ASR ended and an additional 1.5 million share were delivered to Company . In total , 4.1 million share were delivered under average repurchase price of $ 478.20 per share . The share the up-front payment of $ 1.95 billion wa accounted for a in the first quarter of 2013 . In April 2013 , of 20 Common Stock 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s Certificate " +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001193125-15-356351/full-submission_features.json b/src/data/feature/AAPL/10-K/0001193125-15-356351/full-submission_features.json new file mode 100644 index 0000000..6c1fdc7 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001193125-15-356351/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue . ( 2 ) Includes current and long-term debt . Apple Inc. | 2015 Form 10-K | 22 Table Apple Inc. | 2015 Form 10-K | 22 Table of Contents | 2015 Form 10-K | 22 Table of Contents Item 7 22 Table of Contents Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the headi revenue from the and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2015 Form 10-K | 24 Table Apple Inc. | 2015 Form 10-K | 24 Table of Contents | 2015 Form 10-K | 24 Table of Contents Product Performance and unit sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Change 2014 Change 2013 Net thousand ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 20 Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( \u201c ASU 2014-09 606 ) ( \u201c ASU 2014-09 \u201d ) , which amends for revenue recognition . ASU 2014-09 is based on principle that original effective date for ASU 2014-09 would have required the Company in it first quarter of 2018 . In August 2015 , of 2018 . In August 2015 , the FASB issued ASU FASB issued ASU No . 2015-14 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) \u2013 Deferral of the the effective date of ASU 2014-09 fo revenue standard for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 ( in million 2014 and September 28 , 2013 ( in million ) : ( in million ) : 2015 2014 2013 Cash , cash in million ) : 2015 2014 2013 Cash , cash equivalent million ) : 2015 2014 2013 Cash , cash equivalent and equivalent and marketable security $ 20 revenue 8,940 8,491 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 Current revenue 8,940 8,491 Commercial paper 8,499 6,308 Current portion of long-term 8,940 8,491 Commercial paper 8,499 6,308 Current portion of long-term debt Current portion of long-term debt 2,500 0 Total current liability 80,610 portion of long-term d revenue , non-current 0 Total current liability 80,610 63,448 Deferred revenue , non-current 3,624 63,448 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Other non-current 3,624 3,031 Long-term debt 53,463 28,987 Other non-current liability 33,427 3,624 3,031 Long-term debt 53,463 28,987 Other non-current liability 33,427 24,826 53,463 28,987 Other non-current liability 33,427 24,826 Total liability 171,124 revenue 1,042 167 1,080 Accounts payable 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,080 Accounts payable 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,459 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,459 Other current and 5,938 2,340 Deferred revenue 1,042 1,460 1,459 Other current and non-current 2,340 Deferred revenue 1,042 1,460 1,459 Other current and non-current liability Other current and non-current liability 8,746 6,010 4,521 Cash generated by current and non-current liability 8,74 revenue 1,941 1,787 capital asset and investment 2,238 898 Deferred revenue 1,941 1,787 Deferred investment 2,238 898 Deferred revenue 1,941 1,787 Deferred cost sharing 667 2,238 898 Deferred revenue 1,941 1,787 Deferred cost sharing 667 0 1,941 1,787 Deferred cost sharing 667 0 Share-based compensation 575 454 1,787 Deferred cost sharing 667 0 Share-based compensation 575 454 Unrealized sharing 667 0 Share-based compensation 575 454 Unrealized loss 564 130 667 0 Share-based compensation 575 454 Unreal Revenue $ ( 2,432 ) $ 449 Cost of $ ( 2,432 ) $ 449 Cost of sale ( 2,168 449 Cost of sale ( 2,168 ) ( 295 ) Other sale ( 2,168 ) ( 295 ) Other income/ ( expense ( expense ) , net 456 15 Interest rate contract Other expense ) , net 456 15 Interest rate contract Other income/ ( expense ) , net 17 16 ( 4,127 ) 185 expense ) , net 17 16 ( 4,127 ) 185 Unrealized , net 17 16 ( 4,127 ) 185 Unrealized ( gain 17 16 ( 4,127 ) 185 Unrealized ( gain ) /losses ( expense ) , net 91 ( 205 ) Total amount ) , net 91 ( Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2015 ) $ 18,000 for calendar year 2015 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 200 million , $ 163 million $ 200 million , $ 163 million and $ 135 million $ 163 million and $ 135 million in 2015 , 2014 and $ 135 million in 2015 , 2014 revenue from the and other service . ( 3 ) Includes sale of Apple and third-party accessory . Note 12 \u2013 Selected Quarterly Financial Information of the four quarter of 2015 and 2014 ( in million four quarter of 2015 and 2014 ( in million , except Quarter Second Quarter First Quarter 2015 : Net sale $ 51,501 2015 : Net sale $ 51,501 $ 49,605 $ 58,010 $ Net sale $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross margin $ $ 49,605 $ 58,010 $ 74,599 Gross margin $ 20,548 $ ", + "expenses": "Expenses Operating expense for 2015 , 2014 and 2013 are Operating expense for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( dollar dollar in million ) : 2015 Change 2014 Change 2013 Research million ) : 2015 Change 2014 Change 2013 Research and development : 2015 Change 2014 Change 2013 Research and development $ 8,067 2013 Research and development $ 8,067 34 % $ 6,041 35 Research and development $ 8,067 34 % $ 6,041 35 % $ 8,067 34 % $ 6,041 35 % $ 4,475 Percentage 8,067 3", + "net_income": "Net income $ $ 170,910 $ 156,508 $ 108,249 Net income $ 53,394 $ $ 108,249 Net income $ 53,394 $ 39,510 $ 37,037 $ Net income $ 53,394 $ 39,510 $ 37,037 $ 41,733 $ $ 53,394 $ 39,510 $ 37,037 $ 41,733 $ 25,922 Earnings $ 39,510 $ 37,037 $ 41,733 $ 25,922 Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 $ : Basic $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 9.22 $ 5.72 $ 6.38 $ 4. net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.7 billion . Cash used in in investing activity of $ 56.3 billion during 2015 consisted primarily of $ 56.3 billion during 2015 consisted primarily of cash used and maturity , of $ 44.4 billion and cash used to plant and equipment of $ 11.2 billion . Cash used in in financing activity of $ 17.7 billion during 2015 consisted primarily of $ 17.7 billion during 2015 consisted primarily of cash used repurchase common st net income , to net income of $ 13.2 billion and an increase in asset and liability of $ 7.0 billion . Cash used in in investing activity of $ 22.6 billion during 2014 consisted primarily of $ 22.6 billion during 2014 consisted primarily of cash used and maturity , of $ 9.0 billion ; cash used to plant and equipment of $ 9.6 billion ; and cash paid cash acquired , of $ 3.8 billion . Cash used in in financing activity of $ 37.5 billion during 2014 consisted primarily of $ 37.5 billion during 2014 consisted Net income $ Provision for income tax 19,121 13,973 13,118 Net income $ 53,394 for income tax 19,121 13,973 13,118 Net income $ 53,394 $ 13,973 13,118 Net income $ 53,394 $ 39,510 $ 37,037 Earnings Net income $ 53,394 $ 39,510 $ 37,037 Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 Diluted : Basic $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 $ 5.68 Shares 5.72 Diluted $ 9.22 Net income $ , 2014 September 28 , 2013 Net income $ 53,394 $ , 2013 Net income $ 53,394 $ 39,510 $ 37,037 Other Net income $ 53,394 $ 39,510 $ 37,037 Other comprehensive income/ $ 53,394 $ 39,510 $ 37,037 Other comprehensive income/ ( loss of tax effect of $ 201 , $ 50 and $ of $ 201 , $ 50 and $ 35 , respectively , $ 50 and $ 35 , respectively ( 411 ) $ 35 , respectively ( 411 ) ( 137 ) ( respectively ( 411 ) ( 137 ) ( 112 ) Change ) ( 137 ) ( 112 ) Change in unrealized gains/losses expense ) of $ ( 441 Net income 0 $ 101,289 $ 499 $ 118,210 Net income 0 0 37,037 499 $ 118,210 Net income 0 0 37,037 0 37,037 Other $ 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive income/ Net income 0 0 37,037 0 37,037 Other comprehensive income/ ( income 0 0 37,037 0 37,037 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 ( 970 ) income/ ( loss ) 0 0 0 ( 970 ) ( ( loss ) 0 0 0 ( 970 ) ( 970 ) 0 0 0 ( 970 ) ( 970 ) Dividends 0 ( 97 Net income 0 19,764 104,256 ( 471 ) 123,549 Net income 0 0 39,510 471 ) 123,549 Net income 0 0 39,510 0 39,510 Other ) 123,549 Net income 0 0 39,510 0 39,510 Other comprehensive 123,549 Net income 0 0 39,510 0 39,510 Other comprehensive income/ Net income 0 0 39,510 0 39,510 Other comprehensive income/ ( income 0 0 39,510 0 39,510 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 1,553 1,553 Dividends income/ ( loss ) 0 0 0 1,553 1,553 Dividends and ( loss ) 0 0 0 1,553 1,553 Dividen Net income 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 0 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 0 53,394 87,152 1,082 111,547 Net income 0 0 53,394 0 53,394 Other 1,082 111,547 Net income 0 0 53,394 0 53,394 Other comprehensive 111,547 Net income 0 0 53,394 0 53,394 Other comprehensive income/ Net income 0 0 53,394 0 53,394 Other comprehensive income/ ( income 0 0 53,394 0 53,394 Other comprehensive income/ ( loss Net income Operating activity : Net income 53,394 39,510 37,037 Adjustments to reconcile activity : Net income 53,394 39,510 37,037 Adjustments to reconcile net : Net income 53,394 39,510 37,037 Adjustments to reconcile net income activity : Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense : Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense 3,586 Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense 3,586 2,863 7, net income for 2015 , 2014 and 2013 ( net income in million share in thousand ) : 2015 2014 2013 Numerator : Net in thousand ) : 2015 2014 2013 Numerator : Net income thousand ) : 2015 2014 2013 Numerator : Net income $ Numerator : Net income $ 53,394 $ 39,510 $ 37,037 Denominator Net income $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,753,421 6,085,572 6,477,320 Effe Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96 Net income $ $ 14,735 $ 17,947 $ 21,846 Net income $ 8,467 $ $ 21,846 Net income $ 8,467 $ 7,748 $ 10,223 $ Net income $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings per share $ 7,748 $ 10,223 $ 13,072 Earnings per share ( 1 13,072 Earnings per share ( 1 ) : Basic $ 1.43 1 ) : Basic $ 1.43 $ 1.29 $ 1.67 $ : Basic $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 ", + "assets": "Assets s capital expenditure were $ 11.2 billion during 2015 . The were $ 11.2 billion during 2015 . The Company anticipates utilizing Company anticipates utilizing approximately $ 15.0 billion for capital expenditure during billion for capital expenditure during 2016 , which includes product tooling store facility . Debt In 2014 , the Board of Directors repurchase . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had $ , the Company had $ 8.5 billion of Commercial Pape ASSETS September 26 , 2015 September 27 , 2014 ASSETS : Current , 2015 September 27 , 2014 ASSETS : Current asset : Cash and cash equivalent $ 21,120 $ 13,844 Short-term marketable security cash equivalent $ 21,120 $ 13,844 Short-term marketable security 20,481 11,233 $ 13,844 Short-term marketable security 20,481 11,233 Accounts receivable , le 13,844 Short-term marketable security 20,481 11,233 Accounts receivable , le allowance , le allowance of $ 82 and $ 86 , respectively of $ 82 and $ 86 , respe Assets indefinite lived intangible asset during 2015 , 2014 and 2013 . intangible asset during 2015 , 2014 and 2013 . The Company during 2015 , 2014 and 2013 . The Company established reporting each reporting unit . In 2015 and 2014 , the Company unit . In 2015 and 2014 , the Company \u2019 s fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than asset or liability . Level 3 \u2013 Inputs that are generally liability . Apple Inc. | 2015 Form 10-K | 4 Assets On July 31 , 2014 , the Company Assets On July 31 , 2014 , the Company completed the for these acquisition wa $ 2.6 billion , which consisted primarily cash , of which $ 2.2 billion wa allocated to goodwill allocated to goodwill , $ 636 million to acquired intangible asset acquired intangible asset and $ 258 million to net liability assumed , the Company repaid $ 295 million of existing Beats outstanding , the Company issued approximately 5.1 million share of it common wa valued at approximatel", + "liabilities": "LIABILITIES AND SHAREHOLDERS Total asset $ 290,479 $ 231,839 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 25,181 18,453 Deferred revenue 8,9 Liabilities 2015 2014 Deferred tax liability $ Contents Other Non-Current Liabilities 2015 2014 Deferred tax liability $ 24,062 2014 Deferred tax liability $ 24,062 $ 20,259 Other non-current liability tax liability $ 24,062 $ 20,259 Other non-current liability 9,365 4,567 $ 20,259 Other non-current liability 9,365 4,567 Total other non-current liability 20,259 Other non-current liability 9,365 4,567 Total other non-current liability $ Total other non-current liability $ 33,427 $ 24,826 Other Income/ ( non", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 22 6 . Selected Financial Data 22 Item 7 . Management \u2019 Selected Financial Data 22 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 23 Item 7A . Quantitative and Results of Operations 23 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplement equity $ Total shareholder \u2019 equity $ 119,355 $ 111,547 $ 123,549 $ \u2019 equity $ 119,355 $ 111,547 $ 123,549 $ 118,210 $ $ 119,355 $ 111,547 $ 123,549 $ 118,210 $ 76,615 ( $ 111,547 $ 123,549 $ 118,210 $ 76,615 ( 1 ) $ 123,549 $ 118,210 $ 76,615 ( 1 ) Other long-term $ 118,210 $ 76,615 ( 1 ) Other long-term obligation exclude non-current deferred revenue . ( 2 ) Includes current and long-term debt . Apple Inc. | 2015 Form 10-K | 22 Table Apple Inc. | 2015 Form 10-K | 22 Table of Contents | 2015 Form 10- Equity Awards Total 2015 $ 11,561 $ 6,000 $ Equity Awards Total 2015 $ 11,561 $ 6,000 $ 30,026 $ Total 2015 $ 11,561 $ 6,000 $ 30,026 $ 1,499 $ $ 11,561 $ 6,000 $ 30,026 $ 1,499 $ 49,086 2014 $ 6,000 $ 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 $ 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 $ 49,086 2014 EQUITY liability : Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 Current revenue 8,940 8,491 Commercial paper 8,49 equity 119,355 1,082 Total shareholder \u2019 equity 119,355 111,547 Total liability and shareholder Total shareholder \u2019 equity 119,355 111,547 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 290,479 $ 231,839 See accompanying Notes \u2019 equity $ 290,479 $ 231,839 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 41 Table Apple Inc. | 2015 Form 10-K | 41 Table of Contents | 2015 Form 10-K | 41 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 1,232 Balances a of September 28 1,232 Balances a of September 28 , 2013 6,294,494 19,764 104,256 a of September 28 , 2013 6,294,494 19,764 104,256 ( 471 of September 28 , 2013 6,294,494 19,764 104,256 ( 471 ) September 2 equity , including transfer pricing adjustment 0 735 0 0 735 Balances including transfer pricing adjustment 0 735 0 0 735 Balances a transfer pricing adjustment 0 735 0 0 735 Balances a of pricing adjustment 0 735 0 0 735 Balances a of September adjustment 0 735 0 0 735 Balances a of September 27 735 Balances a of September 27 , 2014 5,866,161 23,313 87,152 a of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net September 27 , 201 equity , including transfer pricing adjustment 0 748 0 0 748 Balances including transfer pricing adjustment 0 748 0 0 748 Balances a transfer pricing adjustment 0 748 0 0 748 Balances a of pricing adjustment 0 748 0 0 748 Balances a of September adjustment 0 748 0 0 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 $ 27,416 a of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ ( 345 equity tax benefit from equity award 749 739 701 Taxes paid related benefit from equity award 749 739 701 Taxes paid related to from equity award 749 739 701 Taxes paid related to net settlement of equity award ( 1,499 ) ( 1,158 ) ( award ( 1,499 ) ( 1,158 ) ( 1,082 ) Dividends ) ( 1,158 ) ( 1,082 ) Dividends and dividend equivalent and dividend equivalent paid ( 11,561 ) ( 11,126 ) ( paid ( 11,561 ) ( 11,126 ) ( 10,564 ) Repurchase ) ( 11,126 ) ( 10,564 ) Repurchase of common stock Repurchase of comm equity award of $ 748 million , $ 706 million $ 748 million , $ 706 million and $ 643 million $ 706 million and $ 643 million in 2015 , 2014 and $ 643 million in 2015 , 2014 and 2013 , 643 million in 2015 , 2014 and 2013 , respectively , in 2015 , 2014 and 2013 , respectively , which were stock . Apple Inc. | 2015 Form 10-K | 55 Table Apple Inc. | 2015 Form 10-K | 55 Table of Contents | 2015 Form 10-K | 55 Table of Contents As of of Contents As of September 26 , 2015 and September 27 As of September 2 Equity Dividends Amount ( in million ) 2015 : Fourth quarter $ 0.52 2015 : Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 2,997 Second 0.52 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 Total quarter 0.47 2,734 First quarter 0.47 2,750 Total cas equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award", + "cash_flow": "cash flow $ 21,120 $ 13,844 $ 14,259 Supplemental cash flow disclosure : income tax , net $ 13,252 $ 10,026 $ 9,128 Cash , net $ 13,252 $ 10,026 $ 9,128 Cash paid for $ 13,252 $ 10,026 $ 9,128 Cash paid for interest $ Cash paid for interest $ 514 $ 339 $ 0 See for interest $ 514 $ 339 $ 0 See accompanying Notes $ 514 $ 339 $ 0 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 43 Table Apple Inc. | 2015 Form 10-K | 43 Table of Contents | 2015 Form 10-K | 43 Table of Content Cash Flow Hedges fair value a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,442 $ 109 $ 1,551 Interest exchange contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 394 1,5", + "gross_margin": "Gross Margin Gross Margin Gross margin for 2015 , 2014 and 2013 is Gross margin for 2015 , 2014 and 2013 is a follows for 2015 , 2014 and 2013 is a follows ( dollar dollar in million ) : 2015 2014 2013 Net sale $ in million ) : 2015 2014 2013 Net sale $ 233,715 million ) : 2015 2014 2013 Net sale $ 233,715 $ 2014 2013 Net sale $ 233,715 $ 182,795 $ 170,910 Cost Net sale $ 233,715 $ 182,795 $ 170,910 Cost of sale $ 233,715 $ 182,795 $ 170,910 Cost of sale 140,089 112,258 $ 170,910 Cost of sale 140,089 112,25 Gross margin $ 170,910 Cost of sale 140,089 112,258 106,606 Gross margin $ 93,626 Cost of sale 140,089 112,258 106,606 Gross margin $ 93,626 $ 112,258 106,606 Gross margin $ 93,626 $ 70,537 $ 64,304 Gross Gross margin $ 93,626 $ 70,537 $ 64,304 Gross margin percentage $ 93,626 $ 70,537 $ 64,304 Gross margin percentage 40.1 % $ 64,304 Gross margin percentage 40.1 % 38.6 % 37.6 % Gross margin percentage 40.1 % 38.6 % 37.6 % The year-over-year percentage 40.1 % 38.6 % 37.6 % The year-over-year increase in the gross margin percentage in 2015 wa driven primarily by a the gross margin percentage in 2014 wa driven by multiple factor during the first quarter of 2016 to be between 39 % of 2016 to be between 39 % and 40 % . be between 39 % and 40 % . The foregoing statement in the first quarter of 2016 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk Operating Expenses Operating expense for 2015 , 2014 and 2013 are Operating expense for 2 Gross margin 93,626 170,910 Cost of sale 140,089 112,258 106,606 Gross margin 93,626 70,537 Cost of sale 140,089 112,258 106,606 Gross margin 93,626 70,537 64,304 140,089 112,258 106,606 Gross margin 93,626 70,537 64,304 Operating expense : 112,258 106,606 Gross margin 93,626 70,537 64,304 Operating expense : Research 106,606 Gross margin 93,626 70,537 64,304 Operating expense : Research and expense : Research and development 8,067 6,041 4,475 Selling , general : Research and development 8,067 6,041 4,475 S Gross margin $ $ 49,605 $ 58,010 $ 74,599 Gross margin $ 20,548 $ $ 74,599 Gross margin $ 20,548 $ 19,681 $ 23,656 $ Gross margin $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Gross margin $ $ 37,432 $ 45,646 $ 57,594 Gross margin $ 16,009 $ $ 57,594 Gross margin $ 16,009 $ 14,735 $ 17,947 $ Gross margin $ 16,009 $ 14,735 $ 17,947 $ 21,846 Net $ 16,009 $ 14,735 $ 17,947 $ 21,846 Net income $ $ 14,735 $ 17,947 $ 21,846 Net income $ 8,467 $ $ 21,846 Net income $ 8,467 $ 7,748 $ 10,223 $ Net income $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings per share $ 7,748 $ 10,223 $ 13,072 Earnings per share ( 1 13,072 Earnings per share ( 1 ) : Basic $ ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 49,257 39,015 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 26,786 ) ( 18,391 ) Total amortization ( 26,786 ) ( 18,391 ) Total property , plant and equipment , net $ 22,471 $ 20,624 Apple Inc. | , net $ 22,471 $ 20,624 Apple Inc. | 2015 Form $ 20,624 Apple Inc. | 2015 Form 10-K | 53 Table Apple Inc. | 2015 Form 10-K | 53 Table of Contents | 2015 Form 10-K | 53 Table of Contents Other Non-Current of Contents Other N", + "capital_expenditure": "capital expenditure were $ 11.2 billion during 2015 . The were $ 11.2 billion during 2015 . The Company anticipates utilizing Company anticipates utilizing approximately $ 15.0 billion for capital expenditure during billion for capital expenditure during 2016 , which includes product tooling store facility . Debt In 2014 , the Board of Directors repurchase . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had $ , the Company had $ 8.5 billion of Commercial Paper outstanding a weight", + "debt": "debt $ 0 $ 0 $ 0 Total term debt ( 2 0 Total term debt ( 2 ) $ 55,963 $ 28,987 debt ( 2 ) $ 55,963 $ 28,987 $ 16,960 $ 2 ) $ 55,963 $ 28,987 $ 16,960 $ 0 $ $ 55,963 $ 28,987 $ 16,960 $ 0 $ 0 Other $ 28,987 $ 16,960 $ 0 $ 0 Other long-term obligation $ 16,960 $ 0 $ 0 Other long-term obligation ( 1 0 Other long-term obligation ( 1 ) $ 33,427 $ 24,826 obligation ( 1 ) $ 33,427 $ 24,826 $ 20,208 $ 1 ) $ 33,427 $ 24,826 $ 20,208 $ 16,664 $ $ 33,427 $ 24,826 $ 20,208 $ 16,664 $ 10,100 Total $ 24,826 $ 20, debt . Apple Inc. | 2015 Form 10-K | 22 Table Apple Inc. | 2015 Form 10-K | 22 Table of Contents | 2015 Form 10-K | 22 Table of Contents Item 7 22 Table of Contents Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk in Part II , Item 8 of this Form 1 debt during 2015 . Fiscal 2014 Highlights Net debt during 2015 . Fiscal 2014 Highlights Net sale rose 7 2014 Highlights Net sale rose 7 % or $ 11.9 billion rose 7 % or $ 11.9 billion during 2014 compared to or $ 11.9 billion during 2014 compared to 2013 . This billion during 2014 compared to 2013 . This wa driven by the successful introduction of iPhone 5 and 5c in the latter introduction of iPhone 5 and 5c in the latter half of latter half of calendar year 2013 , the successful launch of the succes debt during billion of long-term debt during 2014 , with varying maturity through , with varying maturity through 2044 , and launched a commercial paper program , with $ 6.3 billion outstanding a of September billion outstanding a of September 27 , 2014 . Sales Data a of September 27 , 2014 . Sales Data The following unit sale by product during 2015 , 2014 and 2013 ( by product during 2015 , 2014 and 2013 ( dollar in during 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Chang debt $ 8,499 $ 6,308 $ 0 Total term debt $ 55,963 0 Total term debt $ 55,963 $ 28,987 $ 16,960 Working term debt $ 55,963 $ 28,987 $ 16,960 Working capital $ $ 55,963 $ 28,987 $ 16,960 Working capital $ 8,768 $ $ 16,960 Working capital $ 8,768 $ 5,083 $ 29,628 Cash Working capital $ 8,768 $ 5,083 $ 29,628 Cash generated by $ 8,768 $ 5,083 $ 29,628 Cash generated by operating activity generated by operating activity $ 81,266 $ 59,713 $ 53,666 Cash operating activity $ 81,266 $ 59,713 $ 53,666 Cash us debt of $ 27.1 billion . During 2014 , $ 27.1 billion . During 2014 , cash generated from operating from operating activity of $ 59.7 billion wa a result of wa a result of $ 39.5 billion of net income , to net income of $ 13.2 billion and an increase in asset and liability of $ 7.0 billion . Cash used in in investing activity of $ 22.6 billion during 2014 consisted primarily of $ 22.6 billion during 2014 consisted primarily of cash used and maturity , of $ 9.0 billion ; cash used to plant and equipm Debt In 2014 , the Board of Directors repurchase . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had $ , the Company had $ 8.5 billion of Commercial Paper outstanding a weighted-average interest rate of 0.14 % and maturity generally le month . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company ha outstanding aggregate principal amount of $ 55.7 billion ( collectively the \u201c s Notes a of September 26 , 2015 are a follows a of September 26 debt 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt $ 55,701 34,345 Total term debt $ 55,701 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to the Consolidated Financial Statements in Note 2 , \u201c Financial Instruments \u201d Financial Instruments \u201d and Note 6 , \u201c Debt . \u201d Capital Return Program In April 2015 , the Company \u2019 s repurchase program authorization from $ 90 billion to $ 140 billion $ 90 billion to $ 140 billion o debt $ Years Total Term debt $ 2,500 $ 9,500 $ 9,356 $ Term debt $ 2,500 $ 9,500 $ 9,356 $ 34,345 $ $ 2,500 $ 9,500 $ 9,356 $ 34,345 $ 55,701 Operating $ 9,500 $ 9,356 $ 34,345 $ 55,701 Operating lease 772 $ 9,356 $ 34,345 $ 55,701 Operating lease 772 1,518 1,389 34,345 $ 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase $ 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase commitment 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase commitment 29,464 Operating lease 772 debt a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 to increase by 2015 and September 27 , 2014 to increase by $ 200 2014 to increase by $ 200 million and $ 110 million $ 200 million and $ 110 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , \u201c Debt . \u201d , typically for up to 12 month . However , the exp debt Current portion of long-term debt 2,500 0 Total current liability 80,610 portion of long-term debt 2,500 0 Total current liability 80,610 63,448 2,500 0 Total current liability 80,610 63,448 Deferred revenue , non-current 0 Total current liability 80,610 63,448 Deferred revenue , non-current 3,624 63,448 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Other non-current 3,624 3,031 Long-term debt 53,4 debt 53,463 28,987 Other non-current liability 33,427 24,826 53,463 28,987 Other non-current liability 33,427 24,826 Total liability 171,124 120,292 28,987 Other non-current liability 33,427 24,826 Total liability 171,124 120,292 Commitments liability 33,427 24,826 Total liability 171,124 120,292 Commitments and contingency Shareholders 33,427 24,826 Total liability 171,124 120,292 Commitments and contingency Shareholders \u2019 additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.0000 debt , net 27,114 11,960 16,896 Change in commercial term debt , net 27,114 11,960 16,896 Change in commercial paper debt , net 27,114 11,960 16,896 Change in commercial paper , in commercial paper , net 2,191 6,306 0 Cash used in commercial paper , net 2,191 6,306 0 Cash used in financing paper , net 2,191 6,306 0 Cash used in financing activity used in financing activity ( 17,716 ) ( 37,549 ) ( activity ( 17,716 ) ( 37,549 ) ( 16,379 ) Increase/ ) ( 37,549 ) ( 16,379 ) Increase/ ( decrease ) in ca debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2015 Form 10-K | 47 Table Apple Inc. | 2015 Form 10-K | 47 Table of Contents | 2015 Form 10-K | 47 Table of Contents Allowance for period . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company \u2019 s building is the lesse debt $ 167 $ 53 $ 143 Foreign currency debt ( 71 143 Foreign currency debt ( 71 ) 0 0 Total $ currency debt ( 71 ) 0 0 Total $ 96 $ debt ( 71 ) 0 0 Total $ 96 $ 53 ) 0 0 Total $ 96 $ 53 $ 143 Gains/ 0 Total $ 96 $ 53 $ 143 Gains/ ( Losses $ 96 $ 53 $ 143 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 4,092 $ ( 154 ) $ contract $ 4,092 $ ( 154 ) $ 676 Interest rate $ ( 154 ) $ 676 Interest rate contract ( 17 676 Interest rate contract ( 17 ) ( 16 ) ( contract ( 17 ) ( 16 ) ( 6 ) Total ) Debt Commercial Paper In \u2013 Debt Commercial Paper In 2014 , the Board of Directors repurchase . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company had $ , the Company had $ 8.5 billion and $ 6.3 billion $ 8.5 billion and $ 6.3 billion of Commercial Paper outstanding a weighted-average interest rate of 0.14 % and 0.12 % , rate of 0.14 % and 0.12 % , respectively , and ma Debt As , net $ 2,191 $ 6,306 Long-Term Debt As of September Long-Term Debt As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had outstanding aggregate principal amount of $ 55.7 billion ( collectively the \u201c note . Apple Inc. | 2015 Form 10-K | 57 Table Apple Inc. | 2015 Form 10-K | 57 Table of Contents | 2015 Form 10-K | 57 Table of Contents The following term debt a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2016 17.0 billion : Floating-rate note 2016 \u2013 2018 $ 3,000 0.51 : Floating-rate note 2016 \u2013 2018 $ 3,000 0.51 % \u2013 note 2016 \u2013 2018 $ 3,000 0.51 % \u2013 1.10 % 2016 \u2013 2018 $ 3,000 0.51 % \u2013 1.10 % $ $ 3,000 0.51 % \u2013 1.10 % $ 3,000 0.51 % % \u2013 1.10 % $ 3,000 0.51 % \u2013 1.10 % \u2013 1.10 % $ 3,000 0.51 % \u2013 1.10 % Fixed-rate $ 3,000 0.51 % \u2013 1.10 % Fixed-rate 0.45 % \u2013 % \u2013 1.10 % Fixed-rate 0.45 % \u2013 3.85 % note % Fixed-rate 0.45 % \u2013 3. debt issuance of 0.51 % \u2013 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2017 12.0 billion : Floating-rate note 2017 \u2013 2019 2,000 0.37 % : Floating-rate note 2017 \u2013 2019 2,000 0.37 % \u2013 0.60 Floating-rate note 2017 \u2013 2019 2,000 0.37 % \u2013 0.60 % note 2017 \u2013 2019 2,000 0.37 % \u2013 0.60 % 2,000 2019 2,000 0.37 % \u2013 0.60 % 2,000 0.31 % \u2013 0.37 % \u2013 0.60 % 2,000 0.31 % \u2013 0.54 % % \u2013 0.60 % 2,000 0.31 % \u2013 0.54 % Fixed-rate % 2,000 0.31 % \u2013 0.54 % Fixed-rate 1.05 % \u2013 % debt issuance of \u20ac euro-denominated debt issuance of \u20ac 2.8 billion : Fixed-rate 1.000 % \u20ac 2.8 billion : Fixed-rate 1.000 % note 2022 1,558 2.94 : Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 % note 2026 2.94 % 0 0 Fixed-rate 1.625 % note 2026 1,558 3.45 0 Fixed-rate 1.625 % note 2026 1,558 3.45 % 0 0 Fi debt 2026 1,558 3.45 % 0 0 Second quarter 2015 debt issuance % 0 0 Second quarter 2015 debt issuance of $ 6.5 2015 debt issuance of $ 6.5 billion : Floating-rate note 2020 6.5 billion : Floating-rate note 2020 500 0.56 % 0 0 billion : Floating-rate note 2020 500 0.56 % 0 0 Fixed-rate : Floating-rate note 2020 500 0.56 % 0 0 Fixed-rate 1.55 note 2020 500 0.56 % 0 0 Fixed-rate 1.55 % note 2020 500 0.56 % 0 0 Fixed-rate 1.55 % note 2020 0.56 % 0 0 Fixed-rate 1.55 % note 2020 1,250 0.56 0 Fixed-rate 1.5 debt issuance of of SFr1.25 billion : Fixed-rate 0.375 % note 2024 895 0.28 : Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.750 note 2024 895 0.28 % 0 0 Fixed-rate 0.750 % note 2024 895 0.28 % 0 0 Fixed-rate 0.750 % note 2030 0.28 % 0 0 Fixed-rate 0.750 % note 2030 384 0.74 0 Fixed-rate 0.750 % note 2030 384 0.74 % 0 0 Fixed-rate 0.750 % note 2030 384 0.74 % 0 0 Third 0.750 % note 2030 384 0.74 % 0 0 T debt 2030 384 0.74 % 0 0 Third quarter 2015 debt issuance % 0 0 Third quarter 2015 debt issuance of $ 8.0 2015 debt issuance of $ 8.0 billion : Floating-rate note 2017 8.0 billion : Floating-rate note 2017 250 0.36 % 0 0 billion : Floating-rate note 2017 250 0.36 % 0 0 Floating-rate : Floating-rate note 2017 250 0.36 % 0 0 Floating-rate note note 2017 250 0.36 % 0 0 Floating-rate note 2020 500 2017 250 0.36 % 0 0 Floating-rate note 2020 500 0.61 % 0 0 Floating-rate note 2020 500 0.61 % 0 0 0 0 Float debt issuance of of \u00a5250.0 billion : Fixed-rate 0.35 % note 2020 2,081 0.35 : Fixed-rate 0.35 % note 2020 2,081 0.35 % 0 0 Fixed-rate 0.35 % note 2020 2,081 0.35 % 0 0 Fourth 0.35 % note 2020 2,081 0.35 % 0 0 Fourth quarter note 2020 2,081 0.35 % 0 0 Fourth quarter 2015 British 2020 2,081 0.35 % 0 0 Fourth quarter 2015 British pound-denominated % 0 0 Fourth quarter 2015 British pound-denominated debt issuance of of \u00a31.25 billion : Fixed-rate 3.05 % note 2029 1,148 3.79 : Fixed-rate 3.05 % note 2029 debt issuance of debt issuance of A $ 2.25 billion : Floating-rate note 2019 2.25 billion : Floating-rate note 2019 493 1.87 % 0 0 billion : Floating-rate note 2019 493 1.87 % 0 0 Fixed-rate : Floating-rate note 2019 493 1.87 % 0 0 Fixed-rate 2.85 note 2019 493 1.87 % 0 0 Fixed-rate 2.85 % note 2019 493 1.87 % 0 0 Fixed-rate 2.85 % note 2019 1.87 % 0 0 Fixed-rate 2.85 % note 2019 282 1.89 0 Fixed-rate 2.85 % note 2019 282 1.89 % 0 0 Fixed-rate 2.85 % note 2019 282 1.89 % 0 0 Fixed-rate 2.85 % note 2 debt % 0 0 Fourth quarter 2015 euro-denominated debt issuance of \u20ac euro-denominated debt issuance of \u20ac 2.0 billion : Fixed-rate 1.375 % \u20ac 2.0 billion : Fixed-rate 1.375 % note 2024 1,113 3.30 : Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 % note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 % note 2027 3.30 % 0 0 Fixed-rate 2.000 % note 2027 1,113 3.85 0 debt 55,701 2027 1,113 3.85 % 0 0 Total term debt 55,701 29,000 0 0 Total term debt 55,701 29,000 Unamortized discount ( 114 0 Total term debt 55,701 29,000 Unamortized discount ( 114 ) 55,701 29,000 Unamortized discount ( 114 ) ( 52 ) Hedge discount ( 114 ) ( 52 ) Hedge accounting fair value Hedge accounting fair value adjustment 376 39 Less : Current portion accounting fair value adjustment 376 39 Less : Current portion of portion of long-term debt ( 2,500 ) 0 Total long-term debt long-term debt ( debt $ 53,463 0 Total long-term debt $ 53,463 $ 28,987 To manage foreign long-term debt $ 53,463 $ 28,987 To manage foreign currency risk in the first quarter of 2015 and the British pound-denominated , in the fourth quarter of 2015 , the Company entered into aggregate notional amount of $ 3.5 billion , $ 1.9 billion $ 3.5 billion , $ 1.9 billion , $ 1.6 billion $ 1.9 billion , $ 1.6 billion and $ 2.2 billion $ 1.6 billion and $ 2.2 billion , respectively , which note . Apple Inc. | 2015 Form 10-K | debt for 2015 , 2014 and 2013 , term debt for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . The future s Notes a of September 26 , 2015 are a follows a of September 26 , 2015 are a follows ( in ( in million ) : 2016 $ 2,500 2017 3,500 2018 million ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 $ 2,500 2017 3,500 debt 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt $ 55,701 34,345 Total term debt $ 55,701 As of September 26 , $ 55,701 As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the fair 2015 and September 27 , 2014 , the fair value of Notes , based on Level 2 input , wa $ 54.9 2 input , wa $ 54.9 billion and $ 28.5 billion $ 54.9 billion and $ 28.5 billion , respectively . Note billion , respectively . Note 7 \u2013 Share", + "share_repurchase": "share repurchase authorization to $ 140 billion and raising it quarterly it quarterly dividend to $ 0.52 per share beginning in May per share beginning in May 2015 . During 2015 , the in May 2015 . During 2015 , the Company spent $ , the Company spent $ 36.0 billion to repurchase share of and dividend equivalent of $ 11.6 billion . Additionally , the , the Company issued $ 14.5 billion of U.S. dollar-denominated , of U.S. dollar-denominated , \u20ac 4.8 billion of euro-denominated , SFr1.3 British pound-denominated share repurchase authorization to $ 90 billion and the quarterly dividend dividend wa raised to $ 0.47 per common share , resulting capital return program from $ 100 billion to over $ 130 100 billion to over $ 130 billion . During 2014 , $ 130 billion . During 2014 , the Company utilized $ , the Company utilized $ 45 billion to repurchase it common and dividend equivalent of $ 11.1 billion . The Company also The Company also issued $ 12.0 billion of long-term debt during billion of long-term debt during 2014 , share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . In a amended . In April 2015 , the Company \u2019 s the quarterly cash dividend by 11 % . The Company plan capital return program in August 2012 through September 26 , 2015 in August 2012 through September 26 , 2015 ( in million 2012 through September 26 , 2015 ( in million ) : Settlement of Equity Awards Total 2015 $ 11,561 $ 6,000 $ Equity Awards Total 2015 $ 11,561 $ 6,000 $ 3 Share Repurchase In the third quarter of 2015 , the Company \u2019 s share repurchase authorization to $ 140 billion of the Company \u2019 stock , of which $ 104 billion had been utilized a been utilized a of September 26 , 2015 . The Company a of September 26 , 2015 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the during the year ended September 26 , 2015 and September 27 year ended September 26 , 2015 and September 27 , 2014 ", + "earnings_per_share": "Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 $ : Basic $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 9.22 $ 5.72 $ 6.38 $ 4.01 Diluted $ 9.22 $ 6.45 6.38 $ 4.01 Diluted $ 9.22 $ 6.45 $ 5.68 $ 4.01 Diluted $ 9.22 $ 6.45 $ 5.68 $ 6.31 $ $ 9.22 $ 6.45 $ 5.68 $ 6.31 $ 3.95 Cash $ 6.45 $ 5.68 $ 6.31 $ 3.95 Cash dividend declared $ 5.68 $ 6.31 $ 3.95 Cash dividend declared per share divide earnings per share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted per share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,0 Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 Diluted : Basic $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 $ 5.68 Shares 5.72 Diluted $ 9.22 $ 6.45 $ 5.68 Shares used in $ 9.22 $ 6.45 $ 5.68 Shares used in computing earnings earnings per share : Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 per share : Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,66 earnings per share for 2015 , 2014 and 2013 ( per share for 2015 , 2014 and 2013 ( net income for 2015 , 2014 and 2013 ( net income in million share in thousand ) : 2015 2014 2013 Numerator : Net in thousand ) : 2015 2014 2013 Numerator : Net income thousand ) : 2015 2014 2013 Numerator : Net income $ Numerator : Net income $ 53,394 $ 39,510 $ 37,037 Denominator Net income $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average share outstanding Denomina earnings per share Weighted-average diluted share 5,793,069 6,122,663 6,521,634 Basic earnings per share $ Basic earnings per share $ 9.28 $ 6.49 $ 5.72 Diluted per share $ 9.28 $ 6.49 $ 5.72 Diluted earnings per $ 9.28 $ 6.49 $ 5.72 Diluted earnings per share $ Diluted earnings per share $ 9.22 $ 6.45 $ 5.68 Potentially per share $ 9.22 $ 6.45 $ 5.68 Potentially dilutive security $ 9.22 $ 6.45 $ 5.68 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.06 Fourth $ 1.96 $ 1.85 $ 2.33 $ 3.06 Fourth Quarter Third $ 1.85 $ 2.33 $ 3.06 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 201 Earnings per share $ 7,748 $ 10,223 $ 13,072 Earnings per share ( 1 13,072 Earnings per share ( 1 ) : Basic $ 1.43 1 ) : Basic $ 1.43 $ 1.29 $ 1.67 $ : Basic $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 $ 1.66 $ 2.08 Diluted $ 1.42 $ 1.28 $ 1.66 $ 2.07 ( $ 1.42 $ 1.28 $ 1.66 $ 2.07 ( 1 ) $ 1.28 $ 1.66 $ 2.07 ( 1 ) Basic and $ 1.66 $ 2.07 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2015 Form 10-", + "tax_rate": "tax rate for 2015 , 2014 and 2013 are tax rate for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( dollar dollar in million ) : 2015 2014 2013 Provision for income in million ) : 2015 2014 2013 Provision for income tax million ) : 2015 2014 2013 Provision for income tax $ Provision for income tax $ 19,121 $ 13,973 $ 13,118 Effective income tax $ 19,121 $ 13,973 $ 13,118 Effective tax rate $ 19,121 $ 13,973 $ 13,118 Effective tax rate 26.4 % $ 13,118 Effective tax rate 26.4 % tax rate 26.4 % 26.1 % 26.2 % The Company rate 26.4 % 26.1 % 26.2 % The Company \u2019 s s effective tax rate for 2015 , 2014 and 2013 differ tax rate for 2015 , 2014 and 2013 differ from the for 2015 , 2014 and 2013 differ from the statutory federal federal income tax rate of 35 % due primarily to certain higher effective tax rate during 2015 compared to 2014 wa due rate during 2015 compared to 2014 wa due primarily to higher The effective tax rate in 2014 compared to 2013 wa relatively rate in 2014 compare tax rate of 12.5 % . As of September % . As of September 26 , 2015 , U.S. income As of September 26 , 2015 , U.S. income tax have a cumulative total of $ 91.5 billion of such earnings . is estimated to be $ 30.0 billion . As of September billion . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , $ 186.9 2015 and September 27 , 2014 , $ 186.9 billion and 27 , 2014 , $ 186.9 billion and $ 137.1 billion $ 186.9 billion and $ 13 tax rate ( 35 % in 2015 , 2014 rate ( 35 % in 2015 , 2014 and 2013 ) 35 % in 2015 , 2014 and 2013 ) to income in 2015 , 2014 and 2013 ) to income before provision provision for income tax for 2015 , 2014 and 2013 , income tax for 2015 , 2014 and 2013 , is a for 2015 , 2014 and 2013 , is a follows ( dollar in million ) : 2015 2014 2013 Computed expected tax in million ) : 2015 2014 2013 Computed expected tax $ million ) : 2015 2014 2013 Computed expected tax $ 25,380 2013 Computed expected tax $ 25,380 $ tax rate $ 19,121 $ 13,973 $ 13,118 Effective tax rate 26.4 % $ 13,118 Effective tax rate 26.4 % 26.1 % 26.2 % Effective tax rate 26.4 % 26.1 % 26.2 % The Company rate 26.4 % 26.1 % 26.2 % The Company \u2019 s from equity award of $ 748 million , $ 706 million $ 748 million , $ 706 million and $ 643 million $ 706 million and $ 643 million in 2015 , 2014 and $ 643 million in 2015 , 2014 and 2013 , 643 million in 2015 , 2014 and 2013 , respectively , in 2015 , 2014 and 2013 , respectively , which were stock . ", + "geographic_information": "geographic basis . In 2015 , the Company changed it in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , \u201c Segment Information and qualifying device . In September 2015 , the Company introduced iPhone , the Company introduced iPhone 6 and 6 Plus , featuring Company introduced iPhone 6 and 6 Plus , featuring 3D Touch and Geographic Data During 2015 , the Company \u2019 s international net sale accounted for 35 % and 65 % , accounted for 35 % and 65 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , \u201c Segment Information and . \u201d Apple Inc. | 2015 Form 10-K | 6 Table Apple Inc. | 2015 Form 10-K | 6 Table of Contents | 2 Geographic a those described in Note 1 , \u201c Summary of Significant purpose . Apple Inc. | 2015 Form 10-K | 66 Table Apple Inc. | 2015 Form 10-K | 66 Table of Contents | 2015 Form 10-K | 66 Table of Contents The following by reportable operating segment for 2015 , 2014 and 2013 ( operating segment for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Americas : Net in million ) : 2015 2014 2013 Americas : Net sale million ) : 2015 2014 2013 Americas ", + "common_stock": "Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.625 share 1.000 % Notes due 2022 1.625 % Notes due 2026 1.000 % Notes due 2022 1.625 % Notes due 2026 3.05 2022 1.625 % Notes due 2026 3.05 % Notes due 2029 1.625 % Notes due 2026 3.05 % Notes due 2029 3.60 2026 3.05 % Notes due 2029 3.60 % Notes due 2042 3.05 % Notes due 2029 3.60 % Notes due 2042 1.375 2029 3.60 % Notes due 2042 1.375 % Notes due 2024 3.60 % Notes due 2042 1.375 % Notes due 2024 2.000 2 common stock were and outstanding a of October 9 , 2015 . DOCUMENTS INCORPORATED a of October 9 , 2015 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2016 annual meeting of shareholder ( of shareholder ( the \u201c 2016 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2016 10-K where indicated . The 2016 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of of Contents Apple Inc. Form 10-K For the Fiscal Year Ended the common stock beginning in 2013 . The Company \u2019 s s common stock to $ 60 billion in April 2013 , $ 60 billion in April 2013 , to $ 90 billion April 2013 , to $ 90 billion in April 2014 and $ 90 billion in April 2014 and to $ 140 billion April 2014 and to $ 140 billion in April 2015 . $ 140 billion in April 2015 . As of September 26 2015 . As of September 26 , 2015 , $ 104 As of September 26 , 2015 , $ 104 billion of 26 , 2015 , $ 104 billion of the $ 140 104 billion of the $ 140 billion had been utilized . u common stock . In July 2015 , the purchase period for ASR ended and an additional 10.0 million share were delivered and retired . In total , 48.3 million net share were delivered average repurchase price of $ 124.24 . Apple Inc. | 2015 124.24 . Apple Inc. | 2015 Form 10-K | 20 Table Apple Inc. | 2015 Form 10-K | 20 Table of Contents | 2015 Form 10-K | 20 Table of Contents Company Stock , the S & P 500 Index , the S & the five year ended September 26 , 2015 . The graph year ended September 26 , 2015 . The gr common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2015 S & P , a right reserved . Copyright \u00a9 2015 Dow Jones & Co. All All right reserved . September 2010 September 2011 September 2012 September reserved . September 2010 September 2011 September 2012 September 2013 September September 2010 September 2011 September 2012 September 2013 September 2014 September September 2011 September 2012 September 2013 September 2014 September 2015 Apple September 2012 September 2013 September common stock of $ 35.3 billion and cash used to and dividend equivalent of $ 11.6 billion , partially offset by of term debt of $ 27.1 billion . During 2014 , $ 27.1 billion . During 2014 , cash generated from operating from operating activity of $ 59.7 billion wa a result of wa a result of $ 39.5 billion of net income , to net income of $ 13.2 billion and an increase in asset and liability of $ 7.0 billion . Cash used in in investing activity of $ 22.6 billion during 2014 consisted primarily of $ 22.6 bill common stock of $ 45.0 billion and cash used to and dividend equivalent of $ 11.1 billion , partially offset by and commercial paper of $ 12.0 billion and $ 6.3 billion $ 12.0 billion and $ 6.3 billion , respectively . Apple respectively . Apple Inc. | 2015 Form 10-K | 30 Table Apple Inc. | 2015 Form 10-K | 30 Table of Contents | 2015 Form 10-K | 30 Table of Contents Capital Assets s capital expenditure were $ 11.2 billion during 2015 . The were $ 11.2 billion during 2015 . The Company anticipates utilizing common stock Repurchase of common stock ( 328,837 ) 0 ( 22,950 ) common stock ( 328,837 ) 0 ( 22,950 ) 0 ( ( 328,837 ) 0 ( 22,950 ) 0 ( 22,950 ) ) 0 ( 22,950 ) 0 ( 22,950 ) Share-based compensation ( 22,950 ) 0 ( 22,950 ) Share-based compensation 0 2,253 ( 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common stock ) Share-based compensation 0 2,253 0 0 2,253 Common stock issued Share-based compensation 0 2,253 0 0 2,253 Common stock issued , c Common stock issued , net share withheld for employee tax 48,873 ( 143 ) ( 444 for employee tax 48,873 ( 143 ) ( 444 ) 0 48,873 ( 143 ) ( 444 ) 0 ( 587 ) 143 ) ( 444 ) 0 ( 587 ) Tax benefit ( 444 ) 0 ( 587 ) Tax benefit from equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 1, common stock Repurchase of common stock ( 488,677 ) 0 ( 45,000 ) common stock ( 488,677 ) 0 ( 45,000 ) 0 ( ( 488,677 ) 0 ( 45,000 ) 0 ( 45,000 ) ) 0 ( 45,000 ) 0 ( 45,000 ) Share-based compensation ( 45,000 ) 0 ( 45,000 ) Share-based compensation 0 2,863 ( 45,000 ) Share-based compensation 0 2,863 0 0 2,863 Common 45,000 ) Share-based compensation 0 2,863 0 0 2,863 Common stock ) Share-based compensation 0 2,863 0 0 2,863 Common stock issued Share-based compensation 0 2,863 0 0 2,863 Common stock issued , c Common stock issued , net share withheld for employee tax 60,344 ( 49 ) ( 399 for employee tax 60,344 ( 49 ) ( 399 ) 0 60,344 ( 49 ) ( 399 ) 0 ( 448 ) 49 ) ( 399 ) 0 ( 448 ) Tax benefit ( 399 ) 0 ( 448 ) Tax benefit from equity , including transfer pricing adjustment 0 735 0 0 735 Balances including transfer pricing adjustment 0 735 0 0 735 Balances a transfer pricing adjustment 0 735 0 0 735 Balances a of pricing adjustment 0 735 0 0 735 Balances a of September adjustment 0 735 0 0 735 Balances a of Septem common stock Repurchase of common stock ( 325,032 ) 0 ( 36,026 ) common stock ( 325,032 ) 0 ( 36,026 ) 0 ( ( 325,032 ) 0 ( 36,026 ) 0 ( 36,026 ) ) 0 ( 36,026 ) 0 ( 36,026 ) Share-based compensation ( 36,026 ) 0 ( 36,026 ) Share-based compensation 0 3,586 ( 36,026 ) Share-based compensation 0 3,586 0 0 3,586 Common 36,026 ) Share-based compensation 0 3,586 0 0 3,586 Common stock ) Share-based compensation 0 3,586 0 0 3,586 Common stock issued Share-based compensation 0 3,586 0 0 3,586 Common stock issued , c Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) 0 37,624 ( 231 ) ( 609 ) 0 ( 840 ) 231 ) ( 609 ) 0 ( 840 ) Tax benefit ( 609 ) 0 ( 840 ) Tax benefit from equity , including transfer pricing adjustment 0 748 0 0 748 Balances including transfer pricing adjustment 0 748 0 0 748 Balances a transfer pricing adjustment 0 748 0 0 748 Balances a of pricing adjustment 0 748 0 0 748 Balances a of September adjustment 0 748 0 0 748 Balances a of Se common stock 543 730 530 Excess tax benefit issuance of common stock 543 730 530 Excess tax benefit from of common stock 543 730 530 Excess tax benefit from equity tax benefit from equity award 749 739 701 Taxes paid related benefit from equity award 749 739 701 Taxes paid related to from equity award 749 739 701 Taxes paid related to net settlement of equity award ( 1,499 ) ( 1,158 ) ( award ( 1,499 ) ( 1,158 ) ( 1,082 ) Dividends ) ( 1,158 ) ( 1,082 ) Dividends and dividend equivalent and dividend equival common stock Repurchase of common stock ( 35,253 ) ( 45,000 ) ( stock ( 35,253 ) ( 45,000 ) ( 22,860 ) Proceeds ) ( 45,000 ) ( 22,860 ) Proceeds from issuance of of term debt , net 27,114 11,960 16,896 Change in commercial term debt , net 27,114 11,960 16,896 Change in commercial paper debt , net 27,114 11,960 16,896 Change in commercial paper , in commercial paper , net 2,191 6,306 0 Cash used in commercial paper , net 2,191 6,306 0 Cash used in financing paper , net 2,191 6,306 0 Cash used in financing ac common stock open market common stock repurchase 255,137 $ 30,026 2014 : Fourth common stock repurchase 255,137 $ 30,026 2014 : Fourth quarter 81,255 stock repurchase 255,137 $ 30,026 2014 : Fourth quarter 81,255 $ 30,026 2014 : Fourth quarter 81,255 $ 98.46 $ 8,000 Third : Fourth quarter 81,255 $ 98.46 $ 8,000 Third quarter 58,661 quarter 81,255 $ 98.46 $ 8,000 Third quarter 58,661 $ 85.23 98.46 $ 8,000 Third quarter 58,661 $ 85.23 5,000 Second quarter 8,000 Third quarter 58,661 $ 85.23 5,000 Second quarte common stock open market common stock repurchase 286,512 $ 24,000 Apple Inc. | common stock repurchase 286,512 $ 24,000 Apple Inc. | 2015 Form $ 24,000 Apple Inc. | 2015 Form 10-K | 60 Table Apple Inc. | 2015 Form 10-K | 60 Table of Contents | 2015 Form 10-K | 60 Table of Contents Note 8 60 Table of Contents Note 8 \u2013 Comprehensive Income Comprehensive income statement line item , for 2015 and 2014 ( in million item , for 2015 and 2014 ( in million ) : Components Financial Statement Line Item 2015 2014 Unrea Common Stock 2014 . 8-K 3.2 3/5/14 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s Certificate Tr", + "cash_flow_hedges": "Cash Flow Hedges fair value a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,442 $ 109 $ 1,551 Interest exchange contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 394 1,551 Inte" +} \ No newline at end of file diff --git a/src/data/feature/AAPL/10-K/0001628280-16-020309/full-submission_features.json b/src/data/feature/AAPL/10-K/0001628280-16-020309/full-submission_features.json new file mode 100644 index 0000000..aeedca1 --- /dev/null +++ b/src/data/feature/AAPL/10-K/0001628280-16-020309/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue . Apple Inc. | 2016 Form 10-K | 21 Item Apple Inc. | 2016 Form 10-K | 21 Item 7 . | 2016 Form 10-K | 21 Item 7 . Management \u2019 Form 10-K | 21 Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk in Part II , Item 8 of this Form 10-K. All Item 8 of revenue from Internet and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2016 Form 10-K | 23 Product Apple Inc. | 2016 Form 10-K | 23 Product Performance iPhone | 2016 Form 10-K | 23 Product Performance iPhone The following and unit sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net sale Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( \u201c ASU 2014-09 606 ) ( \u201c ASU 2014-09 \u201d ) , which amends for revenue recognition . ASU 2014-09 is based on principle that transferred to customer . ASU 2014-09 will be effective for the in it first quarter of 2019 , and early adoption is following standard related to ASU 2014-09 : ASU No . 2016-08 2014-09 : ASU No . 2016-08 , Revenue from Contracts with Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Identifying Performance Obligations and Licensing ( \u201c ASU 2016-10 \u201d ) ; and ASU ; and ASU No . 2016-12 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Narrow-Scope Improvements and Practical Expedients ( \u201c ASU 2016-12 \u201d ) . The Company The Company must adopt ASU 2016-08 , ASU 2016-10 and ASU adopt ASU 2016-08 , ASU 2016-10 and ASU 2016-12 with ASU , ASU 2016-10 and ASU 2016-12 with ASU 2014-09 ( collectively and Revenue Apple Inc. | 2016 Form 10-K | 32 Revenue Recognition Net | 2016 Form 10-K | 32 Revenue Recognition Net sale consist result . Apple Inc. | 2016 Form 10-K | 33 Valuation Apple Inc. | 2016 Form 10-K | 33 Valuation and Impairment | 2016 Form 10-K | 33 Valuation and Impairment of Marketable requirement for period up to 150 day . If there is result . Apple Inc. | 2016 Form 10-K | 34 Income Apple Inc. | 2016 Form 10-K | 34 Income Taxes The | 2016 Form 10-K | 34 Income Taxes The Company record that ha revenue 8,080 8,940 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 Current revenue 8,080 8,940 Commercial paper 8,105 8,499 Current portion of long-term 8,080 8,940 Commercial paper 8,105 8,499 Current portion of long-term debt Current portion of long-term debt 3,500 2,500 Total current liability 79,006 portion of long-te revenue , non-current 2,500 Total current liability 79,006 80,610 Deferred revenue , non-current 2,930 80,610 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liability 36,074 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liability 36,074 33,427 75,427 53,329 Other non-current liability 36,074 33,427 Total liability 193, revenue ( ) 167 Accounts payable 1,791 5,400 5,938 Deferred revenue ( 1,554 167 Accounts payable 1,791 5,400 5,938 Deferred revenue ( 1,554 ) 5,400 5,938 Deferred revenue ( 1,554 ) 1,042 1,460 Other current Deferred revenue ( 1,554 ) 1,042 1,460 Other current and non-current revenue ( 1,554 ) 1,042 1,460 Other current and non-current liability current and non-current liability ( 2,104 ) 8,746 6,010 Cash generated non-current liability ( 2,104 ) 8,746 6,010 Cash generated by operating liability ( 2,104 revenue estimate . Apple Inc. | 2016 Form 10-K | 45 Software Apple Inc. | 2016 Form 10-K | 45 Software Development Costs | 2016 Form 10-K | 45 Software Development Costs Research and can be found in Note 9 , \u201c Benefit Plans . that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , \u201c Income Taxes \u201d security . Apple Inc. | 2016 Form 10-K | 46 The Apple Inc. | 2016 Form 10-K | 46 The following table | 2016 Form 10-K | 46 The following table show the diluted earnings per sha revenue 1,717 1,941 Basis of capital asset 2,107 2,238 Deferred revenue 1,717 1,941 Deferred asset 2,107 2,238 Deferred revenue 1,717 1,941 Deferred cost sharing 667 2,107 2,238 Deferred revenue 1,717 1,941 Deferred cost sharing 667 667 1,717 1,941 Deferred cost sharing 667 667 Share-based compensation 601 575 1,941 Deferred cost sharing 667 667 Share-based compensation 601 575 Unrealized sharing 667 667 Share-based compensation 601 575 Unrealized loss \u2014 564 667 667 Share-based compensation 601 575 Unr Revenue $ ( 865 ) $ ( 2,432 ) ( 865 ) $ ( 2,432 ) Cost of sale ( ) Cost of sale ( 130 ) ( 2,168 ) Other sale ( 130 ) ( 2,168 ) Other income/ ( expense ( expense ) , net 111 456 Interest rate contract Other expense ) , net 111 456 Interest rate contract Other income/ ( expense ) , net 12 17 ( 872 ) ( expense ) , net 12 17 ( 872 ) ( 4,127 , net 12 17 ( 872 ) ( 4,127 ) Unrealized 17 ( 872 ) ( 4,127 ) Unrealized ( gain ) ( expense ) , net 87 91 Total amount reclassified from expense ) , net 87 91 Total amo Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2016 ) $ 18,000 for calendar year 2016 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee \u2019 , up to a maximum 6 % of the employee \u2019 earnings . Apple Inc. | 2016 Form 10-K | 63 Restricted Apple Inc. | 2016 Form 10-K | 63 Restricted Stock Units | 2016 Form 10-K | 63 Restricted Stock Units A summary activity and related information for 2016 , 2015 and 2014 revenue from iTunes and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2016 Form 10-K | 68 Note Apple Inc. | 2016 Form 10-K | 68 Note 12 \u2013 | 2016 Form 10-K | 68 Note 12 \u2013 Selected Quarterly Form 10-K | 68 Note 12 \u2013 Selected Quarterly Financial Information of the four quarter of 2016 and 2015 ( in million four quarter of 2016 and 2015 ( in million , except Quarter Second Quarter First Quarter 2016 : Net sale $ 46,852 2016 : Net sale $ 46,852 $ 42,358 $ 50,557 $ Net sale $ 46,852 $", + "expenses": "Expenses Operating expense for 2016 , 2015 and 2014 are Operating expense for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( dollar dollar in million ) : 2016 Change 2015 Change 2014 Research million ) : 2016 Change 2015 Change 2014 Research and development : 2016 Change 2015 Change 2014 Research and development $ 10,045 2014 Research and development $ 10,045 25 % $ 8,067 34 Research and development $ 10,045 25 % $ 8,067 34 % $ 10,045 25 % $ 8,067 34 % $ 6,041 Percentage 10,", + "net_income": "Net income $ $ 182,795 $ 170,910 $ 156,508 Net income $ 45,687 $ $ 156,508 Net income $ 45,687 $ 53,394 $ 39,510 $ Net income $ 45,687 $ 53,394 $ 39,510 $ 37,037 $ $ 45,687 $ 53,394 $ 39,510 $ 37,037 $ 41,733 Earnings $ 53,394 $ 39,510 $ 37,037 $ 41,733 Earnings per share $ 39,510 $ 37,037 $ 41,733 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 $ : Basic $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 8.31 $ 6.49 $ 5.72 $ 6. net income , to net income of $ 19.7 billion and an increase in asset and liability of $ 484 million . Cash used in in investing activity of $ 46.0 billion during 2016 consisted primarily of $ 46.0 billion during 2016 consisted primarily of cash used and maturity , of $ 30.6 billion and cash used to plant and equipment of $ 12.7 billion . Cash used in in financing activity of $ 20.5 billion during 2016 consisted primarily of $ 20.5 billion during 2016 consisted primarily of cash used repurchase common sto net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.6 billion . Cash used in in investing activity of $ 56.3 billion during 2015 consisted primarily of $ 56.3 billion during 2015 consisted primarily of cash used and maturity , of $ 44.4 billion and cash used to plant and equipment of $ 11.2 billion . Cash used in in financing activity of $ 17.7 billion during 2015 consisted primarily of $ 17.7 billion during 2015 consisted primarily of cash used repurchase common st Net income $ Provision for income tax 15,685 19,121 13,973 Net income $ 45,687 for income tax 15,685 19,121 13,973 Net income $ 45,687 $ 19,121 13,973 Net income $ 45,687 $ 53,394 $ 39,510 Earnings Net income $ 45,687 $ 53,394 $ 39,510 Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 Diluted : Basic $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 $ 6.45 Shares 6.49 Diluted $ 8.31 Net income $ , 2015 September 27 , 2014 Net income $ 45,687 $ , 2014 Net income $ 45,687 $ 53,394 $ 39,510 Other Net income $ 45,687 $ 53,394 $ 39,510 Other comprehensive income/ $ 45,687 $ 53,394 $ 39,510 Other comprehensive income/ ( loss of tax effect of $ 8 , $ 201 and $ of $ 8 , $ 201 and $ 50 , respectively , $ 201 and $ 50 , respectively 75 ( 411 and $ 50 , respectively 75 ( 411 ) ( 137 50 , respectively 75 ( 411 ) ( 137 ) Change 75 ( 411 ) ( 137 ) Change in unrealized gains/losses expense ) of $ ( Net income $ ( 471 ) $ 123,549 Net income \u2014 \u2014 39,510 123,549 Net income \u2014 \u2014 39,510 \u2014 39,510 Other comprehensive income/ income \u2014 \u2014 39,510 \u2014 39,510 Other comprehensive income/ ( loss loss ) \u2014 \u2014 \u2014 1,553 1,553 Dividends and dividend equivalent ) \u2014 \u2014 \u2014 1,553 1,553 Dividends and dividend equivalent declared equivalent declared \u2014 \u2014 ( 11,215 ) \u2014 ( 11,215 ) ( 11,215 ) \u2014 ( 11,215 ) Repurchase of common stock Repurchase of common stock ( 488,677 ) \u2014 ( 45,000 ) ( 488,677 ) \u2014 ( 45,000 ) \u2014 ( 45,000 ) ( 45,000 ) \u2014 ( 45 Net income 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income \u2014 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income \u2014 \u2014 2014 5,866,161 23,313 87,152 1,082 111,547 Net income \u2014 \u2014 53,394 111,547 Net income \u2014 \u2014 53,394 \u2014 53,394 Other comprehensive income/ income \u2014 \u2014 53,394 \u2014 53,394 Other comprehensive income/ ( loss ) \u2014 \u2014 \u2014 ( 1,427 ) ( 1,427 ) Dividends \u2014 ( 1,427 ) ( 1,427 ) Dividends and dividend equivalent equivalent declared \u2014 \u2014 ( 11,627 ) \u2014 ( 11,627 ) ( 11,627 ) \u2014 ( 11,627 ) Repurchase of comm Net income \u2014 27,416 92,284 ( 345 ) 119,355 Net income \u2014 \u2014 45,687 119,355 Net income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ income \u2014 \u2014 45,687 \u2014 45,687 Other comprehensive income/ ( loss loss ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent ) \u2014 \u2014 \u2014 979 979 Dividends and dividend equivalent declared equivalent declared \u2014 \u2014 ( 12,188 ) \u2014 ( 12,188 ) ( 12,188 ) \u2014 ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29,000 ) \u2014 ( 29,000 ) ( 29,000 ) \u2014 Net income Operating activity : Net income 45,687 53,394 39,510 Adjustments to reconcile activity : Net income 45,687 53,394 39,510 Adjustments to reconcile net : Net income 45,687 53,394 39,510 Adjustments to reconcile net income activity : Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense : Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense 4,210 Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense 4,210 3,586 net income for 2016 , 2015 and 2014 ( net income in million share in thousand ) : 2016 2015 2014 Numerator : Net in thousand ) : 2016 2015 2014 Numerator : Net income thousand ) : 2016 2015 2014 Numerator : Net income $ Numerator : Net income $ 45,687 $ 53,394 $ 39,510 Denominator Net income $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,470,820 5,753,421 6,085,572 Effe Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96", + "assets": "Assets The s capital expenditure were $ 12.8 billion during 2016 . The were $ 12.8 billion during 2016 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2017 , which includes product tooling repurchase . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had $ , the Company had $ 8.1 billion of Commercial Paper outstanding a weighted-average interest rate of 0 ASSETS September 24 , 2016 September 26 , 2015 ASSETS : Current , 2016 September 26 , 2015 ASSETS : Current asset : Cash and cash equivalent $ 20,484 $ 21,120 Short-term marketable security cash equivalent $ 20,484 $ 21,120 Short-term marketable security 46,671 20,481 $ 21,120 Short-term marketable security 46,671 20,481 Accounts receivable , le 21,120 Short-term marketable security 46,671 20,481 Accounts receivable , le allowance , le allowance of $ 53 and $ 63 , respectively of $ 53 and $ 63 , respe Assets indefinite lived intangible asset during 2016 , 2015 and 2014 . intangible asset during 2016 , 2015 and 2014 . For purpose during 2016 , 2015 and 2014 . For purpose of testing each reporting unit . In 2016 and 2015 , the Company unit . In 2016 and 2015 , the Company \u2019 s fair value measurement : Level 1 \u2013 Quoted price in active asset or liability . Level 2 \u2013 Observable input other than asset or liability . Level 3 \u2013 Inputs that are generally liability . Apple Inc. | 2016 Form 10-K | 48 The Apple Assets The asset balance a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 2015 Gross Carrying Amount Accumulated in million ) : 2016 2015 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 8,912 $ ( 5,806 ) $ asset $ 8,912 $ ( 5,806 ) $ 3,106 $ 8,125 $ ( 5,806 ) $ 3,106 $ 8,125 $ ( 4,332 5,806 ) $ 3,106 $ 8,125 ", + "liabilities": "Liabilities ( \u201c ASU 2016-01 \u201d ) , which update of financial instrument . ASU 2016-01 will be effective for the in it first quarter of 2019 . The Company doe not believe the adoption of ASU 2016-01 will have a material impact financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments \u2013 Credit \u2013 Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( \u201c ASU 2016-13 \u201d ) , which modifies certain financial instrument . ASU 2016-13 will be eff LIABILITIES AND SHAREHOLDERS Total asset $ 321,686 $ 290,345 LIABILITIES AND SHAREHOLDERS \u2019 EQUITY liability : Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 22,027 25,181 Deferred revenue 8,0 Liabilities , net $ 27,010 $ 22,471 Other Non-Current Liabilities 2016 2015 $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liability $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liability $ 26,019 2015 Deferred tax liability $ 26,019 $ 24,062 Other non-current liability tax liability $ 26,019 $ 24,062 Other non-current liability 10,055 9,365 $ 24,062 Other non-current liability 10,055 9,365 Total other non-current liability 24,062 Other non-current liability 10,055 9,365 Tot", + "equity": "Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplement Equity | 2016 Form 10-K | 18 Purchases of Equity Securities by the three month ended September 24 , 2016 wa a follows month ended September 24 , 2016 wa a follows ( in the Plans or Programs ( 1 ) June 26 , 2016 Programs ( 1 ) June 26 , 2016 to July 30 1 ) June 26 , 2016 to July 30 , 2016 26 , 2016 to July 30 , 2016 : Open market 2016 to July 30 , 2016 : Open market and privately market and privately negotiated purchase 9,036 $ 96.83 9,036 July 31 privately negotiated purchase 9,036 $ 96.83 9,036 July equity $ Total shareholder \u2019 equity $ 128,249 $ 119,355 $ 111,547 $ \u2019 equity $ 128,249 $ 119,355 $ 111,547 $ 123,549 $ $ 128,249 $ 119,355 $ 111,547 $ 123,549 $ 118,210 ( $ 119,355 $ 111,547 $ 123,549 $ 118,210 ( 1 ) $ 111,547 $ 123,549 $ 118,210 ( 1 ) Includes current $ 123,549 $ 118,210 ( 1 ) Includes current and long-term of term debt . ( 2 ) Other long-term obligation excludes revenue . Apple Inc. | 2016 Form 10-K | 21 Item Apple Inc. | 2016 Form 10-K | 21 Item 7 . | 2016 Form 10-K | 21 Item 7 . M Equity Awards Total 2016 $ 12,150 $ 12,000 $ Equity Awards Total 2016 $ 12,150 $ 12,000 $ 17,000 $ Total 2016 $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 $ 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 $ 42,720 2015 EQUITY liability : Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 Current revenue 8,080 8,940 Commercial paper 8,10 equity ) Total shareholder \u2019 equity 128,249 119,355 Total liability and shareholder Total shareholder \u2019 equity 128,249 119,355 Total liability and shareholder \u2019 and shareholder \u2019 equity $ 321,686 $ 290,345 See accompanying Notes \u2019 equity $ 321,686 $ 290,345 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 41 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 41 CONSOLIDATED STATEMENTS OF | 2016 Form 10-K | 41 CONSOLIDATED STATEMENTS OF SHAREHOLDERS \u2019 Amount Balances a of Septe equity including transfer pricing adjustment \u2014 735 \u2014 \u2014 735 Balances a adjustment \u2014 735 \u2014 \u2014 735 Balances a of September 27 735 Balances a of September 27 , 2014 5,866,161 23,313 87,152 a of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income \u2014 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income \u2014 \u2014 2014 equity including transfer pricing adjustment \u2014 748 \u2014 \u2014 748 Balances a adjustment \u2014 748 \u2014 \u2014 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 27,416 92,284 a of September 26 , 2015 5,578,753 27,416 92,284 ( 345 of September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net income \u2014 27,416 92,284 ( 345 ) 119,355 Net income equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Balances a adjustment \u2014 379 \u2014 \u2014 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 $ 31,251 a of September 24 , 2016 5,336,166 $ 31,251 $ 96,364 of September 24 , 2016 5,336,166 $ 31,251 $ 96,364 $ 24 , 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 128,249 See $ 31,251 $ 96,364 $ 634 $ 128,249 See accompanying Notes $ 96,364 $ 634 $ 128,249 See accompanying Notes to Consolidated S equity tax benefit from equity award 407 749 739 Payments for tax benefit from equity award 407 749 739 Payments for tax related from equity award 407 749 739 Payments for tax related to settlement of equity award ( 1,570 ) ( 1,499 ) ( award ( 1,570 ) ( 1,499 ) ( 1,158 ) Payments ) ( 1,499 ) ( 1,158 ) Payments for dividend and dividend and dividend equivalent ( 12,150 ) ( 11,561 ) ( equivalent ( 12,150 ) ( 11,561 ) ( 11,126 ) Repurchases ) ( 11,561 ) ( 11,126 ) Repurchases of common stock Repurchases equity award of $ 379 million , $ 748 million $ 379 million , $ 748 million and $ 706 million $ 748 million and $ 706 million in 2016 , 2015 and $ 706 million in 2016 , 2015 and 2014 , 706 million in 2016 , 2015 and 2014 , respectively , in 2016 , 2015 and 2014 , respectively , which were stock . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the significant 2016 and September 26 , 2015 , the significant component of ( i Equity Dividends Amount ( in million ) 2016 : Fourth quarter $ 0.57 2016 : Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 3,117 Second 0.57 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 Total quarter 0.52 2,879 First quarter 0.52 2,898 Total cas equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award", + "cash_flow": "cash flow . ASU 2016-09 will be effective for the in it first quarter of 2018 . The Company is currently the impact of adopting ASU 2016-09 on it consolidated financial statement statement . Apple Inc. | 2016 Form 10-K | 28 Leases Apple Inc. | 2016 Form 10-K | 28 Leases In February | 2016 Form 10-K | 28 Leases In February 2016 , | 28 Leases In February 2016 , the FASB issued ASU FASB issued ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( \u201c ASU 2016-02 842 ) ( \u201c ASU 2016-02 \u201d ) , wh cash flow $ 20,484 $ 21,120 $ 13,844 Supplemental cash flow disclosure : income tax , net $ 10,444 $ 13,252 $ 10,026 Cash , net $ 10,444 $ 13,252 $ 10,026 Cash paid for $ 10,444 $ 13,252 $ 10,026 Cash paid for interest $ Cash paid for interest $ 1,316 $ 514 $ 339 See for interest $ 1,316 $ 514 $ 339 See accompanying Notes $ 1,316 $ 514 $ 339 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 43 Notes Apple Inc. | 2016 Form 10-K | 43 Notes to Consolidated | 2016 Form 10-K | Cash Flow Hedges fair value a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 518 $ 153 $ 671 Interest exchange contract $ 518 $ 153 $ 671 Interest rate contract $ 518 $ 153 $ 671 Interest rate contract $ 728 671 Interest ra", + "gross_margin": "Gross Margin Gross margin for 2016 , 2015 and 2014 is Gross margin for 2016 , 2015 and 2014 is a follows for 2016 , 2015 and 2014 is a follows ( dollar dollar in million ) : 2016 2015 2014 Net sale $ in million ) : 2016 2015 2014 Net sale $ 215,639 million ) : 2016 2015 2014 Net sale $ 215,639 $ 2015 2014 Net sale $ 215,639 $ 233,715 $ 182,795 Cost Net sale $ 215,639 $ 233,715 $ 182,795 Cost of sale $ 215,639 $ 233,715 $ 182,795 Cost of sale 131,376 140,089 $ 182,795 Cost of sale 131,376 140,089 112,258 Gro Gross margin $ 84,263 Cost of sale 131,376 140,089 112,258 Gross margin $ 84,263 $ 140,089 112,258 Gross margin $ 84,263 $ 93,626 $ 70,537 Gross Gross margin $ 84,263 $ 93,626 $ 70,537 Gross margin percentage $ 84,263 $ 93,626 $ 70,537 Gross margin percentage 39.1 % $ 70,537 Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin decreased in % Gross margin decreased in 2016 compared to 2015 due primarily decreased i gross margin percentage in 2015 wa driven primarily by a dollar . Apple Inc. | 2016 Form 10-K | 26 The Apple Inc. | 2016 Form 10-K | 26 The Company anticipates | 2016 Form 10-K | 26 The Company anticipates gross margin during the first quarter of 2017 to be between 38 % of 2017 to be between 38 % and 38.5 % . be between 38 % and 38.5 % . The foregoing statement in the first quarter of 2017 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the hea Gross margin 84,263 182,795 Cost of sale 131,376 140,089 112,258 Gross margin 84,263 93,626 Cost of sale 131,376 140,089 112,258 Gross margin 84,263 93,626 70,537 131,376 140,089 112,258 Gross margin 84,263 93,626 70,537 Operating expense : 140,089 112,258 Gross margin 84,263 93,626 70,537 Operating expense : Research 112,258 Gross margin 84,263 93,626 70,537 Operating expense : Research and expense : Research and development 10,045 8,067 6,041 Selling , general : Research and development 10,045 8,067 6,041 Gross margin $ $ 42,358 $ 50,557 $ 75,872 Gross margin $ 17,813 $ $ 75,872 Gross margin $ 17,813 $ 16,106 $ 19,921 $ Gross margin $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ Gross margin $ $ 49,605 $ 58,010 $ 74,599 Gross margin $ 20,548 $ $ 74,599 Gross margin $ 20,548 $ 19,681 $ 23,656 $ Gross margin $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : ", + "accumulated_depreciation": "Accumulated depreciation and amortization , plant and equipment 61,245 49,257 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 34,235 ) ( 26,786 ) Total amortization ( 34,235 ) ( 26,786 ) Total property , plant and equipment , net $ 27,010 $ 22,471 Other Non-Current Liabilities , net $ 27,010 $ 22,471 Other Non-Current Liabilities 2016 2015 $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liability $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liabilit", + "capital_expenditure": "capital expenditure were $ 12.8 billion during 2016 . The were $ 12.8 billion during 2016 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2017 , which includes product tooling repurchase . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had $ , the Company had $ 8.1 billion of Commercial Paper outstanding a weighted-average interest rate of 0.45 % and maturity general", + "debt": "debt ( 1 ) $ 78,927 $ 55,829 debt ( 1 ) $ 78,927 $ 55,829 $ 28,987 $ 1 ) $ 78,927 $ 55,829 $ 28,987 $ 16,960 $ $ 78,927 $ 55,829 $ 28,987 $ 16,960 $ \u2014 Other $ 55,829 $ 28,987 $ 16,960 $ \u2014 Other long-term obligation \u2014 Other long-term obligation ( 2 ) $ 36,074 $ 33,427 obligation ( 2 ) $ 36,074 $ 33,427 $ 24,826 $ 2 ) $ 36,074 $ 33,427 $ 24,826 $ 20,208 $ $ 36,074 $ 33,427 $ 24,826 $ 20,208 $ 16,664 Total $ 33,427 $ 24,826 $ 20,208 $ 16,664 Total liability $ $ 24,826 $ 20,208 $ 16,664 Total liability debt . ( 2 ) Other long-term obligation excludes revenue . Apple Inc. | 2016 Form 10-K | 21 Item Apple Inc. | 2016 Form 10-K | 21 Item 7 . | 2016 Form 10-K | 21 Item 7 . Management \u2019 Form 10-K | 21 Item 7 . Management \u2019 s Discussion this Annual Report on Form 10-K ( \u201c Form 10-K \u201d Form 10-K ( \u201c Form 10-K \u201d ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading \u201c Risk i debt and A $ 1.4 billion of Australian dollar-denominated term Australian dollar-denominated term debt during 2016 . Fiscal 2015 Highlights Net debt during 2016 . Fiscal 2015 Highlights Net sale rose 28 2015 Highlights Net sale rose 28 % or $ 50.9 billion rose 28 % or $ 50.9 billion during 2015 compared to or $ 50.9 billion during 2015 compared to 2014 , driven billion during 2015 compared to 2014 , driven by a year-over-year sale and unit sale in 2015 increased in all of the during the third quarte debt during 2015 . Apple Inc. | 2016 2015 . Apple Inc. | 2016 Form 10-K | 22 Sales Apple Inc. | 2016 Form 10-K | 22 Sales Data The | 2016 Form 10-K | 22 Sales Data The following table unit sale by product during 2016 , 2015 and 2014 ( by product during 2016 , 2015 and 2014 ( dollar in during 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net Sales by : 2016 Change 2015 Change 2014 Net Sales by Operating Seg debt $ 8,105 $ 8,499 $ 6,308 Total term debt $ 78,927 6,308 Total term debt $ 78,927 $ 55,829 $ 28,987 Working term debt $ 78,927 $ 55,829 $ 28,987 Working capital $ $ 78,927 $ 55,829 $ 28,987 Working capital $ 27,863 $ $ 28,987 Working capital $ 27,863 $ 8,768 $ 5,083 Cash Working capital $ 27,863 $ 8,768 $ 5,083 Cash generated by $ 27,863 $ 8,768 $ 5,083 Cash generated by operating activity generated by operating activity $ 65,824 $ 81,266 $ 59,713 Cash operating activity $ 65,824 $ 81,266 $ 59,71 debt of $ 2.5 billion , partially offset by of term debt of $ 25.0 billion . During 2015 , $ 25.0 billion . During 2015 , cash generated from operating from operating activity of $ 81.3 billion wa a result of wa a result of $ 53.4 billion of net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.6 billion . Cash used in in investing activity of $ 56.3 billion during 2015 consisted primarily of $ 56.3 billion during 2015 consisted primarily of cash used and maturi debt of $ 27.1 billion . Capital Assets The s capital expenditure were $ 12.8 billion during 2016 . The were $ 12.8 billion during 2016 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2017 , which includes product tooling repurchase . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had $ , the Company had $ 8.1 billion of Commercial Paper outstanding a debt 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt $ 78,384 47,346 Total term debt $ 78,384 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to the Consolidated Financial Statements in Note 2 , \u201c Financial Instruments \u201d Financial Instruments \u201d and Note 6 , \u201c Debt . \u201d . \u201d Apple Inc. | 2016 Form 10-K | 30 Capital Apple Inc. | 2016 Form 10-K | 30 Capital Return Program | 2016 Form 10-K | 30 Capital Return Program In April debt $ Years Total Term debt $ 3,500 $ 13,334 $ 14,204 $ Term debt $ 3,500 $ 13,334 $ 14,204 $ 47,346 $ $ 3,500 $ 13,334 $ 14,204 $ 47,346 $ 78,384 Operating $ 13,334 $ 14,204 $ 47,346 $ 78,384 Operating lease 929 $ 14,204 $ 47,346 $ 78,384 Operating lease 929 1,834 1,725 47,346 $ 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing $ 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase obligat debt a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 to increase by 2016 and September 26 , 2015 to increase by $ 271 2015 to increase by $ 271 million and $ 200 million $ 271 million and $ 200 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , \u201c Debt . \u201d , typically for up to 12 month . However , the exp debt Current portion of long-term debt 3,500 2,500 Total current liability 79,006 portion of long-term debt 3,500 2,500 Total current liability 79,006 80,610 3,500 2,500 Total current liability 79,006 80,610 Deferred revenue , non-current 2,500 Total current liability 79,006 80,610 Deferred revenue , non-current 2,930 80,610 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current 2,930 3,624 Lon debt 75,427 53,329 Other non-current liability 36,074 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liability 36,074 33,427 75,427 53,329 Other non-current liability 36,074 33,427 Total liability 193,437 170,990 53,329 Other non-current liability 36,074 33,427 Total liability 193,437 170,990 Commitments liability 36,074 33,427 Total liability 193,437 170,990 Commitments and contingency Shareholders 36,074 33,427 Total liability 193,437 170,990 Commitments and contingency Shareholders \u2019 debt , net 24,954 27,114 11,960 Repayments of term term debt , net 24,954 27,114 11,960 Repayments of term debt debt , net 24,954 27,114 11,960 Repayments of term debt ( Repayments of term debt ( 2,500 ) \u2014 \u2014 Change in commercial paper , net ( 397 ) 2,191 6,306 Cash used , net ( 397 ) 2,191 6,306 Cash used in financing net ( 397 ) 2,191 6,306 Cash used in financing activity used in financing activity ( 20,483 ) ( 17,716 ) ( activity ( 20,483 ) ( 17,716 ) ( 37,549 ) Increase/ ) ( 17,716 ) ( 37,549 ) I debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2016 Form 10-K | 47 Allowance Apple Inc. | 2016 Form 10-K | 47 Allowance for Doubtful | 2016 Form 10-K | 47 Allowance for Doubtful Accounts The period . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company \u2019 s building debt $ \u2014 $ 167 $ 53 Foreign currency debt ( 258 53 Foreign currency debt ( 258 ) ( 71 ) \u2014 debt ( 258 ) ( 71 ) \u2014 Total $ ( ) \u2014 Total $ ( 258 ) $ 96 $ 53 $ ( 258 ) $ 96 $ 53 Gains/ ( Losses 258 ) $ 96 $ 53 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 885 $ 4,092 $ ( 154 exchange contract $ 885 $ 4,092 $ ( 154 ) Interest 885 $ 4,092 $ ( 154 ) Interest rate contract ( ) Interest rate contract ( 11 ) ( 17 ) ( contract ( 11 ) ( 17 ) ( 16 ) Total ) ( 17 ) ( 16 ) Total $ 874 $ ( 16 ) Total $ Debt Commercial Form 10-K | 57 Note 6 \u2013 Debt Commercial Paper The repurchase . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company had $ , the Company had $ 8.1 billion and $ 8.5 billion $ 8.1 billion and $ 8.5 billion of Commercial Paper outstanding \u2019 s Commercial Paper wa 0.45 % a of September 24 0.45 % a of September 24 , 2016 and 0.14 % a of September 24 , 2016 and Debt $ ( 397 ) $ 2,191 Long-Term Debt As of September Long-Term Debt As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had outstanding aggregate principal amount of $ 78.4 billion ( collectively the \u201c note . Apple Inc. | 2016 Form 10-K | 58 The Apple Inc. | 2016 Form 10-K | 58 The following table | 2016 Form 10-K | 58 The following table provides a term debt a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and Septembe debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2018 17.0 billion : Floating-rate note 2018 $ 2,000 1.10 % $ : Floating-rate note 2018 $ 2,000 1.10 % $ 3,000 0.51 Floating-rate note 2018 $ 2,000 1.10 % $ 3,000 0.51 % $ 2,000 1.10 % $ 3,000 0.51 % - 1.10 % 2,000 1.10 % $ 3,000 0.51 % - 1.10 % Fixed-rate $ 3,000 0.51 % - 1.10 % Fixed-rate 1.000 % - % - 1.10 % Fixed-rate 1.000 % - 3.850 % note % Fixed-rate 1.000 % - 3.850 % note 2018 - 2043 % - 3.850 % note 2018 - 2043 debt issuance of 0.51 % - 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2017 12.0 billion : Floating-rate note 2017 - 2019 2,000 0.86 % : Floating-rate note 2017 - 2019 2,000 0.86 % - 1.09 Floating-rate note 2017 - 2019 2,000 0.86 % - 1.09 % note 2017 - 2019 2,000 0.86 % - 1.09 % 2,000 2019 2,000 0.86 % - 1.09 % 2,000 0.37 % - 0.86 % - 1.09 % 2,000 0.37 % - 0.60 % % - 1.09 % 2,000 0.37 % - 0.60 % Fixed-rate % 2,000 0.37 % - 0.60 % Fixed-rate 1.050 % - debt issuance of 0.37 % - 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2017 27.3 billion : Floating-rate note 2017 - 2020 1,781 0.87 % : Floating-rate note 2017 - 2020 1,781 0.87 % - 1.87 Floating-rate note 2017 - 2020 1,781 0.87 % - 1.87 % note 2017 - 2020 1,781 0.87 % - 1.87 % 1,743 2020 1,781 0.87 % - 1.87 % 1,743 0.36 % - 0.87 % - 1.87 % 1,743 0.36 % - 1.87 % % - 1.87 % 1,743 0.36 % - 1.87 % Fixed-rate % 1,743 0.36 % - 1.87 % Fixed-rate 0.350 % - debt - 4.51 % Second quarter 2016 debt issuance of $ 15.5 2016 debt issuance of $ 15.5 billion : Floating-rate note 2019 15.5 billion : Floating-rate note 2019 500 1.64 % \u2014 \u2014 billion : Floating-rate note 2019 500 1.64 % \u2014 \u2014 Floating-rate : Floating-rate note 2019 500 1.64 % \u2014 \u2014 Floating-rate note % \u2014 \u2014 Floating-rate note 2021 500 1.95 % \u2014 \u2014 \u2014 \u2014 Floating-rate note 2021 500 1.95 % \u2014 \u2014 Fixed-rate \u2014 Floating-rate note 2021 500 1.95 % \u2014 \u2014 Fixed-rate 1.300 1.95 % \u2014 \u2014 Fixed-rate 1.300 % note 2018 500 1.32 debt issuance of debt issuance of A $ 1.4 billion : Fixed-rate 2.650 % $ 1.4 billion : Fixed-rate 2.650 % note 2020 493 1.92 : Fixed-rate 2.650 % note 2020 493 1.92 % \u2014 \u2014 Fixed-rate 2.650 % note 2020 493 1.92 % \u2014 \u2014 Fixed-rate 2.650 % note 2020 493 1.92 % \u2014 \u2014 Fixed-rate 3.350 1.92 % \u2014 \u2014 Fixed-rate 3.350 % note 2024 342 2.61 \u2014 Fixed-rate 3.350 % note 2024 342 2.61 % \u2014 \u2014 Fixed-rate 3.350 % note 2024 342 2.61 % \u2014 \u2014 Fixed-rate 3.350 % note 2024 342 2.61 % \u2014 \u2014 Fixed-rate 3.600 2.61 % \u2014 \u2014 Fixed-rate 3.600 debt issuance of $ 1.4 2016 debt issuance of $ 1.4 billion : Fixed-rate 4.150 % $ 1.4 billion : Fixed-rate 4.150 % note 2046 1,377 4.15 : Fixed-rate 4.150 % note 2046 1,377 4.15 % \u2014 \u2014 Fixed-rate 4.150 % note 2046 1,377 4.15 % \u2014 \u2014 Fourth 4.150 % note 2046 1,377 4.15 % \u2014 \u2014 Fourth quarter % \u2014 \u2014 Fourth quarter 2016 debt issuance of $ 7.0 2016 debt issuance of $ 7.0 billion : Floating-rate note 2019 7.0 billion : Floating-rate note 2019 350 0.91 % \u2014 \u2014 billion : Floating-rate note 2019 350 0.91 % \u2014 \u2014 Fixe debt 78,384 55,701 Unamortized premium/ ( discount \u2014 Total term debt 78,384 55,701 Unamortized premium/ ( discount ) issuance cost , net ( 174 ) ( 248 ) Hedge net ( 174 ) ( 248 ) Hedge accounting fair value Hedge accounting fair value adjustment 717 376 Less : Current portion accounting fair value adjustment 717 376 Less : Current portion of long-term debt , net ( 3,500 ) ( 2,500 ) Total net ( 3,500 ) ( 2,500 ) Total long-term debt $ ) Total long-term debt $ 75,427 $ 53,329 To manage foreign long-te debt $ 75,427 $ 53,329 To manage foreign currency risk in the third quarter of 2016 , the Company entered into aggregate notional amount of $ 1.0 billion , which effectively converted in the second quarter of 2016 and maturing in 2021 , of 2016 and maturing in 2021 , 2023 and 2026 , and maturing in 2021 , 2023 and 2026 , the Company in 2021 , 2023 and 2026 , the Company entered into aggregate notional amount of $ 5.0 billion . To manage interest in the fourth quarter of 2016 and maturing in 2021 and debt for 2016 , 2015 and 2014 , term debt for 2016 , 2015 and 2014 , respectively . for 2016 , 2015 and 2014 , respectively . The future s Notes a of September 24 , 2016 are a follows a of September 24 , 2016 are a follows ( in ( in million ) : 2017 $ 3,500 2018 6,500 2019 million ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 $ 3,500 2018 6,500 debt 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt $ 78,384 47,346 Total term debt $ 78,384 As of September 24 , $ 78,384 As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the fair 2016 and September 26 , 2015 , the fair value of Notes , based on Level 2 input , wa $ 81.7 2 input , wa $ 81.7 billion and $ 54.9 billion $ 81.7 billion and $ 54.9 billion , respectively . Note billion , respectively . Note 7 \u2013 Share", + "share_repurchase": "share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion and raising it quarterly it quarterly dividend from $ 0.52 to $ 0.57 per share from $ 0.52 to $ 0.57 per share beginning in May per share beginning in May 2016 . During 2016 , the in May 2016 . During 2016 , the Company spent $ , the Company spent $ 29.0 billion to repurchase share of and dividend equivalent of $ 12.2 billion . Additionally , the , the Company issued $ 23.9 billion of U.S. dollar-denominated term t share repurchase authorization to $ 140 billion and raising it quarterly it quarterly dividend to $ 0.52 per share beginning in May per share beginning in May 2015 . During 2015 , the in May 2015 . During 2015 , the Company spent $ , the Company spent $ 36.0 billion to repurchase share of and dividend equivalent of $ 11.6 billion . Additionally , the , the Company issued $ 14.5 billion of U.S. dollar-denominated , British pound-denominated , A $ 2.3 billion of Australian dollar-denominated and Japanese yen-deno share repurchase under plan complying with Rule 10b5-1 under the Exchange Act . capital return program in August 2012 through September 24 , 2016 in August 2012 through September 24 , 2016 ( in million 2012 through September 24 , 2016 ( in million ) : Settlement of Equity Awards Total 2016 $ 12,150 $ 12,000 $ Equity Awards Total 2016 $ 12,150 $ 12,000 $ 17,000 $ Total 2016 $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 $ Share Repurchase Program In April 2016 , the Company \u2019 s share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion of the Company \u2019 stock , of which $ 133 billion had been utilized a been utilized a of September 24 , 2016 . The Company a of September 24 , 2016 . The Company \u2019 s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the ) . Apple Inc. | 2016 Form 10-K | 60 The Apple Inc. | 2016 Form 10-K | ", + "earnings_per_share": "Earnings per share $ 39,510 $ 37,037 $ 41,733 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 $ : Basic $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 8.31 $ 6.49 $ 5.72 $ 6.38 Diluted $ 8.31 $ 9.22 5.72 $ 6.38 Diluted $ 8.31 $ 9.22 $ 6.45 $ 6.38 Diluted $ 8.31 $ 9.22 $ 6.45 $ 5.68 $ $ 8.31 $ 9.22 $ 6.45 $ 5.68 $ 6.31 Cash $ 9.22 $ 6.45 $ 5.68 $ 6.31 Cash dividend declared $ 6.45 $ 5.68 $ 6.31 Cash dividend declared per share divide earnings per share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted per share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,2 Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 Diluted : Basic $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 $ 6.45 Shares 6.49 Diluted $ 8.31 $ 9.22 $ 6.45 Shares used in $ 8.31 $ 9.22 $ 6.45 Shares used in computing earnings earnings per share : Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 per share : Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,06 earnings per share for 2016 , 2015 and 2014 ( per share for 2016 , 2015 and 2014 ( net income for 2016 , 2015 and 2014 ( net income in million share in thousand ) : 2016 2015 2014 Numerator : Net in thousand ) : 2016 2015 2014 Numerator : Net income thousand ) : 2016 2015 2014 Numerator : Net income $ Numerator : Net income $ 45,687 $ 53,394 $ 39,510 Denominator Net income $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average share outstanding Denomina earnings per share Weighted-average diluted share 5,500,281 5,793,069 6,122,663 Basic earnings per share $ Basic earnings per share $ 8.35 $ 9.28 $ 6.49 Diluted per share $ 8.35 $ 9.28 $ 6.49 Diluted earnings per $ 8.35 $ 9.28 $ 6.49 Diluted earnings per share $ Diluted earnings per share $ 8.31 $ 9.22 $ 6.45 Potentially per share $ 8.31 $ 9.22 $ 6.45 Potentially dilutive security $ 8.31 $ 9.22 $ 6.45 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.28 Fourth $ 1.67 $ 1.42 $ 1.90 $ 3.28 Fourth Quarter Third $ 1.42 $ 1.90 $ 3.28 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2015 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.06 ( $ 1.96 $ 1.85 $ 2.33 $ 3.06 ( 1 ) $ 1.85 $ 2.33 $ 3.06 ( 1 ) Basic and $ 2.33 $ 3.06 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2016 Form 10", + "tax_rate": "tax rate for 2016 , 2015 and 2014 are tax rate for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( dollar dollar in million ) : 2016 2015 2014 Provision for income in million ) : 2016 2015 2014 Provision for income tax million ) : 2016 2015 2014 Provision for income tax 15,685 2014 Provision for income tax 15,685 $ 19,121 $ 13,973 Effective for income tax 15,685 $ 19,121 $ 13,973 Effective tax rate tax 15,685 $ 19,121 $ 13,973 Effective tax rate 25.6 % $ 13,973 Effective tax tax rate 25.6 % 26.4 % 26.1 % The Company rate 25.6 % 26.4 % 26.1 % The Company \u2019 s s effective tax rate for 2016 , 2015 and 2014 differ tax rate for 2016 , 2015 and 2014 differ from the for 2016 , 2015 and 2014 differ from the statutory federal federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2016 compared to 2015 wa due rate in 2016 compared to 2015 wa due primarily to greater higher effective tax rate during 2015 compared to 2014 wa due rate during 2015 compared to tax rate of 12.5 % . As of September % . As of September 24 , 2016 , U.S. income As of September 24 , 2016 , U.S. income tax have a cumulative total of $ 109.8 billion of such earnings . is estimated to be $ 35.9 billion . As of September billion . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , $ 216.0 2016 and September 26 , 2015 , $ 216.0 billion and 26 , 2015 , $ 216.0 billion and $ 186.9 billion $ 216.0 billion and $ 1 tax rate ( 35 % in 2016 , 2015 rate ( 35 % in 2016 , 2015 and 2014 ) 35 % in 2016 , 2015 and 2014 ) to income in 2016 , 2015 and 2014 ) to income before provision provision for income tax for 2016 , 2015 and 2014 , income tax for 2016 , 2015 and 2014 , is a for 2016 , 2015 and 2014 , is a follows ( dollar in million ) : 2016 2015 2014 Computed expected tax in million ) : 2016 2015 2014 Computed expected tax $ million ) : 2016 2015 2014 Computed expected tax $ 21,480 2014 Computed expected tax $ 21,480 $ tax rate $ 15,685 $ 19,121 $ 13,973 Effective tax rate 25.6 % $ 13,973 Effective tax rate 25.6 % 26.4 % 26.1 % Effective tax rate 25.6 % 26.4 % 26.1 % The Company rate 25.6 % 26.4 % 26.1 % The Company \u2019 s from equity award of $ 379 million , $ 748 million $ 379 million , $ 748 million and $ 706 million $ 748 million and $ 706 million in 2016 , 2015 and $ 706 million in 2016 , 2015 and 2014 , 706 million in 2016 , 2015 and 2014 , respectively , in 2016 , 2015 and 2014 , respectively , which were stock . ", + "geographic_information": "Geographic Data During 2016 , the Company \u2019 s international net sale accounted for 35 % and 65 % , accounted for 35 % and 65 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading \u201c Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , \u201c Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Geographic a those described in Note 1 , \u201c Summary of Significant . \u201d Apple Inc. | 2016 Form 10-K | 66 The Apple Inc. | 2016 Form 10-K | 66 The Company evaluates | 2016 Form 10-K | 66 The Company evaluates the performance by reportable operating segment for 2016 , 2015 and 2014 ( operating segment for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Americas : Net in million ) : 2016 2015 2014 Americas : Net sale million ) : 2016 2015 2014 America", + "common_stock": "Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 1.625 2022 1.375 % Notes due 2024 1.625 % Notes due 2026 1.375 % Notes due 2024 1.625 % Notes due 2026 2.000 2024 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 2027 3.050 2026 2.000 % Notes due 2027 3.050 % Notes due 2029 2.000 % Notes due 2027 3.050 % Notes due 20 common stock were and outstanding a of October 14 , 2016 . DOCUMENTS INCORPORATED a of October 14 , 2016 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2017 annual meeting of shareholder ( of shareholder ( the \u201c 2017 Proxy Statement \u201d ) are this Annual Report on Form 10-K where indicated . The 2017 10-K where indicated . The 2017 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the common stock . In August 2016 , the purchase period for ASR ended and an additional 12.3 million share were delivered and retired . In total , 60.5 million share were delivered under average repurchase price of $ 99.25 . ( 3 ) In of $ 99.25 . ( 3 ) In August 2016 , ( 3 ) In August 2016 , the Company entered into to purchase up to $ 3.0 billion of the Company \u2019 an up-front payment of $ 3.0 billion , the financial institution end in or before November 2016 . The total number of period . Apple Inc. | 2016 Form common stock and September 30th for index . Copyright \u00a9 for index . Copyright \u00a9 2016 S & P , a right reserved . Copyright \u00a9 2016 Dow Jones & Co. All All right reserved . September 2011 September 2012 September 2013 September reserved . September 2011 September 2012 September 2013 September 2014 September September 2011 September 2012 September 2013 September 2014 September 2015 September September 2012 September 2013 September 2014 September 2015 September 2016 Apple September 2013 September 2014 September common stock of $ 29.7 billion , cash used to and dividend equivalent of $ 12.2 billion and cash used to repay term debt of $ 2.5 billion , partially offset by of term debt of $ 25.0 billion . During 2015 , $ 25.0 billion . During 2015 , cash generated from operating from operating activity of $ 81.3 billion wa a result of wa a result of $ 53.4 billion of net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.6 billion . Cash used in in investing activity of $ 56.3 billi common stock of $ 35.3 billion and cash used to and dividend equivalent of $ 11.6 billion , partially offset by of term debt of $ 27.1 billion . Capital Assets The s capital expenditure were $ 12.8 billion during 2016 . The were $ 12.8 billion during 2016 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2017 , which includes product tooling repurchase . As of September 24 , 2016 , the Company common stock Repurchase of common stock ( 488,677 ) \u2014 ( 45,000 ) ( 488,677 ) \u2014 ( 45,000 ) \u2014 ( 45,000 ) ( 45,000 ) \u2014 ( 45,000 ) Share-based compensation \u2014 2,863 45,000 ) Share-based compensation \u2014 2,863 \u2014 \u2014 2,863 Common stock compensation \u2014 2,863 \u2014 \u2014 2,863 Common stock issued , net share withheld for employee tax 60,344 ( 49 ) ( 399 for employee tax 60,344 ( 49 ) ( 399 ) \u2014 60,344 ( 49 ) ( 399 ) \u2014 ( 448 ) ( 399 ) \u2014 ( 448 ) Tax benefit from equity including transfer pricing adjustment \u2014 735 \u2014 \u2014 735 Balances a common stock Repurchase of common stock ( 325,032 ) \u2014 ( 36,026 ) ( 325,032 ) \u2014 ( 36,026 ) \u2014 ( 36,026 ) ( 36,026 ) \u2014 ( 36,026 ) Share-based compensation \u2014 3,586 36,026 ) Share-based compensation \u2014 3,586 \u2014 \u2014 3,586 Common stock compensation \u2014 3,586 \u2014 \u2014 3,586 Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) \u2014 37,624 ( 231 ) ( 609 ) \u2014 ( 840 ) ( 609 ) \u2014 ( 840 ) Tax benefit from equity including transfer pricing adjustment \u2014 748 \u2014 \u2014 748 Balances common stock Repurchase of common stock ( 279,609 ) \u2014 ( 29,000 ) ( 279,609 ) \u2014 ( 29,000 ) \u2014 ( 29,000 ) ( 29,000 ) \u2014 ( 29,000 ) Share-based compensation \u2014 4,262 29,000 ) Share-based compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock compensation \u2014 4,262 \u2014 \u2014 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) \u2014 37,022 ( 806 ) ( 419 ) \u2014 ( 1,225 ) ( 419 ) \u2014 ( 1,225 ) Tax benefit from equity including transfer pricing adjustment \u2014 379 \u2014 \u2014 379 Bala common stock 495 543 730 Excess tax benefit issuance of common stock 495 543 730 Excess tax benefit from of common stock 495 543 730 Excess tax benefit from equity tax benefit from equity award 407 749 739 Payments for tax benefit from equity award 407 749 739 Payments for tax related from equity award 407 749 739 Payments for tax related to settlement of equity award ( 1,570 ) ( 1,499 ) ( award ( 1,570 ) ( 1,499 ) ( 1,158 ) Payments ) ( 1,499 ) ( 1,158 ) Payments for dividend and dividend and dividend equi common stock Repurchases of common stock ( 29,722 ) ( 35,253 ) ( stock ( 29,722 ) ( 35,253 ) ( 45,000 ) Proceeds ) ( 35,253 ) ( 45,000 ) Proceeds from issuance of of term debt , net 24,954 27,114 11,960 Repayments of term term debt , net 24,954 27,114 11,960 Repayments of term debt debt , net 24,954 27,114 11,960 Repayments of term debt ( Repayments of term debt ( 2,500 ) \u2014 \u2014 Change in commercial paper , net ( 397 ) 2,191 6,306 Cash used , net ( 397 ) 2,191 6,306 Cash used in financing net ( 397 ) 2,191 6,3 common stock open market common stock repurchase 167,567 $ 17,000 2015 : Fourth common stock repurchase 167,567 $ 17,000 2015 : Fourth quarter 121,802 stock repurchase 167,567 $ 17,000 2015 : Fourth quarter 121,802 $ 17,000 2015 : Fourth quarter 121,802 $ 115.15 $ 14,026 Third : Fourth quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 $ 128.08 115.15 $ 14,026 Third quarter 31,231 $ 128.08 4,000 Second quarter 14,026 Third quarter 31,231 $ 128.08 4, common stock open market common stock repurchase 255,137 $ 30,026 Note 8 \u2013 common stock repurchase 255,137 $ 30,026 Note 8 \u2013 Comprehensive Income repurchase 255,137 $ 30,026 Note 8 \u2013 Comprehensive Income Comprehensive income available-for-sale . Apple Inc. | 2016 Form 10-K | 61 The Apple Inc. | 2016 Form 10-K | 61 The following table | 2016 Form 10-K | 61 The following table show the statement line item , for 2016 and 2015 ( in million item , for 2016 and 2015 ( in million ) : Components Financial Statement Common Stock 2015 . 8-K 3.2 12/22/15 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s a Trustee . S-3 4.1 4/29/13 4.3 Officer \u2019 s Certificate ", + "cash_flow_hedges": "Cash Flow Hedges fair value a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 518 $ 153 $ 671 Interest exchange contract $ 518 $ 153 $ 671 Interest rate contract $ 518 $ 153 $ 671 Interest rate contract $ 728 671 Interest rate cont" +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-16-000012/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-16-000012/full-submission_features.json new file mode 100644 index 0000000..67e2f2d --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-16-000012/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue from advertising in 2015 . Many of our advertiser our margin could be impacted 7 Table of Contents Alphabet Inc. associated with specific country . 8 Table of Contents Alphabet Inc. processed within that country . 9 Table of Contents Alphabet Inc. thus diminishing our brand . 10 Table of Contents Alphabet Inc. to gain access to our 11 Table of Contents Alphabet Inc. content to help them improve 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our cons revenue of our consolidated revenue in 2015 . In certain international market not violate our policy . 13 Table of Contents Alphabet Inc. motivate our existing employee . 14 Table of Contents Alphabet Inc. For example , from January 1 , 2015 through December 31 , from January 1 , 2015 through December 31 , 2015 1 , 2015 through December 31 , 2015 , the closing 2015 through December 31 , 2015 , the closing price of common stock ranged from $ 497.06 per share to $ 793.96 497.06 per share to $ 793.96 per revenue . 22 Table of Contents Alphabet Inc. employee . As of December 31 , 2015 , we had As of December 31 , 2015 , we had 61,814 full-time , 2015 , we had 61,814 full-time employee : 23,336 in had 61,814 full-time employee : 23,336 in research and development , in research and development , 19,082 in sale and marketing , in sale and marketing , 10,944 in operation , and 8,452 10,944 in operation , and 8,452 in general and administrative , administrative , an increase of 8,214 total headcount from Dec revenue growth of billion and revenue growth of 14 % year over year , constant currency revenue growth of 20 % year over year . Google segment revenue of $ 74.5 billion with revenue growth of billion with revenue growth of 14 % and Other Bets revenue Other Bets revenue of $ 0.4 billion . \u2022 Revenues from Rest of World were $ 34.8 billion , $ 7.1 billion $ 34.8 billion , $ 7.1 billion , and $ 33.1 7.1 billion , and $ 33.1 billion , respectively . \u2022 Cost of revenue wa $ 28.2 billion , consisting of traffi revenue of $ 13.8 billion . Our traffic acquisition percentage of advertising revenue wa 21 % . \u2022 Operating expense of revenue ) were $ 27.5 billion . \u2022 Income from Income from operation wa $ 19.4 billion . \u2022 Effective tax \u2022 Effective tax rate of 17 % . \u2022 Net income \u2022 Net income wa $ 16.3 billion with diluted net income B common stock of $ 22.84 and for Class C capital C capital stock of $ 24.34 . \u2022 Operating cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure revenue 39.6 38.9 37.6 Research and development : Cost of revenue 39.6 38.9 37.6 Research and development 12.9 Cost of revenue 39.6 38.9 37.6 Research and development 12.9 14.9 38.9 37.6 Research and development 12.9 14.9 16.3 Sales and marketing 37.6 Research and development 12.9 14.9 16.3 Sales and marketing 11.8 Research and development 12.9 14.9 16.3 Sales and marketing 11.8 12.3 14.9 16.3 Sales and marketing 11.8 12.3 12.1 General and administrative 16.3 Sales and marketing 11.8 12.3 12.1 General revenue website ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 59,624 14,539 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue ( Google advertising revenue 51,072 59,624 67,390 Google other revenue ( 1 67,390 Google other revenue ( 1 ) 4,435 6,050 7,151 Google other revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue revenue revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( revenue Ended December 31 , 2013 2014 2015 Google segment revenue $ December 31 , 2013 2014 2015 Google segment revenue $ 55,507 2015 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue a a a percentage of consolidated revenue 100.0 % 99.5 % 99.4 % of consolidated revenue 100.0 % 99.5 % 99.4 % Aggregate paid revenue 100.0 % 99.5 % 99.4 % Aggregate paid click change % Aggregate paid c revenue 67.4 % 68.6 % 70.2 % Google segment revenue 67.4 % 68.6 % 70.2 % Paid click revenue 67.4 % 68.6 % 70.2 % Paid click change 29 70.2 % Paid click change 29 % 33 % Cost-per-click change Paid click change 29 % 33 % Cost-per-click change ( 7 33 % Cost-per-click change ( 7 ) % ( 15 ) ( 7 ) % ( 15 ) % Google website revenue Google website revenue increased $ 7,272 million from 2014 to 2015 increased $ 7,272 million from 2014 to 2015 and also increased 7,272 million from 2014 to 2015 and also increased revenue increased $ 7,663 million from 2013 to 2014 increased $ 7,663 million from 2013 to 2014 and also increased 7,663 million from 2013 to 2014 and also increased a a to certain foreign currency . 26 Table of Contents Alphabet Inc. through our advertising program from 2013 to 2014 wa due to advertising program from 2013 to 2014 wa due to certain monetization ) : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google Network Members Ended December 31 , 2013 2014 revenue ( 1 ) 24.6 % 22.1 % segment revenue ( 1 ) 24.6 % 22.1 % 20.2 % ( 1 ) 24.6 % 22.1 % 20.2 % Paid click ) 24.6 % 22.1 % 20.2 % Paid click change 2 20.2 % Paid click change 2 % ( 7 ) % click change 2 % ( 7 ) % Cost-per-click change ( ) % Cost-per-click change ( 6 ) % ( 3 ) ( 6 ) % ( 3 ) % ( 1 ) ( 3 ) % ( 1 ) Prior period amount have ' website revenue increased $ 494 million from 2014 to 2015 increased $ 494 million from 2014 to 2015 . The increase 494 million from 2014 to 2015 . The increase wa pri revenue increased $ 889 million from 2013 to 2014 increased $ 889 million from 2013 to 2014 . The increase 889 million from 2013 to 2014 . The increase wa mainly increase in paid click from 2013 to 2014 wa due to paid click from 2013 to 2014 wa due to certain monetization in the average cost-per-click from 2013 to 2014 wa due to average cost-per-click from 2013 to 2014 wa due to various factor to certain foreign currency . 27 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2013 201 revenue Ended December 31 , 2013 2014 2015 Google other revenue ( December 31 , 2013 2014 2015 Google other revenue ( 1 2015 Google other revenue ( 1 ) $ 4,435 $ 6,050 revenue ( 1 ) $ 4,435 $ 6,050 $ 7,151 Google 1 ) $ 4,435 $ 6,050 $ 7,151 Google other revenue $ 4,435 $ 6,050 $ 7,151 Google other revenue a a of Google segment revenue ( 1 ) 8.0 % 9.3 % segment revenue ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) Prior 9.3 % 9.6 % ( 1 ) Prior period amount have Google ot revenue increased $ 1,101 million from 2014 to 2015 increased $ 1,101 million from 2014 to 2015 and increased a 1,101 million from 2014 to 2015 and increased a a percentage Google other revenue increased $ 1,615 million from 2013 to 2014 increased $ 1,615 million from 2013 to 2014 and increased a 1,615 million from 2013 to 2014 and increased a a percentage presented : Year Ended December 31 , 2013 2014 2015 Other Year Ended December 31 , 2013 2014 2015 Other Bets revenue Ended December 31 , 2013 2014 2 revenue $ December 31 , 2013 2014 2015 Other Bets revenue $ 12 2015 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue a a a percentage of consolidated revenue 0.0 % 0.5 % 0.6 % of consolidated revenue 0.0 % 0.5 % 0.6 % Other Bets revenue 0.0 % 0.5 % 0.6 % Other Bets revenue consist Other Bets revenue increased $ 121 million from 2014 to 2015 increased $ 121 million from 2014 to 2015 and remained relatively 121 million from 201 revenue in 2014 a compared to a full to a full year in 2015 . Our Other Bets revenue Other Bets revenue increased $ 315 million from 2013 to 2014 increased $ 315 million from 2013 to 2014 and increased a 315 million from 2013 to 2014 and increased a a percentage the acquisition of Nest in 2014 a well a an increase increase of licensing revenue . 28 Table of Contents Alphabet Inc. customer : Year Ended December 31 , 2013 2014 2015 United Year Ended December 31 , 2013 2014 2015 United States 46 Ended Dec revenue Ended December 31 , 2013 2014 2015 United Kingdom revenue $ December 31 , 2013 2014 2015 United Kingdom revenue $ 5,600 2015 United Kingdom revenue $ 5,600 $ 6,483 $ 7,067 Exclude Kingdom revenue $ 5,600 $ 6,483 $ 7,067 Exclude : Foreign $ 5,600 $ 6,483 $ 7,067 Exclude : Foreign exchange impact revenue using prior period rate 67 ( 304 ) 538 Exclude prior period rate 67 ( 304 ) 538 Exclude : Hedging rate 67 ( 304 ) 538 Exclude : Hedging gain recognized : Hedging gain recognized ( 63 ) ( 3 ) ( re revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue growth rate United Kingdom revenue growth rate 16 % 9 % United Kingdom revenue growth rate 16 % 9 % United Kingdom constant currency constant currency revenue growth rate 12 % 15 % In 2015 revenue growth rate 12 % 15 % In 2015 , our 12 % 15 % In 2015 , our revenue from the the British pound . In 2014 , our revenue from the to the British pound . 29 Table o revenue of the world revenue ( 1 ) $ 24,332 $ 30,036 revenue ( 1 ) $ 24,332 $ 30,036 $ 33,112 Exclude 1 ) $ 24,332 $ 30,036 $ 33,112 Exclude : Foreign $ 24,332 $ 30,036 $ 33,112 Exclude : Foreign exchange impact revenue using prior period rate 535 857 5,052 Exclude : Hedging using prior period rate 535 857 5,052 Exclude : Hedging gain prior period rate 535 857 5,052 Exclude : Hedging gain recognized : Hedging gain recognized ( 32 ) ( 169 ) ( recognized ( 32 ) ( 169 ) ( 1,267 ) Constant ) ( 169 ) ( 1,26 revenue $ 24,835 $ 30,724 $ 36,897 Rest world revenue $ 24,835 $ 30,724 $ 36,897 Rest of the $ 24,835 $ 30,724 $ 36,897 Rest of the world revenue the world revenue growth rate 23 % 10 % Rest of revenue growth rate 23 % 10 % Rest of the world constant currency revenue growth rate 26 % 24 % United States revenue growth rate 26 % 24 % United States revenue ( % United States revenue ( 1 ) $ 25,587 $ 29,482 revenue ( 1 ) $ 25,587 $ 29,482 $ 34,810 United 1 ) $ 25,587 $ 29,482 $ 34,810 United States revenue revenue growth rate United States revenue growth rate 15 % 18 % Total consolidated revenue growth rate 15 % 18 % Total consolidated revenue $ % Total consolidated revenue $ 55,519 $ 66,001 $ 74,989 Constant consolidated revenue $ 55,519 $ 66,001 $ 74,989 Constant currency total $ 55,519 $ 66,001 $ 74,989 Constant currency total consolidated revenue currency total consolidated revenue $ 56,026 $ 66,382 $ 79,179 Total consolidated revenue $ 56,026 $ 66,382 $ 79,179 Total consolidated revenue $ 56,026 $ 6 revenue growth rate Total consolidated revenue growth rate 19 % 14 % Constant currency revenue growth rate 19 % 14 % Constant currency total consolidated total consolidated revenue growth rate 20 % 20 % ( 1 revenue growth rate 20 % 20 % ( 1 ) In 20 % 20 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated Annual report t on Form 10-K for further information . In for further revenue from the and Japanese yen . In 2014 , our revenue from the ( in million ) : 30 Table of Contents Alphabet Inc. Google Inc. Year Ended December 31 , 2013 2014 2015 Traffic Year Ended December 31 , 2013 2014 2015 Traffic acquisition cost Ended December 31 , 2013 2014 2015 Traffic acquisition cost $ December 31 , 2013 2014 2015 Traffic acquisition cost $ 12,258 2015 Traffic acquisition cost $ 12,258 $ 13,497 $ 14,343 Other acquisition cost $ 12,258 $ 13,497 $ 14,343 Other cost of $ 12,258 $ 13,497 revenue 9,735 14,343 Other cost of revenue 9,735 12,194 13,821 Total cost of Other cost of revenue 9,735 12,194 13,821 Total cost of revenue cost of revenue 9,735 12,194 13,821 Total cost of revenue $ Total cost of revenue $ 21,993 $ 25,691 $ 28,164 Total of revenue $ 21,993 $ 25,691 $ 28,164 Total cost of $ 21,993 $ 25,691 $ 28,164 Total cost of revenue a a a percentage of revenue 39.6 % 38.9 % 37.6 % percentage of revenue 39.6 % 38.9 % 37.6 % Year Ended revenue 39.6 % 38.9 % 37.6 % Year Ended Decembe revenue 24.0 % 22.6 % 21.3 % of advertising revenue 24.0 % 22.6 % 21.3 % The cost revenue 24.0 % 22.6 % 21.3 % The cost of revenue Cost of revenue increased $ 2,473 million from 2014 to 2015 increased $ 2,473 million from 2014 to 2015 . The increase 2,473 million from 2014 to 2015 . The increase wa primarily traffic acquisition cost of $ 846 million , resulting from more an impairment charge of $ 378 million recognized in 2014 related $ 378 million recognized in 2014 related to a patent licensing that revenue increased $ 3,698 million from 2013 to 2014 increased $ 3,698 million from 2013 to 2014 . The increase 3,698 million from 2013 to 2014 . The increase wa partially traffic acquisition cost of $ 1,239 million resulting from more distribution percentage of total revenue in 2016 and future period , based the related revenue generated . 31 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Research Year Ended December 31 , 2013 2014 2015 Research and development Ended Decemb revenue 12.9 % 14.9 % 16.3 % percentage of revenue 12.9 % 14.9 % 16.3 % R & revenue 12.9 % 14.9 % 16.3 % R & D expense & D expense increased $ 2,450 million and increased a a a percentage of revenue from 2014 to 2015 . These increase of revenue from 2014 to 2015 . These increase s were and facilities-related cost of $ 1,502 million and an increase in stock-based compensation expense of $ 487 million , both largely a a a result of a 16 % increase in R & equipment-related expense of approximately $ 248 m revenue from 2013 to 2014 . These increase of revenue from 2013 to 2014 . These increase were primarily and facilities-related cost of $ 1,289 million and an increase in stock-based compensation expense of $ 559 million , both largely a a a result of a 27 % increase in R & and equipment-related expense of $ 425 million and an increase in in professional service of $ 371 million due to additional expense a percentage of revenue in 2016 and future period . Sales ) : Year Ended December 31 , 2013 2014 201 revenue 11.8 % 12.3 % 12.1 % percentage of revenue 11.8 % 12.3 % 12.1 % Sales and revenue 11.8 % 12.3 % 12.1 % Sales and marketing expense and marketing expense increased $ 916 million and remained relatively flat a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar and facilities-related cost of $ 329 million and an increase in stock-based compensation expense of $ 184 million , largely resulting from , largely resulting from a 12 % increase in revenue from 2013 to 2014 . These increase of revenue from 2013 to 2014 . These increase were primarily and promotional expense of $ 614 million . In addition , and facilities-related cost of $ 571 million and an increase in stock-based compensation expense of $ 163 million , both largely resulting both largely resulting from a 15 % increase in sale and sale and marketing headcount . 32 Table of Contents Alphabet Inc. a percentage of revenue in 2016 and future period . General ) : Year Ended December 3 revenue 8.0 % 8.9 % 8.2 % percentage of revenue 8.0 % 8.9 % 8.2 % General and revenue 8.0 % 8.9 % 8.2 % General and administrative expense and administrative expense increased $ 285 million and decreased a a a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar stock-based compensation expense of $ 136 million and an increase in and facilities-related cost of $ 69 million , both largely resulting both largely resulting from a 15 % increase in gen revenue from 2013 to 2014 . The increase of revenue from 2013 to 2014 . The increase s were and facilities-related cost of $ 576 million and an increase in stock-based compensation expense of $ 260 million , both largely resulting both largely resulting from a 24 % increase in general and service related expense of $ 314 million due to higher legal a percentage of revenue in 2016 and future period . Stock-Based ) : Year Ended December 31 , 2013 2014 2015 Stock-based Year Ended December 31 , 2013 2014 2 revenue 5.6 % 6.3 % 6.9 % percentage of revenue 5.6 % 6.3 % 6.9 % Stock-based compensation revenue 5.6 % 6.3 % 6.9 % Stock-based compensation related to equity settled award increased $ 1,028 million from 2014 to 2015 increased $ 1,028 million from 2014 to 2015 and $ 1,048 1,028 million from 2014 to 2015 and $ 1,048 million from 2014 to 2015 and $ 1,048 million from 2013 to 2014 and $ 1,048 million from 2013 to 2014 , and increased 1,048 million from 2013 to 2014 , and increased a a settled in cash of revenue 0.9 % 1.1 % 0.4 % percentage of revenue 0.9 % 1.1 % 0.4 % Other income revenue 0.9 % 1.1 % 0.4 % Other income ( expense , net , decreased $ 472 million from 2014 to 2015 decreased $ 472 million from 2014 to 2015 . This decrease 472 million from 2014 to 2015 . This decrease wa primarily non-marketable investment a compared to 2014 . These decrease were partially , net , increased $ 267 million from 2013 to 2014 increased $ 267 million from 2013 to 2014 . This increase 267 million from 2013 to 20 revenue 5,961 6,114 6,695 6,921 6,356 6,583 : Cost of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 Cost of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and development 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and development 2,126 6,695 6,921 6,356 6,583 7,037 8,188 Research and develop revenue 38.7 38.3 40.5 38.2 36.8 37.1 : Cost of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 Cost of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 13.8 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 13.8 14.0 37.7 38.4 Research and development 13.8 14.0 revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5 revenue share 1,952 and other current liability 4,408 4,768 Accrued revenue share 1,952 2,329 4,408 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 2,428 1,952 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 Income payable 2,778 2,428 Deferred revenue 752 788 Income tax payable , 2,778 2,428 Deferred revenue 752 788 revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferred income tax 758 189 3,340 3,663 Deferred income tax 758 189 Other long-term liability 1,118 3,663 Deferred income tax 758 189 Other long-term liability 1,11 revenue 21,993 25,691 28,164 Research and development : Cost of revenue 21,993 25,691 28,164 Research and development 7,137 Cost of revenue 21,993 25,691 28,164 Research and development 7,137 9,832 25,691 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 8,131 9,832 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative revenue , net 588 591 ( 179 ) Prepaid revenue share , expense and other asset ( 930 ) 459 ( 318 ) other asset ( 930 ) 459 ( 318 ) Accounts payable ( 930 ) 459 ( 318 ) Accounts payable 605 436 ( 318 ) Accounts payable 605 436 203 Accrued expense and 318 ) Accounts payable 605 436 203 Accrued expense and other ) Accounts payable 605 436 203 Accrued expense and other liability Accrued expense and other liability 713 757 1,597 Accrued revenue share expense and other liability 713 757 1,597 Accrued revenue revenue share 254 245 757 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 ( Accrued revenue share 254 245 339 Deferred revenue 233 ( 175 254 245 339 Deferred revenue 233 ( 175 ) 43 Net 339 Deferred revenue 233 ( 175 ) 43 Net cash provided revenue 233 ( 175 ) 43 Net cash provided by operating cash provided by operating activity 18,659 22,376 26,024 Investing activity Purchases provided by operating activity 18,659 22,376 26,024 In revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5 revenue share 1,952 and other current liability 4,408 4,768 Accrued revenue share 1,952 2,329 4,408 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 2,428 1,952 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 Income payable 2,778 2,428 Deferred revenue 752 788 Income tax payable , 2,778 2,428 Deferred revenue 752 788 revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferred income tax 758 189 3,340 3,663 Deferred income tax 758 189 Other long-term liability 1,118 3,663 Deferred income tax 758 189 Other long-term liability 1,11 revenue 21,993 25,691 28,164 Research and development : Cost of revenue 21,993 25,691 28,164 Research and development 7,137 Cost of revenue 21,993 25,691 28,164 Research and development 7,137 9,832 25,691 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 8,131 9,832 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative revenue , net 588 591 ( 179 ) Prepaid revenue share , expense and other asset ( 930 ) 459 ( 318 ) other asset ( 930 ) 459 ( 318 ) Accounts payable ( 930 ) 459 ( 318 ) Accounts payable 605 436 ( 318 ) Accounts payable 605 436 203 Accrued expense and 318 ) Accounts payable 605 436 203 Accrued expense and other ) Accounts payable 605 436 203 Accrued expense and other liability Accrued expense and other liability 713 757 1,597 Accrued revenue share expense and other liability 713 757 1,597 Accrued revenue revenue share 254 245 757 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 ( Accrued revenue share 254 245 339 Deferred revenue 233 ( 175 254 245 339 Deferred revenue 233 ( 175 ) 43 Net 339 Deferred revenue 233 ( 175 ) 43 Net cash provided revenue 233 ( 175 ) 43 Net cash provided by operating cash provided by operating activity 18,659 22,376 26,024 Investing activity Purchases provided by operating activity 18,659 22,376 26,024 In revenue primarily online advertising . On April 17 , 2013 , we sold . On April 17 , 2013 , we sold the Motorola for the year ended December 31 , 2013 . See Note year ended December 31 , 2013 . See Note 9 for , 2013 . See Note 9 for further discussion of the the sale . On April 2 , 2014 , we completed . On April 2 , 2014 , we completed a two Stock Split . See Note 12 for additional information about the Stock Split . On October 29 , 2014 , we sold . On October 29 , 2014 , we sold the Motorola for the ye revenue website ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 59,624 14,539 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue ( Google advertising revenue 51,072 59,624 67,390 Google other revenue ( 1 67,390 Google other revenue ( 1 ) 4,435 6,050 7,151 Google other revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue revenue revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( revenue from affiliated customer represented more than 10 % of our revenue in % of our revenue in 2013 , 2014 , or 2015 our revenue in 2013 , 2014 , or 2015 . Fair 2013 , 2014 , or 2015 . Fair Value of Financial measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Include other input that and credit rating . Level 3 - Unobservable input that are liquid security with maturity beyond 12 month a current asset under under the cost method . 61 Table of Contents Alphabet Revenue from Contracts with Customers . `` ASU 2014-09 supersedes the revenue recognition requirement \u201c Revenue Recognition ( Topic 605 ) \u201d , and requires issued and amended , ASU 2014-09 is effective for annual reporting reporting period beginning after December 15 , 2017 , including interim beginning after December 15 , 2017 , including interim period within reporting period beginning after December 15 , 2016 . We are beginning after December 15 , 2016 . We are currently in of the adoption of ASU 201 revenue year ending December 31 , 2015 . Consolidated revenue are not impacted . Refer to Note 17 for additional information . Prior current period presentation . Note 2 . Financial Instruments We classify and marketable security within Level 1 or Level 2 in the within Level 1 or Level 2 in the fair value hierarchy derivative contract primarily within Level 2 in the fair value hierarchy investment category a of December 31 , 2014 and 2015 ( a of December 31 , 2014 and 2015 ( in million December 31 , 20 revenue asset , current and non-current 1 0 1 Total $ 852 , current and non-current 1 0 1 Total $ 852 $ current and non-current 1 0 1 Total $ 852 $ 0 1 0 1 Total $ 852 $ 0 $ 852 Derivative 1 Total $ 852 $ 0 $ 852 Derivative Liabilities : $ 852 $ 0 $ 852 Derivative Liabilities : Level 2 852 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 0 $ 3 $ 3 Interest current liability $ 0 $ 3 $ 3 Interest rate contract $ 0 $ 3 $ 3 Interest rate contract Accrued ex Revenue a of December 31 , 2015 . Prepaid Revenue Share , Motorola Mobile business on October 29 , 2014 ( see Note business on October 29 , 2014 ( see Note 9 for , 2014 ( see Note 9 for additional information ) , Receivable `` ) due October 2017 from Lenovo . The Note an effective interest rate of 4.5 % . The outstanding balance ) : As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Principal of the As of December 31 , 2015 Principal of Revenue $ 95 $ 171 $ 1,399 Interest contract Revenue $ 95 $ 171 $ 1,399 Interest rate contract $ 95 $ 171 $ 1,399 Interest rate contract Other income ( expense ) , net 0 4 5 Provision for income expense ) , net 0 4 5 Provision for income tax ) , net 0 4 5 Provision for income tax ( Provision for income tax ( 35 ) ( 51 ) ( tax ( 35 ) ( 51 ) ( 401 ) Net ) ( 51 ) ( 401 ) Net of tax $ ) Net of tax $ 60 $ 124 $ 1,003 Total of tax $ 60 $ 124 $ 1,003 Total amount reclassified $ 60 $ 124 $ 1,003 Total amount r revenue of $ 378 million related to a patent date and fall within level 3 in fair value hierarchy . for the year ended December 31 , 2015 . 79 Table year ended December 31 , 2015 . 79 Table of Contents December 31 , 2015 . 79 Table of Contents Alphabet Inc. Google Inc. As of December 31 , 2015 , expected amortization As of December 31 , 2015 , expected amortization expense for ( in million ) : 2016 $ 806 2017 724 2018 million ) : 2016 $ 806 2017 724 2018 637 2019 ) : 2016 $ 806 2017 724 2018 637 2019 5 revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Motorola liability 250 Total liability $ 1,826 Motorola Home On April 17 1,826 Motorola Home On April 17 , 2013 , we sold Home On April 17 , 2013 , we sold the Motorola for consideration of approximately $ 2,412 million in cash , including , including cash of $ 2,238 million received at the date certain post-close adjustment of $ 174 million recei revenue Ended December 31 , 2013 2014 2015 Cost of revenue $ December 31 , 2013 2014 2015 Cost of revenue $ 469 2015 Cost of revenue $ 469 $ 535 $ 806 Research of revenue $ 469 $ 535 $ 806 Research and development $ 469 $ 535 $ 806 Research and development 1,641 2,200 $ 806 Research and development 1,641 2,200 2,687 Sales and marketing 806 Research and development 1,641 2,200 2,687 Sales and marketing 552 Research and development 1,641 2,200 2,687 Sales and marketing 552 715 2,200 2,687 Sales and marke Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 202 million , $ 259 million $ 202 million , $ 259 million , and $ 309 259 million , and $ 309 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . Note 2013 , 2014 , and 2015 . Note 15 . Income , and 2015 . Note 15 . Income Taxes Income from from domestic operation of $ 7,651 million , $ 8,894 million $ 7,651 million , revenue $ $ 74,541 Other Bets 12 327 448 Total revenue $ 55,519 74,541 Other Bets 12 327 448 Total revenue $ 55,519 $ 327 448 Total revenue $ 55,519 $ 66,001 $ 74,989 Year Total revenue $ 55,519 $ 66,001 $ 74,989 Year Ended December $ 55,519 $ 66,001 $ 74,989 Year Ended December 31 , $ 74,989 Year Ended December 31 , 2013 2014 2015 Segment Year Ended December 31 , 2013 2014 2015 Segment operating income Ended December 31 , 2013 2014 2015 Segment operating income ( December 31 , 2013 2014 2015 Segment o revenue $ Rest of the world 24,332 30,036 33,112 Total revenue $ 55,519 of the world 24,332 30,036 33,112 Total revenue $ 55,519 $ 30,036 33,112 Total revenue $ 55,519 $ 66,001 $ 74,989 As Total revenue $ 55,519 $ 66,001 $ 74,989 As of December $ 55,519 $ 66,001 $ 74,989 As of December 31 , $ 74,989 As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Long-lived asset : As of December 31 , 2015 Long-lived asset : United States asset : Unit revenue year ended December 31 , 2015 . Consolidated revenue are not this Annual Report on Form 10-K for the period impacted to for the corresponding period . 96 Table of Contents Alphabet Inc. line item a of December 31 , 2014 ( in million a of December 31 , 2014 ( in million ) : ) : As of December 31 , 2014 As Previously Reported As of December 31 , 2014 As Previously Reported ( 1 2014 As Previously Reported ( 1 ) Adjustment As Revised Selected tax receivable , net $ 1,298 $ ( 707 ) $ net $ 1,298 $ (", + "net_income": "Net income Income from operation 11,742 13,834 15,403 16,496 19,360 Net income from from operation 11,742 13,834 15,403 16,496 19,360 Net income from continuing operation 11,742 13,834 15,403 16,496 19,360 Net income from continuing operation Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income ( continuing operation 9,706 11,435 13,160 Net income ( loss operation 9,706 11,435 13,160 13,620 16,348 Net income ( loss ) loss ) from discontinued operation 0 ( 816 ) ( 427 from discontinued operation 0 ( 816 ) ( 427 ) 516 0 ( 816 ) ( 427 ) 516 0 Net income 816 ) ( 427 ) 516 0 Net income 9,706 10,619 ) ( 427 ) 516 0 Net income 9,706 10,619 12,733 ) 516 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 516 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 1 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 1 ) Net income 9,706 10,619 12,733 14,136 net income per ) ( 0.64 ) 0.76 0.00 Basic net income per share and B common stock $ 15.04 $ 16.22 $ 19.13 $ common stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 15.04 $ 17.47 $ 19.77 $ Continuing operation $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued oper net income per ) ( 0.64 ) 0.76 0.00 Basic net income per share Class C capital stock $ 15.04 $ 16.22 $ 19.13 $ capital stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discont net income per ) ( 0.63 ) 0.75 0.00 Diluted net income per share and B common stock $ 14.83 $ 15.98 $ 18.79 $ common stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontin net income per ) ( 0.63 ) 0.75 0.00 Diluted net income per share Class C capital stock $ 14.83 $ 15.98 $ 18.79 $ capital stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( 1 ) $ 18.79 $ 20.57 $ 24.34 ( 1 ) In the $ 20.57 $ 24.34 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Plea Net income \u2022 Net income wa $ 16.3 billion with diluted net income B common stock of $ 22.84 and for Class C capital C capital stock of $ 24.34 . \u2022 Operating cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the Net income from Provision for income tax 4.9 5.5 4.4 Net income from continuing for income tax 4.9 5.5 4.4 Net income from continuing operation Net income from continuing operation 23.7 20.6 21.8 Net income ( income from continuing operation 23.7 20.6 21.8 Net income ( loss from continuing operation 23.7 20.6 21.8 Net income ( loss ) ) from discontinued operation ( 0.8 ) 0.8 0.0 Net income discontinued operation ( 0.8 ) 0.8 0.0 Net income 22.9 % operation ( 0.8 ) 0.8 0.0 Net income 22.9 % 21.4 ) 0.8 0.0 N Net income 22.9 % 21.4 % 21.8 % ( 1 income 22.9 % 21.4 % 21.8 % ( 1 ) Financial 21.4 % 21.8 % ( 1 ) Financial result of Motorola for the year ended December 31 , 2013 . Financial result year ended December 31 , 2013 . Financial result of Motorola for the year ended December 31 , 2013 and 2014 . year ended December 31 , 2013 and 2014 . ( 2 December 31 , 2013 and 2014 . ( 2 ) In 2013 and 2014 . ( 2 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginnin Net income 903 984 933 819 1,089 1,025 912 277 Net income from 984 933 819 1,089 1,025 912 277 Net income from continuing 933 819 1,089 1,025 912 277 Net income from continuing operation income from continuing operation $ 3,569 $ 3,419 $ 2,924 $ continuing operation $ 3,569 $ 3,419 $ 2,924 $ 3,708 $ $ 3,569 $ 3,419 $ 2,924 $ 3,708 $ 3,515 $ $ 3,419 $ 2,924 $ 3,708 $ 3,515 $ 3,931 $ $ 2,924 $ 3,708 $ 3,515 $ 3,931 $ 3,979 $ $ 3,708 $ 3,515 $ 3,931 $ 3,979 $ 4,923 Net $ 3,515 $ 3,931 $ 3,979 $ 4,923 Net inc Net income ( loss ) ) from discontinued operation ( 198 ) ( 68 ) ( operation ( 198 ) ( 68 ) ( 185 ) 967 ) ( 68 ) ( 185 ) 967 0 0 0 68 ) ( 185 ) 967 0 0 0 0 Net ) ( 185 ) 967 0 0 0 0 Net income ( 185 ) 967 0 0 0 0 Net income $ 185 ) 967 0 0 0 0 Net income $ 3,371 ) 967 0 0 0 0 Net income $ 3,371 $ 0 0 Net income $ 3,371 $ 3,351 $ 2,739 $ Net income $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ 3,931 $ $ 2,739 $ 4,675 $ 3,515 $ 3,931 $ 3,979 $ Net income 0 0 0 0 0 522 0 0 Net income available 0 0 0 0 522 0 0 Net income available to 0 0 0 522 0 0 Net income available to all available to all stockholder $ 3,371 $ 3,351 $ 2,739 $ all stockholder $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ 3,409 $ $ 2,739 $ 4,675 $ 3,515 $ 3,409 $ 3,979 $ $ 4,675 $ 3,515 $ 3,409 $ 3,979 $ 4,923 ( $ 3,515 $ 3,409 $ 3,979 $ 4,923 ( 1 ) $ 3,409 $ 3,979 $ 4,923 ( 1 ) In the $ 3,979 $ 4,923 ( 1 ) In the s net income 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income per ) 1.43 0.00 0.00 0.00 0.00 Basic net income per share and B common stock $ 5.01 $ 4.96 $ 4.05 $ common stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic net income $ 4.99 $ 5.80 $ 7.16 Basic net income ( loss stock : Continuing operation $ 5.30 $ 5.06 $ 4.32 $ Continuing op net income 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income per ) 1.43 0.00 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 5.01 $ 4.96 $ 4.05 $ capital stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted net income $ 6.51 $ 5.80 $ 7.16 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Con net income 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per share and B common stock $ 4.92 $ 4.88 $ 3.98 $ common stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted net income $ 4.93 $ 5.73 $ 7.06 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Con net income 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 4.92 $ 4.88 $ 3.98 $ capital stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( 1 ) $ 6.43 $ 5.73 $ 7.06 ( 1 ) In the $ 5.73 $ 7.06 ( 1 ) In the second quarter In the second quarter of 2015 , we identi Net income 5.8 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net income from 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net income from continuing 5.6 4.5 6.3 5.8 4.9 1.3 Net income from continuing operation Net income from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 income from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net income 23.2 21. Net income ( 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net income ( loss 17.7 20.5 20.4 22.2 21.3 23.1 Net income ( loss ) ) from discontinued operation ( 1.3 ) ( 0.4 ) ( operation ( 1.3 ) ( 0.4 ) ( 1.1 ) 5.3 ) ( 0.4 ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.4 ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 % ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 % 21.0 0.0 0.0 0.0 Net income 21.9 % 21.0 % 16.6 % 0.0 Net income 21. Net income % 2.9 % 0.0 % 0.0 % Net income available to income available to all stockholder 21.9 % 21.0 % 16.6 % to all stockholder 21.9 % 21.0 % 16.6 % 25.8 % stockholder 21.9 % 21.0 % 16.6 % 25.8 % 20.4 % % 21.0 % 16.6 % 25.8 % 20.4 % 19.2 % % 16.6 % 25.8 % 20.4 % 19.2 % 21.3 % % 25.8 % 20.4 % 19.2 % 21.3 % 23.1 % % 20.4 % 19.2 % 21.3 % 23.1 % ( 1 % 19.2 % 21.3 % 23.1 % ( 1 ) In 21.3 % 23.1 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginni net Income tax receivable , net 591 1,903 Prepaid revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-curren net Income tax payable , net 96 302 Total current liability 16,779 tax payable , net 96 302 Total current liability 16,779 19,310 96 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferr Net income from Provision for income tax 2,739 3,639 3,303 Net income from continuing for income tax 2,739 3,639 3,303 Net income from continuing operation income from continuing operation $ 13,160 $ 13,620 $ 16,348 Net continuing operation $ 13,160 $ 13,620 $ 16,348 Net income ( $ 13,160 $ 13,620 $ 16,348 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 Net income discontinued operation ( 427 ) 516 0 Net income $ 12,733 operation ( 427 ) 516 0 Net income $ 12,733 $ 516 0 Net income $ 12,73 Net income $ 12,733 $ 14,136 $ 16,348 Less : Adjustment $ 12,733 $ 14,136 $ 16,348 Less : Adjustment Payment to to Class C capital stockholder 0 0 522 Net income available Class C capital stockholder 0 0 522 Net income available to C capital stockholder 0 0 522 Net income available to all available to all stockholder $ 12,733 $ 14,136 $ 15,826 Basic all stockholder $ 12,733 $ 14,136 $ 15,826 Basic net income $ 12,733 $ 14,136 $ 15,826 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ net income per operation ( 0.64 ) 0.76 0.00 Basic net income per share and B common stock $ 19.13 $ 20.91 $ 23.11 Basic common stock $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( 0.64 ) $ 24.63 Discontinued operation ( 0.64 ) 0.76 0.00 Basic net Discontinued operation ( 0.64 ) 0.76 net income per operation ( 0.64 ) 0.76 0.00 Basic net income per share Class C capital stock $ 19.13 $ 20.91 $ 24.63 Diluted capital stock $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( 0.63 ) $ 22.84 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( net income per operation ( 0.63 ) 0.75 0.00 Diluted net income per share and B common stock $ 18.79 $ 20.57 $ 22.84 Diluted common stock $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( 0.63 ) $ 24.34 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( 0 net income per operation ( 0.63 ) 0.75 0.00 Diluted net income per share Class C capital stock $ 18.79 $ 20.57 $ 24.34 See capital stock $ 18.79 $ 20.57 $ 24.34 See accompanying note $ 18.79 $ 20.57 $ 24.34 See accompanying note . 49 24.34 See accompanying note . 49 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net income $ Ended December 31 , 2013 2014 2015 Net income $ 12,733 December 31 , 2013 2014 2015 Net income $ 12,733 Net income $ 12,733 $ 14,136 $ 16,348 Other Net income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income ( loss in foreign currency translation adjustment 89 ( 996 ) ( 1,067 currency translation adjustment 89 ( 996 ) ( 1,067 ) Available-for-sale 89 ( 996 ) ( 1,067 ) Available-for-sale investment : Change gain ( loss ) ( 392 ) 505 ( 715 ) loss ) ( 392 ) 505 ( 715 ) Less : ( 392 ) 505 ( 715 ) Less : reclassification adjustment included in net income net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 115 ) 52 527 ( 327 ) Other comprehensive 115 ) 52 527 ( 327 ) Other comprehensive loss ( ) Other comprehensive loss ( 413 ) ( 98 ) ( loss ( 413 ) ( 98 ) ( 1,901 ) Comprehensive ) ( 98 ) ( 1,901 ) Comprehensive income $ 12,320 1,901 ) Comprehensive income $ 12,320 $ 14, Net income 1,879 ) 0 0 ( 1,879 ) Net income 0 0 ( 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive loss ) Net income 0 0 12,733 12,733 Other comprehensive loss 0 Net income 0 0 12,733 12,733 Other comprehensive loss 0 ( 12,733 12,733 Other comprehensive loss 0 ( 413 ) 0 ( Other comprehensive loss 0 ( 413 ) 0 ( 413 ) loss 0 ( 413 ) 0 ( 413 ) Balance a ( 413 ) 0 ( 413 ) Balance a of December ) Balance a of December 31 , 2013 671,664 25,922 125 Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of De Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 687,348 $ 32,982 a of December 31 , 2015 68 Net income December 31 , 2013 2014 2015 Operating activity Net income $ Operating activity Net income $ 12,733 $ 14,136 $ 16,348 Adjustments Net income $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation and impairment impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of intan net Income tax receivable , net 591 1,903 Prepaid revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-curren net Income tax payable , net 96 302 Total current liability 16,779 tax payable , net 96 302 Total current liability 16,779 19,310 96 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferr Net income from Provision for income tax 2,739 3,639 3,303 Net income from continuing for income tax 2,739 3,639 3,303 Net income from continuing operation income from continuing operation $ 13,160 $ 13,620 $ 16,348 Net continuing operation $ 13,160 $ 13,620 $ 16,348 Net income ( $ 13,160 $ 13,620 $ 16,348 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 Net income discontinued operation ( 427 ) 516 0 Net income $ 12,733 operation ( 427 ) 516 0 Net income $ 12,733 $ 516 0 Net income $ 12,73 Net income $ 12,733 $ 14,136 $ 16,348 Less : Adjustment $ 12,733 $ 14,136 $ 16,348 Less : Adjustment Payment to to Class C capital stockholder 0 0 522 Net income available Class C capital stockholder 0 0 522 Net income available to C capital stockholder 0 0 522 Net income available to all available to all stockholder $ 12,733 $ 14,136 $ 15,826 See all stockholder $ 12,733 $ 14,136 $ 15,826 See accompanying note $ 12,733 $ 14,136 $ 15,826 See accompanying note . 54 15,826 See accompanying note . 54 Table o Net income $ Ended December 31 , 2013 2014 2015 Net income $ 12,733 December 31 , 2013 2014 2015 Net income $ 12,733 $ 2014 2015 Net income $ 12,733 $ 14,136 $ 16,348 Other Net income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income ( loss in foreign currency translation adjustment 89 ( 996 ) ( 1,067 currency translation adjustment 89 ( 996 ) ( 1,067 ) Available-for-sale 89 ( 996 ) ( 1,067 ) Available-for-sale investment : Change gain ( loss ) ( 3 net income ( 162 ) ( 134 ) 208 income ( 162 ) ( 134 ) 208 Net change ( 162 ) ( 134 ) 208 Net change ( net of of tax effect of $ 212 , $ 60 , and of $ 212 , $ 60 , and $ 29 ) $ 60 , and $ 29 ) ( 554 ) 371 and $ 29 ) ( 554 ) 371 ( 507 ) 29 ) ( 554 ) 371 ( 507 ) Cash flow ( 554 ) 371 ( 507 ) Cash flow hedge : Change in net unrealized gain 112 651 676 Less : reclassification in net unrealized gain 112 651 676 Less : reclassification adjustment net unrealized gain 112 651 676 Less : reclassification adjustment net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 115 ) 52 527 ( 327 ) Other comprehensive 115 ) 52 527 ( 327 ) Other comprehensive loss ( ) Other comprehensive loss ( 413 ) ( 98 ) ( loss ( 413 ) ( 98 ) ( 1,901 ) Comprehensive ) ( 98 ) ( 1,901 ) Comprehensive income $ 12,320 1,901 ) Comprehensive income $ 12,320 $ 14, Net income 1,879 ) 0 0 ( 1,879 ) Net income 0 0 ( 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive loss ) Net income 0 0 12,733 12,733 Other comprehensive loss 0 Net income 0 0 12,733 12,733 Other comprehensive loss 0 ( 12,733 12,733 Other comprehensive loss 0 ( 413 ) 0 ( Other comprehensive loss 0 ( 413 ) 0 ( 413 ) loss 0 ( 413 ) 0 ( 413 ) Balance a ( 413 ) 0 ( 413 ) Balance a of December ) Balance a of December 31 , 2013 671,664 25,922 125 Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of De Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 0 $ 31,313 a of December 31 , 2015 0 $ 31,3 Net income December 31 , 2013 2014 2015 Operating activity Net income $ Operating activity Net income $ 12,733 $ 14,136 $ 16,348 Adjustments Net income $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation and impairment impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of intan Net Income ( loss loss ) from discontinued operation 43 0 0 Provision for income ) from discontinued operation 43 0 0 Provision for income tax from discontinued operation 43 0 0 Provision for income tax ( Provision for income tax ( 39 ) ( 19 ) 0 tax ( 39 ) ( 19 ) 0 Net of tax 39 ) ( 19 ) 0 Net of tax $ 162 0 Net of tax $ 162 $ 134 $ ( 208 of tax $ 162 $ 134 $ ( 208 ) Unrealized 162 $ 134 $ ( 208 ) Unrealized gain on cash Foreign exchange contract Revenue $ 95 $ 171 $ 1,399 Interest contract Revenue $ 95 $ Net income from discontinued operation income from discontinued operation $ 706 ( 1 ) The operating discontinued operation $ 706 ( 1 ) The operating result of Statements of Income from January 1 , 2013 through April 17 Income from January 1 , 2013 through April 17 , 2013 1 , 2013 through April 17 , 2013 , the date 2013 through April 17 , 2013 , the date of divestiture the date of divestiture . 81 Table of Contents Alphabet Inc. Assets : Accounts receivable $ 424 Inventories 228 Deferred income tax Account Net Income Per Share of Stock Dividend In January 2014 , our board of director a record date of March 27 , 2014 and a payment date of March 27 , 2014 and a payment date of a payment date of April 2 , 2014 . In the date of April 2 , 2014 . In the second quarter In the second quarter of 2015 , in accordance with a close of trading on April 2 , 2015 , the last trading on April 2 , 2015 , the last trading day last trading day of the 365 day period following the first in the amount of $ 522 million wa due to C net income per stock remained unchanged at $ 0.001 per share after the Stock amount equal to the $ 0.001 par value of the Class ) : Year Ended December 31 , 2013 Class A Class Year Ended December 31 , 2013 Class A Class B Class earnings - continuing operation $ 5,407 $ 1,173 $ 6,580 Allocation continuing operation $ 5,407 $ 1,173 $ 6,580 Allocation of undistributed $ 5,407 $ 1,173 $ 6,580 Allocation of undistributed earnings - earnings - discontinued operation ( 175 ) ( 38 ) ( operation ( 175 ) ( 38 ) ( 2 net income in per share computation 273,518 59,328 332,846 Basic net income ( per share computation 273,518 59,328 332,846 Basic net income ( loss share : Continuing operation $ 19.77 $ 19.77 $ 19.77 Discontinued Continuing operation $ 19.77 $ 19.77 $ 19.77 Discontinued operation ( $ 19.77 $ 19.77 $ 19.77 Discontinued operation ( 0.64 ) $ 19.77 Discontinued operation ( 0.64 ) ( 0.64 ) ( operation ( 0.64 ) ( 0.64 ) ( 0.64 ) Basic ) ( 0.64 ) ( 0.64 ) Basic net income per net income per share $ 19.13 $ 19.13 net income $ 19.13 $ 19.13 $ 19.13 Diluted net income ( loss computation - continuing operation $ 5,407 $ 1,173 $ 6,580 Reallocation continuing operation $ 5,407 $ 1,173 $ 6,580 Reallocation of undistributed $ 5,407 $ 1,173 $ 6,580 Reallocation of undistributed earnings a B to Class A share 1,173 0 0 Reallocation of undistributed to Class A share 1,173 0 0 Reallocation of undistributed earnings Class A share 1,173 0 0 Reallocation of undistributed earnings 0 0 Reallocation of undistributed earnings 0 ( 21 net income in per share computation 338,809 59,332 338,809 Diluted net income ( per share computation 338,809 59,332 338,809 Diluted net income ( loss share : Continuing operation $ 19.42 $ 19.42 $ 19.42 Discontinued Continuing operation $ 19.42 $ 19.42 $ 19.42 Discontinued operation ( $ 19.42 $ 19.42 $ 19.42 Discontinued operation ( 0.63 ) $ 19.42 Discontinued operation ( 0.63 ) ( 0.63 ) ( operation ( 0.63 ) ( 0.63 ) ( 0.63 ) Diluted ) ( 0.63 ) ( 0.63 ) Diluted net income per net income per share $ 18.79 net income in per share computation 282,877 54,928 338,130 Basic net income per per share computation 282,877 54,928 338,130 Basic net income per share share : Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per 20.15 Discontinued op net income per share net income per share $ 20.91 $ 20.91 $ 20.91 Diluted per share $ 20.91 $ 20.91 $ 20.91 Diluted net income $ 20.91 $ 20.91 $ 20.91 Diluted net income per share computation - continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed earnings a B to Class A share 1,107 0 0 Reallocation of undistributed to Class A share 1,107 0 0 Reallocation of undistributed ea net income in per share computation 342,377 54,928 344,693 Diluted net income per per share computation 342,377 54,928 344,693 Diluted net income per share share : Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per 19.82 Discont net income per share net income per share $ 20.57 $ 20.57 $ 20.57 87 per share $ 20.57 $ 20.57 $ 20.57 87 Table of $ 20.57 $ 20.57 $ 20.57 87 Table of Contents Alphabet 20.57 $ 20.57 $ 20.57 87 Table of Contents Alphabet Inc. Google Inc. Year Ended December 31 , 2015 Class A Class Year Ended December 31 , 2015 Class A Class B Class stockholder - continuing operation $ 0 $ 0 $ 522 Allocation continuing operation $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings - net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share share : Continuing operation $ 23.11 $ 23.11 $ 24.63 Discontinued Continuing operation $ 23.11 $ 23.11 $ 24.63 Discontinued operation 0.00 $ 23.11 $ 23.11 $ 24.63 Discontinued operation 0.00 0.00 0.00 23.11 $ 24.63 Discontinued operation 0.00 0.00 0.00 Basic net income $ 24.63 Discontinued operation 0.00 0.00 0.00 Basic net income per 24.63 Discontinued op net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share stockholder - continuing operation $ 0 $ 0 $ 522 Allocation continuing operation $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for computation - continuing operation $ 6,695 $ 1,196 $ 7,935 Reallocation continuing operation $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed $ 6,6 net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share share : Continuing operation $ 22.84 $ 22.84 $ 24.34 Discontinued Continuing operation $ 22.84 $ 22.84 $ 24.34 Discontinued operation 0.00 $ 22.84 $ 22.84 $ 24.34 Discontinued operation 0.00 0.00 0.00 22.84 $ 24.34 Discontinued operation 0.00 0.00 0.00 Diluted net income $ 24.34 Discontinued operation 0.00 0.00 0.00 Diluted net income per 24.34 Discont net income per share net income per share $ 22.84 $ 22.84 $ 24.34 Google per share $ 22.84 $ 22.84 $ 24.34 Google Net income $ 22.84 $ 22.84 $ 24.34 Google Net income per share not publicly traded . Note 13 . Stockholders \u2019 Equity Alphabet Equity Alphabet Reorganization On October 2 , 2015 , Google implemented Reorganization On October 2 , 2015 , Google implemented a legal the reorganization , on October 2 , 2015 , the Fourth , on October 2 , 2015 , the Fourth Amended and stock , Class B common 88 Table o Net income from $ 3,331 $ 308 $ 3,639 Net income from continuing operation Net income from continuing operation 13,347 ( 187 ) $ 13,160 from continuing operation 13,347 ( 187 ) $ 13,160 13,928 ( 13,347 ( 187 ) $ 13,160 13,928 ( 308 ) $ ( 187 ) $ 13,160 13,928 ( 308 ) $ 13,620 ) $ 13,160 13,928 ( 308 ) $ 13,620 Net income 13,928 ( 308 ) $ 13,620 Net income 12,920 ( 187 ) $ 13,620 Net income 12,920 ( 187 ) $ 12,733 13,620 Net income 12,920 ( 187 ) $ 12,733 14,444 ( 12,920 ( 187 ) $ 12,733 14,444 ( 308 ) $ ( net income per share share from continuing operation $ 20.05 $ ( 0.28 ) $ operation $ 20.05 $ ( 0.28 ) $ 19.77 $ 20.61 $ ( 0.28 ) $ 19.77 $ 20.61 $ ( 0.46 0.28 ) $ 19.77 $ 20.61 $ ( 0.46 ) $ 19.77 $ 20.61 $ ( 0.46 ) $ 20.15 Basic net $ ( 0.46 ) $ 20.15 Basic net income per share Basic net income per share 19.41 ( 0.28 ) 19.13 21.37 income per share 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 share 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 ) 20.91 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 ) 20.91 Diluted 0.28 ) 19.13 21.37 ( 0.46 ) net income 19.13 21.37 ( 0.46 ) 20.91 Diluted net income per share per share from continuing operation 19.70 ( 0.28 ) 19.42 20.27 from continuing operation 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 operation 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 Diluted 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 Diluted net income 19.42 20.27 ( 0.45 ) 19.82 Diluted net income per share net income per share $ 19.07 $ ( 0.28 ) $ share $ 19.07 $ ( 0.28 ) $ 18.79 $ 21.02 $ ( 0.28 ) $ 18.79 $ 21.02 Net income 12,920 ( 187 ) 12,733 14,444 : Net income 12,920 ( 187 ) 12,733 14,444 ( 308 income 12,920 ( 187 ) 12,733 14,444 ( 308 ) 14,136 12,920 ( 187 ) 12,733 14,444 ( 308 ) 14,136 Comprehensive 187 ) 12,733 14,444 ( 308 ) 14,136 Comprehensive income 12,507 12,733 14,444 ( 308 ) 14,136 Comprehensive income 12,507 ( 187 308 ) 14,136 Comprehensive income 12,507 ( 187 ) 12,320 14,346 14,136 Comprehensive income 12,507 ( 187 ) 12,320 14,346 ( 308 income 12,507 ( 187 ) 12,320 14,346 ( 308 ) 14,038 12,507 ( 1 Net income $ 12,920 $ ( 187 ) 12,733 income $ 12,920 $ ( 187 ) 12,733 $ 14,444 $ 12,920 $ ( 187 ) 12,733 $ 14,444 $ ( 308 ( 187 ) 12,733 $ 14,444 $ ( 308 ) $ 12,733 $ 14,444 $ ( 308 ) $ 14,136 Changes in $ ( 308 ) $ 14,136 Changes in income tax , in income tax , net 401 187 588 283 308 591 income tax , net 401 187 588 283 308 591 ITEM tax , net 401 187 588 283 308 591 ITEM 9 , net 401 187 588 283 308 591 ITEM 9 . net 401 187 588 283 308 591 ITEM 9 . CHANGES 401 187 588 283 308 591 ITEM 9 . CHANGES IN 588 ", + "assets": "Assets Current asset As of December 31 , 2015 Assets Current asset : Cash Cash and cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 56,517 Total 18,347 $ 16,549 Marketable security 46,048 56,517 Total cash , cash $ 16,549 Marketable security 46,048 56,517 Total cash , cash equivalent including security loaned of $ 4,058 and $ 4,531 ) 64,395 of $ 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable 4,058 and $ 4,531 ) 64,395 73,0 Assets Current asset As of December 31 , 2015 Assets Current asset : Cash Cash and cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 56,517 Total 18,347 $ 16,549 Marketable security 46,048 56,517 Total cash , cash $ 16,549 Marketable security 46,048 56,517 Total cash , cash equivalent including security loaned of $ 4,058 and $ 4,531 ) 64,395 of $ 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable 4,058 and $ 4,531 ) 64,395 73,0 Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 851 $ 0 $ 851 Interest and non-current $ 851 $ 0 $ 851 Interest rate contract $ 851 $ 0 $ 851 Interest rate contract Prepaid revenue asset , current and non-current 1 0 1 Total $ 852 , current and non-current 1 0 1 Total $ 852 $ current and non-current 1 0 1 Total $ 852 $ 0 1 0 1 Total $ 852 $ 0 $ 852 Derivative 1 Total $ 852 $ 0 $ 852 Derivative Liabilities : $ 852 $ 0 $ 852 Derivative Liabilities : Level 2 852 Derivativ Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 626 $ 2 $ 628 Total and non-current $ 626 $ 2 $ 628 Total $ 626 $ 626 $ 2 $ 628 Total $ 626 $ 2 2 $ 628 Total $ 626 $ 2 $ 628 Derivative 628 Total $ 626 $ 2 $ 628 Derivative Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 1 $ 13 $ 14 Interest current liability $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 Assets As of December 31 , 2014 Gross Amounts Not As of December 31 , 2014 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 852 $ 0 $ 852 $ Exposed Derivatives $ 852 $ 0 $ 852 $ ( 1 $ 852 $ 0 $ 852 $ ( 1 ) ( 0 $ 852 $ ( 1 ) ( 1 ) $ $ ( 1 ) ( 1 ) $ ( 251 ) ( 1 ) $ ( 251 ) $ ( 412 ) ( 251 ) $ ( 412 ) $ 188 Reverse repurchase $ ( 412 ) $ 188 Reverse repurchase agreement 2,637 0 $ 188 Reverse repurchase agreement 2,637 0 2,637 ( 2 ) 188 Reverse repurchase agreement 2,637 0 2,637 ( 2 ) 0 Revers Assets Exposed Derivatives $ 628 $ 0 $ 628 $ Exposed Derivatives $ 628 $ 0 $ 628 $ ( 13 $ 628 $ 0 $ 628 $ ( 13 ) ( 0 $ 628 $ ( 13 ) ( 1 ) $ $ ( 13 ) ( 1 ) $ ( 189 ) ( 1 ) $ ( 189 ) $ ( 214 ) ( 189 ) $ ( 214 ) $ 212 Reverse repurchase $ ( 214 ) $ 212 Reverse repurchase agreement 1,590 0 $ 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 0 agreement 1,590 0 1,590 ( 2 ) 0 0 ( 1,590 0 1,590 ( 2 ) Assets $ 15,456 $ 413 $ 15,869 Other Intangible Assets Information regarding ) : As of December 31 , 2014 Gross Carrying Amount As of December 31 , 2014 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 6,547 $ 2,513 $ 4,034 Customer developed technology $ 6,547 $ 2,513 $ 4,034 Customer relationship 1,410 $ 6,547 $ 2,513 $ 4,034 Customer relationship 1,410 1,168 242 2,513 $ 4,034 Customer relationship 1,410 1,168 242 Trade name and $ 4,034 Customer relationship 1,410 1, Assets : Accounts receivable $ 424 Inventories 228 Deferred income tax Accounts receivable $ 424 Inventories 228 Deferred income tax , net Deferred income tax , net 144 Prepaid and other current asset Prepaid and other current asset 152 Property and equipment , net Property and equipment , net 282 Intangible asset , net 701 282 Intangible asset , net 701 Other asset , non-current 182 701 Other asset , non-current 182 Total asset $ 2,113 Liabilities non-current 182 Total asset $ 2,113 Liabilities : Acc", + "liabilities": "Liabilities and Stockholders Total asset $ 129,187 $ 147,461 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accr Liabilities and Stockholders Total asset $ 129,187 $ 147,461 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accr Liabilities . `` ASU 2016-01 amends various aspect of the asset and liability . ASU 2016-01 is effective for annual reporting those year beginning after December 15 , 2017 . Early adoption beginning after December 15 , 2017 . Early adoption by public In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 in the cumulative amount of the cumulative amount of $ 711 million . We evaluated the in the quarter Liabilities : $ 852 $ 0 $ 852 Derivative Liabilities : Level 2 852 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 0 $ 3 $ 3 Interest current liability $ 0 $ 3 $ 3 Interest rate contract $ 0 $ 3 $ 3 Interest rate contract Accrued expense liability , current and non-current 1 0 1 Total $ 1 , current and non-current 1 0 1 Total $ 1 $ current and non-current 1 0 1 Total $ 1 $ 3 1 0 1 Total $ 1 $ 3 $ 4 As 1 Total $ 1 $ 3 $ 4 As of December $ 1 $ 3 $ 4 As of De Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 1 $ 13 $ 14 Interest current liability $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 $ 14 Interest rate contract Accrued expense liability , current and non-current 2 0 2 Total $ 3 , current and non-current 2 0 2 Total $ 3 $ current and non-current 2 0 2 Total $ 3 $ 13 2 0 2 Total $ 3 $ 13 $ 16 69 2 Total $ 3 $ 13 $ 16 69 Table of $ 3 $ 13 $ 1 Liabilities As of December 31 , 2014 Gross Amounts Not As of December 31 , 2014 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 4 $ 0 $ 4 $ Liabilities Derivatives $ 4 $ 0 $ 4 $ ( 1 $ 4 $ 0 $ 4 $ ( 1 ) ( 0 $ 4 $ ( 1 ) ( 3 ) $ $ ( 1 ) ( 3 ) $ 0 $ 0 ) ( 3 ) $ 0 $ 0 $ 3 Securities 3 ) $ 0 $ 0 $ 3 Securities lending agreement $ 0 $ 0 $ 3 Securities lending agreement 2,778 0 $ 3 Securities lending agreement 2,778 0 2,778 0 0 ( 3 Securities lending agreement 2,778 0 2,778 0 0 ( 2,740 Securities Liabilities Derivatives $ 16 $ 0 $ 16 $ Liabilities Derivatives $ 16 $ 0 $ 16 $ ( 13 $ 16 $ 0 $ 16 $ ( 13 ) ( 0 $ 16 $ ( 13 ) ( 3 ) $ $ ( 13 ) ( 3 ) $ ( 3 ) ( 3 ) $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 $ 0 Securities lending agreement 3 ) $ 0 $ 0 Securities lending agreement 2,428 0 $ 0 Securities lending agreement 2,428 0 2,428 0 0 ( 0 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 ) lending agreement 2,428 0 2,428 0 0 ( 2,401 ) 27 agreement 2,428 0 2,42 Liabilities Goodwill 43 Total asset $ 3,697 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 1,238 Accrued compensation and benefit 163 1,238 Accrued compensation and benefit 163 Accrued expense and other current expense and other current liability 10 Deferred revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Motorola liability 250 Total liability $ 1,826 Motorola Home On April 17 1, Liabilities non-current 182 Total asset $ 2,113 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 169 Accrued expense and other liability Accrued expense and other liability 289 Total liability $ 458 Note liability 289 Total liability $ 458 Note 10 . Other Income Total liability $ 458 Note 10 . Other Income ( Expense ) : Year Ended December 31 , 2013 2014 2015 Interest Year Ended December 31 , 2013 2014 2015 Interest income $ Ended December 31 , 2013 2014 2015 Interest income $ 766 December", + "equity": "Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management \u2019 Selected Financial Data 20 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 41 Item 8 . Financial Statements About Market Risk 41 Item 8 . Financial Statements and Supplement Equity Securities On December 17 , 2015 , we issued Securities On December 17 , 2015 , we issued an aggregate issued an aggregate of approximately 514 thousand share of our Class The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2010 and it relative index on December 31 , 2010 and it relative performance is performance is tracked through December 31 , equity liability 5,294 6,662 6,165 8,548 7,820 Total stockholder \u2019 equity 58,118 7,820 Total stockholder \u2019 equity 58,118 71,570 86,977 103,860 120,331 ( Total stockholder \u2019 equity 58,118 71,570 86,977 103,860 120,331 ( 1 stockholder \u2019 equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) \u2019 equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) In equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) In the 71,570 86,977 103,860 120,331 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an in equity settled award increased $ 1,028 million from 2014 to 2015 increased $ 1,028 million from 2014 to 2015 and $ 1,048 1,028 million from 2014 to 2015 and $ 1,048 million from 2014 to 2015 and $ 1,048 million from 2013 to 2014 and $ 1,048 million from 2013 to 2014 , and increased 1,048 million from 2013 to 2014 , and increased a a settled in cash of $ 0 million , $ 0 million $ 0 million , $ 0 million , and $ 50 0 million , and $ 50 million in the year ended in the year ended December 31 , 2013 , 201 equity investment of $ 159 million and previously-held equity interest previously-held equity interest of $ 126 million , a well a than Motorola Home ) in 2013 . These increase were partially currency exchange loss of $ 23 million and a decrease in in interest income of $ 20 million . The cost of management program may increase in 2016 and future period . Consolidated ) : Year Ended December 31 , 2013 ( 1 ) Year Ended December 31 , 2013 ( 1 ) 2014 ( December 31 , 2013 ( 1 ) 2014 ( 1 ) , 2013 ( 1 ) 201 Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Financial Statements of Google Inc. Inc. : Consolidated Balance Sheets 53 Consolidated Statements of Income 54 53 Consolidated Statements of Income 54 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 55 Consolidated Statements of Stockholders \u2019 Statements of Stockholders \u2019 Equity 56 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 57 Notes t Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued r equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 680, equity 1,874 ) Retained earnings 75,066 89,223 Total stockholder \u2019 equity 103,860 89,223 Total stockholder \u2019 equity 103,860 120,331 Total liability and stockholder Total stockholder \u2019 equity 103,860 120,331 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 129,187 $ 147,461 See accompanying note \u2019 equity $ 129,187 $ 147,461 See accompanying note . 48 147,461 See accompanying note . 48 Table of Contents Alphabet Inc. amount ) Year Ended December 31 , 2013 2014 2015 Revenues Year Ended Decemb Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued r equity : Convertible preferred stock , $ 0.001 par value per share ; par value per share ; 100,000 share authorized , no share share issued and outstanding ; 0.5 share authorized , no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 equity 1,874 ) Retained earnings 75,066 90,892 Total stockholder \u2019 equity 103,860 90,892 Total stockholder \u2019 equity 103,860 120,331 Total liability and stockholder Total stockholder \u2019 equity 103,860 120,331 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 129,187 $ 147,461 See accompanying note \u2019 equity $ 129,187 $ 147,461 See accompanying note . 53 147,461 See accompanying note . 53 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Revenues Year Ended Decem equity security 37 ( 4 ) 15,353 1,128 14,225 Marketable equity security 988 ( 4 ) 15,353 1,128 14,225 Marketable equity security 988 428 1,128 14,225 Marketable equity security 988 428 ( 64 ) 1,352 14,225 Marketable equity security 988 428 ( 64 ) 1,352 0 equity security 988 428 ( 64 ) 1,352 0 1,352 18,840 988 428 ( 64 ) 1,352 0 1,352 18,840 465 ( 428 ( 64 ) 1,352 0 1,352 18,840 465 ( 68 ( 64 ) 1,352 0 1,352 18,840 465 ( 68 ) 64 ) 1,352 0 1,352 18,840 465 ( 68 ) 19,237 ) 1,352 0 1,352 18,840 465 ( 68 ) equity security 27 ( 48 ) 20,901 258 20,643 Marketable equity security 692 ( 48 ) 20,901 258 20,643 Marketable equity security 692 155 258 20,643 Marketable equity security 692 155 0 847 0 847 20,643 Marketable equity security 692 155 0 847 0 847 27,237 Marketable equity security 692 155 0 847 0 847 27,237 182 equity security 692 155 0 847 0 847 27,237 182 ( security 692 155 0 847 0 847 27,237 182 ( 48 692 155 0 847 0 847 27,237 182 ( 48 ) 155 0 847 0 847 27,237 182 ( 48 ) 27,371 0 847 0 847 27,237 18 equity ) 0 0 347 ( 38 ) Marketable equity security 690 38 ) Marketable equity security 690 ( 64 ) 0 0 Marketable equity security 690 ( 64 ) 0 0 690 ( security 690 ( 64 ) 0 0 690 ( 64 ) 690 ( 64 ) 0 0 690 ( 64 ) Total ( 64 ) 0 0 690 ( 64 ) Total $ ) 0 0 690 ( 64 ) Total $ 16,337 $ ( 64 ) Total $ 16,337 $ ( 234 ) $ Total $ 16,337 $ ( 234 ) $ 2,784 $ ( $ ( 234 ) $ 2,784 $ ( 58 ) $ ) $ 2,784 $ ( 58 ) $ 19,121 $ ( $ ( 58 ) $ 19,121 $ ( 292 ) As ) $ 19,121 $ ( 292 ) As of December 31 292 ) As of December 31 equity interest of $ 152 million , $ 51 million $ 152 million , $ 51 million wa cash acquired , wa cash acquired , $ 430 million wa attributed to intangible to intangible asset , $ 2.3 billion wa attributed to goodwill to goodwill , and $ 84 million wa attributed to net . The goodwill of $ 2.3 billion is primarily attributable to . The gain of $ 103 million a a result of for the year ended December 31 , 2014 . Dropcam In year ended December 31 , 2014 . Dropcam In July 2014 2014 . Dropcam In July 2014 equity interest of $ 33 million . In aggregate , . In aggregate , $ 65 million wa cash acquired , wa cash acquired , $ 405 million wa attributed to intangible to intangible asset , $ 1,045 million wa attributed to goodwill to goodwill , and $ 49 million wa attributed to net tax purpose is approximately $ 55 million . Pro forma result during the year ended December 31 , 2014 , patent and year ended December 31 , 2014 , patent and developed technology a weighted-average useful life of 5.1 year , custome Equity Alphabet Equity Alphabet Reorganization On October 2 , 2015 , Google implemented Reorganization On October 2 , 2015 , Google implemented a legal the reorganization , on October 2 , 2015 , the Fourth , on October 2 , 2015 , the Fourth Amended and stock , Class B common 88 Table of Contents Alphabet Inc. stock , par value $ 0.001 per share , from 9 0.001 per share , from 9 billion share , 3 billion from 9 billion share , 3 billion share and 3 billion , 3 billion share and 3 billion share , respec Equity . Note 14 . 401 ( k ) Equity . Note 14 . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans k ) Savings Plans ( 401 ( k ) Plans ) deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 202 million , $ 259 million $ 202 million , $ 259 million , and $ 309 259 million , and $ 309 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 Dece equity 104,500 75,066 Total stockholder ' equity 104,500 ( 640 ) 103,860 Total stockholder ' equity 104,500 ( 640 ) 103,860 Total liability and equity 104,500 ( 640 ) 103,860 Total liability and stockholder ' and stockholder ' equity $ 129,894 $ ( 707 ) $ equity $ 129,894 $ ( 707 ) $ 129,187 ( 1 $ ( 707 ) $ 129,187 ( 1 ) Includes reclassification 707 ) $ 129,187 ( 1 ) Includes reclassification of deferred and liability related to ASU 2015-17 \u201c Income Taxes ( Topic \u201c Income Taxes ( Topic 740 ) : Balanc Equity : \u25e6 $ \u2022 Equity : \u25e6 $ 3.5 million equity grant ( Initial after hire vesting monthly over 12 month \u25e6 $ 3.5 million over 12 month \u25e6 $ 3.5 million equity grant to be to be made in Q1 2017 , to start vesting monthly to start vesting monthly over 12 month upon the full vest the Initial Grant \u2022 $ 250,000 sign-on bonus , subject to employment end within the first 12 month Jim will also be officer . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2016 Annual Meeting of Stock Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Financial Statements of Google Inc. Inc. : Google Balance Sheets 53 Google Statements of Income 54 53 Google Statements of Income 54 Google Statements of Comprehensive Income Google Statements of Comprehensive Income 55 Google Statements of Stockholders \u2019 Statements of Stockholders \u2019 Equity 56 Google Statements of Cash Flows Google Statements of Cash Flows 57 Notes to Consolidated Financial Statements Notes to Con", + "cash_flow": "cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the fourth quarter of 2015 , we implemented legal and . Please refer to Note 16 of the Notes to Consolidated this Annual Report on Form 10-K for further informa cash flow were ) : Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net cash provided Ended December 31 , 2013 2014 2015 Net cash provided by December 31 , 2013 2014 2015 Net cash provided by operating provided by operating activity $ 18,659 $ 22,376 $ 26,024 Net operating activity $ 18,659 $ 22,376 $ 26,024 Net cash used $ 18,659 $ 22,376 $ 26,024 Net cash used in investing used in investing activity ( 13,679 ) ( 21,055 ) ( activity ( 13,679 ) ( 21,055 ) ( 23,711 ) Net cash flow . See Note 11 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency When determining the fair value 40 Table of Contents Alphabet Inc. more fully discussed in Note 6 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated unit . As of December 31 , 2015 , no impa Cash flow ( 554 ) 371 ( 507 ) Cash flow hedge : Change in net unrealized gain 112 651 676 Less : reclassification in net unrealized gain 112 651 676 Less : reclassification adjustment net unrealized gain 112 651 676 Less : reclassification adjustment for included in net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 1 cash flow Cash paid for tax $ 1,932 $ 2,819 $ 3,338 Cash for tax $ 1,932 $ 2,819 $ 3,338 Cash paid for $ 1,932 $ 2,819 $ 3,338 Cash paid for interest 72 3,338 Cash paid for interest 72 86 96 See accompanying note Cash paid for interest 72 86 96 See accompanying note . paid for interest 72 86 96 See accompanying note . 52 96 See accompanying note . 52 Table of Contents Alphabet Inc. amount ) As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 201 Cash flow ( 554 ) 371 ( 507 ) Cash flow hedge : Change in net unrealized gain 112 651 676 Less : reclassification in net unrealized gain 112 651 676 Less : reclassification adjustment net unrealized gain 112 651 676 Less : reclassification adjustment for included in net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 1 cash flow Cash paid for tax $ 1,932 $ 2,819 $ 3,338 Cash for tax $ 1,932 $ 2,819 $ 3,338 Cash paid for $ 1,932 $ 2,819 $ 3,338 Cash paid for interest 72 3,338 Cash paid for interest 72 86 96 See accompanying note Cash paid for interest 72 86 96 See accompanying note . paid for interest 72 86 96 See accompanying note . 57 96 See accompanying note . 57 Table of Contents Alphabet Inc. TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-i Cash Flow Hedges these contract wa approximately $ 13.6 billion and $ 16.4 billion $ 13.6 billion and $ 16.4 billion a of December 31 16.4 billion a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . These foreign December 31 , 2014 and 2015 . These foreign exchange contract exchange contract have maturity of 36 month or le . In month or le . In 2012 , we entered into forward-starting total notional amount of $ 1.0 billion and term calling for anticipated debt issuance of $ 1.0 billion i Cash Flow in Cash Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract Cash Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract $ Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract $ 92 2015 Foreign exchange contract $ 92 $ 929 $ 964 Interest exchange contract $ 92 $ 929 $ 964 Interest rate contract $ 92 $ 929 $ 964 Interest rate contract 86 ( $ 964 Interest rate contract 86 ( 31 ) 0 Total Interest rate contract 86 ( 31 ) 0 Total $ 178 contract 86 ( 31 ) 0 Tot Cash Flow Cash Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Revenues Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Revenues $ Foreign exchange contract Revenues $ 95 $ 171 $ 1,399 Interest contract Revenues $ 95 $ 171 $ 1,399 Interest rate contract $ 95 $ 171 $ 1,399 Interest rate contract Other income ( expense ) , net 0 4 5 Total $ 95 expense ) , net 0 4 5 Total $ 95 $ ) , Cash Flow Cash Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Other Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Other income ) , net $ ( 280 ) $ ( 279 ) ( 280 ) $ ( 279 ) $ ( 297 ) ( 279 ) $ ( 297 ) Interest rate contract Other ( expense ) , net 0 4 0 Total $ ( expense ) , net 0 4 0 Total $ ( 280 ) , net 0 4 0 Total $ ( 280 ) 4 0 Total $ ( 280 ) $ ( 275 ) ( 280 ) $ ( 275 ) $ Cash Flow $ 7,358 $ 10,959 $ 9,915 ( Cash Flow $ 7,358 $ 10,959 $ 9,915 ( 2 ) $ 7,358 $ 10,959 $ 9,915 ( 2 ) Reconciling item $ 10,959 $ 9,915 ( 2 ) Reconciling item are primarily and other miscellaneous difference . 95 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Stock-based Year Ended December 31 , 2013 2014 2015 Stock-based compensation : Ended December 31 , 2013 2014 2015 Stock-based compensation : Google December 31 , 2013 2014 2015 Stock-based compensation : Google $ Cash Flow $ 3,939 $ 4,979 $ 5,063 ( Cash Flow $ 3,939 $ 4,979 $ 5,063 ( 3 ) $ 3,939 $ 4,979 $ 5,063 ( 3 ) Reconciling item $ 4,979 $ 5,063 ( 3 ) Reconciling item represent corporate to individual segment . ( 4 ) For purpose of segment for under FASB ASC Topic 718 that we expect to settle from discontinued operation . ( 5 ) Reconciling item primarily represent ) : Year Ended December 31 , 2013 2014 2015 Revenues Year Ended December 31 , 2013 2014 2015 Revenues : United Ended December 31 , 2013 2014 2015 R", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 32,746 40,146 Less : accumulated depreciation and accumulated depreciation and amortization ( 8,863 ) ( 11,130 ) Property amortization ( 8,863 ) ( 11,130 ) Property and equipment , and equipment , net $ 23,883 $ 29,016 Property under capital , net $ 23,883 $ 29,016 Property under capital lease with a cost basis of $ 258 million wa included in land and building a of December 31 , 2015 . Prepaid Revenue a of December 31 , 2015 . Prepaid Revenue Share , Motorola Mobile busine", + "capital_expenditure": "Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the fourth quarter of 2015 , we implemented legal and . Please refer to Note 16 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Consolidated presented : Year Ended December 31 , 2013 Capital expenditure : Ended December 31 , 2013 2014 2015 Capital expenditure : Google December 31 , 2013 2014 2015 Capital expenditure : Google $ Capital expenditure : Google $ 7,006 $ 11,173 $ 8,849 Other : Google $ 7,006 $ 11,173 $ 8,849 Other Bets 187 $ 7,006 $ 11,173 $ 8,849 Other Bets 187 501 869 11,173 $ 8,849 Other Bets 187 501 869 Reconciling item ( $ 8,849 Other Bets 187 501 869 Reconciling item ( 2 8,849 Other Bets 187 501 869 Reconciling item ( 2 ) 501 869 Reconciling item ( 2 ) 165 ( 715 ) Reconciling capital expenditure ) 165 ( 715 ) 197 Total capital expenditure a presented Statements of Cash Flow $ 7,358 $ 10,959 $ 9,915 ( Cash Flow $ 7,358 $ 10,959 $ 9,915 ( 2 ) $ 7,358 $ 10,959 $ 9,915 ( 2 ) Reconciling item $ 10,959 $ 9,915 ( 2 ) Reconciling item are primarily and other miscellaneous difference . 95 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Stock-based Year Ended December 31 , 2013 2014 2015 Stock-based compensation : Ended December 31 , 2013 2014 2015 Stock-based compens", + "debt": "debt ( 2 ) 1,697 946 298 150 303 Long-term debt obligation 2 ) 1,697 946 298 150 303 Long-term debt obligation , ) 1,697 946 298 150 303 Long-term debt obligation , including including capital lease obligation ( 3 ) 3,722 1,306 140 140 lease obligation ( 3 ) 3,722 1,306 140 140 2,136 Other obligation ( 3 ) 3,722 1,306 140 140 2,136 Other long-term ( 3 ) 3,722 1,306 140 140 2,136 Other long-term liability 3 ) 3,722 1,306 140 140 2,136 Other long-term liability reflected ) 3,722 1,306 140 140 2,136 Ot debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued revenue share 1,952 and other current liability 4,408 4,768 Ac debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferr debt , net of cost 10,768 11,625 13,705 Repayments of debt , net of cost 10,768 11,625 13,705 Repayments of debt ( net of cost 10,768 11,625 13,705 Repayments of debt ( 11,325 13,705 Repayments of debt ( 11,325 ) ( 11,643 ) ( debt ( 11,325 ) ( 11,643 ) ( 13,728 ) Net ) ( 11,643 ) ( 13,728 ) Net cash used in used in financing activity ( 857 ) ( 1,439 ) ( activity ( 857 ) ( 1,439 ) ( 3,677 ) Effect ) ( 1,439 ) ( 3,677 ) Effect of exchange rate cash and cash equivalent ( 3 ) ( 433 ) ( equivalent ( 3 ) debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued revenue share 1,952 and other current liability 4,408 4,768 Ac debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferr debt , net of cost 10,768 11,625 13,705 Repayments of debt , net of cost 10,768 11,625 13,705 Repayments of debt ( net of cost 10,768 11,625 13,705 Repayments of debt ( 11,325 13,705 Repayments of debt ( 11,325 ) ( 11,643 ) ( debt ( 11,325 ) ( 11,643 ) ( 13,728 ) Net ) ( 11,643 ) ( 13,728 ) Net cash used in used in financing activity ( 857 ) ( 1,439 ) ( activity ( 857 ) ( 1,439 ) ( 3,677 ) Effect ) ( 1,439 ) ( 3,677 ) Effect of exchange rate cash and cash equivalent ( 3 ) ( 433 ) ( equivalent ( 3 ) debt security 33 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 114 3 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 0 debt security 11,499 114 ( 122 ) 11,491 0 11,491 Agency 11,499 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 109 0 11,491 A debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13, debt ( 3 ) 1,051 ( 6 ) Corporate debt security 5,851 6 ) Corporate debt security 5,851 ( 112 ) 225 ( Corporate debt security 5,851 ( 112 ) 225 ( 10 ) security 5,851 ( 112 ) 225 ( 10 ) 6,076 ( ( 112 ) 225 ( 10 ) 6,076 ( 122 ) ) 225 ( 10 ) 6,076 ( 122 ) Agency mortgage-backed ( 10 ) 6,076 ( 122 ) Agency mortgage-backed security 609 122 ) Agency mortgage-backed security 609 ( 1 ) 2,168 ( Agency mortgage-backed security 609 ( 1 ) 2,168 ( 41 ) security 609 ( 1 ) 2,168 ( 41 ) 2,777 ( ( 1 ) 2,168 ( 41 ) 2, debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $ debt issuance of $ 1.0 billion in 2014 . We of $ 1.0 billion in 2014 . We issued $ 1.0 2014 . We issued $ 1.0 billion of unsecured senior note unsecured senior note in February 2014 ( See detail in Note ( See detail in Note 4 ) . As a result for the year ended December 31 , 2014 , consistent with year ended December 31 , 2014 , consistent with the impact of the option from our 67 Table of Contents Alphabet Inc. net . As of December 31 , 2015 , the effective As of December 31 , 2015 , the effective p Debt during January 2015 . Note 4 . Debt Short-Term Debt We program of up to $ 3.0 billion through the issuance of purpose . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we had December 31 , 2014 and 2015 , we had $ 2.0 2015 , we had $ 2.0 billion of outstanding commercial paper a weighted-average interest rate of 0.1 % and 0.2 % , rate of 0.1 % and 0.2 % , respectively . In , we have a $ 3.0 billion revolving credit facility expiring credit facility expiring in July 2016 Debt We issued $ 1.0 billion of unsecured senior note senior note ( the `` 2014 Notes `` ) in February Notes `` ) in February 2014 and $ 3.0 billion of in February 2014 and $ 3.0 billion of unsecured senior note ( collectively , the `` 2011 Notes `` ) in May Notes `` ) in May 2011 . We used the net from the issuance of the 2011 Notes to repay a portion from the issuance of the 2014 Notes for the repayment of the principal amount of our 2011 Notes which matured on May Notes which matured on May 19 , Debt Short-Term Portion of Long-Term Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 0 $ due on May 19 , 2016 $ 0 $ 1,000 Capital May 19 , 2016 $ 0 $ 1,000 Capital Lease Obligation , 2016 $ 0 $ 1,000 Capital Lease Obligation 10 225 $ 1,000 Capital Lease Obligation 10 225 Total Short-Term Portion of 1,000 Capital Lease Obligation 10 225 Total Short-Term Portion of Long-Term Portion of Long-Term Debt $ 10 $ 1,225 Long-Term Debt 2.125 Long-Term Debt $ 10 $ 1,225 Long-Term Debt 2.125 % Note Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 1,000 $ due on May 19 , 2016 $ 1,000 $ 0 3.625 May 19 , 2016 $ 1,000 $ 0 3.625 % Notes , 2016 $ 1,000 $ 0 3.625 % Notes due on 2016 $ 1,000 $ 0 3.625 % Notes due on May % Notes due on May 19 , 2021 1,000 1,000 3.375 due on May 19 , 2021 1,000 1,000 3.375 % Notes on May 19 , 2021 1,000 1,000 3.375 % Notes due May 19 , 2021 1,000 1,000 3.375 % Notes due on 19 , 2021 1,000 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 Debt $ 1,995 Capital Lease Obligation 236 0 Total Long-Term Debt $ 3,228 0 Total Long-Term Debt $ 3,228 $ 1,995 The effective interest Long-Term Debt $ 3,228 $ 1,995 The effective interest yield of of the Notes due in 2016 , 2021 , and 2024 Notes due in 2016 , 2021 , and 2024 were 2.241 2016 , 2021 , and 2024 were 2.241 % , 3.734 2021 , and 2024 were 2.241 % , 3.734 % , 2024 were 2.241 % , 3.734 % , and 3.377 % , 3.734 % , and 3.377 % , respectively . Interest respectively . Interest on the 2011 and", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per of Equity Securities On December 17 , 2015 , we issued Securities On December 17 , 2015 , we issued an aggregate issued an aggregate of approximately 514 thousand share of our Class The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2010 and it relative index on December 31 , 2010 and it relative performance is per", + "tax_rate": "tax rate of 17 % . \u2022 Net income \u2022 Net income wa $ 16.3 billion with diluted net income B common stock of $ 22.84 and for Class C capital C capital stock of $ 24.34 . \u2022 Operating cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information ab tax rate $ 2,739 $ 3,639 $ 3,303 Effective tax rate 17.2 % $ 3,303 Effective tax rate 17.2 % 21.1 % 16.8 % Effective tax rate 17.2 % 21.1 % 16.8 % ( 1 rate 17.2 % 21.1 % 16.8 % ( 1 ) In 21.1 % 16.8 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated thi tax rate decreased from 2014 to 2015 , largely due rate decreased from 2014 to 2015 , largely due to a a discrete benefit recognized in 2015 a a result of the effective tax rate increased from 2013 to 2014 , largely due rate increased from 2013 to 2014 , largely due to proportionately and more benefit recognized in 2013 relative to 2014 due to recognized in 2013 relative to 2014 due to the retroactive extension the retroactive extension of the 2012 federal research and development credit a capital loss tax rate of the statute of limitation 34 Table of Contents Alphabet Inc. can be found in Notes 11 and 15 of Part II found in Notes 11 and 15 of Part II , Item of Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. See Critical Accounting Policies and related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2015 . This table quarter ended December 31 , 2015 . This table includes al tax rate ( 35 % ) $ 5,567 $ ( 35 % ) $ 5,567 $ 6,041 $ 6,878 State % ) $ 5,567 $ 6,041 $ 6,878 State tax , $ 5,567 $ 6,041 $ 6,878 State tax , net of , net of federal benefit 133 132 ( 291 ) Change net of federal benefit 133 132 ( 291 ) Change in federal benefit 133 132 ( 291 ) Change in valuation allowance Change in valuation allowance ( 641 ) ( 164 ) ( allowance ( 641 ) ( 164 ) ( 65 ) Foreign ) ( 164 ) ( 65 ) Foreign rate differential ( ) Foreign rate differential ( 2,482 ) ( 2,109 ) ( differential ( tax rate for 2015 reflects the benefit of the reflects the benefit of the 2015 federal research and development tax A retroactive extension of the 2012 federal research and development credit signed into law on January 2 , 2013 in accordance with law on January 2 , 2013 in accordance with The American The American Taxpayer Act of 2012 . The benefit of $ . The benefit of $ 189 million related to the 2012 189 million related to the 2012 federal research and development credit in the year ended December 31 tax rate Our effective tax rate for 2015 included a discrete tax benefit foreign subsidiary a of December 31 , 2015 because we intend a of December 31 , 2015 because we intend to permanently earnings . As of December 31 , 2015 , the cumulative As of December 31 , 2015 , the cumulative amount of been provided is approximately $ 58.3 billion . Determination of the not practicable . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring ", + "segment_revenue": "segment revenue from advertising in 2015 . Many of our advertiser our margin could be impacted 7 Table of Contents Alphabet Inc. associated with specific country . 8 Table of Contents Alphabet Inc. processed within that country . 9 Table of Contents Alphabet Inc. thus diminishing our brand . 10 Table of Contents Alphabet Inc. to gain access to our 11 Table of Contents Alphabet Inc. content to help them improve 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our cons segment revenue of $ 74.5 billion with revenue growth of billion with revenue growth of 14 % and Other Bets revenue Other Bets revenue of $ 0.4 billion . \u2022 Revenues from Rest of World were $ 34.8 billion , $ 7.1 billion $ 34.8 billion , $ 7.1 billion , and $ 33.1 7.1 billion , and $ 33.1 billion , respectively . \u2022 Cost of revenue wa $ 28.2 billion , consisting of traffic traffic acquisition cost of $ 14.4 billion and other cost of cost of revenue of $ 13.8 billion . Our traffic acquisition percentage of advert segment revenue revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,9 segment revenue Ended December 31 , 2013 2014 2015 Google segment revenue $ December 31 , 2013 2014 2015 Google segment revenue $ 55,507 2015 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue a a a percentage of consolidated revenue 100.0 % 99.5 % 99.4 % of consolidated revenue 100.0 % 99.5 % 99.4 % Aggregate paid revenue 100.0 % 99.5 % 99.4 % Aggregate paid click change % Aggregate paid c segment revenue 67.4 % 68.6 % 70.2 % Google segment revenue 67.4 % 68.6 % 70.2 % Paid click revenue 67.4 % 68.6 % 70.2 % Paid click change 29 70.2 % Paid click change 29 % 33 % Cost-per-click change Paid click change 29 % 33 % Cost-per-click change ( 7 33 % Cost-per-click change ( 7 ) % ( 15 ) ( 7 ) % ( 15 ) % Google website revenue Google website revenue increased $ 7,272 million from 2014 to 2015 increased $ 7,272 million from 2014 to 2015 and also increased 7,272 million from 2014 to 2015 and also increased segment revenue ( 1 ) 24.6 % 22.1 % segment revenue ( 1 ) 24.6 % 22.1 % 20.2 % ( 1 ) 24.6 % 22.1 % 20.2 % Paid click ) 24.6 % 22.1 % 20.2 % Paid click change 2 20.2 % Paid click change 2 % ( 7 ) % click change 2 % ( 7 ) % Cost-per-click change ( ) % Cost-per-click change ( 6 ) % ( 3 ) ( 6 ) % ( 3 ) % ( 1 ) ( 3 ) % ( 1 ) Prior period amount have ' website revenue increased $ 494 million from 2014 to 2015 increased $ 494 million from 2014 to 2015 . The increase 494 million from 2014 to 2015 . The increase wa pri segment revenue ( 1 ) 8.0 % 9.3 % segment revenue ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) Prior 9.3 % 9.6 % ( 1 ) Prior period amount have Google other revenue increased $ 1,101 million from 2014 to 2015 increased $ 1,101 million from 2014 to 2015 and increased a 1,101 million from 2014 to 2015 and increased a a percentage Google other revenue increased $ 1,615 million from 2013 to 2014 increased $ 1,615 million from 2013 to 2014 and increased a 1,615 million from 2013 to segment revenue revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,9", + "common_stock": "Common Stock $ 0.001 par value Nasdaq Stock Market Class C Capital Stock $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1 common stock ; 50,199,837 share of Alphabet \u2019 s B common stock ; and 345,539,303 share of Alphabet \u2019 s s Proxy Statement for the 2016 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2015 . Table of year ended December 31 , 2015 . Table of Contents Alphabet This Annual Report on Form 10-K is a combined report being in General Instruction I ( 1 ) ( a ) , ( d ) common stock ranged from $ 497.06 per share to $ 793.96 497.06 per share to $ 793.96 per share , and the capital stock ranged from $ 492.55 to $ 776.60 per share from $ 492.55 to $ 776.60 per share . The trading those of our competitor . 15 Table of Contents Alphabet Inc. cash reserve . In October 2015 , our board of director to repurchase up to $ 5,099,019,513.59 of our Class C capital capital stock and in January 2016 , our board of director an additional amount of approximately 514 thousand share . The r common stock ha 10 vote per share , our right . As of December 31 , 2015 , Larry , As of December 31 , 2015 , Larry , Sergey , and Eric beneficially owned approximately 92.5 % of our outstanding Class stock , which represented approximately 58.5 % of the voting power provision include the following : 16 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it it subsidiary . On October 2 , 2015 , we completed . On October 2 , 2015 , we completed a reorganization new holding company common stock \u201c GOOG \u201d since April 3 , 2014 . Prior to \u201d since April 3 , 2014 . Prior to that time Select Market . Fiscal Year 2015 Quarters Ended : High Low Ended : High Low March 31 , 2015 $ 575.33 $ High Low March 31 , 2015 $ 575.33 $ 492.55 June March 31 , 2015 $ 575.33 $ 492.55 June 30 , , 2015 $ 575.33 $ 492.55 June 30 , 2015 565.06 $ 575.33 $ 492.55 June 30 , 2015 565.06 520.51 September $ 492.55 June 30 , 2015 565.06 520.51 September 30 , 492.55 June 30 , 2015 565.06 520.51 September 30 , 2015 June 3 common stock $ 15.04 $ 16.22 $ 19.13 $ common stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 15.04 $ 17.47 $ 19.77 $ Continuing operation $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued operation 0.00 $ 19.77 $ 20.15 $ 24.63 Discontinued operation 0.00 ( 1.25 2 common stock $ 14.83 $ 15.98 $ 18.79 $ common stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontinued operation 0.00 $ 19.42 $ 19.82 $ 24.34 Discontinued operation 0.00 ( common stock of $ 22.84 and for Class C capital C capital stock of $ 24.34 . \u2022 Operating cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the fourth quarter of 2015 , we implemented legal and . Please refer to No common stock $ 5.01 $ 4.96 $ 4.05 $ common stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic net income $ 4.99 $ 5.80 $ 7.16 Basic net income ( loss stock : Continuing operation $ 5.30 $ 5.06 $ 4.32 $ Continuing operation $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ 6.51 $ $ 4.32 $ 5.46 common stock $ 4.92 $ 4.88 $ 3.98 $ common stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted net income $ 4.93 $ 5.73 $ 7.06 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Continuing operation $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ 6.43 $ $ 4.25 $ common stock $ 19.13 $ 20.91 $ 23.11 Basic common stock $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( 0.64 ) $ 24.63 Discontinued operation ( 0.64 ) 0.76 0.00 Basic net Discontinued operation ( 0.64 ) 0.76 0.00 Basic net income per operation ( 0.64 ) 0.76 0.00 Basic net income per sh common stock $ 18.79 $ 20.57 $ 22.84 Diluted common stock $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( 0.63 ) $ 24.34 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net income per operation ( 0.63 ) 0.75 0.00 Diluted net i Common stock issued $ 538 $ 48,197 $ 71,570 Common stock issued 11,706 1,174 $ 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 0 0 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compe Common stock issued $ 538 $ 48,197 $ 71,570 Common stock issued 11,706 1,174 $ 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 0 0 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compe common stock ( 10.6 million share ) . Subsequent transaction , we own approximately 7.8 % of the outstanding share an indemnification liability of $ 175 million , the majority of a net gain of $ 757 million , which wa presented for the year ended December 31 , 2013 . The financial year ended December 31 , 2013 . The financial result of for the year ended December 31 , 2013 ( in million year ended December 31 , 2013 ( in million ) : ) : Year Ended December 31 , 2013 ( 1 ) Year Ended December 31 , 2013 ( 1 ) common stock , 100 share of Class B common B common stock , and 100 share of Class C capital board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , there were December 31 , 2014 and 2015 , there were no share common stock is entitled to 10 vote per share . Class Alphabet reorganization , on October 2 , 2015 , Google transferred , on October 2 , 20 Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Indenture , 001-37580 ) October 2 , 2015 4.03 Indenture , dated a ) October 2 , ", + "capital_stock": "Capital Stock $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , a capital stock ranged from $ 492.55 to $ 776.60 per share from $ 492.55 to $ 776.60 per share . The trading those of our competitor . 15 Table of Contents Alphabet Inc. cash reserve . In October 2015 , our board of director to repurchase up to $ 5,099,019,513.59 of our Class C capital capital stock and in January 2016 , our board of director an additional amount of approximately 514 thousand share . The repurchase Class B common stock ha 10 vote per share , our right . As of December 31 , 2015 , Larry , As of capital stock were $ 778.01 and $ 758.88 per share were $ 778.01 and $ 758.88 per share , respectively , holder . As of December 31 , 2015 , there were As of December 31 , 2015 , there were approximately 68 2015 , there were approximately 68 stockholder of record of our during the quarter ended December 31 , 2015 . Period Total quarter ended December 31 , 2015 . Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approxim capital stock $ 15.04 $ 16.22 $ 19.13 $ capital stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discontinued operation 0.00 $ 19.42 $ 19.82 $ 22.84 Discontinued operation 0.00 ( capital stock $ 14.83 $ 15.98 $ 18.79 $ capital stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( 1 ) $ 18.79 $ 20.57 $ 24.34 ( 1 ) In the $ 20.57 $ 24.34 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to capital stock of $ 24.34 . \u2022 Operating cash flow Operating cash flow wa $ 26.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. \u2022 Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the fourth quarter of 2015 , we implemented legal and . Please refer to Note 16 of the Notes to Consolidated this Annual Repo capital stock $ 5.01 $ 4.96 $ 4.05 $ capital stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted net income $ 6.51 $ 5.80 $ 7.16 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Continuing operation $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ 4.93 $ $ 4.25 capital stock $ 4.92 $ 4.88 $ 3.98 $ capital stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( 1 ) $ 6.43 $ 5.73 $ 7.06 ( 1 ) In the $ 5.73 $ 7.06 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer capital stock $ 19.13 $ 20.91 $ 24.63 Diluted capital stock $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( 0.63 ) $ 22.84 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net income per operation ( 0.63 ) 0.75 0.00 Diluted net capital stock $ 18.79 $ 20.57 $ 24.34 See capital stock $ 18.79 $ 20.57 $ 24.34 See accompanying note $ 18.79 $ 20.57 $ 24.34 See accompanying note . 49 24.34 See accompanying note . 49 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net income $ Ended December 31 , 2013 2014 2015 Net income $ 12,733 December 31 , 2013 2014 2015 Net income $ 12,733 $ 2014 2015 Net income $ 12,733 $ 14,136 $ 16,348 Other Net income $ 12,733 $ 14,136 capital stock 2013 671,664 25,922 125 60,930 86,977 Common and capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-b capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 0 0 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 664 Stock-b capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income capital stock ) Repurchases of capital stock 0 0 ( 1,780 ) Proceeds Repurchases of capital stock 0 0 ( 1,780 ) Proceeds from capital stock 0 0 ( 1,780 ) Proceeds from issuance of debt , net of cost 10,768 11,625 13,705 Repayments of debt , net of cost 10,768 11,625 13,705 Repayments of debt ( net of cost 10,768 11,625 13,705 Repayments of debt ( 11,325 13,705 Repayments of debt ( 11,325 ) ( 11,643 ) ( debt ( 11,325 ) ( 11,643 ) ( 13,728 ) Net ) ( 11,643 ) ( 13,728 ) Net cash used in used in financing activit capital stock 2013 671,664 25,922 125 60,930 86,977 Common and capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-b capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 6,659 331 0 0 331 Stock-based and capital stock issued 6,659 331 0 0 331 Stock-based compensation capital stock issued 6,659 331 0 0 331 Stock-based compensation expense stock issued 6,659 331 0 0 331 Stock-based compensation expense 5,151 issued 6,659 331 0 0 331 Stock-based compensation expense 5,151 0 0 331 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 331 Stock-b capital stock . In May 2015 , the Adjustment Payment wa in the issuance of approximately 853 thousand share of Class C capital stock , with $ 475 million reflected in additional-paid in additional-paid in capital and $ 47 million of cash in lieu In the year ended December 31 , 2015 , the Adjustment year ended December 31 , 2015 , the Adjustment Payment wa for the year ended December 31 , 2015 . 85 Table year ended December 31 , 2015 . 85 Table of Contents December 31 , 2015 . 85 Table of Contents Alphabet In Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Indenture , 001-37580 ) October 2 , 2015 4.03 Indenture , dated a ) October 2 , 2015 4.03 Indenture , dated a of , dated a of May 19 , 2011 between Google Inc. a of May 19 , 2011 between Google Inc. and The trustee Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) May 19 , 2011 No . 000-50726 ) May 19 , 2011 4.04 Form of 000-", + "corporate_debt": "Corporate debt security 33 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 114 3 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 0 debt security 11,499 114 ( 122 ) 11,491 0 11,491 Agency 11,499 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 109 0 11,491 A Corporate debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13, Corporate debt ( 3 ) 1,051 ( 6 ) Corporate debt security 5,851 6 ) Corporate debt security 5,851 ( 112 ) 225 ( Corporate debt security 5,851 ( 112 ) 225 ( 10 ) security 5,851 ( 112 ) 225 ( 10 ) 6,076 ( ( 112 ) 225 ( 10 ) 6,076 ( 122 ) ) 225 ( 10 ) 6,076 ( 122 ) Agency mortgage-backed ( 10 ) 6,076 ( 122 ) Agency mortgage-backed security 609 122 ) Agency mortgage-backed security 609 ( 1 ) 2,168 ( Agency mortgage-backed security 609 ( 1 ) 2,168 ( 41 ) security 609 ( 1 ) 2,168 ( 41 ) 2,777 ( ( 1 ) 2,168 ( 41 ) 2, Corporate debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 Corporate debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $", + "cash_flow_hedges": "Cash Flow Hedges these contract wa approximately $ 13.6 billion and $ 16.4 billion $ 13.6 billion and $ 16.4 billion a of December 31 16.4 billion a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . These foreign December 31 , 2014 and 2015 . These foreign exchange contract exchange contract have maturity of 36 month or le . In month or le . In 2012 , we entered into forward-starting total notional amount of $ 1.0 billion and term calling for anticipated debt issuance of $ 1.0 billion in 2014 " +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-17-000008/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-17-000008/full-submission_features.json new file mode 100644 index 0000000..dbee2f8 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-17-000008/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue from total revenue from advertising in 2016 . Many of our advertiser a new holding company in 2015 and the investment that we provide product and service that 7 Table of Contents Alphabet Inc. than we have historically . 8 Table of Contents Alphabet Inc. in Europe in May of 2018 , which creates a range face intellectual property litigation , 9 Table of Contents Alphabet Inc. a number of legal challenge 10 Table of Contents Alphabet Inc. be available in every country 11 Table of Contents Alphabe revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2016 . In certain international market not violate our policy . 14 Table of Contents Alphabet Inc impact our future success . 15 Table of Contents Alphabet Inc. For example , from January 1 , 2016 through December 31 , from January 1 , 2016 through December 31 , 2016 1 , 2016 through December 31 , 2016 , the closing 2016 through December 31 , 2016 , the closing price of common stock ranged from $ 681.14 revenue could be volatile . 22 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2016 ( consolidated unless year ended December 31 , 2016 ( consolidated unless otherwise noted : \u2022 Revenues of $ 90.3 billion and revenue growth of billion and revenue growth of 20 % year over year , constant currency revenue growth of 24 % year over year . Google segment revenue of $ 89.5 billion with revenue growth of billion with revenue growth of 20 % year over year and Other Bets revenue of $ 0.8 bil revenue growth of billion with revenue growth of 82 % year over year . of the world were $ 42.8 billion , $ 7.8 billion $ 42.8 billion , $ 7.8 billion , and $ 39.7 7.8 billion , and $ 39.7 billion , respectively . \u2022 Cost of revenue wa $ 35.1 billion , consisting of traffic traffic acquisition cost of $ 16.8 billion and other cost of cost of revenue of $ 18.3 billion . Our traffic acquisition percentage of advertising revenue wa 21 % . \u2022 Operating expense of revenue ) were $ 31.4 billion . \u2022 Income from revenue Network Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 67,390 15,033 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 7,154 67,390 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue 79,383 Google revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidated revenue $ 66,001 $ 74,989 revenue $ 66,001 $ 74,989 $ 90,272 Google segment The $ 66,001 $ 74,989 $ 90,272 Google segment The following table presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google segment revenue Ended December 31 , 2014 2015 2016 Google segment revenue $ December 31 , 2014 2015 2016 Google segment revenue $ 65,674 2016 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ revenue a a a percentage of consolidated revenue 99.5 % 99.4 % 99.1 % of consolidated revenue 99.5 % 99.4 % 99.1 % Aggregate paid revenue 99.5 % 99.4 % 99.1 % Aggregate paid click change % Aggregate paid click change 22 % 32 % Aggregate cost-per-click paid click change 22 % 32 % Aggregate cost-per-click change ( % Aggregate cost-per-click change ( 11 ) % ( 11 ) ( 11 ) % ( 11 ) % Use of Monetization rate ; \u2022 seasonality ; 24 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2014 2015 revenue 68.6 % 70.2 % 71.3 % Google segment revenue 68.6 % 70.2 % 71.3 % Paid click revenue 68.6 % 70.2 % 71.3 % Paid click change 33 71.3 % Paid click change 33 % 40 % Cost-per-click change Paid click change 33 % 40 % Cost-per-click change ( 15 40 % Cost-per-click change ( 15 ) % ( 13 ) ( 15 ) % ( 13 ) % Google property revenue Google property revenue increased $ 11,428 million from 2015 to 2016 increased $ 11,428 million from 2015 to 2016 and also increased 11,428 million from 2015 to 2016 and also i revenue increased $ 7,272 million from 2014 to 2015 increased $ 7,272 million from 2014 to 2015 and also increased 7,272 million from 2014 to 2015 and also increased a a on Google property increased from 2014 to 2015 due to an property increased from 2014 to 2015 due to an increase in partially offset by a decrease 25 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google Network Members Ended December 31 , 2014 2015 201 revenue 22.1 % 20.2 % 17.4 % Google segment revenue 22.1 % 20.2 % 17.4 % Paid click revenue 22.1 % 20.2 % 17.4 % Paid click change ( % Paid click change ( 7 ) % 3 % Cost-per-click change ( 7 ) % 3 % Cost-per-click change ( 3 3 % Cost-per-click change ( 3 ) % ( 13 ) ( 3 ) % ( 13 ) % Google Network Members ' property revenue increased $ 565 million from 2015 to 2016 increased $ 565 million from 2015 to 2016 . The growth 565 million from 2015 to 2016 . The growth wa primarily increase in paid click from 2 revenue increased $ 494 million from 2014 to 2015 increased $ 494 million from 2014 to 2015 . The increase 494 million from 2014 to 2015 . The increase wa primarily paid by our advertiser from 2014 to 2015 were primarily driven our advertiser from 2014 to 2015 were primarily driven by ongoing presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google other revenue Ended December 31 , 2014 2015 2016 Google other revenue $ December 31 , 2014 2015 2016 Google revenue $ 6,050 2016 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue a a percentage of Google segment revenue 9.3 % 9.6 % 11.3 % Google segment revenue 9.3 % 9.6 % 11.3 % Google other revenue 9.3 % 9.6 % 11.3 % Google other revenue consist our Google Cloud offering . 26 Table of Contents Alphabet Inc. Google other revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million fr revenue increased $ 1,104 million from 2014 to 2015 increased $ 1,104 million from 2014 to 2015 and increased a 1,104 million from 2014 to 2015 and increased a a percentage presented : Year Ended December 31 , 2014 2015 2016 Other Year Ended December 31 , 2014 2015 2016 Other Bets revenue Ended December 31 , 2014 2015 2016 Other Bets revenue $ December 31 , 2014 2015 2016 Other Bets revenue $ 327 2016 Other Bets revenue $ 327 $ 445 $ 809 Other Bets revenue $ 327 $ 445 $ 809 Other Bets revenue $ 327 $ 4 revenue a a a percentage of consolidated revenue 0.5 % 0.6 % 0.9 % of consolidated revenue 0.5 % 0.6 % 0.9 % Other Bets revenue 0.5 % 0.6 % 0.9 % Other Bets revenue consist Other Bets revenue increased $ 364 million from 2015 to 2016 increased $ 364 million from 2015 to 2016 and increased a 364 million from 2015 to 2016 and increased a a percentage R & D service from 2015 to 2016 . Our Other D service from 2015 to 2016 . Our Other Bets revenue Other Bets revenue increased $ 118 million from 2014 to 201 revenue in 2014 a compared to a full to a full year in 2015 . Due to the early customer : Year Ended December 31 , 2014 2015 2016 United Year Ended December 31 , 2014 2015 2016 United States 45 Ended December 31 , 2014 2015 2016 United States 45 % December 31 , 2014 2015 2016 United States 45 % 46 2014 2015 2016 United States 45 % 46 % 47 % 2016 United States 45 % 46 % 47 % United Kingdom States 45 % 46 % 47 % United Kingdom 10 % % 47 % United Kingdom 10 % 10 % 9 % % United Kingdom 10 % 10 % 9 % Rest o revenue Ended December 31 , 2014 2015 2016 United Kingdom revenue $ December 31 , 2014 2015 2016 United Kingdom revenue $ 6,483 2016 United Kingdom revenue $ 6,483 $ 7,067 $ 7,787 Exclude Kingdom revenue $ 6,483 $ 7,067 $ 7,787 Exclude : Foreign $ 6,483 $ 7,067 $ 7,787 Exclude : Foreign exchange impact period rate N/A N/A $ 826 Exclude : Hedging ( gain gain ) recognized $ ( 3 ) $ ( 133 ) ( 3 ) $ ( 133 ) $ ( 297 ) ( 133 ) $ ( 297 ) Constant currency United Kingdom currency United Kingdom revenue $ 6,480 revenue $ 6,480 $ 6,934 $ 8,316 United Kingdom revenue $ 6,480 $ 6,934 $ 8,316 United Kingdom revenue growth rate United Kingdom revenue growth rate 9 % 10 % United Kingdom revenue growth rate 9 % 10 % United Kingdom constant currency constant currency revenue growth rate 15 % 20 % Rest of revenue growth rate 15 % 20 % Rest of the world of the world revenue $ 30,036 $ 33,112 $ 39,704 Exclude world revenue $ 30,036 $ 33,112 $ 39,704 Exclude : Foreign $ 30,036 $ 33,112 $ 39,704 Exclude : Foreign exchange revenue $ 29,867 $ 31,845 $ 39,909 Rest world revenue $ 29,867 $ 31,845 $ 39,909 Rest of the $ 29,867 $ 31,845 $ 39,909 Rest of the world revenue the world revenue growth rate 10 % 20 % Rest of revenue growth rate 10 % 20 % Rest of the world constant currency revenue growth rate 24 % 25 % United States revenue growth rate 24 % 25 % United States revenue $ % United States revenue $ 29,482 $ 34,810 $ 42,781 United States revenue $ 29,482 $ 34,810 $ 42,781 United States revenue $ 29,482 $ 34,810 $ 42,781 revenue growth rate United States revenue growth rate 18 % 23 % Total consolidated revenue growth rate 18 % 23 % Total consolidated revenue $ % Total consolidated revenue $ 66,001 $ 74,989 $ 90,272 Constant consolidated revenue $ 66,001 $ 74,989 $ 90,272 Constant currency total $ 66,001 $ 74,989 $ 90,272 Constant currency total consolidated revenue currency total consolidated revenue $ 65,829 $ 73,589 $ 91,006 Total consolidated revenue $ 65,829 $ 73,589 $ 91,006 Total consolidated revenue $ 65,829 $ 7 revenue growth rate Total consolidated revenue growth rate 14 % 20 % Constant currency revenue growth rate 14 % 20 % Constant currency total consolidated total consolidated revenue growth rate 20 % 24 % In 2016 revenue growth rate 20 % 24 % In 2016 and in 20 % 24 % In 2016 and in 2015 , our % In 2016 and in 2015 , our revenue from the the U.S. dollar . In 2016 , our revenue from the the Japanese yen . In 2015 , our revenue from the , and Japanese yen . 28 Table of Contents Alphabet Inc. ) : Year Ended revenue 12,194 16,793 Other cost of revenue 12,194 13,821 18,345 Total cost of Other cost of revenue 12,194 13,821 18,345 Total cost of revenue cost of revenue 12,194 13,821 18,345 Total cost of revenue $ Total cost of revenue $ 25,691 $ 28,164 $ 35,138 Total of revenue $ 25,691 $ 28,164 $ 35,138 Total cost of $ 25,691 $ 28,164 $ 35,138 Total cost of revenue a a a percentage of revenue 38.9 % 37.6 % 38.9 % percentage of revenue 38.9 % 37.6 % 38.9 % Year Ended revenue 38.9 % 37.6 % 38.9 % Year Ended Dec revenue Cost of revenue increased $ 6,974 million from 2015 to 2016 increased $ 6,974 million from 2015 to 2016 due to various 6,974 million from 2015 to 2016 due to various factor including traffic acquisition cost of $ 2,450 million wa due to increase cost of revenue of $ 4,524 million wa primarily due to due to increase in ( 1 ) data center cost including of business growth , ( 2 ) content acquisition cost a related to YouTube , ( 3 ) hardware cost associated with hardware launch , and ( 4 ) stock-b revenue increased $ 2,473 million from 2014 to 2015 increased $ 2,473 million from 2014 to 2015 . The increase 2,473 million from 2014 to 2015 . The increase wa primarily traffic acquisition cost of $ 846 million , resulting from more an impairment charge of $ 378 million recognized in 2014 related $ 378 million recognized in 2014 related to a patent licensing that did not recur in 2015 . The decrease in aggregate in aggregate TAC rate from 2014 to 2015 wa primarily a TAC rate from 2014 to 2015 wa prim revenue in 2017 and future period based on presented : Year Ended December 31 , 2014 2015 2016 Research Year Ended December 31 , 2014 2015 2016 Research and development Ended December 31 , 2014 2015 2016 Research and development expense December 31 , 2014 2015 2016 Research and development expense $ Research and development expense $ 9,832 $ 12,282 $ 13,948 Research development expense $ 9,832 $ 12,282 $ 13,948 Research and development $ 9,832 $ 12,282 $ 13,948 Research and development expense a a a pe revenue 14.9 % 16.3 % 15.5 % percentage of revenue 14.9 % 16.3 % 15.5 % R & revenue 14.9 % 16.3 % 15.5 % R & D expense & D expense increased $ 1,666 million from 2015 to 2016 increased $ 1,666 million from 2015 to 2016 . The increase 1,666 million from 2015 to 2016 . The increase wa primarily stock-based compensation expense of $ 667 million and an increase in and facilities-related cost of $ 326 million both largely a a a a result of a 16 % increase in R & milestone in Other Bets in 2015 . In addition revenue from 2014 to 2015 . These increase of revenue from 2014 to 2015 . These increase were primarily and facilities-related cost of $ 1,502 million and an increase in stock-based compensation expense of $ 487 million , both largely a a a result of a 16 % increase in R & equipment-related expense of approximately $ 248 million and an increase in in professional service of $ 174 million due to additional expense consulting and outsourced service . 30 Table of Contents Alphabet Inc. a percentage of rev revenue 12.3 % 12.1 % 11.6 % percentage of revenue 12.3 % 12.1 % 11.6 % Sales and revenue 12.3 % 12.1 % 11.6 % Sales and marketing expense and marketing expense increased $ 1,438 million from 2015 to 2016 increased $ 1,438 million from 2015 to 2016 . The increase 1,438 million from 2015 to 2016 . The increase wa primarily and promotional expense of $ 679 million largely due to increase and facilities-related cost of $ 482 million and stock-based compensation expense stock-based compensation expense of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar and facilities-related cost of $ 329 million and an increase in stock-based compensation expense of $ 184 million , largely resulting from , largely resulting from a 12 % increase in sale and and promotional expense of $ 184 million and an increase in professional service fee of $ 158 million due to additional expense a percentage of revenue in 2017 and future period . General presented : Year Ended December revenue 8.9 % 8.2 % 7.7 % percentage of revenue 8.9 % 8.2 % 7.7 % General and revenue 8.9 % 8.2 % 7.7 % General and administrative expense and administrative expense increased $ 849 million from 2015 to 2016 increased $ 849 million from 2015 to 2016 . The increase 849 million from 2015 to 2016 . The increase wa primarily and facilities-related cost of $ 460 million and stock-based compensation expense stock-based compensation expense of $ 421 million , both largely resulting both largely resulting from revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar stock-based compensation expense of $ 136 million and an increase in and facilities-related cost of $ 69 million , both largely resulting both largely resulting from a 15 % increase in general and increase in depreciation and equipment- 31 Table of Contents Alphabet Inc. Inc. related expense of $ 121 million and an increase of and an increase of $ 80 million of miscellaneous general and fee and expense of $ 1 revenue in 2017 and future period . Stock-Based presented : Year Ended December 31 , 2014 2015 2016 Stock-based Year Ended December 31 , 2014 2015 2016 Stock-based compensation $ Ended December 31 , 2014 2015 2016 Stock-based compensation $ 4,175 December 31 , 2014 2015 2016 Stock-based compensation $ 4,175 $ 2015 2016 Stock-based compensation $ 4,175 $ 5,203 $ 6,703 Stock-based Stock-based compensation $ 4,175 $ 5,203 $ 6,703 Stock-based compensation a $ 4,175 $ 5,203 $ 6,703 Stock-based compensation revenue 6.3 % 6.9 % 7.4 % percentage of revenue 6.3 % 6.9 % 7.4 % Stock-based compensation revenue 6.3 % 6.9 % 7.4 % Stock-based compensation related to settle in equity increased $ 1,500 million from 2015 to 2016 increased $ 1,500 million from 2015 to 2016 and $ 1,028 1,500 million from 2015 to 2016 and $ 1,028 million from 2015 to 2016 and $ 1,028 million from 2014 to 2015 and $ 1,028 million from 2014 to 2015 . These increase 1,028 million from 2014 to 2015 . These increase s were equity to be appro revenue 1.1 % 0.4 % 0.5 % percentage of revenue 1.1 % 0.4 % 0.5 % Other income revenue 1.1 % 0.4 % 0.5 % Other income ( expense , net , increased $ 143 million from 2015 to 2016 increased $ 143 million from 2015 to 2016 . This increase 143 million from 2015 to 2016 . This increase wa primarily , net , decreased $ 472 million from 2014 to 2015 decreased $ 472 million from 2014 to 2015 . This decrease 472 million from 2014 to 2015 . This decrease wa primarily non-marketable investment a compared to 2014 revenue 6,356 6,583 7,037 8,188 7,648 8,130 : Cost of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 Cost of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and development 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and development 2,753 7,037 8,188 7,648 8,130 8,699 10,661 Research and d revenue , net 1,903 95 Inventory 491 268 Prepaid revenue share , net 1,903 95 Inventory 491 268 Prepaid revenue share , expense , expense and other asset 2,648 4,575 Total current asset 90,114 expense and other asset 2,648 4,575 Total current asset 90,114 105,408 2,648 4,575 Total current asset 90,114 105,408 Prepaid revenue share , 4,575 Total current asset 90,114 105,408 Prepaid revenue share , expense and other asset , non-current 3,181 1,819 Non-marketable investment 5,183 5,878 other asset , non-c revenue share 2,329 and other current liability 4,768 6,144 Accrued revenue share 2,329 2,942 4,768 6,144 Accrued revenue share 2,329 2,942 Securities lending payable 2,428 6,144 Accrued revenue share 2,329 2,942 Securities lending payable 2,428 0 2,329 2,942 Securities lending payable 2,428 0 Deferred revenue 788 1,099 2,942 Securities lending payable 2,428 0 Deferred revenue 788 1,099 Income payable 2,428 0 Deferred revenue 788 1,099 Income tax payable , 2,428 0 Deferred revenue 788 1,099 Income tax revenue , non-current 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 151 3,935 Deferred revenue , non-current 151 202 Income tax payable , Deferred revenue , non-current 151 202 Income tax payable , non-current Income tax payable , non-current 3,663 4,677 Deferred income tax 189 tax payable , non-current 3,663 4,677 Deferred income tax 189 226 3,663 4,677 Deferred income tax 189 226 Other long-term liability 1,822 4,677 Deferred income tax 189 226 Other long-term liability 1,82 revenue 25,691 28,164 35,138 Research and development : Cost of revenue 25,691 28,164 35,138 Research and development 9,832 Cost of revenue 25,691 28,164 35,138 Research and development 9,832 12,282 28,164 35,138 Research and development 9,832 12,282 13,948 Sales and marketing 35,138 Research and development 9,832 12,282 13,948 Sales and marketing 8,131 Research and development 9,832 12,282 13,948 Sales and marketing 8,131 9,047 12,282 13,948 Sales and marketing 8,131 9,047 10,485 General and administr revenue share net 591 ( 179 ) 3,125 Prepaid revenue share , expense , expense and other asset 459 ( 318 ) 312 Accounts and other asset 459 ( 318 ) 312 Accounts payable 436 asset 459 ( 318 ) 312 Accounts payable 436 203 110 318 ) 312 Accounts payable 436 203 110 Accrued expense and ) 312 Accounts payable 436 203 110 Accrued expense and other 312 Accounts payable 436 203 110 Accrued expense and other liability Accrued expense and other liability 757 1,597 1,515 Accrued revenue share expense and other lia revenue share 245 and other liability 757 1,597 1,515 Accrued revenue share 245 339 1,597 1,515 Accrued revenue share 245 339 593 Deferred revenue ( 1,515 Accrued revenue share 245 339 593 Deferred revenue ( 175 Accrued revenue share 245 339 593 Deferred revenue ( 175 ) 339 593 Deferred revenue ( 175 ) 43 223 Net cash Deferred revenue ( 175 ) 43 223 Net cash provided by revenue ( 175 ) 43 223 Net cash provided by operating cash provided by operating activity 23,024 26,572 36,036 Investing activity Purc revenue primarily online advertising . On August 10 , 2015 , we announced . On August 10 , 2015 , we announced plan to operating structure . On October 2 , 2015 , we implemented . On October 2 , 2015 , we implemented the holding holding company reorganization on October 2 , 2015 wa accounted for reorganization on October 2 , 2015 wa accounted for a a ) : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google segment Google Ended December 31 , 2014 2015 2016 Google revenue Network Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 67,390 15,033 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 7,154 67,390 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue 79,383 Google revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidated revenue $ 66,001 $ 74,989 revenue $ 66,001 $ 74,989 $ 90,272 We generate revenue $ 66,001 $ 74,989 $ 90,272 We generate revenue primarily by on Google Network Members \u2019 47 Table of Contents Alphabet Inc. settlement . We recognize stock- 48 Table of Contents Alphabet Inc. With the adoption of ASU 2016-09 on January 1 , 2016 of ASU 2016-09 on January 1 , 2016 , we account 2016-09 on January 1 , 2016 , we account for forfeiture around the world . In 2014 , 2015 , and 2016 world . In 2014 , 2015 , and 2016 , we 2014 , 2015 , and 20 revenue from affiliated customer represented more than 10 % of our revenue in % of our revenue in 2014 , 2015 , or 2016 our revenue in 2014 , 2015 , or 2016 . Fair 2014 , 2015 , or 2016 . Fair Value of Financial measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Include other input that and credit rating . Level 3 - Unobservable input that are issued by foreign government . 49 Table of Contents Alphabet Inc. liquid security with maturity beyond 12 month a current Revenue from Contracts with Customers . `` Topic 606 supersedes the revenue recognition requirement in Accounting Standards Codification Topic 605 , \u201c Revenue Recognition \u201d intend to early adopt Topic 606 a of January 1 , Topic 606 a of January 1 , 2017 , using the a of January 1 , 2017 , using the modified retrospective expect the adoption of Topic 606 will not have a material of Income . In January 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-01 ( ASU 2016-01 ) `` No . 2016 Revenue $ 171 $ 1,399 $ 539 Interest contract Revenue $ 171 $ 1,399 $ 539 Interest rate contract $ 171 $ 1,399 $ 539 Interest rate contract Other income ( expense ) , net 4 5 5 Provision for income expense ) , net 4 5 5 Provision for income tax ) , net 4 5 5 Provision for income tax ( Provision for income tax ( 51 ) ( 401 ) ( tax ( 51 ) ( 401 ) ( 193 ) Net ) ( 401 ) ( 193 ) Net of tax $ ) Net of tax $ 124 $ 1,003 $ 351 Total of tax $ 124 $ 1,003 $ 351 Total amount reclassified $ 124 $ 1,003 $ 351 Total revenue of $ 378 million related to a patent date and fall within level 3 in fair value hierarchy . for the year ended December 31 , 2015 and 2016 . year ended December 31 , 2015 and 2016 . As of December 31 , 2015 and 2016 . As of December 31 2016 . As of December 31 , 2016 , expected amortization As of December 31 , 2016 , expected amortization expense relating ( in million ) : 2017 $ 764 2018 685 2019 million ) : 2017 $ 764 2018 685 2019 579 2020 ) : 2017 $ 764 2018 685 2019 579 2020 487 : 2017 $ 76 revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Note liability 250 Total liability $ 1,826 Note 10 . Commitments and Total liability $ 1,826 Note 10 . Commitments and Contingencies Operating lease period expiring primarily between 2017 and 2063 . We are expiring primarily between 2017 and 2063 . We are committed to these lease agreement . These 68 Table of Contents Alphabet Inc. basis . As of D revenue Ended December 31 , 2014 2015 2016 Cost of revenue $ December 31 , 2014 2015 2016 Cost of revenue $ 535 2016 Cost of revenue $ 535 $ 806 $ 1,157 Research of revenue $ 535 $ 806 $ 1,157 Research and development $ 535 $ 806 $ 1,157 Research and development 2,200 2,687 $ 1,157 Research and development 2,200 2,687 3,354 Sales and marketing 1,157 Research and development 2,200 2,687 3,354 Sales and marketing 715 Research and development 2,200 2,687 3,354 Sales and marketing 715 899 2,687 3,354 Sales Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 259 million , $ 309 million $ 259 million , $ 309 million , and $ 385 309 million , and $ 385 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . Note 2014 , 2015 , and 2016 . Note 14 . Income , and 2016 . Note 14 . Income Taxes Income from from domestic operation of $ 8,894 million , $ 8,271 million $ 8,894 million , revenue $ $ 89,463 Other Bets 327 445 809 Total revenue $ 66,001 89,463 Other Bets 327 445 809 Total revenue $ 66,001 $ 445 809 Total revenue $ 66,001 $ 74,989 $ 90,272 Year Total revenue $ 66,001 $ 74,989 $ 90,272 Year Ended December $ 66,001 $ 74,989 $ 90,272 Year Ended December 31 , $ 90,272 Year Ended December 31 , 2014 2015 2016 Operating Year Ended December 31 , 2014 2015 2016 Operating income ( Ended December 31 , 2014 2015 2016 Operating income ( loss December 31 , 2014 2015 2016 Operating inco revenue $ Rest of the world 30,036 33,112 39,704 Total revenue $ 66,001 of the world 30,036 33,112 39,704 Total revenue $ 66,001 $ 33,112 39,704 Total revenue $ 66,001 $ 74,989 $ 90,272 As Total revenue $ 66,001 $ 74,989 $ 90,272 As of December $ 66,001 $ 74,989 $ 90,272 As of December 31 , $ 90,272 As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Long-lived asset : As of December 31 , 2016 Long-lived asset : United States asset : Unit", + "net_income": "Net income Income from operation 13,834 15,403 16,496 19,360 23,716 Net income from from operation 13,834 15,403 16,496 19,360 23,716 Net income from continuing operation 13,834 15,403 16,496 19,360 23,716 Net income from continuing operation Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income ( continuing operation 11,435 13,160 13, Net income ( loss operation 11,435 13,160 13,620 16,348 19,478 Net income ( loss ) ) from discontinued operation ( 816 ) ( 427 ) 516 operation ( 816 ) ( 427 ) 516 0 0 Net 816 ) ( 427 ) 516 0 0 Net income 10,619 ) ( 427 ) 516 0 0 Net income 10,619 12,733 ( 427 ) 516 0 0 Net income 10,619 12,733 14,136 516 0 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic 0 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic net 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic net income Net income 10,619 12,73 net income ( income 10,619 12,733 14,136 16,348 19,478 Basic net income ( loss stock : Continuing operation $ 17.47 $ 19.77 $ 20.15 $ Continuing operation $ 17.47 $ 19.77 $ 20.15 $ 23.11 $ $ 17.47 $ 19.77 $ 20.15 $ 23.11 $ 28.32 Discontinued $ 19.77 $ 20.15 $ 23.11 $ 28.32 Discontinued operation ( $ 20.15 $ 23.11 $ 28.32 Discontinued operation ( 1.25 ) $ 28.32 Discontinued operation ( 1.25 ) ( 0.64 ) 0.76 operation ( 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic net income ) ( net income per ( 0.64 ) 0.76 0.00 0.00 Basic net income per share and B common stock $ 16.22 $ 19.13 $ 20.91 $ common stock $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income ( loss stock : Continuing operation $ 17.47 $ 19.77 $ 20.15 $ Continuing operation $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued o net income ) ( 0.64 ) 0.76 0.00 0.00 Basic net income per ( 0.64 ) 0.76 0.00 0.00 Basic net income per share Class C capital stock $ 16.22 $ 19.13 $ 20.91 $ capital stock $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ 27.85 Discon net income ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income per ( 0.63 ) 0.75 0.00 0.00 Diluted net income per share and B common stock $ 15.98 $ 18.79 $ 20.57 $ common stock $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ 27.85 Discon net income ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income per ( 0.63 ) 0.75 0.00 0.00 Diluted net income per share Class C capital stock $ 15.98 $ 18.79 $ 20.57 $ capital stock $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ 27.85 As $ 18.79 $ 20.57 $ 24.34 $ 27.85 As of December $ 20.57 $ 24.34 $ 27.85 As of December 31 , $ 27.85 As of December 31 , 2012 2013 2014 2015 As of December 31 , 2012 2013 2014 2015 2016 ( of December 31 , 2012 2013 2014 2015 2016 ( in December 31 , 2012 2013 2 Net income \u2022 Net income wa $ 19.5 billion with diluted net income income per share of $ 27.85 . \u2022 Operating cash flow Operating cash flow wa $ 36.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 10.2 billion . \u2022 Headcount increased . \u2022 Headcount increased to 72,053 a of December 31 , to 72,053 a of December 31 , 2016 . Information about a of December 31 , 2016 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further in Net income 1,089 1,025 912 277 922 1,242 984 1,524 Net income $ 1,025 912 277 922 1,242 984 1,524 Net income $ 3,515 912 277 922 1,242 984 1,524 Net income $ 3,515 $ 984 1,524 Net income $ 3,515 $ 3,931 $ 3,979 $ Net income $ 3,515 $ 3,931 $ 3,979 $ 4,923 $ $ 3,515 $ 3,931 $ 3,979 $ 4,923 $ 4,207 $ $ 3,931 $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ 5,333 Less $ 4,207 $ 4,877 $ 5,061 $ 5,333 Less : Adjustment $ 4,877 $ 5,061 $ 5,333 Less : Net income 0 522 0 0 0 0 0 0 Net income available 522 0 0 0 0 0 0 Net income available to 0 0 0 0 0 0 Net income available to all available to all stockholder $ 3,515 $ 3,409 $ 3,979 $ all stockholder $ 3,515 $ 3,409 $ 3,979 $ 4,923 $ $ 3,515 $ 3,409 $ 3,979 $ 4,923 $ 4,207 $ $ 3,409 $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ 5,333 Basic $ 4,207 $ 4,877 $ 5,061 $ 5,333 Basic net income $ 4,877 $ 5,061 $ 5,333 Basic net income per share and net income $ 7.11 $ 7.36 $ 7.73 Basic net income per share Class C capital stock $ 5.16 $ 6.51 $ 5.80 $ capital stock $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted net income $ 7.11 $ 7.36 $ 7.73 Diluted net income per share and B common stock $ 5.10 $ 4.93 $ 5.73 $ common stock $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ $ 5.10 $ 4.93 $ 5.73 $ 7.0 net income $ 7.00 $ 7.25 $ 7.56 Diluted net income per share Class C capital stock $ 5.10 $ 6.43 $ 5.73 $ capital stock $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 Table of $ 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet Inc. and Liquidity As of December 31 , 2016 , we had As of December 31 net Income tax receivable , net 1,903 95 Inventory 491 268 Prepaid tax receivable , net 1,903 95 Inventory 491 268 Prepaid revenue , net 1,903 95 Inventory 491 268 Prepaid revenue share , net 1,903 95 Inventory 491 268 Prepaid revenue share , expense , expense and other asset 2,648 4,575 Total current asset 90,114 expense and other asset 2,648 4,575 Total current asset 90,114 105,408 2,648 4,575 Total current asset 90,114 105,408 Prepaid revenue share , 4,575 Total current asset 90,114 105,408 Prepaid rev net Income tax payable , net 302 554 Total current liability 19,310 tax payable , net 302 554 Total current liability 19,310 16,756 302 554 Total current liability 19,310 16,756 Long-term debt 1,995 3,935 554 Total current liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 151 3,935 Deferred revenue , non-current 151 202 Income tax payable , Def Net income from Provision for income tax 3,639 3,303 4,672 Net income from continuing for income tax 3,639 3,303 4,672 Net income from continuing operation income from continuing operation $ 13,620 $ 16,348 $ 19,478 Net continuing operation $ 13,620 $ 16,348 $ 19,478 Net income from $ 13,620 $ 16,348 $ 19,478 Net income from discontinued operation Net income from discontinued operation 516 0 0 Net income $ income from discontinued operation 516 0 0 Net income $ 14,136 from discontinued operation 516 0 0 N Net income $ 14,136 $ 16,348 $ 19,478 Less Net income $ 14,136 $ 16,348 $ 19,478 Less : Adjustment $ 14,136 $ 16,348 $ 19,478 Less : Adjustment Payment to to Class C capital stockholder 0 522 0 Net income available Class C capital stockholder 0 522 0 Net income available to C capital stockholder 0 522 0 Net income available to all available to all stockholder $ 14,136 $ 15,826 $ 19,478 Basic all stockholder $ 14,136 $ 15,826 $ 19,478 Basic net income $ 14,136 $ 15,826 $ 19,478 Basic net income per share s net income $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per share and B common stock $ 20.91 $ 23.11 $ 28.32 Basic common stock $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 0.00 0.00 24.63 net income $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per share Class C capital stock $ 20.91 $ 24.63 $ 28.32 Diluted capital stock $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 0.00 0 net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per share and B common stock $ 20.57 $ 22.84 $ 27.85 Diluted common stock $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 0.00 0 net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per share Class C capital stock $ 20.57 $ 24.34 $ 27.85 See capital stock $ 20.57 $ 24.34 $ 27.85 See accompanying note $ 20.57 $ 24.34 $ 27.85 See accompanying note . 43 27.85 See accompanying note . 43 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2014 2015 2016 Net Year Ended December 31 , 2014 2015 2016 Net income $ Ended December 31 , 2014 Net income $ 14,136 December 31 , 2014 2015 2016 Net income $ 14,136 $ 2015 2016 Net income $ 14,136 $ 16,348 $ 19,478 Other Net income $ 14,136 $ 16,348 $ 19,478 Other comprehensive ( $ 14,136 $ 16,348 $ 19,478 Other comprehensive ( loss ) foreign currency translation adjustment ( 996 ) ( 1,067 ) ( adjustment ( 996 ) ( 1,067 ) ( 599 ) Available-for-sale ) ( 1,067 ) ( 599 ) Available-for-sale investment : Change unrealized gain ( loss ) 505 ( 715 ) ( 314 ( loss ) 505 ( 715 ) ( 314 ) Less 505 ( 715 ) ( 314 net income ( 134 ) 208 221 Net change net income ( 134 ) 208 221 Net change ( net income ( 134 ) 208 221 Net change ( net of of tax effect of $ 60 , $ 29 , and of $ 60 , $ 29 , and $ 0 ) $ 29 , and $ 0 ) 371 ( 507 ) , and $ 0 ) 371 ( 507 ) ( 93 $ 0 ) 371 ( 507 ) ( 93 ) Cash 371 ( 507 ) ( 93 ) Cash flow hedge : unrealized gain ( loss ) 651 676 515 Less : reclassification gain ( loss ) 651 676 515 Less : reclassification adjustment ( loss ) 651 676 515 Less : reclassification adjustment for included in net Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of De Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 687,348 32,982 ( a of December 31 , 2015 68 Net income 0 0 ( 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive loss ) Net income 0 0 19,478 19,478 Other comprehensive loss 0 Net income 0 0 19,478 19,478 Other comprehensive loss 0 ( 19,478 19,478 Other comprehensive loss 0 ( 528 ) 0 ( Other comprehensive loss 0 ( 528 ) 0 ( 528 ) loss 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 691,293 $ 36,307 a of December 31 , 2016 691,293 $ Net income December 31 , 2014 2015 2016 Operating activity Net income $ Operating activity Net income $ 14,136 $ 16,348 $ 19,478 Adjustments Net income $ 14,136 $ 16,348 $ 19,478 Adjustments : Depreciation $ 14,136 $ 16,348 $ 19,478 Adjustments : Depreciation and impairment impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of intan Net Income Per Share In the year ended December 31 , 2014 and 2016 , year ended December 31 , 2014 and 2016 , the net December 31 , 2014 and 2016 , the net income per In the year ended December 31 , 2015 , the Class year ended December 31 , 2015 , the Class C Adjustment for the year ended December 31 , 2015 . The following year ended December 31 , 2015 . The following table set per share amount ) : 71 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2014 Class A Class Year Ended Dece net income in per share computation 282,877 54,928 338,130 Basic net income per per share computation 282,877 54,928 338,130 Basic net income per share share : Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per 20.15 Discontinued op net income per share net income per share $ 20.91 $ 20.91 $ 20.91 Diluted per share $ 20.91 $ 20.91 $ 20.91 Diluted net income $ 20.91 $ 20.91 $ 20.91 Diluted net income per share computation - continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed earnings a B to Class A share 1,107 0 0 Reallocation of undistributed to Class A share 1,107 0 0 Reallocation of undistributed ea net income in per share computation 342,377 54,928 344,693 Diluted net income per per share computation 342,377 54,928 344,693 Diluted net income per share share : Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per 19.82 Discont net income per share net income per share $ 20.57 $ 20.57 $ 20.57 72 per share $ 20.57 $ 20.57 $ 20.57 72 Table of $ 20.57 $ 20.57 $ 20.57 72 Table of Contents Alphabet 20.57 $ 20.57 $ 20.57 72 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2015 Class A Class Year Ended December 31 , 2015 Class A Class B Class Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings $ Alloca net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for earnings for basic computatio net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share net income per share $ 22.84 $ 22.84 $ 24.34 73 per share $ 22.84 $ 22.84 $ 24.34 73 Table of $ 22.84 $ 22.84 $ 24.34 73 Table of Contents Alphabet 22.84 $ 22.84 $ 24.34 73 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Numerator Allocation of undistributed e net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 Note per share $ 27.85 $ 27.85 $ 27.85 Note 12 . $ 27.85 $ 27.85 $ 27.85 Note 12 . Stockholders \u2019 $ 27.85 $ 27.85 Note 12 . Stockholders \u2019 Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of", + "assets": "Assets Current asset As of December 31 , 2016 Assets Current asset : Cash Cash and cash equivalent $ 16,549 $ 12,918 Marketable security 56,517 cash equivalent $ 16,549 $ 12,918 Marketable security 56,517 73,415 Total 16,549 $ 12,918 Marketable security 56,517 73,415 Total cash , cash $ 12,918 Marketable security 56,517 73,415 Total cash , cash equivalent including security loaned of $ 4,531 and $ 0 ) 73,066 of $ 4,531 and $ 0 ) 73,066 86,333 Accounts receivable 4,531 and $ 0 ) 73,066 86,333 Accounts Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 626 $ 2 $ 628 Total and non-current $ 626 $ 2 $ 628 Total $ 626 $ 626 $ 2 $ 628 Total $ 626 $ 2 2 $ 628 Total $ 626 $ 2 $ 628 Derivative 628 Total $ 626 $ 2 $ 628 Derivative Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 1 $ 13 $ 14 Interest and non-current $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 $ 14 Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 539 $ 57 $ 596 Total and non-current $ 539 $ 57 $ 596 Total $ 539 $ 539 $ 57 $ 596 Total $ 539 $ 57 57 $ 596 Total $ 539 $ 57 $ 596 Derivative 596 Total $ 539 $ 57 $ 596 Derivative Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Interest and non-current $ 4 $ 9 $ 13 Interest rate contract $ 4 $ 9 Assets As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 628 $ 0 $ 628 $ Exposed Derivatives $ 628 $ 0 $ 628 $ ( 13 $ 628 $ 0 $ 628 $ ( 13 ) ( 0 $ 628 $ ( 13 ) ( 1 ) $ $ ( 13 ) ( 1 ) $ ( 189 ) ( 1 ) $ ( 189 ) $ ( 214 ) ( 189 ) $ ( 214 ) $ 212 Reverse repurchase $ ( 214 ) $ 212 Reverse repurchase agreement 1,590 0 $ 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 Re Assets Exposed Derivatives $ 596 $ 0 $ 596 $ Exposed Derivatives $ 596 $ 0 $ 596 $ ( 11 $ 596 $ 0 $ 596 $ ( 11 ) ( 0 $ 596 $ ( 11 ) ( 1 ) $ $ ( 11 ) ( 1 ) $ ( 337 ) ( 1 ) $ ( 337 ) $ ( 73 ) ( 337 ) $ ( 73 ) $ 175 ( 1 $ ( 73 ) $ 175 ( 1 ) The balance 73 ) $ 175 ( 1 ) The balance a of The balance a of December 31 , 2015 and 2016 were a of December 31 , 2015 and 2016 were related to December 31 , 2015 and 2016 were related to derivative liability master netting agreement . ( 2 ) The balance a of The bala", + "liabilities": "Liabilities and Stockholders Total asset $ 147,461 $ 167,497 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 0 Accrued 1,931 $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit 3,539 0 Accrued compensation and benefit 3,539 3,976 Accrued expense and other Accrued compensation and benefit 3,539 3,976 Accrued expense and Liabilities . `` ASU 2016-01 amends various aspect of the for financial instrument . ASU 2016-01 is effective for annual reporting those year beginning after December 15 , 2017 . The most beginning after December 15 , 2017 . The most significant impact that the adoption of ASU 2016-01 will increase the volatility of equity investment . In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases `` . `` Leases `` . Topic 842 su Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 1 $ 13 $ 14 Interest and non-current $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 $ 14 Interest rate contract Accrued expense liability , current and non-current 2 0 2 Total $ 3 , current and non-current 2 0 2 Total $ 3 $ current and non-current 2 0 2 Total $ 3 $ 13 2 0 2 Total $ 3 $ 13 $ 16 57 2 Total $ 3 $ 13 $ 16 57 Table of $ 3 $ 13 $ 16 57 Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Interest and non-current $ 4 $ 9 $ 13 Interest rate contract $ 4 $ 9 $ 13 Interest rate contract Accrued expense liability , current and non-current 0 0 0 Total $ 4 , current and non-current 0 0 0 Total $ 4 $ current and non-current 0 0 0 Total $ 4 $ 9 0 0 0 Total $ 4 $ 9 $ 13 The 0 Total $ 4 $ 9 $ 13 The effect of $ 4 $ 9 $ 13 The e Liabilities As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 16 $ 0 $ 16 $ Liabilities Derivatives $ 16 $ 0 $ 16 $ ( 13 $ 16 $ 0 $ 16 $ ( 13 ) ( 0 $ 16 $ ( 13 ) ( 3 ) $ $ ( 13 ) ( 3 ) $ ( 3 ) ( 3 ) $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 $ 0 Securities lending agreement 3 ) $ 0 $ 0 Securities lending agreement 2,428 0 $ 0 Securities lending agreement 2,428 0 2,428 0 0 ( 0 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 Securiti Liabilities Derivatives $ 13 $ 0 $ 13 $ Liabilities Derivatives $ 13 $ 0 $ 13 $ ( 11 $ 13 $ 0 $ 13 $ ( 11 ) ( 0 $ 13 $ ( 11 ) ( 3 ) $ $ ( 11 ) ( 3 ) $ 0 $ 0 ) ( 3 ) $ 0 $ 0 $ 2 ( 3 ) $ 0 $ 0 $ 2 ( 3 ) $ 0 $ 0 $ 2 ( 3 ) The balance $ 0 $ 2 ( 3 ) The balance a of The balance a of December 31 , 2015 and 2016 were a of December 31 , 2015 and 2016 were related to December 31 , 2015 and 2016 were related to derivative asset master netting agreement . Note 3 . Non-Marketable Investments Our non-marketable model . Liabilities Goodwill 43 Total asset $ 3,697 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 1,238 Accrued compensation and benefit 163 1,238 Accrued compensation and benefit 163 Accrued expense and other current expense and other current liability 10 Deferred revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Note liability 250 Total liability $ 1,826 Note 10 . Commitments and Total ", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 37 Item 8 . Financial Statements About Market Risk 37 Item 8 . Financial Statements and Supplement EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public Select Market . Fiscal Year 2016 Quarters Ended : High Low Ended : High L equity liability 6,662 6,165 8,548 7,820 11,705 Total stockholder \u2019 equity 71,570 11,705 Total stockholder \u2019 equity 71,570 86,977 103,860 120,331 139,036 21 Total stockholder \u2019 equity 71,570 86,977 103,860 120,331 139,036 21 Table stockholder \u2019 equity 71,570 86,977 103,860 120,331 139,036 21 Table of \u2019 equity 71,570 86,977 103,860 120,331 139,036 21 Table of Contents equity 71,570 86,977 103,860 120,331 139,036 21 Table of Contents Alphabet 71,570 86,977 103,860 120,331 139,036 21 Table of Contents Al equity increased $ 1,500 million from 2015 to 2016 increased $ 1,500 million from 2015 to 2016 and $ 1,028 1,500 million from 2015 to 2016 and $ 1,028 million from 2015 to 2016 and $ 1,028 million from 2014 to 2015 and $ 1,028 million from 2014 to 2015 . These increase 1,028 million from 2014 to 2015 . These increase s were equity to be approximately $ 6.3 billion in 2017 and $ approximately $ 6.3 billion in 2017 and $ 8.3 billion thereafter billion in 2017 and $ 8.3 billion thereafter related to stoc Equity 45 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption \u201c Quarterly Results of Operations . \u201d 39 Table of Contents Alphabet Inc. Alphabet Inc. a of December 31 , 2015 and 2016 , a of December 31 , 2015 and 2016 , and the December 31 , Equity liability : Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 0 Accrued 1,931 $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit 3,539 0 Accrued compensation and benefit 3,539 3,976 Accrued expense and other Accrued compensation and benefit 3,539 3,976 Accrued expense and other current expense and other current liability 4,768 6,144 Accrued revenue share 2,3 equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 687, equity 2,402 ) Retained earnings 89,223 105,131 Total stockholder \u2019 equity 120,331 105,131 Total stockholder \u2019 equity 120,331 139,036 Total liability and stockholder Total stockholder \u2019 equity 120,331 139,036 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 147,461 $ 167,497 See accompanying note \u2019 equity $ 147,461 $ 167,497 See accompanying note . 42 167,497 See accompanying note . 42 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2014 2015 2016 Revenues Year Ended Decem equity investment . In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases `` . `` Leases `` . Topic 842 supersedes the lease recognition requirement in Accounting Standards Codification Topic 840 , `` Leases `` . Leases `` . Under Topic 842 , lessee are required to finance or operating . Topic 842 is effective for annual reporting those year beginning after December 15 , 2018 . Entities are beginning after December equity security 27 ( 48 ) 20,901 258 20,643 Marketable equity security 692 ( 48 ) 20,901 258 20,643 Marketable equity security 692 155 258 20,643 Marketable equity security 692 155 0 847 0 847 20,643 Marketable equity security 692 155 0 847 0 847 27,237 Marketable equity security 692 155 0 847 0 847 27,237 182 equity security 692 155 0 847 0 847 27,237 182 ( security 692 155 0 847 0 847 27,237 182 ( 48 692 155 0 847 0 847 27,237 182 ( 48 ) 155 0 847 0 847 27,237 182 ( 48 ) 27,371 0 847 0 847 27,237 18 equity security 46 ( 215 ) 38,285 613 37,672 Marketable equity security 160 ( 215 ) 38,285 613 37,672 Marketable equity security 160 133 613 37,672 Marketable equity security 160 133 0 293 0 293 37,672 Marketable equity security 160 133 0 293 0 293 43,397 Marketable equity security 160 133 0 293 0 293 43,397 179 equity security 160 133 0 293 0 293 43,397 179 ( security 160 133 0 293 0 293 43,397 179 ( 215 160 133 0 293 0 293 43,397 179 ( 215 ) 133 0 293 0 293 43,397 179 ( 215 ) 43,361 0 293 0 293 43,3 equity interest of $ 0 million . In aggregate , . In aggregate , $ 4 million wa cash acquired , wa cash acquired , $ 88 million wa attributed to intangible to intangible asset , $ 138 million wa attributed to goodwill to goodwill , and $ 33 million wa attributed to net tax purpose is approximately $ 20 million . Pro forma result during the year ended December 31 , 2015 , patent and year ended December 31 , 2015 , patent and developed technology a weighted-average useful life of 4.1 year , customer rel Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , there were December 31 , 2015 and 2016 , there were no share common stock is entitled to 10 vote per share . Class . Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . Options and RSUs granted to participant under the 2012 Stock Plan genera Equity 45 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 2 . Financial Statement Schedules to Consolidated Financial Statements 47 2 . Financial Statement Schedules Schedule the three year ended December 31 , 2016 ( in million year ended December 31 , 2016 ( in million ) : million ) Year ended December 31 , 2014 $ 631 $ Year ended December 31 , 2014 $ 631 $ 1,240 $ December 31 , 201 Equity 2010 10.11 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.11.1 u Apigee 333-214573 ) November 10 , 2016 10.11.1 u Apigee Corporation 2015 ) November 10 , 2016 10.11.1 u Apigee Corporation 2015 Equity 2016 10.11.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.12 u Apigee 333-214573 ) Novemb", + "cash_flow": "cash flow Operating cash flow wa $ 36.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 10.2 billion . \u2022 Headcount increased . \u2022 Headcount increased to 72,053 a of December 31 , to 72,053 a of December 31 , 2016 . Information about a of December 31 , 2016 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Prior current period segment presentation . 23 Table of Contents Alphabet Inc. ) : Year Ended D cash flow from operation for 2016 compared to 2015 . Net operation for 2016 compared to 2015 . Net cash provided by by operating activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to increased net in investing activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in in investing activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to net cash flow . See Note 10 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency additional information regarding contingency . 36 Table of Contents Alphabet Inc. more fully discussed in Note 6 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated we also consider whether ( Cash flow hedge : unrealized gain ( loss ) 651 676 515 Less : reclassification gain ( loss ) 651 676 515 Less : reclassification adjustment ( loss ) 651 676 515 Less : reclassification adjustment for included in net income ( 124 ) ( 1,003 ) ( income ( 124 ) ( 1,003 ) ( 351 ) Net ) ( 1,003 ) ( 351 ) Net change ( net of tax effect of $ 196 , $ 115 , and of $ 196 , $ 115 , and $ 64 ) $ 115 , and $ 64 ) 527 ( 327 ) , and $ 64 ) 527 ( 327 ) 164 Other $ 64 ) 527 ( 327 ) 164 Other comprehensive ( ) 527 ( 327 ) cash flow , net of refund $ 3,138 $ 3,651 $ 1,643 Cash of refund $ 3,138 $ 3,651 $ 1,643 Cash paid for $ 3,138 $ 3,651 $ 1,643 Cash paid for interest 86 1,643 Cash paid for interest 86 96 84 See accompanying note Cash paid for interest 86 96 84 See accompanying note . paid for interest 86 96 84 See accompanying note . 46 84 See accompanying note . 46 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-in Cash Flow Hedges these contract wa approximately $ 16.4 billion and $ 10.7 billion $ 16.4 billion and $ 10.7 billion a of December 31 10.7 billion a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . These contract December 31 , 2015 and 2016 . These contract have maturity These contract have maturity of 36 month or le . We expense ) , net . 56 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2016 , the effective As of December 31 , 2016 , the effective portion of net ac Cash Flow in Cash Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract Cash Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract $ Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract $ 929 2016 Foreign exchange contract $ 929 $ 964 $ 773 Interest exchange contract $ 929 $ 964 $ 773 Interest rate contract $ 929 $ 964 $ 773 Interest rate contract ( 31 773 Interest rate contract ( 31 ) 0 0 Total $ rate contract ( 31 ) 0 0 Total $ 898 $ contract ( 31 ) 0 0 Total $ 8 Cash Flow Cash Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Revenues Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Revenues $ Foreign exchange contract Revenues $ 171 $ 1,399 $ 539 Interest contract Revenues $ 171 $ 1,399 $ 539 Interest rate contract $ 171 $ 1,399 $ 539 Interest rate contract Other income ( expense ) , net 4 5 5 Total $ 175 expense ) , net 4 5 5 Total $ 175 Cash Flow Cash Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Other Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Other income ) , net $ ( 279 ) $ ( 297 ) ( 279 ) $ ( 297 ) $ ( 381 ) ( 297 ) $ ( 381 ) Interest rate contract Other ( expense ) , net 4 0 0 Total $ ( expense ) , net 4 0 0 Total $ ( 275 ) , net 4 0 0 Total $ ( 275 ) 0 0 Total $ ( 275 ) $ ( 297 ) ( 275 ) $ ( 297 ) $", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 40,146 47,527 Less : accumulated depreciation and accumulated depreciation and amortization ( 11,130 ) ( 13,293 ) Property amortization ( 11,130 ) ( 13,293 ) Property and equipment , and equipment , net $ 29,016 $ 34,234 As of December , net $ 29,016 $ 34,234 As of December 31 , $ 34,234 As of December 31 , 2016 , asset under As of December 31 , 2016 , asset under capital lease a cost basis of $ 299 million were included in property Motorola Mobile business on October 29 ,", + "capital_expenditure": "Capital expenditure \u2022 Capital expenditure were $ 10.2 billion . \u2022 Headcount increased . \u2022 Headcount increased to 72,053 a of December 31 , to 72,053 a of December 31 , 2016 . Information about a of December 31 , 2016 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Prior current period segment presentation . 23 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 20 Capital expenditure : Ended December 31 , 2014 2015 2016 Capital expenditure : Google December 31 , 2014 2015 2016 Capital expenditure : Google $ Capital expenditure : Google $ 11,178 $ 8,868 $ 9,417 Other : Google $ 11,178 $ 8,868 $ 9,417 Other Bets 496 $ 11,178 $ 8,868 $ 9,417 Other Bets 496 850 1,385 8,868 $ 9,417 Other Bets 496 850 1,385 Reconciling item ( $ 9,417 Other Bets 496 850 1,385 Reconciling item ( 2 9,417 Other Bets 496 850 1,385 Reconciling item ( 2 ) 850 1,385 Reconciling item ( 2 ) ( 660 ) 232 ite capital expenditure a Statements of Cash Flows $ 11,014 $ 9,950 $ 10,212 ( Cash Flows $ 11,014 $ 9,950 $ 10,212 ( 2 ) $ 11,014 $ 9,950 $ 10,212 ( 2 ) Reconciling item $ 9,950 $ 10,212 ( 2 ) Reconciling item are related For the year ended December 31 , 2014 , reconciling item year ended December 31 , 2014 , reconciling item included capital expenditure of Motorola Mobile . 80 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Stock-based Year Ended December 31 , 2014 2015 2016 Stock-based c", + "debt": "debt ( 2 ) 2,494 1,907 274 99 214 Long-term debt obligation 2 ) 2,494 1,907 274 99 214 Long-term debt obligation ( ) 2,494 1,907 274 99 214 Long-term debt obligation ( 3 214 Long-term debt obligation ( 3 ) 4,816 110 220 1,202 debt obligation ( 3 ) 4,816 110 220 1,202 3,284 Other obligation ( 3 ) 4,816 110 220 1,202 3,284 Other long-term ( 3 ) 4,816 110 220 1,202 3,284 Other long-term liability 3 ) 4,816 110 220 1,202 3,284 Other long-term liability reflected ) 4,816 110 220 1,202 3,284 Other long-te debt 3,225 Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 0 Accrued 1,931 $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit 3,539 0 Accrued compensation and benefit 3,539 3,976 Accrued expense and other Accrued compensation and benefit 3,539 3,976 Accrued expense and other current expense and other current liability 4,768 6,144 Accrued revenue share 2,329 and other current liability 4,768 6,144 Accrued revenue sh debt 1,995 3,935 554 Total current liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 151 3,935 Deferred revenue , non-current 151 202 Income tax payable , Deferred revenue , non-current 151 202 Income tax payable , non-current Income tax payable , non-current 3,663 4,677 Deferred income tax 189 tax payable , non-current 3,663 4,677 Deferr debt , net of cost 11,625 13,705 8,729 Repayments of debt , net of cost 11,625 13,705 8,729 Repayments of debt ( net of cost 11,625 13,705 8,729 Repayments of debt ( 11,643 8,729 Repayments of debt ( 11,643 ) ( 13,728 ) ( debt ( 11,643 ) ( 13,728 ) ( 10,064 ) Net ) ( 13,728 ) ( 10,064 ) Net cash used in used in financing activity ( 2,087 ) ( 4,225 ) ( activity ( 2,087 ) ( 4,225 ) ( 8,332 ) Effect ) ( 4,225 ) ( 8,332 ) Effect of exchange rate cash and cash equivalent ( 433 ) ( 434 ) ( equivalent ( 43 debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13, debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Agency 12,993 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 26 2 12,98 debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Agency mortgage-backed ( 5 ) 6,350 ( 116 ) Agency mortgage-backed security 10,184 116 ) Agency mortgage-backed security 10,184 ( 206 ) 259 ( Agency mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $ debt are categorized accordingly a Level 3 in the fair value hierarchy for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . The 2014 , 2015 , and 2016 . The following table present significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 2015 2016 Beginning balance $ : Year Ended December 31 2015 2016 Beginning balance $ 90 Year Ended December 31 2015 2016 Beginning balance $ 90 $ 2015 2016 B Debt Short-Term $ 1,024 $ 1,165 Note 4 . Debt Short-Term Debt Google program of up to $ 3.0 billion through the issuance of commercial paper and a $ 3.0 billion revolving credit facility a credit facility a of December 31 , 2015 . In February a of December 31 , 2015 . In February 2016 , , 2015 . In February 2016 , we replaced this program program of up to $ 5.0 billion of commercial paper and commercial paper and a $ 4.0 billion revolving credit facility , , which expires in February 2021 . Net proc Debt Google Long-Term Debt Google issued $ 3.0 billion of unsecured senior note ( collectively , the `` 2011 Notes `` ) in May Notes `` ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 , a 2014 , 2016 , and 2021 , a well a $ , a well a $ 1.0 billion of unsecured senior note senior note ( the `` 2014 Notes `` ) in February Notes `` ) in February 2014 due 2024 . In April ) in February 2014 due 2024 . In April 2016 , due 2024 . In April 2016 , we co Debt Short-Term Portion of Long-Term Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 1,000 $ due on May 19 , 2016 $ 1,000 $ 0 Capital May 19 , 2016 $ 1,000 $ 0 Capital Lease Obligation , 2016 $ 1,000 $ 0 Capital Lease Obligation 225 0 $ 0 Capital Lease Obligation 225 0 Total Short-Term Portion of 0 Capital Lease Obligation 225 0 Total Short-Term Portion of Long-Term Portion of Long-Term Debt $ 1,225 $ 0 Long-Term Debt 3.625 Long-Term Debt $ 1,225 $ 0 Long-Term Debt 3.625 % Notes 1,225 $ Debt 3.625 % Notes due on May % Notes due on May 19 , 2021 $ 1,000 $ due on May 19 , 2021 $ 1,000 $ 1,000 3.375 May 19 , 2021 $ 1,000 $ 1,000 3.375 % Notes , 2021 $ 1,000 $ 1,000 3.375 % Notes due on 2021 $ 1,000 $ 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 1.998 due on February 25 , 2024 1,000 1,000 1.998 % Notes on February 25 , 2024 1,000 1,000 1.998 % Notes due February 25 , 2024 1,000 1,000 1.998 % Notes due on 25 , 2024 1,000 1,000 1.998 % Notes due on Au Debt ( ) Total Long-Term Debt ( 1 ) $ 1,995 $ 3,935 Debt ( 1 ) $ 1,995 $ 3,935 ( 1 ) 1 ) $ 1,995 $ 3,935 ( 1 ) Includes the $ 1,995 $ 3,935 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 and 2026 were note due in 2021 , 2024 and 2026 were 3.734 % in 2021 , 2024 and 2026 were 3.734 % , 3.377 ,", + "tax_rate": "tax rate wa 19 % . \u2022 Net income \u2022 Net income wa $ 19.5 billion with diluted net income income per share of $ 27.85 . \u2022 Operating cash flow Operating cash flow wa $ 36.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 10.2 billion . \u2022 Headcount increased . \u2022 Headcount increased to 72,053 a of December 31 , to 72,053 a of December 31 , 2016 . Information about a of December 31 , 2016 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on F tax rate $ 3,639 $ 3,303 $ 4,672 Effective tax rate 21.1 % $ 4,672 Effective tax rate 21.1 % 16.8 % 19.3 % Effective tax rate 21.1 % 16.8 % 19.3 % Our provision rate 21.1 % 16.8 % 19.3 % Our provision for income effective tax rate increased from 2015 to 2016 , largely due rate increased from 2015 to 2016 , largely due to proportionately rate and discrete item in 2015 and 2016 , partially offset discrete item in 2015 and 2016 , partially offset by the Accounting Standards Update No . 2016-09 ( ASU 2016-0 tax rate decreased from 2014 to 2015 , largely due rate decreased from 2014 to 2015 , largely due to a a discrete benefit recognized in 2015 a a result of the related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2016 . This table quarter ended December 31 , 2016 . This table includes all rate . Quarter Ended Mar 31 , 2015 Jun 30 , Quarter Ended Mar 31 , 2015 Jun 30 , 2015 Sep Mar 31 , 2015 Jun 30 , tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 35.0 % statutory tax rate 35.0 % 35.0 % 35.0 % Foreign rate rate 35.0 % 35.0 % 35.0 % Foreign rate differential ( % Foreign rate differential ( 12.2 ) % ( 13.4 ) ( 12.2 ) % ( 13.4 ) % ( 11.0 ) ( 13.4 ) % ( 11.0 ) % Federal research credit % Federal research credit ( 1.8 ) % ( 2.1 ) ( 1.8 ) % ( 2.1 ) % ( 2.0 ) ( 2.1 ) % ( 2.0 ) % Stock-based compensation expense ) % Stock-based compensation expense 0.1 % 0.3 % ( 3.4 Stock-based compensation expense 0 tax rate 21.1 0.7 % Effective tax rate 21.1 % 16.8 % 19.3 % Effective tax rate 21.1 % 16.8 % 19.3 % We adopted rate 21.1 % 16.8 % 19.3 % We adopted ASU 2016-09 19.3 % We adopted ASU 2016-09 on January 1 , 2016 adopted ASU 2016-09 on January 1 , 2016 , which requires 2016-09 on January 1 , 2016 , which requires the excess excess tax benefit recognized in 2016 wa $ 1.0 billion . recognized in 2016 wa $ 1.0 billion . Our effective tax subsidiary . As of December 31 , 2016 , we have As of December 31 , 2016", + "segment_revenue": "segment revenue of $ 89.5 billion with revenue growth of billion with revenue growth of 20 % year over year and Other Bets revenue of $ 0.8 billion with revenue growth of billion with revenue growth of 82 % year over year . of the world were $ 42.8 billion , $ 7.8 billion $ 42.8 billion , $ 7.8 billion , and $ 39.7 7.8 billion , and $ 39.7 billion , respectively . \u2022 Cost of revenue wa $ 35.1 billion , consisting of traffic traffic acquisition cost of $ 16.8 billion and other cost of cost of revenue of $ 18.3 b segment revenue 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidat segment revenue Ended December 31 , 2014 2015 2016 Google segment revenue $ December 31 , 2014 2015 2016 Google segment revenue $ 65,674 2016 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue a a a percentage of consolidated revenue 99.5 % 99.4 % 99.1 % of consolidated revenue 99.5 % 99.4 % 99.1 % Aggregate paid revenue 99.5 % 99.4 % 99.1 % Aggregate paid click change % Aggregate paid clic segment revenue 68.6 % 70.2 % 71.3 % Google segment revenue 68.6 % 70.2 % 71.3 % Paid click revenue 68.6 % 70.2 % 71.3 % Paid click change 33 71.3 % Paid click change 33 % 40 % Cost-per-click change Paid click change 33 % 40 % Cost-per-click change ( 15 40 % Cost-per-click change ( 15 ) % ( 13 ) ( 15 ) % ( 13 ) % Google property revenue Google property revenue increased $ 11,428 million from 2015 to 2016 increased $ 11,428 million from 2015 to 2016 and also increased 11,428 million from 2015 to 2016 and also i segment revenue 22.1 % 20.2 % 17.4 % Google segment revenue 22.1 % 20.2 % 17.4 % Paid click revenue 22.1 % 20.2 % 17.4 % Paid click change ( % Paid click change ( 7 ) % 3 % Cost-per-click change ( 7 ) % 3 % Cost-per-click change ( 3 3 % Cost-per-click change ( 3 ) % ( 13 ) ( 3 ) % ( 13 ) % Google Network Members ' property revenue increased $ 565 million from 2015 to 2016 increased $ 565 million from 2015 to 2016 . The growth 565 million from 2015 to 2016 . The growth wa primarily increase in paid click from 2 segment revenue 9.3 % 9.6 % 11.3 % Google segment revenue 9.3 % 9.6 % 11.3 % Google other revenue 9.3 % 9.6 % 11.3 % Google other revenue consist our Google Cloud offering . 26 Table of Contents Alphabet Inc. Google other revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million from 2015 to 2016 and increased a 2,926 million from 2015 to 2016 and increased a a percentage Google other revenue increased $ 1,104 million from 2014 to 2015 increased $ 1,104 million from 2014 to 2015 and increas segment revenue 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidat", + "common_stock": "Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 193 common stock outstanding , 47,369,687 share of the registrant \u2019 common stock outstanding , and 346,933,134 share of the registrant \u2019 s Proxy Statement for the 2017 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2016 . Table of year ended December 31 , 2016 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock ranged from $ 681.14 per share to $ 835.74 681.14 per share to $ 835.74 per share , and the capital stock ranged from $ 668.26 to $ 813.11 per share from $ 668.26 to $ 813.11 per share . In addition this Annual Report on Form 10-K , the trading price of change in earnings estimate . 16 Table of Contents Alphabet Inc. cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital Class B common stock ha 10 vote per share , our right . As of D common stock \u201c GOOG \u201d since April 3 , 2014 . The following \u201d since April 3 , 2014 . The following table set Select Market . Fiscal Year 2016 Quarters Ended : High Low Ended : High Low March 31 , 2016 $ 764.65 $ High Low March 31 , 2016 $ 764.65 $ 678.11 June March 31 , 2016 $ 764.65 $ 678.11 June 30 , , 2016 $ 764.65 $ 678.11 June 30 , 2016 766.61 $ 764.65 $ 678.11 June 30 , 2016 766.61 668.26 September $ 678.11 June 30 , 2016 766.61 668.26 September 30 , 678.11 June 30 , 2016 766.61 668.26 September 30 , 2 common stock . 19 Table of Contents Alphabet Inc. The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2011 and it relative index on December 31 , 2011 and it relative performance is performance is tracked through December 31 , 2016 . The return tracked through December 31 , 2016 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL common stock $ 16.22 $ 19.13 $ 20.91 $ common stock $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income ( loss stock : Continuing operation $ 17.47 $ 19.77 $ 20.15 $ Continuing operation $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued operation ( $ 20.15 $ 24.63 $ 28.32 Discontinued operation ( 1.25 ) $ 28.32 common stock $ 15.98 $ 18.79 $ 20.57 $ common stock $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ 27.85 Discontinued $ 19.42 $ 19.82 $ 24.34 $ 27.85 Discontinued operation ( $ 19.82 $ 24.34 $ 27.85 Discontinued operation ( 1.23 ) $ common stock $ 5.16 $ 4.99 $ 5.80 $ common stock $ 5.16 $ 4.99 $ 5.80 $ 7.16 $ $ 5.16 $ 4.99 $ 5.80 $ 7.16 $ 6.12 $ $ 4.99 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ 7.73 Basic $ 6.12 $ 7.11 $ 7.36 $ 7.73 Basic net income $ 7.11 $ 7.36 $ 7.73 Basic net income per share Class C capital stock $ 5.16 $ 6.51 $ 5.80 $ capital stock $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7. common stock $ 5.10 $ 4.93 $ 5.73 $ common stock $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ 7.56 Diluted $ 6.02 $ 7.00 $ 7.25 $ 7.56 Diluted net income $ 7.00 $ 7.25 $ 7.56 Diluted net income per share Class C capital stock $ 5.10 $ 6.43 $ 5.73 $ capital stock $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.0 common stock $ 20.91 $ 23.11 $ 28.32 Basic common stock $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 0.00 0.00 24.63 $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per 28.32 Discontinued operatio common stock $ 20.57 $ 22.84 $ 27.85 Diluted common stock $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 0.00 0.00 24.34 $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinue common stock is entitled to 10 vote per share . Class . Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . Options and RSUs granted to participant under the 2012 Stock Plan generally vest over date . As of December 31 , 2016 , there were As of December 31 , 2016 , there were 26,206,647 share , 2016 , there were 26,206,647 share of stock reserved for under our Stock Plan . 74 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Cost Year Ended December 31 , Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , capital stock ranged from $ 668.26 to $ 813.11 per share from $ 668.26 to $ 813.11 per share . In addition this Annual Report on Form 10-K , the trading price of change in earnings estimate . 16 Table of Contents Alphabet Inc. cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital Class B common stock ha 10 vote per share , our right . As of December 31 , 2016 , Larry , As of December 31 , 2016 , Larry , Sergey , and Eric beneficially owned approx capital stock were $ 792.45 and $ 771.82 per share were $ 792.45 and $ 771.82 per share , respectively , holder . As of December 31 , 2016 , there were As of December 31 , 2016 , there were approximately 67 2016 , there were approximately 67 stockholder of record of our Class B common stock . 19 Table of Contents Alphabet Inc. The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each inde capital stock $ 16.22 $ 19.13 $ 20.91 $ capital stock $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ 27.85 Discontinued $ 19.42 $ 19.82 $ 22.84 $ 27.85 Discontinued operation ( $ 19.82 $ 22.84 $ 27.85 Discontinued operation ( 1.23 ) capital stock $ 15.98 $ 18.79 $ 20.57 $ capital stock $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ 27.85 As $ 18.79 $ 20.57 $ 24.34 $ 27.85 As of December $ 20.57 $ 24.34 $ 27.85 As of December 31 , $ 27.85 As of December 31 , 2012 2013 2014 2015 As of December 31 , 2012 2013 2014 2015 2016 ( of December 31 , 2012 2013 2014 2015 2016 ( in December 31 , 2012 2013 2014 2015 2016 ( in million 31 , 2012 2013 2014 2015 2016 ( in million ) , 2012 2013 2014 2015 2016 ( in million ) Consolidat capital stock $ 5.16 $ 6.51 $ 5.80 $ capital stock $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted net income $ 7.11 $ 7.36 $ 7.73 Diluted net income per share and B common stock $ 5.10 $ 4.93 $ 5.73 $ common stock $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ capital stock $ 5.10 $ 6.43 $ 5.73 $ capital stock $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 Table of $ 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet Inc. and Liquidity As of December 31 , 2016 , we had As of December 31 , 2016 , we had $ 86.3 2016 , we had $ 86.3 billion of cash , cash publi capital stock $ 20.91 $ 24.63 $ 28.32 Diluted capital stock $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 0.00 0.00 22.84 $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinu capital stock $ 20.57 $ 24.34 $ 27.85 See capital stock $ 20.57 $ 24.34 $ 27.85 See accompanying note $ 20.57 $ 24.34 $ 27.85 See accompanying note . 43 27.85 See accompanying note . 43 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2014 2015 2016 Net Year Ended December 31 , 2014 2015 2016 Net income $ Ended December 31 , 2014 2015 2016 Net income $ 14,136 December 31 , 2014 2015 2016 Net income $ 14,136 $ 2015 2016 Net income $ 14,136 $ 16,348 $ 19,478 Other Net income $ 14,136 $ 16,348 capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensat capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 0 0 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 664 Stock-b capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 6,700 issued 9,106 298 0 0 298 Stock-based compensation expense 6,700 0 0 298 Stock-based compensation expense 6,700 0 0 6,700 Tax withholding 298 Stock-based compensation expense 6,700 0 0 6,700 Tax withholding related Stock- capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive loss ) Net income 0 0 19,478 19,478 Other comprehensive loss 0 Net income 0 0 19,478 19,478 Other comprehensive loss 0 ( 19,478 19,478 Other comprehensive loss 0 ( 528 ) 0 ( Other comprehensi capital stock 0 0 Repurchases of capital stock 0 ( 1,780 ) ( 3,693 of capital stock 0 ( 1,780 ) ( 3,693 ) Proceeds 0 ( 1,780 ) ( 3,693 ) Proceeds from issuance of debt , net of cost 11,625 13,705 8,729 Repayments of debt , net of cost 11,625 13,705 8,729 Repayments of debt ( net of cost 11,625 13,705 8,729 Repayments of debt ( 11,643 8,729 Repayments of debt ( 11,643 ) ( 13,728 ) ( debt ( 11,643 ) ( 13,728 ) ( 10,064 ) Net ) ( 13,728 ) ( 10,064 ) Net cash used in used in financing activity ( 2,087 ) ( 4,225 Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "corporate_debt": "Corporate debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13, Corporate debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Agency 12,993 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 26 2 12,98 Corporate debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 Corporate debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Agency mortgage-backed ( 5 ) 6,350 ( 116 ) Agency mortgage-backed security 10,184 116 ) Agency mortgage-backed security 10,184 ( 206 ) 259 ( Agency mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 Corporate debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $", + "cash_flow_hedges": "Cash Flow Hedges these contract wa approximately $ 16.4 billion and $ 10.7 billion $ 16.4 billion and $ 10.7 billion a of December 31 10.7 billion a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . These contract December 31 , 2015 and 2016 . These contract have maturity These contract have maturity of 36 month or le . We expense ) , net . 56 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2016 , the effective As of December 31 , 2016 , the effective portion of net accumulat" +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-18-000007/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-18-000007/full-submission_features.json new file mode 100644 index 0000000..e7c18f4 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-18-000007/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue from total revenue from advertising in 2017 . Many of our advertiser revenue and advertising business . 7 Table of Contents Alphabet Inc. a a holding company in 2015 and the investment that we through paid access point . 8 Table of Contents Alphabet Inc. European Union in May of 2018 , which creates a range the European Union on May 13 , 2014 on the \u2018 Union on May 13 , 2014 on the \u2018 right to decision against Google in June 2017 , and others could treat collect information from minor . 9 Table o revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2017 . In certain international market and result of operation . 15 Table of Contents Alphabet Inc. impact our future success . 16 Table of Contents Alphabet Inc. which wa enacted on December 22 , 2017 . The Tax enacted on December 22 , 2017 . The Tax Act introduces for the year ended December 31 , 2017 . The U.S. year ended December 31 , 2017 . The U.S. Treasury Department or otherwise administered that revenue could be volatile . 26 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2017 ( consolidated unless year ended December 31 , 2017 ( consolidated unless otherwise noted : \u2022 Revenues of $ 110.9 billion and revenue growth of billion and revenue growth of 23 % year over year , constant currency revenue growth of 24 % year over year . Google segment revenue of $ 109.7 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 1.2 b revenue growth of billion with revenue growth of 49 % year over year . and Other Americas were $ 52.4 billion , $ 36.0 billion $ 52.4 billion , $ 36.0 billion , $ 16.2 billion $ 36.0 billion , $ 16.2 billion , and $ 6.1 16.2 billion , and $ 6.1 billion , respectively . \u2022 Cost of revenue wa $ 45.6 billion , consisting of TAC consisting of TAC of $ 21.7 billion and other cost of cost of revenue of $ 23.9 billion . Our TAC a percentage of advertising revenue wa 23 % . \u2022 Operating expense of revenue ) were revenue segment Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google Network Members $ 52,357 $ 63,785 $ 77,788 Google Network Members ' property Network Members ' property revenue 15,033 15,598 17,587 Google advertising revenue Members ' property revenue 15,033 15,598 17,587 Google advertising revenue 67,390 ' property revenue 15,033 15,598 17,587 Google advertising revenue 67,390 79,383 15,598 17,587 Google advertising revenue 67,390 79,383 95,3 revenue 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 10,080 79,383 95,375 Google other revenue 7,154 10,080 14,277 Google segment revenue 95,375 Google other revenue 7,154 10,080 14,277 Google segment revenue $ Google other revenue 7,154 10,080 14,277 Google segment revenue $ 74,544 14,277 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Other segment revenue $ 74,544 $ 89,463 $ 109,652 Oth revenue Bets Other Bets revenue $ 445 $ 809 $ 1,203 Revenues Bets revenue $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 90,272 809 $ 1,203 Revenues $ 74,989 $ 90,272 $ 110,855 Google 1,203 Revenues $ 74,989 $ 90,272 $ 110,855 Google segment The $ 74,989 $ 90,272 $ 110,855 Google segment The following table ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google segment revenue Ended December 31 , 2015 2016 2017 Google segment rev revenue $ 74,544 2017 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue a a a percentage of total revenue 99.4 % 99.1 % 98.9 % of total revenue 99.4 % 99.1 % 98.9 % Aggregate paid revenue 99.4 % 99.1 % 98.9 % Aggregate paid click change % Aggregate paid click change 34 % 46 % Aggregate cost-per-click paid click change 34 % 46 % Aggregate cost-per-click change ( % Aggregate cost- revenue foreign currency exchange rate . 29 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google property revenue Ended December 31 , 2015 2016 2017 Google property revenue $ December 31 , 2015 2016 2017 Google property revenue $ 52,357 2017 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue a a percent revenue 70.2 % 71.3 % 70.9 % Google segment revenue 70.2 % 71.3 % 70.9 % Paid click revenue 70.2 % 71.3 % 70.9 % Paid click change 43 70.9 % Paid click change 43 % 54 % Cost-per-click change Paid click change 43 % 54 % Cost-per-click change ( 13 54 % Cost-per-click change ( 13 ) % ( 21 ) ( 13 ) % ( 21 ) % Google property revenue Google property revenue increased $ 14,003 million from 2016 to 2017 increased $ 14,003 million from 2016 to 2017 . The growth 14,003 million from 2016 to 2017 . The growth wa revenue increased $ 11,428 million from 2015 to 2016 increased $ 11,428 million from 2015 to 2016 and also increased 11,428 million from 2015 to 2016 and also increased a a format and delivery launched during 2016 . We also experienced growth on Google property increased from 2015 to 2016 due to growth property increased from 2015 to 2016 due to growth in the ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google Network Members Ended December 31 , 2015 2016 2 revenue $ 15,033 $ 15,598 $ 17,587 Google property revenue $ 15,033 $ 15,598 $ 17,587 Google Network Members $ 15,033 $ 15,598 $ 17,587 Google Network Members ' property percentage of Google segment revenue 20.2 % 17.4 % 16.0 % Google segment revenue 20.2 % 17.4 % 16.0 % Paid click revenue 20.2 % 17.4 % 16.0 % Paid click change 3 16.0 % Paid click change 3 % 10 % Cost-per-click change Paid click change 3 % 10 % Cost-per-click change ( 13 10 % Cost-per-click change ( 13 ) % ( 9 ) ( 13 ) % ( 9 ) % 30 Tab revenue increased $ 1,989 million from 2016 to 2017 increased $ 1,989 million from 2016 to 2017 . The growth 1,989 million from 2016 to 2017 . The growth wa primarily increase in paid click from 2016 to 2017 resulted primarily from paid click from 2016 to 2017 resulted primarily from growth in The change in cost-per-click from 2016 to 2017 wa impacted by in cost-per-click from 2016 to 2017 wa impacted by change in ' property revenue increased $ 565 million from 2015 to 2016 increased $ 565 million from revenue Ended December 31 , 2015 2016 2017 Google other revenue $ December 31 , 2015 2016 2017 Google other revenue $ 7,154 2017 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue a a percentage of Google segment revenue 9.6 % 11.3 % 13.0 % Google segment revenue 9.6 % 11.3 % 13.0 % Google other revenue 9.6 % 11.3 % 13.0 % Google other revenue consist Google other revenue increased $ 4,197 mil revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million from 2015 to 2016 and increased a 2,926 million from 2015 to 2016 and increased a a percentage ) : Year Ended December 31 , 2015 2016 2017 Other Year Ended December 31 , 2015 2016 2017 Other Bets revenue Ended December 31 , 2015 2016 2017 Other Bets revenue $ December 31 , 2015 2016 2017 Other Bets revenue $ 445 2017 Other Bets revenue $ 445 $ 809 $ 1,203 Other Bets revenue $ 445 $ 809 $ 1,203 Other Bets revenue $ 445 $ 809 $ revenue a a a percentage of total revenue 0.6 % 0.9 % 1.1 % of total revenue 0.6 % 0.9 % 1.1 % Other Bets revenue 0.6 % 0.9 % 1.1 % Other Bets revenue consist \u2022 Nest branded hardware . 31 Table of Contents Alphabet Inc. Other Bets revenue increased $ 394 million from 2016 to 2017 increased $ 394 million from 2016 to 2017 . The increase 394 million from 2016 to 2017 . The increase wa primarily Other Bets revenue increased $ 364 million from 2015 to 2016 increased $ 364 million from 2015 to 2016 and incr revenue $ Ended December 31 , 2015 2016 2017 EMEA revenue $ 26,368 December 31 , 2015 2016 2017 EMEA revenue $ 26,368 $ 2016 2017 EMEA revenue $ 26,368 $ 30,304 $ 36,046 Exclude EMEA revenue $ 26,368 $ 30,304 $ 36,046 Exclude foreign exchange $ 26,368 $ 30,304 $ 36,046 Exclude foreign exchange impact on revenue using prior year rate 3,802 1,291 ( 5 ) Exclude using prior year rate 3,802 1,291 ( 5 ) Exclude hedging year rate 3,802 1,291 ( 5 ) Exclude hedging impact recognized recognized in current period revenue $ EMEA constant currency revenue $ 29,181 $ 31,116 $ 36,231 Prior currency revenue $ 29,181 $ 31,116 $ 36,231 Prior period EMEA $ 29,181 $ 31,116 $ 36,231 Prior period EMEA revenue , , excluding hedging impact $ 24,497 $ 25,379 $ 29,825 EMEA hedging impact $ 24,497 $ 25,379 $ 29,825 EMEA revenue growth $ 24,497 $ 25,379 $ 29,825 EMEA revenue growth 15 % $ 29,825 EMEA revenue growth 15 % 19 % EMEA constant EMEA revenue growth 15 % 19 % EMEA constant currency revenue EMEA constant currency revenu revenue currency revenue growth 23 % 21 % APAC revenue $ 9,887 21 % APAC revenue $ 9,887 $ 12,559 $ 16,235 Exclude APAC revenue $ 9,887 $ 12,559 $ 16,235 Exclude foreign exchange $ 9,887 $ 12,559 $ 16,235 Exclude foreign exchange impact on revenue using prior year rate 1,076 ( 362 ) 26 Exclude prior year rate 1,076 ( 362 ) 26 Exclude hedging impact rate 1,076 ( 362 ) 26 Exclude hedging impact recognized in recognized in current period ( 323 ) ( 31 ) ( period ( 323 ) ( 31 ) ( 43 ) APAC ) ( 31 ) ( 43 ) A revenue APAC constant currency revenue $ 10,640 $ 12,166 $ 16,218 Prior currency revenue $ 10,640 $ 12,166 $ 16,218 Prior period APAC $ 10,640 $ 12,166 $ 16,218 Prior period APAC revenue , , excluding hedging impact $ 8,169 $ 9,564 $ 12,528 APAC hedging impact $ 8,169 $ 9,564 $ 12,528 APAC revenue growth $ 8,169 $ 9,564 $ 12,528 APAC revenue growth 27 % $ 12,528 APAC revenue growth 27 % 29 % APAC constant APAC revenue growth 27 % 29 % APAC constant currency revenue APAC constant currency revenue growth revenue growth 27 % 29 % Other Americas revenue $ % Other Americas revenue $ 3,924 $ 4,628 $ 6,125 Exclude Americas revenue $ 3,924 $ 4,628 $ 6,125 Exclude foreign exchange $ 3,924 $ 4,628 $ 6,125 Exclude foreign exchange impact on revenue using prior year rate 712 344 ( 148 ) Exclude using prior year rate 712 344 ( 148 ) Exclude hedging year rate 712 344 ( 148 ) Exclude hedging impact recognized recognized in current period ( 88 ) ( 29 ) 22 period ( 88 ) ( 29 ) 22 Other Americas constant 88 ) ( 29 ) 2 revenue Americas constant currency revenue $ 4,548 $ 4,943 $ 5,999 Prior currency revenue $ 4,548 $ 4,943 $ 5,999 Prior period Other $ 4,548 $ 4,943 $ 5,999 Prior period Other Americas revenue , excluding hedging impact $ 3,681 $ 3,836 $ 4,599 Other hedging impact $ 3,681 $ 3,836 $ 4,599 Other Americas revenue $ 3,681 $ 3,836 $ 4,599 Other Americas revenue growth 18 4,599 Other Americas revenue growth 18 % 32 % Other Americas Americas revenue growth 18 % 32 % Other Americas constant currency Americas c revenue growth 29 % 30 % United States currency revenue growth 29 % 30 % United States revenue $ % United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue growth 23 52,449 United States revenue growth 23 % 23 % Total revenue States revenue growth 23 % 23 % Total revenue $ 74,989 23 % Total revenue $ 74,989 $ 90,272 $ 110,855 Total Total revenue $ 74,989 $ 90,272 $ 110,855 Total constant curr revenue $ Total constant currency revenue $ 79,179 $ 91,006 $ 110,897 Total currency revenue $ 79,179 $ 91,006 $ 110,897 Total revenue growth $ 79,179 $ 91,006 $ 110,897 Total revenue growth 20 % $ 110,897 Total revenue growth 20 % 23 % Total constant Total revenue growth 20 % 23 % Total constant currency revenue Total constant currency revenue growth 24 % 24 % Our EMEA currency revenue growth 24 % 24 % Our EMEA revenue from % Our EMEA revenue from 2016 to 2017 were unfavorably impacted EMEA revenue fr revenue from 2015 to 2016 were unfavorably impacted EMEA revenue from 2015 to 2016 were unfavorably impacted , primarily Our revenue from APAC from 2016 to 2017 were relatively flat from APAC from 2016 to 2017 were relatively flat , primarily . The foreign exchange impact 33 Table of Contents Alphabet Inc. Our revenue from APAC from 2015 to 2016 were relatively flat from APAC from 2015 to 2016 were relatively flat , primarily revenue from Other Americas from 2016 to 2017 were favorably impacted Other A revenue from Other Americas from 2015 to 2016 were unfavorably impacted Other Americas from 2015 to 2016 were unfavorably impacted , primarily for hardware we sell . 34 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2015 2016 2017 TAC Year Ended December 31 , 2015 2016 2017 TAC $ 14,343 Ended December 31 , 2015 2016 2017 TAC $ 14,343 $ December 31 , 2015 2016 2017 TAC $ 14,343 $ 16,793 2015 2016 2017 TAC $ 14,343 $ 16,793 $ 21,672 Other 2017 TAC $ 14,343 $ 16,793 $ 21,672 Other cost of $ 1 revenue 13,821 21,672 Other cost of revenue 13,821 18,345 23,911 Total cost of Other cost of revenue 13,821 18,345 23,911 Total cost of revenue cost of revenue 13,821 18,345 23,911 Total cost of revenue $ Total cost of revenue $ 28,164 $ 35,138 $ 45,583 Total of revenue $ 28,164 $ 35,138 $ 45,583 Total cost of $ 28,164 $ 35,138 $ 45,583 Total cost of revenue a a a percentage of revenue 37.6 % 38.9 % 41.1 % percentage of revenue 37.6 % 38.9 % 41.1 % Year Ended revenue 37.6 % 38.9 % 41.1 % Year Ended Dec revenue ( 1 ) ( Google property TAC Google property TAC rate ) 7.8 % 9.2 % 11.6 % TAC rate ) 7.8 % 9.2 % 11.6 % TAC to ) 7.8 % 9.2 % 11.6 % TAC to Google Network to Google Network Members $ 10,242 $ 10,899 $ 12,641 TAC Network Members $ 10,242 $ 10,899 $ 12,641 TAC to Google $ 10,242 $ 10,899 $ 12,641 TAC to Google Network Members Members ' property revenue ( 1 ) ( Network Members TAC Network Members TAC rate ) 68.1 % 69.9 % 71.9 % TAC rate ) 68.1 % 69.9 % 71.9 % TAC $ ) 68.1 % 69.9 % 71.9 % TAC $ 14,3 revenue ( 1 ) ( Aggregate TAC rate ( Aggregate TAC rate ) 21.3 % 21.2 % 22.7 % TAC rate ) 21.3 % 21.2 % 22.7 % ( 1 ) 21.3 % 21.2 % 22.7 % ( 1 ) Revenues 21.2 % 22.7 % ( 1 ) Revenues include hedging gain Cost of revenue increased $ 10,445 million from 2016 to 2017 increased $ 10,445 million from 2016 to 2017 . The increase 10,445 million from 2016 to 2017 . The increase wa due increase in TAC of $ 4,879 million . The increase in cost of revenue increased $ 5,566 million from 2016 to 2017 increased $ 5,5 revenue increased $ 6,974 million from 2015 to 2016 increased $ 6,974 million from 2015 to 2016 due to various 6,974 million from 2015 to 2016 due to various factor including traffic acquisition cost of $ 2,450 million wa due to increase cost of revenue of $ 4,524 million wa primarily due to due to increase in ( 1 ) data center cost including of business growth , ( 2 ) content acquisition cost a related to YouTube , ( 3 ) hardware cost associated with hardware launch , and ( 4 ) stock-based compensatio revenue 16.4 % 15.5 % 15.0 % percentage of revenue 16.4 % 15.5 % 15.0 % R & revenue 16.4 % 15.5 % 15.0 % R & D expense & D expense increased $ 2,677 million from 2016 to 2017 increased $ 2,677 million from 2016 to 2017 . The increase 2,677 million from 2016 to 2017 . The increase wa primarily and facilities-related cost of $ 1,886 million , largely resulting from , largely resulting from a 16 % increase in headcount . and equipment-related expense of $ 569 million . R & D & D expense increased $ 1,666 revenue 12.1 % 11.6 % 11.6 % percentage of revenue 12.1 % 11.6 % 11.6 % Sales and revenue 12.1 % 11.6 % 11.6 % Sales and marketing expense and marketing expense increased $ 2,408 million from 2016 to 2017 increased $ 2,408 million from 2016 to 2017 . The increase 2,408 million from 2016 to 2017 . The increase wa primarily and promotional expense of $ 1,266 million , largely resulting from and facilities-related cost of $ 853 million , largely resulting from , largely resulting from a 6 % increase in he revenue 8.2 % 7.7 % 6.2 % percentage of revenue 8.2 % 7.7 % 6.2 % General and revenue 8.2 % 7.7 % 6.2 % General and administrative expense and administrative expense decreased $ 113 million from 2016 to 2017 decreased $ 113 million from 2016 to 2017 . The decrease 113 million from 2016 to 2017 . The decrease wa primarily and facilities-related cost of $ 271 million , largely resulting from , largely resulting from a 9 % increase in headcount . professional service fee of $ 253 million due to additional revenue 0.4 % 0.5 % 0.9 % percentage of revenue 0.4 % 0.5 % 0.9 % Other income revenue 0.4 % 0.5 % 0.9 % Other income ( expense , net , increased $ 613 million from 2016 to 2017 increased $ 613 million from 2016 to 2017 . This increase 613 million from 2016 to 2017 . This increase wa primarily increase in interest income . 37 Table of Contents Alphabet Inc. , net , increased $ 143 million from 2015 to 2016 increased $ 143 million from 2015 to 2016 . This increase 143 million from 2015 to 2016 . This in revenue growth rate . 38 Table of Contents Alphabet Inc. Alphabet Inc. Quarter Ended Mar 31 , 2016 Jun 30 , Quarter Ended Mar 31 , 2016 Jun 30 , 2016 Sep Mar 31 , 2016 Jun 30 , 2016 Sep 30 , , 2016 Jun 30 , 2016 Sep 30 , 2016 Dec Jun 30 , 2016 Sep 30 , 2016 Dec 31 , , 2016 Sep 30 , 2016 Dec 31 , 2016 Mar Sep 30 , 2016 Dec 31 , 2016 Mar 31 , , 2016 Dec 31 , 2016 Mar 31 , 2017 Jun Dec 31 , 2016 Mar 31 , 2017 Jun 30 , , 2016 Mar 31 , 2017 Jun 30 , 2017 Sep Mar 31 , 2017 Jun 30 , 2017 Sep 30 , , 2017 Jun 3 revenue 7,648 8,130 8,699 10,661 9,795 10,373 : Cost of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 Cost of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and development 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and development 3,367 8,699 10,661 9,795 10,373 11,14 revenue share 2,942 and other current liability 6,144 10,177 Accrued revenue share 2,942 3,975 6,144 10,177 Accrued revenue share 2,942 3,975 Deferred revenue 1,099 1,432 10,177 Accrued revenue share 2,942 3,975 Deferred revenue 1,099 1,432 Income share 2,942 3,975 Deferred revenue 1,099 1,432 Income tax payable , 2,942 3,975 Deferred revenue 1,099 1,432 Income tax payable , net Income tax payable , net 554 881 Total current liability 16,756 tax payable , net 554 881 Total current liability 16,756 24,1 revenue , non-current 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 202 3,969 Deferred revenue , non-current 202 340 Income tax payable , Deferred revenue , non-current 202 340 Income tax payable , non-current Income tax payable , non-current 4,677 12,812 Deferred income tax 226 tax payable , non-current 4,677 12,812 Deferred income tax 226 430 4,677 12,812 Deferred income tax 226 430 Other long-term liability 2,665 12,812 Deferred income tax 226 430 Other long-term liability revenue 28,164 35,138 45,583 Research and development : Cost of revenue 28,164 35,138 45,583 Research and development 12,282 Cost of revenue 28,164 35,138 45,583 Research and development 12,282 13,948 35,138 45,583 Research and development 12,282 13,948 16,625 Sales and marketing 45,583 Research and development 12,282 13,948 16,625 Sales and marketing 9,047 Research and development 12,282 13,948 16,625 Sales and marketing 9,047 10,485 13,948 16,625 Sales and marketing 9,047 10,485 12,893 General and ad revenue share expense and other liability 1,597 1,515 4,891 Accrued revenue share 339 and other liability 1,597 1,515 4,891 Accrued revenue share 339 593 1,515 4,891 Accrued revenue share 339 593 955 Deferred revenue 43 4,891 Accrued revenue share 339 593 955 Deferred revenue 43 223 Accrued revenue share 339 593 955 Deferred revenue 43 223 390 339 593 955 Deferred revenue 43 223 390 Net cash provided 593 955 Deferred revenue 43 223 390 Net cash provided by 955 Deferred revenue 43 223 390 Net cash provi revenue in % of our revenue in 2015 , 2016 , or 2017 our revenue in 2015 , 2016 , or 2017 . In 2015 , 2016 , or 2017 . In 2015 , 2016 , or 2017 . In 2015 , 2016 , and 2017 2017 . In 2015 , 2016 , and 2017 , we 2015 , 2016 , and 2017 , we generated approximately 46 2017 , we generated approximately 46 % , 47 % , generated approximately 46 % , 47 % , and 47 % , 47 % , and 47 % of our revenue , in the U.S. See Note 2 for further detail . Fair measure fair value : Level 1 - Observable input that reflect in Revenue from Contracts with Customers . `` Topic 606 supersedes the revenue recognition requirement revenue recognition requirement in Topic 605 \u201c Revenue 56 Table of in Topic 605 \u201c Revenue 56 Table of Contents Alphabet Inc . Recognition \u201d ( Topic 605 ) , and requires entity service . We adopted Topic 606 a of January 1 , Topic 606 a of January 1 , 2017 using the modified a of January 1 , 2017 using the modified retrospective transition transition method . See Note 2 for further detail . In further det Revenue from Contracts with Customers `` On January 1 , 2017 , we adopted `` On January 1 , 2017 , we adopted Topic 606 2017 , we adopted Topic 606 using the modified retrospective method not completed a of January 1 , 2017 . Results for a of January 1 , 2017 . Results for reporting period reporting period beginning after January 1 , 2017 are presented under beginning after January 1 , 2017 are presented under Topic 606 2017 are presented under Topic 606 , while prior period amount our historic account Revenue Recognition month ended December 31 , 2017 . Revenue Recognition Revenues are . Twelve Months Ended December 31 , 2015 ( 1 ) Months Ended December 31 , 2015 ( 1 ) 2016 ( December 31 , 2015 ( 1 ) 2016 ( 1 ) , 2015 ( 1 ) 2016 ( 1 ) 2017 Google ( 1 ) 2016 ( 1 ) 2017 Google property $ ) 2016 ( 1 ) 2017 Google property $ 52,357 $ ) 2017 Google property $ 52,357 $ 63,785 $ 77,788 Google Google property $ 52,357 $ 63,785 $ 77,788 Google Network Members $ 52,357 $ 63,785 $ 77,788 Google Network Members revenue Network Members ' property 15,033 15,598 17,587 Google advertising revenue 67,390 Members ' property 15,033 15,598 17,587 Google advertising revenue 67,390 79,383 15,598 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 10,080 79,383 95,375 Google other revenue 7,154 10,080 14,277 Other Bets revenue 95,375 Google o revenue 7,154 10,080 14,277 Other Bets revenue 445 Google other revenue 7,154 10,080 14,277 Other Bets revenue 445 809 10,080 14,277 Other Bets revenue 445 809 1,203 Total revenue ( 14,277 Other Bets revenue 445 809 1,203 Total revenue ( 2 Other Bets revenue 445 809 1,203 Total revenue ( 2 ) 809 1,203 Total revenue ( 2 ) $ 74,989 $ 90,272 revenue ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) As noted $ 90,272 $ 110,855 ( 1 ) As noted above , revenue ( Americas ( 1 ) 3,924 4,628 6,125 Total revenue ( 2 ( 1 ) 3,924 4,628 6,125 Total revenue ( 2 ) 4,628 6,125 Total revenue ( 2 ) $ 74,989 $ 90,272 revenue ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) Regions represent $ 90,272 $ 110,855 ( 1 ) Regions represent Europe , Other Americas ) . ( 2 ) Revenues include hedging gain the the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 20 revenue recognized that revenue balance a of December 31 , 2016 . Our payment a of December 31 , 2016 . Our payment term vary for service performed . Note 3 . Financial Instruments We classify and marketable security within Level 1 or Level 2 in the within Level 1 or Level 2 in the fair value hierarchy derivative contract primarily within Level 2 in the fair value hierarchy data of similar instrument . 59 Table of Contents Alphabet Inc. investment category a of December 31 , 2016 and 2017 ( a of Decemb Revenue $ 1,399 $ 539 $ ( 169 contract Revenue $ 1,399 $ 539 $ ( 169 ) Interest 1,399 $ 539 $ ( 169 ) Interest rate contract Other ( expense ) , net 5 5 5 Benefit ( provision expense ) , net 5 5 5 Benefit ( provision ) ) , net 5 5 5 Benefit ( provision ) for ) for income tax ( 401 ) ( 193 ) 71 tax ( 401 ) ( 193 ) 71 Net of tax 401 ) ( 193 ) 71 Net of tax $ 1,003 71 Net of tax $ 1,003 $ 351 $ ( 93 of tax $ 1,003 $ 351 $ ( 93 ) Total 1,003 $ 351 $ ( 93 ) Total amount reclassified , , net of tax $ 795 $ 1 Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 309 million , $ 385 million $ 309 million , $ 385 million , and $ 448 385 million , and $ 448 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . Note 14 2017 , respectively . Note 14 . Income Taxes Income from from domestic operation of $ 8.3 billion , $ 12.0 billio revenue $ $ 109,652 Other Bets 445 809 1,203 Total revenue $ 74,989 109,652 Other Bets 445 809 1,203 Total revenue $ 74,989 $ 809 1,203 Total revenue $ 74,989 $ 90,272 $ 110,855 Year Total revenue $ 74,989 $ 90,272 $ 110,855 Year Ended December $ 74,989 $ 90,272 $ 110,855 Year Ended December 31 , $ 110,855 Year Ended December 31 , 2015 2016 2017 Operating Year Ended December 31 , 2015 2016 2017 Operating income ( Ended December 31 , 2015 2016 2017 Operating income ( loss December 31 , 2015 2016 2017 Op revenue by long-lived asset $ 62,089 $ 72,987 For revenue by geography , by geography , see Note 2 . ITEM 9 . CHANGES see Note 2 . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2017 , our disclosure a of December 31 , 2017 , our disclosure control and during the quarter ended December 31 , 20", + "net_income": "Net income Income from operation 15,403 16,496 19,360 23,716 26,146 Net income from from operation 15,403 16,496 19,360 23,716 26,146 Net income from continuing operation 15,403 16,496 19,360 23,716 26,146 Net income from continuing operation Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income ( continuing operation 13,160 13,620 16, Net income ( loss operation 13,160 13,620 16,348 19,478 12,662 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 0 0 discontinued operation ( 427 ) 516 0 0 0 Net income operation ( 427 ) 516 0 0 0 Net income 12,733 ( 427 ) 516 0 0 0 Net income 12,733 14,136 427 ) 516 0 0 0 Net income 12,733 14,136 16,348 0 0 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic 0 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic net 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic net income Net inc net income ( income 12,733 14,136 16,348 19,478 12,662 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 23.11 $ Continuing operation $ 19.77 $ 20.15 $ 23.11 $ 28.32 $ $ 19.77 $ 20.15 $ 23.11 $ 28.32 $ 18.27 Discontinued $ 20.15 $ 23.11 $ 28.32 $ 18.27 Discontinued operation ( $ 23.11 $ 28.32 $ 18.27 Discontinued operation ( 0.64 ) $ 18.27 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net operation ( 0.64 ) 0.76 0.00 0.00 net income ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per share and B common stock $ 19.13 $ 20.91 $ 23.11 $ common stock $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 $ Continuing operation $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ 18.27 Discontinu net income ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 19.13 $ 20.91 $ 24.63 $ capital stock $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 $ Continuing operation $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ 18.00 net income ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per share and B common stock $ 18.79 $ 20.57 $ 22.84 $ common stock $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 $ Continuing operation $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ 18.00 net income ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 18.79 $ 20.57 $ 24.34 $ capital stock $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ 18.00 As $ 20.57 $ 24.34 $ 27.85 $ 18.00 As of December $ 24.34 $ 27.85 $ 18.00 As of December 31 , $ 18.00 As of December 31 , 2013 2014 2015 2016 As of December 31 , 2013 2014 2015 2016 2017 ( of December 31 , 2013 2014 2015 2016 2017 ( in December 31 , 2013 Net income \u2022 Net income wa $ 12.7 billion with diluted net income income per share of $ 18.00 . \u2022 Operating cash flow Operating cash flow wa $ 37.1 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 13.2 billion . \u2022 Number of \u2022 Number of employee wa 80,110 a of December 31 , wa 80,110 a of December 31 , 2017 . Information about a of December 31 , 2017 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . 2 Net income 922 1,242 984 1,524 1,393 853 1,247 11,038 Net income $ 1,242 984 1,524 1,393 853 1,247 11,038 Net income $ 4,207 984 1,524 1,393 853 1,247 11,038 Net income $ 4,207 $ 1,247 11,038 Net income $ 4,207 $ 4,877 $ 5,061 $ Net income $ 4,207 $ 4,877 $ 5,061 $ 5,333 $ $ 4,207 $ 4,877 $ 5,061 $ 5,333 $ 5,426 $ $ 4,877 $ 5,061 $ 5,333 $ 5,426 $ 3,524 $ $ 5,061 $ 5,333 $ 5,426 $ 3,524 $ 6,732 $ $ 5,333 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 ) Basic 3,524 $ 6,732 $ ( 3,020 ) net income per Class C capital stock $ 6.12 $ 7.11 $ 7.36 $ capital stock $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 ) Diluted 5.09 $ 9.71 $ ( 4.35 ) Diluted net income per Class C capital stock $ 6.02 $ 7.00 $ 7.25 $ capital stock $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ 5.01 $ $ 7.25 $ net Income tax receivable , net 95 369 Inventory 268 749 Other tax receivable , net 95 369 Inventory 268 749 Other current , net 95 369 Inventory 268 749 Other current asset 4,575 net 95 369 Inventory 268 749 Other current asset 4,575 2,983 268 749 Other current asset 4,575 2,983 Total current asset 105,408 749 Other current asset 4,575 2,983 Total current asset 105,408 124,308 4,575 2,983 Total current asset 105,408 124,308 Non-marketable investment 5,878 7,813 2,983 Total current asset 105,408 124,308 N net Income tax payable , net 554 881 Total current liability 16,756 tax payable , net 554 881 Total current liability 16,756 24,183 554 881 Total current liability 16,756 24,183 Long-term debt 3,935 3,969 881 Total current liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 202 3,969 Deferred revenue , non-current 202 340 Income tax payable , Def Net income $ Provision for income tax 3,303 4,672 14,531 Net income $ 16,348 for income tax 3,303 4,672 14,531 Net income $ 16,348 $ 4,672 14,531 Net income $ 16,348 $ 19,478 $ 12,662 Less Net income $ 16,348 $ 19,478 $ 12,662 Less : Adjustment $ 16,348 $ 19,478 $ 12,662 Less : Adjustment Payment to to Class C capital stockholder 522 0 0 Net income available Class C capital stockholder 522 0 0 Net income available to C capital stockholder 522 0 0 Net income available to all available to all stockholder $ net income $ 15,826 $ 19,478 $ 12,662 Basic net income per share and B common stock $ 23.11 $ 28.32 $ 18.27 Basic common stock $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 Diluted capital stock $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 Diluted common stock $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18 net income per share Class C capital stock $ 24.34 $ 27.85 $ 18.00 See capital stock $ 24.34 $ 27.85 $ 18.00 See accompanying note $ 24.34 $ 27.85 $ 18.00 See accompanying note . 49 18.00 See accompanying note . 49 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2015 2016 2017 Net Year Ended December 31 , 2015 2016 2017 Net income $ Ended December 31 , 2015 2016 2017 Net income $ 16,348 December 31 , 2015 2016 2017 Net income $ 16,348 $ 2016 2017 Net income $ 16,348 $ 19,478 $ 12,662 Oth Net income $ 16,348 $ 19,478 $ 12,662 Other comprehensive income $ 16,348 $ 19,478 $ 12,662 Other comprehensive income ( loss foreign currency translation adjustment ( 1,067 ) ( 599 ) 1,543 adjustment ( 1,067 ) ( 599 ) 1,543 Available-for-sale investment : 1,067 ) ( 599 ) 1,543 Available-for-sale investment : Change in gain ( loss ) ( 715 ) ( 314 ) 307 ) ( 715 ) ( 314 ) 307 Less : reclassification 715 ) ( 314 ) 307 Less : reclassification adjustment for loss included in net income 208 221 105 Net change ( net income 208 221 105 Net change ( net in net income 208 221 105 Net change ( net of of tax effect of $ 29 , $ 0 , and of $ 29 , $ 0 , and $ 0 ) $ 0 , and $ 0 ) ( 507 ) ( and $ 0 ) ( 507 ) ( 93 ) 412 ) ( 507 ) ( 93 ) 412 Cash flow hedge 507 ) ( 93 ) 412 Cash flow hedge : Change unrealized gain ( loss ) 676 515 ( 638 ) Less gain ( loss ) 676 515 ( 638 ) Less : loss ) 676 515 ( 638 ) Less : reclassification adjustment included in net income ( 1,003 ) ( 351 ) 93 income ( 1,003 ) ( 351 ) 93 Net change ( 1,00 Net income 0 0 ( 47 ) Net income 0 0 0 16,348 16,348 Other 47 ) Net income 0 0 0 16,348 16,348 Other comprehensive ) Net income 0 0 0 16,348 16,348 Other comprehensive loss Net income 0 0 0 16,348 16,348 Other comprehensive loss 0 income 0 0 0 16,348 16,348 Other comprehensive loss 0 0 16,348 16,348 Other comprehensive loss 0 0 ( 1,901 ) 0 16,348 Other comprehensive loss 0 0 ( 1,901 ) 0 ( comprehensive loss 0 0 ( 1,901 ) 0 ( 1,901 ) 0 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of De Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehensive loss 0 0 ( 528 ) 0 19,478 Other comprehensive loss 0 0 ( 528 ) 0 ( comprehensive loss 0 0 ( 528 ) 0 ( 528 ) 0 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) B Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income 0 income 0 0 0 12,662 12,662 Other comprehensive income 0 0 12,662 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance 12,662 Other compreh Net income December 31 , 2015 2016 2017 Operating activity Net income $ Operating activity Net income $ 16,348 $ 19,478 $ 12,662 Adjustments Net income $ 16,348 $ 19,478 $ 12,662 Adjustments : Depreciation $ 16,348 $ 19,478 $ 12,662 Adjustments : Depreciation and impairment impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of intan net Income tax , net ( 179 ) 3,125 8,211 Other asset , net ( 179 ) 3,125 8,211 Other asset ( 318 net ( 179 ) 3,125 8,211 Other asset ( 318 ) 3,125 8,211 Other asset ( 318 ) 312 ( 2,164 ) Other asset ( 318 ) 312 ( 2,164 ) Accounts payable ( 318 ) 312 ( 2,164 ) Accounts payable 203 110 ( 2,164 ) Accounts payable 203 110 731 Accrued expense and 2,164 ) Accounts payable 203 110 731 Accrued expense and other ) Accounts payable 203 110 731 Accrued expense and other liability Accrued expense and other liability Net Income Per Share In the year ended December 31 , 2016 and 2017 , year ended December 31 , 2016 and 2017 , the net December 31 , 2016 and 2017 , the net income per In the year ended December 31 , 2015 , the Class year ended December 31 , 2015 , the Class C Adjustment for the year ended December 31 , 2015 . The following year ended December 31 , 2015 . The following table set per share amount ) : 75 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2015 Class A Class Year Ended Dece net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for earnings for basic computatio net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share net income per share $ 22.84 $ 22.84 $ 24.34 76 per share $ 22.84 $ 22.84 $ 24.34 76 Table of $ 22.84 $ 22.84 $ 24.34 76 Table of Contents Alphabet 22.84 $ 22.84 $ 24.34 76 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 77 per share $ 27.85 $ 27.85 $ 27.85 77 Table of $ 27.85 $ 27.85 $ 27.85 77 Table of Contents Alphabet 27.85 $ 27.85 $ 27.85 77 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 Note per share $ 18.00 $ 18.00 $ 18.00 Note 13 . $ 18.00 $ 18.00 $ 18.00 Note 13 . Compensation Plans $ 18.00 $ 18.00 Note 13 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . RSUs granted to granted to participant under the 2012 Stock Plan", + "assets": "Assets Current asset As of December 31 , 2017 Assets Current asset : Cash Cash and cash equivalent $ 12,918 $ 10,715 Marketable security 73,415 cash equivalent $ 12,918 $ 10,715 Marketable security 73,415 91,156 Total 12,918 $ 10,715 Marketable security 73,415 91,156 Total cash , cash $ 10,715 Marketable security 73,415 91,156 Total cash , cash equivalent equivalent , and marketable security 86,333 101,871 Accounts receivable , net , and marketable security 86,333 101,871 Accounts receivable , net of Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 539 $ 57 $ 596 Total non-current asset $ 539 $ 57 $ 596 Total $ 539 $ 539 $ 57 $ 596 Total $ 539 $ 57 57 $ 596 Total $ 539 $ 57 $ 596 Derivative 596 Total $ 539 $ 57 $ 596 Derivative Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Total and non-current $ 4 $ 9 $ 13 Total $ 4 $ 4 $ 9 $ 13 Total Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 51 $ 29 $ 80 Total non-current asset $ 51 $ 29 $ 80 Total $ 51 $ 51 $ 29 $ 80 Total $ 51 $ 29 29 $ 80 Total $ 51 $ 29 $ 80 Derivative 80 Total $ 51 $ 29 $ 80 Derivative Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total Assets As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 596 $ 0 $ 596 $ Exposed Derivatives $ 596 $ 0 $ 596 $ ( 11 $ 596 $ 0 $ 596 $ ( 11 ) ( 0 $ 596 $ ( 11 ) ( 1 ) $ $ ( 11 ) ( 1 ) $ ( 337 ) ( 1 ) $ ( 337 ) $ ( 73 ) ( 337 ) $ ( 73 ) $ 175 As of $ ( 73 ) $ 175 As of December 31 , $ 175 As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 102 $ ( 22 Assets $ 16,295 $ 452 $ 16,747 Other Intangible Assets Information regarding ) : As of December 31 , 2016 Gross Carrying Amount As of December 31 , 2016 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,542 $ 2,710 $ 2,832 Customer developed technology $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 197 155 2,710 $ 2,832 Customer relationship 352 197 155 Trade name and $ 2,832 Customer relationship 352 197 155 Trade ", + "liabilities": "Liabilities and Stockholders Total asset $ 167,497 $ 197,295 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 2,041 $ 3,137 Accrued compensation and Accounts payable $ 2,041 $ 3,137 Accrued compensation and benefit 3,976 3,137 Accrued compensation and benefit 3,976 4,581 Accrued expense and other Accrued compensation and benefit 3,976 4,581 Accrued expense and other current expense and other current liability 6,144 10,177 Accrued revenue share 2,942 and other current liability 6,144 10, Liabilities . `` ASU 2016-01 amends various aspect of the that the adoption of ASU 2016-01 will increase the volatility of . We will adopt ASU 2016-01 effective January 1 , 2018 adopt ASU 2016-01 effective January 1 , 2018 . In February 2016-01 effective January 1 , 2018 . In February 2016 , , 2018 . In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases . `` `` Leases . `` Topic 842 supersedes the lease recognition requi Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Total and non-current $ 4 $ 9 $ 13 Total $ 4 $ 4 $ 9 $ 13 Total $ 4 $ 9 9 $ 13 Total $ 4 $ 9 $ 13 As 13 Total $ 4 $ 9 $ 13 As of December $ 4 $ 9 $ 13 As of December 31 , $ 13 As of December 31 , 2017 Balance Sheet Location As of December 31 , 2017 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total $ 230 $ 122 122 $ 352 Total $ 230 $ 122 $ 352 The 352 Total $ 230 $ 122 $ 352 The effect of $ 230 $ 122 $ 352 The effect of derivative instrument Portion ) Year Ended December 31 , Derivatives in Cash Flow in Cash Flow Hedging Relationship 2015 2016 2017 Fo Liabilities As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 13 $ 0 $ 13 $ Liabilities Derivatives $ 13 $ 0 $ 13 $ ( 11 $ 13 $ 0 $ 13 $ ( 11 ) ( 0 $ 13 $ ( 11 ) ( 2 ) $ $ ( 11 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 2 As 2 ) $ 0 $ 0 $ 2 As of December $ 0 $ 0 $ 2 As of December 31 , $ 2 As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 374 $ ( 22", + "equity": "Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 25 6 . Selected Financial Data 25 Item 7 . Management \u2019 Selected Financial Data 25 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 43 Item 8 . Financial Statements About Market Risk 43 Item 8 . Financial Statements and Supplement EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public Select Market . Fiscal Year 2017 Quarters Ended : High Low Ended : High L equity $ Total stockholder \u2019 equity $ 86,977 $ 103,860 $ 120,331 $ \u2019 equity $ 86,977 $ 103,860 $ 120,331 $ 139,036 $ $ 86,977 $ 103,860 $ 120,331 $ 139,036 $ 152,502 25 $ 103,860 $ 120,331 $ 139,036 $ 152,502 25 Table of $ 120,331 $ 139,036 $ 152,502 25 Table of Contents Alphabet 120,331 $ 139,036 $ 152,502 25 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in O Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 53 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption \u201c Quarterly Results of Operations . \u201d 45 Table of Contents Alphabet Inc. Company ) a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , the related December 31 , Equity liability : Accounts payable $ 2,041 $ 3,137 Accrued compensation and Accounts payable $ 2,041 $ 3,137 Accrued compensation and benefit 3,976 3,137 Accrued compensation and benefit 3,976 4,581 Accrued expense and other Accrued compensation and benefit 3,976 4,581 Accrued expense and other current expense and other current liability 6,144 10,177 Accrued revenue share 2,942 and other current liability 6,144 10,177 Accrued revenue share 2,942 3,975 6,144 10,177 Accrued revenue share 2,942 3,975 De equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 691, equity 992 ) Retained earnings 105,131 113,247 Total stockholder \u2019 equity 139,036 113,247 Total stockholder \u2019 equity 139,036 152,502 Total liability and stockholder Total stockholder \u2019 equity 139,036 152,502 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 167,497 $ 197,295 See accompanying note \u2019 equity $ 167,497 $ 197,295 See accompanying note . 48 197,295 See accompanying note . 48 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2015 2016 2017 Revenues Year Ended Decemb equity security 46 ( 215 ) 38,285 613 37,672 Marketable equity security 160 ( 215 ) 38,285 613 37,672 Marketable equity security 160 133 613 37,672 Marketable equity security 160 133 0 293 0 293 37,672 Marketable equity security 160 133 0 293 0 293 43,397 Marketable equity security 160 133 0 293 0 293 43,397 179 equity security 160 133 0 293 0 293 43,397 179 ( security 160 133 0 293 0 293 43,397 179 ( 215 160 133 0 293 0 293 43,397 179 ( 215 ) 133 0 293 0 293 43,397 179 ( 215 ) 43,361 0 293 0 293 43,3 equity security 2 ( 310 ) 36,948 1,241 35,707 Marketable equity security 242 ( 310 ) 36,948 1,241 35,707 Marketable equity security 242 100 1,241 35,707 Marketable equity security 242 100 ( 2 ) 340 35,707 Marketable equity security 242 100 ( 2 ) 340 0 equity security 242 100 ( 2 ) 340 0 340 39,331 242 100 ( 2 ) 340 0 340 39,331 102 ( 100 ( 2 ) 340 0 340 39,331 102 ( 312 ( 2 ) 340 0 340 39,331 102 ( 312 ) 2 ) 340 0 340 39,331 102 ( 312 ) 39,121 ) 340 0 340 39,331 102 ( 312 ) 39,121 3,074 0 340 39,331 1 equity ( 1 ) 3,935 ( 17 ) Marketable equity security 39 17 ) Marketable equity security 39 ( 2 ) 0 0 Marketable equity security 39 ( 2 ) 0 0 39 ( security 39 ( 2 ) 0 0 39 ( 2 ) 39 ( 2 ) 0 0 39 ( 2 ) Total ( 2 ) 0 0 39 ( 2 ) Total $ ) 0 0 39 ( 2 ) Total $ 58,236 $ ( 2 ) Total $ 58,236 $ ( 432 ) $ Total $ 58,236 $ ( 432 ) $ 22,819 $ ( $ ( 432 ) $ 22,819 $ ( 291 ) $ ) $ 22,819 $ ( 291 ) $ 81,055 $ ( $ ( 291 ) $ 81,055 $ ( 723 ) During ) $ 81,055 $ ( 723 ) During the year ended During the year ended Decem equity 65 Table of Contents Alphabet Inc. of these security wa $ 1.1 billion a of December 31 1.1 billion a of December 31 , 2016 and 2017 . a of December 31 , 2016 and 2017 . These debt December 31 , 2016 and 2017 . These debt security do are categorized accordingly a Level 3 in the fair value hierarchy significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 , 2016 2017 Beginning balance Year Ended December 31 , 2016 2017 Beginning balance $ 1,024 Ended December 31 , 2016 Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , no share December 31 , 2016 and 2017 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2015 , the board of director to repurchase up to $ 5.1 billion of it Class C in the fourth quarter of 2015 . In January 2016 Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 53 2 . Financial Statement Schedules to Consolidated Financial Statements 53 2 . Financial Statement Schedules Schedule the three year ended December 31 , 2017 ( in million year ended December 31 , 2017 ( in million ) : of Year Year ended December 31 , 2015 $ 225 $ Year ended December 31 , 2015 $ 225 $ 579 $ December 31 , 2015 $ Equity 2010 10.09 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.09.1 u Apigee 333-214573 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 Equity 2016 10.09.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 12.01 * Computation 333-214573 ) N", + "cash_flow": "cash flow Operating cash flow wa $ 37.1 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 13.2 billion . \u2022 Number of \u2022 Number of employee wa 80,110 a of December 31 , wa 80,110 a of December 31 , 2017 . Information about a of December 31 , 2017 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . 27 10-K for further information . 27 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2015 2016 2 cash flow from operation for 2016 compared to 2015 . Cash operation for 2016 compared to 2015 . Cash Used in Investing investing activity increased slightly from 2016 to 2017 primarily due to increased slightly from 2016 to 2017 primarily due to increase in in investing activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in financing activity decreased slightly from 2016 to 2017 primarily driven by decreased slightly from 2016 to 2017 prima cash flow . See Note 10 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency When determining the fair value 42 Table of Contents Alphabet Inc. more fully discussed in Note 8 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated we also consider whether ( 1 ) it is more Cash flow hedge 507 ) ( 93 ) 412 Cash flow hedge : Change unrealized gain ( loss ) 676 515 ( 638 ) Less gain ( loss ) 676 515 ( 638 ) Less : loss ) 676 515 ( 638 ) Less : reclassification adjustment included in net income ( 1,003 ) ( 351 ) 93 income ( 1,003 ) ( 351 ) 93 Net change ( 1,003 ) ( 351 ) 93 Net change ( net of of tax effect of $ 115 , $ 64 , and of $ 115 , $ 64 , and $ 247 ) $ 64 , and $ 247 ) ( 327 ) 164 and $ 247 ) ( 327 ) 164 ( 545 ) 247 ) ( 327 ) 164 ( 545 ) Other comprehensive ( 327 ) 164 cash flow , net of refund $ 3,651 $ 1,643 $ 6,191 Cash of refund $ 3,651 $ 1,643 $ 6,191 Cash paid for $ 3,651 $ 1,643 $ 6,191 Cash paid for interest , net of amount capitalized $ 96 $ 84 $ 84 See amount capitalized $ 96 $ 84 $ 84 See accompanying note $ 96 $ 84 $ 84 See accompanying note . 52 84 See accompanying note . 52 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State Stat Cash Flow in Cash Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract Cash Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract $ Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract $ 964 2017 Foreign exchange contract $ 964 $ 773 $ ( 955 exchange contract $ 964 $ 773 $ ( 955 ) Gains 964 $ 773 $ ( 955 ) Gains ( Losses ) Portion ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Fl Cash Flow Cash Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Other Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Other income ) , net $ ( 297 ) $ ( 381 ) ( 297 ) $ ( 381 ) $ 83 ( 1 $ ( 381 ) $ 83 ( 1 ) Gains ( 381 ) $ 83 ( 1 ) Gains ( loss ) in Income on Derivatives ( 2 ) Year Ended December 31 2 ) Year Ended December 31 , Derivatives in Fair Value Fair Value Hedging Relation", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 47,527 59,647 Less : accumulated depreciation ( Less : accumulated depreciation ( 13,293 ) ( 17,264 ) Property depreciation ( 13,293 ) ( 17,264 ) Property and equipment , and equipment , net $ 34,234 $ 42,383 As of December , net $ 34,234 $ 42,383 As of December 31 , $ 42,383 As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , asset under December 31 , 2016 and 2017 , asset under capital lease a cost basis of $ 299 million and $ 390 million $ 299 millio", + "capital_expenditure": "Capital expenditure \u2022 Capital expenditure were $ 13.2 billion . \u2022 Number of \u2022 Number of employee wa 80,110 a of December 31 , wa 80,110 a of December 31 , 2017 . Information about a of December 31 , 2017 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . 27 10-K for further information . 27 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google segm Capital expenditure : Ended December 31 , 2015 2016 2017 Capital expenditure : Google December 31 , 2015 2016 2017 Capital expenditure : Google $ Capital expenditure : Google $ 8,868 $ 9,417 $ 12,605 Other : Google $ 8,868 $ 9,417 $ 12,605 Other Bets 850 $ 8,868 $ 9,417 $ 12,605 Other Bets 850 1,385 507 9,417 $ 12,605 Other Bets 850 1,385 507 Reconciling item ( $ 12,605 Other Bets 850 1,385 507 Reconciling item ( 2 12,605 Other Bets 850 1,385 507 Reconciling item ( 2 ) 1,385 507 Reconciling item ( 2 ) 232 ( 590 ) capital expenditure ) 232 ( 590 ) 72 Total capital expenditure a presented Statements of Cash Flows $ 9,950 $ 10,212 $ 13,184 ( Cash Flows $ 9,950 $ 10,212 $ 13,184 ( 2 ) $ 9,950 $ 10,212 $ 13,184 ( 2 ) Reconciling item $ 10,212 $ 13,184 ( 2 ) Reconciling item are related and other miscellaneous difference . 83 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Stock-based Year Ended December 31 , 2015 2016 2017 Stock-based compensation : Ended December 31 , 2015 2016 2017 Stock-based comp", + "debt": "debt repayment . 40 Table of Contents Alphabet Inc Contractual Obligations a of December 31 , 2017 The following summarizes a of December 31 , 2017 The following summarizes our contractual contractual obligation a of December 31 , 2017 ( in million a of December 31 , 2017 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation , of su debt ( 2 ) 7,154 4,548 1,910 241 455 Long-term debt obligation 2 ) 7,154 4,548 1,910 241 455 Long-term debt obligation ( ) 7,154 4,548 1,910 241 455 Long-term debt obligation ( 3 455 Long-term debt obligation ( 3 ) 4,744 112 224 1,170 debt obligation ( 3 ) 4,744 112 224 1,170 3,238 Tax obligation ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 4 ) 4,744 112 224 1,170 3,238 Tax payable ( 4 ) 1,170 3,238 Tax payable debt , refer to Note 6 of the Notes to Consolidated this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 3.5 billion a of December 31 3.5 billion a of December 31 , 2017 related to uncertain a of December 31 , 2017 related to uncertain tax position position in individual year beyond 12 mont debt security a of December 31 , 2016 and 2017 are a of December 31 , 2016 and 2017 are shown below December 31 , 2016 and 2017 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2016 2017 2016 2017 As of December 31 , 2016 2017 2016 2017 Risk Category of December 31 , 2016 2017 2016 2017 Risk Category - December 31 , 2016 2017 2016 2017 Risk Category - Interest 31 , 2016 2017 2016 2017 Risk debt 3,935 3,969 881 Total current liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 202 3,969 Deferred revenue , non-current 202 340 Income tax payable , Deferred revenue , non-current 202 340 Income tax payable , non-current Income tax payable , non-current 4,677 12,812 Deferred income tax 226 tax payable , non-current 4,677 12,812 Defe debt , net of cost 13,705 8,729 4,291 Repayments of debt , net of cost 13,705 8,729 4,291 Repayments of debt ( net of cost 13,705 8,729 4,291 Repayments of debt ( 13,728 4,291 Repayments of debt ( 13,728 ) ( 10,064 ) ( debt ( 13,728 ) ( 10,064 ) ( 4,377 ) Proceeds ) ( 10,064 ) ( 4,377 ) Proceeds from sale of from sale of subsidiary share 0 0 800 Net cash used sale of subsidiary share 0 0 800 Net cash used in of subsidiary share 0 0 800 Net cash used in financing used in financing activity ( 4,225 ) debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 12,991 debt security 2 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 21 0 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 24,155 debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Mortgage-backed security ( 5 ) 6,350 ( 116 ) Mortgage-backed security 10,184 ( ( 116 ) Mortgage-backed security 10,184 ( 206 ) 259 ( ) Mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 ( 10 ) 10,44 debt ( 6 ) 6,081 ( 53 ) Corporate debt security 18,300 53 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed security ( 21 ) 20,010 ( 135 ) Mortgage-backed security 7,261 ( ( 135 ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( 74 ) security 7,261 ( 89 ) 3,314 ( 74 ) 10,575 ( ( debt December 31 , 2016 and 2017 . These debt security do are categorized accordingly a Level 3 in the fair value hierarchy significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 , 2016 2017 Beginning balance Year Ended December 31 , 2016 2017 Beginning balance $ 1,024 Ended December 31 , 2016 2017 Beginning balance $ 1,024 $ 2016 2017 Beginning balance $ 1,024 $ 1,165 Total net gain Beginning balance $ 1,024 $ 1,165 Total net gain ( loss loss ) Included in earnings 0 ( Debt 2016 and 2017 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2016 and December 31 a of December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 , respectively . 2016 and December 31 , 2017 , respectively . Long-Term Debt Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due debt $ 3,943 Capital lease obligation 0 26 Total long-term debt $ 3,935 26 Total long-term debt $ 3,935 $ 3,969 ( 1 ) long-term debt $ 3,935 $ 3,969 ( 1 ) Includes the $ 3,935 $ 3,969 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 ", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per associated with the repurchase . 22 Table of Contents Alphabet Inc. The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2012 and it relative index on December 31 , 2012 and it relative performance is performance is tracked through December 31 , 2017 . The return tracked through December 31 , 2017 . The return shown ", + "tax_rate": "tax rate wa 53 % . \u2022 Net income \u2022 Net income wa $ 12.7 billion with diluted net income income per share of $ 18.00 . \u2022 Operating cash flow Operating cash flow wa $ 37.1 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 13.2 billion . \u2022 Number of \u2022 Number of employee wa 80,110 a of December 31 , wa 80,110 a of December 31 , 2017 . Information about a of December 31 , 2017 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for tax rate $ 3,303 $ 4,672 $ 14,531 Effective tax rate 16.8 % $ 14,531 Effective tax rate 16.8 % 19.3 % 53.4 % Effective tax rate 16.8 % 19.3 % 53.4 % Our provision rate 16.8 % 19.3 % 53.4 % Our provision for income effective tax rate increased from 2016 to 2017 , due to rate increased from 2016 to 2017 , due to the Tax that wa enacted in December 2017 . Please refer to Note . Please refer to Note 14 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Our effective tax r tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2017 . This table quarter ended December 31 , 2017 . This table includes all sequential revenue growth rate . 38 Table of Contents Alphabet Inc. Alphabet Inc. Quarter Ended Mar 31 , 2016 Jun 30 , Quarter Ended Mar 31 , 2016 Jun 30 , 2016 Sep Mar 31 , 2016 Jun 30 , 2016 Sep 3 tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax . In addition , in 2017 we are subject to a for the year ended December 31 , 2017 . As we year ended December 31 , 2017 . As we collect and Act will be completed in 2018 . Although we believe we cash flow . See Note 10 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency When determining the fair value 42 tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax . In addition , in 2017 we were subject to a financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collect and Act will be completed in 2018 . 79 Table of Contents be completed in 2018 . 79 Table of Contents Alphabet Inc been recorded a of December 31 , 2017 and are subject a of December 31 , 2017 and are subject to change are subject to change during 2018 . One-time transition tax The tax at a rate o tax rate from 35 % to 21 % for rate from 35 % to 21 % for year after 2017 21 % for year after 2017 . Accordingly , we have deferred tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduced rate deferred tax benefit of $ 376 million to reflect the reduced amount recorded a of December 31 , 2017 are provisional . a of December 31 , 2017 are provisional . The net net tax expense recognized in 2017 related to the Tax Act the Tax Act wa $ 9.9 billion . As we complete not refl tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 35.0 % statutory tax rate 35.0 % 35.0 % 35.0 % Foreign income rate 35.0 % 35.0 % 35.0 % Foreign income taxed at taxed at different rate ( 13.4 ) % ( 11.0 ) ( 13.4 ) % ( 11.0 ) % ( 14.2 ) ( 11.0 ) % ( 14.2 ) % Impact of the Tax Act One-time transition tax 0.0 % 0.0 % 37.6 % One-time transition tax 0.0 % 0.0 % 37.6 % Deferred tax tax 0.0 % 0.0 % 37.6 % Deferred tax effect 0.0 37.6 % Deferred tax effect 0.0 % 0.0 % ( 1.4 Deferred tax effect 0.0 % 0.0 % tax rate ) % Effective tax rate 16.8 % 19.3 % 53.4 % Effective tax rate 16.8 % 19.3 % 53.4 % Our effective rate 16.8 % 19.3 % 53.4 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The IRS decision on December 28 , 2015 . The IRS served a Notice of Appeal tax rate from 35 % to 21 % resulting rate from 35 % to 21 % resulting from the Tax ) : As of December 31 , 2016 2017 Deferred tax As of December 31 , 2016 2017 Deferred tax asset : of December 31 , 2016 2017 Deferred tax asset : Stock-based : Stock-based compensation expense $ 574 $ 251 Accrued employee benefit compensation expense $ 574 $ 251 Accrued employee benefit 939 285 $ 251 Accrued employee benefit 939 285 Accruals and reserve not 251 Accrued employee benefit 939 285 Accruals and reserve not cur", + "segment_revenue": "segment revenue of $ 109.7 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 1.2 billion with revenue growth of billion with revenue growth of 49 % year over year . and Other Americas were $ 52.4 billion , $ 36.0 billion $ 52.4 billion , $ 36.0 billion , $ 16.2 billion $ 36.0 billion , $ 16.2 billion , and $ 6.1 16.2 billion , and $ 6.1 billion , respectively . \u2022 Cost of revenue wa $ 45.6 billion , consisting of TAC consisting of TAC of $ 21.7 billion segment revenue 95,375 Google other revenue 7,154 10,080 14,277 Google segment revenue $ Google other revenue 7,154 10,080 14,277 Google segment revenue $ 74,544 14,277 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Other segment revenue $ 74,544 $ 89,463 $ 109,652 Other Bets Other $ 74,544 $ 89,463 $ 109,652 Other Bets Other Bets revenue Bets Other Bets revenue $ 445 $ 809 $ 1,203 Revenues Bets revenue $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 90,272 809 $ 1,203 Revenue segment revenue Ended December 31 , 2015 2016 2017 Google segment revenue $ December 31 , 2015 2016 2017 Google segment revenue $ 74,544 2017 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue a a a percentage of total revenue 99.4 % 99.1 % 98.9 % of total revenue 99.4 % 99.1 % 98.9 % Aggregate paid revenue 99.4 % 99.1 % 98.9 % Aggregate paid click change % Aggregate paid click change 34 segment revenue 70.2 % 71.3 % 70.9 % Google segment revenue 70.2 % 71.3 % 70.9 % Paid click revenue 70.2 % 71.3 % 70.9 % Paid click change 43 70.9 % Paid click change 43 % 54 % Cost-per-click change Paid click change 43 % 54 % Cost-per-click change ( 13 54 % Cost-per-click change ( 13 ) % ( 21 ) ( 13 ) % ( 21 ) % Google property revenue Google property revenue increased $ 14,003 million from 2016 to 2017 increased $ 14,003 million from 2016 to 2017 . The growth 14,003 million from 2016 to 2017 . The growth wa segment revenue 20.2 % 17.4 % 16.0 % Google segment revenue 20.2 % 17.4 % 16.0 % Paid click revenue 20.2 % 17.4 % 16.0 % Paid click change 3 16.0 % Paid click change 3 % 10 % Cost-per-click change Paid click change 3 % 10 % Cost-per-click change ( 13 10 % Cost-per-click change ( 13 ) % ( 9 ) ( 13 ) % ( 9 ) % 30 Table of % ( 9 ) % 30 Table of Contents Alphabet Inc. ' property revenue increased $ 1,989 million from 2016 to 2017 increased $ 1,989 million from 2016 to 2017 . The growth 1,989 million from 2016 to 2 segment revenue 9.6 % 11.3 % 13.0 % Google segment revenue 9.6 % 11.3 % 13.0 % Google other revenue 9.6 % 11.3 % 13.0 % Google other revenue consist Google other revenue increased $ 4,197 million from 2016 to 2017 increased $ 4,197 million from 2016 to 2017 . The increase 4,197 million from 2016 to 2017 . The increase wa primarily Google other revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million from 2015 to 2016 and increased a 2,926 million from 2015 to 2016 and increased a a percent", + "common_stock": "Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 193 common stock outstanding , 46,961,288 share of the registrant \u2019 common stock outstanding , and 349,843,717 share of the registrant \u2019 s Proxy Statement for the 2018 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2017 . Table of year ended December 31 , 2017 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock ranged from $ 807.77 per share to $ 1,085.09 807.77 per share to $ 1,085.09 per share , and the capital stock ranged from $ 786.14 to $ 1,077.14 per share from $ 786.14 to $ 1,077.14 per share . In addition this Annual Report on Form 10-K , the trading price of cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital capital stock . In January 2018 , our board of director up to an additional $ 8,589,869,056 of our Class C capital Class common stock ha 10 vote per share , our right . As of December 31 , 2017 , Larry , As of December 31 , 2017 , Larry , Sergey , E. Schmidt beneficially owned approximately 92.7 % of our outstanding Class stock , which represented approximately 56.7 % of 18 Table of represented approximately 56.7 % of 18 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it it subsidiary . On October 2 , 2015 , we completed . On October 2 , 2015 , we completed a reorganization circumstance prevent common stock \u201c GOOG \u201d since April 3 , 2014 . The following \u201d since April 3 , 2014 . The following table set Select Market . Fiscal Year 2017 Quarters Ended : High Low Ended : High Low March 31 , 2017 $ 852.12 $ High Low March 31 , 2017 $ 852.12 $ 786.14 June March 31 , 2017 $ 852.12 $ 786.14 June 30 , , 2017 $ 852.12 $ 786.14 June 30 , 2017 $ $ 852.12 $ 786.14 June 30 , 2017 $ 983.68 $ $ 786.14 June 30 , 2017 $ 983.68 $ 823.35 September June 30 , 2017 $ 983.68 $ 823.35 September 30 , , 2017 $ 983.68 $ 823.3 common stock $ 19.13 $ 20.91 $ 23.11 $ common stock $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 $ Continuing operation $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ 18.27 Discontinued $ 20.15 $ 24.63 $ 28.32 $ 18.27 Discontinued operation ( $ 24.63 $ 28.32 $ 18.27 Discontinued operation ( 0.64 ) $ 18.27 common stock $ 18.79 $ 20.57 $ 22.84 $ common stock $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 $ Continuing operation $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ 18.00 Discontinued $ 19.82 $ 24.34 $ 27.85 $ 18.00 Discontinued operation ( $ 24.34 $ 27.85 $ 18.00 Discontinued operation ( 0.63 ) $ common stock $ 23.11 $ 28.32 $ 18.27 Basic common stock $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 Diluted capital stock $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 Diluted common stock $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income per share Class C capital stock $ 24.34 $ 27.85 $ common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2015 , the board of director to repurchase up to $ 5.1 billion of it Class C in the fourth quarter of 2015 . In January 2016 , of 2015 . In January 2016 , the board of director an additional amount of approximately 514,000 share . The repurchase were including through the use of 10b5-1 plan . During 2016 , of 10b5-1 plan . During 2016 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million shar Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , capital stock ranged from $ 786.14 to $ 1,077.14 per share from $ 786.14 to $ 1,077.14 per share . In addition this Annual Report on Form 10-K , the trading price of cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital capital stock . In January 2018 , our board of director up to an additional $ 8,589,869,056 of our Class C capital Class B common stock ha 10 vote per share , our right . As of December 31 , 2017 , Larry , As of December 31 , 2017 capital stock were $ 1,053.40 and $ 1,046.40 per share were $ 1,053.40 and $ 1,046.40 per share , respectively , holder . As of December 31 , 2017 , there were As of December 31 , 2017 , there were approximately 62 2017 , there were approximately 62 stockholder of record of our in the foreseeable future . 21 Table of Contents Alphabet Inc. during the quarter ended December 31 , 2017 : Period Total quarter ended December 31 , 2017 : Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Pai capital stock $ 19.13 $ 20.91 $ 24.63 $ capital stock $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 $ Continuing operation $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ 18.00 Discontinued $ 19.82 $ 22.84 $ 27.85 $ 18.00 Discontinued operation ( $ 22.84 $ 27.85 $ 18.00 Discontinued operation ( 0.63 ) capital stock $ 18.79 $ 20.57 $ 24.34 $ capital stock $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ 18.00 As $ 20.57 $ 24.34 $ 27.85 $ 18.00 As of December $ 24.34 $ 27.85 $ 18.00 As of December 31 , $ 18.00 As of December 31 , 2013 2014 2015 2016 As of December 31 , 2013 2014 2015 2016 2017 ( of December 31 , 2013 2014 2015 2016 2017 ( in December 31 , 2013 2014 2015 2016 2017 ( in million 31 , 2013 2014 2015 2016 2017 ( in million ) , 2013 2014 2015 2016 2017 ( in million ) Consolidat capital stock $ 6.12 $ 7.11 $ 7.36 $ capital stock $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 ) Diluted 5.09 $ 9.71 $ ( 4.35 ) Diluted net income per Class C capital stock $ 6.02 $ 7.00 $ 7.25 $ capital stock $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ 5.01 $ $ 7.25 $ 7.56 $ 7.73 $ 5.01 $ 9.57 capital stock . In 2017 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million share of Alphabet Class an aggregate amount of $ 4.8 billion . In January 2018 4.8 billion . In January 2018 , the Board of Directors up to an additional $ 8.6 billion of Alphabet Class C transaction , including through Rule 10b5-1 plan . 39 Table of through Rule 10b5-1 plan . 39 Table of Contents Alphabet Inc Alphabet Inc . In January 2017 , Temasek , a Singapore-based for an aggregate of $ 800 mill capital stock $ 24.63 $ 28.32 $ 18.27 Diluted capital stock $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 Diluted common stock $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income per share Class C capital stock $ 24.34 $ 27.85 $ 18.00 See capital stock $ 24.34 $ 27.85 $ 18.00 See accompanying note $ 24.34 $ 27.85 $ 18.00 See accompanying note . 49 18.00 See accompanying note . 49 Tab capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 0 issued 8,714 664 0 0 664 Stock-based compensation expense 0 5,151 0 664 Stock-based compensation expense 0 5,151 0 0 5,151 Stock-based 664 Stock-based compensation expense 0 5,151 0 0 5,151 Stock-based compensation Stock-bas capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 0 16,348 16,348 Other 47 ) Net income 0 0 0 16,348 capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 0 issued 9,106 298 0 0 298 Stock-based compensation expense 0 6,700 0 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding Stock-based compensation e capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehen capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of subsidiary share ) Sale of subsidiary share 0 722 0 0 722 Net Sale of subsidiary share 0 722 0 0 722 Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12, capital stock stockholder ( 47 ) 0 0 Repurchases of capital stock ( Repurchases of capital stock ( 1,780 ) ( 3,693 ) ( stock ( 1,780 ) ( 3,693 ) ( 4,846 ) Proceeds ) ( 3,693 ) ( 4,846 ) Proceeds from issuance of debt , net of cost 13,705 8,729 4,291 Repayments of debt , net of cost 13,705 8,729 4,291 Repayments of debt ( net of cost 13,705 8,729 4,291 Repayments of debt ( 13,728 4,291 Repayments of debt ( 13,728 ) ( 10,064 ) ( debt ( 13,728 ) ( 10,064 ) ( 4,377 ) Proceeds ) ( 10,064 ) ( 4,377 ) Proceeds from Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "corporate_debt": "Corporate debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 12,991 Corporate debt security 2 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 21 0 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 24,155 Corporate debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Mortgage-backed security ( 5 ) 6,350 ( 116 ) Mortgage-backed security 10,184 ( ( 116 ) Mortgage-backed security 10,184 ( 206 ) 259 ( ) Mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 ( 10 ) 10,44 Corporate debt ( 6 ) 6,081 ( 53 ) Corporate debt security 18,300 53 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed security ( 21 ) 20,010 ( 135 ) Mortgage-backed security 7,261 ( ( 135 ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( 74 ) security 7,261 ( 89 ) 3,314 ( 74 ) 10,575 ( ( " +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-19-000004/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-19-000004/full-submission_features.json new file mode 100644 index 0000000..850e773 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-19-000004/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue from total revenue from advertising in 2018 . Many of our advertiser reputation , brand and third-party 7 Table of Contents Alphabet Inc. a a holding company in 2015 and the investment that we The margin we earn on 8 Table of Contents Alphabet Inc. , we are and will 9 Table of Contents Alphabet Inc. the European Union on May 13 , 2014 on the \u2018 Union on May 13 , 2014 on the \u2018 right to decision against Google in June 2017 , and others could treat California Consumer Privacy Act of 2018 that come revenue up to the higher of 2 % of annual worldwide revenue the European Commission in July 2016 and the Swiss Government in the Swiss Government in January 2017 approved the EU-U.S. and the or supplier are found to 12 Table of Contents Alphabet Inc. at the acquired company . 13 Table of Contents Alphabet Inc. our arrangement with them . 14 Table of Contents Alphabet Inc. harm our operating result . 15 Table of Contents Alphabet Inc International revenue accounted for approximately 54 % of our consolid revenue of our consolidated revenue in 2018 . In addition to risk execute our business strategy . 16 Table of Contents Alphabet Inc. net neutrality rule effective June 11 , 2018 , which could rule effective June 11 , 2018 , which could lead internet to the adoption of ASU 2016-01 \u201c Financial Instruments ; Overall Instruments ; Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities \u201d in January 2018 , we adjust the carrying income ( expense ) . 17 Table of Contents Alphabet Inc. revenue could be volatile . 25 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2018 ( consolidated unless year ended December 31 , 2018 ( consolidated unless otherwise noted : \u2022 Revenues of $ 136.8 billion and revenue growth of billion and revenue growth of 23 % year over year , constant currency revenue growth of 22 % year over year . Google segment revenue of $ 136.2 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 595 m revenue growth of million with revenue growth of 25 % year over year . and Other Americas were $ 63.3 billion , $ 44.6 billion $ 63.3 billion , $ 44.6 billion , $ 21.4 billion $ 44.6 billion , $ 21.4 billion , and $ 7.6 21.4 billion , and $ 7.6 billion , respectively . \u2022 Cost of revenue wa $ 59.5 billion , consisting of TAC consisting of TAC of $ 26.7 billion and other cost of cost of revenue of $ 32.8 billion . Our TAC a percentage of advertising revenue wa 23 % . \u2022 Operating expense of revenue ) were revenue segment Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google Network Members $ 63,785 $ 77,788 $ 96,336 Google Network Members ' property Network Members ' property revenue 15,598 17,587 19,982 Google advertising revenue Members ' property revenue 15,598 17,587 19,982 Google advertising revenue 79,383 ' property revenue 15,598 17,587 19,982 Google advertising revenue 79,383 95,375 17,587 19,982 Google advertising revenue 79,383 95,375 116, revenue 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 15,003 95,375 116,318 Google other revenue 10,601 15,003 19,906 Google segment revenue 116,318 Google other revenue 10,601 15,003 19,906 Google segment revenue $ Google other revenue 10,601 15,003 19,906 Google segment revenue $ 89,984 19,906 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Other segment revenue $ 89,984 $ 110,378 $ revenue Bets Other Bets revenue $ 288 $ 477 $ 595 Revenues Bets revenue $ 288 $ 477 $ 595 Revenues $ 90,272 $ 288 $ 477 $ 595 Revenues $ 90,272 $ 110,855 477 $ 595 Revenues $ 90,272 $ 110,855 $ 136,819 Google 595 Revenues $ 90,272 $ 110,855 $ 136,819 Google segment The $ 90,272 $ 110,855 $ 136,819 Google segment The following table ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google segment revenue Ended December 31 , 2016 2017 2018 Google segment revenue $ revenue $ 89,984 2018 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue a a a percentage of total revenue 99.7 % 99.6 % 99.6 % of total revenue 99.7 % 99.6 % 99.6 % Use of revenue 99.7 % 99.6 % 99.6 % Use of Monetization Metrics a result , in Q1 2018 , we transitioned our Network various factor , including : 27 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 revenue Ended December 31 , 2016 2017 2018 Google property revenue $ December 31 , 2016 2017 2018 Google property revenue $ 63,785 2018 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue a a percentage of Google segment revenue 70.9 % 70.5 % 70.7 % Google segment revenue 70.9 % 70.5 % 70.7 % Paid click revenue 70.9 % 70.5 % 70.7 % Paid click change 54 70.7 % Paid click change 54 revenue Google property revenue increased $ 18,548 million from 2017 to 2018 increased $ 18,548 million from 2017 to 2018 and increased $ 18,548 million from 2017 to 2018 and increased $ 14,003 million to 2018 and increased $ 14,003 million from 2016 to 2017 increased $ 14,003 million from 2016 to 2017 . The growth 14,003 million from 2016 to 2017 . The growth during both Additionally , revenue growth from 2017 to 2018 wa favorably affected revenue growth from 2017 to 2018 wa favorably affected by the revenue $ 15,598 $ 17,587 $ 19,982 Google property revenue $ 15,598 $ 17,587 $ 19,982 Google Network Members $ 15,598 $ 17,587 $ 19,982 Google Network Members ' property percentage of Google segment revenue 17.3 % 15.9 % 14.7 % Google segment revenue 17.3 % 15.9 % 14.7 % Impressions change revenue 17.3 % 15.9 % 14.7 % Impressions change 3 % % 14.7 % Impressions change 3 % 2 % Cost-per-impression change % Impressions change 3 % 2 % Cost-per-impression change 8 % % 2 % Cost-per-impression change 8 % 12 % revenue increased $ 2,395 million from 2017 to 2018 increased $ 2,395 million from 2017 to 2018 . The growth 2,395 million from 2017 to 2018 . The growth wa primarily The increase in impression from 2017 to 2018 resulted primarily from in impression from 2017 to 2018 resulted primarily from growth in ' property revenue increased $ 1,989 million from 2016 to 2017 increased $ 1,989 million from 2016 to 2017 . The growth 1,989 million from 2016 to 2017 . The growth wa primarily The increase in impression revenue Ended December 31 , 2016 2017 2018 Google other revenue $ December 31 , 2016 2017 2018 Google other revenue $ 10,601 2018 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue a a percentage of Google segment revenue 11.8 % 13.6 % 14.6 % Google segment revenue 11.8 % 13.6 % 14.6 % Google other revenue 11.8 % 13.6 % 14.6 % Google other revenue consist Google other revenue increased $ 4, revenue increased $ 4,402 million from 2016 to 2017 increased $ 4,402 million from 2016 to 2017 . The increase 4,402 million from 2016 to 2017 . The increase wa primarily payout to developer ) . 29 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Other Year Ended December 31 , 2016 2017 2018 Other Bets revenue Ended December 31 , 2016 2017 2018 Other Bets revenue $ December 31 , 2016 2017 2018 Other Bets revenue $ 288 2018 Other Bets revenue $ 288 $ 477 $ 595 Other Bets reven revenue $ 288 $ 477 $ 595 Other Bets revenue a a a percentage of total revenue 0.3 % 0.4 % 0.4 % of total revenue 0.3 % 0.4 % 0.4 % Other Bets revenue 0.3 % 0.4 % 0.4 % Other Bets revenue consist Other Bets revenue increased $ 118 million from 2017 to 2018 increased $ 118 million from 2017 to 2018 and increased $ 118 million from 2017 to 2018 and increased $ 189 million to 2018 and increased $ 189 million from 2016 to 2017 increased $ 189 million from 2016 to 2017 . These increase 189 million from 2016 revenue $ Ended December 31 , 2016 2017 2018 EMEA revenue $ 30,304 December 31 , 2016 2017 2018 EMEA revenue $ 30,304 $ 2017 2018 EMEA revenue $ 30,304 $ 36,046 $ 44,567 Exclude EMEA revenue $ 30,304 $ 36,046 $ 44,567 Exclude foreign exchange $ 30,304 $ 36,046 $ 44,567 Exclude foreign exchange effect on revenue using prior year rate 1,291 ( 5 ) ( 1,325 prior year rate 1,291 ( 5 ) ( 1,325 ) Exclude 1,291 ( 5 ) ( 1,325 ) Exclude hedging effect recognized recognized in current period ( 479 ) 190 172 EMEA revenue period ( 479 ) 190 172 EMEA constant currency revenue $ EMEA constant currency revenue $ 31,116 $ 36,231 $ 43,414 Prior currency revenue $ 31,116 $ 36,231 $ 43,414 Prior period EMEA $ 31,116 $ 36,231 $ 43,414 Prior period EMEA revenue , , excluding hedging effect $ 25,379 $ 29,825 $ 36,236 EMEA hedging effect $ 25,379 $ 29,825 $ 36,236 EMEA revenue growth $ 25,379 $ 29,825 $ 36,236 EMEA revenue growth 19 % $ 36,236 EMEA revenue growth 19 % 24 % EMEA constant EMEA revenue growth 19 % 24 % EMEA c revenue EMEA constant currency revenue growth 21 % 20 % APAC revenue currency revenue growth 21 % 20 % APAC revenue $ 12,559 20 % APAC revenue $ 12,559 $ 16,235 $ 21,374 Exclude APAC revenue $ 12,559 $ 16,235 $ 21,374 Exclude foreign exchange $ 12,559 $ 16,235 $ 21,374 Exclude foreign exchange effect on using prior year rate ( 362 ) 26 ( 49 ) year rate ( 362 ) 26 ( 49 ) Exclude hedging ( 362 ) 26 ( 49 ) Exclude hedging effect recognized recognized in current period ( 31 ) ( 43 ) ( period ( 31 ) ( 43 ) revenue APAC constant currency revenue $ 12,166 $ 16,218 $ 21,292 Prior currency revenue $ 12,166 $ 16,218 $ 21,292 Prior period APAC $ 12,166 $ 16,218 $ 21,292 Prior period APAC revenue , , excluding hedging effect $ 9,564 $ 12,528 $ 16,192 APAC hedging effect $ 9,564 $ 12,528 $ 16,192 APAC revenue growth $ 9,564 $ 12,528 $ 16,192 APAC revenue growth 29 % $ 16,192 APAC revenue growth 29 % 32 % APAC constant APAC revenue growth 29 % 32 % APAC constant currency revenue APAC constant currency revenue gro revenue growth 29 % 31 % Other Americas revenue $ % Other Americas revenue $ 4,628 $ 6,125 $ 7,609 Exclude Americas revenue $ 4,628 $ 6,125 $ 7,609 Exclude foreign exchange $ 4,628 $ 6,125 $ 7,609 Exclude foreign exchange effect on revenue using prior year rate 344 ( 148 ) 404 Exclude prior year rate 344 ( 148 ) 404 Exclude hedging effect rate 344 ( 148 ) 404 Exclude hedging effect recognized in recognized in current period ( 29 ) 22 ( 1 ) current period ( 29 ) 22 ( 1 ) Other Americas ( 29 ) 22 ( 1 ) O revenue $ 4,943 $ 5,999 $ 8,012 Prior currency revenue $ 4,943 $ 5,999 $ 8,012 Prior period Other $ 4,943 $ 5,999 $ 8,012 Prior period Other Americas revenue , excluding hedging effect $ 3,836 $ 4,599 $ 6,147 Other hedging effect $ 3,836 $ 4,599 $ 6,147 Other Americas revenue $ 3,836 $ 4,599 $ 6,147 Other Americas revenue growth 32 6,147 Other Americas revenue growth 32 % 24 % Other Americas Americas revenue growth 32 % 24 % Other Americas constant currency Americas constant currency revenue growth 30 revenue growth 30 % 30 % United States revenue $ % United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue growth 23 63,269 United States revenue growth 23 % 21 % Total revenue States revenue growth 23 % 21 % Total revenue $ 90,272 21 % Total revenue $ 90,272 $ 110,855 $ 136,819 Total Total revenue $ 90,272 $ 110,855 $ 136,819 Total constant currency $ 90,272 $ 110,855 $ 136,819 Total consta revenue $ Total constant currency revenue $ 91,006 $ 110,897 $ 135,987 Total currency revenue $ 91,006 $ 110,897 $ 135,987 Total revenue growth $ 91,006 $ 110,897 $ 135,987 Total revenue growth 23 % $ 135,987 Total revenue growth 23 % 23 % Total constant Total revenue growth 23 % 23 % Total constant currency revenue Total constant currency revenue growth 24 % 22 % Our EMEA currency revenue growth 24 % 22 % Our EMEA revenue and revenue and revenue growth from 2017 to 2018 were favorably affected revenue revenue and revenue growth from 2016 to 2017 were unfavorably affected revenue growth from 2016 to 2017 were unfavorably affected by hedging revenue and revenue growth from 2017 to 2018 were favorably affected revenue growth from 2017 to 2018 were favorably affected by change revenue and revenue growth from 2016 to 2017 were slightly affected revenue growth from 2016 to 2017 were slightly affected by hedging , and Taiwanese dollar . 31 Table of Contents Alphabet Inc. revenue and revenue growth from 201 revenue growth from 2017 to 2018 were unfavorably affected by change revenue and revenue growth from 2016 to 2017 were favorably affected revenue growth from 2016 to 2017 were favorably affected by change ) : Year Ended December 31 , 2016 2017 2018 TAC Year Ended December 31 , 2016 2017 2018 TAC $ 16,793 Ended December 31 , 2016 2017 2018 TAC $ 16,793 $ December 31 , 2016 2017 2018 TAC $ 16,793 $ 21,672 2016 2017 2018 TAC $ 16,793 $ 21,672 $ 26,726 Other 2018 TAC $ 16,793 $ 21,672 $ 26,726 Other cost o revenue 18,345 26,726 Other cost of revenue 18,345 23,911 32,823 Total cost of Other cost of revenue 18,345 23,911 32,823 Total cost of revenue cost of revenue 18,345 23,911 32,823 Total cost of revenue $ Total cost of revenue $ 35,138 $ 45,583 $ 59,549 Total of revenue $ 35,138 $ 45,583 $ 59,549 Total cost of $ 35,138 $ 45,583 $ 59,549 Total cost of revenue a a a percentage of revenue 38.9 % 41.1 % 43.5 % percentage of revenue 38.9 % 41.1 % 43.5 % Year Ended revenue 38.9 % 41.1 % 43.5 % Year Ended Dec revenue ( 1 ) ( Google property TAC Google property TAC rate ) 9.2 % 11.6 % 13.1 % TAC rate ) 9.2 % 11.6 % 13.1 % TAC to ) 9.2 % 11.6 % 13.1 % TAC to Google Network to Google Network Members $ 10,899 $ 12,641 $ 14,154 TAC Network Members $ 10,899 $ 12,641 $ 14,154 TAC to Google $ 10,899 $ 12,641 $ 14,154 TAC to Google Network Members Members ' property revenue ( 1 ) ( Network Members TAC Network Members TAC rate ) 69.9 % 71.9 % 70.8 % TAC rate ) 69.9 % 71.9 % 70.8 % TAC $ ) 69.9 % 71.9 % 70.8 % TAC $ 1 revenue ( 1 ) ( Aggregate TAC rate ( Aggregate TAC rate ) 21.2 % 22.7 % 23.0 % TAC rate ) 21.2 % 22.7 % 23.0 % ( 1 ) 21.2 % 22.7 % 23.0 % ( 1 ) Revenues 22.7 % 23.0 % ( 1 ) Revenues include hedging gain Cost of revenue increased $ 13,966 million from 2017 to 2018 increased $ 13,966 million from 2017 to 2018 . The increase 13,966 million from 2017 to 2018 . The increase wa due cost of revenue of $ 5,054 million and $ 8,912 million $ 5,054 million and $ 8,912 million , respectively . The TAC to distribut revenue increased $ 8,912 million from 2017 to 2018 increased $ 8,912 million from 2017 to 2018 . The increase 8,912 million from 2017 to 2018 . The increase wa due Cost of revenue increased $ 10,445 million from 2016 to 2017 increased $ 10,445 million from 2016 to 2017 . The increase 10,445 million from 2016 to 2017 . The increase wa due increase in TAC of $ 4,879 million . The increase in cost of revenue increased $ 5,566 million from 2016 to 2017 increased $ 5,566 million from 2016 to 2017 . The inc revenue 15.5 % 15.0 % 15.7 % percentage of revenue 15.5 % 15.0 % 15.7 % R & revenue 15.5 % 15.0 % 15.7 % R & D expense & D expense increased $ 4,794 million from 2017 to 2018 increased $ 4,794 million from 2017 to 2018 . The increase 4,794 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 3,518 million , largely resulting from , largely resulting from a 24 % increase in headcount . and equipment-related expense of $ 499 33 Table of Contents Alphabet equipment-relate revenue 11.6 % 11.6 % 11.9 % percentage of revenue 11.6 % 11.6 % 11.9 % Sales and revenue 11.6 % 11.6 % 11.9 % Sales and marketing expense and marketing expense increased $ 3,440 million from 2017 to 2018 increased $ 3,440 million from 2017 to 2018 . The increase 3,440 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 1,418 million , largely resulting from , largely resulting from a 12 % increase in headcount . and promotional expense of $ 1,233 million , largely re revenue 7.7 % 6.2 % 5.9 % percentage of revenue 7.7 % 6.2 % 5.9 % General and revenue 7.7 % 6.2 % 5.9 % General and administrative expense and administrative expense increased $ 1,254 million from 2017 to 2018 increased $ 1,254 million from 2017 to 2018 . The increase 1,254 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 1,660 million , largely resulting from cost of revenue ) . 34 Table of Contents Alphabet Inc. and administrative expense decreased $ 113 million revenue 0.5 % 0.9 % 6.3 % percentage of revenue 0.5 % 0.9 % 6.3 % Other income revenue 0.5 % 0.9 % 6.3 % Other income ( expense , net , increased $ 7,545 million from 2017 to 2018 increased $ 7,545 million from 2017 to 2018 . This increase 7,545 million from 2017 to 2018 . This increase wa primarily , net , increased $ 613 million from 2016 to 2017 increased $ 613 million from 2016 to 2017 . This increase 613 million from 2016 to 2017 . This increase wa primarily market dynamic . Beginning in 2018 , ch revenue 9,795 10,373 11,148 14,267 13,467 13,883 : Cost of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 Cost of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and development 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and development 3,942 11,148 14, revenue and operating expense . 37 Table of Contents Alphabet Inc. by operating activity increased from 2016 to 2017 primarily due to activity increased from 2016 to 2017 primarily due to increase in in investing activity decreased from 2017 to 2018 primarily due to activity decreased from 2017 to 2018 primarily due to a decrease investing activity increased slightly from 2016 to 2017 primarily due to increased slightly from 2016 to 2017 primarily due to an increase in financing activity increased from revenue when recognized . During 2018 , we entered into foreign the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 635 million lower a of December million lower a of December 31 , 2018 . The change a of December 31 , 2018 . The change in value a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2017 and 2018 are a of December 31 , 2017 and 2018 are shown below December 31 , 2017 and 2018 are shown below ( in ) : As of revenue share 3,975 and other current liability 10,177 16,958 Accrued revenue share 3,975 4,592 10,177 16,958 Accrued revenue share 3,975 4,592 Deferred revenue 1,432 1,784 16,958 Accrued revenue share 3,975 4,592 Deferred revenue 1,432 1,784 Income share 3,975 4,592 Deferred revenue 1,432 1,784 Income tax payable , 3,975 4,592 Deferred revenue 1,432 1,784 Income tax payable , net Income tax payable , net 881 69 Total current liability 24,183 tax payable , net 881 69 Total current liability 24,183 34,6 revenue , non-current 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 340 4,012 Deferred revenue , non-current 340 396 Income tax payable , Deferred revenue , non-current 340 396 Income tax payable , non-current Income tax payable , non-current 12,812 11,327 Deferred income tax 430 tax payable , non-current 12,812 11,327 Deferred income tax 430 1,264 12,812 11,327 Deferred income tax 430 1,264 Other long-term liability 3,059 11,327 Deferred income tax 430 1,264 Other long-term l revenue 35,138 45,583 59,549 Research and development : Cost of revenue 35,138 45,583 59,549 Research and development 13,948 Cost of revenue 35,138 45,583 59,549 Research and development 13,948 16,625 45,583 59,549 Research and development 13,948 16,625 21,419 Sales and marketing 59,549 Research and development 13,948 16,625 21,419 Sales and marketing 10,485 Research and development 13,948 16,625 21,419 Sales and marketing 10,485 12,893 16,625 21,419 Sales and marketing 10,485 12,893 16,333 General and revenue share expense and other liability 1,515 4,891 8,614 Accrued revenue share 593 and other liability 1,515 4,891 8,614 Accrued revenue share 593 955 4,891 8,614 Accrued revenue share 593 955 483 Deferred revenue 223 8,614 Accrued revenue share 593 955 483 Deferred revenue 223 390 Accrued revenue share 593 955 483 Deferred revenue 223 390 371 593 955 483 Deferred revenue 223 390 371 Net cash provided 955 483 Deferred revenue 223 390 371 Net cash provided by 483 Deferred revenue 223 390 371 Net cash revenue in % of our revenue in 2016 , 2017 , or 2018 our revenue in 2016 , 2017 , or 2018 . In 2016 , 2017 , or 2018 . In 2016 , 2017 , or 2018 . In 2016 , 2017 , and 2018 2018 . In 2016 , 2017 , and 2018 , we 2016 , 2017 , and 2018 , we generated approximately 47 2018 , we generated approximately 47 % , 47 % , generated approximately 47 % , 47 % , and 46 % , 47 % , and 46 % of our revenue , in the U.S. See Note 2 for further detail . Fair measure fair value : Level 1 - Observable input that reflect in Revenue from Contracts with Customers `` On January 1 , 2017 , we adopted `` On January 1 , 2017 , we adopted Topic 606 2017 , we adopted Topic 606 using the modified retrospective method not completed a of January 1 , 2017 . Results for a of January 1 , 2017 . Results for reporting period reporting period beginning after January 1 , 2017 are presented under beginning after January 1 , 2017 are presented under Topic 606 2017 are presented under Topic 606 , while prior period amount our historic account revenue . Year Ended December 31 , 2016 ( 1 ) Year Ended December 31 , 2016 ( 1 ) 2017 2018 December 31 , 2016 ( 1 ) 2017 2018 Google property , 2016 ( 1 ) 2017 2018 Google property $ 63,785 2016 ( 1 ) 2017 2018 Google property $ 63,785 $ 2017 2018 Google property $ 63,785 $ 77,788 $ 96,336 Google Google property $ 63,785 $ 77,788 $ 96,336 Google Network Members $ 63,785 $ 77,788 $ 96,336 Google Network Members ' property Google Network Members ' property 15,598 17,587 19,982 Google advertising revenue revenue 79,383 Members ' property 15,598 17,587 19,982 Google advertising revenue 79,383 95,375 17,587 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 15,003 95,375 116,318 Google other revenue 10,601 15,003 19,906 Other Bets revenue 116,318 Google other revenue 10,601 15,003 19,906 Other Bets revenue 288 Google oth revenue 10,601 15,003 19,906 Other Bets revenue 288 477 15,003 19,906 Other Bets revenue 288 477 595 Total revenue ( 19,906 Other Bets revenue 288 477 595 Total revenue ( 2 Other Bets revenue 288 477 595 Total revenue ( 2 ) 477 595 Total revenue ( 2 ) $ 90,272 $ 110,855 revenue ( 2 ) $ 90,272 $ 110,855 $ 136,819 ( 2 ) $ 90,272 $ 110,855 $ 136,819 ( 1 ) $ 90,272 $ 110,855 $ 136,819 ( 1 ) As noted $ 110,855 $ 136,819 ( 1 ) As noted above , modified retrospective method . ( 2 ) Revenues include hedging ga revenue 1 ) 4,628 5 6,125 5 7,609 6 Total revenue ( ) 4,628 5 6,125 5 7,609 6 Total revenue ( 2 4,628 5 6,125 5 7,609 6 Total revenue ( 2 ) 7,609 6 Total revenue ( 2 ) $ 90,272 100 % revenue ( 2 ) $ 90,272 100 % $ 110,855 100 ( 2 ) $ 90,272 100 % $ 110,855 100 % $ 90,272 100 % $ 110,855 100 % $ 136,819 100 90,272 100 % $ 110,855 100 % $ 136,819 100 % $ 110,855 100 % $ 136,819 100 % ( 1 ) 110,855 100 % $ 136,819 100 % ( 1 ) Regions $ 136,819 100 % ( 1 ) Regions represent Europe , Other Americas ) . ( 2 revenue recognized that revenue balance a of December 31 , 2017 . Our payment a of December 31 , 2017 . Our payment term vary for service performed . Note 3 . Financial Instruments Debt Securities marketable debt security within Level 2 in the fair value hierarchy fair value . In January 2018 , we reclassified our U.S. marketable debt security from Level 1 to Level 2 within the from Level 1 to Level 2 within the fair value hierarchy non-marketable debt security within Level 3 in the fair value hierarch Revenue $ 539 $ ( 169 ) $ Revenue $ 539 $ ( 169 ) $ ( 139 ) ( 169 ) $ ( 139 ) Interest rate contract Other ( expense ) , net 5 5 6 Benefit ( provision expense ) , net 5 5 6 Benefit ( provision ) ) , net 5 5 6 Benefit ( provision ) for ) for income tax ( 193 ) 71 35 Net of income tax ( 193 ) 71 35 Net of tax $ tax ( 193 ) 71 35 Net of tax $ 351 35 Net of tax $ 351 $ ( 93 ) $ tax $ 351 $ ( 93 ) $ ( 98 ) ( 93 ) $ ( 98 ) Total amount reclassified , , net of tax $ 130 $ ( 198 ) $ tax $ 130 $ ( 198 ) $ 813 O Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 385 million , $ 448 million $ 385 million , $ 448 million , and $ 691 448 million , and $ 691 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . Performance Fees For the year ended December 31 , 2018 , performance fee year ended December 31 , 2018 , performance revenue $ $ 136,224 Other Bets 288 477 595 Total revenue $ 90,272 136,224 Other Bets 288 477 595 Total revenue $ 90,272 $ 477 595 Total revenue $ 90,272 $ 110,855 $ 136,819 Year Total revenue $ 90,272 $ 110,855 $ 136,819 Year Ended December $ 90,272 $ 110,855 $ 136,819 Year Ended December 31 , $ 136,819 Year Ended December 31 , 2016 2017 2018 Operating Year Ended December 31 , 2016 2017 2018 Operating income ( Ended December 31 , 2016 2017 2018 Operating income ( loss December 31 , 2016 2017 2018 Opera revenue by long-lived asset $ 72,987 $ 97,116 For revenue by geography , by geography , see Note 2 . ITEM 9 . CHANGES see Note 2 . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2018 , our disclosure a of December 31 , 2018 , our disclosure control and during the quarter ended December 31 , 20", + "net_income": "Net income from $ 23,716 $ 26,146 $ 26,321 Net income from continuing operation income from continuing operation $ 13,620 $ 16,348 $ 19,478 $ continuing operation $ 13,620 $ 16,348 $ 19,478 $ 12,662 $ $ 13,620 $ 16,348 $ 19,478 $ 12,662 $ 30,736 Net $ 16,348 $ 19,478 $ 12,662 $ 30,736 Net income from $ 19,478 $ 12,662 $ 30,736 Net income from discontinued operation income from discontinued operation $ 516 $ 0 $ 0 $ discontinued operation $ 516 $ 0 $ 0 $ 0 $ $ 516 $ 0 $ 0 $ 0 $ 0 Net $ 0 $ 0 $ 0 $ 0 Net in Net income $ 14,136 $ $ 0 Net income $ 14,136 $ 16,348 $ 19,478 $ Net income $ 14,136 $ 16,348 $ 19,478 $ 12,662 $ $ 14,136 $ 16,348 $ 19,478 $ 12,662 $ 30,736 Basic $ 16,348 $ 19,478 $ 12,662 $ 30,736 Basic net income $ 19,478 $ 12,662 $ 30,736 Basic net income per share stock : Continuing operation $ 20.15 $ 23.11 $ 28.32 $ Continuing operation $ 20.15 $ 23.11 $ 28.32 $ 18.27 $ $ 20.15 $ 23.11 $ 28.32 $ 18.27 $ 44.22 Discontinued $ 23.11 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 $ 28.32 $ 18.2 net income Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income per operation 0.76 0.00 0.00 0.00 0.00 Basic net income per share and B common stock $ 20.91 $ 23.11 $ 28.32 $ common stock $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic net income $ 28.32 $ 18.27 $ 44.22 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 $ Continuing operation $ 20.15 $ 24.63 $ 28.32 $ 18.27 $ $ 20.15 $ 24.63 $ 28 net income Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income per operation 0.76 0.00 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 20.91 $ 24.63 $ 28.32 $ capital stock $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 $ Continuing operation $ 19.82 $ 22.84 $ 27.85 $ 18.00 $ $ 19.82 $ net income Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per share and B common stock $ 20.57 $ 22.84 $ 27.85 $ common stock $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted net income $ 27.85 $ 18.00 $ 43.70 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 $ Continuing operation $ 19.82 $ 24.34 $ 27.85 $ 18.00 $ $ 19.82 $ net income Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 20.57 $ 24.34 $ 27.85 $ capital stock $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ 43.70 As $ 24.34 $ 27.85 $ 18.00 $ 43.70 As of December $ 27.85 $ 18.00 $ 43.70 As of December 31 , $ 43.70 As of December 31 , 2014 2015 2016 2017 As of December 31 , 2014 2015 2016 2017 2018 ( of December 31 , 2014 2015 2016 2017 20 Net income \u2022 Net income wa $ 30.7 billion with diluted net income income per share of $ 43.70 . \u2022 Operating cash flow Operating cash flow wa $ 48.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 25.1 billion . \u2022 Number of \u2022 Number of employee wa 98,771 a of December 31 , wa 98,771 a of December 31 , 2018 . Information about a of December 31 , 2018 . Information about Segments We through Verily . In Q1 2018 , Nest joined Google \u2019 result are not affected . 26 Table of Contents Alphabet Inc . P Net income 1,393 853 1,247 11,038 1,142 1,020 891 1,124 Net income ( 853 1,247 11,038 1,142 1,020 891 1,124 Net income ( loss 1,247 11,038 1,142 1,020 891 1,124 Net income ( loss ) income ( loss ) $ 5,426 $ 3,524 $ 6,732 $ loss ) $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 ) $ 3,524 $ 6,732 $ ( 3,020 ) $ 9,401 $ 3,195 $ ( 3,020 ) $ 9,401 $ 3,195 $ 9,192 $ 3,020 ) $ 9,401 $ 3,195 $ 9,192 $ 8,948 Basic $ 9,401 $ 3,195 $ 9,192 $ 8,948 Basic net income $ 3,195 $ 9,192 $ 8,948 Basic net net income $ 4.60 $ 13.21 $ 12.87 Diluted net income ( loss Class C capital stock $ 7.73 $ 5.01 $ 9.57 $ capital stock $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 ) $ 5.01 $ 9.57 $ ( 4.35 ) $ 13.33 $ 4.54 $ ( 4.35 ) $ 13.33 $ 4.54 $ 13.06 $ 4.35 ) $ 13.33 $ 4.54 $ 13.06 $ 12.77 Capital $ 13.33 $ 4.54 $ 13.06 $ 12.77 Capital Resources and $ 4.54 $ 13.06 $ 12.77 Capital Resources and Liquidity As and Liquidity As of December 31 , 2018 , we had As of December 31 , 2018 , we had $ 109.1 2018 , net Income tax receivable , net 369 355 Inventory 749 1,107 Other tax receivable , net 369 355 Inventory 749 1,107 Other current , net 369 355 Inventory 749 1,107 Other current asset 2,983 net 369 355 Inventory 749 1,107 Other current asset 2,983 4,236 749 1,107 Other current asset 2,983 4,236 Total current asset 124,308 1,107 Other current asset 2,983 4,236 Total current asset 124,308 135,676 2,983 4,236 Total current asset 124,308 135,676 Non-marketable investment 7,813 13,859 4,236 Total current asset net Income tax payable , net 881 69 Total current liability 24,183 tax payable , net 881 69 Total current liability 24,183 34,620 881 69 Total current liability 24,183 34,620 Long-term debt 3,969 4,012 69 Total current liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 340 4,012 Deferred revenue , non-current 340 396 Income tax payable , Deferre Net income $ Provision for income tax 4,672 14,531 4,177 Net income $ 19,478 for income tax 4,672 14,531 4,177 Net income $ 19,478 $ 14,531 4,177 Net income $ 19,478 $ 12,662 $ 30,736 Basic Net income $ 19,478 $ 12,662 $ 30,736 Basic net income $ 19,478 $ 12,662 $ 30,736 Basic net income per share Class C capital stock $ 28.32 $ 18.27 $ 44.22 Diluted capital stock $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share Class C capital stock $ 27.85 $ 18.00 $ 43.70 S Net income $ Ended December 31 , 2016 2017 2018 Net income $ 19,478 December 31 , 2016 2017 2018 Net income $ 19,478 $ 2017 2018 Net income $ 19,478 $ 12,662 $ 30,736 Other Net income $ 19,478 $ 12,662 $ 30,736 Other comprehensive income $ 19,478 $ 12,662 $ 30,736 Other comprehensive income ( loss foreign currency translation adjustment ( 599 ) 1,543 ( 781 ) translation adjustment ( 599 ) 1,543 ( 781 ) Available-for-sale investment ( 599 ) 1,543 ( 781 ) Available-for-sale investment : Change gain ( loss ) net income 221 105 ( 911 ) Net included in net income 221 105 ( 911 ) Net change net income 221 105 ( 911 ) Net change ( net of tax effect of $ 0 , $ 0 , and of $ 0 , $ 0 , and $ 156 ) $ 0 , and $ 156 ) ( 93 ) 412 and $ 156 ) ( 93 ) 412 ( 823 ) 156 ) ( 93 ) 412 ( 823 ) Cash flow ( 93 ) 412 ( 823 ) Cash flow hedge : unrealized gain ( loss ) 515 ( 638 ) 290 Less ( loss ) 515 ( 638 ) 290 Less : reclassification ) 515 ( 638 ) 290 Less : reclassification adjustment for included in net income ( 351 ) 93 98 Net net income ( 351 ) 93 98 Net change ( net income ( 351 ) 93 98 Net change ( net of of tax effect of $ 64 , $ 247 , and of $ 64 , $ 247 , and $ 103 ) $ 247 , and $ 103 ) 164 ( 545 ) , and $ 103 ) 164 ( 545 ) 388 Other $ 103 ) 164 ( 545 ) 388 Other comprehensive income ) 164 ( 545 ) 388 Other comprehensive income ( loss income ( loss ) ( 528 ) 1,410 ( 1,216 ) loss ) ( 528 ) 1,410 ( 1,216 ) Comprehensive income ( 528 ) 1,410 ( 1,216 ) Comprehensive income $ 18,950 1,216 ) Comprehensive income $ 18,950 $ 14,0 Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehensive loss 0 0 ( 528 ) 0 19,478 Other comprehensive loss 0 0 ( 528 ) 0 ( comprehensive loss 0 0 ( 528 ) 0 ( 528 ) 0 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) B Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income 0 income 0 0 0 12,662 12,662 Other comprehensive income 0 0 12,662 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance 12,662 Other compreh Net income of subsidiary share 0 659 0 0 659 Net income 0 subsidiary share 0 659 0 0 659 Net income 0 0 share 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive loss Net income 0 0 0 30,736 30,736 Other comprehensive loss 0 income 0 0 0 30,736 30,736 Other comprehensive loss 0 0 30,736 30,736 Other comprehensive loss 0 0 ( 1,216 ) 0 30,736 Other comprehensive loss 0 0 ( Net income December 31 , 2016 2017 2018 Operating activity Net income $ Operating activity Net income $ 19,478 $ 12,662 $ 30,736 Adjustments Net income $ 19,478 $ 12,662 $ 30,736 Adjustments : Depreciation $ 19,478 $ 12,662 $ 30,736 Adjustments : Depreciation and impairment impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of intan Net Income Per Share In the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , the net , 2016 , 2017 and 2018 , the net income per of Incorporation of Alphabet Inc. 74 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Allocation of undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator Numb net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 Year per share $ 27.85 $ 27.85 $ 27.85 Year Ended December $ 27.85 $ 27.85 $ 27.85 Year Ended December 31 , $ 27.85 Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator undistributed earnings $ 5 net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 75 per share $ 18.00 $ 18.00 $ 18.00 75 Table of $ 18.00 $ 18.00 $ 18.00 75 Table of Contents Alphabet 18.00 $ 18.00 $ 18.00 75 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 Note per share $ 43.70 $ 43.70 $ 43.70 Note 12 . $ 43.70 $ 43.70 $ 43.70 Note 12 . Compensation Plans $ 43.70 $ 43.70 Note 12 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . RSUs granted to granted to participant under the 2012 Stock Plan", + "assets": "Assets Current asset As of December 31 , 2018 Assets Current asset : Cash Cash and cash equivalent $ 10,715 $ 16,701 Marketable security 91,156 cash equivalent $ 10,715 $ 16,701 Marketable security 91,156 92,439 Total 10,715 $ 16,701 Marketable security 91,156 92,439 Total cash , cash $ 16,701 Marketable security 91,156 92,439 Total cash , cash equivalent equivalent , and marketable security 101,871 109,140 Accounts receivable , net , and marketable security 101,871 109,140 Accounts receivable , net o Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 51 $ 29 $ 80 Total non-current asset $ 51 $ 29 $ 80 Total $ 51 $ 51 $ 29 $ 80 Total $ 51 $ 29 29 $ 80 Total $ 51 $ 29 $ 80 Derivative 80 Total $ 51 $ 29 $ 80 Derivative Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 459 $ 54 $ 513 Total non-current asset $ 459 $ 54 $ 513 Total $ 459 $ 459 $ 54 $ 513 Total $ 459 $ 54 54 $ 513 Total $ 459 $ 54 $ 513 Derivative 513 Total $ 459 $ 54 $ 513 Derivative Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 2 Assets As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 102 $ ( 22 ) $ Derivatives $ 102 $ ( 22 ) $ 80 $ ( $ ( 22 ) $ 80 $ ( 64 ) ( ) $ 80 $ ( 64 ) ( 1 ) $ $ ( 64 ) ( 1 ) $ ( 4 ) ( 1 ) $ ( 4 ) $ ( 2 ) ( 4 ) $ ( 2 ) $ 10 As of $ ( 2 ) $ 10 As of December 31 , $ 10 As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 569 $ ( 56 ) $ Derivatives $ 569 Assets $ 17,521 $ 367 $ 17,888 Other Intangible Assets Information regarding ) : As of December 31 , 2017 Gross Carrying Amount As of December 31 , 2017 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,260 $ 3,040 $ 2,220 Customer developed technology $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 263 96 3,040 $ 2,220 Customer relationship 359 263 96 Trade name and $ 2,220 Customer relationship 359 263 96 Trade nam", + "liabilities": "Liabilities \u201d in January 2018 , we adjust the carrying income ( expense ) . 17 Table of Contents Alphabet Inc. For example , from January 1 , 2018 through December 31 , from January 1 , 2018 through December 31 , 2018 1 , 2018 through December 31 , 2018 , the closing 2018 through December 31 , 2018 , the closing price of common stock ranged from $ 984.66 per share to $ 1,285.50 984.66 per share to $ 1,285.50 per share , and the capital stock ranged from $ 976.21 to $ 1,268.32 per share from $ 976.21 to $ 1 Liabilities and Stockholders Total asset $ 197,295 $ 232,792 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 3,137 $ 4,378 Accrued compensation and Accounts payable $ 3,137 $ 4,378 Accrued compensation and benefit 4,581 4,378 Accrued compensation and benefit 4,581 6,839 Accrued expense and other Accrued compensation and benefit 4,581 6,839 Accrued expense and other current expense and other current liability 10,177 16,958 Accrued revenue share 3,975 and other current liability 10,177 1 Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total $ 230 $ 122 122 $ 352 Total $ 230 $ 122 $ 352 As 352 Total $ 230 $ 122 $ 352 As of December $ 230 $ 122 $ 352 As of December 31 , $ 352 As of December 31 , 2018 Balance Sheet Location As of December 31 , 2018 Balance Sheet Location Fair Value Value Derivati Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 233 Total $ 5 $ 228 228 $ 233 Total $ 5 $ 228 $ 233 The 233 Total $ 5 $ 228 $ 233 The gain ( $ 5 $ 228 $ 233 The gain ( loss ) Tax Effect Year Ended December 31 , 2016 2017 2018 Derivatives Year Ended December 31 , 2016 2017 2018 Derivatives in Cash Ended December 31 , 20 Liabilities As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 374 $ ( 22 ) $ Derivatives $ 374 $ ( 22 ) $ 352 $ ( $ ( 22 ) $ 352 $ ( 64 ) ( ) $ 352 $ ( 64 ) ( 2 ) $ $ ( 64 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 288 As 2 ) $ 0 $ 0 $ 288 As of December $ 0 $ 0 $ 288 As of December 31 , $ 288 As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 289 $ (", + "equity": "Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 24 6 . Selected Financial Data 24 Item 7 . Management \u2019 Selected Financial Data 24 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 25 Item 7A . Quantitative and Results of Operations 25 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 40 Item 8 . Financial Statements About Market Risk 40 Item 8 . Financial Statements and Supplement EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public \u201c GOOG \u201d since April 3 , 2014 . Holders of \u201d since April 3 , 2014 . Holde equity $ Total stockholder \u2019 equity $ 103,860 $ 120,331 $ 139,036 $ \u2019 equity $ 103,860 $ 120,331 $ 139,036 $ 152,502 $ $ 103,860 $ 120,331 $ 139,036 $ 152,502 $ 177,628 24 $ 120,331 $ 139,036 $ 152,502 $ 177,628 24 Table of $ 139,036 $ 152,502 $ 177,628 24 Table of Contents Alphabet 139,036 $ 152,502 $ 177,628 24 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Busine Equity Securities Beginning on January 1 , 2018 , our non-marketable Beginning on January 1 , 2018 , our non-marketable equity security upon the adoption of ASU 2016-01 . Under the measurement alternative at fair value . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced in contract . If an adverse 10 % foreign currency exchange rate income tax of approximately $ 52 million and $ 1 million $ 52 million and $ 1 million a of December 31 1 million a of equity security by $ 120 million . Our non-marketable equity ( referred to a the 41 Table of Contents Alphabet Inc. investment . As of December 31 , 2018 , the carrying As of December 31 , 2018 , the carrying value of measurement alternative , wa $ 12.3 billion . Valuations of our , please refer to Note 1 and Note 3 of the to Note 1 and Note 3 of the Notes to Consolidated this Annual Report on Form 10-K. 42 Table of Contents Alphabet Annual Report on Form 10-K. 42 Table of Contents Alphabet Inc Conten Equity 49 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 51 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption \u201c Quarterly Results of Operations . \u201d 43 Table of Contents Alphabet Inc. Company ) a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , the related December 31 , Equity liability : Accounts payable $ 3,137 $ 4,378 Accrued compensation and Accounts payable $ 3,137 $ 4,378 Accrued compensation and benefit 4,581 4,378 Accrued compensation and benefit 4,581 6,839 Accrued expense and other Accrued compensation and benefit 4,581 6,839 Accrued expense and other current expense and other current liability 10,177 16,958 Accrued revenue share 3,975 and other current liability 10,177 16,958 Accrued revenue share 3,975 4,592 10,177 16,958 Accrued revenue share 3,975 4,592 equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 694, equity 2,306 ) Retained earnings 113,247 134,885 Total stockholder \u2019 equity 152,502 134,885 Total stockholder \u2019 equity 152,502 177,628 Total liability and stockholder Total stockholder \u2019 equity 152,502 177,628 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 197,295 $ 232,792 See accompanying note \u2019 equity $ 197,295 $ 232,792 See accompanying note . 46 232,792 See accompanying note . 46 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2016 2017 2018 Revenues Year Ended Dece equity security , net 73 37 ( 6,650 ) Other equity security , net 73 37 ( 6,650 ) Other 376 , net 73 37 ( 6,650 ) Other 376 294 ( 37 ( 6,650 ) Other 376 294 ( 189 ) Changes ( 6,650 ) Other 376 294 ( 189 ) Changes in ) Other 376 294 ( 189 ) Changes in asset and acquisition : Accounts receivable ( 2,578 ) ( 3,768 ) ( receivable ( 2,578 ) ( 3,768 ) ( 2,169 ) Income ) ( 3,768 ) ( 2,169 ) Income tax , net ) Income tax , net 3,125 8,211 ( 2,251 ) Other Income tax , net 3,125 8,211 ( 2,251 ) Other asset , ne equity security upon the adoption of ASU 2016-01 . Under the measurement alternative the following criterion : ( 1 ) ha the power to the VIE ; and ( 2 ) ha the obligation to over period of seven to 25 year . We generally depreciate Land is not depreciated . 53 Table of Contents Alphabet Inc benefit that is greater than 50 % likely to be realized expense ) , net . 54 Table of Contents Alphabet Inc. For the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December equity security , see Note 3 . In October 2016 , Note 3 . In October 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-16 ( ASU 2016-16 ) `` No . 2016-16 ( ASU 2016-16 ) `` Income Taxes ( `` Income Taxes ( Topic 740 ) : Intra-Entity Transfers of than Inventory . `` ASU 2016-16 generally accelerates the recognition of control . We adopted ASU 2016-16 a of January 1 , ASU 2016-16 a of January 1 , 2018 using a modified a of January 1 , 2018 using a modified retrospective transition equity security . 59 Table of Contents Alphabet Inc. value and classified within Level 1 and 2 in the fair classified within Level 1 and 2 in the fair value hierarchy market . Prior to January 1 , 2018 , we accounted Prior to January 1 , 2018 , we accounted for the , net . Starting January 1 , 2018 , upon our . Starting January 1 , 2018 , upon our adoption of upon our adoption of ASU 2016-01 , unrealized gain and loss adoption , we reclassified $ 98 million net unrealized gain related investment categ equity security market fund $ 1,833 $ 0 Marketable equity security 0 340 $ 0 Marketable equity security 0 340 1,833 340 Level 2 0 Marketable equity security 0 340 1,833 340 Level 2 : Marketable equity security 0 340 1,833 340 Level 2 : Mutual equity security 0 340 1,833 340 Level 2 : Mutual fund 0 340 1,833 340 Level 2 : Mutual fund ( 1 2 : Mutual fund ( 1 ) 0 252 Total $ Mutual fund ( 1 ) 0 252 Total $ 1,833 $ fund ( 1 ) 0 252 Total $ 1,833 $ 592 ) 0 252 Total $ 1,833 $ 592 ( 1 ) 252 Total $ 1,833 $ equity security market fund $ 3,493 $ 0 Marketable equity security 0 994 $ 0 Marketable equity security 0 994 3,493 994 Level 2 0 Marketable equity security 0 994 3,493 994 Level 2 : Marketable equity security 0 994 3,493 994 Level 2 : Mutual equity security 0 994 3,493 994 Level 2 : Mutual fund 0 994 3,493 994 Level 2 : Mutual fund 0 228 Level 2 : Mutual fund 0 228 Total $ 3,493 $ 2 : Mutual fund 0 228 Total $ 3,493 $ 1,222 fund 0 228 Total $ 3,493 $ 1,222 Non-marketable equity security 228 Total $ 3 equity security Our non-marketable value . Prior to January 1 , 2018 , we accounted Prior to January 1 , 2018 , we accounted for our net . As of December 31 , 2017 , non-marketable equity As of December 31 , 2017 , non-marketable equity security accounted a carrying value of $ 4.5 billion and a fair value fair value of approximately $ 8.8 billion . On January 1 8.8 billion . On January 1 , 2018 , we adopted . On January 1 , 2018 , we adopted ASU 2016-01 2018 , we adopted ASU 2016-01 which changed the equity security $ 4,107 The following table summarizes the security held a of December 31 , 2018 including cumulative unrealized a of December 31 , 2018 including cumulative unrealized upward and : Initial cost basis ( 1 ) $ 8,168 Upward adjustment basis ( 1 ) $ 8,168 Upward adjustment 4,285 Downward adjustment ) $ 8,168 Upward adjustment 4,285 Downward adjustment ( including impairment ( including impairment ) ( 178 ) Total carrying value at end of the period $ 12,275 ( 1 ) Includes $ the period $ 12 equity a non-marketable debt security during 2018 . During the year ended During the year ended December 31 , 2018 , included in year ended December 31 , 2018 , included in the $ , included in the $ 12.3 billion of non-marketable equity security non-marketable equity security , $ 6.9 billion were measured at fair net unrealized gain of $ 4.1 billion . Gains and loss for the year ended December 31 , 2018 are summarized below year ended December 31 , 2018 are summarized below ( in : Twelve Months Ended equity for the year ended December 31 , 2018 . Equity security year ended December 31 , 2018 . Equity security accounted for Equity Method As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , equity security December 31 , 2017 and 2018 , equity security accounted for carrying value of approximately $ 1.4 billion and $ 1.3 billion $ 1.4 billion and $ 1.3 billion , respectively . Our of Income . See Note 6 for further detail on other derivative contract primarily within Level 2 in the equity security , net ( 20 ) 73 5,460 Loss and , net ( 20 ) 73 5,460 Loss and impairment from net ( 20 ) 73 5,460 Loss and impairment from equity method investment , net ( 202 ) ( 156 ) ( net ( 202 ) ( 156 ) ( 120 ) Other ) ( 156 ) ( 120 ) Other 88 158 378 ) ( 120 ) Other 88 158 378 Other income ( ( 120 ) Other 88 158 378 Other income ( expense 120 ) Other 88 158 378 Other income ( expense ) expense ) , net $ 434 $ 1,047 $ 8,592 ( , net $ 434 $ 1,047 $ 8,592 ( 1 ) $ 434 $ 1,047 $ 8,592 ( 1 ) Interest Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , no share December 31 , 2017 and 2018 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2016 , the board of director to repurchase up to $ 7.0 billion of it Class C , which wa completed during 2018 . In January 2 equity security , see Note 3 ) were accrued and recorded and administrative expense . Note 13 . Income Taxes Income from from domestic operation of $ 12.0 billion , $ 10.7 billion $ 12.0 billion , $ 10.7 billion , and $ 15.8 10.7 billion , and $ 15.8 billion for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively , and income from foreign operation of $ 12 equity security recognized in 2018 , we released the valuation Home business to Arris in 2013 . We continue to reassess expense ) , see Note 1 . 79 Table of Contents , see Note 1 . 79 Table of Contents Alphabet Inc unrecognized tax benefit from January 1 , 2016 to December 31 benefit from January 1 , 2016 to December 31 , 2018 1 , 2016 to December 31 , 2018 ( in million 2016 to December 31 , 2018 ( in million ) : ( in million ) : 2016 2017 2018 Beginning gross unrecognized in million ) : 2016 2017 201 Equity 49 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 51 2 . Financial Statement Schedules to Consolidated Financial Statements 51 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 ( December 31 , 2016 , 2017 and 2018 ( in million , 2016 , 2017 and 2018 ( in million ) : of Year Year ended Decembe Equity 2010 10.09 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.09.1 u Apigee 333-214573 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 Equity 2016 10.09.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 14.01 Code of 333-214573 ) Novembe", + "cash_flow": "cash flow Operating cash flow wa $ 48.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 25.1 billion . \u2022 Number of \u2022 Number of employee wa 98,771 a of December 31 , wa 98,771 a of December 31 , 2018 . Information about a of December 31 , 2018 . Information about Segments We through Verily . In Q1 2018 , Nest joined Google \u2019 result are not affected . 26 Table of Contents Alphabet Inc . Please refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annua Cash flow ( 93 ) 412 ( 823 ) Cash flow hedge : unrealized gain ( loss ) 515 ( 638 ) 290 Less ( loss ) 515 ( 638 ) 290 Less : reclassification ) 515 ( 638 ) 290 Less : reclassification adjustment for included in net income ( 351 ) 93 98 Net change net income ( 351 ) 93 98 Net change ( net income ( 351 ) 93 98 Net change ( net of of tax effect of $ 64 , $ 247 , and of $ 64 , $ 247 , and $ 103 ) $ 247 , and $ 103 ) 164 ( 545 ) , and $ 103 ) 164 ( 545 ) 388 Other $ 103 ) 164 ( 545 ) 388 Other comprehensive i cash flow , net of refund $ 1,643 $ 6,191 $ 5,671 Cash of refund $ 1,643 $ 6,191 $ 5,671 Cash paid for $ 1,643 $ 6,191 $ 5,671 Cash paid for interest , net of amount capitalized $ 84 $ 84 $ 69 See amount capitalized $ 84 $ 84 $ 69 See accompanying note $ 84 $ 84 $ 69 See accompanying note . 50 69 See accompanying note . 50 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State Stat Cash Flow December 31 , 2016 2017 2018 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 773 $ ( 955 ) $ effectiveness $ 773 $ ( 955 ) $ 332 Amount excluded $ ( 955 ) $ 332 Amount excluded from the assessment from the assessment of effectiveness 0 0 26 Derivatives in Net the assessment of effectiveness 0 0 26 Derivatives in Net Investment assessment of effectiveness 0 0 26 Derivatives in Net Investment Hedging in the assessment of effectiveness 0 0 136 Total $ 773 the assessment of effec", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 59,647 82,507 Less : accumulated depreciation ( Less : accumulated depreciation ( 17,264 ) ( 22,788 ) Property depreciation ( 17,264 ) ( 22,788 ) Property and equipment , and equipment , net $ 42,383 $ 59,719 67 Table of , net $ 42,383 $ 59,719 67 Table of Contents Alphabet net $ 42,383 $ 59,719 67 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , asset under December 31 , 2017 and 2018 , asset under capit", + "capital_expenditure": "Capital expenditure \u2022 Capital expenditure were $ 25.1 billion . \u2022 Number of \u2022 Number of employee wa 98,771 a of December 31 , wa 98,771 a of December 31 , 2018 . Information about a of December 31 , 2018 . Information about Segments We through Verily . In Q1 2018 , Nest joined Google \u2019 result are not affected . 26 Table of Contents Alphabet Inc . Please refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Revenues ) : Y Capital expenditure : Ended December 31 , 2016 2017 2018 Capital expenditure : Google December 31 , 2016 2017 2018 Capital expenditure : Google $ Capital expenditure : Google $ 9,437 $ 12,619 $ 25,460 Other : Google $ 9,437 $ 12,619 $ 25,460 Other Bets 1,365 $ 9,437 $ 12,619 $ 25,460 Other Bets 1,365 493 181 12,619 $ 25,460 Other Bets 1,365 493 181 Reconciling item ( $ 25,460 Other Bets 1,365 493 181 Reconciling item ( 2 25,460 Other Bets 1,365 493 181 Reconciling item ( 2 ) 493 181 Reconciling item ( 2 ) ( 590 ) capital expenditure a Statements of Cash Flows $ 10,212 $ 13,184 $ 25,139 ( Cash Flows $ 10,212 $ 13,184 $ 25,139 ( 2 ) $ 10,212 $ 13,184 $ 25,139 ( 2 ) Reconciling item $ 13,184 $ 25,139 ( 2 ) Reconciling item are related and other miscellaneous difference . 81 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Stock-based Year Ended December 31 , 2016 2017 2018 Stock-based compensation : Ended December 31 , 2016 2017 2018 Stock-based compensation : Google December 31 , 2016 2017 2018 Sto", + "debt": "debt ( 2 ) 7,433 5,132 1,407 370 524 Long-term debt obligation 2 ) 7,433 5,132 1,407 370 524 Long-term debt obligation ( ) 7,433 5,132 1,407 370 524 Long-term debt obligation ( 3 524 Long-term debt obligation ( 3 ) 4,689 134 1,220 154 debt obligation ( 3 ) 4,689 134 1,220 154 3,181 Tax obligation ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 4 ) 4,689 134 1,220 154 3,181 Tax payable ( 4 ) 154 3,181 Tax payable ( debt , refer to Note 5 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 13 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 3.9 billion a of December 31 3.9 billion a of December 31 , 2018 primarily related to a of Decem debt security a of December 31 , 2017 and 2018 are a of December 31 , 2017 and 2018 are shown below December 31 , 2017 and 2018 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2017 2018 2017 2018 As of December 31 , 2017 2018 2017 2018 Risk Category of December 31 , 2017 2018 2017 2018 Risk Category - December 31 , 2017 2018 2017 2018 Risk Category - Interest 31 , 2017 2018 2017 2018 Risk debt 3,969 4,012 69 Total current liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 340 4,012 Deferred revenue , non-current 340 396 Income tax payable , Deferred revenue , non-current 340 396 Income tax payable , non-current Income tax payable , non-current 12,812 11,327 Deferred income tax 430 tax payable , non-current 12,812 11,327 Def debt , net of cost 8,729 4,291 6,766 Repayments of debt , net of cost 8,729 4,291 6,766 Repayments of debt ( net of cost 8,729 4,291 6,766 Repayments of debt ( 10,064 6,766 Repayments of debt ( 10,064 ) ( 4,377 ) ( debt ( 10,064 ) ( 4,377 ) ( 6,827 ) Proceeds ) ( 4,377 ) ( 6,827 ) Proceeds from sale of from sale of subsidiary share 0 800 950 Net cash used sale of subsidiary share 0 800 950 Net cash used in of subsidiary share 0 800 950 Net cash used in financing used in financing activity ( 8,332 ) Debt Securities marketable debt security within Level 2 in the fair value hierarchy fair value . In January 2018 , we reclassified our U.S. marketable debt security from Level 1 to Level 2 within the from Level 1 to Level 2 within the fair value hierarchy non-marketable debt security within Level 3 in the fair value hierarchy estimate the fair value of 57 Table of Contents Alphabet Inc. investment category a of December 31 , 2017 and 2018 ( a of December 31 , 2017 and 2018 ( in million December 31 , debt 10 ( 406 ) 51,152 1,241 49,911 0 Corporate debt security ( 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 21 49,911 0 Corporate debt security 24,269 21 ( 135 ) 24,155 0 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 0 24,269 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and asset-backed ( 135 ) 24,155 126 24,029 0 Mort debt 92,288 1,724 90,564 0 Level 3 : Non-marketable debt security 1,083 3 : Non-marketable debt security 1,083 811 0 1,894 0 0 : Non-marketable debt security 1,083 811 0 1,894 0 0 1,894 Non-marketable debt security 1,083 811 0 1,894 0 0 1,894 Total debt security 1,083 811 0 1,894 0 0 1,894 Total $ security 1,083 811 0 1,894 0 0 1,894 Total $ 94,048 1,083 811 0 1,894 0 0 1,894 Total $ 94,048 $ 811 0 1,894 0 0 1,894 Total $ 94,048 $ 855 0 0 1,894 Total $ 94,048 $ 855 $ ( 721 1,894 Total $ 94,048 $ 855 debt 71 ( 414 ) 53,291 3,717 49,574 0 Corporate debt security ( 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 15 49,574 0 Corporate debt security 25,383 15 ( 316 ) 25,082 0 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 0 25,383 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and asset-backed ( 316 ) 25,082 44 25,038 0 Mortgage- debt 97,180 5,963 91,217 0 Level 3 : Non-marketable debt security 147 3 : Non-marketable debt security 147 116 0 263 0 0 : Non-marketable debt security 147 116 0 263 0 0 263 Non-marketable debt security 147 116 0 263 0 0 263 Total debt security 147 116 0 263 0 0 263 Total $ security 147 116 0 263 0 0 263 Total $ 98,284 147 116 0 263 0 0 263 Total $ 98,284 $ 116 0 263 0 0 263 Total $ 98,284 $ 213 0 0 263 Total $ 98,284 $ 213 $ ( 1,054 263 Total $ 98,284 $ 213 $ ( 1,054 ) $ 98,284 $ 213 $ ( 1,054 ) $ debt security 18,300 406 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed and ( 21 ) 20,010 ( 135 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,061 ( 105 ) 3,449 ( and asset-backed security 11,061 ( 105 ) 3,449 ( 75 ) security 11,061 ( 105 ) 3,449 ( 75 ) 14,510 ( ( 105 ) 3,449 ( debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8, debt security during 2018 . During the year ended During the year ended December 31 , 2018 , included in year ended December 31 , 2018 , included in the $ , included in the $ 12.3 billion of non-marketable equity security non-marketable equity security , $ 6.9 billion were measured at fair net unrealized gain of $ 4.1 billion . Gains and loss for the year ended December 31 , 2018 are summarized below year ended December 31 , 2018 are summarized below ( in : Twelve Months Ended December 31 , 2018 Rea Debt 2017 and 2018 . Note 5 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2017 and 2018 . a of December 31 , 2017 and 2018 . Long-Term Debt December 31 , 2017 and 2018 . Long-Term Debt Google issued Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and debt $ 3,950 Capital lease obligation 26 62 Total long-term debt $ 3,969 62 Total long-term debt $ 3,969 $ 4,012 ( 1 ) long-term debt $ 3,969 $ 4,012 ( 1 ) Includes the $ 3,969 $ 4,012 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 debt security , net ( 3 ) ( 53 ) ( net ( 3 ) ( 53 ) ( 110 ) 1,190 ) ( 53 ) ( 110 ) 1,190 Gain ( loss 53 ) ( 110 ) 1,190 Gain ( loss ) on equity security , net ( 20 ) 73 5,460 Loss and , net ( 20 ) 73 5,460 Loss and impairment from net ( 20 ) 73 5,460 Loss and impairment from equity method investment , net ( 202 ) ( 156 ) ( net ( 202 ) ( 156 ) ( 120 ) Other ) ( 156 ) ( 120 ) Other 88 158 378 ) ( 120 ) Other 88 158 378 Other income ( ( 120 ) Other 88 158 378 Other income ( expense 120 ) Other 88 158 3", + "share_repurchase": "share repurchase ; 1 Table of Contents Alphabet Inc. the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management \u2019 s Discussion this Annual Report on Form 10-K , and in particular , the risk discussed in Item 1A , `` Risk Factors `` any of these company . 2 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder central Kenya , starting in 2019 . Moonshots Many company get of incredible creativity share repurchase . ( 2 ) Average price paid per associated with the repurchase . 21 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2013 to December 31 ) from December 31 , 2013 to December 31 , 2018 31 , 2013 to December 31 , 2018 . The return 2013 to December 31 , 2018 . The return shown are future performance . COMPARISO", + "tax_rate": "tax rate wa 12 % . \u2022 Net income \u2022 Net income wa $ 30.7 billion with diluted net income income per share of $ 43.70 . \u2022 Operating cash flow Operating cash flow wa $ 48.0 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 25.1 billion . \u2022 Number of \u2022 Number of employee wa 98,771 a of December 31 , wa 98,771 a of December 31 , 2018 . Information about a of December 31 , 2018 . Information about Segments We through Verily . In Q1 2018 , Nest joined Google \u2019 result are not affected . 26 Table of Co tax rate $ 4,672 $ 14,531 $ 4,177 Effective tax rate 19.3 % $ 4,177 Effective tax rate 19.3 % 53.4 % 12.0 % Effective tax rate 19.3 % 53.4 % 12.0 % Our provision rate 19.3 % 53.4 % 12.0 % Our provision for income effective tax rate decreased from 2017 to 2018 , due to rate decreased from 2017 to 2018 , due to the U.S. which wa enacted in December 2017 . Please refer to Note . Please refer to Note 13 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K tax rate increased from 2016 to 2017 , due to rate increased from 2016 to 2017 , due to the effect income tax . Effective in 2018 , the Tax Act reduces U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2018 . This table quarter ended December 31 , 2018 . This table includes all rate . Quarter Ended Mar 31 , 2017 Jun 30 , tax rate from 35 % to 21 % and rate from 35 % to 21 % and created new tax and certain related-party payment . 77 Table of Contents Alphabet Inc. financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collected and been completed a of December 31 , 2018 . One-time transition a of December 31 , 2018 . One-time transition tax The tax at a rate of 15.5 % to the extent of other net current asset and 8 % on the remaining earnings income tax expense of $ 10.2 billion a of December tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 21.0 % statutory tax rate 35.0 % 35.0 % 21.0 % Foreign income rate 35.0 % 35.0 % 21.0 % Foreign income taxed at taxed at different rate ( 11.0 ) ( 14.2 ) ( rate ( 11.0 ) ( 14.2 ) ( 4.9 ) Effect ) ( 14.2 ) ( 4.9 ) Effect of the Tax Tax Act One-time transition tax 0.0 37.6 ( 0.1 ) Deferred Act One-time transition tax 0.0 37.6 ( 0.1 ) Deferred tax transition tax 0.0 37.6 ( 0.1 ) Deferred tax effect 0.0 0.1 ) Deferred tax effect 0.0 ( 1.4 ) ( 1.2 Deferr tax rate adjustment 0.6 ( 1.7 ) 0.7 Effective tax rate 19.3 % ) 0.7 Effective tax rate 19.3 % 53.4 % 12.0 % Effective tax rate 19.3 % 53.4 % 12.0 % Our effective rate 19.3 % 53.4 % 12.0 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The IRS decision on tax rate from 35 % to 21 % resulting rate from 35 % to 21 % resulting from the Tax ) : As of December 31 , 2017 2018 Deferred tax As of December 31 , 2017 2018 Deferred tax asset : of December 31 , 2017 2018 Deferred tax asset : Stock-based : Stock-based compensation expense $ 251 $ 291 Accrued employee benefit compensation expense $ 251 $ 291 Accrued employee benefit 285 387 $ 291 Accrued employee benefit 285 387 Accruals and reserve not 291 Accrued employee benefit 285 387 Accruals and reserve not cur", + "segment_revenue": "segment revenue of $ 136.2 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 595 million with revenue growth of million with revenue growth of 25 % year over year . and Other Americas were $ 63.3 billion , $ 44.6 billion $ 63.3 billion , $ 44.6 billion , $ 21.4 billion $ 44.6 billion , $ 21.4 billion , and $ 7.6 21.4 billion , and $ 7.6 billion , respectively . \u2022 Cost of revenue wa $ 59.5 billion , consisting of TAC consisting of TAC of $ 26.7 billion segment revenue 116,318 Google other revenue 10,601 15,003 19,906 Google segment revenue $ Google other revenue 10,601 15,003 19,906 Google segment revenue $ 89,984 19,906 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Other segment revenue $ 89,984 $ 110,378 $ 136,224 Other Bets Other $ 89,984 $ 110,378 $ 136,224 Other Bets Other Bets revenue Bets Other Bets revenue $ 288 $ 477 $ 595 Revenues Bets revenue $ 288 $ 477 $ 595 Revenues $ 90,272 $ 288 $ 477 $ 595 Revenues $ 90,272 $ 110,855 477 $ 595 Revenues segment revenue Ended December 31 , 2016 2017 2018 Google segment revenue $ December 31 , 2016 2017 2018 Google segment revenue $ 89,984 2018 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue a a a percentage of total revenue 99.7 % 99.6 % 99.6 % of total revenue 99.7 % 99.6 % 99.6 % Use of revenue 99.7 % 99.6 % 99.6 % Use of Monetization Metrics a result , in Q1 2018 , we transition segment revenue 70.9 % 70.5 % 70.7 % Google segment revenue 70.9 % 70.5 % 70.7 % Paid click revenue 70.9 % 70.5 % 70.7 % Paid click change 54 70.7 % Paid click change 54 % 62 % Cost-per-click change Paid click change 54 % 62 % Cost-per-click change ( 21 62 % Cost-per-click change ( 21 ) % ( 25 ) ( 21 ) % ( 25 ) % Google property revenue Google property revenue increased $ 18,548 million from 2017 to 2018 increased $ 18,548 million from 2017 to 2018 and increased $ 18,548 million from 2017 to 2018 and increased segment revenue 17.3 % 15.9 % 14.7 % Google segment revenue 17.3 % 15.9 % 14.7 % Impressions change revenue 17.3 % 15.9 % 14.7 % Impressions change 3 % % 14.7 % Impressions change 3 % 2 % Cost-per-impression change % Impressions change 3 % 2 % Cost-per-impression change 8 % % 2 % Cost-per-impression change 8 % 12 % Google Network % Cost-per-impression change 8 % 12 % Google Network Members ' ' property revenue increased $ 2,395 million from 2017 to 2018 increased $ 2,395 million from 2017 to 2018 . The growth segment revenue 11.8 % 13.6 % 14.6 % Google segment revenue 11.8 % 13.6 % 14.6 % Google other revenue 11.8 % 13.6 % 14.6 % Google other revenue consist Google other revenue increased $ 4,903 million from 2017 to 2018 increased $ 4,903 million from 2017 to 2018 . The increase 4,903 million from 2017 to 2018 . The increase wa primarily Google other revenue increased $ 4,402 million from 2016 to 2017 increased $ 4,402 million from 2016 to 2017 . The increase 4,402 million from 2016 to 2017 . The increase wa prima", + "investment_gains_losses": "Investment gains", + "common_stock": "Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 193 common stock outstanding , 46,535,019 share of the registrant \u2019 common stock outstanding , and 349,291,348 share of the registrant \u2019 s Proxy Statement for the 2019 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2018 . Table of year ended December 31 , 2018 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock ranged from $ 984.66 per share to $ 1,285.50 984.66 per share to $ 1,285.50 per share , and the capital stock ranged from $ 976.21 to $ 1,268.32 per share from $ 976.21 to $ 1,268.32 per share . In addition performance of those company . 18 Table of Contents Alphabet Inc our cash reserve . In 2016 and 2018 , the board reserve . In 2016 and 2018 , the board of director to repurchase up to $ 7.0 billion and $ 8.6 billion $ 7.0 billion and $ 8.6 billion of it Class C stock , respectively . The 201 common stock ha 10 vote per share , our right . As of December 31 , 2018 , Larry Page As of December 31 , 2018 , Larry Page , Sergey E. Schmidt beneficially owned approximately 92.8 % of our outstanding Class stock , which represented approximately 56.5 % of the voting power attempt to acquire u . 19 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it by such restriction . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are common stock all dividend ) from December 31 , 2013 to December 31 ) from December 31 , 2013 to December 31 , 2018 31 , 2013 to December 31 , 2018 . The return 2013 to December 31 , 2018 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2013 in stock or invested on December 31 , 2013 in stock or index , . Fiscal year ending December common stock $ 20.91 $ 23.11 $ 28.32 $ common stock $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic net income $ 28.32 $ 18.27 $ 44.22 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 $ Continuing operation $ 20.15 $ 24.63 $ 28.32 $ 18.27 $ $ 20.15 $ 24.63 $ 28.32 $ 18.27 $ 44.22 Discontinued $ 24.63 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 0.00 common stock $ 20.57 $ 22.84 $ 27.85 $ common stock $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted net income $ 27.85 $ 18.00 $ 43.70 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 $ Continuing operation $ 19.82 $ 24.34 $ 27.85 $ 18.00 $ $ 19.82 $ 24.34 $ 27.85 $ 18.00 $ 43.70 Discontinued $ 24.34 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2016 , the board of director to repurchase up to $ 7.0 billion of it Class C , which wa completed during 2018 . In January 2018 , during 2018 . In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program During the year ended December 31 , 2017 and 2018 , year ended December 31 , 2017 and 2018 , we repurchased December 31 , Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , capital stock ranged from $ 976.21 to $ 1,268.32 per share from $ 976.21 to $ 1,268.32 per share . In addition performance of those company . 18 Table of Contents Alphabet Inc our cash reserve . In 2016 and 2018 , the board reserve . In 2016 and 2018 , the board of director to repurchase up to $ 7.0 billion and $ 8.6 billion $ 7.0 billion and $ 8.6 billion of it Class C stock , respectively . The 2016 authorization wa completed in 2018 2016 authorization wa completed in 2018 . As of December 31 2018 . As of capital stock $ 20.91 $ 24.63 $ 28.32 $ capital stock $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 $ Continuing operation $ 19.82 $ 22.84 $ 27.85 $ 18.00 $ $ 19.82 $ 22.84 $ 27.85 $ 18.00 $ 43.70 Discontinued $ 22.84 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.7 capital stock $ 20.57 $ 24.34 $ 27.85 $ capital stock $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ 43.70 As $ 24.34 $ 27.85 $ 18.00 $ 43.70 As of December $ 27.85 $ 18.00 $ 43.70 As of December 31 , $ 43.70 As of December 31 , 2014 2015 2016 2017 As of December 31 , 2014 2015 2016 2017 2018 ( of December 31 , 2014 2015 2016 2017 2018 ( in December 31 , 2014 2015 2016 2017 2018 ( in million 31 , 2014 2015 2016 2017 2018 ( in million ) , 2014 2015 2016 2017 2018 ( in million ) Consolidat capital stock $ 7.85 $ 5.09 $ 9.71 $ capital stock $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 ) $ 5.09 $ 9.71 $ ( 4.35 ) $ 13.53 $ 4.60 $ ( 4.35 ) $ 13.53 $ 4.60 $ 13.21 $ 4.35 ) $ 13.53 $ 4.60 $ 13.21 $ 12.87 Diluted $ 13.53 $ 4.60 $ 13.21 $ 12.87 Diluted net income $ 4.60 $ 13.21 $ 12.87 Diluted net income ( loss Class C capital stock $ 7.73 $ 5.01 $ 9.57 $ capital stock $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 ) $ 5.01 $ 9.57 $ ( 4.35 ) $ 13.33 $ 4.54 $ ( 4.35 ) $ 13.33 capital stock $ 28.32 $ 18.27 $ 44.22 Diluted capital stock $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share Class C capital stock $ 27.85 $ 18.00 $ 43.70 See capital stock $ 27.85 $ 18.00 $ 43.70 See accompanying note $ 27.85 $ 18.00 $ 43.70 See accompanying note . 47 43.70 See accompanying note . 47 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2016 2017 2018 Net Year Ended December 31 , 2016 2017 2018 Net income $ Ended December 31 , 2016 capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 0 issued 9,106 298 0 0 298 Stock-based compensation expense 0 6,700 0 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding Stock-based compensation e capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehen capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of subsidiary share ) Sale of subsidiary share 0 722 0 0 722 Net Sale of subsidiary share 0 722 0 0 722 Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12, capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of subsidiary share ) Sale of subsidiary share 0 659 0 0 659 Net Sale of subsidiary share 0 659 0 0 659 Net income of subsidiary share 0 659 0 0 659 Net income 0 subsidiary share 0 659 0 0 659 Net income 0 0 share 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30, capital stock Repurchases of capital stock ( 3,693 ) ( 4,846 ) ( stock ( 3,693 ) ( 4,846 ) ( 9,075 ) Proceeds ) ( 4,846 ) ( 9,075 ) Proceeds from issuance of debt , net of cost 8,729 4,291 6,766 Repayments of debt , net of cost 8,729 4,291 6,766 Repayments of debt ( net of cost 8,729 4,291 6,766 Repayments of debt ( 10,064 6,766 Repayments of debt ( 10,064 ) ( 4,377 ) ( debt ( 10,064 ) ( 4,377 ) ( 6,827 ) Proceeds ) ( 4,377 ) ( 6,827 ) Proceeds from sale of from sale of subsidiary share 0 800 950 Net cash us Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "debt_securities": "Debt Securities marketable debt security within Level 2 in the fair value hierarchy fair value . In January 2018 , we reclassified our U.S. marketable debt security from Level 1 to Level 2 within the from Level 1 to Level 2 within the fair value hierarchy non-marketable debt security within Level 3 in the fair value hierarchy estimate the fair value of 57 Table of Contents Alphabet Inc. investment category a of December 31 , 2017 and 2018 ( a of December 31 , 2017 and 2018 ( in million December 31 , 2017 and 2", + "corporate_debt": "Corporate debt 10 ( 406 ) 51,152 1,241 49,911 0 Corporate debt security ( 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 21 49,911 0 Corporate debt security 24,269 21 ( 135 ) 24,155 0 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 0 24,269 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and asset-backed ( 135 ) 24,155 126 24,029 0 Mort Corporate debt 71 ( 414 ) 53,291 3,717 49,574 0 Corporate debt security ( 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 15 49,574 0 Corporate debt security 25,383 15 ( 316 ) 25,082 0 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 0 25,383 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and asset-backed ( 316 ) 25,082 44 25,038 0 Mortgage- Corporate debt security 18,300 406 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed and ( 21 ) 20,010 ( 135 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,061 ( 105 ) 3,449 ( and asset-backed security 11,061 ( 105 ) 3,449 ( 75 ) security 11,061 ( 105 ) 3,449 ( 75 ) 14,510 ( ( 105 ) 3,449 ( Corporate debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8," +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-20-000008/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-20-000008/full-submission_features.json new file mode 100644 index 0000000..5b58b22 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-20-000008/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue from display of ad online in 2019 . Many of our advertiser competitive . If our competitor 9 Table of Contents Alphabet Inc. of our future performance . 10 Table of Contents Alphabet Inc. center upgrade or expansion . 11 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2019 . In addition to risk in country outside the U.S. 12 Table of Contents Alphabet Inc. malfeasance or system error or 13 Table of revenue . Fines of up to 2 % of annual worldwide revenue customer arising from intellectual property 17 Table of Contents Alphabet Inc. cash reserve . In January 2018 , January 2019 , and In January 2018 , January 2019 , and July 2019 , January 2019 , and July 2019 , the board of director to repurchase up to $ 8.6 billion , $ 12.5 billion $ 8.6 billion , $ 12.5 billion , and $ 25.0 12.5 billion , and $ 25.0 billion of it Class C repurchase pursuant to the January 2018 and January 2019 authorization wer revenue and earnings . 27 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2019 ( consolidated unless year ended December 31 , 2019 ( consolidated unless otherwise noted : \u2022 Revenues of $ 161.9 billion and revenue growth of billion and revenue growth of 18 % year over year , constant currency revenue growth of 20 % year over year . Google segment revenue of $ 160.7 billion with revenue growth of billion with revenue growth of 18 % year over year and Other Bets revenue of $ 659 millio revenue growth of million with revenue growth of 11 % year over year . and Other Americas were $ 74.8 billion , $ 50.6 billion $ 74.8 billion , $ 50.6 billion , $ 26.9 billion $ 50.6 billion , $ 26.9 billion , and $ 9.0 26.9 billion , and $ 9.0 billion , respectively . \u2022 Cost of revenue wa $ 71.9 billion , consisting of TAC consisting of TAC of $ 30.1 billion and other cost of cost of revenue of $ 41.8 billion . Our TAC a ( TAC rate ) wa 22.3 % . \u2022 Operating expense of revenue ) were $ 55.7 billion . \u2022 revenue 110,547 other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 595 136,362 160,743 Other Bets revenue 477 595 659 Hedging gain ( 160,743 Other Bets revenue 477 595 659 Hedging gain ( loss Other Bets r revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 ( Total revenue $ 110,855 $ 136,819 $ 161,857 ( 1 ) $ 110,855 $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising revenue are foreign currency exchange rate . 29 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & othe revenue $ 95,577 $ 116,461 $ 134,811 Google advertising revenue a a percentage of Google segment revenue 86.5 % 85.4 % 83.9 % Google segment revenue 86.5 % 85.4 % 83.9 % ( 1 revenue 86.5 % 85.4 % 83.9 % ( 1 ) YouTube 85.4 % 83.9 % ( 1 ) YouTube non-advertising revenue are & other revenue increased $ 12,819 million from 2018 to 2019 increased $ 12,819 million from 2018 to 2019 . The growth 12,819 million from 2018 to 2019 . The growth wa primarily & other revenue increased $ 15,485 million from 2017 to revenue increased $ 3,994 million from 2018 to 2019 increased $ 3,994 million from 2018 to 2019 and increased $ 3,994 million from 2018 to 2019 and increased $ 3,005 million to 2019 and increased $ 3,005 million from 2017 to 2018 increased $ 3,005 million from 2017 to 2018 . The largest 3,005 million from 2017 to 2018 . The largest contributor to ' property revenue increased $ 1,537 million from 2018 to 2019 increased $ 1,537 million from 2018 to 2019 . The growth 1,537 million from 2018 to 2019 . The revenue increased $ 2,394 million from 2017 to 2018 increased $ 2,394 million from 2017 to 2018 , primarily driven 2,394 million from 2017 to 2018 , primarily driven by strength each engagement by user . 30 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 Paid click Year Ended December 31 , 2018 2019 Paid click change 62 Ended December 31 , 2018 2019 Paid click change 62 % 2018 2019 Paid click change 62 % 23 % Cost-per-click change Paid click change 62 % 23 % Cost-per-click change revenue $ 4,056 $ 5,838 $ 8,918 Google Cloud revenue a a percentage of Google segment revenue 3.7 % 4.3 % 5.5 % Google segment revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue consist Google Cloud revenue increased $ 3,080 million from 2018 to 2019 increased $ 3,080 million from 2018 to 2019 and increased $ 3,080 million from 2018 to 2019 and increased $ 1,782 million to 2019 and increased $ 1,782 million from 2017 to 2018 increased $ 1,782 million from 2017 to 2018 revenue 2018 2019 Google other 10,914 14,063 17,014 Google other revenue a 2019 Google other 10,914 14,063 17,014 Google other revenue a a percentage of Google segment revenue 9.9 % 10.3 % 10.6 % Google segment revenue 9.9 % 10.3 % 10.6 % Google other revenue 9.9 % 10.3 % 10.6 % Google other revenue consist Google other revenue increased $ 2,951 million from 2018 to 2019 increased $ 2,951 million from 2018 to 2019 . The growth 2,951 million from 2018 to 2019 . The growth wa primarily Google other reven revenue Ended December 31 , 2017 2018 2019 Other Bets revenue $ December 31 , 2017 2018 2019 Other Bets revenue $ 477 2019 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue a a a percentage of total revenue 0.4 % 0.4 % 0.4 % of total revenue 0.4 % 0.4 % 0.4 % Other Bets revenue 0.4 % 0.4 % 0.4 % Other Bets revenue consist customer : Year Ended December 31 , 2018 2019 United States Year Ended December 31 , 2018 2019 United S revenue Year Ended December 31 , 2018 2019 EMEA revenue $ 44,739 Ended December 31 , 2018 2019 EMEA revenue $ 44,739 $ 2018 2019 EMEA revenue $ 44,739 $ 50,645 Exclude foreign exchange EMEA revenue $ 44,739 $ 50,645 Exclude foreign exchange effect on using prior year rate ( 1,325 ) 2,397 EMEA constant currency year rate ( 1,325 ) 2,397 EMEA constant currency revenue $ EMEA constant currency revenue $ 43,414 $ 53,042 Prior period EMEA currency revenue $ 43,414 $ 53,042 Prior period EMEA revenue $ Prior revenue $ 36,236 $ 44,739 EMEA revenue growth EMEA revenue $ 36,236 $ 44,739 EMEA revenue growth 23 % $ 44,739 EMEA revenue growth 23 % 13 % EMEA constant EMEA revenue growth 23 % 13 % EMEA constant currency revenue EMEA constant currency revenue growth 20 % 19 % APAC revenue currency revenue growth 20 % 19 % APAC revenue $ 21,341 19 % APAC revenue $ 21,341 $ 26,928 Exclude foreign exchange APAC revenue $ 21,341 $ 26,928 Exclude foreign exchange effect on using prior year rate ( 49 ) 388 APAC constant revenue $ APAC constant currency revenue $ 21,292 $ 27,316 Prior period APAC currency revenue $ 21,292 $ 27,316 Prior period APAC revenue $ Prior period APAC revenue $ 16,192 $ 21,341 APAC revenue growth APAC revenue $ 16,192 $ 21,341 APAC revenue growth 32 % $ 21,341 APAC revenue growth 32 % 26 % APAC constant APAC revenue growth 32 % 26 % APAC constant currency revenue APAC constant currency revenue growth 31 % 28 % Other Americas currency revenue growth 31 % 28 % Other Americas revenue $ % Other Ame revenue $ 7,608 $ 8,986 Exclude foreign exchange Americas revenue $ 7,608 $ 8,986 Exclude foreign exchange effect on revenue using prior year rate 404 541 Other Americas constant currency using prior year rate 404 541 Other Americas constant currency revenue Americas constant currency revenue $ 8,012 $ 9,527 Prior period Other currency revenue $ 8,012 $ 9,527 Prior period Other Americas revenue period Other Americas revenue $ 6,147 $ 7,608 Other Americas revenue Americas revenue $ 6,147 $ 7,608 Other A revenue growth 24 7,608 Other Americas revenue growth 24 % 18 % Other Americas Americas revenue growth 24 % 18 % Other Americas constant currency Americas constant currency revenue growth 30 % 25 % United States currency revenue growth 30 % 25 % United States revenue $ % United States revenue $ 63,269 $ 74,843 United States revenue States revenue $ 63,269 $ 74,843 United States revenue growth 21 74,843 United States revenue growth 21 % 18 % Hedging gain States revenue growth 21 % 18 % Hedging gain ( lo revenue $ loss ) ( 138 ) 455 Total revenue $ 136,819 $ ) 455 Total revenue $ 136,819 $ 161,857 Total constant currency Total revenue $ 136,819 $ 161,857 Total constant currency revenue $ Total constant currency revenue $ 135,987 $ 164,728 Prior period revenue currency revenue $ 135,987 $ 164,728 Prior period revenue , excluding , excluding hedging effect ( 1 ) $ 111,024 $ 136,957 effect ( 1 ) $ 111,024 $ 136,957 Total revenue growth 1 ) $ 111,024 $ 136,957 Total revenue growth 23 % $ 136,957 Total reve revenue growth 23 % 18 % Total constant currency revenue Total constant currency revenue growth 22 % 20 % ( 1 currency revenue growth 22 % 20 % ( 1 ) Total 22 % 20 % ( 1 ) Total revenue and hedging for the year ended December 31 , 2017 were $ 110,855 year ended December 31 , 2017 were $ 110,855 million and 31 , 2017 were $ 110,855 million and $ ( 169 110,855 million and $ ( 169 ) million , respectively . Our EMEA revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 wa unfavorably affected by change Other Americas revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 wa unfavorably affected by change real and Argentine peso . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 TAC $ Year Ended December 31 , 2018 2019 TAC $ 26,726 $ Ended December 31 , 2018 2019 TAC $ 26,726 $ 30,089 , 2018 2019 TAC $ 26,726 $ 30,089 Ot revenue 32,823 30,089 Other cost of revenue 32,823 41,807 Total cost of revenue Other cost of revenue 32,823 41,807 Total cost of revenue $ Total cost of revenue $ 59,549 $ 71,896 Total cost of of revenue $ 59,549 $ 71,896 Total cost of revenue a a a percentage of revenue 43.5 % 44.4 % Cost of percentage of revenue 43.5 % 44.4 % Cost of revenue increased Cost of revenue increased $ 12,347 million from 2018 to 2019 increased $ 12,347 million from 2018 to 2019 . The increase 12,347 million from 2018 to 2 revenue and TAC of $ 8,984 million and $ 3,363 million $ 8,984 million and $ 3,363 million , respectively . The other cost of revenue from 2018 to 2019 wa due to of revenue from 2018 to 2019 wa due to an increase The increase in TAC from 2018 to 2019 wa due to in TAC from 2018 to 2019 wa due to increase in The TAC rate decreased from 22.9 % to 22.3 % , decreased from 22.9 % to 22.3 % , primarily due to to our advertising revenue . 35 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 201 revenue 15.7 % 16.1 % R & percentage of revenue 15.7 % 16.1 % R & D expense & D expense increased $ 4,599 million from 2018 to 2019 increased $ 4,599 million from 2018 to 2019 . The increase 4,599 million from 2018 to 2019 . The increase wa primarily and facilities-related cost of $ 3,519 million , largely resulting from , largely resulting from a 23 % increase in headcount . ) : Year Ended December 31 , 2018 2019 Sales and Year Ended December 31 , 2018 2019 Sales and marketing expense Ended December 3 revenue 11.9 % 11.4 % Sales and percentage of revenue 11.9 % 11.4 % Sales and marketing expense and marketing expense increased $ 2,131 million from 2018 to 2019 increased $ 2,131 million from 2018 to 2019 . The increase 2,131 million from 2018 to 2019 . The increase wa primarily and facilities-related cost of $ 1,371 million , largely resulting from , largely resulting from a 15 % increase in headcount . and promotional expense of $ 402 million . Over time , ) : Year Ended December 31 , 2018 2019 Gene revenue 5.1 % 5.9 % General and percentage of revenue 5.1 % 5.9 % General and administrative expense \u2022 Legal-related expense ; and 36 Table of Contents Alphabet Inc. and administrative expense increased $ 2,628 million from 2018 to 2019 increased $ 2,628 million from 2018 to 2019 . The increase 2,628 million from 2018 to 2019 . The increase wa primarily in legal-related expense of $ 1,157 million , including a charge including a charge of $ 554 million from a legal settlement from a legal settlement in revenue 5.4 % 3.3 % Other income percentage of revenue 5.4 % 3.3 % Other income ( expense , net , decreased $ 1,995 million from 2018 to 2019 decreased $ 1,995 million from 2018 to 2019 . This decrease 1,995 million from 2018 to 2019 . This decrease wa primarily security , which were $ 2,649 million in 2019 a compared were $ 2,649 million in 2019 a compared to $ 5,460 2019 a compared to $ 5,460 million in 2018 . The to $ 5,460 million in 2018 . The majority of the an unrealized gain recognized in 2018 revenue 13,467 13,883 14,281 17,918 16,012 17,296 : Cost of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 Cost of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and development 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and development 5,039 14,2 revenue share 4,592 and other current liability 16,958 23,067 Accrued revenue share 4,592 5,916 16,958 23,067 Accrued revenue share 4,592 5,916 Deferred revenue 1,784 1,908 23,067 Accrued revenue share 4,592 5,916 Deferred revenue 1,784 1,908 Income share 4,592 5,916 Deferred revenue 1,784 1,908 Income tax payable , 4,592 5,916 Deferred revenue 1,784 1,908 Income tax payable , net Income tax payable , net 69 274 Total current liability 34,620 tax payable , net 69 274 Total current liability 34,620 45,2 revenue , non-current 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 396 4,554 Deferred revenue , non-current 396 358 Income tax payable , Deferred revenue , non-current 396 358 Income tax payable , non-current Income tax payable , non-current 11,327 9,885 Deferred income tax 1,264 tax payable , non-current 11,327 9,885 Deferred income tax 1,264 1,701 11,327 9,885 Deferred income tax 1,264 1,701 Operating lease liability 0 9,885 Deferred income tax 1,264 1,701 Operating lease l revenue 45,583 59,549 71,896 Research and development : Cost of revenue 45,583 59,549 71,896 Research and development 16,625 Cost of revenue 45,583 59,549 71,896 Research and development 16,625 21,419 59,549 71,896 Research and development 16,625 21,419 26,018 Sales and marketing 71,896 Research and development 16,625 21,419 26,018 Sales and marketing 12,893 Research and development 16,625 21,419 26,018 Sales and marketing 12,893 16,333 21,419 26,018 Sales and marketing 12,893 16,333 18,464 General and revenue share expense and other liability 4,891 8,614 7,170 Accrued revenue share 955 and other liability 4,891 8,614 7,170 Accrued revenue share 955 483 8,614 7,170 Accrued revenue share 955 483 1,273 Deferred revenue 390 7,170 Accrued revenue share 955 483 1,273 Deferred revenue 390 371 Accrued revenue share 955 483 1,273 Deferred revenue 390 371 37 955 483 1,273 Deferred revenue 390 371 37 Net cash provided 483 1,273 Deferred revenue 390 371 37 Net cash provided by 1,273 Deferred revenue 390 371 37 revenue in % of our revenue in 2017 , 2018 , or 2019 our revenue in 2017 , 2018 , or 2019 . In 2017 , 2018 , or 2019 . In 2017 , 2018 , or 2019 . In 2017 , 2018 , and 2019 2019 . In 2017 , 2018 , and 2019 , we 2017 , 2018 , and 2019 , we generated approximately 47 2019 , we generated approximately 47 % , 46 % , generated approximately 47 % , 46 % , and 46 % , 46 % , and 46 % of our revenue , measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based Revenue Recognition Revenues presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google Search & other $ 69,811 $ 85,296 $ 98,115 YouTube & other $ 69,811 $ 85,296 $ 98,115 YouTube ad ( $ 69,811 $ 85,296 $ 98,115 YouTube ad ( 1 ) $ 98,115 YouTube ad ( 1 ) 8,150 11,155 15,149 Google YouTube ad ( 1 ) 8,150 11,155 15,149 Google prop revenue 110,547 other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 595 136,362 160,743 Other Bets revenue 477 595 659 Hedging gain ( 160,743 Other Bets revenue 477 595 659 Hedging gain ( loss Other Bets r revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 ( Total revenue $ 110,855 $ 136,819 $ 161,857 ( 1 ) $ 110,855 $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising revenue are in Google other revenue . 60 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 United Year Ended December 31 , 2017 2018 2019 United States $ Ended December 31 , 2017 2018 2019 United States $ 52,449 Dece revenue $ 0 ( 138 ) 0 455 0 Total revenue $ 110,855 ( 138 ) 0 455 0 Total revenue $ 110,855 100 455 0 Total revenue $ 110,855 100 % $ 136,819 100 0 Total revenue $ 110,855 100 % $ 136,819 100 % $ 110,855 100 % $ 136,819 100 % $ 161,857 100 110,855 100 % $ 136,819 100 % $ 161,857 100 % $ 136,819 100 % $ 161,857 100 % ( 1 ) 136,819 100 % $ 161,857 100 % ( 1 ) Regions $ 161,857 100 % ( 1 ) Regions represent Europe , expected cost plus margin . 61 Table of Contents Alphabet Inc for the year ended December revenue recognized that revenue balance a of December 31 , 2018 . Additionally , a of December 31 , 2018 . Additionally , we have period . As of December 31 , 2019 , the amount As of December 31 , 2019 , the amount not yet from these commitment is $ 11.4 billion , which reflects our two third over the next 24 month with the remaining thereafter and marketing expense . Note 3 . Financial Instruments Debt Securities marketable debt security within Level 2 in the fair value hierarchy investment category a Revenue ( 169 ) ( 139 ) 367 Revenue ( 169 ) ( 139 ) 367 Interest rate contract 169 ) ( 139 ) 367 Interest rate contract Other income ( expense ) , net 5 6 6 Benefit ( provision expense ) , net 5 6 6 Benefit ( provision ) ) , net 5 6 6 Benefit ( provision ) for provision ) for income tax 71 35 ( 74 ) Net ) for income tax 71 35 ( 74 ) Net of income tax 71 35 ( 74 ) Net of tax ( ) Net of tax ( 93 ) ( 98 ) 299 tax ( 93 ) ( 98 ) 299 Total amount reclassified 93 ) ( 98 ) 299 Total amount reclassified , net n Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 448 million , $ 691 million $ 448 million , $ 691 million , and $ 724 691 million , and $ 724 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . 83 Table and 2019 , respectively . 83 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 14 . Income Taxes revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 Year Total revenue $ 110,855 $ 136,819 $ 161,857 Year Ended December $ 110,855 $ 136,819 $ 161,857 Year Ended December 31 , $ 161,857 Year Ended December 31 , 2017 2018 2019 Operating Year Ended December 31 , 2017 2018 2019 Operating income ( Ended December 31 , 2017 2018 2019 Operating income ( loss December 31 , 2017 2018 2019 Operating income ( loss ) loss ) : Google $ 32,456 $ 36,655 $ 41,673 Oth revenue by long-lived asset $ 97,116 $ 123,331 For revenue by geography , by geography , see Note 2 . 89 Table of Contents , see Note 2 . 89 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2019 , our disclosure a of December 31 , 2019 , our", + "net_income": "Net income $ $ 26,178 $ 27,524 $ 34,231 Net income $ 16,348 $ $ 34,231 Net income $ 16,348 $ 19,478 $ 12,662 $ Net income $ 16,348 $ 19,478 $ 12,662 $ 30,736 $ $ 16,348 $ 19,478 $ 12,662 $ 30,736 $ 34,343 Basic $ 19,478 $ 12,662 $ 30,736 $ 34,343 Basic net income $ 12,662 $ 30,736 $ 34,343 Basic net income per share and B common stock $ 23.11 $ 28.32 $ 18.27 $ common stock $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic net income $ 18. net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 $ capital stock $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 $ common stock $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted net income $ 18.00 $ 43.70 $ 49.16 Diluted net income per sha Net income \u2022 Net income wa $ 34.3 billion with diluted net income income per share of $ 49.16 . \u2022 Operating cash flow Operating cash flow wa $ 54.5 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 23.5 billion . \u2022 Number of \u2022 Number of employee wa 118,899 a of December 31 , wa 118,899 a of December 31 , 2019 . The majority a of December 31 , 2019 . The majority of new disclosed a Other Bets . 28 Table of Contents Alphabet Inc. presentation . Year Ended December 31 , 2017 2018 2019 Google Year Net income 1,142 1,020 891 1,124 1,489 2,200 1,560 33 Net income $ 1,020 891 1,124 1,489 2,200 1,560 33 Net income $ 9,401 891 1,124 1,489 2,200 1,560 33 Net income $ 9,401 $ 1,560 33 Net income $ 9,401 $ 3,195 $ 9,192 $ Net income $ 9,401 $ 3,195 $ 9,192 $ 8,948 $ $ 9,401 $ 3,195 $ 9,192 $ 8,948 $ 6,657 $ $ 3,195 $ 9,192 $ 8,948 $ 6,657 $ 9,947 $ $ 9,192 $ 8,948 $ 6,657 $ 9,947 $ 7,068 $ $ 8,948 $ 6,657 $ 9,947 $ 7,068 $ 10,671 Basic $ 6,657 $ 9,947 $ 7,068 $ 10,671 Basic net income $ 9,947 $ 7,068 $ 10, net income per share Class C capital stock $ 13.53 $ 4.60 $ 13.21 $ capital stock $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted net income $ 14.33 $ 10.20 $ 15.49 Diluted net income per share Class C capital stock $ 13.33 $ 4.54 $ 13.06 $ capital stock $ 13.33 $ 4.54 $ 13.06 $ 12.77 $ $ 13.33 $ 4.54 $ 13.06 $ 12.77 net Income tax receivable , net 355 2,166 Inventory 1,107 999 Other tax receivable , net 355 2,166 Inventory 1,107 999 Other current , net 355 2,166 Inventory 1,107 999 Other current asset 4,236 net 355 2,166 Inventory 1,107 999 Other current asset 4,236 4,412 1,107 999 Other current asset 4,236 4,412 Total current asset 135,676 999 Other current asset 4,236 4,412 Total current asset 135,676 152,578 4,236 4,412 Total current asset 135,676 152,578 Non-marketable investment 13,859 13,078 4,412 Total current net Income tax payable , net 69 274 Total current liability 34,620 tax payable , net 69 274 Total current liability 34,620 45,221 69 274 Total current liability 34,620 45,221 Long-term debt 4,012 4,554 274 Total current liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 396 4,554 Deferred revenue , non-current 396 358 Income tax payable , Deferr Net income $ Provision for income tax 14,531 4,177 5,282 Net income $ 12,662 for income tax 14,531 4,177 5,282 Net income $ 12,662 $ 4,177 5,282 Net income $ 12,662 $ 30,736 $ 34,343 Basic Net income $ 12,662 $ 30,736 $ 34,343 Basic net income $ 12,662 $ 30,736 $ 34,343 Basic net income per share Class C capital stock $ 18.27 $ 44.22 $ 49.59 Diluted capital stock $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share Class C capital stock $ 18.00 $ 43.70 $ 49.16 Se Net income $ Ended December 31 , 2017 2018 2019 Net income $ 12,662 December 31 , 2017 2018 2019 Net income $ 12,662 $ 2018 2019 Net income $ 12,662 $ 30,736 $ 34,343 Other Net income $ 12,662 $ 30,736 $ 34,343 Other comprehensive income $ 12,662 $ 30,736 $ 34,343 Other comprehensive income ( loss in foreign currency translation adjustment 1,543 ( 781 ) ( 119 currency translation adjustment 1,543 ( 781 ) ( 119 ) Available-for-sale 1,543 ( 781 ) ( 119 ) Available-for-sale investment : Change unrealized gai net income 105 ( 911 ) ( 111 in net income 105 ( 911 ) ( 111 ) Net 105 ( 911 ) ( 111 ) Net change ( net of tax effect of $ 0 , $ 156 , and of $ 0 , $ 156 , and $ 221 ) $ 156 , and $ 221 ) 412 ( 823 ) , and $ 221 ) 412 ( 823 ) 1,500 Cash $ 221 ) 412 ( 823 ) 1,500 Cash flow hedge ) 412 ( 823 ) 1,500 Cash flow hedge : Change gain ( loss ) ( 638 ) 290 22 Less : loss ) ( 638 ) 290 22 Less : reclassification adjustment ) ( 638 ) 290 22 Less : reclassification adjustment for loss included in net income 93 98 ( 2 net income 93 98 ( 299 ) Net change net income 93 98 ( 299 ) Net change ( net of tax effect of $ 247 , $ 103 , and of $ 247 , $ 103 , and $ 42 ) $ 103 , and $ 42 ) ( 545 ) 388 and $ 42 ) ( 545 ) 388 ( 277 ) 42 ) ( 545 ) 388 ( 277 ) Other comprehensive ( 545 ) 388 ( 277 ) Other comprehensive income ( comprehensive income ( loss ) 1,410 ( 1,216 ) 1,104 Comprehensive ( loss ) 1,410 ( 1,216 ) 1,104 Comprehensive income $ ) 1,410 ( 1,216 ) 1,104 Comprehensive income $ 14,072 $ ) 1,104 Comprehensive income $ 14 Net income in consolidated entity 0 722 0 0 722 Net income 0 consolidated entity 0 722 0 0 722 Net income 0 0 entity 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income ( income 0 0 0 12,662 12,662 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,410 0 1,410 Balance income ( loss ) 0 0 1 Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive income Net income 0 0 0 30,736 30,736 Other comprehensive income ( income 0 0 0 30,736 30,736 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 1,216 ) 0 income ( loss ) 0 0 ( 1,216 ) 0 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1 Net income December 31 , 2017 2018 2019 Operating activity Net income $ Operating activity Net income $ 12,662 $ 30,736 $ 34,343 Adjustments Net income $ 12,662 $ 30,736 $ 34,343 Adjustments : Depreciation $ 12,662 $ 30,736 $ 34,343 Adjustments : Depreciation and impairment impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of in Net Income Per Share the class of stock adversely 80 Table of Contents Alphabet Inc. In the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , the net , 2017 , 2018 and 2019 , the net income per ) : Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator Number of $ net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 81 per share $ 18.00 $ 18.00 $ 18.00 81 Table of $ 18.00 $ 18.00 $ 18.00 81 Table of Contents Alphabet 18.00 $ 18.00 $ 18.00 81 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 Year per share $ 43.70 $ 43.70 $ 43.70 Year Ended December $ 43.70 $ 43.70 $ 43.70 Year Ended December 31 , $ 43.70 Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator undistributed earnings net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 82 per share $ 49.16 $ 49.16 $ 49.16 82 Table of $ 49.16 $ 49.16 $ 49.16 82 Table of Contents Alphabet 49.16 $ 49.16 $ 49.16 82 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year .", + "assets": "Assets Current asset As of December 31 , 2019 Assets Current asset : Cash Cash and cash equivalent $ 16,701 $ 18,498 Marketable security 92,439 cash equivalent $ 16,701 $ 18,498 Marketable security 92,439 101,177 Total 16,701 $ 18,498 Marketable security 92,439 101,177 Total cash , cash $ 18,498 Marketable security 92,439 101,177 Total cash , cash equivalent equivalent , and marketable security 109,140 119,675 Accounts receivable , net , and marketable security 109,140 119,675 Accounts receivable , ne Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 459 $ 54 $ 513 Total non-current asset $ 459 $ 54 $ 513 Total $ 459 $ 459 $ 54 $ 513 Total $ 459 $ 54 54 $ 513 Total $ 459 $ 54 $ 513 Derivative 513 Total $ 459 $ 54 $ 513 Derivative Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 2 Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 91 $ 253 $ 344 Total non-current asset $ 91 $ 253 $ 344 Total $ 91 $ 91 $ 253 $ 344 Total $ 91 $ 253 253 $ 344 Total $ 91 $ 253 $ 344 Derivative 344 Total $ 91 $ 253 $ 344 Derivative Liabilities : $ 91 $ 253 $ 344 Derivative Liabilities : Level 2 344 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 173 $ 196 $ 369 Total and non-current $ 173 $ 196 $ 369 Total $ 173 $ 173 $ Assets As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 569 $ ( 56 ) $ Derivatives $ 569 $ ( 56 ) $ 513 $ ( $ ( 56 ) $ 513 $ ( 90 ) ( ) $ 513 $ ( 90 ) ( 1 ) $ $ ( 90 ) ( 1 ) $ ( 307 ) ( 1 ) $ ( 307 ) $ ( 14 ) ( 307 ) $ ( 14 ) $ 102 As of $ ( 14 ) $ 102 As of December 31 , $ 102 As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 365 $ ( 21 ) $ Der Assets $ 19,921 $ 703 $ 20,624 Other Intangible Assets Information regarding ) : As of December 31 , 2018 Gross Carrying Amount As of December 31 , 2018 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,125 $ 3,394 $ 1,731 Customer developed technology $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 308 41 3,394 $ 1,731 Customer relationship 349 308 41 Trade name and $ 1,731 Customer relationship 349 308 41 Trade nam", + "liabilities": "Liabilities and Stockholders Total asset $ 232,792 $ 275,909 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 4,378 $ 5,561 Accrued compensation and Accounts payable $ 4,378 $ 5,561 Accrued compensation and benefit 6,839 5,561 Accrued compensation and benefit 6,839 8,495 Accrued expense and other Accrued compensation and benefit 6,839 8,495 Accrued expense and other current expense and other current liability 16,958 23,067 Accrued revenue share 4,592 and other current liability 16,958 2 Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 233 Total $ 5 $ 228 228 $ 233 Total $ 5 $ 228 $ 233 As 233 Total $ 5 $ 228 $ 233 As of December $ 5 $ 228 $ 233 As of December 31 , $ 233 As of December 31 , 2019 Balance Sheet Location As of December 31 , 2019 Balance Sheet Location Fair Value Value Derivative Assets : L Liabilities : $ 91 $ 253 $ 344 Derivative Liabilities : Level 2 344 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 173 $ 196 $ 369 Total and non-current $ 173 $ 196 $ 369 Total $ 173 $ 173 $ 196 $ 369 Total $ 173 $ 196 196 $ 369 Total $ 173 $ 196 $ 369 67 369 Total $ 173 $ 196 $ 369 67 Table of $ 173 $ 196 $ 369 67 Table of Contents Alphabet 173 $ 196 $ 369 67 Table of Contents Alphabet Inc Tax Effect Year Ended December 31 , 2017 2018 2019 Derivatives Year Liabilities As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 289 $ ( 56 ) $ Derivatives $ 289 $ ( 56 ) $ 233 $ ( $ ( 56 ) $ 233 $ ( 90 ) ( ) $ 233 $ ( 90 ) ( 2 ) $ $ ( 90 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 143 As 2 ) $ 0 $ 0 $ 143 As of December $ 0 $ 0 $ 143 As of December 31 , $ 143 As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 390 $ (", + "equity": "Equity Securities 23 Item 6 . Selected Financial of Equity Securities 23 Item 6 . Selected Financial Data 26 6 . Selected Financial Data 26 Item 7 . Management \u2019 Selected Financial Data 26 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 27 Item 7A . Quantitative and Results of Operations 27 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 43 Item 8 . Financial Statements About Market Risk 43 Item 8 . Financial Statements and Supplement EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public \u201c GOOG \u201d since April 3 , 2014 . Holders of \u201d since April 3 , 2014 . Holde equity $ Total stockholder \u2019 equity $ 120,331 $ 139,036 $ 152,502 $ \u2019 equity $ 120,331 $ 139,036 $ 152,502 $ 177,628 $ $ 120,331 $ 139,036 $ 152,502 $ 177,628 $ 201,442 26 $ 139,036 $ 152,502 $ 177,628 $ 201,442 26 Table of $ 152,502 $ 177,628 $ 201,442 26 Table of Contents Alphabet 152,502 $ 177,628 $ 201,442 26 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted disc equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. 37 Table of Contents Alphabet Annual Report on Form 10-K. 37 Table of Contents Alphabet Inc rate : Year Ended December 31 , 2018 2019 Provision for Year Ended December 31 , 2018 2019 Provision for income tax Ended December 31 , 2018 2019 Provision for income tax $ Provision for income tax $ 4,177 $ 5,282 Effective tax rate inc equity security by $ 330 million . Our non-marketable equity event . As of December 31 , 2019 , the carrying As of December 31 , 2019 , the carrying value of measurement alternative , wa $ 11.4 billion . Valuations of our , please refer to Note 1 and Note 3 of the to Note 1 and Note 3 of the Notes to Consolidated this Annual Report on Form 10-K. 45 Table of Contents Alphabet Annual Report on Form 10-K. 45 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEME Equity 53 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 55 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption \u201c Quarterly Results of Operations . \u201d 46 Table of Contents Alphabet Inc. Company ) a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , the related December 31 , Equity liability : Accounts payable $ 4,378 $ 5,561 Accrued compensation and Accounts payable $ 4,378 $ 5,561 Accrued compensation and benefit 6,839 5,561 Accrued compensation and benefit 6,839 8,495 Accrued expense and other Accrued compensation and benefit 6,839 8,495 Accrued expense and other current expense and other current liability 16,958 23,067 Accrued revenue share 4,592 and other current liability 16,958 23,067 Accrued revenue share 4,592 5,916 16,958 23,067 Accrued revenue share 4,592 5,916 equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 695, equity 1,232 ) Retained earnings 134,885 152,122 Total stockholder \u2019 equity 177,628 152,122 Total stockholder \u2019 equity 177,628 201,442 Total liability and stockholder Total stockholder \u2019 equity 177,628 201,442 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 232,792 $ 275,909 See accompanying note \u2019 equity $ 232,792 $ 275,909 See accompanying note . 50 275,909 See accompanying note . 50 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2017 2018 2019 Revenues Year Ended Dece equity security , net 37 ( 6,650 ) ( 2,798 security , net 37 ( 6,650 ) ( 2,798 ) Other 37 ( 6,650 ) ( 2,798 ) Other 294 ( 189 ) ( 2,798 ) Other 294 ( 189 ) ( 592 2,798 ) Other 294 ( 189 ) ( 592 ) Changes 294 ( 189 ) ( 592 ) Changes in asset and acquisition : Accounts receivable ( 3,768 ) ( 2,169 ) ( receivable ( 3,768 ) ( 2,169 ) ( 4,340 ) Income ) ( 2,169 ) ( 4,340 ) Income tax , net ) Income tax , net 8,211 ( 2,251 ) ( 3,128 tax , net 8,211 ( 2,251 ) ( 3,128 ) Other 8,211 ( 2,251 ) ( 3,128 ) Other a equity for the year ended December 31 , 2018 and 2019 , year ended December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . In the During the Year Ended December 31 , 2018 2019 Total sale Year Ended December 31 , 2018 2019 Total sale price $ Ended December 31 , 2018 2019 Total sale price $ 1,965 2019 Total sale price $ 1,965 $ 3,134 Total initial cost sale price $ 1,965 $ 3,134 Total initial cost 515 858 $ 3,134 Total initial cost 515 858 Cumulative net gain $ 3,134 To equity security $ 0 $ 4,604 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) 0 994 0 3,046 equity security ( 1 ) 0 994 0 3,046 3,493 994 security ( 1 ) 0 994 0 3,046 3,493 994 4,604 ( 1 ) 0 994 0 3,046 3,493 994 4,604 3,046 1 ) 0 994 0 3,046 3,493 994 4,604 3,046 Level ) 0 994 0 3,046 3,493 994 4,604 3,046 Level 2 0 994 0 3,046 3,493 994 4,604 3,046 Level 2 : 994 0 3,046 3,493 994 4,604 3,046 Level 2 : Mutual 0 3,046 3,493 994 4,604 3,046 Level 2 : Mutual fund 3,493 994 4,604 3,04 equity security $ 4,107 $ 1,791 During the year equity security $ 4,107 $ 1,791 During the year ended December During the year ended December 31 , 2019 , included in year ended December 31 , 2019 , included in the $ , included in the $ 11.4 billion of non-marketable equity security non-marketable equity security , $ 7.6 billion were measured at fair net unrealized gain of $ 1.8 billion . 65 Table of of $ 1.8 billion . 65 Table of Contents Alphabet Inc. carrying value of approximately $ 1.3 billion a o equity In the fourth quarter of 2019 , Verily obtained a controlling transaction resulted in a $ 357 million gain from the revaluation not material a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Note 6 December 31 , 2018 and 2019 . Note 6 . Debt 2018 and 2019 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Long-Term Debt December 31 , 2018 and 2019 . equity security , net 73 5,460 2,649 Performance fee ( equity security , net 73 5,460 2,649 Performance fee ( 4 security , net 73 5,460 2,649 Performance fee ( 4 ) 5,460 2,649 Performance fee ( 4 ) ( 32 ) ( fee ( 4 ) ( 32 ) ( 1,203 ) ( ) ( 32 ) ( 1,203 ) ( 326 ) Gain ) ( 1,203 ) ( 326 ) Gain ( loss ) method investment , net ( 156 ) ( 120 ) 390 net ( 156 ) ( 120 ) 390 Other 158 378 156 ) ( 120 ) 390 Other 158 378 102 Other ( 120 ) 390 Other 158 378 102 Other income ( 120 ) 390 Other 158 378 102 Other i Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , no share December 31 , 2018 and 2019 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C . In January and July 2019 , the board of direc Equity 53 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 55 2 . Financial Statement Schedules to Consolidated Financial Statements 55 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 ( December 31 , 2017 , 2018 and 2019 ( in million , 2017 , 2018 and 2019 ( in million ) : of Year Year ended Decembe Equity 2012 10.10 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.10.1 u Apigee 333-214573 ) November 10 , 2016 10.10.1 u Apigee Corporation 2015 ) November 10 , 2016 10.10.1 u Apigee Corporation 2015 Equity 2016 10.10.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 14.01 Code of 333-214573 ) Novembe", + "cash_flow": "cash flow Operating cash flow wa $ 54.5 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 23.5 billion . \u2022 Number of \u2022 Number of employee wa 118,899 a of December 31 , wa 118,899 a of December 31 , 2019 . The majority a of December 31 , 2019 . The majority of new disclosed a Other Bets . 28 Table of Contents Alphabet Inc. presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other cash flow generated 42 Table of Contents Alphabet Inc. at fair value . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced in and liability . The foreign 43 Table of Contents Alphabet Inc. contract . If an adverse 10 % foreign currency exchange rate income tax of approximately $ 1 million and $ 8 million $ 1 million and $ 8 million a of December 31 8 million a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 Cash flow hedge ) 412 ( 823 ) 1,500 Cash flow hedge : Change gain ( loss ) ( 638 ) 290 22 Less : loss ) ( 638 ) 290 22 Less : reclassification adjustment ) ( 638 ) 290 22 Less : reclassification adjustment for loss included in net income 93 98 ( 299 ) Net included in net income 93 98 ( 299 ) Net change net income 93 98 ( 299 ) Net change ( net of tax effect of $ 247 , $ 103 , and of $ 247 , $ 103 , and $ 42 ) $ 103 , and $ 42 ) ( 545 ) 388 and $ 42 ) ( 545 ) 388 ( 277 ) 42 ) ( 545 ) 388 ( 277 ) Other com cash flow , net of refund $ 6,191 $ 5,671 $ 8,203 See of refund $ 6,191 $ 5,671 $ 8,203 See accompanying note $ 6,191 $ 5,671 $ 8,203 See accompanying note . 54 8,203 See accompanying note . 54 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding or service . See Note 2 for further cash flow . See Note 4 for further detail . Prior period presented . See Note 2 for further detail . Additionally are based . See Note 7 for further detail . Note for further detail . Note 2 . Revenues Revenue Recognition Revenues presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google Search & other $ 69,811 $ 85,296 $ 98,115 Y Cash Flow December 31 , 2017 2018 2019 Derivatives in Cash Flow Hedging assessment of effectiveness $ ( 955 ) $ 332 $ 38 $ ( 955 ) $ 332 $ 38 Amount excluded from 955 ) $ 332 $ 38 Amount excluded from the assessment from the assessment of effectiveness 0 26 ( 14 ) Derivatives the assessment of effectiveness 0 26 ( 14 ) Derivatives in of effectiveness 0 26 ( 14 ) Derivatives in Net Investment in the assessment of effectiveness 0 136 131 Total $ ( the assessment of effectiveness 0 136 131 Total $ ( 955 ass", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 82,507 104,207 Less : accumulated depreciation ( Less : accumulated depreciation ( 22,788 ) ( 30,561 ) Property depreciation ( 22,788 ) ( 30,561 ) Property and equipment , and equipment , net $ 59,719 $ 73,646 As of December , net $ 59,719 $ 73,646 As of December 31 , $ 73,646 As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , information technology December 31 , 2018 and 2019 , information technology asset and a cost basis of $ 648 million and $ 1.6 b", + "capital_expenditure": "Capital expenditure \u2022 Capital expenditure were $ 23.5 billion . \u2022 Number of \u2022 Number of employee wa 118,899 a of December 31 , wa 118,899 a of December 31 , 2019 . The majority a of December 31 , 2019 . The majority of new disclosed a Other Bets . 28 Table of Contents Alphabet Inc. presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google S capital expenditure and operating lease asset of $ 4.4 billion . As of December billion . As of December 31 , 2019 , the amount As of December 31 , 2019 , the amount of total average remaining lease term of 10 year , wa $ 13.9 10 year , wa $ 13.9 billion . Finance lease were for the year ended December 31 , 2019 . Please refer year ended December 31 , 2019 . Please refer to Note . Please refer to Note 4 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for fu Capital expenditure : Ended December 31 , 2017 2018 2019 Capital expenditure : Google December 31 , 2017 2018 2019 Capital expenditure : Google $ Capital expenditure : Google $ 12,619 $ 25,460 $ 25,251 Other : Google $ 12,619 $ 25,460 $ 25,251 Other Bets 493 $ 12,619 $ 25,460 $ 25,251 Other Bets 493 181 281 25,460 $ 25,251 Other Bets 493 181 281 Reconciling item ( $ 25,251 Other Bets 493 181 281 Reconciling item ( 2 25,251 Other Bets 493 181 281 Reconciling item ( 2 ) 181 281 Reconciling item ( 2 ) 72 ( 502 ) Reco capital expenditure a Statements of Cash Flows $ 13,184 $ 25,139 $ 23,548 ( Cash Flows $ 13,184 $ 25,139 $ 23,548 ( 2 ) $ 13,184 $ 25,139 $ 23,548 ( 2 ) Reconciling item $ 25,139 $ 23,548 ( 2 ) Reconciling item are related and other miscellaneous difference . 88 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2017 2018 2019 Stock-based Year Ended December 31 , 2017 2018 2019 Stock-based compensation : Ended December 31 , 2017 2018 2019 Stock-based compensation : Google December 31 , 2017 2018 2019 Sto", + "debt": "debt ( 2 ) 5,660 4,212 933 202 313 Long-term debt obligation 2 ) 5,660 4,212 933 202 313 Long-term debt obligation ( ) 5,660 4,212 933 202 313 Long-term debt obligation ( 3 313 Long-term debt obligation ( 3 ) 5,288 227 1,258 1,224 debt obligation ( 3 ) 5,288 227 1,258 1,224 2,579 Tax obligation ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 4 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 4 ) 1,224 2,579 Tax pa debt , refer to Note 6 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 2.6 billion a of December 31 2.6 billion a of December 31 , 2019 primarily related to a of Decem debt security a of December 31 , 2018 and 2019 are a of December 31 , 2018 and 2019 are shown below December 31 , 2018 and 2019 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2018 2019 2018 2019 As of December 31 , 2018 2019 2018 2019 Risk Category of December 31 , 2018 2019 2018 2019 Risk Category - December 31 , 2018 2019 2018 2019 Risk Category - Interest 31 , 2018 2019 2018 2019 Risk debt 4,012 4,554 274 Total current liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 396 4,554 Deferred revenue , non-current 396 358 Income tax payable , Deferred revenue , non-current 396 358 Income tax payable , non-current Income tax payable , non-current 11,327 9,885 Deferred income tax 1,264 tax payable , non-current 11,327 9,885 De debt , net of cost 4,291 6,766 317 Repayments of debt , net of cost 4,291 6,766 317 Repayments of debt ( net of cost 4,291 6,766 317 Repayments of debt ( 4,377 317 Repayments of debt ( 4,377 ) ( 6,827 ) ( debt ( 4,377 ) ( 6,827 ) ( 585 ) Proceeds ) ( 6,827 ) ( 585 ) Proceeds from sale of of interest in consolidated entity 800 950 220 Net cash used interest in consolidated entity 800 950 220 Net cash used in in consolidated entity 800 950 220 Net cash used in financing used in financing activity ( 8, Debt Securities marketable debt security within Level 2 in the fair value hierarchy investment category a of December 31 , 2018 and 2019 ( a of December 31 , 2018 and 2019 ( in million December 31 , 2018 and 2019 ( in million ) : ) : As of December 31 , 2018 Adjusted Cost Gross As of December 31 , 2018 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,202 $ 0 deposit ( 1 ) $ 2,202 $ 0 $ 0 $ 1 ) $ 2,202 $ 0 $ 0 $ 2,202 $ debt security 71 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 15 3,717 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed security ( 316 ) 25,082 44 25,038 Mortgage-backed a debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asse debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8, debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 ) Debt 2018 and 2019 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Long-Term Debt December 31 , 2018 and 2019 . Long-Term Debt Google issued Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and debt $ ) Total long-term debt $ 4,012 $ 4,554 ( 1 ) long-term debt $ 4,012 $ 4,554 ( 1 ) Includes the $ 4,012 $ 4,554 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 , 2024 , and 2026 were 3.734 % , 3.377 2024 , and 2026 were 3.734 debt security , net ( 3 ) ( 110 ) 1,190 net ( 3 ) ( 110 ) 1,190 149 Gain ( 3 ) ( 110 ) 1,190 149 Gain ( loss ) ) ( 110 ) 1,190 149 Gain ( loss ) on on equity security , net 73 5,460 2,649 Performance fee ( equity security , net 73 5,460 2,649 Performance fee ( 4 security , net 73 5,460 2,649 Performance fee ( 4 ) 5,460 2,649 Performance fee ( 4 ) ( 32 ) ( fee ( 4 ) ( 32 ) ( 1,203 ) ( ) ( 32 ) ( 1,203 ) ( 326 ) Gain ) ( 1,203 ) ( 326 ) Gain ( loss ) method investment , net ( 156 ) ( 120 ) 390 net ( 1", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per associated with the repurchase . 23 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2014 to December 31 ) from December 31 , 2014 to December 31 , 2019 31 , 2014 to December 31 , 2019 . The return 2014 to December 31 , 2019 . The return shown are future performance . COMPARISO", + "tax_rate": "tax rate wa 13 % . \u2022 Net income \u2022 Net income wa $ 34.3 billion with diluted net income income per share of $ 49.16 . \u2022 Operating cash flow Operating cash flow wa $ 54.5 billion . \u2022 Capital expenditure \u2022 Capital expenditure were $ 23.5 billion . \u2022 Number of \u2022 Number of employee wa 118,899 a of December 31 , wa 118,899 a of December 31 , 2019 . The majority a of December 31 , 2019 . The majority of new disclosed a Other Bets . 28 Table of Contents Alphabet Inc. presentation . Year Ended December 31 , 2017 tax rate income tax $ 4,177 $ 5,282 Effective tax rate 12.0 % $ 5,282 Effective tax rate 12.0 % 13.3 % Our provision Effective tax rate 12.0 % 13.3 % Our provision for income effective tax rate increased from 2018 to 2019 , due to rate increased from 2018 to 2019 , due to discrete event due to discrete event in 2018 and 2019 . In 2018 discrete event in 2018 and 2019 . In 2018 , we 2018 and 2019 . In 2018 , we released our deferred Act `` ) . In 2019 , we recognized an increase Appeals decision . See Not tax rate from 35 % to 21 % and rate from 35 % to 21 % and created new tax financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collected and , over the course of 2018 , to the provisional amount wa completed a of December 31 , 2018 . Transition tax a of December 31 , 2018 . Transition tax The Tax tax at a rate of 15.5 % to the extent of other net current asset and 8 % on the remaining earnings income tax expense of $ 10.2 billion a of December 31 10.2 billion a of December tax rate U.S. federal statutory tax rate 35.0 % 21.0 % 21.0 % statutory tax rate 35.0 % 21.0 % 21.0 % Foreign income rate 35.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 14.2 ) ( 4.9 ) ( rate ( 14.2 ) ( 4.9 ) ( 5.6 ) Effect ) ( 4.9 ) ( 5.6 ) Effect of the Tax the Tax Act Transition tax 37.6 ( 0.1 ) ( 0.6 Act Transition tax 37.6 ( 0.1 ) ( 0.6 ) Deferred 37.6 ( 0.1 ) ( 0.6 ) Deferred tax effect ( ) Deferred tax effect ( 1.4 ) ( 1.2 ) 0.0 effect ( 1.4 ) ( 1.2 ) 0.0 Federal research c tax rate 53.4 0.4 ) Effective tax rate 53.4 % 12.0 % 13.3 % Effective tax rate 53.4 % 12.0 % 13.3 % Our effective rate 53.4 % 12.0 % 13.3 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . As a decision on December 28 , 2015 . As a result of compensation co", + "segment_revenue": "segment revenue of $ 160.7 billion with revenue growth of billion with revenue growth of 18 % year over year and Other Bets revenue of $ 659 million with revenue growth of million with revenue growth of 11 % year over year . and Other Americas were $ 74.8 billion , $ 50.6 billion $ 74.8 billion , $ 50.6 billion , $ 26.9 billion $ 50.6 billion , $ 26.9 billion , and $ 9.0 26.9 billion , and $ 9.0 billion , respectively . \u2022 Cost of revenue wa $ 71.9 billion , consisting of TAC consisting of TAC of $ 30.1 billion segment revenue 86.5 % 85.4 % 83.9 % Google segment revenue 86.5 % 85.4 % 83.9 % ( 1 revenue 86.5 % 85.4 % 83.9 % ( 1 ) YouTube 85.4 % 83.9 % ( 1 ) YouTube non-advertising revenue are & other revenue increased $ 12,819 million from 2018 to 2019 increased $ 12,819 million from 2018 to 2019 . The growth 12,819 million from 2018 to 2019 . The growth wa primarily & other revenue increased $ 15,485 million from 2017 to 2018 increased $ 15,485 million from 2017 to 2018 . The growth 15,485 million from 2017 to 2018 . segment revenue 3.7 % 4.3 % 5.5 % Google segment revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue consist Google Cloud revenue increased $ 3,080 million from 2018 to 2019 increased $ 3,080 million from 2018 to 2019 and increased $ 3,080 million from 2018 to 2019 and increased $ 1,782 million to 2019 and increased $ 1,782 million from 2017 to 2018 increased $ 1,782 million from 2017 to 2018 . The growth 1,782 million from 2017 to 2018 . The growth during both of growth in GC segment revenue 9.9 % 10.3 % 10.6 % Google segment revenue 9.9 % 10.3 % 10.6 % Google other revenue 9.9 % 10.3 % 10.6 % Google other revenue consist Google other revenue increased $ 2,951 million from 2018 to 2019 increased $ 2,951 million from 2018 to 2019 . The growth 2,951 million from 2018 to 2019 . The growth wa primarily Google other revenue increased $ 3,149 million from 2017 to 2018 increased $ 3,149 million from 2017 to 2018 . The growth 3,149 million from 2017 to 2018 . The growth wa primarily ) : Ye", + "common_stock": "Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 d common stock outstanding , 46,411,073 share of the registrant \u2019 common stock outstanding , and 340,979,832 share of the registrant \u2019 s Proxy Statement for the 2020 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2019 . Table of year ended December 31 , 2019 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock ha 10 vote per share , our right . As of December 31 , 2019 , Larry Page As of December 31 , 2019 , Larry Page and Sergey Sergey Brin beneficially owned approximately 84.3 % of our outstanding Class stock , which represented approximately 51.2 % of the voting power control of our company . 18 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it acquired business or technology . 19 Table of Contents Alphabet Inc. may change over time . 20 Table of Contents Alphabet I common stock ranged from $ 1,025.47 per share to $ 1,362.47 1,025.47 per share to $ 1,362.47 per share , and the capital stock ranged from $ 1,016.06 to $ 1,361.17 per share from $ 1,016.06 to $ 1,361.17 per share . In addition line with analyst expectation . 21 Table of Contents Alphabet Inc. actual operating performance . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note common stock all dividend ) from December 31 , 2014 to December 31 ) from December 31 , 2014 to December 31 , 2019 31 , 2014 to December 31 , 2019 . The return 2014 to December 31 , 2019 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2014 in stock or invested on December 31 , 2014 in stock or index , . Fiscal year ending December common stock $ 23.11 $ 28.32 $ 18.27 $ common stock $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic net income $ 18.27 $ 44.22 $ 49.59 Basic net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 $ capital stock $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share and B common stock $ 22.84 $ 27. common stock $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted net income $ 18.00 $ 43.70 $ 49.16 Diluted net income per share Class C capital stock $ 24.34 $ 27.85 $ 18.00 $ capital stock $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ 49.16 As $ 27.85 $ 18.00 $ 43.70 $ 49.16 As of December $ 18.00 $ 43.70 $ 49.16 As of December 31 , $ 49.16 As of December 31 , 2015 2016 2017 2018 As of December 31 , 2015 2016 2017 common stock is entitled to 10 vote per share . Class . Share Repurchases In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C . In January and July 2019 , the board of director up to an additional $ 12.5 billion and $ 25.0 billion $ 12.5 billion and $ 25.0 billion of it Class C repurchase pursuant to the January 2018 and January 2019 authorization were the January 2018 and January 2019 authorization were completed in 2019 2019 authorization were completed in 2019 . The re Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , a capital stock ranged from $ 1,016.06 to $ 1,361.17 per share from $ 1,016.06 to $ 1,361.17 per share . In addition line with analyst expectation . 21 Table of Contents Alphabet Inc. actual operating performance . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 10 \u201c Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual capital stock $ 24.63 $ 28.32 $ 18.27 $ capital stock $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 $ common stock $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted net income $ 18.00 $ 43.70 $ 49.16 Diluted net income per share Class C capital stock $ 24.34 capital stock $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ 49.16 As $ 27.85 $ 18.00 $ 43.70 $ 49.16 As of December $ 18.00 $ 43.70 $ 49.16 As of December 31 , $ 49.16 As of December 31 , 2015 2016 2017 2018 As of December 31 , 2015 2016 2017 2018 2019 ( of December 31 , 2015 2016 2017 2018 2019 ( in December 31 , 2015 2016 2017 2018 2019 ( in million 31 , 2015 2016 2017 2018 2019 ( in million ) , 2015 2016 2017 2018 2019 ( in million ) Consolidated , and marketable security $ 73,066 $ capital stock $ 13.53 $ 4.60 $ 13.21 $ capital stock $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted net income $ 14.33 $ 10.20 $ 15.49 Diluted net income per share Class C capital stock $ 13.33 $ 4.54 $ 13.06 $ capital stock $ 13.33 $ 4.54 $ 13.06 $ 12.77 $ $ 13.33 $ 4.54 $ 13.06 $ 12.77 $ 9.50 $ $ 4.54 $ 13.06 $ 12.77 capital stock $ 18.27 $ 44.22 $ 49.59 Diluted capital stock $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share Class C capital stock $ 18.00 $ 43.70 $ 49.16 See capital stock $ 18.00 $ 43.70 $ 49.16 See accompanying note $ 18.00 $ 43.70 $ 49.16 See accompanying note . 51 49.16 See accompanying note . 51 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2017 2018 2019 Net Year Ended December 31 , 2017 2018 2019 Net income $ Ended December 31 , 2017 capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of interest in of interest in consolidated entity 0 722 0 0 722 Net interest in consolidated entity 0 722 0 0 722 Net income in consolidated entity 0 722 0 0 722 Net income 0 consolidated entity 0 722 0 0 722 Net income 0 0 entity 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of interest in of interest in consolidated entity 0 659 0 0 659 Net interest in consolidated entity 0 659 0 0 659 Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding Stock-based compensation exp capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,3 capital stock Repurchases of capital stock ( 4,846 ) ( 9,075 ) ( stock ( 4,846 ) ( 9,075 ) ( 18,396 ) Proceeds ) ( 9,075 ) ( 18,396 ) Proceeds from issuance of debt , net of cost 4,291 6,766 317 Repayments of debt , net of cost 4,291 6,766 317 Repayments of debt ( net of cost 4,291 6,766 317 Repayments of debt ( 4,377 317 Repayments of debt ( 4,377 ) ( 6,827 ) ( debt ( 4,377 ) ( 6,827 ) ( 585 ) Proceeds ) ( 6,827 ) ( 585 ) Proceeds from sale of of interest in consolidated entity 800 950 220 Net cash used int Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "debt_securities": "Debt Securities marketable debt security within Level 2 in the fair value hierarchy investment category a of December 31 , 2018 and 2019 ( a of December 31 , 2018 and 2019 ( in million December 31 , 2018 and 2019 ( in million ) : ) : As of December 31 , 2018 Adjusted Cost Gross As of December 31 , 2018 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,202 $ 0 deposit ( 1 ) $ 2,202 $ 0 $ 0 $ 1 ) $ 2,202 $ 0 $ 0 $ 2,202 $ $ 2,202 $ 0", + "corporate_debt": "Corporate debt security 71 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 15 3,717 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed security ( 316 ) 25,082 44 25,038 Mortgage-backed a Corporate debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asse Corporate debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8, Corporate debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 )" +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-21-000010/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-21-000010/full-submission_features.json new file mode 100644 index 0000000..9bbd6d1 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-21-000010/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue display of ad online in 2020 . Many of our advertiser better than ours . This 10 Table of Contents Alphabet Inc. well a increased content acquisition 11 Table of Contents Alphabet Inc. , tariff , trade dispute 12 Table of Contents Alphabet Inc. could be negatively affected . 13 Table of Contents Alphabet Inc. International revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2020 . In addition to risk business operation and reputation . 14 Table of revenue . Fines of up to 2 % of annual worldwide revenue diminish our cash reserve . 19 Table of Contents Alphabet Inc. Class B common stock ha 10 vote per share , our right . As of December 31 , 2020 , Larry Page As of December 31 , 2020 , Larry Page and Sergey Brin beneficially owned approximate ly 85.3 % of our outstanding Class , which represented approximate ly 51.5 % o f the voting combination with any holder of 15 % or more of it an acquisition of u . 20 Table of Contents Alphabet Inc. back to t revenue and earnings . 30 Table of Contents Alphabet Inc. . For example , in 2020 we announced our Google for Fund to invest approximately $ 10 billion into India over the into India over the next 5-7 year through a mix of Results and Operations In late 2019 , an outbreak of COVID-19 COVID-19 emerged and by March 11 , 2020 wa declared a and by March 11 , 2020 wa declared a global pandemic our financial result in March 2020 when , despite an increase of the quarter ended June 30 , 2020 , we observed qua revenue 2020 Revenues $ 161,857 $ 182,527 Increase in revenue year over in revenue year over year 18 % 13 % Increase in year over year 18 % 13 % Increase in constant currency currency revenue year over year 20 % 14 % Operating income year over year 20 % 14 % Operating income ( 1 14 % Operating income ( 1 ) $ 34,231 $ 41,224 income ( 1 ) $ 34,231 $ 41,224 Operating margin ( 1 ) $ 34,231 $ 41,224 Operating margin ( 1 ) $ 41,224 Operating margin ( 1 ) 21 % 23 % Operating margin ( 1 ) 21 % 23 % Other incom revenue were $ 182.5 billion , an increase of billion , an increase of 13 % year over year , Services segment revenue of $ 16.8 billion or 11 % and of $ 16.8 billion or 11 % and an increase in Cloud segment revenue of $ 4.1 billion or 46 % . of $ 4.1 billion or 46 % . Revenues from the and Other Americas were $ 85.0 billion , $ 55.4 billion $ 85.0 billion , $ 55.4 billion , $ 32.6 billion $ 55.4 billion , $ 32.6 billion , and $ 9.4 32.6 billion , and $ 9.4 billion , respectively . \u2022 cost of revenue wa revenue were $ 51.9 billion , an increase of billion , an increase of 24 % year over year , and content acquisition cost . 32 Table of Contents Alphabet Inc. \u2022 Operating expense were $ 56.6 billion , an increase of billion , an increase of 5 % year over year primarily Operating cash flow wa $ 65.1 billion . \u2022 Capital expenditure technical infrastructure , were $ 22.3 billion . \u2022 Number of \u2022 Number of employee wa 135,301 a of December 31 , wa 135,301 a of December 31 , 2020 . The majority a of December revenue $ 161,857 gain ( loss ) 455 176 Total revenue $ 161,857 $ 455 176 Total revenue $ 161,857 $ 182,527 Google Services Google Total revenue $ 161,857 $ 182,527 Google Services Google advertising revenue , delivery or policy ; 33 Table of Contents Alphabet Inc. & other revenue increased $ 5,947 million from 2019 to 2020 increased $ 5,947 million from 2019 to 2020 . The overall 5,947 million from 2019 to 2020 . The overall growth wa YouTube ad revenue increased $ 4,623 million from 2019 to 2020 incr revenue increased $ 1,543 million from 2019 to 2020 increased $ 1,543 million from 2019 to 2020 . The growth 1,543 million from 2019 to 2020 . The growth wa primarily each engagement by user . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 Paid click Year Ended December 31 , 2019 2020 Paid click change 23 Ended December 31 , 2019 2020 Paid click change 23 % 2019 2020 Paid click change 23 % 19 % Cost-per-click change Paid click change 23 % 19 % Cost-per-click change ( 6 19 % C revenue increased $ 4,697 million from 2019 to 2020 increased $ 4,697 million from 2019 to 2020 . The growth 4,697 million from 2019 to 2020 . The growth wa primarily Google Cloud revenue increased $ 4,141 million from 2019 to 2020 increased $ 4,141 million from 2019 to 2020 . The growth 4,141 million from 2019 to 2020 . The growth wa primarily customer : Year Ended December 31 , 2019 2020 United States Year Ended December 31 , 2019 2020 United States 46 % Ended December 31 , 2019 2020 United States 46 revenue Year Ended December 31 , 2019 2020 EMEA revenue $ 50,645 Ended December 31 , 2019 2020 EMEA revenue $ 50,645 $ 2019 2020 EMEA revenue $ 50,645 $ 55,370 Exclude foreign exchange EMEA revenue $ 50,645 $ 55,370 Exclude foreign exchange effect on revenue using prior year rate 2,397 ( 111 ) EMEA constant prior year rate 2,397 ( 111 ) EMEA constant currency revenue EMEA constant currency revenue $ 53,042 $ 55,259 Prior period EMEA currency revenue $ 53,042 $ 55,259 Prior period EMEA revenue $ Prior p revenue $ 44,739 $ 50,645 EMEA revenue percentage EMEA revenue $ 44,739 $ 50,645 EMEA revenue percentage change 13 50,645 EMEA revenue percentage change 13 % 9 % EMEA constant revenue percentage change 13 % 9 % EMEA constant currency revenue constant currency revenue percentage change 19 % 9 % APAC revenue revenue percentage change 19 % 9 % APAC revenue $ 26,928 9 % APAC revenue $ 26,928 $ 32,550 Exclude foreign exchange APAC revenue $ 26,928 $ 32,550 Exclude foreign exchange effect on revenue using pr revenue using prior year rate 388 11 APAC constant currency revenue $ APAC constant currency revenue $ 27,316 $ 32,561 Prior period APAC currency revenue $ 27,316 $ 32,561 Prior period APAC revenue $ Prior period APAC revenue $ 21,341 $ 26,928 APAC revenue percentage APAC revenue $ 21,341 $ 26,928 APAC revenue percentage change 26 26,928 APAC revenue percentage change 26 % 21 % APAC constant revenue percentage change 26 % 21 % APAC constant currency revenue constant currency revenue percentage change 2 revenue percentage change 28 % 21 % Other Americas revenue $ % Other Americas revenue $ 8,986 $ 9,417 Exclude foreign exchange Americas revenue $ 8,986 $ 9,417 Exclude foreign exchange effect on revenue using prior year rate 541 964 Other Americas constant currency using prior year rate 541 964 Other Americas constant currency revenue Americas constant currency revenue $ 9,527 $ 10,381 Prior period Other currency revenue $ 9,527 $ 10,381 Prior period Other Americas revenue period Other Americas revenue revenue Americas revenue $ 7,608 $ 8,986 Other Americas revenue percentage change Other Americas revenue percentage change 18 % 5 % Other Americas revenue percentage change 18 % 5 % Other Americas constant currency constant currency revenue percentage change 25 % 16 % United States revenue percentage change 25 % 16 % United States revenue $ % United States revenue $ 74,843 $ 85,014 United States revenue States revenue $ 74,843 $ 85,014 United States revenue percentage change United States revenue perce revenue percentage change 18 % 14 % Hedging gain ( loss Hedging gain ( loss ) 455 176 Total revenue $ 161,857 gain ( loss ) 455 176 Total revenue $ 161,857 $ 455 176 Total revenue $ 161,857 $ 182,527 Total constant currency Total revenue $ 161,857 $ 182,527 Total constant currency revenue $ Total constant currency revenue $ 164,728 $ 183,215 Prior period revenue currency revenue $ 164,728 $ 183,215 Prior period revenue , excluding , excluding hedging effect ( 1 ) $ 136,957 $ 161,402 effect ( 1 ) $ 136, revenue percentage 1 ) $ 136,957 $ 161,402 Total revenue percentage change 18 161,402 Total revenue percentage change 18 % 13 % Total constant revenue percentage change 18 % 13 % Total constant currency revenue constant currency revenue percentage change 20 % 14 % ( 1 revenue percentage change 20 % 14 % ( 1 ) Total 20 % 14 % ( 1 ) Total revenue and hedging for the year ended December 31 , 2018 were $ 136,819 year ended December 31 , 2018 were $ 136,819 million and 31 , 2018 were $ 136,819 million and $ revenue percentage change from 2019 to 2020 wa not significantly percentage change from 2019 to 2020 wa not significantly affected by APAC revenue percentage change from 2019 to 2020 wa not significantly percentage change from 2019 to 2020 wa not significantly affected by Americas revenue percentage change from 2019 to 2020 wa unfavorably affected percentage change from 2019 to 2020 wa unfavorably affected by change real and Argentine peso . 37 Table of Contents Alphabet Inc. ) : Year Ended December 31 revenue 41,807 32,778 Other cost of revenue 41,807 51,954 Total cost of revenue Other cost of revenue 41,807 51,954 Total cost of revenue $ Total cost of revenue $ 71,896 $ 84,732 Total cost of of revenue $ 71,896 $ 84,732 Total cost of revenue a a a percentage of revenue 44.4 % 46.4 % Cost of percentage of revenue 44.4 % 46.4 % Cost of revenue increased Cost of revenue increased $ 12,836 million from 2019 to 2020 increased $ 12,836 million from 2019 to 2020 . The increase 12,836 million from 2019 to 2 revenue and TAC of $ 10,147 million and $ 2,689 million $ 10,147 million and $ 2,689 million , respectively . The other cost of revenue from 2019 to 2020 wa due to of revenue from 2019 to 2020 wa due to an increase The increase in TAC from 2019 to 2020 wa due to in TAC from 2019 to 2020 wa due to increase in . The TAC rate wa 22.3 % in both 2019 and wa 22.3 % in both 2019 and 2020 . The TAC % in both 2019 and 2020 . The TAC rate on were both substantially consistent from 2019 to 2020 . Over time substa revenue . 38 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 Research and Year Ended December 31 , 2019 2020 Research and development expense Ended December 31 , 2019 2020 Research and development expense $ Research and development expense $ 26,018 $ 27,573 Research and development development expense $ 26,018 $ 27,573 Research and development expense a a a percentage of revenue 16.1 % 15.1 % R & percentage of revenue 16.1 % 15.1 % R & D expense & D expense increased $ 1,555 mill revenue 11.4 % 9.8 % Sales and percentage of revenue 11.4 % 9.8 % Sales and marketing expense and marketing expense decreased $ 518 million from 2019 to 2020 decreased $ 518 million from 2019 to 2020 . The decrease 518 million from 2019 to 2020 . The decrease wa primarily and promotional expense of $ 1,395 million , a we reduced and entertainment expense of $ 371 million . The decrease wa in compensation expense of $ 1,347 million , largely resulting from , largely resulting from an 8 % increase in hea revenue 5.9 % 6.1 % General and percentage of revenue 5.9 % 6.1 % General and administrative expense organization ; \u2022 Depreciation ; 39 Table of Contents Alphabet Inc. and administrative expense increased $ 1,501 million from 2019 to 2020 increased $ 1,501 million from 2019 to 2020 . The increase 1,501 million from 2019 to 2020 . The increase wa primarily in compensation expense of $ 887 million , largely resulting from , largely resulting from a 16 % increase in headcount . wa an increase of $ 440 mil revenue 16,012 17,296 17,568 21,020 18,982 18,553 : Cost of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 Cost of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 6,029 17,5 revenue share 5,916 and other current liability 23,067 28,631 Accrued revenue share 5,916 7,500 23,067 28,631 Accrued revenue share 5,916 7,500 Deferred revenue 1,908 2,543 28,631 Accrued revenue share 5,916 7,500 Deferred revenue 1,908 2,543 Income share 5,916 7,500 Deferred revenue 1,908 2,543 Income tax payable , 5,916 7,500 Deferred revenue 1,908 2,543 Income tax payable , net Income tax payable , net 274 1,485 Total current liability 45,221 tax payable , net 274 1,485 Total current liability 45,22 revenue , non-current 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 358 13,932 Deferred revenue , non-current 358 481 Income tax payable , Deferred revenue , non-current 358 481 Income tax payable , non-current Income tax payable , non-current 9,885 8,849 Deferred income tax 1,701 tax payable , non-current 9,885 8,849 Deferred income tax 1,701 3,561 9,885 8,849 Deferred income tax 1,701 3,561 Operating lease liability 10,214 8,849 Deferred income tax 1,701 3,561 Operating lea revenue 59,549 71,896 84,732 Research and development : Cost of revenue 59,549 71,896 84,732 Research and development 21,419 Cost of revenue 59,549 71,896 84,732 Research and development 21,419 26,018 71,896 84,732 Research and development 21,419 26,018 27,573 Sales and marketing 84,732 Research and development 21,419 26,018 27,573 Sales and marketing 16,333 Research and development 21,419 26,018 27,573 Sales and marketing 16,333 18,464 26,018 27,573 Sales and marketing 16,333 18,464 17,946 General and revenue share expense and other liability 8,614 7,170 5,504 Accrued revenue share 483 and other liability 8,614 7,170 5,504 Accrued revenue share 483 1,273 7,170 5,504 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 5,504 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 37 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 37 635 483 1,273 1,639 Deferred revenue 371 37 635 Net cash provided 1,273 1,639 Deferred revenue 371 37 635 Net cash provided by 1,639 Deferred revenue Revenue Recognition Revenues are , we report advertising revenue 59 Table of Contents Alphabet Inc. or a flat fee ; 60 Table of Contents Alphabet Inc. For the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , advertising and , 2018 , 2019 and 2020 , advertising and promotional expense promotional expense totaled approximately $ 6.4 billion , $ 6.8 billion $ 6.4 billion , $ 6.8 billion , and $ 5.4 6.8 billion , and $ 5.4 billion revenue in % of our revenue in 2018 , 2019 , or 2020 our revenue in 2018 , 2019 , or 2020 . In 2018 , 2019 , or 2020 . In 2018 , 2019 , or 2020 . In 2018 , 2019 , and 2020 2020 . In 2018 , 2019 , and 2020 , we 2018 , 2019 , and 2020 , we generated approximately 46 2020 , we generated approximately 46 % , 46 % , generated approximately 46 % , 46 % , and 47 % , 46 % , and 47 % of our revenue , derived from revenue earned from 61 Table of Contents Alphabet Inc. measure fair value : Level 1 - Observable in Revenue Recognition The ) . Year Ended December 31 , 2018 2019 2020 Google Year Ended December 31 , 2018 2019 2020 Google Search & Ended December 31 , 2018 2019 2020 Google Search & other December 31 , 2018 2019 2020 Google Search & other $ Google Search & other $ 85,296 $ 98,115 $ 104,062 YouTube & other $ 85,296 $ 98,115 $ 104,062 YouTube ad 11,155 $ 85,296 $ 98,115 $ 104,062 YouTube ad 11,155 15,149 19,772 98,115 $ 104,062 YouTube ad 11,155 15,149 19,772 Google Network Members $ 104,062 YouTube ad 1 revenue loss ) ( 138 ) 455 176 Total revenue $ 136,819 ) ( 138 ) 455 176 Total revenue $ 136,819 $ 455 176 Total revenue $ 136,819 $ 161,857 $ 182,527 The Total revenue $ 136,819 $ 161,857 $ 182,527 The following table $ 136,819 $ 161,857 $ 182,527 The following table present our ) : Year Ended December 31 , 2018 2019 2020 United Year Ended December 31 , 2018 2019 2020 United States $ Ended December 31 , 2018 2019 2020 United States $ 63,269 December 31 , 2018 2019 2020 United States $ 63,269 46 2019 2 revenue ( 138 ) 0 455 0 176 0 Total revenue $ 138 ) 0 455 0 176 0 Total revenue $ 136,819 ) 0 455 0 176 0 Total revenue $ 136,819 100 176 0 Total revenue $ 136,819 100 % $ 161,857 100 0 Total revenue $ 136,819 100 % $ 161,857 100 % $ 136,819 100 % $ 161,857 100 % $ 182,527 100 136,819 100 % $ 161,857 100 % $ 182,527 100 % $ 161,857 100 % $ 182,527 100 % ( 1 ) 161,857 100 % $ 182,527 100 % ( 1 ) Regions $ 182,527 100 % ( 1 ) Regions represent Europe , deferred revenue a of December 31 , 2019 wa $ 2.3 a revenue for the year ending December 31 , 2020 . Additionally , year ending December 31 , 2020 . Additionally , we have performed . As of December 31 , 2020 , the amount As of December 31 , 2020 , the amount not yet from these commitment is $ 29.8 billion . We expect to approximately half over the next 24 month with the remaining thereafter recognize such a revenue . 66 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 3 . Financial Instruments Debt Securities a available-for-sale , within Le Revenue ( 139 ) 367 144 Interest rate contract Revenue ( 139 ) 367 144 Interest rate contract Other Revenue ( 139 ) 367 144 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for provision ) for income tax 35 ( 74 ) ( 34 for income tax 35 ( 74 ) ( 34 ) Net 35 ( 74 ) ( 34 ) Net of tax ( ) Net of tax ( 98 ) 299 116 Total amount of tax ( 98 ) 299 116 Total amount reclassified , tax ( 98 ) 299 116 T Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 691 million , $ 724 million $ 691 million , $ 724 million , and $ 855 724 million , and $ 855 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . Note 14 2020 , respectively . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2018 2019 2020 Domesti revenue loss ) ( 138 ) 455 176 Total revenue $ 136,819 ) ( 138 ) 455 176 Total revenue $ 136,819 $ 455 176 Total revenue $ 136,819 $ 161,857 $ 182,527 Operating Total revenue $ 136,819 $ 161,857 $ 182,527 Operating income ( $ 136,819 $ 161,857 $ 182,527 Operating income ( loss ) ) : Google Services $ 43,137 $ 48,999 $ 54,606 Google Google Services $ 43,137 $ 48,999 $ 54,606 Google Cloud ( $ 43,137 $ 48,999 $ 54,606 Google Cloud ( 4,348 ) $ 54,606 Google Cloud ( 4,348 ) ( 4,645 ) ( Cloud ( 4,348 ) ( 4,6 revenue year ended December 31 , 2019 . For revenue by geography by geography , see Note 2 . The following table present ) . As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Long-lived asset : As of December 31 , 2020 Long-lived asset : United States asset : United States $ 63,102 $ 69,315 International 21,485 27,645 United States $ 63,102 $ 69,315 International 21,485 27,645 Total long-lived $ 63,102 $ 69,315 International 21,485 27,6", + "net_income": "Net income $ $ 27,524 $ 34,231 $ 41,224 Net income $ 19,478 $ $ 41,224 Net income $ 19,478 $ 12,662 $ 30,736 $ Net income $ 19,478 $ 12,662 $ 30,736 $ 34,343 $ $ 19,478 $ 12,662 $ 30,736 $ 34,343 $ 40,269 Basic $ 12,662 $ 30,736 $ 34,343 $ 40,269 Basic net income $ 30,736 $ 34,343 $ 40,269 Basic net income per share and B common stock $ 28.32 $ 18.27 $ 44.22 $ common stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic net income $ 44. net income per share Class C capital stock $ 28.32 $ 18.27 $ 44.22 $ capital stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share and B common stock $ 27.85 $ 18.00 $ 43.70 $ common stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted net income $ 43.70 $ 49.16 $ 58.61 Diluted net income per sha Net Income ( , net $ 5,394 $ 6,858 Net Income ( 1 ) $ 6,858 Net Income ( 1 ) $ 34,343 $ 40,269 Income ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 40,269 Diluted EPS ( 1 ) $ 49.16 $ 58.61 EPS ( 1 ) $ 49.16 $ 58.61 ( 1 ) 1 ) $ 49.16 $ 58.61 ( 1 ) Results for $ 49.16 $ 58.61 ( 1 ) Results for 2019 include ( 1 ) Results for 2019 include the effect of the the effect of the $ 1.7 billion EC fine . See EC fine . See Note 10 of the Notes to Consolidated in Part II , Item 8 of t Net income 1,489 2,200 1,560 33 921 1,318 2,112 3,462 Net income $ 2,200 1,560 33 921 1,318 2,112 3,462 Net income $ 6,657 1,560 33 921 1,318 2,112 3,462 Net income $ 6,657 $ 2,112 3,462 Net income $ 6,657 $ 9,947 $ 7,068 $ Net income $ 6,657 $ 9,947 $ 7,068 $ 10,671 $ $ 6,657 $ 9,947 $ 7,068 $ 10,671 $ 6,836 $ $ 9,947 $ 7,068 $ 10,671 $ 6,836 $ 6,959 $ $ 7,068 $ 10,671 $ 6,836 $ 6,959 $ 11,247 15,227 $ 10,671 $ 6,836 $ 6,959 $ 11,247 15,227 Basic net $ 6,836 $ 6,959 $ 11,247 15,227 Basic net income per 6 net income per share Class C capital stock $ 9.58 $ 14.33 $ 10.20 $ capital stock $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted net income $ 10.21 $ 16.55 $ 22.54 Diluted net income per share Class C capital stock $ 9.50 $ 14.21 $ 10.12 $ capital stock $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ $ 9.50 $ 14.21 $ 10.12 $ 15.3 net Income tax receivable , net 2,166 454 Inventory 999 728 Other tax receivable , net 2,166 454 Inventory 999 728 Other current , net 2,166 454 Inventory 999 728 Other current asset 4,412 net 2,166 454 Inventory 999 728 Other current asset 4,412 5,490 999 728 Other current asset 4,412 5,490 Total current asset 152,578 728 Other current asset 4,412 5,490 Total current asset 152,578 174,296 4,412 5,490 Total current asset 152,578 174,296 Non-marketable investment 13,078 20,703 5,490 Total current asset 152 net Income tax payable , net 274 1,485 Total current liability 45,221 tax payable , net 274 1,485 Total current liability 45,221 56,834 274 1,485 Total current liability 45,221 56,834 Long-term debt 4,554 13,932 1,485 Total current liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 358 13,932 Deferred revenue , non-current 358 481 Income tax Net income $ Provision for income tax 4,177 5,282 7,813 Net income $ 30,736 for income tax 4,177 5,282 7,813 Net income $ 30,736 $ 5,282 7,813 Net income $ 30,736 $ 34,343 $ 40,269 Basic Net income $ 30,736 $ 34,343 $ 40,269 Basic net income $ 30,736 $ 34,343 $ 40,269 Basic net income per share Class C capital stock $ 44.22 $ 49.59 $ 59.15 Diluted capital stock $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share Class C capital stock $ 43.70 $ 49.16 $ 58.61 See Net income $ Ended December 31 , 2018 2019 2020 Net income $ 30,736 December 31 , 2018 2019 2020 Net income $ 30,736 $ 2019 2020 Net income $ 30,736 $ 34,343 $ 40,269 Other Net income $ 30,736 $ 34,343 $ 40,269 Other comprehensive income $ 30,736 $ 34,343 $ 40,269 Other comprehensive income ( loss foreign currency translation adjustment ( 781 ) ( 119 ) 1,139 adjustment ( 781 ) ( 119 ) 1,139 Available-for-sale investment : 781 ) ( 119 ) 1,139 Available-for-sale investment : Change in unrealized gain ( loss net income ( 911 ) ( 111 ) ( income ( 911 ) ( 111 ) ( 513 ) Net ) ( 111 ) ( 513 ) Net change , net ( expense ) of $ 156 , $ ( 221 ) $ 156 , $ ( 221 ) , and $ ( ) , and $ ( 230 ) ( 823 ) 1,500 $ ( 230 ) ( 823 ) 1,500 800 Cash flow 230 ) ( 823 ) 1,500 800 Cash flow hedge : ) ( 823 ) 1,500 800 Cash flow hedge : Change unrealized gain ( loss ) 290 22 42 Less : reclassification gain ( loss ) 290 22 42 Less : reclassification adjustment ( loss ) 290 22 42 Less : reclassification adjustment for loss included in net income 98 ( 299 ) ( 116 in net income 98 ( 299 ) ( 116 ) Net 98 ( 299 ) ( 116 ) Net change , net expense ) of $ ( 103 ) , $ 42 , ( 103 ) , $ 42 , and $ 11 388 $ 42 , and $ 11 388 ( 277 ) ( 42 , and $ 11 388 ( 277 ) ( 74 and $ 11 388 ( 277 ) ( 74 ) Other 388 ( 277 ) ( 74 ) Other comprehensive income ( income ( loss ) ( 1,216 ) 1,104 1,865 Comprehensive income loss ) ( 1,216 ) 1,104 1,865 Comprehensive income $ 29,520 ) ( 1,216 ) 1,104 1,865 Comprehensive income $ 29,520 $ 1,104 1,865 Comprehensive inco Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive income Net income 0 0 0 30,736 30,736 Other comprehensive income ( income 0 0 0 30,736 30,736 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 1,216 ) 0 income ( loss ) 0 0 ( 1,216 ) 0 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance inc Net income December 31 , 2018 2019 2020 Operating activity Net income $ Operating activity Net income $ 30,736 $ 34,343 $ 40,269 Adjustments Net income $ 30,736 $ 34,343 $ 40,269 Adjustments : Depreciation $ 30,736 $ 34,343 $ 40,269 Adjustments : Depreciation and impairment impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of net Income tax , net ( 2,251 ) ( 3,128 ) 1,209 net ( 2,251 ) ( 3,128 ) 1,209 Other asset ( 2,251 ) ( 3,128 ) 1,209 Other asset ( 1,207 ) ) 1,209 Other asset ( 1,207 ) ( 621 ) ( asset ( 1,207 ) ( 621 ) ( 1,330 ) Accounts ) ( 621 ) ( 1,330 ) Accounts payable 1,067 428 ( 1,330 ) Accounts payable 1,067 428 694 Accrued expense and 1,330 ) Accounts payable 1,067 428 694 Accrued expense and other ) Accounts payable 1,067 428 694 Accrued expense and other liability Accrued expense and other liability 8,614 7,170 net income of Income Year Ended December 31 , AOCI Components Location 2018 31 , AOCI Components Location 2018 2019 2020 Unrealized gain ( , AOCI Components Location 2018 2019 2020 Unrealized gain ( loss AOCI Components Location 2018 2019 2020 Unrealized gain ( loss ) expense ) , net $ 1,190 $ 149 $ 650 Benefit , net $ 1,190 $ 149 $ 650 Benefit ( provision $ 1,190 $ 149 $ 650 Benefit ( provision ) for ) for income tax ( 279 ) ( 38 ) ( tax ( 279 ) ( 38 ) ( 137 ) Net ) ( 38 ) ( 137 ) Net of tax 911 137 ) Ne Net Income Per Share there are a number of 84 Table of Contents Alphabet Inc. In the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , the net , 2018 , 2019 and 2020 , the net income per ) : Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator Number of $ net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 85 per share $ 43.70 $ 43.70 $ 43.70 85 Table of $ 43.70 $ 43.70 $ 43.70 85 Table of Contents Alphabet 43.70 $ 43.70 $ 43.70 85 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 Year per share $ 49.16 $ 49.16 $ 49.16 Year Ended December $ 49.16 $ 49.16 $ 49.16 Year Ended December 31 , $ 49.16 Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator undistributed earnings net income in per share computation 299,815 46,182 334,819 Basic net income per per share computation 299,815 46,182 334,819 Basic net income per share net income per share $ 59.15 $ 59.15 $ 59.15 Diluted per share $ 59.15 $ 59.15 $ 59.15 Diluted net income $ 59.15 $ 59.15 $ 59.15 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed net income in per share computation 346,084 46,182 340,944 Diluted net income per per share computation 346,084 46,182 340,944 Diluted net income per share net income per share $ 58.61 $ 58.61 $ 58.61 86 per share $ 58.61 $ 58.61 $ 58.61 86 Table of $ 58.61 $ 58.61 $ 58.61 86 Table of Contents Alphabet 58.61 $ 58.61 $ 58.61 86 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans stock plan include the Alphabet 2012 Stock Plan and Other Bet to participant under th", + "assets": "Assets Current asset As of December 31 , 2020 Assets Current asset : Cash Cash and cash equivalent $ 18,498 $ 26,465 Marketable security 101,177 cash equivalent $ 18,498 $ 26,465 Marketable security 101,177 110,229 Total 18,498 $ 26,465 Marketable security 101,177 110,229 Total cash , cash $ 26,465 Marketable security 101,177 110,229 Total cash , cash equivalent equivalent , and marketable security 119,675 136,694 Accounts receivable , net , and marketable security 119,675 136,694 Accounts receivable Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 91 $ 253 $ 344 Other non-current asset $ 91 $ 253 $ 344 Other contract Other $ 91 $ 253 $ 344 Other contract Other current and Other current and non-current asset 0 1 1 Total $ 91 current and non-current asset 0 1 1 Total $ 91 $ and non-current asset 0 1 1 Total $ 91 $ 254 0 1 1 Total $ 91 $ 254 $ 345 Derivative 1 Total $ 91 $ 254 $ 345 Derivative Liabilities : $ 91 $ 254 $ 345 Derivative Liabilities : Level 2 345 Deriv Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 33 $ 316 $ 349 Other non-current asset $ 33 $ 316 $ 349 Other contract Other $ 33 $ 316 $ 349 Other contract Other current and Other current and non-current asset 0 16 16 Total $ 33 current and non-current asset 0 16 16 Total $ 33 $ and non-current asset 0 16 16 Total $ 33 $ 332 0 16 16 Total $ 33 $ 332 $ 365 Derivative 16 Total $ 33 $ 332 $ 365 Derivative Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 Assets As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 366 $ ( 21 ) $ Derivatives $ 366 $ ( 21 ) $ 345 $ ( $ ( 21 ) $ 345 $ ( 88 ) ( ) $ 345 $ ( 88 ) ( 1 ) $ $ ( 88 ) ( 1 ) $ ( 234 ) ( 1 ) $ ( 234 ) $ 0 $ 23 $ ( 234 ) $ 0 $ 23 As of December 234 ) $ 0 $ 23 As of December 31 , $ 23 As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 397 $ ( 32 ) $", + "liabilities": "Liabilities and Stockholders Total asset $ 275,909 $ 319,616 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 5,561 $ 5,589 Accrued compensation and Accounts payable $ 5,561 $ 5,589 Accrued compensation and benefit 8,495 5,589 Accrued compensation and benefit 8,495 11,086 Accrued expense and other Accrued compensation and benefit 8,495 11,086 Accrued expense and other current expense and other current liability 23,067 28,631 Accrued revenue share 5,916 and other current liability 23,067 Liabilities : $ 91 $ 254 $ 345 Derivative Liabilities : Level 2 345 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 173 $ 196 $ 369 Other and non-current $ 173 $ 196 $ 369 Other contract Accrued $ 173 $ 196 $ 369 Other contract Accrued expense and liability , current and non-current 0 13 13 Total $ 173 , current and non-current 0 13 13 Total $ 173 $ current and non-current 0 13 13 Total $ 173 $ 209 0 13 13 Total $ 173 $ 209 $ 382 As 13 Total $ 173 $ 209 $ 38 Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 365 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 395 $ 185 $ 580 Other and non-current $ 395 $ 185 $ 580 Other contract Accrued $ 395 $ 185 $ 580 Other contract Accrued expense and liability , current and non-current 0 942 942 Total $ 395 , current and non-current 0 942 942 Total $ 395 $ current and non-current 0 942 942 Total $ 395 $ 1,127 0 942 942 Total $ 395 $ 1,127 $ 1,522 72 942 Total $ Liabilities As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 403 $ ( 21 ) $ Derivatives $ 403 $ ( 21 ) $ 382 $ ( $ ( 21 ) $ 382 $ ( 88 ) ( ) $ 382 $ ( 88 ) ( 2 ) $ $ ( 88 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 294 As 2 ) $ 0 $ 0 $ 294 As of December $ 0 $ 0 $ 294 As of December 31 , $ 294 As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 1,554 $", + "equity": "Equity Securities 26 Item 6 . Selected Financial of Equity Securities 26 Item 6 . Selected Financial Data 29 6 . Selected Financial Data 29 Item 7 . Management \u2019 Selected Financial Data 29 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 30 Item 7A . Quantitative and Results of Operations 30 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 47 Item 8 . Financial Statements About Market Risk 47 Item 8 . Financial Statements and Supplement EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public \u201c GOOG \u201d since April 3 , 2014 . Holders of \u201d since April 3 , 2014 . Holde equity $ Total stockholder \u2019 equity $ 139,036 $ 152,502 $ 177,628 $ \u2019 equity $ 139,036 $ 152,502 $ 177,628 $ 201,442 $ $ 139,036 $ 152,502 $ 177,628 $ 201,442 $ 222,544 29 $ 152,502 $ 177,628 $ 201,442 $ 222,544 29 Table of $ 177,628 $ 201,442 $ 222,544 29 Table of Contents Alphabet 177,628 $ 201,442 $ 222,544 29 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted disc equity investment . 31 Table of Contents Alphabet Inc and information technology , in 2020 we slowed the pace of back to the office in 2021 , we may experience increased for the year ended December 31 , 2019 and 2020 ( year ended December 31 , 2019 and 2020 ( in million December 31 , 2019 and 2020 ( in million , except ) . Year Ended December 31 , 2019 2020 Revenues $ Year Ended December 31 , 2019 2020 Revenues $ 161,857 $ Ended December 31 , 2019 2020 Revenues $ 161,857 $ 182,527 , 2019 2020 Revenues equity security by $ 1.8 billion . From time to event . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , the carrying December 31 , 2019 and 2020 , the carrying value of measurement alternative , wa $ 11.4 billion and $ 18.9 billion $ 11.4 billion and $ 18.9 billion , respectively . Valuations , which totaled approximately $ 1.3 billion and $ 1.4 billion $ 1.3 billion and $ 1.4 billion a of December 31 1.4 billion a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 20 Equity 57 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption \u201c Quarterly Results of Operations . \u201d 50 Table of Contents Alphabet Inc. Company ) a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , the related December 31 , Equity liability : Accounts payable $ 5,561 $ 5,589 Accrued compensation and Accounts payable $ 5,561 $ 5,589 Accrued compensation and benefit 8,495 5,589 Accrued compensation and benefit 8,495 11,086 Accrued expense and other Accrued compensation and benefit 8,495 11,086 Accrued expense and other current expense and other current liability 23,067 28,631 Accrued revenue share 5,916 and other current liability 23,067 28,631 Accrued revenue share 5,916 7,500 23,067 28,631 Accrued revenue share 5,916 7,5 equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 688, equity ) 633 Retained earnings 152,122 163,401 Total stockholder \u2019 equity 201,442 163,401 Total stockholder \u2019 equity 201,442 222,544 Total liability and stockholder Total stockholder \u2019 equity 201,442 222,544 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 275,909 $ 319,616 See accompanying note \u2019 equity $ 275,909 $ 319,616 See accompanying note . 54 319,616 See accompanying note . 54 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2018 2019 2020 Revenues Year Ended Decemb equity equity security , net ( 6,650 ) ( 2,798 ) ( net ( 6,650 ) ( 2,798 ) ( 6,317 ) Other ) ( 2,798 ) ( 6,317 ) Other ( 189 ) ( 6,317 ) Other ( 189 ) ( 592 ) 1,267 Other ( 189 ) ( 592 ) 1,267 Changes in asset 189 ) ( 592 ) 1,267 Changes in asset and liability acquisition : Accounts receivable ( 2,169 ) ( 4,340 ) ( receivable ( 2,169 ) ( 4,340 ) ( 6,524 ) Income ) ( 4,340 ) ( 6,524 ) Income tax , net Income tax , net ( 2,251 ) ( 3,128 ) 1,209 net ( 2,251 ) ( 3,128 ) 1,209 Other asset ( 2,251 ) ( 3,128 Equity Securities As of December 31 , 2019 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative net gain $ 1,935 $ 8,297 $ 10,232 Cumulative net gain ( loss gain ( loss ) ( 1 ) 1,361 3,056 4,417 Carrying loss ) ( 1 ) 1,361 3,056 4,417 Carrying value $ ) ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 $ 3,056 4,417 Carrying value $ 3,296 $ 11,353 $ 14 equity $ 11,353 $ 14,649 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 3.5 billion unrealized gain and $ billion unrealized gain and $ 445 million unrealized loss ( including ) . As of December 31 , 2020 Marketable Equity Securities As of December 31 , 2020 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative net gain $ 2,227 $ 14,616 $ 16,843 Cumulative net gain ( loss g equity $ 18,893 $ 24,751 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 6.1 billion unrealized gain and $ billion unrealized gain and $ 1.9 billion unrealized loss ( including including impairment ) . ( 2 ) The long-term portion of marketable equity security of $ 429 million is included in other in other non-current asset . 69 Table of Contents Alphabet Inc investment category a of December 31 , 2019 and 2020 ( a of December 31 , 2019 and 2020 ( in million December 31 , 2019 and 2 Equity Securities Level 1 : Money market fund $ : Money market fund $ 4,604 $ 0 $ 12,210 $ market fund $ 4,604 $ 0 $ 12,210 $ 0 Marketable $ 4,604 $ 0 $ 12,210 $ 0 Marketable equity security $ 0 $ 12,210 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) ( 2 ) 0 security ( 1 ) ( 2 ) 0 3,046 0 5,470 1 ) ( 2 ) 0 3,046 0 5,470 4,604 3,046 ) ( 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 ( 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 5,470 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 5,470 Level ) 0 3,04 equity security of $ 429 million is included within other ) : Year Ended December 31 , 2019 2020 Unrealized gain Year Ended December 31 , 2019 2020 Unrealized gain $ 2,163 Ended December 31 , 2019 2020 Unrealized gain $ 2,163 $ 2019 2020 Unrealized gain $ 2,163 $ 3,020 Unrealized loss ( Unrealized gain $ 2,163 $ 3,020 Unrealized loss ( including impairment ( including impairment ) ( 372 ) ( 1,489 ) Total ) ( 372 ) ( 1,489 ) Total unrealized gain ( for non-marketable equity security $ 1,791 $ 1,531 Dur equity security $ 1,791 $ 1,531 During the year ended December During the year ended December 31 , 2020 , included in year ended December 31 , 2020 , included in the $ , included in the $ 18.9 billion of non-marketable equity security non-marketable equity security , $ 9.7 billion were measured at fair net unrealized gain of $ 1.5 billion . Equity security accounted Equity Method As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , equity security December 31 , 2019 and 2020 , equit equity method investment . 76 Table of Contents Alphabet Inc. not material a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Note 6 December 31 , 2019 and 2020 . Note 6 . Debt 2019 and 2020 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Our short-term December 31 , 2019 and 2020 . Our short-term debt balance . Long-Term Debt In August 2020 , Alphabet is equity security , net 5,460 2,649 5,592 Performance fee ( equity security , net 5,460 2,649 5,592 Performance fee ( 1,203 security , net 5,460 2,649 5,592 Performance fee ( 1,203 ) 2,649 5,592 Performance fee ( 1,203 ) ( 326 ) ( fee ( 1,203 ) ( 326 ) ( 609 ) Income ) ( 326 ) ( 609 ) Income ( loss ) method investment , net ( 120 ) 390 401 Other ( , net ( 120 ) 390 401 Other ( 4 ) net ( 120 ) 390 401 Other ( 4 ) 378 ) 390 401 Other ( 4 ) 378 102 ( 637 401 Other ( 4 ) 378 102 ( 637 ) Other Other ( 4 ) 37 Equity Convertible Board of Directors ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , no share December 31 , 2019 and 2020 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In July 2020 , the Board of Directors up to an additional $ 28.0 billion of it Class C transaction , including through Rule 10b5-1 pla Equity 57 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 2 . Financial Statement Schedules to Consolidated Financial Statements 59 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 ( December 31 , 2018 , 2019 and 2020 ( in million , 2018 , 2019 and 2020 ( in million ) : of Year Year ended Decembe", + "cash_flow": "cash flow wa $ 65.1 billion . \u2022 Capital expenditure technical infrastructure , were $ 22.3 billion . \u2022 Number of \u2022 Number of employee wa 135,301 a of December 31 , wa 135,301 a of December 31 , 2020 . The majority a of December 31 , 2020 . The majority of new in the fourth quarter of 2020 , we report our segment ) . Year Ended December 31 , 2019 2020 Google Search Year Ended December 31 , 2019 2020 Google Search & other Ended December 31 , 2019 2020 Google Search & other $ Google Search & other $ 98,115 Cash flow 230 ) ( 823 ) 1,500 800 Cash flow hedge : ) ( 823 ) 1,500 800 Cash flow hedge : Change unrealized gain ( loss ) 290 22 42 Less : reclassification gain ( loss ) 290 22 42 Less : reclassification adjustment ( loss ) 290 22 42 Less : reclassification adjustment for loss included in net income 98 ( 299 ) ( 116 in net income 98 ( 299 ) ( 116 ) Net 98 ( 299 ) ( 116 ) Net change , net expense ) of $ ( 103 ) , $ 42 , ( 103 ) , $ 42 , and $ 11 388 $ 42 , and $ 11 388 ( 277 ) ( 42 , and $ 11 388 ( 277 ) cash flow , net of refund $ 5,671 $ 8,203 $ 4,990 See of refund $ 5,671 $ 8,203 $ 4,990 See accompanying note $ 5,671 $ 8,203 $ 4,990 See accompanying note . 58 4,990 See accompanying note . 58 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding liability . As of December 31 , 202 Cash flow hedge $ 13,207 $ 10,187 Fair value hedge flow hedge $ 13,207 $ 10,187 Fair value hedge $ 455 10,187 Fair value hedge $ 455 $ 1,569 Net investment hedge value hedge $ 455 $ 1,569 Net investment hedge $ 9,318 1,569 Net investment hedge $ 9,318 $ 9,965 Derivatives Not Designated investment hedge $ 9,318 $ 9,965 Derivatives Not Designated a Hedging : Foreign exchange contract $ 43,497 $ 39,861 Other contract $ exchange contract $ 43,497 $ 39,861 Other contract $ 117 $ $ 39,861 Other contract $ 117 Cash Flow December 31 , 2018 2019 2020 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 332 $ 38 $ 102 Amount of effectiveness $ 332 $ 38 $ 102 Amount excluded from $ 332 $ 38 $ 102 Amount excluded from the assessment from the assessment of effectiveness 26 ( 14 ) ( 37 assessment of effectiveness 26 ( 14 ) ( 37 ) Derivatives 26 ( 14 ) ( 37 ) Derivatives in Net Investment in the assessment of effectiveness 136 131 ( 851 ) Total the assessment of effectiveness 136 131 ( 851 ) Total $ of e", + "operating_margin": "Operating margin ( 1 ) $ 34,231 $ 41,224 Operating margin ( 1 ) $ 41,224 Operating margin ( 1 ) 21 % 23 % Operating margin ( 1 ) 21 % 23 % Other income ( 1 ) 21 % 23 % Other income ( expense expense ) , net $ 5,394 $ 6,858 Net Income ( , net $ 5,394 $ 6,858 Net Income ( 1 ) $ 6,858 Net Income ( 1 ) $ 34,343 $ 40,269 Income ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 40,269 Diluted EPS ( 1 ) $ 49.16 $ 58.61 EPS ( 1 ) $ 49.16 $ 58.61 ( 1 ) 1 ) $ 49.16 $ 58.61 ( 1 ) Results for ", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 104,207 126,462 Less : accumulated depreciation ( Less : accumulated depreciation ( 30,561 ) ( 41,713 ) Property depreciation ( 30,561 ) ( 41,713 ) Property and equipment , and equipment , net $ 73,646 $ 84,749 Accrued expense and , net $ 73,646 $ 84,749 Accrued expense and other current ) : As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 European Commission fine As of December 31 , 2020 European Commissi", + "capital_expenditure": "Capital expenditure technical infrastructure , were $ 22.3 billion . \u2022 Number of \u2022 Number of employee wa 135,301 a of December 31 , wa 135,301 a of December 31 , 2020 . The majority a of December 31 , 2020 . The majority of new in the fourth quarter of 2020 , we report our segment ) . Year Ended December 31 , 2019 2020 Google Search Year Ended December 31 , 2019 2020 Google Search & other Ended December 31 , 2019 2020 Google Search & other $ Google Search & other $ 98,115 $ 104,062 YouTube ad 15,149 & other $ 98,1 capital expenditure and operating lease asset of $ 4.4 billion and $ 2.8 billion $ 4.4 billion and $ 2.8 billion , respectively . As respectively . As of December 31 , 2020 , the amount As of December 31 , 2020 , the amount of total average remaining lease term of 9 year , wa $ 15.1 9 year , wa $ 15.1 billion . As of December billion . As of December 31 , 2020 , we have As of December 31 , 2020 , we have entered into future lease payment of $ 8.0 billion , excluding purchase option These lease will commence betwee", + "debt": "debt security of $ 3,519 million , partially offset by partially offset by a $ 902 million loss resulting from our in interest income of $ 562 million . Over time , our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Provision for Income Taxes ) : Year Ended December 31 , 2019 2020 Provision for Year Ended December 31 , 2019 2020 Provision for income tax Ended December 31 , 201 debt ( 2 ) 10,656 7,368 1,968 354 966 Long-term debt obligation 2 ) 10,656 7,368 1,968 354 966 Long-term debt obligation ( ) 10,656 7,368 1,968 354 966 Long-term debt obligation ( 3 966 Long-term debt obligation ( 3 ) 19,840 1,357 634 2,587 debt obligation ( 3 ) 19,840 1,357 634 2,587 15,262 Tax obligation ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 4 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 4 debt , refer to Note 6 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 2.3 billion a of December 31 2.3 billion a of December 31 , 2020 primarily related to a of Decem debt security a of December 31 , 2019 and 2020 are a of December 31 , 2019 and 2020 are shown below December 31 , 2019 and 2020 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2019 2020 2019 2020 As of December 31 , 2019 2020 2019 2020 Risk Category of December 31 , 2019 2020 2019 2020 Risk Category - December 31 , 2019 2020 2019 2020 Risk Category - Interest 31 , 2019 2020 2019 2020 Risk debt 4,554 13,932 1,485 Total current liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 358 13,932 Deferred revenue , non-current 358 481 Income tax payable , Deferred revenue , non-current 358 481 Income tax payable , non-current Income tax payable , non-current 9,885 8,849 Deferred income tax 1,701 tax payable , non-current 9,885 8,8 debt 12,991 Deferred income tax 778 173 1,390 Gain on debt and Deferred income tax 778 173 1,390 Gain on debt and equity equity security , net ( 6,650 ) ( 2,798 ) ( net ( 6,650 ) ( 2,798 ) ( 6,317 ) Other ) ( 2,798 ) ( 6,317 ) Other ( 189 ) ( 6,317 ) Other ( 189 ) ( 592 ) 1,267 Other ( 189 ) ( 592 ) 1,267 Changes in asset 189 ) ( 592 ) 1,267 Changes in asset and liability acquisition : Accounts receivable ( 2,169 ) ( 4,340 ) ( receivable ( 2,169 ) ( 4,340 ) ( 6,524 ) Income ) ( 4,340 ) ( 6,524 ) Inc debt , net of cost 6,766 317 11,761 Repayments of debt , net of cost 6,766 317 11,761 Repayments of debt ( net of cost 6,766 317 11,761 Repayments of debt ( 6,827 11,761 Repayments of debt ( 6,827 ) ( 585 ) ( debt ( 6,827 ) ( 585 ) ( 2,100 ) Proceeds ) ( 585 ) ( 2,100 ) Proceeds from sale of in consolidated entity , net 950 220 2,800 Net cash used consolidated entity , net 950 220 2,800 Net cash used in entity , net 950 220 2,800 Net cash used in financing used in financing activity ( 13,179 ) ( 23, Debt Securities a available-for-sale , within Level 2 in the fair value hierarchy fair value option were $ 87 million a of December 31 87 million a of December 31 , 2020 . As of a of December 31 , 2020 . As of December 31 2020 . As of December 31 , 2020 , the fair As of December 31 , 2020 , the fair value of these debt security wa $ 2 billion . Balances a of . Balances a of December 31 , 2019 were not material a of December 31 , 2019 were not material . The investment category a of December 31 , 201 debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asse debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backe debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 ) debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) Debt 2019 and 2020 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Our short-term December 31 , 2019 and 2020 . Our short-term debt balance . Long-Term Debt In August 2020 , Alphabet issued $ 10.0 2020 , Alphabet issued $ 10.0 billion of fixed-rate senior unsecured tranche ( collectively , \u201c 2020 Notes \u201d ) : $ Notes \u201d ) : $ 1.0 billion due in 2025 , $ 1.0 billion due in 2 Debt 2011-2016 Notes As of December 31 , 2020 Debt 2011-2016 Notes Issuances 2021 December 31 , 2020 Debt 2011-2016 Notes Issuances 2021 - 2026 2020 Debt 2011-2016 Notes Issuances 2021 - 2026 2.00 % - 2011-2016 Notes Issuances 2021 - 2026 2.00 % - 3.63 % Notes Issuances 2021 - 2026 2.00 % - 3.63 % 2.23 - 2026 2.00 % - 3.63 % 2.23 % - 3.73 2.00 % - 3.63 % 2.23 % - 3.73 % $ 3.63 % 2.23 % - 3.73 % $ 4,000 $ 4,000 % - 3.73 % $ 4,000 $ 4,000 2020 Notes Issuance 3.73 % $ 4,000 $ 4,000 2020 Notes Issuance debt , net ( 1 ) 711 1,201 Total debt 4,711 15,201 net ( 1 ) 711 1,201 Total debt 4,711 15,201 Unamortized ) 711 1,201 Total debt 4,711 15,201 Unamortized discount and debt 711 1,201 Total debt 4,711 15,201 Unamortized discount and debt issuance and debt issuance cost ( 42 ) ( 169 ) Less cost ( 42 ) ( 169 ) Less : Current portion Current portion of Notes ( 2 ) 0 ( 999 ) of Notes ( 2 ) 0 ( 999 ) Less : ( 2 ) 0 ( 999 ) Less : Current portion lease payment , net ( 1 ) ( 2 ) ( net ( 1 ) ( 2 ) ( 115 ) ( debt $ ) Total long-term debt $ 4,554 $ 13,932 ( 1 ) long-term debt $ 4,554 $ 13,932 ( 1 ) Net of $ 4,554 $ 13,932 ( 1 ) Net of imputed interest of imputed interest . ( 2 ) Total current portion of current liability . See Note 7 . The note in the portion , wa approximately $ 4.1 billion and $ 14.0 billion $ 4.1 billion and $ 14.0 billion a of December 31 14.0 billion a of December 31 , 2019 and December 31 a of December 31 , 2019 and December 31 , 2020 31 , 2019 and December 31 , 2020 , respectively debt security , net ( 3 ) 1,190 149 725 Gain , net ( 3 ) 1,190 149 725 Gain ( loss net ( 3 ) 1,190 149 725 Gain ( loss ) ( 3 ) 1,190 149 725 Gain ( loss ) on on equity security , net 5,460 2,649 5,592 Performance fee ( equity security , net 5,460 2,649 5,592 Performance fee ( 1,203 security , net 5,460 2,649 5,592 Performance fee ( 1,203 ) 2,649 5,592 Performance fee ( 1,203 ) ( 326 ) ( fee ( 1,203 ) ( 326 ) ( 609 ) Income ) ( 326 ) ( 609 ) Income ( loss ) method investment , net ( 120 ) 390 401 Oth", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per associated with the repurchase . 26 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2015 to December 31 ) from December 31 , 2015 to December 31 , 2020 31 , 2015 to December 31 , 2020 . The return 2015 to December 31 , 2020 . The return shown are future performance . COMPARISO", + "tax_rate": "tax rate income tax $ 5,282 $ 7,813 Effective tax rate 13.3 % $ 7,813 Effective tax rate 13.3 % 16.2 % Our provision Effective tax rate 13.3 % 16.2 % Our provision for income effective tax rate increased from 2019 to 2020 . The increase rate increased from 2019 to 2020 . The increase in the resolution of multi-year audit in 2019 that did not recur in that did not recur in 2020 , higher earnings in country structure implemented a of December 31 , 2019 , and an a of December 31 , 2019 , and an increase in tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 4.4 ) ( 4.9 ) ( rate ( 4.4 ) ( 4.9 ) ( 0.3 ) Foreign-derived ) ( 4.9 ) ( 0.3 ) Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 0.5 ) ( 0.7 ) ( deduction ( 0.5 ) ( 0.7 ) ( 3.0 ) Stock-based ) ( 0.7 ) ( 3.0 ) Stock-based compensation expense ( ) Stock-based compensation expe tax rate adjustment 1.1 ( 0.4 ) 0.0 Effective tax rate 12.0 % ) 0.0 Effective tax rate 12.0 % 13.3 % 16.2 % Effective tax rate 12.0 % 13.3 % 16.2 % Our effective rate 12.0 % 13.3 % 16.2 % Our effective tax rate Our effective tax rate for 2018 and 2019 wa affected significantly tax rate for 2018 and 2019 wa affected significantly by earnings subsidiary . As of December 31 , 2019 , we have As of December 31 , 2019 , we have simplified our in the U.S. On July 27 , 2015 , the United U.S. On July 27 , 2015 ,", + "segment_revenue": "segment revenue of $ 16.8 billion or 11 % and of $ 16.8 billion or 11 % and an increase in Cloud segment revenue of $ 4.1 billion or 46 % . of $ 4.1 billion or 46 % . Revenues from the and Other Americas were $ 85.0 billion , $ 55.4 billion $ 85.0 billion , $ 55.4 billion , $ 32.6 billion $ 55.4 billion , $ 32.6 billion , and $ 9.4 32.6 billion , and $ 9.4 billion , respectively . \u2022 cost of revenue wa $ 84.7 billion , an increase of billion , an increase of 18 % year over year . year . TAC wa $ 32.8 billion , ", + "common_stock": "Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 d common stock outstanding , 45,843,112 share of the registrant \u2019 common stock outstanding , and 327,556,472 share of the registrant \u2019 s Proxy Statement for the 2021 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2020 . Table of year ended December 31 , 2020 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock ha 10 vote per share , our right . As of December 31 , 2020 , Larry Page As of December 31 , 2020 , Larry Page and Sergey Brin beneficially owned approximate ly 85.3 % of our outstanding Class , which represented approximate ly 51.5 % o f the voting combination with any holder of 15 % or more of it an acquisition of u . 20 Table of Contents Alphabet Inc. back to the office in 2021 , we may experience increased factor listed under this Item 1A in addition to the following considerable time and r common stock all dividend ) from December 31 , 2015 to December 31 ) from December 31 , 2015 to December 31 , 2020 31 , 2015 to December 31 , 2020 . The return 2015 to December 31 , 2020 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2015 in stock or invested on December 31 , 2015 in stock or index , . Fiscal year ending December common stock $ 28.32 $ 18.27 $ 44.22 $ common stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic net income $ 44.22 $ 49.59 $ 59.15 Basic net income per share Class C capital stock $ 28.32 $ 18.27 $ 44.22 $ capital stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share and B common stock $ 27.85 $ 18. common stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted net income $ 43.70 $ 49.16 $ 58.61 Diluted net income per share Class C capital stock $ 27.85 $ 18.00 $ 43.70 $ capital stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 As $ 18.00 $ 43.70 $ 49.16 $ 58.61 As of December $ 43.70 $ 49.16 $ 58.61 As of December 31 , $ 58.61 As of December 31 , 2016 2017 2018 2019 As of December 31 , 2016 2017 2018 common stock is entitled to 10 vote per share . Class . Share Repurchases In July 2020 , the Board of Directors up to an additional $ 28.0 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program During the year ended December 31 , 2019 and 2020 , year ended December 31 , 2019 and 2020 , we repurchased December 31 , 2019 and 2020 , we repurchased and subsequently we repurchased and subsequently retired 15.3 million and 21.5 million share subsequently retired 15.3 milli Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , a capital stock $ 28.32 $ 18.27 $ 44.22 $ capital stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share and B common stock $ 27.85 $ 18.00 $ 43.70 $ common stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted net income $ 43.70 $ 49.16 $ 58.61 Diluted net income per share Class C capital stock $ 27.85 capital stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 As $ 18.00 $ 43.70 $ 49.16 $ 58.61 As of December $ 43.70 $ 49.16 $ 58.61 As of December 31 , $ 58.61 As of December 31 , 2016 2017 2018 2019 As of December 31 , 2016 2017 2018 2019 2020 ( of December 31 , 2016 2017 2018 2019 2020 ( in December 31 , 2016 2017 2018 2019 2020 ( in million 31 , 2016 2017 2018 2019 2020 ( in million ) , 2016 2017 2018 2019 2020 ( in million ) Consolidated , and marketable security $ 86,333 $ capital stock $ 9.58 $ 14.33 $ 10.20 $ capital stock $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted net income $ 10.21 $ 16.55 $ 22.54 Diluted net income per share Class C capital stock $ 9.50 $ 14.21 $ 10.12 $ capital stock $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ 9.87 $ $ 14.21 $ 10.12 $ 15. capital stock $ 44.22 $ 49.59 $ 59.15 Diluted capital stock $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share Class C capital stock $ 43.70 $ 49.16 $ 58.61 See capital stock $ 43.70 $ 49.16 $ 58.61 See accompanying note $ 43.70 $ 49.16 $ 58.61 See accompanying note . 55 58.61 See accompanying note . 55 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2018 2019 2020 Net Year Ended December 31 , 2018 2019 2020 Net income $ Ended December 31 , 2018 capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of interest in of interest in consolidated entity 0 659 0 0 659 Net interest in consolidated entity 0 659 0 0 659 Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding Stock-based compensation exp capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,3 capital stock 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock issued Common and capital stock issued 8,398 168 0 0 168 Stock-based and capital stock issued 8,398 168 0 0 168 Stock-based compensation capital stock issued 8,398 168 0 0 168 Stock-based compensation expense stock issued 8,398 168 0 0 168 Stock-based compensation expense 0 issued 8,398 168 0 0 168 Stock-based compensation expense 0 13,123 0 168 Stock-based compensation expense 0 13,123 0 0 13,123 Tax 168 Stock-based compensation expense capital stock Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale 0 ( 28,990 ) ( 31,149 ) Sale of interest in of interest in consolidated entity 0 2,795 0 0 2,795 Net interest in consolidated entity 0 2,795 0 0 2,795 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net in capital stock Repurchases of capital stock ( 9,075 ) ( 18,396 ) ( stock ( 9,075 ) ( 18,396 ) ( 31,149 ) Proceeds ) ( 18,396 ) ( 31,149 ) Proceeds from issuance of debt , net of cost 6,766 317 11,761 Repayments of debt , net of cost 6,766 317 11,761 Repayments of debt ( net of cost 6,766 317 11,761 Repayments of debt ( 6,827 11,761 Repayments of debt ( 6,827 ) ( 585 ) ( debt ( 6,827 ) ( 585 ) ( 2,100 ) Proceeds ) ( 585 ) ( 2,100 ) Proceeds from sale of in consolidated entity , net 950 220 2,800 Net cash used Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "debt_securities": "Debt Securities a available-for-sale , within Level 2 in the fair value hierarchy fair value option were $ 87 million a of December 31 87 million a of December 31 , 2020 . As of a of December 31 , 2020 . As of December 31 2020 . As of December 31 , 2020 , the fair As of December 31 , 2020 , the fair value of these debt security wa $ 2 billion . Balances a of . Balances a of December 31 , 2019 were not material a of December 31 , 2019 were not material . The investment category a of December 31 , 2019 and 2020 ", + "corporate_debt": "Corporate debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asse Corporate debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backe Corporate debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 ) Corporate debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) " +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-22-000019/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-22-000019/full-submission_features.json new file mode 100644 index 0000000..484999c --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-22-000019/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue from display of ad online in 2021 . Many of our advertiser condition and operating result . 10 Table of Contents Alphabet Inc. in Part II , Item 7 of this Annual Report on this Annual Report on Form 10-K. Our intellectual property right are deemed invalid or unenforceable . 11 Table of Contents Alphabet Inc. may affect our supply . 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2021 . In additi revenue . Fines of up to 2 % of annual worldwide revenue California Consumer Privacy Act of 2018 ( CCPA ) , which into effect in January of 2020 ; the California Privacy Rights will go into effect in 2023 ; the Virginia Consumer Data will go into effect in 2023 ; and the Colorado Privacy will go into effect in 2023 ; all of which give certain requirement . On June 4 , 2021 , the European . On June 4 , 2021 , the European Commission published deemed sale of personal information 19 Table of Contents Alph revenue , see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Costs and Expenses Our cost , and outsourcing service . 31 Table of Contents Alphabet Inc. our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K a well a Item 7A 10-K a well a Item 7A , \u201c Quantitative and Qualitative tax rate , see Note 14 revenue $ 182,527 $ 257,637 $ 75,110 41 Consolidated revenue $ 182,527 $ 257,637 $ 75,110 41 % Change $ 182,527 $ 257,637 $ 75,110 41 % Change in consolidated 182,527 $ 257,637 $ 75,110 41 % Change in consolidated constant in consolidated constant currency revenue 39 % Cost of revenue $ % Cost of revenue $ 84,732 $ 110,939 $ 26,207 31 of revenue $ 84,732 $ 110,939 $ 26,207 31 % Operating $ 84,732 $ 110,939 $ 26,207 31 % Operating expense $ 84,732 $ 110,939 $ 26,207 31 % Operating expense $ 56,571 31 % revenue also contributed to Cost of revenue wa $ 110.9 billion , an increase of billion , an increase of 31 % , primarily driven by \u2022 Operating expense were $ 68.0 billion , an increase of billion , an increase of 20 % , primarily driven by Operating cash flow wa $ 91.7 billion , primarily driven by \u2022 Share repurchase were $ 50.3 billion , an increase of billion , an increase of 62 % . See Note 11 62 % . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Rep revenue Google other . See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . \u2022 information . \u2022 On February 1 , 2022 , the Company \u2022 On February 1 , 2022 , the Company announced that had approved and declared a 20-for-one stock split in the form C stock . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for a revenue quarter ended June 30 , 2020 our advertising revenue declined due throughout the second half of 2020 . Additionally , over the , over the course of 2020 , we experienced variability in for account receivable . Throughout 2021 we remained focused on innovating The impact of COVID-19 on 2020 financial result affected year-over-year growth ) : Year Ended December 31 , 2020 2021 Google Search Year Ended December 31 , 2020 2021 Google Search & other Ended December 31 , 2020 2021 Google Search & othe revenue $ 182,527 gain ( loss ) 176 149 Total revenue $ 182,527 $ 176 149 Total revenue $ 182,527 $ 257,637 Google Services Google Total revenue $ 182,527 $ 257,637 Google Services Google advertising revenue & other revenue increased $ 44.9 billion from 2020 to 2021 increased $ 44.9 billion from 2020 to 2021 . The overall 44.9 billion from 2020 to 2021 . The overall growth wa adoption and usage , primarily 33 Table of Contents Alphabet Inc. adverse effect of COVID-19 on 2020 revenue also contributed to revenue increased $ 9.1 billion from 2020 to 2021 increased $ 9.1 billion from 2020 to 2021 . Growth wa 9.1 billion from 2020 to 2021 . Growth wa driven by adverse effect of COVID-19 on 2020 revenue . Google Network Google Google Network revenue increased $ 8.6 billion from 2020 to 2021 increased $ 8.6 billion from 2020 to 2021 . The growth 8.6 billion from 2020 to 2021 . The growth wa primarily adverse effect of COVID-19 on 2020 revenue also contributed to the a a percentage ) from 2020 to 2021 : Year revenue increased $ 6.3 billion from 2020 to 2021 increased $ 6.3 billion from 2020 to 2021 . The growth 6.3 billion from 2020 to 2021 . The growth wa primarily the acquisition closed in January 2021 , and an increase in apps and in-app purchase . 34 Table of Contents Alphabet Inc. Google Cloud revenue increased $ 6.1 billion from 2020 to 2021 increased $ 6.1 billion from 2020 to 2021 . The growth 6.1 billion from 2020 to 2021 . The growth wa primarily customer : Year Ended December 31 , 2020 2021 Unit revenue $ 55,370 $ 79,107 43 % EMEA EMEA revenue $ 55,370 $ 79,107 43 % EMEA constant currency revenue $ 55,370 $ 79,107 43 % EMEA constant currency revenue % EMEA constant currency revenue 76,321 38 % APAC revenue 32,550 EMEA constant currency revenue 76,321 38 % APAC revenue 32,550 46,123 76,321 38 % APAC revenue 32,550 46,123 42 % APAC constant 38 % APAC revenue 32,550 46,123 42 % APAC constant currency % APAC revenue 32,550 46,123 42 % APAC constant currency revenue % APAC constant currency revenue revenue APAC constant currency revenue 45,666 40 % Other Americas revenue 9,417 40 % Other Americas revenue 9,417 14,404 53 % Other Americas % Other Americas revenue 9,417 14,404 53 % Other Americas constant Other Americas revenue 9,417 14,404 53 % Other Americas constant currency Other Americas constant currency revenue 14,317 52 % United States revenue Americas constant currency revenue 14,317 52 % United States revenue 85,014 52 % United States revenue 85,014 117,854 39 % Hedging gain % United State revenue 85,014 117,854 39 % Hedging gain ( United States revenue 85,014 117,854 39 % Hedging gain ( loss Hedging gain ( loss ) 176 149 Total revenue $ 182,527 gain ( loss ) 176 149 Total revenue $ 182,527 $ 176 149 Total revenue $ 182,527 $ 257,637 41 % Revenues Total revenue $ 182,527 $ 257,637 41 % Revenues , excluding revenue $ 182,527 $ 257,637 41 % Revenues , excluding hedging , excluding hedging effect $ 182,351 $ 257,488 Exchange rate effect hedging effect $ 182,351 $ 257,488 Exchange rate effec revenue Total constant currency revenue $ 254,158 39 % EMEA revenue growth constant currency revenue $ 254,158 39 % EMEA revenue growth from % EMEA revenue growth from 2020 to 2021 wa favorably affected revenue growth from 2020 to 2021 wa favorably affected by foreign . APAC revenue growth from 2020 to 2021 wa favorably affected revenue growth from 2020 to 2021 wa favorably affected by foreign Other Americas growth change from 2020 to 2021 wa favorably affected growth change from 2020 to 2021 wa favora revenue 51,954 45,566 Other cost of revenue 51,954 65,373 Total cost of revenue Other cost of revenue 51,954 65,373 Total cost of revenue $ Total cost of revenue $ 84,732 $ 110,939 Total cost of of revenue $ 84,732 $ 110,939 Total cost of revenue a a a percentage of revenue 46.4 % 43.1 % Cost of percentage of revenue 46.4 % 43.1 % Cost of revenue increased Cost of revenue increased $ 26.2 billion from 2020 to 2021 increased $ 26.2 billion from 2020 to 2021 . The increase 26.2 billion from 2020 to 2021 revenue and TAC of $ 13.4 billion and $ 12.8 billion $ 13.4 billion and $ 12.8 billion , respectively . The The increase in TAC from 2020 to 2021 wa due to in TAC from 2020 to 2021 wa due to an increase The TAC rate decreased from 22.3 % to 21.8 % from decreased from 22.3 % to 21.8 % from 2020 to 2021 % to 21.8 % from 2020 to 2021 primarily due to 21.8 % from 2020 to 2021 primarily due to a revenue were both substantially consistent from 2020 to 2021 . The increase substantially consistent from 2020 to revenue from 2020 to 2021 wa driven by of revenue from 2020 to 2021 wa driven by increase in increase in data center and 36 Table of Contents Alphabet Inc. in the first quarter of 2021 . Research and Development The ) : Year Ended December 31 , 2020 2021 Research and Year Ended December 31 , 2020 2021 Research and development expense Ended December 31 , 2020 2021 Research and development expense $ Research and development expense $ 27,573 $ 31,562 Research and development development expense $ 27,573 $ revenue 15.1 % 12.3 % R & percentage of revenue 15.1 % 12.3 % R & D expense & D expense increased $ 4.0 billion from 2020 to 2021 increased $ 4.0 billion from 2020 to 2021 . The increase 4.0 billion from 2020 to 2021 . The increase wa primarily in compensation expense of $ 3.5 billion , largely resulting from , largely resulting from an 11 % increase in headcount , professional service fee of $ 516 million . This increase wa in depreciation expense of $ 450 million including the effect of ) : Year Ende revenue 9.8 % 8.9 % Sales and percentage of revenue 9.8 % 8.9 % Sales and marketing expense and marketing expense increased $ 5.0 billion from 2020 to 2021 increased $ 5.0 billion from 2020 to 2021 , primarily driven 5.0 billion from 2020 to 2021 , primarily driven by an and promotional activity of $ 2.5 billion and an increase in in compensation expense of $ 2.2 billion . The increase in a reduction in spending in 2020 due to COVID-19 . The wa largely due to a 14 % increase in headcount . ) : Year End revenue 6.1 % 5.2 % General and percentage of revenue 6.1 % 5.2 % General and administrative expense and administrative expense increased $ 2.5 billion from 2020 to 2021 increased $ 2.5 billion from 2020 to 2021 . The increase 2.5 billion from 2020 to 2021 . The increase wa primarily primarily driven by a $ 1.7 billion increase in charge relating legal matter and a $ 664 million increase in compensation expense , largely resulting from a 14 % increase in headcount . reduction in expense of $ 808 millio revenue share 7,500 and other current liability 28,631 31,236 Accrued revenue share 7,500 8,996 28,631 31,236 Accrued revenue share 7,500 8,996 Deferred revenue 2,543 3,288 31,236 Accrued revenue share 7,500 8,996 Deferred revenue 2,543 3,288 Income share 7,500 8,996 Deferred revenue 2,543 3,288 Income tax payable , 7,500 8,996 Deferred revenue 2,543 3,288 Income tax payable , net Income tax payable , net 1,485 808 Total current liability 56,834 tax payable , net 1,485 808 Total current liability 56,83 revenue , non-current 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 481 14,817 Deferred revenue , non-current 481 535 Income tax payable , Deferred revenue , non-current 481 535 Income tax payable , non-current Income tax payable , non-current 8,849 9,176 Deferred income tax 3,561 tax payable , non-current 8,849 9,176 Deferred income tax 3,561 5,257 8,849 9,176 Deferred income tax 3,561 5,257 Operating lease liability 11,146 9,176 Deferred income tax 3,561 5,257 Operating le revenue 71,896 84,732 110,939 Research and development : Cost of revenue 71,896 84,732 110,939 Research and development 26,018 Cost of revenue 71,896 84,732 110,939 Research and development 26,018 27,573 84,732 110,939 Research and development 26,018 27,573 31,562 Sales and marketing 110,939 Research and development 26,018 27,573 31,562 Sales and marketing 18,464 Research and development 26,018 27,573 31,562 Sales and marketing 18,464 17,946 27,573 31,562 Sales and marketing 18,464 17,946 22,912 Genera revenue share expense and other liability 7,170 5,504 7,304 Accrued revenue share 1,273 and other liability 7,170 5,504 7,304 Accrued revenue share 1,273 1,639 5,504 7,304 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 7,304 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 635 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 635 774 1,273 1,639 1,682 Deferred revenue 37 635 774 Net cash provided 1,639 1,682 Deferred revenue 37 635 774 Net cash provided by 1,682 Deferr revenue 37 635 774 Net cash provided by operating cash provided by operating activity 54,520 65,124 91,652 Investing activity Purchases provided by operating activity 54,520 65,124 91,652 Investing activity Purchases of by operating activity 54,520 65,124 91,652 Investing activity Purchases of property of property and equipment ( 23,548 ) ( 22,281 ) ( equipment ( 23,548 ) ( 22,281 ) ( 24,640 ) Purchases ) ( 22,281 ) ( 24,640 ) Purchases of marketable security Purchases of marketable security ( 100,315 Revenue Recognition year ended December 31 , 2021 . Revenue Recognition Revenues are discretion in establishing pricing . 54 Table of Contents Alphabet Inc. a flat fee ) . 55 Table of Contents Alphabet Inc. For the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 , December 31 , 2019 , 2020 and 2021 , advertising and , 2019 , 2020 and 2021 , advertising and promotional expense promotional expense totaled approximately $ 6.8 billion , $ 5.4 billion $ 6.8 billion , $ Revenue Recognition The ) : Year Ended December 31 , 2019 2020 2021 Google Year Ended December 31 , 2019 2020 2021 Google Search & Ended December 31 , 2019 2020 2021 Google Search & other December 31 , 2019 2020 2021 Google Search & other $ Google Search & other $ 98,115 $ 104,062 $ 148,951 YouTube & other $ 98,115 $ 104,062 $ 148,951 YouTube ad 15,149 $ 98,115 $ 104,062 $ 148,951 YouTube ad 15,149 19,772 28,845 104,062 $ 148,951 YouTube ad 15,149 19,772 28,845 Google Network 21,547 $ 148,951 YouTube a revenue $ gain ( loss ) 455 176 149 Total revenue $ 161,857 ( loss ) 455 176 149 Total revenue $ 161,857 $ 176 149 Total revenue $ 161,857 $ 182,527 $ 257,637 No Total revenue $ 161,857 $ 182,527 $ 257,637 No individual customer $ 161,857 $ 182,527 $ 257,637 No individual customer or group affiliated customer represented more than 10 % of our revenue in % of our revenue in 2019 , 2020 , or 2021 our revenue in 2019 , 2020 , or 2021 . 60 2019 , 2020 , or 2021 . 60 Table of Contents 2020 , or 2021 . 60 Ta revenue loss ) 455 0 176 0 149 0 Total revenue $ ) 455 0 176 0 149 0 Total revenue $ 161,857 455 0 176 0 149 0 Total revenue $ 161,857 100 149 0 Total revenue $ 161,857 100 % $ 182,527 100 0 Total revenue $ 161,857 100 % $ 182,527 100 % $ 161,857 100 % $ 182,527 100 % $ 257,637 100 161,857 100 % $ 182,527 100 % $ 257,637 100 % $ 182,527 100 % $ 257,637 100 % ( 1 ) 182,527 100 % $ 257,637 100 % ( 1 ) Regions $ 257,637 100 % ( 1 ) Regions represent Europe , Deferred Revenues As of December 31 , 2021 we h revenue over the next 24 month with the remaining thereafter deferred revenue a of December 31 , 2020 wa $ 3.0 a of December 31 , 2020 wa $ 3.0 billion , 31 , 2020 wa $ 3.0 billion , of which $ billion , of which $ 2.3 billion wa recognized a revenue for the year ending December 31 , 2021 . Note 3 year ending December 31 , 2021 . Note 3 . Financial 31 , 2021 . Note 3 . Financial Instruments Debt Securities for a available-for-sale within Level 2 in the fair value hierarchy fair value option were $ 87 m Revenue 367 144 165 Interest rate contract Foreign exchange contract Revenue 367 144 165 Interest rate contract Other exchange contract Revenue 367 144 165 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for ) for income tax ( 74 ) ( 34 ) ( tax ( 74 ) ( 34 ) ( 17 ) Net ) ( 34 ) ( 17 ) Net of income tax ) Net of income tax 299 116 154 Total amount reclassified Net of income tax 299 116 154 Tot Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 724 million , $ 855 million $ 724 million , $ 855 million , and $ 916 855 million , and $ 916 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . Note 14 2021 , respectively . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2019 2020 2021 Domesti revenue $ gain ( loss ) 455 176 149 Total revenue $ 161,857 ( loss ) 455 176 149 Total revenue $ 161,857 $ 176 149 Total revenue $ 161,857 $ 182,527 $ 257,637 Operating Total revenue $ 161,857 $ 182,527 $ 257,637 Operating income ( $ 161,857 $ 182,527 $ 257,637 Operating income ( loss ) ) : Google Services $ 48,999 $ 54,606 $ 91,855 Google Google Services $ 48,999 $ 54,606 $ 91,855 Google Cloud ( $ 48,999 $ 54,606 $ 91,855 Google Cloud ( 4,645 ) $ 91,855 Google Cloud ( 4,645 ) ( 5,607 ) ( Cloud ( 4,645 revenue year ended December 31 , 2019 . For revenue by geography by geography , see Note 2 . The following table present ) : As of December 31 , 2020 2021 Long-lived asset As of December 31 , 2020 2021 Long-lived asset : United of December 31 , 2020 2021 Long-lived asset : United States asset : United States $ 69,315 $ 80,207 International 27,645 30,351 United States $ 69,315 $ 80,207 International 27,645 30,351 Total long-lived $ 69,315 $ 80,207 International 27,645 30,351 Total long-lived asset $ 69,", + "expenses": "Expenses Our cost , and outsourcing service . 31 Table of Contents Alphabet Inc. our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K a well a Item 7A 10-K a well a Item 7A , \u201c Quantitative and Qualitative tax rate , see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Executive Overview The followin", + "net_income": "Net Income $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 40,269 75 % Net Income $ 40,269 $ 76,033 $ 35,764 89 Net Income $ 40,269 $ 76,033 $ 35,764 89 % Diluted $ 40,269 $ 76,033 $ 35,764 89 % Diluted EPS $ 40,269 $ 76,033 $ 35,764 89 % Diluted EPS $ 58.61 89 % Diluted EPS $ 58.61 $ 112.20 $ 53.59 91 Diluted EPS $ 58.61 $ 112.20 $ 53.59 91 % Number $ 58.61 $ 112.20 $ 53.59 91 % Number of Employees 58.61 $ 112.20 $ 53.59 91 % Number of Employees 135,301 91 % Number of Employees 135,301 156,500 21,199 16 % \u2022 % net Income tax receivable , net 454 966 Inventory 728 1,170 Other tax receivable , net 454 966 Inventory 728 1,170 Other current , net 454 966 Inventory 728 1,170 Other current asset 5,490 net 454 966 Inventory 728 1,170 Other current asset 5,490 7,054 728 1,170 Other current asset 5,490 7,054 Total current asset 174,296 1,170 Other current asset 5,490 7,054 Total current asset 174,296 188,143 5,490 7,054 Total current asset 174,296 188,143 Non-marketable security 20,703 29,549 7,054 Total current asset 1 net Income tax payable , net 1,485 808 Total current liability 56,834 tax payable , net 1,485 808 Total current liability 56,834 64,254 1,485 808 Total current liability 56,834 64,254 Long-term debt 13,932 14,817 808 Total current liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 481 14,817 Deferred revenue , non-current 481 535 Income ta Net income $ Provision for income tax 5,282 7,813 14,701 Net income $ 34,343 for income tax 5,282 7,813 14,701 Net income $ 34,343 $ 7,813 14,701 Net income $ 34,343 $ 40,269 $ 76,033 Basic Net income $ 34,343 $ 40,269 $ 76,033 Basic net income $ 34,343 $ 40,269 $ 76,033 Basic net income per share Class C capital stock $ 49.59 $ 59.15 $ 113.88 Diluted capital stock $ 49.59 $ 59.15 $ 113.88 Diluted net income $ 49.59 $ 59.15 $ 113.88 Diluted net income per share Class C capital stock $ 49.16 $ 58.61 $ 112. Net income $ Ended December 31 , 2019 2020 2021 Net income $ 34,343 December 31 , 2019 2020 2021 Net income $ 34,343 $ 2020 2021 Net income $ 34,343 $ 40,269 $ 76,033 Other Net income $ 34,343 $ 40,269 $ 76,033 Other comprehensive income $ 34,343 $ 40,269 $ 76,033 Other comprehensive income ( loss foreign currency translation adjustment ( 119 ) 1,139 ( 1,442 ) translation adjustment ( 119 ) 1,139 ( 1,442 ) Available-for-sale investment ( 119 ) 1,139 ( 1,442 ) Available-for-sale investment : Change unreali net income ( 111 ) ( 513 ) ( income ( 111 ) ( 513 ) ( 64 ) Net ) ( 513 ) ( 64 ) Net change , net expense ) of $ ( 221 ) , $ ( 230 221 ) , $ ( 230 ) , and $ 394 230 ) , and $ 394 1,500 800 ( 1,376 ) ) , and $ 394 1,500 800 ( 1,376 ) Cash , and $ 394 1,500 800 ( 1,376 ) Cash flow $ 394 1,500 800 ( 1,376 ) Cash flow hedge : unrealized gain ( loss ) 22 42 716 Less : reclassification gain ( loss ) 22 42 716 Less : reclassification adjustment ( loss ) 22 42 716 Less : reclassification adjustment for included in net income ( 299 ) ( 116 ) ( income ( 299 ) ( 116 ) ( 154 ) Net ) ( 116 ) ( 154 ) Net change , net ( expense ) of $ 42 , $ 11 , and of $ 42 , $ 11 , and $ ( 122 11 , and $ ( 122 ) ( 277 ) ( $ ( 122 ) ( 277 ) ( 74 ) 562 ) ( 277 ) ( 74 ) 562 Other comprehensive income 277 ) ( 74 ) 562 Other comprehensive income ( loss comprehensive income ( loss ) 1,104 1,865 ( 2,256 ) Comprehensive income ( loss ) 1,104 1,865 ( 2,256 ) Comprehensive income loss ) 1,104 1,865 ( 2,256 ) Comprehensive income $ 35,447 2,256 ) Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance inc Net income in consolidated entity 0 310 0 0 310 Net income 0 consolidated entity 0 310 0 0 310 Net income 0 0 entity 0 310 0 0 310 Net income 0 0 0 0 0 310 Net income 0 0 0 76,033 76,033 Other 0 310 Net income 0 0 0 76,033 76,033 Other comprehensive 310 Net income 0 0 0 76,033 76,033 Other comprehensive income Net income 0 0 0 76,033 76,033 Other comprehensive income ( income 0 0 0 76,033 76,033 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 2,256 ) 0 income ( loss ) 0 0 ( 2,256 ) 0 Net income December 31 , 2019 2020 2021 Operating activity Net income $ Operating activity Net income $ 34,343 $ 40,269 $ 76,033 Adjustments Net income $ 34,343 $ 40,269 $ 76,033 Adjustments : Depreciation $ 34,343 $ 40,269 $ 76,033 Adjustments : Depreciation and impairment impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment net Income tax , net ( 3,128 ) 1,209 ( 625 ) , net ( 3,128 ) 1,209 ( 625 ) Other asset ( 3,128 ) 1,209 ( 625 ) Other asset ( 621 625 ) Other asset ( 621 ) ( 1,330 ) ( asset ( 621 ) ( 1,330 ) ( 1,846 ) Accounts ) ( 1,330 ) ( 1,846 ) Accounts payable 428 694 ( 1,846 ) Accounts payable 428 694 283 Accrued expense and 1,846 ) Accounts payable 428 694 283 Accrued expense and other ) Accounts payable 428 694 283 Accrued expense and other liability Accrued expense and other liability 7,170 5,504 7,304 Accrued re net income of $ 2.0 billion , or $ 3.02 2.0 billion , or $ 3.02 per basic share and $ per basic share and $ 2.98 per diluted share , for for the year ended December 31 , 2021 . Revenue Recognition year ended December 31 , 2021 . Revenue Recognition Revenues are discretion in establishing pricing . 54 Table of Contents Alphabet Inc. a flat fee ) . 55 Table of Contents Alphabet Inc. For the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 , December 31 , 2019 , 2020 and Net Income Per Share In the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 , December 31 , 2019 , 2020 and 2021 , the net , 2019 , 2020 and 2021 , the net income per ) : Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator Number of $ 14,846 $ 2,307 $ 17,190 Denominator Number of share used net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 79 per share $ 49.16 $ 49.16 $ 49.16 79 Table of $ 49.16 $ 49.16 $ 49.16 79 Table of Contents Alphabet 49.16 $ 49.16 $ 49.16 79 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ net income in per share computation 299,815 46,182 334,819 Basic net income per per share computation 299,815 46,182 334,819 Basic net income per share net income per share $ 59.15 $ 59.15 $ 59.15 Diluted per share $ 59.15 $ 59.15 $ 59.15 Diluted net income $ 59.15 $ 59.15 $ 59.15 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed net income in per share computation 346,084 46,182 340,944 Diluted net income per per share computation 346,084 46,182 340,944 Diluted net income per share net income per share $ 58.61 $ 58.61 $ 58.61 Year per share $ 58.61 $ 58.61 $ 58.61 Year Ended December $ 58.61 $ 58.61 $ 58.61 Year Ended December 31 , $ 58.61 Year Ended December 31 , 2021 Class A Class Year Ended December 31 , 2021 Class A Class B Class Allocation of undistributed earnings $ 34,200 $ 5,174 $ 36,659 Denominator undistributed earnings net income in per share computation 300,310 45,430 321,910 Basic net income per per share computation 300,310 45,430 321,910 Basic net income per share net income per share $ 113.88 $ 113.88 $ 113.88 Diluted per share $ 113.88 $ 113.88 $ 113.88 Diluted net income $ 113.88 $ 113.88 $ 113.88 Diluted net income per share earnings for basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed $ 34,200 $ 5,174 $ 36,659 Reallocation of undi net income in per share computation 345,755 45,430 331,919 Diluted net income per per share computation 345,755 45,430 331,919 Diluted net income per share net income per share $ 112.20 $ 112.20 $ 112.20 80 per share $ 112.20 $ 112.20 $ 112.20 80 Table of $ 112.20 $ 112.20 $ 112.20 80 Table of Contents Alphabet 112.20 $ 112.20 $ 112.20 80 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans the Alphabet Amended and Restated 2012 Stock Plan , the Alphabet Stock Pl", + "assets": "Assets Current As of December 31 , 2020 2021 Assets Current asset : of December 31 , 2020 2021 Assets Current asset : Cash Cash and cash equivalent $ 26,465 $ 20,945 Marketable security 110,229 cash equivalent $ 26,465 $ 20,945 Marketable security 110,229 118,704 Total 26,465 $ 20,945 Marketable security 110,229 118,704 Total cash , cash $ 20,945 Marketable security 110,229 118,704 Total cash , cash equivalent equivalent , and marketable security 136,694 139,649 Accounts receivable , net , and marketa Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 33 $ 316 $ 349 Other non-current asset $ 33 $ 316 $ 349 Other contract Other $ 33 $ 316 $ 349 Other contract Other current and Other current and non-current asset 0 16 16 Total $ 33 current and non-current asset 0 16 16 Total $ 33 $ and non-current asset 0 16 16 Total $ 33 $ 332 0 16 16 Total $ 33 $ 332 $ 365 Derivative 16 Total $ 33 $ 332 $ 365 Derivative Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 867 $ 42 $ 909 Other non-current asset $ 867 $ 42 $ 909 Other contract Other $ 867 $ 42 $ 909 Other contract Other current and Other current and non-current asset 0 52 52 Total $ 867 current and non-current asset 0 52 52 Total $ 867 $ and non-current asset 0 52 52 Total $ 867 $ 94 0 52 52 Total $ 867 $ 94 $ 961 Derivative 52 Total $ 867 $ 94 $ 961 Derivative Liabilities : $ 867 $ 94 $ 961 Derivative Liabilities : Level Assets As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 397 $ ( 32 ) $ Derivatives $ 397 $ ( 32 ) $ 365 $ ( $ ( 32 ) $ 365 $ ( 295 ) ( ) $ 365 $ ( 295 ) ( 1 ) $ $ ( 295 ) ( 1 ) $ ( 16 ) ( 1 ) $ ( 16 ) $ 0 $ 54 $ ( 16 ) $ 0 $ 54 As of December 16 ) $ 0 $ 54 As of December 31 , $ 54 As of December 31 , 2021 Gross Amounts Not As of December 31 , 2021 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 999 $ ( 38 ) $ ", + "liabilities": "Liabilities and Stockholders Total asset $ 319,616 $ 359,268 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 5,589 $ 6,037 Accrued compensation and Accounts payable $ 5,589 $ 6,037 Accrued compensation and benefit 11,086 6,037 Accrued compensation and benefit 11,086 13,889 Accrued expense and other Accrued compensation and benefit 11,086 13,889 Accrued expense and other current expense and other current liability 28,631 31,236 Accrued revenue share 7,500 and other current liability 28, Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 365 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 395 $ 185 $ 580 Other and non-current $ 395 $ 185 $ 580 Other contract Accrued $ 395 $ 185 $ 580 Other contract Accrued expense and liability , current and non-current 0 942 942 Total $ 395 , current and non-current 0 942 942 Total $ 395 $ current and non-current 0 942 942 Total $ 395 $ 1,127 0 942 942 Total $ 395 $ 1,127 $ 1,522 As 942 Total $ Liabilities : $ 867 $ 94 $ 961 Derivative Liabilities : Level 2 961 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 8 $ 452 $ 460 Other and non-current $ 8 $ 452 $ 460 Other contract Accrued $ 8 $ 452 $ 460 Other contract Accrued expense and liability , current and non-current 0 121 121 Total $ 8 , current and non-current 0 121 121 Total $ 8 $ current and non-current 0 121 121 Total $ 8 $ 573 0 121 121 Total $ 8 $ 573 $ 581 67 121 Total $ 8 $ 573 $ 581 67 Ta Liabilities As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 1,554 $ ( 32 ) $ Derivatives $ 1,554 $ ( 32 ) $ 1,522 $ ( $ ( 32 ) $ 1,522 $ ( 295 ) ( ) $ 1,522 $ ( 295 ) ( 2 ) $ $ ( 295 ) ( 2 ) $ ( 1 ) ( 2 ) $ ( 1 ) $ ( 943 ) ( 1 ) $ ( 943 ) $ 283 As of $ ( 943 ) $ 283 As of December 31 , $ 283 As of December 31 , 2021 Gross Amounts Not As of December 31 , 2021 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives ", + "equity": "Equity Securities 25 Item 6 . [ Reserved of Equity Securities 25 Item 6 . [ Reserved ] 27 6 . [ Reserved ] 27 Item 7 . Management \u2019 [ Reserved ] 27 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 28 Item 7A . Quantitative and Results of Operations 28 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 42 Item 8 . Financial Statements About Market Risk 42 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public \u201c GOOG \u201d since April 3 , 2014 . Holders of \u201d since April 3 , 2014 . Holde equity security of $ 6.9 billion , partially offset by to certain investment of $ 1.3 billion . See Note 3 1.3 billion . See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Provision ) : Year Ended December 31 , 2020 2021 Provision for Year Ended December 31 , 2020 2021 Provision for income tax Ended December 31 , 2020 2021 Provision for income tax $ Provision for income tax $ 7,813 $ 14,701 equity security by $ 780 million . From time to event . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , the carrying December 31 , 2020 and 2021 , the carrying value of measurement alternative , wa $ 18.9 billion and $ 27.6 billion $ 18.9 billion and $ 27.6 billion , respectively . Valuations , which totaled approximately $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion a of December 31 1.5 billion a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 20 equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. 44 Table of Contents Alphabet Annual Report on Form 10-K. 44 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Firm ( PCAOB ID : 42 ) 46 Financial Statements : PCAOB ID : 42 ) 46 Financial Statements : Consolidated Balance Statements : Consolidated Balanc Equity 52 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 54 45 Table of Contents Alphabet to Consolidated Financial Statements 54 45 Table of Contents Alphabet Inc. Company ) a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , the related December 31 , 2020 and 2021 , the related consolidated statement in the period ended December 31 , 2021 , and the period ended Dece Equity liability : Accounts payable $ 5,589 $ 6,037 Accrued compensation and Accounts payable $ 5,589 $ 6,037 Accrued compensation and benefit 11,086 6,037 Accrued compensation and benefit 11,086 13,889 Accrued expense and other Accrued compensation and benefit 11,086 13,889 Accrued expense and other current expense and other current liability 28,631 31,236 Accrued revenue share 7,500 and other current liability 28,631 31,236 Accrued revenue share 7,500 8,996 28,631 31,236 Accrued revenue share 7,500 equity : : Preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 675,222 ( Clas equity 1,623 ) Retained earnings 163,401 191,484 Total stockholder \u2019 equity 222,544 191,484 Total stockholder \u2019 equity 222,544 251,635 Total liability and stockholder Total stockholder \u2019 equity 222,544 251,635 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 319,616 $ 359,268 See accompanying note \u2019 equity $ 319,616 $ 359,268 See accompanying note . 49 359,268 See accompanying note . 49 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2019 2020 2021 Revenues Year Ended Dece equity equity security , net ( 2,798 ) ( 6,317 ) ( net ( 2,798 ) ( 6,317 ) ( 12,270 ) Other ) ( 6,317 ) ( 12,270 ) Other ( 592 ) ( 12,270 ) Other ( 592 ) 1,267 ( 213 ) ) Other ( 592 ) 1,267 ( 213 ) Changes in ( 592 ) 1,267 ( 213 ) Changes in asset and acquisition : Accounts receivable ( 4,340 ) ( 6,524 ) ( receivable ( 4,340 ) ( 6,524 ) ( 9,095 ) Income ) ( 6,524 ) ( 9,095 ) Income tax , net Income tax , net ( 3,128 ) 1,209 ( 625 ) , net ( 3,128 ) 1,209 ( 625 ) Other asset ( 3,128 ) 1,209 ( 625 ) Othe equity during the year ended December 31 , 2021 . The associated year ended December 31 , 2021 . The associated derivative liability ) : As of December 31 , 2020 Marketable Equity Securities As of December 31 , 2020 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative net gain $ 2,227 $ 14,616 $ 16,843 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,631 4,277 7,908 Carrying loss ) ( 1 ) 3,631 equity $ 18,893 $ 24,751 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 6.1 billion gain and $ 1.9 6.1 billion gain and $ 1.9 billion loss ( including impairment including impairment ) . ( 2 ) The long-term portion of lock-up restriction ) of $ 429 million is included within other asset . As of December 31 , 2021 Marketable Equity Securities As of December 31 , 2021 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 4,211 $ 15,135 $ 19,346 Cumulative ini equity $ 27,571 $ 35,369 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 14.1 billion gain and $ 1.7 14.1 billion gain and $ 1.7 billion loss ( including impairment including impairment ) . ( 2 ) The long-term portion of lock-up restriction ) of $ 1.4 billion is included within other investment category a of December 31 , 2020 and 2021 ( a of December 31 , 2020 and 2021 ( in million December 31 , 2020 and 2021 ( in million ) : ) : As of December 31 , 2020 As of December As of Decem Equity Securities Level 1 : Money market fund $ : Money market fund $ 12,210 $ 0 $ 7,499 $ market fund $ 12,210 $ 0 $ 7,499 $ 0 Marketable $ 12,210 $ 0 $ 7,499 $ 0 Marketable equity security $ 0 $ 7,499 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) ( 2 ) 0 security ( 1 ) ( 2 ) 0 5,470 0 7,447 1 ) ( 2 ) 0 5,470 0 7,447 12,210 5,470 ) ( 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 ( 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 7,447 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 7,447 Level ) 0 5,47 equity on non-marketable equity security $ 3,020 $ 9,971 Unrealized loss on equity security $ 3,020 $ 9,971 Unrealized loss on non-marketable equity ( including impairment ) ( 1,489 ) ( 122 ) Total ) ( 1,489 ) ( 122 ) Total unrealized gain ( on non-marketable equity security $ 1,531 $ 9,849 During the year equity security $ 1,531 $ 9,849 During the year ended December During the year ended December 31 , 2021 , included in year ended December 31 , 2021 , included in the $ , included in the $ 27.6 billi equity security of the period , $ 18.6 billion were measured at fair net unrealized gain of $ 9.8 billion . Equity security accounted Equity Method As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , equity security December 31 , 2020 and 2021 , equity security accounted for carrying value of approximately $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion , respectively . Our of Income . See Note 7 for further detail on other the derivative primarily within Level 2 in equity security , net 2,649 5,592 12,380 Performance fee ( equity security , net 2,649 5,592 12,380 Performance fee ( 326 security , net 2,649 5,592 12,380 Performance fee ( 326 ) 5,592 12,380 Performance fee ( 326 ) ( 609 ) ( fee ( 326 ) ( 609 ) ( 1,908 ) Income ) ( 609 ) ( 1,908 ) Income ( loss ) equity method investment , net 390 401 334 Other ( 3 method investment , net 390 401 334 Other ( 3 ) investment , net 390 401 334 Other ( 3 ) 102 390 401 334 Other ( 3 ) 102 ( 637 ) 334 Other ( 3 ) 102 ( 63 Equity Preferred Board of Directors ha authorized 100 million share of preferred stock of preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , no share December 31 , 2020 and 2021 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In April 2021 , the Board of Directors to repurchase up to $ 50.0 billion of it Class C C stock . In July 2021 , the Alphabet board approved an amendme Equity 52 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 54 2 . Financial Statement Schedules to Consolidated Financial Statements 54 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 ( December 31 , 2019 , 2020 and 2021 ( in million , 2019 , 2020 and 2021 ( in million ) : of Year Year ended Decembe", + "cash_flow": "cash flow wa $ 91.7 billion , primarily driven by \u2022 Share repurchase were $ 50.3 billion , an increase of billion , an increase of 62 % . See Note 11 62 % . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . 32 10-K for further information . 32 Table of Contents Alphabet Inc. technical infrastructure , were $ 24.6 billion . \u2022 In January billion . \u2022 In January 2021 , we updated the useful in de Cash flow $ 394 1,500 800 ( 1,376 ) Cash flow hedge : unrealized gain ( loss ) 22 42 716 Less : reclassification gain ( loss ) 22 42 716 Less : reclassification adjustment ( loss ) 22 42 716 Less : reclassification adjustment for included in net income ( 299 ) ( 116 ) ( income ( 299 ) ( 116 ) ( 154 ) Net ) ( 116 ) ( 154 ) Net change , net ( expense ) of $ 42 , $ 11 , and of $ 42 , $ 11 , and $ ( 122 11 , and $ ( 122 ) ( 277 ) ( $ ( 122 ) ( 277 ) ( 74 ) 562 ) ( 277 ) ( 74 ) 562 Other comprehensive income cash flow , net of refund $ 8,203 $ 4,990 $ 13,412 See of refund $ 8,203 $ 4,990 $ 13,412 See accompanying note $ 8,203 $ 4,990 $ 13,412 See accompanying note . 53 13,412 See accompanying note . 53 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Summary of Significant Accounting incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding and liability . In Jan Cash flow hedge $ 10,187 $ 16,362 Fair value hedge flow hedge $ 10,187 $ 16,362 Fair value hedge $ 1,569 16,362 Fair value hedge $ 1,569 $ 2,556 Net investment hedge value hedge $ 1,569 $ 2,556 Net investment hedge $ 9,965 2,556 Net investment hedge $ 9,965 $ 10,159 Derivatives Not Designated investment hedge $ 9,965 $ 10,159 Derivatives Not Designated a Hedging : Foreign exchange contract $ 39,861 $ 41,031 Other contract $ exchange contract $ 39,861 $ 41,031 Other contract $ 2,399 $ $ 41,031 Other contr Cash Flow December 31 , 2019 2020 2021 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 38 $ 102 $ 806 Amount of effectiveness $ 38 $ 102 $ 806 Amount excluded from $ 38 $ 102 $ 806 Amount excluded from the assessment the assessment of effectiveness ( 14 ) ( 37 ) 48 effectiveness ( 14 ) ( 37 ) 48 Derivatives in Net 14 ) ( 37 ) 48 Derivatives in Net Investment Hedging in the assessment of effectiveness 131 ( 851 ) 754 Total assessment of effectiveness 131 ( 851 ) 754 Total $ 155 effectiv", + "operating_margin": "Operating margin 23 41,224 $ 78,714 $ 37,490 91 % Operating margin 23 % 37,490 91 % Operating margin 23 % 31 % 8 % % Operating margin 23 % 31 % 8 % Other income margin 23 % 31 % 8 % Other income ( expense expense ) , net $ 6,858 $ 12,020 $ 5,162 75 , net $ 6,858 $ 12,020 $ 5,162 75 % Net $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 40,269 75 % Net Income $ 40,269 $ 76,033 $ 35,764 89 Net Income $ 40,269 $ 76,033 $ 35,764 89 % Diluted $ 40,269 $ 76,033 $ 35,764 89 % Diluted", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 126,462 147,012 Less : accumulated depreciation ( Less : accumulated depreciation ( 41,713 ) ( 49,414 ) Property depreciation ( 41,713 ) ( 49,414 ) Property and equipment , and equipment , net $ 84,749 $ 97,599 Accrued expense and , net $ 84,749 $ 97,599 Accrued expense and other current ) : As of December 31 , 2020 2021 European Commission As of December 31 , 2020 2021 European Commission fine ( of December 31 , 2020 2021 European Commission fine ( 1 2021 European Commiss", + "capital_expenditure": "capital expenditure , For the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , our depreciation December 31 , 2020 and 2021 , our depreciation and impairment property and equipment were $ 12.9 billion and $ 11.6 billion $ 12.9 billion and $ 11.6 billion , respectively . Leases For the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , we recognized December 31 , 2020 and 2021 , we recognized total operating operating lease asset of $ 2.8 billion and $", + "debt": "debt security a of December 31 , 2020 and 2021 are a of December 31 , 2020 and 2021 are shown below December 31 , 2020 and 2021 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2020 2021 2020 2021 As of December 31 , 2020 2021 2020 2021 Risk Category of December 31 , 2020 2021 2020 2021 Risk Category - December 31 , 2020 2021 2020 2021 Risk Category - Interest 31 , 2020 2021 2020 2021 Risk debt 13,932 14,817 808 Total current liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 481 14,817 Deferred revenue , non-current 481 535 Income tax payable , Deferred revenue , non-current 481 535 Income tax payable , non-current Income tax payable , non-current 8,849 9,176 Deferred income tax 3,561 tax payable , non-current 8,849 9 debt 15,376 Deferred income tax 173 1,390 1,808 Gain on debt and Deferred income tax 173 1,390 1,808 Gain on debt and equity equity security , net ( 2,798 ) ( 6,317 ) ( net ( 2,798 ) ( 6,317 ) ( 12,270 ) Other ) ( 6,317 ) ( 12,270 ) Other ( 592 ) ( 12,270 ) Other ( 592 ) 1,267 ( 213 ) ) Other ( 592 ) 1,267 ( 213 ) Changes in ( 592 ) 1,267 ( 213 ) Changes in asset and acquisition : Accounts receivable ( 4,340 ) ( 6,524 ) ( receivable ( 4,340 ) ( 6,524 ) ( 9,095 ) Income ) ( 6,524 ) ( 9,095 ) Income t debt , net of cost 317 11,761 20,199 Repayments of debt , net of cost 317 11,761 20,199 Repayments of debt ( net of cost 317 11,761 20,199 Repayments of debt ( 585 20,199 Repayments of debt ( 585 ) ( 2,100 ) ( debt ( 585 ) ( 2,100 ) ( 21,435 ) Proceeds ) ( 2,100 ) ( 21,435 ) Proceeds from sale of in consolidated entity , net 220 2,800 310 Net cash used consolidated entity , net 220 2,800 310 Net cash used in entity , net 220 2,800 310 Net cash used in financing used in financing activity ( 23,209 ) Debt Securities for a available-for-sale within Level 2 in the fair value hierarchy fair value option were $ 87 million and $ ( 35 87 million and $ ( 35 ) million a of December ) million a of December 31 , 2020 and December 31 a of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , respectively . 2020 and December 31 , 2021 , respectively . As of respectively . As of December 31 , 2020 and December 31 As of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 debt security wa $ 2.0 billion and $ 4.7 billion $ 2.0 billion and $ 4.7 billion , respectively . 61 4.7 billion , respectively . 61 Table of Contents Alphabet Inc investment category a of December 31 , 2020 and 2021 ( a of December 31 , 2020 and 2021 ( in million December 31 , 2020 and 2021 ( in million ) : ) : As of December 31 , 2020 Adjusted Cost Gross As of December 31 , 2020 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backe debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 194 5 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 12 debt security 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 35,576 12 35,564 Mortgage-backed and as debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248 Debt 31 , 2021 . Note 6 . Debt Short-Term Debt We program of up to $ 10.0 billion through the issuance of , which increased from $ 5.0 billion in September 2021 . $ 5.0 billion in September 2021 . Net proceeds from this paper outstanding a of December 31 , 2020 and 2021 . a of December 31 , 2020 and 2021 . Our short-term December 31 , 2020 and 2021 . Our short-term debt balance Interest Rate As of December 31 , Maturity Coupon Rate 2020 31 , Maturity Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuan Debt 2011-2020 Notes Issuances 2024 Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuances 2024 - 2060 2021 Debt 2011-2020 Notes Issuances 2024 - 2060 0.45 % - 2011-2020 Notes Issuances 2024 - 2060 0.45 % - 3.38 % Notes Issuances 2024 - 2060 0.45 % - 3.38 % 0.57 - 2060 0.45 % - 3.38 % 0.57 % - 3.38 0.45 % - 3.38 % 0.57 % - 3.38 % $ 3.38 % 0.57 % - 3.38 % $ 14,000 $ 13,000 % - 3.38 % $ 14,000 $ 13,000 Future finance lease 3.38 % $ 14,000 $ 13,000 Future finance lease payment , lease payment , net ( 1 ) debt , net ( 1 ) 1,201 2,086 Total debt 15,201 15,086 net ( 1 ) 1,201 2,086 Total debt 15,201 15,086 Unamortized ) 1,201 2,086 Total debt 15,201 15,086 Unamortized discount and debt 1,201 2,086 Total debt 15,201 15,086 Unamortized discount and debt issuance and debt issuance cost ( 169 ) ( 156 ) Less cost ( 169 ) ( 156 ) Less : Current portion Current portion of Notes ( 2 ) ( 999 ) \u2014 Notes ( 2 ) ( 999 ) \u2014 Less : Current lease payment , net ( 1 ) ( 2 ) ( net ( 1 ) ( 2 ) ( 101 ) ( ) ( 2 ) ( 101 ) ( 11 debt $ ) Total long-term debt $ 13,932 $ 14,817 ( 1 ) long-term debt $ 13,932 $ 14,817 ( 1 ) Net of $ 13,932 $ 14,817 ( 1 ) Net of imputed interest of imputed interest . ( 2 ) Total current portion of current liability . See Note 7 . The note in the portion , wa approximately $ 14.0 billion and $ 12.4 billion $ 14.0 billion and $ 12.4 billion a of December 31 12.4 billion a of December 31 , 2020 and December 31 a of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , respect debt security , net 149 725 ( 110 ) Gain debt security , net 149 725 ( 110 ) Gain ( , net 149 725 ( 110 ) Gain ( loss ) on equity security , net 2,649 5,592 12,380 Performance fee ( equity security , net 2,649 5,592 12,380 Performance fee ( 326 security , net 2,649 5,592 12,380 Performance fee ( 326 ) 5,592 12,380 Performance fee ( 326 ) ( 609 ) ( fee ( 326 ) ( 609 ) ( 1,908 ) Income ) ( 609 ) ( 1,908 ) Income ( loss ) equity method investment , net 390 401 334 Other ( 3 method investment , net 390 ", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per associated with the repurchase . 25 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-year total stockholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2016 to December 31 ) from December 31 , 2016 to December 31 , 2021 31 , 2016 to December 31 , 2021 . The return 2016 to December 31 , 2021 . The return shown are performance . COMPARISON OF CU Share repurchase were $ 50.3 billion , an increase of billion , an increase of 62 % . See Note 11 62 % . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . 32 10-K for further information . 32 Table of Contents Alphabet Inc. technical infrastructure , were $ 24.6 billion . \u2022 In January billion . \u2022 In January 2021 , we updated the useful in depreciation expense of $ 2.6 billion recorded primarily in c Share Repurchase Program In April 2021 , the Board of Directors to repurchase up to $ 50.0 billion of it Class C C stock . In July 2021 , the Alphabet board approved an amendment to the April 2021 authorization , permitting the company , including the relative trading 40 Table of Contents Alphabet Inc. Directors of Alphabet , during 2021 we repurchased and subsequently retired we repurchased and subsequently retired 20.3 million aggregate share for $ million aggregate share for $ 50.3 billion . Of the aggregate", + "tax_rate": "tax rate , see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Executive Overview The following table for the year ended December 31 , 2020 and 2021 unless year ended December 31 , 2020 and 2021 unless otherwise specified December 31 , 2020 and 2021 unless otherwise specified ( in ) : Year Ended December 31 , 2020 2021 $ Change Year Ended December 31 , 2020 2021 $ Change % Change Ended December 31 , 2020 2021 $ Change tax rate income tax $ 7,813 $ 14,701 Effective tax rate 16.2 % $ 14,701 Effective tax rate 16.2 % 16.2 % The provision Effective tax rate 16.2 % 16.2 % The provision for income for income tax increased from 2020 to 2021 , primarily due tax increased from 2020 to 2021 , primarily due to an . Our effective tax rate 38 Table of Contents Alphabet Inc. Inc. wa substantially consistent from 2020 to 2021 . See Note substantially consistent from 2020 to 2021 . See Note 14 of to 2021 . See Note 14 of the Notes t tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 4.9 ) ( 0.3 ) 0.2 rate ( 4.9 ) ( 0.3 ) 0.2 Foreign-derived intangible income 4.9 ) ( 0.3 ) 0.2 Foreign-derived intangible income deduction ( Foreign-derived intangible income deduction ( 0.7 ) ( 3.0 ) ( deduction ( 0.7 ) ( 3.0 ) ( 2.5 ) Stock-based ) ( 3.0 ) ( 2.5 ) Stock-based compensation expense ( ) Stock-based tax rate and local income tax 1.1 1.1 1.0 Effective tax rate 13.3 local income tax 1.1 1.1 1.0 Effective tax rate 13.3 % 1.1 1.0 Effective tax rate 13.3 % 16.2 % 16.2 % Effective tax rate 13.3 % 16.2 % 16.2 % Our effective rate 13.3 % 16.2 % 16.2 % Our effective tax rate Our effective tax rate for 2019 wa affected significantly by earnings subsidiary . As of December 31 , 2019 , we have As of December 31 , 2019 , we have simplified our in the U.S. On July 27 , 2015 , the U.S. U.S. On July 27 , 2015 , th", + "common_stock": "Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 d common stock outstanding , 44,576,938 share of the registrant \u2019 common stock outstanding , and 315,639,479 share of the registrant \u2019 s Proxy Statement for the 2022 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant \u2019 s fiscal year ended December 31 , 2021 . Table of year ended December 31 , 2021 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year En common stock all dividend ) from December 31 , 2016 to December 31 ) from December 31 , 2016 to December 31 , 2021 31 , 2016 to December 31 , 2021 . The return 2016 to December 31 , 2021 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2016 in stock or invested on December 31 , 2016 in stock or index , . Fiscal year ending De common stock is entitled to 10 vote per share . Class . Share Repurchases In April 2021 , the Board of Directors to repurchase up to $ 50.0 billion of it Class C C stock . In July 2021 , the Alphabet board approved an amendment to the April 2021 authorization , permitting the company share . As of December 31 , 2021 , $ 17.4 As of December 31 , 2021 , $ 17.4 billion remains 31 , 2021 , $ 17.4 billion remains available for Class during the year ended December 31 , 2020 and 2021 , year ended December 31 , 202 Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , a capital stock $ 49.59 $ 59.15 $ 113.88 Diluted capital stock $ 49.59 $ 59.15 $ 113.88 Diluted net income $ 49.59 $ 59.15 $ 113.88 Diluted net income per share Class C capital stock $ 49.16 $ 58.61 $ 112.20 See capital stock $ 49.16 $ 58.61 $ 112.20 See accompanying note $ 49.16 $ 58.61 $ 112.20 See accompanying note . 50 112.20 See accompanying note . 50 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2019 2020 2021 Net Year Ended December 31 , 2019 2020 2021 Net income $ Ended December 31 capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Income 202 Stock-based compensation expense 0 10,890 0 0 10,890 Income tax Stock-based compensation expen capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,3 capital stock 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock issued Common and capital stock issued 8,398 168 0 0 168 Stock-based and capital stock issued 8,398 168 0 0 168 Stock-based compensation capital stock issued 8,398 168 0 0 168 Stock-based compensation expense stock issued 8,398 168 0 0 168 Stock-based compensation expense 0 issued 8,398 168 0 0 168 Stock-based compensation expense 0 13,123 0 168 Stock-based compensation expense 0 13,123 0 0 13,123 Income 168 Stock-based compensation expe capital stock Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale 0 ( 28,990 ) ( 31,149 ) Sale of interest in of interest in consolidated entity 0 2,795 0 0 2,795 Net interest in consolidated entity 0 2,795 0 0 2,795 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net in capital stock 2020 675,222 58,510 633 163,401 222,544 Common and capital stock issued Common and capital stock issued 7,225 12 0 0 12 Stock-based and capital stock issued 7,225 12 0 0 12 Stock-based compensation capital stock issued 7,225 12 0 0 12 Stock-based compensation expense stock issued 7,225 12 0 0 12 Stock-based compensation expense 0 issued 7,225 12 0 0 12 Stock-based compensation expense 0 15,539 0 12 Stock-based compensation expense 0 15,539 0 0 15,539 Income 12 Stock-based compensation expense 0 capital stock ( 20,326 ) ( 2,324 ) 0 stock ( 20,326 ) ( 2,324 ) 0 ( 47,950 ) 20,326 ) ( 2,324 ) 0 ( 47,950 ) ( 50,274 ( 2,324 ) 0 ( 47,950 ) ( 50,274 ) Sale 0 ( 47,950 ) ( 50,274 ) Sale of interest in of interest in consolidated entity 0 310 0 0 310 Net interest in consolidated entity 0 310 0 0 310 Net income in consolidated entity 0 310 0 0 310 Net income 0 consolidated entity 0 310 0 0 310 Net income 0 0 entity 0 310 0 0 310 Net income 0 0 0 0 0 310 Net income 0 0 0 76,033 76,033 Other 0 310 Net income 0 0 capital stock ( 18,396 ) ( 31,149 ) ( stock ( 18,396 ) ( 31,149 ) ( 50,274 ) Proceeds ) ( 31,149 ) ( 50,274 ) Proceeds from issuance of debt , net of cost 317 11,761 20,199 Repayments of debt , net of cost 317 11,761 20,199 Repayments of debt ( net of cost 317 11,761 20,199 Repayments of debt ( 585 20,199 Repayments of debt ( 585 ) ( 2,100 ) ( debt ( 585 ) ( 2,100 ) ( 21,435 ) Proceeds ) ( 2,100 ) ( 21,435 ) Proceeds from sale of in consolidated entity , net 220 2,800 310 Net cash used consolidated entity , Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "debt_securities": "Debt Securities for a available-for-sale within Level 2 in the fair value hierarchy fair value option were $ 87 million and $ ( 35 87 million and $ ( 35 ) million a of December ) million a of December 31 , 2020 and December 31 a of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , respectively . 2020 and December 31 , 2021 , respectively . As of respectively . As of December 31 , 2020 and December 31 As of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , t", + "corporate_debt": "Corporate debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backe Corporate debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 194 5 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 12 debt security 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 35,576 12 35,564 Mortgage-backed and as Corporate debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) Corporate debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248" +} \ No newline at end of file diff --git a/src/data/feature/GOOGL/10-K/0001652044-23-000016/full-submission_features.json b/src/data/feature/GOOGL/10-K/0001652044-23-000016/full-submission_features.json new file mode 100644 index 0000000..9db4c25 --- /dev/null +++ b/src/data/feature/GOOGL/10-K/0001652044-23-000016/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue from revenue from online advertising in 2022 . Many of our advertiser do not create more value 9 Table of Contents Alphabet Inc. hardware that competes effectively . 10 Table of Contents Alphabet Inc in Part II , Item 7 of this Annual Report on this Annual Report on Form 10-K. Our intellectual property right are outside of the U.S. , 11 Table of Contents Alphabet Inc. component we purchase from other 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 51 % of ou revenue of our consolidated revenue in 2022 . In addition to risk civil and criminal penalty ; 13 Table of Contents Alphabet Inc. privacy and data change . 14 Table of Contents Alphabet Inc. Log4j vulnerability reported in December 2021 , which could affect our our data limitation , including 15 Table of Contents Alphabet Inc. . For example , in 2018 the U.S. Federal Communications Commission rule , which could permit 16 Table of Contents Alphabet Inc. Florida \u2019 s Senate Bill 7072 and Texas \u2019 House Bil revenue , see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . In addition to the and service launch ; and 27 Table of Contents Alphabet Inc. other product and service . 28 Table of Contents Alphabet Inc and product development effort . 29 Table of Contents Alphabet Inc our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Ann revenue $ 257,637 $ 282,836 $ 25,199 10 Consolidated revenue $ 257,637 $ 282,836 $ 25,199 10 % Change $ 257,637 $ 282,836 $ 25,199 10 % Change in consolidated 257,637 $ 282,836 $ 25,199 10 % Change in consolidated constant consolidated constant currency revenue ( 1 ) 14 % Cost of currency revenue ( 1 ) 14 % Cost of revenue $ % Cost of revenue $ 110,939 $ 126,203 $ 15,264 14 of revenue $ 110,939 $ 126,203 $ 15,264 14 % Operating $ 110,939 $ 126,203 $ 15,264 14 % Operating expense $ 110,939 $ 126,203 $ 1 revenue of $ 16.0 billion , or 7 % $ 16.0 billion , or 7 % , and an increase Google Cloud revenue of $ 7.1 billion , or 37 % $ 7.1 billion , or 37 % . \u2022 Total constant effect of hedging , increased 14 % year over year . % year over year . 30 Table of Contents Alphabet Inc. Cost of revenue wa $ 126.2 billion , an increase of billion , an increase of 14 % year over year , \u2022 Operating expense were $ 81.8 billion , an increase of billion , an increase of 20 % year over year , information : \u2022 On September 1 revenue $ 257,637 gain ( loss ) 149 1,960 Total revenue $ 257,637 $ 149 1,960 Total revenue $ 257,637 $ 282,836 Google Services Google Total revenue $ 257,637 $ 282,836 Google Services Google advertising revenue & other revenue increased $ 13.5 billion from 2021 to 2022 increased $ 13.5 billion from 2021 to 2022 . The growth 13.5 billion from 2021 to 2022 . The growth wa driven YouTube ad revenue increased $ 398 million from 2021 to 2022 increased $ 398 million from 2021 to 2022 . The growth 398 millio revenue increased $ 1.1 billion from 2021 to 2022 increased $ 1.1 billion from 2021 to 2022 . The growth 1.1 billion from 2021 to 2022 . The growth wa primarily a a percentage ) from 2021 to 2022 : Paid click percentage ) from 2021 to 2022 : Paid click change 10 2022 : Paid click change 10 % Cost-per-click change ( 1 10 % Cost-per-click change ( 1 ) % Paid click increased % Paid click increased from 2021 to 2022 driven by a click increased from 2021 to 2022 driven by a number of delivery . Cost-per-cli revenue increased $ 1.0 billion from 2021 to 2022 increased $ 1.0 billion from 2021 to 2022 primarily driven by 1.0 billion from 2021 to 2022 primarily driven by growth in structure change we announced in 2021 a well a a decrease Google Cloud revenue increased $ 7.1 billion from 2021 to 2022 increased $ 7.1 billion from 2021 to 2022 . The growth 7.1 billion from 2021 to 2022 . The growth wa primarily customer : Year Ended December 31 , 2021 2022 United States Year Ended December 31 , 2021 2022 United S revenue ( 1 gain ( loss ) 149 1,960 Total revenue ( 1 ) 149 1,960 Total revenue ( 1 ) $ 257,637 $ 282,836 revenue ( 1 ) $ 257,637 $ 282,836 $ 294,200 10 1 ) $ 257,637 $ 282,836 $ 294,200 10 % 1 $ 257,637 $ 282,836 $ 294,200 10 % 1 % ( 257,637 $ 282,836 $ 294,200 10 % 1 % ( 5 282,836 $ 294,200 10 % 1 % ( 5 ) % 10 % 1 % ( 5 ) % 14 % ( % ( 5 ) % 14 % ( 1 ) Total ) % 14 % ( 1 ) Total constant currency revenue constant currency revenue of $ 294.2 billion for 2022 increased $ of $ 294.2 billion for 2022 incr revenue , excluding , excluding hedging effect for 2021 . EMEA revenue growth wa ) : Year Ended December 31 , 2021 2022 TAC $ Year Ended December 31 , 2021 2022 TAC $ 45,566 $ Ended December 31 , 2021 2022 TAC $ 45,566 $ 48,955 , 2021 2022 TAC $ 45,566 $ 48,955 Other cost of 2022 TAC $ 45,566 $ 48,955 Other cost of revenue 65,373 48,955 Other cost of revenue 65,373 77,248 Total cost of revenue Other cost of revenue 65,373 77,248 Total cost of revenue $ Total cost of revenue $ 110,939 $ 126,203 Total co revenue $ 110,939 $ 126,203 Total cost of revenue a a a percentage of revenue 43 % 45 % Cost of percentage of revenue 43 % 45 % Cost of revenue increased Cost of revenue increased $ 15.3 billion from 2021 to 2022 increased $ 15.3 billion from 2021 to 2022 . The increase 15.3 billion from 2021 to 2022 . The increase wa due revenue and TAC of $ 11.9 billion and $ 3.4 billion $ 11.9 billion and $ 3.4 billion , respectively . The The increase in TAC from 2021 to 2022 wa due to in TAC from 2021 to 2022 wa d revenue from 2021 to 2022 wa primarily due of revenue from 2021 to 2022 wa primarily due to increase well a hardware cost . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2021 2022 Research and Year Ended December 31 , 2021 2022 Research and development expense Ended December 31 , 2021 2022 Research and development expense $ Research and development expense $ 31,562 $ 39,500 Research and development development expense $ 31,562 $ 39,500 Research and development expense a a a percentage revenue 12 % 14 % R & percentage of revenue 12 % 14 % R & D expense & D expense increased $ 7.9 billion from 2021 to 2022 increased $ 7.9 billion from 2021 to 2022 primarily driven by 7.9 billion from 2021 to 2022 primarily driven by an increase in compensation expense of $ 5.4 billion , largely resulting from , largely resulting from a 21 % increase in average headcount third-party service fee of $ 704 million . Sales and Marketing ) : Year Ended December 31 , 2021 2022 Sales and Year Ended December 3 revenue 9 % 9 % Sales and percentage of revenue 9 % 9 % Sales and marketing expense and marketing expense increased $ 3.7 billion from 2021 to 2022 increased $ 3.7 billion from 2021 to 2022 , primarily driven 3.7 billion from 2021 to 2022 , primarily driven by an in compensation expense of $ 1.8 billion , largely resulting from , largely resulting from a 19 % increase in average headcount and promotional activity of $ 1.3 billion . General and Administrative ) : Year Ended December 31 , 2021 2022 Gener revenue 5 % 6 % General and percentage of revenue 5 % 6 % General and administrative expense and administrative expense increased $ 2.2 billion from 2021 to 2022 increased $ 2.2 billion from 2021 to 2022 . The increase 2.2 billion from 2021 to 2022 . The increase wa primarily in compensation expense of $ 1.1 billion , largely resulting from , largely resulting from a 21 % increase in average headcount third-party service fee of $ 815 million . In addition , , there wa a $ 551 million increase to the al revenue . 35 Table of Contents Alphabet Inc. Cloud operating loss decreased $ 131 million from 2021 to 2022 decreased $ 131 million from 2021 to 2022 . The decrease 131 million from 2021 to 2022 . The decrease in operating Bets operating loss increased $ 802 million from 2021 to 2022 increased $ 802 million from 2021 to 2022 . The increase 802 million from 2021 to 2022 . The increase in operating ) : Year Ended December 31 , 2021 2022 Other income Year Ended December 31 , 2021 2022 Other income ( expen revenue share 8,996 and other current liability 32,044 37,866 Accrued revenue share 8,996 8,370 32,044 37,866 Accrued revenue share 8,996 8,370 Deferred revenue 3,288 3,908 37,866 Accrued revenue share 8,996 8,370 Deferred revenue 3,288 3,908 Total share 8,996 8,370 Deferred revenue 3,288 3,908 Total current liability 64,254 8,996 8,370 Deferred revenue 3,288 3,908 Total current liability 64,254 69,300 3,288 3,908 Total current liability 64,254 69,300 Long-term debt 14,817 14,701 3,908 Total current li revenue , non-current 64,254 69,300 Long-term debt 14,817 14,701 Deferred revenue , non-current 535 14,701 Deferred revenue , non-current 535 599 Income tax payable , Deferred revenue , non-current 535 599 Income tax payable , non-current Income tax payable , non-current 9,176 9,258 Deferred income tax 5,257 tax payable , non-current 9,176 9,258 Deferred income tax 5,257 514 9,176 9,258 Deferred income tax 5,257 514 Operating lease liability 11,389 9,258 Deferred income tax 5,257 514 Operating lease li revenue 84,732 110,939 126,203 Research and development : Cost of revenue 84,732 110,939 126,203 Research and development 27,573 Cost of revenue 84,732 110,939 126,203 Research and development 27,573 31,562 110,939 126,203 Research and development 27,573 31,562 39,500 Sales and marketing 126,203 Research and development 27,573 31,562 39,500 Sales and marketing 17,946 Research and development 27,573 31,562 39,500 Sales and marketing 17,946 22,912 31,562 39,500 Sales and marketing 17,946 22,912 26,567 Ge revenue share expense and other liability 5,504 7,304 3,915 Accrued revenue share 1,639 and other liability 5,504 7,304 3,915 Accrued revenue share 1,639 1,682 7,304 3,915 Accrued revenue share 1,639 1,682 ( 445 ) Deferred 3,915 Accrued revenue share 1,639 1,682 ( 445 ) Deferred revenue revenue share 1,639 1,682 ( 445 ) Deferred revenue 635 774 ( 445 ) Deferred revenue 635 774 367 Net cash provided 445 ) Deferred revenue 635 774 367 Net cash provided by ) Deferred revenue 635 774 367 Net cash provided revenue $ gain ( loss ) 176 149 1,960 Total revenue $ 182,527 ( loss ) 176 149 1,960 Total revenue $ 182,527 $ 149 1,960 Total revenue $ 182,527 $ 257,637 $ 282,836 No Total revenue $ 182,527 $ 257,637 $ 282,836 No in dividual $ 182,527 $ 257,637 $ 282,836 No in dividual customer or affiliated customer represented more than 10 % of our revenue in % of our revenue in 2020 , 2021 , or 2022 our revenue in 2020 , 2021 , or 2022 . The 2020 , 2021 , or 2022 . The following table present ) : Year Ended Decemb revenue loss ) 176 0 149 0 1,960 1 Total revenue $ ) 176 0 149 0 1,960 1 Total revenue $ 182,527 176 0 149 0 1,960 1 Total revenue $ 182,527 100 1,960 1 Total revenue $ 182,527 100 % $ 257,637 100 1 Total revenue $ 182,527 100 % $ 257,637 100 % $ 182,527 100 % $ 257,637 100 % $ 282,836 100 182,527 100 % $ 257,637 100 % $ 282,836 100 % $ 257,637 100 % $ 282,836 100 % ( 1 ) 257,637 100 % $ 282,836 100 % ( 1 ) Regions $ 282,836 100 % ( 1 ) Regions represent Europe , Revenue Backlog As of December 31 , 202 revenue over the next 24 month with the remaining to deferred revenue a of December 31 , 2021 wa $ 3.8 a of December 31 , 2021 wa $ 3.8 billion , 31 , 2021 wa $ 3.8 billion , of which $ billion , of which $ 2.5 billion wa recognized a revenue for the year ending December 31 , 2022 . 59 Table year ending December 31 , 2022 . 59 Table of Contents December 31 , 2022 . 59 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 3 . Financial Instruments Fair Value value and classified within Level 1 and revenue within the next 12 month . Fair Value Hedges , net . See Note 7 for further detail . 64 7 for further detail . 64 Table of Contents Alphabet Inc ) : As of December 31 , 2021 2022 Derivatives designated As of December 31 , 2021 2022 Derivatives designated a hedging of December 31 , 2021 2022 Derivatives designated a hedging instrument contract Cash flow hedge $ 16,362 $ 15,972 Fair value hedge flow hedge $ 16,362 $ 15,972 Fair value hedge $ 2,556 15,972 Fair value hedge $ 2,556 $ 2,117 Net inves Revenue 144 165 2,046 Interest rate contract Foreign exchange contract Revenue 144 165 2,046 Interest rate contract Other exchange contract Revenue 144 165 2,046 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for ) for income tax ( 34 ) ( 17 ) ( tax ( 34 ) ( 17 ) ( 346 ) Net ) ( 17 ) ( 346 ) Net of income tax ) Net of income tax 116 154 1,706 Total amount reclassified Net of income tax 116 1 revenue $ gain ( loss ) 176 149 1,960 Total revenue $ 182,527 ( loss ) 176 149 1,960 Total revenue $ 182,527 $ 149 1,960 Total revenue $ 182,527 $ 257,637 $ 282,836 Operating Total revenue $ 182,527 $ 257,637 $ 282,836 Operating income ( $ 182,527 $ 257,637 $ 282,836 Operating income ( loss ) ) : Google Services $ 54,606 $ 91,855 $ 86,572 Google Google Services $ 54,606 $ 91,855 $ 86,572 Google Cloud ( $ 54,606 $ 91,855 $ 86,572 Google Cloud ( 5,607 ) $ 86,572 Google Cloud ( 5,607 ) ( 3,099 ) ( Cloud ( revenue by $ 41,224 $ 78,714 $ 74,842 For revenue by geography see revenue by geography see Note 2 . The following table present ) : As of December 31 , 2021 2022 Long-lived asset As of December 31 , 2021 2022 Long-lived asset : United of December 31 , 2021 2022 Long-lived asset : United States asset : United States $ 80,207 $ 93,565 International 30,351 33,484 United States $ 80,207 $ 93,565 International 30,351 33,484 Total long-lived $ 80,207 $ 93,565 International 30,351 33,484 Total long-lived ass", + "net_income": "Net income $ ) % Net income $ 76,033 $ 59,972 $ ( 16,061 Net income $ 76,033 $ 59,972 $ ( 16,061 ) ( 76,033 $ 59,972 $ ( 16,061 ) ( 21 ) % $ ( 16,061 ) ( 21 ) % Diluted EPS $ ) % Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 ) ( 5.61 $ 4.56 $ ( 1.05 ) ( 19 ) % $ ( 1.05 ) ( 19 ) % ( 1 ) ( 19 ) % ( 1 ) See `` Use of . \u2022 Revenues were $ 282.8 billion , an increase of billion , an increase of 10 % year over year , Google Services revenue of $ 16.0 billion , or 7 % $ 16.0 billion , or 7 Net income $ Provision for income tax 7,813 14,701 11,356 Net income $ 40,269 for income tax 7,813 14,701 11,356 Net income $ 40,269 $ 14,701 11,356 Net income $ 40,269 $ 76,033 $ 59,972 Basic Net income $ 40,269 $ 76,033 $ 59,972 Basic net income $ 40,269 $ 76,033 $ 59,972 Basic net income per share and Class C stock $ 2.96 $ 5.69 $ 4.59 Diluted C stock $ 2.96 $ 5.69 $ 4.59 Diluted net income $ 2.96 $ 5.69 $ 4.59 Diluted net income per share and Class C stock $ 2.93 $ 5.61 $ 4.56 See C stock $ 2.93 $ 5.6 Net income $ Ended December 31 , 2020 2021 2022 Net income $ 40,269 December 31 , 2020 2021 2022 Net income $ 40,269 $ 2021 2022 Net income $ 40,269 $ 76,033 $ 59,972 Other Net income $ 40,269 $ 76,033 $ 59,972 Other comprehensive income $ 40,269 $ 76,033 $ 59,972 Other comprehensive income ( loss in foreign currency translation adjustment 1,139 ( 1,442 ) ( 1,836 currency translation adjustment 1,139 ( 1,442 ) ( 1,836 ) Available-for-sale 1,139 ( 1,442 ) ( 1,836 ) Available-for-sale investment : Change un net income ( 513 ) ( 64 ) 1,007 income ( 513 ) ( 64 ) 1,007 Net change , 513 ) ( 64 ) 1,007 Net change , net of expense ) of $ ( 230 ) , $ 394 , ( 230 ) , $ 394 , and $ 1,056 800 $ 394 , and $ 1,056 800 ( 1,376 ) ( 394 , and $ 1,056 800 ( 1,376 ) ( 3,713 and $ 1,056 800 ( 1,376 ) ( 3,713 ) Cash 800 ( 1,376 ) ( 3,713 ) Cash flow hedge : unrealized gain ( loss ) 42 716 1,275 Less : reclassification gain ( loss ) 42 716 1,275 Less : reclassification adjustment ( loss ) 42 716 1,275 Less : reclassification ad net income ( 116 ) ( 154 ) ( income ( 116 ) ( 154 ) ( 1,706 ) Net ) ( 154 ) ( 1,706 ) Net change , net ( expense ) of $ 11 , $ ( 122 ) $ 11 , $ ( 122 ) , and $ 110 122 ) , and $ 110 ( 74 ) 562 ( , and $ 110 ( 74 ) 562 ( 431 ) $ 110 ( 74 ) 562 ( 431 ) Other comprehensive ( 74 ) 562 ( 431 ) Other comprehensive income ( comprehensive income ( loss ) 1,865 ( 2,256 ) ( 5,980 ( loss ) 1,865 ( 2,256 ) ( 5,980 ) Comprehensive 1,865 ( 2,256 ) ( 5,980 ) Comprehensive income $ 42,134 5,980 ) Comprehensive income $ 4 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance inc Net income in consolidated entity 0 310 0 0 310 Net income 0 consolidated entity 0 310 0 0 310 Net income 0 0 entity 0 310 0 0 310 Net income 0 0 0 0 0 310 Net income 0 0 0 76,033 76,033 Other 0 310 Net income 0 0 0 76,033 76,033 Other comprehensive 310 Net income 0 0 0 76,033 76,033 Other comprehensive income Net income 0 0 0 76,033 76,033 Other comprehensive income ( income 0 0 0 76,033 76,033 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 2,256 ) 0 income ( loss ) 0 0 ( 2,256 ) 0 Net income in consolidated entity 0 35 0 0 35 Net income 0 consolidated entity 0 35 0 0 35 Net income 0 0 entity 0 35 0 0 35 Net income 0 0 0 0 0 35 Net income 0 0 0 59,972 59,972 Other 0 35 Net income 0 0 0 59,972 59,972 Other comprehensive 35 Net income 0 0 0 59,972 59,972 Other comprehensive income Net income 0 0 0 59,972 59,972 Other comprehensive income ( income 0 0 0 59,972 59,972 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 5,980 ) 0 income ( loss ) 0 0 ( 5,980 ) 0 ( loss ) Net income December 31 , 2020 2021 2022 Operating activity Net income $ Operating activity Net income $ 40,269 $ 76,033 $ 59,972 Adjustments Net income $ 40,269 $ 76,033 $ 59,972 Adjustments : Depreciation $ 40,269 $ 76,033 $ 59,972 Adjustments : Depreciation and impairment impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment Net Income $ 18,523 $ 7,499 $ 11,024 Cash Net Income $ 18,523 $ 7,499 $ 11,024 Cash 0 8,296 $ 18,523 $ 7,499 $ 11,024 Cash 0 8,296 0 Total $ 7,499 $ 11,024 Cash 0 8,296 0 Total $ 112,855 7,499 $ 11,024 Cash 0 8,296 0 Total $ 112,855 $ $ 11,024 Cash 0 8,296 0 Total $ 112,855 $ 548 0 8,296 0 Total $ 112,855 $ 548 $ ( 573 0 Total $ 112,855 $ 548 $ ( 573 ) $ 112,855 $ 548 $ ( 573 ) $ 131,353 $ 20,945 $ ( 573 ) $ 131,353 $ 20,945 $ 118,704 ( 573 ) $ 131,353 $ 20,945 $ 118,704 ( 1 ) $ 131,353 $ 20,945 $ 118,704 Net Income $ 18,893 $ 7,741 $ 11,152 Cash Net Income $ 18,893 $ 7,741 $ 11,152 Cash 0 8,561 $ 18,893 $ 7,741 $ 11,152 Cash 0 8,561 0 Total $ 7,741 $ 11,152 Cash 0 8,561 0 Total $ 91,087 7,741 $ 11,152 Cash 0 8,561 0 Total $ 91,087 $ $ 11,152 Cash 0 8,561 0 Total $ 91,087 $ 77 0 8,561 0 Total $ 91,087 $ 77 $ ( 4,856 0 Total $ 91,087 $ 77 $ ( 4,856 ) $ 91,087 $ 77 $ ( 4,856 ) $ 105,201 $ 21,879 $ ( 4,856 ) $ 105,201 $ 21,879 $ 91,883 ( 4,856 ) $ 105,201 $ 21,879 $ 91,883 ( 1 ) $ 105,201 $ 21,879 $ 91,883 ( Net Income Per Share conversion of those share . 76 Table of Contents Alphabet Inc In the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , the 2020 , 2021 , and 2022 , the net income per ) : Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator Number of net income in per share computation 5,996 924 6,696 Basic net income per per share computation 5,996 924 6,696 Basic net income per share net income per share $ 2.96 $ 2.96 $ 2.96 Diluted per share $ 2.96 $ 2.96 $ 2.96 Diluted net income $ 2.96 $ 2.96 $ 2.96 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed earnings a B to Class net income in per share computation 6,922 924 6,819 Diluted net income per per share computation 6,922 924 6,819 Diluted net income per share net income per share $ 2.93 $ 2.93 $ 2.93 77 per share $ 2.93 $ 2.93 $ 2.93 77 Table of $ 2.93 $ 2.93 $ 2.93 77 Table of Contents Alphabet 2.93 $ 2.93 $ 2.93 77 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2021 Class A Class Year Ended December 31 , 2021 Class A Class B Class Allocation of undistributed earnings $ 34,200 $ 5,174 $ 36,659 De net income in per share computation 6,006 909 6,438 Basic net income per per share computation 6,006 909 6,438 Basic net income per share net income per share $ 5.69 $ 5.69 $ 5.69 Diluted per share $ 5.69 $ 5.69 $ 5.69 Diluted net income $ 5.69 $ 5.69 $ 5.69 Diluted net income per share earnings for basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed earnings a B to Class net income in per share computation 6,915 909 6,638 Diluted net income per per share computation 6,915 909 6,638 Diluted net income per share net income per share $ 5.61 $ 5.61 $ 5.61 Year per share $ 5.61 $ 5.61 $ 5.61 Year Ended December $ 5.61 $ 5.61 $ 5.61 Year Ended December 31 , $ 5.61 Year Ended December 31 , 2022 Class A Class Year Ended December 31 , 2022 Class A Class B Class Allocation of undistributed earnings $ 27,518 $ 4,072 $ 28,382 Denominator undistributed earnings $ 27,518 $ 4,072 $ 28,3 net income in per share computation 5,994 887 6,182 Basic net income per per share computation 5,994 887 6,182 Basic net income per share net income per share $ 4.59 $ 4.59 $ 4.59 Diluted per share $ 4.59 $ 4.59 $ 4.59 Diluted net income $ 4.59 $ 4.59 $ 4.59 Diluted net income per share earnings for basic computation $ 27,518 $ 4,072 $ 28,382 Reallocation basic computation $ 27,518 $ 4,072 $ 28,382 Reallocation of undistributed $ 27,518 $ 4,072 $ 28,382 Reallocation of undistributed earnings a B to Class net income in per share computation 6,881 887 6,278 Diluted net income per per share computation 6,881 887 6,278 Diluted net income per share net income per share $ 4.56 $ 4.56 $ 4.56 78 per share $ 4.56 $ 4.56 $ 4.56 78 Table of $ 4.56 $ 4.56 $ 4.56 78 Table of Contents Alphabet 4.56 $ 4.56 $ 4.56 78 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans the Alphabet Amended and Restated 2021 Stock Plan ( `` Alphabet Stock Plan ( `` Alphabet 2021 Stock Plan `` ) a", + "assets": "Assets Current As of December 31 , 2021 2022 Assets Current asset : of December 31 , 2021 2022 Assets Current asset : Cash Cash and cash equivalent $ 20,945 $ 21,879 Marketable security 118,704 cash equivalent $ 20,945 $ 21,879 Marketable security 118,704 91,883 Total 20,945 $ 21,879 Marketable security 118,704 91,883 Total cash , cash $ 21,879 Marketable security 118,704 91,883 Total cash , cash equivalent equivalent , and marketable security 139,649 113,762 Accounts receivable , net , and marketable Assets and 54 Table of Contents Alphabet Inc. measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are liquid security with maturity beyond 12 month a current asset under our marketable equity security subject 55 Table of Contents Alphabet Inc. Derivative Financial Instruments See Note 3 for the accounting policy pertaining or an income approach . 56 Table of Contents Alphabet Inc over peri Assets ( 1 As of December 31 , 2022 Assets ( 1 ) Liabilities 31 , 2022 Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Assets ( 1 ) ( 2 ) Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Derivatives designated a hedging : Foreign exchange contract $ 867 $ 8 $ 271 $ exchange contract $ 867 $ 8 $ 271 $ 556 Derivatives $ 867 $ 8 $ 271 $ 556 Derivatives not designated $ 8 $ 271 $ 556 Derivatives not designated a hedging instrument : Foreign exchange contract 42 452 365 207 Other contract : Fo Assets $ 7,205 $ 908 $ 28,960 Other Intangible Assets Information regarding ) : As of December 31 , 2021 As of December As of December 31 , 2021 As of December 31 , , 2021 As of December 31 , 2022 Gross Carrying Amount As of December 31 , 2022 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,786 $ 4,112 $ 674 $ developed technology $ 4,786 $ 4,112 $ 674 $ 1,164 $ $ 4,786 $ 4,112 $ 674 $ 1,164 $ 354 $ $ 4,112 $ 674 $ 1,164 $ 354 $ 810 3.2 $ 674 $ 1,164 $ 354 $ 810 3.2", + "liabilities": "Liabilities and Stockholders Total asset $ 359,268 $ 365,264 Liabilities and Stockholders \u2019 Equity liability : Accounts payable $ 6,037 $ 5,128 Accrued compensation and Accounts payable $ 6,037 $ 5,128 Accrued compensation and benefit 13,889 5,128 Accrued compensation and benefit 13,889 14,028 Accrued expense and other Accrued compensation and benefit 13,889 14,028 Accrued expense and other current expense and other current liability 32,044 37,866 Accrued revenue share 8,996 and other current liability 32, Liabilities 31 , 2022 Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Assets ( 1 ) ( 2 ) Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Derivatives designated a hedging : Foreign exchange contract $ 867 $ 8 $ 271 $ exchange contract $ 867 $ 8 $ 271 $ 556 Derivatives $ 867 $ 8 $ 271 $ 556 Derivatives not designated $ 8 $ 271 $ 556 Derivatives not designated a hedging instrument : Foreign exchange contract 42 452 365 207 Other contract : Foreign exchange contract 42 452 365 207 Other contract ", + "equity": "Equity Securities 23 Item 6 . [ Reserved of Equity Securities 23 Item 6 . [ Reserved ] 25 6 . [ Reserved ] 25 Item 7 . Management \u2019 [ Reserved ] 25 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 40 Item 8 . Financial Statements About Market Risk 40 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the \u201c GOOG \u201d since August 19 , 2004 and under the \u201d since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public \u201c GOOG \u201d since April 3 , 2014 . Holders of \u201d since April 3 , 2014 . Holde equity security and $ 1.5 billion of net realized loss by interest income of $ 2.2 billion and reversal of previously to certain investment of $ 798 million . In 2021 , $ 798 million . In 2021 , $ 9.8 billion of . In 2021 , $ 9.8 billion of net unrealized gain non-marketable equity security and $ 1.5 billion of interest income wa , partially offset by $ 1.9 billion of accrued performance fee certain investment . See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this An equity security by $ 516 million . From time to security . As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , the carrying December 31 , 2021 and 2022 , the carrying value of measurement alternative , wa $ 27.6 billion and $ 28.5 billion $ 27.6 billion and $ 28.5 billion , respectively . The , which totaled approximately $ 1.5 billion a of December 31 1.5 billion a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , generally do December 31 , 2021 and 2022 , genera equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. 42 Table of Contents Alphabet Annual Report on Form 10-K. 42 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Firm ( PCAOB ID : 42 ) 44 Financial Statements : PCAOB ID : 42 ) 44 Financial Statements : Consolidated Balance Statements : Consolidated Balanc Equity 50 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 52 43 Table of Contents Alphabet to Consolidated Financial Statements 52 43 Table of Contents Alphabet Inc. Company ) a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , the related December 31 , 2021 and 2022 , the related consolidated statement in the period ended December 31 , 2022 , and the period ended Dece Equity liability : Accounts payable $ 6,037 $ 5,128 Accrued compensation and Accounts payable $ 6,037 $ 5,128 Accrued compensation and benefit 13,889 5,128 Accrued compensation and benefit 13,889 14,028 Accrued expense and other Accrued compensation and benefit 13,889 14,028 Accrued expense and other current expense and other current liability 32,044 37,866 Accrued revenue share 8,996 and other current liability 32,044 37,866 Accrued revenue share 8,996 8,370 32,044 37,866 Accrued revenue share 8,996 equity : : Preferred stock , $ 0.001 par value per share , par value per share , 100 share authorized ; no share no share issued and outstanding 0 0 Class A , Class share issued and outstanding 0 0 Class A , Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 300,000 share authorized ( Class A share authorized ( Class A 180,000 , Class B 60,000 , A 180,000 , Class B 60,000 , Class C 60,000 ) B 60,000 , Class C 60,000 ) ; 13,242 ( Class Class C 60,000 ) ; 13,242 ( C equity 7,603 ) Retained earnings 191,484 195,563 Total stockholder \u2019 equity 251,635 195,563 Total stockholder \u2019 equity 251,635 256,144 Total liability and stockholder Total stockholder \u2019 equity 251,635 256,144 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 359,268 $ 365,264 See accompanying note \u2019 equity $ 359,268 $ 365,264 See accompanying note . 47 365,264 See accompanying note . 47 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2020 2021 2022 Revenues Year Ended Dece equity security , net ( 6,317 ) ( 12,270 ) 5,519 net ( 6,317 ) ( 12,270 ) 5,519 Other 1,267 ( 6,317 ) ( 12,270 ) 5,519 Other 1,267 ( 213 ) ( 12,270 ) 5,519 Other 1,267 ( 213 ) 1,030 Changes ) 5,519 Other 1,267 ( 213 ) 1,030 Changes in asset Other 1,267 ( 213 ) 1,030 Changes in asset and liability Accounts receivable , net ( 6,524 ) ( 9,095 ) ( net ( 6,524 ) ( 9,095 ) ( 2,317 ) Income ) ( 9,095 ) ( 2,317 ) Income tax , net ) Income tax , net 1,209 ( 625 ) 584 Other tax , net 1,209 ( 625 ) 584 Other ass equity security subject 55 Table of Contents Alphabet Inc. Derivative Financial Instruments See Note 3 for the accounting policy pertaining or an income approach . 56 Table of Contents Alphabet Inc over period of seven to 25 year . We depreciate information recoverability of these asset by 57 Table of Contents Alphabet Inc. benefit that is greater than 50 % likely to be realized with current period presentation . 58 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 2 . Revenues Disaggregated equity $ 7,499 $ 7,499 $ 0 Current marketable equity security ( Current marketable equity security ( 3 ) Level 1 5,998 0 security ( 3 ) Level 1 5,998 0 5,998 Mutual fund ( 3 ) Level 1 5,998 0 5,998 Mutual fund Level 3 ) Level 1 5,998 0 5,998 Mutual fund Level 2 ) Level 1 5,998 0 5,998 Mutual fund Level 2 351 0 5,998 Mutual fund Level 2 351 0 351 Government bond 5,998 Mutual fund Level 2 351 0 351 Government bond Level Mutual fund Level 2 351 0 351 Government bond Level 2 fund Level 2 351 0 351 Governm equity $ 7,234 $ 7,234 $ 0 Current marketable equity security ( Current marketable equity security ( 3 ) Level 1 4,013 0 security ( 3 ) Level 1 4,013 0 4,013 Mutual fund ( 3 ) Level 1 4,013 0 4,013 Mutual fund Level 3 ) Level 1 4,013 0 4,013 Mutual fund Level 2 ) Level 1 4,013 0 4,013 Mutual fund Level 2 339 0 4,013 Mutual fund Level 2 339 0 339 Government bond 4,013 Mutual fund Level 2 339 0 339 Government bond Level Mutual fund Level 2 339 0 339 Government bond Level 2 fund Level 2 339 0 339 Governm equity security of the period , $ 14.1 billion were measured at fair and primarily classified a Level 2 investment . 61 Table of a Level 2 investment . 61 Table of Contents Alphabet Inc. ) : As of December 31 , 2022 Due in 1 As of December 31 , 2022 Due in 1 year or 31 , 2022 Due in 1 year or le $ 8,170 1 year or le $ 8,170 Due in 1 year through le $ 8,170 Due in 1 year through 5 year 51,698 Due in 1 year through 5 year 51,698 Due in 5 1 year through 5 year 51,698 Due in 5 year through 5 year 51,698 D Equity Securities As of December 31 , 2022 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 4,211 $ 15,135 $ 19,346 $ initial cost $ 4,211 $ 15,135 $ 19,346 $ 5,764 $ $ 4,211 $ 15,135 $ 19,346 $ 5,764 $ 16,157 $ $ 15,135 $ 19,346 $ 5,764 $ 16,157 $ 21,921 Cumulative $ 19,346 $ 5,764 $ 16,157 $ 21,921 Cumulative net gain $ 5,764 $ 16,157 $ 21,921 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,587 12,436 16,023 ( loss ) ( 1 ) 3,587 12,436 16,023 ( 608 ) ) ( 1 ) 3,587 12,43 equity $ 28,529 $ 33,685 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 14.1 billion gain and $ 1.7 14.1 billion gain and $ 1.7 billion loss ( including impairment impairment ) a of December 31 , 2021 and $ 16.8 a of December 31 , 2021 and $ 16.8 billion gain 31 , 2021 and $ 16.8 billion gain and $ 4.5 16.8 billion gain and $ 4.5 billion loss ( including impairment impairment ) a of December 31 , 2022 . Gains and a of December 31 , 2022 . Gains and loss on ) : Year Ended December equity security 2,722 1,335 ( 3,242 ) Unrealized on marketable equity security 2,722 1,335 ( 3,242 ) Unrealized net equity security 2,722 1,335 ( 3,242 ) Unrealized net gain ( on non-marketable equity security ( 1 ) 1,531 9,849 229 Total equity security ( 1 ) 1,531 9,849 229 Total gain ( security ( 1 ) 1,531 9,849 229 Total gain ( loss ( 1 ) 1,531 9,849 229 Total gain ( loss ) expense ) , net $ 5,592 $ 12,380 $ ( 3,455 , net $ 5,592 $ 12,380 $ ( 3,455 ) ( 5,592 $ 12,380 $ ( 3,455 ) ( 1 ) Unrealized $ equity during the year ended December 31 , 2021 . The associated year ended December 31 , 2021 . The associated derivative liability the underlying equity security . 63 Table of Contents Alphabet Inc. equity method As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , equity security December 31 , 2021 and 2022 , equity security accounted for carrying value of approximately $ 1.5 billion for both year . of Income . See Note 7 for further detail on other the derivative primarily withi equity security , net 5,592 12,380 ( 3,455 ) Performance equity security , net 5,592 12,380 ( 3,455 ) Performance fee , net 5,592 12,380 ( 3,455 ) Performance fee ( 609 3,455 ) Performance fee ( 609 ) ( 1,908 ) 798 fee ( 609 ) ( 1,908 ) 798 Income ( loss 609 ) ( 1,908 ) 798 Income ( loss ) and equity method investment , net 401 334 ( 337 ) Other method investment , net 401 334 ( 337 ) Other ( , net 401 334 ( 337 ) Other ( 637 ) ( 337 ) Other ( 637 ) 411 381 Other income ) Other ( 637 ) 411 381 Other i Equity Class common stock is entitled to 10 vote per share . Class . Stock Split On July 15 , 2022 , the company Split On July 15 , 2022 , the company executed a , the company executed a 20 -for-one stock split with a a record date of July 1 , 2022 , effected in date of July 1 , 2022 , effected in the form Stock Split . See Note 1 for further detail . Share . Share Repurchases In April 2022 , the Board of Directors to repurchase up to $ 70.0 billion of it Class A share . As of December 31 , 2022 , $ 2 Equity 50 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 52 2 . Financial Statement Schedules to Consolidated Financial Statements 52 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 ( in 2020 , 2021 , and 2022 ( in million ) : of Year Year ended December 31 , 2", + "cash_flow": "cash flow wa $ 91.5 billion for the year ended for the year ended December 31 , 2022 . \u2022 Capital year ended December 31 , 2022 . \u2022 Capital expenditure , technical infrastructure , were $ 31.5 billion for the year ended for the year ended December 31 , 2022 . \u2022 As year ended December 31 , 2022 . \u2022 As of December . \u2022 As of December 31 , 2022 , we had As of December 31 , 2022 , we had 190,234 employee , 2022 , we had 190,234 employee . Additionally , looking looking ahead to fiscal year 2023 : \u2022 In January Cash flow hedge : unrealized gain ( loss ) 42 716 1,275 Less : reclassification gain ( loss ) 42 716 1,275 Less : reclassification adjustment ( loss ) 42 716 1,275 Less : reclassification adjustment for included in net income ( 116 ) ( 154 ) ( income ( 116 ) ( 154 ) ( 1,706 ) Net ) ( 154 ) ( 1,706 ) Net change , net ( expense ) of $ 11 , $ ( 122 ) $ 11 , $ ( 122 ) , and $ 110 122 ) , and $ 110 ( 74 ) 562 ( , and $ 110 ( 74 ) 562 ( 431 ) $ 110 ( 74 ) 562 ( 431 ) Other comprehensive ( 74 ) 562 ( 431 ) Othe cash flow , net of refund $ 4,990 $ 13,412 $ 18,892 See of refund $ 4,990 $ 13,412 $ 18,892 See accompanying note $ 4,990 $ 13,412 $ 18,892 See accompanying note . 51 18,892 See accompanying note . 51 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Summary of Significant Accounting incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding and liability . In Cash flow hedge $ 16,362 $ 15,972 Fair value hedge flow hedge $ 16,362 $ 15,972 Fair value hedge $ 2,556 15,972 Fair value hedge $ 2,556 $ 2,117 Net investment hedge value hedge $ 2,556 $ 2,117 Net investment hedge $ 10,159 2,117 Net investment hedge $ 10,159 $ 8,751 Derivatives not designated investment hedge $ 10,159 $ 8,751 Derivatives not designated a hedging : Foreign exchange contract $ 41,031 $ 34,979 Other contract $ exchange contract $ 41,031 $ 34,979 Other contract $ 4,275 $ $ 34,979 Other cont cash flow December 31 , 2020 2021 2022 Derivatives in cash flow hedging the assessment of effectiveness $ 102 $ 806 $ 1,699 Amount of effectiveness $ 102 $ 806 $ 1,699 Amount excluded from $ 102 $ 806 $ 1,699 Amount excluded from the assessment the assessment of effectiveness ( 37 ) 48 ( 188 ) of effectiveness ( 37 ) 48 ( 188 ) Derivatives in ( 37 ) 48 ( 188 ) Derivatives in net investment the assessment of effectiveness ( 851 ) 754 608 Total $ of effectiveness ( 851 ) 754 608 Total $ ( 786 effectiveness cash flow from AOCI to income $ 144 $ 0 $ 165 $ to income $ 144 $ 0 $ 165 $ 0 $ $ 144 $ 0 $ 165 $ 0 $ 2,046 $ $ 0 $ 165 $ 0 $ 2,046 $ 0 Amount $ 165 $ 0 $ 2,046 $ 0 Amount excluded from $ 0 $ 2,046 $ 0 Amount excluded from the assessment of effectiveness ( amortized ) 33 0 ( 16 ) 0 effectiveness ( amortized ) 33 0 ( 16 ) 0 ( amortized ) 33 0 ( 16 ) 0 ( 85 ) 33 0 ( 16 ) 0 ( 85 ) 0 Effect ( 16 ) 0 ( 85 ) 0 Effect of fair ) 0 ( 85 ) 0 Effect of fair value hedge Foreign exchange contract Hedged item 0 18 0 (", + "operating_margin": "Operating margin 31 5 ) % Operating margin 31 % 26 % ( 5 % Operating margin 31 % 26 % ( 5 ) % 31 % 26 % ( 5 ) % Other income ( expense ) , net $ 12,020 $ ( 3,514 ) $ net $ 12,020 $ ( 3,514 ) $ ( 15,534 ) ( 3,514 ) $ ( 15,534 ) ( 129 ) % $ ( 15,534 ) ( 129 ) % Net income $ ) % Net income $ 76,033 $ 59,972 $ ( 16,061 Net income $ 76,033 $ 59,972 $ ( 16,061 ) ( 76,033 $ 59,972 $ ( 16,061 ) ( 21 ) % $ ( 16,061 ) ( 21 ) % Diluted EPS $ ) % Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 ) ( 5.6", + "accumulated_depreciation": "accumulated depreciation and equipment , gross 147,013 171,710 Less : accumulated depreciation ( Less : accumulated depreciation ( 49,414 ) ( 59,042 ) Property depreciation ( 49,414 ) ( 59,042 ) Property and equipment , and equipment , net $ 97,599 $ 112,668 Accrued expense and , net $ 97,599 $ 112,668 Accrued expense and other current ) : As of December 31 , 2021 2022 European Commission As of December 31 , 2021 2022 European Commission fine ( of December 31 , 2021 2022 European Commission fine ( 1 2022 European Commi", + "capital_expenditure": "Capital expenditure , technical infrastructure , were $ 31.5 billion for the year ended for the year ended December 31 , 2022 . \u2022 As year ended December 31 , 2022 . \u2022 As of December . \u2022 As of December 31 , 2022 , we had As of December 31 , 2022 , we had 190,234 employee , 2022 , we had 190,234 employee . Additionally , looking looking ahead to fiscal year 2023 : \u2022 In January 2023 2023 : \u2022 In January 2023 , we announced a reduction of our workforce of approximately 12,000 role . We expect to and related charge of $ capital expenditure , For the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , our depreciation December 31 , 2021 and 2022 , our depreciation and impairment property and equipment were $ 11.6 billion and $ 15.3 billion $ 11.6 billion and $ 15.3 billion , respectively . Leases For the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , we recognized December 31 , 2021 and 2022 , we recognized total operating operating lease asset of $ 3.0 billion and $", + "debt": "debt security a of December 31 , 2021 and 2022 are a of December 31 , 2021 and 2022 are shown below December 31 , 2021 and 2022 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2021 2022 2021 2022 As of December 31 , 2021 2022 2021 2022 Risk category of December 31 , 2021 2022 2021 2022 Risk category - December 31 , 2021 2022 2021 2022 Risk category - interest 31 , 2021 2022 2021 2022 Risk debt 14,817 14,701 3,908 Total current liability 64,254 69,300 Long-term debt 14,817 14,701 Deferred liability 64,254 69,300 Long-term debt 14,817 14,701 Deferred revenue , non-current 64,254 69,300 Long-term debt 14,817 14,701 Deferred revenue , non-current 535 14,701 Deferred revenue , non-current 535 599 Income tax payable , Deferred revenue , non-current 535 599 Income tax payable , non-current Income tax payable , non-current 9,176 9,258 Deferred income tax 5,257 tax payable , non-current 9,176 debt , net of cost 11,761 20,199 52,872 Repayments of debt , net of cost 11,761 20,199 52,872 Repayments of debt ( net of cost 11,761 20,199 52,872 Repayments of debt ( 2,100 52,872 Repayments of debt ( 2,100 ) ( 21,435 ) ( debt ( 2,100 ) ( 21,435 ) ( 54,068 ) Proceeds ) ( 21,435 ) ( 54,068 ) Proceeds from sale of in consolidated entity , net 2,800 310 35 Net cash used consolidated entity , net 2,800 310 35 Net cash used in entity , net 2,800 310 35 Net cash used in financing used in financing activ debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security Level ( 238 ) 53,308 5 53,303 Corporate debt security Level 2 53,303 Corporate debt security Level 2 35,605 194 ( 223 ) Corporate debt security Level 2 35,605 194 ( 223 ) 35,576 debt security Level 2 35,605 194 ( 223 ) 35,576 12 Level 2 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 3 debt 351 Government bond Level 2 1,165 0 1,165 Corporate debt security Government bond Level 2 1,165 0 1,165 Corporate debt security Level bond Level 2 1,165 0 1,165 Corporate debt security Level 2 1,165 Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security Leve debt security 64 ( 2,045 ) 39,055 283 38,772 Corporate debt security Level ( 2,045 ) 39,055 283 38,772 Corporate debt security Level 2 38,772 Corporate debt security Level 2 28,578 8 ( 1,569 ) Corporate debt security Level 2 28,578 8 ( 1,569 ) 27,017 debt security Level 2 28,578 8 ( 1,569 ) 27,017 1 Level 2 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed security ( 1,56 debt 339 Government bond Level 2 1,877 440 1,437 Corporate debt security Government bond Level 2 1,877 440 1,437 Corporate debt security Level bond Level 2 1,877 440 1,437 Corporate debt security Level 2 1,437 Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed security security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed sec debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248 debt security 11,228 2,045 ) Corporate debt security 11,228 ( 440 ) 15,125 ( Corporate debt security 11,228 ( 440 ) 15,125 ( 1,052 ) security 11,228 ( 440 ) 15,125 ( 1,052 ) 26,353 ( ( 440 ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 7,725 ( 585 ) 6,964 ( and asset-backed security 7,725 ( 585 ) 6,964 ( 657 ) security 7,725 ( 585 ) 6,964 ( 657 debt security ( 1 ) $ 86 $ ( security ( 1 ) $ 86 $ ( 122 ) $ ) $ 86 $ ( 122 ) $ ( 557 ) ( 122 ) $ ( 557 ) Gross realized gain on realized gain on debt security 899 432 103 Gross realized loss gain on debt security 899 432 103 Gross realized loss on on debt security 899 432 103 Gross realized loss on debt loss on debt security ( 184 ) ( 329 ) ( security ( 184 ) ( 329 ) ( 1,588 ) ( ) ( 329 ) ( 1,588 ) ( Increase ) /decrease allowance for credit loss ( 76 ) ( 91 ) ( loss ( 76 ) ( 91 ) ( 22 ) Total ) ( Debt 31 , 2022 . Note 6 . Debt Short-Term Debt We program of up to $ 10.0 billion through the issuance of paper outstanding a of December 31 , 2021 and 2022 . a of December 31 , 2021 and 2022 . Our short-term December 31 , 2021 and 2022 . Our short-term debt balance of certain long-term debt . 68 Table of Contents Alphabet Inc Interest Rate As of December 31 , Maturity Coupon Rate 2021 31 , Maturity Coupon Rate 2021 2022 Debt 2014-2020 Notes issuance , Maturity Coupon Rate 2021 2022 Debt 2014-2020 N Debt 2014-2020 Notes issuance 2024 - 2060 2022 Debt 2014-2020 Notes issuance 2024 - 2060 0.45 % - 2014-2020 Notes issuance 2024 - 2060 0.45 % - 3.38 % Notes issuance 2024 - 2060 0.45 % - 3.38 % 0.57 - 2060 0.45 % - 3.38 % 0.57 % - 3.38 0.45 % - 3.38 % 0.57 % - 3.38 % $ 3.38 % 0.57 % - 3.38 % $ 13,000 $ 13,000 % - 3.38 % $ 13,000 $ 13,000 Future finance lease 3.38 % $ 13,000 $ 13,000 Future finance lease payment , , net and other ( 1 ) 2,086 2,142 Total debt and other ( 1 ) 2,086 2,142 Total debt 15, debt 15,086 15,142 Unamortized ) 2,086 2,142 Total debt 15,086 15,142 Unamortized discount and debt 2,086 2,142 Total debt 15,086 15,142 Unamortized discount and debt issuance and debt issuance cost ( 156 ) ( 143 ) Less cost ( 156 ) ( 143 ) Less : current portion and other current debt ( 1 ) ( 2 ) ( debt ( 1 ) ( 2 ) ( 113 ) ( ) ( 2 ) ( 113 ) ( 298 ) Total ) ( 113 ) ( 298 ) Total long-term debt $ ) Total long-term debt $ 14,817 $ 14,701 ( 1 ) long-term debt $ 14,817 $ 14,701 ( 1 ) Future finance $ 14 debt security , net 725 ( 110 ) ( 2,064 security , net 725 ( 110 ) ( 2,064 ) Gain 725 ( 110 ) ( 2,064 ) Gain ( loss ) on equity security , net 5,592 12,380 ( 3,455 ) Performance equity security , net 5,592 12,380 ( 3,455 ) Performance fee , net 5,592 12,380 ( 3,455 ) Performance fee ( 609 3,455 ) Performance fee ( 609 ) ( 1,908 ) 798 fee ( 609 ) ( 1,908 ) 798 Income ( loss 609 ) ( 1,908 ) 798 Income ( loss ) and equity method investment , net 401 334 ( 337 ) Other method investment , net 401 334 ( 3", + "share_repurchase": "share repurchase . ( 2 ) Average price paid per associated with the repurchase . 23 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-year total stockholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2017 to December 31 ) from December 31 , 2017 to December 31 , 2022 31 , 2017 to December 31 , 2022 . The return 2017 to December 31 , 2022 . The return shown are performance . COMPARISON OF CU Share Repurchase Program In April Share Repurchase Program In April 2022 , the Board of Directors to repurchase up to $ 70.0 billion of it Class A share . As of December 31 , 2022 , $ 28.1 As of December 31 , 2022 , $ 28.1 billion remains 31 , 2022 , $ 28.1 billion remains available for Class Directors of Alphabet , during 2022 we repurchased and subsequently retired we repurchased and subsequently retired 530 million share for $ 59.3 530 million share for $ 59.3 billion . Of the aggregate repurchased and subse share repurchase 24 $ 3,399 61 $ 6,719 A share repurchase 24 $ 3,399 61 $ 6,719 Class C share repurchase 24 $ 3,399 61 $ 6,719 Class C share 24 $ 3,399 61 $ 6,719 Class C share repurchase 383 6,719 Class C share repurchase 383 46,875 469 52,577 Total share Class C share repurchase 383 46,875 469 52,577 Total share repurchase C share repurchase 383 46,875 469 52,577 Total share repurchase 407 share repurchase 383 46,875 469 52,577 Total share repurchase 407 $ 469 52,577 Total share repurchase 407 $ 50,274 530 $ share repurchase 407 $ 50,274 530 $ 59,296 Class A share repurchase 407 $ 50,274 530 $ 59,296 Class A and 407 $ 50,274 530 $ 59,296 Class A and Class C transaction , including through Rule 10b5-1 plan . The repurchase program an expiration date . Note 12 . Net Income Per Share conversion of those share . 76 Table of Contents Alphabet Inc In the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , the 2020 , 2021 , and 2022 , the net income", + "tax_rate": "tax rate , see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Executive Overview The following table ) : Year Ended December 31 , 2021 2022 $ Change Year Ended December 31 , 2021 2022 $ Change % Change Ended December 31 , 2021 2022 $ Change % Change Consolidated % Change Consolidated revenue $ 257,637 $ 282,836 $ 25,199 10 Consolidated revenue $ 257,637 $ 282,836 $ 25,199 10 % Change $ 257,637 $ 282,836 $ 25,199 10 % tax rate income tax $ 14,701 $ 11,356 Effective tax rate 16.2 % $ 11,356 Effective tax rate 16.2 % 15.9 % The effective Effective tax rate 16.2 % 15.9 % The effective tax rate effective tax rate decreased from 2021 to 2022 , primarily driven rate decreased from 2021 to 2022 , primarily driven by the R & D expense in 2022 a required by the 2017 2022 a required by the 2017 Tax Cuts and Jobs Act tax benefit . See Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Re tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible different rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible income deduction rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible income deduction ( Foreign-derived intangible income deduction ( 3.0 ) ( 2.5 ) ( deduction ( 3.0 ) ( 2.5 ) ( 5.4 ) Stock-based ) ( 2.5 ) ( 5.4 ) Stock- tax rate 16.2 1.0 ) Effective tax rate 16.2 % 16.2 % 15.9 % Effective tax rate 16.2 % 16.2 % 15.9 % In 2022 rate 16.2 % 16.2 % 15.9 % In 2022 , there 16.2 % 15.9 % In 2022 , there wa an increase R & D expense in 2022 a required by the 2017 2022 a required by the 2017 Tax Cuts and Jobs Act Cuts and Jobs Act . 80 Table of Contents Alphabet Inc ) : As of December 31 , 2021 2022 Deferred tax As of December 31 , 2021 2022 Deferred tax asset : of December 31 , 2021 2022 Deferred tax asset : Accruals reserve n", + "common_stock": "Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 d common stock all dividend ) from December 31 , 2017 to December 31 ) from December 31 , 2017 to December 31 , 2022 31 , 2017 to December 31 , 2022 . The return 2017 to December 31 , 2022 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2017 in stock or invested on December 31 , 2017 in stock or index , of dividend . Copyright common stock is entitled to 10 vote per share . Class . Stock Split On July 15 , 2022 , the company Split On July 15 , 2022 , the company executed a , the company executed a 20 -for-one stock split with a a record date of July 1 , 2022 , effected in date of July 1 , 2022 , effected in the form Stock Split . See Note 1 for further detail . Share . Share Repurchases In April 2022 , the Board of Directors to repurchase up to $ 70.0 billion of it Class A share . As of December 31 , 2022 , $ 28.1 As of December Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October", + "capital_stock": "Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , a Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreemen", + "corporate_debt": "Corporate debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security Level ( 238 ) 53,308 5 53,303 Corporate debt security Level 2 53,303 Corporate debt security Level 2 35,605 194 ( 223 ) Corporate debt security Level 2 35,605 194 ( 223 ) 35,576 debt security Level 2 35,605 194 ( 223 ) 35,576 12 Level 2 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 3 Corporate debt 351 Government bond Level 2 1,165 0 1,165 Corporate debt security Government bond Level 2 1,165 0 1,165 Corporate debt security Level bond Level 2 1,165 0 1,165 Corporate debt security Level 2 1,165 Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security Leve Corporate debt security 64 ( 2,045 ) 39,055 283 38,772 Corporate debt security Level ( 2,045 ) 39,055 283 38,772 Corporate debt security Level 2 38,772 Corporate debt security Level 2 28,578 8 ( 1,569 ) Corporate debt security Level 2 28,578 8 ( 1,569 ) 27,017 debt security Level 2 28,578 8 ( 1,569 ) 27,017 1 Level 2 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed security ( 1,56 Corporate debt 339 Government bond Level 2 1,877 440 1,437 Corporate debt security Government bond Level 2 1,877 440 1,437 Corporate debt security Level bond Level 2 1,877 440 1,437 Corporate debt security Level 2 1,437 Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed security security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed sec Corporate debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248 Corporate debt security 11,228 2,045 ) Corporate debt security 11,228 ( 440 ) 15,125 ( Corporate debt security 11,228 ( 440 ) 15,125 ( 1,052 ) security 11,228 ( 440 ) 15,125 ( 1,052 ) 26,353 ( ( 440 ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 7,725 ( 585 ) 6,964 ( and asset-backed security 7,725 ( 585 ) 6,964 ( 657 ) security 7,725 ( 585 ) 6,964 ( 657" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0000891020-95-000433/full-submission_features.json b/src/data/feature/MSFT/10-K/0000891020-95-000433/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0000891020-95-000433/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0000891020-96-001130/full-submission_features.json b/src/data/feature/MSFT/10-K/0000891020-96-001130/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0000891020-96-001130/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0000950170-23-035122/full-submission_features.json b/src/data/feature/MSFT/10-K/0000950170-23-035122/full-submission_features.json new file mode 100644 index 0000000..3925364 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0000950170-23-035122/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue increased 22 % to $ 111.6 billion increased 22 % to $ 111.6 billion . \u2022 Office Commercial and cloud service revenue increased 10 % driven by Office 365 10 % driven by Office 365 Commercial growth of 13 % Office 365 Commercial growth of 13 % . \u2022 Office Consumer and cloud service revenue increased 2 % and Microsoft 365 Consumer increased 2 % and Microsoft 365 Consumer subscriber increased to 67.0 365 Consumer subscriber increased to 67.0 million . \u2022 LinkedIn revenue . \u2022 LinkedIn revenue increased revenue increased 16 % driven by Dynamics 365 16 % driven by Dynamics 365 growth of 24 % . by Dynamics 365 growth of 24 % . \u2022 Server product and cloud service revenue increased 19 % driven by Azure and other cloud service growth of 29 % . \u2022 Windows original OEM \u201d ) revenue decreased 25 % . \u2022 Devices revenue . \u2022 Devices revenue decreased 24 % . \u2022 Windows Commercial and cloud service revenue increased 5 % . \u2022 Xbox content content and service revenue decreased 3 % . \u2022 Search and excluding traffic acquisit Revenue $ per share amount ) 2023 2022 Percentage Change Revenue $ 211,915 2022 Percentage Change Revenue $ 211,915 $ 198,270 7 % Gross Change Revenue $ 211,915 $ 198,270 7 % Gross margin 146,052 Revenue $ 211,915 $ 198,270 7 % Gross margin 146,052 135,620 198,270 7 % Gross margin 146,052 135,620 8 % Operating income 7 % Gross margin 146,052 135,620 8 % Operating income 88,523 % Gross margin 146,052 135,620 8 % Operating income 88,523 83,383 135,620 8 % Operating income 88,523 83,383 6 % Net income 8 % Revenue increased $ 13.6 billion Year 2022 Revenue increased $ 13.6 billion or 7 % driven increased $ 13.6 billion or 7 % driven by growth in revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 3.2 billion or 5 % driven increased $ 3.2 billion or 5 % driven by growth in . Gross margin increased $ 10.4 billion or 8 % driven increased $ 10.4 billion or 8 % driven by growth in , gross margin percentage decreased 1 point driven by decline in Cloud gross margin Revenue Productivity , except percentage ) 2023 2022 Percentage Change Revenue Productivity and Productivity and Business Processes $ 69,274 $ 63,364 9 % Intelligent Business Processes $ 69,274 $ 63,364 9 % Intelligent Cloud 87,907 Processes $ 69,274 $ 63,364 9 % Intelligent Cloud 87,907 74,965 63,364 9 % Intelligent Cloud 87,907 74,965 17 % More Personal 9 % Intelligent Cloud 87,907 74,965 17 % More Personal Computing % Intelligent Cloud 87,907 74,965 17 % More Personal Computing 54,734 17 % More Pers Revenue Business Processes Revenue increased $ 5.9 billion or 9 % . increased $ 5.9 billion or 9 % . \u2022 Office Commercial cloud service revenue increased $ 3.7 billion or 10 % . increased $ 3.7 billion or 10 % . Office 365 Commercial or 10 % . Office 365 Commercial revenue grew 13 % Office 365 Commercial revenue grew 13 % with seat growth of % with seat growth of 11 % , driven by small Office Commercial product revenue declined 21 % driven by continued customer cloud service revenue increased $ 140 mill revenue \u2022 LinkedIn revenue increased $ 1.3 billion or 10 % driven increased $ 1.3 billion or 10 % driven by Talent Solutions cloud service revenue increased $ 750 million or 16 % driven increased $ 750 million or 16 % driven by Dynamics 365 16 % driven by Dynamics 365 growth of 24 % . by Dynamics 365 growth of 24 % . Operating income increased . Operating income increased $ 4.5 billion or 15 % . increased $ 4.5 billion or 15 % . \u2022 Gross margin \u2022 Gross margin increased $ 5.8 billion or 12 % driven incre Revenue increased $ 12.9 billion or 17 % . increased $ 12.9 billion or 17 % . \u2022 Server product cloud service revenue increased $ 12.6 billion or 19 % driven increased $ 12.6 billion or 19 % driven by Azure and other cloud service revenue grew 29 % driven by growth in . Server product revenue decreased 1 % . \u2022 Enterprise Services Enterprise Services revenue increased $ 315 million or 4 % driven increased $ 315 million or 4 % driven by growth in Microsoft Consulting Services ) . 45 PART II Item 7 Operati Revenue decreased $ 5.2 billion or 9 % . decreased $ 5.2 billion or 9 % . \u2022 Windows revenue \u2022 Windows revenue decreased $ 3.2 billion or 13 % driven decreased $ 3.2 billion or 13 % driven by a decrease . Windows OEM revenue decreased 25 % a elevated channel inventory and cloud service revenue increased 5 % driven by demand for driven by demand for Microsoft 365 . \u2022 Devices revenue decreased \u2022 Devices revenue decreased $ 1.8 billion or 24 % a decreased $ 1.8 billion or 24 % a elevated channel inventory revenue decreased $ 764 million or 5 % driven decreased $ 764 million or 5 % driven by decline in . Xbox hardware revenue decreased 11 % driven by lower volume content and service revenue decreased 3 % driven by a decline news advertising revenue increased $ 617 million or 5 % . increased $ 617 million or 5 % . Search and news excluding traffic acquisition cost increased 11 % driven by higher search . Operating income decreased $ 4.0 billion or 20 % . decreased $ 4.0 billion or 20 % . \u2022 Gross margin \u2022 revenue 13 % 12 % 1ppt Research percent of revenue 13 % 12 % 1ppt Research and development revenue 13 % 12 % 1ppt Research and development expense include service content . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Research and development expense increased and development expense increased $ 2.7 billion or 11 % driven increased $ 2.7 billion or 11 % driven by investment in million , except percentage ) 2023 2022 Percentage Change Sales and , except percentage revenue 11 % 11 % 0ppt Sales percent of revenue 11 % 11 % 0ppt Sales and marketing revenue 11 % 11 % 0ppt Sales and marketing expense include other program . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Sales and marketing expense increased and marketing expense increased $ 934 million or 4 % driven increased $ 934 million or 4 % driven by 3 point or 4 % driven by 3 point of growth from the favorable foreign currency impact of 2 % . General and Administrative mill revenue 4 % 3 % 1ppt General percent of revenue 4 % 3 % 1ppt General and administrative revenue 4 % 3 % 1ppt General and administrative expense include administrative fee . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 General and administrative expense increased and administrative expense increased $ 1.7 billion or 28 % driven increased $ 1.7 billion or 28 % driven by employee severance favorable foreign currency impact of 2 % . 47 PART II impact of 2 % . 47 PART Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional revenue a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) ) Three Months Ending September 30 , 2023 $ 19,673 December Months Ending September 30 , 2023 $ 19,673 December 31 , September 30 , 2023 $ 19,673 December 31 , 2023 15,600 , 2023 $ 19,673 December 31 , 2023 15,600 March 31 $ 19,673 December 31 , 2023 15,600 March 31 , 2024 19,673 December 31 , 2023 15,600 March 31 , 2024 10,801 31 , 2023 15,600 March 31 , 2024 10,801 June 30 2023 15,600 March 31 , 2024 10,801 June 30 , 2024 15,600 Revenue of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) : ( In million ) 2024 Thereafter Total Long-term debt : a ) Principal payment $ 5,250 $ 47,616 $ 52,866 Interest Principal payment $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 Construction commi Revenue . 52 PART II Item 7 Revenue Recognition Our contract with cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the expense ) , net . 53 PART II Item 7 Goodwill . 53 PART II Item 7 Goodwill We allocate goodwill to an annual basis ( May 1 ) and between annual test our consolidated financial statement . 54 PART II Item 7 Income . 54 PART II Item 7 Income Taxes The objective of that ha a greater than 50 % likelihood of being revenue . 55 PART II Item 7 STATEMENT . 55 PART II Item 7 STATEMENT OF MANAGEMENT \u2019 S President and Chief Accounting Officer 56 PART II Item 7A ITEM Officer 56 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2023 Impact Foreign currency Hypothetical Change June 30 , 2023 Impact Foreign currency \u2013 Revenue Impact Foreign currency \u2013 Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 8,122 ) Ea Revenue Year Ended June 30 , 2023 2022 2021 Revenue : Product Ended June 30 , 2023 2022 2021 Revenue : Product $ June 30 , 2023 2022 2021 Revenue : Product $ 64,699 2021 Revenue : Product $ 64,699 $ 72,732 $ 71,074 Service : Product $ 64,699 $ 72,732 $ 71,074 Service and other $ 64,699 $ 72,732 $ 71,074 Service and other 147,216 125,538 $ 71,074 Service and other 147,216 125,538 97,014 Total revenue 211,915 71,074 Service and other 147,216 125,538 97,014 Total revenue 211,915 198,270 Service and other revenue 211,915 198,270 168,088 147,216 125,538 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue 125,538 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue : 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue : Product Cost of revenue : Product 17,804 19,064 18,219 Service and other of revenue : Product 17,804 19,064 18,219 Service and other 48,059 revenue : Product 17,804 19,064 18,219 Service and other 48,059 43,586 19,064 18,219 Service and other 48,059 43,586 34,013 revenue Service and other 48,059 43,586 34,013 Total cost of revenue 65,863 34,013 Total cost of revenue 65,863 62,650 52,232 Gross margin 146,052 Total cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 27,195 52,232 Gross margin 146,052 135,620 115,856 Rese revenue 50,901 10,661 Short-term income tax 4,152 4,067 Short-term unearned revenue 50,901 45,538 4,152 4,067 Short-term unearned revenue 50,901 45,538 Other current liability 14,745 4,067 Short-term unearned revenue 50,901 45,538 Other current liability 14,745 13,067 50,901 45,538 Other current liability 14,745 13,067 Total current liability 104,149 45,538 Other current liability 14,745 13,067 Total current liability 104,149 95,082 14,745 13,067 Total current liability 104,149 95,082 Long-term debt 41 revenue 2,912 47,032 Long-term income tax 25,560 26,069 Long-term unearned revenue 2,912 2,870 25,560 26,069 Long-term unearned revenue 2,912 2,870 Deferred income tax 433 26,069 Long-term unearned revenue 2,912 2,870 Deferred income tax 433 230 2,912 2,870 Deferred income tax 433 230 Operating lease liability 12,728 2,870 Deferred income tax 433 230 Operating lease liability 12,728 11,489 433 230 Operating lease liability 12,728 11,489 Other long-term liability 17,981 230 Operating lease liability 12, revenue Accounts payable ( 2,721 ) 2,943 2,798 Unearned revenue 5,535 5,109 payable ( 2,721 ) 2,943 2,798 Unearned revenue 5,535 5,109 4,633 ) 2,943 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 2,943 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 358 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 358 ) 5,109 4,633 Income tax ( 358 ) 696 ( 2,309 ) Income tax ( 358 ) 696 ( 2,309 ) Other current ( 358 ) 696 ( 2,309 ) Other current liability 2,272 2,309 ) Other current liability 2,27 Revenue . 63 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 64 PART II Item 8 Judgment . 64 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 \u2013 Unearned Revenue for furthe revenue 3,296 2,876 9,440 10,183 Leasing liability 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax liability 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax basis difference in 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax basis difference in investment difference in investment and debt 373 0 Capitalized research and development in investment and debt 373 0 Capitalized research and development ( and development ( a ) 6,958 473 Other 489 461 Deferred development ( a ) 6,958 473 Other 489 461 Def Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional REVENUE PART II Item 8 NOTE 13 \u2014 UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2023 2022 Productivity and million ) June 30 , 2023 2022 Productivity and Business Processes ) June 30 , 2023 2022 Productivity and Business Processes $ Productivity and Business Processes $ 27,572 $ 24,558 Intelligent Cloud 21,563 Business Processes $ 27,572 $ 24,558 Intelligent Cloud 21,563 19,371 More 27,572 $ 24,558 Intelligent Cloud 21,563 19,371 More Personal Computing 4,678 $ 24,558 Intelligent Cloud 21,5 revenue were million ) Year Ended June 30 , 2023 Balance , beginning Year Ended June 30 , 2023 Balance , beginning of period , beginning of period $ 48,408 Deferral of revenue 123,935 Recognition $ 48,408 Deferral of revenue 123,935 Recognition of unearned revenue ( Recognition of unearned revenue ( 118,530 ) Balance , end of , end of period $ 53,813 Revenue allocated to remaining performance future period , wa $ 229 billion a of June 30 229 billion a of June 30 , 2023 , of which a of June 30 , 2023 , revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 \u2014 LEASES We have operating lease term of le than 1 year to 18 year , le than 1 year to 18 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2023 2022 2021 Operating Year Ended June 30 , 2023 2022 2021 Operating lease cost Ended June 30 , 2023 2022 2021 Operating lease cost $ June 30 , 2023 2022 Revenue Year Ended June 30 , 2023 2022 2021 Revenue Productivity and Ended June 30 , 2023 2022 2021 Revenue Productivity and Business June 30 , 2023 2022 2021 Revenue Productivity and Business Processes Productivity and Business Processes $ 69,274 $ 63,364 $ 53,915 Intelligent Business Processes $ 69,274 $ 63,364 $ 53,915 Intelligent Cloud 87,907 $ 69,274 $ 63,364 $ 53,915 Intelligent Cloud 87,907 74,965 59,728 63,364 $ 53,915 Intelligent Cloud 87,907 74,965 59,728 More Personal Computing $ 53,915 Inte revenue for fiscal of revenue for fiscal year 2023 , 2022 , or 2021 for fiscal year 2023 , 2022 , or 2021 . Revenue 2023 , 2022 , or 2021 . Revenue , classified by million ) Year Ended June 30 , 2023 2022 2021 United Year Ended June 30 , 2023 2022 2021 United States ( Ended June 30 , 2023 2022 2021 United States ( a June 30 , 2023 2022 2021 United States ( a ) States ( a ) $ 106,744 $ 100,218 $ 83,953 Other a ) $ 106,744 $ 100,218 $ 83,953 Other country 105,171 $ 106,744 $ 100,218 $ 83,953 Other countr revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue , classified by significant million ) Year Ended June 30 , 2023 2022 2021 Server Year Ended June 30 , 2023 2022 2021 Server product and Ended June 30 , 2023 2022 2021 Server product and cloud June 30 , 2023 2022 2021 Server product and cloud service product and cloud service $ 79,970 $ 67,350 $ 52,589 Office cloud service $ 79,970 $ 67,350 $ 52,589 Office product and $ 79,970 $ 67,350 $ 52,589 Office product and cloud service Office produc revenue , other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 111.6 billion , $ 91.4 billion $ 111.6 billion , $ 91.4 billion , and $ 69.1 91.4 billion , and $ 69.1 billion in fiscal year 2023 69.1 billion in fiscal year 2023 , 2022 , and 2021 in fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . These amount company and with country over 10 % of the total shown ", + "expenses": "EXPENSES Research and Development million , except percentage ) 2023 2022 Percentage Change Research and , except percentage ) 2023 2022 Percentage Change Research and development Change Research and development $ 27,195 $ 24,512 11 % As and development $ 27,195 $ 24,512 11 % As a percent development $ 27,195 $ 24,512 11 % As a percent of As a percent of revenue 13 % 12 % 1ppt Research percent of revenue 13 % 12 % 1ppt Research and development revenue 13 % 12 % 1ppt Research and development expense incl", + "net_income": "net income of and net income of $ 3.0 billion , or $ 0.40 3.0 billion , or $ 0.40 per both basic and diluted basic and diluted share . 41 PART II Item 7 Reportable . 41 PART II Item 7 Reportable Segments We report our segment is contained in Note 19 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are first quarter of fiscal year 2023 , we made update Net income 8 % Operating income 88,523 83,383 6 % Net income 72,361 % Operating income 88,523 83,383 6 % Net income 72,361 72,738 83,383 6 % Net income 72,361 72,738 ( 1 ) % 6 % Net income 72,361 72,738 ( 1 ) % Diluted Net income 72,361 72,738 ( 1 ) % Diluted earnings per % Diluted earnings per share 9.68 9.65 0 % Adjusted gross Diluted earnings per share 9.68 9.65 0 % Adjusted gross margin earnings per share 9.68 9.65 0 % Adjusted gross margin ( gross margin ( non-GAAP ) 146,204 135,620 8 % Adjusted oper net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( net income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings per per share ( non-GAAP ) 9.81 9.21 7 % Adjusted gross share ( non-GAAP ) 9.81 9.21 7 % Adjusted gross margin ( non-GAAP ) 9.81 9.21 7 % Adjusted gross margin , first quarter of fiscal year 2022 . Refer to Note 12 net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of service . In fiscal year 2023 , our U.S. income before before income tax wa $ 52.9 billion and our foreign income before income tax wa $ 36.4 billion . In fiscal year billion . In fiscal year 2022 , our U.S. income before before income tax wa $ Net income $ ) $ 89,694 $ 83,383 8 % Net income $ 72,361 8 % Net income $ 72,361 $ 72,738 ( 1 ) Net income $ 72,361 $ 72,738 ( 1 ) % Severance $ 72,361 $ 72,738 ( 1 ) % Severance , hardware-related , and lease consolidation cost 946 0 * Net income tax and lease consolidation cost 946 0 * Net income tax benefit to transfer of intangible property 0 ( 3,291 ) * Adjusted of intangible property 0 ( 3,291 ) * Adjusted net income income ( non-GAAP ) $ 73,307 $ 69,447 6 % Diluted non-GAAP ) $ 73,307 $ 69,447 6 % Net income tax and lease consolidation cost 0.13 0 * Net income tax benefit to transfer of intangible property 0 ( 0.44 ) * Adjusted of intangible property 0 ( 0.44 ) * Adjusted diluted earnings share ( non-GAAP ) $ 9.81 $ 9.21 7 % * non-GAAP ) $ 9.81 $ 9.21 7 % * Not meaningful ) $ 9.81 $ 9.21 7 % * Not meaningful . % * Not meaningful . 49 PART II Item 7 LIQUIDITY . 49 PART II Item 7 LIQUIDITY AND CAPITAL RESOURCES We for at least the next 12 month and thereafter for the and short-term investment totaled Net income $ Provision for income tax 16,950 10,978 9,831 Net income $ 72,361 for income tax 16,950 10,978 9,831 Net income $ 72,361 $ 10,978 9,831 Net income $ 72,361 $ 72,738 $ 61,271 Earnings Net income $ 72,361 $ 72,738 $ 61,271 Earnings per share $ 72,361 $ 72,738 $ 61,271 Earnings per share : Basic per share : Basic $ 9.72 $ 9.70 $ 8.12 Diluted : Basic $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 $ 8.05 Weighted 8.12 Diluted $ 9.68 Net income $ Ended June 30 , 2023 2022 2021 Net income $ 72,361 June 30 , 2023 2022 2021 Net income $ 72,361 $ 2022 2021 Net income $ 72,361 $ 72,738 $ 61,271 Other Net income $ 72,361 $ 72,738 $ 61,271 Other comprehensive income $ 72,361 $ 72,738 $ 61,271 Other comprehensive income ( loss change related to derivative ( 14 ) 6 19 Net change to derivative ( 14 ) 6 19 Net change related to derivative ( 14 ) 6 19 Net change related to investment change related to investment ( 1,444 ) ( 5,360 ) ( investment ( Net income Ended June 30 , 2023 2022 2021 Operations Net income $ June 30 , 2023 2022 2021 Operations Net income $ 72,361 2021 Operations Net income $ 72,361 $ 72,738 $ 61,271 Adjustments Net income $ 72,361 $ 72,738 $ 61,271 Adjustments to reconcile $ 72,361 $ 72,738 $ 61,271 Adjustments to reconcile net income , amortization , and other 13,861 14,460 11,686 Stock-based compensation expense amortization , and other 13,861 14,460 11,686 Stock-based compensation expense 9,611 , and other 13,861 14,460 11,6 Net income 72,361 , beginning of period 84,281 57,055 34,566 Net income 72,361 72,738 beginning of period 84,281 57,055 34,566 Net income 72,361 72,738 61,271 84,281 57,055 34,566 Net income 72,361 72,738 61,271 Common stock cash 57,055 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend ( Common stock cash dividend ( 20,226 ) ( 18,552 ) ( dividend ( 20,226 ) ( 18,552 ) ( 16,871 ) Common ) ( 18,552 ) ( 16,871 ) Common stock re net income of and net income of $ 3.0 billion , or $ 0.40 3.0 billion , or $ 0.40 per both basic and diluted and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 63 PART II Item 8 Revenue . 63 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recogn Net income available Ended June 30 , 2023 2022 2021 Net income available for June 30 , 2023 2022 2021 Net income available for common shareholder ( A ) $ 72,361 $ 72,738 $ 61,271 Weighted A ) $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding share of common stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based award Dilutive effect of Net Income Equity investment Level 1 $ 10,138 $ 7,446 $ Equity investment Level 1 $ 10,138 $ 7,446 $ 0 $ Level 1 $ 10,138 $ 7,446 $ 0 $ 2,692 Equity $ 10,138 $ 7,446 $ 0 $ 2,692 Equity investment Other $ 7,446 $ 0 $ 2,692 Equity investment Other 7,187 0 $ 2,692 Equity investment Other 7,187 0 0 7,187 Total equity 2,692 Equity investment Other 7,187 0 0 7,187 Total equity investment Equity investment Other 7,187 0 0 7,187 Total equity investment $ investment Other 7,187 0 0 7,187 Total equity investment $ Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 To net income tax benefit first quarter of fiscal year 2022 , a the value of in India . In March 2021 , the India Supreme Court Income Tax for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . The decrease from the statutory rate in fiscal y net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2022 compared to fiscal year 2021 2022 compared to fiscal year 2021 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of ( In million ) June 30 , 2023 2022 Deferred Income million ) June 30 , 2023 2022 Deferred Income Tax Assets ) June 30 , 2023 2022 Deferred Income Tax Assets Stock-based Assets Stock-based compen net income tax for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 included interest 2023 , 2022 , and 2021 included interest expense related to uncertain tax position of $ 918 million , $ 36 million $ 918 million , $ 36 million , and $ 274 36 million , and $ 274 million , respectively , net million ) Year Ended June 30 , 2023 2022 2021 Beginning Year Ended June 30 , 2023 2022 2021 Beginning unrecognized tax Ended June 30 , 2023 2022 2021 Beginning unrecognized tax benefit June 3 Net income ( loss ) 79 45 ( 50 ) Net change loss ) 79 45 ( 50 ) Net change related to of tax of $ ( 373 ) , $ ( 1,428 373 ) , $ ( 1,428 ) , and $ ( ) , and $ ( 602 ) ( 1,444 ) ( $ ( 602 ) ( 1,444 ) ( 5,360 ) ( ) ( 1,444 ) ( 5,360 ) ( 2,266 ) Cumulative ) ( 5,360 ) ( 2,266 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 10 Balance , end effect of accounting change 0 0 10 Balance , end of of accounting change 0 0 10 Balance , end of period end of period $ ( 3,582 ) $ ( 2,138 ) (", + "assets": "Assets Current million ) June 30 , 2023 2022 Assets Current asset : ) June 30 , 2023 2022 Assets Current asset : Cash Cash and cash equivalent $ 34,704 $ 13,931 Short-term investment 76,558 cash equivalent $ 34,704 $ 13,931 Short-term investment 76,558 90,826 Total 34,704 $ 13,931 Short-term investment 76,558 90,826 Total cash , cash $ 13,931 Short-term investment 76,558 90,826 Total cash , cash equivalent equivalent , and short-term investment 111,262 104,757 Accounts receivable , net , and short-ter Assets Derivative Liabilities June 30 , 2023 June 30 , Derivative Liabilities June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 34 $ ( 67 ) $ contract $ 34 $ ( 67 ) $ 0 $ ( $ ( 67 ) $ 0 $ ( 77 ) Interest ) $ 0 $ ( 77 ) Interest rate contract 16 77 ) Interest rate contract 16 0 3 0 Not Designated ) Interest rate contract 16 0 3 0 Not Designated a Interest rate ASSETS The component Amortization Net Carrying Amount June 30 , 2023 2022 Technology-based $ Carrying Amount June 30 , 2023 2022 Technology-based $ 11,245 $ Amount June 30 , 2023 2022 Technology-based $ 11,245 $ ( , 2023 2022 Technology-based $ 11,245 $ ( 7,589 ) $ Technology-based $ 11,245 $ ( 7,589 ) $ 3,656 $ 11,277 $ ( 7,589 ) $ 3,656 $ 11,277 $ ( 6,958 7,589 ) $ 3,656 $ 11,277 $ ( 6,958 ) $ 3,656 $ 11,277 $ ( 6,958 ) $ 4,319 Customer-related 7,281 $ ( 6,958 ) $ 4,319 Customer-related 7,281 ( 4,04 Assets ) June 30 , 2023 2022 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 681 $ 601 Accruals , reserve compensation expense $ 681 $ 601 Accruals , reserve , and reserve , and other expense 3,131 2,874 Loss and credit carryforwards , and other expense 3,131 2,874 Loss and credit carryforwards 1,441 2,874 Loss and credit carryforwards 1,441 1,546 Amortization ( a ) Loss and credit carryforwards 1,441 1,546 Amortization ( a ) 9,440 1,546 Amortization ( a ) 9,440 10,183", + "liabilities": "Liabilities and stockholder Total asset $ 411,976 $ 364,840 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 18,095 $ 19,000 Current portion of Accounts payable $ 18,095 $ 19,000 Current portion of long-term debt Current portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 5,247 2,749 Accrued compensation 1 Liabilities June 30 , 2023 June 30 , Derivative Liabilities June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 34 $ ( 67 ) $ contract $ 34 $ ( 67 ) $ 0 $ ( $ ( 67 ) $ 0 $ ( 77 ) Interest ) $ 0 $ ( 77 ) Interest rate contract 16 77 ) Interest rate contract 16 0 3 0 Not Designated ) Interest rate contract 16 0 3 0 Not Designated a Interest rate contract 16 0 3 0 Not Liabilities Book/tax in investment and debt $ 0 $ ( 174 ) Leasing debt $ 0 $ ( 174 ) Leasing asset ( 4,680 174 ) Leasing asset ( 4,680 ) ( 4,291 ) Depreciation asset ( 4,680 ) ( 4,291 ) Depreciation ( 2,674 ) ( 4,291 ) Depreciation ( 2,674 ) ( 1,602 ) Deferred Depreciation ( 2,674 ) ( 1,602 ) Deferred tax on foreign tax on foreign earnings ( 2,738 ) ( 3,104 ) Other earnings ( 2,738 ) ( 3,104 ) Other ( 89 ) ( 3,104 ) Other ( 89 ) ( 103 ) Deferred Other ( 89 ) ( 103 ) Deferred income tax liability income tax", + "equity": "Equity Securities 38 Item 6 . [ Reserved of Equity Securities 38 Item 6 . [ Reserved ] 39 6 . [ Reserved ] 39 Item 7 . Management \u2019 [ Reserved ] 39 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 40 Item 7A . Quantitative and Results of Operations 40 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 57 Item 8 . Financial Statements about Market Risk 57 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ R PART II Item 6 ITEM 6 . [ R ESERVED ] . [ R ESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2023 compared to the Equity investment . Equity investment were $ 9.9 billion and $ 6.9 billion $ 9.9 billion and $ 6.9 billion a of June 30 6.9 billion a of June 30 , 2023 and 2022 , a of June 30 , 2023 and 2022 , respectively . June 30 , 2023 and 2022 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2023 and 2022 , our Board During fiscal year 2023 and 2022 , our Board of Directors declared quarterly dividend of $ 0.68 per share and $ 0.62 0.68 per share and $ 0.62 per share , totaling $ per share , totaling $ 20.2 billion and $ 18.6 billion $ 20.2 billion and $ 18.6 billion , respectively . We Directors . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item Equity 10 354 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 705 ) Earnings 57 PART II price ( 705 ) Earnings 57 PART II Item 8 ITEM Earnings 57 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2023 2022 2021 Revenue Year Ended June 30 , 2023 2022 2021 Revenue : Product Ended June 30 , 2023 2022 2021 Revenue : Product $ June 30 , 2023 2022 2021 Revenue : Product $ 64,699 2021 Revenue : Product $ 64,699 Equity investment 9,879 6,891 Operating lease right-of-use asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible 14,346 13,148 Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset , net investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset , net 9,366 67,524 Intangible asset , net 9,366 11,298 Other long-term asset 30,6 equity liability : Accounts payable $ 18,095 $ 19,000 Current portion of Accounts payable $ 18,095 $ 19,000 Current portion of long-term debt Current portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 4,067 11,009 10,661 Short-term income tax 4, equity ) Total stockholder \u2019 equity 206,223 166,542 Total liability and stockholder Total stockholder \u2019 equity 206,223 166,542 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 411,976 $ 364,840 Refer to accompanying \u2019 equity $ 411,976 $ 364,840 Refer to accompanying note . Refer to accompanying note . 60 PART II Item 8 CASH . 60 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2023 2022 2021 Operations Year Ended June 30 , 2023 2022 2021 Operations Net income Ended Ju equity $ Total stockholder \u2019 equity $ 206,223 $ 166,542 $ 141,988 Cash \u2019 equity $ 206,223 $ 166,542 $ 141,988 Cash dividend declared $ 206,223 $ 166,542 $ 141,988 Cash dividend declared per common declared per common share $ 2.72 $ 2.48 $ 2.24 Refer common share $ 2.72 $ 2.48 $ 2.24 Refer to accompanying $ 2.72 $ 2.48 $ 2.24 Refer to accompanying note . Refer to accompanying note . 62 PART II Item 8 NOTES . 62 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING P Equity Investments June 30 , 2023 Changes in Fair Equity Investments June 30 , 2023 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 16,589 $ 0 $ Commercial paper Level 2 $ 16,589 $ 0 $ 0 $ Level 2 $ 16,589 $ 0 $ 0 $ 16,589 $ $ 16,589 $ 0 $ 0 $ 16,589 $ 12,231 $ $ 0 $ 0 $ 16,589 $ 12,231 $ 4,358 $ $ 0 $ 16,589 $ 12,231 $ 4,358 $ 0 Certificates $ 16,589 $ 12,231 $ 4,358 $ 0 Certificates of deposit $ 12,231 $ 4,358 $ 0 Certificates of deposit Level 2 0 Certificates of depos Equity investment Level 1 $ 10,138 $ 7,446 $ Equity investment Level 1 $ 10,138 $ 7,446 $ 0 $ Level 1 $ 10,138 $ 7,446 $ 0 $ 2,692 Equity $ 10,138 $ 7,446 $ 0 $ 2,692 Equity investment Other $ 7,446 $ 0 $ 2,692 Equity investment Other 7,187 0 $ 2,692 Equity investment Other 7,187 0 0 7,187 Total equity 2,692 Equity investment Other 7,187 0 0 7,187 Total equity investment Equity investment Other 7,187 0 0 7,187 Total equity investment $ investment Other 7,187 0 0 7,187 Total equity investment $ 17,325 equity investment $ 17,325 $ 7,446 $ 0 $ equity investment $ 17,325 $ 7,446 $ 0 $ 9,879 Cash $ 17,325 $ 7,446 $ 0 $ 9,879 Cash $ 8,478 $ 7,446 $ 0 $ 9,879 Cash $ 8,478 $ 8,478 0 $ 9,879 Cash $ 8,478 $ 8,478 $ 0 $ 9,879 Cash $ 8,478 $ 8,478 $ 0 $ 0 Derivatives $ 8,478 $ 8,478 $ 0 $ 0 Derivatives , net $ 8,478 $ 0 $ 0 Derivatives , net ( a , net ( a ) 6 0 6 0 Total $ net ( a ) 6 0 6 0 Total $ 121,141 ( a ) 6 0 6 0 Total $ 121,141 $ a ) 6 0 6 0 Total $ 121,141 $ 34,704 0 6 0 Total $ 121,141 $ 34,704 $ 76 Equity Investments June 30 , 2022 Changes in Fair Equity Investments June 30 , 2022 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,500 $ 0 $ Commercial paper Level 2 $ 2,500 $ 0 $ 0 $ Level 2 $ 2,500 $ 0 $ 0 $ 2,500 $ $ 2,500 $ 0 $ 0 $ 2,500 $ 2,498 $ $ 0 $ 0 $ 2,500 $ 2,498 $ 2 $ $ 0 $ 2,500 $ 2,498 $ 2 $ 0 Certificates $ 2,500 $ 2,498 $ 2 $ 0 Certificates of deposit $ 2,498 $ 2 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,071 0 0 2,071 2,0 Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 Total equ equity investment $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 0 Derivatives $ 8,258 $ 8,258 $ 0 $ 0 Derivatives , net $ 8,258 $ 0 $ 0 Derivatives , net ( a , net ( a ) 8 0 8 0 Total $ net ( a ) 8 0 8 0 Total $ 111,648 ( a ) 8 0 8 0 Total $ 111,648 $ a ) 8 0 8 0 Total $ 111,648 $ 13,931 0 8 0 Total $ 111,648 $ 13,931 $ 90,826 $ 0 Total $ 111,648 $ 13,931 $ 90,826 equity investment June 30 , 2023 and 2022 , equity investment without readily price or impairment were $ 4.2 billion and $ 3.8 billion $ 4.2 billion and $ 3.8 billion , respectively . 73 3.8 billion , respectively . 73 PART II Item 8 Unrealized . 73 PART II Item 8 Unrealized Losses on Debt Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Tot Equity contract purchased 3,867 Foreign exchange contract sold 25,159 21,606 Equity contract purchased 3,867 1,131 25,159 21,606 Equity contract purchased 3,867 1,131 Equity contract sold 2,154 21,606 Equity contract purchased 3,867 1,131 Equity contract sold 2,154 0 3,867 1,131 Equity contract sold 2,154 0 Other contract purchased 1,224 1,131 Equity contract sold 2,154 0 Other contract purchased 1,224 1,642 2,154 0 Other contract purchased 1,224 1,642 Other contract sold 581 0 Other contract purchase Equity contract ( 332 ) 333 ( 362 ) Equity contract 165 ( ( 362 ) Equity contract 165 ( 400 ) 5 ( ) Equity contract 165 ( 400 ) 5 ( 95 ) contract 165 ( 400 ) 5 ( 95 ) Other contract ( 400 ) 5 ( 95 ) Other contract 5 ( ( 95 ) Other contract 5 ( 6 ) 15 ( ) Other contract 5 ( 6 ) 15 ( 17 ) contract 5 ( 6 ) 15 ( 17 ) Gross amount ( 6 ) 15 ( 17 ) Gross amount of derivative ) Gross amount of derivative 469 ( 805 ) 356 ( amount of derivative 469 ( 805 ) 356 ( 551 ) derivative 469 ( 805 ) 356 ( 551 ) Gross am Equity contract exchange contract ( 73 ) 383 27 Equity contract ( 420 contract ( 73 ) 383 27 Equity contract ( 420 ) 383 27 Equity contract ( 420 ) 13 ( 6 ) Equity contract ( 420 ) 13 ( 6 ) Other contract ( 420 ) 13 ( 6 ) Other contract ( 41 6 ) Other contract ( 41 ) ( 85 ) 15 contract ( 41 ) ( 85 ) 15 Gains ( loss 41 ) ( 85 ) 15 Gains ( loss ) , million ) Year Ended June 30 , 2023 2022 2021 Designated Year Ended June 30 , 2023 2022 2021 Designated a Cash Ended June 30 , 2023 2022 2021 Designated a Ca EQUITY Shares million ) Year Ended June 30 , 2023 2022 2021 Balance Year Ended June 30 , 2023 2022 2021 Balance , beginning Ended June 30 , 2023 2022 2021 Balance , beginning of June 30 , 2023 2022 2021 Balance , beginning of year Balance , beginning of year 7,464 7,519 7,571 Issued 37 40 , beginning of year 7,464 7,519 7,571 Issued 37 40 49 beginning of year 7,464 7,519 7,571 Issued 37 40 49 Repurchased year 7,464 7,519 7,571 Issued 37 40 49 Repurchased ( 69 7,464 7,519 7,571 Issued 37 40 49 Repurcha Equity Statements 62 61 Stockholders \u2019 Equity Statements 62 Notes to Financial Statements 63 62 Notes to Financial Statements 63 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/20", + "cash_flow": "Cash Flow ) Hedged item 38 108 53 Designated a Cash Flow Hedging from accumulated other comprehensive income 61 ( 79 ) 17 Not other comprehensive income 61 ( 79 ) 17 Not Designated a income 61 ( 79 ) 17 Not Designated a Hedging Instruments Instruments Foreign exchange contract ( 73 ) 383 27 Equity contract exchange contract ( 73 ) 383 27 Equity contract ( 420 contract ( 73 ) 383 27 Equity contract ( 420 ) 383 27 Equity contract ( 420 ) 13 ( 6 ) Equity contract ( 420 ) 13 ( 6 ) Other contract ( 420 ) 13 ( Cash Flow June 30 , 2023 2022 2021 Designated a Cash Flow Hedging Included in effectiveness assessment $ 34 $ ( 57 ) $ assessment $ 34 $ ( 57 ) $ 34 NOTE 6 $ ( 57 ) $ 34 NOTE 6 \u2014 INVENTORIES The 57 ) $ 34 NOTE 6 \u2014 INVENTORIES The component of ( In million ) June 30 , 2023 2022 Raw material million ) June 30 , 2023 2022 Raw material $ 709 ) June 30 , 2023 2022 Raw material $ 709 $ 2023 2022 Raw material $ 709 $ 1,144 Work in process Raw material $ 709 $ 1,144 Work in process 23 82 $ 1,144 Work in process cash flow $ 1,853 $ 1,409 $ 1,307 Supplemental cash flow information related million ) Year Ended June 30 , 2023 2022 2021 Cash Year Ended June 30 , 2023 2022 2021 Cash paid for Ended June 30 , 2023 2022 2021 Cash paid for amount June 30 , 2023 2022 2021 Cash paid for amount included flow from operating lease $ 2,706 $ 2,368 $ 2,052 Operating operating lease $ 2,706 $ 2,368 $ 2,052 Operating cash flow $ 2,706 $ 2,368 $ 2,052 Operating cash flow from finance cash flow from finance lease 501 429 386 Financ cash flow flow from finance lease 501 429 386 Financing cash flow from from finance lease 501 429 386 Financing cash flow from finance cash flow from finance lease 1,056 896 648 Right-of-use asset obtained flow from finance lease 1,056 896 648 Right-of-use asset obtained in from finance lease 1,056 896 648 Right-of-use asset obtained in exchange lease obligation : Operating lease 3,514 5,268 4,380 Finance lease 3,128 obligation : Operating lease 3,514 5,268 4,380 Finance lease 3,128 4,234 : Operating lea", + "operating_margin": "operating margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( operating income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( net income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings per per share ( non-GAAP ) ", + "gross_margin": "Gross margin 146,052 Revenue $ 211,915 $ 198,270 7 % Gross margin 146,052 135,620 198,270 7 % Gross margin 146,052 135,620 8 % Operating income 7 % Gross margin 146,052 135,620 8 % Operating income 88,523 % Gross margin 146,052 135,620 8 % Operating income 88,523 83,383 135,620 8 % Operating income 88,523 83,383 6 % Net income 8 % Operating income 88,523 83,383 6 % Net income 72,361 % Operating income 88,523 83,383 6 % Net income 72,361 72,738 83,383 6 % Net income 72,361 72,738 ( 1 ) % 6 % Net income 72,36 gross margin earnings per share 9.68 9.65 0 % Adjusted gross margin ( gross margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( operating income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( net income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted income ( non-GAAP ) gross margin ( non-GAAP ) 9.81 9.21 7 % Adjusted gross margin , first quarter of fiscal year 2022 . Refer to Note 12 2022 . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . financial result . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Revenue increased $ 13.6 billion Year 2022 Revenue increased $ 13.6 billion or 7 % driven increased $ 13.6 billion or 7 % driven by growth in revenue incre Gross margin increased $ 10.4 billion or 8 % driven increased $ 10.4 billion or 8 % driven by growth in , gross margin percentage decreased 1 point driven by decline in Cloud gross margin percentage increased 2 point to 72 % . percentage increased 2 point to 72 % . Excluding the impact part by improvement in Office 365 Commercial . Operating expense increased . Operating expense increased $ 5.3 billion or 10 % driven increased $ 5.3 billion or 10 % driven by employee severance by employee severance expense Gross margin \u2022 Gross margin increased $ 5.8 billion or 12 % driven increased $ 5.8 billion or 12 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn , a driven by improvement in Office 365 Commercial , offset in part \u2022 Operating expense increased $ 1.3 billion or 7 % driven increased $ 1.3 billion or 7 % driven by investment in unfavorable foreign currency impact of 5 % , 5 % , impact of 5 % , 5 % , and 8 % , 5 % , and 8 % , respectively . Intelligent Intelligent Cloud Revenue incre Gross margin \u2022 Gross margin increased $ 8.9 billion or 17 % driven increased $ 8.9 billion or 17 % driven by growth in , gross margin percentage decreased 3 point driven by sale mix \u2022 Operating expense increased $ 4.2 billion or 21 % driven increased $ 4.2 billion or 21 % driven by investment in by investment in Azure , 4 point of growth from the unfavorable foreign currency impact of 4 % , 4 % , impact of 4 % , 4 % , and 6 % , 4 % , and 6 % , respectively . Operating favorable foreign currency impact of 2 Gross margin \u2022 Gross margin decreased $ 4.2 billion or 13 % driven decreased $ 4.2 billion or 13 % driven by decline in \u2022 Operating expense decreased $ 195 million or 2 % driven decreased $ 195 million or 2 % driven by a decline and news advertising , including 2 point of growth from the unfavorable foreign currency impact of 3 % , 4 % , impact of 3 % , 4 % , and 6 % , 4 % , and 6 % , respectively . Operating favorable foreign currency impact of 2 % . 46 PART II impact of 2 % . 46 PART II Item 7 OPERATING . Gross margin per share amount ) 2023 2022 Percentage Change Gross margin $ Percentage Change Gross margin $ 146,052 $ 135,620 8 % Severance Gross margin $ 146,052 $ 135,620 8 % Severance , hardware-related margin $ 146,052 $ 135,620 8 % Severance , hardware-related impairment , and lease consolidation cost 152 0 * Adjusted gross margin and lease consolidation cost 152 0 * Adjusted gross margin ( margin ( non-GAAP ) $ 146,204 $ 135,620 8 % Operating non-GAAP ) $ 146,204 $ 135,620 8 % Operating income $ ) $ 1 Gross margin 146,052 Total cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 27,195 52,232 Gross margin 146,052 135,620 115,856 Research and development 27,195 24,512 135,620 115,856 Research and development 27,195 24,512 20,716 Sales and marketing 115,856 Resear", + "accumulated_depreciation": "accumulated depreciation of $ 68,251 and $ 59,660 95,641 74,398 of $ 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use $ 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use asset 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use asset 14,346 74,398 Operating lease right-of-use asset 14,346 13,148 Equity investment 9,879 6,891 Operating lease right-of-use asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill 67,886 67,52 Accumulated depreciation ( 68,251 Total , at cost 163,892 134,058 Accumulated depreciation ( 68,251 ) 163,892 134,058 Accumulated depreciation ( 68,251 ) ( 59,660 ) Total depreciation ( 68,251 ) ( 59,660 ) Total , net $ ) Total , net $ 95,641 $ 74,398 During fiscal year , net $ 95,641 $ 74,398 During fiscal year 2023 , $ 74,398 During fiscal year 2023 , 2022 , and 2021 During fiscal year 2023 , 2022 , and 2021 , depreciation 2023 , 2022 , and 2021 , depreciation expense wa $ , depreciation expense wa $ 11.0 billion , $ Accumulated depreciation ( at cost $ 20,538 $ 17,388 Accumulated depreciation ( 4,647 ) $ 17,388 Accumulated depreciation ( 4,647 ) ( 3,285 ) Property depreciation ( 4,647 ) ( 3,285 ) Property and equipment , and equipment , net $ 15,891 $ 14,103 Other current liability , net $ 15,891 $ 14,103 Other current liability $ 1,197 14,103 Other current liability $ 1,197 $ 1,060 Other long-term liability current liability $ 1,197 $ 1,060 Other long-term liability 15,870 13,842 $ 1,060 Other long-term liability 15,870 13,842 To", + "debt": "Debt . 50 PART II Item 7 Debt Proceeds We issue debt debt . Refer to Note 11 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) ) Three Months Ending September 30 , 2023 $ 19,673 December Months Ending September 30 , debt : a ) Principal payment $ 5,250 $ 47,616 $ 52,866 Interest Principal payment $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( $ 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( b 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( b ) Construction commitment ( b ) 12,237 1,218 13,455 Operating and finance commitment Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) a construction commitment above . 51 PART II Item 7 Income . 51 PART II Item 7 Income Taxes As a result over eight year , with 8 % due in each of the first five year , 15 % debt Current portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 4,067 11,009 10,661 Short-term income tax 4,152 4,067 Short-term unearned revenue 50,901 10,661 Short-term income tax 4,152 4,067 Short-term unearned revenue 50,901 45,538 4,152 4 debt 41,990 47,032 13,067 Total current liability 104,149 95,082 Long-term debt 41,990 47,032 Long-term liability 104,149 95,082 Long-term debt 41,990 47,032 Long-term income tax 25,560 104,149 95,082 Long-term debt 41,990 47,032 Long-term income tax 25,560 26,069 41,990 47,032 Long-term income tax 25,560 26,069 Long-term unearned revenue 2,912 47,032 Long-term income tax 25,560 26,069 Long-term unearned revenue 2,912 2,870 25,560 26,069 Long-term unearned revenue 2,912 2,870 Deferred income tax 433 debt Cash premium on debt exchange 0 0 ( 1,754 ) Repayments premium on debt exchange 0 0 ( 1,754 ) Repayments of debt exchange 0 0 ( 1,754 ) Repayments of debt ( ) Repayments of debt ( 2,750 ) ( 9,023 ) ( debt ( 2,750 ) ( 9,023 ) ( 3,750 ) Common ) ( 9,023 ) ( 3,750 ) Common stock issued 1,866 3,750 ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ( Common stock issued 1,866 1,841 1,693 Common stock repurchased ( 22,245 debt 0 ( 16 ) 87 0 87 0 Total debt investment ( 16 ) 87 0 87 0 Total debt investment $ 16 ) 87 0 87 0 Total debt investment $ 99,869 0 Total debt investment $ 99,869 $ 13 $ ( 4,550 debt investment $ 99,869 $ 13 $ ( 4,550 ) $ 99,869 $ 13 $ ( 4,550 ) $ 95,332 $ 18,780 $ ( 4,550 ) $ 95,332 $ 18,780 $ 76,552 $ 4,550 ) $ 95,332 $ 18,780 $ 76,552 $ 0 Changes $ 95,332 $ 18,780 $ 76,552 $ 0 Changes in Fair $ 18,780 $ 76,552 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 10,138 $ 7 debt 0 ( 6 ) 97 0 97 0 Total debt investment ( 6 ) 97 0 97 0 Total debt investment $ 6 ) 97 0 97 0 Total debt investment $ 98,118 0 Total debt investment $ 98,118 $ 53 $ ( 2,814 debt investment $ 98,118 $ 53 $ ( 2,814 ) $ 98,118 $ 53 $ ( 2,814 ) $ 95,357 $ 4,539 $ ( 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 0 Changes $ 95,357 $ 4,539 $ 90,818 $ 0 Changes in Fair $ 4,539 $ 90,818 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Eq Debt Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2023 U.S. government and Fair Value June 30 , 2023 U.S. government and agency security government and agency security $ 7,950 $ ( 336 ) $ security $ 7,950 $ ( 336 ) $ 45,273 $ ( $ ( 336 ) $ 45,273 $ ( 3,534 ) $ ) $ 45,273 $ ( 3,534 ) $ debt were in excess of $ 1.0 billion . As a result required to be posted . 75 PART II Item 8 The . 75 PART II Item 8 The following table present the ( In million ) June 30 , 2023 June 30 , million ) June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 1,492 $ 635 Interest rate contract contract purchased $ 1,492 $ 635 Interest rate contract purchased 1,078 635 I DEBT The 2,160 Total $ 9,366 NOTE 11 \u2014 DEBT The component of Rate Effective Interest Rate June 30 , 2023 June 30 , Interest Rate June 30 , 2023 June 30 , 2022 2009 June 30 , 2023 June 30 , 2022 2009 issuance of , 2023 June 30 , 2022 2009 issuance of $ 3.8 2023 June 30 , 2022 2009 issuance of $ 3.8 billion 2022 2009 issuance of $ 3.8 billion 2039 5.20 % 5.24 issuance of $ 3.8 billion 2039 5.20 % 5.24 % $ of $ 3.8 billion 2039 5.20 % 5.24 % $ 520 3.8 billion 2039 5.20 % 5.24 % $ 520 $ 520 5.20 % 5.24 debt exchange Premium on debt exchange ( 5,085 ) ( 5,191 ) Total exchange ( 5,085 ) ( 5,191 ) Total debt 47,237 49,781 ( 5,191 ) Total debt 47,237 49,781 Current portion of long-term 5,191 ) Total debt 47,237 49,781 Current portion of long-term debt portion of long-term debt ( 5,247 ) ( 2,749 ) Long-term debt ( 5,247 ) ( 2,749 ) Long-term debt $ 41,990 2,749 ) Long-term debt $ 41,990 $ 47,032 ( a ) Long-term debt $ 41,990 $ 47,032 ( a ) Refer to a ) Refer to Note 5 \u2013 Derivatives for further informat debt . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , the estimated June 30 , 2023 and 2022 , the estimated fair value current portion , wa $ 46.2 billion and $ 50.9 billion $ 46.2 billion and $ 50.9 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 wa $ 2023 , 2022 , and 2021 wa $ 1.7 billion , , and 2021 wa $ 1.7 billion , $ 1.9 billion $ 1.7 billion , $ 1.9 billion , a debt 373 0 Capitalized research and development in investment and debt 373 0 Capitalized research and development ( and development ( a ) 6,958 473 Other 489 461 Deferred development ( a ) 6,958 473 Other 489 461 Deferred income a ) 6,958 473 Other 489 461 Deferred income tax asset ) 6,958 473 Other 489 461 Deferred income tax asset 30,850 461 Deferred income tax asset 30,850 23,571 Less valuation allowance ( Deferred income tax asset 30,850 23,571 Less valuation allowance ( 939 23,571 Less valuatio debt $ 0 $ ( 174 ) Leasing debt $ 0 $ ( 174 ) Leasing asset ( 4,680 174 ) Leasing asset ( 4,680 ) ( 4,291 ) Depreciation asset ( 4,680 ) ( 4,291 ) Depreciation ( 2,674 ) ( 4,291 ) Depreciation ( 2,674 ) ( 1,602 ) Deferred Depreciation ( 2,674 ) ( 1,602 ) Deferred tax on foreign tax on foreign earnings ( 2,738 ) ( 3,104 ) Other earnings ( 2,738 ) ( 3,104 ) Other ( 89 ) ( 3,104 ) Other ( 89 ) ( 103 ) Deferred Other ( 89 ) ( 103 ) Deferred income tax liability income tax liability $ ( 10,181 ) $ ( 9,27", + "share_repurchase": "share repurchase 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share repurchase were 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2023 : Declaration Date Record Date ( In million ) June 13 , 2023 August 17 , million ) June 13 , 2023 August 17 , 2023 September June 13 , 2023 August 17 , 2023 September 14 , , 2023 August 17 , 2023 September 14 , 2023 $ August 17 , 2023 S share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ R PART II Item 6 ITEM 6 . [ R ESERVED ] . [ R ESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2023 compared to the year ended June 30 , 2023 compared to the year ended to the year ended June 30 , 2022 . For a year ended June 30 , 202 share repurchase program . program . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2023 and 2022 , our Board During fiscal year 2023 and 2022 , our Board of Directors declared quarterly dividend of $ 0.68 per share and $ 0.62 0.68 per share and $ 0.62 per share , totaling $ per share , totaling $ 20.2 billion and $ 18.6 billion $ 20.2 billion and $ 18.6 billion , respectively . We Directors . share repurchase . repurchase program commenced in February 2020 and wa completed in November and wa completed in November 2021 . On September 14 , November 2021 . On September 14 , 2021 , our Board . On September 14 , 2021 , our Board of Directors program authorizing up to $ 60.0 billion in share repurchase . repurchase program commenced in November 2021 , following completion of the the program approved on September 18 , 2019 , ha no approved on September 18 , 2019 , ha no expiration date time . As of June 30 share repurchase program . Shares Amount Year Ended June 30 , 2023 2022 2021 First Year Ended June 30 , 2023 2022 2021 First Quarter 17 Ended June 30 , 2023 2022 2021 First Quarter 17 $ June 30 , 2023 2022 2021 First Quarter 17 $ 4,600 2023 2022 2021 First Quarter 17 $ 4,600 21 $ 6,200 2021 First Quarter 17 $ 4,600 21 $ 6,200 25 $ First Quarter 17 $ 4,600 21 $ 6,200 25 $ 5,270 17 $ 4,600 21 $ 6,200 25 $ 5,270 Second Quarter $ 4,600 21 $ 6,200 25 $ 5,270 Second Quarter 20 21 $ 6,200 25 $ 5,270 Second Quarter 20 share repurchase repurchase program approved on September 14 , 2021 . Shares repurchased approved on September 14 , 2021 . Shares repurchased during the second quarter of fiscal year 2022 were under the share repurchase program approved on both September 14 , 2021 and September 18 on both September 14 , 2021 and September 18 , 2019 14 , 2021 and September 18 , 2019 . All other 2021 and September 18 , 2019 . All other share repurchased repurchase program approved on September 18 , 2019 . The above approved on Se", + "earnings_per_share": "earnings per share 9.68 9.65 0 % Adjusted gross Diluted earnings per share 9.68 9.65 0 % Adjusted gross margin earnings per share 9.68 9.65 0 % Adjusted gross margin ( gross margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( operating income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted earnings per share Diluted earnings per share $ 9.68 $ 9.65 0 % Severance per share $ 9.68 $ 9.65 0 % Severance , hardware-related share $ 9.68 $ 9.65 0 % Severance , hardware-related impairment , and lease consolidation cost 0.13 0 * Net income tax and lease consolidation cost 0.13 0 * Net income tax benefit to transfer of intangible property 0 ( 0.44 ) * Adjusted of intangible property 0 ( 0.44 ) * Adjusted diluted earnings share ( non-GAAP ) $ 9.81 $ 9.21 7 % * non-GAAP ) $ 9.81 $ 9.21 7 % * Not meaningful ) $ Earnings per share $ 72,361 $ 72,738 $ 61,271 Earnings per share : Basic per share : Basic $ 9.72 $ 9.70 $ 8.12 Diluted : Basic $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 $ 8.05 Weighted 8.12 Diluted $ 9.68 $ 9.65 $ 8.05 Weighted average share $ 9.68 $ 9.65 $ 8.05 Weighted average share outstanding : average share outstanding : Basic 7,446 7,496 7,547 Diluted 7,472 7,540 share outstanding : Basic 7,446 7,496 7,547 Diluted 7,472 7,540 7,608 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2023 2022 2021 Net Year Ended June 30 , 2023 2022 2021 Net income available Ended June 30 , 2023 2022 2021 Net income available for June 30 , 2023 2022 2021 Net income available for common shareholder ( A ) $ 72,361 $ 72,738 $ 61,271 Weighted A ) $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding share of common stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock ( B ) 7,446 7,496 7,547 Dilutive e Earnings Per Share equivalent ( C ) 7,472 7,540 7,608 Earnings Per Share Basic ( C ) 7,472 7,540 7,608 Earnings Per Share Basic ( Basic ( A/B ) $ 9.72 $ 9.70 $ 8.12 Diluted A/B ) $ 9.72 $ 9.70 $ 8.12 Diluted ( A/C $ 9.72 $ 9.70 $ 8.12 Diluted ( A/C ) $ Diluted ( A/C ) $ 9.68 $ 9.65 $ 8.05 Anti-dilutive A/C ) $ 9.68 $ 9.65 $ 8.05 Anti-dilutive stock-based award $ 9.68 $ 9.65 $ 8.05 Anti-dilutive stock-based award excluded from during the period presented . 70 PART II Item 8 NOTE . 70 PART II Item 8 NOTE 3 \u2014 OTHER ", + "tax_rate": "tax rate for fiscal year 2023 and 2022 wa 19 % for fiscal year 2023 and 2022 wa 19 % and 13 year 2023 and 2022 wa 19 % and 13 % , 2022 wa 19 % and 13 % , respectively . The primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of service . In fiscal year 2023 , our U Tax Rate $ 89,311 $ 83,716 $ 71,102 Effective Tax Rate The item follows : Year Ended June 30 , 2023 2022 2021 Federal Year Ended June 30 , 2023 2022 2021 Federal statutory rate Ended June 30 , 2023 2022 2021 Federal statutory rate 21.0 June 30 , 2023 2022 2021 Federal statutory rate 21.0 % 2022 2021 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 1.8 ) % ( 1.3 ) ( 1.8 ) % ( 1.3 ) % ( 2.7 tax rate for fiscal year 2023 compared to fiscal year 2022 2023 compared to fiscal year 2022 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2022 compared to fiscal year 2021 2022 compared to fiscal year 2021 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of ( In million ) June 30 , 2023 2022 Deferred tax rate for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 by $ 2023 , 2022 , and 2021 by $ 14.4 billion , , and 2021 by $ 14.4 billion , $ 13.3 billion $ 14.4 billion , $ 13.3 billion , and $ 12.5 13.3 billion , and $ 12.5 billion , respectively . As respectively . As of June 30 , 2023 , 2022 , As of June 30 , 2023 , 2022 , and 2021 June 30 , 2023 , 2022 , and 2021 , we 2023 , 2022 , and 2021 , we had accrued interest uncertain tax position of $ 5.2 billion , $ 4.3 billion $", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , Microsoft Microsoft Viva , and Microsoft 365 Copilot . \u2022 Office Consumer Office Consumer , including Microsoft 365 Consumer subscription , Office Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are first quarter of fiscal year 2023 , we made update to other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud for our Microsoft Cloud business 42 PART II Item 7 Productivity business 42 PART II Item 7 Productivity and Business Processes and and cloud Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 64 PART II Item 8 Judgment . 64 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2 Geographic our consolidated balance sheet . 67 PART II Item 8 Financial . 67 PART II Item 8 Financial Instruments Investments We consider expense ) , net . 68 PART II Item 8 Fair . 68 PART II Item 8 Fair Value Measurements We account level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include c GEOGRAPHIC \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , Microsoft Microsoft Viva , and Microsoft 365 Copilot . \u2022 Office Consumer Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of , and PC accesso", + "common_stock": "Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the re common stock outstanding to be held on December 7 , 2023 are incorporated by held on December 7 , 2023 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2023 INDEX Page PART Year Ended June 30 , 2023 INDEX Page PART I Item INDEX Page PART I Item 1. Business 4 Information about our PART I Item 1. Business 4 Information about our Executive Officers Information about our Executive Officers 20 Item 1A . Risk Factors our Executive O common stock stock repurchase and a $ 6.3 billion decrease in repayment of in part by a $ 1.7 billion increase in dividend paid used in investing decreased $ 7.6 billion to $ 22.7 billion $ 7.6 billion to $ 22.7 billion for fiscal year 2023 22.7 billion for fiscal year 2023 , due to a $ , due to a $ 20.4 billion decrease in cash used in part by a $ 8.2 billion decrease in cash from maturity , and a $ 4.2 billion increase in addition to to property and equipment . 50 PART II Item 7 Debt . 50 PART II Item 7 D common stock for $ 18.4 billion and $ 28.0 billion $ 18.4 billion and $ 28.0 billion , respectively , through resource . As of June 30 , 2023 , $ 22.3 As of June 30 , 2023 , $ 22.3 billion remained 30 , 2023 , $ 22.3 billion remained of our $ billion remained of our $ 60 billion share repurchase program . program . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2023 and 2022 , our Board Dur Common stock issued 1,866 3,750 ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ( Common stock issued 1,866 1,841 1,693 Common stock repurchased ( 22,245 1,693 Common stock repurchased ( 22,245 ) ( 32,696 ) ( repurchased ( 22,245 ) ( 32,696 ) ( 27,385 ) Common ) ( 32,696 ) ( 27,385 ) Common stock cash dividend stock cash dividend paid ( 19,800 ) ( 18,135 ) ( paid ( 19,800 ) ( 18,135 ) ( 16,521 ) Other ) ( 18,135 ) ( 16,521 ) O Common stock and Ended June 30 , 2023 2022 2021 Common stock and paid-in June 30 , 2023 2022 2021 Common stock and paid-in capital , beginning of period $ 86,939 $ 83,111 $ 80,552 Common of period $ 86,939 $ 83,111 $ 80,552 Common stock issued $ 86,939 $ 83,111 $ 80,552 Common stock issued 1,866 1,841 $ 80,552 Common stock issued 1,866 1,841 1,963 Common stock repurchased 80,552 Common stock issued 1,866 1,841 1,963 Common stock repurchased ( Common stock issued 1,866 1,841 1,963 Common stock repurchased ( Common stock repurchased ( 4,696 ) ( 5,688 ) ( repurchased ( 4,696 ) ( 5,688 ) ( 5,539 ) Stock-based ) ( 5,688 ) ( 5,539 ) Stock-based compensation expense 9,611 5,539 ) Stock-based compensation expense 9,611 7,502 6,118 Other , net ) Stock-based compensation expense 9,611 7,502 6,118 Other , net ( Stock-based compensation expense 9,611 7,502 6,118 Other , net ( 2 6,118 Other , net ( 2 ) 173 17 Balance , , net ( 2 ) 173 17 Balance , end of net ( 2 ) 173 17 Balance , end of period Balance , end of period 93, Common stock cash 57,055 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend ( Common stock cash dividend ( 20,226 ) ( 18,552 ) ( dividend ( 20,226 ) ( 18,552 ) ( 16,871 ) Common ) ( 18,552 ) ( 16,871 ) Common stock repurchased ( ) Common stock repurchased ( 17,568 ) ( 26,960 ) ( repurchased ( 17,568 ) ( 26,960 ) ( 21,879 ) Cumulative ) ( 26,960 ) ( 21,879 ) Cumulative effect of accounting Cumulative effect of accounting change common stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based award Dilutive effect of stock-based award 26 44 61 Common stock and effect of stock-based award 26 44 61 Common stock and common of stock-based award 26 44 61 Common stock and common stock stock equivalent ( C ) 7,472 7,540 7,608 Earnings Per Share equivalent ( C ) 7,472 7,540 7,608 Earnings Per Share Basic ( C ) 7,472 7,540 7,608 Earnin", + "fair_value_measurements": "Fair Value Measurements We account level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability include swap contract . \u2022 Level 3 \u2013 input are generally unobservable flow model . Our Level 3 asset and liability include investme", + "derivative_instruments": "Derivative Instruments Derivative Assets Derivative Liabilities June 30 , 2023 June 30 , Derivative Liabilities June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 34 $ ( 67 ) $ contract $ 34 $ ( 67 ) $ 0 $ ( $ ( 67 ) $ 0 $ ( 77 ) Interest ) $ 0 $ ( 77 ) Interest rate contract 16 77 ) Interest rate contract 16 0 3 0 Not Designated ) Interest rate contract 16 0 3 0 Not Designat" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001017062-97-001764/full-submission_features.json b/src/data/feature/MSFT/10-K/0001017062-97-001764/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001017062-97-001764/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001032210-00-001961/full-submission_features.json b/src/data/feature/MSFT/10-K/0001032210-00-001961/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001032210-00-001961/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001032210-01-501099/full-submission_features.json b/src/data/feature/MSFT/10-K/0001032210-01-501099/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001032210-01-501099/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001032210-02-001351/full-submission_features.json b/src/data/feature/MSFT/10-K/0001032210-02-001351/full-submission_features.json new file mode 100644 index 0000000..b12960c --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001032210-02-001351/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue or more of revenue in 2000 , 2001 , or 2002 of revenue in 2000 , 2001 , or 2002 . 6 2000 , 2001 , or 2002 . 6 / MSFT 2002 2001 , or 2002 . 6 / MSFT 2002 FORM 10-K 2002 . 6 / MSFT 2002 FORM 10-K Table of Contents 6 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 COMPETITION The software business is Lineo , and MontaVista . 7 / MSFT 2002 FORM 10-K MontaVista . 7 / MSFT 2002 FORM 10-K Table of Contents 7 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Ite Revenue $ ( 1 ) 2002 ( 2 ) Revenue $ 15,262 $ ( 2 ) Revenue $ 15,262 $ 19,747 $ 22,956 $ ) Revenue $ 15,262 $ 19,747 $ 22,956 $ 25,296 $ $ 15,262 $ 19,747 $ 22,956 $ 25,296 $ 28,365 Operating $ 19,747 $ 22,956 $ 25,296 $ 28,365 Operating income 6,585 $ 22,956 $ 25,296 $ 28,365 Operating income 6,585 10,010 11,006 25,296 $ 28,365 Operating income 6,585 10,010 11,006 11,720 11,910 Income $ 28,365 Operating income 6,585 10,010 11,006 11,720 11,910 Income before 28,365 Operating income 6,585 10,010 11,006 revenue growth rate wa 16 % in fiscal 2000 , wa 16 % in fiscal 2000 , 10 % in fiscal % in fiscal 2000 , 10 % in fiscal 2001 , , 10 % in fiscal 2001 , and 12 % in in fiscal 2001 , and 12 % in fiscal 2002 . and 12 % in fiscal 2002 . Revenue growth in fiscal . Revenue growth in fiscal 2002 wa led by the addition . Revenue growth in fiscal 2001 wa driven primarily by licensing by licensing of Microsoft Windows 2000 Professional , Microsoft SQL Server . Revenue growth in fiscal 2000 wa driven by strong lice REVENUE In fiscal 2002 , Microsoft had four segment Segment Information appearing in Note 20 of the Notes to Financial accounting principle . On July 1 , 2002 , Microsoft revised . On July 1 , 2002 , Microsoft revised it product the new segment in fiscal 2003 . Desktop and Enterprise Software and Services revenue wa $ 20.40 billion , $ 22.41 billion $ 20.40 billion , $ 22.41 billion , and $ 24.01 22.41 billion , and $ 24.01 billion in 2000 , 2001 and $ 24.01 billion in 2000 , 2001 , and 2002 24.01 bill revenue wa $ 9.30 billion , $ 9.54 billion $ 9.30 billion , $ 9.54 billion , and $ 9.60 9.54 billion , and $ 9.60 billion in 2000 , 2001 and $ 9.60 billion in 2000 , 2001 , and 2002 9.60 billion in 2000 , 2001 , and 2002 . Desktop 2000 , 2001 , and 2002 . Desktop Applications includes revenue Windows NT Server and Windows 2000 Server , Exchange , and and bCentral . In fiscal 2002 , Office licensing revenue declined from client access license grew 3 % in fiscal 2002 and grew 3 % in fiscal 2002 and reven revenue from client access from client access license increased 14 % reflecting strong licensing growth Windows NT Server and Windows 2000 Server CALs . Office revenue growth wa flat during fiscal 2001 . In fiscal 2000 , fiscal 2001 . In fiscal 2000 , revenue growth from Microsoft Desktop Platforms revenue wa $ 7.02 billion , $ 8.04 billion $ 7.02 billion , $ 8.04 billion , and $ 9.30 8.04 billion , and $ 9.30 billion in 2000 , 2001 and $ 9.30 billion in 2000 , 2001 , and 2002 9.30 billion in 2000 , 20 revenue Professional and Home , Windows 2000 Professional , Windows NT Workstation , Windows Me , Windows 98 , and other desktop operating operating system . In fiscal 2002 , the growth in Desktop to the higher priced Windows 2000 and Windows XP Professional operating OEM unit shipment . Fiscal 2001 revenue growth reflected the strong the strong adoption of Windows 2000 Professional , partially offset by from Windows Me and Windows 98 operating system , reflecting the a higher mix of Windows 2000 Profe revenue growth post mid-year availability of Windows 2000 operating system ; and , and the mix of Windows 2000 and Windows XP Professional a a a percentage of all 32-bit operating system will continue to and Services revenue wa $ 4.08 billion , $ 4.83 billion $ 4.08 billion , $ 4.83 billion , and $ 5.11 4.83 billion , and $ 5.11 billion in 2000 , 2001 and $ 5.11 billion in 2000 , 2001 , and 2002 5.11 billion in 2000 , 2001 , and 2002 . Enterprise 2000 , 2001 , and 2002 . Enterprise Software and Service revenue , revenue , which includes Windows 2000 Server and Windows NT Server Server operating system , increased 10 % versus fiscal 2001 driven increased 10 % versus fiscal 2001 driven by a modest overall and increased deployment of Windows 2000 Server . Enterprise Services revenue support service , wa up 17 % compared to fiscal 2001 17 % compared to fiscal 2001 , while revenue from Developer Tools and Services wa down 19 % from fiscal 2001 . down 19 % from fiscal 2001 . In fiscal 2001 , fiscal 2001 . revenue increased , Server Applications revenue increased 31 % versus the prior year year a a result of 12 / MSFT 2002 FORM 10-K result of 12 / MSFT 2002 FORM 10-K Table of Contents 12 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 the continued adoption of Microsoft Enterprise Services revenue in fiscal 2001 , wa up 34 % fiscal 2001 , wa up 34 % compared to fiscal 2000 34 % compared to fiscal 2000 and Server Platforms increased 10 2000 and Server Platforms increased 10 % wh revenue from Developer wa flat . In fiscal 2000 , Server Platforms revenue growth Windows NT Server and Windows 2000 Server . Revenue from Server Applications grew strongly in fiscal 2000 , largely due to the strong success of SQL Server 7.0 , while Software Developer Tools and Devices revenue wa $ 1.63 billion , $ 1.95 billion $ 1.63 billion , $ 1.95 billion , and $ 3.59 1.95 billion , and $ 3.59 billion in 2000 , 2001 and $ 3.59 billion in 2000 , 2001 , and 2002 3.59 billion in 2000 , 2001 , and 2002 revenue growth from fiscal 2001 stemmed from sale of the game system released in fiscal 2002 . MSN Internet access revenue from embedded system in fiscal 2002 grew nicely , however learning game declined compared to fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , revenue from MSN network also grew solidly from fiscal 2000 a a result of an consumer market . In fiscal 2000 , online revenue growth wa of entertainment software in fiscal 2000 produced robust revenue growth in Commerce Investme revenue wa $ 182 million , $ 299 million $ 182 million , $ 299 million , and $ 242 299 million , and $ 242 million in 2000 , 2001 and $ 242 million in 2000 , 2001 , and 2002 242 million in 2000 , 2001 , and 2002 . Consumer 2000 , 2001 , and 2002 . Consumer Commerce Investments include in revenue compared to fiscal 2001 reflects the sale of Microsoft Networks , Inc. on February 4 , 2002 . Acquisitions of Inc. on February 4 , 2002 . Acquisitions of Travelscape.com and strong revenue growth in fiscal 2001 revenue growth in fiscal 2000 . Other . Other revenue Microsoft Press , wa $ 754 million , $ 630 million $ 754 million , $ 630 million , and $ 530 630 million , and $ 530 million in 2000 , 2001 and $ 530 million in 2000 , 2001 , and 2002 530 million in 2000 , 2001 , and 2002 . In 2000 , 2001 , and 2002 . In fiscal 2002 , and 2002 . In fiscal 2002 , continued decline in the decline in revenue in fiscal 2001 . Continued success of the to revenue growth in fiscal 2000 . DISTRIBUTION CHANNELS Microsoft dis revenue wa $ 7.01 billion in 2000 , $ wa $ 7.01 billion in 2000 , $ 7.86 billion in billion in 2000 , $ 7.86 billion in 2001 , and , $ 7.86 billion in 2001 , and $ 9.00 billion in 2001 , and $ 9.00 billion in 2002 . In and $ 9.00 billion in 2002 . In fiscal 2002 , in 2002 . In fiscal 2002 , reported license declined compared license declined compared to fiscal 2001 . However , a strong of the higher priced Windows 2000 and Windows XP Professional license OEM revenue growth over fiscal 2001 . In fiscal revenue license also declined in fiscal 2000 compared to the prior year shift to the lower-priced Windows 98 operating system reflecting the softness Americas Region revenue wa $ 8.33 billion , $ 9.52 billion $ 8.33 billion , $ 9.52 billion , and $ 11.41 9.52 billion , and $ 11.41 billion in 2000 , 2001 and $ 11.41 billion in 2000 , 2001 , and 2002 11.41 billion in 2000 , 2001 , and 2002 . In 2000 , 2001 , and 2002 . In fiscal 2002 , and 2002 . In fiscal 2002 , the majority of the Great Plains . In fis revenue growth wa led by strong licensing of Windows 2000 Professional and the family of Servers , particularly SQL Server 2000 and Exchange 2000 Server . SQL Server 2000 and Exchange 2000 Server . Revenue from Enterprise also grew strongly in fiscal 2001 . In fiscal 2000 , fiscal 2001 . In fiscal 2000 , Office 2000 integrated suite In fiscal 2000 , Office 2000 integrated suite , Windows 2000 2000 integrated suite , Windows 2000 Server , online revenue , Africa Region revenue wa $ 5.02 billion , $ 4.86 revenue from Windows 2000 Professional and the .NET Enterprise very healthy . In fiscal 2000 , retail sale of Windows of Windows operating system and 13 / MSFT 2002 FORM 10-K system and 13 / MSFT 2002 FORM 10-K Table of Contents 13 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 Office licensing produced moderate growth Asia Region revenue wa $ 2.60 billion in 2000 , $ wa $ 2.60 billion in 2000 , $ 3.06 billion in billion in 2000 , $ 3.06 billion in 2001 , and , $ 3.06 billio revenue declined localized version of Microsoft Office 2000 and Microsoft Office XP , Office revenue . In fiscal 2001 , the region \u2019 s localized version of Microsoft Office 2000 and Microsoft Office XP , wa also attributable to Windows 2000 Professional and .NET Server application application licensing . In fiscal 2000 , the region \u2019 s localized version of Microsoft Office 2000 , especially the Office Personal foreign exchange rate . Approximately 30 % , 27 % , . Approximately 30 % , 27 % , and 25 % , revenue wa 13.1 % in 2000 , 13.7 revenue wa 13.1 % in 2000 , 13.7 % in 2001 13.1 % in 2000 , 13.7 % in 2001 , and 2000 , 13.7 % in 2001 , and 18.3 % in % in 2001 , and 18.3 % in 2002 . Cost , and 18.3 % in 2002 . Cost of revenue in Cost of revenue in fiscal 2002 increased primarily due to cost to Xbox . In fiscal 2001 , higher support and service Cost of revenue in fiscal 2000 reflected lower cost associated with of goodwill amortization in fiscal 2002 in accordance with Statement of Accounting Standar revenue wa 18.0 % in 2000 , 19.3 revenue wa 18.0 % in 2000 , 19.3 % in 2001 18.0 % in 2000 , 19.3 % in 2001 , and 2000 , 19.3 % in 2001 , and 19.1 % in % in 2001 , and 19.1 % in 2002 . In , and 19.1 % in 2002 . In fiscal 2002 , in 2002 . In fiscal 2002 , sale and marketing expense system revenue . In fiscal 2001 , sale and marketing expense sale initiative . In fiscal 2000 , sale and marketing expense and administrative expense in fiscal 2002 increased due to a charge a charge of approximately $ 660 mi Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , Accounting for the Costs , Leased , or Other- 16 / MSFT 2002 FORM 10-K or Other- 16 / MSFT 2002 FORM 10-K Table of Contents 16 / MSFT 2002 FORM 10-K Table of Contents Part Revenue $ share Year Ended June 30 2000 2001 2002 Revenue $ 22,956 Year Ended June 30 2000 2001 2002 Revenue $ 22,956 $ Ended June 30 2000 2001 2002 Revenue $ 22,956 $ 25,296 2000 2001 2002 Revenue $ 22,956 $ 25,296 $ 28,365 Operating 2002 Revenue $ 22,956 $ 25,296 $ 28,365 Operating expense : $ 22,956 $ 25,296 $ 28,365 Operating expense : Cost of expense : Cost of revenue 3,002 3,455 5,191 Research and development : Cost of revenue 3,002 3,455 5,191 Research and development 3,772 Cost of revenue 3,002 revenue 4,395 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 5,920 1,468 2,022 Short-term unearned revenue 4,395 5,920 Other 1,461 2,449 Total 2,022 Short-term unearned revenue 4,395 5,920 Other 1,461 2,449 Total current unearned revenue 4,395 5,920 Other 1,461 2,449 Total current liability 9,254 revenue 4,395 5,920 Other 1,461 2,449 Total current liability 9,254 12,744 1,461 2,449 Total current liability 9,254 12,744 Long-term unearned revenue 1,219 2,449 Total current liability 9, revenue 1,219 1,823 9,254 12,744 Long-term unearned revenue 1,219 1,823 Deferred income tax 409 12,744 Long-term unearned revenue 1,219 1,823 Deferred income tax 409 398 1,219 1,823 Deferred income tax 409 398 Other long-term liability 659 1,823 Deferred income tax 409 398 Other long-term liability 659 501 409 398 Other long-term liability 659 501 Commitments and contingency Stockholders 398 Other long-term liability 659 501 Commitments and contingency Stockholders \u2019 stock and paid-in capital\u2014shares au revenue 6,177 6,970 ( 416 ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned 416 ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned revenue ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned revenue ( Recognition of unearned revenue ( 5,600 ) ( 6,369 ) ( revenue ( 5,600 ) ( 6,369 ) ( 8,929 ) Accounts ) ( 6,369 ) ( 8,929 ) Accounts receivable ( 944 8,929 ) Accounts receivable ( 944 ) ( 418 ) ( receivable ( 944 ) ( 418 ) ( 1,623 ) Other ) ( 418 ) ( 1,623 ) Other current a Revenue Recognition . introduction of Windows XP in 2002 and revenue for certain product . Advertising expense wa $ 1.23 billion in 2000 , $ wa $ 1.23 billion in 2000 , $ 1.36 billion in billion in 2000 , $ 1.36 billion in 2001 , and , $ 1.36 billion in 2001 , and $ 1.27 billion in 2001 , and $ 1.27 billion in 2002 . 23 and $ 1.27 billion in 2002 . 23 / MSFT 2002 1.27 billion in 2002 . 23 / MSFT 2002 FORM 10-K 2002 . 23 / MSFT 2002 FORM 10-K Table of Contents 23 / MSFT 2002 FORM 10-K Table of Contents REVENUE A Part II Item 8 NOTE 3 UNEARNED REVENUE A portion of undelivered element range from approximately 20 % to 25 % for from approximately 20 % to 25 % for Windows XP Home Windows XP Home , approximately 10 % to 15 % for , approximately 10 % to 15 % for Windows XP Professional XP Professional , and approximately 10 % to 15 % for and approximately 10 % to 15 % for desktop application , for Windows operating system and 18 month for desktop application . follows : In Millions June 30 2001 2002 Volume revenue Undelivered element 2,818 2,830 Other 874 755 Unearned revenue $ 5,614 element 2,818 2,830 Other 874 755 Unearned revenue $ 5,614 $ 874 755 Unearned revenue $ 5,614 $ 7,743 Unearned revenue by Unearned revenue $ 5,614 $ 7,743 Unearned revenue by product wa follows : In Millions June 30 2001 2002 Desktop Applications $ : In Millions June 30 2001 2002 Desktop Applications $ 2,189 In Millions June 30 2001 2002 Desktop Applications $ 2,189 $ 2001 2002 Desktop Applications $ 2,189 $ 3,489 Desktop Pl revenue $ 5,614 Devices , and Other 448 265 Unearned revenue $ 5,614 $ 448 265 Unearned revenue $ 5,614 $ 7,743 Of the $ Unearned revenue $ 5,614 $ 7,743 Of the $ 7.74 billion $ 7,743 Of the $ 7.74 billion of unearned revenue at of unearned revenue at June 30 , 2002 , $ 2.28 revenue at June 30 , 2002 , $ 2.28 billion is 30 , 2002 , $ 2.28 billion is expected to be the first quarter of fiscal 2003 , $ 1.64 billion in of fiscal 2003 , $ 1.64 billion in the second quarter the second quarter of fiscal 2003 revenue and $ 416 million of derivative loss were loss ) . During fiscal 2002 , $ 234 million of During fiscal 2002 , $ 234 million of derivative gain were reclassified to revenue and $ 10 million of derivative loss were The Company estimate that $ 63 million of net derivative gain determined in accordance with SFAS 133 , had no impact on on earnings for the fiscal 2001 and 2002 . No fair for the fiscal 2001 and 2002 . No fair value hedge derecognized or discontinued for fiscal 2001 and 2002 . NOTE 11 Revenue item $ 1,469 $ 2,261 Expense item 691 Revenue item $ 1,469 $ 2,261 Expense item 691 945 Impaired 1,469 $ 2,261 Expense item 691 945 Impaired investment 1,070 2,016 $ 2,261 Expense item 691 945 Impaired investment 1,070 2,016 Deferred item 691 945 Impaired investment 1,070 2,016 Deferred income tax asset 691 945 Impaired investment 1,070 2,016 Deferred income tax asset $ Deferred income tax asset $ 3,230 $ 5,222 Deferred income tax tax asset $ 3,230 $ 5,222 Deferred income tax liability : gain o Revenue $ 22,956 $ 22,956 $ 25,296 $ Forma Revenue $ 22,956 $ 22,956 $ 25,296 $ 25,296 $ $ 22,956 $ 22,956 $ 25,296 $ 25,296 $ 28,365 $ $ 22,956 $ 25,296 $ 25,296 $ 28,365 $ 28,365 Operating $ 25,296 $ 25,296 $ 28,365 $ 28,365 Operating expense : $ 25,296 $ 28,365 $ 28,365 Operating expense : Cost of expense : Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 : Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research and of revenue 3,00 revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research and development 3,772 3,002 3,277 3,455 3,775 5,191 5,699 Research and development 3,772 4,814 5,191 5,699 Research and development 3,772 4,814 4,379 6,106 4,307 6,299 5,699 Research and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales Research and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and marketing development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and marketing 4, Revenue $ 20,410 $ 1,654 Amounts Consolidated 2000 Revenue $ 20,410 $ 1,654 $ 182 $ 2000 Revenue $ 20,410 $ 1,654 $ 182 $ 691 $ $ 20,410 $ 1,654 $ 182 $ 691 $ 19 $ $ 1,654 $ 182 $ 691 $ 19 $ 22,956 Operating $ 182 $ 691 $ 19 $ 22,956 Operating income/ ( $ 691 $ 19 $ 22,956 Operating income/ ( loss ) Operating income/ ( loss ) 13,210 ( 1,090 ) ( 60 ( loss ) 13,210 ( 1,090 ) ( 60 ) 86 13,210 ( 1,090 ) ( 60 ) 86 ( 1,140 ) 1,090 ) ( 60 ) 86 ( 1,140 ) 11,006 2001 ( 60 ) 86 ( 1,140 ) 11,006 2001 Revenue $ ) Revenue $ 22,720 $ 86 ( 1,140 ) 11,006 2001 Revenue $ 22,720 $ 1,961 ) 11,006 2001 Revenue $ 22,720 $ 1,961 $ 522 $ 2001 Revenue $ 22,720 $ 1,961 $ 522 $ 652 $ $ 22,720 $ 1,961 $ 522 $ 652 $ ( 559 $ 1,961 $ 522 $ 652 $ ( 559 ) $ 522 $ 652 $ ( 559 ) $ 25,296 Operating income/ $ ( 559 ) $ 25,296 Operating income/ ( loss ) Operating income/ ( loss ) 14,261 ( 1,666 ) ( 222 ( loss ) 14,261 ( 1,666 ) ( 222 ) 97 14,261 ( 1,666 ) ( 222 ) 97 ( 750 ) 1,666 ) ( 222 ) 97 ( 750 ) 11,720 2002 ( 222 ) 97 ( 750 ) 11,7 Revenue $ ) 97 ( 750 ) 11,720 2002 Revenue $ 23,786 $ 97 ( 750 ) 11,720 2002 Revenue $ 23,786 $ 3,531 ) 11,720 2002 Revenue $ 23,786 $ 3,531 $ 245 $ 2002 Revenue $ 23,786 $ 3,531 $ 245 $ 537 $ $ 23,786 $ 3,531 $ 245 $ 537 $ 266 $ $ 3,531 $ 245 $ 537 $ 266 $ 28,365 Operating $ 245 $ 537 $ 266 $ 28,365 Operating income/ ( $ 537 $ 266 $ 28,365 Operating income/ ( loss ) Operating income/ ( loss ) 14,671 ( 1,778 ) 23 59 ( loss ) 14,671 ( 1,778 ) 23 59 ( 1,065 ) 14,671 ( 1,778 ) 23 59 ( 1,065 ) 11,910 14,67 Revenue attributable to U.S. operation from U.S. operation totaled $ 15.7 billion , $ 17.8 billion $ 15.7 billion , $ 17.8 billion , and $ 20.9 17.8 billion , and $ 20.9 billion in 2000 , 2001 and $ 20.9 billion in 2000 , 2001 , and 2002 20.9 billion in 2000 , 2001 , and 2002 . Revenue 2000 , 2001 , and 2002 . Revenue from outside the U.S. export , totaled $ 7.3 billion , $ 7.5 billion $ 7.3 billion , $ 7.5 billion , and $ 7.5 7.5 billion , and $ 7.5 billion in 2000 , 2001 and $ 7.5 billion in 2000 , 2 revenue or more of revenue in 2000 , 2001 , or 2002 of revenue in 2000 , 2001 , or 2002 . Long-lived 2000 , 2001 , or 2002 . Long-lived asset ( principally and equipment ) totaled $ 2.2 billion and $ 2.0 billion $ 2.2 billion and $ 2.0 billion in the United States in the United States in 2001 and 2002 and $ 154 United States in 2001 and 2002 and $ 154 million and 2001 and 2002 and $ 154 million and $ 220 million $ 154 million and $ 220 million in other country in million in other country in 2001 and 20 Revenue $ 31 June 30 Year Fiscal 2000 Revenue $ 5,384 $ 6,112 Year Fiscal 2000 Revenue $ 5,384 $ 6,112 $ 5,656 $ 2000 Revenue $ 5,384 $ 6,112 $ 5,656 $ 5,804 $ $ 5,384 $ 6,112 $ 5,656 $ 5,804 $ 22,956 Gross $ 6,112 $ 5,656 $ 5,804 $ 22,956 Gross profit 4,672 $ 5,656 $ 5,804 $ 22,956 Gross profit 4,672 5,356 4,904 5,804 $ 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net $ 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 2,1 Revenue per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net $ 25,296 Gr Revenue ( 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 6,126 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 6,126 $ 7,741 1.32 Fiscal 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net $ 28,365 Gross profit 5,242", + "net_income": "Net Income before accounting change 4,490 7,785 9,421 7,721 7,829 Net income before accounting change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 accounting change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 7,785 change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 7,785 9,421 9,421 7,721 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted 7,721 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted earnings 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted earnings per Net income 4,490 7, Net income $ ) \u2013 Net income $ 9,421 $ 7,346 $ 7,829 Basic Net income $ 9,421 $ 7,346 $ 7,829 Basic earnings per $ 9,421 $ 7,346 $ 7,829 Basic earnings per share : : Before accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative effect of $ 1.81 $ 1.45 $ 1.45 Cumulative effect of accounting change of accounting change \u2013 ( 0.07 ) \u2013 $ 1.81 $ ( 0.07 ) \u2013 $ 1.81 $ 1.38 $ 1.45 Diluted ) \u2013 $ 1.81 $ 1.38 $ 1.45 Diluted earnings per $ 1.81 $ 1.38 $ 1.45 Diluted earnings p Net income Year Ended June 30 2000 2001 2002 Operations Net income $ Ended June 30 2000 2001 2002 Operations Net income $ 9,421 2002 Operations Net income $ 9,421 $ 7,346 $ 7,829 Cumulative Net income $ 9,421 $ 7,346 $ 7,829 Cumulative effect of $ 9,421 $ 7,346 $ 7,829 Cumulative effect of accounting change , net of tax \u2013 375 \u2013 Depreciation , amortization , , and other noncash item 1,250 1,536 1,084 Net recognized ( and other noncash item 1,250 1,536 1,084 Net recognized ( gain other noncash item 1,250 1, Net income 9,421 , beginning of year 13,614 18,173 18,899 Net income 9,421 7,346 beginning of year 13,614 18,173 18,899 Net income 9,421 7,346 7,829 13,614 18,173 18,899 Net income 9,421 7,346 7,829 Other comprehensive income 18,173 18,899 Net income 9,421 7,346 7,829 Other comprehensive income : 18,899 Net income 9,421 7,346 7,829 Other comprehensive income : Cumulative of accounting change \u2013 ( 75 ) \u2013 Net gains/ ( ) on derivative instrument \u2013 634 ( 91 ) Net unrealized derivative instrument \u2013 634 ( 91 ) N net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 2001 , Microsoft adopted . Effective July 1 , 2001 , Microsoft adopted SFAS 141 2001 , Microsoft adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 , Goodwill and Other Intangible Other Intangible Assets . SFAS 141 requires business combination initiated after business combination initiated after June 30 , 2001 to be accounted initiated after June 30 , 2001 to be accounted for using separate from goodwill Net income and earnings earnings per share for fiscal 2000 and fiscal 2001 adjusted to for fiscal 2000 and fiscal 2001 adjusted to exclude amortization expense Per Share Year Ended June 30 2000 2001 Net income : Share Year Ended June 30 2000 2001 Net income : Reported Year Ended June 30 2000 2001 Net income : Reported net : Reported net income $ 9,421 $ 7,346 Goodwill amortization 203 net income $ 9,421 $ 7,346 Goodwill amortization 203 252 Equity 9,421 $ 7,346 Goodwill amortization 203 252 Equity method net income $ Equity method goodwill amortization 1 26 Adjusted net income $ 9,625 26 Adjusted net income $ 9,625 $ 7,624 Basic earnings per net income $ 9,625 $ 7,624 Basic earnings per share : basic earnings per share $ 1.81 $ 1.38 Goodwill amortization 0.04 per share $ 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization \u2013 basic earnings per share $ 1.8 Net income \u2013 \u2013 Net income $ 9,421 $ 8,172 $ 7,346 $ Net income $ 9,421 $ 8,172 $ 7,346 $ 5,084 $ $ 9,421 $ 8,172 $ 7,346 $ 5,084 $ 7,829 $ $ 8,172 $ 7,346 $ 5,084 $ 7,829 $ 5,355 Basic $ 7,346 $ 5,084 $ 7,829 $ 5,355 Basic earnings per $ 5,084 $ 7,829 $ 5,355 Basic earnings per share $ Basic earnings per share $ 1.81 $ 1.57 $ 1.38 $ per share $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted earnings per $ 0.95 Net income available available for common shareholder $ 9,408 $ 7,721 $ 7,829 Weighted common shareholder $ 9,408 $ 7,721 $ 7,829 Weighted average outstanding $ 9,408 $ 7,721 $ 7,829 Weighted average outstanding share of outstanding share of common stock 5,189 5,341 5,406 Dilutive effect of share of common stock 5,189 5,341 5,406 Dilutive effect of : of common stock 5,189 5,341 5,406 Dilutive effect of : Put effect of : Put warrant 2 21 \u2013 Preferred stock 7 of : Put warrant 2 21 \u2013 Preferred stock 7 \u2013 2 21 Net income 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 2,436 profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 2,436 2,385 4,904 5,022 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic 5,022 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings per Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings per share income 2,191 2,436 2,385 2,40 Net income 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( 1 5,504 5,710 21,841 Net income 2,206 ( 1 ) 2,624 2,451 21,841 Net income 2,206 ( 1 ) 2,624 2,451 65 ( income 2,206 ( 1 ) 2,624 2,451 65 ( 2 ) 2,206 ( 1 ) 2,624 2,451 65 ( 2 ) 7,346 ( 1 ) 2,624 2,451 65 ( 2 ) 7,346 Basic ) 2,624 2,451 65 ( 2 ) 7,346 Basic earnings per 2,451 65 ( 2 ) 7,346 Basic earnings per sh Net income 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( 3 5,850 5,885 23,174 Net income 1,283 ( 3 ) 2,283 2,738 23,174 Net income 1,283 ( 3 ) 2,283 2,738 ( 4 income 1,283 ( 3 ) 2,283 2,738 ( 4 ) 1,525 1,283 ( 3 ) 2,283 2,738 ( 4 ) 1,525 ( 3 ) 2,283 2,738 ( 4 ) 1,525 ( 5 ) 2,283 2,738 ( 4 ) 1,525 ( 5 ) 7,829 Basic ( 4 ) 1,525 ( 5 ) 7,829 Basic earnings per ) 1,525 (", + "assets": "Assets . SFAS 141 requires business combination to be separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Goodwill amortization ( on pre-tax basis ) wa $ 234 million in fiscal 2000 and $ 234 million in fiscal 2000 and $ 311 million in in fiscal 2000 and $ 311 million in fiscal 2001 . $ 311 million in fiscal 2001 . Effective July 1 , fiscal 2001 . Effective July 1 , 2000 , Microsoft adopted . Effective July 1 , 2000 , Microsoft adopted SFAS 133 2000 Assets Current asset SHEETS In million June 30 2001 2002 Assets Current asset : In million June 30 2001 2002 Assets Current asset : Cash : Cash and equivalent $ 3,922 $ 3,016 Short-term investment 27,678 and equivalent $ 3,922 $ 3,016 Short-term investment 27,678 35,636 Total 3,922 $ 3,016 Short-term investment 27,678 35,636 Total cash and short-term $ 3,016 Short-term investment 27,678 35,636 Total cash and short-term investment Total cash and short-term investment 31,600 38,652 Accounts receivable , Assets . SFAS 141 requires business combination initiated after business combination initiated after June 30 , 2001 to be accounted initiated after June 30 , 2001 to be accounted for using separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Net income and earnings earnings per share for fiscal 2000 and fiscal 2001 adjusted to for fiscal 2000 and fiscal 2001 adjusted to exclude amortization expense Per Share Year Ended June 30 2000 2001 Net income : ASSETS During fiscal 2002 9 INTANGIBLE ASSETS During fiscal 2002 , change in intangible asset \u2019 s acquisition of $ 25 million in patent and license patent and license and $ 27 million in existing technology , will be amortized over approximately 3 year . No significant residual asset amortization expense wa $ 202 million for fiscal 2001 and $ 202 million for fiscal 2001 and $ 194 million for for fiscal 2001 and $ 194 million for fiscal 2002 . $ 194 million for fiscal 2002 . The component of intangible Assets , effective July 1 , 2001 . / S , effective July 1 , 2001 . / S / D LLP Seattle , Washington July 18 , 2002 ITEM 9 . , Washington July 18 , 2002 ITEM 9 . CHANGES IN July 18 , 2002 ITEM 9 . CHANGES IN AND DISAGREEMENTS AND FINANCIAL DISCLOSURES None . 39 / MSFT 2002 FORM 10-K None . 39 / MSFT 2002 FORM 10-K Table of Contents 39 / MSFT 2002 FORM 10-K Table of Contents Part III of Contents Part III Item 10 , 11 , 12 , Part III Item 10 , 11 , 12 , 13 PART Item 10 , 11 , 12 , 13 PART III ITEM , 11 ,", + "liabilities": "Liabilities and stockholder Total asset $ 58,830 $ 67,646 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 1,145 Income 1,188 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 Short-term compensation 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 742 1,145 Income tax 1,468 2,022 Short-term unearned r", + "equity": "equity Total asset 22,357 38,321 51,694 58,830 67,646 Stockholders \u2019 equity 16,627 asset 22,357 38,321 51,694 58,830 67,646 Stockholders \u2019 equity 16,627 28,438 58,830 67,646 Stockholders \u2019 equity 16,627 28,438 41,368 47,289 52,180 ( 67,646 Stockholders \u2019 equity 16,627 28,438 41,368 47,289 52,180 ( 1 Stockholders \u2019 equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) \u2019 equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) Fiscal equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) Fiscal year 28,438 41,368 47,289 52,1 equity investment in fiscal 2002 . The increase in loss investees and other in fiscal 2001 reflects an increase in the the year . In fiscal 2000 loss on equity investees and from the MSNBC entity . 14 / MSFT 2002 FORM 10-K entity . 14 / MSFT 2002 FORM 10-K Table of Contents 14 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 The Company recorded net investment In Millions Year Ended June 30 2000 2001 2002 Dividends $ Millions Year Ended June 30 2000 2001 2002 Dividends $ 363 Equity and Other Investments of $ 623 million were deemed to be exchange it AT & T 5 % convertible preferred debt security preferred debt security for approximately 115 million share of AT & transaction will close by December 31 , 2002 . While it close by December 31 , 2002 . While it is possible exchange transaction a of June 30 , 2002 . The Company a of June 30 , 2002 . The Company \u2019 s effective tax rate for fiscal 2002 wa 32 % . The rate for fiscal 2002 wa 32 % . The effective tax effective tax rat equity at June 30 , 2002 wa $ 52.18 equity at June 30 , 2002 wa $ 52.18 billion . 30 , 2002 wa $ 52.18 billion . Microsoft will continue constructing new building were $ 111 million on June 30 , $ 111 million on June 30 , 2002 . The Company million on June 30 , 2002 . The Company ha not capital resource . Since fiscal 1990 , Microsoft ha repurchased 982 1990 , Microsoft ha repurchased 982 million common share while 2.23 982 million common share while 2.23 billion share were issued under preferred stoc equity , interest re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 th over 20 day at the 97.5 th percentile . Several risk of these security in fiscal 2002 and fiscal 2001 . Such in fiscal 2002 and fiscal 2001 . Such impairment charge have in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the of future Equity $ 333 Currency rate 310 58 162 310 58 Equity price 333 Currency rate 310 58 162 310 58 Equity price 602 Currency rate 310 58 162 310 58 Equity price 602 520 rate 310 58 162 310 58 Equity price 602 520 584 162 310 58 Equity price 602 520 584 757 488 The 310 58 Equity price 602 520 584 757 488 The total 58 Equity price 602 520 584 757 488 The total VAR Equity price 602 520 584 757 488 The total VAR for price 602 520 584 757 488 The total VAR for the combined risk category is $ 908 million at June equity 13,576 16,455 Operating income 11,006 11,720 11,910 Losses on equity investees 16,455 Operating income 11,006 11,720 11,910 Losses on equity investees and equity investees and other ( 57 ) ( 159 ) ( other ( 57 ) ( 159 ) ( 92 ) Investment ) ( 159 ) ( 92 ) Investment income/ ( loss Investment income/ ( loss ) 3,326 ( 36 ) ( 305 ( loss ) 3,326 ( 36 ) ( 305 ) Income 3,326 ( 36 ) ( 305 ) Income before income tax ) Income before income tax 14,275 11,525 11,513 Provision for income Income before incom Equity and other investment and equipment , net 2,309 2,268 Equity and other investment 14,361 2,268 Equity and other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible Equity and other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset , net investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset , net 401 1,426 Intangible asset , net 401 243 Other long-term asset 1,038 Intangible asset , net 401 243 Other l equity liability : Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 1,145 Income 1,188 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 Short-term compensation 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 5,920 1,468 2,022 Short-term unearned revenue 4,395 5,920 Other 1,461 equity 587 and $ 583 18,899 20,533 Total stockholder \u2019 equity 47,289 20,533 Total stockholder \u2019 equity 47,289 52,180 Total liability and stockholder Total stockholder \u2019 equity 47,289 52,180 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 58,830 $ 67,646 See accompanying note \u2019 equity $ 58,830 $ 67,646 See accompanying note . 20 67,646 See accompanying note . 20 / MSFT 2002 FORM 10-K note . 20 / MSFT 2002 FORM 10-K Table of Contents 20 / MSFT 2002 FORM 10-K Table of Contents Part II of Con EQUITY STATEMENTS In In million Year Ended June 30 2000 2001 2002 Convertible preferred million Year Ended June 30 2000 2001 2002 Convertible preferred stock Year Ended June 30 2000 2001 2002 Convertible preferred stock Balance Ended June 30 2000 2001 2002 Convertible preferred stock Balance , , beginning of year $ 980 $ \u2013 $ \u2013 Conversion preferred to common stock ( 980 ) \u2013 \u2013 Balance , Balance , beginning of year 13,844 23,195 28,390 Common stock issued , beginning of year 13,844 23,195 28,390 Common s equity end of year 18,173 18,899 20,533 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 41,368 $ 47,289 $ 52,180 See \u2019 equity $ 41,368 $ 47,289 $ 52,180 See accompanying note $ 41,368 $ 47,289 $ 52,180 See accompanying note . 22 52,180 See accompanying note . 22 / MSFT 2002 FORM 10-K note . 22 / MSFT 2002 FORM 10-K Table of Contents 22 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING Equity 9,421 $ 7,346 Goodwill amortization 203 252 Equity method goodwill amortization $ 7,346 Goodwill amortization 203 252 Equity method goodwill amortization 1 252 Equity method goodwill amortization 1 26 Adjusted net income $ Equity method goodwill amortization 1 26 Adjusted net income $ 9,625 26 Adjusted net income $ 9,625 $ 7,624 Basic earnings per net income $ 9,625 $ 7,624 Basic earnings per share : basic earnings per share $ 1.81 $ 1.38 Goodwill amortization 0.04 per share $ 1.81 $ 1.38 Goodw Equity 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization \u2013 basic earnings per share $ 1.85 $ 1.43 Diluted earnings per per share $ 1.85 $ 1.43 Diluted earnings per share : diluted earnings per share $ 1.70 $ 1.32 Goodwill amortization 0.04 per share $ 1.70 $ 1.32 Goodwill amortization 0.04 0.05 Equity 1.70 $ 1.32 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.32 Goodwill am Equity method goodwill amortization \u2013 diluted earnings per share $ 1.74 $ 1.37 25 / MSFT per share $ 1.74 $ 1.37 25 / MSFT 2002 FORM share $ 1.74 $ 1.37 25 / MSFT 2002 FORM 10-K $ 1.37 25 / MSFT 2002 FORM 10-K Table of Contents 25 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 3 UNEARNED REVENUE A Part II Item 8 NOTE 3 UNEARNED REVENUE A portion of undelivered element range from approximately 20 % to 25 % for from approximately 20 % to 25 % for Windows XP Home Windows EQUITY $ 820 million . NOTE 7 EQUITY AND OTHER INVESTMENTS In OTHER INVESTMENTS In Millions June 30 , 2001 Cost Basis Unrealized In Millions June 30 , 2001 Cost Basis Unrealized Gains Unrealized : Within one year $ 500 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 500 Between 2 and 10 year $ \u2013 $ 500 Between 2 and 10 year 643 12 $ 500 Between 2 and 10 year 643 12 ( 3 Between 2 and 10 year 643 12 ( 3 ) 652 2 and 10 year 643 12 ( 3 ) 652 Between 10 year 643 12 ( 3 ) 652 Between 10 and 643 12 ( 3 ) 652 Between 10 and 15 year ( 3 ) Equity and Other investment 599 \u2013 \u2013 599 Equity and other investment $ Equity and other investment $ 13,445 $ 2,042 $ ( 1,126 other investment $ 13,445 $ 2,042 $ ( 1,126 ) $ 13,445 $ 2,042 $ ( 1,126 ) $ 14,361 28 / $ ( 1,126 ) $ 14,361 28 / MSFT 2002 FORM ( 1,126 ) $ 14,361 28 / MSFT 2002 FORM 10-K $ 14,361 28 / MSFT 2002 FORM 10-K Table of Contents 28 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 In Millions June 30 , Item 8 In Millions June 30 , 2002 Cost Basis Unrealized Equity and Other investment 169 \u2013 \u2013 169 Equity and other investment $ Equity and other investment $ 13,436 $ 1,378 $ ( 623 other investment $ 13,436 $ 1,378 $ ( 623 ) $ 13,436 $ 1,378 $ ( 623 ) $ 14,191 Debt security $ ( 623 ) $ 14,191 Debt security include corporate and . Debt security maturing beyond 15 year are composed entirely of entirely of AT & T 5 % convertible preferred debt with with a contractual maturity of 30 year . The debt is stock on or after December 1 , 2000 , or may or after Decembe Equity security a of June 30 , 2002 . Equity security that are at cost . At June 30 , 2001 the estimated fair . At June 30 , 2001 the estimated fair value of their recorded basis wa $ 161 million . At June 30 161 million . At June 30 , 2002 the recorded basis . At June 30 , 2002 the recorded basis of these estimated fair value wa $ 34 million . This excess of discussed previously ) were $ 1.94 billion and $ ( 10 1.94 billion and $ ( 10 ) million in 2000 , ( 10 ) million in 2000 , $ 3.03 billion and mi EQUITY Shares of In Millions Year Ended June 30 2000 2001 2002 Balance , Millions Year Ended June 30 2000 2001 2002 Balance , beginning Year Ended June 30 2000 2001 2002 Balance , beginning of Ended June 30 2000 2001 2002 Balance , beginning of year Balance , beginning of year 5,109 5,283 5,383 Issued 229 189 , beginning of year 5,109 5,283 5,383 Issued 229 189 104 beginning of year 5,109 5,283 5,383 Issued 229 189 104 Repurchased year 5,109 5,283 5,383 Issued 229 189 104 Repurchased ( 55 5,109 5,283 equity income 11,006 9,113 11,720 8,343 11,910 8,272 Losses on equity investees 11,006 9,113 11,720 8,343 11,910 8,272 Losses on equity investees and equity investees and other ( 57 ) ( 57 ) ( other ( 57 ) ( 57 ) ( 159 ) ( ) ( 57 ) ( 159 ) ( 159 ) ( ) ( 159 ) ( 159 ) ( 92 ) ( ) ( 159 ) ( 92 ) ( 92 ) Investment ) ( 92 ) ( 92 ) Investment income/ ( loss Investment income/ ( loss ) 3,326 3,326 ( 36 ) ( income/ ( loss ) 3,326 3,326 ( 36 ) ( 36 loss ) 3,326 3,326 ( 36 ) ( 36 ) ( 3,326 ( 36 ) ( 36 ) ( 305 ) equity investees . NOTE 19 CONTINGENCIES The Company is a that Microsoft had violated Sections 1 and 2 of the Sherman had violated Sections 1 and 2 of the Sherman Act and Judgment wa entered on June 7 , 2000 ordering , among entered on June 7 , 2000 ordering , among other thing Microsoft into two company . 35 / MSFT 2002 FORM 10-K company . 35 / MSFT 2002 FORM 10-K Table of Contents 35 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 The Judgment wa stayed pending an appeal . Equity compensation by security holder 802 $ 53.75 600 Equity compensation plan not security holder 802 $ 53.75 600 Equity compensation plan not approved holder \u2013 \u2013 \u2013 Total 802 $ 53.75 600 The information \u2013 \u2013 Total 802 $ 53.75 600 The information set forth \u2013 Total 802 $ 53.75 600 The information set forth under herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED incorporated herein by reference . 40 / MSFT 2002 FORM 10-K reference . 40 / MSFT 2002 FORM 10-K Table of Contents 40 / MSFT 20", + "cash_flow": "cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument short-term investment portfolio totaled $ 38.65 billion at June 30 , $ 38.65 billion at June 30 , 2002 . The portfolio billion at June 30 , 2002 . The portfolio consists primarily for immediate cash need . 15 / MSFT 2002 FORM 10-K need . 15 / MSFT 2002 FORM 10-K Table of Contents 15 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 Cas Cash flow from operation flow from operation wa $ 13.42 billion in fiscal 2001 , $ 13.42 billion in fiscal 2001 , an increase of $ , an increase of $ 2.00 billion from the prior year used for financing wa $ 5.59 billion in fiscal 2001 , $ 5.59 billion in fiscal 2001 , an increase of $ , an increase of $ 3.39 billion from the prior year of put warrant in fiscal 2001 , compared to the sale retired or exercised during fiscal 2001 . During fiscal 2001 , fiscal 2001 . During fiscal 2001 , the Company repurcha cash flow from operation flow from operation wa $ 11.43 billion , a decrease of , a decrease of $ 720 million from the prior year used for financing wa $ 2.19 billion in fiscal 2000 , $ 2.19 billion in fiscal 2000 , an increase of $ , an increase of $ 1.33 billion from the prior year prior year . During fiscal 2000 , the Company repurchased 55.2 2000 , the Company repurchased 55.2 million share . Cash used used for investing wa $ 9.39 billion in fiscal 2000 , $ 9.39 billion in fiscal 2000 , a decrease of cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument in OCI a of July 1 , 2000 were reclassified into a of July 1 , 2000 were reclassified into earnings during the twelve month ended June 30 , 2001 . The change month ended June 30 , 2001 . The change in accounting from the adoption of SFAS 133 did not materially affect net materially affect net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 200", + "operating_margin": "operating margin . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , simulating 10,000 market price path over 20 10,000 market price path over 20 day for equity , interest re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 th over 20 day at the 97.5 th percentile . Several risk of these security in fiscal 2002 and fiscal 2001 . Such in fiscal 2002 and fiscal 2001 . S", + "accumulated_depreciation": "Accumulated depreciation ( 2,966 equipment \u2013 at cost 5,275 5,891 Accumulated depreciation ( 2,966 ) 5,275 5,891 Accumulated depreciation ( 2,966 ) ( 3,623 ) Property depreciation ( 2,966 ) ( 3,623 ) Property and equipment \u2013 and equipment \u2013 net $ 2,309 $ 2,268 During 2000 , \u2013 net $ 2,309 $ 2,268 During 2000 , 2001 , $ 2,309 $ 2,268 During 2000 , 2001 , and 2002 $ 2,268 During 2000 , 2001 , and 2002 , depreciation 2000 , 2001 , and 2002 , depreciation expense , of computer equipment , wa $ 668 million , $ 764 million $ 6", + "debt": "debt security preferred debt security for approximately 115 million share of AT & transaction will close by December 31 , 2002 . While it close by December 31 , 2002 . While it is possible exchange transaction a of June 30 , 2002 . The Company a of June 30 , 2002 . The Company \u2019 s effective tax rate for fiscal 2002 wa 32 % . The rate for fiscal 2002 wa 32 % . The effective tax effective tax rate for fiscal 2001 and fiscal 2000 wa 33 for fiscal 2001 and fiscal 2000 wa 33 % and 34 2001 and fiscal 2000 Debt security recorded 4,754 \u2013 ( 829 ) 3,925 Debt security recorded at market Debt security recorded at market 6,410 12 ( 841 ) 5,581 security recorded at market 6,410 12 ( 841 ) 5,581 Common at market 6,410 12 ( 841 ) 5,581 Common stock and 6,410 12 ( 841 ) 5,581 Common stock and warrant 5,555 5,581 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Preferred and warrant 5,555 2,030 ( 285 ) 7,300 Preferred stock 881 5,555 2,030 ( 285 ) 7,300 Prefer Debt security 15 year 3,036 \u2013 \u2013 3,036 Debt security recorded at market Debt security recorded at market 4,955 91 ( 6 ) 5,040 security recorded at market 4,955 91 ( 6 ) 5,040 Common at market 4,955 91 ( 6 ) 5,040 Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,930 5,040 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Preferred and warrant 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,382 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,3 Debt security $ ( 623 ) $ 14,191 Debt security include corporate and . Debt security maturing beyond 15 year are composed entirely of entirely of AT & T 5 % convertible preferred debt with with a contractual maturity of 30 year . The debt is stock on or after December 1 , 2000 , or may or after December 1 , 2000 , or may be redeemed condition on or after June 1 , 2002 . In connection or after June 1 , 2002 . In connection with the exchange it AT & T 5 % convertible preferred debt security preferred debt security for approximately 115 million share of AT & transaction will close by December 31 , 2002 . While it close by December 31 , 2002 . While it is possible exchange transaction a of June 30 , 2002 . Equity security a of June 30 , 2002 . Equity security that are at cost . At June 30 , 2001 the estimated fair . At June 30 , 2001 the estimated fair value of their recorded basis wa $ 161 million . At June 30 161 million . At June 30 , 2002 the recorded basis . At June 30 , 2002 the recorded bas debt of it it equity investees . NOTE 19 CONTINGENCIES The Company is a that Microsoft had violated Sections 1 and 2 of the Sherman had violated Sections 1 and 2 of the Sherman Act and Judgment wa entered on June 7 , 2000 ordering , among entered on June 7 , 2000 ordering , among other thing Microsoft into two company . 35 / MSFT 2002 FORM 10-K company . 35 / MSFT 2002 FORM 10-K Table of Contents 35 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 The Judgment wa stayed pen", + "share_repurchase": "share repurchase program in fiscal 2002 , compared to 89.0 million fiscal 2002 , compared to 89.0 million share repurchased in the year . In addition , 5.1 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , giving it the right it the right to acquire 5.1 million of it share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , ", + "earnings_per_share": "earnings per share income 4,490 7,785 9,421 7,346 7,829 Diluted earnings per share before per share before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted share before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per share change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per share 0.84 1.41 Diluted earnings per share 0.84 1.42 1.70 1.32 1.41 Cash Diluted earnings per earnings per share 0.84 1.42 1.70 1.32 1.41 Cash and short-term per share 0.84 1.42 1.70 1.32 1.41 Cash and short-term investment share 0.84 1.42 1.70 1.32 1.41 Cash and short-term investment 13,927 1.41 Cash and short-term investment 13,927 17,236 23,798 31,600 38,652 Total Cash and short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset and short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset 22,357 short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset 22,357 38,321 i earnings per share : : Before accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative effect of $ 1.81 $ 1.45 $ 1.45 Cumulative effect of accounting change of accounting change \u2013 ( 0.07 ) \u2013 $ 1.81 $ ( 0.07 ) \u2013 $ 1.81 $ 1.38 $ 1.45 Diluted ) \u2013 $ 1.81 $ 1.38 $ 1.45 Diluted earnings per $ 1.81 $ 1.38 $ 1.45 Diluted earnings per share : : Before accounting change $ 1.70 $ 1.38 $ 1.41 Cumulative accounting change $ 1.70 $ 1.38 $ 1.41 Cumulative effect of $ 1.70 $ 1.38 $ 1.41 earnings per share for fiscal 2000 and fiscal 2001 adjusted to for fiscal 2000 and fiscal 2001 adjusted to exclude amortization expense Per Share Year Ended June 30 2000 2001 Net income : Share Year Ended June 30 2000 2001 Net income : Reported Year Ended June 30 2000 2001 Net income : Reported net : Reported net income $ 9,421 $ 7,346 Goodwill amortization 203 net income $ 9,421 $ 7,346 Goodwill amortization 203 252 Equity 9,421 $ 7,346 Goodwill amortization 203 252 Equity method goodwill amortization $ 7,346 Go earnings per share : basic earnings per share $ 1.81 $ 1.38 Goodwill amortization 0.04 per share $ 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization \u2013 basic earnings per share $ 1.85 $ 1.43 Diluted earnings per per share $ 1.85 $ 1.43 Diluted earnings per share : diluted earnings per share $ 1.70 $ 1.32 Goodwill amortization 0.04 per share $ 1.70 $ 1.32 Goodwi earnings per share $ 1.74 $ 1.37 25 / MSFT per share $ 1.74 $ 1.37 25 / MSFT 2002 FORM share $ 1.74 $ 1.37 25 / MSFT 2002 FORM 10-K $ 1.37 25 / MSFT 2002 FORM 10-K Table of Contents 25 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 3 UNEARNED REVENUE A Part II Item 8 NOTE 3 UNEARNED REVENUE A portion of undelivered element range from approximately 20 % to 25 % for from approximately 20 % to 25 % for Windows XP Home Windows XP Home , approximately 10 % to 15 % for , approximately 1 earnings per share $ Basic earnings per share $ 1.81 $ 1.57 $ 1.38 $ per share $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted earnings per $ 0.95 $ 1.45 $ 0.99 Diluted earnings per share $ Diluted earnings per share $ 1.70 $ 1.48 $ 1.32 $ per share $ 1.70 $ 1.48 $ 1.32 $ 0.91 $ $ 1.70 $ 1.48 $ 1.32 $ 0.91 $ 1.41 $ $ 1.48 $ 1.32 $ 0.91 $ 1.41 $ 0.98 The $ 1.32 $ 0.91 $ 1.41 $ 0.98 The weighted average $ 0.91 $ 1.41 $ EARNINGS PER SHARE Part II Item 8 NOTE 16 EARNINGS PER SHARE Basic earnings Share Amounts Year Ended June 30 2000 2001 2002 Income before Amounts Year Ended June 30 2000 2001 2002 Income before accounting Year Ended June 30 2000 2001 2002 Income before accounting change Ended June 30 2000 2001 2002 Income before accounting change $ Income before accounting change $ 9,421 $ 7,721 $ 7,829 Preferred accounting change $ 9,421 $ 7,721 $ 7,829 Preferred stock dividend $ 9,421 $ 7,721 $ 7,829 Preferred stock dividend 13 Earnings per share and common stock equivalent 5,536 5,574 5,553 Earnings per share before common stock equivalent 5,536 5,574 5,553 Earnings per share before accounting accounting change : Basic $ 1.81 $ 1.45 $ 1.45 Diluted : Basic $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For the year $ 1.70 $ 1.38 $ 1.41 For the year ended June For the year ended June 30 , 2000 , 2001 and year ended June 30 , 200 earnings per share income 2,191 2,436 2,385 2,409 9,421 Basic earnings per share 0.43 9,421 Basic earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted Basic earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per share share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per share 0.40 1.81 Diluted earnings per share 0.40 0.44 0.43 0.44 1.70 Fiscal Diluted earnings per share 0.40 0.44 0.43 0.44 earnings per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 6,577 $ 25,296 Gross profit 4 earnings per share 0.42 7,346 Basic earnings per share 0.42 ( 1 ) 0.49 0.46 earnings per share 0.42 ( 1 ) 0.49 0.46 0.01 1.38 share 0.42 ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings 0.42 ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per share 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per share 0.40 1.38 Diluted earnings per share 0.40 ( 1 ) 0.47 0.44 earnings per share 0.40 ( 1 ) 0.47 0.44 0.01 1.32 share 0.40 ( 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 0.40 ( 1 ) 0.47 0.44 0.01 earnings per share 0.24 7,829 Basic earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted Basic earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per share share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per share 0.23 1.45 Diluted earnings per share 0.23 0.41 0.49 0.28 1.41 ( Diluted earnings per share 0.23 0.41 0.49 0.28 1.41 ( 1 earnings per share 0.23 0.41 0.49 0.28 1.41 ( 1 ) per shar", + "tax_rate": "tax rate for fiscal 2002 wa 32 % . The rate for fiscal 2002 wa 32 % . The effective tax effective tax rate for fiscal 2001 and fiscal 2000 wa 33 for fiscal 2001 and fiscal 2000 wa 33 % and 34 2001 and fiscal 2000 wa 33 % and 34 % , 2000 wa 33 % and 34 % , respectively . The . ACCOUNTING CHANGES Effective July 1 , 2001 , Microsoft adopted CHANGES Effective July 1 , 2001 , Microsoft adopted SFAS 141 2001 , Microsoft adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 , Good tax rate the effective tax rate wa 34.0 % , and included the included the effect of a 2.5 % reduction from the U.S. for tax credit and a 1.5 % increase for other item for other item . In 2001 , the effective tax rate the effective tax rate wa 33.0 % , and included the included the effect of a 3.1 % reduction from the U.S. for tax credit and a 1.1 % increase for other item The effective tax rate in 2002 wa 32.0 % , and tax rate in 2002 wa 32.0 % , and included the included the effect of a 2.4 % reduction", + "investment_gains_losses": "investment gains investment gains investment gains", + "common_stock": "common stock a of July 31 , 2002 wa 5,378,746,853 . a of July 31 , 2002 wa 5,378,746,853 . DOCUMENTS INCORPORATED July 31 , 2002 wa 5,378,746,853 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 5 , 2002 are incorporated by be held November 5 , 2002 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2002 INDEX Part I Year Ended June 30 , 2002 INDEX Part I Item 1. 2002 INDEX Part I Item 1. Business 1 I Common stock 31 June 30 Year Fiscal 2001 Common stock price per share per share : High $ 82.00 $ 70.88 $ 64.69 $ : High $ 82.00 $ 70.88 $ 64.69 $ 73.68 $ $ 82.00 $ 70.88 $ 64.69 $ 73.68 $ 82.00 Low $ 70.88 $ 64.69 $ 73.68 $ 82.00 Low 60.31 41.50 $ 64.69 $ 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 $ 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 Common 82.00 Low 60.31 41.50 43.38 51.94 41 Common stock Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 Common stock price 41.50 43.38 51.94 41.50 Fiscal 2002 Common stock price per share per share : High $ 72.57 $ 69.49 $ 69.86 $ : High $ 72.57 $ 69.49 $ 69.86 $ 60.38 $ $ 72.57 $ 69.49 $ 69.86 $ 60.38 $ 72.57 Low $ 69.49 $ 69.86 $ 60.38 $ 72.57 Low 49.71 51.79 $ 69.86 $ 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 $ 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 6 $ 72.57 Low 49.71 51.79 57.99 4 common stock share repurchase program in fiscal 2002 , compared to 89.0 million fiscal 2002 , compared to 89.0 million share repurchased in the year . In addition , 5.1 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , giving it the right it the right to acquire 5.1 million of it share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion Common stock Net cash from operation 11,426 13,422 14,509 Financing Common stock issued cash from operation 11,426 13,422 14,509 Financing Common stock issued 2,245 14,509 Financing Common stock issued 2,245 1,620 1,497 Common stock repurchased Financing Common stock issued 2,245 1,620 1,497 Common stock repurchased ( Common stock issued 2,245 1,620 1,497 Common stock repurchased ( 4,896 1,497 Common stock repurchased ( 4,896 ) ( 6,074 ) ( repurchased ( 4,896 ) ( 6,074 ) ( 6,069 ) Sales/ ) ( 6,074 ) ( 6,069 common stock ( 980 ) \u2013 \u2013 Balance , Balance , beginning of year 13,844 23,195 28,390 Common stock issued , beginning of year 13,844 23,195 28,390 Common stock issued 3,554 beginning of year 13,844 23,195 28,390 Common stock issued 3,554 5,154 23,195 28,390 Common stock issued 3,554 5,154 1,801 Common stock repurchased 28,390 Common stock issued 3,554 5,154 1,801 Common stock repurchased ( Common stock issued 3,554 5,154 1,801 Common stock repurchased ( 210 1,801 Common stock repurchased ( 210 ) ( 394 ) ( rep Common stock repurchased \u2013 Common stock repurchased ( 4,686 ) ( 5,680 ) ( repurchased ( 4,686 ) ( 5,680 ) ( 6,191 ) Balance ) ( 5,680 ) ( 6,191 ) Balance , end of Balance , end of year 18,173 18,899 20,533 Total stockholder \u2019 , end of year 18,173 18,899 20,533 Total stockholder \u2019 equity end of year 18,173 18,899 20,533 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 41,368 $ 47,289 $ 52,180 See \u2019 equity $ 41,368 $ 47,289 $ 52,180 See accompanying note $ 41,368 $ 47,289 $ 52,180 See accompanying no Common stock and 6,410 12 ( 841 ) 5,581 Common stock and warrant 5,555 5,581 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Preferred and warrant 5,555 2,030 ( 285 ) 7,300 Preferred stock 881 5,555 2,030 ( 285 ) 7,300 Preferred stock 881 \u2013 \u2013 285 ) 7,300 Preferred stock 881 \u2013 \u2013 881 Other investment Preferred stock 881 \u2013 \u2013 881 Other investment 599 \u2013 \u2013 \u2013 \u2013 881 Other investment 599 \u2013 \u2013 599 Equity and Other investment 599 \u2013 \u2013 599 Equity and other investment Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,930 5,040 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Preferred and warrant 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,382 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,382 \u2013 \u2013 617 ) 7,600 Preferred stock 1,382 \u2013 \u2013 1,382 Other investment Preferred stock 1,382 \u2013 \u2013 1,382 Other investment 169 \u2013 \u2013 \u2013 \u2013 1,382 Other investment 169 \u2013 \u2013 169 Equity and Other investment 169 \u2013 \u2013 169 Equity and other common stock purchase plan . In 2002 , the Company acquired 5.1 2002 , the Company acquired 5.1 million of it share a repurchase transaction entered into in 2001 , which gave it the up-front net payment of $ 264 million . To enhance it the third quarter of fiscal 2001 , the Company issued 2.8 2001 , the Company issued 2.8 million share to settle a put warrant . At June 30 , 2001 and 2002 , . At June 30 , 2001 and 2002 , there were June 30 , 2001 and 2002 , there were no outstanding outstanding put warrant . common stock 5,189 5,341 5,406 Dilutive effect of share of common stock 5,189 5,341 5,406 Dilutive effect of : of common stock 5,189 5,341 5,406 Dilutive effect of : Put effect of : Put warrant 2 21 \u2013 Preferred stock 7 of : Put warrant 2 21 \u2013 Preferred stock 7 \u2013 2 21 \u2013 Preferred stock 7 \u2013 \u2013 Employee stock option \u2013 \u2013 Employee stock option 338 212 147 Common stock and \u2013 Employee stock option 338 212 147 Common stock and common Employee stock option 338 212 147 Common stock and common stock stock and common st common stock equivalent 5,536 5,574 5,553 Earnings per share before common stock equivalent 5,536 5,574 5,553 Earnings per share before accounting accounting change : Basic $ 1.81 $ 1.45 $ 1.45 Diluted : Basic $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For the year $ 1.70 $ 1.38 $ 1.41 For the year ended June For the year ended June 30 , 2000 , 2001 and year ended June 30 , 2000 , 2001 and 2002", + "hedging_activities": "Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . / S , effective July 1 , 2001 . / S / D LLP Seattle , Washington July 18 , 2002 ITEM 9 . , Washington July 18 , 2002 ITEM 9 . CHANGES IN July 18 , 2002 ITEM 9 . CHANGES IN AND DISAGREEMENTS AND FINANCIAL DISCLOSURES None . 39 / MSFT 2002 FORM 10-K None . 39 / MSFT 2002 FORM 10-K Tabl", + "derivative_instruments": "Derivative Instruments . The adoption of SFAS 133 resulted in a cumulative pre-tax reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a ( OCI ) of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option a Derivative Instruments . The adoption of SFAS 133 on July 1 , 2000 of SFAS 133 on July 1 , 2000 , resulted in 133 on July 1 , 2000 , resulted in a cumulative reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a reduction to OCI of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million Derivative Instruments Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . / S , effective July 1 , 2001 . / S / D LLP Seattle , Washington July 18 , 2002 ITEM 9 . , Washington July 18 , 2002 ITEM 9 . CHANGES IN July 18 , 2002 ITEM 9 . CHANGES IN AND DISAGREEMENTS AND FINANCIAL DISCLOSURES None . 39 / MSFT 2002 FORM 10-K None . 39 / MSFT " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001032210-98-001067/full-submission_features.json b/src/data/feature/MSFT/10-K/0001032210-98-001067/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001032210-98-001067/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001032210-99-001375/full-submission_features.json b/src/data/feature/MSFT/10-K/0001032210-99-001375/full-submission_features.json new file mode 100644 index 0000000..9e26dfe --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001032210-99-001375/full-submission_features.json @@ -0,0 +1 @@ +{} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-03-045632/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-03-045632/full-submission_features.json new file mode 100644 index 0000000..104a24b --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-03-045632/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue . network consisting of more than 4,500 value added resellers , system and network equipment provider . 2 / MSFT 2003 FORM 10-K provider . 2 / MSFT 2003 FORM 10-K Table of Contents 2 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 Home and Entertainment Home and Xbox , released in fiscal 2002 , is our next-generation video For example , we own 50 percent of MSNBC Cable L.L.C Cable L.L.C . , a 24-hour cable news and information channel and information channel , and 50 per revenue or more of revenue in 2001 , 2002 , or 2003 of revenue in 2001 , 2002 , or 2003 . Our 2001 , 2002 , or 2003 . Our practice is to company focused on the Java 2 Platform Enterprise Edition ( J2EE server application for the PC-based 5 / MSFT 2003 FORM 10-K the PC-based 5 / MSFT 2003 FORM 10-K Table of Contents 5 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 distributed client/server environment include Oracle of distribution and marketing . 6 / MSFT 2003 FORM 10-K marketi Revenue $ ( 3 ) 2003 ( 4 ) Revenue $ 19,747 $ ( 4 ) Revenue $ 19,747 $ 22,956 $ 25,296 $ ) Revenue $ 19,747 $ 22,956 $ 25,296 $ 28,365 $ $ 19,747 $ 22,956 $ 25,296 $ 28,365 $ 32,187 Operating $ 22,956 $ 25,296 $ 28,365 $ 32,187 Operating income 10,010 $ 25,296 $ 28,365 $ 32,187 Operating income 10,010 11,006 11,720 28,365 $ 32,187 Operating income 10,010 11,006 11,720 11,910 13,217 Income $ 32,187 Operating income 10,010 11,006 11,720 11,910 13,217 Income before 32,187 Operating income 10,010 11,006 11 REVENUE Our revenue growth rate Our revenue growth rate wa 10 % in fiscal 2001 , wa 10 % in fiscal 2001 , 12 % in fiscal % in fiscal 2001 , 12 % in fiscal 2002 , , 12 % in fiscal 2002 , and 13 % in in fiscal 2002 , and 13 % in fiscal 2003 . and 13 % in fiscal 2003 . Revenue growth in fiscal . Revenue growth in fiscal 2003 wa driven primarily by multi-year new licensing program ( Licensing 6.0 ) in the first quarter the first quarter of fiscal 2003 . Prior to the July . Prior to the July 31 , 2002 trans revenue from . Revenue growth in fiscal 2002 wa led by the addition by the addition of $ 1.35 billion of Xbox video game game system revenue and $ 1.20 billion of revenue growth from . Revenue growth in fiscal 2001 wa driven primarily by licensing by licensing of Microsoft Windows 2000 Professional with $ 1.01 billion Windows 2000 Professional with $ 1.01 billion growth in revenue from Tools revenue growth of $ 852 million . During the second the second quarter of fiscal 2002 , we launched a new new li revenue , partially by an increase of $ 2.52 billion in operating expense , settlement expense . In fiscal 2002 , the growth in operating reflected an increase of $ 3.07 billion in revenue , substantially by an increase of $ 2.88 billion in operating expense , game system . In fiscal 2001 , the growth in operating reflected an increase of $ 2.34 billion in revenue , partially by an increase of $ 1.63 billion in operating expense . our segment for fiscal year 2003 . Our seven segment are Segment Informa revenue $ 32,187 $ 11,910 $ 13,217 Client Client revenue wa $ Client Client revenue wa $ 8.17 billion , $ 9.36 billion $ 8.17 billion , $ 9.36 billion , and $ 10.39 9.36 billion , and $ 10.39 billion in 2001 , 2002 and $ 10.39 billion in 2001 , 2002 , and 2003 10.39 billion in 2001 , 2002 , and 2003 . Client 2001 , 2002 , and 2003 . Client includes revenue from Professional and Home , Windows 2000 Professional , and other standard Windows operating system . In 2003 , Client revenue growth wa licensing revenue growth of $ 933 million and a 9 percentage $ 933 million and a 9 percentage point increase of the Professional revenue growth for fiscal 2003 wa $ 1.59 billion or for fiscal 2003 wa $ 1.59 billion or 31 % compared wa $ 1.59 billion or 31 % compared to fiscal 2002 31 % compared to fiscal 2002 , partially offset by a partially offset by a $ 573 million decline in revenue of million decline in revenue of 10 / MSFT 2003 FORM 10-K revenue of 10 / MSFT 2003 FORM 10-K Table of Contents 10 / MSFT 2003 revenue , related cost . In fiscal 2002 , the growth in Client to the higher priced Windows 2000 and Windows XP Professional operating . OEM revenue grew $ 939 million , despite a 5 939 million , despite a 5 % decline in reported OEM OEM unit shipment . Fiscal 2001 revenue growth reflected the strong the strong adoption of Windows 2000 Professional with professional operating system system revenue growth of $ 1.01 billion and a 7 percentage $ 1.01 billion and a 7 percentage point mix increase to to the revenue from from Windows Me and Windows 98 operating system . We do at previous level into fiscal 2004 . Additionally , variability between the beginning of fiscal year 2003 , under which OEMs are and Tools revenue wa $ 5.84 billion , $ 6.16 billion $ 5.84 billion , $ 6.16 billion , and $ 7.14 6.16 billion , and $ 7.14 billion in 2001 , 2002 and $ 7.14 billion in 2001 , 2002 , and 2003 7.14 billion in 2001 , 2002 , and 2003 . Server 2001 , 2002 , and 2003 . Server and Tools consists and Tools revenue Revenue from developer tool and other service increased $ 105 million or 13 % . increased $ 105 million or 13 % . Server operating profit Server operating profit for fiscal 2003 grew 20 % , primarily profit for fiscal 2003 grew 20 % , primarily a a a a result of the 16 % increase in revenue . in revenue . In fiscal 2002 , Server and Tools revenue Server and Tools revenue increased 5 % compared to fiscal 2001 5 % compared to fiscal 2001 . Server revenue , including , including CALs , increased 9 % versu revenue wa up $ 137 million or 17 % compared up $ 137 million or 17 % compared to fiscal 2001 17 % compared to fiscal 2001 , while revenue from developer other service wa down $ 183 million or 18 % from down $ 183 million or 18 % from fiscal 2001 . or 18 % from fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , Server and Tools revenue and Tools revenue increased $ 852 million or 17 % versus increased $ 852 million or 17 % versus the prior year Information Worker revenue wa $ 8.42 billion , revenue support service . The $ 1.02 billion or 12 % increase The $ 1.02 billion or 12 % increase in Information Worker Worker revenue in fiscal year 2003 compared to fiscal 2002 , year 2003 compared to fiscal 2002 , wa primarily due to licensing agreement and a $ 264 million or 28 % increase a $ 264 million or 28 % increase in revenue from operating profit for fiscal year 2003 grew 9 % compared to for fiscal year 2003 grew 9 % compared to fiscal year % compared to fiscal year 2002 led by the 12 % year revenue , , partially offset by a 24 % growth in operating expense marketing expense . In fiscal 2002 , Information Worker licensing revenue Worker licensing revenue declined $ 228 million or 3 % during declined $ 228 million or 3 % during the year due year , and a $ 294 million or 14 % decrease a $ 294 million or 14 % decrease in consumer purchase partially offset by a $ 189 million or 22 % growth a $ 189 million or 22 % growth in OEM licensing licensing revenue . In fiscal 2001 , Information Worker r revenue growth wa le than 1 % or $ 30 million than 1 % or $ 30 million . Microsoft Business Solutions Business Solutions revenue wa $ 106 million , $ 308 million $ 106 million , $ 308 million , and $ 567 308 million , and $ 567 million in 2001 , 2002 and $ 567 million in 2001 , 2002 , and 2003 567 million in 2001 , 2002 , and 2003 . Microsoft 2001 , 2002 , and 2003 . Microsoft Business Solutions includes Business Solutions revenue for fiscal 2003 grew $ 259 million from for fiscal 2003 grew $ 259 milli revenue wa $ 1.32 billion , $ 1.57 billion $ 1.32 billion , $ 1.57 billion , and $ 1.95 1.57 billion , and $ 1.95 billion in 2001 , 2002 and $ 1.95 billion in 2001 , 2002 , and 2003 1.95 billion in 2001 , 2002 , and 2003 . MSN 2001 , 2002 , and 2003 . MSN includes MSN Subscriptions at the end of fiscal 2003 were flat compared to the to the end of fiscal 2002 , MSN Subscriptions revenue grew MSN Subscriptions revenue grew $ 112 million or 11 % in grew $ 112 million or 11 % in fiscal year 2003 11 % in fi revenue grew $ 270 million or 48 % in grew $ 270 million or 48 % in fiscal 2003 a or 48 % in fiscal 2003 a a result of growth MSN operating loss for fiscal 2003 decreased 53 % , primarily loss for fiscal 2003 decreased 53 % , primarily a a support cost . In fiscal 2002 , MSN Subscriptions revenue increased MSN Subscriptions revenue increased $ 229 million or 29 % a increased $ 229 million or 29 % a a result of MSN Network service increased $ 27 million or 5 % led increased $ 27 million or 5 % led by on revenue from MSN Network MSN Network service grew $ 197 million or 58 % led grew $ 197 million or 58 % led by online advertising Subscriptions revenue also grew $ 141 million or 22 % from grew $ 141 million or 22 % from fiscal 2000 a or 22 % from fiscal 2000 a a result of an contracted under rebate program . 11 / MSFT 2003 FORM 10-K program . 11 / MSFT 2003 FORM 10-K Table of Contents 11 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 Mobile and Embedded Devices Mobile Embedde revenue wa $ 86 million , $ 112 million $ 86 million , $ 112 million , and $ 156 112 million , and $ 156 million in 2001 , 2002 and $ 156 million in 2001 , 2002 , and 2003 156 million in 2001 , 2002 , and 2003 . Mobile 2001 , 2002 , and 2003 . Mobile and Embedded Devices Automotive . Revenue for fiscal 2003 grew $ 44 million driven for fiscal 2003 grew $ 44 million driven by increased Pocket . Operating loss for fiscal 2003 wa flat with the prior and Entertainment revenue wa $ 1.14 billion , $ 2.45 bil revenue increased $ 295 million , a a result available for all of fiscal 2003 . Xbox revenue grew $ . Xbox revenue grew $ 309 million or 23 % in grew $ 309 million or 23 % in fiscal 2003 reflecting or 23 % in fiscal 2003 reflecting a $ 779 million fiscal 2003 reflecting a $ 779 million increase from higher volume partially offset by a $ 470 million decrease due to price and PC game declined $ 14 million or 1 % in declined $ 14 million or 1 % in fiscal 2003 . or 1 % in fiscal 2003 . Operating loss for f revenue . in revenue . In fiscal 2002 , Home and Entertainment revenue Entertainment revenue growth from fiscal 2001 stemmed from $ 1.35 billion fiscal 2001 stemmed from $ 1.35 billion of sale of the game system released in fiscal 2002 . Learning and productivity software and online game declined $ 39 million or 3 % in declined $ 39 million or 3 % in fiscal 2002 compared or 3 % in fiscal 2002 compared to fiscal 2001 . fiscal 2002 compared to fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , revenue and Entertainment revenue declined $ 214 million or 16 % from declined $ 214 million or 16 % from fiscal 2002 . or 16 % from fiscal 2002 . Other Revenue in the which wa sold in February 2002 , resulting in a decline decline in revenue from fiscal 2001 . Acquisitions of Travelscape.com and Expedia , Inc. in fiscal 2001 and increased product offering from strong revenue growth in fiscal 2001 . Operating loss includes Expedia and administrative expense ( $ 1.55 billion in 2002 and $ ( $ 1.55 billi revenue wa collected in foreign currency during 2001 , 2002 , and 2003 foreign currency during 2001 , 2002 , and 2003 . Had 2001 , 2002 , and 2003 . Had the rate from Had the rate from fiscal 2002 been in effect in fiscal been in effect in fiscal 2003 , translated international revenue billed would have been approximately $ 700 million lower . Certain manufacturing a percent of revenue wa 13.7 % in 2001 , 18.3 revenue wa 13.7 % in 2001 , 18.3 % in 2002 13.7 % in 2001 , 18.3 % in 2002 , and 2001 , 18.3 revenue wa cost of revenue wa $ 5.69 billion compared to $ 5.19 5.69 billion compared to $ 5.19 billion in fiscal 2002 . $ 5.19 billion in fiscal 2002 . The primary driver of percentage of revenue in fiscal 2003 wa a 0.2 percentage point in fiscal 2003 wa a 0.2 percentage point decrease from Home video game console and a 0.4 percentage point decrease from MSN and service cost in fiscal 2003 compared to fiscal 2002 . fiscal 2003 compared to fiscal 2002 . Cost of revenue in Cost of revenue in fiscal 2002 revenue in fiscal 2002 wa due to an increase due to an increase of 5.3 percentage point from Home and , partially offset by a 0.7 percentage point decrease due to licensing business . In fiscal 2001 , cost of revenue wa cost of revenue wa $ 3.46 billion , an increase of , an increase of $ 453 million compared to fiscal 2000 453 million compared to fiscal 2000 . The higher sale associated support and service cost drove 0.4 of the 0.6 percentage point cost drove 0.4 of the 0.6 percentage point increase i revenue wa 19.3 % in 2001 , 19.1 revenue wa 19.3 % in 2001 , 19.1 % in 2002 19.3 % in 2001 , 19.1 % in 2002 , and 2001 , 19.1 % in 2002 , and 20.3 % in % in 2002 , and 20.3 % in 2003 . Sales , and 20.3 % in 2003 . Sales and marketing expense and marketing expense were $ 6.52 billion in 2003 , compared were $ 6.52 billion in 2003 , compared to $ 5.41 2003 , compared to $ 5.41 billion in fiscal 2002 . $ 5.41 billion in fiscal 2002 . The increase in absolute dollar wa due to a 20 % increase in sale expens revenue a of June 30 , 2003 wa $ 9.02 a of June 30 , 2003 wa $ 9.02 billion , 30 , 2003 wa $ 9.02 billion , increasing $ 1.27 9.02 billion , increasing $ 1.27 billion from June 30 , $ 1.27 billion from June 30 , 2002 , reflecting the billion from June 30 , 2002 , reflecting the addition of flow from operation wa $ 15.80 billion for fiscal 2003 , $ 15.80 billion for fiscal 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal 2002 . $ 1.29 billion from fiscal 2002 . The increase reflects a revenue , by an increase of $ 2.36 billion in recognition of unearned used for financing wa $ 5.22 billion in fiscal 2003 , $ 5.22 billion in fiscal 2003 , an increase of $ , an increase of $ 651 million from the prior year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and an increase of $ and an increase of $ 417 million in common stock repurchase stock repurchase , offsetting $ 623 million received for common stock stock issued . We repurchased 238.2 million share of Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable hold the investment . SFAS 142 , Goodwill and Other Intangible an annual basis ( July 1 st for Microsoft ) and accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , Accounting for the Costs or Otherwise Marketed . SFAS 86 spe Revenue $ ) Year Ended June 30 2001 2002 2003 Revenue $ 25,296 Year Ended June 30 2001 2002 2003 Revenue $ 25,296 $ Ended June 30 2001 2002 2003 Revenue $ 25,296 $ 28,365 2001 2002 2003 Revenue $ 25,296 $ 28,365 $ 32,187 Operating 2003 Revenue $ 25,296 $ 28,365 $ 32,187 Operating expense : $ 25,296 $ 28,365 $ 32,187 Operating expense : Cost of expense : Cost of revenue 3,455 5,191 5,686 Research and development : Cost of revenue 3,455 5,191 5,686 Research and development 4,379 Cost of revenue 3,455 5,1 revenue 5,920 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 7,225 2,022 2,044 Short-term unearned revenue 5,920 7,225 Other 2,449 1,716 Total 2,044 Short-term unearned revenue 5,920 7,225 Other 2,449 1,716 Total current unearned revenue 5,920 7,225 Other 2,449 1,716 Total current liability 12,744 revenue 5,920 7,225 Other 2,449 1,716 Total current liability 12,744 13,974 2,449 1,716 Total current liability 12,744 13,974 Long-term unearned revenue 1,823 1,716 Total current liabili revenue 1,823 1,790 12,744 13,974 Long-term unearned revenue 1,823 1,790 Deferred income tax 398 13,974 Long-term unearned revenue 1,823 1,790 Deferred income tax 398 1,731 1,823 1,790 Deferred income tax 398 1,731 Other long-term liability 501 1,790 Deferred income tax 398 1,731 Other long-term liability 501 1,056 398 1,731 Other long-term liability 501 1,056 Commitments and contingency Stockholders 1,731 Other long-term liability 501 1,056 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 revenue 6,970 420 ) ( 416 ) 336 Unearned revenue 6,970 11,152 12,519 416 ) 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned ) 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned revenue 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned revenue ( Recognition of unearned revenue ( 6,369 ) ( 8,929 ) ( revenue ( 6,369 ) ( 8,929 ) ( 11,292 ) Accounts ) ( 8,929 ) ( 11,292 ) Accounts receivable ( 418 11,292 ) Accounts receivable ( 418 ) ( 1,623 ) 187 receivable ( 41 Revenue Unearned revenue per share $ 0.68 Note 4\u2014Unearned Revenue Unearned revenue from volume undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price ( In million ) June 30 2002 2003 Volume licensing program In million ) June 30 2002 2003 Volume licensing pro revenue Undelivered element 2,830 2,847 Other 755 696 Unearned revenue $ 7,743 element 2,830 2,847 Other 755 696 Unearned revenue $ 7,743 $ 755 696 Unearned revenue $ 7,743 $ 9,015 Unearned revenue by Unearned revenue $ 7,743 $ 9,015 Unearned revenue by segment wa ( In million ) June 30 2002 2003 Client $ 3,023 In million ) June 30 2002 2003 Client $ 3,023 $ million ) June 30 2002 2003 Client $ 3,023 $ 3,165 30 2002 2003 Client $ 3,023 $ 3,165 Server and Tools 2003 Client $ 3,023 $ 3,165 Server and Too revenue $ 7,743 2,757 3,305 Other segment 368 360 Unearned revenue $ 7,743 $ 368 360 Unearned revenue $ 7,743 $ 9,015 26 / MSFT Unearned revenue $ 7,743 $ 9,015 26 / MSFT 2003 FORM revenue $ 7,743 $ 9,015 26 / MSFT 2003 FORM 10-K $ 9,015 26 / MSFT 2003 FORM 10-K Table of Contents 26 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Of the $ 9.02 billion Item 8 Of the $ 9.02 billion of unearned revenue at of unearned revenue at June 30 , 2003 , $ 2.65 revenue at June 30 , 2003 , revenue and $ 416 million of derivative loss were loss ) . During fiscal 2002 , $ 234 million of During fiscal 2002 , $ 234 million of derivative gain were reclassified to revenue and $ 10 million of derivative loss were loss ) . During fiscal 2003 , $ 40 million of During fiscal 2003 , $ 40 million of derivative gain were reclassified to revenue and $ 2 million of derivative gain were . We estimate that $ 22 million of net derivative gain determined in accordance with SFAS 133 , had no significant imp Revenue item $ 2,261 $ 2,556 Expense item 945 Revenue item $ 2,261 $ 2,556 Expense item 945 1,048 Impaired 2,261 $ 2,556 Expense item 945 1,048 Impaired investment 2,016 1,525 $ 2,556 Expense item 945 1,048 Impaired investment 2,016 1,525 Deferred item 945 1,048 Impaired investment 2,016 1,525 Deferred income tax asset 945 1,048 Impaired investment 2,016 1,525 Deferred income tax asset $ Deferred income tax asset $ 5,222 $ 5,129 Deferred income tax tax asset $ 5,222 $ 5,129 Deferred income tax liabilit Revenue $ 25,296 $ 25,296 $ 28,365 $ Forma Revenue $ 25,296 $ 25,296 $ 28,365 $ 28,365 $ $ 25,296 $ 25,296 $ 28,365 $ 28,365 $ 32,187 $ $ 25,296 $ 28,365 $ 28,365 $ 32,187 $ 32,187 Operating $ 28,365 $ 28,365 $ 32,187 $ 32,187 Operating expense : $ 28,365 $ 32,187 $ 32,187 Operating expense : Cost of expense : Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 : Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research and of revenue 3,45 revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research and development 4,379 3,455 3,775 5,191 5,699 5,686 6,059 Research and development 4,379 6,106 5,686 6,059 Research and development 4,379 6,106 4,307 6,299 4,659 6,595 6,059 Research and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales Research and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and marketing development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and marketing 4, Revenue Client $ ) Year Ended June 30 2002 2003 Revenue Client $ 9,350 Year Ended June 30 2002 2003 Revenue Client $ 9,350 $ 2002 2003 Revenue Client $ 9,350 $ 10,286 Server and Tools Revenue Client $ 9,350 $ 10,286 Server and Tools 5,632 6,519 $ 10,286 Server and Tools 5,632 6,519 Information Worker 8,328 9,718 10,286 Server and Tools 5,632 6,519 Information Worker 8,328 9,718 Microsoft Tools 5,632 6,519 Information Worker 8,328 9,718 Microsoft Business Solutions 308 5,632 6,519 Information Worker 8,3 Revenue 2,779 Reconciling Amounts 288 ( 208 ) Consolidated Revenue $ 28,365 208 ) Consolidated Revenue $ 28,365 $ 32,187 Operating Income/ ( Consolidated Revenue $ 28,365 $ 32,187 Operating Income/ ( Loss ) ( Loss ) Client $ 7,529 $ 8,281 Server and Tools ) Client $ 7,529 $ 8,281 Server and Tools 1,409 1,848 $ 8,281 Server and Tools 1,409 1,848 Information Worker 6,440 7,393 8,281 Server and Tools 1,409 1,848 Information Worker 6,440 7,393 Microsoft Tools 1,409 1,848 Information Worker 6,440 7,393 Micr Revenue 2001 , 2002 , and 2003 . Revenue from outside the U.S. export , totaled $ 7.5 billion , $ 7.5 billion $ 7.5 billion , $ 7.5 billion , and $ 10.1 7.5 billion , and $ 10.1 billion in 2001 , 2002 and $ 10.1 billion in 2001 , 2002 , and 2003 10.1 billion in 2001 , 2002 , and 2003 . No 2001 , 2002 , and 2003 . No single customer accounted No single customer accounted for 10 % or more of revenue or more of revenue in 2001 , 2002 , or 2003 of revenue in 2001 , 2002 , or 2003 . Long-lived 2001 , 2002 , Revenue $ 31 June 30 Year Fiscal 2001 Revenue $ 5,766 $ 6,550 Year Fiscal 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,2 Revenue ( 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 6,126 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 6,126 $ 7,741 0.66 Fiscal 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net $ 28,365 Gross profit 5,242 Revenue 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ 7,746 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ 7,746 $ 8,541 0.70 Fiscal 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,547 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,547 6,507 6,620 8,065 $ 32,187 Gross profit 6,547 6,507 6,620 6,827 26,501 Net $ 32,187 Gross profit", + "net_income": "Net Income before accounting change 7,785 9,421 7,721 7,829 9,993 Net income before accounting change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 accounting change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 9,421 change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 9,421 7,346 7,721 7,829 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted 7,829 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted earnings 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted earnings per Net income 7,785 9, net income net income from fiscal year 2002 and an increase of $ and an increase of $ 1.37 billion in unearned revenue , by an increase of $ 2.36 billion in recognition of unearned used for financing wa $ 5.22 billion in fiscal 2003 , $ 5.22 billion in fiscal 2003 , an increase of $ , an increase of $ 651 million from the prior year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and an increase of $ and an increase of $ 417 million in common stock repurchase stock repurchas Net income \u2013 \u2013 Net income $ 7,346 $ 7,829 $ 9,993 Basic Net income $ 7,346 $ 7,829 $ 9,993 Basic earnings per $ 7,346 $ 7,829 $ 9,993 Basic earnings per share ( Basic earnings per share ( 1 ) : Before accounting change : Before accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative effect of $ 0.72 $ 0.72 $ 0.93 Cumulative effect of accounting change effect of accounting change ( 0.03 ) \u2013 \u2013 $ 0.69 0.03 ) \u2013 \u2013 $ 0.69 $ 0.72 $ 0.93 Diluted \u2013 \u2013 $ 0.69 $ 0.72 $ 0.93 Net income Year Ended June 30 2001 2002 2003 Operations Net income $ Ended June 30 2001 2002 2003 Operations Net income $ 7,346 2003 Operations Net income $ 7,346 $ 7,829 $ 9,993 Cumulative Net income $ 7,346 $ 7,829 $ 9,993 Cumulative effect of $ 7,346 $ 7,829 $ 9,993 Cumulative effect of accounting change change , net of tax 375 \u2013 \u2013 Depreciation , amortization , and other noncash item 1,536 1,084 1,439 Net recognized loss and other noncash item 1,536 1,084 1,439 Net recognized loss on other noncash item Net income 7,346 , beginning of year 18,173 18,899 20,533 Net income 7,346 7,829 beginning of year 18,173 18,899 20,533 Net income 7,346 7,829 9,993 18,173 18,899 20,533 Net income 7,346 7,829 9,993 Other comprehensive income 18,899 20,533 Net income 7,346 7,829 9,993 Other comprehensive income : 20,533 Net income 7,346 7,829 9,993 Other comprehensive income : Cumulative effect of accounting change ( 75 ) \u2013 \u2013 Net gains/ loss ) on derivative instrument 634 ( 91 ) ( 102 on derivative instrument 634 ( 91 ) ( Net income ) Year Ended June 30 2001 2002 2003 Net income , Year Ended June 30 2001 2002 2003 Net income , a Ended June 30 2001 2002 2003 Net income , a reported income , a reported $ 7,346 $ 7,829 $ 9,993 Add a reported $ 7,346 $ 7,829 $ 9,993 Add : Stock-based $ 7,346 $ 7,829 $ 9,993 Add : Stock-based employee compensation income , net of tax 144 99 52 Deduct : Total , net of tax 144 99 52 Deduct : Total stock-based net of tax 144 99 52 Deduct : Total stock-based employee , net of tax ( 2,406 ) ( 2,573 net income Pro forma net income $ 5,084 $ 5,355 $ 7,531 Earnings net income $ 5,084 $ 5,355 $ 7,531 Earnings per share $ 5,084 $ 5,355 $ 7,531 Earnings per share : Basic Basic \u2013 a reported $ 0.69 $ 0.72 $ 0.93 Basic a reported $ 0.69 $ 0.72 $ 0.93 Basic \u2013 pro $ 0.69 $ 0.72 $ 0.93 Basic \u2013 pro forma $ Basic \u2013 pro forma $ 0.48 $ 0.50 $ 0.70 Diluted pro forma $ 0.48 $ 0.50 $ 0.70 Diluted \u2013 a $ 0.48 $ 0.50 $ 0.70 Diluted \u2013 a reported $ Diluted \u2013 a reported $ 0.66 $ 0.70 $ 0.92 Diluted a reported $ 0.66 $ 0.70 net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 2001 , we adopted . Effective July 1 , 2001 , we adopted SFAS 141 2001 , we adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 . SFAS 141 requires business and SFAS 142 . SFAS 141 requires business combination initiated after business combination initiated after June 30 , 2001 to be accounted initiated after June 30 , 2001 to be accounted for using separate from goodwill . SFAS 142 requires that goodwill Net income and earnings earnings per share for fiscal 2001 adjusted to exclude amortization expense share ) Year Ended June 30 2001 Net income : Reported ) Year Ended June 30 2001 Net income : Reported net : Reported net income $ 7,346 Goodwill amortization 252 Equity method income $ 7,346 Goodwill amortization 252 Equity method goodwill amortization 26 252 Equity method goodwill amortization 26 Adjusted net income $ 7,624 26 Adjusted net income $ 7,624 Basic earnings per share : basic earnings per share Net income $ 7,346 $ 5,084 $ 7,829 $ Net income $ 7,346 $ 5,084 $ 7,829 $ 5,355 $ $ 7,346 $ 5,084 $ 7,829 $ 5,355 $ 9,993 $ $ 5,084 $ 7,829 $ 5,355 $ 9,993 $ 7,531 Basic $ 7,829 $ 5,355 $ 9,993 $ 7,531 Basic earnings per $ 5,355 $ 9,993 $ 7,531 Basic earnings per share $ Basic earnings per share $ 0.69 $ 0.48 $ 0.72 $ per share $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted earnings per $ 0.50 $ 0.93 $ 0.70 Net income 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( 2 5,504 5,710 21,841 Net income 2,206 ( 2 ) 2,624 2,451 21,841 Net income 2,206 ( 2 ) 2,624 2,451 65 ( income 2,206 ( 2 ) 2,624 2,451 65 ( 3 ) 2,206 ( 2 ) 2,624 2,451 65 ( 3 ) 7,346 ( 2 ) 2,624 2,451 65 ( 3 ) 7,346 Basic ) 2,624 2,451 65 ( 3 ) 7,346 Basic earnings per 2,451 65 ( 3 ) 7,346 Basic earnings per sh Net income 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( 4 5,850 5,885 23,174 Net income 1,283 ( 4 ) 2,283 2,738 23,174 Net income 1,283 ( 4 ) 2,283 2,738 ( 5 income 1,283 ( 4 ) 2,283 2,738 ( 5 ) 1,525 1,283 ( 4 ) 2,283 2,738 ( 5 ) 1,525 ( 4 ) 2,283 2,738 ( 5 ) 1,525 ( 6 ) 2,283 2,738 ( 5 ) 1,525 ( 6 ) 7,829 Basic ( 5 ) 1,525 ( 6 ) 7,829 Basic earnings per ) 1,525 ( Net income 32,187 Gross profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 Gross profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 2,552 profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 2,552 2,794 6,620 6,827 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic 6,827 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings per Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings per share income 2,726 2,552 2,794 1,92", + "assets": "Assets , $ 272 million which offset the 15 272 million which offset the 15 % growth in headcount-related cost headcount-related cost . In fiscal 2001 , research and development expense and development expense were $ 4.38 billion , an increase of billion , an increase of 16 % compared to fiscal 2000 16 % compared to fiscal 2000 . The increase in research development expense resulted from a 11 % increase in headcount-related cost in headcount-related cost and a 23 % increase in investment in in new prod Assets . SFAS 141 requires business combination to be separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Goodwill amortization ( on pre-tax basis ) wa $ 311 million in fiscal 2001 . $ 311 million in fiscal 2001 . Effective July 1 , fiscal 2001 . Effective July 1 , 2000 , we adopted . Effective July 1 , 2000 , we adopted SFAS 133 2000 , we adopted SFAS 133 , Accounting for Derivative Instruments . The adoption of SFAS 133 resulted in a cumulative p Assets Current asset In million ) June 30 2002 2003 Assets Current asset : million ) June 30 2002 2003 Assets Current asset : Cash : Cash and equivalent $ 3,016 $ 6,438 Short-term investment 35,636 and equivalent $ 3,016 $ 6,438 Short-term investment 35,636 42,610 Total 3,016 $ 6,438 Short-term investment 35,636 42,610 Total cash and short-term $ 6,438 Short-term investment 35,636 42,610 Total cash and short-term investment Total cash and short-term investment 38,652 49,048 Accounts receivable , net c Assets 404 Goodwill $ 1,426 $ 3,128 Note 10\u2014Intangible Assets During fiscal $ 1,426 $ 3,128 Note 10\u2014Intangible Assets During fiscal 2003 , Note 10\u2014Intangible Assets During fiscal 2003 , we recorded addition of we recorded addition of $ 306 million in intangible asset , , Ltd. , with $ 19 million allocated to marketing related marketing related asset , $ 97 million to technology-based asset , to technology-based asset , $ 162 million to contract based asset based asset , and $ 28 million to customer-re Assets $ ) Total Intangible Assets $ 608 $ ( 365 ) $ Assets $ 608 $ ( 365 ) $ 907 $ ( $ ( 365 ) $ 907 $ ( 523 ) Amortization ) $ 907 $ ( 523 ) Amortization expense is estimated is estimated to be $ 151 million for fiscal 2004 , $ 151 million for fiscal 2004 , $ 103 million for for fiscal 2004 , $ 103 million for fiscal 2005 , $ 103 million for fiscal 2005 , $ 56 million for for fiscal 2005 , $ 56 million for fiscal 2006 , $ 56 million for fiscal 2006 , $ 39 million for for fiscal 2006 , $ 39 million f Assets Acquired $ ) Net Assets Acquired $ 1,465 $ 377 $ 202 Of Assets Acquired $ 1,465 $ 377 $ 202 Of the $ $ 1,465 $ 377 $ 202 Of the $ 169 million $ 202 Of the $ 169 million of acquired intangible asset the Navision acquisition , $ 2 million wa assigned to research off in accordance with FIN 4 . Those write-off are included expense . The remaining $ 167 million of acquired intangible asset amount include technology of $ 48 million ( four-year weighted-average useful ) , contract of $ 115 million ( s Assets , effective July 1 , 2001 . /s/ D , effective July 1 , 2001 . /s/ D ELOITTE & LLP Seattle , Washington July 17 , 2003 ( September 3 , Washington July 17 , 2003 ( September 3 , 2003 17 , 2003 ( September 3 , 2003 a to certain 2003 ( September 3 , 2003 a to certain information in to certain information in Note 20 ) 40 / MSFT 2003 information in Note 20 ) 40 / MSFT 2003 FORM 10-K 20 ) 40 / MSFT 2003 FORM 10-K Table of Contents 40 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , I", + "liabilities": "Liabilities and stockholder Total asset $ 67,646 $ 79,571 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 Short-term compensation 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 1,145 1,416 Income tax 2,022 2,044 Short-ter Liabilities ( 180 Total asset acquired 1,614 389 247 Current Liabilities ( 148 Total asset acquired 1,614 389 247 Current Liabilities ( 148 ) 389 247 Current Liabilities ( 148 ) ( 12 ) ( Liabilities ( 148 ) ( 12 ) ( 32 ) Long-term ) ( 12 ) ( 32 ) Long-term liability ( 1 32 ) Long-term liability ( 1 ) \u2013 ( 13 ) ( 1 ) \u2013 ( 13 ) Total liability assumed ( ) Total liability assumed ( 149 ) ( 12 ) ( assumed ( 149 ) ( 12 ) ( 45 ) Net ) ( 12 ) ( 45 ) Net Assets Acquired $ ) Net Assets Acquired $ 1,465 $ 377 $ 202 Of", + "equity": "equity Total asset 38,321 51,694 58,830 67,646 79,571 Stockholders \u2019 equity 28,438 asset 38,321 51,694 58,830 67,646 79,571 Stockholders \u2019 equity 28,438 41,368 67,646 79,571 Stockholders \u2019 equity 28,438 41,368 47,289 52,180 61,020 ( 79,571 Stockholders \u2019 equity 28,438 41,368 47,289 52,180 61,020 ( 1 Stockholders \u2019 equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) \u2019 equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) Earnings equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) Earnings per 41,368 47,289 52,180 6 equity investment in fiscal 2002 in conjunction with the underlying investees and other in fiscal 2001 reflected an increase in the million ) Year Ended June 30 2001 2002 2003 Dividends $ ) Year Ended June 30 2001 2002 2003 Dividends $ 377 Year Ended June 30 2001 2002 2003 Dividends $ 377 $ Ended June 30 2001 2002 2003 Dividends $ 377 $ 357 2001 2002 2003 Dividends $ 377 $ 357 $ 260 Interest 2003 Dividends $ 377 $ 357 $ 260 Interest 1,808 1,762 $ 377 $ 357 $ 260 Interest 1,808 1,762 1,697 Net $ 357 $ equity at June 30 , 2003 wa $ 61.02 equity at June 30 , 2003 wa $ 61.02 billion . 30 , 2003 wa $ 61.02 billion . We will continue constructing new building were $ 117 million on June 30 , $ 117 million on June 30 , 2003 . We have million on June 30 , 2003 . We have not engaged for operating lease wa $ 281 million , $ 318 million $ 281 million , $ 318 million , and $ 290 318 million , and $ 290 million in 2001 , 2002 and $ 290 million in 2001 , 2002 , and 2003 290 million in 2001 , 2002 , and 2003 , re equity , interest re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 th over 20 day at the 97.5 th percentile confidence level . in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the of future market risk . 18 / MSFT 2003 FORM 10-K risk . 18 / MSFT 2003 FORM 10-K Table of Contents 18 / MSFT 2003 FORM 10-K Equity $ 141 $ 156 $ 333 $ 41 Equity price $ $ 156 $ 333 $ 41 Equity price $ 602 $ $ 41 Equity price $ 602 $ 869 $ 838 $ Equity price $ 602 $ 869 $ 838 $ 1,083 $ $ 602 $ 869 $ 838 $ 1,083 $ 523 The $ 869 $ 838 $ 1,083 $ 523 The total VAR $ 838 $ 1,083 $ 523 The total VAR for the combined risk category is $ 987 million at June 30 , $ 987 million at June 30 , 2003 and $ 908 million at June 30 , 2003 and $ 908 million at 30 , 2003 and $ 908 million at June 30 , $ 908 million at June 30 , 2002 . The total equity 16,455 18,970 Operating income 11,720 11,910 13,217 Losses on equity investees 18,970 Operating income 11,720 11,910 13,217 Losses on equity investees and equity investees and other ( 159 ) ( 92 ) ( other ( 159 ) ( 92 ) ( 68 ) Investment ) ( 92 ) ( 68 ) Investment income/ ( loss income/ ( loss ) ( 36 ) ( 305 ) 1,577 ) ( 36 ) ( 305 ) 1,577 Income before income 36 ) ( 305 ) 1,577 Income before income tax 11,525 1,577 Income before income tax 11,525 11,513 14,726 Provision for income Income before Equity and other investment and equipment , net 2,268 2,223 Equity and other investment 14,191 2,223 Equity and other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible Equity and other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset , net investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset , net 243 3,128 Intangible asset , net 243 384 Other long-term asset 942 Intangible asset , net 243 384 Other lon equity liability : Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 Short-term compensation 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 7,225 2,022 2,044 Short-term unearned revenue 5,920 7,225 equity 583 and $ 1,840 20,533 25,676 Total stockholder \u2019 equity 52,180 25,676 Total stockholder \u2019 equity 52,180 61,020 Total liability and stockholder Total stockholder \u2019 equity 52,180 61,020 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 67,646 $ 79,571 See accompanying note \u2019 equity $ 67,646 $ 79,571 See accompanying note . 20 79,571 See accompanying note . 20 / MSFT 2003 FORM 10-K note . 20 / MSFT 2003 FORM 10-K Table of Contents 20 / MSFT 2003 FORM 10-K Table of Contents Part II Cont EQUITY STATEMENTS ( million ) Year Ended June 30 2001 2002 2003 Common stock ) Year Ended June 30 2001 2002 2003 Common stock and Year Ended June 30 2001 2002 2003 Common stock and paid-in Ended June 30 2001 2002 2003 Common stock and paid-in capital , beginning of year $ 23,195 $ 28,390 $ 31,647 Common of year $ 23,195 $ 28,390 $ 31,647 Common stock issued $ 23,195 $ 28,390 $ 31,647 Common stock issued 5,154 1,801 $ 31,647 Common stock issued 5,154 1,801 3,012 Common stock repurchased 31,647 Common s equity end of year 18,899 20,533 25,676 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 47,289 $ 52,180 $ 61,020 See \u2019 equity $ 47,289 $ 52,180 $ 61,020 See accompanying note $ 47,289 $ 52,180 $ 61,020 See accompanying note . 22 61,020 See accompanying note . 22 / MSFT 2003 FORM 10-K note . 22 / MSFT 2003 FORM 10-K Table of Contents 22 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 NOTES TO FINANCIAL STATEMENTS Note NOTES TO FINANCIAL STATEMENTS Note 1\u2014Accounting P Equity method income $ 7,346 Goodwill amortization 252 Equity method goodwill amortization 26 252 Equity method goodwill amortization 26 Adjusted net income $ 7,624 26 Adjusted net income $ 7,624 Basic earnings per share : basic earnings per share $ 0.69 Goodwill amortization 0.02 Equity method share $ 0.69 Goodwill amortization 0.02 Equity method goodwill amortization \u2013 basic earnings per share $ 0.71 Diluted earnings per share : diluted earnings per share $ 0.66 Goodwill amortization 0.02 Equity met Equity method goodwill amortization \u2013 diluted earnings per share $ 0.68 Note 4\u2014Unearned Revenue Unearned revenue per share $ 0.68 Note 4\u2014Unearned Revenue Unearned revenue from volume undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price ( In million ) June Equity and $ 929 million . Note 8\u2014Equity and Other Investments ( In Unrealized Losses Recorded Basis June 30 , 2002 Debt security recorded Recorded Basis June 30 , 2002 Debt security recorded at market : Within one year $ 485 $ 26 $ \u2013 $ one year $ 485 $ 26 $ \u2013 $ 511 Between $ 26 $ \u2013 $ 511 Between 2 and 10 year $ \u2013 $ 511 Between 2 and 10 year 893 46 $ 511 Between 2 and 10 year 893 46 ( 4 Between 2 and 10 year 893 46 ( 4 ) 935 2 and 10 year 893 46 ( 4 ) 935 Between 10 year 893 46 ( 4 ) 935 Between 10 an Equity and Other investment 519 \u2013 \u2013 519 Equity and other investment $ Equity and other investment $ 13,436 $ 1,378 $ ( 623 other investment $ 13,436 $ 1,378 $ ( 623 ) $ 13,436 $ 1,378 $ ( 623 ) $ 14,191 ( In $ ( 623 ) $ 14,191 ( In million ) Cost Unrealized Losses Recorded Basis June 30 , 2003 Debt security recorded Recorded Basis June 30 , 2003 Debt security recorded at market : Within one year $ 293 $ 9 $ \u2013 $ one year $ 293 $ 9 $ \u2013 $ 302 Between $ 9 $ \u2013 $ 302 Between 2 and 10 year $ \u2013 $ 302 Between Equity and Other investment 493 \u2013 \u2013 493 Equity and other investment $ Equity and other investment $ 11,879 $ 1,889 $ ( 76 other investment $ 11,879 $ 1,889 $ ( 76 ) $ 11,879 $ 1,889 $ ( 76 ) $ 13,692 Debt security $ ( 76 ) $ 13,692 Debt security include corporate and exchanged it AT & T 5 % convertible preferred debt for % convertible preferred debt for 115 million share of Comcast Corporation of Comcast Corporation on November 18 , 2002 , resulting in Corporation on November 18 , 2002 , resulting in Equity billion in 2003 . Note 14\u2014Stockholders \u2019 Equity Shares of common million ) Year Ended June 30 2001 2002 2003 Balance , ) Year Ended June 30 2001 2002 2003 Balance , beginning Year Ended June 30 2001 2002 2003 Balance , beginning of Ended June 30 2001 2002 2003 Balance , beginning of year Balance , beginning of year 10,566 10,766 10,718 Issued 378 208 , beginning of year 10,566 10,766 10,718 Issued 378 208 291 beginning of year 10,566 10,766 10,718 Issued 378 208 291 Repurchased year 10,566 10,7 equity income 11,720 8,343 11,910 8,272 13,217 9,545 Losses on equity investees 11,720 8,343 11,910 8,272 13,217 9,545 Losses on equity investees and equity investees and other ( 159 ) ( 159 ) ( other ( 159 ) ( 159 ) ( 92 ) ( ) ( 159 ) ( 92 ) ( 92 ) ( ) ( 92 ) ( 92 ) ( 68 ) ( ) ( 92 ) ( 68 ) ( 68 ) Investment ) ( 68 ) ( 68 ) Investment income/ ( loss income/ ( loss ) ( 36 ) ( 36 ) ( ) ( 36 ) ( 36 ) ( 305 ) ( ) ( 36 ) ( 305 ) ( 305 ) 1,577 ) ( 305 ) ( 305 ) 1,577 1,577 Income before 305 ) ( 305 ) 1,577", + "cash_flow": "cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument . STOCK-BASED COMPENSATION On July 8 , 2003 , we announced COMPENSATION On July 8 , 2003 , we announced change in stock-based compensation for more than 600 of our senior leader will plan by the end of 2003 . In addition to announcing value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , effective July 1 , Cash flow from operation wa flow from operation wa $ 13.42 billion in fiscal 2001 , $ 13.42 billion in fiscal 2001 , an increase of $ , an increase of $ 2.00 billion from the prior year used for financing wa $ 5.59 billion in fiscal 2001 , $ 5.59 billion in fiscal 2001 , an increase of $ , an increase of $ 3.39 billion from the prior year of put warrant in fiscal 2001 , compared to the sale retired or exercised during fiscal 2001 . During fiscal 2001 , fiscal 2001 . During fiscal 2001 , we repurchased 17 cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument in OCI a of July 1 , 2000 were reclassified into a of July 1 , 2000 were reclassified into earnings during the twelve month ended June 30 , 2001 . The change month ended June 30 , 2001 . The change in accounting from the adoption of SFAS 133 did not materially affect net materially affect net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 200", + "accumulated_depreciation": "Accumulated depreciation ( 3,623 equipment \u2013 at cost 5,891 6,078 Accumulated depreciation ( 3,623 ) 5,891 6,078 Accumulated depreciation ( 3,623 ) ( 3,855 ) Property depreciation ( 3,623 ) ( 3,855 ) Property and equipment \u2013 and equipment \u2013 net $ 2,268 $ 2,223 During 2001 , \u2013 net $ 2,268 $ 2,223 During 2001 , 2002 , $ 2,268 $ 2,223 During 2001 , 2002 , and 2003 $ 2,223 During 2001 , 2002 , and 2003 , depreciation 2001 , 2002 , and 2003 , depreciation expense , the computer equipment , wa $ 764 million , $ 820 million $ ", + "debt": "debt for the year . In fiscal 2002 , other-than-temporary impairment primarily related of investment included a $ 1.25 billion gain on sale of and dividend income decreased $ 66 million from fiscal 2001 a $ 66 million from fiscal 2001 a a result of lower dividend income . In fiscal 2001 , other-than-temporary impairment primarily related sale of investment in fiscal 2001 included a gain from our and dividend income increased $ 591 million from fiscal 2000 , $ 591 million from fiscal 2000 , reflectin Debt security recorded Recorded Basis June 30 , 2002 Debt security recorded at market : Within one year $ 485 $ 26 $ \u2013 $ one year $ 485 $ 26 $ \u2013 $ 511 Between $ 26 $ \u2013 $ 511 Between 2 and 10 year $ \u2013 $ 511 Between 2 and 10 year 893 46 $ 511 Between 2 and 10 year 893 46 ( 4 Between 2 and 10 year 893 46 ( 4 ) 935 2 and 10 year 893 46 ( 4 ) 935 Between 10 year 893 46 ( 4 ) 935 Between 10 and 893 46 ( 4 ) 935 Between 10 and 15 year ( 4 ) 935 Between 10 and 15 year 541 19 ) 935 Between 10 and 15 year 541 Debt security 15 year 3,036 \u2013 \u2013 3,036 Debt security recorded at market Debt security recorded at market 4,955 91 ( 6 ) 5,040 security recorded at market 4,955 91 ( 6 ) 5,040 Common at market 4,955 91 ( 6 ) 5,040 Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,580 5,040 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Preferred and warrant 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,382 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,3 Debt security recorded Recorded Basis June 30 , 2003 Debt security recorded at market : Within one year $ 293 $ 9 $ \u2013 $ one year $ 293 $ 9 $ \u2013 $ 302 Between $ 9 $ \u2013 $ 302 Between 2 and 10 year $ \u2013 $ 302 Between 2 and 10 year 1,436 194 $ 302 Between 2 and 10 year 1,436 194 ( 73 Between 2 and 10 year 1,436 194 ( 73 ) 1,557 2 and 10 year 1,436 194 ( 73 ) 1,557 Debt 10 year 1,436 194 ( 73 ) 1,557 Debt security recorded 1,436 194 ( 73 ) 1,557 Debt security recorded at market Debt security recorded at mar Debt security $ ( 76 ) $ 13,692 Debt security include corporate and exchanged it AT & T 5 % convertible preferred debt for % convertible preferred debt for 115 million share of Comcast Corporation of Comcast Corporation on November 18 , 2002 , resulting in Corporation on November 18 , 2002 , resulting in a $ , resulting in a $ 20 million net recognized loss . at cost . At June 30 , 2002 the recorded basis . At June 30 , 2002 the recorded basis of these of these investment wa $ 2.31 billion , and the", + "share_repurchase": "share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion for fiscal 2002 , an increase of $ , an increase of $ 1.09 billion from fiscal 2001 . $ 1.09 billion from fiscal 2001 . The increase reflected strong Upgrade Advanta share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from fiscal 2001 . $ 2", + "earnings_per_share": "earnings per share income 7,785 9,421 7,346 7,829 9,993 Diluted earnings per share before share before accounting change ( 1 ) 0.71 0.85 0.69 0.70 accounting change ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted change ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per share ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.71 0.85 0.66 0.70 per share ( 1 ) 0.71 0.85 0.66 0.70 0.92 C Earnings per share have two-for-one stock split in February 2003 . ( 2 ) Fiscal in February 2003 . ( 2 ) Fiscal year 2001 includes ( 2 ) Fiscal year 2001 includes an unfavorable cumulative effect of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per diluted share , reflecting adoption of SFAS No . 133 , and $ 4.80 billion . 133 , and $ 4.80 billion ( pre-tax ) in and telecommunication investment . ( 3 ) Fiscal year 2002 includes ( 3 ) Fiscal year 2002 includes $ 4.32 billion ( Fiscal yea earnings per share ( Basic earnings per share ( 1 ) : Before accounting change : Before accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative effect of $ 0.72 $ 0.72 $ 0.93 Cumulative effect of accounting change effect of accounting change ( 0.03 ) \u2013 \u2013 $ 0.69 0.03 ) \u2013 \u2013 $ 0.69 $ 0.72 $ 0.93 Diluted \u2013 \u2013 $ 0.69 $ 0.72 $ 0.93 Diluted earnings per $ 0.69 $ 0.72 $ 0.93 Diluted earnings per share ( Diluted earnings per share ( 1 ) : Before accounting change : Before account Earnings per share and two-for-one stock split in February 2003 . See accompanying note . . See accompanying note . 19 / MSFT 2003 FORM 10-K note . 19 / MSFT 2003 FORM 10-K Table of Contents 19 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2002 2003 Assets Current asset In million ) June 30 2002 2003 Assets Current asset : million ) June 30 2002 2003 Assets Current asset : Cash : Cash and equivalent $ 3,016 $ 6,438 Short-term investmen Earnings per share $ 5,084 $ 5,355 $ 7,531 Earnings per share : Basic Basic \u2013 a reported $ 0.69 $ 0.72 $ 0.93 Basic a reported $ 0.69 $ 0.72 $ 0.93 Basic \u2013 pro $ 0.69 $ 0.72 $ 0.93 Basic \u2013 pro forma $ Basic \u2013 pro forma $ 0.48 $ 0.50 $ 0.70 Diluted pro forma $ 0.48 $ 0.50 $ 0.70 Diluted \u2013 a $ 0.48 $ 0.50 $ 0.70 Diluted \u2013 a reported $ Diluted \u2013 a reported $ 0.66 $ 0.70 $ 0.92 Diluted a reported $ 0.66 $ 0.70 $ 0.92 Diluted \u2013 pro $ 0.66 $ 0.70 $ 0.92 Diluted \u2013 pro forma $ Diluted \u2013 pro forma $ 0.46 $ 0.48 $ 0.69 Not earnings per share for fiscal 2001 adjusted to exclude amortization expense share ) Year Ended June 30 2001 Net income : Reported ) Year Ended June 30 2001 Net income : Reported net : Reported net income $ 7,346 Goodwill amortization 252 Equity method income $ 7,346 Goodwill amortization 252 Equity method goodwill amortization 26 252 Equity method goodwill amortization 26 Adjusted net income $ 7,624 26 Adjusted net income $ 7,624 Basic earnings per share : basic earnings per share $ 0.69 Goodwill amortization 0.0 earnings per share $ 0.71 Diluted earnings per share : diluted earnings per share $ 0.66 Goodwill amortization 0.02 Equity method share $ 0.66 Goodwill amortization 0.02 Equity method goodwill amortization \u2013 diluted earnings per share $ 0.68 Note 4\u2014Unearned Revenue Unearned revenue per share $ 0.68 Note 4\u2014Unearned Revenue Unearned revenue from volume undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , appro earnings per share $ Basic earnings per share $ 0.69 $ 0.48 $ 0.72 $ per share $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted earnings per $ 0.50 $ 0.93 $ 0.70 Diluted earnings per share $ Diluted earnings per share $ 0.66 $ 0.46 $ 0.70 $ per share $ 0.66 $ 0.46 $ 0.70 $ 0.48 $ $ 0.66 $ 0.46 $ 0.70 $ 0.48 $ 0.92 $ $ 0.46 $ 0.70 $ 0.48 $ 0.92 $ 0.69 33 $ 0.70 $ 0.48 $ 0.92 $ 0.69 33 / MSFT $ 0.48 $ 0.92 $ 0.69 33 / M Earnings Per Share , and 2003 . Note 17\u2014Earnings Per Share Basic earnings per share ) Year Ended June 30 2001 2002 2003 Income before ) Year Ended June 30 2001 2002 2003 Income before accounting Year Ended June 30 2001 2002 2003 Income before accounting change Ended June 30 2001 2002 2003 Income before accounting change $ Income before accounting change $ 7,721 $ 7,829 $ 9,993 Weighted accounting change $ 7,721 $ 7,829 $ 9,993 Weighted average outstanding $ 7,721 $ 7,829 $ 9,993 Weighted average outstanding share Earnings per share and common stock equivalent 11,148 11,106 10,882 Earnings per share before common stock equivalent 11,148 11,106 10,882 Earnings per share before accounting accounting change : Basic $ 0.72 $ 0.72 $ 0.93 Diluted : Basic $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For the year $ 0.69 $ 0.70 $ 0.92 For the year ended June For the year ended June 30 , 2001 , 2002 and year ended June 30 earnings per share ( Basic earnings per share ( 1 ) 0.21 ( 2 ) per share ( 1 ) 0.21 ( 2 ) 0.25 0.23 ( 1 ) 0.21 ( 2 ) 0.25 0.23 0.01 0.69 ) 0.21 ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings 0.21 ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per share 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.20 ( 2 ) per share ( 1 ) 0.20 ( 2 ) 0.24 0.22 ( 1 ) 0.20 ( 2 ) 0.24 0.22 0.01 0.66 ) 0.20 ( 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 0.20 ( 2 ) earnings per share ( Basic earnings per share ( 1 ) 0.12 0.21 0.25 0.14 per share ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted share ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per share ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.12 0.21 0.25 0.14 per share ( 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal share ( 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 ( 1 ) 0.12 0.21 0.25 0.14 0.7 earnings per share income 2,726 2,552 2,794 1,921 9,993 Basic earnings per share 0.25 9,993 Basic earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted Basic earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per share share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per share 0.25 0.93 Diluted earnings per share 0.25 0.23 0.26 0.18 0.92 ( Diluted earnings per share 0.25 0.23 0.26 0.18 0.92 earnings per share 0.25 0.23 0.26 0.18 0.92 ( 1 ) per share 0.25 0.23 0.26 0.18 0.92 ( 1 ) Earnings share 0.25 0.23 0.26 0.18 0.92 ( 1 ) Earnings per 0.23 0.26 0.18 0.92 ( 1 ) Earnings per share have two-for-one stock split in February 2003 . ( 2 ) Includes in February 2003 . ( 2 ) Includes an unfavorable cumulative of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per basic share and diluted adoption of SFAS No . 133 . ( 3 ) Includes No . 133 . ( 3 ) Includes $ 3.92 billion ( 3 ) Includ", + "tax_rate": "tax rate for fiscal 2003 wa 32 % , reflecting rate for fiscal 2003 wa 32 % , reflecting a one-time the second quarter of $ 126 million from the reversal of tax reversal stem from a 9th Circuit Court of Appeals ruling of Appeals ruling in December 2002 overturning a previous Tax Court tax rate would have been 33 % . The effective tax effective tax rate for fiscal 2001 and fiscal 2002 wa 33 for fiscal 2001 and fiscal 2002 wa 33 % and 32 2001 and fiscal 2002 wa 33 % and 32 % , 2002 wa 33 % and 32 % , respe tax rate the effective tax rate wa 33.0 % and included the effect included the effect of a 3.1 % reduction from the U.S. for tax credit and a 1.1 % increase for other item The effective tax rate in 2002 wa 32.0 % and included tax rate in 2002 wa 32.0 % and included the effect included the effect of a 2.4 % reduction from the U.S. exclusion tax benefit and a 0.6 % reduction for other item The effective tax rate in 2003 wa 32.1 % and included tax rate in 2003 wa 32.1 % and included the effect a one-time b tax rate in 2003 would have been 33.0 % in 2003 would have been 33.0 % . 30 / MSFT have been 33.0 % . 30 / MSFT 2003 FORM 10-K % . 30 / MSFT 2003 FORM 10-K Table of Contents 30 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Deferred income tax were : ( In million ) June 30 2002 2003 Deferred income tax In million ) June 30 2002 2003 Deferred income tax asset million ) June 30 2002 2003 Deferred income tax asset : asset : Revenue item $ 2,261 $ 2,556 Expense item 945 Revenue it", + "investment_gains_losses": "investment gains investment gains investment gains", + "common_stock": "common stock a of August 15 , 2003 wa 10,813,984,831 . a of August 15 , 2003 wa 10,813,984,831 . DOCUMENTS INCORPORATED August 15 , 2003 wa 10,813,984,831 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 11 , 2003 are incorporated by be held November 11 , 2003 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2003 INDEX PART I Year Ended June 30 , 2003 INDEX PART I Item 1. 2003 INDEX PART I Item 1. B Common stock 31 June 30 Year Fiscal 2002 Common stock price per share stock price per share ( 1 ) : High $ 36.29 1 ) : High $ 36.29 $ 34.75 $ 34.93 $ : High $ 36.29 $ 34.75 $ 34.93 $ 30.19 $ $ 36.29 $ 34.75 $ 34.93 $ 30.19 $ 36.29 Low $ 34.75 $ 34.93 $ 30.19 $ 36.29 Low 24.86 25.90 $ 34.93 $ 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 $ 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 Common Common stock Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 Common stock price 25.90 29.00 24.31 24.31 Fiscal 2003 Common stock price per share stock price per share ( 1 ) : High $ 27.43 1 ) : High $ 27.43 $ 29.12 $ 28.49 $ : High $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 1 common stock under the Securities Act of 1933 on the basis of the the exemption provided by Rule 802 thereunder . Rule 802 exempts Rule 802 thereunder . Rule 802 exempts offer and sale in acquisition , we have issued 23,009 share of our common stock of our common stock to 16 employee in exchange for 10,136 16 employee in exchange for 10,136 ordinary share of Navision that the Securities Act . ITEM 6 . Selected Financial Data Financial share ) Year Ended June 30 1999 2000 2001 ( 2 ) Year Ended June 30 1999 2 common stock repurchase stock repurchase , offsetting $ 623 million received for common stock stock issued . We repurchased 238.2 million share of common stock share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion f common stock share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from Common stock Net cash from operation 13,422 14,509 15,797 Financing Common stock issued cash from operation 13,422 14,509 15,797 Financing Common stock issued 1,620 15,797 Financing Common stock issued 1,620 1,497 2,120 Common stock repurchased Financing Common stock issued 1,620 1,497 2,120 Common stock repurchased ( Common stock issued 1,620 1,497 2,120 Common stock repurchased ( 6,074 2,120 Common stock repurchased ( 6,074 ) ( 6,069 ) ( repurchased ( 6,074 ) ( 6,069 ) ( 6,486 ) Repurchases ) ( 6,069 ) ( Common stock stock dividend \u2013 \u2013 ( 857 ) Other , net 235 857 ) Other , net 235 \u2013 \u2013 Net cash used cash used for financing ( 5,586 ) ( 4,572 ) ( financing ( 5,586 ) ( 4,572 ) ( 5,223 ) Investing ) ( 4,572 ) ( 5,223 ) Investing Additions to property to property and equipment ( 1,103 ) ( 770 ) ( equipment ( 1,103 ) ( 770 ) ( 891 ) Acquisitions ) ( 770 ) ( 891 ) Acquisitions of company , cash acquired \u2013 \u2013 ( 1,063 ) Purchases of investment ( ) Purchases of investment ( 66,346 ) ( 89,386 ) ( investment ( 66,346 ) ( Common stock ) Year Ended June 30 2001 2002 2003 Common stock and Year Ended June 30 2001 2002 2003 Common stock and paid-in Ended June 30 2001 2002 2003 Common stock and paid-in capital , beginning of year $ 23,195 $ 28,390 $ 31,647 Common of year $ 23,195 $ 28,390 $ 31,647 Common stock issued $ 23,195 $ 28,390 $ 31,647 Common stock issued 5,154 1,801 $ 31,647 Common stock issued 5,154 1,801 3,012 Common stock repurchased 31,647 Common stock issued 5,154 1,801 3,012 Common stock repurchased ( Common stock Common stock repurchased ( 394 3,012 Common stock repurchased ( 394 ) ( 676 ) ( repurchased ( 394 ) ( 676 ) ( 691 ) Repurchases ) ( 676 ) ( 691 ) Repurchases of put warrant Repurchases of put warrant ( 1,367 ) \u2013 \u2013 Stock option Stock option income tax benefit 2,066 1,596 1,376 Other , net option income tax benefit 2,066 1,596 1,376 Other , net ( income tax benefit 2,066 1,596 1,376 Other , net ( 264 1,376 Other , net ( 264 ) 536 \u2013 Balance , , net ( 264 ) 536 \u2013 Balance , end of Balance , end of year 28,390 31 Common stock repurchased 82 116 Comprehensive income 6,406 7,825 11,250 Common stock repurchased ( 116 Comprehensive income 6,406 7,825 11,250 Common stock repurchased ( 5,680 11,250 Common stock repurchased ( 5,680 ) ( 6,191 ) ( repurchased ( 5,680 ) ( 6,191 ) ( 5,250 ) Common ) ( 6,191 ) ( 5,250 ) Common stock dividend \u2013 stock dividend \u2013 \u2013 ( 857 ) Balance , end of Balance , end of year 18,899 20,533 25,676 Total stockholder \u2019 , end of year 18,899 20,533 25,676 Total stockholder \u2019 equity end of year 18,899 Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,580 5,040 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Preferred and warrant 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,382 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,382 \u2013 \u2013 617 ) 7,250 Preferred stock 1,382 \u2013 \u2013 1,382 Other investment Preferred stock 1,382 \u2013 \u2013 1,382 Other investment 519 \u2013 \u2013 \u2013 \u2013 1,382 Other investment 519 \u2013 \u2013 519 Equity and Other investment 519 \u2013 \u2013 519 Equity and other Common stock and 1,729 203 ( 73 ) 1,859 Common stock and warrant 8,395 1,859 Common stock and warrant 8,395 1,686 ( 3 ) 10,078 Common stock and warrant 8,395 1,686 ( 3 ) 10,078 Preferred and warrant 8,395 1,686 ( 3 ) 10,078 Preferred stock 1,262 8,395 1,686 ( 3 ) 10,078 Preferred stock 1,262 \u2013 \u2013 3 ) 10,078 Preferred stock 1,262 \u2013 \u2013 1,262 Other investment Preferred stock 1,262 \u2013 \u2013 1,262 Other investment 493 \u2013 \u2013 \u2013 \u2013 1,262 Other investment 493 \u2013 \u2013 493 Equity and Other investment 493 \u2013 \u2013 493 Equity and other in common stock of $ 0.08 per share , payable March per share , payable March 7 , 2003 to shareholder of , payable March 7 , 2003 to shareholder of record at close of business on February 21 , 2003 . 31 / business on February 21 , 2003 . 31 / MSFT 2003 February 21 , 2003 . 31 / MSFT 2003 FORM 10-K 2003 . 31 / MSFT 2003 FORM 10-K Table of Contents 31 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Note 15\u2014Other Comprehensive Income ( II , Item 8 Note 15\u2014Other Comprehensive Income ( In common stock 10,683 10,811 10,723 Dilutive effect of share of common stock 10,683 10,811 10,723 Dilutive effect of : of common stock 10,683 10,811 10,723 Dilutive effect of : Put effect of : Put warrant 42 \u2013 \u2013 Employee stock option \u2013 \u2013 Employee stock option 423 295 159 Common stock and \u2013 Employee stock option 423 295 159 Common stock and common Employee stock option 423 295 159 Common stock and common stock stock and common stock equivalent 11,148 11,106 10,882 Earnings per share and common stock equivalent common stock equivalent 11,148 11,106 10,882 Earnings per share before accounting accounting change : Basic $ 0.72 $ 0.72 $ 0.93 Diluted : Basic $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For the year $ 0.69 $ 0.70 $ 0.92 For the year ended June For the year ended June 30 , 2001 , 2002 and year ended June 30 , 2001 , 2002 and 2003 ; June 30 , 2001 , 2002 and 2003 ; 702 million , 2001 , 2002 and", + "hedging_activities": "Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . /s/ D , effective July 1 , 2001 . /s/ D ELOITTE & LLP Seattle , Washington July 17 , 2003 ( September 3 , Washington July 17 , 2003 ( September 3 , 2003 17 , 2003 ( September 3 , 2003 a to certain 2003 ( September 3 , 2003 a to certain information in to certain information in Note 20", + "derivative_instruments": "Derivative Instruments . The adoption of SFAS 133 resulted in a cumulative pre-tax reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a ( OCI ) of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option a Derivative Instruments and Hedging for hedging activity under SFAS 133 . The Statement is effective into or modified after June 30 , 2003 . We do modified after June 30 , 2003 . We do not believe financial statement . In May 2003 , the FASB issued SFAS , the FASB issued SFAS 150 , Accounting for Certain Financial measure certain financial instrument with 15 / MSFT 2003 FORM 10-K instrument with 15 / MSFT 2003 FORM 10-K Table of Contents 15 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 char Derivative Instruments Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . /s/ D , effective July 1 , 2001 . /s/ D ELOITTE & LLP Seattle , Washington July 17 , 2003 ( September 3 , Washington July 17 , 2003 ( September 3 , 2003 17 , 2003 ( September 3 , 2003 a to certain 2003 ( September 3 , 2003 a to certain information in to certain inf" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-04-150689/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-04-150689/full-submission_features.json new file mode 100644 index 0000000..9931a61 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-04-150689/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue . Approximately 40 percent of Information Worker revenue condition . The remaining approximately 20 percent of Information Worker revenue PC shipment . For fiscal 2004 , the segment includes the mid-market business . During fiscal 2004 , we combined the existing the fourth quarter of fiscal 2004 a reorganization which , effective reorganization which , effective July 1 , 2004 , will include , effective July 1 , 2004 , will include the SMS the first quarter of fiscal 2005 , the SMS & P , visited revenue approximately 10 % of fiscal 2004 revenue . These sale were customer accounted for more than 10 % of revenue in 2002 10 % of revenue in 2002 or 2003 . Our practice of revenue in 2002 or 2003 . Our practice is to company focused on the Java 2 Platform Enterprise Edition ( J2EE server application available . PAGE 8 Table of Contents Part I of Contents Part I Item 1 Numerous commercial software vendor offer building on various real-time PAGE 9 Table of Contents Part I of Contents Part I Item 1 , 2 Revenue ( 1,3 ) 2003 ( 1,4 ) 2004 Revenue $ 22,956 ) 2003 ( 1,4 ) 2004 Revenue $ 22,956 $ 25,296 1,4 ) 2004 Revenue $ 22,956 $ 25,296 $ 28,365 $ 2004 Revenue $ 22,956 $ 25,296 $ 28,365 $ 32,187 $ $ 22,956 $ 25,296 $ 28,365 $ 32,187 $ 36,835 Operating $ 25,296 $ 28,365 $ 32,187 $ 36,835 Operating income 11,006 $ 28,365 $ 32,187 $ 36,835 Operating income 11,006 11,720 8,272 32,187 $ 36,835 Operating income 11,006 11,720 8,272 9,545 9,034 Income $ 36,835 Operating income 11,006 11,720 8,272 9,545 9,034 In revenue growth rate that we believe will be between 5 % and 7 % . be between 5 % and 7 % . We continue to unit grew modestly in fiscal 2004 , while Linux distribution rose to decrease significantly in fiscal 2005 . We have approximately $ . We have approximately $ 1.1 billion in original Upgrade Advantage the first quarter of fiscal 2005 . This revenue wa recognized the first quarter of fiscal 2005 the contract period expires . million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except pe Revenue $ 28,365 $ 32,187 13 % $ ) Revenue $ 28,365 $ 32,187 13 % $ 36,835 14 Revenue $ 28,365 $ 32,187 13 % $ 36,835 14 % $ 32,187 13 % $ 36,835 14 % Operating income $ 32,187 13 % $ 36,835 14 % Operating income $ 8,272 14 % Operating income $ 8,272 $ 9,545 15 % $ Operating income $ 8,272 $ 9,545 15 % $ 9,034 ( income $ 8,272 $ 9,545 15 % $ 9,034 ( 5 $ 9,545 15 % $ 9,034 ( 5 ) % Our 15 % $ 9,034 ( 5 ) % Our revenue growth Our revenue growth for fiscal 2004 wa driven by licensing of the transition to o revenue wa positive in fiscal 2004 , primarily due to a been in effect in fiscal 2004 , translated international revenue earned would have been approximately $ 1.10 billion lower . We hedge . Prior to the July 31 , 2002 Licensing 6.0 transition to the July 31 , 2002 Licensing 6.0 transition date , July 31 , 2002 Licensing 6.0 transition date , we experienced . Revenue growth in fiscal 2003 wa driven primarily by multi-year that occurred before the Licensing 6.0 transition date in the first the first qu revenue growth also growth also reflected a $ 933 million or 13 % increase a $ 933 million or 13 % increase associated with OEM operating system and a $ 309 million or 23 % increase a $ 309 million or 23 % increase in revenue from . Revenue growth in fiscal 2002 wa led by the addition by the addition of $ 1.35 billion of Xbox video game game system revenue and $ 1.20 billion of revenue growth from operating system . For fiscal 2004 , the operating income decline operating income decline of $ 511 millio revenue , partially by an increase of $ 2.55 billion in operating expense , Warner settlement charge of $ 750 million . In fiscal 2002 750 million . In fiscal 2002 , the growth in operating reflected an increase of $ 3.07 billion in revenue , substantially by an increase of $ 3.14 billion in operating expense , value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , on July 1 , 2003 and restated prior , on July 1 , 2003 and restated prior period to t revenue growth in fiscal 2005 . We are anticipating little exchange rate benefit in fiscal 2005 . We anticipate that we that we will renew between 10 % and 30 % of renew between 10 % and 30 % of the expiring Upgrade Upgrade Advantage revenue is $ 56 million . MSN had a a strong year in fiscal 2004 with revenue growth of 13 2004 with revenue growth of 13 % driven by over 40 13 % driven by over 40 % growth in advertising revenue advertising revenue . In fiscal 2005 , we expect MSN to growth for MSN in fi revenue revenue grew moderately in fiscal 2004 . We do not expect Home and Entertainment in fiscal 2005 a price reduction in the the second half of fiscal 2004 related to the late stage operating income growth in fiscal 2005 to exceed our revenue growth settlement which occurred in fiscal 2004 , lower stock-based compensation cost that our segment in fiscal 2004 that reported a segment operating toward segment profitability in fiscal 2005 with improved operation . SEGMENT . Corporate expense were $ 3.0 Revenue $ 9,360 $ 10,394 11 % $ ) Revenue $ 9,360 $ 10,394 11 % $ 11,546 11 Revenue $ 9,360 $ 10,394 11 % $ 11,546 11 % $ 10,394 11 % $ 11,546 11 % Operating income $ 10,394 11 % $ 11,546 11 % Operating income $ 7,105 11 % Operating income $ 7,105 $ 8,017 13 % $ Operating income $ 7,105 $ 8,017 13 % $ 8,015 nm income $ 7,105 $ 8,017 13 % $ 8,015 nm PAGE $ 8,017 13 % $ 8,015 nm PAGE 17 Table of % $ 8,015 nm PAGE 17 Table of Contents Part II of Contents Part II Item 7 Client includes revenue from Windows revenue the second half of fiscal 2004 . Revenue from commercial and commercial and retail licensing declined 4 % due to lower revenue product sale . In fiscal 2003 , Client revenue growth wa licensing revenue growth of $ 933 million and a 9 percentage $ 933 million and a 9 percentage point increase in the Professional revenue growth for fiscal 2003 wa $ 1.59 billion , for fiscal 2003 wa $ 1.59 billion , or 31 % $ 1.59 billion , or 31 % , compared to fiscal % , compared to fiscal 2002 . The Windows Pro revenue from income wa flat for fiscal 2004 compared to fiscal 2003 due fiscal 2004 compared to fiscal 2003 due to increased operating expense Sun Microsystems settlement of $ 700 million in the third quarter the third quarter of fiscal 2004 and $ 307 million of of fiscal 2004 and $ 307 million of stock-based compensation expense the second quarter of fiscal 2004 , offset by growth in . Operating income for fiscal 2003 increased primarily a a result a a result of the 11 % growth in revenue , market gro revenue to improve in fiscal 2005 , due to the legal option transfer program in fiscal 2004 . Major investment in fiscal . Major investment in fiscal 2005 include development of the Windows to Windows XP Service Pack 2 and other new product . million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 6,157 $ 7,140 16 % $ ) Revenue $ 6,157 $ 7,140 16 % $ 8,483 19 Rev revenue , grew $ 1.28 billion or 25 % driven grew $ 1.28 billion or 25 % driven primarily by an driven primarily by an estimated 18 % increase in Windows-based server Windows-based server shipment resulting in 15 % growth in new Windows support service revenue increased $ 189 million or 19 % compared increased $ 189 million or 19 % compared to fiscal 2003 19 % compared to fiscal 2003 due to increased customer penetration and other service declined $ 128 million or 14 % compared declined $ 128 million o revenue exchange rate contributed approximately $ 350 million or 5 % of approximately $ 350 million or 5 % of Server and Tools Tools revenue growth . PAGE 18 Table of Contents Part II of Contents Part II Item 7 Total Server and Tools revenue and Tools revenue grew $ 983 million or 16 % in grew $ 983 million or 16 % in fiscal 2003 , or 16 % in fiscal 2003 , driven by an increase and CALs revenue grew $ 787 million or 18 % from grew $ 787 million or 18 % from fiscal 2002 a or 18 % from fiscal 2002 a a re Revenue from developer tool and other service increased $ 105 million or 13 % from increased $ 105 million or 13 % from fiscal 2002 . or 13 % from fiscal 2002 . Server and Tools operating Tools operating income for fiscal 2004 declined primarily due to the Sun Microsystems settlement of $ 1.22 billion in the third quarter the third quarter of fiscal 2004 and $ 651 million of of fiscal 2004 and $ 651 million of stock-based compensation cost the second quarter of fiscal 2004 . Server and Tools operating revenue . hardware shipment will grow from 13 % to 15 % in grow from 13 % to 15 % in fiscal 2005 and to 15 % in fiscal 2005 and new license of Windows We believe that Windows Server 2003 shipment will create opportunity for Tools net revenue for fiscal 2005 will be unfavorably affected by million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 8,212 $ 9,229 12 % Revenue $ 8,212 $ 9,229 12 % $ 10,800 17 Revenue $ 8,212 $ 9,229 12 % $ 10,800 17 % $ 9,229 12 % $ 10,800 17 % Operating income $ 9,229 12 % $ 10,800 17 % Operating income $ 5,932 17 % Operating income $ 5,932 $ 6,486 9 % $ Operating income $ 5,932 $ 6,486 9 % $ 7,151 10 income $ 5,932 $ 6,486 9 % $ 7,151 10 % $ 6,486 9 % $ 7,151 10 % Information Worker consists 6,486 9 % $ 7,151 10 % Information Worker consists of . Revenue growth for fiscal 2004 from volume licensing , retail of Office in Japan wa 15 revenue grew . OEM licensing revenue grew 29 % or $ 325 million grew 29 % or $ 325 million . Foreign exchange rate exchange rate provided approximately $ 485 million or 5 % of approximately $ 485 million or 5 % of total Information Worker revenue growth . The $ 1.02 billion or 12 % increase The $ 1.02 billion or 12 % increase in revenue in increase in revenue in fiscal 2003 compared to fiscal 2002 wa fiscal 2003 compared to fiscal 2002 wa primarily due to growth licensing agreement and a $ 264 million revenue from Worker operating income in fiscal 2004 increased from the prior year , primarily related to $ 351 million of stock-based compensation expense the second quarter of fiscal 2004 and higher sale and marketing Worker operating profit for fiscal 2003 grew 9 % compared to profit for fiscal 2003 grew 9 % compared to fiscal 2002 9 % compared to fiscal 2002 , led by the 12 2002 , led by the 12 % increase in revenue and and partially offset by a 20 % growth in operating expense and marketing expense revenue is expected to be similar to fiscal 2004 . We are expecting a increased purchasing of Office System 2003 a enterprise complete their product their product evaluation . PAGE 19 Table of Contents Part II of Contents Part II Item 7 Microsoft Business Solutions ( In million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 308 $ 567 84 % $ ) Revenue $ 308 $ 567 Revenue $ 308 $ 567 84 % $ 667 18 % $ 567 84 % $ 667 18 % Operating loss $ 567 84 % $ 667 18 % Operating loss $ ( % Operating loss $ ( 301 ) $ ( 309 ) ( 301 ) $ ( 309 ) 3 % $ ( ) $ ( 309 ) 3 % $ ( 255 ) ) 3 % $ ( 255 ) ( 17 ) % $ ( 255 ) ( 17 ) % Microsoft Business Solutions The revenue increase in fiscal 2004 wa primarily attributable to continued Business Solutions revenue for fiscal 2003 grew $ 259 million from for fiscal 2003 grew $ 259 million from fiscal 2002 , $ 259 million from fiscal 2002 , of revenue and cost Business Solutions . In fiscal 2005 , we expect continued growth million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 1,571 $ 1,953 24 % $ ) Revenue $ 1,571 $ 1,953 24 % $ 2,216 13 Revenue $ 1,571 $ 1,953 24 % $ 2,216 13 % $ 1,953 24 % $ 2,216 13 % Operating income/ ( 1,953 24 % $ 2,216 13 % Operating income/ ( loss ( loss ) $ ( 909 ) $ ( 567 revenue increased MSN advertising revenue increased $ 360 million or 43 % a increased $ 360 million or 43 % a a result of by a decline of $ 168 million or 15 % in of $ 168 million or 15 % in Internet access revenue than Internet access increased $ 71 million in fiscal 2004 to $ 71 million in fiscal 2004 to $ 95 million . in fiscal 2004 to $ 95 million . At the end fiscal year , MSN had 4.3 million internet access subscriber compared internet access subscriber compared to 6.5 million at the end of the p revenue grew MSN advertising revenue grew $ 270 million or 48 % in grew $ 270 million or 48 % in fiscal 2003 a or 48 % in fiscal 2003 a a result of growth MSN subscription revenue grew $ 112 million or 11 % in grew $ 112 million or 11 % in fiscal 2003 reflecting or 11 % in fiscal 2003 reflecting an increase in the the first quarter of fiscal 2004 and wa profitable for the business , and a $ 48 million refund of prior year , partially offset by $ 144 million of stock-based compensation expense the secon revenue should benefit access to decline in fiscal 2005 a narrowband subscriber continue to the fourth quarter of fiscal 2004 an increase to the amount increase it profitability in fiscal 2005 , led by continued operational million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 112 $ 156 39 % $ ) Revenue $ 112 $ 156 39 % $ 247 58 Revenue $ 112 $ 156 39 % $ 247 5 revenue growth for fiscal 2004 over fiscal 2003 in all for fiscal 2004 over fiscal 2003 in all product line . Service . Revenue for fiscal 2003 grew $ 44 million driven for fiscal 2003 grew $ 44 million driven by increased Pocket \u2019 operating loss for fiscal 2004 decreased compared to fiscal 2003 2004 decreased compared to fiscal 2003 primarily due to growth in , partially offset by $ 58 million of stock-based compensation expense the second quarter of fiscal 2004 . Operating loss for fiscal . Operating Revenue $ 2,453 $ 2,748 12 % $ ) Revenue $ 2,453 $ 2,748 12 % $ 2,876 5 Revenue $ 2,453 $ 2,748 12 % $ 2,876 5 % $ 2,748 12 % $ 2,876 5 % Operating loss $ 2,748 12 % $ 2,876 5 % Operating loss $ ( % Operating loss $ ( 1,135 ) $ ( 1,191 ) ( 1,135 ) $ ( 1,191 ) 5 % $ ( ) $ ( 1,191 ) 5 % $ ( 1,215 ) ) 5 % $ ( 1,215 ) 2 % Home and % $ ( 1,215 ) 2 % Home and Entertainment includes our first release in fiscal 2002 , and have established ourselves volume have grown quickly since 2002 , but revenue growth mode revenue growth moderated in fiscal 2004 due to price reduction typical console sold . In fiscal 2004 , Xbox revenue increased $ , Xbox revenue increased $ 144 million or 9 % with increased $ 144 million or 9 % with $ 269 million or 9 % with $ 269 million related to higher Xbox Xbox software volume and $ 117 million due to higher Xbox partially offset by a $ 242 million decline related to price , Xbox console volume increased 11 % in fiscal 2004 compared increased 11 % in fiscal 2004 compared to fiscal Revenue from a of June 30 , 2004 . Revenue from consumer hardware and TV platform declined $ 16 million or 1 % compared declined $ 16 million or 1 % compared to fiscal 2003 1 % compared to fiscal 2003 due to lower PC game and Entertainment revenue in fiscal 2003 from fiscal 2002 wa the in fiscal 2003 from fiscal 2002 wa the result of sale available for all of fiscal 2003 . Xbox revenue grew $ . Xbox revenue grew $ 309 million or 23 % in grew $ 309 million or 23 % in fiscal 2003 reflecting or 23 % in fi revenue . in revenue . In fiscal 2005 , we expect Xbox console revenue to decrease from fiscal 2004 consistent with this stage of a Halo2 . In fiscal 2005 we expect PC game revenue revenue to decrease from fiscal 2004 driven by fewer new game the fourth quarter of fiscal 2004 . In fiscal 2005 , fiscal 2004 . In fiscal 2005 , we expect operating margin margin to improve from fiscal 2004 driven by lower unit volume to be higher in fiscal 2005 driven by investment in the million , except percentage ) 2002 revenue $ 5,699 $ 6,059 6 % $ of revenue $ 5,699 $ 6,059 6 % $ 6,716 11 revenue $ 5,699 $ 6,059 6 % $ 6,716 11 % $ 6,059 6 % $ 6,716 11 % As a percent 6,059 6 % $ 6,716 11 % As a percent of As a percent of revenue 20.1 % 18.8 % ( 1.3 percent of revenue 20.1 % 18.8 % ( 1.3 ) pp 20.1 % 18.8 % ( 1.3 ) pp 18.2 % ( % ( 1.3 ) pp 18.2 % ( 0.6 ) pp ) pp 18.2 % ( 0.6 ) pp PAGE 22 Table ( 0.6 ) pp PAGE 22 Table of Contents Part II of Contents Part II Item 7 Cost of revenue includes manufacturing . The increase i revenue 22.2 % 20.5 % ( 1.7 percent of revenue 22.2 % 20.5 % ( 1.7 ) pp 22.2 % 20.5 % ( 1.7 ) pp 21.1 % 0.6 % ( 1.7 ) pp 21.1 % 0.6 pp Research and 1.7 ) pp 21.1 % 0.6 pp Research and development expense . The increase in fiscal 2004 wa primarily due to $ wa primarily due to $ 1.31 billion of stock-based compensation expense the second quarter of fiscal 2004 a well a other headcount-related employee cost related to a 3 % growth in research and and development headcount from fiscal 2003 . In fiscal 2003 revenue 22.0 % 23.5 % 1.5 pp percent of revenue 22.0 % 23.5 % 1.5 pp 22.6 % revenue 22.0 % 23.5 % 1.5 pp 22.6 % ( 0.9 % 23.5 % 1.5 pp 22.6 % ( 0.9 ) pp 1.5 pp 22.6 % ( 0.9 ) pp Sales and marketing marketing cost increased in fiscal 2004 due to $ 400 million fiscal 2004 due to $ 400 million of stock-based compensation expense the second quarter of fiscal 2004 and other headcount-related cost related headcount-related cost related to a 9 % growth in sale and marketing headcount . In fiscal 2003 , the sal revenue 6.5 % 7.5 % 1.0 pp percent of revenue 6.5 % 7.5 % 1.0 pp 13.6 % revenue 6.5 % 7.5 % 1.0 pp 13.6 % 6.1 pp % 7.5 % 1.0 pp 13.6 % 6.1 pp PAGE 23 % 1.0 pp 13.6 % 6.1 pp PAGE 23 Table of 13.6 % 6.1 pp PAGE 23 Table of Contents Part II of Contents Part II Item 7 General and administrative cost include administrative cost increased in fiscal 2004 primarily due to legal expense to legal expense including $ 1.92 billion of charge related to Microsystems settlement , a $ 605 million fine imposed by the t revenue a of June 30 , 2004 decreased $ 838 a of June 30 , 2004 decreased $ 838 million from 30 , 2004 decreased $ 838 million from June 30 , $ 838 million from June 30 , 2003 , reflecting recognition million from June 30 , 2003 , reflecting recognition of unearned ha outpaced addition by $ 397 million , primarily due to licensing agreement and a $ 489 million decline in revenue deferred undelivered element . Starting April 1 , 2003 revenue deferred for . Starting April 1 , 2003 revenue deferred for un revenue of $ 1.66 billion from other long-term liability the Jupiter guarantee of $ 11 million . RECENTLY ISSUED ACCOUNTING ISSUED ACCOUNTING STANDARDS In December 2003 , the Financial Accounting Standards ( FASB ) issued Interpretation 46R ( FIN 46R ) , issued Interpretation 46R ( FIN 46R ) , a revision to , a revision to Interpretation 46 ( FIN 46 ) , to Interpretation 46 ( FIN 46 ) , Consolidation of Variable Variable Interest Entities . FIN 46R clarifies some of the provision of the provision of FI Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable portfolio a discussed in Note 4 \u2013 Investment Income/ ( Loss incur future impairment . SFAS 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , revenue . PAGE 31 Table of Contents Part II of Contents Part II Item 7 Declines in Demand for Software to the transition to Licensing 6.0 in July 2002 . These to Licensing 6.0 in July 2002 . These agreement generally expired agreement generally expired throughout fiscal 2004 and will largely be expired the first fiscal quarter in 2005 . The rate at which Extraterritorial Income . In August 2001 , a World Trade Organization Extraterritorial Income Exclusion Act of 2000 ( \u201c ETI \u201d ) it appeal . On March 1 Revenue ( 1 ) 2003 ( 1 ) 2004 Revenue $ 28,365 ) 2003 ( 1 ) 2004 Revenue $ 28,365 $ 32,187 1 ) 2004 Revenue $ 28,365 $ 32,187 $ 36,835 Operating 2004 Revenue $ 28,365 $ 32,187 $ 36,835 Operating expense : $ 28,365 $ 32,187 $ 36,835 Operating expense : Cost of expense : Cost of revenue 5,699 6,059 6,716 Research and development : Cost of revenue 5,699 6,059 6,716 Research and development 6,299 Cost of revenue 5,699 6,059 6,716 Research and development 6,299 6,595 6,059 6,716 Research and development 6,2 revenue 7,225 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 6,514 2,044 3,478 Short-term unearned revenue 7,225 6,514 Other 1,716 1,921 Total 3,478 Short-term unearned revenue 7,225 6,514 Other 1,716 1,921 Total current unearned revenue 7,225 6,514 Other 1,716 1,921 Total current liability 13,974 revenue 7,225 6,514 Other 1,716 1,921 Total current liability 13,974 14,969 1,716 1,921 Total current liability 13,974 14,969 Long-term unearned revenue 1,790 1,921 Total current liabili revenue 1,790 1,663 13,974 14,969 Long-term unearned revenue 1,790 1,663 Other long-term liability 1,056 14,969 Long-term unearned revenue 1,790 1,663 Other long-term liability 1,056 932 1,790 1,663 Other long-term liability 1,056 932 Commitments and contingency Stockholders 1,663 Other long-term liability 1,056 932 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 10,771 and 10,862 share authorized 24,000 ; outstanding 10,771 and 10,862 49,234 56,396 Re revenue 11,152 12,519 ( 1,479 ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned 1,479 ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned revenue ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned revenue ( Recognition of unearned revenue ( 8,929 ) ( 11,292 ) ( revenue ( 8,929 ) ( 11,292 ) ( 12,527 ) Accounts ) ( 11,292 ) ( 12,527 ) Accounts receivable ( 1,623 12,527 ) Accounts receivable ( 1,623 ) 187 ( 687 ) Accounts receivable ( 1,623 ) 187 ( 687 ) Other curren Revenue related to our Xbox . Advertising expense wa $ 1.13 billion in fiscal 2002 , $ 1.13 billion in fiscal 2002 , $ 1.06 billion in in fiscal 2002 , $ 1.06 billion in fiscal 2003 , $ 1.06 billion in fiscal 2003 , and $ 904 million fiscal 2003 , and $ 904 million in fiscal 2004 . $ 904 million in fiscal 2004 . INCOME TAXES Income tax sell or repledge wa $ 499 million at both June 30 499 million at both June 30 , 2003 and 2004 . at both June 30 , 2003 and 2004 . Investments are June 30 , 2003 and 2004 REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price sale price for desktop PAGE 42 Table of Contents Part II of Contents Part II Item 8 application , depending on the ( In million ) June 30 2003 2004 Volume licensing program In revenue Undelivered element 2,847 2,358 Other 696 744 Unearned revenue $ 9,015 element 2,847 2,358 Other 696 744 Unearned revenue $ 9,015 $ 696 744 Unearned revenue $ 9,015 $ 8,177 Unearned revenue by Unearned revenue $ 9,015 $ 8,177 Unearned revenue by segment is ( In million ) June 30 2003 2004 Client $ 3,165 In million ) June 30 2003 2004 Client $ 3,165 $ million ) June 30 2003 2004 Client $ 3,165 $ 2,822 30 2003 2004 Client $ 3,165 $ 2,822 Server and Tools 2004 Client $ 3,165 $ 2,822 Server and Too revenue $ 9,015 3,305 2,586 Other segment 360 399 Unearned revenue $ 9,015 $ 360 399 Unearned revenue $ 9,015 $ 8,177 PAGE 43 Table Unearned revenue $ 9,015 $ 8,177 PAGE 43 Table of Contents $ 9,015 $ 8,177 PAGE 43 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2003 Fixed maturity security other investment June 30 , 2003 Fixed maturity security Cash $ Fixed maturity revenue and $ 10 million in derivative loss were loss ) . During fiscal 2003 , $ 40 million of During fiscal 2003 , $ 40 million of derivative gain were reclassified to revenue and $ 2 million in derivative gain were loss ) . During fiscal 2004 , $ 14 million of During fiscal 2004 , $ 14 million of derivative gain were . We estimate that $ 119 million of net derivative gain derecognized or discontinued for fiscal 2002 , 2003 , and 2004 discontinued for fiscal 2002 , 2003 , and 2004 . NOTE 2002 , 2003 , Revenue item $ 2,556 $ 2,032 Expense item 1,048 Revenue item $ 2,556 $ 2,032 Expense item 1,048 1,308 Impaired 2,556 $ 2,032 Expense item 1,048 1,308 Impaired investment 1,525 1,246 $ 2,032 Expense item 1,048 1,308 Impaired investment 1,525 1,246 Stock-based item 1,048 1,308 Impaired investment 1,525 1,246 Stock-based compensation expense 3,892 1,048 1,308 Impaired investment 1,525 1,246 Stock-based compensation expense 3,892 3,749 1,525 1,246 Stock-based compensation expense 3,892 3,749 Deferred incom revenue and is a follows : ( 1 ) ( In million ) million ) Year Ended June 30 2002 2003 2004 Revenue Client ) Year Ended June 30 2002 2003 2004 Revenue Client $ Year Ended June 30 2002 2003 2004 Revenue Client $ 9,350 Ended June 30 2002 2003 2004 Revenue Client $ 9,350 $ 2003 2004 Revenue Client $ 9,350 $ 10,287 $ 11,241 Server Revenue Client $ 9,350 $ 10,287 $ 11,241 Server and Tools $ 9,350 $ 10,287 $ 11,241 Server and Tools 5,632 6,692 $ 11,241 Server and Tools 5,632 6,692 7,881 Information Worker 8, Revenue ) ( 3,749 ) ( 4,773 ) Revenue reconciling amount 288 4,773 ) Revenue reconciling amount 288 ( 392 ) 576 Other Revenue reconciling amount 288 ( 392 ) 576 Other ( 889 amount 288 ( 392 ) 576 Other ( 889 ) ( 392 ) 576 Other ( 889 ) ( 1,253 ) ( Other ( 889 ) ( 1,253 ) ( 2,457 ) Total ) ( 1,253 ) ( 2,457 ) Total $ ( 5,058 2,457 ) Total $ ( 5,058 ) $ ( 6,473 ) ( 5,058 ) $ ( 6,473 ) $ ( 9,432 ) ( 6,473 ) $ ( 9,432 ) Other primarily includes corporate with U.S. GAAP . PAGE 61 Table of Contents Part II o revenue . These sale were customer accounted for more than 10 % of revenue in 2002 10 % of revenue in 2002 or 2003 . Revenue , of revenue in 2002 or 2003 . Revenue , classified by million ) Year Ended June 30 2002 2003 2004 United States ) Year Ended June 30 2002 2003 2004 United States ( Year Ended June 30 2002 2003 2004 United States ( 1 Ended June 30 2002 2003 2004 United States ( 1 ) 2003 2004 United States ( 1 ) $ 20,066 $ 22,077 States ( 1 ) $ 20,066 $ 22,077 $ 25,046 Other 1 ) $ 20,066 $ 22,077 Revenue $ 31 June 30 Total Fiscal 2003 Revenue $ 7,746 $ 8,541 Total Fiscal 2003 Revenue $ 7,746 $ 8,541 $ ` 7,835 2003 Revenue $ 7,746 $ 8,541 $ ` 7,835 $ 8,065 7,746 $ 8,541 $ ` 7,835 $ 8,065 $ 32,187 Gross 8,541 $ ` 7,835 $ 8,065 $ 32,187 Gross profit 6,402 ` 7,835 $ 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2 Revenue per share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ 8,215 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ 8,215 $ 10,153 0.69 Fiscal 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,8", + "net_income": "Net Income before accounting change 9,421 7,721 5,355 7,531 8,168 Net income before accounting change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 accounting change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 7,346 change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 7,346 5,355 5,355 7,531 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted 7,531 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted earnings 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted earnings per Net income 9,421 7, Net income $ Provision for income tax 2,520 3,523 4,028 Net income $ 5,355 for income tax 2,520 3,523 4,028 Net income $ 5,355 $ 3,523 4,028 Net income $ 5,355 $ 7,531 $ 8,168 Earnings Net income $ 5,355 $ 7,531 $ 8,168 Earnings per share $ 5,355 $ 7,531 $ 8,168 Earnings per share : Basic per share : Basic $ 0.50 $ 0.70 $ 0.76 Diluted : Basic $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 Weighted 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 We Net income ) 2003 ( 1 ) 2004 Operations Net income $ 5,355 2004 Operations Net income $ 5,355 $ 7,531 $ 8,168 Depreciation Net income $ 5,355 $ 7,531 $ 8,168 Depreciation , amortization $ 5,355 $ 7,531 $ 8,168 Depreciation , amortization , and , and other noncash item 938 1,393 1,186 Stock-based compensation 3,784 and other noncash item 938 1,393 1,186 Stock-based compensation 3,784 3,749 other noncash item 938 1,393 1,186 Stock-based compensation 3,784 3,749 5,734 938 1,393 1,186 Stock-based compensation Net income ) \u2013 \u2013 Net income 5,355 7,531 8,168 Other comprehensive income \u2013 \u2013 Net income 5,355 7,531 8,168 Other comprehensive income : \u2013 Net income 5,355 7,531 8,168 Other comprehensive income : Net ) on derivative instrument ( 91 ) ( 102 ) 101 instrument ( 91 ) ( 102 ) 101 Net unrealized investment 91 ) ( 102 ) 101 Net unrealized investment gains/ ( investment gains/ ( loss ) 5 1,243 ( 873 ) Translation gains/ ( loss ) 5 1,243 ( 873 ) Translation adjustment loss ) 5 1,243 ( 873 ) Translation adjustment a Net income ) Year Ended June 30 2002 2003 2004 Net income available Year Ended June 30 2002 2003 2004 Net income available for Ended June 30 2002 2003 2004 Net income available for common shareholder ( A ) $ 5,355 $ 7,531 $ 8,168 Weighted A ) $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,811 10,723 10,803 Dilutive effect of stock ( B ) 10,811 10,723 10,803 Dilutive effect of employee ( B ) 10,811 10,723 10,803 Dilut Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 2,142 6,561 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic earnings per 2,142 1,483 ( 1 ) 7,531 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 ( Net income 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,690 8,168 ( 2 ) 1,315 ( 3 ) 2,690 8,168 Basic earnings ) 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 1,315 ( 3 ) 2,690 ", + "assets": "Assets ) June 30 2003 ( 1 ) 2004 Assets Current asset 30 2003 ( 1 ) 2004 Assets Current asset : Cash : Cash and equivalent $ 6,438 $ 15,982 Short-term investment 42,610 and equivalent $ 6,438 $ 15,982 Short-term investment 42,610 44,610 Total 6,438 $ 15,982 Short-term investment 42,610 44,610 Total cash and short-term $ 15,982 Short-term investment 42,610 44,610 Total cash and short-term investment Total cash and short-term investment 49,048 60,592 Accounts receivable , net cash and short-term investm ASSETS The component of million ) Year Ended June 30 2003 2004 Gross carrying amount ) Year Ended June 30 2003 2004 Gross carrying amount Accumulated Year Ended June 30 2003 2004 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 584 $ ( 376 ) $ Contract-based $ 584 $ ( 376 ) $ 208 $ 908 $ ( 376 ) $ 208 $ 908 $ ( 476 376 ) $ 208 $ 908 $ ( 476 ) $ 208 $ 908 $ ( 476 ) $ 432 Technology-based 261 $ ( 476 ) $ 432 Technology-based 261 ( 137 ) 476 ) $ 432 Technology-based 261", + "liabilities": "Liabilities and stockholder Total asset $ 81,732 $ 92,389 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 Short-term compensation 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 1,416 1,339 Income tax 2,044 3,478 Short-ter", + "equity": "Equity Securities 13 Item 6 . Selected Financial of Equity Securities 13 Item 6 . Selected Financial Data 14 6 . Selected Financial Data 14 Item 7 . Management \u2019 Selected Financial Data 14 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 15 Item 7A . Quantitative and Results of Operations 15 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 33 Item 8 . Financial Statements about Market Risk 33 Item 8 . Financial Statements and Supplement equity Total asset 51,694 58,830 69,910 81,732 92,389 Stockholders \u2019 equity 41,368 asset 51,694 58,830 69,910 81,732 92,389 Stockholders \u2019 equity 41,368 47,289 81,732 92,389 Stockholders \u2019 equity 41,368 47,289 54,842 64,912 74,825 ( 92,389 Stockholders \u2019 equity 41,368 47,289 54,842 64,912 74,825 ( 1 Stockholders \u2019 equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) \u2019 equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) The equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) The financial 47,289 54,842 64,912 74,82 equity security . In fiscal 2003 , dividend and interest income and interest income decreased $ 162 million driven primarily by a in dividend income of $ 97 million resulting from the exchange exchange of AT & T 5 % convertible preferred debt for the second quarter of fiscal 2003 , and declining interest rate includes other-than-temporary impairment of $ 1.15 billion in fiscal 2003 compared $ 1.15 billion in fiscal 2003 compared to $ 4.32 billion fiscal 2003 compared to $ 4.32 billion in fiscal 2002 a Equity and a of June 30 , 2004 . Equity and other investment and other investment were $ 12.21 billion a of June 30 12.21 billion a of June 30 , 2004 . The portfolio a of June 30 , 2004 . The portfolio consists primarily undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % equity at June 30 , 2004 wa $ 74.8 equity at June 30 , 2004 wa $ 74.8 billion . 30 , 2004 wa $ 74.8 billion . We will continue constructing new building were $ 129 million on June 30 , $ 129 million on June 30 , 2004 . We have million on June 30 , 2004 . We have operating lease incurred rental expense totaling $ 318 million , $ 290 million $ 318 million , $ 290 million , and $ 331 290 million , and $ 331 million in fiscal 2002 , $ 331 million in fiscal 2002 , 2003 , and 2004 million in fiscal 2002 , 2 equity , interest and price . Each PAGE 33 Table of Contents Part II of Contents Part II Item 7A resulting unique set of equity re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 percentile over 20 day at the 97.5 percentile confidence level . Several in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the Equity $ 207 $ 217 $ 326 $ 117 Equity price $ $ 217 $ 326 $ 117 Equity price $ 869 $ $ 117 Equity price $ 869 $ 773 $ 969 $ Equity price $ 869 $ 773 $ 969 $ 1,174 $ $ 869 $ 773 $ 969 $ 1,174 $ 770 The $ 773 $ 969 $ 1,174 $ 770 The total VAR $ 969 $ 1,174 $ 770 The total VAR for the combined risk category is $ 835 million at June 30 , $ 835 million at June 30 , 2004 and $ 987 million at June 30 , 2004 and $ 987 million at 30 , 2004 and $ 987 million at June 30 , $ 987 million at June 30 , 2003 . The to equity 22,642 27,801 Operating income 8,272 9,545 9,034 Losses on equity investees 27,801 Operating income 8,272 9,545 9,034 Losses on equity investees and equity investees and other ( 92 ) ( 68 ) ( other ( 92 ) ( 68 ) ( 25 ) Investment ) ( 68 ) ( 25 ) Investment income/ ( loss income/ ( loss ) ( 305 ) 1,577 3,187 Income before loss ) ( 305 ) 1,577 3,187 Income before income tax ) ( 305 ) 1,577 3,187 Income before income tax 7,875 3,187 Income before income tax 7,875 11,054 12,196 Provision for income Equity and other investment and equipment , net 2,223 2,326 Equity and other investment 13,692 2,326 Equity and other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible Equity and other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset , net investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset , net 384 3,115 Intangible asset , net 384 569 Deferred income tax 2,161 Intangible asset , net 384 569 Deferred equity liability : Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 Short-term compensation 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 6,514 2,044 3,478 Short-term unearned revenue 7,225 6,514 equity 1,840 and $ 1,119 15,678 18,429 Total stockholder \u2019 equity 64,912 18,429 Total stockholder \u2019 equity 64,912 74,825 Total liability and stockholder Total stockholder \u2019 equity 64,912 74,825 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 81,732 $ 92,389 ( 1 ) \u2019 equity $ 81,732 $ 92,389 ( 1 ) June 30 $ 81,732 $ 92,389 ( 1 ) June 30 , 2003 92,389 ( 1 ) June 30 , 2003 balance sheet ha 1 ) June 30 , 2003 balance sheet ha been restated value recognition provision of SFAS 123 , Accounting f EQUITY STATEMENTS ( million ) Year Ended June 30 2002 ( 1 ) 2003 ) Year Ended June 30 2002 ( 1 ) 2003 ( Ended June 30 2002 ( 1 ) 2003 ( 1 ) 30 2002 ( 1 ) 2003 ( 1 ) 2004 Common ( 1 ) 2003 ( 1 ) 2004 Common stock and ) 2003 ( 1 ) 2004 Common stock and paid-in capital , beginning of period $ 28,390 $ 41,845 $ 49,234 Cumulative of period $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 retroactive adjustment 41,845 $ 49,234 Cumulative SFAS 123 retroactive adju equity end of period 12,997 15,678 18,429 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 54,842 $ 64,912 $ 74,825 ( \u2019 equity $ 54,842 $ 64,912 $ 74,825 ( 1 ) $ 54,842 $ 64,912 $ 74,825 ( 1 ) June 30 $ 64,912 $ 74,825 ( 1 ) June 30 , 2002 74,825 ( 1 ) June 30 , 2002 and 2003 stockholder 1 ) June 30 , 2002 and 2003 stockholder \u2019 equity June 30 , 2002 and 2003 stockholder \u2019 equity statement have value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Equity and other investment June 30 , 2003 Fixed maturity security other investment June 30 , 2003 Fixed maturity security Cash $ Fixed maturity security Cash $ 1,308 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 1,308 $ 1,308 $ \u2013 $ $ \u2013 $ 1,308 $ 1,308 $ \u2013 $ \u2013 Money \u2013 Money market mutual fund 1,263 \u2013 \u2013 1,263 1,263 \u2013 mutual fund 1,263 \u2013 \u2013 1,263 1,263 \u2013 \u2013 Commercial paper fund 1,263 \u2013 \u2013 1,263 1,263 \u2013 \u2013 Commercial paper 874 1,263 \u2013 \u2013 Commercial paper 874 \u2013 \u2013 874 774 100 Commercial paper 874 \u2013 \u2013 874 774 100 \u2013 Certificates of paper Equity security 1,568 ( 223 ) 50,907 6,438 42,610 1,859 Equity security Common ( 223 ) 50,907 6,438 42,610 1,859 Equity security Common stock 223 ) 50,907 6,438 42,610 1,859 Equity security Common stock and security Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 \u2013 and equivalent 8,395 1,686 ( 3 ) 10,078 \u2013 \u2013 10,078 8,395 1,686 ( 3 ) 10,078 \u2013 \u2013 10,078 Preferred stock 3 ) 10,078 \u2013 \u2013 10,078 Preferred stock 1,262 \u2013 \u2013 \u2013 \u2013 10,078 Preferred stock 1,26 Equity security \u2013 \u2013 493 \u2013 \u2013 493 Equity security 10,150 1,686 ( \u2013 \u2013 493 Equity security 10,150 1,686 ( 3 ) 11,833 \u2013 493 Equity security 10,150 1,686 ( 3 ) 11,833 \u2013 Equity security 10,150 1,686 ( 3 ) 11,833 \u2013 \u2013 11,833 10,150 1,686 ( 3 ) 11,833 \u2013 \u2013 11,833 Total $ 3 ) 11,833 \u2013 \u2013 11,833 Total $ 59,712 $ 3,254 \u2013 \u2013 11,833 Total $ 59,712 $ 3,254 $ ( 226 11,833 Total $ 59,712 $ 3,254 $ ( 226 ) $ 59,712 $ 3,254 $ ( 226 ) $ 62,740 $ 6,438 $ ( 226 ) $ 62,740 $ 6,438 $ 42,610 $ 226 ) $ 62,740 $ 6,438 $ 42,610 $ 13 Equity and other investment June 30 , 2004 Fixed maturity security other investment June 30 , 2004 Fixed maturity security Cash $ Fixed maturity security Cash $ 1,812 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 1,812 $ 1,812 $ \u2013 $ $ \u2013 $ 1,812 $ 1,812 $ \u2013 $ \u2013 Money \u2013 Money market mutual fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 mutual fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 \u2013 Commercial paper fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 \u2013 Commercial paper 7,286 3,595 \u2013 \u2013 Commercial paper 7,286 \u2013 \u2013 7,286 4,109 3,177 Commercial paper 7,286 \u2013 \u2013 7,286 4,109 3,177 \u2013 Cer Equity security 249 ( 231 ) 62,073 15,982 44,610 1,481 Equity security Common ( 231 ) 62,073 15,982 44,610 1,481 Equity security Common stock 231 ) 62,073 15,982 44,610 1,481 Equity security Common stock and security Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 \u2013 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 Equity security \u2013 \u2013 208 \u2013 \u2013 208 Equity security 9,220 1,571 ( \u2013 \u2013 208 Equity security 9,220 1,571 ( 62 ) 10,729 \u2013 208 Equity security 9,220 1,571 ( 62 ) 10,729 \u2013 Equity security 9,220 1,571 ( 62 ) 10,729 \u2013 \u2013 10,729 9,220 1,571 ( 62 ) 10,729 \u2013 \u2013 10,729 Total $ 62 ) 10,729 \u2013 \u2013 10,729 Total $ 71,275 $ 1,820 \u2013 \u2013 10,729 Total $ 71,275 $ 1,820 $ ( 293 10,729 Total $ 71,275 $ 1,820 $ ( 293 ) $ 71,275 $ 1,820 $ ( 293 ) $ 72,802 $ 15,982 $ ( 293 ) $ 72,802 $ 15,982 $ 44,610 $ 293 ) $ 72,802 $ 15,982 $ 44,610 $ equity domestic equity security and $ 13 million related to international equity the unrealized loss of $ 293 million at June 30 , $ 293 million at June 30 , 2004 , $ 51 million at June 30 , 2004 , $ 51 million exceeded 30 , 2004 , $ 51 million exceeded twelve month . available evidence a of June 30 , 2004 . Common and a of June 30 , 2004 . Common and preferred stock at cost . At June 30 , 2003 , the recorded . At June 30 , 2003 , the recorded basis of of these investment wa $ 2.15 billion , and their EQUITY Shares of million ) Year Ended June 30 2002 2003 2004 Beginning balance ) Year Ended June 30 2002 2003 2004 Beginning balance 10,766 Year Ended June 30 2002 2003 2004 Beginning balance 10,766 10,718 Ended June 30 2002 2003 2004 Beginning balance 10,766 10,718 10,771 2002 2003 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 2003 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 215 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 215 Repurchased balance 10,766 10,71", + "cash_flow": "Cash flow from operation for fiscal 2004 decreased $ 1.17 billion to for fiscal 2004 decreased $ 1.17 billion to $ 14.63 billion $ 1.17 billion to $ 14.63 billion . The decrease primarily combined cash outflow of $ 2.56 billion related to the Sun used for financing wa $ 2.36 billion in fiscal 2004 , $ 2.36 billion in fiscal 2004 , a decrease of $ , a decrease of $ 2.86 billion from the prior year the fourth quarter of fiscal 2004 combined with a $ 628 2004 combined with a $ 628 million increase primarily cash flow statement June 30 , 2002 and 2003 cash flow statement have been value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . See accompanying note . See accompanying note . PAGE 37 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS \u2019 EQUITY STATEMENTS ( million ) Year Ended June 30 2002 ( 1 ) 2003 ) Year Ended June 30 2002 ( 1 ) 2003 ( Ended June 30 2002 ( 1 ) 2003 ( 1 ) 30 2002 ( 1 ) 2003 ( 1 ) 2004 Common ( 1 ) 2003 ( 1 ) 2004 Com", + "operating_margin": "operating margin margin to improve from fiscal 2004 driven by lower unit volume to be higher in fiscal 2005 driven by investment in the million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ) Cost of revenue $ 5,699 $ 6,059 6 % $ of revenue $ 5,699 $ 6,059 6 % $ 6,716 11 revenue $ 5,699 $ 6,059 6 % $ 6,716 11 % $ 6,059 6 % $ 6,716 11 % As a percent 6,059 6 % $ 6,716 11 % As a percent of A", + "accumulated_depreciation": "Accumulated depreciation ( 3,855 equipment , at cost 6,078 6,489 Accumulated depreciation ( 3,855 ) 6,078 6,489 Accumulated depreciation ( 3,855 ) ( 4,163 ) Property depreciation ( 3,855 ) ( 4,163 ) Property and equipment , and equipment , net $ 2,223 $ 2,326 Property and equipment , net $ 2,223 $ 2,326 Property and equipment are stated not depreciated . During fiscal 2002 , 2003 , and 2004 . During fiscal 2002 , 2003 , and 2004 , depreciation 2002 , 2003 , and 2004 , depreciation expense wa $ , depreciation expense wa", + "debt": "debt for share of Comcast during fiscal 2003 and declining interest rate , include other-than-temporary impairment of $ 82 million in fiscal 2004 compared $ 82 million in fiscal 2004 compared to $ 1.15 billion fiscal 2004 compared to $ 1.15 billion in the prior year gain on sale in fiscal 2004 a we moved to more gain on sale were $ 1.65 billion in fiscal 2004 and $ 1.65 billion in fiscal 2004 and $ 1.19 billion in in fiscal 2004 and $ 1.19 billion in fiscal 2003 . $ 1.19 billion in fiscal 2003 . The debt for the second quarter of fiscal 2003 , and declining interest rate includes other-than-temporary impairment of $ 1.15 billion in fiscal 2003 compared $ 1.15 billion in fiscal 2003 compared to $ 4.32 billion fiscal 2003 compared to $ 4.32 billion in fiscal 2002 and $ 4.32 billion in fiscal 2002 and net realized gain on gain on investment of $ 1.19 billion in fiscal 2003 compared $ 1.19 billion in fiscal 2003 compared to $ 2.52 billion fiscal 2003 compared to $ 2.52 billion in fiscal 2002 . $ 2. debt $ \u2013 Construction commitment ( 2 ) 127 2 \u2013 \u2013 Construction commitment ( 2 ) 127 2 \u2013 \u2013 129 Lease commitment ( 2 ) 127 2 \u2013 \u2013 129 Lease obligation ) 127 2 \u2013 \u2013 129 Lease obligation : Capital lease Lease obligation : Capital lease 7 17 10 \u2013 34 Operating obligation : Capital lease 7 17 10 \u2013 34 Operating lease : Capital lease 7 17 10 \u2013 34 Operating lease ( lease 7 17 10 \u2013 34 Operating lease ( 3 ) \u2013 34 Operating lease ( 3 ) 141 250 86 24 Operating lease ( 3 ) 141 250 86 24 501 Purchase lease ( 3 ) 141 25 debt security at June 30 , 2004 were a follows security at June 30 , 2004 were a follows : ( one year or le $ 37,348 $ 37,388 Due after one or le $ 37,348 $ 37,388 Due after one year through one year through five year 14,077 14,064 Due after five year year through five year 14,077 14,064 Due after five year through five year through ten year 5,636 5,665 Due after ten year year through ten year 5,636 5,665 Due after ten year 4,994 5,665 Due after ten year 4,994 4,956 Total $ 62,055 $ Due after ten ye Debt security include 4,956 Total $ 62,055 $ 62,073 Debt security include fixed maturity fixed maturity security . NOTE 4 INVESTMENT INCOME/ ( LOSS ) million ) Year Ended June 30 2002 2003 2004 Dividends and ) Year Ended June 30 2002 2003 2004 Dividends and interest Year Ended June 30 2002 2003 2004 Dividends and interest $ Ended June 30 2002 2003 2004 Dividends and interest $ 2,119 2004 Dividends and interest $ 2,119 $ 1,957 $ 1,892 Net and interest $ 2,119 $ 1,957 $ 1,892 Net recognized gains/ $ 2", + "share_repurchase": "share repurchase program in fiscal 2004 . Cash used for investing used for investing wa $ 2.75 billion in fiscal 2004 , $ 2.75 billion in fiscal 2004 , a decrease of $ , a decrease of $ 4.47 billion from fiscal 2003 , $ 4.47 billion from fiscal 2003 , due to a $ , due to a $ 3.63 billion decrease in net investment investment purchase and a $ 1.06 billion decrease in acquisition spending flow from operation wa $ 15.80 billion for fiscal 2003 , $ 15.80 billion for fiscal 2003 , an increase of $ , an increase of $ share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion for fiscal 2002 , an increase of $ , an increase of $ 1.09 billion from fiscal 2001 . $ 1.09 billion from fiscal 2001 . The increase reflected strong Upgrade Advanta share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from fiscal 2001 . $ 2", + "earnings_per_share": "earnings per share income 9,421 7,346 5,355 7,531 8,168 Diluted earnings per share before share before accounting change $ 0.85 $ 0.69 $ 0.48 $ accounting change $ 0.85 $ 0.69 $ 0.48 $ 0.69 $ $ 0.85 $ 0.69 $ 0.48 $ 0.69 $ 0.75 Diluted $ 0.69 $ 0.48 $ 0.69 $ 0.75 Diluted earnings per $ 0.48 $ 0.69 $ 0.75 Diluted earnings per share $ Diluted earnings per share $ 0.85 $ 0.66 $ 0.48 $ per share $ 0.85 $ 0.66 $ 0.48 $ 0.69 $ $ 0.85 $ 0.66 $ 0.48 $ 0.69 $ 0.75 Cash $ 0.66 $ 0.48 $ 0.69 $ 0.75 Cash dividend per $ 0.48 $ Earnings per share $ 5,355 $ 7,531 $ 8,168 Earnings per share : Basic per share : Basic $ 0.50 $ 0.70 $ 0.76 Diluted : Basic $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 Weighted 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 Weighted average share $ 0.48 $ 0.69 $ 0.75 Weighted average share outstanding : average share outstanding : Basic 10,811 10,723 10,803 Diluted 11,106 10,882 share outstanding : Basic 10,811 10,723 10,803 Diluted 11,106 10,882 10, EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2002 2003 2004 Net income ) Year Ended June 30 2002 2003 2004 Net income available Year Ended June 30 2002 2003 2004 Net income available for Ended June 30 2002 2003 2004 Net income available for common shareholder ( A ) $ 5,355 $ 7,531 $ 8,168 Weighted A ) $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,811 10,723 10,803 Dilutive effect of stock ( B ) 10,811 10,723 Earnings per share equivalent ( C ) 11,106 10,882 10,894 Earnings per share : ( C ) 11,106 10,882 10,894 Earnings per share : Basic Basic ( A/B ) $ 0.50 $ 0.70 $ 0.76 Diluted A/B ) $ 0.50 $ 0.70 $ 0.76 Diluted ( A/C $ 0.50 $ 0.70 $ 0.76 Diluted ( A/C ) $ Diluted ( A/C ) $ 0.48 $ 0.69 $ 0.75 For A/C ) $ 0.48 $ 0.69 $ 0.75 For the year $ 0.48 $ 0.69 $ 0.75 For the year ended June For the year ended June 30 , 2002 , 2003 and year ended June 30 , 2002 , 2003 and 2004 , June 30 , 2002 , 2003 and 2004 , 746 million , 2 earnings per share 0.19 7,531 Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share 0.19 0.70 Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 earnings per share 0.19 0.17 0.20 0.14 0.69 F earnings per share 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 earnings ", + "tax_rate": "tax rate for fiscal 2004 wa 33 % . A rate for fiscal 2004 wa 33 % . A benefit of . A benefit of $ 208 million wa recorded during the open issue remanded by the 9th Circuit Court of Appeals ruling of Appeals ruling in December 2002 . The effective tax rate the fourth quarter of fiscal 2004 wa approximately 27 % . of fiscal 2004 wa approximately 27 % . During the third effective tax rate for fiscal 2003 and fiscal 2002 wa 32 for fiscal 2003 and fiscal 2002 wa 32 % each year 2003 and fiscal 2002 wa 32 % ea tax rate would have been 33 % . Stock-based Compensation . We implemented change in fiscal 2004 in employee compensation designed to the second quarter of fiscal 2004 whereby employee could elect to a strike price of $ 33 or higher ( \u201c eligible during the period from November 14 , 2003 to December 8 period from November 14 , 2003 to December 8 , 2003 14 , 2003 to December 8 , 2003 , which wa 2003 to December 8 , 2003 , which wa $ 25.5720 2003 , which wa $ 25.5720 . Note 13 \u2013 Employee wa $ 25.5720 . Note tax rate reduction for be full phased in by 2006 . Neither bill will fully market . As of June 30 , 2004 , the face As of June 30 , 2004 , the face value of captive insurance arrangement wa $ 2.0 PAGE 32 Table of Contents arrangement wa $ 2.0 PAGE 32 Table of Contents Part II of Contents Part II Item 7 , 7A billion . Actual Part II Item 7 , 7A billion . Actual value at in Part I , Item 1 of this report ; and including impairment charge . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , si", + "segment_revenue": "Segment revenue and is a follows : ( 1 ) ( In million ) million ) Year Ended June 30 2002 2003 2004 Revenue Client ) Year Ended June 30 2002 2003 2004 Revenue Client $ Year Ended June 30 2002 2003 2004 Revenue Client $ 9,350 Ended June 30 2002 2003 2004 Revenue Client $ 9,350 $ 2003 2004 Revenue Client $ 9,350 $ 10,287 $ 11,241 Server Revenue Client $ 9,350 $ 10,287 $ 11,241 Server and Tools $ 9,350 $ 10,287 $ 11,241 Server and Tools 5,632 6,692 $ 11,241 Server and Tools 5,632 6,692 7,881 Information Worker 8,", + "investment_gains_losses": "investment gains investment gains investment gains", + "common_stock": "common stock a of August 15 , 2004 wa 10,872,704,667 . a of August 15 , 2004 wa 10,872,704,667 . DOCUMENTS INCORPORATED August 15 , 2004 wa 10,872,704,667 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 9 , 2004 are incorporated by be held November 9 , 2004 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2004 INDEX PART I Year Ended June 30 , 2004 INDEX PART I Item 1. 2004 INDEX PART I Item 1. Bus Common stock 31 June 30 Year Fiscal 2003 Common stock price per share per share : High $ 27.43 $ 29.12 $ 28.49 $ : High $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 Common 29.12 Low 21.42 21.89 22.80 23.67 21 Common stock Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 Common stock price 21.89 22.80 23.67 21.42 Fiscal 2004 Common stock price per share per share : High $ 29.96 $ 29.35 $ 28.80 $ : High $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 In 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 In September $ 29.96 Low 25.54 25.10 24. common stock dividend of $ 0.16 per share , which wa which wa paid in November 2003 . That wa the only declared or paid in fiscal 2004 . Our dividend policy is business model . On July 20 , 2004 , our board . On July 20 , 2004 , our board of director a quarterly dividend of $ 0.08 per share payable on September per share payable on September 14 , 2004 , to shareholder payable on September 14 , 2004 , to shareholder of record shareholder of record on August 25 , 2004 . In addition record on August 25 , 2004 common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . We did be held November 9 , 2004 . We did not repurchase the fourth quarter of fiscal 20 common stock paid-in capital , a $ 10.00 billion decrease in retained earnings earnings , and a $ 3.89 billion increase in deferred income stock-based compensation expense for fiscal 2002 through 2004 by segment . expense for fiscal 2002 through 2004 by segment . ( In expense per share ) ( 1 ) 2002 2003 2004 Client share ) ( 1 ) 2002 2003 2004 Client $ 471 ) ( 1 ) 2002 2003 2004 Client $ 471 $ ( 1 ) 2002 2003 2004 Client $ 471 $ 450 2002 2003 2004 Client $ 471 $ 450 $ 738 Server 2004 Client $ 471 $ 450 $ 73 common stock share repurchase program in fiscal 2004 . Cash used for investing used for investing wa $ 2.75 billion in fiscal 2004 , $ 2.75 billion in fiscal 2004 , a decrease of $ , a decrease of $ 4.47 billion from fiscal 2003 , $ 4.47 billion from fiscal 2003 , due to a $ , due to a $ 3.63 billion decrease in net investment investment purchase and a $ 1.06 billion decrease in acquisition spending flow from operation wa $ 15.80 billion for fiscal 2003 , $ 15.80 billion for fiscal 2003 , an increase of $ , common stock repurchase stock repurchase , offsetting $ 623 million received for common stock stock issued . We repurchased 238.2 million share of common stock share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion f common stock share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from Common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . We believe be held November 9 , 2004 . We believe existing cash These guarantee arose on Common stock Net cash from operation 14,509 15,797 14,626 Financing Common stock issued cash from operation 14,509 15,797 14,626 Financing Common stock issued 1,497 14,626 Financing Common stock issued 1,497 2,120 2,748 Common stock repurchased Financing Common stock issued 1,497 2,120 2,748 Common stock repurchased ( Common stock issued 1,497 2,120 2,748 Common stock repurchased ( 6,069 2,748 Common stock repurchased ( 6,069 ) ( 6,486 ) ( repurchased ( 6,069 ) ( 6,486 ) ( 3,383 ) Common ) ( 6,486 ) ( 3,383 Common stock dividend \u2013 Common stock dividend \u2013 ( 857 ) ( 1,729 ) Net \u2013 ( 857 ) ( 1,729 ) Net cash used for cash used for financing ( 4,572 ) ( 5,223 ) ( financing ( 4,572 ) ( 5,223 ) ( 2,364 ) Investing ) ( 5,223 ) ( 2,364 ) Investing Additions to property to property and equipment ( 770 ) ( 891 ) ( equipment ( 770 ) ( 891 ) ( 1,109 ) Acquisition ) ( 891 ) ( 1,109 ) Acquisition of company , of cash acquired \u2013 ( 1,063 ) ( 4 ) Purchases \u2013 ( 1,063 ) ( 4 ) Purchases of investment ( ) Purchases of investment ( Common stock and ) 2003 ( 1 ) 2004 Common stock and paid-in capital , beginning of period $ 28,390 $ 41,845 $ 49,234 Cumulative of period $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 retroactive adjustment 41,845 $ 49,234 Cumulative SFAS 123 retroactive adjustment 6,560 \u2013 \u2013 Cumulative SFAS 123 retroactive adjustment 6,560 \u2013 \u2013 Common stock issued \u2013 \u2013 Common stock issued 1,655 2,966 2,815 Common stock repurchased \u2013 Common stock issued 1,655 2,966 2,815 Common s Common stock issued 1,655 2,966 2,815 Common stock repurchased ( 676 2,815 Common stock repurchased ( 676 ) ( 691 ) ( repurchased ( 676 ) ( 691 ) ( 416 ) Stock-based ) ( 691 ) ( 416 ) Stock-based compensation expense 3,784 416 ) Stock-based compensation expense 3,784 3,749 5,734 Stock option income ) Stock-based compensation expense 3,784 3,749 5,734 Stock option income tax Stock-based compensation expense 3,784 3,749 5,734 Stock option income tax benefits/ tax benefits/ ( deficiency ) 1,596 1,365 ( 989 ) O Common stock dividend 116 51 Comprehensive income 5,351 8,788 7,447 Common stock dividend \u2013 51 Comprehensive income 5,351 8,788 7,447 Common stock dividend \u2013 ( Common stock dividend \u2013 ( 857 ) ( 1,729 ) Common \u2013 ( 857 ) ( 1,729 ) Common stock repurchased ( ) Common stock repurchased ( 6,191 ) ( 5,250 ) ( repurchased ( 6,191 ) ( 5,250 ) ( 2,967 ) Balance ) ( 5,250 ) ( 2,967 ) Balance , end of Balance , end of period 12,997 15,678 18,429 Total stockholder \u2019 , end of period 12,997 15,678 18,429 Total stockholde Common stock 223 ) 50,907 6,438 42,610 1,859 Equity security Common stock and security Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 \u2013 and equivalent 8,395 1,686 ( 3 ) 10,078 \u2013 \u2013 10,078 8,395 1,686 ( 3 ) 10,078 \u2013 \u2013 10,078 Preferred stock 3 ) 10,078 \u2013 \u2013 10,078 Preferred stock 1,262 \u2013 \u2013 \u2013 \u2013 10,078 Preferred stock 1,262 \u2013 \u2013 1,262 \u2013 \u2013 Preferred stock 1,262 \u2013 \u2013 1,262 \u2013 \u2013 1,262 Other investment \u2013 \u2013 1,262 \u2013 \u2013 1,262 Other investment 493 \u2013 \u2013 \u2013 \u2013 1,262 Other Common stock 231 ) 62,073 15,982 44,610 1,481 Equity security Common stock and security Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 \u2013 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 \u2013 1,290 \u2013 \u2013 Preferred stock 1,290 \u2013 \u2013 1,290 \u2013 \u2013 1,290 Other investment \u2013 \u2013 1,290 \u2013 \u2013 1,290 Other investment 208 \u2013 \u2013 \u2013 \u2013 1,290 Other in common stock of $ 0.08 and $ 0.16 per share of $ 0.08 and $ 0.16 per share , respectively . dividend were paid on March 7 and November 7 , 2003 on March 7 and November 7 , 2003 , respectively , 7 and November 7 , 2003 , respectively , to shareholder close of business on February 21 , and October 17 , February 21 , and October 17 , 2003 . PAGE 50 , and October 17 , 2003 . PAGE 50 Table of 17 , 2003 . PAGE 50 Table of Contents Part II of Contents Part II Item 8 NOTE 12 OTHER COMPREHENSIVE INCOME Part II Item common stock ( B ) 10,811 10,723 10,803 Dilutive effect of stock ( B ) 10,811 10,723 10,803 Dilutive effect of employee ( B ) 10,811 10,723 10,803 Dilutive effect of employee stock employee stock option and award 295 159 91 Common stock and stock option and award 295 159 91 Common stock and common option and award 295 159 91 Common stock and common stock stock equivalent ( C ) 11,106 10,882 10,894 Earnings per share equivalent ( C ) 11,106 10,882 10,894 Earnings per share : ( C ) 11,106 10,882 10,894 Earnin common stock valued at $ 773 million . The value of Rare wa acquired on September 24 , 2002 for $ 377 acquired on September 24 , 2002 for $ 377 million consisting 24 , 2002 for $ 377 million consisting primarily of $ million consisting primarily of $ 375 million in cash and is Placeware wa acquired on April 30 , 2003 for $ 202 acquired on April 30 , 2003 for $ 202 million , 30 , 2003 for $ 202 million , consisting primarily of , consisting primarily of $ 189 million in cash . Navision of the acquisition for common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . PAGE 62 be held November 9 , 2004 . PAGE 62 Table of 9 , 2004 . PAGE 62 Table of Content", + "derivative_instruments": "Derivative Instruments fair-value hedging instrument under SFAS 133 . Certain option and forward a hedging instrument under SFAS 133 are also used to hedge a hedging instrument under SFAS 133 , are also used to a hedging instrument under SFAS 133 , to hedge interest rate a hedging instrument under SFAS 133 , are used to manage period of change . PAGE 41 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-05-174825/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-05-174825/full-submission_features.json new file mode 100644 index 0000000..0d9cc06 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-05-174825/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue in more place . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Windows XP Home Edition is and connectivity . Windows XP 64-Bit Edition meet the demand of first half of fiscal year 2007 . Server and Tools . built on the Windows Server 2003 operating system . In addition service . During fiscal year 2006 , Server and Tools plan different customer segment . Approximately 50 % of Server revenue come from multi-year licensing agreement , 40 % is purchased through fully volume licensing pr revenue . Approximately 40 % of Information Worker revenue condition . The remaining approximately 20 % of Information Worker revenue with a major release every 24-36 month . New product and cycle . In fiscal year 2006 , the Information Worker segment product , code named Office 12 , due for release during first half of fiscal year 2007 . Microsoft Business Solutions . small and midsized retailer PAGE 5 Table of Contents Part I of Contents Part I Item 1 ( Microsoft Point of Sale Worker . In fiscal year revenue . These of fiscal year 2004 and 2005 revenue . These sale were customer accounted for more than 10 % of revenue in 2003 10 % of revenue in 2003 . Our practice is to and Red Hat . PAGE 10 Table of Contents Part I of Contents Part I Item 1 We compete in the business company focused on the Java 2 Platform Enterprise Edition ( J2EE especially in display and PAGE 11 Table of Contents Part I of Contents Part I Item 1 in search-based advertising . As game console have on average 5 to 7 year lifecycles Revenue $ ) 2003 ( 1,4 ) 2004 2005 Revenue $ 25,296 $ 2003 ( 1,4 ) 2004 2005 Revenue $ 25,296 $ 28,365 ) 2004 2005 Revenue $ 25,296 $ 28,365 $ 32,187 $ 2005 Revenue $ 25,296 $ 28,365 $ 32,187 $ 36,835 $ $ 25,296 $ 28,365 $ 32,187 $ 36,835 $ 39,788 Operating $ 28,365 $ 32,187 $ 36,835 $ 39,788 Operating income 11,720 $ 32,187 $ 36,835 $ 39,788 Operating income 11,720 8,272 9,545 36,835 $ 39,788 Operating income 11,720 8,272 9,545 9,034 14,561 Income $ 39,788 Operating income 11,720 8,272 9,545 9,034 14, Revenue $ 32,187 2005 Percent Change Revenue $ 32,187 $ 36,835 14 % $ Change Revenue $ 32,187 $ 36,835 14 % $ 39,788 8 Revenue $ 32,187 $ 36,835 14 % $ 39,788 8 % $ 36,835 14 % $ 39,788 8 % Operating income $ 36,835 14 % $ 39,788 8 % Operating income $ 9,545 8 % Operating income $ 9,545 $ 9,034 ( 5 ) Operating income $ 9,545 $ 9,034 ( 5 ) % $ $ 9,545 $ 9,034 ( 5 ) % $ 14,561 61 ( 5 ) % $ 14,561 61 % Our revenue growth 5 ) % $ 14,561 61 % Our revenue growth for revenue growth for fiscal year 2005 wa dri revenue wa positive in 2005 , primarily due to relative in effect in fiscal year 2005 , translated international revenue growth would have been approximately $ 873 million or two percentage point point lower for fiscal year 2005 . We hedge a portion growth rate wa a $ 1.1 billion decline in earned revenue Upgrade Advantage in fiscal year 2005 . The Upgrade Advantage contract first quarter of fiscal year 2005 . This revenue wa recognized wa recognized over fiscal year 2003 and fiscal year 2004 and year Revenue growth in fiscal year 2004 wa primarily driven by the all source wa estimated at 13 % and the Windows server server shipment wa estimated at 18 % in fiscal year 2004 18 % in fiscal year 2004 a compared to fiscal year a compared to fiscal year 2003 . The net impact of wa positive in fiscal year 2004 due to a relative strengthening This resulted in approximately $ 1.10 billion growth in total revenue Revenue growth in fiscal year 2003 wa driven primarily by multi-year that occurred before the Lic revenue growth also reflected a growth also reflected a $ 933 million or 13 % increase a $ 933 million or 13 % increase associated with OEM operating system and a $ 309 million or 23 % increase a $ 309 million or 23 % increase in revenue from console . For fiscal year 2005 , the operating income increase , strong sale of Halo 2 reduced the overall operating loss Entertainment segment for fiscal year 2005 . The $ 3.29 billion year 2005 . The $ 3.29 billion decrease in stock-based compensation increased revenue . In fiscal year 2003 , the growth in operating Warner settlement charge of $ 750 million . In fiscal year million . In fiscal year 2004 , we implemented change in second quarter of fiscal year 2004 in which employee could elect a strike price of $ 33 or higher to JPMorgan . transfer . A total of 345 million of the 621 million of 345 million of the 621 million eligible option were transferred stock-based compensation expense of $ 2.21 billion in the second quarter second quarter of fiscal year revenue 380 3,286 ) Cost of revenue 380 681 301 318 ( 363 ) Cost of revenue 380 681 301 318 ( 363 ) Cost of revenue 380 681 301 318 ( 363 ) Research of revenue 380 681 301 318 ( 363 ) Research and 380 681 301 318 ( 363 ) Research and development 1,964 363 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Sales and development 1,964 3,117 1,153 1,241 ( 1,876 ) Sales and 1,964 revenue to higher rate than fiscal year 2005 , mainly due to the revenue growth in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 in Home and Entertainment primarily by the launch of Xbox 360 . We estimate worldwide PC PC shipment will grow between 7 % to 9 % and grow between 7 % to 9 % and worldwide server unit unit shipment will grow between 11 % to 13 % in grow between 11 % to 13 % in fiscal year 2006 13 % in fiscal year 2006 a compared to fiscal year a compared to fiscal revenue growth than incurred in fiscal year 2005 and a reduction in stock-based to increase in fiscal year 2006 driven by the launch of of and investment in Xbox 360 . SEGMENT PRODUCT REVENUE/OPERATING INCOME to each of the PAGE 24 Table of Contents Part II of Contents Part II Item 7 segment . The segment information segment information appearing in Note 18 \u2013 Segment Information of the accordance with SFAS No . 131 , Disclosures about Segments of analyzed separately . Fiscal year 2003 and 2004 amount h Revenue $ 10,394 2005 Percent Change Revenue $ 10,394 $ 11,546 11 % $ Change Revenue $ 10,394 $ 11,546 11 % $ 12,234 6 Revenue $ 10,394 $ 11,546 11 % $ 12,234 6 % $ 11,546 11 % $ 12,234 6 % Operating income $ 11,546 11 % $ 12,234 6 % Operating income $ 7,960 6 % Operating income $ 7,960 $ 8,654 9 % $ Operating income $ 7,960 $ 8,654 9 % $ 9,442 9 income $ 7,960 $ 8,654 9 % $ 9,442 9 % $ 8,654 9 % $ 9,442 9 % Client includes revenue 8,654 9 % $ 9,442 9 % Client includes revenue from OEM channel account revenue revenue increased in fiscal year 2005 driven by 12 % growth fiscal year 2005 driven by 12 % growth in OEM license OEM license unit and $ 886 million or 10 % growth and $ 886 million or 10 % growth in OEM revenue partially offset by a $ 198 million or 9 % decrease a $ 198 million or 9 % decrease in revenue from the year remained flat at 50 % of total OEM Windows Upgrade Advantage declined by $ 99 million in fiscal year 2005 99 million in fiscal year 2005 contributing to the decrease in revenue i revenue second half of fiscal year 2004 . Client operating income increased income increased in fiscal year 2005 primarily due to an increase operating income for fiscal year 2004 ha been restated for a legal settlement charge totaling $ 700 million from Client to corporate income increased for fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 mainly due to growth in second quarter of fiscal year 2004 . We anticipate that worldwide shipment will grow at approximately 7 % t Revenue $ 7,192 2005 Percent Change Revenue $ 7,192 $ 8,538 19 % $ Change Revenue $ 7,192 $ 8,538 19 % $ 9,885 16 Revenue $ 7,192 $ 8,538 19 % $ 9,885 16 % $ 8,538 19 % $ 9,885 16 % Operating income $ 8,538 19 % $ 9,885 16 % Operating income $ 1,160 16 % Operating income $ 1,160 $ 1,418 22 % $ Operating income $ 1,160 $ 1,418 22 % $ 3,259 130 income $ 1,160 $ 1,418 22 % $ 3,259 130 % $ 1,418 22 % $ 3,259 130 % Server and Tools 1,418 22 % $ 3,259 130 % Server and Tools consists revenue growth in fiscal revenue , which grew $ 1.1 billion or 17 % in grew $ 1.1 billion or 17 % in fiscal year 2005 17 % in fiscal year 2005 reflecting broad adoption of Windows overall server hardware shipment grew 13 % to 14 % during shipment grew 13 % to 14 % during fiscal year 2005 14 % during fiscal year 2005 and that Windows-based server shipment support service revenue increased $ 241 million or 19 % compared increased $ 241 million or 19 % compared to the previous change accounted for approximately $ 284 million or t revenue , grew $ 1.28 billion or 25 % . grew $ 1.28 billion or 25 % . Foreign currency exchange exchange rate contributed approximately $ 350 million or five percentage point revenue growth in fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 . Consulting and Premier product support service revenue increased $ 192 million or 18 % compared increased $ 192 million or 18 % compared to fiscal year % compared to fiscal year 2003 due to increased customer penetration income grow Revenue $ 9,113 2005 Percent Change Revenue $ 9,113 $ 10,653 17 % $ Change Revenue $ 9,113 $ 10,653 17 % $ 11,013 3 Revenue $ 9,113 $ 10,653 17 % $ 11,013 3 % $ 10,653 17 % $ 11,013 3 % Operating income $ 10,653 17 % $ 11,013 3 % Operating income $ 6,389 3 % Operating income $ 6,389 $ 7,410 16 % $ Operating income $ 6,389 $ 7,410 16 % $ 7,915 7 income $ 6,389 $ 7,410 16 % $ 7,915 7 % $ 7,410 16 % $ 7,915 7 % Information Worker consists 7,410 16 % $ 7,915 7 % Information Worker consists of . Beginning i revenue increased in fiscal year 2005 primarily due to a 3 2005 primarily due to a 3 % or $ 269 million a 3 % or $ 269 million increase in volume licensing Office in Japan , a 6 % or $ 91 million a 6 % or $ 91 million increase in OEM revenue rate accounted for approximately $ 367 million or three percentage point revenue growth for fiscal year 2005 a compared to the previous , offset by a $ 663 million decline in Upgrade Advantage Revenue growth for fiscal year 2004 from volume licensing , retail of Of revenue grew . OEM licensing revenue grew 29 % or $ 325 million grew 29 % or $ 325 million . Foreign currency exchange exchange rate provided approximately $ 485 million or 5 % of approximately $ 485 million or 5 % of total Information Worker income growth for fiscal year 2005 wa primarily due to the with the launch of Office 2003 . This decline wa offset operating income in fiscal year 2004 increased from the previous year , primarily related to $ 351 million of stock-based compensation expense second Revenue $ 631 2005 Percent Change Revenue $ 631 $ 759 20 % $ Change Revenue $ 631 $ 759 20 % $ 803 6 Revenue $ 631 $ 759 20 % $ 803 6 % $ 759 20 % $ 803 6 % Operating loss $ 759 20 % $ 803 6 % Operating loss $ ( % Operating loss $ ( 148 ) $ ( 315 ) ( 148 ) $ ( 315 ) ( 113 ) % $ ( 315 ) ( 113 ) % $ ( 201 113 ) % $ ( 201 ) 36 % Microsoft Business % $ ( 201 ) 36 % Microsoft Business Solutions provides an adaptable software platform PAGE 27 Table of Contents Part II of Contents Part II Item 7 that work lik revenue in fiscal year 2005 wa mainly due to a wa mainly due to a 10 % revenue growth in software software partially offset by a 25 % decline in service revenue increase wa driven by a 9 % growth in license revenue growth in license revenue and 16 % growth in enhancement revenue revenue increase in fiscal year 2004 wa primarily attributable to continued loss declined in fiscal year 2005 primarily due to a decline operating loss for fiscal year 2004 increased from fiscal year 2003 2004 increased from fi Revenue $ 1,953 2005 Percent Change Revenue $ 1,953 $ 2,216 13 % $ Change Revenue $ 1,953 $ 2,216 13 % $ 2,274 3 Revenue $ 1,953 $ 2,216 13 % $ 2,274 3 % $ 2,216 13 % $ 2,274 3 % Operating income ( 2,216 13 % $ 2,274 3 % Operating income ( loss ( loss ) $ ( 573 ) $ 87 115 % $ ( 573 ) $ 87 115 % $ 405 366 ( 573 ) $ 87 115 % $ 405 366 % $ 87 115 % $ 405 366 % MSN includes personal 87 115 % $ 405 366 % MSN includes personal communication Access . In fiscal year 2005 , we launched a new product enhancement revenue increased MSN advertising revenue increased $ 193 million or 16 % primarily increased $ 193 million or 16 % primarily a a result the search clarity in PAGE 28 Table of Contents Part II of Contents Part II Item 7 advertising program and the impact than Internet Access increased $ 84 million or 88 % in increased $ 84 million or 88 % in fiscal year 2005 88 % in fiscal year 2005 a a result of growth wa a decline of $ 219 million or 24 % in of $ 219 million or 24 % in Internet Access revenue fiscal revenue increased MSN advertising revenue increased $ 360 million or 43 % a increased $ 360 million or 43 % a a result of by a decline of $ 168 million or 15 % in of $ 168 million or 15 % in Internet Access revenue than Internet Access increased $ 71 million . In fiscal year million . In fiscal year 2005 , MSN operating income increased benefit , and a $ 48 million tax benefit recorded in first quarter of fiscal year 2004 . MSN reached profitability in first quarter of fiscal year 2004 and wa profitabl Revenue $ 156 2005 Percent Change Revenue $ 156 $ 247 58 % $ Change Revenue $ 156 $ 247 58 % $ 337 36 Revenue $ 156 $ 247 58 % $ 337 36 % $ 247 58 % $ 337 36 % Operating loss $ 247 58 % $ 337 36 % Operating loss $ ( % Operating loss $ ( 277 ) $ ( 219 ) ( 277 ) $ ( 219 ) 21 % $ ( ) $ ( 219 ) 21 % $ ( 46 ) ) 21 % $ ( 46 ) 79 % Mobile and % $ ( 46 ) 79 % Mobile and Embedded Devices revenue growth for fiscal year 2005 wa primarily due to unit in volume shipment for PAGE 29 Table of Contents Part II of Cont revenue for Windows Mobile Windows Mobile software increased $ 46 million or 45 % , increased $ 46 million or 45 % , revenue for Windows Embedded operating system increased $ 19 million or 21 % and increased $ 19 million or 21 % and revenue for MapPoint and Windows Automotive increased $ 25 million or 45 % . increased $ 25 million or 45 % . Mobile and Embedded community . In fiscal year 2005 , Mobile and Embedded Devices Embedded Devices released Windows Mobile 5.0 which is the latest version revenue g Revenue $ 2,748 2005 Percent Change Revenue $ 2,748 $ 2,876 5 % $ Change Revenue $ 2,748 $ 2,876 5 % $ 3,242 13 Revenue $ 2,748 $ 2,876 5 % $ 3,242 13 % $ 2,876 5 % $ 3,242 13 % Operating loss $ 2,876 5 % $ 3,242 13 % Operating loss $ ( % Operating loss $ ( 1,191 ) $ ( 1,220 ) ( 1,191 ) $ ( 1,220 ) ( 2 ) % $ ( 1,220 ) ( 2 ) % $ ( 391 2 ) % $ ( 391 ) 68 % Home and % $ ( 391 ) 68 % Home and Entertainment includes we entered the market in 2002 and we have established ourselves revenue increased in fiscal revenue second quarter of fiscal year 2005 , we PAGE 30 Table year 2005 , we PAGE 30 Table of Contents Part II of Contents Part II Item 7 introduced Halo 2 , which II Item 7 introduced Halo 2 , which generated over $ , which generated over $ 300 million in revenue in the and TV platform declined $ 50 million or 5 % compared declined $ 50 million or 5 % compared to fiscal year % compared to fiscal year 2004 due to lower PC game sale . In fiscal year 2004 , Xbox revenue increased $ , Xbox revenue increas Revenue from consumer hardware and TV platform declined $ 16 million or 1 % compared declined $ 16 million or 1 % compared to fiscal year % compared to fiscal year 2003 due to lower PC game operating loss in fiscal year 2005 decreased primarily due to an adjustment recorded in fiscal year 2004 , and a decrease in in cost associated with Xbox 360 console development and launch effort operating loss in fiscal year 2004 wa primarily due to $ wa primarily due to $ 141 million of stock-based compensation ex revenue to increase from fiscal year 2005 driven by more new game million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Corporate-level Expenses $ Percent Change Corporate-level Expenses $ 3,775 $ 6,781 80 % $ Corporate-level Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( 14 $ 6,781 80 % $ 5,822 ( 14 ) % Certain 80 % $ 5,822 ( 14 ) % Certain co Revenue ( million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Cost of revenue Change Cost of revenue $ 6,059 $ 6,716 11 % $ of revenue $ 6,059 $ 6,716 11 % $ 6,200 ( revenue $ 6,059 $ 6,716 11 % $ 6,200 ( 8 $ 6,716 11 % $ 6,200 ( 8 ) % As 11 % $ 6,200 ( 8 ) % As a percent As a percent of revenue 19 % 18 % ( 1 percent of revenue 19 % 18 % ( 1 ) ppt 19 % 18 % ( 1 ) ppt 16 % ( revenue consulting service . In PAGE 31 Table of Contents Part II of Contents Part II Item 7 addition to a decrease in of revenue in fiscal year 2005 due to lower stock-based compensation decreased due to a $ 140 million reduction in cost primarily subscription declined and a $ 169 million reduction in other product The increase in fiscal year 2004 wa primarily due to increased consulting service cost of $ 508 million , $ 214 million $ 508 million , $ 214 million of stock-based compensation expense fou revenue 21 % 21 % 0 ppt percent of revenue 21 % 21 % 0 ppt 16 % revenue 21 % 21 % 0 ppt 16 % ( 5 % 21 % 0 ppt 16 % ( 5 ) ppt 0 ppt 16 % ( 5 ) ppt Research and development expense decreased in fiscal year 2005 due to lower stock-based compensation product , primarily the Xbox 360 console and related game , related game , SQL Server 2005 , Windows Vista , and The increase in fiscal year 2004 wa primarily due to $ wa primarily due to $ 1.31 billion of stock-based compensation expense employee cost associa revenue 24 % 23 % ( 1 percent of revenue 24 % 23 % ( 1 ) ppt 24 % 23 % ( 1 ) ppt 22 % ( % ( 1 ) ppt 22 % ( 1 ) ppt ) ppt 22 % ( 1 ) ppt Sales and marketing program . For fiscal year 2005 , sale and marketing expense increased slightly due to $ 470 million higher headcount-related cost from campaign ; launch of Halo 2 ; and launch arrangement for and launch arrangement for Xbox 360 . The increase wa offset cost increased in fiscal year 2004 due to $ 400 million year 2004 due to $ 400 million of stock-ba revenue 8 % 14 % 6 ppt percent of revenue 8 % 14 % 6 ppt 10 % revenue 8 % 14 % 6 ppt 10 % ( 4 % 14 % 6 ppt 10 % ( 4 ) ppt 6 ppt 10 % ( 4 ) ppt PAGE 32 Table ( 4 ) ppt PAGE 32 Table of Contents Part II of Contents Part II Item 7 General and administrative cost include expense decreased in fiscal year 2005 due to lower legal cost and existing employee of $ 25 million . In fiscal year million . In fiscal year 2005 , our legal expense were driven by charge of $ 2.08 billion , nearly all of cost increased i revenue a of June 30 , 2005 increased $ 990 a of June 30 , 2005 increased $ 990 million from 30 , 2005 increased $ 990 million from June 30 , $ 990 million from June 30 , 2004 reflecting current period million from June 30 , 2004 reflecting current period billing outpacing multi-year licensing arrangement by $ 925 million and a $ 304 925 million and a $ 304 million increase primarily in unearned partially offset by a $ 239 million decline in revenue deferred for undelivered element . PAGE 34 Table of C revenue at June 30 , 2005 : ( In revenue at June 30 , 2005 : ( In million ) Three month ended : September 30 , 2005 $ 2,724 December ended : September 30 , 2005 $ 2,724 December 31 , September 30 , 2005 $ 2,724 December 31 , 2005 2,208 , 2005 $ 2,724 December 31 , 2005 2,208 March 31 $ 2,724 December 31 , 2005 2,208 March 31 , 2006 2,724 December 31 , 2005 2,208 March 31 , 2006 1,612 31 , 2005 2,208 March 31 , 2006 1,612 June 30 2005 2,208 March 31 , 2006 1,612 June 30 , 2006 2,208 March 31 , 2006 1,61 revenue 1,612 June 30 , 2006 958 Thereafter 1,665 Unearned revenue $ 30 , 2006 958 Thereafter 1,665 Unearned revenue $ 9,167 Cash Thereafter 1,665 Unearned revenue $ 9,167 Cash Flows Cash flow from from operation for fiscal year 2005 increased 14 % to $ for fiscal year 2005 increased 14 % to $ 16.61 billion increased 14 % to $ 16.61 billion due primarily to an from customer driven by our 8 % revenue growth combined with revenue growth combined with a 12 % increase in unearned revenue Cash payment in fi revenue of $ 1.67 billion from other long-term liability ISSUED ACCOUNTING STANDARDS In November 2004 , the Financial Accounting Standards ) issued SFAS No . 151 , Inventory Costs , which material . SFAS No . 151 will be effective for inventory fiscal year beginning after June 15 , 2005 . We do beginning after June 15 , 2005 . We do not believe adoption of SFAS No . 151 will have a material impact financial statement . In December 2004 , the FASB issued SFAS FASB issued SFAS No . 153 , Exchanges of Non Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether software arrangement , the PAGE 37 Table of Contents Part II of Contents Part II Item 7 ability to identify VSOE for product . SFAS No . 115 , Accounting for Certain Investments Securities , and SEC SAB 59 , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , and SFAS No Revenue $ ) Year Ended June 30 2003 2004 2005 Revenue $ 32,187 Year Ended June 30 2003 2004 2005 Revenue $ 32,187 $ Ended June 30 2003 2004 2005 Revenue $ 32,187 $ 36,835 2003 2004 2005 Revenue $ 32,187 $ 36,835 $ 39,788 Operating 2005 Revenue $ 32,187 $ 36,835 $ 39,788 Operating expense : $ 32,187 $ 36,835 $ 39,788 Operating expense : Cost of expense : Cost of revenue 6,059 6,716 6,200 Research and development : Cost of revenue 6,059 6,716 6,200 Research and development 6,595 Cost of revenue 6,059 6,7 revenue 6,514 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 7,502 3,478 2,020 Short-term unearned revenue 6,514 7,502 Other 1,921 3,607 Total 2,020 Short-term unearned revenue 6,514 7,502 Other 1,921 3,607 Total current unearned revenue 6,514 7,502 Other 1,921 3,607 Total current liability 14,969 revenue 6,514 7,502 Other 1,921 3,607 Total current liability 14,969 16,877 1,921 3,607 Total current liability 14,969 16,877 Long-term unearned revenue 1,663 3,607 Total current liabili revenue 1,663 1,665 14,969 16,877 Long-term unearned revenue 1,663 1,665 Other long-term liability 2,911 16,877 Long-term unearned revenue 1,663 1,665 Other long-term liability 2,911 4,158 1,663 1,665 Other long-term liability 2,911 4,158 Commitments and contingency Stockholders 1,665 Other long-term liability 2,911 4,158 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 10,862 and 10,710 share authorized 24,000 ; outstanding 10,862 and 10,710 56,396 60, revenue 12,519 11,777 ( 179 ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned 179 ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned revenue ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned revenue ( Recognition of unearned revenue ( 11,292 ) ( 12,527 ) ( revenue ( 11,292 ) ( 12,527 ) ( 12,919 ) Accounts ) ( 12,527 ) ( 12,919 ) Accounts receivable 187 ( ( 12,919 ) Accounts receivable 187 ( 687 ) ( 1,243 ) Accounts receivable 187 ( 687 ) ( 1,243 ) Other 187 ( 68 Revenue related to our Xbox . Advertising expense wa $ 1.06 billion in fiscal year 2003 1.06 billion in fiscal year 2003 , $ 904 million in fiscal year 2003 , $ 904 million in fiscal year 2004 904 million in fiscal year 2004 , and $ 995 million year 2004 , and $ 995 million in fiscal year 2005 995 million in fiscal year 2005 . INCOME TAXES Income tax sell or re-pledge wa $ 499 million at both June 30 499 million at both June 30 , 2004 and 2005 . at both June 30 , 2004 and 2005 . Investments are June 30 REVENUE Unearned Part II Item 8 NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price ( In million ) June 30 2004 2005 Volume licensing program In million ) June 30 2004 2005 Volume licensing program $ million ) Ju revenue Undelivered element 2,358 2,119 Other 744 1,048 Unearned revenue $ 8,177 element 2,358 2,119 Other 744 1,048 Unearned revenue $ 8,177 $ 744 1,048 Unearned revenue $ 8,177 $ 9,167 Unearned revenue by Unearned revenue $ 8,177 $ 9,167 Unearned revenue by segment is ( In million ) June 30 2004 2005 Client $ 2,822 In million ) June 30 2004 2005 Client $ 2,822 $ million ) June 30 2004 2005 Client $ 2,822 $ 2,687 30 2004 2005 Client $ 2,822 $ 2,687 Server and Tools 2005 Client $ 2,822 $ 2,687 Server a revenue $ 8,177 2,586 2,814 Other segment 399 618 Unearned revenue $ 8,177 $ 399 618 Unearned revenue $ 8,177 $ 9,167 PAGE 49 Table Unearned revenue $ 8,177 $ 9,167 PAGE 49 Table of Contents $ 8,177 $ 9,167 PAGE 49 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2004 Cash and security other investment June 30 , 2004 Cash and security Cash $ Cash and security Cash $ 1 revenue and $ 2 million in derivative gain were other . During fiscal year 2004 , $ 14 million of fiscal year 2004 , $ 14 million of derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were . We estimate that $ 42 million of net derivative gain or discontinued for fiscal year 2003 , 2004 , and 2005 for fiscal year 2003 , 2004 , and 2005 . NOTE 2003 , 2004 , and 2005 . N revenue $ 1,746 $ 915 Impaired investment 1,246 Unearned revenue $ 1,746 $ 915 Impaired investment 1,246 861 Stock-based 1,746 $ 915 Impaired investment 1,246 861 Stock-based compensation expense 3,749 $ 915 Impaired investment 1,246 861 Stock-based compensation expense 3,749 3,994 1,246 861 Stock-based compensation expense 3,749 3,994 Other revenue item 286 861 Stock-based compensation expense 3,749 3,994 Other revenue item 286 213 3,749 3,994 Other revenue item 286 213 Other expense item 1,308 3,994 revenue item 286 213 Other expense item 1,308 1,751 286 213 Other expense item 1,308 1,751 Other \u2013 173 Deferred 213 Other expense item 1,308 1,751 Other \u2013 173 Deferred income item 1,308 1,751 Other \u2013 173 Deferred income tax asset $ Deferred income tax asset $ 8,335 $ 7,907 Deferred income tax tax asset $ 8,335 $ 7,907 Deferred income tax liability : gain on investment $ ( 1,087 ) $ ( 1,169 ) ( 1,087 ) $ ( 1,169 ) International earnings ( 1,327 1,169 ) International earnings ( 1,327 ) ( 1,393 ) Other ea revenue and million ) Year Ended June 30 2003 2004 2005 Revenue Client ) Year Ended June 30 2003 2004 2005 Revenue Client $ Year Ended June 30 2003 2004 2005 Revenue Client $ 10,304 Ended June 30 2003 2004 2005 Revenue Client $ 10,304 $ 2004 2005 Revenue Client $ 10,304 $ 11,283 $ 12,048 Server Revenue Client $ 10,304 $ 11,283 $ 12,048 Server and Tools $ 10,304 $ 11,283 $ 12,048 Server and Tools 6,786 8,007 $ 12,048 Server and Tools 6,786 8,007 9,143 Information Worker 9,636 12,048 Server and Tools 6,7 Revenue ) ( 4,516 ) ( 1,042 ) Revenue reconciling amount ( ) Revenue reconciling amount ( 508 ) 344 325 Corporate-level expense reconciling amount ( 508 ) 344 325 Corporate-level expense ( 1 amount ( 508 ) 344 325 Corporate-level expense ( 1 ) 344 325 Corporate-level expense ( 1 ) ( 1,980 ) ( expense ( 1 ) ( 1,980 ) ( 3,037 ) ( ) ( 1,980 ) ( 3,037 ) ( 3,405 ) Other ) ( 3,037 ) ( 3,405 ) Other 803 410 167 ) ( 3,405 ) Other 803 410 167 Total $ ( ( 3,405 ) Other 803 410 167 Total $ ( 6,513 3,405 ) Other 8 revenue . These total fiscal year 2004 and 2005 revenue . These sale were customer accounted for more than 10 % of revenue in 2003 10 % of revenue in 2003 . PAGE 67 Table of revenue in 2003 . PAGE 67 Table of Contents Part II of Contents Part II Item 8 Revenue , classified by the million ) Year Ended June 30 2003 2004 2005 United States ) Year Ended June 30 2003 2004 2005 United States ( Year Ended June 30 2003 2004 2005 United States ( 1 Ended June 30 2003 2004 2005 United States ( 1 ) 2004 2005 Unite Revenue June 30 Total Fiscal year 2003 Revenue $ 7,746 $ 8,541 Fiscal year 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,402 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2, Revenue share 0.19 0.17 0.20 0.14 0.69 Fiscal year 2004 Revenue $ 0.20 0.14 0.69 Fiscal year 2004 Revenue $ 8,215 $ 10,153 Fiscal year 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income Revenue share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 8,896 8,221 10,161 $ 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net $ 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net in", + "expenses": "Expenses $ Percent Change Corporate-level Expenses $ 3,775 $ 6,781 80 % $ Corporate-level Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( 14 $ 6,781 80 % $ 5,822 ( 14 ) % Certain 80 % $ 5,822 ( 14 ) % Certain corporate-level expense contingency . In fiscal year 2005 , corporate-level expense decreased primarily legal cost . Fiscal year 2005 legal cost were $ 2.08 2005 legal cost were $ 2.08 billion a compared to $ billion a compared to $ 2.53 billion in fiscal year 2004 2", + "net_income": "Net Income before accounting change 7,721 5,355 7,531 8,168 12,254 Net income before accounting change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 accounting change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 5,355 change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 5,355 7,531 7,531 8,168 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted 8,168 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted earnings 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted earnings per Net incom Net income $ Provision for income tax 3,523 4,028 4,374 Net income $ 7,531 for income tax 3,523 4,028 4,374 Net income $ 7,531 $ 4,028 4,374 Net income $ 7,531 $ 8,168 $ 12,254 Earnings Net income $ 7,531 $ 8,168 $ 12,254 Earnings per share $ 7,531 $ 8,168 $ 12,254 Earnings per share : Basic per share : Basic $ 0.70 $ 0.76 $ 1.13 Diluted : Basic $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Weighted 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Net income Year Ended June 30 2003 2004 2005 Operations Net income $ Ended June 30 2003 2004 2005 Operations Net income $ 7,531 2005 Operations Net income $ 7,531 $ 8,168 $ 12,254 Depreciation Net income $ 7,531 $ 8,168 $ 12,254 Depreciation , amortization $ 7,531 $ 8,168 $ 12,254 Depreciation , amortization , and , and other noncash item 1,393 1,186 855 Stock-based compensation 3,749 and other noncash item 1,393 1,186 855 Stock-based compensation 3,749 5,734 other noncash item 1,393 1,186 855 Stock-based Net income 7,531 , beginning of period 12,997 15,678 18,429 Net income 7,531 8,168 beginning of period 12,997 15,678 18,429 Net income 7,531 8,168 12,254 12,997 15,678 18,429 Net income 7,531 8,168 12,254 Other comprehensive income 15,678 18,429 Net income 7,531 8,168 12,254 Other comprehensive income : 18,429 Net income 7,531 8,168 12,254 Other comprehensive income : Net ) on derivative instrument ( 102 ) 101 ( 58 ) derivative instrument ( 102 ) 101 ( 58 ) Net unrealized ( 102 ) 101 ( 58 ) Net unrealized Net income ) Year Ended June 30 2003 2004 2005 Net income available Year Ended June 30 2003 2004 2005 Net income available for Ended June 30 2003 2004 2005 Net income available for common shareholder ( A ) $ 7,531 $ 8,168 $ 12,254 Weighted A ) $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding share of common stock ( B ) 10,723 10,803 10,839 Dilutive effect of stock ( B ) 10,723 10,803 10,839 Dilutive effect of employee ( B ) 10,723 10,803 10,839 Di Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 2,142 6,561 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic earnings per 2,142 1,483 ( 1 ) 7,531 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 ( Net income 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,690 8,168 ( 2 ) 1,315 ( 3 ) 2,690 8,168 Basic earnings ) 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 1,315 ( 3 ) 2,690 Net income 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 Gross profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 ( profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 ( 4 8,221 8,751 33,588 Net income 2,528 ( 4 ) 3,463 2,563 33,588 Net income 2,528 ( 4 ) 3,463 2,563 ( 5 income 2,528 ( 4 ) 3,463 2,563 ( 5 ) 3,700 2,528 ( 4 ) 3,463 2,563 ( 5 ) 3,700 ( 4 ) 3,463 2,563 ( 5 ) 3,700 ( 6 ) 3,463 2,563 ( 5 ) 3,700 ( 6 ) 12,254 Basic ( 5 ) 3,700 ( 6 ) 12,254 Basic earnings per ) 3,700", + "assets": "Assets substance . SFAS No . 153 will be effective for nonmonetary fiscal period beginning after June 15 , 2005 . We do beginning after June 15 , 2005 . We do not believe adoption of SFAS No . 153 will have a material impact financial statement . In December 2004 , the FASB issued SFAS FASB issued SFAS No . 123 ( R ) , Share-Based APB ) Opinion No . 25 . In March 2005 , . 25 . In March 2005 , the SEC released Staff Accounting Bulletin ( SAB ) 107 , Share-Based Payment , which application of SFAS No . Assets Current asset In million ) June 30 2004 2005 Assets Current asset : million ) June 30 2004 2005 Assets Current asset : Cash : Cash and equivalent $ 14,304 $ 4,851 Short-term investment 46,288 and equivalent $ 14,304 $ 4,851 Short-term investment 46,288 32,900 Total 14,304 $ 4,851 Short-term investment 46,288 32,900 Total cash and short-term $ 4,851 Short-term investment 46,288 32,900 Total cash and short-term investment Total cash and short-term investment 60,592 37,751 Accounts receivable , ne ASSETS The component of ( In million ) June 30 2004 2005 Gross carrying amount In million ) June 30 2004 2005 Gross carrying amount Accumulated million ) June 30 2004 2005 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 908 $ ( 476 ) $ Contract-based $ 908 $ ( 476 ) $ 432 $ 957 $ ( 476 ) $ 432 $ 957 $ ( 606 476 ) $ 432 $ 957 $ ( 606 ) $ 432 $ 957 $ ( 606 ) $ 351 Technology-based 278 $ ( 606 ) $ 351 Technology-based 278 ( 183 ) 606 ) $ 351 Technology-based 278 ( 183 ", + "liabilities": "Liabilities and stockholder Total asset $ 94,368 $ 70,815 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 Short-term compensation 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 1,339 1,662 Income tax 3,478 2,020 Short-ter LIABILITIES ( In ( In million ) June 30 2004 2005 Tax contingency $ In million ) June 30 2004 2005 Tax contingency $ 1,979 million ) June 30 2004 2005 Tax contingency $ 1,979 $ 2004 2005 Tax contingency $ 1,979 $ 3,066 Legal contingency 699 Tax contingency $ 1,979 $ 3,066 Legal contingency 699 961 Employee 1,979 $ 3,066 Legal contingency 699 961 Employee stock option transfer $ 3,066 Legal contingency 699 961 Employee stock option transfer program Employee stock option transfer program 146 48 Other 87 83 O", + "equity": "Equity Securities 20 Item 6 . Selected Financial of Equity Securities 20 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 39 Item 8 . Financial Statements about Market Risk 39 Item 8 . Financial Statements and Supplement Equity of to Financial Statements ( Item 8 ) for information regarding dividend of Directors in fiscal year 2005 . On July 20 , year 2005 . On July 20 , 2004 , our Board . On July 20 , 2004 , our Board of Directors buy back up to $ 30 billion in Microsoft common stock each quarter of fiscal year 2005 a follows : Period Total price paid per share July 1 , 2004 \u2013 September 30 per share July 1 , 2004 \u2013 September 30 , 2004 1 , 2004 \u2013 September 30 , 2004 22,826,608 $ 27.38 2004 \u2013 September 30 , 2004 22,826 equity Long-term obligation 2,287 2,722 2,846 4,574 5,823 Stockholders \u2019 equity 47,289 obligation 2,287 2,722 2,846 4,574 5,823 Stockholders \u2019 equity 47,289 54,842 4,574 5,823 Stockholders \u2019 equity 47,289 54,842 64,912 74,825 48,115 ( 5,823 Stockholders \u2019 equity 47,289 54,842 64,912 74,825 48,115 ( 1 Stockholders \u2019 equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) \u2019 equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) The equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) The financial 54,842 64,912 74,825 48,1 equity investees and other ( 68 ) ( 25 ) 13 other ( 68 ) ( 25 ) 13 Investment income and 68 ) ( 25 ) 13 Investment income and other $ Investment income and other $ 1,509 $ 3,162 $ 2,067 Dividends and other $ 1,509 $ 3,162 $ 2,067 Dividends and interest $ 1,509 $ 3,162 $ 2,067 Dividends and interest income declined and interest income declined $ 432 million in fiscal year 2005 432 million in fiscal year 2005 due to the combination of in preparation for the $ 32.64 billion special dividend paid on speci equity in equity price were $ 202 million and loss related to interest rate derivative were $ 53 million . These loss were foreign currency contract were $ 53 million , related in part on commodity position were $ 46 million during fiscal year 2005 46 million during fiscal year 2005 . In fiscal year 2004 2005 . In fiscal year 2004 , dividend and interest income interest income decreased by $ 65 million mainly due to lower exchange of AT & T 5 % convertible preferred debt for of Comcast during fiscal y Equity for $ 8.0 billion during 2005 . Equity and other investment and other investment were $ 11.00 billion a of June 30 11.00 billion a of June 30 , 2005 compared to $ a of June 30 , 2005 compared to $ 12.21 billion , 2005 compared to $ 12.21 billion a of June 30 12.21 billion a of June 30 , 2004 . The investment a of June 30 , 2004 . The investment portfolio consists comprehensive income , wa $ 12.30 billion at June 30 , $ 12.30 billion at June 30 , 2005 . Our retained billion at June 30 , 2005 . O equity at June 30 , 2005 wa $ 48.12 equity at June 30 , 2005 wa $ 48.12 billion . 30 , 2005 wa $ 48.12 billion . We will continue constructing new building were $ 152 million on June 30 , $ 152 million on June 30 , 2005 . We have million on June 30 , 2005 . We have operating lease rental expense totaling , $ 290 million , $ 331 million $ 290 million , $ 331 million and $ 299 million $ 331 million and $ 299 million in fiscal year 2003 299 million in fiscal year 2003 , 2004 and 2005 , in fiscal year 200 Equity $ 37 Currency rate 46 52 36 55 12 Equity price 37 Currency rate 46 52 36 55 12 Equity price 173 Currency rate 46 52 36 55 12 Equity price 173 164 rate 46 52 36 55 12 Equity price 173 164 166 36 55 12 Equity price 173 164 166 187 141 Commodity 55 12 Equity price 173 164 166 187 141 Commodity price 12 Equity price 173 164 166 187 141 Commodity price \u2013 Equity price 173 164 166 187 141 Commodity price \u2013 14 price 173 164 166 187 141 Commodity price \u2013 14 6 187 141 Commodity price \u2013 14 6 14 \u2013 The tota Equity and other investment and equipment , net 2,326 2,346 Equity and other investment 12,210 2,346 Equity and other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible Equity and other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset , net investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset , net 569 3,309 Intangible asset , net 569 499 Deferred income tax 3,808 Intangible asset , net 569 499 Deferred equity liability : Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 Short-term compensation 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 7,502 3,478 2,020 Short-term unearned revenue 6,514 7,502 equity ) Total stockholder \u2019 equity 74,825 48,115 Total liability and stockholder Total stockholder \u2019 equity 74,825 48,115 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 94,368 $ 70,815 See accompanying note \u2019 equity $ 94,368 $ 70,815 See accompanying note . PAGE See accompanying note . PAGE 42 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2003 2004 2005 Operations Net ) Year Ended June 30 2003 2004 2005 Operations Net income EQUITY STATEMENTS ( million ) Year Ended June 30 2003 2004 2005 Common stock ) Year Ended June 30 2003 2004 2005 Common stock and Year Ended June 30 2003 2004 2005 Common stock and paid-in Ended June 30 2003 2004 2005 Common stock and paid-in capital , beginning of period $ 41,845 $ 49,234 $ 56,396 Common of period $ 41,845 $ 49,234 $ 56,396 Common stock issued $ 41,845 $ 49,234 $ 56,396 Common stock issued 2,966 2,815 $ 56,396 Common stock issued 2,966 2,815 3,223 Common stock repurchased 56,396 Comm equity Total stockholder \u2019 equity $ 64,912 $ 74,825 $ 48,115 See \u2019 equity $ 64,912 $ 74,825 $ 48,115 See accompanying note $ 64,912 $ 74,825 $ 48,115 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The for a subscription . PAGE 45 Table of Contents Part II of Contents Part II Item 8 Revenue related to our Xbox . Advertising Equity and other investment June 30 , 2004 Cash and security other investment June 30 , 2004 Cash and security Cash $ Cash and security Cash $ 1,812 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 1,812 $ 1,812 $ \u2013 $ $ \u2013 $ 1,812 $ 1,812 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 Mutual fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 \u2013 Commercial paper fund 3,595 \u2013 \u2013 3,595 3,595 \u2013 \u2013 Commercial paper 7,286 3,595 \u2013 \u2013 Commercial paper 7,286 \u2013 \u2013 7,286 4,109 3,177 Commercial paper 7,286 \u2013 \u2013 7,286 4,109 3,177 \u2013 Certificates of paper 7,286 \u2013 Equity and other investment June 30 , 2005 Cash and security other investment June 30 , 2005 Cash and security Cash $ Cash and security Cash $ 1,911 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 1,911 $ 1,911 $ \u2013 $ $ \u2013 $ 1,911 $ 1,911 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 $ \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper fund 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper 1,566 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper 1,566 4 817 857 \u2013 Commercial paper 1,566 equity domestic equity security and $ 13 million related to international equity the unrealized loss of $ 293 million at PAGE 50 Table $ 293 million at PAGE 50 Table of Contents Part II of Contents Part II Item 8 June 30 , 2004 , Part II Item 8 June 30 , 2004 , $ 51 Item 8 June 30 , 2004 , $ 51 million exceeded 30 , 2004 , $ 51 million exceeded twelve month . twelve month . At June 30 , 2005 unrealized loss of . At June 30 , 2005 unrealized loss of $ 258 2005 unrealized loss of $ 258 million consisted equity domestic equity security and $ 43 million related to international equity the unrealized loss of $ 258 million at June 30 , $ 258 million at June 30 , 2005 , $ 25 million at June 30 , 2005 , $ 25 million exceeded 30 , 2005 , $ 25 million exceeded twelve month . available evidence a of June 30 , 2005 . Common and a of June 30 , 2005 . Common and preferred stock at cost . At June 30 , 2004 the recorded basis . At June 30 , 2004 the recorded basis of these of these investment wa $ 1.65 billion , a equity investees and other ( 68 ) ( 25 ) 13 other ( 68 ) ( 25 ) 13 Investment income and 68 ) ( 25 ) 13 Investment income and other $ Investment income and other $ 1,509 $ 3,162 $ 2,067 Net and other $ 1,509 $ 3,162 $ 2,067 Net gain on $ 1,509 $ 3,162 $ 2,067 Net gain on investment include include other-than-temporary impairment of $ 1.15 billion in fiscal year 2003 1.15 billion in fiscal year 2003 , $ 82 million in fiscal year 2003 , $ 82 million in fiscal year 2004 82 million in fiscal year 2004 , a EQUITY Part II Item 8 NOTE 12 STOCKHOLDERS \u2019 EQUITY Shares of million ) Year Ended June 30 2003 2004 2005 Balance , ) Year Ended June 30 2003 2004 2005 Balance , beginning Year Ended June 30 2003 2004 2005 Balance , beginning of Ended June 30 2003 2004 2005 Balance , beginning of year Balance , beginning of year 10,718 10,771 10,862 Issued 291 215 , beginning of year 10,718 10,771 10,862 Issued 291 215 160 beginning of year 10,718 10,771 10,862 Issued 291 215 160 Repurchased year 10,718 10,771 10,862 equity . In fiscal year 2005 , our Board of Directors million ) Payment Date July 20 , 2004 $ 0.08 August Payment Date July 20 , 2004 $ 0.08 August 25 , July 20 , 2004 $ 0.08 August 25 , 2004 $ , 2004 $ 0.08 August 25 , 2004 $ 870 September $ 0.08 August 25 , 2004 $ 870 September 14 , August 25 , 2004 $ 870 September 14 , 2004 July , 2004 $ 870 September 14 , 2004 July 20 , $ 870 September 14 , 2004 July 20 , 2004 $ September 14 , 2004 July 20 , 2004 $ 3.00 November , 2004 July 20 , 2004 $ 3.00 Novemb", + "cash_flow": "Cash flow from from operation for fiscal year 2005 increased 14 % to $ for fiscal year 2005 increased 14 % to $ 16.61 billion increased 14 % to $ 16.61 billion due primarily to an from customer driven by our 8 % revenue growth combined with revenue growth combined with a 12 % increase in unearned revenue Cash payment in fiscal year 2005 resulting from significant legal settlement legal settlement were approximately $ 1.8 billion lower than in the to employee resulting from a 7 % increase in full-time emp Cash flow from operation flow from operation wa $ 15.80 billion for fiscal year 2003 15.80 billion for fiscal year 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal year 2002 1.29 billion from fiscal year 2002 . The increase primarily reflects used for financing wa $ 5.22 billion in fiscal year 2003 5.22 billion in fiscal year 2003 , an increase of $ , an increase of $ 651 million from the previous year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and a cash flow . PAGE 38 Table of Contents Part II of Contents Part II Item 7 , 7A We account for Part II Item 7 , 7A We account for stock-based compensation provision of SFAS No . 123 , Accounting for Stock-Based Compensation provision of SFAS No . 123 , stock-based compensation cost is be materially impacted . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , simulating 10,000 market price path over a re-price each holding . The 250th worst performance ( out of worst performance ( out of 10,00", + "accumulated_depreciation": "Accumulated depreciation ( 4,163 equipment , at cost 6,489 6,375 Accumulated depreciation ( 4,163 ) 6,489 6,375 Accumulated depreciation ( 4,163 ) ( 4,029 ) Property depreciation ( 4,163 ) ( 4,029 ) Property and equipment , and equipment , net $ 2,326 $ 2,346 Property and equipment , net $ 2,326 $ 2,346 Property and equipment are stated depreciated . During fiscal year 2003 , 2004 , and 2005 During fiscal year 2003 , 2004 , and 2005 , depreciation 2003 , 2004 , and 2005 , depreciation expense wa $ , depreciation expens", + "debt": "debt for of Comcast during fiscal year 2003 and declining interest rate , gain on investment include PAGE 33 Table of Contents Part II of Contents Part II Item 7 other-than-temporary impairment of $ 82 7 other-than-temporary impairment of $ 82 million in fiscal year 2004 82 million in fiscal year 2004 compared to $ 1.15 billion year 2004 compared to $ 1.15 billion in fiscal year 2003 1.15 billion in fiscal year 2003 and higher net realized gain on sale in fiscal year 2004 a we moved to more gain on debt $ \u2013 Construction commitment ( 2 ) 122 28 2 \u2013 Construction commitment ( 2 ) 122 28 2 \u2013 152 Lease commitment ( 2 ) 122 28 2 \u2013 152 Lease obligation ( 2 ) 122 28 2 \u2013 152 Lease obligation : ) 122 28 2 \u2013 152 Lease obligation : Capital lease Lease obligation : Capital lease 6 17 11 \u2013 34 Operating obligation : Capital lease 6 17 11 \u2013 34 Operating lease : Capital lease 6 17 11 \u2013 34 Operating lease ( lease 6 17 11 \u2013 34 Operating lease ( 3 ) \u2013 34 Operating lease ( 3 ) 230 493 214 96 Operating lease ( 3 ) debt security at June 30 , 2005 were a follows security at June 30 , 2005 were a follows : ( one year or le $ 6,648 $ 6,647 Due after one or le $ 6,648 $ 6,647 Due after one year through one year through five year 16,972 16,960 Due after five year year through five year 16,972 16,960 Due after five year through five year through ten year 7,584 7,771 Due after ten year year through ten year 7,584 7,771 Due after ten year 3,259 7,771 Due after ten year 3,259 3,307 Total $ 34,463 $ Due after ten year 3 Debt security include 3,307 Total $ 34,463 $ 34,685 Debt security include fixed maturity fixed maturity security . NOTE 4 INVESTMENT INCOME AND OTHER The million ) Year Ended June 30 2003 2004 2005 Dividends and ) Year Ended June 30 2003 2004 2005 Dividends and interest Year Ended June 30 2003 2004 2005 Dividends and interest $ Ended June 30 2003 2004 2005 Dividends and interest $ 1,957 2005 Dividends and interest $ 1,957 $ 1,892 $ 1,460 Net and interest $ 1,957 $ 1,892 $ 1,460 Net gain on $ 1,957 $", + "earnings_per_share": "earnings per share income 7,346 5,355 7,531 8,168 12,254 Diluted earnings per share before share before accounting change $ 0.69 $ 0.48 $ 0.69 $ accounting change $ 0.69 $ 0.48 $ 0.69 $ 0.75 $ $ 0.69 $ 0.48 $ 0.69 $ 0.75 $ 1.12 Diluted $ 0.48 $ 0.69 $ 0.75 $ 1.12 Diluted earnings per $ 0.69 $ 0.75 $ 1.12 Diluted earnings per share $ Diluted earnings per share $ 0.66 $ 0.48 $ 0.69 $ per share $ 0.66 $ 0.48 $ 0.69 $ 0.75 $ $ 0.66 $ 0.48 $ 0.69 $ 0.75 $ 1.12 Cash $ 0.48 $ 0.69 $ 0.75 $ 1.12 Cash dividend declared $ Earnings per share $ 7,531 $ 8,168 $ 12,254 Earnings per share : Basic per share : Basic $ 0.70 $ 0.76 $ 1.13 Diluted : Basic $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Weighted 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Weighted average share $ 0.69 $ 0.75 $ 1.12 Weighted average share outstanding : average share outstanding : Basic 10,723 10,803 10,839 Diluted 10,882 10,894 share outstanding : Basic 10,723 10,803 10,839 Diluted 10,882 10,894 10 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2003 2004 2005 Net income ) Year Ended June 30 2003 2004 2005 Net income available Year Ended June 30 2003 2004 2005 Net income available for Ended June 30 2003 2004 2005 Net income available for common shareholder ( A ) $ 7,531 $ 8,168 $ 12,254 Weighted A ) $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding share of common stock ( B ) 10,723 10,803 10,839 Dilutive effect of stock ( B ) 10,723 10, Earnings per share equivalent ( C ) 10,882 10,894 10,906 Earnings per share : ( C ) 10,882 10,894 10,906 Earnings per share : Basic Basic ( A/B ) $ 0.70 $ 0.76 $ 1.13 Diluted A/B ) $ 0.70 $ 0.76 $ 1.13 Diluted ( A/C $ 0.70 $ 0.76 $ 1.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 0.69 $ 0.75 $ 1.12 For A/C ) $ 0.69 $ 0.75 $ 1.12 For the year $ 0.69 $ 0.75 $ 1.12 For the year ended June For the year ended June 30 , 2003 , 2004 , year ended June 30 , 2003 , 2004 , and 2005 June 30 , 2003 , 2004 , and 2005 , 1.09 2003 , 200 earnings per share 0.19 7,531 Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share 0.19 0.70 Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal year earnings per share 0.19 0.17 0.20 0.14 0.69 F earnings per share 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal y earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 per share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 Revenue share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 8,896 8,221 10,161 $ 39,788 Gross earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) per sha", + "tax_rate": "tax rate tax rate for fiscal year 2003 wa 32 % . The for fiscal year 2003 wa 32 % . The fiscal year % . The fiscal year 2003 rate reflected a benefit in the second quarter of $ 126 million which resulted from the of which were reversed in 2003 by the Ninth Circuit Court and short-term investment totaled $ 37.75 billion a of June 30 37.75 billion a of June 30 , 2005 compared to $ a of June 30 , 2005 compared to $ 60.59 billion , 2005 compared to $ 60.59 billion a of June 30 60.59 billion a of June 30 , 2", + "segment_revenue": "Segment revenue and million ) Year Ended June 30 2003 2004 2005 Revenue Client ) Year Ended June 30 2003 2004 2005 Revenue Client $ Year Ended June 30 2003 2004 2005 Revenue Client $ 10,304 Ended June 30 2003 2004 2005 Revenue Client $ 10,304 $ 2004 2005 Revenue Client $ 10,304 $ 11,283 $ 12,048 Server Revenue Client $ 10,304 $ 11,283 $ 12,048 Server and Tools $ 10,304 $ 11,283 $ 12,048 Server and Tools 6,786 8,007 $ 12,048 Server and Tools 6,786 8,007 9,143 Information Worker 9,636 12,048 Server and Tools 6,7", + "investment_gains_losses": "investment gains investment gains investment gains", + "common_stock": "common stock a of August 15 , 2005 wa 10,712,706,028 . a of August 15 , 2005 wa 10,712,706,028 . DOCUMENTS INCORPORATED August 15 , 2005 wa 10,712,706,028 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 9 , 2005 are incorporated by be held November 9 , 2005 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2005 INDEX PART I Year Ended June 30 , 2005 INDEX PART I Item 1. 2005 INDEX PART I Item 1. Bus Common stock price per share per share : High $ 29.96 $ 29.35 $ 28.80 $ : High $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year 2005 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year 2005 Common Low 25.54 25.10 Common stock 24.15 25.08 24.15 Fiscal year 2005 Common stock price per share per share : High $ 29.00 $ 29.98 $ 26.84 $ : High $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In September $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In September 2003 29.98 Low 26.88 26.53 23.92 24.12 common stock dividend of $ 0.16 per share , which wa which wa paid in November 2003 . That wa the only or paid in fiscal year 2004 . See Note 12 \u2013 year 2004 . See Note 12 \u2013 Stockholders \u2019 Equity of to Financial Statements ( Item 8 ) for information regarding dividend of Directors in fiscal year 2005 . On July 20 , year 2005 . On July 20 , 2004 , our Board . On July 20 , 2004 , our Board of Directors buy back up to $ 30 billion in Microsoft common stock each quarter of fiscal year 2005 a follows : Period Tot Common stock \u2013 June 30 , 2005 170,656,770 $ 25.21 Common stock repurchase 30 , 2005 170,656,770 $ 25.21 Common stock repurchase in the fourth quarter of fiscal year 2005 were a follows : Period ( in million ) April 1 , 2005 \u2013 April 30 million ) April 1 , 2005 \u2013 April 30 , 2005 1 , 2005 \u2013 April 30 , 2005 55,331,155 $ 24.77 2005 \u2013 April 30 , 2005 55,331,155 $ 24.77 55,331,155 $ \u2013 April 30 , 2005 55,331,155 $ 24.77 55,331,155 $ 24,930 30 , 2005 55,331,155 $ 24.77 55,331,155 $ 24,930 May 1 , 2005 55,331,155 $ 2 common stock to common stock repurchase of 312 million share for $ 8.0 312 million share for $ 8.0 billion during 2005 . Equity for $ 8.0 billion during 2005 . Equity and other investment and other investment were $ 11.00 billion a of June 30 11.00 billion a of June 30 , 2005 compared to $ a of June 30 , 2005 compared to $ 12.21 billion , 2005 compared to $ 12.21 billion a of June 30 12.21 billion a of June 30 , 2004 . The investment a of June 30 , 2004 . The investment portfolio consists comprehensive inco common stock repurchase program in fiscal year 2004 . Cash used for investing used for investing wa $ 3.34 billion in fiscal year 2004 3.34 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 3.88 billion from fiscal year 2003 3.88 billion from fiscal year 2003 . Cash flow from operation flow from operation wa $ 15.80 billion for fiscal year 2003 15.80 billion for fiscal year 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal year 2002 1.29 billion from fiscal year 2002 . The in common stock repurchased stock repurchased , offsetting $ 623 million received from common stock stock issued . We repurchased 238.2 million share of common stock repurchase program in fiscal year 2003 . Cash used for investing used for investing wa $ 7.50 billion in fiscal year 2003 7.50 billion in fiscal year 2003 , a decrease of $ , a decrease of $ 3.37 billion from fiscal year 2002 3.37 billion from fiscal year 2002 , due to stronger portfolio Stockholders \u2019 equity at June 30 , 2005 wa $ 48.12 equity at common stock cash . During fiscal year 2005 , we repurchased 312 million year 2005 , we repurchased 312 million share , or $ million share , or $ 8.0 billion of our common stock Sheet Arrangements As of June 30 , 2004 , we had As of June 30 , 2004 , we had guaranteed the these guarantee wa approximately $ 51 million . Effective December 21 51 million . Effective December 21 , 2004 , the guarantee . Effective December 21 , 2004 , the guarantee were terminated indemnification under SFAS No . 5 , Accounting fo Common stock Net cash from operation 15,797 14,626 16,605 Financing Common stock issued cash from operation 15,797 14,626 16,605 Financing Common stock issued 2,120 16,605 Financing Common stock issued 2,120 2,748 3,109 Common stock repurchased Financing Common stock issued 2,120 2,748 3,109 Common stock repurchased ( Common stock issued 2,120 2,748 3,109 Common stock repurchased ( 6,486 3,109 Common stock repurchased ( 6,486 ) ( 3,383 ) ( repurchased ( 6,486 ) ( 3,383 ) ( 8,057 ) Common ) ( 3,383 ) ( 8,057 Common stock cash dividend Common stock cash dividend ( 857 ) ( 1,729 ) ( dividend ( 857 ) ( 1,729 ) ( 36,112 ) Other ) ( 1,729 ) ( 36,112 ) Other \u2013 \u2013 ( ) Other \u2013 \u2013 ( 18 ) Net cash used for cash used for financing ( 5,223 ) ( 2,364 ) ( financing ( 5,223 ) ( 2,364 ) ( 41,078 ) Investing ) ( 2,364 ) ( 41,078 ) Investing Additions to property to property and equipment ( 891 ) ( 1,109 ) ( equipment ( 891 ) ( 1,109 ) ( 812 ) Acquisition ) ( 1,109 ) ( 812 ) Acquisition of company , net of cash acquired ( 1,063 ) Common stock ) Year Ended June 30 2003 2004 2005 Common stock and Year Ended June 30 2003 2004 2005 Common stock and paid-in Ended June 30 2003 2004 2005 Common stock and paid-in capital , beginning of period $ 41,845 $ 49,234 $ 56,396 Common of period $ 41,845 $ 49,234 $ 56,396 Common stock issued $ 41,845 $ 49,234 $ 56,396 Common stock issued 2,966 2,815 $ 56,396 Common stock issued 2,966 2,815 3,223 Common stock repurchased 56,396 Common stock issued 2,966 2,815 3,223 Common stock repurchased ( Common st Common stock repurchased ( 691 3,223 Common stock repurchased ( 691 ) ( 416 ) ( repurchased ( 691 ) ( 416 ) ( 1,737 ) Stock-based ) ( 416 ) ( 1,737 ) Stock-based compensation expense 3,749 1,737 ) Stock-based compensation expense 3,749 5,734 2,448 Stock option income ) Stock-based compensation expense 3,749 5,734 2,448 Stock option income tax Stock-based compensation expense 3,749 5,734 2,448 Stock option income tax benefits/ tax benefits/ ( deficiency ) 1,365 ( 989 ) 89 Other ( deficiency ) 1,365 ( 989 ) 8 Common stock cash 6 ) Comprehensive income 8,788 7,447 12,561 Common stock cash dividend ) Comprehensive income 8,788 7,447 12,561 Common stock cash dividend ( Common stock cash dividend ( 857 ) ( 1,729 ) ( dividend ( 857 ) ( 1,729 ) ( 36,968 ) Common ) ( 1,729 ) ( 36,968 ) Common stock repurchased ( ) Common stock repurchased ( 5,250 ) ( 2,967 ) ( repurchased ( 5,250 ) ( 2,967 ) ( 6,320 ) Balance ) ( 2,967 ) ( 6,320 ) Balance , end of Balance , end of period 15,678 18,429 ( 12,298 ) Total , end of period 1 Common stock 39 ( 25 ) 5,168 277 4,891 \u2013 Common stock and ( 25 ) 5,168 277 4,891 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 and equivalent 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 7,722 1,571 ( 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 62 ) 9,231 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 \u2013 \u2013 \u2013 9,231 Preferred stock 1,290 \u2013 \u2013 1,290 \u2013 \u2013 Preferred stock 1,290 \u2013 \u2013 1,290 \u2013 \u2013 1,290 Other investment \u2013 \u2013 1,290 \u2013 \u2013 1,290 Other investment 2 Common stock 99 \u2013 \u2013 99 \u2013 99 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 \u2013 and equivalent 7,273 1,970 ( 133 ) 9,110 \u2013 \u2013 9,110 7,273 1,970 ( 133 ) 9,110 \u2013 \u2013 9,110 Preferred stock 133 ) 9,110 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 1,071 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 1,071 Other investment 4 \u2013 1,071 \u2013 \u2013 1,071 Other investment common stock dollar in billion ) ( 1 ) Fiscal year 2003 2004 ( 1 ) Fiscal year 2003 2004 2005 ( 1 ) 1 ) Fiscal year 2003 2004 2005 ( 1 ) Shares ) Fiscal year 2003 2004 2005 ( 1 ) Shares Amount year 2003 2004 2005 ( 1 ) Shares Amount Shares Amount Amount Shares Amount First quarter 120.6 $ 3.0 43.3 $ 1.2 Amount First quarter 120.6 $ 3.0 43.3 $ 1.2 22.8 $ First quarter 120.6 $ 3.0 43.3 $ 1.2 22.8 $ 0.6 120.6 $ 3.0 43.3 $ 1.2 22.8 $ 0.6 Second quarter $ 3.0 43.3 $ 1.2 22.8 $ 0.6 Second quarter 38.8 43.3 $ 1.2 common stock of $ 0.08 and $ 0.16 per share of $ 0.08 and $ 0.16 per share , respectively . dividend were paid on March 7 and November 7 , 2003 on March 7 and November 7 , 2003 , respectively , 7 and November 7 , 2003 , respectively , to shareholder close of business on February 21 , and October 17 , February 21 , and October 17 , 2003 . NOTE 13 , and October 17 , 2003 . NOTE 13 OTHER COMPREHENSIVE 17 , 2003 . NOTE 13 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 2003 2004 2005 Net ga common stock ( B ) 10,723 10,803 10,839 Dilutive effect of stock ( B ) 10,723 10,803 10,839 Dilutive effect of employee ( B ) 10,723 10,803 10,839 Dilutive effect of employee stock employee stock option and award 159 91 67 Common stock and stock option and award 159 91 67 Common stock and common option and award 159 91 67 Common stock and common stock stock equivalent ( C ) 10,882 10,894 10,906 Earnings per share equivalent ( C ) 10,882 10,894 10,906 Earnings per share : ( C ) 10,882 10,894 10,906 Earnings ", + "hedging_activities": "Hedging Activities . Fiscal year 2001 also includes the acquisition of , Inc. for approximately $ 1.1 billion in stock . ( billion in stock . ( 3 ) Fiscal year 2002 includes ( 3 ) Fiscal year 2002 includes a $ 1.25 billion year 2002 includes a $ 1.25 billion ( pre-tax ) gain of Expedia , Inc. ( 4 ) Fiscal year 2003 includes ( 4 ) Fiscal year 2003 includes the acquisition of Navision for a total of $ 1.23 billion in cash and $ billion in cash and $ 788 million in stock and other and other consideration . PAGE 21 T", + "derivative_instruments": "Derivative Instruments Hedging Activities . Fiscal year 2001 also includes the acquisition of , Inc. for approximately $ 1.1 billion in stock . ( billion in stock . ( 3 ) Fiscal year 2002 includes ( 3 ) Fiscal year 2002 includes a $ 1.25 billion year 2002 includes a $ 1.25 billion ( pre-tax ) gain of Expedia , Inc. ( 4 ) Fiscal year 2003 includes ( 4 ) Fiscal year 2003 includes the acquisition of Navision for a total of $ 1.23 billion in cash and $ billion in cash and $ 788 million in stock and other and other consid Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage period of change . PAGE 47 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2003 $ 209 $ 118 $ end of " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-06-180008/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-06-180008/full-submission_features.json new file mode 100644 index 0000000..0ca5cc6 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-06-180008/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue . We sell the Xbox 360 video game console and game across our business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business and Entertainment . See Note 18 \u2013 Segment Information of the segment reporting . On July 17 , 2006 , we announced . On July 17 , 2006 , we announced a change business realignment announced in September 2005 . These change will be be effective for fiscal year 2007 ; the seven segment discussed group level in fiscal year 2006 , 2005 , an revenue built on the Windows Server 2003 operating system . Windows Server and marketing organization . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Approximately half of Server revenue licensing program , and approximately 10 % come from license sold sold to OEMs . Approximately 15 % of revenue come from company focused on the Java 2 Platform Enterprise Edition ( J2EE Office system offering generate over 85 % of Information Worker revenue and business intelligence . Approximately 40 % of revenue Information Worker revenue . Approximately 40 % of Information Worker revenue condition . The remaining approximately 20 % of Information Worker revenue our flagship product , the 2007 Microsoft Office system , is Office Communication Server . PAGE 5 Table of Contents Part I of Contents Part I Item 1 Competition Competitors to the Microsoft subscriber . In fiscal year 2006 , we launched MSN adCenter U.S. where it now serf 100 percent of paid search traffic third party for delivering PAGE 6 Tabl revenue . These of fiscal year 2005 and 2004 revenue . These sale were executive officer a of August 25 , 2006 were a follows a of August 25 , 2006 were a follows : Name Company William H. Gates III 50 Chairman of the Board Steven the Board Steven A. Ballmer 50 Chief Executive Officer Robert J . ( Robbie ) Bach 44 President , Microsoft Entertainment and Devices Division Lisa E. Brummel 46 Senior Vice President , Human Human Resources Kevin R. Johnson 45 Co-President , Microsoft Platforms and Services D revenue . Xbox 360 console will be assembled in from operation . See Note 1 in \u201c Item 8 . Note 1 in \u201c Item 8 . Financial Statements and Supplementary Data \u201d and \u201c Item 7 . Management \u2019 s Discussion . We operate in over 100 country and a significant part pricing structure uniform might PAGE 16 Table of Contents Part I of Contents Part I Item 1A require that we reduce the market . As of June 30 , 2006 , the face As of June 30 , 2006 , the face value of captive insurance arrangement wa $ 2.0 billion . Act Revenue Year Ended June 30 2006 2005 2004 2003 2002 Revenue $ Ended June 30 2006 2005 2004 2003 2002 Revenue $ 44,282 June 30 2006 2005 2004 2003 2002 Revenue $ 44,282 $ 30 2006 2005 2004 2003 2002 Revenue $ 44,282 $ 39,788 2004 2003 2002 Revenue $ 44,282 $ 39,788 $ 36,835 $ 2002 Revenue $ 44,282 $ 39,788 $ 36,835 $ 32,187 $ $ 44,282 $ 39,788 $ 36,835 $ 32,187 $ 28,365 Operating $ 39,788 $ 36,835 $ 32,187 $ 28,365 Operating income 16,472 $ 36,835 $ 32,187 $ 28,365 Operating income 16,472 14,561 9,034 3 Revenue $ 44,282 2005 Percent Change 2005 versus 2004 Revenue $ 44,282 $ 39,788 2005 versus 2004 Revenue $ 44,282 $ 39,788 $ 36,835 11 2004 Revenue $ 44,282 $ 39,788 $ 36,835 11 % 8 $ 44,282 $ 39,788 $ 36,835 11 % 8 % Operating 44,282 $ 39,788 $ 36,835 11 % 8 % Operating income 39,788 $ 36,835 11 % 8 % Operating income $ 16,472 8 % Operating income $ 16,472 $ 14,561 $ 9,034 13 Operating income $ 16,472 $ 14,561 $ 9,034 13 % 61 $ 16,472 $ 14,561 $ 9,034 13 % 61 % Our 16,472 $ 14,561 $ 9,034 13 % 61 % Ou revenue 14,561 $ 9,034 13 % 61 % Our revenue growth for revenue growth for fiscal year 2006 wa driven primarily by growth the launch of SQL Server 2005 in the second quarter , revenue resulting from the Xbox 360 launch in the second quarter from all source grew approximately 12 % to 14 % and grew approximately 12 % to 14 % and total server hardware server hardware shipment grew approximately 11 % to 13 % during grew approximately 11 % to 13 % during fiscal year 2006 13 % during fiscal year 2006 . Forei Revenue growth for fiscal year 2005 wa driven by growth in Worker product . The November 2004 launch of the \u201c Halo launch of the \u201c Halo 2 \u201d Xbox game also contributed from all source grew approximately 11 % to 13 % and grew approximately 11 % to 13 % and total server hardware server hardware shipment grew approximately 13 % to 14 % during grew approximately 13 % to 14 % during fiscal year 2005 14 % during fiscal year 2005 a compared to fiscal year a compared to fiscal year 2004 . The net impact of on r revenue Upgrade Advantage in fiscal year 2005 . This revenue wa recognized wa recognized over fiscal year 2003 and fiscal year 2004 and year 2003 and fiscal year 2004 and in the first quarter first quarter of fiscal year 2005 when the contract period expired period expired . Fiscal year 2004 revenue growth wa primarily driven all source wa estimated at 13 % and the Windows server server shipment wa estimated at 18 % in fiscal year 2004 18 % in fiscal year 2004 a compared to fiscal year a compared to fi revenue Operating income for fiscal year 2006 increased primarily reflecting the revenue revenue increase and a $ 991 million decrease in cost for partially offset by a $ 1.62 billion increase in cost of revenue primarily related to Xbox 360 and a $ 1.26 billion Xbox 360 and a $ 1.26 billion increase in sale and compensation expense , increased $ 682 million or 7 % resulting increased $ 682 million or 7 % resulting from both an for existing headcount and a 16 % growth in headcount over Stock-based comp revenue and related cost and Entertainment . On July 17 , 2006 , we announced . On July 17 , 2006 , we announced a change our realignment announced in September 2005 . These change will be be effective for fiscal year 2007 ; the seven segment discussed group level in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 . The 2006 , 2005 , and 2004 . The revenue and operating segment information appearing in Note 18 \u2013 Segment Information of the SFAS \u201d ) No . 131 , Disclosures about S Revenue $ 13,209 2005 Percent Change 2005 versus 2004 Revenue $ 13,209 $ 12,151 2005 versus 2004 Revenue $ 13,209 $ 12,151 $ 11,556 9 2004 Revenue $ 13,209 $ 12,151 $ 11,556 9 % 5 $ 13,209 $ 12,151 $ 11,556 9 % 5 % Operating 13,209 $ 12,151 $ 11,556 9 % 5 % Operating income 12,151 $ 11,556 9 % 5 % Operating income $ 10,203 5 % Operating income $ 10,203 $ 9,464 $ 8,740 8 Operating income $ 10,203 $ 9,464 $ 8,740 8 % 8 $ 10,203 $ 9,464 $ 8,740 8 % 8 % PAGE 10,203 $ 9,464 $ 8,740 8 % 8 % PAGE 23 9,464 $ 8 revenue revenue increased in fiscal year 2006 reflecting $ 1.18 billion or fiscal year 2006 reflecting $ 1.18 billion or 12 % growth reflecting $ 1.18 billion or 12 % growth in OEM revenue in OEM revenue driven by 17 % growth in OEM license partially offset by a $ 118 million or 6 % decrease a $ 118 million or 6 % decrease in revenue from increased two percentage point to 52 % . OEM revenue growth increase to revenue of $ 89 million resulting from the alignment revenue increased in fiscal year 2005 dri revenue partially offset by a $ 198 million or 9 % decrease a $ 198 million or 9 % decrease in revenue from Premium Mix remained flat at 50 % of total OEM Windows Upgrade Advantage declined by $ 99 million in fiscal year 2005 99 million in fiscal year 2005 contributing to the decrease in income increased in fiscal year 2006 reflecting the increase in OEM partially offset by a $ 224 million increase in sale and program . Headcount-related cost increased 6 % in fiscal year 2006 6 % in fiscal year 2006 re revenue and a $ 444 million decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 11,467 2005 Percent Change 2005 versus 2004 Revenue Revenue $ 11,467 $ 9,938 $ 8,590 15 2004 Revenue $ 11,467 $ 9,938 $ 8,590 15 % 16 $ 11,467 $ 9,938 $ 8,590 15 % 16 % Operating 11,467 $ 9,938 $ 8,590 15 % 16 % Operating income 9,938 $ 8,590 15 % 16 % Operating income $ 4,323 16 % Operating income $ 4,323 $ 3,291 $ 1,474 31 Operating income $ 4,323 $ 3,291 $ 1,474 31 % 123 $ 4,323 $ 3,291 $ 1,474 31 % 123 % Server 4,323 $ 3,291 $ 1,474 31 % 123 % Server and 3,291 $ 1,474 31 % 123 % Server and Tools consists revenue increased during fiscal year 2006 mai revenue growth in shipment which we estimate grew 11 % to 13 % in estimate grew 11 % to 13 % in fiscal year 2006 13 % in fiscal year 2006 . Server and Server application and certification revenue grew $ 1.31 billion or 16 % during grew $ 1.31 billion or 16 % during fiscal year 2006 16 % during fiscal year 2006 . The result reflect broad Server , which grew over 30 % for PAGE 24 Table over 30 % for PAGE 24 Table of Contents Part II of Contents Part II Item 7 the year . Consulting , support service reven revenue , grew $ 1.10 billion or 17 % . grew $ 1.10 billion or 17 % . Consulting , Premier support service revenue increased $ 241 million or 19 % compared increased $ 241 million or 19 % compared to the previous rate change accounted for $ 284 million or three percentage point wa offset by a $ 314 million decline in Upgrade Advantage income increased during fiscal year 2006 primarily reflecting increased revenue , and marketing expense increased $ 274 million due to additional spending the launch of S revenue and a $ 1.07 billion decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 11,756 2005 Percent Change 2005 versus 2004 Revenu Revenue $ 11,756 $ 11,169 $ 10,748 5 2004 Revenue $ 11,756 $ 11,169 $ 10,748 5 % 4 $ 11,756 $ 11,169 $ 10,748 5 % 4 % Operating 11,756 $ 11,169 $ 10,748 5 % 4 % Operating income 11,169 $ 10,748 5 % 4 % Operating income $ 8,285 4 % Operating income $ 8,285 $ 8,025 $ 7,458 3 Operating income $ 8,285 $ 8,025 $ 7,458 3 % 8 $ 8,285 $ 8,025 $ 7,458 3 % 8 % Information 8,285 $ 8,025 $ 7,458 3 % 8 % Information Worker 8,025 $ 7,458 3 % 8 % Information Worker primarily consists revenue increased in fiscal year revenue increased $ 66 million or 4 % . increased $ 66 million or 4 % . Information Worker revenue revenue increased in fiscal year 2005 primarily reflecting a $ 269 2005 primarily reflecting a $ 269 million or 3 % increase a $ 269 million or 3 % increase in volume licensing in Japan , a $ 91 million or 6 % increase a $ 91 million or 6 % increase in OEM revenue rate accounted for approximately $ 367 million or three percentage point revenue growth for fiscal year 2005 , offset by a $ , offset by a $ 66 revenue partially offset by a $ 283 million or 15 % increase a $ 283 million or 15 % increase in sale and sale effort and a $ 71 million or 10 % increase a $ 71 million or 10 % increase in research and expense . Headcount-related cost increased 14 % during fiscal year 2006 14 % during fiscal year 2006 reflecting both an 18 % year 2006 reflecting both an 18 % increase in headcount related income growth for fiscal year 2005 wa primarily due to the revenue growth and a $ 304 million decrease in stock-base Revenue $ 919 2005 Percent Change 2005 versus 2004 Revenue $ 919 $ 784 2005 versus 2004 Revenue $ 919 $ 784 $ 742 17 2004 Revenue $ 919 $ 784 $ 742 17 % 6 $ 919 $ 784 $ 742 17 % 6 % Operating 919 $ 784 $ 742 17 % 6 % Operating income 784 $ 742 17 % 6 % Operating income ( loss income ( loss ) $ 24 $ ( 171 ) $ ) $ 24 $ ( 171 ) $ ( 291 ) ( 171 ) $ ( 291 ) * 41 % * $ ( 291 ) * 41 % * Not meaningful Microsoft revenue increased in fiscal year 2006 driven by new user for Solutions revenue in fiscal year 2005 revenue growth in software in software partially offset by 25 % decline in service revenue revenue increase wa driven by 9 % growth in license revenue growth in license revenue and 16 % growth in enhancement revenue income increased in fiscal year 2006 reflecting the increase in revenue revenue accompanied by a $ 56 million decrease in sale and spending . Headcount-related cost increased 3 % reflecting both a 10 3 % reflecting both a 10 % increase in headcount and loss declined in fiscal year 2005 prim Revenue $ 2,298 2005 Percent Change 2005 versus 2004 Revenue $ 2,298 $ 2,344 2005 versus 2004 Revenue $ 2,298 $ 2,344 $ 2,270 ( 2004 Revenue $ 2,298 $ 2,344 $ 2,270 ( 2 ) $ 2,298 $ 2,344 $ 2,270 ( 2 ) % 3 $ 2,344 $ 2,270 ( 2 ) % 3 % Operating 2,270 ( 2 ) % 3 % Operating income ( loss ( loss ) $ ( 77 ) $ 412 $ 98 $ ( 77 ) $ 412 $ 98 * 320 % 77 ) $ 412 $ 98 * 320 % * Not $ 412 $ 98 * 320 % * Not meaningful MSN subscriber . In fiscal year 2006 , we launched MSN adCenter U.S. where it now serf 100 percent revenue decreased in fiscal year 2006 primarily reflecting a $ 195 2006 primarily reflecting a $ 195 million or 28 % decline a $ 195 million or 28 % decline in access revenue partially offset by a $ 126 million or 9 % increase a $ 126 million or 9 % increase in advertising revenue advertising revenue and a $ 23 million or 9 % increase a $ 23 million or 9 % increase in revenue from access . As of June 30 , 2006 , MSN had As of June 30 , 2006 , MSN had 2.1 million , 2006 , MSN had 2.1 million access subs revenue increased reflecting MSN revenue increased reflecting $ 193 million or 16 % growth reflecting $ 193 million or 16 % growth in advertising revenue display advertising revenue and $ 84 million or 88 % growth and $ 84 million or 88 % growth in subscription and and a decline of $ 219 million or 24 % in of $ 219 million or 24 % in access revenue , income decreased in fiscal year 2006 due to a $ 230 2006 due to a $ 230 million or 39 % increase a $ 230 million or 39 % increase in research and developm Revenue $ 377 2005 Percent Change 2005 versus 2004 Revenue $ 377 $ 262 2005 versus 2004 Revenue $ 377 $ 262 $ 193 44 2004 Revenue $ 377 $ 262 $ 193 44 % 36 $ 377 $ 262 $ 193 44 % 36 % Operating 377 $ 262 $ 193 44 % 36 % Operating income 262 $ 193 44 % 36 % Operating income ( loss income ( loss ) $ 2 $ ( 65 ) $ ) $ 2 $ ( 65 ) $ ( 237 ) ( 65 ) $ ( 237 ) * 73 % * $ ( 237 ) * 73 % * Not meaningful Mobile mobile operator . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function relat revenue increased in fiscal year 2006 primarily due to unit volume PDAs . In fiscal year 2006 , revenue for Windows Mobile Windows Mobile software increased $ 55 million or 37 % while increased $ 55 million or 37 % while revenue for Windows Embedded operating system increased $ 49 million or 47 % , increased $ 49 million or 47 % , which wa primarily revenue growth for fiscal year 2005 over fiscal PAGE 27 Table year 2005 over fiscal PAGE 27 Table of Contents Part II of Contents Part II Item 7 year 2004 revenue for Windows Mobile Windows Mobile software increased $ 46 million or 45 % and increased $ 46 million or 45 % and revenue for Windows Embedded operating system increased $ 19 million or 21 % . increased $ 19 million or 21 % . Unit volume increase revenue growth for fiscal year 2005 over fiscal year 2004 , year 2005 over fiscal year 2004 , primarily driven by increased operating income for fiscal year 2006 a opposed to the operating operating loss in fiscal year 2005 primarily due to increased re Revenue $ 4,256 2005 Percent Change 2005 versus 2004 Revenue $ 4,256 $ 3,140 2005 versus 2004 Revenue $ 4,256 $ 3,140 $ 2,737 36 2004 Revenue $ 4,256 $ 3,140 $ 2,737 36 % 15 $ 4,256 $ 3,140 $ 2,737 36 % 15 % Operating 4,256 $ 3,140 $ 2,737 36 % 15 % Operating loss 3,140 $ 2,737 36 % 15 % Operating loss $ ( % Operating loss $ ( 1,262 ) $ ( 485 ) ( 1,262 ) $ ( 485 ) $ ( 1,337 ) ( 485 ) $ ( 1,337 ) ( 160 ) % $ ( 1,337 ) ( 160 ) % 64 % Home ) ( 160 ) % 64 % Home and Entertainment includes new console , the Revenue from the first of the introduction of Xbox 360 . Home and Entertainment revenue revenue increased in fiscal year 2006 primarily due to the launch the launch of the Xbox 360 console partially offset by a the significant impact of Halo 2 in fiscal year 2005 . Halo 2 in fiscal year 2005 . We sold approximately 5 2005 . We sold approximately 5 million Xbox 360 console during sold approximately 5 million Xbox 360 console during fiscal year 2006 360 console during fiscal year 2006 . The revenue growt Revenue increased in fiscal Revenue increased in fiscal year 2005 primarily due to significant new which resulted in a $ 416 million or 23 % increase a $ 416 million or 23 % increase in Xbox revenue in Xbox revenue . Halo 2 wa introduced in the second second quarter of fiscal year 2005 and generated over $ 300 2005 and generated over $ 300 million in revenue in fiscal in revenue in fiscal year 2005 . Revenue from consumer hardware and TV platform declined $ 50 million or 5 % compared declined $ 50 mill Revenue ( In million ) September 30 , 2005 December 31 , million ) September 30 , 2005 December 31 , 2005 March September 30 , 2005 December 31 , 2005 March 31 , , 2005 December 31 , 2005 March 31 , 2006 June December 31 , 2005 March 31 , 2006 June 30 , , 2005 March 31 , 2006 June 30 , 2006 Fiscal March 31 , 2006 June 30 , 2006 Fiscal Year 2006 , 2006 June 30 , 2006 Fiscal Year 2006 September 30 30 , 2006 Fiscal Year 2006 September 30 , 2004 December 2006 Fiscal Year 2006 September 30 , 2004 December 3 revenue 1,146 1,250 4,633 658 1,445 633 667 3,403 Total revenue $ 1,250 4,633 658 1,445 633 667 3,403 Total revenue $ 9,741 4,633 658 1,445 633 667 3,403 Total revenue $ 9,741 $ 667 3,403 Total revenue $ 9,741 $ 11,837 $ 10,900 $ Total revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 $ $ 11,837 $ 10,900 $ 11,804 $ 44,282 $ 9,189 $ $ 10,900 $ 11,804 $ 44,282 $ 9,189 $ 10,818 $ $ 11,804 $ 44,282 $ 9,189 $ 10,818 $ 9,620 $ $ 44,282 $ 9,189 $ 10,818 $ 9,620 $ 10,161 revenue growth in fiscal year 2007 . We estimate overall server hardware unit shipment will grow 10 % to 12 % in will grow 10 % to 12 % in fiscal year 2007 12 % in fiscal year 2007 . However , we face in server application . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Online Services Business We expect to grow in fiscal year 2007 a a result of continued to decline in fiscal year 2007 . Microsoft Business Division We to grow in fiscal year 2007 . We feel that our contract indicates enth revenue stream . Xbox 360 console unit cost are expected key area in fiscal year 2007 : increased product cost associated operating expense in fiscal year 2007 , we believe they will million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 vers revenue 2005 Percent Change 2005 versus 2004 Cost of revenue $ 7,650 2004 Cost of revenue $ 7,650 $ 6,031 $ 6,596 27 of revenue $ 7,650 $ 6,031 $ 6,596 27 % ( $ 7,650 $ 6,031 $ 6,596 27 % ( 9 ) 7,650 $ 6,031 $ 6,596 27 % ( 9 ) % $ 6,596 27 % ( 9 ) % As a percent As a percent of revenue 17 % 15 % 18 % percent of revenue 17 % 15 % 18 % 2ppt ( revenue 17 % 15 % 18 % 2ppt ( 3 ) % 15 % 18 % 2ppt ( 3 ) ppt Cost % 18 % 2ppt ( 3 ) ppt Cost of revenue of revenue in fiscal year 2006 increased mainly due to a mai revenue in fiscal year 2005 decreased due to a $ decreased due to a $ 363 million decrease in stock-based compensation compensation expense , a $ 140 million reduction in cost associated base , and a $ 169 million reduction in other product million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 200 revenue 15 % 15 % 21 % percent of revenue 15 % 15 % 21 % \u2013ppt ( revenue 15 % 15 % 21 % \u2013ppt ( 6 ) % 21 % \u2013ppt ( 6 ) ppt Research and development and development expense also PAGE 31 Table of Contents Part II of Contents Part II Item 7 include third-party development and programming cost increased during fiscal year 2006 primarily due to increased development a MSN adCenter , the 2007 Microsoft Office system , Windows , Windows Vista , Xbox 360 , and corporate research activity activity . Headcount-rela revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % \u2013ppt \u2013ppt revenue 22 % 22 % 22 % \u2013ppt \u2013ppt Sales and expense increased during fiscal year 2006 primarily due to increased headcount-related spending . Headcount-related cost increased 13 % during fiscal year 2006 13 % during fiscal year 2006 reflecting both a 20 % year 2006 reflecting both a 20 % increase in headcount and expense . For fiscal year 2005 , sale and marketing expense increased slightly due to $ 470 million higher headcount-related c revenue 8 % 11 % 14 % percent of revenue 8 % 11 % 14 % ( 3 revenue 8 % 11 % 14 % ( 3 ) ppt 11 % 14 % ( 3 ) ppt ( 3 ) ( 3 ) ppt ( 3 ) ppt General and administrative cost decreased in fiscal year 2006 primarily reflecting decreased cost for contingency . We incurred $ 1.32 billion in legal charge during legal charge during fiscal year 2006 a compared to $ 2.31 2006 a compared to $ 2.31 billion in legal charge incurred charge incurred during fiscal year 2005 . Headcount-related cost increased 7 2005 . Hea Revenue Unearned revenue from Unearned revenue a of June 30 , 2006 , increased $ a of June 30 , 2006 , increased $ 1.74 billion , 2006 , increased $ 1.74 billion from June 30 , $ 1.74 billion from June 30 , 2005 , reflecting addition billion from June 30 , 2005 , reflecting addition to unearned that outpaced recognition by $ 1.66 billion , a $ 53 1.66 billion , a $ 53 million decrease in revenue deferred element , and a $ 127 million increase primarily in unearned the expected recognition of $ 10.9 bil revenue a unearned revenue a of June 30 , 2006 : ( In a of June 30 , 2006 : ( In million ) Three month ended : September 30 , 2006 $ 3,483 December ended : September 30 , 2006 $ 3,483 December 31 , September 30 , 2006 $ 3,483 December 31 , 2006 2,687 , 2006 $ 3,483 December 31 , 2006 2,687 March 31 $ 3,483 December 31 , 2006 2,687 March 31 , 2007 3,483 December 31 , 2006 2,687 March 31 , 2007 1,899 31 , 2006 2,687 March 31 , 2007 1,899 June 30 2006 2,687 March 31 , 2007 1,899 June 30 , 2007 2,687 March revenue 1,899 June 30 , 2007 1,069 Thereafter 1,764 Unearned revenue $ 30 , 2007 1,069 Thereafter 1,764 Unearned revenue $ 10,902 Cash Thereafter 1,764 Unearned revenue $ 10,902 Cash Flows Cash flow from from operation for fiscal year 2006 decreased 13 % to $ for fiscal year 2006 decreased 13 % to $ 14.40 billion decreased 13 % to $ 14.40 billion primarily due to increased payment to fund a $ 987 million increase in inventory and product cost related to Xbox 360 and increased payment to employee to emp revenue growth and $ % revenue growth and $ 1.74 billion increase in unearned revenue used in financing wa $ 20.56 billion in fiscal year 2006 20.56 billion in fiscal year 2006 , a decrease of $ , a decrease of $ 20.52 billion from the previous year year driven by a $ 32.57 billion reduction in cash dividend partially offset by an $ 11.15 billion increase in common stock cash from investing wa $ 8.00 billion in fiscal year 2006 8.00 billion in fiscal year 2006 , a decrease of $ , a decrease of $ 7.02 b revenue growth combined with revenue growth combined with a 12 % increase in unearned revenue Cash payment in fiscal year 2005 resulting from significant legal settlement legal settlement were approximately $ 1.8 billion lower than in the to employee resulting from a 7 % increase in full-time employee used for financing wa $ 41.08 billion in fiscal year 2005 41.08 billion in fiscal year 2005 , driven by $ 36.11 2005 , driven by $ 36.11 billion of cash dividend paid dividend paid in fiscal year 2005 com revenue of $ 1.76 billion . RECENTLY ISSUED ACCOUNTING ISSUED ACCOUNTING STANDARDS In November 2005 , the FASB issued Staff prescribed in SFAS No . 123 ( R ) , Share-Based that adopts SFAS No . 123 ( R ) using the adoption of SFAS No . 123 ( R ) or the the FSP a of July 1 , 2005 . This method a of July 1 , 2005 . This method change did financial statement . In June 2006 , the FASB issued FIN FASB issued FIN No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 , which clarifies the account Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether product . SFAS No . 115 , Accounting for Certain Investments Securities , and SEC SAB 59 , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between value allocation approach . PAGE 38 Table of Contents Part II of Contents Part II Item 7 We account for research and , including SFAS No . 2 , Accounting for Research and , and SFAS No Revenue $ ) Year Ended June 30 2006 2005 2004 Revenue $ 44,282 Year Ended June 30 2006 2005 2004 Revenue $ 44,282 $ Ended June 30 2006 2005 2004 Revenue $ 44,282 $ 39,788 2006 2005 2004 Revenue $ 44,282 $ 39,788 $ 36,835 Operating 2004 Revenue $ 44,282 $ 39,788 $ 36,835 Operating expense : $ 44,282 $ 39,788 $ 36,835 Operating expense : Cost of expense : Cost of revenue 7,650 6,031 6,596 Research and development : Cost of revenue 7,650 6,031 6,596 Research and development 6,584 Cost of revenue 7,650 6,0 revenue 9,138 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 7,502 1,557 2,020 Short-term unearned revenue 9,138 7,502 Securities lending payable 3,117 2,020 Short-term unearned revenue 9,138 7,502 Securities lending payable 3,117 \u2014 9,138 7,502 Securities lending payable 3,117 \u2014 Other 3,783 3,607 Total lending payable 3,117 \u2014 Other 3,783 3,607 Total current liability 22,442 payable 3,117 \u2014 Other 3,783 3,607 Total current liability 22,442 16,877 3,783 3,607 Total current liability revenue 1,764 3,607 Total current liability 22,442 16,877 Long-term unearned revenue 1,764 1,665 22,442 16,877 Long-term unearned revenue 1,764 1,665 Other long-term liability 5,287 16,877 Long-term unearned revenue 1,764 1,665 Other long-term liability 5,287 4,158 1,764 1,665 Other long-term liability 5,287 4,158 Commitments and contingency Stockholders 1,665 Other long-term liability 5,287 4,158 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 10,062 revenue 16,453 13,831 ( 1,479 ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned 1,479 ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned revenue ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned revenue ( Recognition of unearned revenue ( 14,729 ) ( 12,919 ) ( revenue ( 14,729 ) ( 12,919 ) ( 12,527 ) Accounts ) ( 12,919 ) ( 12,527 ) Accounts receivable ( 2,071 12,527 ) Accounts receivable ( 2,071 ) ( 1,243 ) ( receivable ( 2,071 ) ( 1,243 ) ( 687 ) Other ) ( 1,2 REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price for desktop application . PAGE 50 Table of Contents Part II of Contents Part II Item 8 Other \u2013 Represents payment for ( In million ) June 30 2006 2005 Volume licensing program revenue Undelivered element 2,066 2,119 Other 1,175 1,048 Unearned revenue $ 10,902 element 2,066 2,119 Other 1,175 1,048 Unearned revenue $ 10,902 $ 1,175 1,048 Unearned revenue $ 10,902 $ 9,167 Unearned revenue by Unearned revenue $ 10,902 $ 9,167 Unearned revenue by segment wa ( In million ) June 30 2006 2005 Client $ 2,850 In million ) June 30 2006 2005 Client $ 2,850 $ million ) June 30 2006 2005 Client $ 2,850 $ 2,687 30 2006 2005 Client $ 2,850 $ 2,687 Server and Tools 2005 Client $ 2,850 $ 2,68 revenue $ 10,902 3,609 2,814 Other segment 651 618 Unearned revenue $ 10,902 $ 651 618 Unearned revenue $ 10,902 $ 9,167 NOTE 3 INVESTMENTS Unearned revenue $ 10,902 $ 9,167 NOTE 3 INVESTMENTS The component $ 10,902 $ 9,167 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2006 Cash $ 3,248 other investment June 30 , 2006 Cash $ 3,248 $ \u2013 30 , 2006 Cash $ 3,248 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 723 11 ( 1 ) 73 revenue and $ 23 million in derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were other . During fiscal year 2004 , $ 14 million of fiscal year 2004 , $ 14 million of derivative gain were . We estimate that $ 133 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2006 , 2005 , and 2004 for fiscal yea revenue 1,028 915 3,994 Other expense item 1,451 1,751 Unearned revenue 1,028 915 Impaired item 1,451 1,751 Unearned revenue 1,028 915 Impaired investment 989 861 1,451 1,751 Unearned revenue 1,028 915 Impaired investment 989 861 Other revenue 1,028 915 Impaired investment 989 861 Other revenue item 102 1,028 915 Impaired investment 989 861 Other revenue item 102 213 989 861 Other revenue item 102 213 Other \u2013 173 Deferred 861 Other revenue item 102 213 Other \u2013 173 Deferred income item 102 213 Other \u2013 1 revenue and million ) Year Ended June 30 2006 2005 2004 Revenue Client ) Year Ended June 30 2006 2005 2004 Revenue Client $ Year Ended June 30 2006 2005 2004 Revenue Client $ 13,001 Ended June 30 2006 2005 2004 Revenue Client $ 13,001 $ 2005 2004 Revenue Client $ 13,001 $ 11,972 $ 11,293 Server Revenue Client $ 13,001 $ 11,972 $ 11,293 Server and Tools $ 13,001 $ 11,972 $ 11,293 Server and Tools 10,542 9,197 $ 11,293 Server and Tools 10,542 9,197 8,031 Information Worker 12,380 11,293 Server and Tools Revenue ) ( 1,042 ) ( 4,516 ) Revenue reconciling amount 308 4,516 ) Revenue reconciling amount 308 286 372 Corporate-level expense ( ) Revenue reconciling amount 308 286 372 Corporate-level expense ( 1 Revenue reconciling amount 308 286 372 Corporate-level expense ( 1 ) 286 372 Corporate-level expense ( 1 ) ( 3,742 ) ( expense ( 1 ) ( 3,742 ) ( 3,493 ) ( ) ( 3,742 ) ( 3,493 ) ( 3,128 ) Other ) ( 3,493 ) ( 3,128 ) Other ( 27 ) ( 3,128 ) Other ( 27 ) 201 385 Total $ ) Other ( 27 ) 201 385 Total $ ( 4,90 revenue . These total fiscal year 2005 and 2004 revenue . These sale were million ) Year Ended June 30 2006 2005 2004 United States ) Year Ended June 30 2006 2005 2004 United States ( Year Ended June 30 2006 2005 2004 United States ( 1 Ended June 30 2006 2005 2004 United States ( 1 ) 2005 2004 United States ( 1 ) $ 29,730 $ 26,949 States ( 1 ) $ 29,730 $ 26,949 $ 25,046 Other 1 ) $ 29,730 $ 26,949 $ 25,046 Other country 14,552 $ 29,730 $ 26,949 $ 25,046 Other country 14,552 12,839 11,789 26,949 $ 25,04 Revenue June 30 Total Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,63 Revenue share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net in Revenue share 0.23 0.32 0.23 0.34 1.12 Fiscal year 2004 Revenue $ 0.23 0.34 1.12 Fiscal year 2004 Revenue $ 8,215 $ 10,153 Fiscal year 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income ", + "net_income": "Net income 28,365 Operating income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 Operating income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 12,254 income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 12,254 8,168 9,034 9,545 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted 9,545 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per share Net income $ Provision for income tax 5,663 4,374 4,028 Net income $ 12,599 for income tax 5,663 4,374 4,028 Net income $ 12,599 $ 4,374 4,028 Net income $ 12,599 $ 12,254 $ 8,168 Earnings Net income $ 12,599 $ 12,254 $ 8,168 Earnings per share $ 12,599 $ 12,254 $ 8,168 Earnings per share : Basic per share : Basic $ 1.21 $ 1.13 $ 0.76 Diluted : Basic $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 $ 0.75 Weighted 0.76 Diluted $ 1.20 $ 1.12 $ Net income Year Ended June 30 2006 2005 2004 Operations Net income $ Ended June 30 2006 2005 2004 Operations Net income $ 12,599 2004 Operations Net income $ 12,599 $ 12,254 $ 8,168 Depreciation Net income $ 12,599 $ 12,254 $ 8,168 Depreciation , amortization $ 12,599 $ 12,254 $ 8,168 Depreciation , amortization , and , and other noncash item 903 855 1,186 Stock-based compensation 1,715 and other noncash item 903 855 1,186 Stock-based compensation 1,715 2,448 other noncash item 903 855 1,186 Stock-based c Net income of period ( 12,298 ) 18,429 15,678 Net income 12,599 12,254 period ( 12,298 ) 18,429 15,678 Net income 12,599 12,254 8,168 ) 18,429 15,678 Net income 12,599 12,254 8,168 Other comprehensive income 18,429 15,678 Net income 12,599 12,254 8,168 Other comprehensive income : 15,678 Net income 12,599 12,254 8,168 Other comprehensive income : Net loss ) on derivative instrument 76 ( 58 ) 101 Net on derivative instrument 76 ( 58 ) 101 Net unrealized investment instrument 76 ( 58 ) 101 Net unrealized in Net income ) Year Ended June 30 2006 2005 2004 Net income available Year Ended June 30 2006 2005 2004 Net income available for Ended June 30 2006 2005 2004 Net income available for common shareholder ( A ) $ 12,599 $ 12,254 $ 8,168 Weighted A ) $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,438 10,839 10,803 Dilutive effect of stock ( B ) 10,438 10,839 10,803 Dilutive effect of employee ( B ) 10,438 10,839 10,803 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 6 8,872 9,674 36,632 Net income 3,141 ( 6 ) 3,653 2,977 36,632 Net income 3,141 ( 6 ) 3,653 2,977 ( 7 income 3,141 ( 6 ) 3,653 2,977 ( 7 ) 2,828 3,141 ( 6 ) 3,653 2,977 ( 7 ) 2,828 ( 6 ) 3,653 2,977 ( 7 ) 2,828 ( 8 ) 3,653 2,977 ( 7 ) 2,828 ( 8 ) 12,599 Basic ( 7 ) 2,828 ( 8 ) 12,599 Basic earnings per ) 2,828 Net income 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( 3 8,257 8,773 33,757 Net income 2,528 ( 3 ) 3,463 2,563 33,757 Net income 2,528 ( 3 ) 3,463 2,563 ( 4 income 2,528 ( 3 ) 3,463 2,563 ( 4 ) 3,700 2,528 ( 3 ) 3,463 2,563 ( 4 ) 3,700 ( 3 ) 3,463 2,563 ( 4 ) 3,700 ( 5 ) 3,463 2,563 ( 4 ) 3,700 ( 5 ) 12,254 Basic ( 4 ) 3,700 ( 5 ) 12,254 Basic earnings per ) 3,700 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 1 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 1 ) 1,315 ( Net income 2,614 1,549 ( 1 ) 1,315 ( 2 ) 2,614 1,549 ( 1 ) 1,315 ( 2 ) 2,690 8,168 ( 1 ) 1,315 ( 2 ) 2,690 8,168 Basic earnings ) 1,315 ( 2 ) 2,690 8,168 Basic earnings per share 1,315 ( 2 ) 2,690 ", + "assets": "Assets Current asset In million ) June 30 2006 2005 Assets Current asset : million ) June 30 2006 2005 Assets Current asset : Cash : Cash and equivalent $ 6,714 $ 4,851 Short-term investment ( and equivalent $ 6,714 $ 4,851 Short-term investment ( including security pledged a collateral of $ 3,065 and $ - ) 27,447 3,065 and $ - ) 27,447 32,900 Total cash and short-term and $ - ) 27,447 32,900 Total cash and short-term investment Total cash and short-term investment 34,161 37,751 Accounts receivable , ASSETS The Part II Item 8 NOTE 9 INTANGIBLE ASSETS The component of ( In million ) June 30 2006 2005 Gross carrying amount In million ) June 30 2006 2005 Gross carrying amount Accumulated million ) June 30 2006 2005 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 954 $ ( 661 ) $ Contract-based $ 954 $ ( 661 ) $ 292 $ 957 $ ( 661 ) $ 292 $ 957 $ ( 606 661 ) $ 292 $ 957 $ ( 606 ) $ 292 $ 957 $ ( 606 ) $ 351 Technology-based 458 $ ( 606 ) $ 351 Technology-based 458 ( 2", + "liabilities": "Liabilities and stockholder Total asset $ 69,597 $ 70,815 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 Short-term compensation 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 1,938 1,662 Income tax 1,557 2,020 Short-ter LIABILITIES ( In ( In million ) June 30 2006 2005 Tax contingency $ In million ) June 30 2006 2005 Tax contingency $ 4,194 million ) June 30 2006 2005 Tax contingency $ 4,194 $ 2006 2005 Tax contingency $ 4,194 $ 3,066 Legal contingency 1,022 Tax contingency $ 4,194 $ 3,066 Legal contingency 1,022 961 Employee 4,194 $ 3,066 Legal contingency 1,022 961 Employee stock option transfer $ 3,066 Legal contingency 1,022 961 Employee stock option transfer program stock option transfer program \u2013 48 Other 71 83 Othe", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management \u2019 Selected Financial Data 20 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 41 Item 8 . Financial Statements about Market Risk 41 Item 8 . Financial Statements and Supplement Equity of to Financial Statements ( Item 8 ) for information regarding dividend of Directors in fiscal year 2006 and 2005 . On July in fiscal year 2006 and 2005 . On July 20 , and 2005 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 , to buy Directors on July 20 , 2004 , to buy back up buy back up to $ 30 billion in Microsoft common stock each quarter of fiscal year 2006 a follows : Period Total price paid per share July 1 , 200 equity Long-term obligation 7,051 5,823 4,574 2,846 2,722 Stockholders \u2019 equity 40,104 obligation 7,051 5,823 4,574 2,846 2,722 Stockholders \u2019 equity 40,104 48,115 2,846 2,722 Stockholders \u2019 equity 40,104 48,115 74,825 64,912 54,842 PAGE 2,722 Stockholders \u2019 equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Stockholders \u2019 equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table \u2019 equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table of equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table of Conten equity investees and other 218 13 ( 25 ) Investment equity investees and other 218 13 ( 25 ) Investment income and other 218 13 ( 25 ) Investment income and other Investment income and other $ 1,790 $ 2,067 $ 3,162 For and other $ 1,790 $ 2,067 $ 3,162 For fiscal year $ 1,790 $ 2,067 $ 3,162 For fiscal year 2006 , $ 3,162 For fiscal year 2006 , dividend and interest income a result of the $ 32.64 billion special dividend paid on special dividend paid on December 2 , 2004 , and stock paid on December 2 equity derivative $ 192 $ ( 202 ) $ derivative $ 192 $ ( 202 ) $ 118 Net gain $ ( 202 ) $ 118 Net gain on commodity derivative Net gain on commodity derivative 101 46 \u2013 Net loss on gain on commodity derivative 101 46 \u2013 Net loss on interest on interest rate derivative ( 79 ) ( 53 ) ( derivative ( 79 ) ( 53 ) ( 102 ) Net ) ( 53 ) ( 102 ) Net loss on foreign on foreign currency contract ( 313 ) ( 53 ) ( contract ( 313 ) ( 53 ) ( 284 ) Net ) ( 53 ) ( 284 ) Net loss on derivative loss on derivative $ ( 99 equity derivative during fiscal year 2006 are primarily due to change derivative loss in fiscal year 2005 were primarily related to loss contract . During fiscal year 2005 , loss related to equity in equity price were $ 202 million and loss related to interest rate derivative were $ 53 million . These loss were foreign currency contract were $ 53 million , related to change on commodity position were $ 46 million during fiscal year 2005 46 million during fiscal year 2005 . Derivative loss were $ . Der equity at June 30 , 2006 , wa $ equity at June 30 , 2006 , wa $ 40.10 billion , 2006 , wa $ 40.10 billion . We will continue constructing new building were $ 234 million on June 30 , $ 234 million on June 30 , 2006 . We have million on June 30 , 2006 . We have operating lease incurred rental expense totaling $ 276 million , $ 299 million $ 276 million , $ 299 million , and $ 331 299 million , and $ 331 million fiscal year 2006 , $ 331 million fiscal year 2006 , 2005 and 2004 , million fiscal year 2006 equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor fiscal quarter of fiscal year 2006 , we changed the methodology second quarter of fiscal year 2006 , we adopted a factor-based future market risk . PAGE 41 Table of Contents Part II of Contents Part II Item 7A The following table set forth our position a of June 30 , 2006 and 2005 , a of June 30 , 2006 and 2005 , a Equity $ 62 Currency rate 91 52 33 91 11 Equity price 62 Currency rate 91 52 33 91 11 Equity price 88 Currency rate 91 52 33 91 11 Equity price 88 164 rate 91 52 33 91 11 Equity price 88 164 116 33 91 11 Equity price 88 164 116 168 84 Commodity 91 11 Equity price 88 164 116 168 84 Commodity price 11 Equity price 88 164 116 168 84 Commodity price 12 Equity price 88 164 116 168 84 Commodity price 12 14 price 88 164 116 168 84 Commodity price 12 14 15 116 168 84 Commodity price 12 14 15 18 12 Total 168 8 Equity and other investment and equipment , net 3,044 2,346 Equity and other investment 9,232 2,346 Equity and other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible Equity and other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset , net investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset , net 539 3,309 Intangible asset , net 539 499 Deferred income tax 2,611 Intangible asset , net 539 499 Deferred incom equity liability : Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 Short-term compensation 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 7,502 1,557 2,020 Short-term unearned revenue 9,138 7,502 equity ) Total stockholder \u2019 equity 40,104 48,115 Total liability and stockholder Total stockholder \u2019 equity 40,104 48,115 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 69,597 $ 70,815 See accompanying note \u2019 equity $ 69,597 $ 70,815 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2006 2005 2004 Operations Net ) Year Ended June 30 2006 2005 2004 Operations Net income EQUITY STATEMENTS ( million ) Year Ended June 30 2006 2005 2004 Common stock ) Year Ended June 30 2006 2005 2004 Common stock and Year Ended June 30 2006 2005 2004 Common stock and paid-in Ended June 30 2006 2005 2004 Common stock and paid-in capital , beginning of period $ 60,413 $ 56,396 $ 49,234 Common of period $ 60,413 $ 56,396 $ 49,234 Common stock issued $ 60,413 $ 56,396 $ 49,234 Common stock issued 1,939 3,223 $ 49,234 Common stock issued 1,939 3,223 2,815 Common stock repurchased 49,234 Comm equity $ Total stockholder \u2019 equity $ 40,104 $ 48,115 $ 74,825 See \u2019 equity $ 40,104 $ 48,115 $ 74,825 See accompanying note $ 40,104 $ 48,115 $ 74,825 See accompanying note . PAGE See accompanying note . PAGE 46 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The classification policy during fiscal year 2006 which resulted in reclassification of . Certain multi-year licensing PAGE 47 Equity and other investment June 30 , 2006 Cash $ 3,248 other investment June 30 , 2006 Cash $ 3,248 $ \u2013 30 , 2006 Cash $ 3,248 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 723 11 ( 1 ) 733 $ \u2013 Mutual fund 723 11 ( 1 ) 733 288 Mutual fund 723 11 ( 1 ) 733 288 445 \u2013 723 11 ( 1 ) 733 288 445 \u2013 Commercial paper 11 ( 1 ) 733 288 445 \u2013 Commercial paper 3,242 ( 1 ) 733 288 445 \u2013 Commercial paper 3,242 \u2013 288 445 \u2013 Commercial paper 3,242 \u2013 \u2013 3,242 3,150 92 Comme Equity and other investment June 30 , 2005 Cash $ 1,911 other investment June 30 , 2005 Cash $ 1,911 $ \u2013 30 , 2005 Cash $ 1,911 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 1,911 $ 1,911 $ \u2013 $ $ \u2013 $ 1,911 $ 1,911 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 $ \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 \u2013 Mutual fund 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper fund 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper 1,566 1,636 38 \u2013 1,674 817 857 \u2013 Commercial paper 1,566 4 817 857 \u2013 Commercial paper 1,566 4 \u2013 1,570 1,570 \u2013 857 equity domestic equity security and $ 33 million related to international equity price movement . At June 30 , 2005 unrealized loss of . At June 30 , 2005 unrealized loss of $ 258 2005 unrealized loss of $ 258 million consisted of : $ million consisted of : $ 112 million related to investment grade grade fixed-income security , $ 13 million related to investment in fixed income security , $ 90 million related to domestic equity domestic equity security and $ 43 million related to international equity equity investees and other 218 13 ( 25 ) Investment equity investees and other 218 13 ( 25 ) Investment income and other 218 13 ( 25 ) Investment income and other Investment income and other $ 1,790 $ 2,067 $ 3,162 Net and other $ 1,790 $ 2,067 $ 3,162 Net gain on $ 1,790 $ 2,067 $ 3,162 Net gain on investment include include other-than-temporary impairment of $ 408 million in fiscal year 2006 408 million in fiscal year 2006 , $ 152 million in fiscal year 2006 , $ 152 million in fiscal year 2005 152 m EQUITY $ 5,287 $ 4,158 NOTE 12 STOCKHOLDERS \u2019 EQUITY Shares of million ) Year Ended June 30 2006 2005 2004 Balance , ) Year Ended June 30 2006 2005 2004 Balance , beginning Year Ended June 30 2006 2005 2004 Balance , beginning of Ended June 30 2006 2005 2004 Balance , beginning of year Balance , beginning of year 10,710 10,862 10,771 Issued 106 160 , beginning of year 10,710 10,862 10,771 Issued 106 160 215 beginning of year 10,710 10,862 10,771 Issued 106 160 215 Repurchased year 10,710 10,862 10,771", + "cash_flow": "Cash flow from from operation for fiscal year 2006 decreased 13 % to $ for fiscal year 2006 decreased 13 % to $ 14.40 billion decreased 13 % to $ 14.40 billion primarily due to increased payment to fund a $ 987 million increase in inventory and product cost related to Xbox 360 and increased payment to employee to employee resulting from a 16 % growth in headcount . from customer driven by our 11 % revenue growth and $ % revenue growth and $ 1.74 billion increase in unearned revenue used in financing wa $ Cash flow from operation for from operation for fiscal year 2004 decreased $ 1.17 billion to fiscal year 2004 decreased $ 1.17 billion to $ 14.63 billion $ 1.17 billion to $ 14.63 billion . The decrease primarily combined cash outflow of $ 2.56 billion related to the Sun used for financing wa $ 2.36 billion in fiscal year 2004 2.36 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 2.86 billion from the previous year fourth quarter of fiscal year 2004 combined with a $ 628 2004 combined with", + "accumulated_depreciation": "Accumulated depreciation ( 4,179 equipment , at cost 7,223 6,375 Accumulated depreciation ( 4,179 ) 7,223 6,375 Accumulated depreciation ( 4,179 ) ( 4,029 ) Property depreciation ( 4,179 ) ( 4,029 ) Property and equipment , and equipment , net $ 3,044 $ 2,346 Property and equipment , net $ 3,044 $ 2,346 Property and equipment are stated building range from five to 15 year , leasehold improvement range depreciated . During fiscal year 2006 , 2005 , and 2004 During fiscal year 2006 , 2005 , and 2004 , depreciation 2006 ,", + "debt": "debt $ \u2013 Construction commitment ( 2 ) ( 4 ) 234 commitment ( 2 ) ( 4 ) 234 \u2013 \u2013 \u2013 2 ) ( 4 ) 234 \u2013 \u2013 \u2013 234 Lease ) 234 \u2013 \u2013 \u2013 234 Lease obligation : Capital lease \u2013 \u2013 Operating lease ( 3 ) 250 436 158 41 Operating lease ( 3 ) 250 436 158 41 885 Purchase lease ( 3 ) 250 436 158 41 885 Purchase commitment ( 3 ) 250 436 158 41 885 Purchase commitment ( 3 ) 250 436 158 41 885 Purchase commitment ( 4 ) 250 436 158 41 885 Purchase commitment ( 4 ) 41 885 Purchase commitment ( 4 ) 2,219 9 \u2013 \u2013 Purchase commit", + "share_repurchase": "share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . PAGE 19 Table of of $ 24.75 . PAGE 19 Table of Contents Part II of Contents Part II Item 5 , 6 On August 18 Part II Item 5 , 6 On August 18 , 2006 5 , 6 On August 18 , 2006 , we an share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of our common common stock , or approximately 1.5 % of the common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of our common common stock , or approximately 1.5 % of our common stock outstanding , for approximately $ 3.8 billion at a per share per share price of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on ", + "earnings_per_share": "earnings per share income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per share $ Diluted earnings per share $ 1.20 $ 1.12 $ 0.75 $ per share $ 1.20 $ 1.12 $ 0.75 $ 0.69 $ $ 1.20 $ 1.12 $ 0.75 $ 0.69 $ 0.48 Cash $ 1.12 $ 0.75 $ 0.69 $ 0.48 Cash dividend declared $ 0.75 $ 0.69 $ 0.48 Cash dividend declared per share dividend declared per share $ 0.35 $ 3.40 $ 0.16 $ per share $ 0.35 $ 3.40 $ 0.16 $ 0.08 $ $ 0.35 $ 3.40 $ 0.16 $ 0.08 $ \u2013 Cash $ 3.40 $ 0.16 $ 0.08 $ \u2013 Cash and short-term \u2013 Cash and short-term i Earnings per share $ 12,599 $ 12,254 $ 8,168 Earnings per share : Basic per share : Basic $ 1.21 $ 1.13 $ 0.76 Diluted : Basic $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 $ 0.75 Weighted 0.76 Diluted $ 1.20 $ 1.12 $ 0.75 Weighted average share $ 1.20 $ 1.12 $ 0.75 Weighted average share outstanding : average share outstanding : Basic 10,438 10,839 10,803 Diluted 10,531 10,906 share outstanding : Basic 10,438 10,839 10,803 Diluted 10,531 10,906 1 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2006 2005 2004 Net income ) Year Ended June 30 2006 2005 2004 Net income available Year Ended June 30 2006 2005 2004 Net income available for Ended June 30 2006 2005 2004 Net income available for common shareholder ( A ) $ 12,599 $ 12,254 $ 8,168 Weighted A ) $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,438 10,839 10,803 Dilutive effect of stock ( B ) 10,438 Earnings per share equivalent ( C ) 10,531 10,906 10,894 Earnings per share : ( C ) 10,531 10,906 10,894 Earnings per share : Basic Basic ( A/B ) $ 1.21 $ 1.13 $ 0.76 Diluted A/B ) $ 1.21 $ 1.13 $ 0.76 Diluted ( A/C $ 1.21 $ 1.13 $ 0.76 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.20 $ 1.12 $ 0.75 PAGE A/C ) $ 1.20 $ 1.12 $ 0.75 PAGE 64 Table $ 1.20 $ 1.12 $ 0.75 PAGE 64 Table of Contents $ 1.12 $ 0.75 PAGE 64 Table of Contents Part II of Contents Part II Item 8 For the year ended June For the year ended June 30 , 2006 earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year earnings per share 0.29 0.34 0.29 0.28 1.20 earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 Fiscal Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 Fiscal year earnings per share 0.23 0.32 0.23 0.34 1.12 earnings per share 1,315 ( 2 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 earnings ", + "tax_rate": "tax rate for fiscal year 2006 wa 31 % a compared for fiscal year 2006 wa 31 % a compared to 26 31 % a compared to 26 % for fiscal year 2005 26 % for fiscal year 2005 . During fiscal year 2006 2005 . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from the resolution of increased rate in fiscal year 2006 resulted primarily from the European European Commission fine of \u20ac 281 million ( $ 351 million \u20ac 281 million ( $ 351 million ) which is not lower rate in fiscal year 2005 a a r tax rate tax rate for fiscal year 2004 wa 33 % . Financial for fiscal year 2004 wa 33 % . Financial Condition Cash and short-term investment totaled $ 34.16 billion and $ 37.75 billion $ 34.16 billion and $ 37.75 billion a of June 30 37.75 billion a of June 30 , 2006 , and 2005 a of June 30 , 2006 , and 2005 , respectively 30 , 2006 , and 2005 , respectively . This investment and other investment were $ 9.23 billion and $ 11.00 billion $ 9.23 billion and $ 11.00 billion a of June 30 11.00 billion a of J", + "segment_revenue": "Segment revenue and million ) Year Ended June 30 2006 2005 2004 Revenue Client ) Year Ended June 30 2006 2005 2004 Revenue Client $ Year Ended June 30 2006 2005 2004 Revenue Client $ 13,001 Ended June 30 2006 2005 2004 Revenue Client $ 13,001 $ 2005 2004 Revenue Client $ 13,001 $ 11,972 $ 11,293 Server Revenue Client $ 13,001 $ 11,972 $ 11,293 Server and Tools $ 13,001 $ 11,972 $ 11,293 Server and Tools 10,542 9,197 $ 11,293 Server and Tools 10,542 9,197 8,031 Information Worker 12,380 11,293 Server and Tools ", + "investment_gains_losses": "investment gains investment gains investment gains", + "common_stock": "common stock outstanding to be held on November 14 , 2006 are incorporated by held on November 14 , 2006 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2006 INDEX PART I Year Ended June 30 , 2006 INDEX PART I Item 1. 2006 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Common stock price per share per share : High $ 29.00 $ 29.98 $ 26.84 $ : High $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year 2006 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year 2006 Common Low 26.88 26.53 Common stock 23.92 24.12 23.92 Fiscal year 2006 Common stock price per share per share : High $ 27.76 $ 28.16 $ 28.15 $ : High $ 27.76 $ 28.16 $ 28.15 $ 27.74 $ $ 27.76 $ 28.16 $ 28.15 $ 27.74 $ 28.16 Low $ 28.16 $ 28.15 $ 27.74 $ 28.16 Low 24.65 24.30 $ 28.15 $ 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 $ 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See Note $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See Note 12 28.16 Low 24.65 24.30 26.28 21.51 21.51 Se common stock each quarter of fiscal year 2006 a follows : Period Total price paid per share July 1 , 2005 \u2013 September 30 per share July 1 , 2005 \u2013 September 30 , 2005 1 , 2005 \u2013 September 30 , 2005 114,134,218 $ 26.54 2005 \u2013 September 30 , 2005 114,134,218 $ 26.54 October 1 \u2013 September 30 , 2005 114,134,218 $ 26.54 October 1 , 30 , 2005 114,134,218 $ 26.54 October 1 , 2005 \u2013 2005 114,134,218 $ 26.54 October 1 , 2005 \u2013 December 31 $ 26.54 October 1 , 2005 \u2013 December 31 , 2005 1 , 2005 \u2013 December 31 , 2005 28 Common stock \u2013 June 30 , 2006 175,609,060 $ 23.78 Common stock repurchase 30 , 2006 175,609,060 $ 23.78 Common stock repurchase in the fourth quarter of fiscal year 2006 were a follows : Period ( in million ) April 1 , 2006 \u2013 April 30 million ) April 1 , 2006 \u2013 April 30 , 2006 1 , 2006 \u2013 April 30 , 2006 38,041,415 $ 27.08 2006 \u2013 April 30 , 2006 38,041,415 $ 27.08 38,041,415 $ \u2013 April 30 , 2006 38,041,415 $ 27.08 38,041,415 $ 5,394 30 , 2006 38,041,415 $ 27.08 38,041,415 $ 5,394 May 1 , 2006 38,041,415 $ 27. common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . PAGE 19 Table of of $ 24.75 . PAGE 19 Table of Contents Part II of Contents Part II Item 5 , 6 On August 18 Part II Item 5 , 6 On August 18 , 2006 5 , 6 On August 18 , 2006 , we announced 6 On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approx common stock cash from investing wa $ 8.00 billion in fiscal year 2006 8.00 billion in fiscal year 2006 , a decrease of $ , a decrease of $ 7.02 billion from fiscal year 2005 7.02 billion from fiscal year 2005 driven primarily by an $ driven primarily by an $ 8.93 billion decrease in cash from of investment and a $ 766 million increase in addition to were partially offset by $ 3.12 billion of cash proceeds from from operation for fiscal year 2005 increased 14 % to $ for fiscal year 2005 increased 14 % to $ common stock repurchase program in fiscal year 2004 . Cash used for investing used for investing wa $ 3.34 billion in fiscal year 2004 3.34 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 3.88 billion from fiscal year 2003 3.88 billion from fiscal year 2003 . We have no material Stockholders \u2019 equity at June 30 , 2006 , wa $ equity at June 30 , 2006 , wa $ 40.10 billion , 2006 , wa $ 40.10 billion . We will continue constructing new building were $ 234 million on June 30 , $ 234 million on J common stock resource . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.75 billion , of our common this plan . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that , comprised of a $ 20 billion tender offer which wa which wa completed on August 17 , 2006 , and an completed on August 17 , 2006 , and an additional $ , and an additional $ 20 billion ongoing share repurchase program with an expiration of June 30 common stock , or approximately 1.5 % of the common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . We b Common stock Net cash from operation 14,404 16,605 14,626 Financing Common stock issued cash from operation 14,404 16,605 14,626 Financing Common stock issued 2,101 14,626 Financing Common stock issued 2,101 3,109 2,748 Common stock repurchased Financing Common stock issued 2,101 3,109 2,748 Common stock repurchased ( Common stock issued 2,101 3,109 2,748 Common stock repurchased ( 19,207 2,748 Common stock repurchased ( 19,207 ) ( 8,057 ) ( repurchased ( 19,207 ) ( 8,057 ) ( 3,383 ) Common ) ( 8,057 ) ( 3, Common stock cash dividend Common stock cash dividend ( 3,545 ) ( 36,112 ) ( dividend ( 3,545 ) ( 36,112 ) ( 1,729 ) Excess ) ( 36,112 ) ( 1,729 ) Excess tax benefit from benefit from stock-based payment arrangement 89 \u2013 \u2013 Other \u2013 ( \u2013 \u2013 Other \u2013 ( 18 ) \u2013 Net cash used cash used in financing ( 20,562 ) ( 41,078 ) ( financing ( 20,562 ) ( 41,078 ) ( 2,364 ) Investing ) ( 41,078 ) ( 2,364 ) Investing Additions to property to property and equipment ( 1,578 ) ( 812 ) ( equipment ( 1,578 ) ( 812 ) ( 1,109 ) Acquis Common stock ) Year Ended June 30 2006 2005 2004 Common stock and Year Ended June 30 2006 2005 2004 Common stock and paid-in Ended June 30 2006 2005 2004 Common stock and paid-in capital , beginning of period $ 60,413 $ 56,396 $ 49,234 Common of period $ 60,413 $ 56,396 $ 49,234 Common stock issued $ 60,413 $ 56,396 $ 49,234 Common stock issued 1,939 3,223 $ 49,234 Common stock issued 1,939 3,223 2,815 Common stock repurchased 49,234 Common stock issued 1,939 3,223 2,815 Common stock repurchased ( Common st Common stock repurchased ( 4,447 2,815 Common stock repurchased ( 4,447 ) ( 1,737 ) ( repurchased ( 4,447 ) ( 1,737 ) ( 416 ) Stock-based ) ( 1,737 ) ( 416 ) Stock-based compensation expense 1,715 416 ) Stock-based compensation expense 1,715 2,448 5,734 Stock option income ) Stock-based compensation expense 1,715 2,448 5,734 Stock option income tax Stock-based compensation expense 1,715 2,448 5,734 Stock option income tax benefits/ benefits/ ( deficiency ) ( 617 ) 89 ( 989 ) deficiency ) ( 617 ) 89 ( 989 ) Common stock cash ) 51 Comprehensive income 12,402 12,561 7,447 Common stock cash dividend 51 Comprehensive income 12,402 12,561 7,447 Common stock cash dividend ( Common stock cash dividend ( 3,594 ) ( 36,968 ) ( dividend ( 3,594 ) ( 36,968 ) ( 1,729 ) Common ) ( 36,968 ) ( 1,729 ) Common stock repurchased ( ) Common stock repurchased ( 15,411 ) ( 6,320 ) ( repurchased ( 15,411 ) ( 6,320 ) ( 2,967 ) Balance ) ( 6,320 ) ( 2,967 ) Balance , end of , end of period ( 18,901 ) ( 12,298 ) 18,429 period ( 18,901 Common stock 5 ( 45 ) 3,968 14 3,954 \u2013 Common stock and ( 45 ) 3,968 14 3,954 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 \u2013 and equivalent 6,933 1,846 ( 34 ) 8,745 \u2013 \u2013 8,745 6,933 1,846 ( 34 ) 8,745 \u2013 \u2013 8,745 Preferred stock 34 ) 8,745 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 46 \u2013 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 46 \u2013 \u2013 46 Preferred stock 41 5 \u2013 46 \u2013 \u2013 46 Other investment 5 \u2013 46 \u2013 \u2013 46 Othe Common stock 70 ( 33 ) 8,616 20 8,596 \u2013 Common stock and ( 33 ) 8,616 20 8,596 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 \u2013 and equivalent 7,273 1,970 ( 133 ) 9,110 \u2013 \u2013 9,110 7,273 1,970 ( 133 ) 9,110 \u2013 \u2013 9,110 Preferred stock 133 ) 9,110 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 \u2013 9,110 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 1,071 Preferred stock 1,067 4 \u2013 1,071 \u2013 \u2013 1,071 Ot Common stock ( 32 ) 2,515 ( 45 ) Common stock and equivalent ) Common stock and equivalent 266 ( 33 ) 29 ( stock and equivalent 266 ( 33 ) 29 ( 1 ) equivalent 266 ( 33 ) 29 ( 1 ) 295 ( ( 33 ) 29 ( 1 ) 295 ( 34 ) ) 29 ( 1 ) 295 ( 34 ) Total $ ( 1 ) 295 ( 34 ) Total $ 13,842 $ ( 34 ) Total $ 13,842 $ ( 180 ) $ Total $ 13,842 $ ( 180 ) $ 3,607 $ ( $ ( 180 ) $ 3,607 $ ( 63 ) $ ) $ 3,607 $ ( 63 ) $ 17,449 $ ( $ ( 63 ) $ 17,449 $ ( 243 ) Less ) $ 17,449 $ ( 243 ) Less than 12 month ( 243 ) Less than 12 month 12 m Common stock ( 3 ) 4,578 ( 33 ) Common stock and equivalent ) Common stock and equivalent 1,168 ( 111 ) 89 ( stock and equivalent 1,168 ( 111 ) 89 ( 22 ) equivalent 1,168 ( 111 ) 89 ( 22 ) 1,257 ( ( 111 ) 89 ( 22 ) 1,257 ( 133 ) ) 89 ( 22 ) 1,257 ( 133 ) Total $ ( 22 ) 1,257 ( 133 ) Total $ 17,565 $ ( 133 ) Total $ 17,565 $ ( 233 ) $ Total $ 17,565 $ ( 233 ) $ 328 $ ( $ ( 233 ) $ 328 $ ( 25 ) $ ) $ 328 $ ( 25 ) $ 17,893 $ ( $ ( 25 ) $ 17,893 $ ( 258 ) PAGE ) $ 17,893 $ ( 258 ) PAGE 52 Table of $ ( 258 ) PAG common stock repurchase Board of Directors on July 20 , 2004 . The repurchase Directors on July 20 , 2004 . The repurchase were made in billion ) Fiscal year 2006 ( 1 ) 2005 ( ) Fiscal year 2006 ( 1 ) 2005 ( 1 ) year 2006 ( 1 ) 2005 ( 1 ) 2004 Shares ( 1 ) 2005 ( 1 ) 2004 Shares Amount Shares ) 2005 ( 1 ) 2004 Shares Amount Shares Amount Shares Amount Shares Amount First quarter 114.1 $ 3.0 22.8 $ 0.6 Amount First quarter 114.1 $ 3.0 22.8 $ 0.6 43.3 $ First quarter 114.1 $ 3.0 22.8 $ 0.6 43.3 $ 1.2 114.1 $ common stock . PAGE 61 Table of Contents Part II of Contents Part II Item 8 Stock Plans . We have and advisor . At June 30 , 2006 , an aggregate . At June 30 , 2006 , an aggregate of 812 2006 , an aggregate of 812 million share were authorized for below ) in fiscal year 2004 have been removed from our our plan . On November 9 , 2004 , our shareholder . On November 9 , 2004 , our shareholder approved amendment pre-dividend value after the $ 3.00 special dividend . Additional award and payment of the $ 3.00 s common stock SPSAs issued in fiscal year 2004 , 2005 , and 2006 in fiscal year 2004 , 2005 , and 2006 wa July 2004 , 2005 , and 2006 wa July 1 , 2003 , and 2006 wa July 1 , 2003 through June 30 2006 wa July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for cert common stock ( B ) 10,438 10,839 10,803 Dilutive effect of stock ( B ) 10,438 10,839 10,803 Dilutive effect of employee ( B ) 10,438 10,839 10,803 Dilutive effect of employee stock employee stock option and award 93 67 91 Common stock and stock option and award 93 67 91 Common stock and common option and award 93 67 91 Common stock and common stock stock equivalent ( C ) 10,531 10,906 10,894 Earnings per share equivalent ( C ) 10,531 10,906 10,894 Earnings per share : ( C ) 10,531 10,906 10,894 Earnings per common stock , or approximately 1.5 % of our common stock outstanding , for approximately $ 3.8 billion at a per share per share price of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . PAGE", + "subsequent_events": "SUBSEQUENT EVENTS On Part II Item 8 NOTE 19 SUBSEQUENT EVENTS On July 12 19 SUBSEQUENT EVENTS On July 12 , 2006 , the European EVENTS On July 12 , 2006 , the European Commission imposed imposed a fine of \u20ac 281 million ( $ 351 million \u20ac 281 million ( $ 351 million ) on Microsoft related the Commission \u2019 s March 2004 decision in it competition law investigation . As of June 30 , 2006 , the total As of June 30 , 2006 , the total amount of current liability . On July 20 , 2006 , we announced . On July 20 , 2006 , we", + "derivative_instruments": "Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage period of change . PAGE 49 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2004 $ 242 $ 44 $ end of p Derivative Instruments significant impact on earnings PAGE 53 Table of Contents Part II of Contents Part II Item 8 for fiscal year 2006 , Item 8 for fiscal year 2006 , 2005 , or 2004 for fiscal year 2006 , 2005 , or 2004 . During 2006 , 2005 , or 2004 . During fiscal year 2006 2004 . During fiscal year 2006 , $ 217 million in fiscal year 2006 , $ 217 million in gain on fair in time value and $ 399 million in loss on cash other . During fiscal year 2005 , $ 79 million in fiscal year 2005 , $ 79 million in gain on fair" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-07-170817/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-07-170817/full-submission_features.json new file mode 100644 index 0000000..822f2d0 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-07-170817/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue . We sell the Xbox 360 video game console and game easily separable business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 In July 2006 , we I Item 1 In July 2006 , we announced a change group level in fiscal year 2007 . See Note 18 \u2013 year 2007 . See Note 18 \u2013 Segment Information of the ( Part II , Item 8 ) for financial information regarding OEM channel account for over 80 % of total Client revenue system , in fiscal year 2007 . This release concluded a and marketing organization revenue come multi-year licensing agreement , approximately 30 % is purchased through fully licensing program , and approximately 10 % come from license sold product support service . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Products and Services : Windows company focused on the Java 2 Platform Enterprise Edition ( J2EE subscription . In fiscal year 2006 , OSB launched adCenter , adCenter . In fiscal year 2007 , we launched new online Live Search\u2122 and Live.com in 54 international marke revenue , Office in Japan . Approximately 75 % of MBD revenue is a given year . Approximately 25 % of MBD revenue is and Workplace offering . PAGE 6 Table of Contents Part I of Contents Part I Item 1 Our Microsoft Dynamics product compete company . Products : Xbox 360 console and game ; Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We think the Xbox 360 is pos revenue . Sales to Dell it subsidiary accounted for approximately 11 % and 10 % of for approximately 11 % and 10 % of fiscal year 2006 10 % of fiscal year 2006 and 2005 revenue , respectively of fiscal year 2006 and 2005 revenue , respectively . These is not significant . PAGE 10 Table of Contents Part I of Contents Part I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 3 , 2007 were a follows a of August 3 , 2007 were a follows : Name Company William H. Gates III 51 Chairman revenue . Xbox 360 console are assembled in Asia and operating margin . PAGE 15 Table of Contents Part I of Contents Part I Item 1A , 1B If our goodwill Part I Item 1A , 1B If our goodwill or amortizable . We operate in over 100 country and a significant part with revenue growth . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2007 that remain unresolved . PAGE that remain unresolved . PAGE 16 Table of Contents Part I of Contents Par Revenue Year Ended June 30 2007 2006 2005 2004 2003 Revenue $ Ended June 30 2007 2006 2005 2004 2003 Revenue $ 51,122 June 30 2007 2006 2005 2004 2003 Revenue $ 51,122 $ 30 2007 2006 2005 2004 2003 Revenue $ 51,122 $ 44,282 2005 2004 2003 Revenue $ 51,122 $ 44,282 $ 39,788 $ 2003 Revenue $ 51,122 $ 44,282 $ 39,788 $ 36,835 $ $ 51,122 $ 44,282 $ 39,788 $ 36,835 $ 32,187 Operating $ 44,282 $ 39,788 $ 36,835 $ 32,187 Operating income 18,524 $ 39,788 $ 36,835 $ 32,187 Operating income 18,524 16,472 14,561 revenue wa highest to the recognition of $ 1.67 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those Devices Division ha generated over 40 % of it yearly segment the exception of fiscal year 2007 , we believe the seasonality Our focus in fiscal year 2008 is building on this foundation s consumer device . PAGE 20 Table of Contents Part II of Contents Part II Item 7 Software plus service . The o Revenue $ 51,122 2006 Percent Change 2006 versus 2005 Revenue $ 51,122 $ 44,282 2006 versus 2005 Revenue $ 51,122 $ 44,282 $ 39,788 15 2005 Revenue $ 51,122 $ 44,282 $ 39,788 15 % 11 $ 51,122 $ 44,282 $ 39,788 15 % 11 % Operating 51,122 $ 44,282 $ 39,788 15 % 11 % Operating income 44,282 $ 39,788 15 % 11 % Operating income $ 18,524 11 % Operating income $ 18,524 $ 16,472 $ 14,561 12 Operating income $ 18,524 $ 16,472 $ 14,561 12 % 13 $ 18,524 $ 16,472 $ 14,561 12 % 13 % Fiscal 18,524 $ 16,472 $ 14,561 Revenue growth wa driven primarily primarily by licensing of the 2007 Microsoft Office system and Windows Studio , and increased Xbox 360 console sale . Foreign currency of revenue associated with Xbox 360 and Windows Vista , increased marketing expense . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year , we recorded a $ 1.06 billion charge for anticipated cost launch . Headcount-related cost increased 15 % , driven by a % , driven by a 10 % increase Revenue growth wa driven primarily the launch of SQL Server 2005 in the second quarter of second quarter of fiscal year 2006 , Windows Server and other revenue resulting from the Xbox 360 launch in November 2005 , Xbox 360 launch in November 2005 , growth in licensing of revenue primarily related to Xbox 360 and an increase in sale spending . Headcount-related cost increased 7 % , driven by an for existing headcount and a 16 % growth in headcount . in headcount . Fiscal Year 2008 Outlook Worldwide macr revenue growth first half of fiscal year 2008 than in the second half PC shipment will grow between 9 % and 11 % . grow between 9 % and 11 % . We do not not expect a significant PAGE 21 Table of Contents Part II of Contents Part II Item 7 impact from change in year-over-year exchange rate in fiscal year 2008 . We expect our operating ( LOSS ) In July 2006 , we announced a change group level in fiscal year 2007 . The revenue and operating segment information appearing in Note 18 \u2013 Segment Information of Revenue $ 14,972 2006 Percent Change 2006 versus 2005 Revenue $ 14,972 $ 13,089 2006 versus 2005 Revenue $ 14,972 $ 13,089 $ 12,042 14 2005 Revenue $ 14,972 $ 13,089 $ 12,042 14 % 9 $ 14,972 $ 13,089 $ 12,042 14 % 9 % Operating 14,972 $ 13,089 $ 12,042 14 % 9 % Operating income 13,089 $ 12,042 14 % 9 % Operating income $ 11,603 9 % Operating income $ 11,603 $ 10,297 $ 9,442 13 Operating income $ 11,603 $ 10,297 $ 9,442 13 % 9 $ 11,603 $ 10,297 $ 9,442 13 % 9 % Client 11,603 $ 10,297 $ 9,442 13 % 9 % Cl revenue system builder . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Client revenue increased primarily reflecting . OEM revenue increased $ 1.46 billion or 13 % driven increased $ 1.46 billion or 13 % driven by 13 % or 13 % driven by 13 % growth in OEM license Windows operating system increased $ 422 million or 21 % . increased $ 422 million or 21 % . During the year the OEM Premium Mix increased 16 percentage point to 68 % increased 16 percentage point to 68 % . Ba revenue increased reflecting $ Client revenue increased reflecting $ 1.18 billion or 12 % growth reflecting $ 1.18 billion or 12 % growth in OEM revenue in OEM revenue driven by 17 % growth in OEM license partially offset by a $ 118 million or 6 % decrease a $ 118 million or 6 % decrease in revenue from increased two percentage point to 52 % . OEM revenue growth increase to revenue of $ 89 million resulting from the alignment from the alignment of PAGE 22 Table of Contents Part II of Contents Part II I Revenue $ 11,175 2006 Percent Change 2006 versus 2005 Revenue $ 11,175 $ 9,652 2006 versus 2005 Revenue $ 11,175 $ 9,652 $ 8,367 16 2005 Revenue $ 11,175 $ 9,652 $ 8,367 16 % 15 $ 11,175 $ 9,652 $ 8,367 16 % 15 % Operating 11,175 $ 9,652 $ 8,367 16 % 15 % Operating income 9,652 $ 8,367 16 % 15 % Operating income $ 3,900 15 % Operating income $ 3,900 $ 3,035 $ 2,072 29 Operating income $ 3,900 $ 3,035 $ 2,072 29 % 46 $ 3,900 $ 3,035 $ 2,072 29 % 46 % Server 3,900 $ 3,035 $ 2,072 29 % 46 % Server and 3,0 revenue and certification revenue increased $ 1.12 billion or 14 % . increased $ 1.12 billion or 14 % . This increase wa SQL Server which grew over 20 % . Consulting , Premier support service revenue increased $ 404 million or 24 % primarily increased $ 404 million or 24 % primarily due to higher rate accounted for a $ 165 million or a two percentage service . Headcount-related cost increased 12 % , driven by an % , driven by an 11 % increase in headcount and Cost of revenue increased $ 243 million or revenue increased Visual Studio . SQL Server 2005 and Visual Studio 2005 were Server 2005 and Visual Studio 2005 were launched in the second second quarter of fiscal year 2006 and produced revenue growth in and certification revenue increased $ 1.07 billion or 16 % during increased $ 1.07 billion or 16 % during fiscal year 2006 16 % during fiscal year 2006 . The result reflect broad Server , which grew over 30 % for the year . support service revenue increased $ 217 million or 15 % primarily increased Revenue $ 2,474 2006 Percent Change 2006 versus 2005 Revenue $ 2,474 $ 2,299 2006 versus 2005 Revenue $ 2,474 $ 2,299 $ 2,344 8 2005 Revenue $ 2,474 $ 2,299 $ 2,344 8 % ( $ 2,474 $ 2,299 $ 2,344 8 % ( 2 ) 2,474 $ 2,299 $ 2,344 8 % ( 2 ) % $ 2,344 8 % ( 2 ) % Operating income ( ( loss ) $ ( 732 ) $ ( 74 ) ( 732 ) $ ( 74 ) $ 402 * * $ ( 74 ) $ 402 * * * Not meaningful future . In fiscal year 2007 , we launched Windows Live Live Search and Live.com in 54 international market , Live Local experience ) , Vi revenue increased driven primarily advertising revenue which grew $ 314 million or 21 % to grew $ 314 million or 21 % to $ 1.84 billion or 21 % to $ 1.84 billion . This increase wa partially offset by a $ 156 million or 31 % decrease a $ 156 million or 31 % decrease in access revenue access revenue . At June 30 , 2007 , we estimate . At June 30 , 2007 , we estimate that OSB estimate that OSB had over 310 million active Hotmail account and active Hotmail account and over 280 million Messenger account . revenue which grew $ 352 million or 45 % and grew $ 352 million or 45 % and increased headcount-related cost royalty . Headcount-related cost increased 30 % , driven by a % , driven by a 12 % increase in headcount and existing headcount . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 OSB revenue decreased primarily reflecting decreased primarily reflecting a $ 195 million or 28 % decline a $ 195 million or 28 % decline in access revenue partially offset by a $ 126 mill revenue advertising revenue and a $ 23 million or 9 % increase a $ 23 million or 9 % increase in revenue from Advertising revenue for fiscal year 2006 wa $ 1.52 billion . fiscal year 2006 wa $ 1.52 billion . The increase in adCenter . As of June 30 , 2006 , OSB had As of June 30 , 2006 , OSB had 2.1 million , 2006 , OSB had 2.1 million access subscriber compared with million access subscriber compared with 2.7 million at June 30 , with 2.7 million at June 30 , 2005 . In addition million at June 30 , 20 Revenue $ 16,396 2006 Percent Change 2006 versus 2005 Revenue $ 16,396 $ 14,486 2006 versus 2005 Revenue $ 16,396 $ 14,486 $ 13,520 13 2005 Revenue $ 16,396 $ 14,486 $ 13,520 13 % 7 $ 16,396 $ 14,486 $ 13,520 13 % 7 % Operating 16,396 $ 14,486 $ 13,520 13 % 7 % Operating income 14,486 $ 13,520 13 % 7 % Operating income $ 10,838 7 % Operating income $ 10,838 $ 9,620 $ 9,116 13 Operating income $ 10,838 $ 9,620 $ 9,116 13 % 6 $ 10,838 $ 9,620 $ 9,116 13 % 6 % MBD 10,838 $ 9,620 $ 9,116 13 % 6 % MBD offer revenue , in Japan . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 MBD revenue increased primarily reflecting primarily reflecting licensing of the 2007 Microsoft Office system . Revenue from consumer sale increased $ 371 million or 11 % while increased $ 371 million or 11 % while revenue from business from business sale increased $ 1.54 billion or 14 % . increased $ 1.54 billion or 14 % . The increase in in business revenue includes a 21 % increase in Microsoft Dynami revenue primarily associated with the 2007 Microsoft Office system . The expense . Headcount-related cost increased 10 % , driven by a % , driven by a 6 % increase in headcount and compensation expense . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 MBD revenue increased reflecting an in business sale of $ 1.01 billion or 10 % , of $ 1.01 billion or 10 % , partially offset by in consumer sale of $ 44 million or 1 % . of $ 44 million or 1 % . The increase in in business Revenue $ 6,083 2006 Percent Change 2006 versus 2005 Revenue $ 6,083 $ 4,756 2006 versus 2005 Revenue $ 6,083 $ 4,756 $ 3,515 28 2005 Revenue $ 6,083 $ 4,756 $ 3,515 28 % 35 $ 6,083 $ 4,756 $ 3,515 28 % 35 % Operating 6,083 $ 4,756 $ 3,515 28 % 35 % Operating loss 4,756 $ 3,515 28 % 35 % Operating loss $ ( % Operating loss $ ( 1,892 ) $ ( 1,284 ) ( 1,892 ) $ ( 1,284 ) $ ( 539 ) ( 1,284 ) $ ( 539 ) ( 47 ) % $ ( 539 ) ( 47 ) % ( 138 ) ( 47 ) % ( 138 ) % The Entertainment and the functionality of the Xbox revenue increased primarily due primarily due to increased Xbox 360 console sale , Zune sale game sale . We shipped 6.6 million Xbox 360 console during We shipped 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 a compared to 5.0 million year 2007 a compared to 5.0 million console during fiscal year million console during fiscal year 2006 . Xbox and PC game PC game revenue increased $ 650 million or 19 % a increased $ 650 million or 19 % a a result of a result of revenue increased $ 539 million or 65 % . increased $ 539 million or 65 % . Mobile and Embedded Embedded Devices revenue increased $ 138 million or 28 % driven increased $ 138 million or 28 % driven by sale growth primarily due to the $ 1.06 billion Xbox 360 charge recognized the $ 1.06 billion Xbox 360 charge recognized in the fourth fourth quarter of fiscal year 2007 and Zune launch-related expense . partially offset by increased Xbox 360 platform sale and decreased Xbox platform sale and decreased X revenue increased primarily due the launch of the Xbox 360 console in November 2005 , Xbox 360 console in November 2005 , partially offset by a the significant impact of Halo 2 in fiscal year 2005 . Halo 2 in fiscal year 2005 . The revenue growth wa wa also attributable to $ 140 million or 15 % growth to $ 140 million or 15 % growth from our other to deployment in fiscal year 2006 . Mobile and Embedded Devices Embedded Devices revenue increased $ 115 million or 44 % driven increased $ 115 million or 44 Revenue from existing million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Cost of revenue 2006 Percent Change 2006 versus 2005 Cost of revenue $ 10,693 2005 Cost of revenue $ 10, revenue $ 10,693 $ 7,650 $ 6,031 40 % 27 $ 10,693 $ 7,650 $ 6,031 40 % 27 % As 10,693 $ 7,650 $ 6,031 40 % 27 % As a 7,650 $ 6,031 40 % 27 % As a percent of As a percent of revenue 21 % 17 % 15 % percent of revenue 21 % 17 % 15 % 4ppt 2ppt revenue 21 % 17 % 15 % 4ppt 2ppt Cost of % 17 % 15 % 4ppt 2ppt Cost of revenue includes 17 % 15 % 4ppt 2ppt Cost of revenue includes manufacturing revenue increased in fiscal year 2007 primarily driven by the Xbox primarily driven by the Xbox 360 charge , increased W revenue increased in fiscal year 2006 mainly due to a $ mainly due to a $ 1.64 billion increase in EDD a console sold and higher Xbox 360 unit cost . Research and million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus revenue 14 % 15 % 15 % percent of revenue 14 % 15 % 15 % ( 1 revenue 14 % 15 % 15 % ( 1 ) ppt 15 % 15 % ( 1 ) ppt \u2013 Research and cost increased during fiscal year 2007 primarily due to increased headcount-related increased headcount-related cost which grew 8 % , reflecting a 9 8 % , reflecting a 9 % growth in headcount and cost increased during fiscal year 2006 primarily due to increased development activity . Headcount-related cost increased 3 % during fiscal year 2006 3 % during fiscal year 2006 , dr revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % \u2013 \u2013 revenue 22 % 22 % 22 % \u2013 \u2013 Sales and expense increased during fiscal year 2007 primarily because of increased headcount-related launch . Headcount-related cost increased 22 % during fiscal year 2007 22 % during fiscal year 2007 , driven by an 11 2007 , driven by an 11 % increase in headcount and expense increased during fiscal year 2006 primarily because of increased headcount-related spending . Headcount-related cost increased 13 % during fi revenue 7 % 8 % 11 % percent of revenue 7 % 8 % 11 % ( 1 revenue 7 % 8 % 11 % ( 1 ) ppt 8 % 11 % ( 1 ) ppt ( 3 ) ( 1 ) ppt ( 3 ) ppt General and administrative cost decreased during fiscal year 2007 primarily reflecting decreased cost for cost . During fiscal year 2007 , we incurred $ 511 2007 , we incurred $ 511 million of legal charge primarily Inc. a compared to $ 1.32 billion of legal charge in legal charge in fiscal year 2006 . Headcount-related cost increased 15 2006 . Headcount-related cost incr revenue . During fiscal year 2006 , we experienced lower net a compared to fiscal year 2005 primarily due to net gain non-designated equity derivative in fiscal 2006 a compared to net loss to net loss in fiscal 2005 and higher net gain on on commodity position in fiscal 2006 driven by increase in the rate derivative contract in fiscal 2006 . Net derivative loss in derivative loss in fiscal year 2005 were primarily related to loss of portfolio diversification . PAGE 30 Table of Contents Part II of Conte revenue a of June 30 , 2007 : ( In a of June 30 , 2007 : ( In million ) Three month ended : September 30 , 2007 $ 4,021 December ended : September 30 , 2007 $ 4,021 December 31 , September 30 , 2007 $ 4,021 December 31 , 2007 3,245 , 2007 $ 4,021 December 31 , 2007 3,245 March 31 $ 4,021 December 31 , 2007 3,245 March 31 , 2008 4,021 December 31 , 2007 3,245 March 31 , 2008 2,264 31 , 2007 3,245 March 31 , 2008 2,264 June 30 2007 3,245 March 31 , 2008 2,264 June 30 , 2008 3,245 March 31 , 2008 2,264 Ju revenue 2,264 June 30 , 2008 1,249 Thereafter 1,867 Unearned revenue $ 30 , 2008 1,249 Thereafter 1,867 Unearned revenue $ 12,646 PAGE Thereafter 1,867 Unearned revenue $ 12,646 PAGE 31 Table of Contents Unearned revenue $ 12,646 PAGE 31 Table of Contents Part II of Contents Part II Item 7 Cash Flows Fiscal year 2007 7 Cash Flows Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Cash flow from operation increased flow from operation increased $ 3.39 billion due to an incre revenue growth , along , along with a $ 1.64 billion decrease in cash outflow used for financing increased $ 3.98 billion . Several event occurred event occurred during fiscal year 2007 that affected cash used for financing . We issued $ 6.78 billion of common stock , common stock , including $ 3.25 billion related to 113 million $ 3.25 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa o revenue growth and a revenue growth and a $ 1.74 billion increase in unearned revenue used in financing decreased $ 20.52 billion driven by a $ billion driven by a $ 32.57 billion reduction in cash dividend partially offset by an $ 11.15 billion increase in common stock cash from investing decreased $ 7.02 billion driven primarily by an driven primarily by an $ 8.93 billion decrease in cash from of investment and a $ 766 million increase in addition to were partially offset by $ 3.12 billion of net cas revenue of and unearned revenue of $ 1.87 billion . In May 2007 1.87 billion . In May 2007 , we entered into an the company for approximately $ 6 billion in cash . As are required to pay $ 500 million if certain event occur to be completed in August 2007 . RECENTLY ISSUED ACCOUNTING STANDARDS ISSUED ACCOUNTING STANDARDS In June 2006 , the FASB issued Interpretation FASB issued Interpretation No . 48 ( \u201c FIN No . ( \u201c FIN No . 48 \u201d ) , Accounting for of FASB Statement No . 109 , which clarifies the accou Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether product . SFAS No . 115 , Accounting for Certain Investments Securities , and SAB Topic 5M , Accounting for Noncurrent Marketable an impairment charge is PAGE 35 Table of Contents Part II of Contents Part II Item 7 recorded and a new cost impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Revenue $ ) Year Ended June 30 2007 2006 2005 Revenue $ 51,122 Year Ended June 30 2007 2006 2005 Revenue $ 51,122 $ Ended June 30 2007 2006 2005 Revenue $ 51,122 $ 44,282 2007 2006 2005 Revenue $ 51,122 $ 44,282 $ 39,788 Operating 2005 Revenue $ 51,122 $ 44,282 $ 39,788 Operating expense : $ 51,122 $ 44,282 $ 39,788 Operating expense : Cost of expense : Cost of revenue 10,693 7,650 6,031 Research and development : Cost of revenue 10,693 7,650 6,031 Research and development 7,121 Cost of revenue 10,693 revenue 10,779 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 9,138 1,040 1,557 Short-term unearned revenue 10,779 9,138 Securities lending payable 2,741 1,557 Short-term unearned revenue 10,779 9,138 Securities lending payable 2,741 3,117 10,779 9,138 Securities lending payable 2,741 3,117 Other 3,622 3,783 Total 9,138 Securities lending payable 2,741 3,117 Other 3,622 3,783 Total current lending payable 2,741 3,117 Other 3,622 3,783 Total current liability 23,754 payable 2,741 revenue 1,867 3,783 Total current liability 23,754 22,442 Long-term unearned revenue 1,867 1,764 23,754 22,442 Long-term unearned revenue 1,867 1,764 Other long-term liability 6,453 22,442 Long-term unearned revenue 1,867 1,764 Other long-term liability 6,453 5,287 1,867 1,764 Other long-term liability 6,453 5,287 Commitments and contingency Stockholders 1,764 Other long-term liability 6,453 5,287 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 9,380 a revenue income tax 421 219 ( 179 ) Unearned revenue 21,032 16,453 ( 179 ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned 179 ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned revenue ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned revenue ( Recognition of unearned revenue ( 19,382 ) ( 14,729 ) ( revenue ( 19,382 ) ( 14,729 ) ( 12,919 ) Accounts ) ( 14,729 ) ( 12,919 ) Accounts receivable ( 1,764 12,919 ) Accounts receivable ( 1,764 ) ( 2,071 ) ( receivable ( REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price price for Windows XP PAGE 48 Table of Contents Part II of Contents Part II Item 8 Professional , depending on the ( In million ) June 30 2007 2006 Volume licensing program In million ) June 30 2007 2006 Volume licensing program $ million ) June 30 2007 2006 Volume licens revenue Undelivered element 1,839 2,066 Other 1,473 1,175 Unearned revenue $ 12,646 element 1,839 2,066 Other 1,473 1,175 Unearned revenue $ 12,646 $ 1,473 1,175 Unearned revenue $ 12,646 $ 10,902 Unearned revenue by Unearned revenue $ 12,646 $ 10,902 Unearned revenue by segment wa ( In million ) June 30 2007 2006 Client $ 2,875 In million ) June 30 2007 2006 Client $ 2,875 $ million ) June 30 2007 2006 Client $ 2,875 $ 2,850 30 2007 2006 Client $ 2,875 $ 2,850 Server and Tools 2006 Client $ 2,875 $ 2, revenue $ 12,646 5,771 3,609 Other segment 348 651 Unearned revenue $ 12,646 $ 348 651 Unearned revenue $ 12,646 $ 10,902 PAGE 49 Table Unearned revenue $ 12,646 $ 10,902 PAGE 49 Table of Contents $ 12,646 $ 10,902 PAGE 49 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2007 Cash $ 3,040 other investment June 30 , 2007 Cash $ 3,040 $ \u2013 30 , 2007 Cash $ 3,040 $ \u2013 $ \u2013 revenue . During fiscal year 2006 , $ 166 million of fiscal year 2006 , $ 166 million of derivative gain were reclassified to revenue and $ 23 million in derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were . We estimate that $ 124 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2007 , 2006 , and revenue 842 1,028 3,630 Other expense item 1,735 1,451 Unearned revenue 842 1,028 Impaired item 1,735 1,451 Unearned revenue 842 1,028 Impaired investment 710 989 1,735 1,451 Unearned revenue 842 1,028 Impaired investment 710 989 Other revenue 842 1,028 Impaired investment 710 989 Other revenue item 58 842 1,028 Impaired investment 710 989 Other revenue item 58 102 710 989 Other revenue item 58 102 Deferred income tax asset 989 Other revenue item 58 102 Deferred income tax asset $ Deferred income tax a revenue and million ) Year Ended June 30 2007 2006 2005 Revenue : ) Year Ended June 30 2007 2006 2005 Revenue : Client Year Ended June 30 2007 2006 2005 Revenue : Client $ Ended June 30 2007 2006 2005 Revenue : Client $ 14,812 2005 Revenue : Client $ 14,812 $ 13,040 $ 11,901 Server : Client $ 14,812 $ 13,040 $ 11,901 Server and Tools $ 14,812 $ 13,040 $ 11,901 Server and Tools 11,182 9,680 $ 11,901 Server and Tools 11,182 9,680 8,314 Online Services Business 11,901 Server and Tools 11,182 9,680 8,314 O Revenue 124 ( 174 ) ( 1,042 ) Revenue reconciling amount 119 1,042 ) Revenue reconciling amount 119 ( 68 ) 437 Other Revenue reconciling amount 119 ( 68 ) 437 Other 180 ( amount 119 ( 68 ) 437 Other 180 ( 98 ) ( 68 ) 437 Other 180 ( 98 ) 130 Total ) 437 Other 180 ( 98 ) 130 Total $ ( Other 180 ( 98 ) 130 Total $ ( 4,770 ) ) 130 Total $ ( 4,770 ) $ ( 5,462 ) ( 4,770 ) $ ( 5,462 ) $ ( 6,407 ) ( 5,462 ) $ ( 6,407 ) ( 1 ) Corporate-level $ ( 6,407 ) ( 1 ) Corporate-level activity excludes stock-based custo revenue . Sales to Dell it subsidiary accounted for approximately 11 % and 10 % of for approximately 11 % and 10 % of fiscal year 2006 10 % of fiscal year 2006 and 2005 revenue , respectively of fiscal year 2006 and 2005 revenue , respectively . These million ) Year Ended June 30 2007 2006 2005 United States ) Year Ended June 30 2007 2006 2005 United States ( Year Ended June 30 2007 2006 2005 United States ( 1 Ended June 30 2007 2006 2005 United States ( 1 ) 2006 2005 United States ( 1 ) $ 31,346 $ 27, Revenue June 30 Total Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( 1 ) 2007 Revenue $ 10,811 $ 12,542 ( 1 ) $ 14,398 $ 10,811 $ 12,542 ( 1 ) $ 14,398 ( 2 12,542 ( 1 ) $ 14,398 ( 2 ) $ 13,371 1 ) $ 14,398 ( 2 ) $ 13,371 $ 51,122 14,398 ( 2 ) $ 13,371 $ 51,122 Gross profit 9,115 2 ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net $ 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income Revenue share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 N Revenue share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net in revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( Microsoft Office system . ( 2 ) Includes $ 1.64 billion ( 2 ) Includes $ 1.64 billion of revenue discussed above above and charge totaling $ 296 million ( pre-tax ) related various legal matter . ( 3 ) Includes $ 1.06 billion ( 3 ) Includes $ 1.06 billion charge related to the charge related to the Xbox 360 warranty policy , inventory write-down and product return .", + "net_income": "Net income 32,187 Operating income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 Operating income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 12,599 income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 12,599 12,254 14,561 9,034 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted 9,034 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings per Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings p Net income $ Provision for income tax 6,036 5,663 4,374 Net income $ 14,065 for income tax 6,036 5,663 4,374 Net income $ 14,065 $ 5,663 4,374 Net income $ 14,065 $ 12,599 $ 12,254 Earnings Net income $ 14,065 $ 12,599 $ 12,254 Earnings per share $ 14,065 $ 12,599 $ 12,254 Earnings per share : Basic per share : Basic $ 1.44 $ 1.21 $ 1.13 Diluted : Basic $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 $ 1.12 Weighted 1.13 Diluted $ 1.42 $ 1.2 Net income Year Ended June 30 2007 2006 2005 Operations Net income $ Ended June 30 2007 2006 2005 Operations Net income $ 14,065 2005 Operations Net income $ 14,065 $ 12,599 $ 12,254 Depreciation Net income $ 14,065 $ 12,599 $ 12,254 Depreciation , amortization $ 14,065 $ 12,599 $ 12,254 Depreciation , amortization , and , and other noncash item 1,440 903 855 Stock-based compensation 1,550 and other noncash item 1,440 903 855 Stock-based compensation 1,550 1,715 other noncash item 1,440 903 855 Stock-base Net income 14,065 18,901 ) ( 12,298 ) 18,429 Net income 14,065 12,599 12,254 12,298 ) 18,429 Net income 14,065 12,599 12,254 Other comprehensive income ) 18,429 Net income 14,065 12,599 12,254 Other comprehensive income : 18,429 Net income 14,065 12,599 12,254 Other comprehensive income : Net loss ) on derivative instrument 14 76 ( 58 ) Net ) on derivative instrument 14 76 ( 58 ) Net unrealized derivative instrument 14 76 ( 58 ) Net unrealized gains/ ( ( loss ) on investment 326 ( 282 ) 371 Translation ) Net income ) Year Ended June 30 2007 2006 2005 Net income available Year Ended June 30 2007 2006 2005 Net income available for Ended June 30 2007 2006 2005 Net income available for common shareholder ( A ) $ 14,065 $ 12,599 $ 12,254 Weighted A ) $ 14,065 $ 12,599 $ 12,254 Weighted average outstanding $ 14,065 $ 12,599 $ 12,254 Weighted average outstanding share of common stock ( B ) 9,742 10,438 10,839 Dilutive effect of stock ( B ) 9,742 10,438 10,839 Dilutive effect of employee ( B ) 9,742 10,438 10,839 Net income 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 2,626 profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 2,626 4,926 12,258 10,134 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 10,134 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 ) 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Net income 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Basic 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Basic earnings per 4,926 3,035 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 4 8,872 9,674 36,632 Net income 3,141 ( 4 ) 3,653 2,977 36,632 Net income 3,141 ( 4 ) 3,653 2,977 ( 5 income 3,141 ( 4 ) 3,653 2,977 ( 5 ) 2,828 3,141 ( 4 ) 3,653 2,977 ( 5 ) 2,828 ( 4 ) 3,653 2,977 ( 5 ) 2,828 ( 6 ) 3,653 2,977 ( 5 ) 2,828 ( 6 ) 12,599 Basic ( 5 ) 2,828 ( 6 ) 12,599 Basic earnings per ) 2,828 Net income 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( 7 8,257 8,773 33,757 Net income 2,528 ( 7 ) 3,463 2,563 33,757 Net income 2,528 ( 7 ) 3,463 2,563 ( 8 income 2,528 ( 7 ) 3,463 2,563 ( 8 ) 3,700 2,528 ( 7 ) 3,463 2,563 ( 8 ) 3,700 ( 7 ) 3,463 2,563 ( 8 ) 3,700 ( 9 ) 3,463 2,563 ( 8 ) 3,700 ( 9 ) 12,254 Basic ( 8 ) 3,700 ( 9 ) 12,254 Basic earnings per ) 3,700", + "assets": "Assets Current asset In million ) June 30 2007 2006 Assets Current asset : million ) June 30 2007 2006 Assets Current asset : Cash : Cash and equivalent $ 6,111 $ 6,714 Short-term investment ( and equivalent $ 6,111 $ 6,714 Short-term investment ( including security pledged a collateral of $ 2,356 and $ 3,065 ) 17,300 of $ 2,356 and $ 3,065 ) 17,300 27,447 Total cash 2,356 and $ 3,065 ) 17,300 27,447 Total cash and short-term and $ 3,065 ) 17,300 27,447 Total cash and short-term investment Total cash ASSETS The component of ( In million ) June 30 2007 2006 Gross carrying amount In million ) June 30 2007 2006 Gross carrying amount Accumulated million ) June 30 2007 2006 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 988 $ ( 727 ) $ Contract-based $ 988 $ ( 727 ) $ 261 $ 954 $ ( 727 ) $ 261 $ 954 $ ( 661 727 ) $ 261 $ 954 $ ( 661 ) $ 261 $ 954 $ ( 661 ) $ 293 Technology-based 916 $ ( 661 ) $ 293 Technology-based 916 ( 407 ) 661 ) $ 293 Technology-based 916 ( 407 ", + "liabilities": "Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early u beginning July 1 , 2008 , although early adoption is adoption of SFAS No . 159 will have on our financial ( \u201c SOP \u201d ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether product . SFAS No . 115 , Accounting for Certain Investments Securities , and SAB Topic 5M , Accounting for Noncurre Liabilities and stockholder Total asset $ 63,171 $ 69,597 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 Short-term compensation 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 2,325 1,938 Income tax 1,040 1,557 Short-te Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early u beginning July 1 , 2008 , although early adoption is adoption of SFAS No . 159 will have on our financial our financial statement . NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and LIABILITIES ( In ( In million ) June 30 2007 2006 Tax contingency $ In million ) June 30 2007 2006 Tax contingency $ 5,071 million ) June 30 2007 2006 Tax contingency $ 5,071 $ 2007 2006 Tax contingency $ 5,071 $ 4,194 Legal contingency 778 Tax contingency $ 5,071 $ 4,194 Legal contingency 778 1,022 Product 5,071 $ 4,194 Legal contingency 778 1,022 Product warranty 487 \u2013 $ 4,194 Legal contingency 778 1,022 Product warranty 487 \u2013 Other contingency 778 1,022 Product warranty 487 \u2013 Other 117 71 Other Product ", + "equity": "Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 19 6 . Selected Financial Data 19 Item 7 . Management \u2019 Selected Financial Data 19 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 39 Item 8 . Financial Statements about Market Risk 39 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 ) for information regarding dividend of Directors in fiscal year 2007 and 2006 . On July in fiscal year 2007 and 2006 . On July 20 , and 2006 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.00 billion tender offer which wa which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program program th equity Long-term obligation 8,320 7,051 5,823 4,574 2,846 Stockholders \u2019 equity 31,097 obligation 8,320 7,051 5,823 4,574 2,846 Stockholders \u2019 equity 31,097 40,104 4,574 2,846 Stockholders \u2019 equity 31,097 40,104 48,115 74,825 64,912 PAGE 2,846 Stockholders \u2019 equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Stockholders \u2019 equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table \u2019 equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table of equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table of Conten equity investment in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 . For fiscal year 2006 2005 . For fiscal year 2006 , other-than-temporary impairment were $ , other-than-temporary impairment were $ 408 million , a compared to , a compared to $ 152 million in fiscal year 2005 152 million in fiscal year 2005 . The increase in other-than-temporary other-than-temporary impairment in fiscal year 2006 wa driven by planned sale raise fund for the $ 20 billion tender offer announ equity derivative in fiscal 2006 a compared to net loss to net loss in fiscal 2005 and higher net gain on on commodity position in fiscal 2006 driven by increase in the rate derivative contract in fiscal 2006 . Net derivative loss in derivative loss in fiscal year 2005 were primarily related to loss of portfolio diversification . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Other , net in fiscal , net in fiscal year 2006 includes $ 195 million of fiscal year 2006 includes $ 195 million Equity and and other investment were $ 10.12 billion and $ 9.23 billion $ 10.12 billion and $ 9.23 billion a of June 30 9.23 billion a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , respectively . June 30 , 2007 and 2006 , respectively . Our investment second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 29.46 billion at June 30 , $ 29.46 billion at June 30 , 2007 . Our retained billion at June 30 , 2007 . Our retained deficit is unearned revenue a of equity at June 30 , 2007 , wa $ equity at June 30 , 2007 , wa $ 31.10 billion , 2007 , wa $ 31.10 billion . We will continue constructing new building were $ 821 million on June 30 , $ 821 million on June 30 , 2007 . We have million on June 30 , 2007 . We have operating lease incurred rental expense totaling $ 326 million , $ 276 million $ 326 million , $ 276 million , and $ 299 276 million , and $ 299 million in fiscal year 2007 299 million in fiscal year 2007 , 2006 , and 2005 in fiscal year 2007 , equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor for the year ended June 30 , 2007 and 2006 : year ended June 30 , 2007 and 2006 : ( In June 30 , 2007 and 2006 : ( In million ) million ) Year ended June 30 , 2007 Risk Categories June Year ended June 30 , 2007 Risk Categories June 30 , , 2007 Risk Categories June 30 , 2007 June 30 , Risk Categories June 30 , 2007 Equity $ 32 Currency rate 55 91 52 101 15 Equity price 32 Currency rate 55 91 52 101 15 Equity price 60 Currency rate 55 91 52 101 15 Equity price 60 88 rate 55 91 52 101 15 Equity price 60 88 59 52 101 15 Equity price 60 88 59 89 49 Commodity 101 15 Equity price 60 88 59 89 49 Commodity price 15 Equity price 60 88 59 89 49 Commodity price 7 Equity price 60 88 59 89 49 Commodity price 7 12 price 60 88 59 89 49 Commodity price 7 12 7 59 89 49 Commodity price 7 12 7 12 4 Total 89 49 Commodity price 7 12 Equity and other investment and equipment , net 4,350 3,044 Equity and other investment 10,117 3,044 Equity and other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible Equity and other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset , net investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset , net 878 3,866 Intangible asset , net 878 539 Deferred income tax 1,389 Intangible asset , net 878 539 Deferred inco equity liability : Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 Short-term compensation 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 9,138 1,040 1,557 Short-term unearned revenue 10,779 9,1 equity ) Total stockholder \u2019 equity 31,097 40,104 Total liability and stockholder Total stockholder \u2019 equity 31,097 40,104 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 63,171 $ 69,597 See accompanying note \u2019 equity $ 63,171 $ 69,597 See accompanying note . PAGE See accompanying note . PAGE 41 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2007 2006 2005 Operations Net ) Year Ended June 30 2007 2006 2005 Operations Net income EQUITY STATEMENTS ( million ) Year Ended June 30 2007 2006 2005 Common stock ) Year Ended June 30 2007 2006 2005 Common stock and Year Ended June 30 2007 2006 2005 Common stock and paid-in Ended June 30 2007 2006 2005 Common stock and paid-in capital , beginning of period $ 59,005 $ 60,413 $ 56,396 Common of period $ 59,005 $ 60,413 $ 56,396 Common stock issued $ 59,005 $ 60,413 $ 56,396 Common stock issued 6,783 1,939 $ 56,396 Common stock issued 6,783 1,939 3,223 Common stock repurchased 56,396 Comm equity Total stockholder \u2019 equity $ 31,097 $ 40,104 $ 48,115 See \u2019 equity $ 31,097 $ 40,104 $ 48,115 See accompanying note $ 31,097 $ 40,104 $ 48,115 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The , other multi-year licensing PAGE 44 Table of Contents Part II of Contents Part II Item 8 arrangement include a perpetual li Equity and other investment may SFAS \u201d ) No . 133 , Accounting for Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage . \u201c To Be PAGE 46 Table of Contents Part II of Contents Part II Item 8 Announced \u201d forward purchase commitment million ) Year Ended June 30 Bala Equity and other investment June 30 , 2007 Cash $ 3,040 other investment June 30 , 2007 Cash $ 3,040 $ \u2013 30 , 2007 Cash $ 3,040 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,040 $ 3,040 $ \u2013 $ $ \u2013 $ 3,040 $ 3,040 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 398 4 ( 1 ) 401 $ \u2013 Mutual fund 398 4 ( 1 ) 401 132 Mutual fund 398 4 ( 1 ) 401 132 205 64 398 4 ( 1 ) 401 132 205 64 Commercial paper 4 ( 1 ) 401 132 205 64 Commercial paper 227 ( 1 ) 401 132 205 64 Commercial paper 227 \u2013 1 ) 401 132 205 64 Commercial paper 227 \u2013 \u2013 132 205 64 Commerc Equity and other investment June 30 , 2006 Cash $ 3,248 other investment June 30 , 2006 Cash $ 3,248 $ \u2013 30 , 2006 Cash $ 3,248 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ $ \u2013 $ 3,248 $ 3,248 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 723 11 ( 1 ) 733 $ \u2013 Mutual fund 723 11 ( 1 ) 733 288 Mutual fund 723 11 ( 1 ) 733 288 445 \u2013 723 11 ( 1 ) 733 288 445 \u2013 Commercial paper 11 ( 1 ) 733 288 445 \u2013 Commercial paper 3,242 ( 1 ) 733 288 445 \u2013 Commercial paper 3,242 \u2013 288 445 \u2013 Commercial paper 3,242 \u2013 \u2013 3,242 3,150 92 Comme equity equity security , and $ 11 million related to international equity equity security . At June 30 , 2006 , unrealized loss . At June 30 , 2006 , unrealized loss of $ , unrealized loss of $ 243 million consisted of : $ million consisted of : $ 196 million related to investment grade grade fixed-income security , $ 12 million related to investment in market fixed-income security , $ 2 million related to domestic equity equity security , and $ 33 million related to international equity available evi equity investees and other ( 34 ) 218 13 Investment income and other ( 34 ) 218 13 Investment income and other other ( 34 ) 218 13 Investment income and other $ Investment income and other $ 1,577 $ 1,790 $ 2,067 Net and other $ 1,577 $ 1,790 $ 2,067 Net gain on $ 1,577 $ 1,790 $ 2,067 Net gain on investment include not material in fiscal year 2007 , were $ 408 million year 2007 , were $ 408 million in fiscal year 2006 408 million in fiscal year 2006 , and were $ 152 2006 , and were $ 152 million in f EQUITY $ 6,453 $ 5,287 NOTE 12 STOCKHOLDERS \u2019 EQUITY Shares of million ) Year Ended June 30 2007 2006 2005 Balance , ) Year Ended June 30 2007 2006 2005 Balance , beginning Year Ended June 30 2007 2006 2005 Balance , beginning of Ended June 30 2007 2006 2005 Balance , beginning of year Balance , beginning of year 10,062 10,710 10,862 Issued 289 106 , beginning of year 10,062 10,710 10,862 Issued 289 106 160 beginning of year 10,062 10,710 10,862 Issued 289 106 160 Repurchased year 10,062 10,710 10,862", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 3.39 billion due to an increase received from customer driven by 15 % revenue growth , along , along with a $ 1.64 billion decrease in cash outflow used for financing increased $ 3.98 billion . Several event occurred event occurred during fiscal year 2007 that affected cash used for financing . We issued $ 6.78 billion of common stock , common stock , including $ 3.25 billion related to 113 million $ 3.25 billion related to 113 million ca Cash flow from operation decreased flow from operation decreased $ 2.20 billion primarily due to increased payment to fund a $ 987 million increase in Xbox 360 987 million increase in Xbox 360 inventory and product cost and to employee resulting from a 16 % growth in headcount . from customer driven by our 11 % revenue growth and a revenue growth and a $ 1.74 billion increase in unearned revenue used in financing decreased $ 20.52 billion driven by a $ billion driven by a $ 32.57 billion reduction in cas", + "operating_margin": "operating margin . PAGE 15 Table of Contents Part I of Contents Part I Item 1A , 1B If our goodwill Part I Item 1A , 1B If our goodwill or amortizable . We operate in over 100 country and a significant part with revenue growth . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2007 that remain unresolved . PAGE that remain unresolved . PAGE 16 Table of Contents Part I of Contents Part I Item 2 , 3 , 4 ITEM Part I Item 2 , 3 , 4 ITEM 2 . Item 2 ", + "accumulated_depreciation": "Accumulated depreciation ( 5,016 equipment , at cost 9,366 7,223 Accumulated depreciation ( 5,016 ) 9,366 7,223 Accumulated depreciation ( 5,016 ) ( 4,179 ) Property depreciation ( 5,016 ) ( 4,179 ) Property and equipment , and equipment , net $ 4,350 $ 3,044 Property and equipment , net $ 4,350 $ 3,044 Property and equipment are stated building range from five to 15 year , leasehold improvement generally depreciated . During fiscal year 2007 , 2006 , and 2005 During fiscal year 2007 , 2006 , and 2005 , depreciation 20", + "debt": "debt $ \u2013 Construction commitment ( 2 ) ( 4 ) 821 commitment ( 2 ) ( 4 ) 821 \u2013 \u2013 \u2013 2 ) ( 4 ) 821 \u2013 \u2013 \u2013 821 Lease ) 821 \u2013 \u2013 \u2013 821 Lease obligation : Capital lease \u2013 \u2013 Operating lease ( 3 ) 349 618 258 116 Operating lease ( 3 ) 349 618 258 116 1,341 Purchase lease ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 4 ) 349 618 258 116 1,341 Purchase commitment ( 4 ) 116 1,341 Purchase commitment ( 4 ) 1,824 19 debt security fixed-maturity security , at June 30 , 2007 were a follows , at June 30 , 2007 were a follows : ( one year or le $ 5,519 $ 5,518 Due after one or le $ 5,519 $ 5,518 Due after one year through one year through five year 6,886 6,849 Due after five year year through five year 6,886 6,849 Due after five year through five year through ten year 2,935 2,890 Due after ten year year through ten year 2,935 2,890 Due after ten year 4,910 2,890 Due after ten year 4,910 4,853 Total $ 20,250 $ Due a", + "share_repurchase": "share repurchase program program that expires on June 30 , 2011 . Under the expires on June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase progra share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase progra", + "earnings_per_share": "earnings per share income 14,065 12,599 12,254 8,168 7,531 Diluted earnings per share $ Diluted earnings per share $ 1.42 $ 1.20 $ 1.12 $ per share $ 1.42 $ 1.20 $ 1.12 $ 0.75 $ $ 1.42 $ 1.20 $ 1.12 $ 0.75 $ 0.69 Cash $ 1.20 $ 1.12 $ 0.75 $ 0.69 Cash dividend declared $ 1.12 $ 0.75 $ 0.69 Cash dividend declared per share dividend declared per share $ 0.40 $ 0.35 $ 3.40 $ per share $ 0.40 $ 0.35 $ 3.40 $ 0.16 $ $ 0.40 $ 0.35 $ 3.40 $ 0.16 $ 0.08 Cash $ 0.35 $ 3.40 $ 0.16 $ 0.08 Cash and short-term $ 3.40 $ 0.16 $ Earnings per share $ 14,065 $ 12,599 $ 12,254 Earnings per share : Basic per share : Basic $ 1.44 $ 1.21 $ 1.13 Diluted : Basic $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 $ 1.12 Weighted 1.13 Diluted $ 1.42 $ 1.20 $ 1.12 Weighted average share $ 1.42 $ 1.20 $ 1.12 Weighted average share outstanding : average share outstanding : Basic 9,742 10,438 10,839 Diluted 9,886 10,531 share outstanding : Basic 9,742 10,438 10,839 Diluted 9,886 10,531 10,9 EARNINGS PER SHARE Basic earnings during the period using PAGE 62 Table of Contents Part II of Contents Part II Item 8 the treasury stock method . share ) Year Ended June 30 2007 2006 2005 Net income ) Year Ended June 30 2007 2006 2005 Net income available Year Ended June 30 2007 2006 2005 Net income available for Ended June 30 2007 2006 2005 Net income available for common shareholder ( A ) $ 14,065 $ 12,599 $ 12,254 Weighted A ) $ 14,065 $ 12,599 $ 12,254 Weighted average outstanding $ 14,065 $ 12,599 $ 12,254 Earnings per share equivalent ( C ) 9,886 10,531 10,906 Earnings per share : ( C ) 9,886 10,531 10,906 Earnings per share : Basic Basic ( A/B ) $ 1.44 $ 1.21 $ 1.13 Diluted A/B ) $ 1.44 $ 1.21 $ 1.13 Diluted ( A/C $ 1.44 $ 1.21 $ 1.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.42 $ 1.20 $ 1.12 For A/C ) $ 1.42 $ 1.20 $ 1.12 For the year $ 1.42 $ 1.20 $ 1.12 For the year ended June For the year ended June 30 , 2007 , 2006 , year ended June 30 , 2007 , 2006 , and 2005 June 30 , 2007 , 2006 , and 2005 , 199 2007 , 2006 , earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year earnings per share 0.35 0.26 0.50 0.31 1.42 earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year earnings per share 0.29 0.34 0.29 0.28 1.20 earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) per sha", + "tax_rate": "tax rate for fiscal year 2007 , 2006 , and 2005 for fiscal year 2007 , 2006 , and 2005 wa 30 2007 , 2006 , and 2005 wa 30 % , 31 2006 , and 2005 wa 30 % , 31 % , 2005 wa 30 % , 31 % , and 26 % , 31 % , and 26 % , respectively . The respectively . The fiscal year 2007 rate reflects a recurring effective recurring effective tax rate of 31 % offset by a $ % offset by a $ 195 million reduction resulting from various assessment . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from tax rate wa lower from and short-term investment totaled $ 23.41 billion and $ 34.16 billion $ 23.41 billion and $ 34.16 billion a of June 30 34.16 billion a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , respectively . June 30 , 2007 and 2006 , respectively . Equity and and other investment were $ 10.12 billion and $ 9.23 billion $ 10.12 billion and $ 9.23 billion a of June 30 9.23 billion a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , respectively . June 30 , 2007 and 2006 ", + "segment_revenue": "Segment revenue and million ) Year Ended June 30 2007 2006 2005 Revenue : ) Year Ended June 30 2007 2006 2005 Revenue : Client Year Ended June 30 2007 2006 2005 Revenue : Client $ Ended June 30 2007 2006 2005 Revenue : Client $ 14,812 2005 Revenue : Client $ 14,812 $ 13,040 $ 11,901 Server : Client $ 14,812 $ 13,040 $ 11,901 Server and Tools $ 14,812 $ 13,040 $ 11,901 Server and Tools 11,182 9,680 $ 11,901 Server and Tools 11,182 9,680 8,314 Online Services Business 11,901 Server and Tools 11,182 9,680 8,314 O", + "common_stock": "common stock outstanding to be held on November 13 , 2007 are incorporated by held on November 13 , 2007 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2007 INDEX PART I Year Ended June 30 , 2007 INDEX PART I Item 1. 2007 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Common stock price per share per share : High $ 27.52 $ 30.26 $ 31.48 $ : High $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year 2006 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year 2006 Common Low 22.23 27.15 Common stock 26.60 27.56 22.23 Fiscal year 2006 Common stock price per share per share : High $ 27.94 $ 28.25 $ 28.38 $ : High $ 27.94 $ 28.25 $ 28.38 $ 27.94 $ $ 27.94 $ 28.25 $ 28.38 $ 27.94 $ 28.38 Low $ 28.25 $ 28.38 $ 27.94 $ 28.38 Low 24.50 24.25 $ 28.38 $ 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 $ 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See Note $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See Note 12 28.38 Low 24.50 24.25 26.10 21.46 21.46 Se common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately $ 16.16 billion . As a result an amount up to $ 36.16 billion through June 30 , $ 36.16 billion through June 30 , 2011 . The repurchase billion thro common stock each quarter of fiscal year 2007 using available cash resource a price paid per share July 1 , 2006 \u2013 September 30 per share July 1 , 2006 \u2013 September 30 , 2006 1 , 2006 \u2013 September 30 , 2006 285,126,354 $ 24.43 2006 \u2013 September 30 , 2006 285,126,354 $ 24.43 October 1 \u2013 September 30 , 2006 285,126,354 $ 24.43 October 1 , 30 , 2006 285,126,354 $ 24.43 October 1 , 2006 \u2013 2006 285,126,354 $ 24.43 October 1 , 2006 \u2013 December 31 $ 24.43 October 1 , 2006 \u2013 December 31 , 2006 1 , 2006 \u2013 December 31 , Common stock \u2013 June 30 , 2007 242,715,913 $ 30.35 Common stock repurchase 30 , 2007 242,715,913 $ 30.35 Common stock repurchase in the fourth quarter of fiscal year 2007 were a follows : Period ( in million ) April 1 , 2007 \u2013 April 30 million ) April 1 , 2007 \u2013 April 30 , 2007 1 , 2007 \u2013 April 30 , 2007 10,816,647 $ 28.17 2007 \u2013 April 30 , 2007 10,816,647 $ 28.17 10,816,647 $ \u2013 April 30 , 2007 10,816,647 $ 28.17 10,816,647 $ 22,200 30 , 2007 10,816,647 $ 28.17 10,816,647 $ 22,200 May 1 , 2007 10,816,647 $ 2 common stock , common stock , including $ 3.25 billion related to 113 million $ 3.25 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa offer on August 17 , 2006 , which wa included in wa included in the $ 27.58 billion of common stock repurchase Cash from investing decreased $ 1.91 billion due to a $ billion due to a $ 3.49 billion decline in security lending the counterparty along with $ 1.1 common stock cash from investing decreased $ 7.02 billion driven primarily by an driven primarily by an $ 8.93 billion decrease in cash from of investment and a $ 766 million increase in addition to were partially offset by $ 3.12 billion of net cash proceeds Stockholders \u2019 equity at June 30 , 2007 , wa $ equity at June 30 , 2007 , wa $ 31.10 billion , 2007 , wa $ 31.10 billion . We will continue constructing new building were $ 821 million on June 30 , $ 821 million on June 30 , 2007 . We have million on J common stock stock . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.75 billion , of our common this plan . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.00 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program w common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately $ 16.16 billion . As a result an amount up to $ 36.16 billion through June 30 , $ 36.16 billion through June 30 , 2011 . As of billion through June Common stock Net cash from operation 17,796 14,404 16,605 Financing Common stock issued cash from operation 17,796 14,404 16,605 Financing Common stock issued 6,782 16,605 Financing Common stock issued 6,782 2,101 3,109 Common stock repurchased Financing Common stock issued 6,782 2,101 3,109 Common stock repurchased ( Common stock issued 6,782 2,101 3,109 Common stock repurchased ( 27,575 3,109 Common stock repurchased ( 27,575 ) ( 19,207 ) ( repurchased ( 27,575 ) ( 19,207 ) ( 8,057 ) Common ) ( 19,207 ) ( Common stock cash dividend Common stock cash dividend ( 3,805 ) ( 3,545 ) ( dividend ( 3,805 ) ( 3,545 ) ( 36,112 ) Excess ) ( 3,545 ) ( 36,112 ) Excess tax benefit from benefit from stock-based payment arrangement 77 89 \u2013 Other ( 23 from stock-based payment arrangement 77 89 \u2013 Other ( 23 ) 77 89 \u2013 Other ( 23 ) \u2013 ( 18 ) ( 23 ) \u2013 ( 18 ) Net cash used in cash used in financing ( 24,544 ) ( 20,562 ) ( financing ( 24,544 ) ( 20,562 ) ( 41,078 ) Investing ) ( 20,562 ) ( 41,078 ) Investing Additions to property t Common stock ) Year Ended June 30 2007 2006 2005 Common stock and Year Ended June 30 2007 2006 2005 Common stock and paid-in Ended June 30 2007 2006 2005 Common stock and paid-in capital , beginning of period $ 59,005 $ 60,413 $ 56,396 Common of period $ 59,005 $ 60,413 $ 56,396 Common stock issued $ 59,005 $ 60,413 $ 56,396 Common stock issued 6,783 1,939 $ 56,396 Common stock issued 6,783 1,939 3,223 Common stock repurchased 56,396 Common stock issued 6,783 1,939 3,223 Common stock repurchased ( Common st Common stock repurchased ( 6,162 3,223 Common stock repurchased ( 6,162 ) ( 4,447 ) ( repurchased ( 6,162 ) ( 4,447 ) ( 1,737 ) Stock-based ) ( 4,447 ) ( 1,737 ) Stock-based compensation expense 1,550 1,737 ) Stock-based compensation expense 1,550 1,715 2,448 Stock option income ) Stock-based compensation expense 1,550 1,715 2,448 Stock option income tax Stock-based compensation expense 1,550 1,715 2,448 Stock option income tax benefits/ benefits/ ( deficiency ) ( 661 ) ( 617 ) 89 ) ( 661 ) ( 617 ) 89 Other Common stock cash 6 ) Comprehensive income 14,490 12,402 12,561 Common stock cash dividend ) Comprehensive income 14,490 12,402 12,561 Common stock cash dividend ( Common stock cash dividend ( 3,837 ) ( 3,594 ) ( dividend ( 3,837 ) ( 3,594 ) ( 36,968 ) Common ) ( 3,594 ) ( 36,968 ) Common stock repurchased ( ) Common stock repurchased ( 21,212 ) ( 15,411 ) ( repurchased ( 21,212 ) ( 15,411 ) ( 6,320 ) Balance ) ( 15,411 ) ( 6,320 ) Balance , end of , end of period ( 29,460 ) ( 18,901 ) ( period ( 29,460 ) ( Common stock 3 ( 25 ) 2,617 334 2,283 \u2013 Common stock and ( 25 ) 2,617 334 2,283 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 \u2013 and equivalent 7,290 2,309 ( 18 ) 9,581 \u2013 \u2013 9,581 7,290 2,309 ( 18 ) 9,581 \u2013 \u2013 9,581 Preferred stock 18 ) 9,581 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 74 \u2013 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 74 \u2013 \u2013 74 Preferred stock 62 12 \u2013 74 \u2013 \u2013 74 Other investment 12 \u2013 74 \u2013 \u2013 Common stock 5 ( 45 ) 3,968 14 3,954 \u2013 Common stock and ( 45 ) 3,968 14 3,954 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 \u2013 and equivalent 6,933 1,846 ( 34 ) 8,745 \u2013 \u2013 8,745 6,933 1,846 ( 34 ) 8,745 \u2013 \u2013 8,745 Preferred stock 34 ) 8,745 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 46 \u2013 \u2013 \u2013 8,745 Preferred stock 41 5 \u2013 46 \u2013 \u2013 46 Preferred stock 41 5 \u2013 46 \u2013 \u2013 46 Other investment 5 \u2013 46 \u2013 \u2013 46 Othe Common stock ( 16 ) 995 ( 25 ) Common stock and equivalent ) Common stock and equivalent 237 ( 17 ) 9 ( stock and equivalent 237 ( 17 ) 9 ( 1 ) equivalent 237 ( 17 ) 9 ( 1 ) 246 ( ( 17 ) 9 ( 1 ) 246 ( 18 ) ) 9 ( 1 ) 246 ( 18 ) Total $ ( 1 ) 246 ( 18 ) Total $ 8,707 $ ( 18 ) Total $ 8,707 $ ( 155 ) $ Total $ 8,707 $ ( 155 ) $ 960 $ ( $ ( 155 ) $ 960 $ ( 31 ) $ ) $ 960 $ ( 31 ) $ 9,667 $ ( $ ( 31 ) $ 9,667 $ ( 186 ) Less ) $ 9,667 $ ( 186 ) Less than 12 month ( 186 ) Less than 12 month 12 month or greater ) L Common stock ( 32 ) 2,515 ( 45 ) Common stock and equivalent ) Common stock and equivalent 266 ( 33 ) 29 ( stock and equivalent 266 ( 33 ) 29 ( 1 ) equivalent 266 ( 33 ) 29 ( 1 ) 295 ( ( 33 ) 29 ( 1 ) 295 ( 34 ) ) 29 ( 1 ) 295 ( 34 ) Total $ ( 1 ) 295 ( 34 ) Total $ 13,842 $ ( 34 ) Total $ 13,842 $ ( 180 ) $ Total $ 13,842 $ ( 180 ) $ 3,607 $ ( $ ( 180 ) $ 3,607 $ ( 63 ) $ ) $ 3,607 $ ( 63 ) $ 17,449 $ ( $ ( 63 ) $ 17,449 $ ( 243 ) At ) $ 17,449 $ ( 243 ) At June 30 , ( 243 ) At June 30 , 2007 , unrealized common stock common stock . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that repurchase program : a $ 20.00 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of commo common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately PAGE 57 Table of Contents Part II of Contents Part II Item 8 $ 16.16 billion . As Part II Item 8 $ 16.16 billion . As a result an amount up to $ 36.16 billion throu common stock common stock for approximately $ 3.84 billion were repurchased under our first quarter of fiscal year 2007 . All other amount repurchased Board of Directors on July 20 , 2006 . ( 2 Directors on July 20 , 2006 . ( 2 ) All 20 , 2006 . ( 2 ) All amount repurchased in amount repurchased in fiscal year 2006 and 2005 were repurchased under in fiscal year 2006 and 2005 were repurchased under the repurchase Board of Directors on July 20 , 2004 . In fiscal Directors on July 20 , 2004 . In fiscal year 20 common stock ( B ) 9,742 10,438 10,839 Dilutive effect of stock ( B ) 9,742 10,438 10,839 Dilutive effect of employee ( B ) 9,742 10,438 10,839 Dilutive effect of employee stock employee stock option and award 144 93 67 Common stock and stock option and award 144 93 67 Common stock and common option and award 144 93 67 Common stock and common stock stock equivalent ( C ) 9,886 10,531 10,906 Earnings per share equivalent ( C ) 9,886 10,531 10,906 Earnings per share : ( C ) 9,886 10,531 10,906 Earnings per sh", + "fair_value_measurements": "Fair Value Measurements , measurement . SFAS No . 157 doe not require any new effective for u beginning July 1 , 2008 . We currently u beginning July 1 , 2008 . We currently are assessing adoption of SFAS No . 157 would have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early Fair Value Measurements , measurement . SFAS No . 157 doe not require any new effective for u beginning July 1 , 2008 . We currently u beginning July 1 , 2008 . We currently are assessing adoption of SFAS No . 157 would have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early ", + "derivative_instruments": "Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage . \u201c To Be PAGE 46 Table of Contents Part II of Contents Part II Item 8 Announced \u201d forward purchase commitment million ) Year Ended June 30 Balance at beginning of year Balance at end of year 2005 166 48 ( 43 ) at end of year 2 Derivative Instruments on earnings for fiscal year 2007 , 2006 , or 2005 for fiscal year 2007 , 2006 , or 2005 . During 2007 , 2006 , or 2005 . During fiscal year 2007 2005 . During fiscal year 2007 , $ 219 million in fiscal year 2007 , $ 219 million in gain on fair in time value and $ 361 million in loss on cash other . During fiscal year 2006 , $ 217 million in fiscal year 2006 , $ 217 million in gain on fair in time value and $ 399 million in loss on cash other . During fiscal year 2005 , $ 79 million in fiscal ye" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-08-162768/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-08-162768/full-submission_features.json new file mode 100644 index 0000000..87d46c3 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-08-162768/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue sell hardware including the Xbox 360 video game console , the across our business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business OEM channel account for over 80 % of total Client revenue system , in fiscal year 2007 . This release concluded a Client platform product . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Approximately 45 % of Server Part I Item 1 Approximately 45 % of Server and Tools multi-year licensing agreement , approximately revenue , and OEM revenue . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Microsoft Office Communicator ; PAGE 6 Table of Contents Part I of Contents Part I Item 1 Microsoft Tellme Service , Microsoft system . Products : Xbox 360 console and game ; Xbox distribution and marketing . PAGE 7 Table of Contents Part I of Contents Part I Item 1 Our Xbox hardware business competes year . We released Xbox 360 , our second generation console generation console , in Nov revenue . Sales of fiscal year 2008 or 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 revenue . These sale were is not significant . PAGE 10 Table of Contents Part I of Contents Part I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 31 , 2008 were a follows a of July 31 , 2008 were a follows : Name the Company Steven A. Ballmer 52 Chief Executive Officer Robert J . ( Robbie ) Bach 46 President , Entertainm revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part or financial condition . PAGE 16 Table of Contents Part I of Contents Part I Item 1A , 1B , 2 Improper Part I Item 1A , 1B , 2 Improper disclosure of Item 1A , 1B , 2 Improper disclosure of personal data with revenue growth . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2008 that remain unresolved . ITEM that remain unresolved . Revenue Ended June 30 , 2008 2007 2006 2005 2004 Revenue $ June 30 , 2008 2007 2006 2005 2004 Revenue $ 60,420 30 , 2008 2007 2006 2005 2004 Revenue $ 60,420 $ , 2008 2007 2006 2005 2004 Revenue $ 60,420 $ 51,122 2006 2005 2004 Revenue $ 60,420 $ 51,122 $ 44,282 $ 2004 Revenue $ 60,420 $ 51,122 $ 44,282 $ 39,788 $ $ 60,420 $ 51,122 $ 44,282 $ 39,788 $ 36,835 Operating $ 51,122 $ 44,282 $ 39,788 $ 36,835 Operating income $ $ 44,282 $ 39,788 $ 36,835 Operating income $ 22,492 $ $ 36,835 Operating income revenue wa highest to the recognition of $ 1.7 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those Our focus in fiscal year 2009 is to continue to build across the company . PAGE 21 Table of Contents Part II of Contents Part II Item 7 Key market opportunity include : with developer . Fiscal year 2008 saw widespread adoption of Windows of Windows Vista and the 2007 Microsoft Office system and Revenue $ 60,420 2007 Percentage Change 2007 versus 2006 Revenue $ 60,420 $ 51,122 2007 versus 2006 Revenue $ 60,420 $ 51,122 $ 44,282 18 2006 Revenue $ 60,420 $ 51,122 $ 44,282 18 % 15 $ 60,420 $ 51,122 $ 44,282 18 % 15 % Operating 60,420 $ 51,122 $ 44,282 18 % 15 % Operating income 51,122 $ 44,282 18 % 15 % Operating income $ 22,492 15 % Operating income $ 22,492 $ 18,524 $ 16,472 21 Operating income $ 22,492 $ 18,524 $ 16,472 21 % 12 $ 22,492 $ 18,524 $ 16,472 21 % 12 % Diluted 22,492 $ 18,524 $ 16, Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted for a $ 1.6 billion or three percentage point revenue . Headcount-related expense increased 12 % , reflecting an increase year . We incurred $ 1.8 billion of legal charge during European Commission fine of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) a compared with ) a compared with $ 511 million o revenue increased $ 905 million or 8 % , increased $ 905 million or 8 % , reflecting increased data partially offset by decreased Xbox 360 cost . The decreased Xbox cost . The decreased Xbox 360 cost reflect the $ 1.1 360 cost reflect the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 related to the expansion of the expansion of our Xbox 360 warranty coverage a discussed below partially offset by increased Xbox 360 product cost reflecting growth in wa impacted by the $ 1.1 billi Revenue growth wa driven primarily primarily by licensing of the 2007 Microsoft Office system and Windows Studio , and increased Xbox 360 platform sale . Foreign currency of revenue associated with Xbox 360 and Windows Vista , increased marketing expense . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year , we recorded a $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 for anticipated cost under the sale and marketing expense PAG Revenue $ 16,865 2007 Percentage Change 2007 versus 2006 Revenue $ 16,865 $ 14,976 2007 versus 2006 Revenue $ 16,865 $ 14,976 $ 13,107 13 2006 Revenue $ 16,865 $ 14,976 $ 13,107 13 % 14 $ 16,865 $ 14,976 $ 13,107 13 % 14 % Operating 16,865 $ 14,976 $ 13,107 13 % 14 % Operating income 14,976 $ 13,107 13 % 14 % Operating income $ 13,052 14 % Operating income $ 13,052 $ 11,467 $ 10,208 14 Operating income $ 13,052 $ 11,467 $ 10,208 14 % 12 $ 13,052 $ 11,467 $ 10,208 14 % 12 % Client 13,052 $ 11,467 $ 10,2 revenue system builder . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Client revenue increased reflecting growth the end of fiscal year 2008 , more than 180 million year 2008 , more than 180 million Windows Vista license had had been sold ( approximately 130 million were sold during fiscal were sold during fiscal year 2008 ) and million of enterprise . OEM revenue increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , driven by 16 13 % , driven by 16 revenue increased $ 115 million or 13 % , increased $ 115 million or 13 % , primarily driven by product cost . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Client revenue increased primarily reflecting . OEM revenue increased $ 1.4 billion or 13 % driven increased $ 1.4 billion or 13 % driven by 13 % or 13 % driven by 13 % growth in OEM license Windows operating system increased $ 447 million or 22 % . increased $ 447 million or 22 % . During the year the OEM prem Revenue $ 13,170 2007 Percentage Change 2007 versus 2006 Revenue $ 13,170 $ 11,171 2007 versus 2006 Revenue $ 13,170 $ 11,171 $ 9,665 18 2006 Revenue $ 13,170 $ 11,171 $ 9,665 18 % 16 $ 13,170 $ 11,171 $ 9,665 18 % 16 % Operating 13,170 $ 11,171 $ 9,665 18 % 16 % Operating income 11,171 $ 9,665 18 % 16 % Operating income $ 4,593 16 % Operating income $ 4,593 $ 3,643 $ 2,868 26 Operating income $ 4,593 $ 3,643 $ 2,868 26 % 27 $ 4,593 $ 3,643 $ 2,868 26 % 27 % Server 4,593 $ 3,643 $ 2,868 26 % 27 % Serve revenue increased currency exchange rate of $ 464 million or four percentage point developer tool revenue increased $ 1.4 billion or 15 % , increased $ 1.4 billion or 15 % , primarily driven by the release of Windows Server 2008 and Visual Studio 2008 during Server 2008 and Visual Studio 2008 during the fiscal year . support service revenue increased $ 593 million or 29 % , increased $ 593 million or 29 % , primarily due to and marketing expense increased $ 475 million or 14 % , increased $ 475 million revenue increased $ 394 million or 18 % , increased $ 394 million or 18 % , reflecting the growth Consulting and Premier and PAGE 24 Table of Contents Part II of Contents Part II Item 7 Professional product support service . and development expense increased $ 183 million or 11 % , increased $ 183 million or 11 % , primarily driven by expense . Headcount-related expense increased 8 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Server and revenue and certification revenue increased $ 1.1 billion or 13 % , increased $ 1.1 billion or 13 % , and included a currency exchange rate of $ 168 million or two percentage point SQL Server which grew over 20 % . Consulting and Premier support service revenue increased $ 428 million or 26 % , increased $ 428 million or 26 % , primarily due to service . Headcount-related expense increased 14 % , driven by an Cost of revenue increased $ 260 million or 14 % , increased $ 260 million or 14 % , reflecting Revenue $ 3,214 2007 Percentage Change 2007 versus 2006 Revenue $ 3,214 $ 2,441 2007 versus 2006 Revenue $ 3,214 $ 2,441 $ 2,296 32 2006 Revenue $ 3,214 $ 2,441 $ 2,296 32 % 6 $ 3,214 $ 2,441 $ 2,296 32 % 6 % Operating 3,214 $ 2,441 $ 2,296 32 % 6 % Operating income 2,441 $ 2,296 32 % 6 % Operating income ( loss ( loss ) $ ( 1,233 ) $ ( 617 ) ( 1,233 ) $ ( 617 ) $ 5 ( 100 $ ( 617 ) $ 5 ( 100 ) % * 617 ) $ 5 ( 100 ) % * * Not future . During fiscal year 2008 , we launched new release first quarter of fi revenue increased driven by Online advertising revenue increased $ 553 million or 31 % , increased $ 553 million or 31 % , to $ 2.3 31 % , to $ 2.3 billion . This increase reflects online advertising revenue of $ 161 million . Agency revenue , from aQuantive , wa $ 345 million during the year . . Access revenue decreased $ 98 million or 28 % , decreased $ 98 million or 28 % , to $ 256 28 % , to $ 256 million , reflecting migration of provider . As of June 30 , 2008 , we estimate As of June 30 , 2008 , revenue increased $ 796 million or 71 % , increased $ 796 million or 71 % , primarily driven by and marketing expense increased $ 300 million or 35 % , increased $ 300 million or 35 % , primarily due to customer-related intangible asset of $ 94 million , increased headcount-related expense and development expense increased $ 177 million or 18 % , increased $ 177 million or 18 % , and general and and administrative expense increased $ 117 million or 175 % , increased $ 117 million or 175 % , primarily r revenue increased driven primarily advertising revenue which grew $ 283 million or 19 % , grew $ 283 million or 19 % , to $ 1.8 19 % , to $ 1.8 billion . This increase wa partially offset by a $ 156 million or 31 % decrease a $ 156 million or 31 % decrease in access revenue of revenue which grew $ 336 million or 42 % , grew $ 336 million or 42 % , and increased headcount-related royalty . Headcount-related expense increased 31 % , driven by an the year . Fiscal Year 2009 Outlook We expect revenue , to Revenue $ 18,932 2007 Percentage Change 2007 versus 2006 Revenue $ 18,932 $ 16,402 2007 versus 2006 Revenue $ 18,932 $ 16,402 $ 14,465 15 2006 Revenue $ 18,932 $ 16,402 $ 14,465 15 % 13 $ 18,932 $ 16,402 $ 14,465 15 % 13 % Operating 18,932 $ 16,402 $ 14,465 15 % 13 % Operating income 16,402 $ 14,465 15 % 13 % Operating income $ 12,358 13 % Operating income $ 12,358 $ 10,777 $ 9,534 15 Operating income $ 12,358 $ 10,777 $ 9,534 15 % 13 $ 12,358 $ 10,777 $ 9,534 15 % 13 % Microsoft 12,358 $ 10,777 $ 9,53 revenue , business intelligence . Microsoft PAGE 26 Table of Contents Part II of Contents Part II Item 7 Dynamics product provide business solution OEM revenue . In April 2008 , we completed our acquisition content management . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 MBD revenue increased reflecting growth growth in licensing of the 2007 Microsoft Office system and included currency exchange rate of $ 724 million or four percentage point . Business revenue in revenue also included a 21 % increase in Microsoft Dynamics . Consumer revenue decreased $ 80 million or 2 % , decreased $ 80 million or 2 % , reflecting the consumer the consumer launch of the 2007 Microsoft Office system in the and marketing expense increased $ 462 million or 13 % , increased $ 462 million or 13 % , reflecting increased expense and development expense increased $ 228 million or 18 % , increased $ 228 million or 18 % , primarily driven by headcount-related expense and a $ 35 million i revenue increased $ 225 million or 29 % , increased $ 225 million or 29 % , primarily driven by sale . Headcount-related expense increased 10 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 MBD revenue increased primarily reflecting primarily reflecting licensing of the 2007 Microsoft Office system and included currency exchange rate of $ 247 million or two percentage point from consumer sale increased $ 339 million or 10 % while increased revenue from business from business sale increased $ 1.6 billion or 15 % . increased $ 1.6 billion or 15 % . The increase in in business revenue included a 21 % increase in Microsoft Dynamics revenue primarily associated with the 2007 Microsoft Office system . The expense . Headcount-related expense increased 8 % , driven by an the year . Fiscal Year 2009 Outlook We expect revenue to the strong performance of the 2007 Microsoft Office system and business other application . Fiscal year 2009 represents Revenue $ 8,140 2007 Percentage Change 2007 versus 2006 Revenue $ 8,140 $ 6,069 2007 versus 2006 Revenue $ 8,140 $ 6,069 $ 4,732 34 2006 Revenue $ 8,140 $ 6,069 $ 4,732 34 % 28 $ 8,140 $ 6,069 $ 4,732 34 % 28 % Operating 8,140 $ 6,069 $ 4,732 34 % 28 % Operating income 6,069 $ 4,732 34 % 28 % Operating income ( loss income ( loss ) $ 426 $ ( 1,969 ) $ ) $ 426 $ ( 1,969 ) $ ( 1,339 ) ( 1,969 ) $ ( 1,339 ) * ( 47 ) ( 1,339 ) * ( 47 ) % * Not meaningful % * Not meaningful PAGE 27 Table of Contents Part II revenue increased primarily due primarily due to increased Xbox 360 platform sale . Xbox 360 360 platform sale . Xbox 360 platform and PC game revenue PC game revenue increased $ 1.7 billion or 41 % a increased $ 1.7 billion or 41 % a a result of a result of increased Xbox 360 console sale , video game game sale led by Halo 3 , Xbox Live revenue , Live revenue , and Xbox 360 accessory sale . We shipped accessory sale . We shipped 8.7 million Xbox 360 console during We shipped 8.7 million Xbox 360 conso revenue decreased $ 683 million or 13 % , decreased $ 683 million or 13 % , reflecting the impact the impact of the $ 1.1 billion Xbox 360 charge in the $ 1.1 billion Xbox 360 charge in fiscal year 2007 360 charge in fiscal year 2007 ( which primarily related to partially offset by increased Xbox 360 product cost related to increased and development expense increased $ 242 million or 18 % , increased $ 242 million or 18 % , primarily reflecting increased Danger , including a $ 24 million in-process res revenue increased primarily due primarily due to increased Xbox 360 platform and Zune sale . Zune sale . We shipped 6.6 million Xbox 360 console during We shipped 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 a compared to 5.0 million year 2007 a compared to 5.0 million console during fiscal year million console during fiscal year 2006 . Xbox and PC game PC game revenue increased $ 650 million or 19 % a increased $ 650 million or 19 % a a result of a result of revenue increased $ 539 million or 65 % primarily increased $ 539 million or 65 % primarily driven by the the Zune launch in November 2006 . EDD operating loss increased primarily due to the $ 1.1 billion Xbox 360 charge recognized the $ 1.1 billion Xbox 360 charge recognized in the fourth fourth quarter of fiscal year 2007 and Zune launch-related expense . partially offset by increased Xbox 360 platform sale and decreased Xbox platform sale and decreased Xbox 360 console manufacturing cost . Headcount revenue to sustained profitability for fiscal year 2009 . Corporate-Level Activity ( In million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Corporate-leve revenue 2007 Percentage Change 2007 versus 2006 Cost of revenue $ 11,598 2006 Cost of revenue $ 11,598 $ 10,693 $ 7,650 8 of revenue $ 11,598 $ 10,693 $ 7,650 8 % 40 $ 11,598 $ 10,693 $ 7,650 8 % 40 % As 11,598 $ 10,693 $ 7,650 8 % 40 % As a 10,693 $ 7,650 8 % 40 % As a percent of As a percent of revenue 19 % 21 % 17 % percent of revenue 19 % 21 % 17 % ( 2 revenue 19 % 21 % 17 % ( 2 ) ppt 21 % 17 % ( 2 ) ppt 4 ppt Cost % ( 2 ) ppt 4 ppt Cost of revenue includes revenue increased in fiscal year 2008 , r revenue increased in fiscal year 2007 , primarily driven by the primarily driven by the Xbox 360 warranty charge , increased Windows million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Perc revenue 14 % 14 % 15 % percent of revenue 14 % 14 % 15 % \u2013 ppt revenue 14 % 14 % 15 % \u2013 ppt ( 1 15 % \u2013 ppt ( 1 ) ppt PAGE 29 Table ( 1 ) ppt PAGE 29 Table of Contents Part II of Contents Part II Item 7 Research and development expense include expense increased during fiscal year 2008 reflecting increased headcount-related expense , year . Headcount-related expense increased 12 % during fiscal year 2008 12 % during fiscal year 2008 , reflecting an increase in cost increased during fiscal year 2007 , pri revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % \u2013 ppt revenue 22 % 22 % 22 % \u2013 ppt \u2013 ppt expense increased during fiscal year 2008 , primarily reflecting increased headcount-related campaign . Headcount-related expense increased 14 % during fiscal year 2008 14 % during fiscal year 2008 , reflecting an increase in expense increased during fiscal year 2007 primarily because of increased headcount-related launch . Headcount-related expense increased 22 % during fiscal year 2007 22 % during fiscal revenue 8 % 7 % 8 % percent of revenue 8 % 7 % 8 % 1 ppt revenue 8 % 7 % 8 % 1 ppt ( 1 % 7 % 8 % 1 ppt ( 1 ) ppt 8 % 1 ppt ( 1 ) ppt General and administrative expense increased during fiscal year 2008 , reflecting increased cost for expense . We incurred $ 1.8 billion of legal charge during legal charge during fiscal year 2008 , primarily related to the European Commission fine of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) a compared with ) a compared with $ 511 million of legal cha revenue a of June 30 , 2008 : ( In a of June 30 , 2008 : ( In million ) Three month ended : September 30 , 2008 $ 5,120 December ended : September 30 , 2008 $ 5,120 December 31 , September 30 , 2008 $ 5,120 December 31 , 2008 4,033 , 2008 $ 5,120 December 31 , 2008 4,033 March 31 $ 5,120 December 31 , 2008 4,033 March 31 , 2009 5,120 December 31 , 2008 4,033 March 31 , 2009 2,775 31 , 2008 4,033 March 31 , 2009 2,775 June 30 2008 4,033 March 31 , 2009 2,775 June 30 , 2009 4,033 March 31 , 2009 2,775 Ju revenue 2,775 June 30 , 2009 1,469 Thereafter 1,900 Unearned revenue $ 30 , 2009 1,469 Thereafter 1,900 Unearned revenue $ 15,297 Cash Thereafter 1,900 Unearned revenue $ 15,297 Cash Flows Fiscal year 2008 15,297 Cash Flows Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cash flow from operation increased flow from operation increased $ 3.8 billion due to an increase received from customer driven by 18 % revenue growth , partially partially offset by the $ 1.4 billio revenue growth , along , along with a $ 1.6 billion decrease in cash outflow used for financing increased $ 4.0 billion . Several event occurred event occurred during fiscal year 2007 affecting cash used for financing financing . We issued $ 6.8 billion of common stock , common stock , including $ 3.3 billion related to 113 million $ 3.3 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa revenue of and unearned revenue of $ 1.9 billion . ( 5 ) $ 1.9 billion . ( 5 ) We have excluded $ ) We have excluded $ 3.1 billion of current tax payable first quarter of fiscal year 2009 a a result of our our settlement related to the 2000-2003 examination . RECENTLY ISSUED ACCOUNTING Adopted Accounting Pronouncements On July 1 , 2007 , we adopted Pronouncements On July 1 , 2007 , we adopted FIN 48 2007 , we adopted FIN 48 which provides a financial statement tax return . Under FIN 48 , we may recogni Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether , customer receive certain PAGE 36 Table of Contents Part II of Contents Part II Item 7 element of our product over product . SFAS No . 115 , Accounting for Certain Investments and Staff Accounting Bulletin Topic 5M , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , an Revenue Year Ended June 30 , 2008 2007 2006 Revenue $ 60,420 Ended June 30 , 2008 2007 2006 Revenue $ 60,420 $ June 30 , 2008 2007 2006 Revenue $ 60,420 $ 51,122 2008 2007 2006 Revenue $ 60,420 $ 51,122 $ 44,282 Operating 2006 Revenue $ 60,420 $ 51,122 $ 44,282 Operating expense : $ 60,420 $ 51,122 $ 44,282 Operating expense : Cost of expense : Cost of revenue 11,598 10,693 7,650 Research and development : Cost of revenue 11,598 10,693 7,650 Research and development 8,164 Cost of revenue 11,598 10,693 revenue 13,397 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 10,779 3,248 1,040 Short-term unearned revenue 13,397 10,779 Securities lending payable 2,614 1,040 Short-term unearned revenue 13,397 10,779 Securities lending payable 2,614 2,741 13,397 10,779 Securities lending payable 2,614 2,741 Other 3,659 3,622 Total 10,779 Securities lending payable 2,614 2,741 Other 3,659 3,622 Total current lending payable 2,614 2,741 Other 3,659 3,622 Total current liability 29,886 payable 2 revenue 1,900 3,622 Total current liability 29,886 23,754 Long-term unearned revenue 1,900 1,867 29,886 23,754 Long-term unearned revenue 1,900 1,867 Other long-term liability 4,721 23,754 Long-term unearned revenue 1,900 1,867 Other long-term liability 4,721 6,453 1,900 1,867 Other long-term liability 4,721 6,453 Commitments and contingency Stockholders 1,867 Other long-term liability 4,721 6,453 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 9,151 a revenue 24,532 ) Deferred income tax 935 421 219 Unearned revenue 24,532 21,032 Deferred income tax 935 421 219 Unearned revenue 24,532 21,032 16,453 935 421 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned 421 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned revenue 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned revenue ( Recognition of unearned revenue ( 21,944 ) ( 19,382 ) ( revenue ( 21,944 ) ( 19,382 ) ( 14,729 ) Accounts ) ( 19,382 ) ( 14,729 ) revenue . During fiscal year 2007 , $ 168 million of fiscal year 2007 , $ 168 million of derivative gain were revenue . During fiscal year 2006 , $ 166 million of fiscal year 2006 , $ 166 million of derivative gain were reclassified to revenue and $ 23 million in derivative gain were . We estimate that $ 111 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2008 , 2007 , and 2006 for fiscal year 2008 , 2007 , and 2006 . Derivative 200 revenue 928 842 2,859 Other expense item 1,933 1,735 Unearned revenue 928 842 Impaired item 1,933 1,735 Unearned revenue 928 842 Impaired investment 331 710 1,933 1,735 Unearned revenue 928 842 Impaired investment 331 710 Other revenue 928 842 Impaired investment 331 710 Other revenue item 91 928 842 Impaired investment 331 710 Other revenue item 91 58 331 710 Other revenue item 91 58 Deferred income tax asset 710 Other revenue item 91 58 Deferred income tax asset $ Deferred income tax asset $ 5,508 $ REVENUE Unearned revenue is billing coverage period . PAGE 60 Table of Contents Part II of Contents Part II Item 8 Undelivered element \u2013 Represents free undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price ( In million ) June 30 , 2008 2007 Volume licensing million ) June 30 , 2008 2007 Volume licensing program $ ) June 30 , 2008 2007 Volume licensin revenue Undelivered element 1,396 1,839 Other 1,669 1,473 Unearned revenue $ 15,297 element 1,396 1,839 Other 1,669 1,473 Unearned revenue $ 15,297 $ 1,669 1,473 Unearned revenue $ 15,297 $ 12,646 Unearned revenue by Unearned revenue $ 15,297 $ 12,646 Unearned revenue by segment wa ( In million ) June 30 , 2008 2007 Client $ million ) June 30 , 2008 2007 Client $ 2,738 $ ) June 30 , 2008 2007 Client $ 2,738 $ 2,875 , 2008 2007 Client $ 2,738 $ 2,875 Server and Tools 2007 Client $ 2,738 $ 2,875 Server a revenue $ 15,297 7,101 5,771 Other segment 451 348 Unearned revenue $ 15,297 $ 451 348 Unearned revenue $ 15,297 $ 12,646 NOTE 13 OTHER Unearned revenue $ 15,297 $ 12,646 NOTE 13 OTHER LONG-TERM LIABILITIES $ 15,297 $ 12,646 NOTE 13 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 , 2008 2007 Tax contingency million ) June 30 , 2008 2007 Tax contingency and other ) June 30 , 2008 2007 Tax contingency and other tax and other tax liability $ 3,812 $ 5,071 Legal contingency 530 tax liability $ 3,81 revenue and million ) Year Ended June 30 , 2008 2007 2006 Revenue Year Ended June 30 , 2008 2007 2006 Revenue : Client Ended June 30 , 2008 2007 2006 Revenue : Client $ June 30 , 2008 2007 2006 Revenue : Client $ 16,472 2006 Revenue : Client $ 16,472 $ 14,844 $ 13,077 Server : Client $ 16,472 $ 14,844 $ 13,077 Server and Tools $ 16,472 $ 14,844 $ 13,077 Server and Tools 13,189 11,184 $ 13,077 Server and Tools 13,189 11,184 9,670 Online Services Business 13,077 Server and Tools 13,189 11,184 9,670 Onlin Revenue ) Stock-based compensation expense 844 123 ( 173 ) Revenue reconciling compensation expense 844 123 ( 173 ) Revenue reconciling amount 368 173 ) Revenue reconciling amount 368 120 ( 7 ) Other ) Revenue reconciling amount 368 120 ( 7 ) Other 46 reconciling amount 368 120 ( 7 ) Other 46 77 ( 120 ( 7 ) Other 46 77 ( 132 ) Total ( 7 ) Other 46 77 ( 132 ) Total $ ) Other 46 77 ( 132 ) Total $ ( 5,446 132 ) Total $ ( 5,446 ) $ ( 4,457 ) ( 5,446 ) $ ( 4,457 ) $ ( 5,116 ) ( 4,457 ) $ ( 5,116 ) ( 1 ) Co revenue year 2008 or fiscal year 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 revenue . These sale were million ) Year Ended June 30 , 2008 2007 2006 United Year Ended June 30 , 2008 2007 2006 United States ( Ended June 30 , 2008 2007 2006 United States ( 1 June 30 , 2008 2007 2006 United States ( 1 ) 2007 2006 United States ( 1 ) $ 35,928 $ 31,346 States ( 1 ) $ 35,928 $ 31,346 $ 27,957 Other 1 ) $ 35,928 $ 31,346 $ 27,957 Oth Revenue June 30 Total Fiscal year 2008 Revenue $ 13,762 $ 16,367 Fiscal year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 60,420 Gross profit 11,087 12,824 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( 3 ) 2007 Revenue $ 10,811 $ 12,542 ( 3 ) $ 14,398 $ 10,811 $ 12,542 ( 3 ) $ 14,398 ( 4 12,542 ( 3 ) $ 14,398 ( 4 ) $ 13,371 3 ) $ 14,398 ( 4 ) $ 13,371 $ 51,122 14,398 ( 4 ) $ 13,371 $ 51,122 Gross profit 9,115 4 ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( 6 $ 51,122 Gross Revenue share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 N revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( Microsoft Office system . ( 4 ) Includes $ 1.6 billion ( 4 ) Includes $ 1.6 billion of revenue discussed above revenue discussed above . ( 5 ) Includes charge of $ ) Includes charge of $ 296 million ( pre-tax ) related various legal matter . ( 6 ) Includes $ 1.1 billion ( 6 ) Includes $ 1.1 billion ( pre-tax ) charge charge related to the Xbox 360 warranty policy , ", + "net_income": "Net income $ $ 16,472 $ 14,561 $ 9,034 Net income $ 17,681 $ $ 9,034 Net income $ 17,681 $ 14,065 $ 12,599 $ Net income $ 17,681 $ 14,065 $ 12,599 $ 12,254 $ $ 17,681 $ 14,065 $ 12,599 $ 12,254 $ 8,168 Diluted $ 14,065 $ 12,599 $ 12,254 $ 8,168 Diluted earnings per $ 12,599 $ 12,254 $ 8,168 Diluted earnings per share $ Diluted earnings per share $ 1.87 $ 1.42 $ 1.20 $ per share $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash dividend declared $ 1.20 $ Net income $ Provision for income tax 6,133 6,036 5,663 Net income $ 17,681 for income tax 6,133 6,036 5,663 Net income $ 17,681 $ 6,036 5,663 Net income $ 17,681 $ 14,065 $ 12,599 Earnings Net income $ 17,681 $ 14,065 $ 12,599 Earnings per share $ 17,681 $ 14,065 $ 12,599 Earnings per share : Basic per share : Basic $ 1.90 $ 1.44 $ 1.21 Diluted : Basic $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 $ 1.20 Weighted 1.21 Diluted $ 1.87 $ 1.4 Net income Ended June 30 , 2008 2007 2006 Operations Net income $ June 30 , 2008 2007 2006 Operations Net income $ 17,681 2006 Operations Net income $ 17,681 $ 14,065 $ 12,599 Depreciation Net income $ 17,681 $ 14,065 $ 12,599 Depreciation , amortization $ 17,681 $ 14,065 $ 12,599 Depreciation , amortization , and , and other noncash item 2,056 1,440 903 Stock-based compensation 1,479 and other noncash item 2,056 1,440 903 Stock-based compensation 1,479 1,550 other noncash item 2,056 1,440 903 Stock-based Net income ) \u2013 \u2013 Net income 17,681 14,065 12,599 Other comprehensive income \u2013 \u2013 Net income 17,681 14,065 12,599 Other comprehensive income : \u2013 Net income 17,681 14,065 12,599 Other comprehensive income : Net unrealized gain on derivative instrument 18 14 76 Net unrealized gain gain on derivative instrument 18 14 76 Net unrealized gain ( on derivative instrument 18 14 76 Net unrealized gain ( loss loss ) on investment ( 653 ) 326 ( 282 ) on investment ( 653 ) 326 ( 282 ) Translation adjustment ( 653 ) 326 Net income available Ended June 30 , 2008 2007 2006 Net income available for June 30 , 2008 2007 2006 Net income available for common shareholder ( A ) $ 17,681 $ 14,065 $ 12,599 Weighted A ) $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding share of common stock ( B ) 9,328 9,742 10,438 Dilutive effect of stock ( B ) 9,328 9,742 10,438 Dilutive effect of employee ( B ) 9,328 9,742 10,438 Dilutive effect of employee stock employee stock option Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 ( 11,940 12,971 48,822 Net income 4,289 4,707 ( 1 ) 4,388 12,971 48,822 Net income 4,289 4,707 ( 1 ) 4,388 ( Net income 4,289 4,707 ( 1 ) 4,388 ( 2 ) 4,289 4,707 ( 1 ) 4,388 ( 2 ) 4,297 17,681 ( 1 ) 4,388 ( 2 ) 4,297 17,681 Basic earnings ) 4,388 ( 2 ) 4,297 17,681 Basic earnings per share Net income 3,478 12,258 10,134 ( 6 ) 40,429 Net income 3,478 2,626 4,926 6 ) 40,429 Net income 3,478 2,626 4,926 ( 5 ) ) 40,429 Net income 3,478 2,626 4,926 ( 5 ) 3,035 40,429 Net income 3,478 2,626 4,926 ( 5 ) 3,035 14,065 income 3,478 2,626 4,926 ( 5 ) 3,035 14,065 Basic earnings 2,626 4,926 ( 5 ) 3,035 14,065 Basic earnings per share 4,926 ( 5 ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 D Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 7 8,872 9,674 36,632 Net income 3,141 ( 7 ) 3,653 2,977 36,632 Net income 3,141 ( 7 ) 3,653 2,977 ( 8 income 3,141 ( 7 ) 3,653 2,977 ( 8 ) 2,828 3,141 ( 7 ) 3,653 2,977 ( 8 ) 2,828 ( 7 ) 3,653 2,977 ( 8 ) 2,828 ( 9 ) 3,653 2,977 ( 8 ) 2,828 ( 9 ) 12,599 Basic ( 8 ) 2,828 ( 9 ) 12,599 Basic earnings per ) 2,828", + "assets": "Assets Current million ) June 30 , 2008 2007 Assets Current asset : ) June 30 , 2008 2007 Assets Current asset : Cash Cash and cash equivalent $ 10,339 $ 6,111 Short-term investment ( cash equivalent $ 10,339 $ 6,111 Short-term investment ( including security pledged a collateral of $ 2,491 and $ 2,356 ) 13,323 of $ 2,491 and $ 2,356 ) 13,323 17,300 Total cash 2,491 and $ 2,356 ) 13,323 17,300 Total cash , cash and $ 2,356 ) 13,323 17,300 Total cash , cash equivalent equivalent , and short-term invest ASSETS The component of ( In million ) June 30 , 2008 2007 Gross carrying million ) June 30 , 2008 2007 Gross carrying amount Accumulated ) June 30 , 2008 2007 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 1,074 $ ( 796 ) $ Contract-based $ 1,074 $ ( 796 ) $ 278 $ 988 $ ( 796 ) $ 278 $ 988 $ ( 727 796 ) $ 278 $ 988 $ ( 727 ) $ 278 $ 988 $ ( 727 ) $ 261 Technology-based 1,677 $ ( 727 ) $ 261 Technology-based 1,677 ( 672 ) 727 ) $ 261 Technology-based 1,677 ( 672 ) ", + "liabilities": "Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 . We do u beginning July 1 , 2008 . We do not believe not believe SFAS No . 159 will have a material impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( \u201c FSP \u201d ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , whic Liabilities and stockholder Total asset $ 72,793 $ 63,171 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 Short-term compensation 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 2,934 2,325 Income tax 3,248 1,040 Short-te Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 . We do u beginning July 1 , 2008 . We do not believe not believe SFAS No . 159 will have a material impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( \u201c FSP \u201d ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , whic LIABILITIES $ 15,297 $ 12,646 NOTE 13 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 , 2008 2007 Tax contingency million ) June 30 , 2008 2007 Tax contingency and other ) June 30 , 2008 2007 Tax contingency and other tax and other tax liability $ 3,812 $ 5,071 Legal contingency 530 tax liability $ 3,812 $ 5,071 Legal contingency 530 778 Product 3,812 $ 5,071 Legal contingency 530 778 Product warranty 278 487 $ 5,071 Legal contingency 530 778 Product warranty 278 487 Other contingency 530 778 Produ", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management \u2019 Selected Financial Data 20 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 40 Item 8 . Financial Statements about Market Risk 40 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 ) for information regarding dividend of Directors in fiscal year 2008 and 2007 . On July in fiscal year 2008 and 2007 . On July 20 , and 2007 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.0 billion tender offer which wa which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program program that equity $ 7,051 $ 5,823 $ 4,574 Stockholders \u2019 equity $ 36,286 4,574 Stockholders \u2019 equity $ 36,286 $ 31,097 $ 40,104 $ \u2019 equity $ 36,286 $ 31,097 $ 40,104 $ 48,115 $ $ 36,286 $ 31,097 $ 40,104 $ 48,115 $ 74,825 PAGE $ 31,097 $ 40,104 $ 48,115 $ 74,825 PAGE 20 Table $ 40,104 $ 48,115 $ 74,825 PAGE 20 Table of Contents $ 48,115 $ 74,825 PAGE 20 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT \u2019 Part II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2008 Equity and and other investment were $ 6.6 billion and $ 10.1 billion $ 6.6 billion and $ 10.1 billion a of June 30 10.1 billion a of June 30 , 2008 and 2007 , a of June 30 , 2008 and 2007 , respectively . June 30 , 2008 and 2007 , respectively . Our investment second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 26.6 billion at June 30 , $ 26.6 billion at June 30 , 2008 . Our retained billion at June 30 , 2008 . Our retained deficit is our portfolio a of June 30 equity at June 30 , 2008 , wa $ equity at June 30 , 2008 , wa $ 36.3 billion , 2008 , wa $ 36.3 billion . We will continue constructing new building were $ 1.2 billion on June 30 , $ 1.2 billion on June 30 , 2008 . We have billion on June 30 , 2008 . We have operating lease incurred rental expense totaling $ 398 million , $ 325 million $ 398 million , $ 325 million , and $ 271 325 million , and $ 271 million in fiscal year 2008 271 million in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 20 equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor for the year ended June 30 , 2008 and 2007 : year ended June 30 , 2008 and 2007 : ( In June 30 , 2008 and 2007 : ( In million ) million ) Year ended June 30 , 2008 Risk Categories June Year ended June 30 , 2008 Risk Categories June 30 , , 2008 Risk Categories June 30 , 2008 June 30 , Risk Categories June 30 , 2008 Equity $ 25 Currency rate 100 55 93 145 60 Equity price 25 Currency rate 100 55 93 145 60 Equity price 45 Currency rate 100 55 93 145 60 Equity price 45 60 rate 100 55 93 145 60 Equity price 45 60 54 93 145 60 Equity price 45 60 54 60 44 Commodity 145 60 Equity price 45 60 54 60 44 Commodity price 60 Equity price 45 60 54 60 44 Commodity price 7 Equity price 45 60 54 60 44 Commodity price 7 7 price 45 60 54 60 44 Commodity price 7 7 6 54 60 44 Commodity price 7 7 6 7 4 Total 60 44 Commodity price 7 7 Equity and other $ 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,588 4,350 Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset , net investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset , net 1,973 4,760 Intangible asset , net 1,973 878 Deferred income equity liability : Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 Short-term compensation 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 10,779 3,248 1,040 Short-term unearned revenue 13,397 10 equity ) Total stockholder \u2019 equity 36,286 31,097 Total liability and stockholder Total stockholder \u2019 equity 36,286 31,097 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 72,793 $ 63,171 See accompanying note \u2019 equity $ 72,793 $ 63,171 See accompanying note . PAGE See accompanying note . PAGE 42 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2008 2007 2006 Operations Year Ended June 30 , 2008 2007 2006 Operations Net income E EQUITY STATEMENTS ( million ) Year Ended June 30 , 2008 2007 2006 Common Year Ended June 30 , 2008 2007 2006 Common stock and Ended June 30 , 2008 2007 2006 Common stock and paid-in June 30 , 2008 2007 2006 Common stock and paid-in capital , beginning of period $ 60,557 $ 59,005 $ 60,413 Common of period $ 60,557 $ 59,005 $ 60,413 Common stock issued $ 60,557 $ 59,005 $ 60,413 Common stock issued 3,504 6,783 $ 60,413 Common stock issued 3,504 6,783 1,939 Common stock repurchased 60,413 Common stock is equity Total stockholder \u2019 equity $ 36,286 $ 31,097 $ 40,104 ( \u2019 equity $ 36,286 $ 31,097 $ 40,104 ( 1 ) $ 36,286 $ 31,097 $ 40,104 ( 1 ) See Note $ 31,097 $ 40,104 ( 1 ) See Note 1 of ( 1 ) See Note 1 of Notes to Financial Statements See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The , other multi-year licensing PAGE 45 Table of Contents Part II of Co Equity and other investment June 30 , 2008 Cash $ 3,274 other investment June 30 , 2008 Cash $ 3,274 $ \u2013 30 , 2008 Cash $ 3,274 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,274 $ 3,274 $ \u2013 $ $ \u2013 $ 3,274 $ 3,274 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 1,044 15 ( 8 ) 1,051 $ \u2013 Mutual fund 1,044 15 ( 8 ) 1,051 835 Mutual fund 1,044 15 ( 8 ) 1,051 835 136 80 1,044 15 ( 8 ) 1,051 835 136 80 Commercial paper 15 ( 8 ) 1,051 835 136 80 Commercial paper 787 ( 8 ) 1,051 835 136 80 Commercial paper 787 \u2013 8 ) 1,051 835 136 80 Commercial paper Equity and other investment June 30 , 2007 Cash $ 3,040 other investment June 30 , 2007 Cash $ 3,040 $ \u2013 30 , 2007 Cash $ 3,040 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,040 $ 3,040 $ \u2013 $ $ \u2013 $ 3,040 $ 3,040 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 398 4 ( 1 ) 401 $ \u2013 Mutual fund 398 4 ( 1 ) 401 132 Mutual fund 398 4 ( 1 ) 401 132 205 64 398 4 ( 1 ) 401 132 205 64 Commercial paper 4 ( 1 ) 401 132 205 64 Commercial paper 227 ( 1 ) 401 132 205 64 Commercial paper 227 \u2013 1 ) 401 132 205 64 Commercial paper 227 \u2013 \u2013 132 205 64 Commerc equity equity security , and $ 14 million related to international equity equity security . At June 30 , 2007 , unrealized loss . At June 30 , 2007 , unrealized loss of $ , unrealized loss of $ 186 million consisted of : $ million consisted of : $ 161 million related to investment grade grade fixed-income security , $ 7 million related to investment in market fixed-income security , $ 7 million related to domestic equity equity security , and $ 11 million related to international equity available evid Equity Equity and other investment ( 1 ) Other current liability Other Other long-term liability Total June 30 , 2008 Cash-flow hedge $ liability Total June 30 , 2008 Cash-flow hedge $ \u2013 $ Cash-flow hedge $ \u2013 $ 488 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 488 Fair-value hedge ( 41 ) $ 488 Fair-value hedge ( 41 ) \u2013 767 ( 11 hedge ( 41 ) \u2013 767 ( 11 ) \u2013 715 41 ) \u2013 767 ( 11 ) \u2013 715 Other derivative 767 ( 11 ) \u2013 715 Other derivative 69 ( 34 ) \u2013 715 Other derivative 69 ( 34 ) 4 ( 715 Other derivative 69 ( 34 ) 4 ( 20 ) derivati EQUITY Shares of million ) Year Ended June 30 , 2008 2007 2006 Balance Year Ended June 30 , 2008 2007 2006 Balance , beginning Ended June 30 , 2008 2007 2006 Balance , beginning of June 30 , 2008 2007 2006 Balance , beginning of year Balance , beginning of year 9,380 10,062 10,710 Issued 173 289 , beginning of year 9,380 10,062 10,710 Issued 173 289 106 beginning of year 9,380 10,062 10,710 Issued 173 289 106 Repurchased year 9,380 10,062 10,710 Issued 173 289 106 Repurchased ( 402 9,380 10,062 10,710", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 3.8 billion due to an increase received from customer driven by 18 % revenue growth , partially partially offset by the $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) payment of the used for financing decreased $ 11.6 billion primarily due to a primarily due to a $ 15.0 billion decrease in common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 Cash flow from operation increased flow from operation increased $ 3.4 billion due to an increase received from customer driven by 15 % revenue growth , along , along with a $ 1.6 billion decrease in cash outflow used for financing increased $ 4.0 billion . Several event occurred event occurred during fiscal year 2007 affecting cash used for financing financing . We issued $ 6.8 billion of common stock , common stock , including $ 3.3 billion related to 113 million $ 3.3 billion related to 113 million ca cash flow . PAGE 37 Table of Contents Part II of Contents Part II Item 7 SFAS No . 109 , Item 7 SFAS No . 109 , Accounting for Income Taxes with the requirement of FIN 48 . Under FIN 48 , FIN 48 . Under FIN 48 , we may recognize the that ha a greater than 50 % likelihood of being realized upon ultimate settlement . FIN 48 also provides guidance on derecognition accordance with SFAS No . 123 ( R ) , Share-Based accordance with SFAS No . 5 , Accounting for Contingencies . a period generally ranging from 90", + "accumulated_depreciation": "accumulated depreciation of $ 6,302 and $ 5,016 6,242 4,350 of $ 6,302 and $ 5,016 6,242 4,350 Equity and other $ 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,588 4,350 Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset , net investment 6,588 10,117 Goodwill 12,108 4,760 Intangi Accumulated depreciation ( 6,302 equipment , at cost 12,544 9,366 Accumulated depreciation ( 6,302 ) 12,544 9,366 Accumulated depreciation ( 6,302 ) ( 5,016 ) Property depreciation ( 6,302 ) ( 5,016 ) Property and equipment , and equipment , net $ 6,242 $ 4,350 Property and equipment , net $ 6,242 $ 4,350 Property and equipment are stated building range from five to 15 year , leasehold improvement generally depreciated . During fiscal year 2008 , 2007 , and 2006 During fiscal year 2008 , 2007 , and 2006 , depreciation ", + "debt": "debt $ \u2013 Construction commitment ( 1 ) ( 2 ) 1,226 commitment ( 1 ) ( 2 ) 1,226 \u2013 \u2013 \u2013 1 ) ( 2 ) 1,226 \u2013 \u2013 \u2013 1,226 Lease ) 1,226 \u2013 \u2013 \u2013 1,226 Lease obligation : Capital lease obligation : Capital lease \u2013 1 \u2013 \u2013 1 Operating lease lease \u2013 1 \u2013 \u2013 1 Operating lease ( 3 ) \u2013 1 Operating lease ( 3 ) 440 831 522 415 Operating lease ( 3 ) 440 831 522 415 2,208 Purchase lease ( 3 ) 440 831 522 415 2,208 Purchase commitment ( 3 ) 440 831 522 415 2,208 Purchase commitment ( 3 ) 440 831 522 415 2,208 Purchase commit debt security fixed-maturity security , at June 30 , 2008 , were a , at June 30 , 2008 , were a follows : one year or le $ 3,618 $ 3,618 Due after one or le $ 3,618 $ 3,618 Due after one year through one year through five year 3,805 3,858 Due after five year year through five year 3,805 3,858 Due after five year through five year through ten year 1,582 1,559 Due after ten year year through ten year 1,582 1,559 Due after ten year 7,831 1,559 Due after ten year 7,831 7,846 Total $ 16,836 $ Due after t", + "share_repurchase": "share repurchase program program that expires on June 30 , 2011 . Under the expires on June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program b share repurchase 30 , 2008 171,474,350 $ 29.01 Total share repurchase in fiscal share repurchase in fiscal year 2008 401,847,562 Common stock repurchase in repurchase in fiscal year 2008 401,847,562 Common stock repurchase in the fourth quarter of fiscal year 2008 were a follows : Period ( in million ) April 1 , 2008 \u2013 April 30 million ) April 1 , 2008 \u2013 April 30 , 2008 1 , 2008 \u2013 April 30 , 2008 \u2013 $ \u2013 2008 \u2013 April 30 , 2008 \u2013 $ \u2013 \u2013 $ \u2013 $ \u2013 \u2013 $ 7,688 May 1 , 2008 \u2013 \u2013 \u2013 $ 7,688 May 1 , 2008 \u2013 May 31 $ 7,688 May share repurchase share repurchase . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Revenue growth wa driven primarily primarily by licensing of the 2007 Microsoft Office system and Windows Studio , and increased Xbox 360 platform sale . Foreign currency of revenue associated with Xbox 360 and Windows Vista , increased marketing expense . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year , we recorded a $ 1.1 billion charge share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program ", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 1.87 $ 1.42 $ 1.20 $ per share $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash dividend declared $ 1.20 $ 1.12 $ 0.75 Cash dividend declared per share dividend declared per share $ 0.44 $ 0.40 $ 0.35 $ per share $ 0.44 $ 0.40 $ 0.35 $ 3.40 $ $ 0.44 $ 0.40 $ 0.35 $ 3.40 $ 0.16 Cash $ 0.40 $ 0.35 $ 3.40 $ 0.16 Cash , cash $ 0.35 $ 3.40 $ 0.16 Cash , cash equivalent , , and short-term investment $ 23,662 $ 23,411 earnings per share Diluted earnings per share $ 1.87 $ 1.42 $ 1.20 32 per share $ 1.87 $ 1.42 $ 1.20 32 % 18 $ 1.87 $ 1.42 $ 1.20 32 % 18 % Fiscal 1.87 $ 1.42 $ 1.20 32 % 18 % Fiscal year 1.42 $ 1.20 32 % 18 % Fiscal year 2008 compared % 18 % Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted f Earnings per share $ 17,681 $ 14,065 $ 12,599 Earnings per share : Basic per share : Basic $ 1.90 $ 1.44 $ 1.21 Diluted : Basic $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 $ 1.20 Weighted 1.21 Diluted $ 1.87 $ 1.42 $ 1.20 Weighted average share $ 1.87 $ 1.42 $ 1.20 Weighted average share outstanding : average share outstanding : Basic 9,328 9,742 10,438 Diluted 9,470 9,886 share outstanding : Basic 9,328 9,742 10,438 Diluted 9,470 9,886 10,531 o EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 , 2008 2007 2006 Net Year Ended June 30 , 2008 2007 2006 Net income available Ended June 30 , 2008 2007 2006 Net income available for June 30 , 2008 2007 2006 Net income available for common shareholder ( A ) $ 17,681 $ 14,065 $ 12,599 Weighted A ) $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding share of common stock ( B ) 9,328 9,742 10,438 Dilutive effect of stock ( B ) 9,328 9,742 10,438 Earnings per share equivalent ( C ) 9,470 9,886 10,531 Earnings per share : ( C ) 9,470 9,886 10,531 Earnings per share : Basic Basic ( A/B ) $ 1.90 $ 1.44 $ 1.21 Diluted A/B ) $ 1.90 $ 1.44 $ 1.21 Diluted ( A/C $ 1.90 $ 1.44 $ 1.21 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.87 $ 1.42 $ 1.20 For A/C ) $ 1.87 $ 1.42 $ 1.20 For the year $ 1.87 $ 1.42 $ 1.20 For the year ended June For the year ended June 30 , 2008 , 2007 and year ended June 30 , 2008 , 2007 and 2006 , June 30 , 2008 , 2007 and 2006 , 91 million , 2008 , earnings per share 4,388 ( 2 ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( 3 ) 2007 Revenue $ 10,811 $ 12,542 ( 3 ) $ 14,398 $ 10,811 $ 12,542 ( 3 ) $ 14,398 ( 4 12,542 ( 3 ) $ 14,398 ( 4 ) $ 13,371 3 ) $ 14,398 ( 4 ) $ 13,371 $ 51,122 14,398 ( 4 ) $ 13,371 $ 51,122 Gross profit 9,115 4 ) $ 13,371 $ 51,122 Gro earnings per share 4,926 ( 5 ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 ( Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 ( 1 earnings per share 0.29 0.34 0.29 0.28 1.20 ( 1 ) per sha", + "tax_rate": "tax rate for fiscal year 2008 , 2007 , and 2006 for fiscal year 2008 , 2007 , and 2006 were 26 2008 , 2007 , and 2006 were 26 % , 30 2007 , and 2006 were 26 % , 30 % , 2006 were 26 % , 30 % , and 31 % , 30 % , and 31 % , respectively . Our decreased rate in fiscal year 2008 resulted from resolution of tax IRS \u201d ) for it 2000-2003 examination . This decline wa European Commission fine of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) , which wa deductible . The fiscal year 2007 rate reflec tax rate of 31 % , offset by a , offset by a $ 195 million reduction resulting from various assessment . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from the resolution of recorded a charge of $ 351 million ( \u20ac 281 million $ 351 million ( \u20ac 281 million ) from the European tax deductible . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted the provision \u201d ) Interpretation No . 48 ( \u201c FIN 48 \u201d . 48 ( \u201c FIN 48 \u201d ) Accounting for Uncertainty of FASB Statement No . 1", + "segment_revenue": "Segment revenue and million ) Year Ended June 30 , 2008 2007 2006 Revenue Year Ended June 30 , 2008 2007 2006 Revenue : Client Ended June 30 , 2008 2007 2006 Revenue : Client $ June 30 , 2008 2007 2006 Revenue : Client $ 16,472 2006 Revenue : Client $ 16,472 $ 14,844 $ 13,077 Server : Client $ 16,472 $ 14,844 $ 13,077 Server and Tools $ 16,472 $ 14,844 $ 13,077 Server and Tools 13,189 11,184 $ 13,077 Server and Tools 13,189 11,184 9,670 Online Services Business 13,077 Server and Tools 13,189 11,184 9,670 Onlin", + "common_stock": "common stock outstanding to be held on November 19 , 2008 are incorporated by held on November 19 , 2008 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2008 INDEX PART I Year Ended June 30 , 2008 INDEX PART I Item 1. 2008 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Common stock price per share per share : High $ 31.84 $ 37.50 $ 35.96 $ : High $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low 27.51 29.29 $ 35.96 $ 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 $ 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year 2007 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year 2007 Common Low 27.51 29.29 Common stock 26.87 27.11 26.87 Fiscal year 2007 Common stock price per share per share : High $ 27.52 $ 30.26 $ 31.48 $ : High $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See Note $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See Note 16 31.48 Low 22.23 27.15 26.60 27.56 22.23 Se common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . The repurchase billion through J common stock each quarter of fiscal year 2008 using available cash resource a price paid per share July 1 , 2007 \u2013 September 30 per share July 1 , 2007 \u2013 September 30 , 2007 1 , 2007 \u2013 September 30 , 2007 80,597,986 $ 29.14 2007 \u2013 September 30 , 2007 80,597,986 $ 29.14 October 1 \u2013 September 30 , 2007 80,597,986 $ 29.14 October 1 , 30 , 2007 80,597,986 $ 29.14 October 1 , 2007 \u2013 2007 80,597,986 $ 29.14 October 1 , 2007 \u2013 December 31 $ 29.14 October 1 , 2007 \u2013 December 31 , 2007 1 , 2007 \u2013 December 31 , 2007 Common stock repurchase in repurchase in fiscal year 2008 401,847,562 Common stock repurchase in the fourth quarter of fiscal year 2008 were a follows : Period ( in million ) April 1 , 2008 \u2013 April 30 million ) April 1 , 2008 \u2013 April 30 , 2008 1 , 2008 \u2013 April 30 , 2008 \u2013 $ \u2013 2008 \u2013 April 30 , 2008 \u2013 $ \u2013 \u2013 $ \u2013 $ \u2013 \u2013 $ 7,688 May 1 , 2008 \u2013 \u2013 \u2013 $ 7,688 May 1 , 2008 \u2013 May 31 $ 7,688 May 1 , 2008 \u2013 May 31 , 2008 1 , 2008 \u2013 May 31 , 2008 82,151,000 $ 29.77 2008 \u2013 May 31 , 2008 82,151,000 $ 29.77 82,151,000 $ \u2013 M common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 billion for fiscal year 2008 a compared with cash provided with cash provided of $ 6.1 billion for fiscal year 2007 6.1 billion for fiscal year 2007 . This decrease wa primarily primarily due to a $ 6.9 billion increase in cash paid first quarter of fiscal year 2008 , a $ 918 million year 2008 , a $ 918 million increase in purchase of equipment , and a $ 3.1 billion decreas common stock , common stock , including $ 3.3 billion related to 113 million $ 3.3 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa offer on August 17 , 2006 , which wa included in wa included in the $ 27.6 billion of common stock repurchase Cash from investing decreased $ 1.9 billion due to a $ billion due to a $ 3.5 billion decline in security lending the counterparty along with $ 1.2 bill common stock stock . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.8 billion , of our common this plan . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.0 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program with common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . As of billion through June 30 , Common stock Net cash from operation 21,612 17,796 14,404 Financing Common stock issued cash from operation 21,612 17,796 14,404 Financing Common stock issued 3,494 14,404 Financing Common stock issued 3,494 6,782 2,101 Common stock repurchased Financing Common stock issued 3,494 6,782 2,101 Common stock repurchased ( Common stock issued 3,494 6,782 2,101 Common stock repurchased ( 12,533 2,101 Common stock repurchased ( 12,533 ) ( 27,575 ) ( repurchased ( 12,533 ) ( 27,575 ) ( 19,207 ) Common ) ( 27,575 ) Common stock cash dividend Common stock cash dividend ( 4,015 ) ( 3,805 ) ( dividend ( 4,015 ) ( 3,805 ) ( 3,545 ) Excess ) ( 3,805 ) ( 3,545 ) Excess tax benefit from benefit from stock-based payment arrangement 120 77 89 Other \u2013 ( from stock-based payment arrangement 120 77 89 Other \u2013 ( 23 stock-based payment arrangement 120 77 89 Other \u2013 ( 23 ) 77 89 Other \u2013 ( 23 ) \u2013 Net cash used cash used in financing ( 12,934 ) ( 24,544 ) ( financing ( 12,934 ) ( 24,544 ) ( 20,562 ) Investing ) ( 24,544 ) ( 20,562 ) I Common stock and Ended June 30 , 2008 2007 2006 Common stock and paid-in June 30 , 2008 2007 2006 Common stock and paid-in capital , beginning of period $ 60,557 $ 59,005 $ 60,413 Common of period $ 60,557 $ 59,005 $ 60,413 Common stock issued $ 60,557 $ 59,005 $ 60,413 Common stock issued 3,504 6,783 $ 60,413 Common stock issued 3,504 6,783 1,939 Common stock repurchased 60,413 Common stock issued 3,504 6,783 1,939 Common stock repurchased ( Common stock issued 3,504 6,783 1,939 Common stock repurchased ( Common stock repurchased ( 3,022 ) ( 6,162 ) ( repurchased ( 3,022 ) ( 6,162 ) ( 4,447 ) Stock-based ) ( 6,162 ) ( 4,447 ) Stock-based compensation expense 1,479 4,447 ) Stock-based compensation expense 1,479 1,550 1,715 Stock option income ) Stock-based compensation expense 1,479 1,550 1,715 Stock option income tax Stock-based compensation expense 1,479 1,550 1,715 Stock option income tax benefit tax benefit ( deficiency ) 253 ( 661 ) ( 617 ( deficiency ) 253 ( 661 ) ( 617 ) Other 253 ( 661 ) ( 617 ) Other Common stock cash 85 9 Comprehensive income 17,167 14,490 12,402 Common stock cash dividend 9 Comprehensive income 17,167 14,490 12,402 Common stock cash dividend ( Common stock cash dividend ( 4,084 ) ( 3,837 ) ( dividend ( 4,084 ) ( 3,837 ) ( 3,594 ) Common ) ( 3,837 ) ( 3,594 ) Common stock repurchased ( ) Common stock repurchased ( 9,774 ) ( 21,212 ) ( repurchased ( 9,774 ) ( 21,212 ) ( 15,411 ) Balance ) ( 21,212 ) ( 15,411 ) Balance , end of , end of period ( 26,563 ) ( 29,460 ) ( period ( 26,563 ) ( common stock ( B ) 9,328 9,742 10,438 Dilutive effect of stock ( B ) 9,328 9,742 10,438 Dilutive effect of employee ( B ) 9,328 9,742 10,438 Dilutive effect of employee stock employee stock option and award 142 144 93 Common stock and stock option and award 142 144 93 Common stock and common option and award 142 144 93 Common stock and common stock stock equivalent ( C ) 9,470 9,886 10,531 Earnings per share equivalent ( C ) 9,470 9,886 10,531 Earnings per share : ( C ) 9,470 9,886 10,531 Earnings per share Common stock 4 ( 4 ) 761 109 652 \u2013 Common stock and ( 4 ) 761 109 652 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 4,508 1,215 ( 113 ) 5,610 Common stock and equivalent 4,508 1,215 ( 113 ) 5,610 \u2013 and equivalent 4,508 1,215 ( 113 ) 5,610 \u2013 \u2013 5,610 4,508 1,215 ( 113 ) 5,610 \u2013 \u2013 5,610 Preferred stock 113 ) 5,610 \u2013 \u2013 5,610 Preferred stock 307 9 \u2013 \u2013 \u2013 5,610 Preferred stock 307 9 \u2013 316 \u2013 \u2013 \u2013 5,610 Preferred stock 307 9 \u2013 316 \u2013 \u2013 316 Preferred stock 307 9 \u2013 316 \u2013 \u2013 316 Other investment 9 \u2013 316 \u2013 \u2013 Common stock 3 ( 25 ) 2,617 334 2,283 \u2013 Common stock and ( 25 ) 2,617 334 2,283 \u2013 Common stock and equivalent \u2013 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 \u2013 and equivalent 7,290 2,309 ( 18 ) 9,581 \u2013 \u2013 9,581 7,290 2,309 ( 18 ) 9,581 \u2013 \u2013 9,581 Preferred stock 18 ) 9,581 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 74 \u2013 \u2013 \u2013 9,581 Preferred stock 62 12 \u2013 74 \u2013 \u2013 74 Preferred stock 62 12 \u2013 74 \u2013 \u2013 74 Other investment 12 \u2013 74 \u2013 \u2013 Common stock ( 1 ) 369 ( 4 ) Common stock and equivalent ) Common stock and equivalent 598 ( 106 ) 28 ( stock and equivalent 598 ( 106 ) 28 ( 7 ) equivalent 598 ( 106 ) 28 ( 7 ) 626 ( ( 106 ) 28 ( 7 ) 626 ( 113 ) ) 28 ( 7 ) 626 ( 113 ) Total $ ( 7 ) 626 ( 113 ) Total $ 5,365 $ ( 113 ) Total $ 5,365 $ ( 233 ) $ Total $ 5,365 $ ( 233 ) $ 1,158 $ ( $ ( 233 ) $ 1,158 $ ( 22 ) $ ) $ 1,158 $ ( 22 ) $ 6,523 $ ( $ ( 22 ) $ 6,523 $ ( 255 ) Less ) $ 6,523 $ ( 255 ) Less than 12 month ( 255 ) Less than 12 month 12 mon Common stock ( 16 ) 995 ( 25 ) Common stock and equivalent ) Common stock and equivalent 237 ( 17 ) 9 ( stock and equivalent 237 ( 17 ) 9 ( 1 ) equivalent 237 ( 17 ) 9 ( 1 ) 246 ( ( 17 ) 9 ( 1 ) 246 ( 18 ) ) 9 ( 1 ) 246 ( 18 ) Total $ ( 1 ) 246 ( 18 ) Total $ 8,707 $ ( 18 ) Total $ 8,707 $ ( 155 ) $ Total $ 8,707 $ ( 155 ) $ 960 $ ( $ ( 155 ) $ 960 $ ( 31 ) $ ) $ 960 $ ( 31 ) $ 9,667 $ ( $ ( 31 ) $ 9,667 $ ( 186 ) At ) $ 9,667 $ ( 186 ) At June 30 , ( 186 ) At June 30 , 2008 , unrealized loss ) At June 30 , common stock common stock . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that repurchase program : a $ 20.0 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . As of billion through June 30 , 2011 . As of Jun common stock common stock for approximately $ 3.8 billion were repurchased under our first quarter of fiscal year 2007 . All other amount repurchased Board of Directors on July 20 , 2006 . ( 3 Directors on July 20 , 2006 . ( 3 ) All 20 , 2006 . ( 3 ) All amount repurchased in amount repurchased in fiscal year 2006 were repurchased under the repurchase Board of Directors on July 20 , 2004 . PAGE 65 Directors on July 20 , 2004 . PAGE 65 Table of 20 , 2004 . PAGE 65 Table of Contents Part II of Contents Part I", + "fair_value_measurements": "Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( \u201c FSP \u201d ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for all nonfinancial asset and ) . SFAS No . 157 is effective for u beginning effective for u beginning July 1 , 2008 ; FSP 157-2 u beginning July 1 , 2008 ; FSP 157-2 delay the 1 , 2008 ; FSP 157-2 delay the effective date for for certain item to July 1 , 2009 . We do item to July 1 , 2009 . We do not believe not bel Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( \u201c FSP \u201d ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for all nonfinancial asset and ) . SFAS No . 157 is effective for u beginning effective for u beginning July 1 , 2008 ; FSP 157-2 u beginning July 1 , 2008 ; FSP 157-2 delay the 1 , 2008 ; FSP 157-2 delay the effective date for for certain item to July 1 , 2009 . We do item to July 1 , 2009 . We do not believe not bel", + "derivative_instruments": "Derivative Instruments of FASB Statement No . 133 , which requires additional disclosure instrument under SFAS No . 133 and it related interpretation , flow . SFAS No . 161 is effective for u beginning effective for u beginning January 1 , 2009 . We are u beginning January 1 , 2009 . We are currently assessing adoption of SFAS No . 161 may have on our financial financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141R , Business Combinations , which which replaces SFAS No . 141 . The st Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage : ( In million ) 2008 2007 2006 Year Ended June ( In million ) 2008 2007 2006 Year Ended June 30 In million ) 2008 2007 2006 Year Ended June 30 , 2007 2006 Year Ended June 30 , Balance , beginning of , beginning of period $ 117 Derivative Instruments , an amendment of FAS 133 , which requires additional disclosure instrument under SFAS No . 133 and it related interpretation , flow . SFAS No . 161 is effective for u beginning effective for u beginning January 1 , 2009 . We are u beginning January 1 , 2009 . We are currently assessing adoption of SFAS No . 161 may have on our financial financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141R , Business Combinations , which , which replaces SFAS No 141 . The sta Derivative Instruments on earnings for fiscal year 2008 , 2007 , or 2006 for fiscal year 2008 , 2007 , or 2006 . During 2008 , 2007 , or 2006 . During fiscal year 2008 2006 . During fiscal year 2008 , $ 274 million in fiscal year 2008 , $ 274 million in gain on fair-value in time value and $ 324 million in loss on cash-flow other . During fiscal year 2007 , $ 219 million in fiscal year 2007 , $ 219 million in gain on fair-value in time value and $ 361 million in loss on cash-flow other . During fiscal year 2006 , $ 2" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-09-158735/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-09-158735/full-submission_features.json new file mode 100644 index 0000000..174f768 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-09-158735/full-submission_features.json @@ -0,0 +1,17 @@ +{ + "revenue": "revenue sell hardware including the Xbox 360 video game console , the resource within business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business OEM channel account for over 80 % of total Client revenue of revenue in fiscal year 2009 came from sale of Windows wa released in fiscal year 2007 . Windows XP operating system in China ) . Windows 7 , the latest version of released to manufacturing in July 2009 and is expected to be be generally available on October 22 revenue , and OEM revenue . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Dynamics CRM Online . PAGE 6 Table of Contents Part I of Contents Part I Item 1 Competition Competitors to the Microsoft . Web-based offering such a 37Signals , Adobe , AjaxWrite , system . Products : Xbox 360 console and game ; Xbox game console average five to 10 year . We released Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . revenue . 2009 , 2008 , or 2007 revenue . Our practice is executive officer a of July 29 , 2009 were a follows a of July 29 , 2009 were a follows : Name the Company Steven A. Ballmer 53 Chief Executive Officer Robert J . ( Robbie ) Bach 47 President , Entertainment and Devices Devices Division Lisa E. Brummel 49 Senior Vice President , Human Human Resources Stephen A. Elop 45 President , Microsoft Business Division Business Division Christopher P. Liddell 51 Senior Vice President and Chief Officer Qi L revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part by our customer . PAGE 17 Table of Contents Part I of Contents Part I Item 1A , 1B , 2 , Part I Item 1A , 1B , 2 , 3 , Item 1A , 1B , 2 , 3 , 4 Acquisitions , 1B , 2 , 3 , 4 Acquisitions and joint , 2 , 3 , 4 Acquisitions and joint venture may and financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2009 that remai Revenue Ended June 30 , 2009 2008 2007 2006 2005 Revenue $ June 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ 60,420 2007 2006 2005 Revenue $ 58,437 $ 60,420 $ 51,122 $ 2005 Revenue $ 58,437 $ 60,420 $ 51,122 $ 44,282 $ $ 58,437 $ 60,420 $ 51,122 $ 44,282 $ 39,788 Operating $ 60,420 $ 51,122 $ 44,282 $ 39,788 Operating income $ $ 51,122 $ 44,282 $ 39,788 Operating income $ 20,363 $ $ 39,788 Operating income revenue wa highest to the recognition of $ 1.7 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those our business in fiscal year 2009 a consumer and business cut for release in fiscal year 2010 , we believe that Microsoft downturn , in fiscal year 2009 we made important adjustment to communication , entertainment , PAGE 21 Table of Contents Part II of Contents Part II Item 7 and other area that Revenue $ 58,437 2008 Percentage Change 2008 Versus 2007 Revenue $ 58,437 $ 60,420 2008 Versus 2007 Revenue $ 58,437 $ 60,420 $ 51,122 ( 2007 Revenue $ 58,437 $ 60,420 $ 51,122 ( 3 ) $ 58,437 $ 60,420 $ 51,122 ( 3 ) % 18 $ 60,420 $ 51,122 ( 3 ) % 18 % Operating 51,122 ( 3 ) % 18 % Operating income $ 20,363 18 % Operating income $ 20,363 $ 22,271 $ 18,438 ( Operating income $ 20,363 $ 22,271 $ 18,438 ( 9 ) $ 20,363 $ 22,271 $ 18,438 ( 9 ) % 21 $ 22,271 $ 18,438 ( 9 ) % 21 % Diluted 18,438 ( 9 ) % 21 % D Revenue declined across most segment rate accounted for a $ 486 million or one percentage point line of business including Xbox 360 platform and PC game revenue price reduction during the past 12 month , partially offset by and administrative expense decreased $ 1.4 billion or 28 % , decreased $ 1.4 billion or 28 % , primarily due to contingency . We incurred $ 283 million of legal charge during the twelve month ended June 30 , 2009 a compared to month ended June 30 , 2009 a compared to $ 1.8 2009 a co revenue increased $ 557 million or 5 % , increased $ 557 million or 5 % , primarily reflecting increased partially offset by decreased Xbox 360 platform cost . In January platform cost . In January 2009 , we announced and implemented , we announced the PAGE 22 Table of Contents Part II of Contents Part II Item 7 elimination of up to 5,000 7 elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During the technology by June 30 , 2010 . During the Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted for a $ 1.6 billion or three percentage point in revenue during fiscal year 2008 . Operating income increased primarily revenue . Headcount-related expense increased 12 % , reflecting an increase in headcount during fiscal year 2008 . We incurred $ 1.8 2008 . We incurred $ 1.8 billion of legal charge during legal ch revenue increased Cost of revenue increased $ 905 million or 8 % , increased $ 905 million or 8 % , reflecting increased data partially offset by decreased Xbox 360 cost . The decreased Xbox cost . The decreased Xbox 360 cost reflect the $ 1.1 360 cost reflect the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 related to the expansion of the expansion of our Xbox 360 warranty , partially offset by partially offset by increased Xbox 360 product cost reflecting growth in wa impact Revenue $ 14,712 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,712 $ 16,865 2008 Versus 2007 Revenue $ 14,712 $ 16,865 $ 14,911 ( 2007 Revenue $ 14,712 $ 16,865 $ 14,911 ( 13 ) $ 14,712 $ 16,865 $ 14,911 ( 13 ) % 13 $ 16,865 $ 14,911 ( 13 ) % 13 % Operating 14,911 ( 13 ) % 13 % Operating income $ 10,856 13 % Operating income $ 10,856 $ 13,105 $ 11,424 ( Operating income $ 10,856 $ 13,105 $ 11,424 ( 17 ) $ 10,856 $ 13,105 $ 11,424 ( 17 ) % 15 $ 13,105 $ 11,424 ( 17 ) % 15 % Client 11,424 ( 17 ) % revenue system builder . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Client revenue decreased primarily a . OEM revenue decreased $ 2.3 billion or 16 % while decreased $ 2.3 billion or 16 % while OEM license unit while OEM license unit declined 2 % . The decline in in OEM revenue reflects a 10 percentage point decline in the the OEM premium mix to 64 % . Based on our experienced a decline of approximately 1 % to growth of approximately % to growth of approximatel revenue increased reflecting growth the end of fiscal year 2008 , more than 180 million year 2008 , more than 180 million Windows Vista license had had been sold ( approximately 130 million were sold during fiscal were sold during fiscal year 2008 ) and million of enterprise . OEM revenue increased $ 1.8 billion or 14 % , increased $ 1.8 billion or 14 % , driven by 16 14 % , driven by 16 % growth in OEM license Windows operating system increased $ 202 million or 9 % , increased $ 202 million or 9 % , p revenue increased $ 116 million or 14 % , increased $ 116 million or 14 % , primarily driven by group level in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 . Effective 2009 , 2008 , and 2007 . Effective July 1 , and 2007 . Effective July 1 , 2009 , we reorganized . Effective July 1 , 2009 , we reorganized the Windows million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 Revenue $ 14,126 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,126 $ 13,102 2008 Versus 2007 Revenue $ 14,126 $ 13,102 $ 11,104 8 2007 Revenue $ 14,126 $ 13,102 $ 11,104 8 % 18 $ 14,126 $ 13,102 $ 11,104 8 % 18 % Operating 14,126 $ 13,102 $ 11,104 8 % 18 % Operating income 13,102 $ 11,104 8 % 18 % Operating income $ 5,327 18 % Operating income $ 5,327 $ 4,539 $ 3,571 17 Operating income $ 5,327 $ 4,539 $ 3,571 17 % 27 $ 5,327 $ 4,539 $ 3,571 17 % 27 % Server 5,327 $ 4,539 $ 3,571 17 % 27 % Serve revenue increased developer tool revenue increased $ 809 million or 8 % , increased $ 809 million or 8 % , primarily driven by support service revenue increased $ 215 million or 8 % , increased $ 215 million or 8 % , primarily due to rate accounted for a $ 140 million or one percentage point and development expense increased $ 168 million or 9 % , increased $ 168 million or 9 % , primarily driven by Cost of revenue increased $ 84 million or 3 % , increased $ 84 million or 3 % , reflecting the growth co revenue increased currency exchange rate of $ 464 million or four percentage point developer tool revenue increased $ 1.4 billion or 16 % , increased $ 1.4 billion or 16 % , primarily driven by the release of Windows Server 2008 and Visual Studio 2008 during Server 2008 and Visual Studio 2008 during fiscal year 2008 . Studio 2008 during fiscal year 2008 . Consulting and Premier product support service revenue increased $ 593 million or 29 % , increased $ 593 million or 29 % , primarily due to and marke revenue increased $ 404 million or 19 % , increased $ 404 million or 19 % , reflecting the growth and development expense increased $ 177 million or 10 % , increased $ 177 million or 10 % , primarily driven by expense . Headcount-related expense increased 6 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage C Revenue $ 3,088 2008 Percentage Change 2008 Versus 2007 Revenue $ 3,088 $ 3,214 2008 Versus 2007 Revenue $ 3,088 $ 3,214 $ 2,434 ( 2007 Revenue $ 3,088 $ 3,214 $ 2,434 ( 4 ) $ 3,088 $ 3,214 $ 2,434 ( 4 ) % 32 $ 3,214 $ 2,434 ( 4 ) % 32 % Operating 2,434 ( 4 ) % 32 % Operating loss $ ( % Operating loss $ ( 2,253 ) $ ( 1,222 ) ( 2,253 ) $ ( 1,222 ) $ ( 604 ) ( 1,222 ) $ ( 604 ) ( 84 ) % $ ( 604 ) ( 84 ) % ( 102 ) ( 84 ) % ( 102 ) % Online Services Business first quarter of fiscal year 2008 , we completed revenue decreased primarily a Online advertising revenue decreased $ 73 million or 3 % , decreased $ 73 million or 3 % , to $ 2.3 3 % , to $ 2.3 billion , reflecting a decrease . Access revenue decreased $ 72 million or 28 % , decreased $ 72 million or 28 % , reflecting continued migration rate accounted for a $ 28 million or one percentage point Cost of revenue increased $ 692 million or 36 % , increased $ 692 million or 36 % , primarily driven by and development expense increased $ 149 million or 13 revenue increased driven by Online advertising revenue increased $ 550 million or 31 % , increased $ 550 million or 31 % , to $ 2.3 31 % , to $ 2.3 billion . This increase reflects online advertising revenue of $ 161 million . Agency revenue , from aQuantive , wa $ 345 million during fiscal year 2008 345 million during fiscal year 2008 . Access revenue decreased $ . Access revenue decreased $ 98 million or 28 % , decreased $ 98 million or 28 % , to $ 256 28 % , to $ 256 million , reflecting migration o revenue increased $ 796 million or 71 % , increased $ 796 million or 71 % , primarily driven by and marketing expense increased $ 311 million or 37 % , increased $ 311 million or 37 % , primarily due to customer-related intangible asset of $ 94 million , increased headcount-related expense and development expense increased $ 177 million or 17 % , increased $ 177 million or 17 % , and general and and administrative expense increased $ 114 million or 178 % , increased $ 114 million or 178 % , primarily r Revenue $ 18,894 2008 Percentage Change 2008 Versus 2007 Revenue $ 18,894 $ 18,929 2008 Versus 2007 Revenue $ 18,894 $ 18,929 $ 16,476 \u2013 2007 Revenue $ 18,894 $ 18,929 $ 16,476 \u2013 % 15 $ 18,894 $ 18,929 $ 16,476 \u2013 % 15 % Operating 18,929 $ 16,476 \u2013 % 15 % Operating income $ 12,141 15 % Operating income $ 12,141 $ 12,369 $ 10,838 ( Operating income $ 12,141 $ 12,369 $ 10,838 ( 2 ) $ 12,141 $ 12,369 $ 10,838 ( 2 ) % 14 $ 12,369 $ 10,838 ( 2 ) % 14 % Microsoft 10,838 ( 2 ) % 14 % Microsoft Business Divisio revenue , OEM revenue . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 MBD revenue wa flat reflecting currency exchange rate of $ 378 million or two percentage point . Consumer revenue decreased $ 525 million or 14 % , decreased $ 525 million or 14 % , primarily a a and pricing promotion on the 2007 Microsoft Office system . Business . Business revenue increased $ 490 million or 3 % , increased $ 490 million or 3 % , primarily reflecting growth agreement revenue and revenue increased $ 135 million or 14 % primarily increased $ 135 million or 14 % primarily driven by expense which we acquired in April 2008 , a well a online and development expense increased $ 119 million or 8 % , increased $ 119 million or 8 % , primarily driven by and marketing expense decreased $ 90 million or 2 % , decreased $ 90 million or 2 % , primarily driven by sale force . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 MBD revenue increased reflecting g revenue increased $ 2.6 billion or 21 % , increased $ 2.6 billion or 21 % , primarily a a business revenue also included a 21 % increase in Microsoft Dynamics . Consumer revenue decreased $ 131 million or 3 % , decreased $ 131 million or 3 % , reflecting the consumer the consumer launch of the 2007 Microsoft Office system in fiscal Office system in fiscal year 2007 . MBD operating income increased and marketing expense increased $ 446 million or 13 % , increased $ 446 million or 13 % , reflecting incre revenue increased $ 214 million or 27 % , increased $ 214 million or 27 % , primarily driven by sale . Headcount-related expense increased 10 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus Revenue $ 7,753 2008 Percentage Change 2008 Versus 2007 Revenue $ 7,753 $ 8,206 2008 Versus 2007 Revenue $ 7,753 $ 8,206 $ 6,139 ( 2007 Revenue $ 7,753 $ 8,206 $ 6,139 ( 6 ) $ 7,753 $ 8,206 $ 6,139 ( 6 ) % 34 $ 8,206 $ 6,139 ( 6 ) % 34 % Operating 6,139 ( 6 ) % 34 % Operating income ( loss income ( loss ) $ 169 $ 497 $ ( 1,898 loss ) $ 169 $ 497 $ ( 1,898 ) ( 169 $ 497 $ ( 1,898 ) ( 66 ) % $ ( 1,898 ) ( 66 ) % * * Not ) offering include the Xbox 360 platform ( which includes the which includes the Micr revenue decreased across most our non-gaming business decreased $ 292 million or 12 % , decreased $ 292 million or 12 % , primarily reflecting decreased hardware product revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 161 million or 3 % , decreased $ 161 million or 3 % , primarily a a of decreased revenue per Xbox 360 console due to price reduction price reduction during the past 12 month , partially offset by partially offset by increased Xbox 360 console sale and increased revenue . We shipped 11.2 million Xbox 360 console during We shipped 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 , compared with 8.7 million year 2009 , compared with 8.7 million Xbox 360 console during compared with 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 . Foreign currency exchange rate rate accounted for a $ 74 million or one percentage point and development expense increased $ 252 million or 16 % , increa revenue decreased $ 326 million or 7 % , decreased $ 326 million or 7 % , primarily due to primarily due to decreased Xbox 360 platform cost . Fiscal year platform cost . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 EDD revenue increased primarily due primarily due to increased Xbox 360 platform sale . Xbox 360 360 platform sale . Xbox 360 platform and PC game revenue PC game revenue increased $ 1.7 billion or 41 % a increased $ 1.7 billion or 41 % a a result of a revenue , Live revenue , and Xbox 360 accessory sale . We shipped accessory sale . We shipped 8.7 million Xbox 360 console during We shipped 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 , compared with 6.6 million year 2008 , compared with 6.6 million Xbox 360 console during compared with 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 . EDD operating income increased Cost of revenue decreased $ 684 million or 13 % , d revenue 2008 Percentage Change 2008 Versus 2007 Cost of revenue $ 12,155 2007 Cost of revenue $ 12,155 $ 11,598 $ 10,693 5 of revenue $ 12,155 $ 11,598 $ 10,693 5 % 8 $ 12,155 $ 11,598 $ 10,693 5 % 8 % As 12,155 $ 11,598 $ 10,693 5 % 8 % As a 11,598 $ 10,693 5 % 8 % As a percent of As a percent of revenue 21 % 19 % 21 % percent of revenue 21 % 19 % 21 % 2ppt ( revenue 21 % 19 % 21 % 2ppt ( 2 ) % 19 % 21 % 2ppt ( 2 ) ppt Cost % 21 % 2ppt ( 2 ) ppt Cost of revenue technological feasibility . Fiscal year revenue increased during the twelve month ended June 30 , 2009 , primarily reflecting month ended June 30 , 2009 , primarily reflecting increased online partially offset by decreased Xbox 360 platform cost . Fiscal year platform cost . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cost of revenue increased reflecting partially offset by decreased Xbox 360 cost . Xbox 360 cost Xbox 360 cost . Xbox 360 cost decreased because of the decreased because of the $ 1.1 bill revenue 15 % 14 % 14 % percent of revenue 15 % 14 % 14 % 1ppt \u2013ppt revenue 15 % 14 % 14 % 1ppt \u2013ppt Research and % 14 % 14 % 1ppt \u2013ppt Research and development expense research and development . PAGE 29 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Research and development expense increased the twelve month ended June 30 , 2009 , primarily reflecting month ended June 30 , revenue 22 % 22 % 23 % percent of revenue 22 % 22 % 23 % \u2013ppt ( revenue 22 % 22 % 23 % \u2013ppt ( 1 ) % 23 % \u2013ppt ( 1 ) ppt Sales and marketing other program . Effective July 1 , 2008 , we began . Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , we included Prior to July 1 , 2008 , we included gain and the twelve month ended June 30 , 2009 , $ 509 month ended June 30 , 2009 , $ 509 million of 30 , 2009 , $ 509 million of loss were reported the twelve month ended June 30 , 200 revenue 6 % 8 % 7 % percent of revenue 6 % 8 % 7 % ( 2 revenue 6 % 8 % 7 % ( 2 ) ppt 8 % 7 % ( 2 ) ppt 1ppt General and % ( 2 ) ppt 1ppt General and administrative cost include other administrative fee . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 General and administrative expense decreased incurred legal charge of $ 283 million in current year , , a compared wi Revenue Unearned revenue is . Undelivered element include $ 276 million of deferred revenue related revenue related to the Windows 7 Upgrade Option program . The program , which started June 26 , 2009 , allows customer which started June 26 , 2009 , allows customer who purchase the corresponding version of Windows 7 at minimal or no cost upgrade to the equivalent Windows 7 product with participating retailer in unearned revenue a of June 30 , 2009 : ( In a of June 30 , 2009 : ( In million ) Three month revenue growth , partially partially offset by the $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) payment of the used for financing decreased $ 11.6 billion primarily due to a primarily due to a $ 15.0 billion decrease in common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 billion for fiscal year 2008 a compared with cash provided with cash provided of $ 6.1 billion for fiscal year 2007 6.1 billion for fi revenue of $ 1.3 billion and non-cash item of and non-cash item of $ 226 million . PAGE 36 Table $ 226 million . PAGE 36 Table of Contents Part II of Contents Part II Item 7 RECENTLY ISSUED ACCOUNTING STANDARDS Recently Adopted Accounting Pronouncements On April 1 , 2009 , we adopted Pronouncements On April 1 , 2009 , we adopted the Financial \u201c FSP \u201d ) FAS 157-4 , FSP FAS 115-2 and FAS 157-4 , FSP FAS 115-2 and FAS 124-2 , and FSP FAS 115-2 and FAS 124-2 , and FSP FAS 107-1 124-2 , and FSP FAS 107-1 an Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether a result of the Windows 7 Upgrade Option program which started Option program which started June 26 , 2009 . The program which started June 26 , 2009 . The program allows customer the corresponding version of Windows 7 at minimal or no cost upgrade to the equivalent Windows 7 product with participating retailer in related to the undelivered Windows 7 product is deferred until the Investment Securities SFAS No . 11 Revenue Year Ended June 30 , 2009 2008 2007 Revenue $ 58,437 Ended June 30 , 2009 2008 2007 Revenue $ 58,437 $ June 30 , 2009 2008 2007 Revenue $ 58,437 $ 60,420 2009 2008 2007 Revenue $ 58,437 $ 60,420 $ 51,122 Operating 2007 Revenue $ 58,437 $ 60,420 $ 51,122 Operating expense : $ 58,437 $ 60,420 $ 51,122 Operating expense : Cost of expense : Cost of revenue 12,155 11,598 10,693 Research and development : Cost of revenue 12,155 11,598 10,693 Research and development 9,010 Cost of revenue 12,155 11,59 revenue 13,003 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 13,397 725 3,248 Short-term unearned revenue 13,003 13,397 Securities lending payable 1,684 3,248 Short-term unearned revenue 13,003 13,397 Securities lending payable 1,684 2,614 13,003 13,397 Securities lending payable 1,684 2,614 Other 3,142 3,659 Total 13,397 Securities lending payable 1,684 2,614 Other 3,142 3,659 Total current lending payable 1,684 2,614 Other 3,142 3,659 Total current liability 27,034 payable 1,684 revenue 1,281 3,746 \u2013 Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 \u2013 Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 4,721 1,281 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders \u2019 paid-in capital \u2013 share authorized 24,000 ; outstanding 8,908 and 9,151 share authorized 24,000 ; outstanding 8,908 and 9,151 62,382 62,849 Retained 24,000 ; revenue Deferred income tax 762 935 421 Deferral of unearned revenue 24,409 421 Deferral of unearned revenue 24,409 24,532 21,032 Recognition of unearned Deferral of unearned revenue 24,409 24,532 21,032 Recognition of unearned revenue of unearned revenue 24,409 24,532 21,032 Recognition of unearned revenue ( Recognition of unearned revenue ( 25,426 ) ( 21,944 ) ( revenue ( 25,426 ) ( 21,944 ) ( 19,382 ) Changes ) ( 21,944 ) ( 19,382 ) Changes in operating asset and liability : Accounts receivable 2,21 Revenue related to our Xbox 360 game console , game published for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . and development expense until PAGE 48 Table of Contents Part II of Contents Part II Item 8 the point that technological feasibility . Advertising expense wa $ 1.4 billion , $ 1.2 billion $ 1.4 billion , $ 1.2 billion , and $ 1.3 1.2 billion , and $ 1.3 billion in fiscal year 2009 1.3 billion in fiscal year 2009 , 2008 , and 2007 in revenue $ 884 Amount excluded from effectiveness assessment ( expense ) $ ( 314 ) We estimate that $ ) We estimate that $ 528 million of net derivative gain into earnings within the next 12 month . No significant amount to occur during fiscal year 2009 . Non-Designated Derivatives Gains ( amount recognized during fiscal year 2009 were a follows : ( Foreign exchange contract $ ( 234 ) Equity contract ( 131 234 ) Equity contract ( 131 ) Interest-rate contract 5 Credit ( 131 ) Interest-rate contract 5 Cre Revenue Service Service settlement \u2013 % ( 5.8 ) % \u2013 % European European Commission fine \u2013 % 2.1 % \u2013 % Other reconciling Other reconciling item , net 0.8 % 1.5 % 0.1 % item , net 0.8 % 1.5 % 0.1 % Effective rate net 0.8 % 1.5 % 0.1 % Effective rate 26.5 % % 0.1 % Effective rate 26.5 % 25.8 % 30.0 % % Effective rate 26.5 % 25.8 % 30.0 % In general rate 26.5 % 25.8 % 30.0 % In general , other credit . In fiscal year 2009 and 2008 , there were In fiscal year 2009 and 2008 , there were no individually reconc revenue 743 928 2,225 Other expense item 1,595 1,933 Unearned revenue 743 928 Impaired item 1,595 1,933 Unearned revenue 743 928 Impaired investment 236 331 1,595 1,933 Unearned revenue 743 928 Impaired investment 236 331 Other revenue 743 928 Impaired investment 236 331 Other revenue item 120 743 928 Impaired investment 236 331 Other revenue item 120 91 236 331 Other revenue item 120 91 Deferred income tax asset 331 Other revenue item 120 91 Deferred income tax asset $ Deferred income tax asset $ 4,69 REVENUE Unearned revenue is . Undelivered element include $ 276 million of deferred revenue related revenue related to the Windows 7 Upgrade Option program . Other revenue recognition criterion . PAGE 67 Table of Contents Part II of Contents Part II Item 8 The component of unearned revenue ( In million ) June 30 , 2009 2008 Volume licensing million ) June 30 , 2009 2008 Volume licensing program $ ) June 30 , 2009 2008 Volume licensing program $ 11,350 2008 Volume licensing program $ 11,350 $ 12,232 Und revenue by 1,669 Total $ 14,284 $ 15,297 Unearned revenue by segment wa ( In million ) June 30 , 2009 2008 Client $ million ) June 30 , 2009 2008 Client $ 2,345 $ ) June 30 , 2009 2008 Client $ 2,345 $ 2,738 , 2009 2008 Client $ 2,345 $ 2,738 Server and Tools 2008 Client $ 2,345 $ 2,738 Server and Tools 4,732 5,007 $ 2,738 Server and Tools 4,732 5,007 Microsoft Business Division 6,508 2,738 Server and Tools 4,732 5,007 Microsoft Business Division 6,508 7,101 4,732 5,007 Microsoft Business Division 6,50 Revenue Year Ended June 30 , 2009 2008 2007 Revenue : Client Ended June 30 , 2009 2008 2007 Revenue : Client $ June 30 , 2009 2008 2007 Revenue : Client $ 14,414 2007 Revenue : Client $ 14,414 $ 16,472 $ 14,779 Server : Client $ 14,414 $ 16,472 $ 14,779 Server and Tools $ 14,414 $ 16,472 $ 14,779 Server and Tools 14,135 13,121 $ 14,779 Server and Tools 14,135 13,121 11,117 Online Services Business 14,779 Server and Tools 14,135 13,121 11,117 Online Services Business 3,088 Server and Tools 14,135 13,121 Revenue reconciling amount ) Stock-based compensation expense 936 950 123 Revenue reconciling amount 280 Stock-based compensation expense 936 950 123 Revenue reconciling amount 280 385 950 123 Revenue reconciling amount 280 385 120 Other ( 12 123 Revenue reconciling amount 280 385 120 Other ( 12 ) Revenue reconciling amount 280 385 120 Other ( 12 ) 27 280 385 120 Other ( 12 ) 27 78 Total $ 120 Other ( 12 ) 27 78 Total $ ( 4,673 Other ( 12 ) 27 78 Total $ ( 4,673 ) 27 78 Total $ ( 4,673 ) $ ( 5,655 ) ( revenue . 2009 , 2008 , or 2007 revenue . Revenue , classified million ) Year Ended June 30 , 2009 2008 2007 United Year Ended June 30 , 2009 2008 2007 United States ( Ended June 30 , 2009 2008 2007 United States ( a June 30 , 2009 2008 2007 United States ( a ) States ( a ) $ 33,052 $ 35,928 $ 31,346 Other a ) $ 33,052 $ 35,928 $ 31,346 Other country 25,385 $ 33,052 $ 35,928 $ 31,346 Other country 25,385 24,492 19,776 35,928 $ 31,346 Other country 25,385 24,492 19,776 Total $ 58,437 $ 31,346 Other coun Revenue June 30 Total Fiscal year 2009 Revenue $ 15,061 $ 16,629 Fiscal year 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( a ) $ 16,629 $ 13,648 $ 13,099 ( a ) $ 58,437 13,099 ( a ) $ 58,437 Gross profit 12,213 12,722 10,834 ) $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income Revenue share 0.48 0.47 0.33 0.34 1.62 Fiscal year 2008 Revenue $ 0.33 0.34 1.62 Fiscal year 2008 Revenue $ 13,762 $ 16,367 Fiscal year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( e ) 2007 Revenue $ 10,811 $ 12,542 ( e ) $ 14,398 12,542 ( e ) $ 14,398 ( f ) $ 13,371 14,398 ( f ) $ 13,371 $ 51,122 Gross profit 9,115 f ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( h $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( h ) 51,122 Gross profit 9,115 8,922 12 revenue deferred to period relating to the Windows 7 Upgrade Option program . ( Includes employee severance of $ 290 million and $ 40 million $ 290 million and $ 40 million ( pre-tax ) in of the year ended June 30 , 2009 , respectively . year ended June 30 , 2009 , respectively . ( c ) Includes charge of $ 237 million ( pre-tax ) related ) Includes charge of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) related to the the European Commission in February 2008 . ( e ) Reflects ( e ) Refle revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( ( f ) Includes $ 1.6 billion of revenue discussed above ) Includes charge of $ 296 million ( pre-tax ) related ( h ) Includes $ 1.1 billion ( pre-tax ) charge charge related to the Xbox 360 warranty policy , inventory write-down and product return . NOTE 24 SUBSEQUENT EVENT On July 29 24 SUBSEQUENT EVENT On July 29 , 2009 , Microsoft and EVENT On July 29 , 2009 , Mi", + "net_income": "Net income $ $ 18,438 $ 16,380 $ 14,576 Net income $ 14,569 $ $ 14,576 Net income $ 14,569 $ 17,681 $ 14,065 $ Net income $ 14,569 $ 17,681 $ 14,065 $ 12,599 $ $ 14,569 $ 17,681 $ 14,065 $ 12,599 $ 12,254 Diluted $ 17,681 $ 14,065 $ 12,599 $ 12,254 Diluted earnings per $ 14,065 $ 12,599 $ 12,254 Diluted earnings per share $ Diluted earnings per share $ 1.62 $ 1.87 $ 1.42 $ per share $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash dividend declared $ 1 Net income $ Provision for income tax 5,252 6,133 6,036 Net income $ 14,569 for income tax 5,252 6,133 6,036 Net income $ 14,569 $ 6,133 6,036 Net income $ 14,569 $ 17,681 $ 14,065 Earnings Net income $ 14,569 $ 17,681 $ 14,065 Earnings per share $ 14,569 $ 17,681 $ 14,065 Earnings per share : Basic per share : Basic $ 1.63 $ 1.90 $ 1.44 Diluted : Basic $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 $ 1.42 Weighted 1.44 Diluted $ 1.62 $ 1.8 Net income Ended June 30 , 2009 2008 2007 Operations Net income $ June 30 , 2009 2008 2007 Operations Net income $ 14,569 2007 Operations Net income $ 14,569 $ 17,681 $ 14,065 Adjustments Net income $ 14,569 $ 17,681 $ 14,065 Adjustments to reconcile $ 14,569 $ 17,681 $ 14,065 Adjustments to reconcile net income , and other noncash item 2,562 2,056 1,440 Stock-based compensation 1,708 and other noncash item 2,562 2,056 1,440 Stock-based compensation 1,708 1,479 other noncash item 2,562 2,056 1,440 Stock-b Net income 14,569 17 ) \u2013 Net income 14,569 17,681 14,065 Other comprehensive income ) \u2013 Net income 14,569 17,681 14,065 Other comprehensive income : \u2013 Net income 14,569 17,681 14,065 Other comprehensive income : Net Net unrealized gain on derivative 302 18 14 Net unrealized gain unrealized gain on derivative 302 18 14 Net unrealized gain ( gain on derivative 302 18 14 Net unrealized gain ( loss loss ) on investment ( 233 ) ( 653 ) 326 investment ( 233 ) ( 653 ) 326 Translation adjustment and 233 ) ( 653 ) Net income available Ended June 30 , 2009 2008 2007 Net income available for June 30 , 2009 2008 2007 Net income available for common shareholder ( A ) $ 14,569 $ 17,681 $ 14,065 Weighted A ) $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding share of common stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based award Dilutive effect of Net income 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 2,977 10,834 10,513 46,282 Net income 4,373 4,174 2,977 ( b ) 10,513 46,282 Net income 4,373 4,174 2,977 ( b ) 3,045 46,282 Net income 4,373 4,174 2,977 ( b ) 3,045 ( 4,174 2,977 ( b ) 3,045 ( b ) 14,569 Basic ) 3,045 ( b ) 14,569 Basic earnings per share 0.48 14,569 Basic earnings per shar Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 ( 11,940 12,971 48,822 Net income 4,289 4,707 ( c ) 4,388 12,971 48,822 Net income 4,289 4,707 ( c ) 4,388 ( 4,289 4,707 ( c ) 4,388 ( d ) 4,297 17,681 ) 4,388 ( d ) 4,297 17,681 Basic earnings per share 4,388 ( d ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share Net income 3,478 2,626 4,926 h ) 40,429 Net income 3,478 2,626 4,926 ( g ) ) 40,429 Net income 3,478 2,626 4,926 ( g ) 3,035 40,429 Net income 3,478 2,626 4,926 ( g ) 3,035 14,065 2,626 4,926 ( g ) 3,035 14,065 Basic earnings per share 4,926 ( g ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.", + "assets": "Assets Current million ) June 30 , 2009 2008 Assets Current asset : ) June 30 , 2009 2008 Assets Current asset : Cash Cash and cash equivalent $ 6,076 $ 10,339 Short-term investment ( cash equivalent $ 6,076 $ 10,339 Short-term investment ( including security pledged a collateral of $ 1,540 and $ 2,491 ) 25,371 of $ 1,540 and $ 2,491 ) 25,371 13,323 Total cash 1,540 and $ 2,491 ) 25,371 13,323 Total cash , cash and $ 2,491 ) 25,371 13,323 Total cash , cash equivalent equivalent , and short-term invest Assets Intangible asset are , ranging from one to 10 year . We evaluate the recent fiscal year and July 29 , 2009 , the date year and July 29 , 2009 , the date the financial Adopted Accounting Pronouncements On April 1 , 2009 , we adopted Pronouncements On April 1 , 2009 , we adopted the Financial \u201c FSP \u201d ) FAS 157-4 , FSP FAS 115-2 and FAS 157-4 , FSP FAS 115-2 and FAS 124-2 , and FSP FAS 115-2 and FAS 124-2 , and FSP FAS 107-1 124-2 , and FSP FAS 107-1 and APB 28-1 . These FSP FAS 107-1 and APB 28-1 Assets and Liabilities Measured at asset and liability at June 30 , 2009 , which are liability at June 30 , 2009 , which are measured at ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value FIN No Fair Value FIN No . 39 Netting ( a ) Net Value Assets Mutual fund $ 982 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 982 $ \u2013 $ 982 Commercial $ 982 $ \u2013 $ 982 Commercial paper \u2013 2,601 \u2013 $ 982 Commercial paper \u2013 2,601 \u2013 2,601 \u2013 2,601 Certificates Comme Assets and Liabilities Measured at other-than-temporarily impaired . At June 30 , 2009 , the fair . At June 30 , 2009 , the fair value of a non-recurring basis wa $ 164 million . This fair value Principles Board Opinion No . 18 , The Equity Method of the fiscal year ended June 30 , 2009 , impairment charge year ended June 30 , 2009 , impairment charge of $ , impairment charge of $ 86 million were recognized for certain in all instance . NOTE 7 INVENTORIES The component of inventory ( In million ) June ASSETS The Part II Item 8 NOTE 11 INTANGIBLE ASSETS The component of ( In million ) June 30 , 2009 2008 Gross Carrying million ) June 30 , 2009 2008 Gross Carrying Amount Accumulated ) June 30 , 2009 2008 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Contract-based $ 1,087 $ ( 855 ) $ Contract-based $ 1,087 $ ( 855 ) $ 232 $ 1,074 $ ( 855 ) $ 232 $ 1,074 $ ( 796 855 ) $ 232 $ 1,074 $ ( 796 ) $ 232 $ 1,074 $ ( 796 ) $ 278 Technology-based 2,033 $ ( 796 ) $ 278 Technology-based 2,03", + "liabilities": "Liabilities and stockholder Total asset $ 77,888 $ 72,793 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued compensation 3,156 2,934 debt 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 Short-term compensation 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue Liabilities $ 44 $ 21 $ 2 $ 633 Liabilities Derivatives not $ 21 $ 2 $ 633 Liabilities Derivatives not designated a Other current liability $ ( 183 ) $ ( 3 ) ( 183 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 274 ) ( 6 ) $ ( 274 ) Derivatives designated a hedging Other current liability $ ( 75 ) $ \u2013 $ \u2013 \u2013 $ \u2013 $ ( 75 ) Total liability ( b ( b ) $ ( 258 ) $ ( 3 ) ( 258 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 349 ) ( 6 ) $ Liabilities Measured at asset and liability at June 30 , 2009 , which are liability at June 30 , 2009 , which are measured at ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value FIN No Fair Value FIN No . 39 Netting ( a ) Net Value Assets Mutual fund $ 982 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 982 $ \u2013 $ 982 Commercial $ 982 $ \u2013 $ 982 Commercial paper \u2013 2,601 \u2013 $ 982 Commercial paper \u2013 2,601 \u2013 2,601 \u2013 2,601 Certificates Commercial paper \u2013 2, Liabilities Derivatives $ ( 235 ) $ 33,724 Liabilities Derivatives $ 5 $ $ 33,724 Liabilities Derivatives $ 5 $ 344 $ \u2013 $ Liabilities Derivatives $ 5 $ 344 $ \u2013 $ 349 $ $ 344 $ \u2013 $ 349 $ ( 231 ) $ \u2013 $ 349 $ ( 231 ) $ 118 ( a $ ( 231 ) $ 118 ( a ) FIN No a ) FIN No . 39 , Offsetting of Amounts Related interpretation of APB No . 10 and FASB Statement No . and FASB Statement No . 105 , permit the netting of risk . Changes in Level 3 Instruments Measured at Fair Value The majority of our Level 3 instrument cons Liabilities Measured at other-than-temporarily impaired . At June 30 , 2009 , the fair . At June 30 , 2009 , the fair value of a non-recurring basis wa $ 164 million . This fair value Principles Board Opinion No . 18 , The Equity Method of the fiscal year ended June 30 , 2009 , impairment charge year ended June 30 , 2009 , impairment charge of $ , impairment charge of $ 86 million were recognized for certain in all instance . NOTE 7 INVENTORIES The component of inventory ( In million ) June 30 , 2009 2008 LIABILITIES $ 14,284 $ 15,297 NOTE 15 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 , 2009 2008 Tax contingency million ) June 30 , 2009 2008 Tax contingency and other ) June 30 , 2009 2008 Tax contingency and other tax and other tax liability $ 5,515 $ 3,812 Legal contingency 407 tax liability $ 5,515 $ 3,812 Legal contingency 407 530 Product 5,515 $ 3,812 Legal contingency 407 530 Product warranty 132 278 $ 3,812 Legal contingency 407 530 Product warranty 132 278 Other contingency 407 530 Produ", + "equity": "Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management \u2019 Selected Financial Data 20 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 42 Item 8 . Financial Statements about Market Risk 42 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 ) for information regarding dividend and share repurchase . PAGE 19 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 , 2009 2008 2007 2006 Year Ended June 30 , 2009 2008 2007 2006 2005 Revenue Ended June 30 , 2009 2008 2007 2006 2005 Revenue $ June 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ , 2009 2008 20 equity $ 8,320 $ 7,051 $ 5,823 Stockholders \u2019 equity $ 39,558 5,823 Stockholders \u2019 equity $ 39,558 $ 36,286 $ 31,097 $ \u2019 equity $ 39,558 $ 36,286 $ 31,097 $ 40,104 $ $ 39,558 $ 36,286 $ 31,097 $ 40,104 $ 48,115 ( $ 36,286 $ 31,097 $ 40,104 $ 48,115 ( a ) $ 31,097 $ 40,104 $ 48,115 ( a ) Includes $ ( a ) Includes $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 \u2013 May 2009 . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 ) . PAGE 20 Table Item 8 ) . PAGE 20 Table Equity and a of June 30 , 2008 . Equity and other investment and other investment were $ 4.9 billion a of June 30 4.9 billion a of June 30 , 2009 , compared with a of June 30 , 2009 , compared with $ 6.6 2009 , compared with $ 6.6 billion a of June 30 6.6 billion a of June 30 , 2008 . Our investment a of June 30 , 2008 . Our investment consist primarily second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 22.8 billion at June 30 , $ 22.8 billion at June 30 , 2009 equity at June 30 , 2009 , wa $ equity at June 30 , 2009 , wa $ 39.6 billion , 2009 , wa $ 39.6 billion . We will continue constructing new building were $ 621 million on June 30 , $ 621 million on June 30 , 2009 . We have million on June 30 , 2009 . We have operating lease incurred rental expense totaling $ 475 million , $ 398 million $ 475 million , $ 398 million , and $ 325 398 million , and $ 325 million , in fiscal year million , in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , Equity $ 20 Interest rate 42 34 28 43 17 Equity 157 20 Interest rate 42 34 28 43 17 Equity 157 45 Interest rate 42 34 28 43 17 Equity 157 45 98 rate 42 34 28 43 17 Equity 157 45 98 158 34 28 43 17 Equity 157 45 98 158 45 Commodity 28 43 17 Equity 157 45 98 158 45 Commodity 16 43 17 Equity 157 45 98 158 45 Commodity 16 7 17 Equity 157 45 98 158 45 Commodity 16 7 10 Equity 157 45 98 158 45 Commodity 16 7 10 16 45 98 158 45 Commodity 16 7 10 16 6 Total 98 158 45 Commodity 16 7 10 16 6 Total one-day 158 4 Equity and other $ 7,547 and $ 6,302 7,535 6,242 Equity and other investment 7,547 and $ 6,302 7,535 6,242 Equity and other investment 4,933 6,242 Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset , net investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset , net 1,759 12,108 Intangible asset , net 1,759 1,973 Deferred inco equity liability : Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued compensation 3,156 2,934 debt 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 Short-term compensation 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 13,397 equity ) Total stockholder \u2019 equity 39,558 36,286 Total liability and stockholder Total stockholder \u2019 equity 39,558 36,286 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 77,888 $ 72,793 See accompanying note \u2019 equity $ 77,888 $ 72,793 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2009 2008 2007 Operations Year Ended June 30 , 2009 2008 2007 Operations Net income E EQUITY STATEMENTS ( million ) Year Ended June 30 , 2009 2008 2007 Common Year Ended June 30 , 2009 2008 2007 Common stock and Ended June 30 , 2009 2008 2007 Common stock and paid-in June 30 , 2009 2008 2007 Common stock and paid-in capital , beginning of period $ 62,849 $ 60,557 $ 59,005 Common of period $ 62,849 $ 60,557 $ 59,005 Common stock issued $ 62,849 $ 60,557 $ 59,005 Common stock issued 567 3,504 $ 59,005 Common stock issued 567 3,504 6,783 Common stock repurchased 59,005 Common stock issued equity Total stockholder \u2019 equity $ 39,558 $ 36,286 $ 31,097 See \u2019 equity $ 39,558 $ 36,286 $ 31,097 See accompanying note $ 39,558 $ 36,286 $ 31,097 See accompanying note . PAGE See accompanying note . PAGE 46 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES Accounting Principles The \u201d ) . Effective July 1 , 2008 , we began . Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , w Equity and Other Investments June 30 , 2009 Cash $ 2,064 Other Investments June 30 , 2009 Cash $ 2,064 $ \u2013 30 , 2009 Cash $ 2,064 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 2,064 $ 2,064 $ \u2013 $ $ \u2013 $ 2,064 $ 2,064 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 1,007 \u2013 ( 25 ) 982 Mutual fund 1,007 \u2013 ( 25 ) 982 900 82 \u2013 1,007 \u2013 ( 25 ) 982 900 82 \u2013 Commercial paper \u2013 ( 25 ) 982 900 82 \u2013 Commercial paper 2,601 ( 25 ) 982 900 82 \u2013 Commercial paper 2,601 \u2013 900 82 \u2013 Commercial paper 2,601 \u2013 \u2013 2,601 400 2,201 Commercial paper 2,601 \u2013 \u2013 2,601 400 Equity and Other Investments June 30 , 2008 Cash $ 3,274 Other Investments June 30 , 2008 Cash $ 3,274 $ \u2013 30 , 2008 Cash $ 3,274 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 3,274 $ 3,274 $ \u2013 $ $ \u2013 $ 3,274 $ 3,274 $ \u2013 $ \u2013 Mutual \u2013 $ \u2013 Mutual fund 1,044 15 ( 8 ) 1,051 $ \u2013 Mutual fund 1,044 15 ( 8 ) 1,051 835 Mutual fund 1,044 15 ( 8 ) 1,051 835 136 80 1,044 15 ( 8 ) 1,051 835 136 80 Commercial paper 15 ( 8 ) 1,051 835 136 80 Commercial paper 787 ( 8 ) 1,051 835 136 80 Commercial paper 787 \u2013 8 ) 1,051 835 136 80 Commercial pap equity equity security , and $ 72 million related to international equity equity security . At June 30 , 2008 , unrealized loss . At June 30 , 2008 , unrealized loss of $ , unrealized loss of $ 255 million consisted of : $ million consisted of : $ 121 million related to investment grade grade fixed-income security , $ 21 million related to investment in market fixed-income security , $ 99 million related to domestic equity equity security , and $ 14 million related to international equity available ev Equity to hedge our price PAGE 55 Table of Contents Part II of Contents Part II Item 8 risk , we may use forward . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount instrument . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 2.7 billion and $ 456 million $ 2.7 billion and $ 456 million , respectively . In instrument under SFAS No . 133 in case where physical delivery date . As of June 30 , 2009 , the total As Equity and other investment \u2013 Equity and other investment \u2013 2 \u2013 \u2013 \u2013 2 Total \u2013 2 \u2013 \u2013 \u2013 2 Total $ 429 $ 2 \u2013 \u2013 2 Total $ 429 $ 2 $ \u2013 $ 2 Total $ 429 $ 2 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 431 Total asset ( b ) asset ( b ) $ 486 $ 80 $ 44 $ b ) $ 486 $ 80 $ 44 $ 21 $ $ 486 $ 80 $ 44 $ 21 $ 2 $ $ 80 $ 44 $ 21 $ 2 $ 633 Liabilities $ 44 $ 21 $ 2 $ 633 Liabilities Derivatives not $ 21 $ 2 $ 633 Liabilities Derivatives not designated a Other current liability $ ( 183 ) $ ( 3 ) ( 183 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 Equity Contracts Derivatives $ 121 $ 191 Hedged item ( Contracts Derivatives $ 121 $ 191 Hedged item ( 120 ) $ 191 Hedged item ( 120 ) ( 211 ) Total item ( 120 ) ( 211 ) Total $ 1 $ ( 211 ) Total $ 1 $ ( 20 ) PAGE Total $ 1 $ ( 20 ) PAGE 57 Table of $ ( 20 ) PAGE 57 Table of Contents Part II of Contents Part II Item 8 Cash-Flow Hedges For a derivative earnings . During fiscal year 2009 , we recognized the following of tax effect of $ 472 $ 876 Gain reclassified from effect of $ 472 $ 876 Gain reclassi Equity contract ( 131 234 ) Equity contract ( 131 ) Interest-rate contract 5 Credit ( 131 ) Interest-rate contract 5 Credit contract ( 18 ) contract 5 Credit contract ( 18 ) Commodity contract ( 126 18 ) Commodity contract ( 126 ) Total $ ( 504 126 ) Total $ ( 504 ) Gains ( loss ) were immaterial for fiscal year 2009 and have been excluded from the table above . NOTE 6 FAIR VALUE MEASUREMENTS SFAS No VALUE MEASUREMENTS SFAS No . 157 defines fair value a the value , SFAS No . 157 expands the disclosure equity . PAGE 59 Table of Contents Part II of Contents Part II Item 8 Assets and Liabilities Measured at asset and liability at June 30 , 2009 , which are liability at June 30 , 2009 , which are measured at ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value FIN No Fair Value FIN No . 39 Netting ( a ) Net Value Assets Mutual fund $ 982 $ \u2013 $ \u2013 $ $ \u2013 $ \u2013 $ 982 $ \u2013 $ 982 Commercial $ 982 $ \u2013 $ 982 Commercial paper \u2013 2,6 Equity Method of the fiscal year ended June 30 , 2009 , impairment charge year ended June 30 , 2009 , impairment charge of $ , impairment charge of $ 86 million were recognized for certain in all instance . NOTE 7 INVENTORIES The component of inventory ( In million ) June 30 , 2009 2008 Raw material million ) June 30 , 2009 2008 Raw material $ 170 ) June 30 , 2009 2008 Raw material $ 170 $ 2009 2008 Raw material $ 170 $ 417 Work in process Raw material $ 170 $ 417 Work in process 45 31 $ 417 Work in p EQUITY Shares Outstanding million ) Year Ended June 30 , 2009 2008 2007 Balance Year Ended June 30 , 2009 2008 2007 Balance , beginning Ended June 30 , 2009 2008 2007 Balance , beginning of June 30 , 2009 2008 2007 Balance , beginning of year Balance , beginning of year 9,151 9,380 10,062 Issued 75 173 , beginning of year 9,151 9,380 10,062 Issued 75 173 289 beginning of year 9,151 9,380 10,062 Issued 75 173 289 Repurchased year 9,151 9,380 10,062 Issued 75 173 289 Repurchased ( 318 9,151 9,380 10,062 Equity Statements 46 45 Stockholders \u2019 Equity Statements 46 Notes to Financial Statements 47 46 Notes to Financial Statements 47 Report of Independent Registered Public Independent Registered Public Accounting Firm 81 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation decreased flow from operation decreased $ 2.6 billion due to payment of to payment of approximately $ 4.1 billion to the IRS in with our settlement of the 2000-2003 audit examination . This impact offset by the fiscal year 2008 payment of the $ 1.4 2008 payment of the $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) European Commission fine used for financing decreased $ 5.5 billion primarily due to $ billion primarily due to $ 5.7 billion of net cash proceeds long-t Cash flow from operation increased flow from operation increased $ 3.8 billion due to an increase received from customer driven by 18 % revenue growth , partially partially offset by the $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) payment of the used for financing decreased $ 11.6 billion primarily due to a primarily due to a $ 15.0 billion decrease in common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 cash flow . See Note 5 \u2013 Derivatives of the Notes ( Part II , Item 8 ) . On July 1 8 ) . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments of the Notes ( Part II , Item 8 ) . SFAS No . ) . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . cash flow . See Note 5 \u2013 Derivatives . On July \u2013 Derivatives . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments . SFAS No Investments . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . SFAS No . 159 2008 . SFAS No . 159 give u the irrev", + "accumulated_depreciation": "accumulated depreciation of $ 7,547 and $ 6,302 7,535 6,242 of $ 7,547 and $ 6,302 7,535 6,242 Equity and other $ 7,547 and $ 6,302 7,535 6,242 Equity and other investment 7,547 and $ 6,302 7,535 6,242 Equity and other investment 4,933 6,242 Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset , net investment 4,933 6,588 Goodwill 12,503 12,108 Intangi Accumulated depreciation ( 7,547 Total , at cost 15,082 12,544 Accumulated depreciation ( 7,547 ) 15,082 12,544 Accumulated depreciation ( 7,547 ) ( 6,302 ) Total depreciation ( 7,547 ) ( 6,302 ) Total , net $ ) Total , net $ 7,535 $ 6,242 Property and equipment , net $ 7,535 $ 6,242 Property and equipment are stated building range from five to 15 year , leasehold improvement generally generally range from two to 10 year ( representing the applicable is not depreciated . PAGE 61 Table of Contents Part II of Contents Pa", + "debt": "debt security issued debt security issued in May 2009 . See Note 12 \u2013 May 2009 . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 ) . PAGE 20 Table Item 8 ) . PAGE 20 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT \u2019 Part II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2009 , 2008 , AND 2007 FOR FISCAL YEARS 2009 , 2008 , AND 2007 Overview The 2009 , 2008 , AND 2007 Overview The following Management \u2019 hardware , including the Xbox 360 video game Debt Short-term Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . Pursuant to the sale of up to $ 2.0 billion in short-term commercial paper paper . As of June 30 , 2009 , $ 2.0 As of June 30 , 2009 , $ 2.0 billion of 30 , 2009 , $ 2.0 billion of the commercial paper including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 119 day . In and maturity of 22 to 119 day . In September 2008 119 day . In September 2008 , we also entered into also Debt year ended June 30 , 2009 . Long-term Debt In November . Long-term Debt In November 2008 , we filed a shelf time pursuant to the September 2008 authorization for debt financing of financing of up to $ 6.0 billion . In May 2009 6.0 billion . In May 2009 , we issued $ 3.75 2009 , we issued $ 3.75 billion of debt security under statement a follows : $ 2.0 billion aggregate principal amount of billion aggregate principal amount of 2.95 % note due 2014 , of 2.95 % note due 2014 , $ 1.0 billion aggre debt in fiscal PAGE 34 Table of Contents Part II of Contents Part II Item 7 year 2009. Financing activity also Part II Item 7 year 2009. Financing activity also included a activity also included a $ 3.2 billion decrease in common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in debt $ \u2013 $ \u2013 $ 2,000 $ 1,750 $ 3,750 Interest $ \u2013 $ 2,000 $ 1,750 $ 3,750 Interest payment 145 $ 2,000 $ 1,750 $ 3,750 Interest payment 145 420 302 1,750 $ 3,750 Interest payment 145 420 302 1,023 1,890 Construction $ 3,750 Interest payment 145 420 302 1,023 1,890 Construction commitment 3,750 Interest payment 145 420 302 1,023 1,890 Construction commitment ( Interest payment 145 420 302 1,023 1,890 Construction commitment ( b payment 145 420 302 1,023 1,890 Construction commitment ( b ) Constructio Debt of the Notes ( Part II , Item 8 ) ( b ) These other tax liability of $ 5.5 billion and other long-term contingent long-term contingent liability of $ 407 million ( related to the excluded unearned revenue of $ 1.3 billion and non-cash item of and non-cash item of $ 226 million . PAGE 36 Table $ 226 million . PAGE 36 Table of Contents Part II of Contents Part II Item 7 RECENTLY ISSUED ACCOUNTING STANDARDS Recently Adopted Accounting Pronouncements On April 1 , 2009 , we adopted Pronouncements On debt 2,000 Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued 3,324 $ 4,034 Short-term debt 2,000 \u2013 Accrued compensation 3,156 2,934 debt 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 2,000 \u2013 Accrued compensation 3,156 2,934 Income tax 725 3,248 Short-term compensation 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 13,397 725 3,248 Short-term unearned revenue 13,003 13,397 Securitie debt 3,746 \u2013 3,659 Total current liability 27,034 29,886 Long-term debt 3,746 \u2013 Long-term liability 27,034 29,886 Long-term debt 3,746 \u2013 Long-term unearned revenue 1,281 3,746 \u2013 Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 \u2013 Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 4,721 1,281 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders debt , maturity longer than 90 day 4,796 \u2013 \u2013 Repayments maturity longer than 90 day 4,796 \u2013 \u2013 Repayments of debt debt , maturity longer than 90 day ( 228 ) \u2013 longer than 90 day ( 228 ) \u2013 \u2013 Common stock \u2013 \u2013 Common stock issued 579 3,494 6,782 Common stock repurchased \u2013 Common stock issued 579 3,494 6,782 Common stock repurchased ( Common stock issued 579 3,494 6,782 Common stock repurchased ( 9,353 6,782 Common stock repurchased ( 9,353 ) ( 12,533 ) ( repurchased ( 9,353 ) ( 12,533 ) ( 27,575 ) Commo debt were in excess of $ 1.0 billion . As a result to be posted . PAGE 56 Table of Contents Part II of Contents Part II Item 8 Gross Fair Values of Derivative ( Excluding FIN No . 39 ( a ) Netting ) a ) Netting ) June 30 , 2009 ( In million Netting ) June 30 , 2009 ( In million ) Foreign hedging instrument Short-term investment $ 9 $ 78 $ 44 $ Short-term investment $ 9 $ 78 $ 44 $ 21 $ $ 9 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 154 Other $ 44 $ 21 $ 2 $ 154 Other current asset $ 21 $ 2 $ 154 Othe DEBT Short-term Debt Part II Item 8 NOTE 12 DEBT Short-term Debt In September DEBT Short-term Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . Pursuant to the sale of up to $ 2.0 billion in short-term commercial paper paper . As of June 30 , 2009 , $ 2.0 As of June 30 , 2009 , $ 2.0 billion of 30 , 2009 , $ 2.0 billion of the commercial paper including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 119 day . The and maturity of 22 to 119 d Debt year ended June 30 , 2009 . Long-term Debt In November . Long-term Debt In November 2008 , we filed a shelf time pursuant to the September 2008 authorization for debt financing of financing of up to $ 6.0 billion . In May 2009 6.0 billion . In May 2009 , we issued $ 3.75 2009 , we issued $ 3.75 billion of debt security under be payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year , commencing year , commencing on December 1 , 2009 , to holder commencing o debt a of June 30 , 2009 were a follows a of June 30 , 2009 were a follows : ( : ( In million ) 2.95 % Notes due on June % Notes due on June 1 , 2014 $ 2,000 4.20 due on June 1 , 2014 $ 2,000 4.20 % Notes June 1 , 2014 $ 2,000 4.20 % Notes due on 1 , 2014 $ 2,000 4.20 % Notes due on June % Notes due on June 1 , 2019 1,000 5.20 % due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June % Notes due on June 1 , 2039 750 Unamorti debt due on June 1 , 2039 750 Unamortized debt discount ( on June 1 , 2039 750 Unamortized debt discount ( 4 750 Unamortized debt discount ( 4 ) Total $ 3,746 Maturities ( 4 ) Total $ 3,746 Maturities of long-term debt for million ) Year Ended June 30 , Amount 2010 $ \u2013 Ended June 30 , Amount 2010 $ \u2013 2011 \u2013 2012 , Amount 2010 $ \u2013 2011 \u2013 2012 \u2013 2013 \u2013 2010 $ \u2013 2011 \u2013 2012 \u2013 2013 \u2013 2014 2,000 \u2013 2011 \u2013 2012 \u2013 2013 \u2013 2014 2,000 Thereafter 1,750 \u2013 2012 \u2013 2013 \u2013 2014 2,000 Thereafter 1,750 Total $ 2012 \u2013 debt were $ 3.75 billion and $ 3.74 billion $ 3.75 billion and $ 3.74 billion , respectively . The publicly-traded debt a of June 30 , 2009 . The effective a of June 30 , 2009 . The effective interest yield of the Notes due in 2014 , 2019 , and 2039 Notes due in 2014 , 2019 , and 2039 were 3.00 2014 , 2019 , and 2039 were 3.00 % , 4.29 2019 , and 2039 were 3.00 % , 4.29 % , 2039 were 3.00 % , 4.29 % , and 5.22 % , 4.29 % , and 5.22 % , respectively , at , respectively , at June 30 , 2009 . PAGE 64 ,", + "share_repurchase": "share repurchase . PAGE 19 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 , 2009 2008 2007 2006 Year Ended June 30 , 2009 2008 2007 2006 2005 Revenue Ended June 30 , 2009 2008 2007 2006 2005 Revenue $ June 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ 60,420 2007 2006 2005 Revenue $ 58,437 $ 60,420 share repurchase during the past 12 month . We repurchased 318 12 month . We repurchased 318 million share during the twelve the twelve month ended June 30 , 2009 . Fiscal year month ended June 30 , 2009 . Fiscal year 2008 compared , 2009 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted f share repurchase during fiscal share repurchase during fiscal year 2008 . Fiscal Year 2010 Outlook year 2008 . Fiscal Year 2010 Outlook Global macroeconomic factor have for improvement in calendar year 2010 , we are unable to Segment information appearing in Note 22 \u2013 Segment Information and Geographic ( Part II , Item 8 ) is presented on a SFAS \u201d ) No . 131 , Disclosures about Segments of million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change share repurchase with an expiration date of September 30 , 2013 . We repurchased date of September 30 , 2013 . We repurchased 318 million , 2013 . We repurchased 318 million share for $ 8.2 318 million share for $ 8.2 billion during the fiscal year the fiscal year ended June 30 , 2009 ; 101 million year ended June 30 , 2009 ; 101 million share were June 30 , 2009 ; 101 million share were repurchased for share were repurchased for $ 2.7 billion under the repurchase program first quarter of fiscal year 2007 and 2 share repurchase program PAGE 71 Table of Contents Part II of Contents Part II Item 8 authorizing up to $ 40.0 8 authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2009 , approximately $ As of June 30 , 2009 , approximately $ 34.5 billion , 2009 , approximately $ 34.5 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . million ) Year Ended June 30 ", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 1.62 $ 1.87 $ 1.42 $ per share $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash dividend declared $ 1.42 $ 1.20 $ 1.12 Cash dividend declared per share dividend declared per share $ 0.52 $ 0.44 $ 0.40 $ per share $ 0.52 $ 0.44 $ 0.40 $ 0.35 $ $ 0.52 $ 0.44 $ 0.40 $ 0.35 $ 3.40 Cash $ 0.44 $ 0.40 $ 0.35 $ 3.40 Cash and cash $ 0.40 $ 0.35 $ 3.40 Cash and cash equivalent and equivalent and short-term investment $ earnings per share Diluted earnings per share $ 1.62 $ 1.87 $ 1.42 ( per share $ 1.62 $ 1.87 $ 1.42 ( 13 ) $ 1.62 $ 1.87 $ 1.42 ( 13 ) % 32 $ 1.87 $ 1.42 ( 13 ) % 32 % Fiscal 1.42 ( 13 ) % 32 % Fiscal year 2009 compared % 32 % Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Revenue declined across most segment rate accounted for a $ 486 million or one percentage point line of business including Xbox 360 platform and PC game revenue price reduction during the past 12 month , par Earnings per share $ 14,569 $ 17,681 $ 14,065 Earnings per share : Basic per share : Basic $ 1.63 $ 1.90 $ 1.44 Diluted : Basic $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 $ 1.42 Weighted 1.44 Diluted $ 1.62 $ 1.87 $ 1.42 Weighted average share $ 1.62 $ 1.87 $ 1.42 Weighted average share outstanding : average share outstanding : Basic 8,945 9,328 9,742 Diluted 8,996 9,470 share outstanding : Basic 8,945 9,328 9,742 Diluted 8,996 9,470 9,886 outs EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 , 2009 2008 2007 Net Year Ended June 30 , 2009 2008 2007 Net income available Ended June 30 , 2009 2008 2007 Net income available for June 30 , 2009 2008 2007 Net income available for common shareholder ( A ) $ 14,569 $ 17,681 $ 14,065 Weighted A ) $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding share of common stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock ( B ) 8,945 9,328 9,742 D Earnings per share equivalent ( C ) 8,996 9,470 9,886 Earnings per share : ( C ) 8,996 9,470 9,886 Earnings per share : Basic Basic ( A/B ) $ 1.63 $ 1.90 $ 1.44 Diluted A/B ) $ 1.63 $ 1.90 $ 1.44 Diluted ( A/C $ 1.63 $ 1.90 $ 1.44 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.62 $ 1.87 $ 1.42 For A/C ) $ 1.62 $ 1.87 $ 1.42 For the year $ 1.62 $ 1.87 $ 1.42 For the year ended June For the year ended June 30 , 2009 , 2008 , year ended June 30 , 2009 , 2008 , and 2007 June 30 , 2009 , 2008 , and 2007 , 342 2009 , 2008 , and earnings per share 0.48 14,569 Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share 0.48 1.63 Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal year earnings per share 0.48 0.47 0.33 0.34 1.62 earnings per share 4,388 ( d ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( e ) 2007 Revenue $ 10,811 $ 12,542 ( e ) $ 14,398 12,542 ( e ) $ 14,398 ( f ) $ 13,371 14,398 ( f ) $ 13,371 $ 51,122 Gross profit 9,115 f ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,2 earnings per share 4,926 ( g ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 ( Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 ( a earning", + "tax_rate": "tax rate in tax rate in fiscal year 2009 and 2008 were 27 % in fiscal year 2009 and 2008 were 27 % and 26 year 2009 and 2008 were 27 % and 26 % , 2008 were 27 % and 26 % , respectively . While . While the fiscal year 2009 rate reflects a higher mix year because the fiscal year 2008 rate reflects the resolution of IRS \u201d ) settling the 2000-2003 examination , partially offset by paid the IRS approximately $ 4.1 billion during fiscal year 2009 4.1 billion during fiscal year 2009 . Fiscal year 2008 compared tax rate in tax rate in fiscal year 2008 and 2007 were 26 % in fiscal year 2008 and 2007 were 26 % and 30 year 2008 and 2007 were 26 % and 30 % , 2007 were 26 % and 30 % , respectively . The respectively . The fiscal year 2008 rate wa lower due to and short-term investment totaled $ 31.4 billion a of June 30 31.4 billion a of June 30 , 2009 , compared with a of June 30 , 2009 , compared with $ 23.7 2009 , compared with $ 23.7 billion a of June 30 23.7 billion a of June 30 , 2008 . Equity and a of June 3", + "geographic_information": "Geographic ( Part II , Item 8 ) is presented on a SFAS \u201d ) No . 131 , Disclosures about Segments of million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Reven GEOGRAPHIC DATA million ) Year Ended June 30 , 2009 2008 2007 Revenue Year Ended June 30 , 2009 2008 2007 Revenue : Client Ended June 30 , 2009 2008 2007 Revenue : Client $ June 30 , 2009 2008 2007 Revenue : Client $ 14,414 2007 Revenue : Client $ 14,414 $ 16,472 $ 14,779 Server : Client $ 14,414 $ 16,472 $ 14,779 Server and Tools $ 14,414 $ 16,472 $ 14,779 Server and Tools 14,135 13,121 $ 14,779 Server and Tools 14,135 13,121 11,117 Online Services Business 14,779 Server and Tools 14,135 13,121 11,117 On", + "common_stock": "common stock outstanding to be held on November 19 , 2009 are incorporated by held on November 19 , 2009 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2009 INDEX PART I Year Ended June 30 , 2009 INDEX PART I Item 1. 2009 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Common stock price per share per share : High $ 28.50 $ 27.47 $ 21.00 $ : High $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 17.50 24.34 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ 14.87 Fiscal $ 17.50 $ 14.87 $ 18.18 $ 14.87 Fiscal year 2008 $ 14.87 $ 18.18 $ 14.87 Fiscal year 2008 Common stock 18.18 $ 14.87 Fiscal year 200 Common stock price per share per share : High $ 31.84 $ 37.50 $ 35.96 $ : High $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 27.51 $ 35.96 $ 32.10 $ 37.50 Low $ 27.51 $ 29.29 32.10 $ 37.50 Low $ 27.51 $ 29.29 $ 26.87 $ 37.50 Low $ 27.51 $ 29.29 $ 26.87 $ 27.11 $ $ 27.51 $ 29.29 $ 26.87 $ 27.11 $ 26.87 DIVIDENDS $ 29.29 $ 26.87 $ 27.11 $ 26.87 DIVIDENDS AND SHARE $ 26.87 $ 27.11 $ 26.87 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCH common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in cash paid of aQuantive in fiscal year 2008 . Fiscal year 2008 compared year 2008 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cash flow from operation increased flow from operation increased common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 billion for fiscal year 2008 a compared with cash provided with cash provided of $ 6.1 billion for fiscal year 2007 6.1 billion for fiscal year 2007 . This decrease wa primarily primarily due to a $ 6.9 billion increase in cash paid first quarter of fiscal year 2008 , a $ 918 million year 2008 , a $ 918 million increase in purchase of equipment , and a $ 3.1 billion decreas common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . We repurchased date of September 30 , 2013 . We repurchased 318 million , 2013 . We repurchased 318 million share for $ 8.2 318 million share for $ 8.2 billion during the fiscal year the fiscal year ended June 30 , 2009 ; 101 million year ended June 30 , 2009 ; 101 million share were June 3 Common stock \u2013 \u2013 Common stock issued 579 3,494 6,782 Common stock repurchased \u2013 Common stock issued 579 3,494 6,782 Common stock repurchased ( Common stock issued 579 3,494 6,782 Common stock repurchased ( 9,353 6,782 Common stock repurchased ( 9,353 ) ( 12,533 ) ( repurchased ( 9,353 ) ( 12,533 ) ( 27,575 ) Common ) ( 12,533 ) ( 27,575 ) Common stock cash dividend Common stock cash dividend ( 4,468 ) ( 4,015 ) ( dividend ( 4,468 ) ( 4,015 ) ( 3,805 ) Excess ) ( 4,015 ) ( 3,805 ) Excess tax benefit from tax Common stock and Ended June 30 , 2009 2008 2007 Common stock and paid-in June 30 , 2009 2008 2007 Common stock and paid-in capital , beginning of period $ 62,849 $ 60,557 $ 59,005 Common of period $ 62,849 $ 60,557 $ 59,005 Common stock issued $ 62,849 $ 60,557 $ 59,005 Common stock issued 567 3,504 $ 59,005 Common stock issued 567 3,504 6,783 Common stock repurchased 59,005 Common stock issued 567 3,504 6,783 Common stock repurchased ( Common stock issued 567 3,504 6,783 Common stock repurchased ( 2,611 6, Common stock repurchased ( 2,611 ) ( 3,022 ) ( repurchased ( 2,611 ) ( 3,022 ) ( 6,162 ) Stock-based ) ( 3,022 ) ( 6,162 ) Stock-based compensation expense 1,708 6,162 ) Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income ) Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income tax Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income tax benefit benefit ( deficiency ) ( 128 ) 253 ( 661 ) deficiency ) ( 128 ) 253 ( 661 ) Common stock cash 121 85 Comprehensive income 14,398 17,167 14,490 Common stock cash dividend 85 Comprehensive income 14,398 17,167 14,490 Common stock cash dividend ( Common stock cash dividend ( 4,620 ) ( 4,084 ) ( dividend ( 4,620 ) ( 4,084 ) ( 3,837 ) Common ) ( 4,084 ) ( 3,837 ) Common stock repurchased ( ) Common stock repurchased ( 6,039 ) ( 9,774 ) ( repurchased ( 6,039 ) ( 9,774 ) ( 21,212 ) Balance ) ( 9,774 ) ( 21,212 ) Balance , end of , end of period ( 22,824 ) ( 26,563 ) ( period ( 22,824 ) ( common stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based award Dilutive effect of stock-based award 51 142 144 Common stock and effect of stock-based award 51 142 144 Common stock and common of stock-based award 51 142 144 Common stock and common stock stock equivalent ( C ) 8,996 9,470 9,886 Earnings per share equivalent ( C ) 8,996 9,470 9,886 Earnings per share : ( C ) 8,996 9,470 9,886 Earn common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that new share repurchase program PAGE 71 Table of Contents Part II of Contents Part II Item 8 authorizing up to $ 40.0 8 authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2009 , approximately $ As of June 30 , 2009 , approximately $ 34.5 billion , 2009 , approximately $ 34.5 bill common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the repurchase plan first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . ( b Directors on September 22 , 2008 . ( b ) All share repurchased in fiscal year 2008 were repurchased under the repurchase Board of Directors on July 20 , 2006 . ( c Directors on July 20 , 2006 . ( c ) common stock stock repurchased in fiscal year 2007 , 155 million share were in fiscal year 2007 , 155 million share were repurchased for share were repurchased for $ 3.8 billion under our tender offer first quarter of fiscal year 2007 . The remaining share were Board of Directors on July 20 , 2006 . Dividends In Directors on July 20 , 2006 . Dividends In fiscal year . Dividends In fiscal year 2009 , our Board of Directors million ) Payment Date September 19 , 2008 $ 0.13 November Payment Date September 19 , common stock on August 31 , 2009 . Activity for stock on August 31 , 2009 . Activity for All Stock using the following assumption : 2009 2008 2007 Year Ended June the following assumption : 2009 2008 2007 Year Ended June 30 following assumption : 2009 2008 2007 Year Ended June 30 , 2008 2007 Year Ended June 30 , Dividends per share ( ( quarterly amount ) $ 0.11 - $ 0.13 $ 0.10 ) $ 0.11 - $ 0.13 $ 0.10 - $ 0.11 0.11 - $ 0.13 $ 0.10 - $ 0.11 $ 0.09 0.13 $ 0.10 - $ 0.11 $ 0.09 - $ 0.10 0.10 - $ 0.11 $ 0.09 - $", + "fair_value_measurements": "Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments of the Notes ( Part II , Item 8 ) . SFAS No . ) . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . SFAS No . 159 2008 . SFAS No . 159 give u the irrevocable option deficit . As of June 30 , 2009 , we had As of June 30 , 2009 , we had not elected Not Yet Adopted In June 2009 , the FASB issued SFAS Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments . SFAS No Investments . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . SFAS No . 159 2008 . SFAS No . 159 give u the irrevocable option deficit . As of June 30 , 2009 , we had As of June 30 , 2009 , we had not elected Not Yet Adopted In June 2009 , the FASB issued SFAS FASB issued SFAS No . 167 Fair Value Measurements . earnings . During fiscal year 2009 , we recognized in other Contracts Equity Contracts Derivatives $ 121 $ 191 Hedged item ( Contracts Derivatives $ 121 $ 191 Hedged item ( 120 ) $ 191 Hedged item ( 120 ) ( 211 ) Total item ( 120 ) ( 211 ) Total $ 1 $ ( 211 ) Total $ 1 $ ( 20 ) PAGE Total $ 1 $ ( 20 ) PAGE 57 Table of $ ( 20 ) PAGE 57 Table of Contents Part II of Contents Part II Item 8 Cash-Flow Hedges For a derivative earnings . During fiscal year 2009 , we recognized the following of tax e FAIR VALUE MEASUREMENTS SFAS No VALUE MEASUREMENTS SFAS No . 157 defines fair value a the value , SFAS No . 157 expands the disclosure requirement around fair value measurement is PAGE 58 Table of Contents Part II of Contents Part II Item 8 reported in one of the level are : \u2022 Level 1 \u2013 input are based upon active market . \u2022 Level 2 \u2013 input are based upon or liability . \u2022 Level 3 \u2013 input are generally unobservable methodology applies to our Level 1 investment , such a domestic investment are included in Level 2 and co", + "derivative_instruments": "Derivative Instruments of FASB Statement No . 133 . SFAS No . 161 133 . SFAS No . 161 requires additional disclosure about the instrument under SFAS No . 133 , Accounting for Derivative Instruments cash flow . See Note 5 \u2013 Derivatives of the Notes ( Part II , Item 8 ) . On July 1 8 ) . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments of the Notes ( Par Derivative Instruments of FASB Statement No . 133 . SFAS No . 161 133 . SFAS No . 161 requires additional disclosure about the instrument under SFAS No . 133 , Accounting for Derivative Instruments cash flow . See Note 5 \u2013 Derivatives . On July \u2013 Derivatives . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 \u2013 Investments . SFAS No Investments . SFAS No . 159 , The Derivative Instruments dollar . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount foreign exchange contract wa $ 7.2 billion . Foreign currency risk instrument . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount exchange contract sold wa $ 3.5 billion . Certain option and exposure . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 3.2 billion and $ 3.6 billion $ 3.2 billion and $ 3.6 billion , re" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-10-171791/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-10-171791/full-submission_features.json new file mode 100644 index 0000000..38d5fee --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-10-171791/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue sell hardware including the Xbox 360 gaming and entertainment console and , and content access . 3 Table of Contents PART I of Contents PART I Item 1 Our current cloud-based service for distribution channel account for approximately 80 % of total Windows Division Windows operating system : Windows 7 , including Home Basic , application and web service . 4 Table of Contents PART I of Contents PART I Item 1 Competition The Windows operating system product and service . Approximately 50 % of Serve revenue , of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is . Web-based offering such a 37Signals , Adobe , AjaxWrite , our customer already have . 7 Table of Contents PART I of Contents PART I Item 1 Entertainment and Devices Division The and marketing : the Xbox 360 platform , including the Xbox platform , including the Xbox 360 gaming and entertainment console and Products and Services : Xbox 360 console and game ; Xbox entertainment cons revenue . 2010 , 2009 , or 2008 revenue . Our practice is backlog is not significant . 12 Table of Contents PART I of Contents PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 30 , 2010 were a follows a of July 30 , 2010 were a follows : Name the Company Steven A. Ballmer 54 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 50 Senior Vice President , Human Human Resources Stephen A. Elop 46 President , Microsoft Business Division Business Division Peter S. revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part other country . Operations outside 19 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 the PART I Item 1A , 1B , 2 the United States Item 1A , 1B , 2 the United States may be or financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2010 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROP Revenue Ended June 30 , 2010 2009 2008 2007 2006 Revenue $ June 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ 58,437 2008 2007 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ 44,282 Operating $ 58,437 $ 60,420 $ 51,122 $ 44,282 Operating income $ $ 60,420 $ 51,122 $ 44,282 Operating income $ 24,098 $ $ 44,282 Operating income Revenue $ 62,484 2009 Percentage Change 2009 Versus 2008 Revenue $ 62,484 $ 58,437 2009 Versus 2008 Revenue $ 62,484 $ 58,437 $ 60,420 7 2008 Revenue $ 62,484 $ 58,437 $ 60,420 7 % ( $ 62,484 $ 58,437 $ 60,420 7 % ( 3 ) 62,484 $ 58,437 $ 60,420 7 % ( 3 ) % $ 60,420 7 % ( 3 ) % Operating income $ ) % Operating income $ 24,098 $ 20,363 $ 22,271 18 Operating income $ 24,098 $ 20,363 $ 22,271 18 % ( $ 24,098 $ 20,363 $ 22,271 18 % ( 9 ) 24,098 $ 20,363 $ 22,271 18 % ( 9 ) % $ 22,271 18 % ( 9 ) % Diluted ea Revenue increased mainly due to to strong sale of Windows 7 , which wa released during wa released during fiscal year 2010 , and PC market improvement and marketing expense increased $ 335 million or 3 % , increased $ 335 million or 3 % , primarily reflecting increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . \u2022 General and administrative and administrative expense increased $ 304 million or 8 % due increased $ 304 million or 8 % due mainly revenue increased $ 240 million or 2 % , increased $ 240 million or 2 % , primarily reflecting increased in part by decreased Xbox 360 console cost and reduction in and development expense decreased $ 296 million or 3 % , decreased $ 296 million or 3 % , primarily reflecting a income and the repurchase of 380 million share during fiscal year million share during fiscal year 2010 . Fiscal year 2009 compared year 2010 . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 R revenue price reduction during the prior 12 month , partially offset by and Xbox LIVE revenue . 23 Table of Contents PART II of Contents PART II Item 7 The above decline were partially a favorable impact of $ 486 million on revenue . Operating and administrative expense decreased $ 1.4 billion or 28 % , decreased $ 1.4 billion or 28 % , primarily due to contingency . We incurred $ 283 million of legal charge during the twelve month ended June 30 , 2009 a compared to month ended June 30 , 2009 a compare revenue increased $ 557 million or 5 % , increased $ 557 million or 5 % , primarily reflecting increased partially offset by decreased Xbox 360 platform cost . In January platform cost . In January 2009 , we announced and implemented the elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During fiscal technology by June 30 , 2010 . During fiscal year 2009 2010 . During fiscal year 2009 , we recorded employee severance employee severance charge REVENUE/OPERATING INCOME Segment information appearing in Note 22 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a second quarter of fiscal year 2010 . Windows & Windows Live million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Perce Revenue $ 18,491 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,491 $ 14,974 2009 Versus 2008 Revenue $ 18,491 $ 14,974 $ 17,211 23 2008 Revenue $ 18,491 $ 14,974 $ 17,211 23 % ( $ 18,491 $ 14,974 $ 17,211 23 % ( 13 ) 18,491 $ 14,974 $ 17,211 23 % ( 13 ) % $ 17,211 23 % ( 13 ) % Operating income $ ) % Operating income $ 12,977 $ 9,982 $ 12,422 30 Operating income $ 12,977 $ 9,982 $ 12,422 30 % ( $ 12,977 $ 9,982 $ 12,422 30 % ( 20 ) 12,977 $ 9,982 $ 12,422 30 % ( 20 ) % $ 12,422 30 % ( 20 ) % 24 revenue . The remaining approximately 20 % of Windows Division revenue Windows Live . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Windows Division revenue increased primarily of strong sale of Windows 7 and PC market improvement . from all source grew approximately 16 % to 18 % . grew approximately 16 % to 18 % . OEM revenue increased . OEM revenue increased $ 2.6 billion or 22 % , increased $ 2.6 billion or 22 % , while OEM license while OEM license unit increas revenue business PCs . Fiscal year 2009 OEM revenue reflects a $ OEM revenue reflects a $ 273 million Windows 7 Deferral , a $ 273 million Windows 7 Deferral , a discussed under subsequently recognized in fiscal year 2010 . Other revenue increased $ . Other revenue increased $ 912 million or 29 % driven increased $ 912 million or 29 % driven primarily by Windows % driven primarily by Windows 7 retail sale . Windows Division Cost of revenue increased $ 296 million or 22 % , increased $ 296 million or 22 revenue decreased primarily . OEM revenue decreased $ 2.3 billion or 16 % while decreased $ 2.3 billion or 16 % while OEM license unit while OEM license unit declined 2 % . Based on our experienced a decline of approximately 1 % to growth of approximately % to growth of approximately 2 % , driven by change and marketing expense increased $ 100 million or 5 % , increased $ 100 million or 5 % , primarily reflecting increased million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except per Revenue $ 14,866 2009 Percentage Change 2009 Versus 2008 Revenue $ 14,866 $ 14,191 2009 Versus 2008 Revenue $ 14,866 $ 14,191 $ 13,195 5 2008 Revenue $ 14,866 $ 14,191 $ 13,195 5 % 8 $ 14,866 $ 14,191 $ 13,195 5 % 8 % Operating 14,866 $ 14,191 $ 13,195 5 % 8 % Operating income 14,191 $ 13,195 5 % 8 % Operating income $ 5,491 8 % Operating income $ 5,491 $ 4,803 $ 4,149 14 Operating income $ 5,491 $ 4,803 $ 4,149 14 % 16 $ 5,491 $ 4,803 $ 4,149 14 % 16 % Server 5,491 $ 4,803 $ 4,149 14 % 16 % Server and revenue increased . Product revenue increased $ 652 million or 6 % , increased $ 652 million or 6 % , driven primarily by and development expense decreased $ 38 million or 2 % , decreased $ 38 million or 2 % , primarily driven by Cost of revenue increased $ 25 million . Fiscal year 2009 25 million . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Server and Tools revenue increased . Product revenue increased $ 741 million or 7 % , increased $ 741 million or 7 % , pri revenue increased $ 255 million or 10 % , increased $ 255 million or 10 % , primarily due to currency exchange impact of $ 140 million . Server and Tools and development expense increased $ 242 million or 12 % , increased $ 242 million or 12 % , primarily driven by Cost of revenue increased $ 82 million or 3 % , increased $ 82 million or 3 % , reflecting the growth million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus exce Revenue $ 2,199 2009 Percentage Change 2009 Versus 2008 Revenue $ 2,199 $ 2,121 2009 Versus 2008 Revenue $ 2,199 $ 2,121 $ 2,198 4 2008 Revenue $ 2,199 $ 2,121 $ 2,198 4 % ( $ 2,199 $ 2,121 $ 2,198 4 % ( 4 ) 2,199 $ 2,121 $ 2,198 4 % ( 4 ) % $ 2,198 4 % ( 4 ) % Operating loss $ % Operating loss $ ( 2,355 ) $ ( 1,652 ) ( 2,355 ) $ ( 1,652 ) $ ( 578 ) ( 1,652 ) $ ( 578 ) ( 43 ) % $ ( 578 ) ( 43 ) % ( 186 ) ( 43 ) % ( 186 ) % Online Services Division ! Commercial Agreement On December 4 , 2009 , we entere revenue increased reflecting increased Online advertising revenue increased $ 146 million or 8 % to increased $ 146 million or 8 % to $ 1.9 billion or 8 % to $ 1.9 billion , reflecting higher search . Access revenue decreased $ 57 million or 31 % , decreased $ 57 million or 31 % , reflecting continued migration Cost of revenue increased $ 565 million , primarily driven by and administrative expense increased $ 136 million . Sales and marketing and marketing expense increased $ 56 million or 5 % due inc revenue decreased primarily a . Access revenue decreased $ 72 million or 28 % , decreased $ 72 million or 28 % , reflecting continued migration Online advertising revenue increased $ 6 million to $ 1.8 billion $ 6 million to $ 1.8 billion , reflecting an increase currency exchange impact of $ 28 million . OSD operating loss Cost of revenue increased $ 700 million or 82 % , increased $ 700 million or 82 % , primarily driven by and development expense increased $ 153 million or 17 % , increased $ 153 mil Revenue $ 18,642 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,642 $ 18,910 2009 Versus 2008 Revenue $ 18,642 $ 18,910 $ 18,899 ( 2008 Revenue $ 18,642 $ 18,910 $ 18,899 ( 1 ) $ 18,642 $ 18,910 $ 18,899 ( 1 ) % 0 $ 18,910 $ 18,899 ( 1 ) % 0 % Operating 18,899 ( 1 ) % 0 % Operating income $ 11,776 0 % Operating income $ 11,776 $ 11,664 $ 11,859 1 Operating income $ 11,776 $ 11,664 $ 11,859 1 % ( $ 11,776 $ 11,664 $ 11,859 1 % ( 2 ) 11,776 $ 11,664 $ 11,859 1 % ( 2 ) % $ 11,859 1 % ( 2 ) % Microso revenue . sale and OEM revenue . 27 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 MBD revenue decreased primarily a the net deferral of $ 254 million of revenue related to to eligible sale of the 2007 Microsoft Office system with a to be upgraded to the 2010 Microsoft Office system at minimal cost ( the \u201c Office 2010 Deferral \u201d ) . Consumer . Consumer revenue decreased $ 1 revenue decreased $ 102 million or 1 % , decreased $ 102 million or 1 % , primarily reflecting a decline in licensing of the 2007 Microsoft Office system to transactional revenue and licensing of the 2010 Microsoft Office system to transactional and marketing expense decreased $ 266 million or 6 % , decreased $ 266 million or 6 % , primarily driven by and development expense decreased $ 187 million or 11 % , decreased $ 187 million or 11 % , primarily a a and administrative expense decreased $ 53 milli revenue wa flat reflecting . Business revenue increased $ 458 million or 3 % , increased $ 458 million or 3 % , primarily reflecting growth agreement revenue and included a 7 % decrease in Microsoft Dynamics . Consumer revenue decreased $ 447 million or 12 % , decreased $ 447 million or 12 % , primarily a a and pricing promotion on the 2007 Microsoft Office system . MBD currency exchange impact of $ 378 million . MBD operating income Cost of revenue increased $ 134 million or 14 % primarily increased $ Revenue $ 8,058 2009 Percentage Change 2009 Versus 2008 Revenue $ 8,058 $ 8,035 2009 Versus 2008 Revenue $ 8,058 $ 8,035 $ 8,495 0 2008 Revenue $ 8,058 $ 8,035 $ 8,495 0 % ( $ 8,058 $ 8,035 $ 8,495 0 % ( 5 ) 8,058 $ 8,035 $ 8,495 0 % ( 5 ) % $ 8,495 0 % ( 5 ) % Operating income $ ) % Operating income $ 679 $ 108 $ 445 529 Operating income $ 679 $ 108 $ 445 529 % ( $ 679 $ 108 $ 445 529 % ( 76 ) 679 $ 108 $ 445 529 % ( 76 ) % $ 445 529 % ( 76 ) % Entertainment and Devices ) offering include the Xbox 360 revenue wa nearly flat by decreased revenue from Xbox 360 platform and PC game . . Non-gaming revenue increased $ 35 million or 1 % primarily increased $ 35 million or 1 % primarily reflecting increased sale Windows Phone revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 12 million , primarily reflecting a reflecting a reduction in Xbox 360 console sold and revenue per LIVE revenue . We shipped 10.3 million Xbox 360 console during We shipped 10.3 million Xbox 360 console durin revenue decreased $ 528 million or 11 % , decreased $ 528 million or 11 % , primarily due to primarily due to lower Xbox 360 console cost , offset in and development expense decreased $ 34 million or 2 % , decreased $ 34 million or 2 % , primarily reflecting decreased programming cost . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 EDD revenue decreased across most our non-gaming business decreased $ 300 million or 11 % , decreased $ 300 million or 11 % , primarily revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 160 million or 3 % , decreased $ 160 million or 3 % , primarily a a of decreased revenue per Xbox 360 console due to price reduction price reduction during the past 12 month , partially offset by partially offset by increased Xbox 360 console sale and increased Xbox LIVE revenue . We shipped 11.2 million Xbox 360 console during We shipped 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 revenue included an currency exchange impact of $ 74 million . EDD operating income and development expense increased $ 275 million or 17 % , increased $ 275 million or 17 % , primarily reflecting increased Cost of revenue decreased $ 344 million or 7 % , decreased $ 344 million or 7 % , primarily due to primarily due to decreased Xbox 360 platform cost . Corporate-Level Activity million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2 revenue 2009 Percentage Change 2009 Versus 2008 Cost of revenue $ 12,395 2008 Cost of revenue $ 12,395 $ 12,155 $ 11,598 2 of revenue $ 12,395 $ 12,155 $ 11,598 2 % 5 $ 12,395 $ 12,155 $ 11,598 2 % 5 % As 12,395 $ 12,155 $ 11,598 2 % 5 % As a 12,155 $ 11,598 2 % 5 % As a percent of As a percent of revenue 20 % 21 % 19 % percent of revenue 20 % 21 % 19 % ( 1 revenue 20 % 21 % 19 % ( 1 ) ppt 21 % 19 % ( 1 ) ppt 2ppt Cost of % ( 1 ) ppt 2ppt Cost of revenue includes : development cost . Fiscal year 2010 c revenue increased reflecting in part by lower Xbox 360 console cost and reduction in management effort . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Cost of revenue increased during revenue increased during fiscal year 2009 , primarily reflecting increased online partially offset by decreased Xbox 360 platform cost . Research and million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus revenue 14 % 15 % 14 % percent of revenue 14 % 15 % 14 % ( 1 revenue 14 % 15 % 14 % ( 1 ) ppt 15 % 14 % ( 1 ) ppt 1ppt Research and % ( 1 ) ppt 1ppt Research and development expense include code and service content . 30 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Research and development expense decreased development cost related to Windows 7 product development in the p revenue 21 % 22 % 22 % percent of revenue 21 % 22 % 22 % ( 1 revenue 21 % 22 % 22 % ( 1 ) ppt 22 % 22 % ( 1 ) ppt 0ppt Sales and % ( 1 ) ppt 0ppt Sales and marketing expense include other program . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Sales and marketing expense increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . Fiscal year 2009 compared Windows 7 . Fiscal year 2009 compared with fiscal year 20 revenue 6 % 6 % 8 % percent of revenue 6 % 6 % 8 % 0ppt ( revenue 6 % 6 % 8 % 0ppt ( 2 ) % 6 % 8 % 0ppt ( 2 ) ppt General % 8 % 0ppt ( 2 ) ppt General and administrative administrative fee . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 General and administrative expense increased offset in part by a 6 % reduction in headcount-related expense reduction in headcount-related expense . 31 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2009 compared w Revenue Unearned revenue at June 30 , 2010 comprised mainly unearned revenue at June 30 , 2010 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2010 also included payment revenue at June 30 , 2010 also included payment for : guarantee program , including the 2010 Microsoft Office technology guarantee program unearned revenue a of June 30 , 2010 : ( In a of June 30 , 2010 : ( In million ) Three Months Ending , September 30 , 2010 $ 5,150 December Ending , September 30 , 2010 $ 5,15 Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used which wa offset in part 35 Table of Contents PART II of Contents PART II Item 7 by a $ 1.7 billion Item 7 by a $ 1.7 billion increase in cash received used for investing decreased $ 4.5 billion due to a $ billion due to a $ 3.3 billion decrease in revenue of $ 1.2 billion and non-cash item of and non-cash item of $ 240 million . Other Planned Uses and potential future need . 37 Table of Contents PART II of Contents PART II Item 7 As a result of the second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 16.7 billion at June 30 , $ 16.7 billion at June 30 , 2010 . Our retained billion at June 30 , 2010 . Our retained deficit is . RECENT LEGISLATION In March 2010 , the Patient Protection and and Education Reconci revenue recognition financial statement . In June 2009 , the FASB issued guidance effective for u beginning July 1 , 2010 . The new u beginning July 1 , 2010 . The new guidance requires to Windows Vista and Windows 7 is not subject to a no significant undelivered element . 2007 Microsoft Office system revenue is a a result of the 2010 Microsoft Office system technology guarantee program , which started March 5 , 2010 . This program which started March 5 , 2010 . This program allows customer purchased c revenue related to the undelivered 2010 Microsoft Office system is deferred the security before recovery . 39 Table of Contents PART II of Contents PART II Item 7 We also consider specific adverse an annual basis ( May 1 for u ) and between impairment test performed on May 1 , 2010 , we performed performed on May 1 , 2010 , we performed an interim first quarter of fiscal year 2010 in connection with the disposal benefit from an uncertain tax 40 Table of Contents PART II of Contents PART II Item 7 posit Revenue Year Ended June 30 , 2010 2009 2008 Revenue $ 62,484 Ended June 30 , 2010 2009 2008 Revenue $ 62,484 $ June 30 , 2010 2009 2008 Revenue $ 62,484 $ 58,437 2010 2009 2008 Revenue $ 62,484 $ 58,437 $ 60,420 Operating 2008 Revenue $ 62,484 $ 58,437 $ 60,420 Operating expense : $ 62,484 $ 58,437 $ 60,420 Operating expense : Cost of expense : Cost of revenue 12,395 12,155 11,598 Research and development : Cost of revenue 12,395 12,155 11,598 Research and development 8,714 Cost of revenue 12,395 12,15 revenue 13,652 3,283 3,156 Income tax 1,074 725 Short-term unearned revenue 13,652 13,003 1,074 725 Short-term unearned revenue 13,652 13,003 Securities lending payable 182 725 Short-term unearned revenue 13,652 13,003 Securities lending payable 182 1,684 13,652 13,003 Securities lending payable 182 1,684 Other 2,931 3,142 Total 13,003 Securities lending payable 182 1,684 Other 2,931 3,142 Total current lending payable 182 1,684 Other 2,931 3,142 Total current liability 26,147 payable 182 1,684 Other 2 revenue 1,178 26,147 27,034 Long-term debt 4,939 3,746 Long-term unearned revenue 1,178 1,281 4,939 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 0 1,178 1,281 Deferred income tax 229 0 Other long-term liability 7,445 1,281 Deferred income tax 229 0 Other long-term liability 7,445 6,269 229 0 Other long-term liability 7,445 6,269 Commitments and contingency Stockholders 0 Other long-term liability 7,445 6,269 Co revenue tax ( 220 ) 762 935 Deferral of unearned revenue 29,374 935 Deferral of unearned revenue 29,374 24,409 24,532 Recognition of unearned Deferral of unearned revenue 29,374 24,409 24,532 Recognition of unearned revenue of unearned revenue 29,374 24,409 24,532 Recognition of unearned revenue ( Recognition of unearned revenue ( 28,813 ) ( 25,426 ) ( revenue ( 28,813 ) ( 25,426 ) ( 21,944 ) Changes ) ( 25,426 ) ( 21,944 ) Changes in operating asset liability : Accounts receivable ( 2,238 ) 2,215 ( 1, Revenue related to our Xbox 360 gaming and entertainment console , for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . life of the product . 49 Table of Contents PART II of Contents PART II Item 8 Sales and Marketing Sales and . Advertising expense wa $ 1.6 billion , $ 1.4 billion $ 1.6 billion , $ 1.4 billion , and $ 1.2 1.4 billion , and $ 1.2 billion in fiscal year 2010 1.2 billion in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , revenue . 52 Table of Contents PART II of Contents PART II Item 8 Property and Equipment Property and and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 10 year ; and furniture and an annual basis ( May 1 for u ) and between , ranging from one to 10 year . We evaluate the Adopted Accounting Pronouncements In January 2010 , the Financial Accounting Standards asset and liability between Level 1 ( quoted price in active or liability ) and Level 2 ( significant other revenue $ 495 $ 884 Amount Excluded from into revenue $ 495 $ 884 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 174 ) $ ( 314 ) ( 174 ) $ ( 314 ) We estimate that $ ) We estimate that $ 496 million of net derivative gain into earnings within the next 12 month . No significant amount to occur during fiscal year 2010 . Non-Designated Derivatives Gains ( immaterial for the fiscal year 2010 and 2009 . Other than the fiscal year 2010 and 2009 . Other than those derivative million ) Year Ende Revenue Service % Internal Revenue Service settlement 0 % 0 % ( 5.8 Revenue Service settlement 0 % 0 % ( 5.8 ) % 0 % 0 % ( 5.8 ) % European Commission fine ) % European Commission fine 0 % 0 % 2.1 % European Commission fine 0 % 0 % 2.1 % Other reconciling fine 0 % 0 % 2.1 % Other reconciling item , Other reconciling item , net 2.1 % 0.8 % 1.5 % item , net 2.1 % 0.8 % 1.5 % Effective rate net 2.1 % 0.8 % 1.5 % Effective rate 25.0 % % 1.5 % Effective rate 25.0 % 26.5 % 25.8 % % Effective rate 25.0 % 26.5 revenue 556 743 2,004 Other expense item 1,696 1,595 Unearned revenue 556 743 Impaired item 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 Other revenue 556 743 Impaired investment 289 236 Other revenue item 80 556 743 Impaired investment 289 236 Other revenue item 80 120 289 236 Other revenue item 80 120 Deferred income tax asset 236 Other revenue item 80 120 Deferred income tax asset $ Deferred income tax asset $ 3,950 REVENUE Unearned revenue ( In million ) June 30 , 2010 2009 Volume licensing million ) June 30 , 2010 2009 Volume licensing program $ ) June 30 , 2010 2009 Volume licensing program $ 12,180 2009 Volume licensing program $ 12,180 $ 11,350 Undelivered element 624 licensing program $ 12,180 $ 11,350 Undelivered element 624 1,083 Other 12,180 $ 11,350 Undelivered element 624 1,083 Other 2,026 1,851 Total $ 11,350 Undelivered element 624 1,083 Other 2,026 1,851 Total $ Undelivered element 624 1,083 Other 2, revenue by segment wa ( In million ) June 30 , 2010 2009 Windows & million ) June 30 , 2010 2009 Windows & Windows Live ) June 30 , 2010 2009 Windows & Windows Live Division & Windows Live Division $ 1,701 $ 2,345 Server and Tools Live Division $ 1,701 $ 2,345 Server and Tools 5,282 4,732 $ 2,345 Server and Tools 5,282 4,732 Microsoft Business Division 7,004 2,345 Server and Tools 5,282 4,732 Microsoft Business Division 7,004 6,508 5,282 4,732 Microsoft Business Division 7,004 6,508 Other segment 843 6 revenue and operating million ) Year Ended June 30 , 2010 2009 2008 Revenue Year Ended June 30 , 2010 2009 2008 Revenue Windows & Ended June 30 , 2010 2009 2008 Revenue Windows & Windows June 30 , 2010 2009 2008 Revenue Windows & Windows Live & Windows Live Division $ 17,788 $ 14,690 $ 16,815 Server Live Division $ 17,788 $ 14,690 $ 16,815 Server and Tools $ 17,788 $ 14,690 $ 16,815 Server and Tools 14,878 14,276 $ 16,815 Server and Tools 14,878 14,276 13,217 Online Services Division 16,815 Server and Revenue reconciling amount ) Stock-based compensation expense 571 770 790 Revenue reconciling amount 369 Stock-based compensation expense 571 770 790 Revenue reconciling amount 369 256 770 790 Revenue reconciling amount 369 256 396 Other 732 ( 790 Revenue reconciling amount 369 256 396 Other 732 ( 19 Revenue reconciling amount 369 256 396 Other 732 ( 19 ) amount 369 256 396 Other 732 ( 19 ) 14 Total 256 396 Other 732 ( 19 ) 14 Total $ ( Other 732 ( 19 ) 14 Total $ ( 2,798 ) ) 14 Total $ ( 2,798 ) $ ( 3 revenue . 2010 , 2009 , or 2008 revenue . Revenue , classified million ) Year Ended June 30 , 2010 2009 2008 United Year Ended June 30 , 2010 2009 2008 United States ( Ended June 30 , 2010 2009 2008 United States ( a June 30 , 2010 2009 2008 United States ( a ) States ( a ) $ 36,173 $ 33,052 $ 35,928 Other a ) $ 36,173 $ 33,052 $ 35,928 Other country 26,311 $ 36,173 $ 33,052 $ 35,928 Other country 26,311 25,385 24,492 33,052 $ 35,928 Other country 26,311 25,385 24,492 Total $ 62,484 $ 35,928 Other coun Revenue June 30 Total Fiscal Year 2010 Revenue $ 12,920 ( b Fiscal Year 2010 Revenue $ 12,920 ( b ) $ 19,022 12,920 ( b ) $ 19,022 ( a ) $ 14,503 19,022 ( a ) $ 14,503 $ 16,039 $ 62,484 Gross a ) $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3 Revenue share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( c ) $ 16,629 $ 13,648 $ 13,099 ( c ) $ 58,437 13,099 ( c ) $ 58,437 Gross profit 12,213 12,722 10,834 ) $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 58,437 Revenue share 0.48 0.47 0.33 0.34 1.62 Fiscal Year 2008 Revenue $ 0.33 0.34 1.62 Fiscal Year 2008 Revenue $ 13,762 $ 16,367 Fiscal Year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the \u201c Windows 7 Deferral \u201d ) . ( ( b ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . ( c ) ( c ) Reflects $ 276 million of revenue deferred to period relating to the Windows 7 Deferral . ( d ) Includes employee severance of $ 290 million and $ 40 million $ 290 million and $ 40 million ( pre-tax ) in of the yea", + "expenses": "EXPENSES Cost of million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Cost of revenue 2009 Percentage Change 2009 Versus 2008 Cost of revenue $ 12,395 2008 ", + "net_income": "Net income $ c ) $ 18,438 $ 16,380 Net income $ 18,760 $ $ 16,380 Net income $ 18,760 $ 14,569 $ 17,681 ( Net income $ 18,760 $ 14,569 $ 17,681 ( c ) $ 18,760 $ 14,569 $ 17,681 ( c ) $ 14,065 17,681 ( c ) $ 14,065 $ 12,599 Diluted earnings per c ) $ 14,065 $ 12,599 Diluted earnings per share $ Diluted earnings per share $ 2.10 $ 1.62 $ 1.87 $ per share $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash dividend declared $ 1.87 $ 1.42 $ 1.20 Cash dividend Net income $ Provision for income tax 6,253 5,252 6,133 Net income $ 18,760 for income tax 6,253 5,252 6,133 Net income $ 18,760 $ 5,252 6,133 Net income $ 18,760 $ 14,569 $ 17,681 Earnings Net income $ 18,760 $ 14,569 $ 17,681 Earnings per share $ 18,760 $ 14,569 $ 17,681 Earnings per share : Basic per share : Basic $ 2.13 $ 1.63 $ 1.90 Diluted : Basic $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 $ 1.87 Weighted 1.90 Diluted $ 2.10 $ 1.6 Net income Ended June 30 , 2010 2009 2008 Operations Net income $ June 30 , 2010 2009 2008 Operations Net income $ 18,760 2008 Operations Net income $ 18,760 $ 14,569 $ 17,681 Adjustments Net income $ 18,760 $ 14,569 $ 17,681 Adjustments to reconcile $ 18,760 $ 14,569 $ 17,681 Adjustments to reconcile net income , and other noncash item 2,673 2,562 2,056 Stock-based compensation 1,891 and other noncash item 2,673 2,562 2,056 Stock-based compensation 1,891 1,708 other noncash item 2,673 2,562 2,056 Stock-b Net income compensated absence 0 0 ( 17 ) Net income 18,760 14,569 ( 17 ) Net income 18,760 14,569 17,681 Other comprehensive income 17 ) Net income 18,760 14,569 17,681 Other comprehensive income : ) Net income 18,760 14,569 17,681 Other comprehensive income : Net Net unrealized gain on derivative 27 302 18 Net unrealized gain unrealized gain on derivative 27 302 18 Net unrealized gain ( gain on derivative 27 302 18 Net unrealized gain ( loss ( loss ) on investment 265 ( 233 ) ( 653 ) on investment 265 ( Net income available Ended June 30 , 2010 2009 2008 Net income available for June 30 , 2010 2009 2008 Net income available for common shareholder ( A ) $ 18,760 $ 14,569 $ 17,681 Weighted A ) $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding share of common stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based award Dilutive effect of Net income 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 4,006 11,748 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share income 3,5 Net income 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 2,977 10,834 10,513 46,282 Net income 4,373 4,174 2,977 ( d ) 10,513 46,282 Net income 4,373 4,174 2,977 ( d ) 3,045 46,282 Net income 4,373 4,174 2,977 ( d ) 3,045 ( 4,174 2,977 ( d ) 3,045 ( d ) 14,569 Basic ) 3,045 ( d ) 14,569 Basic earnings per share 0.48 14,569 Basic earnings per shar Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 4,388 11,940 12,971 48,822 Net income 4,289 4,707 4,388 ( e ) 12,971 48,822 Net income 4,289 4,707 4,388 ( e ) 4,297 48,822 Net income 4,289 4,707 4,388 ( e ) 4,297 17,681 4,707 4,388 ( e ) 4,297 17,681 Basic earnings per share 4,388 ( e ) 4,297 17,681 Basic earnings per share 0.46 17,681 B", + "assets": "Assets Current million ) June 30 , 2010 2009 Assets Current asset : ) June 30 , 2010 2009 Assets Current asset : Cash Cash and cash equivalent $ 5,505 $ 6,076 Short-term investment ( cash equivalent $ 5,505 $ 6,076 Short-term investment ( including security including security loaned of $ 62 and $ 1,540 ) 31,283 of $ 62 and $ 1,540 ) 31,283 25,371 Total cash 62 and $ 1,540 ) 31,283 25,371 Total cash , cash and $ 1,540 ) 31,283 25,371 Total cash , cash equivalent equivalent , and short-term investment 3 Assets Derivatives not Total Derivatives June 30 , 2010 Assets Derivatives not designated a instrument : Short-term investment $ 15 $ 134 $ 12 $ Short-term investment $ 15 $ 134 $ 12 $ 7 $ $ 15 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 176 Other $ 12 $ 7 $ 8 $ 176 Other current asset $ 7 $ 8 $ 176 Other current asset 34 0 $ 176 Other current asset 34 0 0 0 0 34 176 Other current asset 34 0 0 0 0 34 Total Other current asset 34 0 0 0 0 34 Total $ current asset 34 0 0 0 0 34 Total $ 49 asset 34 0 0 0 0 Assets Derivatives not Total Derivatives June 30 , 2009 Assets Derivatives not designated a instrument : Short-term investment $ 9 $ 78 $ 44 $ Short-term investment $ 9 $ 78 $ 44 $ 21 $ $ 9 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 154 Other $ 44 $ 21 $ 2 $ 154 Other current asset $ 21 $ 2 $ 154 Other current asset 48 0 $ 154 Other current asset 48 0 0 0 0 48 154 Other current asset 48 0 0 0 0 48 Total Other current asset 48 0 0 0 0 48 Total $ current asset 48 0 0 0 0 48 Total $ 57 asset 48 0 0 0 0 48 Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2010 Assets Mutual fund Fair Value June 30 , 2010 Assets Mutual fund $ 1,120 2010 Assets Mutual fund $ 1,120 $ 0 $ 0 $ Mutual fund $ 1,120 $ 0 $ 0 $ 1,120 $ $ 1,120 $ 0 $ 0 $ 1,120 $ 0 $ $ 0 $ 0 $ 1,120 $ 0 $ 1,120 Commercial $ 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 172 0 0 $ 1,120 C Assets Mutual fund Fair Value June 30 , 2009 Assets Mutual fund $ 982 2009 Assets Mutual fund $ 982 $ 0 $ 0 $ Mutual fund $ 982 $ 0 $ 0 $ 982 $ $ 982 $ 0 $ 0 $ 982 $ 0 $ $ 0 $ 0 $ 982 $ 0 $ 982 Commercial $ 0 $ 982 $ 0 $ 982 Commercial paper 0 $ 982 $ 0 $ 982 Commercial paper 0 2,601 0 0 $ 982 Commercial paper 0 2,601 0 2,601 0 2,601 $ 982 Commercial paper 0 2,601 0 2,601 0 2,601 Certificates 982 Commercial paper 0 2,601 0 2,601 0 2,601 Certificates of Commercial paper 0 2,601 0 2,601 0 2,601 Certific Assets Total Year Ended June 30 , 2010 Balance , beginning Year Ended June 30 , 2010 Balance , beginning of period , beginning of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Total $ 253 $ 5 $ 5 $ 263 Total realized and $ 5 $ 5 $ 263 Total realized and unrealized gain other income ( expense ) 6 0 4 10 Included in income ( expense ) 6 0 4 10 Included in other ( expense ) 6 0 4 10 Included in other comprehensive expense ) 6 0 4 10 Included in other comprehensive income in other comprehensive inc Assets Total Year Ended June 30 , 2009 Balance , beginning Year Ended June 30 , 2009 Balance , beginning of period , beginning of period $ 138 $ 8 $ 71 $ of period $ 138 $ 8 $ 71 $ 217 Total $ 138 $ 8 $ 71 $ 217 Total realized and $ 8 $ 71 $ 217 Total realized and unrealized gain income ( expense ) ( 6 ) ( 6 ) 51 ) ( 6 ) ( 6 ) 51 39 Included in 6 ) ( 6 ) 51 39 Included in other comprehensive ) ( 6 ) 51 39 Included in other comprehensive income Included in other comprehensive income 111 0 0 111 Purchas Assets and Liabilities Measured at Nonrecurring Basis During fiscal year 2010 and 2009 , impairment charge During fiscal year 2010 and 2009 , impairment charge of $ , impairment charge of $ 5 million and $ 86 million $ 5 million and $ 86 million , respectively , were all instance . At June 30 , 2010 and 2009 , . At June 30 , 2010 and 2009 , the fair June 30 , 2010 and 2009 , the fair value of a non-recurring basis were $ 0 and $ 164 million , were $ 0 and $ 164 million , respectively . NOTE million , ASSETS The component Carrying Amount Year Ended June 30 , 2010 2009 Contract-based $ Year Ended June 30 , 2010 2009 Contract-based $ 1,075 $ Ended June 30 , 2010 2009 Contract-based $ 1,075 $ ( , 2010 2009 Contract-based $ 1,075 $ ( 914 ) $ Contract-based $ 1,075 $ ( 914 ) $ 161 $ 1,087 $ ( 914 ) $ 161 $ 1,087 $ ( 855 914 ) $ 161 $ 1,087 $ ( 855 ) $ 161 $ 1,087 $ ( 855 ) $ 232 Technology-based 2,308 $ ( 855 ) $ 232 Technology-based 2,308 ( 1,521 ) 855 ) $ 232 Technology-based 2,308 ( 1,521 ) 787 2,033 Assets ) June 30 , 2010 2009 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 1,329 $ 2,004 Other expense item compensation expense $ 1,329 $ 2,004 Other expense item 1,696 1,595 $ 2,004 Other expense item 1,696 1,595 Unearned revenue 556 743 2,004 Other expense item 1,696 1,595 Unearned revenue 556 743 Impaired item 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 Other revenue 556 743 Imp", + "liabilities": "Liabilities and stockholder Total asset $ 86,113 $ 77,888 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 Income debt 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1, Liabilities $ 12 $ 7 $ 8 $ 776 Liabilities Derivatives not $ 7 $ 8 $ 776 Liabilities Derivatives not designated a Other current liability $ ( 60 ) $ ( 17 ) ( 60 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 156 ) ( 5 ) $ ( 156 ) Derivatives designated a hedging Other current liability $ ( 9 ) $ 0 $ 0 $ ( 9 ) $ 0 $ 0 $ 0 $ 9 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 9 $ 0 $ 0 $ 0 $ ( 9 ) Total 0 $ 0 $ ( 9 ) Total liability $ ( ) Total liability $ ( 69 ) $ ( 17 ) ( 69 Liabilities $ 44 $ 21 $ 2 $ 633 Liabilities Derivatives not $ 21 $ 2 $ 633 Liabilities Derivatives not designated a Other current liability $ ( 183 ) $ ( 3 ) ( 183 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 274 ) ( 6 ) $ ( 274 ) Derivatives designated a hedging Other current liability $ ( 75 ) $ 0 $ 0 $ ( 75 ) $ 0 $ 0 $ 0 $ 75 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 75 $ 0 $ 0 $ 0 $ ( 75 ) Total 0 $ 0 $ ( 75 ) Total liability $ ( ) Total liability $ ( 258 ) $ ( 3 Liabilities Derivatives $ ( 207 ) $ 42,645 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 85 $ 137 $ 0 $ and other $ 85 $ 137 $ 0 $ 222 $ $ 85 $ 137 $ 0 $ 222 $ ( 205 $ 137 $ 0 $ 222 $ ( 205 ) $ 0 $ 222 $ ( 205 ) $ 17 ( In $ ( 205 ) $ 17 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2009 Assets Mutual fund Fair Value June 30 , 2009 Ass Liabilities Derivatives $ ( 235 ) $ 33,724 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 344 $ 0 $ and other $ 5 $ 344 $ 0 $ 349 $ $ 5 $ 344 $ 0 $ 349 $ ( 231 $ 344 $ 0 $ 349 $ ( 231 ) $ 0 $ 349 $ ( 231 ) $ 118 ( a $ ( 231 ) $ 118 ( a ) These amount and counterparty credit risk . 62 Table of Contents PART II of Contents PART II Item 8 The table below reconciles the these same asset in Note 4 \u2013 Investments for June 30 4 \u2013 Investments for June 30 , 2010 and 2009 . Investments fo Liabilities Measured at Nonrecurring Basis During fiscal year 2010 and 2009 , impairment charge During fiscal year 2010 and 2009 , impairment charge of $ , impairment charge of $ 5 million and $ 86 million $ 5 million and $ 86 million , respectively , were all instance . At June 30 , 2010 and 2009 , . At June 30 , 2010 and 2009 , the fair June 30 , 2010 and 2009 , the fair value of a non-recurring basis were $ 0 and $ 164 million , were $ 0 and $ 164 million , respectively . NOTE million , respectively . N Liabilities International Liabilities International earnings $ ( 1,056 ) $ ( 1,191 ) ( 1,056 ) $ ( 1,191 ) Unrealized gain on investment Unrealized gain on investment ( 674 ) ( 516 ) Other investment ( 674 ) ( 516 ) Other ( 265 ) ( 516 ) Other ( 265 ) ( 499 ) Deferred Other ( 265 ) ( 499 ) Deferred income tax liability Deferred income tax liability ( 1,995 ) ( 2,206 ) Net liability ( 1,995 ) ( 2,206 ) Net deferred income tax deferred income tax asset $ 1,955 $ 2,492 Reported As Current tax asset $ 1,955 $ LIABILITIES ( ( In million ) June 30 , 2010 2009 Tax contingency million ) June 30 , 2010 2009 Tax contingency and other ) June 30 , 2010 2009 Tax contingency and other tax and other tax liability $ 6,887 $ 5,515 Legal contingency 236 tax liability $ 6,887 $ 5,515 Legal contingency 236 407 Product 6,887 $ 5,515 Legal contingency 236 407 Product warranty 69 132 $ 5,515 Legal contingency 236 407 Product warranty 69 132 Other contingency 236 407 Product warranty 69 132 Other 253 215 Total 236 407 Product warr", + "equity": "Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management \u2019 Selected Financial Data 21 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 43 Item 8 . Financial Statements about Market Risk 43 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend and share repurchase . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2010 2009 2008 2007 Year Ended June 30 , 2010 2009 2008 2007 2006 Revenue Ended June 30 , 2010 2009 2008 2007 2006 Revenue $ June 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ 58,437 2008 2007 2006 Revenue equity $ 6,621 $ 8,320 $ 7,051 Stockholders \u2019 equity $ 46,175 7,051 Stockholders \u2019 equity $ 46,175 $ 39,558 $ 36,286 $ \u2019 equity $ 46,175 $ 39,558 $ 36,286 $ 31,097 $ $ 46,175 $ 39,558 $ 36,286 $ 31,097 $ 40,104 ( $ 39,558 $ 36,286 $ 31,097 $ 40,104 ( a ) $ 36,286 $ 31,097 $ 40,104 ( a ) Includes $ ( a ) Includes $ 1.25 billion of convertible debt security debt security issued in June 2010 and $ 3.75 billion of in June 2010 and $ 3.75 billion of debt security issued debt security issued in May 2009 . S Equity and a of June 30 , 2009 . Equity and other investment and other investment were $ 7.8 billion a of June 30 7.8 billion a of June 30 , 2010 , compared with a of June 30 , 2010 , compared with $ 4.9 2010 , compared with $ 4.9 billion a of June 30 4.9 billion a of June 30 , 2009 . Our short-term a of June 30 , 2009 . Our short-term investment are methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note and agency sec equity stockholder \u2019 equity for $ 58 million , with the portion price initially equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and were charged to Revenue Unearned revenue at June 30 , 2010 comprised mainly unearned revenue at June 30 , 2010 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2010 also included payment revenue at June 30 , 2010 also included payment for : guarantee program , including the 2010 Microsoft Office technology guarantee prog Equity $ 42 $ 54 $ 69 $ 43 Equity $ 183 $ 54 $ 69 $ 43 Equity $ 183 $ 157 69 $ 43 Equity $ 183 $ 157 $ 184 $ 43 Equity $ 183 $ 157 $ 184 $ 206 $ $ 183 $ 157 $ 184 $ 206 $ 142 Commodity $ 157 $ 184 $ 206 $ 142 Commodity $ 19 $ 184 $ 206 $ 142 Commodity $ 19 $ 16 206 $ 142 Commodity $ 19 $ 16 $ 17 $ 142 Commodity $ 19 $ 16 $ 17 $ 20 $ $ 19 $ 16 $ 17 $ 20 $ 14 Total $ 16 $ 17 $ 20 $ 14 Total one-day VaR $ 17 $ 20 $ 14 Total one-day VaR for the combined risk category wa $ 235 million at June 30 , $ 235 mi Equity and other $ 8,629 and $ 7,547 7,630 7,535 Equity and other investment 8,629 and $ 7,547 7,630 7,535 Equity and other investment 7,754 7,535 Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset , net investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset , net 1,158 12,503 Intangible asset , net 1,158 1,759 Deferred inco equity liability : Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 Income debt 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 Short-term compensation 3,283 3,156 Income tax 1,074 725 Short-term unearne equity ) Total stockholder \u2019 equity 46,175 39,558 Total liability and stockholder Total stockholder \u2019 equity 46,175 39,558 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 86,113 $ 77,888 See accompanying note \u2019 equity $ 86,113 $ 77,888 See accompanying note . 45 77,888 See accompanying note . 45 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2010 2009 2008 Operations Year Ended June 30 , 2010 2009 2008 Operations Net income E EQUITY STATEMENTS ( million ) Year Ended June 30 , 2010 2009 2008 Common Year Ended June 30 , 2010 2009 2008 Common stock and Ended June 30 , 2010 2009 2008 Common stock and paid-in June 30 , 2010 2009 2008 Common stock and paid-in capital , beginning of period $ 62,382 $ 62,849 $ 60,557 Common of period $ 62,382 $ 62,849 $ 60,557 Common stock issued $ 62,382 $ 62,849 $ 60,557 Common stock issued 2,311 567 $ 60,557 Common stock issued 2,311 567 3,504 Common stock repurchased 60,557 Common stock issued equity Total stockholder \u2019 equity $ 46,175 $ 39,558 $ 36,286 See \u2019 equity $ 46,175 $ 39,558 $ 36,286 See accompanying note $ 46,175 $ 39,558 $ 36,286 See accompanying note . 47 36,286 See accompanying note . 47 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles to Windows Vista and Windows 7 is not subject to a value of both product . 48 Table of Contents PART II of Contents PART II It Equity and Other Investments June 30 , 2010 Cash $ 1,661 Other Investments June 30 , 2010 Cash $ 1,661 $ 0 30 , 2010 Cash $ 1,661 $ 0 $ 0 $ 2010 Cash $ 1,661 $ 0 $ 0 $ 1,661 $ $ 1,661 $ 0 $ 0 $ 1,661 $ 1,661 $ $ 0 $ 0 $ 1,661 $ 1,661 $ 0 $ $ 0 $ 1,661 $ 1,661 $ 0 $ 0 Mutual $ 1,661 $ 1,661 $ 0 $ 0 Mutual fund 1,120 $ 1,661 $ 0 $ 0 Mutual fund 1,120 0 0 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial Mutual fund 1,12 Equity and Other Investments June 30 , 2009 Cash $ 2,064 Other Investments June 30 , 2009 Cash $ 2,064 $ 0 30 , 2009 Cash $ 2,064 $ 0 $ 0 $ 2009 Cash $ 2,064 $ 0 $ 0 $ 2,064 $ $ 2,064 $ 0 $ 0 $ 2,064 $ 2,064 $ $ 0 $ 0 $ 2,064 $ 2,064 $ 0 $ $ 0 $ 2,064 $ 2,064 $ 0 $ 0 Mutual $ 2,064 $ 2,064 $ 0 $ 0 Mutual fund 1,007 $ 2,064 $ 0 $ 0 Mutual fund 1,007 0 ( 0 $ 0 Mutual fund 1,007 0 ( 25 ) 982 $ 0 Mutual fund 1,007 0 ( 25 ) 982 900 Mutual fund 1,007 0 ( 25 ) 982 900 82 0 1,007 0 ( 25 ) 982 900 82 0 Commerc Equity forward . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 918 million and $ 472 million $ 918 million and $ 472 million , respectively . As respectively . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount and sold were immaterial . 57 Table of Contents PART II of Contents PART II Item 8 Interest Rate Securities held in instrument . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notiona Equity Other current asset 417 0 0 0 0 417 Equity and current asset 417 0 0 0 0 417 Equity and other asset 417 0 0 0 0 417 Equity and other investment 417 0 0 0 0 417 Equity and other investment 0 417 Equity and other investment 0 2 0 0 0 2 Equity and other investment 0 2 0 0 0 2 Total and other investment 0 2 0 0 0 2 Total $ other investment 0 2 0 0 0 2 Total $ 429 investment 0 2 0 0 0 2 Total $ 429 $ 0 2 0 0 0 2 Total $ 429 $ 2 0 0 2 Total $ 429 $ 2 $ 0 $ 2 Total $ 429 $ 2 $ 0 $ 0 $ $ 429 $ 2 $ 0 $ Equity Contracts Derivatives ) Total $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives $ 0 $ 191 Hedged item 0 Contracts Derivatives $ 0 $ 191 Hedged item 0 ( 211 0 $ 191 Hedged item 0 ( 211 ) Total $ 191 Hedged item 0 ( 211 ) Total $ 0 $ ( 211 ) Total $ 0 $ ( 20 ) 60 Total $ 0 $ ( 20 ) 60 Table of Contents 0 $ ( 20 ) 60 Table of Contents PART II of Contents PART II Item 8 Cash-Flow Hedges We recognized the million ) Year Ended June 30 , 2010 2009 Effective Portion Year Ended Jun Equity contract $ 106 $ ( 234 ) Equity contract 12 ( ( 234 ) Equity contract 12 ( 131 ) Interest-rate contract ) Equity contract 12 ( 131 ) Interest-rate contract ( 4 131 ) Interest-rate contract ( 4 ) 5 Credit contract 22 Interest-rate contract ( 4 ) 5 Credit contract 22 ( 18 4 ) 5 Credit contract 22 ( 18 ) Commodity contract 5 Credit contract 22 ( 18 ) Commodity contract ( 1 18 ) Commodity contract ( 1 ) ( 126 ) Total contract ( 1 ) ( 126 ) Total $ 135 $ ( 126 ) Total $ 135 $ ( 504 ) 61 Total $ 135 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder equity . As of June 30 , 2010 , the total As of June 30 , 2010 , the total carrying value convertible debt , were $ 4.94 billion and $ 5.21 billion $ 4.94 billion and $ 5.21 billion , respectively . The publicly-traded debt a of June 30 , 2010 , a applicable a of June 30 , 2010 , a applicable . The of the Notes due in 2014 EQUITY Shares million ) Year Ended June 30 , 2010 2009 2008 Balance Year Ended June 30 , 2010 2009 2008 Balance , beginning Ended June 30 , 2010 2009 2008 Balance , beginning of June 30 , 2010 2009 2008 Balance , beginning of year Balance , beginning of year 8,908 9,151 9,380 Issued 140 75 , beginning of year 8,908 9,151 9,380 Issued 140 75 173 beginning of year 8,908 9,151 9,380 Issued 140 75 173 Repurchased year 8,908 9,151 9,380 Issued 140 75 173 Repurchased ( 380 8,908 9,151 9,380 Issued 140 75 17 Equity Statements 47 46 Stockholders \u2019 Equity Statements 47 Notes to Financial Statements 48 47 Notes to Financial Statements 48 Report of Independent Registered Public Independent Registered Public Accounting Firm 84 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 5.0 billion , primarily due to due to payment of $ 4.1 billion to the Internal Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used which wa offset in part 35 Table of Contents PART II of Contents PART II Item 7 by a $ 1.7 billion Item Cash flow from operation decreased flow from operation decreased $ 2.6 billion due to payment of to payment of approximately $ 4.1 billion to the IRS in with our settlement of the 2000-2003 audit examination . This impact offset by the fiscal year 2008 payment of the $ 1.4 2008 payment of the $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) European Commission fine used for financing decreased $ 5.5 billion primarily due to $ billion primarily due to $ 5.7 billion of net cash proceeds long-t", + "accumulated_depreciation": "accumulated depreciation of $ 8,629 and $ 7,547 7,630 7,535 of $ 8,629 and $ 7,547 7,630 7,535 Equity and other $ 8,629 and $ 7,547 7,630 7,535 Equity and other investment 8,629 and $ 7,547 7,630 7,535 Equity and other investment 7,754 7,535 Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset , net investment 7,754 4,933 Goodwill 12,394 12,503 Intangi Accumulated depreciation ( 8,629 Total , at cost 16,259 15,082 Accumulated depreciation ( 8,629 ) 16,259 15,082 Accumulated depreciation ( 8,629 ) ( 7,547 ) Total depreciation ( 8,629 ) ( 7,547 ) Total , net $ ) Total , net $ 7,630 $ 7,535 During fiscal year , net $ 7,630 $ 7,535 During fiscal year 2010 , $ 7,535 During fiscal year 2010 , 2009 , and 2008 During fiscal year 2010 , 2009 , and 2008 , depreciation 2010 , 2009 , and 2008 , depreciation expense wa $ , depreciation expense wa $ 1.8 billion , $ 1.7 billion $ 1", + "debt": "debt security debt security issued in June 2010 and $ 3.75 billion of in June 2010 and $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 \u2013 May 2009 . See Note 12 \u2013 Debt in the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) ( b ) Includes $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 \u2013 May 2009 . See Note 12 \u2013 Debt in the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) debt in May 2009 . Net recognized gain on . Other-than-temporary impairment were $ 69 million during fiscal year 2010 69 million during fiscal year 2010 , a compared with $ , a compared with $ 862 million during fiscal year 2009 862 million during fiscal year 2009 and decreased primarily due to were insignificant in fiscal year 2010 compared to net loss of to net loss of $ 509 million in the prior year year . For fiscal year 2010 , other includes a gain the divestiture of Razorfish . 32 Table of Con Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . As of June billion . As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.0 2010 , we had $ 6.0 billion of issued and outstanding outstanding debt comprised of $ 1.0 billion of commercial paper and of commercial paper and $ 5.0 billion of long-term debt including of long-term debt including $ 1.25 billion of convertible debt . Short-term Debt As of June 30 , 2010 , our $ As of June 30 , 2010 , our $ 1.0 bil Debt Notes As of June 30 , 2010 , we had As of June 30 , 2010 , we had issued and had issued and outstanding $ 3.75 billion of debt security a security a follows : $ 2.0 billion aggregate principal amount of billion aggregate principal amount of 2.95 % note due 2014 , of 2.95 % note due 2014 , $ 1.0 billion aggregate note due 2014 , $ 1.0 billion aggregate principal amount of billion aggregate principal amount of 4.20 % note due 2019 , of 4.20 % note due 2019 , and $ 750 million due 2019 , and $ 750 Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee commercial paper , leaving $ 1.0 billion of commercial paper outstanding paper outstanding a of June 30 , 2010 . Each $ a of June 30 , 2010 . Each $ 1,000 principal , 2010 . Each $ 1,000 principal amount of note is of note is convertible into 29.94 shar debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million , with the portion price initially equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and were charged to Revenue Unearned revenue at June 30 , 2010 comprised mainly unearned revenue at June 30 , 2010 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2010 also included payment revenue at June 30 , 2010 also included payment for : guarantee prog debt in fiscal year 2009. Financing activity also included a activity also included a $ 3.2 billion decrease in common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in cash paid of aQuantive in fiscal year 2008 . Share Repurchases On September . Share Repurchases On September 22 debt a ) Principal payment $ 0 $ 3,250 $ 0 $ Principal payment $ 0 $ 3,250 $ 0 $ 1,750 $ $ 0 $ 3,250 $ 0 $ 1,750 $ 5,000 Interest $ 3,250 $ 0 $ 1,750 $ 5,000 Interest payment 140 $ 0 $ 1,750 $ 5,000 Interest payment 140 420 243 1,750 $ 5,000 Interest payment 140 420 243 942 1,745 Construction $ 5,000 Interest payment 140 420 243 942 1,745 Construction commitment 5,000 Interest payment 140 420 243 942 1,745 Construction commitment ( Interest payment 140 420 243 942 1,745 Construction commitment ( b p Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) ( b ) These other tax liability of $ 7.1 billion and other long-term contingent long-term contingent liability of $ 236 million ( related to the excluded unearned revenue of $ 1.2 billion and non-cash item of and non-cash item of $ 240 million . Other Planned Uses and potential future need . 37 Table of Contents PART II of Contents PART II Item 7 As a result of the second quarter of fiscal year 2005 and share repurch debt 1,000 Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 Income debt 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 Short-term compensation 3,283 3,156 Income tax 1,074 725 Short-term unearned revenue 13,652 3,283 3,156 Income tax 1,074 725 Short-term debt 4,939 3,746 3,142 Total current liability 26,147 27,034 Long-term debt 4,939 3,746 Long-term liability 26,147 27,034 Long-term debt 4,939 3,746 Long-term unearned revenue 1,178 26,147 27,034 Long-term debt 4,939 3,746 Long-term unearned revenue 1,178 1,281 4,939 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 0 1,178 1,281 Deferred income tax 229 0 Other long-term liability 7,445 1,281 Deferred income tax debt debt , maturity longer than 90 day 4,167 4,796 0 Repayments maturity longer than 90 day 4,167 4,796 0 Repayments of debt longer than 90 day 4,167 4,796 0 Repayments of debt , than 90 day 4,167 4,796 0 Repayments of debt , maturity debt , maturity longer than 90 day ( 2,986 ) ( longer than 90 day ( 2,986 ) ( 228 ) 0 day ( 2,986 ) ( 228 ) 0 Common stock issued 2,986 ) ( 228 ) 0 Common stock issued 2,311 579 ) 0 Common stock issued 2,311 579 3,494 Common stock repurchased 0 Common stock issued 2,3 debt security anti-dilutive . See also Note 12 \u2013 Debt . 54 Table Note 12 \u2013 Debt . 54 Table of Contents PART II of Contents PART II Item 8 NOTE 3 \u2014 OTHER INCOME PART II Item 8 NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2010 2009 2008 Dividends Year Ended June 30 , 2010 2009 2008 Dividends and interest Ended June 30 , 2010 2009 2008 Dividends and interest income June 30 , 2010 2009 2008 Dividends and interest income $ Dividends and interest income $ 843 $ 744 $ 994 Interest interes Debt Basis Estimated Fair Value June 30 , 2010 Due in one Fair Value June 30 , 2010 Due in one year or one year or le $ 12,489 $ 12,526 Due after one or le $ 12,489 $ 12,526 Due after one year through one year through five year 14,987 15,283 Due after five year year through five year 14,987 15,283 Due after five year through Due after five year through 10 year 2,137 2,242 Due after five year through 10 year 2,137 2,242 Due after 10 year year through 10 year 2,137 2,242 Due after 10 year 3,791 year 2 debt were in excess of $ 1.0 billion . As a result required to be posted . 58 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments derivative instrument held at June 30 , 2010 and 2009 , held at June 30 , 2010 and 2009 , excluding the June 30 , 2010 and 2009 , excluding the impact of Commodity Contracts Total Derivatives June 30 , 2010 Assets Derivatives not Total Derivatives June 30 , 2010 Assets Derivatives not designated a instrument : Short-term investment $ DEBT In 36 Total $ 1,158 NOTE 12 \u2014 DEBT In September 2008 12 \u2014 DEBT In September 2008 , our Board of Directors financing of up to $ 6.0 billion . As of June billion . As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.0 2010 , we had $ 6.0 billion of issued and outstanding outstanding debt comprised of $ 1.0 billion of commercial paper and of commercial paper and $ 5.0 billion of long-term debt , long-term debt , including $ 1.25 billion of convertible debt . our debt for fiscal year 20 debt for fiscal year 2009 and 2008 . Short-term Debt for fiscal year 2009 and 2008 . Short-term Debt As of Short-term Debt As of June 30 , 2010 , our $ As of June 30 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion of commercial paper issued including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 216 day . The and maturity of 22 to 216 day . The estimated fair carrying value . In November 2009 , we replaced our $ , we replaced our $ 2.0 billion and $ 1.0 billion $ 2. Debt Notes As of June 30 , 2010 , we had As of June 30 , 2010 , we had issued and had issued and outstanding $ 3.75 billion of debt security a is payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year , to record on the preceding May 15 and November 15 . The preceding May 15 and November 15 . The Notes are senior and unsubordinated debt outstanding . 66 Table of Contents PART II of Contents PART II Item 8 Convertible Debt In June 2010 8 Convertible Debt In June debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee commercial paper , leaving $ 1.0 billion of commercial paper outstanding paper outstanding a of June 30 , 2010 . Each $ a of June 30 , 2010 . Each $ 1,000 principal , 2010 . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . Prior to share . Prior to March 15 , debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder equity . As of June 30 , 2010 , the total As of June 30 , 2010 , the total carrying value convertible debt , were $ 4.94 billion and $ 5.21 billion $ 4.94 billion and $ 5.21 billion , respectively . The publicly-traded debt a of June 30 , 2010 , a applicable debt due in 2013 is 1.85 % at June debt due in 2013 is 1.85 % at June 30 , is 1.85 % at June 30 , 2010 and the coupon % at June 30 , 2010 and the coupon interest rate long-term debt a of June 30 , 2010 were a follows a of June 30 , 2010 were a follows : ( convertible note due on June 15 , 2013 $ 1,250 2.95 due on June 15 , 2013 $ 1,250 2.95 % Notes June 15 , 2013 $ 1,250 2.95 % Notes due on 15 , 2013 $ 1,250 2.95 % Notes due on June % Notes due on June 1 , 2014 2,000 4.20 % due on June 1 , 2014 2,00 debt for million ) Year Ending June 30 , 2011 $ 0 2012 Year Ending June 30 , 2011 $ 0 2012 0 2013 June 30 , 2011 $ 0 2012 0 2013 1,250 2014 30 , 2011 $ 0 2012 0 2013 1,250 2014 2,000 , 2011 $ 0 2012 0 2013 1,250 2014 2,000 2015 2011 $ 0 2012 0 2013 1,250 2014 2,000 2015 0 $ 0 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 0 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 Total 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 Total $ 2013 1,250", + "share_repurchase": "share repurchase . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2010 2009 2008 2007 Year Ended June 30 , 2010 2009 2008 2007 2006 Revenue Ended June 30 , 2010 2009 2008 2007 2006 Revenue $ June 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ 58,437 2008 2007 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ 44,282 share repurchase during the prior 12 month . We repurchased 318 12 month . We repurchased 318 million share during fiscal year million share during fiscal year 2009 . SEGMENT PRODUCT REVENUE/OPERATING INCOME Segment information appearing in Note 22 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a second quarter of fiscal year 2010 . Windows & Windows Live million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentag share repurchase with an expiration date of September 30 , 2013 ( the \u201c date of September 30 , 2013 ( the \u201c 2008 Program , 2013 ( the \u201c 2008 Program \u201d ) . As ) . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 380 million share for $ 10.8 380 million share for $ 10.8 billion during fiscal year 2010 10.8 billion dur share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year Ended June 30 , 2010 ( a ) Year Ended June 30 , 2010 ( a ) 2009 ( , 2010 ( a ) 2009 ( b ) 2008 ( ) 2009 ( b ) 2008 ( c ) First quarter ( c ) First quarter 58 $", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 2.10 $ 1.62 $ 1.87 $ per share $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash dividend declared $ 1.87 $ 1.42 $ 1.20 Cash dividend declared per share dividend declared per share $ 0.52 $ 0.52 $ 0.44 $ per share $ 0.52 $ 0.52 $ 0.44 $ 0.40 $ $ 0.52 $ 0.52 $ 0.44 $ 0.40 $ 0.35 Cash $ 0.52 $ 0.44 $ 0.40 $ 0.35 Cash and cash $ 0.44 $ 0.40 $ 0.35 Cash and cash equivalent and equivalent and short-term investment $ earnings per share $ 2.10 $ 1.62 $ 1.87 30 per share $ 2.10 $ 1.62 $ 1.87 30 % ( $ 2.10 $ 1.62 $ 1.87 30 % ( 13 ) 2.10 $ 1.62 $ 1.87 30 % ( 13 ) % $ 1.87 30 % ( 13 ) % Fiscal year 2010 13 ) % Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Revenue increased mainly due to to strong sale of Windows 7 , which wa released during wa released during fiscal year 2010 , and PC market improvement and marketing expense increased $ 335 million or 3 % , increased $ 335 million or 3 % , pri Earnings per share $ 18,760 $ 14,569 $ 17,681 Earnings per share : Basic per share : Basic $ 2.13 $ 1.63 $ 1.90 Diluted : Basic $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 $ 1.87 Weighted 1.90 Diluted $ 2.10 $ 1.62 $ 1.87 Weighted average share $ 2.10 $ 1.62 $ 1.87 Weighted average share outstanding : average share outstanding : Basic 8,813 8,945 9,328 Diluted 8,927 8,996 share outstanding : Basic 8,813 8,945 9,328 Diluted 8,927 8,996 9,470 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2010 2009 2008 Net Year Ended June 30 , 2010 2009 2008 Net income available Ended June 30 , 2010 2009 2008 Net income available for June 30 , 2010 2009 2008 Net income available for common shareholder ( A ) $ 18,760 $ 14,569 $ 17,681 Weighted A ) $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding share of common stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock ( B ) 8,813 8,945 9,328 Dilutive e Earnings Per Share equivalent ( C ) 8,927 8,996 9,470 Earnings Per Share Basic ( C ) 8,927 8,996 9,470 Earnings Per Share Basic ( Basic ( A/B ) $ 2.13 $ 1.63 $ 1.90 Diluted A/B ) $ 2.13 $ 1.63 $ 1.90 Diluted ( A/C $ 2.13 $ 1.63 $ 1.90 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.10 $ 1.62 $ 1.87 For A/C ) $ 2.10 $ 1.62 $ 1.87 For fiscal year $ 2.10 $ 1.62 $ 1.87 For fiscal year 2010 , $ 1.87 For fiscal year 2010 , 2009 , and 2008 For fiscal year 2010 , 2009 , and 2008 , 28 2010 , 2009 , and 2008 , 28 million , 342 2009 earnings per share income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share 0.40 18,760 Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share 0.40 2.13 Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 Fiscal Diluted earnings per share 0.40 0.74 0.45 0.5 earnings per share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 per share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 Revenue share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( c ) $ 16,629 $ 13,648 $ 13,099 ( c ) $ 58,437 13,099 ( c ) $ 58,437 Gross profit 12,213 12,722 10,834 ) $ 58,437 Gross profit 12,213 12,72 earnings per share 0.48 14,569 Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share 0.48 1.63 Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Year earnings per share 0.48 0.47 0.33 0.34 1.62 earnings per share 4,388 ( e ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 ( Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 ( a earning", + "tax_rate": "tax rate in tax rate in fiscal year 2010 and 2009 were 25 % in fiscal year 2010 and 2009 were 25 % and 27 year 2010 and 2009 were 25 % and 27 % , 2009 were 25 % and 27 % , respectively . The respectively . The fiscal year 2010 rate reflects a higher mix lower rate . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Our effective tax rate in tax rate in fiscal year 2009 and 2008 were 27 % in fiscal year 2009 and 2008 were 27 % and 26 year 2009 and 2008 were 27 % and 26 %", + "segment_revenue": "Segment revenue and operating million ) Year Ended June 30 , 2010 2009 2008 Revenue Year Ended June 30 , 2010 2009 2008 Revenue Windows & Ended June 30 , 2010 2009 2008 Revenue Windows & Windows June 30 , 2010 2009 2008 Revenue Windows & Windows Live & Windows Live Division $ 17,788 $ 14,690 $ 16,815 Server Live Division $ 17,788 $ 14,690 $ 16,815 Server and Tools $ 17,788 $ 14,690 $ 16,815 Server and Tools 14,878 14,276 $ 16,815 Server and Tools 14,878 14,276 13,217 Online Services Division 16,815 Server and ", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 8 Table of this Form 10-K ) . 8 Table of Contents PART I of Contents PART I Item 1 OPERATIONS To serve the need our manufacturing activity for Xbox 360 and related game , Zune limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from a single supplier AND DEVELOPMENT During fiscal year 2010 , 2009 , and 2008 During fiscal year 2010 , 2009 , and 2008 , research 2010 , Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a second quarter of fiscal year 2010 . Windows & Windows Live million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 20 GEOGRAPHIC second quarter of fiscal year 2010 . Segment revenue and operating million ) Year Ended June 30 , 2010 2009 2008 Revenue Year Ended June 30 , 2010 2009 2008 Revenue Windows & Ended June 30 , 2010 2009 2008 Revenue Windows & Windows June 30 , 2010 2009 2008 Revenue Windows & Windows Live & Windows Live Division $ 17,788 $ 14,690 $ 16,815 Server Live Division $ 17,788 $ 14,690 $ 16,815 Server and Tools $ 17,788 $ 14,690 $ 16,815 Server and Tools 14,878 14,276 $ 16,815 Server and Tools 14,878 14,2", + "common_stock": "common stock outstanding to be held on November 16 , 2010 are incorporated by held on November 16 , 2010 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2010 INDEX Page PART Year Ended June 30 , 2010 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 13 Item 1A . Risk Factors of the Registra common stock a conversion price of $ 33.40 per share . 34 Table $ 33.40 per share . 34 Table of Contents PART II of Contents PART II Item 7 Prior to March 15 , Item 7 Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million , with the p common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in cash paid of aQuantive in fiscal year 2008 . Share Repurchases On September . Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 200 common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 ( the \u201c date of September 30 , 2013 ( the \u201c 2008 Program , 2013 ( the \u201c 2008 Program \u201d ) . As ) . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved Common stock issued 2,986 ) ( 228 ) 0 Common stock issued 2,311 579 ) 0 Common stock issued 2,311 579 3,494 Common stock repurchased 0 Common stock issued 2,311 579 3,494 Common stock repurchased ( Common stock issued 2,311 579 3,494 Common stock repurchased ( 11,269 3,494 Common stock repurchased ( 11,269 ) ( 9,353 ) ( repurchased ( 11,269 ) ( 9,353 ) ( 12,533 ) Common ) ( 9,353 ) ( 12,533 ) Common stock cash dividend stock cash dividend paid ( 4,578 ) ( 4,468 ) ( paid ( 4,578 ) ( 4,468 ) ( 4,015 ) Excess Common stock and Ended June 30 , 2010 2009 2008 Common stock and paid-in June 30 , 2010 2009 2008 Common stock and paid-in capital , beginning of period $ 62,382 $ 62,849 $ 60,557 Common of period $ 62,382 $ 62,849 $ 60,557 Common stock issued $ 62,382 $ 62,849 $ 60,557 Common stock issued 2,311 567 $ 60,557 Common stock issued 2,311 567 3,504 Common stock repurchased 60,557 Common stock issued 2,311 567 3,504 Common stock repurchased ( Common stock issued 2,311 567 3,504 Common stock repurchased ( 3,113 3, Common stock repurchased ( 3,113 ) ( 2,611 ) ( repurchased ( 3,113 ) ( 2,611 ) ( 3,022 ) Stock-based ) ( 2,611 ) ( 3,022 ) Stock-based compensation expense 1,891 3,022 ) Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income ) Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income tax Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income tax benefit benefit ( deficiency ) ( 647 ) ( 128 ) 253 ) ( 647 ) ( 128 ) 253 Other , ne Common stock cash ) 121 Comprehensive income 18,846 14,398 17,167 Common stock cash dividend 121 Comprehensive income 18,846 14,398 17,167 Common stock cash dividend ( Common stock cash dividend ( 4,547 ) ( 4,620 ) ( dividend ( 4,547 ) ( 4,620 ) ( 4,084 ) Common ) ( 4,620 ) ( 4,084 ) Common stock repurchased ( ) Common stock repurchased ( 8,156 ) ( 6,039 ) ( repurchased ( 8,156 ) ( 6,039 ) ( 9,774 ) Balance ) ( 6,039 ) ( 9,774 ) Balance , end of , end of period ( 16,681 ) ( 22,824 ) ( period ( 16,681 ) ( 22 common stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based award Dilutive effect of stock-based award 114 51 142 Common stock and effect of stock-based award 114 51 142 Common stock and common of stock-based award 114 51 142 Common stock and common stock stock equivalent ( C ) 8,927 8,996 9,470 Earnings Per Share equivalent ( C ) 8,927 8,996 9,470 Earnings Per Share Basic ( C ) 8,927 8,996 9,470 common stock a conversion price of $ 33.40 per share . Prior to share . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the plan approved first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . ( c Directors on September 22 , 2008 . ( c ) All share repurchased in fiscal year 2008 were repurchased under the plan first quarter of fiscal year 2007 . Dividends In fiscal year . Dividends In fiscal yea common stock on August 31 of each year . Activity assumption : Year Ended June 30 , 2010 2009 2008 Dividends Year Ended June 30 , 2010 2009 2008 Dividends per share Ended June 30 , 2010 2009 2008 Dividends per share ( June 30 , 2010 2009 2008 Dividends per share ( quarterly ( quarterly amount ) $ 0.13 $ 0.11 - $ 0.13 amount ) $ 0.13 $ 0.11 - $ 0.13 $ 0.10 0.13 $ 0.11 - $ 0.13 $ 0.10 - $ 0.11 0.11 - $ 0.13 $ 0.10 - $ 0.11 Interest rate 0.13 $ 0.10 - $ 0.11 Interest rate range 2.1 % $ 0.11 Interest rate range common stock . 79 Table of Contents PART II of Contents PART II Item 8 NOTE 21 \u2014 EMPLOYEE SEVERANCE PART II Item 8 NOTE 21 \u2014 EMPLOYEE SEVERANCE In January \u2014 EMPLOYEE SEVERANCE In January 2009 , we announced and implemented we announced the elimination of 5,000 position in research and development technology . As of September 30 , 2009 , we had As of September 30 , 2009 , we had reduced our number of position by approximately 5,000 and headcount by approximately 4,600 5,000 and headcount by approximately 4,6", + "fair_value_measurements": "Fair Value Measurements . Value Measurements . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued business combination completed since July 1 , 2009 . On July completed since July 1 , 2009 . On July 1 , , 2009 . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued financial statement . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance on on our financial statement . 53 Table of Contents PART II of Contents PART II Item 8 Recent Accounting Pronoun Fair Value Measurements . million ) Year Ended June 30 , 2010 2009 Foreign Exchange Year Ended June 30 , 2010 2009 Foreign Exchange Contracts Derivatives Ended June 30 , 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 60 ( 120 ) $ 121 Hedged item 60 ( 120 ) Total $ 121 Hedged item 60 ( 120 ) Total $ 3 $ ( 120 ) Total $ 3 $ 1 Equity Contracts Derivatives ) Total $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2010 Assets Mutual fund Fair Value June 30 , 2010 Assets Mutual fund $ 1,120 2010 Assets Mutual fund $ 1,120 $ 0 $ 0 $ Mutual fund $ 1,120 $ 0 $ 0 $ 1,120 $ $ 1,120 $ 0 $ 0 $ 1,120 $ 0 $ $ 0 $ 0 $ 1,120 $ 0 $ 1,120 Commercial $ 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 172 0 0 $ ", + "foreign_exchange_contracts": "Foreign Exchange Contracts Derivatives Ended June 30 , 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 60 ( 120 ) $ 121 Hedged item 60 ( 120 ) Total $ 121 Hedged item 60 ( 120 ) Total $ 3 $ ( 120 ) Total $ 3 $ 1 Equity Contracts Derivatives ) Total $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives $ 0 $ 191 Hedged item 0 Contracts Derivatives $ 0 $ 191 Hedged item 0 ( 211 0 $ 191 Hedged item 0 ( 211 ) Total $ 191", + "derivative_instruments": "Derivative Instruments derivative instrument held at June 30 , 2010 and 2009 , held at June 30 , 2010 and 2009 , excluding the June 30 , 2010 and 2009 , excluding the impact of Commodity Contracts Total Derivatives June 30 , 2010 Assets Derivatives not Total Derivatives June 30 , 2010 Assets Derivatives not designated a instrument : Short-term investment $ 15 $ 134 $ 12 $ Short-term investment $ 15 $ 134 $ 12 $ 7 $ $ 15 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 176 Other $ 12 $ 7 $ 8 $ 176 Other current asset $ 7 $ 8" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-11-200680/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-11-200680/full-submission_features.json new file mode 100644 index 0000000..f9a1f44 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-11-200680/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue sell hardware including the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC content ; \u2022 Microsoft Office 365 , an online suite that SharePoint , and Lync ; 3 Table of Contents PART I of Contents PART I Item 1 \u2022 Microsoft Dynamics CRM Online information is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & Windo revenue , of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is and OneNote . In June 2011 , MBD launched Office 365 2011 , MBD launched Office 365 , which is an online connect people . The Xbox 360 entertainment platform , including Kinect and Xbox LIVE functionality . 7 Table of Contents PART I of Contents PART I Item 1 Nokia strategic alliance On April Nokia strategic alliance On April 21 , 2011 , Microsoft and alliance On April 21 , 2011 , M revenue . 2011 , 2010 , or 2009 revenue . Our practice is executive officer a of July 28 , 2011 were a follows a of July 28 , 2011 were a follows : Name the Company Steven A. Ballmer 55 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 51 Senior Vice President , Human Human Resources Kurt D. DelBene 51 President , Microsoft Office Division Office Division Peter S. Klein 48 Chief Financial Officer Craig J. Financial Officer Craig J. Mundie 62 Chief Research and Strategy Officer and Strat revenue . Xbox 360 console are assembled in Asia our result of operation . 19 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 We PART I Item 1A , 1B , 2 We operate a Item 1A , 1B , 2 We operate a global business . We operate in over 100 country and a significant part or financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2011 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our Revenue Ended June 30 , 2011 2010 2009 2008 2007 Revenue $ June 30 , 2011 2010 2009 2008 2007 Revenue $ 69,943 30 , 2011 2010 2009 2008 2007 Revenue $ 69,943 $ , 2011 2010 2009 2008 2007 Revenue $ 69,943 $ 62,484 2009 2008 2007 Revenue $ 69,943 $ 62,484 $ 58,437 $ 2007 Revenue $ 69,943 $ 62,484 $ 58,437 $ 60,420 $ $ 69,943 $ 62,484 $ 58,437 $ 60,420 $ 51,122 Operating $ 62,484 $ 58,437 $ 60,420 $ 51,122 Operating income $ $ 58,437 $ 60,420 $ 51,122 Operating income $ 27,161 $ $ 51,122 Operating income revenue Devices Division ha generated approximately 40 % of it yearly segment to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to retailer before general availability availability ( the \u201c Windows 7 Deferral \u201d ) . 24 7 Deferral \u201d ) . 24 Table of Contents PART II of Contents PART II Item 7 RESULTS OF OPERATIONS Summary of of Results for Fiscal Years 2011 , 2010 , and 2009 for Fiscal Years 2011 , 2010 , and 2009 ( In 2011 , 2010 , and 2009 ( In million , except and per share amou Revenue $ 69,943 2010 Percentage Change 2010 Versus 2009 Revenue $ 69,943 $ 62,484 2010 Versus 2009 Revenue $ 69,943 $ 62,484 $ 58,437 12 2009 Revenue $ 69,943 $ 62,484 $ 58,437 12 % 7 $ 69,943 $ 62,484 $ 58,437 12 % 7 % Operating 69,943 $ 62,484 $ 58,437 12 % 7 % Operating income 62,484 $ 58,437 12 % 7 % Operating income $ 27,161 7 % Operating income $ 27,161 $ 24,098 $ 20,363 13 Operating income $ 27,161 $ 24,098 $ 20,363 13 % 18 $ 27,161 $ 24,098 $ 20,363 13 % 18 % Diluted 27,161 $ 24,098 $ 20,363 1 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and increased due to the $ 254 million Office Deferral in fiscal Office Deferral in fiscal year 2010 and the subsequent recognition of Office Deferral during fiscal year 2011 . Changes in foreign currency Cost of revenue increased $ 3.2 billion or 26 % , increased $ 3.2 billion or 26 % , due to higher and increased volume of Xbox 360 console an Revenue increased mainly due to to strong sale of Windows 7 , which wa released during wa released during fiscal year 2010 , and PC market improvement and marketing expense increased $ 335 million or 3 % , increased $ 335 million or 3 % , primarily reflecting increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . \u2022 General and administrative and administrative expense increased $ 33 million or 1 % due increased $ 33 million or 1 % due mainly to revenue increased $ 240 million or 2 % , increased $ 240 million or 2 % , primarily reflecting increased in part by decreased Xbox 360 console cost and reduction in and development expense decreased $ 296 million or 3 % , decreased $ 296 million or 3 % , primarily reflecting a certain software development cost . 25 Table of Contents PART II of Contents PART II Item 7 Diluted earnings per share increased income and the repurchase of 380 million share during fiscal year million share during fiscal year 2 REVENUE/OPERATING INCOME Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Pe Revenue $ 19,024 2010 Percentage Change 2010 Versus 2009 Revenue $ 19,024 $ 19,494 2010 Versus 2009 Revenue $ 19,024 $ 19,494 $ 15,847 ( 2009 Revenue $ 19,024 $ 19,494 $ 15,847 ( 2 ) $ 19,024 $ 19,494 $ 15,847 ( 2 ) % 23 $ 19,494 $ 15,847 ( 2 ) % 23 % Operating 15,847 ( 2 ) % 23 % Operating income $ 12,281 23 % Operating income $ 12,281 $ 13,034 $ 9,790 ( Operating income $ 12,281 $ 13,034 $ 9,790 ( 6 ) $ 12,281 $ 13,034 $ 9,790 ( 6 ) % 33 $ 13,034 $ 9,790 ( 6 ) % 33 % Windows 9,790 ( 6 ) % 33 % Window revenue Windows Live . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Windows Division revenue reflected relative PCs to business grew approximately 11 % this year and sale PCs to consumer declined approximately 1 % . The decline in PC sale included an approximately 32 % decline in the sale PC market increased an estimated 2 % to 4 % . an estimated 2 % to 4 % . Revenue wa negatively Considering the impact of Windows 7 launch in the prior year prior year , including revenue recognized related recognized related to the Windows 7 Deferral , we estimate that and marketing expense increased $ 224 million or 8 % reflecting increased $ 224 million or 8 % reflecting increased advertising of Windows and Windows Live . 26 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Windows Division revenue increased primarily of strong sale of Windows 7 and revenue increased . OEM revenue increased $ 2.6 billion or 22 % , increased $ 2.6 billion or 22 % , while OEM license while OEM license unit increased 21 % . The OEM revenue business PCs . Fiscal year 2009 OEM revenue reflects a $ OEM revenue reflects a $ 273 million Windows 7 Deferral . a $ 273 million Windows 7 Deferral . This amount wa subsequently recognized in fiscal year 2010 . Other revenue increased $ . Other revenue increased $ 970 million or 26 % driven increased $ 970 million or 26 % driven revenue increased Cost of revenue increased $ 251 million or 14 % , increased $ 251 million or 14 % , primarily driven by million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Chan Revenue $ 17,096 2010 Percentage Change 2010 Versus 2009 Revenue $ 17,096 $ 15,378 2010 Versus 2009 Revenue $ 17,096 $ 15,378 $ 14,601 11 2009 Revenue $ 17,096 $ 15,378 $ 14,601 11 % 5 $ 17,096 $ 15,378 $ 14,601 11 % 5 % Operating 17,096 $ 15,378 $ 14,601 11 % 5 % Operating income 15,378 $ 14,601 11 % 5 % Operating income $ 6,608 5 % Operating income $ 6,608 $ 5,539 $ 4,816 19 Operating income $ 6,608 $ 5,539 $ 4,816 19 % 15 $ 6,608 $ 5,539 $ 4,816 19 % 15 % Server 6,608 $ 5,539 $ 4,816 19 % 15 % Serve revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 337 million or 11 % , grew $ 337 million or 11 % , due to growth Cost of revenue increased $ 366 million or 13 % , increased $ 366 million or 13 % , primarily reflecting a , primarily reflecting a $ 323 million increase in expense from and marketing expense increased $ 264 million or 6 % reflecting increased $ 264 million or 6 % reflecting increa revenue increased . Product revenue increased $ 784 million or 7 % , increased $ 784 million or 7 % , driven primarily by by decreased consulting service . 27 Table of Contents PART II of Contents PART II Item 7 Server and Tools operating income Cost of revenue increased $ 65 million or 2 % , increased $ 65 million or 2 % , reflecting increased headcount-related million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except Revenue $ 2,528 2010 Percentage Change 2010 Versus 2009 Revenue $ 2,528 $ 2,201 2010 Versus 2009 Revenue $ 2,528 $ 2,201 $ 2,121 15 2009 Revenue $ 2,528 $ 2,201 $ 2,121 15 % 4 $ 2,528 $ 2,201 $ 2,121 15 % 4 % Operating 2,528 $ 2,201 $ 2,121 15 % 4 % Operating loss 2,201 $ 2,121 15 % 4 % Operating loss $ ( % Operating loss $ ( 2,557 ) $ ( 2,337 ) ( 2,557 ) $ ( 2,337 ) $ ( 1,641 ) ( 2,337 ) $ ( 1,641 ) ( 9 ) % $ ( 1,641 ) ( 9 ) % ( 42 ) ( 9 ) % ( 42 ) % Online Services Division annual revenue . Fiscal ye revenue increased primarily a Online advertising revenue grew $ 358 million or 19 % to grew $ 358 million or 19 % to $ 2.3 billion or 19 % to $ 2.3 billion , reflecting continued growth property . As of June 30 , 2011 , according to As of June 30 , 2011 , according to third-party source U.S. market share grew over 31 % to approximately 14 % over 31 % to approximately 14 % , while Bing-powered U.S. ! property , wa approximately 27 % . OSD operating loss Cost of revenue grew $ 641 million driven by cost revenue increased reflecting increased Online advertising revenue increased $ 146 million or 8 % to increased $ 146 million or 8 % to $ 1.9 billion or 8 % to $ 1.9 billion , reflecting higher search . Access revenue decreased $ 57 million or 31 % , decreased $ 57 million or 31 % , reflecting continued migration Cost of revenue increased $ 567 million , primarily driven by and administrative expense increased $ 135 million . Sales and marketing and marketing expense increased $ 51 million or 5 % due inc Revenue $ 22,186 2010 Percentage Change 2010 Versus 2009 Revenue $ 22,186 $ 19,076 2010 Versus 2009 Revenue $ 22,186 $ 19,076 $ 19,257 16 2009 Revenue $ 22,186 $ 19,076 $ 19,257 16 % ( $ 22,186 $ 19,076 $ 19,257 16 % ( 1 ) 22,186 $ 19,076 $ 19,257 16 % ( 1 ) % $ 19,257 16 % ( 1 ) % Operating income $ ) % Operating income $ 14,124 $ 11,504 $ 11,365 23 Operating income $ 14,124 $ 11,504 $ 11,365 23 % 1 $ 14,124 $ 11,504 $ 11,365 23 % 1 % 28 14,124 $ 11,504 $ 11,365 23 % 1 % 28 Table 11,504 $ 11,365 23 % revenue , OEM revenue . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 MBD revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system , the Office system , the $ 254 million Office Deferral during fiscal Office Deferral during fiscal year 2010 , and the subsequent recognition Office Deferral during fiscal year 2011. Business revenue increased $ 2.0 2011. Business revenue increased $ 2.0 billion or 13 % , increased $ 2.0 bill revenue , and a 10 % increase in Microsoft Dynamics . Consumer revenue increased $ 1.1 billion or 33 % , increased $ 1.1 billion or 33 % , approximately half of to the launch of Office 2010 and half of which wa Office Deferral during fiscal year 2010 and subsequent recognition of the Office Deferral during fiscal year 2011 . Excluding the impact associated , consumer revenue increased $ 620 million or 17 % due increased $ 620 million or 17 % due to sale of due to sale of the 2010 Microsoft Office syste revenue increased $ 335 million or 26 % , increased $ 335 million or 26 % , primarily driven by and marketing expense increased $ 97 million or 2 % , increased $ 97 million or 2 % , primarily driven by and development cost increased $ 79 million or 4 % , increased $ 79 million or 4 % , primarily a a prior year . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 MBD revenue decreased primarily a the net deferral of $ 254 million of revenue related to revenue related to revenue decreased . Consumer revenue decreased $ 142 million or 4 % , decreased $ 142 million or 4 % , primarily due to primarily due to the Office 2010 Deferral , offset in part market and sale of the 2010 Microsoft Office system , which fourth quarter of fiscal year 2010. Business revenue decreased $ 39 2010. Business revenue decreased $ 39 million , primarily reflecting a decline in licensing of the 2007 Microsoft Office system to transactional revenue and licensing of the 2010 Microsoft Office syst Revenue $ 8,913 2010 Percentage Change 2010 Versus 2009 Revenue $ 8,913 $ 6,168 2010 Versus 2009 Revenue $ 8,913 $ 6,168 $ 6,416 45 2009 Revenue $ 8,913 $ 6,168 $ 6,416 45 % ( $ 8,913 $ 6,168 $ 6,416 45 % ( 4 ) 8,913 $ 6,168 $ 6,416 45 % ( 4 ) % $ 6,416 45 % ( 4 ) % Operating income $ ) % Operating income $ 1,324 $ 618 $ 351 114 Operating income $ 1,324 $ 618 $ 351 114 % 76 $ 1,324 $ 618 $ 351 114 % 76 % 29 1,324 $ 618 $ 351 114 % 76 % 29 Table 618 $ 351 114 % 76 % 29 Table of Contents 351 114 % 76 % 2 revenue increased primarily reflecting increased primarily reflecting higher Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue grew $ 2.7 360 platform revenue grew $ 2.7 billion or 48 % , grew $ 2.7 billion or 48 % , led by increased by increased volume of Xbox 360 console , sale of Kinect LIVE revenue . We shipped 13.7 million Xbox 360 console during We shipped 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 , compared with revenue increased $ 1.8 billion or 49 % primarily increased $ 1.8 billion or 49 % primarily reflecting higher volume reflecting higher volume of Xbox 360 console and Kinect sensor sold and development expense increased $ 119 million or 12 % , increased $ 119 million or 12 % , primarily reflecting higher and marketing expense grew $ 90 million or 12 % primarily grew $ 90 million or 12 % primarily reflecting increased Xbox % primarily reflecting increased Xbox 360 platform marketing activity . Fiscal mar revenue decreased reflecting decreased reflecting decreased revenue from Xbox 360 platform and PC game . and PC game . Xbox 360 platform and PC game revenue PC game revenue decreased $ 12 million , primarily reflecting a reflecting a reduction in Xbox 360 console sold and revenue per LIVE revenue . We shipped 10.3 million Xbox 360 console during We shipped 10.3 million Xbox 360 console during fiscal year 2010 360 console during fiscal year 2010 , compared with 11.2 million year 2010 , compared with 11. revenue decreased $ . Non-gaming revenue decreased $ 197 million or 25 % primarily decreased $ 197 million or 25 % primarily reflecting decreased Zune Cost of revenue decreased $ 496 million or 12 % , decreased $ 496 million or 12 % , primarily due to primarily due to lower Xbox 360 console cost , offset in and marketing cost decreased $ 75 million or 9 % , decreased $ 75 million or 9 % , primarily due to primarily due to decreased Xbox 360 platform marketing activity . Research and development expense revenue 2010 Percentage Change 2010 Versus 2009 Cost of revenue $ 15,577 2009 Cost of revenue $ 15,577 $ 12,395 $ 12,155 26 of revenue $ 15,577 $ 12,395 $ 12,155 26 % 2 $ 15,577 $ 12,395 $ 12,155 26 % 2 % As 15,577 $ 12,395 $ 12,155 26 % 2 % As a 12,395 $ 12,155 26 % 2 % As a percent of As a percent of revenue 22 % 20 % 21 % percent of revenue 22 % 20 % 21 % 2ppt ( revenue 22 % 20 % 21 % 2ppt ( 1 ) % 20 % 21 % 2ppt ( 1 ) ppt Cost % 21 % 2ppt ( 1 ) ppt Cost of revenue development cost . Fiscal year 2011 revenue increased primarily to increased volume of Xbox 360 console and Kinect sensor sold content sold . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Cost of revenue increased reflecting in part by lower Xbox 360 console cost and reduction in million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Perc revenue 13 % 14 % 15 % percent of revenue 13 % 14 % 15 % ( 1 revenue 13 % 14 % 15 % ( 1 ) ppt 14 % 15 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Research and development service content . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Research and development expense increased increased primarily due to a 5 % increase in headcount-related expense in the prior year . 31 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal ye revenue 20 % 21 % 22 % percent of revenue 20 % 21 % 22 % ( 1 revenue 20 % 21 % 22 % ( 1 ) ppt 21 % 22 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Sales and marketing expense increased and marketing of the Xbox 360 platform , Windows Phone , and Windows Live , a 5 % increase in headcount-related expense software advisor . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fis revenue 6 % 7 % 7 % percent of revenue 6 % 7 % 7 % ( 1 revenue 6 % 7 % 7 % ( 1 ) ppt 7 % 7 % ( 1 ) ppt 0ppt General and % ( 1 ) ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 General and administrative expense increased increased primarily due to a 12 % increase in headcount-related expense Commercial Agreement . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 200 revenue . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Dividends and interest income increased long term debt in May 2009 . Net recognized gain on . Other-than-temporary impairment were $ 69 million during fiscal year 2010 69 million during fiscal year 2010 , a compared with $ , a compared with $ 862 million during fiscal year 2009 862 million during fiscal year 2009 and decreased primarily due to were insignificant in fiscal year 2010 compared to net loss of to n Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 35 Table of Contents PART due to a $ 5.6 35 Table of Contents PART II of Contents PART II Item 7 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used in part by a $ 1.7 billion increase in cash received used for investing decreased $ 4.5 billion due to a $ billion due to a $ 3.3 billion decrease in c Revenue Unearned revenue at June 30 , 2011 comprised mainly unearned revenue at June 30 , 2011 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2011 also included payment revenue at June 30 , 2011 also included payment for : unearned revenue a of June 30 , 2011 : ( In a of June 30 , 2011 : ( In million ) Three Months Ending , September 30 , 2011 $ 5,979 December Ending , September 30 , 2011 $ 5,979 December 31 , September 30 , 2011 $ 5,979 December 31 , 2011 4,914 , 2011 $ 5,979 D revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 279 million . Other Planned Uses Agreement with Skype On May 10 , 2011 , we announced Skype On May 10 , 2011 , we announced that we communication company , for $ 8.5 billion in cash . We regulatory approval during calendar year 2011 . Liquidity We earn a cash , cash equivalent , 39 Table of Contents PART II of Contents PART II Item 7 short-term investment , and cash for at least the next 12 month and thereafter for the for at least th Revenue Year Ended June 30 , 2011 2010 2009 Revenue $ 69,943 Ended June 30 , 2011 2010 2009 Revenue $ 69,943 $ June 30 , 2011 2010 2009 Revenue $ 69,943 $ 62,484 2011 2010 2009 Revenue $ 69,943 $ 62,484 $ 58,437 Operating 2009 Revenue $ 69,943 $ 62,484 $ 58,437 Operating expense : $ 69,943 $ 62,484 $ 58,437 Operating expense : Cost of expense : Cost of revenue 15,577 12,395 12,155 Research and development : Cost of revenue 15,577 12,395 12,155 Research and development 9,043 Cost of revenue 15,577 12,39 revenue 15,722 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 13,652 580 1,074 Short-term unearned revenue 15,722 13,652 Securities lending payable 1,208 1,074 Short-term unearned revenue 15,722 13,652 Securities lending payable 1,208 182 15,722 13,652 Securities lending payable 1,208 182 Other 3,492 2,931 Total 13,652 Securities lending payable 1,208 182 Other 3,492 2,931 Total current lending payable 1,208 182 Other 3,492 2,931 Total current liability 28,774 payable 1,208 182 Oth revenue 1,398 28,774 26,147 Long-term debt 11,921 4,939 Long-term unearned revenue 1,398 1,178 11,921 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 229 1,398 1,178 Deferred income tax 1,456 229 Other long-term liability 8,072 1,178 Deferred income tax 1,456 229 Other long-term liability 8,072 7,445 1,456 229 Other long-term liability 8,072 7,445 Total liability 51,621 39,938 229 Other long-term liability 8,0 revenue 31,227 762 Deferral of unearned revenue 31,227 29,374 24,409 Recognition of unearned Deferral of unearned revenue 31,227 29,374 24,409 Recognition of unearned revenue of unearned revenue 31,227 29,374 24,409 Recognition of unearned revenue ( Recognition of unearned revenue ( 28,935 ) ( 28,813 ) ( revenue ( 28,935 ) ( 28,813 ) ( 25,426 ) Changes ) ( 28,813 ) ( 25,426 ) Changes in operating asset liability : Accounts receivable ( 1,451 ) ( 2,238 ) 2,215 receivable ( 1,451 ) ( 2,238 ) 2,215 Invent Revenue related to our Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , game published by u for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.9 billion , $ 1.6 billion $ 1.9 billion , $ 1.6 billion , and $ 1.4 1.6 billion , and $ 1.4 billion in fiscal year 2011 1.4 billion in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , revenue $ ( 7 ) $ 495 $ 884 $ ( 7 ) $ 495 $ 884 Amount Excluded from 7 ) $ 495 $ 884 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 276 ) $ ( 174 ) ( 276 ) $ ( 174 ) $ ( 314 ) ( 174 ) $ ( 314 ) We estimate that $ ) We estimate that $ 186 million of net derivative loss included in OCI at June 30 , 2011 will be reclassified OCI at June 30 , 2011 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2011 . Non-Desi Revenue Service Internal Revenue Service settlement ( 1.7 ) % 0 % 0 settlement ( 1.7 ) % 0 % 0 % Other reconciling 1.7 ) % 0 % 0 % Other reconciling item , reconciling item , net ( 0.2 ) % 2.1 % 0.8 net ( 0.2 ) % 2.1 % 0.8 % Effective rate 0.2 ) % 2.1 % 0.8 % Effective rate 17.5 % % 0.8 % Effective rate 17.5 % 25.0 % 26.5 % % Effective rate 17.5 % 25.0 % 26.5 % The reduction rate 17.5 % 25.0 % 26.5 % The reduction from the credit . In fiscal year 2011 , 2010 , and 2009 In fiscal year 2011 , 2010 , and revenue 463 556 1,329 Other expense item 1,411 1,696 Unearned revenue 463 556 Impaired item 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 Other revenue 463 556 Impaired investment 424 289 Other revenue item 69 463 556 Impaired investment 424 289 Other revenue item 69 80 424 289 Other revenue item 69 80 Deferred income tax asset 289 Other revenue item 69 80 Deferred income tax asset $ Deferred income tax asset $ 3,446 $ REVENUE Unearned revenue the revenue recognition criterion . 71 Table of Contents PART II of Contents PART II Item 8 The component of unearned revenue ( In million ) June 30 , 2011 2010 Volume licensing million ) June 30 , 2011 2010 Volume licensing program $ ) June 30 , 2011 2010 Volume licensing program $ 14,625 2010 Volume licensing program $ 14,625 $ 12,180 Other 2,495 2,650 licensing program $ 14,625 $ 12,180 Other 2,495 2,650 Total $ $ 14,625 $ 12,180 Other 2,495 2,650 Total $ 17,120 $ 14,625 $ 1 revenue by 2,650 Total $ 17,120 $ 14,830 Unearned revenue by segment wa ( In million ) June 30 , 2011 2010 Windows & million ) June 30 , 2011 2010 Windows & Windows Live ) June 30 , 2011 2010 Windows & Windows Live Division & Windows Live Division $ 1,782 $ 1,701 Server and Tools Live Division $ 1,782 $ 1,701 Server and Tools 6,552 5,282 $ 1,701 Server and Tools 6,552 5,282 Microsoft Business Division 7,950 1,701 Server and Tools 6,552 5,282 Microsoft Business Division 7,950 7,004 6,552 5,282 Microsoft revenue and operating income million ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenue Windows & Ended June 30 , 2011 2010 2009 Revenue Windows & Windows June 30 , 2011 2010 2009 Revenue Windows & Windows Live & Windows Live Division $ 18,778 $ 18,792 $ 15,563 Server Live Division $ 18,778 $ 18,792 $ 15,563 Server and Tools $ 18,778 $ 18,792 $ 15,563 Server and Tools 17,107 15,390 $ 15,563 Server and Tools 17,107 15,390 14,686 Online Services Division 15,563 Serv Revenue reconciling amount ) Stock-based compensation expense 544 556 753 Revenue reconciling amount 632 Stock-based compensation expense 544 556 753 Revenue reconciling amount 632 366 556 753 Revenue reconciling amount 632 366 256 Other ( 141 753 Revenue reconciling amount 632 366 256 Other ( 141 ) Revenue reconciling amount 632 366 256 Other ( 141 ) 58 632 366 256 Other ( 141 ) 58 ( 19 ) 256 Other ( 141 ) 58 ( 19 ) Total $ ( 141 ) 58 ( 19 ) Total $ ( 3,584 19 ) Total $ ( 3,584 ) $ ( 3,280 ) ( 3,584 ) revenue . 2011 , 2010 , or 2009 revenue . Revenue , classified million ) Year Ended June 30 , 2011 2010 2009 United Year Ended June 30 , 2011 2010 2009 United States ( Ended June 30 , 2011 2010 2009 United States ( a June 30 , 2011 2010 2009 United States ( a ) States ( a ) $ 38,008 $ 36,173 $ 33,052 Other a ) $ 38,008 $ 36,173 $ 33,052 Other country 31,935 $ 38,008 $ 36,173 $ 33,052 Other country 31,935 26,311 25,385 36,173 $ 33,052 Other country 31,935 26,311 25,385 Total $ 69,943 $ 33,052 Other coun Revenue from external customer , million ) Year Ended June 30 , 2011 2010 2009 Microsoft Year Ended June 30 , 2011 2010 2009 Microsoft Office system Ended June 30 , 2011 2010 2009 Microsoft Office system $ June 30 , 2011 2010 2009 Microsoft Office system $ 20,730 2009 Microsoft Office system $ 20,730 $ 17,754 $ 17,998 Windows Office system $ 20,730 $ 17,754 $ 17,998 Windows PC operating $ 20,730 $ 17,754 $ 17,998 Windows PC operating system 17,825 17,998 Windows PC operating system 17,825 18,225 14,653 Revenue June 30 Total Fiscal Year 2011 Revenue $ 16,195 $ 19,953 Fiscal Year 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 69,943 Gross profit 13,056 15,120 Revenue share 0.62 0.77 0.61 0.69 2.69 Fiscal Year 2010 Revenue $ 0.61 0.69 2.69 Fiscal Year 2010 Revenue $ 12,920 ( d Fiscal Year 2010 Revenue $ 12,920 ( d ) $ 19,022 12,920 ( d ) $ 19,022 ( c ) $ 14,503 19,022 ( c ) $ 14,503 $ 16,039 $ 62,484 Gross c ) $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 62,484 G revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the \u201c Windows 7 Deferral \u201d ) . ( ( d ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . 84 Table of the Windows 7 Deferral . 84 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , and the June 30 , 2011 and ", + "net_income": "Net income $ 23,150 $ $ 18,438 Net income $ 23,150 $ 18,760 $ 14,569 $ Net income $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( a ) $ 18,760 $ 14,569 $ 17,681 ( a ) $ 14,065 17,681 ( a ) $ 14,065 Diluted earnings per share $ Diluted earnings per share $ 2.69 $ 2.10 $ 1.62 $ per share $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash dividend declared $ 1.62 $ 1.87 $ 1.42 Cash dividend declared per share dividend declared pe Net income $ Provision for income tax 4,921 6,253 5,252 Net income $ 23,150 for income tax 4,921 6,253 5,252 Net income $ 23,150 $ 6,253 5,252 Net income $ 23,150 $ 18,760 $ 14,569 Earnings Net income $ 23,150 $ 18,760 $ 14,569 Earnings per share $ 23,150 $ 18,760 $ 14,569 Earnings per share : Basic per share : Basic $ 2.73 $ 2.13 $ 1.63 Diluted : Basic $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 $ 1.62 Weighted 1.63 Diluted $ 2.69 $ 2.1 Net income Ended June 30 , 2011 2010 2009 Operations Net income $ June 30 , 2011 2010 2009 Operations Net income $ 23,150 2009 Operations Net income $ 23,150 $ 18,760 $ 14,569 Adjustments Net income $ 23,150 $ 18,760 $ 14,569 Adjustments to reconcile $ 23,150 $ 18,760 $ 14,569 Adjustments to reconcile net income , amortization , and other 2,766 2,673 2,562 Stock-based compensation expense amortization , and other 2,766 2,673 2,562 Stock-based compensation expense 2,166 , and other 2,766 2,673 2,562 Stock- Net income 23,150 18,760 ( 26,563 ) Net income 23,150 18,760 14,569 Other comprehensive income 26,563 ) Net income 23,150 18,760 14,569 Other comprehensive income : ) Net income 23,150 18,760 14,569 Other comprehensive income : Net loss ) on derivative ( 627 ) 27 302 Net unrealized on derivative ( 627 ) 27 302 Net unrealized gain ( derivative ( 627 ) 27 302 Net unrealized gain ( loss ( loss ) on investment 1,054 265 ( 233 ) Translation loss ) on investment 1,054 265 ( 233 ) Translation adjustment on inves Net income available Ended June 30 , 2011 2010 2009 Net income available for June 30 , 2011 2010 2009 Net income available for common shareholder ( A ) $ 23,150 $ 18,760 $ 14,569 Weighted A ) $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding share of common stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based award Dilutive effect of Net income 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 5,232 12,531 13,659 54,366 Net income 5,410 6,634 5,232 ( a ) 13,659 54,366 Net income 5,410 6,634 5,232 ( a ) 5,874 54,366 Net income 5,410 6,634 5,232 ( a ) 5,874 ( 6,634 5,232 ( a ) 5,874 ( b ) 23,150 Basic ) 5,874 ( b ) 23,150 Basic earnings per share 0.63 23,150 Basic earnings per shar Net income 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 4,006 11,748 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share income 3,5 net income increased net income by $ 461 million . ( b ) an effective tax rate of 7 % due mainly to the ( c ) Reflects $ 1.7 billion of revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the \u201c Windows 7 Deferral \u201d ) . ( ( d ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . 84 Table of the Windows 7 Deferral . 84 Table of Contents PART II of Contents PART II Item 8 ", + "assets": "Assets Current million ) June 30 , 2011 2010 Assets Current asset : ) June 30 , 2011 2010 Assets Current asset : Cash Cash and cash equivalent $ 9,610 $ 5,505 Short-term investment ( cash equivalent $ 9,610 $ 5,505 Short-term investment ( including security including security loaned of $ 1,181 and $ 62 ) 43,162 of $ 1,181 and $ 62 ) 43,162 31,283 Total cash 1,181 and $ 62 ) 43,162 31,283 Total cash , cash and $ 62 ) 43,162 31,283 Total cash , cash equivalent equivalent , and short-term investment 52,7 Assets Non-designated hedge Total Derivatives June 30 , 2011 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 179 $ 0 $ Short-term investment $ 14 $ 179 $ 0 $ 17 $ $ 14 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 214 Other $ 0 $ 17 $ 4 $ 214 Other current asset $ 17 $ 4 $ 214 Other current asset 73 0 $ 214 Other current asset 73 0 0 0 0 73 214 Other current asset 73 0 0 0 0 73 Total Other current asset 73 0 0 0 0 73 Total $ current asset 73 0 0 0 0 73 Total $ 87 asset 7 Assets Non-designated hedge Total Derivatives June 30 , 2010 Assets Non-designated hedge derivative : derivative : Short-term investment $ 15 $ 134 $ 12 $ Short-term investment $ 15 $ 134 $ 12 $ 7 $ $ 15 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 176 Other $ 12 $ 7 $ 8 $ 176 Other current asset $ 7 $ 8 $ 176 Other current asset 34 0 $ 176 Other current asset 34 0 0 0 0 34 176 Other current asset 34 0 0 0 0 34 Total Other current asset 34 0 0 0 0 34 Total $ current asset 34 0 0 0 0 34 Total $ 49 asset 3 Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2011 Assets Mutual fund Fair Value June 30 , 2011 Assets Mutual fund $ 1,752 2011 Assets Mutual fund $ 1,752 $ 0 $ 0 $ Mutual fund $ 1,752 $ 0 $ 0 $ 1,752 $ $ 1,752 $ 0 $ 0 $ 1,752 $ 0 $ $ 0 $ 0 $ 1,752 $ 0 $ 1,752 Commercial $ 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 639 0 0 $ 1,752 C Assets Mutual fund Fair Value June 30 , 2010 Assets Mutual fund $ 1,120 2010 Assets Mutual fund $ 1,120 $ 0 $ 0 $ Mutual fund $ 1,120 $ 0 $ 0 $ 1,120 $ $ 1,120 $ 0 $ 0 $ 1,120 $ 0 $ $ 0 $ 0 $ 1,120 $ 0 $ 1,120 Commercial $ 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 172 0 0 $ 1,120 Commercial paper 0 172 0 172 0 172 $ 1,120 Commercial paper 0 172 0 172 0 172 Certificates 1,120 Commercial paper 0 172 0 172 0 172 Certificates of Commercial paper 0 172 0 172 0 172 Cert Assets Total Year Ended June 30 , 2011 Balance , beginning Year Ended June 30 , 2011 Balance , beginning of period , beginning of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Total $ 167 $ 5 $ 9 $ 181 Total realized and $ 5 $ 9 $ 181 Total realized and unrealized gain other income ( expense ) 39 0 11 50 Included in income ( expense ) 39 0 11 50 Included in other ( expense ) 39 0 11 50 Included in other comprehensive expense ) 39 0 11 50 Included in other comprehensive income in other comprehen Assets Total Year Ended June 30 , 2010 Balance , beginning Year Ended June 30 , 2010 Balance , beginning of period , beginning of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Total $ 253 $ 5 $ 5 $ 263 Total realized and $ 5 $ 5 $ 263 Total realized and unrealized gain other income ( expense ) 6 0 4 10 Included in income ( expense ) 6 0 4 10 Included in other ( expense ) 6 0 4 10 Included in other comprehensive expense ) 6 0 4 10 Included in other comprehensive income in other comprehensive inc Assets $ 6 $ 0 $ 4 $ 10 Assets and Liabilities $ 0 $ 4 $ 10 Assets and Liabilities Measured at Nonrecurring Basis During fiscal year 2011 and 2010 , impairment charge During fiscal year 2011 and 2010 , impairment charge of $ , impairment charge of $ 2 million and $ 5 million $ 2 million and $ 5 million , respectively , were all instance . At June 30 , 2011 and 2010 , . At June 30 , 2011 and 2010 , we held June 30 , 2011 and 2010 , we held no common on a nonrecurring basis . 64 Table of Contents PART I ASSETS The component Carrying Amount Year Ended June 30 , 2011 2010 Contract-based $ Year Ended June 30 , 2011 2010 Contract-based $ 1,068 $ Ended June 30 , 2011 2010 Contract-based $ 1,068 $ ( , 2011 2010 Contract-based $ 1,068 $ ( 966 ) $ Contract-based $ 1,068 $ ( 966 ) $ 102 $ 1,075 $ ( 966 ) $ 102 $ 1,075 $ ( 914 966 ) $ 102 $ 1,075 $ ( 914 ) $ 102 $ 1,075 $ ( 914 ) $ 161 Technology-based ( $ ( 914 ) $ 161 Technology-based ( a ) 2,356 161 Technology-based ( a ) 2,356 ( 1,831 ) 525 2,308 ( a ) 2,3 Assets ) June 30 , 2011 2010 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 1,079 $ 1,329 Other expense item compensation expense $ 1,079 $ 1,329 Other expense item 1,411 1,696 $ 1,329 Other expense item 1,411 1,696 Unearned revenue 463 556 1,329 Other expense item 1,411 1,696 Unearned revenue 463 556 Impaired item 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 Other revenue 463 556 Imp Assets 3,598 Total $ 69,943 $ 62,484 $ 58,437 Assets are not $ 69,943 $ 62,484 $ 58,437 Assets are not allocated to ( In million ) June 30 , 2011 2010 2009 United million ) June 30 , 2011 2010 2009 United States $ ) June 30 , 2011 2010 2009 United States $ 18,498 June 30 , 2011 2010 2009 United States $ 18,498 $ 2010 2009 United States $ 18,498 $ 18,716 $ 19,362 Other United States $ 18,498 $ 18,716 $ 19,362 Other country 2,989 $ 18,498 $ 18,716 $ 19,362 Other country 2,989 2,466 2,435 18,716 $ 19,362", + "liabilities": "Liabilities and stockholder Total asset $ 108,704 $ 86,113 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 4,197 $ 4,025 Short-term debt 0 Accounts payable $ 4,197 $ 4,025 Short-term debt 0 1,000 Accrued 4,197 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 Income debt 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 Short-term comp Liabilities $ 0 $ 17 $ 4 $ 416 Liabilities Non-designated hedge $ 17 $ 4 $ 416 Liabilities Non-designated hedge derivative : Other current liability $ ( 91 ) $ ( 12 ) ( 91 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 135 ) ( 4 ) $ ( 135 ) Designated hedge derivative : Other current liability $ ( 128 ) $ 0 $ 0 $ ( 128 ) $ 0 $ 0 $ 0 $ 128 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 128 $ 0 $ 0 $ 0 $ ( 128 ) Total 0 $ 0 $ ( 128 ) Total liability $ ( ) Total liability $ ( 21 Liabilities $ 12 $ 7 $ 8 $ 776 Liabilities Non-designated hedge $ 7 $ 8 $ 776 Liabilities Non-designated hedge derivative : Other current liability $ ( 60 ) $ ( 17 ) ( 60 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 156 ) ( 5 ) $ ( 156 ) Designated hedge derivative : Other current liability $ ( 9 ) $ 0 $ 0 $ ( 9 ) $ 0 $ 0 $ 0 $ 9 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 9 $ 0 $ 0 $ 0 $ ( 9 ) Total 0 $ 0 $ ( 9 ) Total liability $ ( ) Total liability $ ( 69 ) $ ( 17 Liabilities Derivatives $ ( 204 ) $ 61,058 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 109 $ 257 $ 0 $ and other $ 109 $ 257 $ 0 $ 366 $ $ 109 $ 257 $ 0 $ 366 $ ( 203 $ 257 $ 0 $ 366 $ ( 203 ) $ 0 $ 366 $ ( 203 ) $ 163 ( In $ ( 203 ) $ 163 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2010 Assets Mutual fund Fair Value June 30 , 201 Liabilities Derivatives $ ( 207 ) $ 42,645 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 85 $ 137 $ 0 $ and other $ 85 $ 137 $ 0 $ 222 $ $ 85 $ 137 $ 0 $ 222 $ ( 205 $ 137 $ 0 $ 222 $ ( 205 ) $ 0 $ 222 $ ( 205 ) $ 17 ( a $ ( 205 ) $ 17 ( a ) These amount and counterparty credit risk . 63 Table of Contents PART II of Contents PART II Item 8 The table below reconciles the these same asset in Note 4 \u2013 Investments for June 30 4 \u2013 Investments for June 30 , 2011 and 2010 . Investments f Liabilities $ 0 $ 4 $ 10 Assets and Liabilities Measured at Nonrecurring Basis During fiscal year 2011 and 2010 , impairment charge During fiscal year 2011 and 2010 , impairment charge of $ , impairment charge of $ 2 million and $ 5 million $ 2 million and $ 5 million , respectively , were all instance . At June 30 , 2011 and 2010 , . At June 30 , 2011 and 2010 , we held June 30 , 2011 and 2010 , we held no common on a nonrecurring basis . 64 Table of Contents PART II of Contents PART II Item 8 NOTE 7 \u2014 IN Liabilities International Liabilities International earnings $ ( 1,266 ) $ ( 1,056 ) ( 1,266 ) $ ( 1,056 ) Unrealized gain on investment Unrealized gain on investment ( 904 ) ( 674 ) Other investment ( 904 ) ( 674 ) Other ( 265 ) ( 674 ) Other ( 265 ) ( 265 ) Deferred Other ( 265 ) ( 265 ) Deferred income tax liability Deferred income tax liability ( 2,435 ) ( 1,995 ) Net liability ( 2,435 ) ( 1,995 ) Net deferred income tax deferred income tax asset $ 1,011 $ 1,955 Reported As Current tax asset $ 1,011 $ LIABILITIES ( ( In million ) June 30 , 2011 2010 Tax contingency million ) June 30 , 2011 2010 Tax contingency and other ) June 30 , 2011 2010 Tax contingency and other tax and other tax liability $ 7,381 $ 6,887 Legal contingency 276 tax liability $ 7,381 $ 6,887 Legal contingency 276 236 Other 7,381 $ 6,887 Legal contingency 276 236 Other 415 322 Total $ 6,887 Legal contingency 276 236 Other 415 322 Total $ Legal contingency 276 236 Other 415 322 Total $ 8,072 $ contingency 276 236 Other 415 322 Total $ ", + "equity": "Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 22 6 . Selected Financial Data 22 Item 7 . Management \u2019 Selected Financial Data 22 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 44 Item 8 . Financial Statements about Market Risk 44 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2011 : Period Total Number of ( in million ) April 1 , 2011 \u2013 April 30 million ) April 1 , 2011 \u2013 April 30 , 2011 1 , 2011 \u2013 April 30 , 2011 0 $ 0 2011 \u2013 April 30 , 2011 0 $ 0 0 $ \u2013 April 30 , 2011 0 $ 0 0 $ 13,851 30 , 2011 0 $ 0 0 $ 13,851 May 1 , 2011 0 $ 0 0 $ 13,851 May 1 , 0 $ 0 0 $ 13,851 May 1 , 2011 \u2013 0 0 $ 13,851 May 1 , 2011 \u2013 May 31 $ 13,851 May 1 , 2 equity $ 11,296 $ 6,621 $ 8,320 Stockholders \u2019 equity $ 57,083 8,320 Stockholders \u2019 equity $ 57,083 $ 46,175 $ 39,558 $ \u2019 equity $ 57,083 $ 46,175 $ 39,558 $ 36,286 $ $ 57,083 $ 46,175 $ 39,558 $ 36,286 $ 31,097 ( $ 46,175 $ 39,558 $ 36,286 $ 31,097 ( a ) $ 39,558 $ 36,286 $ 31,097 ( a ) Includes a Includes a charge of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) related to the the European Commission in February 2008 . ITEM 7 . MANAGEMENT in February 2008 . ITEM 7 . MANAGEMENT \u2019 S DI Equity and a of June 30 , 2010 . Equity and other investment and other investment were $ 10.9 billion a of June 30 10.9 billion a of June 30 , 2011 , compared with a of June 30 , 2011 , compared with $ 7.8 2011 , compared with $ 7.8 billion a of June 30 7.8 billion a of June 30 , 2010 . Our short-term a of June 30 , 2010 . Our short-term investment are our portfolio a of June 30 , 2011 doe not contain a of June 30 , 2011 doe not contain direct exposure residential mortgage and carry a 100 % principal equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder Revenue Unearned revenue at June 30 , 2011 comprised mainly unearned revenue at June 30 , 2011 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2011 also included payment revenue at June 30 , 2011 also included payment for : unearned revenue a of June 30 , 2011 : ( In a of June 30 , 2011 : ( In million Equity $ 58 $ 56 $ 65 $ 50 Equity $ 212 $ 56 $ 65 $ 50 Equity $ 212 $ 183 65 $ 50 Equity $ 212 $ 183 $ 211 $ 50 Equity $ 212 $ 183 $ 211 $ 230 $ $ 212 $ 183 $ 211 $ 230 $ 184 Commodity $ 183 $ 211 $ 230 $ 184 Commodity $ 28 $ 211 $ 230 $ 184 Commodity $ 28 $ 19 230 $ 184 Commodity $ 28 $ 19 $ 22 $ 184 Commodity $ 28 $ 19 $ 22 $ 30 $ $ 28 $ 19 $ 22 $ 30 $ 18 Total $ 19 $ 22 $ 30 $ 18 Total one-day VaR $ 22 $ 30 $ 18 Total one-day VaR for the combined risk category wa $ 290 million at June 30 , $ 290 mi Equity and other $ 9,829 and $ 8,629 8,162 7,630 Equity and other investment 9,829 and $ 8,629 8,162 7,630 Equity and other investment 10,865 7,630 Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset , net investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset , net 744 12,394 Intangible asset , net 744 1,158 Other long-t equity liability : Accounts payable $ 4,197 $ 4,025 Short-term debt 0 Accounts payable $ 4,197 $ 4,025 Short-term debt 0 1,000 Accrued 4,197 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 Income debt 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 Short-term compensation 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 3,575 3 equity ) Total stockholder \u2019 equity 57,083 46,175 Total liability and stockholder Total stockholder \u2019 equity 57,083 46,175 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 108,704 $ 86,113 See accompanying note \u2019 equity $ 108,704 $ 86,113 See accompanying note . 47 86,113 See accompanying note . 47 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2011 2010 2009 Operations Year Ended June 30 , 2011 2010 2009 Operations Net income EQUITY STATEMENTS ( million ) Year Ended June 30 , 2011 2010 2009 Common Year Ended June 30 , 2011 2010 2009 Common stock and Ended June 30 , 2011 2010 2009 Common stock and paid-in June 30 , 2011 2010 2009 Common stock and paid-in capital , beginning of period $ 62,856 $ 62,382 $ 62,849 Common of period $ 62,856 $ 62,382 $ 62,849 Common stock issued $ 62,856 $ 62,382 $ 62,849 Common stock issued 2,422 2,311 $ 62,849 Common stock issued 2,422 2,311 567 Common stock repurchased 62,849 Common stock issu equity Total stockholder \u2019 equity $ 57,083 $ 46,175 $ 39,558 See \u2019 equity $ 57,083 $ 46,175 $ 39,558 See accompanying note $ 57,083 $ 46,175 $ 39,558 See accompanying note . 49 39,558 See accompanying note . 49 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles product or service over a 50 Table of Contents PART II of Contents PART II Item 8 period of time without taking Revenue relate Equity and Other Investments June 30 , 2011 Cash $ 1,648 Other Investments June 30 , 2011 Cash $ 1,648 $ 0 30 , 2011 Cash $ 1,648 $ 0 $ 0 $ 2011 Cash $ 1,648 $ 0 $ 0 $ 1,648 $ $ 1,648 $ 0 $ 0 $ 1,648 $ 1,648 $ $ 0 $ 0 $ 1,648 $ 1,648 $ 0 $ $ 0 $ 1,648 $ 1,648 $ 0 $ 0 Mutual $ 1,648 $ 1,648 $ 0 $ 0 Mutual fund 1,752 $ 1,648 $ 0 $ 0 Mutual fund 1,752 0 0 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial Mutual fund 1,75 Equity and Other Investments June 30 , 2010 Cash $ 1,661 Other Investments June 30 , 2010 Cash $ 1,661 $ 0 30 , 2010 Cash $ 1,661 $ 0 $ 0 $ 2010 Cash $ 1,661 $ 0 $ 0 $ 1,661 $ $ 1,661 $ 0 $ 0 $ 1,661 $ 1,661 $ $ 0 $ 0 $ 1,661 $ 1,661 $ 0 $ $ 0 $ 1,661 $ 1,661 $ 0 $ 0 Mutual $ 1,661 $ 1,661 $ 0 $ 0 Mutual fund 1,120 $ 1,661 $ 0 $ 0 Mutual fund 1,120 0 0 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial Mutual fund 1,12 Equity forward . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.4 billion and $ 935 million $ 1.4 billion and $ 935 million , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 918 million and $ 472 million $ 918 million and $ 472 million , respectively . Interest instrument . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional Equity Contracts Derivatives 7 ) $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives $ 0 $ 0 $ 191 Hedged Contracts Derivatives $ 0 $ 0 $ 191 Hedged item 0 $ 0 $ 0 $ 191 Hedged item 0 0 ( 0 $ 191 Hedged item 0 0 ( 211 ) Total $ 191 Hedged item 0 0 ( 211 ) Total $ Hedged item 0 0 ( 211 ) Total $ 0 $ ( 211 ) Total $ 0 $ 0 $ ( 20 ) Total $ 0 $ 0 $ ( 20 ) 61 0 $ 0 $ ( 20 ) 61 Table of Contents 0 $ ( 20 ) 61 Table of Contents PART II of Contents PART II Item 8 Cash Flow Hedge Gains ( mi Equity ) $ 106 $ ( 234 ) Equity contract 35 12 ( 234 ) Equity contract 35 12 ( 131 ) Interest-rate 234 ) Equity contract 35 12 ( 131 ) Interest-rate contract Equity contract 35 12 ( 131 ) Interest-rate contract 19 ( ( 131 ) Interest-rate contract 19 ( 4 ) 5 Credit ) Interest-rate contract 19 ( 4 ) 5 Credit contract 24 contract 19 ( 4 ) 5 Credit contract 24 22 ( 4 ) 5 Credit contract 24 22 ( 18 ) Commodity ) 5 Credit contract 24 22 ( 18 ) Commodity contract Credit contract 24 22 ( 18 ) Commodity contra equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder stockholder \u2019 equity . NOTE 13 \u2014 INCOME TAXES The component million ) Year Ended June 30 , 2011 2010 2009 Current Year Ended June 30 , 2011 2010 2009 Current Taxes U.S. Ended June 30 , 2011 2010 2009 Current Taxes U.S. federal June 30 , 2011 2010 2009 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,108 $ 4,415 $ EQUITY Shares million ) Year Ended June 30 , 2011 2010 2009 Balance Year Ended June 30 , 2011 2010 2009 Balance , beginning Ended June 30 , 2011 2010 2009 Balance , beginning of June 30 , 2011 2010 2009 Balance , beginning of year Balance , beginning of year 8,668 8,908 9,151 Issued 155 140 , beginning of year 8,668 8,908 9,151 Issued 155 140 75 beginning of year 8,668 8,908 9,151 Issued 155 140 75 Repurchased year 8,668 8,908 9,151 Issued 155 140 75 Repurchased ( 447 8,668 8,908 9,151 Issued 155 140 Equity Statements 49 48 Stockholders \u2019 Equity Statements 49 Notes to Financial Statements 50 49 Notes to Financial Statements 50 Report of Independent Registered Public Independent Registered Public Accounting Firm 85 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 2.9 billion during the current fiscal current fiscal year to $ 27.0 billion due mainly to increased used in financing decreased $ 4.9 billion to $ 8.4 billion $ 4.9 billion to $ 8.4 billion due mainly to a due mainly to a $ 5.8 billion increase in proceeds from in part by a $ 602 million increase in cash paid used in investing increased $ 3.3 billion to $ 14.6 billion $ 3.3 billion to $ 14.6 billion due to a $ billion due to a $ 5.8 billi Cash flow from operation increased flow from operation increased $ 5.0 billion , primarily due to due to payment of $ 4.1 billion to the Internal Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 35 Table of Contents PART due to a $ 5.6 35 Table of Contents PART II of Contents PART II Item 7 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used in part Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2011 2010 2009 Effective Year Ended June 30 , 2011 2010 2009 Effective Portion Gain Ended June 30 , 2011 2010 2009 Effective Portion Gain ( June 30 , 2011 2010 2009 Effective Portion Gain ( loss tax effect of $ ( 340 ) , $ 188 and ( 340 ) , $ 188 and $ 472 $ ( , $ 188 and $ 472 $ ( 632 ) $ and $ 472 $ ( 632 ) $ 349 $ 876 $ ( 632 ) $ 349 $ 876 Gain ( loss 632 ) $ 349 $ 876 Gain ( loss ) reclassified OCI into revenue $ ( 7 ) $ 495 $ 884 $ ( 7 ) $ 495 $", + "accumulated_depreciation": "accumulated depreciation of $ 9,829 and $ 8,629 8,162 7,630 of $ 9,829 and $ 8,629 8,162 7,630 Equity and other $ 9,829 and $ 8,629 8,162 7,630 Equity and other investment 9,829 and $ 8,629 8,162 7,630 Equity and other investment 10,865 7,630 Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset , net investment 10,865 7,754 Goodwill 12,581 12,394 In Accumulated depreciation ( 9,829 Total , at cost 17,991 16,259 Accumulated depreciation ( 9,829 ) 17,991 16,259 Accumulated depreciation ( 9,829 ) ( 8,629 ) Total depreciation ( 9,829 ) ( 8,629 ) Total , net $ ) Total , net $ 8,162 $ 7,630 During fiscal year , net $ 8,162 $ 7,630 During fiscal year 2011 , $ 7,630 During fiscal year 2011 , 2010 , and 2009 During fiscal year 2011 , 2010 , and 2009 , depreciation 2011 , 2010 , and 2009 , depreciation expense wa $ , depreciation expense wa $ 2.0 billion , $ 1.8 billion $ 2", + "debt": "debt in May 2009 . Net recognized gain on . Other-than-temporary impairment were $ 69 million during fiscal year 2010 69 million during fiscal year 2010 , a compared with $ , a compared with $ 862 million during fiscal year 2009 862 million during fiscal year 2009 and decreased primarily due to were insignificant in fiscal year 2010 compared to net loss of to net loss of $ 509 million in the prior year year . For fiscal year 2010 , other includes a gain . Income Taxes Fiscal year 2011 compared with debt During fiscal year 2011 , we repaid $ 1.0 2011 , we repaid $ 1.0 billion of commercial paper , zero outstanding . On November 5 , 2010 , our $ . On November 5 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion 364-day credit facility expired , our $ 1.0 billion 364-day credit facility expired . This repurchase . As of June 30 , 2011 , the total As of June 30 , 2011 , the total carrying value convertible debt , were $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respect debt a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , a applicable June 30 , 2011 and 2010 , a applicable . The a follows a of June 30 , 2011 : Due Date a of June 30 , 2011 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 2013 $ 1,000 0.875 % 1.000 % March 15 2013 $ 1,000 0.875 % 1.000 % March 15 March 27 0.875 % 1.000 % March 15 March 27 September 15 Septem Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 79 ) Total $ 11,921 Notes ( 79 ) Total $ 11,921 Notes The Notes are senior and unsubordinated debt outstanding . 36 Table of Conten Debt In June 2010 7 Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee were capitalized . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of Ju debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The debt a ) Principal payment $ 0 $ 4,250 $ 2,500 $ Principal payment $ 0 $ 4,250 $ 2,500 $ 5,250 $ $ 0 $ 4,250 $ 2,500 $ 5,250 $ 12,000 Interest $ 4,250 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 959 720 5,250 $ 12,000 Interest payment 344 959 720 3,228 5,251 Construction $ 12,000 Interest payment 344 959 720 3,228 5,251 Construction commitment 12,000 Interest payment 344 959 720 3,228 5,251 Construction commitment ( Interest payment 344 959 720 3,228 5 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) ( b ) These deferred income tax of $ 8.8 billion and other long-term contingent long-term contingent liability of $ 276 million ( related to the excluded unearned revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 279 million . Other Planned Uses Agreement with Skype On May 10 , 2011 , we announced Skype On May 10 , 2011 , we announced that we communication company , for $ 8.5 billion in cash . We r debt 0 Accounts payable $ 4,197 $ 4,025 Short-term debt 0 1,000 Accrued 4,197 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 Income debt 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 Short-term compensation 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 debt 11,921 4,939 2,931 Total current liability 28,774 26,147 Long-term debt 11,921 4,939 Long-term liability 28,774 26,147 Long-term debt 11,921 4,939 Long-term unearned revenue 1,398 28,774 26,147 Long-term debt 11,921 4,939 Long-term unearned revenue 1,398 1,178 11,921 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 229 1,398 1,178 Deferred income tax 1,456 229 Other long-term liability 8,072 1,178 Defer debt Net cash from operation 26,994 24,073 19,037 Financing Short-term debt borrowing cash from operation 26,994 24,073 19,037 Financing Short-term debt borrowing ( repayment ) , maturity of 90 day or le , net or le , net ( 186 ) ( 991 ) 1,178 net ( 186 ) ( 991 ) 1,178 Proceeds from issuance 186 ) ( 991 ) 1,178 Proceeds from issuance of debt debt , maturity longer than 90 day 6,960 4,167 4,796 Repayments maturity longer than 90 day 6,960 4,167 4,796 Repayments of debt longer than 90 day 6,960 4,167 debt , than 90 day 6,960 4,167 4,796 Repayments of debt , maturity debt , maturity longer than 90 day ( 814 ) ( longer than 90 day ( 814 ) ( 2,986 ) ( day ( 814 ) ( 2,986 ) ( 228 ) Common ) ( 2,986 ) ( 228 ) Common stock issued 2,422 228 ) Common stock issued 2,422 2,311 579 Common stock repurchased ) Common stock issued 2,422 2,311 579 Common stock repurchased ( Common stock issued 2,422 2,311 579 Common stock repurchased ( 11,555 579 Common stock repurchased ( 11,555 ) ( 11,269 ) ( repurchased ( 1 debt security met . As of June 30 , 2011 , none of As of June 30 , 2011 , none of these security diluted EPS . See Note 12 \u2013 Debt for additional information for additional information . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2011 2010 2009 Dividends Year Ended June 30 , 2011 2010 2009 Dividends and interest Ended June 30 , 2011 2010 2009 Dividends and interest income June 30 , 2011 2010 2009 Dividends and interest income $ Dividends and interest income $ 900 $ 843 $ 744 Inter Debt Basis Estimated Fair Value June 30 , 2011 Due in one Fair Value June 30 , 2011 Due in one year or one year or le $ 23,982 $ 24,053 Due after one or le $ 23,982 $ 24,053 Due after one year through one year through five year 19,516 19,733 Due after five year year through five year 19,516 19,733 Due after five year through Due after five year through 10 year 2,516 2,637 Due after five year through 10 year 2,516 2,637 Due after 10 year year through 10 year 2,516 2,637 Due after 10 year 2,811 year 2 debt were in excess of $ 1.0 billion . As a result that were held at June 30 , 2011 and 2010 . held at June 30 , 2011 and 2010 . The fair June 30 , 2011 and 2010 . The fair value exclude Commodity Contracts Total Derivatives June 30 , 2011 Assets Non-designated hedge Total Derivatives June 30 , 2011 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 179 $ 0 $ Short-term investment $ 14 $ 179 $ 0 $ 17 $ $ 14 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 214 Other $ 0 $ 17 DEBT Short-term 7 Total $ 744 NOTE 12 \u2014 DEBT Short-term Debt During Short-term Debt During fiscal year 2011 , we repaid $ 1.0 2011 , we repaid $ 1.0 billion of commercial paper , zero outstanding . On November 5 , 2010 , our $ . On November 5 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion 364-day credit facility expired , our $ 1.0 billion 364-day credit facility expired . This Long-term Debt As of June 30 , 2011 , the total As of June 30 , 2011 , the total carrying value convertible debt , w debt a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , a applicable June 30 , 2011 and 2010 , a applicable . Maturities million ) Year Ending June 30 , 2012 $ 0 2013 Year Ending June 30 , 2012 $ 0 2013 1,250 2014 June 30 , 2012 $ 0 2013 1,250 2014 3,000 2015 30 , 2012 $ 0 2013 1,250 2014 3,000 2015 0 , 2012 $ 0 2013 1,250 2014 3,000 2015 0 2016 2012 $ 0 2013 1,250 2014 3,000 2015 0 2016 2,500 $ 0 2013 1,250 2014 3,000 2015 0 2016 2,500 Thereafter 0 2013 1,250 2014 3,000 2015 0 2016 2,500 debt for fiscal year 2011 and 2010 wa $ 197 for fiscal year 2011 and 2010 wa $ 197 million and 2011 and 2010 wa $ 197 million and $ 145 million $ 197 million and $ 145 million , respectively . No debt interest for fiscal year 2009 . The component of long-term a follows a of June 30 , 2011 : Due Date a of June 30 , 2011 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 201 Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 79 ) Total $ 11,921 The ( 79 ) Total $ 11,921 The component of long-term debt a follows a of June 30 , 2010 : Due Date a of June 30 Debt June November 15 December 1 Total 3,750 Convertible Debt June 15 , Total 3,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 61 ) Total $ 4,939 Notes ( 61 ) Total $ 4,939 Notes The Notes are senior and unsubordinated debt outstanding . 68 Table of Conte debt In June 2010 8 Convertible debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee were capitalized . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of Ju debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 . The", + "share_repurchase": "share repurchase with an expiration date of September 30 , 2013 ( the \u201c date of September 30 , 2013 ( the \u201c 2008 Program , 2013 ( the \u201c 2008 Program \u201d ) . As ) . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 447 million share for $ 11.5 447 million share for $ 11.5 billion during fiscal year 2011 11.5 billion dur share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year Ended June 30 , 2011 ( a ) Year Ended June 30 , 2011 ( a ) 2010 ( , 2011 ( a ) 2010 ( a ) 2009 ( ) 2010 ( a ) 2009 ( b ) First quarter ( b ) First quarter 163 ", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 2.69 $ 2.10 $ 1.62 $ per share $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash dividend declared $ 1.62 $ 1.87 $ 1.42 Cash dividend declared per share dividend declared per share $ 0.64 $ 0.52 $ 0.52 $ per share $ 0.64 $ 0.52 $ 0.52 $ 0.44 $ $ 0.64 $ 0.52 $ 0.52 $ 0.44 $ 0.40 Cash $ 0.52 $ 0.52 $ 0.44 $ 0.40 Cash and cash $ 0.52 $ 0.44 $ 0.40 Cash and cash equivalent and equivalent and short-term investment $ earnings per share Diluted earnings per share $ 2.69 $ 2.10 $ 1.62 28 per share $ 2.69 $ 2.10 $ 1.62 28 % 30 $ 2.69 $ 2.10 $ 1.62 28 % 30 % Fiscal 2.69 $ 2.10 $ 1.62 28 % 30 % Fiscal year 2.10 $ 1.62 28 % 30 % Fiscal year 2011 compared % 30 % Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and increased due to the $ 254 earnings per share increased income and the repurchase of 380 million share during fiscal year million share during fiscal year 2010 . SEGMENT PRODUCT REVENUE/OPERATING INCOME Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Earnings per share $ 23,150 $ 18,760 $ 14,569 Earnings per share : Basic per share : Basic $ 2.73 $ 2.13 $ 1.63 Diluted : Basic $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 $ 1.62 Weighted 1.63 Diluted $ 2.69 $ 2.10 $ 1.62 Weighted average share $ 2.69 $ 2.10 $ 1.62 Weighted average share outstanding : average share outstanding : Basic 8,490 8,813 8,945 Diluted 8,593 8,927 share outstanding : Basic 8,490 8,813 8,945 Diluted 8,593 8,927 8,996 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2011 2010 2009 Net Year Ended June 30 , 2011 2010 2009 Net income available Ended June 30 , 2011 2010 2009 Net income available for June 30 , 2011 2010 2009 Net income available for common shareholder ( A ) $ 23,150 $ 18,760 $ 14,569 Weighted A ) $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding share of common stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock ( B ) 8,490 8,813 8,945 Dilutive e Earnings Per Share equivalent ( C ) 8,593 8,927 8,996 Earnings Per Share Basic ( C ) 8,593 8,927 8,996 Earnings Per Share Basic ( Basic ( A/B ) $ 2.73 $ 2.13 $ 1.63 Diluted A/B ) $ 2.73 $ 2.13 $ 1.63 Diluted ( A/C $ 2.73 $ 2.13 $ 1.63 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.69 $ 2.10 $ 1.62 We A/C ) $ 2.69 $ 2.10 $ 1.62 We excluded the $ 2.69 $ 2.10 $ 1.62 We excluded the following share million ) Year Ended June 30 , 2011 2010 2009 Shares Year Ended June 30 , 2011 2010 2009 Shares excluded from Ended June 30 , 201 earnings per share 0.63 23,150 Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share 0.62 2.73 Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 Fiscal Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 Fiscal Year earnings per share 0.62 0.77 0.61 0.69 2.69 earnings per share income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share 0.40 18,760 Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share 0.40 2.13 Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 ( Diluted earnings per share 0.40 0.74 0.45 0.51 2.1 earnings per share 0.40 0.74 0.45 0.51 2.10 ( a ) per share 0.40 0.74 0.45 0.51 2.10 ( a ) Includes share 0.40 0.74 0.45 0.51 2.10 ( a ) Includes a . audit of tax year 2004 to 2006 , which increased of tax year 2004 to 2006 , which increased net income increased net income by $ 461 million . ( b ) an effective tax rate of 7 % due mainly to the ( c ) Reflects $ 1.7 billion of revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and ava", + "tax_rate": "tax rate for tax rate for fiscal year 2011 and 2010 were approximately 18 for fiscal year 2011 and 2010 were approximately 18 % and 2011 and 2010 were approximately 18 % and 25 % , were approximately 18 % and 25 % , respectively . Our , which are subject to 33 Table of Contents PART II of Contents PART II Item 7 lower income tax rate . rate . In fiscal year 2011 and 2010 , our U.S. In fiscal year 2011 and 2010 , our U.S. income before before income tax wa $ 8.9 billion and $ 9.6 billion $ 8.9 billion an tax rate in tax rate in fiscal year 2010 and 2009 were approximately 25 in fiscal year 2010 and 2009 were approximately 25 % and 2010 and 2009 were approximately 25 % and 27 % , were approximately 25 % and 27 % , respectively . In respectively . In fiscal year 2010 and 2009 , the reduction In fiscal year 2010 and 2009 , the reduction to the taxed at lower rate wa 12 % and 9 % , rate wa 12 % and 9 % , respectively , reflecting income . In fiscal year 2010 and 2009 , foreign income In fiscal year 2010 and tax rate of 7 % due mainly to the ( c ) Reflects $ 1.7 billion of revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the \u201c Windows 7 Deferral \u201d ) . ( ( d ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . 84 Table of the Windows 7 Deferral . 84 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2011 and ", + "segment_revenue": "Segment revenue and operating income million ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenue Windows & Ended June 30 , 2011 2010 2009 Revenue Windows & Windows June 30 , 2011 2010 2009 Revenue Windows & Windows Live & Windows Live Division $ 18,778 $ 18,792 $ 15,563 Server Live Division $ 18,778 $ 18,792 $ 15,563 Server and Tools $ 18,778 $ 18,792 $ 15,563 Server and Tools 17,107 15,390 $ 15,563 Server and Tools 17,107 15,390 14,686 Online Services Division 15,563 Serv", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & Windows market worldwide , a approximately 75 % of total Windows Division Products and Services : Windows 7 and prior version of the for any operating system . 4 Table of Contents PART I of Contents PART I Item 1 Windows Live software and service product and service . Approximately 50 % of Server and Tools volume licensing agreement , approximately 30 % is purchased through transactional IBM , and VMWare in 5 Table of Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ GEOGRAPHIC Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Mediaroom ( our Internet , and Windows Phone . 81 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenue Windows & Ended June 30 , 2011 2010 2009 Revenue Windows & Windows June 30 , 2011 2010 2009 Revenue Windows & Windows Live & Windows Live Division", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 15 , 2011 are incorporated by held on November 15 , 2011 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2011 INDEX Page PART Year Ended June 30 , 2011 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registra common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of June 30 , 2011 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt al common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 ( the \u201c date of September 30 , 2013 ( the \u201c 2008 Program , 2013 ( the \u201c 2008 Program \u201d ) . As ) . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved Common stock issued 2,422 228 ) Common stock issued 2,422 2,311 579 Common stock repurchased ) Common stock issued 2,422 2,311 579 Common stock repurchased ( Common stock issued 2,422 2,311 579 Common stock repurchased ( 11,555 579 Common stock repurchased ( 11,555 ) ( 11,269 ) ( repurchased ( 11,555 ) ( 11,269 ) ( 9,353 ) Common ) ( 11,269 ) ( 9,353 ) Common stock cash dividend stock cash dividend paid ( 5,180 ) ( 4,578 ) ( paid ( 5,180 ) ( 4,578 ) ( 4,468 ) Excess ) ( 4,578 ) ( 4,468 ) Excess tax benefit Common stock and Ended June 30 , 2011 2010 2009 Common stock and paid-in June 30 , 2011 2010 2009 Common stock and paid-in capital , beginning of period $ 62,856 $ 62,382 $ 62,849 Common of period $ 62,856 $ 62,382 $ 62,849 Common stock issued $ 62,856 $ 62,382 $ 62,849 Common stock issued 2,422 2,311 $ 62,849 Common stock issued 2,422 2,311 567 Common stock repurchased 62,849 Common stock issued 2,422 2,311 567 Common stock repurchased ( Common stock issued 2,422 2,311 567 Common stock repurchased ( 3,738 Common stock repurchased ( 3,738 ) ( 3,113 ) ( repurchased ( 3,738 ) ( 3,113 ) ( 2,611 ) Stock-based ) ( 3,113 ) ( 2,611 ) Stock-based compensation expense 2,166 2,611 ) Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income ) Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income tax Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income tax deficiency compensation income tax deficiency ( 292 ) ( 647 ) ( deficiency ( 292 ) Common stock cash 240 ) Comprehensive income 23,958 18,846 14,398 Common stock cash dividend ) Comprehensive income 23,958 18,846 14,398 Common stock cash dividend ( Common stock cash dividend ( 5,394 ) ( 4,547 ) ( dividend ( 5,394 ) ( 4,547 ) ( 4,620 ) Common ) ( 4,547 ) ( 4,620 ) Common stock repurchased ( ) Common stock repurchased ( 8,215 ) ( 8,156 ) ( repurchased ( 8,215 ) ( 8,156 ) ( 6,039 ) Balance ) ( 8,156 ) ( 6,039 ) Balance , end of , end of period ( 6,332 ) ( 16,681 ) ( period ( 6,332 ) ( 16,681 common stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based award Dilutive effect of stock-based award 103 114 51 Common stock and effect of stock-based award 103 114 51 Common stock and common of stock-based award 103 114 51 Common stock and common stock stock equivalent ( C ) 8,593 8,927 8,996 Earnings Per Share equivalent ( C ) 8,593 8,927 8,996 Earnings Per Share Basic ( C ) 8,593 8,927 8,996 common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of June 30 , 2011 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt al common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the plan approved first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . Dividends In Directors on September 22 , 2008 . Dividends In fiscal year . Dividends In fiscal year 2011 , our Board of Directors ( In million ) September 21 , 2010 $ 0.16 November million ) September 21 , common stock . 80 Table of Contents PART II of Contents PART II Item 8 NOTE 21 \u2014 SEGMENT INFORMATION PART II Item 8 NOTE 21 \u2014 SEGMENT INFORMATION AND GEOGRAPHIC Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Mediaroom ( our Internet , and Windows Phone . 81 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenu", + "fair_value_measurements": "Fair Value Measurements . million ) Year Ended June 30 , 2011 2010 2009 Foreign Year Ended June 30 , 2011 2010 2009 Foreign Exchange Contracts Ended June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 85 60 ( ) $ 121 Hedged item 85 60 ( 120 ) Total $ 121 Hedged item 85 60 ( 120 ) Total $ Hedged item 85 60 ( 120 ) Total $ ( 7 120 ) To FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2011 Assets Mutual fund Fair Value June 30 , 2011 Assets Mutual fund $ 1,752 2011 Assets Mutual fund $ 1,752 $ 0 $ 0 $ Mutual fund $ 1,752 $ 0 $ 0 $ 1,752 $ $ 1,752 $ 0 $ 0 $ 1,752 $ 0 $ $ 0 $ 0 $ 1,752 $ 0 $ 1,752 Commercial $ 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 639 0 0 $ ", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 85 60 ( ) $ 121 Hedged item 85 60 ( 120 ) Total $ 121 Hedged item 85 60 ( 120 ) Total $ Hedged item 85 60 ( 120 ) Total $ ( 7 120 ) Total $ ( 7 ) $ 3 $ 1 $ ( 7 ) $ 3 $ 1 Equity Contracts Derivatives 7 ) $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-12-316848/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-12-316848/full-submission_features.json new file mode 100644 index 0000000..0c98ed3 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-12-316848/full-submission_features.json @@ -0,0 +1,21 @@ +{ + "revenue": "revenue sell hardware including the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC include : \u2022 Microsoft Office 365 , an online suite that familiar Microsoft Outlook interface ; 3 Table of Contents PART I of Contents PART I Item 1 \u2022 Bing , our Internet information is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & revenue . of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Dynamics CRM ; Microsoft Office 365 , which is an online \u2019 s on-premise offering . 7 Table of Contents PART I of Contents PART I Item 1 Entertainment and Devices Division Entertainment connect people . The Xbox 360 entertainment platform , including Kinect Products and Services : Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox revenue . 2012 , 2011 , or 2010 revenue . Our practice is executive officer a of July 26 , 2012 were a follows a of July 26 , 2012 were a follows : Name the Company Steven A. Ballmer 56 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 52 Chief People Officer Kurt D. People Officer Kurt D. DelBene 52 President , Microsoft Office Division Office Division Peter S. Klein 49 Chief Financial Officer Craig J. Financial Officer Craig J. Mundie 63 Chief Research and Strategy Officer and Strateg revenue . Xbox 360 console are assembled in Asia intangible asset for impairment when 20 Table of Contents PART I of Contents PART I Item 1A event or change in circumstance For example , in July 2012 , we announced a $ , we announced a $ 6.2 billion charge for the impairment . We operate in over 100 country and a significant part result or financial condition . 21 Table of Contents PART I of Contents PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM Revenue Ended June 30 , 2012 2011 2010 2009 2008 Revenue $ June 30 , 2012 2011 2010 2009 2008 Revenue $ 73,723 30 , 2012 2011 2010 2009 2008 Revenue $ 73,723 $ , 2012 2011 2010 2009 2008 Revenue $ 73,723 $ 69,943 2010 2009 2008 Revenue $ 73,723 $ 69,943 $ 62,484 $ 2008 Revenue $ 73,723 $ 69,943 $ 62,484 $ 58,437 $ $ 73,723 $ 69,943 $ 62,484 $ 58,437 $ 60,420 Operating $ 69,943 $ 62,484 $ 58,437 $ 60,420 Operating income $ $ 62,484 $ 58,437 $ 60,420 Operating income $ 21,763 ( $ 60,420 Operating income revenue market and holiday season spending 25 Table of Contents PART II of Contents PART II Item 7 by consumer . Our Entertainment Devices Division ha generated approximately 40 % of it yearly segment to be upgraded to Windows 7 at minimal or no cost cost ( the \u201c Windows 7 Deferral \u201d ) , and , and sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price and per share amount ) 2012 2011 2010 Percentage Change 2012 per share amount ) 2012 2011 2010 Percentage C Revenue $ 73,723 2011 Percentage Change 2011 Versus 2010 Revenue $ 73,723 $ 69,943 2011 Versus 2010 Revenue $ 73,723 $ 69,943 $ 62,484 5 2010 Revenue $ 73,723 $ 69,943 $ 62,484 5 % 12 $ 73,723 $ 69,943 $ 62,484 5 % 12 % Operating 73,723 $ 69,943 $ 62,484 5 % 12 % Operating income 69,943 $ 62,484 5 % 12 % Operating income $ 21,763 12 % Operating income $ 21,763 $ 27,161 $ 24,098 ( Operating income $ 21,763 $ 27,161 $ 24,098 ( 20 ) $ 21,763 $ 27,161 $ 24,098 ( 20 ) % 13 $ 27,161 $ 24,098 ( 20 ) % 13 % Di Revenue increased primarily due to product and service and the 2010 Microsoft Office system , offset to the deferral of $ 540 million of revenue relating to . Revenue in fiscal year 2012 also included Skype revenue from goodwill impairment charge of $ 6.2 billion related to our OSD Cost of revenue increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , reflecting higher cost strategic initiative , higher Xbox 360 royalty cost , and other and development expense increased $ 768 million or 8 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and Revenue also increased due to 26 Table of Contents PART II of Contents PART II Item 7 the $ 254 million Office II Item 7 the $ 254 million Office Deferral in fiscal Office Deferral in fiscal year 2010 and the subsequent recognition of Office Deferral during fiscal year 2011 . Changes in foreign currency Cost of revenue increased $ 3.2 billi Revenue $ 18,373 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,373 $ 19,033 2011 Versus 2010 Revenue $ 18,373 $ 19,033 $ 19,491 ( 2010 Revenue $ 18,373 $ 19,033 $ 19,491 ( 3 ) $ 18,373 $ 19,033 $ 19,491 ( 3 ) % ( $ 19,033 $ 19,491 ( 3 ) % ( 2 ) ( 3 ) % ( 2 ) % Operating income $ ) % Operating income $ 11,460 $ 12,211 $ 12,895 ( Operating income $ 11,460 $ 12,211 $ 12,895 ( 6 ) $ 11,460 $ 12,211 $ 12,895 ( 6 ) % ( $ 12,211 $ 12,895 ( 6 ) % ( 5 ) ( 6 ) % ( 5 ) % Windows & Windows market worldwide revenue advertising from Windows Live . 27 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2012 compared with II Item 7 Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Windows Division revenue reflected relative PCs to business grew approximately 4 % and sale of PCs of PCs to consumer decreased 1 % . Excluding a decline PCs to consumer grew approximately 5 % . Taken together , PC market increased an estimated 0 % to 2 % . an estimated 0 % to 2 % . Re revenue relating to lower revenue and a $ 163 million or 10 % increase a $ 163 million or 10 % increase in research and primarily associated with the Windows 8 operating system . Fiscal year operating system . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Windows Division revenue reflected relative PCs to business grew approximately 11 % this year and sale PCs to consumer declined approximately 1 % . The decline in PC sale included an approximately 32 % decline in Revenue wa negatively the impact of the Windows 7 launch in the prior year prior year , including $ 273 million of revenue recognized related recognized related to the Windows 7 Deferral , we estimate that and marketing expense increased $ 182 million or 6 % , increased $ 182 million or 6 % , reflecting increased advertising million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Revenue $ 18,686 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,686 $ 16,680 2011 Versus 2010 Revenue $ 18,686 $ 16,680 $ 15,109 12 2010 Revenue $ 18,686 $ 16,680 $ 15,109 12 % 10 $ 18,686 $ 16,680 $ 15,109 12 % 10 % Operating 18,686 $ 16,680 $ 15,109 12 % 10 % Operating income 16,680 $ 15,109 12 % 10 % Operating income $ 7,431 10 % Operating income $ 7,431 $ 6,290 $ 5,381 18 Operating income $ 7,431 $ 6,290 $ 5,381 18 % 17 $ 7,431 $ 6,290 $ 5,381 18 % 17 % Server 7,431 $ 6,290 $ 5,381 18 % 17 % revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 595 million or 18 % , grew $ 595 million or 18 % , due to growth Cost of revenue increased $ 682 million or 22 % , increased $ 682 million or 22 % , primarily reflecting higher and marketing expense grew $ 155 million or 4 % , grew $ 155 million or 4 % , reflecting increased corporate increased corporate marketing activity . 28 Table of Contents revenue increased . Product revenue increased $ 1.2 billion or 10 % , increased $ 1.2 billion or 10 % , driven primarily by Enterprise Services revenue grew $ 353 million or 12 % , grew $ 353 million or 12 % , due to growth Cost of revenue increased $ 377 million or 13 % , increased $ 377 million or 13 % , primarily reflecting a , primarily reflecting a $ 323 million increase in expense from and marketing expense increased $ 270 million or 7 % , increased $ 270 million or 7 % , reflecting increased fee Revenue $ 2,867 2011 Percentage Change 2011 Versus 2010 Revenue $ 2,867 $ 2,607 2011 Versus 2010 Revenue $ 2,867 $ 2,607 $ 2,294 10 2010 Revenue $ 2,867 $ 2,607 $ 2,294 10 % 14 $ 2,867 $ 2,607 $ 2,294 10 % 14 % Operating 2,867 $ 2,607 $ 2,294 10 % 14 % Operating loss 2,607 $ 2,294 10 % 14 % Operating loss $ ( % Operating loss $ ( 8,121 ) $ ( 2,657 ) ( 8,121 ) $ ( 2,657 ) $ ( 2,408 ) ( 2,657 ) $ ( 2,408 ) * ( 10 ) ( 2,408 ) * ( 10 ) % * Not meaningful annual revenue . Fiscal year 2012 compared with fisc revenue grew $ Online advertising revenue grew $ 306 million or 13 % to grew $ 306 million or 13 % to $ 2.6 billion or 13 % to $ 2.6 billion , reflecting continued growth for the month of June 2012 wa approximately 16 % , of June 2012 wa approximately 16 % , and grew 120 16 % , and grew 120 basis point year over year ! property , wa approximately 26 % for the month of for the month of June 2012 , down 100 basis point of June 2012 , down 100 basis point year over year OSD \u2019 s fiscal year 2012 operating revenue decreased $ 213 million , driven by lower operating cost . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 OSD revenue increased primarily a Online advertising revenue grew $ 351 million or 18 % to grew $ 351 million or 18 % to $ 2.3 billion or 18 % to $ 2.3 billion , reflecting continued growth the new mix and volume 29 Table of Contents PART II of Contents PART II Item 7 of traffic from the combined for the month of June 2011 wa approximately 14 % , of June revenue grew $ 647 million driven by cost associated and administrative expense decreased $ 156 million or 58 % , decreased $ 156 million or 58 % , due mainly to Research and development increased $ 123 million or 11 % due increased $ 123 million or 11 % due to increased headcount-related million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 20 Revenue $ 23,991 2011 Percentage Change 2011 Versus 2010 Revenue $ 23,991 $ 22,514 2011 Versus 2010 Revenue $ 23,991 $ 22,514 $ 19,256 7 2010 Revenue $ 23,991 $ 22,514 $ 19,256 7 % 17 $ 23,991 $ 22,514 $ 19,256 7 % 17 % Operating 23,991 $ 22,514 $ 19,256 7 % 17 % Operating income 22,514 $ 19,256 7 % 17 % Operating income $ 15,719 17 % Operating income $ 15,719 $ 14,657 $ 11,849 7 Operating income $ 15,719 $ 14,657 $ 11,849 7 % 24 $ 15,719 $ 14,657 $ 11,849 7 % 24 % Microsoft 15,719 $ 14,657 $ 11,849 7 revenue , OEM revenue . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 MBD revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system . Business . Business revenue increased $ 1.7 billion or 9 % , increased $ 1.7 billion or 9 % , primarily reflecting growth revenue , licensing of the 2010 Microsoft Office system to transactional business customer , and an 11 % increase in Microsoft Dynamics . Consumer revenue decreased $ 195 revenue in the . Excluding the fiscal year 2011 impact associated with the Office , consumer revenue increased $ 59 million , driven by increased by increased sale of the 2010 Microsoft Office system . MBD for the year ended June 30 , 2012 included a favorable year ended June 30 , 2012 included a favorable foreign currency foreign currency impact of $ 506 million . MBD operating income Cost of revenue increased $ 258 million or 16 % , increased $ 258 million or 16 % , primarily due to headcount-related revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system , the Office system , the $ 254 million Office Deferral during fiscal Office Deferral during fiscal year 2010 , and the subsequent recognition Office Deferral during fiscal year 2011. Business revenue increased $ 2.1 2011. Business revenue increased $ 2.1 billion or 14 % , increased $ 2.1 billion or 14 % , reflecting licensing of , reflecting licensing of the 2010 Microsoft Office system to transactiona revenue , and a 10 % increase in Microsoft Dynamics . Consumer revenue increased $ 1.1 billion or 33 % , increased $ 1.1 billion or 33 % , approximately half of to the launch of Office 2010 and half of which wa Office Deferral during fiscal year 2010 and subsequent recognition of the Office Deferral during fiscal year 2011 . Excluding the impact associated , consumer revenue increased $ 617 million or 17 % due increased $ 617 million or 17 % due to sale of due to sale of the 2010 Microsoft Office syste revenue increased $ 328 million or 25 % , increased $ 328 million or 25 % , primarily driven by support cost . Sales and 30 Table of Contents PART II of Contents PART II Item 7 marketing expense increased , primarily million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percent Revenue $ 9,593 2011 Percentage Change 2011 Versus 2010 Revenue $ 9,593 $ 8,915 2011 Versus 2010 Revenue $ 9,593 $ 8,915 $ 6,079 8 2010 Revenue $ 9,593 $ 8,915 $ 6,079 8 % 47 $ 9,593 $ 8,915 $ 6,079 8 % 47 % Operating 9,593 $ 8,915 $ 6,079 8 % 47 % Operating income 8,915 $ 6,079 8 % 47 % Operating income $ 364 47 % Operating income $ 364 $ 1,257 $ 517 ( Operating income $ 364 $ 1,257 $ 517 ( 71 ) $ 364 $ 1,257 $ 517 ( 71 ) % 143 $ 1,257 $ 517 ( 71 ) % 143 % Entertainment 517 ( 71 ) % 143 % Entertainmen revenue . In November 2010 , we released Kinect for we released Kinect for Xbox 360 . We acquired Skype on We acquired Skype on October 13 , 2011 , and it Skype on October 13 , 2011 , and it result of discussed below . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 EDD revenue increased primarily reflecting in part by lower Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue decreased $ 113 360 platform revenue decreased $ 113 milli revenue . We shipped 13.0 million Xbox 360 console during We shipped 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 , compared with 13.7 million year 2012 , compared with 13.7 million Xbox 360 console during compared with 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 . Video game revenue decreased Cost of revenue grew $ 900 million or 16 % , grew $ 900 million or 16 % , primarily due to and development expense increa revenue increased primarily reflecting increased primarily reflecting higher Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue grew $ 2.7 360 platform revenue grew $ 2.7 billion or 48 % , grew $ 2.7 billion or 48 % , led by increased by increased volume of Xbox 360 console , sale of Kinect sale of Kinect for Xbox 360 , and higher Xbox LIVE LIVE revenue . We shipped 13.7 million Xbox 360 console during We shipped 13.7 million Xbox 360 console during fiscal year 2011 3 revenue increased $ 1.8 billion or 49 % , increased $ 1.8 billion or 49 % , primarily reflecting higher reflecting higher volume of Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 sold , and increased royalty and development expense increased $ 160 million or 15 % , increased $ 160 million or 15 % , primarily reflecting higher and marketing expense grew $ 112 million or 15 % , grew $ 112 million or 15 % , primarily reflecting increased , primarily reflecting increased Xbox 360 plat revenue 2011 Percentage Change 2011 Versus 2010 Cost of revenue $ 17,530 2010 Cost of revenue $ 17,530 $ 15,577 $ 12,395 13 of revenue $ 17,530 $ 15,577 $ 12,395 13 % 26 $ 17,530 $ 15,577 $ 12,395 13 % 26 % As 17,530 $ 15,577 $ 12,395 13 % 26 % As a 15,577 $ 12,395 13 % 26 % As a percent of As a percent of revenue 24 % 22 % 20 % percent of revenue 24 % 22 % 20 % 2ppt 2ppt revenue 24 % 22 % 20 % 2ppt 2ppt Cost of % 22 % 20 % 2ppt 2ppt Cost of revenue includes 22 % 20 % 2ppt 2ppt Cost of revenue includes revenue increased reflecting sold . Headcount-related expense increased 20 % , primarily related to Services headcount . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cost of revenue increased primarily to increased volume of Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 sold , higher cost associated million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except pe revenue 13 % 13 % 14 % percent of revenue 13 % 13 % 14 % 0ppt ( revenue 13 % 13 % 14 % 0ppt ( 1 ) % 13 % 14 % 0ppt ( 1 ) ppt 32 % 14 % 0ppt ( 1 ) ppt 32 Table of 0ppt ( 1 ) ppt 32 Table of Contents PART II of Contents PART II Item 7 Research and development expense include service content . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Research and development expense increased increased , primarily reflecting a 10 % increase in headcount-related expense headcount- revenue 19 % 20 % 21 % percent of revenue 19 % 20 % 21 % ( 1 revenue 19 % 20 % 21 % ( 1 ) ppt 20 % 21 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Sales and marketing expense decreased and marketing of the Xbox 360 platform , Windows Phone , offset in part by a 5 % increase in headcount-related expense headcount-related expense . Fiscal year 2011 compared with fiscal year 2010 2011 compared revenue 6 % 6 % 7 % percent of revenue 6 % 6 % 7 % 0ppt ( revenue 6 % 6 % 7 % 0ppt ( 1 ) % 6 % 7 % 0ppt ( 1 ) ppt General % 7 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 General and administrative expense increased , primarily due to a 10 % increase in headcount-related expense decrease in legal charge . 33 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2011 compared with II Item 7 Revenue Agents Report and reopened examination . As of June 30 , 2012 , the primary As of June 30 , 2012 , the primary unresolved issue or decrease within the next 12 month , a we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2011 . Fiscal year for tax year 2007 to 2011 . Fiscal year 2011 compared to 2011 . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Our effective tax rate for tax rate for fiscal year 2011 and 2010 were a Revenue Unearned revenue at June 30 , 2012 comprised mainly unearned revenue at June 30 , 2012 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2012 also included payment revenue at June 30 , 2012 also included payment for : unearned revenue a of June 30 , 2012 : ( In a of June 30 , 2012 : ( In million ) Three Months Ending , September 30 , 2012 $ 6,874 December Ending , September 30 , 2012 $ 6,874 December 31 , September 30 , 2012 $ 6,874 December 31 , 2012 5,635 , 2012 $ 6,874 D revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 202 million . Other Planned Uses Uses of Capital On July 18 , 2012 , we acquired Capital On July 18 , 2012 , we acquired Yammer , social network , for $ 1.2 billion in cash . Yammer Equivalents , and Investments , 40 Table of Contents PART II of Contents PART II Item 7 the majority of our cash for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the Adopted Accounting Guidance On July revenue is subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provides significantly discounted right to purchase Windows 8 Pro to qualifying end user end user that purchase Windows 7 PCs during the eligibility period is responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 is deferred until it is an annual basis ( May 1 for u ) and between of a reporting unit . 42 Table of Contents PART II of C Revenue Year Ended June 30 , 2012 2011 2010 Revenue $ 73,723 Ended June 30 , 2012 2011 2010 Revenue $ 73,723 $ June 30 , 2012 2011 2010 Revenue $ 73,723 $ 69,943 2012 2011 2010 Revenue $ 73,723 $ 69,943 $ 62,484 Operating 2010 Revenue $ 73,723 $ 69,943 $ 62,484 Operating expense : $ 73,723 $ 69,943 $ 62,484 Operating expense : Cost of expense : Cost of revenue 17,530 15,577 12,395 Research and development : Cost of revenue 17,530 15,577 12,395 Research and development 9,811 Cost of revenue 17,530 15,57 revenue 18,653 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 15,722 789 580 Short-term unearned revenue 18,653 15,722 Securities lending payable 814 580 Short-term unearned revenue 18,653 15,722 Securities lending payable 814 1,208 18,653 15,722 Securities lending payable 814 1,208 Other 3,151 3,492 Total 15,722 Securities lending payable 814 1,208 Other 3,151 3,492 Total current lending payable 814 1,208 Other 3,151 3,492 Total current liability 32,688 payable 814 1,208 Other 3,151 revenue 1,406 32,688 28,774 Long-term debt 10,713 11,921 Long-term unearned revenue 1,406 1,398 10,713 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 1,456 1,406 1,398 Deferred income tax 1,893 1,456 Other long-term liability 8,208 1,398 Deferred income tax 1,893 1,456 Other long-term liability 8,208 8,072 1,893 1,456 Other long-term liability 8,208 8,072 Total liability 54,908 51,621 1,456 Other long-term revenue ) Deferral of unearned revenue 36,104 31,227 29,374 Recognition of unearned Deferral of unearned revenue 36,104 31,227 29,374 Recognition of unearned revenue of unearned revenue 36,104 31,227 29,374 Recognition of unearned revenue ( Recognition of unearned revenue ( 33,347 ) ( 28,935 ) ( revenue ( 33,347 ) ( 28,935 ) ( 28,813 ) Changes ) ( 28,935 ) ( 28,813 ) Changes in operating asset liability : Accounts receivable ( 1,156 ) ( 1,451 ) ( receivable ( 1,156 ) ( 1,451 ) ( 2,238 ) Inventories ) ( Revenue for software 51 Table of Contents PART II of Contents PART II Item 8 product where customer have the Revenue related to our Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , game published by u for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.6 billion , $ 1.9 billion $ 1.6 billion , $ 1.9 billion , and $ 1.6 1.9 billion , and $ 1.6 billion in fiscal year 2012 1.6 billion in fis revenue $ ( 27 ) $ ( 7 ) ( 27 ) $ ( 7 ) $ 495 Amount Excluded $ ( 7 ) $ 495 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 231 ) $ ( 276 ) ( 231 ) $ ( 276 ) $ ( 174 ) ( 276 ) $ ( 174 ) We estimate that $ ) We estimate that $ 137 million of net derivative gain included in OCI at June 30 , 2012 will be reclassified OCI at June 30 , 2012 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2012 . Non-Designated De revenue and unearned revenue of $ 222 million . The goodwill recognized the following segment : $ 4.2 billion to Entertainment and Devices and Devices Division , $ 2.8 billion to Microsoft Business Division Business Division , and $ 54 million to Online Services Division result of operation starting October 13 , 2011 , the acquisition operation starting October 13 , 2011 , the acquisition date . ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 ye revenue 571 463 1,079 Other expense item 965 1,321 Unearned revenue 571 463 Impaired item 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 Loss revenue 571 463 Impaired investment 152 424 Loss carryforwards 532 90 571 463 Impaired investment 152 424 Loss carryforwards 532 90 Other investment 152 424 Loss carryforwards 532 90 Other revenue item 79 152 424 Loss carryforwards 532 90 Other revenue item 79 69 532 90 Other revenue i revenue item 79 69 Deferred income tax asset $ Deferred income tax asset $ 3,181 $ 3,446 Less valuation allowance tax asset $ 3,181 $ 3,446 Less valuation allowance ( 453 3,446 Less valuation allowance ( 453 ) 0 Deferred income tax valuation allowance ( 453 ) 0 Deferred income tax asset , net of valuation allowance $ 2,728 $ 3,446 Deferred Income Tax valuation allowance $ 2,728 $ 3,446 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,072 ) $ ( 1,266 ) ( 1,072 ) $ ( Revenue Agents Report and reopened examination . As of June 30 , 2012 , the primary As of June 30 , 2012 , the primary unresolved issue or decrease within the next 12 month , a we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2011 . We are for tax year 2007 to 2011 . We are subject to to examination for tax year 1996 to 2011 , some of for tax year 1996 to 2011 , some of which are our financial statement . NOTE 14 \u2014 UNEARNED REVENUE Unearned revenue point ; sale revenue recognition criterion . 73 Table of Contents PART II of Contents PART II Item 8 The component of unearned revenue ( In million ) June 30 , 2012 2011 Volume licensing million ) June 30 , 2012 2011 Volume licensing program $ ) June 30 , 2012 2011 Volume licensing program $ 16,717 2011 Volume licensing program $ 16,717 $ 14,625 Other ( a licensing program $ 16,717 $ 14,625 Other ( a ) 3,342 14,625 Other ( a ) 3,342 2,495 Total $ 20,059 $ Other ( a ) 3,342 2,495 Total $ 20,059 $ 17,120 ) 3,342 2,49 revenue associated ( In million ) June 30 , 2012 2011 Windows & million ) June 30 , 2012 2011 Windows & Windows Live ) June 30 , 2012 2011 Windows & Windows Live Division & Windows Live Division $ 2,444 $ 1,782 Server and Tools Live Division $ 2,444 $ 1,782 Server and Tools 7,445 6,315 $ 1,782 Server and Tools 7,445 6,315 Microsoft Business Division 9,015 1,782 Server and Tools 7,445 6,315 Microsoft Business Division 9,015 8,187 7,445 6,315 Microsoft Business Division 9,015 8,187 Other segment 1,155 83 revenue and operating income million ) Year Ended June 30 , 2012 2011 2010 Revenue Year Ended June 30 , 2012 2011 2010 Revenue Windows & Ended June 30 , 2012 2011 2010 Revenue Windows & Windows June 30 , 2012 2011 2010 Revenue Windows & Windows Live & Windows Live Division $ 18,818 $ 18,787 $ 18,789 Server Live Division $ 18,818 $ 18,787 $ 18,789 Server and Tools $ 18,818 $ 18,787 $ 18,789 Server and Tools 18,696 16,691 $ 18,789 Server and Tools 18,696 16,691 15,121 Online Services Division 18,789 Serv Revenue reconciling amount ( ) Revenue reconciling amount ( 486 ) 381 314 Other 41 reconciling amount ( 486 ) 381 314 Other 41 ( 24 amount ( 486 ) 381 314 Other 41 ( 24 ) 486 ) 381 314 Other 41 ( 24 ) 110 Total 381 314 Other 41 ( 24 ) 110 Total $ ( Other 41 ( 24 ) 110 Total $ ( 5,535 ) ) 110 Total $ ( 5,535 ) $ ( 4,240 ) ( 5,535 ) $ ( 4,240 ) $ ( 3,712 ) ( 4,240 ) $ ( 3,712 ) ( a ) Corporate-level in that line item . 85 Table of Contents PART II of Contents PART II Item 8 No sale to an individual State revenue . 2012 , 2011 , or 2010 revenue . Revenue , classified million ) Year Ended June 30 , 2012 2011 2010 United Year Ended June 30 , 2012 2011 2010 United States ( Ended June 30 , 2012 2011 2010 United States ( a June 30 , 2012 2011 2010 United States ( a ) States ( a ) $ 38,846 $ 38,008 $ 36,173 Other a ) $ 38,846 $ 38,008 $ 36,173 Other country 34,877 $ 38,846 $ 38,008 $ 36,173 Other country 34,877 31,935 26,311 38,008 $ 36,173 Other country 34,877 31,935 26,311 Total $ 73,723 $ 36,173 Other coun Revenue June 30 Total Fiscal Year 2012 Revenue $ 17,372 $ 20,885 Fiscal Year 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 73,723 Gross profit 13,595 15,247 Revenue $ 16,195 $ 19,953 Fiscal Year 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 ", + "expenses": "EXPENSES Cost of million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Cost of revenue 2011 Percentage Change 2011 Versus 2010 Cost of revenue $ 17,530 2010 ", + "net_income": "Net income b ) Net income $ 16,978 ( a ) $ 23,150 16,978 ( a ) $ 23,150 $ 18,760 $ 14,569 $ a ) $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( b ) $ 18,760 $ 14,569 $ 17,681 ( b ) Diluted earnings Diluted earnings per share $ 2.00 ( a ) $ 2.69 2.00 ( a ) $ 2.69 $ 2.10 $ 1.62 $ a ) $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash dividend declared $ 2.10 $ 1.62 $ 1.87 Cash dividend declared per share dividend declared per share $ 0.80 $ 0.64 $ 0.52 $ per share net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ( b ) Includes Includes a charge of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) related to the the European Commission in February 2008 . 23 Table of Contents Commission in February 2008 . 23 Table of Contents PART II of Contents PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION , Windows Phone , Xbox 360 , or the newly announced or the newly announced Surface 24 Table net income the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share prior year . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and Revenue also increased due to 26 Table of Contents PART II of Contents PART II Item 7 the $ 254 million Office II Item 7 the $ 254 m net income and 41 Table of Contents PART II of Contents PART II Item 7 other comprehensive income or in effective for u beginning July 1 , 2012 and will require u beginning July 1 , 2012 and will require financial statement . However , in December 2011 , the FASB issued guidance to existing product . Windows 7 revenue is subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provides significantly discounted right to purchase Windows 8 Pro to qualifying Net income $ Provision for income tax 5,289 4,921 6,253 Net income $ 16,978 for income tax 5,289 4,921 6,253 Net income $ 16,978 $ 4,921 6,253 Net income $ 16,978 $ 23,150 $ 18,760 Earnings Net income $ 16,978 $ 23,150 $ 18,760 Earnings per share $ 16,978 $ 23,150 $ 18,760 Earnings per share : Basic per share : Basic $ 2.02 $ 2.73 $ 2.13 Diluted : Basic $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 $ 2.10 Weighted 2.13 Diluted $ 2.00 $ 2.6 Net income Ended June 30 , 2012 2011 2010 Operations Net income $ June 30 , 2012 2011 2010 Operations Net income $ 16,978 2010 Operations Net income $ 16,978 $ 23,150 $ 18,760 Adjustments Net income $ 16,978 $ 23,150 $ 18,760 Adjustments to reconcile $ 16,978 $ 23,150 $ 18,760 Adjustments to reconcile net income from operation : Goodwill impairment 6,193 0 0 Depreciation , amortization operation : Goodwill impairment 6,193 0 0 Depreciation , amortization , : Goodwill impairment 6,193 0 0 Depreciation , am Net income 16,978 23,150 ( 22,824 ) Net income 16,978 23,150 18,760 Other comprehensive income 22,824 ) Net income 16,978 23,150 18,760 Other comprehensive income : ) Net income 16,978 23,150 18,760 Other comprehensive income : Net ( loss ) on derivative 255 ( 627 ) 27 Net ) on derivative 255 ( 627 ) 27 Net unrealized gain derivative 255 ( 627 ) 27 Net unrealized gain ( loss loss ) on investment ( 390 ) 1,054 265 Translation adjustment on investment ( 390 ) 1,054 265 Translation adjustment and other inves Net income available Ended June 30 , 2012 2011 2010 Net income available for June 30 , 2012 2011 2010 Net income available for common shareholder ( A ) $ 16,978 $ 23,150 $ 18,760 Weighted A ) $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding share of common stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based award Dilutive effect of Net income 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 5,108 13,455 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( a income 5,738 6,624 5,108 ( 492 ) ( a ) 16,978 492 ) ( a ) 16,978 ( a ) Basic earnings ( loss ) per share 0.68 0.79 0.61 ( 0.06 Net income 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 5,232 12,531 13,659 54,366 Net income 5,410 6,634 5,232 ( b ) 13,659 54,366 Net income 5,410 6,634 5,232 ( b ) 5,874 54,366 Net income 5,410 6,634 5,232 ( b ) 5,874 ( 6,634 5,232 ( b ) 5,874 ( c ) 23,150 Basic ) 5,874 ( c ) 23,150 Basic earnings per share 0.63 23,150 Basic earnings per shar net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ( b ) Includes . audit of tax year 2004 to 2006 , which increased of tax year 2004 to 2006 , which increased net income increased net income by $ 461 million . ( c ) an effective tax rate of 7 % due mainly to the our effective tax rate . 87 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and", + "assets": "Assets Current million ) June 30 , 2012 2011 Assets Current asset : ) June 30 , 2012 2011 Assets Current asset : Cash Cash and cash equivalent $ 6,938 $ 9,610 Short-term investment ( cash equivalent $ 6,938 $ 9,610 Short-term investment ( including security including security loaned of $ 785 and $ 1,181 ) 56,102 of $ 785 and $ 1,181 ) 56,102 43,162 Total cash 785 and $ 1,181 ) 56,102 43,162 Total cash , cash and $ 1,181 ) 56,102 43,162 Total cash , cash equivalent equivalent , and short-term investmen Assets All of our , ranging from one to 15 year . We evaluate the adopted accounting guidance On July 1 , 2011 , we adopted guidance On July 1 , 2011 , we adopted guidance issued significant unobservable input ( Level 3 fair value measurement ) . financial statement . On January 1 , 2012 , we adopted . On January 1 , 2012 , we adopted guidance issued expands the disclosure on Level 3 input by requiring quantitative disclosure not yet adopted In December 2011 , the FASB issued guidance effective for u Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Other current asset $ 26 $ 3 $ 215 Other current asset 85 0 $ 215 Other current asset 85 0 0 0 0 85 215 Other current asset 85 0 0 0 0 85 Total Other current asset 85 0 0 0 0 85 Total $ current asset 85 0 0 0 0 85 Total $ 99 as Assets Non-designated hedge Total Derivatives June 30 , 2011 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 179 $ 0 $ Short-term investment $ 14 $ 179 $ 0 $ 17 $ $ 14 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 214 Other $ 0 $ 17 $ 4 $ 214 Other current asset $ 17 $ 4 $ 214 Other current asset 73 0 $ 214 Other current asset 73 0 0 0 0 73 214 Other current asset 73 0 0 0 0 73 Total Other current asset 73 0 0 0 0 73 Total $ current asset 73 0 0 0 0 73 Total $ 87 asset 7 Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2012 Assets Mutual fund Fair Value June 30 , 2012 Assets Mutual fund $ 820 2012 Assets Mutual fund $ 820 $ 0 $ 0 $ Mutual fund $ 820 $ 0 $ 0 $ 820 $ $ 820 $ 0 $ 0 $ 820 $ 0 $ $ 0 $ 0 $ 820 $ 0 $ 820 Commercial $ 0 $ 820 $ 0 $ 820 Commercial paper 0 $ 820 $ 0 $ 820 Commercial paper 0 96 0 0 $ 820 Commercial paper 0 96 0 96 0 Assets Mutual fund Fair Value June 30 , 2011 Assets Mutual fund $ 1,752 2011 Assets Mutual fund $ 1,752 $ 0 $ 0 $ Mutual fund $ 1,752 $ 0 $ 0 $ 1,752 $ $ 1,752 $ 0 $ 0 $ 1,752 $ 0 $ $ 0 $ 0 $ 1,752 $ 0 $ 1,752 Commercial $ 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 639 0 0 $ 1,752 Commercial paper 0 639 0 639 0 639 $ 1,752 Commercial paper 0 639 0 639 0 639 Certificates 1,752 Commercial paper 0 639 0 639 0 639 Certificates of Commercial paper 0 639 0 639 0 639 Cert Assets Total Year Ended June 30 , 2012 Balance , beginning Year Ended June 30 , 2012 Balance , beginning of period , beginning of period $ 58 $ 5 $ 20 $ of period $ 58 $ 5 $ 20 $ 83 Total $ 58 $ 5 $ 20 $ 83 Total realized and $ 5 $ 20 $ 83 Total realized and unrealized loss other income ( expense ) 0 0 ( 5 ) ( income ( expense ) 0 0 ( 5 ) ( 5 expense ) 0 0 ( 5 ) ( 5 ) Included 0 ( 5 ) ( 5 ) Included in other comprehensive in other comprehensive income ( 21 ) 0 0 ( 21 comprehensive income ( 21 ) 0 0 ( Assets Total Year Ended June 30 , 2011 Balance , beginning Year Ended June 30 , 2011 Balance , beginning of period , beginning of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Total $ 167 $ 5 $ 9 $ 181 Total realized and $ 5 $ 9 $ 181 Total realized and unrealized gain other income ( expense ) 39 0 11 50 Included in income ( expense ) 39 0 11 50 Included in other ( expense ) 39 0 11 50 Included in other comprehensive expense ) 39 0 11 50 Included in other comprehensive income in other comprehen Assets and $ 0 $ 11 $ 17 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2012 and 2011 , we did During fiscal year 2012 and 2011 , we did not record on a nonrecurring basis . 65 Table of Contents PART II of Contents PART II Item 8 NOTE 7 \u2014 INVENTORIES The PART II Item 8 NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2012 2011 Raw material million ) June 30 , 2012 2011 Raw material $ 210 ) June 30 , 2012 2011 Raw material $ 210 $ 2012 2011 Raw material $ ASSETS The component Carrying Amount Year Ended June 30 , 2012 2011 Technology-based ( Year Ended June 30 , 2012 2011 Technology-based ( a ) Ended June 30 , 2012 2011 Technology-based ( a ) $ Technology-based ( a ) $ 3,550 $ ( 1,899 ) $ ) $ 3,550 $ ( 1,899 ) $ 1,651 $ 2,356 $ ( 1,899 ) $ 1,651 $ 2,356 $ ( 1,831 1,899 ) $ 1,651 $ 2,356 $ ( 1,831 ) $ 1,651 $ 2,356 $ ( 1,831 ) $ 525 Marketing-related 1,325 $ ( 1,831 ) $ 525 Marketing-related 1,325 ( 136 ) 1,831 ) $ 525 Marketing-related 1,325 ( 136 ) 1,1 Assets ) June 30 , 2012 2011 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 882 $ 1,079 Other expense item compensation expense $ 882 $ 1,079 Other expense item 965 1,321 $ 1,079 Other expense item 965 1,321 Unearned revenue 571 463 1,079 Other expense item 965 1,321 Unearned revenue 571 463 Impaired item 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 Loss revenue 571 463 Impaired investmen Assets 3,478 Total $ 73,723 $ 69,943 $ 62,484 Assets are not $ 73,723 $ 69,943 $ 62,484 Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2012 2011 2010 United million ) June 30 , 2012 2011 2010 United States $ ) June 30 , 2012 2011 2010 United States $ 14,081 June 30 , 2012 2011 2010 United States $ 14,081 $ 2011 2010 United States $ 14,081 $ 18,498 $ 18,716 Luxembourg United States $ 14,081 $ 18,498 $ 18,716 Luxembourg 6,975 0 $ 14,081 $ 18,49", + "liabilities": "Liabilities and stockholder Total asset $ 121,271 $ 108,704 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 4,175 $ 4,197 Current portion of Accounts payable $ 4,175 $ 4,197 Current portion of long-term debt Current portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 Income debt 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 Short-ter Liabilities $ 10 $ 26 $ 3 $ 483 Liabilities Non-designated hedge $ 26 $ 3 $ 483 Liabilities Non-designated hedge derivative : Other current liability $ ( 84 ) $ ( 19 ) ( 84 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 141 ) Designated ) $ 0 $ ( 141 ) Designated hedge derivative : Other current liability $ ( 14 ) $ 0 $ 0 $ ( 14 ) $ 0 $ 0 $ 0 $ 14 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 14 $ 0 $ 0 $ 0 $ ( 14 ) Total 0 $ 0 $ ( 14 ) Total liability $ ( ) Total liability Liabilities $ 0 $ 17 $ 4 $ 416 Liabilities Non-designated hedge $ 17 $ 4 $ 416 Liabilities Non-designated hedge derivative : Other current liability $ ( 91 ) $ ( 12 ) ( 91 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 135 ) ( 4 ) $ ( 135 ) Designated hedge derivative : Other current liability $ ( 128 ) $ 0 $ 0 $ ( 128 ) $ 0 $ 0 $ 0 $ 128 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 128 $ 0 $ 0 $ 0 $ ( 128 ) Total 0 $ 0 $ ( 128 ) Total liability $ ( ) Total liability $ ( 21 Liabilities Derivatives $ ( 141 ) $ 69,623 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 10 $ 145 $ 0 $ and other $ 10 $ 145 $ 0 $ 155 $ $ 10 $ 145 $ 0 $ 155 $ ( 139 $ 145 $ 0 $ 155 $ ( 139 ) $ 0 $ 155 $ ( 139 ) $ 16 ( In $ ( 139 ) $ 16 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2011 Assets Mutual fund Fair Value June 30 , 2011 Ass Liabilities Derivatives $ ( 204 ) $ 61,058 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 109 $ 257 $ 0 $ and other $ 109 $ 257 $ 0 $ 366 $ $ 109 $ 257 $ 0 $ 366 $ ( 203 $ 257 $ 0 $ 366 $ ( 203 ) $ 0 $ 366 $ ( 203 ) $ 163 ( a $ ( 203 ) $ 163 ( a ) These amount and counterparty credit risk . 64 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 \u2013 Investments . ( In ( In million ) June 30 , 2012 2011 Net fair million ) J Liabilities Measured Nonrecurring Basis During fiscal year 2012 and 2011 , we did During fiscal year 2012 and 2011 , we did not record on a nonrecurring basis . 65 Table of Contents PART II of Contents PART II Item 8 NOTE 7 \u2014 INVENTORIES The PART II Item 8 NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2012 2011 Raw material million ) June 30 , 2012 2011 Raw material $ 210 ) June 30 , 2012 2011 Raw material $ 210 $ 2012 2011 Raw material $ 210 $ 232 Work in process Raw material $ 210 $ 232 Liabilities International Liabilities International earnings $ ( 1,072 ) $ ( 1,266 ) ( 1,072 ) $ ( 1,266 ) Unrealized gain on investment Unrealized gain on investment ( 830 ) ( 904 ) Depreciation investment ( 830 ) ( 904 ) Depreciation and amortization ( ) Depreciation and amortization ( 670 ) ( 265 ) Other amortization ( 670 ) ( 265 ) Other ( 14 ) ( 265 ) Other ( 14 ) 0 Deferred income tax ) Other ( 14 ) 0 Deferred income tax liability ( Deferred income tax liability ( 2,586 ) ( 2,435 ) Net liability ( 2, LIABILITIES ( ( In million ) June 30 , 2012 2011 Tax contingency million ) June 30 , 2012 2011 Tax contingency and other ) June 30 , 2012 2011 Tax contingency and other tax and other tax liability $ 7,634 $ 7,381 Legal contingency 220 tax liability $ 7,634 $ 7,381 Legal contingency 220 276 Other 7,634 $ 7,381 Legal contingency 220 276 Other 354 415 Total $ 7,381 Legal contingency 220 276 Other 354 415 Total $ Legal contingency 220 276 Other 354 415 Total $ 8,208 $ contingency 220 276 Other 354 415 Total $ ", + "equity": "Equity Securities 23 Item 6 . Selected Financial of Equity Securities 23 Item 6 . Selected Financial Data 23 6 . Selected Financial Data 23 Item 7 . Management \u2019 Selected Financial Data 23 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 24 Item 7A . Quantitative and Results of Operations 24 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 45 Item 8 . Financial Statements about Market Risk 45 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2012 , all of which were ( in million ) April 1 , 2012 \u2013 April 30 million ) April 1 , 2012 \u2013 April 30 , 2012 1 , 2012 \u2013 April 30 , 2012 404,577 $ 31.98 2012 \u2013 April 30 , 2012 404,577 $ 31.98 404,577 $ \u2013 April 30 , 2012 404,577 $ 31.98 404,577 $ 9,208 30 , 2012 404,577 $ 31.98 404,577 $ 9,208 May 1 , 2012 404,577 $ 31.98 404,577 $ 9,208 May 1 , 404,577 $ 31.98 404 equity $ 13,791 $ 11,296 $ 6,621 Stockholders \u2019 equity $ 66,363 6,621 Stockholders \u2019 equity $ 66,363 $ 57,083 $ 46,175 $ \u2019 equity $ 66,363 $ 57,083 $ 46,175 $ 39,558 $ $ 66,363 $ 57,083 $ 46,175 $ 39,558 $ 36,286 ( $ 57,083 $ 46,175 $ 39,558 $ 36,286 ( a ) $ 46,175 $ 39,558 $ 36,286 ( a ) Includes a and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ( b ) Includes Includes a charge of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) related to the the Equity and a of June 30 , 2011 . Equity and other investment and other investment were $ 9.8 billion a of June 30 9.8 billion a of June 30 , 2012 , compared with a of June 30 , 2012 , compared with $ 10.9 2012 , compared with $ 10.9 billion a of June 30 10.9 billion a of June 30 , 2011 . Our short-term a of June 30 , 2011 . Our short-term investment are our portfolio a of June 30 , 2012 doe not contain a of June 30 , 2012 doe not contain direct exposure residential mortgage and carry a 100 % principal equity stockholder \u2019 equity for $ 58 million with the portion in call transaction are expected to 38 Table of Contents PART II of Contents PART II Item 7 reduce potential dilution of earnings cap price equal to $ 37.16 , which is adjusted periodically call were valued at $ 40 million and recorded to stockholder Revenue Unearned revenue at June 30 , 2012 comprised mainly unearned revenue at June 30 , 2012 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2012 also included payment Equity $ 58 $ 64 $ 73 $ 57 Equity $ 205 $ 64 $ 73 $ 57 Equity $ 205 $ 212 73 $ 57 Equity $ 205 $ 212 $ 194 $ 57 Equity $ 205 $ 212 $ 194 $ 248 $ $ 205 $ 212 $ 194 $ 248 $ 165 Commodity $ 212 $ 194 $ 248 $ 165 Commodity $ 18 $ 194 $ 248 $ 165 Commodity $ 18 $ 28 248 $ 165 Commodity $ 18 $ 28 $ 20 $ 165 Commodity $ 18 $ 28 $ 20 $ 29 $ $ 18 $ 28 $ 20 $ 29 $ 15 Total $ 28 $ 20 $ 29 $ 15 Total one-day VaR $ 20 $ 29 $ 15 Total one-day VaR for the combined risk category wa $ 292 million at June 30 , $ 292 mi Equity and other $ 10,962 and $ 9,829 8,269 8,162 Equity and other investment 10,962 and $ 9,829 8,269 8,162 Equity and other investment 9,776 8,162 Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset , net investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset , net 3,170 12,581 Intangible asset , net 3,170 744 Other lon equity liability : Accounts payable $ 4,175 $ 4,197 Current portion of Accounts payable $ 4,175 $ 4,197 Current portion of long-term debt Current portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 Income debt 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 Short-term compensation 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 3,87 equity ) Total stockholder \u2019 equity 66,363 57,083 Total liability and stockholder Total stockholder \u2019 equity 66,363 57,083 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 121,271 $ 108,704 See accompanying note \u2019 equity $ 121,271 $ 108,704 See accompanying note . 48 108,704 See accompanying note . 48 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2012 2011 2010 Operations Year Ended June 30 , 2012 2011 2010 Operations Net inc EQUITY STATEMENTS ( million ) Year Ended June 30 , 2012 2011 2010 Common Year Ended June 30 , 2012 2011 2010 Common stock and Ended June 30 , 2012 2011 2010 Common stock and paid-in June 30 , 2012 2011 2010 Common stock and paid-in capital , beginning of period $ 63,415 $ 62,856 $ 62,382 Common of period $ 63,415 $ 62,856 $ 62,382 Common stock issued $ 63,415 $ 62,856 $ 62,382 Common stock issued 1,924 2,422 $ 62,382 Common stock issued 1,924 2,422 2,311 Common stock repurchased 62,382 Common stock is equity Total stockholder \u2019 equity $ 66,363 $ 57,083 $ 46,175 See \u2019 equity $ 66,363 $ 57,083 $ 46,175 See accompanying note $ 66,363 $ 57,083 $ 46,175 See accompanying note . 50 46,175 See accompanying note . 50 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles subscription . Revenue for software 51 Table of Contents PART II of Contents PART II Item 8 product where customer have the Re Equity and Other Investments June 30 , 2012 Cash $ 2,019 Other Investments June 30 , 2012 Cash $ 2,019 $ 0 30 , 2012 Cash $ 2,019 $ 0 $ 0 $ 2012 Cash $ 2,019 $ 0 $ 0 $ 2,019 $ $ 2,019 $ 0 $ 0 $ 2,019 $ 2,019 $ $ 0 $ 0 $ 2,019 $ 2,019 $ 0 $ $ 0 $ 2,019 $ 2,019 $ 0 $ 0 Mutual $ 2,019 $ 2,019 $ 0 $ 0 Mutual fund 820 $ 2,019 $ 0 $ 0 Mutual fund 820 0 0 0 $ 0 Mutual fund 820 0 0 820 820 0 $ 0 Mutual fund 820 0 0 820 820 0 0 0 Mutual fund 820 0 0 820 820 0 0 Commercial Mutual fund 820 0 0 820 820 0 0 Commer Equity and Other Investments June 30 , 2011 Cash $ 1,648 Other Investments June 30 , 2011 Cash $ 1,648 $ 0 30 , 2011 Cash $ 1,648 $ 0 $ 0 $ 2011 Cash $ 1,648 $ 0 $ 0 $ 1,648 $ $ 1,648 $ 0 $ 0 $ 1,648 $ 1,648 $ $ 0 $ 0 $ 1,648 $ 1,648 $ 0 $ $ 0 $ 1,648 $ 1,648 $ 0 $ 0 Mutual $ 1,648 $ 1,648 $ 0 $ 0 Mutual fund 1,752 $ 1,648 $ 0 $ 0 Mutual fund 1,752 0 0 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial Mutual fund 1,75 Equity forward . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.4 billion and $ 982 million $ 1.4 billion and $ 982 million , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.1 billion and $ 860 million $ 1.1 billion and $ 860 million , respectively . Interest instrument . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional Equity contract $ ( 27 ) $ 106 Equity contract ( 85 ) $ 106 Equity contract ( 85 ) 35 12 Interest-rate contract Equity contract ( 85 ) 35 12 Interest-rate contract 93 19 contract ( 85 ) 35 12 Interest-rate contract 93 19 ( ) 35 12 Interest-rate contract 93 19 ( 4 ) Credit 35 12 Interest-rate contract 93 19 ( 4 ) Credit contract Interest-rate contract 93 19 ( 4 ) Credit contract ( 7 4 ) Credit contract ( 7 ) 24 22 Commodity contract Credit contract ( 7 ) 24 22 Commodity contract ( 121 contract ( 7 ) 24 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 , which is adjusted periodically call were valued at $ 40 million and recorded to stockholder million ) Year Ending June 30 , 2013 $ 1,250 2014 Year Ending June 30 , 2013 $ 1,250 2014 3,000 2015 June 30 , 2013 $ 1,250 2014 3,000 2015 0 2016 30 , 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 , 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 2017 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 2017 0 $ 1,250 2014 3,000 2015 0 20 EQUITY Shares million ) Year Ended June 30 , 2012 2011 2010 Balance Year Ended June 30 , 2012 2011 2010 Balance , beginning Ended June 30 , 2012 2011 2010 Balance , beginning of June 30 , 2012 2011 2010 Balance , beginning of year Balance , beginning of year 8,376 8,668 8,908 Issued 147 155 , beginning of year 8,376 8,668 8,908 Issued 147 155 140 beginning of year 8,376 8,668 8,908 Issued 147 155 140 Repurchased year 8,376 8,668 8,908 Issued 147 155 140 Repurchased ( 142 8,376 8,668 8,908 Issued 147 1 Equity Statements 50 49 Stockholders \u2019 Equity Statements 50 Notes to Financial Statements 51 50 Notes to Financial Statements 51 Report of Independent Registered Public Independent Registered Public Accounting Firm 88 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 4.6 billion during the current fiscal current fiscal year to $ 31.6 billion due mainly to increased used for financing increased $ 1.0 billion to $ 9.4 billion $ 1.0 billion to $ 9.4 billion due mainly to a due mainly to a $ 6.0 billion net decrease in proceeds of debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 billion to $ 24.8 billion $ 10.2 billion t Cash flow from operation increased flow from operation increased $ 2.9 billion during the current fiscal current fiscal year to $ 27.0 billion due mainly to increased used in financing decreased $ 4.9 billion to $ 8.4 billion $ 4.9 billion to $ 8.4 billion due mainly to a due mainly to a $ 5.8 billion increase in proceeds from in part by a $ 602 million increase in cash paid used in investing increased $ 3.3 billion to $ 14.6 billion $ 3.3 billion to $ 14.6 billion due to a $ billion due to a $ 5.8 billi Cash Flow $ ( 7 ) $ 3 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2012 2011 2010 Effective Year Ended June 30 , 2012 2011 2010 Effective Portion Gain Ended June 30 , 2012 2011 2010 Effective Portion Gain ( June 30 , 2012 2011 2010 Effective Portion Gain ( loss of tax effect of $ 127 , $ ( 340 ) $ 127 , $ ( 340 ) and $ 188 $ ( 340 ) and $ 188 $ 236 $ ( 632 ) and $ 188 $ 236 $ ( 632 ) $ 188 $ 236 $ ( 632 ) $ 349 Gain ( $ ( 632 ) $ 349 Gain ( loss ) reclassified OCI into revenue $ ( 27 ) $ ( 7 ) ", + "operating_margin": "operating margin . 14 Table of Contents PART I of Contents PART I Item 1A Business model competition . Companies Azure Services platform , Office 365 , other cloud-based service offering offering , and the Xbox 360 entertainment platform . We will manufactured device announced in June 2012 . Investments in new technology we have experienced historically . 15 Table of Contents PART I of Contents PART I Item 1A In fall 2012 , we I Item 1A In fall 2012 , we are launching Windows , we are launching Windows 8 , a ma", + "accumulated_depreciation": "accumulated depreciation of $ 10,962 and $ 9,829 8,269 8,162 of $ 10,962 and $ 9,829 8,269 8,162 Equity and other $ 10,962 and $ 9,829 8,269 8,162 Equity and other investment 10,962 and $ 9,829 8,269 8,162 Equity and other investment 9,776 8,162 Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset , net investment 9,776 10,865 Goodwill 13,452 12,581 Accumulated depreciation ( 10,962 Total , at cost 19,231 17,991 Accumulated depreciation ( 10,962 ) 19,231 17,991 Accumulated depreciation ( 10,962 ) ( 9,829 ) Total depreciation ( 10,962 ) ( 9,829 ) Total , net $ ) Total , net $ 8,269 $ 8,162 During fiscal year , net $ 8,269 $ 8,162 During fiscal year 2012 , $ 8,162 During fiscal year 2012 , 2011 , and 2010 During fiscal year 2012 , 2011 , and 2010 , depreciation 2012 , 2011 , and 2010 , depreciation expense wa $ , depreciation expense wa $ 2.2 billion , $ 2.0 billion", + "debt": "debt . Net 34 Table of Contents PART II of Contents PART II Item 7 recognized gain on investment increased . Income Taxes Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Our effective tax rate for tax rate for fiscal year 2012 and 2011 were approximately 24 for fiscal year 2012 and 2011 were approximately 24 % and 2012 and 2011 were approximately 24 % and 18 % , were approximately 24 % and 18 % , respectively . Our rate . Our fiscal year 2012 effective rate increa debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 billion to $ 24.8 billion $ 10.2 billion to $ 24.8 billion due mainly to a due mainly to a $ 10.0 billion increase in acquisition of intangible asset and a $ 1.4 billion decrease in cash from partially offset by a $ 1.2 billion decrease in cash used of investment . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cash flow from oper Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total face , 2013 1,250 0.000 % 1.849 % Total face value $ % Total face value $ 12,000 As of June 30 , $ 12,000 As of June 30 , 2012 , the aggregate As of June 30 , 2012 , the aggregate unamortized discount current portion , wa $ 56 milli Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee . Initially , each $ 1,000 principal amount of note wa of note wa convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . The conversion agreement . As of June 30 , 2012 , the net As of June 30 , 2012 , the net c debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in call transaction are expected to debt In million ) 2013 2014-2015 2016-2017 Thereafter Total Long-term debt : a ) Principal payment $ 1,250 $ 3,000 $ 2,500 $ Principal payment $ 1,250 $ 3,000 $ 2,500 $ 5,250 $ $ 1,250 $ 3,000 $ 2,500 $ 5,250 $ 12,000 Interest $ 3,000 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 616 491 5,250 $ 12,000 Interest payment 344 616 491 3,457 4,908 Construction $ 12,000 Interest payment 344 616 491 3,457 4,908 Construction commitment 12,000 Interest payment 34 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) deferred income tax of $ 9.5 billion and other long-term contingent long-term contingent liability of $ 220 million ( related to the excluded unearned revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 202 million . Other Planned Uses Uses of Capital On July 18 , 2012 , we acquired Capital On July 18 , 2012 , we acquired Yammer , social network , for $ 1.2 billion in cash . Yammer Equivalent debt Current portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 Income debt 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 Short-term compensation 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 15,722 789 580 Short-term unearned revenue 18,653 15,722 Securities l debt 10,713 11,921 3,492 Total current liability 32,688 28,774 Long-term debt 10,713 11,921 Long-term liability 32,688 28,774 Long-term debt 10,713 11,921 Long-term unearned revenue 1,406 32,688 28,774 Long-term debt 10,713 11,921 Long-term unearned revenue 1,406 1,398 10,713 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 1,456 1,406 1,398 Deferred income tax 1,893 1,456 Other long-term liability 8,208 1 debt Net cash from operation 31,626 26,994 24,073 Financing Short-term debt repayment cash from operation 31,626 26,994 24,073 Financing Short-term debt repayment , debt repayment , maturity of 90 day or le , net day or le , net 0 ( 186 ) ( 991 le , net 0 ( 186 ) ( 991 ) Proceeds 0 ( 186 ) ( 991 ) Proceeds from issuance of debt , maturity longer than 90 day 0 6,960 4,167 Repayments maturity longer than 90 day 0 6,960 4,167 Repayments of debt longer than 90 day 0 6,960 4,167 Repayments of debt , than debt , maturity debt , maturity longer than 90 day 0 ( 814 ) maturity longer than 90 day 0 ( 814 ) ( 2,986 than 90 day 0 ( 814 ) ( 2,986 ) Common 0 ( 814 ) ( 2,986 ) Common stock issued 1,913 2,986 ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ( Common stock issued 1,913 2,422 2,311 Common stock repurchased ( 5,029 2,311 Common stock repurchased ( 5,029 ) ( 11,555 ) ( repurchased ( 5,029 ) ( 11,555 ) ( 11,269 ) Commo debt security met . As of June 30 , 2012 , none of As of June 30 , 2012 , none of these security diluted EPS . See Note 12 \u2013 Debt for additional information for additional information . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2012 2011 2010 Dividends Year Ended June 30 , 2012 2011 2010 Dividends and interest Ended June 30 , 2012 2011 2010 Dividends and interest income June 30 , 2012 2011 2010 Dividends and interest income $ Dividends and interest income $ 800 $ 900 $ 843 Inter debt were in excess of $ 1.0 billion . As a result required to be posted . 61 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2012 Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Oth DEBT As 1,236 Total $ 3,170 NOTE 12 \u2014 DEBT As of June \u2014 DEBT As of June 30 , 2012 , the total As of June 30 , 2012 , the total carrying value current portion , were $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively . This estimated fair value of $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respectively , a respectively , a of June 30 , 2011 . These estimated a of June 30 , 2011 . These estimated fair value value are based on Level 2 input . T Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total face , 2013 1,250 0.000 % 1.849 % Total face value $ % Total face value $ 12,000 As of June 30 , $ 12,000 As of June 30 , 2012 and 2011 , As of June 30 , 2012 and 2011 , the aggregate June 30 , 2012 and 2011 , the aggregate unamorti debt outstanding . 69 Table of Contents PART II of Contents PART II Item 8 Convertible Debt In June 2010 8 Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee . Initially , each $ 1,000 principal amount of note wa of note wa convertible into 29.94 share of Microsoft common stock a conversion debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder \u2019 equity stockholder \u2019 equity for $ 58 million with the portion in cap price equal to $ 37.16 , whi debt for fiscal year 2012 , 2011 , and 2010 for fiscal year 2012 , 2011 , and 2010 wa $ 2012 , 2011 , and 2010 wa $ 344 million , , and 2010 wa $ 344 million , $ 197 million $ 344 million , $ 197 million , and $ 145 197 million , and $ 145 million , respectively . 70 145 million , respectively . 70 Table of Contents PART II of Contents PART II Item 8 NOTE 13 \u2014 INCOME TAXES PART II Item 8 NOTE 13 \u2014 INCOME TAXES The component million ) Year Ended June 30 , 2012 2011 2010 Current Year Ended June 30 , 2", + "share_repurchase": "share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2012 , approximately $ As of June 30 , 2012 , approximately $ 8.2 billion , 2012 , approximately $ 8.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 142 million share for $ 4.0 142 million share for $ 4.0 billion during fiscal year 2012 4.0 billion during fiscal year 2012 ; 447 million share for share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2012 , approximately $ As of June 30 , 2012 , approximately $ 8.2 billion , 2012 , approximately $ 8.2 billion of the approved repurchase Shares Amount Year Ended June 30 , 2012 2011 2010 First Year Ended June 30 , 2012 2011 2010 First quarter 38 Ended June 30 , 2012 2011 2010 First quarter 38 $ June 30 , 2012 2011 2010 First quarter 38 $ 1,000 2012 2011 2010 First quarter 3", + "earnings_per_share": "earnings per share $ 2.00 ( a ) $ 2.69 2.00 ( a ) $ 2.69 $ 2.10 $ 1.62 $ a ) $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash dividend declared $ 2.10 $ 1.62 $ 1.87 Cash dividend declared per share dividend declared per share $ 0.80 $ 0.64 $ 0.52 $ per share $ 0.80 $ 0.64 $ 0.52 $ 0.52 $ $ 0.80 $ 0.64 $ 0.52 $ 0.52 $ 0.44 Cash $ 0.64 $ 0.52 $ 0.52 $ 0.44 Cash , cash $ 0.52 $ 0.52 $ 0.44 Cash , cash equivalent , , and short-term investment $ 63,040 $ 52,772 $ 36,788 $ short-term investment $ 63,04 earnings per share by $ 0.73 . ( b ) Includes Includes a charge of $ 1.4 billion ( \u20ac 899 million $ 1.4 billion ( \u20ac 899 million ) related to the the European Commission in February 2008 . 23 Table of Contents Commission in February 2008 . 23 Table of Contents PART II of Contents PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION , Windows Phone , Xbox 360 , or the newly announced or the newly announced Surface 24 Table of Contents PART II of Contents PART II Item 7 device , our earnings per share Diluted earnings per share $ 2.00 $ 2.69 $ 2.10 ( per share $ 2.00 $ 2.69 $ 2.10 ( 26 ) $ 2.00 $ 2.69 $ 2.10 ( 26 ) % 28 $ 2.69 $ 2.10 ( 26 ) % 28 % Fiscal 2.10 ( 26 ) % 28 % Fiscal year 2012 compared % 28 % Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Revenue increased primarily due to product and service and the 2010 Microsoft Office system , offset to the deferral of $ 540 million of revenue relating to . Revenue in fiscal year 2012 also included Skype earnings per share by $ 0.73 . Prior year net income the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share prior year . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and Revenue also increased due to 26 Table of Contents PART II of Contents PART II Item 7 the $ 254 mi Earnings per share $ 16,978 $ 23,150 $ 18,760 Earnings per share : Basic per share : Basic $ 2.02 $ 2.73 $ 2.13 Diluted : Basic $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 $ 2.10 Weighted 2.13 Diluted $ 2.00 $ 2.69 $ 2.10 Weighted average share $ 2.00 $ 2.69 $ 2.10 Weighted average share outstanding : average share outstanding : Basic 8,396 8,490 8,813 Diluted 8,506 8,593 share outstanding : Basic 8,396 8,490 8,813 Diluted 8,506 8,593 8,927 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2012 2011 2010 Net Year Ended June 30 , 2012 2011 2010 Net income available Ended June 30 , 2012 2011 2010 Net income available for June 30 , 2012 2011 2010 Net income available for common shareholder ( A ) $ 16,978 $ 23,150 $ 18,760 Weighted A ) $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding share of common stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock ( B ) 8,396 8,490 8,813 Dilutive e Earnings Per Share equivalent ( C ) 8,506 8,593 8,927 Earnings Per Share Basic ( C ) 8,506 8,593 8,927 Earnings Per Share Basic ( Basic ( A/B ) $ 2.02 $ 2.73 $ 2.13 Diluted A/B ) $ 2.02 $ 2.73 $ 2.13 Diluted ( A/C $ 2.02 $ 2.73 $ 2.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.00 $ 2.69 $ 2.10 We A/C ) $ 2.00 $ 2.69 $ 2.10 We excluded the $ 2.00 $ 2.69 $ 2.10 We excluded the following share million ) Year Ended June 30 , 2012 2011 2010 Shares Year Ended June 30 , 2012 2011 2010 Shares excluded from Ended June 30 , 201 earnings per share 0.63 23,150 Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share 0.62 2.73 Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 ( Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 ( a earnings per share 0.62 0.77 0.61 0.69 2.69 ( a ) per sha earnings per share by $ 0.73 . ( b ) Includes . audit of tax year 2004 to 2006 , which increased of tax year 2004 to 2006 , which increased net income increased net income by $ 461 million . ( c ) an effective tax rate of 7 % due mainly to the our effective tax rate . 87 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and 2011 , and the related consolidated in the period ended June", + "tax_rate": "tax rate for tax rate for fiscal year 2012 and 2011 were approximately 24 for fiscal year 2012 and 2011 were approximately 24 % and 2012 and 2011 were approximately 24 % and 18 % , were approximately 24 % and 18 % , respectively . Our rate . Our fiscal year 2012 effective rate increased by 6 2012 effective rate increased by 6 % from fiscal year 2011 6 % from fiscal year 2011 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment in the fourth quarter of 2 tax rate by 10 % . In addition , addition , in fiscal year 2012 and 2011 , we recognized in fiscal year 2012 and 2011 , we recognized a reduction we recognized a reduction of 21 % and 16 % , reduction of 21 % and 16 % , respectively , to rate . In fiscal year 2011 , we settled a portion . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income tax expense for fiscal year 2011 by $ 461 million and fiscal year 2011 by $ 461 million and reduced the effective the e tax rate by 2 % . Changes in the Division operating income declined $ 751 million in fiscal year 2012 751 million in fiscal year 2012 , while MBD and Server Tools operating income increased $ 1.1 billion and $ 1.1 billion $ 1.1 billion and $ 1.1 billion , respectively , during center . In fiscal year 2012 and 2011 , our U.S. In fiscal year 2012 and 2011 , our U.S. income before before income tax wa $ 1.6 billion and $ 8.9 billion $ 1.6 billion and $ 8.9 billion , respectively , and , respectively , and tax rate for tax rate for fiscal year 2011 and 2010 were approximately 18 for fiscal year 2011 and 2010 were approximately 18 % and 2011 and 2010 were approximately 18 % and 25 % , were approximately 18 % and 25 % , respectively . Our rate . In fiscal year 2011 and 2010 , our U.S. In fiscal year 2011 and 2010 , our U.S. income before before income tax wa $ 8.9 billion and $ 9.6 billion $ 8.9 billion and $ 9.6 billion , respectively , and , respectively , and comprised 32 % and 38 % , and comprised 32 % tax rate of 7 % due mainly to the our effective tax rate . 87 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and 2011 , and the related consolidated in the period ended June 30 , 2012 . These financial period ended June 30 , 2012 . These financial statement are and subsidiary a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and 2011 , ", + "segment_revenue": "Segment revenue and operating income million ) Year Ended June 30 , 2012 2011 2010 Revenue Year Ended June 30 , 2012 2011 2010 Revenue Windows & Ended June 30 , 2012 2011 2010 Revenue Windows & Windows June 30 , 2012 2011 2010 Revenue Windows & Windows Live & Windows Live Division $ 18,818 $ 18,787 $ 18,789 Server Live Division $ 18,818 $ 18,787 $ 18,789 Server and Tools $ 18,818 $ 18,787 $ 18,789 Server and Tools 18,696 16,691 $ 18,789 Server and Tools 18,696 16,691 15,121 Online Services Division 18,789 Serv", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & Windows market worldwide , a approximately 75 % of total Windows Division Products and Services : Windows 7 operating system ; Windows Live our operating system , Windows 8 , will be generally available be generally available on October 26 , 2012 . At that available on October 26 , 2012 . At that time , and manufactured hardware device . 4 Table of Contents PART I of Contents PART I Item 1 Competition The Windows oper Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ GEOGRAPHIC offering consist of the Windows 7 operating system , software and Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Skype , and Windows , and Windows Phone . 84 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2012 2011 2010 Revenue Year Ended June 30 , 2012 2011 2010 Revenue Windows & Ended June 30 , 2012 2011 2010 Revenue Windows & Windows June 30 , 2012 201", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 28 , 2012 are incorporated by held on November 28 , 2012 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2012 INDEX Page PART Year Ended June 30 , 2012 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registra common stock a conversion price of $ 33.40 per share . The conversion agreement . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated be Common stock issued 1,913 2,986 ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ( Common stock issued 1,913 2,422 2,311 Common stock repurchased ( 5,029 2,311 Common stock repurchased ( 5,029 ) ( 11,555 ) ( repurchased ( 5,029 ) ( 11,555 ) ( 11,269 ) Common ) ( 11,555 ) ( 11,269 ) Common stock cash dividend stock cash dividend paid ( 6,385 ) ( 5,180 ) ( paid ( 6,385 ) ( 5,180 ) ( 4,578 ) Excess ) ( 5,180 ) ( 4,578 ) Excess tax Common stock and Ended June 30 , 2012 2011 2010 Common stock and paid-in June 30 , 2012 2011 2010 Common stock and paid-in capital , beginning of period $ 63,415 $ 62,856 $ 62,382 Common of period $ 63,415 $ 62,856 $ 62,382 Common stock issued $ 63,415 $ 62,856 $ 62,382 Common stock issued 1,924 2,422 $ 62,382 Common stock issued 1,924 2,422 2,311 Common stock repurchased 62,382 Common stock issued 1,924 2,422 2,311 Common stock repurchased ( Common stock issued 1,924 2,422 2,311 Common stock repurchased ( Common stock repurchased ( 1,714 ) ( 3,738 ) ( repurchased ( 1,714 ) ( 3,738 ) ( 3,113 ) Stock-based ) ( 3,738 ) ( 3,113 ) Stock-based compensation expense 2,244 3,113 ) Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income ) Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income tax Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income tax deficiency compensation income tax deficiency ( 75 ) ( 292 ) ( deficiency ( 75 ) ( Common stock cash 206 ) Comprehensive income 16,537 23,958 18,846 Common stock cash dividend ) Comprehensive income 16,537 23,958 18,846 Common stock cash dividend ( Common stock cash dividend ( 6,721 ) ( 5,394 ) ( dividend ( 6,721 ) ( 5,394 ) ( 4,547 ) Common ) ( 5,394 ) ( 4,547 ) Common stock repurchased ( ) Common stock repurchased ( 2,918 ) ( 8,215 ) ( repurchased ( 2,918 ) ( 8,215 ) ( 8,156 ) Balance ) ( 8,215 ) ( 8,156 ) Balance , end of Balance , end of period 566 ( 6,332 ) ( 16,681 end of period 566 common stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based award Dilutive effect of stock-based award 110 103 114 Common stock and effect of stock-based award 110 103 114 Common stock and common of stock-based award 110 103 114 Common stock and common stock stock equivalent ( C ) 8,506 8,593 8,927 Earnings Per Share equivalent ( C ) 8,506 8,593 8,927 Earnings Per Share Basic ( C ) 8,506 8,593 8,9 common stock a conversion price of $ 33.40 per share . The conversion agreement . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated be common stock . 83 Table of Contents PART II of Contents PART II Item 8 NOTE 21 \u2014 SEGMENT INFORMATION PART II Item 8 NOTE 21 \u2014 SEGMENT INFORMATION AND GEOGRAPHIC offering consist of the Windows 7 operating system , software and Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Skype , and Windows , and Windows Phone . 84 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2012", + "fair_value_measurements": "Fair Value Measurements . \u2013 Fair Value Measurements . 62 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2012 2011 2010 Foreign Year Ended June 30 , 2012 2011 2010 Foreign Exchange Contracts Ended June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 52 $ ( 92 ) $ Derivatives $ 52 $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) Hedged item ( 50 57 ) Hedged FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2012 Assets Mutual fund Fair Value June 30 , 2012 Assets Mutual fund $ 820 2012 Assets Mutual fund $ 820 $ 0 $ 0 $ Mutual fund $ 820 $ 0 $ 0 $ 820 $ $ 820 $ 0 $ 0 $ 820 $ 0 $ $ 0 $ 0 $ 820 $ 0 $ 820 Commercial $ 0 $ 820 $ 0 $ 820 Commercial paper 0 $ 820 $ 0 $ 820 Commercial paper 0 96 0 0 $ 820 Commercial paper 0 96", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 52 $ ( 92 ) $ Derivatives $ 52 $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) Hedged item ( 50 57 ) Hedged item ( 50 ) 85 60 Total $ Hedged item ( 50 ) 85 60 Total $ 2 $ item ( 50 ) 85 60 Total $ 2 $ ( ) 85 60 Total $ 2 $ ( 7 ) $ Total $ 2 $ ( 7 ) $ 3 Cash Flow $ ( 7 ) $ 3 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2012 2", + "derivative_instruments": "Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2012 Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Other current asset $ 26 $ 3 $ 215 Other current asset 85 0 $ 215 Other current asset 85 0 0 0 0 85 215 Other current asset 85 0 0 0 0 85 Total Other current asset 85 " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-13-310206/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-13-310206/full-submission_features.json new file mode 100644 index 0000000..b2a2530 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-13-310206/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue Surface Pro , the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC we offer include Microsoft Office 365 , Microsoft Dynamics CRM Online Devices Division . Our segment 3 Table of Contents PART I of Contents PART I Item 1 provide management with a comprehensive information is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K revenue . of global enterprise . Approximately 85 % of MBD revenue is a given year . Approximately 15 % of MBD revenue is Dynamics CRM ; Microsoft Office 365 , which is an online new Office started on January 29 , 2013 . Competition Competitors started on January 29 , 2013 . Competition Competitors to Office Products and Services : Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox 360 360 video game , Xbox 360 acces revenue in each research and development effort . 8 Table of Contents PART I of Contents PART I Item 1 Product and Service Development and have a portfolio of over 35,000 U.S. and international patent issued international patent issued and over 38,000 pending . While we employ device and service strategy . 9 Table of Contents PART I of Contents PART I Item 1 DISTRIBUTION , SALES , AND Office Web Apps , Office 365 , Windows Phone Marketplace , Windows Intune , and Office 365 consisting of online version revenue . 2013 , 2012 , or 2011 revenue . Our practice is executive officer a of July 30 , 2013 were a follows a of July 30 , 2013 were a follows : Name the Company Steven A. Ballmer 57 Chief Executive Officer Anthony J. Executive Officer Anthony J. Bates 46 Executive Vice President , Business and Evangelism Lisa E. Brummel 53 Executive Vice President , Human Human Resources Amy E. Hood 41 Executive Vice President , Chief Chief Financial Officer Tami Reller 49 Executive Vice President , Marketing , Mar revenue . 19 Table of Contents PART I of Contents PART I Item 1A Adverse economic or market condition product such a the Xbox 360 console , Surface , and cost of revenue . Xbox 360 console and Surface are assembled revenue , damage to our 20 Table of Contents PART I of Contents PART I Item 1A , 1B reputation , repair PART I Item 1A , 1B reputation , repair or remediation fourth quarter of fiscal year 2012 , we recorded a $ , we recorded a $ 6.2 billion charge for the impairment . We operate in over 100 Revenue Ended June 30 , 2013 2012 2011 2010 2009 Revenue $ June 30 , 2013 2012 2011 2010 2009 Revenue $ 77,849 30 , 2013 2012 2011 2010 2009 Revenue $ 77,849 $ , 2013 2012 2011 2010 2009 Revenue $ 77,849 $ 73,723 2011 2010 2009 Revenue $ 77,849 $ 73,723 $ 69,943 $ 2009 Revenue $ 77,849 $ 73,723 $ 69,943 $ 62,484 $ $ 77,849 $ 73,723 $ 69,943 $ 62,484 $ 58,437 Operating $ 73,723 $ 69,943 $ 62,484 $ 58,437 Operating income $ $ 69,943 $ 62,484 $ 58,437 Operating income $ 26,764 ( $ 58,437 Operating income revenue by developing around the world . Windows 8 reflects this shift . Launched shift . Launched in October 2012 , Windows 8 wa designed in October 2012 , Windows 8 wa designed to unite the a PC . The Windows 8 operating system includes the Windows personal and corporate device . 24 Table of Contents PART II of Contents PART II Item 7 To address these opportunity , both . With Windows Server 2012 , Windows Azure , and support our strategy of offering 25 Table of Contents PART II of Contents PART II I revenue Devices Division ha generated approximately 40 % of it yearly revenue deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Office , and \u201c the 2010 Office Upgrade Offer \u201d for prior offer relating to Office 2010 ) . If our customer and per share amount ) 2013 2012 2011 Percentage Change 2013 per share amount ) 2013 2012 2011 Percentage Change 2013 Versus share amount ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Perc Revenue $ 77,849 2012 Percentage Change 2012 Versus 2011 Revenue $ 77,849 $ 73,723 2012 Versus 2011 Revenue $ 77,849 $ 73,723 $ 69,943 6 2011 Revenue $ 77,849 $ 73,723 $ 69,943 6 % 5 $ 77,849 $ 73,723 $ 69,943 6 % 5 % Operating 77,849 $ 73,723 $ 69,943 6 % 5 % Operating income 73,723 $ 69,943 6 % 5 % Operating income $ 26,764 5 % Operating income $ 26,764 $ 21,763 $ 27,161 23 Operating income $ 26,764 $ 21,763 $ 27,161 23 % ( $ 26,764 $ 21,763 $ 27,161 23 % ( 20 ) 26,764 $ 21,763 $ 27,161 23 % ( 20 ) % Revenue increased , primarily due and service , including Windows 8 , Surface , and the the x86 PC market . 26 Table of Contents PART II of Contents PART II Item 7 Operating income grew , primarily primarily due to the $ 6.2 billion goodwill impairment charge related Cost of revenue increased $ 2.7 billion or 16 % , increased $ 2.7 billion or 16 % , reflecting increased product associated with Surface and Windows 8 , including an approximately $ , including an approximately $ 900 million charge for Sur Revenue increased primarily due to product and service and the 2010 Microsoft Office system , offset to the deferral of $ 540 million of revenue relating to . Revenue in fiscal year 2012 also included Skype revenue from goodwill impairment charge of $ 6.2 billion related to our OSD Cost of revenue increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , reflecting higher cost strategic initiative , higher Xbox 360 royalty cost , and other and development expense increased $ 768 million or 8 REVENUE/OPERATING INCOME ( Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , reflecting immaterial movement of , reflecting immaterial movement of 27 Table of Contents PART II of Contents PART II Item 7 business activity between segment and cost allocation . In July 2013 , we announced a change million , except percentage ) 2013 2012 2011 Percenta Revenue $ 19,239 2012 Percentage Change 2012 Versus 2011 Revenue $ 19,239 $ 18,400 2012 Versus 2011 Revenue $ 19,239 $ 18,400 $ 19,061 5 2011 Revenue $ 19,239 $ 18,400 $ 19,061 5 % ( $ 19,239 $ 18,400 $ 19,061 5 % ( 3 ) 19,239 $ 18,400 $ 19,061 5 % ( 3 ) % $ 19,061 5 % ( 3 ) % Operating income $ ) % Operating income $ 9,504 $ 11,555 $ 12,280 ( Operating income $ 9,504 $ 11,555 $ 12,280 ( 18 ) $ 9,504 $ 11,555 $ 12,280 ( 18 ) % ( $ 11,555 $ 12,280 ( 18 ) % ( 6 ) ( 18 ) % ( 6 ) % Windows Division develop revenue increased $ Windows Division revenue increased $ 839 million . Surface revenue wa . Surface revenue wa $ 853 million . Revenue from commercial licensing of Windows increased $ 487 million , while unearned revenue addition , we recognized $ 540 million of previously deferred revenue revenue . OEM revenue decreased 3 % . Excluding the impact Offer , OEM revenue decreased 10 % . This decrease primarily which we estimate declined approximately 9 % . In May 2013 9 % . In May 2013 , we announced that revenue increased $ 1.8 billion , reflecting a $ billion , reflecting a $ 1.6 billion increase in product cost associated with Surface and Windows 8 , including a charge for inventory adjustment of approximately $ 900 million . Sales and marketing and marketing expense increased $ 1.0 billion or 34 % , increased $ 1.0 billion or 34 % , reflecting an $ % , reflecting an $ 898 million increase in advertising cost cost associated primarily with Windows 8 and Surface . Fiscal year and Surface . Fiscal year revenue reflected relative PCs to business grew approximately 4 % and sale of PCs of PCs to consumer decreased 1 % . Excluding a decline PCs to consumer grew approximately 5 % . Taken together , PC market increased an estimated 0 % to 2 % . an estimated 0 % to 2 % . Relative to PC and the deferral of $ 540 million of revenue relating to lower revenue and a $ 172 million or 11 % increase a $ 172 million or 11 % increase in research and primarily associated with the Windows 8 operating system . 28 Table Revenue $ 20,281 2012 Percentage Change 2012 Versus 2011 Revenue $ 20,281 $ 18,534 2012 Versus 2011 Revenue $ 20,281 $ 18,534 $ 16,559 9 2011 Revenue $ 20,281 $ 18,534 $ 16,559 9 % 12 $ 20,281 $ 18,534 $ 16,559 9 % 12 % Operating 20,281 $ 18,534 $ 16,559 9 % 12 % Operating income 18,534 $ 16,559 9 % 12 % Operating income $ 8,164 12 % Operating income $ 8,164 $ 7,235 $ 6,105 13 Operating income $ 8,164 $ 7,235 $ 6,105 13 % 19 $ 8,164 $ 7,235 $ 6,105 13 % 19 % Server 8,164 $ 7,235 $ 6,105 13 % 19 % Serve revenue increased . Product revenue increased $ 1.3 billion or 9 % , increased $ 1.3 billion or 9 % , driven primarily by Enterprise Services revenue grew $ 434 million or 11 % , grew $ 434 million or 11 % , due to growth Cost of revenue grew $ 589 million or 15 % , grew $ 589 million or 15 % , reflecting a $ % , reflecting a $ 269 million increase in headcount-related expense headcount-related expense and a $ 169 million increase in datacenter expense and marketing expense grew $ 160 million or 3 % , revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 585 million or 17 % , grew $ 585 million or 17 % , due to growth Cost of revenue increased $ 678 million or 22 % , increased $ 678 million or 22 % , primarily reflecting higher and marketing expense grew $ 154 million or 3 % , grew $ 154 million or 3 % , reflecting increased corporate million , except percentage ) 2013 2012 2011 Percentage Change Revenue $ 3,201 2012 Percentage Change 2012 Versus 2011 Revenue $ 3,201 $ 2,867 2012 Versus 2011 Revenue $ 3,201 $ 2,867 $ 2,607 12 2011 Revenue $ 3,201 $ 2,867 $ 2,607 12 % 10 $ 3,201 $ 2,867 $ 2,607 12 % 10 % Operating 3,201 $ 2,867 $ 2,607 12 % 10 % Operating loss 2,867 $ 2,607 12 % 10 % Operating loss $ ( % Operating loss $ ( 1,281 ) $ ( 8,125 ) ( 1,281 ) $ ( 8,125 ) $ ( 2,657 ) ( 8,125 ) $ ( 2,657 ) * * * Not OSD \u2019 s revenue . 29 Table of Contents PART II of Contents PART II Item 7 Fiscal year 201 revenue grew $ Online advertising revenue grew $ 409 million or 16 % to grew $ 409 million or 16 % to $ 3.0 billion or 16 % to $ 3.0 billion , reflecting an increase goodwill impairment charge of $ 6.2 billion . Operating loss wa Cost of revenue decreased $ 302 million or 12 % , decreased $ 302 million or 12 % , driven by a , driven by a $ 271 million decrease in traffic acquisition and marketing expense were $ 120 million or 15 % lower were $ 120 million or 15 % lower , due mainly and development cost revenue grew $ Online advertising revenue grew $ 317 million or 14 % to grew $ 317 million or 14 % to $ 2.6 billion or 14 % to $ 2.6 billion , reflecting continued growth for the month of June 2012 wa approximately 16 % , of June 2012 wa approximately 16 % , and grew 120 16 % , and grew 120 basis point year over year ! property , wa approximately 26 % for the month of for the month of June 2012 , down 100 basis point of June 2012 , down 100 basis point year over year OSD \u2019 s fiscal year 2012 operating revenue decreased $ 208 million , driven by lower million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 24,724 2012 Percentage Change 2012 Versus Revenue $ 24,724 $ 24,111 2012 Versus 2011 Revenue $ 24,724 $ 24,111 $ 22,607 3 2011 Revenue $ 24,724 $ 24,111 $ 22,607 3 % 7 $ 24,724 $ 24,111 $ 22,607 3 % 7 % Operating 24,724 $ 24,111 $ 22,607 3 % 7 % Operating income 24,111 $ 22,607 3 % 7 % Operating income $ 16,194 7 % Operating income $ 16,194 $ 15,832 $ 14,678 2 Operating income $ 16,194 $ 15,832 $ 14,678 2 % 8 $ 16,194 $ 15,832 $ 14,678 2 % 8 % Microsoft 16,194 $ 15,832 $ 14,678 2 % 8 % Microsoft Business 15,832 $ 14,678 2 % 8 % Microsoft Busin revenue , new Office started on January 29 , 2013 . We evaluate started on January 29 , 2013 . We evaluate MBD result OEM revenue . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 MBD revenue increased reflecting growth . Business revenue increased $ 1.2 billion or 6 % , increased $ 1.2 billion or 6 % , which reflects 11 6 % , which reflects 11 % growth in Office revenue Office revenue from subscription and 30 Table of Contents PART II of Contents PART II Item 7 volu revenue decreased $ 582 million or 13 % , decreased $ 582 million or 13 % , primarily driven by for the year ended June 30 , 2013 included an unfavorable year ended June 30 , 2013 included an unfavorable foreign currency foreign currency impact of $ 475 million . MBD operating income and marketing expense grew $ 185 million or 5 % , grew $ 185 million or 5 % , primarily due to Cost of revenue grew $ 108 million or 6 % , grew $ 108 million or 6 % , primarily due to support cost . Fiscal year 2012 compar revenue increased primarily reflecting . Business revenue increased $ 1.7 billion or 9 % , increased $ 1.7 billion or 9 % , primarily reflecting growth business customer , and a 9 % increase in Microsoft Dynamics . Consumer revenue decreased $ 193 million or 4 % due decreased $ 193 million or 4 % due to the recognition to the recognition of $ 254 million of revenue in the prior year associated with the 2010 Office Upgrade Offer . Excluding . Excluding the fiscal year 2011 impact associated with the 201 revenue increased $ 61 million , driven by increased for the year ended June 30 , 2012 included a favorable year ended June 30 , 2012 included a favorable foreign currency foreign currency impact of $ 506 million . MBD operating income Cost of revenue increased $ 278 million or 17 % , increased $ 278 million or 17 % , primarily due to million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Revenue $ 10,165 2012 Percentage Change 2012 Versus 2011 Revenue $ 10,165 $ 9,599 2012 Versus 2011 Revenue $ 10,165 $ 9,599 $ 8,915 6 2011 Revenue $ 10,165 $ 9,599 $ 8,915 6 % 8 $ 10,165 $ 9,599 $ 8,915 6 % 8 % Operating 10,165 $ 9,599 $ 8,915 6 % 8 % Operating income 9,599 $ 8,915 6 % 8 % Operating income $ 848 8 % Operating income $ 848 $ 380 $ 1,261 123 Operating income $ 848 $ 380 $ 1,261 123 % ( $ 848 $ 380 $ 1,261 123 % ( 70 ) 848 $ 380 $ 1,261 123 % ( 70 ) % $ 1,261 123 % ( 70 ) % Entertainment revenue increased , due in part by lower Xbox 360 platform revenue . Windows Phone Windows Phone revenue increased $ 1.2 billion , including an increase of result in fiscal year 2013 . Xbox 360 platform revenue fiscal year 2013 . Xbox 360 platform revenue decreased $ 950 360 platform revenue decreased $ 950 million or 12 % , decreased $ 950 million or 12 % , due mainly to LIVE revenue . We shipped 9.8 million Xbox 360 console during We shipped 9.8 million Xbox 360 console during fiscal year 2013 360 co revenue decreased $ 143 million or 2 % , decreased $ 143 million or 2 % , due mainly to due mainly to a $ 1.0 billion decrease in manufacturing and with lower volume of Xbox 360 console sold , offset in in part by a $ 375 million increase in expense for strategic initiative and a $ 273 million increase in royalty on and development expense increased $ 432 million or 28 % , increased $ 432 million or 28 % , reflecting $ 246 28 % , reflecting $ 246 million higher headcount-related expense , and Skype . F revenue increased primarily reflecting in part by lower Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue decreased $ 107 360 platform revenue decreased $ 107 million , due mainly to volume of Kinect for Xbox 360 sold and lower video game LIVE revenue . We shipped 13.0 million Xbox 360 console during We shipped 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 , compared with 13.7 million year 2012 , compared with 13.7 million revenue decreased Cost of revenue grew $ 896 million or 16 % , grew $ 896 million or 16 % , primarily due to and development expense increased $ 366 million or 31 % , increased $ 366 million or 31 % , primarily reflecting higher and marketing expense increased $ 242 million or 27 % , increased $ 242 million or 27 % , primarily reflecting the million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 201 REVENUE Cost million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Cost of revenue 2012 Percentage Change 2012 Versus 2011 Cost of revenue $ 20,249 2011 Cos revenue $ 20,249 $ 17,530 $ 15,577 16 of revenue $ 20,249 $ 17,530 $ 15,577 16 % 13 $ 20,249 $ 17,530 $ 15,577 16 % 13 % As 20,249 $ 17,530 $ 15,577 16 % 13 % As a 17,530 $ 15,577 16 % 13 % As a percent of As a percent of revenue 26 % 24 % 22 % percent of revenue 26 % 24 % 22 % 2ppt 2ppt revenue 26 % 24 % 22 % 2ppt 2ppt 32 Table % 24 % 22 % 2ppt 2ppt 32 Table of Contents 24 % 22 % 2ppt 2ppt 32 Table of Contents PART % 22 % 2ppt 2ppt 32 Table of Contents PART II of Contents PART II Item 7 Cost of revenu revenue increased , revenue increased , reflecting $ 1.6 billion in product cost associated associated with Surface and Windows 8 , including a charge for inventory adjustment of approximately $ 900 million , $ 578 million $ 900 million , $ 578 million higher headcount-related expense , headcount-related expense , a $ 375 million increase in expense for joint strategic initiative , $ 287 million higher intellectual property licensing licensing cost , a $ 273 million increase in royalty on content , and revenue increased reflecting sold . Headcount-related expense increased 20 % , primarily related to million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Re revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Research and development expense increased increased , reflecting a $ 460 million or 6 % increase a $ 460 million or 6 % increase in headcount-related expense Devices Division . revenue 20 % 19 % 20 % percent of revenue 20 % 19 % 20 % 1ppt ( revenue 20 % 19 % 20 % 1ppt ( 1 ) % 19 % 20 % 1ppt ( 1 ) ppt 33 % 20 % 1ppt ( 1 ) ppt 33 Table of 1ppt ( 1 ) ppt 33 Table of Contents PART II of Contents PART II Item 7 Sales and marketing expense include other program . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Sales and marketing expense grew grew , reflecting an $ 898 million increase in advertising cost cost associated primarily with Windows 8 revenue 7 % 6 % 6 % percent of revenue 7 % 6 % 6 % 1ppt 0ppt revenue 7 % 6 % 6 % 1ppt 0ppt General and % 6 % 6 % 1ppt 0ppt General and administrative expense 6 % 6 % 1ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 General and administrative expense increased EU fine . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 General and administrative expense increased Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month because we do not be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are financial statement . Fiscal year 2012 compared with fiscal year 2011 2012 Revenue Unearned revenue at June 30 , 2013 comprised mainly unearned revenue at June 30 , 2013 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2013 also included payment revenue at June 30 , 2013 also included payment for : unearned revenue a of June 30 , 2013 : ( In a of June 30 , 2013 : ( In million ) Three Months Ending , September 30 , 2013 $ 7,790 December Ending , September 30 , 2013 $ 7,790 December 31 , September 30 , 2013 $ 7,790 December 31 , 2013 6,571 , 2013 $ 7,790 D revenue wa subject PART II Item 7 Windows 7 revenue wa subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provided significantly discounted right to purchase Windows 8 Pro to qualifying end-users that qualifying end-users that purchased Windows 7 PCs during the eligibility period wa responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 wa deferred until it wa Offer , which started October 19 , 2 revenue related to the undelivered 2013 Microsoft Office system and subscription an annual basis ( May 1 for u ) and between feasibility is established , all 44 Table of Contents PART II of Contents PART II Item 7 software cost are capitalized until that ha a greater than 50 % likelihood of being realized analysis require significant judgment . 45 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT \u2019 S Administration ; Chief Accounting Officer 46 Table of Contents PART II of Co Revenue Year Ended June 30 , 2013 2012 2011 Revenue $ 77,849 Ended June 30 , 2013 2012 2011 Revenue $ 77,849 $ June 30 , 2013 2012 2011 Revenue $ 77,849 $ 73,723 2013 2012 2011 Revenue $ 77,849 $ 73,723 $ 69,943 Cost 2011 Revenue $ 77,849 $ 73,723 $ 69,943 Cost of revenue $ 77,849 $ 73,723 $ 69,943 Cost of revenue 20,249 17,530 $ 69,943 Cost of revenue 20,249 17,530 15,577 Gross profit 57,600 69,943 Cost of revenue 20,249 17,530 15,577 Gross profit 57,600 56,193 Cost of revenue 20,249 17,530 15,577 Gro revenue 20,639 4,117 3,875 Income tax 592 789 Short-term unearned revenue 20,639 18,653 592 789 Short-term unearned revenue 20,639 18,653 Securities lending payable 645 789 Short-term unearned revenue 20,639 18,653 Securities lending payable 645 814 20,639 18,653 Securities lending payable 645 814 Other 3,597 3,151 Total 18,653 Securities lending payable 645 814 Other 3,597 3,151 Total current lending payable 645 814 Other 3,597 3,151 Total current liability 37,417 payable 645 814 Other 3,597 3,151 Tot revenue 1,760 37,417 32,688 Long-term debt 12,601 10,713 Long-term unearned revenue 1,760 1,406 12,601 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 1,893 1,760 1,406 Deferred income tax 1,709 1,893 Other long-term liability 10,000 1,406 Deferred income tax 1,709 1,893 Other long-term liability 10,000 8,208 1,709 1,893 Other long-term liability 10,000 8,208 Total liability 63,487 54,908 1,893 Other long-te revenue tax ( 19 ) 954 2 Deferral of unearned revenue 44,253 2 Deferral of unearned revenue 44,253 36,104 31,227 Recognition of unearned Deferral of unearned revenue 44,253 36,104 31,227 Recognition of unearned revenue of unearned revenue 44,253 36,104 31,227 Recognition of unearned revenue ( Recognition of unearned revenue ( 41,921 ) ( 33,347 ) ( revenue ( 41,921 ) ( 33,347 ) ( 28,935 ) Changes ) ( 33,347 ) ( 28,935 ) Changes in operating asset liability : Accounts receivable ( 1,807 ) ( 1,156 ) ( rec revenue $ 195 $ ( 27 ) $ revenue $ 195 $ ( 27 ) $ ( 7 ) ( 27 ) $ ( 7 ) Amount Excluded from Effectiveness ( expense ) $ ( 168 ) $ ( 231 ) ( 168 ) $ ( 231 ) $ ( 276 ) ( 231 ) $ ( 276 ) We estimate that $ ) We estimate that $ 95 million of net derivative gain included in AOCI at June 30 , 2013 will be reclassified AOCI at June 30 , 2013 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2013 . Non-Designated Derivative Gains revenue and unearned revenue of $ 222 million . The goodwill recognized the following segment : $ 4.2 billion to Entertainment and Devices and Devices Division , $ 2.8 billion to Microsoft Business Division Business Division , and $ 54 million to Online Services Division ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 year $ 1,249 15 year Technology-based 275 5 year Customer-related 114 5 1,249 15 year Technology-based 275 5 year Customer-relate revenue 445 571 882 Other expense item 917 965 Unearned revenue 445 571 Impaired item 917 965 Unearned revenue 445 571 Impaired investment 246 152 917 965 Unearned revenue 445 571 Impaired investment 246 152 Loss revenue 445 571 Impaired investment 246 152 Loss carryforwards 715 532 445 571 Impaired investment 246 152 Loss carryforwards 715 532 Other investment 246 152 Loss carryforwards 715 532 Other revenue item 55 246 152 Loss carryforwards 715 532 Other revenue item 55 79 715 532 Other revenue item revenue item 55 79 Deferred income tax asset $ Deferred income tax asset $ 3,266 $ 3,181 Less valuation allowance tax asset $ 3,266 $ 3,181 Less valuation allowance ( 579 3,181 Less valuation allowance ( 579 ) ( 453 ) Deferred allowance ( 579 ) ( 453 ) Deferred income tax asset net of valuation allowance $ 2,687 $ 2,728 Deferred Income Tax valuation allowance $ 2,687 $ 2,728 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,146 ) $ ( 1,072 ) ( 1,146 ) $ ( 1,072 ) Un Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month , because we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are our financial statement . NOTE 14 \u2014 UNEARNED REVENUE Unearned revenue the re revenue ( In million ) June 30 , 2013 2012 Volume licensing million ) June 30 , 2013 2012 Volume licensing program $ ) June 30 , 2013 2012 Volume licensing program $ 18,871 2012 Volume licensing program $ 18,871 $ 16,717 Other ( a licensing program $ 18,871 $ 16,717 Other ( a ) 3,528 16,717 Other ( a ) 3,528 3,342 Total $ 22,399 $ Other ( a ) 3,528 3,342 Total $ 22,399 $ 20,059 ) 3,528 3,342 Total $ 22,399 $ 20,059 ( a ) 3,342 Total $ 22,399 $ 20,059 ( a ) Other a ) Other a of June 30 , 2012 included $ revenue associated associated with sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price ( In million ) June 30 , 2013 2012 Windows Division million ) June 30 , 2013 2012 Windows Division $ 2,086 ) June 30 , 2013 2012 Windows Division $ 2,086 $ 2013 2012 Windows Division $ 2,086 $ 2,444 Server and Tools Windows Division $ 2,086 $ 2,444 Server and Tools 8,639 7,445 $ 2,444 Server and Tools 8,639 7,445 Microsoft Business Division 10,142 2,444 Server and Tool Revenue Year Ended June 30 , 2013 2012 2011 Revenue Windows Division Ended June 30 , 2013 2012 2011 Revenue Windows Division $ June 30 , 2013 2012 2011 Revenue Windows Division $ 18,680 2011 Revenue Windows Division $ 18,680 $ 18,844 $ 18,815 Server Windows Division $ 18,680 $ 18,844 $ 18,815 Server and Tools $ 18,680 $ 18,844 $ 18,815 Server and Tools 20,295 18,544 $ 18,815 Server and Tools 20,295 18,544 16,571 Online Services Division 18,815 Server and Tools 20,295 18,544 16,571 Online Services Divis Revenue reconciling amount ( reconciling amount ( b ) 400 ( 484 ) 380 Other ( b ) 400 ( 484 ) 380 Other 155 33 ) 400 ( 484 ) 380 Other 155 33 ( 2 ( 484 ) 380 Other 155 33 ( 2 ) Total 484 ) 380 Other 155 33 ( 2 ) Total $ 380 Other 155 33 ( 2 ) Total $ ( 6,110 2 ) Total $ ( 6,110 ) $ ( 5,565 ) ( 6,110 ) $ ( 5,565 ) $ ( 4,128 ) ( 5,565 ) $ ( 4,128 ) ( a ) Corporate-level reconciling amount for fiscal year 2012 and 2013 include the deferral for fiscal year 2012 and 2013 include the deferral and subsequent revenue related to States accounted for more than 10 % of fiscal year 2013 10 % of fiscal year 2013 , 2012 , or 2011 of fiscal year 2013 , 2012 , or 2011 revenue . 2013 , 2012 , or 2011 revenue . Revenue , classified million ) Year Ended June 30 , 2013 2012 2011 United Year Ended June 30 , 2013 2012 2011 United States ( Ended June 30 , 2013 2012 2011 United States ( a June 30 , 2013 2012 2011 United States ( a ) States ( a ) $ 41,344 $ 38,846 $ 38,008 Other a ) $ 41,344 $ 38,846 $ 38,008 Other country Revenue June 30 Total Fiscal Year 2013 Revenue $ 16,008 $ 21,456 Fiscal Year 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross profit 11,840 $ 20,489 $ 19,896 $ 77,849 Gross profit 11,840 15,764 15,702 19,896 $ 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net $ 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 77,849 Gross profit 11,840 15,764 Revenue $ 17,372 $ 20,885 Fiscal Year 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 ", + "net_income": "Net income $ $ 27,161 $ 24,098 $ 20,363 Net income $ 21,863 ( $ 20,363 Net income $ 21,863 ( a ) $ 16,978 21,863 ( a ) $ 16,978 ( b ) $ 23,150 16,978 ( b ) $ 23,150 $ 18,760 $ 14,569 Diluted b ) $ 23,150 $ 18,760 $ 14,569 Diluted earnings per $ 23,150 $ 18,760 $ 14,569 Diluted earnings per share $ Diluted earnings per share $ 2.58 ( a ) $ 2.00 2.58 ( a ) $ 2.00 ( b ) $ 2.69 2.00 ( b ) $ 2.69 $ 2.10 $ 1.62 Cash b ) $ 2.69 $ 2.10 $ 1.62 Cash dividend declared $ 2.69 $ 2.10 $ 1.62 Cash dividend declared per net income by $ 733 million ( \u20ac 561 million $ 733 million ( \u20ac 561 million ) and diluted earnings earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( b ) Includes and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . M net income and diluted earnings the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share per share in fiscal year 2011 . SEGMENT REVENUE/OPERATING INCOME ( Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , reflecting immaterial movement of , reflecting immaterial movement of 27 Table of Contents PART II Net income $ Provision for income tax 5,189 5,289 4,921 Net income $ 21,863 for income tax 5,189 5,289 4,921 Net income $ 21,863 $ 5,289 4,921 Net income $ 21,863 $ 16,978 $ 23,150 Earnings Net income $ 21,863 $ 16,978 $ 23,150 Earnings per share $ 21,863 $ 16,978 $ 23,150 Earnings per share : Basic per share : Basic $ 2.61 $ 2.02 $ 2.73 Diluted : Basic $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 $ 2.69 Weighted 2.73 Diluted $ 2.58 $ 2.0 Net income $ Ended June 30 , 2013 2012 2011 Net income $ 21,863 June 30 , 2013 2012 2011 Net income $ 21,863 $ 2012 2011 Net income $ 21,863 $ 16,978 $ 23,150 Other Net income $ 21,863 $ 16,978 $ 23,150 Other comprehensive income $ 21,863 $ 16,978 $ 23,150 Other comprehensive income ( loss tax effect of $ ( 14 ) , $ 137 , ( 14 ) , $ 137 , and $ ( 338 137 , and $ ( 338 ) ) ( 26 ) ( 338 ) ) ( 26 ) 255 ( 627 ) ) ) ( 26 ) 255 ( 627 ) Net unrealized ( 26 ) 255 ( 627 ) Net unrealized gain ( of tax effect of $ 1 Net income Ended June 30 , 2013 2012 2011 Operations Net income $ June 30 , 2013 2012 2011 Operations Net income $ 21,863 2011 Operations Net income $ 21,863 $ 16,978 $ 23,150 Adjustments Net income $ 21,863 $ 16,978 $ 23,150 Adjustments to reconcile $ 21,863 $ 16,978 $ 23,150 Adjustments to reconcile net income from operation : Goodwill impairment 0 6,193 0 Depreciation , amortization operation : Goodwill impairment 0 6,193 0 Depreciation , amortization , : Goodwill impairment 0 6,193 0 Depreciation , am Net income 21,863 16,978 ( 17,736 ) Net income 21,863 16,978 23,150 Common stock cash 17,736 ) Net income 21,863 16,978 23,150 Common stock cash dividend ) Net income 21,863 16,978 23,150 Common stock cash dividend ( Common stock cash dividend ( 7,694 ) ( 6,721 ) ( dividend ( 7,694 ) ( 6,721 ) ( 5,394 ) Common ) ( 6,721 ) ( 5,394 ) Common stock repurchased ( ) Common stock repurchased ( 3,418 ) ( 2,918 ) ( repurchased ( 3,418 ) ( 2,918 ) ( 8,215 ) Balance ) ( 2,918 ) ( 8,215 ) Balance , end of Balance , e Net income available Ended June 30 , 2013 2012 2011 Net income available for June 30 , 2013 2012 2011 Net income available for common shareholder ( A ) $ 21,863 $ 16,978 $ 23,150 Weighted A ) $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding share of common stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based award Dilutive effect of Net income 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 6,055 15,702 14,294 57,600 Net income 4,466 6,377 6,055 ( a ) 14,294 57,600 Net income 4,466 6,377 6,055 ( a ) 4,965 57,600 Net income 4,466 6,377 6,055 ( a ) 4,965 ( 6,377 6,055 ( a ) 4,965 ( b ) 21,863 ( ) 4,965 ( b ) 21,863 ( c ) Basic earnings ) Basic earnings per share 0.53 0.76 0.72 0 Net income 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 5,108 13,455 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( d income 5,738 6,624 5,108 ( 492 ) ( d ) 16,978 492 ) ( d ) 16,978 ( d ) Basic earnings ( loss ) per share 0.68 0.79 0.61 ( 0.06 net income by decreased net income by $ 733 million ( \u20ac 561 million $ 733 million ( \u20ac 561 million ) and diluted earnings earnings per share by $ 0.09 . ( b ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( c ) Includes the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( \u20ac 561 million $ 733 million ( \u20ac 561 million ) and diluted earn net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( d ) Includes decreased net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . 88 Table of Contents share by $ 0.73 . 88 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , and the June 30 , 2013 and 2012 , and the related consolidated in the period ended June 30 , 20", + "assets": "Assets Current million ) June 30 , 2013 2012 Assets Current asset : ) June 30 , 2013 2012 Assets Current asset : Cash Cash and cash equivalent $ 3,804 $ 6,938 Short-term investment ( cash equivalent $ 3,804 $ 6,938 Short-term investment ( including security including security loaned of $ 579 and $ 785 ) 73,218 of $ 579 and $ 785 ) 73,218 56,102 Total cash 579 and $ 785 ) 73,218 56,102 Total cash , cash and $ 785 ) 73,218 56,102 Total cash , cash equivalent equivalent , and short-term investment 77,022 Assets Non-designated hedge Total Derivatives June 30 , 2013 Assets Non-designated hedge derivative : derivative : Short-term investment $ 41 $ 157 $ 18 $ Short-term investment $ 41 $ 157 $ 18 $ 19 $ $ 41 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 238 Other $ 18 $ 19 $ 3 $ 238 Other current asset $ 19 $ 3 $ 238 Other current asset 87 0 $ 238 Other current asset 87 0 0 0 0 87 238 Other current asset 87 0 0 0 0 87 Total Other current asset 87 0 0 0 0 87 Total $ current asset 87 0 0 0 0 87 Total $ 128 a Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Other current asset $ 26 $ 3 $ 215 Other current asset 85 0 $ 215 Other current asset 85 0 0 0 0 85 215 Other current asset 85 0 0 0 0 85 Total Other current asset 85 0 0 0 0 85 Total $ current asset 85 0 0 0 0 85 Total $ 99 as Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2013 Assets Mutual fund Fair Value June 30 , 2013 Assets Mutual fund $ 868 2013 Assets Mutual fund $ 868 $ 0 $ 0 $ Mutual fund $ 868 $ 0 $ 0 $ 868 $ $ 868 $ 0 $ 0 $ 868 $ 0 $ $ 0 $ 0 $ 868 $ 0 $ 868 Commercial $ 0 $ 868 $ 0 $ 868 Commercial paper 0 $ 868 $ 0 $ 868 Commercial paper 0 603 0 0 $ 868 Commercial paper 0 603 0 60 Assets Mutual fund Fair Value June 30 , 2012 Assets Mutual fund $ 820 2012 Assets Mutual fund $ 820 $ 0 $ 0 $ Mutual fund $ 820 $ 0 $ 0 $ 820 $ $ 820 $ 0 $ 0 $ 820 $ 0 $ $ 0 $ 0 $ 820 $ 0 $ 820 Commercial $ 0 $ 820 $ 0 $ 820 Commercial paper 0 $ 820 $ 0 $ 820 Commercial paper 0 96 0 0 $ 820 Commercial paper 0 96 0 96 0 96 $ 820 Commercial paper 0 96 0 96 0 96 Certificates 820 Commercial paper 0 96 0 96 0 96 Certificates of Commercial paper 0 96 0 96 0 96 Certificates of deposit paper 0 96 0 96 0 96 Ce Assets and investment component $ 87,866 $ 72,816 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2013 and 2012 , we did During fiscal year 2013 and 2012 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2013 2012 Raw material million ) June 30 , 2013 2012 Raw material $ 328 ) June 30 , 2013 2012 Raw material $ 328 $ 2013 2012 Raw material $ 328 $ 210 Work in process Raw material $ 328 $ 210 Work in process 201 96 ASSETS The component Carrying Amount Year Ended June 30 , 2013 2012 Technology-based ( Year Ended June 30 , 2013 2012 Technology-based ( a ) Ended June 30 , 2013 2012 Technology-based ( a ) $ Technology-based ( a ) $ 3,760 $ ( 2,110 ) $ ) $ 3,760 $ ( 2,110 ) $ 1,650 $ 3,550 $ ( 2,110 ) $ 1,650 $ 3,550 $ ( 1,899 2,110 ) $ 1,650 $ 3,550 $ ( 1,899 ) $ 1,650 $ 3,550 $ ( 1,899 ) $ 1,651 Marketing-related 1,348 $ ( 1,899 ) $ 1,651 Marketing-related 1,348 ( 211 ) 1,899 ) $ 1,651 Marketing-related 1,348 ( 211 Assets ) June 30 , 2013 2012 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 888 $ 882 Other expense item compensation expense $ 888 $ 882 Other expense item 917 965 $ 882 Other expense item 917 965 Unearned revenue 445 571 882 Other expense item 917 965 Unearned revenue 445 571 Impaired item 917 965 Unearned revenue 445 571 Impaired investment 246 152 917 965 Unearned revenue 445 571 Impaired investment 246 152 Loss revenue 445 571 Impaired investment 246 152 Loss car Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2013 2012 2011 United million ) June 30 , 2013 2012 2011 United States $ ) June 30 , 2013 2012 2011 United States $ 16,615 June 30 , 2013 2012 2011 United States $ 16,615 $ 2012 2011 United States $ 16,615 $ 14,081 $ 18,498 Luxembourg United States $ 16,615 $ 14,081 $ 18,498 Luxembourg 6,943 6,975 $ 16,615 $ 14,081 $ 18,498 Luxembourg 6,943 6,975 0 Other $ 14,081 $ 18,498 Luxembourg 6,943 6,975 0", + "liabilities": "Liabilities and stockholder Total asset $ 142,431 $ 121,271 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 4,828 $ 4,175 Current portion of Accounts payable $ 4,828 $ 4,175 Current portion of long-term debt Current portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 Income debt 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 5 Liabilities $ 18 $ 19 $ 3 $ 501 Liabilities Non-designated hedge $ 19 $ 3 $ 501 Liabilities Non-designated hedge derivative : Other current liability $ ( 63 ) $ ( 9 ) ( 63 ) $ ( 9 ) $ ( 45 ) ( 9 ) $ ( 45 ) $ ( 17 ) ( 45 ) $ ( 17 ) $ ( 1 ) ( 17 ) $ ( 1 ) $ ( 135 ) ( 1 ) $ ( 135 ) Designated hedge derivative : : Other current liability $ 0 $ 0 $ 0 $ current liability $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 Total $ 0 $ 0 $ 0 $ 0 Total liability $ $ 0 $ 0 $ 0 Total liability $ ( 63 0 Total Liabilities $ 10 $ 26 $ 3 $ 483 Liabilities Non-designated hedge $ 26 $ 3 $ 483 Liabilities Non-designated hedge derivative : Other current liability $ ( 84 ) $ ( 19 ) ( 84 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 141 ) Designated ) $ 0 $ ( 141 ) Designated hedge derivative : Other current liability $ ( 14 ) $ 0 $ 0 $ ( 14 ) $ 0 $ 0 $ 0 $ 14 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 14 $ 0 $ 0 $ 0 $ ( 14 ) Total 0 $ 0 $ ( 14 ) Total liability $ ( ) Total liability Liabilities Derivatives $ ( 81 ) $ 84,468 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 14 $ 121 $ 0 $ and other $ 14 $ 121 $ 0 $ 135 $ $ 14 $ 121 $ 0 $ 135 $ ( 80 $ 121 $ 0 $ 135 $ ( 80 ) $ 0 $ 135 $ ( 80 ) $ 55 ( In $ ( 80 ) $ 55 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2012 Assets Mutual fund Fair Value June 30 , 2012 Assets M Liabilities Derivatives $ ( 141 ) $ 69,623 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 10 $ 145 $ 0 $ and other $ 10 $ 145 $ 0 $ 155 $ $ 10 $ 145 $ 0 $ 155 $ ( 139 $ 145 $ 0 $ 155 $ ( 139 ) $ 0 $ 155 $ ( 139 ) $ 16 ( a $ ( 139 ) $ 16 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 67 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 \u2013 Investments . ( Liabilities Measured Nonrecurring Basis During fiscal year 2013 and 2012 , we did During fiscal year 2013 and 2012 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2013 2012 Raw material million ) June 30 , 2013 2012 Raw material $ 328 ) June 30 , 2013 2012 Raw material $ 328 $ 2013 2012 Raw material $ 328 $ 210 Work in process Raw material $ 328 $ 210 Work in process 201 96 $ 210 Work in process 201 96 Finished good 1,409 831 210 Work in process 201 Liabilities International Liabilities International earnings $ ( 1,146 ) $ ( 1,072 ) ( 1,146 ) $ ( 1,072 ) Unrealized gain on investment Unrealized gain on investment ( 1,012 ) ( 830 ) Depreciation investment ( 1,012 ) ( 830 ) Depreciation and amortization ( ) Depreciation and amortization ( 604 ) ( 670 ) Other amortization ( 604 ) ( 670 ) Other ( 2 ) ( 670 ) Other ( 2 ) ( 14 ) Deferred Other ( 2 ) ( 14 ) Deferred income tax liability income tax liability $ ( 2,764 ) $ ( 2,586 ) ( 2,764 ) $ ( 2,586 ) Net d LIABILITIES ( ( In million ) June 30 , 2013 2012 Tax contingency million ) June 30 , 2013 2012 Tax contingency and other ) June 30 , 2013 2012 Tax contingency and other tax and other tax liability $ 9,548 $ 7,634 Legal contingency 162 tax liability $ 9,548 $ 7,634 Legal contingency 162 220 Other 9,548 $ 7,634 Legal contingency 162 220 Other 290 354 Total $ 7,634 Legal contingency 162 220 Other 290 354 Total $ Legal contingency 162 220 Other 290 354 Total $ 10,000 $ contingency 162 220 Other 290 354 Total $", + "equity": "Equity Securities 22 Item 6 . Selected Financial of Equity Securities 22 Item 6 . Selected Financial Data 23 6 . Selected Financial Data 23 Item 7 . Management \u2019 Selected Financial Data 23 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 23 Item 7A . Quantitative and Results of Operations 23 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 47 Item 8 . Financial Statements about Market Risk 47 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2013 , all of which were ( in million ) April 1 , 2013 \u2013 April 30 million ) April 1 , 2013 \u2013 April 30 , 2013 1 , 2013 \u2013 April 30 , 2013 0 $ 0.00 2013 \u2013 April 30 , 2013 0 $ 0.00 0 $ \u2013 April 30 , 2013 0 $ 0.00 0 $ 4,614 30 , 2013 0 $ 0.00 0 $ 4,614 May 1 , 2013 0 $ 0.00 0 $ 4,614 May 1 , 0 $ 0.00 0 $ 4,614 May 1 , 2013 \u2013 0.00 0 $ 4,614 May 1 , 2013 \u2013 May 31 $ 4,614 equity $ 22,847 $ 13,791 $ 11,296 Stockholders \u2019 equity $ 78,944 11,296 Stockholders \u2019 equity $ 78,944 $ 66,363 $ 57,083 $ \u2019 equity $ 78,944 $ 66,363 $ 57,083 $ 46,175 $ $ 78,944 $ 66,363 $ 57,083 $ 46,175 $ 39,558 ( $ 66,363 $ 57,083 $ 46,175 $ 39,558 ( a ) $ 57,083 $ 46,175 $ 39,558 ( a ) Includes a the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( \u20ac 561 million $ 733 million ( \u20ac 561 million ) and diluted earnings earnings per share by $ 0.0 Equity and a of June 30 , 2012 . Equity and other investment and other investment were $ 10.8 billion a of June 30 10.8 billion a of June 30 , 2013 , compared with a of June 30 , 2013 , compared with $ 9.8 2013 , compared with $ 9.8 billion a of June 30 9.8 billion a of June 30 , 2012 . Our short-term a of June 30 , 2012 . Our short-term investment are our portfolio a of June 30 , 2013 doe not contain a of June 30 , 2013 doe not contain material direct residential mortgage and carry a 100 % principal Equity $ 71 $ 73 $ 86 $ 63 Equity $ 181 $ 73 $ 86 $ 63 Equity $ 181 $ 205 86 $ 63 Equity $ 181 $ 205 $ 198 $ 63 Equity $ 181 $ 205 $ 198 $ 211 $ $ 181 $ 205 $ 198 $ 211 $ 178 Commodity $ 205 $ 198 $ 211 $ 178 Commodity $ 19 $ 198 $ 211 $ 178 Commodity $ 19 $ 18 211 $ 178 Commodity $ 19 $ 18 $ 20 $ 178 Commodity $ 19 $ 18 $ 20 $ 24 $ $ 19 $ 18 $ 20 $ 24 $ 18 Total $ 18 $ 20 $ 24 $ 18 Total one-day VaR $ 20 $ 24 $ 18 Total one-day VaR for the combined risk category wa $ 350 million at June 30 , $ 350 mi Equity and other $ 12,513 and $ 10,962 9,991 8,269 Equity and other investment 12,513 and $ 10,962 9,991 8,269 Equity and other investment 10,844 8,269 Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset , net investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset , net 3,083 13,452 Intangible asset , net 3,083 3,170 Othe equity liability : Accounts payable $ 4,828 $ 4,175 Current portion of Accounts payable $ 4,828 $ 4,175 Current portion of long-term debt Current portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 Income debt 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 Short-term compensation 4,117 3,875 Income tax 592 789 Short-term unearned rev equity Accumulated other comprehensive income 1,743 1,422 Total stockholder \u2019 equity 78,944 1,422 Total stockholder \u2019 equity 78,944 66,363 Total liability and stockholder Total stockholder \u2019 equity 78,944 66,363 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 142,431 $ 121,271 See accompanying note \u2019 equity $ 142,431 $ 121,271 See accompanying note . 51 121,271 See accompanying note . 51 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended J EQUITY STATEMENTS ( million ) Year Ended June 30 , 2013 2012 2011 Common Year Ended June 30 , 2013 2012 2011 Common stock and Ended June 30 , 2013 2012 2011 Common stock and paid-in June 30 , 2013 2012 2011 Common stock and paid-in capital , beginning of period $ 65,797 $ 63,415 $ 62,856 Common of period $ 65,797 $ 63,415 $ 62,856 Common stock issued $ 65,797 $ 63,415 $ 62,856 Common stock issued 920 1,924 $ 62,856 Common stock issued 920 1,924 2,422 Common stock repurchased 62,856 Common stock issued equity end of period 1,743 1,422 1,863 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 78,944 $ 66,363 $ 57,083 See \u2019 equity $ 78,944 $ 66,363 $ 57,083 See accompanying note $ 78,944 $ 66,363 $ 57,083 See accompanying note . 53 57,083 See accompanying note . 53 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles price set by management . 54 Table of Contents PART II of Content Equity and Other Investments June 30 , 2013 Cash $ 1,967 Other Investments June 30 , 2013 Cash $ 1,967 $ 0 30 , 2013 Cash $ 1,967 $ 0 $ 0 $ 2013 Cash $ 1,967 $ 0 $ 0 $ 1,967 $ $ 1,967 $ 0 $ 0 $ 1,967 $ 1,967 $ $ 0 $ 0 $ 1,967 $ 1,967 $ 0 $ $ 0 $ 1,967 $ 1,967 $ 0 $ 0 Mutual $ 1,967 $ 1,967 $ 0 $ 0 Mutual fund 868 $ 1,967 $ 0 $ 0 Mutual fund 868 0 0 0 $ 0 Mutual fund 868 0 0 868 868 0 $ 0 Mutual fund 868 0 0 868 868 0 0 0 Mutual fund 868 0 0 868 868 0 0 Commercial Mutual fund 868 0 0 868 868 0 0 Commer Equity and Other Investments June 30 , 2012 Cash $ 2,019 Other Investments June 30 , 2012 Cash $ 2,019 $ 0 30 , 2012 Cash $ 2,019 $ 0 $ 0 $ 2012 Cash $ 2,019 $ 0 $ 0 $ 2,019 $ $ 2,019 $ 0 $ 0 $ 2,019 $ 2,019 $ $ 0 $ 0 $ 2,019 $ 2,019 $ 0 $ $ 0 $ 2,019 $ 2,019 $ 0 $ 0 Mutual $ 2,019 $ 2,019 $ 0 $ 0 Mutual fund 820 $ 2,019 $ 0 $ 0 Mutual fund 820 0 0 0 $ 0 Mutual fund 820 0 0 820 820 0 $ 0 Mutual fund 820 0 0 820 820 0 0 0 Mutual fund 820 0 0 820 820 0 0 Commercial Mutual fund 820 0 0 820 820 0 0 Commer Equity forward . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount designated and non-designated equity contract 63 Table of Contents PART II of Contents PART II Item 8 purchased and sold were $ purchased and sold were $ 898 million and $ 1.0 billion $ 898 million and $ 1.0 billion , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.4 billion and $ 982 million $ 1.4 billion and Equity contract 16 ( ( 27 ) Equity contract 16 ( 85 ) 35 Interest-rate ) Equity contract 16 ( 85 ) 35 Interest-rate contract ( contract 16 ( 85 ) 35 Interest-rate contract ( 11 ) ) 35 Interest-rate contract ( 11 ) 93 19 Credit contract Interest-rate contract ( 11 ) 93 19 Credit contract ( 3 contract ( 11 ) 93 19 Credit contract ( 3 ) 93 19 Credit contract ( 3 ) ( 7 ) 24 contract ( 3 ) ( 7 ) 24 Commodity contract ( 3 ) ( 7 ) 24 Commodity contract ( 42 ) ) 24 Commodity contract ( 42 ) ( 121 ) 148 contra EQUITY Shares million ) Year Ended June 30 , 2013 2012 2011 Balance Year Ended June 30 , 2013 2012 2011 Balance , beginning Ended June 30 , 2013 2012 2011 Balance , beginning of June 30 , 2013 2012 2011 Balance , beginning of year Balance , beginning of year 8,381 8,376 8,668 Issued 105 147 , beginning of year 8,381 8,376 8,668 Issued 105 147 155 beginning of year 8,381 8,376 8,668 Issued 105 147 155 Repurchased year 8,381 8,376 8,668 Issued 105 147 155 Repurchased ( 158 8,381 8,376 8,668 Issued 105 1 Equity Statements 53 52 Stockholders \u2019 Equity Statements 53 Notes to Financial Statements 54 53 Notes to Financial Statements 54 Report of Independent Registered Public Independent Registered Public Accounting Firm 89 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ 28.8 billion , due mainly to used for financing decreased $ 1.3 billion to $ 8.1 billion $ 1.3 billion to $ 8.1 billion , due mainly to due mainly to a $ 3.5 billion increase in proceeds from in part by a $ 1.1 billion increase in dividend paid dividend paid and a $ 982 million decrease in proceeds from used in investing decreased $ 975 million to $ 23.8 billion $ 975 million Cash flow from operation increased flow from operation increased $ 4.6 billion during fiscal year 2012 4.6 billion during fiscal year 2012 to $ 31.6 billion , fiscal year 2012 to $ 31.6 billion , due mainly to used for financing increased $ 1.0 billion to $ 9.4 billion $ 1.0 billion to $ 9.4 billion , due mainly to due mainly to a $ 6.0 billion net decrease in proceeds of debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 Cash Flow Hedge Gains million ) Year Ended June 30 , 2013 2012 2011 Effective Year Ended June 30 , 2013 2012 2011 Effective Portion Gains Ended June 30 , 2013 2012 2011 Effective Portion Gains ( June 30 , 2013 2012 2011 Effective Portion Gains ( loss of tax effect of $ 54 , $ 127 and $ of $ 54 , $ 127 and $ ( 340 ) $ 127 and $ ( 340 ) $ 101 $ 236 $ ( 340 ) $ 101 $ 236 $ ( 632 340 ) $ 101 $ 236 $ ( 632 ) Gains 101 $ 236 $ ( 632 ) Gains ( loss ) from AOCI into revenue $ 195 $ ( 27 ) $ revenue $ 195 $ ( 27 ", + "operating_margin": "operating margin . 14 Table of Contents PART I of Contents PART I Item 1A Business model competition Companies compete their data . In July 2013 , we announced a change service , such a Office 365 , rather than licensing transaction-based period of the subscription . 15 Table of Contents PART I of Contents PART I Item 1A We make significant investment in Azure Services platform , Office 365 , other cloud-based service offering offering , and the Xbox 360 entertainment platform . We will manufactured Surface lau", + "accumulated_depreciation": "accumulated depreciation of $ 12,513 and $ 10,962 9,991 8,269 of $ 12,513 and $ 10,962 9,991 8,269 Equity and other $ 12,513 and $ 10,962 9,991 8,269 Equity and other investment 12,513 and $ 10,962 9,991 8,269 Equity and other investment 10,844 8,269 Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset , net investment 10,844 9,776 Goodwill 14,655 1 Accumulated depreciation ( 12,513 Total , at cost 22,504 19,231 Accumulated depreciation ( 12,513 ) 22,504 19,231 Accumulated depreciation ( 12,513 ) ( 10,962 ) Total depreciation ( 12,513 ) ( 10,962 ) Total , net $ ) Total , net $ 9,991 $ 8,269 During fiscal year , net $ 9,991 $ 8,269 During fiscal year 2013 , $ 8,269 During fiscal year 2013 , 2012 , and 2011 During fiscal year 2013 , 2012 , and 2011 , depreciation 2013 , 2012 , and 2011 , depreciation expense wa $ , depreciation expense wa $ 2.6 billion , $ 2.2 billi", + "debt": "debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 billion to $ 24.8 billion $ 10.2 billion to $ 24.8 billion , due mainly to due mainly to a $ 10.0 billion increase in acquisition of intangible asset and a $ 1.4 billion decrease in cash from partially offset by a $ 1.2 billion decrease in cash used and sale of investment . 38 Table of Contents PART II of Contents PART II Item 7 Debt We issued debt to debt . As of Ju debt security . ( b ) In April 2013 , we issued $ 1.95 2013 , we issued $ 1.95 billion of debt security . ( c ) In April 2013 , we issued \u20ac 550 2013 , we issued \u20ac 550 million of debt security . annually . As of June 30 , 2013 , the aggregate As of June 30 , 2013 , the aggregate unamortized discount current portion , wa $ 65 million . Notes The Notes and unsubordinated debt outstanding . 39 Table of Contents PART II of Contents PART II Item 7 Convertible Debt In June 2013 7 Convertible Debt In June 2 debt In million ) 2014 2015-2016 2017-2018 Thereafter Total Long-term debt : a ) Principal payment $ 3,000 $ 2,500 $ 1,050 $ Principal payment $ 3,000 $ 2,500 $ 1,050 $ 9,115 $ $ 3,000 $ 2,500 $ 1,050 $ 9,115 $ 15,665 Interest $ 2,500 $ 1,050 $ 9,115 $ 15,665 Interest payment 459 $ 1,050 $ 9,115 $ 15,665 Interest payment 459 776 693 9,115 $ 15,665 Interest payment 459 776 693 4,940 6,868 Construction $ 15,665 Interest payment 459 776 693 4,940 6,868 Construction commitment 15,665 Interest payment 45 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) a construction commitment above . 41 Table of Contents PART II of Contents PART II Item 7 ( e ) We have deferred income tax of $ 11.3 billion and other long-term contingent long-term contingent liability of $ 162 million ( related to the for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the Adopted Accounting Guidance In September 2011 , the Financial Acco debt Current portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 Income debt 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 Short-term compensation 4,117 3,875 Income tax 592 789 Short-term unearned revenue 20,639 4,117 3,875 Income tax 592 789 Short-term unearned revenue 20,639 18,653 592 789 Short-term unearned revenue 20,639 18, debt 12,601 10,713 3,151 Total current liability 37,417 32,688 Long-term debt 12,601 10,713 Long-term liability 37,417 32,688 Long-term debt 12,601 10,713 Long-term unearned revenue 1,760 37,417 32,688 Long-term debt 12,601 10,713 Long-term unearned revenue 1,760 1,406 12,601 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 1,893 1,760 1,406 Deferred income tax 1,709 1,893 Other long-term liability 10,000 debt Net cash from operation 28,833 31,626 26,994 Financing Short-term debt repayment cash from operation 28,833 31,626 26,994 Financing Short-term debt repayment , debt repayment , maturity of 90 day or le , net day or le , net 0 0 ( 186 ) Proceeds or le , net 0 0 ( 186 ) Proceeds from , net 0 0 ( 186 ) Proceeds from issuance of Proceeds from issuance of debt 4,883 0 6,960 Repayments of debt from issuance of debt 4,883 0 6,960 Repayments of debt ( issuance of debt 4,883 0 6,960 Repayments of debt ( debt ( 1,346 ) 0 ( 814 ) of debt ( 1,346 ) 0 ( 814 ) Common stock ( 1,346 ) 0 ( 814 ) Common stock issued 931 814 ) Common stock issued 931 1,913 2,422 Common stock repurchased ) Common stock issued 931 1,913 2,422 Common stock repurchased ( Common stock issued 931 1,913 2,422 Common stock repurchased ( 5,360 2,422 Common stock repurchased ( 5,360 ) ( 5,029 ) ( repurchased ( 5,360 ) ( 5,029 ) ( 11,555 ) Common ) ( 5,029 ) ( 11,555 ) Common stock cash dividend stock cash dividend paid ( 7,455 ) ( 6,3 debt were in excess of $ 1.0 billion . As a result required to be posted . 64 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2013 Assets Non-designated hedge Total Derivatives June 30 , 2013 Assets Non-designated hedge derivative : derivative : Short-term investment $ 41 $ 157 $ 18 $ Short-term investment $ 41 $ 157 $ 18 $ 19 $ $ 41 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 238 Other $ 18 $ 19 $ 3 $ 238 Oth DEBT As 1,079 Total $ 3,083 NOTE 12 \u2014 DEBT As of June \u2014 DEBT As of June 30 , 2013 , the total As of June 30 , 2013 , the total carrying value current portion , were $ 15.6 billion and $ 15.8 billion $ 15.6 billion and $ 15.8 billion , respectively . This estimated fair value of $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively , a respectively , a of June 30 , 2012 . These estimated a of June 30 , 2012 . These estimated fair value value are based on Level 2 input . 7 Debt June 15 % 3.829 % Total 15,665 10,750 Convertible Debt June 15 , 15,665 10,750 Convertible Debt June 15 , 2013 0 1,250 0.000 Convertible Debt June 15 , 2013 0 1,250 0.000 % 1.849 Debt June 15 , 2013 0 1,250 0.000 % 1.849 % June 15 , 2013 0 1,250 0.000 % 1.849 % Total 15 , 2013 0 1,250 0.000 % 1.849 % Total $ 2013 0 1,250 0.000 % 1.849 % Total $ 15,665 $ % 1.849 % Total $ 15,665 $ 12,000 ( a ) % Total $ 15,665 $ 12,000 ( a ) In November ( a ) In November 2012 , we issued $ 2.25 2012 , we issued debt security . ( b ) In April 2013 , we issued $ 1.95 2013 , we issued $ 1.95 billion of debt security . ( c ) In April 2013 , we issued \u20ac 550 2013 , we issued \u20ac 550 million of debt security . applicable . As of June 30 , 2013 and 2012 , As of June 30 , 2013 and 2012 , the aggregate June 30 , 2013 and 2012 , the aggregate unamortized discount current portion , wa $ 65 million and $ 56 million $ 65 million and $ 56 million , respectively . Notes . Convertible Debt In June 2013 , we paid cash of we p Debt Service Maturities million ) Year Ending June 30 , 2014 $ 3,000 2015 Year Ending June 30 , 2014 $ 3,000 2015 0 2016 June 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 Total 0 2016 2,500 2017 0 2018 1, debt for fiscal year 2013 , 2012 , and 2011 for fiscal year 2013 , 2012 , and 2011 wa $ 2013 , 2012 , and 2011 wa $ 371 million , , and 2011 wa $ 371 million , $ 344 million $ 371 million , $ 344 million , and $ 197 344 million , and $ 197 million , respectively . Credit . Credit Facility In June 2013 , we established a commercial sale of up to $ 1.3 billion in commercial paper . paper . As of June 30 , 2013 , we have As of June 30 , 2013 , we have not issued this program . In June 2013 , we entered", + "share_repurchase": "share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2013 , approximately $ As of June 30 , 2013 , approximately $ 3.6 billion , 2013 , approximately $ 3.6 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . any time without notice . 40 Table of Contents PART II of Contents PART II Item 7 During the period reported , repurchased with cash resource : 158 million share for $ 4.6 158 mill share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2013 , approximately $ As of June 30 , 2013 , approximately $ 3.6 billion , 2013 , approximately $ 3.6 billion of the approved repurchase Shares Amount Year Ended June 30 , 2013 2012 2011 First Year Ended June 30 , 2013 2012 2011 First quarter 33 Ended June 30 , 2013 2012 2011 First quarter 33 $ June 30 , 2013 2012 2011 First quarter 33 $ 1,000 2013 2012 2011 First quarter 3", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 2.58 ( a ) $ 2.00 2.58 ( a ) $ 2.00 ( b ) $ 2.69 2.00 ( b ) $ 2.69 $ 2.10 $ 1.62 Cash b ) $ 2.69 $ 2.10 $ 1.62 Cash dividend declared $ 2.69 $ 2.10 $ 1.62 Cash dividend declared per share dividend declared per share $ 0.92 $ 0.80 $ 0.64 $ per share $ 0.92 $ 0.80 $ 0.64 $ 0.52 $ $ 0.92 $ 0.80 $ 0.64 $ 0.52 $ 0.52 Cash $ 0.80 $ 0.64 $ 0.52 $ 0.52 Cash , cash $ 0.64 $ 0.52 $ 0.52 Cash , cash equivalent , , and short-term investment $ 77,022 $ 63,040 $ 52,772 $ short- earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( b ) Includes and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION range of computing device . 23 Table of Contents PART II of Contents PART II Ite earnings per share $ 2.58 $ 2.00 $ 2.69 29 per share $ 2.58 $ 2.00 $ 2.69 29 % ( $ 2.58 $ 2.00 $ 2.69 29 % ( 26 ) 2.58 $ 2.00 $ 2.69 29 % ( 26 ) % $ 2.69 29 % ( 26 ) % Fiscal year 2013 26 ) % Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Revenue increased , primarily due and service , including Windows 8 , Surface , and the the x86 PC market . 26 Table of Contents PART II of Contents PART II Item 7 Operating income grew , primarily primarily due to the $ 6.2 billion goodwill earnings per share were earnings per share by $ 0.73 . Fiscal year 2011 net $ 0.73 . Fiscal year 2011 net income and diluted earnings the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share per share in fiscal year 2011 . SEGMENT REVENUE/OPERATING INCOME ( Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , refl Earnings per share $ 21,863 $ 16,978 $ 23,150 Earnings per share : Basic per share : Basic $ 2.61 $ 2.02 $ 2.73 Diluted : Basic $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 $ 2.69 Weighted 2.73 Diluted $ 2.58 $ 2.00 $ 2.69 Weighted average share $ 2.58 $ 2.00 $ 2.69 Weighted average share outstanding : average share outstanding : Basic 8,375 8,396 8,490 Diluted 8,470 8,506 share outstanding : Basic 8,375 8,396 8,490 Diluted 8,470 8,506 8,593 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2013 2012 2011 Net Year Ended June 30 , 2013 2012 2011 Net income available Ended June 30 , 2013 2012 2011 Net income available for June 30 , 2013 2012 2011 Net income available for common shareholder ( A ) $ 21,863 $ 16,978 $ 23,150 Weighted A ) $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding share of common stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock ( B ) 8,375 8,396 8,490 Dilutive e Earnings Per Share equivalent ( C ) 8,470 8,506 8,593 Earnings Per Share Basic ( C ) 8,470 8,506 8,593 Earnings Per Share Basic ( Basic ( A/B ) $ 2.61 $ 2.02 $ 2.73 Diluted A/B ) $ 2.61 $ 2.02 $ 2.73 Diluted ( A/C $ 2.61 $ 2.02 $ 2.73 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.58 $ 2.00 $ 2.69 Anti-dilutive A/C ) $ 2.58 $ 2.00 $ 2.69 Anti-dilutive stock-based award $ 2.58 $ 2.00 $ 2.69 Anti-dilutive stock-based award excluded from during the period presented . 60 Table of Contents PART II of Contents PART II Item 8 NO earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share 0.53 2.61 Diluted earnings per share 0.53 0.76 0.72 ( a ) Diluted earnings per share 0.53 0.76 0.72 ( a ) 0.59 earnings per share 0.53 0.76 0.72 ( a ) 0.59 ( 0.76 0.72 ( a ) 0.59 ( b ) 2.58 ( ) 0.59 ( b ) 2.58 ( c earnings per share by $ 0.09 . ( b ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( c ) Includes the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( \u20ac 561 million $ 733 million ( \u20ac 561 million ) and diluted earnings earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased net income decrea earnings per share by $ 0.07 . ( d ) Includes decreased net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . 88 Table of Contents share by $ 0.73 . 88 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC \u201d ) a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , and the June 30 , 2013 and 2012 , and the related consolidated in the period ended June 30 , 2013 . These financial period ended June 30 , 2013 . These financial statement are a", + "tax_rate": "tax rate for tax rate for fiscal year 2013 and 2012 wa approximately 19 for fiscal year 2013 and 2012 wa approximately 19 % and 2013 and 2012 wa approximately 19 % and 24 % , wa approximately 19 % and 24 % , respectively . Our Rico . Our fiscal year 2013 effective rate decreased by 5 2013 effective rate decreased by 5 % from fiscal year 2012 5 % from fiscal year 2012 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment wa recorded in fiscal year 2012 . tax rate by 10 % in fiscal year 2012 10 % in fiscal year 2012 . In addition , in addition , in fiscal year 2013 and 2012 , we recognized in fiscal year 2013 and 2012 , we recognized a reduction we recognized a reduction of 18 % and 21 % , reduction of 18 % and 21 % , respectively , to tax rate for fiscal year 2013 wa primarily offset by a wa primarily offset by a 1 % increase related to the Division operating income declined $ 2.1 billion in fiscal year 2013 2.1 billion in fiscal year 2013 , while MBD a tax rate for tax rate for fiscal year 2012 and 2011 were approximately 24 for fiscal year 2012 and 2011 were approximately 24 % and 2012 and 2011 were approximately 24 % and 18 % , were approximately 24 % and 18 % , respectively . Our Rico . Our fiscal year 2012 effective rate increased by 6 2012 effective rate increased by 6 % from fiscal year 2011 6 % from fiscal year 2011 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment in the fourth quarter of 2 tax rate by 10 % . In addition , addition , in fiscal year 2012 and 2011 , we recognized in fiscal year 2012 and 2011 , we recognized 36 Table and 2011 , we recognized 36 Table of Contents PART II of Contents PART II Item 7 a reduction of 21 % Item 7 a reduction of 21 % and 16 % , reduction of 21 % and 16 % , respectively , to rate . In fiscal year 2011 , we settled a portion . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income tax expense for fiscal year tax rate by 2 % . Changes in the Division operating income declined $ 751 million in fiscal year 2012 751 million in fiscal year 2012 , while MBD and Server Tools operating income increased $ 1.1 billion and $ 1.1 billion $ 1.1 billion and $ 1.1 billion , respectively , during center . In fiscal year 2012 and 2011 , our U.S. In fiscal year 2012 and 2011 , our U.S. income before before income tax wa $ 1.6 billion and $ 8.9 billion $ 1.6 billion and $ 8.9 billion , respectively , and , respectively , and ", + "segment_revenue": "SEGMENT REVENUE/OPERATING INCOME ( Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , reflecting immaterial movement of , reflecting immaterial movement of 27 Table of Contents PART II of Contents PART II Item 7 business activity between segment and cost allocation . In July 2013 , we announced a change million , except percentage ) 2013 2012 2011 Percenta", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . In July 2013 10-K ) . In July 2013 , we announced a change hardware and software . Windows 8 is the first version of worldwide . Currently , approximately 65 % of total Windows Division of Surface RT and Windows 8 started on October 26 , Windows 8 started on October 26 , 2012 . The general started on October 26 , 2012 . The general availability of Surface Pro started on February 9 , 2013 . A preview started on February 9 , 2013 Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , reflecting immaterial movement of , reflecting immaterial movement of 27 Table of Contents PART II of Contents PART II Item 7 business activity between segment and cost allocation . In July 2013 , we announced a change million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percenta GEOGRAPHIC the three month ended December 31 , 2012 , we changed month ended December 31 , 2012 , we changed the name the cost being allocated . 85 Table of Contents PART II of Contents PART II Item 8 In addition , certain cost cost allocation . In July 2013 , we announced a change business solution , and Office 365 . Entertainment and Devices Division Division offering include the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 19 , 2013 are incorporated by held on November 19 , 2013 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2013 INDEX Page PART Year Ended June 30 , 2013 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registra common stock a conversion price of $ 32.59 per share . As of share . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount the unamortized discount were $ 1.2 billion and $ 19 million $ 1.2 billion and $ 19 million , respectively . In issuance of the note in 2010 , we entered into capped of the note in June 2013 , we exercised the capped were physically settled by acquiring 29 million share of our own own common stock for $ 938 million . The remaining capped net cash settled for $ 24 Common stock ( 1,346 ) 0 ( 814 ) Common stock issued 931 814 ) Common stock issued 931 1,913 2,422 Common stock repurchased ) Common stock issued 931 1,913 2,422 Common stock repurchased ( Common stock issued 931 1,913 2,422 Common stock repurchased ( 5,360 2,422 Common stock repurchased ( 5,360 ) ( 5,029 ) ( repurchased ( 5,360 ) ( 5,029 ) ( 11,555 ) Common ) ( 5,029 ) ( 11,555 ) Common stock cash dividend stock cash dividend paid ( 7,455 ) ( 6,385 ) ( paid ( 7,455 ) ( 6,385 ) ( 5,180 ) Excess ) ( 6,385 ) Common stock and Ended June 30 , 2013 2012 2011 Common stock and paid-in June 30 , 2013 2012 2011 Common stock and paid-in capital , beginning of period $ 65,797 $ 63,415 $ 62,856 Common of period $ 65,797 $ 63,415 $ 62,856 Common stock issued $ 65,797 $ 63,415 $ 62,856 Common stock issued 920 1,924 $ 62,856 Common stock issued 920 1,924 2,422 Common stock repurchased 62,856 Common stock issued 920 1,924 2,422 Common stock repurchased ( Common stock issued 920 1,924 2,422 Common stock repurchased ( 2,014 2, Common stock repurchased ( 2,014 ) ( 1,714 ) ( repurchased ( 2,014 ) ( 1,714 ) ( 3,738 ) Stock-based ) ( 1,714 ) ( 3,738 ) Stock-based compensation expense 2,406 3,738 ) Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income ) Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income tax Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income tax benefit tax benefit ( deficiency ) 190 ( 75 ) ( 292 ( deficiency ) 190 ( 75 ) ( 292 Common stock cash 17,736 ) Net income 21,863 16,978 23,150 Common stock cash dividend ) Net income 21,863 16,978 23,150 Common stock cash dividend ( Common stock cash dividend ( 7,694 ) ( 6,721 ) ( dividend ( 7,694 ) ( 6,721 ) ( 5,394 ) Common ) ( 6,721 ) ( 5,394 ) Common stock repurchased ( ) Common stock repurchased ( 3,418 ) ( 2,918 ) ( repurchased ( 3,418 ) ( 2,918 ) ( 8,215 ) Balance ) ( 2,918 ) ( 8,215 ) Balance , end of Balance , end of period 9,895 ( 856 ) ( 8,195 end of period 9,895 ( 856 ) ( 8,195 common stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based award Dilutive effect of stock-based award 95 110 103 Common stock and effect of stock-based award 95 110 103 Common stock and common of stock-based award 95 110 103 Common stock and common stock stock equivalent ( C ) 8,470 8,506 8,593 Earnings Per Share equivalent ( C ) 8,470 8,506 8,593 Earnings Per Share Basic ( C ) 8,470 8,506 8,593 common stock a conversion price of $ 32.59 per share . As of share . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount the unamortized discount were $ 1.2 billion and $ 19 million $ 1.2 billion and $ 19 million , respectively . In issuance of the note in 2010 , we entered into capped of the note in June 72 Table of Contents PART II of Contents PART II Item 8 2013 , we exercised the Contents PART II Item 8 2013 , we exercised the capped were physically settled by acquiring 29 mill common stock for $ 938 million . The remaining capped net cash settled for $ 24 million . Debt Service Maturities million ) Year Ending June 30 , 2014 $ 3,000 2015 Year Ending June 30 , 2014 $ 3,000 2015 0 2016 June 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 2015 common stock . NOTE 21 \u2014 SEGMENT INFORMATION AND GEOGRAPHIC the three month ended December 31 , 2012 , we changed month ended December 31 , 2012 , we changed the name the cost being allocated . 85 Table of Contents PART II of Contents PART II Item 8 In addition , certain cost cost allocation . In July 2013 , we announced a change business solution , and Office 365 . Entertainment and Devices Division Division offering include the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xb", + "fair_value_measurements": "Fair Value Measurements We account level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of government bond . Our Level 2 derivative asset and liability primarily swap contract . \u2022 Level 3 \u2013 input are generally unobservable flow model . Our Level 3 asset primarily compri Fair Value Measurements . \u2013 Fair Value Measurements . 65 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2013 2012 2011 Foreign Year Ended June 30 , 2013 2012 2011 Foreign Exchange Contracts Ended June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 70 $ 52 $ ( 92 Contracts Derivatives $ 70 $ 52 $ ( 92 ) Hedged 70 $ 52 $ ( 92 ) Hedged item ( FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2013 Assets Mutual fund Fair Value June 30 , 2013 Assets Mutual fund $ 868 2013 Assets Mutual fund $ 868 $ 0 $ 0 $ Mutual fund $ 868 $ 0 $ 0 $ 868 $ $ 868 $ 0 $ 0 $ 868 $ 0 $ $ 0 $ 0 $ 868 $ 0 $ 868 Commercial $ 0 $ 868 $ 0 $ 868 Commercial paper 0 $ 868 $ 0 $ 868 Commercial paper 0 603 0 0 $ 868 Commercial paper 0 6", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 70 $ 52 $ ( 92 Contracts Derivatives $ 70 $ 52 $ ( 92 ) Hedged 70 $ 52 $ ( 92 ) Hedged item ( 69 92 ) Hedged item ( 69 ) ( 50 ) 85 item ( 69 ) ( 50 ) 85 Total $ 1 69 ) ( 50 ) 85 Total $ 1 $ 2 50 ) 85 Total $ 1 $ 2 $ ( 7 85 Total $ 1 $ 2 $ ( 7 ) Cash 1 $ 2 $ ( 7 ) Cash Flow Hedge Gains million ) Year Ended June 30 , 2013 ", + "derivative_instruments": "Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2013 Assets Non-designated hedge Total Derivatives June 30 , 2013 Assets Non-designated hedge derivative : derivative : Short-term investment $ 41 $ 157 $ 18 $ Short-term investment $ 41 $ 157 $ 18 $ 19 $ $ 41 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 238 Other $ 18 $ 19 $ 3 $ 238 Other current asset $ 19 $ 3 $ 238 Other current asset 87 0 $ 238 Other current asset 87 0 0 0 0 87 238 Other current asset 87 0 0 0 0 87 Total Other current asset 87 " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-14-289961/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-14-289961/full-submission_features.json new file mode 100644 index 0000000..7114670 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-14-289961/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue CRM Online , Microsoft Office 365 , OneDrive , Skype , first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial , and Commercial Other . 3 Table of Contents PART I of Contents PART I Item 1 On April 25 , 2014 I Item 1 On April 25 , 2014 , we completed 1 On April 25 , 2014 , we completed the transaction fourth quarter of fiscal year 2014 . Our segment provide management information is contained in Note 21 \u2013 Segment Information revenue is included in & C Other segment . 4 Table of Contents PART I of Contents PART I Item 1 The Windows Phone operating system service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively . Surface device were first released in October 2012 . Our latest Surface device device , the Surface Pro 3 , wa released in June , wa released in June 2014 . Competition Our Xbox Platform latest generation revenue in each have a portfolio of over 55,000 U.S. and international patent issued international patent issued and over 40,000 pending . While we employ , we received an initial 10-year non-exclusive license to certain Nokia of emerging technology trend and 10 Table of Contents PART I of Contents PART I Item 1 breakthrough that we believe offer Bing or Windows with Office 365 subscription . There are two . Although each type of 11 Table of Contents PART I of Contents PART I Item 1 reselling partner r revenue . 2014 , 2013 , or 2012 revenue . Our practice is backlog is not significant . 13 Table of Contents PART I of Contents PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 25 , 2014 were a follows a of July 25 , 2014 were a follows : Name with the Company Satya Nadella 46 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 54 Executive Vice President , Human Human Resources Christopher C. Capossela 44 Executive Vice President , Chief Marketing Officer Amy Revenue $ 2014 ( a ) 2013 2012 2011 2010 Revenue $ 86,833 ( a ) 2013 2012 2011 2010 Revenue $ 86,833 $ a ) 2013 2012 2011 2010 Revenue $ 86,833 $ 77,849 2012 2011 2010 Revenue $ 86,833 $ 77,849 $ 73,723 $ 2010 Revenue $ 86,833 $ 77,849 $ 73,723 $ 69,943 $ $ 86,833 $ 77,849 $ 73,723 $ 69,943 $ 62,484 Operating $ 77,849 $ 73,723 $ 69,943 $ 62,484 Operating income $ $ 73,723 $ 69,943 $ 62,484 Operating income $ 27,759 $ $ 62,484 Operating income $ 27,759 $ 26,764 ( c ) Operating income $ 27,759 $ 26,764 ( Revenue Quarterly deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on first quarter of fiscal year 2014 , we changed our organizational segment performance during fiscal year 2014 . Our reportable segment are described below . On April 25 , 2014 , we acquired . On April 25 , 2014 Revenue $ 86,833 2013 Percentage Change 2013 Versus 2012 Revenue $ 86,833 $ 77,849 2013 Versus 2012 Revenue $ 86,833 $ 77,849 $ 73,723 12 2012 Revenue $ 86,833 $ 77,849 $ 73,723 12 % 6 $ 86,833 $ 77,849 $ 73,723 12 % 6 % Gross 86,833 $ 77,849 $ 73,723 12 % 6 % Gross margin 77,849 $ 73,723 12 % 6 % Gross margin $ 59,899 6 % Gross margin $ 59,899 $ 57,600 $ 56,193 4 Gross margin $ 59,899 $ 57,600 $ 56,193 4 % 3 $ 59,899 $ 57,600 $ 56,193 4 % 3 % Operating 59,899 $ 57,600 $ 56,193 4 % 3 % Operating income Revenue increased $ 9.0 billion year 2013 Revenue increased $ 9.0 billion or 12 % , increased $ 9.0 billion or 12 % , demonstrating growth across from our cloud-based offering . 30 Table of Contents PART II of Contents PART II Item 7 Gross margin increased $ 2.3 7 Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million higher datacenter expense Revenue increased $ 4.1 billion year 2012 Revenue increased $ 4.1 billion or 6 % , increased $ 4.1 billion or 6 % , mainly due to . Operating income grew $ 5.0 billion or 23 % , grew $ 5.0 billion or 23 % , primarily due to primarily due to the $ 6.2 billion goodwill impairment charge recorded Cost of revenue increased $ 2.7 billion or 16 % , increased $ 2.7 billion or 16 % , reflecting increased product associated with Surface and Windows 8 , including an approximately $ , including an approximately $ Revenue Licensing $ 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 18,803 $ Versus 2012 Revenue Licensing $ 18,803 $ 19,021 $ 19,495 ( Revenue Licensing $ 18,803 $ 19,021 $ 19,495 ( 1 ) $ 18,803 $ 19,021 $ 19,495 ( 1 ) % ( $ 19,021 $ 19,495 ( 1 ) % ( 2 ) ( 1 ) % ( 2 ) % Hardware : Computing : Computing and Gaming Hardware 9,628 6,461 6,740 49 % ( Computing and Gaming Hardware 9,628 6,461 6,740 49 % ( 4 and Gaming Hardware 9,628 6,461 6,740 49 % ( 4 ) Gaming Hardware 9,628 6,461 6,740 49 % revenue $ 37,674 $ 32,100 $ 32,438 17 C revenue $ 37,674 $ 32,100 $ 32,438 17 % ( $ 37,674 $ 32,100 $ 32,438 17 % ( 1 ) 37,674 $ 32,100 $ 32,438 17 % ( 1 ) % $ 32,438 17 % ( 1 ) % Gross Margin Licensing % Gross Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 % ( $ 17,216 $ 17,044 $ 17,240 1 % ( 1 ) 17,216 $ 17,044 $ 17,240 1 % ( 1 ) % $ 17,240 1 % ( 1 ) % Hardware : Computing : Computing and Gaming Hardware 893 956 2,495 ( 7 ) Computing and Gaming Hardware 89 revenue increased & C revenue increased $ 5.6 billion or 17 % , increased $ 5.6 billion or 17 % , primarily due to . Revenue also increased $ 2.0 billion due to the acquisition Cost of revenue increased $ 5.7 billion or 47 % , increased $ 5.7 billion or 47 % , due mainly to of revenue also increased $ 1.9 billion due to NDS . C Licensing revenue decreased $ 218 million or 1 % , decreased $ 218 million or 1 % , due mainly to sale of Windows declined $ 304 million or 41 % , declined $ 304 million or 41 % revenue declined $ 136 million or 1 % , declined $ 136 million or 1 % , due to continued offset in part by a 12 % increase in OEM Pro Office Consumer revenue declined $ 243 million or 8 % , declined $ 243 million or 8 % , reflecting the transition transition of customer to Office 365 Consumer a well a continued for Windows XP in April 2014 . Windows Phone revenue increased Windows Phone revenue increased $ 822 million or 48 % , increased $ 822 million or 48 % , due mainly to to the recognition of $ 382 revenue under our joint Licensing gross margin increased $ 172 million or 1 % , increased $ 172 million or 1 % , primarily due to primarily due to a $ 390 million or 20 % decrease a $ 390 million or 20 % decrease in cost of due mainly to a $ 411 million or 23 % decline a $ 411 million or 23 % decline in traffic acquisition in traffic acquisition cost . 32 Table of Contents PART II of Contents PART II Item 7 Computing and Gaming Hardware Computing Gaming Hardware revenue increased $ 3.2 billion or 49 % revenue increased $ 1.7 billion or 34 % , increased $ 1.7 billion or 34 % , due mainly to which wa released in November 2013 , offset in part by decrease in sale of Xbox 360 . We sold 11.7 million Xbox 360 . We sold 11.7 million Xbox console during fiscal Xbox console during fiscal year 2014 compared with 9.8 million Xbox fiscal year 2014 compared with 9.8 million Xbox console during fiscal Xbox console during fiscal year 2013 . Surface revenue increased $ . Surface revenue increased $ 1.3 billion or 1 revenue increased $ 2.1 billion or 72 % , increased $ 2.1 billion or 72 % , due mainly to cost of revenue increased $ 970 million or 51 % , increased $ 970 million or 51 % , due mainly to inventory adjustment of approximately $ 900 million in fiscal year 2013 900 million in fiscal year 2013 . Phone Hardware Phone Hardware Phone Hardware revenue wa $ 2.0 billion , reflecting sale of acquisition of NDS on April 25 , 2014 . Since the NDS on April 25 , 2014 . Since the acquisition , the acquisition , we so revenue of , reflecting revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 640 million or 10 % , increased $ 640 million or 10 % , due mainly to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of second quarter of fiscal year 2013 . Online advertising revenue increased Online advertising revenue increased $ 49 revenue . Search advertising revenue increased 39 % , due primarily to offset in part by a 25 % reduction in display advertising display advertising revenue . Office 365 Consumer revenue grew $ 316 365 Consumer revenue grew $ 316 million , primarily reflecting subscriber . We ended fiscal year 2014 with over five million subscriber Other gross margin decreased $ 276 million or 13 % , decreased $ 276 million or 13 % , due to a , due to a $ 916 million or 20 % increase a $ 916 million or 20 % increase in revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher transaction cost . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 D & C revenue decreased & C revenue decreased $ 338 million or 1 % , decreased $ 338 million or 1 % , reflecting lower revenue C gross margin decreased $ 1.7 billion or 8 % , decreased $ 1.7 billion or 8 % , primarily due to Cost of revenue increased $ 1.3 billion or 13 % , increased $ 1.3 billion or 13 % , revenue decreased $ 474 million or 2 % , decreased $ 474 million or 2 % , due mainly to Office Consumer revenue declined $ 618 million or 15 % , declined $ 618 million or 15 % , while Windows OEM while Windows OEM revenue declined 10 % . These decrease resulted which we estimate declined approximately 9 % . Windows Phone revenue Windows Phone revenue increased $ 1.2 billion , including an increase of Windows Phone license . 33 Table of Contents PART II of Contents PART II Item 7 In May 2013 , we II Ite revenue decreased $ 279 million or 4 % , decreased $ 279 million or 4 % , due primarily to Xbox Platform revenue decreased $ 1.3 billion or 22 % , decreased $ 1.3 billion or 22 % , due mainly to subscription revenue . We shipped 9.8 million Xbox 360 console during We shipped 9.8 million Xbox 360 console during fiscal year 2013 360 console during fiscal year 2013 , compared with 13.0 million year 2013 , compared with 13.0 million Xbox 360 console during compared with 13.0 million Xbox 360 console during revenue wa $ . Surface revenue wa $ 853 million . The general availability and Surface Pro started October 26 , 2012 and February 9 Pro started October 26 , 2012 and February 9 , 2013 26 , 2012 and February 9 , 2013 , respectively . 2012 and February 9 , 2013 , respectively . Computing and Hardware gross margin decreased $ 1.5 billion or 62 % , decreased $ 1.5 billion or 62 % , due to a , due to a $ 1.3 billion or 30 % increase a $ 1.3 billion or 30 % increase in cost of , primarily due to $ 1.9 billio revenue increased $ 415 million or 7 % , increased $ 415 million or 7 % , due mainly to revenue , which increased $ 213 million or 7 % to increased $ 213 million or 7 % to $ 3.5 billion or 7 % to $ 3.5 billion . Search advertising revenue Other revenue also increased $ 202 million or 7 % , increased $ 202 million or 7 % , due mainly to Other gross margin increased $ 48 million or 2 % , increased $ 48 million or 2 % , due to increased in part by a $ 367 million or 9 % increase a $ 367 million or 9 % inc Revenue Licensing $ 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 42,027 $ Versus 2012 Revenue Licensing $ 42,027 $ 39,686 $ 37,126 6 Revenue Licensing $ 42,027 $ 39,686 $ 37,126 6 % 7 $ 42,027 $ 39,686 $ 37,126 6 % 7 % Other 42,027 $ 39,686 $ 37,126 6 % 7 % Other 7,547 39,686 $ 37,126 6 % 7 % Other 7,547 5,660 4,644 6 % 7 % Other 7,547 5,660 4,644 33 % 22 % 7 % Other 7,547 5,660 4,644 33 % 22 % 7 % Other 7,547 5,660 4,644 33 % 22 % Total % Other 7,547 5,660 4,644 33 % 22 % Total Commerci revenue $ % Total Commercial revenue $ 49,574 $ 45,346 $ 41,770 9 Commercial revenue $ 49,574 $ 45,346 $ 41,770 9 % 9 $ 49,574 $ 45,346 $ 41,770 9 % 9 % Gross 49,574 $ 45,346 $ 41,770 9 % 9 % Gross Margin 45,346 $ 41,770 9 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 % 5 $ 38,604 $ 36,261 $ 34,463 6 % 5 % Other 38,604 $ 36,261 $ 34,463 6 % 5 % Other 1,856 36,261 $ 34,463 6 % 5 % Other 1,856 921 579 6 % 5 % Other 1,856 revenue increased $ 4.2 2013 Commercial revenue increased $ 4.2 billion or 9 % , increased $ 4.2 billion or 9 % , due mainly to , Office Commercial and Office 365 Commercial revenue grew 8 % Office 365 Commercial revenue grew 8 % . Collectively , our including Microsoft Azure , grew 13 % . Commercial gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with Commercial Licensing revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % , grew $ 334 million or 10 % , due mainly to Office Commercial revenue grew $ 253 million or 1 % , grew $ 253 million or 1 % , and wa impacted by customer transitioning to Office 365 Commercial . Commercial Licensing gross Licensing gross margin increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , in line with Commercial Other revenue increased $ 1.9 b revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , due mainly to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , due mainly to Other gross margin increased $ 935 million or 102 % , increased $ 935 million or 102 % , due to higher in part by a $ 952 million or 20 % increase a $ 952 million or 20 % increase in cost of Commercial Cloud . Fiscal year 2013 compared with fiscal year revenue increased $ 3.6 2012 Commercial revenue increased $ 3.6 billion or 9 % , increased $ 3.6 billion or 9 % , due mainly to Commercial gross margin increased $ 2.1 billion or 6 % . increased $ 2.1 billion or 6 % . Commercial Licensing Commercial Commercial Licensing revenue increased $ 2.6 billion or 7 % , increased $ 2.6 billion or 7 % , due to increased Server product revenue increased $ 1.2 billion or 9 % , increased $ 1.2 billion or 9 % , driven primarily by Office Commercial revenue increased revenue increased $ 379 million or 13 % , increased $ 379 million or 13 % , reflecting continued support of result in fiscal year 2013 . Commercial Licensing gross margin Licensing gross margin increased $ 1.8 billion or 5 % , increased $ 1.8 billion or 5 % , due to higher in part by a $ 762 million or 29 % increase a $ 762 million or 29 % increase in cost of commercial offering , including $ 287 million higher intellectual property licensing Commercial Other revenue increased $ 1.0 billion or 22 % , i revenue grew $ 582 million or 82 % , grew $ 582 million or 82 % , due mainly to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 434 million or 11 % , grew $ 434 million or 11 % , due to growth support and consulting service . 35 Table of Contents PART II of Contents PART II Item 7 Commercial Other gross margin increased Other gross margin increased $ 342 million or 59 % , increased $ 342 million or 59 % , due to higher in part by a $ 674 mil Revenue $ ( 2013 Percentage Change 2013 Versus 2012 Revenue $ ( 415 ) Versus 2012 Revenue $ ( 415 ) $ 403 $ ( $ ( 415 ) $ 403 $ ( 485 ) ( ) $ 403 $ ( 485 ) ( 203 ) % $ ( 485 ) ( 203 ) % 183 % Gross ) ( 203 ) % 183 % Gross margin $ ( % Gross margin $ ( 494 ) $ 372 $ ( $ ( 494 ) $ 372 $ ( 582 ) ( ) $ 372 $ ( 582 ) ( 233 ) % $ ( 582 ) ( 233 ) % 164 % Corporate ) ( 233 ) % 164 % Corporate and Other revenue general availability . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year revenue decreased and Other revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerings . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of previously deferred revenue Other gross margin decreased $ 866 million , due mainly to decreased revenue . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Corporate and Other revenue incr revenue increased $ 888 million or 183 % , increased $ 888 million or 183 % , primarily due to deferral . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of revenue that had been deferred in fiscal year 2012 related to the Windows Upgrade Other gross margin increased $ 954 million or 164 % , increased $ 954 million or 164 % , due mainly to million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Vers revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Research and development expense increased and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , due mainly to engineering group , including $ revenue 18 % 20 % 19 % percent of revenue 18 % 20 % 19 % ( 2 revenue 18 % 20 % 19 % ( 2 ) ppt 20 % 19 % ( 2 ) ppt 1ppt Sales and % ( 2 ) ppt 1ppt Sales and marketing expense include other program . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Sales and marketing expense increased and marketing expense increased $ 535 million or 4 % , increased $ 535 million or 4 % , primarily due to and marketing expense were $ 394 million during fiscal year 2014 394 million durin revenue 6 % 7 % 6 % percent of revenue 6 % 7 % 6 % ( 1 revenue 6 % 7 % 6 % ( 1 ) ppt 7 % 6 % ( 1 ) ppt 1ppt General and % ( 1 ) ppt 1ppt General and administrative expense include administrative fee . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 General and administrative expense decreased and administrative expense decreased $ 328 million or 6 % , decreased $ 328 million or 6 % , due mainly to and administrative expense were $ 77 million during fiscal year 2014 7 revenue decreased $ 655 million in fiscal year 2014 655 million in fiscal year 2014 , while Microsoft Office system and tool revenue increased $ 1.3 billion and $ 1.6 billion $ 1.3 billion and $ 1.6 billion , respectively , during period . In fiscal year 2014 and 2013 , our U.S. In fiscal year 2014 and 2013 , our U.S. income before before income tax wa $ 7.1 billion and $ 6.7 billion $ 7.1 billion and $ 6.7 billion , respectively , and , respectively , and comprised 26 % and 25 % , and comprised 26 % a Revenue Agents Report and reopened examination . As of June 30 , 2014 , the primary As of June 30 , 2014 , the primary unresolved issue these issue in the next 12 month . Based on the I.R.S . for tax year 2007 to 2013 . We are for tax year 2007 to 2013 . We are subject to to examination for tax year 1996 to 2013 , some of for tax year 1996 to 2013 , some of which are our consolidated financial statement . 39 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2013 compared with II Item 7 F revenue increased $ 209 million in fiscal year 2013 209 million in fiscal year 2013 , while Microsoft Office system and tool revenue increased $ 696 million and $ 1.2 billion $ 696 million and $ 1.2 billion , respectively , during period . In fiscal year 2013 and 2012 , our U.S. In fiscal year 2013 and 2012 , our U.S. income before before income tax wa $ 6.7 billion and $ 1.6 billion $ 6.7 billion and $ 1.6 billion , respectively , and , respectively , and comprised 25 % and 7 % , and comprised 25 % an Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month because we do not be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are and short-term investment totaled $ 85.7 billion a of June 30 85.7 billion Revenue Unearned Revenue Unearned revenue at June 30 , 2014 wa comprised mainly revenue at June 30 , 2014 wa comprised mainly of unearned . Unearned revenue at June 30 , 2014 also included payment revenue at June 30 , 2014 also included payment for : business solution product ; Office 365 subscription ; Bundled Offerings ; the revenue recognition criterion . 43 Table of Contents PART II of Contents PART II Item 7 The following table outline the unearned revenue a of June 30 , 2014 : ( In a of June 30 , revenue wa subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provided significantly discounted right to purchase Windows 8 Pro to qualifying end-users that qualifying end-users that purchased Windows 7 PCs during the eligibility period wa responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 wa deferred until it wa an annual basis ( May 1 for u ) and between of a reporting unit . 47 Table of Co Revenue Year Ended June 30 , 2014 2013 2012 Revenue $ 86,833 Ended June 30 , 2014 2013 2012 Revenue $ 86,833 $ June 30 , 2014 2013 2012 Revenue $ 86,833 $ 77,849 2014 2013 2012 Revenue $ 86,833 $ 77,849 $ 73,723 Cost 2012 Revenue $ 86,833 $ 77,849 $ 73,723 Cost of revenue $ 86,833 $ 77,849 $ 73,723 Cost of revenue 26,934 20,249 $ 73,723 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 73,723 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 57,600 Cost of revenue 26,934 20,249 17,530 Gro revenue 23,150 4,797 4,117 Income tax 782 592 Short-term unearned revenue 23,150 20,639 782 592 Short-term unearned revenue 23,150 20,639 Securities lending payable 558 592 Short-term unearned revenue 23,150 20,639 Securities lending payable 558 645 23,150 20,639 Securities lending payable 558 645 Other 6,906 3,597 Total 20,639 Securities lending payable 558 645 Other 6,906 3,597 Total current lending payable 558 645 Other 6,906 3,597 Total current liability 45,625 payable 558 645 Other 6,906 3,597 Tot revenue 2,008 45,625 37,417 Long-term debt 20,645 12,601 Long-term unearned revenue 2,008 1,760 20,645 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 1,709 2,008 1,760 Deferred income tax 2,728 1,709 Other long-term liability 11,594 1,760 Deferred income tax 2,728 1,709 Other long-term liability 11,594 10,000 2,728 1,709 Other long-term liability 11,594 10,000 Total liability 82,600 63,487 1,709 Other long- revenue 44,325 954 Deferral of unearned revenue 44,325 44,253 36,104 Recognition of unearned Deferral of unearned revenue 44,325 44,253 36,104 Recognition of unearned revenue of unearned revenue 44,325 44,253 36,104 Recognition of unearned revenue ( Recognition of unearned revenue ( 41,739 ) ( 41,921 ) ( revenue ( 41,739 ) ( 41,921 ) ( 33,347 ) Changes ) ( 41,921 ) ( 33,347 ) Changes in operating asset liability : Accounts receivable ( 1,120 ) ( 1,807 ) ( receivable ( 1,120 ) ( 1,807 ) ( 1,156 ) Invent Revenue , and Unearned Revenue , and Note 21 \u2013 Segment Information and Geographic remitted to governmental authority . 58 Table of Contents PART II of Contents PART II Item 8 Revenue recognition for multiple-element arrangement same revenue recognition timing . 59 Table of Contents PART II of Contents PART II Item 8 Revenue related to phone , a period generally ranging from 90 day to three year . . Advertising expense wa $ 2.3 billion , $ 2.6 billion $ 2.3 billion , $ 2.6 billion , and $ 1.6 2.6 billio revenue $ 104 $ 195 $ ( 27 into revenue $ 104 $ 195 $ ( 27 ) Amount 104 $ 195 $ ( 27 ) Amount Excluded from Effectiveness ( expense ) $ ( 239 ) $ ( 168 ) ( 239 ) $ ( 168 ) $ ( 231 ) ( 168 ) $ ( 231 ) We estimate that $ ) We estimate that $ 32 million of net derivative gain included in AOCI at June 30 , 2014 will be reclassified AOCI at June 30 , 2014 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2014 . Non-Designated D revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable NDS since the Acquisition . 74 Table of Contents PART II of Contents PART II Item 8 Following are the supplemental consolidated had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 2013 Revenue $ Year Ended June 30 , 2014 2013 Revenue $ 96,248 $ Ended June 30 , 2014 2013 Revenue $ 96,248 $ Revenue $ 96,248 $ 93,243 Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net income $ 20,234 $ 20,153 Diluted earnings per Net income $ 20,234 $ 20,153 Diluted earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction w revenue and unearned revenue of $ 222 million . The goodwill recognized current segment structure : $ 5.6 billion to Commercial Licensing , to Commercial Licensing , $ 1.4 billion to Computing and Gaming Gaming Hardware , and $ 54 million to D & C on the acquisition date . 75 Table of Contents PART II of Contents PART II Item 8 Following are the detail of ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 year $ 1,249 15 year Technology-based 275 5 revenue 520 445 888 Other expense item 1,112 917 Unearned revenue 520 445 Impaired item 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 Loss revenue 520 445 Impaired investment 209 246 Loss carryforwards 922 715 520 445 Impaired investment 209 246 Loss carryforwards 922 715 Other investment 209 246 Loss carryforwards 922 715 Other revenue item 64 209 246 Loss carryforwards 922 715 Other revenue item 64 55 922 715 Other revenu revenue item 64 55 Deferred income tax asset $ Deferred income tax asset $ 3,730 $ 3,266 Less valuation allowance tax asset $ 3,730 $ 3,266 Less valuation allowance ( 903 3,266 Less valuation allowance ( 903 ) ( 579 ) Deferred allowance ( 903 ) ( 579 ) Deferred income tax asset net of valuation allowance $ 2,827 $ 2,687 Deferred Income Tax valuation allowance $ 2,827 $ 2,687 Deferred Income Tax Liabilities Foreign Liabilities Foreign earnings $ ( 1,140 ) $ ( 1,146 ) ( 1,140 ) $ ( 1,146 ) Unrealized gai Revenue Agents Report and reopened examination . As of June 30 , 2014 , the primary As of June 30 , 2014 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2013 . We are for tax year 2007 to 2013 . We are subject to to examination for tax year 1996 to 2013 , some of for tax year 1996 to 2013 , some of which are consolidated financial statement . NOTE 14 \u2014 UNEARNED REVENUE Unearned revenue ( revenue ( 104 ) ( 195 ) 29 revenue ( 104 ) ( 195 ) 29 Tax expense ( 104 ) ( 195 ) 29 Tax expense ( benefit ) in provision for income tax 6 68 ( 10 ) Amounts provision for income tax 6 68 ( 10 ) Amounts reclassified income tax 6 68 ( 10 ) Amounts reclassified from accumulated accumulated other comprehensive income ( 98 ) ( 127 ) 19 income ( 98 ) ( 127 ) 19 Net current period 98 ) ( 127 ) 19 Net current period other comprehensive income ( loss ) ( 35 ) ( 26 ) 255 ) ( 35 ) ( 26 ) 255 Accumulated other com Revenue Year Ended June 30 , 2014 2013 2012 Revenue Devices and Ended June 30 , 2014 2013 2012 Revenue Devices and Consumer June 30 , 2014 2013 2012 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 18,803 $ 19,021 $ 19,495 Hardware Consumer Licensing $ 18,803 $ 19,021 $ 19,495 Hardware : Computing $ 18,803 $ 19,021 $ 19,495 Hardware : Computing and Gaming : Computing and Gaming Hardware 9,628 6,461 6,740 Phone Hardware 1,985 Computing and Gaming Hardware 9,628 6,461 6,740 Phone H revenue ( 415 ) 403 ( 485 ) Total revenue $ 86,833 485 ) Total revenue $ 86,833 $ 77,849 $ 73,723 ( Total revenue $ 86,833 $ 77,849 $ 73,723 ( In million $ 86,833 $ 77,849 $ 73,723 ( In million ) Year million ) Year Ended June 30 , 2014 2013 2012 Gross Year Ended June 30 , 2014 2013 2012 Gross margin Devices Ended June 30 , 2014 2013 2012 Gross margin Devices and June 30 , 2014 2013 2012 Gross margin Devices and Consumer Devices and Consumer Licensing $ 17,216 $ 17,044 $ 17,240 Hardware Consumer Licens revenue reconciling of revenue reconciling amount ( 79 ) ( 31 ) ( amount ( 79 ) ( 31 ) ( 97 ) Operating ) ( 31 ) ( 97 ) Operating expense reconciling amount Operating expense reconciling amount ( 40 ) 75 ( 13 ) reconciling amount ( 40 ) 75 ( 13 ) Total Corporate ( 40 ) 75 ( 13 ) Total Corporate and Other Corporate and Other $ ( 4,422 ) $ ( 3,789 ) ( 4,422 ) $ ( 3,789 ) $ ( 4,266 ) ( 3,789 ) $ ( 4,266 ) ( a ) Corporate reconciling amount for fiscal year 2014 included a net $ 349 2014 included a net $ 34 revenue deferral related reconciling amount for fiscal year 2012 and 2013 included the deferral for fiscal year 2012 and 2013 included the deferral and subsequent , respectively , of $ 540 million of revenue related to States accounted for more than 10 % of fiscal year 2014 10 % of fiscal year 2014 , 2013 , or 2012 of fiscal year 2014 , 2013 , or 2012 revenue . 2014 , 2013 , or 2012 revenue . Revenue , classified million ) Year Ended June 30 , 2014 2013 2012 United Year Ended June 30 , 2014 2013 2012 U revenue . 94 Table of Contents PART II of Contents PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2014 2013 2012 Microsoft Year Ended June 30 , 2014 2013 2012 Microsoft Office system Ended June 30 , 2014 2013 2012 Microsoft Office system $ June 30 , 2014 2013 2012 Microsoft Office system $ 24,323 2012 Microsoft Office system $ 24,323 $ 22,995 $ 22,299 Windows Office system $ 24,323 $ 22,995 $ 22,299 Windows PC operating $ 24,323 $ 22,995 $ 22,299 Windows PC operating sys revenue Commercial Cloud revenue wa $ 2.8 billion , $ 1.3 billion $ 2.8 billion , $ 1.3 billion , and $ 0.7 1.3 billion , and $ 0.7 billion in fiscal year 2014 0.7 billion in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2014 2013 2012 United million ) June 30 , 2014 2013 2012 United States $ ) June 30 , 2014 2013 2012 United State Revenue $ 18,529 $ 24,519 Fiscal Year 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,415 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 Revenue $ 16,008 $ 21,456 Fiscal Year 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross margin 11,840 $ 20,489 $ 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 revenue for the year ended June 30 , 2014 . Based on year ended June 30 , 2014 . Based on this evaluation wa effective a of June 30 , 2014 . There were a of June 30 , 2014 . There were no change during the quarter ended June 30 , 2014 that have materially quarter ended June 30 , 2014 that have materially affected , financial reporting a of June 30 , 2014 ; their report a of June 30 , 2014 ; their report is included report is included in Item 9A . 98 Table of Contents included in Item 9A . 98 Table of C revenue for for the year ended June 30 , 2014 . Accordingly , year ended June 30 , 2014 . Accordingly , our audit policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2014 , based on a of June 30 , 2014 , based on the criterion Control \u2013 Integrated Framework ( 2013 ) issued by the Committee for the year ended June 30 , 2014 , of the year ended ", + "net_income": "Net income $ d ) $ 27,161 $ 24,098 Net income $ 22,074 ( $ 24,098 Net income $ 22,074 ( b ) $ 21,863 22,074 ( b ) $ 21,863 ( c ) $ 16,978 21,863 ( c ) $ 16,978 ( d ) $ 23,150 16,978 ( d ) $ 23,150 $ 18,760 Diluted earnings per d ) $ 23,150 $ 18,760 Diluted earnings per share $ Diluted earnings per share $ 2.63 ( b ) $ 2.58 2.63 ( b ) $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 $ 2.10 Cash dividend declared d ) $ 2.69 $ 2.10 Cash dividend declared per share dividend declared per sh net income by $ 458 million and diluted earnings per earnings per share by $ 0.05 . ( c ) Includes the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( \u20ac561 million ) earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( d ) Includes and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION device operating system and hardware 26 Table of Contents PART II of Contents PART II Item 7 With investment in these area ecosystem , our digital work 27 Table of Contents PART II of Contents PART II Item 7 and life experience will also NDS \u201d ) on April 25 , 2014 , phone . ) on April 25 , 2014 , phone . As consumer To support our strategy of 28 Table of Co Net income $ Provision for income tax 5,746 5,189 5,289 Net income $ 22,074 for income tax 5,746 5,189 5,289 Net income $ 22,074 $ 5,189 5,289 Net income $ 22,074 $ 21,863 $ 16,978 Earnings Net income $ 22,074 $ 21,863 $ 16,978 Earnings per share $ 22,074 $ 21,863 $ 16,978 Earnings per share : Basic per share : Basic $ 2.66 $ 2.61 $ 2.02 Diluted : Basic $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 $ 2.00 Weighted 2.02 Diluted $ 2.63 $ 2.5 Net income $ Ended June 30 , 2014 2013 2012 Net income $ 22,074 June 30 , 2014 2013 2012 Net income $ 22,074 $ 2013 2012 Net income $ 22,074 $ 21,863 $ 16,978 Other Net income $ 22,074 $ 21,863 $ 16,978 Other comprehensive income $ 22,074 $ 21,863 $ 16,978 Other comprehensive income ( loss tax effect of $ ( 4 ) , $ ( 14 4 ) , $ ( 14 ) , and $ 137 14 ) , and $ 137 ) ( 35 ) ( and $ 137 ) ( 35 ) ( 26 ) 255 ) ( 35 ) ( 26 ) 255 Net unrealized gain 35 ) ( 26 ) 255 Net unrealized gain ( loss of tax effect of $ 9 Net income Ended June 30 , 2014 2013 2012 Operations Net income $ June 30 , 2014 2013 2012 Operations Net income $ 22,074 2012 Operations Net income $ 22,074 $ 21,863 $ 16,978 Adjustments Net income $ 22,074 $ 21,863 $ 16,978 Adjustments to reconcile $ 22,074 $ 21,863 $ 16,978 Adjustments to reconcile net income from operation : Goodwill impairment 0 0 6,193 Depreciation , amortization operation : Goodwill impairment 0 0 6,193 Depreciation , amortization , : Goodwill impairment 0 0 6,193 Depreciation , am Net income 22,074 21,863 ( 8,195 ) Net income 22,074 21,863 16,978 Common stock cash 8,195 ) Net income 22,074 21,863 16,978 Common stock cash dividend ) Net income 22,074 21,863 16,978 Common stock cash dividend ( Common stock cash dividend ( 9,271 ) ( 7,694 ) ( dividend ( 9,271 ) ( 7,694 ) ( 6,721 ) Common ) ( 7,694 ) ( 6,721 ) Common stock repurchased ( ) Common stock repurchased ( 4,988 ) ( 3,418 ) ( repurchased ( 4,988 ) ( 3,418 ) ( 2,918 ) Balance ) ( 3,418 ) ( 2,918 ) Balance , end of Balance , end Net income available Ended June 30 , 2014 2013 2012 Net income available for June 30 , 2014 2013 2012 Net income available for common shareholder ( A ) $ 22,074 $ 21,863 $ 16,978 Weighted A ) $ 22,074 $ 21,863 $ 16,978 Weighted average outstanding $ 22,074 $ 21,863 $ 16,978 Weighted average outstanding share of common stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based award Dilutive effect of Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net income $ 20,234 $ 20,153 Diluted earnings per Net income $ 20,234 $ 20,153 Diluted earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July Net income 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 5,660 14,462 15,787 59,899 Net income 5,244 6,558 5,660 4,612 ( b 15,787 59,899 Net income 5,244 6,558 5,660 4,612 ( b ) 59,899 Net income 5,244 6,558 5,660 4,612 ( b ) 22,074 Net income 5,244 6,558 5,660 4,612 ( b ) 22,074 ( 5,660 4,612 ( b ) 22,074 ( b ) Basic earnings ) Basic earnings pe Net income 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 6,055 15,702 14,294 57,600 Net income 4,466 6,377 6,055 ( c ) 14,294 57,600 Net income 4,466 6,377 6,055 ( c ) 4,965 57,600 Net income 4,466 6,377 6,055 ( c ) 4,965 ( 6,377 6,055 ( c ) 4,965 ( d ) 21,863 ( ) 4,965 ( d ) 21,863 ( e ) Basic earnings ) Basic earnings per share 0.53 0.76 0.72 0 net income by $ 458 million and diluted earnings per earnings per share by $ 0.05 . 95 Table of Contents share by $ 0.05 . 95 Table of Contents PART II of Contents PART II Item 8 ( c ) Includes a the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( \u20ac561 million ) earnings per share by $ 0.09 . ( d ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share net income by decreased net income by $ 733 million ( \u20ac561 million ) earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . NOTE 23 \u2014 SUBSEQUENT by $ 0.07 . NOTE 23 \u2014 SUBSEQUENT EVENT On July \u2014 SUBSEQUENT EVENT On July 17 , 2014 , we announced EVENT On July 17 , 2014 , we announced a restructuring We will eliminate up to 18,000 position over the next ", + "assets": "Assets Current million ) June 30 , 2014 2013 Assets Current asset : ) June 30 , 2014 2013 Assets Current asset : Cash Cash and cash equivalent $ 8,669 $ 3,804 Short-term investment ( cash equivalent $ 8,669 $ 3,804 Short-term investment ( including security including security loaned of $ 541 and $ 579 ) 77,040 of $ 541 and $ 579 ) 77,040 73,218 Total cash 541 and $ 579 ) 77,040 73,218 Total cash , cash and $ 579 ) 77,040 73,218 Total cash , cash equivalent equivalent , and short-term investment 85,709 Assets June 30 , 2014 June 30 , 2013 Assets Liabilities Assets , 2014 June 30 , 2013 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 10 $ 39 $ 0 $ exchange contract $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) $ 39 $ 0 $ ( 97 ) $ 41 $ 87 $ ( 97 ) $ 41 $ 87 $ ( 63 97 ) $ 41 $ 87 $ ( 63 ) Equity 41 $ 87 $ ( 63 ) Equity contract 177 0 ( 63 ) Equity contract 177 0 0 ( 21 ) 63 ) Equity contract 177 0 0 ( 21 ) 157 ) Equity contract 177 0 0 ( 21 ) 157 0 contract 177 0 0 ( 21 ) Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2014 Assets Mutual fund Fair Value June 30 , 2014 Assets Mutual fund $ 590 2014 Assets Mutual fund $ 590 $ 0 $ 0 $ Mutual fund $ 590 $ 0 $ 0 $ 590 $ $ 590 $ 0 $ 0 $ 590 $ 0 $ $ 0 $ 0 $ 590 $ 0 $ 590 Commercial $ 0 $ 590 $ 0 $ 590 Commercial paper 0 $ 590 $ 0 $ 590 Commercial paper 0 189 0 0 $ 590 Commercial paper 0 189 0 18 Assets Mutual fund Fair Value June 30 , 2013 Assets Mutual fund $ 868 2013 Assets Mutual fund $ 868 $ 0 $ 0 $ Mutual fund $ 868 $ 0 $ 0 $ 868 $ $ 868 $ 0 $ 0 $ 868 $ 0 $ $ 0 $ 0 $ 868 $ 0 $ 868 Commercial $ 0 $ 868 $ 0 $ 868 Commercial paper 0 $ 868 $ 0 $ 868 Commercial paper 0 603 0 0 $ 868 Commercial paper 0 603 0 603 0 603 $ 868 Commercial paper 0 603 0 603 0 603 Certificates 868 Commercial paper 0 603 0 603 0 603 Certificates of Commercial paper 0 603 0 603 0 603 Certificates of deposit paper 0 60 ASSETS The component Carrying Amount Year Ended June 30 , 2014 2013 Technology-based ( Year Ended June 30 , 2014 2013 Technology-based ( a ) Ended June 30 , 2014 2013 Technology-based ( a ) $ Technology-based ( a ) $ 6,440 $ ( 2,615 ) $ ) $ 6,440 $ ( 2,615 ) $ 3,825 $ 3,760 $ ( 2,615 ) $ 3,825 $ 3,760 $ ( 2,110 2,615 ) $ 3,825 $ 3,760 $ ( 2,110 ) $ 3,825 $ 3,760 $ ( 2,110 ) $ 1,650 Marketing-related 1,518 $ ( 2,110 ) $ 1,650 Marketing-related 1,518 ( 324 ) 2,110 ) $ 1,650 Marketing-related 1,518 ( 324 Assets ) June 30 , 2014 2013 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 903 $ 888 Other expense item compensation expense $ 903 $ 888 Other expense item 1,112 917 $ 888 Other expense item 1,112 917 Unearned revenue 520 445 888 Other expense item 1,112 917 Unearned revenue 520 445 Impaired item 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 Loss revenue 520 445 Impaired investment 209 24", + "liabilities": "Liabilities and stockholder Total asset $ 172,384 $ 142,431 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 0 Current 7,432 $ 4,828 Short-term debt 2,000 0 Current portion of long-term $ 4,828 Short-term debt 2,000 0 Current portion of long-term debt Current portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 Income Liabilities Assets , 2014 June 30 , 2013 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 10 $ 39 $ 0 $ exchange contract $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) $ 39 $ 0 $ ( 97 ) $ 41 $ 87 $ ( 97 ) $ 41 $ 87 $ ( 63 97 ) $ 41 $ 87 $ ( 63 ) Equity 41 $ 87 $ ( 63 ) Equity contract 177 0 ( 63 ) Equity contract 177 0 0 ( 21 ) 63 ) Equity contract 177 0 0 ( 21 ) 157 ) Equity contract 177 0 0 ( 21 ) 157 0 contract 177 0 0 ( 21 ) 157 0 ( 9 0 0 ( 21 ) 157 0 ( 9 ) Interest 0 ( 21 Liabilities Derivatives $ ( 155 ) $ 92,164 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 153 $ 126 $ and other $ 5 $ 153 $ 126 $ 284 $ $ 5 $ 153 $ 126 $ 284 $ ( 155 $ 153 $ 126 $ 284 $ ( 155 ) $ 126 $ 284 $ ( 155 ) $ 129 ( In $ ( 155 ) $ 129 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2013 Assets Mutual fund Fair Value June 30 , Liabilities Derivatives $ ( 81 ) $ 84,468 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 14 $ 121 $ 0 $ and other $ 14 $ 121 $ 0 $ 135 $ $ 14 $ 121 $ 0 $ 135 $ ( 80 $ 121 $ 0 $ 135 $ ( 80 ) $ 0 $ 135 $ ( 80 ) $ 55 ( a $ ( 80 ) $ 55 ( a ) These amount \u201d ) , on September 23 , 2013 we provided Nokia , on September 23 , 2013 we provided Nokia \u20ac 1.5 2013 we provided Nokia \u20ac 1.5 billion ( $ 2.1 billion \u20ac 1.5 billion ( $ 2.1 billion ) principal of convertible convertible note classified a Liabilities Foreign Liabilities Foreign earnings $ ( 1,140 ) $ ( 1,146 ) ( 1,140 ) $ ( 1,146 ) Unrealized gain on investment Unrealized gain on investment ( 1,911 ) ( 1,012 ) Depreciation investment ( 1,911 ) ( 1,012 ) Depreciation and amortization ( ) Depreciation and amortization ( 470 ) ( 604 ) Other amortization ( 470 ) ( 604 ) Other ( 87 ) ( 604 ) Other ( 87 ) ( 2 ) Deferred Other ( 87 ) ( 2 ) Deferred income tax liability income tax liability $ ( 3,608 ) $ ( 2,764 ) ( 3,608 ) $ ( 2,764 ) Net deferred LIABILITIES ( ( In million ) June 30 , 2014 2013 Tax contingency million ) June 30 , 2014 2013 Tax contingency and other ) June 30 , 2014 2013 Tax contingency and other tax and other tax liability $ 10,510 $ 9,548 Other 1,084 452 tax liability $ 10,510 $ 9,548 Other 1,084 452 Total $ $ 10,510 $ 9,548 Other 1,084 452 Total $ 11,594 $ 10,510 $ 9,548 Other 1,084 452 Total $ 11,594 $ 10,000 Other 1,084 452 Total $ 11,594 $ 10,000 NOTE 16 \u2014 452 Total $ 11,594 $ 10,000 NOTE 16 \u2014 COMMITMENTS AND $ 11,594 $ 10,000", + "equity": "Equity Securities 25 Item 6 . Selected Financial of Equity Securities 25 Item 6 . Selected Financial Data 25 6 . Selected Financial Data 25 Item 7 . Management \u2019 Selected Financial Data 25 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 51 Item 8 . Financial Statements about Market Risk 51 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2014 , all of which were ( in million ) April 1 , 2014 \u2013 April 30 million ) April 1 , 2014 \u2013 April 30 , 2014 1 , 2014 \u2013 April 30 , 2014 756,720 $ 41.37 2014 \u2013 April 30 , 2014 756,720 $ 41.37 756,720 $ \u2013 April 30 , 2014 756,720 $ 41.37 756,720 $ 36,177 30 , 2014 756,720 $ 41.37 756,720 $ 36,177 May 1 , 2014 756,720 $ 41.37 756,720 $ 36,177 May 1 , 756,720 $ 41.37 equity $ 22,220 $ 22,847 $ 13,791 Stockholders \u2019 equity $ 89,784 13,791 Stockholders \u2019 equity $ 89,784 $ 78,944 $ 66,363 $ \u2019 equity $ 89,784 $ 78,944 $ 66,363 $ 57,083 $ $ 89,784 $ 78,944 $ 66,363 $ 57,083 $ 46,175 25 $ 78,944 $ 66,363 $ 57,083 $ 46,175 25 Table of $ 66,363 $ 57,083 $ 46,175 25 Table of Contents PART 66,363 $ 57,083 $ 46,175 25 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) On April ( a ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , Equity and a of June 30 , 2013 . Equity and other investment and other investment were $ 14.6 billion a of June 30 14.6 billion a of June 30 , 2014 , compared with a of June 30 , 2014 , compared with $ 10.8 2014 , compared with $ 10.8 billion a of June 30 10.8 billion a of June 30 , 2013 . Our short-term a of June 30 , 2013 . Our short-term investment are of our fixed-income portfolio are 40 Table of Contents PART II of Contents PART II Item 7 managed to achieve economic return and short-term investme Equity $ 85 $ 82 $ 91 $ 73 Equity $ 176 $ 82 $ 91 $ 73 Equity $ 176 $ 181 91 $ 73 Equity $ 176 $ 181 $ 208 $ 73 Equity $ 176 $ 181 $ 208 $ 246 $ $ 176 $ 181 $ 208 $ 246 $ 173 Commodity $ 181 $ 208 $ 246 $ 173 Commodity $ 17 $ 208 $ 246 $ 173 Commodity $ 17 $ 19 246 $ 173 Commodity $ 17 $ 19 $ 18 $ 173 Commodity $ 17 $ 19 $ 18 $ 21 $ $ 17 $ 19 $ 18 $ 21 $ 16 Total $ 19 $ 18 $ 21 $ 16 Total one-day VaR $ 18 $ 21 $ 16 Total one-day VaR for the combined risk category wa $ 333 million at June 30 , $ 333 mi Equity and other $ 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,597 9,991 Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset , net investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset , net 6,981 14,655 Intangible asset , net 6,981 3,08 equity liability : Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 0 Current 7,432 $ 4,828 Short-term debt 2,000 0 Current portion of long-term $ 4,828 Short-term debt 2,000 0 Current portion of long-term debt Current portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 Income debt 0 2,999 Accrued compensation 4,797 4,117 Income tax 782 592 0 2,999 Accrued comp equity Accumulated other comprehensive income 3,708 1,743 Total stockholder \u2019 equity 89,784 1,743 Total stockholder \u2019 equity 89,784 78,944 Total liability and stockholder Total stockholder \u2019 equity 89,784 78,944 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 172,384 $ 142,431 See accompanying note \u2019 equity $ 172,384 $ 142,431 See accompanying note . 55 142,431 See accompanying note . 55 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended J EQUITY STATEMENTS ( million ) Year Ended June 30 , 2014 2013 2012 Common Year Ended June 30 , 2014 2013 2012 Common stock and Ended June 30 , 2014 2013 2012 Common stock and paid-in June 30 , 2014 2013 2012 Common stock and paid-in capital , beginning of period $ 67,306 $ 65,797 $ 63,415 Common of period $ 67,306 $ 65,797 $ 63,415 Common stock issued $ 67,306 $ 65,797 $ 63,415 Common stock issued 607 920 $ 63,415 Common stock issued 607 920 1,924 Common stock repurchased 63,415 Common stock issued 607 equity end of period 3,708 1,743 1,422 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 89,784 $ 78,944 $ 66,363 See \u2019 equity $ 89,784 $ 78,944 $ 66,363 See accompanying note $ 89,784 $ 78,944 $ 66,363 See accompanying note . 57 66,363 See accompanying note . 57 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles first quarter of fiscal year 2014 , we changed our organizational Equity and Other Investments June 30 , 2014 Cash $ 4,980 Other Investments June 30 , 2014 Cash $ 4,980 $ 0 30 , 2014 Cash $ 4,980 $ 0 $ 0 $ 2014 Cash $ 4,980 $ 0 $ 0 $ 4,980 $ $ 4,980 $ 0 $ 0 $ 4,980 $ 4,980 $ $ 0 $ 0 $ 4,980 $ 4,980 $ 0 $ $ 0 $ 4,980 $ 4,980 $ 0 $ 0 Mutual $ 4,980 $ 4,980 $ 0 $ 0 Mutual fund 590 $ 4,980 $ 0 $ 0 Mutual fund 590 0 0 0 $ 0 Mutual fund 590 0 0 590 590 0 $ 0 Mutual fund 590 0 0 590 590 0 0 0 Mutual fund 590 0 0 590 590 0 0 Commercial Mutual fund 590 0 0 590 590 0 0 Commer Equity and Other Investments June 30 , 2013 Cash $ 1,967 Other Investments June 30 , 2013 Cash $ 1,967 $ 0 30 , 2013 Cash $ 1,967 $ 0 $ 0 $ 2013 Cash $ 1,967 $ 0 $ 0 $ 1,967 $ $ 1,967 $ 0 $ 0 $ 1,967 $ 1,967 $ $ 0 $ 0 $ 1,967 $ 1,967 $ 0 $ $ 0 $ 1,967 $ 1,967 $ 0 $ 0 Mutual $ 1,967 $ 1,967 $ 0 $ 0 Mutual fund 868 $ 1,967 $ 0 $ 0 Mutual fund 868 0 0 0 $ 0 Mutual fund 868 0 0 868 868 0 $ 0 Mutual fund 868 0 0 868 868 0 0 0 Mutual fund 868 0 0 868 868 0 0 Commercial Mutual fund 868 0 0 868 868 0 0 Commer Equity forward . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount market price risk were $ 3.1 billion and $ 2.1 billion $ 3.1 billion and $ 2.1 billion , respectively , of respectively , of which $ 362 million and $ 420 million $ 362 million and $ 420 million , respectively , were instrument . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount market price risk were $ 898 million and $ 1.0 billion $ 898 million and $ 1.0 billion , respec Equity 41 $ 87 $ ( 63 ) Equity contract 177 0 ( 63 ) Equity contract 177 0 0 ( 21 ) 63 ) Equity contract 177 0 0 ( 21 ) 157 ) Equity contract 177 0 0 ( 21 ) 157 0 contract 177 0 0 ( 21 ) 157 0 ( 9 0 0 ( 21 ) 157 0 ( 9 ) Interest 0 ( 21 ) 157 0 ( 9 ) Interest rate 21 ) 157 0 ( 9 ) Interest rate contract 17 9 ) Interest rate contract 17 0 0 ( 12 ) ) Interest rate contract 17 0 0 ( 12 ) 18 Interest rate contract 17 0 0 ( 12 ) 18 0 contract 17 0 0 ( 12 ) 18 0 ( 45 0 0 ( 12 ) 18 0 ( 45 ) Credit 0 ( 12 ) 18 Equity 15 ) $ 9 $ 167 $ 0 Equity contract 0 $ 9 $ 167 $ 0 Equity contract 0 0 7 167 $ 0 Equity contract 0 0 7 ( 125 ) $ 0 Equity contract 0 0 7 ( 125 ) 0 0 Equity contract 0 0 7 ( 125 ) 0 0 contract 0 0 7 ( 125 ) 0 0 0 Total 0 7 ( 125 ) 0 0 0 Total $ 1 7 ( 125 ) 0 0 0 Total $ 1 $ ( 125 ) 0 0 0 Total $ 1 $ 70 0 0 0 Total $ 1 $ 70 $ 7 $ 0 Total $ 1 $ 70 $ 7 $ ( 140 $ 1 $ 70 $ 7 $ ( 140 ) $ 70 $ 7 $ ( 140 ) $ 9 $ 167 $ ( 140 ) $ 9 $ 167 $ 0 Total 140 ) $ 9 $ 167 $ 0 Total gross amount $ 9 $ 167 $ 0 Total Equity Contracts Derivatives 8 ) $ 1 $ 2 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 110 ) $ 0 $ 0 $ ( 110 ) $ 0 $ 0 Hedged item 110 110 ) $ 0 $ 0 Hedged item 110 0 0 0 $ 0 Hedged item 110 0 0 Total amount of $ 0 Hedged item 110 0 0 Total amount of ineffectiveness 0 Hedged item 110 0 0 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded from effectivenes Equity ) $ 18 $ ( 119 ) Equity contract ( 64 119 ) Equity contract ( 64 ) 16 ( 85 ) Equity contract ( 64 ) 16 ( 85 ) Interest-rate contract ( 64 ) 16 ( 85 ) Interest-rate contract 24 ( ( 85 ) Interest-rate contract 24 ( 11 ) 93 Credit ) Interest-rate contract 24 ( 11 ) 93 Credit contract 13 contract 24 ( 11 ) 93 Credit contract 13 ( 3 11 ) 93 Credit contract 13 ( 3 ) ( 7 93 Credit contract 13 ( 3 ) ( 7 ) Commodity 13 ( 3 ) ( 7 ) Commodity contract 71 ( ( 7 ) Commodity contract 71 ( 42 ) ( 121 ) Commod EQUITY Shares million ) Year Ended June 30 , 2014 2013 2012 Balance Year Ended June 30 , 2014 2013 2012 Balance , beginning Ended June 30 , 2014 2013 2012 Balance , beginning of June 30 , 2014 2013 2012 Balance , beginning of year Balance , beginning of year 8,328 8,381 8,376 Issued 86 105 , beginning of year 8,328 8,381 8,376 Issued 86 105 147 beginning of year 8,328 8,381 8,376 Issued 86 105 147 Repurchased year 8,328 8,381 8,376 Issued 86 105 147 Repurchased ( 175 8,328 8,381 8,376 Issued 86 105 14 Equity Statements 57 56 Stockholders \u2019 Equity Statements 57 Notes to Financial Statements 58 57 Notes to Financial Statements 58 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "Cash flow from operation increased flow from operation increased $ 3.4 billion during the current fiscal current fiscal year to $ 32.2 billion , due mainly to used in financing increased $ 246 million to $ 8.4 billion $ 246 million to $ 8.4 billion , due mainly to due mainly to a $ 2.0 billion increase in cash used stock repurchase , a $ 1.4 billion increase in dividend paid paid , and a $ 324 million decrease in proceeds from in part by a $ 3.4 billion increase in 41 Table $ 3.4 billion increase in 41 T Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ 28.8 billion , due mainly to used for financing decreased $ 1.3 billion to $ 8.1 billion $ 1.3 billion to $ 8.1 billion , due mainly to due mainly to a $ 3.5 billion increase in proceeds from in part by a $ 1.1 billion increase in dividend paid dividend paid and a $ 982 million decrease in proceeds from used in investing decreased $ 975 million to $ 23.8 billion $ 975 million Cash Flow Hedge 9 ) $ 0 $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2014 2013 2012 Effective Year Ended June 30 , 2014 2013 2012 Effective Portion Gains Ended June 30 , 2014 2013 2012 Effective Portion Gains recognized June 30 , 2014 2013 2012 Effective Portion Gains recognized in of tax effect of $ 2 , $ 54 and $ of $ 2 , $ 54 and $ 127 $ 63 , $ 54 and $ 127 $ 63 $ 101 $ 54 and $ 127 $ 63 $ 101 $ 236 Gains $ 127 $ 63 $ 101 $ 236 Gains ( loss $ 63 $ 101 $ 236 Gains ( loss ) reclassified fr", + "gross_margin": "Gross margin 77,849 $ 73,723 12 % 6 % Gross margin $ 59,899 6 % Gross margin $ 59,899 $ 57,600 $ 56,193 4 Gross margin $ 59,899 $ 57,600 $ 56,193 4 % 3 $ 59,899 $ 57,600 $ 56,193 4 % 3 % Operating 59,899 $ 57,600 $ 56,193 4 % 3 % Operating income 57,600 $ 56,193 4 % 3 % Operating income $ 27,759 3 % Operating income $ 27,759 $ 26,764 $ 21,763 4 Operating income $ 27,759 $ 26,764 $ 21,763 4 % 23 $ 27,759 $ 26,764 $ 21,763 4 % 23 % Diluted 27,759 $ 26,764 $ 21,763 4 % 23 % Diluted earnings 26,764 $ 21,763 4 % Gross margin increased $ 2.3 7 Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million higher datacenter expense , . Operating income increased $ 995 million or 4 % , increased $ 995 million or 4 % , reflecting higher gross and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , due mainly to and marketing expense in Gross Margin Licensing % Gross Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 % ( $ 17,216 $ 17,044 $ 17,240 1 % ( 1 ) 17,216 $ 17,044 $ 17,240 1 % ( 1 ) % $ 17,240 1 % ( 1 ) % Hardware : Computing : Computing and Gaming Hardware 893 956 2,495 ( 7 ) Computing and Gaming Hardware 893 956 2,495 ( 7 ) % and Gaming Hardware 893 956 2,495 ( 7 ) % ( Hardware 893 956 2,495 ( 7 ) % ( 62 ) ( 7 ) % ( 62 ) % Phone Hardware 54 62 ) % Phone Hardware 54 0 0 * * Total ) % Phone gross margin $ 19,933 $ 20,046 $ 21,733 ( gross margin $ 19,933 $ 20,046 $ 21,733 ( 1 ) $ 19,933 $ 20,046 $ 21,733 ( 1 ) % ( $ 20,046 $ 21,733 ( 1 ) % ( 8 ) ( 1 ) % ( 8 ) % * Not meaningful * Not meaningful Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 D & C revenue increased & C revenue increased $ 5.6 billion or 17 % , increased $ 5.6 billion or 17 % , primarily due to . Revenue also increased $ 2.0 billion due to the acquisition Cost of revenue increased $ 5.7 billio gross margin increased $ 172 million or 1 % , increased $ 172 million or 1 % , primarily due to primarily due to a $ 390 million or 20 % decrease a $ 390 million or 20 % decrease in cost of due mainly to a $ 411 million or 23 % decline a $ 411 million or 23 % decline in traffic acquisition in traffic acquisition cost . 32 Table of Contents PART II of Contents PART II Item 7 Computing and Gaming Hardware Computing Gaming Hardware revenue increased $ 3.2 billion or 49 % , increased $ 3.2 billion or 49 % , pri gross margin wa $ 54 million , reflecting revenue of , reflecting revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 640 million or 10 % , increased $ 640 million or 10 % , due mainly to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of second quarter of fiscal year 2013 . Online advertising revenue increased Onli gross margin decreased $ 276 million or 13 % , decreased $ 276 million or 13 % , due to a , due to a $ 916 million or 20 % increase a $ 916 million or 20 % increase in cost of due mainly to a $ 541 million or 24 % increase a $ 541 million or 24 % increase in online advertising of revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher transaction cost . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 D & C revenue decreased & C reven gross margin decreased $ 1.7 billion or 8 % , decreased $ 1.7 billion or 8 % , primarily due to Cost of revenue increased $ 1.3 billion or 13 % , increased $ 1.3 billion or 13 % , primarily due to C Licensing revenue decreased $ 474 million or 2 % , decreased $ 474 million or 2 % , due mainly to Office Consumer revenue declined $ 618 million or 15 % , declined $ 618 million or 15 % , while Windows OEM while Windows OEM revenue declined 10 % . These decrease resulted which we estimate declined approximately gross margin decreased $ 196 million or 1 % , decreased $ 196 million or 1 % , due to decreased in part by a $ 278 million or 12 % decrease a $ 278 million or 12 % decrease in cost of in part by a $ 375 million increase in expense for Gaming Hardware revenue decreased $ 279 million or 4 % , decreased $ 279 million or 4 % , due primarily to Xbox Platform revenue decreased $ 1.3 billion or 22 % , decreased $ 1.3 billion or 22 % , due mainly to subscription revenue . We shipped 9.8 million Xbox 360 console dur gross margin decreased $ 1.5 billion or 62 % , decreased $ 1.5 billion or 62 % , due to a , due to a $ 1.3 billion or 30 % increase a $ 1.3 billion or 30 % increase in cost of , primarily due to $ 1.9 billion in product cost associated inventory adjustment of approximately $ 900 million . These cost were in part by a $ 920 million or 24 % decrease a $ 920 million or 24 % decrease in Xbox Platform with lower volume of Xbox 360 console sold . D & C Other revenue increased $ 415 million or 7 % , increased $ 41 gross margin increased $ 48 million or 2 % , increased $ 48 million or 2 % , due to increased in part by a $ 367 million or 9 % increase a $ 367 million or 9 % increase in cost of due mainly to a $ 327 million or 28 % increase a $ 327 million or 28 % increase in cost associated transaction , primarily a $ 257 million increase in royalty on million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Gross Margin 45,346 $ 41,770 9 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 % 5 $ 38,604 $ 36,261 $ 34,463 6 % 5 % Other 38,604 $ 36,261 $ 34,463 6 % 5 % Other 1,856 36,261 $ 34,463 6 % 5 % Other 1,856 921 579 6 % 5 % Other 1,856 921 579 102 % 59 % 5 % Other 1,856 921 579 102 % 59 % 5 % Other 1,856 921 579 102 % 59 % Total % Other 1,856 921 579 102 % 59 % Total Commercial 1,856 921 579 102 % 59 % Total Commercial gross mar gross margin $ 40,460 $ 37,182 $ 35,042 9 gross margin $ 40,460 $ 37,182 $ 35,042 9 % 6 $ 40,460 $ 37,182 $ 35,042 9 % 6 % 34 40,460 $ 37,182 $ 35,042 9 % 6 % 34 Table 37,182 $ 35,042 9 % 6 % 34 Table of Contents 35,042 9 % 6 % 34 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2014 compared with II Item 7 Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Commercial revenue increased $ 4.2 2013 Commercial revenue increased $ 4.2 billion or 9 % , increased $ gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with Commercial Licensing revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , due primarily to server product revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % , grew $ 334 million or 10 % , due mainly to Office Commercial revenue grew $ 253 million or 1 % , grew $ 253 million or 1 % , an gross margin increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , in line with Commercial Other revenue increased $ 1.9 billion or 33 % , increased $ 1.9 billion or 33 % , due to higher Commercial Cloud revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , due mainly to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , due mainly to Other gross margin increased $ 935 millio gross margin increased $ 2.1 billion or 6 % . increased $ 2.1 billion or 6 % . Commercial Licensing Commercial Commercial Licensing revenue increased $ 2.6 billion or 7 % , increased $ 2.6 billion or 7 % , due to increased Server product revenue increased $ 1.2 billion or 9 % , increased $ 1.2 billion or 9 % , driven primarily by Office Commercial revenue increased $ 622 million or 4 % , increased $ 622 million or 4 % , reflecting growth in Windows Commercial revenue increased $ 379 million or 13 % , increa gross margin Licensing gross margin increased $ 1.8 billion or 5 % , increased $ 1.8 billion or 5 % , due to higher in part by a $ 762 million or 29 % increase a $ 762 million or 29 % increase in cost of commercial offering , including $ 287 million higher intellectual property licensing Commercial Other revenue increased $ 1.0 billion or 22 % , increased $ 1.0 billion or 22 % , due to higher Commercial Cloud revenue grew $ 582 million or 82 % , grew $ 582 million or 82 % , due mainly to to higher revenue f gross margin increased Other gross margin increased $ 342 million or 59 % , increased $ 342 million or 59 % , due to higher in part by a $ 674 million or 17 % increase a $ 674 million or 17 % increase in cost of million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change Gross margin $ ( % Gross margin $ ( 494 ) $ 372 $ ( $ ( 494 ) $ 372 $ ( 582 ) ( ) $ 372 $ ( 582 ) ( 233 ) % $ ( 582 ) ( 233 ) % 164 % Corporate ) ( 233 ) % 164 % Corporate and Other revenue general availability . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Corporate and Other revenue decreased and Other revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerin gross margin decreased $ 866 million , due mainly to decreased revenue . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Corporate and Other revenue increased and Other revenue increased $ 888 million or 183 % , increased $ 888 million or 183 % , primarily due to deferral . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of revenue that had been deferred in fiscal year 2012 related to the Windows Upgrade Other gross margin increased $ 954 Gross margin 59,899 73,723 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 57,600 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 57,600 56,193 26,934 20,249 17,530 Gross margin 59,899 57,600 56,193 Research and development 20,249 17,530 Gross margin 59,899 57,600 56,193 Research and development 11,381 17,530 Gross margin 59,899 57,600 56,193 Research and development 11,381 10,411 57,600 56,193 Research and development 11,381 10,411 9,811 Sales and marketing 56,193 Research and development Gross margin Devices Ended June 30 , 2014 2013 2012 Gross margin Devices and June 30 , 2014 2013 2012 Gross margin Devices and Consumer Devices and Consumer Licensing $ 17,216 $ 17,044 $ 17,240 Hardware Consumer Licensing $ 17,216 $ 17,044 $ 17,240 Hardware : Computing $ 17,216 $ 17,044 $ 17,240 Hardware : Computing and Gaming : Computing and Gaming Hardware 893 956 2,495 Phone Hardware 54 Computing and Gaming Hardware 893 956 2,495 Phone Hardware 54 0 and Gaming Hardware 893 956 2,495 Phone Hardware 54 0 0 gross margin $ ) Total gross margin $ 59,899 $ 57,600 $ 56,193 Following gross margin $ 59,899 $ 57,600 $ 56,193 Following is operating $ 59,899 $ 57,600 $ 56,193 Following is operating expense by million ) Year Ended June 30 , 2014 2013 2012 Devices Year Ended June 30 , 2014 2013 2012 Devices and Consumer Ended June 30 , 2014 2013 2012 Devices and Consumer $ June 30 , 2014 2013 2012 Devices and Consumer $ 11,219 2012 Devices and Consumer $ 11,219 $ 10,625 $ 15,682 Commercial and Consumer $ 11,219 $ 10,625 Gross margin 13,415 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 5,660 14,462 15,787 59,899 Net income 5,244 6,558 5,660 4,612 ( b 15,787 59,899 Net inc Gross margin 11,840 $ 20,489 $ 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 6,055 15,702 14,294 57,600 Net income 4,466 6,377 6,055 ( c ) 14,294 57,600 Net income ", + "accumulated_depreciation": "accumulated depreciation of $ 14,793 and $ 12,513 13,011 9,991 of $ 14,793 and $ 12,513 13,011 9,991 Equity and other $ 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,597 9,991 Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset , net investment 14,597 10,844 Goodwill Accumulated depreciation ( 14,793 Total , at cost 27,804 22,504 Accumulated depreciation ( 14,793 ) 27,804 22,504 Accumulated depreciation ( 14,793 ) ( 12,513 ) Total depreciation ( 14,793 ) ( 12,513 ) Total , net $ ) Total , net $ 13,011 $ 9,991 During fiscal year , net $ 13,011 $ 9,991 During fiscal year 2014 , $ 9,991 During fiscal year 2014 , 2013 , and 2012 During fiscal year 2014 , 2013 , and 2012 , depreciation 2014 , 2013 , and 2012 , depreciation expense wa $ , depreciation expense wa $ 3.4 billion , $ 2.6 bil", + "capital_expenditure": "capital expenditure and equipment . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ 28.8 billion , due mainly to used for financing decreased $ 1.3 billion to $ 8.1 billion $ 1.3 billion to $ 8.1 billion , due mainly to due mainly to a $ 3.5 billion increase in proceeds from in part by a $ 1.1 billion increase in dividend paid dividend paid and a $ 98", + "debt": "debt used in investing decreased $ 5.0 billion to $ 18.8 billion $ 5.0 billion to $ 18.8 billion , due mainly to due mainly to a $ 10.5 billion decrease in cash used in part by a $ 4.4 billion increase in cash used asset , and a $ 1.2 billion increase in capital expenditure and equipment . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ debt . As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 22.6 2014 , we had $ 22.6 billion of issued and outstanding outstanding debt , comprising $ 2.0 billion of short-term debt and of short-term debt and $ 20.6 billion of long-term debt . Short-term debt As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 2.0 2014 , we had $ 2.0 billion of commercial paper issued a weighted-average interest rate of 0.12 % and maturity ranging from % and maturity ranging from 86 day to 91 day debt As of June 30 , 2014 , the total As of June 30 , 2014 , the total carrying value our long-term debt were $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively . These value are based on Level 2 input . 42 Table of on Level 2 input . 42 Table of Contents PART II of Contents PART II Item 7 The component of our long-term a follows a of June 30 , 2014 : Due Date a of June 30 , 2014 : Due Date Face Value In million ) Notes September 25 , 2015 $ 1,750 1.625 ) Notes Septem debt security . ( b ) In December 2013 , we issued \u20ac3.5 billion ( c ) In April 2013 , we issued \u20ac550 million annually . As of June 30 , 2014 , the aggregate As of June 30 , 2014 , the aggregate unamortized discount our long-term debt wa $ 100 million . Unearned Revenue Unearned Revenue Unearned revenue at June 30 , 2014 wa comprised mainly revenue at June 30 , 2014 wa comprised mainly of unearned . Unearned revenue at June 30 , 2014 also included payment revenue at June 30 , 2014 also included payme debt In million ) 2015 2016-2017 2018-2019 Thereafter Total Long-term debt : a ) Principal payment $ 0 $ 2,500 $ 3,300 $ Principal payment $ 0 $ 2,500 $ 3,300 $ 14,945 $ $ 0 $ 2,500 $ 3,300 $ 14,945 $ 20,745 Interest $ 2,500 $ 3,300 $ 14,945 $ 20,745 Interest payment 566 $ 3,300 $ 14,945 $ 20,745 Interest payment 566 1,069 1,015 14,945 $ 20,745 Interest payment 566 1,069 1,015 6,110 8,760 Construction $ 20,745 Interest payment 566 1,069 1,015 6,110 8,760 Construction commitment 20,745 Interest payme Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) deferred income tax of $ 13.3 billion from the amount presented for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the at reasonable interest rate . 45 Table of Contents PART II of Contents PART II Item 7 RECENT ACCOUNTING GUIDANCE Recently Adopted Adopted Accounting Guidance In December 2011 , the Financial Accounting Standards net exposure . In January 20 debt 2,000 Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 0 Current 7,432 $ 4,828 Short-term debt 2,000 0 Current portion of long-term $ 4,828 Short-term debt 2,000 0 Current portion of long-term debt Current portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 Income debt 0 2,999 Accrued compensation 4,797 4,117 Income tax 782 592 0 2,999 Accrued compensation 4,797 4,117 Income tax 782 592 Short-term compensati debt 20,645 12,601 3,597 Total current liability 45,625 37,417 Long-term debt 20,645 12,601 Long-term liability 45,625 37,417 Long-term debt 20,645 12,601 Long-term unearned revenue 2,008 45,625 37,417 Long-term debt 20,645 12,601 Long-term unearned revenue 2,008 1,760 20,645 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 1,709 2,008 1,760 Deferred income tax 2,728 1,709 Other long-term liability 11,594 debt , maturity of 90 day or le , net day or le , net 500 0 0 Proceeds from issuance or le , net 500 0 0 Proceeds from issuance of le , net 500 0 0 Proceeds from issuance of debt Proceeds from issuance of debt 10,350 4,883 0 Repayments of debt from issuance of debt 10,350 4,883 0 Repayments of debt ( issuance of debt 10,350 4,883 0 Repayments of debt ( 3,888 0 Repayments of debt ( 3,888 ) ( 1,346 ) 0 debt ( 3,888 ) ( 1,346 ) 0 Common stock issued 3,888 ) ( 1,346 ) 0 Common stock issued 607 931 ) 0 C Debt Investment a of June 30 , 2014 . Debt Investment Maturities ( Basis Estimated Fair Value June 30 , 2014 Due in one Fair Value June 30 , 2014 Due in one year or one year or le $ 28,681 $ 28,719 Due after one or le $ 28,681 $ 28,719 Due after one year through one year through five year 46,734 46,881 Due after five year year through five year 46,734 46,881 Due after five year through Due after five year through 10 year 2,910 2,987 Due after five year through 10 year 2,910 2,987 Due after 10 year y debt were in excess of $ 1.0 billion . As a result required to be posted . 69 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2014 June 30 , risk : June 30 , 2014 June 30 , 2013 Assets June 30 , 2014 June 30 , 2013 Assets Liabilities Assets , 2014 June 30 , 2013 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 10 $ 39 $ 0 $ exchange contract $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) $ 39 DEBT As 2,567 Total $ 6,981 NOTE 12 \u2014 DEBT As of June \u2014 DEBT As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 22.6 2014 , we had $ 22.6 billion of issued and outstanding outstanding debt , comprising $ 2.0 billion of short-term debt and of short-term debt and $ 20.6 billion of long-term debt . debt . As of June 30 , 2013 , we had As of June 30 , 2013 , we had $ 15.6 2013 , we had $ 15.6 billion of issued and outstanding Short-term Debt As of June 30 , 2014 , we had As of June 30 , 2014 Debt As of June 30 , 2014 , the total As of June 30 , 2014 , the total carrying value our long-term debt were $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively . This current portion , of $ 15.6 billion and $ 15.8 billion $ 15.6 billion and $ 15.8 billion , respectively , a respectively , a of June 30 , 2013 . These estimated a of June 30 , 2013 . These estimated fair value value are based on Level 2 input . 78 Table of on Level 2 input . 78 Table of Contents PART II debt security . ( b ) In December 2013 , we issued \u20ac3.5 billion ( c ) In April 2013 , we issued \u20ac550 million our debt for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 wa $ 2014 , 2013 , and 2012 wa $ 509 million , , and 2012 wa $ 509 million , $ 371 million $ 509 million , $ 371 million , and $ 344 371 million , and $ 344 million , respectively . As respectively . As of June 30 , 2014 and 2013 , As of June 30 , 2014 and 2013 , the aggregate June 30 , 2014 and 2013 , the Debt Service Maturities of our million ) Year Ending June 30 , 2015 $ 0 2016 Year Ending June 30 , 2015 $ 0 2016 2,500 2017 June 30 , 2015 $ 0 2016 2,500 2017 0 2018 30 , 2015 $ 0 2016 2,500 2017 0 2018 1,050 , 2015 $ 0 2016 2,500 2017 0 2018 1,050 2019 2015 $ 0 2016 2,500 2017 0 2018 1,050 2019 2,250 $ 0 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 0 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 Total 2,500 2017 0 2018 1,05", + "share_repurchase": "share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date notice . As of June 30 , 2014 , $ 35.1 As of June 30 , 2014 , $ 35.1 billion remained 30 , 2014 , $ 35.1 billion remained of the $ billion remained of the $ 40.0 billion share repurchase program . program . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share of Microsoft common Microsoft common stock for $ 6.4 billion ; 128 million share for share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . During fiscal and expired September 30 , 2013 . During fiscal year 2013 2013 . During fis share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2014 , $ 35.1 As of June 30 , 2014 , $ 35.1 billion remained 30 , 2014 , $ 35.1 billion remained of our $ billion remained of our $ 40.0 billion share repu share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . ( b expired on September 30 , 2013 . ( b ) All share repurchased in fiscal year 2013 and 2012 ", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 2.63 ( b ) $ 2.58 2.63 ( b ) $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 $ 2.10 Cash dividend declared d ) $ 2.69 $ 2.10 Cash dividend declared per share dividend declared per share $ 1.12 $ 0.92 $ 0.80 $ per share $ 1.12 $ 0.92 $ 0.80 $ 0.64 $ $ 1.12 $ 0.92 $ 0.80 $ 0.64 $ 0.52 Cash $ 0.92 $ 0.80 $ 0.64 $ 0.52 Cash , cash $ 0.80 $ 0.64 $ 0.52 Cash , cash equivalent , , and short-term investment $ 85,709 $ 77,022 $ 63,040 $ short-term inve earnings per share by $ 0.05 . ( c ) Includes the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( \u20ac561 million ) earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( d ) Includes and net income by $ 6.2 billion and diluted earnings per earnings earnings per share Diluted earnings per share $ 2.63 $ 2.58 $ 2.00 2 per share $ 2.63 $ 2.58 $ 2.00 2 % 29 $ 2.63 $ 2.58 $ 2.00 2 % 29 % Fiscal 2.63 $ 2.58 $ 2.00 2 % 29 % Fiscal year 2.58 $ 2.00 2 % 29 % Fiscal year 2014 compared % 29 % Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Revenue increased $ 9.0 billion year 2013 Revenue increased $ 9.0 billion or 12 % , increased $ 9.0 billion or 12 % , demonstrating growth across from our cloud-based offering . 30 Table of Conten Earnings per share $ 22,074 $ 21,863 $ 16,978 Earnings per share : Basic per share : Basic $ 2.66 $ 2.61 $ 2.02 Diluted : Basic $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 $ 2.00 Weighted 2.02 Diluted $ 2.63 $ 2.58 $ 2.00 Weighted average share $ 2.63 $ 2.58 $ 2.00 Weighted average share outstanding : average share outstanding : Basic 8,299 8,375 8,396 Diluted 8,399 8,470 share outstanding : Basic 8,299 8,375 8,396 Diluted 8,399 8,470 8,506 outs EARNINGS PER SHARE Basic option and stock award . 64 Table of Contents PART II of Contents PART II Item 8 The component of basic and share ) Year Ended June 30 , 2014 2013 2012 Net Year Ended June 30 , 2014 2013 2012 Net income available Ended June 30 , 2014 2013 2012 Net income available for June 30 , 2014 2013 2012 Net income available for common shareholder ( A ) $ 22,074 $ 21,863 $ 16,978 Weighted A ) $ 22,074 $ 21,863 $ 16,978 Weighted average outstanding $ 22,074 $ 21,863 $ 16,978 Weighted average outstandi Earnings Per Share equivalent ( C ) 8,399 8,470 8,506 Earnings Per Share Basic ( C ) 8,399 8,470 8,506 Earnings Per Share Basic ( Basic ( A/B ) $ 2.66 $ 2.61 $ 2.02 Diluted A/B ) $ 2.66 $ 2.61 $ 2.02 Diluted ( A/C $ 2.66 $ 2.61 $ 2.02 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.63 $ 2.58 $ 2.00 Anti-dilutive A/C ) $ 2.63 $ 2.58 $ 2.00 Anti-dilutive stock-based award $ 2.63 $ 2.58 $ 2.00 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20 earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.1 billion in cash . Yammer price were goodwill of $ 937 million and iden earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share 0.62 2.66 Diluted earnings per share 0.62 0.78 0.68 0.55 ( b Diluted earnings per share 0.62 0.78 0.68 0.55 ( b ) earnings per share 0.62 0.78 0.68 0.55 ( b ) 2.63 per share 0.62 0.78 0.68 0.55 ( b ) 2.63 ( 0.68 0. earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share 0.53 2.61 Diluted earnings per share 0.53 0.76 0.72 ( c ) Diluted earnings per share 0.53 0.76 0.72 ( c ) 0.59 earnings per share 0.53 0.76 0.72 ( c ) 0.59 ( 0.76 0.72 ( c ) 0.59 ( d ) 2.58 ( ) 0.59 ( d ) 2.58 ( e earnings per share by $ 0.05 . 95 Table of Contents share by $ 0.05 . 95 Table of Contents PART II of Contents PART II Item 8 ( c ) Includes a the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( \u20ac561 million ) earnings per share by $ 0.09 . ( d ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( e ) Includes the European Commission in March earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . NOTE 23 \u2014 SUBSEQUENT by $ 0.07 . NOTE 23 \u2014 SUBSEQUENT EVENT On July \u2014 SUBSEQUENT EVENT On July 17 , 2014 , we announced EVENT On July 17 , 2014 , we announced a restructuring We will eliminate up to 18,000 position over the next year the next year , including 12,500 professional and factory position relat", + "tax_rate": "tax rate for tax rate for fiscal year 2014 and 2013 wa approximately 21 for fiscal year 2014 and 2013 wa approximately 21 % and 2014 and 2013 wa approximately 21 % and 19 % , wa approximately 21 % and 19 % , respectively . Our Rico . Our fiscal year 2014 effective rate increased by 2 2014 effective rate increased by 2 % from fiscal year 2013 2 % from fiscal year 2013 mainly due to adjustment of due to adjustment of $ 458 million to prior year \u2019 operating system revenue decreased $ 655 million in fiscal tax rate for tax rate for fiscal year 2013 and 2012 wa approximately 19 for fiscal year 2013 and 2012 wa approximately 19 % and 2013 and 2012 wa approximately 19 % and 24 % , wa approximately 19 % and 24 % , respectively . Our Rico . Our fiscal year 2013 effective rate decreased by 5 2013 effective rate decreased by 5 % from fiscal year 2012 5 % from fiscal year 2012 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment wa recorded in fiscal year 2012 . tax rate by 10 % in fiscal year 2012 10 % in fiscal year 2012 . In addition , in addition , in fiscal year 2013 and 2012 , we recognized in fiscal year 2013 and 2012 , we recognized a reduction we recognized a reduction of 18 % and 21 % , reduction of 18 % and 21 % , respectively , to tax rate for fiscal year 2013 wa primarily offset by a wa primarily offset by a 1 % increase related to the operating system revenue increased $ 209 million in fiscal year 2013 209 million in fiscal year 2013 , while Micro tax rate for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 , by 2014 , 2013 , and 2012 , by $ 7.0 billion and 2012 , by $ 7.0 billion , $ 6.5 billion $ 7.0 billion , $ 6.5 billion , and $ 6.2 6.5 billion , and $ 6.2 billion , respectively . As respectively . As of June 30 , 2014 , 2013 , As of June 30 , 2014 , 2013 , and 2012 June 30 , 2014 , 2013 , and 2012 , we 2014 , 2013 , and 2012 , we had accrued interest uncertain tax position of $ 1.5 billion , $ 1.3 billion $ 1.5 bil", + "geographic_information": "Geographic a the transition to Office 365 Consumer , our subscription-based cloud other productivity service . Office 365 Consumer revenue is included in & C Other segment . 4 Table of Contents PART I of Contents PART I Item 1 The Windows Phone operating system service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively . Surface device were first released in October 2012 . Our latest Surface devic Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on first quarter of fiscal year 2014 , we changed our organizational segment performance during fiscal year 2014 . Our reportable segment are described below . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all for total consideration of $ 9.5 billion . This amount wa wa greater than the $ 7.2 billion disclosed previously , primarily , primarily due to $ 1.5 billion of cash acq Geographic segment performance during fiscal year 2014 . This change impacted Note . This change impacted Note 10 \u2013 Goodwill , Note 14 10 \u2013 Goodwill , Note 14 \u2013 Unearned Revenue , and Unearned Revenue , and Note 21 \u2013 Segment Information and Geographic remitted to governmental authority . 58 Table of Contents PART II of Contents PART II Item 8 Revenue recognition for multiple-element arrangement same revenue recognition timing . 59 Table of Contents PART II of Contents PART II Item 8 Revenue related to pho Geographic first quarter of fiscal year 2014 , we changed our organizational for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2014 or May 1 a of May 1 , 2014 or May 1 , 2013 1 , 2014 or May 1 , 2013 . Upon completion 2014 or May 1 , 2013 . Upon completion of the completion of the fiscal year 2012 test , the goodwill of goodwill impairment charge of $ 6.2 billion also represented our accumulated goodwill impairment a of June 30 , 2014 and 2013 . a of June 30 , 2014 an GEOGRAPHIC first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial segment performance during fiscal year 2014 . On April 25 , year 2014 . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 \u2013 Business Combinations for additional fourth quarter of fiscal year 2014 . Our reportable segment are segment are described below . 91 Table of Contents PART II of Contents PART II Item 8 Device", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on December 3 , 2014 are incorporated by held on December 3 , 2014 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2014 INDEX Page PART Year Ended June 30 , 2014 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 14 Item 1A . Risk Factors of the Registrant common stock for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 Common stock issued 3,888 ) ( 1,346 ) 0 Common stock issued 607 931 ) 0 Common stock issued 607 931 1,913 Common stock repurchased 0 Common stock issued 607 931 1,913 Common stock repurchased ( Common stock issued 607 931 1,913 Common stock repurchased ( 7,316 1,913 Common stock repurchased ( 7,316 ) ( 5,360 ) ( repurchased ( 7,316 ) ( 5,360 ) ( 5,029 ) Common ) ( 5,360 ) ( 5,029 ) Common stock cash dividend stock cash dividend paid ( 8,879 ) ( 7,455 ) ( paid ( 8,879 ) ( 7,455 ) ( 6,385 ) Excess ) ( 7,455 ) Common stock and Ended June 30 , 2014 2013 2012 Common stock and paid-in June 30 , 2014 2013 2012 Common stock and paid-in capital , beginning of period $ 67,306 $ 65,797 $ 63,415 Common of period $ 67,306 $ 65,797 $ 63,415 Common stock issued $ 67,306 $ 65,797 $ 63,415 Common stock issued 607 920 $ 63,415 Common stock issued 607 920 1,924 Common stock repurchased 63,415 Common stock issued 607 920 1,924 Common stock repurchased ( Common stock issued 607 920 1,924 Common stock repurchased ( 2,328 1,924 Comm Common stock cash 8,195 ) Net income 22,074 21,863 16,978 Common stock cash dividend ) Net income 22,074 21,863 16,978 Common stock cash dividend ( Common stock cash dividend ( 9,271 ) ( 7,694 ) ( dividend ( 9,271 ) ( 7,694 ) ( 6,721 ) Common ) ( 7,694 ) ( 6,721 ) Common stock repurchased ( ) Common stock repurchased ( 4,988 ) ( 3,418 ) ( repurchased ( 4,988 ) ( 3,418 ) ( 2,918 ) Balance ) ( 3,418 ) ( 2,918 ) Balance , end of Balance , end of period 17,710 9,895 ( 856 ) Accumulated , end of period 17,710 9, common stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based award Dilutive effect of stock-based award 100 95 110 Common stock and effect of stock-based award 100 95 110 Common stock and common of stock-based award 100 95 110 Common stock and common stock stock equivalent ( C ) 8,399 8,470 8,506 Earnings Per Share equivalent ( C ) 8,399 8,470 8,506 Earnings Per Share Basic ( C ) 8,399 8,470 8,506 common stock . NOTE 21 \u2014 SEGMENT INFORMATION AND GEOGRAPHIC first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial segment performance during fiscal year 2014 . On April 25 , year 2014 . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 \u2013 Business Combinations for additional fourth quarter of fiscal year 2014 . Our reportable segment are segment are described below . 91 Table of Con", + "fair_value_measurements": "Fair Value Measurements . \u2013 Fair Value Measurements . 70 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2014 2013 2012 Foreign Year Ended June 30 , 2014 2013 2012 Foreign Exchange Contracts Ended June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 14 ) $ 70 $ 52 $ ( 14 ) $ 70 $ 52 Hedged item 6 14 ) $ 70 $ 52 Hedged item 6 ( 69 70 $ 52 Hedged ite FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2014 Assets Mutual fund Fair Value June 30 , 2014 Assets Mutual fund $ 590 2014 Assets Mutual fund $ 590 $ 0 $ 0 $ Mutual fund $ 590 $ 0 $ 0 $ 590 $ $ 590 $ 0 $ 0 $ 590 $ 0 $ $ 0 $ 0 $ 590 $ 0 $ 590 Commercial $ 0 $ 590 $ 0 $ 590 Commercial paper 0 $ 590 $ 0 $ 590 Commercial paper 0 189 0 0 $ 590 Commercial paper 0 1", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 14 ) $ 70 $ 52 $ ( 14 ) $ 70 $ 52 Hedged item 6 14 ) $ 70 $ 52 Hedged item 6 ( 69 70 $ 52 Hedged item 6 ( 69 ) ( 50 52 Hedged item 6 ( 69 ) ( 50 ) Total 6 ( 69 ) ( 50 ) Total amount of ineffectiveness amount of ineffectiveness $ ( 8 ) $ 1 $ 2 $ ( 8 ) $ 1 $ 2 Equity Contracts Derivatives 8 ) $ 1 $ 2 Equity Contracts Derivatives", + "derivative_instruments": "Derivative Instruments counterparty credit risk : June 30 , 2014 June 30 , risk : June 30 , 2014 June 30 , 2013 Assets June 30 , 2014 June 30 , 2013 Assets Liabilities Assets , 2014 June 30 , 2013 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 10 $ 39 $ 0 $ exchange contract $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) $ 39 $ 0 $ ( 97 ) $ 41 $ 87 $ ( 97 ) $ 41 $ 87 $ ( 63 97 ) $ 41 $ 87 $ ( 63 ) Equity 41 $ 87 $ ( 63 ) Equity contract 177 0 ( 63 ) Equity contract 177 0 0 ( 21 ) 63 ) Eq" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-15-272806/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-15-272806/full-submission_features.json new file mode 100644 index 0000000..958a07e --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-15-272806/full-submission_features.json @@ -0,0 +1,23 @@ +{ + "revenue": "revenue is included in service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively . Surface is device , the Surface Pro 3 and Surface 3 , were Surface Pro 3 and Surface 3 , were released in June , were released in June 2014 and May 2015 , respectively in June 2014 and May 2015 , respectively . Competition Our latest generation console in November 2012 . Sony released their latest latest generat revenue in each have a portfolio of over 57,000 U.S. and international patent issued international patent issued and over 35,000 pending . While we employ development of our product . 12 Table of Contents PART I of Contents PART I Item 1 Investing in the Future Microsoft Bing or Windows with Office 365 subscription . There are two \u201c EDAs \u201d ) . 13 Table of Contents PART I of Contents PART I Item 1 Organizations also license our product portal and channel , Office 365 , Windows Phone Store , Microsoft Az revenue . 2015 , 2014 , or 2013 revenue . Our practice is executive officer a of July 30 , 2015 were a follows a of July 30 , 2015 were a follows : Name with the Company Satya Nadella 47 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 45 Executive Vice President , Chief Marketing Officer Kathleen T. Hogan 49 Executive Vice President , Human Human Resources Amy E. Hood 43 Executive Vice President , Chief Chief Financial Officer Margaret Johnson 53 Executive Vice Preside Revenue $ 93,580 2014 ( b ) 2013 2012 2011 Revenue $ 93,580 $ ( b ) 2013 2012 2011 Revenue $ 93,580 $ 86,833 2013 2012 2011 Revenue $ 93,580 $ 86,833 $ 77,849 $ 2011 Revenue $ 93,580 $ 86,833 $ 77,849 $ 73,723 $ $ 93,580 $ 86,833 $ 77,849 $ 73,723 $ 69,943 Gross $ 86,833 $ 77,849 $ 73,723 $ 69,943 Gross margin $ $ 77,849 $ 73,723 $ 69,943 Gross margin $ 60,542 $ $ 69,943 Gross margin $ 60,542 $ 59,755 $ 57,464 $ Gross margin $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ 54 revenue increased 9 % , driven by growth and we ended fiscal year 2015 with more than 17,000 Enterprise year 2015 with more than 17,000 Enterprise Mobility Services customer . wa calculated by multiplying June 2015 revenue by twelve month . revenue by twelve month . 29 Table of Contents PART II of Contents PART II Item 7 \u2022 We reached over 8 7 \u2022 We reached over 8 million paid Dynamics seat and We currently have more than 15 million Office 365 consumer subscriber more than 15 million Office 365 consumer revenue Hardware segment ha generated approximately 40-50 % of it yearly revenue deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Segment information appearing in Note 22 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on cash flow . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all other patent licensing revenue . 31 Table of Conte Revenue $ 93,580 2014 Percentage Change 2014 Versus 2013 Revenue $ 93,580 $ 86,833 2014 Versus 2013 Revenue $ 93,580 $ 86,833 $ 77,849 8 2013 Revenue $ 93,580 $ 86,833 $ 77,849 8 % 12 $ 93,580 $ 86,833 $ 77,849 8 % 12 % Gross 93,580 $ 86,833 $ 77,849 8 % 12 % Gross margin 86,833 $ 77,849 8 % 12 % Gross margin $ 60,542 12 % Gross margin $ 60,542 $ 59,755 $ 57,464 1 Gross margin $ 60,542 $ 59,755 $ 57,464 1 % 4 $ 60,542 $ 59,755 $ 57,464 1 % 4 % Operating 60,542 $ 59,755 $ 57,464 1 % 4 % Operating income Revenue increased $ 6.7 billion year 2014 Revenue increased $ 6.7 billion or 8 % , increased $ 6.7 billion or 8 % , reflecting a full foreign currency impact of approximately 2 % . Gross margin increased . Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , primarily due to in part by a $ 6.0 billion or 22 % increase a $ 6.0 billion or 22 % increase in cost of Commercial Cloud , including $ 396 million of higher datacenter expense of our reportable segment . 32 Table of Conte Revenue increased $ 9.0 billion year 2013 Revenue increased $ 9.0 billion or 12 % , increased $ 9.0 billion or 12 % , demonstrating growth across . Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million of higher datacenter expense . Operating income increased $ 995 million or 4 % , increased $ 995 million or 4 % , reflecting higher gross and d Revenue Licensing $ 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 14,969 $ Versus 2013 Revenue Licensing $ 14,969 $ 19,528 $ 19,427 ( Revenue Licensing $ 14,969 $ 19,528 $ 19,427 ( 23 ) $ 14,969 $ 19,528 $ 19,427 ( 23 ) % 1 $ 19,528 $ 19,427 ( 23 ) % 1 % Hardware 19,427 ( 23 ) % 1 % Hardware : Computing and : Computing and Gaming Hardware 10,183 9,093 6,149 12 % 48 Computing and Gaming Hardware 10,183 9,093 6,149 12 % 48 % and Gaming Hardware 10,183 9,093 6,149 12 % 48 % Phone Gaming Hard revenue $ 41,501 $ 37,617 $ 32,007 10 Consumer revenue $ 41,501 $ 37,617 $ 32,007 10 % 18 $ 41,501 $ 37,617 $ 32,007 10 % 18 % Gross 41,501 $ 37,617 $ 32,007 10 % 18 % Gross Margin 37,617 $ 32,007 10 % 18 % Gross Margin Licensing $ % Gross Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( 20 ) $ 13,870 $ 17,439 $ 16,985 ( 20 ) % 3 $ 17,439 $ 16,985 ( 20 ) % 3 % Hardware 16,985 ( 20 ) % 3 % Hardware : Computing and : Computing and Gaming Hardware 1,788 892 956 1 revenue increased & C revenue increased $ 3.9 billion or 10 % , increased $ 3.9 billion or 10 % , primarily due to , Office Consumer and Office 365 Consumer revenue declined 17 % Office 365 Consumer revenue declined 17 % . D & C C gross margin decreased $ 1.4 billion or 7 % , decreased $ 1.4 billion or 7 % , reflecting higher cost cost of revenue increased $ 5.3 billion or 30 % , increased $ 5.3 billion or 30 % , mainly due to C Licensing revenue decreased $ 4.6 billion or 23 % , decreased $ 4.6 billio revenue declined $ 1.9 billion or 15 % , declined $ 1.9 billion or 15 % , primarily due to primarily due to decline of 15 % in OEM Pro revenue in OEM Pro revenue and 16 % in OEM non-Pro revenue Phone operating system decreased $ 1.4 billion or 55 % , decreased $ 1.4 billion or 55 % , primarily due to Office Consumer revenue declined $ 946 million or 29 % , declined $ 946 million or 29 % , reflecting the transition transition of customer to Office 365 Consumer , where revenue is Licensing gross margin d revenue increased $ 1.1 billion or 12 % , increased $ 1.1 billion or 12 % , primarily due to Platform . Surface revenue increased 65 % to $ 3.6 billion increased 65 % to $ 3.6 billion , primarily due to primarily due to Surface Pro 3 unit sold . Surface Pro unit sold . Surface Pro 3 wa released in June 2014 3 wa released in June 2014 . Xbox Platform revenue decreased Xbox Platform revenue decreased $ 385 million or 6 % , decreased $ 385 million or 6 % , driven by lower game revenue . We sold 12.1 milli revenue increased $ 5.5 billion , a we sold billion , a we sold 36.8 million Lumia phone and 126.8 36.8 million Lumia phone and 126.8 million other non-Lumia phone in non-Lumia phone in fiscal year 2015 , compared with 5.8 million year 2015 , compared with 5.8 million and 30.3 million sold compared with 5.8 million and 30.3 million sold , respectively , respectively , in fiscal year 2014 following the acquisition of NDS fourth quarter of fiscal year 2014 . Phone Hardware gross margin Hardware gross mar revenue increased $ 4.9 billion , and included $ billion , and included $ 476 million of amortization of acquired intangible asset in fiscal year 2015 . We recorded goodwill and asset impairment charge of $ 7.5 billion related to our Phone fourth quarter of fiscal year 2015 . See further discussion under C Other revenue increased $ 1.8 billion or 26 % , increased $ 1.8 billion or 26 % , mainly due to including Minecraft , and Office 365 Consumer . D & C foreign currency impact of approximately 2 % . Se revenue Search advertising revenue increased $ 651 million or 22 % , increased $ 651 million or 22 % , primarily driven by store transaction revenue increased $ 531 million , driven by increased video game revenue increased $ 367 million , mainly due to acquisition of Mojang in November 2014 , and new Xbox title the current year . Office 365 Consumer revenue increased $ 323 365 Consumer revenue increased $ 323 million , reflecting subscriber growth Other gross margin increased $ 629 million or 45 % , i revenue increased & C revenue increased $ 5.6 billion or 18 % , increased $ 5.6 billion or 18 % , primarily due to . Revenue also increased $ 2.0 billion due to the acquisition Cost of revenue increased $ 5.7 billion or 47 % , increased $ 5.7 billion or 47 % , mainly due to of revenue also increased $ 1.9 billion due to NDS . C Licensing revenue increased $ 101 million or 1 % , increased $ 101 million or 1 % , mainly due to Windows Phone revenue increased $ 822 million or 48 % , increased $ 822 million revenue under our joint strategic initiative with Nokia , 35 Table of Contents PART II of Contents PART II Item 7 which concluded in conjunction with sale of Windows declined $ 274 million or 35 % , declined $ 274 million or 35 % , mainly due to to the launch of Windows 8 in the prior year . Windows OEM revenue declined $ 136 million or 1 % , declined $ 136 million or 1 % , due to continued offset in part by a 12 % increase in OEM Pro Office Consumer revenue declined $ 249 million or 7 % , declined $ 2 revenue increased $ 2.9 billion or 48 % , increased $ 2.9 billion or 48 % , primarily due to Xbox Platform revenue increased $ 1.7 billion or 34 % , increased $ 1.7 billion or 34 % , mainly due to which wa released in November 2013 , offset in part by decrease in sale of Xbox 360 . We sold 11.7 million Xbox 360 . We sold 11.7 million Xbox console during fiscal Xbox console during fiscal year 2014 compared with 9.8 million Xbox fiscal year 2014 compared with 9.8 million Xbox console during fiscal Xbox c revenue increased $ . Surface revenue increased $ 1.3 billion or 157 % , increased $ 1.3 billion or 157 % , mainly due to , due to a $ 3.0 billion or 58 % increase a $ 3.0 billion or 58 % increase in cost of cost of revenue increased $ 2.1 billion or 72 % , increased $ 2.1 billion or 72 % , mainly due to cost of revenue increased $ 970 million or 51 % , increased $ 970 million or 51 % , mainly due to inventory adjustment of approximately $ 900 million in fiscal year 2013 900 million in fiscal year 2013 revenue wa $ 2.0 billion in fiscal year 2014 2.0 billion in fiscal year 2014 , reflecting sale of Lumia acquisition of NDS on April 25 , 2014 . Since the NDS on April 25 , 2014 . Since the acquisition , the acquisition , we sold 5.8 million Lumia phone and 30.3 5.8 million Lumia phone and 30.3 million other non-Lumia phone in non-Lumia phone in fiscal year 2014 . Phone Hardware gross margin Hardware gross margin wa $ 54 million in fiscal year 2014 54 million in fiscal year 2014 , reflecting revenue of revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 583 million or 9 % , increased $ 583 million or 9 % , mainly due to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of second quarter of fiscal year 2013 . Online advertising revenue increased Online advertising revenue increased $ 497 million or 14 % . increa revenue . Search advertising revenue increased 39 % , primarily due to offset in part by a 25 % reduction in display advertising display advertising revenue . Office 365 Consumer revenue grew $ 316 365 Consumer revenue grew $ 316 million , primarily reflecting subscriber . We ended fiscal year 2014 with over five million subscriber Other gross margin decreased $ 558 million or 29 % , decreased $ 558 million or 29 % , due to a , due to a $ 1.1 billion or 25 % increase a $ 1.1 billion or 25 % increase in revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher higher resale transaction cost . 36 Table of Contents PART II of Contents PART II Item 7 Commercial ( In million , million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Cha Revenue Licensing $ 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 41,039 $ Versus 2013 Revenue Licensing $ 41,039 $ 42,085 $ 39,778 ( Revenue Licensing $ 41,039 $ 42,085 $ 39,778 ( 2 ) $ 41,039 $ 42,085 $ 39,778 ( 2 ) % 6 $ 42,085 $ 39,778 ( 2 ) % 6 % Other 39,778 ( 2 ) % 6 % Other 10,836 7,546 5,661 ) % 6 % Other 10,836 7,546 5,661 44 % 33 % 6 % Other 10,836 7,546 5,661 44 % 33 % 6 % Other 10,836 7,546 5,661 44 % 33 % Total % Other 10,836 7,546 5,661 44 % 33 % Total Commercial 10,836 7,5 revenue $ % Total Commercial revenue $ 51,875 $ 49,631 $ 45,439 5 Commercial revenue $ 51,875 $ 49,631 $ 45,439 5 % 9 $ 51,875 $ 49,631 $ 45,439 5 % 9 % Gross 51,875 $ 49,631 $ 45,439 5 % 9 % Gross Margin 49,631 $ 45,439 5 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( 2 ) $ 37,830 $ 38,615 $ 36,280 ( 2 ) % 6 $ 38,615 $ 36,280 ( 2 ) % 6 % Other 36,280 ( 2 ) % 6 % Other 4,199 1,855 922 ) % 6 % Other 4,199 1,855 922 126 % revenue increased $ 2.2 2014 Commercial revenue increased $ 2.2 billion or 5 % , increased $ 2.2 billion or 5 % , mainly due to foreign currency impact of approximately 2 % . Our server product server product and service grew 9 % . Our Office Commercial Commercial product and service declined 1 % . Commercial gross margin Commercial gross margin increased $ 1.6 billion or 4 % . increased $ 1.6 billion or 4 % . Commercial Licensing Commercial Commercial Licensing revenue decreased $ 1.0 billion or 2 % , revenue Office Commercial revenue declined $ 2.5 billion or 13 % , declined $ 2.5 billion or 13 % , due to lower , customer transitioning to Office 365 Commercial , and decline in server product revenue grew $ 1.1 billion or 7 % , grew $ 1.1 billion or 7 % , primarily driven by Licensing gross margin decreased $ 785 million or 2 % , decreased $ 785 million or 2 % , in line with Commercial Other revenue increased $ 3.3 billion or 44 % , increased $ 3.3 billion or 44 % , primarily due to foreign currency revenue Commercial Cloud revenue grew $ 3.0 billion or 106 % , grew $ 3.0 billion or 106 % , mainly due to higher premium mix of Office 365 Commercial , a well a Other gross margin increased $ 2.3 billion or 126 % , increased $ 2.3 billion or 126 % , due to higher in part by a $ 946 million or 17 % increase a $ 946 million or 17 % increase in cost of Commercial Cloud . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Commercial revenue increased $ 4.2 2013 Commercial revenue increased $ 4.2 billion or 9 % , increased $ 4.2 billion or 9 % , mainly due to , Office Commercial and Office 365 Commercial revenue grew 7 % Office 365 Commercial revenue grew 7 % . Collectively , our including Microsoft Azure , grew 13 % . Commercial gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with in line with revenue . 37 Table of Contents PART II of Contents PART II Item 7 Commercial Licensing Commercial Licensing revenue revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , primarily due to server product revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % , grew $ 334 million or 10 % , mainly due to Office Commercial revenue grew $ 219 million or 1 % , grew $ 219 million or 1 % , and wa impacted by customer transitioning to Office 365 Commercial . Commercial Licensing gross Licensing gross margin increased $ 2.3 revenue increased $ 1.9 billion or 33 % , increased $ 1.9 billion or 33 % , due to higher Commercial Cloud revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , mainly due to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , mainly due to Other gross margin increased $ 933 million or 101 % , increased $ 933 million or 101 % , due to higher in part by a $ 952 million or 20 % increas Revenue $ 204 2014 Percentage Change 2014 Versus 2013 Revenue $ 204 $ ( 2014 Versus 2013 Revenue $ 204 $ ( 415 ) $ Revenue $ 204 $ ( 415 ) $ 403 149 % $ ( 415 ) $ 403 149 % ( 203 ) ( 415 ) $ 403 149 % ( 203 ) % $ 403 149 % ( 203 ) % Gross margin $ ) % Gross margin $ 132 $ ( 493 ) $ margin $ 132 $ ( 493 ) $ 370 127 % $ ( 493 ) $ 370 127 % ( 233 ) ( 493 ) $ 370 127 % ( 233 ) % $ 370 127 % ( 233 ) % Corporate and Other general availability . Fiscal year 2015 compared with fiscal year 2014 2015 compared wi revenue increased and Other revenue increased $ 619 million , primarily due to year . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Offerings . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Other gross margin increased $ 625 million , primarily due to increased revenue . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Corporate and Other revenue decrea revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerings . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of previously deferred revenue Other gross margin decreased $ 863 million , mainly due to due to decreased revenue . 38 Table of Contents PART II of Contents PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2015 20 revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Research and development expense increased and development expense increased $ 665 million or 6 % , increased $ 665 million or 6 % , mainly due to and service , including $ 739 m revenue 17 % 18 % 20 % percent of revenue 17 % 18 % 20 % ( 1 revenue 17 % 18 % 20 % ( 1 ) ppt 18 % 20 % ( 1 ) ppt ( 2 ) ( 1 ) ppt ( 2 ) ppt Sales and marketing other program . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Sales and marketing expense decreased and marketing expense decreased $ 98 million or 1 % , decreased $ 98 million or 1 % , primarily due to foreign currency impact of approximately 4 % . Fiscal year 2014 4 % . Fiscal year 2014 compared with fisca revenue 5 % 5 % 6 % percent of revenue 5 % 5 % 6 % 0ppt ( revenue 5 % 5 % 6 % 0ppt ( 1 ) % 5 % 6 % 0ppt ( 1 ) ppt General % 6 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 General and administrative expense were prior year . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 General and administrative expense decreased and administrative expense decreased $ 336 million Revenue Agents Report and reopened examination . As of June 30 , 2015 , the primary As of June 30 , 2015 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2015 . We are for tax year 2007 to 2015 . We are subject to to examination for tax year 1996 to 2015 , some of for tax year 1996 to 2015 , some of which are financial statement . Fiscal year 2014 compared with fiscal year 2013 2014 compar revenue decreased $ 655 million in fiscal year 2014 655 million in fiscal year 2014 , while Microsoft Office system and tool revenue increased $ 1.3 billion and $ 1.6 billion $ 1.3 billion and $ 1.6 billion , respectively , during period . In fiscal year 2014 and 2013 , our U.S. In fiscal year 2014 and 2013 , our U.S. income before before income tax wa $ 7.1 billion and $ 6.7 billion $ 7.1 billion and $ 6.7 billion , respectively , and , respectively , and comprised 26 % and 25 % , and comprised 26 % a Revenue Unearned revenue at June 30 , 2015 wa comprised mainly revenue at June 30 , 2015 wa comprised mainly of unearned . Unearned revenue at June 30 , 2015 also included payment revenue at June 30 , 2015 also included payment for : business solution product ; Office 365 subscription ; Skype prepaid credit unearned revenue a of June 30 , 2015 : ( In a of June 30 , 2015 : ( In million ) Three Months Ending , September 30 , 2015 $ 8,889 December Ending , September 30 , 2015 $ 8,889 December 31 , Septemb revenue and non-cash item . 45 Table of Contents PART II of Contents PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCOUNTING GUIDANCE See Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . over the coverage period . 46 Table of Contents PART II of Contents PART II Item 7 Software update are evaluated on each delive Revenue Year Ended June 30 , 2015 2014 2013 Revenue $ 93,580 Ended June 30 , 2015 2014 2013 Revenue $ 93,580 $ June 30 , 2015 2014 2013 Revenue $ 93,580 $ 86,833 2015 2014 2013 Revenue $ 93,580 $ 86,833 $ 77,849 Cost 2013 Revenue $ 93,580 $ 86,833 $ 77,849 Cost of revenue $ 93,580 $ 86,833 $ 77,849 Cost of revenue 33,038 27,078 $ 77,849 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 77,849 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 59,755 Cost of revenue 33,038 27,078 20,385 Gro revenue 23,223 5,096 4,797 Income tax 606 782 Short-term unearned revenue 23,223 23,150 606 782 Short-term unearned revenue 23,223 23,150 Securities lending payable 92 782 Short-term unearned revenue 23,223 23,150 Securities lending payable 92 558 23,223 23,150 Securities lending payable 92 558 Other 6,766 6,906 Total 23,150 Securities lending payable 92 558 Other 6,766 6,906 Total current lending payable 92 558 Other 6,766 6,906 Total current liability 49,858 payable 92 558 Other 6,766 6,906 Total cur revenue 2,095 49,858 45,625 Long-term debt 27,808 20,645 Long-term unearned revenue 2,095 2,008 27,808 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 2,728 2,095 2,008 Deferred income tax 2,835 2,728 Other long-term liability 13,544 2,008 Deferred income tax 2,835 2,728 Other long-term liability 13,544 11,594 2,835 2,728 Other long-term liability 13,544 11,594 Total liability 96,140 82,600 2,728 Other long- revenue ) Deferral of unearned revenue 45,072 44,325 44,253 Recognition of unearned Deferral of unearned revenue 45,072 44,325 44,253 Recognition of unearned revenue of unearned revenue 45,072 44,325 44,253 Recognition of unearned revenue ( Recognition of unearned revenue ( 44,920 ) ( 41,739 ) ( revenue ( 44,920 ) ( 41,739 ) ( 41,921 ) Changes ) ( 41,739 ) ( 41,921 ) Changes in operating asset and liability : Accounts receivable 1,456 ( 1,120 ) ( 1,807 : Accounts receivable 1,456 ( 1,120 ) ( 1,807 ) In revenue ha been 59 Table of Contents PART II of Contents PART II Item 8 completed . Consulting service revenue a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.9 billion , $ 2.3 billion $ 1.9 billion , $ 2.3 billion , and $ 2.6 2.3 billion , and $ 2.6 billion in fiscal year 2015 2.6 billion in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . Stock-Based Compensation using the straight-line revenue $ 608 $ 104 $ 195 Amount into revenue $ 608 $ 104 $ 195 Amount Excluded from $ 608 $ 104 $ 195 Amount Excluded from Effectiveness Assessment ) , net $ ( 346 ) $ ( 239 ) ( 346 ) $ ( 239 ) $ ( 168 ) ( 239 ) $ ( 168 ) We estimate that $ ) We estimate that $ 492 million of net derivative gain included in AOCI at June 30 , 2015 will be reclassified AOCI at June 30 , 2015 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 2013 Revenue $ Year Ended June 30 , 2014 2013 Revenue $ 96,248 $ Ended June 30 , 2014 2013 Revenue $ 96,248 $ 93,243 , 2014 2013 Revenue $ 96,248 $ 93,243 Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net inco revenue 520 520 1,531 1,112 Restructuring charge 211 0 Unearned revenue 520 520 Impaired charge 211 0 Unearned revenue 520 520 Impaired investment 257 272 211 0 Unearned revenue 520 520 Impaired investment 257 272 Loss revenue 520 520 Impaired investment 257 272 Loss carryforwards 1,158 922 520 520 Impaired investment 257 272 Loss carryforwards 1,158 922 Depreciation investment 257 272 Loss carryforwards 1,158 922 Depreciation and amortization 798 257 272 Loss carryforwards 1,158 922 Depreciation and a revenue item 56 922 Depreciation and amortization 798 0 Other revenue item 56 64 798 0 Other revenue item 56 64 Deferred income tax asset 0 Other revenue item 56 64 Deferred income tax asset 5,415 64 Deferred income tax asset 5,415 3,793 Less valuation allowance ( Deferred income tax asset 5,415 3,793 Less valuation allowance ( 2,265 3,793 Less valuation allowance ( 2,265 ) ( 903 ) Deferred allowance ( 2,265 ) ( 903 ) Deferred income tax asset net of valuation allowance $ 3,150 $ 2,890 Deferred Income Revenue Agents Report and reopened examination . As of June 30 , 2015 , the primary As of June 30 , 2015 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2015 . We are for tax year 2007 to 2015 . We are subject to to examination for tax year 1996 to 2015 , some of for tax year 1996 to 2015 , some of which are consolidated financial statement . NOTE 14 \u2014 RESTRUCTURING CHARGES Phone Hardware REVENUE Unearned revenue ( In million ) June 30 , 2015 2014 Commercial Licensing million ) June 30 , 2015 2014 Commercial Licensing $ 17,672 ) June 30 , 2015 2014 Commercial Licensing $ 17,672 $ 2015 2014 Commercial Licensing $ 17,672 $ 19,099 Commercial Other 5,641 Commercial Licensing $ 17,672 $ 19,099 Commercial Other 5,641 3,934 Rest 17,672 $ 19,099 Commercial Other 5,641 3,934 Rest of the segment $ 19,099 Commercial Other 5,641 3,934 Rest of the segment 2,005 3,934 Rest of the segment 2,005 2,125 revenue ( 608 ) ( 104 ) ( revenue ( 608 ) ( 104 ) ( 195 ) Tax ) ( 104 ) ( 195 ) Tax expense included in in provision for income tax 15 6 68 Amounts reclassified from provision for income tax 15 6 68 Amounts reclassified from accumulated for income tax 15 6 68 Amounts reclassified from accumulated other accumulated other comprehensive income ( 593 ) ( 98 ) ( income ( 593 ) ( 98 ) ( 127 ) Net ) ( 98 ) ( 127 ) Net current period other comprehensive income ( loss ) 559 ( 35 ) ( 26 ( loss ) 559 ( 35 ) ( 26 revenue . 92 Table of Contents PART II of Contents PART II Item 8 \u2022 Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office , and restructuring expense . 93 Table of Contents PART II of Contents PART II Item 8 Segment revenue and gross margin million ) Year E Revenue Year Ended June 30 , 2015 2014 2013 Revenue Devices and Ended June 30 , 2015 2014 2013 Revenue Devices and Consumer June 30 , 2015 2014 2013 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing and Gaming : Computing and Gaming Hardware 10,183 9,093 6,149 Phone Hardware 7,524 Computing and Gaming Hardware 10,183 9,093 6,149 Phone revenue $ Other 204 ( 415 ) 403 Total revenue $ 93,580 $ ) 403 Total revenue $ 93,580 $ 86,833 $ 77,849 ( Total revenue $ 93,580 $ 86,833 $ 77,849 ( In million $ 93,580 $ 86,833 $ 77,849 ( In million ) Year million ) Year Ended June 30 , 2015 2014 2013 Gross Year Ended June 30 , 2015 2014 2013 Gross margin Devices Ended June 30 , 2015 2014 2013 Gross margin Devices and June 30 , 2015 2014 2013 Gross margin Devices and Consumer Devices and Consumer Licensing $ 13,870 $ 17,439 $ 16,985 Hardware Consumer revenue ) 204 ( 415 ) 403 Cost of revenue reconciling amount of revenue reconciling amount ( 72 ) ( 78 ) ( amount ( 72 ) ( 78 ) ( 31 ) Operating ) ( 78 ) ( 31 ) Operating expense reconciling amount Operating expense reconciling amount ( 124 ) ( 40 ) 75 amount ( 124 ) ( 40 ) 75 Total Corporate and 124 ) ( 40 ) 75 Total Corporate and Other $ Corporate and Other $ ( 13,567 ) $ ( 4,277 ) ( 13,567 ) $ ( 4,277 ) $ ( 3,655 ) ( 4,277 ) $ ( 3,655 ) ( a ) Corporate ) Corporate for fiscal year 2015 included impai revenue deferral related reconciling amount for fiscal year 2013 included the recognition of $ included the recognition of $ 540 million of revenue previously deferred deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price States accounted for more than 10 % of fiscal year 2015 10 % of fiscal year 2015 , 2014 , or 2013 of fiscal year 2015 , 2014 , or 2013 revenue . 2015 , 2014 , or 2013 revenue . Revenue , classified million ) Year Ended June 30 revenue . 95 Table of Contents PART II of Contents PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2015 2014 2013 Microsoft Year Ended June 30 , 2015 2014 2013 Microsoft Office system Ended June 30 , 2015 2014 2013 Microsoft Office system $ June 30 , 2015 2014 2013 Microsoft Office system $ 23,538 2013 Microsoft Office system $ 23,538 $ 24,323 $ 22,995 Server Office system $ 23,538 $ 24,323 $ 22,995 Server product and $ 23,538 $ 24,323 $ 22,995 Server product and tool 18, revenue Commercial Cloud revenue wa $ 5.8 billion , $ 2.8 billion $ 5.8 billion , $ 2.8 billion , and $ 1.3 2.8 billion , and $ 1.3 billion in fiscal year 2015 1.3 billion in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2015 2014 2013 United million ) June 30 , 2015 2014 2013 United States $ ) June 30 , 2015 2014 2013 United State Revenue June 30 Total Fiscal Year 2015 Revenue $ 23,201 $ 26,470 Fiscal Year 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income 93,580 Gross margin 14,928 16,334 Revenue $ 18,529 $ 24,519 Fiscal Year 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,384 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 ", + "expenses": "EXPENSES Research and Development million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Research and development 2014 Percentage Change 2014 Versus 2013 Rese", + "net_income": "Net income $ 12,193 ( $ 27,161 Net income $ 12,193 ( a ) $ 22,074 12,193 ( a ) $ 22,074 $ 21,863 ( c ) a ) $ 22,074 $ 21,863 ( c ) $ 16,978 21,863 ( c ) $ 16,978 ( d ) $ 23,150 16,978 ( d ) $ 23,150 Diluted earnings per share $ Diluted earnings per share $ 1.48 ( a ) $ 2.63 1.48 ( a ) $ 2.63 $ 2.58 ( c ) a ) $ 2.63 $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 Cash dividend declared per share dividend declared per share $ 1.24 $ 1.12 $ 0.92 $ per share $ 1.24 $ 1.12 $ 0.92 $ 0.80 $ net income and net income by $ 10.0 billion and diluted earnings per EPS \u201d ) by $ 1.15 . ( b ) On ( b ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( \u20ac561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by net income by $ 6.2 billion and diluted EPS by and diluted EPS by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT \u2019 S DISCUSSION our focus in fiscal year 2015 wa toward transforming our organization . Highlights from fiscal year 2015 included : \u2022 Momentum continued a we surpassed an $ 8 billion annualized run rate * the year . \u2022 Office 365 Commercial seat grew 74 % Office 365 Commercial seat grew 74 % , and Office 365 74 % , and Office 365 is now deployed in four four out of five Fortune 500 Net income $ Provision for income tax 6,314 5,746 5,189 Net income $ 12,193 for income tax 6,314 5,746 5,189 Net income $ 12,193 $ 5,746 5,189 Net income $ 12,193 $ 22,074 $ 21,863 Earnings Net income $ 12,193 $ 22,074 $ 21,863 Earnings per share $ 12,193 $ 22,074 $ 21,863 Earnings per share : Basic per share : Basic $ 1.49 $ 2.66 $ 2.61 Diluted : Basic $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 $ 2.58 Weighted 2.61 Diluted $ 1.48 $ 2.6 Net income $ Ended June 30 , 2015 2014 2013 Net income $ 12,193 June 30 , 2015 2014 2013 Net income $ 12,193 $ 2014 2013 Net income $ 12,193 $ 22,074 $ 21,863 Other Net income $ 12,193 $ 22,074 $ 21,863 Other comprehensive income $ 12,193 $ 22,074 $ 21,863 Other comprehensive income ( loss of tax effect of $ 20 , $ ( 4 ) $ 20 , $ ( 4 ) , and $ ( ) , and $ ( 14 ) ) 559 ( 35 $ ( 14 ) ) 559 ( 35 ) ( 26 14 ) ) 559 ( 35 ) ( 26 ) Net 559 ( 35 ) ( 26 ) Net unrealized gain ( tax effect of $ ( 197 ) , $ 936 , ( 19 Net income Ended June 30 , 2015 2014 2013 Operations Net income $ June 30 , 2015 2014 2013 Operations Net income $ 12,193 2013 Operations Net income $ 12,193 $ 22,074 $ 21,863 Adjustments Net income $ 12,193 $ 22,074 $ 21,863 Adjustments to reconcile $ 12,193 $ 22,074 $ 21,863 Adjustments to reconcile net income : Goodwill and asset impairment 7,498 0 0 Depreciation , amortization Goodwill and asset impairment 7,498 0 0 Depreciation , amortization , and asset impairment 7,498 0 0 Depreciation , amortizati Net income of period 17,710 9,895 ( 856 ) Net income 12,193 22,074 ( 856 ) Net income 12,193 22,074 21,863 Common stock cash 856 ) Net income 12,193 22,074 21,863 Common stock cash dividend ) Net income 12,193 22,074 21,863 Common stock cash dividend ( Common stock cash dividend ( 10,063 ) ( 9,271 ) ( dividend ( 10,063 ) ( 9,271 ) ( 7,694 ) Common ) ( 9,271 ) ( 7,694 ) Common stock repurchased ( ) Common stock repurchased ( 10,744 ) ( 4,988 ) ( repurchased ( 10,744 ) ( 4,988 ) ( 3,418 ) Balance ) ( 4,988 Net income available Ended June 30 , 2015 2014 2013 Net income available for June 30 , 2015 2014 2013 Net income available for common shareholder ( A ) $ 12,193 $ 22,074 $ 21,863 Weighted A ) $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding share of common stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based award Dilutive effect of Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net income $ 20,234 $ 20,153 Diluted earnings per Net income $ 20,234 $ 20,153 Diluted earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July Net income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss ) Net income ( loss ) 4,540 5,863 4,985 ( 3,195 ) income ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( a ) 4,540 5,863 4,985 ( 3,195 ) ( a ) 12,193 3,195 ) ( a ) 12,193 ( b ) Basic earnings ( loss ) per share 0.55 0.71 0.61 ( 0.40 ) loss ) per share 0.55 0.71 0.61 ( 0.40 ) Net income 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 5,660 14,425 15,749 59,755 Net income 5,244 6,558 5,660 4,612 ( c 15,749 59,755 Net income 5,244 6,558 5,660 4,612 ( c ) 59,755 Net income 5,244 6,558 5,660 4,612 ( c ) 22,074 Net income 5,244 6,558 5,660 4,612 ( c ) 22,074 ( 5,660 4,612 ( c ) 22,074 ( c ) Basic earnings ) Basic earnings pe net income by $ 8.4 2015 net income by $ 8.4 billion and diluted EPS by and diluted EPS by $ 1.02 . ( b ) Includes ( b ) Includes $ 7.5 billion of goodwill and asset , a well a $ 2.5 billion of integration and restructuring , which decreased fiscal year 2015 net income by $ 10.0 2015 net income by $ 10.0 billion and diluted EPS by and diluted EPS by $ 1.15 . ( c ) Includes fourth quarter of fiscal year 2014 related to adjustment to prior decreased net income by $ 458 million and diluted EPS by and diluted", + "assets": "Assets Current million ) June 30 , 2015 2014 Assets Current asset : ) June 30 , 2015 2014 Assets Current asset : Cash Cash and cash equivalent $ 5,595 $ 8,669 Short-term investment ( cash equivalent $ 5,595 $ 8,669 Short-term investment ( including security including security loaned of $ 75 and $ 541 ) 90,931 of $ 75 and $ 541 ) 90,931 77,040 Total cash 75 and $ 541 ) 90,931 77,040 Total cash , cash and $ 541 ) 90,931 77,040 Total cash , cash equivalent equivalent , and short-term investment 96,526 85 Assets June 30 , 2015 June 30 , 2014 Assets Liabilities Assets , 2015 June 30 , 2014 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 17 $ 167 $ 0 $ exchange contract $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) $ 167 $ 0 $ ( 79 ) $ 10 $ 39 $ ( 79 ) $ 10 $ 39 $ 0 $ 79 ) $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) Equity 39 $ 0 $ ( 97 ) Equity contract 148 0 ( 97 ) Equity contract 148 0 0 ( 18 ) 97 ) Equity contract 148 0 0 ( 18 ) 177 ) Equity contract 148 0 0 ( 18 ) 177 Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2015 Assets Mutual fund Fair Value June 30 , 2015 Assets Mutual fund $ 1,100 2015 Assets Mutual fund $ 1,100 $ 0 $ 0 $ Mutual fund $ 1,100 $ 0 $ 0 $ 1,100 $ $ 1,100 $ 0 $ 0 $ 1,100 $ 0 $ $ 0 $ 0 $ 1,100 $ 0 $ 1,100 Commercial $ 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 1 0 0 $ 1,100 Com Assets Mutual fund Fair Value June 30 , 2014 Assets Mutual fund $ 590 2014 Assets Mutual fund $ 590 $ 0 $ 0 $ Mutual fund $ 590 $ 0 $ 0 $ 590 $ $ 590 $ 0 $ 0 $ 590 $ 0 $ $ 0 $ 0 $ 590 $ 0 $ 590 Commercial $ 0 $ 590 $ 0 $ 590 Commercial paper 0 $ 590 $ 0 $ 590 Commercial paper 0 189 0 0 $ 590 Commercial paper 0 189 0 189 0 189 $ 590 Commercial paper 0 189 0 189 0 189 Certificates 590 Commercial paper 0 189 0 189 0 189 Certificates of Commercial paper 0 189 0 189 0 189 Certificates of deposit paper 0 18 Assets and investment component $ 108,554 $ 98,770 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2015 and 2014 , we did During fiscal year 2015 and 2014 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2015 2014 Raw material million ) June 30 , 2015 2014 Raw material $ 1,100 ) June 30 , 2015 2014 Raw material $ 1,100 $ 2015 2014 Raw material $ 1,100 $ 944 Work in process Raw material $ 1,100 $ 944 Work in proces Assets for additional income statement for fiscal year 2014 included revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 2013 Revenue $ Year Ended June 30 , 2014 2013 Revenue $ 96,248 $ Ended June 30 , 2014 2013 Revenue $ 96,248 $ 93,243 , 2014 2013 Revenue $ 96,248 $ 93,243 Net income $ ASSETS The component Carrying Amount Year Ended June 30 , 2015 2014 Technology-based ( Year Ended June 30 , 2015 2014 Technology-based ( a ) Ended June 30 , 2015 2014 Technology-based ( a ) $ Technology-based ( a ) $ 6,187 $ ( 3,410 ) $ ) $ 6,187 $ ( 3,410 ) $ 2,777 $ 6,440 $ ( 3,410 ) $ 2,777 $ 6,440 $ ( 2,615 3,410 ) $ 2,777 $ 6,440 $ ( 2,615 ) $ 2,777 $ 6,440 $ ( 2,615 ) $ 3,825 Marketing-related 1,974 $ ( 2,615 ) $ 3,825 Marketing-related 1,974 ( 540 ) 2,615 ) $ 3,825 Marketing-related 1,974 ( 540 Assets ) June 30 , 2015 2014 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 884 $ 903 Other expense item compensation expense $ 884 $ 903 Other expense item 1,531 1,112 $ 903 Other expense item 1,531 1,112 Restructuring charge 211 0 903 Other expense item 1,531 1,112 Restructuring charge 211 0 Unearned item 1,531 1,112 Restructuring charge 211 0 Unearned revenue 520 520 1,531 1,112 Restructuring charge 211 0 Unearned revenue 520 520 Impaired charge 211 0 Unearned reve", + "liabilities": "Liabilities and stockholder Total asset $ 176,223 $ 172,384 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 2,000 Current 6,591 $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term debt Current portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 portion of long-term debt 2,499 0 Accrued compensation 5,096 4 Liabilities Assets , 2015 June 30 , 2014 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 17 $ 167 $ 0 $ exchange contract $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) $ 167 $ 0 $ ( 79 ) $ 10 $ 39 $ ( 79 ) $ 10 $ 39 $ 0 $ 79 ) $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) Equity 39 $ 0 $ ( 97 ) Equity contract 148 0 ( 97 ) Equity contract 148 0 0 ( 18 ) 97 ) Equity contract 148 0 0 ( 18 ) 177 ) Equity contract 148 0 0 ( 18 ) 177 0 contract 148 0 0 ( 18 ) 177 0 0 ( 0 0 ( 18 ) 1 Liabilities Derivatives $ ( 162 ) $ 104,369 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 159 $ 54 $ and other $ 5 $ 159 $ 54 $ 218 $ $ 5 $ 159 $ 54 $ 218 $ ( 161 $ 159 $ 54 $ 218 $ ( 161 ) $ 54 $ 218 $ ( 161 ) $ 57 ( In $ ( 161 ) $ 57 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2014 Assets Mutual fund Fair Value June 30 , 2014 Liabilities Derivatives $ ( 155 ) $ 92,164 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 153 $ 126 $ and other $ 5 $ 153 $ 126 $ 284 $ $ 5 $ 153 $ 126 $ 284 $ ( 155 $ 153 $ 126 $ 284 $ ( 155 ) $ 126 $ 284 $ ( 155 ) $ 129 ( a $ ( 155 ) $ 129 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 72 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 \u2013 Invest Liabilities Measured Nonrecurring Basis During fiscal year 2015 and 2014 , we did During fiscal year 2015 and 2014 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2015 2014 Raw material million ) June 30 , 2015 2014 Raw material $ 1,100 ) June 30 , 2015 2014 Raw material $ 1,100 $ 2015 2014 Raw material $ 1,100 $ 944 Work in process Raw material $ 1,100 $ 944 Work in process 202 266 $ 944 Work in process 202 266 Finished good 1,600 1,450 944 Work in Liabilities Foreign Liabilities Foreign earnings $ ( 1,280 ) $ ( 1,140 ) ( 1,280 ) $ ( 1,140 ) Unrealized gain on investment on investment and debt ( 2,223 ) ( 1,974 ) Depreciation debt ( 2,223 ) ( 1,974 ) Depreciation and amortization ( ) Depreciation and amortization ( 685 ) ( 470 ) Other amortization ( 685 ) ( 470 ) Other ( 29 ) ( 470 ) Other ( 29 ) ( 87 ) Deferred Other ( 29 ) ( 87 ) Deferred income tax liability Deferred income tax liability ( 4,217 ) ( 3,671 ) Net liability ( 4,217 ) ( 3,671 ) Net de LIABILITIES ( ( In million ) June 30 , 2015 2014 Tax contingency million ) June 30 , 2015 2014 Tax contingency and other ) June 30 , 2015 2014 Tax contingency and other tax and other tax liability $ 12,290 $ 10,510 Other 1,254 1,084 tax liability $ 12,290 $ 10,510 Other 1,254 1,084 Total $ $ 12,290 $ 10,510 Other 1,254 1,084 Total $ 13,544 $ 12,290 $ 10,510 Other 1,254 1,084 Total $ 13,544 $ 11,594 Other 1,254 1,084 Total $ 13,544 $ 11,594 83 Table of 1,084 Total $ 13,544 $ 11,594 83 Table of Contents PART", + "equity": "Equity Securities 28 Item 6 . Selected Financial of Equity Securities 28 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management \u2019 Selected Financial Data 28 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 51 Item 8 . Financial Statements about Market Risk 51 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2015 , all of which were ( in million ) April 1 , 2015 \u2013 April 30 million ) April 1 , 2015 \u2013 April 30 , 2015 1 , 2015 \u2013 April 30 , 2015 45,393,872 $ 42.92 2015 \u2013 April 30 , 2015 45,393,872 $ 42.92 45,393,872 $ \u2013 April 30 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,143 30 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,143 May 1 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,1 equity $ 26,070 $ 22,220 $ 22,847 Stockholders \u2019 equity $ 80,083 22,847 Stockholders \u2019 equity $ 80,083 $ 89,784 $ 78,944 $ \u2019 equity $ 80,083 $ 89,784 $ 78,944 $ 66,363 $ $ 80,083 $ 89,784 $ 78,944 $ 66,363 $ 57,083 28 $ 89,784 $ 78,944 $ 66,363 $ 57,083 28 Table of $ 78,944 $ 66,363 $ 57,083 28 Table of Contents PART 78,944 $ 66,363 $ 57,083 28 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) Includes $ ( a ) Includes $ 7.5 billion of goodwill and asset Phone Har Equity and a of June 30 , 2014 . Equity and other investment and other investment were $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2015 , compared with a of June 30 , 2015 , compared with $ 14.6 2015 , compared with $ 14.6 billion a of June 30 14.6 billion a of June 30 , 2014 . Our short-term a of June 30 , 2014 . Our short-term investment are facilitate liquidity and for capital 42 Table of Contents PART II of Contents PART II Item 7 preservation . They consist predominantly and short-ter Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2015 : ( In a of June 30 , 2015 : ( In million ) : ( In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term ( In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term debt In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term debt : a ) Principal payment $ 2,500 $ 1,050 $ 3,750 $ Principal payment $ 2,500 $ 1,050 $ 3,750 $ 23,163 $ $ 2, Equity $ 73 $ 57 $ 74 $ 48 Equity $ 149 $ 57 $ 74 $ 48 Equity $ 149 $ 176 74 $ 48 Equity $ 149 $ 176 $ 161 $ 48 Equity $ 149 $ 176 $ 161 $ 178 $ $ 149 $ 176 $ 161 $ 178 $ 146 Commodity $ 176 $ 161 $ 178 $ 146 Commodity $ 13 $ 161 $ 178 $ 146 Commodity $ 13 $ 17 178 $ 146 Commodity $ 13 $ 17 $ 16 $ 146 Commodity $ 13 $ 17 $ 16 $ 20 $ $ 13 $ 17 $ 16 $ 20 $ 11 Total $ 17 $ 16 $ 20 $ 11 Total one-day VaR $ 16 $ 20 $ 11 Total one-day VaR for the combined risk category wa $ 237 million at June 30 , $ 237 mi Equity and other $ 17,606 and $ 14,793 14,731 13,011 Equity and other investment 17,606 and $ 14,793 14,731 13,011 Equity and other investment 12,053 13,011 Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset , net investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset , net 4,835 20,127 Intangible asset , net 4,835 6 equity liability : Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 2,000 Current 6,591 $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term debt Current portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 Income debt 2,499 0 Accrued compensation 5,096 4,797 Income tax 606 782 2,499 0 equity Accumulated other comprehensive income 2,522 3,708 Total stockholder \u2019 equity 80,083 3,708 Total stockholder \u2019 equity 80,083 89,784 Total liability and stockholder Total stockholder \u2019 equity 80,083 89,784 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 176,223 $ 172,384 See accompanying note \u2019 equity $ 176,223 $ 172,384 See accompanying note . 55 172,384 See accompanying note . 55 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended J EQUITY STATEMENTS ( million ) Year Ended June 30 , 2015 2014 2013 Common Year Ended June 30 , 2015 2014 2013 Common stock and Ended June 30 , 2015 2014 2013 Common stock and paid-in June 30 , 2015 2014 2013 Common stock and paid-in capital , beginning of period $ 68,366 $ 67,306 $ 65,797 Common of period $ 68,366 $ 67,306 $ 65,797 Common stock issued $ 68,366 $ 67,306 $ 65,797 Common stock issued 634 607 $ 65,797 Common stock issued 634 607 920 Common stock repurchased 65,797 Common stock issued 634 6 equity end of period 2,522 3,708 1,743 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 80,083 $ 89,784 $ 78,944 See \u2019 equity $ 80,083 $ 89,784 $ 78,944 See accompanying note $ 80,083 $ 89,784 $ 78,944 See accompanying note . 57 78,944 See accompanying note . 57 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles ii ) third-party evidence , 58 Table of Contents PART II of Conte Equity and Other Investments June 30 , 2015 Cash $ 3,679 Other Investments June 30 , 2015 Cash $ 3,679 $ 0 30 , 2015 Cash $ 3,679 $ 0 $ 0 $ 2015 Cash $ 3,679 $ 0 $ 0 $ 3,679 $ $ 3,679 $ 0 $ 0 $ 3,679 $ 3,679 $ $ 0 $ 0 $ 3,679 $ 3,679 $ 0 $ $ 0 $ 3,679 $ 3,679 $ 0 $ 0 Mutual $ 3,679 $ 3,679 $ 0 $ 0 Mutual fund 1,100 $ 3,679 $ 0 $ 0 Mutual fund 1,100 0 0 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial Mutual fund 1,10 Equity and Other Investments June 30 , 2014 Cash $ 4,980 Other Investments June 30 , 2014 Cash $ 4,980 $ 0 30 , 2014 Cash $ 4,980 $ 0 $ 0 $ 2014 Cash $ 4,980 $ 0 $ 0 $ 4,980 $ $ 4,980 $ 0 $ 0 $ 4,980 $ 4,980 $ $ 0 $ 0 $ 4,980 $ 4,980 $ 0 $ $ 0 $ 4,980 $ 4,980 $ 0 $ 0 Mutual $ 4,980 $ 4,980 $ 0 $ 0 Mutual fund 590 $ 4,980 $ 0 $ 0 Mutual fund 590 0 0 0 $ 0 Mutual fund 590 0 0 590 590 0 $ 0 Mutual fund 590 0 0 590 590 0 0 0 Mutual fund 590 0 0 590 590 0 0 Commercial Mutual fund 590 0 0 590 590 0 0 Commer Equity forward . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount market price risk were $ 2.2 billion and $ 2.6 billion $ 2.2 billion and $ 2.6 billion , respectively , of respectively , of which $ 1.1 billion and $ 1.4 billion $ 1.1 billion and $ 1.4 billion , respectively , were instrument . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount market price risk were $ 1.9 billion and $ 1.9 billion $ 1.9 billion and $ 1.9 billion , respec Equity 39 $ 0 $ ( 97 ) Equity contract 148 0 ( 97 ) Equity contract 148 0 0 ( 18 ) 97 ) Equity contract 148 0 0 ( 18 ) 177 ) Equity contract 148 0 0 ( 18 ) 177 0 contract 148 0 0 ( 18 ) 177 0 0 ( 0 0 ( 18 ) 177 0 0 ( 21 ) 0 ( 18 ) 177 0 0 ( 21 ) Interest ( 18 ) 177 0 0 ( 21 ) Interest rate ) 177 0 0 ( 21 ) Interest rate contract 7 21 ) Interest rate contract 7 0 0 ( 12 ) ) Interest rate contract 7 0 0 ( 12 ) 17 Interest rate contract 7 0 0 ( 12 ) 17 0 contract 7 0 0 ( 12 ) 17 0 0 ( 0 0 ( 12 ) 17 0 0 ( Equity 70 $ 0 $ ( 15 ) Equity contract 0 0 ( 15 ) Equity contract 0 0 25 ( 69 ) 15 ) Equity contract 0 0 25 ( 69 ) 0 ) Equity contract 0 0 25 ( 69 ) 0 0 contract 0 0 25 ( 69 ) 0 0 7 ( 0 25 ( 69 ) 0 0 7 ( 125 ) 25 ( 69 ) 0 0 7 ( 125 ) Total ( 69 ) 0 0 7 ( 125 ) Total $ ) 0 0 7 ( 125 ) Total $ 56 $ ( 125 ) Total $ 56 $ 552 $ 25 $ ) Total $ 56 $ 552 $ 25 $ ( 100 $ 56 $ 552 $ 25 $ ( 100 ) $ 552 $ 25 $ ( 100 ) $ 1 $ 70 $ ( 100 ) $ 1 $ 70 $ 7 $ 100 ) $ 1 $ 70 $ 7 $ ( 140 $ 1 $ 70 $ 7 $ ( 140 ) Total 70 $ 7 Equity Contracts $ ( 8 ) $ 1 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 107 ) $ ( 110 ) ( 107 ) $ ( 110 ) $ 0 Hedged item $ ( 110 ) $ 0 Hedged item 107 110 0 ) $ 0 Hedged item 107 110 0 Total amount of $ 0 Hedged item 107 110 0 Total amount of ineffectiveness 0 Hedged item 107 110 0 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded excluded from effec Equity contract $ ( 78 ) $ 18 Equity contract ( 19 ) $ 18 Equity contract ( 19 ) ( 64 ) 16 contract ( 19 ) ( 64 ) 16 Interest-rate contract 23 19 ) ( 64 ) 16 Interest-rate contract 23 24 ( 64 ) 16 Interest-rate contract 23 24 ( 11 ) Credit ) 16 Interest-rate contract 23 24 ( 11 ) Credit contract Interest-rate contract 23 24 ( 11 ) Credit contract ( 1 11 ) Credit contract ( 1 ) 13 ( 3 ) Credit contract ( 1 ) 13 ( 3 ) Commodity contract ( 1 ) 13 ( 3 ) Commodity contract ( 223 3 ) Commodity contract ( 22 EQUITY Shares million ) Year Ended June 30 , 2015 2014 2013 Balance Year Ended June 30 , 2015 2014 2013 Balance , beginning Ended June 30 , 2015 2014 2013 Balance , beginning of June 30 , 2015 2014 2013 Balance , beginning of year Balance , beginning of year 8,239 8,328 8,381 Issued 83 86 , beginning of year 8,239 8,328 8,381 Issued 83 86 105 beginning of year 8,239 8,328 8,381 Issued 83 86 105 Repurchased year 8,239 8,328 8,381 Issued 83 86 105 Repurchased ( 295 8,239 8,328 8,381 Issued 83 86 105 Rep Equity Statements 57 56 Stockholders \u2019 Equity Statements 57 Notes to Financial Statements 58 57 Notes to Financial Statements 58 Report of Independent Registered Public Independent Registered Public Accounting Firm 98 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/0", + "cash_flow": "cash flow . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all other patent licensing revenue . 31 Table of Contents PART II of Contents PART II Item 7 \u2022 Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office and per share am Cash flow from operation decreased flow from operation decreased $ 3.2 billion during the fiscal year the fiscal year to $ 29.1 billion , mainly due to used in financing increased $ 686 million to $ 9.1 billion $ 686 million to $ 9.1 billion , mainly due to mainly due to a $ 7.1 billion increase in cash used in part by a $ 6.7 billion increase in proceeds from used in investing increased $ 4.2 billion to $ 23.0 billion $ 4.2 billion to $ 23.0 billion , mainly due to mainly due to a $ 5.5 billion increase Cash flow from operation increased flow from operation increased $ 3.4 billion during fiscal year 2014 3.4 billion during fiscal year 2014 to $ 32.2 billion , fiscal year 2014 to $ 32.2 billion , mainly due to used in financing increased $ 246 million to $ 8.4 billion $ 246 million to $ 8.4 billion , mainly due to mainly due to a $ 2.0 billion increase in cash used stock repurchase , a $ 1.4 billion increase in dividend paid paid , and a $ 324 million decrease in proceeds from in part by a $ 3.4 billion cash flow methodology . impairment testing a of May 1 , 2015 , we determined a of May 1 , 2015 , we determined that goodwill fourth quarter of fiscal year 2015 . As of June 30 2015 . As of June 30 , 2015 , none of As of June 30 , 2015 , none of our reporting that ha a greater than 50 % likelihood of being realized our consolidated financial statement . 48 Table of Contents PART II of Contents PART II Item 7 Inventories Inventories are stated at analysis require significant judgment . 49 Table of Contents Cash Flow $ ( 9 ) $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2015 2014 2013 Effective Year Ended June 30 , 2015 2014 2013 Effective Portion Gains Ended June 30 , 2015 2014 2013 Effective Portion Gains recognized June 30 , 2015 2014 2013 Effective Portion Gains recognized in of tax effect of $ 35 , $ 2 and $ of $ 35 , $ 2 and $ 54 ) $ , $ 2 and $ 54 ) $ 1,152 $ 63 and $ 54 ) $ 1,152 $ 63 $ 101 Gains 54 ) $ 1,152 $ 63 $ 101 Gains reclassified from $ 1,152 $ 63 $ 101 Gains reclassified from ", + "operating_margin": "operating margin . 18 Table of Contents PART I of Contents PART I Item 1A Business model competition Companies compete margin and operating income . 19 Table of Contents PART I of Contents PART I Item 1A We make significant investment in Azure Services platform , Office 365 , other cloud-based service offering . The launch of Windows 10 , with free upgrade available to existing user of Windows 7 and 8.1 , constitutes the user of Windows 7 and 8.1 , constitutes the most ambitious for our user installing Windows ", + "gross_margin": "Gross margin $ $ 77,849 $ 73,723 $ 69,943 Gross margin $ 60,542 $ $ 69,943 Gross margin $ 60,542 $ 59,755 $ 57,464 $ Gross margin $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ 54,366 Operating $ 59,755 $ 57,464 $ 56,193 $ 54,366 Operating income $ $ 57,464 $ 56,193 $ 54,366 Operating income $ 18,161 ( $ 54,366 Operating income $ 18,161 ( a ) $ 27,759 18,161 ( a ) $ 27,759 $ 26,764 ( c ) a ) $ 27,759 $ 26,764 ( c ) $ 21,763 26,764 ( c ) $ 21,763 ( d ) $ 27,161 21,763 ( d ) $ 27, Gross margin 86,833 $ 77,849 8 % 12 % Gross margin $ 60,542 12 % Gross margin $ 60,542 $ 59,755 $ 57,464 1 Gross margin $ 60,542 $ 59,755 $ 57,464 1 % 4 $ 60,542 $ 59,755 $ 57,464 1 % 4 % Operating 60,542 $ 59,755 $ 57,464 1 % 4 % Operating income 59,755 $ 57,464 1 % 4 % Operating income $ 18,161 4 % Operating income $ 18,161 $ 27,759 $ 26,764 ( Operating income $ 18,161 $ 27,759 $ 26,764 ( 35 ) $ 18,161 $ 27,759 $ 26,764 ( 35 ) % 4 $ 27,759 $ 26,764 ( 35 ) % 4 % Diluted 26,764 ( 35 ) % 4 % Diluted earnings Gross margin increased . Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , primarily due to in part by a $ 6.0 billion or 22 % increase a $ 6.0 billion or 22 % increase in cost of Commercial Cloud , including $ 396 million of higher datacenter expense of our reportable segment . 32 Table of Contents PART II of Contents PART II Item 7 Operating income decreased $ 9.6 7 Operating income decreased $ 9.6 billion or 35 % , decreased $ 9.6 billion or 35 % , primarily due to and restru Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million of higher datacenter expense . Operating income increased $ 995 million or 4 % , increased $ 995 million or 4 % , reflecting higher gross and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , mainly due to and marketing expense increased $ 535 million or 4 % , Gross Margin 37,617 $ 32,007 10 % 18 % Gross Margin Licensing $ % Gross Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( 20 ) $ 13,870 $ 17,439 $ 16,985 ( 20 ) % 3 $ 17,439 $ 16,985 ( 20 ) % 3 % Hardware 16,985 ( 20 ) % 3 % Hardware : Computing and : Computing and Gaming Hardware 1,788 892 956 100 % ( Computing and Gaming Hardware 1,788 892 956 100 % ( 7 and Gaming Hardware 1,788 892 956 100 % ( 7 ) Gaming Hardware 1,788 892 956 100 % ( 7 ) % 892 956 100 % ( 7 ) % gross margin $ 18,381 $ 19,778 $ 19,892 ( gross margin $ 18,381 $ 19,778 $ 19,892 ( 7 ) $ 18,381 $ 19,778 $ 19,892 ( 7 ) % ( $ 19,778 $ 19,892 ( 7 ) % ( 1 ) ( 7 ) % ( 1 ) % * Not meaningful * Not meaningful Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 D & C revenue increased & C revenue increased $ 3.9 billion or 10 % , increased $ 3.9 billion or 10 % , primarily due to , Office Consumer and Office 365 Consumer revenue declined 17 % Office 365 Consumer revenue declined gross margin decreased $ 1.4 billion or 7 % , decreased $ 1.4 billion or 7 % , reflecting higher cost cost of revenue increased $ 5.3 billion or 30 % , increased $ 5.3 billion or 30 % , mainly due to C Licensing revenue decreased $ 4.6 billion or 23 % , decreased $ 4.6 billion or 23 % , mainly due to Windows OEM revenue declined $ 1.9 billion or 15 % , declined $ 1.9 billion or 15 % , primarily due to primarily due to decline of 15 % in OEM Pro revenue in OEM Pro revenue and 16 % in OEM non-Pro revenue Phon gross margin decreased $ 3.6 billion or 20 % , decreased $ 3.6 billion or 20 % , primarily due to in part by a $ 990 million or 47 % decrease a $ 990 million or 47 % decrease in cost of mainly due to a $ 788 million decline in traffic acquisition when we acquired NDS . 34 Table of Contents PART II of Contents PART II Item 7 Computing and Gaming Hardware Computing Gaming Hardware revenue increased $ 1.1 billion or 12 % , increased $ 1.1 billion or 12 % , primarily due to Platform . Surface revenue increased gross margin increased $ 896 million or 100 % , increased $ 896 million or 100 % , mainly due to in part by a $ 194 million or 2 % increase a $ 194 million or 2 % increase in cost of mix shift to Surface Pro 3 . Xbox Platform cost of Phone Hardware revenue increased $ 5.5 billion , a we sold billion , a we sold 36.8 million Lumia phone and 126.8 36.8 million Lumia phone and 126.8 million other non-Lumia phone in non-Lumia phone in fiscal year 2015 , compared with 5.8 million year 2015 , compared with 5.8 mi gross margin Hardware gross margin increased $ 647 million , primarily due to cost of revenue increased $ 4.9 billion , and included $ billion , and included $ 476 million of amortization of acquired intangible asset in fiscal year 2015 . We recorded goodwill and asset impairment charge of $ 7.5 billion related to our Phone fourth quarter of fiscal year 2015 . See further discussion under C Other revenue increased $ 1.8 billion or 26 % , increased $ 1.8 billion or 26 % , mainly due to including Minecraft , gross margin increased $ 629 million or 45 % , increased $ 629 million or 45 % , due to higher in part by a $ 1.2 billion or 21 % increase a $ 1.2 billion or 21 % increase in cost of , mainly due to $ 372 million higher Xbox Live and transaction cost , a $ 279 million increase in search infrastructure search infrastructure cost , $ 267 million higher retail store expense store expense , and $ 194 million higher first-party video game Minecraft cost . Fiscal year 2014 compared with fiscal year 2013 2014 comp gross margin increased $ 454 million or 3 % , increased $ 454 million or 3 % , primarily due to primarily due to a $ 353 million or 14 % decrease a $ 353 million or 14 % decrease in cost of mainly due to a $ 411 million or 23 % decline a $ 411 million or 23 % decline in traffic acquisition Gaming Hardware revenue increased $ 2.9 billion or 48 % , increased $ 2.9 billion or 48 % , primarily due to Xbox Platform revenue increased $ 1.7 billion or 34 % , increased $ 1.7 billion or 34 % , mainly due to which wa gross margin Hardware gross margin wa $ 54 million in fiscal year 2014 54 million in fiscal year 2014 , reflecting revenue of $ , reflecting revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 583 million or 9 % , increased $ 583 million or 9 % , mainly due to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of secon gross margin decreased $ 558 million or 29 % , decreased $ 558 million or 29 % , due to a , due to a $ 1.1 billion or 25 % increase a $ 1.1 billion or 25 % increase in cost of mainly due to a $ 541 million or 24 % increase a $ 541 million or 24 % increase in online advertising of revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher higher resale transaction cost . 36 Table of Contents PART II of Contents PART II Item 7 Commercial ( In million , million , except perc Gross Margin 49,631 $ 45,439 5 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( 2 ) $ 37,830 $ 38,615 $ 36,280 ( 2 ) % 6 $ 38,615 $ 36,280 ( 2 ) % 6 % Other 36,280 ( 2 ) % 6 % Other 4,199 1,855 922 ) % 6 % Other 4,199 1,855 922 126 % 101 % 6 % Other 4,199 1,855 922 126 % 101 % 6 % Other 4,199 1,855 922 126 % 101 % Total % Other 4,199 1,855 922 126 % 101 % Total Commercial 4,199 1,855 922 126 % 101 % Total Commercial gross marg gross margin $ 42,029 $ 40,470 $ 37,202 4 gross margin $ 42,029 $ 40,470 $ 37,202 4 % 9 $ 42,029 $ 40,470 $ 37,202 4 % 9 % Fiscal 42,029 $ 40,470 $ 37,202 4 % 9 % Fiscal year 40,470 $ 37,202 4 % 9 % Fiscal year 2015 compared % 9 % Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Commercial revenue increased $ 2.2 2014 Commercial revenue increased $ 2.2 billion or 5 % , increased $ 2.2 billion or 5 % , mainly due to foreign currency impact of approximately 2 % . Our server gross margin Commercial gross margin increased $ 1.6 billion or 4 % . increased $ 1.6 billion or 4 % . Commercial Licensing Commercial Commercial Licensing revenue decreased $ 1.0 billion or 2 % , decreased $ 1.0 billion or 2 % , primarily due to foreign currency impact of approximately 2 % . Office Commercial revenue Office Commercial revenue declined $ 2.5 billion or 13 % , declined $ 2.5 billion or 13 % , due to lower , customer transitioning to Office 365 Commercial , and decline in server product reven gross margin decreased $ 785 million or 2 % , decreased $ 785 million or 2 % , in line with Commercial Other revenue increased $ 3.3 billion or 44 % , increased $ 3.3 billion or 44 % , primarily due to foreign currency impact of approximately 3 % . Commercial Cloud revenue Commercial Cloud revenue grew $ 3.0 billion or 106 % , grew $ 3.0 billion or 106 % , mainly due to higher premium mix of Office 365 Commercial , a well a Other gross margin increased $ 2.3 billion or 126 % , increased $ 2.3 billion or 126 gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with in line with revenue . 37 Table of Contents PART II of Contents PART II Item 7 Commercial Licensing Commercial Licensing revenue Commercial Licensing revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , primarily due to server product revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % gross margin increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , in line with Commercial Other revenue increased $ 1.9 billion or 33 % , increased $ 1.9 billion or 33 % , due to higher Commercial Cloud revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , mainly due to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , mainly due to Other gross margin increased $ 933 millio Gross margin $ ) % Gross margin $ 132 $ ( 493 ) $ margin $ 132 $ ( 493 ) $ 370 127 % $ ( 493 ) $ 370 127 % ( 233 ) ( 493 ) $ 370 127 % ( 233 ) % $ 370 127 % ( 233 ) % Corporate and Other general availability . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Corporate and Other revenue increased and Other revenue increased $ 619 million , primarily due to year . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue O gross margin increased $ 625 million , primarily due to increased revenue . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Corporate and Other revenue decreased and Other revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerings . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of previously deferred revenue Other gross margin d Gross margin 60,542 77,849 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 59,755 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 59,755 57,464 33,038 27,078 20,385 Gross margin 60,542 59,755 57,464 Research and development 27,078 20,385 Gross margin 60,542 59,755 57,464 Research and development 12,046 20,385 Gross margin 60,542 59,755 57,464 Research and development 12,046 11,381 59,755 57,464 Research and development 12,046 11,381 10,411 Sales and marketing 57,464 Research and developmen gross margin million ) Year Ended June 30 , 2015 2014 2013 Revenue Year Ended June 30 , 2015 2014 2013 Revenue Devices and Ended June 30 , 2015 2014 2013 Revenue Devices and Consumer June 30 , 2015 2014 2013 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing and Gaming : Computing and Gaming Hardware 10,183 9,093 6,149 Phone Hardware 7,524 Gross margin Devices Ended June 30 , 2015 2014 2013 Gross margin Devices and June 30 , 2015 2014 2013 Gross margin Devices and Consumer Devices and Consumer Licensing $ 13,870 $ 17,439 $ 16,985 Hardware Consumer Licensing $ 13,870 $ 17,439 $ 16,985 Hardware : Computing $ 13,870 $ 17,439 $ 16,985 Hardware : Computing and Gaming : Computing and Gaming Hardware 1,788 892 956 Phone Hardware 701 Computing and Gaming Hardware 1,788 892 956 Phone Hardware 701 54 and Gaming Hardware 1,788 892 956 Phone Hardware 701 gross margin Other 132 ( 493 ) 370 Total gross margin $ 60,542 370 Total gross margin $ 60,542 $ 59,755 $ 57,464 Below gross margin $ 60,542 $ 59,755 $ 57,464 Below are operating $ 60,542 $ 59,755 $ 57,464 Below are operating expense by million ) Year Ended June 30 , 2015 2014 2013 Devices Year Ended June 30 , 2015 2014 2013 Devices and Consumer Ended June 30 , 2015 2014 2013 Devices and Consumer $ June 30 , 2015 2014 2013 Devices and Consumer $ 11,505 2013 Devices and Consumer $ 11,505 $ 11,219 $ 10,625 Co Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss ) Net income ( loss ) 4,540 5,863 4,985 ( 3,195 ) income ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( ( los Gross margin 13,384 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 5,660 14,425 15,749 59,755 Net income 5,244 6,558 5,660 4,612 ( c 15,749 59,755 Net inc", + "accumulated_depreciation": "accumulated depreciation of $ 17,606 and $ 14,793 14,731 13,011 of $ 17,606 and $ 14,793 14,731 13,011 Equity and other $ 17,606 and $ 14,793 14,731 13,011 Equity and other investment 17,606 and $ 14,793 14,731 13,011 Equity and other investment 12,053 13,011 Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset , net investment 12,053 14,597 Good Accumulated depreciation ( 17,606 Total , at cost 32,337 27,804 Accumulated depreciation ( 17,606 ) 32,337 27,804 Accumulated depreciation ( 17,606 ) ( 14,793 ) Total depreciation ( 17,606 ) ( 14,793 ) Total , net $ ) Total , net $ 14,731 $ 13,011 During fiscal year , net $ 14,731 $ 13,011 During fiscal year 2015 , $ 13,011 During fiscal year 2015 , 2014 , and 2013 During fiscal year 2015 , 2014 , and 2013 , depreciation 2015 , 2014 , and 2013 , depreciation expense wa $ , depreciation expense wa $ 4.1 billion , $ 3.4 ", + "capital_expenditure": "capital expenditure existing debt . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K for Item 8 of this Form 10-K for further discussion . Unearned Revenue Unearned revenue at June 30 , 2015 wa comprised mainly revenue at June 30 , 2015 wa comprised mainly of unearned . Unearned revenue at June 30 , 2015 also included payment revenue at June 30 , 2015 also included payment for : business solution product ; Office 365 subscription ; Skype prepaid credit unearned revenue a of June 30 , 2015 : ( I", + "debt": "debt . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K for Item 8 of this Form 10-K for further discussion . Unearned Revenue Unearned revenue at June 30 , 2015 wa comprised mainly revenue at June 30 , 2015 wa comprised mainly of unearned . Unearned revenue at June 30 , 2015 also included payment revenue at June 30 , 2015 also included payment for : business solution product ; Office 365 subscription ; Skype prepaid credit unearned revenue a of June 30 , 2015 : ( In a of June 30 debt In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term debt : a ) Principal payment $ 2,500 $ 1,050 $ 3,750 $ Principal payment $ 2,500 $ 1,050 $ 3,750 $ 23,163 $ $ 2,500 $ 1,050 $ 3,750 $ 23,163 $ 30,463 Interest $ 1,050 $ 3,750 $ 23,163 $ 30,463 Interest payment 855 $ 3,750 $ 23,163 $ 30,463 Interest payment 855 1,641 1,552 23,163 $ 30,463 Interest payment 855 1,641 1,552 11,412 15,460 Construction $ 30,463 Interest payment 855 1,641 1,552 11,412 15,460 Construction commitment 30,46 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) long-term pension liability of $ 15.2 billion from the amount presented revenue and non-cash item . 45 Table of Contents PART II of Contents PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCOUNTING GUIDANCE See Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of th debt 4,985 Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 2,000 Current 6,591 $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term debt Current portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 Income debt 2,499 0 Accrued compensation 5,096 4,797 Income tax 606 782 2,499 0 Accrued compensation 5,096 4,797 Income tax 606 782 Short-ter debt 27,808 20,645 6,906 Total current liability 49,858 45,625 Long-term debt 27,808 20,645 Long-term liability 49,858 45,625 Long-term debt 27,808 20,645 Long-term unearned revenue 2,095 49,858 45,625 Long-term debt 27,808 20,645 Long-term unearned revenue 2,095 2,008 27,808 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 2,728 2,095 2,008 Deferred income tax 2,835 2,728 Other long-term liability 13,544 debt , maturity of 90 day or le , net day or le , net 4,481 500 0 Proceeds from issuance or le , net 4,481 500 0 Proceeds from issuance of le , net 4,481 500 0 Proceeds from issuance of debt Proceeds from issuance of debt 10,680 10,350 4,883 Repayments of debt from issuance of debt 10,680 10,350 4,883 Repayments of debt ( issuance of debt 10,680 10,350 4,883 Repayments of debt ( 1,500 4,883 Repayments of debt ( 1,500 ) ( 3,888 ) ( debt ( 1,500 ) ( 3,888 ) ( 1,346 ) Common ) ( 3,888 ) ( 1,346 ) Commo Debt Investment a of June 30 , 2015 . Debt Investment Maturities ( Basis Estimated Fair Value June 30 , 2015 Due in one Fair Value June 30 , 2015 Due in one year or one year or le $ 53,616 $ 53,645 Due after one or le $ 53,616 $ 53,645 Due after one year through one year through five year 33,260 33,336 Due after five year year through five year 33,260 33,336 Due after five year through Due after five year through 10 year 3,180 3,161 Due after five year through 10 year 3,180 3,161 Due after 10 year y debt were in excess of $ 1.0 billion . As a result required to be posted . 69 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2015 June 30 , risk : June 30 , 2015 June 30 , 2014 Assets June 30 , 2015 June 30 , 2014 Assets Liabilities Assets , 2015 June 30 , 2014 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 17 $ 167 $ 0 $ exchange contract $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) $ DEBT Short-term 1,451 Total $ 4,835 NOTE 12 \u2014 DEBT Short-term Debt As Short-term Debt As of June 30 , 2015 , we had As of June 30 , 2015 , we had $ 5.0 2015 , we had $ 5.0 billion of commercial paper issued a weighted-average interest rate of 0.11 % and maturity ranging from % and maturity ranging from 8 day to 63 day . ranging from 8 day to 63 day . As of June day . As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 2.0 2014 , we had $ 2.0 billion of commercial paper issued a weighted-av Debt As of June 30 , 2015 , the total As of June 30 , 2015 , the total carrying value current portion , were $ 30.3 billion and $ 30.5 billion $ 30.3 billion and $ 30.5 billion , respectively . This our long-term debt of $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively , a respectively , a of June 30 , 2014 . These estimated a of June 30 , 2014 . These estimated fair value value are based on Level 2 input . 78 Table of on Level 2 input . 78 Table of Contents PART II debt security . our debt for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 wa $ 2015 , 2014 , and 2013 wa $ 620 million , , and 2013 wa $ 620 million , $ 509 million $ 620 million , $ 509 million , and $ 371 509 million , and $ 371 million , respectively . As respectively . As of June 30 , 2015 and 2014 , As of June 30 , 2015 and 2014 , the aggregate June 30 , 2015 and 2014 , the aggregate unamortized discount current portion , wa $ 156 million and $ 100 million $ 156 mil Debt Service Maturities of our million ) Year Ending June 30 , 2016 $ 2,500 2017 Year Ending June 30 , 2016 $ 2,500 2017 0 2018 June 30 , 2016 $ 2,500 2017 0 2018 1,050 2019 30 , 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 , 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 debt ( 2,223 ) ( 1,974 ) Depreciation debt ( 2,223 ) ( 1,974 ) Depreciation and amortization ( ) Depreciation and amortization ( 685 ) ( 470 ) Other amortization ( 685 ) ( 470 ) Other ( 29 ) ( 470 ) Other ( 29 ) ( 87 ) Deferred Other ( 29 ) ( 87 ) Deferred income tax liability Deferred income tax liability ( 4,217 ) ( 3,671 ) Net liability ( 4,217 ) ( 3,671 ) Net deferred income tax ( liability ) $ ( 1,067 ) $ ( 781 ) ( 1,067 ) $ ( 781 ) Reported As Current deferred deferred income tax asset $ 1,915", + "share_repurchase": "share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date to complete it by December 31 , 2016 . As of it by December 31 , 2016 . As of June 30 2016 . As of June 30 , 2015 , $ 21.9 As of June 30 , 2015 , $ 21.9 billion remained 30 , 2015 , $ 21.9 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . program . During fiscal year 2015 , we repurchased 295 million year 2015 , we repurchased 295 million share o share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share for $ 6.4 175 million share for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 , and 47 Directors on September 16 , 2013 share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . During fiscal and expired September 30 , 2013 . During fiscal year 2013 2013 . During fiscal year 2013 , we repurchased 158 million year 2013 , we repurchased 158 million share for $ 4.6 158 million share for $ 4.6 billion , under the share repurchase program announced on September 22 , 2008 . All repurchase announced on September 22 share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2015 , $ 21.9 As of June 30 , 2015 , $ 21.9 billion remained 30 , 2015 , $ 21.9 billion remained of our $ billion remained of our $ 40.0 billion share repu share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . The above expired on September 30 , 2013 . The above table excludes . Dividends In fiscal year", + "earnings_per_share": "earnings per share $ Diluted earnings per share $ 1.48 ( a ) $ 2.63 1.48 ( a ) $ 2.63 $ 2.58 ( c ) a ) $ 2.63 $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 Cash dividend declared per share dividend declared per share $ 1.24 $ 1.12 $ 0.92 $ per share $ 1.24 $ 1.12 $ 0.92 $ 0.80 $ $ 1.24 $ 1.12 $ 0.92 $ 0.80 $ 0.64 Cash $ 1.12 $ 0.92 $ 0.80 $ 0.64 Cash , cash $ 0.92 $ 0.80 $ 0.64 Cash , cash equivalent , , and short-term investment $ 96,526 $ 85,709 $ 77,022 $ short-term investment $ 96,526 $ earnings per share Diluted earnings per share $ 1.48 $ 2.63 $ 2.58 ( per share $ 1.48 $ 2.63 $ 2.58 ( 44 ) $ 1.48 $ 2.63 $ 2.58 ( 44 ) % 2 $ 2.63 $ 2.58 ( 44 ) % 2 % Fiscal 2.58 ( 44 ) % 2 % Fiscal year 2015 compared % 2 % Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Revenue increased $ 6.7 billion year 2014 Revenue increased $ 6.7 billion or 8 % , increased $ 6.7 billion or 8 % , reflecting a full foreign currency impact of approximately 2 % . Gross margin increased . Gross Earnings per share $ 12,193 $ 22,074 $ 21,863 Earnings per share : Basic per share : Basic $ 1.49 $ 2.66 $ 2.61 Diluted : Basic $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 $ 2.58 Weighted 2.61 Diluted $ 1.48 $ 2.63 $ 2.58 Weighted average share $ 1.48 $ 2.63 $ 2.58 Weighted average share outstanding : average share outstanding : Basic 8,177 8,299 8,375 Diluted 8,254 8,399 share outstanding : Basic 8,177 8,299 8,375 Diluted 8,254 8,399 8,470 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2015 2014 2013 Net Year Ended June 30 , 2015 2014 2013 Net income available Ended June 30 , 2015 2014 2013 Net income available for June 30 , 2015 2014 2013 Net income available for common shareholder ( A ) $ 12,193 $ 22,074 $ 21,863 Weighted A ) $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding share of common stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock ( B ) 8,177 8,299 8,375 Dilutive e Earnings Per Share equivalent ( C ) 8,254 8,399 8,470 Earnings Per Share Basic ( C ) 8,254 8,399 8,470 Earnings Per Share Basic ( Basic ( A/B ) $ 1.49 $ 2.66 $ 2.61 Diluted A/B ) $ 1.49 $ 2.66 $ 2.61 Diluted ( A/C $ 1.49 $ 2.66 $ 2.61 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.48 $ 2.63 $ 2.58 Anti-dilutive A/C ) $ 1.48 $ 2.63 $ 2.58 Anti-dilutive stock-based award $ 1.48 $ 2.63 $ 2.58 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20 earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.1 billion in cash . Yammer price were goodwill of $ 937 million and iden earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share 0.62 2.66 Diluted earnings per share 0.62 0.78 0.68 0.55 ( c Diluted earnings per share 0.62 0.78 0.68 0.55 ( c ) earnings per share 0.62 0.78 0.68 0.55 ( c ) 2.63 per share 0.62 0.78 0.68 0.55 ( c ) 2.63 ( 0.68 0.", + "tax_rate": "tax rate for tax rate for fiscal year 2015 and 2014 wa approximately 34 for fiscal year 2015 and 2014 wa approximately 34 % and 2015 and 2014 wa approximately 34 % and 21 % , wa approximately 34 % and 21 % , respectively . The respectively . The fiscal year 2015 effective rate increased by 13 2015 effective rate increased by 13 % , primarily due to charge recorded in fiscal year 2015 , most of which did Rico . In fiscal year 2015 , this reduction wa mostly impairment and restructuring charge . 41 Table tax rate for tax rate for fiscal year 2014 and 2013 wa approximately 21 for fiscal year 2014 and 2013 wa approximately 21 % and 2014 and 2013 wa approximately 21 % and 19 % , wa approximately 21 % and 19 % , respectively . Our Rico . Our fiscal year 2014 effective rate increased by 2 2014 effective rate increased by 2 % from fiscal year 2013 2 % from fiscal year 2013 mainly due to adjustment of due to adjustment of $ 458 million to prior year \u2019 operating system revenue decreased $ 655 million in fiscal tax rate for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 , by 2015 , 2014 , and 2013 , by $ 7.9 billion and 2013 , by $ 7.9 billion , $ 7.0 billion $ 7.9 billion , $ 7.0 billion , and $ 6.5 7.0 billion , and $ 6.5 billion , respectively . As respectively . As of June 30 , 2015 , 2014 , As of June 30 , 2015 , 2014 , and 2013 June 30 , 2015 , 2014 , and 2013 , we 2015 , 2014 , and 2013 , we had accrued interest uncertain tax position of $ 1.7 billion , $ 1.5 billion $ 1.7 bil", + "segment_revenue": "Segment revenue and gross margin million ) Year Ended June 30 , 2015 2014 2013 Revenue Year Ended June 30 , 2015 2014 2013 Revenue Devices and Ended June 30 , 2015 2014 2013 Revenue Devices and Consumer June 30 , 2015 2014 2013 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing and Gaming : Computing and Gaming Hardware 10,183 9,093 6,149 Phon", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Devices and Consumer licensed . \u2022 Piracy . 6 Table of Contents PART I of Contents PART I Item 1 The version of Office included a the transition to Office 365 Consumer , our subscription-based cloud other productivity service . Office 365 Consumer revenue is included in service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respe Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on cash flow . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all other patent licensing revenue . 31 Table of Contents PART II of Contents PART II Item 7 \u2022 Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , compris Geographic goodwill impairment a of June 30 , 2015 and 2014 wa a of June 30 , 2015 and 2014 wa $ 11.3 June 30 , 2015 and 2014 wa $ 11.3 billion and 2015 and 2014 wa $ 11.3 billion and $ 6.2 billion $ 11.3 billion and $ 6.2 billion , respectively . 76 6.2 billion , respectively . 76 Table of Contents PART II of Contents PART II Item 8 Goodwill Impairment We test goodwill for impairment annually on May 1 at the reporting unit level annual testing a of May 1 , 2015 , Phone Hardware a of May 1 , 2015 , Phone Geographic were identified during fiscal year 2014 . 77 Table of Contents during fiscal year 2014 . 77 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2015 2014 Technology-based $ Year Ended June 30 , 2015 2014 Technology-based $ 874 5 Ended June 30 , 2015 2014 Technology-based $ 874 5 year , 2015 2014 Technology-based $ 874 5 year $ 2,841 9 2015 2014 Technology-based $ 874 5 year $ 2,841 9 year $ 874 5 year $ 2,841 9 year Marketing- Geographic Restructuring liability a of June 30 , 2014 $ 0 $ a of June 30 , 2014 $ 0 $ 0 $ June 30 , 2014 $ 0 $ 0 $ 0 Restructuring , 2014 $ 0 $ 0 $ 0 Restructuring charge 1,308 $ 0 $ 0 $ 0 Restructuring charge 1,308 770 2,078 0 $ 0 Restructuring charge 1,308 770 2,078 Cash paid ( $ 0 Restructuring charge 1,308 770 2,078 Cash paid ( 701 0 Restructuring charge 1,308 770 2,078 Cash paid ( 701 ) 770 2,078 Cash paid ( 701 ) ( 134 ) ( paid ( 701 ) ( 134 ) ( 835 ) Other ) ( 134 ) ( 835 ) Other ( 19 ) ( 835 ) Ot GEOGRAPHIC Commercial Other . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 \u2013 Business Combinations for additional other patent licensing revenue . 92 Table of Contents PART II of Contents PART II Item 8 \u2022 Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud ", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on December 2 , 2015 are incorporated by held on December 2 , 2015 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2015 INDEX Page PART Year Ended June 30 , 2015 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 16 Item 1A . Risk Factors of the Registrant common stock for $ 13.2 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share for $ 6.4 175 million share for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2 Common stock issued 634 1,346 ) Common stock issued 634 607 931 Common stock repurchased ) Common stock issued 634 607 931 Common stock repurchased ( Common stock issued 634 607 931 Common stock repurchased ( 14,443 931 Common stock repurchased ( 14,443 ) ( 7,316 ) ( repurchased ( 14,443 ) ( 7,316 ) ( 5,360 ) Common ) ( 7,316 ) ( 5,360 ) Common stock cash dividend stock cash dividend paid ( 9,882 ) ( 8,879 ) ( paid ( 9,882 ) ( 8,879 ) ( 7,455 ) Excess ) ( 8,879 ) ( 7,455 ) Excess tax benefit from tax benefi Common stock and Ended June 30 , 2015 2014 2013 Common stock and paid-in June 30 , 2015 2014 2013 Common stock and paid-in capital , beginning of period $ 68,366 $ 67,306 $ 65,797 Common of period $ 68,366 $ 67,306 $ 65,797 Common stock issued $ 68,366 $ 67,306 $ 65,797 Common stock issued 634 607 $ 65,797 Common stock issued 634 607 920 Common stock repurchased 65,797 Common stock issued 634 607 920 Common stock repurchased ( Common stock issued 634 607 920 Common stock repurchased ( 3,700 920 Common stock Common stock cash 856 ) Net income 12,193 22,074 21,863 Common stock cash dividend ) Net income 12,193 22,074 21,863 Common stock cash dividend ( Common stock cash dividend ( 10,063 ) ( 9,271 ) ( dividend ( 10,063 ) ( 9,271 ) ( 7,694 ) Common ) ( 9,271 ) ( 7,694 ) Common stock repurchased ( ) Common stock repurchased ( 10,744 ) ( 4,988 ) ( repurchased ( 10,744 ) ( 4,988 ) ( 3,418 ) Balance ) ( 4,988 ) ( 3,418 ) Balance , end of Balance , end of period 9,096 17,710 9,895 Accumulated other comprehensive , end common stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based award Dilutive effect of stock-based award 77 100 95 Common stock and effect of stock-based award 77 100 95 Common stock and common of stock-based award 77 100 95 Common stock and common stock stock equivalent ( C ) 8,254 8,399 8,470 Earnings Per Share equivalent ( C ) 8,254 8,399 8,470 Earnings Per Share Basic ( C ) 8,254 8,399 8,470 Ear common stock . NOTE 22 \u2014 SEGMENT INFORMATION AND GEOGRAPHIC Commercial Other . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 \u2013 Business Combinations for additional other patent licensing revenue . 92 Table of Contents PART II of Contents PART II Item 8 \u2022 Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Pe", + "fair_value_measurements": "Fair Value Measurements . \u2013 Fair Value Measurements . 70 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2015 2014 2013 Foreign Year Ended June 30 , 2015 2014 2013 Foreign Exchange Contracts Ended June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 741 $ ( 14 ) $ Derivatives $ 741 $ ( 14 ) $ 70 Hedged item $ ( 14 ) $ 70 Hedged item $ ( 725 7 FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2015 Assets Mutual fund Fair Value June 30 , 2015 Assets Mutual fund $ 1,100 2015 Assets Mutual fund $ 1,100 $ 0 $ 0 $ Mutual fund $ 1,100 $ 0 $ 0 $ 1,100 $ $ 1,100 $ 0 $ 0 $ 1,100 $ 0 $ $ 0 $ 0 $ 1,100 $ 0 $ 1,100 Commercial $ 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 1 0 0 $ 1,", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 741 $ ( 14 ) $ Derivatives $ 741 $ ( 14 ) $ 70 Hedged item $ ( 14 ) $ 70 Hedged item $ ( 725 70 Hedged item $ ( 725 ) 6 ( 69 ) item $ ( 725 ) 6 ( 69 ) Total amount ( 725 ) 6 ( 69 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 16 $ ( 8 ) $ ineffectiveness $ 16 $ ( 8 ) $ 1 Equity Contracts $ ( 8 ) $ 1 ", + "derivative_instruments": "Derivative Instruments counterparty credit risk : June 30 , 2015 June 30 , risk : June 30 , 2015 June 30 , 2014 Assets June 30 , 2015 June 30 , 2014 Assets Liabilities Assets , 2015 June 30 , 2014 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 17 $ 167 $ 0 $ exchange contract $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) $ 167 $ 0 $ ( 79 ) $ 10 $ 39 $ ( 79 ) $ 10 $ 39 $ 0 $ 79 ) $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) Equity 39 $ 0 $ ( 97 ) Equity contract 148 0 ( 97 ) Equity cont" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001193125-16-662209/full-submission_features.json b/src/data/feature/MSFT/10-K/0001193125-16-662209/full-submission_features.json new file mode 100644 index 0000000..0723cdb --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001193125-16-662209/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue a variety of device . 6 Table of Contents PART I of Contents PART I Item 1 Dynamics Dynamics provides business solution on-premises hardware and software . 7 Table of Contents PART I of Contents PART I Item 1 Enterprise Services Enterprise Services , , and PC accessory . 8 Table of Contents PART I of Contents PART I Item 1 \u2022 Gaming , including Xbox consider the launch of Windows 10 in July 2015 to be of Windows 10 in July 2015 to be a transformative moment MSN ad . In June 2015 , we entered int revenue in fiscal of revenue in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . We plan have a portfolio of over 61,000 U.S. and international patent issued international patent issued and over 35,000 11 Table of Contents PART patent issued and over 35,000 11 Table of Contents PART I of Contents PART I Item 1 pending . While we employ Bing or Windows with Office 365 subscription . 12 Table of with Office 365 subscription . revenue in fiscal of revenue in fiscal year 2016 , 2015 , or 2014 in fiscal year 2016 , 2015 , or 2014 . Our 2016 , 2015 , or 2014 . Our practice is to executive officer a of July 28 , 2016 were a follows a of July 28 , 2016 were a follows : Name with the Company Satya Nadella 48 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 46 Executive Vice President , Chief Chief Marketing Officer Jean-Philippe Courtois 55 Executive Vice President and President and Operations Kath Revenue $ 85,320 ( 2014 ( d ) 2013 2012 Revenue $ 85,320 ( a ) 2013 2012 Revenue $ 85,320 ( a ) $ 93,580 85,320 ( a ) $ 93,580 $ 86,833 $ 77,849 $ a ) $ 93,580 $ 86,833 $ 77,849 $ 73,723 Gross $ 93,580 $ 86,833 $ 77,849 $ 73,723 Gross margin $ $ 86,833 $ 77,849 $ 73,723 Gross margin $ 52,540 ( $ 73,723 Gross margin $ 52,540 ( a ) $ 60,542 52,540 ( a ) $ 60,542 $ 59,755 $ 57,464 $ a ) $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating income $ $ 59,755 $ 57,464 $ revenue deferral from Windows 10 of $ 6.6 billion , from Windows 10 of $ 6.6 billion , which decreased operating EPS \u201d ) by $ 6.6 billion , $ 4.6 billion $ 6.6 billion , $ 4.6 billion , and $ 0.58 4.6 billion , and $ 0.58 , respectively . ( b ( b ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . ( c revenue grew 113 % , with usage of nearly doubled year-over-year to over 33,000 . \u2022 Windows 10 is over 33,000 . \u2022 Windows 10 is now active on more now active on more than 350 million device around the world Live monthly active user grew 33 % year-over-year to 49 million grew 33 % year-over-year to 49 million . * Commercial cloud quarter by twelve for Office 365 commercial , Azure , Dynamics cloud property . In June 2016 , we entered into a to acquire LinkedIn for $ 196 per share in an all-cash all-cash revenue ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue \u2022 Revenue deferred on Windows 10 license to reflect ratable recognition solution , service revenue exceeded 10 % of total revenue for first time in fiscal year 2016 . As a result , and content such a Office 365 , Azure , Dynamics CRM Segment information appearing in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on and Oth Revenue $ 85,320 2015 Percentage Change 2015 Versus 2014 Revenue $ 85,320 $ 93,580 2015 Versus 2014 Revenue $ 85,320 $ 93,580 $ 86,833 ( 2014 Revenue $ 85,320 $ 93,580 $ 86,833 ( 9 ) $ 85,320 $ 93,580 $ 86,833 ( 9 ) % 8 $ 93,580 $ 86,833 ( 9 ) % 8 % Gross 86,833 ( 9 ) % 8 % Gross margin $ 52,540 8 % Gross margin $ 52,540 $ 60,542 $ 59,755 ( Gross margin $ 52,540 $ 60,542 $ 59,755 ( 13 ) $ 52,540 $ 60,542 $ 59,755 ( 13 ) % 1 $ 60,542 $ 59,755 ( 13 ) % 1 % Operating 59,755 ( 13 ) % 1 % Operating income $ Revenue decreased $ 8.3 billion year 2015 Revenue decreased $ 8.3 billion or 9 % , decreased $ 8.3 billion or 9 % , primarily due to net revenue deferral from Windows 10 of $ 6.6 billion and from Windows 10 of $ 6.6 billion and an unfavorable foreign currency impact of approximately $ 3.8 billion or 4 % . approximately $ 3.8 billion or 4 % . Windows 10 revenue or 4 % . Windows 10 revenue is primarily recognized at . Operating income increased $ 2.0 billion or 11 % , increased $ 2.0 billion or 11 % , pr revenue decreased $ 258 million or 1 % , decreased $ 258 million or 1 % , mainly due to and restructuring expense decreased $ 8.9 billion , primarily driven by and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , driven by a foreign currency impact of approximately 2 % . Diluted earnings per EPS \u201d ) wa $ 2.10 for fiscal year 2016 . $ 2.10 for fiscal year 2016 . Current year diluted EPS net revenue deferral from Windows 10 and impairment , integration , to diluted EPS Revenue increased $ 6.7 billion year 2014 Revenue increased $ 6.7 billion or 8 % , increased $ 6.7 billion or 8 % , primarily due to foreign currency impact of approximately 2 % . Operating income decreased . Operating income decreased $ 9.6 billion or 35 % , decreased $ 9.6 billion or 35 % , primarily due to restructuring expense in fiscal year 2015 , a well a increased . Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , driven by our Cost of revenue increased $ 6.0 billio Revenue Productivity and 2015 Percentage Change 2015 Versus 2014 Revenue Productivity and Business Processes Productivity and Business Processes $ 26,487 $ 26,430 $ 26,976 0 Business Processes $ 26,487 $ 26,430 $ 26,976 0 % ( $ 26,487 $ 26,430 $ 26,976 0 % ( 2 ) 26,487 $ 26,430 $ 26,976 0 % ( 2 ) % $ 26,976 0 % ( 2 ) % Intelligent Cloud 25,042 2 ) % Intelligent Cloud 25,042 23,715 21,735 6 % 9 ) % Intelligent Cloud 25,042 23,715 21,735 6 % 9 % % Intelligent Cloud 25,042 23,715 21,735 6 % 9 % More Intel revenue * * Total revenue $ 85,320 $ 93,580 $ 86,833 ( Total revenue $ 85,320 $ 93,580 $ 86,833 ( 9 ) $ 85,320 $ 93,580 $ 86,833 ( 9 ) % 8 $ 93,580 $ 86,833 ( 9 ) % 8 % Operating 86,833 ( 9 ) % 8 % Operating income ( loss Productivity and Business Processes $ 12,461 $ 13,359 $ 14,173 ( Business Processes $ 12,461 $ 13,359 $ 14,173 ( 7 ) $ 12,461 $ 13,359 $ 14,173 ( 7 ) % ( $ 13,359 $ 14,173 ( 7 ) % ( 6 ) ( 7 ) % ( 6 ) % Intelligent Cloud 9,358 6 ) % Intelligent Cloud 9,358 9,871 8,446 ( 5 ) ) % Intelli revenue increased $ 135 million or 1 % , increased $ 135 million or 1 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial and a decline in foreign currency impact of approximately 6 % . \u2022 Office Consumer Office Consumer revenue decreased $ 69 million or 2 % , decreased $ 69 million or 2 % , driven by a by higher revenue from Office 365 consumer , mainly due to foreign currency impact of approximately 4 % . \u2022 Dynamics revenue . \u2022 D revenue increased 4 % , mainly due to foreign currency impact of approximately 6 % . Productivity and Business Processes operating income decreased $ 898 million or 7 % , decreased $ 898 million or 7 % , driven by lower . Gross margin decreased $ 970 million or 4 % , decreased $ 970 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 1.0 billion or 26 % , increased $ 1.0 billion or 26 % , primarily due to . Operating expense decre revenue increased $ 1.3 billion or 6 % , increased $ 1.3 billion or 6 % , primarily due to foreign currency impact of approximately 5 % . \u2022 Server product cloud service revenue grew $ 686 million or 4 % , grew $ 686 million or 4 % , driven by revenue revenue growth from Azure of 113 % , offset in part foreign currency impact of approximately 5 % . \u2022 Enterprise Services Enterprise Services revenue grew $ 536 million or 11 % , grew $ 536 million or 11 % , mainly due to foreign currency impact of approxim revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 851 million or 15 % , increased $ 851 million or 15 % , primarily driven by Personal Computing revenue decreased $ 2.7 billion or 6 % , decreased $ 2.7 billion or 6 % , mainly due to foreign currency impact of approximately 2 % . \u2022 Devices revenue \u2022 Devices revenue decreased $ 3.7 billion or 32 % , decreased $ 3.7 billion or 32 % , mainly due to Surface \u201d ) revenue . 34 Table of Contents PART II of Conten revenue decreased $ 4.2 7 Phone revenue decreased $ 4.2 billion or 56 % , decreased $ 4.2 billion or 56 % , a we sold % , a we sold 13.8 million Microsoft Lumia ( \u201c Lumia \u201d ) phone and 75.5 million other phone in fiscal other phone in fiscal year 2016 , compared with 36.8 million year 2016 , compared with 36.8 million and 126.8 million sold compared with 36.8 million and 126.8 million sold , respectively , respectively , in fiscal year 2015 . Surface revenue increased $ . Surface revenue increased $ 48 revenue from Surface Pro 3 . Devices revenue included an foreign currency impact of approximately 3 % . \u2022 Windows revenue \u2022 Windows revenue decreased $ 871 million or 5 % , decreased $ 871 million or 5 % , mainly due to . Patent licensing revenue decreased 27 % , due to a . Windows OEM revenue decreased 1 % . Windows OEM Pro Windows OEM Pro revenue declined 6 % , driven by a Windows OEM non-Pro revenue increased 7 % , outperforming the consumer Windows Phone licensing revenue decreased 64 % , driven by revenue in fiscal year 2015 from Windows Phone 8 . year 2015 from Windows Phone 8 . Windows revenue included an foreign currency impact of approximately 2 % . \u2022 Search advertising Search advertising revenue increased $ 1.7 billion or 46 % . increased $ 1.7 billion or 46 % . Search advertising revenue traffic acquisition cost , increased 17 % , primarily driven by foreign currency impact of approximately 2 % . \u2022 Gaming revenue \u2022 Gaming revenue increased $ 132 million or 1 % , increased $ 132 million or revenue increased 17 % , driven by higher . Video game revenue grew 34 % , driven by the by the launch of Halo 5 and sale of Minecraft . gaming franchise , in November 2014 . Xbox hardware revenue decreased . Xbox hardware revenue decreased 16 % , mainly due to and a decline in Xbox 360 console volume , offset in foreign currency impact of approximately 4 % . More Personal Computing Computing operating income increased $ 1.5 billion or 32 % , increased $ 1.5 billion or 32 % , primarily due to . Operati revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by of revenue . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Productivity and Business Processes Productivity Business Processes revenue decreased $ 546 million or 2 % , decreased $ 546 million or 2 % , mainly due to foreign currency impact of approximately 2 % . \u2022 Office Consumer Office Consumer revenue decreased $ 624 million or 17 % , decreased $ 624 million or 17 % , driven by decline by subscriber growth of Office 365 consumer . \u2022 Office Commercial Office Commercial revenue decreased $ 152 million or 1 % , decreased $ 152 million or 1 % , driven by lower higher premium mix of Office 365 commercial . \u2022 Dynamics revenue . \u2022 Dynamics revenue grew 12 % , mainly due to Dynamics user increased , with 30 % growth in number of and we ended fiscal year 2015 with over eight million paid eight millio revenue Cost of revenue increased $ 492 million or 15 % , increased $ 492 million or 15 % , primarily due to capacity to serve our Office 365 offering . Operating expense decreased . Operating expense decreased $ 224 million or 2 % . decreased $ 224 million or 2 % . Sales and marketing and administrative expense decreased $ 258 million and $ 125 million $ 258 million and $ 125 million , respectively , mainly and development expense increased $ 159 million or 6 % , increased $ 159 million or 6 % , mainl revenue increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , mainly due to foreign currency impact of approximately 2 % . \u2022 Server product cloud service revenue grew $ 1.6 billion or 9 % , grew $ 1.6 billion or 9 % , primarily driven by Enterprise Services revenue grew $ 325 million or 7 % , grew $ 325 million or 7 % , mainly due to Cloud operating income increased $ 1.4 billion or 17 % , increased $ 1.4 billion or 17 % , primarily due to . Gross margin increased $ 1.6 billion or 10 % , in revenue foreign currency impact of approximately 2 % . Cost of revenue Cost of revenue increased $ 404 million or 7 % , increased $ 404 million or 7 % , mainly due to . Operating expense increased $ 151 million or 2 % , increased $ 151 million or 2 % , driven by higher and development expense increased $ 160 million or 6 % , increased $ 160 million or 6 % , mainly due to Personal Computing revenue increased $ 4.7 billion or 12 % , increased $ 4.7 billion or 12 % , mainly due to \u2022 Devices revenue increa revenue increased . Phones revenue increased $ 5.5 billion , a we sold billion , a we sold 36.8 million Lumia phone and 126.8 36.8 million Lumia phone and 126.8 million other phone in fiscal other phone in fiscal year 2015 , compared with 5.8 million year 2015 , compared with 5.8 million and 30.3 million sold compared with 5.8 million and 30.3 million sold , respectively , respectively , in fiscal year 2014 following the acquisition of Nokia fourth quarter of fiscal year 2014 . Surface revenue increase revenue increased 65 % to $ 3.6 billion increased 65 % to $ 3.6 billion , primarily due to primarily due to Surface Pro 3 unit sold . Surface Pro unit sold . Surface Pro 3 wa released in June 2014 3 wa released in June 2014 . \u2022 Search advertising revenue Search advertising revenue increased $ 651 million or 22 % , increased $ 651 million or 22 % , primarily driven by \u2022 Gaming revenue increased $ 463 million or 5 % , increased $ 463 million or 5 % , mainly due to game royalty . We sold 12.1 million Xbox revenue increased Xbox Live revenue increased $ 500 million , driven by increased Video game revenue increased $ 265 million , mainly due to acquisition of Mojang in November 2014 , and new Xbox title \u2022 Windows revenue decreased $ 3.6 billion or 16 % , decreased $ 3.6 billion or 16 % , mainly due to Windows OEM revenue decreased $ 1.9 billion or 15 % , decreased $ 1.9 billion or 15 % , primarily due to primarily due to decline of 15 % in OEM Pro revenue in OEM Pro revenue and 16 % in OEM non-Pro revenu revenue increased $ 5.1 billion or 28 % , increased $ 5.1 billion or 28 % , driven by higher cost of revenue increased $ 4.8 billion , reflecting a full phone sale in fiscal year 2015 . Windows Phone cost of cost of revenue decreased $ 897 million , driven by prior . Operating expense increased $ 574 million or 4 % , increased $ 574 million or 4 % , driven by a and development expense increased $ 346 million or 5 % , increased $ 346 million or 5 % , mainly due to and marketing expense increased $ 211 m revenue decreased and Other revenue decreased $ 6.9 billion , primarily due to net revenue deferral from Windows 10 . During fiscal year 2016 10 . During fiscal year 2016 , we deferred net revenue deferred net revenue from Windows 10 of $ 6.6 billion . from Windows 10 of $ 6.6 billion . During fiscal year billion . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Other operating loss decreased $ 2.0 billion , primarily due to primarily due t revenue . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Corporate and Other revenue increased and Other revenue increased $ 613 million , primarily due to year . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Offerings . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Other operating loss increased $ 9.3 billion , primarily due to million , except perce revenue 14 % 13 % 13 % percent of revenue 14 % 13 % 13 % 1ppt 0ppt revenue 14 % 13 % 13 % 1ppt 0ppt 37 Table % 13 % 13 % 1ppt 0ppt 37 Table of Contents 13 % 13 % 1ppt 0ppt 37 Table of Contents PART % 13 % 1ppt 0ppt 37 Table of Contents PART II of Contents PART II Item 7 Research and development expense include software code . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Research and development expense decreased and development expense decreased $ 58 million , pri revenue 17 % 17 % 18 % percent of revenue 17 % 17 % 18 % 0ppt ( revenue 17 % 17 % 18 % 0ppt ( 1 ) % 17 % 18 % 0ppt ( 1 ) ppt Sales % 18 % 0ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Sales and marketing expense decreased and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , primarily due to foreign currency impact of approximately 2 % . Fiscal year 2015 2 % . Fiscal year 2015 comp revenue 5 % 5 % 5 % percent of revenue 5 % 5 % 5 % 0ppt 0ppt revenue 5 % 5 % 5 % 0ppt 0ppt General and % 5 % 5 % 0ppt 0ppt General and administrative expense 5 % 5 % 0ppt 0ppt General and administrative expense include and other administrative fee . 38 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2016 compared with II Item 7 Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 General and administrative expense decreased and administrative expense decr revenue deferral related to sale related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the center . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss before income tax before income tax by $ 6.0 billion and foreign incom Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2016 , the primary As of June 30 , 2016 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue the IRS for tax year 2010 to 2016 . We are for tax year 2010 to 2016 . We are subject to to examination for tax year 1996 to 2016 , some of for tax year 1996 to revenue a of June 30 , 2016 wa comprised mainly a of June 30 , 2016 wa comprised mainly of unearned Unearned revenue a of June 30 , 2016 also included payment a of June 30 , 2016 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; Xbox Live subscription the revenue recognition criterion . 43 Table of Contents PART II of Contents PART II Item 7 The following table outline the unearned revenue a of June 30 , 2016 : ( revenue from license of Windows 10 is recognized ratably over the financial statement . See Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between for each reporting unit . 47 Table of Contents PART II of Contents PART II Item 7 Research and Development Costs Costs that ha a greater than 50 % likelihood of being realized to cost of revenue . 48 Table of Contents PART II of Contents PART I Revenue Year Ended June 30 , 2016 2015 2014 Revenue : Product Ended June 30 , 2016 2015 2014 Revenue : Product $ June 30 , 2016 2015 2014 Revenue : Product $ 61,502 2014 Revenue : Product $ 61,502 $ 75,956 $ 72,948 Service : Product $ 61,502 $ 75,956 $ 72,948 Service and other $ 61,502 $ 75,956 $ 72,948 Service and other 23,818 17,624 $ 72,948 Service and other 23,818 17,624 13,885 Total revenue 85,320 72,948 Service and other 23,818 17,624 13,885 Total revenue 85,320 93,580 Service and other 23,818 17 revenue 85,320 93,580 86,833 23,818 17,624 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue 17,624 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue : 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue : Product Cost of revenue : Product 17,880 21,410 16,681 Service and other of revenue : Product 17,880 21,410 16,681 Service and other 14,900 revenue : Product 17,880 21,410 16,681 Service and other 14,900 11,628 21,410 16,681 Service and other 14,900 11,628 10,397 Total cost of 1 revenue Service and other 14,900 11,628 10,397 Total cost of revenue 32,780 10,397 Total cost of revenue 32,780 33,038 27,078 Gross margin 52,540 Total cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 11,988 27,078 Gross margin 52,540 60,542 59,755 Research and develo revenue 27,468 5,264 5,096 Income tax 580 606 Short-term unearned revenue 27,468 23,223 580 606 Short-term unearned revenue 27,468 23,223 Securities lending payable 294 606 Short-term unearned revenue 27,468 23,223 Securities lending payable 294 92 27,468 23,223 Securities lending payable 294 92 Other 5,949 6,555 Total 23,223 Securities lending payable 294 92 Other 5,949 6,555 Total current lending payable 294 92 Other 5,949 6,555 Total current liability 59,357 payable 294 92 Other 5,949 6,555 Total cu revenue 6,441 59,357 49,647 Long-term debt 40,783 27,808 Long-term unearned revenue 6,441 2,095 40,783 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 1,295 6,441 2,095 Deferred income tax 1,476 1,295 Other long-term liability 13,640 2,095 Deferred income tax 1,476 1,295 Other long-term liability 13,640 13,544 1,476 1,295 Other long-term liability 13,640 13,544 Total liability 121,697 94,389 1,295 Other long revenue ) Deferral of unearned revenue 57,072 45,072 44,325 Recognition of unearned Deferral of unearned revenue 57,072 45,072 44,325 Recognition of unearned revenue of unearned revenue 57,072 45,072 44,325 Recognition of unearned revenue ( Recognition of unearned revenue ( 48,498 ) ( 44,920 ) ( revenue ( 48,498 ) ( 44,920 ) ( 41,739 ) Changes ) ( 44,920 ) ( 41,739 ) Changes in operating asset liability : Accounts receivable ( 530 ) 1,456 ( 1,120 ) Accounts receivable ( 530 ) 1,456 ( 1,120 ) Inventorie Revenue , and Unearned Revenue , and Note 21 \u2013 Segment Information and Geographic \u201c OCI \u201d ) . 57 Table of Contents PART II of Contents PART II Item 8 Product Revenue and Service and Other Revenue Service revenue exceeded 10 % of total revenue for first time in fiscal year 2016 . As a result , and content such a Office 365 , Microsoft Azure ( \u201c a multiple-element arrangement and all 58 Table of Contents PART II of Contents PART II Item 8 revenue from the arrangement is . Customers purchasing a Windows 1 revenue from license of Windows 10 is recognized ratably over the based on historical and projected 59 Table of Contents PART II of Contents PART II Item 8 product failure rate , historical a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.6 billion , $ 1.9 billion $ 1.6 billion , $ 1.9 billion , and $ 2.3 1.9 billion , and $ 2.3 billion in fiscal year 2016 2.3 billion in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 201 revenue predominantly at the time the net change in Windows 10 revenue from period to period the new standard . NOTE 2 \u2014 EARNINGS PER SHARE Basic option and stock award . 65 Table of Contents PART II of Contents PART II Item 8 The component of basic and share ) Year Ended June 30 , 2016 2015 2014 Net Year Ended June 30 , 2016 2015 2014 Net income available Ended June 30 , 2016 2015 2014 Net income available for June 30 , 2016 2015 2014 Net income available for common shareholder ( A ) $ 16,798 $ 12,193 revenue $ 625 $ 608 $ 104 Amount into revenue $ 625 $ 608 $ 104 Amount Excluded from $ 625 $ 608 $ 104 Amount Excluded from Effectiveness Assessment ) , net $ ( 354 ) $ ( 346 ) ( 354 ) $ ( 346 ) $ ( 239 ) ( 346 ) $ ( 239 ) We estimate that $ ) We estimate that $ 319 million of net derivative gain in AOCI a of June 30 , 2016 will be reclassified a of June 30 , 2016 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2016 . No revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 Revenue $ 96,248 Year Ended June 30 , 2014 Revenue $ 96,248 Net income 30 , 2014 Revenue $ 96,248 Net income $ 20,234 Diluted $ 96,248 Net income $ 20,234 Diluted earnings per share $ Diluted earnings per share $ 2.41 These pro forma resu revenue 494 520 1,609 1,531 Restructuring charge 284 211 Unearned revenue 494 520 Impaired charge 284 211 Unearned revenue 494 520 Impaired investment 226 257 284 211 Unearned revenue 494 520 Impaired investment 226 257 Loss revenue 494 520 Impaired investment 226 257 Loss carryforwards 1,703 1,158 494 520 Impaired investment 226 257 Loss carryforwards 1,703 1,158 Depreciation investment 226 257 Loss carryforwards 1,703 1,158 Depreciation and amortization 115 226 257 Loss carryforwards 1,703 1,158 Depr revenue item 89 1,158 Depreciation and amortization 115 798 Other revenue item 89 56 115 798 Other revenue item 89 56 Deferred income tax asset 798 Other revenue item 89 56 Deferred income tax asset 5,329 56 Deferred income tax asset 5,329 5,415 Less valuation allowance ( Deferred income tax asset 5,329 5,415 Less valuation allowance ( 2,180 5,415 Less valuation allowance ( 2,180 ) ( 2,265 ) Deferred allowance ( 2,180 ) ( 2,265 ) Deferred income tax asset net of valuation allowance $ 3,149 $ 3,150 Defe Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2016 , the primary As of June 30 , 2016 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue the IRS for tax year 2010 to 2016 . We are for tax year 2010 to 2016 . We are subject to to examination for tax year 1996 to 2016 , some of for tax year 1996 to REVENUE PART II Item 8 NOTE 15 \u2014 UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2016 2015 Productivity and million ) June 30 , 2016 2015 Productivity and Business Processes ) June 30 , 2016 2015 Productivity and Business Processes $ Productivity and Business Processes $ 12,482 $ 11,643 Intelligent Cloud 11,472 Business Processes $ 12,482 $ 11,643 Intelligent Cloud 11,472 10,346 More 12,482 $ 11,643 Intelligent Cloud 11,472 10,346 More Personal Computing 3,246 $ 11,643 Intelligent Cloud 11,4 Revenue from Windows 83 Total $ 33,909 $ 25,318 Revenue from Windows 10 is $ 25,318 Revenue from Windows 10 is primarily recognized at the above . As of June 30 , 2016 , we deferred As of June 30 , 2016 , we deferred a net we deferred a net $ 6.6 billion in revenue related to in revenue related to Windows 10 . NOTE 16 \u2014 COMMITMENTS to Windows 10 . NOTE 16 \u2014 COMMITMENTS Construction and Operating Commitments We have committed $ 2.0 billion for constructing new building leasehold improvement a of June 30 revenue ( 625 ) ( 608 ) ( revenue ( 625 ) ( 608 ) ( 104 ) Tax ) ( 608 ) ( 104 ) Tax expense included in in provision for income tax 36 15 6 Amounts reclassified from provision for income tax 36 15 6 Amounts reclassified from accumulated for income tax 36 15 6 Amounts reclassified from accumulated other accumulated other comprehensive income ( 589 ) ( 593 ) ( income ( 589 ) ( 593 ) ( 98 ) Net ) ( 593 ) ( 98 ) Net current period other income ( loss ) ( 238 ) 559 ( 35 ) loss ) ( 238 ) 559 ( 35 ) Accumulat Revenue Year Ended June 30 , 2016 2015 2014 Revenue Productivity and Ended June 30 , 2016 2015 2014 Revenue Productivity and Business June 30 , 2016 2015 2014 Revenue Productivity and Business Processes Productivity and Business Processes $ 26,487 $ 26,430 $ 26,976 Intelligent Business Processes $ 26,487 $ 26,430 $ 26,976 Intelligent Cloud 25,042 $ 26,487 $ 26,430 $ 26,976 Intelligent Cloud 25,042 23,715 21,735 26,430 $ 26,976 Intelligent Cloud 25,042 23,715 21,735 More Personal Computing $ 26,976 Inte revenue ( 6,669 ) 275 ( 338 ) Total revenue $ 85,320 338 ) Total revenue $ 85,320 $ 93,580 $ 86,833 92 Total revenue $ 85,320 $ 93,580 $ 86,833 92 Table of $ 85,320 $ 93,580 $ 86,833 92 Table of Contents PART 85,320 $ 93,580 $ 86,833 92 Table of Contents PART II of Contents PART II Item 8 ( In million ) Year million ) Year Ended June 30 , 2016 2015 2014 Operating Year Ended June 30 , 2016 2015 2014 Operating income ( Ended June 30 , 2016 2015 2014 Operating income ( loss June 30 , 2016 2015 2014 Operat Revenue reconciling amount and other ( a ) ( 6,669 ) 275 ( 338 ) a ) ( 6,669 ) 275 ( 338 ) Total Corporate ( 6,669 ) 275 ( 338 ) Total Corporate and Other Corporate and Other $ ( 7,779 ) $ ( 9,736 ) ( 7,779 ) $ ( 9,736 ) $ ( 465 ) ( 9,736 ) $ ( 465 ) ( a ) Revenue and other for fiscal year 2016 primarily consisted of a net consisted of a net $ 6.6 billion of revenue deferral related related to sale of Windows 10 . Revenue reconciling amount for reconciling amount for fiscal year 2015 included a net $ 3 revenue deferral related States accounted for more than 10 % of fiscal year 2016 10 % of fiscal year 2016 , 2015 , or 2014 of fiscal year 2016 , 2015 , or 2014 revenue . 2016 , 2015 , or 2014 revenue . Revenue , classified million ) Year Ended June 30 , 2016 2015 2014 United Year Ended June 30 , 2016 2015 2014 United States ( Ended June 30 , 2016 2015 2014 United States ( a June 30 , 2016 2015 2014 United States ( a ) States ( a ) $ 40,578 $ 42,941 $ 43,474 Other a ) $ 40,578 $ 42,941 $ 43,474 Other co revenue deferral related related to sale of Windows 10 . 93 Table of Contents sale of Windows 10 . 93 Table of Contents PART II of Contents PART II Item 8 Our total commercial cloud revenue , which primarily comprises Office 365 commercial , Azure , Dynamics cloud property , wa $ 9.5 billion , $ 5.8 billion $ 9.5 billion , $ 5.8 billion , and $ 2.8 5.8 billion , and $ 2.8 billion in fiscal year 2016 2.8 billion in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2 Revenue June 30 Total Fiscal Year 2016 Revenue ( a ) $ Revenue ( a ) $ 20,379 $ 23,796 $ 20,531 $ a ) $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52, Revenue $ 23,201 $ 26,470 Fiscal Year 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Opera revenue deferral from Windows 10 of $ 1.3 billion , from Windows 10 of $ 1.3 billion , $ 1.7 billion $ 1.3 billion , $ 1.7 billion , $ 1.6 billion $ 1.7 billion , $ 1.6 billion , and $ 2.0 1.6 billion , and $ 2.0 billion , for the first fourth quarter of fiscal year 2016 , respectively , and $ , respectively , and $ 6.6 billion for fiscal year 2016 6.6 billion for fiscal year 2016 . ( b ) Includes ( b ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructurin", + "net_income": "Net income f ) Net income $ 16,798 ( a ) ( b ) ( b ) $ 12,193 ( c ) $ 22,074 12,193 ( c ) $ 22,074 $ 21,863 ( e ) c ) $ 22,074 $ 21,863 ( e ) $ 16,978 21,863 ( e ) $ 16,978 ( f ) Diluted earnings Diluted earnings per share $ 2.10 ( a ) ( b ) ( b ) $ 1.48 ( c ) $ 2.63 1.48 ( c ) $ 2.63 $ 2.58 ( e ) c ) $ 2.63 $ 2.58 ( e ) $ 2.00 2.58 ( e ) $ 2.00 ( f ) Cash dividend dividend declared per share $ 1.44 $ 1.24 $ 1.12 $ per share $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ 0.80 Cash $ 1.24 $ 1. net income by $ 733 million ( \u20ac561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income and diluted EPS by $ 900 million , $ 596 million $ 900 million , $ 596 million , and $ 0.07 596 million , and $ 0.07 , respectively . ( f and net income by $ 6.2 billion and diluted EPS by and diluted EPS by $ 0.73 . ( g ) Reflects accounting standard in fiscal year 2016 related to balance sheet classification deferred tax . See Note 1 \u2013 Acco Net income $ Provision for income tax 2,953 6,314 5,746 Net income $ 16,798 for income tax 2,953 6,314 5,746 Net income $ 16,798 $ 6,314 5,746 Net income $ 16,798 $ 12,193 $ 22,074 Earnings Net income $ 16,798 $ 12,193 $ 22,074 Earnings per share $ 16,798 $ 12,193 $ 22,074 Earnings per share : Basic per share : Basic $ 2.12 $ 1.49 $ 2.66 Diluted : Basic $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 $ 2.63 Weighted 2.66 Diluted $ 2.10 $ 1.4 Net income $ Ended June 30 , 2016 2015 2014 Net income $ 16,798 June 30 , 2016 2015 2014 Net income $ 16,798 $ 2015 2014 Net income $ 16,798 $ 12,193 $ 22,074 Other Net income $ 16,798 $ 12,193 $ 22,074 Other comprehensive income $ 16,798 $ 12,193 $ 22,074 Other comprehensive income ( loss tax effect of $ ( 12 ) , $ 20 , ( 12 ) , $ 20 , and $ ( 4 20 , and $ ( 4 ) ) ( 238 ) ( 4 ) ) ( 238 ) 559 ( 35 ) ) ) ( 238 ) 559 ( 35 ) Net unrealized ( 238 ) 559 ( 35 ) Net unrealized gain ( tax effect of $ ( 121 ) , $ Net income Ended June 30 , 2016 2015 2014 Operations Net income $ June 30 , 2016 2015 2014 Operations Net income $ 16,798 2014 Operations Net income $ 16,798 $ 12,193 $ 22,074 Adjustments Net income $ 16,798 $ 12,193 $ 22,074 Adjustments to reconcile $ 16,798 $ 12,193 $ 22,074 Adjustments to reconcile net income : Goodwill and asset impairment 630 7,498 0 Depreciation , amortization Goodwill and asset impairment 630 7,498 0 Depreciation , amortization , and asset impairment 630 7,498 0 Depreciation , amor Net income 16,798 , beginning of period 9,096 17,710 9,895 Net income 16,798 12,193 beginning of period 9,096 17,710 9,895 Net income 16,798 12,193 22,074 9,096 17,710 9,895 Net income 16,798 12,193 22,074 Common stock cash 17,710 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend ( Common stock cash dividend ( 11,329 ) ( 10,063 ) ( dividend ( 11,329 ) ( 10,063 ) ( 9,271 ) Common ) ( 10,063 ) ( 9,271 ) Common stock repurchased Net income available Ended June 30 , 2016 2015 2014 Net income available for June 30 , 2016 2015 2014 Net income available for common shareholder ( A ) $ 16,798 $ 12,193 $ 22,074 Weighted A ) $ 16,798 $ 12,193 $ 22,074 Weighted average outstanding $ 16,798 $ 12,193 $ 22,074 Weighted average outstanding share of common stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based award Dilutive effect of Net income 30 , 2014 Revenue $ 96,248 Net income $ 20,234 Diluted $ 96,248 Net income $ 20,234 Diluted earnings per share $ Diluted earnings per share $ 2.41 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were . Other During fiscal year 2016 , we completed 17 acquisition year 2016 , we completed 17 acquisition for total cash consideration Net income 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 3,756 5,283 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( b 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( b ) 20,182 Net income 4,902 5,018 3,756 3,122 ( b ) 16,798 Net income 4,902 5,018 3,756 3,122 ( b ) 16,798 ( 3,756 3,122 ( b ) 16,798 ( b ) Basic earnings ) Basic earnings per share Net income ( 7,776 6,594 ( 2,053 ) 18,161 Net income ( loss ) Net income ( loss ) 4,540 5,863 4,985 ( 3,195 ) income ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( c ) 4,540 5,863 4,985 ( 3,195 ) ( c ) 12,193 3,195 ) ( c ) 12,193 ( d ) Basic earnings ( loss ) per share 0.55 0.71 0.61 ( 0.40 ) loss ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted earnings ( 0.71 0.61 ( 0.40 ) 1.49 Diluted earn", + "assets": "Assets Current million ) June 30 , 2016 2015 Assets Current asset : ) June 30 , 2016 2015 Assets Current asset : Cash Cash and cash equivalent $ 6,510 $ 5,595 Short-term investment ( cash equivalent $ 6,510 $ 5,595 Short-term investment ( including security including security loaned of $ 204 and $ 75 ) 106,730 of $ 204 and $ 75 ) 106,730 90,931 Total cash 204 and $ 75 ) 106,730 90,931 Total cash , cash and $ 75 ) 106,730 90,931 Total cash , cash equivalent equivalent , and short-term investment 113,24 Assets June 30 , 2016 June 30 , 2015 Assets Liabilities Assets , 2016 June 30 , 2015 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 33 $ 156 $ 0 $ exchange contract $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) $ 156 $ 0 $ ( 296 ) $ 17 $ 167 $ ( 296 ) $ 17 $ 167 $ 0 $ 296 ) $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) Equity 167 $ 0 $ ( 79 ) Equity contract 23 0 ( 79 ) Equity contract 23 0 0 ( 16 ) 79 ) Equity contract 23 0 0 ( 16 ) 148 ) Equity contract 23 0 0 ( 16 Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2016 Assets Mutual fund Fair Value June 30 , 2016 Assets Mutual fund $ 1,012 2016 Assets Mutual fund $ 1,012 $ 0 $ 0 $ Mutual fund $ 1,012 $ 0 $ 0 $ 1,012 $ $ 1,012 $ 0 $ 0 $ 1,012 $ 0 $ $ 0 $ 0 $ 1,012 $ 0 $ 1,012 Commercial $ 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 298 0 0 $ 1,012 C Assets Mutual fund Fair Value June 30 , 2015 Assets Mutual fund $ 1,100 2015 Assets Mutual fund $ 1,100 $ 0 $ 0 $ Mutual fund $ 1,100 $ 0 $ 0 $ 1,100 $ $ 1,100 $ 0 $ 0 $ 1,100 $ 0 $ $ 0 $ 0 $ 1,100 $ 0 $ 1,100 Commercial $ 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 1 0 0 $ 1,100 Commercial paper 0 1 0 1 0 1 $ 1,100 Commercial paper 0 1 0 1 0 1 Certificates 1,100 Commercial paper 0 1 0 1 0 1 Certificates of Commercial paper 0 1 0 1 0 1 Certificates of deposit paper Assets and investment component $ 123,646 $ 108,554 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2016 and 2015 , we did During fiscal year 2016 and 2015 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2016 2015 Raw material million ) June 30 , 2016 2015 Raw material $ 612 ) June 30 , 2016 2015 Raw material $ 612 $ 2016 2015 Raw material $ 612 $ 1,100 Work in process Raw material $ 612 $ 1,100 Work in process 1 Assets for additional additional detail . In May 2016 , we announced an agreement feature phone asset for $ 350 million . The transaction is second half of calendar year 2016 , subject to regulatory approval income statement for fiscal year 2014 included revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year End ASSETS The component Amortization Net Carrying Amount June 30 , 2016 2015 Technology-based ( Carrying Amount June 30 , 2016 2015 Technology-based ( a ) Amount June 30 , 2016 2015 Technology-based ( a ) $ Technology-based ( a ) $ 5,970 $ ( 3,648 ) $ ) $ 5,970 $ ( 3,648 ) $ 2,322 $ 5,926 $ ( 3,648 ) $ 2,322 $ 5,926 $ ( 3,149 3,648 ) $ 2,322 $ 5,926 $ ( 3,149 ) $ 2,322 $ 5,926 $ ( 3,149 ) $ 2,777 Marketing-related 1,869 $ ( 3,149 ) $ 2,777 Marketing-related 1,869 ( 616 ) 3,149 ) $ 2,777 Marketing-related Assets ) June 30 , 2016 2015 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 809 $ 884 Other expense item compensation expense $ 809 $ 884 Other expense item 1,609 1,531 $ 884 Other expense item 1,609 1,531 Restructuring charge 284 211 884 Other expense item 1,609 1,531 Restructuring charge 284 211 Unearned item 1,609 1,531 Restructuring charge 284 211 Unearned revenue 494 520 1,609 1,531 Restructuring charge 284 211 Unearned revenue 494 520 Impaired charge 284 211 Une", + "liabilities": "Liabilities and stockholder Total asset $ 193,694 $ 174,472 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 4,985 Current 6,898 $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term debt Current portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 portion of long-term debt 0 2,499 Accrued compensation 5,2 Liabilities Assets , 2016 June 30 , 2015 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 33 $ 156 $ 0 $ exchange contract $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) $ 156 $ 0 $ ( 296 ) $ 17 $ 167 $ ( 296 ) $ 17 $ 167 $ 0 $ 296 ) $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) Equity 167 $ 0 $ ( 79 ) Equity contract 23 0 ( 79 ) Equity contract 23 0 0 ( 16 ) 79 ) Equity contract 23 0 0 ( 16 ) 148 ) Equity contract 23 0 0 ( 16 ) 148 0 contract 23 0 0 ( 16 ) 148 0 0 ( 0 0 ( 1 Liabilities Derivatives $ ( 401 ) $ 119,019 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 17 $ 613 $ 0 $ and other $ 17 $ 613 $ 0 $ 630 $ $ 17 $ 613 $ 0 $ 630 $ ( 398 $ 613 $ 0 $ 630 $ ( 398 ) $ 0 $ 630 $ ( 398 ) $ 232 ( In $ ( 398 ) $ 232 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2015 Assets Mutual fund Fair Value June 30 , 2015 Liabilities Derivatives $ ( 162 ) $ 104,369 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 159 $ 54 $ and other $ 5 $ 159 $ 54 $ 218 $ $ 5 $ 159 $ 54 $ 218 $ ( 161 $ 159 $ 54 $ 218 $ ( 161 ) $ 54 $ 218 $ ( 161 ) $ 57 ( a $ ( 161 ) $ 57 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 73 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 \u2013 Investments Liabilities Measured Nonrecurring Basis During fiscal year 2016 and 2015 , we did During fiscal year 2016 and 2015 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2016 2015 Raw material million ) June 30 , 2016 2015 Raw material $ 612 ) June 30 , 2016 2015 Raw material $ 612 $ 2016 2015 Raw material $ 612 $ 1,100 Work in process Raw material $ 612 $ 1,100 Work in process 158 202 $ 1,100 Work in process 158 202 Finished good 1,481 1,600 1,100 Work in Liabilities Foreign Liabilities Foreign earnings $ ( 1,242 ) $ ( 1,280 ) ( 1,242 ) $ ( 1,280 ) Unrealized gain on investment on investment and debt ( 2,102 ) ( 2,223 ) Depreciation debt ( 2,102 ) ( 2,223 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,008 ) ( 685 ) Other amortization ( 1,008 ) ( 685 ) Other ( 54 ) ( 685 ) Other ( 54 ) ( 29 ) Deferred Other ( 54 ) ( 29 ) Deferred income tax liability Deferred income tax liability ( 4,406 ) ( 4,217 ) Net liability ( 4,406 ) ( 4,217 ) Ne", + "equity": "Equity Securities 28 Item 6 . Selected Financial of Equity Securities 28 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management \u2019 Selected Financial Data 28 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2016 , all of which were ( in million ) April 1 , 2016 \u2013 April 30 million ) April 1 , 2016 \u2013 April 30 , 2016 1 , 2016 \u2013 April 30 , 2016 23,687,526 $ 53.72 2016 \u2013 April 30 , 2016 23,687,526 $ 53.72 23,687,526 $ \u2013 April 30 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 30 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 May 1 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 equity $ 71,977 $ 80,083 $ 89,784 $ \u2019 equity $ 71,977 $ 80,083 $ 89,784 $ 78,944 $ $ 71,977 $ 80,083 $ 89,784 $ 78,944 $ 66,363 28 $ 80,083 $ 89,784 $ 78,944 $ 66,363 28 Table of $ 89,784 $ 78,944 $ 66,363 28 Table of Contents PART 89,784 $ 78,944 $ 66,363 28 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) Reflects the net revenue deferral from Windows 10 of $ 6.6 billion , from Windows 10 of $ 6.6 billion , which decreased operating EPS \u201d ) by $ 6.6 billion , $ Equity and a of June 30 , 2015 . Equity and other investment and other investment were $ 10.4 billion a of June 30 10.4 billion a of June 30 , 2016 , compared with a of June 30 , 2016 , compared with $ 12.1 2016 , compared with $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2015 . Our short-term a of June 30 , 2015 . Our short-term investment are short-term investment a of June 30 , 2016 , $ 108.9 a of June 30 , 2016 , $ 108.9 billion wa 30 , 2016 , $ 108.9 billion wa held by our local regula Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . during the period presented . 44 Table of Contents PART II of Contents PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2016 : ( In a of June 30 , 2016 : ( In million ) : ( In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term ( In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term debt In million ) 2017 2018-2019 2020-2021 Thereafte Equity $ 51 $ 56 $ 63 $ 50 Equity $ 157 $ 56 $ 63 $ 50 Equity $ 157 $ 149 63 $ 50 Equity $ 157 $ 149 $ 163 $ 50 Equity $ 157 $ 149 $ 163 $ 178 $ $ 157 $ 149 $ 163 $ 178 $ 137 Commodity $ 149 $ 163 $ 178 $ 137 Commodity $ 12 $ 163 $ 178 $ 137 Commodity $ 12 $ 13 178 $ 137 Commodity $ 12 $ 13 $ 10 $ 137 Commodity $ 12 $ 13 $ 10 $ 14 $ $ 12 $ 13 $ 10 $ 14 $ 6 Total $ 13 $ 10 $ 14 $ 6 Total one-day VaR $ 10 $ 14 $ 6 Total one-day VaR for the combined risk category wa $ 225 million a of June 30 225 million Equity and other $ 19,800 and $ 17,606 18,356 14,731 Equity and other investment 19,800 and $ 17,606 18,356 14,731 Equity and other investment 10,431 14,731 Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset , net investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset , net 3,733 16,939 Intangible asset , net 3,733 4 equity liability : Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 4,985 Current 6,898 $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term debt Current portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 Income debt 0 2,499 Accrued compensation 5,264 5,096 Income tax 580 606 0 2, equity Accumulated other comprehensive income 1,537 2,522 Total stockholder \u2019 equity 71,997 2,522 Total stockholder \u2019 equity 71,997 80,083 Total liability and stockholder Total stockholder \u2019 equity 71,997 80,083 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 193,694 $ 174,472 See accompanying note \u2019 equity $ 193,694 $ 174,472 See accompanying note . 54 174,472 See accompanying note . 54 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended J EQUITY STATEMENTS ( million ) Year Ended June 30 , 2016 2015 2014 Common Year Ended June 30 , 2016 2015 2014 Common stock and Ended June 30 , 2016 2015 2014 Common stock and paid-in June 30 , 2016 2015 2014 Common stock and paid-in capital , beginning of period $ 68,465 $ 68,366 $ 67,306 Common of period $ 68,465 $ 68,366 $ 67,306 Common stock issued $ 68,465 $ 68,366 $ 67,306 Common stock issued 668 634 $ 67,306 Common stock issued 668 634 607 Common stock repurchased 67,306 Common stock issued 668 6 equity end of period 1,537 2,522 3,708 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 71,997 $ 80,083 $ 89,784 See \u2019 equity $ 71,997 $ 80,083 $ 89,784 See accompanying note $ 71,997 $ 80,083 $ 89,784 See accompanying note . 56 89,784 See accompanying note . 56 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles . Segment Information In June 2015 , we announced a change first Equity and Other Investments June 30 , 2016 Cash $ 3,501 Other Investments June 30 , 2016 Cash $ 3,501 $ 0 30 , 2016 Cash $ 3,501 $ 0 $ 0 $ 2016 Cash $ 3,501 $ 0 $ 0 $ 3,501 $ $ 3,501 $ 0 $ 0 $ 3,501 $ 3,501 $ $ 0 $ 0 $ 3,501 $ 3,501 $ 0 $ $ 0 $ 3,501 $ 3,501 $ 0 $ 0 Mutual $ 3,501 $ 3,501 $ 0 $ 0 Mutual fund 1,012 $ 3,501 $ 0 $ 0 Mutual fund 1,012 0 0 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial Mutual fund 1,01 Equity and Other Investments June 30 , 2015 Cash $ 3,679 Other Investments June 30 , 2015 Cash $ 3,679 $ 0 30 , 2015 Cash $ 3,679 $ 0 $ 0 $ 2015 Cash $ 3,679 $ 0 $ 0 $ 3,679 $ $ 3,679 $ 0 $ 0 $ 3,679 $ 3,679 $ $ 0 $ 0 $ 3,679 $ 3,679 $ 0 $ $ 0 $ 3,679 $ 3,679 $ 0 $ 0 Mutual $ 3,679 $ 3,679 $ 0 $ 0 Mutual fund 1,100 $ 3,679 $ 0 $ 0 Mutual fund 1,100 0 0 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial Mutual fund 1,10 Equity forward . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount market price risk were $ 1.3 billion and $ 2.2 billion $ 1.3 billion and $ 2.2 billion , respectively , of respectively , of which $ 737 million and $ 986 million $ 737 million and $ 986 million , respectively , were instrument . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount market price risk were $ 2.2 billion and $ 2.6 billion $ 2.2 billion and $ 2.6 billion , respec Equity 167 $ 0 $ ( 79 ) Equity contract 23 0 ( 79 ) Equity contract 23 0 0 ( 16 ) 79 ) Equity contract 23 0 0 ( 16 ) 148 ) Equity contract 23 0 0 ( 16 ) 148 0 contract 23 0 0 ( 16 ) 148 0 0 ( 0 0 ( 16 ) 148 0 0 ( 18 ) 0 ( 16 ) 148 0 0 ( 18 ) Interest ( 16 ) 148 0 0 ( 18 ) Interest rate ) 148 0 0 ( 18 ) Interest rate contract 10 18 ) Interest rate contract 10 0 0 ( 25 ) ) Interest rate contract 10 0 0 ( 25 ) 7 Interest rate contract 10 0 0 ( 25 ) 7 0 contract 10 0 0 ( 25 ) 7 0 0 ( 0 0 ( 25 ) 7 0 0 ( 12 Equity 552 $ 0 $ ( 31 ) Equity contract 0 0 ( 31 ) Equity contract 0 0 18 ( 25 ) 31 ) Equity contract 0 0 18 ( 25 ) 0 ) Equity contract 0 0 18 ( 25 ) 0 0 contract 0 0 18 ( 25 ) 0 0 25 ( 0 18 ( 25 ) 0 0 25 ( 69 ) 18 ( 25 ) 0 0 25 ( 69 ) Total ( 25 ) 0 0 25 ( 69 ) Total $ ) 0 0 25 ( 69 ) Total $ 1 $ ( 69 ) Total $ 1 $ 392 $ 18 $ ) Total $ 1 $ 392 $ 18 $ ( 288 $ 1 $ 392 $ 18 $ ( 288 ) $ 392 $ 18 $ ( 288 ) $ 56 $ 552 $ ( 288 ) $ 56 $ 552 $ 25 $ 288 ) $ 56 $ 552 $ 25 $ ( 100 $ 56 $ 552 $ 25 $ ( 100 ) Total Equity 41 $ 16 $ ( 8 ) Equity Contracts Derivatives $ Equity Contracts Derivatives $ ( 76 ) $ ( 107 ) ( 76 ) $ ( 107 ) $ ( 110 ) ( 107 ) $ ( 110 ) Hedged item 76 107 ( 110 ) Hedged item 76 107 110 Total amount of 110 ) Hedged item 76 107 110 Total amount of ineffectiveness ) Hedged item 76 107 110 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded from effectiveness assessme Equity contract ( 21 78 ) Equity contract ( 21 ) ( 19 ) ( contract ( 21 ) ( 19 ) ( 64 ) Interest-rate ) ( 19 ) ( 64 ) Interest-rate contract 10 23 ( 64 ) Interest-rate contract 10 23 24 Credit contract ( 64 ) Interest-rate contract 10 23 24 Credit contract ( 1 ) Interest-rate contract 10 23 24 Credit contract ( 1 ) 23 24 Credit contract ( 1 ) ( 1 ) 13 contract ( 1 ) ( 1 ) 13 Commodity contract ( 1 ) ( 1 ) 13 Commodity contract ( 87 ) ) 13 Commodity contract ( 87 ) ( 223 ) 71 contract ( 87 ) ( 223 ) 71 EQUITY Shares million ) Year Ended June 30 , 2016 2015 2014 Balance Year Ended June 30 , 2016 2015 2014 Balance , beginning Ended June 30 , 2016 2015 2014 Balance , beginning of June 30 , 2016 2015 2014 Balance , beginning of year Balance , beginning of year 8,027 8,239 8,328 Issued 75 83 , beginning of year 8,027 8,239 8,328 Issued 75 83 86 beginning of year 8,027 8,239 8,328 Issued 75 83 86 Repurchased year 8,027 8,239 8,328 Issued 75 83 86 Repurchased ( 294 8,027 8,239 8,328 Issued 75 83 86 Repurch Equity Statements 56 55 Stockholders \u2019 Equity Statements 56 Notes to Financial Statements 57 56 Notes to Financial Statements 57 Report of Independent Registered Public Independent Registered Public Accounting Firm 95 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 2.1 Agreement and Plan of Merger , dated a of June 11 , 2016 , by and a of June 11 , 2016 , by and among Microsoft Inc. , and LinkedIn Corporation 8-K * * * 2.1 6/13/16 Corporation 8-K * * * 2.1 6/13/16 3.1 Amended and Restated 8-K ", + "cash_flow": "cash flow . 24 Table of Contents PART I of Contents PART I Item 1A Our hardware and software product customer are located in over 200 country and a significant part and provide cloud-based service . 25 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 Adverse PART I Item 1A , 1B , 2 Adverse economic or Item 1A , 1B , 2 Adverse economic or market condition our financial result . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year Cash flow from operation increased flow from operation increased $ 3.7 billion to $ 33.3 billion $ 3.7 billion to $ 33.3 billion during the fiscal year used in financing decreased $ 1.3 billion to $ 8.4 billion $ 1.3 billion to $ 8.4 billion , mainly due to mainly due to a $ 4.6 billion increase in proceeds from in part by a $ 1.5 billion increase in cash used stock repurchase and a $ 1.1 billion increase in dividend paid used in investing increased $ 949 million to $ 24.0 billion $ 949 million to $ 24.0 Cash flow from operation decreased flow from operation decreased $ 2.8 billion to $ 29.7 billion $ 2.8 billion to $ 29.7 billion , mainly due to used in financing increased $ 1.0 billion to $ 9.7 billion $ 1.0 billion to $ 9.7 billion , mainly due to mainly due to a $ 7.1 billion increase in cash used in part by a $ 6.7 billion increase in proceeds from used in investing increased $ 4.2 billion to $ 23.0 billion $ 4.2 billion to $ 23.0 billion , mainly due to mainly due to a $ 5.5 billion increase in cas Cash Flow Hedge Gains million ) Year Ended June 30 , 2016 2015 2014 Effective Year Ended June 30 , 2016 2015 2014 Effective Portion Gains Ended June 30 , 2016 2015 2014 Effective Portion Gains recognized June 30 , 2016 2015 2014 Effective Portion Gains recognized in of tax effect of $ 24 , $ 35 and $ of $ 24 , $ 35 and $ 2 ) $ , $ 35 and $ 2 ) $ 351 $ 1,152 and $ 2 ) $ 351 $ 1,152 $ 63 Gains 2 ) $ 351 $ 1,152 $ 63 Gains reclassified from $ 351 $ 1,152 $ 63 Gains reclassified from AOCI into from AOCI into", + "gross_margin": "Gross margin $ $ 86,833 $ 77,849 $ 73,723 Gross margin $ 52,540 ( $ 73,723 Gross margin $ 52,540 ( a ) $ 60,542 52,540 ( a ) $ 60,542 $ 59,755 $ 57,464 $ a ) $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating income $ $ 59,755 $ 57,464 $ 56,193 Operating income $ 20,182 ( $ 56,193 Operating income $ 20,182 ( a ) ( b ) ( b ) $ 18,161 ( c ) $ 27,759 18,161 ( c ) $ 27,759 $ 26,764 ( e ) c ) $ 27,759 $ 26,764 ( e ) $ 21,763 26,764 ( e ) $ 21,763 ( f ) Net income f ) Net Gross margin $ 52,540 8 % Gross margin $ 52,540 $ 60,542 $ 59,755 ( Gross margin $ 52,540 $ 60,542 $ 59,755 ( 13 ) $ 52,540 $ 60,542 $ 59,755 ( 13 ) % 1 $ 60,542 $ 59,755 ( 13 ) % 1 % Operating 59,755 ( 13 ) % 1 % Operating income $ 20,182 1 % Operating income $ 20,182 $ 18,161 $ 27,759 11 Operating income $ 20,182 $ 18,161 $ 27,759 11 % ( $ 20,182 $ 18,161 $ 27,759 11 % ( 35 ) 20,182 $ 18,161 $ 27,759 11 % ( 35 ) % $ 27,759 11 % ( 35 ) % Diluted earnings per Diluted earnings per share $ 2.10 $ 1.48 $ 2.63 Gross margin decreased $ 8.0 billion or 13 % , decreased $ 8.0 billion or 13 % , driven by the currency impact of approximately $ 3.3 billion or 5 % . approximately $ 3.3 billion or 5 % . Productivity and Business Cost of revenue decreased $ 258 million or 1 % , decreased $ 258 million or 1 % , mainly due to and restructuring expense decreased $ 8.9 billion , primarily driven by and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , driven by a foreign currency impact of app Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , driven by our Cost of revenue increased $ 6.0 billion or 22 % , increased $ 6.0 billion or 22 % , mainly due to commercial cloud , including $ 396 million of higher datacenter expense and restructuring expense were $ 10.0 billion in fiscal year 2015 10.0 billion in fiscal year 2015 , reflecting goodwill and asset asset impairment charge of $ 7.5 billion related to our phone phone business , and $ 2.5 billion of integration and re Gross margin decreased $ 970 million or 4 % , decreased $ 970 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 1.0 billion or 26 % , increased $ 1.0 billion or 26 % , primarily due to . Operating expense decreased $ 72 million or 1 % , decreased $ 72 million or 1 % , driven by lower and marketing expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , mainly due to Intelligent Cloud revenue increased $ 1.3 billion or Gross margin increased $ 476 million or 3 % , increased $ 476 million or 3 % , driven by revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 851 million or 15 % , increased $ 851 million or 15 % , primarily driven by Personal Computing revenue decreased $ 2.7 billion or 6 % , decreased $ 2.7 billion or 6 % , mainly due to foreign currency impact of approximately 2 % . \u2022 Devices revenue \u2022 Devices revenue decreased $ 3.7 billion or 32 % , decreased $ 3.7 billion Gross margin decreased $ 564 million or 3 % , decreased $ 564 million or 3 % , reflecting lower revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by of revenue . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Productivity and Business Processes Productivity Business Processes revenue decreased $ 546 million or 2 % , decreased $ 546 million or 2 % , main Gross margin decreased $ 1.0 billion or 4 % , decreased $ 1.0 billion or 4 % , primarily due to foreign currency impact of approximately 2 % . Cost of revenue Cost of revenue increased $ 492 million or 15 % , increased $ 492 million or 15 % , primarily due to capacity to serve our Office 365 offering . Operating expense decreased . Operating expense decreased $ 224 million or 2 % . decreased $ 224 million or 2 % . Sales and marketing and administrative expense decreased $ 258 million and $ 125 million $ 258 Gross margin increased $ 1.6 billion or 10 % , increased $ 1.6 billion or 10 % , driven by revenue foreign currency impact of approximately 2 % . Cost of revenue Cost of revenue increased $ 404 million or 7 % , increased $ 404 million or 7 % , mainly due to . Operating expense increased $ 151 million or 2 % , increased $ 151 million or 2 % , driven by higher and development expense increased $ 160 million or 6 % , increased $ 160 million or 6 % , mainly due to Personal Computing revenue increased $ 4.7 bill Gross margin decreased $ 364 million or 2 % , decreased $ 364 million or 2 % , reflecting a reduction Cost of revenue increased $ 5.1 billion or 28 % , increased $ 5.1 billion or 28 % , driven by higher cost of revenue increased $ 4.8 billion , reflecting a full phone sale in fiscal year 2015 . Windows Phone cost of cost of revenue decreased $ 897 million , driven by prior . Operating expense increased $ 574 million or 4 % , increased $ 574 million or 4 % , driven by a and development expense increased $ 34 Gross margin 52,540 Total cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 11,988 27,078 Gross margin 52,540 60,542 59,755 Research and development 11,988 12,046 60,542 59,755 Research and development 11,988 12,046 11,381 Sales and marketing 59,755 Research and development Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 12,809 12,635 52,540 Operating income 5,793 6,026 5 Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income ( Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income ( loss margin 14,928 16,334 14,568 14,712 60,542 Operating income ( loss ) Operating income ( loss ) 5,844 7,776 6,594 ( 2,053 ) income ( loss )", + "accumulated_depreciation": "accumulated depreciation of $ 19,800 and $ 17,606 18,356 14,731 of $ 19,800 and $ 17,606 18,356 14,731 Equity and other $ 19,800 and $ 17,606 18,356 14,731 Equity and other investment 19,800 and $ 17,606 18,356 14,731 Equity and other investment 10,431 14,731 Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset , net investment 10,431 12,053 Good Accumulated depreciation ( 19,800 Total , at cost 38,156 32,337 Accumulated depreciation ( 19,800 ) 38,156 32,337 Accumulated depreciation ( 19,800 ) ( 17,606 ) Total depreciation ( 19,800 ) ( 17,606 ) Total , net $ ) Total , net $ 18,356 $ 14,731 During fiscal year , net $ 18,356 $ 14,731 During fiscal year 2016 , $ 14,731 During fiscal year 2016 , 2015 , and 2014 During fiscal year 2016 , 2015 , and 2014 , depreciation 2016 , 2015 , and 2014 , depreciation expense wa $ , depreciation expense wa $ 4.9 billion , $ 4.1 ", + "debt": "debt . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . Unearned revenue a of June 30 , 2016 wa comprised mainly a of June 30 , 2016 wa comprised mainly of unearned Unearned revenue a of June 30 , 2016 also included payment a of June 30 , 2016 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; Xbox Live subscription the revenue recognition debt In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term debt : a ) Principal payment $ 0 $ 5,050 $ 5,250 $ Principal payment $ 0 $ 5,050 $ 5,250 $ 30,649 $ $ 0 $ 5,050 $ 5,250 $ 30,649 $ 40,949 Interest $ 5,050 $ 5,250 $ 30,649 $ 40,949 Interest payment 1,289 $ 5,250 $ 30,649 $ 40,949 Interest payment 1,289 2,547 2,324 30,649 $ 40,949 Interest payment 1,289 2,547 2,324 16,836 22,996 Construction $ 40,949 Interest payment 1,289 2,547 2,324 16,836 22,996 Construction commitment 40,949 In Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) long-term pension liability of $ 13.0 billion from the amount presented Uses of Capital In June 2016 , we entered into a all-cash transaction valued at $ 26.2 billion , inclusive of LinkedIn will close in calendar year 2016 , and we will finance for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the for the foreseeable future . 45 Table of Contents PART II debt 12,904 Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 4,985 Current 6,898 $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term debt Current portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 Income debt 0 2,499 Accrued compensation 5,264 5,096 Income tax 580 606 0 2,499 Accrued compensation 5,264 5,096 Income tax 580 606 Short debt 40,783 27,808 6,555 Total current liability 59,357 49,647 Long-term debt 40,783 27,808 Long-term liability 59,357 49,647 Long-term debt 40,783 27,808 Long-term unearned revenue 6,441 59,357 49,647 Long-term debt 40,783 27,808 Long-term unearned revenue 6,441 2,095 40,783 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 1,295 6,441 2,095 Deferred income tax 1,476 1,295 Other long-term liability 13,640 debt , maturity of 90 day or le , net day or le , net 7,195 4,481 500 Proceeds from issuance or le , net 7,195 4,481 500 Proceeds from issuance of le , net 7,195 4,481 500 Proceeds from issuance of debt Proceeds from issuance of debt 13,884 10,680 10,350 Repayments of debt from issuance of debt 13,884 10,680 10,350 Repayments of debt ( issuance of debt 13,884 10,680 10,350 Repayments of debt ( 2,796 10,350 Repayments of debt ( 2,796 ) ( 1,500 ) ( debt ( 2,796 ) ( 1,500 ) ( 3,888 ) Common ) ( 1,500 ) debt were in excess of $ 1.0 billion . As a result required to be posted . 70 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2016 June 30 , risk : June 30 , 2016 June 30 , 2015 Assets June 30 , 2016 June 30 , 2015 Assets Liabilities Assets , 2016 June 30 , 2015 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 33 $ 156 $ 0 $ exchange contract $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) DEBT Short-term 916 Total $ 3,733 NOTE 12 \u2014 DEBT Short-term Debt As Short-term Debt As of June 30 , 2016 , we had As of June 30 , 2016 , we had $ 12.9 2016 , we had $ 12.9 billion of commercial paper issued a weighted-average interest rate of 0.43 % and maturity ranging from % and maturity ranging from 1 day to 99 day . ranging from 1 day to 99 day . As of June day . As of June 30 , 2015 , we had As of June 30 , 2015 , we had $ 5.0 2015 , we had $ 5.0 billion of commercial paper issued a weighted-av Debt As of June 30 , 2016 , the total As of June 30 , 2016 , the total carrying value our long-term debt were $ 40.8 billion and $ 44.0 billion $ 40.8 billion and $ 44.0 billion , respectively . This current portion , of $ 30.3 billion and $ 30.5 billion $ 30.3 billion and $ 30.5 billion , respectively , a respectively , a of June 30 , 2015 . These estimated a of June 30 , 2015 . These estimated fair value value are based on Level 2 input . 79 Table of on Level 2 input . 79 Table of Contents PART II debt security . our debt for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 wa $ 2016 , 2015 , and 2014 wa $ 1.1 billion , , and 2014 wa $ 1.1 billion , $ 620 million $ 1.1 billion , $ 620 million , and $ 509 620 million , and $ 509 million , respectively . As respectively . As of June 30 , 2016 and 2015 , As of June 30 , 2016 and 2015 , the aggregate June 30 , 2016 and 2015 , the aggregate unamortized discount current portion , wa $ 166 million and $ 156 million $ 166 mil debt million ) Year Ending June 30 , 2017 $ 0 2018 Year Ending June 30 , 2017 $ 0 2018 1,050 2019 June 30 , 2017 $ 0 2018 1,050 2019 4,000 2020 30 , 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 , 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 Total 1,050 2019 4,000 202 debt ( 2,102 ) ( 2,223 ) Depreciation debt ( 2,102 ) ( 2,223 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,008 ) ( 685 ) Other amortization ( 1,008 ) ( 685 ) Other ( 54 ) ( 685 ) Other ( 54 ) ( 29 ) Deferred Other ( 54 ) ( 29 ) Deferred income tax liability Deferred income tax liability ( 4,406 ) ( 4,217 ) Net liability ( 4,406 ) ( 4,217 ) Net deferred income tax ( liability ) $ ( 1,257 ) $ ( 1,067 ) ( 1,257 ) $ ( 1,067 ) Reported As Other long-term asset ( a ) $ 219 $ 228 Lo", + "share_repurchase": "share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2016 , $ 7.1 As of June 30 , 2016 , $ 7.1 billion remained 30 , 2016 , $ 7.1 billion remained of our $ billion remained of our $ 40.0 billion share repurch share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2015 2013 . During fiscal year 2015 , we repurchased 295 million year 2015 , we repurchased 295 million share of Microsoft common Microsoft common stock for $ 13.2 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year 2014 , we repurchased 175 million year 2014 , share repurchase Board of Directors on September 16 , 2013 , and 47 Directors on September 16 , 2013 , and 47 million share 16 , 2013 , and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . Dividends See and expired September 30 , 2013 . Dividends See Note 18 2013 . Dividends See Note 18 \u2013 Stock share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2016 , $ 7.1 As of June 30 , 2016 , $ 7.1 billion remained 30 , 2016 , $ 7.1 billion remained of our $ billion remained of our $ 40.0 billion share repurch share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . The above expired on September 30 , 2013 . The above table excludes vesting of stock award . 8", + "earnings_per_share": "earnings per share $ 2.10 ( a ) ( b ) ( b ) $ 1.48 ( c ) $ 2.63 1.48 ( c ) $ 2.63 $ 2.58 ( e ) c ) $ 2.63 $ 2.58 ( e ) $ 2.00 2.58 ( e ) $ 2.00 ( f ) Cash dividend dividend declared per share $ 1.44 $ 1.24 $ 1.12 $ per share $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ 0.80 Cash $ 1.24 $ 1.12 $ 0.92 $ 0.80 Cash , cash $ 1.12 $ 0.92 $ 0.80 Cash , cash equivalent , , and short-term investment $ 113,240 $ 96,526 $ 85,709 $ short-term investment $ 113,240 $ 96,526 $ 85,709 $ 77,022 $ $ 113,240 $ 96,526 earnings per share $ 2.10 $ 1.48 $ 2.63 42 per share $ 2.10 $ 1.48 $ 2.63 42 % ( $ 2.10 $ 1.48 $ 2.63 42 % ( 44 ) 2.10 $ 1.48 $ 2.63 42 % ( 44 ) % $ 2.63 42 % ( 44 ) % Fiscal year 2016 44 ) % Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Revenue decreased $ 8.3 billion year 2015 Revenue decreased $ 8.3 billion or 9 % , decreased $ 8.3 billion or 9 % , primarily due to net revenue deferral from Windows 10 of $ 6.6 billion and from Windows 10 of $ 6.6 billion and an unfavorable Earnings per share $ 16,798 $ 12,193 $ 22,074 Earnings per share : Basic per share : Basic $ 2.12 $ 1.49 $ 2.66 Diluted : Basic $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 $ 2.63 Weighted 2.66 Diluted $ 2.10 $ 1.48 $ 2.63 Weighted average share $ 2.10 $ 1.48 $ 2.63 Weighted average share outstanding : average share outstanding : Basic 7,925 8,177 8,299 Diluted 8,013 8,254 share outstanding : Basic 7,925 8,177 8,299 Diluted 8,013 8,254 8,399 outs EARNINGS PER SHARE Basic option and stock award . 65 Table of Contents PART II of Contents PART II Item 8 The component of basic and share ) Year Ended June 30 , 2016 2015 2014 Net Year Ended June 30 , 2016 2015 2014 Net income available Ended June 30 , 2016 2015 2014 Net income available for June 30 , 2016 2015 2014 Net income available for common shareholder ( A ) $ 16,798 $ 12,193 $ 22,074 Weighted A ) $ 16,798 $ 12,193 $ 22,074 Weighted average outstanding $ 16,798 $ 12,193 $ 22,074 Weighted average outstandi Earnings Per Share equivalent ( C ) 8,013 8,254 8,399 Earnings Per Share Basic ( C ) 8,013 8,254 8,399 Earnings Per Share Basic ( Basic ( A/B ) $ 2.12 $ 1.49 $ 2.66 Diluted A/B ) $ 2.12 $ 1.49 $ 2.66 Diluted ( A/C $ 2.12 $ 1.49 $ 2.66 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.10 $ 1.48 $ 2.63 Anti-dilutive A/C ) $ 2.10 $ 1.48 $ 2.63 Anti-dilutive stock-based award $ 2.10 $ 1.48 $ 2.63 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20 earnings per share $ Diluted earnings per share $ 2.41 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were . Other During fiscal year 2016 , we completed 17 acquisition year 2016 , we completed 17 acquisition for total cash consideration total cash consideration of $ 1.4 billion . These entity have consolidated result of operation . 76 Table of Co earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share 0.61 2.12 Diluted earnings per share 0.61 0.62 0.47 0.39 ( b Diluted earnings per share 0.61 0.62 0.47 0.39 ( b ) earnings per share 0.61 0.62 0.47 0.39 ( b ) 2.10 per share 0.61 0.62 0.47 0.39 ( b ) 2.10 ( 0.47 0.", + "tax_rate": "tax rate for tax rate for fiscal year 2016 and 2015 wa 15 % for fiscal year 2016 and 2015 wa 15 % and 34 year 2016 and 2015 wa 15 % and 34 % , 2015 wa 15 % and 34 % , respectively . Our tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change including the impact of net 40 Table of Contents PART II of Contents PART II Item 7 revenue deferral related to sale related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 tax rate included the center . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss before income tax before income tax by $ 6.0 billion and foreign income before before income tax by $ 588 million . In fiscal year million . In fiscal year 2015 , our U.S. income before before income tax rate for tax rate for fiscal year 2015 and 2014 wa 34 % for fiscal year 2015 and 2014 wa 34 % and 21 year 2015 and 2014 wa 34 % and 21 % , 2014 wa 34 % and 21 % , respectively . The respectively . The fiscal year 2015 effective rate increased by 13 2015 effective rate increased by 13 % , primarily due to charge recorded in fiscal year 2015 , most of which did Rico . In fiscal year 2015 , this reduction wa mostly center , while we supply 41 Table of Contents PART II of Contents PART II Item 7 the Mic tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the ( In million ) June 30 , 2016 2015 Deferred Income million ) June 30 , 2016 2015 Deferred Income Tax Assets ) June 30 , 2016 2015 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 809 $ 884 Other expense item compensation expense $ 809 $ 8 tax rate for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , by 2016 , 2015 , and 2014 , by $ 8.8 billion and 2014 , by $ 8.8 billion , $ 7.9 billion $ 8.8 billion , $ 7.9 billion , and $ 7.0 7.9 billion , and $ 7.0 billion , respectively . As respectively . As of June 30 , 2016 , 2015 , As of June 30 , 2016 , 2015 , and 2014 June 30 , 2016 , 2015 , and 2014 , we 2016 , 2015 , and 2014 , we had accrued interest uncertain tax position of $ 1.9 billion , $ 1.7 billion $ 1.9 bil", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment licensing and subscription to Office 365 commercial for product and service retail or through an Office 365 consumer subscription , and Office the continued shift to Office 365 . Office 365 is our to Office 365 . Office 365 is our cloud-based service that the continued shift to Office 365 . Office Consumer Services revenue a variety of device . 6 Table of Contents PART I of Contents PART I Item 1 Dynamics Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on and Other . In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial and monitor segment performance . 31 Table of Contents PART II of Contents PART II Item 7 We expect to report the segment is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this For Geographic segment performance during fiscal year 2016 . This change primarily impacted This change primarily impacted Note 10 \u2013 Goodwill , Note 15 10 \u2013 Goodwill , Note 15 \u2013 Unearned Revenue , and Unearned Revenue , and Note 21 \u2013 Segment Information and Geographic \u201c OCI \u201d ) . 57 Table of Contents PART II of Contents PART II Item 8 Product Revenue and Service and Other Revenue Service revenue exceeded 10 % of total revenue for first time in fiscal year 2016 . As a result , and content such a Office 365 , M Geographic impairment a of both June 30 , 2016 and 2015 wa of both June 30 , 2016 and 2015 wa $ 11.3 June 30 , 2016 and 2015 wa $ 11.3 billion . 2016 and 2015 wa $ 11.3 billion . As discussed in . As discussed in Note 21 \u2013 Segment Information and Geographic first quarter of fiscal year 2016 our chief operating decision maker for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2016 test . Upon in our May 1 , 2016 test . Upon completion of annual testing a of May 1 , Geographic to our intangible asset . 78 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2016 2015 Technology-based $ Year Ended June 30 , 2016 2015 Technology-based $ 361 4 Ended June 30 , 2016 2015 Technology-based $ 361 4 year , 2016 2015 Technology-based $ 361 4 year $ 874 5 2016 2015 Technology-based $ 361 4 year $ 874 5 year $ 361 4 year $ 874 5 year Marketing-related 2 1 361 4 year $ 874 5 year Marketing-related 2 1 year $ 874 Geographic Data Restructuring liability a of June 30 , 2015 $ 588 $ a of June 30 , 2015 $ 588 $ 249 $ June 30 , 2015 $ 588 $ 249 $ 837 Restructuring , 2015 $ 588 $ 249 $ 837 Restructuring charge 372 $ 588 $ 249 $ 837 Restructuring charge 372 129 501 249 $ 837 Restructuring charge 372 129 501 Reversal of prior $ 837 Restructuring charge 372 129 501 Reversal of prior year 837 Restructuring charge 372 129 501 Reversal of prior year restructuring of prior year restructuring charge 0 ( 21 ) ( 21 year restructu GEOGRAPHIC U.S. GAAP . In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial licensing and subscription to Office 365 commercial for product and service retail or through an Office 365 consumer subscription , and Office and Dynamics CRM Online . 91 Table of Contents PART II of Contents PART II Item 8 Intelligent Cloud Our Intelligent Cloud million ) Year Ended June 30 , 2016 2015 2014 Revenue Year End", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 30 , 2016 are incorporated by held on November 30 , 2016 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2016 INDEX Page PART Year Ended June 30 , 2016 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registra common stock for $ 14.8 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2015 2013 . During fiscal year 2015 , we repurchased 295 million year 2015 , we repurchased 295 million share of Microsoft common Microsoft common stock for $ 13.2 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year Common stock issued 668 3,888 ) Common stock issued 668 634 607 Common stock repurchased ) Common stock issued 668 634 607 Common stock repurchased ( Common stock issued 668 634 607 Common stock repurchased ( 15,969 607 Common stock repurchased ( 15,969 ) ( 14,443 ) ( repurchased ( 15,969 ) ( 14,443 ) ( 7,316 ) Common ) ( 14,443 ) ( 7,316 ) Common stock cash dividend stock cash dividend paid ( 11,006 ) ( 9,882 ) ( paid ( 11,006 ) ( 9,882 ) ( 8,879 ) Other ) ( 9,882 ) ( 8,879 ) Other ( 369 ) ( 8,879 ) Other Common stock and Ended June 30 , 2016 2015 2014 Common stock and paid-in June 30 , 2016 2015 2014 Common stock and paid-in capital , beginning of period $ 68,465 $ 68,366 $ 67,306 Common of period $ 68,465 $ 68,366 $ 67,306 Common stock issued $ 68,465 $ 68,366 $ 67,306 Common stock issued 668 634 $ 67,306 Common stock issued 668 634 607 Common stock repurchased 67,306 Common stock issued 668 634 607 Common stock repurchased ( Common stock issued 668 634 607 Common stock repurchased ( 3,689 607 Common stock Common stock cash 17,710 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend ( Common stock cash dividend ( 11,329 ) ( 10,063 ) ( dividend ( 11,329 ) ( 10,063 ) ( 9,271 ) Common ) ( 10,063 ) ( 9,271 ) Common stock repurchased ( ) Common stock repurchased ( 12,283 ) ( 10,744 ) ( repurchased ( 12,283 ) ( 10,744 ) ( 4,988 ) Balance ) ( 10,744 ) ( 4,988 ) Balance , end of Balance , end of period 2,282 9,096 17,710 Accumulated other co common stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based award Dilutive effect of stock-based award 88 77 100 Common stock and effect of stock-based award 88 77 100 Common stock and common of stock-based award 88 77 100 Common stock and common stock stock equivalent ( C ) 8,013 8,254 8,399 Earnings Per Share equivalent ( C ) 8,013 8,254 8,399 Earnings Per Share Basic ( C ) 8,013 8,254 8,399 Ear", + "fair_value_measurements": "Fair Value Measurements . \u2013 Fair Value Measurements . 71 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2016 2015 2014 Foreign Year Ended June 30 , 2016 2015 2014 Foreign Exchange Contracts Ended June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 797 ) $ 741 $ ( $ ( 797 ) $ 741 $ ( 14 ) Hedged ) $ 741 $ ( 14 ) Hedged item 838 ( ( 14 ) Hedged ite FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2016 Assets Mutual fund Fair Value June 30 , 2016 Assets Mutual fund $ 1,012 2016 Assets Mutual fund $ 1,012 $ 0 $ 0 $ Mutual fund $ 1,012 $ 0 $ 0 $ 1,012 $ $ 1,012 $ 0 $ 0 $ 1,012 $ 0 $ $ 0 $ 0 $ 1,012 $ 0 $ 1,012 Commercial $ 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 298 0 0 $ ", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 797 ) $ 741 $ ( $ ( 797 ) $ 741 $ ( 14 ) Hedged ) $ 741 $ ( 14 ) Hedged item 838 ( ( 14 ) Hedged item 838 ( 725 ) 6 Total ) Hedged item 838 ( 725 ) 6 Total amount of item 838 ( 725 ) 6 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 41 $ 16 $ ( 8 of ineffectiveness $ 41 $ 16 $ ( 8 ) Equity 41 $ 16 $ ( 8 ) E", + "derivative_instruments": "Derivative Instruments counterparty credit risk : June 30 , 2016 June 30 , risk : June 30 , 2016 June 30 , 2015 Assets June 30 , 2016 June 30 , 2015 Assets Liabilities Assets , 2016 June 30 , 2015 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 33 $ 156 $ 0 $ exchange contract $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) $ 156 $ 0 $ ( 296 ) $ 17 $ 167 $ ( 296 ) $ 17 $ 167 $ 0 $ 296 ) $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) Equity 167 $ 0 $ ( 79 ) Equity contract 23 0 ( 79 ) Eq" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-17-014900/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-17-014900/full-submission_features.json new file mode 100644 index 0000000..8bbfccd --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-17-014900/full-submission_features.json @@ -0,0 +1,20 @@ +{ + "revenue": "revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world the continued shift to Dynamics 365 , a unified set of Dynamics CRM on-premises and Dynamics 365 offering . Intelligent Cloud Our and Microsoft Consulting Services . 7 PART I Item 1 Server . 7 PART I Item 1 Server Products and Cloud Services all size and complexity . 8 PART I Item 1 Our . 8 PART I Item 1 Our Enterprise Services business competes MSN ad . In June 2015 , we entered into agreement revenue in fiscal of revenue in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . We plan have a portfolio of over 66,000 U.S. and international patent issued international patent issued and over 35,000 pending . While we employ our external development community . 11 PART I Item 1 W . 11 PART I Item 1 W hile it may be capability to subscribe to Office 365 . There are two broad many of these sale . 12 PART I Item 1 We . 12 PA revenue in fiscal of revenue in fiscal year 2017 , 2016 , or 2015 in fiscal year 2017 , 2016 , or 2015 . Our 2017 , 2016 , or 2015 . Our practice is to backlog is not significant . 14 PART I Item 1 EXECUTIVE . 14 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 2 , 2017 were a follows a of August 2 , 2017 were a follows : Name with the Company Satya Nadella 49 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 47 Executive Vice President , revenue . 19 PART I Item 1A We . 19 PART I Item 1A We may not receive expected a new threat emerge . 20 PART I Item 1A Security . 20 PART I Item 1A Security of our product , Microsoft Account service , Office 365 , OneDrive , SharePoint Online result and financial condition . 21 PART I Item 1A Government . 21 PART I Item 1A Government litigation and regulatory activity product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own p revenue . product release such a Windows 10 , significant business transaction , that determination is made . 23 PART I Item 1A We . 23 PART I Item 1A We earn a significant amount customer are located in over 200 country and a significant part on our operating result . 24 PART I Item 1A Abrupt . 24 PART I Item 1A Abrupt political change , terrorist impact revenue . In July 2017 , we announced plan to could be adversely impacted . 25 PART I Item 1B , . 25 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 Revenue 2015 2014 ( h ) 2013 Revenue $ 89,950 ( b h ) 2013 Revenue $ 89,950 ( b ) $ 85,320 89,950 ( b ) $ 85,320 ( d ) $ 93,580 85,320 ( d ) $ 93,580 $ 86,833 $ 77,849 Gross d ) $ 93,580 $ 86,833 $ 77,849 Gross margin 55,689 $ 93,580 $ 86,833 $ 77,849 Gross margin 55,689 ( b 86,833 $ 77,849 Gross margin 55,689 ( b ) 52,540 ( margin 55,689 ( b ) 52,540 ( d ) 60,542 59,755 ) 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 ( ( d ) 60,542 revenue deferral from Windows 10 of $ 6.7 billion , from Windows 10 of $ 6.7 billion , which decreased operating EPS \u201d ) by $ 6.7 billion , $ 4.4 billion $ 6.7 billion , $ 4.4 billion , and $ 0.57 4.4 billion , and $ 0.57 , respectively . ( c ( c ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.03 243 million , and $ 0.03 , respectively . ( d net revenue deferral from Windows 10 of $ 6.6 billion , from Window revenue grew 6 % , driven by Office % , driven by Office 365 commercial revenue growth of 46 365 commercial revenue growth of 46 % . \u2022 Office Consumer \u2022 Office Consumer revenue grew 14 % , and Office 365 14 % , and Office 365 consumer subscriber increased to 27.0 365 consumer subscriber increased to 27.0 million . \u2022 Microsoft Dynamics \u2022 Microsoft Dynamics revenue grew 9 % , driven by Dynamics % , driven by Dynamics 365 revenue growth of 78 % Dynamics 365 revenue growth of 78 % . \u2022 LinkedIn contributed revenue of $ 2.3 billion . \u2022 Server product and cloud service revenue grew 13 % , driven by Microsoft Microsoft Azure revenue growth of 99 % . \u2022 Enterprise Services \u2022 Enterprise Services revenue decreased 2 % , driven by a OEM \u201d ) revenue increased 3 % . \u2022 Windows Commercial \u2022 Windows Commercial revenue grew 5 % , driven by multi-year \u2022 Microsoft Surface revenue decreased 2 % , driven by a traffic acquisition cost , grew 9 % . \u2022 Gaming revenue quarter by twelve for Office 365 commercial , Azure , Dynam revenue ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue segment is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 30 PART II this Form 10-K ) . 30 PART II Item 7 SUMMARY . 30 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2017 2016 2015 Percentage Change 2017 per share amount ) 2017 2016 2015 Percentage Change 2017 Versus share amount ) 2017 2016 2015 Percen Revenue $ 89,950 2016 Percentage Change 2016 Versus 2015 Revenue $ 89,950 $ 85,320 2016 Versus 2015 Revenue $ 89,950 $ 85,320 $ 93,580 5 2015 Revenue $ 89,950 $ 85,320 $ 93,580 5 % ( $ 89,950 $ 85,320 $ 93,580 5 % ( 9 ) 89,950 $ 85,320 $ 93,580 5 % ( 9 ) % $ 93,580 5 % ( 9 ) % Gross margin 55,689 9 ) % Gross margin 55,689 52,540 60,542 6 % ( ) % Gross margin 55,689 52,540 60,542 6 % ( 13 % Gross margin 55,689 52,540 60,542 6 % ( 13 ) Gross margin 55,689 52,540 60,542 6 % ( 13 ) % 52,540 60,542 6 % ( 13 Revenue increased $ 4.6 billion year 2016 Revenue increased $ 4.6 billion or 5 % , increased $ 4.6 billion or 5 % , driven by growth unfavorable foreign currency impact of 2 % . Gross margin increased . Gross margin increased $ 3.1 billion or 6 % , increased $ 3.1 billion or 6 % , due to growth unfavorable foreign currency impact of 2 % . Gross margin percentage Gross margin percentage includes a 5-point improvement in commercial cloud gross primarily across Azure and Office 365 . Operating income incr revenue increased $ 1.5 billion or 5 % , increased $ 1.5 billion or 5 % , mainly due to and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to and marketing expense increased $ 842 million or 6 % , increased $ 842 million or 6 % , primarily due to and restructuring expense decreased $ 804 million , driven by prior EPS \u201d ) wa $ 2.71 for fiscal year 2017 . $ 2.71 for fiscal year 2017 . Current year diluted EPS net revenue deferral from Windows 10 and re revenue deferral from Windows 10 and impairment and restructuring expense in diluted EPS of $ 0.69 . Fiscal year 2016 compared $ 0.69 . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Revenue decreased $ 8.3 billion year 2015 Revenue decreased $ 8.3 billion or 9 % , decreased $ 8.3 billion or 9 % , primarily due to net revenue deferral from Windows 10 of $ 6.6 billion and from Windows 10 of $ 6.6 billion and an unfavorable foreign currency impact of approximately $ 3 revenue or 4 % . Windows 10 revenue is primarily recognized at Office and Dynamics revenue . 31 PART II Item 7 Operating . 31 PART II Item 7 Operating income increased $ 2.0 7 Operating income increased $ 2.0 billion or 11 % , increased $ 2.0 billion or 11 % , primarily due to . Gross margin decreased $ 8.0 billion or 13 % , decreased $ 8.0 billion or 13 % , driven by the currency impact of approximately $ 3.3 billion or 5 % . approximately $ 3.3 billion or 5 % . Productivity and Business Cost of reven revenue deferral from Windows 10 and impairment , integration , to diluted EPS of $ 0.69 . Diluted EPS wa $ . Diluted EPS wa $ 1.48 for fiscal year 2015 . $ 1.48 for fiscal year 2015 . Diluted EPS wa negatively to diluted EPS of $ 1.15 . SEGMENT RESULTS OF OPERATIONS million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2 Revenue Productivity and 2016 Percentage Change 2016 Versus 2015 Revenue Productivity and Business Processes Productivity and Business Processes $ 30,444 $ 26,487 $ 26,430 15 Business Processes $ 30,444 $ 26,487 $ 26,430 15 % 0 $ 30,444 $ 26,487 $ 26,430 15 % 0 % Intelligent 30,444 $ 26,487 $ 26,430 15 % 0 % Intelligent Cloud 26,487 $ 26,430 15 % 0 % Intelligent Cloud 27,440 25,042 % 0 % Intelligent Cloud 27,440 25,042 23,715 10 % 6 0 % Intelligent Cloud 27,440 25,042 23,715 10 % 6 % % Intelligent Clou Revenue Business Processes Revenue increased $ 4.0 billion or 15 % , increased $ 4.0 billion or 15 % , driven by the \u2022 LinkedIn revenue wa $ 2.3 billion , primarily comprised of Office Commercial revenue increased $ 1.2 billion or 6 % , increased $ 1.2 billion or 6 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial . 32 PART II to Office 365 commercial . 32 PART II Item 7 \u2022 . 32 PART II Item 7 \u2022 Office Consumer revenue increased revenue increased $ 425 million or 14 % , increased $ 425 million or 14 % , driven by higher by higher revenue from Office 365 consumer , mainly due to . \u2022 Dynamics revenue increased 9 % , primarily due to to higher revenue from Dynamics 365 . Operating income decreased $ . Operating income decreased $ 505 million or 4 % , decreased $ 505 million or 4 % , primarily due to unfavorable foreign currency impact of 3 % . \u2022 Operating expense \u2022 Operating expense increased $ 2.4 billion or 26 % , increased $ 2 revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.4 billion or 10 % , increased $ 2.4 billion or 10 % , primarily due to cloud service revenue grew $ 2.5 billion or 13 % , grew $ 2.5 billion or 13 % , driven by Azure by Azure revenue growth of 99 % and server product licensed licensed on-premises revenue growth of 4 % . \u2022 Enterprise Services \u2022 Enterprise Services revenue decreased 2 % , dri Revenue decreased $ 1.7 billion or 4 % , decreased $ 1.7 billion or 4 % , mainly due to \u2022 Windows revenue increased $ 442 million or 3 % , increased $ 442 million or 3 % , mainly due to . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 5 % , outperforming the commercial Windows OEM non-Pro revenue grew 1 % , outperforming the consumer . Windows Commercial revenue grew 5 % , driven by multi-year Search advertising revenue increased $ 791 million or 15 % . increased $ 791 revenue traffic acquisition cost , increased 9 % , primarily driven by . Xbox hardware revenue decreased 21 % , mainly due to software and service revenue increased 11 % , driven by a and revenue per transaction . 33 PART II Item 7 \u2022 . 33 PART II Item 7 \u2022 Surface revenue decreased $ \u2022 Surface revenue decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to \u2022 Phone revenue decreased $ 2.8 billion . Operating income increased . Operating income increased $ 2.1 billion or 34 % , in revenue increased $ 135 million or 1 % , increased $ 135 million or 1 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial and a decline in foreign currency impact of approximately 6 % . \u2022 Office Consumer Office Consumer revenue decreased $ 69 million or 2 % , decreased $ 69 million or 2 % , driven by a by higher revenue from Office 365 consumer , mainly due to foreign currency impact of approximately 4 % . \u2022 Dynamics revenue . \u2022 D revenue increased 4 % , mainly due to foreign currency impact of approximately 6 % . Productivity and Business Processes operating income decreased $ 856 million or 6 % , decreased $ 856 million or 6 % , driven by lower . Gross margin decreased $ 928 million or 4 % , decreased $ 928 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 985 million or 25 % , increased $ 985 million or 25 % , primarily due to . Operating expense decre revenue increased $ 1.3 billion or 6 % , increased $ 1.3 billion or 6 % , primarily due to foreign currency impact of approximately 5 % . \u2022 Server product cloud service revenue grew $ 686 million or 4 % , grew $ 686 million or 4 % , driven by revenue revenue growth from Azure of 113 % , offset in part foreign currency impact of approximately 5 % . \u2022 Enterprise Services Enterprise Services revenue grew $ 536 million or 11 % , grew $ 536 million or 11 % , mainly due to foreign currency impact of approxim revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 826 million or 14 % , increased $ 826 million or 14 % , primarily driven by mix of cloud service . 34 PART II Item 7 More . 34 PART II Item 7 More Personal Computing More Personal Personal Computing revenue decreased $ 3.0 billion or 7 % , decreased $ 3.0 billion or 7 % , mainly due to foreign currency impact of approximately 2 % . \u2022 Devices revenue \u2022 Devices revenue decreased $ 4.0 billion or 33 % , decr revenue decreased $ 4.2 billion or 56 % , decreased $ 4.2 billion or 56 % , a we sold % , a we sold 13.8 million Microsoft Lumia phone and million Microsoft Lumia phone and 75.5 million other phone in fiscal other phone in fiscal year 2016 , compared with 36.8 million year 2016 , compared with 36.8 million and 126.8 million sold compared with 36.8 million and 126.8 million sold , respectively , respectively , in fiscal year 2015 . Surface revenue increased $ . Surface revenue increased $ 207 million or revenue from Surface Pro 3 . Devices revenue included an foreign currency impact of approximately 3 % . \u2022 Windows revenue \u2022 Windows revenue decreased $ 958 million or 5 % , decreased $ 958 million or 5 % , mainly due to . Patent licensing revenue decreased 27 % , due to a . Windows OEM revenue decreased 1 % . Windows OEM Pro Windows OEM Pro revenue declined 6 % , driven by a Windows OEM non-Pro revenue increased 7 % , outperforming the consumer Windows Phone licensing revenue decreased 64 % , driven by revenue in fiscal year 2015 from Windows Phone 8 . year 2015 from Windows Phone 8 . Windows revenue included an foreign currency impact of approximately 2 % . \u2022 Search advertising Search advertising revenue increased $ 1.7 billion or 46 % . increased $ 1.7 billion or 46 % . Search advertising revenue traffic acquisition cost , increased 17 % , primarily driven by foreign currency impact of approximately 2 % . \u2022 Gaming revenue \u2022 Gaming revenue increased $ 75 million or 1 % , increased $ 75 million or 1 revenue increased 17 % , driven by higher . Video game revenue grew 28 % , driven by the by the launch of Halo 5 and sale of Minecraft . gaming franchise , in November 2014 . Xbox hardware revenue decreased . Xbox hardware revenue decreased 16 % , mainly due to and a decline in Xbox 360 console volume , offset in foreign currency impact of approximately 4 % . More Personal Computing Computing operating income increased $ 1.1 billion or 22 % , increased $ 1.1 billion or 22 % , primarily due to . Operati revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by revenue deferral related to Windows 10 . Corporate and Other operating revenue deferral related to Windows 10 and corporate-level activity not specifically restructuring expense . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Revenue decreased $ 64 million year 2016 Revenue decreased $ 64 millio revenue deferral from Windows 10 . During fiscal year 2017 10 . During fiscal year 2017 and 2016 , we deferred During fiscal year 2017 and 2016 , we deferred net revenue deferred net revenue from Windows 10 of $ 6.7 billion and from Windows 10 of $ 6.7 billion and $ 6.6 billion $ 6.7 billion and $ 6.6 billion , respectively . Corporate Other operating loss decreased $ 740 million , primarily due to primarily due to an $ 804 million reduction in impairment , and marketing restructuring plan . 35 PART II revenue decreased and Other revenue decreased $ 6.6 billion , due to the net revenue deferral from Windows 10 . Corporate and Other operating Other operating loss decreased $ 2.3 billion , primarily due to primarily due to an $ 8.9 billion reduction in impairment , million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 201 revenue 14 % 14 % 13 % percent of revenue 14 % 14 % 13 % 0ppt 1ppt revenue 14 % 14 % 13 % 0ppt 1ppt Research and % 14 % 13 % 0ppt 1ppt Research and development expense 14 % 13 % 0ppt 1ppt Research and development expense include service content . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Research and development expense increased and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to expense . Expenses include revenue 17 % 17 % 17 % percent of revenue 17 % 17 % 17 % 0ppt 0ppt revenue 17 % 17 % 17 % 0ppt 0ppt Sales and % 17 % 17 % 0ppt 0ppt Sales and marketing expense 17 % 17 % 0ppt 0ppt Sales and marketing expense include other program . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Sales and marketing expense increased and marketing expense increased $ 842 million or 6 % , increased $ 842 million or 6 % , primarily due to , commercial , and Windows 10 . Expenses include revenue 5 % 5 % 5 % percent of revenue 5 % 5 % 5 % 0ppt 0ppt revenue 5 % 5 % 5 % 0ppt 0ppt General and % 5 % 5 % 0ppt 0ppt General and administrative expense 5 % 5 % 0ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 General and administrative expense decreased and administrative expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to expense . Expenses included $ revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2017 U.S. income before income tax before income tax by $ 6.4 billion and foreign income before before income tax by $ 317 million . In fiscal year million . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year nega Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2017 , the primary As of June 30 , 2017 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are financial statement . Fiscal year 2016 compared with fiscal year revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss before income tax before income tax by $ 6.0 billion and foreign income before before income tax by $ 588 million . In fiscal year million . In fiscal year 2015 , our U.S. income before before income tax wa $ 7.4 billion and our foreign income before income tax wa $ 11.1 billion . Impairment , integration business decreased our fiscal year 2015 U.S income before income t revenue a of June 30 , 2017 wa comprised mainly a of June 30 , 2017 wa comprised mainly of unearned Unearned revenue a of June 30 , 2017 also included payment a of June 30 , 2017 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; LinkedIn ; Xbox unearned revenue a of June 30 , 2017 : ( In a of June 30 , 2017 : ( In million ) Three Months Ending , September 30 , 2017 $ 12,544 December Ending , September 30 , 2017 $ revenue and non-cash item . 42 PART II Item 7 Other . 42 PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCOUNTING GUIDANCE See Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . over the coverage period . 43 PART II Item 7 Software . 43 PART II Item 7 Software update are evaluated on . Customers purchasing a Windows revenue from license of Windows 10 is recognized ratably over the financial statement . See Note 1 \u2013 Accounting Policies in the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between average cost of capital . 44 PART II Item 7 The . 44 PART II Item 7 The estimate used to calculate that ha a greater than 50 % likelihood of being realized to cost of revenue . 45 PART II Item 7 STATEMENT . 45 PART II Item 7 STATEMENT OF MANAGE Revenue Year Ended June 30 , 2017 2016 2015 Revenue : Product Ended June 30 , 2017 2016 2015 Revenue : Product $ June 30 , 2017 2016 2015 Revenue : Product $ 57,190 2015 Revenue : Product $ 57,190 $ 61,502 $ 75,956 Service : Product $ 57,190 $ 61,502 $ 75,956 Service and other $ 57,190 $ 61,502 $ 75,956 Service and other 32,760 23,818 $ 75,956 Service and other 32,760 23,818 17,624 Total revenue 89,950 75,956 Service and other 32,760 23,818 17,624 Total revenue 89,950 85,320 Service and other 32,760 23 revenue 89,950 85,320 93,580 32,760 23,818 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue 23,818 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue : 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue : Product Cost of revenue : Product 15,175 17,880 21,410 Service and other of revenue : Product 15,175 17,880 21,410 Service and other 19,086 revenue : Product 15,175 17,880 21,410 Service and other 19,086 14,900 17,880 21,410 Service and other 19,086 14,900 11,628 Total cost of 2 revenue Service and other 19,086 14,900 11,628 Total cost of revenue 34,261 11,628 Total cost of revenue 34,261 32,780 33,038 Gross margin 55,689 Total cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 13,037 33,038 Gross margin 55,689 52,540 60,542 Research and develo revenue 34,102 5,819 5,264 Income tax 718 580 Short-term unearned revenue 34,102 27,468 718 580 Short-term unearned revenue 34,102 27,468 Securities lending payable 97 580 Short-term unearned revenue 34,102 27,468 Securities lending payable 97 294 34,102 27,468 Securities lending payable 97 294 Other 6,280 5,949 Total 27,468 Securities lending payable 97 294 Other 6,280 5,949 Total current lending payable 97 294 Other 6,280 5,949 Total current liability 64,527 payable 97 294 Other 6,280 5,949 Total cur revenue 10,377 64,527 59,357 Long-term debt 76,073 40,557 Long-term unearned revenue 10,377 6,441 76,073 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 1,476 10,377 6,441 Deferred income tax 531 1,476 Other long-term liability 17,184 6,441 Deferred income tax 531 1,476 Other long-term liability 17,184 13,640 531 1,476 Other long-term liability 17,184 13,640 Total liability 168,692 121,471 1,476 Other long-ter revenue tax ( 3,296 ) 332 224 Deferral of unearned revenue 67,711 224 Deferral of unearned revenue 67,711 57,072 45,072 Recognition of unearned Deferral of unearned revenue 67,711 57,072 45,072 Recognition of unearned revenue of unearned revenue 67,711 57,072 45,072 Recognition of unearned revenue ( Recognition of unearned revenue ( 57,735 ) ( 48,498 ) ( revenue ( 57,735 ) ( 48,498 ) ( 44,920 ) Changes ) ( 48,498 ) ( 44,920 ) Changes in operating asset liability : Accounts receivable ( 925 ) ( 530 ) 1, Revenue . 54 PART II Item 8 Revenue recognition for multiple-element arrangement . Customers purchasing a Windows 10 license will receive unspecified update the life of their Windows 10 device at no additional cost revenue from license of Windows 10 is recognized ratably over the same revenue recognition timing . 55 PART II Item 8 Revenue . 55 PART II Item 8 Revenue related to Surface device a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.5 billion , $ 1.6 billion $ revenue cloud offering such a Office 365 , LinkedIn , and professional of additional revenue of $ 6.6 billion and $ 5.8 billion $ 6.6 billion and $ 5.8 billion for fiscal year 2017 5.8 billion for fiscal year 2017 and 2016 , respectively , for fiscal year 2017 and 2016 , respectively , and an for income tax of $ 2.5 billion and $ 2.1 billion $ 2.5 billion and $ 2.1 billion , respectively , primarily the net change in Windows 10 revenue recognition . In addition and long-term asset of $ 2.7 billion and revenue of $ 17.8 billion and $ 11.7 billion $ 17.8 billion and $ 11.7 billion a of June 30 11.7 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , driven by of license revenue from Windows 10 and certain multi-year commercial software deferred income tax of $ 5.2 billion and $ 4.8 billion $ 5.2 billion and $ 4.8 billion a of June 30 4.8 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 Revenue Standard Income statement : Revenue $ 89,950 $ 6,621 $ 0 $ : Revenue $ 89,950 $ 6,621 $ 0 $ 96,571 Provision $ 89,950 $ 6,621 $ 0 $ 96,571 Provision for income $ 6,621 $ 0 $ 96,571 Provision for income tax 1,945 96,571 Provision for income tax 1,945 2,467 0 4,412 Net income Provision for income tax 1,945 2,467 0 4,412 Net income 21,204 for income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 0 2,467 0 4,412 Net income 21,204 4,285 0 25,48 Revenue Standard Income statement : Revenue $ 85,320 $ 5,834 $ 0 $ : Revenue $ 85,320 $ 5,834 $ 0 $ 91,154 Provision $ 85,320 $ 5,834 $ 0 $ 91,154 Provision for income $ 5,834 $ 0 $ 91,154 Provision for income tax 2,953 91,154 Provision for income tax 2,953 2,147 0 5,100 Net income Provision for income tax 2,953 2,147 0 5,100 Net income 16,798 for income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 0 2,147 0 5,100 Net income 16,798 3,741 0 20,53 Revenue Standard Accounts receivable , net $ 19,792 $ 2,639 $ 0 $ , net $ 19,792 $ 2,639 $ 0 $ 22,431 Operating $ 19,792 $ 2,639 $ 0 $ 22,431 Operating lease right-of-use $ 2,639 $ 0 $ 22,431 Operating lease right-of-use asset 0 22,431 Operating lease right-of-use asset 0 0 6,555 6,555 Other current Operating lease right-of-use asset 0 0 6,555 6,555 Other current and lease right-of-use asset 0 0 6,555 6,555 Other current and long-term right-of-use asset 0 0 6,555 6,555 Other current and long-term asset revenue current and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( 17,823 32 0 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 Deferred income revenue 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 5,203 0 26,656 Deferred income tax 531 5,203 0 5,734 Operating Revenue Standard Accounts receivable , net $ 18,277 $ 2,359 $ 0 $ , net $ 18,277 $ 2,359 $ 0 $ 20,636 Operating $ 18,277 $ 2,359 $ 0 $ 20,636 Operating lease right-of-use $ 2,359 $ 0 $ 20,636 Operating lease right-of-use asset 0 20,636 Operating lease right-of-use asset 0 0 5,198 5,198 Other current Operating lease right-of-use asset 0 0 5,198 5,198 Other current and lease right-of-use asset 0 0 5,198 5,198 Other current and long-term right-of-use asset 0 0 5,198 5,198 Other current and long-term asset revenue current and long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 and long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 ( long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 ( 11,716 1,872 0 11,180 Unearned revenue 33,909 ( 11,716 ) 0 22,193 11,180 Unearned revenue 33,909 ( 11,716 ) 0 22,193 Deferred income revenue 33,909 ( 11,716 ) 0 22,193 Deferred income tax 1,476 33,909 ( 11,716 ) 0 22,193 Deferred income tax 1,476 4,837 0 22,193 Deferred income tax 1,476 4,837 0 revenue 555 625 608 Amount Excluded from comprehensive income into revenue 555 625 608 Amount Excluded from Effectiveness income into revenue 555 625 608 Amount Excluded from Effectiveness Assessment expense ) , net ( 389 ) ( 354 ) ( net ( 389 ) ( 354 ) ( 346 ) We ) ( 354 ) ( 346 ) We estimate that $ ) We estimate that $ 130 million of net derivative gain in AOCI a of June 30 , 2017 will be reclassified a of June 30 , 2017 will be reclassified into earnings into earnings within the following 12 month . Revenue $ 2,268 Year Ended June 30 , 2017 Revenue $ 2,268 Operating loss 30 , 2017 Revenue $ 2,268 Operating loss $ ( 948 2,268 Operating loss $ ( 948 ) Following are the supplemental had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , share ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 91,668 $ Ended June 30 , 2017 2016 Revenue $ 91,668 $ 88,652 , 2017 2016 Revenue $ 91,668 $ 88,652 Net income 20,894 2016 Revenue $ 91,668 $ 8 revenue 1,889 494 1,550 1,609 Restructuring charge 66 284 Unearned revenue 1,889 494 Impaired charge 66 284 Unearned revenue 1,889 494 Impaired investment 59 226 66 284 Unearned revenue 1,889 494 Impaired investment 59 226 Loss revenue 1,889 494 Impaired investment 59 226 Loss carryforwards 4,809 4,252 1,889 494 Impaired investment 59 226 Loss carryforwards 4,809 4,252 Depreciation investment 59 226 Loss carryforwards 4,809 4,252 Depreciation and amortization 53 59 226 Loss carryforwards 4,809 4,252 De revenue item 130 4,252 Depreciation and amortization 53 115 Other revenue item 130 89 53 115 Other revenue item 130 89 Deferred income tax asset 115 Other revenue item 130 89 Deferred income tax asset 9,333 89 Deferred income tax asset 9,333 7,878 Less valuation allowance ( Deferred income tax asset 9,333 7,878 Less valuation allowance ( 3,310 7,878 Less valuation allowance ( 3,310 ) ( 4,729 ) Deferred allowance ( 3,310 ) ( 4,729 ) Deferred income tax asset net of valuation allowance $ 6,023 $ 3,149 De Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2017 , the primary As of June 30 , 2017 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are consolidated financial statement . NOTE 14 \u2014 RESTRUCTURING CHARGE REVENUE Unearned revenue ( In million ) June 30 , 2017 2016 Productivity and million ) June 30 , 2017 2016 Productivity and Business Processes ) June 30 , 2017 2016 Productivity and Business Processes $ Productivity and Business Processes $ 14,291 $ 12,497 Intelligent Cloud 13,464 Business Processes $ 14,291 $ 12,497 Intelligent Cloud 13,464 11,472 More 14,291 $ 12,497 Intelligent Cloud 13,464 11,472 More Personal Computing 3 $ 12,497 Intelligent Cloud 13,464 11,472 More Personal Computing 3 , 13,464 1 revenue deferral from Windows 10 . Revenue from Windows 10 10 . Revenue from Windows 10 is primarily recognized at the in Corporate and Other . 82 PART II Item 8 NOTE . 82 PART II Item 8 NOTE 16 \u2014 COMMITMENTS Construction PART II Item 8 NOTE 16 \u2014 COMMITMENTS Construction and Operating Leases We have committed $ 1.1 billion for constructing new building leasehold improvement a of June 30 , 2017 . We have a of June 30 , 2017 . We have operating lease facility operating lease wa $ 1.3 billion , $ 1.0 bill revenue ( 555 ) ( 625 ) ( revenue ( 555 ) ( 625 ) ( 608 ) Tax ) ( 625 ) ( 608 ) Tax expense included in in provision for income tax 9 36 15 Amounts reclassified from provision for income tax 9 36 15 Amounts reclassified from accumulated for income tax 9 36 15 Amounts reclassified from accumulated other accumulated other comprehensive income ( 546 ) ( 589 ) ( income ( 546 ) ( 589 ) ( 593 ) Net ) ( 589 ) ( 593 ) Net current period other income ( loss ) ( 218 ) ( 238 ) 559 ) ( 218 ) ( 238 ) 559 Balance , revenue recognition . Revenue and million ) Year Ended June 30 , 2017 2016 2015 Revenue Year Ended June 30 , 2017 2016 2015 Revenue Productivity and Ended June 30 , 2017 2016 2015 Revenue Productivity and Business June 30 , 2017 2016 2015 Revenue Productivity and Business Processes Productivity and Business Processes $ 30,444 $ 26,487 $ 26,430 Intelligent Business Processes $ 30,444 $ 26,487 $ 26,430 Intelligent Cloud 27,440 $ 30,444 $ 26,487 $ 26,430 Intelligent Cloud 27,440 25,042 23,715 26,487 $ 26, revenue deferral Ended June 30 , 2017 2016 2015 Net revenue deferral from June 30 , 2017 2016 2015 Net revenue deferral from Windows Net revenue deferral from Windows 10 $ ( 6,707 ) $ from Windows 10 $ ( 6,707 ) $ ( 6,643 ) ( 6,707 ) $ ( 6,643 ) $ 0 Impairment , $ ( 6,643 ) $ 0 Impairment , integration , and , and restructuring expense ( 306 ) ( 1,110 ) ( expense ( 306 ) ( 1,110 ) ( 10,011 ) Total ) ( 1,110 ) ( 10,011 ) Total Corporate and Other Corporate and Other $ ( 7,013 ) $ ( 7,753 ) ( 7,013 ) $ ( revenue . 2017 , 2016 , or 2015 revenue . Revenue , classified million ) Year Ended June 30 , 2017 2016 2015 United Year Ended June 30 , 2017 2016 2015 United States ( Ended June 30 , 2017 2016 2015 United States ( a June 30 , 2017 2016 2015 United States ( a ) States ( a ) $ 45,248 $ 40,578 $ 42,941 Other a ) $ 45,248 $ 40,578 $ 42,941 Other country 44,702 $ 45,248 $ 40,578 $ 42,941 Other country 44,702 44,742 50,639 40,578 $ 42,941 Other country 44,702 44,742 50,639 Total $ 89,950 $ 42,941 Other coun revenue deferral from Windows 10 . ( b ) Includes , which primarily comprises Office 365 commercial , Azure , Dynamics commercial , Azure , Dynamics 365 , and other cloud property cloud property , wa $ 14.9 billion , $ 9.5 billion $ 14.9 billion , $ 9.5 billion , and $ 5.8 9.5 billion , and $ 5.8 billion in fiscal year 2017 5.8 billion in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . These amount in the table above . 92 P Revenue ( Revenue ( b ) $ 20,453 $ 24,090 $ 22,090 $ b ) $ 20,453 $ 24,090 $ 22,090 $ 23,317 $ $ 20,453 $ 24,090 $ 22,090 $ 23,317 $ 89,950 Gross $ 24,090 $ 22,090 $ 23,317 $ 89,950 Gross margin 12,609 $ 22,090 $ 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 Gross margin 12,60 Revenue ( d ) $ Revenue ( d ) $ 20,379 $ 23,796 $ 20,531 $ d ) $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 Gross margin revenue deferral from Windows 10 of $ 1.9 billion , from Windows 10 of $ 1.9 billion , $ 2.0 billion $ 1.9 billion , $ 2.0 billion , $ 1.5 billion $ 2.0 billion , $ 1.5 billion , and $ 1.4 1.5 billion , and $ 1.4 billion , for the first fourth quarter of fiscal year 2017 , respectively , and $ , respectively , and $ 6.7 billion for fiscal year 2017 6.7 billion for fiscal year 2017 . ( c ) Includes ( c ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 millio revenue deferral from Windows 10 of $ 1.3 billion , from Windows 10 of $ 1.3 billion , $ 1.7 billion $ 1.3 billion , $ 1.7 billion , $ 1.6 billion $ 1.7 billion , $ 1.6 billion , and $ 2.0 1.6 billion , and $ 2.0 billion , for the first fourth quarter of fiscal year 2016 , respectively , and $ , respectively , and $ 6.6 billion for fiscal year 2016 6.6 billion for fiscal year 2016 . ( e ) Includes ( e ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructurin", + "expenses": "Expenses included $ 745 million related to our acquisition of LinkedIn . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Research and development expense decreased and development expense decreased $ 58 million , primarily due to million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Expenses included $ 1.3 10 . Expenses included $ 1.3 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired of acquired intangible asset . 36 PART II Item 7 Fiscal . 36 PART II Item 7 Fiscal year 2016 compared with II Item 7 Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Sales and marketing expense decreased and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , primarily due to foreign cu Expenses included $ 294 million related to our acquisition of LinkedIn . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 General and administrative expense decreased and administrative expense decreased $ 48 million or 1 % , decreased $ 48 million or 1 % , primarily due to foreign currency impact of approximately 2 % . IMPAIRMENT , INTEGRATION \u201d ) . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Impairment , integration , and and r", + "net_income": "Net income ( i ) Net income 21,204 ( b ) ( c b ) ( c ) 16,798 ( d ) ( e d ) ( e ) 12,193 ( g ) 22,074 21,863 ) 12,193 ( g ) 22,074 21,863 ( i ) Diluted 12,193 ( g ) 22,074 21,863 ( i ) Diluted earnings ) Diluted earnings per share 2.71 ( b ) ( c b ) ( c ) 2.10 ( d ) ( e d ) ( e ) 1.48 ( g ) 2.63 2.58 ) 1.48 ( g ) 2.63 2.58 ( i ) Cash 1.48 ( g ) 2.63 2.58 ( i ) Cash dividend Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash , declared p net income by $ 733 million ( \u20ac561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income and diluted EPS by $ 900 million , $ 596 million $ 900 million , $ 596 million , and $ 0.07 596 million , and $ 0.07 , respectively . 28 PART $ 0.07 , respectively . 28 PART II Item 7 ITEM . 28 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K Net income $ Provision for income tax 1,945 2,953 6,314 Net income $ 21,204 for income tax 1,945 2,953 6,314 Net income $ 21,204 $ 2,953 6,314 Net income $ 21,204 $ 16,798 $ 12,193 Earnings Net income $ 21,204 $ 16,798 $ 12,193 Earnings per share $ 21,204 $ 16,798 $ 12,193 Earnings per share : Basic per share : Basic $ 2.74 $ 2.12 $ 1.49 Diluted : Basic $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 $ 1.48 Weighted 1.49 Diluted $ 2.71 $ 2.1 Net income $ Ended June 30 , 2017 2016 2015 Net income $ 21,204 June 30 , 2017 2016 2015 Net income $ 21,204 $ 2016 2015 Net income $ 21,204 $ 16,798 $ 12,193 Other Net income $ 21,204 $ 16,798 $ 12,193 Other comprehensive income $ 21,204 $ 16,798 $ 12,193 Other comprehensive income ( loss tax effect of $ ( 5 ) , $ ( 12 5 ) , $ ( 12 ) , and $ 20 12 ) , and $ 20 ) ( 218 ) ( and $ 20 ) ( 218 ) ( 238 ) 559 ) ( 218 ) ( 238 ) 559 Net unrealized loss 218 ) ( 238 ) 559 Net unrealized loss on investment tax effec Net income Ended June 30 , 2017 2016 2015 Operations Net income $ June 30 , 2017 2016 2015 Operations Net income $ 21,204 2015 Operations Net income $ 21,204 $ 16,798 $ 12,193 Adjustments Net income $ 21,204 $ 16,798 $ 12,193 Adjustments to reconcile $ 21,204 $ 16,798 $ 12,193 Adjustments to reconcile net income : Goodwill and asset impairment 0 630 7,498 Depreciation , amortization Goodwill and asset impairment 0 630 7,498 Depreciation , amortization , and asset impairment 0 630 7,498 Depreciation , amor Net income 21,204 , beginning of period 2,282 9,096 17,710 Net income 21,204 16,798 beginning of period 2,282 9,096 17,710 Net income 21,204 16,798 12,193 2,282 9,096 17,710 Net income 21,204 16,798 12,193 Common stock cash 9,096 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend ( Common stock cash dividend ( 12,040 ) ( 11,329 ) ( dividend ( 12,040 ) ( 11,329 ) ( 10,063 ) Common ) ( 11,329 ) ( 10,063 ) Common stock repurchas Net income Provision for income tax 1,945 2,467 0 4,412 Net income 21,204 for income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 0 2,467 0 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings 0 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings per 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings per share Net income 21,204 4,285 0 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 0 3.25 ( In Diluted Net income Provision for income tax 2,953 2,147 0 5,100 Net income 16,798 for income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 0 2,147 0 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings 0 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings per 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings per share Net income 16,798 3,741 0 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 0 2.56 61 PART Dilu Net income available Ended June 30 , 2017 2016 2015 Net income available for June 30 , 2017 2016 2015 Net income available for common shareholder ( A ) $ 21,204 $ 16,798 $ 12,193 Weighted A ) $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding share of common stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based award Dilutive effect of Net income 20,894 2016 Revenue $ 91,668 $ 88,652 Net income 20,894 15,383 Diluted 91,668 $ 88,652 Net income 20,894 15,383 Diluted earnings per share $ 88,652 Net income 20,894 15,383 Diluted earnings per share 2.67 15,383 Diluted earnings per share 2.67 1.92 73 PART II Item Diluted earnings per share 2.67 1.92 73 PART II Item 8 earnings per share 2.67 1.92 73 PART II Item 8 These 1.92 73 PART II Item 8 These pro forma result were earliest period presented . NOTE 10 \u2014 GOODWILL Changes in the ( In million Net income 55,689 Operating income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 Operating income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 5,200 income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 5,200 4,801 5,594 5,330 22,326 Net income 4,690 5,200 4,801 6,513 ( c 5,330 22,326 Net income 4,690 5,200 4,801 6,513 ( c ) 22,326 Net income 4,690 5,200 4,801 6,513 ( c ) 21,204 Net income 4,690 5,200 4,801 6,513 ( c ) 21,204 ( 4,801 6,513 ( c ) 21,204 ( c ) Basic earnings ) Basic earnings per share Net income 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 3,756 5,283 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( e 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( e ) 20,182 Net income 4,902 5,018 3,756 3,122 ( e ) 16,798 Net income 4,902 5,018 3,756 3,122 ( e ) 16,798 ( 3,756 3,122 ( e ) 16,798 ( e ) Basic earnings ) Basic earnings per share", + "assets": "Assets Current million ) June 30 , 2017 2016 Assets Current asset : ) June 30 , 2017 2016 Assets Current asset : Cash Cash and cash equivalent $ 7,663 $ 6,510 Short-term investment ( cash equivalent $ 7,663 $ 6,510 Short-term investment ( including security including security loaned of $ 3,694 and $ 204 ) 125,318 of $ 3,694 and $ 204 ) 125,318 106,730 Total cash 3,694 and $ 204 ) 125,318 106,730 Total cash , cash and $ 204 ) 125,318 106,730 Total cash , cash equivalent equivalent , and short-term inve Assets June 30 , 2017 June 30 , 2016 Assets Liabilities Assets , 2017 June 30 , 2016 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) $ 33 $ 156 $ ( 8 ) $ 33 $ 156 $ 0 $ 8 ) $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) Equity 156 $ 0 $ ( 296 ) Equity contract 3 0 ( 296 ) Equity contract 3 0 0 0 ( 6 296 ) Equity contract 3 0 0 Assets Mutual fund Fair Value June 30 , 2017 Assets Mutual fund $ 1,478 2017 Assets Mutual fund $ 1,478 $ 0 $ 0 $ Mutual fund $ 1,478 $ 0 $ 0 $ 1,478 $ $ 1,478 $ 0 $ 0 $ 1,478 $ 0 $ $ 0 $ 0 $ 1,478 $ 0 $ 1,478 Commercial $ 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 319 0 0 $ 1,478 Commercial paper 0 319 0 319 0 319 $ 1,478 Commercial paper 0 319 0 319 0 319 Certificates 1,478 Commercial paper 0 319 0 319 0 319 Certificates of Commercial paper 0 319 0 319 0 319 Cert Assets Mutual fund Fair Value June 30 , 2016 Assets Mutual fund $ 1,012 2016 Assets Mutual fund $ 1,012 $ 0 $ 0 $ Mutual fund $ 1,012 $ 0 $ 0 $ 1,012 $ $ 1,012 $ 0 $ 0 $ 1,012 $ 0 $ $ 0 $ 0 $ 1,012 $ 0 $ 1,012 Commercial $ 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 298 0 0 $ 1,012 Commercial paper 0 298 0 298 0 298 $ 1,012 Commercial paper 0 298 0 298 0 298 Certificates 1,012 Commercial paper 0 298 0 298 0 298 Certificates of Commercial paper 0 298 0 298 0 298 Cert Assets and investment component $ 139,004 $ 123,671 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2017 and 2016 , we did During fiscal year 2017 and 2016 , we did not record on a nonrecurring basis . 71 PART II Item 8 NOTE . 71 PART II Item 8 NOTE 7 \u2014 INVENTORIES The PART II Item 8 NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2017 2016 Raw material million ) June 30 , 2017 2016 Raw material $ 797 ) June 30 , 2017 2016 Raw material $ 797 $ 2017 2016 R ASSETS The component Amortization Net Carrying Amount June 30 , 2017 2016 Technology-based ( Carrying Amount June 30 , 2017 2016 Technology-based ( a ) Amount June 30 , 2017 2016 Technology-based ( a ) $ Technology-based ( a ) $ 7,765 $ ( 4,318 ) $ ) $ 7,765 $ ( 4,318 ) $ 3,447 $ 5,970 $ ( 4,318 ) $ 3,447 $ 5,970 $ ( 3,648 4,318 ) $ 3,447 $ 5,970 $ ( 3,648 ) $ 3,447 $ 5,970 $ ( 3,648 ) $ 2,322 Marketing-related 4,016 $ ( 3,648 ) $ 2,322 Marketing-related 4,016 ( 829 ) 3,648 ) $ 2,322 Marketing-related Assets ) June 30 , 2017 2016 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 777 $ 809 Other expense item compensation expense $ 777 $ 809 Other expense item 1,550 1,609 $ 809 Other expense item 1,550 1,609 Restructuring charge 66 284 809 Other expense item 1,550 1,609 Restructuring charge 66 284 Unearned item 1,550 1,609 Restructuring charge 66 284 Unearned revenue 1,889 494 1,550 1,609 Restructuring charge 66 284 Unearned revenue 1,889 494 Impaired charge 66 284 Unea Assets . 92 PART II Item 8 Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2017 2016 2015 United million ) June 30 , 2017 2016 2015 United States $ ) June 30 , 2017 2016 2015 United States $ 39,118 June 30 , 2017 2016 2015 United States $ 39,118 $ 2016 2015 United States $ 39,118 $ 22,819 $ 19,562 Ireland United States $ 39,118 $ 22,819 $ 19,562 Ireland 12,876 2,078 $ 39,118 $ 22,819 $ 19,562 Ireland 12,876 2,078 1,595 Luxembourg $ 22,819 $ 19", + "liabilities": "Liabilities and stockholder Total asset $ 241,086 $ 193,468 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 12,904 Current 7,390 $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term debt Current portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 portion of long-term debt 1,049 0 Accrued compensation 5,81 Liabilities Assets , 2017 June 30 , 2016 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) $ 33 $ 156 $ ( 8 ) $ 33 $ 156 $ 0 $ 8 ) $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) Equity 156 $ 0 $ ( 296 ) Equity contract 3 0 ( 296 ) Equity contract 3 0 0 0 ( 6 296 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equity Liabilities Derivatives $ ( 227 ) $ 133,985 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 0 $ 345 $ 39 $ and other $ 0 $ 345 $ 39 $ 384 $ $ 0 $ 345 $ 39 $ 384 $ ( 228 $ 345 $ 39 $ 384 $ ( 228 ) $ 39 $ 384 $ ( 228 ) $ 156 70 PART $ ( 228 ) $ 156 70 PART II Item 8 ( 228 ) $ 156 70 PART II Item 8 ( 156 70 PART II Item 8 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting Liabilities Derivatives $ ( 401 ) $ 119,019 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 17 $ 613 $ 0 $ and other $ 17 $ 613 $ 0 $ 630 $ $ 17 $ 613 $ 0 $ 630 $ ( 398 $ 613 $ 0 $ 630 $ ( 398 ) $ 0 $ 630 $ ( 398 ) $ 232 ( a $ ( 398 ) $ 232 ( a ) These amount The change in our Level 3 financial instrument that are measured these same asset in Note 4 \u2013 Investments . ( In ( In million ) June 30 , 2017 2016 Net fair million ) June 30 , 2017 2016 Net fair value of ) June 30 , 2017 2016 Liabilities Measured Nonrecurring Basis During fiscal year 2017 and 2016 , we did During fiscal year 2017 and 2016 , we did not record on a nonrecurring basis . 71 PART II Item 8 NOTE . 71 PART II Item 8 NOTE 7 \u2014 INVENTORIES The PART II Item 8 NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2017 2016 Raw material million ) June 30 , 2017 2016 Raw material $ 797 ) June 30 , 2017 2016 Raw material $ 797 $ 2017 2016 Raw material $ 797 $ 612 Work in process Raw material $ 797 $ 612 Work in proce Liabilities Foreign Liabilities Foreign earnings $ ( 1,107 ) $ ( 1,242 ) ( 1,107 ) $ ( 1,242 ) Unrealized gain on investment on investment and debt ( 1,384 ) ( 2,102 ) Depreciation debt ( 1,384 ) ( 2,102 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,630 ) ( 1,008 ) Other amortization ( 1,630 ) ( 1,008 ) Other ( 21 ) ( 1,008 ) Other ( 21 ) ( 54 ) Deferred Other ( 21 ) ( 54 ) Deferred income tax liability Deferred income tax liability ( 4,142 ) ( 4,406 ) Net liability ( 4,142 ) ( 4,40", + "equity": "Equity Securities 27 Item 6 . Selected Financial of Equity Securities 27 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management \u2019 Selected Financial Data 28 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 47 Item 8 . Financial Statements about Market Risk 47 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding fourth quarter of fiscal year 2017 : Period Total Number of ( in million ) April 1 , 2017 \u2013 April 30 million ) April 1 , 2017 \u2013 April 30 , 2017 1 , 2017 \u2013 April 30 , 2017 5,241,413 $ 66.17 2017 \u2013 April 30 , 2017 5,241,413 $ 66.17 5,241,413 $ \u2013 April 30 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 30 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 May 1 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 May equity 72,394 71,997 80,083 89,784 78,944 ( ) Stockholders \u2019 equity 72,394 71,997 80,083 89,784 78,944 ( a Stockholders \u2019 equity 72,394 71,997 80,083 89,784 78,944 ( a ) \u2019 equity 72,394 71,997 80,083 89,784 78,944 ( a ) On equity 72,394 71,997 80,083 89,784 78,944 ( a ) On December ( a ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation net revenue deferral from Windows 10 of $ 6.7 billion , from Windows 10 of $ 6.7 billion , which decreased operating EPS \u201d ) Equity and a of June 30 , 2016 . Equity and other investment and other investment were $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2017 , compared with a of June 30 , 2017 , compared with $ 10.4 2017 , compared with $ 10.4 billion a of June 30 10.4 billion a of June 30 , 2016 . Our short-term a of June 30 , 2016 . Our short-term investment are short-term investment a of June 30 , 2017 , $ 127.9 a of June 30 , 2017 , $ 127.9 billion wa 30 , 2017 , $ 127.9 billion wa held by our local regulato Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . discussion . Dividends See Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2017 : ( In a of June 30 , 2017 : ( In million ) : ( In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term ( In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term debt In million ) 2018 2019-2 Equity $ 88 Interest rate 152 58 113 155 57 Equity 54 88 Interest rate 152 58 113 155 57 Equity 54 157 Interest rate 152 58 113 155 57 Equity 54 157 121 rate 152 58 113 155 57 Equity 54 157 121 165 58 113 155 57 Equity 54 157 121 165 54 Commodity 113 155 57 Equity 54 157 121 165 54 Commodity 0 155 57 Equity 54 157 121 165 54 Commodity 0 12 57 Equity 54 157 121 165 54 Commodity 0 12 8 Equity 54 157 121 165 54 Commodity 0 12 8 12 157 121 165 54 Commodity 0 12 8 12 0 Total 121 165 54 Commodity 0 12 8 12 Equity and other $ 24,179 and $ 19,800 23,734 18,356 Equity and other investment 24,179 and $ 19,800 23,734 18,356 Equity and other investment 6,023 18,356 Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset , net investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset , net 10,106 17,872 Intangible asset , net 10,106 3,73 equity liability : Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 12,904 Current 7,390 $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term debt Current portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 Income debt 1,049 0 Accrued compensation 5,819 5,264 Income tax 718 580 1,049 equity Accumulated other comprehensive income 431 1,537 Total stockholder \u2019 equity 72,394 1,537 Total stockholder \u2019 equity 72,394 71,997 Total liability and stockholder Total stockholder \u2019 equity 72,394 71,997 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 241,086 $ 193,468 See accompanying note \u2019 equity $ 241,086 $ 193,468 See accompanying note . 51 193,468 See accompanying note . 51 PART II Item 8 CASH . 51 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2017 201 equity end of period 431 1,537 2,522 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 72,394 $ 71,997 $ 80,083 See \u2019 equity $ 72,394 $ 71,997 $ 80,083 See accompanying note $ 72,394 $ 71,997 $ 80,083 See accompanying note . 53 80,083 See accompanying note . 53 PART II Item 8 NOTES . 53 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles content such a Microsoft Office 365 , Microsoft Azure , Microsoft Microsoft Azure , Micr equity 72,394 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 15,317 1,183 24,621 Stockholders ' equity 72,394 15,317 0 87,711 ( In 24,621 Stockholders ' equity 72,394 15,317 0 87,711 ( In million Stockholders ' equity 72,394 15,317 0 87,711 ( In million ) ' equity 72,394 15,317 0 87,711 ( In million ) June ( In million ) June 30 , 2016 As Reported New million ) June 30 , 2016 As Reported New Revenue Standard Accounts receivable , net $ 18,277 $ 2,359 $ 0 $ , net $ 18,277 $ 2,359 $ 0 $ 20,636 equity and long-term liability 19,589 17 941 20,547 Stockholders ' equity 71,997 long-term liability 19,589 17 941 20,547 Stockholders ' equity 71,997 11,093 941 20,547 Stockholders ' equity 71,997 11,093 0 83,090 Adoption of 20,547 Stockholders ' equity 71,997 11,093 0 83,090 Adoption of the Stockholders ' equity 71,997 11,093 0 83,090 Adoption of the standard ' equity 71,997 11,093 0 83,090 Adoption of the standard related cash flow statement . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended Ju Equity and Other Investments June 30 , 2017 Cash $ 3,624 Other Investments June 30 , 2017 Cash $ 3,624 $ 0 30 , 2017 Cash $ 3,624 $ 0 $ 0 $ 2017 Cash $ 3,624 $ 0 $ 0 $ 3,624 $ $ 3,624 $ 0 $ 0 $ 3,624 $ 3,624 $ $ 0 $ 0 $ 3,624 $ 3,624 $ 0 $ $ 0 $ 3,624 $ 3,624 $ 0 $ 0 Mutual $ 3,624 $ 3,624 $ 0 $ 0 Mutual fund 1,478 $ 3,624 $ 0 $ 0 Mutual fund 1,478 0 0 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial Mutual fund 1,47 Equity and Other Investments June 30 , 2016 Cash $ 3,501 Other Investments June 30 , 2016 Cash $ 3,501 $ 0 30 , 2016 Cash $ 3,501 $ 0 $ 0 $ 2016 Cash $ 3,501 $ 0 $ 0 $ 3,501 $ $ 3,501 $ 0 $ 0 $ 3,501 $ 3,501 $ $ 0 $ 0 $ 3,501 $ 3,501 $ 0 $ $ 0 $ 3,501 $ 3,501 $ 0 $ 0 Mutual $ 3,501 $ 3,501 $ 0 $ 0 Mutual fund 1,012 $ 3,501 $ 0 $ 0 Mutual fund 1,012 0 0 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial Mutual fund 1,01 Equity forward . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount market price risk were $ 1.9 billion and $ 2.4 billion $ 1.9 billion and $ 2.4 billion , respectively , of respectively , of which $ 1.6 billion and $ 1.8 billion $ 1.6 billion and $ 1.8 billion , respectively , were instrument . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount market price risk were $ 1.3 billion and $ 2.2 billion $ 1.3 billion and $ 2.2 billion , respec Equity 156 $ 0 $ ( 296 ) Equity contract 3 0 ( 296 ) Equity contract 3 0 0 0 ( 6 296 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equity contract 3 0 0 0 ( 6 ) 0 23 3 0 0 0 ( 6 ) 0 23 0 0 0 0 ( 6 ) 0 23 0 0 ( 16 0 ( 6 ) 0 23 0 0 ( 16 ) ( 6 ) 0 23 0 0 ( 16 ) Interest 6 ) 0 23 0 0 ( 16 ) Interest rate 0 23 0 0 ( 16 ) Interest rate contract 3 16 ) Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) 0 rate contract 3 0 0 0 ( 7 Equity 392 $ 0 $ ( 263 ) Equity contract 0 0 ( 263 ) Equity contract 0 0 67 0 ( 186 263 ) Equity contract 0 0 67 0 ( 186 ) ) Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 0 0 0 67 0 ( 186 ) 0 0 0 18 67 0 ( 186 ) 0 0 0 18 ( 25 0 ( 186 ) 0 0 0 18 ( 25 ) ( 186 ) 0 0 0 18 ( 25 ) Total 186 ) 0 0 0 18 ( 25 ) Total $ 0 0 0 18 ( 25 ) Total $ 80 $ ( 25 ) Total $ 80 $ 133 $ 67 $ ) Total $ 80 $ 133 $ 67 $ 0 $ $ 80 $ 133 $ 67 $ 0 $ ( 189 $ 133 $ 67 $ 0 $ ( 189 ) $ 67 $ 0 $ ( 189 ) $ 0 $ 1 Equity of ineffectiveness $ 55 $ 41 $ 16 Equity Contracts Derivatives $ 55 $ 41 $ 16 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 74 ) $ ( 76 ) ( 74 ) $ ( 76 ) $ ( 107 ) ( 76 ) $ ( 107 ) Hedged item 74 76 ( 107 ) Hedged item 74 76 107 Total amount of 107 ) Hedged item 74 76 107 Total amount of ineffectiveness ) Hedged item 74 76 107 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amoun equity contract excluded from effectiveness assessment $ ( 80 ) $ ( 10 ) ( 80 ) $ ( 10 ) $ 0 Cash Flow $ ( 10 ) $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2017 2016 2015 Effective Year Ended June 30 , 2017 2016 2015 Effective Portion Gains Ended June 30 , 2017 2016 2015 Effective Portion Gains recognized June 30 , 2017 2016 2015 Effective Portion Gains recognized in of tax effect of $ 4 , $ 24 and $ of $ 4 , $ 24 and $ 35 ) $ , $ 24 and $ 35 ) $ 328 $ 351 and $ 35 ) $ 328 $ 351 $ 1,152 Equity contract ( 114 483 ) Equity contract ( 114 ) ( 21 ) ( contract ( 114 ) ( 21 ) ( 19 ) Interest-rate ) ( 21 ) ( 19 ) Interest-rate contract 14 10 ( 19 ) Interest-rate contract 14 10 23 Credit contract 5 19 ) Interest-rate contract 14 10 23 Credit contract 5 ( ) Interest-rate contract 14 10 23 Credit contract 5 ( 1 14 10 23 Credit contract 5 ( 1 ) ( 1 23 Credit contract 5 ( 1 ) ( 1 ) Commodity 5 ( 1 ) ( 1 ) Commodity contract ( 22 1 ) Commodity contract ( 22 ) ( 87 ) ( contract ( 22 ) ( 87 ) ( 223 EQUITY Shares million ) Year Ended June 30 , 2017 2016 2015 Balance Year Ended June 30 , 2017 2016 2015 Balance , beginning Ended June 30 , 2017 2016 2015 Balance , beginning of June 30 , 2017 2016 2015 Balance , beginning of year Balance , beginning of year 7,808 8,027 8,239 Issued 70 75 , beginning of year 7,808 8,027 8,239 Issued 70 75 83 beginning of year 7,808 8,027 8,239 Issued 70 75 83 Repurchased year 7,808 8,027 8,239 Issued 70 75 83 Repurchased ( 170 7,808 8,027 8,239 Issued 70 75 83 Repurch Equity Statements 53 52 Stockholders \u2019 Equity Statements 53 Notes to Financial Statements 54 53 Notes to Financial Statements 54 Report of Independent Registered Public Independent Registered Public Accounting Firm 94 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 2.1 Agreement and Plan of Merger , dated a of June 11 , 2016 , by and a of June 11 , 2016 , by and among Microsoft Inc. , and LinkedIn Corporation 8-K * * * 2.1 6/13/16 Corporation 8-K * * * 2.1 6/13/16 3.1 Amended and Restated 8-K ", + "cash_flow": "cash flow statement . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2017 2016 2015 Net Year Ended June 30 , 2017 2016 2015 Net income available Ended June 30 , 2017 2016 2015 Net income available for June 30 , 2017 2016 2015 Net income available for common shareholder ( A ) $ 21,204 $ 16,798 $ 12,193 Weighted A ) $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding share of common stock ( B ) 7,746 7,925 8,177 Dilutive effect of Cash Flow $ ( 10 ) $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2017 2016 2015 Effective Year Ended June 30 , 2017 2016 2015 Effective Portion Gains Ended June 30 , 2017 2016 2015 Effective Portion Gains recognized June 30 , 2017 2016 2015 Effective Portion Gains recognized in of tax effect of $ 4 , $ 24 and $ of $ 4 , $ 24 and $ 35 ) $ , $ 24 and $ 35 ) $ 328 $ 351 and $ 35 ) $ 328 $ 351 $ 1,152 Gains 35 ) $ 328 $ 351 $ 1,152 Gains reclassified from $ 328 $ 351 $ 1,152 Gains reclassified f", + "gross_margin": "Gross margin 55,689 $ 93,580 $ 86,833 $ 77,849 Gross margin 55,689 ( b 86,833 $ 77,849 Gross margin 55,689 ( b ) 52,540 ( margin 55,689 ( b ) 52,540 ( d ) 60,542 59,755 ) 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 ( ( d ) 60,542 59,755 57,464 Operating income 22,326 ( b 60,542 59,755 57,464 Operating income 22,326 ( b ) ( c b ) ( c ) 20,182 ( d ) ( e d ) ( e ) 18,161 ( g ) 27,759 26,764 ) 18,161 ( g ) 27,759 26,764 ( i ) Net 18,161 ( g Gross margin 55,689 9 ) % Gross margin 55,689 52,540 60,542 6 % ( ) % Gross margin 55,689 52,540 60,542 6 % ( 13 % Gross margin 55,689 52,540 60,542 6 % ( 13 ) Gross margin 55,689 52,540 60,542 6 % ( 13 ) % 52,540 60,542 6 % ( 13 ) % Operating income 22,326 13 ) % Operating income 22,326 20,182 18,161 11 % 11 ) % Operating income 22,326 20,182 18,161 11 % 11 % % Operating income 22,326 20,182 18,161 11 % 11 % Diluted Operating income 22,326 20,182 18,161 11 % 11 % Diluted earnings 22,326 20,182 18,161 11 % Gross margin increased . Gross margin increased $ 3.1 billion or 6 % , increased $ 3.1 billion or 6 % , due to growth unfavorable foreign currency impact of 2 % . Gross margin percentage Gross margin percentage includes a 5-point improvement in commercial cloud gross primarily across Azure and Office 365 . Operating income increased $ . Operating income increased $ 2.1 billion or 11 % , increased $ 2.1 billion or 11 % , primarily due to an operating loss of $ 948 million related to the acquisition of Linked Gross margin decreased $ 8.0 billion or 13 % , decreased $ 8.0 billion or 13 % , driven by the currency impact of approximately $ 3.3 billion or 5 % . approximately $ 3.3 billion or 5 % . Productivity and Business Cost of revenue decreased $ 258 million or 1 % , decreased $ 258 million or 1 % , mainly due to and restructuring expense decreased $ 8.9 billion , primarily driven by and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , driven by a foreign currency impact of app Gross margin \u2022 Gross margin increased $ 1.8 billion or 9 % , increased $ 1.8 billion or 9 % , primarily due to Cost of revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.4 billion or 10 % , increased $ 2.4 billion or 10 % , primarily due to cloud service revenue grew $ 2.5 billion or 13 % , grew $ 2.5 billion or 13 % , driven by Azure by Azure revenue growth of 99 % and server product licensed li Gross margin \u2022 Gross margin increased $ 796 million or 4 % , increased $ 796 million or 4 % , driven by growth unfavorable foreign currency impact of 2 % . Gross margin percentage Personal Computing Revenue decreased $ 1.7 billion or 4 % , decreased $ 1.7 billion or 4 % , mainly due to \u2022 Windows revenue increased $ 442 million or 3 % , increased $ 442 million or 3 % , mainly due to . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 5 % , outperforming the commercial Windows O Gross margin \u2022 Gross margin increased $ 568 million or 3 % , increased $ 568 million or 3 % , driven by growth unfavorable foreign currency impact of 2 % . Fiscal year 2016 2 % . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Productivity and Business Processes Productivity foreign currency impact of approximately 6 % . \u2022 Office Commercial Office Commercial revenue increased $ 135 million or 1 % , increased $ 135 million or 1 % , driven by higher by higher revenue from O Gross margin decreased $ 928 million or 4 % , decreased $ 928 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 985 million or 25 % , increased $ 985 million or 25 % , primarily due to . Operating expense decreased $ 72 million or 1 % , decreased $ 72 million or 1 % , driven by lower and marketing expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , mainly due to Intelligent Cloud revenue increased $ 1.3 billion or Gross margin increased $ 501 million or 3 % , increased $ 501 million or 3 % , driven by revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 826 million or 14 % , increased $ 826 million or 14 % , primarily driven by mix of cloud service . 34 PART II Item 7 More . 34 PART II Item 7 More Personal Computing More Personal Personal Computing revenue decreased $ 3.0 billion or 7 % , decreased $ 3.0 billion or 7 % , mainly due to foreign currency impact of approximat Gross margin decreased $ 932 million or 5 % , decreased $ 932 million or 5 % , reflecting lower revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by revenue deferral related to Windows 10 . Corporate and Other operating revenue deferral related to Windows 10 and corporate-level activity not specifically restructuring expense . Fiscal year 2017 compared with fiscal year 2016 2017 compared w Gross margin 55,689 Total cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 13,037 33,038 Gross margin 55,689 52,540 60,542 Research and development 13,037 11,988 52,540 60,542 Research and development 13,037 11,988 12,046 Sales and marketing 60,542 Research and development Gross margin 12,609 $ 22,090 $ 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 6,177 margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 6,177 5,594 14,030 14,861 55,689 Operating income 5,225 6,177 5 Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 12,809 12,635 52,540 Operating income 5,793 6,026 5", + "accumulated_depreciation": "accumulated depreciation of $ 24,179 and $ 19,800 23,734 18,356 of $ 24,179 and $ 19,800 23,734 18,356 Equity and other $ 24,179 and $ 19,800 23,734 18,356 Equity and other investment 24,179 and $ 19,800 23,734 18,356 Equity and other investment 6,023 18,356 Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset , net investment 6,023 10,431 Goodwill Accumulated depreciation ( 24,179 Total , at cost 47,913 38,156 Accumulated depreciation ( 24,179 ) 47,913 38,156 Accumulated depreciation ( 24,179 ) ( 19,800 ) Total depreciation ( 24,179 ) ( 19,800 ) Total , net $ ) Total , net $ 23,734 $ 18,356 As of June , net $ 23,734 $ 18,356 As of June 30 , $ 18,356 As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , asset recorded June 30 , 2017 and 2016 , asset recorded under capital under capital lease were $ 2.7 billion and $ 865 million $ 2.7 billion and $ 865 m", + "debt": "Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ( g ) Includes $ 7.5 billion of goodwill and asset phone business , and $ 2.5 billion of integration and restructuring and diluted EPS by $ 10.0 billion , $ 9.5 billion $ 10.0 billion , $ 9.5 billion , and $ 1.15 9.5 billion , and $ 1.15 , respectively . ( h ( h ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all the European Commission in March 2013 which debt . See Note 12 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . Unearned revenue a of June 30 , 2017 wa comprised mainly a of June 30 , 2017 wa comprised mainly of unearned Unearned revenue a of June 30 , 2017 also included payment a of June 30 , 2017 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; LinkedIn ; Xbox unearned revenue a of June 30 debt In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term debt : a ) Principal payment $ 1,050 $ 9,518 $ 11,746 $ Principal payment $ 1,050 $ 9,518 $ 11,746 $ 55,523 $ $ 1,050 $ 9,518 $ 11,746 $ 55,523 $ 77,837 Interest $ 9,518 $ 11,746 $ 55,523 $ 77,837 Interest payment 2,402 $ 11,746 $ 55,523 $ 77,837 Interest payment 2,402 4,672 4,301 55,523 $ 77,837 Interest payment 2,402 4,672 4,301 33,179 44,554 Construction $ 77,837 Interest payment 2,402 4,672 4,301 33,179 44,554 Construction com Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) ( b ) See Note 16 \u2013 Commitments of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) long-term pension liability of $ 14.4 billion from the amount presented revenue and non-cash item . 42 PART II Item 7 Other . 42 PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCO debt 9,072 Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 12,904 Current 7,390 $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term debt Current portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 Income debt 1,049 0 Accrued compensation 5,819 5,264 Income tax 718 580 1,049 0 Accrued compensation 5,819 5,264 Income tax 718 580 Short- debt 76,073 40,557 5,949 Total current liability 64,527 59,357 Long-term debt 76,073 40,557 Long-term liability 64,527 59,357 Long-term debt 76,073 40,557 Long-term unearned revenue 10,377 64,527 59,357 Long-term debt 76,073 40,557 Long-term unearned revenue 10,377 6,441 76,073 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 1,476 10,377 6,441 Deferred income tax 531 1,476 Other long-term liability 17,184 6 debt , maturity of 90 day or le , net or le , net ( 4,963 ) 7,195 4,481 Proceeds from , net ( 4,963 ) 7,195 4,481 Proceeds from issuance of net ( 4,963 ) 7,195 4,481 Proceeds from issuance of debt Proceeds from issuance of debt 44,344 13,884 10,680 Repayments of debt from issuance of debt 44,344 13,884 10,680 Repayments of debt ( issuance of debt 44,344 13,884 10,680 Repayments of debt ( 7,922 10,680 Repayments of debt ( 7,922 ) ( 2,796 ) ( debt ( 7,922 ) ( 2,796 ) ( 1,500 ) Common ) ( 2,796 ) ( 1,5 debt were in excess of $ 1.0 billion . As a result required to be posted . 67 PART II Item 8 Fair . 67 PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2017 June 30 , risk : June 30 , 2017 June 30 , 2016 Assets June 30 , 2017 June 30 , 2016 Assets Liabilities Assets , 2017 June 30 , 2016 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not balance sheet . See Note 12 \u2013 Debt for further information Weighted Averag DEBT Short-term 3,100 Total $ 10,106 NOTE 12 \u2014 DEBT Short-term Debt As Short-term Debt As of June 30 , 2017 , we had As of June 30 , 2017 , we had $ 9.1 2017 , we had $ 9.1 billion of commercial paper issued a weighted-average interest rate of 1.01 % and maturity ranging from % and maturity ranging from 25 day to 264 day . ranging from 25 day to 264 day . As of June day . As of June 30 , 2016 , we had As of June 30 , 2016 , we had $ 12.9 2016 , we had $ 12.9 billion of commercial paper issued a weig Debt As of June 30 , 2017 , the total As of June 30 , 2017 , the total carrying value current portion , were $ 77.1 billion and $ 80.3 billion $ 77.1 billion and $ 80.3 billion , respectively . As respectively . As of June 30 , 2016 , the total As of June 30 , 2016 , the total carrying value our long-term debt were $ 40.6 billion and $ 44.0 billion $ 40.6 billion and $ 44.0 billion , respectively . These value are based on Level 2 input . 76 PART II on Level 2 input . 76 PART II Item 8 The . 76 PART debt security . billion of debt security . 77 PART II Item 8 ( . 77 PART II Item 8 ( b ) Remaining note LinkedIn acquisition . See Note 9 \u2013 Business Combinations for further ( c ) In February 2017 , we issued $ 17.0 2017 , we issued $ 17.0 billion of debt security . our debt for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 wa $ 2017 , 2016 , and 2015 wa $ 1.6 billion , , and 2015 wa $ 1.6 billion , $ 1.1 billion $ 1.6 billion , $ 1.1 billion , and $ 620 1.1 billion , and debt ( 1,384 ) ( 2,102 ) Depreciation debt ( 1,384 ) ( 2,102 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,630 ) ( 1,008 ) Other amortization ( 1,630 ) ( 1,008 ) Other ( 21 ) ( 1,008 ) Other ( 21 ) ( 54 ) Deferred Other ( 21 ) ( 54 ) Deferred income tax liability Deferred income tax liability ( 4,142 ) ( 4,406 ) Net liability ( 4,142 ) ( 4,406 ) Net deferred income tax asset ( liability ) $ 1,881 $ ( 1,257 ) Reported ) $ 1,881 $ ( 1,257 ) Reported As Other long-term As Other ", + "share_repurchase": "share repurchase . program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an additional $ 40.0 billion in share repurchase . repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the share repurchase program . Shares Amount Year Ended June 30 , 2017 2016 2015 First Year Ended June 30 , 2017 2016 2015 First Quarter 63 Ended June 30 , 2017 2016 2015 First Quarter 63 $ June 30 , 2017 2016 2015 First Quarter 63 $ 3,550 2017 2016 2015 First Quarter 63 $ 3,550 89 $ 4,000 2015 First Quarter 63 $ 3,550 89 $ 4,000 43 $ First Quarter 63 $ 3,550 89 $ 4,000 43 $ 2,000 63 $ 3,550 89 $ 4,000 43 $ 2,000 Second Quarter $ 3,550 89 $ 4,000 43 $ 2,000 Second Quarter 59 89 $ 4,000 43 $ 2,000 Second Quarter 59 share repurchase share repurchase program approved September 20 , 2016 . All other program approved September 20 , 2016 . All other share repurchased share repurchase program approved September 16 , 2013 . The above program approved September 16 , 2013 . The above table excludes made using cash resource . 86 PART II Item 8 Dividends . 86 PART II Item 8 Dividends In fiscal year 2017 8 Dividends In fiscal year 2017 , our Board of Directors ( In million ) September 20 , 2016 $ 0.39 November million ) September 20 ", + "earnings_per_share": "earnings per share 2.71 ( b ) ( c b ) ( c ) 2.10 ( d ) ( e d ) ( e ) 1.48 ( g ) 2.63 2.58 ) 1.48 ( g ) 2.63 2.58 ( i ) Cash 1.48 ( g ) 2.63 2.58 ( i ) Cash dividend Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash , declared per share 1.56 1.44 1.24 1.12 0.92 Cash , cash per share 1.56 1.44 1.24 1.12 0.92 Cash , cash equivalent share 1.56 1.44 1.24 1.12 0.92 Cash , cash equivalent , equivalent , and short-term investment 132,981 113,240 96,52 earnings per share % Diluted earnings per share 2.71 2.10 1.48 29 % 42 Diluted earnings per share 2.71 2.10 1.48 29 % 42 % earnings per share 2.71 2.10 1.48 29 % 42 % Fiscal per share 2.71 2.10 1.48 29 % 42 % Fiscal year 2.71 2.10 1.48 29 % 42 % Fiscal year 2017 compared % 42 % Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Revenue increased $ 4.6 billion year 2016 Revenue increased $ 4.6 billion or 5 % , increased $ 4.6 billion or 5 % , driven by growth unfavorable foreign cu Earnings per share $ 21,204 $ 16,798 $ 12,193 Earnings per share : Basic per share : Basic $ 2.74 $ 2.12 $ 1.49 Diluted : Basic $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 $ 1.48 Weighted 1.49 Diluted $ 2.71 $ 2.10 $ 1.48 Weighted average share $ 2.71 $ 2.10 $ 1.48 Weighted average share outstanding : average share outstanding : Basic 7,746 7,925 8,177 Diluted 7,832 8,013 share outstanding : Basic 7,746 7,925 8,177 Diluted 7,832 8,013 8,254 outs earnings per share Net income 21,204 4,285 0 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 0 3.25 ( In Diluted earnings per share 2.71 0.54 0 3.25 ( In million earnings per share 2.71 0.54 0 3.25 ( In million , per share 2.71 0.54 0 3.25 ( In million , except share ) Year Ended June 30 , 2016 As Reported New Year Ended June 30 , 2016 As Reported New Revenue Standard Income statement : Revenue $ 85,320 $ 5,834 $ 0 $ : Revenue $ 85,320 $ 5,834 $ 0 $ 91,154 Provision $ 85,320 $ 5 earnings per share Net income 16,798 3,741 0 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 0 2.56 61 PART Diluted earnings per share 2.10 0.46 0 2.56 61 PART II earnings per share 2.10 0.46 0 2.56 61 PART II Item per share 2.10 0.46 0 2.56 61 PART II Item 8 share 2.10 0.46 0 2.56 61 PART II Item 8 ( 2.56 61 PART II Item 8 ( In million ) June ( In million ) June 30 , 2017 As Reported New million ) June 30 , 2017 As Reported New Revenue Standard Accounts receivable , net $ 19,79 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2017 2016 2015 Net Year Ended June 30 , 2017 2016 2015 Net income available Ended June 30 , 2017 2016 2015 Net income available for June 30 , 2017 2016 2015 Net income available for common shareholder ( A ) $ 21,204 $ 16,798 $ 12,193 Weighted A ) $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding share of common stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock ( B ) 7,746 7,925 8,177 Dilutive e Earnings Per Share equivalent ( C ) 7,832 8,013 8,254 Earnings Per Share Basic ( C ) 7,832 8,013 8,254 Earnings Per Share Basic ( Basic ( A/B ) $ 2.74 $ 2.12 $ 1.49 Diluted A/B ) $ 2.74 $ 2.12 $ 1.49 Diluted ( A/C $ 2.74 $ 2.12 $ 1.49 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.71 $ 2.10 $ 1.48 62 A/C ) $ 2.71 $ 2.10 $ 1.48 62 PART II $ 2.71 $ 2.10 $ 1.48 62 PART II Item 8 2.71 $ 2.10 $ 1.48 62 PART II Item 8 Anti-dilutive 1.48 62 PART II Item 8 Anti-dilutive stock-based award excluded from the period presented . NOTE earnings per share $ 88,652 Net income 20,894 15,383 Diluted earnings per share 2.67 15,383 Diluted earnings per share 2.67 1.92 73 PART II Item Diluted earnings per share 2.67 1.92 73 PART II Item 8 earnings per share 2.67 1.92 73 PART II Item 8 These 1.92 73 PART II Item 8 These pro forma result were earliest period presented . NOTE 10 \u2014 GOODWILL Changes in the ( In million ) June 30 , 2015 Acquisitions Other June million ) June 30 , 2015 Acquisitions Other June 30 , , 2015 Acquisitions Other June 30 , 2016 Acq earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted Basic earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per share share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per share 0.60 2.74 Diluted earnings per share 0.60 0.66 0.61 0.83 ( c Diluted earnings per share 0.60 0.66 0.61 0.83 ( c ) earnings per share 0.60 0.66 0.61 0.83 ( c ) 2.71 per share 0.60 0.66 0.61 0.83 ( c ) 2.71 ( 0.61 0. earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share 0.61 2.12 Diluted earnings per share 0.61 0.62 0.47 0.39 ( e Diluted earnings per share 0.61 0.62 0.47 0.39 ( e ) earnings per share 0.61 0.62 0.47 0.39 ( e ) 2.10 per share 0.61 0.62 0.47 0.39 ( e ) 2.10 ( 0.47 0.", + "tax_rate": "tax rate for tax rate for fiscal year 2017 and 2016 wa 8 % for fiscal year 2017 and 2016 wa 8 % and 15 year 2017 and 2016 wa 8 % and 15 % , 2016 wa 8 % and 15 % , respectively . The tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the of our income before income 38 PART II Item 7 tax income 38 PART II Item 7 tax between the U. S. country . The fiscal year 2016 effective tax rate included the tax rate in fiscal year 2017 reflects the r ealiz tax rate for tax rate for fiscal year 2016 and 2015 wa 15 % for fiscal year 2016 and 2015 wa 15 % and 34 year 2016 and 2015 wa 15 % and 34 % , 2015 wa 15 % and 34 % , respectively . Our tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the center . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 milli tax rate in fiscal year 2017 reflects the realization of tax credit . In fiscal year 2017 , 2016 , and 2015 In fiscal year 2017 , 2016 , and 2015 , there 2017 , 2016 , and 2015 , there were no individually tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the country . The fiscal year 2016 effective tax rate included the charge and valuation allowance . 79 PART II Item 8 The . 79 PART II Item 8 The component of the deferred ( In million ) Ju tax rate for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , by 2017 , 2016 , and 2015 , by $ 10.2 billion and 2015 , by $ 10.2 billion , $ 8.8 billion $ 10.2 billion , $ 8.8 billion , and $ 7.9 8.8 billion , and $ 7.9 billion , respectively . As respectively . As of June 30 , 2017 , 2016 , As of June 30 , 2017 , 2016 , and 2015 June 30 , 2017 , 2016 , and 2015 , we 2017 , 2016 , and 2015 , we had accrued interest uncertain tax position of $ 2.3 billion , $ 1.9 billion $ 2.3 ", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based the continued shift to Office 365 . CALs provide certain Office the continued shift to Office 365 . Office Consumer Services revenue the sale of minute . 6 PART I Item 1 LinkedIn . Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 30 PART II this Form 10-K ) . 30 PART II Item 7 SUMMARY . 30 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2017 2016 2015 Percentage Change 2017 per share amount ) 2017 2016 2015 Percentage Change 2017 Versus share amount ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 20 Geographic to our intangible asset . 75 PART II Item 8 The . 75 PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2017 2016 Customer-related $ Year Ended June 30 , 2017 2016 Customer-related $ 3,607 7 Ended June 30 , 2017 2016 Customer-related $ 3,607 7 year , 2017 2016 Customer-related $ 3,607 7 year $ 30 3 2017 2016 Customer-related $ 3,607 7 year $ 30 3 year $ 3,607 7 year $ 30 3 year Technology-based 2,265 2 3,607 7 year $ 30 3 year Technology-based 2,265 2 year $ 30 3 GEOGRAPHIC Personal Computing . In December 2016 , we completed our acquisition Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based across ERP and CRM . 90 PART II Item 8 Intelligent . 90 PART II Item 8 Intelligent Cloud Our Intelligent Cloud U.S. GAAP relate to Windows 10 revenue recognition . Revenue and million ) Year Ended June ", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 29 , 2017 are incorporated by held on November 29 , 2017 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2017 INDEX Page PART Year Ended June 30 , 2017 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 common stock for $ 10.3 billion , $ 14.8 billion $ 10.3 billion , $ 14.8 billion , and $ 13.2 14.8 billion , and $ 13.2 billion , respectively , through cash resource . See Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . discussion . Dividends See Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2017 : ( In a of June Common stock issued 772 1,500 ) Common stock issued 772 668 634 Common stock repurchased ) Common stock issued 772 668 634 Common stock repurchased ( Common stock issued 772 668 634 Common stock repurchased ( 11,788 634 Common stock repurchased ( 11,788 ) ( 15,969 ) ( repurchased ( 11,788 ) ( 15,969 ) ( 14,443 ) Common ) ( 15,969 ) ( 14,443 ) Common stock cash dividend stock cash dividend paid ( 11,845 ) ( 11,006 ) ( paid ( 11,845 ) ( 11,006 ) ( 9,882 ) Other ) ( 11,006 ) ( 9,882 ) Other , net ( ) Other , n Common stock and Ended June 30 , 2017 2016 2015 Common stock and paid-in June 30 , 2017 2016 2015 Common stock and paid-in capital , beginning of period $ 68,178 $ 68,465 $ 68,366 Common of period $ 68,178 $ 68,465 $ 68,366 Common stock issued $ 68,178 $ 68,465 $ 68,366 Common stock issued 772 668 $ 68,366 Common stock issued 772 668 634 Common stock repurchased 68,366 Common stock issued 772 668 634 Common stock repurchased ( Common stock issued 772 668 634 Common stock repurchased ( 2,987 634 Common stock Common stock cash 9,096 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend ( Common stock cash dividend ( 12,040 ) ( 11,329 ) ( dividend ( 12,040 ) ( 11,329 ) ( 10,063 ) Common ) ( 11,329 ) ( 10,063 ) Common stock repurchased ( ) Common stock repurchased ( 8,798 ) ( 12,283 ) ( repurchased ( 8,798 ) ( 12,283 ) ( 10,744 ) Balance ) ( 12,283 ) ( 10,744 ) Balance , end of Balance , end of period 2,648 2,282 9,096 Accumulated other common stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based award Dilutive effect of stock-based award 86 88 77 Common stock and effect of stock-based award 86 88 77 Common stock and common of stock-based award 86 88 77 Common stock and common stock stock equivalent ( C ) 7,832 8,013 8,254 Earnings Per Share equivalent ( C ) 7,832 8,013 8,254 Earnings Per Share Basic ( C ) 7,832 8,013 8,254 Earnin", + "fair_value_measurements": "Fair Value Measurements . \u2013 Fair Value Measurements . 68 PART II Item 8 Fair . 68 PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2017 2016 2015 Foreign Year Ended June 30 , 2017 2016 2015 Foreign Exchange Contracts Ended June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 441 $ ( 797 ) $ Derivatives $ 441 $ ( 797 ) $ 741 Hedged item $ ( 797 ) $ 741 Hedged item ( 386 ) $ 741 Hed FAIR VALUE MEASUREMENTS Financial ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2017 Assets Mutual fund Fair Value June 30 , 2017 Assets Mutual fund $ 1,478 2017 Assets Mutual fund $ 1,478 $ 0 $ 0 $ Mutual fund $ 1,478 $ 0 $ 0 $ 1,478 $ $ 1,478 $ 0 $ 0 $ 1,478 $ 0 $ $ 0 $ 0 $ 1,478 $ 0 $ 1,478 Commercial $ 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 319 0 0", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 441 $ ( 797 ) $ Derivatives $ 441 $ ( 797 ) $ 741 Hedged item $ ( 797 ) $ 741 Hedged item ( 386 ) $ 741 Hedged item ( 386 ) 838 ( 725 ) Hedged item ( 386 ) 838 ( 725 ) Total amount ( 386 ) 838 ( 725 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 55 $ 41 $ 16 Equity of ineffectiveness $ 55 $ 41 $ 16 E", + "derivative_instruments": "Derivative Instruments counterparty credit risk : June 30 , 2017 June 30 , risk : June 30 , 2017 June 30 , 2016 Assets June 30 , 2017 June 30 , 2016 Assets Liabilities Assets , 2017 June 30 , 2016 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) $ 33 $ 156 $ ( 8 ) $ 33 $ 156 $ 0 $ 8 ) $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) Equity 156 $ " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-18-019062/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-18-019062/full-submission_features.json new file mode 100644 index 0000000..7342e2a --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-18-019062/full-submission_features.json @@ -0,0 +1,21 @@ +{ + "revenue": "revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world the continued shift to Dynamics 365 , a unified set of and Microsoft Consulting Services . 7 PART I Item 1 Server . 7 PART I Item 1 Server Products and Cloud Services all size and complexity . 8 PART I Item 1 Our . 8 PART I Item 1 Our Enterprise Services business comp more productive . In May 2016 , we announced plan to hardware business . In November 2016 , we completed the sale our feature Pho revenue in fiscal of revenue in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 . We 2018 , 2017 , and 2016 . We plan to continue have a portfolio of over 53,000 U.S. and international patent issued international patent issued and over 29,000 pending . While we employ development of our product . 11 PART I Item 1 Investing . 11 PART I Item 1 Investing in the Future Our capability to subscribe to Office 365 . There are two broad , and retail store . 12 PART I Item 1 Distributors revenue in fiscal of revenue in fiscal year 2018 , 2017 , or 2016 in fiscal year 2018 , 2017 , or 2016 . Our 2018 , 2017 , or 2016 . Our practice is to backlog is not significant . 14 PART I Item 1 EXECUTIVE . 14 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 3 , 2018 were a follows a of August 3 , 2018 were a follows : Name with the Company Satya Nadella 50 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 48 Executive Vice President , revenue . 19 PART I Item 1A We . 19 PART I Item 1A We may not receive expected or reveal confidential information . 20 PART I Item 1A Cyberthreats . 20 PART I Item 1A Cyberthreats are constantly evolving , reputation or competitive position . 21 PART I Item 1A Disclosure . 21 PART I Item 1A Disclosure and misuse of personal Microsoft account service , Office 365 , OneDrive , SharePoint Online result and financial condition . 22 PART I Item 1A Government . 22 PART I Item 1A Government litigation and reg revenue , , or reputational damage . 24 PART I Item 1A The . 24 PART I Item 1A The Company \u2019 s investment product release such a Windows 10 , significant business transaction , example , compliance with the 2017 United States Tax Cut and expense and cash flow . 25 PART I Item 1A We . 25 PART I Item 1A We may experience quality or customer are located in over 200 country and a significant part on our operating result . 26 PART I Item 1A Abrupt . 26 PART I Item 1A Abrupt political c hange , impact revenu revenue or margin . 27 PART I Item 1A Issues . 27 PART I Item 1A Issues in the use of most highly qualified employee . 28 PART I Item 1B , . 28 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2018 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Revenue 2016 ( b ) 2015 2014 ( h ) Revenue $ ( h ) Revenue $ 110,360 $ 96,571 $ 91,154 $ ) Revenue $ 110,360 $ 96,571 $ 91,154 $ 93,580 $ $ 110,360 $ 96,571 $ 91,154 $ 93,580 $ 86,833 Gross $ 96,571 $ 91,154 $ 93,580 $ 86,833 Gross margin 72,007 $ 91,154 $ 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 86,833 Gross margin 72,007 62,310 58,374 60,542 59,7 revenue recognition and lease . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ( c ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation ( d ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( e ( e ) Includes $ 630 million of asset impai revenue increased 11 % , driven by Office % , driven by Office 365 commercial revenue growth of 41 365 commercial revenue growth of 41 % . \u2022 Office Consumer \u2022 Office Consumer revenue increased 11 % and Office 365 consumer increased 11 % and Office 365 consumer subscriber increased to 31.4 365 consumer subscriber increased to 31.4 million . \u2022 LinkedIn contributed LinkedIn contributed revenue of $ 5.3 billion , driven by strong . \u2022 Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynami revenue growth of 65 % Dynamics 365 revenue growth of 65 % . \u2022 Server product and cloud service revenue increased 21 % , driven by Azure by Azure revenue growth of 91 % . \u2022 Enterprise Services \u2022 Enterprise Services revenue increased 5 % . \u2022 Windows original OEM \u201d ) revenue increased 5 % , driven by OEM OEM Pro revenue growth of 11 % . \u2022 Windows Commercial \u2022 Windows Commercial revenue increased 12 % , driven by an . \u2022 Gaming revenue increased 14 % , driven by Xbox and service revenue growth of 20 % , ma revenue increased 16 % , driven by a traffic acquisition cost , increased 16 % , driven by higher search volume . On June 4 , 2018 , we entered . On June 4 , 2018 , we entered into a GitHub , Inc. for $ 7.5 billion in an all-stock transaction calendar year . On December 8 , 2016 , we completed . On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . LinkedIn ha been acquisition . Refer to Note 9 \u2013 Business Combinations of the ( Part II , Item 8 of this Form 10-K ) revenue and trend reversed in fiscal year 2018 . Strengthening of foreign currency ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 21 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2018 2017 2016 Percentage Change 2018 per share amount ) 2018 2017 20 Revenue $ 110,360 2017 Percentage Change 2017 Versus 2016 Revenue $ 110,360 $ 96,571 2017 Versus 2016 Revenue $ 110,360 $ 96,571 $ 91,154 14 2016 Revenue $ 110,360 $ 96,571 $ 91,154 14 % 6 $ 110,360 $ 96,571 $ 91,154 14 % 6 % Gross 110,360 $ 96,571 $ 91,154 14 % 6 % Gross margin 96,571 $ 91,154 14 % 6 % Gross margin 72,007 62,310 % 6 % Gross margin 72,007 62,310 58,374 16 % 7 6 % Gross margin 72,007 62,310 58,374 16 % 7 % % Gross margin 72,007 62,310 58,374 16 % 7 % Operating Gross margin 72,007 62,310 Revenue increased $ 13.8 billion Year 2017 Revenue increased $ 13.8 billion or 14 % , increased $ 13.8 billion or 14 % , driven by growth . Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by growth LinkedIn operating loss increased $ 63 million to $ 987 million $ 63 million to $ 987 million , i revenue increased $ 4.1 billion or 12 % , increased $ 4.1 billion or 12 % , mainly due to and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively Revenue increased $ 5.4 billion Year 2016 Revenue increased $ 5.4 billion or 6 % , increased $ 5.4 billion or 6 % , driven by growth . Gross margin increased $ 3.9 billion or 7 % , increased $ 3.9 billion or 7 % , due to growth Gross margin percentage includes a 5 percentage point improvement in commercial primarily across Azure and Office 365 . Operating income increased $ . Operating income increased $ 2.9 billion or 11 % , increased $ 2.9 billion or 11 % , primarily due to an operating loss of $ 924 revenue increased $ 1.5 billion or 5 % , increased $ 1.5 billion or 5 % , mainly due to and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to and marketing expense increased $ 826 million or 6 % , increased $ 826 million or 6 % , primarily due to and restructuring expense decreased $ 804 million , driven by asset Phone business in fiscal year 2016 , offset in part by restructuring plan in fiscal year 2017 . Diluted EPS wa $ . Diluted EPS wa $ 3.25 fo Revenue Productivity and 2017 Percentage Change 2017 Versus 2016 Revenue Productivity and Business Processes Productivity and Business Processes $ 35,865 $ 29,870 $ 25,792 20 Business Processes $ 35,865 $ 29,870 $ 25,792 20 % 16 $ 35,865 $ 29,870 $ 25,792 20 % 16 % Intelligent 35,865 $ 29,870 $ 25,792 20 % 16 % Intelligent Cloud 29,870 $ 25,792 20 % 16 % Intelligent Cloud 32,219 27,407 % 16 % Intelligent Cloud 32,219 27,407 24,952 18 % 10 16 % Intelligent Cloud 32,219 27,407 24,952 18 % 10 % % Intellig Revenue Business Processes Revenue increased $ 6.0 billion or 20 % . increased $ 6.0 billion or 20 % . \u2022 LinkedIn revenue \u2022 LinkedIn revenue increased $ 3.0 billion to $ 5.3 billion $ 3.0 billion to $ 5.3 billion . Fiscal year 2018 5.3 billion . Fiscal year 2018 includes a full period of result , whereas fiscal year 2017 only includes result from the date of acquisition on December 8 , 2016 . LinkedIn revenue acquisition on December 8 , 2016 . LinkedIn revenue primarily consisted Office Commercial reve revenue growth , mainly a continued shift to Office 365 commercial . \u2022 Office Consumer Office Consumer revenue increased $ 382 million or 11 % , increased $ 382 million or 11 % , driven by Office % , driven by Office 365 consumer revenue growth , mainly . \u2022 Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynamics 365 revenue growth . Operating income . Operating income increased $ 1.5 billion or 13 % , increased $ 1.5 billion or 13 % , including a favorable favorable foreign currency revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired \u2022 Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ 2.2 billion to $ 4.5 billion $ 2.2 billion to $ 4.5 billion , including $ 617 4.5 billion , including $ 617 million of amortization of acquired Intelligent Cloud Revenue increased $ 4.8 billion or revenue increased $ 4.5 billion or 21 % , increased $ 4.5 billion or 21 % , driven by Azure . Azure revenue growth of 91 % , due to higher product licensed on-premises revenue increased 5 % , mainly due to Enterprise Services revenue increased $ 304 million or 5 % , increased $ 304 million or 5 % , driven by higher . Operating income increased $ 2.4 billion or 26 % . increased $ 2.4 billion or 26 % . \u2022 Gross margin \u2022 Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , drive Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM revenue increased 5 % . Windows OEM Pro Windows OEM Pro revenue grew 11 % , ahead of a Windows OEM non-Pro revenue declined 4 % , below the consumer the entry-level price category . 36 PART II Item 7 \u2022 . 36 PART II Item 7 \u2022 Gaming re revenue increased $ 1.3 b illion or 14 % $ 1.3 b illion or 14 % , driven by Xbox and service revenue growth of 20 % , mainly from third-party Search advertising revenue increased $ 793 million or 13 % . increased $ 793 million or 13 % . Search advertising revenue traffic acquisition cost , increased 16 % , driven by growth \u2022 Surface revenue increased $ 625 million or 16 % , increased $ 625 million or 16 % , driven by a \u2022 Phone revenue decreased $ 525 million . Operating income increased . Operating inc Revenue Business Processes Revenue increased $ 4.1 billion or 16 % . increased $ 4.1 billion or 16 % . \u2022 LinkedIn revenue \u2022 LinkedIn revenue wa $ 2.3 billion , primarily comprised of Office Commercial revenue increased $ 1.4 billion or 7 % , increased $ 1.4 billion or 7 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial . \u2022 Office Consumer Office Consumer revenue increased $ 351 million or 11 % , increased $ 351 million or 11 % , revenue from Office 365 consumer , mainly due to . \u2022 Dynamics revenue increased 5 % , primarily due to to higher revenue from Dynamics 365 . Operating income decreased $ . Operating income decreased $ 367 million or 3 % , decreased $ 367 million or 3 % , including an unfavorable unfavorable foreign currency impact of 2 % . \u2022 Operating expense \u2022 Operating expense increased $ 2.3 billion or 26 % , increased $ 2.3 billion or 26 % , mainly due to . Operating expense included $ 2.3 billion related to our ac revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.5 billion or 10 % . increased $ 2.5 billion or 10 % . \u2022 Server product cloud service revenue grew $ 2.6 billion or 14 % , grew $ 2.6 billion or 14 % , driven by Azure by Azure revenue growth of 98 % and server product licensed licensed on-premises revenue growth of 5 % . \u2022 Enterprise Services \u2022 Enterprise Services revenue decreased 2 % , dri Revenue decreased $ 1.1 billion or 3 % . decreased $ 1.1 billion or 3 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 1.0 billion or 6 % , increased $ 1.0 billion or 6 % , mainly due to . Windows Commercial revenue grew 14 % , driven by multi-year . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 4 % , outperforming the commercial Windows OEM non-Pro revenue grew 3 % , outperforming the consumer Search advertising revenue increased $ 791 million or 15 % . increased revenue traffic acquisition cost , increased 9 % , primarily driven by . Xbox hardware revenue decreased 21 % , mainly due to software and service revenue increased 11 % , driven by a \u2022 Surface revenue decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to \u2022 Phone revenue decreased $ 2.8 billion . Operating income increased . Operating income increased $ 2.6 billion or 43 % , increased $ 2.6 billion or 43 % , including an unfavorable unfavorable foreign currency impact of 3 % revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Research and development expense increased and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to . LinkedIn expense incre revenue 16 % 16 % 16 % percent of revenue 16 % 16 % 16 % 0ppt 0ppt revenue 16 % 16 % 16 % 0ppt 0ppt Sales and % 16 % 16 % 0ppt 0ppt Sales and marketing expense 16 % 16 % 0ppt 0ppt Sales and marketing expense include other program . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Sales and marketing expense increased and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to . LinkedIn expense increased $ 1.2 billion to revenue 4 % 5 % 5 % percent of revenue 4 % 5 % 5 % ( 1 revenue 4 % 5 % 5 % ( 1 ) ppt 5 % 5 % ( 1 ) ppt 0ppt General and % ( 1 ) ppt 0ppt General and administrative expense include administrative fee . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 General and administrative expense increased and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to . LinkedIn expense increased $ 234 million to $ 528 million $ 234 m Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2018 , the primary As of June 30 , 2018 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are in accordance with GAAP . 42 PART II Item 7 The . 42 PART II Item revenue a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) Three Months Ending , September 30 , 2018 $ 11,081 December Ending , September 30 , 2018 $ 11,081 December 31 , September 30 , 2018 $ 11,081 December 31 , 2018 8,688 , 2018 $ 11,081 December 31 , 2018 8,688 March 31 $ 11,081 December 31 , 2018 8,688 March 31 , 2019 11,081 December 31 , 2018 8,688 March 31 , 2019 5,995 31 , 2018 8,688 March 31 , 2019 5,995 June 30 2018 8,688 March 31 , 2019 5,995 June 30 , 2019 8,688 March 31 , 2019 Revenue from Office 365 is recognized ratably over the cloud service are provided . 46 PART II Item 7 Judgment . 46 PART II Item 7 Judgment is required to determine statement . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between average cost of capital . 47 PART II Item 7 The . 47 PART II Item 7 The estimate used to calculate that ha a greater than 50 % likelihood of being rea revenue . 48 PART II Item 7 STATEMENT . 48 PART II Item 7 STATEMENT OF MANAGEMENT \u2019 S Administration ; Chief Accounting Officer 49 PART II Item 7A ITEM Officer 49 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2018 June 30 , Hypothetical Change June 30 , 2018 June 30 , 2017 Impact June 30 , 2018 June 30 , 2017 Impact Foreign currency , 2018 June 30 , 2017 Impact Foreign currency - Revenue Impact Foreign cu Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 2,187 ) $ ( 1,785 ) ( 2,187 ) $ ( 1,785 ) Earnings Foreign currency - Earnings Foreign currency - Investments 10 % decrease in foreign exchange in foreign exchange rate ( 70 ) ( 92 ) Fair rate ( 70 ) ( 92 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 2,705 ) ( 2,394 ) Fair rate ( 2,705 ) ( 2,394 ) Fair Value Credit 100 2,394 ) Fair Value Credit 100 basis point incre Revenue Year Ended June 30 , 2018 2017 2016 Revenue : Product Ended June 30 , 2018 2017 2016 Revenue : Product $ June 30 , 2018 2017 2016 Revenue : Product $ 64,497 2016 Revenue : Product $ 64,497 $ 63,811 $ 67,336 Service : Product $ 64,497 $ 63,811 $ 67,336 Service and other $ 64,497 $ 63,811 $ 67,336 Service and other 45,863 32,760 $ 67,336 Service and other 45,863 32,760 23,818 Total revenue 110,360 67,336 Service and other 45,863 32,760 23,818 Total revenue 110,360 96,571 Service and other 45,863 revenue 110,360 96,571 91,154 45,863 32,760 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue 32,760 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue : 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue : Product Cost of revenue : Product 15,420 15,175 17,880 Service and other of revenue : Product 15,420 15,175 17,880 Service and other 22,933 revenue : Product 15,420 15,175 17,880 Service and other 22,933 19,086 15,175 17,880 Service and other 22,933 19,086 14,900 Total cost revenue Service and other 22,933 19,086 14,900 Total cost of revenue 38,353 14,900 Total cost of revenue 38,353 34,261 32,780 Gross margin 72,007 Total cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 14,726 32,780 Gross margin 72,007 62,310 58,374 Research and develo revenue 28,905 5,819 Short-term income tax 2,121 718 Short-term unearned revenue 28,905 24,013 2,121 718 Short-term unearned revenue 28,905 24,013 Other 8,744 7,684 Total 718 Short-term unearned revenue 28,905 24,013 Other 8,744 7,684 Total current unearned revenue 28,905 24,013 Other 8,744 7,684 Total current liability 58,488 revenue 28,905 24,013 Other 8,744 7,684 Total current liability 58,488 55,745 8,744 7,684 Total current liability 58,488 55,745 Long-term debt 72,242 76,073 7,684 Total current l revenue 3,815 76,073 Long-term income tax 30,265 13,485 Long-term unearned revenue 3,815 2,643 30,265 13,485 Long-term unearned revenue 3,815 2,643 Deferred income tax 541 13,485 Long-term unearned revenue 3,815 2,643 Deferred income tax 541 5,734 3,815 2,643 Deferred income tax 541 5,734 Operating lease liability 5,568 2,643 Deferred income tax 541 5,734 Operating lease liability 5,568 5,372 541 5,734 Operating lease liability 5,568 5,372 Other long-term liability 5,211 5,734 Operating lease liability revenue 5,922 1,110 ) Accounts payable 1,148 81 88 Unearned revenue 5,922 3,820 ) Accounts payable 1,148 81 88 Unearned revenue 5,922 3,820 2,565 1,148 81 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 81 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 1,792 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 1,792 ( 5,922 3,820 2,565 Income tax 18,183 1,792 ( 298 ) Other 3,820 2,565 Income tax 18,183 1,792 ( 298 ) Other current Income tax 18,183 1,792 ( 298 ) Other current liabili Revenue . 56 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 21 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine doubtful account , wa $ 22.3 billion a of July 1 22.3 billion a of July 1 , 2016 . As of a of July 1 , 2016 . As of June 30 2016 revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics business service . Refer to Note 15 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where a period generally ranging from 90 day to three year . the amount a necessary . 59 PART II Item 8 Research . 59 PART II Item 8 Research and Development Research revenue predominantly offering ( such a Office 365 ) , LinkedIn , and the net change in Windows 10 revenue recognition . In addition of license revenue from Windows 10 and certain multi-year commercial software Income Statements Year Ended June 30 , 2017 Revenue $ 89,950 Year Ended June 30 , 2017 Revenue $ 89,950 $ 6,621 30 , 2017 Revenue $ 89,950 $ 6,621 $ 96,571 Provision 2017 Revenue $ 89,950 $ 6,621 $ 96,571 Provision for income $ 89,950 $ 6,621 $ 96,571 Provision for income tax 1,945 96,571 Provis Revenue $ 85,320 Year Ended June 30 , 2016 Revenue $ 85,320 $ 5,834 30 , 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision for income $ 85,320 $ 5,834 $ 91,154 Provision for income tax 2,953 91,154 Provision for income tax 2,953 2,147 5,100 Net income 16,798 Provision for income tax 2,953 2,147 5,100 Net income 16,798 3,741 for income tax 2,953 2,147 5,100 Net income 16,798 3,741 20,539 2,953 2,147 5,100 Net income 16,798 3,741 20,539 Diluted earnings per revenue current and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( 17,823 32 0 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 Deferred income revenue 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 5,203 0 26,656 Deferred income tax 531 5,203 0 5,734 Operating revenue 185 555 625 Amount Excluded from loss ) into revenue 185 555 625 Amount Excluded from Effectiveness ) into revenue 185 555 625 Amount Excluded from Effectiveness Assessment expense ) , net ( 255 ) ( 389 ) ( net ( 255 ) ( 389 ) ( 354 ) We ) ( 389 ) ( 354 ) We estimate that $ ) We estimate that $ 179 million of net derivative gain in AOCI a of June 30 , 2018 will be reclassified a of June 30 , 2018 will be reclassified into earnings into earnings within the following 12 month . No significant amo Revenue $ 2,271 Year Ended June 30 , 2017 Revenue $ 2,271 Operating loss 30 , 2017 Revenue $ 2,271 Operating loss ( 924 ) $ 2,271 Operating loss ( 924 ) 76 PART II Item Operating loss ( 924 ) 76 PART II Item 8 Following ) 76 PART II Item 8 Following are the supplemental consolidated had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , share ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 98,291 $ Ended June 30 , 2017 2016 Revenue Revenue $ 98,291 $ 94,490 Net income 25,179 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 19,128 Diluted 98,291 $ 94,490 Net income 25,179 19,128 Diluted earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were . GitHub Inc. On June 4 , 2018 , we entered Inc. On June 4 , 2018 , we entered into a GitHub \u201d ) for $ 7.5 billion in an all-stock tr Revenue Service regulation are subject to a 60-day comment period . Final regulation million ) Year Ended June 30 , 2018 2017 2016 Current Year Ended June 30 , 2018 2017 2016 Current Taxes U.S. Ended June 30 , 2018 2017 2016 Current Taxes U.S. federal June 30 , 2018 2017 2016 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 19,764 $ 2,739 $ 545 U.S. U.S. federal $ 19,764 $ 2,739 $ 545 U.S. state and $ 19,764 $ 2,739 $ 545 U.S. state and local 934 545 U.S. state and local 934 30 136 Foreign 4,3 revenue investment and debt 0 ( 1,384 ) Unearned revenue ( 639 1,384 ) Unearned revenue ( 639 ) ( 5,760 ) Depreciation revenue ( 639 ) ( 5,760 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,103 ) ( 1,630 ) Other amortization ( 1,103 ) ( 1,630 ) Other ( 312 ) ( 1,630 ) Other ( 312 ) ( 21 ) Deferred Other ( 312 ) ( 21 ) Deferred income tax liability income tax liability $ ( 2,054 ) $ ( 9,929 ) ( 2,054 ) $ ( 9,929 ) Net deferred income tax asset ( liability ) $ 828 $ ( 5,486 ) Repor Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2018 , the primary As of June 30 , 2018 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are consolidated financial statement . NOTE 14 \u2014 RESTRUCTURING CHARGE REVENUE PART II Item 8 NOTE 15 \u2014 UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2018 2017 Productivity and million ) June 30 , 2018 2017 Productivity and Business Processes ) June 30 , 2018 2017 Productivity and Business Processes $ Productivity and Business Processes $ 14,864 $ 12,692 Intelligent Cloud 14,706 Business Processes $ 14,864 $ 12,692 Intelligent Cloud 14,706 11,152 More 14,864 $ 12,692 Intelligent Cloud 14,706 11,152 More Personal Computing 3,150 $ 12,692 Intelligent Cloud 14,7 revenue wa $ 22.2 billion a of July 1 22.2 billion a of July 1 , 2016 . Changes in a of July 1 , 2016 . Changes in unearned revenue million ) Year Ended June 30 , 2018 Balance , beginning Year Ended June 30 , 2018 Balance , beginning of period , beginning of period $ 26,656 Deferral of revenue 61,142 Recognition $ 26,656 Deferral of revenue 61,142 Recognition of unearned revenue ( Recognition of unearned revenue ( 55,078 ) Balance , end of , end of period $ 32,720 Revenue allocated to remaining perform revenue wa $ 73 billion a of June 30 73 billion a of June 30 , 2018 , of which a of June 30 , 2018 , of which we expect we expect to recognize approximately 60 % of the revenue over the revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 16 \u2014 LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Y revenue ( 185 ) ( 555 ) ( revenue ( 185 ) ( 555 ) ( 625 ) Tax ) ( 555 ) ( 625 ) Tax expense included in in provision for income tax 6 9 36 Amounts reclassified from provision for income tax 6 9 36 Amounts reclassified from accumulated for income tax 6 9 36 Amounts reclassified from accumulated other accumulated other comprehensive income ( 179 ) ( 546 ) ( income ( 179 ) ( 546 ) ( 589 ) Net ) ( 546 ) ( 589 ) Net change related to net of tax of $ 5 , $ ( 5 ) $ 5 , $ ( 5 ) , and $ ( ) , and $ ( 12 ) 39 ( Revenue . 93 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2018 2017 2016 Revenue Year Ended June 30 , 2018 2017 2016 Revenue Productivity and Ended June 30 , 2018 2017 2016 Revenue Productivity and Business June 30 , 2018 2017 2016 Revenue Productivity and Business Processes Productivity and Business Processes $ 35,865 $ 29,870 $ 25,792 Intelligent Business Processes $ 35,865 $ 29,870 $ 25,792 Intelligent Cloud 32,219 $ 35,865 $ 29,870 $ 25,792 Intelligent Cloud 32,219 2 revenue for the revenue for the fiscal year 2018 , 2017 , or 2016 the fiscal year 2018 , 2017 , or 2016 . Revenue 2018 , 2017 , or 2016 . Revenue , classified by million ) Year Ended June 30 , 2018 2017 2016 United Year Ended June 30 , 2018 2017 2016 United States ( Ended June 30 , 2018 2017 2016 United States ( a June 30 , 2018 2017 2016 United States ( a ) States ( a ) $ 55,926 $ 51,078 $ 46,416 Other a ) $ 55,926 $ 51,078 $ 46,416 Other country 54,434 $ 55,926 $ 51,078 $ 46,416 Other country 54,434 revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2018 2017 2016 Office Year Ended June 30 , 2018 2017 2016 Office product and Ended June 30 , 2018 2017 2016 Office product and cloud June 30 , 2018 2017 2016 Office product and cloud service product and cloud service $ 28,316 $ 25,573 $ 23,868 Server cloud service $ 28,316 $ 25,573 $ 23,868 Server product and $ 28,316 $ 25,573 $ 23,868 Server product and cloud service Server product a revenue , , which primarily comprises Office 365 commercial , Azure , Dynamics commercial , Azure , Dynamics 365 , and other cloud property cloud property , wa $ 23.2 billion , $ 14.9 billion $ 23.2 billion , $ 14.9 billion , and $ 9.5 14.9 billion , and $ 9.5 billion in fiscal year 2018 9.5 billion in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . These amount company and with country over 10 % of the total shown ( In mil Revenue June 30 Total Fiscal Year 2018 Revenue $ 24,538 $ 28,918 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 110,360 Gross ma Revenue $ ( c ) Revenue $ 21,928 $ 25,826 $ 23,212 $ ) Revenue $ 21,928 $ 25,826 $ 23,212 $ 25,605 $ $ 21,928 $ 25,826 $ 23,212 $ 25,605 $ 96,571 Gross $ 25,826 $ 23,212 $ 25,605 $ 96,571 Gross margin 14,084 $ 23,212 $ 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 Gross margin", + "expenses": "EXPENSES Research and million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Research and development 2017 Percentage Change 2017 Versus 2016 Research and dev Expenses included $ 745 million related to our acquisition million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Sales and marketing 2017 Percentage Change 2 Expenses included $ 1.2 10 . Expenses included $ 1.2 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired of acquired intangible asset . 39 PART II Item 7 General . 39 PART II Item 7 General and Administrative ( In million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Ve Expenses included $ 294 million related to our acquisition restructuring activity . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 During fiscal year 2017 , Year 2017 During fiscal year 2017 , we recorded $ 306 2017 , we recorded $ 306 million of employee severance expense restructuring plan . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Impairment and restructuring expense were and restructuring expense were $ 306 million for f", + "net_income": "Net income 16,571 ( a g ) 27,759 Net income 16,571 ( a ) 25,489 ( income 16,571 ( a ) 25,489 ( d ) 20,539 ( ) 25,489 ( d ) 20,539 ( e ) 12,193 ( ) 20,539 ( e ) 12,193 ( g ) 22,074 Diluted ) 12,193 ( g ) 22,074 Diluted earnings per share 2.13 22,074 Diluted earnings per share 2.13 ( a ) 3.25 ( share 2.13 ( a ) 3.25 ( d ) 2.56 ( ) 3.25 ( d ) 2.56 ( e ) 1.48 ( ) 2.56 ( e ) 1.48 ( g ) 2.63 Cash ) 1.48 ( g ) 2.63 Cash dividend declared per share Cash dividend declared per share 1.68 1.56 1.44 1.24 1.12 Cash di Net Income 35,058 29,025 26,078 21 % 11 % Net Income 16,571 25,489 % 11 % Net Income 16,571 25,489 20,539 ( 35 ) 11 % Net Income 16,571 25,489 20,539 ( 35 ) % % Net Income 16,571 25,489 20,539 ( 35 ) % 24 Income 16,571 25,489 20,539 ( 35 ) % 24 % Diluted 20,539 ( 35 ) % 24 % Diluted earnings per share % Diluted earnings per share 2.13 3.25 2.56 ( 34 ) Diluted earnings per share 2.13 3.25 2.56 ( 34 ) % earnings per share 2.13 3.25 2.56 ( 34 ) % 27 share 2.13 3.25 2.56 ( 34 ) % 27 % Adjusted 2.56 ( 34 ) % 2 net income 30,267 8 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted diluted 30,267 25,732 21,434 18 % 20 % Adjusted diluted earnings per Adjusted diluted earnings per share 3.88 3.29 2.67 18 % 23 diluted earnings per share 3.88 3.29 2.67 18 % 23 % earnings per share 3.88 3.29 2.67 18 % 23 % Consolidated per share 3.88 3.29 2.67 18 % 23 % Con Net income 29,331 $ 27,188 20 % 8 % Net income $ 16,571 8 % Net income $ 16,571 $ 25,489 $ 20,539 ( Net income $ 16,571 $ 25,489 $ 20,539 ( 35 ) $ 16,571 $ 25,489 $ 20,539 ( 35 ) % 24 $ 25,489 $ 20,539 ( 35 ) % 24 % Net 20,539 ( 35 ) % 24 % Net charge related to charge related to the TCJA 13,696 0 0 Impairment and restructuring related to the TCJA 13,696 0 0 Impairment and restructuring expense to the TCJA 13,696 0 0 Impairment and restructuring expense 0 0 Impairment and restructuring expense 0 243 895 A net income Impairment and restructuring expense 0 243 895 Adjusted net income $ and restructuring expense 0 243 895 Adjusted net income $ 30,267 895 Adjusted net income $ 30,267 $ 25,732 $ 21,434 18 net income $ 30,267 $ 25,732 $ 21,434 18 % 20 $ 30,267 $ 25,732 $ 21,434 18 % 20 % Diluted 30,267 $ 25,732 $ 21,434 18 % 20 % Diluted earnings 25,732 $ 21,434 18 % 20 % Diluted earnings per share Diluted earnings per share $ 2.13 $ 3.25 $ 2.56 ( per share $ 2.13 $ 3.25 $ 2.56 ( 34 ) $ 2.13 $ 3.25 $ 2.56 ( 34 ) Net income $ Provision for income tax 19,903 4,412 5,100 Net income $ 16,571 for income tax 19,903 4,412 5,100 Net income $ 16,571 $ 4,412 5,100 Net income $ 16,571 $ 25,489 $ 20,539 Earnings Net income $ 16,571 $ 25,489 $ 20,539 Earnings per share $ 16,571 $ 25,489 $ 20,539 Earnings per share : Basic per share : Basic $ 2.15 $ 3.29 $ 2.59 Diluted : Basic $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 $ 2.56 Weighted 2.59 Diluted $ 2.13 $ 3 Net income $ Ended June 30 , 2018 2017 2016 Net income $ 16,571 June 30 , 2018 2017 2016 Net income $ 16,571 $ 2017 2016 Net income $ 16,571 $ 25,489 $ 20,539 Other Net income $ 16,571 $ 25,489 $ 20,539 Other comprehensive income $ 16,571 $ 25,489 $ 20,539 Other comprehensive income ( loss Net change related to derivative 39 ( 218 ) ( 238 related to derivative 39 ( 218 ) ( 238 ) Net 39 ( 218 ) ( 238 ) Net change related to change related to investment ( 2,717 ) ( 1,116 ) ( investment ( 2,717 ) ( 1,116 ) ( Net income Ended June 30 , 2018 2017 2016 Operations Net income $ June 30 , 2018 2017 2016 Operations Net income $ 16,571 2016 Operations Net income $ 16,571 $ 25,489 $ 20,539 Adjustments Net income $ 16,571 $ 25,489 $ 20,539 Adjustments to reconcile $ 16,571 $ 25,489 $ 20,539 Adjustments to reconcile net income from operation : Asset impairment 0 0 630 Depreciation , amortization operation : Asset impairment 0 0 630 Depreciation , amortization , : Asset impairment 0 0 630 Depreciation , amortization , an Net income 16,571 , beginning of period 17,769 13,118 16,191 Net income 16,571 25,489 beginning of period 17,769 13,118 16,191 Net income 16,571 25,489 20,539 17,769 13,118 16,191 Net income 16,571 25,489 20,539 Common stock cash 13,118 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend ( Common stock cash dividend ( 12,917 ) ( 12,040 ) ( dividend ( 12,917 ) ( 12,040 ) ( 11,329 ) Common ) ( 12,040 ) ( 11,329 ) Common stock re Net income 21,204 Provision for income tax 1,945 2,467 4,412 Net income 21,204 4,285 for income tax 1,945 2,467 4,412 Net income 21,204 4,285 25,489 1,945 2,467 4,412 Net income 21,204 4,285 25,489 Diluted earnings per 2,467 4,412 Net income 21,204 4,285 25,489 Diluted earnings per share 4,412 Net income 21,204 4,285 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 3.25 Year Ended June Diluted earnings per share 2.71 0.54 3.25 Year Ended June 30 earnings per share 2.71 0. Net income 16,798 Provision for income tax 2,953 2,147 5,100 Net income 16,798 3,741 for income tax 2,953 2,147 5,100 Net income 16,798 3,741 20,539 2,953 2,147 5,100 Net income 16,798 3,741 20,539 Diluted earnings per 2,147 5,100 Net income 16,798 3,741 20,539 Diluted earnings per share 5,100 Net income 16,798 3,741 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 2.56 65 PART II Diluted earnings per share 2.10 0.46 2.56 65 PART II Item earnings per share 2.10 0.46 2.56 Net income available Ended June 30 , 2018 2017 2016 Net income available for June 30 , 2018 2017 2016 Net income available for common shareholder ( A ) $ 16,571 $ 25,489 $ 20,539 Weighted A ) $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding share of common stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based award Dilutive effect of Net income 25,179 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 19,128 Diluted 98,291 $ 94,490 Net income 25,179 19,128 Diluted earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were . GitHub Inc. On June 4 , 2018 , we entered Inc. On June 4 , 2018 , we entered into a GitHub \u201d ) for $ 7.5 billion in an all-stock transaction . Other During fisc Net income 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( loss income 7,708 8,679 8,292 10,379 35,058 Net income ( loss ) loss ) ( a ) 6,576 ( 6,302 ) 7,424 8,873 ( a ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ) ( loss ) per share 0.85 ( 0.82 ) 0.96 1.15 ) per sha Net income ( d ) Net income 5,667 6,267 5,486 8,069 ( d d ) Net income 5,667 6,267 5,486 8,069 ( d ) ) Net income 5,667 6,267 5,486 8,069 ( d ) 25,489 Net income 5,667 6,267 5,486 8,069 ( d ) 25,489 ( 5,486 8,069 ( d ) 25,489 ( d ) Basic earnings ) Basic earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted Basic earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per share share 0.7", + "assets": "Assets Current million ) June 30 , 2018 2017 Assets Current asset : ) June 30 , 2018 2017 Assets Current asset : Cash Cash and cash equivalent $ 11,946 $ 7,663 Short-term investment 121,822 cash equivalent $ 11,946 $ 7,663 Short-term investment 121,822 125,318 Total 11,946 $ 7,663 Short-term investment 121,822 125,318 Total cash , cash $ 7,663 Short-term investment 121,822 125,318 Total cash , cash equivalent equivalent , and short-term investment 133,768 132,981 Accounts receivable , net , and short- Assets ) 71 PART II Item 8 Assets Liabilities ( In million Liabilities Other Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) Equity contract 3 0 ( 8 ) Equity contract 3 0 0 0 ( 6 8 ) Equity contract 3 0 0 0 ( 6 ) Assets Mutual fund Fair Value June 30 , 2018 Assets Mutual fund $ 246 2018 Assets Mutual fund $ 246 $ 0 $ 0 $ Mutual fund $ 246 $ 0 $ 0 $ 246 $ $ 246 $ 0 $ 0 $ 246 $ 0 $ $ 0 $ 0 $ 246 $ 0 $ 246 Commercial $ 0 $ 246 $ 0 $ 246 Commercial paper 0 $ 246 $ 0 $ 246 Commercial paper 0 2,513 0 0 $ 246 Commercial paper 0 2,513 0 2,513 0 2,513 $ 246 Commercial paper 0 2,513 0 2,513 0 2,513 Certificates 246 Commercial paper 0 2,513 0 2,513 0 2,513 Certificates of Commercial paper 0 2,513 0 2,513 0 2,513 Certific Assets Mutual fund Fair Value June 30 , 2017 Assets Mutual fund $ 1,478 2017 Assets Mutual fund $ 1,478 $ 0 $ 0 $ Mutual fund $ 1,478 $ 0 $ 0 $ 1,478 $ $ 1,478 $ 0 $ 0 $ 1,478 $ 0 $ $ 0 $ 0 $ 1,478 $ 0 $ 1,478 Commercial $ 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 319 0 0 $ 1,478 Commercial paper 0 319 0 319 0 319 $ 1,478 Commercial paper 0 319 0 319 0 319 Certificates 1,478 Commercial paper 0 319 0 319 0 319 Certificates of Commercial paper 0 319 0 319 0 319 Cert Assets and investment component $ 135,630 $ 139,004 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2018 and 2017 , we did During fiscal year 2018 and 2017 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2018 2017 Raw material million ) June 30 , 2018 2017 Raw material $ 655 ) June 30 , 2018 2017 Raw material $ 655 $ 2018 2017 Raw material $ 655 $ 797 Work in process Raw material $ 655 $ 797 Work in process 54 14 ASSETS The component Amortization Net Carrying Amount June 30 , 2018 2017 Technology-based $ Carrying Amount June 30 , 2018 2017 Technology-based $ 7,220 $ Amount June 30 , 2018 2017 Technology-based $ 7,220 $ ( , 2018 2017 Technology-based $ 7,220 $ ( 5,018 ) $ Technology-based $ 7,220 $ ( 5,018 ) $ 2,202 $ 7,765 $ ( 5,018 ) $ 2,202 $ 7,765 $ ( 4,318 5,018 ) $ 2,202 $ 7,765 $ ( 4,318 ) $ 2,202 $ 7,765 $ ( 4,318 ) $ 3,447 Customer-related 4,031 $ ( 4,318 ) $ 3,447 Customer-related 4,031 ( 1,205 ) 4,31 Assets ) June 30 , 2018 2017 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 460 $ 777 Accruals , reserve compensation expense $ 460 $ 777 Accruals , reserve , and reserve , and other expense 1,832 1,859 Loss and credit carryforwards , and other expense 1,832 1,859 Loss and credit carryforwards 3,369 1,859 Loss and credit carryforwards 3,369 4,809 Depreciation and amortization 351 Loss and credit carryforwards 3,369 4,809 Depreciation and amortization 351 53 3,369 4,80", + "liabilities": "Liabilities and stockholder Total asset $ 258,848 $ 250,312 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 8,617 $ 7,390 Short-term debt 0 Accounts payable $ 8,617 $ 7,390 Short-term debt 0 9,072 Current 8,617 $ 7,390 Short-term debt 0 9,072 Current portion of long-term $ 7,390 Short-term debt 0 9,072 Current portion of long-term debt Current portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Sho Liabilities Other Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 10 $ 221 $ 0 $ exchange contract $ 10 $ 221 $ 0 $ 25 $ $ 10 $ 221 $ 0 $ 25 $ ( 193 $ 221 $ 0 $ 25 $ ( 193 ) $ 0 $ 25 $ ( 193 ) $ ( 4 ) ( 193 ) $ ( 4 ) Equity contract 2 0 ( 4 ) Equity contract 2 0 0 0 ( 7 4 ) Equity contract 2 0 0 0 ( 7 ) ) Equity contract 2 0 0 0 ( 7 ) 0 Equity contract 2 0 0 0 Liabilities ( In million Liabilities Other Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) Equity contract 3 0 ( 8 ) Equity contract 3 0 0 0 ( 6 8 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equit Liabilities Derivatives $ ( 152 ) $ 130,412 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 1 $ 206 $ 0 $ and other $ 1 $ 206 $ 0 $ 207 $ $ 1 $ 206 $ 0 $ 207 $ ( 153 $ 206 $ 0 $ 207 $ ( 153 ) $ 0 $ 207 $ ( 153 ) $ 54 ( In $ ( 153 ) $ 54 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2017 Assets Mutual fund Fair Value June 30 , 2017 Asset Liabilities Derivatives $ ( 227 ) $ 133,985 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 0 $ 345 $ 39 $ and other $ 0 $ 345 $ 39 $ 384 $ $ 0 $ 345 $ 39 $ 384 $ ( 228 $ 345 $ 39 $ 384 $ ( 228 ) $ 39 $ 384 $ ( 228 ) $ 156 ( a $ ( 228 ) $ 156 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 74 PART II Item 8 The . 74 PART II Item 8 The following table reconciles the these same asset in Note 4 \u2013 Investments . ( In ( In Liabilities Measured Nonrecurring Basis During fiscal year 2018 and 2017 , we did During fiscal year 2018 and 2017 , we did not record a nonrecurring basis . NOTE 7 \u2014 INVENTORIES The component of ( In million ) June 30 , 2018 2017 Raw material million ) June 30 , 2018 2017 Raw material $ 655 ) June 30 , 2018 2017 Raw material $ 655 $ 2018 2017 Raw material $ 655 $ 797 Work in process Raw material $ 655 $ 797 Work in process 54 145 $ 797 Work in process 54 145 Finished good 1,953 1,239 797 Work in process 5 Liabilities Foreign Tax Liabilities Foreign earnings $ 0 $ ( 1,134 ) Unrealized earnings $ 0 $ ( 1,134 ) Unrealized gain on investment gain on investment and debt 0 ( 1,384 ) Unearned revenue investment and debt 0 ( 1,384 ) Unearned revenue ( 639 1,384 ) Unearned revenue ( 639 ) ( 5,760 ) Depreciation revenue ( 639 ) ( 5,760 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,103 ) ( 1,630 ) Other amortization ( 1,103 ) ( 1,630 ) Other ( 312 ) ( 1,630 ) Other ( 312 ) ( 21 ) Deferred Other", + "equity": "Equity Securities 30 Item 6 . Selected Financial of Equity Securities 30 Item 6 . Selected Financial Data 31 6 . Selected Financial Data 31 Item 7 . Management \u2019 Selected Financial Data 31 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 32 Item 7A . Quantitative and Results of Operations 32 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding fourth quarter of fiscal year 2018 : Period Total Number of ( in million ) April 1 , 2018 \u2013 April 30 million ) April 1 , 2018 \u2013 April 30 , 2018 1 , 2018 \u2013 April 30 , 2018 10,320,190 $ 93.11 2018 \u2013 April 30 , 2018 10,320,190 $ 93.11 10,320,190 $ \u2013 April 30 , 2018 10,320,190 $ 93.11 10,320,190 $ 29,339 30 , 2018 10,320,190 $ 93.11 10,320,190 $ 29,339 May 1 , 2018 10,320,190 $ 93.11 10,320,190 $ 2 equity 82,718 87,711 83,090 80,083 89,784 ( ) Stockholders \u2019 equity 82,718 87,711 83,090 80,083 89,784 ( a Stockholders \u2019 equity 82,718 87,711 83,090 80,083 89,784 ( a ) \u2019 equity 82,718 87,711 83,090 80,083 89,784 ( a ) Includes equity 82,718 87,711 83,090 80,083 89,784 ( a ) Includes a a ) Includes a $ 13.7 billion net charge related to EPS \u201d ) by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 13 \u2013 Income Taxes of the ( Part II , Item 8 of Equity and and other investment were $ 1.9 billion and $ 6.0 billion $ 1.9 billion and $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , respectively . June 30 , 2018 and 2017 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment such a corporate note U.S. agency security . Level 3 investment are valued using internally portion of our portfolio . 43 PART II Item 7 A . Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) : ( In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term ( In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term debt In million ) 2019 2020-2021 20 Equity 10 167 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 140 ) ( 323 ) Fair price ( 140 ) ( 323 ) Fair Value 50 PART ( 323 ) Fair Value 50 PART II Item 8 ITEM Value 50 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2018 2017 2016 Revenue Year Ended June 30 , 2018 2017 2016 Revenue : Product Ended June 30 , 2018 2017 2016 Revenue : Product $ June 30 , 2018 2017 2016 Revenue : Product $ 64,497 2016 Equity and other investment Operating lease right-of-use asset 6,686 6,555 Equity and other investment 1,862 6,555 Equity and other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible Equity and other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset , net investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset , net 8,053 35,122 Intangible asset , net 8,053 10,106 Other long-term asset 7,442 Intangible asset equity liability : Accounts payable $ 8,617 $ 7,390 Short-term debt 0 Accounts payable $ 8,617 $ 7,390 Short-term debt 0 9,072 Current 8,617 $ 7,390 Short-term debt 0 9,072 Current portion of long-term $ 7,390 Short-term debt 0 9,072 Current portion of long-term debt Current portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term income tax 2,121 equity 82,718 627 Total stockholder \u2019 equity 82,718 87,711 Total liability and stockholder Total stockholder \u2019 equity 82,718 87,711 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 258,848 $ 250,312 Refer to accompanying \u2019 equity $ 258,848 $ 250,312 Refer to accompanying note . Refer to accompanying note . 53 PART II Item 8 CASH . 53 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2018 2017 2016 Operations Year Ended June 30 , 2018 2017 2016 Operations Net income End equity period ( 2,187 ) 627 1,794 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 82,718 $ 87,711 $ 83,090 Refer \u2019 equity $ 82,718 $ 87,711 $ 83,090 Refer to accompanying $ 82,718 $ 87,711 $ 83,090 Refer to accompanying note . Refer to accompanying note . 55 PART II Item 8 NOTES . 55 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIES Accounting Principles content such a Microsoft Office 365 , Microsoft Azure , Microsoft Microsoft Azure , Micro equity method . 61 PART II Item 8 We . 61 PART II Item 8 We lend certain fixed-income and and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not Land is not depreciated . 62 PART II Item 8 Leases . 62 PART II Item 8 Leases We determine if an an annual basis ( May 1 for u ) and between , ranging from one to 20 year . We evaluate the Recent Tax Legislation On December 22 , 2017 , the Tax Legisl equity 72,394 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 15,317 1,183 24,621 Stockholders ' equity 72,394 15,317 0 87,711 Adoption of 24,621 Stockholders ' equity 72,394 15,317 0 87,711 Adoption of the Stockholders ' equity 72,394 15,317 0 87,711 Adoption of the standard ' equity 72,394 15,317 0 87,711 Adoption of the standard related for Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adop Equity and Other Investments June 30 , 2018 Cash $ 3,942 Other Investments June 30 , 2018 Cash $ 3,942 $ 0 30 , 2018 Cash $ 3,942 $ 0 $ 0 $ 2018 Cash $ 3,942 $ 0 $ 0 $ 3,942 $ $ 3,942 $ 0 $ 0 $ 3,942 $ 3,942 $ $ 0 $ 0 $ 3,942 $ 3,942 $ 0 $ $ 0 $ 3,942 $ 3,942 $ 0 $ 0 Mutual $ 3,942 $ 3,942 $ 0 $ 0 Mutual fund 246 $ 3,942 $ 0 $ 0 Mutual fund 246 0 0 0 $ 0 Mutual fund 246 0 0 246 246 0 $ 0 Mutual fund 246 0 0 246 246 0 0 0 Mutual fund 246 0 0 246 246 0 0 Commercial Mutual fund 246 0 0 246 246 0 0 Commer Equity and Other Investments June 30 , 2017 Cash $ 3,624 Other Investments June 30 , 2017 Cash $ 3,624 $ 0 30 , 2017 Cash $ 3,624 $ 0 $ 0 $ 2017 Cash $ 3,624 $ 0 $ 0 $ 3,624 $ $ 3,624 $ 0 $ 0 $ 3,624 $ 3,624 $ $ 0 $ 0 $ 3,624 $ 3,624 $ 0 $ $ 0 $ 3,624 $ 3,624 $ 0 $ 0 Mutual $ 3,624 $ 3,624 $ 0 $ 0 Mutual fund 1,478 $ 3,624 $ 0 $ 0 Mutual fund 1,478 0 0 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial Mutual fund 1,47 Equity forward . As of June 30 , 2018 , the total As of June 30 , 2018 , the total notional amount market price risk were $ 49 million and $ 5 million $ 49 million and $ 5 million , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount market price risk were $ 1.9 billion and $ 2.4 billion $ 1.9 billion and $ 2.4 billion , respectively , of respectively , of which $ 1.6 billion and $ 1.8 billion $ 1.6 billion and $ 1.8 billion , respectively Equity contract 2 0 ( 4 ) Equity contract 2 0 0 0 ( 7 4 ) Equity contract 2 0 0 0 ( 7 ) ) Equity contract 2 0 0 0 ( 7 ) 0 Equity contract 2 0 0 0 ( 7 ) 0 Interest 2 0 0 0 ( 7 ) 0 Interest rate contract 0 0 ( 7 ) 0 Interest rate contract 11 0 ) 0 Interest rate contract 11 0 0 0 ( 2 0 Interest rate contract 11 0 0 0 ( 2 ) Interest rate contract 11 0 0 0 ( 2 ) 0 rate contract 11 0 0 0 ( 2 ) 0 Credit 11 0 0 0 ( 2 ) 0 Credit contract 0 0 0 ( 2 ) 0 Credit contract 0 0 0 2 ) 0 Credit contract 0 0 0 0 ( 1 ) 0 Equity $ 0 $ 0 $ 0 $ 0 Equity contract 0 $ 0 $ 0 $ 0 Equity contract 0 0 0 0 $ 0 Equity contract 0 0 0 0 0 0 $ 0 Equity contract 0 0 0 0 0 0 Total 0 Equity contract 0 0 0 0 0 0 Total $ Equity contract 0 0 0 0 0 0 Total $ 95 contract 0 0 0 0 0 0 Total $ 95 $ 0 0 0 0 0 0 Total $ 95 $ 174 0 0 0 Total $ 95 $ 174 $ 0 $ 0 Total $ 95 $ 174 $ 0 $ 0 $ $ 95 $ 174 $ 0 $ 0 $ 0 $ $ 174 $ 0 $ 0 $ 0 $ 0 Total $ 0 $ 0 $ 0 $ 0 Total gross amount $ 0 $ 0 $ 0 Total gross amount of derivative gross amount of derivative $ Equity contract 3 0 ( 8 ) Equity contract 3 0 0 0 ( 6 8 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equity contract 3 0 0 0 ( 6 ) 0 Interest 3 0 0 0 ( 6 ) 0 Interest rate contract 0 0 ( 6 ) 0 Interest rate contract 3 0 ) 0 Interest rate contract 3 0 0 0 ( 7 0 Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) 0 rate contract 3 0 0 0 ( 7 ) 0 Credit 3 0 0 0 ( 7 ) 0 Credit contract 5 0 0 ( 7 ) 0 Credit contract 5 0 0 7 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 Credi Equity contract $ ( 3 ) $ 0 Equity contract 0 0 67 ) $ 0 Equity contract 0 0 67 0 ( 186 $ 0 Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 Total 0 0 67 0 ( 186 ) 0 Total $ 80 67 0 ( 186 ) 0 Total $ 80 $ 133 186 ) 0 Total $ 80 $ 133 $ 67 $ 0 Total $ 80 $ 133 $ 67 $ 0 $ $ 80 $ 133 $ 67 $ 0 $ ( 189 $ 133 $ 67 $ 0 $ ( 189 ) $ 67 $ 0 $ ( 189 ) $ 0 Total gross $ ( 189 ) $ 0 Total gross amount of derivative gross amount of derivative $ 100 $ 336 $ 67 Equity of ineffectiveness $ 103 $ 55 $ 41 Equity Contracts Derivatives $ 103 $ 55 $ 41 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 324 ) $ ( 74 ) ( 324 ) $ ( 74 ) $ ( 76 ) ( 74 ) $ ( 76 ) Hedged item 324 74 ( 76 ) Hedged item 324 74 76 Total amount of 76 ) Hedged item 324 74 76 Total amount of ineffectiveness ) Hedged item 324 74 76 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amou equity contract excluded excluded from effectiveness assessment $ 80 $ ( 80 ) $ assessment $ 80 $ ( 80 ) $ ( 10 ) ( 80 ) $ ( 10 ) 72 PART II Item ) $ ( 10 ) 72 PART II Item 8 Cash ) 72 PART II Item 8 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2018 2017 2016 Effective Year Ended June 30 , 2018 2017 2016 Effective Portion Gains Ended June 30 , 2018 2017 2016 Effective Portion Gains recognized June 30 , 2018 2017 2016 Effective Portion Gains recognized in net of tax of $ 11 , $ 4 , and of $ 1 Equity contract ( 87 55 ) Equity contract ( 87 ) ( 114 ) ( contract ( 87 ) ( 114 ) ( 21 ) Interest ) ( 114 ) ( 21 ) Interest rate contract ( ) Interest rate contract ( 15 ) 14 10 Credit contract rate contract ( 15 ) 14 10 Credit contract ( 2 contract ( 15 ) 14 10 Credit contract ( 2 ) 14 10 Credit contract ( 2 ) 5 ( 1 ) Credit contract ( 2 ) 5 ( 1 ) Other contract ( 2 ) 5 ( 1 ) Other contract 0 ( ( 1 ) Other contract 0 ( 22 ) ( 87 ) Other contract 0 ( 22 ) ( 87 ) Total 0 ( 22 ) ( 87 ) Total $ ( 137 87 EQUITY Shares million ) Year Ended June 30 , 2018 2017 2016 Balance Year Ended June 30 , 2018 2017 2016 Balance , beginning Ended June 30 , 2018 2017 2016 Balance , beginning of June 30 , 2018 2017 2016 Balance , beginning of year Balance , beginning of year 7,708 7,808 8,027 Issued 68 70 , beginning of year 7,708 7,808 8,027 Issued 68 70 75 beginning of year 7,708 7,808 8,027 Issued 68 70 75 Repurchased year 7,708 7,808 8,027 Issued 68 70 75 Repurchased ( 99 7,708 7,808 8,027 Issued 68 70 75 Repurcha Equity Statements 55 54 Stockholders \u2019 Equity Statements 55 Notes to Financial Statements 56 55 Notes to Financial Statements 56 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2", + "cash_flow": "cash flow . 25 PART I Item 1A We . 25 PART I Item 1A We may experience quality or customer are located in over 200 country and a significant part on our operating result . 26 PART I Item 1A Abrupt . 26 PART I Item 1A Abrupt political c hange , impact revenue . In July 2017 , we announced plan to our revenue or margin . 27 PART I Item 1A Issues . 27 PART I Item 1A Issues in the use of most highly qualified employee . 28 PART I Item 1B , . 28 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B cash flow statement . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2018 2017 2016 Net Year Ended June 30 , 2018 2017 2016 Net income available Ended June 30 , 2018 2017 2016 Net income available for June 30 , 2018 2017 2016 Net income available for common shareholder ( A ) $ 16,571 $ 25,489 $ 20,539 Weighted A ) $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding share of common stock ( B ) 7,700 7,746 7,925 Dilutive effect of Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2018 2017 2016 Effective Year Ended June 30 , 2018 2017 2016 Effective Portion Gains Ended June 30 , 2018 2017 2016 Effective Portion Gains recognized June 30 , 2018 2017 2016 Effective Portion Gains recognized in net of tax of $ 11 , $ 4 , and of $ 11 , $ 4 , and $ 24 ) $ 4 , and $ 24 ) $ 219 $ 328 and $ 24 ) $ 219 $ 328 $ 351 Gains 24 ) $ 219 $ 328 $ 351 Gains reclassified from $ 219 $ 328 $ 351 Gains reclassified from accumulated other ( loss ) in cash flow information related million ) Year Ended June 30 , 2018 2017 2016 Cash Year Ended June 30 , 2018 2017 2016 Cash paid for Ended June 30 , 2018 2017 2016 Cash paid for amount June 30 , 2018 2017 2016 Cash paid for amount included flow from operating lease $ 1,522 $ 1,157 $ 936 Operating operating lease $ 1,522 $ 1,157 $ 936 Operating cash flow $ 1,522 $ 1,157 $ 936 Operating cash flow from finance cash flow from finance lease 175 68 28 Financing cash flow flow from finance lease 175 68 28 Financi cash flow from from finance lease 175 68 28 Financing cash flow from finance cash flow from finance lease 144 46 6 Right-of-use asset obtained flow from finance lease 144 46 6 Right-of-use asset obtained in from finance lease 144 46 6 Right-of-use asset obtained in exchange lease obligation : Operating lease 1,571 1,270 1,062 Finance lease 1,933 obligation : Operating lease 1,571 1,270 1,062 Finance lease 1,933 1,773 : Operating lease 1,571 1,270 1,062 Finance lease 1,933 1,773 413 1,571 1,270 1,062 Fina", + "operating_margin": "operating margin . 17 PART I Item 1A Business . 17 PART I Item 1A Business model competition Companies compete margin and operating income . 18 PART I Item 1A We . 18 PART I Item 1A We make significant investment s operating system , Micros oft 365 , Office , Bing , Store , Azure , Office 365 , Xbox Live , Mixer business strategy . In December 2016 , we completed our acquisition of LinkedIn Corporation for $ 27.0 billion . In June 2018 27.0 billion . In June 2018 , we announced an agreement GitHub , Inc. for $ ", + "gross_margin": "Gross margin 72,007 $ 91,154 $ 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 29,025 margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 29,025 ( 58,374 60,542 59,755 Operating income 35,058 29,02 Gross margin 96,571 $ 91,154 14 % 6 % Gross margin 72,007 62,310 % 6 % Gross margin 72,007 62,310 58,374 16 % 7 6 % Gross margin 72,007 62,310 58,374 16 % 7 % % Gross margin 72,007 62,310 58,374 16 % 7 % Operating Gross margin 72,007 62,310 58,374 16 % 7 % Operating income 72,007 62,310 58,374 16 % 7 % Operating income 35,058 29,025 % 7 % Operating income 35,058 29,025 26,078 21 % 11 7 % Operating income 35,058 29,025 26,078 21 % 11 % % Operating income 35,058 29,025 26,078 21 % 11 % Net Operating income 35 Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by growth LinkedIn operating loss increased $ 63 million to $ 987 million $ 63 million to $ 987 million , including $ 1.5 987 million , including $ 1.5 billion of amortization of intangible favorable foreign currency impact of 2 % . Key change in Cost Gross margin increased $ 3.9 billion or 7 % , increased $ 3.9 billion or 7 % , due to growth Gross margin percentage includes a 5 percentage point improvement in commercial primarily across Azure and Office 365 . Operating income increased $ . Operating income increased $ 2.9 billion or 11 % , increased $ 2.9 billion or 11 % , primarily due to an operating loss of $ 924 million related to the acquisition of LinkedIn , including $ 866 million of amortization of intangible unfavorable foreign currency impact Gross margin \u2022 Gross margin increased $ 4.4 billion or 19 % , increased $ 4.4 billion or 19 % , driven by LinkedIn margin percentage improvement in Office 365 commercial and LinkedIn . LinkedIn cost of revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired \u2022 Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ Gross margin \u2022 Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , driven by growth \u2022 Operating expense increased $ 683 million or 7 % , increased $ 683 million or 7 % , driven by investment Personal Computing Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM Gross margin \u2022 Gross margin increased $ 2.2 billion or 11 % , increased $ 2.2 billion or 11 % , driven by growth \u2022 Operating expense increased $ 391 million or 3 % , increased $ 391 million or 3 % , driven by investment marketing expense . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Productivity and Business Processes Revenue Business Processes Revenue increased $ 4.1 billion or 16 % . increased $ 4.1 billion or 16 % . \u2022 LinkedIn revenue \u2022 LinkedIn revenue wa $ 2.3 bi Gross margin \u2022 Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , primarily due to Cost of revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.5 billion or 10 % . increased $ 2.5 billion or 10 % . \u2022 Server product cloud service revenue grew $ 2.6 billion or 14 % , grew $ 2.6 billion or 14 % , driven by Azure by Azure revenue growth of 98 % and server product licensed li Gross margin \u2022 Gross margin increased $ 853 million or 5 % , increased $ 853 million or 5 % , driven by growth Personal Computing Revenue decreased $ 1.1 billion or 3 % . decreased $ 1.1 billion or 3 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 1.0 billion or 6 % , increased $ 1.0 billion or 6 % , mainly due to . Windows Commercial revenue grew 14 % , driven by multi-year . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 4 % , outperforming the commercial Windows OEM Gross margin \u2022 Gross margin increased $ 1.1 billion or 6 % , increased $ 1.1 billion or 6 % , driven by growth restructuring expense . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Corporate and Other operating loss Other operating loss decreased $ 306 million , due to a restructuring plan in fiscal year 2017 . 38 PART II Item in fiscal year 2017 . 38 PART II Item 7 Fiscal . 38 PART II Item 7 Fiscal Y ear 2017 Compared Item 7 Fiscal Y ear 2017 Compared with F iscal Y wi Gross margin 72,007 Total cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 14,726 32,780 Gross margin 72,007 62,310 58,374 Research and development 14,726 13,037 62,310 58,374 Research and development 14,726 13,037 11,988 Sales and marketing 58,374 Research and development Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 17,550 20,343 72,007 Operating income 7,708 8,6 Gross margin 14,084 $ 23,212 $ 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 7,905 margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 7,905 6,723 15,152 17,149 62,310 Operating income 6,715 7,905 6", + "accumulated_depreciation": "accumulated depreciation of $ 29,223 and $ 24,179 29,460 23,734 of $ 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use $ 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use asset 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use asset 6,686 23,734 Operating lease right-of-use asset 6,686 6,555 Equity and other investment Operating lease right-of-use asset 6,686 6,555 Equity and other investment 1,862 6,555 Equity and other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible Equ Accumulated depreciation ( 29,223 Total , at cost 58,683 47,913 Accumulated depreciation ( 29,223 ) 58,683 47,913 Accumulated depreciation ( 29,223 ) ( 24,179 ) Total depreciation ( 29,223 ) ( 24,179 ) Total , net $ ) Total , net $ 29,460 $ 23,734 During fiscal year , net $ 29,460 $ 23,734 During fiscal year 2018 , $ 23,734 During fiscal year 2018 , 2017 , and 2016 During fiscal year 2018 , 2017 , and 2016 , depreciation 2018 , 2017 , and 2016 , depreciation expense wa $ , depreciation expense wa $ 7.7 billion , $ 6.1 Accumulated depreciation ( , gross $ 4,543 $ 2,658 Accumulated depreciation ( 404 ) $ 2,658 Accumulated depreciation ( 404 ) ( 161 ) Property depreciation ( 404 ) ( 161 ) Property and equipment , and equipment , net $ 4,139 $ 2,497 Other current liability , net $ 4,139 $ 2,497 Other current liability $ 176 2,497 Other current liability $ 176 $ 113 Other long-term liability current liability $ 176 $ 113 Other long-term liability 4,125 2,425 $ 113 Other long-term liability 4,125 2,425 Total finance lease liability 113 Ot", + "debt": "debt . Refer to Note 12 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 44 PART II Item 7 The . 44 PART II Item 7 The following table outline the unearned revenue a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) Three Months Ending , September 30 , 2018 debt In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term debt : a ) Principal payment $ 4,000 $ 9,268 $ 10,794 $ Principal payment $ 4,000 $ 9,268 $ 10,794 $ 52,836 $ $ 4,000 $ 9,268 $ 10,794 $ 52,836 $ 76,898 Interest $ 9,268 $ 10,794 $ 52,836 $ 76,898 Interest payment 2,377 $ 10,794 $ 52,836 $ 76,898 Interest payment 2,377 4,495 4,066 52,836 $ 76,898 Interest payment 2,377 4,495 4,066 31,247 42,185 Construction $ 76,898 Interest payment 2,377 4,495 4,066 31,247 42,185 Construction com Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 8 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 45 PART II this Form 10-K ) . 45 PART II Item 7 ( . 45 PART II Item 7 ( c ) Refer to c ) Refer to Note 16 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 13 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of th debt 0 Accounts payable $ 8,617 $ 7,390 Short-term debt 0 9,072 Current 8,617 $ 7,390 Short-term debt 0 9,072 Current portion of long-term $ 7,390 Short-term debt 0 9,072 Current portion of long-term debt Current portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term income tax 2,121 3,998 1,049 Accrued compensation 6,103 5,819 Short-term inco debt 72,242 76,073 7,684 Total current liability 58,488 55,745 Long-term debt 72,242 76,073 Long-term liability 58,488 55,745 Long-term debt 72,242 76,073 Long-term income tax 30,265 58,488 55,745 Long-term debt 72,242 76,073 Long-term income tax 30,265 13,485 72,242 76,073 Long-term income tax 30,265 13,485 Long-term unearned revenue 3,815 76,073 Long-term income tax 30,265 13,485 Long-term unearned revenue 3,815 2,643 30,265 13,485 Long-term unearned revenue 3,815 2,643 Deferred income tax 541 13, debt , maturity of 90 day or le , net or le , net ( 7,324 ) ( 4,963 ) 7,195 net ( 7,324 ) ( 4,963 ) 7,195 Proceeds from issuance 7,324 ) ( 4,963 ) 7,195 Proceeds from issuance of debt Proceeds from issuance of debt 7,183 44,344 13,884 Repayments of debt from issuance of debt 7,183 44,344 13,884 Repayments of debt ( issuance of debt 7,183 44,344 13,884 Repayments of debt ( 10,060 13,884 Repayments of debt ( 10,060 ) ( 7,922 ) ( debt ( 10,060 ) ( 7,922 ) ( 2,796 ) Common ) ( 7,922 ) ( 2,796 ) Common s debt were in excess of $ 1.0 billion . As a result Liabilities Other Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 10 $ 221 $ 0 $ exchange contract $ 10 $ 221 $ 0 $ 25 $ $ 10 $ 221 $ 0 $ 25 $ ( 193 $ 221 $ 0 $ 25 $ ( 193 ) $ 0 $ 25 $ ( 193 ) $ ( 4 ) ( 193 ) $ ( 4 ) Equity contract 2 0 ( 4 ) Equity contract 2 0 0 0 ( 7 4 ) Equity contract 2 0 0 0 ( 7 ) debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not sheet . Refer to Note 12 \u2013 Debt for further information Weighted Average L DEBT Short-term 2,210 Total $ 8,053 NOTE 12 \u2014 DEBT Short-term Debt As Short-term Debt As of June 30 , 2018 , we had As of June 30 , 2018 , we had no commercial outstanding . As of June 30 , 2017 , we had As of June 30 , 2017 , we had $ 9.1 2017 , we had $ 9.1 billion of commercial paper issued weighted average interest rate of 1.01 % and maturity ranging from % and maturity ranging from 25 day to 264 day . ranging from 25 day to 264 day . The estimated fair . We have two $ 5.0 billion credit facilit Debt As of June 30 , 2018 , the total As of June 30 , 2018 , the total carrying value current portion , were $ 76.2 billion and $ 77.5 billion $ 76.2 billion and $ 77.5 billion , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total carrying value current portion , were $ 77.1 billion and $ 80.3 billion $ 77.1 billion and $ 80.3 billion , respectively . These value are based on Level 2 input . 79 PART II on Level 2 input . 79 PART II Item 8 The . 79 PART debt ) Euro-denominated debt security . 80 PART II Item 8 The . 80 PART II Item 8 The note in the table our debt for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 wa $ 2018 , 2017 , and 2016 wa $ 2 . 4 , and 2016 wa $ 2 . 4 billion , $ 2016 wa $ 2 . 4 billion , $ 1 . . 4 billion , $ 1 . 6 billion , and billion , $ 1 . 6 billion , and $ 1.1 6 billion , and $ 1.1 b illion , respectively . respectively . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the agg debt issuance current portion , were $ 6 58 million and $ 715 portion , were $ 6 58 million and $ 715 million 6 58 million and $ 715 million , respectively . Maturities million ) Year Ending June 30 , 2019 $ 4,000 2020 Year Ending June 30 , 2019 $ 4,000 2020 5,518 2021 June 30 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 30 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2,750 $ 4,000 2020 5,518 2021 debt 0 ( 1,384 ) Unearned revenue investment and debt 0 ( 1,384 ) Unearned revenue ( 639 1,384 ) Unearned revenue ( 639 ) ( 5,760 ) Depreciation revenue ( 639 ) ( 5,760 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,103 ) ( 1,630 ) Other amortization ( 1,103 ) ( 1,630 ) Other ( 312 ) ( 1,630 ) Other ( 312 ) ( 21 ) Deferred Other ( 312 ) ( 21 ) Deferred income tax liability income tax liability $ ( 2,054 ) $ ( 9,929 ) ( 2,054 ) $ ( 9,929 ) Net deferred income tax asset ( liabil", + "share_repurchase": "share repurchase . program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an additional $ 40.0 billion in share repurchase . repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the share repurchase program . Shares Amount Year Ended June 30 , 2018 2017 2016 First Year Ended June 30 , 2018 2017 2016 First Quarter 22 Ended June 30 , 2018 2017 2016 First Quarter 22 $ June 30 , 2018 2017 2016 First Quarter 22 $ 1,600 2018 2017 2016 First Quarter 22 $ 1,600 63 $ 3,550 2016 First Quarter 22 $ 1,600 63 $ 3,550 89 $ First Quarter 22 $ 1,600 63 $ 3,550 89 $ 4,000 22 $ 1,600 63 $ 3,550 89 $ 4,000 Second Quarter $ 1,600 63 $ 3,550 89 $ 4,000 Second Quarter 22 63 $ 3,550 89 $ 4,000 Second Quarter 22 share repurchase share repurchase program approved September 20 , 2016 . All other program approved September 20 , 2016 . All other share repurchased share repurchase program approved September 16 , 2013 . The above program approved September 16 , 2013 . The above table excludes Amount Payment Date Fiscal Year 2018 ( in million ) September ( in million ) September 19 , 2017 $ 0.42 November million ) September 19 , 2017 $ 0.42 November 16 , September 19 , 2017 $ 0.42 November 16 , 2017 $ , 2017 $ 0.42 November 1", + "earnings_per_share": "earnings per share 2.13 22,074 Diluted earnings per share 2.13 ( a ) 3.25 ( share 2.13 ( a ) 3.25 ( d ) 2.56 ( ) 3.25 ( d ) 2.56 ( e ) 1.48 ( ) 2.56 ( e ) 1.48 ( g ) 2.63 Cash ) 1.48 ( g ) 2.63 Cash dividend declared per share Cash dividend declared per share 1.68 1.56 1.44 1.24 1.12 Cash dividend declared per share 1.68 1.56 1.44 1.24 1.12 Cash , declared per share 1.68 1.56 1.44 1.24 1.12 Cash , cash per share 1.68 1.56 1.44 1.24 1.12 Cash , cash equivalent share 1.68 1.56 1.44 1.24 1.12 Cash , cash equivalent earnings per share % Diluted earnings per share 2.13 3.25 2.56 ( 34 ) Diluted earnings per share 2.13 3.25 2.56 ( 34 ) % earnings per share 2.13 3.25 2.56 ( 34 ) % 27 share 2.13 3.25 2.56 ( 34 ) % 27 % Adjusted 2.56 ( 34 ) % 27 % Adjusted operating income 35,058 27 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted net 35,058 29,331 earnings per share 3.88 3.29 2.67 18 % 23 diluted earnings per share 3.88 3.29 2.67 18 % 23 % earnings per share 3.88 3.29 2.67 18 % 23 % Consolidated per share 3.88 3.29 2.67 18 % 23 % Consolidated result 3.88 3.29 2.67 18 % 23 % Consolidated result of operation date of acquisition on December 8 , 2016 . Fiscal year acquisition on December 8 , 2016 . Fiscal year 2018 includes , 2016 . Fiscal year 2018 includes a full period of result , whereas fiscal year 2017 only includes result from the financial result . Fis earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Prior year and diluted EPS of $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . 34 PART $ 0.04 , respectively . 34 PART II Item 7 Fiscal . 34 PART II Item 7 Fiscal Year 2017 Compared with II Item 7 Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Revenue increased $ 5.4 billion Year 2016 Revenue increased $ 5.4 billion or 6 earnings per share Diluted earnings per share $ 2.13 $ 3.25 $ 2.56 ( per share $ 2.13 $ 3.25 $ 2.56 ( 34 ) $ 2.13 $ 3.25 $ 2.56 ( 34 ) % 27 $ 3.25 $ 2.56 ( 34 ) % 27 % Net 2.56 ( 34 ) % 27 % Net charge related to charge related to the TCJA 1.75 0 0 Impairment and restructuring related to the TCJA 1.75 0 0 Impairment and restructuring expense to the TCJA 1.75 0 0 Impairment and restructuring expense 0 0 Impairment and restructuring expense 0 0.04 0.11 Adjusted diluted earnings Impairment and restructuring expense earnings per share diluted earnings per share $ 3.88 $ 3.29 $ 2.67 18 per share $ 3.88 $ 3.29 $ 2.67 18 % 23 $ 3.88 $ 3.29 $ 2.67 18 % 23 % FINANCIAL 3.88 $ 3.29 $ 2.67 18 % 23 % FINANCIAL CONDITION 3.29 $ 2.67 18 % 23 % FINANCIAL CONDITION Cash , and short-term investment totaled $ 133.8 billion and $ 133.0 billion $ 133.8 billion and $ 133.0 billion a of June 30 133.0 billion a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , respectively . June 30 , 2018 and 2017 , respectively . Equity and and othe Earnings per share $ 16,571 $ 25,489 $ 20,539 Earnings per share : Basic per share : Basic $ 2.15 $ 3.29 $ 2.59 Diluted : Basic $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 $ 2.56 Weighted 2.59 Diluted $ 2.13 $ 3.25 $ 2.56 Weighted average share $ 2.13 $ 3.25 $ 2.56 Weighted average share outstanding : average share outstanding : Basic 7,700 7,746 7,925 Diluted 7,794 7,832 share outstanding : Basic 7,700 7,746 7,925 Diluted 7,794 7,832 8,013 outs earnings per share 4,412 Net income 21,204 4,285 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 3.25 Year Ended June Diluted earnings per share 2.71 0.54 3.25 Year Ended June 30 earnings per share 2.71 0.54 3.25 Year Ended June 30 , 0.54 3.25 Year Ended June 30 , 2016 Revenue $ 85,320 Year Ended June 30 , 2016 Revenue $ 85,320 $ 5,834 30 , 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision for income $ 85,320 $ 5,834 $ 91,154 Provi earnings per share 5,100 Net income 16,798 3,741 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 2.56 65 PART II Diluted earnings per share 2.10 0.46 2.56 65 PART II Item earnings per share 2.10 0.46 2.56 65 PART II Item 8 per share 2.10 0.46 2.56 65 PART II Item 8 ( 2.56 65 PART II Item 8 ( In million ) As As Restated Balance Sheets June 30 , 2017 Accounts receivable , Balance Sheets June 30 , 2017 Accounts receivable , net of allowance for doubtful account $ 19,792 $ 2,639 $ 0 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2018 2017 2016 Net Year Ended June 30 , 2018 2017 2016 Net income available Ended June 30 , 2018 2017 2016 Net income available for June 30 , 2018 2017 2016 Net income available for common shareholder ( A ) $ 16,571 $ 25,489 $ 20,539 Weighted A ) $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding share of common stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock ( B ) 7,700 7,746 7,925 Dilutive e Earnings Per Share equivalent ( C ) 7,794 7,832 8,013 Earnings Per Share Basic ( C ) 7,794 7,832 8,013 Earnings Per Share Basic ( Basic ( A/B ) $ 2.15 $ 3.29 $ 2.59 Diluted A/B ) $ 2.15 $ 3.29 $ 2.59 Diluted ( A/C $ 2.15 $ 3.29 $ 2.59 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.13 $ 3.25 $ 2.56 Anti-dilutive A/C ) $ 2.13 $ 3.25 $ 2.56 Anti-dilutive stock-based award $ 2.13 $ 3.25 $ 2.56 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20 earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were . GitHub Inc. On June 4 , 2018 , we entered Inc. On June 4 , 2018 , we entered into a GitHub \u201d ) for $ 7.5 billion in an all-stock transaction . Other During fiscal year 2018 , we completed nine acquisition for total consideration of $ 948 million , substantially all of result of operation . NOTE 10 earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted Basic earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per share share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per share 0.72 3.29 Diluted earnings per share 0.72 0.80 0.70 1.03 ( d Diluted earnings per share 0.72 0.80 0.70 1.03 ( d ) earnings per share 0.72 0.80 0.70 1.03 ( d ) 3.25 per share 0.72 0.80 0.70 1.03 ( d ) 3.25 ( 0.70 1.", + "tax_rate": "Tax Rate Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Our effective tax rate for tax rate for fiscal year 2018 and 2017 wa 55 % for fiscal year 2018 and 2017 wa 55 % and 15 year 2018 and 2017 wa 55 % and 15 % , 2017 wa 55 % and 15 % , respectively . The tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the the TCJA in fiscal year 2018 and the realization of tax business loss in fiscal year 2017 . Our ef tax rate service . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . In fiscal year billion . In fiscal year 2017 , our U.S. income before before income tax wa $ 6.8 billion and our foreign income before income tax wa $ 23.1 billion . Fiscal Year 2017 23.1 billion . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Our effective tax rate for tax rate for fiscal year 2017 and 2016 tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the service . In fiscal year 2017 , our U.S. income before before income tax wa $ 6.8 billion and our foreign income before income tax wa $ 23.1 billion . In fiscal year billion . In fiscal year 2016 , our U.S. income before before income tax wa $ 5.1 billion and our foreign income before income tax wa $ 20.5 billion . 41 PART II wa $ 20.5 billion . 41 PART II Item 7 Recent . 41 PART II Item tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . For fiscal % effective January 1 , 2018 . For fiscal year 2018 2018 . For fiscal year 2018 , our blended U.S. federal federal statutory tax rate is 28.1 % . This is the using the tax rate of 35 % for the first and second quarter of fiscal year 2018 and the reduced tax rate the reduced tax rate of 21 % for the third and fourth quarter of fiscal year 2018 . The TCJA includes a effective f tax rate of $ 4.2 billion , primarily on deferred IRS audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and a portion of IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit second quarter of fiscal year 2018 , we settled a portion IRS audit for tax year 2010 to 2013 . We continue for tax year 2010 to 2013 tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . For fiscal % effective January 1 , 2018 . For fiscal year 2018 2018 . For fiscal year 2018 , our blended U.S. federal federal statutory tax rate is 28.1 % . This is the using the tax rate of 35 % for the first and second quarter of fiscal year 2018 and the reduced tax rate the reduced tax rate of 21 % for the third and fourth quarter of fiscal year 2018 . The TCJA includes a effective f tax rate of $ 4.2 billion , primarily on deferred We recorded an estimated $ 17.9 billion charge in fiscal year billion charge in fiscal year 2018 related to the transition tax foreign income for fiscal year 2018 because these tax return are or due . Fiscal year 2018 taxable income will be known the audit are concluded . 81 PART II Item 8 In . 81 PART II Item 8 In addition , we recorded we recorded an estimated $ 4 . 2 billio n benefit an estimated $ 4 . 2 billio n benefit in fiscal n benefit in fiscal Tax Rate The item follows : Year Ended June 30 , 2018 2017 2016 Federal Year Ended June 30 , 2018 2017 2016 Federal statutory rate Ended June 30 , 2018 2017 2016 Federal statutory rate 28.1 June 30 , 2018 2017 2016 Federal statutory rate 28.1 % 2017 2016 Federal statutory rate 28.1 % 35.0 % 35.0 % Federal statutory rate 28.1 % 35.0 % 35.0 % Effect of rate 28.1 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 7.8 ) % ( 11.6 ) ( 7.8 ) % ( 11.6 ) % ( 14.5 ) ( 11.6 ) % ( 14.5 ) % Impacts of TCJA ) tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the business loss in fiscal year 2017 . The decrease in our tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the U.S. and foreign country . 83 PART II Item 8 The . 83 PART II Item 8 The component of the deferred ( In million ) June 30 , 2018 2017 Deferred Income million ) June 30 , 2018 2017 Deferred Income Tax Assets ) June 30 , tax rate for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , by 2018 , 2017 , and 2016 , by $ 11.3 billion and 2016 , by $ 11.3 billion , $ 10.2 billion $ 11.3 billion , $ 10.2 billion , and $ 8.8 10.2 billion , and $ 8.8 billion , respectively . 84 8.8 billion , respectively . 84 PART II Item 8 As . 84 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2018 , 2017 , As of June 30 , 2018 , 2017 , and 2016 June 30 , 2018 , 2017 , and 2016 , we 2018 , 2017 , and 2016 , we ha", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based Office licensed on-premises to Office 365 . CALs provide certain Office Office licensed on-premises to Office 365 . Office Consumer Services revenue the sale of minute . 6 PART I I Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2018 2017 2016 Percentage Change 2018 per share amount ) 2018 2017 2016 Percentage Change 2018 Versus share amount ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 20 Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine doubtful account , wa $ 22.3 billion a of July 1 22.3 billion a of July 1 , 2016 . As of a of July 1 , 2016 . As of June 30 2016 . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , long-term account June 30 , 2018 and 2017 , long-term account r Geographic Average Life Year Ended June 30 , 2018 2017 Technology-based $ Year Ended June 30 , 2018 2017 Technology-based $ 178 4 Ended June 30 , 2018 2017 Technology-based $ 178 4 year , 2018 2017 Technology-based $ 178 4 year $ 2,265 2 2018 2017 Technology-based $ 178 4 year $ 2,265 2 year $ 178 4 year $ 2,265 2 year Marketing-related 14 5 178 4 year $ 2,265 2 year Marketing-related 14 5 year $ 2,265 2 year Marketing-related 14 5 year 2,148 19 year 2,265 2 year Marketing-related 14 5 year 2,148 19 year GEOGRAPHIC Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based royalty . \u2022 Search . 93 PART II Item 8 Revenue . 93 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2018 2017 2016 Revenue Year Ended June 30 , 2018 2017 2016 Revenue Productivity and Ended June 30 , 2018 2017 2016 Revenue Productivity and Bu", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) common stock outstanding to be held on November 28 , 2018 are incorporated by held on November 28 , 2018 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2018 INDEX Page PART Year Ended June 30 , 2018 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 common stock for $ 8.6 billion , $ 10.3 billion $ 8.6 billion , $ 10.3 billion , and $ 14.8 10.3 billion , and $ 14.8 billion , respectively , through resource . Refer to Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 18 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2018 : ( In a of June 30 , 201 Common stock issued 1,002 2,796 ) Common stock issued 1,002 772 668 Common stock repurchased ) Common stock issued 1,002 772 668 Common stock repurchased ( Common stock issued 1,002 772 668 Common stock repurchased ( 10,721 668 Common stock repurchased ( 10,721 ) ( 11,788 ) ( repurchased ( 10,721 ) ( 11,788 ) ( 15,969 ) Common ) ( 11,788 ) ( 15,969 ) Common stock cash dividend stock cash dividend paid ( 12,699 ) ( 11,845 ) ( paid ( 12,699 ) ( 11,845 ) ( 11,006 ) Other ) ( 11,845 ) ( 11,006 ) Other , net ( ) Common stock and Ended June 30 , 2018 2017 2016 Common stock and paid-in June 30 , 2018 2017 2016 Common stock and paid-in capital , beginning of period $ 69,315 $ 68,178 $ 68,465 Common of period $ 69,315 $ 68,178 $ 68,465 Common stock issued $ 69,315 $ 68,178 $ 68,465 Common stock issued 1,002 772 $ 68,465 Common stock issued 1,002 772 668 Common stock repurchased 68,465 Common stock issued 1,002 772 668 Common stock repurchased ( Common stock issued 1,002 772 668 Common stock repurchased ( 3,033 668 Comm Common stock cash 13,118 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend ( Common stock cash dividend ( 12,917 ) ( 12,040 ) ( dividend ( 12,917 ) ( 12,040 ) ( 11,329 ) Common ) ( 12,040 ) ( 11,329 ) Common stock repurchased ( ) Common stock repurchased ( 7,699 ) ( 8,798 ) ( repurchased ( 7,699 ) ( 8,798 ) ( 12,283 ) Cumulative ) ( 8,798 ) ( 12,283 ) Cumulative effect of accounting effect of accounting change ( 42 ) 0 0 Balan common stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based award Dilutive effect of stock-based award 94 86 88 Common stock and effect of stock-based award 94 86 88 Common stock and common of stock-based award 94 86 88 Common stock and common stock stock equivalent ( C ) 7,794 7,832 8,013 Earnings Per Share equivalent ( C ) 7,794 7,832 8,013 Earnings Per Share Basic ( C ) 7,794 7,832 8,013 Earnin", + "fair_value_measurements": "Fair Value Measurements We account level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 non-derivative investment consist primarily of agency security . Our Level 2 derivative asset and liability primarily swap contract . \u2022 Level 3 \u2013 input are generally unobservable flow model . Our Level 3 non-derivative asset an Fair Value Measurements for million ) Year Ended June 30 , 2018 2017 2016 Foreign Year Ended June 30 , 2018 2017 2016 Foreign Exchange Contracts Ended June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 25 $ 441 $ ( 797 Contracts Derivatives $ 25 $ 441 $ ( 797 ) Hedged 25 $ 441 $ ( 797 ) Hedged item 78 ( ( 797 ) Hedged item 78 ( 386 ) 838 Total ) Hedged item 78 ( 386 ) 838 Total amount of item 78 ( 38 FAIR VALUE MEASUREMENTS Financial ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2018 Assets Mutual fund Fair Value June 30 , 2018 Assets Mutual fund $ 246 2018 Assets Mutual fund $ 246 $ 0 $ 0 $ Mutual fund $ 246 $ 0 $ 0 $ 246 $ $ 246 $ 0 $ 0 $ 246 $ 0 $ $ 0 $ 0 $ 246 $ 0 $ 246 Commercial $ 0 $ 246 $ 0 $ 246 Commercial paper 0 $ 246 $ 0 $ 246 Commercial paper 0 2,513 0 0 $ 246 Commercial pape", + "hedging_activities": "Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted Intra-Entity Asset Transfers In October 2016 , the FASB issued new effective for u beginning July 1 , 2018 , with early u beginning July 1 , 2018 , with early adoption permitted early adoption permitted beginning July 1 , 2017 . We plan permitted beginning July 1 , 2017 . We plan to adopt adopt the guidance effective July 1 , 2018 . Adoption of guid", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 25 $ 441 $ ( 797 Contracts Derivatives $ 25 $ 441 $ ( 797 ) Hedged 25 $ 441 $ ( 797 ) Hedged item 78 ( ( 797 ) Hedged item 78 ( 386 ) 838 Total ) Hedged item 78 ( 386 ) 838 Total amount of item 78 ( 386 ) 838 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 103 $ 55 $ 41 Equity of ineffectiveness $ 103" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-19-027952/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-19-027952/full-submission_features.json new file mode 100644 index 0000000..fcbc0f4 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-19-027952/full-submission_features.json @@ -0,0 +1,21 @@ +{ + "revenue": "revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world Marketing Solutions . On November 16 , 2018 , LinkedIn acquired . On November 16 , 2018 , LinkedIn acquired Glint , the continued shift to Dynamics 365 , a unified set of , and large organization . 7 PART I Item 1 Intelligent . 7 PART I Item 1 Intelligent Cloud Our Intelligent Cloud and Ruby on Rails . 8 PART I Item 1 We . 8 PART I Item 1 We believe our server product in a given year . 9 PART I revenue . 23 PART I Item 1A Third . 23 PART I Item 1A Third party may claim we product release such a Windows 10 , significant business transaction , product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may on which developer rely . 24 PART I Item 1A \u2022 . 24 PART I Item 1A \u2022 We may be required ability to realize revenue , example , compliance with the 2017 United States Tax Cuts and that determination is made . 26 PART I Item 1A We . 26 PART I Item 1A We earn a significant amount account receivable may increase . 27 PART I Item 1A We . 27 PART I Item 1A We maintain an investment portfolio meet our workforce need . 28 PART I Item 1B , . 28 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS Exchange Revenue ) 2016 ( d ) 2015 Revenue $ 125,843 $ 110,360 d ) 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 91,154 $ $ 125,843 $ 110,360 $ 96,571 $ 91,154 $ 93,580 Gross $ 110,360 $ 96,571 $ 91,154 $ 93,580 Gross margin 82,933 $ 96,571 $ 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 93,580 Gross margin 82,933 72,007 revenue recognition and operation starting on the December 8 , 2016 acquisition date . on the December 8 , 2016 acquisition date . ( f ( f ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( g ( g ) Includes $ 630 million of asset impairment charge our Phone business and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 millio revenue increased 13 % , driven by Office % , driven by Office 365 Commercial growth of 33 % Office 365 Commercial growth of 33 % . \u2022 Office Consumer \u2022 Office Consumer revenue increased 7 % , and Office 365 7 % , and Office 365 Consumer subscriber increased to 34.8 365 Consumer subscriber increased to 34.8 million . \u2022 LinkedIn revenue . \u2022 LinkedIn revenue increased 28 % , with record level by LinkedIn session growth of 27 % . \u2022 Dynamics revenue . \u2022 Dynamics revenue increased 15 % , driven by Dynamics % revenue increased 5 % . \u2022 Windows original OEM \u201d ) revenue increased 4 % . \u2022 Windows Commercial \u2022 Windows Commercial revenue increased 14 % . \u2022 Microsoft Surface \u2022 Microsoft Surface revenue increased 23 % . \u2022 Gaming revenue . \u2022 Gaming revenue increased 10 % , driven by Xbox software and service growth of 19 % . \u2022 Search advertising traffic acquisition cost , increased 13 % . We have recast for organization . On October 25 , 2018 , we acquired . On October 25 , 2018 , we acquired GitHub , \u201d ) in a $ 7.5 revenue and second quarter of fiscal year 2019 , and reduced reported revenue fourth quarter of fiscal year 2019 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 20 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2019 2018 2017 Revenue $ 125,843 2018 Percentage Change 2018 Versus 2017 Revenue $ 125,843 $ 110,360 2018 Versus 2017 Revenue $ 125,843 $ 110,360 $ 96,571 14 2017 Revenue $ 125,843 $ 110,360 $ 96,571 14 % 14 $ 125,843 $ 110,360 $ 96,571 14 % 14 % Gross 125,843 $ 110,360 $ 96,571 14 % 14 % Gross margin 110,360 $ 96,571 14 % 14 % Gross margin 82,933 72,007 % 14 % Gross margin 82,933 72,007 62,310 15 % 16 14 % Gross margin 82,933 72,007 62,310 15 % 16 % % Gross margin 82,933 72,007 62,310 15 % 16 % Operating Gross margi Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial . Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , driven by growth Cost of revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven b Revenue increased $ 13.8 billion Year 2017 Revenue increased $ 13.8 billion or 14 % , increased $ 13.8 billion or 14 % , driven by growth lower revenue from Phone . 34 PART II Item 7 Gross . 34 PART II Item 7 Gross margin increased $ 9.7 7 Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by grow revenue increased $ 4.1 billion or 12 % , increased $ 4.1 billion or 12 % , mainly due to and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to LinkedIn expense . Fiscal year 2018 net income and diluted EPS earnings per share of $ 13.7 Revenue Productivity and 2018 Percentage Change 2018 Versus 2017 Revenue Productivity and Business Processes Productivity and Business Processes $ 41,160 $ 35,865 $ 29,870 15 Business Processes $ 41,160 $ 35,865 $ 29,870 15 % 20 $ 41,160 $ 35,865 $ 29,870 15 % 20 % Intelligent 41,160 $ 35,865 $ 29,870 15 % 20 % Intelligent Cloud 35,865 $ 29,870 15 % 20 % Intelligent Cloud 38,985 32,219 % 20 % Intelligent Cloud 38,985 32,219 27,407 21 % 18 20 % Intelligent Cloud 38,985 32,219 27,407 21 % 18 % % Intellig Revenue Business Processes Revenue increased $ 5.3 billion or 15 % . increased $ 5.3 billion or 15 % . \u2022 Office Commercial Office Commercial revenue increased $ 3.2 billion or 13 % , increased $ 3.2 billion or 13 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial grew 33 % , . Office 365 Commercial grew 33 % , due to growth average revenue per user . 35 PART II Item 7 \u2022 . 35 PART II Item 7 \u2022 Office Consumer revenue increased Office Consum revenue increased $ 286 million or 7 % , increased $ 286 million or 7 % , driven by Office % , driven by Office 365 Consumer , due to recurring \u2022 LinkedIn revenue increased $ 1.5 billion or 28 % , increased $ 1.5 billion or 28 % , driven by growth . \u2022 Dynamics revenue increased 15 % , driven by Dynamics % , driven by Dynamics 365 growth . Operating income increased . Operating income increased $ 3.3 billion or 25 % , increased $ 3.3 billion or 25 % , including an unfavorable unfavorable foreign currenc Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . \u2022 Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure revenue growth wa 72 % , due to higher . Server product revenue increased 6 % , due to continued of end-of-support for SQL Server 2008 and Windows Server 2008 . Server 2008 and Windows Server 2008 . \u2022 Enterprise Services revenue Enterprise Services revenue increased $ 278 million or 5 % , increased $ 2 Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth . Windows Commercial revenue increased 14 % , driven by an . Windows OEM revenue increased 4 % . Windows OEM Pro Windows OEM Pro revenue grew 10 % , ahead of the , driven by healthy Windows 10 demand . Windows OEM non-Pro Windows OEM non-Pro revenue declined 7 % , below the consumer \u2022 Surface revenue increased $ revenue increased $ 1.0 billion or 10 % , increased $ 1.0 billion or 10 % , driven by Xbox software and service growth of 19 % , primarily due to decline in Xbox hardware of 13 % primarily due to a Search advertising revenue increased $ 616 million or 9 % . increased $ 616 million or 9 % . Search advertising revenue traffic acquisition cost , increased 13 % , driven by higher . Operating income increased $ 2.2 billion or 21 % , increased $ 2.2 billion or 21 % , including an unfavorable unfavorable fore Revenue Business Processes Revenue increased $ 6.0 billion or 20 % . increased $ 6.0 billion or 20 % . \u2022 LinkedIn revenue \u2022 LinkedIn revenue increased $ 3.0 billion to $ 5.3 billion $ 3.0 billion to $ 5.3 billion . Fiscal year 2018 5.3 billion . Fiscal year 2018 included a full period of result , whereas fiscal year 2017 only included result from the date of acquisition on December 8 , 2016 . LinkedIn revenue acquisition on December 8 , 2016 . LinkedIn revenue primarily consisted Office Commercial reve revenue growth , mainly a continued shift to Office 365 Commercial . \u2022 Office Consumer Office Consumer revenue increased $ 382 million or 11 % , increased $ 382 million or 11 % , driven by Office % , driven by Office 365 Consumer revenue growth , mainly . \u2022 Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynamics 365 revenue growth . Operating income . Operating income increased $ 1.5 billion or 13 % , increased $ 1.5 billion or 13 % , including a favorable favorable foreign currency revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired \u2022 Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ 2.2 billion to $ 4.5 billion $ 2.2 billion to $ 4.5 billion , including $ 617 4.5 billion , including $ 617 million of amortization of acquired Intelligent Cloud Revenue increased $ 4.8 billion or revenue increased $ 4.5 billion or 21 % , increased $ 4.5 billion or 21 % , driven by Azure growth . Azure revenue grew 91 % , due to higher product licensed on-premises revenue increased 5 % , mainly due to Enterprise Services revenue increased $ 304 million or 5 % , increased $ 304 million or 5 % , driven by higher . Operating income increased $ 2.4 billion or 26 % . increased $ 2.4 billion or 26 % . \u2022 Gross margin \u2022 Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , dri Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM revenue increased 5 % . Windows OEM Pro Windows OEM Pro revenue grew 11 % , ahead of a Windows OEM non-Pro revenue declined 4 % , below the consumer \u2022 Gaming revenue increased $ 1.3 billion or 14 % , increased $ 1.3 billion or 14 % , revenue growth of 20 % , mainly from third-party from third-party title strength . 37 PART II Item 7 \u2022 . 37 PART II Item 7 \u2022 Search advertising revenue increased Search advertising revenue increased $ 793 million or 13 % . increased $ 793 million or 13 % . Search advertising revenue traffic acquisition cost , increased 16 % , driven by growth \u2022 Surface revenue increased $ 625 million or 16 % , increased $ 625 million or 16 % , driven by a \u2022 Phone revenue decreased $ 525 million . Operating income incre revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Research and development expense increased and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and GitHub . Fiscal revenue 14 % 16 % 16 % percent of revenue 14 % 16 % 16 % ( 2 revenue 14 % 16 % 16 % ( 2 ) ppt 16 % 16 % ( 2 ) ppt 0ppt Sales and % ( 2 ) ppt 0ppt Sales and marketing expense include other program . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Sales and marketing expense increased and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . Fiscal Year 2018 2 % . Fiscal Year revenue 4 % 4 % 5 % percent of revenue 4 % 4 % 5 % 0ppt ( revenue 4 % 4 % 5 % 0ppt ( 1 ) % 4 % 5 % 0ppt ( 1 ) ppt General % 5 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 General and administrative expense increased and administrative expense increased $ 131 million or 3 % . increased $ 131 million or 3 % . Fiscal Year 2018 3 % . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fisc Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . We expect for tax year revenue a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) Three Months Ending , September 30 , 2019 $ 12,353 December Ending , September 30 , 2019 $ 12,353 December 31 , September 30 , 2019 $ 12,353 December 31 , 2019 9,807 , 2019 $ 12,353 December 31 , 2019 9,807 March 31 $ 12,353 December 31 , 2019 9,807 March 31 , 2020 12,353 December 31 , 2019 9,807 March 31 , 2020 6,887 31 , 2019 9,807 March 31 , 2020 6,887 June 30 2019 9,807 March 31 , 2020 6,887 June 30 , 2020 9,807 March 31 , 2020 Revenue from Office 365 is recognized ratably over the for the period presented . 46 PART II Item 7 Impairment . 46 PART II Item 7 Impairment of Investment Securities We an annual basis ( May 1 for u ) and between our consolidated financial statement . 47 PART II Item 7 Income . 47 PART II Item 7 Income Taxes The objective of that ha a greater than 50 % likelihood of being realized business . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for fu revenue . 48 PART II Item 7 STATEMENT . 48 PART II Item 7 STATEMENT OF MANAGEMENT \u2019 S Administration ; Chief Accounting Officer 49 PART II Item 7A ITEM Officer 49 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2019 Impact Foreign currency Hypothetical Change June 30 , 2019 Impact Foreign currency - Revenue Impact Foreign currency - Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 3,402 ) Revenue Year Ended June 30 , 2019 2018 2017 Revenue : Product Ended June 30 , 2019 2018 2017 Revenue : Product $ June 30 , 2019 2018 2017 Revenue : Product $ 66,069 2017 Revenue : Product $ 66,069 $ 64,497 $ 63,811 Service : Product $ 66,069 $ 64,497 $ 63,811 Service and other $ 66,069 $ 64,497 $ 63,811 Service and other 59,774 45,863 $ 63,811 Service and other 59,774 45,863 32,760 Total revenue 125,843 63,811 Service and other 59,774 45,863 32,760 Total revenue 125,843 110,360 Service and other 59,774 revenue 125,843 110,360 96,571 59,774 45,863 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue 45,863 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue : 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue : Product Cost of revenue : Product 16,273 15,420 15,175 Service and other of revenue : Product 16,273 15,420 15,175 Service and other 26,637 revenue : Product 16,273 15,420 15,175 Service and other 26,637 22,933 15,420 15,175 Service and other 26,637 22,933 19,086 Total c revenue Service and other 26,637 22,933 19,086 Total cost of revenue 42,910 19,086 Total cost of revenue 42,910 38,353 34,261 Gross margin 82,933 Total cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 16,876 34,261 Gross margin 82,933 72,007 62,310 Research and develo revenue 32,676 6,103 Short-term income tax 5,665 2,121 Short-term unearned revenue 32,676 28,905 5,665 2,121 Short-term unearned revenue 32,676 28,905 Other 9,351 8,744 Total 2,121 Short-term unearned revenue 32,676 28,905 Other 9,351 8,744 Total current unearned revenue 32,676 28,905 Other 9,351 8,744 Total current liability 69,420 revenue 32,676 28,905 Other 9,351 8,744 Total current liability 69,420 58,488 9,351 8,744 Total current liability 69,420 58,488 Long-term debt 66,662 72,242 8,744 Total cur revenue 4,530 72,242 Long-term income tax 29,612 30,265 Long-term unearned revenue 4,530 3,815 29,612 30,265 Long-term unearned revenue 4,530 3,815 Deferred income tax 233 30,265 Long-term unearned revenue 4,530 3,815 Deferred income tax 233 541 4,530 3,815 Deferred income tax 233 541 Operating lease liability 6,188 3,815 Deferred income tax 233 541 Operating lease liability 6,188 5,568 233 541 Operating lease liability 6,188 5,568 Other long-term liability 7,581 541 Operating lease liability 6,188 5,5 revenue 4,462 917 ) Accounts payable 232 1,148 81 Unearned revenue 4,462 5,922 ) Accounts payable 232 1,148 81 Unearned revenue 4,462 5,922 3,820 232 1,148 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 1,148 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 18,183 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 18,183 1,792 4,462 5,922 3,820 Income tax 2,929 18,183 1,792 Other current liability 5,922 3,820 Income tax 2,929 18,183 1,792 Other current liability 1,419 3,820 Income tax Revenue . 56 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 20 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine license . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , long-term account June 30 , 2019 and 2018 , long-term revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics busin service . Refer to Note 14 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where a period generally ranging from 90 day to three year . the amount a necessary . 59 PART II Item 8 Research . 59 PART II Item 8 Research and Development Research and revenue 341 185 555 Amount Excluded from loss ) into revenue 341 185 555 Amount Excluded from Effectiveness ) into revenue 341 185 555 Amount Excluded from Effectiveness Assessment expense ) , net ( 64 ) ( 255 ) ( net ( 64 ) ( 255 ) ( 389 ) We ) ( 255 ) ( 389 ) We do not have in AOCI a of June 30 , 2019 that will be a of June 30 , 2019 that will be reclassified into into earnings within the following 12 month . No significant amount to occur during fiscal year 2019 . Non-designated Derivative Gains ( m Revenue $ 2,271 Year Ended June 30 , 2017 Revenue $ 2,271 Operating loss 30 , 2017 Revenue $ 2,271 Operating loss ( 924 ) $ 2,271 Operating loss ( 924 ) Following are the supplemental had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , amount ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 98,291 $ Ended June 30 , 2017 2016 Revenue $ 98,291 $ 94,490 , 2017 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 2016 Revenue $ 98,291 $ revenue 475 0 7,046 351 Leasing liability 1,594 1,427 Unearned revenue 475 0 Other liability 1,594 1,427 Unearned revenue 475 0 Other 367 56 Deferred 1,594 1,427 Unearned revenue 475 0 Other 367 56 Deferred income Unearned revenue 475 0 Other 367 56 Deferred income tax asset revenue 475 0 Other 367 56 Deferred income tax asset 15,693 56 Deferred income tax asset 15,693 7,495 Less valuation allowance ( Deferred income tax asset 15,693 7,495 Less valuation allowance ( 3,214 7,495 Less valuation allowance revenue $ ( 738 ) $ 0 Unearned revenue ( 30 ) $ 0 Unearned revenue ( 30 ) ( 639 ) Depreciation revenue ( 30 ) ( 639 ) Depreciation and amortization 0 639 ) Depreciation and amortization 0 ( 1,164 ) Leasing asset Depreciation and amortization 0 ( 1,164 ) Leasing asset ( 1,510 1,164 ) Leasing asset ( 1,510 ) ( 1,366 ) Deferred asset ( 1,510 ) ( 1,366 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,607 ) ( 61 ) Other liability ( 2,607 ) ( 61 ) Other ( 291 ) ( 61 ) Other ( 291 ) ( 251 ) Def Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . We expect for tax year REVENUE PART II Item 8 NOTE 14 \u2014 UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2019 2018 Productivity and million ) June 30 , 2019 2018 Productivity and Business Processes ) June 30 , 2019 2018 Productivity and Business Processes $ Productivity and Business Processes $ 16,831 $ 14,864 Intelligent Cloud 16,988 Business Processes $ 16,831 $ 14,864 Intelligent Cloud 16,988 14,706 More 16,831 $ 14,864 Intelligent Cloud 16,988 14,706 More Personal Computing 3,387 $ 14,864 Intelligent Cloud 16,9 revenue were million ) Year Ended June 30 , 2019 Balance , beginning Year Ended June 30 , 2019 Balance , beginning of period , beginning of period $ 32,720 Deferral of revenue 69,493 Recognition $ 32,720 Deferral of revenue 69,493 Recognition of unearned revenue ( Recognition of unearned revenue ( 65,007 ) Balance , end of , end of period $ 37,206 Revenue allocated to remaining performance not recognized revenue wa $ 91 billion a of June 30 91 billion a of June 30 , 2019 , of which a of June 30 , 2019 revenue over the revenue over the next 12 month and the remainder thereafter be recognized beyond the next 12 month . NOTE 15 \u2014 next 12 month . NOTE 15 \u2014 LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2019 2018 2017 Operating Year Ended June 30 , 2019 2018 2017 Operating lease cost Ended June 30 , 2019 2018 2 revenue ( 341 ) ( 185 ) ( revenue ( 341 ) ( 185 ) ( 555 ) Tax ) ( 185 ) ( 555 ) Tax expense included in in provision for income tax 8 6 9 Amounts reclassified from provision for income tax 8 6 9 Amounts reclassified from accumulated for income tax 8 6 9 Amounts reclassified from accumulated other income ( loss ) ( 333 ) ( 179 ) ( ) ( 333 ) ( 179 ) ( 546 ) Net ) ( 179 ) ( 546 ) Net change related to of tax of $ ( 6 ) , $ 5 , ( 6 ) , $ 5 , and $ ( 5 5 , and $ ( 5 ) ( 173 ) 39 $ ( 5 ) ( 173 ) 39 ( 218 ) 5 Revenue . 89 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2019 2018 2017 Revenue Year Ended June 30 , 2019 2018 2017 Revenue Productivity and Ended June 30 , 2019 2018 2017 Revenue Productivity and Business June 30 , 2019 2018 2017 Revenue Productivity and Business Processes Productivity and Business Processes $ 41,160 $ 35,865 $ 29,870 Intelligent Business Processes $ 41,160 $ 35,865 $ 29,870 Intelligent Cloud 38,985 $ 41,160 $ 35,865 $ 29,870 Intelligent Cloud 38,985 3 revenue for fiscal of revenue for fiscal year 2019 , 2018 , or 2017 for fiscal year 2019 , 2018 , or 2017 . Revenue 2019 , 2018 , or 2017 . Revenue , classified by million ) Year Ended June 30 , 2019 2018 2017 United Year Ended June 30 , 2019 2018 2017 United States ( Ended June 30 , 2019 2018 2017 United States ( a June 30 , 2019 2018 2017 United States ( a ) States ( a ) $ 64,199 $ 55,926 $ 51,078 Other a ) $ 64,199 $ 55,926 $ 51,078 Other country 61,644 $ 64,199 $ 55,926 $ 51,078 Other country 61,64 revenue . 90 PART II Item 8 Revenue . 90 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2019 2018 2017 Server Year Ended June 30 , 2019 2018 2017 Server product and Ended June 30 , 2019 2018 2017 Server product and cloud June 30 , 2019 2018 2017 Server product and cloud service product and cloud service $ 32,622 $ 26,129 $ 21,649 Office cloud service $ 32,622 $ 26,129 $ 21,649 Office product and $ 32,622 $ 26,129 $ 21,649 Office product and cloud service Office product a revenue , revenue , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 38.1 billion , $ 26.6 billion $ 38.1 billion , $ 26.6 billion and $ 16.2 billion $ 26.6 billion and $ 16.2 billion in fiscal year 2019 16.2 billion in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . These amount company and with country over 10 % of the total shown ( In Revenue June 30 Total Fiscal Year 2019 Revenue $ 29,084 $ 32,471 Fiscal Year 2019 Revenue $ 29,084 $ 32,471 $ 30,571 $ 2019 Revenue $ 29,084 $ 32,471 $ 30,571 $ 33,717 $ $ 29,084 $ 32,471 $ 30,571 $ 33,717 $ 125,843 Gross $ 32,471 $ 30,571 $ 33,717 $ 125,843 Gross margin 19,179 $ 30,571 $ 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 125,843 Gross ma Revenue ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year 2018 Revenue $ 1.14 1.71 5.06 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 Revenue . 93 PART II Item 8 Revenue Recognition \u2014 Refer to Recognition \u2014 Refer to Note 1 to the F inancial S in the financial statement . 94 PART II Item 8 Income . 94 PART II Item 8 Income Taxes \u2014 Uncertain Tax Positions \u2014 Refer to Note 1 2 to the F inancial \u2014 Refer to Note 1 2 to the F inancial S for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington August 1 , 2019 We have served , Washington August 1 , 2019 We have served a the Company \u2019 s auditor since 1983 . 95 PART II It", + "expenses": "EXPENSES Research and million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Research and development 2018 Percentage Change 2018 Versus 2017 Research and dev EXPENSES Restructuring restructuring activity . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 We did not incur restructuring restructuring expense in fiscal year 2019 or 2018 . Fiscal Year in fiscal year 2019 or 2018 . Fiscal Year 2018 Compared or 2018 . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 During fiscal year 2017 , Year 2017 During fiscal year 2017 , we recorded $ 306 2017 , we recorded $ 306 million of employee severa", + "net_income": "Net income ( h ) Net income 39,240 ( b ) 16,571 ( income 39,240 ( b ) 16,571 ( c ) 25,489 ( ) 16,571 ( c ) 25,489 ( f ) 20,539 ( ) 25,489 ( f ) 20,539 ( g ) 12,193 ( ) 20,539 ( g ) 12,193 ( h ) Diluted earnings ) Diluted earnings per share 5.06 ( b ) 2.13 ( share 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) 1.48 ( ) 2.56 ( g ) 1.48 ( h ) Cash dividend Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 C net income tax benefit property transfer and a $ 157 million net charge related to EPS \u201d ) by $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Refer to respectively . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . c ) Includes a $ 13.7 billion net charge related to and diluted EPS by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 12 \u2013 Income T net income tax benef it . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . U.S. dollar throughout fiscal year 2018 positively impacted reported revenue and second quarter of fiscal year 2019 , and reduced reported revenue fourth quarter of fiscal year 2019 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 20 \u2013 Segment Information and Geo Net income 42,959 35,058 29,025 23 % 21 % Net income 39,240 16,571 % 21 % Net income 39,240 16,571 25,489 137 % ( 21 % Net income 39,240 16,571 25,489 137 % ( 35 % Net income 39,240 16,571 25,489 137 % ( 35 ) Net income 39,240 16,571 25,489 137 % ( 35 ) % 16,571 25,489 137 % ( 35 ) % Diluted earnings per % Diluted earnings per share 5.06 2.13 3.25 138 % ( Diluted earnings per share 5.06 2.13 3.25 138 % ( 34 earnings per share 5.06 2.13 3.25 138 % ( 34 ) per share 5.06 2.13 3.25 138 % ( 34 ) % 2.13 3.25 13 net income 36,830 20 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP diluted 36,830 30,267 25,732 22 % 18 % Non-GAAP diluted earnings per Non-GAAP diluted earnings per share 4.75 3.88 3.29 22 % 18 diluted earnings per share 4.75 3.88 3.29 22 % 18 % earnings per share 4.75 3.88 3.29 22 % 18 % Non-GAAP per share 4.75 3.88 3.29 22 % 18 % Non-GA net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Prior year and diluted EPS of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Fiscal Year , respectively . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Revenue increased $ 13.8 billion Year 2017 Revenue increased $ 13.8 billion or 14 % , inc net income and diluted EPS earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Fiscal year , respectively . Fiscal year 2017 operating income , net income and diluted EPS of $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . SEGMENT RESULTS million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . In fiscal year billion . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . 40 PART II wa $ 24.9 billion . 40 PART II Item 7 Fiscal . 40 PART II Item 7 Fiscal Year 2018 net income tax benefit fourth quarter of fiscal year 2019 , a the value of tax . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 41 PART II Item 7 Uncertain . 41 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS with Net income 35,058 $ 29,331 23 % 20 % Net income $ 39,240 20 % Net income $ 39,240 $ 16,571 $ 25,489 137 Net income $ 39,240 $ 16,571 $ 25,489 137 % ( $ 39,240 $ 16,571 $ 25,489 137 % ( 35 ) 39,240 $ 16,571 $ 25,489 137 % ( 35 ) % $ 25,489 137 % ( 35 ) % Net tax impact transfer of intangible property ( 2,567 ) 0 0 * * intangible property ( 2,567 ) 0 0 * * Net tax property ( 2,567 ) 0 0 * * Net tax impact tax impact of the TCJA 157 13,696 0 * * Restructuring impact of the TCJA 157 13,696 0 * * Restructuring net income * Non-GAAP net income $ 36,830 $ 30,267 $ 25,732 22 net income $ 36,830 $ 30,267 $ 25,732 22 % 18 $ 36,830 $ 30,267 $ 25,732 22 % 18 % Diluted 36,830 $ 30,267 $ 25,732 22 % 18 % Diluted earnings 30,267 $ 25,732 22 % 18 % Diluted earnings per share Diluted earnings per share $ 5.06 $ 2.13 $ 3.25 138 per share $ 5.06 $ 2.13 $ 3.25 138 % ( $ 5.06 $ 2.13 $ 3.25 138 % ( 34 ) 5.06 $ 2.13 $ 3.25 138 % ( 34 ) % $ 3.25 138 % ( 34 ) % Net tax impact transfer of intangible property ( 0.33 ) 0 0 * * intang Net income $ Provision for income tax 4,448 19,903 4,412 Net income $ 39,240 for income tax 4,448 19,903 4,412 Net income $ 39,240 $ 19,903 4,412 Net income $ 39,240 $ 16,571 $ 25,489 Earnings Net income $ 39,240 $ 16,571 $ 25,489 Earnings per share $ 39,240 $ 16,571 $ 25,489 Earnings per share : Basic per share : Basic $ 5.11 $ 2.15 $ 3.29 Diluted : Basic $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 $ 3.25 Weighted 3.29 Diluted $ 5.06 $ Net income $ Ended June 30 , 2019 2018 2017 Net income $ 39,240 June 30 , 2019 2018 2017 Net income $ 39,240 $ 2018 2017 Net income $ 39,240 $ 16,571 $ 25,489 Other Net income $ 39,240 $ 16,571 $ 25,489 Other comprehensive income $ 39,240 $ 16,571 $ 25,489 Other comprehensive income ( loss change related to derivative ( 173 ) 39 ( 218 ) to derivative ( 173 ) 39 ( 218 ) Net change ( 173 ) 39 ( 218 ) Net change related to Net change related to investment 2,405 ( 2,717 ) ( 1,116 related to investment 2,405 ( Net income Ended June 30 , 2019 2018 2017 Operations Net income $ June 30 , 2019 2018 2017 Operations Net income $ 39,240 2017 Operations Net income $ 39,240 $ 16,571 $ 25,489 Adjustments Net income $ 39,240 $ 16,571 $ 25,489 Adjustments to reconcile $ 39,240 $ 16,571 $ 25,489 Adjustments to reconcile net income , amortization , and other 11,682 10,261 8,778 Stock-based compensation expense amortization , and other 11,682 10,261 8,778 Stock-based compensation expense 4,652 , and other 11,682 10,261 8,778 Net income 39,240 , beginning of period 13,682 17,769 13,118 Net income 39,240 16,571 beginning of period 13,682 17,769 13,118 Net income 39,240 16,571 25,489 13,682 17,769 13,118 Net income 39,240 16,571 25,489 Common stock cash 17,769 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend ( Common stock cash dividend ( 14,103 ) ( 12,917 ) ( dividend ( 14,103 ) ( 12,917 ) ( 12,040 ) Common ) ( 12,917 ) ( 12,040 ) Common stock re Net income available Ended June 30 , 2019 2018 2017 Net income available for June 30 , 2019 2018 2017 Net income available for common shareholder ( A ) $ 39,240 $ 16,571 $ 25,489 Weighted A ) $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding share of common stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based award Dilutive effect of Net Income Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investm Net income 25,179 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 19,128 Diluted 98,291 $ 94,490 Net income 25,179 19,128 Diluted earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were the earliest period presented . 74 PART II Item 8 Other . 74 PART II Item 8 Other During fiscal year 2019 8 Other During fiscal year 2019 , we completed 19 additi net income tax benefit fourth quarter of fiscal year 2019 , a the value of and U.S. GILTI tax . 78 PART II Item 8 Provision . 78 PART II Item 8 Provision for Income Taxes The million ) Year Ended June 30 , 2019 2018 2017 Current Year Ended June 30 , 2019 2018 2017 Current Taxes U.S. Ended June 30 , 2019 2018 2017 Current Taxes U.S. federal June 30 , 2019 2018 2017 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 4,718 $ 19,764 $ 2,739 U.S. U.S. federal $ 4,718 $ 19,764 $ 2,739 U.S. state and $ 4, net income tax benefit statutory rate in fiscal year 2018 is primarily due to the second quarter of fiscal year 2018 , offset in part by statutory rate in fiscal year 2017 is primarily due to earnings the U.S. rate , generated 82 % , 8 7 % , generated 82 % , 8 7 % , and 76 generated 82 % , 8 7 % , and 76 % 8 7 % , and 76 % of our foreign income efore tax in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . Other reconciling tax net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the business loss in fiscal year 2017 . The component of the ( In million ) June 30 , 2019 2018 Deferred Income million ) June 30 , 2019 2018 Deferred Income Tax Assets ) June 30 , 2019 2018 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 406 $ 460 Accruals , reserv net income tax for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 included interest 2019 , 2018 , and 2017 included interest expense related to uncertain tax position of $ 515 million , $ 688 million $ 515 million , $ 688 million , and $ 399 688 million , and $ 399 million , respectively , net million ) Year Ended June 30 , 2019 2018 2017 Beginning Year Ended June 30 , 2019 2018 2017 Beginning unrecognized tax Ended June 30 , 2019 2018 2017 Beginning unrecognized tax benefit Jun Net income 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( a income 9,955 10,258 10,341 12,405 42,959 Net income ( a ) Net income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 Net income 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( loss income 7,708 8,679 8,292 10,379 35,058 Net income ( loss ) loss ) ( c ) 6,576 ( 6,302 ) 7,424 8,873 ( c ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ) ( loss ) per share 0.85 ( 0.82 ) 0.96 1.15 ) per sha net income tax benefit increased net income by $ 2.4 billion for fiscal year 2019 2.4 billion for fiscal year 2019 . See Note 12 \u2013 year 2019 . See Note 12 \u2013 Income Taxes for further increased ) diluted EPS $ 0.02 for the second quarter , second quarter , $ ( 0.34 ) for the fourth quarter quarter , and $ ( 0.31 ) for fiscal year 2019 0.31 ) for fiscal year 2019 . ( c ) Reflects of the TCJA of $ 13.8 billion for the second quarter second quarter , $ ( 104 ) million for the fourth fourth quarter , and $ 13.7", + "assets": "Assets Current million ) June 30 , 2019 2018 Assets Current asset : ) June 30 , 2019 2018 Assets Current asset : Cash Cash and cash equivalent $ 11,356 $ 11,946 Short-term investment 122,463 cash equivalent $ 11,356 $ 11,946 Short-term investment 122,463 121,822 Total 11,356 $ 11,946 Short-term investment 122,463 121,822 Total cash , cash $ 11,946 Short-term investment 122,463 121,822 Total cash , cash equivalent equivalent , and short-term investment 133,819 133,768 Accounts receivable , net , and sh Assets Liabilities Assets Liabilities June 30 , 2019 June 30 , Assets Liabilities June 30 , 2019 June 30 , 2018 Changes June 30 , 2019 June 30 , 2018 Changes in Fair , 2019 June 30 , 2018 Changes in Fair Value Recorded Instruments Foreign exchange contract $ 0 $ 0 $ 174 $ exchange contract $ 0 $ 0 $ 174 $ 0 Changes $ 0 $ 0 $ 174 $ 0 Changes in Fair $ 0 $ 174 $ 0 Changes in Fair Value Recorded Hedging Instruments Foreign exchange contract 0 ( 93 ) 95 0 Foreign exchange contract 0 ( 93 ) 95 0 Not Design ASSETS The component Amortization Net Carrying Amount June 30 , 2019 2018 Technology-based $ Carrying Amount June 30 , 2019 2018 Technology-based $ 7,691 $ Amount June 30 , 2019 2018 Technology-based $ 7,691 $ ( , 2019 2018 Technology-based $ 7,691 $ ( 5,771 ) $ Technology-based $ 7,691 $ ( 5,771 ) $ 1,920 $ 7,220 $ ( 5,771 ) $ 1,920 $ 7,220 $ ( 5,018 5,771 ) $ 1,920 $ 7,220 $ ( 5,018 ) $ 1,920 $ 7,220 $ ( 5,018 ) $ 2,202 Customer-related 4,709 $ ( 5,018 ) $ 2,202 Customer-related 4,709 ( 1,785 ) 5,01 Assets ) June 30 , 2019 2018 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 406 $ 460 Accruals , reserve compensation expense $ 406 $ 460 Accruals , reserve , and reserve , and other expense 2,287 1,832 Loss and credit carryforwards , and other expense 2,287 1,832 Loss and credit carryforwards 3,518 1,832 Loss and credit carryforwards 3,518 3,369 Depreciation and amortization 7,046 Loss and credit carryforwards 3,518 3,369 Depreciation and amortization 7,046 351 3,518", + "liabilities": "Liabilities and stockholder Total asset $ 286,556 $ 258,848 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 9,382 $ 8,617 Current portion of Accounts payable $ 9,382 $ 8,617 Current portion of long-term debt Current portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 5,516 3,998 Accrued compensation 6,830 6,103 Liabilities Assets Liabilities June 30 , 2019 June 30 , Assets Liabilities June 30 , 2019 June 30 , 2018 Changes June 30 , 2019 June 30 , 2018 Changes in Fair , 2019 June 30 , 2018 Changes in Fair Value Recorded Instruments Foreign exchange contract $ 0 $ 0 $ 174 $ exchange contract $ 0 $ 0 $ 174 $ 0 Changes $ 0 $ 0 $ 174 $ 0 Changes in Fair $ 0 $ 174 $ 0 Changes in Fair Value Recorded Hedging Instruments Foreign exchange contract 0 ( 93 ) 95 0 Foreign exchange contract 0 ( 93 ) 95 0 Not Designated contrac Liabilities Unrealized investment and debt $ ( 738 ) $ 0 Unearned revenue $ ( 738 ) $ 0 Unearned revenue ( 30 ) $ 0 Unearned revenue ( 30 ) ( 639 ) Depreciation revenue ( 30 ) ( 639 ) Depreciation and amortization 0 639 ) Depreciation and amortization 0 ( 1,164 ) Leasing asset Depreciation and amortization 0 ( 1,164 ) Leasing asset ( 1,510 1,164 ) Leasing asset ( 1,510 ) ( 1,366 ) Deferred asset ( 1,510 ) ( 1,366 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,607 ) ( 61 ) Other liability (", + "equity": "Equity Securities 30 Item 6 . Selected Financial of Equity Securities 30 Item 6 . Selected Financial Data 31 6 . Selected Financial Data 31 Item 7 . Management \u2019 Selected Financial Data 31 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 32 Item 7A . Quantitative and Results of Operations 32 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 30 PART II Item 6 ITEM . 30 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2019 ( a ) Year Ended June 30 , 2019 ( a ) 2018 2017 , 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) 2015 Revenue ) 2016 ( d ) 2015 Revenue $ 125,843 $ 110,360 d ) 2015 Re equity Long-term obligation 114,806 117,642 106,856 66,705 44,574 Stockholders \u2019 equity 102,330 obligation 114,806 117,642 106,856 66,705 44,574 Stockholders \u2019 equity 102,330 82,718 66,705 44,574 Stockholders \u2019 equity 102,330 82,718 87,711 83,090 80,083 ( 44,574 Stockholders \u2019 equity 102,330 82,718 87,711 83,090 80,083 ( a Stockholders \u2019 equity 102,330 82,718 87,711 83,090 80,083 ( a ) \u2019 equity 102,330 82,718 87,711 83,090 80,083 ( a ) GitHub equity 102,330 82,718 87,711 83,090 80,083 ( a ) GitHub ha Equity investment June 30 , 2019 and 2018 . Equity investment were $ . Equity investment were $ 2.6 billion and $ 1.9 billion $ 2.6 billion and $ 1.9 billion a of June 30 1.9 billion a of June 30 , 2019 and 2018 , a of June 30 , 2019 and 2018 , respectively . June 30 , 2019 and 2018 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using int Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 17 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 44 PART II Item 7 Off-Balance . 44 PART II Item 7 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) : ( In million ) 2020 2021-2022 2023-2024 Thereafter Equity 10 224 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 244 ) Earnings 50 PART II price ( 244 ) Earnings 50 PART II Item 8 ITEM Earnings 50 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2019 2018 2017 Revenue Year Ended June 30 , 2019 2018 2017 Revenue : Product Ended June 30 , 2019 2018 2017 Revenue : Product $ June 30 , 2019 2018 2017 Revenue : Product $ 66,069 2017 Revenue : Product $ 66,069 Equity investment 2,649 1,862 Operating lease right-of-use asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible 7,379 6,686 Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset , net investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset , net 7,750 35,683 Intangible asset , net 7,750 8,053 Other long-term asset 14,723 Inta equity liability : Accounts payable $ 9,382 $ 8,617 Current portion of Accounts payable $ 9,382 $ 8,617 Current portion of long-term debt Current portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 2,121 6,830 6,103 Short-term income tax 5,665 2,121 Shor equity ) Total stockholder \u2019 equity 102,330 82,718 Total liability and stockholder Total stockholder \u2019 equity 102,330 82,718 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 286,556 $ 258,848 Refer to accompanying \u2019 equity $ 286,556 $ 258,848 Refer to accompanying note . Refer to accompanying note . 53 PART II Item 8 CASH . 53 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2019 2018 2017 Operations Year Ended June 30 , 2019 2018 2017 Operations Net income Ended June equity $ Total stockholder \u2019 equity $ 102,330 $ 82,718 $ 87,711 Cash \u2019 equity $ 102,330 $ 82,718 $ 87,711 Cash dividend declared $ 102,330 $ 82,718 $ 87,711 Cash dividend declared per common declared per common share $ 1.84 $ 1.68 $ 1.56 Refer common share $ 1.84 $ 1.68 $ 1.56 Refer to accompanying $ 1.84 $ 1.68 $ 1.56 Refer to accompanying note . Refer to accompanying note . 55 PART II Item 8 NOTES . 55 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICIE Equity Investments June 30 , 2019 Changes in Fair Equity Investments June 30 , 2019 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,211 $ 0 $ Commercial paper Level 2 $ 2,211 $ 0 $ 0 $ Level 2 $ 2,211 $ 0 $ 0 $ 2,211 $ $ 2,211 $ 0 $ 0 $ 2,211 $ 1,773 $ $ 0 $ 0 $ 2,211 $ 1,773 $ 438 $ $ 0 $ 2,211 $ 1,773 $ 438 $ 0 Certificates $ 2,211 $ 1,773 $ 438 $ 0 Certificates of deposit $ 1,773 $ 438 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,018 0 0 2 Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investment $ 3 equity investment $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 0 Derivatives $ 3,771 $ 3,771 $ 0 $ 0 Derivatives , net $ 3,771 $ 0 $ 0 Derivatives , net ( a net ( a ) ( 13 ) 0 ( 13 ) a ) ( 13 ) 0 ( 13 ) 0 Total ( 13 ) 0 ( 13 ) 0 Total $ 136,468 ) 0 ( 13 ) 0 Total $ 136,468 $ 11,356 13 ) 0 Total $ 136,468 $ 11,356 $ 122,463 $ 0 Total $ 136,468 $ 11,356 $ 122,463 $ 2,649 Equity Investments June 30 , 2018 Changes in Fair Equity Investments June 30 , 2018 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,513 $ 0 $ Commercial paper Level 2 $ 2,513 $ 0 $ 0 $ Level 2 $ 2,513 $ 0 $ 0 $ 2,513 $ $ 2,513 $ 0 $ 0 $ 2,513 $ 2,215 $ $ 0 $ 0 $ 2,513 $ 2,215 $ 298 $ $ 0 $ 2,513 $ 2,215 $ 298 $ 0 Certificates $ 2,513 $ 2,215 $ 298 $ 0 Certificates of deposit $ 2,215 $ 298 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,058 0 0 2 Equity $ 129,475 $ 7,758 $ 121,717 $ 0 Equity investment Level $ 7,758 $ 121,717 $ 0 Equity investment Level 1 $ $ 0 Equity investment Level 1 $ 533 $ 246 $ Equity investment Level 1 $ 533 $ 246 $ 0 $ Level 1 $ 533 $ 246 $ 0 $ 287 Equity $ 533 $ 246 $ 0 $ 287 Equity investment Level $ 246 $ 0 $ 287 Equity investment Level 3 18 $ 287 Equity investment Level 3 18 0 0 18 Equity 287 Equity investment Level 3 18 0 0 18 Equity investment Equity investment Level 3 18 0 0 18 Equity investment Other investment Equity investment Other 1,558 Level 3 18 0 0 18 Equity investment Other 1,558 0 0 18 Equity investment Other 1,558 0 1 1,557 Total equity 18 Equity investment Other 1,558 0 1 1,557 Total equity investment Equity investment Other 1,558 0 1 1,557 Total equity investment $ investment Other 1,558 0 1 1,557 Total equity investment $ 2,109 1,557 Total equity investment $ 2,109 $ 246 $ 1 $ equity investment $ 2,109 $ 246 $ 1 $ 1,862 Cash $ 2,109 $ 246 $ 1 $ 1,862 Cash $ 3,942 $ 246 $ 1 $ 1,862 Cash $ 3,942 $ equity investment June 30 , 2019 and 2018 , equity investment without readily price or impairment were $ 1.2 billion and $ 697 million $ 1.2 billion and $ 697 million , respectively . As respectively . As of June 30 , 2019 , we had As of June 30 , 2019 , we had no collateral security . As of June 30 , 2018 , collateral received As of June 30 , 2018 , collateral received under agreement for loaned security wa $ 1.8 billion and primarily comprised U.S. unrealized loss for le than 12 month and 12 month o Equity contract purchased 680 Foreign exchange contract sold 15,614 13,374 Equity contract purchased 680 49 15,614 13,374 Equity contract purchased 680 49 Equity contract sold 5 13,374 Equity contract purchased 680 49 Equity contract sold 5 5 680 49 Equity contract sold 5 5 Other contract purchased 1,327 49 Equity contract sold 5 5 Other contract purchased 1,327 878 5 5 Other contract purchased 1,327 878 Other contract sold 451 5 Other contract purchased 1,327 878 Other contract sold 451 472 1,327 878 Equity contract ( 172 ) 256 ( 197 ) Equity contract 38 0 ( 197 ) Equity contract 38 0 2 ( 7 ) 197 ) Equity contract 38 0 2 ( 7 ) Other ) Equity contract 38 0 2 ( 7 ) Other contract contract 38 0 2 ( 7 ) Other contract 8 ( ( 7 ) Other contract 8 ( 7 ) 11 ( ) Other contract 8 ( 7 ) 11 ( 3 ) contract 8 ( 7 ) 11 ( 3 ) Gross amount ( 7 ) 11 ( 3 ) Gross amount of derivative ) Gross amount of derivative 250 ( 272 ) 538 ( amount of derivative 250 ( 272 ) 538 ( 207 ) derivative 250 ( 272 ) 538 ( 207 ) Gross am Equity of ineffectiveness $ 168 $ 103 $ 55 Equity Contracts Derivatives $ 168 $ 103 $ 55 Equity Contracts Derivatives $ 0 55 Equity Contracts Derivatives $ 0 $ ( 324 ) $ Derivatives $ 0 $ ( 324 ) $ ( 74 ) ( 324 ) $ ( 74 ) Hedged item 0 324 ( 74 ) Hedged item 0 324 74 Total amount of 74 ) Hedged item 0 324 74 Total amount of ineffectiveness ) Hedged item 0 324 74 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 equity contract excluded excluded from effectiveness assessment $ 0 $ 80 $ ( 80 effectiveness assessment $ 0 $ 80 $ ( 80 ) Cash 0 $ 80 $ ( 80 ) Cash Flow Hedge Gains million ) Year Ended June 30 , 2019 2018 2017 Effective Year Ended June 30 , 2019 2018 2017 Effective Portion Gains Ended June 30 , 2019 2018 2017 Effective Portion Gains recognized June 30 , 2019 2018 2017 Effective Portion Gains recognized in net of tax of $ 1 , $ 11 , and of $ 1 , $ 11 , and $ 4 $ $ 11 , and $ 4 $ 159 $ 219 $ , and $ 4 Equity contract 3 ( ( 117 ) Equity contract 3 ( 87 ) ( 114 ) Equity contract 3 ( 87 ) ( 114 ) Other 3 ( 87 ) ( 114 ) Other contract 35 ( ( 114 ) Other contract 35 ( 17 ) ( 3 ) Other contract 35 ( 17 ) ( 3 ) Total 35 ( 17 ) ( 3 ) Total $ ( 59 3 ) Total $ ( 59 ) $ ( 137 ) ( 59 ) $ ( 137 ) $ ( 234 ) ( 137 ) $ ( 234 ) 71 PART II Item ) $ ( 234 ) 71 PART II Item 8 NOTE ) 71 PART II Item 8 NOTE 6 \u2014 INVENTORIES The PART II Item 8 NOTE 6 \u2014 INVENTORIES The component of ( In million ) June 30 , 2019 2018 Raw ma EQUITY Shares million ) Year Ended June 30 , 2019 2018 2017 Balance Year Ended June 30 , 2019 2018 2017 Balance , beginning Ended June 30 , 2019 2018 2017 Balance , beginning of June 30 , 2019 2018 2017 Balance , beginning of year Balance , beginning of year 7,677 7,708 7,808 Issued 116 68 , beginning of year 7,677 7,708 7,808 Issued 116 68 70 beginning of year 7,677 7,708 7,808 Issued 116 68 70 Repurchased year 7,677 7,708 7,808 Issued 116 68 70 Repurchased ( 150 7,677 7,708 7,808 Issued 116 68 70 Re Equity Statements 55 54 Stockholders \u2019 Equity Statements 55 Notes to Financial Statements 56 55 Notes to Financial Statements 56 Report of Independent Registered Public Independent Registered Public Accounting Firm 93 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2", + "cash_flow": "cash flow statement . 63 PART II Item 8 Recent . 63 PART II Item 8 Recent Accounting Guid ance Not for Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted \u2013 Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard , and system . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2019 2018 Cash Flow Hedge Gains million ) Year Ended June 30 , 2019 2018 2017 Effective Year Ended June 30 , 2019 2018 2017 Effective Portion Gains Ended June 30 , 2019 2018 2017 Effective Portion Gains recognized June 30 , 2019 2018 2017 Effective Portion Gains recognized in net of tax of $ 1 , $ 11 , and of $ 1 , $ 11 , and $ 4 $ $ 11 , and $ 4 $ 159 $ 219 $ , and $ 4 $ 159 $ 219 $ 328 Gains $ 4 $ 159 $ 219 $ 328 Gains reclassified from $ 159 $ 219 $ 328 Gains reclassified from accumulated other ( loss ) into re cash flow information related million ) Year Ended June 30 , 2019 2018 2017 Cash Year Ended June 30 , 2019 2018 2017 Cash paid for Ended June 30 , 2019 2018 2017 Cash paid for amount June 30 , 2019 2018 2017 Cash paid for amount included flow from operating lease $ 1,670 $ 1,522 $ 1,157 Operating operating lease $ 1,670 $ 1,522 $ 1,157 Operating cash flow $ 1,670 $ 1,522 $ 1,157 Operating cash flow from finance cash flow from finance lease 247 175 68 Financing cash flow flow from finance lease 247 175 68 cash flow from from finance lease 247 175 68 Financing cash flow from finance cash flow from finance lease 221 144 46 Right-of-use asset obtained flow from finance lease 221 144 46 Right-of-use asset obtained in from finance lease 221 144 46 Right-of-use asset obtained in exchange lease obligation : Operating lease 2,303 1,571 1,270 Finance lease 2,532 obligation : Operating lease 2,303 1,571 1,270 Finance lease 2,532 1,933 : Operating lease 2,303 1,571 1,270 Finance lease 2,532 1,933 1,773 2,303 1,571 1", + "operating_margin": "operating margin . 17 PART I Item 1A Business . 17 PART I Item 1A Business model competition Companies compete margin and operating income . 18 PART I Item 1A We . 18 PART I Item 1A We make significant investment in Windows operating system , Microsoft 365 , Office , Bing , Server , Azure , Office 365 , Xbox Live , Mixer business strategy . In December 2016 , we completed our acquisition LinkedIn \u201d ) for $ 27.0 billion , and in October billion , and in October 2018 , we completed our acquisition GitHub , Inc. f", + "gross_margin": "Gross margin 82,933 $ 96,571 $ 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 35,058 margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 35,058 29,025 62,310 58,374 60,542 Operating income 42,959 Gross margin 110,360 $ 96,571 14 % 14 % Gross margin 82,933 72,007 % 14 % Gross margin 82,933 72,007 62,310 15 % 16 14 % Gross margin 82,933 72,007 62,310 15 % 16 % % Gross margin 82,933 72,007 62,310 15 % 16 % Operating Gross margin 82,933 72,007 62,310 15 % 16 % Operating income 82,933 72,007 62,310 15 % 16 % Operating income 42,959 35,058 % 16 % Operating income 42,959 35,058 29,025 23 % 21 16 % Operating income 42,959 35,058 29,025 23 % 21 % % Operating income 42,959 35,058 29,025 23 % 21 % Net Operatin Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial . Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , driven by growth Cost of revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven by growth and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and marketing expense i Gross margin increased $ 9.7 7 Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by growth LinkedIn operating loss increased $ 63 million to $ 987 million $ 63 million to $ 987 million , including $ 1.5 987 million , including $ 1.5 billion of amortization of intangible favorable foreign currency impa Gross margin \u2022 Gross margin increased $ 4.1 billion or 15 % , increased $ 4.1 billion or 15 % , driven by growth improvement in LinkedIn and Office 365 Commercial , offset in part \u2022 Operating expense increased $ 806 million or 6 % , increased $ 806 million or 6 % , driven by investment Intelligent Cloud Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . \u2022 Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure rev Gross margin \u2022 Gross margin increased $ 4.8 billion or 22 % , increased $ 4.8 billion or 22 % , driven by growth \u2022 Operating expense increased $ 2.4 billion or 22 % , increased $ 2.4 billion or 22 % , driven by investment Personal Computing Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth . Windows Commercial revenue increased 14 % , driven by an . Windows OEM reven Gross margin \u2022 Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , driven by growth \u2022 Operating expense decreased $ 172 million or 1 % . decreased $ 172 million or 1 % . 36 PART II million or 1 % . 36 PART II Item 7 Fiscal . 36 PART II Item 7 Fiscal Year 2018 Compared with II Item 7 Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Productivity and Business Processes Revenue Business Processes Revenue increased $ 6.0 billion or 20 % . increased $ Gross margin \u2022 Gross margin increased $ 4.4 billion or 19 % , increased $ 4.4 billion or 19 % , driven by LinkedIn margin percentage improvement in Office 365 Commercial and LinkedIn . LinkedIn cost of revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired \u2022 Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ Gross margin \u2022 Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , driven by growth \u2022 Operating expense increased $ 683 million or 7 % , increased $ 683 million or 7 % , driven by investment Personal Computing Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM Gross margin \u2022 Gross margin increased $ 2.2 billion or 11 % , increased $ 2.2 billion or 11 % , driven by growth \u2022 Operating expense increased $ 391 million or 3 % , increased $ 391 million or 3 % , driven by investment restructuring expense . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 We did not incur Corporate Other activity in fiscal year 2019 or 2018 . Fiscal Year in fiscal year 2019 or 2018 . Fiscal Year 2018 Compared or 2018 . Fiscal Year 2018 Compared with Fis Gross margin 82,933 Total cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 16,876 34,261 Gross margin 82,933 72,007 62,310 Research and development 16,876 14,726 72,007 62,310 Research and development 16,876 14,726 13,037 Sales and marketing 62,310 Research and development Gross margin 19,179 $ 30,571 $ 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 10,341 20,401 23,305 82,933 Operating income 9,955 Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 17,550 20,343 72,007 Operating income 7,708 8,6", + "accumulated_depreciation": "accumulated depreciation of $ 35,330 and $ 29,223 36,477 29,460 of $ 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use $ 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use asset 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use asset 7,379 29,460 Operating lease right-of-use asset 7,379 6,686 Equity investment 2,649 1,862 Operating lease right-of-use asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intan Accumulated depreciation ( 35,330 Total , at cost 71,807 58,683 Accumulated depreciation ( 35,330 ) 71,807 58,683 Accumulated depreciation ( 35,330 ) ( 29,223 ) Total depreciation ( 35,330 ) ( 29,223 ) Total , net $ ) Total , net $ 36,477 $ 29,460 During fiscal year , net $ 36,477 $ 29,460 During fiscal year 2019 , $ 29,460 During fiscal year 2019 , 2018 , and 2017 During fiscal year 2019 , 2018 , and 2017 , depreciation 2019 , 2018 , and 2017 , depreciation expense wa $ , depreciation expense wa $ 9.7 billion , $ 7.7 Accumulated depreciation ( at cost $ 7,041 $ 4,543 Accumulated depreciation ( 774 ) $ 4,543 Accumulated depreciation ( 774 ) ( 404 ) Property depreciation ( 774 ) ( 404 ) Property and equipment , and equipment , net $ 6,267 $ 4,139 Other current liability , net $ 6,267 $ 4,139 Other current liability $ 317 4,139 Other current liability $ 317 $ 176 Other long-term liability current liability $ 317 $ 176 Other long-term liability 6,257 4,125 $ 176 Other long-term liability 6,257 4,125 Total finance lease liability 176 Ot", + "debt": "debt . Refer to Note 11 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) Three Months Ending , September 30 , 2019 $ 12,353 December Ending , September 30 , 2019 $ 12,353 December 31 , September 30 , 2019 $ 12,353 D debt In million ) 2020 2021-2022 2023-2024 Thereafter Total Long-term debt : a ) Principal payment $ 5,518 $ 11,744 $ 8,000 $ Principal payment $ 5,518 $ 11,744 $ 8,000 $ 47,519 $ $ 5,518 $ 11,744 $ 8,000 $ 47,519 $ 72,781 Interest $ 11,744 $ 8,000 $ 47,519 $ 72,781 Interest payment 2,299 $ 8,000 $ 47,519 $ 72,781 Interest payment 2,299 4,309 3,818 47,519 $ 72,781 Interest payment 2,299 4,309 3,818 29,383 39,809 Construction $ 72,781 Interest payment 2,299 4,309 3,818 29,383 39,809 Construction comm Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 15 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 14.2 billion from the amount pr debt Current portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 2,121 6,830 6,103 Short-term income tax 5,665 2,121 Short-term unearned revenue 32,676 6,103 Short-term income tax 5,665 2,121 Short-term unearned revenue 32,676 28,905 5,665 2,121 Short- debt 66,662 72,242 8,744 Total current liability 69,420 58,488 Long-term debt 66,662 72,242 Long-term liability 69,420 58,488 Long-term debt 66,662 72,242 Long-term income tax 29,612 69,420 58,488 Long-term debt 66,662 72,242 Long-term income tax 29,612 30,265 66,662 72,242 Long-term income tax 29,612 30,265 Long-term unearned revenue 4,530 72,242 Long-term income tax 29,612 30,265 Long-term unearned revenue 4,530 3,815 29,612 30,265 Long-term unearned revenue 4,530 3,815 Deferred income tax 233 30, debt short-term debt , maturity of 90 day or le , net day or le , net 0 ( 7,324 ) ( 4,963 le , net 0 ( 7,324 ) ( 4,963 ) Proceeds 0 ( 7,324 ) ( 4,963 ) Proceeds from issuance of Proceeds from issuance of debt 0 7,183 44,344 Repayments of debt from issuance of debt 0 7,183 44,344 Repayments of debt ( issuance of debt 0 7,183 44,344 Repayments of debt ( 4,000 44,344 Repayments of debt ( 4,000 ) ( 10,060 ) ( debt ( 4,000 ) ( 10,060 ) ( 7,922 ) Common ) ( 10,060 ) ( 7,922 ) Common stock issued 1,142 7,9 Debt . 60 PART II Item 8 Debt investment are classified a level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include actively traded on exchange . 61 PART II Item 8 \u2022 . 61 PART II Item 8 \u2022 Level 2 \u2013 input II Item 8 \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability prim debt 3 7 0 0 7 0 7 0 Total debt investment 7 0 0 7 0 7 0 Total debt investment $ 0 0 7 0 7 0 Total debt investment $ 127,747 0 Total debt investment $ 127,747 $ 2,027 $ ( 122 debt investment $ 127,747 $ 2,027 $ ( 122 ) $ 127,747 $ 2,027 $ ( 122 ) $ 129,652 $ 7,176 $ ( 122 ) $ 129,652 $ 7,176 $ 122,476 $ 122 ) $ 129,652 $ 7,176 $ 122,476 $ 0 Changes $ 129,652 $ 7,176 $ 122,476 $ 0 Changes in Fair $ 7,176 $ 122,476 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 973 $ 409 $ E debt 37 ( 1 ) 307 0 307 0 Total debt investment ( 1 ) 307 0 307 0 Total debt investment $ 1 ) 307 0 307 0 Total debt investment $ 130,597 0 Total debt investment $ 130,597 $ 125 $ ( 1,247 debt investment $ 130,597 $ 125 $ ( 1,247 ) $ 130,597 $ 125 $ ( 1,247 ) $ 129,475 $ 7,758 $ ( 1,247 ) $ 129,475 $ 7,758 $ 121,717 $ 1,247 ) $ 129,475 $ 7,758 $ 121,717 $ 0 Equity $ 129,475 $ 7,758 $ 121,717 $ 0 Equity investment Level $ 7,758 $ 121,717 $ 0 Equity investment Level 1 $ $ 0 Equity investment Level 1 $ debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2019 June 30 , million ) June 30 , 2019 June 30 , 2018 Designated June 30 , 2019 June 30 , 2018 Designated a Hedging , 2019 June 30 , 2018 Designated a Hedging Instruments Foreign Foreign exchange contract sold $ 6,034 $ 11,101 Not Designated a contract sold $ 6,034 $ 11,101 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 14,889 9,425 Foreign exchange contract sold Foreign exchange contra debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not sheet . Refer to Note 11 \u2013 Debt for further information Weighted Average L DEBT Short-term 2,003 Total $ 7,750 NOTE 11 \u2014 DEBT Short-term Debt As Short-term Debt As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , we had June 30 , 2019 and 2018 , we had no commercial or outstanding . Effective August 31 , 2018 , we terminated . Effective August 31 , 2018 , we terminated our credit Long-term Debt As of June 30 , 2019 , the total As of June 30 , 2019 , the total carrying value current portion , were $ 72.2 billion and $ 78.9 billion $ 72.2 billion and $ 78.9 billi debt our debt for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 wa $ 2019 , 2018 , and 2017 wa $ 2.4 billion , , and 2017 wa $ 2.4 billion , $ 2.4 billion $ 2.4 billion , $ 2.4 billion , and $ 1.6 2.4 billion , and $ 1.6 billion , respectively . As respectively . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , the aggregate June 30 , 2019 and 2018 , the aggregate debt issuance current portion , were $ 603 million and $ 658 million $ 603 million and $ 658 m debt million ) Year Ending June 30 , 2020 $ 5,518 2021 Year Ending June 30 , 2020 $ 5,518 2021 3,750 2022 June 30 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 30 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 47,519 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 4 debt $ ( 738 ) $ 0 Unearned revenue $ ( 738 ) $ 0 Unearned revenue ( 30 ) $ 0 Unearned revenue ( 30 ) ( 639 ) Depreciation revenue ( 30 ) ( 639 ) Depreciation and amortization 0 639 ) Depreciation and amortization 0 ( 1,164 ) Leasing asset Depreciation and amortization 0 ( 1,164 ) Leasing asset ( 1,510 1,164 ) Leasing asset ( 1,510 ) ( 1,366 ) Deferred asset ( 1,510 ) ( 1,366 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,607 ) ( 61 ) Other liability ( 2,607 ) ( 61 ) Other ( 291 ) (", + "share_repurchase": "share repurchase 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share repurchase were 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2019 : Declaration Date Record Date ( In million ) June 12 , 2019 August 15 , million ) June 12 , 2019 August 15 , 2019 September June 12 , 2019 August 15 , 2019 September 12 , , 2019 August 15 , 2019 September 12 , 2019 $ August 15 , 20 share repurchase and dividend . 30 PART II Item 6 ITEM . 30 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2019 ( a ) Year Ended June 30 , 2019 ( a ) 2018 2017 , 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) 2015 Revenue ) 2016 ( d ) 2015 Revenue $ 125,843 $ 110,360 d ) 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 91,154 $ $ 125,843 $ 110,360 $ 96,571 share repurchase program ( \u201c 2013 Share Repurchase Program \u201d ) ) authorizing up to $ 40.0 billion in share repurchase . in share repurchase . The 2013 Share Repurchase Program became effective Program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an addition share repurchase ( in share repurchase ( \u201c 2016 Share Repurchase Program \u201d ) repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the 2013 2016 following completion of the 2013 Share Repurchase Program , ha notice . As of June 30 , 2019 , $ 11.4 As of June 30 , 2019 , $ 11.4 billion remained 30 , 2019 , $ 11.4 billion remained of the 2016 11.4 billion remained of the 2016 Share Repurchase Program . 85 2016 Share Repurchase Program . 8 Share Repurchase Program . All share repurchased were under the 2016 Share Repurchase Program . The of stock award of $ 2.7 billion , $ 2.1 billion $ 2.7 billion , $ 2.1 billion , and $ 1.5 2.1 billion , and $ 1.5 billion for fiscal year 2019 1.5 billion for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . All share Per Share Amount Fiscal Year 2019 ( In million ) September ( In million ) September 18 , 2018 November 15 , million ) ", + "earnings_per_share": "earnings per share 5.06 ( b ) 2.13 ( share 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) 1.48 ( ) 2.56 ( g ) 1.48 ( h ) Cash dividend Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 Cash , declared per share 1.84 1.68 1.56 1.44 1.24 Cash , cash per share 1.84 1.68 1.56 1.44 1.24 Cash , cash equivalent share 1.84 1.68 1.56 1.44 1.24 Cash , cash equivalent , equivalent , and short-term investment 133,819 133,76 earnings per share 5.06 2.13 3.25 138 % ( Diluted earnings per share 5.06 2.13 3.25 138 % ( 34 earnings per share 5.06 2.13 3.25 138 % ( 34 ) per share 5.06 2.13 3.25 138 % ( 34 ) % 2.13 3.25 138 % ( 34 ) % Non-GAAP operating income ) % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP net 42,959 35,058 29,331 23 % 20 % Non-GAAP earnings per share 4.75 3.88 3.29 22 % 18 diluted earnings per share 4.75 3.88 3.29 22 % 18 % earnings per share 4.75 3.88 3.29 22 % 18 % Non-GAAP per share 4.75 3.88 3.29 22 % 18 % Non-GAAP operating 4.75 3.88 3.29 22 % 18 % Non-GAAP operating income , financial result . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increase earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Fiscal year , respectively . Fiscal year 2017 operating income , net income and diluted EPS of $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . SEGMENT RESULTS million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus earnings per share Diluted earnings per share $ 5.06 $ 2.13 $ 3.25 138 per share $ 5.06 $ 2.13 $ 3.25 138 % ( $ 5.06 $ 2.13 $ 3.25 138 % ( 34 ) 5.06 $ 2.13 $ 3.25 138 % ( 34 ) % $ 3.25 138 % ( 34 ) % Net tax impact transfer of intangible property ( 0.33 ) 0 0 * * intangible property ( 0.33 ) 0 0 * * Net tax property ( 0.33 ) 0 0 * * Net tax impact tax impact of the TCJA 0.02 1.75 0 * * Restructuring impact of the TCJA 0.02 1.75 0 * * Restructuring expense of the TCJA 0.02 1.75 0 * * Restructuring expense 0 0 * * earnings per share $ 4.75 $ 3.88 $ 3.29 22 per share $ 4.75 $ 3.88 $ 3.29 22 % 18 $ 4.75 $ 3.88 $ 3.29 22 % 18 % * 4.75 $ 3.88 $ 3.29 22 % 18 % * Not 3.88 $ 3.29 22 % 18 % * Not meaningful . % * Not meaningful . 42 PART II Item 7 FINANCIAL . 42 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 133.8 billion a of both June billion a of both June 30 , 2019 and 2018 . of both June 30 , 2019 and 2018 . Equity investment June 30 , 2019 and 2018 . Equity investment were $ . Equity inves Earnings per share $ 39,240 $ 16,571 $ 25,489 Earnings per share : Basic per share : Basic $ 5.11 $ 2.15 $ 3.29 Diluted : Basic $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 $ 3.25 Weighted 3.29 Diluted $ 5.06 $ 2.13 $ 3.25 Weighted average share $ 5.06 $ 2.13 $ 3.25 Weighted average share outstanding : average share outstanding : Basic 7,673 7,700 7,746 Diluted 7,753 7,794 share outstanding : Basic 7,673 7,700 7,746 Diluted 7,753 7,794 7,832 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2019 2018 2017 Net Year Ended June 30 , 2019 2018 2017 Net income available Ended June 30 , 2019 2018 2017 Net income available for June 30 , 2019 2018 2017 Net income available for common shareholder ( A ) $ 39,240 $ 16,571 $ 25,489 Weighted A ) $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding share of common stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock ( B ) 7,673 7,700 7,746 Dilutive e Earnings Per Share equivalent ( C ) 7,753 7,794 7,832 Earnings Per Share Basic ( C ) 7,753 7,794 7,832 Earnings Per Share Basic ( Basic ( A/B ) $ 5.11 $ 2.15 $ 3.29 Diluted A/B ) $ 5.11 $ 2.15 $ 3.29 Diluted ( A/C $ 5.11 $ 2.15 $ 3.29 Diluted ( A/C ) $ Diluted ( A/C ) $ 5.06 $ 2.13 $ 3.25 Anti-dilutive A/C ) $ 5.06 $ 2.13 $ 3.25 Anti-dilutive stock-based award $ 5.06 $ 2.13 $ 3.25 Anti-dilutive stock-based award excluded from during the period presented . 64 PART II Item 8 NOTE . 64 PART II Item 8 NOTE 3 \u2014 OTHER earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were the earliest period presented . 74 PART II Item 8 Other . 74 PART II Item 8 Other During fiscal year 2019 8 Other During fiscal year 2019 , we completed 19 additional year 2019 , we completed 19 additional acquisition for $ 1.6 19 additional acquisition for $ 1.6 billion , substantially all of respec earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share ( per share ( b ) 1.14 1.08 1.14 1.71 5.06 Fiscal share ( b ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year ( b ) 1.14 1.08 1.1", + "tax_rate": "Tax Rate Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Our effective tax rate for tax rate for fiscal year 2019 and 2018 wa 10 % for fiscal year 2019 and 2018 wa 10 % and 55 year 2019 and 2018 wa 10 % and 55 % , 2018 wa 10 % and 55 % , respectively . The tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 and a $ 2.6 billion year 2018 and a $ 2.6 billion net income ta tax rate for tax rate for fiscal year 2018 and 2017 wa 55 % for fiscal year 2018 and 2017 wa 55 % and 15 year 2018 and 2017 wa 55 % and 15 % , 2017 wa 55 % and 15 % , respectively . The tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the the TCJA in fiscal year 2018 and the realization of tax business loss in fiscal year 2017 . Our effective tax rate service . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . In addition % effective January 1 , 2018 . In addition , the GILTI \u201d ) effective July 1 , 2018 . Under GAAP ) effective July 1 , 2018 . Under GAAP , we sheet . During fiscal year 2018 , we recorded a net a net charge of $ 13.7 billion related to the enactment deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred second quarter o tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . In addition % effective January 1 , 2018 . In addition , the on our GILTI effective July 1 , 2018 . Under GAAP GILTI effective July 1 , 2018 . Under GAAP , we sheet . During fiscal year 2018 , we recorded a net a net charge of $ 13.7 billion related to the enactment deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred second qu Tax Rate $ 43,688 $ 36,474 $ 29,901 Effective Tax Rate The item follows : Year Ended June 30 , 2019 2018 2017 Federal Year Ended June 30 , 2019 2018 2017 Federal statutory rate Ended June 30 , 2019 2018 2017 Federal statutory rate 21.0 June 30 , 2019 2018 2017 Federal statutory rate 21.0 % 2018 2017 Federal statutory rate 21.0 % 28.1 % 35.0 % Federal statutory rate 21.0 % 28.1 % 35.0 % Effect of rate 21.0 % 28.1 % 35.0 % Effect of : Foreign taxed at lower rate ( 4.1 ) % ( 7.8 ) ( 4.1 ) % ( 7.8 ) % ( 11. tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 , and a $ 2.6 2018 , and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the business loss in fiscal year 2017 . The component of the ( In million ) June 30 , 2019 2018 Deferred tax rate for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 by $ 2019 , 2018 , and 2017 by $ 12.0 billion , , and 2017 by $ 12.0 billion , $ 11.3 billion $ 12.0 billion , $ 11.3 billion , and $ 10.2 11.3 billion , and $ 10.2 billion , respectively . As respectively . As of June 30 , 2019 , 2018 , As of June 30 , 2019 , 2018 , and 2017 June 30 , 2019 , 2018 , and 2017 , we 2019 , 2018 , and 2017 , we had accrued interest uncertain tax position of $ 3.4 billion , $ 3.0 billion $", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Office 365 subscription and Office licensed on-premises business solution , including Dynamics 365 , a set of cloud-based Office licensed on-premises to Office 365 . CALs provide certain Office Office licensed on-premises to Office 3 Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2019 2018 2017 Percentage Change 2019 per share amount ) 2019 2018 2017 Percentage Change 2019 Versus share amount ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 20 Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine license . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , long-term account June 30 , 2019 and 2018 , long-term account receivable , doubtful account , wa $ 2.2 billion and $ 1.8 billion $ 2.2 billion and $ 1.8 billion , respectively , and mi GEOGRAPHIC Office Commercial , including Office 365 subscription and Office licensed on-premises , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Office 365 subscription and Office licensed on-premises business solution , including Dynamics 365 , a set of cloud-based royalty . \u2022 Search . 89 PART II Item 8 Revenue . 89 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2019 2018 2017 Revenue Year Ended June 30 , 2019 2018 2017 Revenue Produc", + "common_stock": "COMMON STOCK , $ 0.00000625 par value per share MSFT value per share MSFT NASDAQ 2.125 % Notes due 2021 MSFT NASDAQ 2.125 % Notes due 2021 MSFT New York Stock Exchange MSFT New York Stock Exchange 3.125 % Notes due 2028 MSFT Exchange 3.125 % Notes due 2028 MSFT New York Stock Exchange MSFT New York Stock Exchange 2.625 % Notes due 2033 MSFT Exchange 2.625 % Notes due 2033 MSFT New York Stock Exchange Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . fi common stock outstanding to be held on December 4 , 2019 are incorporated by held on December 4 , 2019 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2019 INDEX Page PART Year Ended June 30 , 2019 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 It common stock stock repurchase and a $ 1.1 billion increase in dividend paid in part by a $ 6.2 billion decrease in repayment of used in investing increased $ 9.7 billion to $ 15.8 billion $ 9.7 billion to $ 15.8 billion for fiscal year 2019 15.8 billion for fiscal year 2019 , mainly due to a mainly due to a $ 6.0 billion decrease in cash from and maturity , a $ 2.3 billion increase in addition to equipment , and a $ 1.5 billion increase in cash used intangible and other asset . 43 PART II Item 7 Fiscal . 43 common stock for $ 16.8 billion , $ 8.6 billion $ 16.8 billion , $ 8.6 billion , and $ 10.3 8.6 billion , and $ 10.3 billion , respectively , through resource . Refer to Note 17 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 17 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 44 PART II Item 7 Off-Balance . 44 PART II Common stock issued 1,142 7,922 ) Common stock issued 1,142 1,002 772 Common stock repurchased ) Common stock issued 1,142 1,002 772 Common stock repurchased ( Common stock issued 1,142 1,002 772 Common stock repurchased ( 19,543 772 Common stock repurchased ( 19,543 ) ( 10,721 ) ( repurchased ( 19,543 ) ( 10,721 ) ( 11,788 ) Common ) ( 10,721 ) ( 11,788 ) Common stock cash dividend stock cash dividend paid ( 13,811 ) ( 12,699 ) ( paid ( 13,811 ) ( 12,699 ) ( 11,845 ) Other ) ( 12,699 ) ( 11,845 ) Other , n Common stock and Ended June 30 , 2019 2018 2017 Common stock and paid-in June 30 , 2019 2018 2017 Common stock and paid-in capital , beginning of period $ 71,223 $ 69,315 $ 68,178 Common of period $ 71,223 $ 69,315 $ 68,178 Common stock issued $ 71,223 $ 69,315 $ 68,178 Common stock issued 6,829 1,002 $ 68,178 Common stock issued 6,829 1,002 772 Common stock repurchased 68,178 Common stock issued 6,829 1,002 772 Common stock repurchased ( Common stock issued 6,829 1,002 772 Common stock repurchased ( 4,195 Common stock repurchased ( 4,195 ) ( 3,033 ) ( repurchased ( 4,195 ) ( 3,033 ) ( 2,987 ) Stock-based ) ( 3,033 ) ( 2,987 ) Stock-based compensation expense 4,652 2,987 ) Stock-based compensation expense 4,652 3,940 3,266 Other , net ) Stock-based compensation expense 4,652 3,940 3,266 Other , net 11 Stock-based compensation expense 4,652 3,940 3,266 Other , net 11 ( 3,940 3,266 Other , net 11 ( 1 ) 86 Balance Other , net 11 ( 1 ) 86 Balance , end net 11 ( 1 ) 86 Balance , end of period Balance , end of peri Common stock cash 17,769 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend ( Common stock cash dividend ( 14,103 ) ( 12,917 ) ( dividend ( 14,103 ) ( 12,917 ) ( 12,040 ) Common ) ( 12,917 ) ( 12,040 ) Common stock repurchased ( ) Common stock repurchased ( 15,346 ) ( 7,699 ) ( repurchased ( 15,346 ) ( 7,699 ) ( 8,798 ) Cumulative ) ( 7,699 ) ( 8,798 ) Cumulative effect of accounting Cumulative effect of accounting change 677 ( common stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based award Dilutive effect of stock-based award 80 94 86 Common stock and effect of stock-based award 80 94 86 Common stock and common of stock-based award 80 94 86 Common stock and common stock stock equivalent ( C ) 7,753 7,794 7,832 Earnings Per Share equivalent ( C ) 7,753 7,794 7,832 Earnings Per Share Basic ( C ) 7,753 7,794 7,832 Earnin", + "hedging_activities": "Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted \u2013 Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard , and system . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2019 2018 2017 Net Year Ended June 30 , 2019 2018 2017 Net income available Ended June 30 , 2019 2018 2017 Net income avai", + "foreign_exchange_contracts": "Foreign Exchange Contracts Ended June 30 , 2019 2018 2017 Foreign Exchange Contracts Derivatives June 30 , 2019 2018 2017 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 38 $ 25 $ 441 Hedged Contracts Derivatives $ 38 $ 25 $ 441 Hedged item 130 $ 38 $ 25 $ 441 Hedged item 130 78 ( 25 $ 441 Hedged item 130 78 ( 386 ) Total $ 441 Hedged item 130 78 ( 386 ) Total amount Hedged item 130 78 ( 386 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 168 $ 103 $ 55 Equity of inef", + "derivative_instruments": "Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2019 June 30 , Assets Liabilities June 30 , 2019 June 30 , 2018 Changes June 30 , 2019 June 30 , 2018 Changes in Fair , 2019 June 30 , 2018 Changes in Fair Value Recorded Instruments Foreign exchange contract $ 0 $ 0 $ 174 $ exchange contract $ 0 $ 0 $ 174 $ 0 Changes $ 0 $ 0 $ 174 $ 0 Changes in Fair $ 0 $ 174 $ 0 Changes in Fair Value Recorded Hedging Instruments Foreign exchange contract 0 ( 93 ) 95 0 Foreign exchange contract 0 ( 93 ) 95 0 Not" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-20-034944/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-20-034944/full-submission_features.json new file mode 100644 index 0000000..37d3797 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-20-034944/full-submission_features.json @@ -0,0 +1,19 @@ +{ + "revenue": "revenue , which a curated library of over 100 first- and third-party console and those that enable productivity . 11 PART I Item 1 Devices . 11 PART I Item 1 Devices face competition from various experience and social interaction . 12 PART I Item 1 Internal . 12 PART I Item 1 Internal development allows u to have a portfolio of over 63,000 U.S. and international patent issued international patent issued and over 24,500 pending worldwide . While we research and development effort . 13 PART I Item 1 DIST revenue . 25 PART I Item 1A Third . 25 PART I Item 1A Third party may claim we product release such a Windows 10 , significant business transaction , product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may on which developer rely . 26 PART I Item 1A \u2022 . 26 PART I Item 1A \u2022 We may be required ability to realize revenue , example , compliance with the 2017 United States Tax Cuts and that determination is made . 28 PART I Item 1A We . 28 PART I Item 1A We earn a significant amount cause sale channel disruption . 29 PART I Item 1A Challenging . 29 PART I Item 1A Challenging economic condition also may to virtual-only through fiscal year 2021 . The COVID-19 pandemic ha fourth quarter of fiscal year 2020 , we have experienced adverse , and forward-looking guidance . 30 PART I Item 1A Measures . 30 PART I Item 1A M Revenue $ ( d ) Revenue $ 143,015 $ 125,843 $ 110,360 $ ) Revenue $ 143,015 $ 125,843 $ 110,360 $ 96,571 $ $ 143,015 $ 125,843 $ 110,360 $ 96,571 $ 91,154 Gross $ 125,843 $ 110,360 $ 96,571 $ 91,154 Gross margin 96,937 $ 110,360 $ 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 revenue recognition and operation starting on the December 8 , 2016 acquisition date . on the December 8 , 2016 acquisition date . ( f ( f ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( g ( g ) Includes $ 630 million of asset impairment charge our Phone business and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 millio revenue increased 36 % to $ 51.7 billion increased 36 % to $ 51.7 billion . \u2022 Office Commercial and cloud service revenue increased 12 % , driven by Office % , driven by Office 365 Commercial growth of 24 % Office 365 Commercial growth of 24 % . \u2022 Office Consumer and cloud service revenue increased 11 % , with continued growth with continued growth in Office 365 Consumer subscriber to 42.7 million Office 365 Consumer subscriber to 42.7 million . \u2022 LinkedIn revenue . \u2022 LinkedIn revenue increased 20 % . revenue increased 14 % , driven by Dynamics % , driven by Dynamics 365 growth of 42 % . by Dynamics 365 growth of 42 % . \u2022 Server product and cloud service revenue increased 27 % , driven by Azure driven by Azure growth of 56 % . \u2022 Enterprise Services \u2022 Enterprise Services revenue increased 5 % . \u2022 Windows Commercial and cloud service revenue increased 18 % . \u2022 Windows original OEM \u201d ) revenue increased 9 % . \u2022 Surface revenue . \u2022 Surface revenue increased 8 % . \u2022 Xbox content content and service reven revenue fourth quarter of fiscal year 2019 . Strengthening of the U.S. international operation in fiscal year 2020 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of . COVID-19 In fiscal year 2020 , the COVID-19 pandemic impacted ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of executed during the period . 36 PART II Item 7 Reportable . 36 PART II Item 7 Reportable Segments We report our segment is contain Revenue $ 143,015 2019 Percentage Change 2019 Versus 2018 Revenue $ 143,015 $ 125,843 2019 Versus 2018 Revenue $ 143,015 $ 125,843 $ 110,360 14 2018 Revenue $ 143,015 $ 125,843 $ 110,360 14 % 14 $ 143,015 $ 125,843 $ 110,360 14 % 14 % Gross 143,015 $ 125,843 $ 110,360 14 % 14 % Gross margin 125,843 $ 110,360 14 % 14 % Gross margin 96,937 82,933 % 14 % Gross margin 96,937 82,933 72,007 17 % 15 14 % Gross margin 96,937 82,933 72,007 17 % 15 % % Gross margin 96,937 82,933 72,007 17 % 15 % Operating Gross Revenue increased $ 17.2 billion Year 2019 Revenue increased $ 17.2 billion or 14 % , increased $ 17.2 billion or 14 % , driven by growth . Gross margin increased $ 14.0 billion or 17 % , increased $ 14.0 billion or 17 % , driven by growth cloud gross margin percentage increased 4 point to 67 % , percentage increased 4 point to 67 % , primarily driven by . Operating income increased $ 10.0 billion or 23 % , increased $ 10.0 billion or 23 % , driven by growth Cost of revenue increased $ 3.2 billion or 7 Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial , primarily from Azure . 39 PART II Item 7 Operating . 39 PART II Item 7 Operating income increased $ 7.9 7 Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , dri revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven by growth and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . Fiscal year 2019 2 % . Fiscal year 2019 net income included a $ net income included a $ 2.6 billion net income tax benefit property transfer and a $ Revenue Productivity and 2019 Percentage Change 2019 Versus 2018 Revenue Productivity and Business Processes Productivity and Business Processes $ 46,398 $ 41,160 $ 35,865 13 Business Processes $ 46,398 $ 41,160 $ 35,865 13 % 15 $ 46,398 $ 41,160 $ 35,865 13 % 15 % Intelligent 46,398 $ 41,160 $ 35,865 13 % 15 % Intelligent Cloud 41,160 $ 35,865 13 % 15 % Intelligent Cloud 48,366 38,985 % 15 % Intelligent Cloud 48,366 38,985 32,219 24 % 21 15 % Intelligent Cloud 48,366 38,985 32,219 24 % 21 % % Intellig Revenue Business Processes Revenue increased $ 5.2 billion or 13 % . increased $ 5.2 billion or 13 % . \u2022 Office Commercial cloud service revenue increased $ 3.1 billion or 12 % , increased $ 3.1 billion or 12 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial revenue grew 24 % Office 365 Commercial revenue grew 24 % , due to seat cloud service revenue increased $ 458 million or 11 % , increased $ 458 million or 11 % , driven by Microsoft revenue and transactional strength in Japan . Office 365 Consumer subscriber increased 23 % Office 365 Consumer subscriber increased 23 % to 42.7 million with subscriber increased 23 % to 42.7 million with increased demand from \u2022 LinkedIn revenue increased $ 1.3 billion or 20 % , increased $ 1.3 billion or 20 % , driven by growth and cloud service revenue increased 14 % , driven by Dynamics % , driven by Dynamics 365 growth of 42 % . by Dynamics 365 growth of 42 % . 40 PART II growth of 42 % . 40 PART Revenue increased $ 9.4 billion or 24 % . increased $ 9.4 billion or 24 % . \u2022 Server product cloud service revenue increased $ 8.8 billion or 27 % , increased $ 8.8 billion or 27 % , driven by Azure Azure . Azure revenue grew 56 % , due to growth . Server product revenue increased 8 % , due to hybrid demand related to SQL Server 2008 and Windows Server 2008 end Server 2008 and Windows Server 2008 end of support . \u2022 Enterprise Services revenue increased $ 285 million or 5 % , increased $ 285 million or Revenue increased $ 2.6 billion or 6 % . increased $ 2.6 billion or 6 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 1.9 billion or 9 % , increased $ 1.9 billion or 9 % , driven by growth and cloud service revenue increased 18 % , driven by increased by increased demand for Microsoft 365 . Windows OEM revenue increased . Windows OEM revenue increased 9 % , ahead of PC Windows OEM Pro revenue grew 11 % , driven by Windows % , driven by Windows 7 end of support and healthy of support and healthy Win revenue grew 5 % , driven by consumer \u2022 Surface revenue increased $ 457 million or 8 % , increased $ 457 million or 8 % , driven by increased \u2022 Gaming revenue increased $ 189 million or 2 % , increased $ 189 million or 2 % , driven by an and service revenue increased $ 943 million or 11 % on increased $ 943 million or 11 % on a strong prior . Xbox hardware revenue declined 31 % , primarily due to Search advertising revenue increased $ 112 million or 1 % . increased $ 112 million or 1 % . Search adverti revenue . Operating income increased $ 3.1 billion or 24 % . increased $ 3.1 billion or 24 % . \u2022 Gross margin \u2022 Gross margin increased $ 3.0 billion or 12 % , increased $ 3.0 billion or 12 % , driven by growth \u2022 Operating expense decreased $ 119 million or 1 % , decreased $ 119 million or 1 % , driven by the and investment in Gaming . 41 PART II Item 7 Gross . 41 PART II Item 7 Gross margin and operating income unfavorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . Revenue Business Processes Revenue increased $ 5.3 billion or 15 % . increased $ 5.3 billion or 15 % . \u2022 Office Commercial cloud service revenue increased $ 3.2 billion or 13 % , increased $ 3.2 billion or 13 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial grew 33 % , . Office 365 Commercial grew 33 % , due to growth cloud service revenue increased $ 286 million or 7 % , increased $ 286 million or 7 % , driven by Microsoft % , driven b revenue increased $ 1.5 billion or 28 % , increased $ 1.5 billion or 28 % , driven by growth and cloud service revenue increased 15 % , driven by Dynamics % , driven by Dynamics 365 growth . Operating income increased . Operating income increased $ 3.3 billion or 25 % , increased $ 3.3 billion or 25 % , including an unfavorable unfavorable foreign currency impact of 2 % . \u2022 Gross margin \u2022 Gross margin increased $ 4.1 billion or 15 % , increased $ 4.1 billion or 15 % , driven by growth improvement in Li Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . \u2022 Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure revenue growth wa 72 % , due to higher . Server product revenue increased 6 % , due to continued of end-of-support for SQL Server 2008 and Windows Server 2008 . Server 2008 and Windows Server 2008 . \u2022 Enterprise Services revenue Enterprise Services revenue increased $ 278 million or 5 % , increased $ 2 Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth and cloud service revenue increased 14 % , driven by an . Windows OEM revenue increased 4 % . Windows OEM Pro Windows OEM Pro revenue grew 10 % , ahead of the , driven by healthy Windows 10 demand . Windows OEM non-Pro Windows OEM non-Pro revenue declined 7 % , below the consumer \u2022 Surface revenue increased $ 1.1 revenue increased $ \u2022 Gaming revenue increased $ 1.0 billion or 10 % , increased $ 1.0 billion or 10 % , driven by Xbox software and service growth of 19 % , primarily due to decline in Xbox hardware of 13 % primarily due to a Search advertising revenue increased $ 616 million or 9 % . increased $ 616 million or 9 % . Search advertising revenue traffic acquisition cost , increased 13 % , driven by higher . Operating income increased $ 2.2 billion or 21 % , increased $ 2.2 billion or 21 % , including an revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Research and development expense increased and development expense increased $ 2.4 billion or 14 % , increased $ 2.4 billion or 14 % , driven by investment and Gaming . Fiscal revenue 14 % 14 % 16 % percent of revenue 14 % 14 % 16 % 0ppt ( revenue 14 % 14 % 16 % 0ppt ( 2 ) % 14 % 16 % 0ppt ( 2 ) ppt Sales % 16 % 0ppt ( 2 ) ppt Sales and marketing other program . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Sales and marketing expense increased and marketing expense increased $ 1.4 billion or 8 % , increased $ 1.4 billion or 8 % , driven by investment in bad debt expense . 43 PART II Item 7 Fiscal . 43 PART II Item 7 Fiscal Year 2019 Com revenue 4 % 4 % 4 % percent of revenue 4 % 4 % 4 % 0ppt 0ppt revenue 4 % 4 % 4 % 0ppt 0ppt General and % 4 % 4 % 0ppt 0ppt General and administrative expense 4 % 4 % 0ppt 0ppt General and administrative expense include administrative fee . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 General and administrative expense increased and administrative expense increased $ 226 million or 5 % , increased $ 226 million or 5 % , driven by charge legal expense . Fiscal Year Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . In April for tax year revenue a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) ) Three Months Ending September 30 , 2020 $ 13,884 December Months Ending September 30 , 2020 $ 13,884 December 31 , September 30 , 2020 $ 13,884 December 31 , 2020 10,950 , 2020 $ 13,884 December 31 , 2020 10,950 March 31 $ 13,884 December 31 , 2020 10,950 March 31 , 2021 13,884 December 31 , 2020 10,950 March 31 , 2021 7,476 31 , 2020 10,950 March 31 , 2021 7,476 June 30 2020 10,950 March 31 , 2021 7,476 June 30 , 2021 10,950 Mar Revenue from Office 365 is recognized ratably over the for the period presented . 50 PART II Item 7 Impairment . 50 PART II Item 7 Impairment of Investment Securities We an annual basis ( May 1 for u ) and between life of the product . 51 PART II Item 7 Legal . 51 PART II Item 7 Legal and Other Contingencies The that ha a greater than 50 % likelihood of being realized business . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussi Revenue Hypothetical Change June 30 , 2020 Impact Foreign currency\u2013Revenue 10 % , 2020 Impact Foreign currency\u2013Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 4,142 ) Earnings Foreign currency\u2013Investments 10 4,142 ) Earnings Foreign currency\u2013Investments 10 % decrease in foreign exchange in foreign exchange rate ( 119 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 3,951 ) Fair Value Credit 100 3,951 ) Fair Value Cr Revenue Year Ended June 30 , 2020 2019 2018 Revenue : Product Ended June 30 , 2020 2019 2018 Revenue : Product $ June 30 , 2020 2019 2018 Revenue : Product $ 68,041 2018 Revenue : Product $ 68,041 $ 66,069 $ 64,497 Service : Product $ 68,041 $ 66,069 $ 64,497 Service and other $ 68,041 $ 66,069 $ 64,497 Service and other 74,974 59,774 $ 64,497 Service and other 74,974 59,774 45,863 Total revenue 143,015 64,497 Service and other 74,974 59,774 45,863 Total revenue 143,015 125,843 Service and other 74,974 revenue 143,015 125,843 110,360 74,974 59,774 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue 59,774 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue : 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue : Product Cost of revenue : Product 16,017 16,273 15,420 Service and other of revenue : Product 16,017 16,273 15,420 Service and other 30,061 revenue : Product 16,017 16,273 15,420 Service and other 30,061 26,637 16,273 15,420 Service and other 30,061 26,637 22,933 Tot revenue Service and other 30,061 26,637 22,933 Total cost of revenue 46,078 22,933 Total cost of revenue 46,078 42,910 38,353 Gross margin 96,937 Total cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 19,269 38,353 Gross margin 96,937 82,933 72,007 Research and develo revenue 36,000 6,830 Short-term income tax 2,130 5,665 Short-term unearned revenue 36,000 32,676 2,130 5,665 Short-term unearned revenue 36,000 32,676 Other current liability 10,027 5,665 Short-term unearned revenue 36,000 32,676 Other current liability 10,027 9,351 36,000 32,676 Other current liability 10,027 9,351 Total current liability 72,310 32,676 Other current liability 10,027 9,351 Total current liability 72,310 69,420 10,027 9,351 Total current liability 72,310 69,420 Long-term debt 59,578 66, revenue 3,180 66,662 Long-term income tax 29,432 29,612 Long-term unearned revenue 3,180 4,530 29,432 29,612 Long-term unearned revenue 3,180 4,530 Deferred income tax 204 29,612 Long-term unearned revenue 3,180 4,530 Deferred income tax 204 233 3,180 4,530 Deferred income tax 204 233 Operating lease liability 7,671 4,530 Deferred income tax 204 233 Operating lease liability 7,671 6,188 204 233 Operating lease liability 7,671 6,188 Other long-term liability 10,632 233 Operating lease liability 7,671 6, revenue 2,212 285 ) Accounts payable 3,018 232 1,148 Unearned revenue 2,212 4,462 ) Accounts payable 3,018 232 1,148 Unearned revenue 2,212 4,462 5,922 3,018 232 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 232 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 3,631 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 3,631 ) 4,462 5,922 Income tax ( 3,631 ) 2,929 18,183 Other current Income tax ( 3,631 ) 2,929 18,183 Other current liability 1,346 tax ( 3,631 ) 2,929 18,183 Other current Revenue . 60 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 61 PART II Item 8 Judgment . 61 PART II Item 8 Judgment is required to determine license . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , long-term account June 30 , 2020 and 2019 , long-term revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics business service . Refer to Note 13 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where country . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , our financing June 30 , 2020 and 2019 , our financing receivables , receivables , net w Revenue Year Ended June 30 , 2020 2019 2018 Revenue Other Income Ended June 30 , 2020 2019 2018 Revenue Other Income ( June 30 , 2020 2019 2018 Revenue Other Income ( Expense Foreign exchange contract Derivatives $ 0 $ 1 $ 0 $ contract Derivatives $ 0 $ 1 $ 0 $ ( 130 $ 0 $ 1 $ 0 $ ( 130 ) $ 1 $ 0 $ ( 130 ) $ 0 $ ( $ ( 130 ) $ 0 $ ( 78 ) Hedged ) $ 0 $ ( 78 ) Hedged item 0 3 ( 78 ) Hedged item 0 3 0 130 0 78 78 ) Hedged item 0 3 0 130 0 78 Excluded ) Hedged item 0 3 0 130 0 78 Excluded from Hedged item revenue 1,553 475 6,361 7,046 Leasing liability 3,025 1,594 Unearned revenue 1,553 475 Other liability 3,025 1,594 Unearned revenue 1,553 475 Other 354 367 Deferred 3,025 1,594 Unearned revenue 1,553 475 Other 354 367 Deferred income Unearned revenue 1,553 475 Other 354 367 Deferred income tax asset revenue 1,553 475 Other 354 367 Deferred income tax asset 15,340 367 Deferred income tax asset 15,340 15,693 Less valuation allowance ( Deferred income tax asset 15,340 15,693 Less valuation allowance ( 755 revenue 0 ( ( 738 ) Unearned revenue 0 ( 30 ) Leasing asset ) Unearned revenue 0 ( 30 ) Leasing asset ( 2,817 30 ) Leasing asset ( 2,817 ) ( 1,510 ) Deferred asset ( 2,817 ) ( 1,510 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,581 ) ( 2,607 ) Other liability ( 2,581 ) ( 2,607 ) Other ( 344 ) ( 2,607 ) Other ( 344 ) ( 291 ) Deferred Other ( 344 ) ( 291 ) Deferred income tax liability income tax liability $ ( 8,384 ) $ ( 5,176 ) ( 8,384 ) $ ( 5,176 ) Net deferred income tax deferred in Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . In April for tax year REVENUE Unearned revenue ( In million ) June 30 , 2020 2019 Productivity and million ) June 30 , 2020 2019 Productivity and Business Processes ) June 30 , 2020 2019 Productivity and Business Processes $ Productivity and Business Processes $ 18,643 $ 16,831 Intelligent Cloud 16,620 Business Processes $ 18,643 $ 16,831 Intelligent Cloud 16,620 16,988 More 18,643 $ 16,831 Intelligent Cloud 16,620 16,988 More Personal Computing 3,917 $ 16,831 Intelligent Cloud 16,620 16,988 More Personal Computing 3,917 3, revenue were million ) Year Ended June 30 , 2020 Balance , beginning Year Ended June 30 , 2020 Balance , beginning of period , beginning of period $ 37,206 Deferral of revenue 78,922 Recognition $ 37,206 Deferral of revenue 78,922 Recognition of unearned revenue ( Recognition of unearned revenue ( 76,948 ) Balance , end of , end of period $ 39,180 82 PART II Item 8 end of period $ 39,180 82 PART II Item 8 Revenue 39,180 82 PART II Item 8 Revenue allocated to remaining performance future period , wa $ 1 revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 \u2014 LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2020 2019 2018 Operating Year Ended June 30 , 2020 2019 2018 Operating lease cost Ended June 30 , 2020 2019 2018 Operating lease cost $ June 30 , 20 revenue 0 ( 341 ) ( 185 included in revenue 0 ( 341 ) ( 185 ) Tax 0 ( 341 ) ( 185 ) Tax expense included in in provision for income tax 0 8 6 Amounts reclassified from provision for income tax 0 8 6 Amounts reclassified from accumulated for income tax 0 8 6 Amounts reclassified from accumulated other comprehensive income ( loss ) 0 ( 333 ) ( 179 ( loss ) 0 ( 333 ) ( 179 ) Net 0 ( 333 ) ( 179 ) Net change related to of tax of $ ( 10 ) , $ ( 6 10 ) , $ ( 6 ) , and $ 5 6 ) , and $ 5 ( 38 ) ( 173 , and $ 5 Revenue Year Ended June 30 , 2020 2019 2018 Revenue Productivity and Ended June 30 , 2020 2019 2018 Revenue Productivity and Business June 30 , 2020 2019 2018 Revenue Productivity and Business Processes Productivity and Business Processes $ 46,398 $ 41,160 $ 35,865 Intelligent Business Processes $ 46,398 $ 41,160 $ 35,865 Intelligent Cloud 48,366 $ 46,398 $ 41,160 $ 35,865 Intelligent Cloud 48,366 38,985 32,219 41,160 $ 35,865 Intelligent Cloud 48,366 38,985 32,219 More Personal Computing $ 35,865 Inte revenue for fiscal of revenue for fiscal year 2020 , 2019 , or 2018 for fiscal year 2020 , 2019 , or 2018 . Revenue 2020 , 2019 , or 2018 . Revenue , classified by million ) Year Ended June 30 , 2020 2019 2018 United Year Ended June 30 , 2020 2019 2018 United States ( Ended June 30 , 2020 2019 2018 United States ( a June 30 , 2020 2019 2018 United States ( a ) States ( a ) $ 73,160 $ 64,199 $ 55,926 Other a ) $ 73,160 $ 64,199 $ 55,926 Other country 69,855 $ 73,160 $ 64,199 $ 55,926 Other country 69,85 revenue . 91 PART II Item 8 Revenue . 91 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2020 2019 2018 Server Year Ended June 30 , 2020 2019 2018 Server product and Ended June 30 , 2020 2019 2018 Server product and cloud June 30 , 2020 2019 2018 Server product and cloud service product and cloud service $ 41,379 $ 32,622 $ 26,129 Office cloud service $ 41,379 $ 32,622 $ 26,129 Office product and $ 41,379 $ 32,622 $ 26,129 Office product and cloud service Office product a revenue , revenue , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 51.7 billion , $ 38.1 billion $ 51.7 billion , $ 38.1 billion and $ 26.6 billion $ 38.1 billion and $ 26.6 billion in fiscal year 2020 26.6 billion in fiscal year 2020 , 2019 , and 2018 in fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . These amount company and with country over 10 % of the total shown ( In Revenue June 30 Total Fiscal Year 2020 Revenue $ 33,055 $ 36,906 Fiscal Year 2020 Revenue $ 33,055 $ 36,906 $ 35,021 $ 2020 Revenue $ 33,055 $ 36,906 $ 35,021 $ 38,033 $ $ 33,055 $ 36,906 $ 35,021 $ 38,033 $ 143,015 Gross $ 36,906 $ 35,021 $ 38,033 $ 143,015 Gross margin 22,649 $ 35,021 $ 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 143,015 Gross ma Revenue share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 2 Revenue . 94 PART II Item 8 Revenue Recognition \u2013 Refer to Recognition \u2013 Refer to Note 1 to the financial statement Critical in the financial statement . 95 PART II Item 8 Income . 95 PART II Item 8 Income Taxes \u2013 Uncertain Tax Positions \u2013 Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 30 , 2020 We have served , Washington July 30 , 2020 We have served a the the Company 's auditor since 1983 . 96 PART II Item 's ", + "expenses": "EXPENSES Research million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Research and development 2019 Percentage Change 2019 Versus 2018 Research and develop", + "net_income": "Net income ( g ) Net income 44,281 39,240 ( b ) 16,571 g ) Net income 44,281 39,240 ( b ) 16,571 ( 44,281 39,240 ( b ) 16,571 ( c ) 25,489 ( ) 16,571 ( c ) 25,489 ( f ) 20,539 ( ) 25,489 ( f ) 20,539 ( g ) Diluted earnings ) Diluted earnings per share 5.76 5.06 ( b ) 2.13 Diluted earnings per share 5.76 5.06 ( b ) 2.13 ( 5.76 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) Cash dividend dividend declared per common share 2.04 1.84 1.68 1.56 1.44 Cash declared per common net income tax benefit property transfer and a $ 157 million net charge related to EPS \u201d ) by $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Refer to respectively . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . c ) Includes a $ 13.7 billion net charge related to and diluted EPS by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 12 \u2013 Income T Net income 52,959 42,959 35,058 23 % 23 % Net income 44,281 39,240 % 23 % Net income 44,281 39,240 16,571 13 % 137 23 % Net income 44,281 39,240 16,571 13 % 137 % % Net income 44,281 39,240 16,571 13 % 137 % Diluted Net income 44,281 39,240 16,571 13 % 137 % Diluted earnings 44,281 39,240 16,571 13 % 137 % Diluted earnings per share % Diluted earnings per share 5.76 5.06 2.13 14 % 138 Diluted earnings per share 5.76 5.06 2.13 14 % 138 % earnings per share 5.76 5.06 2.13 14 % 138 % Non-GAAP per share 5.76 net income 44,281 138 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP diluted 44,281 36,830 30,267 20 % 22 % Non-GAAP diluted earnings per Non-GAAP diluted earnings per share 5.76 4.75 3.88 21 % 22 diluted earnings per share 5.76 4.75 3.88 21 % 22 % earnings per share 5.76 4.75 3.88 21 % 22 % Non-GAAP per share 5.76 4.75 3.88 21 % 22 % Non-G net income and intangible property in fiscal year 2019 and the net tax impact \u201d ) in fiscal year 2019 and 2018 . Refer to in fiscal year 2019 and 2018 . Refer to the Non-GAAP financial result . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Revenue increased $ 17.2 billion Year 2019 Revenue increased $ 17.2 billion or 14 % , increased $ 17.2 billion or 14 % , driven by growth . Gross margin increased $ 14.0 billion or 17 % , increased $ 14.0 billion or 17 % , driven by net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Fiscal Year , respectively . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increased $ 10.9 billion or 15 % , in net income included a $ net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Fiscal year , respectively . Fiscal year 2018 net income and diluted EPS and diluted EPS of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . SEGMENT RESULTS million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2020 , our U.S. income before before income tax wa $ 24.1 billion and our foreign income before income tax wa $ 28.9 billion . In fiscal year billion . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . Fiscal Year 2019 27.9 billion . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . In fiscal year billion . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . Tax Cuts and and Jobs Act On December 22 , 2017 , the TCJA Act On December 22 , 2017 , the TC net income tax benefit fourth quarter of fiscal year 2019 , a the value of tax . Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 45 PART II Item 7 Uncertain . 45 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS with Net income $ 2019 Percentage Change 2019 Versus 2018 Net income $ 44,281 $ Versus 2018 Net income $ 44,281 $ 39,240 $ 16,571 13 Net income $ 44,281 $ 39,240 $ 16,571 13 % 137 $ 44,281 $ 39,240 $ 16,571 13 % 137 % Net 44,281 $ 39,240 $ 16,571 13 % 137 % Net tax 39,240 $ 16,571 13 % 137 % Net tax impact of of transfer of intangible property 0 ( 2,567 ) 0 * of intangible property 0 ( 2,567 ) 0 * * Net property 0 ( 2,567 ) 0 * * Net tax impact tax impact of the TCJA 0 157 13,696 * * Non-GAAP impact of the TCJ net income * Non-GAAP net income $ 44,281 $ 36,830 $ 30,267 20 net income $ 44,281 $ 36,830 $ 30,267 20 % 22 $ 44,281 $ 36,830 $ 30,267 20 % 22 % Diluted 44,281 $ 36,830 $ 30,267 20 % 22 % Diluted earnings 36,830 $ 30,267 20 % 22 % Diluted earnings per share Diluted earnings per share $ 5.76 $ 5.06 $ 2.13 14 per share $ 5.76 $ 5.06 $ 2.13 14 % 138 $ 5.76 $ 5.06 $ 2.13 14 % 138 % Net 5.76 $ 5.06 $ 2.13 14 % 138 % Net tax 5.06 $ 2.13 14 % 138 % Net tax impact of of transfer of intangible property 0 ( 0.33 ) Net income $ Provision for income tax 8,755 4,448 19,903 Net income $ 44,281 for income tax 8,755 4,448 19,903 Net income $ 44,281 $ 4,448 19,903 Net income $ 44,281 $ 39,240 $ 16,571 Earnings Net income $ 44,281 $ 39,240 $ 16,571 Earnings per share $ 44,281 $ 39,240 $ 16,571 Earnings per share : Basic per share : Basic $ 5.82 $ 5.11 $ 2.15 Diluted : Basic $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 $ 2.13 Weighted 2.15 Diluted $ 5.76 $ Net income $ Ended June 30 , 2020 2019 2018 Net income $ 44,281 June 30 , 2020 2019 2018 Net income $ 44,281 $ 2019 2018 Net income $ 44,281 $ 39,240 $ 16,571 Other Net income $ 44,281 $ 39,240 $ 16,571 Other comprehensive income $ 44,281 $ 39,240 $ 16,571 Other comprehensive income ( loss change related to derivative ( 38 ) ( 173 ) 39 derivative ( 38 ) ( 173 ) 39 Net change related 38 ) ( 173 ) 39 Net change related to investment Net change related to investment 3,990 2,405 ( 2,717 ) Translation change r Net income Ended June 30 , 2020 2019 2018 Operations Net income $ June 30 , 2020 2019 2018 Operations Net income $ 44,281 2018 Operations Net income $ 44,281 $ 39,240 $ 16,571 Adjustments Net income $ 44,281 $ 39,240 $ 16,571 Adjustments to reconcile $ 44,281 $ 39,240 $ 16,571 Adjustments to reconcile net income , amortization , and other 12,796 11,682 10,261 Stock-based compensation expense amortization , and other 12,796 11,682 10,261 Stock-based compensation expense 5,289 , and other 12,796 11,682 10,2 Net income 44,281 , beginning of period 24,150 13,682 17,769 Net income 44,281 39,240 beginning of period 24,150 13,682 17,769 Net income 44,281 39,240 16,571 24,150 13,682 17,769 Net income 44,281 39,240 16,571 Common stock cash 13,682 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend ( Common stock cash dividend ( 15,483 ) ( 14,103 ) ( dividend ( 15,483 ) ( 14,103 ) ( 12,917 ) Common ) ( 14,103 ) ( 12,917 ) Common stock re Net income available Ended June 30 , 2020 2019 2018 Net income available for June 30 , 2020 2019 2018 Net income available for common shareholder ( A ) $ 44,281 $ 39,240 $ 16,571 Weighted A ) $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding share of common stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based award Dilutive effect of Net Income Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity Net Income Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investm net income tax benefit fourth quarter of fiscal year 2019 , a the value of million ) Year Ended June 30 , 2020 2019 2018 Current Year Ended June 30 , 2020 2019 2018 Current Taxes U.S. Ended June 30 , 2020 2019 2018 Current Taxes U.S. federal June 30 , 2020 2019 2018 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,537 $ 4,718 $ 19,764 U.S. U.S. federal $ 3,537 $ 4,718 $ 19,764 U.S. state and $ 3,537 $ 4,718 $ 19,764 U.S. state and local 763 19,764 U.S. state and local 763 662 934 Foreign 4,444 net income tax benefit statutory rate in fiscal year 2018 is primarily due to the second quarter of fiscal year 2018 , offset in part by jurisdiction . In fiscal year 2020 , our foreign regional operating the U.S. rate , generated 86 % of our foreign income tax . In fiscal year 2019 and 2018 , our foreign In fiscal year 2019 and 2018 , our foreign regional operating the U.S. rate , generated 82 % and 87 % of , generated 82 % and 87 % of our foreign income tax . In fiscal year 2020 , 2019 , and 2018 In fis net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 , and a $ 2.6 2018 , and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer to intangible property transfer . 80 PART II Item 8 The . 80 PART II Item 8 The component of the deferred ( In million ) net income tax for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 included interest 2020 , 2019 , and 2018 included interest expense related to uncertain tax position of $ 579 million , $ 515 million $ 579 million , $ 515 million , and $ 688 515 million , and $ 688 million , respectively , net million ) Year Ended June 30 , 2020 2019 2018 Beginning Year Ended June 30 , 2020 2019 2018 Beginning unrecognized tax Ended June 30 , 2020 2019 2018 Beginning unrecognized tax benefit Jun Net income ( loss ) 3 74 ( 1,571 ) Net change loss ) 3 74 ( 1,571 ) Net change related to net of tax of $ 1,058 , $ 635 , and of $ 1,058 , $ 635 , and $ ( 1,165 635 , and $ ( 1,165 ) 3,990 2,405 ( 2,717 and $ ( 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative $ ( 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative effect 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 67 ) 42 Balance of accounting change 0 ( 67 ) 42 Balance , end change 0 ( 67 ) 42 Balance , end of pe Net income 96,937 Operating income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 Operating income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 11,649 income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 11,649 10,752 12,975 13,407 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic 13,407 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic earnings 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic earnings per Net income 10,678 11,649 10,752 11,202 44,281 Basic Net income 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( a income 9,955 10,258 10,341 12,405 42,959 Net income ( a ) Net income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 net income tax benefit increased net income by $ 2.4 billion for fiscal year 2019 2.4 billion for fiscal year 2019 . See Note 12 \u2013 year 2019 . See Note 12 \u2013 Income Taxes for further increased ) diluted EPS $ 0.02 for the second quarter , second quarter , $ ( 0.34 ) for the fourth quarter quarter , and $ ( 0.31 ) for fiscal year 2019 0.31 ) for fiscal year 2019 . 93 PART II Item for fiscal year 2019 . 93 PART II Item 8 REPORT . 93 PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2", + "assets": "Assets Current million ) June 30 , 2020 2019 Assets Current asset : ) June 30 , 2020 2019 Assets Current asset : Cash Cash and cash equivalent $ 13,576 $ 11,356 Short-term investment 122,951 cash equivalent $ 13,576 $ 11,356 Short-term investment 122,951 122,463 Total 13,576 $ 11,356 Short-term investment 122,951 122,463 Total cash , cash $ 11,356 Short-term investment 122,951 122,463 Total cash , cash equivalent equivalent , and short-term investment 136,527 133,819 Accounts receivable , net , and sh Assets and and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox Live ; online advertising and LinkedIn . 60 PART II Item 8 Revenue . 60 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 61 PART II Item 8 Judgment . 61 PART II Item 8 Assets Our intangible asset , ranging from one to 20 year . We evaluate the for Hedging Activities In August 2017 , the Financial Accounting Standards adopted the standard effective July 1 , 2019 . As we standard effective July 1 , 2019 . As we did not \u2013 Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard for Income Taxes In December 2019 , the FASB issued a effective for u beginning July 1 , 2021 , with e Assets Liabilities Assets Liabilities June 30 , 2020 June 30 , Assets Liabilities June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 44 $ ( 54 ) $ contract $ 44 $ ( 54 ) $ 0 $ ( $ ( 54 ) $ 0 $ ( 93 ) Interest ) $ 0 $ ( 93 ) Interest rate contract 93 93 ) Interest rate contract 93 0 0 0 Not Designated ) Interest rate contract 93 0 0 0 Not Designated a Interest ASSETS PART II Item 8 NOTE 10 \u2014 INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2020 2019 Technology-based $ Carrying Amount June 30 , 2020 2019 Technology-based $ 8,160 $ Amount June 30 , 2020 2019 Technology-based $ 8,160 $ ( , 2020 2019 Technology-based $ 8,160 $ ( 6,381 ) $ Technology-based $ 8,160 $ ( 6,381 ) $ 1,779 $ 7,691 $ ( 6,381 ) $ 1,779 $ 7,691 $ ( 5,771 6,381 ) $ 1,779 $ 7,691 $ ( 5,771 ) $ 1,779 $ 7,691 $ ( 5,771 ) $ 1,920 Customer-related 4,967 $ ( 5,771 ) $ Assets ) June 30 , 2020 2019 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 461 $ 406 Accruals , reserve compensation expense $ 461 $ 406 Accruals , reserve , and reserve , and other expense 2,721 2,287 Loss and credit carryforwards , and other expense 2,721 2,287 Loss and credit carryforwards 865 2,287 Loss and credit carryforwards 865 3,518 Depreciation and amortization 6,361 Loss and credit carryforwards 865 3,518 Depreciation and amortization 6,361 7,046 865 3,518", + "liabilities": "Liabilities and stockholder Total asset $ 301,311 $ 286,556 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 12,530 $ 9,382 Current portion of Accounts payable $ 12,530 $ 9,382 Current portion of long-term debt Current portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 3,749 5,516 Accrued compensation 7,874 6,8 Liabilities Assets Liabilities June 30 , 2020 June 30 , Assets Liabilities June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 44 $ ( 54 ) $ contract $ 44 $ ( 54 ) $ 0 $ ( $ ( 54 ) $ 0 $ ( 93 ) Interest ) $ 0 $ ( 93 ) Interest rate contract 93 93 ) Interest rate contract 93 0 0 0 Not Designated ) Interest rate contract 93 0 0 0 Not Designated a Interest rate contrac Liabilities Book/tax investment and debt $ ( 2,642 ) $ ( 738 ) ( 2,642 ) $ ( 738 ) Unearned revenue 0 ( ( 738 ) Unearned revenue 0 ( 30 ) Leasing asset ) Unearned revenue 0 ( 30 ) Leasing asset ( 2,817 30 ) Leasing asset ( 2,817 ) ( 1,510 ) Deferred asset ( 2,817 ) ( 1,510 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,581 ) ( 2,607 ) Other liability ( 2,581 ) ( 2,607 ) Other ( 344 ) ( 2,607 ) Other ( 344 ) ( 291 ) Deferred Other ( 344 ) ( 291 ) Deferred income tax liability income tax lia", + "equity": "Equity Securities 33 Item 6 . Selected Financial of Equity Securities 33 Item 6 . Selected Financial Data 34 6 . Selected Financial Data 34 Item 7 . Management \u2019 Selected Financial Data 34 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 35 Item 7A . Quantitative and Results of Operations 35 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 54 Item 8 . Financial Statements about Market Risk 54 Item 8 . Financial Statements and Supplement Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 33 PART II Item 6 ITEM . 33 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2020 2019 ( a Year Ended June 30 , 2020 2019 ( a ) 2018 Ended June 30 , 2020 2019 ( a ) 2018 2017 2020 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) Revenue $ ( d ) Revenu equity Long-term obligation 110,697 114,806 117,642 106,856 66,705 Stockholders \u2019 equity 118,304 obligation 110,697 114,806 117,642 106,856 66,705 Stockholders \u2019 equity 118,304 102,330 106,856 66,705 Stockholders \u2019 equity 118,304 102,330 82,718 87,711 83,090 ( 66,705 Stockholders \u2019 equity 118,304 102,330 82,718 87,711 83,090 ( a Stockholders \u2019 equity 118,304 102,330 82,718 87,711 83,090 ( a ) \u2019 equity 118,304 102,330 82,718 87,711 83,090 ( a ) GitHub equity 118,304 102,330 82,718 87,711 83,090 ( a ) G equity derivative . 44 PART II Item 7 Fiscal . 44 PART II Item 7 Fiscal Year 2019 Compared with II Item 7 Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Interest and dividend income increased Effective Tax Rate Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Our effective tax rate for tax rate for fiscal year 2020 and 2019 wa 17 % for fiscal year 2020 and 2019 wa 17 % and 10 year 2020 and 2019 wa 17 % and 10 % , 2019 wa 17 % and Equity investment June 30 , 2020 and 2019 . Equity investment were $ . Equity investment were $ 3.0 billion and $ 2.6 billion $ 3.0 billion and $ 2.6 billion a of June 30 2.6 billion a of June 30 , 2020 and 2019 , a of June 30 , 2020 and 2019 , respectively . June 30 , 2020 and 2019 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using int Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 48 PART II Item 7 Off-Balance . 48 PART II Item 7 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) : ( In million ) 2021 2022-2023 2024-2025 Thereafter Equity 10 301 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 239 ) Earnings 54 PART II price ( 239 ) Earnings 54 PART II Item 8 ITEM Earnings 54 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2020 2019 2018 Revenue Year Ended June 30 , 2020 2019 2018 Revenue : Product Ended June 30 , 2020 2019 2018 Revenue : Product $ June 30 , 2020 2019 2018 Revenue : Product $ 68,041 2018 Revenue : Equity investment 2,965 2,649 Operating lease right-of-use asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible 8,753 7,379 Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset , net investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset , net 7,038 42,026 Intangible asset , net 7,038 7,750 Other long-term asset 13,138 Inta equity liability : Accounts payable $ 12,530 $ 9,382 Current portion of Accounts payable $ 12,530 $ 9,382 Current portion of long-term debt Current portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 5,665 7,874 6,830 Short-term income tax 2,130 5,665 Sh equity ) Total stockholder \u2019 equity 118,304 102,330 Total liability and stockholder Total stockholder \u2019 equity 118,304 102,330 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 301,311 $ 286,556 Refer to accompanying \u2019 equity $ 301,311 $ 286,556 Refer to accompanying note . Refer to accompanying note . 57 PART II Item 8 CASH . 57 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2020 2019 2018 Operations Year Ended June 30 , 2020 2019 2018 Operations Net income Ended EQUITY STATEMENTS ( million ) Year Ended June 30 , 2020 2019 2018 Common Year Ended June 30 , 2020 2019 2018 Common stock and Ended June 30 , 2020 2019 2018 Common stock and paid-in June 30 , 2020 2019 2018 Common stock and paid-in capital , beginning of period $ 78,520 $ 71,223 $ 69,315 Common of period $ 78,520 $ 71,223 $ 69,315 Common stock issued $ 78,520 $ 71,223 $ 69,315 Common stock issued 1,343 6,829 $ 69,315 Common stock issued 1,343 6,829 1,002 Common stock repurchased 69,315 Common stock is equity Total stockholder \u2019 equity $ 118,304 $ 102,330 $ 82,718 Cash \u2019 equity $ 118,304 $ 102,330 $ 82,718 Cash dividend declared $ 118,304 $ 102,330 $ 82,718 Cash dividend declared per common declared per common share $ 2.04 $ 1.84 $ 1.68 Refer common share $ 2.04 $ 1.84 $ 1.68 Refer to accompanying $ 2.04 $ 1.84 $ 1.68 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 NOTES . 59 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING POLICI Equity Investments June 30 , 2020 Changes in Fair Equity Investments June 30 , 2020 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,687 $ 1 $ Commercial paper Level 2 $ 4,687 $ 1 $ 0 $ Level 2 $ 4,687 $ 1 $ 0 $ 4,688 $ $ 4,687 $ 1 $ 0 $ 4,688 $ 1,618 $ $ 1 $ 0 $ 4,688 $ 1,618 $ 3,070 $ $ 0 $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates of deposit $ 1,618 $ 3,070 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,8 Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity invest equity investment $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 0 Derivatives $ 5,910 $ 5,910 $ 0 $ 0 Derivatives , net $ 5,910 $ 0 $ 0 Derivatives , net ( a , net ( a ) 35 0 35 0 Total $ net ( a ) 35 0 35 0 Total $ 139,492 ( a ) 35 0 35 0 Total $ 139,492 $ a ) 35 0 35 0 Total $ 139,492 $ 13,576 0 35 0 Total $ 139,492 $ 13,576 $ 122,951 $ 0 Total $ 139,492 $ 13,576 $ 122 Equity Investments June 30 , 2019 Changes in Fair Equity Investments June 30 , 2019 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,211 $ 0 $ Commercial paper Level 2 $ 2,211 $ 0 $ 0 $ Level 2 $ 2,211 $ 0 $ 0 $ 2,211 $ $ 2,211 $ 0 $ 0 $ 2,211 $ 1,773 $ $ 0 $ 0 $ 2,211 $ 1,773 $ 438 $ $ 0 $ 2,211 $ 1,773 $ 438 $ 0 Certificates $ 2,211 $ 1,773 $ 438 $ 0 Certificates of deposit $ 1,773 $ 438 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,018 0 0 2 Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investment $ 3 equity investment $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 0 Derivatives $ 3,771 $ 3,771 $ 0 $ 0 Derivatives , net $ 3,771 $ 0 $ 0 Derivatives , net ( a net ( a ) ( 13 ) 0 ( 13 ) a ) ( 13 ) 0 ( 13 ) 0 Total ( 13 ) 0 ( 13 ) 0 Total $ 136,468 ) 0 ( 13 ) 0 Total $ 136,468 $ 11,356 13 ) 0 Total $ 136,468 $ 11,356 $ 122,463 $ 0 Total $ 136,468 $ 11,356 $ 122,463 $ 2,649 equity investment June 30 , 2020 and 2019 , equity investment without readily price or impairment were $ 1.4 billion and $ 1.2 billion $ 1.4 billion and $ 1.2 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2020 U.S. government and Fair Value June 30 , 2020 U.S. gove Equity contract 0 ( 93 ) 0 0 0 0 Equity contract Derivatives ( 93 ) 0 0 0 0 Equity contract Derivatives 0 93 ) 0 0 0 0 Equity contract Derivatives 0 0 0 0 Equity contract Derivatives 0 0 0 0 0 ( 0 Equity contract Derivatives 0 0 0 0 0 ( 324 Equity contract Derivatives 0 0 0 0 0 ( 324 ) contract Derivatives 0 0 0 0 0 ( 324 ) Hedged Derivatives 0 0 0 0 0 ( 324 ) Hedged item 0 0 0 0 ( 324 ) Hedged item 0 0 ( 324 ) Hedged item 0 0 0 0 0 324 324 ) Hedged item 0 0 0 0 0 324 Excluded ) Hedged item 0 0 0 0 0 EQUITY Shares million ) Year Ended June 30 , 2020 2019 2018 Balance Year Ended June 30 , 2020 2019 2018 Balance , beginning Ended June 30 , 2020 2019 2018 Balance , beginning of June 30 , 2020 2019 2018 Balance , beginning of year Balance , beginning of year 7,643 7,677 7,708 Issued 54 116 , beginning of year 7,643 7,677 7,708 Issued 54 116 68 beginning of year 7,643 7,677 7,708 Issued 54 116 68 Repurchased year 7,643 7,677 7,708 Issued 54 116 68 Repurchased ( 126 7,643 7,677 7,708 Issued 54 116 68 Re Equity Statements 59 58 Stockholders \u2019 Equity Statements 59 Notes to Financial Statements 60 59 Notes to Financial Statements 60 Report of Independent Registered Public Independent Registered Public Accounting Firm 94 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2", + "cash_flow": "Cash Flow 0 0 0 0 0 80 Designated a Cash Flow Hedging from accumulated other comprehensive income 0 0 341 0 185 0 accumulated other comprehensive income 0 0 341 0 185 0 Excluded other comprehensive income 0 0 341 0 185 0 Excluded from comprehensive income 0 0 341 0 185 0 Excluded from effectiveness income 0 0 341 0 185 0 Excluded from effectiveness assessment 0 0 341 0 185 0 Excluded from effectiveness assessment 0 0 Excluded from effectiveness assessment 0 0 ( 64 ) 0 Excluded from effectiveness assessme Cash Flow June 30 , 2020 2019 2018 Designated a Cash Flow Hedging in effectiveness assessment $ ( 38 ) $ 159 $ 219 $ ( 38 ) $ 159 $ 219 NOTE 6 \u2014 38 ) $ 159 $ 219 NOTE 6 \u2014 INVENTORIES The $ 159 $ 219 NOTE 6 \u2014 INVENTORIES The component of ( In million ) June 30 , 2020 2019 Raw material million ) June 30 , 2020 2019 Raw material $ 700 ) June 30 , 2020 2019 Raw material $ 700 $ 2020 2019 Raw material $ 700 $ 399 Work in process Raw material $ 700 $ 399 Work in process 83 53 $ 399 Work in process 83 53 Finish cash flow $ 947 $ 617 $ 418 Supplemental cash flow information related million ) Year Ended June 30 , 2020 2019 2018 Cash Year Ended June 30 , 2020 2019 2018 Cash paid for Ended June 30 , 2020 2019 2018 Cash paid for amount June 30 , 2020 2019 2018 Cash paid for amount included flow from operating lease $ 1,829 $ 1,670 $ 1,522 Operating operating lease $ 1,829 $ 1,670 $ 1,522 Operating cash flow $ 1,829 $ 1,670 $ 1,522 Operating cash flow from finance cash flow from finance lease 336 247 175 Financing ca cash flow from from finance lease 336 247 175 Financing cash flow from finance cash flow from finance lease 409 221 144 Right-of-use asset obtained flow from finance lease 409 221 144 Right-of-use asset obtained in from finance lease 409 221 144 Right-of-use asset obtained in exchange lease obligation : Operating lease 3,677 2,303 1,571 Finance lease 3,467 obligation : Operating lease 3,677 2,303 1,571 Finance lease 3,467 2,532 : Operating lease 3,677 2,303 1,571 Finance lease 3,467 2,532 1,933 3,677 2,3", + "gross_margin": "Gross margin 96,937 $ 110,360 $ 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 42,959 margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 42,959 35,058 72,007 62,310 58,374 Operating income 52,959 Gross margin 125,843 $ 110,360 14 % 14 % Gross margin 96,937 82,933 % 14 % Gross margin 96,937 82,933 72,007 17 % 15 14 % Gross margin 96,937 82,933 72,007 17 % 15 % % Gross margin 96,937 82,933 72,007 17 % 15 % Operating Gross margin 96,937 82,933 72,007 17 % 15 % Operating income 96,937 82,933 72,007 17 % 15 % Operating income 52,959 42,959 % 15 % Operating income 52,959 42,959 35,058 23 % 23 15 % Operating income 52,959 42,959 35,058 23 % 23 % % Operating income 52,959 42,959 35,058 23 % 23 % Net Operati Gross margin increased $ 14.0 billion or 17 % , increased $ 14.0 billion or 17 % , driven by growth cloud gross margin percentage increased 4 point to 67 % , percentage increased 4 point to 67 % , primarily driven by . Operating income increased $ 10.0 billion or 23 % , increased $ 10.0 billion or 23 % , driven by growth Cost of revenue increased $ 3.2 billion or 7 % , increased $ 3.2 billion or 7 % , driven by growth and development expense increased $ 2.4 billion or 14 % , increased $ 2.4 billion or 14 % Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial , primarily from Azure . 39 PART II Item 7 Operating . 39 PART II Item 7 Operating income increased $ 7.9 7 Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , driven by growth Cost of revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven by growth and development expense increa Gross margin \u2022 Gross margin increased $ 4.1 billion or 13 % , increased $ 4.1 billion or 13 % , driven by growth \u2022 Operating expense increased $ 1.6 billion or 11 % , increased $ 1.6 billion or 11 % , driven by investment unfavorable foreign currency impact of 2 % , 2 % , impact of 2 % , 2 % , and 4 % , 2 % , and 4 % , respectively . Intelligent Intelligent Cloud Revenue increased $ 9.4 billion or 24 % . increased $ 9.4 billion or 24 % . \u2022 Server product cloud service revenue increased $ 8.8 billion or 27 % Gross margin \u2022 Gross margin increased $ 6.9 billion or 26 % , increased $ 6.9 billion or 26 % , driven by growth \u2022 Operating expense increased $ 2.5 billion or 19 % , increased $ 2.5 billion or 19 % , driven by investment unfavorable foreign currency impact of 2 % , 2 % , impact of 2 % , 2 % , and 4 % , 2 % , and 4 % , respectively . More Personal Computing Revenue increased $ 2.6 billion or 6 % . increased $ 2.6 billion or 6 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 1.9 billion or 9 % , increased Gross margin \u2022 Gross margin increased $ 3.0 billion or 12 % , increased $ 3.0 billion or 12 % , driven by growth \u2022 Operating expense decreased $ 119 million or 1 % , decreased $ 119 million or 1 % , driven by the and investment in Gaming . 41 PART II Item 7 Gross . 41 PART II Item 7 Gross margin and operating income unfavorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . Fiscal , respectively . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year Gross margin \u2022 Gross margin increased $ 4.1 billion or 15 % , increased $ 4.1 billion or 15 % , driven by growth improvement in LinkedIn and Office 365 Commercial , offset in part \u2022 Operating expense increased $ 806 million or 6 % , increased $ 806 million or 6 % , driven by investment Intelligent Cloud Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . \u2022 Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure rev Gross margin \u2022 Gross margin increased $ 4.8 billion or 22 % , increased $ 4.8 billion or 22 % , driven by growth \u2022 Operating expense increased $ 2.4 billion or 22 % , increased $ 2.4 billion or 22 % , driven by investment Personal Computing Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth and cloud service revenue increased 14 % , driven by an . Windows OEM revenue Gross margin \u2022 Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , driven by growth \u2022 Operating expense decreased $ 172 million or 1 % . decreased $ 172 million or 1 % . OPERATING EXPENSES Research million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Perc Gross margin 96,937 Total cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 19,269 38,353 Gross margin 96,937 82,933 72,007 Research and development 19,269 16,876 82,933 72,007 Research and development 19,269 16,876 14,726 Sales and marketing 72,007 Research and development Gross margin 22,649 $ 35,021 $ 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 13,891 margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 13,891 12,975 24,046 25,694 96,937 Operating income 12, Gross margin Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 20,401 30,571 33,717 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating 33,717 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 Gross margin 19,179 20,048 20,40", + "accumulated_depreciation": "accumulated depreciation of $ 43,197 and $ 35,330 44,151 36,477 of $ 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use $ 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use asset 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use asset 8,753 36,477 Operating lease right-of-use asset 8,753 7,379 Equity investment 2,965 2,649 Operating lease right-of-use asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intan Accumulated depreciation ( 43,197 Total , at cost 87,348 71,807 Accumulated depreciation ( 43,197 ) 87,348 71,807 Accumulated depreciation ( 43,197 ) ( 35,330 ) Total depreciation ( 43,197 ) ( 35,330 ) Total , net $ ) Total , net $ 44,151 $ 36,477 During fiscal year , net $ 44,151 $ 36,477 During fiscal year 2020 , $ 36,477 During fiscal year 2020 , 2019 , and 2018 During fiscal year 2020 , 2019 , and 2018 , depreciation 2020 , 2019 , and 2018 , depreciation expense wa $ , depreciation expense wa $ 10.7 billion , $ 9.7 Accumulated depreciation ( at cost $ 10,371 $ 7,041 Accumulated depreciation ( 1,385 ) $ 7,041 Accumulated depreciation ( 1,385 ) ( 774 ) Property depreciation ( 1,385 ) ( 774 ) Property and equipment , and equipment , net $ 8,986 $ 6,267 Other current liability , net $ 8,986 $ 6,267 Other current liability $ 540 6,267 Other current liability $ 540 $ 317 Other long-term liability current liability $ 540 $ 317 Other long-term liability 8,956 6,257 $ 317 Other long-term liability 8,956 6,257 Total finance lease liability", + "debt": "debt expense . 43 PART II Item 7 Fiscal . 43 PART II Item 7 Fiscal Year 2019 Compared with II Item 7 Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Sales and marketing expense increased and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 20 debt exchange , a $ 3.4 billion increase in common stock stock repurchase , a $ 1.5 billion increase in repayment of debt , and a $ 1.3 billion increase in dividend paid used in investing decreased $ 3.6 billion to $ 12.2 billion $ 3.6 billion to $ 12.2 billion for fiscal year 2020 12.2 billion for fiscal year 2020 , mainly due to a mainly due to a $ 6.4 billion increase in cash from in part by a $ 1.5 billion increase in addition to property and equipment and $ 1.2 billion in other investing to the debt . In June 2020 , we exchanged a portion environment . Refer to Note 11 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) ) Three Months Ending September 30 , 2020 $ 13,884 December Months Ending September 30 , 2 debt In million ) 2021 2022-2023 2024-2025 Thereafter Total Long-term debt : a ) Principal payment $ 3,750 $ 10,716 $ 7,500 $ Principal payment $ 3,750 $ 10,716 $ 7,500 $ 45,441 $ $ 3,750 $ 10,716 $ 7,500 $ 45,441 $ 67,407 Interest $ 10,716 $ 7,500 $ 45,441 $ 67,407 Interest payment 2,028 $ 7,500 $ 45,441 $ 67,407 Interest payment 2,028 3,736 3,293 45,441 $ 67,407 Interest payment 2,028 3,736 3,293 25,265 34,322 Construction $ 67,407 Interest payment 2,028 3,736 3,293 25,265 34,322 Construction comm Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 15.2 billion from the amount pr debt Current portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 5,665 7,874 6,830 Short-term income tax 2,130 5,665 Short-term unearned revenue 36,000 6,830 Short-term income tax 2,130 5,665 Short-term unearned revenue 36,000 32,676 2,130 5,665 Short- debt 59,578 66,662 9,351 Total current liability 72,310 69,420 Long-term debt 59,578 66,662 Long-term liability 72,310 69,420 Long-term debt 59,578 66,662 Long-term income tax 29,432 72,310 69,420 Long-term debt 59,578 66,662 Long-term income tax 29,432 29,612 59,578 66,662 Long-term income tax 29,432 29,612 Long-term unearned revenue 3,180 66,662 Long-term income tax 29,432 29,612 Long-term unearned revenue 3,180 4,530 29,432 29,612 Long-term unearned revenue 3,180 4,530 Deferred income tax 204 29, debt short-term debt , maturity of 90 day or le , net day or le , net 0 0 ( 7,324 ) Proceeds or le , net 0 0 ( 7,324 ) Proceeds from , net 0 0 ( 7,324 ) Proceeds from issuance of Proceeds from issuance of debt 0 0 7,183 Cash premium on from issuance of debt 0 0 7,183 Cash premium on debt issuance of debt 0 0 7,183 Cash premium on debt exchange premium on debt exchange ( 3,417 ) 0 0 Repayments of debt exchange ( 3,417 ) 0 0 Repayments of debt ( exchange ( 3,417 ) 0 0 Repayments of debt ( 5,518 0 Repa debt ( 5,518 ) ( 4,000 ) ( debt ( 5,518 ) ( 4,000 ) ( 10,060 ) Common ) ( 4,000 ) ( 10,060 ) Common stock issued 1,343 10,060 ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ( Common stock issued 1,343 1,142 1,002 Common stock repurchased ( 22,968 1,002 Common stock repurchased ( 22,968 ) ( 19,543 ) ( repurchased ( 22,968 ) ( 19,543 ) ( 10,721 ) Common ) ( 19,543 ) ( 10,721 ) Common stock cash dividend stock cash divid Debt . 64 PART II Item 8 Debt investment are classified a level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability primarily option and swap contract . 65 PART II Item 8 \u2022 . 65 PART II Item 8 \u2022 Level 3 \u2013 debt 3 91 0 0 91 0 91 0 Total debt investment 91 0 0 91 0 91 0 Total debt investment $ 0 0 91 0 91 0 Total debt investment $ 122,900 0 Total debt investment $ 122,900 $ 6,929 $ ( 31 debt investment $ 122,900 $ 6,929 $ ( 31 ) $ 122,900 $ 6,929 $ ( 31 ) $ 129,798 $ 6,882 $ ( 31 ) $ 129,798 $ 6,882 $ 122,916 $ 31 ) $ 129,798 $ 6,882 $ 122,916 $ 0 Changes $ 129,798 $ 6,882 $ 122,916 $ 0 Changes in Fair $ 6,882 $ 122,916 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,198 $ 78 debt 3 7 0 0 7 0 7 0 Total debt investment 7 0 0 7 0 7 0 Total debt investment $ 0 0 7 0 7 0 Total debt investment $ 127,747 0 Total debt investment $ 127,747 $ 2,027 $ ( 122 debt investment $ 127,747 $ 2,027 $ ( 122 ) $ 127,747 $ 2,027 $ ( 122 ) $ 129,652 $ 7,176 $ ( 122 ) $ 129,652 $ 7,176 $ 122,476 $ 122 ) $ 129,652 $ 7,176 $ 122,476 $ 0 Changes $ 129,652 $ 7,176 $ 122,476 $ 0 Changes in Fair $ 7,176 $ 122,476 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 973 $ 409 $ E debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2020 June 30 , million ) June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 0 Foreign exchange contract contract purchased $ 635 $ 0 Foreign exchange contract sold 6,754 0 Foreign exchange contract sold 6,754 6,034 Interest rate contract purchased Foreign exchange contract sold 6 DEBT The PART II Item 8 NOTE 11 \u2014 DEBT The component of Rate Effective Interest Rate June 30 , 2020 June 30 , Interest Rate June 30 , 2020 June 30 , 2019 2009 June 30 , 2020 June 30 , 2019 2009 issuance of , 2020 June 30 , 2019 2009 issuance of $ 3.8 2020 June 30 , 2019 2009 issuance of $ 3.8 billion 2019 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 559 a ) 2039 5.20 % 5.24 % $ 559 $ 750 5.20 % 5.24 % $ 559 $ 750 2010 issuance of debt exchange adjustment ( b ) 93 0 Premium on debt exchange ( exchange ( a ) ( 3,619 ) 0 Total debt 63,327 a ) ( 3,619 ) 0 Total debt 63,327 72,178 Current 3,619 ) 0 Total debt 63,327 72,178 Current portion of long-term ) 0 Total debt 63,327 72,178 Current portion of long-term debt portion of long-term debt ( 3,749 ) ( 5,516 ) Long-term debt ( 3,749 ) ( 5,516 ) Long-term debt $ 59,578 5,516 ) Long-term debt $ 59,578 $ 66,662 ( a ) Long-term debt $ 59,578 $ 66,662 ( a ) In June ( a ) In June 2020 , debt . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , the estimated June 30 , 2020 and 2019 , the estimated fair value current portion , wa $ 77.1 billion and $ 78.9 billion $ 77.1 billion and $ 78.9 billion , respectively . The value are based on Level 2 input . Debt in the portion , a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) million ) Year Ending June 30 , 2021 $ 3,750 2022 Year Ending June 30 , 2021 $ 3,750 2022 7,966 2023 June 30 , 2021 $ 3,750 2022 7,966 20 debt $ ( 2,642 ) $ ( 738 ) ( 2,642 ) $ ( 738 ) Unearned revenue 0 ( ( 738 ) Unearned revenue 0 ( 30 ) Leasing asset ) Unearned revenue 0 ( 30 ) Leasing asset ( 2,817 30 ) Leasing asset ( 2,817 ) ( 1,510 ) Deferred asset ( 2,817 ) ( 1,510 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,581 ) ( 2,607 ) Other liability ( 2,581 ) ( 2,607 ) Other ( 344 ) ( 2,607 ) Other ( 344 ) ( 291 ) Deferred Other ( 344 ) ( 291 ) Deferred income tax liability income tax liability $ ( 8,384 ) $ ( 5,176 ", + "share_repurchase": "share repurchase 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share repurchase were 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2020 : Declaration Date Record Date ( In million ) June 17 , 2020 August 20 , million ) June 17 , 2020 August 20 , 2020 September June 17 , 2020 August 20 , 2020 September 10 , , 2020 August 20 , 2020 September 10 , 2020 $ August 20 , 2020 S share repurchase and dividend . 33 PART II Item 6 ITEM . 33 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2020 2019 ( a Year Ended June 30 , 2020 2019 ( a ) 2018 Ended June 30 , 2020 2019 ( a ) 2018 2017 2020 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) Revenue $ ( d ) Revenue $ 143,015 $ 125,843 $ 110,360 $ ) Revenue $ 143,015 $ 125,843 $ 110,360 $ 96,571 $ $ 143,015 $ 125,843 $ 110,360 $ 96 share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 , following completion of the the program approved on September 20 , 2016 , ha no approved on September 20 , 2016 , ha no expiration date time . As of June 30 share repurchase program . billion share repurchase program . 86 PART II Item 8 We . 86 PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2020 2019 2018 First Year Ended June 30 , 2020 2019 2018 First Quarter 29 Ended June 30 , 2020 2019 2018 First Quarter 29 $ June 30 , 2020 2019 2018 First Quarter 29 $ 4,000 2020 2019 2018 First Quarter 29 $ 4,000 24 $ 2,600 2018 First Quarter 29 $ 4,000 24 $ 2,600 22 $ First Quarter 29 $ 4,000 24 $ 2,600 22 $ 1,600 29 $ 4,000 24 $ 2,600 22 share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on Sep", + "earnings_per_share": "earnings per share 5.76 5.06 ( b ) 2.13 Diluted earnings per share 5.76 5.06 ( b ) 2.13 ( 5.76 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) Cash dividend dividend declared per common share 2.04 1.84 1.68 1.56 1.44 Cash declared per common share 2.04 1.84 1.68 1.56 1.44 Cash , per common share 2.04 1.84 1.68 1.56 1.44 Cash , cash common share 2.04 1.84 1.68 1.56 1.44 Cash , cash equivalent share 2.04 1.84 1.68 1.56 1.44 Cash , cash equivalent , equivalent , and short-term inv earnings per share % Diluted earnings per share 5.76 5.06 2.13 14 % 138 Diluted earnings per share 5.76 5.06 2.13 14 % 138 % earnings per share 5.76 5.06 2.13 14 % 138 % Non-GAAP per share 5.76 5.06 2.13 14 % 138 % Non-GAAP net 5.76 5.06 2.13 14 % 138 % Non-GAAP net income 44,281 138 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP diluted 44,281 36, earnings per share 5.76 4.75 3.88 21 % 22 diluted earnings per share 5.76 4.75 3.88 21 % 22 % earnings per share 5.76 4.75 3.88 21 % 22 % Non-GAAP per share 5.76 4.75 3.88 21 % 22 % Non-GAAP net 5.76 4.75 3.88 21 % 22 % Non-GAAP net income and intangible property in fiscal year 2019 and the net tax impact \u201d ) in fiscal year 2019 and 2018 . Refer to in fiscal year 2019 and 2018 . Refer to the Non-GAAP financial result . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Revenue inc earnings per share Diluted earnings per share $ 5.76 $ 5.06 $ 2.13 14 per share $ 5.76 $ 5.06 $ 2.13 14 % 138 $ 5.76 $ 5.06 $ 2.13 14 % 138 % Net 5.76 $ 5.06 $ 2.13 14 % 138 % Net tax 5.06 $ 2.13 14 % 138 % Net tax impact of of transfer of intangible property 0 ( 0.33 ) 0 * of intangible property 0 ( 0.33 ) 0 * * Net property 0 ( 0.33 ) 0 * * Net tax impact tax impact of the TCJA 0 0.02 1.75 * * Non-GAAP impact of the TCJA 0 0.02 1.75 * * Non-GAAP diluted of the TCJA 0 0.02 1.75 * * Non-GAAP diluted earnings dilu earnings per share $ 5.76 $ 4.75 $ 3.88 21 per share $ 5.76 $ 4.75 $ 3.88 21 % 22 $ 5.76 $ 4.75 $ 3.88 21 % 22 % * 5.76 $ 4.75 $ 3.88 21 % 22 % * Not 4.75 $ 3.88 21 % 22 % * Not meaningful . % * Not meaningful . 46 PART II Item 7 FINANCIAL . 46 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 136.5 billion and $ 133.8 billion $ 136.5 billion and $ 133.8 billion a of June 30 133.8 billion a of June 30 , 2020 and 2019 . a of June 30 , 2020 and 2019 . Equity investment June 30 , 202 Earnings per share $ 44,281 $ 39,240 $ 16,571 Earnings per share : Basic per share : Basic $ 5.82 $ 5.11 $ 2.15 Diluted : Basic $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 $ 2.13 Weighted 2.15 Diluted $ 5.76 $ 5.06 $ 2.13 Weighted average share $ 5.76 $ 5.06 $ 2.13 Weighted average share outstanding : average share outstanding : Basic 7,610 7,673 7,700 Diluted 7,683 7,753 share outstanding : Basic 7,610 7,673 7,700 Diluted 7,683 7,753 7,794 outs EARNINGS PER SHARE Basic option and stock award . 67 PART II Item 8 The . 67 PART II Item 8 The component of basic and share ) Year Ended June 30 , 2020 2019 2018 Net Year Ended June 30 , 2020 2019 2018 Net income available Ended June 30 , 2020 2019 2018 Net income available for June 30 , 2020 2019 2018 Net income available for common shareholder ( A ) $ 44,281 $ 39,240 $ 16,571 Weighted A ) $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding share of co Earnings Per Share equivalent ( C ) 7,683 7,753 7,794 Earnings Per Share Basic ( C ) 7,683 7,753 7,794 Earnings Per Share Basic ( Basic ( A/B ) $ 5.82 $ 5.11 $ 2.15 Diluted A/B ) $ 5.82 $ 5.11 $ 2.15 Diluted ( A/C $ 5.82 $ 5.11 $ 2.15 Diluted ( A/C ) $ Diluted ( A/C ) $ 5.76 $ 5.06 $ 2.13 Anti-dilutive A/C ) $ 5.76 $ 5.06 $ 2.13 Anti-dilutive stock-based award $ 5.76 $ 5.06 $ 2.13 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20 earnings per share income 10,678 11,649 10,752 11,202 44,281 Basic earnings per share 1.40 44,281 Basic earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted Basic earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per share share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per share 1.38 5.82 Diluted earnings per share 1.38 1.51 1.40 1.46 5.76 Fiscal Diluted earnings per share 1.38 1.51 1.40 earnings per share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 per share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 Revenue share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 2019 Revenue 29,084 32,471 30,571 33,717 125,8 earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share ( per share ( b ) 1.14 1.08 1.14 1.71 5.06 ( share ( b ) 1.14 1.08 1.14 1.71 5.06 ( a ( b ) 1.14 1.08 1.14 1.71 5.06 (", + "tax_rate": "Tax Rate Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Our effective tax rate for tax rate for fiscal year 2020 and 2019 wa 17 % for fiscal year 2020 and 2019 wa 17 % and 10 year 2020 and 2019 wa 17 % and 10 % , 2019 wa 17 % and 10 % , respectively . The tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related t tax rate for tax rate for fiscal year 2019 and 2018 wa 10 % for fiscal year 2019 and 2018 wa 10 % and 55 year 2019 and 2018 wa 10 % and 55 % , 2018 wa 10 % and 55 % , respectively . The tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 and a $ 2.6 billion year 2018 and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal ye Tax Rate The item follows : Year Ended June 30 , 2020 2019 2018 Federal Year Ended June 30 , 2020 2019 2018 Federal statutory rate Ended June 30 , 2020 2019 2018 Federal statutory rate 21.0 June 30 , 2020 2019 2018 Federal statutory rate 21.0 % 2019 2018 Federal statutory rate 21.0 % 21.0 % 28.1 % Federal statutory rate 21.0 % 21.0 % 28.1 % Effect of rate 21.0 % 21.0 % 28.1 % Effect of : Foreign taxed at lower rate ( 3.7 ) % ( 4.1 ) ( 3.7 ) % ( 4.1 ) % ( 7.8 ) ( 4.1 ) % ( 7.8 ) % Impact of the the enact tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 , and a $ 2.6 2018 , and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to tax rate for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 by $ 2020 , 2019 , and 2018 by $ 12.1 billion , , and 2018 by $ 12.1 billion , $ 12.0 billion $ 12.1 billion , $ 12.0 billion , and $ 11.3 12.0 billion , and $ 11.3 billion , respectively . 81 11.3 billion , respectively . 81 PART II Item 8 As . 81 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2020 , 2019 , As of June 30 , 2020 , 2019 , and 2018 June 30 , 2020 , 2019 , and 2018 , we 2020 , 2019 , and 2018 , we", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription , the Office portion the Office portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscription and Office business solution , including Dynamics 365 , a set of cl Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are business , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud for our commercial cloud business 37 PART II Item 7 Productivity business 37 PART II Item 7 Productivity and Business Processes and cloud service , including Office 365 subscription , the Office 365 36 Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 61 PART II Item 8 Judgment . 61 PART II Item 8 Judgment is required to determine license . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , long-term account June 30 , 2020 and 2019 , long-term account receivable , doubtful account , wa $ 2.7 billion and $ 2.2 billion $ 2.7 billion and $ 2.2 billion , respectively , and mi GEOGRAPHIC Office Commercial , including Office 365 subscription , the Office portion the Office portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscription and Office business solution , including Dynamics 365 , a set of cloud-based Surface and PC accessory . 90 PART II Item 8 \u2022 . 90 PART II Item 8 \u2022 Gaming , inc", + "common_stock": "Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 3.125 % Notes Notes due 2021 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . fi common stock outstanding to be held on December 2 , 2020 are incorporated by held on December 2 , 2020 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2020 INDEX Page PART Year Ended June 30 , 2020 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 17 Item 1A . Risk Factors of the Registrant 17 It common stock stock repurchase , a $ 1.5 billion increase in repayment of debt , and a $ 1.3 billion increase in dividend paid used in investing decreased $ 3.6 billion to $ 12.2 billion $ 3.6 billion to $ 12.2 billion for fiscal year 2020 12.2 billion for fiscal year 2020 , mainly due to a mainly due to a $ 6.4 billion increase in cash from in part by a $ 1.5 billion increase in addition to property and equipment and $ 1.2 billion in other investing to the purchase of component . 47 PART II Item 7 Fiscal . common stock stock repurchase and a $ 1.1 billion increase in dividend paid in part by a $ 6.2 billion decrease in repayment of used in investing increased $ 9.7 billion to $ 15.8 billion $ 9.7 billion to $ 15.8 billion for fiscal year 2019 15.8 billion for fiscal year 2019 , mainly due to a mainly due to a $ 6.0 billion decrease in cash from and maturity , a $ 2.3 billion increase in addition to equipment , and a $ 1.5 billion increase in cash used existing debt . In June 2020 , we exchanged a portion envi common stock for $ 19.7 billion , $ 16.8 billion $ 19.7 billion , $ 16.8 billion , and $ 8.6 16.8 billion , and $ 8.6 billion , respectively , through resource . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 48 PART II Item 7 Off-Balance . 48 PART I Common stock issued 1,343 10,060 ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ( Common stock issued 1,343 1,142 1,002 Common stock repurchased ( 22,968 1,002 Common stock repurchased ( 22,968 ) ( 19,543 ) ( repurchased ( 22,968 ) ( 19,543 ) ( 10,721 ) Common ) ( 19,543 ) ( 10,721 ) Common stock cash dividend stock cash dividend paid ( 15,137 ) ( 13,811 ) ( paid ( 15,137 ) ( 13,811 ) ( 12,699 ) Other ) ( 13,811 ) ( 12,699 ) Common stock and Ended June 30 , 2020 2019 2018 Common stock and paid-in June 30 , 2020 2019 2018 Common stock and paid-in capital , beginning of period $ 78,520 $ 71,223 $ 69,315 Common of period $ 78,520 $ 71,223 $ 69,315 Common stock issued $ 78,520 $ 71,223 $ 69,315 Common stock issued 1,343 6,829 $ 69,315 Common stock issued 1,343 6,829 1,002 Common stock repurchased 69,315 Common stock issued 1,343 6,829 1,002 Common stock repurchased ( Common stock issued 1,343 6,829 1,002 Common stock repurchased ( Common stock repurchased ( 4,599 ) ( 4,195 ) ( repurchased ( 4,599 ) ( 4,195 ) ( 3,033 ) Stock-based ) ( 4,195 ) ( 3,033 ) Stock-based compensation expense 5,289 3,033 ) Stock-based compensation expense 5,289 4,652 3,940 Other , net ) Stock-based compensation expense 5,289 4,652 3,940 Other , net ( Stock-based compensation expense 5,289 4,652 3,940 Other , net ( 1 3,940 Other , net ( 1 ) 11 ( 1 ) , net ( 1 ) 11 ( 1 ) Balance , ( 1 ) 11 ( 1 ) Balance , end of Balance , end of period 80,552 78,520 71,223 Reta Common stock cash 13,682 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend ( Common stock cash dividend ( 15,483 ) ( 14,103 ) ( dividend ( 15,483 ) ( 14,103 ) ( 12,917 ) Common ) ( 14,103 ) ( 12,917 ) Common stock repurchased ( ) Common stock repurchased ( 18,382 ) ( 15,346 ) ( repurchased ( 18,382 ) ( 15,346 ) ( 7,699 ) Cumulative ) ( 15,346 ) ( 7,699 ) Cumulative effect of accounting Cumulative effect of accounting change 0 common stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based award Dilutive effect of stock-based award 73 80 94 Common stock and effect of stock-based award 73 80 94 Common stock and common of stock-based award 73 80 94 Common stock and common stock stock equivalent ( C ) 7,683 7,753 7,794 Earnings Per Share equivalent ( C ) 7,683 7,753 7,794 Earnings Per Share Basic ( C ) 7,683 7,753 7,794 Earnin", + "hedging_activities": "Hedging Activities In August 2017 , the Financial Accounting Standards adopted the standard effective July 1 , 2019 . As we standard effective July 1 , 2019 . As we did not \u2013 Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard for Income Taxes In December 2019 , the FASB issued a effective for u beginning July 1 , 2021 , with early u beginning July 1 , 2021 , with early adoption permitted , and system . NOTE 2 \u2014 EARNI", + "derivative_instruments": "Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2020 June 30 , Assets Liabilities June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 44 $ ( 54 ) $ contract $ 44 $ ( 54 ) $ 0 $ ( $ ( 54 ) $ 0 $ ( 93 ) Interest ) $ 0 $ ( 93 ) Interest rate contract 93 93 ) Interest rate contract 93 0 0 0 Not Designated ) Interest rate contract 93 0 0 0 Not Designated a In" +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-21-039151/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-21-039151/full-submission_features.json new file mode 100644 index 0000000..bdb2f3b --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-21-039151/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue , condition , and reputation . 31 PART I Item 1A We . 31 PART I Item 1A We may have additional tax example , compliance with the 2017 United States Tax Cuts and may negatively impact revenue . 32 PART I Item 1A Third . 32 PART I Item 1A Third party may claim we our consolidated financial statement . 33 PART I Item 1A Catastrophic . 33 PART I Item 1A Catastrophic event or geopolitical condition growth , and reputation . 34 PART I Item 1A The . 34 PART I Item 1A The long-term effect of climate me revenue increased 34 % to $ 69.1 billion increased 34 % to $ 69.1 billion . \u2022 Office Commercial and cloud service revenue increased 13 % driven by Office 365 13 % driven by Office 365 Commercial growth of 22 % Office 365 Commercial growth of 22 % . \u2022 Office Consumer and cloud service revenue increased 10 % and Microsoft 365 Consumer increased 10 % and Microsoft 365 Consumer subscriber increased to 51.9 365 Consumer subscriber increased to 51.9 million . \u2022 LinkedIn revenue . \u2022 LinkedIn revenue increased revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 43 % . by Dynamics 365 growth of 43 % . \u2022 Server product and cloud service revenue increased 27 % driven by Azure growth driven by Azure growth of 50 % . \u2022 Windows original and cloud service revenue increased 14 % . \u2022 Xbox content content and service revenue increased 23 % . \u2022 Search advertising traffic acquisition cost , increased 13 % . \u2022 Surface revenue . \u2022 Surface revenue increased 5 % . On March 9 5 % . On March 9 Revenue $ per share amount ) 2021 2020 Percentage Change Revenue $ 168,088 2020 Percentage Change Revenue $ 168,088 $ 143,015 18 % Gross Change Revenue $ 168,088 $ 143,015 18 % Gross margin 115,856 Revenue $ 168,088 $ 143,015 18 % Gross margin 115,856 96,937 143,015 18 % Gross margin 115,856 96,937 20 % Operating income 18 % Gross margin 115,856 96,937 20 % Operating income 69,916 % Gross margin 115,856 96,937 20 % Operating income 69,916 52,959 96,937 20 % Operating income 69,916 52,959 32 % Net incom Revenue increased $ 25.1 billion or 18 % driven increased $ 25.1 billion or 18 % driven by growth across revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 6.2 billion or 13 % driven increased $ 6.2 billion or 13 % driven by growth in . Gross margin increased $ 18.9 billion or 20 % driven increased $ 18.9 billion or 20 % driven by growth across cloud gross margin percentage increased 4 point to 71 % driven percentage increased 4 point to 71 % driven by gro Revenue , favorable foreign currency impact of 3 % , 3 % , impact of 3 % , 3 % , and 4 % , 3 % , and 4 % , respectively . SEGMENT million , except percentage ) 2021 2020 Percentage Change Revenue Productivity , except percentage ) 2021 2020 Percentage Change Revenue Productivity and Productivity and Business Processes $ 53,915 $ 46,398 16 % Intelligent Business Processes $ 53,915 $ 46,398 16 % Intelligent Cloud 60,080 Processes $ 53,915 $ 46,398 16 % Intelligent Cloud 60,080 48,366 46,398 16 % Intellig Revenue increased $ 7.5 billion or 16 % . increased $ 7.5 billion or 16 % . \u2022 Office Commercial cloud service revenue increased $ 4.0 billion or 13 % . increased $ 4.0 billion or 13 % . Office 365 Commercial or 13 % . Office 365 Commercial revenue grew 22 % Office 365 Commercial revenue grew 22 % driven by seat growth driven by seat growth of 17 % and higher revenue per Office Commercial product revenue declined 23 % driven by continued customer cloud service revenue increased $ 474 million or 10 % dri revenue , on strength in Japan . Microsoft 365 Consumer subscriber increased 22 % Microsoft 365 Consumer subscriber increased 22 % to 51.9 million . subscriber increased 22 % to 51.9 million . \u2022 LinkedIn revenue \u2022 LinkedIn revenue increased $ 2.2 billion or 27 % driven increased $ 2.2 billion or 27 % driven by advertising demand and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 43 % . by Dynamics 365 growth of 43 % . Operating income increased . Opera Revenue increased $ Intelligent Cloud Revenue increased $ 11.7 billion or 24 % . increased $ 11.7 billion or 24 % . \u2022 Server product cloud service revenue increased $ 11.2 billion or 27 % driven increased $ 11.2 billion or 27 % driven by Azure . Azure . Azure revenue grew 50 % due to growth in . Server product revenue increased 6 % driven by hybrid and demand related to SQL Server 2008 and Windows Server 2008 end Server 2008 and Windows Server 2008 end of support . \u2022 Enterprise Services revenue increas Revenue increased $ 5.8 billion or 12 % . increased $ 5.8 billion or 12 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 933 million or 4 % driven increased $ 933 million or 4 % driven by growth in and cloud service revenue increased 14 % driven by demand for driven by demand for Microsoft 365 . Windows OEM revenue increased comparable that benefited from Windows 7 end of support . Windows Windows OEM Pro revenue decreased 9 % and Windows OEM non-Pro Windows OEM non-Pro revenue grew 21 % . \u2022 Gaming revenue \u2022 Gaming revenue increased $ 3.8 billion or 33 % driven increased $ 3.8 billion or 33 % driven by growth in and service revenue increased $ 2.3 billion or 23 % driven increased $ 2.3 billion or 23 % driven by growth in . Xbox hardware revenue increased 92 % driven by higher price Search advertising revenue increased $ 788 million or 10 % . increased $ 788 million or 10 % . Search advertising revenue excluding traffic acquisition cost increased 13 % driven by higher revenue \u2022 Surface revenue inc revenue 12 % 13 % ( 1 percent of revenue 12 % 13 % ( 1 ) ppt 12 % 13 % ( 1 ) ppt Research and development and development expense increased $ 1.4 billion or 8 % driven increased $ 1.4 billion or 8 % driven by investment in million , except percentage ) 2021 2020 Percentage Change Sales and , except percentage ) 2021 2020 Percentage Change Sales and marketing Change Sales and marketing $ 20,117 $ 19,598 3 % As and marketing $ 20,117 $ 19,598 3 % As a percent marketing $ 20,117 $ 19,598 3 % As a percent revenue 12 % 14 % ( 2 percent of revenue 12 % 14 % ( 2 ) ppt 12 % 14 % ( 2 ) ppt Sales and marketing and marketing expense increased $ 519 million or 3 % driven increased $ 519 million or 3 % driven by investment in unfavorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2021 2020 Percentage Change General and , except percentage ) 2021 2020 Percentage Change General and administrative Change General and administrative $ 5,107 $ 5,111 0 % As and administrat revenue 3 % 4 % ( 1 percent of revenue 3 % 4 % ( 1 ) ppt 3 % 4 % ( 1 ) ppt General and administrative expense and business tax . 46 PART II Item 7 OTHER . 46 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2021 2020 Interest and Year Ended June 30 , 2021 2020 Interest and dividend income Ended June 30 , 2021 2020 Interest and dividend income $ Interest and dividend income $ 2,131 $ 2,680 Interest expense ( dividend income $ 2,131 $ 2,680 Interest expense ( 2,346 ) $ 2,680 Interes Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional Revenue Unearned revenue comprises service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) ) Three Months Ending September 30 , 2021 $ 15,922 December Months Ending September 30 , 2021 $ 15,922 December 31 , September 30 , 2021 $ 15,922 December 31 , 2021 12,646 , 2021 $ 15,922 December 31 , 2021 12,646 March 31 $ 15,922 December 31 , Revenue from Office 365 is recognized ratably over the may incur future impairment . 52 PART II Item 7 Equity . 52 PART II Item 7 Equity investment without readily determinable an annual basis ( May 1 for u ) and between that ha a greater than 50 % likelihood of being realized our consolidated financial statement . 53 PART II Item 7 The . 53 PART II Item 7 The TCJA significantly change existing business . Refer to Note 12 \u2013 Income Taxes of the Part I I , Item 8 of this Form 10-K ) Item 8 of this Form 1 revenue . 54 PART II Item 7 STATEMENT . 54 PART II Item 7 STATEMENT OF MANAGEMENT \u2019 S President and Chief Accounting Officer 55 PART II Item 7A ITEM Officer 55 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2021 Impact Foreign currency\u2013Revenue Hypothetical Change June 30 , 2021 Impact Foreign currency\u2013Revenue 10 % , 2021 Impact Foreign currency\u2013Revenue 10 % decrease in foreign exchange foreign exchange rat Revenue Year Ended June 30 , 2021 2020 2019 Revenue : Product Ended June 30 , 2021 2020 2019 Revenue : Product $ June 30 , 2021 2020 2019 Revenue : Product $ 71,074 2019 Revenue : Product $ 71,074 $ 68,041 $ 66,069 Service : Product $ 71,074 $ 68,041 $ 66,069 Service and other $ 71,074 $ 68,041 $ 66,069 Service and other 97,014 74,974 $ 66,069 Service and other 97,014 74,974 59,774 Total revenue 168,088 66,069 Service and other 97,014 74,974 59,774 Total revenue 168,088 143,015 Service and other 97,014 revenue 168,088 143,015 125,843 97,014 74,974 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue 74,974 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue : 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue : Product Cost of revenue : Product 18,219 16,017 16,273 Service and other of revenue : Product 18,219 16,017 16,273 Service and other 34,013 revenue : Product 18,219 16,017 16,273 Service and other 34,013 30,061 16,017 16,273 Service and other 34,013 30,061 26,637 Tot revenue Service and other 34,013 30,061 26,637 Total cost of revenue 52,232 26,637 Total cost of revenue 52,232 46,078 42,910 Gross margin 115,856 Total cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 20,716 42,910 Gross margin 115,856 96,937 82,933 Research and revenue 41,525 7,874 Short-term income tax 2,174 2,130 Short-term unearned revenue 41,525 36,000 2,174 2,130 Short-term unearned revenue 41,525 36,000 Other current liability 11,666 2,130 Short-term unearned revenue 41,525 36,000 Other current liability 11,666 10,027 41,525 36,000 Other current liability 11,666 10,027 Total current liability 88,657 36,000 Other current liability 11,666 10,027 Total current liability 88,657 72,310 11,666 10,027 Total current liability 88,657 72,310 Long-term debt 50,074 revenue 2,616 59,578 Long-term income tax 27,190 29,432 Long-term unearned revenue 2,616 3,180 27,190 29,432 Long-term unearned revenue 2,616 3,180 Deferred income tax 198 29,432 Long-term unearned revenue 2,616 3,180 Deferred income tax 198 204 2,616 3,180 Deferred income tax 198 204 Operating lease liability 9,629 3,180 Deferred income tax 198 204 Operating lease liability 9,629 7,671 198 204 Operating lease liability 9,629 7,671 Other long-term liability 13,427 204 Operating lease liability 9,629 7, revenue 4,633 1,834 ) Accounts payable 2,798 3,018 232 Unearned revenue 4,633 2,212 ) Accounts payable 2,798 3,018 232 Unearned revenue 4,633 2,212 4,462 2,798 3,018 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 3,018 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 2,309 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 2,309 ) 2,212 4,462 Income tax ( 2,309 ) ( 3,631 ) 2,929 tax ( 2,309 ) ( 3,631 ) 2,929 Other current liability 2,309 ) ( 3,631 ) 2,929 Other current liability 4,149 1,346 ) Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , , Xbox subscription , Windows 10 post-delivery support , Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , other receivables June 30 , 2021 and 2020 , other receivables due from due from supplier were $ 965 million and $ 442 million $ 965 million and $ 442 million , respectively , and sheet . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , long-term account June 30 , 2021 and 2020 , long-term account Revenue Year Ended June 30 , 2021 2020 2019 Revenue Other Income Ended June 30 , 2021 2020 2019 Revenue Other Income ( June 30 , 2021 2020 2019 Revenue Other Income ( Expense Foreign exchange contract Derivatives $ 0 $ 193 $ 0 $ contract Derivatives $ 0 $ 193 $ 0 $ 1 $ $ 0 $ 193 $ 0 $ 1 $ 0 $ $ 193 $ 0 $ 1 $ 0 $ ( 130 $ 0 $ 1 $ 0 $ ( 130 ) Hedged 1 $ 0 $ ( 130 ) Hedged item 0 ( ( 130 ) Hedged item 0 ( 188 ) 0 3 ) Hedged item 0 ( 188 ) 0 3 0 130 item 0 ( 188 ) 0 3 0 130 Excluded from 0 ( 188 ) 0 3 0 130 revenue 2,659 1,553 6,346 6,737 Leasing liability 4,060 3,025 Unearned revenue 2,659 1,553 Other liability 4,060 3,025 Unearned revenue 2,659 1,553 Other 543 354 Deferred 4,060 3,025 Unearned revenue 2,659 1,553 Other 543 354 Deferred income Unearned revenue 2,659 1,553 Other 543 354 Deferred income tax asset revenue 2,659 1,553 Other 543 354 Deferred income tax asset 18,160 354 Deferred income tax asset 18,160 15,716 Less valuation allowance ( Deferred income tax asset 18,160 15,716 Less valuation all Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional REVENUE Unearned revenue ( In million ) June 30 , 2021 2020 Productivity and million ) June 30 , 2021 2020 Productivity and Business Processes ) June 30 , 2021 2020 Productivity and Business Processes $ Productivity and Business Processes $ 22,120 $ 18,643 Intelligent Cloud 17,710 Business Processes $ 22,120 $ 18,643 Intelligent Cloud 17,710 16,620 More 22,120 $ 18,643 Intelligent Cloud 17,710 16,620 More Personal Computing 4,311 $ 18,643 Intelligent Cloud 17,710 16,620 More Personal Computing 4,311 3, revenue were million ) Year Ended June 30 , 2021 Balance , beginning Year Ended June 30 , 2021 Balance , beginning of period , beginning of period $ 39,180 Deferral of revenue 94,565 Recognition $ 39,180 Deferral of revenue 94,565 Recognition of unearned revenue ( Recognition of unearned revenue ( 89,604 ) Balance , end of , end of period $ 44,141 Revenue allocated to remaining performance future period , wa $ 146 billion a of June 30 146 billion a of June 30 , 2021 , of which a of June 30 , 2021 , of revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 \u2014 LEASES We have operating have remaining lease term of 1 year to 15 year , term of 1 year to 15 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2021 2020 2019 Operating Year Ended June 30 , 2021 2020 2019 Operating lease cost Ended June 30 , 2021 2020 2019 Operating lease cost $ June 30 , 20 Revenue Year Ended June 30 , 2021 2020 2019 Revenue Productivity and Ended June 30 , 2021 2020 2019 Revenue Productivity and Business June 30 , 2021 2020 2019 Revenue Productivity and Business Processes Productivity and Business Processes $ 53,915 $ 46,398 $ 41,160 Intelligent Business Processes $ 53,915 $ 46,398 $ 41,160 Intelligent Cloud 60,080 $ 53,915 $ 46,398 $ 41,160 Intelligent Cloud 60,080 48,366 38,985 46,398 $ 41,160 Intelligent Cloud 60,080 48,366 38,985 More Personal Computing $ 41,160 Inte revenue for fiscal of revenue for fiscal year 2021 , 2020 , or 2019 for fiscal year 2021 , 2020 , or 2019 . Revenue 2021 , 2020 , or 2019 . Revenue , classified by million ) Year Ended June 30 , 2021 2020 2019 United Year Ended June 30 , 2021 2020 2019 United States ( Ended June 30 , 2021 2020 2019 United States ( a June 30 , 2021 2020 2019 United States ( a ) States ( a ) $ 83,953 $ 73,160 $ 64,199 Other a ) $ 83,953 $ 73,160 $ 64,199 Other country 84,135 $ 83,953 $ 73,160 $ 64,199 Other country 84,13 revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2021 2020 2019 Server Year Ended June 30 , 2021 2020 2019 Server product and Ended June 30 , 2021 2020 2019 Server product and cloud June 30 , 2021 2020 2019 Server product and cloud service product and cloud service $ 52,589 $ 41,379 $ 32,622 Office cloud service $ 52,589 $ 41,379 $ 32,622 Office product and $ 52,589 $ 41,379 $ 32,622 Office product and cloud service Office product a revenue , which includes Azure , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 69.1 billion , $ 51.7 billion $ 69.1 billion , $ 51.7 billion and $ 38.1 billion $ 51.7 billion and $ 38.1 billion in fiscal year 2021 38.1 billion in fiscal year 2021 , 2020 , and 2019 in fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . These amount company and with country over 10 % of the total s Revenue . 96 PART II Item 8 Revenue Recognition \u2013 Refer to Recognition \u2013 Refer to Note 1 to the financial statement Critical in the financial statement . 97 PART II Item 8 Income . 97 PART II Item 8 Income Taxes \u2013 Uncertain Tax Positions \u2013 Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 29 , 2021 We have served , Washington July 29 , 2021 We have served a the the Company 's auditor since 1983 . 98 PART II Item 's ", + "expenses": "EXPENSES Research and Development million , except percentage ) 2021 2020 Percentage Change Research and , except percentage ) 2021 2020 Percentage Change Research and development Change Research and development $ 20,716 $ 19,269 8 % As and development $ 20,716 $ 19,269 8 % As a percent development $ 20,716 $ 19,269 8 % As a percent of As a percent of revenue 12 % 13 % ( 1 percent of revenue 12 % 13 % ( 1 ) ppt 12 % 13 % ( 1 ) ppt Research and development and development expense increased $ 1.4 billion ", + "net_income": "net income of and net income of $ 2.3 billion , or $ 0.30 2.3 billion , or $ 0.30 per both basic and diluted segment is contained in Note 19 \u2013 Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are which includes Azure , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud for our commercial cloud b Net income 20 % Operating income 69,916 52,959 32 % Net income 61,271 % Operating income 69,916 52,959 32 % Net income 61,271 44,281 52,959 32 % Net income 61,271 44,281 38 % Diluted earnings 32 % Net income 61,271 44,281 38 % Diluted earnings per % Net income 61,271 44,281 38 % Diluted earnings per share % Diluted earnings per share 8.05 5.76 40 % Adjusted net Diluted earnings per share 8.05 5.76 40 % Adjusted net income earnings per share 8.05 5.76 40 % Adjusted net income ( net income ( non-GAAP ) 60,6 net income ( non-GAAP ) 7.97 5.76 38 % Adjusted net income and withholding tax in fiscal year 2021 . Refer to the Non-GAAP financial result . See Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . discussion . Revenue increased $ 25.1 billion or 18 % driven increased $ 25.1 billion or 18 % driven by growth across revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 6.2 billion or 13 % driven Net income per share amount ) 2021 2020 Percentage Change Net income $ Percentage Change Net income $ 61,271 $ 44,281 38 % Net Net income $ 61,271 $ 44,281 38 % Net income tax income $ 61,271 $ 44,281 38 % Net income tax benefit decision on withholding tax ( 620 ) 0 * Adjusted net withholding tax ( 620 ) 0 * Adjusted net income ( income ( non-GAAP ) $ 60,651 $ 44,281 37 % Diluted non-GAAP ) $ 60,651 $ 44,281 37 % Diluted earnings per ) $ 60,651 $ 44,281 37 % Diluted earnings per share Diluted earnings per Net income tax share $ 8.05 $ 5.76 40 % Net income tax benefit decision on withholding tax ( 0.08 ) 0 * Adjusted diluted withholding tax ( 0.08 ) 0 * Adjusted diluted earnings per share ( non-GAAP ) $ 7.97 $ 5.76 38 % * non-GAAP ) $ 7.97 $ 5.76 38 % * Not meaningful ) $ 7.97 $ 5.76 38 % * Not meaningful . % * Not meaningful . 48 PART II Item 7 FINANCIAL . 48 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 130.3 billion and $ 136.5 billion $ 130.3 billion and $ 136.5 bill Net income $ Provision for income tax 9,831 8,755 4,448 Net income $ 61,271 for income tax 9,831 8,755 4,448 Net income $ 61,271 $ 8,755 4,448 Net income $ 61,271 $ 44,281 $ 39,240 Earnings Net income $ 61,271 $ 44,281 $ 39,240 Earnings per share $ 61,271 $ 44,281 $ 39,240 Earnings per share : Basic per share : Basic $ 8.12 $ 5.82 $ 5.11 Diluted : Basic $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 $ 5.06 Weighted 5.11 Diluted $ 8.05 $ 5.7 Net income $ Ended June 30 , 2021 2020 2019 Net income $ 61,271 June 30 , 2021 2020 2019 Net income $ 61,271 $ 2020 2019 Net income $ 61,271 $ 44,281 $ 39,240 Other Net income $ 61,271 $ 44,281 $ 39,240 Other comprehensive income $ 61,271 $ 44,281 $ 39,240 Other comprehensive income ( loss Net change related to derivative 19 ( 38 ) ( 173 related to derivative 19 ( 38 ) ( 173 ) Net 19 ( 38 ) ( 173 ) Net change related to change related to investment ( 2,266 ) 3,990 2,405 Translation adjustment to investmen Net income Ended June 30 , 2021 2020 2019 Operations Net income $ June 30 , 2021 2020 2019 Operations Net income $ 61,271 2019 Operations Net income $ 61,271 $ 44,281 $ 39,240 Adjustments Net income $ 61,271 $ 44,281 $ 39,240 Adjustments to reconcile $ 61,271 $ 44,281 $ 39,240 Adjustments to reconcile net income , amortization , and other 11,686 12,796 11,682 Stock-based compensation expense amortization , and other 11,686 12,796 11,682 Stock-based compensation expense 6,118 , and other 11,686 12,796 11,6 Net income 61,271 , beginning of period 34,566 24,150 13,682 Net income 61,271 44,281 beginning of period 34,566 24,150 13,682 Net income 61,271 44,281 39,240 34,566 24,150 13,682 Net income 61,271 44,281 39,240 Common stock cash 24,150 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend ( Common stock cash dividend ( 16,871 ) ( 15,483 ) ( dividend ( 16,871 ) ( 15,483 ) ( 14,103 ) Common ) ( 15,483 ) ( 14,103 ) Common stock re net income of and net income of $ 2.3 billion , or $ 0.30 2.3 billion , or $ 0.30 per both basic and diluted and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 62 PART II Item 8 Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recogn Net income available Ended June 30 , 2021 2020 2019 Net income available for June 30 , 2021 2020 2019 Net income available for common shareholder ( A ) $ 61,271 $ 44,281 $ 39,240 Weighted A ) $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding share of common stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based award Dilutive effect of Net Income Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity Net Income Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity net income tax benefit fourth quarter of fiscal year 2019 , a the value of million ) Year Ended June 30 , 2021 2020 2019 Current Year Ended June 30 , 2021 2020 2019 Current Taxes U.S. Ended June 30 , 2021 2020 2019 Current Taxes U.S. federal June 30 , 2021 2020 2019 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,285 $ 3,537 $ 4,718 U.S. U.S. federal $ 3,285 $ 3,537 $ 4,718 U.S. state and $ 3,285 $ 3,537 $ 4,718 U.S. state and local 1,229 4,718 U.S. state and local 1,229 763 662 Foreign 5,467 net income tax benefit Rico . In fiscal year 2021 and 2020 , our foreign In fiscal year 2021 and 2020 , our foreign regional operating the U.S. rate , generated 82 % and 86 % of , generated 82 % and 86 % of our foreign income tax . In fiscal year 2019 , our foreign regional operating the U.S. rate , generated 82 % of our foreign income , and in fiscal year 2021 , includes tax benefit from tax . In fiscal year 2021 , 2020 , and 2019 In fiscal year 2021 , 2020 , and 2019 , there 2021 , 2020 , and 2019 , the net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer ( In million ) June 30 , 2021 2020 Deferred Income million ) June 30 , 2021 2020 Deferred Income Tax Assets ) June 30 , 2021 2020 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 502 $ 461 Accruals , reserve compensation expense $ 502 $ 461 Accruals , reserve , and reserve , and other expense 2,960 2,721 Loss and credit carryforwards , and other expense 2,960 2,721 Loss and cre net income tax for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 included interest 2021 , 2020 , and 2019 included interest expense related to uncertain tax position of $ 274 million , $ 579 million $ 274 million , $ 579 million , and $ 515 579 million , and $ 515 million , respectively , net million ) Year Ended June 30 , 2021 2020 2019 Beginning Year Ended June 30 , 2021 2020 2019 Beginning unrecognized tax Ended June 30 , 2021 2020 2019 Beginning unrecognized tax benefit Jun", + "assets": "Assets Current million ) June 30 , 2021 2020 Assets Current asset : ) June 30 , 2021 2020 Assets Current asset : Cash Cash and cash equivalent $ 14,224 $ 13,576 Short-term investment 116,110 cash equivalent $ 14,224 $ 13,576 Short-term investment 116,110 122,951 Total 14,224 $ 13,576 Short-term investment 116,110 122,951 Total cash , cash $ 13,576 Short-term investment 116,110 122,951 Total cash , cash equivalent equivalent , and short-term investment 130,334 136,527 Accounts receivable , net , and sh Assets Our intangible asset , ranging from one to 20 year . We evaluate the \u2013 Credit Losses In June 2016 , the FASB issued a adopted the standard effective July 1 , 2020 . We use standard effective July 1 , 2020 . We use a forward-looking for Income Taxes In December 2019 , the FASB issued a effective for u beginning July 1 , 2021 . We have u beginning July 1 , 2021 . We have completed our consolidated financial statement . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2021 2020 2019 Assets Liabilities Assets Liabilities June 30 , 2021 June 30 , Assets Liabilities June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 76 $ ( 8 ) $ contract $ 76 $ ( 8 ) $ 44 $ ( $ ( 8 ) $ 44 $ ( 54 ) Interest ) $ 44 $ ( 54 ) Interest rate contract 40 54 ) Interest rate contract 40 0 93 0 Not Designated ) Interest rate contract 40 0 93 0 Not Designated a Interes ASSETS The component Amortization Net Carrying Amount June 30 , 2021 2020 Technology-based $ Carrying Amount June 30 , 2021 2020 Technology-based $ 9,779 $ Amount June 30 , 2021 2020 Technology-based $ 9,779 $ ( , 2021 2020 Technology-based $ 9,779 $ ( 7,007 ) $ Technology-based $ 9,779 $ ( 7,007 ) $ 2,772 $ 8,160 $ ( 7,007 ) $ 2,772 $ 8,160 $ ( 6,381 7,007 ) $ 2,772 $ 8,160 $ ( 6,381 ) $ 2,772 $ 8,160 $ ( 6,381 ) $ 1,779 Customer-related 4,958 $ ( 6,381 ) $ 1,779 Customer-related 4,958 ( 2,859 ) 6,38 Assets ) June 30 , 2021 2020 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 502 $ 461 Accruals , reserve compensation expense $ 502 $ 461 Accruals , reserve , and reserve , and other expense 2,960 2,721 Loss and credit carryforwards , and other expense 2,960 2,721 Loss and credit carryforwards 1,090 2,721 Loss and credit carryforwards 1,090 865 Amortization 6,346 6,737 Leasing Loss and credit carryforwards 1,090 865 Amortization 6,346 6,737 Leasing liability credit ca", + "liabilities": "Liabilities and stockholder Total asset $ 333,779 $ 301,311 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 15,163 $ 12,530 Current portion of Accounts payable $ 15,163 $ 12,530 Current portion of long-term debt Current portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 8,072 3,749 Accrued compensation 10,0 Liabilities Assets Liabilities June 30 , 2021 June 30 , Assets Liabilities June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 76 $ ( 8 ) $ contract $ 76 $ ( 8 ) $ 44 $ ( $ ( 8 ) $ 44 $ ( 54 ) Interest ) $ 44 $ ( 54 ) Interest rate contract 40 54 ) Interest rate contract 40 0 93 0 Not Designated ) Interest rate contract 40 0 93 0 Not Designated a Interest rate contr Liabilities Book/tax investment and debt $ ( 2,605 ) $ ( 2,642 ) ( 2,605 ) $ ( 2,642 ) Leasing asset ( 3,834 2,642 ) Leasing asset ( 3,834 ) ( 2,817 ) Depreciation asset ( 3,834 ) ( 2,817 ) Depreciation ( 1,010 ) ( 2,817 ) Depreciation ( 1,010 ) ( 376 ) Deferred Depreciation ( 1,010 ) ( 376 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,815 ) ( 2,581 ) Other liability ( 2,815 ) ( 2,581 ) Other ( 144 ) ( 2,581 ) Other ( 144 ) ( 344 ) Deferred Other ( 144 ) ( 344 ) Deferred income tax liabil", + "equity": "Equity Securities 37 Item 6 . [ Reserved of Equity Securities 37 Item 6 . [ Reserved ] 38 6 . [ Reserved ] 38 Item 7 . Management \u2019 [ Reserved ] 38 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 39 Item 7A . Quantitative and Results of Operations 39 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 56 Item 8 . Financial Statements about Market Risk 56 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar Equity In our 2020 Diversity and Inclusion Report , the U.S. combined earn $ 1.006 for every $ 1.000 earned $ 1.006 for every $ 1.000 earned by their white counterpart in the U.S. earn $ 1.001 for every $ 1.000 earned $ 1.001 for every $ 1.000 earned by their counterpart in Kingdom ) combined earn $ 1.000 for every $ 1.000 by $ 1.000 for every $ 1.000 by men in these country differentiated leadership development program . 9 PART I Item 1 \u2022 . 9 PART I Item 1 \u2022 New employee orientation covering solution Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 37 PART II Item 6 ITEM . 37 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 38 6 . [ RESERVED ] 38 PART II Item 7 ITEM ] 38 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2021 compa Equity investment June 30 , 2021 and 2020 . Equity investment were $ . Equity investment were $ 6.0 billion and $ 3.0 billion $ 6.0 billion and $ 3.0 billion a of June 30 3.0 billion a of June 30 , 2021 and 2020 , a of June 30 , 2021 and 2020 , respectively . June 30 , 2021 and 2020 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using int Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . during the period presented . 50 PART II Item 7 Contractual . 50 PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) : ( In million ) 2022 2023-2024 2025-2026 There Equity . 52 PART II Item 7 Equity investment without readily determinable an annual basis ( May 1 for u ) and between that ha a greater than 50 % likelihood of being realized our consolidated financial statement . 53 PART II Item 7 The . 53 PART II Item 7 The TCJA significantly change existing business . Refer to Note 12 \u2013 Income Taxes of the Part I I , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . to cost of revenue . 54 PART II Item 7 STATEMENT . 54 PART II Item 7 ST Equity 10 309 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 602 ) Earnings 56 PART II price ( 602 ) Earnings 56 PART II Item 8 ITEM Earnings 56 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2021 2020 2019 Revenue Year Ended June 30 , 2021 2020 2019 Revenue : Product Ended June 30 , 2021 2020 2019 Revenue : Product $ June 30 , 2021 2020 2019 Revenue : Product $ 71,074 2019 Revenue : Equity investment 5,984 2,965 Operating lease right-of-use asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible 11,088 8,753 Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset , net investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset , net 7,800 43,351 Intangible asset , net 7,800 7,038 Other long-term asset 15,075 I equity liability : Accounts payable $ 15,163 $ 12,530 Current portion of Accounts payable $ 15,163 $ 12,530 Current portion of long-term debt Current portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 2,130 10,057 7,874 Short-term income tax 2,174 2 equity Accumulated other comprehensive income 1,822 3,186 Total stockholder \u2019 equity 141,988 3,186 Total stockholder \u2019 equity 141,988 118,304 Total liability and stockholder Total stockholder \u2019 equity 141,988 118,304 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 333,779 $ 301,311 Refer to accompanying \u2019 equity $ 333,779 $ 301,311 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 CASH . 59 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , EQUITY STATEMENTS ( amount ) Year Ended June 30 , 2021 2020 2019 Common Year Ended June 30 , 2021 2020 2019 Common stock and Ended June 30 , 2021 2020 2019 Common stock and paid-in June 30 , 2021 2020 2019 Common stock and paid-in capital , beginning of period $ 80,552 $ 78,520 $ 71,223 Common of period $ 80,552 $ 78,520 $ 71,223 Common stock issued $ 80,552 $ 78,520 $ 71,223 Common stock issued 1,963 1,343 $ 71,223 Common stock issued 1,963 1,343 6,829 Common stock repurchased 71,223 Common stock iss equity Total stockholder \u2019 equity $ 141,988 $ 118,304 $ 102,330 Cash \u2019 equity $ 141,988 $ 118,304 $ 102,330 Cash dividend declared $ 141,988 $ 118,304 $ 102,330 Cash dividend declared per common declared per common share $ 2.24 $ 2.04 $ 1.84 Refer common share $ 2.24 $ 2.04 $ 1.84 Refer to accompanying $ 2.24 $ 2.04 $ 1.84 Refer to accompanying note . Refer to accompanying note . 61 PART II Item 8 NOTES . 61 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 \u2014 ACCOUNTING POL Equity Investments June 30 , 2021 Changes in Fair Equity Investments June 30 , 2021 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,316 $ 0 $ Commercial paper Level 2 $ 4,316 $ 0 $ 0 $ Level 2 $ 4,316 $ 0 $ 0 $ 4,316 $ $ 4,316 $ 0 $ 0 $ 4,316 $ 1,331 $ $ 0 $ 0 $ 4,316 $ 1,331 $ 2,985 $ $ 0 $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates of deposit $ 1,331 $ 2,985 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 3,6 Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity invest equity investment $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 0 Derivatives $ 7,272 $ 7,272 $ 0 $ 0 Derivatives , net $ 7,272 $ 0 $ 0 Derivatives , net ( a , net ( a ) 78 0 78 0 Total $ net ( a ) 78 0 78 0 Total $ 136,318 ( a ) 78 0 78 0 Total $ 136,318 $ a ) 78 0 78 0 Total $ 136,318 $ 14,224 0 78 0 Total $ 136,318 $ 14,224 $ 116,110 $ 0 Total $ 136,318 $ 14,224 $ 116 Equity Investments June 30 , 2020 Changes in Fair Equity Investments June 30 , 2020 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,687 $ 1 $ Commercial paper Level 2 $ 4,687 $ 1 $ 0 $ Level 2 $ 4,687 $ 1 $ 0 $ 4,688 $ $ 4,687 $ 1 $ 0 $ 4,688 $ 1,618 $ $ 1 $ 0 $ 4,688 $ 1,618 $ 3,070 $ $ 0 $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates of deposit $ 1,618 $ 3,070 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,8 Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity invest equity investment $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 0 Derivatives $ 5,910 $ 5,910 $ 0 $ 0 Derivatives , net $ 5,910 $ 0 $ 0 Derivatives , net ( a , net ( a ) 35 0 35 0 Total $ net ( a ) 35 0 35 0 Total $ 139,492 ( a ) 35 0 35 0 Total $ 139,492 $ a ) 35 0 35 0 Total $ 139,492 $ 13,576 0 35 0 Total $ 139,492 $ 13,576 $ 122,951 $ 0 Total $ 139,492 $ 13,576 $ 122 equity investment June 30 , 2021 and 2020 , equity investment without readily price or impairment were $ 3.3 billion and $ 1.4 billion $ 3.3 billion and $ 1.4 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2021 U.S. government and Fair Value June 30 , 2021 U.S. gove EQUITY Shares million ) Year Ended June 30 , 2021 2020 2019 Balance Year Ended June 30 , 2021 2020 2019 Balance , beginning Ended June 30 , 2021 2020 2019 Balance , beginning of June 30 , 2021 2020 2019 Balance , beginning of year Balance , beginning of year 7,571 7,643 7,677 Issued 49 54 , beginning of year 7,571 7,643 7,677 Issued 49 54 116 beginning of year 7,571 7,643 7,677 Issued 49 54 116 Repurchased year 7,571 7,643 7,677 Issued 49 54 116 Repurchased ( 101 7,571 7,643 7,677 Issued 49 54 116 Rep Equity Statements 61 60 Stockholders \u2019 Equity Statements 61 Notes to Financial Statements 62 61 Notes to Financial Statements 62 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2", + "cash_flow": "Cash Flow 0 ( 93 ) 0 0 Designated a Cash Flow Hedging from accumulated other comprehensive income 0 17 0 0 341 0 accumulated other comprehensive income 0 17 0 0 341 0 Excluded other comprehensive income 0 17 0 0 341 0 Excluded from comprehensive income 0 17 0 0 341 0 Excluded from effectiveness income 0 17 0 0 341 0 Excluded from effectiveness assessment 0 17 0 0 341 0 Excluded from effectiveness assessment 0 0 Excluded from effectiveness assessment 0 0 0 0 ( 64 Excluded from effectiveness assessment 0 0 Cash Flow June 30 , 2021 2020 2019 Designated a Cash Flow Hedging Included in effectiveness assessment $ 34 $ ( 38 ) $ assessment $ 34 $ ( 38 ) $ 159 NOTE 6 $ ( 38 ) $ 159 NOTE 6 \u2014 INVENTORIES The 38 ) $ 159 NOTE 6 \u2014 INVENTORIES The component of ( In million ) June 30 , 2021 2020 Raw material million ) June 30 , 2021 2020 Raw material $ 1,190 ) June 30 , 2021 2020 Raw material $ 1,190 $ 2021 2020 Raw material $ 1,190 $ 700 Work in process Raw material $ 1,190 $ 700 Work in process 79 83 $ 700 Work in pro cash flow $ 1,307 $ 947 $ 617 Supplemental cash flow information related million ) Year Ended June 30 , 2021 2020 2019 Cash Year Ended June 30 , 2021 2020 2019 Cash paid for Ended June 30 , 2021 2020 2019 Cash paid for amount June 30 , 2021 2020 2019 Cash paid for amount included flow from operating lease $ 2,052 $ 1,829 $ 1,670 Operating operating lease $ 2,052 $ 1,829 $ 1,670 Operating cash flow $ 2,052 $ 1,829 $ 1,670 Operating cash flow from finance cash flow from finance lease 386 336 247 Financing cash flow flow from finance lease 386 336 247 Financing cash flow from from finance lease 386 336 247 Financing cash flow from finance cash flow from finance lease 648 409 221 Right-of-use asset obtained flow from finance lease 648 409 221 Right-of-use asset obtained in from finance lease 648 409 221 Right-of-use asset obtained in exchange lease obligation : Operating lease 4,380 3,677 2,303 Finance lease 3,290 obligation : Operating lease 4,380 3,677 2,303 Finance lease 3,290 3,467 : Operating lease 4,3", + "gross_margin": "Gross margin 115,856 Revenue $ 168,088 $ 143,015 18 % Gross margin 115,856 96,937 143,015 18 % Gross margin 115,856 96,937 20 % Operating income 18 % Gross margin 115,856 96,937 20 % Operating income 69,916 % Gross margin 115,856 96,937 20 % Operating income 69,916 52,959 96,937 20 % Operating income 69,916 52,959 32 % Net income 20 % Operating income 69,916 52,959 32 % Net income 61,271 % Operating income 69,916 52,959 32 % Net income 61,271 44,281 52,959 32 % Net income 61,271 44,281 38 % Diluted earnings Gross margin increased $ 18.9 billion or 20 % driven increased $ 18.9 billion or 20 % driven by growth across cloud gross margin percentage increased 4 point to 71 % driven percentage increased 4 point to 71 % driven by gross margin . Operating expense increased $ 2.0 billion or 4 % driven increased $ 2.0 billion or 4 % driven by investment in and development expense increased $ 1.4 billion or 8 % driven increased $ 1.4 billion or 8 % driven by investment in and marketing expense increased $ 519 million or Gross margin \u2022 Gross margin increased $ 6.5 billion or 18 % driven increased $ 6.5 billion or 18 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn , and \u2022 Operating expense increased $ 839 million or 5 % driven increased $ 839 million or 5 % driven by investment in favorable foreign currency impact of 2 % , 3 % , impact of 2 % , 3 % , and 4 % , 3 % , and 4 % , respectively . 44 4 % , respectively . 44 PART II Item 7 Intelligent . 44 PART II Item 7 Intelligent Cloud Revenue increas Gross margin \u2022 Gross margin increased $ 9.7 billion or 29 % driven increased $ 9.7 billion or 29 % driven by growth in \u2022 Operating expense increased $ 1.9 billion or 12 % driven increased $ 1.9 billion or 12 % driven by investment in favorable foreign currency impact of 2 % , 3 % , impact of 2 % , 3 % , and 4 % , 3 % , and 4 % , respectively . More Personal Computing Revenue increased $ 5.8 billion or 12 % . increased $ 5.8 billion or 12 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 933 million or 4 % Gross margin \u2022 Gross margin increased $ 2.8 billion or 10 % driven increased $ 2.8 billion or 10 % driven by growth in \u2022 Operating expense decreased $ 752 million or 6 % driven decreased $ 752 million or 6 % driven by prior year favorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . 45 3 % , respectively . 45 PART II Item 7 OPERATING . 45 PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2021 2020 Percentage Change Research and , exce Gross margin 115,856 Total cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 20,716 42,910 Gross margin 115,856 96,937 82,933 Research and development 20,716 19,269 96,937 82,933 Research and development 20,716 19,269 16,876 Sales and marketing 82,933 Research and devel", + "accumulated_depreciation": "accumulated depreciation of $ 51,351 and $ 43,197 59,715 44,151 of $ 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use $ 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use asset 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use asset 11,088 44,151 Operating lease right-of-use asset 11,088 8,753 Equity investment 5,984 2,965 Operating lease right-of-use asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill 49,711 43,351 I Accumulated depreciation ( 51,351 Total , at cost 111,066 87,348 Accumulated depreciation ( 51,351 ) 111,066 87,348 Accumulated depreciation ( 51,351 ) ( 43,197 ) Total depreciation ( 51,351 ) ( 43,197 ) Total , net $ ) Total , net $ 59,715 $ 44,151 During fiscal year , net $ 59,715 $ 44,151 During fiscal year 2021 , $ 44,151 During fiscal year 2021 , 2020 , and 2019 During fiscal year 2021 , 2020 , and 2019 , depreciation 2021 , 2020 , and 2019 , depreciation expense wa $ , depreciation expense wa $ 9.3 billion , $ 10 Accumulated depreciation ( at cost $ 14,107 $ 10,371 Accumulated depreciation ( 2,306 ) $ 10,371 Accumulated depreciation ( 2,306 ) ( 1,385 ) Property depreciation ( 2,306 ) ( 1,385 ) Property and equipment , and equipment , net $ 11,801 $ 8,986 Other current liability , net $ 11,801 $ 8,986 Other current liability $ 791 8,986 Other current liability $ 791 $ 540 Other long-term liability current liability $ 791 $ 540 Other long-term liability 11,750 8,956 $ 540 Other long-term liability 11,750 8,956 Total finance lease", + "debt": "debt and a $ 1.7 billion decrease in cash premium used in investing increased $ 15.4 billion to $ 27.6 billion $ 15.4 billion to $ 27.6 billion for fiscal year 2021 27.6 billion for fiscal year 2021 , mainly due to a mainly due to a $ 6.4 billion increase in cash used other asset , a $ 5.2 billion increase in addition to equipment , and a $ 4.1 billion decrease in cash from existing debt . In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion environment . Refer to No Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 49 PART II Item 7 Unearned . 49 PART II Item 7 Unearned Revenue Unearned revenue comprises service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) ) Three Months Ending September 30 , 2021 $ 15,922 debt In million ) 2022 2023-2024 2025-2026 Thereafter Total Long-term debt : a ) Principal payment $ 8,075 $ 8,000 $ 5,250 $ Principal payment $ 8,075 $ 8,000 $ 5,250 $ 42,585 $ $ 8,075 $ 8,000 $ 5,250 $ 42,585 $ 63,910 Interest $ 8,000 $ 5,250 $ 42,585 $ 63,910 Interest payment 1,628 $ 5,250 $ 42,585 $ 63,910 Interest payment 1,628 2,847 2,438 42,585 $ 63,910 Interest payment 1,628 2,847 2,438 17,320 24,233 Construction $ 63,910 Interest payment 1,628 2,847 2,438 17,320 24,233 Construction commitme Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 14.6 billion from the amount pr debt Current portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 2,130 10,057 7,874 Short-term income tax 2,174 2,130 Short-term unearned revenue 41,525 7,874 Short-term income tax 2,174 2,130 Short-term unearned revenue 41,525 36,000 2,174 2,130 S debt 50,074 59,578 10,027 Total current liability 88,657 72,310 Long-term debt 50,074 59,578 Long-term liability 88,657 72,310 Long-term debt 50,074 59,578 Long-term income tax 27,190 88,657 72,310 Long-term debt 50,074 59,578 Long-term income tax 27,190 29,432 50,074 59,578 Long-term income tax 27,190 29,432 Long-term unearned revenue 2,616 59,578 Long-term income tax 27,190 29,432 Long-term unearned revenue 2,616 3,180 27,190 29,432 Long-term unearned revenue 2,616 3,180 Deferred income tax 198 29 debt premium on debt exchange ( 1,754 ) ( 3,417 ) 0 exchange ( 1,754 ) ( 3,417 ) 0 Repayments of debt 1,754 ) ( 3,417 ) 0 Repayments of debt ( 3,750 0 Repayments of debt ( 3,750 ) ( 5,518 ) ( debt ( 3,750 ) ( 5,518 ) ( 4,000 ) Common ) ( 5,518 ) ( 4,000 ) Common stock issued 1,693 4,000 ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ( Common stock issued 1,693 1,343 1,142 Common stock repurchased ( 27,385 1,142 Common Debt . 66 PART II Item 8 Debt investment are classified a level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability primarily option and swap contract . 67 PART II Item 8 \u2022 . 67 PART II Item 8 \u2022 Level 3 \u2013 debt 0 ( 7 ) 88 0 88 0 Total debt investment ( 7 ) 88 0 88 0 Total debt investment $ 7 ) 88 0 88 0 Total debt investment $ 117,966 0 Total debt investment $ 117,966 $ 4,177 $ ( 135 debt investment $ 117,966 $ 4,177 $ ( 135 ) $ 117,966 $ 4,177 $ ( 135 ) $ 122,008 $ 5,976 $ ( 135 ) $ 122,008 $ 5,976 $ 116,032 $ 135 ) $ 122,008 $ 5,976 $ 116,032 $ 0 Changes $ 122,008 $ 5,976 $ 116,032 $ 0 Changes in Fair $ 5,976 $ 116,032 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,582 $ debt 3 91 0 0 91 0 91 0 Total debt investment 91 0 0 91 0 91 0 Total debt investment $ 0 0 91 0 91 0 Total debt investment $ 122,900 0 Total debt investment $ 122,900 $ 6,929 $ ( 31 debt investment $ 122,900 $ 6,929 $ ( 31 ) $ 122,900 $ 6,929 $ ( 31 ) $ 129,798 $ 6,882 $ ( 31 ) $ 129,798 $ 6,882 $ 122,916 $ 31 ) $ 129,798 $ 6,882 $ 122,916 $ 0 Changes $ 129,798 $ 6,882 $ 122,916 $ 0 Changes in Fair $ 6,882 $ 122,916 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,198 $ 78 debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2021 June 30 , million ) June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 635 Foreign exchange contract contract purchased $ 635 $ 635 Foreign exchange contract sold 6,081 635 Foreign exchange contract sold 6,081 6,754 Interest rate contract purchased Foreign exchange contract DEBT The PART II Item 8 NOTE 11 \u2014 DEBT The component of Rate Effective Interest Rate June 30 , 2021 June 30 , Interest Rate June 30 , 2021 June 30 , 2020 2009 June 30 , 2021 June 30 , 2020 2009 issuance of , 2021 June 30 , 2020 2009 issuance of $ 3.8 2021 June 30 , 2020 2009 issuance of $ 3.8 billion 2020 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 520 a ) 2039 5.20 % 5.24 % $ 520 $ 559 5.20 % 5.24 % $ 520 $ 559 2010 issuance of debt exchange adjustment ( b ) 40 93 Premium on debt exchange ( exchange ( a ) ( 5,293 ) ( 3,619 ) Total ) ( 5,293 ) ( 3,619 ) Total debt 58,146 63,327 ( 3,619 ) Total debt 58,146 63,327 Current portion of long-term 3,619 ) Total debt 58,146 63,327 Current portion of long-term debt portion of long-term debt ( 8,072 ) ( 3,749 ) Long-term debt ( 8,072 ) ( 3,749 ) Long-term debt $ 50,074 3,749 ) Long-term debt $ 50,074 $ 59,578 ( a ) Long-term debt $ 50,074 $ 59,578 ( a ) In March ( a ) In March 2021 a debt . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , the estimated June 30 , 2021 and 2020 , the estimated fair value current portion , wa $ 70.0 billion and $ 77.1 billion $ 70.0 billion and $ 77.1 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 wa $ 2021 , 2020 , and 2019 wa $ 2.0 billion , , and 2019 wa $ 2.0 billion , $ 2.4 billion $ 2.0 billion , $ 2.4 billion , a debt $ ( 2,605 ) $ ( 2,642 ) ( 2,605 ) $ ( 2,642 ) Leasing asset ( 3,834 2,642 ) Leasing asset ( 3,834 ) ( 2,817 ) Depreciation asset ( 3,834 ) ( 2,817 ) Depreciation ( 1,010 ) ( 2,817 ) Depreciation ( 1,010 ) ( 376 ) Deferred Depreciation ( 1,010 ) ( 376 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,815 ) ( 2,581 ) Other liability ( 2,815 ) ( 2,581 ) Other ( 144 ) ( 2,581 ) Other ( 144 ) ( 344 ) Deferred Other ( 144 ) ( 344 ) Deferred income tax liability income tax liability $ ( ", + "share_repurchase": "share repurchase 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share repurchase were 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2021 : Declaration Date Record Date ( In million ) June 16 , 2021 August 19 , million ) June 16 , 2021 August 19 , 2021 September June 16 , 2021 August 19 , 2021 September 9 , , 2021 August 19 , 2021 September 9 , 2021 $ August 19 , 2021 Septe share repurchase and dividend . 37 PART II Item 6 ITEM . 37 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 38 6 . [ RESERVED ] 38 PART II Item 7 ITEM ] 38 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2021 compared to the year ended June 30 , 2021 compared to the year ended to the year ended June 30 , 2020 . For a year ended Jun share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 , following completion of the the program approved on September 20 , 2016 , ha no approved on September 20 , 2016 , ha no expiration date time . As of June 30 share repurchase program . billion share repurchase program . 89 PART II Item 8 We . 89 PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2021 2020 2019 First Year Ended June 30 , 2021 2020 2019 First Quarter 25 Ended June 30 , 2021 2020 2019 First Quarter 25 $ June 30 , 2021 2020 2019 First Quarter 25 $ 5,270 2021 2020 2019 First Quarter 25 $ 5,270 29 $ 4,000 2019 First Quarter 25 $ 5,270 29 $ 4,000 24 $ First Quarter 25 $ 5,270 29 $ 4,000 24 $ 2,600 25 $ 5,270 29 $ 4,000 24 share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on Sep", + "earnings_per_share": "earnings per share % Diluted earnings per share 8.05 5.76 40 % Adjusted net Diluted earnings per share 8.05 5.76 40 % Adjusted net income earnings per share 8.05 5.76 40 % Adjusted net income ( net income ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted income ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted earnings ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted earnings per per share ( non-GAAP ) 7.97 5.76 38 % Adjusted net share ( non-GAAP ) 7.97 5.76 38 % Adjusted net income ( non-GAAP ) 7.97 5.76 38 % Adju earnings per share Diluted earnings per share $ 8.05 $ 5.76 40 % Net per share $ 8.05 $ 5.76 40 % Net income tax share $ 8.05 $ 5.76 40 % Net income tax benefit decision on withholding tax ( 0.08 ) 0 * Adjusted diluted withholding tax ( 0.08 ) 0 * Adjusted diluted earnings per share ( non-GAAP ) $ 7.97 $ 5.76 38 % * non-GAAP ) $ 7.97 $ 5.76 38 % * Not meaningful ) $ 7.97 $ 5.76 38 % * Not meaningful . % * Not meaningful . 48 PART II Item 7 FINANCIAL . 48 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-te Earnings per share $ 61,271 $ 44,281 $ 39,240 Earnings per share : Basic per share : Basic $ 8.12 $ 5.82 $ 5.11 Diluted : Basic $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 $ 5.06 Weighted 5.11 Diluted $ 8.05 $ 5.76 $ 5.06 Weighted average share $ 8.05 $ 5.76 $ 5.06 Weighted average share outstanding : average share outstanding : Basic 7,547 7,610 7,673 Diluted 7,608 7,683 share outstanding : Basic 7,547 7,610 7,673 Diluted 7,608 7,683 7,753 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2021 2020 2019 Net Year Ended June 30 , 2021 2020 2019 Net income available Ended June 30 , 2021 2020 2019 Net income available for June 30 , 2021 2020 2019 Net income available for common shareholder ( A ) $ 61,271 $ 44,281 $ 39,240 Weighted A ) $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding share of common stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock ( B ) 7,547 7,610 7,673 Dilutive e Earnings Per Share equivalent ( C ) 7,608 7,683 7,753 Earnings Per Share Basic ( C ) 7,608 7,683 7,753 Earnings Per Share Basic ( Basic ( A/B ) $ 8.12 $ 5.82 $ 5.11 Diluted A/B ) $ 8.12 $ 5.82 $ 5.11 Diluted ( A/C $ 8.12 $ 5.82 $ 5.11 Diluted ( A/C ) $ Diluted ( A/C ) $ 8.05 $ 5.76 $ 5.06 Anti-dilutive A/C ) $ 8.05 $ 5.76 $ 5.06 Anti-dilutive stock-based award $ 8.05 $ 5.76 $ 5.06 Anti-dilutive stock-based award excluded from during the period presented . 69 PART II Item 8 NOTE . 69 PART II Item 8 NOTE 3 \u2014 OTHER ", + "tax_rate": "tax rate for fiscal year 2021 and 2020 wa 14 % for fiscal year 2021 and 2020 wa 14 % and 17 year 2021 and 2020 wa 14 % and 17 % , 2020 wa 14 % and 17 % , respectively . The in India . In March 2021 , the India Supreme Court ruled favorably for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 throug tax rate service . In fiscal year 2021 , our U.S. income before before income tax wa $ 35.0 billion and our foreign income before income tax wa $ 36.1 billion . In fiscal year billion . In fiscal year 2020 , our U.S. income before before income tax wa $ 24.1 billion and our foreign income before income tax wa $ 28.9 billion . Uncertain Tax Positions ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 Tax Rate The item follows : Year Ended June 30 , 2021 2020 2019 Federal Year Ended June 30 , 2021 2020 2019 Federal statutory rate Ended June 30 , 2021 2020 2019 Federal statutory rate 21.0 June 30 , 2021 2020 2019 Federal statutory rate 21.0 % 2020 2019 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 2.7 ) % ( 3.7 ) ( 2.7 ) % ( 3.7 ) % ( 4.1 ) ( 3.7 ) % ( 4.1 ) % Impact of the the enact tax rate for fiscal year 2021 compared to fiscal year 2020 2021 compared to fiscal year 2020 wa primarily due to tax tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer ( In million ) June 30 , 2021 2020 Deferred Income million ) June 30 , 2021 2020 Deferred Income Tax Assets ) June 30 , 2021 2020 Deferred Income tax rate for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 by $ 2021 , 2020 , and 2019 by $ 12.5 billion , , and 2019 by $ 12.5 billion , $ 12.1 billion $ 12.5 billion , $ 12.1 billion , and $ 12.0 12.1 billion , and $ 12.0 billion , respectively . As respectively . As of June 30 , 2021 , 2020 , As of June 30 , 2021 , 2020 , and 2019 June 30 , 2021 , 2020 , and 2019 , we 2021 , 2020 , and 2019 , we had accrued interest uncertain tax position of $ 4.3 billion , $ 4.0 billion $", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription and Office licensed business solution , including Dynamics 365 , comprising a Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are which includes Azure , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud for our commercial cloud business 41 PART II Item 7 Productivity business 41 PART II Item 7 Productivity and Business Processes and and cloud service ( Office 365 subscription , the Office 365 Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , , Xbox subscription , Windows 10 post-delivery support , Dynamics business service . Refer to Note 13 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of GEOGRAPHIC \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription and Office licensed business solution , including Dynamics 365 , comprising a set of Surface and PC accessory . 93 PART II Item 8 \u2022 . 93 PART II Item 8 \u2022 Gaming , inclu", + "common_stock": "Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 3.125 % Notes Notes due 2021 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . fi common stock outstanding to be held on November 30 , 2021 are incorporated by held on November 30 , 2021 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2021 INDEX Page PART Year Ended June 30 , 2021 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Information about our PART I Item 1. Business 3 Information about our Executive Officers Information about our Executive Officers 20 Item 1A . Risk Factors our Executive common stock stock repurchase and a $ 1.4 billion increase in dividend paid in part by a $ 1.8 billion decrease in repayment of of debt and a $ 1.7 billion decrease in cash premium used in investing increased $ 15.4 billion to $ 27.6 billion $ 15.4 billion to $ 27.6 billion for fiscal year 2021 27.6 billion for fiscal year 2021 , mainly due to a mainly due to a $ 6.4 billion increase in cash used other asset , a $ 5.2 billion increase in addition to equipment , and a $ 4.1 billion decrease in cash from exis common stock for $ 23.0 billion and $ 19.7 billion $ 23.0 billion and $ 19.7 billion , respectively , through resource . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . during the period presented . 50 PART II Item 7 Contractual . 50 PART II Item 7 Contractual Obligations The f Common stock issued 1,693 4,000 ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ( Common stock issued 1,693 1,343 1,142 Common stock repurchased ( 27,385 1,142 Common stock repurchased ( 27,385 ) ( 22,968 ) ( repurchased ( 27,385 ) ( 22,968 ) ( 19,543 ) Common ) ( 22,968 ) ( 19,543 ) Common stock cash dividend stock cash dividend paid ( 16,521 ) ( 15,137 ) ( paid ( 16,521 ) ( 15,137 ) ( 13,811 ) Other ) ( 15,137 ) ( 13,811 ) O Common stock and Ended June 30 , 2021 2020 2019 Common stock and paid-in June 30 , 2021 2020 2019 Common stock and paid-in capital , beginning of period $ 80,552 $ 78,520 $ 71,223 Common of period $ 80,552 $ 78,520 $ 71,223 Common stock issued $ 80,552 $ 78,520 $ 71,223 Common stock issued 1,963 1,343 $ 71,223 Common stock issued 1,963 1,343 6,829 Common stock repurchased 71,223 Common stock issued 1,963 1,343 6,829 Common stock repurchased ( Common stock issued 1,963 1,343 6,829 Common stock repurchased ( Common stock repurchased ( 5,539 ) ( 4,599 ) ( repurchased ( 5,539 ) ( 4,599 ) ( 4,195 ) Stock-based ) ( 4,599 ) ( 4,195 ) Stock-based compensation expense 6,118 4,195 ) Stock-based compensation expense 6,118 5,289 4,652 Other , net ) Stock-based compensation expense 6,118 5,289 4,652 Other , net 17 Stock-based compensation expense 6,118 5,289 4,652 Other , net 17 ( 5,289 4,652 Other , net 17 ( 1 ) 11 Balance Other , net 17 ( 1 ) 11 Balance , end net 17 ( 1 ) 11 Balance , end of period Balance , end of peri Common stock cash 24,150 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend ( Common stock cash dividend ( 16,871 ) ( 15,483 ) ( dividend ( 16,871 ) ( 15,483 ) ( 14,103 ) Common ) ( 15,483 ) ( 14,103 ) Common stock repurchased ( ) Common stock repurchased ( 21,879 ) ( 18,382 ) ( repurchased ( 21,879 ) ( 18,382 ) ( 15,346 ) Cumulative ) ( 18,382 ) ( 15,346 ) Cumulative effect of accounting effect of accounting change ( 32 ) 0 67 common stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based award Dilutive effect of stock-based award 61 73 80 Common stock and effect of stock-based award 61 73 80 Common stock and common of stock-based award 61 73 80 Common stock and common stock stock equivalent ( C ) 7,608 7,683 7,753 Earnings Per Share equivalent ( C ) 7,608 7,683 7,753 Earnings Per Share Basic ( C ) 7,608 7,683 7,753 Earnin", + "derivative_instruments": "Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2021 June 30 , Assets Liabilities June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 76 $ ( 8 ) $ contract $ 76 $ ( 8 ) $ 44 $ ( $ ( 8 ) $ 44 $ ( 54 ) Interest ) $ 44 $ ( 54 ) Interest rate contract 40 54 ) Interest rate contract 40 0 93 0 Not Designated ) Interest rate contract 40 0 93 0 Not Designated a " +} \ No newline at end of file diff --git a/src/data/feature/MSFT/10-K/0001564590-22-026876/full-submission_features.json b/src/data/feature/MSFT/10-K/0001564590-22-026876/full-submission_features.json new file mode 100644 index 0000000..ebf2b68 --- /dev/null +++ b/src/data/feature/MSFT/10-K/0001564590-22-026876/full-submission_features.json @@ -0,0 +1,18 @@ +{ + "revenue": "revenue , which a curated library of over 100 first- and third-party console and advertiser offering . On June 6 , 2022 , we acquired . On June 6 , 2022 , we acquired Xandr , those that enable productivity . 15 PART I Item 1 Devices . 15 PART I Item 1 Devices face competition from various experience and social interaction . 16 PART I Item 1 Internal . 16 PART I Item 1 Internal development allows u to have a portfolio of over 69,000 U.S. and international patent issued international patent issued and ov revenue in transfer of personal data . 32 PART I Item 1A The . 32 PART I Item 1A The Company \u2019 s investment example , compliance with the 2017 United States Tax Cuts and our consolidated financial statement . 33 PART I Item 1A INTELLECTUAL . 33 PART I Item 1A INTELLECTUAL PROPERTY RISKS We may partner do not like . 34 PART I Item 1A \u2022 . 34 PART I Item 1A \u2022 Public scrutiny of our or financial market instability . 35 PART I Item 1A Measures . 35 PART I Item 1A Measures to contain a global relationship wi revenue increased 32 % to $ 91.2 billion increased 32 % to $ 91.2 billion . \u2022 Office Commercial and cloud service revenue increased 13 % driven by Office 365 13 % driven by Office 365 Commercial growth of 18 % Office 365 Commercial growth of 18 % . \u2022 Office Consumer and cloud service revenue increased 11 % and Microsoft 365 Consumer increased 11 % and Microsoft 365 Consumer subscriber grew to 59.7 365 Consumer subscriber grew to 59.7 million . \u2022 LinkedIn revenue . \u2022 LinkedIn revenue increased 34 % . \u2022 revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 39 % . by Dynamics 365 growth of 39 % . \u2022 Server product and cloud service revenue increased 28 % driven by Azure and other cloud service growth of 45 % . \u2022 Windows original OEM \u201d ) revenue increased 11 % . \u2022 Windows Commercial and cloud service revenue increased 11 % . \u2022 Xbox content content and service revenue increased 3 % . \u2022 Search and excluding traffic acquisition cost increased 27 % . \u2022 Surface revenue . \u2022 Surfac revenue increased 3 % . On March 4 3 % . On March 4 , 2022 , we completed . On March 4 , 2022 , we completed our acquisition total purchase price of $ 18.8 billion , consisting primarily of segment . Refer to Note 8 \u2013 Business Combinations of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . , and competitive force . 40 PART II Item 7 Economic . 40 PART II Item 7 Economic Conditions , Challenges , international operation in fiscal year 2022 . Refer to Risk F Revenue $ per share amount ) 2022 2021 Percentage Change Revenue $ 198,270 2021 Percentage Change Revenue $ 198,270 $ 168,088 18 % Gross Change Revenue $ 198,270 $ 168,088 18 % Gross margin 135,620 Revenue $ 198,270 $ 168,088 18 % Gross margin 135,620 115,856 168,088 18 % Gross margin 135,620 115,856 17 % Operating income 18 % Gross margin 135,620 115,856 17 % Operating income 83,383 % Gross margin 135,620 115,856 17 % Operating income 83,383 69,916 115,856 17 % Operating income 83,383 69,916 19 % Net Revenue increased $ 30.2 billion Year 2021 Revenue increased $ 30.2 billion or 18 % driven increased $ 30.2 billion or 18 % driven by growth across revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 10.4 billion or 20 % driven increased $ 10.4 billion or 20 % driven by growth in . Gross margin increased $ 19.8 billion or 17 % driven increased $ 19.8 billion or 17 % driven by growth across impact of the fiscal year 2021 change in accounting estimate for , g Revenue Productivity , except percentage ) 2022 2021 Percentage Change Revenue Productivity and Productivity and Business Processes $ 63,364 $ 53,915 18 % Intelligent Business Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 60,080 53,915 18 % Intelligent Cloud 75,251 60,080 25 % More Personal 18 % Intelligent Cloud 75,251 60,080 25 % More Personal Computing % Intelligent Cloud 75,251 60,080 25 % More Personal Computing 59,655 25 % More Revenue Business Processes Revenue increased $ 9.4 billion or 18 % . increased $ 9.4 billion or 18 % . \u2022 Office Commercial cloud service revenue increased $ 4.4 billion or 13 % . increased $ 4.4 billion or 13 % . Office 365 Commercial or 13 % . Office 365 Commercial revenue grew 18 % Office 365 Commercial revenue grew 18 % driven by seat growth driven by seat growth of 14 % , with continued momentum Office Commercial product revenue declined 22 % driven by continued customer cloud service revenue incre revenue . Microsoft Consumer subscription revenue . Microsoft 365 Consumer subscriber grew 15 % Microsoft 365 Consumer subscriber grew 15 % to 59.7 million . subscriber grew 15 % to 59.7 million . \u2022 LinkedIn revenue \u2022 LinkedIn revenue increased $ 3.5 billion or 34 % driven increased $ 3.5 billion or 34 % driven by a strong and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 39 % . by Dynamics 365 growth of 39 % . 44 PART II growth of 39 % . 44 PART II I Revenue Intelligent Cloud Revenue increased $ 15.2 billion or 25 % . increased $ 15.2 billion or 25 % . \u2022 Server product cloud service revenue increased $ 14.7 billion or 28 % driven increased $ 14.7 billion or 28 % driven by Azure and other cloud service revenue grew 45 % driven by growth in . Server product revenue increased 5 % driven by hybrid solution Enterprise Services revenue increased $ 464 million or 7 % driven increased $ 464 million or 7 % driven by growth in . Operating income increased $ Revenue increased $ 5.6 billion or 10 % . increased $ 5.6 billion or 10 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 2.3 billion or 10 % driven increased $ 2.3 billion or 10 % driven by growth in . Windows OEM revenue increased 11 % driven by continued strength and cloud service revenue increased 11 % driven by demand for driven by demand for Microsoft 365 . \u2022 Search and news news advertising revenue increased $ 2.3 billion or 25 % . increased $ 2.3 billion or 25 % . Search and news excluding tr revenue \u2022 Gaming revenue increased $ 860 million or 6 % on increased $ 860 million or 6 % on a strong prior . Xbox hardware revenue increased 16 % due to continued demand content and service revenue increased 3 % driven by growth in \u2022 Surface revenue increased $ 226 million or 3 % . increased $ 226 million or 3 % . Operating income increased . Operating income increased $ 1.5 billion or 8 % . increased $ 1.5 billion or 8 % . \u2022 Gross margin \u2022 Gross margin increased $ 3.1 billion or 10 % driven increased revenue 12 % 12 % 0ppt Research percent of revenue 12 % 12 % 0ppt Research and development revenue 12 % 12 % 0ppt Research and development expense include and development expense increased $ 3.8 billion or 18 % driven increased $ 3.8 billion or 18 % driven by investment in million , except percentage ) 2022 2021 Percentage Change Sales and , except percentage ) 2022 2021 Percentage Change Sales and marketing Change Sales and marketing $ 21,825 $ 20,117 8 % As and marketing $ 21,825 $ 20,117 8 % As a pe revenue 11 % 12 % ( 1 percent of revenue 11 % 12 % ( 1 ) ppt 11 % 12 % ( 1 ) ppt Sales and marketing and marketing expense increased $ 1.7 billion or 8 % driven increased $ 1.7 billion or 8 % driven by investment in favorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2022 2021 Percentage Change General and , except percentage ) 2022 2021 Percentage Change General and administrative Change General and administrative $ 5,900 $ 5,107 16 % As and administrati revenue 3 % 3 % 0ppt General percent of revenue 3 % 3 % 0ppt General and administrative revenue 3 % 3 % 0ppt General and administrative expense include and administrative expense increased $ 793 million or 16 % driven increased $ 793 million or 16 % driven by investment in investment in corporate function . 46 PART II Item 7 OTHER . 46 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2022 2021 Interest and Year Ended June 30 , 2022 2021 Interest and dividend income Ended June 30 , Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional revenue a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) ) Three Months Ending September 30 , 2022 $ 17,691 December Months Ending September 30 , 2022 $ 17,691 December 31 , September 30 , 2022 $ 17,691 December 31 , 2022 13,923 , 2022 $ 17,691 December 31 , 2022 13,923 March 31 $ 17,691 December 31 , 2022 13,923 March 31 , 2023 17,691 December 31 , 2022 13,923 March 31 , 2023 9,491 31 , 2022 13,923 March 31 , 2023 9,491 June 30 2022 13,923 March 31 , 2023 9,491 June 30 , 2023 13,923 Mar Revenue from Office 365 is recognized ratably over the our portfolio of customer . 52 PART II Item 7 Our . 52 PART II Item 7 Our product are generally sold an annual basis ( May 1 for u ) and between life of the product . 53 PART II Item 7 Legal . 53 PART II Item 7 Legal and Other Contingencies The that ha a greater than 50 % likelihood of being realized IN ACCOUNTING ESTIMATE In July 2022 , we completed an assessment be effective beginning fiscal year 2023 . Based on the carrying , net a of June 30 , Revenue Impact Foreign currency \u2013 Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 6,822 ) Earnings Foreign currency \u2013 Earnings Foreign currency \u2013 Investments 10 % decrease in foreign exchange in foreign exchange rate ( 94 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 2,536 ) Fair Value Credit 100 2,536 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 350 ) Fair Value Equity 10 35 Revenue Year Ended June 30 , 2022 2021 2020 Revenue : Product Ended June 30 , 2022 2021 2020 Revenue : Product $ June 30 , 2022 2021 2020 Revenue : Product $ 72,732 2020 Revenue : Product $ 72,732 $ 71,074 $ 68,041 Service : Product $ 72,732 $ 71,074 $ 68,041 Service and other $ 72,732 $ 71,074 $ 68,041 Service and other 125,538 97,014 $ 68,041 Service and other 125,538 97,014 74,974 Total revenue 198,270 68,041 Service and other 125,538 97,014 74,974 Total revenue 198,270 168,088 Service and other 125 revenue 198,270 168,088 143,015 125,538 97,014 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue 97,014 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue : 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue : Product Cost of revenue : Product 19,064 18,219 16,017 Service and other of revenue : Product 19,064 18,219 16,017 Service and other 43,586 revenue : Product 19,064 18,219 16,017 Service and other 43,586 34,013 18,219 16,017 Service and other 43,586 34,013 30,061 To revenue Service and other 43,586 34,013 30,061 Total cost of revenue 62,650 30,061 Total cost of revenue 62,650 52,232 46,078 Gross margin 135,620 Total cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 24,512 46,078 Gross margin 135,620 115,856 96,937 Research revenue 45,538 10,057 Short-term income tax 4,067 2,174 Short-term unearned revenue 45,538 41,525 4,067 2,174 Short-term unearned revenue 45,538 41,525 Other current liability 13,067 2,174 Short-term unearned revenue 45,538 41,525 Other current liability 13,067 11,666 45,538 41,525 Other current liability 13,067 11,666 Total current liability 95,082 41,525 Other current liability 13,067 11,666 Total current liability 95,082 88,657 13,067 11,666 Total current liability 95,082 88,657 Long-term debt 47,03 revenue 2,870 50,074 Long-term income tax 26,069 27,190 Long-term unearned revenue 2,870 2,616 26,069 27,190 Long-term unearned revenue 2,870 2,616 Deferred income tax 230 27,190 Long-term unearned revenue 2,870 2,616 Deferred income tax 230 198 2,870 2,616 Deferred income tax 230 198 Operating lease liability 11,489 2,616 Deferred income tax 230 198 Operating lease liability 11,489 9,629 230 198 Operating lease liability 11,489 9,629 Other long-term liability 15,526 198 Operating lease liability 11,48 revenue 5,109 1,037 ) Accounts payable 2,943 2,798 3,018 Unearned revenue 5,109 4,633 ) Accounts payable 2,943 2,798 3,018 Unearned revenue 5,109 4,633 2,212 2,943 2,798 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 2,798 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 ( 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 ( 2,309 5,109 4,633 2,212 Income tax 696 ( 2,309 ) ( 3,631 2,212 Income tax 696 ( 2,309 ) ( 3,631 ) Other 696 ( 2,309 ) ( 3,631 ) Other current liability 2,344 3 Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 \u2013 Unearned Revenue for furthe revenue 2,876 2,659 10,656 6,346 Leasing liability 4,557 4,060 Unearned revenue 2,876 2,659 Other liability 4,557 4,060 Unearned revenue 2,876 2,659 Other 461 319 Deferred 4,557 4,060 Unearned revenue 2,876 2,659 Other 461 319 Deferred income Unearned revenue 2,876 2,659 Other 461 319 Deferred income tax asset revenue 2,876 2,659 Other 461 319 Deferred income tax asset 23,571 319 Deferred income tax asset 23,571 17,936 Less valuation allowance ( Deferred income tax asset 23,571 17,936 Less valuation al Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional REVENUE Unearned revenue ( In million ) June 30 , 2022 2021 Productivity and million ) June 30 , 2022 2021 Productivity and Business Processes ) June 30 , 2022 2021 Productivity and Business Processes $ Productivity and Business Processes $ 24,558 $ 22,120 Intelligent Cloud 19,371 Business Processes $ 24,558 $ 22,120 Intelligent Cloud 19,371 17,710 More 24,558 $ 22,120 Intelligent Cloud 19,371 17,710 More Personal Computing 4,479 $ 22,120 Intelligent Cloud 19,371 17,710 More Personal Computing 4,479 4, revenue were million ) Year Ended June 30 , 2022 Balance , beginning Year Ended June 30 , 2022 Balance , beginning of period , beginning of period $ 44,141 Deferral of revenue 110,455 Recognition $ 44,141 Deferral of revenue 110,455 Recognition of unearned revenue ( Recognition of unearned revenue ( 106,188 ) Balance , end of , end of period $ 48,408 85 PART II Item 8 end of period $ 48,408 85 PART II Item 8 Revenue 48,408 85 PART II Item 8 Revenue allocated to remaining performance future period , wa revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 \u2014 LEASES We have operating have remaining lease term of 1 year to 19 year , term of 1 year to 19 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2022 2021 2020 Operating Year Ended June 30 , 2022 2021 2020 Operating lease cost Ended June 30 , 2022 2021 2020 Operating lease cost $ June 30 , 20 Revenue . 93 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2022 2021 2020 Revenue Year Ended June 30 , 2022 2021 2020 Revenue Productivity and Ended June 30 , 2022 2021 2020 Revenue Productivity and Business June 30 , 2022 2021 2020 Revenue Productivity and Business Processes Productivity and Business Processes $ 63,364 $ 53,915 $ 46,398 Intelligent Business Processes $ 63,364 $ 53,915 $ 46,398 Intelligent Cloud 75,251 $ 63,364 $ 53,915 $ 46,398 Intelligent Cloud 75,251 6 revenue for fiscal of revenue for fiscal year 2022 , 2021 , or 2020 for fiscal year 2022 , 2021 , or 2020 . Revenue 2022 , 2021 , or 2020 . Revenue , classified by million ) Year Ended June 30 , 2022 2021 2020 United Year Ended June 30 , 2022 2021 2020 United States ( Ended June 30 , 2022 2021 2020 United States ( a June 30 , 2022 2021 2020 United States ( a ) States ( a ) $ 100,218 $ 83,953 $ 73,160 Other a ) $ 100,218 $ 83,953 $ 73,160 Other country 98,052 $ 100,218 $ 83,953 $ 73,160 Other country 98 revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue , classified by significant million ) Year Ended June 30 , 2022 2021 2020 Server Year Ended June 30 , 2022 2021 2020 Server product and Ended June 30 , 2022 2021 2020 Server product and cloud June 30 , 2022 2021 2020 Server product and cloud service product and cloud service $ 67,321 $ 52,589 $ 41,379 Office cloud service $ 67,321 $ 52,589 $ 41,379 Office product and $ 67,321 $ 52,589 $ 41,379 Office product and cloud service Office produc Revenue . 96 PART II Item 8 Revenue Recognition \u2013 Refer to Recognition \u2013 Refer to Note 1 to the financial statement Critical in the financial statement . 97 PART II Item 8 Income . 97 PART II Item 8 Income Taxes \u2013 Uncertain Tax Positions \u2013 Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 28 , 2022 We have served , Washington July 28 , 2022 We have served a the the Company 's auditor since 1983 . 98 PART II Item 's ", + "expenses": "EXPENSES Research and Development million , except percentage ) 2022 2021 Percentage Change Research and , except percentage ) 2022 2021 Percentage Change Research and development Change Research and development $ 24,512 $ 20,716 18 % As and development $ 24,512 $ 20,716 18 % As a percent development $ 24,512 $ 20,716 18 % As a percent of As a percent of revenue 12 % 12 % 0ppt Research percent of revenue 12 % 12 % 0ppt Research and development revenue 12 % 12 % 0ppt Research and development expense incl", + "net_income": "Net income 17 % Operating income 83,383 69,916 19 % Net income 72,738 % Operating income 83,383 69,916 19 % Net income 72,738 61,271 69,916 19 % Net income 72,738 61,271 19 % Diluted earnings 19 % Net income 72,738 61,271 19 % Diluted earnings per % Net income 72,738 61,271 19 % Diluted earnings per share % Diluted earnings per share 9.65 8.05 20 % Adjusted net Diluted earnings per share 9.65 8.05 20 % Adjusted net income earnings per share 9.65 8.05 20 % Adjusted net income ( net income ( non-GAAP ) 69,4 net income ( non-GAAP ) 9.21 7.97 16 % Adjusted net income and first quarter of fiscal year 2022 and the net income tax third quarter of fiscal year 2021 . Refer to the Non-GAAP financial result . See Note 12 \u2013 Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . further discussion . Fiscal Year 2022 Compared with Fiscal Year 2021 2022 Compared with Fiscal Year 2021 Revenue increased $ 30.2 billion Year 2021 Revenue increased $ 30.2 billion or 18 % net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of in India . In March 2021 , the India Supreme Court ruled favorably for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of net income tax third quarter of fiscal year 2021 . We believe these non-GAAP and per share amount ) 2022 2021 Percentage Change Net income per share amount ) 2022 2021 Percentage Change Net income $ Percentage Change Net income $ 72,738 $ 61,271 19 % Net Net income $ 72,738 $ 61,271 19 % Net income tax income $ 72,738 $ 61,271 19 % Net income tax benefit transfer of intangible property ( 3,291 ) 0 * Net income intangible property ( 3,291 ) 0 * Net income tax benefit Court decision on withholding tax 0 ( 6 net income income ( non-GAAP ) $ 69,447 $ 60,651 15 % Diluted non-GAAP ) $ 69,447 $ 60,651 15 % Diluted earnings per ) $ 69,447 $ 60,651 15 % Diluted earnings per share Diluted earnings per share $ 9.65 $ 8.05 20 % Net per share $ 9.65 $ 8.05 20 % Net income tax share $ 9.65 $ 8.05 20 % Net income tax benefit transfer of intangible property ( 0.44 ) 0 * Net income intangible property ( 0.44 ) 0 * Net income tax benefit Court decision on withholding tax 0 ( 0.08 ) * Adjusted on withholding tax 0 ( 0.08 ) * Net income $ Provision for income tax 10,978 9,831 8,755 Net income $ 72,738 for income tax 10,978 9,831 8,755 Net income $ 72,738 $ 9,831 8,755 Net income $ 72,738 $ 61,271 $ 44,281 Earnings Net income $ 72,738 $ 61,271 $ 44,281 Earnings per share $ 72,738 $ 61,271 $ 44,281 Earnings per share : Basic per share : Basic $ 9.70 $ 8.12 $ 5.82 Diluted : Basic $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 $ 5.76 Weighted 5.82 Diluted $ 9.65 $ 8 Net income $ Ended June 30 , 2022 2021 2020 Net income $ 72,738 June 30 , 2022 2021 2020 Net income $ 72,738 $ 2021 2020 Net income $ 72,738 $ 61,271 $ 44,281 Other Net income $ 72,738 $ 61,271 $ 44,281 Other comprehensive income $ 72,738 $ 61,271 $ 44,281 Other comprehensive income ( loss Net change related to derivative 6 19 ( 38 ) Net change related to derivative 6 19 ( 38 ) Net change to derivative 6 19 ( 38 ) Net change related to change related to investment ( 5,360 ) ( 2,266 ) 3,990 investment ( 5, Net income Ended June 30 , 2022 2021 2020 Operations Net income $ June 30 , 2022 2021 2020 Operations Net income $ 72,738 2020 Operations Net income $ 72,738 $ 61,271 $ 44,281 Adjustments Net income $ 72,738 $ 61,271 $ 44,281 Adjustments to reconcile $ 72,738 $ 61,271 $ 44,281 Adjustments to reconcile net income , amortization , and other 14,460 11,686 12,796 Stock-based compensation expense amortization , and other 14,460 11,686 12,796 Stock-based compensation expense 7,502 , and other 14,460 11,686 12,7 Net income 72,738 , beginning of period 57,055 34,566 24,150 Net income 72,738 61,271 beginning of period 57,055 34,566 24,150 Net income 72,738 61,271 44,281 57,055 34,566 24,150 Net income 72,738 61,271 44,281 Common stock cash 34,566 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend ( Common stock cash dividend ( 18,552 ) ( 16,871 ) ( dividend ( 18,552 ) ( 16,871 ) ( 15,483 ) Common ) ( 16,871 ) ( 15,483 ) Common stock re Net income available Ended June 30 , 2022 2021 2020 Net income available for June 30 , 2022 2021 2020 Net income available for common shareholder ( A ) $ 72,738 $ 61,271 $ 44,281 Weighted A ) $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding share of common stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based award Dilutive effect of Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 To Net Income Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity net income tax benefit first quarter of fiscal year 2022 , a the value of GILTI \u201d ) tax . 82 PART II Item 8 We . 82 PART II Item 8 We have historically paid India in India . In March 2021 , the India Supreme Court Income Tax for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 201 net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2021 compared to fiscal year 2020 2021 compared to fiscal year 2020 wa primarily due to tax relating to stock-based compensation . 83 PART II Item 8 The . 83 PART II Item 8 The component of the deferred ( In million ) June 30 , 2022 2021 Deferred Income million ) June 30 , 2022 2021 Deferred Income Tax Assets ) June 30 , 2022 2021 Deferred Income Tax Assets Stock-based Assets Stock-based compensati net income tax for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 included interest 2022 , 2021 , and 2020 included interest expense related to uncertain tax position of $ 36 million , $ 274 million $ 36 million , $ 274 million , and $ 579 274 million , and $ 579 million , respectively , net million ) Year Ended June 30 , 2022 2021 2020 Beginning Year Ended June 30 , 2022 2021 2020 Beginning unrecognized tax Ended June 30 , 2022 2021 2020 Beginning unrecognized tax benefit June ", + "assets": "Assets Current million ) June 30 , 2022 2021 Assets Current asset : ) June 30 , 2022 2021 Assets Current asset : Cash Cash and cash equivalent $ 13,931 $ 14,224 Short-term investment 90,826 cash equivalent $ 13,931 $ 14,224 Short-term investment 90,826 116,110 Total 13,931 $ 14,224 Short-term investment 90,826 116,110 Total cash , cash $ 14,224 Short-term investment 90,826 116,110 Total cash , cash equivalent equivalent , and short-term investment 104,757 130,334 Accounts receivable , net , and short- Assets and and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 62 PART II Item 8 Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 \u2013 Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Ite Assets Our intangible asset , ranging from one to 20 year . We evaluate the for Income Taxes In December 2019 , the Financial Accounting Standards adopted the standard effective July 1 , 2021 . Adoption of standard effective July 1 , 2021 . Adoption of the standard consolidated financial statement . NOTE 2 \u2014 EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2022 2021 2020 Net Year Ended June 30 , 2022 2021 2020 Net income available Ended June 30 , 2022 2021 2020 Net income available for June 30 , Assets Liabilities Assets Liabilities June 30 , 2022 June 30 , Assets Liabilities June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 0 $ ( 77 ) $ contract $ 0 $ ( 77 ) $ 76 $ ( $ ( 77 ) $ 76 $ ( 8 ) Interest ) $ 76 $ ( 8 ) Interest rate contract 3 8 ) Interest rate contract 3 0 40 0 Not Designated ) Interest rate contract 3 0 40 0 Not Designated a Interest rat ASSETS The component Amortization Net Carrying Amount June 30 , 2022 2021 Technology-based $ Carrying Amount June 30 , 2022 2021 Technology-based $ 11,277 $ Amount June 30 , 2022 2021 Technology-based $ 11,277 $ ( , 2022 2021 Technology-based $ 11,277 $ ( 6,958 ) $ Technology-based $ 11,277 $ ( 6,958 ) $ 4,319 $ 9,779 $ ( 6,958 ) $ 4,319 $ 9,779 $ ( 7,007 6,958 ) $ 4,319 $ 9,779 $ ( 7,007 ) $ 4,319 $ 9,779 $ ( 7,007 ) $ 2,772 Customer-related 7,342 $ ( 7,007 ) $ 2,772 Customer-related 7,342 ( 3,171 ) Assets ) June 30 , 2022 2021 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 601 $ 502 Accruals , reserve compensation expense $ 601 $ 502 Accruals , reserve , and reserve , and other expense 2,874 2,960 Loss and credit carryforwards , and other expense 2,874 2,960 Loss and credit carryforwards 1,546 2,960 Loss and credit carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing Loss and credit carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing liability cre", + "liabilities": "Liabilities and stockholder Total asset $ 364,840 $ 333,779 Liabilities and stockholder \u2019 equity liability : Accounts payable $ 19,000 $ 15,163 Current portion of Accounts payable $ 19,000 $ 15,163 Current portion of long-term debt Current portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,749 8,072 Accrued compensation 1 Liabilities Assets Liabilities June 30 , 2022 June 30 , Assets Liabilities June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 0 $ ( 77 ) $ contract $ 0 $ ( 77 ) $ 76 $ ( $ ( 77 ) $ 76 $ ( 8 ) Interest ) $ 76 $ ( 8 ) Interest rate contract 3 8 ) Interest rate contract 3 0 40 0 Not Designated ) Interest rate contract 3 0 40 0 Not Designated a Interest rate contract 3 Liabilities Book/tax investment and debt $ ( 174 ) $ ( 2,381 ) ( 174 ) $ ( 2,381 ) Leasing asset ( 4,291 2,381 ) Leasing asset ( 4,291 ) ( 3,834 ) Depreciation asset ( 4,291 ) ( 3,834 ) Depreciation ( 1,602 ) ( 3,834 ) Depreciation ( 1,602 ) ( 1,010 ) Deferred Depreciation ( 1,602 ) ( 1,010 ) Deferred tax on foreign tax on foreign earnings ( 3,104 ) ( 2,815 ) Other earnings ( 3,104 ) ( 2,815 ) Other ( 103 ) ( 2,815 ) Other ( 103 ) ( 144 ) Deferred Other ( 103 ) ( 144 ) Deferred income tax liability income ", + "equity": "Equity Securities 38 Item 6 . [ Reserved of Equity Securities 38 Item 6 . [ Reserved ] 39 6 . [ Reserved ] 39 Item 7 . Management \u2019 [ Reserved ] 39 Item 7 . Management \u2019 s Discussion Condition and Results of Operations 40 Item 7A . Quantitative and Results of Operations 40 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 56 Item 8 . Financial Statements about Market Risk 56 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementar Equity In our 2021 Diversity and Inclusion Report , the U.S. combined earn $ 1.006 for every $ 1.000 earned $ 1.006 for every $ 1.000 earned by their white counterpart in the U.S. earn $ 1.002 for every $ 1.000 earned $ 1.002 for every $ 1.000 earned by their counterpart in other largest employee geography representing 86.6 % of our global population Kingdom ) combined earn $ 1.001 for every $ 1.000 by $ 1.001 for every $ 1.000 by men in these country our employee listening system . 9 PART I Item 1 We Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 39 6 . [ RESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2022 compa Equity investment . Equity investment were $ 6.9 billion and $ 6.0 billion $ 6.9 billion and $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2022 and 2021 , a of June 30 , 2022 and 2021 , respectively . June 30 , 2022 and 2021 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2022 , our Board of Directors declared quarterly dividend of $ 0.62 per share . We intend Directors . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 51 PART II Item 7 Other . 51 PART II Item 7 Other Planned Uses of Capital Uses of Capital On January 18 , 2022 Equity 10 350 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 637 ) Earnings 56 PART II price ( 637 ) Earnings 56 PART II Item 8 ITEM Earnings 56 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2022 2021 2020 Revenue Year Ended June 30 , 2022 2021 2020 Revenue : Product Ended June 30 , 2022 2021 2020 Revenue : Product $ June 30 , 2022 2021 2020 Revenue : Product $ 72,732 2020 Revenue : Equity investment 6,891 5,984 Operating lease right-of-use asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible 13,148 11,088 Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset , net investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset , net 11,298 49,711 Intangible asset , net 11,298 7,800 Other long-term asset 21, equity liability : Accounts payable $ 19,000 $ 15,163 Current portion of Accounts payable $ 19,000 $ 15,163 Current portion of long-term debt Current portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,174 10,661 10,057 Short-term income tax 4, equity 166,542 1,822 Total stockholder \u2019 equity 166,542 141,988 Total liability and stockholder Total stockholder \u2019 equity 166,542 141,988 Total liability and stockholder \u2019 and stockholder \u2019 equity $ 364,840 $ 333,779 Refer to accompanying \u2019 equity $ 364,840 $ 333,779 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 CASH . 59 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2022 2021 2020 Operations Year Ended June 30 , 2022 2021 2020 Operations Net i EQUITY STATEMENTS ( amount ) Year Ended June 30 , 2022 2021 2020 Common Year Ended June 30 , 2022 2021 2020 Common stock and Ended June 30 , 2022 2021 2020 Common stock and paid-in June 30 , 2022 2021 2020 Common stock and paid-in capital , beginning of period $ 83,111 $ 80,552 $ 78,520 Common of period $ 83,111 $ 80,552 $ 78,520 Common stock issued $ 83,111 $ 80,552 $ 78,520 Common stock issued 1,841 1,963 $ 78,520 Common stock issued 1,841 1,963 1,343 Common stock repurchased 78,520 Common stock iss equity period ( 4,678 ) 1,822 3,186 Total stockholder \u2019 equity $ Total stockholder \u2019 equity $ 166,542 $ 141,988 $ 118,304 Cash \u2019 equity $ 166,542 $ 141,988 $ 118,304 Cash dividend declared $ 166,542 $ 141,988 $ 118,304 Cash dividend declared per common declared per common share $ 2.48 $ 2.24 $ 2.04 Refer common share $ 2.48 $ 2.24 $ 2.04 Refer to accompanying $ 2.48 $ 2.24 $ 2.04 Refer to accompanying note . Refer to accompanying note . 61 PART II Item 8 NOTES . 61 PART II Item 8 NOTES TO FINANCIAL ST Equity Investments June 30 , 2022 Changes in Fair Equity Investments June 30 , 2022 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,500 $ 0 $ Commercial paper Level 2 $ 2,500 $ 0 $ 0 $ Level 2 $ 2,500 $ 0 $ 0 $ 2,500 $ $ 2,500 $ 0 $ 0 $ 2,500 $ 2,498 $ $ 0 $ 0 $ 2,500 $ 2,498 $ 2 $ $ 0 $ 2,500 $ 2,498 $ 2 $ 0 Certificates $ 2,500 $ 2,498 $ 2 $ 0 Certificates of deposit $ 2,498 $ 2 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,071 0 0 2,071 2,0 Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 Total equ equity investment $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 0 Derivatives $ 8,258 $ 8,258 $ 0 $ 0 Derivatives , net $ 8,258 $ 0 $ 0 Derivatives , net ( a , net ( a ) 8 0 8 0 Total $ net ( a ) 8 0 8 0 Total $ 111,648 ( a ) 8 0 8 0 Total $ 111,648 $ a ) 8 0 8 0 Total $ 111,648 $ 13,931 0 8 0 Total $ 111,648 $ 13,931 $ 90,826 $ 0 Total $ 111,648 $ 13,931 $ 90,826 Equity Investments June 30 , 2021 Changes in Fair Equity Investments June 30 , 2021 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,316 $ 0 $ Commercial paper Level 2 $ 4,316 $ 0 $ 0 $ Level 2 $ 4,316 $ 0 $ 0 $ 4,316 $ $ 4,316 $ 0 $ 0 $ 4,316 $ 1,331 $ $ 0 $ 0 $ 4,316 $ 1,331 $ 2,985 $ $ 0 $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates of deposit $ 1,331 $ 2,985 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 3,6 Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity invest equity investment $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 0 Derivatives $ 7,272 $ 7,272 $ 0 $ 0 Derivatives , net $ 7,272 $ 0 $ 0 Derivatives , net ( a , net ( a ) 78 0 78 0 Total $ net ( a ) 78 0 78 0 Total $ 136,318 ( a ) 78 0 78 0 Total $ 136,318 $ a ) 78 0 78 0 Total $ 136,318 $ 14,224 0 78 0 Total $ 136,318 $ 14,224 $ 116,110 $ 0 Total $ 136,318 $ 14,224 $ 116 equity investment June 30 , 2022 and 2021 , equity investment without readily price or impairment were $ 3.8 billion and $ 3.3 billion $ 3.8 billion and $ 3.3 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2022 U.S. government and Fair Value June 30 , 2022 U.S. gove EQUITY Shares million ) Year Ended June 30 , 2022 2021 2020 Balance Year Ended June 30 , 2022 2021 2020 Balance , beginning Ended June 30 , 2022 2021 2020 Balance , beginning of June 30 , 2022 2021 2020 Balance , beginning of year Balance , beginning of year 7,519 7,571 7,643 Issued 40 49 , beginning of year 7,519 7,571 7,643 Issued 40 49 54 beginning of year 7,519 7,571 7,643 Issued 40 49 54 Repurchased year 7,519 7,571 7,643 Issued 40 49 54 Repurchased ( 95 7,519 7,571 7,643 Issued 40 49 54 Repurcha Equity Statements 61 60 Stockholders \u2019 Equity Statements 61 Notes to Financial Statements 62 61 Notes to Financial Statements 62 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2", + "cash_flow": "Cash Flow accumulated other comprehensive income ( 79 ) 17 0 Not Designated comprehensive income ( 79 ) 17 0 Not Designated a Hedging income ( 79 ) 17 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 383 27 ( 123 ) Other Instruments Foreign exchange contract 383 27 ( 123 ) Other contract exchange contract 383 27 ( 123 ) Other contract ( 72 123 ) Other contract ( 72 ) 9 50 Gains ( Other contract ( 72 ) 9 50 Gains ( loss ) contract ( 72 ) 9 50 Gains ( loss ) , million ) Cash Flow June 30 , 2022 2021 2020 Designated a Cash Flow Hedging in effectiveness assessment $ ( 57 ) $ 34 $ ( $ ( 57 ) $ 34 $ ( 38 ) NOTE ) $ 34 $ ( 38 ) NOTE 6 \u2014 INVENTORIES $ ( 38 ) NOTE 6 \u2014 INVENTORIES The component of ( In million ) June 30 , 2022 2021 Raw material million ) June 30 , 2022 2021 Raw material $ 1,144 ) June 30 , 2022 2021 Raw material $ 1,144 $ 2022 2021 Raw material $ 1,144 $ 1,190 Work in process Raw material $ 1,144 $ 1,190 Work in process 82 79 $ 1,190 Work in process 82 79 Finis cash flow $ 1,409 $ 1,307 $ 947 Supplemental cash flow information related million ) Year Ended June 30 , 2022 2021 2020 Cash Year Ended June 30 , 2022 2021 2020 Cash paid for Ended June 30 , 2022 2021 2020 Cash paid for amount June 30 , 2022 2021 2020 Cash paid for amount included flow from operating lease $ 2,368 $ 2,052 $ 1,829 Operating operating lease $ 2,368 $ 2,052 $ 1,829 Operating cash flow $ 2,368 $ 2,052 $ 1,829 Operating cash flow from finance cash flow from finance lease 429 386 336 Financin cash flow flow from finance lease 429 386 336 Financing cash flow from from finance lease 429 386 336 Financing cash flow from finance cash flow from finance lease 896 648 409 Right-of-use asset obtained flow from finance lease 896 648 409 Right-of-use asset obtained in from finance lease 896 648 409 Right-of-use asset obtained in exchange lease obligation : Operating lease 5,268 4,380 3,677 Finance lease 4,234 obligation : Operating lease 5,268 4,380 3,677 Finance lease 4,234 3,290 : Operating lease 5,2", + "gross_margin": "Gross margin 135,620 Revenue $ 198,270 $ 168,088 18 % Gross margin 135,620 115,856 168,088 18 % Gross margin 135,620 115,856 17 % Operating income 18 % Gross margin 135,620 115,856 17 % Operating income 83,383 % Gross margin 135,620 115,856 17 % Operating income 83,383 69,916 115,856 17 % Operating income 83,383 69,916 19 % Net income 17 % Operating income 83,383 69,916 19 % Net income 72,738 % Operating income 83,383 69,916 19 % Net income 72,738 61,271 69,916 19 % Net income 72,738 61,271 19 % Diluted ear Gross margin increased $ 19.8 billion or 17 % driven increased $ 19.8 billion or 17 % driven by growth across impact of the fiscal year 2021 change in accounting estimate for , gross margin percentage increased 1 point driven by improvement in margin percentage decreased slightly to 70 % . Excluding the impact Cloud gross margin percentage increased 3 point driven by improvement across and other cloud service . 43 PART II Item 7 Operating . 43 PART II Item 7 Operating expense increased $ 6 7 Operating expen Gross margin unfavorable foreign currency impact of 2 % . SEGMENT RESULTS OF million , except percentage ) 2022 2021 Percentage Change Revenue Productivity , except percentage ) 2022 2021 Percentage Change Revenue Productivity and Productivity and Business Processes $ 63,364 $ 53,915 18 % Intelligent Business Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 60,080 53,915 18 % Intelligent Cloud 75,251 60,080 25 % More Personal 18 % Intelligen Gross margin \u2022 Gross margin increased $ 7.3 billion or 17 % driven increased $ 7.3 billion or 17 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn . Gross , gross margin percentage increased 2 point driven by improvement across \u2022 Operating expense increased $ 2.0 billion or 11 % driven increased $ 2.0 billion or 11 % driven by investment in unfavorable foreign currency impact of 2 % . Intelligent Cloud Revenue Intelligent Cloud Revenue increased $ 15.2 billion or 25 % . increased Gross margin \u2022 Gross margin increased $ 9.4 billion or 22 % driven increased $ 9.4 billion or 22 % driven by growth in \u2022 Operating expense increased $ 2.8 billion or 16 % driven increased $ 2.8 billion or 16 % driven by investment in unfavorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . More Personal Computing Revenue increased $ 5.6 billion or 10 % . increased $ 5.6 billion or 10 % . \u2022 Windows revenue \u2022 Windows revenue increased $ 2.3 billion or 10 % driven increased $ Gross margin \u2022 Gross margin increased $ 3.1 billion or 10 % driven increased $ 3.1 billion or 10 % driven by growth in \u2022 Operating expense increased $ 1.5 billion or 14 % driven increased $ 1.5 billion or 14 % driven by investment in , and Windows marketing . 45 PART II Item 7 OPERATING . 45 PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2022 2021 Percentage Change Research and , except percentage ) 2022 2021 Percentage Change Research and development Change Researc Gross margin 135,620 Total cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 24,512 46,078 Gross margin 135,620 115,856 96,937 Research and development 24,512 20,716 115,856 96,937 Research and development 24,512 20,716 19,269 Sales and marketing 96,937 Research and", + "accumulated_depreciation": "accumulated depreciation of $ 59,660 and $ 51,351 74,398 59,715 of $ 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use $ 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use asset 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use asset 13,148 59,715 Operating lease right-of-use asset 13,148 11,088 Equity investment 6,891 5,984 Operating lease right-of-use asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill 67,524 49,71 Accumulated depreciation ( 59,660 Total , at cost 134,058 111,066 Accumulated depreciation ( 59,660 ) 134,058 111,066 Accumulated depreciation ( 59,660 ) ( 51,351 ) Total depreciation ( 59,660 ) ( 51,351 ) Total , net $ ) Total , net $ 74,398 $ 59,715 During fiscal year , net $ 74,398 $ 59,715 During fiscal year 2022 , $ 59,715 During fiscal year 2022 , 2021 , and 2020 During fiscal year 2022 , 2021 , and 2020 , depreciation 2022 , 2021 , and 2020 , depreciation expense wa $ , depreciation expense wa $ 12.6 billion , $ Accumulated depreciation ( at cost $ 17,388 $ 14,107 Accumulated depreciation ( 3,285 ) $ 14,107 Accumulated depreciation ( 3,285 ) ( 2,306 ) Property depreciation ( 3,285 ) ( 2,306 ) Property and equipment , and equipment , net $ 14,103 $ 11,801 Other current liability , net $ 14,103 $ 11,801 Other current liability $ 1,060 11,801 Other current liability $ 1,060 $ 791 Other long-term liability current liability $ 1,060 $ 791 Other long-term liability 13,842 11,750 $ 791 Other long-term liability 13,842 11,750 Total fi", + "debt": "Debt . 49 PART II Item 7 Debt Proceeds We issue debt existing debt . In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion environment . Refer to Note 11 \u2013 Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 \u2013 Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2022 : ( In a of June 30 , 20 debt : a ) Principal payment $ 2,750 $ 52,761 $ 55,511 Interest Principal payment $ 2,750 $ 52,761 $ 55,511 Interest payment 1,468 $ 2,750 $ 52,761 $ 55,511 Interest payment 1,468 21,139 22,607 52,761 $ 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( $ 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( b 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( b ) Construction commitment ( b ) 7,942 576 8,518 Operating and finance commitment ( b Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 \u2013 Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 \u2013 Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . paid transit debt Current portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,174 10,661 10,057 Short-term income tax 4,067 2,174 Short-term unearned revenue 45,538 10,057 Short-term income tax 4,067 2,174 Short-term unearned revenue 45,538 41,525 4,067 2 debt 47,032 50,074 11,666 Total current liability 95,082 88,657 Long-term debt 47,032 50,074 Long-term liability 95,082 88,657 Long-term debt 47,032 50,074 Long-term income tax 26,069 95,082 88,657 Long-term debt 47,032 50,074 Long-term income tax 26,069 27,190 47,032 50,074 Long-term income tax 26,069 27,190 Long-term unearned revenue 2,870 50,074 Long-term income tax 26,069 27,190 Long-term unearned revenue 2,870 2,616 26,069 27,190 Long-term unearned revenue 2,870 2,616 Deferred income tax 230 27 debt Cash premium on debt exchange 0 ( 1,754 ) ( 3,417 on debt exchange 0 ( 1,754 ) ( 3,417 ) Repayments 0 ( 1,754 ) ( 3,417 ) Repayments of debt ( ) Repayments of debt ( 9,023 ) ( 3,750 ) ( debt ( 9,023 ) ( 3,750 ) ( 5,518 ) Common ) ( 3,750 ) ( 5,518 ) Common stock issued 1,841 5,518 ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ( Common stock issued 1,841 1,693 1,343 Common stock repurchased ( 32,696 1,343 Common Debt . 66 PART II Item 8 Debt investment are classified a level are : \u2022 Level 1 \u2013 input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . \u2022 Level 2 \u2013 input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability include , and swap contract . 67 PART II Item 8 \u2022 . 67 PART II Item 8 \u2022 Level 3 \u2013 input debt 0 ( 6 ) 97 0 97 0 Total debt investment ( 6 ) 97 0 97 0 Total debt investment $ 6 ) 97 0 97 0 Total debt investment $ 98,118 0 Total debt investment $ 98,118 $ 53 $ ( 2,814 debt investment $ 98,118 $ 53 $ ( 2,814 ) $ 98,118 $ 53 $ ( 2,814 ) $ 95,357 $ 4,539 $ ( 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 0 Changes $ 95,357 $ 4,539 $ 90,818 $ 0 Changes in Fair $ 4,539 $ 90,818 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Eq debt 0 ( 7 ) 88 0 88 0 Total debt investment ( 7 ) 88 0 88 0 Total debt investment $ 7 ) 88 0 88 0 Total debt investment $ 117,966 0 Total debt investment $ 117,966 $ 4,177 $ ( 135 debt investment $ 117,966 $ 4,177 $ ( 135 ) $ 117,966 $ 4,177 $ ( 135 ) $ 122,008 $ 5,976 $ ( 135 ) $ 122,008 $ 5,976 $ 116,032 $ 135 ) $ 122,008 $ 5,976 $ 116,032 $ 0 Changes $ 122,008 $ 5,976 $ 116,032 $ 0 Changes in Fair $ 5,976 $ 116,032 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,582 $ debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2022 June 30 , million ) June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 635 Foreign exchange contract contract purchased $ 635 $ 635 Foreign exchange contract sold 0 635 Foreign exchange contract sold 0 6,081 Interest rate contract purchased Foreign exchange contract sold 0 6 DEBT The PART II Item 8 NOTE 11 \u2014 DEBT The component of Rate Effective Interest Rate June 30 , 2022 June 30 , Interest Rate June 30 , 2022 June 30 , 2021 2009 June 30 , 2022 June 30 , 2021 2009 issuance of , 2022 June 30 , 2021 2009 issuance of $ 3.8 2022 June 30 , 2021 2009 issuance of $ 3.8 billion 2021 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 520 a ) 2039 5.20 % 5.24 % $ 520 $ 520 5.20 % 5.24 % $ 520 $ 520 2010 issuance of debt b ) ( 68 ) 40 Premium on debt exchange ( exchange ( a ) ( 5,191 ) ( 5,293 ) Total ) ( 5,191 ) ( 5,293 ) Total debt 49,781 58,146 ( 5,293 ) Total debt 49,781 58,146 Current portion of long-term 5,293 ) Total debt 49,781 58,146 Current portion of long-term debt portion of long-term debt ( 2,749 ) ( 8,072 ) Long-term debt ( 2,749 ) ( 8,072 ) Long-term debt $ 47,032 8,072 ) Long-term debt $ 47,032 $ 50,074 ( a ) Long-term debt $ 47,032 $ 50,074 ( a ) In March ( a ) In March 2021 and June 2020 , we debt . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , the estimated June 30 , 2022 and 2021 , the estimated fair value current portion , wa $ 50.9 billion and $ 70.0 billion $ 50.9 billion and $ 70.0 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 wa $ 2022 , 2021 , and 2020 wa $ 1.9 billion , , and 2020 wa $ 1.9 billion , $ 2.0 billion $ 1.9 billion , $ 2.0 billion , a debt $ ( 174 ) $ ( 2,381 ) ( 174 ) $ ( 2,381 ) Leasing asset ( 4,291 2,381 ) Leasing asset ( 4,291 ) ( 3,834 ) Depreciation asset ( 4,291 ) ( 3,834 ) Depreciation ( 1,602 ) ( 3,834 ) Depreciation ( 1,602 ) ( 1,010 ) Deferred Depreciation ( 1,602 ) ( 1,010 ) Deferred tax on foreign tax on foreign earnings ( 3,104 ) ( 2,815 ) Other earnings ( 3,104 ) ( 2,815 ) Other ( 103 ) ( 2,815 ) Other ( 103 ) ( 144 ) Deferred Other ( 103 ) ( 144 ) Deferred income tax liability income tax liability $ ( 9,274 ) $ (", + "share_repurchase": "share repurchase 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share repurchase were 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2022 : Declaration Date Record Date ( In million ) June 14 , 2022 August 18 , million ) June 14 , 2022 August 18 , 2022 September June 14 , 2022 August 18 , 2022 September 8 , , 2022 August 18 , 2022 September 8 , 2022 $ August 18 , 2022 Sep share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 39 6 . [ RESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 PART II Item 7 ITEM 7 . MANAGEMENT \u2019 S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2022 compared to the year ended June 30 , 2022 compared to the year ended to the year ended June 30 , 2021 . For a year ended Jun share repurchase program . program . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2022 , our Board of Directors declared quarterly dividend of $ 0.62 per share . We intend Directors . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 51 PART II Item 7 Other . 51 PART II Item 7 Other share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 and wa completed in November and wa completed in November 2021 . On September 14 , November 2021 . On September 14 , 2021 , our Board . On September 14 , 2021 share repurchase . repurchase program commenced in November 2021 , following completion of the the program approved on September 18 , 2019 , ha no approved on September 18 , 2019 , ha no expiration date time . As of June 30 , 2022 , $ 40.7 As of June 30 , 2022 , $ 40.7 billion remained 30 , 2022 , $ 40.7 billion remained of this $ billion remained of this $ 60.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2022 2021 2020 First Year Ended June 30 , 2022 2021 2020 First Quarter 21 Ended J share repurchase repurchase program approved on September 14 , 2021 . Shares repurchased approved on September 14 , 2021 . Shares repurchased during the second quarter of fiscal year 2022 were under the share repurchase program approved on both September 14 , 2021 and September 18 on both September 14 , 2021 and September 18 , 2019 14 , 2021 and September 18 , 2019 . Shares repurchased 2021 and September 18 , 2019 . Shares repurchased during the first quarter of fiscal year 2022 , fiscal year 2021 , year 2022 , share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on Sep", + "earnings_per_share": "earnings per share % Diluted earnings per share 9.65 8.05 20 % Adjusted net Diluted earnings per share 9.65 8.05 20 % Adjusted net income earnings per share 9.65 8.05 20 % Adjusted net income ( net income ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted income ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted earnings ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted earnings per per share ( non-GAAP ) 9.21 7.97 16 % Adjusted net share ( non-GAAP ) 9.21 7.97 16 % Adjusted net income ( non-GAAP ) 9.21 7.97 16 % Adju earnings per share Diluted earnings per share $ 9.65 $ 8.05 20 % Net per share $ 9.65 $ 8.05 20 % Net income tax share $ 9.65 $ 8.05 20 % Net income tax benefit transfer of intangible property ( 0.44 ) 0 * Net income intangible property ( 0.44 ) 0 * Net income tax benefit Court decision on withholding tax 0 ( 0.08 ) * Adjusted on withholding tax 0 ( 0.08 ) * Adjusted diluted earnings share ( non-GAAP ) $ 9.21 $ 7.97 16 % * non-GAAP ) $ 9.21 $ 7.97 16 % * Not meaningful ) $ 9.21 $ 7.97 16 % * Not meaningful . % * Earnings per share $ 72,738 $ 61,271 $ 44,281 Earnings per share : Basic per share : Basic $ 9.70 $ 8.12 $ 5.82 Diluted : Basic $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 $ 5.76 Weighted 5.82 Diluted $ 9.65 $ 8.05 $ 5.76 Weighted average share $ 9.65 $ 8.05 $ 5.76 Weighted average share outstanding : average share outstanding : Basic 7,496 7,547 7,610 Diluted 7,540 7,608 share outstanding : Basic 7,496 7,547 7,610 Diluted 7,540 7,608 7,683 outs EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2022 2021 2020 Net Year Ended June 30 , 2022 2021 2020 Net income available Ended June 30 , 2022 2021 2020 Net income available for June 30 , 2022 2021 2020 Net income available for common shareholder ( A ) $ 72,738 $ 61,271 $ 44,281 Weighted A ) $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding share of common stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock ( B ) 7,496 7,547 7,610 Dilutive e Earnings Per Share equivalent ( C ) 7,540 7,608 7,683 Earnings Per Share Basic ( C ) 7,540 7,608 7,683 Earnings Per Share Basic ( Basic ( A/B ) $ 9.70 $ 8.12 $ 5.82 Diluted A/B ) $ 9.70 $ 8.12 $ 5.82 Diluted ( A/C $ 9.70 $ 8.12 $ 5.82 Diluted ( A/C ) $ Diluted ( A/C ) $ 9.65 $ 8.05 $ 5.76 Anti-dilutive A/C ) $ 9.65 $ 8.05 $ 5.76 Anti-dilutive stock-based award $ 9.65 $ 8.05 $ 5.76 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 \u2014 OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 20", + "tax_rate": "tax rate for fiscal year 2022 and 2021 wa 13 % for fiscal year 2022 and 2021 wa 13 % and 14 year 2022 and 2021 wa 13 % and 14 % , 2021 wa 13 % and 14 % , respectively . The primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of in India . In March 2021 , the India tax rate service . In fiscal year 2022 , our U.S. income before before income tax wa $ 47.8 billion and our foreign income before income tax wa $ 35.9 billion . In fiscal year billion . In fiscal year 2021 , our U.S. income before before income tax wa $ 35.0 billion and our foreign income before income tax wa $ 36.1 billion . 47 PART II wa $ 36.1 billion . 47 PART II Item 7 Uncertain . 47 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 tax rate on a Share Repurchases During fiscal year 2022 and 2021 , we repurchased During fiscal year 2022 and 2021 , we repurchased 95 million and 2021 , we repurchased 95 million share and 101 million repurchased 95 million share and 101 million share of our common our common stock for $ 28.0 billion and $ 23.0 billion $ 28.0 billion and $ 23.0 billion , respectively , through resource . As of June 30 , 2022 , $ 40.7 As of June 30 , 2022 , $ 40.7 billion remained 30 , 2022 , $ 40.7 billion remained of Tax Rate $ 83,716 $ 71,102 $ 53,036 Effective Tax Rate The item follows : Year Ended June 30 , 2022 2021 2020 Federal Year Ended June 30 , 2022 2021 2020 Federal statutory rate Ended June 30 , 2022 2021 2020 Federal statutory rate 21.0 June 30 , 2022 2021 2020 Federal statutory rate 21.0 % 2021 2020 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 1.3 ) % ( 2.7 ) ( 1.3 ) % ( 2.7 ) % ( 3.7 tax rate for fiscal year 2022 compared to fiscal year 2021 2022 compared to fiscal year 2021 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2021 compared to fiscal year 2020 2021 compared to fiscal year 2020 wa primarily due to tax relating to stock-based compensation . 83 PART II Item 8 The . 83 PART II Item 8 The component of the deferred ( In million ) June 30 , 2022 2021 Deferred Inco tax rate for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 by $ 2022 , 2021 , and 2020 by $ 13.3 billion , , and 2020 by $ 13.3 billion , $ 12.5 billion $ 13.3 billion , $ 12.5 billion , and $ 12.1 12.5 billion , and $ 12.1 billion , respectively . 84 12.1 billion , respectively . 84 PART II Item 8 As . 84 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2022 , 2021 , As of June 30 , 2022 , 2021 , and 2020 June 30 , 2022 , 2021 , and 2020 , we 2022 , 2021 , and 2020 , we", + "geographic_information": "Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a s Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are first quarter of fiscal year 2022 , we made update to our MD & A . 41 PART II Item 7 In . 41 PART II Item 7 In the third quarter of third quarter of fiscal year 2022 , we completed our acquisition other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial clo Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 \u2013 Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2 GEOGRAPHIC \u2022 Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of Search and news advertising . 93 PART II Item 8 Revenue . 93 PART II Item 8 Revenue a", + "common_stock": "Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the re common stock outstanding to be held on December 13 , 2022 are incorporated by held on December 13 , 2022 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2022 INDEX Page PART Year Ended June 30 , 2022 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Information about our PART I Item 1. Business 3 Information about our Executive Officers Information about our Executive Officers 21 Item 1A . Risk Factors our Executive common stock stock repurchase and a $ 5.3 billion increase in repayment of used in investing increased $ 2.7 billion to $ 30.3 billion $ 2.7 billion to $ 30.3 billion for fiscal year 2022 30.3 billion for fiscal year 2022 , mainly due to a mainly due to a $ 13.1 billion increase in cash used asset , and a $ 3.3 billion increase in addition to in part by a $ 15.6 billion increase in cash from sale , and maturity . 49 PART II Item 7 Debt . 49 PART II Item 7 Debt Proceeds We issue debt existing debt . In March common stock for $ 28.0 billion and $ 23.0 billion $ 28.0 billion and $ 23.0 billion , respectively , through resource . As of June 30 , 2022 , $ 40.7 As of June 30 , 2022 , $ 40.7 billion remained 30 , 2022 , $ 40.7 billion remained of our $ billion remained of our $ 60 billion share repurchase program . program . Refer to Note 16 \u2013 Stockholders \u2019 Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2022 , our Board of Directors Common stock issued 1,841 5,518 ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ( Common stock issued 1,841 1,693 1,343 Common stock repurchased ( 32,696 1,343 Common stock repurchased ( 32,696 ) ( 27,385 ) ( repurchased ( 32,696 ) ( 27,385 ) ( 22,968 ) Common ) ( 27,385 ) ( 22,968 ) Common stock cash dividend stock cash dividend paid ( 18,135 ) ( 16,521 ) ( paid ( 18,135 ) ( 16,521 ) ( 15,137 ) Other ) ( 16,521 ) ( 15,137 ) O Common stock and Ended June 30 , 2022 2021 2020 Common stock and paid-in June 30 , 2022 2021 2020 Common stock and paid-in capital , beginning of period $ 83,111 $ 80,552 $ 78,520 Common of period $ 83,111 $ 80,552 $ 78,520 Common stock issued $ 83,111 $ 80,552 $ 78,520 Common stock issued 1,841 1,963 $ 78,520 Common stock issued 1,841 1,963 1,343 Common stock repurchased 78,520 Common stock issued 1,841 1,963 1,343 Common stock repurchased ( Common stock issued 1,841 1,963 1,343 Common stock repurchased ( Common stock repurchased ( 5,688 ) ( 5,539 ) ( repurchased ( 5,688 ) ( 5,539 ) ( 4,599 ) Stock-based ) ( 5,539 ) ( 4,599 ) Stock-based compensation expense 7,502 4,599 ) Stock-based compensation expense 7,502 6,118 5,289 Other , net ) Stock-based compensation expense 7,502 6,118 5,289 Other , net 173 Stock-based compensation expense 7,502 6,118 5,289 Other , net 173 17 6,118 5,289 Other , net 173 17 ( 1 ) Balance 5,289 Other , net 173 17 ( 1 ) Balance , , net 173 17 ( 1 ) Balance , end of Balance , end of p Common stock cash 34,566 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend ( Common stock cash dividend ( 18,552 ) ( 16,871 ) ( dividend ( 18,552 ) ( 16,871 ) ( 15,483 ) Common ) ( 16,871 ) ( 15,483 ) Common stock repurchased ( ) Common stock repurchased ( 26,960 ) ( 21,879 ) ( repurchased ( 26,960 ) ( 21,879 ) ( 18,382 ) Cumulative ) ( 21,879 ) ( 18,382 ) Cumulative effect of accounting Cumulative effect of accounting change common stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based award Dilutive effect of stock-based award 44 61 73 Common stock and effect of stock-based award 44 61 73 Common stock and common of stock-based award 44 61 73 Common stock and common stock stock equivalent ( C ) 7,540 7,608 7,683 Earnings Per Share equivalent ( C ) 7,540 7,608 7,683 Earnings Per Share Basic ( C ) 7,540 7,608 7,683 Earnin", + "derivative_instruments": "Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2022 June 30 , Assets Liabilities June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 0 $ ( 77 ) $ contract $ 0 $ ( 77 ) $ 76 $ ( $ ( 77 ) $ 76 $ ( 8 ) Interest ) $ 76 $ ( 8 ) Interest rate contract 3 8 ) Interest rate contract 3 0 40 0 Not Designated ) Interest rate contract 3 0 40 0 Not Designated a Inter" +} \ No newline at end of file diff --git a/src/data/output-json/full-submission.json b/src/data/output-json/full-submission.json deleted file mode 100644 index 1a2cee0..0000000 --- a/src/data/output-json/full-submission.json +++ /dev/null @@ -1,22 +0,0 @@ -{ - "id": "gen-CDcLf9HXVr4h67A5g32lIbcGCvGQ", - "model": "mistralai/mistral-7b-instruct:free", - "object": "chat.completion", - "created": 1714695661, - "choices": [ - { - "index": 0, - "message": { - "role": "assistant", - "content": " Can you provide me with more context on what you are asking? Are you asking me to provide a detailed financial analysis of Apple's financial statements? If so, I can provide you with the financial ratios and analysis of Apple's financial statements for the past several years. However, please provide me with specific years you are interested in." - }, - "finish_reason": "stop" - } - ], - "usage": { - "prompt_tokens": 21330, - "completion_tokens": 70, - "total_tokens": 21400, - "total_cost": 0 - } -} \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-17-000070/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-17-000070/full-submission_features.txt new file mode 100644 index 0000000..e734e25 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-17-000070/full-submission_features.txt @@ -0,0 +1,35 @@ + Financial Overview: + +* Total revenue for 2017 was $ 228,433,000,277, an increase of 54% from the previous year. +* Net income for 2017 was $ 53,046,000,816, a decrease of 49% from the previous year. +* Gross margin for 2017 was 38%, an increase of 2% from the previous year. + +Operational Efficiency: + +* Operating margin for 2017 was 19%, lower than the industry average but an improvement from the previous year. +* Cost of sales decreased by 48% to $ 192,079,451,004, while operating expenses increased by 50% to $ 77,674,021,060, resulting in a net decrease in operating income. + +Liquidity and Solvency: + +* Current ratio for 2017 was 4.6:1, still above the industry average but slightly lower than the previous year. +* Quick ratio for 2017 was 4.2:1, a slight decrease from the previous year. +* Debt-to-equity ratio for 2017 was 0.2:1, largely due to cash holdings and lower than the industry average. +* Interest coverage ratio for 2017 was 60.5:1, a significant improvement from the previous year. + +Cash Flow Analysis: + +* Cash flow from operations for 2017 was $ 17,434,000,136, largely due to higher sales and better inventory management. +* Cash flow from investing activities for 2017 was $ 3,226,486,467, mainly driven by capital expenditures and stock buybacks. +* Cash flow from financing activities for 2017 was $ -4,422,366,439, primarily due to interest and taxes payments and dividend payouts. + +Investment and Future Outlook: + +* Apple Inc. has made significant investments in research and development in recent years, including the development of new products and technologies such as AR and VR. +* Management has announced plans to invest $ 20 billion in content and software development by 2021, with the goal of expanding Apple’s ecosystem across various platforms and markets. +* The company is expected to continue to face intense competition from both established players and new entrants in various markets, particularly in areas such as smartphones, PCs, and streaming services. + +Risks and Opportunities: + +* One key risk facing Apple is its dependence on a few key products, such as the iPhone and MacBook, which could negatively impact revenue growth and profitability if industry trends shift. +* Another potential risk is increased geopolitical tensions and trade disputes, which could negatively impact the company’s global operations and profit margins. +* However, Apple also has several emerging opportunities in areas such as healthcare, augmented reality, and autonomous driving, which could provide new revenue streams and growth opportunities in the future. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-18-000145/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-18-000145/full-submission_features.txt new file mode 100644 index 0000000..e307ef9 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-18-000145/full-submission_features.txt @@ -0,0 +1,39 @@ + Financial Overview: + +- Total revenue increased 24% from $ 217.9 billion in 2016 to $ 270.2 billion in 2017. +- Net income increased 13% from $ 7.8 billion in 2016 to $ 8.8 billion in 2017. +- Gross profit increased 20% from $ 139.3 billion in 2016 to $ 166.2 billion in 2017. +- Gross margin increased by 0.2 percentage points from 62.3% in 2016 to 62.5% in 2017. + +Noteable trends include the continued growth in service revenue, driven by Apple's cloud-based services such as iTunes and the App Store. However, the company also faced a decline in hardware sales, particularly in the Mac and iPad segments. Additionally, Apple saw a significant increase in expenses related to research and development, as well as foreign currency risks due to declining exchange rates. + +Operational Efficiency: + +- Operating margin trended downwards by 2 percentage points from 22.6% in 2016 to 20.6% in 2017, falling below the industry average. +- Point-of-sale equipment sales represented around 3% of total revenue, significant but relatively muted compared to more traditional retail sources. + +Cost management effectiveness was overall good, with a focus on using automation to reduce costs and improve efficiency. However, labor costs increased by 8.2% in 2017, driven by higher wages and benefits. + +Liquidity and Solvency: + +- Current ratio increased from 1.1:1 in 2016 to 2.6:1 in 2017, indicating a significant improvement in liquidity. +- Quick ratio also improved from 0.9:1 in 2016 to 1.4:1 in 2017, demonstrating strong control over current assets. +- Debt-to-equity ratio decreased from 43.3% in 2016 to 32.5% in 2017, indicating a reduction in debt. +- Interest coverage ratio increased from 5.9:1 in 2016 to 6.6:1 in 2017, indicating an increase in safety. + +Cash Flow Analysis: + +- Cash flow from operations increased from around $ 110.5 billion in 2016 to $ 120.4 billion in 2017, reflecting higher operating profits. +- Cash flow from investing increased from $ 6.6 billion in 2016 to $ 8.8 billion in 2017, driven by increased spending on property, plant, and equipment. +- Cash flow from financing decreased from $ 38.8 billion in 2016 to $ 26.3 billion in 2017, as the company repaid a portion of its long-term debt. + +Investment and Future Outlook: + +- The company plans to continue investing in its services platform, with a focus on expanding payment options and enhancing the overall customer experience. +- Apple has also announced plans to invest in advancing its artificial intelligence capabilities, including the acquisition of AI startup Dnora. +- Management expects net sales to grow 20-25% year-over-year, driven by increasing sales of Mac, iPad, iPhone, and iPhone-related services. + +Risks and Opportunities: + +- Key risks facing the company include the ongoing trade tensions with China, which could impact its supply chain and inflate manufacturing costs. Additionally, increased competition from other smartphone manufacturers, such as Samsung and Microsoft, could also impact sales. +- Emerging opportunities include the expansion of Apple's payment platform and the continued growth of its services division. Additionally, the company's ongoing research and development efforts in areas such as artificial intelligence and virtual reality could lead to significant breakthroughs and new revenue streams. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-19-000119/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-19-000119/full-submission_features.txt new file mode 100644 index 0000000..69d9e75 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-19-000119/full-submission_features.txt @@ -0,0 +1,36 @@ + financial statement analysis: + +1. Financial Overview: + +- Revenue: total revenue for 2019 was $ 243,574 million, an increase of 4.4% from the previous year. +- Net Income: net income for 2019 was $ 83,071 million, an increase of 6.7% from the previous year. +- Gross Margin: gross margin for 2019 was 37.7%, an increase of 1.1% from the previous year. + +2. Operational Efficiency: + +- Operating Margin: operating margin for 2019 was 5.9%, which is lower than the industry average. +- Cost Management Effectiveness: while cost management initiatives were in place, the company faced challenges in controlling costs, particularly related to research and development expenses. + +3. Liquidity and Solvency: + +- Current Ratio: the current ratio for 2019 was 1.1, indicating that the company had enough short-term assets to cover its short-term liabilities. +- Quick Ratio: the quick ratio for 2019 was 0.8, indicating that the company had enough current assets or inventories to cover its short-term liabilities without counting accounts receivable. +- Debt-to-Equity Ratio: the debt-to-equity ratio for 2019 was 0.88, which is higher than the industry average. +- Interest Coverage Ratio: the interest coverage ratio for 2019 was 3.36, indicating that the company had enough earnings before interest and taxes (EBIT) to cover its interest expenses. + +4. Cash Flow Analysis: + +- Cash from Operations: the company generated $ 43,828 million in cash from operations. +- Cash from Investing: the company used $ 68,337 million in cash from investing activities. +- Cash from Financing: the company received $ 2,280 million in cash from financing activities. +- Cash Holdings: at the end of 2019, the company had $ 5,582 million in cash and cash equivalents. + +5. Investment and Future Outlook: + +- Investments: the company did not make any major investments during the year. +- Mergers and Acquisitions: the company did not engage in any mergers or acquisitions during the year. + +6. Risks and Opportunities: + +- Key Risks: key risks faced by the company include political and economic instability, changes in consumer preferences, and technological advancements that could make the company's products obsolete. +- Opportunities: opportunities for the company include expanding into new markets, expanding its product offerings, and investing in artificial intelligence to enhance its products and services. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-20-000096/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-20-000096/full-submission_features.txt new file mode 100644 index 0000000..95a402b --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-20-000096/full-submission_features.txt @@ -0,0 +1,32 @@ + Financial Overview: + +* Apple Inc.'s total revenue for 2020 was $ 274.5 billion, representing a year-over-year increase of 5.1%. +* The company's net income for 2020 was $ 113.1 billion, representing a year-over-year increase of 37.3%. +* The gross margin for 2020 was 38.5%, compared to 39.0% in 2019. + +Operational Efficiency: + +* Apple Inc.'s operating margin in 2020 was 30.8%, which is above the industry average. +* The company's operating margin has decreased compared to 2019, primarily due to increased operating expenses. + +Liquidity and Solvency: + +* The company's current ratio was 1.7:1 and quick ratio was 1.6:1 in 2020, indicating a decent level of liquidity. +* Apple Inc.'s debt-to-equity ratio was 0.73, indicating that the company relies heavily on debt financing. +* The interest coverage ratio was 57.0 in 2020, which is well above the industry average. + +Cash Flow Analysis: + +* The company's cash flow from operations was $ 66.5 billion in 2020, indicating a strong operational performance. +* The company's cash flow from investing was negative $ 10.1 billion, primarily due to capital expenditures. +* The company's cash flow from financing was $ 89.3 billion, indicating strong net cash inflow. + +Investment and Future Outlook: + +* Apple Inc. made several key investments in development and deployment of new products. +* The company's management outlook became more optimistic in 2020, citing strong sales performance and solid execution on product launches. + +Risks and Opportunities: + +* The ongoing COVID-19 pandemic poses risks to global supply chains and demand, particularly for the company's consumer products. +* Rapid technological changes in various fields provide emerging opportunities for the company's continued growth. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-21-000105/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-21-000105/full-submission_features.txt new file mode 100644 index 0000000..9f06da9 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-21-000105/full-submission_features.txt @@ -0,0 +1,35 @@ + 1. **Financial Overview**: + + - In fiscal year 2021, Apple Inc. generated a total revenue of $274.5 billion, representing a 19% increase compared to the previous year. + - The company's net income was $97.3 billion, a 42% increase from the 2020 net income of $68.5 billion. + - The gross margin for Apple remained strong at 42.4%, a slight decrease from the 43.1% achieved in fiscal year 2020. + +2. **Operational Efficiency**: + + - Operating margin for Apple was 21.2%, a decrease from 22.2% in the previous year. This can be attributed to increased operating expenses, particularly in the Research and Development segment. + - When compared to industry standards, Apple's operating margin is higher than the average for technology companies but lower than some of the high-performing e-commerce and retail sectors. + - Cost management effectiveness appears to be reasonably effective, with total operating expenses increasing at a rate lower than revenue growth. + +3. **Liquidity and Solvency**: + + - Apple's current ratio was 1.4, indicating the company has sufficient short-term assets to cover short-term liabilities. + - The quick ratio, which excludes inventory from current assets, was 0.9, suggesting the company has sufficient liquid assets to cover short-term liabilities. + - The debt-to-equity ratio was 1.6, indicating the company has relatively high levels of debt compared to shareholder's equity. + - Interest coverage ratio was 91.1, signifying the company's ability to meet its interest payments. + +4. **Cash Flow Analysis**: + + - Cash flow from operations was $82.2 billion, a decrease of 26% from the previous year, mainly driven by the lower gross margin. + - Investing cash flow was $19.6 billion, an increase of 35% from the previous year, largely due to investments in property, plant, and equipment. + - Financing cash flow was $72.6 billion, an increase of 74% from the previous year, mainly due to the net increase in long-term debt. + +5. **Investment and Future Outlook**: + + - In 2021, Apple made several major investments, such as expanding its production capacity in India and the United States, investing in research and development, and acquiring AR/VR company Next Reality. + - Management expects continued growth, driven by the release of new products, including the Apple Watch Series 7, AirPods Max, and the M1 chip-based MacBook Pro and MacBook Air. + - The company anticipates continuing investment in its data centers, sustainable energy initiatives, and other strategic projects. + +6. **Risks and Opportunities**: + + - Key risks for Apple include global supply chain disruptions, currency fluctuations, increasing competition from other technology companies, and regulatory risks related to antitrust and privacy concerns. + - Emerging opportunities for the company include continued growth in the services segment, expanding market share in China and India, and exploring new markets and technologies, such as augmented reality and 5G networks. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-22-000108/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-22-000108/full-submission_features.txt new file mode 100644 index 0000000..08942b7 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-22-000108/full-submission_features.txt @@ -0,0 +1,89 @@ + Apple Inc. Overview + +* Revenue: + + 2022: $274,528 million + + 2021: $274,521 million + + 2020: $274,557 million + + YoY growth rate: -4.4% +* Net Income: + + 2022: $91,537 million + + 2021: $91,537 million + + 2020: $91,049 million +* Gross Margin: + + 2022: 38.1% + + 2021: 37.8% + + 2020: 37.3% + +Operational Efficiency + +* Operating Margin Trends: + + 2022: 38.1% + + 2021: 37.8% + + 2020: 37.3% +* Comparison to Industry Standards: + + Apple's operating margin is higher than the industry average for consumer electronics companies. + +Cost Management Effectiveness + +* Controlling costs through keen pricing strategies and efficiency efforts has helped maintain a healthy profit margin. + +Liquidity and Solvency + +* Current Ratio: + + 2022: 1.6 + + 2021: 1.7 + + 2020: 1.4 +* Quick Ratio: + + 2022: 1.2 + + 2021: 1.3 + + 2020: 1.1 +* Debt-to-Equity Ratio: + + 2022: 0.11 + + 2021: 0.12 + + 2020: 0.13 +* Interest Coverage Ratio: + + 2022: 2.0 + + 2021: 2.1 + + 2020: 2.1 + +Cash Flow Analysis + +* Cash Flow from Operations: + + 2022: $86,555 million + + 2021: $89,052 million + + 2020: $89,543 million +* Cash Flow from Investing: + + 2022: $5,626 million + + 2021: $7,926 million + + 2020: $3,704 million +* Cash Flow from Financing: + + 2022: $22,306 million + + 2021: $33,525 million + + 2020: $4,975 million + +Investment and Future Outlook + +* Major Investments: + + Apple continues to invest in research and development, which is expected to drive future growth initiatives. +* Mergers and Acquisitions: + + Apple recently acquired a startup focused on augmented reality technology, indicating potential expansion into new markets. +* Management's Outlook and Future Growth Initiatives: + + Apple is focused on continued innovation, expanding into new markets, and increasing sales through its powerful brand and loyal customer base. + +Risks and Opportunities + +* Key Risks: + + competition from rival tech companies and changing consumer preferences pose potential risks. + + shifts in global economic conditions and regulatory changes could impact Apple's sales and profitability. +* Emerging + +Apple Inc. | 2022 Form 10-K | 26 Opportunities: + + Expansion into emerging markets, particularly China and India, presents significant growth opportunities. + + The ongoing development of new technologies, such as 5G and artificial intelligence, could open up new product lines and business models. + + Possible acquisitions of smaller companies with complementary technologies could enhance Apple's position in the market. + +Actionable Insights: + +* Apple's overall financial performance was strong, with notable growth in revenue despite a slight decrease in net income. Maintaining tight cost control is crucial to maintaining the company's healthy profit margin. +* The rapid expansion of the company's business in Asia, particularly China, presents significant growth opportunities. Staying abreast of changing technological trends and consumer preferences will be essential for sustained success. +* Apple's strong balance sheet and cash holdings position the company for future growth, while investments in research and development are likely to drive innovation and new business opportunities. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-23-000106/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-23-000106/full-submission_features.txt new file mode 100644 index 0000000..cd8f281 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-23-000106/full-submission_features.txt @@ -0,0 +1,6 @@ + 7. **Financial Overview**: + +* Total revenue for 2023 was $ 305,336 million, down 5.6% compared to the previous year. The year-over-year decline can be attributed to increased competition in the smartphone market and reduced demand for Mac products, which currently represent a smaller proportion of Apple’s revenue. +* Net income for 2023 came in at $ 19,080 million, 55.6% lower than the previous year primarily due to the lower revenue. +* The gross margin in 2023 was 35.5%, a 15.6% decrease compared to the prior period. +* It is important to note that the global economic conditions, geopolitical tensions, and supply chain disruptions continue to pose significant challenges for businesses, including Apple, and could impact their future financial performance. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-95-000016/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-95-000016/full-submission_features.txt new file mode 100644 index 0000000..62955c2 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-95-000016/full-submission_features.txt @@ -0,0 +1,39 @@ + 1. **Financial Overview**: +- Total revenue: $X million in FY 2023, up 12% from $X million in FY 2022. +- Net income: $X million in FY 2023, up 15% from $X million in FY 2022. +- Gross margin: 55%, down 1% from 56% in FY 2022. + +Notable trends include the steady growth in both revenue and net income, despite a slight decline in gross margin. This may indicate increased competition or operational inefficiencies. + +2. **Operational Efficiency**: +- Operating margin: X%, down 1% from X% in FY 2022. +- Cost management effectiveness: Improved due to cost-cutting measures and increased automation. + +The decline in operating margin should be closely monitored, as this may impact overall profitability. While cost management efforts have improved, further optimization may be necessary to offset declining gross margin. + +3. **Liquidity and Solvency**: +- Current ratio: X, down from X in FY 2022. +- Quick ratio: X, down from X in FY 2022. +- Debt-to-equity ratio: X, up from X in FY 2022. +- Interest coverage ratio: X, down from X in FY 2022. + +While liquidity has decreased slightly, the company remains in a stable financial position. An increase in the debt-to-equity ratio and a decline in the interest coverage ratio could indicate a need for more efficient use of debt financing or increased profitability to maintain solvency. + +4. **Cash Flow Analysis**: +- Cash flow from operations: X, up 10% from X in FY 2022. +- Investing cash flow: X, down 5% from X in FY 2022. +- Financing cash flow: X, down 20% from X in FY 2022. + +A significant increase in cash flow from operations suggests effective cost management and increased sales, while a decrease in investing and financing cash flows implies a reduction in capital expenditures and debt financing. + +5. **Investment and Future Outlook**: +- Major investments: Expansion of overseas operations and development of new product lines. +- Mergers/acquisitions: None announced. + +Management's outlook for future growth includes continued expansion into new markets and diversification of product offerings. In order to achieve these goals, the company will need to maintain strong financial performance and effectively allocate resources. + +6. **Risks and Opportunities**: +- Risks: Increased competition, market shifts, regulatory changes, technological disruption. +- Opportunities: Emerging markets, product innovation, strategic partnerships, customer segmentation. + +To mitigate potential risks, the company should closely monitor market trends and maintain a diverse product portfolio. Pursuing new opportunities in emerging markets, as well as leveraging technological advancements, could facilitate long-term growth. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000320193-96-000023/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000320193-96-000023/full-submission_features.txt new file mode 100644 index 0000000..7de0fa9 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000320193-96-000023/full-submission_features.txt @@ -0,0 +1,37 @@ + 1. **Financial Overview** + +- Total revenue for FY2021 was $X million, representing a year-over-year growth rate of X%. +- Net income for FY2021 was $X million, representing a YoY growth rate of X%. +- Gross margin decreased slightly from X% in FY2020 to X% in FY2021. +- Notable trends include increased operating expenses due to raw material price fluctuations and higher labor costs. There was also a decline in capital expenditures compared to the previous year. + +2. **Operational Efficiency** + +- Operating margin for FY2021 was X%, below industry standards of X%. +- Cost management was effective in controlling input costs, but saw challenges in managing distribution and logistics due to supply chain disruptions caused by the pandemic. +- The company could improve operational efficiency by streamlining production processes and investing in automation technologies to reduce labor costs and improve quality control. + +3. **Liquidity and Solvency** + +- Current ratio for FY2021 was X.x:1, indicating adequate liquidity to meet short-term obligations. +- Quick ratio for FY2021 was X.x:1, confirming that current assets can cover short-term obligations quickly. +- Debt-to-equity ratio increased from X:1 in FY2020 to X:1 in FY2021, indicating higher leverage. +- Interest coverage ratio decreased from X:1 in FY2020 to X:1 in FY2021, indicating lower profitability in servicing interest on debt. + +4. **Cash Flow Analysis** + +- Cash flow from operations generated $X million, X% higher than the previous year. +- Cash flow from investing reduced by $X million, primarily due to decreased capital expenditures. +- Cash flow from financing decreased by $X million, driven by lower net income and increased dividend payments. +- Net cash decreased from $X million in FY2020 to $X million in FY2021, indicative of weakening liquidity. + +5. **Investment and Future Outlook** + +- The company invested $X million in R&D during FY2021, focused on developing new products and refining existing processes. +- No major acquisitions or mergers were made in the past fiscal year. +- Management anticipates growth in demand for its products and services due to increasing consumer spending and trade policies that favor domestic producers. Future initiatives include expanding its product line and strengthening partnerships with distributors. + +6. **Risks and Opportunities** + +- Key risks include supply chain disruptions, increasingly competitive market conditions, and rising labor costs. These could negatively impact profitability and narrow operational margins. +- Emerging opportunities include expanding into new markets, investing in technology to enhance production efficiencies, and exploring innovative partnerships to create shared value for stakeholders. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000912057-00-053623/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000912057-00-053623/full-submission_features.txt new file mode 100644 index 0000000..b8c102b --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000912057-00-053623/full-submission_features.txt @@ -0,0 +1,42 @@ + 1. Financial Overview: + +- Total Revenue for Fiscal Year 2021: $100 million, up 12.5% from the previous year. +- Net Income for Fiscal Year 2021: $15 million, up 10% from the previous year. +- Gross Margin for Fiscal Year 2021: 45%, down 2% from the previous year. + +The company has consistently grown its revenue and net income over the past several years. However, the gross margin has decreased due to increased production costs and higher energy prices. + +2. Operational Efficiency: + +- Operating Margin for Fiscal Year 2021: 10%, down 3% from the previous year. +- Comparison to Industry Standard: The operating margin is lower than the average for the industry, which suggests that the company could improve efficiency by reducing operating expenses. + +The company has shown limited progress in improving its operational efficiency. Management should focus on reducing overhead costs, optimizing production processes, and investing in automation to increase efficiency and improve profitability. + +3. Liquidity and Solvency: + +- Current Ratio for Fiscal Year 2021: 2.5, up 7% from the previous year. +- Quick Ratio for Fiscal Year 2021: 2.0, down 3% from the previous year. +- Debt-to-Equity Ratio for Fiscal Year 2021: 1.5, up 5% from the previous year. +- Interest Coverage Ratio for Fiscal Year 2021: 5.0, up 20% from the previous year. + +The company has a steady cash position, with an increased current ratio and quick ratio. However, the debt-to-equity ratio has increased, indicating that the company is taking on more debt to finance its operations. The interest coverage ratio has also improved significantly due to higher net income. + +4. Cash Flow Analysis: + +- Cash Flow from Operations: $30 million, up 10% from the previous year. +- Cash Flow from Investing: ($5 million), down 50% from the previous year. +- Cash Flow from Financing: $25 million, up 30% from the previous year. + +The company has generated strong cash flows from its operations, but there have been significant investments in capital equipment and property. The negative cash flow from investing suggests that the company is investing heavily to expand its production capacity, which may have negatively impacted cash holdings in the short term. + +5. Investment and Future Outlook: + +- Major Investments: In 2021, the company completed the acquisition of a new manufacturing facility in Europe. Management expects to invest in additional facilities and technologies to support growth over the next three years, with a focus on expanding production capacity and improving efficiency. + +Management's outlook for the future is optimistic, with expectations for continued revenue growth and profitability. The company plans to expand into new markets and develop new products to capitalize on emerging opportunities in the industry. + +6. Risks and Opportunities: + +- Key Risks: The company faces several risks, including rising energy prices, fluctuations in raw material costs, and supply chain disruptions. Additionally, there is regulatory risk associated with changes in trade policies and environmental regulations. +- Emerging Opportunities: The company has significant growth opportunities in emerging markets, particularly in Asia and South America. Additionally, the development of new technologies and product innovation can provide additional revenue streams and competitive advantages in the industry. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0000912057-99-010244/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0000912057-99-010244/full-submission_features.txt new file mode 100644 index 0000000..e618b03 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0000912057-99-010244/full-submission_features.txt @@ -0,0 +1,29 @@ + Financial Overview: +- Total revenue for the year was $x.xx million, a x% increase from the previous year. +- Net income amounts to $x.xx million, a x% change from the previous period. +- Gross margin stands at x%, showing a x% decline compared to the previous year. + +Operational Efficiency: +- Operating margin has dropped from x% in the previous year to x% in the current period, falling short of industry standards by x%. +- Cost management effectiveness has decreased by x%, resulting in increased expenses. + +Liquidity and Solvency: +- Current ratio is x:1, up from x:1 in the previous year, indicating strong liquidity. +- Quick ratio stands at x:1, a decrease from x:1 in the previous year, suggesting some improvement in liquidity. +- Debt-to-equity ratio is x:1, showing an increase from x:1 in the previous period. +- Interest coverage ratio is x:1, a decline from x:1 in the previous year, indicating poor solvency. + +Cash Flow Analysis: +- Cash flow from operations was $x.xx million in the current year, an increase of x% from the previous year. +- Investing saw $x.xx million in outflows, compared to $x.xx million in the previous year. +- Financing showed a net inflow of $x.xx million, up from $x.xx million in the prior year. + +Investment and Future Outlook: +- There were no major investments, mergers, or acquisitions during the year. +- Management outlines a focus on organic growth, while exploring strategic partnerships. + +Risks and Opportunities: +- Fluctuating market conditions pose a significant risk. +- Technological advancements and changing consumer behaviors may present opportunities for innovation and growth. + +Note: The specific figures and comparisons used in the analysis will depend on the company being analyzed. It is recommended to research and gather accurate data for the company being examined. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001047469-02-007674/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001047469-02-007674/full-submission_features.txt new file mode 100644 index 0000000..a80215c --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001047469-02-007674/full-submission_features.txt @@ -0,0 +1,37 @@ + 1. Financial Overview: + +* Total revenue for the revenue of the current fiscal year was generated, while the revenue in the template was $32,811,292. +* Net income for the company in the current fiscal year was $7,303,398, down from $10,247,684 in the template year. +* Gross margin for the current fiscal year was $8,242,447, while the template year's gross margin was $7,195,602. +* Year-over-year gross margin growth was achieved at approximately 11.5%. + +2. Operational Efficiency: + +* The company's operating margin (operating income divided by net sales) was 24.8% in the current fiscal year, an increase from 21 as in the template year. +* Operating performance is above industry standards for similar-sized companies. +* Cost management over the past fiscal year was effective, considering revenue growth has outpaced cost increases, leading to a favorable operating margin. + +3. Liquidity and Solvency: + +* Current ratio for the current fiscal year was high at 2.60, indicating strong liquidity. +* Quick ratio (current assets minus current liabilities divided by current assets) for the current fiscal year was 2.26, also indicating appropriate liquidity. +* Debt-to-equity ratio for the current fiscal year was 0.60, reflecting a relatively low debt level compared to equity. +* Interest coverage ratio for the current fiscal year was 3.27, indicating adequate debt servicing capacity. + +4. Cash Flow Analysis: + +* Cash flow from operations for the current fiscal year was $12,269,971, indicating positive cash generation from core business activities. +* Cash flow from investing for the current fiscal year was $-2,887,236, reflecting significant capital expenditures, such as purchases of property, plant, and equipment. +* Cash flow from financing for the current fiscal year was $20,831,738, primarily driven by interest earnings and proceeds from equity issuance. +* Significant changes in cash holdings include an increase in cash and cash equivalents during the year, resulting in a positive net increase in cash and cash equivalents. + +5. Investment and Future Outlook: + +* No significant investments, mergers, or acquisitions were announced in the past fiscal year. +* Management forecasts revenue growth to continue and anticipates further improvements in gross margin and operating efficiency through cost management initiatives. +* Future growth initiatives include enhancing product innovation, expanding market presence in targeted segments, and optimizing supply chain operations. + +6. Risks and Opportunities: + +* Key risks facing the company include competition in the technology market, product obsolescence, fluctuating exchange rates, and economic downturns. +* Emerging opportunities include expanding into emerging markets, capitalizing on technological advancements, and entering new product segments. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001047469-03-041604/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001047469-03-041604/full-submission_features.txt new file mode 100644 index 0000000..a8c5883 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001047469-03-041604/full-submission_features.txt @@ -0,0 +1,35 @@ + Financial Overview: + +* Total revenue was $ 174.8 billion in Q2 2020 and $ 178.6 billion in Q2 2019 for 3.0% YoY revenue growth. +* Net income was $ 96.1 billion in Q2 2020 and $ 95.8 billion in Q2 2019 for -6.3% YoY revenue growth. +* Gross margin was 46.1% in Q2 2020 and 47.7% in Q2 2019 for -1.6% YoY revenue growth. +* Key trends include increased revenue growth and gross margin, with a decrease in net income. + +Operational Efficiency: + +* Operating margin was 10.6% in Q2 2020 and 10.7% in Q2 2019 for slight decrease YoY. +* Operating productivity improved by 2.7%, indicating effective cost management. + +Liquidity and Solvency: + +* Current ratio increased from 9.2 in Q2 2019 to 9.4 in Q2 2020, indicating improvement in liquidity. +* Debt-to-equity ratio decreased from 0.6 in Q2 2019 to 0.5 in Q2 2020, indicating stability in solvency. + +Cash Flow Analysis: + +* Cash from operations was $ 59.1 billion in Q2 2020 and $ 60.1 billion in Q2 2019 for slight decrease YoY. +* Cash from investing increased from $ 3.3 billion in Q2 2019 to $ 11.1 billion in Q2 2020 due to the acquisition of BP assets and other investments. +* Cash from financing increased from $ 45.1 billion in Q2 2019 to $ 70.3 billion in Q2 2020 due to a refund of dividends paid in Q1 2020. +* The acquisition of BP assets had a significant impact on cash holdings, resulting in increased liquidity and solvency. + +Investment and Future Outlook: + +* BP Aviation Holdings (BP) was acquired for $ 11.1 billion in Q2 2020, representing a significant investment. +* Mergers and acquisitions are expected to continue as part of the company's growth strategy. +* Management highlights their focus on maintaining a disciplined financial approach and generating returns for shareholders. + +Risks and Opportunities: + +* Key risks include the impact of the COVID-19 pandemic on the global economy and supply chain disruptions. +* The potential for increased competition in the oil and gas industry presents a challenge. +* Emerging opportunities include investing in low-carbon emissions technologies and exploring new markets for refined petroleum products. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001047469-04-035975/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001047469-04-035975/full-submission_features.txt new file mode 100644 index 0000000..b683dff --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001047469-04-035975/full-submission_features.txt @@ -0,0 +1,34 @@ + Financial Overview: + +* Total Revenue: The company generated total revenue of $ 27.9 billion in 2021. This represents a 23.2% increase in revenue compared to the previous year. +* Net Income: The net income of the company in 2021 was $ 5.3 billion, resulting in a 12.1% growth from the previous year. +* Gross Margin: The company's gross margin was 39.9% in 2021, down 0.1% from the previous year. + +Operational Efficiency: + +* Operating Margin: The operating margin decreased to 21.4% in 2021, representing a 0.8% year-over-year decline. The figure is below industry standards. +* Growth Rates: Restaurant slow-growth rate has been declining to 3% from previous year, which is below industry standard of 6.5% + +Liquidity and Solvency: + +* Current Ratio: Current ratio of the company was 0.6, increasing 0.1 from the previous year. +* Quick Ratio: N/A +* Debt-to-Equity Ratio: Debt-to-equity ratio of the company was 0.4, decreasing from 0.5 in the previous year. Interest Coverage Ratio: The company has no interest coverage. + +Cash Flow Analysis: + +* Free Cash Flow from Operations: Free cash flow from operations generated was $ 4.4 billion, up $ 1.3 billion from the previous year, representing a 42.5% increase. +* Free Cash Flow from Investing: Free cash flow from investing was $ 186 million, decreasing by $ 731 million from the previous year, representing a 71.0% decline. +* Free Cash Flow from Financing: Free cash flow from financing was $ 2.7 billion, resulting in a decline of 13.2% from the previous year. +* Cash Changes: The company increased its cash holdings by $ 4.4 billion compared to the previous year, representing a 391.4% increase. + +Investment and Future Outlook: + +* Major Investments: Apple plans to invest $ 90 billion in 2021, including developing new technologies, expanding more retail stores, and launching new products. +* Mergers and Acquisitions: The company made no significant mergers or acquisitions during the year. +* Future Growth Initiatives: Apple plans to launch new products such as the Apple Watch and AirPods Max, and expand its services such as Apple Card and Apple Fitness. + +Risks and Opportunities: + +* Key Risks: The company faces risks related to the ongoing trade war between the US and China. The company also faces risks related to cybersecurity threats. +* Opportunities: The company has opportunities to expand its product offerings and enter new markets, such as the automotive industry and healthcare \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001047469-07-009340/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001047469-07-009340/full-submission_features.txt new file mode 100644 index 0000000..eca31b7 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001047469-07-009340/full-submission_features.txt @@ -0,0 +1,39 @@ + Financial Overview +-------- + +* Total revenue: $ 255.1 billion ( +* Net income: $ 9.5 billion ( +* Gross margin: 37.1% ( + +Operational Efficiency +-------------------- + +* Operating margin: 22.5% ( +* Industry average operating margin: 11.3% ( + +Liquidity and Solvency +---------------------- + +* Current ratio: 0.29 ( +* Quick ratio: 0.28 ( +* Debt-to-equity ratio: 0.50 ( +* Interest coverage ratio: 7.9 ( + +Cash Flow Analysis +------------------ + +* Cash from operations: $ 110.3 billion ( +* Cash from investing: $( 4.3 ) billion ( +* Cash from financing: $ 40.0 billion ( + +Investment and Future Outlook +------------------------------ + +* Major investments: +*mergers, or acquisitions: Not mentioned +*Summarize management’s outlook and future growth initiatives: Not mentioned + +Risks and Opportunities +---------------------- + +* Key risks facing the company and potential impacts: Not mentioned \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001047469-97-006960/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001047469-97-006960/full-submission_features.txt new file mode 100644 index 0000000..413594d --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001047469-97-006960/full-submission_features.txt @@ -0,0 +1,35 @@ + Financial Overview: + +- Total revenue: XYZ Inc. generated $1.5 billion in revenue in fiscal year 2021, representing a 7% year-over-year increase from $1.4 billion in 2020. +- Net income: The company's net income for fiscal year 2021 was $100 million, an improvement of 36% compared to $70 million in 2020. +- Gross margin: XYZ Inc.'s gross margin in 2021 was 25%, up 2% from the previous year's 23%. This increase can be attributed to better cost management and efficient production processes. + +Operational Efficiency: + +- Operating margin: XYZ Inc.'s operating margin for 2021 was 7%, below the industry average of 9%. This can be attributed to higher operating expenses including labor and materials costs. +- Cost management: Despite operating expenses increasing by 3% in 2021, XYZ Inc. managed to improve its gross margin. This shows effective cost management by the company. + +Liquidity and Solvency: + +- Current ratio: The company's current ratio increased from 2.5 in 2020 to 2.8 in 2021, indicating improved liquidity position. +- Quick ratio: XYZ Inc.'s quick ratio remained unchanged from the previous year at 1.9. +- Debt-to-equity ratio: The company's debt-to-equity ratio increased slightly from 0.3 in 2020 to 0.4 in 2021, indicating a higher debt level. +- Interest coverage ratio: XYZ Inc.'s interest coverage ratio improved from 1.2 in 2020 to 1.6 in 2021, showing better ability to meet interest payments. + +Cash Flow Analysis: + +- Cash flow from operations: XYZ Inc. generated $500 million in cash flow from operations in 2021, representing a 17% increase from $425 million in 2020. +- Cash flow from investing: The company invested $200 million in capital expenditures, resulting in a negative net cash used in investing activities. +- Cash flow from financing: XYZ Inc. issued $100 million in new debt and repurchased $50 million in stock, resulting in a net increase in long-term debt and a net decrease in stockholders' equity. + +Investment and Future Outlook: + +- Investments: In 2021, XYZ Inc. invested $200 million in capital expenditures, including the expansion of its production facilities and the development of new products. +- Mergers and acquisitions: The company did not engage in any major mergers or acquisitions during the year. +- Outlook: Management's outlook for the future is positive, with plans to continue expanding into new markets and product segments. The company expects to maintain its focus on cost management and improve operational efficiency. + +Risks and Opportunities: + +- Key risks: Operational risks related to supply chain disruptions and labor shortages, as well as financial risks related to interest rate fluctuations and economic downturns. +- Potential impacts: Disruptions in supply chains could lead to production delays and higher costs, while economic downturns could impact demand for products and services. +- Emerging opportunities: Technological advancements in automation and robotics could improve production efficiency and reduce costs, opening up new opportunities for growth and expansion. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001104659-05-058421/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001104659-05-058421/full-submission_features.txt new file mode 100644 index 0000000..594aa6c --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001104659-05-058421/full-submission_features.txt @@ -0,0 +1,31 @@ + 1. **Financial Overview** +* Total revenue for the year ended September 24, 2005 was $ 51,208 million, representing a year-over-year growth rate of 42.8%. +* Net income for the year ended September 24, 2005 was $ 3,740 million. +* Gross margin for the year ended September 24, 2005 was 32.2%. + +Notable trends include the substantial year-over-year growth in revenue, indicating strong demand for Apple products and services. The relatively low gross margin may be due to higher manufacturing costs or increased marketing expenses. + +2. **Operational Efficiency** +* Operating margin for the year ended September 24, 2005 was 9.2%, below the industry average. +* Cost management effectiveness for the year ended September 24, 2005 is not explicitly discussed in the provided data. + +The low operating margin may suggest inefficiencies in production or distribution processes, which may need to be addressed to improve profitability. + +3. **Liquidity and Solvency** +* Current ratio for the year ended September 24, 2005 was 1.1, indicating a moderately healthy level of liquidity. +* Quick ratio for the year ended September 24, 2005 was also 1.1, suggesting that Apple has a solvent balance sheet. + +Debt-to-equity ratio for the year ended September 24, 2005 was 0.4, indicating that Apple has a relatively low debt-to-equity ratio. Interest coverage ratio for the year ended September 24, 2005 was 45.8, suggesting that Apple was solvent in terms of its interest payments. + +4. **Cash Flow Analysis** +* Cash flow from operations for the year ended September 24, 2005 was $ 9,418 million, representing a significant increase from the previous year. +* Cash flow from investing for the year ended September 24, 2005 was $ -9,483 million. +* Cash flow from financing for the year ended September 24, 2005 was $ 2,097 million. + +The significant increase in cash flow from operations may indicate increased profitability, but the negative cash flow from investing and positive cash flow from financing suggest that Apple's investments and financing activities had a net impact on cash holdings. + +5. **Investment and Future Outlook** +There are no specific mentions of major investments, mergers, or acquisitions in the provided data. Apple's management outlook and future growth initiatives are not explicitly discussed. + +6. **Risks and Opportunities** +The provided data does not explicitly discuss any key risks facing the company or emerging opportunities in the market or through technological advancements. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001104659-06-084288/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001104659-06-084288/full-submission_features.txt new file mode 100644 index 0000000..4ea38e9 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001104659-06-084288/full-submission_features.txt @@ -0,0 +1,35 @@ + 1. Financial Overview: + +* Total revenue for the year was $274,220 million, an increase of 6.6% compared to the previous year. +* Net income for the year was $71,999 million, an increase of 33.9% compared to the previous year. +* Gross margin for the year was 27.7%, an increase of 0.1% compared to the previous year. + +2. Operational Efficiency: + +* Operating margin decreased by 1% in comparison to the previous year. +* The company has exhibited strong growth in recent years, with a net income growth of over 30% in the last calendar year. + +3. Liquidity and Solvency: + +* Current ratio for the year was $1,288,901 million, indicating a healthy liquidity position. +* Quick ratio for the year was $1,145,641 million, further indicating good liquidity management. +* The company’s debt-to-equity ratio remained relatively low at 0.69, indicating a strong cost management position. +* Interest coverage ratio for the year was 6.94, which is above the industry average. + +4. Cash Flow Analysis: + +* Cash flow from operations was $127.12 million, indicating a significant influx of cash from operation of the business. +* Investing cash flow was $408.59 million, which includes major investments such as acquisitions or property, plant, and equipment purchases. +* Financing cash flow was $859,082 million, primarily driven by financing activities such as stock deals, debt issuance, or investment fund raising. +* Cash at the beginning of the year was $826,351 million, and cash at the end of the year was $1,319,683 million, indicating an increase in cash holdings over the year. + +5. Investment and Future Outlook: + +* The company is continuing its focus on investing in research and development, which is expected to contribute to growth in future years. +* There have been no major mergers or acquisitions announced in recent times. +* Management expects continued growth in revenue and profit in the future, driven by market expansion and innovation. + +6. Risks and Opportunities: + +* The company may face risks related to increased competition from other players in the market and changes in consumer preferences. +* Emerging opportunities include continued technological advancements in Apple products and services, as well as potential for growth in new markets such as China and other emerging economies. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-08-224958/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-08-224958/full-submission_features.txt new file mode 100644 index 0000000..b6694fc --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-08-224958/full-submission_features.txt @@ -0,0 +1,44 @@ + Financial Overview +--------------- + +| Key Financial Figures | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Total Revenue | $ 84,084,000 | $ 77,278,000 | 10.7% | +| Cost of Goods Sold | $ 59,910,000 | $ 54,552,000 | -5.1% | +| Gross Margin | 44.1% | 29.9% | -123.5% | +| Operating Income |)$ 25,106,000 | $ 20,964,000 | -15.5% | +| Net Income | $ 20,264,000 | $ 14,891,000 | -28.6% | +| Gross Margin | 40.7% | 25.5% | -55.2% | + +Key takeaways: + +* The company experienced a significant increase in revenue, with a 10.7% YoY growth rate in 2021, compared to a 29.9% downward trend in 2020. +* The gross margin consistently remained positive throughout the period, with a gradual decline from 44.1% in 2021 to 40.7% in 2022, representing a 10.9% decrease. +* The company's operating and net income had fluctuated significantly in recent years, with positive growth in 2021 (-15.5%) and a considerable loss in 2022 (-28.6%). This trend highlights the need for better cost management and revenue growth. + +Operational Efficiency +---------------------- + +| Key Metrics | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Operating Margin | 29.9% | 21.8% | 37.7% | +* The operating margin showed a substantial increase, from 21.8% in 2020 to 29.9% in 2021, representing a 37.7% growth rate. This trend indicates better operational efficiency and cost control. + +Liquidity and Solvency +---------------------- + +| Key Ratios | 2021 | 2020 | YoY Growth Rate | +* Current Ratio: The current ratio increased from 1.5 in 2020 to 1.5 in 2021, with no growth rate to compare. +* Quick Ratio: The quick ratio remained stable at 1.0 in both years. +* Debt-to-Equity Ratio: The debt-to-equity ratio increased from 0.5 in 2020 to 0.5 in 2021, with no growth rate to compare. +* Interest Coverage Ratio (EBITDA): The interest coverage ratio (EBITDA) decreased from 5.7 in 2020 to 3.5 in 2021, representing a 37.3% decline. + +Cash Flow Analysis +------------------ + +| Key Cash Flow Metrics | 2021 | 2020 | YoY Growth Rate | +| --- | --- | --- | --- | +| Cash from Operations | $ 28,515,000 | $ 27,579,000 | 3.2% | +| Cash from Investing | $ 0 | $ 0 | 0% | +| Cash from Financing | $ 0 | $ 0 | 0% | +| Net Increase \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-09-214859/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-09-214859/full-submission_features.txt new file mode 100644 index 0000000..3c57c9d --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-09-214859/full-submission_features.txt @@ -0,0 +1,15 @@ + 1. Financial Overview: +* Apple Inc. reported total revenue of $ 260.5 billion for the fiscal year ended September 26, 2009, representing an increase of 17.8% compared to $ 217.7 billion in the previous fiscal year. +* Net income for the current fiscal year was $ 32.4 billion, which is a 15.9% increase from the previous year's net income of $ 27.7 billion. +* The gross margin for the company in the current year was 35.5%, compared to 30.7% in the previous year. +1. Operational Efficiency: +On the operational efficiency front, Apple's operating margin increased by 11.5 percentage points from 14.3% in the previous year to 25.8% in 2009, indicating significant improvement. The operating margin is above the industry average, demonstrating the company's ability to generate costs effectively. +1. Liquidity and Solvency: +Apple maintained a healthy liquidity position, with a current ratio of 1.45 and a quick ratio of 1.29 at the end of September 2009. These ratios indicate that the company had enough current assets to meet its short-term liabilities without needing to convert any long-term assets. The company's debt-to-equity ratio was 0.63, and the interest coverage ratio stood at 20.2 times, indicating that the company was financially stable. +1. Cash Flow Analysis: +Apple generated positive cash flow from operations, investing, and financing activities during the fiscal year ended September 26, 2009. The operating cash flow stood at $ 24.9 billion, investing cash flow was $ 68.6 billion, and financing cash flow was $ 65.7 billion. The company also experienced an increase in cash holdings, which indicates its strong financial position. +1. Investment and Future Outlook: +During the fiscal year 2009, Apple made several significant investments, including $ 2 billion in research and development, and the acquisition of iPhone-maker Quanta Communications for $ 7.7 billion. The company's future growth initiatives include expanding its retail stores, further developing its mobile devices, and potentially entering new markets such as the healthcare industry. +1. Risks and Opportunities: +Some key risks facing Apple include intense competition from other technology companies, macroeconomic factors affecting consumer demand, and supply chain disruptions due to component shortages or other unforeseen events. There are also opportunities for the company to continue innovating and expanding its product offerings, particularly in the areas of artificial intelligence, augmented reality, and virtual reality. +In summary, Apple's financial performance in 2009 was strong, with significant improvements in operational efficiencies, liquidity, and solvency. The company maintained a healthy cash flow position and made strategic investments, while also facing potential risks and opportunities for future growth. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-10-238044/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-10-238044/full-submission_features.txt new file mode 100644 index 0000000..7a1984c --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-10-238044/full-submission_features.txt @@ -0,0 +1,30 @@ + Financial Overview: + +* For the fiscal year ending September 25, 2010, Apple's total revenue increased by approximately 12% compared to the same period in 2009. +* Apple's net income decreased by approximately 4% compared to the previous year. +* The gross margin for the fiscal year ending September 25, 2010, was 39%. indicating that AirPods contributed to this loss. + +Operational Efficiency: + +* Apple's operated margin for the fiscal year ending September 25, 2010, was approximately 33%. slightly down compared to industry standards. +* Apple's cost management effectiveness during the past fiscal year is 65 Table of Contents Azure management effectiveness is 65 Table of Contents Azure effective stock-based compensation of approximately $ 1.3 billion , compared to $ 1.1 billion for the same period last year, primarily due to additional employee tax benefit of around $ 230 million. + +Liquidity and Solvency: + +* Apple's current ratio as of September 25, 2010, was 1.49:1 . +* Apple's quick ratio as of September 25, 2010, was 1.36:1 more than the most 52% of sales + +Cash Flow Analysis: + +* Apple generated cash from operations that exceeded cash used in investing and financing during the fiscal year ending September 25, 2010. +* Apple's cash holdings increased by approximately $ 2.2 billion during the fiscal year ending September 25, 2010. + +Investment and Future Outlook: + +* Apple announced its transition to M1 chips, which should lead to increased power efficiency and performance. +* Apple's CEO, Tim Cook, has expressed his confidence in continued growth through innovation and product updates. + +Risks and Opportunities: + +* One key risk facing Apple is intense competition from other smartphone and tablet manufacturers . +* Emerging opportunities include expanding into new markets such as China and continued technological advancements in manufacturing, such as the implementation of flexible OLED displays. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-11-282113/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-11-282113/full-submission_features.txt new file mode 100644 index 0000000..a04586e --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-11-282113/full-submission_features.txt @@ -0,0 +1,29 @@ + 5. + +Apollo, the Harvard Business Review's case study on 3D printing + +In the world of manufacturing, additive manufacturing still represents a long tail of potential. Despite its hype, only a small number of 3D printing processes are able to manufacture objects at scale. In addition, these processes often lack the precision and performance of conventional manufacturing processes. + +Nevertheless, there are a few companies that are making an impression in additive manufacturing, one of which is Apollo, a small U.S.-based 3D printing company founded in 2002. + +According to its website, Apollo offers 3D printing services in a variety of materials, including metals, ceramics, plastics, and composites. Its customers include major manufacturers, medical device companies, and research institutions. + +Last year Apollo received a patent for a new 3D printing process that uses a laser to fuse metal strips together. This process allows for the creation of high-strength, complex structures that are difficult to achieve with traditional manufacturing methods. + +One of the most promising applications of this new process is in the medical device industry. The U.S. Food and Drug Administration (FDA) has approved for use in medical devices made with Apollo's 3D printing process, which opens up new opportunities for the company to grow its business in this area. + +Hidden trend in global pharmaceutical industry: increasing demand for personalized medicine + +Personalized medicine is an emerging field in healthcare that aims to create tailored treatments for individual patients based on their unique genetic makeup and other factors. This approach has the potential to improve patient outcomes, reduce side effects from treatments, and ultimately lead to more cost-effective healthcare. + +However, one of the challenges facing the personalized medicine industry is the high cost of data storage and analysis required to generate personalized treatment plans. + +To address this challenge, many pharmaceutical companies and healthcare providers are investing in big data technologies, such as machine learning algorithms and distributed computing systems, to help analyze large amounts of patient data quickly and efficiently. + +Another trend to emerge in the global pharmaceutical industry is the increasing use of bioprinting and 3D printing technologies for drug development and testing. + +Advancements in bioprinting and 3D printing technologies allow pharmaceutical companies to create miniaturized models of human tissues and organs, enabling them to test drug compounds on living cells without the need for animal testing. + +Despite these technological advancements, the pharmaceutical industry is still facing significant challenges, such as the need for increased collaboration and partnerships among different stakeholders, the regulatory hurdles associated with developing new drugs, and the rising cost of developing and bringing drugs to market. + +To overcome these challenges, pharmaceutical companies must continue investing in new technologies and collaboration strategies, while also developing innovative business models that capture the value of personalized medicine and other emerging healthcare trends. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-12-444068/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-12-444068/full-submission_features.txt new file mode 100644 index 0000000..04b552d --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-12-444068/full-submission_features.txt @@ -0,0 +1,41 @@ + 1. Financial Overview: + +- Total Revenue: Total revenue for the fiscal year ended September 29, 2012, was $ 152.4 billion, representing an increase of 13.4% compared to the previous fiscal year. Net Operating Income (NOI) stood at $ 55.3 billion, a growth of 12.5% over the previous year, and net interest expense (NIE) was $ 4.3 billion, down 4.0% from the previous year. + +2. Operational Efficiency: + +- The operating margin of 37.9% is above the industry average of 28%. The consolidated gross margin shows an increase of 16.2% over the previous year, primarily driven by growth in Service Nirbhik helped increase the Gross Profit by $ 322 million in one year, which constituted about 18% of the increase in Gross Profit. The number of customers served has been consistently increasing and this increased between Sep 2011 to Sep 2012 stood at around 371,000. + +- The Company also utilizes modern techniques such as Electric Vehicles (EVs) in their service fleet. They installed EVs in their fleet and started to increase EV usage in 2013. Their plan is to reduce the number of fleet vehicles gradually and replace them with EVs. + +3. Liquidity and Solvency: + +- The current ratio stands at 5.88:1, indicating the Company's ability to meet short-term obligations. + +- The quick ratio also indicates that the Company has sufficient quick assets to cover current liabilities. + +- The debt-to-equity ratio is at 1.11:1, which shows higher leverage compared to the industry. + +- The interest coverage ratio stands at 1.67x, indicating a positive cash flow from operations which can cover the interest expense. + +4. Cash Flow Analysis: + +- The net cash provided by operating activities is $ 24.7 billion, up 24.9% from the previous year. + +- The net cash provided by investing activities is $ 1.4 billion, up 67.6% from the previous year. + +- The net cash generating capability is $ 25.4 billion, a 38.3% increase from the previous year. + +- The net cash used in financing activities was shown to be $ 40.7 billion, which is about $ 10.2 billion more than the net cash generated from operating and investing activities. + +5. Investment and Future Outlook: + +- The Company registered no major acquisitions during the period. The Company invested $ 5.6 billion in research and development activities during the FY 2018-19. + +- Management is focused on expanding its product portfolio and offering related services to drive its growth. It is also focused on expanding its presence in emerging markets. + +6. Risks and Opportunities: + +- Key risks facing the Company include political instability, political unrest, and increasing competition in the market. + +- There are also challenges related to the changing climate due to global warming and environmental degradation. The Company needs to find sustainable solutions to mitigate these risks and capitalize on opportunities in the constantly evolving market. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-13-416534/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-13-416534/full-submission_features.txt new file mode 100644 index 0000000..50657d0 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-13-416534/full-submission_features.txt @@ -0,0 +1,63 @@ + Financial Overview +------------- + +Key Financial Figures +-------------------- + +### Apple Inc. (AAPL) - Financial Highlights (2015) + +* Total Revenue: + + 2015 - $ 236.4 billion $ + + 2014 - $ 201.8 billion $ + + 2013 - $ 182.7 billion $ +* Net Income: + + 2015 - $ 51.9 billion $ + + 2014 - $ 11.1 billion $ + + 2013 - $ 10.2 billion $ +* Gross Margin: + + 2015 - 39.3% $ + + 2014 - 38.3% $ + + 2013 - 37.5% $ + +Financial Growth and Trends +--------------------------- + +During the past fiscal year (2015), Apple Inc. reported its highest-ever revenue and net income. compared to the prior year, total revenue grew +13.0% and net income grew +409.3%. Both revenue and net income outperformed industry averages. + +Gross margin was a standout metric for Apple in 2015, reaching an impressive +39.3%. This was an improvement from 2014's gross margin rate of +38.3%. Gross margin exceeded industry averages by 7.0% and 6.8% for 2015 and 2014, respectively. + +Operational Efficiency +---------------------- + +Operating Margin Trends +---------------------- + +Operating Margin Performance compared with Industry Average: + +1. 2015: Apple: +34.0% (industry average: +9.3%) +2. 2014: Apple: +32.0% (industry average: +4.8%) + +Operating Margin has been consistently above industry standards, indicating stronger financial performance and strategic business initiatives compared to competitors. + +Cost Management Effectiveness +-------------------------------- + +Cost of Goods Sold (COGS) as a percentage of total revenue for last three years has declined, demonstrating cost management effectiveness: + +1. 2015: Apple: 36.8% (2014: 34.6% | 2013: 38.7%) + +Indicating cost management efficiency, Operating Expenses decreased from $106.85 billion in FY2014 to $83.74 billion in FY2015 ($106.85 billion | FY2013). Apple's total costs declined +21.4% from $ 126.51 billion in 2013 to $ 100.45 billion in 2015, with gross costs declining from $ 89.92 billion in 2013 to $ 80.34 billion in 2015 ($ 89.92 billion | FY2014). + +Liquidity and Solvency +----------------------- + +Liquidity and Solvency Metrics: + +| Metric | 2015 | 2014 | 2013 | +| --- | --- | --- | --- | +| Current Ratio | 3.11 | 2.13 | 1.70 | +| Quick Ratio | 1.85 | 1.12 | 0.91 | +| Debt-to-Equity Ratio | 1.09 | 2.01 | 1.37 | +| Interest Coverage Ratio | 181.2 | 21.0 | 10.2 | + +Apple's liquidity and solvency ratios indicate a relatively healthy financial position compared to its peers. The current ratio increased from the previous year by 48.0% ($ 3.11 billion Creekside | 2014 $ - table | S-7 than 2014). Similarly, quick ratio also increased +174.1%; however, it remained below 1.0 compared to 1.12 in 2013. Apple's debt \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001193125-15-356351/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001193125-15-356351/full-submission_features.txt new file mode 100644 index 0000000..04b3170 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001193125-15-356351/full-submission_features.txt @@ -0,0 +1,30 @@ + Financial Overview: + +- Total revenue for 2015 was $ 184.4 billion, an increase of 9.4% compared to $ 167.8 billion in 2014. This marks a consistent growth over the years. +- Net income for 2015 was $ 39.1 billion, an increase of 9.8% compared to $ 36.0 billion in 2014. This growth indicates a significant increase in the company's earning capacity. +- Gross margin for 2015 was 40.6%, an improved figure from 37.6% in 2014. This geographic scope of line item for each Segment in 2015, 2014 and 2013 (in million) for each Segment : + +2013 2014 2015 +----- ------ ------ +Americas $ 80,504 82,317 94,689 +Europe, the Middle East and Africa $ 21,711 25,203 31,050 +Asia $ 175,014 207,597 251,480 + +- Gross margin in 2015 was significantly higher than the expected figure due to strong sales in International markets, especially in Asia. + +- Gross margin in 2015 was 3.0% higher than that of 2014. This indicates an improvement in gross profit margins, suggesting a successful sales strategy. + +- Operating margin in 2015 was 9.5%, a 43.4% increase from 5.2% in 2014. This reflects the company's effective cost management and operating control over expenditure over the past year. +- Interest income from continuing operations, as well as term debt interest and dividend income were the principal sources of interest income for the company in 2015, accounting for $ 11.7 billion and $ 10.6 billion, respectively. +- During 2015, the company invested $ 37.9 billion in its core business activities, $ 9.2 billion in property, plant and equipment, and $ 3.8 billion in restricted cash. These figures indicate that the company has been investing heavily in its business, which is a potential driver for future growth. +- Apple Inc. also repurchased stock worth $ 30.0 billion in 2015, which shows the company's commitment to returning excess capital to its shareholders in the form of buybacks. This is a positive sign for the company's future financial health. + +Operational Efficiency: + +- Operating margin in 2015 shows an improvement over the previous year, indicating a successful cost management strategy and an effective control over operating expenses. +- The net interest expense as a percentage of revenue increased in both 2015 and 2014, indicating a growing interest expense burden on the company. However, this was offset by an increase in interest income from continuing operations, as well as term debt interest and dividend income. +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. +- The change in inventory as a percentage of average accounts receivable decreased from 120.1% in 2014 to 91.8% in 2015, indicating an effective inventory management strategy. +- The cost of goods sold (COGS) as a percentage of revenue decreased from 46.2% in 2014 to 45.2% in 2015, indicating effective cost control measures. +- Expenditures related to research and development accounted for $ 10.7 billion or 5.7% of total operating expenses in 2015, which is generally considered a significant investment in the company's intellectual property portfolio and future growth potential. \ No newline at end of file diff --git a/src/data/output-responses/AAPL/10-K/0001628280-16-020309/full-submission_features.txt b/src/data/output-responses/AAPL/10-K/0001628280-16-020309/full-submission_features.txt new file mode 100644 index 0000000..833de29 --- /dev/null +++ b/src/data/output-responses/AAPL/10-K/0001628280-16-020309/full-submission_features.txt @@ -0,0 +1,22 @@ + 1. Financial Overview: + + * Total Revenue: $226.8 billion (2016), $205.2 billion (2015) + + Year-over-year growth rate: 8.6% + + Gross Margin: 38.2% (2016), 38.3% (2015) + + The company's gross margin has remained relatively stable over the past two years, despite the growth in total revenue. This indicates the company's ability to effectively manage its costs and generate healthy profits in all areas of its business. +2. Operational Efficiency: + The company's operating margin has decreased compared to the previous year. This could be due to increased operating expenses or higher fixed costs. Operating expenses now account for 55.2% of total revenue, while fixed costs are 8.1%. +3. Liquidity and Solvency: + * Current Ratio: 5.4 (2016), 5.0 (2015) + * Quick Ratio: 3.7 (2016), 3.9 (2015) + * Debt-to-Equity Ratio: 3.4 (2016), 2.3 (2015) + * Interest Coverage Ratio: 109.1 (2016), 124.1 (2015) + + Overall, the company's liquidity and solvency remain solid, with high current and quick ratios. However, the debt-to-equity ratio has increased, which means the company has more debt than equity. This increase is related to the company's expansion and financing activities. The interest coverage ratio has also decreased, which may indicate higher interest costs. +4. Cash Flow Analysis: + * Cash flow from operations: $89.9 billion (2016), $81.5 billion (2015) + * Cash flow from investing: $23.1 billion (2016), $14.1 billion (2015) + * Cash flow from financing: -$18.1 billion (2016), $17.4 billion (2015) + + The company shows a decrease in cash flow from operations, which might j \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-16-000012/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-16-000012/full-submission_features.txt new file mode 100644 index 0000000..fc9c6f4 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-16-000012/full-submission_features.txt @@ -0,0 +1,34 @@ + Financial Overview: +1.Total revenue: + +For the fiscal year ended December 31, 2017, Google's total revenue was $162,901 million, an increase of 14.2% from $139,053 million in the previous year. This was mainly driven by growth in the Other revenue segment, which saw a 33.0% increase from $6,399 million to $8,387 million. + +2.Net income: + +Google's net income for the fiscal year ended December 31, 2017 was $10,905 million, $1,015 million above the previous year's net income of $9,890 million. This resulted in a net income margin of 6.9%, compared to an industry average of 2.8%. The increase in net income was primarily due to the growth in Other revenue, which greatly offset the increase in Operating expenses. + +3.Gross margin: + +Google's gross margin for the fiscal year ended December 31, 2017 was 65.7%, a slight decline from 66.7% in the previous year. This change was mainly due to the increase in Operating expenses, which rose from a percentage of sales of 34.9% in the previous year to 35.9% in the current year. The decrease in gross margin was partially compensated by increasing the Other revenue segment from 43.5% to 45.5% of sales. + +Operational Efficiency: +1.Operating margin: + +Google's operating margin for the fiscal year ended December 31, 2017 was 21.5%, lower than the industry average of 23.3%. The decline in the operating margin was mainly due to the increase in net selling, general, and administrative expenses, which rose from a percentage of sales of 15.4% in the previous year to 16.2% in the current year. This increase was partially offset by the growth in Other revenue, which rose from a percentage of sales of 43.5% in the previous year to 45.5% in the current year. + +2.Cost management effectiveness: + +Google's cost management effectiveness can be assessed by analyzing the relationship between net selling, general, and administrative expenses and net income. The company's G&A expenses as a percentage of net income increased from 33.0% in the previous year to 35.9% in the current year. This indicates that the increase in these expenses was not as efficiently managed as an increase in net income. However, the increase in Other revenue helped to mitigate this inefficiency. + +Liquidity and Solvency: +1.Current ratio: + +Google's current ratio was 1.6, indicating that the company had a 6-month liquidity position, which is in line with industry standards. The increase in current assets, $135,155 million, was driven mainly by the increase in inventory, $5,637 million. + +2.Quick ratio: + +Google's quick ratio was 1.1, indicating that the company had a 4-month liquidity position, which is below industry standards. The increase in inventory, $5,637 million, was a significant contributor to this decrease in liabilities, which are financial instruments that will or may be converted into cash quickly. + +3.Debt-to-equity ratio: + +Google's debt-to-equity ratio was 0.6, indicating that the company's debt totaled 60% of its equity, which is higher than industry standards. This reflects the company's heavy reliance on debt financing, which increased from $89,210 million in \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-17-000008/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-17-000008/full-submission_features.txt new file mode 100644 index 0000000..6ba4d93 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-17-000008/full-submission_features.txt @@ -0,0 +1,10 @@ + Financial Overview: + +- Total revenue for Alphabet Inc. was $20.88 billion in 2016, up from $20.46 billion in 2015. This represents a year-over-year growth rate of 4.6%. +- Net income for Alphabet Inc. was $9.40 billion in 2016, up from $7.03 billion in 2015. This represents a year-over-year growth rate of 36.7%. +- Gross margin for Alphabet Inc. was 84.5% in 2016, compared to 80.9% in 2015. + +Operational Efficiency: + +- Operating margin for Alphabet Inc. improved from 28.1% in 2015 to 31.6% in 2016, indicating improved operational efficiency. +- This is significantly higher than the industry average, which \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-18-000007/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-18-000007/full-submission_features.txt new file mode 100644 index 0000000..25b0320 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-18-000007/full-submission_features.txt @@ -0,0 +1,26 @@ + Financial Overview: + +* Total Revenue: + + In 2017, Alphabet generated $128.2 billion in revenue, which represents an increase of 10.2% compared to 2016. +* Net Income: + + Alphabet's net income for 2017 was $9.9 billion, down 9.9% from 2016. +* Gross Margin: + + Gross margin in 2017 was 81.9%, up 0.6% from 2016. + +Operational Efficiency: + +* Operating margin for 2017 was 45.4%, down 2.3% from 2016. +* While the effort to control costs has been a focus in recent years, there were significant deviations from expected figures in 2017. + +Liquidity and Solvency: + +* Current Ratio for 2017 was 3.94, down 0.14 from 2016. +* Quick Ratio for 2017 was 2.78, down 0.19 from 2016. +* Debt-to-Equity Ratio for 2017 was 1.40, down 0.05 from 2016. +* Interest Coverage Ratio for 2017 was 237.00, down 7.52 from 2016. + +Cash Flow Analysis: + +* Cash flow from operations in 2017 was $90.5 billion, up 216.4% from 2016. +* Cash flow from investing in 2017 was $16.9 billion, down 20.0% from 2016. +* Cash flow from financing in 2017 was -$11.7 billion \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-19-000004/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-19-000004/full-submission_features.txt new file mode 100644 index 0000000..99dcfd7 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-19-000004/full-submission_features.txt @@ -0,0 +1,30 @@ + Sure, I can help you with that. Here is an example of a financial analysis for Alphabet Inc. based on the information you provided: + +1. Financial Overview: +* Revenue: Alphabet Inc. generated total revenue of $120.6 billion and $130.9 billion in the fiscal year ending December 31, 2018, and 2017, respectively (a decrease of 10.3%). +* Gross Margin: The gross margin remained relatively stable at 39.3% in 2018 and 40.0% in 2017. +* Net Income: The net income for the fiscal year ending December 31, 2018, was $32.3 billion, a decrease of 8.4% from the previous year ending Dec 31, 2017 ($36.7 billion). +1. Operational Efficiency: +* The operating income for Alphabet Inc. saw a decrease of 6.4% from $67.9 billion in 2017 to $63.6 billion in 2018. +* However, the operating margin slightly improved from 47.4% in 2017 to 47.1% in 2018. +* Operational efficiency remains strong, and Alphabet Inc. has been able to improve its cost management effectiveness in recent years, leading to an increase in gross profit margins. +1. Liquidity and Solvency: +* Alphabet Inc. maintains a strong liquidity position, with a current ratio of 6.1x in 2018, compared to 4.9x in 2017, indicating an improvement in short-term liquidity. +* The quick ratio remained unchanged at 3.1x in 2018 and 2017, demonstrating consistent liquidity in the form of quick assets (current assets minus current liabilities). +* The company's debt-to-equity ratio decreased from 3.6x in 2017 to 2.7x in 2018, indicating a decrease in reliance on external funding. +* The interest coverage ratio increased from 3.8x in 2017 to 4.2x in 2018, demonstrating that the company has been able to generate sufficient earnings to cover its interest expenses. +1. Cash Flow Analysis: +* The company's cash flow from operations increased from $21.7 billion in 2017 to $23.9 billion in 2018, indicating an improvement in cash generation. +* Cash from investing increased from $1.6 billion in 2017 to $9.7 billion in 2018, mainly due to capital expenditures related to infrastructure developments. +* Cash from financing decreased from $4.7 billion in 2017 to $4.0 billion in 2018, mainly due to lower proceeds from equity issuances. +* However, the cash holdings did increase from $18.5 billion in 2017 to $22.8 billion in 2018, indicating an improvement in cash management. +1. Investment and Future Outlook: +* Alphabet Inc. has been making significant investments in various areas, including search engine innovation, cloud computing, and advertising. +* The company has also been exploring new opportunities, such as self-driving cars, health-related projects, and internet of things (IoT) devices. +* Alphabet Inc.'s management outlook for the future remains optimistic, with plans to continue investing in research and development to drive growth. +1. Risks and Opportunities: +* Key risks facing the company include regulatory challenges, cybersecurity threats, and increased competition. +* Potential impacts of these risks include limitations on growth, increased costs, and loss of market share. +* Emerging opportunities in the market or through technological advancements could include expansion into emerging markets, growth in artificial intelligence and machine learning, and new revenue streams. + +Overall, Alphabet Inc. has shown strong financial performance in recent years, with \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-20-000008/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-20-000008/full-submission_features.txt new file mode 100644 index 0000000..1cc91b7 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-20-000008/full-submission_features.txt @@ -0,0 +1,34 @@ + 1. Financial Overview: + + - In 2019, Alphabet generated total revenue of $161,902 million, a significant increase of 38.5% from 2018. + - Net income for Alphabet in 2019 was $22,463 million, a 56.1% increase compared to 2018. + - Gross margin in 2019 was 49.9%, an improvement of 0.5% from the previous year. + +2. Operational Efficiency: + + - Alphabet's operating margin increased to 20.6% in 2019 from 16.6% in 2018, surpassing the industry standard. + - The company's cost management effectiveness remained strong, with operating expenses as a percentage of revenue decreasing from 50.5% in 2018 to 40.1% in 2019. + +3. Liquidity and Solvency: + + - Current ratio for Alphabet in 2019 was 3.5:1, indicating adequate liquidity. + - The quick ratio for the company in 2019 was 2.9:1, reflecting a slightly lower level of liquidity compared to the current ratio. + - Alphabet's debt-to-equity ratio increased from 0.8:1 in 2018 to 1.6:1 in 2019, indicating an increase in debt levels. + - The interest coverage ratio for the company in 2019 was 37.8:1, well above the industry standard, indicating strong solvency. + +4. Cash Flow Analysis: + + - Cash flow from operations for Alphabet in 2019 was $29,609 million, a 43.6% increase from the previous year. + - Investing cash flow for the company in 2019 was $20,820 million, an increase of 201.7% compared to 2018. + - Financing cash flow for Alphabet in 2019 was $11,270 million, a decrease of 52.8% from the previous year. + +5. Investment and Future Outlook: + + - In 2019, Alphabet invested heavily in research and development, with capital expenditures totaling $16,983 million, a 14.7% increase from the previous year. + - The company also made significant acquisitions, including a $1.7 billion acquisition of Ingage to enhance its point of care services for patients. + - Alphabet's management expects continued growth through its diverse portfolio of products and services, including its cloud computing, search, advertising, and smart home offerings. + +6. Risks and Opportunities: + + - Key risks facing Alphabet include regulatory scrutiny, ongoing competition in the search and advertising markets, and the potential for technological disruptions in various sectors. + - Emerging opportunities for the company include expansion into new markets, such as healthcare and enterprise, as well as continued innovation in artificial intelligence, virtual and augmented reality, and smart home technology. \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-21-000010/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-21-000010/full-submission_features.txt new file mode 100644 index 0000000..8c49141 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-21-000010/full-submission_features.txt @@ -0,0 +1,30 @@ + 1. **Financial Overview** +- Revenue: Alphabet Inc.’s revenue for the year-ended December 31, 2021, was $191.9 billion, up $37.4 billion or 23.4% compared to the previous year. +- Net Income: The company's net income for the same period was $40.7 billion, up $18.7 billion or 108.8% compared to the previous year. +- Gross Margin: The gross margin for the company was 85.9%, up from 80.4% compared to the previous year. + +2. **Operational Efficiency** +- Operating Margin Trends: The operating margin trend for the company has been increasing over the past few years due to strong revenue growth and effective cost management. In 2021, the operating margin was 36.9%, up from 33.9% compared to 2020. +- Industry Standards: The company's current operating margin is above industry standards, indicating a high level of operational efficiency. +- Cost Management Effectiveness: Cost management has been an area of focus for the company in recent years, leading to reduced costs and increased profitability. + +3. **Liquidity and Solvency** +- Current Ratio: The current ratio for the company was 0.9, indicating that the company has enough current assets to cover its short-term liabilities. +- Quick Ratio: The quick ratio for the company was 0.7, which is below the industry average but still indicates sufficient liquidity to meet short-term obligations. +- Debt-Equity Ratio: The company's debt-equity ratio was 0.5, which is lower than the industry average, indicating a strong balance between debt and equity financing. +- Interest Coverage Ratio: The company's interest coverage ratio was 24.8, which is above the industry average, providing a strong cushion against debt payments. + +4. **Cash Flow Analysis** +- Cash Flow from Operations: The company generated $99.2 billion in cash flow from operations in 2021, up from $70.0 billion compared to 2020. +- Cash Flow from Investing: The company generated $14.1 billion in cash flow from investing in 2021, down from $19.6 billion compared to the previous year. +- Cash Flow from Financing: The company generated $3.7 billion in cash flow from financing in 2021, up from $2.0 billion compared to the previous year. + +5. **Investment and Future Outlook** +- Major Investments: The company has been investing heavily in several areas, including search engines, cloud computing, smart homes, and virtual reality. +- Mergers and Acquisitions: In 2021, the company made several acquisitions, including Fitbit, which will help strengthen its position in wearable technology. +- Management Outlook and Future Growth Initiatives: The management has a strong outlook for the future due to the growing adoption of Google's products and services in various areas. The company is also focused on developing new technologies, entering new markets, and enhancing its existing business line. + +6. **Risks and Opportunities** +- Key Risks: The company faces several risks, including regulatory uncertainty, antitrust challenges, cybersecurity threats, and increased competition in certain markets. +- Potential Impacts: Any adverse impact on the company's business, particularly from clients or governments, could result in revenue declines. +- Emerging Opportunities: The company's dominance in the search engine market presents growth opportunities, particularly in the areas of cloud computing, search advertising, and video streaming. The company's digital advertising platform remains a significant area of growth, with the increasing adoption of mobile devices and the rise of social media platforms. \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-22-000019/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-22-000019/full-submission_features.txt new file mode 100644 index 0000000..c22ad92 --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-22-000019/full-submission_features.txt @@ -0,0 +1,33 @@ + Financial Overview: + +- Total Revenue in 2021 was up 46.4% compared to the same period in 2020. +- Net Income in 2021 was up 45.6% compared to the same period in 2020. +- Gross Margin in 2021 was up 44.9% compared to the same period in 2020. + +Operational Efficiency: + +- Operating Margin in 2021 remained constant compared to the same period in 2020. +- Cost Management Effectiveness in 2021 was strong, with a reduction in operating expenses of 5.9%. + +Liquidity and Solvability: + +- Current Ratio in 2021 was down 19.3% compared to the same period in 2020. +- Quick Ratio in 2021 was down 21.1% compared to the same period in 2020. +- Debt-to-Equity Ratio in 2021 was up 64.4% compared to the same period in 2020. +- Interest Coverage Ratio in 2021 was up 10.8% compared to the same period in 2020. + +Cash Flow Analysis: + +- Cash Flow from Operations in 2021 was up 40.6% compared to the same period in 2020. +- Cash Flow from Investing in 2021 was down 65.1% compared to the same period in 2020. +- Cash Flow from Financing in 2021 was down 4.8% compared to the same period in 2020. + +Investment and Future Outlook: + +- No major investments, mergers, or acquisitions were disclosed in the report. +- Management's outlook for the future includes continuing its focus on innovation and growth in the digital technology space. + +Risks and Opportunities: + +- Key risks facing the company include increased competition, rapid technological advancements, and geopolitical uncertainties. +- Emerging opportunities in the market or through technological advancements include continued growth in the digital technology space and expansion into new markets. \ No newline at end of file diff --git a/src/data/output-responses/GOOGL/10-K/0001652044-23-000016/full-submission_features.txt b/src/data/output-responses/GOOGL/10-K/0001652044-23-000016/full-submission_features.txt new file mode 100644 index 0000000..662680b --- /dev/null +++ b/src/data/output-responses/GOOGL/10-K/0001652044-23-000016/full-submission_features.txt @@ -0,0 +1,10 @@ + Table of Contents +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS + +SUMMARY OF RESULTS OF OPERATIONS \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0000891020-95-000433/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0000891020-95-000433/full-submission_features.txt new file mode 100644 index 0000000..8037798 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0000891020-95-000433/full-submission_features.txt @@ -0,0 +1,43 @@ + Financial Overview: + +- Total revenue for XYZ Inc. in the fiscal year 2021 was $10.2 million, representing a 7% increase from the previous year. + +- Net income for XYZ Inc. in the fiscal year 2021 was $2.4 million, representing a 30% increase from the previous year. + +- Gross margin for XYZ Inc. in the fiscal year 2021 was 32%. + +Operational Efficiency: + +- Operating margin for XYZ Inc. in the fiscal year 2021 was 24%, above the industry average of 20%. + +- Cost management effectiveness shows improvement over the past fiscal year as operational expenses decreased by 8%. + +Liquidity and Solvency: + +- Current ratio for XYZ Inc. in the fiscal year 2021 was 2.8, indicating sufficient current assets to meet short-term obligations. + +- Quick ratio for XYZ Inc. in the fiscal year 2021 was 2.0, also indicating sufficient current assets to meet short-term obligations. + +- Debt-to-equity ratio for XYZ Inc. in the fiscal year 2021 was 1.3, below the industry average of 2.0. + +- Interest coverage ratio for XYZ Inc. in the fiscal year 2021 was 5.8, indicating sufficient EBIT to cover interest expenses. + +Cash Flow Analysis: + +- Cash flow from operations for XYZ Inc. in the fiscal year 2021 was $1.2 million, representing a 20% increase from the previous year. + +- Cash flow from investing for XYZ Inc. in the fiscal year 2021 was -$1.8 million, mainly due to the purchase of intangible assets and long-term investments. + +- Cash flow from financing for XYZ Inc. in the fiscal year 2021 was $4.2 million, mainly due to the increase in net income and reinvestment of earnings. + +Investment and Future Outlook: + +- XYZ Inc. announced a major investment in research and development during the fiscal year 2021, aimed at developing new products and expanding market share. + +- Management's outlook for the future growth initiatives includes strategic partnerships, geographic expansion, and product diversification. + +Risks and Opportunities: + +- Key risks facing XYZ Inc. include trade tensions, increased competition, and supply chain disruptions. + +- Emerging opportunities in the market include growth in the e-commerce sector and technological advancements such as artificial intelligence and robotics. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0000891020-96-001130/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0000891020-96-001130/full-submission_features.txt new file mode 100644 index 0000000..960510c --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0000891020-96-001130/full-submission_features.txt @@ -0,0 +1,37 @@ + 1. Financial Overview: + +- Total revenue for the fiscal year was $XXX million, representing a year-over-year growth rate of XX%. +- Net income for the period was $XXX million, up XX% from the previous year. +- The gross margin was XX%, an improvement of XX% from the previous year. + +Notable trends include a consistent increase in revenue and net income with a positive gross margin trend. However, there has been no significant change in the operating margin. + +2. Operational Efficiency: + +- The operating margin remained relatively stagnant at XX%, which is slightly below industry standards. +- Cost management was effective, leading to a reduction in the cost of goods sold by XX%. + +3. Liquidity and Solvency: + +- The current ratio was X.XX, indicating good liquidity. +- The quick ratio was X.XX, also indicating good liquidity. +- The debt-to-equity ratio was X.XX, which is within acceptable levels. +- The interest coverage ratio was X.XX, indicating that the company has the ability to meet its interest payments. + +4. Cash Flow Analysis: + +- Cash flow from operations was net positive at XX million, mainly due to the increase in revenue and effective cost management. +- Investing expenditures totaled XX million, which was mostly related to growth initiatives. +- Financing activities resulted in a net inflow of XX million, due to the issuance of new debt and equity. + +5. Investment and Future Outlook: + +- The company recently acquired XYZ for $XXX million, which is expected to bolster their market share. +- Management plans to expand into new markets and introduce new products, aiming for a 10% growth rate in the next fiscal year. + +6. Risks and Opportunities: + +- Economic downturns could impact demand for the company's products or services. +- Fluctuations in raw material prices could impact costs and margins. +- Increasing competition in the market could impact revenue growth. +- Emerging technologies, such as automation and sustainability initiatives, could create new opportunities for the company to innovate and increase efficiency. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0000950170-23-035122/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0000950170-23-035122/full-submission_features.txt new file mode 100644 index 0000000..ceca8f1 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0000950170-23-035122/full-submission_features.txt @@ -0,0 +1,45 @@ + 78 PART II Item 7 Other Supplementary Information We describe other information related to us and our business below: + + + + +79 PART II Item 8 Item 8 of Form 10-K certain information is required to be disclosed under law or regulation ( Part II , Item 8 of Form 10-K ) Item 8 of Form 10-K ) including: + + + + +80 PART II Item 9 Item 9 of Form 10-K certain information is required to be disclosed under law or regulation ( Part II , Item 9 of Form 10-K ) Item 9 of Form 10-K ) , such as: + + + + +81 PART II Item 10 Item 10 of Form 10-K report on environmental matters, including the following: + + + + +82 PART II Item 11 Item 11 of Form 10-K report on mining matters, including the following: + + + + +83 PART II Item 12 Item 12 of Form 10-K report on geologic, geotectonic, hydrologic or other natural disasters, including the following: + + + + +84 PART II Item 13 Item 13 of Form 10-K report on material investments in property, plant, and equipment, and intangibles, including the following: + + + + +85 PART II Item 14 Item 14 of Form 10-K report on environmental or long-lived assets, including the following: + + + + +86 PART II Item 15 Item 15 of Form 10-K statement of physical objective and whole ore reserve and metal/substance that the company has proven to be recoverable, indicating the percentages and reserve at the beginning and end of each period and reserves that were became unproven during each period. + +87 Part II Item 16 Item 16 of this Form 10-K) Management Compensation 16 PART II Item 16 16 + +88 We filed under the Securities Act of 1933, and the Securities Exchange Act of 1934, in fulfillment of the annual reporting requirement. 16 PART II Item 16 is our report about our executive compensation for officers and directors. 16 PART II Item 16 of Form 10-K) The 16th item, Part 2 of Form 10-K under the Securities and Exchange Commission, provides the requirements and regulations to which we must comply when it comes to compensating our officers and directors. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001017062-97-001764/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001017062-97-001764/full-submission_features.txt new file mode 100644 index 0000000..c2f9272 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001017062-97-001764/full-submission_features.txt @@ -0,0 +1,43 @@ + Financial Overview: + +"The financial year 2021-2022 marked significant growth for the company. Total revenue increased by 22% from the previous year, reaching $10.5M. Net income also experienced an increase of 15%, resulting in a net profit of $1.9M. This was a positive development given the challenging economic environment. + +Gross profit margin improved by 2%, reflecting better cost management and pricing strategies. Year-over-year growth in gross profit margin was driven by improved operational efficiencies and higher sales volumes across all product categories. + +One notable trend was the increase in online sales, which grew by 40% YoY. This shift towards e-commerce has accelerated due to the pandemic, and the company is paying close attention to capitalize on this trend. + +Overall, the 2021-2022 financial year was marked by robust financial performance. However, the company is facing some challenges in managing supply chain disruptions and rising input costs, which could impact future financial results." + +Operational Efficiency: + +"The operational efficiency of the company has improved significantly over the past fiscal year. Operating margin increased by 2%, which is above the industry average of 2%. This improvement can be attributed to better cost management, improved pricing strategies, and higher sales volumes across all product categories. + +In terms of cost management, the company has implemented several measures, such as streamlining inventory management processes and reducing waste in production, which has led to a decrease in overhead costs. The company has also been focusing on improving labor productivity by investing in training and development programs for employees." + +Liquidity and Solvency: + +"The company has maintained a strong liquidity position, with a current ratio of 3.5:1 and a quick ratio of 2.7:1. These ratios indicate that the company has ample cash reserves to meet short-term liquidity needs. However, it's worth noting that the company's inventory levels have been increasing, which could impact liquidity in the future if not managed effectively. + +In terms of solvency, the company's debt-to-equity ratio has decreased from the previous year, while interest coverage ratio has been maintained at a comfortable level. These developments suggest that the company has a strong solvency position, but it's still important to closely monitor the company's debt levels given the increasing input costs." + +Cash Flow Analysis: + +"The company has generated strong cash flows from operations, investing, and financing. Net cash provided by operating activities increased by 25%, driven by higher profitability and improved working capital management. Net cash generated from capital expenditures and investments was $1M, which was used to fund expansion projects and capitalize on new growth opportunities. + +Financing activities resulted in an inflow of cash, as the company issued new debt and equity financing. The net increase in cash from financing activities was $2M, which brought the total cash holdings to $5M. However, the company experienced a significant decrease in cash holdings primarily due to increased investments in the business. + +Overall, the company has a healthy cash position, with cash holdings of $5M, which provides a cushion to absorb any unexpected expenditures." + +Investment and Future Outlook: + +"The company is heavily invested in growth initiatives, including the expansion of its e-commerce platform and the launch of new products. The company has also been exploring potential M&A opportunities to expand its market share and leverage its expertise in the industry. Management believes that these initiatives will drive growth and enhance the company's competitive position in the market. + +Furthermore, the company is focused on improving its operational efficiencies and reducing costs, which will enable it to generate higher profits and increase shareholder returns. + +Overall, the company's outlook is optimistic, with a strong focus on growth and operational excellence." + +Risks and Opportunities: + +"The company is facing several risks, including supply chain disruptions, rising input costs, and increased competition in the market. These challenges could impact the company's financial performance and growth prospects. However, the company is well-positioned to navigate these risks given its strong liquidity position and operational efficiencies. + +There are also several emerging opportunities for the company, including the growth of e-commerce and the adoption of new technologies that could enhance its products and services. The company needs to continually innovate and invest in research and development to stay ahead of the competition and capitalize on these opportunities." \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001032210-00-001961/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001032210-00-001961/full-submission_features.txt new file mode 100644 index 0000000..b54d490 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001032210-00-001961/full-submission_features.txt @@ -0,0 +1,53 @@ + 1. **Financial Overview**: + + - Total revenue for the company was $XXX million in 2021, up from $XXX million in 2020. + - The net income for the company was $XXX million in 2021, representing a healthy increase from the $XXX million achieved in 2020. + - Gross margin for the year came in at X%, showing a slight decline compared to the Y% recorded in 2020. + - Year-over-year revenue growth rate stands at X%. + + Notable trends: + - Increase in revenue due to successful expansion into new markets and product offerings. + - Margins may have been negatively impacted by higher operating costs. + + +2. **Operational Efficiency**: + + - Operating margin for the company was X%, remaining stable compared to the Y% recorded in 2020. + - This falls short of the industry standard of Z% for companies in this segment. + - Cost management was reasonably effective in controlling expenses throughout the year. + + +3. **Liquidity and Solvency**: + + - Current ratio stands at X, indicating sufficient short-term liquidity. + - Quick ratio, which accounts for inventory and accounts receivable, is at X. This suggests adequate operational flexibility. + - Debt-to-equity ratio was Z, showing a healthy balance between debt financing and equity financing. + - Interest coverage ratio, which measures a company's ability to meet its interest payments, was Y. This is within the industry norm. + + +4. **Cash Flow Analysis**: + + - Net cash from operations was X, driven by increased revenue and better management of costs. + - Net cash used in investing activities was Y, mainly due to investments in capital equipment and working capital. + - Net cash used in financing activities was Z, reflecting issuance of new shares and payment of dividends. + + Significant changes: + - Large inflow of cash from operations, contributing to increased net cash holdings. + + +5. **Investment and Future Outlook**: + + - The company plans to invest heavily in R&D to develop new products and innovate in existing markets. + - Potential mergers or acquisitions to expand into complementary market segments are under consideration. + - Management is bullish about growth prospects, with plans to increase market share and revenue by X% in the coming year. + + +6. **Risks and Opportunities**: + + Key risks: + - Fluctuations in currency exchange rates could impact imports/exports and profit margins. + - Economic downturn could lead to reduced consumer demand and impact sales. + + Emerging opportunities: + - Growing demand for eco-friendly products presents a significant opportunity. + - Expansion into emerging markets, particularly technology-driven sectors, could generate substantial growth. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001032210-01-501099/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001032210-01-501099/full-submission_features.txt new file mode 100644 index 0000000..05734fd --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001032210-01-501099/full-submission_features.txt @@ -0,0 +1,37 @@ + Financial Overview: + +- Total revenue for the company increased by 9% YoY to $2.5 billion. This growth was driven by strong sales across all product categories. +- Net income saw a 15% YoY increase to $500 million. This growth was largely due to improved cost management practices, resulting in higher profit margins. +- Gross margin expanded to 35%, up from 32% in the previous year. This was primarily due to increased product pricing and better control over production costs. + +Operational Efficiency: + +- Operating margin increased by 10% YoY to 12%. This growth was driven by improved cost control measures, such as sourcing cost savings and streamlining supply chain processes. +- Industry standards for operating margins in this sector typically range between 8-10%. While the company's operating margin is above these standards, it could benefit from further cost reduction initiatives to improve its competitive edge. + +Liquidity and Solvency: + +- Current ratio increased by 5% YoY to 2.0. This ratio measures the company's ability to cover its short-term liabilities with short-term assets. +- Quick ratio also increased by 5% YoY to 1.5. This ratio eliminates some of the less liquid assets from the current ratio, providing a more accurate measure of liquidity. +- Debt-to-equity ratio decreased by 5% YoY to 1.2. This ratio measures the relative proportions of debt and equity financing in the company. +- Interest coverage ratio increased by 20% YoY to 3.5. This ratio measures the company's ability to cover interest payments on its debt with earnings before interest and taxes. + +Cash Flow Analysis: + +- Cash from operations increased by 10% YoY to $900 million. This was driven by strong sales growth and improved cost control measures. +- Investment expenditures decreased by 5% YoY to $50 million. This decrease was primarily due to lower capital expenditures on property, plant, and equipment. +- Financing activities accounted for a net cash inflow of $1.4 billion, driven by increased equity financing and repayment of debt. +- The company's cash holdings increased by $1.0 billion YoY, primarily driven by lower capital expenditures and higher equity financing. + +Investment and Future Outlook: + +- The company did not make any major investments, mergers, or acquisitions in the past fiscal year. +- Management's outlook for the future is optimistic, with plans to expand into new markets and launch new products. The company also intends to continue improving cost control measures to boost profitability. + +Risks and Opportunities: + +- One major risk facing the company is increased competition in the market, both from established players and new entrants. +- The company could also face challenges related to pricing pressure and supply chain disruptions, which could impact revenue growth. +- Emerging technologies, such as automation and artificial intelligence, could present both opportunities and risks for the company. While these technologies could improve efficiency and reduce costs, they could also lead to job displacement and increased regulation. + +Overall, the company is in a strong financial position, with improving profitability and cash flow. However, there is room for further cost reduction initiatives to enhance its competitive edge. The company should carefully monitor the impact of external risks and market disruptions, while also leveraging emerging technologies to enhance its operations and stay ahead of the competition. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001032210-02-001351/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001032210-02-001351/full-submission_features.txt new file mode 100644 index 0000000..1ab2ff6 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001032210-02-001351/full-submission_features.txt @@ -0,0 +1,34 @@ + Financial Overview: + +* In 2022, Microsoft Corporation reported total revenue of $ 147.68 billion, a year-over-year growth of 30.4%. Net income was $ 16.71 billion, a year-over-year growth of 29.8%. Gross margin was 67.2%, an improvement from 65.0% in the previous fiscal year (2021). +* In 2021, Microsoft Corporation reported total revenue of $ 104.18 billion, a year-over-year growth of 18.8%. Net income was $ 15.50 billion, a year-over-year growth of 25.5%. Gross margin was 63.9%, a decrease from 65.0% in the previous fiscal year (2020). + +Operational Efficiency: + +* Operating margin increased from 24.7% in 2021 to 28.0% in 2022. This represents a year-over-year improvement of 15.3%. +* Microsoft performed well in cost management compared to industry standards. + +Liquidity and Solvency: + +* Current ratio increased from 6.4:1 in 2021 to 7.9:1 in 2022. This represents a year-over-year improvement of 26.1%. +* Quick ratio increased from 6.0:1 in 2021 to 7.3:1 in 2022. This represents a year-over-year improvement of 22.1%. +* Debt-to-equity ratio decreased from 1.0:1 in 2021 to 0.9:1 in 2022. This represents a year-over-year improvement of 10%. +* Interest coverage ratio increased from 3.5 times in 2021 to 4.2 times in 2022. This represents a year-over-year improvement of 17.2%. + +Cash Flow Analysis: + +* Cash flow from operations increased from $ 30.99 billion in 2021 to $ 40.20 billion in 2022. This represents a year-over-year increase of 31.7%. +* Cash flow from investing activities decreased from $ -2.75 billion in 2021 to -$ 3.41 billion in 2022. This represents a year-over-year decrease of 23.6%. +* Cash flow from financing activities decreased from $ 1.24 billion in 2021 to $ 0.97 billion in 2022. This represents a year-over-year decrease of 23.6%. +* The company's cash and cash equivalents increased from $ 12.61 billion in 2021 to $ 15.68 billion in 2022. + +Investment and Future Outlook: + +* Microsoft did not make any major investments in 2022. +* Microsoft announced a $100 billion increase in its dividend payout and a $65 billion stock buyback in 2022, reflecting its strong financial position and commitment to ongoing growth. + +Risks and Opportunities: + +* Microsoft faces competition from other technology giants such as Google and Apple, as well as emerging players like cloud-based technology companies. +* Microsoft also depends heavily on sales from its flagship product, Windows, as well as Office. The company faces challenges in its legacy product business, particularly as it shifts away from traditional licensing models. +* On the other hand, Microsoft has several growth opportunities, including its cloud-based products such as Azure, its acquisition of LinkedIn, and its emerging technologies like metaverse and autonomous vehicles. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001032210-98-001067/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001032210-98-001067/full-submission_features.txt new file mode 100644 index 0000000..2063dc2 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001032210-98-001067/full-submission_features.txt @@ -0,0 +1,22 @@ + Financial Overview: + Total revenue for the company increased by 10.5% from the previous fiscal year, reaching $1 million. Net income improved by 12.8% to $382,000. Gross margin expanded by 1.2% to 32.2%. + +Notable trends include a consistent focus on innovation, which has allowed the company to differentiate itself from competitors and drive revenue growth. + +Operational Efficiency: +The operating margin has remained stable over the past fiscal year at 22%. This is slightly lower than industry standards, indicating potential areas for improvement in cost management. + +The company has demonstrated effective cost management throughout the year. It has successfully launched new products while maintaining profitability. + +Liquidity and Solvency: +The current ratio increased by 2.7% to 4.5, indicating an improvement in the company's liquidity position. The quick ratio also improved by 1.5% to 2.7. These figures suggest that the company has sufficient liquidity to meet its short-term obligations. + +The debt-to-equity ratio increased by 7.7% to 0.8, indicating that the company's debt has grown compared to its equity levels. This suggests that the company may need to consider refinancing its debt in the future. + +The interest coverage ratio increased to 4.1, indicating that the company has been able to cover its interest expenses. This is an improvement compared to the previous year's figure of 3.1. + +Cash Flow Analysis: +The company generated cash flow from operations of $250,000, a 41.2% increase from the previous year. This is largely due to the growth in revenue and effective cost management. The company also invested $150,000 in capital equipment, resulting in a net increase in cash holdings of $100,000. + +Investment and Future Outlook: +The company announced the launch of two new product lines in Q2, which are expected to drive additional revenue growth in the coming fiscal year. The company has also haven \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001032210-99-001375/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001032210-99-001375/full-submission_features.txt new file mode 100644 index 0000000..a00c190 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001032210-99-001375/full-submission_features.txt @@ -0,0 +1,29 @@ + Financial Overview: +- Total Revenue: The company generated $X million in total revenue for the fiscal year, which represents a Y% increase compared to the previous year. +- Net Income: The company reported a net income of $X million, up X% from the previous year. +- Gross Margin: The gross margin increased from X% to Y% due to cost reduction initiatives and price adjustments. + +Operational Efficiency: +- Operating Margin: The operating margin decreased from X% to Y% over the past fiscal year, which is below industry standards. +- Cost Management: While the company implemented cost-saving measures, it failed to meet its initial goals, resulting in higher expenses than expected. + +Liquidity and Solvency: +- Current Ratio: The current ratio improved from X to Y, which indicates better liquidity management. +- Quick Ratio: The quick ratio decreased from X to Y, indicating less liquidity than expected. +- Debt-to-Equity Ratio: The debt-to-equity ratio rose from X to Y, indicating an increase in debt and a decrease in equity. +- Interest Coverage Ratio: The interest coverage ratio worsened from X to Y, indicating a decrease in the company's ability to meet interest obligations. + +Cash Flow Analysis: +- Cash Flow from Operations: The cash flow from operations declined from X to Y, which may indicate operational inefficiencies or lower sales. +- Cash Flow from Investing: There were no significant investments made during the year, resulting in no impact on cash flow. +- Cash Flow from Financing: The cash flow from financing increased due to less borrowing and higher net income. +- Changes in Cash Holdings: The company's cash holdings decreased from X to Y due to increased operating expenses. + +Investment and Future Outlook: +- Investments: The company did not make any major investments in the past fiscal year. +- Mergers and Acquisitions: The company was in talks to acquire another company, but the deal fell through. +- Management Outlook and Future Growth Initiatives: The management expects to focus on cost reduction and revenue growth in the coming year. It plans to introduce new products and penetrate new markets through digital marketing strategies. + +Risks and Opportunities: +- Risks: The company faces risks such as increased competition, fluctuating exchange rates, and supply chain disruptions. +- Opportunities: The company can leverage technology to improve operational efficiency and reduce costs. It can also explore international markets and expand its product offerings. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-03-045632/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-03-045632/full-submission_features.txt new file mode 100644 index 0000000..2fbd651 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-03-045632/full-submission_features.txt @@ -0,0 +1,9 @@ + 1. Financial Overview: + +* For the fiscal year ended June 30, 2021, Microsoft's total revenue was $ 162.8 billion, a 5.8% decrease from $ 166.8 billion the previous year. +* The company's net income for the same period was $ 25.3 billion, representing a 30.1% increase from $ 20.2 billion the previous year. +* In terms of gross profit margin, Microsoft improved to 63.1% from 59.9% the previous year. +* In terms of revenue growth, the company outperformed the industry average of 4.3%. +* Key financial figures for Microsoft for the fiscal year ended June 30, 2021: + + discrepancy reported by the FASB and the state of California on the effective tax rate for fiscal year ended June 30, 2003. Invitation to commence. Personal liability of shareholders For each stockholder declared eligible to participate in the stock for which a Participating Stock was surrendered, the Subsidiary shall be responsible for reissuing a new stock having a par value of $ 0.001, designated as the property of such Shareholder. The KSC shall immediately deliver to the Subsidiary such Participating Stock, and the Subsidiary shall immediately deliver to the Shareholder a new stock having a par value of $ 0.001, designated as the property of such Shareholder. Reacquisition Price. Except in the circumstances constituting deferred issuance rights, the Reacquisition Price of a Participating Stock shall be the price (the "Acquisition Price") at which such Participating Stock was issued to the Shareholder, plus a premium of $ 0.01 per share of Common Stock representing payment for the Participating Stock, subject to adjustment for Accrued Triggering Dividend and Accrued Triggering Expenses. Many \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-04-150689/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-04-150689/full-submission_features.txt new file mode 100644 index 0000000..42174e4 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-04-150689/full-submission_features.txt @@ -0,0 +1,55 @@ + Part I of Contents +================== + +### 1. Part I: General Information + +The Table of Contents summarizes the information provided in the within Registration Statement for the Initial Public Offering of Microsoft Corporation's Common Stock. This includes: + +* Securities Information: Discusses information about the securities being offered, including the number of shares, price range, minimum investment amount, product characteristics, and distribution. +* Financial Information: Presents a summary of the company's financial status over the past three years, including income statements, balance sheets, cash flow statements, and key financial ratios. +* Operational Information: Information about the company's management, products, and services, competitors, strategic partnerships, and organizational structure. +* Risk Independent Directors and Decision Making Process: Information about the company's board of directors, including their qualifications, independence from management, and decision-making process. +* Additional Information: Explanation of other aspects related to the securities and the issuance, including legal disclosures and any amendments to SEC filings. + +### 2. Part II: Industry Analysis + +* Industry Overview: An overview of the software industry, including market size, growth rate, and major competitors. +* Industry Trends and Analysis: Discusses trends and analysis in the software industry, including e-commerce trends, emerging technologies, and potential opportunities. +* Industry Opportunities and Threats: Presents detailed information about opportunities and threats facing the industry, such as the impact of economic factors, changes in market trends, and competitive landscape. + +Part III of Contents +==================== + +### 1. Part III: Business Description + +* Business Description: Presents an overview of Microsoft Corporation's business model, mission, operations, strategy, and history. +* Products and Services: A detailed description of Microsoft's products and services, including Windows, Office, Xbox, and cloud computing. +* Market and Customer Analysis: Analyzes the size and scope of the target market, competitors, and target customers. +* Financial Plan and Projections: Presents assumptions, projections, and forecasts on income statements, balance sheets, cash flow statements, and key financial ratios. + +Part IV of Contents +=================== + +### 1. Part IV: Financial Information + +* Revenue Summary: An overview of Microsoft Corporation's revenue, including year-over-year growth rates, key financial ratios, and product breakdowns. +* Operating Expenses: A detailed analysis of Microsoft's operating expenses, including product development costs, marketing and sales, and research and development. +* Net Income Summary: A comprehensive summary of Microsoft's net income, including year-over-year growth rates and a breakdown of major revenue and expense items. + +Part V of Contents +=================== + +### 1. Part V: Use of Proceeds + +* Description of Proceeds Title: An overview of how the proceeds from the offering will be used, including working capital, corporate strategy, research and development, and other initiatives. +* Additional Information on Management's Decision Making Process: Explanation of the process used to make investment decisions, including financial analysis and expert input. +* Dilution Information: A detailed analysis of potential dilution resulting from the offering, including assumptions and projections. + +Conclusion +========== + +Microsoft Corporation's Registration Statement provides significant information about the company's financial status, business model, products and services, market and customer analysis, and future plans. This information can help investors make informed decisions about investing in Microsoft Corporation. Key takeaways include: + +* Microsoft Corporation has a strong financial position, with consistent growth over the past three years and projected income growth for the next several years. +* Microsoft Corporation's products and services are market-leading, with significant competitive advantages in the software industry. +* Microsoft Corporation's strategic focus on cloud computing and enterprise software solutions positions the company well for future growth and success. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-05-174825/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-05-174825/full-submission_features.txt new file mode 100644 index 0000000..e71991a --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-05-174825/full-submission_features.txt @@ -0,0 +1 @@ + I can help you with your homework. However, I would need more specific information about the data you are working with and what you want me to analyze. For example, which is the company that you want me to analyze and what is the purpose of the analysis? \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-06-180008/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-06-180008/full-submission_features.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/output-responses/MSFT/10-K/0001193125-07-170817/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-07-170817/full-submission_features.txt new file mode 100644 index 0000000..7f729c7 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-07-170817/full-submission_features.txt @@ -0,0 +1,26 @@ + Part II, Item 8 +Announced +April 27, 2005 1.18 +2.07 +1.26 +2.04 +179 +200 +148 +203 +1.15 +2.04 +0.25 +0.15 +1.81 +2.46 +1.01 +0.02 +145 +234 +133 +233 +178 +182 + +Table of Contents \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-08-162768/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-08-162768/full-submission_features.txt new file mode 100644 index 0000000..7dcae1c --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-08-162768/full-submission_features.txt @@ -0,0 +1,11 @@ + Microsoft Announces Second Quarter 2011 Financial Results + +Microsoft Corp. announced its second quarter 2011 financial results. Total revenue for the quarter was $ 26.4 billion, an increase of 5.1% year-over-year (YOY). Net income for the quarter was $ 6.9 billion, compared to $ 5.5 billion in the same period last year. The gross margin for the quarter was 25.2%, up from 24.0% in the same period last year. + +During the quarter, Microsoft’s Service & Other segment saw revenue growth of 21.2% YOY, driven by continued strong demand for the company’s cloud and enterprise services. The company’s Productivity & Server segment also saw strong revenue growth of 11.4% YOY, driven by continued demand for its productivity, server, and software offerings. The gaming segment saw revenue growth of 79.0% YOY, as it benefited from the strong sales of Xbox 360 game hardware and associated services. + +Microsoft's operating margin for the quarter was 20.2%, up from 19.3% in the same period last year. This improvement was primarily due to higher margins in the company’s Service & Other segment, which offset lower margins in the Productivity & Server segment. + +Microsoft's debt-to-equity ratio for the quarter was 0.09:1, up from 0.08:1 in the same period last year. The company's interest coverage ratio was 6.4:1, up from 5.2:1 in the same period last year, indicating that the company was able to meet its interest expense obligations with ease. + +The company generated $ 8.1 billion in cash from operations, $ 6.1 billion in cash from investing, and $ 4.2 bill \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-09-158735/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-09-158735/full-submission_features.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/output-responses/MSFT/10-K/0001193125-10-171791/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-10-171791/full-submission_features.txt new file mode 100644 index 0000000..7916dec --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-10-171791/full-submission_features.txt @@ -0,0 +1,34 @@ + Financial Overview + +* Microsoft generated $169.4 billion in total revenue for fiscal year 2021, representing a 16.8% increase from the previous year. +* The company's net income for fiscal year 2021 was $65.3 billion, which represents an increase of 63.6% from the previous year. +* Microsoft's gross margin remained unchanged from the previous year at 35.5%. + +Operational Efficiency + +* Microsoft's operating margin increased to 24.1% in fiscal year 2021, up from 22.9% in the previous year. This represents a strong improvement in efficiency. +* The operating margin trend for Microsoft compares favorably to industry standards, indicating that Microsoft is effectively managing its costs and generating strong profits. + +Liquidity and Solvency + +* Microsoft's current ratio increased from 4.2 to 5.5 in fiscal year 2021. This increase indicates that the company has stronger liquid holdings than in the previous year. +* Microsoft's quick ratio also improved from 3.7 to 4.6 in fiscal year 2021. This increase indicates that the company has strong liquid holdings and is well-positioned to meet short-term obligations. +* Microsoft's debt-to-equity ratio remained relatively consistent at 1.4 in fiscal year 2021, indicating that the company maintains a healthy balance between debt and equity financing. +* Microsoft's interest coverage ratio increased from 57.6 to 103.2 in fiscal year 2021. This increase indicates that the company is able to make interest payments on its debt without any difficulty. + +Cash Flow Analysis + +* Microsoft generated $56.0 billion in cash flows from operations in fiscal year 2021, up from $47.1 billion in the previous year. This represents a strong improvement in operating cash flows. +* Microsoft generated $10.3 billion in cash flows from investing in fiscal year 2021, which is lower than the previous year, indicating that Microsoft is not currently making significant investments. +* Microsoft generated $8.5 billion in cash flows from financing in fiscal year 2021, which is lower than the previous year, indicating that the company is not currently issuing or repurchasing significant amounts of stock. + +Investment and Future Outlook + +* Microsoft announced a $100 billion share repurchase plan in 2020, which is expected to continue into 2021. This represents a significant investment in the company's future growth. +* Microsoft continues to invest in research and development, with a focus on artificial intelligence and cloud computing. The company expects to continue to innovate and expand its product offerings. + +Risks and Opportunities + +* The COVID-19 pandemic has created challenges for Microsoft, particularly in terms of remote work and supply chain disruptions. The company has made arrangements to accommodate remote work and is closely monitoring supply chain logistics. +* Microsoft faces competition from other technology companies, such as Google and AMD. The company is focused on innovation and differentiation to maintain its market position. +* Microsoft has opportunities to further expand its cloud computing and AI offerings. The company continues to invest in these areas to capitalize on emerging trends in the market. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-11-200680/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-11-200680/full-submission_features.txt new file mode 100644 index 0000000..f99b5f1 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-11-200680/full-submission_features.txt @@ -0,0 +1,81 @@ + Introduction + +In this analysis, we will elaborate on Microsoft's financial performance for the year ending June 30, 2011. We will first summarize the key results, then dive into the company's operational efficiency and liquidity. Next, we will assess the cash flow analysis and discuss investment and future outlook. Finally, we will identify risks and opportunities for the company. + +Financial Overview +------------------ + +### Key Results + +* Revenue for the year ending June 30, 2011 was $ 22.3 billion, which represents a 9.3% increase over the previous year. +* Net income for the year was $ 7.5 billion, up 150.4% from the previous year. +* The gross margin for the company was 42.4%, an increase of 1.7 percentage points from the previous year. + +### Year-over-Year Growth Rates + +* Revenue growth rate: 9.3% +* Net income growth rate: 150.4% + +### Notable Trends + +* The Windows server and tools business witnessed significant growth, driven by increasing adoption rates of the cloud-based services. +* Services revenue, which includes Windows Live, Xbox Live, Skype, and Bing, grew 26.4%, reflecting the company's successful diversification strategy. + +Operational Efficiency +---------------------- + +### Operating Margin Trends + +* The operating margin for the year was 32.2%, an increase of 7.2 percentage points from the previous year. This translates to a net operating income of $ 7.5 billion. +* The operating margin is higher than the industry standard. + +### Cost Management Effectiveness + +* Microsoft's cost management strategy has been effective, with a decrease in operating expenses from the previous year. + +Liquidity and Solvency +----------------------- + +### Current and Quick Ratios + +* The current ratio was 3.1, indicating that the company has sufficient current assets to cover its current liabilities. +* The quick ratio was 2.2, suggesting that the company has maintained a healthy level of liquidity. + +### Debt-to-Equity and Interest Coverage Ratios + +* The debt-to-equity ratio was 0.6, which implies a moderate level of debt. +* The interest coverage ratio was 4.9, indicating that the company has a sufficient level of EBITDA to cover interest expenses. + +Cash Flow Analysis +------------------ + +### Cash Flow from Operations + +* The company generated a positive cash flow from operations, indicating that it was able to generate more cash than it spent on operating activities. + +### Cash Flow from Investing + +* The company spent $ 23.7 billion on property, plant, and equipment, as well as $ 1.1 billion on patents, copyrights, trademarks, and other intangibles. +* This represents a decrease of 4.7% from the previous year, indicating that the company is actively managing its capital expenditures. + +### Cash Flow from Financing + +* Cash received from financing activities included $ 15.0 billion in proceeds from issuing common stock and $ 0.4 billion in proceeds from issuing long-term debt. +* The company returned $ 7.4 billion in capital to shareholders through dividends and share repurchases. + +Investment and Future Outlook +----------------------------- + +### Major Investments + +* In 2007, Microsoft launched the Server and Tools Solutions Platform, which includes major investments in the development of new cloud services. +* In 2010, Microsoft launched several new products, such as theSurface, Bing Maps, and the Nokia Lumia. + +### Mergers and Acquisitions + +* In 2007, Microsoft acquired Skype for $ 8.5 billion. +* In 2010, Microsoft acquired Danger Mobile phone business. + +### Future Growth Initiatives + +* Microsoft continues to invest in cloud-based services and is currently working on \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-12-316848/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-12-316848/full-submission_features.txt new file mode 100644 index 0000000..08a4995 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-12-316848/full-submission_features.txt @@ -0,0 +1,100 @@ + Financial Overview +---------------- + +Key Financial Figures +---------------------- + +* Total revenue: $24.9 billion +* Net income: $20.4 billion +* Gross margin: 41.3% +* Year-over-year growth rates: + + Revenue growth: 13.1% + + Net income growth: 26.1% + + Gross margin growth: 7.5% + +Notable Trends and Deviations +-------------------------------- + +* Gross margin expansion from 33.5% in 2010 to 41.3% in 2011 and 41.4% in 2012 (outperforming industry average) +* Focus on high-margin products, such as acquisition of LinkedIn and Bing search engine +* Investment in cloud computing technology and services + +Operational Efficiency +----------------------- + +Operating Margin Trends +----------------------- + +* Improved operating margin from 8.2% in 2010 to 11.6% in 2011 and further to 11.9% in 2012 (outperforming industry average) +* Focus on improving efficiency across all segments, notably Windows and Windows Server +* Focus on portfolio management, divesting from low-margin businesses, and investing in high-growth areas + +Cost Management Effectiveness +------------------------------ + +* Effective cost management initiatives, resulting in lower operating expenses and higher operating profit margins +* Improved working capital management, particularly in accounts receivable and accounts payable +* Continued focus on supply chain optimization and reducing lead times + +Liquidity and Solvency +---------------------- + +Current and Quick Ratios +------------------------- + +* Current ratio improved from 2.2 to 2.8, demonstrating improved liquidity +* Quick ratio improved from 1.9 to 2.1, indicating better operational liquidity + +Debt-to-Equity and Interest Coverage Ratios +------------------------------------------ + +* Debt-to-equity ratio decreased from 1.7 to 1.4, indicating lower financing costs +* Interest coverage ratio improved from 3.1 to 3.9, demonstrating better financial stability + +Cash Flow Analysis +------------------ + +Cash flow from operations, investing, and financing +-------------------------------------------------- + +* Cash flow from operations improved by $3.1 billion to $11.4 billion, driven by higher net income +* Cash flow from investing decreased by $1.1 billion, primarily due to the impact of the LinkedIn acquisition +* Cash flow from financing decreased by $3.1 billion, reflecting lower operating cash flows and increased interest payments + +Significant changes in cash holdings +-------------------------------------- + +* Increased cash holdings reduced the company's, net long-term investments decreased from $6.8 billion to $3.6 billion +* Net cash and cash equivalents increased from $4.7 billion to $7.1 billion + +Investment and Future Outlook +------------------------------ + +Major investments, mergers, or acquisitions +------------------------------------ + +* Acquisition of LinkedIn in Q1 2012 for $26.2 billion +* Advertising and marketing expenditures increased + +Management's outlook and future growth initiatives +-------------------------------------------------- + +* Focus on cloud computing and enterprise services revenue streams +* Investment in cloud-based technologies and services +* Expansion of not-for-profit partnerships + +Risks and Opportunities +----------------------- + +Key risks facing the company +---------------------------- + +* Competition from other cloud computing players such as Amazon, Google, and VMware +* Economic downturns, which could impact demand for Azure and other cloud-based services +* Integration risks related to the acquisition of LinkedIn + +Potential impacts +------------------- + +* Stringent enforcement of data privacy regulations could lead to additional regulatory and compliance costs +* Emergence of new cloud technologies, which could impact Microsoft's market position \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-13-310206/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-13-310206/full-submission_features.txt new file mode 100644 index 0000000..2c96cb8 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-13-310206/full-submission_features.txt @@ -0,0 +1,3 @@ + 0 + +COPYRIGHT 2021 KAGGLE, Inc. unaufnahme,sgz \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-14-289961/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-14-289961/full-submission_features.txt new file mode 100644 index 0000000..c544835 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-14-289961/full-submission_features.txt @@ -0,0 +1,34 @@ + Financial Overview: + +* Revenue: Microsoft reported total revenue of $ 22.074 billion in the fiscal year ended June 30 , 2014, an increase of 12% from $ 21,863 million in the previous year. +* Net Income: Microsoft incurred a loss of $ 1,143 million in the fiscal year ended June 30 , 2014, compared to a profit of $ 5,520 million in the previous year. +* Gross Margin: Microsoft’s gross margin was 61.5%, up significantly from 54.2% in the previous year. + +Operational Efficiency: + +* Microso dific Efficiency: Microsoft’s operating margin improved to 41.5% from 33.6% in the previous year. This improvement can be attributed to cost management effectiveness, as well as sales growth. +* Comparison to Industry Standards: Microsoft’s operating margin is above the industry average, indicating operational efficiency. + +Liquidity and Solvency: + +* Current Ratio: Microsoft’s current ratio stands at 17.09 times, indicating strong liquidity. +* Quick Ratio: Microsoft’s quick ratio is 12.55 times, indicating strong liquidity. +* Debt-to-Equity Ratio: Microsoft’s debt-to-equity ratio is 0.80 times, indicating solvency. +* Interest Coverage Ratio: Microsoft’s interest coverage ratio stands at 0.9 times, indicating solvency. + +Cash Flow Analysis: + +* Cash from Operations: Microsoft generated $ 14.9 billion in cash from operations during the fiscal year. +* Cash from Investing: Microsoft invested $ 5.4 billion during the fiscal year, which resulted in a net cash outflow from investing activities. +* Cash from Financing: Microsoft generated $ 1.7 billion in cash from financing, with $ 1.1 billion coming from the issuance of common stock and $ 572 million from the sale of debt securities. + +Investment and Future Outlook: + +* Major Investments: Microsoft announced complex integration and productivity initiatives in 2014, which are expected to drive long-term growth. These initiatives include improvements to Office 365, the Windows Phone platform, and user experience across all of Microsoft’s products. +* Mergers and Acquisitions: Microsoft acquired several companies during the year, including Skype in 2011 and the mobile elron communication systems provider BMC Communications in 2013. +* Future Growth Initiatives: Management continues to prioritize cloud computing and mobile devices as key growth areas. The company is investing heavily in the development of Azure, its cloud platform, and the expansion of its gaming and entertainment offerings. + +Risks and Opportunities: + +* Key Risks: Microsoft faces intense competition from various companies, including Google, Amazon, and Apple. The company must continue to innovate and adapt to changing market conditions and consumer preferences. +* Emerging Opportunities: The growth of the cloud computing and mobile device markets presents significant opportunities for Microsoft. The company has already begun to make strides in these areas, with acquisitions such as Skype and Nokia highlighting this focus. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-15-272806/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-15-272806/full-submission_features.txt new file mode 100644 index 0000000..738138d --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-15-272806/full-submission_features.txt @@ -0,0 +1,9 @@ + Microsoft Corporation's 2015 Annual Report contains extensive financial data and information about the company's operations and financial performance. + +The report begins with an overview of Microsoft's business strategy and operations, highlighting key achievements and initiatives for the year. The report also provides an overview of the industry in which Microsoft operates, including trends and challenges. + +The financial section of the report includes detailed financial information such as income statements, balance sheets, and cash flow statements. Microsoft's revenue for the year was $ 89,297 million, with net income of $ 26,021 million. The report also includes information on Microsoft's debt, equity, and retained earnings. + +Aside from the financial information, the report also includes disclosures regarding various risks and uncertainties that Microsoft faces, including risks such as changes in market conditions, competitive risks, and risks related to its foreign operations. Microsoft's risk management practices are also discussed in the report. + +Overall, Microsoft Corporation's 2015 Annual Report provides valuable insights into the company's financial performance and operations, as well as the risks and uncertainties associated with its business. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001193125-16-662209/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001193125-16-662209/full-submission_features.txt new file mode 100644 index 0000000..3edbed7 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001193125-16-662209/full-submission_features.txt @@ -0,0 +1,10 @@ + Sure, I'd be happy to help you with that. Based on the provided data, Microsoft has several important financial metrics that can be analyzed, including revenue, profitability, liquidity, and shareholder equity. + +1. Revenue: Microsoft's revenue for the fiscal year ended June 2016 was $ 93.2 billion, compared to $ 78.9 billion in the previous year. This represents a 19.5% increase in revenue, which is a significant growth. The growth was primarily driven by the Intelligent Cloud segment, which saw revenue growth of 35%. +2. Earnings before interest, taxes, depreciation and amortization (EBITDA): For the fiscal year ended June 2016, Microsoft's EBITDA was $ 31.9 billion, representing a 27% increase from the previous year's $ 25.7 billion. This is a strong indication of Microsoft's ability to generate profits. +3. Net income: For the fiscal year ended June 2016, Microsoft's net income was $ 13.9 billion, which is a 66.2% increase from the previous year's $ 8.3 billion. This represents a strong increase in profitability. +4. Return on equity (ROE): Microsoft's ROE for the fiscal year ended June 2016 was 28.1%. This is a good indication of Microsoft's ability to generate profits from shareholder equity. The ROE was driven by both revenue growth and profit growth. +5. Liquidity: Microsoft's current ratio for the fiscal year ended June 2016 was 3.3, which is a good indication of its liquidity. The current ratio measures a company's ability to meet its short-term obligations using its current assets. +6. Shareholder equity: Microsoft's total shareholder's equity for the fiscal year ended June 2016 was $ 30.8 billion, which is a 15.7% increase from the previous year's $ 26.6 billion. This represents a good increase in shareholder's equity + +In summary, Microsoft has exhibited strong revenue growth, profitability, and liquidity in the fiscal year ended June 2016. This is evident from the increase in EBITDA and net income, along with the healthy current ratio and shareholder’s equity. Additionally, the ROE is also within a healthy range. Overall, Microsoft appears to be in a strong financial position, with potential for continued growth. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-17-014900/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-17-014900/full-submission_features.txt new file mode 100644 index 0000000..01c3fe1 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-17-014900/full-submission_features.txt @@ -0,0 +1,13 @@ + Sure, I can help you with that! Based on the data provided, here is a summary of Microsoft's financial performance for the fiscal year ended June 30, 2017: + +Microsoft's revenue for the fiscal year ended June 30, 2017 was $ 110,031 million. This represents a decrease of 5.9% compared to the $ 116,320 million generated in the previous fiscal year. Contributing to this decrease was the shift to cloud-based subscription revenue in the Software and Services segment. + +Operating income for the fiscal year was $ 34,653 million, representing a increase of 13.5% compared to the $ 30,596 million generated in the previous fiscal year. This was driven by increased revenue recognition in the Software segment for subscriptions as well as increased revenue in the Services segment for cloud and server services. + +Net income for the fiscal year was $ 22,077 million, representing a increase of 13.5% compared to the $ 19,095 million generated in the previous fiscal year. This was driven by the increased operating income in the current period, as well as a decline in interest expenses and a decrease in tax expense. + +In terms of cash flow, Microsoft generated a net operating cash inflow of $ 25,843 million. This represents a 22.8% increase compared to the $ 21,168 million generated in the previous fiscal year. This was driven by the increase in Net Income for the period, as well as improved gross margins. However, this was offset by an increase in capital expenditures and a decline in Investing cash outflow related to property, plant and equipment. + +In terms of future growth prospects, Microsoft has continued to shift its focus towards cloud-based subscription revenue. The company has also been investing heavily in its AI and cloud technologies, which are expected to drive future growth. Additionally, Microsoft has been expanding its presence in emerging markets, such as the Middle East and Africa. + +Overall, Microsoft's financial performance for the fiscal year ended June 30, 2017 was solid, driven by increased revenue recognition in the Software segment and improved gross margins. However, there is still room for improvement in reducing costs and generating cash outside of operating activities. \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-18-019062/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-18-019062/full-submission_features.txt new file mode 100644 index 0000000..7c28ee4 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-18-019062/full-submission_features.txt @@ -0,0 +1,32 @@ + Microsoft Corporation provided financial disclosures in its Form 10-K Annual Report for the fiscal year ended June 30, 2018. Here is a summary of the financial information presented in the financial statements: + +Revenue and Net Income +======================= + +Microsoft's revenue for the year ended June 30, 2018 was $ 122.9 billion $ 120.3 billion $ 115.6 billion, a 2.6% increase from the year ended June 30, 2017, and a 4.9% increase from the year ended June 30, 2016. The increase in revenue is primarily attributable to higher sales of the Personal Computing and Intelligent Cloud segments. + +Microsoft's net income for the year ended June 30, 2018 was $ 45.6 billion $ 43.4 billion $ 38.2 billion, a 10.7% increase from the year ended June 30, 2017, and a 18.7% increase from the year ended June 30, 2016. The increase in net income is primarily attributable to higher net sales across all segments. + +Cash Flows and Debt +==================== + +Microsoft generated positive operating cash flows of $ 71.8 billion $ 70.4 billion $ 63.7 billion for the year ended June 30, 2018, a 4.8% increase from the year ended June 30, 2017, and a 11.7% increase from the year ended June 30, 2016. The increase in operating cash flows was driven by higher net sales across all segments. + +Microsoft also generated positive free cash flows of $ 46.2 billion $ 45.0 billion $ 41.6 billion for the year ended June 30, 2018, a 5.2% increase from the year ended June 30, 2017, and a 8.1% increase from the year ended June 30, 2016. The increase in free cash flows is primarily due to higher operating cash flows. + +Microsoft's total long-term debt was specified as $ 41.0 billion $ 38.5 billion $ 35.1 billion at June 30, 2018, a 4.5% increase from the year ended June 30, 2017, and a 14.2% increase from the year ended June 30, 2016. The increase in long-term debt was primarily due to higher long-term debt issues. + +Stockholder Equity +================== + +Microsoft's stockholder equity for June 30, 2018 was specified as $ 150.6 billion $ 141.4 billion $ 137.8 billion, a 8% increase from the year ended June 30, 2017. The increase in stockholder equity was primarily due to the context of $ 53.0 billion $ 51.0 billion $ 50.6 billion of net income minus stockholder equity distributed. + +Judgment +========= + +There is not enough context provided in the pre-generated data to indicate any judgments about Microsoft Corporation. + +Conclusion +========== + +In summary, Microsoft Corporation reported a 2.6% increase in revenue and a 10.7% increase in net income for the year ended June 30, 2018, from the year ended June 30, 2017. The company generated positive operating and free cash flows and had a total long-term debt of $ 41.0 billion at June 30, \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-19-027952/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-19-027952/full-submission_features.txt new file mode 100644 index 0000000..69552d5 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-19-027952/full-submission_features.txt @@ -0,0 +1,95 @@ + 1. Item 102 - Common Stock + +Cash Dividends Paid: + +11 + +In millions + +7 + +9 + +10 + +8. Stock-Based Compensation Expense + +3 + +9 + +7 + +9. Dividend Expense + +2144 + +31483 + +584 + +4792 + +5. Stock Options + +452030 + +3403930 + +2432950 + +6. Restricted Stock Units + +140365 + +84200 + +95845 + +7. Stock Appreciation Rights + +17177 + +1110 + +420 + +Total Stock-Based Compensation Expense + +Yes + +Yes + +Yes + +8. Stock Conversion Exercise + +B + +C + +A + +Total Stock Conversion Exercise + +Yes + +Yes + +Yes + +9. Additionally Paid in Conversion of Preferred Stock + +D + +E + +F + +Total Additional Paid in Conversion of Preferred Stock + +No + +No + +Yes \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-20-034944/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-20-034944/full-submission_features.txt new file mode 100644 index 0000000..0bcf1e8 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-20-034944/full-submission_features.txt @@ -0,0 +1,31 @@ + 60 PART II Item 7 Liquidity . 60 PART II Item 7 Liquidity + +A. Current Assets + +1. Cash and Cash Equivalents: The Company had $ 164.4 billion of cash and cash equivalents, $ 16.5 billion and $ 123.0 billion, respectively, at June 30, 2020 and June 30, 2019. +2. Accounts Receivable: The Company's accounts receivable, net, were $ 5.7 billion at June 30, 2020, and $ 14.8 billion at June 30, 2019. +3. Inventory: The Company's inventory was $ 20.6 billion at June 30, 2020, and $ 22.9 billion at June 30, 2019. +4. Prepaid Expenses: The Company's prepaid expenses were $ 5.9 billion at June 30, 2020, and $ 5.3 billion at June 30, 2019. +5. Other Current Assets: The Company's other current assets were $ 106.0 billion at June 30, 2020, and $ 98.6 billion at June 30, 2019. + +B. Current Liabilities + +1. Current Liabilities: The Company's current liabilities were $ 27.1 billion at June 30, 2020, and $ 35.7 billion at June 30, 2019. +2. Long-Term Liabilities + +C. Long-Term Liabilities + +1. Property, Plant, and Equipment, Net: The Company's property, plant, and equipment, net, were $ 295.3 billion at June 30, 2020, and $ 293.3 billion at June 30, 2019. +2. Intangible Assets, Net: The Company's intangible assets, net, were $ 186.7 billion at June 30, 2020, and $ 181.1 billion at June 30, 2019. + +D. Total Assets: + +1. The Company's total assets were $ 483.3 billion\*\*\* ($ 483.7 billion) at June 30, 2020 (\*\*\*\) and June 30, 2019 (\*\*\**), respectively. +2. The Company's total equity of $ 143.4 billion ($ 152.5 billion) at June 30, 2020 (\*\\%) and June 30, 2019 (\*\%), respectively. + +Notes accompany the above key financial ratios. + +\*\*\*Excludes depreciation, amortization, and accumulated depreciation, net of initial investment. \*\**Excludes accumulated depreciation, net of initial investment. + +61 PARTI . Item 61 . EARNINGS PER SHARE (EPS) +Earnings Per Share (EPS) is the net income for a company for a \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-21-039151/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-21-039151/full-submission_features.txt new file mode 100644 index 0000000..cf1d117 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-21-039151/full-submission_features.txt @@ -0,0 +1,27 @@ + In response to the request, please generate a detailed financial analysis for the provided data of Microsoft Corporation’s financial statements for the fiscal year ended June 30, 2021. + +I. Summary Information + +* Microsoft Corporation reported revenue of $ 44,281 million and operating income of $ 61,271 million for the fiscal year ended June 30, 2021. +* The company's net income for the fiscal year was $ 46,381 million. + +II. Balance Sheet + +a. Assets + +* Microsoft's total assets reported for the fiscal year were $ 75,278 million. + +b. Liabilities and Equity + +* Microsoft's total liabilities reported for the fiscal year were $ 32,775 million. +* Microsoft's total equity reported for the fiscal year was $ 42,512 million. + +III. Income Statement + +* Microsoft reported revenue of $ 44,281 million for the fiscal year ended June 30, 2021, an increase of 2.6% over the same period in the previous year. +* Microsoft reported operating income of $ 61,271 million for the fiscal year, an increase of 34.0% over the similar period in the previous year. +* Microsoft reported net income of $ 46,381 million for the fiscal year, an increase of 7.7% over the same period in the previous year. + +IV. Carefully analyze the financial statements of Microsoft Corporation for the fiscal year ended June 30, 2021, and provide a detailed business plan. + +V. Implement a comprehensive market research and financial analysis to identify potential areas for growth and expansion. This should include an evaluation of Microsoft's market position, competition, and trends within the technology industry. The analysis should also include an assessment of Microsoft's strengths, weaknesses, opportunities, and threats (SWOT analysis). \ No newline at end of file diff --git a/src/data/output-responses/MSFT/10-K/0001564590-22-026876/full-submission_features.txt b/src/data/output-responses/MSFT/10-K/0001564590-22-026876/full-submission_features.txt new file mode 100644 index 0000000..be7e862 --- /dev/null +++ b/src/data/output-responses/MSFT/10-K/0001564590-22-026876/full-submission_features.txt @@ -0,0 +1,9 @@ + PART II Item 8 Revenue + +We made upgrades to our Azure Dynamics 365 ERP spiritual disciplines, and play with the Pinnacle offering to promote Pinnacle Energy Management (s) . + +a Revenue as of December 31, 2021, $ 32.109 million $ 28.110 million $ 29.454 million a Revenue as of December 31, 2020, $ 29.383 million $ 29.383 million $ 29.380 million a Revenue per share for the fiscal years 2020 and 2021 $ 9.91/share $ 9.90/share $ 10.26/share . + +a Revenue from Azure Dynamics 365 ERP center of gravity in the last quarter of the quarter ended December 31, 2021 $ 29.380 million $ 29.380 million $ 29.380 million a Revenue for Azure Dynamics 365 ERP from for fiscal years 2020 and 2021 $ 26.670 million $ 29.380 million $ 23.109 million . + +a Revenue per available share for the quarter ended December 31, 2021 $ 9.90/share $ 9.90/share Shares outstanding, December 31, 2021 $ 309,200,000 shares outstanding, December 31, 2020 $ 309,200,000 shares outstanding, December 31, 2001 $ 309,200,000 shares outstanding, December 31, 2000 $ 309,200,000 shares outstanding, December 31, 1999 $ 309,200,000 shares outstanding, December 31, 1998 $ 69,701,000 shares outstanding, December 31, 1997 $ 69,701,000 shares outstanding, December 31, 1996 $ 47,790,000 shares outstanding, December 31, 1995 $ 47,790,000 shares outstanding, December 31, 1994 $ 47,790,000 shares outstanding, December 31, 1993 $ 63,367,000 shares outstanding, December 31, 1992 $ 48,372,000 shares outstanding, December 31, 1991 $ 32,447,000 shares outstanding, December 31, 1990 $ 22,087,000 shares outstanding, December 31, 1989 $ 52,243,000 shares outstanding. \ No newline at end of file diff --git a/src/data/output-responses/full-submission_response.json b/src/data/output-responses/full-submission_response.json deleted file mode 100644 index 1b6b6a5..0000000 --- a/src/data/output-responses/full-submission_response.json +++ /dev/null @@ -1,6 +0,0 @@ -{ - "error": { - "message": "{\"error\":{\"message\":\"{\\\"object\\\":\\\"error\\\",\\\"message\\\":\\\"This model's maximum context length is 32768 tokens. However, you requested 36431 tokens (30532 in the messages, 5899 in the completion). Please reduce the length of the messages or completion.\\\",\\\"type\\\":\\\"BadRequestError\\\",\\\"param\\\":null,\\\"code\\\":400}\"}}", - "code": 400 - } -} \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-17-000070/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-17-000070/full-submission.txt new file mode 100644 index 0000000..14fad9f --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-17-000070/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 30 , 2017 or ☐ TRANSITION year ended September 30 , 2017 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the : Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 0.875 2022 1.375 % Notes due 2024 0.875 % Notes due 2025 1.375 % Notes due 2024 0.875 % Notes due 2025 1.625 2024 0.875 % Notes due 2025 1.625 % Notes due 2026 0.875 % Notes due 2025 1.625 % Notes due 2026 2.000 2025 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 2027 1.375 2026 2.000 % Notes due 2027 1.375 % Notes due 2029 2.000 % Notes due 2027 1.375 % Notes due 2029 3.050 2027 1.375 % Notes due 2029 3.050 % Notes due 2029 1.375 % Notes due 2029 3.050 % Notes due 2029 3.600 2029 3.050 % Notes due 2029 3.600 % Notes due 2042 3.050 % Notes due 2029 3.600 % Notes due 2042 The 2029 3.600 % Notes due 2042 The Nasdaq Stock Market LLC Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ☐ Indicate by check mark growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 31 , 2017 , the last a of March 31 , 2017 , the last business day quarter , wa approximately $ 747,509,000,000 . Solely for purpose of for any other purpose . 5,134,312,000 share of common stock were and outstanding a of October 20 , 2017 . DOCUMENTS INCORPORATED a of October 20 , 2017 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2018 annual meeting of shareholder ( of shareholder ( the “ 2018 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2018 10-K where indicated . The 2018 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 30 , 2017 TABLE OF CONTENTS Year Ended September 30 , 2017 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 8 Item Item 1A . Risk Factors 8 Item 1B . Unresolved Staff . Risk Factors 8 Item 1B . Unresolved Staff Comments 16 1B . Unresolved Staff Comments 16 Item 2 . Properties 17 Unresolved Staff Comments 16 Item 2 . Properties 17 Item 3 16 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Mine Safety . Legal Proceedings 17 Item 4 . Mine Safety Disclosures 17 4 . Mine Safety Disclosures 17 Part II Item 5 . Disclosures 17 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 38 Item 9 . Changes in and Supplementary Data 38 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 72 Item 9A . Controls and and Financial Disclosure 72 Item 9A . Controls and Procedures 72 9A . Controls and Procedures 72 Item 9B . Other Information Controls and Procedures 72 Item 9B . Other Information 72 Part Item 9B . Other Information 72 Part III Item 10 . Information 72 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 73 Item 11 . Executive Compensation and Corporate Governance 73 Item 11 . Executive Compensation 73 Item Item 11 . Executive Compensation 73 Item 12 . Security Ownership . Executive Compensation 73 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 73 Item 13 . Certain Relationships Related Stockholder Matters 73 Item 13 . Certain Relationships and Related Transactions , and Director Independence 73 Item 14 . Principal Accounting and Director Independence 73 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 73 Part IV Item 15 . Services 73 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 74 Item 16 . Form 10-K Financial Statement Schedules 74 Item 16 . Form 10-K Summary 76 74 Item 16 . Form 10-K Summary 76 This Annual Report 16 . Form 10-K Summary 76 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the a California corporation established in 1977. Business Strategy The Company is in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and . ” Apple Inc. | 2017 Form 10-K | 1 Products Apple Inc. | 2017 Form 10-K | 1 Products iPhone iPhone | 2017 Form 10-K | 1 Products iPhone iPhone is the qualifying device . In September 2017 , the Company introduced iPhone , the Company introduced iPhone 8 and 8 Plus , featuring Company introduced iPhone 8 and 8 Plus , featuring a new . Additionally , in September 2017 , the Company announced iPhone and facial recognition . iPhone 8 and 8 Plus were available recognition . iPhone 8 and 8 Plus were available starting in were available starting in September 2017 , and iPhone X is to be available in November 2017 . The Company ’ s of smartphones also includes iPhone 7 , 7 Plus , 6 also includes iPhone 7 , 7 Plus , 6 , 6 7 , 7 Plus , 6 , 6 Plus and SE 7 Plus , 6 , 6 Plus and SE model . Touch ID . In June 2017 , the Company released a the Company released a new 10.5-inch iPad Pro and an updated iPad Pro and an updated 12.9-inch iPad Pro with more advanced computer include iMac ® , 21.5 ” iMac with Retina ® ” iMac with Retina ® 4K display , 27 ” iMac Retina ® 4K display , 27 ” iMac with Retina 5K 27 ” iMac with Retina 5K display , Mac Pro ® mini ® . In June 2017 , the Company announced the to be available in December 2017 . The Company ’ s iCloud service . In September 2017 , the Company released iOS , the Company released iOS 11 , which includes new iPad redesigned App Store . iOS 11 also introduces ARKit , an Sierra , released in September 2017 , is the 14th major September 2017 , is the 14th major release of macOS and Apple Watch . In September 2017 , the Company released watchOS , the Company released watchOS 4 , which add a proactive new music experience . watchOS 4 also includes an enhanced Workout service . Apple Inc. | 2017 Form 10-K | 2 Application Apple Inc. | 2017 Form 10-K | 2 Application Software The | 2017 Form 10-K | 2 Application Software The Company ’ release an update to iOS 11 and watchOS 4 in fall to iOS 11 and watchOS 4 in fall 2017 that will and watchOS 4 in fall 2017 that will allow peer-to-peer payment and supply . In December 2016 , the Company released AirPods . Additionally , in June 2017 , the Company announced the wireless speaker and in September 2017 , announced AirPower™ , a to be available in December 2017 and calendar year 2018 , December 2017 and calendar year 2018 , respectively . Apple TV their voice . In September 2017 , the Company introduced Apple the Company introduced Apple TV 4K , which support 4K and TV 4K , which support 4K and High Dynamic Range content quality . Apple Inc. | 2017 Form 10-K | 3 Apple Apple Inc. | 2017 Form 10-K | 3 Apple Watch Apple | 2017 Form 10-K | 3 Apple Watch Apple Watch is Apple Pay . In September 2017 , the Company introduced Apple Company introduced Apple Watch Series 3 , featuring health and fitness and value-added resellers . During 2017 , the Company ’ s indirect distribution channel accounted for 28 % and 72 % , accounted for 28 % and 72 % , respectively , of store . Apple Inc. | 2017 Form 10-K | 4 The Apple Inc. | 2017 Form 10-K | 4 The Company also | 2017 Form 10-K | 4 The Company also sell it customer accounted for more than 10 % of net sale in % of net sale in 2017 , 2016 and 2015 . net sale in 2017 , 2016 and 2015 . Competition The in 2017 , 2016 and 2015 . Competition The market for result . Apple Inc. | 2017 Form 10-K | 5 Substantially Apple Inc. | 2017 Form 10-K | 5 Substantially all of | 2017 Form 10-K | 5 Substantially all of the Company requirement for period up to 150 day . Research and Development & D expense wa $ 11.6 billion , $ 10.0 billion $ 11.6 billion , $ 10.0 billion and $ 8.1 billion $ 10.0 billion and $ 8.1 billion in 2017 , 2016 and $ 8.1 billion in 2017 , 2016 and 2015 , 8.1 billion in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . Intellectual Property Operations and Geographic Data During 2017 , the Company ’ s international net sale accounted for 37 % and 63 % , accounted for 37 % and 63 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies performance . Apple Inc. | 2017 Form 10-K | 6 Warranty Apple Inc. | 2017 Form 10-K | 6 Warranty The Company | 2017 Form 10-K | 6 Warranty The Company offer a The Company also offer a 90-day limited warranty on the service . Employees As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had approximately , the Company had approximately 123,000 full-time equivalent employee . Available s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2017 Form 10-K | 7 Item Apple Inc. | 2017 Form 10-K | 7 Item 1A . | 2017 Form 10-K | 7 Item 1A . Risk Factors Form 10-K | 7 Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial affected . Apple Inc. | 2017 Form 10-K | 8 The Apple Inc. | 2017 Form 10-K | 8 The Company market | 2017 Form 10-K | 8 The Company market certain mobile product . Apple Inc. | 2017 Form 10-K | 9 The Apple Inc. | 2017 Form 10-K | 9 The Company face | 2017 Form 10-K | 9 The Company face substantial inventory requirement for period up to 150 day . Because the Company impacted . Apple Inc. | 2017 Form 10-K | 10 The Apple Inc. | 2017 Form 10-K | 10 The Company ’ | 2017 Form 10-K | 10 The Company ’ s product suffer . Apple Inc. | 2017 Form 10-K | 11 The Apple Inc. | 2017 Form 10-K | 11 The Company relies | 2017 Form 10-K | 11 The Company relies on access product . Apple Inc. | 2017 Form 10-K | 12 Compliance Apple Inc. | 2017 Form 10-K | 12 Compliance with these | 2017 Form 10-K | 12 Compliance with these law , result . Apple Inc. | 2017 Form 10-K | 13 There Apple Inc. | 2017 Form 10-K | 13 There may be | 2017 Form 10-K | 13 There may be loss or liability . Apple Inc. | 2017 Form 10-K | 14 The Apple Inc. | 2017 Form 10-K | 14 The Company ’ | 2017 Form 10-K | 14 The Company ’ s success retention . Apple Inc. | 2017 Form 10-K | 15 The Apple Inc. | 2017 Form 10-K | 15 The Company ’ | 2017 Form 10-K | 15 The Company ’ s financial component . As of September 30 , 2017 , a significant As of September 30 , 2017 , a significant portion of be adversely affected . Item 1B . Unresolved Staff Comments None None . Apple Inc. | 2017 Form 10-K | 16 Item Apple Inc. | 2017 Form 10-K | 16 Item 2 . | 2017 Form 10-K | 16 Item 2 . Properties The Form 10-K | 16 Item 2 . Properties The Company ’ California . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company owned 13.4 2017 , the Company owned 13.4 million square foot and leased million square foot and leased 23.0 million square foot of building Company owned a total of 4,928 acre of land , primarily the U.S. As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company owned facility for it product . Item 3 . Legal Proceedings The Company in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2017 that did not individually or or operating result . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2017 Form 10-K | 17 PART Apple Inc. | 2017 Form 10-K | 17 PART II Item | 2017 Form 10-K | 17 PART II Item 5 . | 17 PART II Item 5 . Market for Registrant ’ Quarter Second Quarter First Quarter 2017 price range per share $ price range per share $ 164.94 – $ 142.41 $ 156.65 share $ 164.94 – $ 142.41 $ 156.65 – $ 140.06 164.94 – $ 142.41 $ 156.65 – $ 140.06 $ 144.50 142.41 $ 156.65 – $ 140.06 $ 144.50 – $ 114.76 156.65 – $ 140.06 $ 144.50 – $ 114.76 $ 118.69 140.06 $ 144.50 – $ 114.76 $ 118.69 – $ 104.08 144.50 – $ 114.76 $ 118.69 – $ 104.08 2016 price 114.76 $ 118.69 – $ 104.08 2016 price range per share $ 118.69 – $ 104.08 2016 price range per share $ price range per share $ 116.18 – $ 91.50 $ 112.39 share $ 116.18 – $ 91.50 $ 112.39 – $ 89.47 116.18 – $ 91.50 $ 112.39 – $ 89.47 $ 109.43 91.50 $ 112.39 – $ 89.47 $ 109.43 – $ 92.39 112.39 – $ 89.47 $ 109.43 – $ 92.39 $ 123.82 89.47 $ 109.43 – $ 92.39 $ 123.82 – $ 105.57 109.43 – $ 92.39 $ 123.82 – $ 105.57 Holders As 92.39 $ 123.82 – $ 105.57 Holders As of October 20 105.57 Holders As of October 20 , 2017 , there were As of October 20 , 2017 , there were 25,333 shareholder , 2017 , there were 25,333 shareholder of record . Dividends paid a total of $ 12.6 billion and $ 12.0 billion $ 12.6 billion and $ 12.0 billion in dividend during 2017 12.0 billion in dividend during 2017 and 2016 , respectively , in dividend during 2017 and 2016 , respectively , and expects pay quarterly dividend of $ 0.63 per common share each quarter Directors . Apple Inc. | 2017 Form 10-K | 18 Purchases Apple Inc. | 2017 Form 10-K | 18 Purchases of Equity | 2017 Form 10-K | 18 Purchases of Equity Securities by the three month ended September 30 , 2017 wa a follows month ended September 30 , 2017 wa a follows ( in the Plans or Programs ( 1 ) July 2 , 2017 Programs ( 1 ) July 2 , 2017 to August 5 1 ) July 2 , 2017 to August 5 , 2017 2 , 2017 to August 5 , 2017 : Open market 2017 to August 5 , 2017 : Open market and privately market and privately negotiated purchase 10,076 $ 148.87 10,076 August 6 privately negotiated purchase 10,076 $ 148.87 10,076 August 6 , 2017 negotiated purchase 10,076 $ 148.87 10,076 August 6 , 2017 to 10,076 $ 148.87 10,076 August 6 , 2017 to September 2 148.87 10,076 August 6 , 2017 to September 2 , 2017 6 , 2017 to September 2 , 2017 : May 2017 2017 to September 2 , 2017 : May 2017 ASR 4,510 2 , 2017 : May 2017 ASR 4,510 ( 2 ) 2017 : May 2017 ASR 4,510 ( 2 ) 4,510 August May 2017 ASR 4,510 ( 2 ) 4,510 August 2017 ASR ASR 4,510 ( 2 ) 4,510 August 2017 ASR 15,069 ( ( 2 ) 4,510 August 2017 ASR 15,069 ( 3 ) ) 4,510 August 2017 ASR 15,069 ( 3 ) ( 3 August 2017 ASR 15,069 ( 3 ) ( 3 ) 15,069 15,069 ( 3 ) ( 3 ) 15,069 ( 3 ) 3 ) ( 3 ) 15,069 ( 3 ) Open market ( 3 ) 15,069 ( 3 ) Open market and privately market and privately negotiated purchase 9,684 $ 160.06 9,684 September 3 privately negotiated purchase 9,684 $ 160.06 9,684 September 3 , 2017 negotiated purchase 9,684 $ 160.06 9,684 September 3 , 2017 to 9,684 $ 160.06 9,684 September 3 , 2017 to September 30 160.06 9,684 September 3 , 2017 to September 30 , 2017 3 , 2017 to September 30 , 2017 : Open market 2017 to September 30 , 2017 : Open market and privately market and privately negotiated purchase 9,313 $ 155.69 9,313 Total 48,652 privately negotiated purchase 9,313 $ 155.69 9,313 Total 48,652 $ 44,023 negotiated purchase 9,313 $ 155.69 9,313 Total 48,652 $ 44,023 ( 9,313 $ 155.69 9,313 Total 48,652 $ 44,023 ( 1 ) 155.69 9,313 Total 48,652 $ 44,023 ( 1 ) In May Total 48,652 $ 44,023 ( 1 ) In May 2017 , ( 1 ) In May 2017 , the Company ’ s share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company ’ stock , of which $ 166 billion had been utilized a been utilized a of September 30 , 2017 . The remaining a of September 30 , 2017 . The remaining $ 44 2017 . The remaining $ 44 billion in the table represents repurchase program a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In May 2017 , ( 2 ) In May 2017 , the Company entered into to purchase up to $ 3.0 billion of the Company ’ common stock . In August 2017 , the purchase period for ASR ended and an additional 4.5 million share were delivered and retired . In total , 20.1 million share were delivered under average repurchase price of $ 149.20 . ( 3 ) In of $ 149.20 . ( 3 ) In August 2017 , ( 3 ) In August 2017 , the Company entered into to purchase up to $ 3.0 billion of the Company ’ an up-front payment of $ 3.0 billion , the financial institution which will end in November 2017 . The total number of period . Apple Inc. | 2017 Form 10-K | 19 Company Apple Inc. | 2017 Form 10-K | 19 Company Stock Performance | 2017 Form 10-K | 19 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 30 , 2017 . The graph year ended September 30 , 2017 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 28 , 2012 . Note that close on September 28 , 2012 . Note that historic stock price performance . * $ 100 invested on 9/28/12 in stock * $ 100 invested on 9/28/12 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2017 S & P , a right reserved . Copyright © 2017 Dow Jones & Co. All All right reserved . September 2012 September 2013 September 2014 September reserved . September 2012 September 2013 September 2014 September 2015 September September 2012 September 2013 September 2014 September 2015 September 2016 September September 2013 September 2014 September 2015 September 2016 September 2017 Apple September 2014 September 2015 September 2016 September 2017 Apple Inc. $ September 2015 September 2016 September 2017 Apple Inc. $ 100 $ September 2017 Apple Inc. $ 100 $ 74 $ 111 $ Apple Inc. $ 100 $ 74 $ 111 $ 128 $ $ 100 $ 74 $ 111 $ 128 $ 129 $ $ 74 $ 111 $ 128 $ 129 $ 179 S $ 111 $ 128 $ 129 $ 179 S & P $ 128 $ 129 $ 179 S & P 500 Index $ 179 S & P 500 Index $ 100 $ 119 & P 500 Index $ 100 $ 119 $ 143 $ 500 Index $ 100 $ 119 $ 143 $ 142 $ $ 100 $ 119 $ 143 $ 142 $ 164 $ $ 119 $ 143 $ 142 $ 164 $ 194 S $ 143 $ 142 $ 164 $ 194 S & P $ 142 $ 164 $ 194 S & P Information Technology P Information Technology Index $ 100 $ 107 $ 138 $ Technology Index $ 100 $ 107 $ 138 $ 141 $ $ 100 $ 107 $ 138 $ 141 $ 173 $ $ 107 $ 138 $ 141 $ 173 $ 223 Dow $ 138 $ 141 $ 173 $ 223 Dow Jones U.S. $ 141 $ 173 $ 223 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 105 $ 137 $ Supersector Index $ 100 $ 105 $ 137 $ 137 $ $ 100 $ 105 $ 137 $ 137 $ 167 $ $ 105 $ 137 $ 137 $ 167 $ 214 Apple $ 137 $ 137 $ 167 $ 214 Apple Inc. | $ 137 $ 167 $ 214 Apple Inc. | 2017 Form $ 214 Apple Inc. | 2017 Form 10-K | 20 Item Apple Inc. | 2017 Form 10-K | 20 Item 6 . | 2017 Form 10-K | 20 Item 6 . Selected Financial Form 10-K | 20 Item 6 . Selected Financial Data The the five year ended September 30 , 2017 , is not year ended September 30 , 2017 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2017 2016 2015 2014 2013 Net share amount ) . 2017 2016 2015 2014 2013 Net sale amount ) . 2017 2016 2015 2014 2013 Net sale $ ) . 2017 2016 2015 2014 2013 Net sale $ 229,234 . 2017 2016 2015 2014 2013 Net sale $ 229,234 $ 2014 2013 Net sale $ 229,234 $ 215,639 $ 233,715 $ Net sale $ 229,234 $ 215,639 $ 233,715 $ 182,795 $ $ 229,234 $ 215,639 $ 233,715 $ 182,795 $ 170,910 Net $ 215,639 $ 233,715 $ 182,795 $ 170,910 Net income $ $ 233,715 $ 182,795 $ 170,910 Net income $ 48,351 $ $ 170,910 Net income $ 48,351 $ 45,687 $ 53,394 $ Net income $ 48,351 $ 45,687 $ 53,394 $ 39,510 $ $ 48,351 $ 45,687 $ 53,394 $ 39,510 $ 37,037 Earnings $ 45,687 $ 53,394 $ 39,510 $ 37,037 Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 $ : Basic $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ $ 9.27 $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 8.35 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.21 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.21 $ 8.31 6.49 $ 5.72 Diluted $ 9.21 $ 8.31 $ 9.22 $ 5.72 Diluted $ 9.21 $ 8.31 $ 9.22 $ 6.45 $ $ 9.21 $ 8.31 $ 9.22 $ 6.45 $ 5.68 Cash $ 8.31 $ 9.22 $ 6.45 $ 5.68 Cash dividend declared $ 9.22 $ 6.45 $ 5.68 Cash dividend declared per share dividend declared per share $ 2.40 $ 2.18 $ 1.98 $ per share $ 2.40 $ 2.18 $ 1.98 $ 1.82 $ $ 2.40 $ 2.18 $ 1.98 $ 1.82 $ 1.64 Shares $ 2.18 $ 1.98 $ 1.82 $ 1.64 Shares used in $ 1.98 $ 1.82 $ 1.64 Shares used in computing earnings earnings per share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted per share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 share : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 : Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 Basic 5,217,242 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 5,470,820 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 6,521,634 Total 5,753,421 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 6,521,634 Total cash 6,085,572 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 6,521,634 Total cash , 6,477,320 Diluted 5,251,692 5,500,281 5,793,069 6,122,663 6,521,634 Total cash , cash Diluted 5,251,692 5,500,281 5,793,069 6,122,663 6,521,634 Total cash , cash equivalent equivalent and marketable security $ 268,895 $ 237,585 $ 205,666 $ marketable security $ 268,895 $ 237,585 $ 205,666 $ 155,239 $ $ 268,895 $ 237,585 $ 205,666 $ 155,239 $ 146,761 Total $ 237,585 $ 205,666 $ 155,239 $ 146,761 Total asset $ $ 205,666 $ 155,239 $ 146,761 Total asset $ 375,319 $ $ 146,761 Total asset $ 375,319 $ 321,686 $ 290,345 $ Total asset $ 375,319 $ 321,686 $ 290,345 $ 231,839 $ $ 375,319 $ 321,686 $ 290,345 $ 231,839 $ 207,000 Commercial $ 321,686 $ 290,345 $ 231,839 $ 207,000 Commercial paper $ $ 290,345 $ 231,839 $ 207,000 Commercial paper $ 11,977 $ $ 207,000 Commercial paper $ 11,977 $ 8,105 $ 8,499 $ Commercial paper $ 11,977 $ 8,105 $ 8,499 $ 6,308 $ $ 11,977 $ 8,105 $ 8,499 $ 6,308 $ — Total $ 8,105 $ 8,499 $ 6,308 $ — Total term debt — Total term debt ( 1 ) $ 103,703 $ 78,927 debt ( 1 ) $ 103,703 $ 78,927 $ 55,829 $ 1 ) $ 103,703 $ 78,927 $ 55,829 $ 28,987 $ $ 103,703 $ 78,927 $ 55,829 $ 28,987 $ 16,960 Other $ 78,927 $ 55,829 $ 28,987 $ 16,960 Other long-term obligation $ 55,829 $ 28,987 $ 16,960 Other long-term obligation ( 2 16,960 Other long-term obligation ( 2 ) $ 40,415 $ 36,074 obligation ( 2 ) $ 40,415 $ 36,074 $ 33,427 $ 2 ) $ 40,415 $ 36,074 $ 33,427 $ 24,826 $ $ 40,415 $ 36,074 $ 33,427 $ 24,826 $ 20,208 Total $ 36,074 $ 33,427 $ 24,826 $ 20,208 Total liability $ $ 33,427 $ 24,826 $ 20,208 Total liability $ 241,272 $ $ 20,208 Total liability $ 241,272 $ 193,437 $ 170,990 $ Total liability $ 241,272 $ 193,437 $ 170,990 $ 120,292 $ $ 241,272 $ 193,437 $ 170,990 $ 120,292 $ 83,451 Total $ 193,437 $ 170,990 $ 120,292 $ 83,451 Total shareholder ’ $ 170,990 $ 120,292 $ 83,451 Total shareholder ’ equity $ Total shareholder ’ equity $ 134,047 $ 128,249 $ 119,355 $ ’ equity $ 134,047 $ 128,249 $ 119,355 $ 111,547 $ $ 134,047 $ 128,249 $ 119,355 $ 111,547 $ 123,549 ( $ 128,249 $ 119,355 $ 111,547 $ 123,549 ( 1 ) $ 119,355 $ 111,547 $ 123,549 ( 1 ) Includes current $ 111,547 $ 123,549 ( 1 ) Includes current and long-term of term debt . ( 2 ) Excludes non-current deferred revenue revenue . Apple Inc. | 2017 Form 10-K | 21 Item Apple Inc. | 2017 Form 10-K | 21 Item 7 . | 2017 Form 10-K | 21 Item 7 . Management ’ Form 10-K | 21 Item 7 . Management ’ s Discussion this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2017 included 53 week and ended s fiscal year 2017 included 53 week and ended on September week and ended on September 30 , 2017 . A 14th ended on September 30 , 2017 . A 14th week wa 30 , 2017 . A 14th week wa included in the in the first quarter of 2017 , a is done every Company ’ s fiscal year 2016 and 2015 ended on September s fiscal year 2016 and 2015 ended on September 24 , and 2015 ended on September 24 , 2016 and September 26 ended on September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , respectively , 2016 and September 26 , 2015 , respectively , and spanned , respectively , and spanned 52 week each . Fiscal 2017 52 week each . Fiscal 2017 Highlights Net sale increased 6 2017 Highlights Net sale increased 6 % or $ 13.6 billion increased 6 % or $ 13.6 billion during 2017 compared to or $ 13.6 billion during 2017 compared to 2016 , primarily billion during 2017 compared to 2016 , primarily driven by growth impact on net sale during 2017 compared to 2016 . In sale during 2017 compared to 2016 . In May 2017 , to 2016 . In May 2017 , the Company announced an of the program from $ 250 billion to $ 300 billion $ 250 billion to $ 300 billion through March 2019 . $ 300 billion through March 2019 . This included increasing it share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion and raising it quarterly it quarterly dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share beginning in May per share beginning in May 2017 . During 2017 , the in May 2017 . During 2017 , the Company spent $ , the Company spent $ 33.0 billion to repurchase share of and dividend equivalent of $ 12.8 billion . Additionally , the , the Company issued $ 24.0 billion of U.S. dollar-denominated term term debt and C $ 2.5 billion of Canadian dollar-denominated term Canadian dollar-denominated term debt during 2017 . Fiscal 2016 Highlights Net debt during 2017 . Fiscal 2016 Highlights Net sale declined 8 2016 Highlights Net sale declined 8 % or $ 18.1 billion declined 8 % or $ 18.1 billion during 2016 compared to or $ 18.1 billion during 2016 compared to 2015 , primarily billion during 2016 compared to 2015 , primarily driven by a in Services . In April 2016 , the Company announced an of the program from $ 200 billion to $ 250 billion $ 200 billion to $ 250 billion through March 2018 . $ 250 billion through March 2018 . This included increasing it share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion and raising it quarterly it quarterly dividend from $ 0.52 to $ 0.57 per share from $ 0.52 to $ 0.57 per share beginning in May per share beginning in May 2016 . During 2016 , the in May 2016 . During 2016 , the Company spent $ , the Company spent $ 29.0 billion to repurchase share of and dividend equivalent of $ 12.2 billion . Additionally , the , the Company issued $ 23.9 billion of U.S. dollar-denominated term term debt and A $ 1.4 billion of Australian dollar-denominated term Australian dollar-denominated term debt during 2016 . Apple Inc. | 2017 2016 . Apple Inc. | 2017 Form 10-K | 22 Sales Apple Inc. | 2017 Form 10-K | 22 Sales Data The | 2017 Form 10-K | 22 Sales Data The following table unit sale by product for 2017 , 2016 and 2015 ( by product for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million and unit in thousand ) : 2017 Change 2016 Change 2015 Net thousand ) : 2017 Change 2016 Change 2015 Net Sales by : 2017 Change 2016 Change 2015 Net Sales by Operating Segment Operating Segment : Americas $ 96,600 12 % $ 86,613 ( Segment : Americas $ 96,600 12 % $ 86,613 ( 8 $ 96,600 12 % $ 86,613 ( 8 ) % $ 12 % $ 86,613 ( 8 ) % $ 93,864 Europe ( 8 ) % $ 93,864 Europe 54,938 10 % 49,952 ) % $ 93,864 Europe 54,938 10 % 49,952 ( 1 % $ 93,864 Europe 54,938 10 % 49,952 ( 1 ) 93,864 Europe 54,938 10 % 49,952 ( 1 ) % 50,337 54,938 10 % 49,952 ( 1 ) % 50,337 Greater China 49,952 ( 1 ) % 50,337 Greater China 44,764 ( 8 ) % 50,337 Greater China 44,764 ( 8 ) % 48,492 50,337 Greater China 44,764 ( 8 ) % 48,492 ( 17 44,764 ( 8 ) % 48,492 ( 17 ) % 58,715 8 ) % 48,492 ( 17 ) % 58,715 Japan 17,733 48,492 ( 17 ) % 58,715 Japan 17,733 5 % 16,928 17 ) % 58,715 Japan 17,733 5 % 16,928 8 % ) % 58,715 Japan 17,733 5 % 16,928 8 % 15,706 58,715 Japan 17,733 5 % 16,928 8 % 15,706 Rest of Japan 17,733 5 % 16,928 8 % 15,706 Rest of Asia 5 % 16,928 8 % 15,706 Rest of Asia Pacific 15,199 15,706 Rest of Asia Pacific 15,199 11 % 13,654 ( 10 Rest of Asia Pacific 15,199 11 % 13,654 ( 10 ) Asia Pacific 15,199 11 % 13,654 ( 10 ) % 15,093 15,199 11 % 13,654 ( 10 ) % 15,093 Total net 13,654 ( 10 ) % 15,093 Total net sale $ 229,234 15,093 Total net sale $ 229,234 6 % $ 215,639 ( Total net sale $ 229,234 6 % $ 215,639 ( 8 $ 229,234 6 % $ 215,639 ( 8 ) % $ 6 % $ 215,639 ( 8 ) % $ 233,715 Net ( 8 ) % $ 233,715 Net Sales by Product : by Product : iPhone ( 1 ) $ 141,319 3 % iPhone ( 1 ) $ 141,319 3 % $ 136,700 ( ( 1 ) $ 141,319 3 % $ 136,700 ( 12 $ 141,319 3 % $ 136,700 ( 12 ) % $ 3 % $ 136,700 ( 12 ) % $ 155,041 iPad ( 12 ) % $ 155,041 iPad ( 1 ) 19,222 % $ 155,041 iPad ( 1 ) 19,222 ( 7 ) 155,041 iPad ( 1 ) 19,222 ( 7 ) % 20,628 ( 1 ) 19,222 ( 7 ) % 20,628 ( 11 19,222 ( 7 ) % 20,628 ( 11 ) % 23,227 7 ) % 20,628 ( 11 ) % 23,227 Mac ( 20,628 ( 11 ) % 23,227 Mac ( 1 ) 25,850 ) % 23,227 Mac ( 1 ) 25,850 13 % 22,831 23,227 Mac ( 1 ) 25,850 13 % 22,831 ( 10 Mac ( 1 ) 25,850 13 % 22,831 ( 10 ) 1 ) 25,850 13 % 22,831 ( 10 ) % 25,471 25,850 13 % 22,831 ( 10 ) % 25,471 Services ( 22,831 ( 10 ) % 25,471 Services ( 2 ) 29,980 ) % 25,471 Services ( 2 ) 29,980 23 % 24,348 25,471 Services ( 2 ) 29,980 23 % 24,348 22 % Services ( 2 ) 29,980 23 % 24,348 22 % 19,909 2 ) 29,980 23 % 24,348 22 % 19,909 Other Products ) 29,980 23 % 24,348 22 % 19,909 Other Products ( 23 % 24,348 22 % 19,909 Other Products ( 1 ) % 19,909 Other Products ( 1 ) ( 3 ) 12,863 Products ( 1 ) ( 3 ) 12,863 16 % 11,132 1 ) ( 3 ) 12,863 16 % 11,132 11 % ) ( 3 ) 12,863 16 % 11,132 11 % 10,067 3 ) 12,863 16 % 11,132 11 % 10,067 Total net ) 12,863 16 % 11,132 11 % 10,067 Total net sale 16 % 11,132 11 % 10,067 Total net sale $ 229,234 10,067 Total net sale $ 229,234 6 % $ 215,639 ( Total net sale $ 229,234 6 % $ 215,639 ( 8 $ 229,234 6 % $ 215,639 ( 8 ) % $ 6 % $ 215,639 ( 8 ) % $ 233,715 Unit ( 8 ) % $ 233,715 Unit Sales by Product : Sales by Product : iPhone 216,756 2 % 211,884 ( 8 by Product : iPhone 216,756 2 % 211,884 ( 8 ) : iPhone 216,756 2 % 211,884 ( 8 ) % 231,218 216,756 2 % 211,884 ( 8 ) % 231,218 iPad 43,753 211,884 ( 8 ) % 231,218 iPad 43,753 ( 4 ) 8 ) % 231,218 iPad 43,753 ( 4 ) % 45,590 % 231,218 iPad 43,753 ( 4 ) % 45,590 ( 17 43,753 ( 4 ) % 45,590 ( 17 ) % 54,856 4 ) % 45,590 ( 17 ) % 54,856 Mac 19,251 45,590 ( 17 ) % 54,856 Mac 19,251 4 % 18,484 17 ) % 54,856 Mac 19,251 4 % 18,484 ( 10 ) % 54,856 Mac 19,251 4 % 18,484 ( 10 ) 54,856 Mac 19,251 4 % 18,484 ( 10 ) % 20,587 19,251 4 % 18,484 ( 10 ) % 20,587 ( 1 18,484 ( 10 ) % 20,587 ( 1 ) Includes deferral 10 ) % 20,587 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from Digital in the fourth quarter of 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2017 Form 10-K | 23 Product Apple Inc. | 2017 Form 10-K | 23 Product Performance iPhone | 2017 Form 10-K | 23 Product Performance iPhone The following and unit sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million and unit in thousand ) : 2017 Change 2016 Change 2015 Net thousand ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 141,319 3 Change 2015 Net sale $ 141,319 3 % $ 136,700 ( 2015 Net sale $ 141,319 3 % $ 136,700 ( 12 $ 141,319 3 % $ 136,700 ( 12 ) % $ 3 % $ 136,700 ( 12 ) % $ 155,041 Percentage ( 12 ) % $ 155,041 Percentage of total net sale Percentage of total net sale 62 % 63 % 66 % total net sale 62 % 63 % 66 % Unit sale sale 62 % 63 % 66 % Unit sale 216,756 2 % 66 % Unit sale 216,756 2 % 211,884 ( 8 66 % Unit sale 216,756 2 % 211,884 ( 8 ) Unit sale 216,756 2 % 211,884 ( 8 ) % 231,218 216,756 2 % 211,884 ( 8 ) % 231,218 iPhone net 211,884 ( 8 ) % 231,218 iPhone net sale increased during iPhone net sale increased during 2017 compared to 2016 due to increased during 2017 compared to 2016 due to higher iPhone unit on iPhone net sale during 2017 compared to 2016. iPhone net sale during 2017 compared to 2016. iPhone net sale decreased during iPhone net sale decreased during 2016 compared to 2015 . The decreased during 2016 compared to 2015 . The Company belief the rate of iPhone upgrade during 2016 compared to 2015 and challenging upgrade during 2016 compared to 2015 and challenging macroeconomic condition in number of major market in 2016 . Average selling price for iPhone were lower year-over-year during 2016 due primarily to a different the iPhone SE introduced in 2016 , and the effect of and unit sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million and unit in thousand ) : 2017 Change 2016 Change 2015 Net thousand ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 19,222 ( Change 2015 Net sale $ 19,222 ( 7 ) % $ Net sale $ 19,222 ( 7 ) % $ 20,628 ( ( 7 ) % $ 20,628 ( 11 ) % $ ) % $ 20,628 ( 11 ) % $ 23,227 Percentage ( 11 ) % $ 23,227 Percentage of total net sale Percentage of total net sale 8 % 10 % 10 % total net sale 8 % 10 % 10 % Unit sale sale 8 % 10 % 10 % Unit sale 43,753 ( % 10 % Unit sale 43,753 ( 4 ) % 45,590 % Unit sale 43,753 ( 4 ) % 45,590 ( 17 43,753 ( 4 ) % 45,590 ( 17 ) % 54,856 4 ) % 45,590 ( 17 ) % 54,856 iPad net 45,590 ( 17 ) % 54,856 iPad net sale decreased during iPad net sale decreased during 2017 compared to 2016 due to decreased during 2017 compared to 2016 due to lower iPad unit on iPad net sale during 2017 compared to 2016. iPad net sale during 2017 compared to 2016. iPad net sale decreased during iPad net sale decreased during 2016 compared to 2015 primarily due decreased during 2016 compared to 2015 primarily due to lower unit and unit sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million and unit in thousand ) : 2017 Change 2016 Change 2015 Net thousand ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 25,850 13 Change 2015 Net sale $ 25,850 13 % $ 22,831 ( 2015 Net sale $ 25,850 13 % $ 22,831 ( 10 $ 25,850 13 % $ 22,831 ( 10 ) % $ 13 % $ 22,831 ( 10 ) % $ 25,471 Percentage ( 10 ) % $ 25,471 Percentage of total net sale Percentage of total net sale 11 % 11 % 11 % total net sale 11 % 11 % 11 % Unit sale sale 11 % 11 % 11 % Unit sale 19,251 4 % 11 % Unit sale 19,251 4 % 18,484 ( 10 11 % Unit sale 19,251 4 % 18,484 ( 10 ) Unit sale 19,251 4 % 18,484 ( 10 ) % 20,587 19,251 4 % 18,484 ( 10 ) % 20,587 Mac net 18,484 ( 10 ) % 20,587 Mac net sale increased during Mac net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to a different on Mac net sale during 2017 compared to 2016 . Mac sale during 2017 compared to 2016 . Mac net sale decreased Mac net sale decreased during 2016 compared to 2015 primarily due decreased during 2016 compared to 2015 primarily due to lower year-over-year sale . Apple Inc. | 2017 Form 10-K | 24 Services Apple Inc. | 2017 Form 10-K | 24 Services The following | 2017 Form 10-K | 24 Services The following table present Services net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 29,980 23 Change 2015 Net sale $ 29,980 23 % $ 24,348 22 2015 Net sale $ 29,980 23 % $ 24,348 22 % $ 29,980 23 % $ 24,348 22 % $ 19,909 Percentage 29,980 23 % $ 24,348 22 % $ 19,909 Percentage of $ 24,348 22 % $ 19,909 Percentage of total net sale Percentage of total net sale 13 % 11 % 9 % total net sale 13 % 11 % 9 % The year-over-year sale 13 % 11 % 9 % The year-over-year growth in in Services net sale in 2017 wa due primarily to increase in the fourth quarter of 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change in Services net sale in 2016 wa due primarily to growth During the first quarter of 2016 , the Company received $ , the Company received $ 548 million from Samsung Electronics Co. in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and Americas net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 96,600 12 Change 2015 Net sale $ 96,600 12 % $ 86,613 ( 2015 Net sale $ 96,600 12 % $ 86,613 ( 8 $ 96,600 12 % $ 86,613 ( 8 ) % $ 12 % $ 86,613 ( 8 ) % $ 93,864 Percentage ( 8 ) % $ 93,864 Percentage of total net sale Percentage of total net sale 42 % 40 % 40 % total net sale 42 % 40 % 40 % Americas net sale 42 % 40 % 40 % Americas net sale increased Americas net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net Americas net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net Europe net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 54,938 10 Change 2015 Net sale $ 54,938 10 % $ 49,952 ( 2015 Net sale $ 54,938 10 % $ 49,952 ( 1 $ 54,938 10 % $ 49,952 ( 1 ) % $ 10 % $ 49,952 ( 1 ) % $ 50,337 Percentage ( 1 ) % $ 50,337 Percentage of total net sale Percentage of total net sale 24 % 23 % 22 % total net sale 24 % 23 % 22 % Europe net sale 24 % 23 % 22 % Europe net sale increased Europe net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net on Europe net sale during 2017 compared to 2016 . Europe sale during 2017 compared to 2016 . Europe net sale decreased Europe net sale decreased during 2016 compared to 2015 driven primarily decreased during 2016 compared to 2015 driven primarily by the effect Services . Apple Inc. | 2017 Form 10-K | 25 Greater Apple Inc. | 2017 Form 10-K | 25 Greater China The | 2017 Form 10-K | 25 Greater China The following table China net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 44,764 ( Change 2015 Net sale $ 44,764 ( 8 ) % $ Net sale $ 44,764 ( 8 ) % $ 48,492 ( ( 8 ) % $ 48,492 ( 17 ) % $ ) % $ 48,492 ( 17 ) % $ 58,715 Percentage ( 17 ) % $ 58,715 Percentage of total net sale Percentage of total net sale 20 % 22 % 25 % total net sale 20 % 22 % 25 % Greater China sale 20 % 22 % 25 % Greater China net sale China net sale decreased during 2017 compared to 2016 due primarily decreased during 2017 compared to 2016 due primarily to lower net Greater China net sale during 2017 compared to 2016 . Greater sale during 2017 compared to 2016 . Greater China net sale China net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net Japan net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 17,733 5 Change 2015 Net sale $ 17,733 5 % $ 16,928 8 2015 Net sale $ 17,733 5 % $ 16,928 8 % $ 17,733 5 % $ 16,928 8 % $ 15,706 Percentage 17,733 5 % $ 16,928 8 % $ 15,706 Percentage of $ 16,928 8 % $ 15,706 Percentage of total net sale Percentage of total net sale 8 % 8 % 7 % total net sale 8 % 8 % 7 % The year-over-year sale 8 % 8 % 7 % The year-over-year increase in in Japan net sale in 2017 and 2016 wa due primarily net sale in 2017 and 2016 wa due primarily to higher Pacific net sale information for 2017 , 2016 and 2015 ( sale information for 2017 , 2016 and 2015 ( dollar in for 2017 , 2016 and 2015 ( dollar in million ) dollar in million ) : 2017 Change 2016 Change 2015 Net million ) : 2017 Change 2016 Change 2015 Net sale $ : 2017 Change 2016 Change 2015 Net sale $ 15,199 11 Change 2015 Net sale $ 15,199 11 % $ 13,654 ( 2015 Net sale $ 15,199 11 % $ 13,654 ( 10 $ 15,199 11 % $ 13,654 ( 10 ) % $ 11 % $ 13,654 ( 10 ) % $ 15,093 Percentage ( 10 ) % $ 15,093 Percentage of total net sale Percentage of total net sale 7 % 6 % 6 % total net sale 7 % 6 % 6 % Rest of sale 7 % 6 % 6 % Rest of Asia Pacific Pacific net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net Asia Pacific net sale during 2017 compared to 2016 . Rest sale during 2017 compared to 2016 . Rest of Asia Pacific Pacific net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net Gross Margin Gross margin for 2017 , 2016 and 2015 wa Gross margin for 2017 , 2016 and 2015 wa a follows for 2017 , 2016 and 2015 wa a follows ( dollar dollar in million ) : 2017 2016 2015 Net sale $ in million ) : 2017 2016 2015 Net sale $ 229,234 million ) : 2017 2016 2015 Net sale $ 229,234 $ 2016 2015 Net sale $ 229,234 $ 215,639 $ 233,715 Cost Net sale $ 229,234 $ 215,639 $ 233,715 Cost of sale $ 229,234 $ 215,639 $ 233,715 Cost of sale 141,048 131,376 $ 233,715 Cost of sale 141,048 131,376 140,089 Gross margin $ 233,715 Cost of sale 141,048 131,376 140,089 Gross margin $ 88,186 Cost of sale 141,048 131,376 140,089 Gross margin $ 88,186 $ 131,376 140,089 Gross margin $ 88,186 $ 84,263 $ 93,626 Gross Gross margin $ 88,186 $ 84,263 $ 93,626 Gross margin percentage $ 88,186 $ 84,263 $ 93,626 Gross margin percentage 38.5 % $ 93,626 Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage 38.5 % 39.1 % 40.1 % Gross margin percentage decreased Gross margin percentage decreased in 2017 compared to 2016 due primarily decreased in 2017 compared to 2016 due primarily to higher product percentage and gross margin during 2017 compared to 2016 . Gross margin during 2017 compared to 2016 . Gross margin percentage decreased Gross margin percentage decreased in 2016 compared to 2015 due primarily decreased in 2016 compared to 2015 due primarily to the effect service . Apple Inc. | 2017 Form 10-K | 26 The Apple Inc. | 2017 Form 10-K | 26 The Company anticipates | 2017 Form 10-K | 26 The Company anticipates gross margin during the first quarter of 2018 to be between 38.0 % of 2018 to be between 38.0 % and 38.5 % . be between 38.0 % and 38.5 % . The foregoing statement in the first quarter of 2018 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2017 , 2016 and 2015 were Operating expense for 2017 , 2016 and 2015 were a follows for 2017 , 2016 and 2015 were a follows ( dollar dollar in million ) : 2017 Change 2016 Change 2015 Research million ) : 2017 Change 2016 Change 2015 Research and development : 2017 Change 2016 Change 2015 Research and development $ 11,581 2015 Research and development $ 11,581 15 % $ 10,045 25 Research and development $ 11,581 15 % $ 10,045 25 % $ 11,581 15 % $ 10,045 25 % $ 8,067 Percentage 11,581 15 % $ 10,045 25 % $ 8,067 Percentage of $ 10,045 25 % $ 8,067 Percentage of total net sale Percentage of total net sale 5 % 5 % 3 % total net sale 5 % 5 % 3 % Selling , sale 5 % 5 % 3 % Selling , general and , general and administrative $ 15,261 8 % $ 14,194 ( general and administrative $ 15,261 8 % $ 14,194 ( 1 $ 15,261 8 % $ 14,194 ( 1 ) % $ 8 % $ 14,194 ( 1 ) % $ 14,329 Percentage ( 1 ) % $ 14,329 Percentage of total net sale Percentage of total net sale 7 % 7 % 6 % total net sale 7 % 7 % 6 % Total operating sale 7 % 7 % 6 % Total operating expense $ % Total operating expense $ 26,842 11 % $ 24,239 8 Total operating expense $ 26,842 11 % $ 24,239 8 % $ 26,842 11 % $ 24,239 8 % $ 22,396 Percentage 26,842 11 % $ 24,239 8 % $ 22,396 Percentage of $ 24,239 8 % $ 22,396 Percentage of total net sale Percentage of total net sale 12 % 11 % 10 % total net sale 12 % 11 % 10 % Research and sale 12 % 11 % 10 % Research and Development The R & D expense in 2017 and 2016 wa driven primarily D expense in 2017 and 2016 wa driven primarily by increase general and administrative expense in 2017 compared to 2016 wa driven expense in 2017 compared to 2016 wa driven primarily by an general and administrative expense in 2016 compared to 2015 wa due expense in 2016 compared to 2015 wa due primarily to lower expense ) , net for 2017 , 2016 and 2015 wa , net for 2017 , 2016 and 2015 wa a follows for 2017 , 2016 and 2015 wa a follows ( dollar dollar in million ) : 2017 Change 2016 Change 2015 Interest million ) : 2017 Change 2016 Change 2015 Interest and dividend : 2017 Change 2016 Change 2015 Interest and dividend income $ Interest and dividend income $ 5,201 $ 3,999 $ 2,921 Interest dividend income $ 5,201 $ 3,999 $ 2,921 Interest expense ( $ 5,201 $ 3,999 $ 2,921 Interest expense ( 2,323 ) $ 2,921 Interest expense ( 2,323 ) ( 1,456 ) ( expense ( 2,323 ) ( 1,456 ) ( 733 ) Other ) ( 1,456 ) ( 733 ) Other expense , net Other expense , net ( 133 ) ( 1,195 ) ( net ( 133 ) ( 1,195 ) ( 903 ) Total ) ( 1,195 ) ( 903 ) Total other income/ ( expense ) , net $ 2,745 104 % $ 1,348 5 ) , net $ 2,745 104 % $ 1,348 5 % $ 2,745 104 % $ 1,348 5 % $ 1,285 The 2,745 104 % $ 1,348 5 % $ 1,285 The year-over-year $ 1,348 5 % $ 1,285 The year-over-year increase in other expense ) , net during 2017 wa due primarily to higher expense ) , net during 2016 wa due primarily to higher equivalent and marketable security wa 1.99 % , 1.73 % and security wa 1.99 % , 1.73 % and 1.49 % in % , 1.73 % and 1.49 % in 2017 , 2016 % and 1.49 % in 2017 , 2016 and 2015 , 1.49 % in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . Apple Inc. respectively . Apple Inc. | 2017 Form 10-K | 27 Provision Apple Inc. | 2017 Form 10-K | 27 Provision for Income | 2017 Form 10-K | 27 Provision for Income Taxes Provision and effective tax rate for 2017 , 2016 and 2015 were tax rate for 2017 , 2016 and 2015 were a follows for 2017 , 2016 and 2015 were a follows ( dollar dollar in million ) : 2017 2016 2015 Provision for income in million ) : 2017 2016 2015 Provision for income tax million ) : 2017 2016 2015 Provision for income tax $ Provision for income tax $ 15,738 $ 15,685 $ 19,121 Effective income tax $ 15,738 $ 15,685 $ 19,121 Effective tax rate $ 15,738 $ 15,685 $ 19,121 Effective tax rate 24.6 % $ 19,121 Effective tax rate 24.6 % 25.6 % 26.4 % Effective tax rate 24.6 % 25.6 % 26.4 % The Company rate 24.6 % 25.6 % 26.4 % The Company ’ s s effective tax rate for 2017 , 2016 and 2015 differ tax rate for 2017 , 2016 and 2015 differ from the for 2017 , 2016 and 2015 differ from the statutory federal federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2017 compared to 2016 wa due rate in 2017 compared to 2016 wa due to a different lower effective tax rate in 2016 compared to 2015 wa due rate in 2016 compared to 2015 wa due primarily to greater credit . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had deferred and tax credit of $ 3.9 billion and deferred tax liability deferred tax liability of $ 31.5 billion . Management belief it it review of the year 2010 through 2012 during the third of the year 2010 through 2012 during the third quarter of during the third quarter of 2017 . All year prior to . All year prior to 2013 are closed , and the is currently examining the year 2013 through 2015 . The Company examining the year 2013 through 2015 . The Company is also , the year subsequent to 2003 generally remain open and could resolution occurs . On August 30 , 2016 , the European . On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of be placed into escrow in 2018 , where they will remain Accounting Pronouncements Hedging In August 2017 , the Financial Accounting Standards ASU ” ) No . 2017-12 , Derivatives and Hedging ( Derivatives and Hedging ( Topic 815 ) : Targeted Improvements to Hedging Activities ( “ ASU 2017-12 ” ) . ASU 2017-12 2017-12 ” ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition . Restricted Cash In November 2016 , the FASB issued ASU FASB issued ASU No . 2016-18 , Statement of Cash Flows of Cash Flows ( Topic 230 ) : Restricted Cash ( Restricted Cash ( “ ASU 2016-18 ” ) , which enhances The Company will adopt ASU 2016-18 in it first quarter of in it first quarter of 2019 utilizing the retrospective transition method significant . Apple Inc. | 2017 Form 10-K | 28 Income Apple Inc. | 2017 Form 10-K | 28 Income Taxes In | 2017 Form 10-K | 28 Income Taxes In October 2016 28 Income Taxes In October 2016 , the FASB issued ASU FASB issued ASU No . 2016-16 , Income Taxes ( Topic , Income Taxes ( Topic 740 ) : Intra-Entity Transfers of Than Inventory ( “ ASU 2016-16 ” ) , which requires The Company will adopt ASU 2016-16 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition anticipates recording up to $ 9 billion of net deferred tax ultimate impact of adopting ASU 2016-16 will depend on the balance . Stock Compensation In March 2016 , the FASB issued ASU FASB issued ASU No . 2016-09 , Compensation – Stock Compensation – Stock Compensation ( Topic 718 ) : Improvements to Employee Payment Accounting ( “ ASU 2016-09 ” ) , which modifies The Company will adopt ASU 2016-09 in it first quarter of in it first quarter of 2018 . Currently , excess tax award . Leases In February 2016 , the FASB issued ASU FASB issued ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( “ ASU 2016-02 842 ) ( “ ASU 2016-02 ” ) , which modifies The Company will adopt ASU 2016-02 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition and impact of adopting ASU 2016-02 , currently the Company anticipates liability in excess of $ 9.5 billion on it Consolidated Balance ultimate impact of adopting ASU 2016-02 will depend on the Company . Financial Instruments In January 2016 , the FASB issued ASU FASB issued ASU No . 2016-01 , Financial Instruments – Overall Instruments – Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities ( “ ASU 2016-01 ” ) , which update The Company will adopt ASU 2016-01 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition , the adoption of ASU 2016-01 is not expected to have financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies The Company will adopt ASU 2016-13 in it first quarter of in it first quarter of 2021 utilizing the modified retrospective transition , the adoption of ASU 2016-13 is not expected to have . Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( “ ASU 2014-09 606 ) ( “ ASU 2014-09 ” ) , which amends for revenue recognition . ASU 2014-09 is based on principle that following standard related to ASU 2014-09 : ASU No . 2016-08 2014-09 : ASU No . 2016-08 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Principal versus Agent Agent Considerations ( “ ASU 2016-08 ” ) ; ASU No ) ; ASU No . 2016-10 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Identifying Performance Obligations and Licensing ( “ ASU 2016-10 ” ) ; ASU No ) ; ASU No . 2016-12 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Narrow-Scope Improvements and Practical Expedients ( “ ASU 2016-12 ” ) ; and ASU ; and ASU No . 2016-20 , Technical Corrections and Improvements Corrections and Improvements to Topic 606 , Revenue from Contracts with with Customers ( “ ASU 2016-20 ” ) . The Company The Company must adopt ASU 2016-08 , ASU 2016-10 , ASU adopt ASU 2016-08 , ASU 2016-10 , ASU 2016-12 and ASU , ASU 2016-10 , ASU 2016-12 and ASU 2016-20 with ASU , ASU 2016-12 and ASU 2016-20 with ASU 2014-09 ( collectively and ASU 2016-20 with ASU 2014-09 ( collectively , the “ in it first quarter of 2019 utilizing the full retrospective transition statement . Apple Inc. | 2017 Form 10-K | 29 Liquidity Apple Inc. | 2017 Form 10-K | 29 Liquidity and Capital | 2017 Form 10-K | 29 Liquidity and Capital Resources The for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2017 2016 2015 Cash , cash in million ) : 2017 2016 2015 Cash , cash equivalent million ) : 2017 2016 2015 Cash , cash equivalent and equivalent and marketable security $ 268,895 $ 237,585 $ 205,666 Property marketable security $ 268,895 $ 237,585 $ 205,666 Property , plant $ 268,895 $ 237,585 $ 205,666 Property , plant and equipment and equipment , net $ 33,783 $ 27,010 $ 22,471 Commercial , net $ 33,783 $ 27,010 $ 22,471 Commercial paper $ $ 33,783 $ 27,010 $ 22,471 Commercial paper $ 11,977 $ $ 22,471 Commercial paper $ 11,977 $ 8,105 $ 8,499 Total Commercial paper $ 11,977 $ 8,105 $ 8,499 Total term debt $ 11,977 $ 8,105 $ 8,499 Total term debt $ 103,703 8,499 Total term debt $ 103,703 $ 78,927 $ 55,829 Working term debt $ 103,703 $ 78,927 $ 55,829 Working capital $ $ 103,703 $ 78,927 $ 55,829 Working capital $ 27,831 $ $ 55,829 Working capital $ 27,831 $ 27,863 $ 8,768 Cash Working capital $ 27,831 $ 27,863 $ 8,768 Cash generated by $ 27,831 $ 27,863 $ 8,768 Cash generated by operating activity generated by operating activity $ 63,598 $ 65,824 $ 81,266 Cash operating activity $ 63,598 $ 65,824 $ 81,266 Cash used in $ 63,598 $ 65,824 $ 81,266 Cash used in investing activity in investing activity $ ( 46,446 ) $ ( 45,977 ) ( 46,446 ) $ ( 45,977 ) $ ( 56,274 ) ( 45,977 ) $ ( 56,274 ) Cash used in financing in financing activity $ ( 17,347 ) $ ( 20,483 ) ( 17,347 ) $ ( 20,483 ) $ ( 17,716 ) ( 20,483 ) $ ( 17,716 ) The Company belief it existing operation over the next 12 month . The Company currently borrowing . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the Company 2017 and September 24 , 2016 , the Company ’ s by foreign subsidiary were $ 252.3 billion and $ 216.0 billion $ 252.3 billion and $ 216.0 billion , respectively , and be placed into escrow in 2018 , where they will remain of principal loss . During 2017 , cash generated by operating by operating activity of $ 63.6 billion wa a result of wa a result of $ 48.4 billion of net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 5.6 billion , which included a a one-time payment of $ 1.9 billion related to a multi-year in investing activity of $ 46.4 billion during 2017 consisted primarily of $ 46.4 billion during 2017 consisted primarily of cash used and maturity , of $ 33.1 billion and cash used to plant and equipment of $ 12.5 billion . Cash used in in financing activity of $ 17.3 billion during 2017 consisted primarily of $ 17.3 billion during 2017 consisted primarily of cash used repurchase common stock of $ 32.9 billion , cash used to and dividend equivalent of $ 12.8 billion and cash used to repay term debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . During 2016 , $ 3.9 billion . During 2016 , cash generated by operating by operating activity of $ 65.8 billion wa a result of wa a result of $ 45.7 billion of net income and to net income of $ 20.1 billion . Cash used in in investing activity of $ 46.0 billion during 2016 consisted primarily of $ 46.0 billion during 2016 consisted primarily of cash used and maturity , of $ 30.6 billion and cash used to plant and equipment of $ 12.7 billion . Cash used in in financing activity of $ 20.5 billion during 2016 consisted primarily of $ 20.5 billion during 2016 consisted primarily of cash used repurchase common stock of $ 29.7 billion , cash used to and dividend equivalent of $ 12.2 billion and cash used to repay term debt of $ 2.5 billion , partially offset by debt , net of $ 25.0 billion . Capital Assets The s capital expenditure were $ 14.9 billion during 2017 . The were $ 14.9 billion during 2017 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2018 , which includes product tooling repurchase . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of 1.20 % and maturity generally le month . Apple Inc. | 2017 Form 10-K | 30 As Apple Inc. | 2017 Form 10-K | 30 As of September | 2017 Form 10-K | 30 As of September 30 , | 30 As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had outstanding aggregate principal amount of $ 104.0 billion ( collectively the “ Notes ” ) . During 2017 , the Company repaid $ , the Company repaid $ 3.5 billion of it Notes upon s Notes a of September 30 , 2017 are a follows a of September 30 , 2017 are a follows ( in ( in million ) : 2018 $ 6,500 2019 8,863 2020 million ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total term 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt $ 104,021 61,391 Total term debt $ 104,021 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 2 , “ Financial Instruments ” Financial Instruments ” and Note 6 , “ Debt . ” Capital Return Program In May 2017 , the Company ’ s capital return program from $ 250 billion to $ 300 billion $ 250 billion to $ 300 billion , which included an share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company ’ quarterly cash dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share , beginning with during the third quarter of 2017 . The Company intends to Directors . As of September 30 , 2017 , $ 166 As of September 30 , 2017 , $ 166 billion of 30 , 2017 , $ 166 billion of the share repurchase under plan complying with Rule 10b5-1 under the Exchange Act . capital return program in August 2012 through September 30 , 2017 in August 2012 through September 30 , 2017 ( in million 2012 through September 30 , 2017 ( in million ) : Settlement of Equity Awards Total 2017 $ 12,769 $ 15,000 $ Equity Awards Total 2017 $ 12,769 $ 15,000 $ 18,001 $ Total 2017 $ 12,769 $ 15,000 $ 18,001 $ 1,874 $ $ 12,769 $ 15,000 $ 18,001 $ 1,874 $ 47,644 2016 $ 15,000 $ 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 $ 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 18,001 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 $ 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 1,874 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 11,561 $ 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 11,561 6,000 47,644 2016 12,150 12,000 17,000 1,570 42,720 2015 11,561 6,000 30,026 2016 12,150 12,000 17,000 1,570 42,720 2015 11,561 6,000 30,026 1,499 12,150 12,000 17,000 1,570 42,720 2015 11,561 6,000 30,026 1,499 49,086 12,000 17,000 1,570 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 17,000 1,570 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 1,570 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 56 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 56 2,544 13,950 9,000 1,082 34,596 2012 2,488 — — 56 2,544 Total 34,596 2012 2,488 — — 56 2,544 Total $ 60,658 $ 2012 2,488 — — 56 2,544 Total $ 60,658 $ 67,950 — 56 2,544 Total $ 60,658 $ 67,950 $ 98,027 $ 2,544 Total $ 60,658 $ 67,950 $ 98,027 $ 7,239 $ $ 60,658 $ 67,950 $ 98,027 $ 7,239 $ 233,874 The $ 67,950 $ 98,027 $ 7,239 $ 233,874 The Company expects $ 98,027 $ 7,239 $ 233,874 The Company expects to execute by the end of March 2019 by paying dividend and dividend Company . Apple Inc. | 2017 Form 10-K | 31 The Apple Inc. | 2017 Form 10-K | 31 The following table | 2017 Form 10-K | 31 The following table present certain the Company a of September 30 , 2017 , and excludes a of September 30 , 2017 , and excludes amount already Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Total Term debt $ Years Total Term debt $ 6,500 $ 18,083 $ 18,047 $ Term debt $ 6,500 $ 18,083 $ 18,047 $ 61,391 $ $ 6,500 $ 18,083 $ 18,047 $ 61,391 $ 104,021 Operating $ 18,083 $ 18,047 $ 61,391 $ 104,021 Operating lease 1,223 $ 18,047 $ 61,391 $ 104,021 Operating lease 1,223 2,295 1,904 61,391 $ 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing $ 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing purchase 104,021 Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing purchase obligation Operating lease 1,223 2,295 1,904 4,123 9,545 Manufacturing purchase obligation ( lease 1,223 2,295 1,904 4,123 9,545 Manufacturing purchase obligation ( 1 9,545 Manufacturing purchase obligation ( 1 ) 32,787 2,632 2,147 — purchase obligation ( 1 ) 32,787 2,632 2,147 — 37,566 Other obligation ( 1 ) 32,787 2,632 2,147 — 37,566 Other purchase ( 1 ) 32,787 2,632 2,147 — 37,566 Other purchase obligation ) 32,787 2,632 2,147 — 37,566 Other purchase obligation 4,019 1,669 — 37,566 Other purchase obligation 4,019 1,669 417 14 6,119 Total 37,566 Other purchase obligation 4,019 1,669 417 14 6,119 Total $ Other purchase obligation 4,019 1,669 417 14 6,119 Total $ 44,529 purchase obligation 4,019 1,669 417 14 6,119 Total $ 44,529 $ obligation 4,019 1,669 417 14 6,119 Total $ 44,529 $ 24,679 417 14 6,119 Total $ 44,529 $ 24,679 $ 22,515 $ 6,119 Total $ 44,529 $ 24,679 $ 22,515 $ 65,528 $ $ 44,529 $ 24,679 $ 22,515 $ 65,528 $ 157,251 ( $ 24,679 $ 22,515 $ 65,528 $ 157,251 ( 1 ) $ 22,515 $ 65,528 $ 157,251 ( 1 ) Represents amount $ 65,528 $ 157,251 ( 1 ) Represents amount expected to Operating Leases As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company ’ s noncancelable operating lease were $ 9.5 billion . The Company ’ have original term not exceeding 10 year and generally contain multi-year typically cover period up to 150 day . The Company also supplier . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company expects to Company expects to pay $ 37.6 billion under manufacturing-related supplier arrangement obligation . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had other other purchase obligation of $ 6.1 billion . The Company ’ penalty . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had deferred deferred tax liability of $ 31.5 billion , gross unrecognized tax unrecognized tax benefit of $ 8.4 billion and an additional $ billion and an additional $ 1.2 billion for gross interest and arise . Apple Inc. | 2017 Form 10-K | 32 Critical Apple Inc. | 2017 Form 10-K | 32 Critical Accounting Policies | 2017 Form 10-K | 32 Critical Accounting Policies and Estimates and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy provided . Apple Inc. | 2017 Form 10-K | 33 The Apple Inc. | 2017 Form 10-K | 33 The Company record | 2017 Form 10-K | 33 The Company record reduction to requirement for period up to 150 day . If there is recorded . Apple Inc. | 2017 Form 10-K | 34 Warranty Apple Inc. | 2017 Form 10-K | 34 Warranty Costs The | 2017 Form 10-K | 34 Warranty Costs The Company accrues that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies affected . Apple Inc. | 2017 Form 10-K | 35 Item Apple Inc. | 2017 Form 10-K | 35 Item 7A . | 2017 Form 10-K | 35 Item 7A . Quantitative and Form 10-K | 35 Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , a hypothetical 2017 and September 24 , 2016 , a hypothetical 100 basis , 2016 , a hypothetical 100 basis point increase in interest would result in a $ 6.0 billion and $ 4.9 billion $ 6.0 billion and $ 4.9 billion incremental decline in the maturity . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the Company 2017 and September 24 , 2016 , the Company had outstanding aggregate carrying amount of $ 103.7 billion and $ 78.9 billion $ 103.7 billion and $ 78.9 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 to increase by 2017 and September 24 , 2016 to increase by $ 376 2016 to increase by $ 376 million and $ 271 million $ 376 million and $ 271 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , “ Debt . ” , typically for up to 12 month . However , the exposure . Apple Inc. | 2017 Form 10-K | 36 To Apple Inc. | 2017 Form 10-K | 36 To provide a | 2017 Form 10-K | 36 To provide a meaningful assessment , the Company estimate with 95 % confidence , a maximum in fair value of $ 485 million a of September 30 485 million a of September 30 , 2017 compared to a a of September 30 , 2017 compared to a maximum one-day in fair value of $ 434 million a of September 24 434 million a of September 24 , 2016 . Because the a of September 24 , 2016 . Because the Company us analysis performed a of September 30 , 2017 due to the a of September 30 , 2017 due to the inherent limitation position . Apple Inc. | 2017 Form 10-K | 37 Item Apple Inc. | 2017 Form 10-K | 37 Item 8 . | 2017 Form 10-K | 37 Item 8 . Financial Statements Form 10-K | 37 Item 8 . Financial Statements and Supplementary for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 39 Consolidated Statements 2016 and September 26 , 2015 39 Consolidated Statements of Comprehensive and September 26 , 2015 39 Consolidated Statements of Comprehensive Income for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 40 Consolidated Balance 2016 and September 26 , 2015 40 Consolidated Balance Sheets a and September 26 , 2015 40 Consolidated Balance Sheets a of Balance Sheets a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 41 Consolidated Statements 2017 and September 24 , 2016 41 Consolidated Statements of Shareholders and September 24 , 2016 41 Consolidated Statements of Shareholders ’ for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 42 Consolidated Statements 2016 and September 26 , 2015 42 Consolidated Statements of Cash and September 26 , 2015 42 Consolidated Statements of Cash Flows for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 43 Notes to 2016 and September 26 , 2015 43 Notes to Consolidated Financial and September 26 , 2015 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 68 Reports of Ernst & Young Independent Registered Public Accounting Firm 70 All financial statement schedule have thereto . Apple Inc. | 2017 Form 10-K | 38 Apple Apple Inc. | 2017 Form 10-K | 38 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 38 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 30 , 2017 September 24 , Years ended September 30 , 2017 September 24 , 2016 September September 30 , 2017 September 24 , 2016 September 26 , , 2017 September 24 , 2016 September 26 , 2015 Net September 24 , 2016 September 26 , 2015 Net sale $ , 2016 September 26 , 2015 Net sale $ 229,234 $ , 2015 Net sale $ 229,234 $ 215,639 $ 233,715 Cost Net sale $ 229,234 $ 215,639 $ 233,715 Cost of sale $ 229,234 $ 215,639 $ 233,715 Cost of sale 141,048 131,376 $ 233,715 Cost of sale 141,048 131,376 140,089 Gross margin 88,186 233,715 Cost of sale 141,048 131,376 140,089 Gross margin 88,186 84,263 Cost of sale 141,048 131,376 140,089 Gross margin 88,186 84,263 93,626 141,048 131,376 140,089 Gross margin 88,186 84,263 93,626 Operating expense : 131,376 140,089 Gross margin 88,186 84,263 93,626 Operating expense : Research 140,089 Gross margin 88,186 84,263 93,626 Operating expense : Research and expense : Research and development 11,581 10,045 8,067 Selling , general : Research and development 11,581 10,045 8,067 Selling , general and Research and development 11,581 10,045 8,067 Selling , general and administrative Selling , general and administrative 15,261 14,194 14,329 Total operating expense , general and administrative 15,261 14,194 14,329 Total operating expense 26,842 general and administrative 15,261 14,194 14,329 Total operating expense 26,842 24,239 14,194 14,329 Total operating expense 26,842 24,239 22,396 Operating income 61,344 14,329 Total operating expense 26,842 24,239 22,396 Operating income 61,344 60,024 Total operating expense 26,842 24,239 22,396 Operating income 61,344 60,024 71,230 26,842 24,239 22,396 Operating income 61,344 60,024 71,230 Other income/ ( 24,239 22,396 Operating income 61,344 60,024 71,230 Other income/ ( expense 22,396 Operating income 61,344 60,024 71,230 Other income/ ( expense ) ( expense ) , net 2,745 1,348 1,285 Income before provision expense ) , net 2,745 1,348 1,285 Income before provision for ) , net 2,745 1,348 1,285 Income before provision for income before provision for income tax 64,089 61,372 72,515 Provision for income provision for income tax 64,089 61,372 72,515 Provision for income tax for income tax 64,089 61,372 72,515 Provision for income tax 15,738 72,515 Provision for income tax 15,738 15,685 19,121 Net income $ Provision for income tax 15,738 15,685 19,121 Net income $ 48,351 for income tax 15,738 15,685 19,121 Net income $ 48,351 $ 15,685 19,121 Net income $ 48,351 $ 45,687 $ 53,394 Earnings Net income $ 48,351 $ 45,687 $ 53,394 Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 9.27 $ 8.35 $ 9.28 Diluted : Basic $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 9.27 $ 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 8.35 $ 9.28 Diluted $ 9.21 $ 8.31 $ 9.22 Shares 9.28 Diluted $ 9.21 $ 8.31 $ 9.22 Shares used in $ 9.21 $ 8.31 $ 9.22 Shares used in computing earnings earnings per share : Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 per share : Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 share : Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 Cash Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 Cash dividend declared 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 Cash dividend declared per 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 Cash dividend declared per share dividend declared per share $ 2.40 $ 2.18 $ 1.98 See per share $ 2.40 $ 2.18 $ 1.98 See accompanying Notes $ 2.40 $ 2.18 $ 1.98 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 39 Apple Apple Inc. | 2017 Form 10-K | 39 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 39 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 30 , 2017 September 24 , Years ended September 30 , 2017 September 24 , 2016 September September 30 , 2017 September 24 , 2016 September 26 , , 2017 September 24 , 2016 September 26 , 2015 Net September 24 , 2016 September 26 , 2015 Net income $ , 2016 September 26 , 2015 Net income $ 48,351 $ , 2015 Net income $ 48,351 $ 45,687 $ 53,394 Other Net income $ 48,351 $ 45,687 $ 53,394 Other comprehensive income/ $ 48,351 $ 45,687 $ 53,394 Other comprehensive income/ ( loss tax effect of $ ( 77 ) , $ 8 and ( 77 ) , $ 8 and $ 201 , respectively , $ 8 and $ 201 , respectively 224 75 ( and $ 201 , respectively 224 75 ( 411 ) Change $ 201 , respectively 224 75 ( 411 ) Change in , respectively 224 75 ( 411 ) Change in unrealized gains/losses expense ) of $ ( 478 ) , $ ( 7 478 ) , $ ( 7 ) and $ ( 441 7 ) and $ ( 441 ) , respectively 1,315 7 ( 441 ) , respectively 1,315 7 2,905 Adjustment for net 441 ) , respectively 1,315 7 2,905 Adjustment for net ( ) , respectively 1,315 7 2,905 Adjustment for net ( gain ( benefit ) of $ 475 , $ 131 and $ of $ 475 , $ 131 and $ 630 , respectively , $ 131 and $ 630 , respectively ( 1,477 ) $ 630 , respectively ( 1,477 ) ( 741 ) ( respectively ( 1,477 ) ( 741 ) ( 3,497 ) Total ) ( 741 ) ( 3,497 ) Total change in unrealized , net of tax ( 162 ) ( 734 ) ( tax ( 162 ) ( 734 ) ( 592 ) Change ) ( 734 ) ( 592 ) Change in unrealized gains/losses ( expense ) of $ 425 , $ ( 863 ) $ 425 , $ ( 863 ) and $ 264 , ( 863 ) and $ 264 , respectively ( 782 ) $ 264 , respectively ( 782 ) 1,582 ( 483 ) , respectively ( 782 ) 1,582 ( 483 ) Adjustment for ( 782 ) 1,582 ( 483 ) Adjustment for net ( ( benefit ) of $ 35 , $ ( 31 ) $ 35 , $ ( 31 ) and $ ( 32 31 ) and $ ( 32 ) , respectively ( 64 32 ) , respectively ( 64 ) 56 59 Total change , respectively ( 64 ) 56 59 Total change in unrealized respectively ( 64 ) 56 59 Total change in unrealized gains/losses , net of tax ( 846 ) 1,638 ( 424 ) of tax ( 846 ) 1,638 ( 424 ) Total other ( 846 ) 1,638 ( 424 ) Total other comprehensive income/ income/ ( loss ) ( 784 ) 979 ( 1,427 ) loss ) ( 784 ) 979 ( 1,427 ) Total comprehensive ( 784 ) 979 ( 1,427 ) Total comprehensive income $ ) Total comprehensive income $ 47,567 $ 46,666 $ 51,967 See comprehensive income $ 47,567 $ 46,666 $ 51,967 See accompanying Notes $ 47,567 $ 46,666 $ 51,967 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 40 Apple Apple Inc. | 2017 Form 10-K | 40 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 40 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 30 , 2017 September 24 , value ) September 30 , 2017 September 24 , 2016 ASSETS September 30 , 2017 September 24 , 2016 ASSETS : Current , 2017 September 24 , 2016 ASSETS : Current asset : Cash and cash equivalent $ 20,289 $ 20,484 Short-term marketable security cash equivalent $ 20,289 $ 20,484 Short-term marketable security 53,892 46,671 $ 20,484 Short-term marketable security 53,892 46,671 Accounts receivable , le 20,484 Short-term marketable security 53,892 46,671 Accounts receivable , le allowance , le allowance of $ 58 and $ 53 , respectively of $ 58 and $ 53 , respectively 17,874 15,754 Inventories and $ 53 , respectively 17,874 15,754 Inventories 4,855 2,132 Vendor $ 53 , respectively 17,874 15,754 Inventories 4,855 2,132 Vendor non-trade , respectively 17,874 15,754 Inventories 4,855 2,132 Vendor non-trade receivables 17,799 respectively 17,874 15,754 Inventories 4,855 2,132 Vendor non-trade receivables 17,799 13,545 4,855 2,132 Vendor non-trade receivables 17,799 13,545 Other current asset 13,936 2,132 Vendor non-trade receivables 17,799 13,545 Other current asset 13,936 8,283 17,799 13,545 Other current asset 13,936 8,283 Total current asset 128,645 13,545 Other current asset 13,936 8,283 Total current asset 128,645 106,869 13,936 8,283 Total current asset 128,645 106,869 Long-term marketable security 194,714 8,283 Total current asset 128,645 106,869 Long-term marketable security 194,714 170,430 128,645 106,869 Long-term marketable security 194,714 170,430 Property , plant and 106,869 Long-term marketable security 194,714 170,430 Property , plant and equipment plant and equipment , net 33,783 27,010 Goodwill 5,717 5,414 Acquired and equipment , net 33,783 27,010 Goodwill 5,717 5,414 Acquired intangible , net 33,783 27,010 Goodwill 5,717 5,414 Acquired intangible asset , net 33,783 27,010 Goodwill 5,717 5,414 Acquired intangible asset , net Acquired intangible asset , net 2,298 3,206 Other non-current asset 10,162 intangible asset , net 2,298 3,206 Other non-current asset 10,162 8,757 2,298 3,206 Other non-current asset 10,162 8,757 Total asset $ 375,319 3,206 Other non-current asset 10,162 8,757 Total asset $ 375,319 $ 10,162 8,757 Total asset $ 375,319 $ 321,686 LIABILITIES AND SHAREHOLDERS Total asset $ 375,319 $ 321,686 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 Accounts payable $ 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred 49,049 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 $ 37,294 Accrued expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial expense 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 25,744 22,027 Deferred revenue 7,548 8,080 Commercial paper 11,977 8,105 Current revenue 7,548 8,080 Commercial paper 11,977 8,105 Current portion of long-term 7,548 8,080 Commercial paper 11,977 8,105 Current portion of long-term debt Current portion of long-term debt 6,496 3,500 Total current liability 100,814 portion of long-term debt 6,496 3,500 Total current liability 100,814 79,006 6,496 3,500 Total current liability 100,814 79,006 Deferred revenue , non-current 3,500 Total current liability 100,814 79,006 Deferred revenue , non-current 2,836 79,006 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Deferred revenue , non-current 2,836 2,930 Long-term debt 97,207 75,427 Other non-current 2,836 2,930 Long-term debt 97,207 75,427 Other non-current liability 40,415 2,836 2,930 Long-term debt 97,207 75,427 Other non-current liability 40,415 36,074 97,207 75,427 Other non-current liability 40,415 36,074 Total liability 241,272 193,437 75,427 Other non-current liability 40,415 36,074 Total liability 241,272 193,437 Commitments liability 40,415 36,074 Total liability 241,272 193,437 Commitments and contingency Shareholders 40,415 36,074 Total liability 241,272 193,437 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.00001 par value : 12,600,000 share authorized ; 5,126,201 and : 12,600,000 share authorized ; 5,126,201 and 5,336,166 share issued and share authorized ; 5,126,201 and 5,336,166 share issued and outstanding , issued and outstanding , respectively 35,867 31,251 Retained earnings 98,330 96,364 and outstanding , respectively 35,867 31,251 Retained earnings 98,330 96,364 Accumulated respectively 35,867 31,251 Retained earnings 98,330 96,364 Accumulated other comprehensive income/ 35,867 31,251 Retained earnings 98,330 96,364 Accumulated other comprehensive income/ ( income/ ( loss ) ( 150 ) 634 Total shareholder ’ loss ) ( 150 ) 634 Total shareholder ’ equity 134,047 634 Total shareholder ’ equity 134,047 128,249 Total liability and shareholder Total shareholder ’ equity 134,047 128,249 Total liability and shareholder ’ and shareholder ’ equity $ 375,319 $ 321,686 See accompanying Notes ’ equity $ 375,319 $ 321,686 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 41 Apple Apple Inc. | 2017 Form 10-K | 41 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 41 Apple Inc. CONSOLIDATED STATEMENTS OF Amount Balances a of September 27 , 2014 5,866,161 $ 23,313 a of September 27 , 2014 5,866,161 $ 23,313 $ 87,152 of September 27 , 2014 5,866,161 $ 23,313 $ 87,152 $ 27 , 2014 5,866,161 $ 23,313 $ 87,152 $ 1,082 $ 2014 5,866,161 $ 23,313 $ 87,152 $ 1,082 $ 111,547 Net $ 23,313 $ 87,152 $ 1,082 $ 111,547 Net income — $ 87,152 $ 1,082 $ 111,547 Net income — — 53,394 111,547 Net income — — 53,394 — 53,394 Other comprehensive income/ income — — 53,394 — 53,394 Other comprehensive income/ ( loss ) — — — ( 1,427 ) ( 1,427 ) Dividends — ( 1,427 ) ( 1,427 ) Dividends and dividend equivalent equivalent declared — — ( 11,627 ) — ( 11,627 ) ( 11,627 ) — ( 11,627 ) Repurchase of common stock Repurchase of common stock ( 325,032 ) — ( 36,026 ) ( 325,032 ) — ( 36,026 ) — ( 36,026 ) ( 36,026 ) — ( 36,026 ) Share-based compensation — 3,586 36,026 ) Share-based compensation — 3,586 — — 3,586 Common stock compensation — 3,586 — — 3,586 Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) — 37,624 ( 231 ) ( 609 ) — ( 840 ) ( 609 ) — ( 840 ) Tax benefit from equity including transfer pricing adjustment — 748 — — 748 Balances a adjustment — 748 — — 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 27,416 92,284 a of September 26 , 2015 5,578,753 27,416 92,284 ( 345 of September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net income — 27,416 92,284 ( 345 ) 119,355 Net income — — 45,687 119,355 Net income — — 45,687 — 45,687 Other comprehensive income/ income — — 45,687 — 45,687 Other comprehensive income/ ( loss loss ) — — — 979 979 Dividends and dividend equivalent ) — — — 979 979 Dividends and dividend equivalent declared equivalent declared — — ( 12,188 ) — ( 12,188 ) ( 12,188 ) — ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) — ( 29,000 ) ( 279,609 ) — ( 29,000 ) — ( 29,000 ) ( 29,000 ) — ( 29,000 ) Share-based compensation — 4,262 29,000 ) Share-based compensation — 4,262 — — 4,262 Common stock compensation — 4,262 — — 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) — 37,022 ( 806 ) ( 419 ) — ( 1,225 ) ( 419 ) — ( 1,225 ) Tax benefit from equity including transfer pricing adjustment — 379 — — 379 Balances a adjustment — 379 — — 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 31,251 96,364 a of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income — , 2016 5,336,166 31,251 96,364 634 128,249 Net income — — 2016 5,336,166 31,251 96,364 634 128,249 Net income — — 48,351 128,249 Net income — — 48,351 — 48,351 Other comprehensive income/ income — — 48,351 — 48,351 Other comprehensive income/ ( loss ) — — — ( 784 ) ( 784 ) Dividends — ( 784 ) ( 784 ) Dividends and dividend equivalent equivalent declared — — ( 12,803 ) — ( 12,803 ) ( 12,803 ) — ( 12,803 ) Repurchase of common stock Repurchase of common stock ( 246,496 ) — ( 33,001 ) ( 246,496 ) — ( 33,001 ) — ( 33,001 ) ( 33,001 ) — ( 33,001 ) Share-based compensation — 4,909 33,001 ) Share-based compensation — 4,909 — — 4,909 Common stock compensation — 4,909 — — 4,909 Common stock issued , net share withheld for employee tax 36,531 ( 913 ) ( 581 for employee tax 36,531 ( 913 ) ( 581 ) — 36,531 ( 913 ) ( 581 ) — ( 1,494 ) ( 581 ) — ( 1,494 ) Tax benefit from equity including transfer pricing adjustment — 620 — — 620 Balances a adjustment — 620 — — 620 Balances a of September 30 620 Balances a of September 30 , 2017 5,126,201 $ 35,867 a of September 30 , 2017 5,126,201 $ 35,867 $ 98,330 of September 30 , 2017 5,126,201 $ 35,867 $ 98,330 $ 30 , 2017 5,126,201 $ 35,867 $ 98,330 $ ( 150 2017 5,126,201 $ 35,867 $ 98,330 $ ( 150 ) $ 35,867 $ 98,330 $ ( 150 ) $ 134,047 See accompanying $ ( 150 ) $ 134,047 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 42 Apple Apple Inc. | 2017 Form 10-K | 42 Apple Inc. CONSOLIDATED | 2017 Form 10-K | 42 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 30 , 2017 September 24 , Years ended September 30 , 2017 September 24 , 2016 September September 30 , 2017 September 24 , 2016 September 26 , , 2017 September 24 , 2016 September 26 , 2015 Cash September 24 , 2016 September 26 , 2015 Cash and cash , 2016 September 26 , 2015 Cash and cash equivalent , beginning of the year $ 20,484 $ 21,120 $ 13,844 Operating the year $ 20,484 $ 21,120 $ 13,844 Operating activity : $ 20,484 $ 21,120 $ 13,844 Operating activity : Net income Operating activity : Net income 48,351 45,687 53,394 Adjustments to reconcile activity : Net income 48,351 45,687 53,394 Adjustments to reconcile net : Net income 48,351 45,687 53,394 Adjustments to reconcile net income activity : Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense : Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense 4,840 Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense 4,840 4,210 10,505 11,257 Share-based compensation expense 4,840 4,210 3,586 Deferred income tax 11,257 Share-based compensation expense 4,840 4,210 3,586 Deferred income tax expense Share-based compensation expense 4,840 4,210 3,586 Deferred income tax expense 5,966 3,586 Deferred income tax expense 5,966 4,938 1,382 Other ( 166 Deferred income tax expense 5,966 4,938 1,382 Other ( 166 ) income tax expense 5,966 4,938 1,382 Other ( 166 ) 486 5,966 4,938 1,382 Other ( 166 ) 486 385 Changes in 1,382 Other ( 166 ) 486 385 Changes in operating asset Other ( 166 ) 486 385 Changes in operating asset and Accounts receivable , net ( 2,093 ) 527 417 Inventories ( , net ( 2,093 ) 527 417 Inventories ( 2,723 ) net ( 2,093 ) 527 417 Inventories ( 2,723 ) 217 ) 527 417 Inventories ( 2,723 ) 217 ( 238 ) 417 Inventories ( 2,723 ) 217 ( 238 ) Vendor non-trade ( 2,723 ) 217 ( 238 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 4,254 ) ( 51 ) ( receivables ( 4,254 ) ( 51 ) ( 3,735 ) Other ) ( 51 ) ( 3,735 ) Other current and non-current current and non-current asset ( 5,318 ) 1,055 ( 283 ) non-current asset ( 5,318 ) 1,055 ( 283 ) Accounts payable ( 5,318 ) 1,055 ( 283 ) Accounts payable 9,618 1,837 ( 283 ) Accounts payable 9,618 1,837 5,001 Deferred revenue ( 283 ) Accounts payable 9,618 1,837 5,001 Deferred revenue ( 626 ) Accounts payable 9,618 1,837 5,001 Deferred revenue ( 626 ) 1,837 5,001 Deferred revenue ( 626 ) ( 1,554 ) 1,042 revenue ( 626 ) ( 1,554 ) 1,042 Other current and 626 ) ( 1,554 ) 1,042 Other current and non-current liability current and non-current liability ( 154 ) ( 2,033 ) 9,058 liability ( 154 ) ( 2,033 ) 9,058 Cash generated by 154 ) ( 2,033 ) 9,058 Cash generated by operating activity Cash generated by operating activity 63,598 65,824 81,266 Investing activity : generated by operating activity 63,598 65,824 81,266 Investing activity : Purchases by operating activity 63,598 65,824 81,266 Investing activity : Purchases of Purchases of marketable security ( 159,486 ) ( 142,428 ) ( security ( 159,486 ) ( 142,428 ) ( 166,402 ) Proceeds ) ( 142,428 ) ( 166,402 ) Proceeds from maturity of from maturity of marketable security 31,775 21,258 14,538 Proceeds from sale maturity of marketable security 31,775 21,258 14,538 Proceeds from sale of of marketable security 31,775 21,258 14,538 Proceeds from sale of marketable from sale of marketable security 94,564 90,536 107,447 Payments made in sale of marketable security 94,564 90,536 107,447 Payments made in connection of marketable security 94,564 90,536 107,447 Payments made in connection with business acquisition , net ( 329 ) ( 297 ) ( net ( 329 ) ( 297 ) ( 343 ) Payments ) ( 297 ) ( 343 ) Payments for acquisition of , plant and equipment ( 12,451 ) ( 12,734 ) ( equipment ( 12,451 ) ( 12,734 ) ( 11,247 ) Payments ) ( 12,734 ) ( 11,247 ) Payments for acquisition of acquisition of intangible asset ( 344 ) ( 814 ) ( asset ( 344 ) ( 814 ) ( 241 ) Payments ) ( 814 ) ( 241 ) Payments for strategic investment strategic investment , net ( 395 ) ( 1,388 ) — net ( 395 ) ( 1,388 ) — Other 220 ( ( 1,388 ) — Other 220 ( 110 ) ( 26 ) — Other 220 ( 110 ) ( 26 ) Cash 220 ( 110 ) ( 26 ) Cash used in investing used in investing activity ( 46,446 ) ( 45,977 ) ( activity ( 46,446 ) ( 45,977 ) ( 56,274 ) Financing ) ( 45,977 ) ( 56,274 ) Financing activity : Proceeds from issuance of common stock 555 495 543 Excess tax benefit issuance of common stock 555 495 543 Excess tax benefit from of common stock 555 495 543 Excess tax benefit from equity tax benefit from equity award 627 407 749 Payments for tax benefit from equity award 627 407 749 Payments for tax related from equity award 627 407 749 Payments for tax related to settlement of equity award ( 1,874 ) ( 1,570 ) ( award ( 1,874 ) ( 1,570 ) ( 1,499 ) Payments ) ( 1,570 ) ( 1,499 ) Payments for dividend and dividend and dividend equivalent ( 12,769 ) ( 12,150 ) ( equivalent ( 12,769 ) ( 12,150 ) ( 11,561 ) Repurchases ) ( 12,150 ) ( 11,561 ) Repurchases of common stock Repurchases of common stock ( 32,900 ) ( 29,722 ) ( stock ( 32,900 ) ( 29,722 ) ( 35,253 ) Proceeds ) ( 29,722 ) ( 35,253 ) Proceeds from issuance of of term debt , net 28,662 24,954 27,114 Repayments of term term debt , net 28,662 24,954 27,114 Repayments of term debt debt , net 28,662 24,954 27,114 Repayments of term debt ( Repayments of term debt ( 3,500 ) ( 2,500 ) — debt ( 3,500 ) ( 2,500 ) — Change in commercial in commercial paper , net 3,852 ( 397 ) 2,191 Cash paper , net 3,852 ( 397 ) 2,191 Cash used in net 3,852 ( 397 ) 2,191 Cash used in financing activity used in financing activity ( 17,347 ) ( 20,483 ) ( activity ( 17,347 ) ( 20,483 ) ( 17,716 ) Increase/ ) ( 20,483 ) ( 17,716 ) Increase/ ( Decrease ) cash and cash equivalent ( 195 ) ( 636 ) 7,276 equivalent ( 195 ) ( 636 ) 7,276 Cash and cash 195 ) ( 636 ) 7,276 Cash and cash equivalent , end of the year $ 20,289 $ 20,484 $ 21,120 Supplemental the year $ 20,289 $ 20,484 $ 21,120 Supplemental cash flow $ 20,289 $ 20,484 $ 21,120 Supplemental cash flow disclosure : income tax , net $ 11,591 $ 10,444 $ 13,252 Cash , net $ 11,591 $ 10,444 $ 13,252 Cash paid for $ 11,591 $ 10,444 $ 13,252 Cash paid for interest $ Cash paid for interest $ 2,092 $ 1,316 $ 514 See for interest $ 2,092 $ 1,316 $ 514 See accompanying Notes $ 2,092 $ 1,316 $ 514 See accompanying Notes to Consolidated Statements . Apple Inc. | 2017 Form 10-K | 43 Apple Apple Inc. | 2017 Form 10-K | 43 Apple Inc. Notes | 2017 Form 10-K | 43 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2017 included 53 week and ended s fiscal year 2017 included 53 week and ended on September week and ended on September 30 , 2017 . A 14th ended on September 30 , 2017 . A 14th week wa 30 , 2017 . A 14th week wa included in the the first fiscal quarter of 2017 , a is done every Company ’ s fiscal year 2016 and 2015 ended on September s fiscal year 2016 and 2015 ended on September 24 , and 2015 ended on September 24 , 2016 and September 26 ended on September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , respectively , 2016 and September 26 , 2015 , respectively , and spanned , respectively , and spanned 52 week each . Unless otherwise Operations . Apple Inc. | 2017 Form 10-K | 44 The Apple Inc. | 2017 Form 10-K | 44 The Company record | 2017 Form 10-K | 44 The Company record deferred revenue estimate . Apple Inc. | 2017 Form 10-K | 45 Software Apple Inc. | 2017 Form 10-K | 45 Software Development Costs | 2017 Form 10-K | 45 Software Development Costs Research and can be found in Note 9 , “ Benefit Plans . that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” security . Apple Inc. | 2017 Form 10-K | 46 The Apple Inc. | 2017 Form 10-K | 46 The following table | 2017 Form 10-K | 46 The following table show the diluted earnings per share for 2017 , 2016 and 2015 ( per share for 2017 , 2016 and 2015 ( net income for 2017 , 2016 and 2015 ( net income in million share in thousand ) : 2017 2016 2015 Numerator : Net in thousand ) : 2017 2016 2015 Numerator : Net income thousand ) : 2017 2016 2015 Numerator : Net income $ Numerator : Net income $ 48,351 $ 45,687 $ 53,394 Denominator Net income $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average $ 48,351 $ 45,687 $ 53,394 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,217,242 5,470,820 5,753,421 Effect of dilutive : Weighted-average share outstanding 5,217,242 5,470,820 5,753,421 Effect of dilutive security Weighted-average share outstanding 5,217,242 5,470,820 5,753,421 Effect of dilutive security 34,450 5,753,421 Effect of dilutive security 34,450 29,461 39,648 Weighted-average diluted share Effect of dilutive security 34,450 29,461 39,648 Weighted-average diluted share 5,251,692 of dilutive security 34,450 29,461 39,648 Weighted-average diluted share 5,251,692 5,500,281 29,461 39,648 Weighted-average diluted share 5,251,692 5,500,281 5,793,069 Basic earnings per 39,648 Weighted-average diluted share 5,251,692 5,500,281 5,793,069 Basic earnings per share Weighted-average diluted share 5,251,692 5,500,281 5,793,069 Basic earnings per share $ Basic earnings per share $ 9.27 $ 8.35 $ 9.28 Diluted per share $ 9.27 $ 8.35 $ 9.28 Diluted earnings per $ 9.27 $ 8.35 $ 9.28 Diluted earnings per share $ Diluted earnings per share $ 9.21 $ 8.31 $ 9.22 Potentially per share $ 9.21 $ 8.31 $ 9.22 Potentially dilutive security $ 9.21 $ 8.31 $ 9.22 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2017 Form 10-K | 47 Allowance Apple Inc. | 2017 Form 10-K | 47 Allowance for Doubtful | 2017 Form 10-K | 47 Allowance for Doubtful Accounts The building is the lesser of 30 year or the remaining life property and equipment wa $ 8.2 billion , $ 8.3 billion $ 8.2 billion , $ 8.3 billion and $ 9.2 billion $ 8.3 billion and $ 9.2 billion during 2017 , 2016 and $ 9.2 billion during 2017 , 2016 and 2015 , 9.2 billion during 2017 , 2016 and 2015 , respectively . during 2017 , 2016 and 2015 , respectively . Long-Lived Assets indefinite lived intangible asset during 2017 , 2016 and 2015 . intangible asset during 2017 , 2016 and 2015 . For purpose during 2017 , 2016 and 2015 . For purpose of testing each reporting unit . In 2017 and 2016 , the Company unit . In 2017 and 2016 , the Company ’ s fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally liability . Apple Inc. | 2017 Form 10-K | 48 The Apple Inc. | 2017 Form 10-K | 48 The Company ’ | 2017 Form 10-K | 48 The Company ’ s valuation at historical rate . Note 2 – Financial Instruments Cash , investment category a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 7,982 $ — $ — $ $ — $ — $ 7,982 $ 7,982 $ — $ $ — $ 7,982 $ 7,982 $ — $ — Level $ — $ — Level 1 : Money market fund 6,534 1 : Money market fund 6,534 — — 6,534 6,534 — market fund 6,534 — — 6,534 6,534 — — Mutual fund fund 6,534 — — 6,534 6,534 — — Mutual fund 799 6,534 — — Mutual fund 799 — ( 88 ) 711 Mutual fund 799 — ( 88 ) 711 — 711 — 799 — ( 88 ) 711 — 711 — Subtotal 7,333 ( 88 ) 711 — 711 — Subtotal 7,333 — ( 711 — 711 — Subtotal 7,333 — ( 88 ) 7,245 — Subtotal 7,333 — ( 88 ) 7,245 6,534 711 — 7,333 — ( 88 ) 7,245 6,534 711 — Level 2 — ( 88 ) 7,245 6,534 711 — Level 2 : ( 88 ) 7,245 6,534 711 — Level 2 : U.S. 7,245 6,534 711 — Level 2 : U.S. Treasury security 55,254 2 : U.S. Treasury security 55,254 58 ( 230 ) 55,082 : U.S. Treasury security 55,254 58 ( 230 ) 55,082 865 Treasury security 55,254 58 ( 230 ) 55,082 865 17,228 36,989 55,254 58 ( 230 ) 55,082 865 17,228 36,989 U.S. agency 58 ( 230 ) 55,082 865 17,228 36,989 U.S. agency security ( 230 ) 55,082 865 17,228 36,989 U.S. agency security 5,162 230 ) 55,082 865 17,228 36,989 U.S. agency security 5,162 2 17,228 36,989 U.S. agency security 5,162 2 ( 9 ) 5,155 36,989 U.S. agency security 5,162 2 ( 9 ) 5,155 1,439 agency security 5,162 2 ( 9 ) 5,155 1,439 2,057 1,659 5,162 2 ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government 2 ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security 7,827 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security 7,827 210 2,057 1,659 Non-U.S. government security 7,827 210 ( 37 ) 8,000 1,659 Non-U.S. government security 7,827 210 ( 37 ) 8,000 9 government security 7,827 210 ( 37 ) 8,000 9 123 7,868 7,827 210 ( 37 ) 8,000 9 123 7,868 Certificates of 210 ( 37 ) 8,000 9 123 7,868 Certificates of deposit ( 37 ) 8,000 9 123 7,868 Certificates of deposit and 37 ) 8,000 9 123 7,868 Certificates of deposit and time of deposit and time deposit 5,832 — — 5,832 1,142 3,918 time deposit 5,832 — — 5,832 1,142 3,918 772 Commercial paper deposit 5,832 — — 5,832 1,142 3,918 772 Commercial paper 3,640 5,832 — — 5,832 1,142 3,918 772 Commercial paper 3,640 — — — 5,832 1,142 3,918 772 Commercial paper 3,640 — — 1,142 3,918 772 Commercial paper 3,640 — — 3,640 2,146 1,494 Commercial paper 3,640 — — 3,640 2,146 1,494 — Corporate security paper 3,640 — — 3,640 2,146 1,494 — Corporate security 152,724 3,640 — — 3,640 2,146 1,494 — Corporate security 152,724 969 2,146 1,494 — Corporate security 152,724 969 ( 242 ) 153,451 1,494 — Corporate security 152,724 969 ( 242 ) 153,451 172 Corporate security 152,724 969 ( 242 ) 153,451 172 27,591 125,688 152,724 969 ( 242 ) 153,451 172 27,591 125,688 Municipal security 969 ( 242 ) 153,451 172 27,591 125,688 Municipal security 961 ( 242 ) 153,451 172 27,591 125,688 Municipal security 961 4 242 ) 153,451 172 27,591 125,688 Municipal security 961 4 ( 172 27,591 125,688 Municipal security 961 4 ( 1 ) 964 27,591 125,688 Municipal security 961 4 ( 1 ) 964 — Municipal security 961 4 ( 1 ) 964 — 114 850 961 4 ( 1 ) 964 — 114 850 Mortgage- and ( 1 ) 964 — 114 850 Mortgage- and asset-backed security 1 ) 964 — 114 850 Mortgage- and asset-backed security 21,684 850 Mortgage- and asset-backed security 21,684 35 ( 175 ) 21,544 Mortgage- and asset-backed security 21,684 35 ( 175 ) 21,544 — asset-backed security 21,684 35 ( 175 ) 21,544 — 656 20,888 21,684 35 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 694 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 — 656 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 5,773 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 5,773 53,181 194,714 253,084 1,278 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 1,278 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 $ 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 $ 1,278 5,773 53,181 194,714 Total $ 268,399 $ 1,278 $ ( 782 194,714 Total $ 268,399 $ 1,278 $ ( 782 ) $ 268,399 $ 1,278 $ ( 782 ) $ 268,895 $ 20,289 $ ( 782 ) $ 268,895 $ 20,289 $ 53,892 $ 782 ) $ 268,895 $ 20,289 $ 53,892 $ 194,714 Apple $ 268,895 $ 20,289 $ 53,892 $ 194,714 Apple Inc. | $ 20,289 $ 53,892 $ 194,714 Apple Inc. | 2017 Form $ 194,714 Apple Inc. | 2017 Form 10-K | 49 2016 Apple Inc. | 2017 Form 10-K | 49 2016 Adjusted Cost | 2017 Form 10-K | 49 2016 Adjusted Cost Unrealized Gains 2017 Form 10-K | 49 2016 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 8,601 $ — $ — $ $ — $ — $ 8,601 $ 8,601 $ — $ $ — $ 8,601 $ 8,601 $ — $ — Level $ — $ — Level 1 : Money market fund 3,666 1 : Money market fund 3,666 — — 3,666 3,666 — market fund 3,666 — — 3,666 3,666 — — Mutual fund fund 3,666 — — 3,666 3,666 — — Mutual fund 1,407 3,666 — — Mutual fund 1,407 — ( 146 ) 1,261 Mutual fund 1,407 — ( 146 ) 1,261 — 1,261 — 1,407 — ( 146 ) 1,261 — 1,261 — Subtotal 5,073 ( 146 ) 1,261 — 1,261 — Subtotal 5,073 — ( 1,261 — 1,261 — Subtotal 5,073 — ( 146 ) 4,927 — Subtotal 5,073 — ( 146 ) 4,927 3,666 1,261 — 5,073 — ( 146 ) 4,927 3,666 1,261 — Level 2 — ( 146 ) 4,927 3,666 1,261 — Level 2 : ( 146 ) 4,927 3,666 1,261 — Level 2 : U.S. 4,927 3,666 1,261 — Level 2 : U.S. Treasury security 41,697 2 : U.S. Treasury security 41,697 319 ( 4 ) 42,012 : U.S. Treasury security 41,697 319 ( 4 ) 42,012 1,527 Treasury security 41,697 319 ( 4 ) 42,012 1,527 13,492 26,993 41,697 319 ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency 319 ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency security ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency security 7,543 4 ) 42,012 1,527 13,492 26,993 U.S. agency security 7,543 16 13,492 26,993 U.S. agency security 7,543 16 — 7,559 2,762 2,441 26,993 U.S. agency security 7,543 16 — 7,559 2,762 2,441 2,356 agency security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,609 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,609 259 2,441 2,356 Non-U.S. government security 7,609 259 ( 27 ) 7,841 2,356 Non-U.S. government security 7,609 259 ( 27 ) 7,841 110 government security 7,609 259 ( 27 ) 7,841 110 818 6,913 7,609 259 ( 27 ) 7,841 110 818 6,913 Certificates of 259 ( 27 ) 7,841 110 818 6,913 Certificates of deposit ( 27 ) 7,841 110 818 6,913 Certificates of deposit and 27 ) 7,841 110 818 6,913 Certificates of deposit and time of deposit and time deposit 6,598 — — 6,598 1,108 3,897 time deposit 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper deposit 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 — — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 — — 1,108 3,897 1,593 Commercial paper 7,433 — — 7,433 2,468 4,965 Commercial paper 7,433 — — 7,433 2,468 4,965 — Corporate security paper 7,433 — — 7,433 2,468 4,965 — Corporate security 131,166 7,433 — — 7,433 2,468 4,965 — Corporate security 131,166 1,409 2,468 4,965 — Corporate security 131,166 1,409 ( 206 ) 132,369 4,965 — Corporate security 131,166 1,409 ( 206 ) 132,369 242 Corporate security 131,166 1,409 ( 206 ) 132,369 242 19,599 112,528 131,166 1,409 ( 206 ) 132,369 242 19,599 112,528 Municipal security 1,409 ( 206 ) 132,369 242 19,599 112,528 Municipal security 956 ( 206 ) 132,369 242 19,599 112,528 Municipal security 956 5 206 ) 132,369 242 19,599 112,528 Municipal security 956 5 — 242 19,599 112,528 Municipal security 956 5 — 961 — 167 19,599 112,528 Municipal security 956 5 — 961 — 167 794 Municipal security 956 5 — 961 — 167 794 Mortgage- and 956 5 — 961 — 167 794 Mortgage- and asset-backed security 5 — 961 — 167 794 Mortgage- and asset-backed security 19,134 794 Mortgage- and asset-backed security 19,134 178 ( 28 ) 19,284 Mortgage- and asset-backed security 19,134 178 ( 28 ) 19,284 — asset-backed security 19,134 178 ( 28 ) 19,284 — 31 19,253 19,134 178 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 265 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 — 31 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 8,217 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 8,217 45,410 170,430 222,136 2,186 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 2,186 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 $ 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 $ 2,186 8,217 45,410 170,430 Total $ 235,810 $ 2,186 $ ( 411 170,430 Total $ 235,810 $ 2,186 $ ( 411 ) $ 235,810 $ 2,186 $ ( 411 ) $ 237,585 $ 20,484 $ ( 411 ) $ 237,585 $ 20,484 $ 46,671 $ 411 ) $ 237,585 $ 20,484 $ 46,671 $ 170,430 The $ 237,585 $ 20,484 $ 46,671 $ 170,430 The Company may $ 20,484 $ 46,671 $ 170,430 The Company may sell certain basis . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company doe not , typically for up to 12 month . To help protect hedge . Apple Inc. | 2017 Form 10-K | 50 The Apple Inc. | 2017 Form 10-K | 50 The Company may | 2017 Form 10-K | 50 The Company may also enter rate transaction a of September 30 , 2017 are expected to a of September 30 , 2017 are expected to be recognized expected to be recognized within 10 year . The Company may currency transaction a of September 30 , 2017 are expected to a of September 30 , 2017 are expected to be recognized expected to be recognized within 25 year . Cash Flow Hedges recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale and a gain of $ 606 million in other income/ ( expense ) , net for 2017 . The Company record all fair value a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,049 $ 363 $ 1,412 Interest exchange contract $ 1,049 $ 363 $ 1,412 Interest rate contract $ 1,049 $ 363 $ 1,412 Interest rate contract $ 218 1,412 Interest rate contract $ 218 $ — $ 218 Derivative $ 218 $ — $ 218 Derivative liability ( 2 ) $ 218 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 759 $ 501 $ 1,260 Interest exchange contract $ 759 $ 501 $ 1,260 Interest rate contract $ 759 $ 501 $ 1,260 Interest rate contract $ 303 1,260 Interest rate contract $ 303 $ — $ 303 Apple $ 303 $ — $ 303 Apple Inc. | 2017 Form $ 303 Apple Inc. | 2017 Form 10-K | 51 2016 Apple Inc. | 2017 Form 10-K | 51 2016 Fair Value | 2017 Form 10-K | 51 2016 Fair Value of Derivatives 2017 Form 10-K | 51 2016 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 518 $ 153 $ 671 Interest exchange contract $ 518 $ 153 $ 671 Interest rate contract $ 518 $ 153 $ 671 Interest rate contract $ 728 671 Interest rate contract $ 728 $ — $ 728 Derivative $ 728 $ — $ 728 Derivative liability ( 2 ) $ 728 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 935 $ 134 $ 1,069 Interest exchange contract $ 935 $ 134 $ 1,069 Interest rate contract $ 935 $ 134 $ 1,069 Interest rate contract $ 7 1,069 Interest rate contract $ 7 $ — $ 7 ( $ 7 $ — $ 7 ( 1 ) The fair $ — $ 7 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Consolidated Statements of Operations for 2017 , 2016 and 2015 ( of Operations for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Gains/ ( Losses in million ) : 2017 2016 2015 Gains/ ( Losses ) million ) : 2017 2016 2015 Gains/ ( Losses ) recognized : Foreign exchange contract $ 1,797 $ 109 $ 3,592 Interest exchange contract $ 1,797 $ 109 $ 3,592 Interest rate contract $ 1,797 $ 109 $ 3,592 Interest rate contract 7 ( $ 3,592 Interest rate contract 7 ( 57 ) ( 111 Interest rate contract 7 ( 57 ) ( 111 ) Total 7 ( 57 ) ( 111 ) Total $ 1,804 $ ( 111 ) Total $ 1,804 $ 52 $ 3,481 Net ) Total $ 1,804 $ 52 $ 3,481 Net investment hedge $ 1,804 $ 52 $ 3,481 Net investment hedge : Foreign $ — $ — $ 167 Foreign currency debt 67 ( $ 167 Foreign currency debt 67 ( 258 ) ( 71 Foreign currency debt 67 ( 258 ) ( 71 ) Total 67 ( 258 ) ( 71 ) Total $ 67 $ ( 71 ) Total $ 67 $ ( 258 ) $ Total $ 67 $ ( 258 ) $ 96 Gains/ ( $ ( 258 ) $ 96 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 1,958 $ 885 $ 4,092 Interest exchange contract $ 1,958 $ 885 $ 4,092 Interest rate contract $ 1,958 $ 885 $ 4,092 Interest rate contract ( 2 4,092 Interest rate contract ( 2 ) ( 11 ) ( contract ( 2 ) ( 11 ) ( 17 ) Total ) ( 11 ) ( 17 ) Total $ 1,956 $ ( 17 ) Total $ 1,956 $ 874 $ 4,075 Gains/ ) Total $ 1,956 $ 874 $ 4,075 Gains/ ( Losses $ 1,956 $ 874 $ 4,075 Gains/ ( Losses ) on Interest rate contract $ ( 810 ) $ 341 $ 337 $ ( 810 ) $ 341 $ 337 Gains/ ( Losses 810 ) $ 341 $ 337 Gains/ ( Losses ) related hedge : Fixed-rate debt $ 810 $ ( 341 ) $ debt $ 810 $ ( 341 ) $ ( 337 ) ( 341 ) $ ( 337 ) Apple Inc. | 2017 337 ) Apple Inc. | 2017 Form 10-K | 52 The Apple Inc. | 2017 Form 10-K | 52 The following table | 2017 Form 10-K | 52 The following table show the derivative instrument a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 2016 Notional Amount Credit Risk in million ) : 2017 2016 Notional Amount Credit Risk Amount : Foreign exchange contract $ 56,156 $ 1,049 $ 44,678 $ exchange contract $ 56,156 $ 1,049 $ 44,678 $ 518 Interest $ 56,156 $ 1,049 $ 44,678 $ 518 Interest rate contract $ 1,049 $ 44,678 $ 518 Interest rate contract $ 33,000 518 Interest rate contract $ 33,000 $ 218 $ 24,500 $ rate contract $ 33,000 $ 218 $ 24,500 $ 728 Instruments $ 33,000 $ 218 $ 24,500 $ 728 Instruments not designated $ 218 $ 24,500 $ 728 Instruments not designated a accounting : Foreign exchange contract $ 69,774 $ 363 $ 54,305 $ exchange contract $ 69,774 $ 363 $ 54,305 $ 153 The $ 69,774 $ 363 $ 54,305 $ 153 The notional amount $ 363 $ 54,305 $ 153 The notional amount for outstanding collateral security arrangement wa $ 35 million and $ 163 million $ 35 million and $ 163 million a of September 30 163 million a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , respectively , 2017 and September 24 , 2016 , respectively , which were other . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the potential 2017 and September 24 , 2016 , the potential effect of and derivative liability of $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion , respectively , resulting net derivative asset of $ 32 million and $ 160 million $ 32 million and $ 160 million , respectively . Accounts arrangement . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had two two customer that individually represented 10 % or more of total each of which accounted for 10 % . As of September % . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company ’ cellular network carrier accounted for 59 % and 63 % of accounted for 59 % and 63 % of trade receivables a trade receivables a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , respectively . 2017 and September 24 , 2016 , respectively . Vendor Non-Trade supplier . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had three three vendor that individually represented 10 % or more of total receivables , which accounted for 42 % , 19 % and accounted for 42 % , 19 % and 10 % . % , 19 % and 10 % . As of September % . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 47 % and 21 % . accounted for 47 % and 21 % . Apple Inc. | % . Apple Inc. | 2017 Form 10-K | 53 Note Apple Inc. | 2017 Form 10-K | 53 Note 3 – | 2017 Form 10-K | 53 Note 3 – Consolidated Financial Form 10-K | 53 Note 3 – Consolidated Financial Statement Details statement detail a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : Plant and Equipment , Net 2017 2016 Land and building $ and Equipment , Net 2017 2016 Land and building $ 13,587 2016 Land and building $ 13,587 $ 10,185 Machinery , equipment and building $ 13,587 $ 10,185 Machinery , equipment and internal-use , equipment and internal-use software 54,210 44,543 Leasehold improvement 7,279 6,517 equipment and internal-use software 54,210 44,543 Leasehold improvement 7,279 6,517 Gross software 54,210 44,543 Leasehold improvement 7,279 6,517 Gross property , plant 54,210 44,543 Leasehold improvement 7,279 6,517 Gross property , plant and property , plant and equipment 75,076 61,245 Accumulated depreciation and amortization , plant and equipment 75,076 61,245 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 41,293 ) ( 34,235 ) Total amortization ( 41,293 ) ( 34,235 ) Total property , plant and equipment , net $ 33,783 $ 27,010 Other Non-Current Liabilities , net $ 33,783 $ 27,010 Other Non-Current Liabilities 2017 2016 $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liability $ 27,010 Other Non-Current Liabilities 2017 2016 Deferred tax liability $ 31,504 2016 Deferred tax liability $ 31,504 $ 26,019 Other non-current liability tax liability $ 31,504 $ 26,019 Other non-current liability 8,911 10,055 $ 26,019 Other non-current liability 8,911 10,055 Total other non-current liability 26,019 Other non-current liability 8,911 10,055 Total other non-current liability $ Total other non-current liability $ 40,415 $ 36,074 Other Income/ ( non-current liability $ 40,415 $ 36,074 Other Income/ ( Expense ) expense ) , net for 2017 , 2016 and 2015 ( , net for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Interest and dividend in million ) : 2017 2016 2015 Interest and dividend income million ) : 2017 2016 2015 Interest and dividend income $ Interest and dividend income $ 5,201 $ 3,999 $ 2,921 Interest dividend income $ 5,201 $ 3,999 $ 2,921 Interest expense ( $ 5,201 $ 3,999 $ 2,921 Interest expense ( 2,323 ) $ 2,921 Interest expense ( 2,323 ) ( 1,456 ) ( expense ( 2,323 ) ( 1,456 ) ( 733 ) Other ) ( 1,456 ) ( 733 ) Other expense , net Other expense , net ( 133 ) ( 1,195 ) ( net ( 133 ) ( 1,195 ) ( 903 ) Total ) ( 1,195 ) ( 903 ) Total other income/ ( expense ) , net $ 2,745 $ 1,348 $ 1,285 Note , net $ 2,745 $ 1,348 $ 1,285 Note 4 – $ 2,745 $ 1,348 $ 1,285 Note 4 – Acquired Intangible $ 1,348 $ 1,285 Note 4 – Acquired Intangible Assets The asset balance a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2017 2016 Gross Carrying Amount Accumulated in million ) : 2017 2016 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 7,507 $ ( 5,309 ) $ asset $ 7,507 $ ( 5,309 ) $ 2,198 $ 8,912 $ ( 5,309 ) $ 2,198 $ 8,912 $ ( 5,806 5,309 ) $ 2,198 $ 8,912 $ ( 5,806 ) $ 2,198 $ 8,912 $ ( 5,806 ) $ 3,106 Indefinite-lived and $ ( 5,806 ) $ 3,106 Indefinite-lived and non-amortizable acquired intangible and non-amortizable acquired intangible asset 100 — 100 100 — 100 acquired intangible asset 100 — 100 100 — 100 Total acquired intangible asset 100 — 100 100 — 100 Total acquired intangible 100 — 100 100 — 100 Total acquired intangible asset $ Total acquired intangible asset $ 7,607 $ ( 5,309 ) $ asset $ 7,607 $ ( 5,309 ) $ 2,298 $ 9,012 $ ( 5,309 ) $ 2,298 $ 9,012 $ ( 5,806 5,309 ) $ 2,298 $ 9,012 $ ( 5,806 ) $ 2,298 $ 9,012 $ ( 5,806 ) $ 3,206 Apple Inc. $ ( 5,806 ) $ 3,206 Apple Inc. | 2017 Form $ 3,206 Apple Inc. | 2017 Form 10-K | 54 Amortization Apple Inc. | 2017 Form 10-K | 54 Amortization expense related | 2017 Form 10-K | 54 Amortization expense related to acquired acquired intangible asset wa $ 1.2 billion , $ 1.5 billion $ 1.2 billion , $ 1.5 billion and $ 1.3 billion $ 1.5 billion and $ 1.3 billion in 2017 , 2016 and $ 1.3 billion in 2017 , 2016 and 2015 , 1.3 billion in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . As of respectively . As of September 30 , 2017 , the remaining As of September 30 , 2017 , the remaining weighted-average amortization for acquired intangible asset is 3.4 year . The expected annual intangible asset a of September 30 , 2017 , is a a of September 30 , 2017 , is a follows ( ( in million ) : 2018 $ 948 2019 505 2020 million ) : 2018 $ 948 2019 505 2020 323 2021 ) : 2018 $ 948 2019 505 2020 323 2021 222 : 2018 $ 948 2019 505 2020 323 2021 222 2022 2018 $ 948 2019 505 2020 323 2021 222 2022 131 $ 948 2019 505 2020 323 2021 222 2022 131 Thereafter 948 2019 505 2020 323 2021 222 2022 131 Thereafter 69 2019 505 2020 323 2021 222 2022 131 Thereafter 69 Total 505 2020 323 2021 222 2022 131 Thereafter 69 Total $ 2020 323 2021 222 2022 131 Thereafter 69 Total $ 2,198 2021 222 2022 131 Thereafter 69 Total $ 2,198 Note 5 131 Thereafter 69 Total $ 2,198 Note 5 – Income Taxes 69 Total $ 2,198 Note 5 – Income Taxes The provision provision for income tax for 2017 , 2016 and 2015 , income tax for 2017 , 2016 and 2015 , consisted of for 2017 , 2016 and 2015 , consisted of the following ( in million ) : 2017 2016 2015 Federal : Current in million ) : 2017 2016 2015 Federal : Current $ million ) : 2017 2016 2015 Federal : Current $ 7,842 2015 Federal : Current $ 7,842 $ 7,652 $ 11,730 Deferred : Current $ 7,842 $ 7,652 $ 11,730 Deferred 5,980 5,043 $ 7,842 $ 7,652 $ 11,730 Deferred 5,980 5,043 3,408 Total $ 7,652 $ 11,730 Deferred 5,980 5,043 3,408 Total ( 1 7,652 $ 11,730 Deferred 5,980 5,043 3,408 Total ( 1 ) $ 11,730 Deferred 5,980 5,043 3,408 Total ( 1 ) 13,822 5,980 5,043 3,408 Total ( 1 ) 13,822 12,695 15,138 State 3,408 Total ( 1 ) 13,822 12,695 15,138 State : Current Total ( 1 ) 13,822 12,695 15,138 State : Current 259 ( 1 ) 13,822 12,695 15,138 State : Current 259 990 12,695 15,138 State : Current 259 990 1,265 Deferred 2 ( 15,138 State : Current 259 990 1,265 Deferred 2 ( 138 State : Current 259 990 1,265 Deferred 2 ( 138 ) Current 259 990 1,265 Deferred 2 ( 138 ) ( 220 990 1,265 Deferred 2 ( 138 ) ( 220 ) Total 2 ( 138 ) ( 220 ) Total 261 852 1,045 ) ( 220 ) Total 261 852 1,045 Foreign : Current ( 220 ) Total 261 852 1,045 Foreign : Current 1,671 220 ) Total 261 852 1,045 Foreign : Current 1,671 2,105 852 1,045 Foreign : Current 1,671 2,105 4,744 Deferred ( 16 1,045 Foreign : Current 1,671 2,105 4,744 Deferred ( 16 ) Foreign : Current 1,671 2,105 4,744 Deferred ( 16 ) 33 1,671 2,105 4,744 Deferred ( 16 ) 33 ( 1,806 ) 4,744 Deferred ( 16 ) 33 ( 1,806 ) Total 1,655 ( 16 ) 33 ( 1,806 ) Total 1,655 2,138 2,938 33 ( 1,806 ) Total 1,655 2,138 2,938 Provision for income ( 1,806 ) Total 1,655 2,138 2,938 Provision for income tax 1,806 ) Total 1,655 2,138 2,938 Provision for income tax $ Provision for income tax $ 15,738 $ 15,685 $ 19,121 ( income tax $ 15,738 $ 15,685 $ 19,121 ( 1 ) $ 15,738 $ 15,685 $ 19,121 ( 1 ) Includes tax $ 15,685 $ 19,121 ( 1 ) Includes tax of $ ) Includes tax of $ 7.9 billion , $ 6.7 billion $ 7.9 billion , $ 6.7 billion and $ 7.3 billion $ 6.7 billion and $ 7.3 billion provided on foreign pre-tax on foreign pre-tax earnings in 2017 , 2016 and 2015 , pre-tax earnings in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . The foreign foreign pre-tax earnings of $ 44.7 billion , $ 41.1 billion $ 44.7 billion , $ 41.1 billion and $ 47.6 billion $ 41.1 billion and $ 47.6 billion in 2017 , 2016 and $ 47.6 billion in 2017 , 2016 and 2015 , 47.6 billion in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . The Company a statutory tax rate of 12.5 % . As of September % . As of September 30 , 2017 , U.S. income As of September 30 , 2017 , U.S. income tax have a cumulative total of $ 128.7 billion of such earnings . is estimated to be $ 42.2 billion . As of September billion . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , $ 252.3 2017 and September 24 , 2016 , $ 252.3 billion and 24 , 2016 , $ 252.3 billion and $ 216.0 billion $ 252.3 billion and $ 216.0 billion , respectively , of the U.S. Apple Inc. | 2017 Form 10-K | 55 A Apple Inc. | 2017 Form 10-K | 55 A reconciliation of | 2017 Form 10-K | 55 A reconciliation of the provision federal income tax rate ( 35 % in 2017 , 2016 rate ( 35 % in 2017 , 2016 and 2015 ) 35 % in 2017 , 2016 and 2015 ) to income in 2017 , 2016 and 2015 ) to income before provision provision for income tax for 2017 , 2016 and 2015 , income tax for 2017 , 2016 and 2015 , is a for 2017 , 2016 and 2015 , is a follows ( dollar in million ) : 2017 2016 2015 Computed expected tax in million ) : 2017 2016 2015 Computed expected tax $ million ) : 2017 2016 2015 Computed expected tax $ 22,431 2015 Computed expected tax $ 22,431 $ 21,480 $ 25,380 State expected tax $ 22,431 $ 21,480 $ 25,380 State tax , $ 22,431 $ 21,480 $ 25,380 State tax , net of , net of federal effect 185 553 680 Indefinitely invested earnings net of federal effect 185 553 680 Indefinitely invested earnings of of federal effect 185 553 680 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 6,135 ) ( 5,582 ) ( subsidiary ( 6,135 ) ( 5,582 ) ( 6,470 ) Domestic ) ( 5,582 ) ( 6,470 ) Domestic production activity deduction Domestic production activity deduction ( 209 ) ( 382 ) ( deduction ( 209 ) ( 382 ) ( 426 ) Research ) ( 382 ) ( 426 ) Research and development credit development credit , net ( 678 ) ( 371 ) ( net ( 678 ) ( 371 ) ( 171 ) Other ) ( 371 ) ( 171 ) Other 144 ( 13 ) ( 171 ) Other 144 ( 13 ) 128 Provision 171 ) Other 144 ( 13 ) 128 Provision for income Other 144 ( 13 ) 128 Provision for income tax $ Provision for income tax $ 15,738 $ 15,685 $ 19,121 Effective income tax $ 15,738 $ 15,685 $ 19,121 Effective tax rate $ 15,738 $ 15,685 $ 19,121 Effective tax rate 24.6 % $ 19,121 Effective tax rate 24.6 % 25.6 % 26.4 % Effective tax rate 24.6 % 25.6 % 26.4 % The Company rate 24.6 % 25.6 % 26.4 % The Company ’ s from equity award of $ 620 million , $ 379 million $ 620 million , $ 379 million and $ 748 million $ 379 million and $ 748 million in 2017 , 2016 and $ 748 million in 2017 , 2016 and 2015 , 748 million in 2017 , 2016 and 2015 , respectively , in 2017 , 2016 and 2015 , respectively , which were stock . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the significant 2017 and September 24 , 2016 , the significant component of ( in million ) : 2017 2016 Deferred tax asset : in million ) : 2017 2016 Deferred tax asset : Accrued liability and other reserve $ 4,019 $ 4,135 Basis of capital other reserve $ 4,019 $ 4,135 Basis of capital asset 1,230 4,135 Basis of capital asset 1,230 2,107 Deferred revenue 1,521 1,717 Basis of capital asset 1,230 2,107 Deferred revenue 1,521 1,717 Deferred asset 1,230 2,107 Deferred revenue 1,521 1,717 Deferred cost sharing 667 1,230 2,107 Deferred revenue 1,521 1,717 Deferred cost sharing 667 667 1,521 1,717 Deferred cost sharing 667 667 Share-based compensation 703 601 1,717 Deferred cost sharing 667 667 Share-based compensation 703 601 Other sharing 667 667 Share-based compensation 703 601 Other 834 788 Total 667 667 Share-based compensation 703 601 Other 834 788 Total deferred Share-based compensation 703 601 Other 834 788 Total deferred tax asset compensation 703 601 Other 834 788 Total deferred tax asset , of valuation allowance of $ 0 8,974 10,015 Deferred tax liability valuation allowance of $ 0 8,974 10,015 Deferred tax liability : allowance of $ 0 8,974 10,015 Deferred tax liability : Unremitted Unremitted earnings of foreign subsidiary 36,355 31,436 Other 207 485 Total earnings of foreign subsidiary 36,355 31,436 Other 207 485 Total deferred foreign subsidiary 36,355 31,436 Other 207 485 Total deferred tax liability subsidiary 36,355 31,436 Other 207 485 Total deferred tax liability 36,562 485 Total deferred tax liability 36,562 31,921 Net deferred tax liability Total deferred tax liability 36,562 31,921 Net deferred tax liability $ deferred tax liability $ ( 27,588 ) $ ( 21,906 ) ( 27,588 ) $ ( 21,906 ) Deferred tax asset and benefit that is greater than 50 % likely of being realized Sheets . As of September 30 , 2017 , the total As of September 30 , 2017 , the total amount of unrecognized tax benefit wa $ 8.4 billion , of which $ billion , of which $ 2.5 billion , if recognized , rate . As of September 24 , 2016 , the total As of September 24 , 2016 , the total amount of unrecognized tax benefit wa $ 7.7 billion , of which $ billion , of which $ 2.8 billion , if recognized , rate . Apple Inc. | 2017 Form 10-K | 56 The Apple Inc. | 2017 Form 10-K | 56 The aggregate change | 2017 Form 10-K | 56 The aggregate change in the interest and penalty , for 2017 , 2016 and 2015 , penalty , for 2017 , 2016 and 2015 , is a for 2017 , 2016 and 2015 , is a follows ( ( in million ) : 2017 2016 2015 Beginning balance $ in million ) : 2017 2016 2015 Beginning balance $ 7,724 million ) : 2017 2016 2015 Beginning balance $ 7,724 $ 2016 2015 Beginning balance $ 7,724 $ 6,900 $ 4,033 Increases Beginning balance $ 7,724 $ 6,900 $ 4,033 Increases related to $ 7,724 $ 6,900 $ 4,033 Increases related to tax position taken during a prior year 333 1,121 2,056 Decreases related to during a prior year 333 1,121 2,056 Decreases related to tax a prior year 333 1,121 2,056 Decreases related to tax position during a prior year ( 952 ) ( 257 ) ( year ( 952 ) ( 257 ) ( 345 ) Increases ) ( 257 ) ( 345 ) Increases related to tax taken during the current year 1,880 1,578 1,278 Decreases related to during the current year 1,880 1,578 1,278 Decreases related to settlement the current year 1,880 1,578 1,278 Decreases related to settlement with settlement with taxing authority ( 539 ) ( 1,618 ) ( authority ( 539 ) ( 1,618 ) ( 109 ) Decreases ) ( 1,618 ) ( 109 ) Decreases related to expiration of statute of limitation ( 39 ) — ( 13 ) ( 39 ) — ( 13 ) Ending balance $ 8,407 13 ) Ending balance $ 8,407 $ 7,724 $ 6,900 The Ending balance $ 8,407 $ 7,724 $ 6,900 The Company includes $ 8,407 $ 7,724 $ 6,900 The Company includes interest and tax . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the total 2017 and September 24 , 2016 , the total amount of and penalty accrued wa $ 1.2 billion and $ 1.0 billion $ 1.2 billion and $ 1.0 billion , respectively , which interest and penalty expense in 2017 , 2016 and 2015 of penalty expense in 2017 , 2016 and 2015 of $ 165 in 2017 , 2016 and 2015 of $ 165 million , 2016 and 2015 of $ 165 million , $ 295 million $ 165 million , $ 295 million and $ 709 million $ 295 million and $ 709 million , respectively . The it review of the year 2010 through 2012 during the third of the year 2010 through 2012 during the third quarter of during the third quarter of 2017 . All year prior to . All year prior to 2013 are closed , and the is currently examining the year 2013 through 2015 . The Company examining the year 2013 through 2015 . The Company is also , the year subsequent to 2003 generally remain open and could materially change in the next 12 month . On August 30 12 month . On August 30 , 2016 , the European . On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of be placed into escrow in 2018 , where they will remain tax . Apple Inc. | 2017 Form 10-K | 57 Note Apple Inc. | 2017 Form 10-K | 57 Note 6 – | 2017 Form 10-K | 57 Note 6 – Debt Commercial Form 10-K | 57 Note 6 – Debt Commercial Paper The repurchase . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the Company 2017 and September 24 , 2016 , the Company had $ , the Company had $ 12.0 billion and $ 8.1 billion $ 12.0 billion and $ 8.1 billion of Commercial Paper outstanding ’ s Commercial Paper wa 1.20 % a of September 30 1.20 % a of September 30 , 2017 and 0.45 % a of September 30 , 2017 and 0.45 % a of September 30 , 2017 and 0.45 % a of September 24 0.45 % a of September 24 , 2016 . The following a of September 24 , 2016 . The following table provides maturity of Commercial Paper for 2017 and 2016 ( in million Commercial Paper for 2017 and 2016 ( in million ) : ( in million ) : 2017 2016 Maturities le than 90 in million ) : 2017 2016 Maturities le than 90 day 2017 2016 Maturities le than 90 day : Proceeds from/ ( paper , net $ ( 1,782 ) $ ( 869 ) ( 1,782 ) $ ( 869 ) Maturities greater than 90 869 ) Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 17,932 3,632 Repayments of commercial paper Proceeds from commercial paper 17,932 3,632 Repayments of commercial paper ( Repayments of commercial paper ( 12,298 ) ( 3,160 ) Proceeds paper ( 12,298 ) ( 3,160 ) Proceeds from/ ( Repayments ) commercial paper , net 5,634 472 Total change in commercial commercial paper , net 5,634 472 Total change in commercial paper commercial paper , net $ 3,852 $ ( 397 ) Term net $ 3,852 $ ( 397 ) Term Debt As of Term Debt As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had outstanding aggregate principal amount of $ 104.0 billion ( collectively the “ term debt a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 : Maturities 2017 2017 and September 24 , 2016 : Maturities 2017 2016 Amount 24 , 2016 : Maturities 2017 2016 Amount ( in million , 2016 : Maturities 2017 2016 Amount ( in million ) million ) Effective Interest Rate 2013 debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2018 17.0 billion : Floating-rate note 2018 2018 $ 2,000 1.10 % billion : Floating-rate note 2018 2018 $ 2,000 1.10 % 1.10 Floating-rate note 2018 2018 $ 2,000 1.10 % 1.10 % $ note 2018 2018 $ 2,000 1.10 % 1.10 % $ 2,000 2018 $ 2,000 1.10 % 1.10 % $ 2,000 1.10 % 1.10 % 1.10 % $ 2,000 1.10 % 1.10 % Fixed-rate % 1.10 % $ 2,000 1.10 % 1.10 % Fixed-rate 1.000 % $ 2,000 1.10 % 1.10 % Fixed-rate 1.000 % – 1.10 % 1.10 % Fixed-rate 1.000 % – 3.850 % note % Fixed-rate 1.000 % – 3.850 % note 2018 – 2043 % – 3.850 % note 2018 – 2043 12,500 1.08 % 3.850 % note 2018 – 2043 12,500 1.08 % – 3.91 % note 2018 – 2043 12,500 1.08 % – 3.91 % note 2018 – 2043 12,500 1.08 % – 3.91 % 12,500 2043 12,500 1.08 % – 3.91 % 12,500 1.08 % – 1.08 % – 3.91 % 12,500 1.08 % – 3.91 % % – 3.91 % 12,500 1.08 % – 3.91 % 2014 % 12,500 1.08 % – 3.91 % 2014 debt issuance of 1.08 % – 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2019 12.0 billion : Floating-rate note 2019 2019 1,000 1.61 % 1.61 billion : Floating-rate note 2019 2019 1,000 1.61 % 1.61 % : Floating-rate note 2019 2019 1,000 1.61 % 1.61 % 2,000 Floating-rate note 2019 2019 1,000 1.61 % 1.61 % 2,000 0.86 2019 2019 1,000 1.61 % 1.61 % 2,000 0.86 % – 1,000 1.61 % 1.61 % 2,000 0.86 % – 1.09 % 1.61 % 1.61 % 2,000 0.86 % – 1.09 % Fixed-rate % 2,000 0.86 % – 1.09 % Fixed-rate 2.100 % – % – 1.09 % Fixed-rate 2.100 % – 4.450 % note % Fixed-rate 2.100 % – 4.450 % note 2019 – 2044 % – 4.450 % note 2019 – 2044 8,500 1.61 % 4.450 % note 2019 – 2044 8,500 1.61 % – 4.48 % note 2019 – 2044 8,500 1.61 % – 4.48 % note 2019 – 2044 8,500 1.61 % – 4.48 % 10,000 2044 8,500 1.61 % – 4.48 % 10,000 0.85 % – 1.61 % – 4.48 % 10,000 0.85 % – 4.48 % % – 4.48 % 10,000 0.85 % – 4.48 % 2015 % 10,000 0.85 % – 4.48 % 2015 debt issuance of 0.85 % – 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2019 27.3 billion : Floating-rate note 2019 – 2020 1,549 1.56 % : Floating-rate note 2019 – 2020 1,549 1.56 % – 1.87 Floating-rate note 2019 – 2020 1,549 1.56 % – 1.87 % note 2019 – 2020 1,549 1.56 % – 1.87 % 1,781 2020 1,549 1.56 % – 1.87 % 1,781 0.87 % – 1.56 % – 1.87 % 1,781 0.87 % – 1.87 % % – 1.87 % 1,781 0.87 % – 1.87 % Fixed-rate % 1,781 0.87 % – 1.87 % Fixed-rate 0.350 % – % – 1.87 % Fixed-rate 0.350 % – 4.375 % note % Fixed-rate 0.350 % – 4.375 % note 2019 – 2045 % – 4.375 % note 2019 – 2045 24,522 0.28 % 4.375 % note 2019 – 2045 24,522 0.28 % – 4.51 % note 2019 – 2045 24,522 0.28 % – 4.51 % note 2019 – 2045 24,522 0.28 % – 4.51 % 25,144 2045 24,522 0.28 % – 4.51 % 25,144 0.28 % – 0.28 % – 4.51 % 25,144 0.28 % – 4.51 % % – 4.51 % 25,144 0.28 % – 4.51 % 2016 % 25,144 0.28 % – 4.51 % 2016 debt issuance of 0.28 % – 4.51 % 2016 debt issuance of $ 24.9 2016 debt issuance of $ 24.9 billion : Floating-rate note 2019 24.9 billion : Floating-rate note 2019 – 2021 1,350 1.45 % : Floating-rate note 2019 – 2021 1,350 1.45 % – 2.44 Floating-rate note 2019 – 2021 1,350 1.45 % – 2.44 % note 2019 – 2021 1,350 1.45 % – 2.44 % 1,350 2021 1,350 1.45 % – 2.44 % 1,350 0.91 % – 1.45 % – 2.44 % 1,350 0.91 % – 1.95 % % – 2.44 % 1,350 0.91 % – 1.95 % Fixed-rate % 1,350 0.91 % – 1.95 % Fixed-rate 1.100 % – % – 1.95 % Fixed-rate 1.100 % – 4.650 % note % Fixed-rate 1.100 % – 4.650 % note 2018 – 2046 % – 4.650 % note 2018 – 2046 23,645 1.13 % 4.650 % note 2018 – 2046 23,645 1.13 % – 4.78 % note 2018 – 2046 23,645 1.13 % – 4.78 % note 2018 – 2046 23,645 1.13 % – 4.78 % 23,609 2046 23,645 1.13 % – 4.78 % 23,609 1.13 % – 1.13 % – 4.78 % 23,609 1.13 % – 4.58 % % – 4.78 % 23,609 1.13 % – 4.58 % Apple % 23,609 1.13 % – 4.58 % Apple Inc. | 2017 4.58 % Apple Inc. | 2017 Form 10-K | 58 Maturities Apple Inc. | 2017 Form 10-K | 58 Maturities 2017 2016 | 2017 Form 10-K | 58 Maturities 2017 2016 ( Continued Form 10-K | 58 Maturities 2017 2016 ( Continued ) Amount 10-K | 58 Maturities 2017 2016 ( Continued ) Amount ( Effective Interest Rate Second quarter 2017 debt issuance of $ 10.0 2017 debt issuance of $ 10.0 billion : Floating-rate note 2019 10.0 billion : Floating-rate note 2019 500 1.39 % — — billion : Floating-rate note 2019 500 1.39 % — — % : Floating-rate note 2019 500 1.39 % — — % Floating-rate — — % Floating-rate note 2020 500 1.51 % — — — % Floating-rate note 2020 500 1.51 % — — % % Floating-rate note 2020 500 1.51 % — — % Floating-rate — — % Floating-rate note 2022 1,000 1.81 % — — — % Floating-rate note 2022 1,000 1.81 % — — % % Floating-rate note 2022 1,000 1.81 % — — % Fixed-rate % — — % Fixed-rate 1.550 % note 2019 500 1.59 % Fixed-rate 1.550 % note 2019 500 1.59 % — — Fixed-rate 1.550 % note 2019 500 1.59 % — — % 1.550 % note 2019 500 1.59 % — — % Fixed-rate % — — % Fixed-rate 1.900 % note 2020 1,000 1.51 % Fixed-rate 1.900 % note 2020 1,000 1.51 % — — Fixed-rate 1.900 % note 2020 1,000 1.51 % — — % 1.900 % note 2020 1,000 1.51 % — — % Fixed-rate % — — % Fixed-rate 2.500 % note 2022 1,500 1.80 % Fixed-rate 2.500 % note 2022 1,500 1.80 % — — Fixed-rate 2.500 % note 2022 1,500 1.80 % — — % 2.500 % note 2022 1,500 1.80 % — — % Fixed-rate % — — % Fixed-rate 3.000 % note 2024 1,750 2.11 % Fixed-rate 3.000 % note 2024 1,750 2.11 % — — Fixed-rate 3.000 % note 2024 1,750 2.11 % — — % 3.000 % note 2024 1,750 2.11 % — — % Fixed-rate % — — % Fixed-rate 3.350 % note 2027 2,250 2.25 % Fixed-rate 3.350 % note 2027 2,250 2.25 % — — Fixed-rate 3.350 % note 2027 2,250 2.25 % — — % 3.350 % note 2027 2,250 2.25 % — — % Fixed-rate % — — % Fixed-rate 4.250 % note 2047 1,000 4.26 % Fixed-rate 4.250 % note 2047 1,000 4.26 % — — Fixed-rate 4.250 % note 2047 1,000 4.26 % — — % 4.250 % note 2047 1,000 4.26 % — — % Second — — % Second quarter 2017 debt issuance of $ 1.0 2017 debt issuance of $ 1.0 billion : Fixed-rate 4.300 % $ 1.0 billion : Fixed-rate 4.300 % note 2047 1,000 4.30 : Fixed-rate 4.300 % note 2047 1,000 4.30 % — — Fixed-rate 4.300 % note 2047 1,000 4.30 % — — % 4.300 % note 2047 1,000 4.30 % — — % Third — — % Third quarter 2017 debt issuance of $ 7.0 2017 debt issuance of $ 7.0 billion : Floating-rate note 2020 7.0 billion : Floating-rate note 2020 500 1.38 % — — billion : Floating-rate note 2020 500 1.38 % — — % : Floating-rate note 2020 500 1.38 % — — % Floating-rate — — % Floating-rate note 2022 750 1.66 % — — — % Floating-rate note 2022 750 1.66 % — — % % Floating-rate note 2022 750 1.66 % — — % Fixed-rate % — — % Fixed-rate 1.800 % note 2020 1,000 1.84 % Fixed-rate 1.800 % note 2020 1,000 1.84 % — — Fixed-rate 1.800 % note 2020 1,000 1.84 % — — % 1.800 % note 2020 1,000 1.84 % — — % Fixed-rate % — — % Fixed-rate 2.300 % note 2022 1,000 2.34 % Fixed-rate 2.300 % note 2022 1,000 2.34 % — — Fixed-rate 2.300 % note 2022 1,000 2.34 % — — % 2.300 % note 2022 1,000 2.34 % — — % Fixed-rate % — — % Fixed-rate 2.850 % note 2024 1,750 2.25 % Fixed-rate 2.850 % note 2024 1,750 2.25 % — — Fixed-rate 2.850 % note 2024 1,750 2.25 % — — % 2.850 % note 2024 1,750 2.25 % — — % Fixed-rate % — — % Fixed-rate 3.200 % note 2027 2,000 2.43 % Fixed-rate 3.200 % note 2027 2,000 2.43 % — — Fixed-rate 3.200 % note 2027 2,000 2.43 % — — % 3.200 % note 2027 2,000 2.43 % — — % Third — — % Third quarter 2017 euro-denominated debt issuance of €2.5 of €2.5 billion : Fixed-rate 0.875 % note 2025 1,469 3.03 : Fixed-rate 0.875 % note 2025 1,469 3.03 % — — Fixed-rate 0.875 % note 2025 1,469 3.03 % — — % 0.875 % note 2025 1,469 3.03 % — — % Fixed-rate % — — % Fixed-rate 1.375 % note 2029 1,469 3.37 % Fixed-rate 1.375 % note 2029 1,469 3.37 % — — Fixed-rate 1.375 % note 2029 1,469 3.37 % — — % 1.375 % note 2029 1,469 3.37 % — — % Third — — % Third quarter 2017 debt issuance of $ 1.0 2017 debt issuance of $ 1.0 billion : Fixed-rate 3.000 % $ 1.0 billion : Fixed-rate 3.000 % note 2027 1,000 3.03 : Fixed-rate 3.000 % note 2027 1,000 3.03 % — — Fixed-rate 3.000 % note 2027 1,000 3.03 % — — % 3.000 % note 2027 1,000 3.03 % — — % Fourth — — % Fourth quarter 2017 Canadian dollar-denominated debt issuance of debt issuance of C $ 2.5 billion : Fixed-rate 2.513 % $ 2.5 billion : Fixed-rate 2.513 % note 2024 2,017 2.66 : Fixed-rate 2.513 % note 2024 2,017 2.66 % — — Fixed-rate 2.513 % note 2024 2,017 2.66 % — — % 2.513 % note 2024 2,017 2.66 % — — % Fourth — — % Fourth quarter 2017 debt issuance of $ 5.0 2017 debt issuance of $ 5.0 billion : Fixed-rate 1.500 % $ 5.0 billion : Fixed-rate 1.500 % note 2019 1,000 1.54 : Fixed-rate 1.500 % note 2019 1,000 1.54 % — — Fixed-rate 1.500 % note 2019 1,000 1.54 % — — % 1.500 % note 2019 1,000 1.54 % — — % Fixed-rate % — — % Fixed-rate 2.100 % note 2022 1,000 1.92 % Fixed-rate 2.100 % note 2022 1,000 1.92 % — — Fixed-rate 2.100 % note 2022 1,000 1.92 % — — % 2.100 % note 2022 1,000 1.92 % — — % Fixed-rate % — — % Fixed-rate 2.900 % note 2027 2,000 2.55 % Fixed-rate 2.900 % note 2027 2,000 2.55 % — — Fixed-rate 2.900 % note 2027 2,000 2.55 % — — % 2.900 % note 2027 2,000 2.55 % — — % Fixed-rate % — — % Fixed-rate 3.750 % note 2047 1,000 3.78 % Fixed-rate 3.750 % note 2047 1,000 3.78 % — — Fixed-rate 3.750 % note 2047 1,000 3.78 % — — % 3.750 % note 2047 1,000 3.78 % — — % Total — % Total term debt 104,021 78,384 Unamortized premium/ ( discount % Total term debt 104,021 78,384 Unamortized premium/ ( discount ) issuance cost , net ( 225 ) ( 174 ) Hedge net ( 225 ) ( 174 ) Hedge accounting fair value accounting fair value adjustment ( 93 ) 717 Less : Current value adjustment ( 93 ) 717 Less : Current portion of portion of long-term debt ( 6,496 ) ( 3,500 ) Total debt ( 6,496 ) ( 3,500 ) Total long-term debt $ ) Total long-term debt $ 97,207 $ 75,427 To manage interest long-term debt $ 97,207 $ 75,427 To manage interest rate risk operation . As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the carrying 2017 and September 24 , 2016 , the carrying value of net investment hedge wa $ 1.6 billion and $ 1.9 billion $ 1.6 billion and $ 1.9 billion , respectively . For Financial Instruments section of Note 2 , “ Financial Instruments . . ” Apple Inc. | 2017 Form 10-K | 59 The Apple Inc. | 2017 Form 10-K | 59 The effective interest | 2017 Form 10-K | 59 The effective interest rate for . The Company recognized $ 2.2 billion , $ 1.4 billion $ 2.2 billion , $ 1.4 billion and $ 722 million $ 1.4 billion and $ 722 million of interest expense on on it term debt for 2017 , 2016 and 2015 , term debt for 2017 , 2016 and 2015 , respectively . for 2017 , 2016 and 2015 , respectively . The future s Notes a of September 30 , 2017 are a follows a of September 30 , 2017 are a follows ( in ( in million ) : 2018 $ 6,500 2019 8,863 2020 million ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 ) : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 : 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 2018 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 $ 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 6,500 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 2019 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total 8,863 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total term 2020 9,220 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt 2021 7,750 2022 10,297 Thereafter 61,391 Total term debt $ 104,021 61,391 Total term debt $ 104,021 As of September 30 , $ 104,021 As of September 30 , 2017 and September 24 As of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , the fair 2017 and September 24 , 2016 , the fair value of Notes , based on Level 2 input , wa $ 106.1 2 input , wa $ 106.1 billion and $ 81.7 billion $ 106.1 billion and $ 81.7 billion , respectively . Note billion , respectively . Note 7 – Shareholders ’ Equity Dividends Amount ( in million ) 2017 : Fourth quarter $ 0.63 2017 : Fourth quarter $ 0.63 $ 3,252 Third quarter 0.63 Fourth quarter $ 0.63 $ 3,252 Third quarter 0.63 3,281 Second 0.63 $ 3,252 Third quarter 0.63 3,281 Second quarter 0.57 2,988 $ 3,252 Third quarter 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.57 3,042 0.63 3,281 Second quarter 0.57 2,988 First quarter 0.57 3,042 Total quarter 0.57 2,988 First quarter 0.57 3,042 Total cash dividend declared 0.57 2,988 First quarter 0.57 3,042 Total cash dividend declared and dividend declared and paid $ 2.40 $ 12,563 2016 : Fourth and paid $ 2.40 $ 12,563 2016 : Fourth quarter $ paid $ 2.40 $ 12,563 2016 : Fourth quarter $ 0.57 2016 : Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 3,117 Second 0.57 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 Total quarter 0.52 2,879 First quarter 0.52 2,898 Total cash dividend declared 0.52 2,879 First quarter 0.52 2,898 Total cash dividend declared and dividend declared and paid $ 2.18 $ 11,965 Future dividend are and paid $ 2.18 $ 11,965 Future dividend are subject to Share Repurchase Program In May 2017 , the Company ’ s share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion of the Company ’ stock , of which $ 166 billion had been utilized a been utilized a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company ’ s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the instrument . Apple Inc. | 2017 Form 10-K | 60 The Apple Inc. | 2017 Form 10-K | 60 The following table | 2017 Form 10-K | 60 The following table show the during the year ended September 30 , 2017 and September 24 year ended September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 : Purchase Period 2017 and September 24 , 2016 : Purchase Period End Date ( in million ) August 2017 ASR November 2017 15,069 ( ) August 2017 ASR November 2017 15,069 ( 1 ) ( August 2017 ASR November 2017 15,069 ( 1 ) ( 1 ASR November 2017 15,069 ( 1 ) ( 1 ) $ 15,069 ( 1 ) ( 1 ) $ 3,000 May 2017 ) ( 1 ) $ 3,000 May 2017 ASR August 2017 1 ) $ 3,000 May 2017 ASR August 2017 20,108 ( 3,000 May 2017 ASR August 2017 20,108 ( 2 ) $ May 2017 ASR August 2017 20,108 ( 2 ) $ 149.20 ASR August 2017 20,108 ( 2 ) $ 149.20 $ 3,000 20,108 ( 2 ) $ 149.20 $ 3,000 February 2017 ASR 2 ) $ 149.20 $ 3,000 February 2017 ASR May 2017 $ 149.20 $ 3,000 February 2017 ASR May 2017 20,949 $ 3,000 February 2017 ASR May 2017 20,949 $ 143.20 $ 3,000 February 2017 ASR May 2017 20,949 $ 143.20 $ 3,000 November ASR May 2017 20,949 $ 143.20 $ 3,000 November 2016 ASR 2017 20,949 $ 143.20 $ 3,000 November 2016 ASR February 2017 $ 143.20 $ 3,000 November 2016 ASR February 2017 51,157 $ 3,000 November 2016 ASR February 2017 51,157 $ 117.29 $ 6,000 November 2016 ASR February 2017 51,157 $ 117.29 $ 6,000 August ASR February 2017 51,157 $ 117.29 $ 6,000 August 2016 ASR 2017 51,157 $ 117.29 $ 6,000 August 2016 ASR November 2016 $ 117.29 $ 6,000 August 2016 ASR November 2016 26,850 $ 6,000 August 2016 ASR November 2016 26,850 $ 111.73 $ 3,000 August 2016 ASR November 2016 26,850 $ 111.73 $ 3,000 May ASR November 2016 26,850 $ 111.73 $ 3,000 May 2016 ASR 2016 26,850 $ 111.73 $ 3,000 May 2016 ASR August 2016 $ 111.73 $ 3,000 May 2016 ASR August 2016 60,452 $ 3,000 May 2016 ASR August 2016 60,452 $ 99.25 $ 6,000 May 2016 ASR August 2016 60,452 $ 99.25 $ 6,000 November ASR August 2016 60,452 $ 99.25 $ 6,000 November 2015 ASR 2016 60,452 $ 99.25 $ 6,000 November 2015 ASR April 2016 $ 99.25 $ 6,000 November 2015 ASR April 2016 29,122 $ 6,000 November 2015 ASR April 2016 29,122 $ 103.02 $ 3,000 November 2015 ASR April 2016 29,122 $ 103.02 $ 3,000 ( ASR April 2016 29,122 $ 103.02 $ 3,000 ( 1 ) 2016 29,122 $ 103.02 $ 3,000 ( 1 ) “ Number $ 103.02 $ 3,000 ( 1 ) “ Number of Shares that period . The August 2017 ASR purchase period will end period will end in November 2017 . ( 2 ) Includes in November 2017 . ( 2 ) Includes 15.6 million share . ( 2 ) Includes 15.6 million share delivered and retired in the third quarter of 2017 , and 4.5 million share quarter of 2017 , and 4.5 million share delivered and retired in the fourth quarter of 2017 . Additionally , the Company Amount ( in million ) 2017 : Fourth quarter 29,073 $ ) 2017 : Fourth quarter 29,073 $ 154.78 $ 4,500 Third : Fourth quarter 29,073 $ 154.78 $ 4,500 Third quarter 30,356 quarter 29,073 $ 154.78 $ 4,500 Third quarter 30,356 $ 148.24 154.78 $ 4,500 Third quarter 30,356 $ 148.24 4,500 Second quarter 4,500 Third quarter 30,356 $ 148.24 4,500 Second quarter 31,070 $ Third quarter 30,356 $ 148.24 4,500 Second quarter 31,070 $ 128.74 $ 148.24 4,500 Second quarter 31,070 $ 128.74 4,001 First quarter 4,500 Second quarter 31,070 $ 128.74 4,001 First quarter 44,333 $ Second quarter 31,070 $ 128.74 4,001 First quarter 44,333 $ 112.78 $ 128.74 4,001 First quarter 44,333 $ 112.78 5,000 Total open 4,001 First quarter 44,333 $ 112.78 5,000 Total open market common First quarter 44,333 $ 112.78 5,000 Total open market common stock open market common stock repurchase 134,832 $ 18,001 2016 : Fourth common stock repurchase 134,832 $ 18,001 2016 : Fourth quarter 28,579 stock repurchase 134,832 $ 18,001 2016 : Fourth quarter 28,579 $ 18,001 2016 : Fourth quarter 28,579 $ 104.97 $ 3,000 Third : Fourth quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 $ 97.00 104.97 $ 3,000 Third quarter 41,238 $ 97.00 4,000 Second quarter 3,000 Third quarter 41,238 $ 97.00 4,000 Second quarter 71,766 $ Third quarter 41,238 $ 97.00 4,000 Second quarter 71,766 $ 97.54 $ 97.00 4,000 Second quarter 71,766 $ 97.54 7,000 First quarter 4,000 Second quarter 71,766 $ 97.54 7,000 First quarter 25,984 $ Second quarter 71,766 $ 97.54 7,000 First quarter 25,984 $ 115.45 $ 97.54 7,000 First quarter 25,984 $ 115.45 3,000 Total open 7,000 First quarter 25,984 $ 115.45 3,000 Total open market common First quarter 25,984 $ 115.45 3,000 Total open market common stock open market common stock repurchase 167,567 $ 17,000 Note 8 – common stock repurchase 167,567 $ 17,000 Note 8 – Comprehensive Income repurchase 167,567 $ 17,000 Note 8 – Comprehensive Income Comprehensive income available-for-sale . Apple Inc. | 2017 Form 10-K | 61 The Apple Inc. | 2017 Form 10-K | 61 The following table | 2017 Form 10-K | 61 The following table show the statement line item , for 2017 and 2016 ( in million item , for 2017 and 2016 ( in million ) : Components Financial Statement Line Item 2017 2016 Unrealized ( gain ) Financial Statement Line Item 2017 2016 Unrealized ( gain ) /losses exchange contract Revenue $ ( 662 ) $ ( 865 ) ( 662 ) $ ( 865 ) Cost of sale ( ) Cost of sale ( 654 ) ( 130 ) Other sale ( 654 ) ( 130 ) Other income/ ( expense expense ) , net ( 638 ) 111 Interest rate contract , net ( 638 ) 111 Interest rate contract Other income/ ( expense ) , net 2 12 ( 1,952 ) ( expense ) , net 2 12 ( 1,952 ) ( 872 , net 2 12 ( 1,952 ) ( 872 ) Unrealized 12 ( 1,952 ) ( 872 ) Unrealized ( gain ) expense ) , net ( 99 ) 87 Total amount reclassified , net ( 99 ) 87 Total amount reclassified from AOCI reclassified from AOCI $ ( 2,051 ) $ ( 785 ) ( 2,051 ) $ ( 785 ) The following table show in AOCI by component for 2017 and 2016 ( in million by component for 2017 and 2016 ( in million ) : Total Balances a of September 26 , 2015 $ ( 653 a of September 26 , 2015 $ ( 653 ) $ 26 , 2015 $ ( 653 ) $ 772 $ ( $ ( 653 ) $ 772 $ ( 464 ) $ ) $ 772 $ ( 464 ) $ ( 345 ) ( 464 ) $ ( 345 ) Other comprehensive income/ ( ( loss ) before reclassification 67 14 2,445 2,526 Amounts reclassified loss ) before reclassification 67 14 2,445 2,526 Amounts reclassified from ) before reclassification 67 14 2,445 2,526 Amounts reclassified from AOCI before reclassification 67 14 2,445 2,526 Amounts reclassified from AOCI — reclassified from AOCI — ( 872 ) 87 ( 785 ) AOCI — ( 872 ) 87 ( 785 ) Tax effect ( 872 ) 87 ( 785 ) Tax effect 8 124 ( 785 ) Tax effect 8 124 ( 894 ) ( 785 ) Tax effect 8 124 ( 894 ) ( 762 Tax effect 8 124 ( 894 ) ( 762 ) Other 124 ( 894 ) ( 762 ) Other comprehensive income/ ( comprehensive income/ ( loss ) 75 ( 734 ) 1,638 979 ( loss ) 75 ( 734 ) 1,638 979 Balances a ) 75 ( 734 ) 1,638 979 Balances a of September 75 ( 734 ) 1,638 979 Balances a of September 24 979 Balances a of September 24 , 2016 ( 578 ) a of September 24 , 2016 ( 578 ) 38 1,174 September 24 , 2016 ( 578 ) 38 1,174 634 Other , 2016 ( 578 ) 38 1,174 634 Other comprehensive income/ 2016 ( 578 ) 38 1,174 634 Other comprehensive income/ ( ( 578 ) 38 1,174 634 Other comprehensive income/ ( loss ( loss ) before reclassification 301 1,793 ( 1,207 ) 887 loss ) before reclassification 301 1,793 ( 1,207 ) 887 Amounts before reclassification 301 1,793 ( 1,207 ) 887 Amounts reclassified from 301 1,793 ( 1,207 ) 887 Amounts reclassified from AOCI — reclassified from AOCI — ( 1,952 ) ( 99 ) ( — ( 1,952 ) ( 99 ) ( 2,051 ) Tax ) ( 99 ) ( 2,051 ) Tax effect ( 77 2,051 ) Tax effect ( 77 ) ( 3 ) 460 effect ( 77 ) ( 3 ) 460 380 Other comprehensive 77 ) ( 3 ) 460 380 Other comprehensive income/ ( ) ( 3 ) 460 380 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 224 ( 162 ) ( 846 ( loss ) 224 ( 162 ) ( 846 ) ( 224 ( 162 ) ( 846 ) ( 784 ) Balances ) ( 846 ) ( 784 ) Balances a of September ) Balances a of September 30 , 2017 $ ( 354 a of September 30 , 2017 $ ( 354 ) $ 30 , 2017 $ ( 354 ) $ ( 124 ) ( 354 ) $ ( 124 ) $ 328 $ ( $ ( 124 ) $ 328 $ ( 150 ) Note ) $ 328 $ ( 150 ) Note 9 – Benefit $ ( 150 ) Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 30 , 2017 , approximately 327.9 As of September 30 , 2017 , approximately 327.9 million share 30 , 2017 , approximately 327.9 million share were reserved for for future issuance under the 2014 Plan . Apple Inc. | Plan . Apple Inc. | 2017 Form 10-K | 62 2003 Apple Inc. | 2017 Form 10-K | 62 2003 Employee Stock | 2017 Form 10-K | 62 2003 Employee Stock Plan The 2017 Form 10-K | 62 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Plan is a shareholder approved including executive officer . The 2003 Plan permitted the granting of . Options granted under the 2003 Plan generally expire seven to . RSUs granted under the 2003 Plan generally vest over two Officer , granted under the 2003 Plan have DERs . DERs In the second quarter of 2014 , the Company terminated the grant new award under the 2003 Plan . 1997 Director Stock under the 2003 Plan . 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . All RSUs Plan expires November 9 , 2019 . All RSUs granted under vest . As of September 30 , 2017 , approximately 1.1 As of September 30 , 2017 , approximately 1.1 million share 30 , 2017 , approximately 1.1 million share were reserved for the Director Plan . Rule 10b5-1 Trading Plans During the three the three month ended September 30 , 2017 , Section 16 month ended September 30 , 2017 , Section 16 officer Angela 30 , 2017 , Section 16 officer Angela Ahrendts , Timothy place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 30 , 2017 , approximately 41.5 As of September 30 , 2017 , approximately 41.5 million share 30 , 2017 , approximately 41.5 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2017 ) $ 18,000 for calendar year 2017 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ earnings . Apple Inc. | 2017 Form 10-K | 63 Restricted Apple Inc. | 2017 Form 10-K | 63 Restricted Stock Units | 2017 Form 10-K | 63 Restricted Stock Units A summary activity and related information for 2017 , 2016 and 2015 , related information for 2017 , 2016 and 2015 , is a for 2017 , 2016 and 2015 , is a follows : ) Balance a of September 27 , 2014 103,822 $ 70.98 a of September 27 , 2014 103,822 $ 70.98 RSUs granted of September 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 41,684 ) $ 105.51 RSUs vested ( 41,684 ) $ 71.32 RSUs canceled vested ( 41,684 ) $ 71.32 RSUs canceled ( 6,258 ) $ 71.32 RSUs canceled ( 6,258 ) $ 80.34 Balance a canceled ( 6,258 ) $ 80.34 Balance a of September 26 80.34 Balance a of September 26 , 2015 101,467 $ 85.77 a of September 26 , 2015 101,467 $ 85.77 RSUs granted of September 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 46,313 ) $ 109.28 RSUs vested ( 46,313 ) $ 84.44 RSUs canceled vested ( 46,313 ) $ 84.44 RSUs canceled ( 5,533 ) $ 84.44 RSUs canceled ( 5,533 ) $ 96.48 Balance a canceled ( 5,533 ) $ 96.48 Balance a of September 24 96.48 Balance a of September 24 , 2016 99,089 $ 97.54 a of September 24 , 2016 99,089 $ 97.54 RSUs granted of September 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 45,735 ) $ 121.65 RSUs vested ( 45,735 ) $ 95.48 RSUs canceled vested ( 45,735 ) $ 95.48 RSUs canceled ( 5,895 ) $ 95.48 RSUs canceled ( 5,895 ) $ 106.87 Balance a canceled ( 5,895 ) $ 106.87 Balance a of September 30 106.87 Balance a of September 30 , 2017 97,571 $ 110.33 a of September 30 , 2017 97,571 $ 110.33 $ 15,038 of September 30 , 2017 97,571 $ 110.33 $ 15,038 The 30 , 2017 97,571 $ 110.33 $ 15,038 The fair value 2017 97,571 $ 110.33 $ 15,038 The fair value a of date of RSUs wa $ 6.1 billion , $ 5.1 billion $ 6.1 billion , $ 5.1 billion and $ 4.8 billion $ 5.1 billion and $ 4.8 billion for 2017 , 2016 and $ 4.8 billion for 2017 , 2016 and 2015 , 4.8 billion for 2017 , 2016 and 2015 , respectively . for 2017 , 2016 and 2015 , respectively . The majority of RSUs that vested in 2017 , 2016 and 2015 were that vested in 2017 , 2016 and 2015 were net share in 2017 , 2016 and 2015 were net share settled such total share withheld were approximately 15.4 million , 15.9 million and were approximately 15.4 million , 15.9 million and 14.1 million for million , 15.9 million and 14.1 million for 2017 , 2016 million and 14.1 million for 2017 , 2016 and 2015 , 14.1 million for 2017 , 2016 and 2015 , respectively , for 2017 , 2016 and 2015 , respectively , and were to taxing authority were $ 2.0 billion , $ 1.7 billion $ 2.0 billion , $ 1.7 billion and $ 1.6 billion $ 1.7 billion and $ 1.6 billion in 2017 , 2016 and $ 1.6 billion in 2017 , 2016 and 2015 , 1.6 billion in 2017 , 2016 and 2015 , respectively , in 2017 , 2016 and 2015 , respectively , and are Consolidated Statements of Operations for 2017 , 2016 and 2015 ( of Operations for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Cost of sale in million ) : 2017 2016 2015 Cost of sale $ million ) : 2017 2016 2015 Cost of sale $ 877 2015 Cost of sale $ 877 $ 769 $ 575 Research of sale $ 877 $ 769 $ 575 Research and development $ 877 $ 769 $ 575 Research and development 2,299 1,889 $ 575 Research and development 2,299 1,889 1,536 Selling , general 575 Research and development 2,299 1,889 1,536 Selling , general and Research and development 2,299 1,889 1,536 Selling , general and administrative Selling , general and administrative 1,664 1,552 1,475 Total share-based compensation , general and administrative 1,664 1,552 1,475 Total share-based compensation expense general and administrative 1,664 1,552 1,475 Total share-based compensation expense $ Total share-based compensation expense $ 4,840 $ 4,210 $ 3,586 The compensation expense $ 4,840 $ 4,210 $ 3,586 The income tax $ 4,840 $ 4,210 $ 3,586 The income tax benefit related share-based compensation expense wa $ 1.6 billion , $ 1.4 billion $ 1.6 billion , $ 1.4 billion and $ 1.2 billion $ 1.4 billion and $ 1.2 billion for 2017 , 2016 and $ 1.2 billion for 2017 , 2016 and 2015 , 1.2 billion for 2017 , 2016 and 2015 , respectively . for 2017 , 2016 and 2015 , respectively . As of respectively . As of September 30 , 2017 , the total As of September 30 , 2017 , the total unrecognized compensation and stock option wa $ 8.1 billion , which the Company over a weighted-average period of 2.5 year . Note 10 – of 2.5 year . Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2017 , 2016 and 2015 ( related cost for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Beginning accrued warranty in million ) : 2017 2016 2015 Beginning accrued warranty and million ) : 2017 2016 2015 Beginning accrued warranty and related warranty and related cost $ 3,702 $ 4,780 $ 4,159 Cost related cost $ 3,702 $ 4,780 $ 4,159 Cost of warranty $ 3,702 $ 4,780 $ 4,159 Cost of warranty claim ( Cost of warranty claim ( 4,322 ) ( 4,663 ) ( claim ( 4,322 ) ( 4,663 ) ( 4,401 ) Accruals ) ( 4,663 ) ( 4,401 ) Accruals for product warranty ) Accruals for product warranty 4,454 3,585 5,022 Ending accrued warranty Accruals for product warranty 4,454 3,585 5,022 Ending accrued warranty and for product warranty 4,454 3,585 5,022 Ending accrued warranty and related warranty and related cost $ 3,834 $ 3,702 $ 4,780 Apple related cost $ 3,834 $ 3,702 $ 4,780 Apple Inc. | $ 3,834 $ 3,702 $ 4,780 Apple Inc. | 2017 Form $ 4,780 Apple Inc. | 2017 Form 10-K | 64 Agreements Apple Inc. | 2017 Form 10-K | 64 Agreements entered into | 2017 Form 10-K | 64 Agreements entered into by the requirement for period up to 150 day . Other Off-Balance Sheet arrangement . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company ’ s noncancelable operating lease were $ 9.5 billion . The Company ’ have original term not exceeding 10 year and generally contain multi-year option . Apple Inc. | 2017 Form 10-K | 65 Rent Apple Inc. | 2017 Form 10-K | 65 Rent expense under | 2017 Form 10-K | 65 Rent expense under all operating noncancelable lease , wa $ 1.1 billion , $ 939 million $ 1.1 billion , $ 939 million and $ 794 million $ 939 million and $ 794 million in 2017 , 2016 and $ 794 million in 2017 , 2016 and 2015 , 794 million in 2017 , 2016 and 2015 , respectively . in 2017 , 2016 and 2015 , respectively . Future minimum one year a of September 30 , 2017 , are a a of September 30 , 2017 , are a follows ( ( in million ) : 2018 $ 1,223 2019 1,187 2020 million ) : 2018 $ 1,223 2019 1,187 2020 1,108 2021 ) : 2018 $ 1,223 2019 1,187 2020 1,108 2021 1,033 : 2018 $ 1,223 2019 1,187 2020 1,108 2021 1,033 2022 2018 $ 1,223 2019 1,187 2020 1,108 2021 1,033 2022 871 $ 1,223 2019 1,187 2020 1,108 2021 1,033 2022 871 Thereafter 1,223 2019 1,187 2020 1,108 2021 1,033 2022 871 Thereafter 4,123 2019 1,187 2020 1,108 2021 1,033 2022 871 Thereafter 4,123 Total 1,187 2020 1,108 2021 1,033 2022 871 Thereafter 4,123 Total $ 2020 1,108 2021 1,033 2022 871 Thereafter 4,123 Total $ 9,545 2021 1,033 2022 871 Thereafter 4,123 Total $ 9,545 Unconditional Purchase 871 Thereafter 4,123 Total $ 9,545 Unconditional Purchase Obligations The Company one year a of September 30 , 2017 , are a a of September 30 , 2017 , are a follows ( ( in million ) : 2018 $ 1,798 2019 2,675 2020 million ) : 2018 $ 1,798 2019 2,675 2020 1,626 2021 ) : 2018 $ 1,798 2019 2,675 2020 1,626 2021 1,296 : 2018 $ 1,798 2019 2,675 2020 1,626 2021 1,296 2022 2018 $ 1,798 2019 2,675 2020 1,626 2021 1,296 2022 1,268 $ 1,798 2019 2,675 2020 1,626 2021 1,296 2022 1,268 Thereafter 1,798 2019 2,675 2020 1,626 2021 1,296 2022 1,268 Thereafter 14 2019 2,675 2020 1,626 2021 1,296 2022 1,268 Thereafter 14 Total 2,675 2020 1,626 2021 1,296 2022 1,268 Thereafter 14 Total $ 2020 1,626 2021 1,296 2022 1,268 Thereafter 14 Total $ 8,677 2021 1,296 2022 1,268 Thereafter 14 Total $ 8,677 Contingencies The 1,268 Thereafter 14 Total $ 8,677 Contingencies The Company is subject in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal et al . On August 24 , 2012 , a jury . On August 24 , 2012 , a jury returned a verdict awarding the Company $ 1.05 billion in it lawsuit against Jose Division . On March 6 , 2014 , the District . On March 6 , 2014 , the District Court entered the amount of approximately $ 930 million . On May 18 930 million . On May 18 , 2015 , the U.S. . On May 18 , 2015 , the U.S. Court of the amount of approximately $ 548 million , with the District part . Samsung paid $ 548 million to the Company in to the Company in December 2015 , which wa included in of Operations . On December 6 , 2016 , the U.S. . On December 6 , 2016 , the U.S. Supreme Court proceeding related to the $ 548 million in damage . On in damage . On February 7 , 2017 , the U.S. . On February 7 , 2017 , the U.S. Court of are needed . On October 22 , 2017 , on remand . On October 22 , 2017 , on remand from the damage . Apple Inc. | 2017 Form 10-K | 66 Note Apple Inc. | 2017 Form 10-K | 66 Note 11 – | 2017 Form 10-K | 66 Note 11 – Segment Information Form 10-K | 66 Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant information by reportable segment for 2017 , 2016 and 2015 ( reportable segment for 2017 , 2016 and 2015 ( in million for 2017 , 2016 and 2015 ( in million ) : ( in million ) : 2017 2016 2015 Americas : Net in million ) : 2017 2016 2015 Americas : Net sale million ) : 2017 2016 2015 Americas : Net sale $ Americas : Net sale $ 96,600 $ 86,613 $ 93,864 Operating Net sale $ 96,600 $ 86,613 $ 93,864 Operating income $ $ 96,600 $ 86,613 $ 93,864 Operating income $ 30,684 $ $ 93,864 Operating income $ 30,684 $ 28,172 $ 31,186 Europe Operating income $ 30,684 $ 28,172 $ 31,186 Europe : Net $ 30,684 $ 28,172 $ 31,186 Europe : Net sale $ Europe : Net sale $ 54,938 $ 49,952 $ 50,337 Operating Net sale $ 54,938 $ 49,952 $ 50,337 Operating income $ $ 54,938 $ 49,952 $ 50,337 Operating income $ 16,514 $ $ 50,337 Operating income $ 16,514 $ 15,348 $ 16,527 Greater Operating income $ 16,514 $ 15,348 $ 16,527 Greater China : $ 16,514 $ 15,348 $ 16,527 Greater China : Net sale China : Net sale $ 44,764 $ 48,492 $ 58,715 Operating Net sale $ 44,764 $ 48,492 $ 58,715 Operating income $ $ 44,764 $ 48,492 $ 58,715 Operating income $ 17,032 $ $ 58,715 Operating income $ 17,032 $ 18,835 $ 23,002 Japan Operating income $ 17,032 $ 18,835 $ 23,002 Japan : Net $ 17,032 $ 18,835 $ 23,002 Japan : Net sale $ Japan : Net sale $ 17,733 $ 16,928 $ 15,706 Operating Net sale $ 17,733 $ 16,928 $ 15,706 Operating income $ $ 17,733 $ 16,928 $ 15,706 Operating income $ 8,097 $ $ 15,706 Operating income $ 8,097 $ 7,165 $ 7,617 Rest Operating income $ 8,097 $ 7,165 $ 7,617 Rest of Asia $ 8,097 $ 7,165 $ 7,617 Rest of Asia Pacific : Pacific : Net sale $ 15,199 $ 13,654 $ 15,093 Operating Net sale $ 15,199 $ 13,654 $ 15,093 Operating income $ $ 15,199 $ 13,654 $ 15,093 Operating income $ 5,304 $ $ 15,093 Operating income $ 5,304 $ 4,781 $ 5,518 A Operating income $ 5,304 $ 4,781 $ 5,518 A reconciliation of $ 5,304 $ 4,781 $ 5,518 A reconciliation of the Company Consolidated Statements of Operations for 2017 , 2016 and 2015 is of Operations for 2017 , 2016 and 2015 is a follows for 2017 , 2016 and 2015 is a follows ( in ( in million ) : 2017 2016 2015 Segment operating income in million ) : 2017 2016 2015 Segment operating income $ million ) : 2017 2016 2015 Segment operating income $ 77,631 2015 Segment operating income $ 77,631 $ 74,301 $ 83,850 Research operating income $ 77,631 $ 74,301 $ 83,850 Research and development $ 77,631 $ 74,301 $ 83,850 Research and development expense ( Research and development expense ( 11,581 ) ( 10,045 ) ( expense ( 11,581 ) ( 10,045 ) ( 8,067 ) Other ) ( 10,045 ) ( 8,067 ) Other corporate expense , corporate expense , net ( 4,706 ) ( 4,232 ) ( net ( 4,706 ) ( 4,232 ) ( 4,553 ) Total ) ( 4,232 ) ( 4,553 ) Total operating income $ ) Total operating income $ 61,344 $ 60,024 $ 71,230 Apple operating income $ 61,344 $ 60,024 $ 71,230 Apple Inc. | $ 61,344 $ 60,024 $ 71,230 Apple Inc. | 2017 Form $ 71,230 Apple Inc. | 2017 Form 10-K | 67 The Apple Inc. | 2017 Form 10-K | 67 The U.S. and | 2017 Form 10-K | 67 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2017 , 2016 and 2015 . net sale in 2017 , 2016 and 2015 . There wa in 2017 , 2016 and 2015 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2017 , 2016 and 2015 . net sale in 2017 , 2016 and 2015 . Net sale in 2017 , 2016 and 2015 . Net sale for 2017 2015 . Net sale for 2017 , 2016 and 2015 and Net sale for 2017 , 2016 and 2015 and long-lived asset for 2017 , 2016 and 2015 and long-lived asset a of long-lived asset a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 were a follows 2017 and September 24 , 2016 were a follows ( in ( in million ) : 2017 2016 2015 Net sale : in million ) : 2017 2016 2015 Net sale : U.S. million ) : 2017 2016 2015 Net sale : U.S. $ Net sale : U.S. $ 84,339 $ 75,667 $ 81,732 China : U.S. $ 84,339 $ 75,667 $ 81,732 China ( 1 $ 84,339 $ 75,667 $ 81,732 China ( 1 ) 44,764 75,667 $ 81,732 China ( 1 ) 44,764 48,492 58,715 Other 81,732 China ( 1 ) 44,764 48,492 58,715 Other country 100,131 China ( 1 ) 44,764 48,492 58,715 Other country 100,131 91,480 ( 1 ) 44,764 48,492 58,715 Other country 100,131 91,480 93,268 44,764 48,492 58,715 Other country 100,131 91,480 93,268 Total net sale 48,492 58,715 Other country 100,131 91,480 93,268 Total net sale $ 58,715 Other country 100,131 91,480 93,268 Total net sale $ 229,234 93,268 Total net sale $ 229,234 $ 215,639 $ 233,715 2017 net sale $ 229,234 $ 215,639 $ 233,715 2017 2016 Long-lived $ 229,234 $ 215,639 $ 233,715 2017 2016 Long-lived asset : 229,234 $ 215,639 $ 233,715 2017 2016 Long-lived asset : U.S. $ 215,639 $ 233,715 2017 2016 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 20,637 $ 16,364 China ( 1 : U.S. $ 20,637 $ 16,364 China ( 1 ) 10,211 20,637 $ 16,364 China ( 1 ) 10,211 7,875 Other country 16,364 China ( 1 ) 10,211 7,875 Other country 2,935 2,771 China ( 1 ) 10,211 7,875 Other country 2,935 2,771 Total ) 10,211 7,875 Other country 2,935 2,771 Total long-lived asset $ 10,211 7,875 Other country 2,935 2,771 Total long-lived asset $ 33,783 2,771 Total long-lived asset $ 33,783 $ 27,010 ( 1 ) long-lived asset $ 33,783 $ 27,010 ( 1 ) China includes $ 33,783 $ 27,010 ( 1 ) China includes Hong Kong Net sale by product for 2017 , 2016 and 2015 were by product for 2017 , 2016 and 2015 were a follows for 2017 , 2016 and 2015 were a follows ( in ( in million ) : 2017 2016 2015 iPhone ( 1 in million ) : 2017 2016 2015 iPhone ( 1 ) million ) : 2017 2016 2015 iPhone ( 1 ) $ 2017 2016 2015 iPhone ( 1 ) $ 141,319 $ 136,700 iPhone ( 1 ) $ 141,319 $ 136,700 $ 155,041 iPad 1 ) $ 141,319 $ 136,700 $ 155,041 iPad ( 1 $ 141,319 $ 136,700 $ 155,041 iPad ( 1 ) 19,222 136,700 $ 155,041 iPad ( 1 ) 19,222 20,628 23,227 Mac 155,041 iPad ( 1 ) 19,222 20,628 23,227 Mac ( 1 iPad ( 1 ) 19,222 20,628 23,227 Mac ( 1 ) ( 1 ) 19,222 20,628 23,227 Mac ( 1 ) 25,850 19,222 20,628 23,227 Mac ( 1 ) 25,850 22,831 25,471 Services 23,227 Mac ( 1 ) 25,850 22,831 25,471 Services ( 2 Mac ( 1 ) 25,850 22,831 25,471 Services ( 2 ) ( 1 ) 25,850 22,831 25,471 Services ( 2 ) 29,980 25,850 22,831 25,471 Services ( 2 ) 29,980 24,348 19,909 Other 25,471 Services ( 2 ) 29,980 24,348 19,909 Other Products ( Services ( 2 ) 29,980 24,348 19,909 Other Products ( 1 ( 2 ) 29,980 24,348 19,909 Other Products ( 1 ) 24,348 19,909 Other Products ( 1 ) ( 3 ) 12,863 Products ( 1 ) ( 3 ) 12,863 11,132 10,067 Total 1 ) ( 3 ) 12,863 11,132 10,067 Total net sale ) ( 3 ) 12,863 11,132 10,067 Total net sale $ ( 3 ) 12,863 11,132 10,067 Total net sale $ 229,234 10,067 Total net sale $ 229,234 $ 215,639 $ 233,715 ( net sale $ 229,234 $ 215,639 $ 233,715 ( 1 ) $ 229,234 $ 215,639 $ 233,715 ( 1 ) Includes deferral $ 215,639 $ 233,715 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from Digital in the fourth quarter of 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of Apple and third-party accessory . Note 12 – Selected Quarterly Financial Information of the four quarter of 2017 and 2016 ( in million four quarter of 2017 and 2016 ( in million , except Quarter Second Quarter First Quarter 2017 : Net sale $ 52,579 2017 : Net sale $ 52,579 $ 45,408 $ 52,896 $ Net sale $ 52,579 $ 45,408 $ 52,896 $ 78,351 Gross $ 52,579 $ 45,408 $ 52,896 $ 78,351 Gross margin $ $ 45,408 $ 52,896 $ 78,351 Gross margin $ 19,931 $ $ 78,351 Gross margin $ 19,931 $ 17,488 $ 20,591 $ Gross margin $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.36 Apple $ 2.07 $ 1.67 $ 2.10 $ 3.36 Apple Inc. | $ 1.67 $ 2.10 $ 3.36 Apple Inc. | 2017 Form $ 3.36 Apple Inc. | 2017 Form 10-K | 68 Fourth Apple Inc. | 2017 Form 10-K | 68 Fourth Quarter Third | 2017 Form 10-K | 68 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2016 : Net sale $ 46,852 2016 : Net sale $ 46,852 $ 42,358 $ 50,557 $ Net sale $ 46,852 $ 42,358 $ 50,557 $ 75,872 Gross $ 46,852 $ 42,358 $ 50,557 $ 75,872 Gross margin $ $ 42,358 $ 50,557 $ 75,872 Gross margin $ 17,813 $ $ 75,872 Gross margin $ 17,813 $ 16,106 $ 19,921 $ Gross margin $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.28 ( $ 1.67 $ 1.42 $ 1.90 $ 3.28 ( 1 ) $ 1.42 $ 1.90 $ 3.28 ( 1 ) Basic and $ 1.90 $ 3.28 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2017 Form 10-K | 69 Report Apple Inc. | 2017 Form 10-K | 69 Report of Ernst | 2017 Form 10-K | 69 Report of Ernst & Young Apple Inc. a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , and the 2017 and September 24 , 2016 , and the related consolidated in the period ended September 30 , 2017 . These financial period ended September 30 , 2017 . These financial statement are of Apple Inc. at September 30 , 2017 and September 24 Inc. at September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 , and the 2017 and September 24 , 2016 , and the consolidated result in the period ended September 30 , 2017 , in conformity period ended September 30 , 2017 , in conformity with U.S. financial reporting a of September 30 , 2017 , based on a of September 30 , 2017 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated November 3 , 2017 expressed an unqualified report dated November 3 , 2017 expressed an unqualified opinion thereon San Jose , California November 3 , 2017 Apple Inc. | , California November 3 , 2017 Apple Inc. | 2017 Form , 2017 Apple Inc. | 2017 Form 10-K | 70 Report Apple Inc. | 2017 Form 10-K | 70 Report of Ernst | 2017 Form 10-K | 70 Report of Ernst & Young financial reporting a of September 30 , 2017 , based on a of September 30 , 2017 , based on criterion established of the Treadway Commission ( 2013 framework ) ( “ the policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 30 , 2017 , based on a of September 30 , 2017 , based on the COSO United States ) , the 2017 consolidated financial statement of Apple and our report dated November 3 , 2017 expressed an unqualified report dated November 3 , 2017 expressed an unqualified opinion thereon San Jose , California November 3 , 2017 Apple Inc. | , California November 3 , 2017 Apple Inc. | 2017 Form , 2017 Apple Inc. | 2017 Form 10-K | 71 Item Apple Inc. | 2017 Form 10-K | 71 Item 9 . | 2017 Form 10-K | 71 Item 9 . Changes in Form 10-K | 71 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 30 , 2017 to provide reasonable a of September 30 , 2017 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 30 , 2017 to provide reasonable a of September 30 , 2017 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control Over during the fourth quarter of 2017 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable applicable . Apple Inc. | 2017 Form 10-K | 72 PART Apple Inc. | 2017 Form 10-K | 72 PART III Item | 2017 Form 10-K | 72 PART III Item 10 . | 72 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2018 Proxy Statement to be filed filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2017 in connection with day after September 30 , 2017 in connection with the solicitation for the Company ’ s 2018 annual meeting of shareholder and or by filing a Form 8-K , in each case to SEC or Nasdaq . Item 11 . Executive Compensation The information ” and “ Director Compensation— 2017 ” under the heading “ in the Company ’ s 2018 Proxy Statement to be filed filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2017 and is incorporated day after September 30 , 2017 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2018 Proxy Statement to be filed filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2017 and is incorporated day after September 30 , 2017 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2018 Proxy Statement to be filed filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2017 and is incorporated day after September 30 , 2017 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2018 Proxy Statement to be filed filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2017 and is incorporated day after September 30 , 2017 and is incorporated herein by reference . Apple Inc. | 2017 Form 10-K | 73 PART Apple Inc. | 2017 Form 10-K | 73 PART IV Item | 2017 Form 10-K | 73 PART IV Item 15 . | 73 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 39 Consolidated Statements 2016 and September 26 , 2015 39 Consolidated Statements of Comprehensive and September 26 , 2015 39 Consolidated Statements of Comprehensive Income for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 40 Consolidated Balance 2016 and September 26 , 2015 40 Consolidated Balance Sheets a and September 26 , 2015 40 Consolidated Balance Sheets a of Balance Sheets a of September 30 , 2017 and September 24 a of September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 41 Consolidated Statements 2017 and September 24 , 2016 41 Consolidated Statements of Shareholders and September 24 , 2016 41 Consolidated Statements of Shareholders ’ for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 42 Consolidated Statements 2016 and September 26 , 2015 42 Consolidated Statements of Cash and September 26 , 2015 42 Consolidated Statements of Cash Flows for the year ended September 30 , 2017 , September 24 year ended September 30 , 2017 , September 24 , 2016 30 , 2017 , September 24 , 2016 and September 26 2017 , September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 43 Notes to 2016 and September 26 , 2015 43 Notes to Consolidated Financial and September 26 , 2015 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 68 Reports of Ernst & Young Independent Registered Public Accounting Firm 70 ( 2 ) Financial Statement Public Accounting Firm 70 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of Registrant effective a of June 6 , 2014 . 8-K 3.1 a of June 6 , 2014 . 8-K 3.1 6/6/14 3.2 June 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws of Registrant effective a of December 13 , 2016 . 8-K 3.2 a of December 13 , 2016 . 8-K 3.2 12/15/16 4.1 December 13 , 2016 . 8-K 3.2 12/15/16 4.1 Form of 13 , 2016 . 8-K 3.2 12/15/16 4.1 Form of Common , 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of June 10 , 2015 , including form a of June 10 , 2015 , including form of global of global note representing the 0.350 % Notes due 2020 . the 0.350 % Notes due 2020 . 8-K 4.1 6/10/15 Apple % Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2017 due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2017 Form 4.1 6/10/15 Apple Inc. | 2017 Form 10-K | 74 Incorporated Apple Inc. | 2017 Form 10-K | 74 Incorporated by Reference | 2017 Form 10-K | 74 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.9 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 to 2/23/16 4.12 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.13 March 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate of , dated a of June 22 , 2016 , including form a of June 22 , 2016 , including form of global form of global note representing 4.15 % Notes due 2046 . representing 4.15 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate of , dated a of March 3 , 2017 , including form a of March 3 , 2017 , including form of global form of global note representing 4.300 % Notes due 2047 . representing 4.300 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 10.1 % Notes due 2047 . 8-K 4.1 9/12/17 10.1 * Employee Notes due 2047 . 8-K 4.1 9/12/17 10.1 * Employee Stock due 2047 . 8-K 4.1 9/12/17 10.1 * Employee Stock Purchase 2047 . 8-K 4.1 9/12/17 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through August 23 , 2012 . 10-Q 10.3 amended through August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of April 6 , 2012 . 10-Q 10.8 a of April 6 , 2012 . 10-Q 10.8 3/31/12 10.7 April 6 , 2012 . 10-Q 10.8 3/31/12 10.7 * Summary 6 , 2012 . 10-Q 10.8 3/31/12 10.7 * Summary Description , 2012 . 10-Q 10.8 3/31/12 10.7 * Summary Description of 2012 . 10-Q 10.8 3/31/12 10.7 * Summary Description of Amendment , effective a of May 24 , 2012 , to certain a of May 24 , 2012 , to certain Restricted Stock Agreements outstanding a of April 5 , 2012 . 10-Q 10.8 a of April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * , 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * , * , 2012 . 10-Q 10.8 6/30/12 10.8 * , * * 2012 . 10-Q 10.8 6/30/12 10.8 * , * * 2014 10.8 * , * * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10.9 * a of October 1 , 2017 . 10.9 * Form of October 1 , 2017 . 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan a of Stock Plan a of February 28 , 2014 . 8-K 10.2 a of February 28 , 2014 . 8-K 10.2 3/5/14 10.10 February 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form of , 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of February 28 , 2014 . 8-K 10.3 a of February 28 , 2014 . 8-K 10.3 3/5/14 10.11 February 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form of , 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.11 a of August 26 , 2014 . 10-K 10.11 9/27/14 Apple August 26 , 2014 . 10-K 10.11 9/27/14 Apple Inc. | 26 , 2014 . 10-K 10.11 9/27/14 Apple Inc. | 2017 , 2014 . 10-K 10.11 9/27/14 Apple Inc. | 2017 Form 10.11 9/27/14 Apple Inc. | 2017 Form 10-K | 75 Incorporated Apple Inc. | 2017 Form 10-K | 75 Incorporated by Reference | 2017 Form 10-K | 75 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.12 a of August 26 , 2014 . 10-K 10.12 9/27/14 10.13 August 26 , 2014 . 10-K 10.12 9/27/14 10.13 * Form 26 , 2014 . 10-K 10.12 9/27/14 10.13 * Form of , 2014 . 10-K 10.12 9/27/14 10.13 * Form of Amendment 2014 . 10-K 10.12 9/27/14 10.13 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.13 a of August 26 , 2014 . 10-K 10.13 9/27/14 10.14 August 26 , 2014 . 10-K 10.13 9/27/14 10.14 * Offer 26 , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , dated Offer Letter , dated August 1 , 2013 , from the , dated August 1 , 2013 , from the Registrant to Registrant to Angela Ahrendts . 10-Q 10.14 12/27/14 10.15 * Form to Angela Ahrendts . 10-Q 10.14 12/27/14 10.15 * Form of Angela Ahrendts . 10-Q 10.14 12/27/14 10.15 * Form of Restricted Ahrendts . 10-Q 10.14 12/27/14 10.15 * Form of Restricted Stock Unit Award Agreement under the 1997 Director Stock Plan a of Stock Plan a of November 17 , 2015 . 10-Q 10.15 a of November 17 , 2015 . 10-Q 10.15 12/26/15 10.16 November 17 , 2015 . 10-Q 10.15 12/26/15 10.16 * Form 17 , 2015 . 10-Q 10.15 12/26/15 10.16 * Form of , 2015 . 10-Q 10.15 12/26/15 10.16 * Form of Restricted 2015 . 10-Q 10.15 12/26/15 10.16 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.16 a of October 5 , 2015 . 10-Q 10.16 3/26/16 10.17 October 5 , 2015 . 10-Q 10.16 3/26/16 10.17 * Form 5 , 2015 . 10-Q 10.16 3/26/16 10.17 * Form of , 2015 . 10-Q 10.16 3/26/16 10.17 * Form of Performance 2015 . 10-Q 10.16 3/26/16 10.17 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.17 a of October 5 , 2015 . 10-Q 10.17 3/26/16 10.18 October 5 , 2015 . 10-Q 10.17 3/26/16 10.18 * Form 5 , 2015 . 10-Q 10.17 3/26/16 10.18 * Form of , 2015 . 10-Q 10.17 3/26/16 10.18 * Form of Restricted 2015 . 10-Q 10.17 3/26/16 10.18 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.18 a of October 14 , 2016 . 10-K 10.18 9/24/16 10.19 October 14 , 2016 . 10-K 10.18 9/24/16 10.19 * Form 14 , 2016 . 10-K 10.18 9/24/16 10.19 * Form of , 2016 . 10-K 10.18 9/24/16 10.19 * Form of Performance 2016 . 10-K 10.18 9/24/16 10.19 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.19 a of October 14 , 2016 . 10-K 10.19 9/24/16 10.20 October 14 , 2016 . 10-K 10.19 9/24/16 10.20 * , 14 , 2016 . 10-K 10.19 9/24/16 10.20 * , * , 2016 . 10-K 10.19 9/24/16 10.20 * , * * 2016 . 10-K 10.19 9/24/16 10.20 * , * * Form Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10.21 * a of September 26 , 2017 . 10.21 * , * September 26 , 2017 . 10.21 * , * * Form of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 12.1 * a of September 26 , 2017 . 12.1 * * Computation September 26 , 2017 . 12.1 * * Computation of Ratio Earnings to Fixed Charges . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2017 Form 10-K | 76 SIGNATURES Apple Inc. | 2017 Form 10-K | 76 SIGNATURES Pursuant to | 2017 Form 10-K | 76 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : November 3 , 2017 Apple Inc. By Date : November 3 , 2017 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 3 , 2017 TIMOTHY D. COOK Officer ) November 3 , 2017 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) November 3 , 2017 LUCA MAESTRI /s/ Officer ) November 3 , 2017 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) November 3 , 2017 CHRIS KONDO /s/ Officer ) November 3 , 2017 CHRIS KONDO /s/ James A A . Bell Director November 3 , 2017 JAMES A . Bell Director November 3 , 2017 JAMES A . BELL /s/ /s/ Al Gore Director November 3 , 2017 AL GORE /s/ Gore Director November 3 , 2017 AL GORE /s/ Robert A. Robert A. Iger Director November 3 , 2017 ROBERT A. IGER Iger Director November 3 , 2017 ROBERT A. IGER /s/ Andrea /s/ Andrea Jung Director November 3 , 2017 ANDREA JUNG /s/ Jung Director November 3 , 2017 ANDREA JUNG /s/ Arthur D. Arthur D. Levinson Director November 3 , 2017 ARTHUR D. LEVINSON Levinson Director November 3 , 2017 ARTHUR D. LEVINSON /s/ Ronald Ronald D. Sugar Director November 3 , 2017 RONALD D. SUGAR Sugar Director November 3 , 2017 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director November 3 , 2017 SUSAN L. WAGNER Wagner Director November 3 , 2017 SUSAN L. WAGNER Apple Inc. L. WAGNER Apple Inc. | 2017 Form 10-K | 77 Apple Inc. | 2017 Form 10-K | 77 | 2017 Form 10-K | 77 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-18-000145/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-18-000145/full-submission.txt new file mode 100644 index 0000000..8b9f325 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-18-000145/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 29 , 2018 or ☐ TRANSITION year ended September 29 , 2018 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Park Way Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the : Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 0.875 2022 1.375 % Notes due 2024 0.875 % Notes due 2025 1.375 % Notes due 2024 0.875 % Notes due 2025 1.625 2024 0.875 % Notes due 2025 1.625 % Notes due 2026 0.875 % Notes due 2025 1.625 % Notes due 2026 2.000 2025 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 2027 1.375 2026 2.000 % Notes due 2027 1.375 % Notes due 2029 2.000 % Notes due 2027 1.375 % Notes due 2029 3.050 2027 1.375 % Notes due 2029 3.050 % Notes due 2029 1.375 % Notes due 2029 3.050 % Notes due 2029 3.600 2029 3.050 % Notes due 2029 3.600 % Notes due 2042 3.050 % Notes due 2029 3.600 % Notes due 2042 The 2029 3.600 % Notes due 2042 The Nasdaq Stock Market LLC Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ☒ Indicate by check mark growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 30 , 2018 , the last a of March 30 , 2018 , the last business day quarter , wa approximately $ 828,880,000,000 . Solely for purpose of for any other purpose . 4,745,398,000 share of common stock were and outstanding a of October 26 , 2018 . DOCUMENTS INCORPORATED a of October 26 , 2018 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2019 annual meeting of shareholder ( of shareholder ( the “ 2019 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2019 10-K where indicated . The 2019 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 29 , 2018 TABLE OF CONTENTS Year Ended September 29 , 2018 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 8 Item Item 1A . Risk Factors 8 Item 1B . Unresolved Staff . Risk Factors 8 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 18 Unresolved Staff Comments 17 Item 2 . Properties 18 Item 3 17 Item 2 . Properties 18 Item 3 . Legal Proceedings 2 . Properties 18 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Mine Safety . Legal Proceedings 18 Item 4 . Mine Safety Disclosures 18 4 . Mine Safety Disclosures 18 Part II Item 5 . Disclosures 18 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 35 Item 8 . Financial Statements About Market Risk 35 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 37 Item 9 . Changes in and Supplementary Data 37 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 67 Item 9A . Controls and and Financial Disclosure 67 Item 9A . Controls and Procedures 67 9A . Controls and Procedures 67 Item 9B . Other Information Controls and Procedures 67 Item 9B . Other Information 67 Part Item 9B . Other Information 67 Part III Item 10 . Information 67 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 68 Item 11 . Executive Compensation and Corporate Governance 68 Item 11 . Executive Compensation 68 Item Item 11 . Executive Compensation 68 Item 12 . Security Ownership . Executive Compensation 68 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 68 Item 13 . Certain Relationships Related Stockholder Matters 68 Item 13 . Certain Relationships and Related Transactions , and Director Independence 68 Item 14 . Principal Accounting and Director Independence 68 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 68 Part IV Item 15 . Services 68 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 69 Item 16 . Form 10-K Financial Statement Schedules 69 Item 16 . Form 10-K Summary 71 69 Item 16 . Form 10-K Summary 71 This Annual Report 16 . Form 10-K Summary 71 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the a California corporation established in 1977. Business Strategy The Company is qualifying device . In September 2018 , the Company introduced three were available beginning in September 2018. iPhone X R feature a wa available beginning in October 2018 . The Company ’ s of smartphones also includes iPhone 8 , 8 Plus , 7 also includes iPhone 8 , 8 Plus , 7 and 7 8 , 8 Plus , 7 and 7 Plus model . 8 Plus , 7 and 7 Plus model . iPhone work apps . Apple Inc. | 2018 Form 10-K | 1 iPad Apple Inc. | 2018 Form 10-K | 1 iPad iPad is | 2018 Form 10-K | 1 iPad iPad is the Company Touch ID . In March 2018 , the Company released a the Company released a new 9.7-inch iPad with Apple Pencil ® ® compatibility . In October 2018 , the Company introduced a Keyboard Folio™ . The new 11-inch and 12.9-inch iPad Pro model . The new 11-inch and 12.9-inch iPad Pro model feature a desktop computer include iMac ® 21.5-inch , iMac 21.5-inch with Retina iMac ® 21.5-inch , iMac 21.5-inch with Retina ® 4K display iMac 21.5-inch with Retina ® 4K display , iMac 27-inch with ® 4K display , iMac 27-inch with Retina 5K display , , iMac 27-inch with Retina 5K display , iMac Pro ® Touch Bar™ . In October 2018 , the Company introduced a iCloud service . In September 2018 , the Company released iOS , the Company released iOS 12 , which includes improved performance Mojave , released in September 2018 , is the 15th major September 2018 , is the 15th major release of macOS and Apple Watch . In September 2018 , the Company released watchOS , the Company released watchOS 5 , which help user stay and service . In September 2018 , the Company released tvOS , the Company released tvOS 12 , which support enhanced sound sound quality and provides additional 4K high dynamic range ( “ library . Apple Inc. | 2018 Form 10-K | 2 iCloud Apple Inc. | 2018 Form 10-K | 2 iCloud iCloud is | 2018 Form 10-K | 2 iCloud iCloud is the Company debit card . In December 2017 , the Company released an released an update to iOS 11 and watchOS 4 introducing Apple to iOS 11 and watchOS 4 introducing Apple Pay Cash in Apple TV and Apple TV 4K ® , which support 4K 4K ® , which support 4K and HDR content . Apple Apple Pay . In September 2018 , the Company introduced Apple Company introduced Apple Watch Series 4 , with a new design with Siri . In February 2018 , the Company released HomePod code . Apple Inc. | 2018 Form 10-K | 3 Markets Apple Inc. | 2018 Form 10-K | 3 Markets and Distribution | 2018 Form 10-K | 3 Markets and Distribution The Company retailer and resellers . During 2018 , the Company ’ s indirect distribution channel accounted for 29 % and 71 % , accounted for 29 % and 71 % , respectively , of customer accounted for more than 10 % of net sale in % of net sale in 2018 , 2017 and 2016 . net sale in 2018 , 2017 and 2016 . Competition The in 2018 , 2017 and 2016 . Competition The market for business . Apple Inc. | 2018 Form 10-K | 4 The Apple Inc. | 2018 Form 10-K | 4 The Company ’ | 2018 Form 10-K | 4 The Company ’ s service requirement for period up to 150 day . Research and Development personnel . Apple Inc. | 2018 Form 10-K | 5 The Apple Inc. | 2018 Form 10-K | 5 The Company regularly | 2018 Form 10-K | 5 The Company regularly file patent Operations and Geographic Data During 2018 , the Company ’ s international net sale accounted for 37 % and 63 % , accounted for 37 % and 63 % , respectively , of The Company also offer a 90-day limited warranty on the service . Employees As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had approximately , the Company had approximately 132,000 full-time equivalent employee . Apple employee . Apple Inc. | 2018 Form 10-K | 6 Available Apple Inc. | 2018 Form 10-K | 6 Available Information The | 2018 Form 10-K | 6 Available Information The Company ’ s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2018 Form 10-K | 7 Item Apple Inc. | 2018 Form 10-K | 7 Item 1A . | 2018 Form 10-K | 7 Item 1A . Risk Factors Form 10-K | 7 Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial affected . Apple Inc. | 2018 Form 10-K | 8 The Apple Inc. | 2018 Form 10-K | 8 The Company ha | 2018 Form 10-K | 8 The Company ha a minority product . Apple Inc. | 2018 Form 10-K | 9 The Apple Inc. | 2018 Form 10-K | 9 The Company face | 2018 Form 10-K | 9 The Company face substantial inventory typically for period up to 150 day . Because the Company dispute . Apple Inc. | 2018 Form 10-K | 10 The Apple Inc. | 2018 Form 10-K | 10 The Company ha | 2018 Form 10-K | 10 The Company ha invested in service . Apple Inc. | 2018 Form 10-K | 11 The Apple Inc. | 2018 Form 10-K | 11 The Company ’ | 2018 Form 10-K | 11 The Company ’ s minority in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 9 , “ Commitments and Contingencies arise . Apple Inc. | 2018 Form 10-K | 12 The Apple Inc. | 2018 Form 10-K | 12 The Company is | 2018 Form 10-K | 12 The Company is subject to cost . Apple Inc. | 2018 Form 10-K | 13 Investment Apple Inc. | 2018 Form 10-K | 13 Investment in new | 2018 Form 10-K | 13 Investment in new business strategy fine . Apple Inc. | 2018 Form 10-K | 14 Under Apple Inc. | 2018 Form 10-K | 14 Under payment card | 2018 Form 10-K | 14 Under payment card rule and Company . Apple Inc. | 2018 Form 10-K | 15 The Apple Inc. | 2018 Form 10-K | 15 The Company ’ | 2018 Form 10-K | 15 The Company ’ s operation place . Apple Inc. | 2018 Form 10-K | 16 The Apple Inc. | 2018 Form 10-K | 16 The Company is | 2018 Form 10-K | 16 The Company is exposed to component . As of September 29 , 2018 , a significant As of September 29 , 2018 , a significant portion of materially adversely affected . Item 1B . Unresolved Staff Comments None None . Apple Inc. | 2018 Form 10-K | 17 Item Apple Inc. | 2018 Form 10-K | 17 Item 2 . | 2018 Form 10-K | 17 Item 2 . Properties The Form 10-K | 17 Item 2 . Properties The Company ’ California . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company owned 16.5 2018 , the Company owned 16.5 million square foot and leased million square foot and leased 24.3 million square foot of building Company owned a total of 7,376 acre of land , primarily the U.S. As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company owned facility product and service . Item 3 . Legal Proceedings The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 9 , “ Commitments and Contingencies in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2018 that did not individually or or operating result . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2018 Form 10-K | 18 PART Apple Inc. | 2018 Form 10-K | 18 PART II Item | 2018 Form 10-K | 18 PART II Item 5 . | 18 PART II Item 5 . Market for Registrant ’ . Holders As of October 26 , 2018 , there were As of October 26 , 2018 , there were 23,712 shareholder , 2018 , there were 23,712 shareholder of record . Purchases the three month ended September 29 , 2018 wa a follows month ended September 29 , 2018 wa a follows ( in the Plans or Programs ( 1 ) July 1 , 2018 Programs ( 1 ) July 1 , 2018 to August 4 1 ) July 1 , 2018 to August 4 , 2018 1 , 2018 to August 4 , 2018 : Open market 2018 to August 4 , 2018 : Open market and privately market and privately negotiated purchase 26,859 $ 192.50 26,859 August 5 privately negotiated purchase 26,859 $ 192.50 26,859 August 5 , 2018 negotiated purchase 26,859 $ 192.50 26,859 August 5 , 2018 to 26,859 $ 192.50 26,859 August 5 , 2018 to September 1 192.50 26,859 August 5 , 2018 to September 1 , 2018 5 , 2018 to September 1 , 2018 : Open market 2018 to September 1 , 2018 : Open market and privately market and privately negotiated purchase 36,575 $ 214.07 36,575 September 2 privately negotiated purchase 36,575 $ 214.07 36,575 September 2 , 2018 negotiated purchase 36,575 $ 214.07 36,575 September 2 , 2018 to 36,575 $ 214.07 36,575 September 2 , 2018 to September 29 214.07 36,575 September 2 , 2018 to September 29 , 2018 2 , 2018 to September 29 , 2018 : Open market 2018 to September 29 , 2018 : Open market and privately market and privately negotiated purchase 29,029 $ 222.07 29,029 Total 92,463 privately negotiated purchase 29,029 $ 222.07 29,029 Total 92,463 $ 70,970 negotiated purchase 29,029 $ 222.07 29,029 Total 92,463 $ 70,970 ( 29,029 $ 222.07 29,029 Total 92,463 $ 70,970 ( 1 ) 222.07 29,029 Total 92,463 $ 70,970 ( 1 ) On May Total 92,463 $ 70,970 ( 1 ) On May 1 , ( 1 ) On May 1 , 2018 , the Company ) On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company ’ stock , of which $ 29.0 billion had been utilized a been utilized a of September 29 , 2018 . The remaining a of September 29 , 2018 . The remaining $ 71.0 2018 . The remaining $ 71.0 billion in the table represents repurchase program a of September 29 , 2018 . The Company a of September 29 , 2018 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2018 Form 10-K | 19 Company Apple Inc. | 2018 Form 10-K | 19 Company Stock Performance | 2018 Form 10-K | 19 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 29 , 2018 . The graph year ended September 29 , 2018 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 27 , 2013 . Note that close on September 27 , 2013 . Note that historic stock price performance . * $ 100 invested on September 27 , $ 100 invested on September 27 , 2013 in stock or invested on September 27 , 2013 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2018 Standard & Poor ’ s right reserved . Copyright © 2018 S & P Dow Jones All right reserved . September 2013 September 2014 September 2015 September reserved . September 2013 September 2014 September 2015 September 2016 September September 2013 September 2014 September 2015 September 2016 September 2017 September September 2014 September 2015 September 2016 September 2017 September 2018 Apple September 2015 September 2016 September 2017 September 2018 Apple Inc. $ September 2016 September 2017 September 2018 Apple Inc. $ 100 $ September 2018 Apple Inc. $ 100 $ 149 $ 173 $ Apple Inc. $ 100 $ 149 $ 173 $ 174 $ $ 100 $ 149 $ 173 $ 174 $ 242 $ $ 149 $ 173 $ 174 $ 242 $ 359 S $ 173 $ 174 $ 242 $ 359 S & P $ 174 $ 242 $ 359 S & P 500 Index $ 359 S & P 500 Index $ 100 $ 120 & P 500 Index $ 100 $ 120 $ 119 $ 500 Index $ 100 $ 120 $ 119 $ 137 $ $ 100 $ 120 $ 119 $ 137 $ 163 $ $ 120 $ 119 $ 137 $ 163 $ 192 S $ 119 $ 137 $ 163 $ 192 S & P $ 137 $ 163 $ 192 S & P Information Technology P Information Technology Index $ 100 $ 129 $ 132 $ Technology Index $ 100 $ 129 $ 132 $ 162 $ $ 100 $ 129 $ 132 $ 162 $ 209 $ $ 129 $ 132 $ 162 $ 209 $ 275 Dow $ 132 $ 162 $ 209 $ 275 Dow Jones U.S. $ 162 $ 209 $ 275 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 130 $ 130 $ Supersector Index $ 100 $ 130 $ 130 $ 159 $ $ 100 $ 130 $ 130 $ 159 $ 203 $ $ 130 $ 130 $ 159 $ 203 $ 266 Apple $ 130 $ 159 $ 203 $ 266 Apple Inc. | $ 159 $ 203 $ 266 Apple Inc. | 2018 Form $ 266 Apple Inc. | 2018 Form 10-K | 20 Item Apple Inc. | 2018 Form 10-K | 20 Item 6 . | 2018 Form 10-K | 20 Item 6 . Selected Financial Form 10-K | 20 Item 6 . Selected Financial Data The the five year ended September 29 , 2018 , is not year ended September 29 , 2018 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2018 2017 2016 2015 2014 Net share amount ) . 2018 2017 2016 2015 2014 Net sale amount ) . 2018 2017 2016 2015 2014 Net sale $ ) . 2018 2017 2016 2015 2014 Net sale $ 265,595 . 2018 2017 2016 2015 2014 Net sale $ 265,595 $ 2015 2014 Net sale $ 265,595 $ 229,234 $ 215,639 $ Net sale $ 265,595 $ 229,234 $ 215,639 $ 233,715 $ $ 265,595 $ 229,234 $ 215,639 $ 233,715 $ 182,795 Net $ 229,234 $ 215,639 $ 233,715 $ 182,795 Net income $ $ 215,639 $ 233,715 $ 182,795 Net income $ 59,531 $ $ 182,795 Net income $ 59,531 $ 48,351 $ 45,687 $ Net income $ 59,531 $ 48,351 $ 45,687 $ 53,394 $ $ 59,531 $ 48,351 $ 45,687 $ 53,394 $ 39,510 Earnings $ 48,351 $ 45,687 $ 53,394 $ 39,510 Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 $ : Basic $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ $ 12.01 $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 9.27 $ 8.35 $ 9.28 $ 6.49 Diluted $ 11.91 $ 8.35 $ 9.28 $ 6.49 Diluted $ 11.91 $ 9.21 9.28 $ 6.49 Diluted $ 11.91 $ 9.21 $ 8.31 $ 6.49 Diluted $ 11.91 $ 9.21 $ 8.31 $ 9.22 $ $ 11.91 $ 9.21 $ 8.31 $ 9.22 $ 6.45 Cash $ 9.21 $ 8.31 $ 9.22 $ 6.45 Cash dividend declared $ 8.31 $ 9.22 $ 6.45 Cash dividend declared per share dividend declared per share $ 2.72 $ 2.40 $ 2.18 $ per share $ 2.72 $ 2.40 $ 2.18 $ 1.98 $ $ 2.72 $ 2.40 $ 2.18 $ 1.98 $ 1.82 Shares $ 2.40 $ 2.18 $ 1.98 $ 1.82 Shares used in $ 2.18 $ 1.98 $ 1.82 Shares used in computing earnings earnings per share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted per share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 share : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 : Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 Basic 4,955,377 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 5,217,242 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 6,122,663 Total 5,470,820 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 6,122,663 Total cash 5,753,421 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 6,122,663 Total cash , 6,085,572 Diluted 5,000,109 5,251,692 5,500,281 5,793,069 6,122,663 Total cash , cash Diluted 5,000,109 5,251,692 5,500,281 5,793,069 6,122,663 Total cash , cash equivalent equivalent and marketable security $ 237,100 $ 268,895 $ 237,585 $ marketable security $ 237,100 $ 268,895 $ 237,585 $ 205,666 $ $ 237,100 $ 268,895 $ 237,585 $ 205,666 $ 155,239 Total $ 268,895 $ 237,585 $ 205,666 $ 155,239 Total asset $ $ 237,585 $ 205,666 $ 155,239 Total asset $ 365,725 $ $ 155,239 Total asset $ 365,725 $ 375,319 $ 321,686 $ Total asset $ 365,725 $ 375,319 $ 321,686 $ 290,345 $ $ 365,725 $ 375,319 $ 321,686 $ 290,345 $ 231,839 Non-current $ 375,319 $ 321,686 $ 290,345 $ 231,839 Non-current portion of $ 321,686 $ 290,345 $ 231,839 Non-current portion of term debt portion of term debt $ 93,735 $ 97,207 $ 75,427 $ term debt $ 93,735 $ 97,207 $ 75,427 $ 53,329 $ $ 93,735 $ 97,207 $ 75,427 $ 53,329 $ 28,987 Other $ 97,207 $ 75,427 $ 53,329 $ 28,987 Other non-current liability $ 75,427 $ 53,329 $ 28,987 Other non-current liability $ 45,180 28,987 Other non-current liability $ 45,180 $ 40,415 $ 36,074 $ non-current liability $ 45,180 $ 40,415 $ 36,074 $ 33,427 $ $ 45,180 $ 40,415 $ 36,074 $ 33,427 $ 24,826 Apple $ 40,415 $ 36,074 $ 33,427 $ 24,826 Apple Inc. | $ 36,074 $ 33,427 $ 24,826 Apple Inc. | 2018 Form $ 24,826 Apple Inc. | 2018 Form 10-K | 21 Item Apple Inc. | 2018 Form 10-K | 21 Item 7 . | 2018 Form 10-K | 21 Item 7 . Management ’ Form 10-K | 21 Item 7 . Management ’ s Discussion this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2018 and 2016 spanned 52 week s fiscal year 2018 and 2016 spanned 52 week each , year 2018 and 2016 spanned 52 week each , whereas fiscal each , whereas fiscal year 2017 included 53 week . A whereas fiscal year 2017 included 53 week . A 14th week included 53 week . A 14th week wa included in the in the first quarter of 2017 , a is done every with calendar quarter . Fiscal 2018 Highlights Net sale increased 16 2018 Highlights Net sale increased 16 % or $ 36.4 billion increased 16 % or $ 36.4 billion during 2018 compared to or $ 36.4 billion during 2018 compared to 2017 , driven billion during 2018 compared to 2017 , driven by higher net reportable segment . In May 2018 , the Company announced a capital return program of $ 100 billion and raised it quarterly it quarterly dividend from $ 0.63 to $ 0.73 per share from $ 0.63 to $ 0.73 per share beginning in May per share beginning in May 2018 . During 2018 , the in May 2018 . During 2018 , the Company spent $ , the Company spent $ 73.1 billion to repurchase share of and dividend equivalent of $ 13.7 billion . Fiscal 2017 Highlights $ 13.7 billion . Fiscal 2017 Highlights Net sale increased 6 2017 Highlights Net sale increased 6 % or $ 13.6 billion increased 6 % or $ 13.6 billion during 2017 compared to or $ 13.6 billion during 2017 compared to 2016 , primarily billion during 2017 compared to 2016 , primarily driven by growth impact on net sale during 2017 . In May 2017 , during 2017 . In May 2017 , the Company announced an of the program from $ 250 billion to $ 300 billion $ 250 billion to $ 300 billion . This included increasing share repurchase authorization from $ 175 billion to $ 210 billion $ 175 billion to $ 210 billion and raising it quarterly it quarterly dividend from $ 0.57 to $ 0.63 per share from $ 0.57 to $ 0.63 per share beginning in May per share beginning in May 2017 . During 2017 , the in May 2017 . During 2017 , the Company spent $ , the Company spent $ 33.0 billion to repurchase share of and dividend equivalent of $ 12.8 billion . The $ 210 12.8 billion . The $ 210 billion share repurchase program wa in the third quarter of 2018 . The Company issued $ . The Company issued $ 24.0 billion of U.S. dollar–denominated term term debt and C $ 2.5 billion of Canadian dollar–denominated term Canadian dollar–denominated term debt during 2017 . Apple Inc. | 2018 2017 . Apple Inc. | 2018 Form 10-K | 22 Sales Apple Inc. | 2018 Form 10-K | 22 Sales Data The | 2018 Form 10-K | 22 Sales Data The following table unit sale by product for 2018 , 2017 and 2016 ( by product for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million and unit in thousand ) : 2018 Change 2017 Change 2016 Net thousand ) : 2018 Change 2017 Change 2016 Net Sales by : 2018 Change 2017 Change 2016 Net Sales by Reportable Segment Reportable Segment : Americas $ 112,093 16 % $ 96,600 12 Segment : Americas $ 112,093 16 % $ 96,600 12 % $ 112,093 16 % $ 96,600 12 % $ 86,613 Europe 112,093 16 % $ 96,600 12 % $ 86,613 Europe 62,420 $ 96,600 12 % $ 86,613 Europe 62,420 14 % 54,938 12 % $ 86,613 Europe 62,420 14 % 54,938 10 % % $ 86,613 Europe 62,420 14 % 54,938 10 % 49,952 86,613 Europe 62,420 14 % 54,938 10 % 49,952 Greater China Europe 62,420 14 % 54,938 10 % 49,952 Greater China 51,942 14 % 54,938 10 % 49,952 Greater China 51,942 16 % 10 % 49,952 Greater China 51,942 16 % 44,764 ( 8 % 49,952 Greater China 51,942 16 % 44,764 ( 8 ) Greater China 51,942 16 % 44,764 ( 8 ) % 48,492 51,942 16 % 44,764 ( 8 ) % 48,492 Japan 21,733 44,764 ( 8 ) % 48,492 Japan 21,733 23 % 17,733 8 ) % 48,492 Japan 21,733 23 % 17,733 5 % ) % 48,492 Japan 21,733 23 % 17,733 5 % 16,928 48,492 Japan 21,733 23 % 17,733 5 % 16,928 Rest of Japan 21,733 23 % 17,733 5 % 16,928 Rest of Asia 23 % 17,733 5 % 16,928 Rest of Asia Pacific 17,407 16,928 Rest of Asia Pacific 17,407 15 % 15,199 11 % Rest of Asia Pacific 17,407 15 % 15,199 11 % 13,654 Asia Pacific 17,407 15 % 15,199 11 % 13,654 Total net Pacific 17,407 15 % 15,199 11 % 13,654 Total net sale 15 % 15,199 11 % 13,654 Total net sale $ 265,595 13,654 Total net sale $ 265,595 16 % $ 229,234 6 Total net sale $ 265,595 16 % $ 229,234 6 % $ 265,595 16 % $ 229,234 6 % $ 215,639 Net 265,595 16 % $ 229,234 6 % $ 215,639 Net Sales $ 229,234 6 % $ 215,639 Net Sales by Product : by Product : iPhone ( 1 ) $ 166,699 18 % iPhone ( 1 ) $ 166,699 18 % $ 141,319 3 ( 1 ) $ 166,699 18 % $ 141,319 3 % $ 166,699 18 % $ 141,319 3 % $ 136,700 iPad 166,699 18 % $ 141,319 3 % $ 136,700 iPad ( $ 141,319 3 % $ 136,700 iPad ( 1 ) 18,805 % $ 136,700 iPad ( 1 ) 18,805 ( 2 ) 136,700 iPad ( 1 ) 18,805 ( 2 ) % 19,222 ( 1 ) 18,805 ( 2 ) % 19,222 ( 7 18,805 ( 2 ) % 19,222 ( 7 ) % 20,628 2 ) % 19,222 ( 7 ) % 20,628 Mac ( 19,222 ( 7 ) % 20,628 Mac ( 1 ) 25,484 ) % 20,628 Mac ( 1 ) 25,484 ( 1 ) 20,628 Mac ( 1 ) 25,484 ( 1 ) % 25,850 ( 1 ) 25,484 ( 1 ) % 25,850 13 % 25,484 ( 1 ) % 25,850 13 % 22,831 Services ( ( 1 ) % 25,850 13 % 22,831 Services ( 2 ) % 25,850 13 % 22,831 Services ( 2 ) 37,190 13 % 22,831 Services ( 2 ) 37,190 24 % 29,980 22,831 Services ( 2 ) 37,190 24 % 29,980 23 % Services ( 2 ) 37,190 24 % 29,980 23 % 24,348 2 ) 37,190 24 % 29,980 23 % 24,348 Other Products ) 37,190 24 % 29,980 23 % 24,348 Other Products ( 24 % 29,980 23 % 24,348 Other Products ( 1 ) % 24,348 Other Products ( 1 ) ( 3 ) 17,417 Products ( 1 ) ( 3 ) 17,417 35 % 12,863 1 ) ( 3 ) 17,417 35 % 12,863 16 % ) ( 3 ) 17,417 35 % 12,863 16 % 11,132 3 ) 17,417 35 % 12,863 16 % 11,132 Total net ) 17,417 35 % 12,863 16 % 11,132 Total net sale 35 % 12,863 16 % 11,132 Total net sale $ 265,595 11,132 Total net sale $ 265,595 16 % $ 229,234 6 Total net sale $ 265,595 16 % $ 229,234 6 % $ 265,595 16 % $ 229,234 6 % $ 215,639 Unit 265,595 16 % $ 229,234 6 % $ 215,639 Unit Sales $ 229,234 6 % $ 215,639 Unit Sales by Product : Sales by Product : iPhone 217,722 — % 216,756 2 % : iPhone 217,722 — % 216,756 2 % 211,884 iPad 43,535 iPhone 217,722 — % 216,756 2 % 211,884 iPad 43,535 — — % 216,756 2 % 211,884 iPad 43,535 — % 43,753 216,756 2 % 211,884 iPad 43,535 — % 43,753 ( 4 211,884 iPad 43,535 — % 43,753 ( 4 ) % 45,590 43,535 — % 43,753 ( 4 ) % 45,590 Mac 18,209 43,753 ( 4 ) % 45,590 Mac 18,209 ( 5 ) 4 ) % 45,590 Mac 18,209 ( 5 ) % 19,251 % 45,590 Mac 18,209 ( 5 ) % 19,251 4 % 18,209 ( 5 ) % 19,251 4 % 18,484 ( 1 ( 5 ) % 19,251 4 % 18,484 ( 1 ) ) % 19,251 4 % 18,484 ( 1 ) Includes deferral 19,251 4 % 18,484 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from Digital . Services net sale in 2018 included a favorable one-time item favorable one-time item of $ 236 million in connection with the . Services net sale in 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of AirPods accessory . Apple Inc. | 2018 Form 10-K | 23 Product Apple Inc. | 2018 Form 10-K | 23 Product Performance iPhone | 2018 Form 10-K | 23 Product Performance iPhone The following and unit sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million and unit in thousand ) : 2018 Change 2017 Change 2016 Net thousand ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 166,699 18 Change 2016 Net sale $ 166,699 18 % $ 141,319 3 2016 Net sale $ 166,699 18 % $ 141,319 3 % $ 166,699 18 % $ 141,319 3 % $ 136,700 Percentage 166,699 18 % $ 141,319 3 % $ 136,700 Percentage of $ 141,319 3 % $ 136,700 Percentage of total net sale Percentage of total net sale 63 % 62 % 63 % total net sale 63 % 62 % 63 % Unit sale sale 63 % 62 % 63 % Unit sale 217,722 — % 63 % Unit sale 217,722 — % 216,756 2 % Unit sale 217,722 — % 216,756 2 % 211,884 iPhone net sale 217,722 — % 216,756 2 % 211,884 iPhone net sale — % 216,756 2 % 211,884 iPhone net sale increased during iPhone net sale increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to a different iPhone net sale increased during 2017 compared to 2016 due to increased during 2017 compared to 2016 due to higher iPhone unit on iPhone net sale during 2017. iPad The following table present and unit sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million and unit in thousand ) : 2018 Change 2017 Change 2016 Net thousand ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 18,805 ( Change 2016 Net sale $ 18,805 ( 2 ) % $ Net sale $ 18,805 ( 2 ) % $ 19,222 ( ( 2 ) % $ 19,222 ( 7 ) % $ ) % $ 19,222 ( 7 ) % $ 20,628 Percentage ( 7 ) % $ 20,628 Percentage of total net sale Percentage of total net sale 7 % 8 % 10 % total net sale 7 % 8 % 10 % Unit sale sale 7 % 8 % 10 % Unit sale 43,535 — % 10 % Unit sale 43,535 — % 43,753 ( 4 Unit sale 43,535 — % 43,753 ( 4 ) % 45,590 43,535 — % 43,753 ( 4 ) % 45,590 iPad net 43,753 ( 4 ) % 45,590 iPad net sale decreased during iPad net sale decreased during 2018 compared to 2017 due primarily decreased during 2018 compared to 2017 due primarily to a different on iPad net sale during 2018. iPad net sale decreased during iPad net sale decreased during 2017 compared to 2016 due to decreased during 2017 compared to 2016 due to lower iPad unit on iPad net sale during 2017 . Mac The following table and unit sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million and unit in thousand ) : 2018 Change 2017 Change 2016 Net thousand ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 25,484 ( Change 2016 Net sale $ 25,484 ( 1 ) % $ Net sale $ 25,484 ( 1 ) % $ 25,850 13 ( 1 ) % $ 25,850 13 % $ 22,831 Percentage 1 ) % $ 25,850 13 % $ 22,831 Percentage of $ 25,850 13 % $ 22,831 Percentage of total net sale Percentage of total net sale 10 % 11 % 11 % total net sale 10 % 11 % 11 % Unit sale sale 10 % 11 % 11 % Unit sale 18,209 ( % 11 % Unit sale 18,209 ( 5 ) % 19,251 % Unit sale 18,209 ( 5 ) % 19,251 4 % 18,209 ( 5 ) % 19,251 4 % 18,484 Mac net ( 5 ) % 19,251 4 % 18,484 Mac net sale ) % 19,251 4 % 18,484 Mac net sale decreased during Mac net sale decreased during 2018 compared to 2017 due primarily decreased during 2018 compared to 2017 due primarily to lower Mac on Mac net sale during 2018 . Mac net sale increased Mac net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to a different on Mac net sale during 2017 . Apple Inc. | 2018 2017 . Apple Inc. | 2018 Form 10-K | 24 Services Apple Inc. | 2018 Form 10-K | 24 Services The following | 2018 Form 10-K | 24 Services The following table present Services net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 37,190 24 Change 2016 Net sale $ 37,190 24 % $ 29,980 23 2016 Net sale $ 37,190 24 % $ 29,980 23 % $ 37,190 24 % $ 29,980 23 % $ 24,348 Percentage 37,190 24 % $ 29,980 23 % $ 24,348 Percentage of $ 29,980 23 % $ 24,348 Percentage of total net sale Percentage of total net sale 14 % 13 % 11 % total net sale 14 % 13 % 11 % The year-over-year sale 14 % 13 % 11 % The year-over-year growth in in Services net sale in 2018 wa due primarily to licensing Store and AppleCare . During 2018 , the Company recognized a favorable one-time item of $ 236 million in connection with the in Services net sale in 2017 wa due primarily to increase . Services net sale in 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Segment Information and Americas net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 112,093 16 Change 2016 Net sale $ 112,093 16 % $ 96,600 12 2016 Net sale $ 112,093 16 % $ 96,600 12 % $ 112,093 16 % $ 96,600 12 % $ 86,613 Percentage 112,093 16 % $ 96,600 12 % $ 86,613 Percentage of $ 96,600 12 % $ 86,613 Percentage of total net sale Percentage of total net sale 42 % 42 % 40 % total net sale 42 % 42 % 40 % Americas net sale 42 % 42 % 40 % Americas net sale increased Americas net sale increased during 2018 compared to 2017 due to increased during 2018 compared to 2017 due to higher net sale Americas net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net Europe net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 62,420 14 Change 2016 Net sale $ 62,420 14 % $ 54,938 10 2016 Net sale $ 62,420 14 % $ 54,938 10 % $ 62,420 14 % $ 54,938 10 % $ 49,952 Percentage 62,420 14 % $ 54,938 10 % $ 49,952 Percentage of $ 54,938 10 % $ 49,952 Percentage of total net sale Percentage of total net sale 24 % 24 % 23 % total net sale 24 % 24 % 23 % Europe net sale 24 % 24 % 23 % Europe net sale increased Europe net sale increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to higher net on Europe net sale during 2018 . Europe net sale increased Europe net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net on Europe net sale during 2017 . Apple Inc. | 2018 2017 . Apple Inc. | 2018 Form 10-K | 25 Greater Apple Inc. | 2018 Form 10-K | 25 Greater China The | 2018 Form 10-K | 25 Greater China The following table China net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 51,942 16 Change 2016 Net sale $ 51,942 16 % $ 44,764 ( 2016 Net sale $ 51,942 16 % $ 44,764 ( 8 $ 51,942 16 % $ 44,764 ( 8 ) % $ 16 % $ 44,764 ( 8 ) % $ 48,492 Percentage ( 8 ) % $ 48,492 Percentage of total net sale Percentage of total net sale 20 % 20 % 22 % total net sale 20 % 20 % 22 % Greater China sale 20 % 20 % 22 % Greater China net sale China net sale increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to higher net Greater China net sale during 2018 . Greater China net sale China net sale decreased during 2017 compared to 2016 due primarily decreased during 2017 compared to 2016 due primarily to lower net Greater China net sale during 2017 . Japan The following table Japan net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 21,733 23 Change 2016 Net sale $ 21,733 23 % $ 17,733 5 2016 Net sale $ 21,733 23 % $ 17,733 5 % $ 21,733 23 % $ 17,733 5 % $ 16,928 Percentage 21,733 23 % $ 17,733 5 % $ 16,928 Percentage of $ 17,733 5 % $ 16,928 Percentage of total net sale Percentage of total net sale 8 % 8 % 8 % total net sale 8 % 8 % 8 % Japan net sale 8 % 8 % 8 % Japan net sale increased Japan net sale increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to higher net in Japan net sale in 2017 wa due to higher net Pacific net sale information for 2018 , 2017 and 2016 ( sale information for 2018 , 2017 and 2016 ( dollar in for 2018 , 2017 and 2016 ( dollar in million ) dollar in million ) : 2018 Change 2017 Change 2016 Net million ) : 2018 Change 2017 Change 2016 Net sale $ : 2018 Change 2017 Change 2016 Net sale $ 17,407 15 Change 2016 Net sale $ 17,407 15 % $ 15,199 11 2016 Net sale $ 17,407 15 % $ 15,199 11 % $ 17,407 15 % $ 15,199 11 % $ 13,654 Percentage 17,407 15 % $ 15,199 11 % $ 13,654 Percentage of $ 15,199 11 % $ 13,654 Percentage of total net sale Percentage of total net sale 7 % 7 % 6 % total net sale 7 % 7 % 6 % Rest of sale 7 % 7 % 6 % Rest of Asia Pacific Pacific net sale increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to higher net Asia Pacific net sale during 2018 . Rest of Asia Pacific Pacific net sale increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to higher net Asia Pacific net sale during 2017 . Gross Margin Gross margin Gross Margin Gross margin for 2018 , 2017 and 2016 wa Gross margin for 2018 , 2017 and 2016 wa a follows for 2018 , 2017 and 2016 wa a follows ( dollar dollar in million ) : 2018 2017 2016 Net sale $ in million ) : 2018 2017 2016 Net sale $ 265,595 million ) : 2018 2017 2016 Net sale $ 265,595 $ 2017 2016 Net sale $ 265,595 $ 229,234 $ 215,639 Cost Net sale $ 265,595 $ 229,234 $ 215,639 Cost of sale $ 265,595 $ 229,234 $ 215,639 Cost of sale 163,756 141,048 $ 215,639 Cost of sale 163,756 141,048 131,376 Gross margin $ 215,639 Cost of sale 163,756 141,048 131,376 Gross margin $ 101,839 Cost of sale 163,756 141,048 131,376 Gross margin $ 101,839 $ 141,048 131,376 Gross margin $ 101,839 $ 88,186 $ 84,263 Gross Gross margin $ 101,839 $ 88,186 $ 84,263 Gross margin percentage $ 101,839 $ 88,186 $ 84,263 Gross margin percentage 38.3 % $ 84,263 Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin percentage 38.3 % 38.5 % 39.1 % Gross margin increased in % Gross margin increased in 2018 compared to 2017 due primarily increased in 2018 compared to 2017 due primarily to a favorable and gross margin percentage during 2018 . Apple Inc. | 2018 2018 . Apple Inc. | 2018 Form 10-K | 26 Gross Apple Inc. | 2018 Form 10-K | 26 Gross margin increased | 2018 Form 10-K | 26 Gross margin increased in 2017 26 Gross margin increased in 2017 compared to 2016 due primarily increased in 2017 compared to 2016 due primarily to a shift and gross margin percentage during 2017 . The Company anticipates gross during the first quarter of 2019 to be between 38.0 % of 2019 to be between 38.0 % and 38.5 % . be between 38.0 % and 38.5 % . The foregoing statement in the first quarter of 2019 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2018 , 2017 and 2016 were Operating expense for 2018 , 2017 and 2016 were a follows for 2018 , 2017 and 2016 were a follows ( dollar dollar in million ) : 2018 Change 2017 Change 2016 Research million ) : 2018 Change 2017 Change 2016 Research and development : 2018 Change 2017 Change 2016 Research and development $ 14,236 2016 Research and development $ 14,236 23 % $ 11,581 15 Research and development $ 14,236 23 % $ 11,581 15 % $ 14,236 23 % $ 11,581 15 % $ 10,045 Percentage 14,236 23 % $ 11,581 15 % $ 10,045 Percentage of $ 11,581 15 % $ 10,045 Percentage of total net sale Percentage of total net sale 5 % 5 % 5 % total net sale 5 % 5 % 5 % Selling , sale 5 % 5 % 5 % Selling , general and , general and administrative $ 16,705 9 % $ 15,261 8 general and administrative $ 16,705 9 % $ 15,261 8 % $ 16,705 9 % $ 15,261 8 % $ 14,194 Percentage 16,705 9 % $ 15,261 8 % $ 14,194 Percentage of $ 15,261 8 % $ 14,194 Percentage of total net sale Percentage of total net sale 6 % 7 % 7 % total net sale 6 % 7 % 7 % Total operating sale 6 % 7 % 7 % Total operating expense $ % Total operating expense $ 30,941 15 % $ 26,842 11 Total operating expense $ 30,941 15 % $ 26,842 11 % $ 30,941 15 % $ 26,842 11 % $ 24,239 Percentage 30,941 15 % $ 26,842 11 % $ 24,239 Percentage of $ 26,842 11 % $ 24,239 Percentage of total net sale Percentage of total net sale 12 % 12 % 11 % total net sale 12 % 12 % 11 % Research and sale 12 % 12 % 11 % Research and Development The R & D expense in 2018 wa driven primarily by increase & D expense increased during 2017 compared to 2016 due primarily increased during 2017 compared to 2016 due primarily to increase in general and administrative expense in 2018 wa driven primarily by increase general and administrative expense in 2017 compared to 2016 wa driven expense in 2017 compared to 2016 wa driven primarily by an expense ) , net for 2018 , 2017 and 2016 wa , net for 2018 , 2017 and 2016 wa a follows for 2018 , 2017 and 2016 wa a follows ( dollar dollar in million ) : 2018 Change 2017 Change 2016 Interest million ) : 2018 Change 2017 Change 2016 Interest and dividend : 2018 Change 2017 Change 2016 Interest and dividend income $ Interest and dividend income $ 5,686 $ 5,201 $ 3,999 Interest dividend income $ 5,686 $ 5,201 $ 3,999 Interest expense ( $ 5,686 $ 5,201 $ 3,999 Interest expense ( 3,240 ) $ 3,999 Interest expense ( 3,240 ) ( 2,323 ) ( expense ( 3,240 ) ( 2,323 ) ( 1,456 ) Other ) ( 2,323 ) ( 1,456 ) Other expense , net Other expense , net ( 441 ) ( 133 ) ( net ( 441 ) ( 133 ) ( 1,195 ) Total ) ( 133 ) ( 1,195 ) Total other income/ ( expense ) , net $ 2,005 ( 27 ) % $ , net $ 2,005 ( 27 ) % $ 2,745 104 ( 27 ) % $ 2,745 104 % $ 1,348 The 27 ) % $ 2,745 104 % $ 1,348 The year-over-year $ 2,745 104 % $ 1,348 The year-over-year decrease in other expense ) , net during 2018 wa due primarily to higher expense ) , net during 2017 wa due primarily to higher equivalent and marketable security wa 2.16 % , 1.99 % and security wa 2.16 % , 1.99 % and 1.73 % in % , 1.99 % and 1.73 % in 2018 , 2017 % and 1.73 % in 2018 , 2017 and 2016 , 1.73 % in 2018 , 2017 and 2016 , respectively . in 2018 , 2017 and 2016 , respectively . Apple Inc. respectively . Apple Inc. | 2018 Form 10-K | 27 Provision Apple Inc. | 2018 Form 10-K | 27 Provision for Income | 2018 Form 10-K | 27 Provision for Income Taxes Provision and effective tax rate for 2018 , 2017 and 2016 were tax rate for 2018 , 2017 and 2016 were a follows for 2018 , 2017 and 2016 were a follows ( dollar dollar in million ) : 2018 2017 2016 Provision for income in million ) : 2018 2017 2016 Provision for income tax million ) : 2018 2017 2016 Provision for income tax $ Provision for income tax $ 13,372 $ 15,738 $ 15,685 Effective income tax $ 13,372 $ 15,738 $ 15,685 Effective tax rate $ 13,372 $ 15,738 $ 15,685 Effective tax rate 18.3 % $ 15,685 Effective tax rate 18.3 % 24.6 % 25.6 % Effective tax rate 18.3 % 24.6 % 25.6 % On December rate 18.3 % 24.6 % 25.6 % On December 22 , % 25.6 % On December 22 , 2017 , the U.S. % On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a federal income tax rate of 24.5 % for 2018 ( the rate of 24.5 % for 2018 ( the “ 2018 blended for 2018 ( the “ 2018 blended U.S. tax rate ” s effective tax rate for 2018 wa lower than the 2018 2018 wa lower than the 2018 blended U.S. tax rate due s effective tax rate for 2017 and 2016 were lower than tax rate for 2017 and 2016 were lower than the historical federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2018 compared to 2017 wa due rate in 2018 compared to 2017 wa due primarily to the due primarily to the lower 2018 blended U.S. tax rate , lower effective tax rate in 2017 compared to 2016 wa due rate in 2017 compared to 2016 wa due to a different ASU ” ) No . 2016-09 , Compensation – Stock Compensation – Stock Compensation ( Topic 718 ) : Improvements to Employee Payment Accounting ( “ ASU 2016-09 ” ) , in 2018 2016-09 ” ) , in 2018 , the Company record any quarter . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had deferred and tax credit of $ 6.3 billion and deferred tax liability deferred tax liability of $ 426 million . Management belief it valuation allowance . On August 30 , 2016 , the European . On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . The period June 2003 through December 2014 . The recovery amount wa , effective a of January 2015 , eliminated the application of Act . As of September 29 , 2018 , the entire As of September 29 , 2018 , the entire recovery amount all appeal . On July 24 , 2018 , the U.S. . On July 24 , 2018 , the U.S. Ninth Circuit Accounting Pronouncements Hedging In August 2017 , the Financial Accounting Standards ) issued ASU No . 2017-12 , Derivatives and Hedging ( Derivatives and Hedging ( Topic 815 ) : Targeted Improvements to Hedging Activities ( “ ASU 2017-12 ” ) . ASU 2017-12 2017-12 ” ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition statement . Apple Inc. | 2018 Form 10-K | 28 Income Apple Inc. | 2018 Form 10-K | 28 Income Taxes In | 2018 Form 10-K | 28 Income Taxes In October 2016 28 Income Taxes In October 2016 , the FASB issued ASU FASB issued ASU No . 2016-16 , Income Taxes ( Topic , Income Taxes ( Topic 740 ) : Intra-Entity Transfers of Than Inventory ( “ ASU 2016-16 ” ) , which requires The Company will adopt ASU 2016-16 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition the Company estimate recording $ 3 billion of net deferred tax ultimate impact of adopting ASU 2016-16 will depend on the balance utilized . Leases In February 2016 , the FASB issued ASU FASB issued ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( “ ASU 2016-02 842 ) ( “ ASU 2016-02 ” ) , which modifies The Company will adopt ASU 2016-02 utilizing the modified retrospective transition of it first quarter of 2020 . While the Company is the impact of adopting ASU 2016-02 , based on the lease lease portfolio a of September 29 , 2018 , the Company a of September 29 , 2018 , the Company anticipates recording and liability of approximately $ 8.9 billion on it Condensed Consolidated ultimate impact of adopting ASU 2016-02 will depend on the Company . Financial Instruments In January 2016 , the FASB issued ASU FASB issued ASU No . 2016-01 , Financial Instruments – Overall Instruments – Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities ( “ ASU 2016-01 ” ) , which update The Company will adopt ASU 2016-01 in it first quarter of in it first quarter of 2019 utilizing the modified retrospective transition , the adoption of ASU 2016-01 is not expected to have financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies The Company will adopt ASU 2016-13 in it first quarter of in it first quarter of 2021 utilizing the modified retrospective transition , the adoption of ASU 2016-13 is not expected to have . Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( “ ASU 2014-09 606 ) ( “ ASU 2014-09 ” ) , which amends for revenue recognition . ASU 2014-09 is based on principle that clarify the guidance in ASU 2014-09 . ASU 2014-09 and it in ASU 2014-09 . ASU 2014-09 and it related ASUs are in it first quarter of 2019 utilizing the full retrospective transition statement . Apple Inc. | 2018 Form 10-K | 29 Liquidity Apple Inc. | 2018 Form 10-K | 29 Liquidity and Capital | 2018 Form 10-K | 29 Liquidity and Capital Resources The for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 ( in million 2017 and September 24 , 2016 ( in million ) : ( in million ) : 2018 2017 2016 Cash , cash in million ) : 2018 2017 2016 Cash , cash equivalent million ) : 2018 2017 2016 Cash , cash equivalent and equivalent and marketable security ( 1 ) $ 237,100 $ 268,895 security ( 1 ) $ 237,100 $ 268,895 $ 237,585 Property 1 ) $ 237,100 $ 268,895 $ 237,585 Property , plant $ 237,100 $ 268,895 $ 237,585 Property , plant and equipment and equipment , net $ 41,304 $ 33,783 $ 27,010 Commercial , net $ 41,304 $ 33,783 $ 27,010 Commercial paper $ $ 41,304 $ 33,783 $ 27,010 Commercial paper $ 11,964 $ $ 27,010 Commercial paper $ 11,964 $ 11,977 $ 8,105 Total Commercial paper $ 11,964 $ 11,977 $ 8,105 Total term debt $ 11,964 $ 11,977 $ 8,105 Total term debt $ 102,519 8,105 Total term debt $ 102,519 $ 103,703 $ 78,927 Working term debt $ 102,519 $ 103,703 $ 78,927 Working capital $ $ 102,519 $ 103,703 $ 78,927 Working capital $ 14,473 $ $ 78,927 Working capital $ 14,473 $ 27,831 $ 27,863 Cash Working capital $ 14,473 $ 27,831 $ 27,863 Cash generated by $ 14,473 $ 27,831 $ 27,863 Cash generated by operating activity generated by operating activity ( 2 ) $ 77,434 $ 64,225 activity ( 2 ) $ 77,434 $ 64,225 $ 66,231 Cash 2 ) $ 77,434 $ 64,225 $ 66,231 Cash generated by/ $ 77,434 $ 64,225 $ 66,231 Cash generated by/ ( used in ) investing activity $ 16,066 $ ( 46,446 ) $ activity $ 16,066 $ ( 46,446 ) $ ( 45,977 ) ( 46,446 ) $ ( 45,977 ) Cash used in financing used in financing activity ( 2 ) $ ( 87,876 ) ( 2 ) $ ( 87,876 ) $ ( 17,974 ) ( 87,876 ) $ ( 17,974 ) $ ( 20,890 ) ( 17,974 ) $ ( 20,890 ) ( 1 ) As $ ( 20,890 ) ( 1 ) As of September 29 1 ) As of September 29 , 2018 , total cash As of September 29 , 2018 , total cash , cash and marketable security included $ 20.3 billion that wa restricted from and other agreement . ( 2 ) Refer to Note 1 2 ) Refer to Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K for Item 8 of this Form 10-K for more information on the ’ s adoption of ASU 2016-09 . The Company belief it existing operation over the next 12 month . The Company currently Decision , a of September 29 , 2018 , the entire a of September 29 , 2018 , the entire recovery amount any one issuer . During 2018 , cash generated by operating by operating activity of $ 77.4 billion wa a result of wa a result of $ 59.5 billion of net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billion . Cash generated by by investing activity of $ 16.1 billion during 2018 consisted primarily of $ 16.1 billion during 2018 consisted primarily of proceeds from of purchase , of $ 32.4 billion , partially offset by plant and equipment of $ 13.3 billion . Cash used in in financing activity of $ 87.9 billion during 2018 consisted primarily of $ 87.9 billion during 2018 consisted primarily of cash used repurchase common stock of $ 72.7 billion , cash used to and dividend equivalent of $ 13.7 billion and cash used to repay term debt of $ 6.5 billion , partially offset by debt , net of $ 7.0 billion . During 2017 , $ 7.0 billion . During 2017 , cash generated by operating by operating activity of $ 64.2 billion wa a result of wa a result of $ 48.4 billion of net income , to net income of $ 20.8 billion and a decrease in asset and liability of $ 4.9 billion , which included a a one-time payment of $ 1.9 billion related to a multi-year in investing activity of $ 46.4 billion during 2017 consisted primarily of $ 46.4 billion during 2017 consisted primarily of cash used and maturity , of $ 33.1 billion and cash used to plant and equipment of $ 12.5 billion . Cash used in in financing activity of $ 18.0 billion during 2017 consisted primarily of $ 18.0 billion during 2017 consisted primarily of cash used repurchase common stock of $ 32.9 billion , cash used to and dividend equivalent of $ 12.8 billion and cash used to repay term debt of $ 3.5 billion , partially offset by debt , net of $ 28.7 billion and proceeds from commercial paper , net of $ 3.9 billion . Capital Assets The s capital expenditure were $ 16.7 billion during 2018 . The were $ 16.7 billion during 2018 . The Company anticipates utilizing Company anticipates utilizing approximately $ 14.0 billion for capital expenditure during billion for capital expenditure during 2019 , which includes product tooling repurchase . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding a weighted-average interest rate of 2.18 % and maturity generally le month . Apple Inc. | 2018 Form 10-K | 30 As Apple Inc. | 2018 Form 10-K | 30 As of September | 2018 Form 10-K | 30 As of September 29 , | 30 As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had outstanding aggregate principal amount of $ 104.2 billion ( collectively the “ Notes ” ) . During 2018 , the Company issued $ , the Company issued $ 7.0 billion and repaid $ 6.5 7.0 billion and repaid $ 6.5 billion of Notes . The in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 2 , “ Financial Instruments ” Financial Instruments ” and Note 5 , “ Debt . ” ” Capital Return Program During 2018 , the Company repurchased 405.5 2018 , the Company repurchased 405.5 million share of it common it common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company ’ stock . The remaining $ 29.0 billion repurchased during 2018 wa $ 29.0 billion repurchased during 2018 wa in connection with the under plan complying with Rule 10b5-1 under the Exchange Act . Exchange Act . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company also announced quarterly cash dividend from $ 0.63 to $ 0.73 per share from $ 0.63 to $ 0.73 per share , beginning with during the third quarter of 2018 . The Company intends to the Company a of September 29 , 2018 , and excludes a of September 29 , 2018 , and excludes amount already ) : Payments Due in 2019 Payments Due in 2020–2021 Payments in 2019 Payments Due in 2020–2021 Payments Due in 2022–2023 Payments in 2020–2021 Payments Due in 2022–2023 Payments Due After 2023 Total in 2022–2023 Payments Due After 2023 Total Term debt $ 8,797 2023 Total Term debt $ 8,797 $ 18,933 $ 17,978 $ Term debt $ 8,797 $ 18,933 $ 17,978 $ 58,485 $ $ 8,797 $ 18,933 $ 17,978 $ 58,485 $ 104,193 Operating $ 18,933 $ 17,978 $ 58,485 $ 104,193 Operating lease 1,298 $ 17,978 $ 58,485 $ 104,193 Operating lease 1,298 2,507 1,838 58,485 $ 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing $ 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing purchase 104,193 Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing purchase obligation Operating lease 1,298 2,507 1,838 3,984 9,627 Manufacturing purchase obligation ( lease 1,298 2,507 1,838 3,984 9,627 Manufacturing purchase obligation ( 1 9,627 Manufacturing purchase obligation ( 1 ) 41,548 2,469 1,183 — purchase obligation ( 1 ) 41,548 2,469 1,183 — 45,200 Other obligation ( 1 ) 41,548 2,469 1,183 — 45,200 Other purchase ( 1 ) 41,548 2,469 1,183 — 45,200 Other purchase obligation ) 41,548 2,469 1,183 — 45,200 Other purchase obligation 3,784 2,482 — 45,200 Other purchase obligation 3,784 2,482 681 66 7,013 Deemed 45,200 Other purchase obligation 3,784 2,482 681 66 7,013 Deemed repatriation Other purchase obligation 3,784 2,482 681 66 7,013 Deemed repatriation tax purchase obligation 3,784 2,482 681 66 7,013 Deemed repatriation tax payable obligation 3,784 2,482 681 66 7,013 Deemed repatriation tax payable — Deemed repatriation tax payable — 5,366 5,942 22,281 33,589 Total $ repatriation tax payable — 5,366 5,942 22,281 33,589 Total $ 55,427 tax payable — 5,366 5,942 22,281 33,589 Total $ 55,427 $ payable — 5,366 5,942 22,281 33,589 Total $ 55,427 $ 31,757 5,942 22,281 33,589 Total $ 55,427 $ 31,757 $ 27,622 $ 33,589 Total $ 55,427 $ 31,757 $ 27,622 $ 84,816 $ $ 55,427 $ 31,757 $ 27,622 $ 84,816 $ 199,622 ( $ 31,757 $ 27,622 $ 84,816 $ 199,622 ( 1 ) $ 27,622 $ 84,816 $ 199,622 ( 1 ) Represents amount $ 84,816 $ 199,622 ( 1 ) Represents amount expected to have original term not exceeding 10 year and generally contain multi-year typically cover period up to 150 day . The Company also activity . Apple Inc. | 2018 Form 10-K | 31 Deemed Apple Inc. | 2018 Form 10-K | 31 Deemed Repatriation Tax | 2018 Form 10-K | 31 Deemed Repatriation Tax Payable As Tax Payable As of September 29 , 2018 , a significant As of September 29 , 2018 , a significant portion of in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 9 , “ Commitments and Contingencies and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy Directors . Apple Inc. | 2018 Form 10-K | 32 Revenue Apple Inc. | 2018 Form 10-K | 32 Revenue Recognition Net | 2018 Form 10-K | 32 Revenue Recognition Net sale consist result . Apple Inc. | 2018 Form 10-K | 33 Valuation Apple Inc. | 2018 Form 10-K | 33 Valuation and Impairment | 2018 Form 10-K | 33 Valuation and Impairment of Marketable typically for period up to 150 day . If there is that ha a greater than 50 % likelihood of being realized settlement . Apple Inc. | 2018 Form 10-K | 34 Management Apple Inc. | 2018 Form 10-K | 34 Management belief it | 2018 Form 10-K | 34 Management belief it is more operating result . On December 22 , 2017 , the U.S. . On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a for income tax by $ 1.5 billion during 2018 . This by $ 1.5 billion during 2018 . This increase wa composed increase wa composed of $ 2.0 billion related to the remeasurement asset and liability and $ 1.2 billion associated with the deemed partially offset by a $ 1.7 billion impact the deemed repatriation Staff Accounting Bulletin No . 118 . Resolution of the Act in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 9 , “ Commitments and Contingencies in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 9 , “ Commitments and Contingencies materially adversely affected . Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , a hypothetical 2018 and September 30 , 2017 , a hypothetical 100 basis , 2017 , a hypothetical 100 basis point increase in interest would result in a $ 4.9 billion and $ 6.0 billion $ 4.9 billion and $ 6.0 billion incremental decline in the maturity . Apple Inc. | 2018 Form 10-K | 35 As Apple Inc. | 2018 Form 10-K | 35 As of September | 2018 Form 10-K | 35 As of September 29 , | 35 As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the Company 2018 and September 30 , 2017 , the Company had outstanding aggregate carrying amount of $ 102.5 billion and $ 103.7 billion $ 102.5 billion and $ 103.7 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 to increase by 2018 and September 30 , 2017 to increase by $ 399 2017 to increase by $ 399 million and $ 376 million $ 399 million and $ 376 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 5 , “ Debt . ” , typically for up to 12 month . However , the , the Company estimate with 95 % confidence , a maximum in fair value of $ 592 million a of September 29 592 million a of September 29 , 2018 compared to a a of September 29 , 2018 compared to a maximum one-day in fair value of $ 485 million a of September 30 485 million a of September 30 , 2017 . Because the a of September 30 , 2017 . Because the Company us analysis performed a of September 29 , 2018 due to the a of September 29 , 2018 due to the inherent limitation position . Apple Inc. | 2018 Form 10-K | 36 Item Apple Inc. | 2018 Form 10-K | 36 Item 8 . | 2018 Form 10-K | 36 Item 8 . Financial Statements Form 10-K | 36 Item 8 . Financial Statements and Supplementary for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 38 Consolidated Statements 2017 and September 24 , 2016 38 Consolidated Statements of Comprehensive and September 24 , 2016 38 Consolidated Statements of Comprehensive Income for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 39 Consolidated Balance 2017 and September 24 , 2016 39 Consolidated Balance Sheets a and September 24 , 2016 39 Consolidated Balance Sheets a of Balance Sheets a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 40 Consolidated Statements 2018 and September 30 , 2017 40 Consolidated Statements of Shareholders and September 30 , 2017 40 Consolidated Statements of Shareholders ’ for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 41 Consolidated Statements 2017 and September 24 , 2016 41 Consolidated Statements of Cash and September 24 , 2016 41 Consolidated Statements of Cash Flows for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 42 Notes to 2017 and September 24 , 2016 42 Notes to Consolidated Financial and September 24 , 2016 42 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 43 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 64 Reports of Independent Registered Public Independent Registered Public Accounting Firm 65 All financial statement schedule have thereto . Apple Inc. | 2018 Form 10-K | 37 Apple Apple Inc. | 2018 Form 10-K | 37 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 37 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 29 , 2018 September 30 , Years ended September 29 , 2018 September 30 , 2017 September September 29 , 2018 September 30 , 2017 September 24 , , 2018 September 30 , 2017 September 24 , 2016 Net September 30 , 2017 September 24 , 2016 Net sale $ , 2017 September 24 , 2016 Net sale $ 265,595 $ , 2016 Net sale $ 265,595 $ 229,234 $ 215,639 Cost Net sale $ 265,595 $ 229,234 $ 215,639 Cost of sale $ 265,595 $ 229,234 $ 215,639 Cost of sale 163,756 141,048 $ 215,639 Cost of sale 163,756 141,048 131,376 Gross margin 101,839 215,639 Cost of sale 163,756 141,048 131,376 Gross margin 101,839 88,186 Cost of sale 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expense : 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expense : Research 131,376 Gross margin 101,839 88,186 84,263 Operating expense : Research and expense : Research and development 14,236 11,581 10,045 Selling , general : Research and development 14,236 11,581 10,045 Selling , general and Research and development 14,236 11,581 10,045 Selling , general and administrative Selling , general and administrative 16,705 15,261 14,194 Total operating expense , general and administrative 16,705 15,261 14,194 Total operating expense 30,941 general and administrative 16,705 15,261 14,194 Total operating expense 30,941 26,842 15,261 14,194 Total operating expense 30,941 26,842 24,239 Operating income 70,898 14,194 Total operating expense 30,941 26,842 24,239 Operating income 70,898 61,344 Total operating expense 30,941 26,842 24,239 Operating income 70,898 61,344 60,024 30,941 26,842 24,239 Operating income 70,898 61,344 60,024 Other income/ ( 26,842 24,239 Operating income 70,898 61,344 60,024 Other income/ ( expense 24,239 Operating income 70,898 61,344 60,024 Other income/ ( expense ) ( expense ) , net 2,005 2,745 1,348 Income before provision expense ) , net 2,005 2,745 1,348 Income before provision for ) , net 2,005 2,745 1,348 Income before provision for income before provision for income tax 72,903 64,089 61,372 Provision for income provision for income tax 72,903 64,089 61,372 Provision for income tax for income tax 72,903 64,089 61,372 Provision for income tax 13,372 61,372 Provision for income tax 13,372 15,738 15,685 Net income $ Provision for income tax 13,372 15,738 15,685 Net income $ 59,531 for income tax 13,372 15,738 15,685 Net income $ 59,531 $ 15,738 15,685 Net income $ 59,531 $ 48,351 $ 45,687 Earnings Net income $ 59,531 $ 48,351 $ 45,687 Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 12.01 $ 9.27 $ 8.35 Diluted : Basic $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 12.01 $ 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 9.27 $ 8.35 Diluted $ 11.91 $ 9.21 $ 8.31 Shares 8.35 Diluted $ 11.91 $ 9.21 $ 8.31 Shares used in $ 11.91 $ 9.21 $ 8.31 Shares used in computing earnings earnings per share : Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 per share : Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 5,500,281 share : Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 5,500,281 See Basic 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 5,500,281 See accompanying Notes 4,955,377 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 5,500,281 See accompanying Notes to 5,217,242 5,470,820 Diluted 5,000,109 5,251,692 5,500,281 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 38 Apple Apple Inc. | 2018 Form 10-K | 38 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 38 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 29 , 2018 September 30 , Years ended September 29 , 2018 September 30 , 2017 September September 29 , 2018 September 30 , 2017 September 24 , , 2018 September 30 , 2017 September 24 , 2016 Net September 30 , 2017 September 24 , 2016 Net income $ , 2017 September 24 , 2016 Net income $ 59,531 $ , 2016 Net income $ 59,531 $ 48,351 $ 45,687 Other Net income $ 59,531 $ 48,351 $ 45,687 Other comprehensive income/ $ 59,531 $ 48,351 $ 45,687 Other comprehensive income/ ( loss tax effect of $ ( 1 ) , $ ( 77 1 ) , $ ( 77 ) and $ 8 , ( 77 ) and $ 8 , respectively ( 525 ) $ 8 , respectively ( 525 ) 224 75 Change in , respectively ( 525 ) 224 75 Change in unrealized gains/losses respectively ( 525 ) 224 75 Change in unrealized gains/losses on expense ) of $ ( 149 ) , $ ( 478 149 ) , $ ( 478 ) and $ ( 7 478 ) and $ ( 7 ) , respectively 523 1,315 ( 7 ) , respectively 523 1,315 7 Adjustment for net 7 ) , respectively 523 1,315 7 Adjustment for net ( ) , respectively 523 1,315 7 Adjustment for net ( gain benefit ) of $ ( 104 ) , $ 475 and ( 104 ) , $ 475 and $ 131 , respectively , $ 475 and $ 131 , respectively 382 ( 1,477 and $ 131 , respectively 382 ( 1,477 ) ( 741 131 , respectively 382 ( 1,477 ) ( 741 ) Total 382 ( 1,477 ) ( 741 ) Total change in unrealized instrument , net of tax 905 ( 162 ) ( 734 net of tax 905 ( 162 ) ( 734 ) Change 905 ( 162 ) ( 734 ) Change in unrealized gains/losses ( expense ) of $ 1,156 , $ 425 and $ of $ 1,156 , $ 425 and $ ( 863 ) $ 425 and $ ( 863 ) , respectively ( 3,407 863 ) , respectively ( 3,407 ) ( 782 ) 1,582 respectively ( 3,407 ) ( 782 ) 1,582 Adjustment for net 3,407 ) ( 782 ) 1,582 Adjustment for net ( gain ( benefit ) of $ 21 , $ 35 and $ of $ 21 , $ 35 and $ ( 31 ) $ 35 and $ ( 31 ) , respectively 1 ( ( 31 ) , respectively 1 ( 64 ) 56 Total ) , respectively 1 ( 64 ) 56 Total change in respectively 1 ( 64 ) 56 Total change in unrealized gains/losses , net of tax ( 3,406 ) ( 846 ) 1,638 tax ( 3,406 ) ( 846 ) 1,638 Total other comprehensive 3,406 ) ( 846 ) 1,638 Total other comprehensive income/ ( income/ ( loss ) ( 3,026 ) ( 784 ) 979 ) ( 3,026 ) ( 784 ) 979 Total comprehensive income 3,026 ) ( 784 ) 979 Total comprehensive income $ 56,505 979 Total comprehensive income $ 56,505 $ 47,567 $ 46,666 See comprehensive income $ 56,505 $ 47,567 $ 46,666 See accompanying Notes $ 56,505 $ 47,567 $ 46,666 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 39 Apple Apple Inc. | 2018 Form 10-K | 39 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 39 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 29 , 2018 September 30 , value ) September 29 , 2018 September 30 , 2017 ASSETS September 29 , 2018 September 30 , 2017 ASSETS : Current , 2018 September 30 , 2017 ASSETS : Current asset : Cash and cash equivalent $ 25,913 $ 20,289 Marketable security 40,388 cash equivalent $ 25,913 $ 20,289 Marketable security 40,388 53,892 Accounts 25,913 $ 20,289 Marketable security 40,388 53,892 Accounts receivable , net $ 20,289 Marketable security 40,388 53,892 Accounts receivable , net 23,186 53,892 Accounts receivable , net 23,186 17,874 Inventories 3,956 4,855 Vendor Accounts receivable , net 23,186 17,874 Inventories 3,956 4,855 Vendor non-trade , net 23,186 17,874 Inventories 3,956 4,855 Vendor non-trade receivables 25,809 net 23,186 17,874 Inventories 3,956 4,855 Vendor non-trade receivables 25,809 17,799 3,956 4,855 Vendor non-trade receivables 25,809 17,799 Other current asset 12,087 4,855 Vendor non-trade receivables 25,809 17,799 Other current asset 12,087 13,936 25,809 17,799 Other current asset 12,087 13,936 Total current asset 131,339 17,799 Other current asset 12,087 13,936 Total current asset 131,339 128,645 12,087 13,936 Total current asset 131,339 128,645 Non-current asset : Marketable 13,936 Total current asset 131,339 128,645 Non-current asset : Marketable security Non-current asset : Marketable security 170,799 194,714 Property , plant and asset : Marketable security 170,799 194,714 Property , plant and equipment plant and equipment , net 41,304 33,783 Other non-current asset 22,283 and equipment , net 41,304 33,783 Other non-current asset 22,283 18,177 41,304 33,783 Other non-current asset 22,283 18,177 Total non-current asset 234,386 33,783 Other non-current asset 22,283 18,177 Total non-current asset 234,386 246,674 22,283 18,177 Total non-current asset 234,386 246,674 Total asset $ 365,725 18,177 Total non-current asset 234,386 246,674 Total asset $ 365,725 $ 234,386 246,674 Total asset $ 365,725 $ 375,319 LIABILITIES AND SHAREHOLDERS Total asset $ 365,725 $ 375,319 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 55,888 $ 44,242 Other current liability Accounts payable $ 55,888 $ 44,242 Other current liability 32,687 30,551 $ 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 44,242 Other current liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial liability 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 32,687 30,551 Deferred revenue 7,543 7,548 Commercial paper 11,964 11,977 Term revenue 7,543 7,548 Commercial paper 11,964 11,977 Term debt 8,784 6,496 7,543 7,548 Commercial paper 11,964 11,977 Term debt 8,784 6,496 Total paper 11,964 11,977 Term debt 8,784 6,496 Total current liability 116,866 11,964 11,977 Term debt 8,784 6,496 Total current liability 116,866 100,814 8,784 6,496 Total current liability 116,866 100,814 Non-current liability : Deferred 6,496 Total current liability 116,866 100,814 Non-current liability : Deferred revenue Non-current liability : Deferred revenue 2,797 2,836 Term debt 93,735 97,207 liability : Deferred revenue 2,797 2,836 Term debt 93,735 97,207 Other revenue 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 2,797 2,836 Term debt 93,735 97,207 Other non-current liability 45,180 40,415 93,735 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 97,207 Other non-current liability 45,180 40,415 Total non-current liability 141,712 140,458 45,180 40,415 Total non-current liability 141,712 140,458 Total liability 258,578 241,272 40,415 Total non-current liability 141,712 140,458 Total liability 258,578 241,272 Commitments liability 141,712 140,458 Total liability 258,578 241,272 Commitments and contingency Shareholders 141,712 140,458 Total liability 258,578 241,272 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.00001 par value : 12,600,000 share authorized ; 4,754,986 and : 12,600,000 share authorized ; 4,754,986 and 5,126,201 share issued and share authorized ; 4,754,986 and 5,126,201 share issued and outstanding , issued and outstanding , respectively 40,201 35,867 Retained earnings 70,400 98,330 and outstanding , respectively 40,201 35,867 Retained earnings 70,400 98,330 Accumulated respectively 40,201 35,867 Retained earnings 70,400 98,330 Accumulated other comprehensive income/ 40,201 35,867 Retained earnings 70,400 98,330 Accumulated other comprehensive income/ ( income/ ( loss ) ( 3,454 ) ( 150 ) Total ) ( 3,454 ) ( 150 ) Total shareholder ’ equity ) Total shareholder ’ equity 107,147 134,047 Total liability and shareholder Total shareholder ’ equity 107,147 134,047 Total liability and shareholder ’ and shareholder ’ equity $ 365,725 $ 375,319 See accompanying Notes ’ equity $ 365,725 $ 375,319 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 40 Apple Apple Inc. | 2018 Form 10-K | 40 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 40 Apple Inc. CONSOLIDATED STATEMENTS OF Amount Balances a of September 26 , 2015 5,578,753 $ 27,416 a of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ ( 345 2015 5,578,753 $ 27,416 $ 92,284 $ ( 345 ) $ 27,416 $ 92,284 $ ( 345 ) $ 119,355 Net income $ ( 345 ) $ 119,355 Net income — — 45,687 119,355 Net income — — 45,687 — 45,687 Other comprehensive income/ income — — 45,687 — 45,687 Other comprehensive income/ ( loss loss ) — — — 979 979 Dividends and dividend equivalent ) — — — 979 979 Dividends and dividend equivalent declared dividend equivalent declared at $ 2.18 per share or RSU — or RSU — — ( 12,188 ) — ( 12,188 ) ( 12,188 ) — ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) — ( 29,000 ) ( 279,609 ) — ( 29,000 ) — ( 29,000 ) ( 29,000 ) — ( 29,000 ) Share-based compensation — 4,262 29,000 ) Share-based compensation — 4,262 — — 4,262 Common stock compensation — 4,262 — — 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) — 37,022 ( 806 ) ( 419 ) — ( 1,225 ) ( 419 ) — ( 1,225 ) Tax benefit from equity including transfer pricing adjustment — 379 — — 379 Balances a adjustment — 379 — — 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 31,251 96,364 a of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 of September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net September 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income 24 , 2016 5,336,166 31,251 96,364 634 128,249 Net income — , 2016 5,336,166 31,251 96,364 634 128,249 Net income — — 2016 5,336,166 31,251 96,364 634 128,249 Net income — — 48,351 128,249 Net income — — 48,351 — 48,351 Other comprehensive income/ income — — 48,351 — 48,351 Other comprehensive income/ ( loss ) — — — ( 784 ) ( 784 ) Dividends — ( 784 ) ( 784 ) Dividends and dividend equivalent dividend equivalent declared at $ 2.40 per share or RSU — or RSU — — ( 12,803 ) — ( 12,803 ) ( 12,803 ) — ( 12,803 ) Repurchase of common stock Repurchase of common stock ( 246,496 ) — ( 33,001 ) ( 246,496 ) — ( 33,001 ) — ( 33,001 ) ( 33,001 ) — ( 33,001 ) Share-based compensation — 4,909 33,001 ) Share-based compensation — 4,909 — — 4,909 Common stock compensation — 4,909 — — 4,909 Common stock issued , net share withheld for employee tax 36,531 ( 913 ) ( 581 for employee tax 36,531 ( 913 ) ( 581 ) — 36,531 ( 913 ) ( 581 ) — ( 1,494 ) ( 581 ) — ( 1,494 ) Tax benefit from equity including transfer pricing adjustment — 620 — — 620 Balances a adjustment — 620 — — 620 Balances a of September 30 620 Balances a of September 30 , 2017 5,126,201 35,867 98,330 a of September 30 , 2017 5,126,201 35,867 98,330 ( 150 of September 30 , 2017 5,126,201 35,867 98,330 ( 150 ) September 30 , 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 30 , 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 Cumulative 2017 5,126,201 35,867 98,330 ( 150 ) 134,047 Cumulative effect of 35,867 98,330 ( 150 ) 134,047 Cumulative effect of change in in accounting principle — — 278 ( 278 ) — Net principle — — 278 ( 278 ) — Net income — — Net income — — 59,531 — 59,531 Other comprehensive income/ income — — 59,531 — 59,531 Other comprehensive income/ ( loss ) — — — ( 3,026 ) ( 3,026 ) Dividends — ( 3,026 ) ( 3,026 ) Dividends and dividend equivalent dividend equivalent declared at $ 2.72 per share or RSU — or RSU — — ( 13,735 ) — ( 13,735 ) ( 13,735 ) — ( 13,735 ) Repurchase of common stock Repurchase of common stock ( 405,549 ) — ( 73,056 ) ( 405,549 ) — ( 73,056 ) — ( 73,056 ) ( 73,056 ) — ( 73,056 ) Share-based compensation — 5,443 73,056 ) Share-based compensation — 5,443 — — 5,443 Common stock compensation — 5,443 — — 5,443 Common stock issued , net share withheld for employee tax 34,334 ( 1,109 ) ( 948 for employee tax 34,334 ( 1,109 ) ( 948 ) — 34,334 ( 1,109 ) ( 948 ) — ( 2,057 ) ( 948 ) — ( 2,057 ) Balances a of September ) Balances a of September 29 , 2018 4,754,986 $ 40,201 a of September 29 , 2018 4,754,986 $ 40,201 $ 70,400 of September 29 , 2018 4,754,986 $ 40,201 $ 70,400 $ 29 , 2018 4,754,986 $ 40,201 $ 70,400 $ ( 3,454 2018 4,754,986 $ 40,201 $ 70,400 $ ( 3,454 ) $ 40,201 $ 70,400 $ ( 3,454 ) $ 107,147 See accompanying $ ( 3,454 ) $ 107,147 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 41 Apple Apple Inc. | 2018 Form 10-K | 41 Apple Inc. CONSOLIDATED | 2018 Form 10-K | 41 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 29 , 2018 September 30 , Years ended September 29 , 2018 September 30 , 2017 September September 29 , 2018 September 30 , 2017 September 24 , , 2018 September 30 , 2017 September 24 , 2016 Cash September 30 , 2017 September 24 , 2016 Cash and cash , 2017 September 24 , 2016 Cash and cash equivalent , beginning of the year $ 20,289 $ 20,484 $ 21,120 Operating the year $ 20,289 $ 20,484 $ 21,120 Operating activity : $ 20,289 $ 20,484 $ 21,120 Operating activity : Net income Operating activity : Net income 59,531 48,351 45,687 Adjustments to reconcile activity : Net income 59,531 48,351 45,687 Adjustments to reconcile net : Net income 59,531 48,351 45,687 Adjustments to reconcile net income activity : Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense : Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense 5,340 Depreciation and amortization 10,903 10,157 10,505 Share-based compensation expense 5,340 4,840 10,157 10,505 Share-based compensation expense 5,340 4,840 4,210 Deferred income tax 10,505 Share-based compensation expense 5,340 4,840 4,210 Deferred income tax expense/ Share-based compensation expense 5,340 4,840 4,210 Deferred income tax expense/ ( expense/ ( benefit ) ( 32,590 ) 5,966 4,938 Other ( benefit ) ( 32,590 ) 5,966 4,938 Other ( 444 ) ) ( 32,590 ) 5,966 4,938 Other ( 444 ) ( ) 5,966 4,938 Other ( 444 ) ( 166 ) 486 Other ( 444 ) ( 166 ) 486 Changes in operating 444 ) ( 166 ) 486 Changes in operating asset and Accounts receivable , net ( 5,322 ) ( 2,093 ) 527 net ( 5,322 ) ( 2,093 ) 527 Inventories 828 ( 5,322 ) ( 2,093 ) 527 Inventories 828 ( 2,723 ) ( 2,093 ) 527 Inventories 828 ( 2,723 ) 217 Vendor ) 527 Inventories 828 ( 2,723 ) 217 Vendor non-trade receivables Inventories 828 ( 2,723 ) 217 Vendor non-trade receivables ( 8,010 217 Vendor non-trade receivables ( 8,010 ) ( 4,254 ) ( receivables ( 8,010 ) ( 4,254 ) ( 51 ) Other ) ( 4,254 ) ( 51 ) Other current and non-current current and non-current asset ( 423 ) ( 5,318 ) 1,055 asset ( 423 ) ( 5,318 ) 1,055 Accounts payable 9,175 423 ) ( 5,318 ) 1,055 Accounts payable 9,175 8,966 2,117 5,318 ) 1,055 Accounts payable 9,175 8,966 2,117 Deferred revenue ( ) 1,055 Accounts payable 9,175 8,966 2,117 Deferred revenue ( 44 1,055 Accounts payable 9,175 8,966 2,117 Deferred revenue ( 44 ) 8,966 2,117 Deferred revenue ( 44 ) ( 626 ) ( revenue ( 44 ) ( 626 ) ( 1,554 ) Other ) ( 626 ) ( 1,554 ) Other current and non-current Other current and non-current liability 38,490 1,125 ( 1,906 ) Cash current and non-current liability 38,490 1,125 ( 1,906 ) Cash generated non-current liability 38,490 1,125 ( 1,906 ) Cash generated by operating Cash generated by operating activity 77,434 64,225 66,231 Investing activity : generated by operating activity 77,434 64,225 66,231 Investing activity : Purchases by operating activity 77,434 64,225 66,231 Investing activity : Purchases of Purchases of marketable security ( 71,356 ) ( 159,486 ) ( security ( 71,356 ) ( 159,486 ) ( 142,428 ) Proceeds ) ( 159,486 ) ( 142,428 ) Proceeds from maturity of from maturity of marketable security 55,881 31,775 21,258 Proceeds from sale maturity of marketable security 55,881 31,775 21,258 Proceeds from sale of of marketable security 55,881 31,775 21,258 Proceeds from sale of marketable from sale of marketable security 47,838 94,564 90,536 Payments for acquisition sale of marketable security 47,838 94,564 90,536 Payments for acquisition of of marketable security 47,838 94,564 90,536 Payments for acquisition of property , plant and equipment ( 13,313 ) ( 12,451 ) ( equipment ( 13,313 ) ( 12,451 ) ( 12,734 ) Payments ) ( 12,451 ) ( 12,734 ) Payments made in connection business acquisition , net ( 721 ) ( 329 ) ( net ( 721 ) ( 329 ) ( 297 ) Purchases ) ( 329 ) ( 297 ) Purchases of non-marketable security Purchases of non-marketable security ( 1,871 ) ( 521 ) ( security ( 1,871 ) ( 521 ) ( 1,388 ) Proceeds ) ( 521 ) ( 1,388 ) Proceeds from non-marketable security ) Proceeds from non-marketable security 353 126 — Other ( 745 Proceeds from non-marketable security 353 126 — Other ( 745 ) 353 126 — Other ( 745 ) ( 124 ) ( Other ( 745 ) ( 124 ) ( 924 ) Cash ) ( 124 ) ( 924 ) Cash generated by/ ( used in ) investing activity 16,066 ( 46,446 ) ( 45,977 ) investing activity 16,066 ( 46,446 ) ( 45,977 ) Financing 16,066 ( 46,446 ) ( 45,977 ) Financing activity : Proceeds from issuance of common stock 669 555 495 Payments for tax issuance of common stock 669 555 495 Payments for tax related of common stock 669 555 495 Payments for tax related to settlement of equity award ( 2,527 ) ( 1,874 ) ( award ( 2,527 ) ( 1,874 ) ( 1,570 ) Payments ) ( 1,874 ) ( 1,570 ) Payments for dividend and dividend and dividend equivalent ( 13,712 ) ( 12,769 ) ( equivalent ( 13,712 ) ( 12,769 ) ( 12,150 ) Repurchases ) ( 12,769 ) ( 12,150 ) Repurchases of common stock Repurchases of common stock ( 72,738 ) ( 32,900 ) ( stock ( 72,738 ) ( 32,900 ) ( 29,722 ) Proceeds ) ( 32,900 ) ( 29,722 ) Proceeds from issuance of of term debt , net 6,969 28,662 24,954 Repayments of term term debt , net 6,969 28,662 24,954 Repayments of term debt debt , net 6,969 28,662 24,954 Repayments of term debt ( Repayments of term debt ( 6,500 ) ( 3,500 ) ( debt ( 6,500 ) ( 3,500 ) ( 2,500 ) Change ) ( 3,500 ) ( 2,500 ) Change in commercial paper commercial paper , net ( 37 ) 3,852 ( 397 ) , net ( 37 ) 3,852 ( 397 ) Cash used ( 37 ) 3,852 ( 397 ) Cash used in financing used in financing activity ( 87,876 ) ( 17,974 ) ( activity ( 87,876 ) ( 17,974 ) ( 20,890 ) Increase/ ) ( 17,974 ) ( 20,890 ) Increase/ ( Decrease ) in cash and cash equivalent 5,624 ( 195 ) ( 636 and cash equivalent 5,624 ( 195 ) ( 636 ) Cash 5,624 ( 195 ) ( 636 ) Cash and cash equivalent end of the year $ 25,913 $ 20,289 $ 20,484 Supplemental the year $ 25,913 $ 20,289 $ 20,484 Supplemental cash flow $ 25,913 $ 20,289 $ 20,484 Supplemental cash flow disclosure : income tax , net $ 10,417 $ 11,591 $ 10,444 Cash , net $ 10,417 $ 11,591 $ 10,444 Cash paid for $ 10,417 $ 11,591 $ 10,444 Cash paid for interest $ Cash paid for interest $ 3,022 $ 2,092 $ 1,316 See for interest $ 3,022 $ 2,092 $ 1,316 See accompanying Notes $ 3,022 $ 2,092 $ 1,316 See accompanying Notes to Consolidated Statements . Apple Inc. | 2018 Form 10-K | 42 Apple Apple Inc. | 2018 Form 10-K | 42 Apple Inc. Notes | 2018 Form 10-K | 42 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2018 and 2016 spanned 52 week s fiscal year 2018 and 2016 spanned 52 week each , year 2018 and 2016 spanned 52 week each , whereas fiscal each , whereas fiscal year 2017 included 53 week . A whereas fiscal year 2017 included 53 week . A 14th week included 53 week . A 14th week wa included in the the first fiscal quarter of 2017 , a is done every Operations . Apple Inc. | 2018 Form 10-K | 43 The Apple Inc. | 2018 Form 10-K | 43 The Company record | 2018 Form 10-K | 43 The Company record deferred revenue expense . Apple Inc. | 2018 Form 10-K | 44 Share-Based Apple Inc. | 2018 Form 10-K | 44 Share-Based Compensation The | 2018 Form 10-K | 44 Share-Based Compensation The Company generally can be found in Note 8 , “ Benefit Plans . During the first quarter of 2018 , the Company adopted the ASU ” ) No . 2016-09 , Compensation – Stock Compensation – Stock Compensation ( Topic 718 ) : Improvements to Employee Payment Accounting ( “ ASU 2016-09 ” ) , which modified Cash Flows . Beginning in 2018 , the Company record any of Cash Flows of $ 627 million and $ 407 million $ 627 million and $ 407 million for 2017 and 2016 and $ 407 million for 2017 and 2016 , respectively . 407 million for 2017 and 2016 , respectively . Earnings Per diluted earnings per share for 2018 , 2017 and 2016 ( per share for 2018 , 2017 and 2016 ( net income for 2018 , 2017 and 2016 ( net income in million share in thousand ) : 2018 2017 2016 Numerator : Net in thousand ) : 2018 2017 2016 Numerator : Net income thousand ) : 2018 2017 2016 Numerator : Net income $ Numerator : Net income $ 59,531 $ 48,351 $ 45,687 Denominator Net income $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average $ 59,531 $ 48,351 $ 45,687 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 4,955,377 5,217,242 5,470,820 Effect of dilutive Weighted-average basic share outstanding 4,955,377 5,217,242 5,470,820 Effect of dilutive security basic share outstanding 4,955,377 5,217,242 5,470,820 Effect of dilutive security 44,732 5,470,820 Effect of dilutive security 44,732 34,450 29,461 Weighted-average diluted share Effect of dilutive security 44,732 34,450 29,461 Weighted-average diluted share 5,000,109 of dilutive security 44,732 34,450 29,461 Weighted-average diluted share 5,000,109 5,251,692 34,450 29,461 Weighted-average diluted share 5,000,109 5,251,692 5,500,281 Basic earnings per 29,461 Weighted-average diluted share 5,000,109 5,251,692 5,500,281 Basic earnings per share Weighted-average diluted share 5,000,109 5,251,692 5,500,281 Basic earnings per share $ Basic earnings per share $ 12.01 $ 9.27 $ 8.35 Diluted per share $ 12.01 $ 9.27 $ 8.35 Diluted earnings per $ 12.01 $ 9.27 $ 8.35 Diluted earnings per share $ Diluted earnings per share $ 11.91 $ 9.21 $ 8.31 Cash per share $ 11.91 $ 9.21 $ 8.31 Cash Equivalents and $ 11.91 $ 9.21 $ 8.31 Cash Equivalents and Marketable Securities building is the lesser of 30 year or the remaining life property and equipment wa $ 9.3 billion , $ 8.2 billion $ 9.3 billion , $ 8.2 billion and $ 8.3 billion $ 8.2 billion and $ 8.3 billion during 2018 , 2017 and $ 8.3 billion during 2018 , 2017 and 2016 , 8.3 billion during 2018 , 2017 and 2016 , respectively . during 2018 , 2017 and 2016 , respectively . During 2018 2016 , respectively . During 2018 , non-cash investing activity involving other current liability of $ 3.4 billion . Apple Inc. | billion . Apple Inc. | 2018 Form 10-K | 45 Fair Apple Inc. | 2018 Form 10-K | 45 Fair Value Measurements | 2018 Form 10-K | 45 Fair Value Measurements The Company observable market data . Note 2 – Financial Instruments Cash , investment category a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 11,575 $ — $ — $ $ — $ — $ 11,575 $ 11,575 $ — $ $ — $ 11,575 $ 11,575 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 8,083 — — 8,083 8,083 — market fund 8,083 — — 8,083 8,083 — — Mutual fund fund 8,083 — — 8,083 8,083 — — Mutual fund 799 8,083 — — Mutual fund 799 — ( 116 ) 683 Mutual fund 799 — ( 116 ) 683 — 683 — 799 — ( 116 ) 683 — 683 — Subtotal 8,882 ( 116 ) 683 — 683 — Subtotal 8,882 — ( 683 — 683 — Subtotal 8,882 — ( 116 ) 8,766 — Subtotal 8,882 — ( 116 ) 8,766 8,083 683 — 8,882 — ( 116 ) 8,766 8,083 683 — Level 2 — ( 116 ) 8,766 8,083 683 — Level 2 ( ( 116 ) 8,766 8,083 683 — Level 2 ( 2 8,766 8,083 683 — Level 2 ( 2 ) : U.S. 683 — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 47,296 — ( 1,202 ) 46,094 Treasury security 47,296 — ( 1,202 ) 46,094 1,613 7,606 36,875 47,296 — ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency — ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security 4,127 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security 4,127 — 7,606 36,875 U.S. agency security 4,127 — ( 48 ) 4,079 agency security 4,127 — ( 48 ) 4,079 1,732 360 1,987 4,127 — ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government — ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government security ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government security 21,601 48 ) 4,079 1,732 360 1,987 Non-U.S. government security 21,601 49 360 1,987 Non-U.S. government security 21,601 49 ( 250 ) 21,400 1,987 Non-U.S. government security 21,601 49 ( 250 ) 21,400 — government security 21,601 49 ( 250 ) 21,400 — 3,355 18,045 21,601 49 ( 250 ) 21,400 — 3,355 18,045 Certificates of ( 250 ) 21,400 — 3,355 18,045 Certificates of deposit and 250 ) 21,400 — 3,355 18,045 Certificates of deposit and time of deposit and time deposit 3,074 — — 3,074 1,247 1,330 time deposit 3,074 — — 3,074 1,247 1,330 497 Commercial paper deposit 3,074 — — 3,074 1,247 1,330 497 Commercial paper 2,573 3,074 — — 3,074 1,247 1,330 497 Commercial paper 2,573 — — — 3,074 1,247 1,330 497 Commercial paper 2,573 — — 1,247 1,330 497 Commercial paper 2,573 — — 2,573 1,663 910 Commercial paper 2,573 — — 2,573 1,663 910 — Corporate security paper 2,573 — — 2,573 1,663 910 — Corporate security 123,001 2,573 — — 2,573 1,663 910 — Corporate security 123,001 152 1,663 910 — Corporate security 123,001 152 ( 2,038 ) 121,115 910 — Corporate security 123,001 152 ( 2,038 ) 121,115 — Corporate security 123,001 152 ( 2,038 ) 121,115 — 25,162 95,953 123,001 152 ( 2,038 ) 121,115 — 25,162 95,953 Municipal security ( 2,038 ) 121,115 — 25,162 95,953 Municipal security 946 — 2,038 ) 121,115 — 25,162 95,953 Municipal security 946 — ( — 25,162 95,953 Municipal security 946 — ( 12 ) 934 Municipal security 946 — ( 12 ) 934 — 178 756 946 — ( 12 ) 934 — 178 756 Mortgage- and ( 12 ) 934 — 178 756 Mortgage- and asset-backed security 12 ) 934 — 178 756 Mortgage- and asset-backed security 18,105 756 Mortgage- and asset-backed security 18,105 8 ( 623 ) 17,490 Mortgage- and asset-backed security 18,105 8 ( 623 ) 17,490 — asset-backed security 18,105 8 ( 623 ) 17,490 — 804 16,686 18,105 8 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 209 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 209 ( 4,173 17,490 — 804 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 — 804 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 6,255 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 6,255 39,705 170,799 220,723 209 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 209 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ) 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ) $ 6,255 39,705 170,799 Total ( 3 ) $ 241,180 $ 209 Total ( 3 ) $ 241,180 $ 209 $ ( 4,289 3 ) $ 241,180 $ 209 $ ( 4,289 ) $ 241,180 $ 209 $ ( 4,289 ) $ 237,100 $ 25,913 $ ( 4,289 ) $ 237,100 $ 25,913 $ 40,388 $ 4,289 ) $ 237,100 $ 25,913 $ 40,388 $ 170,799 Apple $ 237,100 $ 25,913 $ 40,388 $ 170,799 Apple Inc. | $ 25,913 $ 40,388 $ 170,799 Apple Inc. | 2018 Form $ 170,799 Apple Inc. | 2018 Form 10-K | 46 2017 Apple Inc. | 2018 Form 10-K | 46 2017 Adjusted Cost | 2018 Form 10-K | 46 2017 Adjusted Cost Unrealized Gains 2018 Form 10-K | 46 2017 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 7,982 $ — $ — $ $ — $ — $ 7,982 $ 7,982 $ — $ $ — $ 7,982 $ 7,982 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 6,534 — — 6,534 6,534 — market fund 6,534 — — 6,534 6,534 — — Mutual fund fund 6,534 — — 6,534 6,534 — — Mutual fund 799 6,534 — — Mutual fund 799 — ( 88 ) 711 Mutual fund 799 — ( 88 ) 711 — 711 — 799 — ( 88 ) 711 — 711 — Subtotal 7,333 ( 88 ) 711 — 711 — Subtotal 7,333 — ( 711 — 711 — Subtotal 7,333 — ( 88 ) 7,245 — Subtotal 7,333 — ( 88 ) 7,245 6,534 711 — 7,333 — ( 88 ) 7,245 6,534 711 — Level 2 — ( 88 ) 7,245 6,534 711 — Level 2 ( ( 88 ) 7,245 6,534 711 — Level 2 ( 2 7,245 6,534 711 — Level 2 ( 2 ) : U.S. 711 — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 55,254 58 ( 230 ) 55,082 : U.S. Treasury security 55,254 58 ( 230 ) 55,082 865 Treasury security 55,254 58 ( 230 ) 55,082 865 17,228 36,989 55,254 58 ( 230 ) 55,082 865 17,228 36,989 U.S. agency 58 ( 230 ) 55,082 865 17,228 36,989 U.S. agency security ( 230 ) 55,082 865 17,228 36,989 U.S. agency security 5,162 230 ) 55,082 865 17,228 36,989 U.S. agency security 5,162 2 17,228 36,989 U.S. agency security 5,162 2 ( 9 ) 5,155 36,989 U.S. agency security 5,162 2 ( 9 ) 5,155 1,439 agency security 5,162 2 ( 9 ) 5,155 1,439 2,057 1,659 5,162 2 ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government 2 ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security ( 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security 7,827 9 ) 5,155 1,439 2,057 1,659 Non-U.S. government security 7,827 210 2,057 1,659 Non-U.S. government security 7,827 210 ( 37 ) 8,000 1,659 Non-U.S. government security 7,827 210 ( 37 ) 8,000 9 government security 7,827 210 ( 37 ) 8,000 9 123 7,868 7,827 210 ( 37 ) 8,000 9 123 7,868 Certificates of 210 ( 37 ) 8,000 9 123 7,868 Certificates of deposit ( 37 ) 8,000 9 123 7,868 Certificates of deposit and 37 ) 8,000 9 123 7,868 Certificates of deposit and time of deposit and time deposit 5,832 — — 5,832 1,142 3,918 time deposit 5,832 — — 5,832 1,142 3,918 772 Commercial paper deposit 5,832 — — 5,832 1,142 3,918 772 Commercial paper 3,640 5,832 — — 5,832 1,142 3,918 772 Commercial paper 3,640 — — — 5,832 1,142 3,918 772 Commercial paper 3,640 — — 1,142 3,918 772 Commercial paper 3,640 — — 3,640 2,146 1,494 Commercial paper 3,640 — — 3,640 2,146 1,494 — Corporate security paper 3,640 — — 3,640 2,146 1,494 — Corporate security 152,724 3,640 — — 3,640 2,146 1,494 — Corporate security 152,724 969 2,146 1,494 — Corporate security 152,724 969 ( 242 ) 153,451 1,494 — Corporate security 152,724 969 ( 242 ) 153,451 172 Corporate security 152,724 969 ( 242 ) 153,451 172 27,591 125,688 152,724 969 ( 242 ) 153,451 172 27,591 125,688 Municipal security 969 ( 242 ) 153,451 172 27,591 125,688 Municipal security 961 ( 242 ) 153,451 172 27,591 125,688 Municipal security 961 4 242 ) 153,451 172 27,591 125,688 Municipal security 961 4 ( 172 27,591 125,688 Municipal security 961 4 ( 1 ) 964 27,591 125,688 Municipal security 961 4 ( 1 ) 964 — Municipal security 961 4 ( 1 ) 964 — 114 850 961 4 ( 1 ) 964 — 114 850 Mortgage- and ( 1 ) 964 — 114 850 Mortgage- and asset-backed security 1 ) 964 — 114 850 Mortgage- and asset-backed security 21,684 850 Mortgage- and asset-backed security 21,684 35 ( 175 ) 21,544 Mortgage- and asset-backed security 21,684 35 ( 175 ) 21,544 — asset-backed security 21,684 35 ( 175 ) 21,544 — 656 20,888 21,684 35 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 175 ) 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 694 21,544 — 656 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 — 656 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 5,773 20,888 Subtotal 253,084 1,278 ( 694 ) 253,668 5,773 53,181 194,714 253,084 1,278 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 1,278 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 ( 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 $ 694 ) 253,668 5,773 53,181 194,714 Total $ 268,399 $ 1,278 5,773 53,181 194,714 Total $ 268,399 $ 1,278 $ ( 782 194,714 Total $ 268,399 $ 1,278 $ ( 782 ) $ 268,399 $ 1,278 $ ( 782 ) $ 268,895 $ 20,289 $ ( 782 ) $ 268,895 $ 20,289 $ 53,892 $ 782 ) $ 268,895 $ 20,289 $ 53,892 $ 194,714 ( $ 268,895 $ 20,289 $ 53,892 $ 194,714 ( 1 ) $ 20,289 $ 53,892 $ 194,714 ( 1 ) Level 1 $ 53,892 $ 194,714 ( 1 ) Level 1 fair value 194,714 ( 1 ) Level 1 fair value estimate are based asset or liability . ( 2 ) Level 2 fair value . ( 2 ) Level 2 fair value estimate are based asset or liability . ( 3 ) As of September 29 3 ) As of September 29 , 2018 , total cash As of September 29 , 2018 , total cash , cash and marketable security included $ 20.3 billion that wa restricted from Decision ( refer to Note 4 , “ Income Taxes ” loss position for le than 12 month and for 12 month than 12 month and for 12 month or greater a of or greater a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 Continuous Unrealized Losses Less than Continuous Unrealized Losses Less than 12 Months 12 Months or Greater Losses Less than 12 Months 12 Months or Greater Total Fair value of marketable security $ 126,238 $ 60,599 $ 186,837 Unrealized marketable security $ 126,238 $ 60,599 $ 186,837 Unrealized loss $ $ 126,238 $ 60,599 $ 186,837 Unrealized loss $ ( 2,400 186,837 Unrealized loss $ ( 2,400 ) $ ( 1,889 ) ( 2,400 ) $ ( 1,889 ) $ ( 4,289 ) ( 1,889 ) $ ( 4,289 ) 2017 Continuous Unrealized Losses ) $ ( 4,289 ) 2017 Continuous Unrealized Losses Less than Continuous Unrealized Losses Less than 12 Months 12 Months or Greater Losses Less than 12 Months 12 Months or Greater Total Fair value of marketable security $ 101,986 $ 8,290 $ 110,276 Unrealized marketable security $ 101,986 $ 8,290 $ 110,276 Unrealized loss $ $ 101,986 $ 8,290 $ 110,276 Unrealized loss $ ( 596 110,276 Unrealized loss $ ( 596 ) $ ( 186 ) ( 596 ) $ ( 186 ) $ ( 782 ) ( 186 ) $ ( 782 ) Apple Inc. | 2018 782 ) Apple Inc. | 2018 Form 10-K | 47 The Apple Inc. | 2018 Form 10-K | 47 The Company typically | 2018 Form 10-K | 47 The Company typically invests in basis . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company doe not , typically for up to 12 month . To protect the hedge . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company ’ s expected to be recognized within 24 year . The Company may hedge . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company ’ s expected to be recognized within 9 year . Cash Flow Hedges transaction . Apple Inc. | 2018 Form 10-K | 48 Net Apple Inc. | 2018 Form 10-K | 48 Net Investment Hedges | 2018 Form 10-K | 48 Net Investment Hedges The effective As a result , during 2018 , the Company recognized a recognized a gain of $ 20 million in net sale , , a gain of $ 85 million in cost of sale and a loss of $ 198 million in other income/ ( ) , net . During 2017 , the Company recognized a recognized a gain of $ 20 million in net sale , , a loss of $ 40 million in cost of sale and a gain of $ 606 million in other income/ ( fair value a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,015 $ 259 $ 1,274 Derivative exchange contract $ 1,015 $ 259 $ 1,274 Derivative liability ( $ 1,015 $ 259 $ 1,274 Derivative liability ( 2 ) $ 1,274 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 543 $ 137 $ 680 Interest exchange contract $ 543 $ 137 $ 680 Interest rate contract $ 543 $ 137 $ 680 Interest rate contract $ 1,456 680 Interest rate contract $ 1,456 $ — $ 1,456 2017 $ 1,456 $ — $ 1,456 2017 Fair Value of Derivatives 1,456 $ — $ 1,456 2017 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,049 $ 363 $ 1,412 Interest exchange contract $ 1,049 $ 363 $ 1,412 Interest rate contract $ 1,049 $ 363 $ 1,412 Interest rate contract $ 218 1,412 Interest rate contract $ 218 $ — $ 218 Derivative $ 218 $ — $ 218 Derivative liability ( 2 ) $ 218 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 759 $ 501 $ 1,260 Interest exchange contract $ 759 $ 501 $ 1,260 Interest rate contract $ 759 $ 501 $ 1,260 Interest rate contract $ 303 1,260 Interest rate contract $ 303 $ — $ 303 ( $ 303 $ — $ 303 ( 1 ) The fair $ — $ 303 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Flows . Apple Inc. | 2018 Form 10-K | 49 The Apple Inc. | 2018 Form 10-K | 49 The following table | 2018 Form 10-K | 49 The following table show the Consolidated Statements of Operations for 2018 , 2017 and 2016 ( of Operations for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Gains/ ( Losses in million ) : 2018 2017 2016 Gains/ ( Losses ) million ) : 2018 2017 2016 Gains/ ( Losses ) recognized : Foreign exchange contract $ 682 $ 1,797 $ 109 Interest exchange contract $ 682 $ 1,797 $ 109 Interest rate contract $ 682 $ 1,797 $ 109 Interest rate contract 1 7 $ 109 Interest rate contract 1 7 ( 57 ) Total 109 Interest rate contract 1 7 ( 57 ) Total $ rate contract 1 7 ( 57 ) Total $ 683 $ ( 57 ) Total $ 683 $ 1,804 $ 52 Net ) Total $ 683 $ 1,804 $ 52 Net investment hedge $ 683 $ 1,804 $ 52 Net investment hedge : Foreign : Foreign currency debt $ 4 $ 67 $ ( 258 currency debt $ 4 $ 67 $ ( 258 ) Gains/ 4 $ 67 $ ( 258 ) Gains/ ( Losses ) Foreign exchange contract $ ( 482 ) $ 1,958 $ 885 $ ( 482 ) $ 1,958 $ 885 Interest rate contract 482 ) $ 1,958 $ 885 Interest rate contract 1 ( $ 885 Interest rate contract 1 ( 2 ) ( 11 Interest rate contract 1 ( 2 ) ( 11 ) Total 1 ( 2 ) ( 11 ) Total $ ( 481 11 ) Total $ ( 481 ) $ 1,956 $ 874 $ ( 481 ) $ 1,956 $ 874 Gains/ ( Losses 481 ) $ 1,956 $ 874 Gains/ ( Losses ) on Foreign exchange contract $ ( 168 ) $ — $ — — Interest rate contract ( 1,363 ) ( 810 ) 341 contract ( 1,363 ) ( 810 ) 341 Total $ ( 1,363 ) ( 810 ) 341 Total $ ( 1,531 ) ) 341 Total $ ( 1,531 ) $ ( 810 ) ( 1,531 ) $ ( 810 ) $ 341 Gains/ ( $ ( 810 ) $ 341 Gains/ ( Losses ) related hedge : Marketable security $ 167 $ — $ — Fixed-rate — $ — Fixed-rate debt 1,363 810 ( 341 ) Total $ — Fixed-rate debt 1,363 810 ( 341 ) Total $ Fixed-rate debt 1,363 810 ( 341 ) Total $ 1,530 $ ( 341 ) Total $ 1,530 $ 810 $ ( 341 ) Total $ 1,530 $ 810 $ ( 341 ) The 1,530 $ 810 $ ( 341 ) The following table show derivative instrument a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2018 2017 Notional Amount Credit Risk in million ) : 2018 2017 Notional Amount Credit Risk Amount : Foreign exchange contract $ 65,368 $ 1,015 $ 56,156 $ exchange contract $ 65,368 $ 1,015 $ 56,156 $ 1,049 Interest $ 65,368 $ 1,015 $ 56,156 $ 1,049 Interest rate contract $ 1,015 $ 56,156 $ 1,049 Interest rate contract $ 33,250 1,049 Interest rate contract $ 33,250 $ — $ 33,000 $ $ 33,250 $ — $ 33,000 $ 218 Instruments not designated $ — $ 33,000 $ 218 Instruments not designated a accounting : Foreign exchange contract $ 63,062 $ 259 $ 69,774 $ exchange contract $ 63,062 $ 259 $ 69,774 $ 363 The $ 63,062 $ 259 $ 69,774 $ 363 The notional amount $ 259 $ 69,774 $ 363 The notional amount for outstanding instrument . Apple Inc. | 2018 Form 10-K | 50 The Apple Inc. | 2018 Form 10-K | 50 The Company generally | 2018 Form 10-K | 50 The Company generally enters into Sheets . As of September 29 , 2018 , the net As of September 29 , 2018 , the net cash collateral collateral security arrangement wa $ 1.0 billion , which wa recorded Sheet . As of September 30 , 2017 , the net As of September 30 , 2017 , the net cash collateral collateral security arrangement wa $ 35 million , which wa recorded other . As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the potential 2018 and September 30 , 2017 , the potential effect of and derivative liability of $ 2.1 billion and $ 1.4 billion $ 2.1 billion and $ 1.4 billion , respectively , resulting net derivative asset of $ 138 million and $ 32 million $ 138 million and $ 32 million , respectively . Accounts arrangement . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . As of September % . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had two two customer that individually represented 10 % or more of total each of which accounted for 10 % . The Company ’ cellular network carrier accounted for 59 % of total trade receivables receivables a of both September 29 , 2018 and September 30 of both September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 . Vendor Non-Trade 2018 and September 30 , 2017 . Vendor Non-Trade Receivables The supplier . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 62 % and 12 % . accounted for 62 % and 12 % . As of September % . As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had three three vendor that individually represented 10 % or more of total receivables , which accounted for 42 % , 19 % and accounted for 42 % , 19 % and 10 % . % , 19 % and 10 % . Note 3 – and 10 % . Note 3 – Consolidated Financial Statement Details statement detail a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : Plant and Equipment , Net 2018 2017 Land and building $ and Equipment , Net 2018 2017 Land and building $ 16,216 2017 Land and building $ 16,216 $ 13,587 Machinery , equipment and building $ 16,216 $ 13,587 Machinery , equipment and internal-use , equipment and internal-use software 65,982 54,210 Leasehold improvement 8,205 7,279 equipment and internal-use software 65,982 54,210 Leasehold improvement 8,205 7,279 Gross software 65,982 54,210 Leasehold improvement 8,205 7,279 Gross property , plant 65,982 54,210 Leasehold improvement 8,205 7,279 Gross property , plant and property , plant and equipment 90,403 75,076 Accumulated depreciation and amortization , plant and equipment 90,403 75,076 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 49,099 ) ( 41,293 ) Total amortization ( 49,099 ) ( 41,293 ) Total property , plant and equipment , net $ 41,304 $ 33,783 Apple Inc. | , net $ 41,304 $ 33,783 Apple Inc. | 2018 Form $ 33,783 Apple Inc. | 2018 Form 10-K | 51 Other Apple Inc. | 2018 Form 10-K | 51 Other Non-Current Liabilities | 2018 Form 10-K | 51 Other Non-Current Liabilities 2018 2017 | 51 Other Non-Current Liabilities 2018 2017 Long-term tax payable $ 51 Other Non-Current Liabilities 2018 2017 Long-term tax payable $ 33,589 2017 Long-term tax payable $ 33,589 $ 257 Deferred tax liability tax payable $ 33,589 $ 257 Deferred tax liability 426 31,504 $ 257 Deferred tax liability 426 31,504 Other non-current liability 11,165 257 Deferred tax liability 426 31,504 Other non-current liability 11,165 8,654 426 31,504 Other non-current liability 11,165 8,654 Total other non-current liability 31,504 Other non-current liability 11,165 8,654 Total other non-current liability $ Total other non-current liability $ 45,180 $ 40,415 Other Income/ ( non-current liability $ 45,180 $ 40,415 Other Income/ ( Expense ) expense ) , net for 2018 , 2017 and 2016 ( , net for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Interest and dividend in million ) : 2018 2017 2016 Interest and dividend income million ) : 2018 2017 2016 Interest and dividend income $ Interest and dividend income $ 5,686 $ 5,201 $ 3,999 Interest dividend income $ 5,686 $ 5,201 $ 3,999 Interest expense ( $ 5,686 $ 5,201 $ 3,999 Interest expense ( 3,240 ) $ 3,999 Interest expense ( 3,240 ) ( 2,323 ) ( expense ( 3,240 ) ( 2,323 ) ( 1,456 ) Other ) ( 2,323 ) ( 1,456 ) Other expense , net Other expense , net ( 441 ) ( 133 ) ( net ( 441 ) ( 133 ) ( 1,195 ) Total ) ( 133 ) ( 1,195 ) Total other income/ ( expense ) , net $ 2,005 $ 2,745 $ 1,348 Note , net $ 2,005 $ 2,745 $ 1,348 Note 4 – $ 2,005 $ 2,745 $ 1,348 Note 4 – Income Taxes $ 2,745 $ 1,348 Note 4 – Income Taxes U.S. Tax and Jobs Act On December 22 , 2017 , the U.S. Act On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a for income tax by $ 1.5 billion during 2018 . This by $ 1.5 billion during 2018 . This increase wa composed increase wa composed of $ 2.0 billion related to the remeasurement asset and liability and $ 1.2 billion associated with the deemed partially offset by a $ 1.7 billion impact the deemed repatriation earnings . Of the $ 2.0 billion recognized related to the asset and liability , $ 1.2 billion is a provisional estimate Staff Accounting Bulletin No . 118 . Deemed Repatriation Tax As Repatriation Tax As of September 30 , 2017 , the Company As of September 30 , 2017 , the Company had a deferred tax liability of $ 36.4 billion for deferred foreign income deferred foreign income . During 2018 , the Company replaced $ , the Company replaced $ 36.1 billion of it U.S. deferred repatriation tax payable of $ 37.3 billion , which wa based Adoption of ASU No . 2018-02 During the second quarter of During the second quarter of 2018 , the FASB issued ASU FASB issued ASU No . 2018-02 , Income Statement – Reporting Reporting Comprehensive Income ( Topic 220 ) : Reclassification of Certain Comprehensive Income ( “ ASU 2018-02 ” ) . ASU 2018-02 2018-02 ” ) . ASU 2018-02 allows an entity to elect apply the provision of ASU 2018-02 in 2018 with a reclassification provision of ASU 2018-02 in 2018 with a reclassification of net , resulting in a $ 278 million decrease in AOCI and Equity . Apple Inc. | 2018 Form 10-K | 52 Provision Apple Inc. | 2018 Form 10-K | 52 Provision for Income | 2018 Form 10-K | 52 Provision for Income Taxes and provision for income tax for 2018 , 2017 and 2016 , income tax for 2018 , 2017 and 2016 , consisted of for 2018 , 2017 and 2016 , consisted of the following ( in million ) : 2018 2017 2016 Federal : Current in million ) : 2018 2017 2016 Federal : Current $ million ) : 2018 2017 2016 Federal : Current $ 41,425 2016 Federal : Current $ 41,425 $ 7,842 $ 7,652 Deferred : Current $ 41,425 $ 7,842 $ 7,652 Deferred ( 33,819 $ 41,425 $ 7,842 $ 7,652 Deferred ( 33,819 ) 5,980 7,842 $ 7,652 Deferred ( 33,819 ) 5,980 5,043 Total 7,606 7,652 Deferred ( 33,819 ) 5,980 5,043 Total 7,606 13,822 12,695 Deferred ( 33,819 ) 5,980 5,043 Total 7,606 13,822 12,695 State 33,819 ) 5,980 5,043 Total 7,606 13,822 12,695 State : Current ) 5,980 5,043 Total 7,606 13,822 12,695 State : Current 551 5,980 5,043 Total 7,606 13,822 12,695 State : Current 551 259 13,822 12,695 State : Current 551 259 990 Deferred 48 2 12,695 State : Current 551 259 990 Deferred 48 2 ( State : Current 551 259 990 Deferred 48 2 ( 138 Current 551 259 990 Deferred 48 2 ( 138 ) Total 551 259 990 Deferred 48 2 ( 138 ) Total 599 990 Deferred 48 2 ( 138 ) Total 599 261 852 2 ( 138 ) Total 599 261 852 Foreign : Current ( 138 ) Total 599 261 852 Foreign : Current 3,986 138 ) Total 599 261 852 Foreign : Current 3,986 1,671 261 852 Foreign : Current 3,986 1,671 2,105 Deferred 1,181 ( 852 Foreign : Current 3,986 1,671 2,105 Deferred 1,181 ( 16 Foreign : Current 3,986 1,671 2,105 Deferred 1,181 ( 16 ) Current 3,986 1,671 2,105 Deferred 1,181 ( 16 ) 33 Total 1,671 2,105 Deferred 1,181 ( 16 ) 33 Total 5,167 1,655 Deferred 1,181 ( 16 ) 33 Total 5,167 1,655 2,138 Provision ( 16 ) 33 Total 5,167 1,655 2,138 Provision for income 16 ) 33 Total 5,167 1,655 2,138 Provision for income tax ) 33 Total 5,167 1,655 2,138 Provision for income tax $ Provision for income tax $ 13,372 $ 15,738 $ 15,685 The income tax $ 13,372 $ 15,738 $ 15,685 The foreign provision $ 13,372 $ 15,738 $ 15,685 The foreign provision for income foreign pre-tax earnings of $ 48.0 billion , $ 44.7 billion $ 48.0 billion , $ 44.7 billion and $ 41.1 billion $ 44.7 billion and $ 41.1 billion in 2018 , 2017 and $ 41.1 billion in 2018 , 2017 and 2016 , 41.1 billion in 2018 , 2017 and 2016 , respectively . in 2018 , 2017 and 2016 , respectively . A reconciliation federal income tax rate ( 24.5 % in 2018 ; 35 rate ( 24.5 % in 2018 ; 35 % in 2017 24.5 % in 2018 ; 35 % in 2017 and 2016 2018 ; 35 % in 2017 and 2016 ) to income 35 % in 2017 and 2016 ) to income before provision provision for income tax for 2018 , 2017 and 2016 , income tax for 2018 , 2017 and 2016 , is a for 2018 , 2017 and 2016 , is a follows ( dollar in million ) : 2018 2017 2016 Computed expected tax in million ) : 2018 2017 2016 Computed expected tax $ million ) : 2018 2017 2016 Computed expected tax $ 17,890 2016 Computed expected tax $ 17,890 $ 22,431 $ 21,480 State expected tax $ 17,890 $ 22,431 $ 21,480 State tax , $ 17,890 $ 22,431 $ 21,480 State tax , net of , net of federal effect 271 185 553 Impacts of the net of federal effect 271 185 553 Impacts of the Act of federal effect 271 185 553 Impacts of the Act 1,515 553 Impacts of the Act 1,515 — — Earnings of foreign Earnings of foreign subsidiary ( 5,606 ) ( 6,135 ) ( subsidiary ( 5,606 ) ( 6,135 ) ( 5,582 ) Domestic ) ( 6,135 ) ( 5,582 ) Domestic production activity deduction Domestic production activity deduction ( 195 ) ( 209 ) ( deduction ( 195 ) ( 209 ) ( 382 ) Research ) ( 209 ) ( 382 ) Research and development credit development credit , net ( 560 ) ( 678 ) ( net ( 560 ) ( 678 ) ( 371 ) Other ) ( 678 ) ( 371 ) Other 57 144 ( ) ( 371 ) Other 57 144 ( 13 ) Provision ( 371 ) Other 57 144 ( 13 ) Provision for ) Other 57 144 ( 13 ) Provision for income tax Provision for income tax $ 13,372 $ 15,738 $ 15,685 Effective income tax $ 13,372 $ 15,738 $ 15,685 Effective tax rate $ 13,372 $ 15,738 $ 15,685 Effective tax rate 18.3 % $ 15,685 Effective tax rate 18.3 % 24.6 % 25.6 % Effective tax rate 18.3 % 24.6 % 25.6 % The Company rate 18.3 % 24.6 % 25.6 % The Company ’ s . Prior to adopting ASU 2016-09 in the first quarter of in the first quarter of 2018 , the Company reflected net , which amounted to $ 620 million and $ 379 million $ 620 million and $ 379 million in 2017 and 2016 and $ 379 million in 2017 and 2016 , respectively . 379 million in 2017 and 2016 , respectively . Refer to respectively . Refer to Note 1 , “ Summary of Significant information . Apple Inc. | 2018 Form 10-K | 53 Deferred Apple Inc. | 2018 Form 10-K | 53 Deferred Tax Assets | 2018 Form 10-K | 53 Deferred Tax Assets and Liabilities and Liabilities As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the significant 2018 and September 30 , 2017 , the significant component of ( in million ) : 2018 2017 Deferred tax asset : in million ) : 2018 2017 Deferred tax asset : Accrued liability and other reserve $ 3,151 $ 4,019 Basis of capital other reserve $ 3,151 $ 4,019 Basis of capital asset 137 4,019 Basis of capital asset 137 1,230 Deferred revenue 1,141 1,521 Basis of capital asset 137 1,230 Deferred revenue 1,141 1,521 Deferred asset 137 1,230 Deferred revenue 1,141 1,521 Deferred cost sharing — 137 1,230 Deferred revenue 1,141 1,521 Deferred cost sharing — 667 1,521 Deferred cost sharing — 667 Share-based compensation 513 703 Unrealized sharing — 667 Share-based compensation 513 703 Unrealized loss 871 — — 667 Share-based compensation 513 703 Unrealized loss 871 — Other compensation 513 703 Unrealized loss 871 — Other 797 834 Total Unrealized loss 871 — Other 797 834 Total deferred tax asset loss 871 — Other 797 834 Total deferred tax asset 6,610 834 Total deferred tax asset 6,610 8,974 Deferred tax liability : Total deferred tax asset 6,610 8,974 Deferred tax liability : Earnings : Earnings of foreign subsidiary 275 36,355 Other 501 207 Total Earnings of foreign subsidiary 275 36,355 Other 501 207 Total deferred foreign subsidiary 275 36,355 Other 501 207 Total deferred tax liability subsidiary 275 36,355 Other 501 207 Total deferred tax liability 776 207 Total deferred tax liability 776 36,562 Net deferred tax assets/ Total deferred tax liability 776 36,562 Net deferred tax assets/ ( assets/ ( liability ) $ 5,834 $ ( 27,588 ) Deferred ) $ 5,834 $ ( 27,588 ) Deferred tax asset and Tax Positions As of September 29 , 2018 , the total As of September 29 , 2018 , the total amount of unrecognized tax benefit wa $ 9.7 billion , of which $ billion , of which $ 7.4 billion , if recognized , rate . As of September 30 , 2017 , the total As of September 30 , 2017 , the total amount of unrecognized tax benefit wa $ 8.4 billion , of which $ billion , of which $ 2.5 billion , if recognized , interest and penalty , for 2018 , 2017 and 2016 , penalty , for 2018 , 2017 and 2016 , is a for 2018 , 2017 and 2016 , is a follows ( ( in million ) : 2018 2017 2016 Beginning balance $ in million ) : 2018 2017 2016 Beginning balance $ 8,407 million ) : 2018 2017 2016 Beginning balance $ 8,407 $ 2017 2016 Beginning balance $ 8,407 $ 7,724 $ 6,900 Increases Beginning balance $ 8,407 $ 7,724 $ 6,900 Increases related to $ 8,407 $ 7,724 $ 6,900 Increases related to tax position taken during a prior year 2,431 333 1,121 Decreases related to during a prior year 2,431 333 1,121 Decreases related to tax a prior year 2,431 333 1,121 Decreases related to tax position during a prior year ( 2,212 ) ( 952 ) ( year ( 2,212 ) ( 952 ) ( 257 ) Increases ) ( 952 ) ( 257 ) Increases related to tax taken during the current year 1,824 1,880 1,578 Decreases related to during the current year 1,824 1,880 1,578 Decreases related to settlement the current year 1,824 1,880 1,578 Decreases related to settlement with settlement with taxing authority ( 756 ) ( 539 ) ( authority ( 756 ) ( 539 ) ( 1,618 ) Decreases ) ( 539 ) ( 1,618 ) Decreases related to expiration statute of limitation — ( 39 ) — Ending balance $ ) — Ending balance $ 9,694 $ 8,407 $ 7,724 The Ending balance $ 9,694 $ 8,407 $ 7,724 The Company includes $ 9,694 $ 8,407 $ 7,724 The Company includes interest and tax . As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the total 2018 and September 30 , 2017 , the total amount of and penalty accrued wa $ 1.4 billion and $ 1.2 billion $ 1.4 billion and $ 1.2 billion , respectively . Both interest and penalty expense in 2018 , 2017 and 2016 of penalty expense in 2018 , 2017 and 2016 of $ 236 in 2018 , 2017 and 2016 of $ 236 million , 2017 and 2016 of $ 236 million , $ 165 million $ 236 million , $ 165 million and $ 295 million $ 165 million and $ 295 million , respectively . Apple respectively . Apple Inc. | 2018 Form 10-K | 54 The Apple Inc. | 2018 Form 10-K | 54 The Company is | 2018 Form 10-K | 54 The Company is subject to it review of the year 2013 through 2015 in 2018 , of the year 2013 through 2015 in 2018 , and all year 2013 through 2015 in 2018 , and all year prior and all year prior to 2016 are closed . Tax year . Tax year subsequent to 2006 in certain major U.S. state U.S. state and subsequent to 2007 in certain major foreign jurisdiction both ) in the next 12 month by a much a by a much a $ 800 million . European Commission State State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . The period June 2003 through December 2014 . The recovery amount wa , effective a of January 2015 , eliminated the application of Act . As of September 29 , 2018 , the entire As of September 29 , 2018 , the entire recovery amount appeal . Refer to Note 2 , “ Financial Instruments ” for more information . Note 5 – Debt Commercial Paper The . As of both September 29 , 2018 and September 30 of both September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the Company 2018 and September 30 , 2017 , the Company had $ , the Company had $ 12.0 billion of Commercial Paper outstanding ’ s Commercial Paper wa 2.18 % a of September 29 2.18 % a of September 29 , 2018 and 1.20 % a of September 29 , 2018 and 1.20 % a of September 29 , 2018 and 1.20 % a of September 30 1.20 % a of September 30 , 2017 . The following a of September 30 , 2017 . The following table provides maturity of Commercial Paper for 2018 , 2017 and 2016 ( Commercial Paper for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Maturities 90 day in million ) : 2018 2017 2016 Maturities 90 day or million ) : 2018 2017 2016 Maturities 90 day or le : 2018 2017 2016 Maturities 90 day or le : Proceeds commercial paper , net $ 1,044 $ ( 1,782 ) $ net $ 1,044 $ ( 1,782 ) $ ( 869 ) ( 1,782 ) $ ( 869 ) Maturities greater than 90 869 ) Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 14,555 17,932 3,632 Repayments of commercial Proceeds from commercial paper 14,555 17,932 3,632 Repayments of commercial paper from commercial paper 14,555 17,932 3,632 Repayments of commercial paper ( Repayments of commercial paper ( 15,636 ) ( 12,298 ) ( paper ( 15,636 ) ( 12,298 ) ( 3,160 ) Proceeds ) ( 12,298 ) ( 3,160 ) Proceeds from/ ( Repayments commercial paper , net ( 1,081 ) 5,634 472 Total change , net ( 1,081 ) 5,634 472 Total change in commercial net ( 1,081 ) 5,634 472 Total change in commercial paper paper , net $ ( 37 ) $ 3,852 $ ( $ ( 37 ) $ 3,852 $ ( 397 ) Apple ) $ 3,852 $ ( 397 ) Apple Inc. | 2018 397 ) Apple Inc. | 2018 Form 10-K | 55 Term Apple Inc. | 2018 Form 10-K | 55 Term Debt As | 2018 Form 10-K | 55 Term Debt As of September Term Debt As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had outstanding aggregate principal amount of $ 104.2 billion ( collectively the “ term debt a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 : Maturities ( 2018 and September 30 , 2017 : Maturities ( calendar year Maturities ( calendar year ) 2018 2017 Amount ( in million ( calendar year ) 2018 2017 Amount ( in million ) million ) Effective Interest Rate 2013 debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note — $ — — % $ 2,000 1.10 % Fixed-rate 2.400 % — — % $ 2,000 1.10 % Fixed-rate 2.400 % – $ 2,000 1.10 % Fixed-rate 2.400 % – 3.850 % note % Fixed-rate 2.400 % – 3.850 % note 2023 – 2043 % – 3.850 % note 2023 – 2043 8,500 2.44 % 3.850 % note 2023 – 2043 8,500 2.44 % – 3.91 % note 2023 – 2043 8,500 2.44 % – 3.91 % note 2023 – 2043 8,500 2.44 % – 3.91 % 12,500 2043 8,500 2.44 % – 3.91 % 12,500 1.08 % – 2.44 % – 3.91 % 12,500 1.08 % – 3.91 % % – 3.91 % 12,500 1.08 % – 3.91 % 2014 % 12,500 1.08 % – 3.91 % 2014 debt issuance of 1.08 % – 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2019 12.0 billion : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 billion : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 % : Floating-rate note 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate note 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate 2.100 % 2019 1,000 2.64 % 1,000 1.61 % Fixed-rate 2.100 % – % 1,000 1.61 % Fixed-rate 2.100 % – 4.450 % note % Fixed-rate 2.100 % – 4.450 % note 2019 – 2044 % – 4.450 % note 2019 – 2044 8,500 2.64 % 4.450 % note 2019 – 2044 8,500 2.64 % – 4.48 % note 2019 – 2044 8,500 2.64 % – 4.48 % note 2019 – 2044 8,500 2.64 % – 4.48 % 8,500 2044 8,500 2.64 % – 4.48 % 8,500 1.61 % – 2.64 % – 4.48 % 8,500 1.61 % – 4.48 % % – 4.48 % 8,500 1.61 % – 4.48 % 2015 % 8,500 1.61 % – 4.48 % 2015 debt issuance of 1.61 % – 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2019 27.3 billion : Floating-rate note 2019 – 2020 1,507 1.87 % : Floating-rate note 2019 – 2020 1,507 1.87 % – 2.64 Floating-rate note 2019 – 2020 1,507 1.87 % – 2.64 % note 2019 – 2020 1,507 1.87 % – 2.64 % 1,549 2020 1,507 1.87 % – 2.64 % 1,549 1.56 % – 1.87 % – 2.64 % 1,549 1.56 % – 1.87 % % – 2.64 % 1,549 1.56 % – 1.87 % Fixed-rate % 1,549 1.56 % – 1.87 % Fixed-rate 0.350 % – % – 1.87 % Fixed-rate 0.350 % – 4.375 % note % Fixed-rate 0.350 % – 4.375 % note 2019 – 2045 % – 4.375 % note 2019 – 2045 24,410 0.28 % 4.375 % note 2019 – 2045 24,410 0.28 % – 4.51 % note 2019 – 2045 24,410 0.28 % – 4.51 % note 2019 – 2045 24,410 0.28 % – 4.51 % 24,522 2045 24,410 0.28 % – 4.51 % 24,522 0.28 % – 0.28 % – 4.51 % 24,522 0.28 % – 4.51 % % – 4.51 % 24,522 0.28 % – 4.51 % 2016 % 24,522 0.28 % – 4.51 % 2016 debt issuance of 0.28 % – 4.51 % 2016 debt issuance of $ 24.9 2016 debt issuance of $ 24.9 billion : Floating-rate note 2019 24.9 billion : Floating-rate note 2019 – 2021 1,350 2.48 % : Floating-rate note 2019 – 2021 1,350 2.48 % – 3.44 Floating-rate note 2019 – 2021 1,350 2.48 % – 3.44 % note 2019 – 2021 1,350 2.48 % – 3.44 % 1,350 2021 1,350 2.48 % – 3.44 % 1,350 1.45 % – 2.48 % – 3.44 % 1,350 1.45 % – 2.44 % % – 3.44 % 1,350 1.45 % – 2.44 % Fixed-rate % 1,350 1.45 % – 2.44 % Fixed-rate 1.100 % – % – 2.44 % Fixed-rate 1.100 % – 4.650 % note % Fixed-rate 1.100 % – 4.650 % note 2019 – 2046 % – 4.650 % note 2019 – 2046 23,059 1.13 % 4.650 % note 2019 – 2046 23,059 1.13 % – 4.78 % note 2019 – 2046 23,059 1.13 % – 4.78 % note 2019 – 2046 23,059 1.13 % – 4.78 % 23,645 2046 23,059 1.13 % – 4.78 % 23,645 1.13 % – 1.13 % – 4.78 % 23,645 1.13 % – 4.78 % % – 4.78 % 23,645 1.13 % – 4.78 % 2017 % 23,645 1.13 % – 4.78 % 2017 debt issuance of 1.13 % – 4.78 % 2017 debt issuance of $ 28.7 2017 debt issuance of $ 28.7 billion : Floating-rate note 2019 28.7 billion : Floating-rate note 2019 – 2022 3,250 2.41 % : Floating-rate note 2019 – 2022 3,250 2.41 % – 2.84 Floating-rate note 2019 – 2022 3,250 2.41 % – 2.84 % note 2019 – 2022 3,250 2.41 % – 2.84 % 3,250 2022 3,250 2.41 % – 2.84 % 3,250 1.38 % – 2.41 % – 2.84 % 3,250 1.38 % – 1.81 % % – 2.84 % 3,250 1.38 % – 1.81 % Fixed-rate % 3,250 1.38 % – 1.81 % Fixed-rate 0.875 % – % – 1.81 % Fixed-rate 0.875 % – 4.300 % note % Fixed-rate 0.875 % – 4.300 % note 2019 – 2047 % – 4.300 % note 2019 – 2047 25,617 1.54 % 4.300 % note 2019 – 2047 25,617 1.54 % – 4.30 % note 2019 – 2047 25,617 1.54 % – 4.30 % note 2019 – 2047 25,617 1.54 % – 4.30 % 25,705 2047 25,617 1.54 % – 4.30 % 25,705 1.51 % – 1.54 % – 4.30 % 25,705 1.51 % – 4.30 % % – 4.30 % 25,705 1.51 % – 4.30 % First % 25,705 1.51 % – 4.30 % First quarter 2018 debt – 4.30 % First quarter 2018 debt issuance of $ 7.0 2018 debt issuance of $ 7.0 billion : Fixed-rate 1.800 % $ 7.0 billion : Fixed-rate 1.800 % note 2019 1,000 1.83 : Fixed-rate 1.800 % note 2019 1,000 1.83 % — — Fixed-rate 1.800 % note 2019 1,000 1.83 % — — % 1.800 % note 2019 1,000 1.83 % — — % Fixed-rate % — — % Fixed-rate 2.000 % note 2020 1,000 2.03 % Fixed-rate 2.000 % note 2020 1,000 2.03 % — — Fixed-rate 2.000 % note 2020 1,000 2.03 % — — % 2.000 % note 2020 1,000 2.03 % — — % Fixed-rate % — — % Fixed-rate 2.400 % note 2023 750 2.66 % Fixed-rate 2.400 % note 2023 750 2.66 % — — Fixed-rate 2.400 % note 2023 750 2.66 % — — % 2.400 % note 2023 750 2.66 % — — % Fixed-rate % — — % Fixed-rate 2.750 % note 2025 1,500 2.77 % Fixed-rate 2.750 % note 2025 1,500 2.77 % — — Fixed-rate 2.750 % note 2025 1,500 2.77 % — — % 2.750 % note 2025 1,500 2.77 % — — % Fixed-rate % — — % Fixed-rate 3.000 % note 2027 1,500 3.05 % Fixed-rate 3.000 % note 2027 1,500 3.05 % — — Fixed-rate 3.000 % note 2027 1,500 3.05 % — — % 3.000 % note 2027 1,500 3.05 % — — % Fixed-rate % — — % Fixed-rate 3.750 % note 2047 1,250 3.80 % Fixed-rate 3.750 % note 2047 1,250 3.80 % — — Fixed-rate 3.750 % note 2047 1,250 3.80 % — — % 3.750 % note 2047 1,250 3.80 % — — % Total — % Total term debt 104,193 104,021 Unamortized premium/ ( discount % Total term debt 104,193 104,021 Unamortized premium/ ( discount ) issuance cost , net ( 218 ) ( 225 ) Hedge net ( 218 ) ( 225 ) Hedge accounting fair value accounting fair value adjustment ( 1,456 ) ( 93 ) Less adjustment ( 1,456 ) ( 93 ) Less : Current portion portion of term debt ( 8,784 ) ( 6,496 ) Total debt ( 8,784 ) ( 6,496 ) Total non-current portion of portion of term debt $ 93,735 $ 97,207 To manage interest term debt $ 93,735 $ 97,207 To manage interest rate risk operation . As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the carrying 2018 and September 30 , 2017 , the carrying value of net investment hedge wa $ 811 million and $ 1.6 billion $ 811 million and $ 1.6 billion , respectively . For Financial Instruments section of Note 2 , “ Financial Instruments . . The Company recognized $ 3.0 billion , $ 2.2 billion $ 3.0 billion , $ 2.2 billion and $ 1.4 billion $ 2.2 billion and $ 1.4 billion of interest expense on on it term debt for 2018 , 2017 and 2016 , term debt for 2018 , 2017 and 2016 , respectively . for 2018 , 2017 and 2016 , respectively . Apple Inc. respectively . Apple Inc. | 2018 Form 10-K | 56 The Apple Inc. | 2018 Form 10-K | 56 The future principal | 2018 Form 10-K | 56 The future principal payment for s Notes a of September 29 , 2018 are a follows a of September 29 , 2018 are a follows ( in ( in million ) : 2019 $ 8,797 2020 10,183 2021 million ) : 2019 $ 8,797 2020 10,183 2021 8,750 2022 ) : 2019 $ 8,797 2020 10,183 2021 8,750 2022 8,583 : 2019 $ 8,797 2020 10,183 2021 8,750 2022 8,583 2023 2019 $ 8,797 2020 10,183 2021 8,750 2022 8,583 2023 9,395 $ 8,797 2020 10,183 2021 8,750 2022 8,583 2023 9,395 Thereafter 8,797 2020 10,183 2021 8,750 2022 8,583 2023 9,395 Thereafter 58,485 2020 10,183 2021 8,750 2022 8,583 2023 9,395 Thereafter 58,485 Total 10,183 2021 8,750 2022 8,583 2023 9,395 Thereafter 58,485 Total term 2021 8,750 2022 8,583 2023 9,395 Thereafter 58,485 Total term debt 2022 8,583 2023 9,395 Thereafter 58,485 Total term debt $ 104,193 58,485 Total term debt $ 104,193 As of September 29 , $ 104,193 As of September 29 , 2018 and September 30 As of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , the fair 2018 and September 30 , 2017 , the fair value of Notes , based on Level 2 input , wa $ 103.2 2 input , wa $ 103.2 billion and $ 106.1 billion $ 103.2 billion and $ 106.1 billion , respectively . Note billion , respectively . Note 6 – Shareholders ’ Equity Share Equity Share Repurchase Program During 2018 , the Company repurchased 405.5 2018 , the Company repurchased 405.5 million share of it common it common stock for $ 73.1 billion in connection with two program . Of the $ 73.1 billion , $ 44.0 billion $ 73.1 billion , $ 44.0 billion wa repurchased under the program of up to $ 210 billion , thereby completing that that program . On May 1 , 2018 , the Company . On May 1 , 2018 , the Company announced the to repurchase up to $ 100 billion of the Company ’ stock . The remaining $ 29.0 billion repurchased during 2018 wa $ 29.0 billion repurchased during 2018 wa in connection with the under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the Act ” ) . Note 7 – Comprehensive Income The Company statement line item , for 2018 and 2017 ( in million item , for 2018 and 2017 ( in million ) : Components Financial Statement Line Item 2018 2017 Unrealized ( gain ) Financial Statement Line Item 2018 2017 Unrealized ( gain ) /losses exchange contract Net sale $ 214 $ ( 662 ) Cost sale $ 214 $ ( 662 ) Cost of sale ( ) Cost of sale ( 70 ) ( 654 ) Other sale ( 70 ) ( 654 ) Other income/ ( expense ( expense ) , net 344 ( 638 ) Interest rate ) , net 344 ( 638 ) Interest rate contract Other expense ) , net ( 2 ) 2 486 ( 1,952 , net ( 2 ) 2 486 ( 1,952 ) Unrealized net ( 2 ) 2 486 ( 1,952 ) Unrealized ( 2 ) 2 486 ( 1,952 ) Unrealized ( gain ) expense ) , net ( 20 ) ( 99 ) Total net ( 20 ) ( 99 ) Total amount reclassified from amount reclassified from AOCI $ 466 $ ( 2,051 ) Apple AOCI $ 466 $ ( 2,051 ) Apple Inc. | 2018 2,051 ) Apple Inc. | 2018 Form 10-K | 57 The Apple Inc. | 2018 Form 10-K | 57 The following table | 2018 Form 10-K | 57 The following table show the in AOCI by component for 2018 and 2017 ( in million by component for 2018 and 2017 ( in million ) : Total Balances a of September 24 , 2016 $ ( 578 a of September 24 , 2016 $ ( 578 ) $ 24 , 2016 $ ( 578 ) $ 38 $ 1,174 $ ( 578 ) $ 38 $ 1,174 $ 634 Other 578 ) $ 38 $ 1,174 $ 634 Other comprehensive income/ $ 38 $ 1,174 $ 634 Other comprehensive income/ ( loss ( loss ) before reclassification 301 1,793 ( 1,207 ) 887 loss ) before reclassification 301 1,793 ( 1,207 ) 887 Amounts before reclassification 301 1,793 ( 1,207 ) 887 Amounts reclassified from 301 1,793 ( 1,207 ) 887 Amounts reclassified from AOCI — reclassified from AOCI — ( 1,952 ) ( 99 ) ( — ( 1,952 ) ( 99 ) ( 2,051 ) Tax ) ( 99 ) ( 2,051 ) Tax effect ( 77 2,051 ) Tax effect ( 77 ) ( 3 ) 460 effect ( 77 ) ( 3 ) 460 380 Other comprehensive 77 ) ( 3 ) 460 380 Other comprehensive income/ ( ) ( 3 ) 460 380 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 224 ( 162 ) ( 846 ( loss ) 224 ( 162 ) ( 846 ) ( 224 ( 162 ) ( 846 ) ( 784 ) Balances ) ( 846 ) ( 784 ) Balances a of September ) Balances a of September 30 , 2017 ( 354 ) a of September 30 , 2017 ( 354 ) ( 124 September 30 , 2017 ( 354 ) ( 124 ) 328 2017 ( 354 ) ( 124 ) 328 ( 150 ) 354 ) ( 124 ) 328 ( 150 ) Other comprehensive ( 124 ) 328 ( 150 ) Other comprehensive income/ ( loss ) before reclassification ( 524 ) 672 ( 4,563 ) before reclassification ( 524 ) 672 ( 4,563 ) ( 4,415 ( 524 ) 672 ( 4,563 ) ( 4,415 ) Amounts 672 ( 4,563 ) ( 4,415 ) Amounts reclassified from AOCI Amounts reclassified from AOCI — 486 ( 20 ) 466 Tax from AOCI — 486 ( 20 ) 466 Tax effect ( — 486 ( 20 ) 466 Tax effect ( 1 ) ) 466 Tax effect ( 1 ) ( 253 ) 1,177 effect ( 1 ) ( 253 ) 1,177 923 Other comprehensive 1 ) ( 253 ) 1,177 923 Other comprehensive income/ ( ) ( 253 ) 1,177 923 Other comprehensive income/ ( loss income/ ( loss ) ( 525 ) 905 ( 3,406 ) loss ) ( 525 ) 905 ( 3,406 ) ( 3,026 ( 525 ) 905 ( 3,406 ) ( 3,026 ) Cumulative 905 ( 3,406 ) ( 3,026 ) Cumulative effect of change change in accounting principle ( 1 ) ( 176 ) 29 principle ( 1 ) ( 176 ) 29 ( 131 ) 1 ) ( 176 ) 29 ( 131 ) ( 278 ( 176 ) 29 ( 131 ) ( 278 ) Balances 29 ( 131 ) ( 278 ) Balances a of September ) Balances a of September 29 , 2018 $ ( 1,055 a of September 29 , 2018 $ ( 1,055 ) $ 29 , 2018 $ ( 1,055 ) $ 810 $ ( $ ( 1,055 ) $ 810 $ ( 3,209 ) $ ) $ 810 $ ( 3,209 ) $ ( 3,454 ) ( 3,209 ) $ ( 3,454 ) ( 1 ) Refer $ ( 3,454 ) ( 1 ) Refer to Note 4 1 ) Refer to Note 4 , “ Income Taxes ” ’ s adoption of ASU 2018-02 in 2018 . Note 8 adoption of ASU 2018-02 in 2018 . Note 8 – Benefit 2018-02 in 2018 . Note 8 – Benefit Plans 2014 Employee Note 8 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 29 , 2018 , approximately 280.2 As of September 29 , 2018 , approximately 280.2 million share 29 , 2018 , approximately 280.2 million share were reserved for for future issuance under the 2014 Plan . Apple Inc. Non-Employee The Director Plan expires November 12 , 2027 . All RSUs Plan expires November 12 , 2027 . All RSUs granted under vest . As of September 29 , 2018 , approximately 1.1 As of September 29 , 2018 , approximately 1.1 million share 29 , 2018 , approximately 1.1 million share were reserved for Plan . Apple Inc. | 2018 Form 10-K | 58 Rule Apple Inc. | 2018 Form 10-K | 58 Rule 10b5-1 Trading | 2018 Form 10-K | 58 Rule 10b5-1 Trading Plans During Form 10-K | 58 Rule 10b5-1 Trading Plans During the three the three month ended September 29 , 2018 , Section 16 month ended September 29 , 2018 , Section 16 officer Angela 29 , 2018 , Section 16 officer Angela Ahrendts , Timothy place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 29 , 2018 , approximately 36.5 As of September 29 , 2018 , approximately 36.5 million share 29 , 2018 , approximately 36.5 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,500 for calendar year 2018 ) $ 18,500 for calendar year 2018 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ activity and related information for 2018 , 2017 and 2016 , related information for 2018 , 2017 and 2016 , is a for 2018 , 2017 and 2016 , is a follows : ) Balance a of September 26 , 2015 101,467 $ 85.77 a of September 26 , 2015 101,467 $ 85.77 RSUs granted of September 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 46,313 ) $ 109.28 RSUs vested ( 46,313 ) $ 84.44 RSUs canceled vested ( 46,313 ) $ 84.44 RSUs canceled ( 5,533 ) $ 84.44 RSUs canceled ( 5,533 ) $ 96.48 Balance a canceled ( 5,533 ) $ 96.48 Balance a of September 24 96.48 Balance a of September 24 , 2016 99,089 $ 97.54 a of September 24 , 2016 99,089 $ 97.54 RSUs granted of September 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 45,735 ) $ 121.65 RSUs vested ( 45,735 ) $ 95.48 RSUs canceled vested ( 45,735 ) $ 95.48 RSUs canceled ( 5,895 ) $ 95.48 RSUs canceled ( 5,895 ) $ 106.87 Balance a canceled ( 5,895 ) $ 106.87 Balance a of September 30 106.87 Balance a of September 30 , 2017 97,571 $ 110.33 a of September 30 , 2017 97,571 $ 110.33 RSUs granted of September 30 , 2017 97,571 $ 110.33 RSUs granted 45,351 30 , 2017 97,571 $ 110.33 RSUs granted 45,351 $ 162.86 97,571 $ 110.33 RSUs granted 45,351 $ 162.86 RSUs vested ( 110.33 RSUs granted 45,351 $ 162.86 RSUs vested ( 44,718 ) $ 162.86 RSUs vested ( 44,718 ) $ 111.24 RSUs canceled vested ( 44,718 ) $ 111.24 RSUs canceled ( 6,049 ) $ 111.24 RSUs canceled ( 6,049 ) $ 127.82 Balance a canceled ( 6,049 ) $ 127.82 Balance a of September 29 127.82 Balance a of September 29 , 2018 92,155 $ 134.60 a of September 29 , 2018 92,155 $ 134.60 $ 20,803 of September 29 , 2018 92,155 $ 134.60 $ 20,803 The 29 , 2018 92,155 $ 134.60 $ 20,803 The fair value 2018 92,155 $ 134.60 $ 20,803 The fair value a of date of RSUs wa $ 7.6 billion , $ 6.1 billion $ 7.6 billion , $ 6.1 billion and $ 5.1 billion $ 6.1 billion and $ 5.1 billion for 2018 , 2017 and $ 5.1 billion for 2018 , 2017 and 2016 , 5.1 billion for 2018 , 2017 and 2016 , respectively . for 2018 , 2017 and 2016 , respectively . The majority of RSUs that vested in 2018 , 2017 and 2016 were that vested in 2018 , 2017 and 2016 were net share in 2018 , 2017 and 2016 were net share settled such total share withheld were approximately 16.0 million , 15.4 million and were approximately 16.0 million , 15.4 million and 15.9 million for million , 15.4 million and 15.9 million for 2018 , 2017 million and 15.9 million for 2018 , 2017 and 2016 , 15.9 million for 2018 , 2017 and 2016 , respectively , for 2018 , 2017 and 2016 , respectively , and were to taxing authority were $ 2.7 billion , $ 2.0 billion $ 2.7 billion , $ 2.0 billion and $ 1.7 billion $ 2.0 billion and $ 1.7 billion in 2018 , 2017 and $ 1.7 billion in 2018 , 2017 and 2016 , 1.7 billion in 2018 , 2017 and 2016 , respectively , in 2018 , 2017 and 2016 , respectively , and are Company . Apple Inc. | 2018 Form 10-K | 59 Share-Based Apple Inc. | 2018 Form 10-K | 59 Share-Based Compensation The | 2018 Form 10-K | 59 Share-Based Compensation The following table Consolidated Statements of Operations for 2018 , 2017 and 2016 ( of Operations for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Cost of sale in million ) : 2018 2017 2016 Cost of sale $ million ) : 2018 2017 2016 Cost of sale $ 1,010 2016 Cost of sale $ 1,010 $ 877 $ 769 Research of sale $ 1,010 $ 877 $ 769 Research and development $ 1,010 $ 877 $ 769 Research and development 2,668 2,299 $ 769 Research and development 2,668 2,299 1,889 Selling , general 769 Research and development 2,668 2,299 1,889 Selling , general and Research and development 2,668 2,299 1,889 Selling , general and administrative Selling , general and administrative 1,662 1,664 1,552 Total share-based compensation , general and administrative 1,662 1,664 1,552 Total share-based compensation expense general and administrative 1,662 1,664 1,552 Total share-based compensation expense $ Total share-based compensation expense $ 5,340 $ 4,840 $ 4,210 The compensation expense $ 5,340 $ 4,840 $ 4,210 The income tax $ 5,340 $ 4,840 $ 4,210 The income tax benefit related share-based compensation expense wa $ 1.9 billion , $ 1.6 billion $ 1.9 billion , $ 1.6 billion and $ 1.4 billion $ 1.6 billion and $ 1.4 billion for 2018 , 2017 and $ 1.4 billion for 2018 , 2017 and 2016 , 1.4 billion for 2018 , 2017 and 2016 , respectively . for 2018 , 2017 and 2016 , respectively . As of respectively . As of September 29 , 2018 , the total As of September 29 , 2018 , the total unrecognized compensation and stock option wa $ 9.4 billion , which the Company over a weighted-average period of 2.5 year . Note 9 – of 2.5 year . Note 9 – Commitments and Contingencies Accrued warranty and related cost for 2018 , 2017 and 2016 ( related cost for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Beginning accrued warranty in million ) : 2018 2017 2016 Beginning accrued warranty and million ) : 2018 2017 2016 Beginning accrued warranty and related warranty and related cost $ 3,834 $ 3,702 $ 4,780 Cost related cost $ 3,834 $ 3,702 $ 4,780 Cost of warranty $ 3,834 $ 3,702 $ 4,780 Cost of warranty claim ( Cost of warranty claim ( 4,115 ) ( 4,322 ) ( claim ( 4,115 ) ( 4,322 ) ( 4,663 ) Accruals ) ( 4,322 ) ( 4,663 ) Accruals for product warranty ) Accruals for product warranty 3,973 4,454 3,585 Ending accrued warranty Accruals for product warranty 3,973 4,454 3,585 Ending accrued warranty and for product warranty 3,973 4,454 3,585 Ending accrued warranty and related warranty and related cost $ 3,692 $ 3,834 $ 3,702 Agreements related cost $ 3,692 $ 3,834 $ 3,702 Agreements entered into $ 3,692 $ 3,834 $ 3,702 Agreements entered into by the result . Apple Inc. | 2018 Form 10-K | 60 The Apple Inc. | 2018 Form 10-K | 60 The Company us | 2018 Form 10-K | 60 The Company us some custom requirement for period up to 150 day . Other Off–Balance Sheet arrangement . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company ’ s noncancelable operating lease were $ 9.6 billion . The Company ’ have original term not exceeding 10 year and generally contain multi-year noncancelable lease , wa $ 1.2 billion , $ 1.1 billion $ 1.2 billion , $ 1.1 billion and $ 939 million $ 1.1 billion and $ 939 million in 2018 , 2017 and $ 939 million in 2018 , 2017 and 2016 , 939 million in 2018 , 2017 and 2016 , respectively . in 2018 , 2017 and 2016 , respectively . Future minimum one year a of September 29 , 2018 , are a a of September 29 , 2018 , are a follows ( ( in million ) : 2019 $ 1,298 2020 1,289 2021 million ) : 2019 $ 1,298 2020 1,289 2021 1,218 2022 ) : 2019 $ 1,298 2020 1,289 2021 1,218 2022 1,038 : 2019 $ 1,298 2020 1,289 2021 1,218 2022 1,038 2023 2019 $ 1,298 2020 1,289 2021 1,218 2022 1,038 2023 800 $ 1,298 2020 1,289 2021 1,218 2022 1,038 2023 800 Thereafter 1,298 2020 1,289 2021 1,218 2022 1,038 2023 800 Thereafter 3,984 2020 1,289 2021 1,218 2022 1,038 2023 800 Thereafter 3,984 Total 1,289 2021 1,218 2022 1,038 2023 800 Thereafter 3,984 Total $ 2021 1,218 2022 1,038 2023 800 Thereafter 3,984 Total $ 9,627 2022 1,038 2023 800 Thereafter 3,984 Total $ 9,627 Unconditional Purchase 800 Thereafter 3,984 Total $ 9,627 Unconditional Purchase Obligations The Company one year a of September 29 , 2018 , are a a of September 29 , 2018 , are a follows ( ( in million ) : 2019 $ 2,447 2020 3,202 2021 million ) : 2019 $ 2,447 2020 3,202 2021 1,749 2022 ) : 2019 $ 2,447 2020 3,202 2021 1,749 2022 1,596 : 2019 $ 2,447 2020 3,202 2021 1,749 2022 1,596 2023 2019 $ 2,447 2020 3,202 2021 1,749 2022 1,596 2023 268 $ 2,447 2020 3,202 2021 1,749 2022 1,596 2023 268 Thereafter 2,447 2020 3,202 2021 1,749 2022 1,596 2023 268 Thereafter 66 2020 3,202 2021 1,749 2022 1,596 2023 268 Thereafter 66 Total 3,202 2021 1,749 2022 1,596 2023 268 Thereafter 66 Total $ 2021 1,749 2022 1,596 2023 268 Thereafter 66 Total $ 9,328 2022 1,596 2023 268 Thereafter 66 Total $ 9,328 Apple Inc. 268 Thereafter 66 Total $ 9,328 Apple Inc. | 2018 Form $ 9,328 Apple Inc. | 2018 Form 10-K | 61 Contingencies Apple Inc. | 2018 Form 10-K | 61 Contingencies The Company | 2018 Form 10-K | 61 Contingencies The Company is subject in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal ” ) . On September 30 , 2016 , a jury . On September 30 , 2016 , a jury returned a and awarded damage of $ 302 million , which later increased which later increased to $ 440 million in post-trial proceeding . ” ) . On April 11 , 2018 , a jury . On April 11 , 2018 , a jury returned a and awarded damage of $ 503 million . VirnetX II is merit . Qualcomm On January 20 , 2017 , the Company Qualcomm On January 20 , 2017 , the Company filed a of the second quarter of 2017 . The Company belief it of this matter . Note 10 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant purpose . Apple Inc. | 2018 Form 10-K | 62 The Apple Inc. | 2018 Form 10-K | 62 The following table | 2018 Form 10-K | 62 The following table show information information by reportable segment for 2018 , 2017 and 2016 ( reportable segment for 2018 , 2017 and 2016 ( in million for 2018 , 2017 and 2016 ( in million ) : ( in million ) : 2018 2017 2016 Americas : Net in million ) : 2018 2017 2016 Americas : Net sale million ) : 2018 2017 2016 Americas : Net sale $ Americas : Net sale $ 112,093 $ 96,600 $ 86,613 Operating Net sale $ 112,093 $ 96,600 $ 86,613 Operating income $ $ 112,093 $ 96,600 $ 86,613 Operating income $ 34,864 $ $ 86,613 Operating income $ 34,864 $ 30,684 $ 28,172 Europe Operating income $ 34,864 $ 30,684 $ 28,172 Europe : Net $ 34,864 $ 30,684 $ 28,172 Europe : Net sale $ Europe : Net sale $ 62,420 $ 54,938 $ 49,952 Operating Net sale $ 62,420 $ 54,938 $ 49,952 Operating income $ $ 62,420 $ 54,938 $ 49,952 Operating income $ 19,955 $ $ 49,952 Operating income $ 19,955 $ 16,514 $ 15,348 Greater Operating income $ 19,955 $ 16,514 $ 15,348 Greater China : $ 19,955 $ 16,514 $ 15,348 Greater China : Net sale China : Net sale $ 51,942 $ 44,764 $ 48,492 Operating Net sale $ 51,942 $ 44,764 $ 48,492 Operating income $ $ 51,942 $ 44,764 $ 48,492 Operating income $ 19,742 $ $ 48,492 Operating income $ 19,742 $ 17,032 $ 18,835 Japan Operating income $ 19,742 $ 17,032 $ 18,835 Japan : Net $ 19,742 $ 17,032 $ 18,835 Japan : Net sale $ Japan : Net sale $ 21,733 $ 17,733 $ 16,928 Operating Net sale $ 21,733 $ 17,733 $ 16,928 Operating income $ $ 21,733 $ 17,733 $ 16,928 Operating income $ 9,500 $ $ 16,928 Operating income $ 9,500 $ 8,097 $ 7,165 Rest Operating income $ 9,500 $ 8,097 $ 7,165 Rest of Asia $ 9,500 $ 8,097 $ 7,165 Rest of Asia Pacific : Pacific : Net sale $ 17,407 $ 15,199 $ 13,654 Operating Net sale $ 17,407 $ 15,199 $ 13,654 Operating income $ $ 17,407 $ 15,199 $ 13,654 Operating income $ 6,181 $ $ 13,654 Operating income $ 6,181 $ 5,304 $ 4,781 A Operating income $ 6,181 $ 5,304 $ 4,781 A reconciliation of $ 6,181 $ 5,304 $ 4,781 A reconciliation of the Company Consolidated Statements of Operations for 2018 , 2017 and 2016 is of Operations for 2018 , 2017 and 2016 is a follows for 2018 , 2017 and 2016 is a follows ( in ( in million ) : 2018 2017 2016 Segment operating income in million ) : 2018 2017 2016 Segment operating income $ million ) : 2018 2017 2016 Segment operating income $ 90,242 2016 Segment operating income $ 90,242 $ 77,631 $ 74,301 Research operating income $ 90,242 $ 77,631 $ 74,301 Research and development $ 90,242 $ 77,631 $ 74,301 Research and development expense ( Research and development expense ( 14,236 ) ( 11,581 ) ( expense ( 14,236 ) ( 11,581 ) ( 10,045 ) Other ) ( 11,581 ) ( 10,045 ) Other corporate expense , corporate expense , net ( 5,108 ) ( 4,706 ) ( net ( 5,108 ) ( 4,706 ) ( 4,232 ) Total ) ( 4,706 ) ( 4,232 ) Total operating income $ ) Total operating income $ 70,898 $ 61,344 $ 60,024 The operating income $ 70,898 $ 61,344 $ 60,024 The U.S. and $ 70,898 $ 61,344 $ 60,024 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2018 , 2017 and 2016 . net sale in 2018 , 2017 and 2016 . There wa in 2018 , 2017 and 2016 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2018 , 2017 and 2016 . net sale in 2018 , 2017 and 2016 . Net sale in 2018 , 2017 and 2016 . Net sale for 2018 2016 . Net sale for 2018 , 2017 and 2016 and Net sale for 2018 , 2017 and 2016 and long-lived asset for 2018 , 2017 and 2016 and long-lived asset a of long-lived asset a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 were a follows 2018 and September 30 , 2017 were a follows ( in ( in million ) : 2018 2017 2016 Net sale : in million ) : 2018 2017 2016 Net sale : U.S. million ) : 2018 2017 2016 Net sale : U.S. $ Net sale : U.S. $ 98,061 $ 84,339 $ 75,667 China : U.S. $ 98,061 $ 84,339 $ 75,667 China ( 1 $ 98,061 $ 84,339 $ 75,667 China ( 1 ) 51,942 84,339 $ 75,667 China ( 1 ) 51,942 44,764 48,492 Other 75,667 China ( 1 ) 51,942 44,764 48,492 Other country 115,592 China ( 1 ) 51,942 44,764 48,492 Other country 115,592 100,131 ( 1 ) 51,942 44,764 48,492 Other country 115,592 100,131 91,480 51,942 44,764 48,492 Other country 115,592 100,131 91,480 Total net sale 44,764 48,492 Other country 115,592 100,131 91,480 Total net sale $ 48,492 Other country 115,592 100,131 91,480 Total net sale $ 265,595 91,480 Total net sale $ 265,595 $ 229,234 $ 215,639 2018 net sale $ 265,595 $ 229,234 $ 215,639 2018 2017 Long-lived $ 265,595 $ 229,234 $ 215,639 2018 2017 Long-lived asset : 265,595 $ 229,234 $ 215,639 2018 2017 Long-lived asset : U.S. $ 229,234 $ 215,639 2018 2017 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 23,963 $ 20,637 China ( 1 : U.S. $ 23,963 $ 20,637 China ( 1 ) 13,268 23,963 $ 20,637 China ( 1 ) 13,268 10,211 Other country 20,637 China ( 1 ) 13,268 10,211 Other country 4,073 2,935 China ( 1 ) 13,268 10,211 Other country 4,073 2,935 Total ) 13,268 10,211 Other country 4,073 2,935 Total long-lived asset $ 13,268 10,211 Other country 4,073 2,935 Total long-lived asset $ 41,304 2,935 Total long-lived asset $ 41,304 $ 33,783 ( 1 ) long-lived asset $ 41,304 $ 33,783 ( 1 ) China includes $ 41,304 $ 33,783 ( 1 ) China includes Hong Kong infrastructure . Apple Inc. | 2018 Form 10-K | 63 Net Apple Inc. | 2018 Form 10-K | 63 Net sale by | 2018 Form 10-K | 63 Net sale by product for Net sale by product for 2018 , 2017 and 2016 were by product for 2018 , 2017 and 2016 were a follows for 2018 , 2017 and 2016 were a follows ( in ( in million ) : 2018 2017 2016 iPhone ( 1 in million ) : 2018 2017 2016 iPhone ( 1 ) million ) : 2018 2017 2016 iPhone ( 1 ) $ 2018 2017 2016 iPhone ( 1 ) $ 166,699 $ 141,319 iPhone ( 1 ) $ 166,699 $ 141,319 $ 136,700 iPad 1 ) $ 166,699 $ 141,319 $ 136,700 iPad ( 1 $ 166,699 $ 141,319 $ 136,700 iPad ( 1 ) 18,805 141,319 $ 136,700 iPad ( 1 ) 18,805 19,222 20,628 Mac 136,700 iPad ( 1 ) 18,805 19,222 20,628 Mac ( 1 iPad ( 1 ) 18,805 19,222 20,628 Mac ( 1 ) ( 1 ) 18,805 19,222 20,628 Mac ( 1 ) 25,484 18,805 19,222 20,628 Mac ( 1 ) 25,484 25,850 22,831 Services 20,628 Mac ( 1 ) 25,484 25,850 22,831 Services ( 2 Mac ( 1 ) 25,484 25,850 22,831 Services ( 2 ) ( 1 ) 25,484 25,850 22,831 Services ( 2 ) 37,190 25,484 25,850 22,831 Services ( 2 ) 37,190 29,980 24,348 Other 22,831 Services ( 2 ) 37,190 29,980 24,348 Other Products ( Services ( 2 ) 37,190 29,980 24,348 Other Products ( 1 ( 2 ) 37,190 29,980 24,348 Other Products ( 1 ) 29,980 24,348 Other Products ( 1 ) ( 3 ) 17,417 Products ( 1 ) ( 3 ) 17,417 12,863 11,132 Total 1 ) ( 3 ) 17,417 12,863 11,132 Total net sale ) ( 3 ) 17,417 12,863 11,132 Total net sale $ ( 3 ) 17,417 12,863 11,132 Total net sale $ 265,595 11,132 Total net sale $ 265,595 $ 229,234 $ 215,639 ( net sale $ 265,595 $ 229,234 $ 215,639 ( 1 ) $ 265,595 $ 229,234 $ 215,639 ( 1 ) Includes deferral $ 229,234 $ 215,639 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from Digital . Services net sale in 2018 included a favorable one-time item favorable one-time item of $ 236 million in connection with the . Services net sale in 2017 included a favorable one-time adjustment favorable one-time adjustment of $ 640 million due to a change additional supporting information . ( 3 ) Includes sale of AirPods and third-party accessory . Note 11 – Selected Quarterly Financial Information of the four quarter of 2018 and 2017 ( in million four quarter of 2018 and 2017 ( in million , except Quarter Second Quarter First Quarter 2018 : Net sale $ 62,900 2018 : Net sale $ 62,900 $ 53,265 $ 61,137 $ Net sale $ 62,900 $ 53,265 $ 61,137 $ 88,293 Gross $ 62,900 $ 53,265 $ 61,137 $ 88,293 Gross margin $ $ 53,265 $ 61,137 $ 88,293 Gross margin $ 24,084 $ $ 88,293 Gross margin $ 24,084 $ 20,421 $ 23,422 $ Gross margin $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.89 Fourth $ 2.91 $ 2.34 $ 2.73 $ 3.89 Fourth Quarter Third $ 2.34 $ 2.73 $ 3.89 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2017 : Net sale $ 52,579 2017 : Net sale $ 52,579 $ 45,408 $ 52,896 $ Net sale $ 52,579 $ 45,408 $ 52,896 $ 78,351 Gross $ 52,579 $ 45,408 $ 52,896 $ 78,351 Gross margin $ $ 45,408 $ 52,896 $ 78,351 Gross margin $ 19,931 $ $ 78,351 Gross margin $ 19,931 $ 17,488 $ 20,591 $ Gross margin $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net $ 19,931 $ 17,488 $ 20,591 $ 30,176 Net income $ $ 17,488 $ 20,591 $ 30,176 Net income $ 10,714 $ $ 30,176 Net income $ 10,714 $ 8,717 $ 11,029 $ Net income $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings $ 10,714 $ 8,717 $ 11,029 $ 17,891 Earnings per share $ 8,717 $ 11,029 $ 17,891 Earnings per share ( 1 17,891 Earnings per share ( 1 ) : Basic $ 2.08 1 ) : Basic $ 2.08 $ 1.68 $ 2.11 $ : Basic $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.08 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.68 $ 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 2.11 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.38 Diluted $ 2.07 $ 1.67 $ 2.10 $ 3.36 ( $ 2.07 $ 1.67 $ 2.10 $ 3.36 ( 1 ) $ 1.67 $ 2.10 $ 3.36 ( 1 ) Basic and $ 2.10 $ 3.36 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2018 Form 10-K | 64 Report Apple Inc. | 2018 Form 10-K | 64 Report of Independent | 2018 Form 10-K | 64 Report of Independent Registered Public Apple Inc. a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , and the 2018 and September 30 , 2017 , and the related consolidated in the period ended September 29 , 2018 , and the period ended September 29 , 2018 , and the related note of Apple Inc. at September 29 , 2018 and September 30 Inc. at September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , and the 2018 and September 30 , 2017 , and the result of in the period ended September 29 , 2018 , in conformity period ended September 29 , 2018 , in conformity with U.S. financial reporting a of September 29 , 2018 , based on a of September 29 , 2018 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated November 5 , 2018 expressed an unqualified report dated November 5 , 2018 expressed an unqualified opinion thereon Inc. ’ s auditor since 2009 . San Jose , California San Jose , California November 5 , 2018 Apple Inc. | , California November 5 , 2018 Apple Inc. | 2018 Form , 2018 Apple Inc. | 2018 Form 10-K | 65 Report Apple Inc. | 2018 Form 10-K | 65 Report of Independent | 2018 Form 10-K | 65 Report of Independent Registered Public financial reporting a of September 29 , 2018 , based on a of September 29 , 2018 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 29 , 2018 , based on a of September 29 , 2018 , based on the COSO Apple Inc. a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 , and the 2018 and September 30 , 2017 , and the related consolidated in the period ended September 29 , 2018 , and the period ended September 29 , 2018 , and the related note and our report dated November 5 , 2018 expressed an unqualified report dated November 5 , 2018 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California November 5 , 2018 Apple Inc. | , California November 5 , 2018 Apple Inc. | 2018 Form , 2018 Apple Inc. | 2018 Form 10-K | 66 Item Apple Inc. | 2018 Form 10-K | 66 Item 9 . | 2018 Form 10-K | 66 Item 9 . Changes in Form 10-K | 66 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 29 , 2018 to provide reasonable a of September 29 , 2018 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 29 , 2018 to provide reasonable a of September 29 , 2018 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control Over during the fourth quarter of 2018 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information None . None . Apple Inc. | 2018 Form 10-K | 67 PART Apple Inc. | 2018 Form 10-K | 67 PART III Item | 2018 Form 10-K | 67 PART III Item 10 . | 67 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2019 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2018 in connection with day after September 29 , 2018 in connection with the solicitation for the Company ’ s 2019 annual meeting of shareholder and or by filing a Form 8-K , in each case to SEC or Nasdaq . Item 11 . Executive Compensation The information ” and “ Director Compensation— 2018 ” under the heading “ in the Company ’ s 2019 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2018 and is incorporated day after September 29 , 2018 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2019 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2018 and is incorporated day after September 29 , 2018 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2019 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2018 and is incorporated day after September 29 , 2018 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2019 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2018 and is incorporated day after September 29 , 2018 and is incorporated herein by reference . Apple Inc. | 2018 Form 10-K | 68 PART Apple Inc. | 2018 Form 10-K | 68 PART IV Item | 2018 Form 10-K | 68 PART IV Item 15 . | 68 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 38 Consolidated Statements 2017 and September 24 , 2016 38 Consolidated Statements of Comprehensive and September 24 , 2016 38 Consolidated Statements of Comprehensive Income for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 39 Consolidated Balance 2017 and September 24 , 2016 39 Consolidated Balance Sheets a and September 24 , 2016 39 Consolidated Balance Sheets a of Balance Sheets a of September 29 , 2018 and September 30 a of September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 40 Consolidated Statements 2018 and September 30 , 2017 40 Consolidated Statements of Shareholders and September 30 , 2017 40 Consolidated Statements of Shareholders ’ for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 41 Consolidated Statements 2017 and September 24 , 2016 41 Consolidated Statements of Cash and September 24 , 2016 41 Consolidated Statements of Cash Flows for the year ended September 29 , 2018 , September 30 year ended September 29 , 2018 , September 30 , 2017 29 , 2018 , September 30 , 2017 and September 24 2018 , September 30 , 2017 and September 24 , 2016 30 , 2017 and September 24 , 2016 42 Notes to 2017 and September 24 , 2016 42 Notes to Consolidated Financial and September 24 , 2016 42 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 43 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 64 Reports of Independent Registered Public Independent Registered Public Accounting Firm 65 ( 2 ) Financial Statement Public Accounting Firm 65 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of Registrant effective a of June 6 , 2014 . 8-K 3.1 a of June 6 , 2014 . 8-K 3.1 6/6/14 3.2 June 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws of Registrant effective a of December 13 , 2016 . 8-K 3.2 a of December 13 , 2016 . 8-K 3.2 12/15/16 4.1 December 13 , 2016 . 8-K 3.2 12/15/16 4.1 Form of 13 , 2016 . 8-K 3.2 12/15/16 4.1 Form of Common , 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock 2016 . 8-K 3.2 12/15/16 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of June 10 , 2015 , including form a of June 10 , 2015 , including form of global of global note representing the 0.350 % Notes due 2020 . the 0.350 % Notes due 2020 . 8-K 4.1 6/10/15 Apple % Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2018 due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2018 Form 4.1 6/10/15 Apple Inc. | 2018 Form 10-K | 69 Incorporated Apple Inc. | 2018 Form 10-K | 69 Incorporated by Reference | 2018 Form 10-K | 69 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.9 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 to 2/23/16 4.12 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.13 March 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate of , dated a of June 22 , 2016 , including form a of June 22 , 2016 , including form of global form of global note representing 4.15 % Notes due 2046 . representing 4.15 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate of , dated a of March 3 , 2017 , including form a of March 3 , 2017 , including form of global form of global note representing 4.300 % Notes due 2047 . representing 4.300 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.22 % Notes due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.23 % Notes due 2047 . 8-K 4.1 11/13/17 4.23 * Apple Notes due 2047 . 8-K 4.1 11/13/17 4.23 * Apple Inc due 2047 . 8-K 4.1 11/13/17 4.23 * Apple Inc . 2047 . 8-K 4.1 11/13/17 4.23 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director and restated a of February 13 , 2018 . 8-K 10.1 a of February 13 , 2018 . 8-K 10.1 2/14/18 10.4 February 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 10.7 October 1 , 2017 . 10-K 10.8 9/30/17 10.7 * Form 1 , 2017 . 10-K 10.8 9/30/17 10.7 * Form of , 2017 . 10-K 10.8 9/30/17 10.7 * Form of Restricted 2017 . 10-K 10.8 9/30/17 10.7 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.11 a of August 26 , 2014 . 10-K 10.11 9/27/14 10.8 August 26 , 2014 . 10-K 10.11 9/27/14 10.8 * Form 26 , 2014 . 10-K 10.11 9/27/14 10.8 * Form of , 2014 . 10-K 10.11 9/27/14 10.8 * Form of Performance 2014 . 10-K 10.11 9/27/14 10.8 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.12 a of August 26 , 2014 . 10-K 10.12 9/27/14 Apple August 26 , 2014 . 10-K 10.12 9/27/14 Apple Inc. | 26 , 2014 . 10-K 10.12 9/27/14 Apple Inc. | 2018 , 2014 . 10-K 10.12 9/27/14 Apple Inc. | 2018 Form 10.12 9/27/14 Apple Inc. | 2018 Form 10-K | 70 Incorporated Apple Inc. | 2018 Form 10-K | 70 Incorporated by Reference | 2018 Form 10-K | 70 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.9 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.13 a of August 26 , 2014 . 10-K 10.13 9/27/14 10.10 August 26 , 2014 . 10-K 10.13 9/27/14 10.10 * Form 26 , 2014 . 10-K 10.13 9/27/14 10.10 * Form of , 2014 . 10-K 10.13 9/27/14 10.10 * Form of Restricted 2014 . 10-K 10.13 9/27/14 10.10 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.16 a of October 5 , 2015 . 10-Q 10.16 3/26/16 10.11 October 5 , 2015 . 10-Q 10.16 3/26/16 10.11 * Form 5 , 2015 . 10-Q 10.16 3/26/16 10.11 * Form of , 2015 . 10-Q 10.16 3/26/16 10.11 * Form of Performance 2015 . 10-Q 10.16 3/26/16 10.11 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.17 a of October 5 , 2015 . 10-Q 10.17 3/26/16 10.12 October 5 , 2015 . 10-Q 10.17 3/26/16 10.12 * Form 5 , 2015 . 10-Q 10.17 3/26/16 10.12 * Form of , 2015 . 10-Q 10.17 3/26/16 10.12 * Form of Restricted 2015 . 10-Q 10.17 3/26/16 10.12 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.18 a of October 14 , 2016 . 10-K 10.18 9/24/16 10.13 October 14 , 2016 . 10-K 10.18 9/24/16 10.13 * Form 14 , 2016 . 10-K 10.18 9/24/16 10.13 * Form of , 2016 . 10-K 10.18 9/24/16 10.13 * Form of Performance 2016 . 10-K 10.18 9/24/16 10.13 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.19 a of October 14 , 2016 . 10-K 10.19 9/24/16 10.14 October 14 , 2016 . 10-K 10.19 9/24/16 10.14 * Form 14 , 2016 . 10-K 10.19 9/24/16 10.14 * Form of , 2016 . 10-K 10.19 9/24/16 10.14 * Form of Restricted 2016 . 10-K 10.19 9/24/16 10.14 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.15 September 26 , 2017 . 10-K 10.20 9/30/17 10.15 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.15 * Form of , 2017 . 10-K 10.20 9/30/17 10.15 * Form of Performance 2017 . 10-K 10.20 9/30/17 10.15 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.21 a of September 26 , 2017 . 10-K 10.21 9/30/17 10.16 September 26 , 2017 . 10-K 10.21 9/30/17 10.16 * Form 26 , 2017 . 10-K 10.21 9/30/17 10.16 * Form of , 2017 . 10-K 10.21 9/30/17 10.16 * Form of Restricted 2017 . 10-K 10.21 9/30/17 10.16 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.17 February 13 , 2018 . 10-Q 10.2 3/31/18 10.17 * , 13 , 2018 . 10-Q 10.2 3/31/18 10.17 * , * , 2018 . 10-Q 10.2 3/31/18 10.17 * , * * 2018 . 10-Q 10.2 3/31/18 10.17 * , * * Form Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10.18 * a of August 21 , 2018 . 10.18 * , * August 21 , 2018 . 10.18 * , * * Form of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 21.1 * a of August 21 , 2018 . 21.1 * * Subsidiaries August 21 , 2018 . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2018 Form 10-K | 71 SIGNATURES Apple Inc. | 2018 Form 10-K | 71 SIGNATURES Pursuant to | 2018 Form 10-K | 71 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : November 5 , 2018 Apple Inc. By Date : November 5 , 2018 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 5 , 2018 TIMOTHY D. COOK Officer ) November 5 , 2018 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) November 5 , 2018 LUCA MAESTRI /s/ Officer ) November 5 , 2018 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) November 5 , 2018 CHRIS KONDO /s/ Officer ) November 5 , 2018 CHRIS KONDO /s/ James A A . Bell Director November 5 , 2018 JAMES A . Bell Director November 5 , 2018 JAMES A . BELL /s/ /s/ Al Gore Director November 5 , 2018 AL GORE /s/ Gore Director November 5 , 2018 AL GORE /s/ Robert A. Robert A. Iger Director November 5 , 2018 ROBERT A. IGER Iger Director November 5 , 2018 ROBERT A. IGER /s/ Andrea /s/ Andrea Jung Director November 5 , 2018 ANDREA JUNG /s/ Jung Director November 5 , 2018 ANDREA JUNG /s/ Arthur D. Arthur D. Levinson Director November 5 , 2018 ARTHUR D. LEVINSON Levinson Director November 5 , 2018 ARTHUR D. LEVINSON /s/ Ronald Ronald D. Sugar Director November 5 , 2018 RONALD D. SUGAR Sugar Director November 5 , 2018 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director November 5 , 2018 SUSAN L. WAGNER Wagner Director November 5 , 2018 SUSAN L. WAGNER Apple Inc. L. 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2017-12-31 2018-03-31 0000320193 2017-10-01 2017-12-30 iso4217 : USD iso4217 : EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 28 , 2019 or ☐ TRANSITION year ended September 28 , 2019 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Apple Park Way Cupertino California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the registered Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 — LLC 1.000 % Notes due 2022 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 — LLC 1.375 % Notes due 2024 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 — LLC 0.875 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 — LLC 1.625 % Notes due 2026 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % Notes due 2027 — LLC 2.000 % Notes due 2027 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2029 — LLC 1.375 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.050 % Notes due 2029 — LLC 3.050 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.600 % Notes due 2042 — LLC 3.600 % Notes due 2042 — The Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 29 , 2019 , the last a of March 29 , 2019 , the last business day quarter , wa approximately $ 874,698,000,000 . Solely for purpose of for any other purpose . 4,443,265,000 share of common stock were and outstanding a of October 18 , 2019 . DOCUMENTS INCORPORATED a of October 18 , 2019 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2020 annual meeting of shareholder ( of shareholder ( the “ 2020 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2020 10-K where indicated . The 2020 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 28 , 2019 TABLE OF CONTENTS Year Ended September 28 , 2019 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 5 Item Item 1A . Risk Factors 5 Item 1B . Unresolved Staff . Risk Factors 5 Item 1B . Unresolved Staff Comments 14 1B . Unresolved Staff Comments 14 Item 2 . Properties 14 Unresolved Staff Comments 14 Item 2 . Properties 14 Item 3 14 Item 2 . Properties 14 Item 3 . Legal Proceedings 2 . Properties 14 Item 3 . Legal Proceedings 14 Item Item 3 . Legal Proceedings 14 Item 4 . Mine Safety . Legal Proceedings 14 Item 4 . Mine Safety Disclosures 14 4 . Mine Safety Disclosures 14 Part II Item 5 . Disclosures 14 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 15 Item 6 . Selected Financial of Equity Securities 15 Item 6 . Selected Financial Data 17 6 . Selected Financial Data 17 Item 7 . Management ’ Selected Financial Data 17 Item 7 . Management ’ s Discussion Condition and Results of Operations 18 Item 7A . Quantitative and Results of Operations 18 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 28 Item 9 . Changes in and Supplementary Data 28 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 59 Item 9A . Controls and and Financial Disclosure 59 Item 9A . Controls and Procedures 59 9A . Controls and Procedures 59 Item 9B . Other Information Controls and Procedures 59 Item 9B . Other Information 59 Part Item 9B . Other Information 59 Part III Item 10 . Information 59 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 60 Item 11 . Executive Compensation and Corporate Governance 60 Item 11 . Executive Compensation 60 Item Item 11 . Executive Compensation 60 Item 12 . Security Ownership . Executive Compensation 60 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 60 Item 13 . Certain Relationships Related Stockholder Matters 60 Item 13 . Certain Relationships and Related Transactions , and Director Independence 60 Item 14 . Principal Accounting and Director Independence 60 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 60 Part IV Item 15 . Services 60 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 61 Item 16 . Form 10-K Financial Statement Schedules 61 Item 16 . Form 10-K Summary 63 61 Item 16 . Form 10-K Summary 63 This Annual Report 16 . Form 10-K Summary 63 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the a California corporation established in 1977 . Products iPhone iPhone ® operating system . In September 2019 , the Company introduced three three new iPhones : iPhone 11 , iPhone 11 Pro and : iPhone 11 , iPhone 11 Pro and iPhone 11 Pro iPhone 11 Pro and iPhone 11 Pro Max . Mac Mac ® operating system . During 2019 , the Company released a available in the fall of 2019. iPad iPad ® is the , which wa introduced during 2019 . Also during 2019 , during 2019 . Also during 2019 , the Company released two mini ® and a new 10.2-inch iPad . Wearables , Home with Siri . In October 2019 , the Company introduced AirPods smaller device . In September 2019 , the Company introduced Apple Company introduced Apple Watch Series 5 . Services Digital Content Stores to be available in November 2019 . Apple Inc. | 2019 2019 . Apple Inc. | 2019 Form 10-K | 1 AppleCare Apple Inc. | 2019 Form 10-K | 1 AppleCare AppleCare ® | 2019 Form 10-K | 1 AppleCare AppleCare ® includes AppleCare retailer and resellers . During 2019 , the Company ’ s indirect distribution channel accounted for 31 % and 69 % , accounted for 31 % and 69 % , respectively , of customer accounted for more than 10 % of net sale in % of net sale in 2019 , 2018 and 2017 . net sale in 2019 , 2018 and 2017 . Competition The in 2019 , 2018 and 2017 . Competition The market for offering . Apple Inc. | 2019 Form 10-K | 2 Supply Apple Inc. | 2019 Form 10-K | 2 Supply of Components | 2019 Form 10-K | 2 Supply of Components Although most . Employees As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had approximately , the Company had approximately 137,000 full-time equivalent employee . Apple employee . Apple Inc. | 2019 Form 10-K | 3 Available Apple Inc. | 2019 Form 10-K | 3 Available Information The | 2019 Form 10-K | 3 Available Information The Company ’ s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2019 Form 10-K | 4 Item Apple Inc. | 2019 Form 10-K | 4 Item 1A . | 2019 Form 10-K | 4 Item 1A . Risk Factors Form 10-K | 4 Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial affected . Apple Inc. | 2019 Form 10-K | 5 The Apple Inc. | 2019 Form 10-K | 5 The Company ha | 2019 Form 10-K | 5 The Company ha a minority product . Apple Inc. | 2019 Form 10-K | 6 The Apple Inc. | 2019 Form 10-K | 6 The Company is | 2019 Form 10-K | 6 The Company is exposed to typically for period up to 150 day . Because the Company dispute . Apple Inc. | 2019 Form 10-K | 7 The Apple Inc. | 2019 Form 10-K | 7 The Company ha | 2019 Form 10-K | 7 The Company ha invested in service . Apple Inc. | 2019 Form 10-K | 8 The Apple Inc. | 2019 Form 10-K | 8 The Company ’ | 2019 Form 10-K | 8 The Company ’ s minority in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies arise . Apple Inc. | 2019 Form 10-K | 9 The Apple Inc. | 2019 Form 10-K | 9 The Company is | 2019 Form 10-K | 9 The Company is subject to result . Apple Inc. | 2019 Form 10-K | 10 There Apple Inc. | 2019 Form 10-K | 10 There may be | 2019 Form 10-K | 10 There may be loss or liability . Apple Inc. | 2019 Form 10-K | 11 The Apple Inc. | 2019 Form 10-K | 11 The Company ’ | 2019 Form 10-K | 11 The Company ’ s success result . Apple Inc. | 2019 Form 10-K | 12 The Apple Inc. | 2019 Form 10-K | 12 The Company ha | 2019 Form 10-K | 12 The Company ha historically experienced result . Apple Inc. | 2019 Form 10-K | 13 The Apple Inc. | 2019 Form 10-K | 13 The Company is | 2019 Form 10-K | 13 The Company is exposed to component . As of September 28 , 2019 , a significant As of September 28 , 2019 , a significant portion of materially adversely affected . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company owned or of it business . Item 3 . Legal Proceedings The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2019 that did not individually or or operating result . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2019 Form 10-K | 14 PART Apple Inc. | 2019 Form 10-K | 14 PART II Item | 2019 Form 10-K | 14 PART II Item 5 . | 14 PART II Item 5 . Market for Registrant ’ . Holders As of October 18 , 2019 , there were As of October 18 , 2019 , there were 23,233 shareholder , 2019 , there were 23,233 shareholder of record . Purchases the three month ended September 28 , 2019 wa a follows month ended September 28 , 2019 wa a follows ( in the Plans or Programs ( 1 ) June 30 , 2019 Programs ( 1 ) June 30 , 2019 to August 3 1 ) June 30 , 2019 to August 3 , 2019 30 , 2019 to August 3 , 2019 : Open market 2019 to August 3 , 2019 : Open market and privately market and privately negotiated purchase 23,860 $ 205.36 23,860 August 4 privately negotiated purchase 23,860 $ 205.36 23,860 August 4 , 2019 negotiated purchase 23,860 $ 205.36 23,860 August 4 , 2019 to 23,860 $ 205.36 23,860 August 4 , 2019 to August 31 205.36 23,860 August 4 , 2019 to August 31 , 2019 4 , 2019 to August 31 , 2019 : February 2019 2019 to August 31 , 2019 : February 2019 ASR 6,886 31 , 2019 : February 2019 ASR 6,886 ( 2 ) 2019 : February 2019 ASR 6,886 ( 2 ) 6,886 Open February 2019 ASR 6,886 ( 2 ) 6,886 Open market and ASR 6,886 ( 2 ) 6,886 Open market and privately negotiated market and privately negotiated purchase 34,705 $ 204.59 34,705 September 1 privately negotiated purchase 34,705 $ 204.59 34,705 September 1 , 2019 negotiated purchase 34,705 $ 204.59 34,705 September 1 , 2019 to 34,705 $ 204.59 34,705 September 1 , 2019 to September 28 204.59 34,705 September 1 , 2019 to September 28 , 2019 1 , 2019 to September 28 , 2019 : Open market 2019 to September 28 , 2019 : Open market and privately market and privately negotiated purchase 27,178 $ 217.17 27,178 Total 92,629 privately negotiated purchase 27,178 $ 217.17 27,178 Total 92,629 $ 78,869 negotiated purchase 27,178 $ 217.17 27,178 Total 92,629 $ 78,869 ( 27,178 $ 217.17 27,178 Total 92,629 $ 78,869 ( 1 ) 217.17 27,178 Total 92,629 $ 78,869 ( 1 ) On April Total 92,629 $ 78,869 ( 1 ) On April 30 , ( 1 ) On April 30 , 2019 , the Company ) On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company ’ stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . The remaining a of September 28 , 2019 . The remaining $ 78.9 2019 . The remaining $ 78.9 billion in the table represents repurchase program a of September 28 , 2019 . The Company a of September 28 , 2019 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In February 2019 , ( 2 ) In February 2019 , the Company entered into to purchase up to $ 12.0 billion of the Company ’ common stock . In August 2019 , the purchase period for ASR ended and an additional 6.9 million share were delivered and retired . In total , 62.0 million share were delivered under average repurchase price of $ 193.69 . Apple Inc. | 2019 193.69 . Apple Inc. | 2019 Form 10-K | 15 Company Apple Inc. | 2019 Form 10-K | 15 Company Stock Performance | 2019 Form 10-K | 15 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 28 , 2019 . The graph year ended September 28 , 2019 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 26 , 2014 . Note that close on September 26 , 2014 . Note that historic stock price performance . * $ 100 invested on September 26 , $ 100 invested on September 26 , 2014 in stock or invested on September 26 , 2014 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2019 Standard & Poor ’ s right reserved . Copyright © 2019 S & P Dow Jones All right reserved . September 2014 September 2015 September 2016 September reserved . September 2014 September 2015 September 2016 September 2017 September September 2014 September 2015 September 2016 September 2017 September 2018 September September 2015 September 2016 September 2017 September 2018 September 2019 Apple September 2016 September 2017 September 2018 September 2019 Apple Inc. $ September 2017 September 2018 September 2019 Apple Inc. $ 100 $ September 2019 Apple Inc. $ 100 $ 116 $ 116 $ Apple Inc. $ 100 $ 116 $ 116 $ 162 $ $ 100 $ 116 $ 116 $ 162 $ 240 $ $ 116 $ 116 $ 162 $ 240 $ 237 S $ 116 $ 162 $ 240 $ 237 S & P $ 162 $ 240 $ 237 S & P 500 Index $ 237 S & P 500 Index $ 100 $ 99 & P 500 Index $ 100 $ 99 $ 115 $ 500 Index $ 100 $ 99 $ 115 $ 136 $ $ 100 $ 99 $ 115 $ 136 $ 160 $ $ 99 $ 115 $ 136 $ 160 $ 167 S $ 115 $ 136 $ 160 $ 167 S & P $ 136 $ 160 $ 167 S & P Information Technology P Information Technology Index $ 100 $ 102 $ 125 $ Technology Index $ 100 $ 102 $ 125 $ 162 $ $ 100 $ 102 $ 125 $ 162 $ 213 $ $ 102 $ 125 $ 162 $ 213 $ 231 Dow $ 125 $ 162 $ 213 $ 231 Dow Jones U.S. $ 162 $ 213 $ 231 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 100 $ 122 $ Supersector Index $ 100 $ 100 $ 122 $ 156 $ $ 100 $ 100 $ 122 $ 156 $ 205 $ $ 100 $ 122 $ 156 $ 205 $ 218 Apple $ 122 $ 156 $ 205 $ 218 Apple Inc. | $ 156 $ 205 $ 218 Apple Inc. | 2019 Form $ 218 Apple Inc. | 2019 Form 10-K | 16 Item Apple Inc. | 2019 Form 10-K | 16 Item 6 . | 2019 Form 10-K | 16 Item 6 . Selected Financial Form 10-K | 16 Item 6 . Selected Financial Data The the five year ended September 28 , 2019 , is not year ended September 28 , 2019 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2019 2018 2017 2016 2015 Total share amount ) . 2019 2018 2017 2016 2015 Total net amount ) . 2019 2018 2017 2016 2015 Total net sale ) . 2019 2018 2017 2016 2015 Total net sale $ . 2019 2018 2017 2016 2015 Total net sale $ 260,174 2015 Total net sale $ 260,174 $ 265,595 $ 229,234 $ net sale $ 260,174 $ 265,595 $ 229,234 $ 215,639 $ $ 260,174 $ 265,595 $ 229,234 $ 215,639 $ 233,715 Net $ 265,595 $ 229,234 $ 215,639 $ 233,715 Net income $ $ 229,234 $ 215,639 $ 233,715 Net income $ 55,256 $ $ 233,715 Net income $ 55,256 $ 59,531 $ 48,351 $ Net income $ 55,256 $ 59,531 $ 48,351 $ 45,687 $ $ 55,256 $ 59,531 $ 48,351 $ 45,687 $ 53,394 Earnings $ 59,531 $ 48,351 $ 45,687 $ 53,394 Earnings per share $ 48,351 $ 45,687 $ 53,394 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 $ : Basic $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ $ 11.97 $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 12.01 $ 9.27 $ 8.35 $ 9.28 Diluted $ 11.89 $ 9.27 $ 8.35 $ 9.28 Diluted $ 11.89 $ 11.91 8.35 $ 9.28 Diluted $ 11.89 $ 11.91 $ 9.21 $ 9.28 Diluted $ 11.89 $ 11.91 $ 9.21 $ 8.31 $ $ 11.89 $ 11.91 $ 9.21 $ 8.31 $ 9.22 Cash $ 11.91 $ 9.21 $ 8.31 $ 9.22 Cash dividend declared $ 9.21 $ 8.31 $ 9.22 Cash dividend declared per share dividend declared per share $ 3.00 $ 2.72 $ 2.40 $ per share $ 3.00 $ 2.72 $ 2.40 $ 2.18 $ $ 3.00 $ 2.72 $ 2.40 $ 2.18 $ 1.98 Shares $ 2.72 $ 2.40 $ 2.18 $ 1.98 Shares used in $ 2.40 $ 2.18 $ 1.98 Shares used in computing earnings earnings per share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted per share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 share : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 : Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 Basic 4,617,834 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 4,955,377 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 5,793,069 Total 5,217,242 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 5,793,069 Total cash 5,470,820 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 5,793,069 Total cash , 5,753,421 Diluted 4,648,913 5,000,109 5,251,692 5,500,281 5,793,069 Total cash , cash Diluted 4,648,913 5,000,109 5,251,692 5,500,281 5,793,069 Total cash , cash equivalent equivalent and marketable security $ 205,898 $ 237,100 $ 268,895 $ marketable security $ 205,898 $ 237,100 $ 268,895 $ 237,585 $ $ 205,898 $ 237,100 $ 268,895 $ 237,585 $ 205,666 Total $ 237,100 $ 268,895 $ 237,585 $ 205,666 Total asset $ $ 268,895 $ 237,585 $ 205,666 Total asset $ 338,516 $ $ 205,666 Total asset $ 338,516 $ 365,725 $ 375,319 $ Total asset $ 338,516 $ 365,725 $ 375,319 $ 321,686 $ $ 338,516 $ 365,725 $ 375,319 $ 321,686 $ 290,345 Non-current $ 365,725 $ 375,319 $ 321,686 $ 290,345 Non-current portion of $ 375,319 $ 321,686 $ 290,345 Non-current portion of term debt portion of term debt $ 91,807 $ 93,735 $ 97,207 $ term debt $ 91,807 $ 93,735 $ 97,207 $ 75,427 $ $ 91,807 $ 93,735 $ 97,207 $ 75,427 $ 53,329 Other $ 93,735 $ 97,207 $ 75,427 $ 53,329 Other non-current liability $ 97,207 $ 75,427 $ 53,329 Other non-current liability $ 50,503 53,329 Other non-current liability $ 50,503 $ 48,914 $ 44,212 $ non-current liability $ 50,503 $ 48,914 $ 44,212 $ 39,986 $ $ 50,503 $ 48,914 $ 44,212 $ 39,986 $ 38,104 Apple $ 48,914 $ 44,212 $ 39,986 $ 38,104 Apple Inc. | $ 44,212 $ 39,986 $ 38,104 Apple Inc. | 2019 Form $ 38,104 Apple Inc. | 2019 Form 10-K | 17 Item Apple Inc. | 2019 Form 10-K | 17 Item 7 . | 2019 Form 10-K | 17 Item 7 . Management ’ Form 10-K | 17 Item 7 . Management ’ s Discussion this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K . Item 8 of this Form 10-K . Unless otherwise stated , This section of this Form 10-K generally discus 2019 and 2018 this Form 10-K generally discus 2019 and 2018 item and year-to-year 10-K generally discus 2019 and 2018 item and year-to-year comparison between item and year-to-year comparison between 2019 and 2018 . Discussions of year-to-year comparison between 2019 and 2018 . Discussions of 2017 item and 2018 . Discussions of 2017 item and year-to-year comparison between item and year-to-year comparison between 2018 and 2017 that are not year-to-year comparison between 2018 and 2017 that are not included in not included in this Form 10-K can be found in “ in Part II , Item 7 of the Company ’ s s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 29 , 2018 . Fiscal Period year ended September 29 , 2018 . Fiscal Period The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2019 and 2018 spanned 52 week s fiscal year 2019 and 2018 spanned 52 week each , year 2019 and 2018 spanned 52 week each , whereas fiscal each , whereas fiscal year 2017 included 53 week . A whereas fiscal year 2017 included 53 week . A 14th week included 53 week . A 14th week wa included in the in the first quarter of 2017 , a is done every with calendar quarter . Fiscal 2019 Highlights Total net sale decreased Highlights Total net sale decreased 2 % or $ 5.4 billion decreased 2 % or $ 5.4 billion during 2019 compared to or $ 5.4 billion during 2019 compared to 2018 , driven billion during 2019 compared to 2018 , driven by lower net impact on net sale during 2019 . In April 2019 , during 2019 . In April 2019 , the Company announced an repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion and raised it quarterly it quarterly dividend from $ 0.73 to $ 0.77 per share from $ 0.73 to $ 0.77 per share beginning in May per share beginning in May 2019 . During 2019 , the in May 2019 . During 2019 , the Company repurchased $ , the Company repurchased $ 67.1 billion of it common stock and dividend equivalent of $ 14.1 billion . Apple Inc. | billion . Apple Inc. | 2019 Form 10-K | 18 Products Apple Inc. | 2019 Form 10-K | 18 Products and Services | 2019 Form 10-K | 18 Products and Services Performance Beginning in the first quarter of 2019 , the Company classified the and Services net sale for 2018 and 2017 were reclassified to net sale for 2018 and 2017 were reclassified to conform to reclassified to conform to the 2019 presentation . The following table net sale by category for 2019 , 2018 and 2017 ( by category for 2019 , 2018 and 2017 ( dollar in for 2019 , 2018 and 2017 ( dollar in million ) dollar in million ) : 2019 Change 2018 Change 2017 Net million ) : 2019 Change 2018 Change 2017 Net sale by : 2019 Change 2018 Change 2017 Net sale by category : by category : iPhone ( 1 ) $ 142,381 ( 14 iPhone ( 1 ) $ 142,381 ( 14 ) % $ 1 ) $ 142,381 ( 14 ) % $ 164,888 18 ( 14 ) % $ 164,888 18 % $ 139,337 Mac 14 ) % $ 164,888 18 % $ 139,337 Mac ( $ 164,888 18 % $ 139,337 Mac ( 1 ) 25,740 % $ 139,337 Mac ( 1 ) 25,740 2 % 25,198 139,337 Mac ( 1 ) 25,740 2 % 25,198 ( 1 Mac ( 1 ) 25,740 2 % 25,198 ( 1 ) 1 ) 25,740 2 % 25,198 ( 1 ) % 25,569 25,740 2 % 25,198 ( 1 ) % 25,569 iPad ( 25,198 ( 1 ) % 25,569 iPad ( 1 ) 21,280 ) % 25,569 iPad ( 1 ) 21,280 16 % 18,380 25,569 iPad ( 1 ) 21,280 16 % 18,380 ( 2 iPad ( 1 ) 21,280 16 % 18,380 ( 2 ) 1 ) 21,280 16 % 18,380 ( 2 ) % 18,802 21,280 16 % 18,380 ( 2 ) % 18,802 Wearables , 18,380 ( 2 ) % 18,802 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 24,482 Accessories ( 1 ) ( 2 ) 24,482 41 % 17,381 1 ) ( 2 ) 24,482 41 % 17,381 36 % ) ( 2 ) 24,482 41 % 17,381 36 % 12,826 2 ) 24,482 41 % 17,381 36 % 12,826 Services ( ) 24,482 41 % 17,381 36 % 12,826 Services ( 3 41 % 17,381 36 % 12,826 Services ( 3 ) 46,291 36 % 12,826 Services ( 3 ) 46,291 16 % 39,748 12,826 Services ( 3 ) 46,291 16 % 39,748 22 % Services ( 3 ) 46,291 16 % 39,748 22 % 32,700 3 ) 46,291 16 % 39,748 22 % 32,700 Total net ) 46,291 16 % 39,748 22 % 32,700 Total net sale 16 % 39,748 22 % 32,700 Total net sale $ 260,174 32,700 Total net sale $ 260,174 ( 2 ) % $ net sale $ 260,174 ( 2 ) % $ 265,595 16 ( 2 ) % $ 265,595 16 % $ 229,234 ( 2 ) % $ 265,595 16 % $ 229,234 ( 1 $ 265,595 16 % $ 229,234 ( 1 ) Products net 16 % $ 229,234 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and and third-party accessory . ( 3 ) Services net sale include iPhone net sale decreased during 2019 compared to 2018 due primarily decreased during 2019 compared to 2018 due primarily to lower iPhone Mac net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher net iPad net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher net Accessories net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher net Services net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher net AppleCare . Apple Inc. | 2019 Form 10-K | 19 Segment Apple Inc. | 2019 Form 10-K | 19 Segment Operating Performance | 2019 Form 10-K | 19 Segment Operating Performance The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and sale by reportable segment for 2019 , 2018 and 2017 ( reportable segment for 2019 , 2018 and 2017 ( dollar in for 2019 , 2018 and 2017 ( dollar in million ) dollar in million ) : 2019 Change 2018 Change 2017 Net million ) : 2019 Change 2018 Change 2017 Net sale by : 2019 Change 2018 Change 2017 Net sale by reportable segment reportable segment : Americas $ 116,914 4 % $ 112,093 16 segment : Americas $ 116,914 4 % $ 112,093 16 % $ 116,914 4 % $ 112,093 16 % $ 96,600 Europe 116,914 4 % $ 112,093 16 % $ 96,600 Europe 60,288 $ 112,093 16 % $ 96,600 Europe 60,288 ( 3 ) 16 % $ 96,600 Europe 60,288 ( 3 ) % 62,420 $ 96,600 Europe 60,288 ( 3 ) % 62,420 14 % 60,288 ( 3 ) % 62,420 14 % 54,938 Greater China ( 3 ) % 62,420 14 % 54,938 Greater China 43,678 ) % 62,420 14 % 54,938 Greater China 43,678 ( 16 14 % 54,938 Greater China 43,678 ( 16 ) % 51,942 54,938 Greater China 43,678 ( 16 ) % 51,942 16 % 43,678 ( 16 ) % 51,942 16 % 44,764 Japan 21,506 ( 16 ) % 51,942 16 % 44,764 Japan 21,506 ( ) % 51,942 16 % 44,764 Japan 21,506 ( 1 ) 51,942 16 % 44,764 Japan 21,506 ( 1 ) % 21,733 % 44,764 Japan 21,506 ( 1 ) % 21,733 23 % 21,506 ( 1 ) % 21,733 23 % 17,733 Rest of ( 1 ) % 21,733 23 % 17,733 Rest of Asia ) % 21,733 23 % 17,733 Rest of Asia Pacific 17,788 17,733 Rest of Asia Pacific 17,788 2 % 17,407 15 % Rest of Asia Pacific 17,788 2 % 17,407 15 % 15,199 Asia Pacific 17,788 2 % 17,407 15 % 15,199 Total net Pacific 17,788 2 % 17,407 15 % 15,199 Total net sale 2 % 17,407 15 % 15,199 Total net sale $ 260,174 15,199 Total net sale $ 260,174 ( 2 ) % $ net sale $ 260,174 ( 2 ) % $ 265,595 16 ( 2 ) % $ 265,595 16 % $ 229,234 Americas 2 ) % $ 265,595 16 % $ 229,234 Americas Americas $ 265,595 16 % $ 229,234 Americas Americas net sale increased Americas net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher Services on Americas net sale during 2019 . Europe Europe net sale Europe net sale decreased during 2019 compared to 2018 due to decreased during 2019 compared to 2018 due to lower iPhone net on Europe net sale during 2019 . Greater China Greater China China net sale decreased during 2019 compared to 2018 due primarily decreased during 2019 compared to 2018 due primarily to lower iPhone Greater China net sale during 2019 . Japan Japan net sale Japan net sale decreased during 2019 compared to 2018 due to decreased during 2019 compared to 2018 due to lower iPhone net on Japan net sale during 2019 . Rest of Asia Pacific Pacific net sale increased during 2019 compared to 2018 due primarily increased during 2019 compared to 2018 due primarily to higher Wearables Asia Pacific net sale during 2019 . Apple Inc. | 2019 2019 . Apple Inc. | 2019 Form 10-K | 20 Gross Apple Inc. | 2019 Form 10-K | 20 Gross Margin Products | 2019 Form 10-K | 20 Gross Margin Products and Services and gross margin percentage for 2019 , 2018 and 2017 were margin percentage for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 2018 2017 Gross margin : in million ) : 2019 2018 2017 Gross margin : Products million ) : 2019 2018 2017 Gross margin : Products $ Gross margin : Products $ 68,887 $ 77,683 $ 70,197 Services : Products $ 68,887 $ 77,683 $ 70,197 Services 29,505 24,156 $ 68,887 $ 77,683 $ 70,197 Services 29,505 24,156 17,989 Total $ 77,683 $ 70,197 Services 29,505 24,156 17,989 Total gross margin 77,683 $ 70,197 Services 29,505 24,156 17,989 Total gross margin $ $ 70,197 Services 29,505 24,156 17,989 Total gross margin $ 98,392 17,989 Total gross margin $ 98,392 $ 101,839 $ 88,186 Gross gross margin $ 98,392 $ 101,839 $ 88,186 Gross margin percentage $ 98,392 $ 101,839 $ 88,186 Gross margin percentage : Products Gross margin percentage : Products 32.2 % 34.4 % 35.7 % percentage : Products 32.2 % 34.4 % 35.7 % Services 63.7 Products 32.2 % 34.4 % 35.7 % Services 63.7 % 60.8 34.4 % 35.7 % Services 63.7 % 60.8 % 55.0 % 35.7 % Services 63.7 % 60.8 % 55.0 % Total gross Services 63.7 % 60.8 % 55.0 % Total gross margin percentage % Total gross margin percentage 37.8 % 38.3 % 38.5 % gross margin percentage 37.8 % 38.3 % 38.5 % Products Gross percentage 37.8 % 38.3 % 38.5 % Products Gross Margin Products gross margin percentage decreased during 2019 compared to 2018 due primarily decreased during 2019 compared to 2018 due primarily to lower iPhone Products gross margin increased during 2018 compared to 2017 due primarily increased during 2018 compared to 2017 due primarily to a favorable gross margin percentage decreased during 2018 due primarily to higher product Services gross margin increased during 2019 and 2018 due primarily to margin increased during 2019 and 2018 due primarily to higher Services gross margin percentage increased during 2019 and 2018 due primarily to percentage increased during 2019 and 2018 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2019 , 2018 and 2017 were Operating expense for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 Change 2018 Change 2017 Research million ) : 2019 Change 2018 Change 2017 Research and development : 2019 Change 2018 Change 2017 Research and development $ 16,217 2017 Research and development $ 16,217 14 % $ 14,236 23 Research and development $ 16,217 14 % $ 14,236 23 % $ 16,217 14 % $ 14,236 23 % $ 11,581 Percentage 16,217 14 % $ 14,236 23 % $ 11,581 Percentage of $ 14,236 23 % $ 11,581 Percentage of total net sale Percentage of total net sale 6 % 5 % 5 % total net sale 6 % 5 % 5 % Selling , sale 6 % 5 % 5 % Selling , general and , general and administrative $ 18,245 9 % $ 16,705 9 general and administrative $ 18,245 9 % $ 16,705 9 % $ 18,245 9 % $ 16,705 9 % $ 15,261 Percentage 18,245 9 % $ 16,705 9 % $ 15,261 Percentage of $ 16,705 9 % $ 15,261 Percentage of total net sale Percentage of total net sale 7 % 6 % 7 % total net sale 7 % 6 % 7 % Total operating sale 7 % 6 % 7 % Total operating expense $ % Total operating expense $ 34,462 11 % $ 30,941 15 Total operating expense $ 34,462 11 % $ 30,941 15 % $ 34,462 11 % $ 30,941 15 % $ 26,842 Percentage 34,462 11 % $ 30,941 15 % $ 26,842 Percentage of $ 30,941 15 % $ 26,842 Percentage of total net sale Percentage of total net sale 13 % 12 % 12 % total net sale 13 % 12 % 12 % Research and sale 13 % 12 % 12 % Research and Development The R & D expense in 2019 wa driven primarily by increase general and administrative expense in 2019 wa driven primarily by increase cost . Apple Inc. | 2019 Form 10-K | 21 Other Apple Inc. | 2019 Form 10-K | 21 Other Income/ ( | 2019 Form 10-K | 21 Other Income/ ( Expense ) & E ” ) for 2019 , 2018 and 2017 wa ” ) for 2019 , 2018 and 2017 wa a follows for 2019 , 2018 and 2017 wa a follows ( dollar dollar in million ) : 2019 Change 2018 Change 2017 Interest million ) : 2019 Change 2018 Change 2017 Interest and dividend : 2019 Change 2018 Change 2017 Interest and dividend income $ Interest and dividend income $ 4,961 $ 5,686 $ 5,201 Interest dividend income $ 4,961 $ 5,686 $ 5,201 Interest expense ( $ 4,961 $ 5,686 $ 5,201 Interest expense ( 3,576 ) $ 5,201 Interest expense ( 3,576 ) ( 3,240 ) ( expense ( 3,576 ) ( 3,240 ) ( 2,323 ) Other ) ( 3,240 ) ( 2,323 ) Other income/ ( expense ( expense ) , net 422 ( 441 ) ( 133 ) , net 422 ( 441 ) ( 133 ) Total 422 ( 441 ) ( 133 ) Total other income/ ( expense ) , net $ 1,807 ( 10 ) % $ , net $ 1,807 ( 10 ) % $ 2,005 ( ( 10 ) % $ 2,005 ( 27 ) % $ ) % $ 2,005 ( 27 ) % $ 2,745 The ( 27 ) % $ 2,745 The year-over-year decrease in OI in OI & E during 2019 wa due primarily to lower equivalent and marketable security wa 2.19 % and 2.16 % in security wa 2.19 % and 2.16 % in 2019 and 2018 % and 2.16 % in 2019 and 2018 , respectively . 2.16 % in 2019 and 2018 , respectively . Provision for federal income tax rate for 2019 , 2018 and 2017 were tax rate for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( dollar dollar in million ) : 2019 2018 2017 Provision for income in million ) : 2019 2018 2017 Provision for income tax million ) : 2019 2018 2017 Provision for income tax $ Provision for income tax $ 10,481 $ 13,372 $ 15,738 Effective income tax $ 10,481 $ 13,372 $ 15,738 Effective tax rate $ 10,481 $ 13,372 $ 15,738 Effective tax rate 15.9 % $ 15,738 Effective tax rate 15.9 % 18.3 % 24.6 % Effective tax rate 15.9 % 18.3 % 24.6 % Statutory federal rate 15.9 % 18.3 % 24.6 % Statutory federal income tax Statutory federal income tax rate 21.0 % 24.5 % 35.0 % income tax rate 21.0 % 24.5 % 35.0 % On December rate 21.0 % 24.5 % 35.0 % On December 22 , % 35.0 % On December 22 , 2017 , the U.S. % On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a federal income tax rate of 24.5 % for 2018 ( the rate of 24.5 % for 2018 ( the “ 2018 blended for 2018 ( the “ 2018 blended U.S. tax rate ” s effective tax rate for 2019 wa lower than the statutory s effective tax rate for 2018 wa lower than the 2018 2018 wa lower than the 2018 blended U.S. tax rate due s effective tax rate for 2019 wa lower compared to 2018 2019 wa lower compared to 2018 due primarily to a lower federal income tax rate in 2019 and the impact of the impact of the Act in 2018 , partially offset by higher tax on foreign earnings in 2019 . As of September 28 2019 . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had net and tax credit of $ 14.3 billion and deferred tax liability deferred tax liability of $ 6.2 billion . Management belief it Accounting Pronouncements Hedging In August 2017 , the Financial Accounting Standards ASU ” ) No . 2017-12 , Derivatives and Hedging ( Derivatives and Hedging ( Topic 815 ) : Targeted Improvements to Hedging Activities ( “ ASU 2017-12 ” ) . ASU 2017-12 2017-12 ” ) . ASU 2017-12 expands component and fair value The Company will adopt ASU 2017-12 in it first quarter of in it first quarter of 2020 utilizing the modified retrospective transition , the adoption of ASU 2017-12 is not expected to have . Financial Instruments In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies The Company will adopt ASU 2016-13 in it first quarter of in it first quarter of 2021 utilizing the modified retrospective transition , the adoption of ASU 2016-13 is not expected to have statement . Apple Inc. | 2019 Form 10-K | 22 Leases Apple Inc. | 2019 Form 10-K | 22 Leases In February | 2019 Form 10-K | 22 Leases In February 2016 , | 22 Leases In February 2016 , the FASB issued ASU FASB issued ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( “ ASU 2016-02 842 ) ( “ ASU 2016-02 ” ) , which modifies The Company will adopt ASU 2016-02 utilizing the modified retrospective transition of it first quarter of 2020 . Upon adoption , the and liability of approximately $ 8 billion on it Condensed Consolidated for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 ( in million 2018 and September 30 , 2017 ( in million ) : ( in million ) : 2019 2018 2017 Cash , cash in million ) : 2019 2018 2017 Cash , cash equivalent million ) : 2019 2018 2017 Cash , cash equivalent and equivalent and marketable security ( 1 ) $ 205,898 $ 237,100 security ( 1 ) $ 205,898 $ 237,100 $ 268,895 Property 1 ) $ 205,898 $ 237,100 $ 268,895 Property , plant $ 205,898 $ 237,100 $ 268,895 Property , plant and equipment and equipment , net $ 37,378 $ 41,304 $ 33,783 Commercial , net $ 37,378 $ 41,304 $ 33,783 Commercial paper $ $ 37,378 $ 41,304 $ 33,783 Commercial paper $ 5,980 $ $ 33,783 Commercial paper $ 5,980 $ 11,964 $ 11,977 Total Commercial paper $ 5,980 $ 11,964 $ 11,977 Total term debt $ 5,980 $ 11,964 $ 11,977 Total term debt $ 102,067 11,977 Total term debt $ 102,067 $ 102,519 $ 103,703 Working term debt $ 102,067 $ 102,519 $ 103,703 Working capital $ $ 102,067 $ 102,519 $ 103,703 Working capital $ 57,101 $ $ 103,703 Working capital $ 57,101 $ 15,410 $ 28,792 Cash Working capital $ 57,101 $ 15,410 $ 28,792 Cash generated by $ 57,101 $ 15,410 $ 28,792 Cash generated by operating activity generated by operating activity $ 69,391 $ 77,434 $ 64,225 Cash operating activity $ 69,391 $ 77,434 $ 64,225 Cash generated by/ $ 69,391 $ 77,434 $ 64,225 Cash generated by/ ( used in ) investing activity $ 45,896 $ 16,066 $ ( 46,446 investing activity $ 45,896 $ 16,066 $ ( 46,446 ) Cash 45,896 $ 16,066 $ ( 46,446 ) Cash used in financing in financing activity $ ( 90,976 ) $ ( 87,876 ) ( 90,976 ) $ ( 87,876 ) $ ( 17,974 ) ( 87,876 ) $ ( 17,974 ) ( 1 ) As $ ( 17,974 ) ( 1 ) As of September 28 1 ) As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , total cash 2019 and September 29 , 2018 , total cash , cash and marketable security included $ 18.9 billion and $ 20.3 billion $ 18.9 billion and $ 20.3 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” in Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) and other agreement . existing operation over the next 12 month . In connection with Decision , a of September 28 , 2019 , the entire a of September 28 , 2019 , the entire adjusted recovery in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 5 , “ Income Taxes . any one issuer . During 2019 , cash generated by operating by operating activity of $ 69.4 billion wa a result of wa a result of $ 55.3 billion of net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 billion . Cash generated by by investing activity of $ 45.9 billion during 2019 consisted primarily of $ 45.9 billion during 2019 consisted primarily of proceeds from of purchase , of $ 57.5 billion , partially offset by plant and equipment of $ 10.5 billion . Cash used in in financing activity of $ 91.0 billion during 2019 consisted primarily of $ 91.0 billion during 2019 consisted primarily of cash used repurchase common stock of $ 66.9 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to repay term debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . During 2018 , $ 7.0 billion . During 2018 , cash generated by operating by operating activity of $ 77.4 billion wa a result of wa a result of $ 59.5 billion of net income and asset and liability of $ 34.7 billion , partially offset by to net income of $ 16.8 billion . Cash generated by by investing activity of $ 16.1 billion during 2018 consisted primarily of $ 16.1 billion during 2018 consisted primarily of proceeds from of purchase , of $ 32.4 billion , partially offset by plant and equipment of $ 13.3 billion . Cash used in in financing activity of $ 87.9 billion during 2018 consisted primarily of $ 87.9 billion during 2018 consisted primarily of cash used repurchase common stock of $ 72.7 billion , cash used to and dividend equivalent of $ 13.7 billion and cash used to repay term debt of $ 6.5 billion , partially offset by of term debt of $ 7.0 billion . Apple Inc. | billion . Apple Inc. | 2019 Form 10-K | 23 Capital Apple Inc. | 2019 Form 10-K | 23 Capital Assets The | 2019 Form 10-K | 23 Capital Assets The Company ’ s capital expenditure were $ 7.6 billion during 2019 , which were $ 7.6 billion during 2019 , which included product tooling repurchase . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had $ , the Company had $ 6.0 billion of Commercial Paper outstanding a weighted-average interest rate of 2.24 % and maturity generally le month . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had outstanding aggregate principal amount of $ 101.7 billion ( collectively the “ Notes ” ) . During 2019 , the Company issued $ , the Company issued $ 7.0 billion and repaid $ 8.8 7.0 billion and repaid $ 8.8 billion of Notes . The in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 3 , “ Financial Instruments ” Financial Instruments ” and Note 6 , “ Debt . ” Capital Return Program On April 30 , 2019 , the Company Program On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company ’ stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . During 2019 a of September 28 , 2019 . During 2019 , the 28 , 2019 . During 2019 , the Company repurchased 345.2 2019 , the Company repurchased 345.2 million share of it common it common stock for $ 67.1 billion , including 62.0 million $ 67.1 billion , including 62.0 million share delivered under a share delivered under a $ 12.0 billion ASR dated February 2019 12.0 billion ASR dated February 2019 , which settled in August , which settled in August 2019 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . Exchange Act . On April 30 , 2019 , the Company . On April 30 , 2019 , the Company also announced quarterly cash dividend from $ 0.73 to $ 0.77 per share from $ 0.73 to $ 0.77 per share , beginning with during the third quarter of 2019 . The Company intends to the Company a of September 28 , 2019 , and excludes a of September 28 , 2019 , and excludes amount already ) : Payments due in 2020 Payments due in 2021–2022 Payments in 2020 Payments due in 2021–2022 Payments due in 2023–2024 Payments in 2021–2022 Payments due in 2023–2024 Payments due after 2024 Total in 2023–2024 Payments due after 2024 Total Term debt $ 10,270 2024 Total Term debt $ 10,270 $ 18,278 $ 19,329 $ Term debt $ 10,270 $ 18,278 $ 19,329 $ 53,802 $ $ 10,270 $ 18,278 $ 19,329 $ 53,802 $ 101,679 Operating $ 18,278 $ 19,329 $ 53,802 $ 101,679 Operating lease 1,306 $ 19,329 $ 53,802 $ 101,679 Operating lease 1,306 2,413 1,746 53,802 $ 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing $ 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing purchase 101,679 Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing purchase obligation Operating lease 1,306 2,413 1,746 5,373 10,838 Manufacturing purchase obligation ( lease 1,306 2,413 1,746 5,373 10,838 Manufacturing purchase obligation ( 1 10,838 Manufacturing purchase obligation ( 1 ) 40,076 1,974 808 69 purchase obligation ( 1 ) 40,076 1,974 808 69 42,927 Other obligation ( 1 ) 40,076 1,974 808 69 42,927 Other purchase ( 1 ) 40,076 1,974 808 69 42,927 Other purchase obligation 1 ) 40,076 1,974 808 69 42,927 Other purchase obligation 3,744 ) 40,076 1,974 808 69 42,927 Other purchase obligation 3,744 2,271 69 42,927 Other purchase obligation 3,744 2,271 572 41 6,628 Deemed 42,927 Other purchase obligation 3,744 2,271 572 41 6,628 Deemed repatriation Other purchase obligation 3,744 2,271 572 41 6,628 Deemed repatriation tax purchase obligation 3,744 2,271 572 41 6,628 Deemed repatriation tax payable obligation 3,744 2,271 572 41 6,628 Deemed repatriation tax payable — Deemed repatriation tax payable — 4,350 8,501 16,655 29,506 Total $ repatriation tax payable — 4,350 8,501 16,655 29,506 Total $ 55,396 tax payable — 4,350 8,501 16,655 29,506 Total $ 55,396 $ payable — 4,350 8,501 16,655 29,506 Total $ 55,396 $ 29,286 8,501 16,655 29,506 Total $ 55,396 $ 29,286 $ 30,956 $ 29,506 Total $ 55,396 $ 29,286 $ 30,956 $ 75,940 $ $ 55,396 $ 29,286 $ 30,956 $ 75,940 $ 191,578 ( $ 29,286 $ 30,956 $ 75,940 $ 191,578 ( 1 ) $ 30,956 $ 75,940 $ 191,578 ( 1 ) Represents amount $ 75,940 $ 191,578 ( 1 ) Represents amount expected to have original term not exceeding 10 year and generally contain multi-year typically cover period up to 150 day . The Company also supplier . Apple Inc. | 2019 Form 10-K | 24 Other Apple Inc. | 2019 Form 10-K | 24 Other Purchase Obligations | 2019 Form 10-K | 24 Other Purchase Obligations The Company Tax Payable As of September 28 , 2019 , a significant As of September 28 , 2019 , a significant portion of the amount reported . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy provided . Apple Inc. | 2019 Form 10-K | 25 Valuation Apple Inc. | 2019 Form 10-K | 25 Valuation of Manufacturing-Related | 2019 Form 10-K | 25 Valuation of Manufacturing-Related Assets and in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies materially adversely affected . Item 7A . Quantitative and Qualitative Disclosures debt . Apple Inc. | 2019 Form 10-K | 26 The Apple Inc. | 2019 Form 10-K | 26 The Company ’ | 2019 Form 10-K | 26 The Company ’ s investment the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , a hypothetical 2019 and September 29 , 2018 , a hypothetical 100 basis , 2018 , a hypothetical 100 basis point increase in interest would result in a $ 2.8 billion and $ 4.9 billion $ 2.8 billion and $ 4.9 billion incremental decline in the maturity . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the Company 2019 and September 29 , 2018 , the Company had outstanding aggregate carrying amount of $ 102.1 billion and $ 102.5 billion $ 102.1 billion and $ 102.5 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 to increase by 2019 and September 29 , 2018 to increase by $ 325 2018 to increase by $ 325 million and $ 399 million $ 325 million and $ 399 million on an annualized basis , typically for up to 12 month . However , the , the Company estimate with 95 % confidence , a maximum in fair value of $ 452 million a of September 28 452 million a of September 28 , 2019 , compared to a of September 28 , 2019 , compared to a maximum in fair value of $ 592 million a of September 29 592 million a of September 29 , 2018 . Because the a of September 29 , 2018 . Because the Company us analysis performed a of September 28 , 2019 due to the a of September 28 , 2019 due to the inherent limitation position . Apple Inc. | 2019 Form 10-K | 27 Item Apple Inc. | 2019 Form 10-K | 27 Item 8 . | 2019 Form 10-K | 27 Item 8 . Financial Statements Form 10-K | 27 Item 8 . Financial Statements and Supplementary for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 29 Consolidated Statements 2018 and September 30 , 2017 29 Consolidated Statements of Comprehensive and September 30 , 2017 29 Consolidated Statements of Comprehensive Income for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 30 Consolidated Balance 2018 and September 30 , 2017 30 Consolidated Balance Sheets a and September 30 , 2017 30 Consolidated Balance Sheets a of Balance Sheets a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 31 Consolidated Statements 2019 and September 29 , 2018 31 Consolidated Statements of Shareholders and September 29 , 2018 31 Consolidated Statements of Shareholders ’ for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 32 Consolidated Statements 2018 and September 30 , 2017 32 Consolidated Statements of Cash and September 30 , 2017 32 Consolidated Statements of Cash Flows for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 33 Notes to 2018 and September 30 , 2017 33 Notes to Consolidated Financial and September 30 , 2017 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 55 Reports of Independent Registered Public Independent Registered Public Accounting Firm 56 All financial statement schedule have note . Apple Inc. | 2019 Form 10-K | 28 Apple Apple Inc. | 2019 Form 10-K | 28 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 28 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 28 , 2019 September 29 , Years ended September 28 , 2019 September 29 , 2018 September September 28 , 2019 September 29 , 2018 September 30 , , 2019 September 29 , 2018 September 30 , 2017 Net September 29 , 2018 September 30 , 2017 Net sale : , 2018 September 30 , 2017 Net sale : Products $ Net sale : Products $ 213,883 $ 225,847 $ 196,534 Services : Products $ 213,883 $ 225,847 $ 196,534 Services 46,291 39,748 $ 213,883 $ 225,847 $ 196,534 Services 46,291 39,748 32,700 Total $ 225,847 $ 196,534 Services 46,291 39,748 32,700 Total net sale 225,847 $ 196,534 Services 46,291 39,748 32,700 Total net sale 260,174 $ 196,534 Services 46,291 39,748 32,700 Total net sale 260,174 265,595 39,748 32,700 Total net sale 260,174 265,595 229,234 Cost of sale 32,700 Total net sale 260,174 265,595 229,234 Cost of sale : Total net sale 260,174 265,595 229,234 Cost of sale : Products Cost of sale : Products 144,996 148,164 126,337 Services 16,786 15,592 of sale : Products 144,996 148,164 126,337 Services 16,786 15,592 14,711 sale : Products 144,996 148,164 126,337 Services 16,786 15,592 14,711 Total Products 144,996 148,164 126,337 Services 16,786 15,592 14,711 Total cost of 144,996 148,164 126,337 Services 16,786 15,592 14,711 Total cost of sale 148,164 126,337 Services 16,786 15,592 14,711 Total cost of sale 161,782 14,711 Total cost of sale 161,782 163,756 141,048 Gross margin 98,392 Total cost of sale 161,782 163,756 141,048 Gross margin 98,392 101,839 cost of sale 161,782 163,756 141,048 Gross margin 98,392 101,839 88,186 161,782 163,756 141,048 Gross margin 98,392 101,839 88,186 Operating expense : 163,756 141,048 Gross margin 98,392 101,839 88,186 Operating expense : Research 141,048 Gross margin 98,392 101,839 88,186 Operating expense : Research and expense : Research and development 16,217 14,236 11,581 Selling , general : Research and development 16,217 14,236 11,581 Selling , general and Research and development 16,217 14,236 11,581 Selling , general and administrative Selling , general and administrative 18,245 16,705 15,261 Total operating expense , general and administrative 18,245 16,705 15,261 Total operating expense 34,462 general and administrative 18,245 16,705 15,261 Total operating expense 34,462 30,941 16,705 15,261 Total operating expense 34,462 30,941 26,842 Operating income 63,930 15,261 Total operating expense 34,462 30,941 26,842 Operating income 63,930 70,898 Total operating expense 34,462 30,941 26,842 Operating income 63,930 70,898 61,344 34,462 30,941 26,842 Operating income 63,930 70,898 61,344 Other income/ ( 30,941 26,842 Operating income 63,930 70,898 61,344 Other income/ ( expense 26,842 Operating income 63,930 70,898 61,344 Other income/ ( expense ) ( expense ) , net 1,807 2,005 2,745 Income before provision expense ) , net 1,807 2,005 2,745 Income before provision for ) , net 1,807 2,005 2,745 Income before provision for income before provision for income tax 65,737 72,903 64,089 Provision for income provision for income tax 65,737 72,903 64,089 Provision for income tax for income tax 65,737 72,903 64,089 Provision for income tax 10,481 64,089 Provision for income tax 10,481 13,372 15,738 Net income $ Provision for income tax 10,481 13,372 15,738 Net income $ 55,256 for income tax 10,481 13,372 15,738 Net income $ 55,256 $ 13,372 15,738 Net income $ 55,256 $ 59,531 $ 48,351 Earnings Net income $ 55,256 $ 59,531 $ 48,351 Earnings per share $ 55,256 $ 59,531 $ 48,351 Earnings per share : Basic per share : Basic $ 11.97 $ 12.01 $ 9.27 Diluted : Basic $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.97 $ 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 12.01 $ 9.27 Diluted $ 11.89 $ 11.91 $ 9.21 Shares 9.27 Diluted $ 11.89 $ 11.91 $ 9.21 Shares used in $ 11.89 $ 11.91 $ 9.21 Shares used in computing earnings earnings per share : Basic 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 per share : Basic 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 5,251,692 share : Basic 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 5,251,692 See Basic 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 5,251,692 See accompanying Notes 4,617,834 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 5,251,692 See accompanying Notes to 4,955,377 5,217,242 Diluted 4,648,913 5,000,109 5,251,692 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 29 Apple Apple Inc. | 2019 Form 10-K | 29 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 29 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 28 , 2019 September 29 , Years ended September 28 , 2019 September 29 , 2018 September September 28 , 2019 September 29 , 2018 September 30 , , 2019 September 29 , 2018 September 30 , 2017 Net September 29 , 2018 September 30 , 2017 Net income $ , 2018 September 30 , 2017 Net income $ 55,256 $ , 2017 Net income $ 55,256 $ 59,531 $ 48,351 Other Net income $ 55,256 $ 59,531 $ 48,351 Other comprehensive income/ $ 55,256 $ 59,531 $ 48,351 Other comprehensive income/ ( loss , net of tax ( 408 ) ( 525 ) 224 tax ( 408 ) ( 525 ) 224 Change in unrealized 408 ) ( 525 ) 224 Change in unrealized gains/losses on fair value of derivative ( 661 ) 523 1,315 Adjustment for of derivative ( 661 ) 523 1,315 Adjustment for net ( derivative ( 661 ) 523 1,315 Adjustment for net ( gain and included in net income 23 382 ( 1,477 ) Total included in net income 23 382 ( 1,477 ) Total change net income 23 382 ( 1,477 ) Total change in unrealized gains/losses on derivative instrument ( 638 ) 905 ( 162 ) derivative instrument ( 638 ) 905 ( 162 ) Change in ( 638 ) 905 ( 162 ) Change in unrealized gains/losses fair value of marketable security 3,802 ( 3,407 ) ( 782 of marketable security 3,802 ( 3,407 ) ( 782 ) Adjustment 3,802 ( 3,407 ) ( 782 ) Adjustment for net ( and included in net income 25 1 ( 64 ) Total included in net income 25 1 ( 64 ) Total change net income 25 1 ( 64 ) Total change in unrealized unrealized gains/losses on marketable security 3,827 ( 3,406 ) ( 846 on marketable security 3,827 ( 3,406 ) ( 846 ) Total 3,827 ( 3,406 ) ( 846 ) Total other comprehensive income/ comprehensive income/ ( loss ) 2,781 ( 3,026 ) ( 784 ( loss ) 2,781 ( 3,026 ) ( 784 ) Total 2,781 ( 3,026 ) ( 784 ) Total comprehensive income $ ) Total comprehensive income $ 58,037 $ 56,505 $ 47,567 See comprehensive income $ 58,037 $ 56,505 $ 47,567 See accompanying Notes $ 58,037 $ 56,505 $ 47,567 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 30 Apple Apple Inc. | 2019 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 30 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 28 , 2019 September 29 , value ) September 28 , 2019 September 29 , 2018 ASSETS September 28 , 2019 September 29 , 2018 ASSETS : Current , 2019 September 29 , 2018 ASSETS : Current asset : Cash and cash equivalent $ 48,844 $ 25,913 Marketable security 51,713 cash equivalent $ 48,844 $ 25,913 Marketable security 51,713 40,388 Accounts 48,844 $ 25,913 Marketable security 51,713 40,388 Accounts receivable , net $ 25,913 Marketable security 51,713 40,388 Accounts receivable , net 22,926 40,388 Accounts receivable , net 22,926 23,186 Inventories 4,106 3,956 Vendor Accounts receivable , net 22,926 23,186 Inventories 4,106 3,956 Vendor non-trade , net 22,926 23,186 Inventories 4,106 3,956 Vendor non-trade receivables 22,878 net 22,926 23,186 Inventories 4,106 3,956 Vendor non-trade receivables 22,878 25,809 4,106 3,956 Vendor non-trade receivables 22,878 25,809 Other current asset 12,352 3,956 Vendor non-trade receivables 22,878 25,809 Other current asset 12,352 12,087 22,878 25,809 Other current asset 12,352 12,087 Total current asset 162,819 25,809 Other current asset 12,352 12,087 Total current asset 162,819 131,339 12,352 12,087 Total current asset 162,819 131,339 Non-current asset : Marketable 12,087 Total current asset 162,819 131,339 Non-current asset : Marketable security Non-current asset : Marketable security 105,341 170,799 Property , plant and asset : Marketable security 105,341 170,799 Property , plant and equipment plant and equipment , net 37,378 41,304 Other non-current asset 32,978 and equipment , net 37,378 41,304 Other non-current asset 32,978 22,283 37,378 41,304 Other non-current asset 32,978 22,283 Total non-current asset 175,697 41,304 Other non-current asset 32,978 22,283 Total non-current asset 175,697 234,386 32,978 22,283 Total non-current asset 175,697 234,386 Total asset $ 338,516 22,283 Total non-current asset 175,697 234,386 Total asset $ 338,516 $ 175,697 234,386 Total asset $ 338,516 $ 365,725 LIABILITIES AND SHAREHOLDERS Total asset $ 338,516 $ 365,725 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 46,236 $ 55,888 Other current liability Accounts payable $ 46,236 $ 55,888 Other current liability 37,720 33,327 $ 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 55,888 Other current liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial liability 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 37,720 33,327 Deferred revenue 5,522 5,966 Commercial paper 5,980 11,964 Term revenue 5,522 5,966 Commercial paper 5,980 11,964 Term debt 10,260 8,784 5,522 5,966 Commercial paper 5,980 11,964 Term debt 10,260 8,784 Total paper 5,980 11,964 Term debt 10,260 8,784 Total current liability 105,718 5,980 11,964 Term debt 10,260 8,784 Total current liability 105,718 115,929 10,260 8,784 Total current liability 105,718 115,929 Non-current liability : Term 8,784 Total current liability 105,718 115,929 Non-current liability : Term debt Non-current liability : Term debt 91,807 93,735 Other non-current liability 50,503 liability : Term debt 91,807 93,735 Other non-current liability 50,503 48,914 91,807 93,735 Other non-current liability 50,503 48,914 Total non-current liability 142,310 93,735 Other non-current liability 50,503 48,914 Total non-current liability 142,310 142,649 50,503 48,914 Total non-current liability 142,310 142,649 Total liability 248,028 258,578 48,914 Total non-current liability 142,310 142,649 Total liability 248,028 258,578 Commitments liability 142,310 142,649 Total liability 248,028 258,578 Commitments and contingency Shareholders 142,310 142,649 Total liability 248,028 258,578 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.00001 par value : 12,600,000 share authorized ; 4,443,236 and : 12,600,000 share authorized ; 4,443,236 and 4,754,986 share issued and share authorized ; 4,443,236 and 4,754,986 share issued and outstanding , issued and outstanding , respectively 45,174 40,201 Retained earnings 45,898 70,400 and outstanding , respectively 45,174 40,201 Retained earnings 45,898 70,400 Accumulated respectively 45,174 40,201 Retained earnings 45,898 70,400 Accumulated other comprehensive income/ 45,174 40,201 Retained earnings 45,898 70,400 Accumulated other comprehensive income/ ( income/ ( loss ) ( 584 ) ( 3,454 ) Total ) ( 584 ) ( 3,454 ) Total shareholder ’ equity ) Total shareholder ’ equity 90,488 107,147 Total liability and shareholder Total shareholder ’ equity 90,488 107,147 Total liability and shareholder ’ and shareholder ’ equity $ 338,516 $ 365,725 See accompanying Notes ’ equity $ 338,516 $ 365,725 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 31 Apple Apple Inc. | 2019 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 28 , 2019 September 29 , Years ended September 28 , 2019 September 29 , 2018 September September 28 , 2019 September 29 , 2018 September 30 , , 2019 September 29 , 2018 September 30 , 2017 Total September 29 , 2018 September 30 , 2017 Total shareholder ’ , 2018 September 30 , 2017 Total shareholder ’ equity , equity , beginning balance $ 107,147 $ 134,047 $ 128,249 Common beginning balance $ 107,147 $ 134,047 $ 128,249 Common stock and $ 107,147 $ 134,047 $ 128,249 Common stock and additional paid-in paid-in capital : Beginning balance 40,201 35,867 31,251 Common stock issued capital : Beginning balance 40,201 35,867 31,251 Common stock issued 781 : Beginning balance 40,201 35,867 31,251 Common stock issued 781 669 35,867 31,251 Common stock issued 781 669 555 Common stock withheld 31,251 Common stock issued 781 669 555 Common stock withheld related Common stock issued 781 669 555 Common stock withheld related to settlement of equity award ( 2,002 ) ( 1,778 ) ( award ( 2,002 ) ( 1,778 ) ( 1,468 ) Share-based ) ( 1,778 ) ( 1,468 ) Share-based compensation 6,194 5,443 ( 1,468 ) Share-based compensation 6,194 5,443 4,909 Tax benefit from 1,468 ) Share-based compensation 6,194 5,443 4,909 Tax benefit from equity ) Share-based compensation 6,194 5,443 4,909 Tax benefit from equity award transfer pricing adjustment — — 620 Ending balance 45,174 40,201 35,867 — — 620 Ending balance 45,174 40,201 35,867 Retained earnings : — 620 Ending balance 45,174 40,201 35,867 Retained earnings : Beginning 620 Ending balance 45,174 40,201 35,867 Retained earnings : Beginning balance Retained earnings : Beginning balance 70,400 98,330 96,364 Net income 55,256 earnings : Beginning balance 70,400 98,330 96,364 Net income 55,256 59,531 : Beginning balance 70,400 98,330 96,364 Net income 55,256 59,531 48,351 70,400 98,330 96,364 Net income 55,256 59,531 48,351 Dividends and dividend 98,330 96,364 Net income 55,256 59,531 48,351 Dividends and dividend equivalent 96,364 Net income 55,256 59,531 48,351 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,129 ) ( 13,735 ) ( declared ( 14,129 ) ( 13,735 ) ( 12,803 ) Common ) ( 13,735 ) ( 12,803 ) Common stock withheld related settlement of equity award ( 1,029 ) ( 948 ) ( award ( 1,029 ) ( 948 ) ( 581 ) Common ) ( 948 ) ( 581 ) Common stock repurchased ( ) Common stock repurchased ( 67,101 ) ( 73,056 ) ( repurchased ( 67,101 ) ( 73,056 ) ( 33,001 ) Cumulative ) ( 73,056 ) ( 33,001 ) Cumulative effect of change of change in accounting principle 2,501 278 — Ending balance 45,898 change in accounting principle 2,501 278 — Ending balance 45,898 70,400 2,501 278 — Ending balance 45,898 70,400 98,330 Accumulated other comprehensive 278 — Ending balance 45,898 70,400 98,330 Accumulated other comprehensive income/ — Ending balance 45,898 70,400 98,330 Accumulated other comprehensive income/ ( ) : Beginning balance ( 3,454 ) ( 150 ) 634 balance ( 3,454 ) ( 150 ) 634 Other comprehensive income/ 3,454 ) ( 150 ) 634 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 2,781 ( 3,026 ) ( 784 ( loss ) 2,781 ( 3,026 ) ( 784 ) Cumulative 2,781 ( 3,026 ) ( 784 ) Cumulative effect of change of change in accounting principle 89 ( 278 ) — Ending in accounting principle 89 ( 278 ) — Ending balance ( ) — Ending balance ( 584 ) ( 3,454 ) ( balance ( 584 ) ( 3,454 ) ( 150 ) Total ) ( 3,454 ) ( 150 ) Total shareholder ’ equity equity , ending balance $ 90,488 $ 107,147 $ 134,047 Dividends ending balance $ 90,488 $ 107,147 $ 134,047 Dividends and dividend $ 90,488 $ 107,147 $ 134,047 Dividends and dividend equivalent declared per share or RSU $ 3.00 $ 2.72 $ 2.40 See or RSU $ 3.00 $ 2.72 $ 2.40 See accompanying Notes $ 3.00 $ 2.72 $ 2.40 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 32 Apple Apple Inc. | 2019 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2019 Form 10-K | 32 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 28 , 2019 September 29 , Years ended September 28 , 2019 September 29 , 2018 September September 28 , 2019 September 29 , 2018 September 30 , , 2019 September 29 , 2018 September 30 , 2017 Cash September 29 , 2018 September 30 , 2017 Cash , cash , 2018 September 30 , 2017 Cash , cash equivalent and cash , beginning balance $ 25,913 $ 20,289 $ 20,484 Operating beginning balance $ 25,913 $ 20,289 $ 20,484 Operating activity : $ 25,913 $ 20,289 $ 20,484 Operating activity : Net income Operating activity : Net income 55,256 59,531 48,351 Adjustments to reconcile activity : Net income 55,256 59,531 48,351 Adjustments to reconcile net : Net income 55,256 59,531 48,351 Adjustments to reconcile net income activity : Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense : Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense 6,068 Depreciation and amortization 12,547 10,903 10,157 Share-based compensation expense 6,068 5,340 10,903 10,157 Share-based compensation expense 6,068 5,340 4,840 Deferred income tax 10,157 Share-based compensation expense 6,068 5,340 4,840 Deferred income tax expense/ Share-based compensation expense 6,068 5,340 4,840 Deferred income tax expense/ ( expense/ ( benefit ) ( 340 ) ( 32,590 ) 5,966 ) ( 340 ) ( 32,590 ) 5,966 Other ( 652 340 ) ( 32,590 ) 5,966 Other ( 652 ) ( 32,590 ) 5,966 Other ( 652 ) ( 444 ) ( Other ( 652 ) ( 444 ) ( 166 ) Changes ) ( 444 ) ( 166 ) Changes in operating asset : Accounts receivable , net 245 ( 5,322 ) ( 2,093 receivable , net 245 ( 5,322 ) ( 2,093 ) Inventories 245 ( 5,322 ) ( 2,093 ) Inventories ( 289 ) ( 2,093 ) Inventories ( 289 ) 828 ( 2,723 ) ) Inventories ( 289 ) 828 ( 2,723 ) Vendor non-trade ( 289 ) 828 ( 2,723 ) Vendor non-trade receivables 2,931 2,723 ) Vendor non-trade receivables 2,931 ( 8,010 ) ( 4,254 Vendor non-trade receivables 2,931 ( 8,010 ) ( 4,254 ) Other 2,931 ( 8,010 ) ( 4,254 ) Other current and non-current Other current and non-current asset 873 ( 423 ) ( 5,318 and non-current asset 873 ( 423 ) ( 5,318 ) Accounts 873 ( 423 ) ( 5,318 ) Accounts payable ( 1,923 5,318 ) Accounts payable ( 1,923 ) 9,175 8,966 Deferred revenue Accounts payable ( 1,923 ) 9,175 8,966 Deferred revenue ( 625 payable ( 1,923 ) 9,175 8,966 Deferred revenue ( 625 ) 9,175 8,966 Deferred revenue ( 625 ) ( 3 ) ( revenue ( 625 ) ( 3 ) ( 593 ) Other ) ( 3 ) ( 593 ) Other current and non-current current and non-current liability ( 4,700 ) 38,449 1,092 Cash generated non-current liability ( 4,700 ) 38,449 1,092 Cash generated by operating liability ( 4,700 ) 38,449 1,092 Cash generated by operating activity Cash generated by operating activity 69,391 77,434 64,225 Investing activity : generated by operating activity 69,391 77,434 64,225 Investing activity : Purchases by operating activity 69,391 77,434 64,225 Investing activity : Purchases of Purchases of marketable security ( 39,630 ) ( 71,356 ) ( security ( 39,630 ) ( 71,356 ) ( 159,486 ) Proceeds ) ( 71,356 ) ( 159,486 ) Proceeds from maturity of from maturity of marketable security 40,102 55,881 31,775 Proceeds from sale maturity of marketable security 40,102 55,881 31,775 Proceeds from sale of of marketable security 40,102 55,881 31,775 Proceeds from sale of marketable from sale of marketable security 56,988 47,838 94,564 Payments for acquisition sale of marketable security 56,988 47,838 94,564 Payments for acquisition of of marketable security 56,988 47,838 94,564 Payments for acquisition of property , plant and equipment ( 10,495 ) ( 13,313 ) ( equipment ( 10,495 ) ( 13,313 ) ( 12,451 ) Payments ) ( 13,313 ) ( 12,451 ) Payments made in connection business acquisition , net ( 624 ) ( 721 ) ( net ( 624 ) ( 721 ) ( 329 ) Purchases ) ( 721 ) ( 329 ) Purchases of non-marketable security Purchases of non-marketable security ( 1,001 ) ( 1,871 ) ( security ( 1,001 ) ( 1,871 ) ( 521 ) Proceeds ) ( 1,871 ) ( 521 ) Proceeds from non-marketable security ) Proceeds from non-marketable security 1,634 353 126 Other ( 1,078 Proceeds from non-marketable security 1,634 353 126 Other ( 1,078 ) from non-marketable security 1,634 353 126 Other ( 1,078 ) ( 1,634 353 126 Other ( 1,078 ) ( 745 ) ( Other ( 1,078 ) ( 745 ) ( 124 ) Cash ) ( 745 ) ( 124 ) Cash generated by/ ( used in ) investing activity 45,896 16,066 ( 46,446 ) Financing in ) investing activity 45,896 16,066 ( 46,446 ) Financing activity investing activity 45,896 16,066 ( 46,446 ) Financing activity : Proceeds from issuance of common stock 781 669 555 Payments for tax issuance of common stock 781 669 555 Payments for tax related of common stock 781 669 555 Payments for tax related to settlement of equity award ( 2,817 ) ( 2,527 ) ( award ( 2,817 ) ( 2,527 ) ( 1,874 ) Payments ) ( 2,527 ) ( 1,874 ) Payments for dividend and dividend and dividend equivalent ( 14,119 ) ( 13,712 ) ( equivalent ( 14,119 ) ( 13,712 ) ( 12,769 ) Repurchases ) ( 13,712 ) ( 12,769 ) Repurchases of common stock Repurchases of common stock ( 66,897 ) ( 72,738 ) ( stock ( 66,897 ) ( 72,738 ) ( 32,900 ) Proceeds ) ( 72,738 ) ( 32,900 ) Proceeds from issuance of of term debt , net 6,963 6,969 28,662 Repayments of term term debt , net 6,963 6,969 28,662 Repayments of term debt debt , net 6,963 6,969 28,662 Repayments of term debt ( Repayments of term debt ( 8,805 ) ( 6,500 ) ( debt ( 8,805 ) ( 6,500 ) ( 3,500 ) Proceeds ) ( 6,500 ) ( 3,500 ) Proceeds from/ ( Repayments commercial paper , net ( 5,977 ) ( 37 ) 3,852 net ( 5,977 ) ( 37 ) 3,852 Other ( 105 5,977 ) ( 37 ) 3,852 Other ( 105 ) — 37 ) 3,852 Other ( 105 ) — — Cash used used in financing activity ( 90,976 ) ( 87,876 ) ( activity ( 90,976 ) ( 87,876 ) ( 17,974 ) Increase/ ) ( 87,876 ) ( 17,974 ) Increase/ ( Decrease ) cash equivalent and restricted cash 24,311 5,624 ( 195 ) Cash equivalent and restricted cash 24,311 5,624 ( 195 ) Cash , restricted cash 24,311 5,624 ( 195 ) Cash , cash equivalent cash , ending balance $ 50,224 $ 25,913 $ 20,289 Supplemental ending balance $ 50,224 $ 25,913 $ 20,289 Supplemental cash flow $ 50,224 $ 25,913 $ 20,289 Supplemental cash flow disclosure : income tax , net $ 15,263 $ 10,417 $ 11,591 Cash , net $ 15,263 $ 10,417 $ 11,591 Cash paid for $ 15,263 $ 10,417 $ 11,591 Cash paid for interest $ Cash paid for interest $ 3,423 $ 3,022 $ 2,092 See for interest $ 3,423 $ 3,022 $ 2,092 See accompanying Notes $ 3,423 $ 3,022 $ 2,092 See accompanying Notes to Consolidated Statements . Apple Inc. | 2019 Form 10-K | 33 Apple Apple Inc. | 2019 Form 10-K | 33 Apple Inc. Notes | 2019 Form 10-K | 33 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2019 and 2018 spanned 52 week s fiscal year 2019 and 2018 spanned 52 week each , year 2019 and 2018 spanned 52 week each , whereas fiscal each , whereas fiscal year 2017 included 53 week . A whereas fiscal year 2017 included 53 week . A 14th week included 53 week . A 14th week wa included in the the first fiscal quarter of 2017 , a is done every In the first quarter of 2019 , the Company adopted the ASU ” ) No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( “ ASU 2014-09 606 ) ( “ ASU 2014-09 ” ) , and additional clarify the guidance in ASU 2014-09 ( collectively the “ new in the first quarter of 2019 , the Company classified the and Services net sale for 2018 and 2017 were reclassified to net sale for 2018 and 2017 were reclassified to conform to reclassified to conform to the 2019 presentation . Financial Instruments In In the first quarter of 2019 , the Company adopted FASB adopted FASB ASU No . 2016-01 , Financial Instruments – Overall Instruments – Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities ( “ ASU 2016-01 ” ) , which update . The adoption of ASU 2016-01 did not have a material In the first quarter of 2019 , the Company adopted FASB adopted FASB ASU No . 2016-16 , Income Taxes ( Topic , Income Taxes ( Topic 740 ) : Intra-Entity Transfers of Than Inventory ( “ ASU 2016-16 ” ) , which requires . The Company adopted ASU 2016-16 utilizing the modified retrospective transition , the Company recorded $ 2.7 billion of net deferred tax other non-current asset by $ 128 million , and increased retained increased retained earnings by $ 2.6 billion on it Consolidated Balance In the first quarter of 2019 , the Company adopted FASB adopted FASB ASU No . 2016-18 , Statement of Cash Flows of Cash Flows ( Topic 230 ) : Restricted Cash ( Restricted Cash ( “ ASU 2016-18 ” ) , which enhances expense . Apple Inc. | 2019 Form 10-K | 34 Share-Based Apple Inc. | 2019 Form 10-K | 34 Share-Based Compensation The | 2019 Form 10-K | 34 Share-Based Compensation The Company generally can be found in Note 9 , “ Benefit Plans . diluted earnings per share for 2019 , 2018 and 2017 ( per share for 2019 , 2018 and 2017 ( net income for 2019 , 2018 and 2017 ( net income in million share in thousand ) : 2019 2018 2017 Numerator : Net in thousand ) : 2019 2018 2017 Numerator : Net income thousand ) : 2019 2018 2017 Numerator : Net income $ Numerator : Net income $ 55,256 $ 59,531 $ 48,351 Denominator Net income $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average $ 55,256 $ 59,531 $ 48,351 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 4,617,834 4,955,377 5,217,242 Effect of dilutive Weighted-average basic share outstanding 4,617,834 4,955,377 5,217,242 Effect of dilutive security basic share outstanding 4,617,834 4,955,377 5,217,242 Effect of dilutive security 31,079 5,217,242 Effect of dilutive security 31,079 44,732 34,450 Weighted-average diluted share Effect of dilutive security 31,079 44,732 34,450 Weighted-average diluted share 4,648,913 of dilutive security 31,079 44,732 34,450 Weighted-average diluted share 4,648,913 5,000,109 44,732 34,450 Weighted-average diluted share 4,648,913 5,000,109 5,251,692 Basic earnings per 34,450 Weighted-average diluted share 4,648,913 5,000,109 5,251,692 Basic earnings per share Weighted-average diluted share 4,648,913 5,000,109 5,251,692 Basic earnings per share $ Basic earnings per share $ 11.97 $ 12.01 $ 9.27 Diluted per share $ 11.97 $ 12.01 $ 9.27 Diluted earnings per $ 11.97 $ 12.01 $ 9.27 Diluted earnings per share $ Diluted earnings per share $ 11.89 $ 11.91 $ 9.21 The per share $ 11.89 $ 11.91 $ 9.21 The Company applies $ 11.89 $ 11.91 $ 9.21 The Company applies the treasury . Potentially dilutive security representing 15.5 million share of common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 30 year or the remaining life property and equipment wa $ 11.3 billion , $ 9.3 billion $ 11.3 billion , $ 9.3 billion and $ 8.2 billion $ 9.3 billion and $ 8.2 billion during 2019 , 2018 and $ 8.2 billion during 2019 , 2018 and 2017 , 8.2 billion during 2019 , 2018 and 2017 , respectively . during 2019 , 2018 and 2017 , respectively . Non-cash investing current liability of $ ( 2.9 ) billion and $ 3.4 2.9 ) billion and $ 3.4 billion during 2019 and 2018 and $ 3.4 billion during 2019 and 2018 , respectively . 3.4 billion during 2019 and 2018 , respectively . Apple Inc. respectively . Apple Inc. | 2019 Form 10-K | 35 Non-Marketable Apple Inc. | 2019 Form 10-K | 35 Non-Marketable Securities The | 2019 Form 10-K | 35 Non-Marketable Securities The Company ha observable market data . Note 2 – Revenue Recognition Net sale service . Apple Inc. | 2019 Form 10-K | 36 For Apple Inc. | 2019 Form 10-K | 36 For the sale | 2019 Form 10-K | 36 For the sale of third-party Deferred Revenue As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the Company 2019 and September 29 , 2018 , the Company had total total deferred revenue of $ 8.1 billion and $ 8.8 billion $ 8.1 billion and $ 8.8 billion , respectively . As respectively . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company expects 68 2019 , the Company expects 68 % of total deferred revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 6 % within two-to-three year and % within two-to-three year and 1 % in greater than three significant product and service for 2019 , 2018 and 2017 were and service for 2019 , 2018 and 2017 were a follows for 2019 , 2018 and 2017 were a follows ( in ( in million ) : 2019 2018 2017 iPhone ( 1 in million ) : 2019 2018 2017 iPhone ( 1 ) million ) : 2019 2018 2017 iPhone ( 1 ) $ 2019 2018 2017 iPhone ( 1 ) $ 142,381 $ 164,888 iPhone ( 1 ) $ 142,381 $ 164,888 $ 139,337 Mac 1 ) $ 142,381 $ 164,888 $ 139,337 Mac ( 1 $ 142,381 $ 164,888 $ 139,337 Mac ( 1 ) 25,740 164,888 $ 139,337 Mac ( 1 ) 25,740 25,198 25,569 iPad 139,337 Mac ( 1 ) 25,740 25,198 25,569 iPad ( 1 Mac ( 1 ) 25,740 25,198 25,569 iPad ( 1 ) ( 1 ) 25,740 25,198 25,569 iPad ( 1 ) 21,280 25,740 25,198 25,569 iPad ( 1 ) 21,280 18,380 18,802 Wearables 25,569 iPad ( 1 ) 21,280 18,380 18,802 Wearables , Home iPad ( 1 ) 21,280 18,380 18,802 Wearables , Home and ( 1 ) 21,280 18,380 18,802 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 24,482 Accessories ( 1 ) ( 2 ) 24,482 17,381 12,826 Services 1 ) ( 2 ) 24,482 17,381 12,826 Services ( 3 ) ( 2 ) 24,482 17,381 12,826 Services ( 3 ) ( 2 ) 24,482 17,381 12,826 Services ( 3 ) 46,291 24,482 17,381 12,826 Services ( 3 ) 46,291 39,748 32,700 Total 12,826 Services ( 3 ) 46,291 39,748 32,700 Total net sale Services ( 3 ) 46,291 39,748 32,700 Total net sale ( ( 3 ) 46,291 39,748 32,700 Total net sale ( 4 32,700 Total net sale ( 4 ) $ 260,174 $ 265,595 sale ( 4 ) $ 260,174 $ 265,595 $ 229,234 ( 4 ) $ 260,174 $ 265,595 $ 229,234 ( 1 ) $ 260,174 $ 265,595 $ 229,234 ( 1 ) Products net $ 265,595 $ 229,234 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and and third-party accessory . ( 3 ) Services net sale include of certain product . ( 4 ) Includes $ 5.9 billion ( 4 ) Includes $ 5.9 billion of revenue recognized in billion of revenue recognized in 2019 that wa included in deferred deferred revenue a of September 29 , 2018 , $ 5.8 a of September 29 , 2018 , $ 5.8 billion of 29 , 2018 , $ 5.8 billion of revenue recognized in billion of revenue recognized in 2018 that wa included in deferred deferred revenue a of September 30 , 2017 , and $ a of September 30 , 2017 , and $ 6.3 billion , 2017 , and $ 6.3 billion of revenue recognized in billion of revenue recognized in 2017 that wa included in deferred deferred revenue a of September 24 , 2016 . The Company a of September 24 , 2016 . The Company ’ s each reportable segment in Note 11 , “ Segment Information and and Geographic Data ” for 2019 , 2018 and 2017 . Data ” for 2019 , 2018 and 2017 . Apple Inc. for 2019 , 2018 and 2017 . Apple Inc. | 2019 2017 . Apple Inc. | 2019 Form 10-K | 37 Note Apple Inc. | 2019 Form 10-K | 37 Note 3 – | 2019 Form 10-K | 37 Note 3 – Financial Instruments Form 10-K | 37 Note 3 – Financial Instruments Cash , investment category a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 12,204 $ — $ — $ $ — $ — $ 12,204 $ 12,204 $ — $ $ — $ 12,204 $ 12,204 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 15,897 — — 15,897 15,897 — market fund 15,897 — — 15,897 15,897 — — Subtotal 15,897 fund 15,897 — — 15,897 15,897 — — Subtotal 15,897 — 15,897 15,897 — — Subtotal 15,897 — — 15,897 15,897 — — Subtotal 15,897 — — 15,897 15,897 — — Level 2 Subtotal 15,897 — — 15,897 15,897 — — Level 2 ( 15,897 15,897 — — Level 2 ( 2 ) : U.S. — — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 30,293 33 ( 62 ) 30,264 : U.S. Treasury security 30,293 33 ( 62 ) 30,264 6,165 Treasury security 30,293 33 ( 62 ) 30,264 6,165 9,817 14,282 30,293 33 ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency 33 ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency security ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency security 9,767 62 ) 30,264 6,165 9,817 14,282 U.S. agency security 9,767 1 9,817 14,282 U.S. agency security 9,767 1 ( 3 ) 9,765 14,282 U.S. agency security 9,767 1 ( 3 ) 9,765 6,489 agency security 9,767 1 ( 3 ) 9,765 6,489 2,249 1,027 9,767 1 ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government 1 ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security 19,821 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security 19,821 337 2,249 1,027 Non-U.S. government security 19,821 337 ( 50 ) 20,108 1,027 Non-U.S. government security 19,821 337 ( 50 ) 20,108 749 government security 19,821 337 ( 50 ) 20,108 749 3,168 16,191 19,821 337 ( 50 ) 20,108 749 3,168 16,191 Certificates of 337 ( 50 ) 20,108 749 3,168 16,191 Certificates of deposit ( 50 ) 20,108 749 3,168 16,191 Certificates of deposit and 50 ) 20,108 749 3,168 16,191 Certificates of deposit and time of deposit and time deposit 4,041 — — 4,041 2,024 1,922 time deposit 4,041 — — 4,041 2,024 1,922 95 Commercial paper deposit 4,041 — — 4,041 2,024 1,922 95 Commercial paper 12,433 4,041 — — 4,041 2,024 1,922 95 Commercial paper 12,433 — — — 4,041 2,024 1,922 95 Commercial paper 12,433 — — 2,024 1,922 95 Commercial paper 12,433 — — 12,433 5,193 7,240 Commercial paper 12,433 — — 12,433 5,193 7,240 — Corporate debt paper 12,433 — — 12,433 5,193 7,240 — Corporate debt security 12,433 — — 12,433 5,193 7,240 — Corporate debt security 85,383 7,240 — Corporate debt security 85,383 756 ( 92 ) 86,047 — Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 ( 123 26,127 59,797 Municipal security 958 8 ( 1 ) 965 26,127 59,797 Municipal security 958 8 ( 1 ) 965 — Municipal security 958 8 ( 1 ) 965 — 68 897 958 8 ( 1 ) 965 — 68 897 Mortgage- and ( 1 ) 965 — 68 897 Mortgage- and asset-backed security 1 ) 965 — 68 897 Mortgage- and asset-backed security 14,180 897 Mortgage- and asset-backed security 14,180 67 ( 73 ) 14,174 Mortgage- and asset-backed security 14,180 67 ( 73 ) 14,174 — asset-backed security 14,180 67 ( 73 ) 14,174 — 1,122 13,052 14,180 67 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 20,743 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 20,743 51,713 105,341 176,876 1,202 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 1,202 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ) 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ) $ 20,743 51,713 105,341 Total ( 3 ) $ 204,977 $ 1,202 Total ( 3 ) $ 204,977 $ 1,202 $ ( 281 3 ) $ 204,977 $ 1,202 $ ( 281 ) $ 204,977 $ 1,202 $ ( 281 ) $ 205,898 $ 48,844 $ ( 281 ) $ 205,898 $ 48,844 $ 51,713 $ 281 ) $ 205,898 $ 48,844 $ 51,713 $ 105,341 2018 $ 205,898 $ 48,844 $ 51,713 $ 105,341 2018 Adjusted Cost $ 48,844 $ 51,713 $ 105,341 2018 Adjusted Cost Unrealized Gains 48,844 $ 51,713 $ 105,341 2018 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 11,575 $ — $ — $ $ — $ — $ 11,575 $ 11,575 $ — $ $ — $ 11,575 $ 11,575 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 8,083 — — 8,083 8,083 — market fund 8,083 — — 8,083 8,083 — — Mutual fund fund 8,083 — — 8,083 8,083 — — Mutual fund 799 8,083 — — Mutual fund 799 — ( 116 ) 683 Mutual fund 799 — ( 116 ) 683 — 683 — 799 — ( 116 ) 683 — 683 — Subtotal 8,882 ( 116 ) 683 — 683 — Subtotal 8,882 — ( 683 — 683 — Subtotal 8,882 — ( 116 ) 8,766 — Subtotal 8,882 — ( 116 ) 8,766 8,083 683 — 8,882 — ( 116 ) 8,766 8,083 683 — Level 2 — ( 116 ) 8,766 8,083 683 — Level 2 ( ( 116 ) 8,766 8,083 683 — Level 2 ( 2 8,766 8,083 683 — Level 2 ( 2 ) : U.S. 683 — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 47,296 — ( 1,202 ) 46,094 Treasury security 47,296 — ( 1,202 ) 46,094 1,613 7,606 36,875 47,296 — ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency — ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security ( 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security 4,127 1,202 ) 46,094 1,613 7,606 36,875 U.S. agency security 4,127 — 7,606 36,875 U.S. agency security 4,127 — ( 48 ) 4,079 agency security 4,127 — ( 48 ) 4,079 1,732 360 1,987 4,127 — ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government — ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government security ( 48 ) 4,079 1,732 360 1,987 Non-U.S. government security 21,601 48 ) 4,079 1,732 360 1,987 Non-U.S. government security 21,601 49 360 1,987 Non-U.S. government security 21,601 49 ( 250 ) 21,400 1,987 Non-U.S. government security 21,601 49 ( 250 ) 21,400 — government security 21,601 49 ( 250 ) 21,400 — 3,355 18,045 21,601 49 ( 250 ) 21,400 — 3,355 18,045 Certificates of ( 250 ) 21,400 — 3,355 18,045 Certificates of deposit and 250 ) 21,400 — 3,355 18,045 Certificates of deposit and time of deposit and time deposit 3,074 — — 3,074 1,247 1,330 time deposit 3,074 — — 3,074 1,247 1,330 497 Commercial paper deposit 3,074 — — 3,074 1,247 1,330 497 Commercial paper 2,573 3,074 — — 3,074 1,247 1,330 497 Commercial paper 2,573 — — — 3,074 1,247 1,330 497 Commercial paper 2,573 — — 1,247 1,330 497 Commercial paper 2,573 — — 2,573 1,663 910 Commercial paper 2,573 — — 2,573 1,663 910 — Corporate debt paper 2,573 — — 2,573 1,663 910 — Corporate debt security 2,573 — — 2,573 1,663 910 — Corporate debt security 123,001 910 — Corporate debt security 123,001 152 ( 2,038 ) 121,115 — Corporate debt security 123,001 152 ( 2,038 ) 121,115 — debt security 123,001 152 ( 2,038 ) 121,115 — 25,162 95,953 123,001 152 ( 2,038 ) 121,115 — 25,162 95,953 Municipal security ( 2,038 ) 121,115 — 25,162 95,953 Municipal security 946 — 2,038 ) 121,115 — 25,162 95,953 Municipal security 946 — ( — 25,162 95,953 Municipal security 946 — ( 12 ) 934 Municipal security 946 — ( 12 ) 934 — 178 756 946 — ( 12 ) 934 — 178 756 Mortgage- and ( 12 ) 934 — 178 756 Mortgage- and asset-backed security 12 ) 934 — 178 756 Mortgage- and asset-backed security 18,105 756 Mortgage- and asset-backed security 18,105 8 ( 623 ) 17,490 Mortgage- and asset-backed security 18,105 8 ( 623 ) 17,490 — asset-backed security 18,105 8 ( 623 ) 17,490 — 804 16,686 18,105 8 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 209 ( 623 ) 17,490 — 804 16,686 Subtotal 220,723 209 ( 4,173 17,490 — 804 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 — 804 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 6,255 16,686 Subtotal 220,723 209 ( 4,173 ) 216,759 6,255 39,705 170,799 220,723 209 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 209 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ( 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ) 4,173 ) 216,759 6,255 39,705 170,799 Total ( 3 ) $ 6,255 39,705 170,799 Total ( 3 ) $ 241,180 $ 209 Total ( 3 ) $ 241,180 $ 209 $ ( 4,289 3 ) $ 241,180 $ 209 $ ( 4,289 ) $ 241,180 $ 209 $ ( 4,289 ) $ 237,100 $ 25,913 $ ( 4,289 ) $ 237,100 $ 25,913 $ 40,388 $ 4,289 ) $ 237,100 $ 25,913 $ 40,388 $ 170,799 ( $ 237,100 $ 25,913 $ 40,388 $ 170,799 ( 1 ) $ 25,913 $ 40,388 $ 170,799 ( 1 ) Level 1 $ 40,388 $ 170,799 ( 1 ) Level 1 fair value 170,799 ( 1 ) Level 1 fair value estimate are based asset or liability . ( 2 ) Level 2 fair value . ( 2 ) Level 2 fair value estimate are based asset or liability . ( 3 ) As of September 28 3 ) As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , total cash 2019 and September 29 , 2018 , total cash , cash and marketable security included $ 18.9 billion and $ 20.3 billion $ 18.9 billion and $ 20.3 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” agreement . Apple Inc. | 2019 Form 10-K | 38 The Apple Inc. | 2019 Form 10-K | 38 The Company may | 2019 Form 10-K | 38 The Company may sell certain loss position for le than 12 month and for 12 month than 12 month and for 12 month or greater a of or greater a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 Continuous Unrealized Losses Less than Continuous Unrealized Losses Less than 12 Months 12 Months or Greater Losses Less than 12 Months 12 Months or Greater Total Fair of marketable debt security $ 28,151 $ 28,167 $ 56,318 Unrealized debt security $ 28,151 $ 28,167 $ 56,318 Unrealized loss $ $ 28,151 $ 28,167 $ 56,318 Unrealized loss $ ( 138 56,318 Unrealized loss $ ( 138 ) $ ( 143 ) ( 138 ) $ ( 143 ) $ ( 281 ) ( 143 ) $ ( 281 ) 2018 Continuous Unrealized Losses ) $ ( 281 ) 2018 Continuous Unrealized Losses Less than Continuous Unrealized Losses Less than 12 Months 12 Months or Greater Losses Less than 12 Months 12 Months or Greater Total Fair value of marketable security $ 126,238 $ 60,599 $ 186,837 Unrealized marketable security $ 126,238 $ 60,599 $ 186,837 Unrealized loss $ $ 126,238 $ 60,599 $ 186,837 Unrealized loss $ ( 2,400 186,837 Unrealized loss $ ( 2,400 ) $ ( 1,889 ) ( 2,400 ) $ ( 1,889 ) $ ( 4,289 ) ( 1,889 ) $ ( 4,289 ) The Company typically invests basis . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company doe not value . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company ’ s a carrying value of $ 2.9 billion . Restricted Cash A Cash Flows a of September 28 , 2019 is a follows a of September 28 , 2019 is a follows ( in ( in million ) : 2019 Cash and cash equivalent $ Cash and cash equivalent $ 48,844 Restricted cash included in other included in other current asset 23 Restricted cash included in other included in other non-current asset 1,357 Cash , cash equivalent and equivalent and restricted cash $ 50,224 The Company ’ s restricted , typically for up to 12 month . Apple Inc. | month . Apple Inc. | 2019 Form 10-K | 39 To Apple Inc. | 2019 Form 10-K | 39 To protect the | 2019 Form 10-K | 39 To protect the net investment hedge . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company ’ s expected to be recognized within 23 year . The Company may hedge . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company ’ s expected to be recognized within 8 year . Cash Flow Hedges wa a gain of $ 777 million for 2019 , and of $ 777 million for 2019 , and wa recognized in relates . Apple Inc. | 2019 Form 10-K | 40 The Apple Inc. | 2019 Form 10-K | 40 The Company record | 2019 Form 10-K | 40 The Company record all derivative fair value a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,798 $ 323 $ 2,121 Interest exchange contract $ 1,798 $ 323 $ 2,121 Interest rate contract $ 1,798 $ 323 $ 2,121 Interest rate contract $ 685 2,121 Interest rate contract $ 685 $ — $ 685 Derivative $ 685 $ — $ 685 Derivative liability ( 2 ) $ 685 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 1,341 $ 160 $ 1,501 Interest exchange contract $ 1,341 $ 160 $ 1,501 Interest rate contract $ 1,341 $ 160 $ 1,501 Interest rate contract $ 105 1,501 Interest rate contract $ 105 $ — $ 105 2018 $ 105 $ — $ 105 2018 Fair Value of Derivatives 105 $ — $ 105 2018 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,015 $ 259 $ 1,274 Derivative exchange contract $ 1,015 $ 259 $ 1,274 Derivative liability ( $ 1,015 $ 259 $ 1,274 Derivative liability ( 2 ) $ 1,274 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 543 $ 137 $ 680 Interest exchange contract $ 543 $ 137 $ 680 Interest rate contract $ 543 $ 137 $ 680 Interest rate contract $ 1,456 680 Interest rate contract $ 1,456 $ — $ 1,456 ( $ 1,456 $ — $ 1,456 ( 1 ) The fair $ — $ 1,456 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Flows . Apple Inc. | 2019 Form 10-K | 41 The Apple Inc. | 2019 Form 10-K | 41 The following table | 2019 Form 10-K | 41 The following table show the Consolidated Statements of Operations for 2019 , 2018 and 2017 ( of Operations for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Gains/ ( Losses in million ) : 2019 2018 2017 Gains/ ( Losses ) million ) : 2019 2018 2017 Gains/ ( Losses ) recognized Foreign exchange contract $ ( 959 ) $ 682 $ 1,797 $ ( 959 ) $ 682 $ 1,797 Interest rate contract 959 ) $ 682 $ 1,797 Interest rate contract — 1 1,797 Interest rate contract — 1 7 Total $ ( 959 Interest rate contract — 1 7 Total $ ( 959 ) 1 7 Total $ ( 959 ) $ 683 $ 1,804 $ ( 959 ) $ 683 $ 1,804 Net investment hedge 959 ) $ 683 $ 1,804 Net investment hedge : Foreign Foreign currency debt $ ( 58 ) $ 4 $ 67 $ ( 58 ) $ 4 $ 67 Gains/ ( Losses 58 ) $ 4 $ 67 Gains/ ( Losses ) reclassified Foreign exchange contract $ ( 116 ) $ ( 482 ) ( 116 ) $ ( 482 ) $ 1,958 Interest rate $ ( 482 ) $ 1,958 Interest rate contract ( 7 1,958 Interest rate contract ( 7 ) 1 ( 2 ) rate contract ( 7 ) 1 ( 2 ) Total $ ( 7 ) 1 ( 2 ) Total $ ( 123 2 ) Total $ ( 123 ) $ ( 481 ) ( 123 ) $ ( 481 ) $ 1,956 Gains/ ( $ ( 481 ) $ 1,956 Gains/ ( Losses ) on : Foreign exchange contract $ 1,020 $ ( 168 ) $ contract $ 1,020 $ ( 168 ) $ — Interest rate $ — Interest rate contract 2,068 ( 1,363 ) ( 810 Interest rate contract 2,068 ( 1,363 ) ( 810 ) Total 2,068 ( 1,363 ) ( 810 ) Total $ 3,088 $ ( 810 ) Total $ 3,088 $ ( 1,531 ) $ Total $ 3,088 $ ( 1,531 ) $ ( 810 ) ( 1,531 ) $ ( 810 ) Gains/ ( Losses ) : Marketable security $ ( 1,018 ) $ 167 $ — $ ( 1,018 ) $ 167 $ — Fixed-rate debt ( $ — Fixed-rate debt ( 2,068 ) 1,363 810 Total $ Fixed-rate debt ( 2,068 ) 1,363 810 Total $ ( 3,086 debt ( 2,068 ) 1,363 810 Total $ ( 3,086 ) 1,363 810 Total $ ( 3,086 ) $ 1,530 $ 810 $ ( 3,086 ) $ 1,530 $ 810 The following table 3,086 ) $ 1,530 $ 810 The following table show the derivative instrument a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2019 2018 Notional Amount Credit Risk in million ) : 2019 2018 Notional Amount Credit Risk Amount : Foreign exchange contract $ 61,795 $ 1,798 $ 65,368 $ exchange contract $ 61,795 $ 1,798 $ 65,368 $ 1,015 Interest $ 61,795 $ 1,798 $ 65,368 $ 1,015 Interest rate contract $ 1,798 $ 65,368 $ 1,015 Interest rate contract $ 31,250 1,015 Interest rate contract $ 31,250 $ 685 $ 33,250 $ rate contract $ 31,250 $ 685 $ 33,250 $ — Instruments $ 31,250 $ 685 $ 33,250 $ — Instruments not designated : Foreign exchange contract $ 76,868 $ 323 $ 63,062 $ exchange contract $ 76,868 $ 323 $ 63,062 $ 259 The $ 76,868 $ 323 $ 63,062 $ 259 The notional amount $ 323 $ 63,062 $ 259 The notional amount for outstanding instrument . Apple Inc. | 2019 Form 10-K | 42 The Apple Inc. | 2019 Form 10-K | 42 The Company generally | 2019 Form 10-K | 42 The Company generally enters into Sheets . As of September 28 , 2019 , the net As of September 28 , 2019 , the net cash collateral collateral security arrangement wa $ 1.6 billion , which wa recorded Sheet . As of September 29 , 2018 , the net As of September 29 , 2018 , the net cash collateral collateral security arrangement wa $ 1.0 billion , which wa recorded other . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the potential 2019 and September 29 , 2018 , the potential effect of and derivative liability of $ 2.7 billion and $ 2.1 billion $ 2.7 billion and $ 2.1 billion , respectively , resulting net derivative liability of $ 407 million and a net derivative net derivative asset of $ 138 million , respectively . Accounts arrangement . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had no no customer that individually represented 10 % or more of total receivables . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company ’ cellular network carrier accounted for 51 % and 59 % of accounted for 51 % and 59 % of total trade receivables trade receivables a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , respectively . 2019 and September 29 , 2018 , respectively . Vendor Non-Trade supplier . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 59 % and 14 % . accounted for 59 % and 14 % . As of September % . As of September 29 , 2018 , the Company As of September 29 , 2018 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 62 % and 12 % . accounted for 62 % and 12 % . Note 4 – and 12 % . Note 4 – Consolidated Financial Statement Details statement detail a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : Plant and Equipment , Net 2019 2018 Land and building $ and Equipment , Net 2019 2018 Land and building $ 17,085 2018 Land and building $ 17,085 $ 16,216 Machinery , equipment and building $ 17,085 $ 16,216 Machinery , equipment and internal-use , equipment and internal-use software 69,797 65,982 Leasehold improvement 9,075 8,205 equipment and internal-use software 69,797 65,982 Leasehold improvement 9,075 8,205 Gross software 69,797 65,982 Leasehold improvement 9,075 8,205 Gross property , plant 69,797 65,982 Leasehold improvement 9,075 8,205 Gross property , plant and property , plant and equipment 95,957 90,403 Accumulated depreciation and amortization , plant and equipment 95,957 90,403 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 58,579 ) ( 49,099 ) Total amortization ( 58,579 ) ( 49,099 ) Total property , plant and equipment , net $ 37,378 $ 41,304 Apple Inc. | , net $ 37,378 $ 41,304 Apple Inc. | 2019 Form $ 41,304 Apple Inc. | 2019 Form 10-K | 43 Other Apple Inc. | 2019 Form 10-K | 43 Other Non-Current Liabilities | 2019 Form 10-K | 43 Other Non-Current Liabilities 2019 2018 | 43 Other Non-Current Liabilities 2019 2018 Long-term tax payable $ 43 Other Non-Current Liabilities 2019 2018 Long-term tax payable $ 29,545 2018 Long-term tax payable $ 29,545 $ 33,589 Other non-current liability tax payable $ 29,545 $ 33,589 Other non-current liability 20,958 15,325 $ 33,589 Other non-current liability 20,958 15,325 Total other non-current liability 33,589 Other non-current liability 20,958 15,325 Total other non-current liability $ Total other non-current liability $ 50,503 $ 48,914 Other Income/ ( non-current liability $ 50,503 $ 48,914 Other Income/ ( Expense ) of OI & E for 2019 , 2018 and 2017 ( & E for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Interest and dividend in million ) : 2019 2018 2017 Interest and dividend income million ) : 2019 2018 2017 Interest and dividend income $ Interest and dividend income $ 4,961 $ 5,686 $ 5,201 Interest dividend income $ 4,961 $ 5,686 $ 5,201 Interest expense ( $ 4,961 $ 5,686 $ 5,201 Interest expense ( 3,576 ) $ 5,201 Interest expense ( 3,576 ) ( 3,240 ) ( expense ( 3,576 ) ( 3,240 ) ( 2,323 ) Other ) ( 3,240 ) ( 2,323 ) Other income/ ( expense ( expense ) , net 422 ( 441 ) ( 133 ) , net 422 ( 441 ) ( 133 ) Total 422 ( 441 ) ( 133 ) Total other income/ ( expense ) , net $ 1,807 $ 2,005 $ 2,745 Note , net $ 1,807 $ 2,005 $ 2,745 Note 5 – $ 1,807 $ 2,005 $ 2,745 Note 5 – Income Taxes $ 2,005 $ 2,745 Note 5 – Income Taxes U.S. Tax and Jobs Act On December 22 , 2017 , the U.S. Act On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a effect of the Act during 2019 , in accordance with the Staff Accounting Bulletin No . 118 . Provision for Income Taxes provision for income tax for 2019 , 2018 and 2017 , income tax for 2019 , 2018 and 2017 , consisted of for 2019 , 2018 and 2017 , consisted of the following ( in million ) : 2019 2018 2017 Federal : Current in million ) : 2019 2018 2017 Federal : Current $ million ) : 2019 2018 2017 Federal : Current $ 6,384 2017 Federal : Current $ 6,384 $ 41,425 $ 7,842 Deferred : Current $ 6,384 $ 41,425 $ 7,842 Deferred ( 2,939 $ 6,384 $ 41,425 $ 7,842 Deferred ( 2,939 ) ( 41,425 $ 7,842 Deferred ( 2,939 ) ( 33,819 ) 5,980 Deferred ( 2,939 ) ( 33,819 ) 5,980 Total 3,445 7,606 2,939 ) ( 33,819 ) 5,980 Total 3,445 7,606 13,822 State ( 33,819 ) 5,980 Total 3,445 7,606 13,822 State : Current 33,819 ) 5,980 Total 3,445 7,606 13,822 State : Current 475 ) 5,980 Total 3,445 7,606 13,822 State : Current 475 551 7,606 13,822 State : Current 475 551 259 Deferred ( 67 13,822 State : Current 475 551 259 Deferred ( 67 ) State : Current 475 551 259 Deferred ( 67 ) 48 475 551 259 Deferred ( 67 ) 48 2 Total 408 259 Deferred ( 67 ) 48 2 Total 408 599 261 Deferred ( 67 ) 48 2 Total 408 599 261 Foreign 67 ) 48 2 Total 408 599 261 Foreign : Current ) 48 2 Total 408 599 261 Foreign : Current 3,962 48 2 Total 408 599 261 Foreign : Current 3,962 3,986 599 261 Foreign : Current 3,962 3,986 1,671 Deferred 2,666 1,181 261 Foreign : Current 3,962 3,986 1,671 Deferred 2,666 1,181 ( Foreign : Current 3,962 3,986 1,671 Deferred 2,666 1,181 ( 16 Current 3,962 3,986 1,671 Deferred 2,666 1,181 ( 16 ) Total 3,962 3,986 1,671 Deferred 2,666 1,181 ( 16 ) Total 6,628 1,671 Deferred 2,666 1,181 ( 16 ) Total 6,628 5,167 1,655 1,181 ( 16 ) Total 6,628 5,167 1,655 Provision for income ( 16 ) Total 6,628 5,167 1,655 Provision for income tax 16 ) Total 6,628 5,167 1,655 Provision for income tax $ Provision for income tax $ 10,481 $ 13,372 $ 15,738 The income tax $ 10,481 $ 13,372 $ 15,738 The foreign provision $ 10,481 $ 13,372 $ 15,738 The foreign provision for income foreign pre-tax earnings of $ 44.3 billion , $ 48.0 billion $ 44.3 billion , $ 48.0 billion and $ 44.7 billion $ 48.0 billion and $ 44.7 billion in 2019 , 2018 and $ 44.7 billion in 2019 , 2018 and 2017 , 44.7 billion in 2019 , 2018 and 2017 , respectively . in 2019 , 2018 and 2017 , respectively . Apple Inc. respectively . Apple Inc. | 2019 Form 10-K | 44 A Apple Inc. | 2019 Form 10-K | 44 A reconciliation of | 2019 Form 10-K | 44 A reconciliation of the provision federal income tax rate ( 21 % in 2019 ; 24.5 rate ( 21 % in 2019 ; 24.5 % in 2018 21 % in 2019 ; 24.5 % in 2018 ; 35 2019 ; 24.5 % in 2018 ; 35 % in 2017 24.5 % in 2018 ; 35 % in 2017 ) to 2018 ; 35 % in 2017 ) to income before provision provision for income tax for 2019 , 2018 and 2017 , income tax for 2019 , 2018 and 2017 , is a for 2019 , 2018 and 2017 , is a follows ( dollar in million ) : 2019 2018 2017 Computed expected tax in million ) : 2019 2018 2017 Computed expected tax $ million ) : 2019 2018 2017 Computed expected tax $ 13,805 2017 Computed expected tax $ 13,805 $ 17,890 $ 22,431 State expected tax $ 13,805 $ 17,890 $ 22,431 State tax , $ 13,805 $ 17,890 $ 22,431 State tax , net of , net of federal effect 423 271 185 Impacts of the net of federal effect 423 271 185 Impacts of the Act of federal effect 423 271 185 Impacts of the Act — Impacts of the Act — 1,515 — Earnings of foreign subsidiary Earnings of foreign subsidiary ( 2,625 ) ( 5,606 ) ( subsidiary ( 2,625 ) ( 5,606 ) ( 6,135 ) Research ) ( 5,606 ) ( 6,135 ) Research and development credit development credit , net ( 548 ) ( 560 ) ( net ( 548 ) ( 560 ) ( 678 ) Excess ) ( 560 ) ( 678 ) Excess tax benefit from benefit from equity award ( 639 ) ( 675 ) — award ( 639 ) ( 675 ) — Other 65 537 ( 675 ) — Other 65 537 ( 65 ) Provision 675 ) — Other 65 537 ( 65 ) Provision for — Other 65 537 ( 65 ) Provision for income tax Provision for income tax $ 10,481 $ 13,372 $ 15,738 Effective income tax $ 10,481 $ 13,372 $ 15,738 Effective tax rate $ 10,481 $ 13,372 $ 15,738 Effective tax rate 15.9 % $ 15,738 Effective tax rate 15.9 % 18.3 % 24.6 % Effective tax rate 15.9 % 18.3 % 24.6 % The Company rate 15.9 % 18.3 % 24.6 % The Company ’ s market value . Prior to 2018 , the Company reflected net , which amounted to $ 620 million in 2017 . Deferred to $ 620 million in 2017 . Deferred Tax Assets and and Liabilities As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the significant 2019 and September 29 , 2018 , the significant component of ( in million ) : 2019 2018 Deferred tax asset : in million ) : 2019 2018 Deferred tax asset : Amortization : Amortization and depreciation $ 11,433 $ 137 Accrued liability and and depreciation $ 11,433 $ 137 Accrued liability and other reserve Accrued liability and other reserve 5,389 3,151 Deferred revenue 1,372 1,141 liability and other reserve 5,389 3,151 Deferred revenue 1,372 1,141 Share-based reserve 5,389 3,151 Deferred revenue 1,372 1,141 Share-based compensation 749 513 5,389 3,151 Deferred revenue 1,372 1,141 Share-based compensation 749 513 Unrealized revenue 1,372 1,141 Share-based compensation 749 513 Unrealized loss — 871 1,372 1,141 Share-based compensation 749 513 Unrealized loss — 871 Other 749 513 Unrealized loss — 871 Other 697 797 Total deferred Unrealized loss — 871 Other 697 797 Total deferred tax asset loss — 871 Other 697 797 Total deferred tax asset , deferred tax asset , net 19,640 6,610 Deferred tax liability : tax asset , net 19,640 6,610 Deferred tax liability : Minimum Minimum tax on foreign earnings 10,809 — Earnings of foreign subsidiary — Earnings of foreign subsidiary 330 275 Other 456 501 Total Earnings of foreign subsidiary 330 275 Other 456 501 Total deferred foreign subsidiary 330 275 Other 456 501 Total deferred tax liability subsidiary 330 275 Other 456 501 Total deferred tax liability 11,595 501 Total deferred tax liability 11,595 776 Net deferred tax assets/ Total deferred tax liability 11,595 776 Net deferred tax assets/ ( assets/ ( liability ) $ 8,045 $ 5,834 Deferred tax asset liability ) $ 8,045 $ 5,834 Deferred tax asset and liability settled . Apple Inc. | 2019 Form 10-K | 45 Uncertain Apple Inc. | 2019 Form 10-K | 45 Uncertain Tax Positions | 2019 Form 10-K | 45 Uncertain Tax Positions As of Tax Positions As of September 28 , 2019 , the total As of September 28 , 2019 , the total amount of unrecognized tax benefit wa $ 15.6 billion , of which $ billion , of which $ 8.6 billion , if recognized , rate . As of September 29 , 2018 , the total As of September 29 , 2018 , the total amount of unrecognized tax benefit wa $ 9.7 billion , of which $ billion , of which $ 7.4 billion , if recognized , interest and penalty , for 2019 , 2018 and 2017 , penalty , for 2019 , 2018 and 2017 , is a for 2019 , 2018 and 2017 , is a follows ( ( in million ) : 2019 2018 2017 Beginning balance $ in million ) : 2019 2018 2017 Beginning balance $ 9,694 million ) : 2019 2018 2017 Beginning balance $ 9,694 $ 2018 2017 Beginning balance $ 9,694 $ 8,407 $ 7,724 Increases Beginning balance $ 9,694 $ 8,407 $ 7,724 Increases related to $ 9,694 $ 8,407 $ 7,724 Increases related to tax position taken during a prior year 5,845 2,431 333 Decreases related to during a prior year 5,845 2,431 333 Decreases related to tax a prior year 5,845 2,431 333 Decreases related to tax position during a prior year ( 686 ) ( 2,212 ) ( year ( 686 ) ( 2,212 ) ( 952 ) Increases ) ( 2,212 ) ( 952 ) Increases related to tax taken during the current year 1,697 1,824 1,880 Decreases related to during the current year 1,697 1,824 1,880 Decreases related to settlement the current year 1,697 1,824 1,880 Decreases related to settlement with settlement with taxing authority ( 852 ) ( 756 ) ( authority ( 852 ) ( 756 ) ( 539 ) Decreases ) ( 756 ) ( 539 ) Decreases related to expiration the statute of limitation ( 79 ) — ( 39 ) ( 79 ) — ( 39 ) Ending balance $ 15,619 39 ) Ending balance $ 15,619 $ 9,694 $ 8,407 The Ending balance $ 15,619 $ 9,694 $ 8,407 The Company is $ 15,619 $ 9,694 $ 8,407 The Company is subject to it review of the year 2013 through 2015 in 2018 , of the year 2013 through 2015 in 2018 , and all year 2013 through 2015 in 2018 , and all year before , and all year before 2016 are closed . Tax year closed . Tax year after 2014 remain open in certain major could decrease in the next 12 month by a much a by a much a $ 2.0 billion . Interest and Penalties tax . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the total 2019 and September 29 , 2018 , the total amount of and penalty accrued wa $ 1.3 billion and $ 1.4 billion $ 1.3 billion and $ 1.4 billion , respectively . The interest and penalty expense in 2019 , 2018 and 2017 of penalty expense in 2019 , 2018 and 2017 of $ 73 in 2019 , 2018 and 2017 of $ 73 million , 2018 and 2017 of $ 73 million , $ 489 million $ 73 million , $ 489 million and $ 238 million $ 489 million and $ 238 million , respectively . European State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . The period June 2003 through December 2014 . The recovery amount wa wa calculated to be € 13.1 billion , plus interest of , plus interest of € 1.2 billion . During the fourth During the fourth quarter of 2019 , the Irish Minister for the recovery amount by € 190 million due to tax paid adjusted recovery amount of € 12.9 billion a of September 28 12.9 billion a of September 28 , 2019 . Irish legislative a of September 28 , 2019 . Irish legislative change , , effective a of January 2015 , eliminated the application of Act . As of September 28 , 2019 , the entire As of September 28 , 2019 , the entire adjusted recovery Marketable Securities section of Note 3 , “ Financial Instruments ” information . Apple Inc. | 2019 Form 10-K | 46 Note Apple Inc. | 2019 Form 10-K | 46 Note 6 – | 2019 Form 10-K | 46 Note 6 – Debt Commercial Form 10-K | 46 Note 6 – Debt Commercial Paper The repurchase . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the Company 2019 and September 29 , 2018 , the Company had $ , the Company had $ 6.0 billion and $ 12.0 billion $ 6.0 billion and $ 12.0 billion of Commercial Paper outstanding ’ s Commercial Paper wa 2.24 % and 2.18 % a Paper wa 2.24 % and 2.18 % a of September 28 2.18 % a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , respectively . 2019 and September 29 , 2018 , respectively . The following maturity of Commercial Paper for 2019 , 2018 and 2017 ( Commercial Paper for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Maturities 90 day in million ) : 2019 2018 2017 Maturities 90 day or million ) : 2019 2018 2017 Maturities 90 day or le : 2019 2018 2017 Maturities 90 day or le : Proceeds paper , net $ ( 3,248 ) $ 1,044 $ ( $ ( 3,248 ) $ 1,044 $ ( 1,782 ) Maturities ) $ 1,044 $ ( 1,782 ) Maturities greater than 90 1,782 ) Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 13,874 14,555 17,932 Repayments of commercial Proceeds from commercial paper 13,874 14,555 17,932 Repayments of commercial paper from commercial paper 13,874 14,555 17,932 Repayments of commercial paper ( Repayments of commercial paper ( 16,603 ) ( 15,636 ) ( paper ( 16,603 ) ( 15,636 ) ( 12,298 ) Proceeds ) ( 15,636 ) ( 12,298 ) Proceeds from/ ( Repayments commercial paper , net ( 2,729 ) ( 1,081 ) 5,634 net ( 2,729 ) ( 1,081 ) 5,634 Total proceeds from/ 2,729 ) ( 1,081 ) 5,634 Total proceeds from/ ( repayment paper , net $ ( 5,977 ) $ ( 37 ) ( 5,977 ) $ ( 37 ) $ 3,852 Term Debt $ ( 37 ) $ 3,852 Term Debt As of September Term Debt As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had outstanding aggregate principal amount of $ 101.7 billion ( collectively the “ term debt a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 : Maturities ( 2019 and September 29 , 2018 : Maturities ( calendar year Maturities ( calendar year ) 2019 2018 Amount ( in million ( calendar year ) 2019 2018 Amount ( in million ) million ) Effective Interest Rate 2013–2018 debt issuance : Floating-rate note debt issuance : Floating-rate note 2020 – 2022 $ 4,250 2.25 : Floating-rate note 2020 – 2022 $ 4,250 2.25 % – note 2020 – 2022 $ 4,250 2.25 % – 3.28 % 2020 – 2022 $ 4,250 2.25 % – 3.28 % $ $ 4,250 2.25 % – 3.28 % $ 7,107 1.87 % % – 3.28 % $ 7,107 1.87 % – 3.44 % – 3.28 % $ 7,107 1.87 % – 3.44 % Fixed-rate $ 7,107 1.87 % – 3.44 % Fixed-rate 0.350 % – % – 3.44 % Fixed-rate 0.350 % – 4.650 % note % Fixed-rate 0.350 % – 4.650 % note 2019 – 2047 % – 4.650 % note 2019 – 2047 90,429 0.28 % 4.650 % note 2019 – 2047 90,429 0.28 % – 4.78 % note 2019 – 2047 90,429 0.28 % – 4.78 % note 2019 – 2047 90,429 0.28 % – 4.78 % 97,086 2047 90,429 0.28 % – 4.78 % 97,086 0.28 % – 0.28 % – 4.78 % 97,086 0.28 % – 4.78 % % – 4.78 % 97,086 0.28 % – 4.78 % 2019 % 97,086 0.28 % – 4.78 % 2019 debt issuance : 0.28 % – 4.78 % 2019 debt issuance : Fixed-rate 1.700 2019 debt issuance : Fixed-rate 1.700 % – 2.950 % note : Fixed-rate 1.700 % – 2.950 % note 2022 – 2049 % – 2.950 % note 2022 – 2049 7,000 1.71 % 2.950 % note 2022 – 2049 7,000 1.71 % – 2.99 % note 2022 – 2049 7,000 1.71 % – 2.99 % note 2022 – 2049 7,000 1.71 % – 2.99 % — 2049 7,000 1.71 % – 2.99 % — — % Total — % Total term debt 101,679 104,193 Unamortized premium/ ( discount % Total term debt 101,679 104,193 Unamortized premium/ ( discount ) issuance cost , net ( 224 ) ( 218 ) Hedge net ( 224 ) ( 218 ) Hedge accounting fair value Hedge accounting fair value adjustment 612 ( 1,456 ) Less : fair value adjustment 612 ( 1,456 ) Less : Current portion portion of term debt ( 10,260 ) ( 8,784 ) Total debt ( 10,260 ) ( 8,784 ) Total non-current portion of portion of term debt $ 91,807 $ 93,735 To manage interest term debt $ 91,807 $ 93,735 To manage interest rate risk operation . As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the carrying 2019 and September 29 , 2018 , the carrying value of net investment hedge wa $ 1.0 billion and $ 811 million $ 1.0 billion and $ 811 million , respectively . For Financial Instruments section of Note 3 , “ Financial Instruments . . The Company recognized $ 3.2 billion , $ 3.0 billion $ 3.2 billion , $ 3.0 billion and $ 2.2 billion $ 3.0 billion and $ 2.2 billion of interest cost on on it term debt for 2019 , 2018 and 2017 , term debt for 2019 , 2018 and 2017 , respectively . for 2019 , 2018 and 2017 , respectively . Apple Inc. respectively . Apple Inc. | 2019 Form 10-K | 47 The Apple Inc. | 2019 Form 10-K | 47 The future principal | 2019 Form 10-K | 47 The future principal payment for s Notes a of September 28 , 2019 are a follows a of September 28 , 2019 are a follows ( in ( in million ) : 2020 $ 10,270 2021 8,750 2022 million ) : 2020 $ 10,270 2021 8,750 2022 9,528 2023 ) : 2020 $ 10,270 2021 8,750 2022 9,528 2023 9,290 : 2020 $ 10,270 2021 8,750 2022 9,528 2023 9,290 2024 2020 $ 10,270 2021 8,750 2022 9,528 2023 9,290 2024 10,039 $ 10,270 2021 8,750 2022 9,528 2023 9,290 2024 10,039 Thereafter 10,270 2021 8,750 2022 9,528 2023 9,290 2024 10,039 Thereafter 53,802 2021 8,750 2022 9,528 2023 9,290 2024 10,039 Thereafter 53,802 Total 8,750 2022 9,528 2023 9,290 2024 10,039 Thereafter 53,802 Total term 2022 9,528 2023 9,290 2024 10,039 Thereafter 53,802 Total term debt 2023 9,290 2024 10,039 Thereafter 53,802 Total term debt $ 101,679 53,802 Total term debt $ 101,679 As of September 28 , $ 101,679 As of September 28 , 2019 and September 29 As of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the fair 2019 and September 29 , 2018 , the fair value of Notes , based on Level 2 input , wa $ 107.5 2 input , wa $ 107.5 billion and $ 103.2 billion $ 107.5 billion and $ 103.2 billion , respectively . Note billion , respectively . Note 7 – Shareholders ’ Equity Share Share Repurchase Program On April 30 , 2019 , the Company Program On April 30 , 2019 , the Company announced the repurchase program authorization from $ 100 billion to $ 175 billion $ 100 billion to $ 175 billion of the Company ’ stock , of which $ 96.1 billion had been utilized a been utilized a of September 28 , 2019 . During 2019 a of September 28 , 2019 . During 2019 , the 28 , 2019 . During 2019 , the Company repurchased 345.2 2019 , the Company repurchased 345.2 million share of it common it common stock for $ 67.1 billion , including 62.0 million $ 67.1 billion , including 62.0 million share delivered under a share delivered under a $ 12.0 billion accelerated share repurchase arrangement share repurchase arrangement dated February 2019 , which settled in August , which settled in August 2019 . The Company ’ s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2019 , 2018 and 2017 ( common stock for 2019 , 2018 and 2017 ( in thousand for 2019 , 2018 and 2017 ( in thousand ) : ( in thousand ) : 2019 2018 2017 Common stock outstanding in thousand ) : 2019 2018 2017 Common stock outstanding , thousand ) : 2019 2018 2017 Common stock outstanding , beginning stock outstanding , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased outstanding , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased ( , beginning balance 4,754,986 5,126,201 5,336,166 Common stock repurchased ( 345,205 5,336,166 Common stock repurchased ( 345,205 ) ( 405,549 ) ( repurchased ( 345,205 ) ( 405,549 ) ( 246,496 ) Common ) ( 405,549 ) ( 246,496 ) Common stock issued , share withheld for employee tax 33,455 34,334 36,531 Common stock outstanding withheld for employee tax 33,455 34,334 36,531 Common stock outstanding , for employee tax 33,455 34,334 36,531 Common stock outstanding , ending stock outstanding , ending balance 4,443,236 4,754,986 5,126,201 Note 8 – outstanding , ending balance 4,443,236 4,754,986 5,126,201 Note 8 – Comprehensive , ending balance 4,443,236 4,754,986 5,126,201 Note 8 – Comprehensive Income balance 4,443,236 4,754,986 5,126,201 Note 8 – Comprehensive Income The Company statement line item , for 2019 and 2018 ( in million item , for 2019 and 2018 ( in million ) : Components Financial Statement Line Item 2019 2018 Unrealized ( gain ) Financial Statement Line Item 2019 2018 Unrealized ( gain ) /losses Total net sale $ ( 206 ) $ 214 Total cost $ ( 206 ) $ 214 Total cost of sale ( Total cost of sale ( 482 ) ( 70 ) Other sale ( 482 ) ( 70 ) Other income/ ( expense ( expense ) , net 784 344 Interest rate contract Other expense ) , net 784 344 Interest rate contract Other income/ ( expense ) , net 7 ( 2 ) 103 486 ) , net 7 ( 2 ) 103 486 Unrealized ( net 7 ( 2 ) 103 486 Unrealized ( gain ) 7 ( 2 ) 103 486 Unrealized ( gain ) /losses ( expense ) , net 31 ( 20 ) Total amount ) , net 31 ( 20 ) Total amount reclassified from amount reclassified from AOCI $ 134 $ 466 Apple Inc. | from AOCI $ 134 $ 466 Apple Inc. | 2019 Form $ 466 Apple Inc. | 2019 Form 10-K | 48 The Apple Inc. | 2019 Form 10-K | 48 The following table | 2019 Form 10-K | 48 The following table show the in AOCI by component for 2019 and 2018 ( in million by component for 2019 and 2018 ( in million ) : Total Balances a of September 30 , 2017 $ ( 354 a of September 30 , 2017 $ ( 354 ) $ 30 , 2017 $ ( 354 ) $ ( 124 ) ( 354 ) $ ( 124 ) $ 328 $ ( $ ( 124 ) $ 328 $ ( 150 ) Other ) $ 328 $ ( 150 ) Other comprehensive income/ ( loss ) before reclassification ( 524 ) 672 ( 4,563 ) before reclassification ( 524 ) 672 ( 4,563 ) ( 4,415 ( 524 ) 672 ( 4,563 ) ( 4,415 ) Amounts 672 ( 4,563 ) ( 4,415 ) Amounts reclassified from AOCI Amounts reclassified from AOCI — 486 ( 20 ) 466 Tax from AOCI — 486 ( 20 ) 466 Tax effect ( — 486 ( 20 ) 466 Tax effect ( 1 ) ) 466 Tax effect ( 1 ) ( 253 ) 1,177 effect ( 1 ) ( 253 ) 1,177 923 Other comprehensive 1 ) ( 253 ) 1,177 923 Other comprehensive income/ ( ) ( 253 ) 1,177 923 Other comprehensive income/ ( loss income/ ( loss ) ( 525 ) 905 ( 3,406 ) loss ) ( 525 ) 905 ( 3,406 ) ( 3,026 ( 525 ) 905 ( 3,406 ) ( 3,026 ) Cumulative 905 ( 3,406 ) ( 3,026 ) Cumulative effect of change change in accounting principle ( 176 ) 29 ( 131 ) accounting principle ( 176 ) 29 ( 131 ) ( 278 ( 176 ) 29 ( 131 ) ( 278 ) Balances 29 ( 131 ) ( 278 ) Balances a of September ) Balances a of September 29 , 2018 ( 1,055 ) a of September 29 , 2018 ( 1,055 ) 810 ( September 29 , 2018 ( 1,055 ) 810 ( 3,209 ) , 2018 ( 1,055 ) 810 ( 3,209 ) ( 3,454 ( 1,055 ) 810 ( 3,209 ) ( 3,454 ) Other 810 ( 3,209 ) ( 3,454 ) Other comprehensive income/ ( loss ) before reclassification ( 421 ) ( 949 ) 4,854 reclassification ( 421 ) ( 949 ) 4,854 3,484 Amounts reclassified 421 ) ( 949 ) 4,854 3,484 Amounts reclassified from AOCI ) ( 949 ) 4,854 3,484 Amounts reclassified from AOCI — Amounts reclassified from AOCI — 103 31 134 Tax effect 13 reclassified from AOCI — 103 31 134 Tax effect 13 208 from AOCI — 103 31 134 Tax effect 13 208 ( 103 31 134 Tax effect 13 208 ( 1,058 ) ( 31 134 Tax effect 13 208 ( 1,058 ) ( 837 Tax effect 13 208 ( 1,058 ) ( 837 ) Other 208 ( 1,058 ) ( 837 ) Other comprehensive income/ ( income/ ( loss ) ( 408 ) ( 638 ) 3,827 ) ( 408 ) ( 638 ) 3,827 2,781 Cumulative effect 408 ) ( 638 ) 3,827 2,781 Cumulative effect of change ) ( 638 ) 3,827 2,781 Cumulative effect of change in change in accounting principle ( 1 ) — — 89 89 ( 1 ) — — 89 89 Balances a of September 1 ) — — 89 89 Balances a of September 28 89 Balances a of September 28 , 2019 $ ( 1,463 a of September 28 , 2019 $ ( 1,463 ) $ 28 , 2019 $ ( 1,463 ) $ 172 $ 707 $ ( 1,463 ) $ 172 $ 707 $ ( 584 1,463 ) $ 172 $ 707 $ ( 584 ) ( 172 $ 707 $ ( 584 ) ( 1 ) Refer $ ( 584 ) ( 1 ) Refer to Note 1 1 ) Refer to Note 1 , “ Summary of Significant ’ s adoption of ASU 2016-01 in 2019 . Note 9 adoption of ASU 2016-01 in 2019 . Note 9 – Benefit 2016-01 in 2019 . Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four . RSUs granted under the 2014 Plan reduce the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 28 , 2019 , approximately 246.4 As of September 28 , 2019 , approximately 246.4 million share 28 , 2019 , approximately 246.4 million share were reserved for for future issuance under the 2014 Plan . Apple Inc. Non-Employee Director Plan expires on November 12 , 2027 . All RSUs expires on November 12 , 2027 . All RSUs granted under vest . As of September 28 , 2019 , approximately 1.1 As of September 28 , 2019 , approximately 1.1 million share 28 , 2019 , approximately 1.1 million share were reserved for Plan . Apple Inc. | 2019 Form 10-K | 49 Rule Apple Inc. | 2019 Form 10-K | 49 Rule 10b5-1 Trading | 2019 Form 10-K | 49 Rule 10b5-1 Trading Plans During Form 10-K | 49 Rule 10b5-1 Trading Plans During the three the three month ended September 28 , 2019 , Section 16 month ended September 28 , 2019 , Section 16 officer Timothy 28 , 2019 , Section 16 officer Timothy D. Cook , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 28 , 2019 , approximately 31.1 As of September 28 , 2019 , approximately 31.1 million share 28 , 2019 , approximately 31.1 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,000 for calendar year 2019 ) $ 19,000 for calendar year 2019 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ up to a maximum of 6 % of the employee ’ activity and related information for 2019 , 2018 and 2017 , related information for 2019 , 2018 and 2017 , is a for 2019 , 2018 and 2017 , is a follows : ) Balance a of September 24 , 2016 99,089 $ 97.54 a of September 24 , 2016 99,089 $ 97.54 RSUs granted of September 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 24 , 2016 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 99,089 $ 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 97.54 RSUs granted 50,112 $ 121.65 RSUs vested ( 45,735 ) $ 121.65 RSUs vested ( 45,735 ) $ 95.48 RSUs canceled vested ( 45,735 ) $ 95.48 RSUs canceled ( 5,895 ) $ 95.48 RSUs canceled ( 5,895 ) $ 106.87 Balance a canceled ( 5,895 ) $ 106.87 Balance a of September 30 106.87 Balance a of September 30 , 2017 97,571 $ 110.33 a of September 30 , 2017 97,571 $ 110.33 RSUs granted of September 30 , 2017 97,571 $ 110.33 RSUs granted 45,351 30 , 2017 97,571 $ 110.33 RSUs granted 45,351 $ 162.86 97,571 $ 110.33 RSUs granted 45,351 $ 162.86 RSUs vested ( 110.33 RSUs granted 45,351 $ 162.86 RSUs vested ( 44,718 ) $ 162.86 RSUs vested ( 44,718 ) $ 111.24 RSUs canceled vested ( 44,718 ) $ 111.24 RSUs canceled ( 6,049 ) $ 111.24 RSUs canceled ( 6,049 ) $ 127.82 Balance a canceled ( 6,049 ) $ 127.82 Balance a of September 29 127.82 Balance a of September 29 , 2018 92,155 $ 134.60 a of September 29 , 2018 92,155 $ 134.60 RSUs granted of September 29 , 2018 92,155 $ 134.60 RSUs granted 36,852 29 , 2018 92,155 $ 134.60 RSUs granted 36,852 $ 215.95 92,155 $ 134.60 RSUs granted 36,852 $ 215.95 RSUs vested ( 134.60 RSUs granted 36,852 $ 215.95 RSUs vested ( 42,088 ) $ 215.95 RSUs vested ( 42,088 ) $ 135.21 RSUs canceled vested ( 42,088 ) $ 135.21 RSUs canceled ( 5,402 ) $ 135.21 RSUs canceled ( 5,402 ) $ 162.85 Balance a canceled ( 5,402 ) $ 162.85 Balance a of September 28 162.85 Balance a of September 28 , 2019 81,517 $ 169.18 a of September 28 , 2019 81,517 $ 169.18 $ 17,838 of September 28 , 2019 81,517 $ 169.18 $ 17,838 The 28 , 2019 81,517 $ 169.18 $ 17,838 The fair value 2019 81,517 $ 169.18 $ 17,838 The fair value a of date of RSUs wa $ 8.6 billion , $ 7.6 billion $ 8.6 billion , $ 7.6 billion and $ 6.1 billion $ 7.6 billion and $ 6.1 billion for 2019 , 2018 and $ 6.1 billion for 2019 , 2018 and 2017 , 6.1 billion for 2019 , 2018 and 2017 , respectively . for 2019 , 2018 and 2017 , respectively . The majority of RSUs that vested in 2019 , 2018 and 2017 were that vested in 2019 , 2018 and 2017 were net share in 2019 , 2018 and 2017 were net share settled such total share withheld were approximately 14.8 million , 16.0 million and were approximately 14.8 million , 16.0 million and 15.4 million for million , 16.0 million and 15.4 million for 2019 , 2018 million and 15.4 million for 2019 , 2018 and 2017 , 15.4 million for 2019 , 2018 and 2017 , respectively , for 2019 , 2018 and 2017 , respectively , and were to taxing authority were $ 3.0 billion , $ 2.7 billion $ 3.0 billion , $ 2.7 billion and $ 2.0 billion $ 2.7 billion and $ 2.0 billion in 2019 , 2018 and $ 2.0 billion in 2019 , 2018 and 2017 , 2.0 billion in 2019 , 2018 and 2017 , respectively . in 2019 , 2018 and 2017 , respectively . These net Company . Apple Inc. | 2019 Form 10-K | 50 Share-Based Apple Inc. | 2019 Form 10-K | 50 Share-Based Compensation The | 2019 Form 10-K | 50 Share-Based Compensation The following table Consolidated Statements of Operations for 2019 , 2018 and 2017 ( of Operations for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Share-based compensation expense in million ) : 2019 2018 2017 Share-based compensation expense $ million ) : 2019 2018 2017 Share-based compensation expense $ 6,068 2017 Share-based compensation expense $ 6,068 $ 5,340 $ 4,840 Income compensation expense $ 6,068 $ 5,340 $ 4,840 Income tax benefit $ 6,068 $ 5,340 $ 4,840 Income tax benefit related to share-based compensation expense $ ( 1,967 ) $ ( 1,893 ) ( 1,967 ) $ ( 1,893 ) $ ( 1,632 ) ( 1,893 ) $ ( 1,632 ) As of September 28 1,632 ) As of September 28 , 2019 , the total As of September 28 , 2019 , the total unrecognized compensation and stock option wa $ 10.5 billion , which the Company over a weighted-average period of 2.5 year . Note 10 – of 2.5 year . Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2019 , 2018 and 2017 ( related cost for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Beginning accrued warranty in million ) : 2019 2018 2017 Beginning accrued warranty and million ) : 2019 2018 2017 Beginning accrued warranty and related warranty and related cost $ 3,692 $ 3,834 $ 3,702 Cost related cost $ 3,692 $ 3,834 $ 3,702 Cost of warranty $ 3,692 $ 3,834 $ 3,702 Cost of warranty claim ( Cost of warranty claim ( 3,857 ) ( 4,115 ) ( claim ( 3,857 ) ( 4,115 ) ( 4,322 ) Accruals ) ( 4,115 ) ( 4,322 ) Accruals for product warranty ) Accruals for product warranty 3,735 3,973 4,454 Ending accrued warranty Accruals for product warranty 3,735 3,973 4,454 Ending accrued warranty and for product warranty 3,735 3,973 4,454 Ending accrued warranty and related warranty and related cost $ 3,570 $ 3,692 $ 3,834 The related cost $ 3,570 $ 3,692 $ 3,834 The Company offer $ 3,570 $ 3,692 $ 3,834 The Company offer an iPhone arrangement . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company ’ s noncancelable operating lease were $ 10.8 billion . The Company ’ have original term not exceeding 10 year and generally contain multi-year option . Apple Inc. | 2019 Form 10-K | 51 Rent Apple Inc. | 2019 Form 10-K | 51 Rent expense under | 2019 Form 10-K | 51 Rent expense under all operating noncancelable lease , wa $ 1.3 billion , $ 1.2 billion $ 1.3 billion , $ 1.2 billion and $ 1.1 billion $ 1.2 billion and $ 1.1 billion in 2019 , 2018 and $ 1.1 billion in 2019 , 2018 and 2017 , 1.1 billion in 2019 , 2018 and 2017 , respectively . in 2019 , 2018 and 2017 , respectively . Future minimum one year a of September 28 , 2019 , are a a of September 28 , 2019 , are a follows ( ( in million ) : 2020 $ 1,306 2021 1,276 2022 million ) : 2020 $ 1,306 2021 1,276 2022 1,137 2023 ) : 2020 $ 1,306 2021 1,276 2022 1,137 2023 912 : 2020 $ 1,306 2021 1,276 2022 1,137 2023 912 2024 2020 $ 1,306 2021 1,276 2022 1,137 2023 912 2024 834 $ 1,306 2021 1,276 2022 1,137 2023 912 2024 834 Thereafter 1,306 2021 1,276 2022 1,137 2023 912 2024 834 Thereafter 5,373 2021 1,276 2022 1,137 2023 912 2024 834 Thereafter 5,373 Total 1,276 2022 1,137 2023 912 2024 834 Thereafter 5,373 Total $ 2022 1,137 2023 912 2024 834 Thereafter 5,373 Total $ 10,838 2023 912 2024 834 Thereafter 5,373 Total $ 10,838 Unconditional Purchase 834 Thereafter 5,373 Total $ 10,838 Unconditional Purchase Obligations The Company one year a of September 28 , 2019 , are a a of September 28 , 2019 , are a follows ( ( in million ) : 2020 $ 2,476 2021 2,386 2022 million ) : 2020 $ 2,476 2021 2,386 2022 1,859 2023 ) : 2020 $ 2,476 2021 2,386 2022 1,859 2023 1,162 : 2020 $ 2,476 2021 2,386 2022 1,859 2023 1,162 2024 2020 $ 2,476 2021 2,386 2022 1,859 2023 1,162 2024 218 $ 2,476 2021 2,386 2022 1,859 2023 1,162 2024 218 Thereafter 2,476 2021 2,386 2022 1,859 2023 1,162 2024 218 Thereafter 110 2021 2,386 2022 1,859 2023 1,162 2024 218 Thereafter 110 Total 2,386 2022 1,859 2023 1,162 2024 218 Thereafter 110 Total $ 2022 1,859 2023 1,162 2024 218 Thereafter 110 Total $ 8,211 2023 1,162 2024 218 Thereafter 110 Total $ 8,211 Contingencies The 218 Thereafter 110 Total $ 8,211 Contingencies The Company is subject ” ) . On September 30 , 2016 , a jury . On September 30 , 2016 , a jury returned a and awarded damage of $ 302 million , which later increased which later increased to $ 440 million in post-trial proceeding . ” ) . On April 11 , 2018 , a jury . On April 11 , 2018 , a jury returned a and awarded damage of $ 503 million . VirnetX II is invalidity proceeding . On January 15 , 2019 , the Federal . On January 15 , 2019 , the Federal Circuit affirmed further appeal . On July 8 , 2019 , the Federal . On July 8 , 2019 , the Federal Circuit remanded further proceeding . On August 1 , 2019 , the Federal . On August 1 , 2019 , the Federal Circuit affirmed-in-part matter . Apple Inc. | 2019 Form 10-K | 52 Qualcomm Apple Inc. | 2019 Form 10-K | 52 Qualcomm On January | 2019 Form 10-K | 52 Qualcomm On January 20 , | 52 Qualcomm On January 20 , 2017 , the Company Qualcomm On January 20 , 2017 , the Company filed a of the second quarter of 2017 . Following the Company ’ particular country . On April 16 , 2019 , the Company . On April 16 , 2019 , the Company and Qualcomm certain iPhones in iOS update 10.2.1 and 11.2 . The claim in iOS update 10.2.1 and 11.2 . The claim seek monetary non-monetary relief . On April 5 , 2018 , several U.S. . On April 5 , 2018 , several U.S. federal action feature introduced with iOS update 10.2.1 and 11.2 wa intended to with iOS update 10.2.1 and 11.2 wa intended to , and French Competition Authority In June 2019 , the French Competition Authority before the FCA on October 15 , 2019 . The Company FCA on October 15 , 2019 . The Company is awaiting include a fine . Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant purpose . Apple Inc. | 2019 Form 10-K | 53 The Apple Inc. | 2019 Form 10-K | 53 The following table | 2019 Form 10-K | 53 The following table show information information by reportable segment for 2019 , 2018 and 2017 ( reportable segment for 2019 , 2018 and 2017 ( in million for 2019 , 2018 and 2017 ( in million ) : ( in million ) : 2019 2018 2017 Americas : Net in million ) : 2019 2018 2017 Americas : Net sale million ) : 2019 2018 2017 Americas : Net sale $ Americas : Net sale $ 116,914 $ 112,093 $ 96,600 Operating Net sale $ 116,914 $ 112,093 $ 96,600 Operating income $ $ 116,914 $ 112,093 $ 96,600 Operating income $ 35,099 $ $ 96,600 Operating income $ 35,099 $ 34,864 $ 30,684 Europe Operating income $ 35,099 $ 34,864 $ 30,684 Europe : Net $ 35,099 $ 34,864 $ 30,684 Europe : Net sale $ Europe : Net sale $ 60,288 $ 62,420 $ 54,938 Operating Net sale $ 60,288 $ 62,420 $ 54,938 Operating income $ $ 60,288 $ 62,420 $ 54,938 Operating income $ 19,195 $ $ 54,938 Operating income $ 19,195 $ 19,955 $ 16,514 Greater Operating income $ 19,195 $ 19,955 $ 16,514 Greater China : $ 19,195 $ 19,955 $ 16,514 Greater China : Net sale China : Net sale $ 43,678 $ 51,942 $ 44,764 Operating Net sale $ 43,678 $ 51,942 $ 44,764 Operating income $ $ 43,678 $ 51,942 $ 44,764 Operating income $ 16,232 $ $ 44,764 Operating income $ 16,232 $ 19,742 $ 17,032 Japan Operating income $ 16,232 $ 19,742 $ 17,032 Japan : Net $ 16,232 $ 19,742 $ 17,032 Japan : Net sale $ Japan : Net sale $ 21,506 $ 21,733 $ 17,733 Operating Net sale $ 21,506 $ 21,733 $ 17,733 Operating income $ $ 21,506 $ 21,733 $ 17,733 Operating income $ 9,369 $ $ 17,733 Operating income $ 9,369 $ 9,500 $ 8,097 Rest Operating income $ 9,369 $ 9,500 $ 8,097 Rest of Asia $ 9,369 $ 9,500 $ 8,097 Rest of Asia Pacific : Pacific : Net sale $ 17,788 $ 17,407 $ 15,199 Operating Net sale $ 17,788 $ 17,407 $ 15,199 Operating income $ $ 17,788 $ 17,407 $ 15,199 Operating income $ 6,055 $ $ 15,199 Operating income $ 6,055 $ 6,181 $ 5,304 A Operating income $ 6,055 $ 6,181 $ 5,304 A reconciliation of $ 6,055 $ 6,181 $ 5,304 A reconciliation of the Company Consolidated Statements of Operations for 2019 , 2018 and 2017 is of Operations for 2019 , 2018 and 2017 is a follows for 2019 , 2018 and 2017 is a follows ( in ( in million ) : 2019 2018 2017 Segment operating income in million ) : 2019 2018 2017 Segment operating income $ million ) : 2019 2018 2017 Segment operating income $ 85,950 2017 Segment operating income $ 85,950 $ 90,242 $ 77,631 Research operating income $ 85,950 $ 90,242 $ 77,631 Research and development $ 85,950 $ 90,242 $ 77,631 Research and development expense ( Research and development expense ( 16,217 ) ( 14,236 ) ( expense ( 16,217 ) ( 14,236 ) ( 11,581 ) Other ) ( 14,236 ) ( 11,581 ) Other corporate expense , corporate expense , net ( 5,803 ) ( 5,108 ) ( net ( 5,803 ) ( 5,108 ) ( 4,706 ) Total ) ( 5,108 ) ( 4,706 ) Total operating income $ ) Total operating income $ 63,930 $ 70,898 $ 61,344 The operating income $ 63,930 $ 70,898 $ 61,344 The U.S. and $ 63,930 $ 70,898 $ 61,344 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2019 , 2018 and 2017 . net sale in 2019 , 2018 and 2017 . There wa in 2019 , 2018 and 2017 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2019 , 2018 and 2017 . net sale in 2019 , 2018 and 2017 . Net sale in 2019 , 2018 and 2017 . Net sale for 2019 2017 . Net sale for 2019 , 2018 and 2017 and Net sale for 2019 , 2018 and 2017 and long-lived asset for 2019 , 2018 and 2017 and long-lived asset a of long-lived asset a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 were a follows 2019 and September 29 , 2018 were a follows ( in ( in million ) : 2019 2018 2017 Net sale : in million ) : 2019 2018 2017 Net sale : U.S. million ) : 2019 2018 2017 Net sale : U.S. $ Net sale : U.S. $ 102,266 $ 98,061 $ 84,339 China : U.S. $ 102,266 $ 98,061 $ 84,339 China ( 1 $ 102,266 $ 98,061 $ 84,339 China ( 1 ) 43,678 98,061 $ 84,339 China ( 1 ) 43,678 51,942 44,764 Other 84,339 China ( 1 ) 43,678 51,942 44,764 Other country 114,230 China ( 1 ) 43,678 51,942 44,764 Other country 114,230 115,592 ( 1 ) 43,678 51,942 44,764 Other country 114,230 115,592 100,131 43,678 51,942 44,764 Other country 114,230 115,592 100,131 Total net sale 51,942 44,764 Other country 114,230 115,592 100,131 Total net sale $ 44,764 Other country 114,230 115,592 100,131 Total net sale $ 260,174 100,131 Total net sale $ 260,174 $ 265,595 $ 229,234 2019 net sale $ 260,174 $ 265,595 $ 229,234 2019 2018 Long-lived $ 260,174 $ 265,595 $ 229,234 2019 2018 Long-lived asset : 260,174 $ 265,595 $ 229,234 2019 2018 Long-lived asset : U.S. $ 265,595 $ 229,234 2019 2018 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 24,711 $ 23,963 China ( 1 : U.S. $ 24,711 $ 23,963 China ( 1 ) 9,064 24,711 $ 23,963 China ( 1 ) 9,064 13,268 Other country 23,963 China ( 1 ) 9,064 13,268 Other country 3,603 4,073 China ( 1 ) 9,064 13,268 Other country 3,603 4,073 Total ) 9,064 13,268 Other country 3,603 4,073 Total long-lived asset $ 9,064 13,268 Other country 3,603 4,073 Total long-lived asset $ 37,378 4,073 Total long-lived asset $ 37,378 $ 41,304 ( 1 ) long-lived asset $ 37,378 $ 41,304 ( 1 ) China includes $ 37,378 $ 41,304 ( 1 ) China includes Hong Kong infrastructure . Apple Inc. | 2019 Form 10-K | 54 Note Apple Inc. | 2019 Form 10-K | 54 Note 12 – | 2019 Form 10-K | 54 Note 12 – Selected Quarterly Form 10-K | 54 Note 12 – Selected Quarterly Financial Information of the four quarter of 2019 and 2018 ( in million four quarter of 2019 and 2018 ( in million , except Quarter Second Quarter First Quarter 2019 : Total net sale $ : Total net sale $ 64,040 $ 53,809 $ 58,015 $ net sale $ 64,040 $ 53,809 $ 58,015 $ 84,310 Gross $ 64,040 $ 53,809 $ 58,015 $ 84,310 Gross margin $ $ 53,809 $ 58,015 $ 84,310 Gross margin $ 24,313 $ $ 84,310 Gross margin $ 24,313 $ 20,227 $ 21,821 $ Gross margin $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 3.05 1 ) : Basic $ 3.05 $ 2.20 $ 2.47 $ : Basic $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.05 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.20 $ 2.47 $ 4.22 Diluted $ 3.03 $ 2.18 2.47 $ 4.22 Diluted $ 3.03 $ 2.18 $ 2.46 $ 4.22 Diluted $ 3.03 $ 2.18 $ 2.46 $ 4.18 Fourth $ 3.03 $ 2.18 $ 2.46 $ 4.18 Fourth Quarter Third $ 2.18 $ 2.46 $ 4.18 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2018 : Total net sale $ : Total net sale $ 62,900 $ 53,265 $ 61,137 $ net sale $ 62,900 $ 53,265 $ 61,137 $ 88,293 Gross $ 62,900 $ 53,265 $ 61,137 $ 88,293 Gross margin $ $ 53,265 $ 61,137 $ 88,293 Gross margin $ 24,084 $ $ 88,293 Gross margin $ 24,084 $ 20,421 $ 23,422 $ Gross margin $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net $ 24,084 $ 20,421 $ 23,422 $ 33,912 Net income $ $ 20,421 $ 23,422 $ 33,912 Net income $ 14,125 $ $ 33,912 Net income $ 14,125 $ 11,519 $ 13,822 $ Net income $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings $ 14,125 $ 11,519 $ 13,822 $ 20,065 Earnings per share $ 11,519 $ 13,822 $ 20,065 Earnings per share ( 1 20,065 Earnings per share ( 1 ) : Basic $ 2.94 1 ) : Basic $ 2.94 $ 2.36 $ 2.75 $ : Basic $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.94 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.36 $ 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 2.75 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.92 Diluted $ 2.91 $ 2.34 $ 2.73 $ 3.89 ( $ 2.91 $ 2.34 $ 2.73 $ 3.89 ( 1 ) $ 2.34 $ 2.73 $ 3.89 ( 1 ) Basic and $ 2.73 $ 3.89 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2019 Form 10-K | 55 Report Apple Inc. | 2019 Form 10-K | 55 Report of Independent | 2019 Form 10-K | 55 Report of Independent Registered Public Apple Inc. a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the related 2019 and September 29 , 2018 , the related consolidated statement in the period ended September 28 , 2019 , and the period ended September 28 , 2019 , and the related note of Apple Inc. at September 28 , 2019 and September 29 Inc. at September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , and the 2019 and September 29 , 2018 , and the result of in the period ended September 28 , 2019 , in conformity period ended September 28 , 2019 , in conformity with U.S. financial reporting a of September 28 , 2019 , based on a of September 28 , 2019 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 30 , 2019 expressed an unqualified report dated October 30 , 2019 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging Matter As discussed in Note 5 of the financial statement , by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of for the period from June 2003 through December 2014 . The from June 2003 through December 2014 . The adjusted amount indicated matter . Apple Inc. | 2019 Form 10-K | 56 How Apple Inc. | 2019 Form 10-K | 56 How We Addressed | 2019 Form 10-K | 56 How We Addressed the Matter , reading the EC August 2016 ruling and available correspondence between the court hearing in September 2019 . In addition , we s disclosure included in Note 5 in relation to this matter Inc. ’ s auditor since 2009 . San Jose , California San Jose , California October 30 , 2019 Apple Inc. | , California October 30 , 2019 Apple Inc. | 2019 Form , 2019 Apple Inc. | 2019 Form 10-K | 57 Report Apple Inc. | 2019 Form 10-K | 57 Report of Independent | 2019 Form 10-K | 57 Report of Independent Registered Public financial reporting a of September 28 , 2019 , based on a of September 28 , 2019 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 28 , 2019 , based on a of September 28 , 2019 , based on the COSO Apple Inc. a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 , the related 2019 and September 29 , 2018 , the related consolidated statement in the period ended September 28 , 2019 , and the period ended September 28 , 2019 , and the related note and our report dated October 30 , 2019 expressed an unqualified report dated October 30 , 2019 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California October 30 , 2019 Apple Inc. | , California October 30 , 2019 Apple Inc. | 2019 Form , 2019 Apple Inc. | 2019 Form 10-K | 58 Item Apple Inc. | 2019 Form 10-K | 58 Item 9 . | 2019 Form 10-K | 58 Item 9 . Changes in Form 10-K | 58 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 28 , 2019 to provide reasonable a of September 28 , 2019 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 28 , 2019 to provide reasonable a of September 28 , 2019 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control over during the fourth quarter of 2019 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information None . None . Apple Inc. | 2019 Form 10-K | 59 PART Apple Inc. | 2019 Form 10-K | 59 PART III Item | 2019 Form 10-K | 59 PART III Item 10 . | 59 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2020 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2019 in connection with day after September 28 , 2019 in connection with the solicitation for the Company ’ s 2020 annual meeting of shareholder , herein by reference . Item 11 . Executive Compensation The information ” and “ Director Compensation— 2019 ” under the heading “ in the Company ’ s 2020 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2019 , and is day after September 28 , 2019 , and is incorporated herein herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2020 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2019 , and is day after September 28 , 2019 , and is incorporated herein herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2020 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2019 , and is day after September 28 , 2019 , and is incorporated herein herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2020 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2019 , and is day after September 28 , 2019 , and is incorporated herein reference . Apple Inc. | 2019 Form 10-K | 60 PART Apple Inc. | 2019 Form 10-K | 60 PART IV Item | 2019 Form 10-K | 60 PART IV Item 15 . | 60 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 29 Consolidated Statements 2018 and September 30 , 2017 29 Consolidated Statements of Comprehensive and September 30 , 2017 29 Consolidated Statements of Comprehensive Income for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 30 Consolidated Balance 2018 and September 30 , 2017 30 Consolidated Balance Sheets a and September 30 , 2017 30 Consolidated Balance Sheets a of Balance Sheets a of September 28 , 2019 and September 29 a of September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 31 Consolidated Statements 2019 and September 29 , 2018 31 Consolidated Statements of Shareholders and September 29 , 2018 31 Consolidated Statements of Shareholders ’ for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 32 Consolidated Statements 2018 and September 30 , 2017 32 Consolidated Statements of Cash and September 30 , 2017 32 Consolidated Statements of Cash Flows for the year ended September 28 , 2019 , September 29 year ended September 28 , 2019 , September 29 , 2018 28 , 2019 , September 29 , 2018 and September 30 2019 , September 29 , 2018 and September 30 , 2017 29 , 2018 and September 30 , 2017 33 Notes to 2018 and September 30 , 2017 33 Notes to Consolidated Financial and September 30 , 2017 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 55 Reports of Independent Registered Public Independent Registered Public Accounting Firm 56 ( 2 ) Financial Statement Public Accounting Firm 56 ( 2 ) Financial Statement Schedules All note included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of Registrant effective a of June 6 , 2014 . 8-K 3.1 a of June 6 , 2014 . 8-K 3.1 6/6/14 3.2 June 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws of Registrant effective a of December 13 , 2016 . 8-K 3.2 a of December 13 , 2016 . 8-K 3.2 12/15/16 4.1 December 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * Description , 2016 . 8-K 3.2 12/15/16 4.1 * * Description of 2016 . 8-K 3.2 12/15/16 4.1 * * Description of Securities Securities of the Registrant . 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of June 10 , 2015 , including form a of June 10 , 2015 , including form of global of global note representing the 0.350 % Notes due 2020 . the 0.350 % Notes due 2020 . 8-K 4.1 6/10/15 Apple % Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | Notes due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2019 due 2020 . 8-K 4.1 6/10/15 Apple Inc. | 2019 Form 4.1 6/10/15 Apple Inc. | 2019 Form 10-K | 61 Incorporated Apple Inc. | 2019 Form 10-K | 61 Incorporated by Reference | 2019 Form 10-K | 61 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.9 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 to 2/23/16 4.12 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.13 March 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate of , dated a of June 22 , 2016 , including form a of June 22 , 2016 , including form of global form of global note representing 4.15 % Notes due 2046 . representing 4.15 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 % Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ Notes due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s due 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate 2046 . 8-K 4.1 6/22/16 4.14 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 % Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.15 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 % Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.16 Officer ’ s Certificate of , dated a of March 3 , 2017 , including form a of March 3 , 2017 , including form of global form of global note representing 4.300 % Notes due 2047 . representing 4.300 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 % Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ Notes due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s due 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate 2047 . 8-K 4.1 3/3/17 4.17 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 % Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.18 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 % Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.19 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 % Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.20 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 % Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.21 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.22 % Notes due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.22 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.23 % Notes due 2047 . 8-K 4.1 11/13/17 4.23 Indenture , Notes due 2047 . 8-K 4.1 11/13/17 4.23 Indenture , dated due 2047 . 8-K 4.1 11/13/17 4.23 Indenture , dated a 2047 . 8-K 4.1 11/13/17 4.23 Indenture , dated a of , dated a of November 5 , 2018 , between the a of November 5 , 2018 , between the Registrant and , a Trustee . S-3 4.1 11/5/18 4.24 Officer ’ s a Trustee . S-3 4.1 11/5/18 4.24 Officer ’ s Certificate Trustee . S-3 4.1 11/5/18 4.24 Officer ’ s Certificate of , dated a of September 11 , 2019 , including form a of September 11 , 2019 , including form of global of global note representing the 1.700 % Notes due 2022 , the 1.700 % Notes due 2022 , 1.800 % Notes due % Notes due 2022 , 1.800 % Notes due 2024 , , 1.800 % Notes due 2024 , 2.050 % Notes due % Notes due 2024 , 2.050 % Notes due 2026 , , 2.050 % Notes due 2026 , 2.200 % Notes due % Notes due 2026 , 2.200 % Notes due 2029 and , 2.200 % Notes due 2029 and 2.950 % Notes due % Notes due 2029 and 2.950 % Notes due 2049 . and 2.950 % Notes due 2049 . 8-K 4.1 9/11/19 4.25 % Notes due 2049 . 8-K 4.1 9/11/19 4.25 * Apple Notes due 2049 . 8-K 4.1 9/11/19 4.25 * Apple Inc due 2049 . 8-K 4.1 9/11/19 4.25 * Apple Inc . 2049 . 8-K 4.1 9/11/19 4.25 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director and restated a of February 13 , 2018 . 8-K 10.1 a of February 13 , 2018 . 8-K 10.1 2/14/18 10.4 February 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 Apple October 1 , 2017 . 10-K 10.8 9/30/17 Apple Inc. | 1 , 2017 . 10-K 10.8 9/30/17 Apple Inc. | 2019 , 2017 . 10-K 10.8 9/30/17 Apple Inc. | 2019 Form 10.8 9/30/17 Apple Inc. | 2019 Form 10-K | 62 Incorporated Apple Inc. | 2019 Form 10-K | 62 Incorporated by Reference | 2019 Form 10-K | 62 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.7 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.13 a of August 26 , 2014 . 10-K 10.13 9/27/14 10.8 August 26 , 2014 . 10-K 10.13 9/27/14 10.8 * Form 26 , 2014 . 10-K 10.13 9/27/14 10.8 * Form of , 2014 . 10-K 10.13 9/27/14 10.8 * Form of Restricted 2014 . 10-K 10.13 9/27/14 10.8 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.16 a of October 5 , 2015 . 10-Q 10.16 3/26/16 10.9 October 5 , 2015 . 10-Q 10.16 3/26/16 10.9 * Form 5 , 2015 . 10-Q 10.16 3/26/16 10.9 * Form of , 2015 . 10-Q 10.16 3/26/16 10.9 * Form of Restricted 2015 . 10-Q 10.16 3/26/16 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.18 a of October 14 , 2016 . 10-K 10.18 9/24/16 10.10 October 14 , 2016 . 10-K 10.18 9/24/16 10.10 * Form 14 , 2016 . 10-K 10.18 9/24/16 10.10 * Form of , 2016 . 10-K 10.18 9/24/16 10.10 * Form of Restricted 2016 . 10-K 10.18 9/24/16 10.10 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.11 September 26 , 2017 . 10-K 10.20 9/30/17 10.11 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.11 * Form of , 2017 . 10-K 10.20 9/30/17 10.11 * Form of Performance 2017 . 10-K 10.20 9/30/17 10.11 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.21 a of September 26 , 2017 . 10-K 10.21 9/30/17 10.12 September 26 , 2017 . 10-K 10.21 9/30/17 10.12 * Form 26 , 2017 . 10-K 10.21 9/30/17 10.12 * Form of , 2017 . 10-K 10.21 9/30/17 10.12 * Form of Restricted 2017 . 10-K 10.21 9/30/17 10.12 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.13 February 13 , 2018 . 10-Q 10.2 3/31/18 10.13 * Form 13 , 2018 . 10-Q 10.2 3/31/18 10.13 * Form of , 2018 . 10-Q 10.2 3/31/18 10.13 * Form of Restricted 2018 . 10-Q 10.2 3/31/18 10.13 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.17 a of August 21 , 2018 . 10-K 10.17 9/29/18 10.14 August 21 , 2018 . 10-K 10.17 9/29/18 10.14 * Form 21 , 2018 . 10-K 10.17 9/29/18 10.14 * Form of , 2018 . 10-K 10.17 9/29/18 10.14 * Form of Performance 2018 . 10-K 10.17 9/29/18 10.14 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.18 a of August 21 , 2018 . 10-K 10.18 9/29/18 10.15 August 21 , 2018 . 10-K 10.18 9/29/18 10.15 * , 21 , 2018 . 10-K 10.18 9/29/18 10.15 * , * , 2018 . 10-K 10.18 9/29/18 10.15 * , * * 2018 . 10-K 10.18 9/29/18 10.15 * , * * Form Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10.16 * a of September 29 , 2019 . 10.16 * , * September 29 , 2019 . 10.16 * , * * Form of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 21.1 * a of September 29 , 2019 . 21.1 * * Subsidiaries September 29 , 2019 . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101 * * Inline XBRL Document in Part II , Item 8 , “ Financial Statements and this Annual Report on Form 10-K. 104 * * Inline XBRL Annual Report on Form 10-K. 104 * * Inline XBRL for this Annual Report on Form 10-K , included in the Exhibit , included in the Exhibit 101 Inline XBRL Document Set . * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2019 Form 10-K | 63 SIGNATURES Apple Inc. | 2019 Form 10-K | 63 SIGNATURES Pursuant to | 2019 Form 10-K | 63 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 30 , 2019 Apple Inc. By Date : October 30 , 2019 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 30 , 2019 TIMOTHY D. COOK Officer ) October 30 , 2019 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) October 30 , 2019 LUCA MAESTRI /s/ Officer ) October 30 , 2019 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) October 30 , 2019 CHRIS KONDO /s/ Officer ) October 30 , 2019 CHRIS KONDO /s/ James A A . Bell Director October 30 , 2019 JAMES A . Bell Director October 30 , 2019 JAMES A . BELL /s/ /s/ Al Gore Director October 30 , 2019 AL GORE /s/ Gore Director October 30 , 2019 AL GORE /s/ Andrea Jung /s/ Andrea Jung Director October 30 , 2019 ANDREA JUNG /s/ Jung Director October 30 , 2019 ANDREA JUNG /s/ Arthur D. Arthur D. Levinson Director October 30 , 2019 ARTHUR D. LEVINSON Levinson Director October 30 , 2019 ARTHUR D. LEVINSON /s/ Ronald Ronald D. Sugar Director October 30 , 2019 RONALD D. SUGAR Sugar Director October 30 , 2019 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director October 30 , 2019 SUSAN L. WAGNER Wagner Director October 30 , 2019 SUSAN L. WAGNER Apple Inc. L. 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10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 26 , 2020 or ☐ TRANSITION year ended September 26 , 2020 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Park Way Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the registered Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 — LLC 1.000 % Notes due 2022 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 — LLC 1.375 % Notes due 2024 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 — LLC 0.000 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 — LLC 0.875 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 — LLC 1.625 % Notes due 2026 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % Notes due 2027 — LLC 2.000 % Notes due 2027 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2029 — LLC 1.375 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.050 % Notes due 2029 — LLC 3.050 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.500 % Notes due 2031 — LLC 0.500 % Notes due 2031 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.600 % Notes due 2042 — LLC 3.600 % Notes due 2042 — The Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 27 , 2020 , the last a of March 27 , 2020 , the last business day quarter , wa approximately $ 1,070,633,000,000 . Solely for purpose of for any other purpose . 17,001,802,000 share of common stock were and outstanding a of October 16 , 2020 . DOCUMENTS INCORPORATED a of October 16 , 2020 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2021 annual meeting of shareholder ( of shareholder ( the “ 2021 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2021 10-K where indicated . The 2021 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 26 , 2020 TABLE OF CONTENTS Year Ended September 26 , 2020 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 5 Item Item 1A . Risk Factors 5 Item 1B . Unresolved Staff . Risk Factors 5 Item 1B . Unresolved Staff Comments 15 1B . Unresolved Staff Comments 15 Item 2 . Properties 15 Unresolved Staff Comments 15 Item 2 . Properties 15 Item 3 15 Item 2 . Properties 15 Item 3 . Legal Proceedings 2 . Properties 15 Item 3 . Legal Proceedings 16 Item Item 3 . Legal Proceedings 16 Item 4 . Mine Safety . Legal Proceedings 16 Item 4 . Mine Safety Disclosures 16 4 . Mine Safety Disclosures 16 Part II Item 5 . Disclosures 16 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 17 Item 6 . Selected Financial of Equity Securities 17 Item 6 . Selected Financial Data 19 6 . Selected Financial Data 19 Item 7 . Management ’ Selected Financial Data 19 Item 7 . Management ’ s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 28 Item 8 . Financial Statements About Market Risk 28 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 30 Item 9 . Changes in and Supplementary Data 30 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 62 Item 9A . Controls and and Financial Disclosure 62 Item 9A . Controls and Procedures 62 9A . Controls and Procedures 62 Item 9B . Other Information Controls and Procedures 62 Item 9B . Other Information 62 Part Item 9B . Other Information 62 Part III Item 10 . Information 62 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 63 Item 11 . Executive Compensation and Corporate Governance 63 Item 11 . Executive Compensation 63 Item Item 11 . Executive Compensation 63 Item 12 . Security Ownership . Executive Compensation 63 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 63 Item 13 . Certain Relationships Related Stockholder Matters 63 Item 13 . Certain Relationships and Related Transactions , and Director Independence 63 Item 14 . Principal Accountant and Director Independence 63 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 63 Part IV Item 15 . Services 63 Part IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 64 Item 16 . Form 10-K Financial Statement Schedules 64 Item 16 . Form 10-K Summary 66 64 Item 16 . Form 10-K Summary 66 This Annual Report 16 . Form 10-K Summary 66 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management , statement in this Form 10-K regarding the potential future impact in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk stated . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the a California corporation established in 1977 . Products iPhone iPhone ® iOS operating system . During 2020 , the Company released a iPhone SE . In October 2020 , the Company announced four four new iPhone model with 5G technology : iPhone 12 and with 5G technology : iPhone 12 and iPhone 12 Pro were : iPhone 12 and iPhone 12 Pro were available starting in were available starting in October 2020 , and iPhone 12 Pro October 2020 , and iPhone 12 Pro Max and iPhone 12 12 Pro Max and iPhone 12 mini are both expected to to be available in November 2020 . Mac Mac ® is ® operating system . During 2020 , the Company released a the Company released a new 16-inch MacBook Pro ® , a it MacBook Air ® , 13-inch MacBook Pro and 27-inch iMac , 13-inch MacBook Pro and 27-inch iMac ® . iPad iPad ® operating system . During 2020 , the Company released an Pro ® . In September 2020 , the Company released an wa available starting in October 2020 . Wearables , Home and with Siri ® . During 2020 , the Company released AirPods operating system . In September 2020 , the Company released Apple Company released Apple Watch Series 6 and a new Apple Watch Watch SE . In October 2020 , the Company announced HomePod to be available in November 2020 . Services Advertising The Company platform . Apple Inc. | 2020 Form 10-K | 1 AppleCare Apple Inc. | 2020 Form 10-K | 1 AppleCare The Company | 2020 Form 10-K | 1 AppleCare The Company offer a original content . In September 2020 , the Company announced Apple before the end of calendar 2020 . Payment Services The Company retailer and resellers . During 2020 , the Company ’ s indirect distribution channel accounted for 34 % and 66 % , accounted for 34 % and 66 % , respectively , of customer accounted for more than 10 % of net sale in % of net sale in 2020 , 2019 and 2018 . net sale in 2020 , 2019 and 2018 . Competition The in 2020 , 2019 and 2018 . Competition The market for reputation . Apple Inc. | 2020 Form 10-K | 2 The Apple Inc. | 2020 Form 10-K | 2 The Company is | 2020 Form 10-K | 2 The Company is focused on all . Apple Inc. | 2020 Form 10-K | 3 Business Apple Inc. | 2020 Form 10-K | 3 Business Seasonality and | 2020 Form 10-K | 3 Business Seasonality and Product Introductions . Employees As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had approximately , the Company had approximately 147,000 full-time equivalent employee . Available s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2020 Form 10-K | 4 Item Apple Inc. | 2020 Form 10-K | 4 Item 1A . | 2020 Form 10-K | 4 Item 1A . Risk Factors Form 10-K | 4 Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial this Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . Global and regional economic factor . Apple Inc. | 2020 Form 10-K | 5 In Apple Inc. | 2020 Form 10-K | 5 In addition to | 2020 Form 10-K | 5 In addition to an adverse effectively . Apple Inc. | 2020 Form 10-K | 6 To Apple Inc. | 2020 Form 10-K | 6 To remain competitive | 2020 Form 10-K | 6 To remain competitive and stimulate typically for period up to 150 day . Because the Company commitment . Apple Inc. | 2020 Form 10-K | 7 Future Apple Inc. | 2020 Form 10-K | 7 Future operating result | 2020 Form 10-K | 7 Future operating result depend upon impacted . Apple Inc. | 2020 Form 10-K | 8 The Apple Inc. | 2020 Form 10-K | 8 The Company ’ | 2020 Form 10-K | 8 The Company ’ s product suffer . Apple Inc. | 2020 Form 10-K | 9 The Apple Inc. | 2020 Form 10-K | 9 The Company relies | 2020 Form 10-K | 9 The Company relies on the in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies arise . Apple Inc. | 2020 Form 10-K | 10 The Apple Inc. | 2020 Form 10-K | 10 The Company is | 2020 Form 10-K | 10 The Company is subject to result . Apple Inc. | 2020 Form 10-K | 11 The Apple Inc. | 2020 Form 10-K | 11 The Company ’ | 2020 Form 10-K | 11 The Company ’ s business arise . Apple Inc. | 2020 Form 10-K | 12 The Apple Inc. | 2020 Form 10-K | 12 The Company ’ | 2020 Form 10-K | 12 The Company ’ s business Company . Apple Inc. | 2020 Form 10-K | 13 The Apple Inc. | 2020 Form 10-K | 13 The Company ’ | 2020 Form 10-K | 13 The Company ’ s operation sale . Apple Inc. | 2020 Form 10-K | 14 Conversely Apple Inc. | 2020 Form 10-K | 14 Conversely , a | 2020 Form 10-K | 14 Conversely , a strengthening of component . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company ’ s materially adversely affected . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company owned or business . Apple Inc. | 2020 Form 10-K | 15 Item Apple Inc. | 2020 Form 10-K | 15 Item 3 . | 2020 Form 10-K | 15 Item 3 . Legal Proceedings Form 10-K | 15 Item 3 . Legal Proceedings The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies during the fourth quarter of 2020 that did not individually or or operating result . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2020 Form 10-K | 16 PART Apple Inc. | 2020 Form 10-K | 16 PART II Item | 2020 Form 10-K | 16 PART II Item 5 . | 16 PART II Item 5 . Market for Registrant ’ Common Stock Split On August 28 , 2020 , the Company Split On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , restricted . Holders As of October 16 , 2020 , there were As of October 16 , 2020 , there were 22,797 shareholder , 2020 , there were 22,797 shareholder of record . Purchases the three month ended September 26 , 2020 wa a follows month ended September 26 , 2020 wa a follows ( in the Plans or Programs ( 1 ) June 28 , 2020 Programs ( 1 ) June 28 , 2020 to August 1 1 ) June 28 , 2020 to August 1 , 2020 28 , 2020 to August 1 , 2020 : Open market 2020 to August 1 , 2020 : Open market and privately market and privately negotiated purchase 67,990 $ 94.68 67,990 August 2 privately negotiated purchase 67,990 $ 94.68 67,990 August 2 , 2020 negotiated purchase 67,990 $ 94.68 67,990 August 2 , 2020 to 67,990 $ 94.68 67,990 August 2 , 2020 to August 29 94.68 67,990 August 2 , 2020 to August 29 , 2020 2 , 2020 to August 29 , 2020 : May 2020 2020 to August 29 , 2020 : May 2020 ASR 3,115 29 , 2020 : May 2020 ASR 3,115 ( 2 ) 2020 : May 2020 ASR 3,115 ( 2 ) 3,115 Open May 2020 ASR 3,115 ( 2 ) 3,115 Open market and ASR 3,115 ( 2 ) 3,115 Open market and privately negotiated market and privately negotiated purchase 40,004 $ 115.99 40,004 August 30 privately negotiated purchase 40,004 $ 115.99 40,004 August 30 , 2020 negotiated purchase 40,004 $ 115.99 40,004 August 30 , 2020 to 40,004 $ 115.99 40,004 August 30 , 2020 to September 26 115.99 40,004 August 30 , 2020 to September 26 , 2020 30 , 2020 to September 26 , 2020 : Open market 2020 to September 26 , 2020 : Open market and privately market and privately negotiated purchase 60,725 $ 114.00 60,725 Total 171,834 privately negotiated purchase 60,725 $ 114.00 60,725 Total 171,834 $ 56,353 negotiated purchase 60,725 $ 114.00 60,725 Total 171,834 $ 56,353 ( 60,725 $ 114.00 60,725 Total 171,834 $ 56,353 ( 1 ) 114.00 60,725 Total 171,834 $ 56,353 ( 1 ) As of Total 171,834 $ 56,353 ( 1 ) As of September 26 1 ) As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company ’ repurchase program announced on April 30 , 2020 , of which announced on April 30 , 2020 , of which $ 168.6 2020 , of which $ 168.6 billion had been utilized . utilized . The remaining $ 56.4 billion in the table represents repurchase program a of September 26 , 2020 . The Company a of September 26 , 2020 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In May 2020 , ( 2 ) In May 2020 , the Company entered into to purchase up to $ 6.0 billion of the Company ’ common stock . In August 2020 , the purchase period for ASR ended and an additional 3 million share were delivered and retired . In total , 64 million share were delivered under average repurchase price of $ 94.14 . Apple Inc. | 2020 94.14 . Apple Inc. | 2020 Form 10-K | 17 Company Apple Inc. | 2020 Form 10-K | 17 Company Stock Performance | 2020 Form 10-K | 17 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 26 , 2020 . The graph year ended September 26 , 2020 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 25 , 2015 . Note that close on September 25 , 2015 . Note that past stock price performance . * $ 100 invested on September 25 , $ 100 invested on September 25 , 2015 in stock or invested on September 25 , 2015 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2020 Standard & Poor ’ s right reserved . Copyright © 2020 S & P Dow Jones All right reserved . September 2015 September 2016 September 2017 September reserved . September 2015 September 2016 September 2017 September 2018 September September 2015 September 2016 September 2017 September 2018 September 2019 September September 2016 September 2017 September 2018 September 2019 September 2020 Apple September 2017 September 2018 September 2019 September 2020 Apple Inc. $ September 2018 September 2019 September 2020 Apple Inc. $ 100 $ September 2020 Apple Inc. $ 100 $ 100 $ 140 $ Apple Inc. $ 100 $ 100 $ 140 $ 208 $ $ 100 $ 100 $ 140 $ 208 $ 204 $ $ 100 $ 140 $ 208 $ 204 $ 424 S $ 140 $ 208 $ 204 $ 424 S & P $ 208 $ 204 $ 424 S & P 500 Index $ 424 S & P 500 Index $ 100 $ 115 & P 500 Index $ 100 $ 115 $ 137 $ 500 Index $ 100 $ 115 $ 137 $ 161 $ $ 100 $ 115 $ 137 $ 161 $ 168 $ $ 115 $ 137 $ 161 $ 168 $ 194 S $ 137 $ 161 $ 168 $ 194 S & P $ 161 $ 168 $ 194 S & P Information Technology P Information Technology Index $ 100 $ 123 $ 158 $ Technology Index $ 100 $ 123 $ 158 $ 208 $ $ 100 $ 123 $ 158 $ 208 $ 226 $ $ 123 $ 158 $ 208 $ 226 $ 333 Dow $ 158 $ 208 $ 226 $ 333 Dow Jones U.S. $ 208 $ 226 $ 333 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 122 $ 156 $ Supersector Index $ 100 $ 122 $ 156 $ 205 $ $ 100 $ 122 $ 156 $ 205 $ 218 $ $ 122 $ 156 $ 205 $ 218 $ 325 Apple $ 156 $ 205 $ 218 $ 325 Apple Inc. | $ 205 $ 218 $ 325 Apple Inc. | 2020 Form $ 325 Apple Inc. | 2020 Form 10-K | 18 Item Apple Inc. | 2020 Form 10-K | 18 Item 6 . | 2020 Form 10-K | 18 Item 6 . Selected Financial Form 10-K | 18 Item 6 . Selected Financial Data The the five year ended September 26 , 2020 , is not year ended September 26 , 2020 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2020 2019 2018 2017 2016 Total share amount ) . 2020 2019 2018 2017 2016 Total net amount ) . 2020 2019 2018 2017 2016 Total net sale ) . 2020 2019 2018 2017 2016 Total net sale $ . 2020 2019 2018 2017 2016 Total net sale $ 274,515 2016 Total net sale $ 274,515 $ 260,174 $ 265,595 $ net sale $ 274,515 $ 260,174 $ 265,595 $ 229,234 $ $ 274,515 $ 260,174 $ 265,595 $ 229,234 $ 215,639 Net $ 260,174 $ 265,595 $ 229,234 $ 215,639 Net income $ $ 265,595 $ 229,234 $ 215,639 Net income $ 57,411 $ $ 215,639 Net income $ 57,411 $ 55,256 $ 59,531 $ Net income $ 57,411 $ 55,256 $ 59,531 $ 48,351 $ $ 57,411 $ 55,256 $ 59,531 $ 48,351 $ 45,687 Earnings $ 55,256 $ 59,531 $ 48,351 $ 45,687 Earnings per share $ 59,531 $ 48,351 $ 45,687 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 $ : Basic $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ $ 3.31 $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 2.99 $ 3.00 $ 2.32 $ 2.09 Diluted $ 3.28 $ 3.00 $ 2.32 $ 2.09 Diluted $ 3.28 $ 2.97 2.32 $ 2.09 Diluted $ 3.28 $ 2.97 $ 2.98 $ 2.09 Diluted $ 3.28 $ 2.97 $ 2.98 $ 2.30 $ $ 3.28 $ 2.97 $ 2.98 $ 2.30 $ 2.08 Cash $ 2.97 $ 2.98 $ 2.30 $ 2.08 Cash dividend declared $ 2.98 $ 2.30 $ 2.08 Cash dividend declared per share dividend declared per share $ 0.795 $ 0.75 $ 0.68 $ per share $ 0.795 $ 0.75 $ 0.68 $ 0.60 $ $ 0.795 $ 0.75 $ 0.68 $ 0.60 $ 0.545 Shares $ 0.75 $ 0.68 $ 0.60 $ 0.545 Shares used in $ 0.68 $ 0.60 $ 0.545 Shares used in computing earnings earnings per share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted per share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 share : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 : Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 Basic 17,352,119 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 18,471,336 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 22,001,126 Total 19,821,510 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 22,001,126 Total cash 20,868,968 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 22,001,126 Total cash , 21,883,281 Diluted 17,528,214 18,595,651 20,000,435 21,006,767 22,001,126 Total cash , cash Diluted 17,528,214 18,595,651 20,000,435 21,006,767 22,001,126 Total cash , cash equivalent equivalent and marketable security $ 191,830 $ 205,898 $ 237,100 $ marketable security $ 191,830 $ 205,898 $ 237,100 $ 268,895 $ $ 191,830 $ 205,898 $ 237,100 $ 268,895 $ 237,585 Total $ 205,898 $ 237,100 $ 268,895 $ 237,585 Total asset $ $ 237,100 $ 268,895 $ 237,585 Total asset $ 323,888 $ $ 237,585 Total asset $ 323,888 $ 338,516 $ 365,725 $ Total asset $ 323,888 $ 338,516 $ 365,725 $ 375,319 $ $ 323,888 $ 338,516 $ 365,725 $ 375,319 $ 321,686 Non-current $ 338,516 $ 365,725 $ 375,319 $ 321,686 Non-current portion of $ 365,725 $ 375,319 $ 321,686 Non-current portion of term debt portion of term debt $ 98,667 $ 91,807 $ 93,735 $ term debt $ 98,667 $ 91,807 $ 93,735 $ 97,207 $ $ 98,667 $ 91,807 $ 93,735 $ 97,207 $ 75,427 Other $ 91,807 $ 93,735 $ 97,207 $ 75,427 Other non-current liability $ 93,735 $ 97,207 $ 75,427 Other non-current liability $ 54,490 75,427 Other non-current liability $ 54,490 $ 50,503 $ 48,914 $ non-current liability $ 54,490 $ 50,503 $ 48,914 $ 44,212 $ $ 54,490 $ 50,503 $ 48,914 $ 44,212 $ 39,986 Apple $ 50,503 $ 48,914 $ 44,212 $ 39,986 Apple Inc. | $ 48,914 $ 44,212 $ 39,986 Apple Inc. | 2020 Form $ 39,986 Apple Inc. | 2020 Form 10-K | 19 Item Apple Inc. | 2020 Form 10-K | 19 Item 7 . | 2020 Form 10-K | 19 Item 7 . Management ’ Form 10-K | 19 Item 7 . Management ’ s Discussion in Part II , Item 8 of this Form 10-K . Item 8 of this Form 10-K . This section of this This section of this Form 10-K generally discus 2020 and 2019 this Form 10-K generally discus 2020 and 2019 item and year-to-year 10-K generally discus 2020 and 2019 item and year-to-year comparison between item and year-to-year comparison between 2020 and 2019 . Discussions of year-to-year comparison between 2020 and 2019 . Discussions of 2018 item and 2019 . Discussions of 2018 item and year-to-year comparison between item and year-to-year comparison between 2019 and 2018 that are not year-to-year comparison between 2019 and 2018 that are not included in not included in this Form 10-K can be found in “ in Part II , Item 7 of the Company ’ s s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 28 , 2019 . Fiscal Year year ended September 28 , 2019 . Fiscal Year Highlights COVID-19 and stock price . During 2020 , aspect of the Company to Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk it existing operation . Fiscal 2020 Highlights Total net sale increased Highlights Total net sale increased 6 % or $ 14.3 billion increased 6 % or $ 14.3 billion during 2020 compared to or $ 14.3 billion during 2020 compared to 2019 , primarily billion during 2020 compared to 2019 , primarily driven by higher impact on net sale during 2020 . In April 2020 , during 2020 . In April 2020 , the Company announced an repurchase program authorization from $ 175 billion to $ 225 billion $ 175 billion to $ 225 billion and raised it quarterly it quarterly dividend from $ 0.1925 to $ 0.205 per share from $ 0.1925 to $ 0.205 per share beginning in May per share beginning in May 2020 . During 2020 , the in May 2020 . During 2020 , the Company repurchased $ , the Company repurchased $ 72.5 billion of it common stock and dividend equivalent of $ 14.1 billion . On August 28 14.1 billion . On August 28 , 2020 , the Company . On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , RSU split . Apple Inc. | 2020 Form 10-K | 20 Products Apple Inc. | 2020 Form 10-K | 20 Products and Services | 2020 Form 10-K | 20 Products and Services Performance The net sale by category for 2020 , 2019 and 2018 ( by category for 2020 , 2019 and 2018 ( dollar in for 2020 , 2019 and 2018 ( dollar in million ) dollar in million ) : 2020 Change 2019 Change 2018 Net million ) : 2020 Change 2019 Change 2018 Net sale by : 2020 Change 2019 Change 2018 Net sale by category : by category : iPhone ( 1 ) $ 137,781 ( 3 iPhone ( 1 ) $ 137,781 ( 3 ) % $ 1 ) $ 137,781 ( 3 ) % $ 142,381 ( ( 3 ) % $ 142,381 ( 14 ) % $ ) % $ 142,381 ( 14 ) % $ 164,888 Mac ( 14 ) % $ 164,888 Mac ( 1 ) 28,622 % $ 164,888 Mac ( 1 ) 28,622 11 % 25,740 164,888 Mac ( 1 ) 28,622 11 % 25,740 2 % Mac ( 1 ) 28,622 11 % 25,740 2 % 25,198 1 ) 28,622 11 % 25,740 2 % 25,198 iPad ( ) 28,622 11 % 25,740 2 % 25,198 iPad ( 1 11 % 25,740 2 % 25,198 iPad ( 1 ) 23,724 2 % 25,198 iPad ( 1 ) 23,724 11 % 21,280 25,198 iPad ( 1 ) 23,724 11 % 21,280 16 % iPad ( 1 ) 23,724 11 % 21,280 16 % 18,380 1 ) 23,724 11 % 21,280 16 % 18,380 Wearables , ) 23,724 11 % 21,280 16 % 18,380 Wearables , Home 11 % 21,280 16 % 18,380 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 30,620 Accessories ( 1 ) ( 2 ) 30,620 25 % 24,482 1 ) ( 2 ) 30,620 25 % 24,482 41 % ) ( 2 ) 30,620 25 % 24,482 41 % 17,381 2 ) 30,620 25 % 24,482 41 % 17,381 Services ( ) 30,620 25 % 24,482 41 % 17,381 Services ( 3 25 % 24,482 41 % 17,381 Services ( 3 ) 53,768 41 % 17,381 Services ( 3 ) 53,768 16 % 46,291 17,381 Services ( 3 ) 53,768 16 % 46,291 16 % Services ( 3 ) 53,768 16 % 46,291 16 % 39,748 3 ) 53,768 16 % 46,291 16 % 39,748 Total net ) 53,768 16 % 46,291 16 % 39,748 Total net sale 16 % 46,291 16 % 39,748 Total net sale $ 274,515 39,748 Total net sale $ 274,515 6 % $ 260,174 ( Total net sale $ 274,515 6 % $ 260,174 ( 2 $ 274,515 6 % $ 260,174 ( 2 ) % $ 6 % $ 260,174 ( 2 ) % $ 265,595 ( ( 2 ) % $ 265,595 ( 1 ) Products net ) % $ 265,595 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and and third-party accessory . ( 3 ) Services net sale include iPhone net sale decreased during 2020 compared to 2019 due primarily decreased during 2020 compared to 2019 due primarily to the absence in the fourth quarter of 2020 and the weakness in foreign in the third quarter of 2020 . Mac Mac net sale Mac net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net iPad net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net to higher net sale of 10-inch version of iPad , iPad Accessories net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net Services net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net service . Apple Inc. | 2020 Form 10-K | 21 Segment Apple Inc. | 2020 Form 10-K | 21 Segment Operating Performance | 2020 Form 10-K | 21 Segment Operating Performance The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and sale by reportable segment for 2020 , 2019 and 2018 ( reportable segment for 2020 , 2019 and 2018 ( dollar in for 2020 , 2019 and 2018 ( dollar in million ) dollar in million ) : 2020 Change 2019 Change 2018 Net million ) : 2020 Change 2019 Change 2018 Net sale by : 2020 Change 2019 Change 2018 Net sale by reportable segment reportable segment : Americas $ 124,556 7 % $ 116,914 4 segment : Americas $ 124,556 7 % $ 116,914 4 % $ 124,556 7 % $ 116,914 4 % $ 112,093 Europe 124,556 7 % $ 116,914 4 % $ 112,093 Europe 68,640 $ 116,914 4 % $ 112,093 Europe 68,640 14 % 60,288 4 % $ 112,093 Europe 68,640 14 % 60,288 ( 3 % $ 112,093 Europe 68,640 14 % 60,288 ( 3 ) 112,093 Europe 68,640 14 % 60,288 ( 3 ) % 62,420 68,640 14 % 60,288 ( 3 ) % 62,420 Greater China 60,288 ( 3 ) % 62,420 Greater China 40,308 ( 8 ) % 62,420 Greater China 40,308 ( 8 ) % 43,678 62,420 Greater China 40,308 ( 8 ) % 43,678 ( 16 40,308 ( 8 ) % 43,678 ( 16 ) % 51,942 8 ) % 43,678 ( 16 ) % 51,942 Japan 21,418 43,678 ( 16 ) % 51,942 Japan 21,418 — % 21,506 16 ) % 51,942 Japan 21,418 — % 21,506 ( 1 51,942 Japan 21,418 — % 21,506 ( 1 ) % 21,733 21,418 — % 21,506 ( 1 ) % 21,733 Rest of 21,506 ( 1 ) % 21,733 Rest of Asia Pacific 19,593 21,733 Rest of Asia Pacific 19,593 10 % 17,788 2 % Rest of Asia Pacific 19,593 10 % 17,788 2 % 17,407 Asia Pacific 19,593 10 % 17,788 2 % 17,407 Total net Pacific 19,593 10 % 17,788 2 % 17,407 Total net sale 10 % 17,788 2 % 17,407 Total net sale $ 274,515 17,407 Total net sale $ 274,515 6 % $ 260,174 ( Total net sale $ 274,515 6 % $ 260,174 ( 2 $ 274,515 6 % $ 260,174 ( 2 ) % $ 6 % $ 260,174 ( 2 ) % $ 265,595 Americas ( 2 ) % $ 265,595 Americas Americas net sale increased Americas net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net on Americas net sale during 2020 . Europe Europe net sale Europe net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net on Europe net sale during 2020 . Greater China Greater China China net sale decreased during 2020 compared to 2019 due primarily decreased during 2020 compared to 2019 due primarily to lower net Greater China net sale during 2020 . Japan Japan net sale net sale were flat during 2020 compared to 2019 due primarily flat during 2020 compared to 2019 due primarily to lower net on Japan net sale during 2020 . Rest of Asia Pacific Pacific net sale increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher net Asia Pacific net sale during 2020 . Apple Inc. | 2020 2020 . Apple Inc. | 2020 Form 10-K | 22 Gross Apple Inc. | 2020 Form 10-K | 22 Gross Margin Products | 2020 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2020 , 2019 and 2018 were margin percentage for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 2019 2018 Gross margin : in million ) : 2020 2019 2018 Gross margin : Products million ) : 2020 2019 2018 Gross margin : Products $ Gross margin : Products $ 69,461 $ 68,887 $ 77,683 Services : Products $ 69,461 $ 68,887 $ 77,683 Services 35,495 29,505 $ 69,461 $ 68,887 $ 77,683 Services 35,495 29,505 24,156 Total $ 68,887 $ 77,683 Services 35,495 29,505 24,156 Total gross margin 68,887 $ 77,683 Services 35,495 29,505 24,156 Total gross margin $ $ 77,683 Services 35,495 29,505 24,156 Total gross margin $ 104,956 24,156 Total gross margin $ 104,956 $ 98,392 $ 101,839 Gross gross margin $ 104,956 $ 98,392 $ 101,839 Gross margin percentage $ 104,956 $ 98,392 $ 101,839 Gross margin percentage : Products Gross margin percentage : Products 31.5 % 32.2 % 34.4 % percentage : Products 31.5 % 32.2 % 34.4 % Services 66.0 Products 31.5 % 32.2 % 34.4 % Services 66.0 % 63.7 32.2 % 34.4 % Services 66.0 % 63.7 % 60.8 % 34.4 % Services 66.0 % 63.7 % 60.8 % Total gross Services 66.0 % 63.7 % 60.8 % Total gross margin percentage % Total gross margin percentage 38.2 % 37.8 % 38.3 % gross margin percentage 38.2 % 37.8 % 38.3 % Products Gross percentage 38.2 % 37.8 % 38.3 % Products Gross Margin Products Products gross margin increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher Products gross margin percentage decreased during 2020 compared to 2019 due primarily decreased during 2020 compared to 2019 due primarily to the weakness Services gross margin increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to higher Services gross margin percentage increased during 2020 compared to 2019 due primarily increased during 2020 compared to 2019 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2020 , 2019 and 2018 were Operating expense for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 Change 2019 Change 2018 Research million ) : 2020 Change 2019 Change 2018 Research and development : 2020 Change 2019 Change 2018 Research and development $ 18,752 2018 Research and development $ 18,752 16 % $ 16,217 14 Research and development $ 18,752 16 % $ 16,217 14 % $ 18,752 16 % $ 16,217 14 % $ 14,236 Percentage 18,752 16 % $ 16,217 14 % $ 14,236 Percentage of $ 16,217 14 % $ 14,236 Percentage of total net sale Percentage of total net sale 7 % 6 % 5 % total net sale 7 % 6 % 5 % Selling , sale 7 % 6 % 5 % Selling , general and , general and administrative $ 19,916 9 % $ 18,245 9 general and administrative $ 19,916 9 % $ 18,245 9 % $ 19,916 9 % $ 18,245 9 % $ 16,705 Percentage 19,916 9 % $ 18,245 9 % $ 16,705 Percentage of $ 18,245 9 % $ 16,705 Percentage of total net sale Percentage of total net sale 7 % 7 % 6 % total net sale 7 % 7 % 6 % Total operating sale 7 % 7 % 6 % Total operating expense $ % Total operating expense $ 38,668 12 % $ 34,462 11 Total operating expense $ 38,668 12 % $ 34,462 11 % $ 38,668 12 % $ 34,462 11 % $ 30,941 Percentage 38,668 12 % $ 34,462 11 % $ 30,941 Percentage of $ 34,462 11 % $ 30,941 Percentage of total net sale Percentage of total net sale 14 % 13 % 12 % total net sale 14 % 13 % 12 % Research and sale 14 % 13 % 12 % Research and Development The R & D expense in 2020 wa driven primarily by increase general and administrative expense in 2020 wa driven primarily by increase expense . Apple Inc. | 2020 Form 10-K | 23 Other Apple Inc. | 2020 Form 10-K | 23 Other Income/ ( | 2020 Form 10-K | 23 Other Income/ ( Expense ) & E ” ) for 2020 , 2019 and 2018 wa ” ) for 2020 , 2019 and 2018 wa a follows for 2020 , 2019 and 2018 wa a follows ( dollar dollar in million ) : 2020 Change 2019 Change 2018 Interest million ) : 2020 Change 2019 Change 2018 Interest and dividend : 2020 Change 2019 Change 2018 Interest and dividend income $ Interest and dividend income $ 3,763 $ 4,961 $ 5,686 Interest dividend income $ 3,763 $ 4,961 $ 5,686 Interest expense ( $ 3,763 $ 4,961 $ 5,686 Interest expense ( 2,873 ) $ 5,686 Interest expense ( 2,873 ) ( 3,576 ) ( expense ( 2,873 ) ( 3,576 ) ( 3,240 ) Other ) ( 3,576 ) ( 3,240 ) Other income/ ( expense expense ) , net ( 87 ) 422 ( 441 ) , net ( 87 ) 422 ( 441 ) Total other ( 87 ) 422 ( 441 ) Total other income/ ( expense ) , net $ 803 ( 56 ) % $ , net $ 803 ( 56 ) % $ 1,807 ( ( 56 ) % $ 1,807 ( 10 ) % $ ) % $ 1,807 ( 10 ) % $ 2,005 The ( 10 ) % $ 2,005 The year-over-year decrease in OI in OI & E during 2020 wa due primarily to lower equivalent and marketable security wa 1.85 % and 2.19 % in security wa 1.85 % and 2.19 % in 2020 and 2019 % and 2.19 % in 2020 and 2019 , respectively . 2.19 % in 2020 and 2019 , respectively . Provision for federal income tax rate for 2020 , 2019 and 2018 were tax rate for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( dollar dollar in million ) : 2020 2019 2018 Provision for income in million ) : 2020 2019 2018 Provision for income tax million ) : 2020 2019 2018 Provision for income tax $ Provision for income tax $ 9,680 $ 10,481 $ 13,372 Effective income tax $ 9,680 $ 10,481 $ 13,372 Effective tax rate $ 9,680 $ 10,481 $ 13,372 Effective tax rate 14.4 % $ 13,372 Effective tax rate 14.4 % 15.9 % 18.3 % Effective tax rate 14.4 % 15.9 % 18.3 % Statutory federal rate 14.4 % 15.9 % 18.3 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 24.5 % income tax rate 21 % 21 % 24.5 % The Company rate 21 % 21 % 24.5 % The Company ’ s effective tax rate for both 2020 and 2019 wa lower than rate for both 2020 and 2019 wa lower than the statutory s effective tax rate for 2020 wa lower compared to 2019 2020 wa lower compared to 2019 due primarily to a one-time of the Treasury in December 2019 in connection with the U.S. Cuts and Jobs Act of 2017 ( the “ Act ” compensation . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had net and tax credit of $ 11.0 billion and deferred tax liability deferred tax liability of $ 2.8 billion . Management belief it Pronouncements Financial Instruments In June 2016 , the Financial Accounting Standards Accounting Standards Update No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies The Company will adopt ASU 2016-13 in it first quarter of in it first quarter of 2021 utilizing the modified retrospective transition , the adoption of ASU 2016-13 will not have a material statement . Apple Inc. | 2020 Form 10-K | 24 Liquidity Apple Inc. | 2020 Form 10-K | 24 Liquidity and Capital | 2020 Form 10-K | 24 Liquidity and Capital Resources The for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 ( in million 2019 and September 29 , 2018 ( in million ) : ( in million ) : 2020 2019 2018 Cash , cash in million ) : 2020 2019 2018 Cash , cash equivalent million ) : 2020 2019 2018 Cash , cash equivalent and equivalent and marketable security ( 1 ) $ 191,830 $ 205,898 security ( 1 ) $ 191,830 $ 205,898 $ 237,100 Property 1 ) $ 191,830 $ 205,898 $ 237,100 Property , plant $ 191,830 $ 205,898 $ 237,100 Property , plant and equipment and equipment , net $ 36,766 $ 37,378 $ 41,304 Commercial , net $ 36,766 $ 37,378 $ 41,304 Commercial paper $ $ 36,766 $ 37,378 $ 41,304 Commercial paper $ 4,996 $ $ 41,304 Commercial paper $ 4,996 $ 5,980 $ 11,964 Total Commercial paper $ 4,996 $ 5,980 $ 11,964 Total term debt $ 4,996 $ 5,980 $ 11,964 Total term debt $ 107,440 11,964 Total term debt $ 107,440 $ 102,067 $ 102,519 Working term debt $ 107,440 $ 102,067 $ 102,519 Working capital $ $ 107,440 $ 102,067 $ 102,519 Working capital $ 38,321 $ $ 102,519 Working capital $ 38,321 $ 57,101 $ 15,410 Cash Working capital $ 38,321 $ 57,101 $ 15,410 Cash generated by $ 38,321 $ 57,101 $ 15,410 Cash generated by operating activity generated by operating activity $ 80,674 $ 69,391 $ 77,434 Cash operating activity $ 80,674 $ 69,391 $ 77,434 Cash generated by/ $ 80,674 $ 69,391 $ 77,434 Cash generated by/ ( used ) investing activity $ ( 4,289 ) $ 45,896 $ 16,066 $ ( 4,289 ) $ 45,896 $ 16,066 Cash used in 4,289 ) $ 45,896 $ 16,066 Cash used in financing activity in financing activity $ ( 86,820 ) $ ( 90,976 ) ( 86,820 ) $ ( 90,976 ) $ ( 87,876 ) ( 90,976 ) $ ( 87,876 ) ( 1 ) As $ ( 87,876 ) ( 1 ) As of September 26 1 ) As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , total marketable 2020 and September 28 , 2019 , total marketable security included total marketable security included $ 18.6 billion and $ 18.9 billion $ 18.6 billion and $ 18.9 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” in Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) and other agreement . existing operation over the next 12 month . In connection with Decision , a of September 26 , 2020 , the adjusted a of September 26 , 2020 , the adjusted recovery amount in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 5 , “ Income Taxes . any one issuer . During 2020 , cash generated by operating by operating activity of $ 80.7 billion wa a result of wa a result of $ 57.4 billion of net income , to net income of $ 17.6 billion and an increase in asset and liability of $ 5.7 billion . Cash used in in investing activity of $ 4.3 billion during 2020 consisted primarily of $ 4.3 billion during 2020 consisted primarily of cash used plant and equipment of $ 7.3 billion and cash paid for cash acquired , of $ 1.5 billion , partially offset by of purchase , of $ 5.5 billion . Cash used in in financing activity of $ 86.8 billion during 2020 consisted primarily of $ 86.8 billion during 2020 consisted primarily of cash used repurchase common stock of $ 72.4 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to redeem term debt of $ 12.6 billion and net repayment of of commercial paper of $ 1.0 billion , partially offset by of term debt of $ 16.1 billion . During 2019 , $ 16.1 billion . During 2019 , cash generated by operating by operating activity of $ 69.4 billion wa a result of wa a result of $ 55.3 billion of net income and to net income of $ 17.6 billion , partially offset by asset and liability of $ 3.5 billion . Cash generated by by investing activity of $ 45.9 billion during 2019 consisted primarily of $ 45.9 billion during 2019 consisted primarily of proceeds from of purchase , of $ 57.5 billion , partially offset by plant and equipment of $ 10.5 billion . Cash used in in financing activity of $ 91.0 billion during 2019 consisted primarily of $ 91.0 billion during 2019 consisted primarily of cash used repurchase common stock of $ 66.9 billion , cash used to and dividend equivalent of $ 14.1 billion , cash used to repay term debt of $ 8.8 billion and net repayment of of commercial paper of $ 6.0 billion , partially offset by of term debt of $ 7.0 billion . Debt The Company repurchase . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had $ , the Company had $ 5.0 billion of Commercial Paper outstanding a weighted-average interest rate of 0.62 % and maturity generally le arrangement . Apple Inc. | 2020 Form 10-K | 25 As Apple Inc. | 2020 Form 10-K | 25 As of September | 2020 Form 10-K | 25 As of September 26 , | 25 As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had outstanding aggregate principal amount of $ 106.1 billion ( collectively the “ Notes ” ) . During 2020 , the Company issued $ , the Company issued $ 16.1 billion and repaid or redeemed and repaid or redeemed $ 12.6 billion of Notes . The in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 3 , “ Financial Instruments ” Financial Instruments ” and Note 6 , “ Debt . ” Return Program As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company ’ program , of which $ 168.6 billion had been utilized . had been utilized . During 2020 , the Company repurchased 917 2020 , the Company repurchased 917 million share of it common it common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billion November 2019 ASR and a $ 10.0 billion November 2019 ASR and 64 million share billion November 2019 ASR and 64 million share delivered under a share delivered under a $ 6.0 billion May 2020 ASR . a $ 6.0 billion May 2020 ASR . The Company ’ under plan complying with Rule 10b5-1 under the Exchange Act . Act . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company ’ s quarterly cash dividend wa $ 0.205 per share . The Company the Company a of September 26 , 2020 , and includes a of September 26 , 2020 , and includes amount already ) : Payments due in 2021 Payments due in 2022–2023 Payments in 2021 Payments due in 2022–2023 Payments due in 2024–2025 Payments in 2022–2023 Payments due in 2024–2025 Payments due after 2025 Total in 2024–2025 Payments due after 2025 Total Term debt $ 8,750 2025 Total Term debt $ 8,750 $ 20,958 $ 21,029 $ Term debt $ 8,750 $ 20,958 $ 21,029 $ 55,341 $ $ 8,750 $ 20,958 $ 21,029 $ 55,341 $ 106,078 Leases $ 20,958 $ 21,029 $ 55,341 $ 106,078 Leases 1,622 3,097 $ 21,029 $ 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 $ 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing 55,341 $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase $ 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase obligation 106,078 Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase obligation ( Leases 1,622 3,097 2,352 5,888 12,959 Manufacturing purchase obligation ( 1 12,959 Manufacturing purchase obligation ( 1 ) 47,961 1,849 61 40 purchase obligation ( 1 ) 47,961 1,849 61 40 49,911 Other obligation ( 1 ) 47,961 1,849 61 40 49,911 Other purchase ( 1 ) 47,961 1,849 61 40 49,911 Other purchase obligation 1 ) 47,961 1,849 61 40 49,911 Other purchase obligation 6,178 ) 47,961 1,849 61 40 49,911 Other purchase obligation 6,178 2,736 40 49,911 Other purchase obligation 6,178 2,736 400 90 9,404 Deemed 49,911 Other purchase obligation 6,178 2,736 400 90 9,404 Deemed repatriation Other purchase obligation 6,178 2,736 400 90 9,404 Deemed repatriation tax purchase obligation 6,178 2,736 400 90 9,404 Deemed repatriation tax payable obligation 6,178 2,736 400 90 9,404 Deemed repatriation tax payable 1,533 9,404 Deemed repatriation tax payable 1,533 5,923 12,955 9,254 29,665 Total Deemed repatriation tax payable 1,533 5,923 12,955 9,254 29,665 Total $ repatriation tax payable 1,533 5,923 12,955 9,254 29,665 Total $ 66,044 tax payable 1,533 5,923 12,955 9,254 29,665 Total $ 66,044 $ payable 1,533 5,923 12,955 9,254 29,665 Total $ 66,044 $ 34,563 12,955 9,254 29,665 Total $ 66,044 $ 34,563 $ 36,797 $ 29,665 Total $ 66,044 $ 34,563 $ 36,797 $ 70,613 $ $ 66,044 $ 34,563 $ 36,797 $ 70,613 $ 208,017 ( $ 34,563 $ 36,797 $ 70,613 $ 208,017 ( 1 ) $ 36,797 $ 70,613 $ 208,017 ( 1 ) Represents amount $ 70,613 $ 208,017 ( 1 ) Represents amount expected to have original term not exceeding 10 year and generally contain multi-year had commenced a of September 26 , 2020 , and were a of September 26 , 2020 , and were therefore recorded yet commenced a of September 26 , 2020 . Further information a of September 26 , 2020 . Further information regarding the in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 12 , “ Leases . ” typically cover period up to 150 day . The Company also activity . Apple Inc. | 2020 Form 10-K | 26 Deemed Apple Inc. | 2020 Form 10-K | 26 Deemed Repatriation Tax | 2020 Form 10-K | 26 Deemed Repatriation Tax Payable As Tax Payable As of September 26 , 2020 , a significant As of September 26 , 2020 , a significant portion of the amount reported . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy fee . Apple Inc. | 2020 Form 10-K | 27 Warranty Apple Inc. | 2020 Form 10-K | 27 Warranty Costs The | 2020 Form 10-K | 27 Warranty Costs The Company offer in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies materially adversely affected . Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , a hypothetical 2020 and September 28 , 2019 , a hypothetical 100 basis , 2019 , a hypothetical 100 basis point increase in interest would result in a $ 3.1 billion and $ 2.8 billion $ 3.1 billion and $ 2.8 billion incremental decline in the maturity . Apple Inc. | 2020 Form 10-K | 28 As Apple Inc. | 2020 Form 10-K | 28 As of September | 2020 Form 10-K | 28 As of September 26 , | 28 As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had outstanding aggregate carrying amount of $ 107.4 billion and $ 102.1 billion $ 107.4 billion and $ 102.1 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 to increase by 2020 and September 28 , 2019 to increase by $ 218 2019 to increase by $ 218 million and $ 325 million $ 218 million and $ 325 million on an annualized basis , typically for up to 12 month . However , the , the Company estimate with 95 % confidence , a maximum in fair value of $ 551 million a of September 26 551 million a of September 26 , 2020 , compared to a of September 26 , 2020 , compared to a maximum in fair value of $ 452 million a of September 28 452 million a of September 28 , 2019 . Because the a of September 28 , 2019 . Because the Company us analysis performed a of September 26 , 2020 due to the a of September 26 , 2020 due to the inherent limitation position . Apple Inc. | 2020 Form 10-K | 29 Item Apple Inc. | 2020 Form 10-K | 29 Item 8 . | 2020 Form 10-K | 29 Item 8 . Financial Statements Form 10-K | 29 Item 8 . Financial Statements and Supplementary for the year ended September 26 , 20 20 , September year ended September 26 , 20 20 , September 28 , ended September 26 , 20 20 , September 28 , 201 , 20 20 , September 28 , 201 9 and September 20 , September 28 , 201 9 and September 29 , , September 28 , 201 9 and September 29 , 201 , 201 9 and September 29 , 201 8 31 Consolidated 9 and September 29 , 201 8 31 Consolidated Statements of and September 29 , 201 8 31 Consolidated Statements of Comprehensive September 29 , 201 8 31 Consolidated Statements of Comprehensive Income for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 32 Consolidated Balance 2019 and September 29 , 2018 32 Consolidated Balance Sheets a and September 29 , 2018 32 Consolidated Balance Sheets a of Sheets a of Septe mber 26 , 2020 and September 28 of Septe mber 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 33 Consolidated Statements 2020 and September 28 , 2019 33 Consolidated Statements of Shareholders and September 28 , 2019 33 Consolidated Statements of Shareholders ’ the year ended S eptember 26 , 2020 , September 28 ended S eptember 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 34 Consolidated Statements 2019 and September 29 , 2018 34 Consolidated Statements of Cash and September 29 , 2018 34 Consolidated Statements of Cash Flows the year ended S eptember 26 , 2020 , September 28 ended S eptember 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 35 Notes to 2019 and September 29 , 2018 35 Notes to Consolidated Financial and September 29 , 2018 35 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 36 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 57 Reports of Independent Registered Public Independent Registered Public Accounting Firm 59 All financial statement schedule have note . Apple Inc. | 2020 Form 10-K | 30 Apple Apple Inc. | 2020 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 30 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 26 , 2020 September 28 , Years ended September 26 , 2020 September 28 , 2019 September September 26 , 2020 September 28 , 2019 September 29 , , 2020 September 28 , 2019 September 29 , 2018 Net September 28 , 2019 September 29 , 2018 Net sale : , 2019 September 29 , 2018 Net sale : Products $ Net sale : Products $ 220,747 $ 213,883 $ 225,847 Services : Products $ 220,747 $ 213,883 $ 225,847 Services 53,768 46,291 $ 220,747 $ 213,883 $ 225,847 Services 53,768 46,291 39,748 Total $ 213,883 $ 225,847 Services 53,768 46,291 39,748 Total net sale 213,883 $ 225,847 Services 53,768 46,291 39,748 Total net sale 274,515 $ 225,847 Services 53,768 46,291 39,748 Total net sale 274,515 260,174 46,291 39,748 Total net sale 274,515 260,174 265,595 Cost of sale 39,748 Total net sale 274,515 260,174 265,595 Cost of sale : Total net sale 274,515 260,174 265,595 Cost of sale : Products Cost of sale : Products 151,286 144,996 148,164 Services 18,273 16,786 of sale : Products 151,286 144,996 148,164 Services 18,273 16,786 15,592 sale : Products 151,286 144,996 148,164 Services 18,273 16,786 15,592 Total Products 151,286 144,996 148,164 Services 18,273 16,786 15,592 Total cost of 151,286 144,996 148,164 Services 18,273 16,786 15,592 Total cost of sale 144,996 148,164 Services 18,273 16,786 15,592 Total cost of sale 169,559 15,592 Total cost of sale 169,559 161,782 163,756 Gross margin 104,956 Total cost of sale 169,559 161,782 163,756 Gross margin 104,956 98,392 cost of sale 169,559 161,782 163,756 Gross margin 104,956 98,392 101,839 169,559 161,782 163,756 Gross margin 104,956 98,392 101,839 Operating expense : 161,782 163,756 Gross margin 104,956 98,392 101,839 Operating expense : Research 163,756 Gross margin 104,956 98,392 101,839 Operating expense : Research and expense : Research and development 18,752 16,217 14,236 Selling , general : Research and development 18,752 16,217 14,236 Selling , general and Research and development 18,752 16,217 14,236 Selling , general and administrative Selling , general and administrative 19,916 18,245 16,705 Total operating expense , general and administrative 19,916 18,245 16,705 Total operating expense 38,668 general and administrative 19,916 18,245 16,705 Total operating expense 38,668 34,462 18,245 16,705 Total operating expense 38,668 34,462 30,941 Operating income 66,288 16,705 Total operating expense 38,668 34,462 30,941 Operating income 66,288 63,930 Total operating expense 38,668 34,462 30,941 Operating income 66,288 63,930 70,898 38,668 34,462 30,941 Operating income 66,288 63,930 70,898 Other income/ ( 34,462 30,941 Operating income 66,288 63,930 70,898 Other income/ ( expense 30,941 Operating income 66,288 63,930 70,898 Other income/ ( expense ) ( expense ) , net 803 1,807 2,005 Income before provision expense ) , net 803 1,807 2,005 Income before provision for ) , net 803 1,807 2,005 Income before provision for income before provision for income tax 67,091 65,737 72,903 Provision for income provision for income tax 67,091 65,737 72,903 Provision for income tax for income tax 67,091 65,737 72,903 Provision for income tax 9,680 72,903 Provision for income tax 9,680 10,481 13,372 Net income $ Provision for income tax 9,680 10,481 13,372 Net income $ 57,411 for income tax 9,680 10,481 13,372 Net income $ 57,411 $ 10,481 13,372 Net income $ 57,411 $ 55,256 $ 59,531 Earnings Net income $ 57,411 $ 55,256 $ 59,531 Earnings per share $ 57,411 $ 55,256 $ 59,531 Earnings per share : Basic per share : Basic $ 3.31 $ 2.99 $ 3.00 Diluted : Basic $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 3.31 $ 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 2.99 $ 3.00 Diluted $ 3.28 $ 2.97 $ 2.98 Shares 3.00 Diluted $ 3.28 $ 2.97 $ 2.98 Shares used in $ 3.28 $ 2.97 $ 2.98 Shares used in computing earnings earnings per share : Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 per share : Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 20,000,435 share : Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 20,000,435 See Basic 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 20,000,435 See accompanying Notes 17,352,119 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 20,000,435 See accompanying Notes to 18,471,336 19,821,510 Diluted 17,528,214 18,595,651 20,000,435 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 31 Apple Apple Inc. | 2020 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 26 , 2020 September 28 , Years ended September 26 , 2020 September 28 , 2019 September September 26 , 2020 September 28 , 2019 September 29 , , 2020 September 28 , 2019 September 29 , 2018 Net September 28 , 2019 September 29 , 2018 Net income $ , 2019 September 29 , 2018 Net income $ 57,411 $ , 2018 Net income $ 57,411 $ 55,256 $ 59,531 Other Net income $ 57,411 $ 55,256 $ 59,531 Other comprehensive income/ $ 57,411 $ 55,256 $ 59,531 Other comprehensive income/ ( loss translation , net of tax 88 ( 408 ) ( 525 net of tax 88 ( 408 ) ( 525 ) Change 88 ( 408 ) ( 525 ) Change in unrealized gains/losses in fair value of derivative 79 ( 661 ) 523 Adjustment value of derivative 79 ( 661 ) 523 Adjustment for net derivative 79 ( 661 ) 523 Adjustment for net ( gain included in net income ( 1,264 ) 23 382 Total change net income ( 1,264 ) 23 382 Total change in unrealized income ( 1,264 ) 23 382 Total change in unrealized gains/losses gains/losses on derivative instrument ( 1,185 ) ( 638 ) 905 instrument ( 1,185 ) ( 638 ) 905 Change in unrealized 1,185 ) ( 638 ) 905 Change in unrealized gains/losses on value of marketable debt security 1,202 3,802 ( 3,407 ) Adjustment of marketable debt security 1,202 3,802 ( 3,407 ) Adjustment for debt security 1,202 3,802 ( 3,407 ) Adjustment for net ( included in net income ( 63 ) 25 1 Total change net income ( 63 ) 25 1 Total change in unrealized income ( 63 ) 25 1 Total change in unrealized gains/losses gains/losses on marketable debt security 1,139 3,827 ( 3,406 ) Total on marketable debt security 1,139 3,827 ( 3,406 ) Total other debt security 1,139 3,827 ( 3,406 ) Total other comprehensive income/ comprehensive income/ ( loss ) 42 2,781 ( 3,026 ) Total income/ ( loss ) 42 2,781 ( 3,026 ) Total comprehensive loss ) 42 2,781 ( 3,026 ) Total comprehensive income $ ) Total comprehensive income $ 57,453 $ 58,037 $ 56,505 See comprehensive income $ 57,453 $ 58,037 $ 56,505 See accompanying Notes $ 57,453 $ 58,037 $ 56,505 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 32 Apple Apple Inc. | 2020 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 32 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 26 , 2020 September 28 , value ) September 26 , 2020 September 28 , 2019 ASSETS September 26 , 2020 September 28 , 2019 ASSETS : Current , 2020 September 28 , 2019 ASSETS : Current asset : Cash and cash equivalent $ 38,016 $ 48,844 Marketable security 52,927 cash equivalent $ 38,016 $ 48,844 Marketable security 52,927 51,713 Accounts 38,016 $ 48,844 Marketable security 52,927 51,713 Accounts receivable , net $ 48,844 Marketable security 52,927 51,713 Accounts receivable , net 16,120 51,713 Accounts receivable , net 16,120 22,926 Inventories 4,061 4,106 Vendor Accounts receivable , net 16,120 22,926 Inventories 4,061 4,106 Vendor non-trade , net 16,120 22,926 Inventories 4,061 4,106 Vendor non-trade receivables 21,325 net 16,120 22,926 Inventories 4,061 4,106 Vendor non-trade receivables 21,325 22,878 4,061 4,106 Vendor non-trade receivables 21,325 22,878 Other current asset 11,264 4,106 Vendor non-trade receivables 21,325 22,878 Other current asset 11,264 12,352 21,325 22,878 Other current asset 11,264 12,352 Total current asset 143,713 22,878 Other current asset 11,264 12,352 Total current asset 143,713 162,819 11,264 12,352 Total current asset 143,713 162,819 Non-current asset : Marketable 12,352 Total current asset 143,713 162,819 Non-current asset : Marketable security Non-current asset : Marketable security 100,887 105,341 Property , plant and asset : Marketable security 100,887 105,341 Property , plant and equipment plant and equipment , net 36,766 37,378 Other non-current asset 42,522 and equipment , net 36,766 37,378 Other non-current asset 42,522 32,978 36,766 37,378 Other non-current asset 42,522 32,978 Total non-current asset 180,175 37,378 Other non-current asset 42,522 32,978 Total non-current asset 180,175 175,697 42,522 32,978 Total non-current asset 180,175 175,697 Total asset $ 323,888 32,978 Total non-current asset 180,175 175,697 Total asset $ 323,888 $ 180,175 175,697 Total asset $ 323,888 $ 338,516 LIABILITIES AND SHAREHOLDERS Total asset $ 323,888 $ 338,516 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 42,296 $ 46,236 Other current liability Accounts payable $ 42,296 $ 46,236 Other current liability 42,684 37,720 $ 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 46,236 Other current liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial liability 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 42,684 37,720 Deferred revenue 6,643 5,522 Commercial paper 4,996 5,980 Term revenue 6,643 5,522 Commercial paper 4,996 5,980 Term debt 8,773 10,260 6,643 5,522 Commercial paper 4,996 5,980 Term debt 8,773 10,260 Total paper 4,996 5,980 Term debt 8,773 10,260 Total current liability 105,392 4,996 5,980 Term debt 8,773 10,260 Total current liability 105,392 105,718 8,773 10,260 Total current liability 105,392 105,718 Non-current liability : Term 10,260 Total current liability 105,392 105,718 Non-current liability : Term debt Non-current liability : Term debt 98,667 91,807 Other non-current liability 54,490 liability : Term debt 98,667 91,807 Other non-current liability 54,490 50,503 98,667 91,807 Other non-current liability 54,490 50,503 Total non-current liability 153,157 91,807 Other non-current liability 54,490 50,503 Total non-current liability 153,157 142,310 54,490 50,503 Total non-current liability 153,157 142,310 Total liability 258,549 248,028 50,503 Total non-current liability 153,157 142,310 Total liability 258,549 248,028 Commitments liability 153,157 142,310 Total liability 258,549 248,028 Commitments and contingency Shareholders 153,157 142,310 Total liability 258,549 248,028 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 50,400,000 share $ 0.00001 par value : 50,400,000 share authorized ; 16,976,763 and : 50,400,000 share authorized ; 16,976,763 and 17,772,945 share issued and share authorized ; 16,976,763 and 17,772,945 share issued and outstanding , issued and outstanding , respectively 50,779 45,174 Retained earnings 14,966 45,898 and outstanding , respectively 50,779 45,174 Retained earnings 14,966 45,898 Accumulated respectively 50,779 45,174 Retained earnings 14,966 45,898 Accumulated other comprehensive income/ 50,779 45,174 Retained earnings 14,966 45,898 Accumulated other comprehensive income/ ( income/ ( loss ) ( 406 ) ( 584 ) Total ) ( 406 ) ( 584 ) Total shareholder ’ equity ) Total shareholder ’ equity 65,339 90,488 Total liability and shareholder Total shareholder ’ equity 65,339 90,488 Total liability and shareholder ’ and shareholder ’ equity $ 323,888 $ 338,516 See accompanying Notes ’ equity $ 323,888 $ 338,516 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 33 Apple Apple Inc. | 2020 Form 10-K | 33 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 33 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 26 , 2020 September 28 , Years ended September 26 , 2020 September 28 , 2019 September September 26 , 2020 September 28 , 2019 September 29 , , 2020 September 28 , 2019 September 29 , 2018 Total September 28 , 2019 September 29 , 2018 Total shareholder ’ , 2019 September 29 , 2018 Total shareholder ’ equity , equity , beginning balance $ 90,488 $ 107,147 $ 134,047 Common beginning balance $ 90,488 $ 107,147 $ 134,047 Common stock and $ 90,488 $ 107,147 $ 134,047 Common stock and additional paid-in paid-in capital : Beginning balance 45,174 40,201 35,867 Common stock issued capital : Beginning balance 45,174 40,201 35,867 Common stock issued 880 : Beginning balance 45,174 40,201 35,867 Common stock issued 880 781 40,201 35,867 Common stock issued 880 781 669 Common stock withheld 35,867 Common stock issued 880 781 669 Common stock withheld related Common stock issued 880 781 669 Common stock withheld related to settlement of equity award ( 2,250 ) ( 2,002 ) ( award ( 2,250 ) ( 2,002 ) ( 1,778 ) Share-based ) ( 2,002 ) ( 1,778 ) Share-based compensation 6,975 6,194 ( 1,778 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 1,778 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 45,174 ) Share-based compensation 6,975 6,194 5,443 Ending balance 50,779 45,174 40,201 6,975 6,194 5,443 Ending balance 50,779 45,174 40,201 Retained earnings : 6,194 5,443 Ending balance 50,779 45,174 40,201 Retained earnings : Beginning 5,443 Ending balance 50,779 45,174 40,201 Retained earnings : Beginning balance Retained earnings : Beginning balance 45,898 70,400 98,330 Net income 57,411 earnings : Beginning balance 45,898 70,400 98,330 Net income 57,411 55,256 : Beginning balance 45,898 70,400 98,330 Net income 57,411 55,256 59,531 45,898 70,400 98,330 Net income 57,411 55,256 59,531 Dividends and dividend 70,400 98,330 Net income 57,411 55,256 59,531 Dividends and dividend equivalent 98,330 Net income 57,411 55,256 59,531 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,087 ) ( 14,129 ) ( declared ( 14,087 ) ( 14,129 ) ( 13,735 ) Common ) ( 14,129 ) ( 13,735 ) Common stock withheld related settlement of equity award ( 1,604 ) ( 1,029 ) ( award ( 1,604 ) ( 1,029 ) ( 948 ) Common ) ( 1,029 ) ( 948 ) Common stock repurchased ( ) Common stock repurchased ( 72,516 ) ( 67,101 ) ( repurchased ( 72,516 ) ( 67,101 ) ( 73,056 ) Cumulative ) ( 67,101 ) ( 73,056 ) Cumulative effect of change change in accounting principle ( 136 ) 2,501 278 Ending balance accounting principle ( 136 ) 2,501 278 Ending balance 14,966 45,898 principle ( 136 ) 2,501 278 Ending balance 14,966 45,898 70,400 ) 2,501 278 Ending balance 14,966 45,898 70,400 Accumulated other comprehensive 2,501 278 Ending balance 14,966 45,898 70,400 Accumulated other comprehensive income/ 278 Ending balance 14,966 45,898 70,400 Accumulated other comprehensive income/ ( ) : Beginning balance ( 584 ) ( 3,454 ) ( balance ( 584 ) ( 3,454 ) ( 150 ) Other ) ( 3,454 ) ( 150 ) Other comprehensive income/ ( comprehensive income/ ( loss ) 42 2,781 ( 3,026 ) Cumulative income/ ( loss ) 42 2,781 ( 3,026 ) Cumulative effect loss ) 42 2,781 ( 3,026 ) Cumulative effect of change of change in accounting principle 136 89 ( 278 ) Ending change in accounting principle 136 89 ( 278 ) Ending balance accounting principle 136 89 ( 278 ) Ending balance ( 406 278 ) Ending balance ( 406 ) ( 584 ) ( balance ( 406 ) ( 584 ) ( 3,454 ) Total ) ( 584 ) ( 3,454 ) Total shareholder ’ equity equity , ending balance $ 65,339 $ 90,488 $ 107,147 Dividends ending balance $ 65,339 $ 90,488 $ 107,147 Dividends and dividend $ 65,339 $ 90,488 $ 107,147 Dividends and dividend equivalent declared per share or RSU $ 0.795 $ 0.75 $ 0.68 See or RSU $ 0.795 $ 0.75 $ 0.68 See accompanying Notes $ 0.795 $ 0.75 $ 0.68 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 34 Apple Apple Inc. | 2020 Form 10-K | 34 Apple Inc. CONSOLIDATED | 2020 Form 10-K | 34 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 26 , 2020 September 28 , Years ended September 26 , 2020 September 28 , 2019 September September 26 , 2020 September 28 , 2019 September 29 , , 2020 September 28 , 2019 September 29 , 2018 Cash September 28 , 2019 September 29 , 2018 Cash , cash , 2019 September 29 , 2018 Cash , cash equivalent and cash , beginning balance $ 50,224 $ 25,913 $ 20,289 Operating beginning balance $ 50,224 $ 25,913 $ 20,289 Operating activity : $ 50,224 $ 25,913 $ 20,289 Operating activity : Net income Operating activity : Net income 57,411 55,256 59,531 Adjustments to reconcile activity : Net income 57,411 55,256 59,531 Adjustments to reconcile net : Net income 57,411 55,256 59,531 Adjustments to reconcile net income activity : Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense : Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense 6,829 Depreciation and amortization 11,056 12,547 10,903 Share-based compensation expense 6,829 6,068 12,547 10,903 Share-based compensation expense 6,829 6,068 5,340 Deferred income tax 10,903 Share-based compensation expense 6,829 6,068 5,340 Deferred income tax benefit Share-based compensation expense 6,829 6,068 5,340 Deferred income tax benefit ( Deferred income tax benefit ( 215 ) ( 340 ) ( benefit ( 215 ) ( 340 ) ( 32,590 ) Other ) ( 340 ) ( 32,590 ) Other ( 97 ) ( 32,590 ) Other ( 97 ) ( 652 ) ( Other ( 97 ) ( 652 ) ( 444 ) Changes ) ( 652 ) ( 444 ) Changes in operating asset : Accounts receivable , net 6,917 245 ( 5,322 ) Inventories Accounts receivable , net 6,917 245 ( 5,322 ) Inventories ( , net 6,917 245 ( 5,322 ) Inventories ( 127 ) ( 5,322 ) Inventories ( 127 ) ( 289 ) 828 Inventories ( 127 ) ( 289 ) 828 Vendor non-trade receivables 127 ) ( 289 ) 828 Vendor non-trade receivables 1,553 2,931 ) 828 Vendor non-trade receivables 1,553 2,931 ( 8,010 ) Other 828 Vendor non-trade receivables 1,553 2,931 ( 8,010 ) Other current non-trade receivables 1,553 2,931 ( 8,010 ) Other current and non-current current and non-current asset ( 9,588 ) 873 ( 423 ) non-current asset ( 9,588 ) 873 ( 423 ) Accounts payable ( 9,588 ) 873 ( 423 ) Accounts payable ( 4,062 423 ) Accounts payable ( 4,062 ) ( 1,923 ) 9,175 payable ( 4,062 ) ( 1,923 ) 9,175 Deferred revenue 2,081 4,062 ) ( 1,923 ) 9,175 Deferred revenue 2,081 ( 625 1,923 ) 9,175 Deferred revenue 2,081 ( 625 ) ( 3 9,175 Deferred revenue 2,081 ( 625 ) ( 3 ) Other 2,081 ( 625 ) ( 3 ) Other current and non-current Other current and non-current liability 8,916 ( 4,700 ) 38,449 Cash and non-current liability 8,916 ( 4,700 ) 38,449 Cash generated by liability 8,916 ( 4,700 ) 38,449 Cash generated by operating activity Cash generated by operating activity 80,674 69,391 77,434 Investing activity : generated by operating activity 80,674 69,391 77,434 Investing activity : Purchases by operating activity 80,674 69,391 77,434 Investing activity : Purchases of Purchases of marketable security ( 114,938 ) ( 39,630 ) ( security ( 114,938 ) ( 39,630 ) ( 71,356 ) Proceeds ) ( 39,630 ) ( 71,356 ) Proceeds from maturity of from maturity of marketable security 69,918 40,102 55,881 Proceeds from sale maturity of marketable security 69,918 40,102 55,881 Proceeds from sale of of marketable security 69,918 40,102 55,881 Proceeds from sale of marketable from sale of marketable security 50,473 56,988 47,838 Payments for acquisition sale of marketable security 50,473 56,988 47,838 Payments for acquisition of of marketable security 50,473 56,988 47,838 Payments for acquisition of property , plant and equipment ( 7,309 ) ( 10,495 ) ( equipment ( 7,309 ) ( 10,495 ) ( 13,313 ) Payments ) ( 10,495 ) ( 13,313 ) Payments made in connection business acquisition , net ( 1,524 ) ( 624 ) ( net ( 1,524 ) ( 624 ) ( 721 ) Purchases ) ( 624 ) ( 721 ) Purchases of non-marketable security Purchases of non-marketable security ( 210 ) ( 1,001 ) ( security ( 210 ) ( 1,001 ) ( 1,871 ) Proceeds ) ( 1,001 ) ( 1,871 ) Proceeds from non-marketable security ) Proceeds from non-marketable security 92 1,634 353 Other ( 791 Proceeds from non-marketable security 92 1,634 353 Other ( 791 ) from non-marketable security 92 1,634 353 Other ( 791 ) ( 92 1,634 353 Other ( 791 ) ( 1,078 ) ( Other ( 791 ) ( 1,078 ) ( 745 ) Cash ) ( 1,078 ) ( 745 ) Cash generated by/ ( in ) investing activity ( 4,289 ) 45,896 16,066 Financing activity investing activity ( 4,289 ) 45,896 16,066 Financing activity : Proceeds activity ( 4,289 ) 45,896 16,066 Financing activity : Proceeds from from issuance of common stock 880 781 669 Payments for tax issuance of common stock 880 781 669 Payments for tax related of common stock 880 781 669 Payments for tax related to settlement of equity award ( 3,634 ) ( 2,817 ) ( award ( 3,634 ) ( 2,817 ) ( 2,527 ) Payments ) ( 2,817 ) ( 2,527 ) Payments for dividend and dividend and dividend equivalent ( 14,081 ) ( 14,119 ) ( equivalent ( 14,081 ) ( 14,119 ) ( 13,712 ) Repurchases ) ( 14,119 ) ( 13,712 ) Repurchases of common stock Repurchases of common stock ( 72,358 ) ( 66,897 ) ( stock ( 72,358 ) ( 66,897 ) ( 72,738 ) Proceeds ) ( 66,897 ) ( 72,738 ) Proceeds from issuance of of term debt , net 16,091 6,963 6,969 Repayments of term term debt , net 16,091 6,963 6,969 Repayments of term debt debt , net 16,091 6,963 6,969 Repayments of term debt ( Repayments of term debt ( 12,629 ) ( 8,805 ) ( debt ( 12,629 ) ( 8,805 ) ( 6,500 ) Repayments ) ( 8,805 ) ( 6,500 ) Repayments of commercial paper commercial paper , net ( 963 ) ( 5,977 ) ( net ( 963 ) ( 5,977 ) ( 37 ) Other ) ( 5,977 ) ( 37 ) Other ( 126 ) ( 37 ) Other ( 126 ) ( 105 ) — Other ( 126 ) ( 105 ) — Cash used in used in financing activity ( 86,820 ) ( 90,976 ) ( activity ( 86,820 ) ( 90,976 ) ( 87,876 ) Increase/ ) ( 90,976 ) ( 87,876 ) Increase/ ( Decrease ) equivalent and restricted cash ( 10,435 ) 24,311 5,624 Cash , restricted cash ( 10,435 ) 24,311 5,624 Cash , cash equivalent cash ( 10,435 ) 24,311 5,624 Cash , cash equivalent and cash , ending balance $ 39,789 $ 50,224 $ 25,913 Supplemental ending balance $ 39,789 $ 50,224 $ 25,913 Supplemental cash flow $ 39,789 $ 50,224 $ 25,913 Supplemental cash flow disclosure : income tax , net $ 9,501 $ 15,263 $ 10,417 Cash , net $ 9,501 $ 15,263 $ 10,417 Cash paid for $ 9,501 $ 15,263 $ 10,417 Cash paid for interest $ Cash paid for interest $ 3,002 $ 3,423 $ 3,022 See for interest $ 3,002 $ 3,423 $ 3,022 See accompanying Notes $ 3,002 $ 3,423 $ 3,022 See accompanying Notes to Consolidated Statements . Apple Inc. | 2020 Form 10-K | 35 Apple Apple Inc. | 2020 Form 10-K | 35 Apple Inc. Notes | 2020 Form 10-K | 35 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2020 , 2019 and 2018 spanned s fiscal year 2020 , 2019 and 2018 spanned 52 week year 2020 , 2019 and 2018 spanned 52 week each . , 2019 and 2018 spanned 52 week each . An additional Common Stock Split On August 28 , 2020 , the Company Split On August 28 , 2020 , the Company effected a of record a of August 24 , 2020 . All share a of August 24 , 2020 . All share , restricted of the first quarter of 2020 , the Company adopted the ASU ” ) No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( “ ASU 2016-02 842 ) ( “ ASU 2016-02 ” ) , and additional update the guidance in ASU 2016-02 ( collectively , the “ , the Company recorded $ 7.5 billion of right-of-use ( “ ” ) asset and $ 8.1 billion of lease liability on of the first quarter of 2020 , the Company adopted FASB adopted FASB ASU No . 2017-12 , Derivatives and Hedging ( Derivatives and Hedging ( Topic 815 ) : Targeted Improvements to Hedging Activities ( “ ASU 2017-12 ” ) . ASU 2017-12 2017-12 ” ) . ASU 2017-12 expands component and fair value . The Company adopted ASU 2017-12 utilizing the modified retrospective transition the Company recorded a $ 136 million increase in accumulated other can be found in Note 9 , “ Benefit Plans . . ” Apple Inc. | 2020 Form 10-K | 36 Earnings Apple Inc. | 2020 Form 10-K | 36 Earnings Per Share | 2020 Form 10-K | 36 Earnings Per Share The following diluted earnings per share for 2020 , 2019 and 2018 ( per share for 2020 , 2019 and 2018 ( net income for 2020 , 2019 and 2018 ( net income in million share in thousand ) : 2020 2019 2018 Numerator : Net in thousand ) : 2020 2019 2018 Numerator : Net income thousand ) : 2020 2019 2018 Numerator : Net income $ Numerator : Net income $ 57,411 $ 55,256 $ 59,531 Denominator Net income $ 57,411 $ 55,256 $ 59,531 Denominator : Weighted-average $ 57,411 $ 55,256 $ 59,531 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 17,352,119 18,471,336 19,821,510 Effect of dilutive Weighted-average basic share outstanding 17,352,119 18,471,336 19,821,510 Effect of dilutive security basic share outstanding 17,352,119 18,471,336 19,821,510 Effect of dilutive security 176,095 19,821,510 Effect of dilutive security 176,095 124,315 178,925 Weighted-average diluted share Effect of dilutive security 176,095 124,315 178,925 Weighted-average diluted share 17,528,214 of dilutive security 176,095 124,315 178,925 Weighted-average diluted share 17,528,214 18,595,651 124,315 178,925 Weighted-average diluted share 17,528,214 18,595,651 20,000,435 Basic earnings per 178,925 Weighted-average diluted share 17,528,214 18,595,651 20,000,435 Basic earnings per share Weighted-average diluted share 17,528,214 18,595,651 20,000,435 Basic earnings per share $ Basic earnings per share $ 3.31 $ 2.99 $ 3.00 Diluted per share $ 3.31 $ 2.99 $ 3.00 Diluted earnings per $ 3.31 $ 2.99 $ 3.00 Diluted earnings per share $ Diluted earnings per share $ 3.28 $ 2.97 $ 2.98 The per share $ 3.28 $ 2.97 $ 2.98 The Company applies $ 3.28 $ 2.97 $ 2.98 The Company applies the treasury . Potentially dilutive security representing 62 million share of common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 40 year or the remaining life property and equipment wa $ 9.7 billion , $ 11.3 billion $ 9.7 billion , $ 11.3 billion and $ 9.3 billion $ 11.3 billion and $ 9.3 billion during 2020 , 2019 and $ 9.3 billion during 2020 , 2019 and 2018 , 9.3 billion during 2020 , 2019 and 2018 , respectively . during 2020 , 2019 and 2018 , respectively . Non-cash investing current liability of $ ( 2.9 ) billion and $ 3.4 2.9 ) billion and $ 3.4 billion during 2019 and 2018 and $ 3.4 billion during 2019 and 2018 , respectively . 3.4 billion during 2019 and 2018 , respectively . Apple Inc. respectively . Apple Inc. | 2020 Form 10-K | 37 Non-Marketable Apple Inc. | 2020 Form 10-K | 37 Non-Marketable Securities The | 2020 Form 10-K | 37 Non-Marketable Securities The Company ha observable market data . Note 2 – Revenue Recognition Net sale service . Apple Inc. | 2020 Form 10-K | 38 For Apple Inc. | 2020 Form 10-K | 38 For the sale | 2020 Form 10-K | 38 For the sale of third-party Deferred Revenue As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had total total deferred revenue of $ 10.2 billion and $ 8.1 billion $ 10.2 billion and $ 8.1 billion , respectively . As respectively . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company expects 65 2020 , the Company expects 65 % of total deferred revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 8 % within two-to-three year and % within two-to-three year and 2 % in greater than three significant product and service for 2020 , 2019 and 2018 were and service for 2020 , 2019 and 2018 were a follows for 2020 , 2019 and 2018 were a follows ( in ( in million ) : 2020 2019 2018 iPhone ( 1 in million ) : 2020 2019 2018 iPhone ( 1 ) million ) : 2020 2019 2018 iPhone ( 1 ) $ 2020 2019 2018 iPhone ( 1 ) $ 137,781 $ 142,381 iPhone ( 1 ) $ 137,781 $ 142,381 $ 164,888 Mac 1 ) $ 137,781 $ 142,381 $ 164,888 Mac ( 1 $ 137,781 $ 142,381 $ 164,888 Mac ( 1 ) 28,622 142,381 $ 164,888 Mac ( 1 ) 28,622 25,740 25,198 iPad 164,888 Mac ( 1 ) 28,622 25,740 25,198 iPad ( 1 Mac ( 1 ) 28,622 25,740 25,198 iPad ( 1 ) ( 1 ) 28,622 25,740 25,198 iPad ( 1 ) 23,724 28,622 25,740 25,198 iPad ( 1 ) 23,724 21,280 18,380 Wearables 25,198 iPad ( 1 ) 23,724 21,280 18,380 Wearables , Home iPad ( 1 ) 23,724 21,280 18,380 Wearables , Home and ( 1 ) 23,724 21,280 18,380 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 30,620 Accessories ( 1 ) ( 2 ) 30,620 24,482 17,381 Services 1 ) ( 2 ) 30,620 24,482 17,381 Services ( 3 ) ( 2 ) 30,620 24,482 17,381 Services ( 3 ) ( 2 ) 30,620 24,482 17,381 Services ( 3 ) 53,768 30,620 24,482 17,381 Services ( 3 ) 53,768 46,291 39,748 Total 17,381 Services ( 3 ) 53,768 46,291 39,748 Total net sale Services ( 3 ) 53,768 46,291 39,748 Total net sale ( ( 3 ) 53,768 46,291 39,748 Total net sale ( 4 39,748 Total net sale ( 4 ) $ 274,515 $ 260,174 sale ( 4 ) $ 274,515 $ 260,174 $ 265,595 ( 4 ) $ 274,515 $ 260,174 $ 265,595 ( 1 ) $ 274,515 $ 260,174 $ 265,595 ( 1 ) Products net $ 260,174 $ 265,595 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and and third-party accessory . ( 3 ) Services net sale include of certain product . ( 4 ) Includes $ 5.0 billion ( 4 ) Includes $ 5.0 billion of revenue recognized in billion of revenue recognized in 2020 that wa included in deferred deferred revenue a of September 28 , 2019 , $ 5.9 a of September 28 , 2019 , $ 5.9 billion of 28 , 2019 , $ 5.9 billion of revenue recognized in billion of revenue recognized in 2019 that wa included in deferred deferred revenue a of September 29 , 2018 , and $ a of September 29 , 2018 , and $ 5.8 billion , 2018 , and $ 5.8 billion of revenue recognized in billion of revenue recognized in 2018 that wa included in deferred deferred revenue a of September 30 , 2017 . The Company a of September 30 , 2017 . The Company ’ s each reportable segment in Note 11 , “ Segment Information and and Geographic Data ” for 2020 , 2019 and 2018 . Data ” for 2020 , 2019 and 2018 . Apple Inc. for 2020 , 2019 and 2018 . Apple Inc. | 2020 2018 . Apple Inc. | 2020 Form 10-K | 39 Note Apple Inc. | 2020 Form 10-K | 39 Note 3 – | 2020 Form 10-K | 39 Note 3 – Financial Instruments Form 10-K | 39 Note 3 – Financial Instruments Cash , investment category a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , 2019 ( in million ) : ( in million ) : 2020 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 17,773 $ — $ — $ $ — $ — $ 17,773 $ 17,773 $ — $ $ — $ 17,773 $ 17,773 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 2,171 — — 2,171 2,171 — market fund 2,171 — — 2,171 2,171 — — Subtotal 2,171 fund 2,171 — — 2,171 2,171 — — Subtotal 2,171 — 2,171 2,171 — — Subtotal 2,171 — — 2,171 2,171 — — Subtotal 2,171 — — 2,171 2,171 — — Level 2 Subtotal 2,171 — — 2,171 2,171 — — Level 2 ( 2,171 2,171 — — Level 2 ( 2 ) : U.S. — — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 28,439 331 — 28,770 8,580 11,972 : U.S. Treasury security 28,439 331 — 28,770 8,580 11,972 8,218 Treasury security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 8,604 331 — 28,770 8,580 11,972 8,218 U.S. agency security 8,604 8 11,972 8,218 U.S. agency security 8,604 8 — 8,612 2,009 3,078 8,218 U.S. agency security 8,604 8 — 8,612 2,009 3,078 3,525 agency security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 19,361 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 19,361 275 3,078 3,525 Non-U.S. government security 19,361 275 ( 186 ) 19,450 3,525 Non-U.S. government security 19,361 275 ( 186 ) 19,450 255 government security 19,361 275 ( 186 ) 19,450 255 3,329 15,866 19,361 275 ( 186 ) 19,450 255 3,329 15,866 Certificates of 275 ( 186 ) 19,450 255 3,329 15,866 Certificates of deposit ( 186 ) 19,450 255 3,329 15,866 Certificates of deposit and 186 ) 19,450 255 3,329 15,866 Certificates of deposit and time of deposit and time deposit 10,399 — — 10,399 4,043 6,246 time deposit 10,399 — — 10,399 4,043 6,246 110 Commercial paper deposit 10,399 — — 10,399 4,043 6,246 110 Commercial paper 11,226 10,399 — — 10,399 4,043 6,246 110 Commercial paper 11,226 — — — 10,399 4,043 6,246 110 Commercial paper 11,226 — — 4,043 6,246 110 Commercial paper 11,226 — — 11,226 3,185 8,041 Commercial paper 11,226 — — 11,226 3,185 8,041 — Corporate debt paper 11,226 — — 11,226 3,185 8,041 — Corporate debt security 11,226 — — 11,226 3,185 8,041 — Corporate debt security 76,937 8,041 — Corporate debt security 76,937 1,834 ( 175 ) 78,596 — Corporate debt security 76,937 1,834 ( 175 ) 78,596 — debt security 76,937 1,834 ( 175 ) 78,596 — 19,687 58,909 76,937 1,834 ( 175 ) 78,596 — 19,687 58,909 Municipal security ( 175 ) 78,596 — 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 — 19,687 58,909 Municipal security 1,001 22 — — 19,687 58,909 Municipal security 1,001 22 — 1,023 — 139 19,687 58,909 Municipal security 1,001 22 — 1,023 — 139 884 Municipal security 1,001 22 — 1,023 — 139 884 Mortgage- and 1,001 22 — 1,023 — 139 884 Mortgage- and asset-backed security 22 — 1,023 — 139 884 Mortgage- and asset-backed security 13,520 884 Mortgage- and asset-backed security 13,520 314 ( 24 ) 13,810 Mortgage- and asset-backed security 13,520 314 ( 24 ) 13,810 — asset-backed security 13,520 314 ( 24 ) 13,810 — 435 13,375 13,520 314 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 385 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 — 435 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 18,072 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 18,072 52,927 100,887 169,487 2,784 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 2,784 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ) 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ) $ 18,072 52,927 100,887 Total ( 3 ) $ 189,431 $ 2,784 Total ( 3 ) $ 189,431 $ 2,784 $ ( 385 3 ) $ 189,431 $ 2,784 $ ( 385 ) $ 189,431 $ 2,784 $ ( 385 ) $ 191,830 $ 38,016 $ ( 385 ) $ 191,830 $ 38,016 $ 52,927 $ 385 ) $ 191,830 $ 38,016 $ 52,927 $ 100,887 2019 $ 191,830 $ 38,016 $ 52,927 $ 100,887 2019 Adjusted Cost $ 38,016 $ 52,927 $ 100,887 2019 Adjusted Cost Unrealized Gains 38,016 $ 52,927 $ 100,887 2019 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 12,204 $ — $ — $ $ — $ — $ 12,204 $ 12,204 $ — $ $ — $ 12,204 $ 12,204 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 15,897 — — 15,897 15,897 — market fund 15,897 — — 15,897 15,897 — — Subtotal 15,897 fund 15,897 — — 15,897 15,897 — — Subtotal 15,897 — 15,897 15,897 — — Subtotal 15,897 — — 15,897 15,897 — — Subtotal 15,897 — — 15,897 15,897 — — Level 2 Subtotal 15,897 — — 15,897 15,897 — — Level 2 ( 15,897 15,897 — — Level 2 ( 2 ) : U.S. — — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 30,293 33 ( 62 ) 30,264 : U.S. Treasury security 30,293 33 ( 62 ) 30,264 6,165 Treasury security 30,293 33 ( 62 ) 30,264 6,165 9,817 14,282 30,293 33 ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency 33 ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency security ( 62 ) 30,264 6,165 9,817 14,282 U.S. agency security 9,767 62 ) 30,264 6,165 9,817 14,282 U.S. agency security 9,767 1 9,817 14,282 U.S. agency security 9,767 1 ( 3 ) 9,765 14,282 U.S. agency security 9,767 1 ( 3 ) 9,765 6,489 agency security 9,767 1 ( 3 ) 9,765 6,489 2,249 1,027 9,767 1 ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government 1 ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security ( 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security 19,821 3 ) 9,765 6,489 2,249 1,027 Non-U.S. government security 19,821 337 2,249 1,027 Non-U.S. government security 19,821 337 ( 50 ) 20,108 1,027 Non-U.S. government security 19,821 337 ( 50 ) 20,108 749 government security 19,821 337 ( 50 ) 20,108 749 3,168 16,191 19,821 337 ( 50 ) 20,108 749 3,168 16,191 Certificates of 337 ( 50 ) 20,108 749 3,168 16,191 Certificates of deposit ( 50 ) 20,108 749 3,168 16,191 Certificates of deposit and 50 ) 20,108 749 3,168 16,191 Certificates of deposit and time of deposit and time deposit 4,041 — — 4,041 2,024 1,922 time deposit 4,041 — — 4,041 2,024 1,922 95 Commercial paper deposit 4,041 — — 4,041 2,024 1,922 95 Commercial paper 12,433 4,041 — — 4,041 2,024 1,922 95 Commercial paper 12,433 — — — 4,041 2,024 1,922 95 Commercial paper 12,433 — — 2,024 1,922 95 Commercial paper 12,433 — — 12,433 5,193 7,240 Commercial paper 12,433 — — 12,433 5,193 7,240 — Corporate debt paper 12,433 — — 12,433 5,193 7,240 — Corporate debt security 12,433 — — 12,433 5,193 7,240 — Corporate debt security 85,383 7,240 — Corporate debt security 85,383 756 ( 92 ) 86,047 — Corporate debt security 85,383 756 ( 92 ) 86,047 123 debt security 85,383 756 ( 92 ) 86,047 123 26,127 59,797 85,383 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 756 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 ( 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 92 ) 86,047 123 26,127 59,797 Municipal security 958 8 ( 123 26,127 59,797 Municipal security 958 8 ( 1 ) 965 26,127 59,797 Municipal security 958 8 ( 1 ) 965 — Municipal security 958 8 ( 1 ) 965 — 68 897 958 8 ( 1 ) 965 — 68 897 Mortgage- and ( 1 ) 965 — 68 897 Mortgage- and asset-backed security 1 ) 965 — 68 897 Mortgage- and asset-backed security 14,180 897 Mortgage- and asset-backed security 14,180 67 ( 73 ) 14,174 Mortgage- and asset-backed security 14,180 67 ( 73 ) 14,174 — asset-backed security 14,180 67 ( 73 ) 14,174 — 1,122 13,052 14,180 67 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 73 ) 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 14,174 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 — 1,122 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 20,743 13,052 Subtotal 176,876 1,202 ( 281 ) 177,797 20,743 51,713 105,341 176,876 1,202 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 1,202 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ( 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ) 281 ) 177,797 20,743 51,713 105,341 Total ( 3 ) $ 20,743 51,713 105,341 Total ( 3 ) $ 204,977 $ 1,202 Total ( 3 ) $ 204,977 $ 1,202 $ ( 281 3 ) $ 204,977 $ 1,202 $ ( 281 ) $ 204,977 $ 1,202 $ ( 281 ) $ 205,898 $ 48,844 $ ( 281 ) $ 205,898 $ 48,844 $ 51,713 $ 281 ) $ 205,898 $ 48,844 $ 51,713 $ 105,341 ( $ 205,898 $ 48,844 $ 51,713 $ 105,341 ( 1 ) $ 48,844 $ 51,713 $ 105,341 ( 1 ) Level 1 $ 51,713 $ 105,341 ( 1 ) Level 1 fair value 105,341 ( 1 ) Level 1 fair value estimate are based asset or liability . ( 2 ) Level 2 fair value . ( 2 ) Level 2 fair value estimate are based asset or liability . ( 3 ) As of September 26 3 ) As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , total marketable 2020 and September 28 , 2019 , total marketable security included total marketable security included $ 18.6 billion and $ 18.9 billion $ 18.6 billion and $ 18.9 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” agreement . Apple Inc. | 2020 Form 10-K | 40 The Apple Inc. | 2020 Form 10-K | 40 The Company may | 2020 Form 10-K | 40 The Company may sell certain basis . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company doe not value . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company ’ s a carrying value of $ 2.8 billion and $ 2.9 billion $ 2.8 billion and $ 2.9 billion , respectively . Restricted Cash Flows a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 is a follows 2020 and September 28 , 2019 is a follows ( in ( in million ) : 2020 2019 Cash and cash equivalent in million ) : 2020 2019 Cash and cash equivalent $ Cash and cash equivalent $ 38,016 $ 48,844 Restricted cash included cash equivalent $ 38,016 $ 48,844 Restricted cash included in other included in other current asset 36 23 Restricted cash included in in other current asset 36 23 Restricted cash included in other included in other non-current asset 1,737 1,357 Cash , cash equivalent in other non-current asset 1,737 1,357 Cash , cash equivalent and equivalent and restricted cash $ 39,789 $ 50,224 The Company ’ restricted cash $ 39,789 $ 50,224 The Company ’ s restricted , typically for up to 12 month . To protect the hedge . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company ’ s expected to be recognized within 22 year . The Company may currency . Apple Inc. | 2020 Form 10-K | 41 To Apple Inc. | 2020 Form 10-K | 41 To protect the | 2020 Form 10-K | 41 To protect the Company ’ hedge . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company ’ s E were gain of $ 465 million and $ 777 million $ 465 million and $ 777 million for 2020 and 2019 and $ 777 million for 2020 and 2019 , respectively . 777 million for 2020 and 2019 , respectively . Changes in fair value a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , 2019 ( in million ) : ( in million ) : 2020 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 749 $ 303 $ 1,052 Interest exchange contract $ 749 $ 303 $ 1,052 Interest rate contract $ 749 $ 303 $ 1,052 Interest rate contract $ 1,557 1,052 Interest rate contract $ 1,557 $ — $ 1,557 Derivative $ 1,557 $ — $ 1,557 Derivative liability ( 2 ) $ 1,557 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 1,561 $ 485 $ 2,046 Apple exchange contract $ 1,561 $ 485 $ 2,046 Apple Inc. | $ 1,561 $ 485 $ 2,046 Apple Inc. | 2020 Form $ 2,046 Apple Inc. | 2020 Form 10-K | 42 2019 Apple Inc. | 2020 Form 10-K | 42 2019 Fair Value | 2020 Form 10-K | 42 2019 Fair Value of Derivatives 2020 Form 10-K | 42 2019 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,798 $ 323 $ 2,121 Interest exchange contract $ 1,798 $ 323 $ 2,121 Interest rate contract $ 1,798 $ 323 $ 2,121 Interest rate contract $ 685 2,121 Interest rate contract $ 685 $ — $ 685 Derivative $ 685 $ — $ 685 Derivative liability ( 2 ) $ 685 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 1,341 $ 160 $ 1,501 Interest exchange contract $ 1,341 $ 160 $ 1,501 Interest rate contract $ 1,341 $ 160 $ 1,501 Interest rate contract $ 105 1,501 Interest rate contract $ 105 $ — $ 105 ( $ 105 $ — $ 105 ( 1 ) The fair $ — $ 105 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Consolidated Statements of Operations for 2020 , 2019 and 2018 ( of Operations for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Gains/ ( Losses in million ) : 2020 2019 2018 Gains/ ( Losses ) million ) : 2020 2019 2018 Gains/ ( Losses ) recognized : Foreign exchange contract $ 365 $ ( 959 ) $ contract $ 365 $ ( 959 ) $ 682 Interest rate $ ( 959 ) $ 682 Interest rate contract ( 57 682 Interest rate contract ( 57 ) — 1 Total $ contract ( 57 ) — 1 Total $ 308 $ ( ) — 1 Total $ 308 $ ( 959 ) $ Total $ 308 $ ( 959 ) $ 683 Net investment $ ( 959 ) $ 683 Net investment hedge : Foreign : Foreign currency debt $ 15 $ ( 58 ) $ debt $ 15 $ ( 58 ) $ 4 Gains/ ( $ ( 58 ) $ 4 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 1,553 $ ( 116 ) $ contract $ 1,553 $ ( 116 ) $ ( 482 ) ( 116 ) $ ( 482 ) Interest rate contract ( ) Interest rate contract ( 8 ) ( 7 ) 1 contract ( 8 ) ( 7 ) 1 Total $ 1,545 8 ) ( 7 ) 1 Total $ 1,545 $ ( 7 ) 1 Total $ 1,545 $ ( 123 ) $ Total $ 1,545 $ ( 123 ) $ ( 481 ) ( 123 ) $ ( 481 ) The amount excluded from wa a loss of $ 168 million for 2020 . Apple of $ 168 million for 2020 . Apple Inc. | 2020 2020 . Apple Inc. | 2020 Form 10-K | 43 The Apple Inc. | 2020 Form 10-K | 43 The following table | 2020 Form 10-K | 43 The following table show information the related hedged item for 2020 , 2019 and 2018 and hedged item for 2020 , 2019 and 2018 and a of for 2020 , 2019 and 2018 and a of September 26 2018 and a of September 26 , 2020 ( in million a of September 26 , 2020 ( in million ) : ( in million ) : 2020 2019 2018 Gains/ ( Losses in million ) : 2020 2019 2018 Gains/ ( Losses ) million ) : 2020 2019 2018 Gains/ ( Losses ) on ) on derivative instrument ( 1 ) : Foreign exchange contract Foreign exchange contract $ ( 992 ) $ 1,020 $ ( $ ( 992 ) $ 1,020 $ ( 168 ) Interest ) $ 1,020 $ ( 168 ) Interest rate contract 1,114 168 ) Interest rate contract 1,114 2,068 ( 1,363 ) Total ) Interest rate contract 1,114 2,068 ( 1,363 ) Total $ rate contract 1,114 2,068 ( 1,363 ) Total $ 122 $ ( 1,363 ) Total $ 122 $ 3,088 $ ( 1,531 ) Total $ 122 $ 3,088 $ ( 1,531 ) Gains/ 122 $ 3,088 $ ( 1,531 ) Gains/ ( Losses ) related to hedged item ( 1 ) : Marketable security $ ) : Marketable security $ 991 $ ( 1,018 ) $ security $ 991 $ ( 1,018 ) $ 167 Fixed-rate debt $ ( 1,018 ) $ 167 Fixed-rate debt ( 1,114 ) $ 167 Fixed-rate debt ( 1,114 ) ( 2,068 ) 1,363 debt ( 1,114 ) ( 2,068 ) 1,363 Total $ ( 1,114 ) ( 2,068 ) 1,363 Total $ ( 123 ) ) 1,363 Total $ ( 123 ) $ ( 3,086 ) ( 123 ) $ ( 3,086 ) $ 1,530 2020 Carrying $ ( 3,086 ) $ 1,530 2020 Carrying amount of hedged ( 3,086 ) $ 1,530 2020 Carrying amount of hedged assets/ ) : Marketable security ( 2 ) $ 16,270 Fixed-rate debt security ( 2 ) $ 16,270 Fixed-rate debt ( 3 ) $ 16,270 Fixed-rate debt ( 3 ) $ ( 21,033 ) ( 3 ) $ ( 21,033 ) Cumulative hedging adjustment included increases/ ( decrease ) $ 493 Fixed-rate debt carrying amount ( increase ) /decreases $ ( 1,541 ) ( 1 ) Gains $ ( 1,541 ) ( 1 ) Gains and loss related Statements of Operations . ( 2 ) The carrying amount of Consolidated Balance Sheet . ( 3 ) The carrying amount of derivative instrument a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , 2019 ( in million ) : ( in million ) : 2020 2019 Notional Amount Credit Risk in million ) : 2020 2019 Notional Amount Credit Risk Amount : Foreign exchange contract $ 57,410 $ 749 $ 61,795 $ exchange contract $ 57,410 $ 749 $ 61,795 $ 1,798 Interest $ 57,410 $ 749 $ 61,795 $ 1,798 Interest rate contract $ 749 $ 61,795 $ 1,798 Interest rate contract $ 20,700 1,798 Interest rate contract $ 20,700 $ 1,557 $ 31,250 $ rate contract $ 20,700 $ 1,557 $ 31,250 $ 685 Instruments $ 20,700 $ 1,557 $ 31,250 $ 685 Instruments not designated $ 1,557 $ 31,250 $ 685 Instruments not designated a accounting : Foreign exchange contract $ 88,636 $ 303 $ 76,868 $ exchange contract $ 88,636 $ 303 $ 76,868 $ 323 The $ 88,636 $ 303 $ 76,868 $ 323 The notional amount $ 303 $ 76,868 $ 323 The notional amount for outstanding instrument . Apple Inc. | 2020 Form 10-K | 44 The Apple Inc. | 2020 Form 10-K | 44 The Company generally | 2020 Form 10-K | 44 The Company generally enters into Sheets . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the net 2020 and September 28 , 2019 , the net cash collateral collateral security arrangement wa $ 875 million and $ 1.6 billion $ 875 million and $ 1.6 billion , respectively . The other . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the potential 2020 and September 28 , 2019 , the potential effect of and derivative liability of $ 2.8 billion and $ 2.7 billion $ 2.8 billion and $ 2.7 billion , respectively , resulting net derivative liability of $ 312 million and $ 407 million $ 312 million and $ 407 million , respectively . Accounts . As of both September 26 , 2020 and September 28 of both September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had no no customer that individually represented 10 % or more of total cellular network carrier accounted for 51 % of total trade receivables trade receivables a of September 28 , 2019 . Vendor Non-Trade a of September 28 , 2019 . Vendor Non-Trade Receivables The supplier . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 57 % and 11 % . accounted for 57 % and 11 % . As of September % . As of September 28 , 2019 , the Company As of September 28 , 2019 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 59 % and 14 % . accounted for 59 % and 14 % . Note 4 – and 14 % . Note 4 – Consolidated Financial Statement Details statement detail a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 ( in million 2020 and September 28 , 2019 ( in million ) : Plant and Equipment , Net 2020 2019 Land and building $ and Equipment , Net 2020 2019 Land and building $ 17,952 2019 Land and building $ 17,952 $ 17,085 Machinery , equipment and building $ 17,952 $ 17,085 Machinery , equipment and internal-use , equipment and internal-use software 75,291 69,797 Leasehold improvement 10,283 9,075 equipment and internal-use software 75,291 69,797 Leasehold improvement 10,283 9,075 Gross software 75,291 69,797 Leasehold improvement 10,283 9,075 Gross property , plant 75,291 69,797 Leasehold improvement 10,283 9,075 Gross property , plant and property , plant and equipment 103,526 95,957 Accumulated depreciation and amortization , plant and equipment 103,526 95,957 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 66,760 ) ( 58,579 ) Total amortization ( 66,760 ) ( 58,579 ) Total property , plant and equipment , net $ 36,766 $ 37,378 Other Non-Current Liabilities , net $ 36,766 $ 37,378 Other Non-Current Liabilities 2020 2019 $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable $ 37,378 Other Non-Current Liabilities 2020 2019 Long-term tax payable $ 28,170 2019 Long-term tax payable $ 28,170 $ 29,545 Other non-current liability tax payable $ 28,170 $ 29,545 Other non-current liability 26,320 20,958 $ 29,545 Other non-current liability 26,320 20,958 Total other non-current liability 29,545 Other non-current liability 26,320 20,958 Total other non-current liability $ Total other non-current liability $ 54,490 $ 50,503 Apple Inc. | non-current liability $ 54,490 $ 50,503 Apple Inc. | 2020 Form $ 50,503 Apple Inc. | 2020 Form 10-K | 45 Other Apple Inc. | 2020 Form 10-K | 45 Other Income/ ( | 2020 Form 10-K | 45 Other Income/ ( Expense ) of OI & E for 2020 , 2019 and 2018 ( & E for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Interest and dividend in million ) : 2020 2019 2018 Interest and dividend income million ) : 2020 2019 2018 Interest and dividend income $ Interest and dividend income $ 3,763 $ 4,961 $ 5,686 Interest dividend income $ 3,763 $ 4,961 $ 5,686 Interest expense ( $ 3,763 $ 4,961 $ 5,686 Interest expense ( 2,873 ) $ 5,686 Interest expense ( 2,873 ) ( 3,576 ) ( expense ( 2,873 ) ( 3,576 ) ( 3,240 ) Other ) ( 3,576 ) ( 3,240 ) Other income/ ( expense expense ) , net ( 87 ) 422 ( 441 ) , net ( 87 ) 422 ( 441 ) Total other ( 87 ) 422 ( 441 ) Total other income/ ( expense ) , net $ 803 $ 1,807 $ 2,005 Note , net $ 803 $ 1,807 $ 2,005 Note 5 – $ 803 $ 1,807 $ 2,005 Note 5 – Income Taxes $ 1,807 $ 2,005 Note 5 – Income Taxes U.S. Tax and Jobs Act On December 22 , 2017 , the U.S. Act On December 22 , 2017 , the U.S. enacted the federal income tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 , while also % effective January 1 , 2018 , while also imposing a provision for income tax for 2020 , 2019 and 2018 , income tax for 2020 , 2019 and 2018 , consisted of for 2020 , 2019 and 2018 , consisted of the following ( in million ) : 2020 2019 2018 Federal : Current in million ) : 2020 2019 2018 Federal : Current $ million ) : 2020 2019 2018 Federal : Current $ 6,306 2018 Federal : Current $ 6,306 $ 6,384 $ 41,425 Deferred : Current $ 6,306 $ 6,384 $ 41,425 Deferred ( 3,619 $ 6,306 $ 6,384 $ 41,425 Deferred ( 3,619 ) ( 6,384 $ 41,425 Deferred ( 3,619 ) ( 2,939 ) ( Deferred ( 3,619 ) ( 2,939 ) ( 33,819 ) Total ) ( 2,939 ) ( 33,819 ) Total 2,687 3,445 7,606 ) ( 33,819 ) Total 2,687 3,445 7,606 State : Current ( 33,819 ) Total 2,687 3,445 7,606 State : Current 455 33,819 ) Total 2,687 3,445 7,606 State : Current 455 475 3,445 7,606 State : Current 455 475 551 Deferred 21 ( 7,606 State : Current 455 475 551 Deferred 21 ( 67 State : Current 455 475 551 Deferred 21 ( 67 ) Current 455 475 551 Deferred 21 ( 67 ) 48 Total 475 551 Deferred 21 ( 67 ) 48 Total 476 408 Deferred 21 ( 67 ) 48 Total 476 408 599 Foreign ( 67 ) 48 Total 476 408 599 Foreign : Current 67 ) 48 Total 476 408 599 Foreign : Current 3,134 ) 48 Total 476 408 599 Foreign : Current 3,134 3,962 408 599 Foreign : Current 3,134 3,962 3,986 Deferred 3,383 2,666 599 Foreign : Current 3,134 3,962 3,986 Deferred 3,383 2,666 1,181 Foreign : Current 3,134 3,962 3,986 Deferred 3,383 2,666 1,181 Total Current 3,134 3,962 3,986 Deferred 3,383 2,666 1,181 Total 6,517 6,628 3,134 3,962 3,986 Deferred 3,383 2,666 1,181 Total 6,517 6,628 5,167 3,962 3,986 Deferred 3,383 2,666 1,181 Total 6,517 6,628 5,167 Provision Deferred 3,383 2,666 1,181 Total 6,517 6,628 5,167 Provision for income 3,383 2,666 1,181 Total 6,517 6,628 5,167 Provision for income tax 2,666 1,181 Total 6,517 6,628 5,167 Provision for income tax $ Provision for income tax $ 9,680 $ 10,481 $ 13,372 The income tax $ 9,680 $ 10,481 $ 13,372 The foreign provision $ 9,680 $ 10,481 $ 13,372 The foreign provision for income foreign pre-tax earnings of $ 38.1 billion , $ 44.3 billion $ 38.1 billion , $ 44.3 billion and $ 48.0 billion $ 44.3 billion and $ 48.0 billion in 2020 , 2019 and $ 48.0 billion in 2020 , 2019 and 2018 , 48.0 billion in 2020 , 2019 and 2018 , respectively . in 2020 , 2019 and 2018 , respectively . A reconciliation federal income tax rate ( 21 % in 2020 and 2019 rate ( 21 % in 2020 and 2019 ; 24.5 % 21 % in 2020 and 2019 ; 24.5 % in 2018 in 2020 and 2019 ; 24.5 % in 2018 ) to 2019 ; 24.5 % in 2018 ) to income before provision provision for income tax for 2020 , 2019 and 2018 , income tax for 2020 , 2019 and 2018 , is a for 2020 , 2019 and 2018 , is a follows ( dollar in million ) : 2020 2019 2018 Computed expected tax in million ) : 2020 2019 2018 Computed expected tax $ million ) : 2020 2019 2018 Computed expected tax $ 14,089 2018 Computed expected tax $ 14,089 $ 13,805 $ 17,890 State expected tax $ 14,089 $ 13,805 $ 17,890 State tax , $ 14,089 $ 13,805 $ 17,890 State tax , net of , net of federal effect 423 423 271 Impacts of the net of federal effect 423 423 271 Impacts of the Act of federal effect 423 423 271 Impacts of the Act ( Impacts of the Act ( 582 ) — 1,515 Earnings of Act ( 582 ) — 1,515 Earnings of foreign subsidiary ( Earnings of foreign subsidiary ( 2,534 ) ( 2,625 ) ( subsidiary ( 2,534 ) ( 2,625 ) ( 5,606 ) Research ) ( 2,625 ) ( 5,606 ) Research and development credit development credit , net ( 728 ) ( 548 ) ( net ( 728 ) ( 548 ) ( 560 ) Excess ) ( 548 ) ( 560 ) Excess tax benefit from benefit from equity award ( 930 ) ( 639 ) ( award ( 930 ) ( 639 ) ( 675 ) Other ) ( 639 ) ( 675 ) Other ( 58 ) ( 675 ) Other ( 58 ) 65 537 Provision for ) Other ( 58 ) 65 537 Provision for income tax Other ( 58 ) 65 537 Provision for income tax $ Provision for income tax $ 9,680 $ 10,481 $ 13,372 Effective income tax $ 9,680 $ 10,481 $ 13,372 Effective tax rate $ 9,680 $ 10,481 $ 13,372 Effective tax rate 14.4 % $ 13,372 Effective tax rate 14.4 % 15.9 % 18.3 % Effective tax rate 14.4 % 15.9 % 18.3 % Apple Inc. rate 14.4 % 15.9 % 18.3 % Apple Inc. | 2020 18.3 % Apple Inc. | 2020 Form 10-K | 46 Deferred Apple Inc. | 2020 Form 10-K | 46 Deferred Tax Assets | 2020 Form 10-K | 46 Deferred Tax Assets and Liabilities and Liabilities As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the significant 2020 and September 28 , 2019 , the significant component of ( in million ) : 2020 2019 Deferred tax asset : in million ) : 2020 2019 Deferred tax asset : Amortization : Amortization and depreciation $ 8,317 $ 11,645 Accrued liability and and depreciation $ 8,317 $ 11,645 Accrued liability and other reserve Accrued liability and other reserve 4,934 5,196 Lease liability 2,038 — liability and other reserve 4,934 5,196 Lease liability 2,038 — Deferred reserve 4,934 5,196 Lease liability 2,038 — Deferred revenue 1,638 1,372 liability 2,038 — Deferred revenue 1,638 1,372 Other 2,409 2,174 Total 2,038 — Deferred revenue 1,638 1,372 Other 2,409 2,174 Total deferred Deferred revenue 1,638 1,372 Other 2,409 2,174 Total deferred tax asset revenue 1,638 1,372 Other 2,409 2,174 Total deferred tax asset 19,336 2,174 Total deferred tax asset 19,336 20,387 Less : Valuation allowance Total deferred tax asset 19,336 20,387 Less : Valuation allowance ( Less : Valuation allowance ( 1,041 ) ( 747 ) Total allowance ( 1,041 ) ( 747 ) Total deferred tax asset deferred tax asset , net 18,295 19,640 Deferred tax liability : tax asset , net 18,295 19,640 Deferred tax liability : Minimum Minimum tax on foreign earnings 7,045 10,809 Right-of-use asset 1,862 — tax on foreign earnings 7,045 10,809 Right-of-use asset 1,862 — Unrealized earnings 7,045 10,809 Right-of-use asset 1,862 — Unrealized gain 526 186 asset 1,862 — Unrealized gain 526 186 Other 705 600 Total 1,862 — Unrealized gain 526 186 Other 705 600 Total deferred Unrealized gain 526 186 Other 705 600 Total deferred tax liability gain 526 186 Other 705 600 Total deferred tax liability 10,138 600 Total deferred tax liability 10,138 11,595 Net deferred tax asset Total deferred tax liability 10,138 11,595 Net deferred tax asset $ Net deferred tax asset $ 8,157 $ 8,045 Deferred tax asset tax asset $ 8,157 $ 8,045 Deferred tax asset and liability Tax Positions As of September 26 , 2020 , the total As of September 26 , 2020 , the total amount of unrecognized tax benefit wa $ 16.5 billion , of which $ billion , of which $ 8.8 billion , if recognized , rate . As of September 28 , 2019 , the total As of September 28 , 2019 , the total amount of unrecognized tax benefit wa $ 15.6 billion , of which $ billion , of which $ 8.6 billion , if recognized , interest and penalty , for 2020 , 2019 and 2018 , penalty , for 2020 , 2019 and 2018 , is a for 2020 , 2019 and 2018 , is a follows ( ( in million ) : 2020 2019 2018 Beginning balance $ in million ) : 2020 2019 2018 Beginning balance $ 15,619 million ) : 2020 2019 2018 Beginning balance $ 15,619 $ 2019 2018 Beginning balance $ 15,619 $ 9,694 $ 8,407 Increases Beginning balance $ 15,619 $ 9,694 $ 8,407 Increases related to $ 15,619 $ 9,694 $ 8,407 Increases related to tax position taken during a prior year 454 5,845 2,431 Decreases related to during a prior year 454 5,845 2,431 Decreases related to tax a prior year 454 5,845 2,431 Decreases related to tax position during a prior year ( 791 ) ( 686 ) ( year ( 791 ) ( 686 ) ( 2,212 ) Increases ) ( 686 ) ( 2,212 ) Increases related to tax taken during the current year 1,347 1,697 1,824 Decreases related to during the current year 1,347 1,697 1,824 Decreases related to settlement the current year 1,347 1,697 1,824 Decreases related to settlement with settlement with taxing authority ( 85 ) ( 852 ) ( authority ( 85 ) ( 852 ) ( 756 ) Decreases ) ( 852 ) ( 756 ) Decreases related to expiration the statute of limitation ( 69 ) ( 79 ) — limitation ( 69 ) ( 79 ) — Ending balance $ ) — Ending balance $ 16,475 $ 15,619 $ 9,694 The Ending balance $ 16,475 $ 15,619 $ 9,694 The Company is $ 16,475 $ 15,619 $ 9,694 The Company is subject to it review of the year 2013 through 2015 in 2018 , of the year 2013 through 2015 in 2018 , and all year 2013 through 2015 in 2018 , and all year before , and all year before 2016 are closed . Tax year closed . Tax year after 2014 remain open in certain major could decrease in the next 12 month by a much a by a much a $ 3.9 billion . Apple Inc. | billion . Apple Inc. | 2020 Form 10-K | 47 Interest Apple Inc. | 2020 Form 10-K | 47 Interest and Penalties | 2020 Form 10-K | 47 Interest and Penalties The Company tax . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the total 2020 and September 28 , 2019 , the total amount of and penalty accrued wa $ 1.4 billion and $ 1.3 billion $ 1.4 billion and $ 1.3 billion , respectively . The interest and penalty expense in 2020 , 2019 and 2018 of penalty expense in 2020 , 2019 and 2018 of $ 85 in 2020 , 2019 and 2018 of $ 85 million , 2019 and 2018 of $ 85 million , $ 73 million $ 85 million , $ 73 million and $ 489 million $ 73 million and $ 489 million , respectively . European State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of wa calculated to be € 13.1 billion , plus interest of , plus interest of € 1.2 billion . The Company and ” ) . On July 15 , 2020 , the General . On July 15 , 2020 , the General Court annulled Aid Decision . On September 25 , 2020 , the European . On September 25 , 2020 , the European Commission appealed country . As of September 26 , 2020 , the adjusted As of September 26 , 2020 , the adjusted recovery amount adjusted recovery amount wa € 12.9 billion , excluding interest . Marketable Securities section of Note 3 , “ Financial Instruments ” for more information . Note 6 – Debt Commercial Paper and repurchase . As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the Company 2020 and September 28 , 2019 , the Company had $ , the Company had $ 5.0 billion and $ 6.0 billion $ 5.0 billion and $ 6.0 billion of Commercial Paper outstanding ’ s Commercial Paper wa 0.62 % and 2.24 % a Paper wa 0.62 % and 2.24 % a of September 26 2.24 % a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , respectively . 2020 and September 28 , 2019 , respectively . The following maturity of Commercial Paper for 2020 , 2019 and 2018 ( Commercial Paper for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Maturities 90 day in million ) : 2020 2019 2018 Maturities 90 day or million ) : 2020 2019 2018 Maturities 90 day or le : 2020 2019 2018 Maturities 90 day or le : Proceeds commercial paper , net $ 100 $ ( 3,248 ) $ net $ 100 $ ( 3,248 ) $ 1,044 Maturities greater $ ( 3,248 ) $ 1,044 Maturities greater than 90 day $ 1,044 Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 6,185 13,874 14,555 Repayments of commercial Proceeds from commercial paper 6,185 13,874 14,555 Repayments of commercial paper from commercial paper 6,185 13,874 14,555 Repayments of commercial paper ( Repayments of commercial paper ( 7,248 ) ( 16,603 ) ( paper ( 7,248 ) ( 16,603 ) ( 15,636 ) Repayments ) ( 16,603 ) ( 15,636 ) Repayments of commercial paper commercial paper , net ( 1,063 ) ( 2,729 ) ( net ( 1,063 ) ( 2,729 ) ( 1,081 ) Total ) ( 2,729 ) ( 1,081 ) Total repayment of commercial paper , net $ ( 963 ) $ ( 5,977 ) ( 963 ) $ ( 5,977 ) $ ( 37 ) ( 5,977 ) $ ( 37 ) In 2020 , the $ ( 37 ) In 2020 , the Company entered into The Company entered into $ 5.2 billion of Repos during 2020 5.2 billion of Repos during 2020 , all of which had been settled a of September 26 , 2020 . Apple Inc. a of September 26 , 2020 . Apple Inc. | 2020 2020 . Apple Inc. | 2020 Form 10-K | 48 Term Apple Inc. | 2020 Form 10-K | 48 Term Debt As | 2020 Form 10-K | 48 Term Debt As of September Term Debt As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had outstanding aggregate principal amount of $ 106.1 billion ( collectively the “ term debt a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 : Maturities ( 2020 and September 28 , 2019 : Maturities ( calendar year Maturities ( calendar year ) 2020 2019 Amount ( in million ( calendar year ) 2020 2019 Amount ( in million ) million ) Effective Interest Rate 2013 – 2019 debt issuance : Effective Interest Rate 2013 – 2019 debt issuance : Floating-rate note debt issuance : Floating-rate note 2021 – 2022 $ 2,250 0.60 : Floating-rate note 2021 – 2022 $ 2,250 0.60 % – note 2021 – 2022 $ 2,250 0.60 % – 1.39 % 2021 – 2022 $ 2,250 0.60 % – 1.39 % $ $ 2,250 0.60 % – 1.39 % $ 4,250 2.25 % % – 1.39 % $ 4,250 2.25 % – 3.28 % – 1.39 % $ 4,250 2.25 % – 3.28 % Fixed-rate $ 4,250 2.25 % – 3.28 % Fixed-rate 0.375 % – % – 3.28 % Fixed-rate 0.375 % – 4.650 % note % Fixed-rate 0.375 % – 4.650 % note 2020 – 2049 % – 4.650 % note 2020 – 2049 87,487 0.28 % 4.650 % note 2020 – 2049 87,487 0.28 % – 4.78 % note 2020 – 2049 87,487 0.28 % – 4.78 % note 2020 – 2049 87,487 0.28 % – 4.78 % 97,429 2049 87,487 0.28 % – 4.78 % 97,429 0.28 % – 0.28 % – 4.78 % 97,429 0.28 % – 4.78 % % – 4.78 % 97,429 0.28 % – 4.78 % First % 97,429 0.28 % – 4.78 % First quarter 2020 debt – 4.78 % First quarter 2020 debt issuance of € 2.0 2020 debt issuance of € 2.0 billion : Fixed-rate 0.000 % € 2.0 billion : Fixed-rate 0.000 % – 0.500 % note : Fixed-rate 0.000 % – 0.500 % note 2025 – 2031 % – 0.500 % note 2025 – 2031 2,341 0.03 % 0.500 % note 2025 – 2031 2,341 0.03 % – 0.56 % note 2025 – 2031 2,341 0.03 % – 0.56 % note 2025 – 2031 2,341 0.03 % – 0.56 % — 2031 2,341 0.03 % – 0.56 % — — % Third — — % Third quarter 2020 debt issuance of $ 8.5 2020 debt issuance of $ 8.5 billion : Fixed-rate 0.750 % $ 8.5 billion : Fixed-rate 0.750 % – 2.650 % note : Fixed-rate 0.750 % – 2.650 % note 2023 – 2050 % – 2.650 % note 2023 – 2050 8,500 0.84 % 2.650 % note 2023 – 2050 8,500 0.84 % – 2.72 % note 2023 – 2050 8,500 0.84 % – 2.72 % note 2023 – 2050 8,500 0.84 % – 2.72 % — 2050 8,500 0.84 % – 2.72 % — — % Fourth — — % Fourth quarter 2020 debt issuance of $ 5.5 2020 debt issuance of $ 5.5 billion : Fixed-rate 0.550 % $ 5.5 billion : Fixed-rate 0.550 % – 2.550 % note : Fixed-rate 0.550 % – 2.550 % note 2025 – 2060 % – 2.550 % note 2025 – 2060 5,500 0.60 % 2.550 % note 2025 – 2060 5,500 0.60 % – 2.59 % note 2025 – 2060 5,500 0.60 % – 2.59 % note 2025 – 2060 5,500 0.60 % – 2.59 % — 2060 5,500 0.60 % – 2.59 % — — % Total — % Total term debt 106,078 101,679 Unamortized premium/ ( discount % Total term debt 106,078 101,679 Unamortized premium/ ( discount ) issuance cost , net ( 314 ) ( 224 ) Hedge net ( 314 ) ( 224 ) Hedge accounting fair value Hedge accounting fair value adjustment 1,676 612 Less : Current portion accounting fair value adjustment 1,676 612 Less : Current portion of portion of term debt ( 8,773 ) ( 10,260 ) Total debt ( 8,773 ) ( 10,260 ) Total non-current portion of portion of term debt $ 98,667 $ 91,807 To manage interest term debt $ 98,667 $ 91,807 To manage interest rate risk note . As of September 28 , 2019 , a portion As of September 28 , 2019 , a portion of the a carrying value of $ 1.0 billion wa designated a a Japanese yen–denominated note matured during 2020 and the associated net investment Financial Instruments section of Note 3 , “ Financial Instruments . . The Company recognized $ 2.8 billion , $ 3.2 billion $ 2.8 billion , $ 3.2 billion and $ 3.0 billion $ 3.2 billion and $ 3.0 billion of interest cost on on it term debt for 2020 , 2019 and 2018 , term debt for 2020 , 2019 and 2018 , respectively . for 2020 , 2019 and 2018 , respectively . The future s Notes a of September 26 , 2020 , are a a of September 26 , 2020 , are a follows ( ( in million ) : 2021 $ 8,750 2022 9,569 2023 million ) : 2021 $ 8,750 2022 9,569 2023 11,389 2024 ) : 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 : 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 2025 2021 $ 8,750 2022 9,569 2023 11,389 2024 10,115 2025 10,914 $ 8,750 2022 9,569 2023 11,389 2024 10,115 2025 10,914 Thereafter 8,750 2022 9,569 2023 11,389 2024 10,115 2025 10,914 Thereafter 55,341 2022 9,569 2023 11,389 2024 10,115 2025 10,914 Thereafter 55,341 Total 9,569 2023 11,389 2024 10,115 2025 10,914 Thereafter 55,341 Total term 2023 11,389 2024 10,115 2025 10,914 Thereafter 55,341 Total term debt 2024 10,115 2025 10,914 Thereafter 55,341 Total term debt $ 106,078 55,341 Total term debt $ 106,078 As of September 26 , $ 106,078 As of September 26 , 2020 and September 28 As of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the fair 2020 and September 28 , 2019 , the fair value of Notes , based on Level 2 input , wa $ 117.1 2 input , wa $ 117.1 billion and $ 107.5 billion $ 117.1 billion and $ 107.5 billion , respectively . Apple respectively . Apple Inc. | 2020 Form 10-K | 49 Note Apple Inc. | 2020 Form 10-K | 49 Note 7 – | 2020 Form 10-K | 49 Note 7 – Shareholders ’ Form 10-K | 49 Note 7 – Shareholders ’ Equity Share Repurchase Program As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company wa authorized to purchase up to $ 225 billion of the Company ’ program , of which $ 168.6 billion had been utilized . had been utilized . During 2020 , the Company repurchased 917 2020 , the Company repurchased 917 million share of it common it common stock for $ 72.5 billion , including 141 million $ 72.5 billion , including 141 million share delivered under a share delivered under a $ 10.0 billion November 2019 accelerated share a $ 10.0 billion November 2019 accelerated share repurchase arrangement ( “ ASR ” ) and 64 million share delivered under a share delivered under a $ 6.0 billion May 2020 ASR . a $ 6.0 billion May 2020 ASR . The Company ’ under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2020 , 2019 and 2018 ( common stock for 2020 , 2019 and 2018 ( in thousand for 2020 , 2019 and 2018 ( in thousand ) : ( in thousand ) : 2020 2019 2018 Common stock outstanding in thousand ) : 2020 2019 2018 Common stock outstanding , thousand ) : 2020 2019 2018 Common stock outstanding , beginning stock outstanding , beginning balance 17,772,945 19,019,943 20,504,805 Common stock repurchased outstanding , beginning balance 17,772,945 19,019,943 20,504,805 Common stock repurchased ( , beginning balance 17,772,945 19,019,943 20,504,805 Common stock repurchased ( 917,270 20,504,805 Common stock repurchased ( 917,270 ) ( 1,380,819 ) ( repurchased ( 917,270 ) ( 1,380,819 ) ( 1,622,198 ) Common ) ( 1,380,819 ) ( 1,622,198 ) Common stock issued , share withheld for employee tax 121,088 133,821 137,336 Common stock outstanding withheld for employee tax 121,088 133,821 137,336 Common stock outstanding , for employee tax 121,088 133,821 137,336 Common stock outstanding , ending stock outstanding , ending balance 16,976,763 17,772,945 19,019,943 Note 8 – outstanding , ending balance 16,976,763 17,772,945 19,019,943 Note 8 – Comprehensive , ending balance 16,976,763 17,772,945 19,019,943 Note 8 – Comprehensive Income balance 16,976,763 17,772,945 19,019,943 Note 8 – Comprehensive Income The Company statement line item , for 2020 and 2019 ( in million item , for 2020 and 2019 ( in million ) : Components Financial Statement Line Items 2020 2019 Unrealized ( gain ) Financial Statement Line Items 2020 2019 Unrealized ( gain ) /losses Total net sale $ ( 365 ) $ ( 206 ) ( 365 ) $ ( 206 ) Total cost of sale Total cost of sale ( 584 ) ( 482 ) Other sale ( 584 ) ( 482 ) Other income/ ( expense expense ) , net ( 604 ) 784 Interest rate contract , net ( 604 ) 784 Interest rate contract Other income/ ( expense ) , net 8 7 ( 1,545 ) 103 expense ) , net 8 7 ( 1,545 ) 103 Unrealized , net 8 7 ( 1,545 ) 103 Unrealized ( gain 8 7 ( 1,545 ) 103 Unrealized ( gain ) /losses expense ) , net ( 82 ) 31 Total amount reclassified , net ( 82 ) 31 Total amount reclassified from AOCI reclassified from AOCI $ ( 1,627 ) $ 134 Apple Inc. $ ( 1,627 ) $ 134 Apple Inc. | 2020 Form $ 134 Apple Inc. | 2020 Form 10-K | 50 The Apple Inc. | 2020 Form 10-K | 50 The following table | 2020 Form 10-K | 50 The following table show the in AOCI by component for 2020 and 2019 ( in million by component for 2020 and 2019 ( in million ) : Total Balances a of September 29 , 2018 $ ( 1,055 a of September 29 , 2018 $ ( 1,055 ) $ 29 , 2018 $ ( 1,055 ) $ 810 $ ( $ ( 1,055 ) $ 810 $ ( 3,209 ) $ ) $ 810 $ ( 3,209 ) $ ( 3,454 ) ( 3,209 ) $ ( 3,454 ) Other comprehensive income/ ( loss ) before reclassification ( 421 ) ( 949 ) 4,854 reclassification ( 421 ) ( 949 ) 4,854 3,484 Amounts reclassified 421 ) ( 949 ) 4,854 3,484 Amounts reclassified from AOCI ) ( 949 ) 4,854 3,484 Amounts reclassified from AOCI — Amounts reclassified from AOCI — 103 31 134 Tax effect 13 reclassified from AOCI — 103 31 134 Tax effect 13 208 from AOCI — 103 31 134 Tax effect 13 208 ( 103 31 134 Tax effect 13 208 ( 1,058 ) ( 31 134 Tax effect 13 208 ( 1,058 ) ( 837 Tax effect 13 208 ( 1,058 ) ( 837 ) Other 208 ( 1,058 ) ( 837 ) Other comprehensive income/ ( income/ ( loss ) ( 408 ) ( 638 ) 3,827 ) ( 408 ) ( 638 ) 3,827 2,781 Cumulative effect 408 ) ( 638 ) 3,827 2,781 Cumulative effect of change ) ( 638 ) 3,827 2,781 Cumulative effect of change in in accounting principle — — 89 89 Balances a of September accounting principle — — 89 89 Balances a of September 28 89 Balances a of September 28 , 2019 ( 1,463 ) a of September 28 , 2019 ( 1,463 ) 172 707 September 28 , 2019 ( 1,463 ) 172 707 ( 584 , 2019 ( 1,463 ) 172 707 ( 584 ) Other 2019 ( 1,463 ) 172 707 ( 584 ) Other comprehensive 1,463 ) 172 707 ( 584 ) Other comprehensive income/ ( ( loss ) before reclassification 91 115 1,560 1,766 Amounts reclassified loss ) before reclassification 91 115 1,560 1,766 Amounts reclassified from ) before reclassification 91 115 1,560 1,766 Amounts reclassified from AOCI before reclassification 91 115 1,560 1,766 Amounts reclassified from AOCI — reclassified from AOCI — ( 1,545 ) ( 82 ) ( — ( 1,545 ) ( 82 ) ( 1,627 ) Tax ) ( 82 ) ( 1,627 ) Tax effect ( 3 1,627 ) Tax effect ( 3 ) 245 ( 339 ) Tax effect ( 3 ) 245 ( 339 ) ( 97 ( 3 ) 245 ( 339 ) ( 97 ) Other 245 ( 339 ) ( 97 ) Other comprehensive income/ ( comprehensive income/ ( loss ) 88 ( 1,185 ) 1,139 42 ( loss ) 88 ( 1,185 ) 1,139 42 Cumulative effect ) 88 ( 1,185 ) 1,139 42 Cumulative effect of change 88 ( 1,185 ) 1,139 42 Cumulative effect of change in change in accounting principle ( 1 ) — 136 — 136 principle ( 1 ) — 136 — 136 Balances a of 1 ) — 136 — 136 Balances a of September 26 136 Balances a of September 26 , 2020 $ ( 1,375 a of September 26 , 2020 $ ( 1,375 ) $ 26 , 2020 $ ( 1,375 ) $ ( 877 ) ( 1,375 ) $ ( 877 ) $ 1,846 $ ( $ ( 877 ) $ 1,846 $ ( 406 ) ( ) $ 1,846 $ ( 406 ) ( 1 ) Refer $ ( 406 ) ( 1 ) Refer to Note 1 1 ) Refer to Note 1 , “ Summary of Significant ’ s adoption of ASU 2017-12 in 2020 . Note 9 adoption of ASU 2017-12 in 2020 . Note 9 – Benefit 2017-12 in 2020 . Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four . RSUs granted under the 2014 Plan reduce the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 1.54 billion share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 26 , 2020 , approximately 808 As of September 26 , 2020 , approximately 808 million share 26 , 2020 , approximately 808 million share were reserved for for future issuance under the 2014 Plan . Apple Inc. Non-Employee Director Plan expires on November 12 , 2027 . All RSUs expires on November 12 , 2027 . All RSUs granted under vest . As of September 26 , 2020 , approximately 4 As of September 26 , 2020 , approximately 4 million share 26 , 2020 , approximately 4 million share were reserved for Plan . Apple Inc. | 2020 Form 10-K | 51 Rule Apple Inc. | 2020 Form 10-K | 51 Rule 10b5-1 Trading | 2020 Form 10-K | 51 Rule 10b5-1 Trading Plans During Form 10-K | 51 Rule 10b5-1 Trading Plans During the three the three month ended September 26 , 2020 , Section 16 month ended September 26 , 2020 , Section 16 officer Katherine 26 , 2020 , Section 16 officer Katherine L. Adams , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 26 , 2020 , approximately 107 As of September 26 , 2020 , approximately 107 million share 26 , 2020 , approximately 107 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,500 for calendar year 2020 ) $ 19,500 for calendar year 2020 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ up to a maximum of 6 % of the employee ’ activity and related information for 2020 , 2019 and 2018 , related information for 2020 , 2019 and 2018 , is a for 2020 , 2019 and 2018 , is a follows : ) Balance a of September 30 , 2017 390,284 $ 27.58 a of September 30 , 2017 390,284 $ 27.58 RSUs granted of September 30 , 2017 390,284 $ 27.58 RSUs granted 181,402 30 , 2017 390,284 $ 27.58 RSUs granted 181,402 $ 40.72 390,284 $ 27.58 RSUs granted 181,402 $ 40.72 RSUs vested ( 27.58 RSUs granted 181,402 $ 40.72 RSUs vested ( 178,873 ) $ 40.72 RSUs vested ( 178,873 ) $ 27.81 RSUs canceled vested ( 178,873 ) $ 27.81 RSUs canceled ( 24,195 ) $ 27.81 RSUs canceled ( 24,195 ) $ 31.95 Balance a canceled ( 24,195 ) $ 31.95 Balance a of September 29 31.95 Balance a of September 29 , 2018 368,618 $ 33.65 a of September 29 , 2018 368,618 $ 33.65 RSUs granted of September 29 , 2018 368,618 $ 33.65 RSUs granted 147,409 29 , 2018 368,618 $ 33.65 RSUs granted 147,409 $ 53.99 368,618 $ 33.65 RSUs granted 147,409 $ 53.99 RSUs vested ( 33.65 RSUs granted 147,409 $ 53.99 RSUs vested ( 168,350 ) $ 53.99 RSUs vested ( 168,350 ) $ 33.80 RSUs canceled vested ( 168,350 ) $ 33.80 RSUs canceled ( 21,609 ) $ 33.80 RSUs canceled ( 21,609 ) $ 40.71 Balance a canceled ( 21,609 ) $ 40.71 Balance a of September 28 40.71 Balance a of September 28 , 2019 326,068 $ 42.30 a of September 28 , 2019 326,068 $ 42.30 RSUs granted of September 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 157,743 ) $ 59.20 RSUs vested ( 157,743 ) $ 40.29 RSUs canceled vested ( 157,743 ) $ 40.29 RSUs canceled ( 14,347 ) $ 40.29 RSUs canceled ( 14,347 ) $ 48.07 Balance a canceled ( 14,347 ) $ 48.07 Balance a of September 26 48.07 Balance a of September 26 , 2020 310,778 $ 51.58 a of September 26 , 2020 310,778 $ 51.58 $ 34,894 of September 26 , 2020 310,778 $ 51.58 $ 34,894 The 26 , 2020 310,778 $ 51.58 $ 34,894 The fair value 2020 310,778 $ 51.58 $ 34,894 The fair value a of date of RSUs wa $ 10.8 billion , $ 8.6 billion $ 10.8 billion , $ 8.6 billion and $ 7.6 billion $ 8.6 billion and $ 7.6 billion for 2020 , 2019 and $ 7.6 billion for 2020 , 2019 and 2018 , 7.6 billion for 2020 , 2019 and 2018 , respectively . for 2020 , 2019 and 2018 , respectively . The majority of RSUs that vested in 2020 , 2019 and 2018 were that vested in 2020 , 2019 and 2018 were net share in 2020 , 2019 and 2018 were net share settled such total share withheld were approximately 56 million , 59 million and were approximately 56 million , 59 million and 64 million for million , 59 million and 64 million for 2020 , 2019 million and 64 million for 2020 , 2019 and 2018 , 64 million for 2020 , 2019 and 2018 , respectively , for 2020 , 2019 and 2018 , respectively , and were to taxing authority were $ 3.9 billion , $ 3.0 billion $ 3.9 billion , $ 3.0 billion and $ 2.7 billion $ 3.0 billion and $ 2.7 billion in 2020 , 2019 and $ 2.7 billion in 2020 , 2019 and 2018 , 2.7 billion in 2020 , 2019 and 2018 , respectively . in 2020 , 2019 and 2018 , respectively . Apple Inc. respectively . Apple Inc. | 2020 Form 10-K | 52 Share-Based Apple Inc. | 2020 Form 10-K | 52 Share-Based Compensation The | 2020 Form 10-K | 52 Share-Based Compensation The following table Consolidated Statements of Operations for 2020 , 2019 and 2018 ( of Operations for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Share-based compensation expense in million ) : 2020 2019 2018 Share-based compensation expense $ million ) : 2020 2019 2018 Share-based compensation expense $ 6,829 2018 Share-based compensation expense $ 6,829 $ 6,068 $ 5,340 Income compensation expense $ 6,829 $ 6,068 $ 5,340 Income tax benefit $ 6,829 $ 6,068 $ 5,340 Income tax benefit related to share-based compensation expense $ ( 2,476 ) $ ( 1,967 ) ( 2,476 ) $ ( 1,967 ) $ ( 1,893 ) ( 1,967 ) $ ( 1,893 ) As of September 26 1,893 ) As of September 26 , 2020 , the total As of September 26 , 2020 , the total unrecognized compensation and stock option wa $ 12.2 billion , which the Company over a weighted-average period of 2.6 year . Note 10 – of 2.6 year . Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2020 , 2019 and 2018 ( related cost for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Beginning accrued warranty in million ) : 2020 2019 2018 Beginning accrued warranty and million ) : 2020 2019 2018 Beginning accrued warranty and related warranty and related cost $ 3,570 $ 3,692 $ 3,834 Cost related cost $ 3,570 $ 3,692 $ 3,834 Cost of warranty $ 3,570 $ 3,692 $ 3,834 Cost of warranty claim ( Cost of warranty claim ( 2,956 ) ( 3,857 ) ( claim ( 2,956 ) ( 3,857 ) ( 4,115 ) Accruals ) ( 3,857 ) ( 4,115 ) Accruals for product warranty ) Accruals for product warranty 2,740 3,735 3,973 Ending accrued warranty Accruals for product warranty 2,740 3,735 3,973 Ending accrued warranty and for product warranty 2,740 3,735 3,973 Ending accrued warranty and related warranty and related cost $ 3,354 $ 3,570 $ 3,692 The related cost $ 3,354 $ 3,570 $ 3,692 The Company offer $ 3,354 $ 3,570 $ 3,692 The Company offer an iPhone Ireland . Apple Inc. | 2020 Form 10-K | 53 Unconditional Apple Inc. | 2020 Form 10-K | 53 Unconditional Purchase Obligations | 2020 Form 10-K | 53 Unconditional Purchase Obligations The Company one year a of September 26 , 2020 , are a a of September 26 , 2020 , are a follows ( ( in million ) : 2021 $ 3,476 2022 2,885 2023 million ) : 2021 $ 3,476 2022 2,885 2023 1,700 2024 ) : 2021 $ 3,476 2022 2,885 2023 1,700 2024 357 : 2021 $ 3,476 2022 2,885 2023 1,700 2024 357 2025 2021 $ 3,476 2022 2,885 2023 1,700 2024 357 2025 104 $ 3,476 2022 2,885 2023 1,700 2024 357 2025 104 Thereafter 3,476 2022 2,885 2023 1,700 2024 357 2025 104 Thereafter 130 2022 2,885 2023 1,700 2024 357 2025 104 Thereafter 130 Total 2,885 2023 1,700 2024 357 2025 104 Thereafter 130 Total $ 2023 1,700 2024 357 2025 104 Thereafter 130 Total $ 8,652 2024 357 2025 104 Thereafter 130 Total $ 8,652 Contingencies The 104 Thereafter 130 Total $ 8,652 Contingencies The Company is subject by VirnetX . On April 11 , 2018 , a jury . On April 11 , 2018 , a jury returned a and awarded damage of $ 503 million . The Company appealed for a re-trial in October 2020 . The Company ha challenged certain iPhones in iOS update 10.2.1 and 11.2 . The claim in iOS update 10.2.1 and 11.2 . The claim seek monetary non-monetary relief . On April 5 , 2018 , several U.S. . On April 5 , 2018 , several U.S. federal action ” ) . On February 28 , 2020 , the party . On February 28 , 2020 , the party in the Court preliminarily approved in May 2020 , the Company ha agreed to pay up to $ 500 million in the aggregate to to pay at least $ 310 million to settle the claim feature introduced with iOS update 10.2.1 and 11.2 wa intended to with iOS update 10.2.1 and 11.2 wa intended to , and French Competition Authority On March 16 , 2020 , the French Authority On March 16 , 2020 , the French Competition Authority issued a fine of € 1.1 billion . The Company strongly appealed . Apple Inc. | 2020 Form 10-K | 54 Optis Apple Inc. | 2020 Form 10-K | 54 Optis Optis Wireless | 2020 Form 10-K | 54 Optis Optis Wireless Technology , by Optis . On August 11 , 2020 , a jury . On August 11 , 2020 , a jury returned a and awarded damage of $ 506 million . The Company ha case remains pending . Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant information by reportable segment for 2020 , 2019 and 2018 ( reportable segment for 2020 , 2019 and 2018 ( in million for 2020 , 2019 and 2018 ( in million ) : ( in million ) : 2020 2019 2018 Americas : Net in million ) : 2020 2019 2018 Americas : Net sale million ) : 2020 2019 2018 Americas : Net sale $ Americas : Net sale $ 124,556 $ 116,914 $ 112,093 Operating Net sale $ 124,556 $ 116,914 $ 112,093 Operating income $ $ 124,556 $ 116,914 $ 112,093 Operating income $ 37,722 $ $ 112,093 Operating income $ 37,722 $ 35,099 $ 34,864 Europe Operating income $ 37,722 $ 35,099 $ 34,864 Europe : Net $ 37,722 $ 35,099 $ 34,864 Europe : Net sale $ Europe : Net sale $ 68,640 $ 60,288 $ 62,420 Operating Net sale $ 68,640 $ 60,288 $ 62,420 Operating income $ $ 68,640 $ 60,288 $ 62,420 Operating income $ 22,170 $ $ 62,420 Operating income $ 22,170 $ 19,195 $ 19,955 Greater Operating income $ 22,170 $ 19,195 $ 19,955 Greater China : $ 22,170 $ 19,195 $ 19,955 Greater China : Net sale China : Net sale $ 40,308 $ 43,678 $ 51,942 Operating Net sale $ 40,308 $ 43,678 $ 51,942 Operating income $ $ 40,308 $ 43,678 $ 51,942 Operating income $ 15,261 $ $ 51,942 Operating income $ 15,261 $ 16,232 $ 19,742 Japan Operating income $ 15,261 $ 16,232 $ 19,742 Japan : Net $ 15,261 $ 16,232 $ 19,742 Japan : Net sale $ Japan : Net sale $ 21,418 $ 21,506 $ 21,733 Operating Net sale $ 21,418 $ 21,506 $ 21,733 Operating income $ $ 21,418 $ 21,506 $ 21,733 Operating income $ 9,279 $ $ 21,733 Operating income $ 9,279 $ 9,369 $ 9,500 Rest Operating income $ 9,279 $ 9,369 $ 9,500 Rest of Asia $ 9,279 $ 9,369 $ 9,500 Rest of Asia Pacific : Pacific : Net sale $ 19,593 $ 17,788 $ 17,407 Operating Net sale $ 19,593 $ 17,788 $ 17,407 Operating income $ $ 19,593 $ 17,788 $ 17,407 Operating income $ 6,808 $ $ 17,407 Operating income $ 6,808 $ 6,055 $ 6,181 Apple Operating income $ 6,808 $ 6,055 $ 6,181 Apple Inc. | $ 6,808 $ 6,055 $ 6,181 Apple Inc. | 2020 Form $ 6,181 Apple Inc. | 2020 Form 10-K | 55 A Apple Inc. | 2020 Form 10-K | 55 A reconciliation of | 2020 Form 10-K | 55 A reconciliation of the Company Consolidated Statements of Operations for 2020 , 2019 and 2018 is of Operations for 2020 , 2019 and 2018 is a follows for 2020 , 2019 and 2018 is a follows ( in ( in million ) : 2020 2019 2018 Segment operating income in million ) : 2020 2019 2018 Segment operating income $ million ) : 2020 2019 2018 Segment operating income $ 91,240 2018 Segment operating income $ 91,240 $ 85,950 $ 90,242 Research operating income $ 91,240 $ 85,950 $ 90,242 Research and development $ 91,240 $ 85,950 $ 90,242 Research and development expense ( Research and development expense ( 18,752 ) ( 16,217 ) ( expense ( 18,752 ) ( 16,217 ) ( 14,236 ) Other ) ( 16,217 ) ( 14,236 ) Other corporate expense , corporate expense , net ( 6,200 ) ( 5,803 ) ( net ( 6,200 ) ( 5,803 ) ( 5,108 ) Total ) ( 5,803 ) ( 5,108 ) Total operating income $ ) Total operating income $ 66,288 $ 63,930 $ 70,898 The operating income $ 66,288 $ 63,930 $ 70,898 The U.S. and $ 66,288 $ 63,930 $ 70,898 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2020 , 2019 and 2018 . net sale in 2020 , 2019 and 2018 . There wa in 2020 , 2019 and 2018 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2020 , 2019 and 2018 . net sale in 2020 , 2019 and 2018 . Net sale in 2020 , 2019 and 2018 . Net sale for 2020 2018 . Net sale for 2020 , 2019 and 2018 and Net sale for 2020 , 2019 and 2018 and long-lived asset for 2020 , 2019 and 2018 and long-lived asset a of long-lived asset a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 were a follows 2020 and September 28 , 2019 were a follows ( in ( in million ) : 2020 2019 2018 Net sale : in million ) : 2020 2019 2018 Net sale : U.S. million ) : 2020 2019 2018 Net sale : U.S. $ Net sale : U.S. $ 109,197 $ 102,266 $ 98,061 China : U.S. $ 109,197 $ 102,266 $ 98,061 China ( 1 $ 109,197 $ 102,266 $ 98,061 China ( 1 ) 40,308 102,266 $ 98,061 China ( 1 ) 40,308 43,678 51,942 Other 98,061 China ( 1 ) 40,308 43,678 51,942 Other country 125,010 China ( 1 ) 40,308 43,678 51,942 Other country 125,010 114,230 ( 1 ) 40,308 43,678 51,942 Other country 125,010 114,230 115,592 40,308 43,678 51,942 Other country 125,010 114,230 115,592 Total net sale 43,678 51,942 Other country 125,010 114,230 115,592 Total net sale $ 51,942 Other country 125,010 114,230 115,592 Total net sale $ 274,515 115,592 Total net sale $ 274,515 $ 260,174 $ 265,595 2020 net sale $ 274,515 $ 260,174 $ 265,595 2020 2019 Long-lived $ 274,515 $ 260,174 $ 265,595 2020 2019 Long-lived asset : 274,515 $ 260,174 $ 265,595 2020 2019 Long-lived asset : U.S. $ 260,174 $ 265,595 2020 2019 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 25,890 $ 24,711 China ( 1 : U.S. $ 25,890 $ 24,711 China ( 1 ) 7,256 25,890 $ 24,711 China ( 1 ) 7,256 9,064 Other country 24,711 China ( 1 ) 7,256 9,064 Other country 3,620 3,603 China ( 1 ) 7,256 9,064 Other country 3,620 3,603 Total ) 7,256 9,064 Other country 3,620 3,603 Total long-lived asset $ 7,256 9,064 Other country 3,620 3,603 Total long-lived asset $ 36,766 3,603 Total long-lived asset $ 36,766 $ 37,378 ( 1 ) long-lived asset $ 36,766 $ 37,378 ( 1 ) China includes $ 36,766 $ 37,378 ( 1 ) China includes Hong Kong and related infrastructure . Note 12 – Leases The Company ha have original term not exceeding 10 year and generally contain multi-year s operating lease were $ 1.5 billion for 2020 . Lease were $ 1.5 billion for 2020 . Lease cost associated with ’ s lease were $ 9.3 billion for 2020 . Rent were $ 9.3 billion for 2020 . Rent expense for operating accounting standard , wa $ 1.3 billion and $ 1.2 billion $ 1.3 billion and $ 1.2 billion in 2019 and 2018 and $ 1.2 billion in 2019 and 2018 , respectively . 1.2 billion in 2019 and 2018 , respectively . For 2020 2018 , respectively . For 2020 , the Company made $ , the Company made $ 1.5 billion of fixed cash payment for lease liability were $ 10.5 billion for 2020 , including were $ 10.5 billion for 2020 , including the impact of in the first quarter of 2020 . Apple Inc. | 2020 2020 . Apple Inc. | 2020 Form 10-K | 56 The Apple Inc. | 2020 Form 10-K | 56 The following table | 2020 Form 10-K | 56 The following table show ROU item , a of September 26 , 2020 ( in million a of September 26 , 2020 ( in million ) : Liabilities Financial Statement Line Items 2020 Right-of-use asset : Operating lease lease Other non-current asset $ 8,570 Finance lease Property , plant plant and equipment , net 629 Total right-of-use asset $ 9,199 629 Total right-of-use asset $ 9,199 Lease liability : Operating lease lease Other current liability $ 1,436 Other non-current liability 7,745 Finance $ 1,436 Other non-current liability 7,745 Finance lease Other current liability Finance lease Other current liability 24 Other non-current liability 637 Total liability 24 Other non-current liability 637 Total lease liability $ 9,842 637 Total lease liability $ 9,842 Lease liability maturity a of liability maturity a of September 26 , 2020 , are a a of September 26 , 2020 , are a follows ( Operating Leases Finance Leases Total 2021 $ 1,493 $ 43 $ Finance Leases Total 2021 $ 1,493 $ 43 $ 1,536 2022 Total 2021 $ 1,493 $ 43 $ 1,536 2022 1,461 43 $ 1,493 $ 43 $ 1,536 2022 1,461 43 1,504 2023 1,493 $ 43 $ 1,536 2022 1,461 43 1,504 2023 1,317 $ 43 $ 1,536 2022 1,461 43 1,504 2023 1,317 54 43 $ 1,536 2022 1,461 43 1,504 2023 1,317 54 1,371 $ 1,536 2022 1,461 43 1,504 2023 1,317 54 1,371 2024 1,536 2022 1,461 43 1,504 2023 1,317 54 1,371 2024 1,068 2022 1,461 43 1,504 2023 1,317 54 1,371 2024 1,068 30 1,461 43 1,504 2023 1,317 54 1,371 2024 1,068 30 1,098 43 1,504 2023 1,317 54 1,371 2024 1,068 30 1,098 2025 1,504 2023 1,317 54 1,371 2024 1,068 30 1,098 2025 960 2023 1,317 54 1,371 2024 1,068 30 1,098 2025 960 25 1,317 54 1,371 2024 1,068 30 1,098 2025 960 25 985 54 1,371 2024 1,068 30 1,098 2025 960 25 985 Thereafter 1,371 2024 1,068 30 1,098 2025 960 25 985 Thereafter 3,845 2024 1,068 30 1,098 2025 960 25 985 Thereafter 3,845 895 1,068 30 1,098 2025 960 25 985 Thereafter 3,845 895 4,740 30 1,098 2025 960 25 985 Thereafter 3,845 895 4,740 Total 2025 960 25 985 Thereafter 3,845 895 4,740 Total undiscounted liability 960 25 985 Thereafter 3,845 895 4,740 Total undiscounted liability 10,144 25 985 Thereafter 3,845 895 4,740 Total undiscounted liability 10,144 1,090 895 4,740 Total undiscounted liability 10,144 1,090 11,234 Less : Imputed 4,740 Total undiscounted liability 10,144 1,090 11,234 Less : Imputed interest Total undiscounted liability 10,144 1,090 11,234 Less : Imputed interest ( Less : Imputed interest ( 963 ) ( 429 ) ( interest ( 963 ) ( 429 ) ( 1,392 ) Total ) ( 429 ) ( 1,392 ) Total lease liability $ ) Total lease liability $ 9,181 $ 661 $ 9,842 The lease liability $ 9,181 $ 661 $ 9,842 The weighted-average remaining $ 9,181 $ 661 $ 9,842 The weighted-average remaining lease term lease liability a of September 26 , 2020 were 10.3 year a of September 26 , 2020 were 10.3 year and 2.0 September 26 , 2020 were 10.3 year and 2.0 % , 2020 were 10.3 year and 2.0 % , respectively . The determined . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had $ , the Company had $ 1.7 billion of future payment under These lease will commence between 2021 and 2022 , with lease will commence between 2021 and 2022 , with lease term ranging with lease term ranging from 1 year to 20 year . ranging from 1 year to 20 year . Note 13 – to 20 year . Note 13 – Selected Quarterly Financial Information of the four quarter of 2020 and 2019 ( in million four quarter of 2020 and 2019 ( in million , except Quarter Second Quarter First Quarter 2020 : Total net sale $ : Total net sale $ 64,698 $ 59,685 $ 58,313 $ net sale $ 64,698 $ 59,685 $ 58,313 $ 91,819 Gross $ 64,698 $ 59,685 $ 58,313 $ 91,819 Gross margin $ $ 59,685 $ 58,313 $ 91,819 Gross margin $ 24,689 $ $ 91,819 Gross margin $ 24,689 $ 22,680 $ 22,370 $ Gross margin $ 24,689 $ 22,680 $ 22,370 $ 35,217 Net $ 24,689 $ 22,680 $ 22,370 $ 35,217 Net income $ $ 22,680 $ 22,370 $ 35,217 Net income $ 12,673 $ $ 35,217 Net income $ 12,673 $ 11,253 $ 11,249 $ Net income $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings $ 12,673 $ 11,253 $ 11,249 $ 22,236 Earnings per share $ 11,253 $ 11,249 $ 22,236 Earnings per share ( 1 22,236 Earnings per share ( 1 ) : Basic $ 0.74 1 ) : Basic $ 0.74 $ 0.65 $ 0.64 $ : Basic $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.74 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.26 Diluted $ 0.73 $ 0.65 $ 0.64 $ 1.25 Apple $ 0.73 $ 0.65 $ 0.64 $ 1.25 Apple Inc. | $ 0.65 $ 0.64 $ 1.25 Apple Inc. | 2020 Form $ 1.25 Apple Inc. | 2020 Form 10-K | 57 Fourth Apple Inc. | 2020 Form 10-K | 57 Fourth Quarter Third | 2020 Form 10-K | 57 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2019 : Total net sale $ : Total net sale $ 64,040 $ 53,809 $ 58,015 $ net sale $ 64,040 $ 53,809 $ 58,015 $ 84,310 Gross $ 64,040 $ 53,809 $ 58,015 $ 84,310 Gross margin $ $ 53,809 $ 58,015 $ 84,310 Gross margin $ 24,313 $ $ 84,310 Gross margin $ 24,313 $ 20,227 $ 21,821 $ Gross margin $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net $ 24,313 $ 20,227 $ 21,821 $ 32,031 Net income $ $ 20,227 $ 21,821 $ 32,031 Net income $ 13,686 $ $ 32,031 Net income $ 13,686 $ 10,044 $ 11,561 $ Net income $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings $ 13,686 $ 10,044 $ 11,561 $ 19,965 Earnings per share $ 10,044 $ 11,561 $ 19,965 Earnings per share ( 1 19,965 Earnings per share ( 1 ) : Basic $ 0.76 1 ) : Basic $ 0.76 $ 0.55 $ 0.62 $ : Basic $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 0.62 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.61 $ 1.05 Diluted $ 0.76 $ 0.55 $ 0.61 $ 1.05 ( $ 0.76 $ 0.55 $ 0.61 $ 1.05 ( 1 ) $ 0.55 $ 0.61 $ 1.05 ( 1 ) Basic and $ 0.61 $ 1.05 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2020 Form 10-K | 58 Report Apple Inc. | 2020 Form 10-K | 58 Report of Independent | 2020 Form 10-K | 58 Report of Independent Registered Public Apple Inc. a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the related 2020 and September 28 , 2019 , the related consolidated statement in the period ended September 26 , 2020 , and the period ended September 26 , 2020 , and the related note of Apple Inc. at September 26 , 2020 and September 28 Inc. at September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , and the 2020 and September 28 , 2019 , and the result of in the period ended September 26 , 2020 , in conformity period ended September 26 , 2020 , in conformity with U.S. financial reporting a of September 26 , 2020 , based on a of September 26 , 2020 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 29 , 2020 expressed an unqualified report dated October 29 , 2020 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging Matter As discussed in Note 5 to the financial statement , jurisdiction . As of September 26 , 2020 , the total As of September 26 , 2020 , the total amount of unrecognized tax benefit wa $ 16.5 billion , of which $ billion , of which $ 8.8 billion , if recognized , ruling . Apple Inc. | 2020 Form 10-K | 59 How Apple Inc. | 2020 Form 10-K | 59 How We Addressed | 2020 Form 10-K | 59 How We Addressed the Matter these matter included in Note 5 to the financial statement . Inc. ’ s auditor since 2009 . San Jose , California San Jose , California October 29 , 2020 Apple Inc. | , California October 29 , 2020 Apple Inc. | 2020 Form , 2020 Apple Inc. | 2020 Form 10-K | 60 Report Apple Inc. | 2020 Form 10-K | 60 Report of Independent | 2020 Form 10-K | 60 Report of Independent Registered Public financial reporting a of September 26 , 2020 , based on a of September 26 , 2020 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 26 , 2020 , based on a of September 26 , 2020 , based on the COSO Apple Inc. a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 , the related 2020 and September 28 , 2019 , the related consolidated statement in the period ended September 26 , 2020 , and the period ended September 26 , 2020 , and the related note and our report dated October 29 , 2020 expressed an unqualified report dated October 29 , 2020 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California October 29 , 2020 Apple Inc. | , California October 29 , 2020 Apple Inc. | 2020 Form , 2020 Apple Inc. | 2020 Form 10-K | 61 Item Apple Inc. | 2020 Form 10-K | 61 Item 9 . | 2020 Form 10-K | 61 Item 9 . Changes in Form 10-K | 61 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 26 , 2020 to provide reasonable a of September 26 , 2020 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 26 , 2020 to provide reasonable a of September 26 , 2020 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control over during the fourth quarter of 2020 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information None . None . Apple Inc. | 2020 Form 10-K | 62 PART Apple Inc. | 2020 Form 10-K | 62 PART III Item | 2020 Form 10-K | 62 PART III Item 10 . | 62 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2021 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2020 in connection with day after September 26 , 2020 in connection with the solicitation for the Company ’ s 2021 annual meeting of shareholder , herein by reference . Item 11 . Executive Compensation The information in the Company ’ s 2021 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2020 , and is day after September 26 , 2020 , and is incorporated herein herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2021 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2020 , and is day after September 26 , 2020 , and is incorporated herein herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2021 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2020 , and is day after September 26 , 2020 , and is incorporated herein herein by reference . Item 14 . Principal Accountant Fees and in the Company ’ s 2021 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2020 , and is day after September 26 , 2020 , and is incorporated herein reference . Apple Inc. | 2020 Form 10-K | 63 PART Apple Inc. | 2020 Form 10-K | 63 PART IV Item | 2020 Form 10-K | 63 PART IV Item 15 . | 63 PART IV Item 15 . Exhibit and Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 31 Consolidated Statements 2019 and September 29 , 2018 31 Consolidated Statements of Comprehensive and September 29 , 2018 31 Consolidated Statements of Comprehensive Income for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 32 Consolidated Balance 2019 and September 29 , 2018 32 Consolidated Balance Sheets a and September 29 , 2018 32 Consolidated Balance Sheets a of Balance Sheets a of September 26 , 2020 and September 28 a of September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 33 Consolidated Statements 2020 and September 28 , 2019 33 Consolidated Statements of Shareholders and September 28 , 2019 33 Consolidated Statements of Shareholders ’ for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 34 Consolidated Statements 2019 and September 29 , 2018 34 Consolidated Statements of Cash and September 29 , 2018 34 Consolidated Statements of Cash Flows for the year ended September 26 , 2020 , September 28 year ended September 26 , 2020 , September 28 , 2019 26 , 2020 , September 28 , 2019 and September 29 2020 , September 28 , 2019 and September 29 , 2018 28 , 2019 and September 29 , 2018 35 Notes to 2019 and September 29 , 2018 35 Notes to Consolidated Financial and September 29 , 2018 35 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 36 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 57 Reports of Independent Registered Public Independent Registered Public Accounting Firm 59 ( 2 ) Financial Statement Public Accounting Firm 59 ( 2 ) Financial Statement Schedules All note included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of the Registrant filed on August 3 , 2020 . 8-K 3.1 filed on August 3 , 2020 . 8-K 3.1 8/7/20 3.2 August 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws of Registrant effective a of December 13 , 2016 . 8-K 3.2 a of December 13 , 2016 . 8-K 3.2 12/15/16 4.1 December 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * Description , 2016 . 8-K 3.2 12/15/16 4.1 * * Description of 2016 . 8-K 3.2 12/15/16 4.1 * * Description of Securities Securities of the Registrant . 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 Apple % Notes due 2042 . 8-K 4.1 7/31/15 Apple Inc. | Notes due 2042 . 8-K 4.1 7/31/15 Apple Inc. | 2020 due 2042 . 8-K 4.1 7/31/15 Apple Inc. | 2020 Form 4.1 7/31/15 Apple Inc. | 2020 Form 10-K | 64 Incorporated Apple Inc. | 2020 Form 10-K | 64 Incorporated by Reference | 2020 Form 10-K | 64 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.9 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.10 % Notes due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 to 2/23/16 4.11 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.12 March 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a of , dated a of November 5 , 2018 , between the a of November 5 , 2018 , between the Registrant and , a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate of , dated a of September 11 , 2019 , including form a of September 11 , 2019 , including form of global of global note representing the 1.700 % Notes due 2022 , the 1.700 % Notes due 2022 , 1.800 % Notes due % Notes due 2022 , 1.800 % Notes due 2024 , , 1.800 % Notes due 2024 , 2.050 % Notes due % Notes due 2024 , 2.050 % Notes due 2026 , , 2.050 % Notes due 2026 , 2.200 % Notes due % Notes due 2026 , 2.200 % Notes due 2029 and , 2.200 % Notes due 2029 and 2.950 % Notes due % Notes due 2029 and 2.950 % Notes due 2049 . and 2.950 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate of dated a of No vember 15 , 2019 , including form of No vember 15 , 2019 , including form of global of global note representing the 0.000 % Notes due 202 5 the 0.000 % Notes due 202 5 and 0.500 % Notes 0.000 % Notes due 202 5 and 0.500 % Notes due Notes due 202 5 and 0.500 % Notes due 20 31 and 0.500 % Notes due 20 31 . 8-K 4.1 11/15/19 0.500 % Notes due 20 31 . 8-K 4.1 11/15/19 4.23 Notes due 20 31 . 8-K 4.1 11/15/19 4.23 Officer ’ due 20 31 . 8-K 4.1 11/15/19 4.23 Officer ’ s 20 31 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate 31 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate of , dated a of May 11 , 2020 , including form a of May 11 , 2020 , including form of global of global note representing the 0.750 % Notes due 2023 , the 0.750 % Notes due 2023 , 1.125 % Notes due % Notes due 2023 , 1.125 % Notes due 2025 , , 1.125 % Notes due 2025 , 1.650 % Notes due % Notes due 2025 , 1.650 % Notes due 2030 and , 1.650 % Notes due 2030 and 2.650 % Notes due % Notes due 2030 and 2.650 % Notes due 2050 . and 2.650 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate of , dated a of August 20 , 2020 , including form a of August 20 , 2020 , including form of global of global note representing the 0.550 % Notes due 202 5 the 0.550 % Notes due 202 5 , 1 . 25 0.550 % Notes due 202 5 , 1 . 25 % Notes due 202 5 , 1 . 25 % Notes due 202 5 , 1 . 25 % Notes due 20 30 . 25 % Notes due 20 30 , 2.40 0 % 25 % Notes due 20 30 , 2.40 0 % Notes Notes due 20 30 , 2.40 0 % Notes due 20 due 20 30 , 2.40 0 % Notes due 20 5 2.40 0 % Notes due 20 5 0 and 2 . 0 % Notes due 20 5 0 and 2 . 5 % Notes due 20 5 0 and 2 . 5 50 due 20 5 0 and 2 . 5 50 % Notes 5 0 and 2 . 5 50 % Notes due 20 0 and 2 . 5 50 % Notes due 20 6 5 50 % Notes due 20 6 0 . 8-K 4.1 50 % Notes due 20 6 0 . 8-K 4.1 8/20/20 % Notes due 20 6 0 . 8-K 4.1 8/20/20 4.25 due 20 6 0 . 8-K 4.1 8/20/20 4.25 * Apple 20 6 0 . 8-K 4.1 8/20/20 4.25 * Apple Inc 6 0 . 8-K 4.1 8/20/20 4.25 * Apple Inc . 0 . 8-K 4.1 8/20/20 4.25 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director and restated a of February 13 , 2018 . 8-K 10.1 a of February 13 , 2018 . 8-K 10.1 2/14/18 10.4 February 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee , 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock 2018 . 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan 8-K 10.1 2/14/18 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 Apple February 25 , 2010 . 8-K 10.1 3/1/10 Apple Inc. | 25 , 2010 . 8-K 10.1 3/1/10 Apple Inc. | 2020 , 2010 . 8-K 10.1 3/1/10 Apple Inc. | 2020 Form 10.1 3/1/10 Apple Inc. | 2020 Form 10-K | 65 Incorporated Apple Inc. | 2020 Form 10-K | 65 Incorporated by Reference | 2020 Form 10-K | 65 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee , 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock 2010 . 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan 10-Q 10.10 12/25/10 10.6 * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 10.7 October 1 , 2017 . 10-K 10.8 9/30/17 10.7 * Form 1 , 2017 . 10-K 10.8 9/30/17 10.7 * Form of , 2017 . 10-K 10.8 9/30/17 10.7 * Form of Amendment 2017 . 10-K 10.8 9/30/17 10.7 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.13 a of August 26 , 2014 . 10-K 10.13 9/27/14 10.8 August 26 , 2014 . 10-K 10.13 9/27/14 10.8 * Form 26 , 2014 . 10-K 10.13 9/27/14 10.8 * Form of , 2014 . 10-K 10.13 9/27/14 10.8 * Form of Restricted 2014 . 10-K 10.13 9/27/14 10.8 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.18 a of October 14 , 2016 . 10-K 10.18 9/24/16 10.9 October 14 , 2016 . 10-K 10.18 9/24/16 10.9 * Form 14 , 2016 . 10-K 10.18 9/24/16 10.9 * Form of , 2016 . 10-K 10.18 9/24/16 10.9 * Form of Restricted 2016 . 10-K 10.18 9/24/16 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.10 September 26 , 2017 . 10-K 10.20 9/30/17 10.10 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.10 * Form of , 2017 . 10-K 10.20 9/30/17 10.10 * Form of Performance 2017 . 10-K 10.20 9/30/17 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.21 a of September 26 , 2017 . 10-K 10.21 9/30/17 10.11 September 26 , 2017 . 10-K 10.21 9/30/17 10.11 * Form 26 , 2017 . 10-K 10.21 9/30/17 10.11 * Form of , 2017 . 10-K 10.21 9/30/17 10.11 * Form of Restricted 2017 . 10-K 10.21 9/30/17 10.11 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.12 February 13 , 2018 . 10-Q 10.2 3/31/18 10.12 * Form 13 , 2018 . 10-Q 10.2 3/31/18 10.12 * Form of , 2018 . 10-Q 10.2 3/31/18 10.12 * Form of Restricted 2018 . 10-Q 10.2 3/31/18 10.12 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.17 a of August 21 , 2018 . 10-K 10.17 9/29/18 10.13 August 21 , 2018 . 10-K 10.17 9/29/18 10.13 * Form 21 , 2018 . 10-K 10.17 9/29/18 10.13 * Form of , 2018 . 10-K 10.17 9/29/18 10.13 * Form of Performance 2018 . 10-K 10.17 9/29/18 10.13 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.18 a of August 21 , 2018 . 10-K 10.18 9/29/18 10.14 August 21 , 2018 . 10-K 10.18 9/29/18 10.14 * Form 21 , 2018 . 10-K 10.18 9/29/18 10.14 * Form of , 2018 . 10-K 10.18 9/29/18 10.14 * Form of Restricted 2018 . 10-K 10.18 9/29/18 10.14 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.15 a of September 29 , 2019 . 10-K 10.15 9/28/19 10.15 September 29 , 2019 . 10-K 10.15 9/28/19 10.15 * Form 29 , 2019 . 10-K 10.15 9/28/19 10.15 * Form of , 2019 . 10-K 10.15 9/28/19 10.15 * Form of Performance 2019 . 10-K 10.15 9/28/19 10.15 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.16 a of September 29 , 2019 . 10-K 10.16 9/28/19 10.16 September 29 , 2019 . 10-K 10.16 9/28/19 10.16 * , 29 , 2019 . 10-K 10.16 9/28/19 10.16 * , * , 2019 . 10-K 10.16 9/28/19 10.16 * , * * 2019 . 10-K 10.16 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Certifications of Chief Executive Officer and Chief Financial Officer . 101 * * Inline XBRL Document in Part II , Item 8 , “ Financial Statements and this Annual Report on Form 10-K. 104 * * Inline XBRL Annual Report on Form 10-K. 104 * * Inline XBRL for this Annual Report on Form 10-K , included in the Exhibit , included in the Exhibit 101 Inline XBRL Document Set . * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2020 Form 10-K | 66 SIGNATURES Apple Inc. | 2020 Form 10-K | 66 SIGNATURES Pursuant to | 2020 Form 10-K | 66 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 29 , 2020 Apple Inc. By Date : October 29 , 2020 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 29 , 2020 TIMOTHY D. COOK Officer ) October 29 , 2020 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) October 29 , 2020 LUCA MAESTRI /s/ Officer ) October 29 , 2020 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) October 29 , 2020 CHRIS KONDO /s/ Officer ) October 29 , 2020 CHRIS KONDO /s/ James A A . Bell Director October 29 , 2020 JAMES A . Bell Director October 29 , 2020 JAMES A . BELL /s/ /s/ Al Gore Director October 29 , 2020 AL GORE /s/ Gore Director October 29 , 2020 AL GORE /s/ Andrea Jung /s/ Andrea Jung Director October 29 , 2020 ANDREA JUNG /s/ Jung Director October 29 , 2020 ANDREA JUNG /s/ Arthur D. Arthur D. Levinson Director October 29 , 2020 ARTHUR D. LEVINSON Levinson Director October 29 , 2020 ARTHUR D. LEVINSON /s/ Ronald Ronald D. Sugar Director October 29 , 2020 RONALD D. SUGAR Sugar Director October 29 , 2020 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director October 29 , 2020 SUSAN L. WAGNER Wagner Director October 29 , 2020 SUSAN L. WAGNER Apple Inc. L. 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0000320193 aapl : OtherCountriesMember 2020-09-26 0000320193 aapl : OtherCountriesMember 2021-09-25 0000320193 aapl : OtherCountriesMember 2020-09-26 UNITED 2021-09-25 0000320193 aapl : OtherCountriesMember 2020-09-26 UNITED STATES SECURITIES AND EXCHANGE EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 25 , 2021 or ☐ TRANSITION year ended September 25 , 2021 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Park Way Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the registered Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 — LLC 1.000 % Notes due 2022 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 — LLC 1.375 % Notes due 2024 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 — LLC 0.000 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 — LLC 0.875 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 — LLC 1.625 % Notes due 2026 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % Notes due 2027 — LLC 2.000 % Notes due 2027 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2029 — LLC 1.375 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.050 % Notes due 2029 — LLC 3.050 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.500 % Notes due 2031 — LLC 0.500 % Notes due 2031 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.600 % Notes due 2042 — LLC 3.600 % Notes due 2042 — The Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 26 , 2021 , the last a of March 26 , 2021 , the last business day quarter , wa approximately $ 2,021,360,000,000 . Solely for purpose of for any other purpose . 16,406,397,000 share of common stock were and outstanding a of October 15 , 2021 . DOCUMENTS INCORPORATED a of October 15 , 2021 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2022 annual meeting of shareholder ( of shareholder ( the “ 2022 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2022 10-K where indicated . The 2022 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 25 , 2021 TABLE OF CONTENTS Year Ended September 25 , 2021 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 6 Item Item 1A . Risk Factors 6 Item 1B . Unresolved Staff . Risk Factors 6 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 17 Unresolved Staff Comments 17 Item 2 . Properties 17 Item 3 17 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Mine Safety . Legal Proceedings 17 Item 4 . Mine Safety Disclosures 17 4 . Mine Safety Disclosures 17 Part II Item 5 . Disclosures 17 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management ’ [ Reserved ] 19 Item 7 . Management ’ s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 28 Item 9 . Changes in and Supplementary Data 28 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 55 Item 9A . Controls and and Financial Disclosure 55 Item 9A . Controls and Procedures 55 9A . Controls and Procedures 55 Item 9B . Other Information Controls and Procedures 55 Item 9B . Other Information 56 Item Item 9B . Other Information 56 Item 9C . Disclosure Regarding . Other Information 56 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 56 Part III Item 10 . Inspections 56 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 56 Item 11 . Executive Compensation and Corporate Governance 56 Item 11 . Executive Compensation 56 Item Item 11 . Executive Compensation 56 Item 12 . Security Ownership . Executive Compensation 56 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 56 Item 13 . Certain Relationships Related Stockholder Matters 56 Item 13 . Certain Relationships and Related Transactions , and Director Independence 56 Item 14 . Principal Accountant and Director Independence 56 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 56 Part IV Item 15 . Services 56 Part IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 57 Item 16 . Form 10-K Financial Statement Schedules 57 Item 16 . Form 10-K Summary 59 57 Item 16 . Form 10-K Summary 59 This Annual Report 16 . Form 10-K Summary 59 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management , statement in this Form 10-K regarding the potential future impact in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk stated . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the . In October and November 2020 , the Company released iPhone , the Company released iPhone 12 , iPhone 12 mini , released iPhone 12 , iPhone 12 mini , iPhone 12 Pro iPhone 12 mini , iPhone 12 Pro and iPhone 12 Pro iPhone 12 Pro and iPhone 12 Pro Max , all with Pro Max , all with 5G technology . In September 2021 5G technology . In September 2021 , the Company released iPhone , the Company released iPhone 13 , iPhone 13 mini , released iPhone 13 , iPhone 13 mini , iPhone 13 Pro iPhone 13 mini , iPhone 13 Pro and iPhone 13 Pro iPhone 13 Pro and iPhone 13 Pro Max . Mac Mac operating system . In November 2020 , the Company released new of MacBook Air ® , 13-inch MacBook Pro ® and Mac ® , and in May 2021 , the Company released a M1 chip . In October 2021 , the Company released a MacBook Pro , available in 14- and 16-inch model and powered , available in 14- and 16-inch model and powered by the operating system . In October 2020 , the Company released a ® , and in April 2021 , the Company released a M1 chip . In September 2021 , the Company released an Siri ® . In December 2020 , the Company released AirPods headphone , and in October 2021 , the Company released the operating system . In September 2021 , the Company announced Apple Company announced Apple Watch Series 7 , which wa available starting wa available starting in October 2021 . Apple Inc. | 2021 2021 . Apple Inc. | 2021 Form 10-K | 1 Services Apple Inc. | 2021 Form 10-K | 1 Services Advertising The | 2021 Form 10-K | 1 Services Advertising The Company ’ exclusive original content . During 2021 , the Company released Apple retailer and resellers . During 2021 , the Company ’ s indirect distribution channel accounted for 36 % and 64 % , accounted for 36 % and 64 % , respectively , of reputation . Apple Inc. | 2021 Form 10-K | 2 The Apple Inc. | 2021 Form 10-K | 2 The Company is | 2021 Form 10-K | 2 The Company is focused on all . Apple Inc. | 2021 Form 10-K | 3 Business Apple Inc. | 2021 Form 10-K | 3 Business Seasonality and | 2021 Form 10-K | 3 Business Seasonality and Product Introductions culture . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had approximately , the Company had approximately 154,000 full-time equivalent employee . Workplace coverage . Apple Inc. | 2021 Form 10-K | 4 Available Apple Inc. | 2021 Form 10-K | 4 Available Information The | 2021 Form 10-K | 4 Available Information The Company ’ s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2021 Form 10-K | 5 Item Apple Inc. | 2021 Form 10-K | 5 Item 1A . | 2021 Form 10-K | 5 Item 1A . Risk Factors Form 10-K | 5 Item 1A . Risk Factors The Company with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K. Risks Related to COVID-19 The this Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . Macroeconomic and Industry Risks factor . Apple Inc. | 2021 Form 10-K | 6 In Apple Inc. | 2021 Form 10-K | 6 In addition to | 2021 Form 10-K | 6 In addition to an adverse arise . Apple Inc. | 2021 Form 10-K | 7 Global Apple Inc. | 2021 Form 10-K | 7 Global market for | 2021 Form 10-K | 7 Global market for the Company service . Apple Inc. | 2021 Form 10-K | 8 The Apple Inc. | 2021 Form 10-K | 8 The Company depends | 2021 Form 10-K | 8 The Company depends on component source . Apple Inc. | 2021 Form 10-K | 9 The Apple Inc. | 2021 Form 10-K | 9 The Company ’ | 2021 Form 10-K | 9 The Company ’ s product typically for period up to 150 day . Because the Company service . Apple Inc. | 2021 Form 10-K | 10 The Apple Inc. | 2021 Form 10-K | 10 The Company ’ | 2021 Form 10-K | 10 The Company ’ s minority amount . Apple Inc. | 2021 Form 10-K | 11 The Apple Inc. | 2021 Form 10-K | 11 The Company ha | 2021 Form 10-K | 11 The Company ha invested and arise . Apple Inc. | 2021 Form 10-K | 12 Investment Apple Inc. | 2021 Form 10-K | 12 Investment in new | 2021 Form 10-K | 12 Investment in new business strategy in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies claim . Apple Inc. | 2021 Form 10-K | 13 The Apple Inc. | 2021 Form 10-K | 13 The outcome of | 2021 Form 10-K | 13 The outcome of litigation or sale . Apple Inc. | 2021 Form 10-K | 14 The Apple Inc. | 2021 Form 10-K | 14 The Company ’ | 2021 Form 10-K | 14 The Company ’ s business fluctuation . Apple Inc. | 2021 Form 10-K | 15 The Apple Inc. | 2021 Form 10-K | 15 The weakening of | 2021 Form 10-K | 15 The weakening of foreign currency component . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company ’ s affected . Apple Inc. | 2021 Form 10-K | 16 General Apple Inc. | 2021 Form 10-K | 16 General Risks The | 2021 Form 10-K | 16 General Risks The price of and employee retention . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company owned or of it business . Item 3 . Legal Proceedings The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies during the fourth quarter of 2021 that did not individually or of contract . On September 10 , 2021 , the Northern . On September 10 , 2021 , the Northern California District injunction pending appeal . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2021 Form 10-K | 17 PART Apple Inc. | 2021 Form 10-K | 17 PART II Item | 2021 Form 10-K | 17 PART II Item 5 . | 17 PART II Item 5 . Market for Registrant ’ . Holders As of October 15 , 2021 , there were As of October 15 , 2021 , there were 23,502 shareholder , 2021 , there were 23,502 shareholder of record . Purchases the three month ended September 25 , 2021 wa a follows month ended September 25 , 2021 wa a follows ( in the Plans or Programs ( 1 ) June 27 , 2021 Programs ( 1 ) June 27 , 2021 to July 31 1 ) June 27 , 2021 to July 31 , 2021 27 , 2021 to July 31 , 2021 : Open market 2021 to July 31 , 2021 : Open market and privately market and privately negotiated purchase 59,216 $ 143.54 59,216 August 1 privately negotiated purchase 59,216 $ 143.54 59,216 August 1 , 2021 negotiated purchase 59,216 $ 143.54 59,216 August 1 , 2021 to 59,216 $ 143.54 59,216 August 1 , 2021 to August 28 143.54 59,216 August 1 , 2021 to August 28 , 2021 1 , 2021 to August 28 , 2021 : May 2021 2021 to August 28 , 2021 : May 2021 ASR 4,921 28 , 2021 : May 2021 ASR 4,921 ( 2 ) 2021 : May 2021 ASR 4,921 ( 2 ) 4,921 Open May 2021 ASR 4,921 ( 2 ) 4,921 Open market and ASR 4,921 ( 2 ) 4,921 Open market and privately negotiated market and privately negotiated purchase 42,343 $ 147.61 42,343 August 29 privately negotiated purchase 42,343 $ 147.61 42,343 August 29 , 2021 negotiated purchase 42,343 $ 147.61 42,343 August 29 , 2021 to 42,343 $ 147.61 42,343 August 29 , 2021 to September 25 147.61 42,343 August 29 , 2021 to September 25 , 2021 29 , 2021 to September 25 , 2021 : Open market 2021 to September 25 , 2021 : Open market and privately market and privately negotiated purchase 35,041 $ 149.81 35,041 Total 141,521 privately negotiated purchase 35,041 $ 149.81 35,041 Total 141,521 $ 60,851 negotiated purchase 35,041 $ 149.81 35,041 Total 141,521 $ 60,851 ( 35,041 $ 149.81 35,041 Total 141,521 $ 60,851 ( 1 ) 149.81 35,041 Total 141,521 $ 60,851 ( 1 ) As of Total 141,521 $ 60,851 ( 1 ) As of September 25 1 ) As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company wa authorized to purchase up to $ 315 billion of the Company ’ repurchase program announced on April 28 , 2021 ( the “ announced on April 28 , 2021 ( the “ Program ” ) , of which $ 254.1 billion had been utilized . utilized . The remaining $ 60.9 billion in the table represents the Program a of September 25 , 2021 . The Program a of September 25 , 2021 . The Program doe not under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In May 2021 , ( 2 ) In May 2021 , the Company entered into to purchase up to $ 5.0 billion of the Company ’ common stock . In August 2021 , the purchase period for ASR ended and an additional 5 million share were delivered and retired . In total , 36 million share were delivered under average repurchase price of $ 137.20 . Apple Inc. | 2021 137.20 . Apple Inc. | 2021 Form 10-K | 18 Company Apple Inc. | 2021 Form 10-K | 18 Company Stock Performance | 2021 Form 10-K | 18 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 25 , 2021 . The graph year ended September 25 , 2021 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 23 , 2016 . Note that close on September 23 , 2016 . Note that past stock price performance . * $ 100 invested on September 23 , $ 100 invested on September 23 , 2016 in stock or invested on September 23 , 2016 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2021 Standard & Poor ’ s right reserved . Copyright © 2021 S & P Dow Jones All right reserved . September 2016 September 2017 September 2018 September reserved . September 2016 September 2017 September 2018 September 2019 September September 2016 September 2017 September 2018 September 2019 September 2020 September September 2017 September 2018 September 2019 September 2020 September 2021 Apple September 2018 September 2019 September 2020 September 2021 Apple Inc. $ September 2019 September 2020 September 2021 Apple Inc. $ 100 $ September 2021 Apple Inc. $ 100 $ 139 $ 207 $ Apple Inc. $ 100 $ 139 $ 207 $ 204 $ $ 100 $ 139 $ 207 $ 204 $ 422 $ $ 139 $ 207 $ 204 $ 422 $ 556 S $ 207 $ 204 $ 422 $ 556 S & P $ 204 $ 422 $ 556 S & P 500 Index $ 556 S & P 500 Index $ 100 $ 119 & P 500 Index $ 100 $ 119 $ 140 $ 500 Index $ 100 $ 119 $ 140 $ 146 $ $ 100 $ 119 $ 140 $ 146 $ 168 $ $ 119 $ 140 $ 146 $ 168 $ 218 S $ 140 $ 146 $ 168 $ 218 S & P $ 146 $ 168 $ 218 S & P Information Technology P Information Technology Index $ 100 $ 129 $ 169 $ Technology Index $ 100 $ 129 $ 169 $ 184 $ $ 100 $ 129 $ 169 $ 184 $ 271 $ $ 129 $ 169 $ 184 $ 271 $ 349 Dow $ 169 $ 184 $ 271 $ 349 Dow Jones U.S. $ 184 $ 271 $ 349 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 128 $ 168 $ Supersector Index $ 100 $ 128 $ 168 $ 178 $ $ 100 $ 128 $ 168 $ 178 $ 265 $ $ 128 $ 168 $ 178 $ 265 $ 362 Item $ 168 $ 178 $ 265 $ 362 Item 6 . $ 178 $ 265 $ 362 Item 6 . [ Reserved $ 265 $ 362 Item 6 . [ Reserved ] Apple Reserved ] Apple Inc. | 2021 Form 10-K | 19 Item Apple Inc. | 2021 Form 10-K | 19 Item 7 . | 2021 Form 10-K | 19 Item 7 . Management ’ Form 10-K | 19 Item 7 . Management ’ s Discussion in Part II , Item 8 of this Form 10-K . Item 8 of this Form 10-K . This section of this This section of this Form 10-K generally discus 2021 and 2020 this Form 10-K generally discus 2021 and 2020 item and year-to-year 10-K generally discus 2021 and 2020 item and year-to-year comparison between item and year-to-year comparison between 2021 and 2020 . Discussions of year-to-year comparison between 2021 and 2020 . Discussions of 2019 item and 2020 . Discussions of 2019 item and year-to-year comparison between item and year-to-year comparison between 2020 and 2019 are not included year-to-year comparison between 2020 and 2019 are not included in this not included in this Form 10-K , and can be found in Part II , Item 7 of the Company ’ s s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 26 , 2020 . Fiscal Year year ended September 26 , 2020 . Fiscal Year Highlights COVID-19 ’ s stock . During 2021 , aspect of the Company During the fourth quarter of 2021 , certain of the Company to Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk for more information . Fiscal 2021 Highlights Total net sale increased Highlights Total net sale increased 33 % or $ 91.3 billion increased 33 % or $ 91.3 billion during 2021 compared to or $ 91.3 billion during 2021 compared to 2020 , driven billion during 2021 compared to 2020 , driven by growth in . Year-over-year net sale during 2021 also grew in each of reportable segment . In April 2021 , the Company announced an repurchase program authorization from $ 225 billion to $ 315 billion $ 225 billion to $ 315 billion and raised it quarterly it quarterly dividend from $ 0.205 to $ 0.22 per share from $ 0.205 to $ 0.22 per share beginning in May per share beginning in May 2021 . During 2021 , the in May 2021 . During 2021 , the Company repurchased $ , the Company repurchased $ 85.5 billion of it common stock and dividend equivalent of $ 14.5 billion . Apple Inc. | billion . Apple Inc. | 2021 Form 10-K | 20 Products Apple Inc. | 2021 Form 10-K | 20 Products and Services | 2021 Form 10-K | 20 Products and Services Performance The net sale by category for 2021 , 2020 and 2019 ( by category for 2021 , 2020 and 2019 ( dollar in for 2021 , 2020 and 2019 ( dollar in million ) dollar in million ) : 2021 Change 2020 Change 2019 Net million ) : 2021 Change 2020 Change 2019 Net sale by : 2021 Change 2020 Change 2019 Net sale by category : by category : iPhone ( 1 ) $ 191,973 39 % iPhone ( 1 ) $ 191,973 39 % $ 137,781 ( ( 1 ) $ 191,973 39 % $ 137,781 ( 3 $ 191,973 39 % $ 137,781 ( 3 ) % $ 39 % $ 137,781 ( 3 ) % $ 142,381 Mac ( 3 ) % $ 142,381 Mac ( 1 ) 35,190 % $ 142,381 Mac ( 1 ) 35,190 23 % 28,622 142,381 Mac ( 1 ) 35,190 23 % 28,622 11 % Mac ( 1 ) 35,190 23 % 28,622 11 % 25,740 1 ) 35,190 23 % 28,622 11 % 25,740 iPad ( ) 35,190 23 % 28,622 11 % 25,740 iPad ( 1 23 % 28,622 11 % 25,740 iPad ( 1 ) 31,862 11 % 25,740 iPad ( 1 ) 31,862 34 % 23,724 25,740 iPad ( 1 ) 31,862 34 % 23,724 11 % iPad ( 1 ) 31,862 34 % 23,724 11 % 21,280 1 ) 31,862 34 % 23,724 11 % 21,280 Wearables , ) 31,862 34 % 23,724 11 % 21,280 Wearables , Home 34 % 23,724 11 % 21,280 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 38,367 Accessories ( 1 ) ( 2 ) 38,367 25 % 30,620 1 ) ( 2 ) 38,367 25 % 30,620 25 % ) ( 2 ) 38,367 25 % 30,620 25 % 24,482 2 ) 38,367 25 % 30,620 25 % 24,482 Services ( ) 38,367 25 % 30,620 25 % 24,482 Services ( 3 25 % 30,620 25 % 24,482 Services ( 3 ) 68,425 25 % 24,482 Services ( 3 ) 68,425 27 % 53,768 24,482 Services ( 3 ) 68,425 27 % 53,768 16 % Services ( 3 ) 68,425 27 % 53,768 16 % 46,291 3 ) 68,425 27 % 53,768 16 % 46,291 Total net ) 68,425 27 % 53,768 16 % 46,291 Total net sale 27 % 53,768 16 % 46,291 Total net sale $ 365,817 46,291 Total net sale $ 365,817 33 % $ 274,515 6 Total net sale $ 365,817 33 % $ 274,515 6 % $ 365,817 33 % $ 274,515 6 % $ 260,174 ( 365,817 33 % $ 274,515 6 % $ 260,174 ( 1 $ 274,515 6 % $ 260,174 ( 1 ) Products net 6 % $ 260,174 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and touch and accessory . ( 3 ) Services net sale include iPhone net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net quarter and fourth quarter of 2021 and a favorable mix of Mac net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net iPad net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Accessories net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Services net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net service . Apple Inc. | 2021 Form 10-K | 21 Segment Apple Inc. | 2021 Form 10-K | 21 Segment Operating Performance | 2021 Form 10-K | 21 Segment Operating Performance The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and sale by reportable segment for 2021 , 2020 and 2019 ( reportable segment for 2021 , 2020 and 2019 ( dollar in for 2021 , 2020 and 2019 ( dollar in million ) dollar in million ) : 2021 Change 2020 Change 2019 Net million ) : 2021 Change 2020 Change 2019 Net sale by : 2021 Change 2020 Change 2019 Net sale by reportable segment reportable segment : Americas $ 153,306 23 % $ 124,556 7 segment : Americas $ 153,306 23 % $ 124,556 7 % $ 153,306 23 % $ 124,556 7 % $ 116,914 Europe 153,306 23 % $ 124,556 7 % $ 116,914 Europe 89,307 $ 124,556 7 % $ 116,914 Europe 89,307 30 % 68,640 7 % $ 116,914 Europe 89,307 30 % 68,640 14 % % $ 116,914 Europe 89,307 30 % 68,640 14 % 60,288 116,914 Europe 89,307 30 % 68,640 14 % 60,288 Greater China Europe 89,307 30 % 68,640 14 % 60,288 Greater China 68,366 30 % 68,640 14 % 60,288 Greater China 68,366 70 % 14 % 60,288 Greater China 68,366 70 % 40,308 ( 8 % 60,288 Greater China 68,366 70 % 40,308 ( 8 ) Greater China 68,366 70 % 40,308 ( 8 ) % 43,678 68,366 70 % 40,308 ( 8 ) % 43,678 Japan 28,482 40,308 ( 8 ) % 43,678 Japan 28,482 33 % 21,418 8 ) % 43,678 Japan 28,482 33 % 21,418 — % ) % 43,678 Japan 28,482 33 % 21,418 — % 21,506 43,678 Japan 28,482 33 % 21,418 — % 21,506 Rest of 33 % 21,418 — % 21,506 Rest of Asia Pacific 26,356 21,506 Rest of Asia Pacific 26,356 35 % 19,593 10 % Rest of Asia Pacific 26,356 35 % 19,593 10 % 17,788 Asia Pacific 26,356 35 % 19,593 10 % 17,788 Total net Pacific 26,356 35 % 19,593 10 % 17,788 Total net sale 35 % 19,593 10 % 17,788 Total net sale $ 365,817 17,788 Total net sale $ 365,817 33 % $ 274,515 6 Total net sale $ 365,817 33 % $ 274,515 6 % $ 365,817 33 % $ 274,515 6 % $ 260,174 Americas 365,817 33 % $ 274,515 6 % $ 260,174 Americas Americas $ 274,515 6 % $ 260,174 Americas Americas net sale increased Americas net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Europe net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net on Europe net sale during 2021 . Greater China Greater China China net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Greater China net sale during 2021 . Japan Japan net sale Japan net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Pacific net sale increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher net Asia Pacific net sale during 2021 . Apple Inc. | 2021 2021 . Apple Inc. | 2021 Form 10-K | 22 Gross Apple Inc. | 2021 Form 10-K | 22 Gross Margin Products | 2021 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2021 , 2020 and 2019 were margin percentage for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 2020 2019 Gross margin : in million ) : 2021 2020 2019 Gross margin : Products million ) : 2021 2020 2019 Gross margin : Products $ Gross margin : Products $ 105,126 $ 69,461 $ 68,887 Services : Products $ 105,126 $ 69,461 $ 68,887 Services 47,710 35,495 $ 105,126 $ 69,461 $ 68,887 Services 47,710 35,495 29,505 Total $ 69,461 $ 68,887 Services 47,710 35,495 29,505 Total gross margin 69,461 $ 68,887 Services 47,710 35,495 29,505 Total gross margin $ $ 68,887 Services 47,710 35,495 29,505 Total gross margin $ 152,836 29,505 Total gross margin $ 152,836 $ 104,956 $ 98,392 Gross gross margin $ 152,836 $ 104,956 $ 98,392 Gross margin percentage $ 152,836 $ 104,956 $ 98,392 Gross margin percentage : Products Gross margin percentage : Products 35.3 % 31.5 % 32.2 % percentage : Products 35.3 % 31.5 % 32.2 % Services 69.7 Products 35.3 % 31.5 % 32.2 % Services 69.7 % 66.0 31.5 % 32.2 % Services 69.7 % 66.0 % 63.7 % 32.2 % Services 69.7 % 66.0 % 63.7 % Total gross Services 69.7 % 66.0 % 63.7 % Total gross margin percentage % Total gross margin percentage 41.8 % 38.2 % 37.8 % gross margin percentage 41.8 % 38.2 % 37.8 % Products Gross percentage 41.8 % 38.2 % 37.8 % Products Gross Margin Products Products gross margin increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher Products gross margin percentage increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to a different Services gross margin increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to higher Services gross margin percentage increased during 2021 compared to 2020 due primarily increased during 2021 compared to 2020 due primarily to a different in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2021 , 2020 and 2019 were Operating expense for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 Change 2020 Change 2019 Research million ) : 2021 Change 2020 Change 2019 Research and development : 2021 Change 2020 Change 2019 Research and development $ 21,914 2019 Research and development $ 21,914 17 % $ 18,752 16 Research and development $ 21,914 17 % $ 18,752 16 % $ 21,914 17 % $ 18,752 16 % $ 16,217 Percentage 21,914 17 % $ 18,752 16 % $ 16,217 Percentage of $ 18,752 16 % $ 16,217 Percentage of total net sale Percentage of total net sale 6 % 7 % 6 % total net sale 6 % 7 % 6 % Selling , sale 6 % 7 % 6 % Selling , general and , general and administrative $ 21,973 10 % $ 19,916 9 general and administrative $ 21,973 10 % $ 19,916 9 % $ 21,973 10 % $ 19,916 9 % $ 18,245 Percentage 21,973 10 % $ 19,916 9 % $ 18,245 Percentage of $ 19,916 9 % $ 18,245 Percentage of total net sale Percentage of total net sale 6 % 7 % 7 % total net sale 6 % 7 % 7 % Total operating sale 6 % 7 % 7 % Total operating expense $ % Total operating expense $ 43,887 13 % $ 38,668 12 Total operating expense $ 43,887 13 % $ 38,668 12 % $ 43,887 13 % $ 38,668 12 % $ 34,462 Percentage 43,887 13 % $ 38,668 12 % $ 34,462 Percentage of $ 38,668 12 % $ 34,462 Percentage of total net sale Percentage of total net sale 12 % 14 % 13 % total net sale 12 % 14 % 13 % Research and sale 12 % 14 % 13 % Research and Development The R & D expense in 2021 wa driven primarily by increase general and administrative expense in 2021 wa driven primarily by increase service . Apple Inc. | 2021 Form 10-K | 23 Other Apple Inc. | 2021 Form 10-K | 23 Other Income/ ( | 2021 Form 10-K | 23 Other Income/ ( Expense ) & E ” ) for 2021 , 2020 and 2019 wa ” ) for 2021 , 2020 and 2019 wa a follows for 2021 , 2020 and 2019 wa a follows ( dollar dollar in million ) : 2021 Change 2020 Change 2019 Interest million ) : 2021 Change 2020 Change 2019 Interest and dividend : 2021 Change 2020 Change 2019 Interest and dividend income $ Interest and dividend income $ 2,843 $ 3,763 $ 4,961 Interest dividend income $ 2,843 $ 3,763 $ 4,961 Interest expense ( $ 2,843 $ 3,763 $ 4,961 Interest expense ( 2,645 ) $ 4,961 Interest expense ( 2,645 ) ( 2,873 ) ( expense ( 2,645 ) ( 2,873 ) ( 3,576 ) Other ) ( 2,873 ) ( 3,576 ) Other income/ ( expense ( expense ) , net 60 ( 87 ) 422 Total ) , net 60 ( 87 ) 422 Total other income/ net 60 ( 87 ) 422 Total other income/ ( expense expense ) , net $ 258 ( 68 ) % $ , net $ 258 ( 68 ) % $ 803 ( ( 68 ) % $ 803 ( 56 ) % $ ) % $ 803 ( 56 ) % $ 1,807 The ( 56 ) % $ 1,807 The year-over-year decrease in OI in OI & E during 2021 wa due primarily to lower federal income tax rate for 2021 , 2020 and 2019 were tax rate for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( dollar dollar in million ) : 2021 2020 2019 Provision for income in million ) : 2021 2020 2019 Provision for income tax million ) : 2021 2020 2019 Provision for income tax $ Provision for income tax $ 14,527 $ 9,680 $ 10,481 Effective income tax $ 14,527 $ 9,680 $ 10,481 Effective tax rate $ 14,527 $ 9,680 $ 10,481 Effective tax rate 13.3 % $ 10,481 Effective tax rate 13.3 % 14.4 % 15.9 % Effective tax rate 13.3 % 14.4 % 15.9 % Statutory federal rate 13.3 % 14.4 % 15.9 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company ’ s s effective tax rate for 2021 wa lower than the statutory s effective tax rate for 2020 wa lower than the statutory s effective tax rate for 2021 wa lower compared to 2020 2021 wa lower compared to 2020 due primarily to higher tax by a one-time adjustment in 2020 of U.S. foreign tax credit of the Treasury in December 2019 . During 2021 , the in December 2019 . During 2021 , the Company established deferred resulted in a combined $ 3.5 billion increase in the valuation security , which totaled $ 172.6 billion a of September 25 172.6 billion a of September 25 , 2021 , along with a of September 25 , 2021 , along with cash generated return program over the next 12 month and beyond . The . Debt As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had outstanding aggregate principal amount of $ 118.1 billion ( collectively the “ ” ) , with $ 9.6 billion payable within 12 month $ 9.6 billion payable within 12 month . Future interest payment with the Notes total $ 39.5 billion , with $ 2.9 39.5 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had $ , the Company had $ 6.0 billion of Commercial Paper outstanding of which wa payable within 12 month . Apple Inc. | month . Apple Inc. | 2021 Form 10-K | 24 Leases Apple Inc. | 2021 Form 10-K | 24 Leases The Company | 2021 Form 10-K | 24 Leases The Company ha lease space . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had fixed lease payment obligation of $ 14.6 billion , with $ 1.8 14.6 billion , with $ 1.8 billion payable within 12 month $ 1.8 billion payable within 12 month . Manufacturing Purchase Obligations typically cover period up to 150 day . As of September day . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had manufacturing manufacturing purchase obligation of $ 54.8 billion , with $ 54.7 54.8 billion , with $ 54.7 billion payable within 12 month $ 54.7 billion payable within 12 month . The Company ’ service . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had other other purchase obligation of $ 8.3 billion , with $ 4.8 8.3 billion , with $ 4.8 billion payable within 12 month $ 4.8 billion payable within 12 month . Deemed Repatriation Tax Tax Payable As of September 25 , 2021 , the balance As of September 25 , 2021 , the balance of the Cuts and Jobs Act of 2017 ( the “ Act ” Act ” ) wa $ 24.6 billion , none of which of which is payable within 12 month . In addition to share . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company ’ s quarterly cash dividend wa $ 0.22 per share . The Company the amount reported . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy result . Apple Inc. | 2021 Form 10-K | 25 Item Apple Inc. | 2021 Form 10-K | 25 Item 7A . | 2021 Form 10-K | 25 Item 7A . Quantitative and Form 10-K | 25 Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , a hypothetical 2021 and September 26 , 2020 , a hypothetical 100 basis , 2020 , a hypothetical 100 basis point increase in interest would result in a $ 4.1 billion and $ 3.1 billion $ 4.1 billion and $ 3.1 billion incremental decline in the maturity . As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had outstanding aggregate carrying amount of $ 118.7 billion and $ 107.4 billion $ 118.7 billion and $ 107.4 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 to increase by 2021 and September 26 , 2020 to increase by $ 186 2020 to increase by $ 186 million and $ 218 million $ 186 million and $ 218 million on an annualized basis , typically for up to 12 month . However , the exposure . Apple Inc. | 2021 Form 10-K | 26 To Apple Inc. | 2021 Form 10-K | 26 To provide an | 2021 Form 10-K | 26 To provide an assessment of , the Company estimate with 95 % confidence , a maximum in fair value of $ 550 million a of September 25 550 million a of September 25 , 2021 , compared to a of September 25 , 2021 , compared to a maximum in fair value of $ 551 million a of September 26 551 million a of September 26 , 2020 . Because the a of September 26 , 2020 . Because the Company us analysis performed a of September 25 , 2021 due to the a of September 25 , 2021 due to the inherent limitation position . Apple Inc. | 2021 Form 10-K | 27 Item Apple Inc. | 2021 Form 10-K | 27 Item 8 . | 2021 Form 10-K | 27 Item 8 . Financial Statements Form 10-K | 27 Item 8 . Financial Statements and Supplementary for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 29 Consolidated Statements 2020 and September 28 , 2019 29 Consolidated Statements of Comprehensive and September 28 , 2019 29 Consolidated Statements of Comprehensive Income for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 30 Consolidated Balance 2020 and September 28 , 2019 30 Consolidated Balance Sheets a and September 28 , 2019 30 Consolidated Balance Sheets a of Balance Sheets a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 31 Consolidated Statements 2021 and September 26 , 2020 31 Consolidated Statements of Shareholders and September 26 , 2020 31 Consolidated Statements of Shareholders ’ for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 32 Consolidated Statements 2020 and September 28 , 2019 32 Consolidated Statements of Cash and September 28 , 2019 32 Consolidated Statements of Cash Flows for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 33 Notes to 2020 and September 28 , 2019 33 Notes to Consolidated Financial and September 28 , 2019 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Reports of Independent Registered Public Independent Registered Public Accounting Firm 52 All financial statement schedule have note . Apple Inc. | 2021 Form 10-K | 28 Apple Apple Inc. | 2021 Form 10-K | 28 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 28 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 25 , 2021 September 26 , Years ended September 25 , 2021 September 26 , 2020 September September 25 , 2021 September 26 , 2020 September 28 , , 2021 September 26 , 2020 September 28 , 2019 Net September 26 , 2020 September 28 , 2019 Net sale : , 2020 September 28 , 2019 Net sale : Products $ Net sale : Products $ 297,392 $ 220,747 $ 213,883 Services : Products $ 297,392 $ 220,747 $ 213,883 Services 68,425 53,768 $ 297,392 $ 220,747 $ 213,883 Services 68,425 53,768 46,291 Total $ 220,747 $ 213,883 Services 68,425 53,768 46,291 Total net sale 220,747 $ 213,883 Services 68,425 53,768 46,291 Total net sale 365,817 $ 213,883 Services 68,425 53,768 46,291 Total net sale 365,817 274,515 53,768 46,291 Total net sale 365,817 274,515 260,174 Cost of sale 46,291 Total net sale 365,817 274,515 260,174 Cost of sale : Total net sale 365,817 274,515 260,174 Cost of sale : Products Cost of sale : Products 192,266 151,286 144,996 Services 20,715 18,273 of sale : Products 192,266 151,286 144,996 Services 20,715 18,273 16,786 sale : Products 192,266 151,286 144,996 Services 20,715 18,273 16,786 Total Products 192,266 151,286 144,996 Services 20,715 18,273 16,786 Total cost of 192,266 151,286 144,996 Services 20,715 18,273 16,786 Total cost of sale 151,286 144,996 Services 20,715 18,273 16,786 Total cost of sale 212,981 16,786 Total cost of sale 212,981 169,559 161,782 Gross margin 152,836 Total cost of sale 212,981 169,559 161,782 Gross margin 152,836 104,956 cost of sale 212,981 169,559 161,782 Gross margin 152,836 104,956 98,392 212,981 169,559 161,782 Gross margin 152,836 104,956 98,392 Operating expense : 169,559 161,782 Gross margin 152,836 104,956 98,392 Operating expense : Research 161,782 Gross margin 152,836 104,956 98,392 Operating expense : Research and expense : Research and development 21,914 18,752 16,217 Selling , general : Research and development 21,914 18,752 16,217 Selling , general and Research and development 21,914 18,752 16,217 Selling , general and administrative Selling , general and administrative 21,973 19,916 18,245 Total operating expense , general and administrative 21,973 19,916 18,245 Total operating expense 43,887 general and administrative 21,973 19,916 18,245 Total operating expense 43,887 38,668 19,916 18,245 Total operating expense 43,887 38,668 34,462 Operating income 108,949 18,245 Total operating expense 43,887 38,668 34,462 Operating income 108,949 66,288 Total operating expense 43,887 38,668 34,462 Operating income 108,949 66,288 63,930 43,887 38,668 34,462 Operating income 108,949 66,288 63,930 Other income/ ( 38,668 34,462 Operating income 108,949 66,288 63,930 Other income/ ( expense 34,462 Operating income 108,949 66,288 63,930 Other income/ ( expense ) ( expense ) , net 258 803 1,807 Income before provision expense ) , net 258 803 1,807 Income before provision for ) , net 258 803 1,807 Income before provision for income before provision for income tax 109,207 67,091 65,737 Provision for income provision for income tax 109,207 67,091 65,737 Provision for income tax for income tax 109,207 67,091 65,737 Provision for income tax 14,527 65,737 Provision for income tax 14,527 9,680 10,481 Net income $ Provision for income tax 14,527 9,680 10,481 Net income $ 94,680 for income tax 14,527 9,680 10,481 Net income $ 94,680 $ 9,680 10,481 Net income $ 94,680 $ 57,411 $ 55,256 Earnings Net income $ 94,680 $ 57,411 $ 55,256 Earnings per share $ 94,680 $ 57,411 $ 55,256 Earnings per share : Basic per share : Basic $ 5.67 $ 3.31 $ 2.99 Diluted : Basic $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 5.67 $ 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 3.31 $ 2.99 Diluted $ 5.61 $ 3.28 $ 2.97 Shares 2.99 Diluted $ 5.61 $ 3.28 $ 2.97 Shares used in $ 5.61 $ 3.28 $ 2.97 Shares used in computing earnings earnings per share : Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 per share : Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 18,595,651 share : Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 18,595,651 See Basic 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 18,595,651 See accompanying Notes 16,701,272 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 18,595,651 See accompanying Notes to 17,352,119 18,471,336 Diluted 16,864,919 17,528,214 18,595,651 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 29 Apple Apple Inc. | 2021 Form 10-K | 29 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 29 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 25 , 2021 September 26 , Years ended September 25 , 2021 September 26 , 2020 September September 25 , 2021 September 26 , 2020 September 28 , , 2021 September 26 , 2020 September 28 , 2019 Net September 26 , 2020 September 28 , 2019 Net income $ , 2020 September 28 , 2019 Net income $ 94,680 $ , 2019 Net income $ 94,680 $ 57,411 $ 55,256 Other Net income $ 94,680 $ 57,411 $ 55,256 Other comprehensive income/ $ 94,680 $ 57,411 $ 55,256 Other comprehensive income/ ( loss translation , net of tax 501 88 ( 408 ) Change , net of tax 501 88 ( 408 ) Change in of tax 501 88 ( 408 ) Change in unrealized gains/losses fair value of derivative instrument 32 79 ( 661 ) Adjustment value of derivative instrument 32 79 ( 661 ) Adjustment for derivative instrument 32 79 ( 661 ) Adjustment for net ( and included in net income 1,003 ( 1,264 ) 23 Total in net income 1,003 ( 1,264 ) 23 Total change in income 1,003 ( 1,264 ) 23 Total change in unrealized gains/losses unrealized gains/losses on derivative instrument 1,035 ( 1,185 ) ( 638 on derivative instrument 1,035 ( 1,185 ) ( 638 ) Change 1,035 ( 1,185 ) ( 638 ) Change in unrealized gains/losses of marketable debt security ( 694 ) 1,202 3,802 Adjustment for debt security ( 694 ) 1,202 3,802 Adjustment for net ( security ( 694 ) 1,202 3,802 Adjustment for net ( gain included in net income ( 273 ) ( 63 ) 25 income ( 273 ) ( 63 ) 25 Total change in 273 ) ( 63 ) 25 Total change in unrealized gains/losses on marketable debt security ( 967 ) 1,139 3,827 Total other debt security ( 967 ) 1,139 3,827 Total other comprehensive income/ security ( 967 ) 1,139 3,827 Total other comprehensive income/ ( comprehensive income/ ( loss ) 569 42 2,781 Total comprehensive income income/ ( loss ) 569 42 2,781 Total comprehensive income $ ( loss ) 569 42 2,781 Total comprehensive income $ 95,249 2,781 Total comprehensive income $ 95,249 $ 57,453 $ 58,037 See comprehensive income $ 95,249 $ 57,453 $ 58,037 See accompanying Notes $ 95,249 $ 57,453 $ 58,037 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 30 Apple Apple Inc. | 2021 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 30 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 25 , 2021 September 26 , value ) September 25 , 2021 September 26 , 2020 ASSETS September 25 , 2021 September 26 , 2020 ASSETS : Current , 2021 September 26 , 2020 ASSETS : Current asset : Cash and cash equivalent $ 34,940 $ 38,016 Marketable security 27,699 cash equivalent $ 34,940 $ 38,016 Marketable security 27,699 52,927 Accounts 34,940 $ 38,016 Marketable security 27,699 52,927 Accounts receivable , net $ 38,016 Marketable security 27,699 52,927 Accounts receivable , net 26,278 52,927 Accounts receivable , net 26,278 16,120 Inventories 6,580 4,061 Vendor Accounts receivable , net 26,278 16,120 Inventories 6,580 4,061 Vendor non-trade , net 26,278 16,120 Inventories 6,580 4,061 Vendor non-trade receivables 25,228 net 26,278 16,120 Inventories 6,580 4,061 Vendor non-trade receivables 25,228 21,325 6,580 4,061 Vendor non-trade receivables 25,228 21,325 Other current asset 14,111 4,061 Vendor non-trade receivables 25,228 21,325 Other current asset 14,111 11,264 25,228 21,325 Other current asset 14,111 11,264 Total current asset 134,836 21,325 Other current asset 14,111 11,264 Total current asset 134,836 143,713 14,111 11,264 Total current asset 134,836 143,713 Non-current asset : Marketable 11,264 Total current asset 134,836 143,713 Non-current asset : Marketable security Non-current asset : Marketable security 127,877 100,887 Property , plant and asset : Marketable security 127,877 100,887 Property , plant and equipment plant and equipment , net 39,440 36,766 Other non-current asset 48,849 and equipment , net 39,440 36,766 Other non-current asset 48,849 42,522 39,440 36,766 Other non-current asset 48,849 42,522 Total non-current asset 216,166 36,766 Other non-current asset 48,849 42,522 Total non-current asset 216,166 180,175 48,849 42,522 Total non-current asset 216,166 180,175 Total asset $ 351,002 42,522 Total non-current asset 216,166 180,175 Total asset $ 351,002 $ 216,166 180,175 Total asset $ 351,002 $ 323,888 LIABILITIES AND SHAREHOLDERS Total asset $ 351,002 $ 323,888 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 54,763 $ 42,296 Other current liability Accounts payable $ 54,763 $ 42,296 Other current liability 47,493 42,684 $ 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 42,296 Other current liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial liability 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 47,493 42,684 Deferred revenue 7,612 6,643 Commercial paper 6,000 4,996 Term revenue 7,612 6,643 Commercial paper 6,000 4,996 Term debt 9,613 8,773 7,612 6,643 Commercial paper 6,000 4,996 Term debt 9,613 8,773 Total paper 6,000 4,996 Term debt 9,613 8,773 Total current liability 125,481 6,000 4,996 Term debt 9,613 8,773 Total current liability 125,481 105,392 9,613 8,773 Total current liability 125,481 105,392 Non-current liability : Term 8,773 Total current liability 125,481 105,392 Non-current liability : Term debt Non-current liability : Term debt 109,106 98,667 Other non-current liability 53,325 liability : Term debt 109,106 98,667 Other non-current liability 53,325 54,490 109,106 98,667 Other non-current liability 53,325 54,490 Total non-current liability 162,431 98,667 Other non-current liability 53,325 54,490 Total non-current liability 162,431 153,157 53,325 54,490 Total non-current liability 162,431 153,157 Total liability 287,912 258,549 54,490 Total non-current liability 162,431 153,157 Total liability 287,912 258,549 Commitments liability 162,431 153,157 Total liability 287,912 258,549 Commitments and contingency Shareholders 162,431 153,157 Total liability 287,912 258,549 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 50,400,000 share $ 0.00001 par value : 50,400,000 share authorized ; 16,426,786 and : 50,400,000 share authorized ; 16,426,786 and 16,976,763 share issued and share authorized ; 16,426,786 and 16,976,763 share issued and outstanding , issued and outstanding , respectively 57,365 50,779 Retained earnings 5,562 14,966 and outstanding , respectively 57,365 50,779 Retained earnings 5,562 14,966 Accumulated respectively 57,365 50,779 Retained earnings 5,562 14,966 Accumulated other comprehensive income/ 57,365 50,779 Retained earnings 5,562 14,966 Accumulated other comprehensive income/ ( comprehensive income/ ( loss ) 163 ( 406 ) Total shareholder ( loss ) 163 ( 406 ) Total shareholder ’ equity ) Total shareholder ’ equity 63,090 65,339 Total liability and shareholder Total shareholder ’ equity 63,090 65,339 Total liability and shareholder ’ and shareholder ’ equity $ 351,002 $ 323,888 See accompanying Notes ’ equity $ 351,002 $ 323,888 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 31 Apple Apple Inc. | 2021 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 25 , 2021 September 26 , Years ended September 25 , 2021 September 26 , 2020 September September 25 , 2021 September 26 , 2020 September 28 , , 2021 September 26 , 2020 September 28 , 2019 Total September 26 , 2020 September 28 , 2019 Total shareholder ’ , 2020 September 28 , 2019 Total shareholder ’ equity , equity , beginning balance $ 65,339 $ 90,488 $ 107,147 Common beginning balance $ 65,339 $ 90,488 $ 107,147 Common stock and $ 65,339 $ 90,488 $ 107,147 Common stock and additional paid-in paid-in capital : Beginning balance 50,779 45,174 40,201 Common stock issued capital : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 : Beginning balance 50,779 45,174 40,201 Common stock issued 1,105 880 45,174 40,201 Common stock issued 1,105 880 781 Common stock withheld 40,201 Common stock issued 1,105 880 781 Common stock withheld related Common stock issued 1,105 880 781 Common stock withheld related to settlement of equity award ( 2,627 ) ( 2,250 ) ( award ( 2,627 ) ( 2,250 ) ( 2,002 ) Share-based ) ( 2,250 ) ( 2,002 ) Share-based compensation 8,108 6,975 ( 2,002 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 2,002 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 50,779 ) Share-based compensation 8,108 6,975 6,194 Ending balance 57,365 50,779 45,174 8,108 6,975 6,194 Ending balance 57,365 50,779 45,174 Retained earnings : 6,975 6,194 Ending balance 57,365 50,779 45,174 Retained earnings : Beginning 6,194 Ending balance 57,365 50,779 45,174 Retained earnings : Beginning balance Retained earnings : Beginning balance 14,966 45,898 70,400 Net income 94,680 earnings : Beginning balance 14,966 45,898 70,400 Net income 94,680 57,411 : Beginning balance 14,966 45,898 70,400 Net income 94,680 57,411 55,256 14,966 45,898 70,400 Net income 94,680 57,411 55,256 Dividends and dividend 45,898 70,400 Net income 94,680 57,411 55,256 Dividends and dividend equivalent 70,400 Net income 94,680 57,411 55,256 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,431 ) ( 14,087 ) ( declared ( 14,431 ) ( 14,087 ) ( 14,129 ) Common ) ( 14,087 ) ( 14,129 ) Common stock withheld related settlement of equity award ( 4,151 ) ( 1,604 ) ( award ( 4,151 ) ( 1,604 ) ( 1,029 ) Common ) ( 1,604 ) ( 1,029 ) Common stock repurchased ( ) Common stock repurchased ( 85,502 ) ( 72,516 ) ( repurchased ( 85,502 ) ( 72,516 ) ( 67,101 ) Cumulative ) ( 72,516 ) ( 67,101 ) Cumulative effect of change in accounting principle — ( 136 ) 2,501 Ending balance 5,562 principle — ( 136 ) 2,501 Ending balance 5,562 14,966 45,898 136 ) 2,501 Ending balance 5,562 14,966 45,898 Accumulated other comprehensive ) 2,501 Ending balance 5,562 14,966 45,898 Accumulated other comprehensive income/ 2,501 Ending balance 5,562 14,966 45,898 Accumulated other comprehensive income/ ( ) : Beginning balance ( 406 ) ( 584 ) ( balance ( 406 ) ( 584 ) ( 3,454 ) Other ) ( 584 ) ( 3,454 ) Other comprehensive income/ ( comprehensive income/ ( loss ) 569 42 2,781 Cumulative effect of income/ ( loss ) 569 42 2,781 Cumulative effect of change ( loss ) 569 42 2,781 Cumulative effect of change in change in accounting principle — 136 89 Ending balance 163 ( in accounting principle — 136 89 Ending balance 163 ( 406 — 136 89 Ending balance 163 ( 406 ) ( 584 89 Ending balance 163 ( 406 ) ( 584 ) Total 163 ( 406 ) ( 584 ) Total shareholder ’ equity equity , ending balance $ 63,090 $ 65,339 $ 90,488 Dividends ending balance $ 63,090 $ 65,339 $ 90,488 Dividends and dividend $ 63,090 $ 65,339 $ 90,488 Dividends and dividend equivalent declared per share or RSU $ 0.85 $ 0.795 $ 0.75 See or RSU $ 0.85 $ 0.795 $ 0.75 See accompanying Notes $ 0.85 $ 0.795 $ 0.75 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 32 Apple Apple Inc. | 2021 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2021 Form 10-K | 32 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 25 , 2021 September 26 , Years ended September 25 , 2021 September 26 , 2020 September September 25 , 2021 September 26 , 2020 September 28 , , 2021 September 26 , 2020 September 28 , 2019 Cash September 26 , 2020 September 28 , 2019 Cash , cash , 2020 September 28 , 2019 Cash , cash equivalent and cash , beginning balance $ 39,789 $ 50,224 $ 25,913 Operating beginning balance $ 39,789 $ 50,224 $ 25,913 Operating activity : $ 39,789 $ 50,224 $ 25,913 Operating activity : Net income Operating activity : Net income 94,680 57,411 55,256 Adjustments to reconcile activity : Net income 94,680 57,411 55,256 Adjustments to reconcile net : Net income 94,680 57,411 55,256 Adjustments to reconcile net income activity : Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense : Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense 7,906 Depreciation and amortization 11,284 11,056 12,547 Share-based compensation expense 7,906 6,829 11,056 12,547 Share-based compensation expense 7,906 6,829 6,068 Deferred income tax 12,547 Share-based compensation expense 7,906 6,829 6,068 Deferred income tax benefit Share-based compensation expense 7,906 6,829 6,068 Deferred income tax benefit ( Deferred income tax benefit ( 4,774 ) ( 215 ) ( benefit ( 4,774 ) ( 215 ) ( 340 ) Other ) ( 215 ) ( 340 ) Other ( 147 ) ( 340 ) Other ( 147 ) ( 97 ) ( Other ( 147 ) ( 97 ) ( 652 ) Changes ) ( 97 ) ( 652 ) Changes in operating asset Accounts receivable , net ( 10,125 ) 6,917 245 Inventories ( , net ( 10,125 ) 6,917 245 Inventories ( 2,642 ) net ( 10,125 ) 6,917 245 Inventories ( 2,642 ) ( ) 6,917 245 Inventories ( 2,642 ) ( 127 ) ( Inventories ( 2,642 ) ( 127 ) ( 289 ) Vendor ) ( 127 ) ( 289 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 3,903 ) 1,553 2,931 Other current non-trade receivables ( 3,903 ) 1,553 2,931 Other current and non-current receivables ( 3,903 ) 1,553 2,931 Other current and non-current asset current and non-current asset ( 8,042 ) ( 9,588 ) 873 asset ( 8,042 ) ( 9,588 ) 873 Accounts payable 12,326 8,042 ) ( 9,588 ) 873 Accounts payable 12,326 ( 4,062 9,588 ) 873 Accounts payable 12,326 ( 4,062 ) ( 1,923 873 Accounts payable 12,326 ( 4,062 ) ( 1,923 ) Deferred 12,326 ( 4,062 ) ( 1,923 ) Deferred revenue 1,676 2,081 ( 1,923 ) Deferred revenue 1,676 2,081 ( 625 ) Other 1,923 ) Deferred revenue 1,676 2,081 ( 625 ) Other current Deferred revenue 1,676 2,081 ( 625 ) Other current and non-current Other current and non-current liability 5,799 8,916 ( 4,700 ) Cash current and non-current liability 5,799 8,916 ( 4,700 ) Cash generated non-current liability 5,799 8,916 ( 4,700 ) Cash generated by operating Cash generated by operating activity 104,038 80,674 69,391 Investing activity : generated by operating activity 104,038 80,674 69,391 Investing activity : Purchases by operating activity 104,038 80,674 69,391 Investing activity : Purchases of Purchases of marketable security ( 109,558 ) ( 114,938 ) ( security ( 109,558 ) ( 114,938 ) ( 39,630 ) Proceeds ) ( 114,938 ) ( 39,630 ) Proceeds from maturity of from maturity of marketable security 59,023 69,918 40,102 Proceeds from sale maturity of marketable security 59,023 69,918 40,102 Proceeds from sale of of marketable security 59,023 69,918 40,102 Proceeds from sale of marketable from sale of marketable security 47,460 50,473 56,988 Payments for acquisition sale of marketable security 47,460 50,473 56,988 Payments for acquisition of of marketable security 47,460 50,473 56,988 Payments for acquisition of property , plant and equipment ( 11,085 ) ( 7,309 ) ( equipment ( 11,085 ) ( 7,309 ) ( 10,495 ) Payments ) ( 7,309 ) ( 10,495 ) Payments made in connection business acquisition , net ( 33 ) ( 1,524 ) ( net ( 33 ) ( 1,524 ) ( 624 ) Purchases ) ( 1,524 ) ( 624 ) Purchases of non-marketable security Purchases of non-marketable security ( 131 ) ( 210 ) ( security ( 131 ) ( 210 ) ( 1,001 ) Proceeds ) ( 210 ) ( 1,001 ) Proceeds from non-marketable security ) Proceeds from non-marketable security 387 92 1,634 Other ( 608 Proceeds from non-marketable security 387 92 1,634 Other ( 608 ) from non-marketable security 387 92 1,634 Other ( 608 ) ( 387 92 1,634 Other ( 608 ) ( 791 ) ( Other ( 608 ) ( 791 ) ( 1,078 ) Cash ) ( 791 ) ( 1,078 ) Cash generated by/ ( in ) investing activity ( 14,545 ) ( 4,289 ) 45,896 activity ( 14,545 ) ( 4,289 ) 45,896 Financing activity : 14,545 ) ( 4,289 ) 45,896 Financing activity : Proceeds from from issuance of common stock 1,105 880 781 Payments for tax issuance of common stock 1,105 880 781 Payments for tax related of common stock 1,105 880 781 Payments for tax related to settlement of equity award ( 6,556 ) ( 3,634 ) ( award ( 6,556 ) ( 3,634 ) ( 2,817 ) Payments ) ( 3,634 ) ( 2,817 ) Payments for dividend and dividend and dividend equivalent ( 14,467 ) ( 14,081 ) ( equivalent ( 14,467 ) ( 14,081 ) ( 14,119 ) Repurchases ) ( 14,081 ) ( 14,119 ) Repurchases of common stock Repurchases of common stock ( 85,971 ) ( 72,358 ) ( stock ( 85,971 ) ( 72,358 ) ( 66,897 ) Proceeds ) ( 72,358 ) ( 66,897 ) Proceeds from issuance of of term debt , net 20,393 16,091 6,963 Repayments of term term debt , net 20,393 16,091 6,963 Repayments of term debt debt , net 20,393 16,091 6,963 Repayments of term debt ( Repayments of term debt ( 8,750 ) ( 12,629 ) ( debt ( 8,750 ) ( 12,629 ) ( 8,805 ) Proceeds ) ( 12,629 ) ( 8,805 ) Proceeds from/ ( Repayments ) commercial paper , net 1,022 ( 963 ) ( 5,977 paper , net 1,022 ( 963 ) ( 5,977 ) Other 1,022 ( 963 ) ( 5,977 ) Other ( 129 ) ( 5,977 ) Other ( 129 ) ( 126 ) ( Other ( 129 ) ( 126 ) ( 105 ) Cash ) ( 126 ) ( 105 ) Cash used in financing used in financing activity ( 93,353 ) ( 86,820 ) ( activity ( 93,353 ) ( 86,820 ) ( 90,976 ) Increase/ ) ( 86,820 ) ( 90,976 ) Increase/ ( Decrease ) equivalent and restricted cash ( 3,860 ) ( 10,435 ) 24,311 cash ( 3,860 ) ( 10,435 ) 24,311 Cash , cash 3,860 ) ( 10,435 ) 24,311 Cash , cash equivalent and cash , ending balance $ 35,929 $ 39,789 $ 50,224 Supplemental ending balance $ 35,929 $ 39,789 $ 50,224 Supplemental cash flow $ 35,929 $ 39,789 $ 50,224 Supplemental cash flow disclosure : income tax , net $ 25,385 $ 9,501 $ 15,263 Cash , net $ 25,385 $ 9,501 $ 15,263 Cash paid for $ 25,385 $ 9,501 $ 15,263 Cash paid for interest $ Cash paid for interest $ 2,687 $ 3,002 $ 3,423 See for interest $ 2,687 $ 3,002 $ 3,423 See accompanying Notes $ 2,687 $ 3,002 $ 3,423 See accompanying Notes to Consolidated Statements . Apple Inc. | 2021 Form 10-K | 33 Apple Apple Inc. | 2021 Form 10-K | 33 Apple Inc. Notes | 2021 Form 10-K | 33 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the Company ’ s fiscal year 2021 , 2020 and 2019 spanned s fiscal year 2021 , 2020 and 2019 spanned 52 week year 2021 , 2020 and 2019 spanned 52 week each . , 2020 and 2019 spanned 52 week each . Unless otherwise of the first quarter of 2021 , the Company adopted the ASU ” ) No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies . The Company adopted ASU 2016-13 utilizing the modified retrospective transition . The adoption of ASU 2016-13 did not have a material can be found in Note 9 , “ Benefit Plans . diluted earnings per share for 2021 , 2020 and 2019 ( per share for 2021 , 2020 and 2019 ( net income for 2021 , 2020 and 2019 ( net income in million share in thousand ) : 2021 2020 2019 Numerator : Net in thousand ) : 2021 2020 2019 Numerator : Net income thousand ) : 2021 2020 2019 Numerator : Net income $ Numerator : Net income $ 94,680 $ 57,411 $ 55,256 Denominator Net income $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average $ 94,680 $ 57,411 $ 55,256 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 16,701,272 17,352,119 18,471,336 Effect of dilutive Weighted-average basic share outstanding 16,701,272 17,352,119 18,471,336 Effect of dilutive security basic share outstanding 16,701,272 17,352,119 18,471,336 Effect of dilutive security 163,647 18,471,336 Effect of dilutive security 163,647 176,095 124,315 Weighted-average diluted share Effect of dilutive security 163,647 176,095 124,315 Weighted-average diluted share 16,864,919 of dilutive security 163,647 176,095 124,315 Weighted-average diluted share 16,864,919 17,528,214 176,095 124,315 Weighted-average diluted share 16,864,919 17,528,214 18,595,651 Basic earnings per 124,315 Weighted-average diluted share 16,864,919 17,528,214 18,595,651 Basic earnings per share Weighted-average diluted share 16,864,919 17,528,214 18,595,651 Basic earnings per share $ Basic earnings per share $ 5.67 $ 3.31 $ 2.99 Diluted per share $ 5.67 $ 3.31 $ 2.99 Diluted earnings per $ 5.67 $ 3.31 $ 2.99 Diluted earnings per share $ Diluted earnings per share $ 5.61 $ 3.28 $ 2.97 Apple per share $ 5.61 $ 3.28 $ 2.97 Apple Inc. | $ 5.61 $ 3.28 $ 2.97 Apple Inc. | 2021 Form $ 2.97 Apple Inc. | 2021 Form 10-K | 34 The Apple Inc. | 2021 Form 10-K | 34 The Company applies | 2021 Form 10-K | 34 The Company applies the treasury . Potentially dilutive security representing 62 million share of common stock diluted earnings per share for 2019 because their effect would have building is the lesser of 40 year or the remaining life property and equipment wa $ 9.5 billion , $ 9.7 billion $ 9.5 billion , $ 9.7 billion and $ 11.3 billion $ 9.7 billion and $ 11.3 billion during 2021 , 2020 and $ 11.3 billion during 2021 , 2020 and 2019 , 11.3 billion during 2021 , 2020 and 2019 , respectively . during 2021 , 2020 and 2019 , respectively . Noncash investing other current liability of $ 2.9 billion during 2019 . Restricted of $ 2.9 billion during 2019 . Restricted Cash and Restricted relate . Apple Inc. | 2021 Form 10-K | 35 The Apple Inc. | 2021 Form 10-K | 35 The Company present | 2021 Form 10-K | 35 The Company present derivative asset observable market data . Note 2 – Revenue Recognition Net sale authority . Apple Inc. | 2021 Form 10-K | 36 Deferred Apple Inc. | 2021 Form 10-K | 36 Deferred Revenue As | 2021 Form 10-K | 36 Deferred Revenue As of September Deferred Revenue As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had total total deferred revenue of $ 11.9 billion and $ 10.2 billion $ 11.9 billion and $ 10.2 billion , respectively . As respectively . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company expects 64 2021 , the Company expects 64 % of total deferred revenue le than a year , 26 % within one-to-two year , % within one-to-two year , 8 % within two-to-three year and % within two-to-three year and 2 % in greater than three significant product and service for 2021 , 2020 and 2019 were and service for 2021 , 2020 and 2019 were a follows for 2021 , 2020 and 2019 were a follows ( in ( in million ) : 2021 2020 2019 iPhone ( 1 in million ) : 2021 2020 2019 iPhone ( 1 ) million ) : 2021 2020 2019 iPhone ( 1 ) $ 2021 2020 2019 iPhone ( 1 ) $ 191,973 $ 137,781 iPhone ( 1 ) $ 191,973 $ 137,781 $ 142,381 Mac 1 ) $ 191,973 $ 137,781 $ 142,381 Mac ( 1 $ 191,973 $ 137,781 $ 142,381 Mac ( 1 ) 35,190 137,781 $ 142,381 Mac ( 1 ) 35,190 28,622 25,740 iPad 142,381 Mac ( 1 ) 35,190 28,622 25,740 iPad ( 1 Mac ( 1 ) 35,190 28,622 25,740 iPad ( 1 ) ( 1 ) 35,190 28,622 25,740 iPad ( 1 ) 31,862 35,190 28,622 25,740 iPad ( 1 ) 31,862 23,724 21,280 Wearables 25,740 iPad ( 1 ) 31,862 23,724 21,280 Wearables , Home iPad ( 1 ) 31,862 23,724 21,280 Wearables , Home and ( 1 ) 31,862 23,724 21,280 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 38,367 Accessories ( 1 ) ( 2 ) 38,367 30,620 24,482 Services 1 ) ( 2 ) 38,367 30,620 24,482 Services ( 3 ) ( 2 ) 38,367 30,620 24,482 Services ( 3 ) ( 2 ) 38,367 30,620 24,482 Services ( 3 ) 68,425 38,367 30,620 24,482 Services ( 3 ) 68,425 53,768 46,291 Total 24,482 Services ( 3 ) 68,425 53,768 46,291 Total net sale Services ( 3 ) 68,425 53,768 46,291 Total net sale ( ( 3 ) 68,425 53,768 46,291 Total net sale ( 4 46,291 Total net sale ( 4 ) $ 365,817 $ 274,515 sale ( 4 ) $ 365,817 $ 274,515 $ 260,174 ( 4 ) $ 365,817 $ 274,515 $ 260,174 ( 1 ) $ 365,817 $ 274,515 $ 260,174 ( 1 ) Products net $ 274,515 $ 260,174 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and touch and accessory . ( 3 ) Services net sale include of certain product . ( 4 ) Includes $ 6.7 billion ( 4 ) Includes $ 6.7 billion of revenue recognized in billion of revenue recognized in 2021 that wa included in deferred deferred revenue a of September 26 , 2020 , $ 5.0 a of September 26 , 2020 , $ 5.0 billion of 26 , 2020 , $ 5.0 billion of revenue recognized in billion of revenue recognized in 2020 that wa included in deferred deferred revenue a of September 28 , 2019 , and $ a of September 28 , 2019 , and $ 5.9 billion , 2019 , and $ 5.9 billion of revenue recognized in billion of revenue recognized in 2019 that wa included in deferred deferred revenue a of September 29 , 2018 . The Company a of September 29 , 2018 . The Company ’ s each reportable segment in Note 11 , “ Segment Information and and Geographic Data ” for 2021 , 2020 and 2019 . Data ” for 2021 , 2020 and 2019 . Apple Inc. for 2021 , 2020 and 2019 . Apple Inc. | 2021 2019 . Apple Inc. | 2021 Form 10-K | 37 Note Apple Inc. | 2021 Form 10-K | 37 Note 3 – | 2021 Form 10-K | 37 Note 3 – Financial Instruments Form 10-K | 37 Note 3 – Financial Instruments Cash , investment category a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 ( in million 2021 and September 26 , 2020 ( in million ) : ( in million ) : 2021 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 17,305 $ — $ — $ $ — $ — $ 17,305 $ 17,305 $ — $ $ — $ 17,305 $ 17,305 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 9,608 — — 9,608 9,608 — market fund 9,608 — — 9,608 9,608 — — Mutual fund fund 9,608 — — 9,608 9,608 — — Mutual fund 175 9,608 — — Mutual fund 175 11 ( 1 ) 185 — — Mutual fund 175 11 ( 1 ) 185 — Mutual fund 175 11 ( 1 ) 185 — 185 — 175 11 ( 1 ) 185 — 185 — Subtotal 9,783 ( 1 ) 185 — 185 — Subtotal 9,783 11 ( 185 — 185 — Subtotal 9,783 11 ( 1 ) 9,793 — 185 — Subtotal 9,783 11 ( 1 ) 9,793 9,608 — Subtotal 9,783 11 ( 1 ) 9,793 9,608 185 — 9,783 11 ( 1 ) 9,793 9,608 185 — Level 2 11 ( 1 ) 9,793 9,608 185 — Level 2 ( ( 1 ) 9,793 9,608 185 — Level 2 ( 2 9,793 9,608 185 — Level 2 ( 2 ) : Equity 185 — Level 2 ( 2 ) : Equity security 1,527 2 ) : Equity security 1,527 — ( 564 ) 963 Equity security 1,527 — ( 564 ) 963 — 963 — 1,527 — ( 564 ) 963 — 963 — U.S. Treasury ( 564 ) 963 — 963 — U.S. Treasury security 22,878 963 — U.S. Treasury security 22,878 102 ( 77 ) 22,903 — U.S. Treasury security 22,878 102 ( 77 ) 22,903 3,596 Treasury security 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency security ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency security 8,949 77 ) 22,903 3,596 6,625 12,682 U.S. agency security 8,949 2 6,625 12,682 U.S. agency security 8,949 2 ( 64 ) 8,887 12,682 U.S. agency security 8,949 2 ( 64 ) 8,887 1,775 agency security 8,949 2 ( 64 ) 8,887 1,775 1,930 5,182 8,949 2 ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government 2 ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security 20,201 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security 20,201 211 1,930 5,182 Non-U.S. government security 20,201 211 ( 101 ) 20,311 5,182 Non-U.S. government security 20,201 211 ( 101 ) 20,311 390 government security 20,201 211 ( 101 ) 20,311 390 3,091 16,830 20,201 211 ( 101 ) 20,311 390 3,091 16,830 Certificates of 211 ( 101 ) 20,311 390 3,091 16,830 Certificates of deposit ( 101 ) 20,311 390 3,091 16,830 Certificates of deposit and 101 ) 20,311 390 3,091 16,830 Certificates of deposit and time of deposit and time deposit 1,300 — — 1,300 490 810 time deposit 1,300 — — 1,300 490 810 — Commercial paper deposit 1,300 — — 1,300 490 810 — Commercial paper 2,639 1,300 — — 1,300 490 810 — Commercial paper 2,639 — 490 810 — Commercial paper 2,639 — — 2,639 1,776 863 Commercial paper 2,639 — — 2,639 1,776 863 — Corporate debt paper 2,639 — — 2,639 1,776 863 — Corporate debt security 2,639 — — 2,639 1,776 863 — Corporate debt security 83,883 863 — Corporate debt security 83,883 1,242 ( 267 ) 84,858 — Corporate debt security 83,883 1,242 ( 267 ) 84,858 — debt security 83,883 1,242 ( 267 ) 84,858 — 12,327 72,531 83,883 1,242 ( 267 ) 84,858 — 12,327 72,531 Municipal security ( 267 ) 84,858 — 12,327 72,531 Municipal security 967 14 267 ) 84,858 — 12,327 72,531 Municipal security 967 14 — — 12,327 72,531 Municipal security 967 14 — 981 — 130 12,327 72,531 Municipal security 967 14 — 981 — 130 851 Municipal security 967 14 — 981 — 130 851 Mortgage- and 967 14 — 981 — 130 851 Mortgage- and asset-backed security 14 — 981 — 130 851 Mortgage- and asset-backed security 20,529 851 Mortgage- and asset-backed security 20,529 171 ( 124 ) 20,576 Mortgage- and asset-backed security 20,529 171 ( 124 ) 20,576 — asset-backed security 20,529 171 ( 124 ) 20,576 — 775 19,801 20,529 171 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 8,027 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 162,873 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ) 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ) $ 8,027 27,514 127,877 Total ( 3 ) $ 189,961 $ 1,753 Total ( 3 ) $ 189,961 $ 1,753 $ ( 1,198 3 ) $ 189,961 $ 1,753 $ ( 1,198 ) $ 189,961 $ 1,753 $ ( 1,198 ) $ 190,516 $ 34,940 $ ( 1,198 ) $ 190,516 $ 34,940 $ 27,699 $ 1,198 ) $ 190,516 $ 34,940 $ 27,699 $ 127,877 2020 $ 190,516 $ 34,940 $ 27,699 $ 127,877 2020 Adjusted Cost $ 34,940 $ 27,699 $ 127,877 2020 Adjusted Cost Unrealized Gains 34,940 $ 27,699 $ 127,877 2020 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 17,773 $ — $ — $ $ — $ — $ 17,773 $ 17,773 $ — $ $ — $ 17,773 $ 17,773 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 2,171 — — 2,171 2,171 — market fund 2,171 — — 2,171 2,171 — — Level 2 fund 2,171 — — 2,171 2,171 — — Level 2 ( 2,171 2,171 — — Level 2 ( 2 ) : U.S. — — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 28,439 331 — 28,770 8,580 11,972 : U.S. Treasury security 28,439 331 — 28,770 8,580 11,972 8,218 Treasury security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 28,439 331 — 28,770 8,580 11,972 8,218 U.S. agency security 8,604 331 — 28,770 8,580 11,972 8,218 U.S. agency security 8,604 8 11,972 8,218 U.S. agency security 8,604 8 — 8,612 2,009 3,078 8,218 U.S. agency security 8,604 8 — 8,612 2,009 3,078 3,525 agency security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 8,604 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 19,361 8 — 8,612 2,009 3,078 3,525 Non-U.S. government security 19,361 275 3,078 3,525 Non-U.S. government security 19,361 275 ( 186 ) 19,450 3,525 Non-U.S. government security 19,361 275 ( 186 ) 19,450 255 government security 19,361 275 ( 186 ) 19,450 255 3,329 15,866 19,361 275 ( 186 ) 19,450 255 3,329 15,866 Certificates of 275 ( 186 ) 19,450 255 3,329 15,866 Certificates of deposit ( 186 ) 19,450 255 3,329 15,866 Certificates of deposit and 186 ) 19,450 255 3,329 15,866 Certificates of deposit and time of deposit and time deposit 10,399 — — 10,399 4,043 6,246 time deposit 10,399 — — 10,399 4,043 6,246 110 Commercial paper deposit 10,399 — — 10,399 4,043 6,246 110 Commercial paper 11,226 10,399 — — 10,399 4,043 6,246 110 Commercial paper 11,226 — — — 10,399 4,043 6,246 110 Commercial paper 11,226 — — 4,043 6,246 110 Commercial paper 11,226 — — 11,226 3,185 8,041 Commercial paper 11,226 — — 11,226 3,185 8,041 — Corporate debt paper 11,226 — — 11,226 3,185 8,041 — Corporate debt security 11,226 — — 11,226 3,185 8,041 — Corporate debt security 76,937 8,041 — Corporate debt security 76,937 1,834 ( 175 ) 78,596 — Corporate debt security 76,937 1,834 ( 175 ) 78,596 — debt security 76,937 1,834 ( 175 ) 78,596 — 19,687 58,909 76,937 1,834 ( 175 ) 78,596 — 19,687 58,909 Municipal security ( 175 ) 78,596 — 19,687 58,909 Municipal security 1,001 22 175 ) 78,596 — 19,687 58,909 Municipal security 1,001 22 — — 19,687 58,909 Municipal security 1,001 22 — 1,023 — 139 19,687 58,909 Municipal security 1,001 22 — 1,023 — 139 884 Municipal security 1,001 22 — 1,023 — 139 884 Mortgage- and 1,001 22 — 1,023 — 139 884 Mortgage- and asset-backed security 22 — 1,023 — 139 884 Mortgage- and asset-backed security 13,520 884 Mortgage- and asset-backed security 13,520 314 ( 24 ) 13,810 Mortgage- and asset-backed security 13,520 314 ( 24 ) 13,810 — asset-backed security 13,520 314 ( 24 ) 13,810 — 435 13,375 13,520 314 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 24 ) 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 385 13,810 — 435 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 — 435 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 18,072 13,375 Subtotal 169,487 2,784 ( 385 ) 171,886 18,072 52,927 100,887 169,487 2,784 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 2,784 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ( 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ) 385 ) 171,886 18,072 52,927 100,887 Total ( 3 ) $ 18,072 52,927 100,887 Total ( 3 ) $ 189,431 $ 2,784 Total ( 3 ) $ 189,431 $ 2,784 $ ( 385 3 ) $ 189,431 $ 2,784 $ ( 385 ) $ 189,431 $ 2,784 $ ( 385 ) $ 191,830 $ 38,016 $ ( 385 ) $ 191,830 $ 38,016 $ 52,927 $ 385 ) $ 191,830 $ 38,016 $ 52,927 $ 100,887 ( $ 191,830 $ 38,016 $ 52,927 $ 100,887 ( 1 ) $ 38,016 $ 52,927 $ 100,887 ( 1 ) Level 1 $ 52,927 $ 100,887 ( 1 ) Level 1 fair value 100,887 ( 1 ) Level 1 fair value estimate are based asset or liability . ( 2 ) Level 2 fair value . ( 2 ) Level 2 fair value estimate are based asset or liability . ( 3 ) As of September 25 3 ) As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , total marketable 2021 and September 26 , 2020 , total marketable security included total marketable security included $ 17.9 billion and $ 18.6 billion $ 17.9 billion and $ 18.6 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” agreement . Apple Inc. | 2021 Form 10-K | 38 The Apple Inc. | 2021 Form 10-K | 38 The Company may | 2021 Form 10-K | 38 The Company may sell certain maturity , a of September 25 , 2021 ( in million a of September 25 , 2021 ( in million ) : million ) : Due after 1 year through 5 year $ Due after 1 year through 5 year $ 83,755 Due after year through 5 year $ 83,755 Due after 5 year through year $ 83,755 Due after 5 year through 10 year 23,915 Due after 5 year through 10 year 23,915 Due after 10 5 year through 10 year 23,915 Due after 10 year 20,207 10 year 23,915 Due after 10 year 20,207 Total fair value 23,915 Due after 10 year 20,207 Total fair value $ 127,877 20,207 Total fair value $ 127,877 The Company typically invests in , typically for up to 12 month . To protect the hedge . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company ’ s expected to be recognized within 21 year . The Company may derivative instrument a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 were a follows 2021 and September 26 , 2020 were a follows ( in ( in million ) : 2021 2020 Derivative instrument designated a in million ) : 2021 2020 Derivative instrument designated a accounting : Foreign exchange contract $ 76,475 $ 57,410 Interest rate contract exchange contract $ 76,475 $ 57,410 Interest rate contract $ 16,875 57,410 Interest rate contract $ 16,875 $ 20,700 Derivative instrument not rate contract $ 16,875 $ 20,700 Derivative instrument not designated a : Foreign exchange contract $ 126,918 $ 88,636 The gross fair exchange contract $ 126,918 $ 88,636 The gross fair value of not material a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 . The gain 2021 and September 26 , 2020 . The gain and loss hedge were not material in 2021 , 2020 and 2019 . not material in 2021 , 2020 and 2019 . Apple Inc. in 2021 , 2020 and 2019 . Apple Inc. | 2021 2019 . Apple Inc. | 2021 Form 10-K | 39 The Apple Inc. | 2021 Form 10-K | 39 The carrying amount | 2021 Form 10-K | 39 The carrying amount of the value hedge a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 were a follows 2021 and September 26 , 2020 were a follows ( in ( in million ) : 2021 2020 Hedged assets/ ( liability in million ) : 2021 2020 Hedged assets/ ( liability ) and non-current marketable security $ 15,954 $ 16,270 Current and non-current marketable security $ 15,954 $ 16,270 Current and non-current term debt non-current term debt $ ( 17,857 ) $ ( 21,033 ) ( 17,857 ) $ ( 21,033 ) The gain and loss adjustment were not material in 2021 , 2020 and 2019 . not material in 2021 , 2020 and 2019 . Accounts Receivable in 2021 , 2020 and 2019 . Accounts Receivable Trade Receivables . As of both September 25 , 2021 and September 26 of both September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had no no customer that individually represented 10 % or more of total cellular network carrier accounted for 42 % of total trade receivables trade receivables a of September 25 , 2021 . Vendor Non-Trade a of September 25 , 2021 . Vendor Non-Trade Receivables The supplier . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had three three vendor that individually represented 10 % or more of total receivables , which accounted for 52 % , 11 % and accounted for 52 % , 11 % and 11 % . % , 11 % and 11 % . As of September % . As of September 26 , 2020 , the Company As of September 26 , 2020 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 57 % and 11 % . accounted for 57 % and 11 % . Note 4 – and 11 % . Note 4 – Consolidated Financial Statement Details statement detail a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 ( in million 2021 and September 26 , 2020 ( in million ) : Plant and Equipment , Net 2021 2020 Land and building $ and Equipment , Net 2021 2020 Land and building $ 20,041 2020 Land and building $ 20,041 $ 17,952 Machinery , equipment and building $ 20,041 $ 17,952 Machinery , equipment and internal-use , equipment and internal-use software 78,659 75,291 Leasehold improvement 11,023 10,283 equipment and internal-use software 78,659 75,291 Leasehold improvement 11,023 10,283 Gross software 78,659 75,291 Leasehold improvement 11,023 10,283 Gross property , plant 78,659 75,291 Leasehold improvement 11,023 10,283 Gross property , plant and property , plant and equipment 109,723 103,526 Accumulated depreciation and amortization , plant and equipment 109,723 103,526 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 70,283 ) ( 66,760 ) Total amortization ( 70,283 ) ( 66,760 ) Total property , plant and equipment , net $ 39,440 $ 36,766 Other Non-Current Liabilities , net $ 39,440 $ 36,766 Other Non-Current Liabilities 2021 2020 $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payable $ 36,766 Other Non-Current Liabilities 2021 2020 Long-term tax payable $ 24,689 2020 Long-term tax payable $ 24,689 $ 28,170 Other non-current liability tax payable $ 24,689 $ 28,170 Other non-current liability 28,636 26,320 $ 28,170 Other non-current liability 28,636 26,320 Total other non-current liability 28,170 Other non-current liability 28,636 26,320 Total other non-current liability $ Total other non-current liability $ 53,325 $ 54,490 Apple Inc. | non-current liability $ 53,325 $ 54,490 Apple Inc. | 2021 Form $ 54,490 Apple Inc. | 2021 Form 10-K | 40 Other Apple Inc. | 2021 Form 10-K | 40 Other Income/ ( | 2021 Form 10-K | 40 Other Income/ ( Expense ) of OI & E for 2021 , 2020 and 2019 ( & E for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Interest and dividend in million ) : 2021 2020 2019 Interest and dividend income million ) : 2021 2020 2019 Interest and dividend income $ Interest and dividend income $ 2,843 $ 3,763 $ 4,961 Interest dividend income $ 2,843 $ 3,763 $ 4,961 Interest expense ( $ 2,843 $ 3,763 $ 4,961 Interest expense ( 2,645 ) $ 4,961 Interest expense ( 2,645 ) ( 2,873 ) ( expense ( 2,645 ) ( 2,873 ) ( 3,576 ) Other ) ( 2,873 ) ( 3,576 ) Other income/ ( expense ( expense ) , net 60 ( 87 ) 422 Total ) , net 60 ( 87 ) 422 Total other income/ net 60 ( 87 ) 422 Total other income/ ( expense expense ) , net $ 258 $ 803 $ 1,807 Note , net $ 258 $ 803 $ 1,807 Note 5 – $ 258 $ 803 $ 1,807 Note 5 – Income Taxes $ 803 $ 1,807 Note 5 – Income Taxes Provision for provision for income tax for 2021 , 2020 and 2019 , income tax for 2021 , 2020 and 2019 , consisted of for 2021 , 2020 and 2019 , consisted of the following ( in million ) : 2021 2020 2019 Federal : Current in million ) : 2021 2020 2019 Federal : Current $ million ) : 2021 2020 2019 Federal : Current $ 8,257 2019 Federal : Current $ 8,257 $ 6,306 $ 6,384 Deferred : Current $ 8,257 $ 6,306 $ 6,384 Deferred ( 7,176 $ 8,257 $ 6,306 $ 6,384 Deferred ( 7,176 ) ( 6,306 $ 6,384 Deferred ( 7,176 ) ( 3,619 ) ( Deferred ( 7,176 ) ( 3,619 ) ( 2,939 ) Total ) ( 3,619 ) ( 2,939 ) Total 1,081 2,687 3,445 ) ( 2,939 ) Total 1,081 2,687 3,445 State : Current ( 2,939 ) Total 1,081 2,687 3,445 State : Current 1,620 2,939 ) Total 1,081 2,687 3,445 State : Current 1,620 455 2,687 3,445 State : Current 1,620 455 475 Deferred ( 338 3,445 State : Current 1,620 455 475 Deferred ( 338 ) State : Current 1,620 455 475 Deferred ( 338 ) 21 1,620 455 475 Deferred ( 338 ) 21 ( 67 ) 475 Deferred ( 338 ) 21 ( 67 ) Total 1,282 ( 338 ) 21 ( 67 ) Total 1,282 476 408 21 ( 67 ) Total 1,282 476 408 Foreign : Current ( 67 ) Total 1,282 476 408 Foreign : Current 9,424 67 ) Total 1,282 476 408 Foreign : Current 9,424 3,134 476 408 Foreign : Current 9,424 3,134 3,962 Deferred 2,740 3,383 408 Foreign : Current 9,424 3,134 3,962 Deferred 2,740 3,383 2,666 Foreign : Current 9,424 3,134 3,962 Deferred 2,740 3,383 2,666 Total Current 9,424 3,134 3,962 Deferred 2,740 3,383 2,666 Total 12,164 6,517 9,424 3,134 3,962 Deferred 2,740 3,383 2,666 Total 12,164 6,517 6,628 3,134 3,962 Deferred 2,740 3,383 2,666 Total 12,164 6,517 6,628 Provision Deferred 2,740 3,383 2,666 Total 12,164 6,517 6,628 Provision for income 2,740 3,383 2,666 Total 12,164 6,517 6,628 Provision for income tax 3,383 2,666 Total 12,164 6,517 6,628 Provision for income tax $ Provision for income tax $ 14,527 $ 9,680 $ 10,481 The income tax $ 14,527 $ 9,680 $ 10,481 The foreign provision $ 14,527 $ 9,680 $ 10,481 The foreign provision for income foreign pretax earnings of $ 68.7 billion , $ 38.1 billion $ 68.7 billion , $ 38.1 billion and $ 44.3 billion $ 38.1 billion and $ 44.3 billion in 2021 , 2020 and $ 44.3 billion in 2021 , 2020 and 2019 , 44.3 billion in 2021 , 2020 and 2019 , respectively . in 2021 , 2020 and 2019 , respectively . A reconciliation federal income tax rate ( 21 % in 2021 , 2020 rate ( 21 % in 2021 , 2020 and 2019 ) 21 % in 2021 , 2020 and 2019 ) to income in 2021 , 2020 and 2019 ) to income before provision provision for income tax for 2021 , 2020 and 2019 , income tax for 2021 , 2020 and 2019 , is a for 2021 , 2020 and 2019 , is a follows ( dollar in million ) : 2021 2020 2019 Computed expected tax in million ) : 2021 2020 2019 Computed expected tax $ million ) : 2021 2020 2019 Computed expected tax $ 22,933 2019 Computed expected tax $ 22,933 $ 14,089 $ 13,805 State expected tax $ 22,933 $ 14,089 $ 13,805 State tax , $ 22,933 $ 14,089 $ 13,805 State tax , net of , net of federal effect 1,151 423 423 Impacts of the net of federal effect 1,151 423 423 Impacts of the U.S. of federal effect 1,151 423 423 Impacts of the U.S. Tax Cuts and Jobs Act of 2017 — ( 582 ) — Act of 2017 — ( 582 ) — Earnings of foreign Earnings of foreign subsidiary ( 4,715 ) ( 2,534 ) ( subsidiary ( 4,715 ) ( 2,534 ) ( 2,625 ) Foreign-derived ) ( 2,534 ) ( 2,625 ) Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 1,372 ) ( 169 ) ( deduction ( 1,372 ) ( 169 ) ( 149 ) Research ) ( 169 ) ( 149 ) Research and development credit development credit , net ( 1,033 ) ( 728 ) ( net ( 1,033 ) ( 728 ) ( 548 ) Excess ) ( 728 ) ( 548 ) Excess tax benefit from benefit from equity award ( 2,137 ) ( 930 ) ( award ( 2,137 ) ( 930 ) ( 639 ) Other ) ( 930 ) ( 639 ) Other ( 300 ) ( 639 ) Other ( 300 ) 111 214 Provision for ) Other ( 300 ) 111 214 Provision for income tax Other ( 300 ) 111 214 Provision for income tax $ Provision for income tax $ 14,527 $ 9,680 $ 10,481 Effective income tax $ 14,527 $ 9,680 $ 10,481 Effective tax rate $ 14,527 $ 9,680 $ 10,481 Effective tax rate 13.3 % $ 10,481 Effective tax rate 13.3 % 14.4 % 15.9 % Effective tax rate 13.3 % 14.4 % 15.9 % Apple Inc. rate 13.3 % 14.4 % 15.9 % Apple Inc. | 2021 15.9 % Apple Inc. | 2021 Form 10-K | 41 Deferred Apple Inc. | 2021 Form 10-K | 41 Deferred Tax Assets | 2021 Form 10-K | 41 Deferred Tax Assets and Liabilities and Liabilities As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the significant 2021 and September 26 , 2020 , the significant component of ( in million ) : 2021 2020 Deferred tax asset : in million ) : 2021 2020 Deferred tax asset : Amortization : Amortization and depreciation $ 5,575 $ 8,317 Accrued liability and and depreciation $ 5,575 $ 8,317 Accrued liability and other reserve Accrued liability and other reserve 5,895 4,934 Lease liability 2,406 2,038 liability and other reserve 5,895 4,934 Lease liability 2,406 2,038 Deferred reserve 5,895 4,934 Lease liability 2,406 2,038 Deferred revenue 5,399 1,638 5,895 4,934 Lease liability 2,406 2,038 Deferred revenue 5,399 1,638 Tax liability 2,406 2,038 Deferred revenue 5,399 1,638 Tax credit carryforwards 4,262 2,406 2,038 Deferred revenue 5,399 1,638 Tax credit carryforwards 4,262 797 5,399 1,638 Tax credit carryforwards 4,262 797 Other 1,639 1,612 Total 1,638 Tax credit carryforwards 4,262 797 Other 1,639 1,612 Total deferred credit carryforwards 4,262 797 Other 1,639 1,612 Total deferred tax asset carryforwards 4,262 797 Other 1,639 1,612 Total deferred tax asset 25,176 1,612 Total deferred tax asset 25,176 19,336 Less : Valuation allowance Total deferred tax asset 25,176 19,336 Less : Valuation allowance ( Less : Valuation allowance ( 4,903 ) ( 1,041 ) Total allowance ( 4,903 ) ( 1,041 ) Total deferred tax asset deferred tax asset , net 20,273 18,295 Deferred tax liability : tax asset , net 20,273 18,295 Deferred tax liability : Minimum Minimum tax on foreign earnings 4,318 7,045 Right-of-use asset 2,167 1,862 tax on foreign earnings 4,318 7,045 Right-of-use asset 2,167 1,862 Unrealized earnings 4,318 7,045 Right-of-use asset 2,167 1,862 Unrealized gain 203 526 4,318 7,045 Right-of-use asset 2,167 1,862 Unrealized gain 203 526 Other asset 2,167 1,862 Unrealized gain 203 526 Other 512 705 Total 2,167 1,862 Unrealized gain 203 526 Other 512 705 Total deferred Unrealized gain 203 526 Other 512 705 Total deferred tax liability gain 203 526 Other 512 705 Total deferred tax liability 7,200 705 Total deferred tax liability 7,200 10,138 Net deferred tax asset Total deferred tax liability 7,200 10,138 Net deferred tax asset $ Net deferred tax asset $ 13,073 $ 8,157 Deferred tax asset tax asset $ 13,073 $ 8,157 Deferred tax asset and liability Cuts and Jobs Act of 2017 ( the “ Act ” ) . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had $ , the Company had $ 2.6 billion in foreign tax credit carryforwards in Ireland and $ 1.6 billion in California research and Tax Positions As of September 25 , 2021 , the total As of September 25 , 2021 , the total amount of unrecognized tax benefit wa $ 15.5 billion , of which $ billion , of which $ 6.6 billion , if recognized , rate . As of September 26 , 2020 , the total As of September 26 , 2020 , the total amount of unrecognized tax benefit wa $ 16.5 billion , of which $ billion , of which $ 8.8 billion , if recognized , interest and penalty , for 2021 , 2020 and 2019 , penalty , for 2021 , 2020 and 2019 , is a for 2021 , 2020 and 2019 , is a follows ( ( in million ) : 2021 2020 2019 Beginning balance $ in million ) : 2021 2020 2019 Beginning balance $ 16,475 million ) : 2021 2020 2019 Beginning balance $ 16,475 $ 2020 2019 Beginning balance $ 16,475 $ 15,619 $ 9,694 Increases Beginning balance $ 16,475 $ 15,619 $ 9,694 Increases related to $ 16,475 $ 15,619 $ 9,694 Increases related to tax position taken during a prior year 816 454 5,845 Decreases related to during a prior year 816 454 5,845 Decreases related to tax a prior year 816 454 5,845 Decreases related to tax position during a prior year ( 1,402 ) ( 791 ) ( year ( 1,402 ) ( 791 ) ( 686 ) Increases ) ( 791 ) ( 686 ) Increases related to tax taken during the current year 1,607 1,347 1,697 Decreases related to during the current year 1,607 1,347 1,697 Decreases related to settlement the current year 1,607 1,347 1,697 Decreases related to settlement with settlement with taxing authority ( 1,838 ) ( 85 ) ( authority ( 1,838 ) ( 85 ) ( 852 ) Decreases ) ( 85 ) ( 852 ) Decreases related to expiration the statute of limitation ( 181 ) ( 69 ) ( limitation ( 181 ) ( 69 ) ( 79 ) Ending ) ( 69 ) ( 79 ) Ending balance $ 15,477 79 ) Ending balance $ 15,477 $ 16,475 $ 15,619 The Ending balance $ 15,477 $ 16,475 $ 15,619 The Company is $ 15,477 $ 16,475 $ 15,619 The Company is subject to ictions . Tax year after 2015 for the U.S. federal jurisdiction federal jurisdiction , and after 2014 in certain major foreign jurisdiction could decrease in the next 12 month by a much a by a much a $ 1.2 billion . Apple Inc. | billion . Apple Inc. | 2021 Form 10-K | 42 Interest Apple Inc. | 2021 Form 10-K | 42 Interest and Penalties | 2021 Form 10-K | 42 Interest and Penalties The Company tax . As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the total 2021 and September 26 , 2020 , the total amount of and penalty accrued wa $ 1.5 billion and $ 1.4 billion $ 1.5 billion and $ 1.4 billion , respectively . The and penalty expense of $ 219 million , $ 85 million $ 219 million , $ 85 million and $ 73 million $ 85 million and $ 73 million in 2021 , 2020 and $ 73 million in 2021 , 2020 and 2019 , 73 million in 2021 , 2020 and 2019 , respectively . in 2021 , 2020 and 2019 , respectively . European Commission State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of wa calculated to be € 13.1 billion , plus interest of , plus interest of € 1.2 billion . The Company and ” ) . On July 15 , 2020 , the General . On July 15 , 2020 , the General Court annulled Aid Decision . On September 25 , 2020 , the European . On September 25 , 2020 , the European Commission appealed country . As of September 25 , 2021 , the adjusted As of September 25 , 2021 , the adjusted recovery amount adjusted recovery amount wa € 12.7 billion , excluding interest . Marketable Securities section of Note 3 , “ Financial Instruments ” for more information . Note 6 – Leases The Company ha have original term not exceeding 10 year and generally contain multiyear s operating lease were $ 1.7 billion and $ 1.5 billion $ 1.7 billion and $ 1.5 billion for 2021 and 2020 and $ 1.5 billion for 2021 and 2020 , respectively . 1.5 billion for 2021 and 2020 , respectively . Lease cost ’ s lease were $ 12.9 billion and $ 9.3 billion $ 12.9 billion and $ 9.3 billion for 2021 and 2020 and $ 9.3 billion for 2021 and 2020 , respectively . 9.3 billion for 2021 and 2020 , respectively . Rent expense accounting standard , wa $ 1.3 billion in 2019 . The wa $ 1.3 billion in 2019 . The Company made $ . The Company made $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion of fixed cash payment related to operating lease in 2021 and 2020 , respectively . operating lease in 2021 and 2020 , respectively . Noncash activity for lease liability were $ 3.3 billion for 2021 and $ were $ 3.3 billion for 2021 and $ 10.5 billion for billion for 2021 and $ 10.5 billion for 2020 , including and $ 10.5 billion for 2020 , including the impact of adopting FASB ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) in the first quarter in the first quarter of 2020 . The following table show item , a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 ( in million 2021 and September 26 , 2020 ( in million ) : Liabilities Financial Statement Line Items 2021 2020 Right-of-use asset : Operating Financial Statement Line Items 2021 2020 Right-of-use asset : Operating lease lease Other non-current asset $ 10,087 $ 8,570 Finance lease Property non-current asset $ 10,087 $ 8,570 Finance lease Property , plant plant and equipment , net 861 629 Total right-of-use asset $ and equipment , net 861 629 Total right-of-use asset $ 10,948 629 Total right-of-use asset $ 10,948 $ 9,199 Lease liability : right-of-use asset $ 10,948 $ 9,199 Lease liability : Operating lease lease Other current liability $ 1,449 $ 1,436 Other non-current liability current liability $ 1,449 $ 1,436 Other non-current liability 9,506 7,745 $ 1,436 Other non-current liability 9,506 7,745 Finance lease Other current 1,436 Other non-current liability 9,506 7,745 Finance lease Other current liability Finance lease Other current liability 79 24 Other non-current liability 769 lease Other current liability 79 24 Other non-current liability 769 637 79 24 Other non-current liability 769 637 Total lease liability $ 24 Other non-current liability 769 637 Total lease liability $ 11,803 637 Total lease liability $ 11,803 $ 9,842 Apple Inc. | lease liability $ 11,803 $ 9,842 Apple Inc. | 2021 Form $ 9,842 Apple Inc. | 2021 Form 10-K | 43 Lease Apple Inc. | 2021 Form 10-K | 43 Lease liability maturity | 2021 Form 10-K | 43 Lease liability maturity a of liability maturity a of September 25 , 2021 , are a a of September 25 , 2021 , are a follows ( Operating Leases Finance Leases Total 2022 $ 1,629 $ 104 $ Finance Leases Total 2022 $ 1,629 $ 104 $ 1,733 2023 Total 2022 $ 1,629 $ 104 $ 1,733 2023 1,560 123 $ 1,629 $ 104 $ 1,733 2023 1,560 123 1,683 2024 1,629 $ 104 $ 1,733 2023 1,560 123 1,683 2024 1,499 $ 104 $ 1,733 2023 1,560 123 1,683 2024 1,499 99 104 $ 1,733 2023 1,560 123 1,683 2024 1,499 99 1,598 $ 1,733 2023 1,560 123 1,683 2024 1,499 99 1,598 2025 1,733 2023 1,560 123 1,683 2024 1,499 99 1,598 2025 1,251 2023 1,560 123 1,683 2024 1,499 99 1,598 2025 1,251 46 1,560 123 1,683 2024 1,499 99 1,598 2025 1,251 46 1,297 123 1,683 2024 1,499 99 1,598 2025 1,251 46 1,297 2026 1,683 2024 1,499 99 1,598 2025 1,251 46 1,297 2026 1,061 2024 1,499 99 1,598 2025 1,251 46 1,297 2026 1,061 26 1,499 99 1,598 2025 1,251 46 1,297 2026 1,061 26 1,087 99 1,598 2025 1,251 46 1,297 2026 1,061 26 1,087 Thereafter 1,598 2025 1,251 46 1,297 2026 1,061 26 1,087 Thereafter 5,187 2025 1,251 46 1,297 2026 1,061 26 1,087 Thereafter 5,187 868 1,251 46 1,297 2026 1,061 26 1,087 Thereafter 5,187 868 6,055 46 1,297 2026 1,061 26 1,087 Thereafter 5,187 868 6,055 Total 2026 1,061 26 1,087 Thereafter 5,187 868 6,055 Total undiscounted liability 1,061 26 1,087 Thereafter 5,187 868 6,055 Total undiscounted liability 12,187 26 1,087 Thereafter 5,187 868 6,055 Total undiscounted liability 12,187 1,266 868 6,055 Total undiscounted liability 12,187 1,266 13,453 Less : Imputed 6,055 Total undiscounted liability 12,187 1,266 13,453 Less : Imputed interest Total undiscounted liability 12,187 1,266 13,453 Less : Imputed interest ( Less : Imputed interest ( 1,232 ) ( 418 ) ( interest ( 1,232 ) ( 418 ) ( 1,650 ) Total ) ( 418 ) ( 1,650 ) Total lease liability $ ) Total lease liability $ 10,955 $ 848 $ 11,803 The lease liability $ 10,955 $ 848 $ 11,803 The weighted-average remaining $ 10,955 $ 848 $ 11,803 The weighted-average remaining lease term lease liability a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 wa 10.8 year 2021 and September 26 , 2020 wa 10.8 year and 10.3 September 26 , 2020 wa 10.8 year and 10.3 year , 2020 wa 10.8 year and 10.3 year , respectively . The liability a of both September 25 , 2021 and September 26 of both September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 wa 2.0 % 2021 and September 26 , 2020 wa 2.0 % . The September 26 , 2020 wa 2.0 % . The discount rate determined . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had $ , the Company had $ 1.1 billion of future payment under These lease will commence between 2022 and 2023 , with lease will commence between 2022 and 2023 , with lease term ranging with lease term ranging from 3 year to 20 year . ranging from 3 year to 20 year . Note 7 – to 20 year . Note 7 – Debt Commercial Paper and repurchase . As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the Company 2021 and September 26 , 2020 , the Company had $ , the Company had $ 6.0 billion and $ 5.0 billion $ 6.0 billion and $ 5.0 billion of Commercial Paper outstanding ’ s Commercial Paper wa 0.06 % and 0.62 % a Paper wa 0.06 % and 0.62 % a of September 25 0.62 % a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , respectively . 2021 and September 26 , 2020 , respectively . The following maturity of Commercial Paper for 2021 , 2020 and 2019 ( Commercial Paper for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Maturities 90 day in million ) : 2021 2020 2019 Maturities 90 day or million ) : 2021 2020 2019 Maturities 90 day or le : 2021 2020 2019 Maturities 90 day or le : Proceeds paper , net $ ( 357 ) $ 100 $ ( $ ( 357 ) $ 100 $ ( 3,248 ) Maturities ) $ 100 $ ( 3,248 ) Maturities greater than 90 3,248 ) Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 7,946 6,185 13,874 Repayments of commercial Proceeds from commercial paper 7,946 6,185 13,874 Repayments of commercial paper from commercial paper 7,946 6,185 13,874 Repayments of commercial paper ( Repayments of commercial paper ( 6,567 ) ( 7,248 ) ( paper ( 6,567 ) ( 7,248 ) ( 16,603 ) Proceeds ) ( 7,248 ) ( 16,603 ) Proceeds from/ ( Repayments ) commercial paper , net 1,379 ( 1,063 ) ( 2,729 paper , net 1,379 ( 1,063 ) ( 2,729 ) Total 1,379 ( 1,063 ) ( 2,729 ) Total proceeds from/ ( commercial paper , net $ 1,022 $ ( 963 ) $ net $ 1,022 $ ( 963 ) $ ( 5,977 ) ( 963 ) $ ( 5,977 ) In 2020 , the $ ( 5,977 ) In 2020 , the Company entered into The Company entered into $ 5.2 billion of Repos during 2020 5.2 billion of Repos during 2020 , all of which had been settled a of September 26 , 2020 . Apple Inc. a of September 26 , 2020 . Apple Inc. | 2021 2020 . Apple Inc. | 2021 Form 10-K | 44 Term Apple Inc. | 2021 Form 10-K | 44 Term Debt As | 2021 Form 10-K | 44 Term Debt As of September Term Debt As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had outstanding aggregate principal amount of $ 118.1 billion ( collectively the “ term debt a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 : Maturities ( 2021 and September 26 , 2020 : Maturities ( calendar year Maturities ( calendar year ) 2021 2020 Amount ( in million ( calendar year ) 2021 2020 Amount ( in million ) million ) Effective Interest Rate 2013 – 2020 debt issuance : Effective Interest Rate 2013 – 2020 debt issuance : Floating-rate note debt issuance : Floating-rate note 2022 $ 1,750 0.48 % – : Floating-rate note 2022 $ 1,750 0.48 % – 0.63 % Floating-rate note 2022 $ 1,750 0.48 % – 0.63 % $ $ 1,750 0.48 % – 0.63 % $ 2,250 0.60 % % – 0.63 % $ 2,250 0.60 % – 1.39 % – 0.63 % $ 2,250 0.60 % – 1.39 % Fixed-rate $ 2,250 0.60 % – 1.39 % Fixed-rate 0.000 % – % – 1.39 % Fixed-rate 0.000 % – 4.650 % note % Fixed-rate 0.000 % – 4.650 % note 2022 – 2060 % – 4.650 % note 2022 – 2060 95,813 0.03 % 4.650 % note 2022 – 2060 95,813 0.03 % – 4.78 % note 2022 – 2060 95,813 0.03 % – 4.78 % note 2022 – 2060 95,813 0.03 % – 4.78 % 103,828 2060 95,813 0.03 % – 4.78 % 103,828 0.03 % – 0.03 % – 4.78 % 103,828 0.03 % – 4.78 % % – 4.78 % 103,828 0.03 % – 4.78 % Second % 103,828 0.03 % – 4.78 % Second quarter 2021 debt – 4.78 % Second quarter 2021 debt issuance : Fixed-rate 0.700 2021 debt issuance : Fixed-rate 0.700 % – 2.800 % note : Fixed-rate 0.700 % – 2.800 % note 2026 – 2061 % – 2.800 % note 2026 – 2061 14,000 0.75 % 2.800 % note 2026 – 2061 14,000 0.75 % – 2.81 % note 2026 – 2061 14,000 0.75 % – 2.81 % note 2026 – 2061 14,000 0.75 % – 2.81 % — 2061 14,000 0.75 % – 2.81 % — — % Fourth — — % Fourth quarter 2021 debt issuance : Fixed-rate 1.400 2021 debt issuance : Fixed-rate 1.400 % – 2.850 % note : Fixed-rate 1.400 % – 2.850 % note 2028 – 2061 % – 2.850 % note 2028 – 2061 6,500 1.43 % 2.850 % note 2028 – 2061 6,500 1.43 % – 2.86 % note 2028 – 2061 6,500 1.43 % – 2.86 % note 2028 – 2061 6,500 1.43 % – 2.86 % — 2061 6,500 1.43 % – 2.86 % — — % Total — % Total term debt 118,063 106,078 Unamortized premium/ ( discount % Total term debt 118,063 106,078 Unamortized premium/ ( discount ) issuance cost , net ( 380 ) ( 314 ) Hedge net ( 380 ) ( 314 ) Hedge accounting fair value Hedge accounting fair value adjustment 1,036 1,676 Less : Current portion accounting fair value adjustment 1,036 1,676 Less : Current portion of portion of term debt ( 9,613 ) ( 8,773 ) Total debt ( 9,613 ) ( 8,773 ) Total non-current portion of portion of term debt $ 109,106 $ 98,667 To manage interest term debt $ 109,106 $ 98,667 To manage interest rate risk . The Company recognized $ 2.6 billion , $ 2.8 billion $ 2.6 billion , $ 2.8 billion and $ 3.2 billion $ 2.8 billion and $ 3.2 billion of interest expense on on it term debt for 2021 , 2020 and 2019 , term debt for 2021 , 2020 and 2019 , respectively . for 2021 , 2020 and 2019 , respectively . The future s Notes a of September 25 , 2021 , are a a of September 25 , 2021 , are a follows ( ( in million ) : 2022 $ 9,583 2023 11,391 2024 million ) : 2022 $ 9,583 2023 11,391 2024 10,202 2025 ) : 2022 $ 9,583 2023 11,391 2024 10,202 2025 10,914 : 2022 $ 9,583 2023 11,391 2024 10,202 2025 10,914 2026 2022 $ 9,583 2023 11,391 2024 10,202 2025 10,914 2026 11,408 $ 9,583 2023 11,391 2024 10,202 2025 10,914 2026 11,408 Thereafter 9,583 2023 11,391 2024 10,202 2025 10,914 2026 11,408 Thereafter 64,565 2023 11,391 2024 10,202 2025 10,914 2026 11,408 Thereafter 64,565 Total 11,391 2024 10,202 2025 10,914 2026 11,408 Thereafter 64,565 Total term 2024 10,202 2025 10,914 2026 11,408 Thereafter 64,565 Total term debt 2025 10,914 2026 11,408 Thereafter 64,565 Total term debt $ 118,063 64,565 Total term debt $ 118,063 As of September 25 , $ 118,063 As of September 25 , 2021 and September 26 As of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the fair 2021 and September 26 , 2020 , the fair value of Notes , based on Level 2 input , wa $ 125.3 2 input , wa $ 125.3 billion and $ 117.1 billion $ 125.3 billion and $ 117.1 billion , respectively . Apple respectively . Apple Inc. | 2021 Form 10-K | 45 Note Apple Inc. | 2021 Form 10-K | 45 Note 8 – | 2021 Form 10-K | 45 Note 8 – Shareholders ’ Form 10-K | 45 Note 8 – Shareholders ’ Equity Share Repurchase Program As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company wa authorized to purchase up to $ 315 billion of the Company ’ Program ” ) . During 2021 , the Company repurchased 656 2021 , the Company repurchased 656 million share of it common it common stock for $ 85.5 billion , including 36 million $ 85.5 billion , including 36 million share delivered under a share delivered under a $ 5.0 billion accelerated share repurchase agreement agreement entered into in May 2021 , bringing the total utilization under the Program to $ 254.1 billion a of September 25 254.1 billion a of September 25 , 2021 . The Program a of September 25 , 2021 . The Program doe not under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the share of common stock for 2021 , 2020 and 2019 ( common stock for 2021 , 2020 and 2019 ( in thousand for 2021 , 2020 and 2019 ( in thousand ) : ( in thousand ) : 2021 2020 2019 Common stock outstanding in thousand ) : 2021 2020 2019 Common stock outstanding , thousand ) : 2021 2020 2019 Common stock outstanding , beginning stock outstanding , beginning balance 16,976,763 17,772,945 19,019,943 Common stock repurchased outstanding , beginning balance 16,976,763 17,772,945 19,019,943 Common stock repurchased ( , beginning balance 16,976,763 17,772,945 19,019,943 Common stock repurchased ( 656,340 19,019,943 Common stock repurchased ( 656,340 ) ( 917,270 ) ( repurchased ( 656,340 ) ( 917,270 ) ( 1,380,819 ) Common ) ( 917,270 ) ( 1,380,819 ) Common stock issued , share withheld for employee tax 106,363 121,088 133,821 Common stock outstanding withheld for employee tax 106,363 121,088 133,821 Common stock outstanding , for employee tax 106,363 121,088 133,821 Common stock outstanding , ending stock outstanding , ending balance 16,426,786 16,976,763 17,772,945 Note 9 – outstanding , ending balance 16,426,786 16,976,763 17,772,945 Note 9 – Benefit , ending balance 16,426,786 16,976,763 17,772,945 Note 9 – Benefit Plans balance 16,426,786 16,976,763 17,772,945 Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan The 2014 2014 Employee Stock Plan The 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) is a . RSUs granted under the 2014 Plan generally vest over four . RSUs granted under the 2014 Plan reduce the number of available for grant under the 2014 Plan utilizing a factor of All RSUs granted under the 2014 Plan have dividend equivalent right RSUs . As of September 25 , 2021 , approximately 760 As of September 25 , 2021 , approximately 760 million share 25 , 2021 , approximately 760 million share were reserved for for future issuance under the 2014 Plan . Shares subject to to outstanding award under the 2003 Employee Stock Plan that expire available for award under the 2014 Plan . Apple Inc. Non-Employee Director Plan expires on November 12 , 2027 . All RSUs expires on November 12 , 2027 . All RSUs granted under RSUs . As of September 25 , 2021 , approximately 4 As of September 25 , 2021 , approximately 4 million share 25 , 2021 , approximately 4 million share were reserved for the Director Plan . Rule 10b5-1 Trading Plans During the three the three month ended September 25 , 2021 , Section 16 month ended September 25 , 2021 , Section 16 officer Katherine 25 , 2021 , Section 16 officer Katherine L. Adams , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act plan . Apple Inc. | 2021 Form 10-K | 46 Employee Apple Inc. | 2021 Form 10-K | 46 Employee Stock Purchase | 2021 Form 10-K | 46 Employee Stock Purchase Plan The at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 25 , 2021 , approximately 96 As of September 25 , 2021 , approximately 96 million share 25 , 2021 , approximately 96 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 19,500 for calendar year 2021 ) $ 19,500 for calendar year 2021 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ up to a maximum of 6 % of the employee ’ activity and related information for 2021 , 2020 and 2019 , related information for 2021 , 2020 and 2019 , is a for 2021 , 2020 and 2019 , is a follows : ) Balance a of September 29 , 2018 368,618 $ 33.65 a of September 29 , 2018 368,618 $ 33.65 RSUs granted of September 29 , 2018 368,618 $ 33.65 RSUs granted 147,409 29 , 2018 368,618 $ 33.65 RSUs granted 147,409 $ 53.99 368,618 $ 33.65 RSUs granted 147,409 $ 53.99 RSUs vested ( 33.65 RSUs granted 147,409 $ 53.99 RSUs vested ( 168,350 ) $ 53.99 RSUs vested ( 168,350 ) $ 33.80 RSUs canceled vested ( 168,350 ) $ 33.80 RSUs canceled ( 21,609 ) $ 33.80 RSUs canceled ( 21,609 ) $ 40.71 Balance a canceled ( 21,609 ) $ 40.71 Balance a of September 28 40.71 Balance a of September 28 , 2019 326,068 $ 42.30 a of September 28 , 2019 326,068 $ 42.30 RSUs granted of September 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 157,743 ) $ 59.20 RSUs vested ( 157,743 ) $ 40.29 RSUs canceled vested ( 157,743 ) $ 40.29 RSUs canceled ( 14,347 ) $ 40.29 RSUs canceled ( 14,347 ) $ 48.07 Balance a canceled ( 14,347 ) $ 48.07 Balance a of September 26 48.07 Balance a of September 26 , 2020 310,778 $ 51.58 a of September 26 , 2020 310,778 $ 51.58 RSUs granted of September 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 145,766 ) $ 116.33 RSUs vested ( 145,766 ) $ 50.71 RSUs canceled vested ( 145,766 ) $ 50.71 RSUs canceled ( 13,948 ) $ 50.71 RSUs canceled ( 13,948 ) $ 68.95 Balance a canceled ( 13,948 ) $ 68.95 Balance a of September 25 68.95 Balance a of September 25 , 2021 240,427 $ 75.16 a of September 25 , 2021 240,427 $ 75.16 $ 35,324 of September 25 , 2021 240,427 $ 75.16 $ 35,324 The 25 , 2021 240,427 $ 75.16 $ 35,324 The fair value 2021 240,427 $ 75.16 $ 35,324 The fair value a of date of RSUs wa $ 19.0 billion , $ 10.8 billion $ 19.0 billion , $ 10.8 billion and $ 8.6 billion $ 10.8 billion and $ 8.6 billion for 2021 , 2020 and $ 8.6 billion for 2021 , 2020 and 2019 , 8.6 billion for 2021 , 2020 and 2019 , respectively . for 2021 , 2020 and 2019 , respectively . The majority of RSUs that vested in 2021 , 2020 and 2019 were that vested in 2021 , 2020 and 2019 were net share in 2021 , 2020 and 2019 were net share settled such total share withheld were approximately 53 million , 56 million and were approximately 53 million , 56 million and 59 million for million , 56 million and 59 million for 2021 , 2020 million and 59 million for 2021 , 2020 and 2019 , 59 million for 2021 , 2020 and 2019 , respectively , for 2021 , 2020 and 2019 , respectively , and were to taxing authority were $ 6.8 billion , $ 3.9 billion $ 6.8 billion , $ 3.9 billion and $ 3.0 billion $ 3.9 billion and $ 3.0 billion in 2021 , 2020 and $ 3.0 billion in 2021 , 2020 and 2019 , 3.0 billion in 2021 , 2020 and 2019 , respectively . in 2021 , 2020 and 2019 , respectively . Share-Based Compensation Consolidated Statements of Operations for 2021 , 2020 and 2019 ( of Operations for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Share-based compensation expense in million ) : 2021 2020 2019 Share-based compensation expense $ million ) : 2021 2020 2019 Share-based compensation expense $ 7,906 2019 Share-based compensation expense $ 7,906 $ 6,829 $ 6,068 Income compensation expense $ 7,906 $ 6,829 $ 6,068 Income tax benefit $ 7,906 $ 6,829 $ 6,068 Income tax benefit related to share-based compensation expense $ ( 4,056 ) $ ( 2,476 ) ( 4,056 ) $ ( 2,476 ) $ ( 1,967 ) ( 2,476 ) $ ( 1,967 ) As of September 25 1,967 ) As of September 25 , 2021 , the total As of September 25 , 2021 , the total unrecognized compensation and stock option wa $ 13.6 billion , which the Company over a weighted-average period of 2.5 year . Apple Inc. | year . Apple Inc. | 2021 Form 10-K | 47 Note Apple Inc. | 2021 Form 10-K | 47 Note 10 – | 2021 Form 10-K | 47 Note 10 – Commitments and Form 10-K | 47 Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2021 , 2020 and 2019 ( related cost for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Beginning accrued warranty in million ) : 2021 2020 2019 Beginning accrued warranty and million ) : 2021 2020 2019 Beginning accrued warranty and related warranty and related cost $ 3,354 $ 3,570 $ 3,692 Cost related cost $ 3,354 $ 3,570 $ 3,692 Cost of warranty $ 3,354 $ 3,570 $ 3,692 Cost of warranty claim ( Cost of warranty claim ( 2,674 ) ( 2,956 ) ( claim ( 2,674 ) ( 2,956 ) ( 3,857 ) Accruals ) ( 2,956 ) ( 3,857 ) Accruals for product warranty ) Accruals for product warranty 2,684 2,740 3,735 Ending accrued warranty Accruals for product warranty 2,684 2,740 3,735 Ending accrued warranty and for product warranty 2,684 2,740 3,735 Ending accrued warranty and related warranty and related cost $ 3,364 $ 3,354 $ 3,570 The related cost $ 3,364 $ 3,354 $ 3,570 The Company offer $ 3,364 $ 3,354 $ 3,570 The Company offer an iPhone one year a of September 25 , 2021 , are a a of September 25 , 2021 , are a follows ( ( in million ) : 2022 $ 4,551 2023 2,165 2024 million ) : 2022 $ 4,551 2023 2,165 2024 984 2025 ) : 2022 $ 4,551 2023 2,165 2024 984 2025 405 : 2022 $ 4,551 2023 2,165 2024 984 2025 405 2026 2022 $ 4,551 2023 2,165 2024 984 2025 405 2026 51 $ 4,551 2023 2,165 2024 984 2025 405 2026 51 Thereafter 4,551 2023 2,165 2024 984 2025 405 2026 51 Thereafter 28 2023 2,165 2024 984 2025 405 2026 51 Thereafter 28 Total 2,165 2024 984 2025 405 2026 51 Thereafter 28 Total $ 2024 984 2025 405 2026 51 Thereafter 28 Total $ 8,184 2025 405 2026 51 Thereafter 28 Total $ 8,184 Apple Inc. 51 Thereafter 28 Total $ 8,184 Apple Inc. | 2021 Form $ 8,184 Apple Inc. | 2021 Form 10-K | 48 Contingencies Apple Inc. | 2021 Form 10-K | 48 Contingencies The Company | 2021 Form 10-K | 48 Contingencies The Company is subject by VirnetX . On April 11 , 2018 , a jury . On April 11 , 2018 , a jury returned a retrial wa held in October 2020 . The jury returned a and awarded damage of $ 503 million , which the Company Performance Management Cases On April 5 , 2018 , several U.S. Cases On April 5 , 2018 , several U.S. federal action certain iPhones in iOS update 10.2.1 and 11.2 , were consolidated in iOS update 10.2.1 and 11.2 , were consolidated through a ” ) . On February 28 , 2020 , the party . On February 28 , 2020 , the party in the class action . On March 18 , 2021 , the Northern . On March 18 , 2021 , the Northern California District an aggregate payment of $ 310 million to settle all claim feature introduced with iOS update 10.2.1 and 11.2 wa intended to with iOS update 10.2.1 and 11.2 wa intended to , and French Competition Authority On March 16 , 2020 , the French Authority On March 16 , 2020 , the French Competition Authority issued a fine of € 1.1 billion . The Company strongly by Optis . On August 11 , 2020 , a jury . On August 11 , 2020 , a jury returned a damage wa held in August 2021 and the jury in that proceeding awarded damage of $ 300 million against the Company , plan to appeal . Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant . ” Apple Inc. | 2021 Form 10-K | 49 The Apple Inc. | 2021 Form 10-K | 49 The Company evaluates | 2021 Form 10-K | 49 The Company evaluates the performance information by reportable segment for 2021 , 2020 and 2019 ( reportable segment for 2021 , 2020 and 2019 ( in million for 2021 , 2020 and 2019 ( in million ) : ( in million ) : 2021 2020 2019 Americas : Net in million ) : 2021 2020 2019 Americas : Net sale million ) : 2021 2020 2019 Americas : Net sale $ Americas : Net sale $ 153,306 $ 124,556 $ 116,914 Operating Net sale $ 153,306 $ 124,556 $ 116,914 Operating income $ $ 153,306 $ 124,556 $ 116,914 Operating income $ 53,382 $ $ 116,914 Operating income $ 53,382 $ 37,722 $ 35,099 Europe Operating income $ 53,382 $ 37,722 $ 35,099 Europe : Net $ 53,382 $ 37,722 $ 35,099 Europe : Net sale $ Europe : Net sale $ 89,307 $ 68,640 $ 60,288 Operating Net sale $ 89,307 $ 68,640 $ 60,288 Operating income $ $ 89,307 $ 68,640 $ 60,288 Operating income $ 32,505 $ $ 60,288 Operating income $ 32,505 $ 22,170 $ 19,195 Greater Operating income $ 32,505 $ 22,170 $ 19,195 Greater China : $ 32,505 $ 22,170 $ 19,195 Greater China : Net sale China : Net sale $ 68,366 $ 40,308 $ 43,678 Operating Net sale $ 68,366 $ 40,308 $ 43,678 Operating income $ $ 68,366 $ 40,308 $ 43,678 Operating income $ 28,504 $ $ 43,678 Operating income $ 28,504 $ 15,261 $ 16,232 Japan Operating income $ 28,504 $ 15,261 $ 16,232 Japan : Net $ 28,504 $ 15,261 $ 16,232 Japan : Net sale $ Japan : Net sale $ 28,482 $ 21,418 $ 21,506 Operating Net sale $ 28,482 $ 21,418 $ 21,506 Operating income $ $ 28,482 $ 21,418 $ 21,506 Operating income $ 12,798 $ $ 21,506 Operating income $ 12,798 $ 9,279 $ 9,369 Rest Operating income $ 12,798 $ 9,279 $ 9,369 Rest of Asia $ 12,798 $ 9,279 $ 9,369 Rest of Asia Pacific : Pacific : Net sale $ 26,356 $ 19,593 $ 17,788 Operating Net sale $ 26,356 $ 19,593 $ 17,788 Operating income $ $ 26,356 $ 19,593 $ 17,788 Operating income $ 9,817 $ $ 17,788 Operating income $ 9,817 $ 6,808 $ 6,055 A Operating income $ 9,817 $ 6,808 $ 6,055 A reconciliation of $ 9,817 $ 6,808 $ 6,055 A reconciliation of the Company Consolidated Statements of Operations for 2021 , 2020 and 2019 is of Operations for 2021 , 2020 and 2019 is a follows for 2021 , 2020 and 2019 is a follows ( in ( in million ) : 2021 2020 2019 Segment operating income in million ) : 2021 2020 2019 Segment operating income $ million ) : 2021 2020 2019 Segment operating income $ 137,006 2019 Segment operating income $ 137,006 $ 91,240 $ 85,950 Research operating income $ 137,006 $ 91,240 $ 85,950 Research and development $ 137,006 $ 91,240 $ 85,950 Research and development expense ( Research and development expense ( 21,914 ) ( 18,752 ) ( expense ( 21,914 ) ( 18,752 ) ( 16,217 ) Other ) ( 18,752 ) ( 16,217 ) Other corporate expense , corporate expense , net ( 6,143 ) ( 6,200 ) ( net ( 6,143 ) ( 6,200 ) ( 5,803 ) Total ) ( 6,200 ) ( 5,803 ) Total operating income $ ) Total operating income $ 108,949 $ 66,288 $ 63,930 Apple operating income $ 108,949 $ 66,288 $ 63,930 Apple Inc. | $ 108,949 $ 66,288 $ 63,930 Apple Inc. | 2021 Form $ 63,930 Apple Inc. | 2021 Form 10-K | 50 The Apple Inc. | 2021 Form 10-K | 50 The U.S. and | 2021 Form 10-K | 50 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2021 , 2020 and 2019 . net sale in 2021 , 2020 and 2019 . There wa in 2021 , 2020 and 2019 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2021 , 2020 and 2019 . net sale in 2021 , 2020 and 2019 . Net sale in 2021 , 2020 and 2019 . Net sale for 2021 2019 . Net sale for 2021 , 2020 and 2019 and Net sale for 2021 , 2020 and 2019 and long-lived asset for 2021 , 2020 and 2019 and long-lived asset a of long-lived asset a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 were a follows 2021 and September 26 , 2020 were a follows ( in ( in million ) : 2021 2020 2019 Net sale : in million ) : 2021 2020 2019 Net sale : U.S. million ) : 2021 2020 2019 Net sale : U.S. $ Net sale : U.S. $ 133,803 $ 109,197 $ 102,266 China : U.S. $ 133,803 $ 109,197 $ 102,266 China ( 1 $ 133,803 $ 109,197 $ 102,266 China ( 1 ) 68,366 109,197 $ 102,266 China ( 1 ) 68,366 40,308 43,678 Other 102,266 China ( 1 ) 68,366 40,308 43,678 Other country 163,648 China ( 1 ) 68,366 40,308 43,678 Other country 163,648 125,010 ( 1 ) 68,366 40,308 43,678 Other country 163,648 125,010 114,230 68,366 40,308 43,678 Other country 163,648 125,010 114,230 Total net sale 40,308 43,678 Other country 163,648 125,010 114,230 Total net sale $ 43,678 Other country 163,648 125,010 114,230 Total net sale $ 365,817 114,230 Total net sale $ 365,817 $ 274,515 $ 260,174 2021 net sale $ 365,817 $ 274,515 $ 260,174 2021 2020 Long-lived $ 365,817 $ 274,515 $ 260,174 2021 2020 Long-lived asset : 365,817 $ 274,515 $ 260,174 2021 2020 Long-lived asset : U.S. $ 274,515 $ 260,174 2021 2020 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 28,203 $ 25,890 China ( 1 : U.S. $ 28,203 $ 25,890 China ( 1 ) 7,521 28,203 $ 25,890 China ( 1 ) 7,521 7,256 Other country 25,890 China ( 1 ) 7,521 7,256 Other country 3,716 3,620 China ( 1 ) 7,521 7,256 Other country 3,716 3,620 Total ) 7,521 7,256 Other country 3,716 3,620 Total long-lived asset $ 7,521 7,256 Other country 3,716 3,620 Total long-lived asset $ 39,440 3,620 Total long-lived asset $ 39,440 $ 36,766 ( 1 ) long-lived asset $ 39,440 $ 36,766 ( 1 ) China includes $ 39,440 $ 36,766 ( 1 ) China includes Hong Kong infrastructure . Apple Inc. | 2021 Form 10-K | 51 Report Apple Inc. | 2021 Form 10-K | 51 Report of Independent | 2021 Form 10-K | 51 Report of Independent Registered Public Apple Inc. a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the related 2021 and September 26 , 2020 , the related consolidated statement in the period ended September 25 , 2021 , and the period ended September 25 , 2021 , and the related note of Apple Inc. at September 25 , 2021 and September 26 Inc. at September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , and the 2021 and September 26 , 2020 , and the result of in the period ended September 25 , 2021 , in conformity period ended September 25 , 2021 , in conformity with U.S. financial reporting a of September 25 , 2021 , based on a of September 25 , 2021 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 28 , 2021 expressed an unqualified report dated October 28 , 2021 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging Matter As discussed in Note 5 to the financial statement , jurisdiction . As of September 25 , 2021 , the total As of September 25 , 2021 , the total amount of unrecognized tax benefit wa $ 15.5 billion , of which $ billion , of which $ 6.6 billion , if recognized , ruling . Apple Inc. | 2021 Form 10-K | 52 How Apple Inc. | 2021 Form 10-K | 52 How We Addressed | 2021 Form 10-K | 52 How We Addressed the Matter these matter included in Note 5 to the financial statement . Inc. ’ s auditor since 2009 . San Jose , California San Jose , California October 28 , 2021 Apple Inc. | , California October 28 , 2021 Apple Inc. | 2021 Form , 2021 Apple Inc. | 2021 Form 10-K | 53 Report Apple Inc. | 2021 Form 10-K | 53 Report of Independent | 2021 Form 10-K | 53 Report of Independent Registered Public financial reporting a of September 25 , 2021 , based on a of September 25 , 2021 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 25 , 2021 , based on a of September 25 , 2021 , based on the COSO Apple Inc. a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 , the related 2021 and September 26 , 2020 , the related consolidated statement in the period ended September 25 , 2021 , and the period ended September 25 , 2021 , and the related note and our report dated October 28 , 2021 expressed an unqualified report dated October 28 , 2021 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California October 28 , 2021 Apple Inc. | , California October 28 , 2021 Apple Inc. | 2021 Form , 2021 Apple Inc. | 2021 Form 10-K | 54 Item Apple Inc. | 2021 Form 10-K | 54 Item 9 . | 2021 Form 10-K | 54 Item 9 . Changes in Form 10-K | 54 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 25 , 2021 to provide reasonable a of September 25 , 2021 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 25 , 2021 to provide reasonable a of September 25 , 2021 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control over during the fourth quarter of 2021 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , reporting . Apple Inc. | 2021 Form 10-K | 55 Item Apple Inc. | 2021 Form 10-K | 55 Item 9B . | 2021 Form 10-K | 55 Item 9B . Other Information Form 10-K | 55 Item 9B . Other Information Disclosure Pursuant Information Disclosure Pursuant to Section 13 ( r ) of the the Exchange Act Under Section 13 ( r ) of the Executive Orders . On March 2 , 2021 , the U.S. . On March 2 , 2021 , the U.S. Secretary of blocked party under Executive Order 13382 . On the same day updated General License No . 1B to authorize transaction and activity s Quarterly Report on Form 10-Q for the three-month period ended the three-month period ended June 26 , 2021 , during such period ended June 26 , 2021 , during such period , by General License No . 1B . The Company did not law and regulation . Item 9C . Disclosure Regarding Foreign Jurisdictions applicable . PART III Item 10 . Directors , Executive Officers in the Company ’ s 2022 Proxy Statement to be filed filed with the SEC within 120 day after September 25 , within 120 day after September 25 , 2021 in connection with day after September 25 , 2021 in connection with the solicitation for the Company ’ s 2022 annual meeting of shareholder , herein by reference . Item 11 . Executive Compensation The information in the Company ’ s 2022 Proxy Statement to be filed filed with the SEC within 120 day after September 25 , within 120 day after September 25 , 2021 , and is day after September 25 , 2021 , and is incorporated herein herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2022 Proxy Statement to be filed filed with the SEC within 120 day after September 25 , within 120 day after September 25 , 2021 , and is day after September 25 , 2021 , and is incorporated herein herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2022 Proxy Statement to be filed filed with the SEC within 120 day after September 25 , within 120 day after September 25 , 2021 , and is day after September 25 , 2021 , and is incorporated herein herein by reference . Item 14 . Principal Accountant Fees and in the Company ’ s 2022 Proxy Statement to be filed filed with the SEC within 120 day after September 25 , within 120 day after September 25 , 2021 , and is day after September 25 , 2021 , and is incorporated herein reference . Apple Inc. | 2021 Form 10-K | 56 PART Apple Inc. | 2021 Form 10-K | 56 PART IV Item | 2021 Form 10-K | 56 PART IV Item 15 . | 56 PART IV Item 15 . Exhibit and Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 29 Consolidated Statements 2020 and September 28 , 2019 29 Consolidated Statements of Comprehensive and September 28 , 2019 29 Consolidated Statements of Comprehensive Income for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 30 Consolidated Balance 2020 and September 28 , 2019 30 Consolidated Balance Sheets a and September 28 , 2019 30 Consolidated Balance Sheets a of Balance Sheets a of September 25 , 2021 and September 26 a of September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 31 Consolidated Statements 2021 and September 26 , 2020 31 Consolidated Statements of Shareholders and September 26 , 2020 31 Consolidated Statements of Shareholders ’ for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 32 Consolidated Statements 2020 and September 28 , 2019 32 Consolidated Statements of Cash and September 28 , 2019 32 Consolidated Statements of Cash Flows for the year ended September 25 , 2021 , September 26 year ended September 25 , 2021 , September 26 , 2020 25 , 2021 , September 26 , 2020 and September 28 2021 , September 26 , 2020 and September 28 , 2019 26 , 2020 and September 28 , 2019 33 Notes to 2020 and September 28 , 2019 33 Notes to Consolidated Financial and September 28 , 2019 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Reports of Independent Registered Public Independent Registered Public Accounting Firm 52 ( 2 ) Financial Statement Public Accounting Firm 52 ( 2 ) Financial Statement Schedules All note included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of the Registrant filed on August 3 , 2020 . 8-K 3.1 filed on August 3 , 2020 . 8-K 3.1 8/7/20 3.2 August 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws of Registrant effective a of December 13 , 2016 . 8-K 3.2 a of December 13 , 2016 . 8-K 3.2 12/15/16 4.1 December 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * 13 , 2016 . 8-K 3.2 12/15/16 4.1 * * Description , 2016 . 8-K 3.2 12/15/16 4.1 * * Description of 2016 . 8-K 3.2 12/15/16 4.1 * * Description of Securities Securities of the Registrant . 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 Apple % Notes due 2042 . 8-K 4.1 7/31/15 Apple Inc. | Notes due 2042 . 8-K 4.1 7/31/15 Apple Inc. | 2021 due 2042 . 8-K 4.1 7/31/15 Apple Inc. | 2021 Form 4.1 7/31/15 Apple Inc. | 2021 Form 10-K | 57 Incorporated Apple Inc. | 2021 Form 10-K | 57 Incorporated by Reference | 2021 Form 10-K | 57 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.9 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.10 % Notes due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.10 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 to 2/23/16 4.11 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.12 March 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a of , dated a of November 5 , 2018 , between the a of November 5 , 2018 , between the Registrant and , a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate of , dated a of September 11 , 2019 , including form a of September 11 , 2019 , including form of global of global note representing the 1.700 % Notes due 2022 , the 1.700 % Notes due 2022 , 1.800 % Notes due % Notes due 2022 , 1.800 % Notes due 2024 , , 1.800 % Notes due 2024 , 2.050 % Notes due % Notes due 2024 , 2.050 % Notes due 2026 , , 2.050 % Notes due 2026 , 2.200 % Notes due % Notes due 2026 , 2.200 % Notes due 2029 and , 2.200 % Notes due 2029 and 2.950 % Notes due % Notes due 2029 and 2.950 % Notes due 2049 . and 2.950 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate of , dated a of November 15 , 2019 , including form a of November 15 , 2019 , including form of global of global note representing the 0.000 % Notes due 2025 and the 0.000 % Notes due 2025 and 0.500 % Notes due % Notes due 2025 and 0.500 % Notes due 2031 . and 0.500 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate of , dated a of May 11 , 2020 , including form a of May 11 , 2020 , including form of global of global note representing the 0.750 % Notes due 2023 , the 0.750 % Notes due 2023 , 1.125 % Notes due % Notes due 2023 , 1.125 % Notes due 2025 , , 1.125 % Notes due 2025 , 1.650 % Notes due % Notes due 2025 , 1.650 % Notes due 2030 and , 1.650 % Notes due 2030 and 2.650 % Notes due % Notes due 2030 and 2.650 % Notes due 2050 . and 2.650 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate of , dated a of August 20 , 2020 , including form a of August 20 , 2020 , including form of global of global note representing the 0.550 % Notes due 2025 , the 0.550 % Notes due 2025 , 1.25 % Notes due % Notes due 2025 , 1.25 % Notes due 2030 , , 1.25 % Notes due 2030 , 2.400 % Notes due % Notes due 2030 , 2.400 % Notes due 2050 and , 2.400 % Notes due 2050 and 2.550 % Notes due % Notes due 2050 and 2.550 % Notes due 2060 . and 2.550 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate of , dated a of February 8 , 2021 , including form a of February 8 , 2021 , including form of global of global note representing the 0.700 % Notes due 2026 , the 0.700 % Notes due 2026 , 1.200 % Notes due % Notes due 2026 , 1.200 % Notes due 2028 , , 1.200 % Notes due 2028 , 1.650 % Notes due % Notes due 2028 , 1.650 % Notes due 2031 , , 1.650 % Notes due 2031 , 2.375 % Notes due % Notes due 2031 , 2.375 % Notes due 2041 , , 2.375 % Notes due 2041 , 2.650 % Notes due % Notes due 2041 , 2.650 % Notes due 2051 and , 2.650 % Notes due 2051 and 2.800 % Notes due % Notes due 2051 and 2.800 % Notes due 2061 . and 2.800 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate of , dated a of August 5 , 2021 , including form a of August 5 , 2021 , including form of global of global note representing the 1.400 % Notes due 2028 , the 1.400 % Notes due 2028 , 1.700 % Notes due % Notes due 2028 , 1.700 % Notes due 2031 , , 1.700 % Notes due 2031 , 2.700 % Notes due % Notes due 2031 , 2.700 % Notes due 2051 and , 2.700 % Notes due 2051 and 2.850 % Notes due % Notes due 2051 and 2.850 % Notes due 2061 . and 2.850 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 * Apple Notes due 2061 . 8-K 4.1 8/5/21 4.27 * Apple Inc due 2061 . 8-K 4.1 8/5/21 4.27 * Apple Inc . 2061 . 8-K 4.1 8/5/21 4.27 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 Apple Inc. | 2021 Compensation Plan . S-8 4.1 8/23/18 Apple Inc. | 2021 Form 4.1 8/23/18 Apple Inc. | 2021 Form 10-K | 58 Incorporated Apple Inc. | 2021 Form 10-K | 58 Incorporated by Reference | 2021 Form 10-K | 58 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director and restated a of February 13 , 2018 . 8-K 10.1 a of February 13 , 2018 . 8-K 10.1 2/14/18 10.4 February 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2014 13 , 2018 . 8-K 10.1 2/14/18 10.4 * 2014 Employee , 2018 . 8-K 10.1 2/14/18 10.4 * 2014 Employee Stock 2018 . 8-K 10.1 2/14/18 10.4 * 2014 Employee Stock Plan 8-K 10.1 2/14/18 10.4 * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 10.5 October 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form of , 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10-K 10.18 a of October 14 , 2016 . 10-K 10.18 9/24/16 10.6 October 14 , 2016 . 10-K 10.18 9/24/16 10.6 * Form 14 , 2016 . 10-K 10.18 9/24/16 10.6 * Form of , 2016 . 10-K 10.18 9/24/16 10.6 * Form of Restricted 2016 . 10-K 10.18 9/24/16 10.6 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.7 September 26 , 2017 . 10-K 10.20 9/30/17 10.7 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.7 * Form of , 2017 . 10-K 10.20 9/30/17 10.7 * Form of Performance 2017 . 10-K 10.20 9/30/17 10.7 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.21 a of September 26 , 2017 . 10-K 10.21 9/30/17 10.8 September 26 , 2017 . 10-K 10.21 9/30/17 10.8 * Form 26 , 2017 . 10-K 10.21 9/30/17 10.8 * Form of , 2017 . 10-K 10.21 9/30/17 10.8 * Form of Restricted 2017 . 10-K 10.21 9/30/17 10.8 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.9 February 13 , 2018 . 10-Q 10.2 3/31/18 10.9 * Form 13 , 2018 . 10-Q 10.2 3/31/18 10.9 * Form of , 2018 . 10-Q 10.2 3/31/18 10.9 * Form of Restricted 2018 . 10-Q 10.2 3/31/18 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.17 a of August 21 , 2018 . 10-K 10.17 9/29/18 10.10 August 21 , 2018 . 10-K 10.17 9/29/18 10.10 * Form 21 , 2018 . 10-K 10.17 9/29/18 10.10 * Form of , 2018 . 10-K 10.17 9/29/18 10.10 * Form of Performance 2018 . 10-K 10.17 9/29/18 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.18 a of August 21 , 2018 . 10-K 10.18 9/29/18 10.11 August 21 , 2018 . 10-K 10.18 9/29/18 10.11 * Form 21 , 2018 . 10-K 10.18 9/29/18 10.11 * Form of , 2018 . 10-K 10.18 9/29/18 10.11 * Form of Restricted 2018 . 10-K 10.18 9/29/18 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.15 a of September 29 , 2019 . 10-K 10.15 9/28/19 10.12 September 29 , 2019 . 10-K 10.15 9/28/19 10.12 * Form 29 , 2019 . 10-K 10.15 9/28/19 10.12 * Form of , 2019 . 10-K 10.15 9/28/19 10.12 * Form of Performance 2019 . 10-K 10.15 9/28/19 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.16 a of September 29 , 2019 . 10-K 10.16 9/28/19 10.13 September 29 , 2019 . 10-K 10.16 9/28/19 10.13 * Form 29 , 2019 . 10-K 10.16 9/28/19 10.13 * Form of , 2019 . 10-K 10.16 9/28/19 10.13 * Form of Restricted 2019 . 10-K 10.16 9/28/19 10.13 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.16 a of August 18 , 2020 . 10-K 10.16 9/26/20 10.14 August 18 , 2020 . 10-K 10.16 9/26/20 10.14 * Form 18 , 2020 . 10-K 10.16 9/26/20 10.14 * Form of , 2020 . 10-K 10.16 9/26/20 10.14 * Form of Performance 2020 . 10-K 10.16 9/26/20 10.14 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.17 a of August 18 , 2020 . 10-K 10.17 9/26/20 10.15 August 18 , 2020 . 10-K 10.17 9/26/20 10.15 * Form 18 , 2020 . 10-K 10.17 9/26/20 10.15 * Form of , 2020 . 10-K 10.17 9/26/20 10.15 * Form of CEO 2020 . 10-K 10.17 9/26/20 10.15 * Form of CEO Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.1 a of September 27 , 2020 . 10-Q 10.1 1/28/21 10.16 September 27 , 2020 . 10-Q 10.1 1/28/21 10.16 * Form 27 , 2020 . 10-Q 10.1 1/28/21 10.16 * Form of , 2020 . 10-Q 10.1 1/28/21 10.16 * Form of CEO 2020 . 10-Q 10.1 1/28/21 10.16 * Form of CEO Performance CEO Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.2 a of September 27 , 2020 . 10-Q 10.2 1/28/21 21.1 September 27 , 2020 . 10-Q 10.2 1/28/21 21.1 * * 27 , 2020 . 10-Q 10.2 1/28/21 21.1 * * Subsidiaries , 2020 . 10-Q 10.2 1/28/21 21.1 * * Subsidiaries of 2020 . 10-Q 10.2 1/28/21 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101 * * Inline XBRL Document in Part II , Item 8 , “ Financial Statements and this Annual Report on Form 10-K. 104 * * Inline XBRL Annual Report on Form 10-K. 104 * * Inline XBRL for this Annual Report on Form 10-K , included in the Exhibit , included in the Exhibit 101 Inline XBRL Document Set . * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2021 Form 10-K | 59 SIGNATURES Apple Inc. | 2021 Form 10-K | 59 SIGNATURES Pursuant to | 2021 Form 10-K | 59 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 28 , 2021 Apple Inc. By Date : October 28 , 2021 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 28 , 2021 TIMOTHY D. COOK Officer ) October 28 , 2021 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) October 28 , 2021 LUCA MAESTRI /s/ Officer ) October 28 , 2021 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) October 28 , 2021 CHRIS KONDO /s/ Officer ) October 28 , 2021 CHRIS KONDO /s/ James A A . Bell Director October 28 , 2021 JAMES A . Bell Director October 28 , 2021 JAMES A . BELL /s/ /s/ Al Gore Director October 28 , 2021 AL GORE /s/ Gore Director October 28 , 2021 AL GORE /s/ Andrea Jung /s/ Andrea Jung Director October 28 , 2021 ANDREA JUNG /s/ Jung Director October 28 , 2021 ANDREA JUNG /s/ Arthur D. Chair of the Board October 28 , 2021 ARTHUR D. LEVINSON the Board October 28 , 2021 ARTHUR D. LEVINSON /s/ Monica /s/ Monica Lozano Director October 28 , 2021 MONICA LOZANO /s/ Lozano Director October 28 , 2021 MONICA LOZANO /s/ Ronald D. Ronald D. Sugar Director October 28 , 2021 RONALD D. SUGAR Sugar Director October 28 , 2021 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director October 28 , 2021 SUSAN L. WAGNER Wagner Director October 28 , 2021 SUSAN L. WAGNER Apple Inc. L. 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0000320193 2021-09-25 0000320193 aapl : OtherCountriesMember 2022-09-24 0000320193 aapl : OtherCountriesMember 2021-09-25 0000320193 aapl : OtherCountriesMember 2022-09-24 0000320193 aapl : OtherCountriesMember 2021-09-25 UNITED 2022-09-24 0000320193 aapl : OtherCountriesMember 2021-09-25 UNITED STATES SECURITIES AND EXCHANGE EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 24 , 2022 or ☐ TRANSITION year ended September 24 , 2022 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Park Way Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the registered Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.000 % Notes due 2022 — LLC 1.000 % Notes due 2022 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2024 — LLC 1.375 % Notes due 2024 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 — LLC 0.000 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 — LLC 0.875 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 — LLC 1.625 % Notes due 2026 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % Notes due 2027 — LLC 2.000 % Notes due 2027 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2029 — LLC 1.375 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.050 % Notes due 2029 — LLC 3.050 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.500 % Notes due 2031 — LLC 0.500 % Notes due 2031 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.600 % Notes due 2042 — LLC 3.600 % Notes due 2042 — The Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 25 , 2022 , the last a of March 25 , 2022 , the last business day quarter , wa approximately $ 2,830,067,000,000 . Solely for purpose of for any other purpose . 15,908,118,000 share of common stock were and outstanding a of October 14 , 2022 . DOCUMENTS INCORPORATED a of October 14 , 2022 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2023 annual meeting of shareholder are this Annual Report on Form 10-K where indicated . The Registrant Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 24 , 2022 TABLE OF CONTENTS Year Ended September 24 , 2022 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 5 Item Item 1A . Risk Factors 5 Item 1B . Unresolved Staff . Risk Factors 5 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 17 Unresolved Staff Comments 17 Item 2 . Properties 17 Item 3 17 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Mine Safety . Legal Proceedings 17 Item 4 . Mine Safety Disclosures 17 4 . Mine Safety Disclosures 17 Part II Item 5 . Disclosures 17 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management ’ [ Reserved ] 19 Item 7 . Management ’ s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 28 Item 9 . Changes in and Supplementary Data 28 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 53 Item 9A . Controls and and Financial Disclosure 53 Item 9A . Controls and Procedures 53 9A . Controls and Procedures 53 Item 9B . Other Information Controls and Procedures 53 Item 9B . Other Information 54 Item Item 9B . Other Information 54 Item 9C . Disclosure Regarding . Other Information 54 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 54 Part III Item 10 . Inspections 54 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 54 Item 11 . Executive Compensation and Corporate Governance 54 Item 11 . Executive Compensation 54 Item Item 11 . Executive Compensation 54 Item 12 . Security Ownership . Executive Compensation 54 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 54 Item 13 . Certain Relationships Related Stockholder Matters 54 Item 13 . Certain Relationships and Related Transactions , and Director Independence 54 Item 14 . Principal Accountant and Director Independence 54 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 54 Part IV Item 15 . Services 54 Part IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 55 Item 16 . Form 10-K Financial Statement Schedules 55 Item 16 . Form 10-K Summary 57 55 Item 16 . Form 10-K Summary 57 This Annual Report 16 . Form 10-K Summary 57 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading “ Business and Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management , statement in this Form 10-K regarding the potential future impact in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk stated . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the The iPhone line includes iPhone 14 Pro , iPhone 14 , iPhone 14 Pro , iPhone 14 , iPhone 13 , iPhone , iPhone 14 , iPhone 13 , iPhone SE ® , iPhone SE ® , iPhone 12 and iPhone 11 . Mac , iPhone 12 and iPhone 11 . Mac Mac ® is system , including Apple TV 4K and Apple TV HD ; Ultra™ , Apple Watch Series 8 and Apple Watch SE ® accessory . Apple Inc. | 2022 Form 10-K | 1 Services Apple Inc. | 2022 Form 10-K | 1 Services Advertising The | 2022 Form 10-K | 1 Services Advertising The Company ’ retailer and resellers . During 2022 , the Company ’ s indirect distribution channel accounted for 38 % and 62 % , accounted for 38 % and 62 % , respectively , of reputation . Apple Inc. | 2022 Form 10-K | 2 The Apple Inc. | 2022 Form 10-K | 2 The Company is | 2022 Form 10-K | 2 The Company is focused on all . Apple Inc. | 2022 Form 10-K | 3 Business Apple Inc. | 2022 Form 10-K | 3 Business Seasonality and | 2022 Form 10-K | 3 Business Seasonality and Product Introductions member . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had approximately , the Company had approximately 164,000 full-time equivalent employee . Workplace s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2022 Form 10-K | 4 Item Apple Inc. | 2022 Form 10-K | 4 Item 1A . | 2022 Form 10-K | 4 Item 1A . Risk Factors Form 10-K | 4 Item 1A . Risk Factors The Company with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . Macroeconomic and Industry Risks area . Apple Inc. | 2022 Form 10-K | 5 The Apple Inc. | 2022 Form 10-K | 5 The Company continues | 2022 Form 10-K | 5 The Company continues to monitor this Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . The Company ’ s Company . Apple Inc. | 2022 Form 10-K | 6 The Apple Inc. | 2022 Form 10-K | 6 The Company ’ | 2022 Form 10-K | 6 The Company ’ s operation effectively . Apple Inc. | 2022 Form 10-K | 7 Business Apple Inc. | 2022 Form 10-K | 7 Business Risks To | 2022 Form 10-K | 7 Business Risks To remain competitive condition . Apple Inc. | 2022 Form 10-K | 8 The Apple Inc. | 2022 Form 10-K | 8 The Company ’ | 2022 Form 10-K | 8 The Company ’ s new typically for period up to 150 day . Because the Company condition . Apple Inc. | 2022 Form 10-K | 9 The Apple Inc. | 2022 Form 10-K | 9 The Company ’ | 2022 Form 10-K | 9 The Company ’ s future manner . Apple Inc. | 2022 Form 10-K | 10 The Apple Inc. | 2022 Form 10-K | 10 The Company ’ | 2022 Form 10-K | 10 The Company ’ s success condition . Apple Inc. | 2022 Form 10-K | 11 The Apple Inc. | 2022 Form 10-K | 11 The Company experience | 2022 Form 10-K | 11 The Company experience malicious attack cost . Apple Inc. | 2022 Form 10-K | 12 Legal Apple Inc. | 2022 Form 10-K | 12 Legal and Regulatory | 2022 Form 10-K | 12 Legal and Regulatory Compliance Risks in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies change . Apple Inc. | 2022 Form 10-K | 13 Compliance Apple Inc. | 2022 Form 10-K | 13 Compliance with these | 2022 Form 10-K | 13 Compliance with these law and proceeding . Apple Inc. | 2022 Form 10-K | 14 There Apple Inc. | 2022 Form 10-K | 14 There can be | 2022 Form 10-K | 14 There can be no assurance partner . Apple Inc. | 2022 Form 10-K | 15 The Apple Inc. | 2022 Form 10-K | 15 The Company ’ | 2022 Form 10-K | 15 The Company ’ s financial component . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company ’ s interpretation . Apple Inc. | 2022 Form 10-K | 16 The Apple Inc. | 2022 Form 10-K | 16 The Company is | 2022 Form 10-K | 16 The Company is also subject and employee retention . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company owned or of it business . Item 3 . Legal Proceedings Epic Games of contract . On September 10 , 2021 , the Northern . On September 10 , 2021 , the Northern California District during the fourth quarter of 2022 that did not individually or materially adversely affected . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2022 Form 10-K | 17 PART Apple Inc. | 2022 Form 10-K | 17 PART II Item | 2022 Form 10-K | 17 PART II Item 5 . | 17 PART II Item 5 . Market for Registrant ’ . Holders As of October 14 , 2022 , there were As of October 14 , 2022 , there were 23,838 shareholder , 2022 , there were 23,838 shareholder of record . Purchases the three month ended September 24 , 2022 wa a follows month ended September 24 , 2022 wa a follows ( in the Plans or Programs ( 1 ) June 26 , 2022 Programs ( 1 ) June 26 , 2022 to July 30 1 ) June 26 , 2022 to July 30 , 2022 26 , 2022 to July 30 , 2022 : Open market 2022 to July 30 , 2022 : Open market and privately market and privately negotiated purchase 41,690 $ 145.91 41,690 July 31 privately negotiated purchase 41,690 $ 145.91 41,690 July 31 , 2022 negotiated purchase 41,690 $ 145.91 41,690 July 31 , 2022 to 41,690 $ 145.91 41,690 July 31 , 2022 to August 27 145.91 41,690 July 31 , 2022 to August 27 , 2022 31 , 2022 to August 27 , 2022 : Open market 2022 to August 27 , 2022 : Open market and privately market and privately negotiated purchase 54,669 $ 168.29 54,669 August 28 privately negotiated purchase 54,669 $ 168.29 54,669 August 28 , 2022 negotiated purchase 54,669 $ 168.29 54,669 August 28 , 2022 to 54,669 $ 168.29 54,669 August 28 , 2022 to September 24 168.29 54,669 August 28 , 2022 to September 24 , 2022 28 , 2022 to September 24 , 2022 : Open market 2022 to September 24 , 2022 : Open market and privately market and privately negotiated purchase 63,813 $ 155.59 63,813 Total 160,172 privately negotiated purchase 63,813 $ 155.59 63,813 Total 160,172 $ 60,665 negotiated purchase 63,813 $ 155.59 63,813 Total 160,172 $ 60,665 ( 63,813 $ 155.59 63,813 Total 160,172 $ 60,665 ( 1 ) 155.59 63,813 Total 160,172 $ 60,665 ( 1 ) As of Total 160,172 $ 60,665 ( 1 ) As of September 24 1 ) As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company wa authorized to purchase up to $ 405 billion of the Company ’ most recently announced on April 28 , 2022 ( the “ announced on April 28 , 2022 ( the “ Program ” ) , of which $ 344.3 billion had been utilized . under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2022 Form 10-K | 18 Company Apple Inc. | 2022 Form 10-K | 18 Company Stock Performance | 2022 Form 10-K | 18 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 24 , 2022 . The graph year ended September 24 , 2022 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 29 , 2017 . Past stock close on September 29 , 2017 . Past stock price performance price performance . * $ 100 invested on September 29 , $ 100 invested on September 29 , 2017 in stock or invested on September 29 , 2017 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2022 Standard & Poor ’ s right reserved . Copyright © 2022 S & P Dow Jones All right reserved . September 2017 September 2018 September 2019 September reserved . September 2017 September 2018 September 2019 September 2020 September September 2017 September 2018 September 2019 September 2020 September 2021 September September 2018 September 2019 September 2020 September 2021 September 2022 Apple September 2019 September 2020 September 2021 September 2022 Apple Inc. $ September 2020 September 2021 September 2022 Apple Inc. $ 100 $ September 2022 Apple Inc. $ 100 $ 149 $ 146 $ Apple Inc. $ 100 $ 149 $ 146 $ 303 $ $ 100 $ 149 $ 146 $ 303 $ 400 $ $ 149 $ 146 $ 303 $ 400 $ 411 S $ 146 $ 303 $ 400 $ 411 S & P $ 303 $ 400 $ 411 S & P 500 Index $ 411 S & P 500 Index $ 100 $ 118 & P 500 Index $ 100 $ 118 $ 123 $ 500 Index $ 100 $ 118 $ 123 $ 142 $ $ 100 $ 118 $ 123 $ 142 $ 184 $ $ 118 $ 123 $ 142 $ 184 $ 156 S $ 123 $ 142 $ 184 $ 156 S & P $ 142 $ 184 $ 156 S & P Information Technology P Information Technology Index $ 100 $ 131 $ 143 $ Technology Index $ 100 $ 131 $ 143 $ 210 $ $ 100 $ 131 $ 143 $ 210 $ 271 $ $ 131 $ 143 $ 210 $ 271 $ 217 Dow $ 143 $ 210 $ 271 $ 217 Dow Jones U.S. $ 210 $ 271 $ 217 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 131 $ 139 $ Supersector Index $ 100 $ 131 $ 139 $ 208 $ $ 100 $ 131 $ 139 $ 208 $ 283 $ $ 131 $ 139 $ 208 $ 283 $ 209 Item $ 139 $ 208 $ 283 $ 209 Item 6 . $ 208 $ 283 $ 209 Item 6 . [ Reserved $ 283 $ 209 Item 6 . [ Reserved ] Apple Reserved ] Apple Inc. | 2022 Form 10-K | 19 Item Apple Inc. | 2022 Form 10-K | 19 Item 7 . | 2022 Form 10-K | 19 Item 7 . Management ’ Form 10-K | 19 Item 7 . Management ’ s Discussion in Part II , Item 8 of this Form 10-K . Item 8 of this Form 10-K . This section of this This section of this Form 10-K generally discus 2022 and 2021 this Form 10-K generally discus 2022 and 2021 item and year-to-year 10-K generally discus 2022 and 2021 item and year-to-year comparison between item and year-to-year comparison between 2022 and 2021 . Discussions of year-to-year comparison between 2022 and 2021 . Discussions of 2020 item and 2021 . Discussions of 2020 item and year-to-year comparison between item and year-to-year comparison between 2021 and 2020 are not included year-to-year comparison between 2021 and 2020 are not included in this not included in this Form 10-K , and can be found in Part II , Item 7 of the Company ’ s s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 25 , 2021 . Fiscal Year year ended September 25 , 2021 . Fiscal Year Highlights Fiscal . Fiscal Year Highlights Fiscal 2022 Highlights Total net sale increased Highlights Total net sale increased 8 % or $ 28.5 billion increased 8 % or $ 28.5 billion during 2022 compared to or $ 28.5 billion during 2022 compared to 2021 , driven billion during 2022 compared to 2021 , driven primarily by higher and Services net sale during 2022 . The Company announces new . Significant announcement during fiscal 2022 included the following : First the following : First Quarter 2022 : • Updated MacBook Pro : • Updated MacBook Pro 14 ” and MacBook Pro 16 14 ” and MacBook Pro 16 ” , powered by the of AirPods . Second Quarter 2022 : • Updated iPhone SE • Updated iPhone SE with 5G technology ; • All-new Mac • Updated iPad Air with 5G technology , powered by the M1 chip . Third Quarter 2022 : • Updated MacBook Air MacBook Air and MacBook Pro 13 ” , both powered by M2 chip ; • iOS 16 , macOS Ventura , iPadOS , macOS Ventura , iPadOS 16 and watchOS 9 , update , iPadOS 16 and watchOS 9 , update to the Company later service . Fourth Quarter 2022 : • iPhone 14 , Quarter 2022 : • iPhone 14 , iPhone 14 Plus , • iPhone 14 , iPhone 14 Plus , iPhone 14 Pro iPhone 14 Plus , iPhone 14 Pro and iPhone 14 Pro iPhone 14 Pro and iPhone 14 Pro Max ; • Second and • Apple Watch Series 8 , updated Apple Watch SE Watch Ultra . In April 2022 , the Company announced an it Program authorization from $ 315 billion to $ 405 billion $ 315 billion to $ 405 billion and raised it quarterly it quarterly dividend from $ 0.22 to $ 0.23 per share from $ 0.22 to $ 0.23 per share beginning in May per share beginning in May 2022 . During 2022 , the in May 2022 . During 2022 , the Company repurchased $ , the Company repurchased $ 90.2 billion of it common stock and dividend equivalent of $ 14.8 billion . COVID-19 The COVID-19 future . Apple Inc. | 2022 Form 10-K | 20 Products Apple Inc. | 2022 Form 10-K | 20 Products and Services | 2022 Form 10-K | 20 Products and Services Performance The net sale by category for 2022 , 2021 and 2020 ( by category for 2022 , 2021 and 2020 ( dollar in for 2022 , 2021 and 2020 ( dollar in million ) dollar in million ) : 2022 Change 2021 Change 2020 Net million ) : 2022 Change 2021 Change 2020 Net sale by : 2022 Change 2021 Change 2020 Net sale by category : by category : iPhone ( 1 ) $ 205,489 7 % iPhone ( 1 ) $ 205,489 7 % $ 191,973 39 ( 1 ) $ 205,489 7 % $ 191,973 39 % $ 205,489 7 % $ 191,973 39 % $ 137,781 Mac 205,489 7 % $ 191,973 39 % $ 137,781 Mac ( $ 191,973 39 % $ 137,781 Mac ( 1 ) 40,177 % $ 137,781 Mac ( 1 ) 40,177 14 % 35,190 137,781 Mac ( 1 ) 40,177 14 % 35,190 23 % Mac ( 1 ) 40,177 14 % 35,190 23 % 28,622 1 ) 40,177 14 % 35,190 23 % 28,622 iPad ( ) 40,177 14 % 35,190 23 % 28,622 iPad ( 1 14 % 35,190 23 % 28,622 iPad ( 1 ) 29,292 23 % 28,622 iPad ( 1 ) 29,292 ( 8 ) 28,622 iPad ( 1 ) 29,292 ( 8 ) % 31,862 ( 1 ) 29,292 ( 8 ) % 31,862 34 % 29,292 ( 8 ) % 31,862 34 % 23,724 Wearables , ( 8 ) % 31,862 34 % 23,724 Wearables , Home ) % 31,862 34 % 23,724 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 41,241 Accessories ( 1 ) ( 2 ) 41,241 7 % 38,367 1 ) ( 2 ) 41,241 7 % 38,367 25 % ) ( 2 ) 41,241 7 % 38,367 25 % 30,620 2 ) 41,241 7 % 38,367 25 % 30,620 Services ( ) 41,241 7 % 38,367 25 % 30,620 Services ( 3 7 % 38,367 25 % 30,620 Services ( 3 ) 78,129 25 % 30,620 Services ( 3 ) 78,129 14 % 68,425 30,620 Services ( 3 ) 78,129 14 % 68,425 27 % Services ( 3 ) 78,129 14 % 68,425 27 % 53,768 3 ) 78,129 14 % 68,425 27 % 53,768 Total net ) 78,129 14 % 68,425 27 % 53,768 Total net sale 14 % 68,425 27 % 53,768 Total net sale $ 394,328 53,768 Total net sale $ 394,328 8 % $ 365,817 33 Total net sale $ 394,328 8 % $ 365,817 33 % $ 394,328 8 % $ 365,817 33 % $ 274,515 ( 394,328 8 % $ 365,817 33 % $ 274,515 ( 1 $ 365,817 33 % $ 274,515 ( 1 ) Products net 33 % $ 274,515 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and mini and accessory . ( 3 ) Services net sale include iPhone net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net of the fourth quarter of 2021 . Mac Mac net sale Mac net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net iPad net sale decreased during 2022 compared to 2021 due primarily decreased during 2022 compared to 2021 due primarily to lower net Accessories net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net Services net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net Store . Apple Inc. | 2022 Form 10-K | 21 Segment Apple Inc. | 2022 Form 10-K | 21 Segment Operating Performance | 2022 Form 10-K | 21 Segment Operating Performance The Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and sale by reportable segment for 2022 , 2021 and 2020 ( reportable segment for 2022 , 2021 and 2020 ( dollar in for 2022 , 2021 and 2020 ( dollar in million ) dollar in million ) : 2022 Change 2021 Change 2020 Net million ) : 2022 Change 2021 Change 2020 Net sale by : 2022 Change 2021 Change 2020 Net sale by reportable segment reportable segment : Americas $ 169,658 11 % $ 153,306 23 segment : Americas $ 169,658 11 % $ 153,306 23 % $ 169,658 11 % $ 153,306 23 % $ 124,556 Europe 169,658 11 % $ 153,306 23 % $ 124,556 Europe 95,118 $ 153,306 23 % $ 124,556 Europe 95,118 7 % 89,307 23 % $ 124,556 Europe 95,118 7 % 89,307 30 % % $ 124,556 Europe 95,118 7 % 89,307 30 % 68,640 124,556 Europe 95,118 7 % 89,307 30 % 68,640 Greater China Europe 95,118 7 % 89,307 30 % 68,640 Greater China 74,200 7 % 89,307 30 % 68,640 Greater China 74,200 9 % 30 % 68,640 Greater China 74,200 9 % 68,366 70 % % 68,640 Greater China 74,200 9 % 68,366 70 % 40,308 Greater China 74,200 9 % 68,366 70 % 40,308 Japan 25,977 China 74,200 9 % 68,366 70 % 40,308 Japan 25,977 ( 9 % 68,366 70 % 40,308 Japan 25,977 ( 9 ) 68,366 70 % 40,308 Japan 25,977 ( 9 ) % 28,482 % 40,308 Japan 25,977 ( 9 ) % 28,482 33 % 25,977 ( 9 ) % 28,482 33 % 21,418 Rest of ( 9 ) % 28,482 33 % 21,418 Rest of Asia ) % 28,482 33 % 21,418 Rest of Asia Pacific 29,375 21,418 Rest of Asia Pacific 29,375 11 % 26,356 35 % Rest of Asia Pacific 29,375 11 % 26,356 35 % 19,593 Asia Pacific 29,375 11 % 26,356 35 % 19,593 Total net Pacific 29,375 11 % 26,356 35 % 19,593 Total net sale 11 % 26,356 35 % 19,593 Total net sale $ 394,328 19,593 Total net sale $ 394,328 8 % $ 365,817 33 Total net sale $ 394,328 8 % $ 365,817 33 % $ 394,328 8 % $ 365,817 33 % $ 274,515 Americas 394,328 8 % $ 365,817 33 % $ 274,515 Americas Americas $ 365,817 33 % $ 274,515 Americas Americas net sale increased Americas net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net Europe net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net on Europe net sale during 2022 . Greater China Greater China China net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net Greater China net sale during 2022 . Japan Japan net sale Japan net sale decreased during 2022 compared to 2021 due to decreased during 2022 compared to 2021 due to the weakness of Pacific net sale increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher net Asia Pacific net sale during 2022 . Apple Inc. | 2022 2022 . Apple Inc. | 2022 Form 10-K | 22 Gross Apple Inc. | 2022 Form 10-K | 22 Gross Margin Products | 2022 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2022 , 2021 and 2020 were margin percentage for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 2021 2020 Gross margin : in million ) : 2022 2021 2020 Gross margin : Products million ) : 2022 2021 2020 Gross margin : Products $ Gross margin : Products $ 114,728 $ 105,126 $ 69,461 Services : Products $ 114,728 $ 105,126 $ 69,461 Services 56,054 47,710 $ 114,728 $ 105,126 $ 69,461 Services 56,054 47,710 35,495 Total $ 105,126 $ 69,461 Services 56,054 47,710 35,495 Total gross margin 105,126 $ 69,461 Services 56,054 47,710 35,495 Total gross margin $ $ 69,461 Services 56,054 47,710 35,495 Total gross margin $ 170,782 35,495 Total gross margin $ 170,782 $ 152,836 $ 104,956 Gross gross margin $ 170,782 $ 152,836 $ 104,956 Gross margin percentage $ 170,782 $ 152,836 $ 104,956 Gross margin percentage : Products Gross margin percentage : Products 36.3 % 35.3 % 31.5 % percentage : Products 36.3 % 35.3 % 31.5 % Services 71.7 Products 36.3 % 35.3 % 31.5 % Services 71.7 % 69.7 35.3 % 31.5 % Services 71.7 % 69.7 % 66.0 % 31.5 % Services 71.7 % 69.7 % 66.0 % Total gross Services 71.7 % 69.7 % 66.0 % Total gross margin percentage % Total gross margin percentage 43.3 % 41.8 % 38.2 % gross margin percentage 43.3 % 41.8 % 38.2 % Products Gross percentage 43.3 % 41.8 % 38.2 % Products Gross Margin Products Products gross margin increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to a different gross margin percentage increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to a different Services gross margin increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to higher Services gross margin percentage increased during 2022 compared to 2021 due primarily increased during 2022 compared to 2021 due primarily to improved leverage in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2022 , 2021 and 2020 were Operating expense for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 Change 2021 Change 2020 Research million ) : 2022 Change 2021 Change 2020 Research and development : 2022 Change 2021 Change 2020 Research and development $ 26,251 2020 Research and development $ 26,251 20 % $ 21,914 17 Research and development $ 26,251 20 % $ 21,914 17 % $ 26,251 20 % $ 21,914 17 % $ 18,752 Percentage 26,251 20 % $ 21,914 17 % $ 18,752 Percentage of $ 21,914 17 % $ 18,752 Percentage of total net sale Percentage of total net sale 7 % 6 % 7 % total net sale 7 % 6 % 7 % Selling , sale 7 % 6 % 7 % Selling , general and , general and administrative $ 25,094 14 % $ 21,973 10 general and administrative $ 25,094 14 % $ 21,973 10 % $ 25,094 14 % $ 21,973 10 % $ 19,916 Percentage 25,094 14 % $ 21,973 10 % $ 19,916 Percentage of $ 21,973 10 % $ 19,916 Percentage of total net sale Percentage of total net sale 6 % 6 % 7 % total net sale 6 % 6 % 7 % Total operating sale 6 % 6 % 7 % Total operating expense $ % Total operating expense $ 51,345 17 % $ 43,887 13 Total operating expense $ 51,345 17 % $ 43,887 13 % $ 51,345 17 % $ 43,887 13 % $ 38,668 Percentage 51,345 17 % $ 43,887 13 % $ 38,668 Percentage of $ 43,887 13 % $ 38,668 Percentage of total net sale Percentage of total net sale 13 % 12 % 14 % total net sale 13 % 12 % 14 % Research and sale 13 % 12 % 14 % Research and Development The R & D expense in 2022 wa driven primarily by increase general and administrative expense in 2022 wa driven primarily by increase service . Apple Inc. | 2022 Form 10-K | 23 Other Apple Inc. | 2022 Form 10-K | 23 Other Income/ ( | 2022 Form 10-K | 23 Other Income/ ( Expense ) & E ” ) for 2022 , 2021 and 2020 wa ” ) for 2022 , 2021 and 2020 wa a follows for 2022 , 2021 and 2020 wa a follows ( dollar dollar in million ) : 2022 Change 2021 Change 2020 Interest million ) : 2022 Change 2021 Change 2020 Interest and dividend : 2022 Change 2021 Change 2020 Interest and dividend income $ Interest and dividend income $ 2,825 $ 2,843 $ 3,763 Interest dividend income $ 2,825 $ 2,843 $ 3,763 Interest expense ( $ 2,825 $ 2,843 $ 3,763 Interest expense ( 2,931 ) $ 3,763 Interest expense ( 2,931 ) ( 2,645 ) ( expense ( 2,931 ) ( 2,645 ) ( 2,873 ) Other ) ( 2,645 ) ( 2,873 ) Other income/ ( expense expense ) , net ( 228 ) 60 ( 87 ) , net ( 228 ) 60 ( 87 ) Total other ( 228 ) 60 ( 87 ) Total other income/ ( ) , net $ ( 334 ) ( 229 ) % $ ( 334 ) ( 229 ) % $ 258 ( ( 229 ) % $ 258 ( 68 ) % $ ) % $ 258 ( 68 ) % $ 803 The ( 68 ) % $ 803 The decrease in OI & in OI & E during 2022 compared to 2021 wa due E during 2022 compared to 2021 wa due primarily to higher federal income tax rate for 2022 , 2021 and 2020 were tax rate for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( dollar dollar in million ) : 2022 2021 2020 Provision for income in million ) : 2022 2021 2020 Provision for income tax million ) : 2022 2021 2020 Provision for income tax $ Provision for income tax $ 19,300 $ 14,527 $ 9,680 Effective income tax $ 19,300 $ 14,527 $ 9,680 Effective tax rate $ 19,300 $ 14,527 $ 9,680 Effective tax rate 16.2 % $ 9,680 Effective tax rate 16.2 % 13.3 % 14.4 % Effective tax rate 16.2 % 13.3 % 14.4 % Statutory federal rate 16.2 % 13.3 % 14.4 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company ’ s s effective tax rate for 2022 wa lower than the statutory s effective tax rate for 2021 wa lower than the statutory s effective tax rate for 2022 wa higher compared to 2021 2022 wa higher compared to 2021 due primarily to a higher Department of the Treasury in 2022 , and lower tax benefit security , which totaled $ 156.4 billion a of September 24 156.4 billion a of September 24 , 2022 , along with a of September 24 , 2022 , along with cash generated return program over the next 12 month and beyond . The . Debt As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had outstanding aggregate principal amount of $ 111.8 billion ( collectively the “ ” ) , with $ 11.1 billion payable within 12 month $ 11.1 billion payable within 12 month . Future interest payment with the Notes total $ 41.3 billion , with $ 2.9 41.3 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had $ , the Company had $ 10.0 billion of Commercial Paper outstanding of which wa payable within 12 month . Leases The Company space . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had fixed lease payment obligation of $ 15.3 billion , with $ 2.0 15.3 billion , with $ 2.0 billion payable within 12 month $ 2.0 billion payable within 12 month . Apple Inc. | month . Apple Inc. | 2022 Form 10-K | 24 Manufacturing Apple Inc. | 2022 Form 10-K | 24 Manufacturing Purchase Obligations | 2022 Form 10-K | 24 Manufacturing Purchase Obligations The Company typically cover period up to 150 day . As of September day . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had manufacturing manufacturing purchase obligation of $ 71.1 billion , with $ 68.4 71.1 billion , with $ 68.4 billion payable within 12 month $ 68.4 billion payable within 12 month . The Company ’ creation . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had other other purchase obligation of $ 17.8 billion , with $ 6.8 17.8 billion , with $ 6.8 billion payable within 12 month $ 6.8 billion payable within 12 month . Deemed Repatriation Tax Tax Payable As of September 24 , 2022 , the balance As of September 24 , 2022 , the balance of the Cuts and Jobs Act of 2017 ( the “ Act ” Act ” ) wa $ 22.0 billion , with $ 5.3 22.0 billion , with $ 5.3 billion expected to be paid expected to be paid within 12 month . In addition to share . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company ’ s quarterly cash dividend wa $ 0.23 per share . The Company the amount reported . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy result . Apple Inc. | 2022 Form 10-K | 25 Item Apple Inc. | 2022 Form 10-K | 25 Item 7A . | 2022 Form 10-K | 25 Item 7A . Quantitative and Form 10-K | 25 Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , a hypothetical 2022 and September 25 , 2021 , a hypothetical 100 basis , 2021 , a hypothetical 100 basis point increase in interest would result in a $ 4.0 billion and $ 4.1 billion $ 4.0 billion and $ 4.1 billion incremental decline in the maturity . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had outstanding note and a of September 25 , 2021 , the Company a of September 25 , 2021 , the Company had outstanding aggregate carrying amount of $ 110.1 billion and $ 118.7 billion $ 110.1 billion and $ 118.7 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 to increase by 2022 and September 25 , 2021 to increase by $ 201 2021 to increase by $ 201 million and $ 186 million $ 201 million and $ 186 million on an annualized basis , typically for up to 12 month . However , the exposure . Apple Inc. | 2022 Form 10-K | 26 To Apple Inc. | 2022 Form 10-K | 26 To provide an | 2022 Form 10-K | 26 To provide an assessment of , the Company estimate with 95 % confidence , a maximum in fair value of $ 1.0 billion a of September 24 1.0 billion a of September 24 , 2022 , compared to a of September 24 , 2022 , compared to a maximum in fair value of $ 550 million a of September 25 550 million a of September 25 , 2021 . Because the a of September 25 , 2021 . Because the Company us analysis performed a of September 24 , 2022 due to the a of September 24 , 2022 due to the inherent limitation position . Apple Inc. | 2022 Form 10-K | 27 Item Apple Inc. | 2022 Form 10-K | 27 Item 8 . | 2022 Form 10-K | 27 Item 8 . Financial Statements Form 10-K | 27 Item 8 . Financial Statements and Supplementary for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 29 Consolidated Statements 2021 and September 26 , 2020 29 Consolidated Statements of Comprehensive and September 26 , 2020 29 Consolidated Statements of Comprehensive Income for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 30 Consolidated Balance 2021 and September 26 , 2020 30 Consolidated Balance Sheets a and September 26 , 2020 30 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 31 Consolidated Statements 2022 and September 25 , 2021 31 Consolidated Statements of Shareholders and September 25 , 2021 31 Consolidated Statements of Shareholders ’ for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 32 Consolidated Statements 2021 and September 26 , 2020 32 Consolidated Statements of Cash and September 26 , 2020 32 Consolidated Statements of Cash Flows for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 33 Notes to 2021 and September 26 , 2020 33 Notes to Consolidated Financial and September 26 , 2020 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Reports of Independent Registered Public Independent Registered Public Accounting Firm 50 All financial statement schedule have note . Apple Inc. | 2022 Form 10-K | 28 Apple Apple Inc. | 2022 Form 10-K | 28 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 28 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 24 , 2022 September 25 , Years ended September 24 , 2022 September 25 , 2021 September September 24 , 2022 September 25 , 2021 September 26 , , 2022 September 25 , 2021 September 26 , 2020 Net September 25 , 2021 September 26 , 2020 Net sale : , 2021 September 26 , 2020 Net sale : Products $ Net sale : Products $ 316,199 $ 297,392 $ 220,747 Services : Products $ 316,199 $ 297,392 $ 220,747 Services 78,129 68,425 $ 316,199 $ 297,392 $ 220,747 Services 78,129 68,425 53,768 Total $ 297,392 $ 220,747 Services 78,129 68,425 53,768 Total net sale 297,392 $ 220,747 Services 78,129 68,425 53,768 Total net sale 394,328 $ 220,747 Services 78,129 68,425 53,768 Total net sale 394,328 365,817 68,425 53,768 Total net sale 394,328 365,817 274,515 Cost of sale 53,768 Total net sale 394,328 365,817 274,515 Cost of sale : Total net sale 394,328 365,817 274,515 Cost of sale : Products Cost of sale : Products 201,471 192,266 151,286 Services 22,075 20,715 of sale : Products 201,471 192,266 151,286 Services 22,075 20,715 18,273 sale : Products 201,471 192,266 151,286 Services 22,075 20,715 18,273 Total Products 201,471 192,266 151,286 Services 22,075 20,715 18,273 Total cost of 201,471 192,266 151,286 Services 22,075 20,715 18,273 Total cost of sale 192,266 151,286 Services 22,075 20,715 18,273 Total cost of sale 223,546 18,273 Total cost of sale 223,546 212,981 169,559 Gross margin 170,782 Total cost of sale 223,546 212,981 169,559 Gross margin 170,782 152,836 cost of sale 223,546 212,981 169,559 Gross margin 170,782 152,836 104,956 223,546 212,981 169,559 Gross margin 170,782 152,836 104,956 Operating expense : 212,981 169,559 Gross margin 170,782 152,836 104,956 Operating expense : Research 169,559 Gross margin 170,782 152,836 104,956 Operating expense : Research and expense : Research and development 26,251 21,914 18,752 Selling , general : Research and development 26,251 21,914 18,752 Selling , general and Research and development 26,251 21,914 18,752 Selling , general and administrative Selling , general and administrative 25,094 21,973 19,916 Total operating expense , general and administrative 25,094 21,973 19,916 Total operating expense 51,345 general and administrative 25,094 21,973 19,916 Total operating expense 51,345 43,887 21,973 19,916 Total operating expense 51,345 43,887 38,668 Operating income 119,437 19,916 Total operating expense 51,345 43,887 38,668 Operating income 119,437 108,949 Total operating expense 51,345 43,887 38,668 Operating income 119,437 108,949 66,288 51,345 43,887 38,668 Operating income 119,437 108,949 66,288 Other income/ ( 43,887 38,668 Operating income 119,437 108,949 66,288 Other income/ ( expense 38,668 Operating income 119,437 108,949 66,288 Other income/ ( expense ) expense ) , net ( 334 ) 258 803 Income before , net ( 334 ) 258 803 Income before provision for net ( 334 ) 258 803 Income before provision for income before provision for income tax 119,103 109,207 67,091 Provision for income provision for income tax 119,103 109,207 67,091 Provision for income tax for income tax 119,103 109,207 67,091 Provision for income tax 19,300 67,091 Provision for income tax 19,300 14,527 9,680 Net income $ Provision for income tax 19,300 14,527 9,680 Net income $ 99,803 for income tax 19,300 14,527 9,680 Net income $ 99,803 $ 14,527 9,680 Net income $ 99,803 $ 94,680 $ 57,411 Earnings Net income $ 99,803 $ 94,680 $ 57,411 Earnings per share $ 99,803 $ 94,680 $ 57,411 Earnings per share : Basic per share : Basic $ 6.15 $ 5.67 $ 3.31 Diluted : Basic $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 6.15 $ 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 5.67 $ 3.31 Diluted $ 6.11 $ 5.61 $ 3.28 Shares 3.31 Diluted $ 6.11 $ 5.61 $ 3.28 Shares used in $ 6.11 $ 5.61 $ 3.28 Shares used in computing earnings earnings per share : Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 per share : Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 17,528,214 share : Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 17,528,214 See Basic 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 17,528,214 See accompanying Notes 16,215,963 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 17,528,214 See accompanying Notes to 16,701,272 17,352,119 Diluted 16,325,819 16,864,919 17,528,214 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 29 Apple Apple Inc. | 2022 Form 10-K | 29 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 29 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 24 , 2022 September 25 , Years ended September 24 , 2022 September 25 , 2021 September September 24 , 2022 September 25 , 2021 September 26 , , 2022 September 25 , 2021 September 26 , 2020 Net September 25 , 2021 September 26 , 2020 Net income $ , 2021 September 26 , 2020 Net income $ 99,803 $ , 2020 Net income $ 99,803 $ 94,680 $ 57,411 Other Net income $ 99,803 $ 94,680 $ 57,411 Other comprehensive income/ $ 99,803 $ 94,680 $ 57,411 Other comprehensive income/ ( loss , net of tax ( 1,511 ) 501 88 Change in of tax ( 1,511 ) 501 88 Change in unrealized gains/losses tax ( 1,511 ) 501 88 Change in unrealized gains/losses on fair value of derivative instrument 3,212 32 79 Adjustment for net value of derivative instrument 3,212 32 79 Adjustment for net ( of derivative instrument 3,212 32 79 Adjustment for net ( gain included in net income ( 1,074 ) 1,003 ( 1,264 ) net income ( 1,074 ) 1,003 ( 1,264 ) Total change ( 1,074 ) 1,003 ( 1,264 ) Total change in unrealized unrealized gains/losses on derivative instrument 2,138 1,035 ( 1,185 ) Change gains/losses on derivative instrument 2,138 1,035 ( 1,185 ) Change in derivative instrument 2,138 1,035 ( 1,185 ) Change in unrealized gains/losses of marketable debt security ( 12,104 ) ( 694 ) 1,202 security ( 12,104 ) ( 694 ) 1,202 Adjustment for net 12,104 ) ( 694 ) 1,202 Adjustment for net ( gain and included in net income 205 ( 273 ) ( 63 in net income 205 ( 273 ) ( 63 ) Total 205 ( 273 ) ( 63 ) Total change in unrealized on marketable debt security ( 11,899 ) ( 967 ) 1,139 security ( 11,899 ) ( 967 ) 1,139 Total other comprehensive 11,899 ) ( 967 ) 1,139 Total other comprehensive income/ ( income/ ( loss ) ( 11,272 ) 569 42 Total comprehensive loss ) ( 11,272 ) 569 42 Total comprehensive income $ ) ( 11,272 ) 569 42 Total comprehensive income $ 88,531 42 Total comprehensive income $ 88,531 $ 95,249 $ 57,453 See comprehensive income $ 88,531 $ 95,249 $ 57,453 See accompanying Notes $ 88,531 $ 95,249 $ 57,453 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 30 Apple Apple Inc. | 2022 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 30 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 24 , 2022 September 25 , value ) September 24 , 2022 September 25 , 2021 ASSETS September 24 , 2022 September 25 , 2021 ASSETS : Current , 2022 September 25 , 2021 ASSETS : Current asset : Cash and cash equivalent $ 23,646 $ 34,940 Marketable security 24,658 cash equivalent $ 23,646 $ 34,940 Marketable security 24,658 27,699 Accounts 23,646 $ 34,940 Marketable security 24,658 27,699 Accounts receivable , net $ 34,940 Marketable security 24,658 27,699 Accounts receivable , net 28,184 27,699 Accounts receivable , net 28,184 26,278 Inventories 4,946 6,580 Vendor Accounts receivable , net 28,184 26,278 Inventories 4,946 6,580 Vendor non-trade , net 28,184 26,278 Inventories 4,946 6,580 Vendor non-trade receivables 32,748 net 28,184 26,278 Inventories 4,946 6,580 Vendor non-trade receivables 32,748 25,228 4,946 6,580 Vendor non-trade receivables 32,748 25,228 Other current asset 21,223 6,580 Vendor non-trade receivables 32,748 25,228 Other current asset 21,223 14,111 32,748 25,228 Other current asset 21,223 14,111 Total current asset 135,405 25,228 Other current asset 21,223 14,111 Total current asset 135,405 134,836 21,223 14,111 Total current asset 135,405 134,836 Non-current asset : Marketable 14,111 Total current asset 135,405 134,836 Non-current asset : Marketable security Non-current asset : Marketable security 120,805 127,877 Property , plant and asset : Marketable security 120,805 127,877 Property , plant and equipment plant and equipment , net 42,117 39,440 Other non-current asset 54,428 and equipment , net 42,117 39,440 Other non-current asset 54,428 48,849 42,117 39,440 Other non-current asset 54,428 48,849 Total non-current asset 217,350 39,440 Other non-current asset 54,428 48,849 Total non-current asset 217,350 216,166 54,428 48,849 Total non-current asset 217,350 216,166 Total asset $ 352,755 48,849 Total non-current asset 217,350 216,166 Total asset $ 352,755 $ 217,350 216,166 Total asset $ 352,755 $ 351,002 LIABILITIES AND SHAREHOLDERS Total asset $ 352,755 $ 351,002 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 64,115 $ 54,763 Other current liability Accounts payable $ 64,115 $ 54,763 Other current liability 60,845 47,493 $ 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 54,763 Other current liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial liability 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 60,845 47,493 Deferred revenue 7,912 7,612 Commercial paper 9,982 6,000 Term revenue 7,912 7,612 Commercial paper 9,982 6,000 Term debt 11,128 9,613 7,912 7,612 Commercial paper 9,982 6,000 Term debt 11,128 9,613 Total paper 9,982 6,000 Term debt 11,128 9,613 Total current liability 153,982 9,982 6,000 Term debt 11,128 9,613 Total current liability 153,982 125,481 11,128 9,613 Total current liability 153,982 125,481 Non-current liability : Term 9,613 Total current liability 153,982 125,481 Non-current liability : Term debt Non-current liability : Term debt 98,959 109,106 Other non-current liability 49,142 liability : Term debt 98,959 109,106 Other non-current liability 49,142 53,325 98,959 109,106 Other non-current liability 49,142 53,325 Total non-current liability 148,101 109,106 Other non-current liability 49,142 53,325 Total non-current liability 148,101 162,431 49,142 53,325 Total non-current liability 148,101 162,431 Total liability 302,083 287,912 53,325 Total non-current liability 148,101 162,431 Total liability 302,083 287,912 Commitments liability 148,101 162,431 Total liability 302,083 287,912 Commitments and contingency Shareholders 148,101 162,431 Total liability 302,083 287,912 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 50,400,000 share $ 0.00001 par value : 50,400,000 share authorized ; 15,943,425 and : 50,400,000 share authorized ; 15,943,425 and 16,426,786 share issued and share authorized ; 15,943,425 and 16,426,786 share issued and outstanding , issued and outstanding , respectively 64,849 57,365 Retained earnings/ ( Accumulated and outstanding , respectively 64,849 57,365 Retained earnings/ ( Accumulated deficit ( Accumulated deficit ) ( 3,068 ) 5,562 Accumulated other comprehensive deficit ) ( 3,068 ) 5,562 Accumulated other comprehensive income/ ( income/ ( loss ) ( 11,109 ) 163 Total shareholder ’ loss ) ( 11,109 ) 163 Total shareholder ’ equity 50,672 163 Total shareholder ’ equity 50,672 63,090 Total liability and shareholder Total shareholder ’ equity 50,672 63,090 Total liability and shareholder ’ and shareholder ’ equity $ 352,755 $ 351,002 See accompanying Notes ’ equity $ 352,755 $ 351,002 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 31 Apple Apple Inc. | 2022 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 24 , 2022 September 25 , Years ended September 24 , 2022 September 25 , 2021 September September 24 , 2022 September 25 , 2021 September 26 , , 2022 September 25 , 2021 September 26 , 2020 Total September 25 , 2021 September 26 , 2020 Total shareholder ’ , 2021 September 26 , 2020 Total shareholder ’ equity , equity , beginning balance $ 63,090 $ 65,339 $ 90,488 Common beginning balance $ 63,090 $ 65,339 $ 90,488 Common stock and $ 63,090 $ 65,339 $ 90,488 Common stock and additional paid-in paid-in capital : Beginning balance 57,365 50,779 45,174 Common stock issued capital : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 : Beginning balance 57,365 50,779 45,174 Common stock issued 1,175 1,105 50,779 45,174 Common stock issued 1,175 1,105 880 Common stock withheld 45,174 Common stock issued 1,175 1,105 880 Common stock withheld related Common stock issued 1,175 1,105 880 Common stock withheld related to settlement of equity award ( 2,971 ) ( 2,627 ) ( award ( 2,971 ) ( 2,627 ) ( 2,250 ) Share-based ) ( 2,627 ) ( 2,250 ) Share-based compensation 9,280 8,108 ( 2,250 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 2,250 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 57,365 ) Share-based compensation 9,280 8,108 6,975 Ending balance 64,849 57,365 50,779 9,280 8,108 6,975 Ending balance 64,849 57,365 50,779 Retained earnings/ ( 8,108 6,975 Ending balance 64,849 57,365 50,779 Retained earnings/ ( Accumulated 6,975 Ending balance 64,849 57,365 50,779 Retained earnings/ ( Accumulated deficit deficit ) : Beginning balance 5,562 14,966 45,898 Net income 99,803 ) : Beginning balance 5,562 14,966 45,898 Net income 99,803 94,680 : Beginning balance 5,562 14,966 45,898 Net income 99,803 94,680 57,411 5,562 14,966 45,898 Net income 99,803 94,680 57,411 Dividends and dividend 14,966 45,898 Net income 99,803 94,680 57,411 Dividends and dividend equivalent 45,898 Net income 99,803 94,680 57,411 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,793 ) ( 14,431 ) ( declared ( 14,793 ) ( 14,431 ) ( 14,087 ) Common ) ( 14,431 ) ( 14,087 ) Common stock withheld related settlement of equity award ( 3,454 ) ( 4,151 ) ( award ( 3,454 ) ( 4,151 ) ( 1,604 ) Common ) ( 4,151 ) ( 1,604 ) Common stock repurchased ( ) Common stock repurchased ( 90,186 ) ( 85,502 ) ( repurchased ( 90,186 ) ( 85,502 ) ( 72,516 ) Cumulative ) ( 85,502 ) ( 72,516 ) Cumulative effect of change accounting principle — — ( 136 ) Ending balance ( 3,068 136 ) Ending balance ( 3,068 ) 5,562 14,966 Accumulated other Ending balance ( 3,068 ) 5,562 14,966 Accumulated other comprehensive income/ balance ( 3,068 ) 5,562 14,966 Accumulated other comprehensive income/ ( loss ) : Beginning balance 163 ( 406 ) ( 584 : Beginning balance 163 ( 406 ) ( 584 ) Other 163 ( 406 ) ( 584 ) Other comprehensive income/ ( income/ ( loss ) ( 11,272 ) 569 42 Cumulative effect loss ) ( 11,272 ) 569 42 Cumulative effect of change ) ( 11,272 ) 569 42 Cumulative effect of change in in accounting principle — — 136 Ending balance ( 11,109 ) — 136 Ending balance ( 11,109 ) 163 ( 406 ) Ending balance ( 11,109 ) 163 ( 406 ) Total shareholder ( 11,109 ) 163 ( 406 ) Total shareholder ’ equity equity , ending balance $ 50,672 $ 63,090 $ 65,339 Dividends ending balance $ 50,672 $ 63,090 $ 65,339 Dividends and dividend $ 50,672 $ 63,090 $ 65,339 Dividends and dividend equivalent declared per share or RSU $ 0.90 $ 0.85 $ 0.795 See or RSU $ 0.90 $ 0.85 $ 0.795 See accompanying Notes $ 0.90 $ 0.85 $ 0.795 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 32 Apple Apple Inc. | 2022 Form 10-K | 32 Apple Inc. CONSOLIDATED | 2022 Form 10-K | 32 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 24 , 2022 September 25 , Years ended September 24 , 2022 September 25 , 2021 September September 24 , 2022 September 25 , 2021 September 26 , , 2022 September 25 , 2021 September 26 , 2020 Cash September 25 , 2021 September 26 , 2020 Cash , cash , 2021 September 26 , 2020 Cash , cash equivalent and cash , beginning balance $ 35,929 $ 39,789 $ 50,224 Operating beginning balance $ 35,929 $ 39,789 $ 50,224 Operating activity : $ 35,929 $ 39,789 $ 50,224 Operating activity : Net income Operating activity : Net income 99,803 94,680 57,411 Adjustments to reconcile activity : Net income 99,803 94,680 57,411 Adjustments to reconcile net : Net income 99,803 94,680 57,411 Adjustments to reconcile net income activity : Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense : Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense 9,038 Depreciation and amortization 11,104 11,284 11,056 Share-based compensation expense 9,038 7,906 11,284 11,056 Share-based compensation expense 9,038 7,906 6,829 Deferred income tax 11,056 Share-based compensation expense 9,038 7,906 6,829 Deferred income tax expense/ Share-based compensation expense 9,038 7,906 6,829 Deferred income tax expense/ ( tax expense/ ( benefit ) 895 ( 4,774 ) ( 215 ( benefit ) 895 ( 4,774 ) ( 215 ) Other 895 ( 4,774 ) ( 215 ) Other 111 ( 147 ) ( 215 ) Other 111 ( 147 ) ( 97 215 ) Other 111 ( 147 ) ( 97 ) Changes 111 ( 147 ) ( 97 ) Changes in operating asset Accounts receivable , net ( 1,823 ) ( 10,125 ) 6,917 net ( 1,823 ) ( 10,125 ) 6,917 Inventories 1,484 ( 1,823 ) ( 10,125 ) 6,917 Inventories 1,484 ( 2,642 ) ( 10,125 ) 6,917 Inventories 1,484 ( 2,642 ) ( 127 ) 6,917 Inventories 1,484 ( 2,642 ) ( 127 ) Vendor 1,484 ( 2,642 ) ( 127 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 7,520 ) ( 3,903 ) 1,553 receivables ( 7,520 ) ( 3,903 ) 1,553 Other current and 7,520 ) ( 3,903 ) 1,553 Other current and non-current asset current and non-current asset ( 6,499 ) ( 8,042 ) ( asset ( 6,499 ) ( 8,042 ) ( 9,588 ) Accounts ) ( 8,042 ) ( 9,588 ) Accounts payable 9,448 12,326 ( 9,588 ) Accounts payable 9,448 12,326 ( 4,062 ) Deferred 9,588 ) Accounts payable 9,448 12,326 ( 4,062 ) Deferred revenue Accounts payable 9,448 12,326 ( 4,062 ) Deferred revenue 478 1,676 ( 4,062 ) Deferred revenue 478 1,676 2,081 Other current and 4,062 ) Deferred revenue 478 1,676 2,081 Other current and non-current ) Deferred revenue 478 1,676 2,081 Other current and non-current liability Other current and non-current liability 5,632 5,799 8,916 Cash generated by current and non-current liability 5,632 5,799 8,916 Cash generated by operating and non-current liability 5,632 5,799 8,916 Cash generated by operating activity Cash generated by operating activity 122,151 104,038 80,674 Investing activity : generated by operating activity 122,151 104,038 80,674 Investing activity : Purchases by operating activity 122,151 104,038 80,674 Investing activity : Purchases of Purchases of marketable security ( 76,923 ) ( 109,558 ) ( security ( 76,923 ) ( 109,558 ) ( 114,938 ) Proceeds ) ( 109,558 ) ( 114,938 ) Proceeds from maturity of from maturity of marketable security 29,917 59,023 69,918 Proceeds from sale maturity of marketable security 29,917 59,023 69,918 Proceeds from sale of of marketable security 29,917 59,023 69,918 Proceeds from sale of marketable from sale of marketable security 37,446 47,460 50,473 Payments for acquisition sale of marketable security 37,446 47,460 50,473 Payments for acquisition of of marketable security 37,446 47,460 50,473 Payments for acquisition of property , plant and equipment ( 10,708 ) ( 11,085 ) ( equipment ( 10,708 ) ( 11,085 ) ( 7,309 ) Payments ) ( 11,085 ) ( 7,309 ) Payments made in connection business acquisition , net ( 306 ) ( 33 ) ( net ( 306 ) ( 33 ) ( 1,524 ) Other ) ( 33 ) ( 1,524 ) Other ( 1,780 ) ( 1,524 ) Other ( 1,780 ) ( 352 ) ( Other ( 1,780 ) ( 352 ) ( 909 ) Cash ) ( 352 ) ( 909 ) Cash used in investing used in investing activity ( 22,354 ) ( 14,545 ) ( activity ( 22,354 ) ( 14,545 ) ( 4,289 ) Financing ) ( 14,545 ) ( 4,289 ) Financing activity : Payments settlement of equity award ( 6,223 ) ( 6,556 ) ( award ( 6,223 ) ( 6,556 ) ( 3,634 ) Payments ) ( 6,556 ) ( 3,634 ) Payments for dividend and dividend and dividend equivalent ( 14,841 ) ( 14,467 ) ( equivalent ( 14,841 ) ( 14,467 ) ( 14,081 ) Repurchases ) ( 14,467 ) ( 14,081 ) Repurchases of common stock Repurchases of common stock ( 89,402 ) ( 85,971 ) ( stock ( 89,402 ) ( 85,971 ) ( 72,358 ) Proceeds ) ( 85,971 ) ( 72,358 ) Proceeds from issuance of of term debt , net 5,465 20,393 16,091 Repayments of term term debt , net 5,465 20,393 16,091 Repayments of term debt debt , net 5,465 20,393 16,091 Repayments of term debt ( Repayments of term debt ( 9,543 ) ( 8,750 ) ( debt ( 9,543 ) ( 8,750 ) ( 12,629 ) Proceeds ) ( 8,750 ) ( 12,629 ) Proceeds from/ ( Repayments ) commercial paper , net 3,955 1,022 ( 963 ) Other commercial paper , net 3,955 1,022 ( 963 ) Other ( , net 3,955 1,022 ( 963 ) Other ( 160 ) ( 963 ) Other ( 160 ) 976 754 Cash used ) Other ( 160 ) 976 754 Cash used in financing Other ( 160 ) 976 754 Cash used in financing activity used in financing activity ( 110,749 ) ( 93,353 ) ( activity ( 110,749 ) ( 93,353 ) ( 86,820 ) Decrease ) ( 93,353 ) ( 86,820 ) Decrease in cash , equivalent and restricted cash ( 10,952 ) ( 3,860 ) ( cash ( 10,952 ) ( 3,860 ) ( 10,435 ) Cash ) ( 3,860 ) ( 10,435 ) Cash , cash equivalent cash , ending balance $ 24,977 $ 35,929 $ 39,789 Supplemental ending balance $ 24,977 $ 35,929 $ 39,789 Supplemental cash flow $ 24,977 $ 35,929 $ 39,789 Supplemental cash flow disclosure : income tax , net $ 19,573 $ 25,385 $ 9,501 Cash , net $ 19,573 $ 25,385 $ 9,501 Cash paid for $ 19,573 $ 25,385 $ 9,501 Cash paid for interest $ Cash paid for interest $ 2,865 $ 2,687 $ 3,002 See for interest $ 2,865 $ 2,687 $ 3,002 See accompanying Notes $ 2,865 $ 2,687 $ 3,002 See accompanying Notes to Consolidated Statements . Apple Inc. | 2022 Form 10-K | 33 Apple Apple Inc. | 2022 Form 10-K | 33 Apple Inc. Notes | 2022 Form 10-K | 33 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the s fiscal year ending September 30 , 2023 . The Company year ending September 30 , 2023 . The Company ’ s Company ’ s fiscal year 2022 , 2021 and 2020 spanned s fiscal year 2022 , 2021 and 2020 spanned 52 week year 2022 , 2021 and 2020 spanned 52 week each . , 2021 and 2020 spanned 52 week each . Unless otherwise service . Apple Inc. | 2022 Form 10-K | 34 For Apple Inc. | 2022 Form 10-K | 34 For the sale | 2022 Form 10-K | 34 For the sale of third-party can be found in Note 9 , “ Benefit Plans . diluted earnings per share for 2022 , 2021 and 2020 ( per share for 2022 , 2021 and 2020 ( net income for 2022 , 2021 and 2020 ( net income in million share in thousand ) : 2022 2021 2020 Numerator : Net in thousand ) : 2022 2021 2020 Numerator : Net income thousand ) : 2022 2021 2020 Numerator : Net income $ Numerator : Net income $ 99,803 $ 94,680 $ 57,411 Denominator Net income $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average $ 99,803 $ 94,680 $ 57,411 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 16,215,963 16,701,272 17,352,119 Effect of dilutive Weighted-average basic share outstanding 16,215,963 16,701,272 17,352,119 Effect of dilutive security basic share outstanding 16,215,963 16,701,272 17,352,119 Effect of dilutive security 109,856 17,352,119 Effect of dilutive security 109,856 163,647 176,095 Weighted-average diluted share Effect of dilutive security 109,856 163,647 176,095 Weighted-average diluted share 16,325,819 of dilutive security 109,856 163,647 176,095 Weighted-average diluted share 16,325,819 16,864,919 163,647 176,095 Weighted-average diluted share 16,325,819 16,864,919 17,528,214 Basic earnings per 176,095 Weighted-average diluted share 16,325,819 16,864,919 17,528,214 Basic earnings per share Weighted-average diluted share 16,325,819 16,864,919 17,528,214 Basic earnings per share $ Basic earnings per share $ 6.15 $ 5.67 $ 3.31 Diluted per share $ 6.15 $ 5.67 $ 3.31 Diluted earnings per $ 6.15 $ 5.67 $ 3.31 Diluted earnings per share $ Diluted earnings per share $ 6.11 $ 5.61 $ 3.28 The per share $ 6.11 $ 5.61 $ 3.28 The Company applies $ 6.11 $ 5.61 $ 3.28 The Company applies the treasury method . Apple Inc. | 2022 Form 10-K | 35 Restricted Apple Inc. | 2022 Form 10-K | 35 Restricted Marketable Securities | 2022 Form 10-K | 35 Restricted Marketable Securities The Company building is the shorter of 40 year or the remaining life plant and equipment wa $ 8.7 billion , $ 9.5 billion $ 8.7 billion , $ 9.5 billion and $ 9.7 billion $ 9.5 billion and $ 9.7 billion during 2022 , 2021 and $ 9.7 billion during 2022 , 2021 and 2020 , 9.7 billion during 2022 , 2021 and 2020 , respectively . during 2022 , 2021 and 2020 , respectively . Derivative Instruments Cuts and Jobs Act of 2017 ( the “ Act ” determined . Apple Inc. | 2022 Form 10-K | 36 Segment Apple Inc. | 2022 Form 10-K | 36 Segment Reporting The | 2022 Form 10-K | 36 Segment Reporting The Company report described elsewhere in this Note 1 , “ Summary of Significant management reporting purpose . Note 2 – Revenue Net sale disaggregated significant product and service for 2022 , 2021 and 2020 were and service for 2022 , 2021 and 2020 were a follows for 2022 , 2021 and 2020 were a follows ( in ( in million ) : 2022 2021 2020 iPhone ( 1 in million ) : 2022 2021 2020 iPhone ( 1 ) million ) : 2022 2021 2020 iPhone ( 1 ) $ 2022 2021 2020 iPhone ( 1 ) $ 205,489 $ 191,973 iPhone ( 1 ) $ 205,489 $ 191,973 $ 137,781 Mac 1 ) $ 205,489 $ 191,973 $ 137,781 Mac ( 1 $ 205,489 $ 191,973 $ 137,781 Mac ( 1 ) 40,177 191,973 $ 137,781 Mac ( 1 ) 40,177 35,190 28,622 iPad 137,781 Mac ( 1 ) 40,177 35,190 28,622 iPad ( 1 Mac ( 1 ) 40,177 35,190 28,622 iPad ( 1 ) ( 1 ) 40,177 35,190 28,622 iPad ( 1 ) 29,292 40,177 35,190 28,622 iPad ( 1 ) 29,292 31,862 23,724 Wearables 28,622 iPad ( 1 ) 29,292 31,862 23,724 Wearables , Home iPad ( 1 ) 29,292 31,862 23,724 Wearables , Home and ( 1 ) 29,292 31,862 23,724 Wearables , Home and Accessories , Home and Accessories ( 1 ) ( 2 ) 41,241 Accessories ( 1 ) ( 2 ) 41,241 38,367 30,620 Services 1 ) ( 2 ) 41,241 38,367 30,620 Services ( 3 ) ( 2 ) 41,241 38,367 30,620 Services ( 3 ) ( 2 ) 41,241 38,367 30,620 Services ( 3 ) 78,129 41,241 38,367 30,620 Services ( 3 ) 78,129 68,425 53,768 Total 30,620 Services ( 3 ) 78,129 68,425 53,768 Total net sale Services ( 3 ) 78,129 68,425 53,768 Total net sale ( ( 3 ) 78,129 68,425 53,768 Total net sale ( 4 53,768 Total net sale ( 4 ) $ 394,328 $ 365,817 sale ( 4 ) $ 394,328 $ 365,817 $ 274,515 ( 4 ) $ 394,328 $ 365,817 $ 274,515 ( 1 ) $ 394,328 $ 365,817 $ 274,515 ( 1 ) Products net $ 365,817 $ 274,515 ( 1 ) Products net sale include the respective product . ( 2 ) Wearables , Home and mini and accessory . ( 3 ) Services net sale include of certain product . ( 4 ) Includes $ 7.5 billion ( 4 ) Includes $ 7.5 billion of revenue recognized in billion of revenue recognized in 2022 that wa included in deferred deferred revenue a of September 25 , 2021 , $ 6.7 a of September 25 , 2021 , $ 6.7 billion of 25 , 2021 , $ 6.7 billion of revenue recognized in billion of revenue recognized in 2021 that wa included in deferred deferred revenue a of September 26 , 2020 , and $ a of September 26 , 2020 , and $ 5.0 billion , 2020 , and $ 5.0 billion of revenue recognized in billion of revenue recognized in 2020 that wa included in deferred deferred revenue a of September 28 , 2019 . The Company a of September 28 , 2019 . The Company ’ s each reportable segment in Note 11 , “ Segment Information and and Geographic Data ” for 2022 , 2021 and 2020 , Data ” for 2022 , 2021 and 2020 , except in for 2022 , 2021 and 2020 , except in Greater China proportion of net sale in 2022 and 2021 . As of net sale in 2022 and 2021 . As of September 24 2021 . As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the Company 2022 and September 25 , 2021 , the Company had total total deferred revenue of $ 12.4 billion and $ 11.9 billion $ 12.4 billion and $ 11.9 billion , respectively . As respectively . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company expects 64 2022 , the Company expects 64 % of total deferred revenue le than a year , 27 % within one-to-two year , % within one-to-two year , 7 % within two-to-three year and % within two-to-three year and 2 % in greater than three year . Apple Inc. | 2022 Form 10-K | 37 Note Apple Inc. | 2022 Form 10-K | 37 Note 3 – | 2022 Form 10-K | 37 Note 3 – Financial Instruments Form 10-K | 37 Note 3 – Financial Instruments Cash , investment category a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 ( in million 2022 and September 25 , 2021 ( in million ) : ( in million ) : 2022 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 18,546 $ — $ — $ $ — $ — $ 18,546 $ 18,546 $ — $ $ — $ 18,546 $ 18,546 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 2,929 — — 2,929 2,929 — market fund 2,929 — — 2,929 2,929 — — Mutual fund fund 2,929 — — 2,929 2,929 — — Mutual fund 274 2,929 — — Mutual fund 274 — ( 47 ) 227 Mutual fund 274 — ( 47 ) 227 — 227 — 274 — ( 47 ) 227 — 227 — Subtotal 3,203 ( 47 ) 227 — 227 — Subtotal 3,203 — ( 227 — 227 — Subtotal 3,203 — ( 47 ) 3,156 — Subtotal 3,203 — ( 47 ) 3,156 2,929 227 — 3,203 — ( 47 ) 3,156 2,929 227 — Level 2 — ( 47 ) 3,156 2,929 227 — Level 2 ( ( 47 ) 3,156 2,929 227 — Level 2 ( 2 3,156 2,929 227 — Level 2 ( 2 ) : U.S. 227 — Level 2 ( 2 ) : U.S. Treasury security ) : U.S. Treasury security 25,134 — ( 1,725 ) 23,409 Treasury security 25,134 — ( 1,725 ) 23,409 338 5,091 17,980 25,134 — ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency — ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency security ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency security 5,823 1,725 ) 23,409 338 5,091 17,980 U.S. agency security 5,823 — 5,091 17,980 U.S. agency security 5,823 — ( 655 ) 5,168 agency security 5,823 — ( 655 ) 5,168 — 240 4,928 5,823 — ( 655 ) 5,168 — 240 4,928 Non-U.S. government ( 655 ) 5,168 — 240 4,928 Non-U.S. government security 16,948 655 ) 5,168 — 240 4,928 Non-U.S. government security 16,948 2 240 4,928 Non-U.S. government security 16,948 2 ( 1,201 ) 15,749 4,928 Non-U.S. government security 16,948 2 ( 1,201 ) 15,749 — government security 16,948 2 ( 1,201 ) 15,749 — 8,806 6,943 16,948 2 ( 1,201 ) 15,749 — 8,806 6,943 Certificates of ( 1,201 ) 15,749 — 8,806 6,943 Certificates of deposit and 1,201 ) 15,749 — 8,806 6,943 Certificates of deposit and time of deposit and time deposit 2,067 — — 2,067 1,805 262 time deposit 2,067 — — 2,067 1,805 262 — Commercial paper deposit 2,067 — — 2,067 1,805 262 — Commercial paper 718 2,067 — — 2,067 1,805 262 — Commercial paper 718 — 1,805 262 — Commercial paper 718 — — 718 28 690 Commercial paper 718 — — 718 28 690 — Corporate debt paper 718 — — 718 28 690 — Corporate debt security 718 — — 718 28 690 — Corporate debt security 87,148 690 — Corporate debt security 87,148 9 ( 7,707 ) 79,450 — Corporate debt security 87,148 9 ( 7,707 ) 79,450 — debt security 87,148 9 ( 7,707 ) 79,450 — 9,023 70,427 87,148 9 ( 7,707 ) 79,450 — 9,023 70,427 Municipal security ( 7,707 ) 79,450 — 9,023 70,427 Municipal security 921 — 7,707 ) 79,450 — 9,023 70,427 Municipal security 921 — ( — 9,023 70,427 Municipal security 921 — ( 35 ) 886 Municipal security 921 — ( 35 ) 886 — 266 620 921 — ( 35 ) 886 — 266 620 Mortgage- and ( 35 ) 886 — 266 620 Mortgage- and asset-backed security 35 ) 886 — 266 620 Mortgage- and asset-backed security 22,553 620 Mortgage- and asset-backed security 22,553 — ( 2,593 ) 19,960 asset-backed security 22,553 — ( 2,593 ) 19,960 — 53 19,907 22,553 — ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 11 ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 11 ( 13,916 19,960 — 53 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 — 53 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 2,171 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 2,171 24,431 120,805 161,312 11 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 11 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 3 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 3 ) 13,916 ) 147,407 2,171 24,431 120,805 Total ( 3 ) $ 2,171 24,431 120,805 Total ( 3 ) $ 183,061 $ 11 Total ( 3 ) $ 183,061 $ 11 $ ( 13,963 3 ) $ 183,061 $ 11 $ ( 13,963 ) $ 183,061 $ 11 $ ( 13,963 ) $ 169,109 $ 23,646 $ ( 13,963 ) $ 169,109 $ 23,646 $ 24,658 $ 13,963 ) $ 169,109 $ 23,646 $ 24,658 $ 120,805 2021 $ 169,109 $ 23,646 $ 24,658 $ 120,805 2021 Adjusted Cost $ 23,646 $ 24,658 $ 120,805 2021 Adjusted Cost Unrealized Gains 23,646 $ 24,658 $ 120,805 2021 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 17,305 $ — $ — $ $ — $ — $ 17,305 $ 17,305 $ — $ $ — $ 17,305 $ 17,305 $ — $ — Level $ — $ — Level 1 ( 1 ) : Money $ — Level 1 ( 1 ) : Money market fund ) : Money market fund 9,608 — — 9,608 9,608 — market fund 9,608 — — 9,608 9,608 — — Mutual fund fund 9,608 — — 9,608 9,608 — — Mutual fund 175 9,608 — — Mutual fund 175 11 ( 1 ) 185 — — Mutual fund 175 11 ( 1 ) 185 — Mutual fund 175 11 ( 1 ) 185 — 185 — 175 11 ( 1 ) 185 — 185 — Subtotal 9,783 ( 1 ) 185 — 185 — Subtotal 9,783 11 ( 185 — 185 — Subtotal 9,783 11 ( 1 ) 9,793 — 185 — Subtotal 9,783 11 ( 1 ) 9,793 9,608 — Subtotal 9,783 11 ( 1 ) 9,793 9,608 185 — 9,783 11 ( 1 ) 9,793 9,608 185 — Level 2 11 ( 1 ) 9,793 9,608 185 — Level 2 ( ( 1 ) 9,793 9,608 185 — Level 2 ( 2 9,793 9,608 185 — Level 2 ( 2 ) : Equity 185 — Level 2 ( 2 ) : Equity security 1,527 2 ) : Equity security 1,527 — ( 564 ) 963 Equity security 1,527 — ( 564 ) 963 — 963 — 1,527 — ( 564 ) 963 — 963 — U.S. Treasury ( 564 ) 963 — 963 — U.S. Treasury security 22,878 963 — U.S. Treasury security 22,878 102 ( 77 ) 22,903 — U.S. Treasury security 22,878 102 ( 77 ) 22,903 3,596 Treasury security 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency security ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency security 8,949 77 ) 22,903 3,596 6,625 12,682 U.S. agency security 8,949 2 6,625 12,682 U.S. agency security 8,949 2 ( 64 ) 8,887 12,682 U.S. agency security 8,949 2 ( 64 ) 8,887 1,775 agency security 8,949 2 ( 64 ) 8,887 1,775 1,930 5,182 8,949 2 ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government 2 ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security 20,201 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government security 20,201 211 1,930 5,182 Non-U.S. government security 20,201 211 ( 101 ) 20,311 5,182 Non-U.S. government security 20,201 211 ( 101 ) 20,311 390 government security 20,201 211 ( 101 ) 20,311 390 3,091 16,830 20,201 211 ( 101 ) 20,311 390 3,091 16,830 Certificates of 211 ( 101 ) 20,311 390 3,091 16,830 Certificates of deposit ( 101 ) 20,311 390 3,091 16,830 Certificates of deposit and 101 ) 20,311 390 3,091 16,830 Certificates of deposit and time of deposit and time deposit 1,300 — — 1,300 490 810 time deposit 1,300 — — 1,300 490 810 — Commercial paper deposit 1,300 — — 1,300 490 810 — Commercial paper 2,639 1,300 — — 1,300 490 810 — Commercial paper 2,639 — 490 810 — Commercial paper 2,639 — — 2,639 1,776 863 Commercial paper 2,639 — — 2,639 1,776 863 — Corporate debt paper 2,639 — — 2,639 1,776 863 — Corporate debt security 2,639 — — 2,639 1,776 863 — Corporate debt security 83,883 863 — Corporate debt security 83,883 1,242 ( 267 ) 84,858 — Corporate debt security 83,883 1,242 ( 267 ) 84,858 — debt security 83,883 1,242 ( 267 ) 84,858 — 12,327 72,531 83,883 1,242 ( 267 ) 84,858 — 12,327 72,531 Municipal security ( 267 ) 84,858 — 12,327 72,531 Municipal security 967 14 267 ) 84,858 — 12,327 72,531 Municipal security 967 14 — — 12,327 72,531 Municipal security 967 14 — 981 — 130 12,327 72,531 Municipal security 967 14 — 981 — 130 851 Municipal security 967 14 — 981 — 130 851 Mortgage- and 967 14 — 981 — 130 851 Mortgage- and asset-backed security 14 — 981 — 130 851 Mortgage- and asset-backed security 20,529 851 Mortgage- and asset-backed security 20,529 171 ( 124 ) 20,576 Mortgage- and asset-backed security 20,529 171 ( 124 ) 20,576 — asset-backed security 20,529 171 ( 124 ) 20,576 — 775 19,801 20,529 171 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 8,027 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 162,873 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ( 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ) 1,197 ) 163,418 8,027 27,514 127,877 Total ( 3 ) $ 8,027 27,514 127,877 Total ( 3 ) $ 189,961 $ 1,753 Total ( 3 ) $ 189,961 $ 1,753 $ ( 1,198 3 ) $ 189,961 $ 1,753 $ ( 1,198 ) $ 189,961 $ 1,753 $ ( 1,198 ) $ 190,516 $ 34,940 $ ( 1,198 ) $ 190,516 $ 34,940 $ 27,699 $ 1,198 ) $ 190,516 $ 34,940 $ 27,699 $ 127,877 ( $ 190,516 $ 34,940 $ 27,699 $ 127,877 ( 1 ) $ 34,940 $ 27,699 $ 127,877 ( 1 ) Level 1 $ 27,699 $ 127,877 ( 1 ) Level 1 fair value 127,877 ( 1 ) Level 1 fair value estimate are based asset or liability . ( 2 ) Level 2 fair value . ( 2 ) Level 2 fair value estimate are based asset or liability . ( 3 ) As of September 24 3 ) As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , total marketable 2022 and September 25 , 2021 , total marketable security included total marketable security included $ 12.7 billion and $ 17.9 billion $ 12.7 billion and $ 17.9 billion , respectively , that Decision ( refer to Note 5 , “ Income Taxes ” agreement . Apple Inc. | 2022 Form 10-K | 38 The Apple Inc. | 2022 Form 10-K | 38 The following table | 2022 Form 10-K | 38 The following table show the maturity , a of September 24 , 2022 ( in million a of September 24 , 2022 ( in million ) : million ) : Due after 1 year through 5 year $ Due after 1 year through 5 year $ 87,031 Due after year through 5 year $ 87,031 Due after 5 year through year $ 87,031 Due after 5 year through 10 year 16,429 Due after 5 year through 10 year 16,429 Due after 10 5 year through 10 year 16,429 Due after 10 year 17,345 10 year 16,429 Due after 10 year 17,345 Total fair value 16,429 Due after 10 year 17,345 Total fair value $ 120,805 17,345 Total fair value $ 120,805 Derivative Instruments and Hedging The , typically for up to 12 month . To protect the hedge . As of September 24 , 2022 , the maximum As of September 24 , 2022 , the maximum length of debt–related foreign currency transaction is 20 year . The Company may derivative instrument a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 were a follows 2022 and September 25 , 2021 were a follows ( in ( in million ) : 2022 2021 Derivative instrument designated a in million ) : 2022 2021 Derivative instrument designated a accounting : Foreign exchange contract $ 102,670 $ 76,475 Interest rate contract exchange contract $ 102,670 $ 76,475 Interest rate contract $ 20,125 76,475 Interest rate contract $ 20,125 $ 16,875 Derivative instrument not rate contract $ 20,125 $ 16,875 Derivative instrument not designated a : Foreign exchange contract $ 185,381 $ 126,918 Apple Inc. | exchange contract $ 185,381 $ 126,918 Apple Inc. | 2022 Form $ 126,918 Apple Inc. | 2022 Form 10-K | 39 The Apple Inc. | 2022 Form 10-K | 39 The gross fair | 2022 Form 10-K | 39 The gross fair value of and liability a of September 24 , 2022 were a follows a of September 24 , 2022 were a follows ( in ( in million ) : 2022 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 4,317 $ 2,819 $ 7,136 Derivative exchange contract $ 4,317 $ 2,819 $ 7,136 Derivative liability ( $ 4,317 $ 2,819 $ 7,136 Derivative liability ( 2 ) $ 7,136 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 2,205 $ 2,547 $ 4,752 Interest exchange contract $ 2,205 $ 2,547 $ 4,752 Interest rate contract $ 2,205 $ 2,547 $ 4,752 Interest rate contract $ 1,367 4,752 Interest rate contract $ 1,367 $ — $ 1,367 ( $ 1,367 $ — $ 1,367 ( 1 ) Derivative asset $ — $ 1,367 ( 1 ) Derivative asset are measured asset are measured using Level 2 fair value input and are Consolidated Balance Sheets . ( 2 ) Derivative liability are measured liability are measured using Level 2 fair value input and are other . As of September 24 , 2022 , the potential As of September 24 , 2022 , the potential effect of and derivative liability of $ 7.8 billion , resulting in a net derivative asset of $ 412 million . The carrying amount value hedge a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 were a follows 2022 and September 25 , 2021 were a follows ( in ( in million ) : 2022 2021 Hedged assets/ ( liability in million ) : 2022 2021 Hedged assets/ ( liability ) and non-current marketable security $ 13,378 $ 15,954 Current and non-current marketable security $ 13,378 $ 15,954 Current and non-current term debt non-current term debt $ ( 18,739 ) $ ( 17,857 ) ( 18,739 ) $ ( 17,857 ) Accounts Receivable Trade Receivables arrangement . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company ’ cellular network carrier accounted for 44 % and 42 % of accounted for 44 % and 42 % of total trade receivables trade receivables a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , respectively . 2022 and September 25 , 2021 , respectively . Vendor Non-Trade supplier . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 54 % and 13 % . accounted for 54 % and 13 % . As of September % . As of September 25 , 2021 , the Company As of September 25 , 2021 , the Company had three three vendor that individually represented 10 % or more of total receivables , which accounted for 52 % , 11 % and accounted for 52 % , 11 % and 11 % . % , 11 % and 11 % . Apple Inc. | % . Apple Inc. | 2022 Form 10-K | 40 Note Apple Inc. | 2022 Form 10-K | 40 Note 4 – | 2022 Form 10-K | 40 Note 4 – Consolidated Financial Form 10-K | 40 Note 4 – Consolidated Financial Statement Details statement detail a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 ( in million 2022 and September 25 , 2021 ( in million ) : Plant and Equipment , Net 2022 2021 Land and building $ and Equipment , Net 2022 2021 Land and building $ 22,126 2021 Land and building $ 22,126 $ 20,041 Machinery , equipment and building $ 22,126 $ 20,041 Machinery , equipment and internal-use , equipment and internal-use software 81,060 78,659 Leasehold improvement 11,271 11,023 equipment and internal-use software 81,060 78,659 Leasehold improvement 11,271 11,023 Gross software 81,060 78,659 Leasehold improvement 11,271 11,023 Gross property , plant 81,060 78,659 Leasehold improvement 11,271 11,023 Gross property , plant and property , plant and equipment 114,457 109,723 Accumulated depreciation and amortization , plant and equipment 114,457 109,723 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 72,340 ) ( 70,283 ) Total amortization ( 72,340 ) ( 70,283 ) Total property , plant and equipment , net $ 42,117 $ 39,440 Other Non-Current Liabilities , net $ 42,117 $ 39,440 Other Non-Current Liabilities 2022 2021 $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payable $ 39,440 Other Non-Current Liabilities 2022 2021 Long-term tax payable $ 16,657 2021 Long-term tax payable $ 16,657 $ 24,689 Other non-current liability tax payable $ 16,657 $ 24,689 Other non-current liability 32,485 28,636 $ 24,689 Other non-current liability 32,485 28,636 Total other non-current liability 24,689 Other non-current liability 32,485 28,636 Total other non-current liability $ Total other non-current liability $ 49,142 $ 53,325 Other Income/ ( non-current liability $ 49,142 $ 53,325 Other Income/ ( Expense ) of OI & E for 2022 , 2021 and 2020 ( & E for 2022 , 2021 and 2020 ( in million for 2022 , 2021 and 2020 ( in million ) : ( in million ) : 2022 2021 2020 Interest and dividend in million ) : 2022 2021 2020 Interest and dividend income million ) : 2022 2021 2020 Interest and dividend income $ Interest and dividend income $ 2,825 $ 2,843 $ 3,763 Interest dividend income $ 2,825 $ 2,843 $ 3,763 Interest expense ( $ 2,825 $ 2,843 $ 3,763 Interest expense ( 2,931 ) $ 3,763 Interest expense ( 2,931 ) ( 2,645 ) ( expense ( 2,931 ) ( 2,645 ) ( 2,873 ) Other ) ( 2,645 ) ( 2,873 ) Other income/ ( expense expense ) , net ( 228 ) 60 ( 87 ) , net ( 228 ) 60 ( 87 ) Total other ( 228 ) 60 ( 87 ) Total other income/ ( ) , net $ ( 334 ) $ 258 $ 803 $ ( 334 ) $ 258 $ 803 Note 5 – 334 ) $ 258 $ 803 Note 5 – Income Taxes $ 258 $ 803 Note 5 – Income Taxes Provision for provision for income tax for 2022 , 2021 and 2020 , income tax for 2022 , 2021 and 2020 , consisted of for 2022 , 2021 and 2020 , consisted of the following ( in million ) : 2022 2021 2020 Federal : Current in million ) : 2022 2021 2020 Federal : Current $ million ) : 2022 2021 2020 Federal : Current $ 7,890 2020 Federal : Current $ 7,890 $ 8,257 $ 6,306 Deferred : Current $ 7,890 $ 8,257 $ 6,306 Deferred ( 2,265 $ 7,890 $ 8,257 $ 6,306 Deferred ( 2,265 ) ( 8,257 $ 6,306 Deferred ( 2,265 ) ( 7,176 ) ( Deferred ( 2,265 ) ( 7,176 ) ( 3,619 ) Total ) ( 7,176 ) ( 3,619 ) Total 5,625 1,081 2,687 ) ( 3,619 ) Total 5,625 1,081 2,687 State : Current ( 3,619 ) Total 5,625 1,081 2,687 State : Current 1,519 3,619 ) Total 5,625 1,081 2,687 State : Current 1,519 1,620 1,081 2,687 State : Current 1,519 1,620 455 Deferred 84 ( 2,687 State : Current 1,519 1,620 455 Deferred 84 ( 338 State : Current 1,519 1,620 455 Deferred 84 ( 338 ) Current 1,519 1,620 455 Deferred 84 ( 338 ) 21 Total 1,620 455 Deferred 84 ( 338 ) 21 Total 1,603 1,282 Deferred 84 ( 338 ) 21 Total 1,603 1,282 476 Foreign ( 338 ) 21 Total 1,603 1,282 476 Foreign : Current 338 ) 21 Total 1,603 1,282 476 Foreign : Current 8,996 ) 21 Total 1,603 1,282 476 Foreign : Current 8,996 9,424 1,282 476 Foreign : Current 8,996 9,424 3,134 Deferred 3,076 2,740 476 Foreign : Current 8,996 9,424 3,134 Deferred 3,076 2,740 3,383 Foreign : Current 8,996 9,424 3,134 Deferred 3,076 2,740 3,383 Total Current 8,996 9,424 3,134 Deferred 3,076 2,740 3,383 Total 12,072 12,164 8,996 9,424 3,134 Deferred 3,076 2,740 3,383 Total 12,072 12,164 6,517 9,424 3,134 Deferred 3,076 2,740 3,383 Total 12,072 12,164 6,517 Provision Deferred 3,076 2,740 3,383 Total 12,072 12,164 6,517 Provision for income 3,076 2,740 3,383 Total 12,072 12,164 6,517 Provision for income tax 2,740 3,383 Total 12,072 12,164 6,517 Provision for income tax $ Provision for income tax $ 19,300 $ 14,527 $ 9,680 The income tax $ 19,300 $ 14,527 $ 9,680 The foreign provision $ 19,300 $ 14,527 $ 9,680 The foreign provision for income foreign pretax earnings of $ 71.3 billion , $ 68.7 billion $ 71.3 billion , $ 68.7 billion and $ 38.1 billion $ 68.7 billion and $ 38.1 billion in 2022 , 2021 and $ 38.1 billion in 2022 , 2021 and 2020 , 38.1 billion in 2022 , 2021 and 2020 , respectively . in 2022 , 2021 and 2020 , respectively . Apple Inc. respectively . Apple Inc. | 2022 Form 10-K | 41 A Apple Inc. | 2022 Form 10-K | 41 A reconciliation of | 2022 Form 10-K | 41 A reconciliation of the provision federal income tax rate ( 21 % in 2022 , 2021 rate ( 21 % in 2022 , 2021 and 2020 ) 21 % in 2022 , 2021 and 2020 ) to income in 2022 , 2021 and 2020 ) to income before provision provision for income tax for 2022 , 2021 and 2020 , income tax for 2022 , 2021 and 2020 , is a for 2022 , 2021 and 2020 , is a follows ( dollar in million ) : 2022 2021 2020 Computed expected tax in million ) : 2022 2021 2020 Computed expected tax $ million ) : 2022 2021 2020 Computed expected tax $ 25,012 2020 Computed expected tax $ 25,012 $ 22,933 $ 14,089 State expected tax $ 25,012 $ 22,933 $ 14,089 State tax , $ 25,012 $ 22,933 $ 14,089 State tax , net of , net of federal effect 1,518 1,151 423 Impacts of the net of federal effect 1,518 1,151 423 Impacts of the Act of federal effect 1,518 1,151 423 Impacts of the Act 542 423 Impacts of the Act 542 — ( 582 ) Earnings the Act 542 — ( 582 ) Earnings of foreign subsidiary Earnings of foreign subsidiary ( 4,366 ) ( 4,715 ) ( subsidiary ( 4,366 ) ( 4,715 ) ( 2,534 ) Foreign-derived ) ( 4,715 ) ( 2,534 ) Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 296 ) ( 1,372 ) ( deduction ( 296 ) ( 1,372 ) ( 169 ) Research ) ( 1,372 ) ( 169 ) Research and development credit development credit , net ( 1,153 ) ( 1,033 ) ( net ( 1,153 ) ( 1,033 ) ( 728 ) Excess ) ( 1,033 ) ( 728 ) Excess tax benefit from benefit from equity award ( 1,871 ) ( 2,137 ) ( award ( 1,871 ) ( 2,137 ) ( 930 ) Other ) ( 2,137 ) ( 930 ) Other ( 86 ) ( 930 ) Other ( 86 ) ( 300 ) 111 Other ( 86 ) ( 300 ) 111 Provision for income 86 ) ( 300 ) 111 Provision for income tax $ Provision for income tax $ 19,300 $ 14,527 $ 9,680 Effective income tax $ 19,300 $ 14,527 $ 9,680 Effective tax rate $ 19,300 $ 14,527 $ 9,680 Effective tax rate 16.2 % $ 9,680 Effective tax rate 16.2 % 13.3 % 14.4 % Effective tax rate 16.2 % 13.3 % 14.4 % Deferred Tax rate 16.2 % 13.3 % 14.4 % Deferred Tax Assets and and Liabilities As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the significant 2022 and September 25 , 2021 , the significant component of ( in million ) : 2022 2021 Deferred tax asset : in million ) : 2022 2021 Deferred tax asset : Amortization : Amortization and depreciation $ 1,496 $ 5,575 Accrued liability and and depreciation $ 1,496 $ 5,575 Accrued liability and other reserve Accrued liability and other reserve 6,515 5,895 Lease liability 2,400 2,406 liability and other reserve 6,515 5,895 Lease liability 2,400 2,406 Deferred reserve 6,515 5,895 Lease liability 2,400 2,406 Deferred revenue 5,742 5,399 6,515 5,895 Lease liability 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized liability 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized loss 2,913 53 2,400 2,406 Deferred revenue 5,742 5,399 Unrealized loss 2,913 53 Tax revenue 5,742 5,399 Unrealized loss 2,913 53 Tax credit carryforwards 6,962 5,742 5,399 Unrealized loss 2,913 53 Tax credit carryforwards 6,962 4,262 2,913 53 Tax credit carryforwards 6,962 4,262 Other 1,596 1,639 Total 53 Tax credit carryforwards 6,962 4,262 Other 1,596 1,639 Total deferred credit carryforwards 6,962 4,262 Other 1,596 1,639 Total deferred tax asset carryforwards 6,962 4,262 Other 1,596 1,639 Total deferred tax asset 27,624 1,639 Total deferred tax asset 27,624 25,229 Less : Valuation allowance Total deferred tax asset 27,624 25,229 Less : Valuation allowance ( Less : Valuation allowance ( 7,530 ) ( 4,903 ) Total allowance ( 7,530 ) ( 4,903 ) Total deferred tax asset deferred tax asset , net 20,094 20,326 Deferred tax liability : tax asset , net 20,094 20,326 Deferred tax liability : Minimum Minimum tax on foreign earnings 1,983 4,318 Right-of-use asset 2,163 2,167 tax on foreign earnings 1,983 4,318 Right-of-use asset 2,163 2,167 Unrealized earnings 1,983 4,318 Right-of-use asset 2,163 2,167 Unrealized gain 942 203 1,983 4,318 Right-of-use asset 2,163 2,167 Unrealized gain 942 203 Other asset 2,163 2,167 Unrealized gain 942 203 Other 469 565 Total 2,163 2,167 Unrealized gain 942 203 Other 469 565 Total deferred Unrealized gain 942 203 Other 469 565 Total deferred tax liability gain 942 203 Other 469 565 Total deferred tax liability 5,557 565 Total deferred tax liability 5,557 7,253 Net deferred tax asset Total deferred tax liability 5,557 7,253 Net deferred tax asset $ Net deferred tax asset $ 14,537 $ 13,073 As of September tax asset $ 14,537 $ 13,073 As of September 24 , $ 13,073 As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had $ , the Company had $ 4.4 billion in foreign tax credit carryforwards in Ireland and $ 2.5 billion in California R & difference . Apple Inc. | 2022 Form 10-K | 42 Uncertain Apple Inc. | 2022 Form 10-K | 42 Uncertain Tax Positions | 2022 Form 10-K | 42 Uncertain Tax Positions As of Tax Positions As of September 24 , 2022 , the total As of September 24 , 2022 , the total amount of unrecognized tax benefit wa $ 16.8 billion , of which $ billion , of which $ 8.0 billion , if recognized , rate . As of September 25 , 2021 , the total As of September 25 , 2021 , the total amount of unrecognized tax benefit wa $ 15.5 billion , of which $ billion , of which $ 6.6 billion , if recognized , interest and penalty , for 2022 , 2021 and 2020 , penalty , for 2022 , 2021 and 2020 , is a for 2022 , 2021 and 2020 , is a follows ( ( in million ) : 2022 2021 2020 Beginning balance $ in million ) : 2022 2021 2020 Beginning balance $ 15,477 million ) : 2022 2021 2020 Beginning balance $ 15,477 $ 2021 2020 Beginning balance $ 15,477 $ 16,475 $ 15,619 Increases Beginning balance $ 15,477 $ 16,475 $ 15,619 Increases related to $ 15,477 $ 16,475 $ 15,619 Increases related to tax position taken during a prior year 2,284 816 454 Decreases related to during a prior year 2,284 816 454 Decreases related to tax a prior year 2,284 816 454 Decreases related to tax position during a prior year ( 1,982 ) ( 1,402 ) ( year ( 1,982 ) ( 1,402 ) ( 791 ) Increases ) ( 1,402 ) ( 791 ) Increases related to tax taken during the current year 1,936 1,607 1,347 Decreases related to during the current year 1,936 1,607 1,347 Decreases related to settlement the current year 1,936 1,607 1,347 Decreases related to settlement with settlement with taxing authority ( 28 ) ( 1,838 ) ( authority ( 28 ) ( 1,838 ) ( 85 ) Decreases ) ( 1,838 ) ( 85 ) Decreases related to expiration the statute of limitation ( 929 ) ( 181 ) ( limitation ( 929 ) ( 181 ) ( 69 ) Ending ) ( 181 ) ( 69 ) Ending balance $ 16,758 69 ) Ending balance $ 16,758 $ 15,477 $ 16,475 The Ending balance $ 16,758 $ 15,477 $ 16,475 The Company is $ 16,758 $ 15,477 $ 16,475 The Company is subject to ictions . Tax year after 2017 for the U.S. federal jurisdiction federal jurisdiction , and after 2014 in certain major foreign jurisdiction could decrease in the next 12 month by a much a by a much a $ 4.8 billion . European Commission State State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of wa calculated to be € 13.1 billion , plus interest of , plus interest of € 1.2 billion . The Company and ” ) . On July 15 , 2020 , the General . On July 15 , 2020 , the General Court annulled Aid Decision . On September 25 , 2020 , the European . On September 25 , 2020 , the European Commission appealed country . As of September 24 , 2022 , the adjusted As of September 24 , 2022 , the adjusted recovery amount adjusted recovery amount wa € 12.7 billion , excluding interest . Marketable Securities section of Note 3 , “ Financial Instruments ” for more information . Note 6 – Leases The Company ha have original term not exceeding 10 year and generally contain multiyear s operating lease were $ 1.9 billion , $ 1.7 billion $ 1.9 billion , $ 1.7 billion and $ 1.5 billion $ 1.7 billion and $ 1.5 billion for 2022 , 2021 and $ 1.5 billion for 2022 , 2021 and 2020 , 1.5 billion for 2022 , 2021 and 2020 , respectively . for 2022 , 2021 and 2020 , respectively . Lease cost ’ s lease were $ 14.9 billion , $ 12.9 billion $ 14.9 billion , $ 12.9 billion and $ 9.3 billion $ 12.9 billion and $ 9.3 billion for 2022 , 2021 and $ 9.3 billion for 2022 , 2021 and 2020 , 9.3 billion for 2022 , 2021 and 2020 , respectively . for 2022 , 2021 and 2020 , respectively . The Company . The Company made $ 1.8 billion , $ 1.4 billion $ 1.8 billion , $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion of fixed cash payment related to operating lease in 2022 , 2021 and 2020 , operating lease in 2022 , 2021 and 2020 , respectively . in 2022 , 2021 and 2020 , respectively . Noncash activity for lease liability were $ 2.8 billion for 2022 , $ were $ 2.8 billion for 2022 , $ 3.3 billion for billion for 2022 , $ 3.3 billion for 2021 and $ , $ 3.3 billion for 2021 and $ 10.5 billion for billion for 2021 and $ 10.5 billion for 2020 , including and $ 10.5 billion for 2020 , including the impact of Accounting Standards Update No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) in the first quarter in the first quarter of 2020 . Apple Inc. | 2022 2020 . Apple Inc. | 2022 Form 10-K | 43 The Apple Inc. | 2022 Form 10-K | 43 The following table | 2022 Form 10-K | 43 The following table show ROU item , a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 ( in million 2022 and September 25 , 2021 ( in million ) : Liabilities Financial Statement Line Items 2022 2021 Right-of-use asset : Operating Financial Statement Line Items 2022 2021 Right-of-use asset : Operating lease lease Other non-current asset $ 10,417 $ 10,087 Finance lease Property non-current asset $ 10,417 $ 10,087 Finance lease Property , plant plant and equipment , net 952 861 Total right-of-use asset $ and equipment , net 952 861 Total right-of-use asset $ 11,369 861 Total right-of-use asset $ 11,369 $ 10,948 Lease liability : right-of-use asset $ 11,369 $ 10,948 Lease liability : Operating lease lease Other current liability $ 1,534 $ 1,449 Other non-current liability current liability $ 1,534 $ 1,449 Other non-current liability 9,936 9,506 $ 1,449 Other non-current liability 9,936 9,506 Finance lease Other current 1,449 Other non-current liability 9,936 9,506 Finance lease Other current liability Finance lease Other current liability 129 79 Other non-current liability 812 lease Other current liability 129 79 Other non-current liability 812 769 129 79 Other non-current liability 812 769 Total lease liability $ 79 Other non-current liability 812 769 Total lease liability $ 12,411 769 Total lease liability $ 12,411 $ 11,803 Lease liability maturity lease liability $ 12,411 $ 11,803 Lease liability maturity a of liability maturity a of September 24 , 2022 , are a a of September 24 , 2022 , are a follows ( Operating Leases Finance Leases Total 2023 $ 1,758 $ 155 $ Finance Leases Total 2023 $ 1,758 $ 155 $ 1,913 2024 Total 2023 $ 1,758 $ 155 $ 1,913 2024 1,742 130 $ 1,758 $ 155 $ 1,913 2024 1,742 130 1,872 2025 1,758 $ 155 $ 1,913 2024 1,742 130 1,872 2025 1,677 $ 155 $ 1,913 2024 1,742 130 1,872 2025 1,677 81 155 $ 1,913 2024 1,742 130 1,872 2025 1,677 81 1,758 $ 1,913 2024 1,742 130 1,872 2025 1,677 81 1,758 2026 1,913 2024 1,742 130 1,872 2025 1,677 81 1,758 2026 1,382 2024 1,742 130 1,872 2025 1,677 81 1,758 2026 1,382 48 1,742 130 1,872 2025 1,677 81 1,758 2026 1,382 48 1,430 130 1,872 2025 1,677 81 1,758 2026 1,382 48 1,430 2027 1,872 2025 1,677 81 1,758 2026 1,382 48 1,430 2027 1,143 2025 1,677 81 1,758 2026 1,382 48 1,430 2027 1,143 34 1,677 81 1,758 2026 1,382 48 1,430 2027 1,143 34 1,177 81 1,758 2026 1,382 48 1,430 2027 1,143 34 1,177 Thereafter 1,758 2026 1,382 48 1,430 2027 1,143 34 1,177 Thereafter 5,080 2026 1,382 48 1,430 2027 1,143 34 1,177 Thereafter 5,080 906 1,382 48 1,430 2027 1,143 34 1,177 Thereafter 5,080 906 5,986 48 1,430 2027 1,143 34 1,177 Thereafter 5,080 906 5,986 Total 2027 1,143 34 1,177 Thereafter 5,080 906 5,986 Total undiscounted liability 1,143 34 1,177 Thereafter 5,080 906 5,986 Total undiscounted liability 12,782 34 1,177 Thereafter 5,080 906 5,986 Total undiscounted liability 12,782 1,354 906 5,986 Total undiscounted liability 12,782 1,354 14,136 Less : Imputed 5,986 Total undiscounted liability 12,782 1,354 14,136 Less : Imputed interest Total undiscounted liability 12,782 1,354 14,136 Less : Imputed interest ( Less : Imputed interest ( 1,312 ) ( 413 ) ( interest ( 1,312 ) ( 413 ) ( 1,725 ) Total ) ( 413 ) ( 1,725 ) Total lease liability $ ) Total lease liability $ 11,470 $ 941 $ 12,411 The lease liability $ 11,470 $ 941 $ 12,411 The weighted-average remaining $ 11,470 $ 941 $ 12,411 The weighted-average remaining lease term lease liability a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 wa 10.1 year 2022 and September 25 , 2021 wa 10.1 year and 10.8 September 25 , 2021 wa 10.1 year and 10.8 year , 2021 wa 10.1 year and 10.8 year , respectively . The lease liability a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 wa 2.3 % 2022 and September 25 , 2021 wa 2.3 % and 2.0 September 25 , 2021 wa 2.3 % and 2.0 % , 2021 wa 2.3 % and 2.0 % , respectively . As respectively . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had $ , the Company had $ 1.2 billion of future payment under These lease will commence between 2023 and 2026 , with lease will commence between 2023 and 2026 , with lease term ranging term ranging from le than 1 year to 21 year . le than 1 year to 21 year . Apple Inc. | year . Apple Inc. | 2022 Form 10-K | 44 Note Apple Inc. | 2022 Form 10-K | 44 Note 7 – | 2022 Form 10-K | 44 Note 7 – Debt Commercial Form 10-K | 44 Note 7 – Debt Commercial Paper and repurchase . As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the Company 2022 and September 25 , 2021 , the Company had $ , the Company had $ 10.0 billion and $ 6.0 billion $ 10.0 billion and $ 6.0 billion of Commercial Paper outstanding ’ s Commercial Paper wa 2.31 % and 0.06 % a Paper wa 2.31 % and 0.06 % a of September 24 0.06 % a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , respectively . 2022 and September 25 , 2021 , respectively . The following maturity of Commercial Paper for 2022 , 2021 and 2020 ( Commercial Paper for 2022 , 2021 and 2020 ( in million for 2022 , 2021 and 2020 ( in million ) : ( in million ) : 2022 2021 2020 Maturities 90 day in million ) : 2022 2021 2020 Maturities 90 day or million ) : 2022 2021 2020 Maturities 90 day or le : 2022 2021 2020 Maturities 90 day or le : Proceeds commercial paper , net $ 5,264 $ ( 357 ) $ net $ 5,264 $ ( 357 ) $ 100 Maturities greater $ ( 357 ) $ 100 Maturities greater than 90 day $ 100 Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 5,948 7,946 6,185 Repayments of commercial Proceeds from commercial paper 5,948 7,946 6,185 Repayments of commercial paper from commercial paper 5,948 7,946 6,185 Repayments of commercial paper ( Repayments of commercial paper ( 7,257 ) ( 6,567 ) ( paper ( 7,257 ) ( 6,567 ) ( 7,248 ) Proceeds ) ( 6,567 ) ( 7,248 ) Proceeds from/ ( Repayments commercial paper , net ( 1,309 ) 1,379 ( 1,063 ) , net ( 1,309 ) 1,379 ( 1,063 ) Total proceeds ( 1,309 ) 1,379 ( 1,063 ) Total proceeds from/ ( commercial paper , net $ 3,955 $ 1,022 $ ( 963 , net $ 3,955 $ 1,022 $ ( 963 ) In 3,955 $ 1,022 $ ( 963 ) In 2020 , the $ ( 963 ) In 2020 , the Company entered into The Company entered into $ 5.2 billion of Repos during 2020 5.2 billion of Repos during 2020 , all of which had been settled a of September 26 , 2020 . Term Debt a of September 26 , 2020 . Term Debt The Company term debt a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 : Maturities ( 2022 and September 25 , 2021 : Maturities ( calendar year Maturities ( calendar year ) 2022 2021 Amount ( in million ( calendar year ) 2022 2021 Amount ( in million ) million ) Effective Interest Rate 2013 – 2021 debt issuance : Effective Interest Rate 2013 – 2021 debt issuance : Floating-rate note Floating-rate note $ — $ 1,750 0.48 % – 0.63 % note $ — $ 1,750 0.48 % – 0.63 % Fixed-rate $ 1,750 0.48 % – 0.63 % Fixed-rate 0.000 % – % – 0.63 % Fixed-rate 0.000 % – 4.650 % note % Fixed-rate 0.000 % – 4.650 % note 2022 – 2061 % – 4.650 % note 2022 – 2061 106,324 0.03 % 4.650 % note 2022 – 2061 106,324 0.03 % – 4.78 % note 2022 – 2061 106,324 0.03 % – 4.78 % note 2022 – 2061 106,324 0.03 % – 4.78 % 116,313 2061 106,324 0.03 % – 4.78 % 116,313 0.03 % – 0.03 % – 4.78 % 116,313 0.03 % – 4.78 % % – 4.78 % 116,313 0.03 % – 4.78 % Fourth % 116,313 0.03 % – 4.78 % Fourth quarter 2022 debt – 4.78 % Fourth quarter 2022 debt issuance : Fixed-rate 3.250 2022 debt issuance : Fixed-rate 3.250 % – 4.100 % note : Fixed-rate 3.250 % – 4.100 % note 2029 – 2062 % – 4.100 % note 2029 – 2062 5,500 3.27 % 4.100 % note 2029 – 2062 5,500 3.27 % – 4.12 % note 2029 – 2062 5,500 3.27 % – 4.12 % note 2029 – 2062 5,500 3.27 % – 4.12 % — 2062 5,500 3.27 % – 4.12 % — Total term debt % — Total term debt 111,824 118,063 Unamortized premium/ ( discount — Total term debt 111,824 118,063 Unamortized premium/ ( discount ) issuance cost , net ( 374 ) ( 380 ) Hedge net ( 374 ) ( 380 ) Hedge accounting fair value accounting fair value adjustment ( 1,363 ) 1,036 Less : Current value adjustment ( 1,363 ) 1,036 Less : Current portion of portion of term debt ( 11,128 ) ( 9,613 ) Total debt ( 11,128 ) ( 9,613 ) Total non-current portion of portion of term debt $ 98,959 $ 109,106 To manage interest term debt $ 98,959 $ 109,106 To manage interest rate risk . The Company recognized $ 2.8 billion , $ 2.6 billion $ 2.8 billion , $ 2.6 billion and $ 2.8 billion $ 2.6 billion and $ 2.8 billion of interest expense on on it term debt for 2022 , 2021 and 2020 , term debt for 2022 , 2021 and 2020 , respectively . for 2022 , 2021 and 2020 , respectively . Apple Inc. respectively . Apple Inc. | 2022 Form 10-K | 45 The Apple Inc. | 2022 Form 10-K | 45 The future principal | 2022 Form 10-K | 45 The future principal payment for s Notes a of September 24 , 2022 , are a a of September 24 , 2022 , are a follows ( ( in million ) : 2023 $ 11,139 2024 9,910 2025 million ) : 2023 $ 11,139 2024 9,910 2025 10,645 2026 ) : 2023 $ 11,139 2024 9,910 2025 10,645 2026 11,209 : 2023 $ 11,139 2024 9,910 2025 10,645 2026 11,209 2027 2023 $ 11,139 2024 9,910 2025 10,645 2026 11,209 2027 9,631 $ 11,139 2024 9,910 2025 10,645 2026 11,209 2027 9,631 Thereafter 11,139 2024 9,910 2025 10,645 2026 11,209 2027 9,631 Thereafter 59,290 2024 9,910 2025 10,645 2026 11,209 2027 9,631 Thereafter 59,290 Total 9,910 2025 10,645 2026 11,209 2027 9,631 Thereafter 59,290 Total term 2025 10,645 2026 11,209 2027 9,631 Thereafter 59,290 Total term debt 2026 11,209 2027 9,631 Thereafter 59,290 Total term debt $ 111,824 59,290 Total term debt $ 111,824 As of September 24 , $ 111,824 As of September 24 , 2022 and September 25 As of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the fair 2022 and September 25 , 2021 , the fair value of Notes , based on Level 2 input , wa $ 98.8 2 input , wa $ 98.8 billion and $ 125.3 billion $ 98.8 billion and $ 125.3 billion , respectively . Note billion , respectively . Note 8 – Shareholders ’ Equity Share Equity Share Repurchase Program During 2022 , the Company repurchased 569 2022 , the Company repurchased 569 million share of it common it common stock for $ 90.2 billion under a share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . Shares share of common stock for 2022 , 2021 and 2020 ( common stock for 2022 , 2021 and 2020 ( in thousand for 2022 , 2021 and 2020 ( in thousand ) : ( in thousand ) : 2022 2021 2020 Common stock outstanding in thousand ) : 2022 2021 2020 Common stock outstanding , thousand ) : 2022 2021 2020 Common stock outstanding , beginning stock outstanding , beginning balance 16,426,786 16,976,763 17,772,945 Common stock repurchased outstanding , beginning balance 16,426,786 16,976,763 17,772,945 Common stock repurchased ( , beginning balance 16,426,786 16,976,763 17,772,945 Common stock repurchased ( 568,589 17,772,945 Common stock repurchased ( 568,589 ) ( 656,340 ) ( repurchased ( 568,589 ) ( 656,340 ) ( 917,270 ) Common ) ( 656,340 ) ( 917,270 ) Common stock issued , share withheld for employee tax 85,228 106,363 121,088 Common stock outstanding withheld for employee tax 85,228 106,363 121,088 Common stock outstanding , for employee tax 85,228 106,363 121,088 Common stock outstanding , ending stock outstanding , ending balance 15,943,425 16,426,786 16,976,763 Note 9 – outstanding , ending balance 15,943,425 16,426,786 16,976,763 Note 9 – Benefit , ending balance 15,943,425 16,426,786 16,976,763 Note 9 – Benefit Plans balance 15,943,425 16,426,786 16,976,763 Note 9 – Benefit Plans 2022 Employee Note 9 – Benefit Plans 2022 Employee Stock Plan In the In the second quarter of 2022 , shareholder approved the Apple shareholder approved the Apple Inc. 2022 Employee Stock Plan ( the Stock Plan ( the “ 2022 Plan ” ) , which . RSUs granted under the 2022 Plan generally vest over four . RSUs granted under the 2022 Plan reduce the number of available for grant under the 2022 Plan utilizing a factor of All RSUs granted under the 2022 Plan have dividend equivalent right . A maximum of approximately 1.3 billion share were authorized for authorized for issuance pursuant to 2022 Plan award at the time plan wa approved on March 4 , 2022 . 2014 Employee approved on March 4 , 2022 . 2014 Employee Stock Plan March 4 , 2022 . 2014 Employee Stock Plan The Apple Stock Plan The Apple Inc. 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) is a including executive officer . The 2014 Plan permitted the granting of the same term a the 2022 Plan . The 2014 Plan the 2022 Plan . The 2014 Plan also permitted the granting In the third quarter of 2022 , the Company terminated the grant new award under the 2014 Plan . Apple Inc. | Plan . Apple Inc. | 2022 Form 10-K | 46 Apple Apple Inc. | 2022 Form 10-K | 46 Apple Inc. Non-Employee | 2022 Form 10-K | 46 Apple Inc. Non-Employee Director Stock Director Plan expires on November 12 , 2027 . All RSUs expires on November 12 , 2027 . All RSUs granted under . A maximum of approximately 45 million share ( split-adjusted ) wa last amended on November 9 , 2021 . Employee Stock amended on November 9 , 2021 . Employee Stock Purchase Plan at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar . A maximum of approximately 230 million share ( split-adjusted ) amended and restated on March 10 , 2015 . 401 ( restated on March 10 , 2015 . 401 ( k ) March 10 , 2015 . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred compensation arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , limit . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ up to a maximum of 6 % of the employee ’ activity and related information for 2022 , 2021 and 2020 , related information for 2022 , 2021 and 2020 , is a for 2022 , 2021 and 2020 , is a follows : ) Balance a of September 28 , 2019 326,068 $ 42.30 a of September 28 , 2019 326,068 $ 42.30 RSUs granted of September 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 28 , 2019 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 326,068 $ 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 42.30 RSUs granted 156,800 $ 59.20 RSUs vested ( 157,743 ) $ 59.20 RSUs vested ( 157,743 ) $ 40.29 RSUs canceled vested ( 157,743 ) $ 40.29 RSUs canceled ( 14,347 ) $ 40.29 RSUs canceled ( 14,347 ) $ 48.07 Balance a canceled ( 14,347 ) $ 48.07 Balance a of September 26 48.07 Balance a of September 26 , 2020 310,778 $ 51.58 a of September 26 , 2020 310,778 $ 51.58 RSUs granted of September 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 145,766 ) $ 116.33 RSUs vested ( 145,766 ) $ 50.71 RSUs canceled vested ( 145,766 ) $ 50.71 RSUs canceled ( 13,948 ) $ 50.71 RSUs canceled ( 13,948 ) $ 68.95 Balance a canceled ( 13,948 ) $ 68.95 Balance a of September 25 68.95 Balance a of September 25 , 2021 240,427 $ 75.16 a of September 25 , 2021 240,427 $ 75.16 RSUs granted of September 25 , 2021 240,427 $ 75.16 RSUs granted 91,674 25 , 2021 240,427 $ 75.16 RSUs granted 91,674 $ 150.70 240,427 $ 75.16 RSUs granted 91,674 $ 150.70 RSUs vested ( 75.16 RSUs granted 91,674 $ 150.70 RSUs vested ( 115,861 ) $ 150.70 RSUs vested ( 115,861 ) $ 72.12 RSUs canceled vested ( 115,861 ) $ 72.12 RSUs canceled ( 14,739 ) $ 72.12 RSUs canceled ( 14,739 ) $ 99.77 Balance a canceled ( 14,739 ) $ 99.77 Balance a of September 24 99.77 Balance a of September 24 , 2022 201,501 $ 109.48 a of September 24 , 2022 201,501 $ 109.48 $ 30,312 of September 24 , 2022 201,501 $ 109.48 $ 30,312 The 24 , 2022 201,501 $ 109.48 $ 30,312 The fair value 2022 201,501 $ 109.48 $ 30,312 The fair value a of date of RSUs wa $ 18.2 billion , $ 19.0 billion $ 18.2 billion , $ 19.0 billion and $ 10.8 billion $ 19.0 billion and $ 10.8 billion for 2022 , 2021 and $ 10.8 billion for 2022 , 2021 and 2020 , 10.8 billion for 2022 , 2021 and 2020 , respectively . for 2022 , 2021 and 2020 , respectively . The majority of RSUs that vested in 2022 , 2021 and 2020 were that vested in 2022 , 2021 and 2020 were net share in 2022 , 2021 and 2020 were net share settled such total share withheld were approximately 41 million , 53 million and were approximately 41 million , 53 million and 56 million for million , 53 million and 56 million for 2022 , 2021 million and 56 million for 2022 , 2021 and 2020 , 56 million for 2022 , 2021 and 2020 , respectively , for 2022 , 2021 and 2020 , respectively , and were ’ tax obligation were $ 6.4 billion , $ 6.8 billion $ 6.4 billion , $ 6.8 billion and $ 3.9 billion $ 6.8 billion and $ 3.9 billion in 2022 , 2021 and $ 3.9 billion in 2022 , 2021 and 2020 , 3.9 billion in 2022 , 2021 and 2020 , respectively . in 2022 , 2021 and 2020 , respectively . Apple Inc. respectively . Apple Inc. | 2022 Form 10-K | 47 Share-Based Apple Inc. | 2022 Form 10-K | 47 Share-Based Compensation The | 2022 Form 10-K | 47 Share-Based Compensation The following table Consolidated Statements of Operations for 2022 , 2021 and 2020 ( of Operations for 2022 , 2021 and 2020 ( in million for 2022 , 2021 and 2020 ( in million ) : ( in million ) : 2022 2021 2020 Share-based compensation expense in million ) : 2022 2021 2020 Share-based compensation expense $ million ) : 2022 2021 2020 Share-based compensation expense $ 9,038 2020 Share-based compensation expense $ 9,038 $ 7,906 $ 6,829 Income compensation expense $ 9,038 $ 7,906 $ 6,829 Income tax benefit $ 9,038 $ 7,906 $ 6,829 Income tax benefit related to share-based compensation expense $ ( 4,002 ) $ ( 4,056 ) ( 4,002 ) $ ( 4,056 ) $ ( 2,476 ) ( 4,056 ) $ ( 2,476 ) As of September 24 2,476 ) As of September 24 , 2022 , the total As of September 24 , 2022 , the total unrecognized compensation and stock option wa $ 16.7 billion , which the Company over a weighted-average period of 2.6 year . Note 10 – of 2.6 year . Note 10 – Commitments and Contingencies Concentrations one year a of September 24 , 2022 , are a a of September 24 , 2022 , are a follows ( ( in million ) : 2023 $ 13,488 2024 4,876 2025 million ) : 2023 $ 13,488 2024 4,876 2025 1,418 2026 ) : 2023 $ 13,488 2024 4,876 2025 1,418 2026 6,780 : 2023 $ 13,488 2024 4,876 2025 1,418 2026 6,780 2027 2023 $ 13,488 2024 4,876 2025 1,418 2026 6,780 2027 312 $ 13,488 2024 4,876 2025 1,418 2026 6,780 2027 312 Thereafter 13,488 2024 4,876 2025 1,418 2026 6,780 2027 312 Thereafter 412 2024 4,876 2025 1,418 2026 6,780 2027 312 Thereafter 412 Total 4,876 2025 1,418 2026 6,780 2027 312 Thereafter 412 Total $ 2025 1,418 2026 6,780 2027 312 Thereafter 412 Total $ 27,286 2026 6,780 2027 312 Thereafter 412 Total $ 27,286 Contingencies The 312 Thereafter 412 Total $ 27,286 Contingencies The Company is subject claim . Apple Inc. | 2022 Form 10-K | 48 Note Apple Inc. | 2022 Form 10-K | 48 Note 11 – | 2022 Form 10-K | 48 Note 11 – Segment Information Form 10-K | 48 Note 11 – Segment Information and Geographic information by reportable segment for 2022 , 2021 and 2020 ( reportable segment for 2022 , 2021 and 2020 ( in million for 2022 , 2021 and 2020 ( in million ) : ( in million ) : 2022 2021 2020 Americas : Net in million ) : 2022 2021 2020 Americas : Net sale million ) : 2022 2021 2020 Americas : Net sale $ Americas : Net sale $ 169,658 $ 153,306 $ 124,556 Operating Net sale $ 169,658 $ 153,306 $ 124,556 Operating income $ $ 169,658 $ 153,306 $ 124,556 Operating income $ 62,683 $ $ 124,556 Operating income $ 62,683 $ 53,382 $ 37,722 Europe Operating income $ 62,683 $ 53,382 $ 37,722 Europe : Net $ 62,683 $ 53,382 $ 37,722 Europe : Net sale $ Europe : Net sale $ 95,118 $ 89,307 $ 68,640 Operating Net sale $ 95,118 $ 89,307 $ 68,640 Operating income $ $ 95,118 $ 89,307 $ 68,640 Operating income $ 35,233 $ $ 68,640 Operating income $ 35,233 $ 32,505 $ 22,170 Greater Operating income $ 35,233 $ 32,505 $ 22,170 Greater China : $ 35,233 $ 32,505 $ 22,170 Greater China : Net sale China : Net sale $ 74,200 $ 68,366 $ 40,308 Operating Net sale $ 74,200 $ 68,366 $ 40,308 Operating income $ $ 74,200 $ 68,366 $ 40,308 Operating income $ 31,153 $ $ 40,308 Operating income $ 31,153 $ 28,504 $ 15,261 Japan Operating income $ 31,153 $ 28,504 $ 15,261 Japan : Net $ 31,153 $ 28,504 $ 15,261 Japan : Net sale $ Japan : Net sale $ 25,977 $ 28,482 $ 21,418 Operating Net sale $ 25,977 $ 28,482 $ 21,418 Operating income $ $ 25,977 $ 28,482 $ 21,418 Operating income $ 12,257 $ $ 21,418 Operating income $ 12,257 $ 12,798 $ 9,279 Rest Operating income $ 12,257 $ 12,798 $ 9,279 Rest of Asia $ 12,257 $ 12,798 $ 9,279 Rest of Asia Pacific : Pacific : Net sale $ 29,375 $ 26,356 $ 19,593 Operating Net sale $ 29,375 $ 26,356 $ 19,593 Operating income $ $ 29,375 $ 26,356 $ 19,593 Operating income $ 11,569 $ $ 19,593 Operating income $ 11,569 $ 9,817 $ 6,808 A Operating income $ 11,569 $ 9,817 $ 6,808 A reconciliation of $ 11,569 $ 9,817 $ 6,808 A reconciliation of the Company Consolidated Statements of Operations for 2022 , 2021 and 2020 is of Operations for 2022 , 2021 and 2020 is a follows for 2022 , 2021 and 2020 is a follows ( in ( in million ) : 2022 2021 2020 Segment operating income in million ) : 2022 2021 2020 Segment operating income $ million ) : 2022 2021 2020 Segment operating income $ 152,895 2020 Segment operating income $ 152,895 $ 137,006 $ 91,240 Research operating income $ 152,895 $ 137,006 $ 91,240 Research and development $ 152,895 $ 137,006 $ 91,240 Research and development expense ( Research and development expense ( 26,251 ) ( 21,914 ) ( expense ( 26,251 ) ( 21,914 ) ( 18,752 ) Other ) ( 21,914 ) ( 18,752 ) Other corporate expense , corporate expense , net ( 7,207 ) ( 6,143 ) ( net ( 7,207 ) ( 6,143 ) ( 6,200 ) Total ) ( 6,143 ) ( 6,200 ) Total operating income $ ) Total operating income $ 119,437 $ 108,949 $ 66,288 The operating income $ 119,437 $ 108,949 $ 66,288 The U.S. and $ 119,437 $ 108,949 $ 66,288 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2022 , 2021 and 2020 . net sale in 2022 , 2021 and 2020 . Net sale in 2022 , 2021 and 2020 . Net sale for 2022 2020 . Net sale for 2022 , 2021 and 2020 and Net sale for 2022 , 2021 and 2020 and long-lived asset for 2022 , 2021 and 2020 and long-lived asset a of long-lived asset a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 were a follows 2022 and September 25 , 2021 were a follows ( in ( in million ) : 2022 2021 2020 Net sale : in million ) : 2022 2021 2020 Net sale : U.S. million ) : 2022 2021 2020 Net sale : U.S. $ Net sale : U.S. $ 147,859 $ 133,803 $ 109,197 China : U.S. $ 147,859 $ 133,803 $ 109,197 China ( 1 $ 147,859 $ 133,803 $ 109,197 China ( 1 ) 74,200 133,803 $ 109,197 China ( 1 ) 74,200 68,366 40,308 Other 109,197 China ( 1 ) 74,200 68,366 40,308 Other country 172,269 China ( 1 ) 74,200 68,366 40,308 Other country 172,269 163,648 ( 1 ) 74,200 68,366 40,308 Other country 172,269 163,648 125,010 74,200 68,366 40,308 Other country 172,269 163,648 125,010 Total net sale 68,366 40,308 Other country 172,269 163,648 125,010 Total net sale $ 40,308 Other country 172,269 163,648 125,010 Total net sale $ 394,328 125,010 Total net sale $ 394,328 $ 365,817 $ 274,515 2022 net sale $ 394,328 $ 365,817 $ 274,515 2022 2021 Long-lived $ 394,328 $ 365,817 $ 274,515 2022 2021 Long-lived asset : 394,328 $ 365,817 $ 274,515 2022 2021 Long-lived asset : U.S. $ 365,817 $ 274,515 2022 2021 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 31,119 $ 28,203 China ( 1 : U.S. $ 31,119 $ 28,203 China ( 1 ) 7,260 31,119 $ 28,203 China ( 1 ) 7,260 7,521 Other country 28,203 China ( 1 ) 7,260 7,521 Other country 3,738 3,716 China ( 1 ) 7,260 7,521 Other country 3,738 3,716 Total ) 7,260 7,521 Other country 3,738 3,716 Total long-lived asset $ 7,260 7,521 Other country 3,738 3,716 Total long-lived asset $ 42,117 3,716 Total long-lived asset $ 42,117 $ 39,440 ( 1 ) long-lived asset $ 42,117 $ 39,440 ( 1 ) China includes $ 42,117 $ 39,440 ( 1 ) China includes Hong Kong infrastructure . Apple Inc. | 2022 Form 10-K | 49 Report Apple Inc. | 2022 Form 10-K | 49 Report of Independent | 2022 Form 10-K | 49 Report of Independent Registered Public Apple Inc. a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the related 2022 and September 25 , 2021 , the related consolidated statement in the period ended September 24 , 2022 , and the period ended September 24 , 2022 , and the related note of Apple Inc. at September 24 , 2022 and September 25 Inc. at September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , and the 2022 and September 25 , 2021 , and the result of in the period ended September 24 , 2022 , in conformity period ended September 24 , 2022 , in conformity with U.S. financial reporting a of September 24 , 2022 , based on a of September 24 , 2022 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 27 , 2022 expressed an unqualified report dated October 27 , 2022 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging Matter As discussed in Note 5 to the financial statement , jurisdiction . As of September 24 , 2022 , the total As of September 24 , 2022 , the total amount of unrecognized tax benefit wa $ 16.8 billion , of which $ billion , of which $ 8.0 billion , if recognized , ruling . Apple Inc. | 2022 Form 10-K | 50 How Apple Inc. | 2022 Form 10-K | 50 How We Addressed | 2022 Form 10-K | 50 How We Addressed the Matter these matter included in Note 5 to the financial statement . Inc. ’ s auditor since 2009 . San Jose , California San Jose , California October 27 , 2022 Apple Inc. | , California October 27 , 2022 Apple Inc. | 2022 Form , 2022 Apple Inc. | 2022 Form 10-K | 51 Report Apple Inc. | 2022 Form 10-K | 51 Report of Independent | 2022 Form 10-K | 51 Report of Independent Registered Public financial reporting a of September 24 , 2022 , based on a of September 24 , 2022 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 24 , 2022 , based on a of September 24 , 2022 , based on the COSO Apple Inc. a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 , the related 2022 and September 25 , 2021 , the related consolidated statement in the period ended September 24 , 2022 , and the period ended September 24 , 2022 , and the related note and our report dated October 27 , 2022 expressed an unqualified report dated October 27 , 2022 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California October 27 , 2022 Apple Inc. | , California October 27 , 2022 Apple Inc. | 2022 Form , 2022 Apple Inc. | 2022 Form 10-K | 52 Item Apple Inc. | 2022 Form 10-K | 52 Item 9 . | 2022 Form 10-K | 52 Item 9 . Changes in Form 10-K | 52 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 24 , 2022 to provide reasonable a of September 24 , 2022 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 24 , 2022 to provide reasonable a of September 24 , 2022 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control over during the fourth quarter of 2022 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , reporting . Apple Inc. | 2022 Form 10-K | 53 Item Apple Inc. | 2022 Form 10-K | 53 Item 9B . | 2022 Form 10-K | 53 Item 9B . Other Information Form 10-K | 53 Item 9B . Other Information Rule 10b5-1 9B . Other Information Rule 10b5-1 Trading Plans During the three the three month ended September 24 , 2022 , Katherine L. month ended September 24 , 2022 , Katherine L. Adams , officer for purpose of Section 16 of the Exchange Act , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act director equity plan . Item 9C . Disclosure Regarding Foreign Jurisdictions applicable . PART III Item 10 . Directors , Executive Officers filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2022 , in connection day after September 24 , 2022 , in connection with the for the Company ’ s 2023 annual meeting of shareholder ( of shareholder ( the “ 2023 Proxy Statement ” ) , herein by reference . Item 11 . Executive Compensation The information will be included in the 2023 Proxy Statement , and is herein by reference . Item 12 . Security Ownership of Certain will be included in the 2023 Proxy Statement , and is herein by reference . Item 13 . Certain Relationships and Related will be included in the 2023 Proxy Statement , and is herein by reference . Item 14 . Principal Accountant Fees and will be included in the 2023 Proxy Statement , and is reference . Apple Inc. | 2022 Form 10-K | 54 PART Apple Inc. | 2022 Form 10-K | 54 PART IV Item | 2022 Form 10-K | 54 PART IV Item 15 . | 54 PART IV Item 15 . Exhibit and Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 29 Consolidated Statements 2021 and September 26 , 2020 29 Consolidated Statements of Comprehensive and September 26 , 2020 29 Consolidated Statements of Comprehensive Income for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 30 Consolidated Balance 2021 and September 26 , 2020 30 Consolidated Balance Sheets a and September 26 , 2020 30 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2022 and September 25 a of September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 31 Consolidated Statements 2022 and September 25 , 2021 31 Consolidated Statements of Shareholders and September 25 , 2021 31 Consolidated Statements of Shareholders ’ for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 32 Consolidated Statements 2021 and September 26 , 2020 32 Consolidated Statements of Cash and September 26 , 2020 32 Consolidated Statements of Cash Flows for the year ended September 24 , 2022 , September 25 year ended September 24 , 2022 , September 25 , 2021 24 , 2022 , September 25 , 2021 and September 26 2022 , September 25 , 2021 and September 26 , 2020 25 , 2021 and September 26 , 2020 33 Notes to 2021 and September 26 , 2020 33 Notes to Consolidated Financial and September 26 , 2020 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 34 Reports of Independent Registered Public Registered Public Accounting Firm * 50 * Ernst & Young LLP PCAOB Firm ID No . 000 42 . ( 2 ) Firm ID No . 000 42 . ( 2 ) Financial . 000 42 . ( 2 ) Financial Statement Schedules All note included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of the Registrant filed on August 3 , 2020 . 8-K 3.1 filed on August 3 , 2020 . 8-K 3.1 8/7/20 3.2 August 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws of Registrant effective a of August 17 , 2022 . 8-K 3.2 a of August 17 , 2022 . 8-K 3.2 8/19/22 4.1 August 17 , 2022 . 8-K 3.2 8/19/22 4.1 * * 17 , 2022 . 8-K 3.2 8/19/22 4.1 * * Description , 2022 . 8-K 3.2 8/19/22 4.1 * * Description of 2022 . 8-K 3.2 8/19/22 4.1 * * Description of Securities Securities of the Registrant . 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.9 % Notes due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 Apple % Notes due 2027 . 8-K 4.1 9/17/15 Apple Inc. | Notes due 2027 . 8-K 4.1 9/17/15 Apple Inc. | 2022 due 2027 . 8-K 4.1 9/17/15 Apple Inc. | 2022 Form 4.1 9/17/15 Apple Inc. | 2022 Form 10-K | 55 Incorporated Apple Inc. | 2022 Form 10-K | 55 Incorporated by Reference | 2022 Form 10-K | 55 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.10 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 to 2/23/16 4.11 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.12 March 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a of , dated a of November 5 , 2018 , between the a of November 5 , 2018 , between the Registrant and , a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate of , dated a of September 11 , 2019 , including form a of September 11 , 2019 , including form of global of global note representing the 1.700 % Notes due 2022 , the 1.700 % Notes due 2022 , 1.800 % Notes due % Notes due 2022 , 1.800 % Notes due 2024 , , 1.800 % Notes due 2024 , 2.050 % Notes due % Notes due 2024 , 2.050 % Notes due 2026 , , 2.050 % Notes due 2026 , 2.200 % Notes due % Notes due 2026 , 2.200 % Notes due 2029 and , 2.200 % Notes due 2029 and 2.950 % Notes due % Notes due 2029 and 2.950 % Notes due 2049 . and 2.950 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate of , dated a of November 15 , 2019 , including form a of November 15 , 2019 , including form of global of global note representing the 0.000 % Notes due 2025 and the 0.000 % Notes due 2025 and 0.500 % Notes due % Notes due 2025 and 0.500 % Notes due 2031 . and 0.500 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate of , dated a of May 11 , 2020 , including form a of May 11 , 2020 , including form of global of global note representing the 0.750 % Notes due 2023 , the 0.750 % Notes due 2023 , 1.125 % Notes due % Notes due 2023 , 1.125 % Notes due 2025 , , 1.125 % Notes due 2025 , 1.650 % Notes due % Notes due 2025 , 1.650 % Notes due 2030 and , 1.650 % Notes due 2030 and 2.650 % Notes due % Notes due 2030 and 2.650 % Notes due 2050 . and 2.650 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate of , dated a of August 20 , 2020 , including form a of August 20 , 2020 , including form of global of global note representing the 0.550 % Notes due 2025 , the 0.550 % Notes due 2025 , 1.25 % Notes due % Notes due 2025 , 1.25 % Notes due 2030 , , 1.25 % Notes due 2030 , 2.400 % Notes due % Notes due 2030 , 2.400 % Notes due 2050 and , 2.400 % Notes due 2050 and 2.550 % Notes due % Notes due 2050 and 2.550 % Notes due 2060 . and 2.550 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate of , dated a of February 8 , 2021 , including form a of February 8 , 2021 , including form of global of global note representing the 0.700 % Notes due 2026 , the 0.700 % Notes due 2026 , 1.200 % Notes due % Notes due 2026 , 1.200 % Notes due 2028 , , 1.200 % Notes due 2028 , 1.650 % Notes due % Notes due 2028 , 1.650 % Notes due 2031 , , 1.650 % Notes due 2031 , 2.375 % Notes due % Notes due 2031 , 2.375 % Notes due 2041 , , 2.375 % Notes due 2041 , 2.650 % Notes due % Notes due 2041 , 2.650 % Notes due 2051 and , 2.650 % Notes due 2051 and 2.800 % Notes due % Notes due 2051 and 2.800 % Notes due 2061 . and 2.800 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate of , dated a of August 5 , 2021 , including form a of August 5 , 2021 , including form of global of global note representing the 1.400 % Notes due 2028 , the 1.400 % Notes due 2028 , 1.700 % Notes due % Notes due 2028 , 1.700 % Notes due 2031 , , 1.700 % Notes due 2031 , 2.700 % Notes due % Notes due 2031 , 2.700 % Notes due 2051 and , 2.700 % Notes due 2051 and 2.850 % Notes due % Notes due 2051 and 2.850 % Notes due 2061 . and 2.850 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , Notes due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated a 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated a of , dated a of October 28 , 2021 , between the a of October 28 , 2021 , between the Registrant and , a Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s a Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s Certificate Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s Certificate of , dated a of August 8 , 2022 , including form a of August 8 , 2022 , including form of global of global note representing the 3.250 % Notes due 2029 , the 3.250 % Notes due 2029 , 3.350 % Notes due % Notes due 2029 , 3.350 % Notes due 2032 , , 3.350 % Notes due 2032 , 3.950 % Notes due % Notes due 2032 , 3.950 % Notes due 2052 and , 3.950 % Notes due 2052 and 4.100 % Notes due % Notes due 2052 and 4.100 % Notes due 2062 . and 4.100 % Notes due 2062 . 8-K 4.1 8/8/22 Apple % Notes due 2062 . 8-K 4.1 8/8/22 Apple Inc. | Notes due 2062 . 8-K 4.1 8/8/22 Apple Inc. | 2022 due 2062 . 8-K 4.1 8/8/22 Apple Inc. | 2022 Form 4.1 8/8/22 Apple Inc. | 2022 Form 10-K | 56 Incorporated Apple Inc. | 2022 Form 10-K | 56 Incorporated by Reference | 2022 Form 10-K | 56 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.29 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Compensation Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan . S-8 4.1 8/23/18 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director Plan , a amended November 9 , 2021 . 10-Q 10.1 a amended November 9 , 2021 . 10-Q 10.1 12/25/21 10.4 November 9 , 2021 . 10-Q 10.1 12/25/21 10.4 * 2014 9 , 2021 . 10-Q 10.1 12/25/21 10.4 * 2014 Employee , 2021 . 10-Q 10.1 12/25/21 10.4 * 2014 Employee Stock 2021 . 10-Q 10.1 12/25/21 10.4 * 2014 Employee Stock Plan 10-Q 10.1 12/25/21 10.4 * 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 10.5 October 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form of , 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.6 September 26 , 2017 . 10-K 10.20 9/30/17 10.6 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.6 * Form of , 2017 . 10-K 10.20 9/30/17 10.6 * Form of Restricted 2017 . 10-K 10.20 9/30/17 10.6 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.7 February 13 , 2018 . 10-Q 10.2 3/31/18 10.7 * Form 13 , 2018 . 10-Q 10.2 3/31/18 10.7 * Form of , 2018 . 10-Q 10.2 3/31/18 10.7 * Form of Restricted 2018 . 10-Q 10.2 3/31/18 10.7 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.17 a of August 21 , 2018 . 10-K 10.17 9/29/18 10.8 August 21 , 2018 . 10-K 10.17 9/29/18 10.8 * Form 21 , 2018 . 10-K 10.17 9/29/18 10.8 * Form of , 2018 . 10-K 10.17 9/29/18 10.8 * Form of Performance 2018 . 10-K 10.17 9/29/18 10.8 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.18 a of August 21 , 2018 . 10-K 10.18 9/29/18 10.9 August 21 , 2018 . 10-K 10.18 9/29/18 10.9 * Form 21 , 2018 . 10-K 10.18 9/29/18 10.9 * Form of , 2018 . 10-K 10.18 9/29/18 10.9 * Form of Restricted 2018 . 10-K 10.18 9/29/18 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.15 a of September 29 , 2019 . 10-K 10.15 9/28/19 10.10 September 29 , 2019 . 10-K 10.15 9/28/19 10.10 * Form 29 , 2019 . 10-K 10.15 9/28/19 10.10 * Form of , 2019 . 10-K 10.15 9/28/19 10.10 * Form of Performance 2019 . 10-K 10.15 9/28/19 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.16 a of September 29 , 2019 . 10-K 10.16 9/28/19 10.11 September 29 , 2019 . 10-K 10.16 9/28/19 10.11 * Form 29 , 2019 . 10-K 10.16 9/28/19 10.11 * Form of , 2019 . 10-K 10.16 9/28/19 10.11 * Form of Restricted 2019 . 10-K 10.16 9/28/19 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.16 a of August 18 , 2020 . 10-K 10.16 9/26/20 10.12 August 18 , 2020 . 10-K 10.16 9/26/20 10.12 * Form 18 , 2020 . 10-K 10.16 9/26/20 10.12 * Form of , 2020 . 10-K 10.16 9/26/20 10.12 * Form of Performance 2020 . 10-K 10.16 9/26/20 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.17 a of August 18 , 2020 . 10-K 10.17 9/26/20 10.13 August 18 , 2020 . 10-K 10.17 9/26/20 10.13 * Form 18 , 2020 . 10-K 10.17 9/26/20 10.13 * Form of , 2020 . 10-K 10.17 9/26/20 10.13 * Form of CEO 2020 . 10-K 10.17 9/26/20 10.13 * Form of CEO Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.1 a of September 27 , 2020 . 10-Q 10.1 12/26/20 10.14 September 27 , 2020 . 10-Q 10.1 12/26/20 10.14 * Form 27 , 2020 . 10-Q 10.1 12/26/20 10.14 * Form of , 2020 . 10-Q 10.1 12/26/20 10.14 * Form of CEO 2020 . 10-Q 10.1 12/26/20 10.14 * Form of CEO Performance CEO Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.2 a of September 27 , 2020 . 10-Q 10.2 12/26/20 10.15 September 27 , 2020 . 10-Q 10.2 12/26/20 10.15 * 2022 27 , 2020 . 10-Q 10.2 12/26/20 10.15 * 2022 Employee , 2020 . 10-Q 10.2 12/26/20 10.15 * 2022 Employee Stock 2020 . 10-Q 10.2 12/26/20 10.15 * 2022 Employee Stock Plan 10-Q 10.2 12/26/20 10.15 * 2022 Employee Stock Plan . 8-K 2022 Employee Stock Plan . 8-K 10.1 3/4/22 10.16 * Form Employee Stock Plan . 8-K 10.1 3/4/22 10.16 * Form of Stock Plan . 8-K 10.1 3/4/22 10.16 * Form of Restricted Plan . 8-K 10.1 3/4/22 10.16 * Form of Restricted Stock Stock Unit Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of March 4 , 2022 . 8-K 10.2 a of March 4 , 2022 . 8-K 10.2 3/4/22 10.17 March 4 , 2022 . 8-K 10.2 3/4/22 10.17 * Form 4 , 2022 . 8-K 10.2 3/4/22 10.17 * Form of , 2022 . 8-K 10.2 3/4/22 10.17 * Form of Performance 2022 . 8-K 10.2 3/4/22 10.17 * Form of Performance Award of Performance Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of March 4 , 2022 . 8-K 10.3 a of March 4 , 2022 . 8-K 10.3 3/4/22 10.18 March 4 , 2022 . 8-K 10.3 3/4/22 10.18 * Apple 4 , 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. , 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. Executive 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. Executive Cash Executive Cash Incentive Plan . 8-K 10.1 8/19/22 21.1 * * Cash Incentive Plan . 8-K 10.1 8/19/22 21.1 * * Subsidiaries Incentive Plan . 8-K 10.1 8/19/22 21.1 * * Subsidiaries of Plan . 8-K 10.1 8/19/22 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101 * * Inline XBRL Document in Part II , Item 8 , “ Financial Statements and this Annual Report on Form 10-K. 104 * * Inline XBRL Annual Report on Form 10-K. 104 * * Inline XBRL for this Annual Report on Form 10-K , included in the Exhibit , included in the Exhibit 101 Inline XBRL Document Set . * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2022 Form 10-K | 57 SIGNATURES Apple Inc. | 2022 Form 10-K | 57 SIGNATURES Pursuant to | 2022 Form 10-K | 57 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 27 , 2022 Apple Inc. By Date : October 27 , 2022 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 27 , 2022 TIMOTHY D. COOK Officer ) October 27 , 2022 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) October 27 , 2022 LUCA MAESTRI /s/ Officer ) October 27 , 2022 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) October 27 , 2022 CHRIS KONDO /s/ Officer ) October 27 , 2022 CHRIS KONDO /s/ James A A . Bell Director October 27 , 2022 JAMES A . Bell Director October 27 , 2022 JAMES A . BELL /s/ /s/ Al Gore Director October 27 , 2022 AL GORE /s/ Gore Director October 27 , 2022 AL GORE /s/ Alex Gorsky /s/ Alex Gorsky Director October 27 , 2022 ALEX GORSKY /s/ Gorsky Director October 27 , 2022 ALEX GORSKY /s/ Andrea Jung /s/ Andrea Jung Director October 27 , 2022 ANDREA JUNG /s/ Jung Director October 27 , 2022 ANDREA JUNG /s/ Arthur D. Chair of the Board October 27 , 2022 ARTHUR D. LEVINSON the Board October 27 , 2022 ARTHUR D. LEVINSON /s/ Monica /s/ Monica Lozano Director October 27 , 2022 MONICA LOZANO /s/ Lozano Director October 27 , 2022 MONICA LOZANO /s/ Ronald D. Ronald D. Sugar Director October 27 , 2022 RONALD D. SUGAR Sugar Director October 27 , 2022 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director October 27 , 2022 SUSAN L. WAGNER Wagner Director October 27 , 2022 SUSAN L. WAGNER Apple Inc. L. 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13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 30 , 2023 or ☐ TRANSITION year ended September 30 , 2023 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Park Way Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the registered Common Stock , $ 0.00001 par value per share AAPL The Nasdaq Stock Market LLC 1.375 % Notes due 2024 — LLC 1.375 % Notes due 2024 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.000 % Notes due 2025 — LLC 0.000 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.875 % Notes due 2025 — LLC 0.875 % Notes due 2025 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.625 % Notes due 2026 — LLC 1.625 % Notes due 2026 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 2.000 % Notes due 2027 — LLC 2.000 % Notes due 2027 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 1.375 % Notes due 2029 — LLC 1.375 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.050 % Notes due 2029 — LLC 3.050 % Notes due 2029 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 0.500 % Notes due 2031 — LLC 0.500 % Notes due 2031 — The Nasdaq Stock Market The Nasdaq Stock Market LLC 3.600 % Notes due 2042 — LLC 3.600 % Notes due 2042 — The Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by are registered pursuant to Section 12 ( b ) of the ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 31 , 2023 , the last a of March 31 , 2023 , the last business day quarter , wa approximately $ 2,591,165,000,000 . Solely for purpose of for any other purpose . 15,552,752,000 share of common stock were and outstanding a of October 20 , 2023 . DOCUMENTS INCORPORATED a of October 20 , 2023 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2024 annual meeting of shareholder are this Annual Report on Form 10-K where indicated . The Registrant Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 30 , 2023 TABLE OF CONTENTS Year Ended September 30 , 2023 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 5 Item Item 1A . Risk Factors 5 Item 1B . Unresolved Staff . Risk Factors 5 Item 1B . Unresolved Staff Comments 16 1B . Unresolved Staff Comments 16 Item 1C . C ybersecurity Unresolved Staff Comments 16 Item 1C . C ybersecurity 16 Item Item 1C . C ybersecurity 16 Item 2 . Properties 17 . C ybersecurity 16 Item 2 . Properties 17 Item 3 16 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Mine Safety . Legal Proceedings 17 Item 4 . Mine Safety Disclosures 17 4 . Mine Safety Disclosures 17 Part II Item 5 . Disclosures 17 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . [ Reserved of Equity Securities 18 Item 6 . [ Reserved ] 19 6 . [ Reserved ] 19 Item 7 . Management ’ [ Reserved ] 19 Item 7 . Management ’ s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 26 Item 8 . Financial Statements About Market Risk 26 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 27 Item 9 . Changes in and Supplementary Data 27 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 52 Item 9A . Controls and and Financial Disclosure 52 Item 9A . Controls and Procedures 52 9A . Controls and Procedures 52 Item 9B . Other Information Controls and Procedures 52 Item 9B . Other Information 53 Item Item 9B . Other Information 53 Item 9C . Disclosure Regarding . Other Information 53 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 53 Part III Item 10 . Inspections 53 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 53 Item 11 . Executive Compensation and Corporate Governance 53 Item 11 . Executive Compensation 53 Item Item 11 . Executive Compensation 53 Item 12 . Security Ownership . Executive Compensation 53 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 53 Item 13 . Certain Relationships Related Stockholder Matters 53 Item 13 . Certain Relationships and Related Transactions , and Director Independence 53 Item 14 . Principal Accountant and Director Independence 53 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 53 Part IV Item 15 . Services 53 Part IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 54 Item 16 . Form 10-K Financial Statement Schedules 54 Item 16 . Form 10-K Summary 57 54 Item 16 . Form 10-K Summary 57 This Annual Report 16 . Form 10-K Summary 57 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading “ Business and Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management , statement in this Form 10-K regarding the potential future impact in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk stated . PART I Item 1. Business Company Background The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the The iPhone line includes iPhone 15 Pro , iPhone 15 , iPhone 15 Pro , iPhone 15 , iPhone 14 , iPhone , iPhone 15 , iPhone 14 , iPhone 13 and iPhone , iPhone 14 , iPhone 13 and iPhone SE ® . , includes Apple Watch Ultra™ 2 , Apple Watch ® Series , Apple Watch ® Series 9 and Apple Watch SE ® accessory . Apple Inc. | 2023 Form 10-K | 1 Services Apple Inc. | 2023 Form 10-K | 1 Services Advertising The | 2023 Form 10-K | 1 Services Advertising The Company ’ retailer and resellers . During 2023 , the Company ’ s indirect distribution channel accounted for 37 % and 63 % , accounted for 37 % and 63 % , respectively , of property . Apple Inc. | 2023 Form 10-K | 2 The Apple Inc. | 2023 Form 10-K | 2 The Company ’ | 2023 Form 10-K | 2 The Company ’ s ability all . Apple Inc. | 2023 Form 10-K | 3 Business Apple Inc. | 2023 Form 10-K | 3 Business Seasonality and | 2023 Form 10-K | 3 Business Seasonality and Product Introductions member . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had approximately , the Company had approximately 161,000 full-time equivalent employee . Workplace s Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the website referenced in this Form 10-K is not incorporated by reference only . Apple Inc. | 2023 Form 10-K | 4 Item Apple Inc. | 2023 Form 10-K | 4 Item 1A . | 2023 Form 10-K | 4 Item 1A . Risk Factors Form 10-K | 4 Item 1A . Risk Factors The Company with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . Macroeconomic and Industry Risks partner . Apple Inc. | 2023 Form 10-K | 5 The Apple Inc. | 2023 Form 10-K | 5 The Company ha | 2023 Form 10-K | 5 The Company ha a large successfully . Apple Inc. | 2023 Form 10-K | 6 The Apple Inc. | 2023 Form 10-K | 6 The Company currently | 2023 Form 10-K | 6 The Company currently hold a condition . Apple Inc. | 2023 Form 10-K | 7 The Apple Inc. | 2023 Form 10-K | 7 The Company relies | 2023 Form 10-K | 7 The Company relies on single-source sale . Apple Inc. | 2023 Form 10-K | 8 The Apple Inc. | 2023 Form 10-K | 8 The Company is | 2023 Form 10-K | 8 The Company is exposed to typically for period up to 150 day . Because the Company product . Apple Inc. | 2023 Form 10-K | 9 The Apple Inc. | 2023 Form 10-K | 9 The Company distributes | 2023 Form 10-K | 9 The Company distributes third-party application to comply with by March 2024 . The Company is also amount . Apple Inc. | 2023 Form 10-K | 10 The Apple Inc. | 2023 Form 10-K | 10 The Company ha | 2023 Form 10-K | 10 The Company ha invested and arise . Apple Inc. | 2023 Form 10-K | 11 Investment Apple Inc. | 2023 Form 10-K | 11 Investment in new | 2023 Form 10-K | 11 Investment in new business strategy in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 12 , “ Commitments , Contingencies arise . Apple Inc. | 2023 Form 10-K | 12 The Apple Inc. | 2023 Form 10-K | 12 The Company is | 2023 Form 10-K | 12 The Company is subject to to comply with by March 2024 , or similar law in mechanism . Apple Inc. | 2023 Form 10-K | 13 The Apple Inc. | 2023 Form 10-K | 13 The Company is | 2023 Form 10-K | 13 The Company is also currently condition . Apple Inc. | 2023 Form 10-K | 14 Financial Apple Inc. | 2023 Form 10-K | 14 Financial Risks The | 2023 Form 10-K | 14 Financial Risks The Company expects condition . Apple Inc. | 2023 Form 10-K | 15 The Apple Inc. | 2023 Form 10-K | 15 The Company is | 2023 Form 10-K | 15 The Company is exposed to component . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company ’ s and employee retention . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 1C . Cybersecurity Not applicable . applicable . Apple Inc. | 2023 Form 10-K | 16 Item Apple Inc. | 2023 Form 10-K | 16 Item 2 . | 2023 Form 10-K | 16 Item 2 . Properties The Form 10-K | 16 Item 2 . Properties The Company ’ California . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company owned or of it business . Item 3 . Legal Proceedings Epic Games App Store . On September 10 , 2021 , the District . On September 10 , 2021 , the District Court ruled App Store . On April 24 , 2023 , the U.S. . On April 24 , 2023 , the U.S. Court of s ruling . On June 7 , 2023 , the Company . On June 7 , 2023 , the Company and Epic the decision . On June 30 , 2023 , the Circuit . On June 30 , 2023 , the Circuit Court denied both petition . On July 17 , 2023 , the Circuit . On July 17 , 2023 , the Circuit Court granted feature in Apple Watch Series 6 and 7 . In it Apple Watch Series 6 and 7 . In it complaint , sensing functionality . On October 26 , 2023 , the ITC . On October 26 , 2023 , the ITC entered a which includes Apple Watch Series 9 and Ultra 2 . The Watch Series 9 and Ultra 2 . The Order will not expected to end on December 25 , 2023 . The Company end on December 25 , 2023 . The Company intends to during the fourth quarter of 2023 that did not individually or materially adversely affected . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2023 Form 10-K | 17 PART Apple Inc. | 2023 Form 10-K | 17 PART II Item | 2023 Form 10-K | 17 PART II Item 5 . | 17 PART II Item 5 . Market for Registrant ’ . Holders As of October 20 , 2023 , there were As of October 20 , 2023 , there were 23,763 shareholder , 2023 , there were 23,763 shareholder of record . Purchases the three month ended September 30 , 2023 wa a follows month ended September 30 , 2023 wa a follows ( in the Plans or Programs ( 1 ) July 2 , 2023 Programs ( 1 ) July 2 , 2023 to August 5 1 ) July 2 , 2023 to August 5 , 2023 2 , 2023 to August 5 , 2023 : Open market 2023 to August 5 , 2023 : Open market and privately market and privately negotiated purchase 33,864 $ 191.62 33,864 August 6 privately negotiated purchase 33,864 $ 191.62 33,864 August 6 , 2023 negotiated purchase 33,864 $ 191.62 33,864 August 6 , 2023 to 33,864 $ 191.62 33,864 August 6 , 2023 to September 2 191.62 33,864 August 6 , 2023 to September 2 , 2023 6 , 2023 to September 2 , 2023 : August 2023 2023 to September 2 , 2023 : August 2023 ASRs 22,085 2 , 2023 : August 2023 ASRs 22,085 ( 2 ) 2023 : August 2023 ASRs 22,085 ( 2 ) ( 2 August 2023 ASRs 22,085 ( 2 ) ( 2 ) 22,085 22,085 ( 2 ) ( 2 ) 22,085 ( 2 ) 2 ) ( 2 ) 22,085 ( 2 ) Open market ( 2 ) 22,085 ( 2 ) Open market and privately market and privately negotiated purchase 30,299 $ 178.99 30,299 September 3 privately negotiated purchase 30,299 $ 178.99 30,299 September 3 , 2023 negotiated purchase 30,299 $ 178.99 30,299 September 3 , 2023 to 30,299 $ 178.99 30,299 September 3 , 2023 to September 30 178.99 30,299 September 3 , 2023 to September 30 , 2023 3 , 2023 to September 30 , 2023 : Open market 2023 to September 30 , 2023 : Open market and privately market and privately negotiated purchase 20,347 $ 176.31 20,347 Total 106,595 privately negotiated purchase 20,347 $ 176.31 20,347 Total 106,595 $ 74,069 negotiated purchase 20,347 $ 176.31 20,347 Total 106,595 $ 74,069 ( 20,347 $ 176.31 20,347 Total 106,595 $ 74,069 ( 1 ) 176.31 20,347 Total 106,595 $ 74,069 ( 1 ) As of Total 106,595 $ 74,069 ( 1 ) As of September 30 1 ) As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company wa authorized to purchase up to $ 90 billion of the Company ’ repurchase program announced on May 4 , 2023 , of which announced on May 4 , 2023 , of which $ 15.9 2023 , of which $ 15.9 billion had been utilized . During the fourth quarter of 2023 , the Company also utilized also utilized the final $ 4.6 billion under it previous repurchase most recently authorized in April 2022 . The program do not under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In August 2023 , ( 2 ) In August 2023 , the Company entered into for up-front payment totaling $ 5.0 billion . The total number in the first quarter of 2024 . Apple Inc. | 2023 2024 . Apple Inc. | 2023 Form 10-K | 18 Company Apple Inc. | 2023 Form 10-K | 18 Company Stock Performance | 2023 Form 10-K | 18 Company Stock Performance The following , the S & P 500 Index and the Dow Jones . The graph assumes $ 100 wa invested in each of , the S & P 500 Index and the Dow Jones the market close on September 28 , 2018 . Past stock close on September 28 , 2018 . Past stock price performance stock price performance . September 2018 September 2019 September 2020 September performance . September 2018 September 2019 September 2020 September 2021 September September 2018 September 2019 September 2020 September 2021 September 2022 September September 2019 September 2020 September 2021 September 2022 September 2023 Apple September 2020 September 2021 September 2022 September 2023 Apple Inc. $ September 2021 September 2022 September 2023 Apple Inc. $ 100 $ September 2023 Apple Inc. $ 100 $ 98 $ 204 $ Apple Inc. $ 100 $ 98 $ 204 $ 269 $ $ 100 $ 98 $ 204 $ 269 $ 277 $ $ 98 $ 204 $ 269 $ 277 $ 317 S $ 204 $ 269 $ 277 $ 317 S & P $ 269 $ 277 $ 317 S & P 500 Index $ 317 S & P 500 Index $ 100 $ 104 & P 500 Index $ 100 $ 104 $ 118 $ 500 Index $ 100 $ 104 $ 118 $ 161 $ $ 100 $ 104 $ 118 $ 161 $ 136 $ $ 104 $ 118 $ 161 $ 136 $ 160 Dow $ 118 $ 161 $ 136 $ 160 Dow Jones U.S. $ 161 $ 136 $ 160 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 105 $ 154 $ Supersector Index $ 100 $ 105 $ 154 $ 227 $ $ 100 $ 105 $ 154 $ 227 $ 164 $ $ 105 $ 154 $ 227 $ 164 $ 226 Item $ 154 $ 227 $ 164 $ 226 Item 6 . $ 227 $ 164 $ 226 Item 6 . [ Reserved $ 164 $ 226 Item 6 . [ Reserved ] Apple Reserved ] Apple Inc. | 2023 Form 10-K | 19 Item Apple Inc. | 2023 Form 10-K | 19 Item 7 . | 2023 Form 10-K | 19 Item 7 . Management ’ Form 10-K | 19 Item 7 . Management ’ s Discussion in Part II , Item 8 of this Form 10-K . Item 8 of this Form 10-K . This Item generally discus . This Item generally discus 2023 and 2022 item and year-to-year Item generally discus 2023 and 2022 item and year-to-year comparison between item and year-to-year comparison between 2023 and 2022 . Discussions of year-to-year comparison between 2023 and 2022 . Discussions of 2021 item and 2022 . Discussions of 2021 item and year-to-year comparison between item and year-to-year comparison between 2022 and 2021 are not included year-to-year comparison between 2022 and 2021 are not included , and in Part II , Item 7 of the Company ’ s s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 24 , 2022 . Fiscal Period year ended September 24 , 2022 . Fiscal Period The Company s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the in the first quarter of 2023 . The Company ’ s Company ’ s fiscal year 2023 spanned 53 week , whereas s fiscal year 2023 spanned 53 week , whereas fiscal year week , whereas fiscal year 2022 and 2021 spanned 52 week whereas fiscal year 2022 and 2021 spanned 52 week each . year 2022 and 2021 spanned 52 week each . Fiscal Year total net sale were $ 383.3 billion and net income wa and net income wa $ 97.0 billion during 2023 . The wa $ 97.0 billion during 2023 . The Company ’ s s total net sale decreased 3 % or $ 11.0 billion decreased 3 % or $ 11.0 billion during 2023 compared to or $ 11.0 billion during 2023 compared to 2022 . The billion during 2023 compared to 2022 . The weakness in foreign Significant announcement during fiscal year 2023 included the following : First the following : First Quarter 2023 : • iPad and iPad ; • Next-generation Apple TV 4K ; and • MLS Season streaming service . Second Quarter 2023 : • MacBook Pro 14 2023 : • MacBook Pro 14 ” , MacBook Pro 16 14 ” , MacBook Pro 16 ” and Mac mini ; Second-generation HomePod . Third Quarter 2023 : • MacBook Air 15 2023 : • MacBook Air 15 ” , Mac Studio and available in early calendar year 2024 ; and • iOS 17 2024 ; and • iOS 17 , macOS Sonoma , iPadOS , macOS Sonoma , iPadOS 17 , tvOS 17 and watchOS , iPadOS 17 , tvOS 17 and watchOS 10 , update , tvOS 17 and watchOS 10 , update to the Company operating system . Fourth Quarter 2023 : • iPhone 15 , Quarter 2023 : • iPhone 15 , iPhone 15 Plus , • iPhone 15 , iPhone 15 Plus , iPhone 15 Pro iPhone 15 Plus , iPhone 15 Pro and iPhone 15 Pro iPhone 15 Pro and iPhone 15 Pro Max ; and • and • Apple Watch Series 9 and Apple Watch Ultra 2 9 and Apple Watch Ultra 2 . In May 2023 , Ultra 2 . In May 2023 , the Company announced a program of up to $ 90 billion and raised it quarterly it quarterly dividend from $ 0.23 to $ 0.24 per share from $ 0.23 to $ 0.24 per share beginning in May per share beginning in May 2023 . During 2023 , the in May 2023 . During 2023 , the Company repurchased $ , the Company repurchased $ 76.6 billion of it common stock and dividend equivalent of $ 15.0 billion . Macroeconomic Conditions Macroeconomic condition . Apple Inc. | 2023 Form 10-K | 20 Segment Apple Inc. | 2023 Form 10-K | 20 Segment Operating Performance | 2023 Form 10-K | 20 Segment Operating Performance The following sale by reportable segment for 2023 , 2022 and 2021 ( reportable segment for 2023 , 2022 and 2021 ( dollar in for 2023 , 2022 and 2021 ( dollar in million ) dollar in million ) : 2023 Change 2022 Change 2021 Net million ) : 2023 Change 2022 Change 2021 Net sale by : 2023 Change 2022 Change 2021 Net sale by reportable segment reportable segment : Americas $ 162,560 ( 4 ) % $ : Americas $ 162,560 ( 4 ) % $ 169,658 11 ( 4 ) % $ 169,658 11 % $ 153,306 Europe 4 ) % $ 169,658 11 % $ 153,306 Europe 94,294 $ 169,658 11 % $ 153,306 Europe 94,294 ( 1 ) 11 % $ 153,306 Europe 94,294 ( 1 ) % 95,118 $ 153,306 Europe 94,294 ( 1 ) % 95,118 7 % 94,294 ( 1 ) % 95,118 7 % 89,307 Greater China ( 1 ) % 95,118 7 % 89,307 Greater China 72,559 ) % 95,118 7 % 89,307 Greater China 72,559 ( 2 7 % 89,307 Greater China 72,559 ( 2 ) % 74,200 89,307 Greater China 72,559 ( 2 ) % 74,200 9 % 72,559 ( 2 ) % 74,200 9 % 68,366 Japan 24,257 ( 2 ) % 74,200 9 % 68,366 Japan 24,257 ( ) % 74,200 9 % 68,366 Japan 24,257 ( 7 ) 74,200 9 % 68,366 Japan 24,257 ( 7 ) % 25,977 % 68,366 Japan 24,257 ( 7 ) % 25,977 ( 9 24,257 ( 7 ) % 25,977 ( 9 ) % 28,482 7 ) % 25,977 ( 9 ) % 28,482 Rest of 25,977 ( 9 ) % 28,482 Rest of Asia Pacific 29,615 28,482 Rest of Asia Pacific 29,615 1 % 29,375 11 % Rest of Asia Pacific 29,615 1 % 29,375 11 % 26,356 Asia Pacific 29,615 1 % 29,375 11 % 26,356 Total net Pacific 29,615 1 % 29,375 11 % 26,356 Total net sale 1 % 29,375 11 % 26,356 Total net sale $ 383,285 26,356 Total net sale $ 383,285 ( 3 ) % $ net sale $ 383,285 ( 3 ) % $ 394,328 8 ( 3 ) % $ 394,328 8 % $ 365,817 Americas 3 ) % $ 394,328 8 % $ 365,817 Americas Americas $ 394,328 8 % $ 365,817 Americas Americas net sale decreased Americas Americas net sale decreased 4 % or $ 7.1 billion decreased 4 % or $ 7.1 billion during 2023 compared to or $ 7.1 billion during 2023 compared to 2022 due to billion during 2023 compared to 2022 due to lower net sale Europe Europe net sale decreased 1 % or $ 824 million decreased 1 % or $ 824 million during 2023 compared to or $ 824 million during 2023 compared to 2022 . The million during 2023 compared to 2022 . The weakness in foreign Greater China net sale decreased 2 % or $ 1.6 billion decreased 2 % or $ 1.6 billion during 2023 compared to or $ 1.6 billion during 2023 compared to 2022 . The billion during 2023 compared to 2022 . The weakness in the Japan Japan net sale decreased 7 % or $ 1.7 billion decreased 7 % or $ 1.7 billion during 2023 compared to or $ 1.7 billion during 2023 compared to 2022 . The billion during 2023 compared to 2022 . The weakness in the Asia Pacific net sale increased 1 % or $ 240 million increased 1 % or $ 240 million during 2023 compared to or $ 240 million during 2023 compared to 2022 . The million during 2023 compared to 2022 . The weakness in foreign iPad . Apple Inc. | 2023 Form 10-K | 21 Products Apple Inc. | 2023 Form 10-K | 21 Products and Services | 2023 Form 10-K | 21 Products and Services Performance The net sale by category for 2023 , 2022 and 2021 ( by category for 2023 , 2022 and 2021 ( dollar in for 2023 , 2022 and 2021 ( dollar in million ) dollar in million ) : 2023 Change 2022 Change 2021 Net million ) : 2023 Change 2022 Change 2021 Net sale by : 2023 Change 2022 Change 2021 Net sale by category : by category : iPhone ( 1 ) $ 200,583 ( 2 iPhone ( 1 ) $ 200,583 ( 2 ) % $ 1 ) $ 200,583 ( 2 ) % $ 205,489 7 ( 2 ) % $ 205,489 7 % $ 191,973 Mac 2 ) % $ 205,489 7 % $ 191,973 Mac ( $ 205,489 7 % $ 191,973 Mac ( 1 ) 29,357 % $ 191,973 Mac ( 1 ) 29,357 ( 27 ) 191,973 Mac ( 1 ) 29,357 ( 27 ) % 40,177 ( 1 ) 29,357 ( 27 ) % 40,177 14 % 29,357 ( 27 ) % 40,177 14 % 35,190 iPad ( ( 27 ) % 40,177 14 % 35,190 iPad ( 1 ) % 40,177 14 % 35,190 iPad ( 1 ) 28,300 14 % 35,190 iPad ( 1 ) 28,300 ( 3 ) 35,190 iPad ( 1 ) 28,300 ( 3 ) % 29,292 ( 1 ) 28,300 ( 3 ) % 29,292 ( 8 28,300 ( 3 ) % 29,292 ( 8 ) % 31,862 3 ) % 29,292 ( 8 ) % 31,862 Wearables , 29,292 ( 8 ) % 31,862 Wearables , Home and Accessories , Home and Accessories ( 1 ) 39,845 ( 3 ) and Accessories ( 1 ) 39,845 ( 3 ) % 41,241 ( 1 ) 39,845 ( 3 ) % 41,241 7 % 39,845 ( 3 ) % 41,241 7 % 38,367 Services ( ( 3 ) % 41,241 7 % 38,367 Services ( 2 ) % 41,241 7 % 38,367 Services ( 2 ) 85,200 7 % 38,367 Services ( 2 ) 85,200 9 % 78,129 38,367 Services ( 2 ) 85,200 9 % 78,129 14 % Services ( 2 ) 85,200 9 % 78,129 14 % 68,425 2 ) 85,200 9 % 78,129 14 % 68,425 Total net ) 85,200 9 % 78,129 14 % 68,425 Total net sale 9 % 78,129 14 % 68,425 Total net sale $ 383,285 68,425 Total net sale $ 383,285 ( 3 ) % $ net sale $ 383,285 ( 3 ) % $ 394,328 8 ( 3 ) % $ 394,328 8 % $ 365,817 ( 3 ) % $ 394,328 8 % $ 365,817 ( 1 $ 394,328 8 % $ 365,817 ( 1 ) Products net 8 % $ 365,817 ( 1 ) Products net sale include the respective product . ( 2 ) Services net sale include iPhone iPhone net sale decreased 2 % or $ 4.9 billion decreased 2 % or $ 4.9 billion during 2023 compared to or $ 4.9 billion during 2023 compared to 2022 due to billion during 2023 compared to 2022 due to lower net sale Mac Mac net sale decreased 27 % or $ 10.8 billion decreased 27 % or $ 10.8 billion during 2023 compared to or $ 10.8 billion during 2023 compared to 2022 due primarily billion during 2023 compared to 2022 due primarily to lower net iPad iPad net sale decreased 3 % or $ 1.0 billion decreased 3 % or $ 1.0 billion during 2023 compared to or $ 1.0 billion during 2023 compared to 2022 due primarily billion during 2023 compared to 2022 due primarily to lower net combined net sale of iPad 9th and 10th generation . Wearables sale of iPad 9th and 10th generation . Wearables , Home and Accessories net sale decreased 3 % or $ 1.4 billion decreased 3 % or $ 1.4 billion during 2023 compared to or $ 1.4 billion during 2023 compared to 2022 due primarily billion during 2023 compared to 2022 due primarily to lower net Services Services net sale increased 9 % or $ 7.1 billion increased 9 % or $ 7.1 billion during 2023 compared to or $ 7.1 billion during 2023 compared to 2022 due to billion during 2023 compared to 2022 due to higher net sale business . Apple Inc. | 2023 Form 10-K | 22 Gross Apple Inc. | 2023 Form 10-K | 22 Gross Margin Products | 2023 Form 10-K | 22 Gross Margin Products and Services and gross margin percentage for 2023 , 2022 and 2021 were margin percentage for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 2022 2021 Gross margin : in million ) : 2023 2022 2021 Gross margin : Products million ) : 2023 2022 2021 Gross margin : Products $ Gross margin : Products $ 108,803 $ 114,728 $ 105,126 Services : Products $ 108,803 $ 114,728 $ 105,126 Services 60,345 56,054 $ 108,803 $ 114,728 $ 105,126 Services 60,345 56,054 47,710 Total $ 114,728 $ 105,126 Services 60,345 56,054 47,710 Total gross margin 114,728 $ 105,126 Services 60,345 56,054 47,710 Total gross margin $ $ 105,126 Services 60,345 56,054 47,710 Total gross margin $ 169,148 47,710 Total gross margin $ 169,148 $ 170,782 $ 152,836 Gross gross margin $ 169,148 $ 170,782 $ 152,836 Gross margin percentage $ 169,148 $ 170,782 $ 152,836 Gross margin percentage : Products Gross margin percentage : Products 36.5 % 36.3 % 35.3 % percentage : Products 36.5 % 36.3 % 35.3 % Services 70.8 Products 36.5 % 36.3 % 35.3 % Services 70.8 % 71.7 36.3 % 35.3 % Services 70.8 % 71.7 % 69.7 % 35.3 % Services 70.8 % 71.7 % 69.7 % Total gross Services 70.8 % 71.7 % 69.7 % Total gross margin percentage % Total gross margin percentage 44.1 % 43.3 % 41.8 % gross margin percentage 44.1 % 43.3 % 41.8 % Products Gross percentage 44.1 % 43.3 % 41.8 % Products Gross Margin Products Products gross margin decreased during 2023 compared to 2022 due to decreased during 2023 compared to 2022 due to the weakness in gross margin percentage increased during 2023 compared to 2022 due to increased during 2023 compared to 2022 due to cost saving and Services gross margin increased during 2023 compared to 2022 due primarily increased during 2023 compared to 2022 due primarily to higher Services gross margin percentage decreased during 2023 compared to 2022 due to decreased during 2023 compared to 2022 due to higher Services cost in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2023 , 2022 and 2021 were Operating expense for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 Change 2022 Change 2021 Research million ) : 2023 Change 2022 Change 2021 Research and development : 2023 Change 2022 Change 2021 Research and development $ 29,915 2021 Research and development $ 29,915 14 % $ 26,251 20 Research and development $ 29,915 14 % $ 26,251 20 % $ 29,915 14 % $ 26,251 20 % $ 21,914 Percentage 29,915 14 % $ 26,251 20 % $ 21,914 Percentage of $ 26,251 20 % $ 21,914 Percentage of total net sale Percentage of total net sale 8 % 7 % 6 % total net sale 8 % 7 % 6 % Selling , sale 8 % 7 % 6 % Selling , general and , general and administrative $ 24,932 ( 1 ) % $ and administrative $ 24,932 ( 1 ) % $ 25,094 14 ( 1 ) % $ 25,094 14 % $ 21,973 Percentage 1 ) % $ 25,094 14 % $ 21,973 Percentage of $ 25,094 14 % $ 21,973 Percentage of total net sale Percentage of total net sale 7 % 6 % 6 % total net sale 7 % 6 % 6 % Total operating sale 7 % 6 % 6 % Total operating expense $ % Total operating expense $ 54,847 7 % $ 51,345 17 Total operating expense $ 54,847 7 % $ 51,345 17 % $ 54,847 7 % $ 51,345 17 % $ 43,887 Percentage 54,847 7 % $ 51,345 17 % $ 43,887 Percentage of $ 51,345 17 % $ 43,887 Percentage of total net sale Percentage of total net sale 14 % 13 % 12 % total net sale 14 % 13 % 12 % Research and sale 14 % 13 % 12 % Research and Development The R & D expense in 2023 wa driven primarily by increase expense wa relatively flat in 2023 compared to 2022 . Apple flat in 2023 compared to 2022 . Apple Inc. | 2023 2022 . Apple Inc. | 2023 Form 10-K | 23 Provision Apple Inc. | 2023 Form 10-K | 23 Provision for Income | 2023 Form 10-K | 23 Provision for Income Taxes Provision federal income tax rate for 2023 , 2022 and 2021 were tax rate for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( dollar dollar in million ) : 2023 2022 2021 Provision for income in million ) : 2023 2022 2021 Provision for income tax million ) : 2023 2022 2021 Provision for income tax $ Provision for income tax $ 16,741 $ 19,300 $ 14,527 Effective income tax $ 16,741 $ 19,300 $ 14,527 Effective tax rate $ 16,741 $ 19,300 $ 14,527 Effective tax rate 14.7 % $ 14,527 Effective tax rate 14.7 % 16.2 % 13.3 % Effective tax rate 14.7 % 16.2 % 13.3 % Statutory federal rate 14.7 % 16.2 % 13.3 % Statutory federal income tax Statutory federal income tax rate 21 % 21 % 21 % income tax rate 21 % 21 % 21 % The Company rate 21 % 21 % 21 % The Company ’ s s effective tax rate for 2023 and 2022 wa lower than tax rate for 2023 and 2022 wa lower than the statutory s effective tax rate for 2023 wa lower compared to 2022 2023 wa lower compared to 2022 due primarily to a lower Department of the Treasury in 2022 , partially offset by lower security , which totaled $ 148.3 billion a of September 30 148.3 billion a of September 30 , 2023 , along with a of September 30 , 2023 , along with cash generated return program over the next 12 month and beyond . The : Debt As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had outstanding aggregate principal amount of $ 106.6 billion ( collectively the “ ” ) , with $ 9.9 billion payable within 12 month $ 9.9 billion payable within 12 month . Future interest payment with the Notes total $ 41.1 billion , with $ 2.9 41.1 billion , with $ 2.9 billion payable within 12 month $ 2.9 billion payable within 12 month . The Company also program . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had $ , the Company had $ 6.0 billion of commercial paper outstanding of which wa payable within 12 month . Leases The Company space . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had fixed lease payment obligation of $ 15.8 billion , with $ 2.0 15.8 billion , with $ 2.0 billion payable within 12 month $ 2.0 billion payable within 12 month . Manufacturing Purchase Obligations supplier . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had manufacturing manufacturing purchase obligation of $ 53.1 billion , with $ 52.9 53.1 billion , with $ 52.9 billion payable within 12 month $ 52.9 billion payable within 12 month . The Company ’ right . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had other other purchase obligation of $ 21.9 billion , with $ 5.6 21.9 billion , with $ 5.6 billion payable within 12 month $ 5.6 billion payable within 12 month . Deemed Repatriation Tax Tax Payable As of September 30 , 2023 , the balance As of September 30 , 2023 , the balance of the Cuts and Jobs Act of 2017 ( the “ Act ” Act ” ) wa $ 22.0 billion , with $ 6.5 22.0 billion , with $ 6.5 billion expected to be paid expected to be paid within 12 month . Apple Inc. | month . Apple Inc. | 2023 Form 10-K | 24 Capital Apple Inc. | 2023 Form 10-K | 24 Capital Return Program | 2023 Form 10-K | 24 Capital Return Program In addition share . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company ’ s quarterly cash dividend wa $ 0.24 per share . The Company the amount reported . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy result . Apple Inc. | 2023 Form 10-K | 25 Item Apple Inc. | 2023 Form 10-K | 25 Item 7A . | 2023 Form 10-K | 25 Item 7A . Quantitative and Form 10-K | 25 Item 7A . Quantitative and Qualitative Disclosures interest rate a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( dollar in 2023 and September 24 , 2022 ( dollar in million ) Interest Rate Increase Potential Impact 2023 2022 Investment portfolio 100 basis Rate Increase Potential Impact 2023 2022 Investment portfolio 100 basis point Impact 2023 2022 Investment portfolio 100 basis point , all tenor Decline in fair value $ 3,089 $ 4,022 Term debt 100 fair value $ 3,089 $ 4,022 Term debt 100 basis point 3,089 $ 4,022 Term debt 100 basis point , all tenor in annual interest expense $ 194 $ 201 Foreign Exchange Rate interest expense $ 194 $ 201 Foreign Exchange Rate Risk The the Company estimate , with 95 % confidence , a maximum in fair value of $ 669 million and $ 1.0 billion $ 669 million and $ 1.0 billion a of September 30 1.0 billion a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , respectively . 2023 and September 24 , 2022 , respectively . Changes in derivative . Apple Inc. | 2023 Form 10-K | 26 Item Apple Inc. | 2023 Form 10-K | 26 Item 8 . | 2023 Form 10-K | 26 Item 8 . Financial Statements Form 10-K | 26 Item 8 . Financial Statements and Supplementary for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 28 Consolidated Statements 2022 and September 25 , 2021 28 Consolidated Statements of Comprehensive and September 25 , 2021 28 Consolidated Statements of Comprehensive Income for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 29 Consolidated Balance 2022 and September 25 , 2021 29 Consolidated Balance Sheets a and September 25 , 2021 29 Consolidated Balance Sheets a of Balance Sheets a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 30 Consolidated Statements 2023 and September 24 , 2022 30 Consolidated Statements of Shareholders and September 24 , 2022 30 Consolidated Statements of Shareholders ’ for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 31 Consolidated Statements 2022 and September 25 , 2021 31 Consolidated Statements of Cash and September 25 , 2021 31 Consolidated Statements of Cash Flows for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 32 Notes to 2022 and September 25 , 2021 32 Notes to Consolidated Financial and September 25 , 2021 32 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 33 Reports of Independent Registered Public Independent Registered Public Accounting Firm 49 All financial statement schedule have note . Apple Inc. | 2023 Form 10-K | 27 Apple Apple Inc. | 2023 Form 10-K | 27 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 27 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 30 , 2023 September 24 , Years ended September 30 , 2023 September 24 , 2022 September September 30 , 2023 September 24 , 2022 September 25 , , 2023 September 24 , 2022 September 25 , 2021 Net September 24 , 2022 September 25 , 2021 Net sale : , 2022 September 25 , 2021 Net sale : Products $ Net sale : Products $ 298,085 $ 316,199 $ 297,392 Services : Products $ 298,085 $ 316,199 $ 297,392 Services 85,200 78,129 $ 298,085 $ 316,199 $ 297,392 Services 85,200 78,129 68,425 Total $ 316,199 $ 297,392 Services 85,200 78,129 68,425 Total net sale 316,199 $ 297,392 Services 85,200 78,129 68,425 Total net sale 383,285 $ 297,392 Services 85,200 78,129 68,425 Total net sale 383,285 394,328 78,129 68,425 Total net sale 383,285 394,328 365,817 Cost of sale 68,425 Total net sale 383,285 394,328 365,817 Cost of sale : Total net sale 383,285 394,328 365,817 Cost of sale : Products Cost of sale : Products 189,282 201,471 192,266 Services 24,855 22,075 of sale : Products 189,282 201,471 192,266 Services 24,855 22,075 20,715 sale : Products 189,282 201,471 192,266 Services 24,855 22,075 20,715 Total Products 189,282 201,471 192,266 Services 24,855 22,075 20,715 Total cost of 189,282 201,471 192,266 Services 24,855 22,075 20,715 Total cost of sale 201,471 192,266 Services 24,855 22,075 20,715 Total cost of sale 214,137 20,715 Total cost of sale 214,137 223,546 212,981 Gross margin 169,148 Total cost of sale 214,137 223,546 212,981 Gross margin 169,148 170,782 cost of sale 214,137 223,546 212,981 Gross margin 169,148 170,782 152,836 214,137 223,546 212,981 Gross margin 169,148 170,782 152,836 Operating expense : 223,546 212,981 Gross margin 169,148 170,782 152,836 Operating expense : Research 212,981 Gross margin 169,148 170,782 152,836 Operating expense : Research and expense : Research and development 29,915 26,251 21,914 Selling , general : Research and development 29,915 26,251 21,914 Selling , general and Research and development 29,915 26,251 21,914 Selling , general and administrative Selling , general and administrative 24,932 25,094 21,973 Total operating expense , general and administrative 24,932 25,094 21,973 Total operating expense 54,847 general and administrative 24,932 25,094 21,973 Total operating expense 54,847 51,345 25,094 21,973 Total operating expense 54,847 51,345 43,887 Operating income 114,301 21,973 Total operating expense 54,847 51,345 43,887 Operating income 114,301 119,437 Total operating expense 54,847 51,345 43,887 Operating income 114,301 119,437 108,949 54,847 51,345 43,887 Operating income 114,301 119,437 108,949 Other income/ ( 51,345 43,887 Operating income 114,301 119,437 108,949 Other income/ ( expense 43,887 Operating income 114,301 119,437 108,949 Other income/ ( expense ) expense ) , net ( 565 ) ( 334 ) 258 net ( 565 ) ( 334 ) 258 Income before provision 565 ) ( 334 ) 258 Income before provision for income before provision for income tax 113,736 119,103 109,207 Provision for income provision for income tax 113,736 119,103 109,207 Provision for income tax for income tax 113,736 119,103 109,207 Provision for income tax 16,741 109,207 Provision for income tax 16,741 19,300 14,527 Net income $ Provision for income tax 16,741 19,300 14,527 Net income $ 96,995 for income tax 16,741 19,300 14,527 Net income $ 96,995 $ 19,300 14,527 Net income $ 96,995 $ 99,803 $ 94,680 Earnings Net income $ 96,995 $ 99,803 $ 94,680 Earnings per share $ 96,995 $ 99,803 $ 94,680 Earnings per share : Basic per share : Basic $ 6.16 $ 6.15 $ 5.67 Diluted : Basic $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.16 $ 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 6.15 $ 5.67 Diluted $ 6.13 $ 6.11 $ 5.61 Shares 5.67 Diluted $ 6.13 $ 6.11 $ 5.61 Shares used in $ 6.13 $ 6.11 $ 5.61 Shares used in computing earnings earnings per share : Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 per share : Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 16,864,919 share : Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 16,864,919 See Basic 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 16,864,919 See accompanying Notes 15,744,231 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 16,864,919 See accompanying Notes to 16,215,963 16,701,272 Diluted 15,812,547 16,325,819 16,864,919 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 28 Apple Apple Inc. | 2023 Form 10-K | 28 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 28 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 30 , 2023 September 24 , Years ended September 30 , 2023 September 24 , 2022 September September 30 , 2023 September 24 , 2022 September 25 , , 2023 September 24 , 2022 September 25 , 2021 Net September 24 , 2022 September 25 , 2021 Net income $ , 2022 September 25 , 2021 Net income $ 96,995 $ , 2021 Net income $ 96,995 $ 99,803 $ 94,680 Other Net income $ 96,995 $ 99,803 $ 94,680 Other comprehensive income/ $ 96,995 $ 99,803 $ 94,680 Other comprehensive income/ ( loss , net of tax ( 765 ) ( 1,511 ) 501 tax ( 765 ) ( 1,511 ) 501 Change in unrealized 765 ) ( 1,511 ) 501 Change in unrealized gains/losses on fair value of derivative instrument 323 3,212 32 Adjustment for net value of derivative instrument 323 3,212 32 Adjustment for net ( of derivative instrument 323 3,212 32 Adjustment for net ( gain included in net income ( 1,717 ) ( 1,074 ) 1,003 income ( 1,717 ) ( 1,074 ) 1,003 Total change in 1,717 ) ( 1,074 ) 1,003 Total change in unrealized gains/losses gains/losses on derivative instrument ( 1,394 ) 2,138 1,035 Change in derivative instrument ( 1,394 ) 2,138 1,035 Change in unrealized gains/losses instrument ( 1,394 ) 2,138 1,035 Change in unrealized gains/losses on value of marketable debt security 1,563 ( 12,104 ) ( 694 marketable debt security 1,563 ( 12,104 ) ( 694 ) Adjustment 1,563 ( 12,104 ) ( 694 ) Adjustment for net ( and included in net income 253 205 ( 273 ) Total included in net income 253 205 ( 273 ) Total change net income 253 205 ( 273 ) Total change in unrealized gains/losses on marketable debt security 1,816 ( 11,899 ) ( 967 marketable debt security 1,816 ( 11,899 ) ( 967 ) Total 1,816 ( 11,899 ) ( 967 ) Total other comprehensive income/ income/ ( loss ) ( 343 ) ( 11,272 ) 569 ) ( 343 ) ( 11,272 ) 569 Total comprehensive income 343 ) ( 11,272 ) 569 Total comprehensive income $ 96,652 569 Total comprehensive income $ 96,652 $ 88,531 $ 95,249 See comprehensive income $ 96,652 $ 88,531 $ 95,249 See accompanying Notes $ 96,652 $ 88,531 $ 95,249 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 29 Apple Apple Inc. | 2023 Form 10-K | 29 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 29 Apple Inc. CONSOLIDATED BALANCE SHEETS and par value ) September 30 , 2023 September 24 , value ) September 30 , 2023 September 24 , 2022 ASSETS September 30 , 2023 September 24 , 2022 ASSETS : Current , 2023 September 24 , 2022 ASSETS : Current asset : Cash and cash equivalent $ 29,965 $ 23,646 Marketable security 31,590 cash equivalent $ 29,965 $ 23,646 Marketable security 31,590 24,658 Accounts 29,965 $ 23,646 Marketable security 31,590 24,658 Accounts receivable , net $ 23,646 Marketable security 31,590 24,658 Accounts receivable , net 29,508 24,658 Accounts receivable , net 29,508 28,184 Vendor non-trade receivables 31,477 Accounts receivable , net 29,508 28,184 Vendor non-trade receivables 31,477 32,748 29,508 28,184 Vendor non-trade receivables 31,477 32,748 Inventories 6,331 4,946 Other 28,184 Vendor non-trade receivables 31,477 32,748 Inventories 6,331 4,946 Other current non-trade receivables 31,477 32,748 Inventories 6,331 4,946 Other current asset 14,695 receivables 31,477 32,748 Inventories 6,331 4,946 Other current asset 14,695 21,223 6,331 4,946 Other current asset 14,695 21,223 Total current asset 143,566 4,946 Other current asset 14,695 21,223 Total current asset 143,566 135,405 14,695 21,223 Total current asset 143,566 135,405 Non-current asset : Marketable 21,223 Total current asset 143,566 135,405 Non-current asset : Marketable security Non-current asset : Marketable security 100,544 120,805 Property , plant and asset : Marketable security 100,544 120,805 Property , plant and equipment plant and equipment , net 43,715 42,117 Other non-current asset 64,758 and equipment , net 43,715 42,117 Other non-current asset 64,758 54,428 43,715 42,117 Other non-current asset 64,758 54,428 Total non-current asset 209,017 42,117 Other non-current asset 64,758 54,428 Total non-current asset 209,017 217,350 64,758 54,428 Total non-current asset 209,017 217,350 Total asset $ 352,583 54,428 Total non-current asset 209,017 217,350 Total asset $ 352,583 $ 209,017 217,350 Total asset $ 352,583 $ 352,755 LIABILITIES AND SHAREHOLDERS Total asset $ 352,583 $ 352,755 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 62,611 $ 64,115 Other current liability Accounts payable $ 62,611 $ 64,115 Other current liability 58,829 60,845 $ 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 64,115 Other current liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial liability 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 58,829 60,845 Deferred revenue 8,061 7,912 Commercial paper 5,985 9,982 Term revenue 8,061 7,912 Commercial paper 5,985 9,982 Term debt 9,822 11,128 8,061 7,912 Commercial paper 5,985 9,982 Term debt 9,822 11,128 Total paper 5,985 9,982 Term debt 9,822 11,128 Total current liability 145,308 5,985 9,982 Term debt 9,822 11,128 Total current liability 145,308 153,982 9,822 11,128 Total current liability 145,308 153,982 Non-current liability : Term 11,128 Total current liability 145,308 153,982 Non-current liability : Term debt Non-current liability : Term debt 95,281 98,959 Other non-current liability 49,848 liability : Term debt 95,281 98,959 Other non-current liability 49,848 49,142 95,281 98,959 Other non-current liability 49,848 49,142 Total non-current liability 145,129 98,959 Other non-current liability 49,848 49,142 Total non-current liability 145,129 148,101 49,848 49,142 Total non-current liability 145,129 148,101 Total liability 290,437 302,083 49,142 Total non-current liability 145,129 148,101 Total liability 290,437 302,083 Commitments liability 145,129 148,101 Total liability 290,437 302,083 Commitments and contingency Shareholders 145,129 148,101 Total liability 290,437 302,083 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 50,400,000 share $ 0.00001 par value : 50,400,000 share authorized ; 15,550,061 and : 50,400,000 share authorized ; 15,550,061 and 15,943,425 share issued and share authorized ; 15,550,061 and 15,943,425 share issued and outstanding , issued and outstanding , respectively 73,812 64,849 Accumulated deficit ( 214 and outstanding , respectively 73,812 64,849 Accumulated deficit ( 214 ) 73,812 64,849 Accumulated deficit ( 214 ) ( 3,068 ) Accumulated deficit ( 214 ) ( 3,068 ) Accumulated other comprehensive loss Accumulated other comprehensive loss ( 11,452 ) ( 11,109 ) Total loss ( 11,452 ) ( 11,109 ) Total shareholder ’ equity ) Total shareholder ’ equity 62,146 50,672 Total liability and shareholder Total shareholder ’ equity 62,146 50,672 Total liability and shareholder ’ and shareholder ’ equity $ 352,583 $ 352,755 See accompanying Notes ’ equity $ 352,583 $ 352,755 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 30 Apple Apple Inc. | 2023 Form 10-K | 30 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 30 Apple Inc. CONSOLIDATED STATEMENTS OF amount ) Years ended September 30 , 2023 September 24 , Years ended September 30 , 2023 September 24 , 2022 September September 30 , 2023 September 24 , 2022 September 25 , , 2023 September 24 , 2022 September 25 , 2021 Total September 24 , 2022 September 25 , 2021 Total shareholder ’ , 2022 September 25 , 2021 Total shareholder ’ equity , equity , beginning balance $ 50,672 $ 63,090 $ 65,339 Common beginning balance $ 50,672 $ 63,090 $ 65,339 Common stock and $ 50,672 $ 63,090 $ 65,339 Common stock and additional paid-in paid-in capital : Beginning balance 64,849 57,365 50,779 Common stock issued capital : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 : Beginning balance 64,849 57,365 50,779 Common stock issued 1,346 1,175 57,365 50,779 Common stock issued 1,346 1,175 1,105 Common stock withheld 50,779 Common stock issued 1,346 1,175 1,105 Common stock withheld related Common stock issued 1,346 1,175 1,105 Common stock withheld related to settlement of equity award ( 3,521 ) ( 2,971 ) ( award ( 3,521 ) ( 2,971 ) ( 2,627 ) Share-based ) ( 2,971 ) ( 2,627 ) Share-based compensation 11,138 9,280 ( 2,627 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 2,627 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 64,849 ) Share-based compensation 11,138 9,280 8,108 Ending balance 73,812 64,849 57,365 11,138 9,280 8,108 Ending balance 73,812 64,849 57,365 Retained earnings/ ( 9,280 8,108 Ending balance 73,812 64,849 57,365 Retained earnings/ ( Accumulated 8,108 Ending balance 73,812 64,849 57,365 Retained earnings/ ( Accumulated deficit ) : Beginning balance ( 3,068 ) 5,562 14,966 Net income Beginning balance ( 3,068 ) 5,562 14,966 Net income 96,995 99,803 balance ( 3,068 ) 5,562 14,966 Net income 96,995 99,803 94,680 ) 5,562 14,966 Net income 96,995 99,803 94,680 Dividends and dividend 5,562 14,966 Net income 96,995 99,803 94,680 Dividends and dividend equivalent 14,966 Net income 96,995 99,803 94,680 Dividends and dividend equivalent declared and dividend equivalent declared ( 14,996 ) ( 14,793 ) ( declared ( 14,996 ) ( 14,793 ) ( 14,431 ) Common ) ( 14,793 ) ( 14,431 ) Common stock withheld related settlement of equity award ( 2,099 ) ( 3,454 ) ( award ( 2,099 ) ( 3,454 ) ( 4,151 ) Common ) ( 3,454 ) ( 4,151 ) Common stock repurchased ( ) Common stock repurchased ( 77,046 ) ( 90,186 ) ( repurchased ( 77,046 ) ( 90,186 ) ( 85,502 ) Ending ) ( 90,186 ) ( 85,502 ) Ending balance ( 214 85,502 ) Ending balance ( 214 ) ( 3,068 ) 5,562 balance ( 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive 214 ) ( 3,068 ) 5,562 Accumulated other comprehensive income/ ( ) : Beginning balance ( 11,109 ) 163 ( 406 ) Beginning balance ( 11,109 ) 163 ( 406 ) Other comprehensive ( 11,109 ) 163 ( 406 ) Other comprehensive income/ ( income/ ( loss ) ( 343 ) ( 11,272 ) 569 ) ( 343 ) ( 11,272 ) 569 Ending balance ( 343 ) ( 11,272 ) 569 Ending balance ( 11,452 ) ) 569 Ending balance ( 11,452 ) ( 11,109 ) 163 balance ( 11,452 ) ( 11,109 ) 163 Total shareholder ’ 11,452 ) ( 11,109 ) 163 Total shareholder ’ equity , equity , ending balance $ 62,146 $ 50,672 $ 63,090 Dividends ending balance $ 62,146 $ 50,672 $ 63,090 Dividends and dividend $ 62,146 $ 50,672 $ 63,090 Dividends and dividend equivalent declared per share or RSU $ 0.94 $ 0.90 $ 0.85 See or RSU $ 0.94 $ 0.90 $ 0.85 See accompanying Notes $ 0.94 $ 0.90 $ 0.85 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 31 Apple Apple Inc. | 2023 Form 10-K | 31 Apple Inc. CONSOLIDATED | 2023 Form 10-K | 31 Apple Inc. CONSOLIDATED STATEMENTS OF million ) Years ended September 30 , 2023 September 24 , Years ended September 30 , 2023 September 24 , 2022 September September 30 , 2023 September 24 , 2022 September 25 , , 2023 September 24 , 2022 September 25 , 2021 Cash September 24 , 2022 September 25 , 2021 Cash , cash , 2022 September 25 , 2021 Cash , cash equivalent and cash , beginning balance $ 24,977 $ 35,929 $ 39,789 Operating beginning balance $ 24,977 $ 35,929 $ 39,789 Operating activity : $ 24,977 $ 35,929 $ 39,789 Operating activity : Net income Operating activity : Net income 96,995 99,803 94,680 Adjustments to reconcile activity : Net income 96,995 99,803 94,680 Adjustments to reconcile net : Net income 96,995 99,803 94,680 Adjustments to reconcile net income activity : Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense : Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense 10,833 Depreciation and amortization 11,519 11,104 11,284 Share-based compensation expense 10,833 9,038 11,104 11,284 Share-based compensation expense 10,833 9,038 7,906 Other ( 2,227 11,284 Share-based compensation expense 10,833 9,038 7,906 Other ( 2,227 ) Share-based compensation expense 10,833 9,038 7,906 Other ( 2,227 ) 1,006 10,833 9,038 7,906 Other ( 2,227 ) 1,006 ( 4,921 ) 7,906 Other ( 2,227 ) 1,006 ( 4,921 ) Changes in ( 2,227 ) 1,006 ( 4,921 ) Changes in operating asset Accounts receivable , net ( 1,688 ) ( 1,823 ) ( net ( 1,688 ) ( 1,823 ) ( 10,125 ) Vendor ) ( 1,823 ) ( 10,125 ) Vendor non-trade receivables 1,271 10,125 ) Vendor non-trade receivables 1,271 ( 7,520 ) ( 3,903 Vendor non-trade receivables 1,271 ( 7,520 ) ( 3,903 ) Inventories 1,271 ( 7,520 ) ( 3,903 ) Inventories ( 1,618 ) ( 3,903 ) Inventories ( 1,618 ) 1,484 ( 2,642 ) ) Inventories ( 1,618 ) 1,484 ( 2,642 ) Other current ( 1,618 ) 1,484 ( 2,642 ) Other current and non-current current and non-current asset ( 5,684 ) ( 6,499 ) ( asset ( 5,684 ) ( 6,499 ) ( 8,042 ) Accounts ) ( 6,499 ) ( 8,042 ) Accounts payable ( 1,889 8,042 ) Accounts payable ( 1,889 ) 9,448 12,326 Other current Accounts payable ( 1,889 ) 9,448 12,326 Other current and non-current payable ( 1,889 ) 9,448 12,326 Other current and non-current liability Other current and non-current liability 3,031 6,110 7,475 Cash generated by current and non-current liability 3,031 6,110 7,475 Cash generated by operating and non-current liability 3,031 6,110 7,475 Cash generated by operating activity Cash generated by operating activity 110,543 122,151 104,038 Investing activity : generated by operating activity 110,543 122,151 104,038 Investing activity : Purchases by operating activity 110,543 122,151 104,038 Investing activity : Purchases of Purchases of marketable security ( 29,513 ) ( 76,923 ) ( security ( 29,513 ) ( 76,923 ) ( 109,558 ) Proceeds ) ( 76,923 ) ( 109,558 ) Proceeds from maturity of from maturity of marketable security 39,686 29,917 59,023 Proceeds from sale maturity of marketable security 39,686 29,917 59,023 Proceeds from sale of of marketable security 39,686 29,917 59,023 Proceeds from sale of marketable from sale of marketable security 5,828 37,446 47,460 Payments for acquisition sale of marketable security 5,828 37,446 47,460 Payments for acquisition of of marketable security 5,828 37,446 47,460 Payments for acquisition of property , plant and equipment ( 10,959 ) ( 10,708 ) ( equipment ( 10,959 ) ( 10,708 ) ( 11,085 ) Other ) ( 10,708 ) ( 11,085 ) Other ( 1,337 ) ( 11,085 ) Other ( 1,337 ) ( 2,086 ) ( Other ( 1,337 ) ( 2,086 ) ( 385 ) Cash ) ( 2,086 ) ( 385 ) Cash generated by/ ( used in ) investing activity 3,705 ( 22,354 ) ( 14,545 ) investing activity 3,705 ( 22,354 ) ( 14,545 ) Financing 3,705 ( 22,354 ) ( 14,545 ) Financing activity : Payments settlement of equity award ( 5,431 ) ( 6,223 ) ( award ( 5,431 ) ( 6,223 ) ( 6,556 ) Payments ) ( 6,223 ) ( 6,556 ) Payments for dividend and dividend and dividend equivalent ( 15,025 ) ( 14,841 ) ( equivalent ( 15,025 ) ( 14,841 ) ( 14,467 ) Repurchases ) ( 14,841 ) ( 14,467 ) Repurchases of common stock Repurchases of common stock ( 77,550 ) ( 89,402 ) ( stock ( 77,550 ) ( 89,402 ) ( 85,971 ) Proceeds ) ( 89,402 ) ( 85,971 ) Proceeds from issuance of of term debt , net 5,228 5,465 20,393 Repayments of term term debt , net 5,228 5,465 20,393 Repayments of term debt debt , net 5,228 5,465 20,393 Repayments of term debt ( Repayments of term debt ( 11,151 ) ( 9,543 ) ( debt ( 11,151 ) ( 9,543 ) ( 8,750 ) Proceeds ) ( 9,543 ) ( 8,750 ) Proceeds from/ ( Repayments commercial paper , net ( 3,978 ) 3,955 1,022 Other ( , net ( 3,978 ) 3,955 1,022 Other ( 581 ) net ( 3,978 ) 3,955 1,022 Other ( 581 ) ( ) 3,955 1,022 Other ( 581 ) ( 160 ) 976 Other ( 581 ) ( 160 ) 976 Cash used in 581 ) ( 160 ) 976 Cash used in financing activity used in financing activity ( 108,488 ) ( 110,749 ) ( activity ( 108,488 ) ( 110,749 ) ( 93,353 ) Increase/ ) ( 110,749 ) ( 93,353 ) Increase/ ( Decrease ) cash equivalent and restricted cash 5,760 ( 10,952 ) ( 3,860 and restricted cash 5,760 ( 10,952 ) ( 3,860 ) Cash 5,760 ( 10,952 ) ( 3,860 ) Cash , cash equivalent cash , ending balance $ 30,737 $ 24,977 $ 35,929 Supplemental ending balance $ 30,737 $ 24,977 $ 35,929 Supplemental cash flow $ 30,737 $ 24,977 $ 35,929 Supplemental cash flow disclosure : income tax , net $ 18,679 $ 19,573 $ 25,385 Cash , net $ 18,679 $ 19,573 $ 25,385 Cash paid for $ 18,679 $ 19,573 $ 25,385 Cash paid for interest $ Cash paid for interest $ 3,803 $ 2,865 $ 2,687 See for interest $ 3,803 $ 2,865 $ 2,687 See accompanying Notes $ 3,803 $ 2,865 $ 2,687 See accompanying Notes to Consolidated Statements . Apple Inc. | 2023 Form 10-K | 32 Apple Apple Inc. | 2023 Form 10-K | 32 Apple Inc. Notes | 2023 Form 10-K | 32 Apple Inc. Notes to Consolidated to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52- or 53-week period that end year is the 52- or 53-week period that end on the the first fiscal quarter of 2023 . The Company ’ s Company ’ s fiscal year 2023 spanned 53 week , whereas s fiscal year 2023 spanned 53 week , whereas fiscal year week , whereas fiscal year 2022 and 2021 spanned 52 week whereas fiscal year 2022 and 2021 spanned 52 week each . year 2022 and 2021 spanned 52 week each . Unless otherwise facility . Apple Inc. | 2023 Form 10-K | 33 Note Apple Inc. | 2023 Form 10-K | 33 Note 2 – | 2023 Form 10-K | 33 Note 2 – Revenue The Form 10-K | 33 Note 2 – Revenue The Company recognizes retains . Apple Inc. | 2023 Form 10-K | 34 Net Apple Inc. | 2023 Form 10-K | 34 Net sale disaggregated | 2023 Form 10-K | 34 Net sale disaggregated by significant significant product and service for 2023 , 2022 and 2021 were and service for 2023 , 2022 and 2021 were a follows for 2023 , 2022 and 2021 were a follows ( in ( in million ) : 2023 2022 2021 iPhone ( 1 in million ) : 2023 2022 2021 iPhone ( 1 ) million ) : 2023 2022 2021 iPhone ( 1 ) $ 2023 2022 2021 iPhone ( 1 ) $ 200,583 $ 205,489 iPhone ( 1 ) $ 200,583 $ 205,489 $ 191,973 Mac 1 ) $ 200,583 $ 205,489 $ 191,973 Mac ( 1 $ 200,583 $ 205,489 $ 191,973 Mac ( 1 ) 29,357 205,489 $ 191,973 Mac ( 1 ) 29,357 40,177 35,190 iPad 191,973 Mac ( 1 ) 29,357 40,177 35,190 iPad ( 1 Mac ( 1 ) 29,357 40,177 35,190 iPad ( 1 ) ( 1 ) 29,357 40,177 35,190 iPad ( 1 ) 28,300 29,357 40,177 35,190 iPad ( 1 ) 28,300 29,292 31,862 Wearables 35,190 iPad ( 1 ) 28,300 29,292 31,862 Wearables , Home iPad ( 1 ) 28,300 29,292 31,862 Wearables , Home and ( 1 ) 28,300 29,292 31,862 Wearables , Home and Accessories , Home and Accessories ( 1 ) 39,845 41,241 38,367 Services and Accessories ( 1 ) 39,845 41,241 38,367 Services ( 2 Accessories ( 1 ) 39,845 41,241 38,367 Services ( 2 ) ( 1 ) 39,845 41,241 38,367 Services ( 2 ) 85,200 39,845 41,241 38,367 Services ( 2 ) 85,200 78,129 68,425 Total 38,367 Services ( 2 ) 85,200 78,129 68,425 Total net sale Services ( 2 ) 85,200 78,129 68,425 Total net sale $ ( 2 ) 85,200 78,129 68,425 Total net sale $ 383,285 68,425 Total net sale $ 383,285 $ 394,328 $ 365,817 ( net sale $ 383,285 $ 394,328 $ 365,817 ( 1 ) $ 383,285 $ 394,328 $ 365,817 ( 1 ) Products net $ 394,328 $ 365,817 ( 1 ) Products net sale include the respective product . ( 2 ) Services net sale include Total net sale include $ 8.2 billion of revenue recognized in billion of revenue recognized in 2023 that wa included in deferred deferred revenue a of September 24 , 2022 , $ 7.5 a of September 24 , 2022 , $ 7.5 billion of 24 , 2022 , $ 7.5 billion of revenue recognized in billion of revenue recognized in 2022 that wa included in deferred deferred revenue a of September 25 , 2021 , and $ a of September 25 , 2021 , and $ 6.7 billion , 2021 , and $ 6.7 billion of revenue recognized in billion of revenue recognized in 2021 that wa included in deferred deferred revenue a of September 26 , 2020 . The Company a of September 26 , 2020 . The Company ’ s each reportable segment in Note 13 , “ Segment Information and and Geographic Data ” for 2023 , 2022 and 2021 , Data ” for 2023 , 2022 and 2021 , except in for 2023 , 2022 and 2021 , except in Greater China sale . As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the Company 2023 and September 24 , 2022 , the Company had total total deferred revenue of $ 12.1 billion and $ 12.4 billion $ 12.1 billion and $ 12.4 billion , respectively . As respectively . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company expects 67 2023 , the Company expects 67 % of total deferred revenue le than a year , 25 % within one-to-two year , % within one-to-two year , 7 % within two-to-three year and % within two-to-three year and 1 % in greater than three than three year . Note 3 – Earnings Per Share The diluted earnings per share for 2023 , 2022 and 2021 ( per share for 2023 , 2022 and 2021 ( net income for 2023 , 2022 and 2021 ( net income in million share in thousand ) : 2023 2022 2021 Numerator : Net in thousand ) : 2023 2022 2021 Numerator : Net income thousand ) : 2023 2022 2021 Numerator : Net income $ Numerator : Net income $ 96,995 $ 99,803 $ 94,680 Denominator Net income $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-average $ 96,995 $ 99,803 $ 94,680 Denominator : Weighted-average basic share : Weighted-average basic share outstanding 15,744,231 16,215,963 16,701,272 Effect of dilutive Weighted-average basic share outstanding 15,744,231 16,215,963 16,701,272 Effect of dilutive share-based basic share outstanding 15,744,231 16,215,963 16,701,272 Effect of dilutive share-based award Effect of dilutive share-based award 68,316 109,856 163,647 Weighted-average diluted share of dilutive share-based award 68,316 109,856 163,647 Weighted-average diluted share 15,812,547 dilutive share-based award 68,316 109,856 163,647 Weighted-average diluted share 15,812,547 16,325,819 109,856 163,647 Weighted-average diluted share 15,812,547 16,325,819 16,864,919 Basic earnings per 163,647 Weighted-average diluted share 15,812,547 16,325,819 16,864,919 Basic earnings per share Weighted-average diluted share 15,812,547 16,325,819 16,864,919 Basic earnings per share $ Basic earnings per share $ 6.16 $ 6.15 $ 5.67 Diluted per share $ 6.16 $ 6.15 $ 5.67 Diluted earnings per $ 6.16 $ 6.15 $ 5.67 Diluted earnings per share $ Diluted earnings per share $ 6.13 $ 6.11 $ 5.61 Approximately per share $ 6.13 $ 6.11 $ 5.61 Approximately 24 million $ 6.13 $ 6.11 $ 5.61 Approximately 24 million restricted stock $ 6.11 $ 5.61 Approximately 24 million restricted stock unit ( diluted earnings per share for 2023 because their effect would have antidilutive . Apple Inc. | 2023 Form 10-K | 35 Note Apple Inc. | 2023 Form 10-K | 35 Note 4 – | 2023 Form 10-K | 35 Note 4 – Financial Instruments Form 10-K | 35 Note 4 – Financial Instruments Cash , investment category a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : ( in million ) : 2023 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 28,359 $ — $ — $ $ — $ — $ 28,359 $ 28,359 $ — $ $ — $ 28,359 $ 28,359 $ — $ — Level $ — $ — Level 1 : Money market fund 481 1 : Money market fund 481 — — 481 481 — market fund 481 — — 481 481 — — Mutual fund fund 481 — — 481 481 — — Mutual fund and Mutual fund and equity security 442 12 ( 26 ) 428 fund and equity security 442 12 ( 26 ) 428 — equity security 442 12 ( 26 ) 428 — 428 — 442 12 ( 26 ) 428 — 428 — Subtotal 923 ( 26 ) 428 — 428 — Subtotal 923 12 ( 428 — 428 — Subtotal 923 12 ( 26 ) 909 — 428 — Subtotal 923 12 ( 26 ) 909 481 — Subtotal 923 12 ( 26 ) 909 481 428 — 923 12 ( 26 ) 909 481 428 — Level 2 12 ( 26 ) 909 481 428 — Level 2 ( ( 26 ) 909 481 428 — Level 2 ( 1 909 481 428 — Level 2 ( 1 ) : U.S. 428 — Level 2 ( 1 ) : U.S. Treasury security ) : U.S. Treasury security 19,406 — ( 1,292 ) 18,114 Treasury security 19,406 — ( 1,292 ) 18,114 35 5,468 12,611 19,406 — ( 1,292 ) 18,114 35 5,468 12,611 U.S. agency — ( 1,292 ) 18,114 35 5,468 12,611 U.S. agency security ( 1,292 ) 18,114 35 5,468 12,611 U.S. agency security 5,736 1,292 ) 18,114 35 5,468 12,611 U.S. agency security 5,736 — 5,468 12,611 U.S. agency security 5,736 — ( 600 ) 5,136 agency security 5,736 — ( 600 ) 5,136 36 271 4,829 5,736 — ( 600 ) 5,136 36 271 4,829 Non-U.S. government — ( 600 ) 5,136 36 271 4,829 Non-U.S. government security ( 600 ) 5,136 36 271 4,829 Non-U.S. government security 17,533 600 ) 5,136 36 271 4,829 Non-U.S. government security 17,533 6 271 4,829 Non-U.S. government security 17,533 6 ( 1,048 ) 16,491 4,829 Non-U.S. government security 17,533 6 ( 1,048 ) 16,491 — government security 17,533 6 ( 1,048 ) 16,491 — 11,332 5,159 17,533 6 ( 1,048 ) 16,491 — 11,332 5,159 Certificates of ( 1,048 ) 16,491 — 11,332 5,159 Certificates of deposit and 1,048 ) 16,491 — 11,332 5,159 Certificates of deposit and time of deposit and time deposit 1,354 — — 1,354 1,034 320 time deposit 1,354 — — 1,354 1,034 320 — Commercial paper deposit 1,354 — — 1,354 1,034 320 — Commercial paper 608 1,354 — — 1,354 1,034 320 — Commercial paper 608 — 1,034 320 — Commercial paper 608 — — 608 — 608 Commercial paper 608 — — 608 — 608 — Corporate debt 608 — — 608 — 608 — Corporate debt security 76,840 608 — Corporate debt security 76,840 6 ( 5,956 ) 70,890 — Corporate debt security 76,840 6 ( 5,956 ) 70,890 20 debt security 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 6 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 ( 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 — 5,956 ) 70,890 20 12,627 58,243 Municipal security 628 — ( 20 12,627 58,243 Municipal security 628 — ( 26 ) 602 Municipal security 628 — ( 26 ) 602 — 192 410 628 — ( 26 ) 602 — 192 410 Mortgage- and ( 26 ) 602 — 192 410 Mortgage- and asset-backed security 26 ) 602 — 192 410 Mortgage- and asset-backed security 22,365 410 Mortgage- and asset-backed security 22,365 6 ( 2,735 ) 19,636 Mortgage- and asset-backed security 22,365 6 ( 2,735 ) 19,636 — asset-backed security 22,365 6 ( 2,735 ) 19,636 — 344 19,292 22,365 6 ( 2,735 ) 19,636 — 344 19,292 Subtotal 144,470 ( 2,735 ) 19,636 — 344 19,292 Subtotal 144,470 18 ( 2,735 ) 19,636 — 344 19,292 Subtotal 144,470 18 ( 11,657 19,636 — 344 19,292 Subtotal 144,470 18 ( 11,657 ) 132,831 — 344 19,292 Subtotal 144,470 18 ( 11,657 ) 132,831 1,125 19,292 Subtotal 144,470 18 ( 11,657 ) 132,831 1,125 31,162 100,544 144,470 18 ( 11,657 ) 132,831 1,125 31,162 100,544 Total ( 18 ( 11,657 ) 132,831 1,125 31,162 100,544 Total ( 2 ( 11,657 ) 132,831 1,125 31,162 100,544 Total ( 2 ) 11,657 ) 132,831 1,125 31,162 100,544 Total ( 2 ) $ 1,125 31,162 100,544 Total ( 2 ) $ 173,752 $ 30 Total ( 2 ) $ 173,752 $ 30 $ ( 11,683 2 ) $ 173,752 $ 30 $ ( 11,683 ) $ 173,752 $ 30 $ ( 11,683 ) $ 162,099 $ 29,965 $ ( 11,683 ) $ 162,099 $ 29,965 $ 31,590 $ 11,683 ) $ 162,099 $ 29,965 $ 31,590 $ 100,544 2022 $ 162,099 $ 29,965 $ 31,590 $ 100,544 2022 Adjusted Cost $ 29,965 $ 31,590 $ 100,544 2022 Adjusted Cost Unrealized Gains 29,965 $ 31,590 $ 100,544 2022 Adjusted Cost Unrealized Gains Unrealized Non-Current Marketable Securities Cash $ 18,546 $ — $ — $ $ — $ — $ 18,546 $ 18,546 $ — $ $ — $ 18,546 $ 18,546 $ — $ — Level $ — $ — Level 1 : Money market fund 2,929 1 : Money market fund 2,929 — — 2,929 2,929 — market fund 2,929 — — 2,929 2,929 — — Mutual fund fund 2,929 — — 2,929 2,929 — — Mutual fund 274 2,929 — — Mutual fund 274 — ( 47 ) 227 Mutual fund 274 — ( 47 ) 227 — 227 — 274 — ( 47 ) 227 — 227 — Subtotal 3,203 ( 47 ) 227 — 227 — Subtotal 3,203 — ( 227 — 227 — Subtotal 3,203 — ( 47 ) 3,156 — Subtotal 3,203 — ( 47 ) 3,156 2,929 227 — 3,203 — ( 47 ) 3,156 2,929 227 — Level 2 — ( 47 ) 3,156 2,929 227 — Level 2 ( ( 47 ) 3,156 2,929 227 — Level 2 ( 1 3,156 2,929 227 — Level 2 ( 1 ) : U.S. 227 — Level 2 ( 1 ) : U.S. Treasury security ) : U.S. Treasury security 25,134 — ( 1,725 ) 23,409 Treasury security 25,134 — ( 1,725 ) 23,409 338 5,091 17,980 25,134 — ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency — ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency security ( 1,725 ) 23,409 338 5,091 17,980 U.S. agency security 5,823 1,725 ) 23,409 338 5,091 17,980 U.S. agency security 5,823 — 5,091 17,980 U.S. agency security 5,823 — ( 655 ) 5,168 agency security 5,823 — ( 655 ) 5,168 — 240 4,928 5,823 — ( 655 ) 5,168 — 240 4,928 Non-U.S. government ( 655 ) 5,168 — 240 4,928 Non-U.S. government security 16,948 655 ) 5,168 — 240 4,928 Non-U.S. government security 16,948 2 240 4,928 Non-U.S. government security 16,948 2 ( 1,201 ) 15,749 4,928 Non-U.S. government security 16,948 2 ( 1,201 ) 15,749 — government security 16,948 2 ( 1,201 ) 15,749 — 8,806 6,943 16,948 2 ( 1,201 ) 15,749 — 8,806 6,943 Certificates of ( 1,201 ) 15,749 — 8,806 6,943 Certificates of deposit and 1,201 ) 15,749 — 8,806 6,943 Certificates of deposit and time of deposit and time deposit 2,067 — — 2,067 1,805 262 time deposit 2,067 — — 2,067 1,805 262 — Commercial paper deposit 2,067 — — 2,067 1,805 262 — Commercial paper 718 2,067 — — 2,067 1,805 262 — Commercial paper 718 — 1,805 262 — Commercial paper 718 — — 718 28 690 Commercial paper 718 — — 718 28 690 — Corporate debt paper 718 — — 718 28 690 — Corporate debt security 718 — — 718 28 690 — Corporate debt security 87,148 690 — Corporate debt security 87,148 9 ( 7,707 ) 79,450 — Corporate debt security 87,148 9 ( 7,707 ) 79,450 — debt security 87,148 9 ( 7,707 ) 79,450 — 9,023 70,427 87,148 9 ( 7,707 ) 79,450 — 9,023 70,427 Municipal security ( 7,707 ) 79,450 — 9,023 70,427 Municipal security 921 — 7,707 ) 79,450 — 9,023 70,427 Municipal security 921 — ( — 9,023 70,427 Municipal security 921 — ( 35 ) 886 Municipal security 921 — ( 35 ) 886 — 266 620 921 — ( 35 ) 886 — 266 620 Mortgage- and ( 35 ) 886 — 266 620 Mortgage- and asset-backed security 35 ) 886 — 266 620 Mortgage- and asset-backed security 22,553 620 Mortgage- and asset-backed security 22,553 — ( 2,593 ) 19,960 asset-backed security 22,553 — ( 2,593 ) 19,960 — 53 19,907 22,553 — ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 11 ( 2,593 ) 19,960 — 53 19,907 Subtotal 161,312 11 ( 13,916 19,960 — 53 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 — 53 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 2,171 19,907 Subtotal 161,312 11 ( 13,916 ) 147,407 2,171 24,431 120,805 161,312 11 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 11 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 2 ( 13,916 ) 147,407 2,171 24,431 120,805 Total ( 2 ) 13,916 ) 147,407 2,171 24,431 120,805 Total ( 2 ) $ 2,171 24,431 120,805 Total ( 2 ) $ 183,061 $ 11 Total ( 2 ) $ 183,061 $ 11 $ ( 13,963 2 ) $ 183,061 $ 11 $ ( 13,963 ) $ 183,061 $ 11 $ ( 13,963 ) $ 169,109 $ 23,646 $ ( 13,963 ) $ 169,109 $ 23,646 $ 24,658 $ 13,963 ) $ 169,109 $ 23,646 $ 24,658 $ 120,805 ( $ 169,109 $ 23,646 $ 24,658 $ 120,805 ( 1 ) $ 23,646 $ 24,658 $ 120,805 ( 1 ) The valuation $ 24,658 $ 120,805 ( 1 ) The valuation technique used the Company ’ s Level 2 financial instrument , which generally observable market data . ( 2 ) As of September 30 2 ) As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , total marketable 2023 and September 24 , 2022 , total marketable security included total marketable security included $ 13.8 billion and $ 12.7 billion $ 13.8 billion and $ 12.7 billion , respectively , that Decision ( refer to Note 7 , “ Income Taxes ” agreement . Apple Inc. | 2023 Form 10-K | 36 The Apple Inc. | 2023 Form 10-K | 36 The following table | 2023 Form 10-K | 36 The following table show the maturity , a of September 30 , 2023 ( in million a of September 30 , 2023 ( in million ) : million ) : Due after 1 year through 5 year $ Due after 1 year through 5 year $ 74,427 Due after year through 5 year $ 74,427 Due after 5 year through year $ 74,427 Due after 5 year through 10 year 9,964 Due after 5 year through 10 year 9,964 Due after 10 5 year through 10 year 9,964 Due after 10 year 16,153 10 year 9,964 Due after 10 year 16,153 Total fair value 9,964 Due after 10 year 16,153 Total fair value $ 100,544 16,153 Total fair value $ 100,544 The Company ’ s investment , typically for up to 12 month . To protect the hedge . As of September 30 , 2023 , the maximum As of September 30 , 2023 , the maximum length of debt–related foreign currency transaction is 19 year . The Company may derivative instrument a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 were a follows 2023 and September 24 , 2022 were a follows ( in ( in million ) : 2023 2022 Derivative instrument designated a in million ) : 2023 2022 Derivative instrument designated a accounting : Foreign exchange contract $ 74,730 $ 102,670 Interest rate contract exchange contract $ 74,730 $ 102,670 Interest rate contract $ 19,375 102,670 Interest rate contract $ 19,375 $ 20,125 Derivative instrument not rate contract $ 19,375 $ 20,125 Derivative instrument not designated a : Foreign exchange contract $ 104,777 $ 185,381 Apple Inc. | exchange contract $ 104,777 $ 185,381 Apple Inc. | 2023 Form $ 185,381 Apple Inc. | 2023 Form 10-K | 37 The Apple Inc. | 2023 Form 10-K | 37 The gross fair | 2023 Form 10-K | 37 The gross fair value of and liability a of September 24 , 2022 were a follows a of September 24 , 2022 were a follows ( in ( in million ) : 2022 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 4,317 $ 2,819 $ 7,136 Derivative exchange contract $ 4,317 $ 2,819 $ 7,136 Derivative liability ( $ 4,317 $ 2,819 $ 7,136 Derivative liability ( 2 ) $ 7,136 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 2,205 $ 2,547 $ 4,752 Interest exchange contract $ 2,205 $ 2,547 $ 4,752 Interest rate contract $ 2,205 $ 2,547 $ 4,752 Interest rate contract $ 1,367 4,752 Interest rate contract $ 1,367 $ — $ 1,367 ( $ 1,367 $ — $ 1,367 ( 1 ) Derivative asset $ — $ 1,367 ( 1 ) Derivative asset are measured asset are measured using Level 2 fair value input and are Consolidated Balance Sheet . ( 2 ) Derivative liability are measured liability are measured using Level 2 fair value input and are other . As of September 24 , 2022 , the potential As of September 24 , 2022 , the potential effect of and derivative liability of $ 7.8 billion , resulting in a net derivative asset of $ 412 million . The carrying amount value hedge a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 were a follows 2023 and September 24 , 2022 were a follows ( in ( in million ) : 2023 2022 Hedged assets/ ( liability in million ) : 2023 2022 Hedged assets/ ( liability ) and non-current marketable security $ 14,433 $ 13,378 Current and non-current marketable security $ 14,433 $ 13,378 Current and non-current term debt non-current term debt $ ( 18,247 ) $ ( 18,739 ) ( 18,247 ) $ ( 18,739 ) Accounts Receivable Trade Receivables Trade Receivables As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % . The Company ’ cellular network carrier accounted for 41 % and 44 % of accounted for 41 % and 44 % of total trade receivables trade receivables a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , respectively . 2023 and September 24 , 2022 , respectively . The Company Company . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 48 % and 23 % . accounted for 48 % and 23 % . As of September % . As of September 24 , 2022 , the Company As of September 24 , 2022 , the Company had two two vendor that individually represented 10 % or more of total receivables , which accounted for 54 % and 13 % . accounted for 54 % and 13 % . Apple Inc. | % . Apple Inc. | 2023 Form 10-K | 38 Note Apple Inc. | 2023 Form 10-K | 38 Note 5 – | 2023 Form 10-K | 38 Note 5 – Property , Form 10-K | 38 Note 5 – Property , Plant and accumulated depreciation a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : ( in million ) : 2023 2022 Land and building $ in million ) : 2023 2022 Land and building $ 23,446 2022 Land and building $ 23,446 $ 22,126 Machinery , equipment and building $ 23,446 $ 22,126 Machinery , equipment and internal-use , equipment and internal-use software 78,314 81,060 Leasehold improvement 12,839 11,271 equipment and internal-use software 78,314 81,060 Leasehold improvement 12,839 11,271 Gross software 78,314 81,060 Leasehold improvement 12,839 11,271 Gross property , plant 78,314 81,060 Leasehold improvement 12,839 11,271 Gross property , plant and property , plant and equipment 114,599 114,457 Accumulated depreciation ( 70,884 , plant and equipment 114,599 114,457 Accumulated depreciation ( 70,884 ) 114,599 114,457 Accumulated depreciation ( 70,884 ) ( 72,340 ) Total depreciation ( 70,884 ) ( 72,340 ) Total property , plant and equipment , net $ 43,715 $ 42,117 Depreciation expense on , net $ 43,715 $ 42,117 Depreciation expense on property , plant and equipment wa $ 8.5 billion , $ 8.7 billion $ 8.5 billion , $ 8.7 billion and $ 9.5 billion $ 8.7 billion and $ 9.5 billion during 2023 , 2022 and $ 9.5 billion during 2023 , 2022 and 2021 , 9.5 billion during 2023 , 2022 and 2021 , respectively . during 2023 , 2022 and 2021 , respectively . Note 6 2021 , respectively . Note 6 – Consolidated Financial Statement Details statement detail a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : ) : Other Non-Current Assets 2023 2022 Deferred tax asset $ : Other Non-Current Assets 2023 2022 Deferred tax asset $ 17,852 2022 Deferred tax asset $ 17,852 $ 15,375 Other non-current asset tax asset $ 17,852 $ 15,375 Other non-current asset 46,906 39,053 $ 15,375 Other non-current asset 46,906 39,053 Total other non-current asset 15,375 Other non-current asset 46,906 39,053 Total other non-current asset $ Total other non-current asset $ 64,758 $ 54,428 Other Current Liabilities non-current asset $ 64,758 $ 54,428 Other Current Liabilities 2023 2022 $ 54,428 Other Current Liabilities 2023 2022 Income tax payable $ 54,428 Other Current Liabilities 2023 2022 Income tax payable $ 8,819 2022 Income tax payable $ 8,819 $ 6,552 Other current liability tax payable $ 8,819 $ 6,552 Other current liability 50,010 54,293 $ 6,552 Other current liability 50,010 54,293 Total other current liability 6,552 Other current liability 50,010 54,293 Total other current liability $ Total other current liability $ 58,829 $ 60,845 Other Non-Current Liabilities current liability $ 58,829 $ 60,845 Other Non-Current Liabilities 2023 2022 $ 60,845 Other Non-Current Liabilities 2023 2022 Long-term tax payable $ 60,845 Other Non-Current Liabilities 2023 2022 Long-term tax payable $ 15,457 2022 Long-term tax payable $ 15,457 $ 16,657 Other non-current liability tax payable $ 15,457 $ 16,657 Other non-current liability 34,391 32,485 $ 16,657 Other non-current liability 34,391 32,485 Total other non-current liability 16,657 Other non-current liability 34,391 32,485 Total other non-current liability $ Total other non-current liability $ 49,848 $ 49,142 Other Income/ ( non-current liability $ 49,848 $ 49,142 Other Income/ ( Expense ) expense ) , net for 2023 , 2022 and 2021 ( , net for 2023 , 2022 and 2021 ( in million for 2023 , 2022 and 2021 ( in million ) : ( in million ) : 2023 2022 2021 Interest and dividend in million ) : 2023 2022 2021 Interest and dividend income million ) : 2023 2022 2021 Interest and dividend income $ Interest and dividend income $ 3,750 $ 2,825 $ 2,843 Interest dividend income $ 3,750 $ 2,825 $ 2,843 Interest expense ( $ 3,750 $ 2,825 $ 2,843 Interest expense ( 3,933 ) $ 2,843 Interest expense ( 3,933 ) ( 2,931 ) ( expense ( 3,933 ) ( 2,931 ) ( 2,645 ) Other ) ( 2,931 ) ( 2,645 ) Other income/ ( expense expense ) , net ( 382 ) ( 228 ) 60 net ( 382 ) ( 228 ) 60 Total other income/ 382 ) ( 228 ) 60 Total other income/ ( expense ) , net $ ( 565 ) $ ( 334 ) ( 565 ) $ ( 334 ) $ 258 Apple Inc. $ ( 334 ) $ 258 Apple Inc. | 2023 Form $ 258 Apple Inc. | 2023 Form 10-K | 39 Note Apple Inc. | 2023 Form 10-K | 39 Note 7 – | 2023 Form 10-K | 39 Note 7 – Income Taxes Form 10-K | 39 Note 7 – Income Taxes Provision for provision for income tax for 2023 , 2022 and 2021 , income tax for 2023 , 2022 and 2021 , consisted of for 2023 , 2022 and 2021 , consisted of the following ( in million ) : 2023 2022 2021 Federal : Current in million ) : 2023 2022 2021 Federal : Current $ million ) : 2023 2022 2021 Federal : Current $ 9,445 2021 Federal : Current $ 9,445 $ 7,890 $ 8,257 Deferred : Current $ 9,445 $ 7,890 $ 8,257 Deferred ( 3,644 $ 9,445 $ 7,890 $ 8,257 Deferred ( 3,644 ) ( 7,890 $ 8,257 Deferred ( 3,644 ) ( 2,265 ) ( Deferred ( 3,644 ) ( 2,265 ) ( 7,176 ) Total ) ( 2,265 ) ( 7,176 ) Total 5,801 5,625 1,081 ) ( 7,176 ) Total 5,801 5,625 1,081 State : Current ( 7,176 ) Total 5,801 5,625 1,081 State : Current 1,570 7,176 ) Total 5,801 5,625 1,081 State : Current 1,570 1,519 5,625 1,081 State : Current 1,570 1,519 1,620 Deferred ( 49 1,081 State : Current 1,570 1,519 1,620 Deferred ( 49 ) State : Current 1,570 1,519 1,620 Deferred ( 49 ) 84 1,570 1,519 1,620 Deferred ( 49 ) 84 ( 338 ) 1,620 Deferred ( 49 ) 84 ( 338 ) Total 1,521 ( 49 ) 84 ( 338 ) Total 1,521 1,603 1,282 84 ( 338 ) Total 1,521 1,603 1,282 Foreign : Current ( 338 ) Total 1,521 1,603 1,282 Foreign : Current 8,750 338 ) Total 1,521 1,603 1,282 Foreign : Current 8,750 8,996 1,603 1,282 Foreign : Current 8,750 8,996 9,424 Deferred 669 3,076 1,282 Foreign : Current 8,750 8,996 9,424 Deferred 669 3,076 2,740 Foreign : Current 8,750 8,996 9,424 Deferred 669 3,076 2,740 Total Current 8,750 8,996 9,424 Deferred 669 3,076 2,740 Total 9,419 12,072 8,750 8,996 9,424 Deferred 669 3,076 2,740 Total 9,419 12,072 12,164 8,996 9,424 Deferred 669 3,076 2,740 Total 9,419 12,072 12,164 Provision Deferred 669 3,076 2,740 Total 9,419 12,072 12,164 Provision for income 669 3,076 2,740 Total 9,419 12,072 12,164 Provision for income tax 3,076 2,740 Total 9,419 12,072 12,164 Provision for income tax $ Provision for income tax $ 16,741 $ 19,300 $ 14,527 The income tax $ 16,741 $ 19,300 $ 14,527 The foreign provision $ 16,741 $ 19,300 $ 14,527 The foreign provision for income foreign pretax earnings of $ 72.9 billion , $ 71.3 billion $ 72.9 billion , $ 71.3 billion and $ 68.7 billion $ 71.3 billion and $ 68.7 billion in 2023 , 2022 and $ 68.7 billion in 2023 , 2022 and 2021 , 68.7 billion in 2023 , 2022 and 2021 , respectively . in 2023 , 2022 and 2021 , respectively . A reconciliation federal income tax rate ( 21 % in 2023 , 2022 rate ( 21 % in 2023 , 2022 and 2021 ) 21 % in 2023 , 2022 and 2021 ) to income in 2023 , 2022 and 2021 ) to income before provision provision for income tax for 2023 , 2022 and 2021 , income tax for 2023 , 2022 and 2021 , is a for 2023 , 2022 and 2021 , is a follows ( dollar in million ) : 2023 2022 2021 Computed expected tax in million ) : 2023 2022 2021 Computed expected tax $ million ) : 2023 2022 2021 Computed expected tax $ 23,885 2021 Computed expected tax $ 23,885 $ 25,012 $ 22,933 State expected tax $ 23,885 $ 25,012 $ 22,933 State tax , $ 23,885 $ 25,012 $ 22,933 State tax , net of , net of federal effect 1,124 1,518 1,151 Earnings of foreign net of federal effect 1,124 1,518 1,151 Earnings of foreign subsidiary of federal effect 1,124 1,518 1,151 Earnings of foreign subsidiary ( Earnings of foreign subsidiary ( 5,744 ) ( 4,366 ) ( subsidiary ( 5,744 ) ( 4,366 ) ( 4,715 ) Research ) ( 4,366 ) ( 4,715 ) Research and development credit development credit , net ( 1,212 ) ( 1,153 ) ( net ( 1,212 ) ( 1,153 ) ( 1,033 ) Excess ) ( 1,153 ) ( 1,033 ) Excess tax benefit from benefit from equity award ( 1,120 ) ( 1,871 ) ( award ( 1,120 ) ( 1,871 ) ( 2,137 ) Foreign-derived ) ( 1,871 ) ( 2,137 ) Foreign-derived intangible income deduction intangible income deduction — ( 296 ) ( 1,372 ) Other — ( 296 ) ( 1,372 ) Other ( 192 ) ( 1,372 ) Other ( 192 ) 456 ( 300 ) ) Other ( 192 ) 456 ( 300 ) Provision for ( 192 ) 456 ( 300 ) Provision for income tax Provision for income tax $ 16,741 $ 19,300 $ 14,527 Effective income tax $ 16,741 $ 19,300 $ 14,527 Effective tax rate $ 16,741 $ 19,300 $ 14,527 Effective tax rate 14.7 % $ 14,527 Effective tax rate 14.7 % 16.2 % 13.3 % Effective tax rate 14.7 % 16.2 % 13.3 % Apple Inc. rate 14.7 % 16.2 % 13.3 % Apple Inc. | 2023 13.3 % Apple Inc. | 2023 Form 10-K | 40 Deferred Apple Inc. | 2023 Form 10-K | 40 Deferred Tax Assets | 2023 Form 10-K | 40 Deferred Tax Assets and Liabilities and Liabilities As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the significant 2023 and September 24 , 2022 , the significant component of ( in million ) : 2023 2022 Deferred tax asset : in million ) : 2023 2022 Deferred tax asset : Tax : Tax credit carryforwards $ 8,302 $ 6,962 Accrued liability and credit carryforwards $ 8,302 $ 6,962 Accrued liability and other reserve Accrued liability and other reserve 6,365 6,515 Capitalized research and development liability and other reserve 6,365 6,515 Capitalized research and development 6,294 6,515 Capitalized research and development 6,294 1,267 Deferred revenue 4,571 5,742 Capitalized research and development 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized development 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized loss 2,447 2,913 6,294 1,267 Deferred revenue 4,571 5,742 Unrealized loss 2,447 2,913 Lease revenue 4,571 5,742 Unrealized loss 2,447 2,913 Lease liability 2,421 2,400 4,571 5,742 Unrealized loss 2,447 2,913 Lease liability 2,421 2,400 Other loss 2,447 2,913 Lease liability 2,421 2,400 Other 2,343 3,407 Total 2,447 2,913 Lease liability 2,421 2,400 Other 2,343 3,407 Total deferred Lease liability 2,421 2,400 Other 2,343 3,407 Total deferred tax asset liability 2,421 2,400 Other 2,343 3,407 Total deferred tax asset 32,743 3,407 Total deferred tax asset 32,743 29,206 Less : Valuation allowance Total deferred tax asset 32,743 29,206 Less : Valuation allowance ( Less : Valuation allowance ( 8,374 ) ( 7,530 ) Total allowance ( 8,374 ) ( 7,530 ) Total deferred tax asset deferred tax asset , net 24,369 21,676 Deferred tax liability : tax asset , net 24,369 21,676 Deferred tax liability : Right-of-use tax liability : Right-of-use asset 2,179 2,163 Depreciation 1,998 1,582 Minimum liability : Right-of-use asset 2,179 2,163 Depreciation 1,998 1,582 Minimum tax Right-of-use asset 2,179 2,163 Depreciation 1,998 1,582 Minimum tax on foreign asset 2,179 2,163 Depreciation 1,998 1,582 Minimum tax on foreign earnings Minimum tax on foreign earnings 1,940 1,983 Unrealized gain 511 942 tax on foreign earnings 1,940 1,983 Unrealized gain 511 942 Other earnings 1,940 1,983 Unrealized gain 511 942 Other 490 469 Total 1,940 1,983 Unrealized gain 511 942 Other 490 469 Total deferred Unrealized gain 511 942 Other 490 469 Total deferred tax liability gain 511 942 Other 490 469 Total deferred tax liability 7,118 469 Total deferred tax liability 7,118 7,139 Net deferred tax asset Total deferred tax liability 7,118 7,139 Net deferred tax asset $ Net deferred tax asset $ 17,251 $ 14,537 As of September tax asset $ 17,251 $ 14,537 As of September 30 , $ 14,537 As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had $ , the Company had $ 5.2 billion in foreign tax credit carryforwards in Ireland and $ 3.0 billion in California R & Tax Positions As of September 30 , 2023 , the total As of September 30 , 2023 , the total amount of unrecognized tax benefit wa $ 19.5 billion , of which $ billion , of which $ 9.5 billion , if recognized , rate . As of September 24 , 2022 , the total As of September 24 , 2022 , the total amount of unrecognized tax benefit wa $ 16.8 billion , of which $ billion , of which $ 8.0 billion , if recognized , interest and penalty , for 2023 , 2022 and 2021 , penalty , for 2023 , 2022 and 2021 , is a for 2023 , 2022 and 2021 , is a follows ( ( in million ) : 2023 2022 2021 Beginning balance $ in million ) : 2023 2022 2021 Beginning balance $ 16,758 million ) : 2023 2022 2021 Beginning balance $ 16,758 $ 2022 2021 Beginning balance $ 16,758 $ 15,477 $ 16,475 Increases Beginning balance $ 16,758 $ 15,477 $ 16,475 Increases related to $ 16,758 $ 15,477 $ 16,475 Increases related to tax position taken during a prior year 2,044 2,284 816 Decreases related to during a prior year 2,044 2,284 816 Decreases related to tax a prior year 2,044 2,284 816 Decreases related to tax position during a prior year ( 1,463 ) ( 1,982 ) ( year ( 1,463 ) ( 1,982 ) ( 1,402 ) Increases ) ( 1,982 ) ( 1,402 ) Increases related to tax taken during the current year 2,628 1,936 1,607 Decreases related to during the current year 2,628 1,936 1,607 Decreases related to settlement the current year 2,628 1,936 1,607 Decreases related to settlement with settlement with taxing authority ( 19 ) ( 28 ) ( authority ( 19 ) ( 28 ) ( 1,838 ) Decreases ) ( 28 ) ( 1,838 ) Decreases related to expiration the statute of limitation ( 494 ) ( 929 ) ( limitation ( 494 ) ( 929 ) ( 181 ) Ending ) ( 929 ) ( 181 ) Ending balance $ 19,454 181 ) Ending balance $ 19,454 $ 16,758 $ 15,477 The Ending balance $ 19,454 $ 16,758 $ 15,477 The Company is $ 19,454 $ 16,758 $ 15,477 The Company is subject to ictions . Tax year after 2017 for the U.S. federal jurisdiction federal jurisdiction , and after 2014 in certain major foreign jurisdiction could decrease in the next 12 month by a much a by a much a $ 4.5 billion . Apple Inc. | billion . Apple Inc. | 2023 Form 10-K | 41 European Apple Inc. | 2023 Form 10-K | 41 European Commission State | 2023 Form 10-K | 41 European Commission State Aid Decision State Aid Decision On August 30 , 2016 , the European Decision On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through December 2014 . Irish period June 2003 through December 2014 . Irish legislative change , , effective a of January 2015 , eliminated the application of wa calculated to be € 13.1 billion , plus interest of , plus interest of € 1.2 billion . The Company and ” ) . On July 15 , 2020 , the General . On July 15 , 2020 , the General Court annulled Aid Decision . On September 25 , 2020 , the European . On September 25 , 2020 , the European Commission appealed hearing wa held on May 23 , 2023 . A decision held on May 23 , 2023 . A decision from the is expected in calendar year 2024 . The Company belief it country . As of September 30 , 2023 , the adjusted As of September 30 , 2023 , the adjusted recovery amount adjusted recovery amount wa € 12.7 billion , excluding interest . Marketable Securities section of Note 4 , “ Financial Instruments ” for more information . Note 8 – Leases The Company ha have original term not exceeding 10 year and generally contain multiyear s operating lease were $ 2.0 billion , $ 1.9 billion $ 2.0 billion , $ 1.9 billion and $ 1.7 billion $ 1.9 billion and $ 1.7 billion for 2023 , 2022 and $ 1.7 billion for 2023 , 2022 and 2021 , 1.7 billion for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . Lease cost ’ s lease were $ 13.9 billion , $ 14.9 billion $ 13.9 billion , $ 14.9 billion and $ 12.9 billion $ 14.9 billion and $ 12.9 billion for 2023 , 2022 and $ 12.9 billion for 2023 , 2022 and 2021 , 12.9 billion for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . The Company . The Company made $ 1.9 billion , $ 1.8 billion $ 1.9 billion , $ 1.8 billion and $ 1.4 billion $ 1.8 billion and $ 1.4 billion of fixed cash payment related to operating lease in 2023 , 2022 and 2021 , operating lease in 2023 , 2022 and 2021 , respectively . in 2023 , 2022 and 2021 , respectively . Noncash activity for lease liability were $ 2.1 billion , $ 2.8 billion $ 2.1 billion , $ 2.8 billion and $ 3.3 billion $ 2.8 billion and $ 3.3 billion for 2023 , 2022 and $ 3.3 billion for 2023 , 2022 and 2021 , 3.3 billion for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . The following item , a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 ( in million 2023 and September 24 , 2022 ( in million ) : Liabilities Financial Statement Line Items 2023 2022 Right-of-use asset : Operating Financial Statement Line Items 2023 2022 Right-of-use asset : Operating lease lease Other non-current asset $ 10,661 $ 10,417 Finance lease Property non-current asset $ 10,661 $ 10,417 Finance lease Property , plant plant and equipment , net 1,015 952 Total right-of-use asset $ and equipment , net 1,015 952 Total right-of-use asset $ 11,676 952 Total right-of-use asset $ 11,676 $ 11,369 Lease liability : right-of-use asset $ 11,676 $ 11,369 Lease liability : Operating lease lease Other current liability $ 1,410 $ 1,534 Other non-current liability current liability $ 1,410 $ 1,534 Other non-current liability 10,408 9,936 $ 1,534 Other non-current liability 10,408 9,936 Finance lease Other current 1,534 Other non-current liability 10,408 9,936 Finance lease Other current liability Finance lease Other current liability 165 129 Other non-current liability 859 lease Other current liability 165 129 Other non-current liability 859 812 165 129 Other non-current liability 859 812 Total lease liability $ 129 Other non-current liability 859 812 Total lease liability $ 12,842 812 Total lease liability $ 12,842 $ 12,411 Apple Inc. | lease liability $ 12,842 $ 12,411 Apple Inc. | 2023 Form $ 12,411 Apple Inc. | 2023 Form 10-K | 42 Lease Apple Inc. | 2023 Form 10-K | 42 Lease liability maturity | 2023 Form 10-K | 42 Lease liability maturity a of liability maturity a of September 30 , 2023 , are a a of September 30 , 2023 , are a follows ( Operating Leases Finance Leases Total 2024 $ 1,719 $ 196 $ Finance Leases Total 2024 $ 1,719 $ 196 $ 1,915 2025 Total 2024 $ 1,719 $ 196 $ 1,915 2025 1,875 151 $ 1,719 $ 196 $ 1,915 2025 1,875 151 2,026 2026 1,719 $ 196 $ 1,915 2025 1,875 151 2,026 2026 1,732 $ 196 $ 1,915 2025 1,875 151 2,026 2026 1,732 120 196 $ 1,915 2025 1,875 151 2,026 2026 1,732 120 1,852 $ 1,915 2025 1,875 151 2,026 2026 1,732 120 1,852 2027 1,915 2025 1,875 151 2,026 2026 1,732 120 1,852 2027 1,351 2025 1,875 151 2,026 2026 1,732 120 1,852 2027 1,351 52 1,875 151 2,026 2026 1,732 120 1,852 2027 1,351 52 1,403 151 2,026 2026 1,732 120 1,852 2027 1,351 52 1,403 2028 2,026 2026 1,732 120 1,852 2027 1,351 52 1,403 2028 1,181 2026 1,732 120 1,852 2027 1,351 52 1,403 2028 1,181 34 1,732 120 1,852 2027 1,351 52 1,403 2028 1,181 34 1,215 120 1,852 2027 1,351 52 1,403 2028 1,181 34 1,215 Thereafter 1,852 2027 1,351 52 1,403 2028 1,181 34 1,215 Thereafter 5,983 2027 1,351 52 1,403 2028 1,181 34 1,215 Thereafter 5,983 872 1,351 52 1,403 2028 1,181 34 1,215 Thereafter 5,983 872 6,855 52 1,403 2028 1,181 34 1,215 Thereafter 5,983 872 6,855 Total 2028 1,181 34 1,215 Thereafter 5,983 872 6,855 Total undiscounted liability 1,181 34 1,215 Thereafter 5,983 872 6,855 Total undiscounted liability 13,841 34 1,215 Thereafter 5,983 872 6,855 Total undiscounted liability 13,841 1,425 872 6,855 Total undiscounted liability 13,841 1,425 15,266 Less : Imputed 6,855 Total undiscounted liability 13,841 1,425 15,266 Less : Imputed interest Total undiscounted liability 13,841 1,425 15,266 Less : Imputed interest ( Less : Imputed interest ( 2,023 ) ( 401 ) ( interest ( 2,023 ) ( 401 ) ( 2,424 ) Total ) ( 401 ) ( 2,424 ) Total lease liability $ ) Total lease liability $ 11,818 $ 1,024 $ 12,842 The lease liability $ 11,818 $ 1,024 $ 12,842 The weighted-average remaining $ 11,818 $ 1,024 $ 12,842 The weighted-average remaining lease term lease liability a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 wa 10.6 year 2023 and September 24 , 2022 wa 10.6 year and 10.1 September 24 , 2022 wa 10.6 year and 10.1 year , 2022 wa 10.6 year and 10.1 year , respectively . The lease liability a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 wa 3.0 % 2023 and September 24 , 2022 wa 3.0 % and 2.3 September 24 , 2022 wa 3.0 % and 2.3 % , 2022 wa 3.0 % and 2.3 % , respectively . The determined . As of September 30 , 2023 , the Company As of September 30 , 2023 , the Company had $ , the Company had $ 544 million of future payment under These lease will commence between 2024 and 2026 , with lease will commence between 2024 and 2026 , with lease term ranging with lease term ranging from 1 year to 21 year . ranging from 1 year to 21 year . Note 9 – to 21 year . Note 9 – Debt Commercial Paper The repurchase . As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the Company 2023 and September 24 , 2022 , the Company had $ , the Company had $ 6.0 billion and $ 10.0 billion $ 6.0 billion and $ 10.0 billion of commercial paper outstanding ’ s commercial paper wa 5.28 % and 2.31 % a paper wa 5.28 % and 2.31 % a of September 30 2.31 % a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , respectively . 2023 and September 24 , 2022 , respectively . The following maturity of commercial paper for 2023 , 2022 and 2021 ( commercial paper for 2023 , 2022 and 2021 ( in million for 2023 , 2022 and 2021 ( in million ) : ( in million ) : 2023 2022 2021 Maturities 90 day in million ) : 2023 2022 2021 Maturities 90 day or million ) : 2023 2022 2021 Maturities 90 day or le : 2023 2022 2021 Maturities 90 day or le : Proceeds paper , net $ ( 1,333 ) $ 5,264 $ ( $ ( 1,333 ) $ 5,264 $ ( 357 ) Maturities ) $ 5,264 $ ( 357 ) Maturities greater than 90 357 ) Maturities greater than 90 day : Proceeds from commercial Proceeds from commercial paper — 5,948 7,946 Repayments of commercial paper from commercial paper — 5,948 7,946 Repayments of commercial paper ( Repayments of commercial paper ( 2,645 ) ( 7,257 ) ( paper ( 2,645 ) ( 7,257 ) ( 6,567 ) Proceeds ) ( 7,257 ) ( 6,567 ) Proceeds from/ ( Repayments commercial paper , net ( 2,645 ) ( 1,309 ) 1,379 net ( 2,645 ) ( 1,309 ) 1,379 Total proceeds from/ 2,645 ) ( 1,309 ) 1,379 Total proceeds from/ ( repayment paper , net $ ( 3,978 ) $ 3,955 $ 1,022 $ ( 3,978 ) $ 3,955 $ 1,022 Apple Inc. | 3,978 ) $ 3,955 $ 1,022 Apple Inc. | 2023 Form $ 1,022 Apple Inc. | 2023 Form 10-K | 43 Term Apple Inc. | 2023 Form 10-K | 43 Term Debt The | 2023 Form 10-K | 43 Term Debt The Company ha term debt a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 : Maturities ( 2023 and September 24 , 2022 : Maturities ( calendar year Maturities ( calendar year ) 2023 2022 Amount ( in million ( calendar year ) 2023 2022 Amount ( in million ) million ) Effective Interest Rate 2013 – 2022 debt issuance : Effective Interest Rate 2013 – 2022 debt issuance : Fixed-rate 0.000 2022 debt issuance : Fixed-rate 0.000 % – 4.650 % note : Fixed-rate 0.000 % – 4.650 % note 2024 – 2062 % – 4.650 % note 2024 – 2062 $ 101,322 0.03 4.650 % note 2024 – 2062 $ 101,322 0.03 % – note 2024 – 2062 $ 101,322 0.03 % – 6.72 % 2024 – 2062 $ 101,322 0.03 % – 6.72 % $ $ 101,322 0.03 % – 6.72 % $ 111,824 0.03 % % – 6.72 % $ 111,824 0.03 % – 4.78 % – 6.72 % $ 111,824 0.03 % – 4.78 % Third $ 111,824 0.03 % – 4.78 % Third quarter 2023 debt – 4.78 % Third quarter 2023 debt issuance : Fixed-rate 4.000 2023 debt issuance : Fixed-rate 4.000 % – 4.850 % note : Fixed-rate 4.000 % – 4.850 % note 2026 – 2053 % – 4.850 % note 2026 – 2053 5,250 4.04 % 4.850 % note 2026 – 2053 5,250 4.04 % – 4.88 % note 2026 – 2053 5,250 4.04 % – 4.88 % note 2026 – 2053 5,250 4.04 % – 4.88 % — 2053 5,250 4.04 % – 4.88 % — Total term debt — Total term debt principal 106,572 111,824 Unamortized premium/ ( discount Total term debt principal 106,572 111,824 Unamortized premium/ ( discount ) issuance cost , net ( 356 ) ( 374 ) Hedge net ( 356 ) ( 374 ) Hedge accounting fair value accounting fair value adjustment ( 1,113 ) ( 1,363 ) Total adjustment ( 1,113 ) ( 1,363 ) Total term debt 105,103 1,363 ) Total term debt 105,103 110,087 Less : Current portion ) Total term debt 105,103 110,087 Less : Current portion of portion of term debt ( 9,822 ) ( 11,128 ) Total debt ( 9,822 ) ( 11,128 ) Total non-current portion of portion of term debt $ 95,281 $ 98,959 To manage interest term debt $ 95,281 $ 98,959 To manage interest rate risk . The Company recognized $ 3.7 billion , $ 2.8 billion $ 3.7 billion , $ 2.8 billion and $ 2.6 billion $ 2.8 billion and $ 2.6 billion of interest expense on on it term debt for 2023 , 2022 and 2021 , term debt for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . The future s Notes a of September 30 , 2023 , are a a of September 30 , 2023 , are a follows ( ( in million ) : 2024 $ 9,943 2025 10,775 2026 million ) : 2024 $ 9,943 2025 10,775 2026 12,265 2027 ) : 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 : 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 2028 2024 $ 9,943 2025 10,775 2026 12,265 2027 9,786 2028 7,800 $ 9,943 2025 10,775 2026 12,265 2027 9,786 2028 7,800 Thereafter 9,943 2025 10,775 2026 12,265 2027 9,786 2028 7,800 Thereafter 56,003 2025 10,775 2026 12,265 2027 9,786 2028 7,800 Thereafter 56,003 Total 10,775 2026 12,265 2027 9,786 2028 7,800 Thereafter 56,003 Total term 2026 12,265 2027 9,786 2028 7,800 Thereafter 56,003 Total term debt 2027 9,786 2028 7,800 Thereafter 56,003 Total term debt principal $ Total term debt principal $ 106,572 As of September 30 , $ 106,572 As of September 30 , 2023 and September 24 As of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the fair 2023 and September 24 , 2022 , the fair value of Notes , based on Level 2 input , wa $ 90.8 2 input , wa $ 90.8 billion and $ 98.8 billion $ 90.8 billion and $ 98.8 billion , respectively . Note billion , respectively . Note 10 – Shareholders ’ Equity Share Equity Share Repurchase Program During 2023 , the Company repurchased 471 2023 , the Company repurchased 471 million share of it common it common stock for $ 76.6 billion , excluding excise tax the Inflation Reduction Act of 2022 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . Act . Apple Inc. | 2023 Form 10-K | 44 Shares Apple Inc. | 2023 Form 10-K | 44 Shares of Common | 2023 Form 10-K | 44 Shares of Common Stock The share of common stock for 2023 , 2022 and 2021 ( common stock for 2023 , 2022 and 2021 ( in thousand for 2023 , 2022 and 2021 ( in thousand ) : ( in thousand ) : 2023 2022 2021 Common stock outstanding in thousand ) : 2023 2022 2021 Common stock outstanding , thousand ) : 2023 2022 2021 Common stock outstanding , beginning stock outstanding , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased outstanding , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased ( , beginning balance 15,943,425 16,426,786 16,976,763 Common stock repurchased ( 471,419 16,976,763 Common stock repurchased ( 471,419 ) ( 568,589 ) ( repurchased ( 471,419 ) ( 568,589 ) ( 656,340 ) Common ) ( 568,589 ) ( 656,340 ) Common stock issued , share withheld for employee tax 78,055 85,228 106,363 Common stock outstanding withheld for employee tax 78,055 85,228 106,363 Common stock outstanding , for employee tax 78,055 85,228 106,363 Common stock outstanding , ending stock outstanding , ending balance 15,550,061 15,943,425 16,426,786 Note 11 – outstanding , ending balance 15,550,061 15,943,425 16,426,786 Note 11 – Share-Based , ending balance 15,550,061 15,943,425 16,426,786 Note 11 – Share-Based Compensation balance 15,550,061 15,943,425 16,426,786 Note 11 – Share-Based Compensation 2022 Employee Note 11 – Share-Based Compensation 2022 Employee Stock Plan The Apple Stock Plan The Apple Inc. 2022 Employee Stock Plan ( the Stock Plan ( the “ 2022 Plan ” ) is a . RSUs granted under the 2022 Plan generally vest over four All RSUs granted under the 2022 Plan have dividend equivalent right . A maximum of approximately 1.3 billion share were authorized for authorized for issuance pursuant to 2022 Plan award at the time plan wa approved on March 4 , 2022 . 2014 Employee approved on March 4 , 2022 . 2014 Employee Stock Plan March 4 , 2022 . 2014 Employee Stock Plan The Apple Stock Plan The Apple Inc. 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) is a including executive officer . The 2014 Plan permitted the granting of the same term a the 2022 Plan . The 2014 Plan the 2022 Plan . The 2014 Plan also permitted the granting In the third quarter of 2022 , the Company terminated the grant new award under the 2014 Plan . Restricted Stock Units activity and related information for 2023 , 2022 and 2021 , related information for 2023 , 2022 and 2021 , is a for 2023 , 2022 and 2021 , is a follows : ) Balance a of September 26 , 2020 310,778 $ 51.58 a of September 26 , 2020 310,778 $ 51.58 RSUs granted of September 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 26 , 2020 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 310,778 $ 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 51.58 RSUs granted 89,363 $ 116.33 RSUs vested ( 145,766 ) $ 116.33 RSUs vested ( 145,766 ) $ 50.71 RSUs canceled vested ( 145,766 ) $ 50.71 RSUs canceled ( 13,948 ) $ 50.71 RSUs canceled ( 13,948 ) $ 68.95 Balance a canceled ( 13,948 ) $ 68.95 Balance a of September 25 68.95 Balance a of September 25 , 2021 240,427 $ 75.16 a of September 25 , 2021 240,427 $ 75.16 RSUs granted of September 25 , 2021 240,427 $ 75.16 RSUs granted 91,674 25 , 2021 240,427 $ 75.16 RSUs granted 91,674 $ 150.70 240,427 $ 75.16 RSUs granted 91,674 $ 150.70 RSUs vested ( 75.16 RSUs granted 91,674 $ 150.70 RSUs vested ( 115,861 ) $ 150.70 RSUs vested ( 115,861 ) $ 72.12 RSUs canceled vested ( 115,861 ) $ 72.12 RSUs canceled ( 14,739 ) $ 72.12 RSUs canceled ( 14,739 ) $ 99.77 Balance a canceled ( 14,739 ) $ 99.77 Balance a of September 24 99.77 Balance a of September 24 , 2022 201,501 $ 109.48 a of September 24 , 2022 201,501 $ 109.48 RSUs granted of September 24 , 2022 201,501 $ 109.48 RSUs granted 88,768 24 , 2022 201,501 $ 109.48 RSUs granted 88,768 $ 150.87 201,501 $ 109.48 RSUs granted 88,768 $ 150.87 RSUs vested ( 109.48 RSUs granted 88,768 $ 150.87 RSUs vested ( 101,878 ) $ 150.87 RSUs vested ( 101,878 ) $ 97.31 RSUs canceled vested ( 101,878 ) $ 97.31 RSUs canceled ( 8,144 ) $ 97.31 RSUs canceled ( 8,144 ) $ 127.98 Balance a canceled ( 8,144 ) $ 127.98 Balance a of September 30 127.98 Balance a of September 30 , 2023 180,247 $ 135.91 a of September 30 , 2023 180,247 $ 135.91 $ 30,860 of September 30 , 2023 180,247 $ 135.91 $ 30,860 The 30 , 2023 180,247 $ 135.91 $ 30,860 The fair value 2023 180,247 $ 135.91 $ 30,860 The fair value a of date of RSUs wa $ 15.9 billion , $ 18.2 billion $ 15.9 billion , $ 18.2 billion and $ 19.0 billion $ 18.2 billion and $ 19.0 billion for 2023 , 2022 and $ 19.0 billion for 2023 , 2022 and 2021 , 19.0 billion for 2023 , 2022 and 2021 , respectively . for 2023 , 2022 and 2021 , respectively . The majority of RSUs that vested in 2023 , 2022 and 2021 were that vested in 2023 , 2022 and 2021 were net share in 2023 , 2022 and 2021 were net share settled such total share withheld were approximately 37 million , 41 million and were approximately 37 million , 41 million and 53 million for million , 41 million and 53 million for 2023 , 2022 million and 53 million for 2023 , 2022 and 2021 , 53 million for 2023 , 2022 and 2021 , respectively , for 2023 , 2022 and 2021 , respectively , and were ’ tax obligation were $ 5.6 billion , $ 6.4 billion $ 5.6 billion , $ 6.4 billion and $ 6.8 billion $ 6.4 billion and $ 6.8 billion in 2023 , 2022 and $ 6.8 billion in 2023 , 2022 and 2021 , 6.8 billion in 2023 , 2022 and 2021 , respectively . in 2023 , 2022 and 2021 , respectively . Apple Inc. respectively . Apple Inc. | 2023 Form 10-K | 45 Share-Based Apple Inc. | 2023 Form 10-K | 45 Share-Based Compensation The | 2023 Form 10-K | 45 Share-Based Compensation The following table Consolidated Statements of Operations for 2023 , 2022 and 2021 ( of Operations for 2023 , 2022 and 2021 ( in million for 2023 , 2022 and 2021 ( in million ) : ( in million ) : 2023 2022 2021 Share-based compensation expense in million ) : 2023 2022 2021 Share-based compensation expense $ million ) : 2023 2022 2021 Share-based compensation expense $ 10,833 2021 Share-based compensation expense $ 10,833 $ 9,038 $ 7,906 Income compensation expense $ 10,833 $ 9,038 $ 7,906 Income tax benefit $ 10,833 $ 9,038 $ 7,906 Income tax benefit related to share-based compensation expense $ ( 3,421 ) $ ( 4,002 ) ( 3,421 ) $ ( 4,002 ) $ ( 4,056 ) ( 4,002 ) $ ( 4,056 ) As of September 30 4,056 ) As of September 30 , 2023 , the total As of September 30 , 2023 , the total unrecognized compensation to outstanding RSUs wa $ 18.6 billion , which the Company over a weighted-average period of 2.5 year . Note 12 – of 2.5 year . Note 12 – Commitments , Contingencies and one year a of September 30 , 2023 , are a a of September 30 , 2023 , are a follows ( ( in million ) : 2024 $ 4,258 2025 2,674 2026 million ) : 2024 $ 4,258 2025 2,674 2026 3,434 2027 ) : 2024 $ 4,258 2025 2,674 2026 3,434 2027 1,277 : 2024 $ 4,258 2025 2,674 2026 3,434 2027 1,277 2028 2024 $ 4,258 2025 2,674 2026 3,434 2027 1,277 2028 5,878 $ 4,258 2025 2,674 2026 3,434 2027 1,277 2028 5,878 Thereafter 4,258 2025 2,674 2026 3,434 2027 1,277 2028 5,878 Thereafter 3,215 2025 2,674 2026 3,434 2027 1,277 2028 5,878 Thereafter 3,215 Total 2,674 2026 3,434 2027 1,277 2028 5,878 Thereafter 3,215 Total $ 2026 3,434 2027 1,277 2028 5,878 Thereafter 3,215 Total $ 20,736 2027 1,277 2028 5,878 Thereafter 3,215 Total $ 20,736 Contingencies The 5,878 Thereafter 3,215 Total $ 20,736 Contingencies The Company is subject Vietnam . Apple Inc. | 2023 Form 10-K | 46 Note Apple Inc. | 2023 Form 10-K | 46 Note 13 – | 2023 Form 10-K | 46 Note 13 – Segment Information Form 10-K | 46 Note 13 – Segment Information and Geographic information by reportable segment for 2023 , 2022 and 2021 ( reportable segment for 2023 , 2022 and 2021 ( in million for 2023 , 2022 and 2021 ( in million ) : ( in million ) : 2023 2022 2021 Americas : Net in million ) : 2023 2022 2021 Americas : Net sale million ) : 2023 2022 2021 Americas : Net sale $ Americas : Net sale $ 162,560 $ 169,658 $ 153,306 Operating Net sale $ 162,560 $ 169,658 $ 153,306 Operating income $ $ 162,560 $ 169,658 $ 153,306 Operating income $ 60,508 $ $ 153,306 Operating income $ 60,508 $ 62,683 $ 53,382 Europe Operating income $ 60,508 $ 62,683 $ 53,382 Europe : Net $ 60,508 $ 62,683 $ 53,382 Europe : Net sale $ Europe : Net sale $ 94,294 $ 95,118 $ 89,307 Operating Net sale $ 94,294 $ 95,118 $ 89,307 Operating income $ $ 94,294 $ 95,118 $ 89,307 Operating income $ 36,098 $ $ 89,307 Operating income $ 36,098 $ 35,233 $ 32,505 Greater Operating income $ 36,098 $ 35,233 $ 32,505 Greater China : $ 36,098 $ 35,233 $ 32,505 Greater China : Net sale China : Net sale $ 72,559 $ 74,200 $ 68,366 Operating Net sale $ 72,559 $ 74,200 $ 68,366 Operating income $ $ 72,559 $ 74,200 $ 68,366 Operating income $ 30,328 $ $ 68,366 Operating income $ 30,328 $ 31,153 $ 28,504 Japan Operating income $ 30,328 $ 31,153 $ 28,504 Japan : Net $ 30,328 $ 31,153 $ 28,504 Japan : Net sale $ Japan : Net sale $ 24,257 $ 25,977 $ 28,482 Operating Net sale $ 24,257 $ 25,977 $ 28,482 Operating income $ $ 24,257 $ 25,977 $ 28,482 Operating income $ 11,888 $ $ 28,482 Operating income $ 11,888 $ 12,257 $ 12,798 Rest Operating income $ 11,888 $ 12,257 $ 12,798 Rest of Asia $ 11,888 $ 12,257 $ 12,798 Rest of Asia Pacific : Pacific : Net sale $ 29,615 $ 29,375 $ 26,356 Operating Net sale $ 29,615 $ 29,375 $ 26,356 Operating income $ $ 29,615 $ 29,375 $ 26,356 Operating income $ 12,066 $ $ 26,356 Operating income $ 12,066 $ 11,569 $ 9,817 A Operating income $ 12,066 $ 11,569 $ 9,817 A reconciliation of $ 12,066 $ 11,569 $ 9,817 A reconciliation of the Company Consolidated Statements of Operations for 2023 , 2022 and 2021 is of Operations for 2023 , 2022 and 2021 is a follows for 2023 , 2022 and 2021 is a follows ( in ( in million ) : 2023 2022 2021 Segment operating income in million ) : 2023 2022 2021 Segment operating income $ million ) : 2023 2022 2021 Segment operating income $ 150,888 2021 Segment operating income $ 150,888 $ 152,895 $ 137,006 Research operating income $ 150,888 $ 152,895 $ 137,006 Research and development $ 150,888 $ 152,895 $ 137,006 Research and development expense ( Research and development expense ( 29,915 ) ( 26,251 ) ( expense ( 29,915 ) ( 26,251 ) ( 21,914 ) Other ) ( 26,251 ) ( 21,914 ) Other corporate expense , corporate expense , net ( 1 ) ( 6,672 ) ( net ( 1 ) ( 6,672 ) ( 7,207 ) ( ) ( 6,672 ) ( 7,207 ) ( 6,143 ) Total ) ( 7,207 ) ( 6,143 ) Total operating income $ ) Total operating income $ 114,301 $ 119,437 $ 108,949 ( operating income $ 114,301 $ 119,437 $ 108,949 ( 1 ) $ 114,301 $ 119,437 $ 108,949 ( 1 ) Includes corporate $ 119,437 $ 108,949 ( 1 ) Includes corporate marketing expense cost . Apple Inc. | 2023 Form 10-K | 47 The Apple Inc. | 2023 Form 10-K | 47 The U.S. and | 2023 Form 10-K | 47 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2023 , 2022 and 2021 . net sale in 2023 , 2022 and 2021 . Net sale in 2023 , 2022 and 2021 . Net sale for 2023 2021 . Net sale for 2023 , 2022 and 2021 and Net sale for 2023 , 2022 and 2021 and long-lived asset for 2023 , 2022 and 2021 and long-lived asset a of long-lived asset a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 were a follows 2023 and September 24 , 2022 were a follows ( in ( in million ) : 2023 2022 2021 Net sale : in million ) : 2023 2022 2021 Net sale : U.S. million ) : 2023 2022 2021 Net sale : U.S. $ Net sale : U.S. $ 138,573 $ 147,859 $ 133,803 China : U.S. $ 138,573 $ 147,859 $ 133,803 China ( 1 $ 138,573 $ 147,859 $ 133,803 China ( 1 ) 72,559 147,859 $ 133,803 China ( 1 ) 72,559 74,200 68,366 Other 133,803 China ( 1 ) 72,559 74,200 68,366 Other country 172,153 China ( 1 ) 72,559 74,200 68,366 Other country 172,153 172,269 ( 1 ) 72,559 74,200 68,366 Other country 172,153 172,269 163,648 72,559 74,200 68,366 Other country 172,153 172,269 163,648 Total net sale 74,200 68,366 Other country 172,153 172,269 163,648 Total net sale $ 68,366 Other country 172,153 172,269 163,648 Total net sale $ 383,285 163,648 Total net sale $ 383,285 $ 394,328 $ 365,817 2023 net sale $ 383,285 $ 394,328 $ 365,817 2023 2022 Long-lived $ 383,285 $ 394,328 $ 365,817 2023 2022 Long-lived asset : 383,285 $ 394,328 $ 365,817 2023 2022 Long-lived asset : U.S. $ 394,328 $ 365,817 2023 2022 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 33,276 $ 31,119 China ( 1 : U.S. $ 33,276 $ 31,119 China ( 1 ) 5,778 33,276 $ 31,119 China ( 1 ) 5,778 7,260 Other country 31,119 China ( 1 ) 5,778 7,260 Other country 4,661 3,738 China ( 1 ) 5,778 7,260 Other country 4,661 3,738 Total ) 5,778 7,260 Other country 4,661 3,738 Total long-lived asset $ 5,778 7,260 Other country 4,661 3,738 Total long-lived asset $ 43,715 3,738 Total long-lived asset $ 43,715 $ 42,117 ( 1 ) long-lived asset $ 43,715 $ 42,117 ( 1 ) China includes $ 43,715 $ 42,117 ( 1 ) China includes Hong Kong Taiwan . Apple Inc. | 2023 Form 10-K | 48 Report Apple Inc. | 2023 Form 10-K | 48 Report of Independent | 2023 Form 10-K | 48 Report of Independent Registered Public Apple Inc. a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the related 2023 and September 24 , 2022 , the related consolidated statement in the period ended September 30 , 2023 , and the period ended September 30 , 2023 , and the related note of Apple Inc. at September 30 , 2023 and September 24 Inc. at September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , and the 2023 and September 24 , 2022 , and the result of in the period ended September 30 , 2023 , in conformity period ended September 30 , 2023 , in conformity with U.S. financial reporting a of September 30 , 2023 , based on a of September 30 , 2023 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated November 2 , 2023 expressed an unqualified report dated November 2 , 2023 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging Matter As discussed in Note 7 to the financial statement , jurisdiction . As of September 30 , 2023 , the total As of September 30 , 2023 , the total amount of unrecognized tax benefit wa $ 19.5 billion , of which $ billion , of which $ 9.5 billion , if recognized , ruling . Apple Inc. | 2023 Form 10-K | 49 How Apple Inc. | 2023 Form 10-K | 49 How We Addressed | 2023 Form 10-K | 49 How We Addressed the Matter these matter included in Note 7 to the financial statement . Inc. ’ s auditor since 2009 . San Jose , California San Jose , California November 2 , 2023 Apple Inc. | , California November 2 , 2023 Apple Inc. | 2023 Form , 2023 Apple Inc. | 2023 Form 10-K | 50 Report Apple Inc. | 2023 Form 10-K | 50 Report of Independent | 2023 Form 10-K | 50 Report of Independent Registered Public financial reporting a of September 30 , 2023 , based on a of September 30 , 2023 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the “ financial reporting a of September 30 , 2023 , based on a of September 30 , 2023 , based on the COSO Apple Inc. a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 , the related 2023 and September 24 , 2022 , the related consolidated statement in the period ended September 30 , 2023 , and the period ended September 30 , 2023 , and the related note and our report dated November 2 , 2023 expressed an unqualified report dated November 2 , 2023 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California November 2 , 2023 Apple Inc. | , California November 2 , 2023 Apple Inc. | 2023 Form , 2023 Apple Inc. | 2023 Form 10-K | 51 Item Apple Inc. | 2023 Form 10-K | 51 Item 9 . | 2023 Form 10-K | 51 Item 9 . Changes in Form 10-K | 51 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 30 , 2023 to provide reasonable a of September 30 , 2023 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 30 , 2023 to provide reasonable a of September 30 , 2023 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control over during the fourth quarter of 2023 , which were identified in ( d ) of Rules 13a-15 and 15d-15 under the Exchange ) of Rules 13a-15 and 15d-15 under the Exchange Act , reporting . Apple Inc. | 2023 Form 10-K | 52 Item Apple Inc. | 2023 Form 10-K | 52 Item 9B . | 2023 Form 10-K | 52 Item 9B . Other Information Form 10-K | 52 Item 9B . Other Information Insider Trading Insider Trading Arrangements On August 30 , 2023 , Deirdre O Arrangements On August 30 , 2023 , Deirdre O ’ Brien affirmative defense condition of Rule 10b5-1 ( c ) under the plan will expire on October 15 , 2024 , and Mr. expire on October 15 , 2024 , and Mr. Williams ’ plan will expire on December 15 , 2024 , subject to expire on December 15 , 2024 , subject to early termination in the plan . Item 9C . Disclosure Regarding Foreign Jurisdictions applicable . PART III Item 10 . Directors , Executive Officers filed with the SEC within 120 day after September 30 , within 120 day after September 30 , 2023 , in connection day after September 30 , 2023 , in connection with the for the Company ’ s 2024 annual meeting of shareholder ( of shareholder ( the “ 2024 Proxy Statement ” ) , herein by reference . Item 11 . Executive Compensation The information will be included in the 2024 Proxy Statement , and is herein by reference . Item 12 . Security Ownership of Certain will be included in the 2024 Proxy Statement , and is herein by reference . Item 13 . Certain Relationships and Related will be included in the 2024 Proxy Statement , and is herein by reference . Item 14 . Principal Accountant Fees and will be included in the 2024 Proxy Statement , and is reference . Apple Inc. | 2023 Form 10-K | 53 PART Apple Inc. | 2023 Form 10-K | 53 PART IV Item | 2023 Form 10-K | 53 PART IV Item 15 . | 53 PART IV Item 15 . Exhibit and Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 28 Consolidated Statements 2022 and September 25 , 2021 28 Consolidated Statements of Comprehensive and September 25 , 2021 28 Consolidated Statements of Comprehensive Income for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 29 Consolidated Balance 2022 and September 25 , 2021 29 Consolidated Balance Sheets a and September 25 , 2021 29 Consolidated Balance Sheets a of Balance Sheets a of September 30 , 2023 and September 24 a of September 30 , 2023 and September 24 , 2022 30 , 2023 and September 24 , 2022 30 Consolidated Statements 2023 and September 24 , 2022 30 Consolidated Statements of Shareholders and September 24 , 2022 30 Consolidated Statements of Shareholders ’ for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 31 Consolidated Statements 2022 and September 25 , 2021 31 Consolidated Statements of Cash and September 25 , 2021 31 Consolidated Statements of Cash Flows for the year ended September 30 , 2023 , September 24 year ended September 30 , 2023 , September 24 , 2022 30 , 2023 , September 24 , 2022 and September 25 2023 , September 24 , 2022 and September 25 , 2021 24 , 2022 and September 25 , 2021 32 Notes to 2022 and September 25 , 2021 32 Notes to Consolidated Financial and September 25 , 2021 32 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 33 Reports of Independent Registered Public Registered Public Accounting Firm * 49 * Ernst & Young LLP PCAOB Firm ID No . 000 42 . ( 2 ) Firm ID No . 000 42 . ( 2 ) Financial . 000 42 . ( 2 ) Financial Statement Schedules All note included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K ( 1 601 of Regulation S-K ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of the Registrant filed on August 3 , 2020 . 8-K 3.1 filed on August 3 , 2020 . 8-K 3.1 8/7/20 3.2 August 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and 3 , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated , 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws 2020 . 8-K 3.1 8/7/20 3.2 Amended and Restated Bylaws of Registrant effective a of August 17 , 2022 . 8-K 3.2 a of August 17 , 2022 . 8-K 3.2 8/19/22 4.1 August 17 , 2022 . 8-K 3.2 8/19/22 4.1 * * 17 , 2022 . 8-K 3.2 8/19/22 4.1 * * Description , 2022 . 8-K 3.2 8/19/22 4.1 * * Description of 2022 . 8-K 3.2 8/19/22 4.1 * * Description of Securities Securities of the Registrant . 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.9 % Notes due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.9 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 Apple % Notes due 2027 . 8-K 4.1 9/17/15 Apple Inc. | Notes due 2027 . 8-K 4.1 9/17/15 Apple Inc. | 2023 due 2027 . 8-K 4.1 9/17/15 Apple Inc. | 2023 Form 4.1 9/17/15 Apple Inc. | 2023 Form 10-K | 54 Incorporated Apple Inc. | 2023 Form 10-K | 54 Incorporated by Reference | 2023 Form 10-K | 54 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.10 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 % Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.11 Supplement No . 1 to 2/23/16 4.11 Supplement No . 1 to the Officer ’ s , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.12 March 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.12 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 % Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ Notes due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s due 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate 2046 . 8-K 4.1 8/4/16 4.13 Officer ’ s Certificate of , dated a of February 9 , 2017 , including form a of February 9 , 2017 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.550 % Notes due Rate Notes due 2022 , 1.550 % Notes due 2019 , , 1.550 % Notes due 2019 , 1.900 % Notes due % Notes due 2019 , 1.900 % Notes due 2020 , , 1.900 % Notes due 2020 , 2.500 % Notes due % Notes due 2020 , 2.500 % Notes due 2022 , , 2.500 % Notes due 2022 , 3.000 % Notes due % Notes due 2022 , 3.000 % Notes due 2024 , , 3.000 % Notes due 2024 , 3.350 % Notes due % Notes due 2024 , 3.350 % Notes due 2027 and , 3.350 % Notes due 2027 and 4.250 % Notes due % Notes due 2027 and 4.250 % Notes due 2047 . and 4.250 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 % Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ Notes due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s due 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate 2047 . 8-K 4.1 2/9/17 4.14 Officer ’ s Certificate of , dated a of May 11 , 2017 , including form a of May 11 , 2017 , including form of global the Floating Rate Notes due 2020 , Floating Rate Notes due , Floating Rate Notes due 2022 , 1.800 % Notes due Rate Notes due 2022 , 1.800 % Notes due 2020 , , 1.800 % Notes due 2020 , 2.300 % Notes due % Notes due 2020 , 2.300 % Notes due 2022 , , 2.300 % Notes due 2022 , 2.850 % Notes due % Notes due 2022 , 2.850 % Notes due 2024 and , 2.850 % Notes due 2024 and 3.200 % Notes due % Notes due 2024 and 3.200 % Notes due 2027 . and 3.200 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 % Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ Notes due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s due 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate 2027 . 8-K 4.1 5/11/17 4.15 Officer ’ s Certificate of , dated a of May 24 , 2017 , including form a of May 24 , 2017 , including form of global of global note representing the 0.875 % Notes due 2025 and the 0.875 % Notes due 2025 and 1.375 % Notes due % Notes due 2025 and 1.375 % Notes due 2029 . and 1.375 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 % Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ Notes due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s due 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate 2029 . 8-K 4.1 5/24/17 4.16 Officer ’ s Certificate of , dated a of June 20 , 2017 , including form a of June 20 , 2017 , including form of global of global note representing the 3.000 % Notes due 2027 . the 3.000 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 % Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ Notes due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s due 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate 2027 . 8-K 4.1 6/20/17 4.17 Officer ’ s Certificate of , dated a of August 18 , 2017 , including form a of August 18 , 2017 , including form of global of global note representing the 2.513 % Notes due 2024 . the 2.513 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 % Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ Notes due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s due 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate 2024 . 8-K 4.1 8/18/17 4.18 Officer ’ s Certificate of , dated a of September 12 , 2017 , including form a of September 12 , 2017 , including form of global of global note representing the 1.500 % Notes due 2019 , the 1.500 % Notes due 2019 , 2.100 % Notes due % Notes due 2019 , 2.100 % Notes due 2022 , , 2.100 % Notes due 2022 , 2.900 % Notes due % Notes due 2022 , 2.900 % Notes due 2027 and , 2.900 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 % Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ Notes due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s due 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate 2047 . 8-K 4.1 9/12/17 4.19 Officer ’ s Certificate of , dated a of November 13 , 2017 , including form a of November 13 , 2017 , including form of global of global note representing the 1.800 % Notes due 2019 , the 1.800 % Notes due 2019 , 2.000 % Notes due % Notes due 2019 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2023 , , 2.400 % Notes due 2023 , 2.750 % Notes due % Notes due 2023 , 2.750 % Notes due 2025 , , 2.750 % Notes due 2025 , 3.000 % Notes due % Notes due 2025 , 3.000 % Notes due 2027 and , 3.000 % Notes due 2027 and 3.750 % Notes due % Notes due 2027 and 3.750 % Notes due 2047 . and 3.750 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 % Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , Notes due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated due 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a 2047 . 8-K 4.1 11/13/17 4.20 Indenture , dated a of , dated a of November 5 , 2018 , between the a of November 5 , 2018 , between the Registrant and , a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s a Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate Trustee . S-3 4.1 11/5/18 4.21 Officer ’ s Certificate of , dated a of September 11 , 2019 , including form a of September 11 , 2019 , including form of global of global note representing the 1.700 % Notes due 2022 , the 1.700 % Notes due 2022 , 1.800 % Notes due % Notes due 2022 , 1.800 % Notes due 2024 , , 1.800 % Notes due 2024 , 2.050 % Notes due % Notes due 2024 , 2.050 % Notes due 2026 , , 2.050 % Notes due 2026 , 2.200 % Notes due % Notes due 2026 , 2.200 % Notes due 2029 and , 2.200 % Notes due 2029 and 2.950 % Notes due % Notes due 2029 and 2.950 % Notes due 2049 . and 2.950 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 % Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ Notes due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s due 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate 2049 . 8-K 4.1 9/11/19 4.22 Officer ’ s Certificate of , dated a of November 15 , 2019 , including form a of November 15 , 2019 , including form of global of global note representing the 0.000 % Notes due 2025 and the 0.000 % Notes due 2025 and 0.500 % Notes due % Notes due 2025 and 0.500 % Notes due 2031 . and 0.500 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 % Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ Notes due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s due 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate 2031 . 8-K 4.1 11/15/19 4.23 Officer ’ s Certificate of , dated a of May 11 , 2020 , including form a of May 11 , 2020 , including form of global of global note representing the 0.750 % Notes due 2023 , the 0.750 % Notes due 2023 , 1.125 % Notes due % Notes due 2023 , 1.125 % Notes due 2025 , , 1.125 % Notes due 2025 , 1.650 % Notes due % Notes due 2025 , 1.650 % Notes due 2030 and , 1.650 % Notes due 2030 and 2.650 % Notes due % Notes due 2030 and 2.650 % Notes due 2050 . and 2.650 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 % Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ Notes due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s due 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate 2050 . 8-K 4.1 5/11/20 4.24 Officer ’ s Certificate of , dated a of August 20 , 2020 , including form a of August 20 , 2020 , including form of global of global note representing the 0.550 % Notes due 2025 , the 0.550 % Notes due 2025 , 1.25 % Notes due % Notes due 2025 , 1.25 % Notes due 2030 , , 1.25 % Notes due 2030 , 2.400 % Notes due % Notes due 2030 , 2.400 % Notes due 2050 and , 2.400 % Notes due 2050 and 2.550 % Notes due % Notes due 2050 and 2.550 % Notes due 2060 . and 2.550 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 % Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ Notes due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s due 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate 2060 . 8-K 4.1 8/20/20 4.25 Officer ’ s Certificate of , dated a of February 8 , 2021 , including form a of February 8 , 2021 , including form of global of global note representing the 0.700 % Notes due 2026 , the 0.700 % Notes due 2026 , 1.200 % Notes due % Notes due 2026 , 1.200 % Notes due 2028 , , 1.200 % Notes due 2028 , 1.650 % Notes due % Notes due 2028 , 1.650 % Notes due 2031 , , 1.650 % Notes due 2031 , 2.375 % Notes due % Notes due 2031 , 2.375 % Notes due 2041 , , 2.375 % Notes due 2041 , 2.650 % Notes due % Notes due 2041 , 2.650 % Notes due 2051 and , 2.650 % Notes due 2051 and 2.800 % Notes due % Notes due 2051 and 2.800 % Notes due 2061 . and 2.800 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 % Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ Notes due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s due 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate 2061 . 8-K 4.1 2/8/21 4.26 Officer ’ s Certificate of , dated a of August 5 , 2021 , including form a of August 5 , 2021 , including form of global of global note representing the 1.400 % Notes due 2028 , the 1.400 % Notes due 2028 , 1.700 % Notes due % Notes due 2028 , 1.700 % Notes due 2031 , , 1.700 % Notes due 2031 , 2.700 % Notes due % Notes due 2031 , 2.700 % Notes due 2051 and , 2.700 % Notes due 2051 and 2.850 % Notes due % Notes due 2051 and 2.850 % Notes due 2061 . and 2.850 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 % Notes due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , Notes due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated due 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated a 2061 . 8-K 4.1 8/5/21 4.27 Indenture , dated a of , dated a of October 28 , 2021 , between the a of October 28 , 2021 , between the Registrant and , a Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s a Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s Certificate Trustee . S-3 4.1 10/29/21 4.28 Officer ’ s Certificate of , dated a of August 8 , 2022 , including form a of August 8 , 2022 , including form of global of global note representing the 3.250 % Notes due 2029 , the 3.250 % Notes due 2029 , 3.350 % Notes due % Notes due 2029 , 3.350 % Notes due 2032 , , 3.350 % Notes due 2032 , 3.950 % Notes due % Notes due 2032 , 3.950 % Notes due 2052 and , 3.950 % Notes due 2052 and 4.100 % Notes due % Notes due 2052 and 4.100 % Notes due 2062 . and 4.100 % Notes due 2062 . 8-K 4.1 8/8/22 Apple % Notes due 2062 . 8-K 4.1 8/8/22 Apple Inc. | Notes due 2062 . 8-K 4.1 8/8/22 Apple Inc. | 2023 due 2062 . 8-K 4.1 8/8/22 Apple Inc. | 2023 Form 4.1 8/8/22 Apple Inc. | 2023 Form 10-K | 55 Incorporated Apple Inc. | 2023 Form 10-K | 55 Incorporated by Reference | 2023 Form 10-K | 55 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 4.29 Officer ’ s Certificate of , dated a of May 10 , 2023 , including form a of May 10 , 2023 , including form of global of global note representing the 4.421 % Notes due 2026 , the 4.421 % Notes due 2026 , 4.000 % Notes due % Notes due 2026 , 4.000 % Notes due 2028 , , 4.000 % Notes due 2028 , 4.150 % Notes due % Notes due 2028 , 4.150 % Notes due 2030 , , 4.150 % Notes due 2030 , 4.300 % Notes due % Notes due 2030 , 4.300 % Notes due 2033 and , 4.300 % Notes due 2033 and 4.850 % Notes due % Notes due 2033 and 4.850 % Notes due 2053 . and 4.850 % Notes due 2053 . 8-K 4.1 5/10/23 4.30 % Notes due 2053 . 8-K 4.1 5/10/23 4.30 * Apple Notes due 2053 . 8-K 4.1 5/10/23 4.30 * Apple Inc due 2053 . 8-K 4.1 5/10/23 4.30 * Apple Inc . 2053 . 8-K 4.1 5/10/23 4.30 * Apple Inc . Deferred Deferred Compensation Plan . S-8 4.1 8/23/18 10.1 * Apple Inc Compensation Plan . S-8 4.1 8/23/18 10.1 * Apple Inc . Plan . S-8 4.1 8/23/18 10.1 * Apple Inc . Employee and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple of the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. the Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Registrant . 10-Q 10.2 6/27/09 10.3 * Apple Inc. Non-Employee Director Plan , a amended November 9 , 2021 . 10-Q 10.1 a amended November 9 , 2021 . 10-Q 10.1 12/25/21 10.4 November 9 , 2021 . 10-Q 10.1 12/25/21 10.4 * Apple 9 , 2021 . 10-Q 10.1 12/25/21 10.4 * Apple Inc. , 2021 . 10-Q 10.1 12/25/21 10.4 * Apple Inc. 2014 2021 . 10-Q 10.1 12/25/21 10.4 * Apple Inc. 2014 Employee 12/25/21 10.4 * Apple Inc. 2014 Employee Stock Plan , a and restated a of October 1 , 2017 . 10-K 10.8 a of October 1 , 2017 . 10-K 10.8 9/30/17 10.5 October 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form 1 , 2017 . 10-K 10.8 9/30/17 10.5 * Form of , 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted 2017 . 10-K 10.8 9/30/17 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 26 , 2017 . 10-K 10.20 a of September 26 , 2017 . 10-K 10.20 9/30/17 10.6 September 26 , 2017 . 10-K 10.20 9/30/17 10.6 * Form 26 , 2017 . 10-K 10.20 9/30/17 10.6 * Form of , 2017 . 10-K 10.20 9/30/17 10.6 * Form of Restricted 2017 . 10-K 10.20 9/30/17 10.6 * Form of Restricted Stock Plan effective a of February 13 , 2018 . 10-Q 10.2 a of February 13 , 2018 . 10-Q 10.2 3/31/18 10.7 February 13 , 2018 . 10-Q 10.2 3/31/18 10.7 * Form 13 , 2018 . 10-Q 10.2 3/31/18 10.7 * Form of , 2018 . 10-Q 10.2 3/31/18 10.7 * Form of Restricted 2018 . 10-Q 10.2 3/31/18 10.7 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.17 a of August 21 , 2018 . 10-K 10.17 9/29/18 10.8 August 21 , 2018 . 10-K 10.17 9/29/18 10.8 * Form 21 , 2018 . 10-K 10.17 9/29/18 10.8 * Form of , 2018 . 10-K 10.17 9/29/18 10.8 * Form of Performance 2018 . 10-K 10.17 9/29/18 10.8 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 21 , 2018 . 10-K 10.18 a of August 21 , 2018 . 10-K 10.18 9/29/18 10.9 August 21 , 2018 . 10-K 10.18 9/29/18 10.9 * Form 21 , 2018 . 10-K 10.18 9/29/18 10.9 * Form of , 2018 . 10-K 10.18 9/29/18 10.9 * Form of Restricted 2018 . 10-K 10.18 9/29/18 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.15 a of September 29 , 2019 . 10-K 10.15 9/28/19 10.10 September 29 , 2019 . 10-K 10.15 9/28/19 10.10 * Form 29 , 2019 . 10-K 10.15 9/28/19 10.10 * Form of , 2019 . 10-K 10.15 9/28/19 10.10 * Form of Performance 2019 . 10-K 10.15 9/28/19 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 29 , 2019 . 10-K 10.16 a of September 29 , 2019 . 10-K 10.16 9/28/19 10.11 September 29 , 2019 . 10-K 10.16 9/28/19 10.11 * Form 29 , 2019 . 10-K 10.16 9/28/19 10.11 * Form of , 2019 . 10-K 10.16 9/28/19 10.11 * Form of Restricted 2019 . 10-K 10.16 9/28/19 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.16 a of August 18 , 2020 . 10-K 10.16 9/26/20 10.12 August 18 , 2020 . 10-K 10.16 9/26/20 10.12 * Form 18 , 2020 . 10-K 10.16 9/26/20 10.12 * Form of , 2020 . 10-K 10.16 9/26/20 10.12 * Form of Performance 2020 . 10-K 10.16 9/26/20 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 18 , 2020 . 10-K 10.17 a of August 18 , 2020 . 10-K 10.17 9/26/20 10.13 August 18 , 2020 . 10-K 10.17 9/26/20 10.13 * Form 18 , 2020 . 10-K 10.17 9/26/20 10.13 * Form of , 2020 . 10-K 10.17 9/26/20 10.13 * Form of CEO 2020 . 10-K 10.17 9/26/20 10.13 * Form of CEO Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.1 a of September 27 , 2020 . 10-Q 10.1 12/26/20 10.14 September 27 , 2020 . 10-Q 10.1 12/26/20 10.14 * Form 27 , 2020 . 10-Q 10.1 12/26/20 10.14 * Form of , 2020 . 10-Q 10.1 12/26/20 10.14 * Form of CEO 2020 . 10-Q 10.1 12/26/20 10.14 * Form of CEO Performance CEO Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of September 27 , 2020 . 10-Q 10.2 a of September 27 , 2020 . 10-Q 10.2 12/26/20 10.15 September 27 , 2020 . 10-Q 10.2 12/26/20 10.15 * Apple 27 , 2020 . 10-Q 10.2 12/26/20 10.15 * Apple Inc. , 2020 . 10-Q 10.2 12/26/20 10.15 * Apple Inc. 2022 2020 . 10-Q 10.2 12/26/20 10.15 * Apple Inc. 2022 Employee 12/26/20 10.15 * Apple Inc. 2022 Employee Stock Plan . 8-K 2022 Employee Stock Plan . 8-K 10.1 3/4/22 10.16 * Form Employee Stock Plan . 8-K 10.1 3/4/22 10.16 * Form of Stock Plan . 8-K 10.1 3/4/22 10.16 * Form of Restricted Plan . 8-K 10.1 3/4/22 10.16 * Form of Restricted Stock Stock Unit Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of March 4 , 2022 . 8-K 10.2 a of March 4 , 2022 . 8-K 10.2 3/4/22 10.17 March 4 , 2022 . 8-K 10.2 3/4/22 10.17 * Form 4 , 2022 . 8-K 10.2 3/4/22 10.17 * Form of , 2022 . 8-K 10.2 3/4/22 10.17 * Form of Performance 2022 . 8-K 10.2 3/4/22 10.17 * Form of Performance Award of Performance Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of March 4 , 2022 . 8-K 10.3 a of March 4 , 2022 . 8-K 10.3 3/4/22 10.18 March 4 , 2022 . 8-K 10.3 3/4/22 10.18 * Apple 4 , 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. , 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. Executive 2022 . 8-K 10.3 3/4/22 10.18 * Apple Inc. Executive Cash Executive Cash Incentive Plan . 8-K 10.1 8/19/22 10.19 * Form Cash Incentive Plan . 8-K 10.1 8/19/22 10.19 * Form of Incentive Plan . 8-K 10.1 8/19/22 10.19 * Form of CEO Plan . 8-K 10.1 8/19/22 10.19 * Form of CEO Restricted Stock Unit Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of September 25 , 2022 . 10-Q 10.1 a of September 25 , 2022 . 10-Q 10.1 12/31/22 10.20 September 25 , 2022 . 10-Q 10.1 12/31/22 10.20 * Form 25 , 2022 . 10-Q 10.1 12/31/22 10.20 * Form of , 2022 . 10-Q 10.1 12/31/22 10.20 * Form of CEO 2022 . 10-Q 10.1 12/31/22 10.20 * Form of CEO Performance CEO Performance Award Agreement under 2022 Employee Stock Plan effective a Plan effective a of September 25 , 2022 . 10-Q 10.2 a of September 25 , 2022 . 10-Q 10.2 12/31/22 21.1 September 25 , 2022 . 10-Q 10.2 12/31/22 21.1 * * 25 , 2022 . 10-Q 10.2 12/31/22 21.1 * * Subsidiaries , 2022 . 10-Q 10.2 12/31/22 21.1 * * Subsidiaries of 2022 . 10-Q 10.2 12/31/22 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101 * * Inline XBRL Document in Part II , Item 8 , “ Financial Statements and this Annual Report on Form 10-K. Apple Inc. | 2023 Form Form 10-K. Apple Inc. | 2023 Form 10-K | 56 Incorporated Apple Inc. | 2023 Form 10-K | 56 Incorporated by Reference | 2023 Form 10-K | 56 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 104 * * Inline XBRL for this Annual Report on Form 10-K , included in the Exhibit , included in the Exhibit 101 Inline XBRL Document Set . * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of any such instrument . Item 16 . Form 10-K Summary None . Item 16 . Form 10-K Summary None . Apple Inc. None . Apple Inc. | 2023 Form 10-K | 57 SIGNATURES Apple Inc. | 2023 Form 10-K | 57 SIGNATURES Pursuant to | 2023 Form 10-K | 57 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : November 2 , 2023 Apple Inc. By Date : November 2 , 2023 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 2 , 2023 TIMOTHY D. COOK Officer ) November 2 , 2023 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) November 2 , 2023 LUCA MAESTRI /s/ Officer ) November 2 , 2023 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) November 2 , 2023 CHRIS KONDO /s/ Officer ) November 2 , 2023 CHRIS KONDO /s/ James A A . Bell Director November 2 , 2023 JAMES A . Bell Director November 2 , 2023 JAMES A . BELL /s/ /s/ Al Gore Director November 2 , 2023 AL GORE /s/ Gore Director November 2 , 2023 AL GORE /s/ Alex Gorsky /s/ Alex Gorsky Director November 2 , 2023 ALEX GORSKY /s/ Gorsky Director November 2 , 2023 ALEX GORSKY /s/ Andrea Jung /s/ Andrea Jung Director November 2 , 2023 ANDREA JUNG /s/ Jung Director November 2 , 2023 ANDREA JUNG /s/ Arthur D. Chair of the Board November 2 , 2023 ARTHUR D. LEVINSON the Board November 2 , 2023 ARTHUR D. LEVINSON /s/ Monica /s/ Monica Lozano Director November 2 , 2023 MONICA LOZANO /s/ Lozano Director November 2 , 2023 MONICA LOZANO /s/ Ronald D. Ronald D. Sugar Director November 2 , 2023 RONALD D. SUGAR Sugar Director November 2 , 2023 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director November 2 , 2023 SUSAN L. WAGNER Wagner Director November 2 , 2023 SUSAN L. WAGNER Apple Inc. L. WAGNER Apple Inc. | 2023 Form 10-K | 58 Apple Inc. | 2023 Form 10-K | 58 | 2023 Form 10-K | 58 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-95-000016/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-95-000016/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-96-000023/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000320193-96-000023/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000912057-00-053623/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000912057-00-053623/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0000912057-99-010244/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0000912057-99-010244/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-02-007674/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-02-007674/full-submission.txt new file mode 100644 index 0000000..584ce26 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-02-007674/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 28 , 2002 OR o TRANSITION year ended September 28 , 2002 OR o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 0-10030 APPLE COMPUTER , INC. ( of incorporation or organization ) 942404110 ( I.R.S . Employer Identification Employer Identification No . ) 1 Infinite Loop Cupertino , California of principal executive office ) 95014 ( Zip Code ) Registrant including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ý Indicate by check mark defined in Exchange Act Rule 12b-2 ) . Yes ý No the Registrant wa approximately $ 4,925,788,282 a of December 6 , $ 4,925,788,282 a of December 6 , 2002 , based upon a of December 6 , 2002 , based upon the closing who beneficially owns more than 5 % of the outstanding Common determination for other purpose . 359,135,584 share of Common Stock Issued and Outstanding a of December 6 , 2002 PART I The a of December 6 , 2002 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . Item 1. Business Company this Form 10-K . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , information presented in this Form 10-K is based on the Company of it retail initiative in 2001 , the Company ha opened , the Company ha opened 51 retail store in the United of the first quarter of 2003 , the Company estimate that the Company estimate that over 30 % of the U.S. population U.S. population will live within 15 mile of one of it and marketing of personal computing 1 product . The store employ the Company indicate that approximately 40 % of customer buying system . Education For more than 25 year , the Company ha in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Segment in Part II , Item 8 on this Form 10-K in Item 8 on this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and and Geographic Data . `` 2 Hardware Products The Company offer in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors During the third quarter of 2002 , the Company introduced and and shipped Xserve™ , a 1U rack-mount server designed for simple Xserve delivers high-speed networking , 15 gigaflops of computational power , service and support program including 4-hour onsite response , 24x7 technical including 4-hour onsite response , 24x7 technical support , AppleCare® Service , wa introduced in January 2001 . The Titanium PowerBook is The Titanium PowerBook G4 is 1-inch thick , weighs a little , weighs a little a 5.4 pound and is encased in industrial design with a built-in 15-inch shadow-mask cathode ray tube ( suggested retail price under $ 1,000 . In January 2002 , $ 1,000 . In January 2002 , the Company introduced the design that incorporates an adjustable 15-inch TFT active-matrix flat panel display . New iMac model with 15-inch display are available in three and DVDs . In July 2002 , the Company introduced an new iMac that feature a 17-inch TFT active-matrix flat panel display , and a SuperDrive . 3 eMac™ In April 2002 , . 3 eMac™ In April 2002 , the Company introduced the available to consumer in June 2002 . The eMac feature a processor , a high resolution 17-inch flat CRT display , a wa introduced in May of 2001 . Current iBook model feature . Current iBook model feature 12.1-inch or 14.1-inch TFT active-matrix display iBook model feature 12.1-inch or 14.1-inch TFT active-matrix display , include , weigh a little a 4.9 pound , and have a suggested retail price under $ 1,000 . iPod™ Introduced in October . iPod™ Introduced in October 2001 , the original iPod portable digital music player utilized a 5GB hard disk drive allowing it it to hold up to 1,000 CD-quality song in a 6.5 1,000 CD-quality song in a 6.5 ounce design . The iPod intuitive user interface on a 2-inch liquid crystal display , automatic data transfer and up to 10 hour of battery life . hub strategy . In March 2002 , the Company added a , the Company added a 10GB model to it iPod line line , and in July 2002 , the Company added a , the Company added a 20GB model and announced that all Windows-compatible version . The newer 10GB and 20GB iPod model come . The newer 10GB and 20GB iPod model come with carrying System and Server Software During 2001 , the Company introduced the , Mac OS X version 10.1 . At it introduction , introduction of the Macintosh in 1984 . Mac OS X feature X includes Apple 's Quartz™ 2D graphic engine ( based on support , OpenGL for enhanced 3D graphic and gaming , and new functionality . In January 2002 , the Company made Mac user to run Mac OS 9 application natively in the Classic the Classic compatibility environment in 4 Mac OS X . The developer tool . In August 2002 , the Company released Mac released Mac OS X version 10.2 ( code named `` Jaguar foundation with enhancement including FreeBSD 4.4 and GCC 3.1-based developer tool including FreeBSD 4.4 and GCC 3.1-based developer tool . Mac OS wa initially introduced in May 2001 . The current version of Mac OS X Server version 10.2 ( code named `` Jaguar ) wa released in August 2002 . Jaguar Server is a . Based on the Mach 3.0 microkernel and the BSD 4.4 3.0 microkernel and the BSD 4.4 operating system , Jaguar Server in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors Application Software Final Cut Pro® 3 is a video authoring application Arts and Sciences with a 2002 Primetime Emmy Engineering Award for during the fourth quarter of 2002 , Shake 2.5 wa the quarter of 2002 , Shake 2.5 wa the first Mac OS image for quicker processing . 5 Introduced in 2002 , Cinema processing . 5 Introduced in 2002 , Cinema Tools for Final that enhances Final Cut Pro 3 's 24 frames-per-second ( fps Final Cut Pro 3 's 24 frames-per-second ( fps ) editing for film cut list and 24-frame edit decision list ( EDLs HD ) video . The 24-frame EDL support allows off-line HD who shoot and finish with 35mm or 16mm film , but and finish with 35mm or 16mm film , but want to `` content to it native 24-frame rate for editing , then editing , then generates a 24-fps cut list for negative conform . With it support for 24-fps EDL import/export , Cinema Tools capability required to create high-definition 24P universal master used to efficiently format . DVD Studio Pro® 1.5 let professional user encode video disk . DVD Studio Pro 1.5 ha been optimized for Mac The Company wa honored in 2002 by the National Academy of during the fourth quarter of 2002 . Emagic 's most popular Macintosh-based product accounted for over 65 % of Emagic 's revenue it first fiscal quarter of 2003 . Consumer , Education and Business Oriented Application Software iMovie™ 2 , the Company 's easy-to-use added special effect . iMovie 2 is currently preinstalled on all 's Macintosh system . iDVD™ 2 is consumer oriented software that consumer DVD player . iDVD 2 simplifies DVD authoring by including and drag-and-drop simplicity . iDVD 2 is currently preinstalled on all Company introduced iPhoto™ in January 2002 . Designed exclusively for Mac Macintosh system . In July 2002 , the Company introduced iTunes , the Company introduced iTunes 3 , 6 featuring Smart Playlists Company introduced iTunes 3 , 6 featuring Smart Playlists , which During the fourth quarter of 2002 , the Company released two to the Internet . AppleWorks® 6.2 is an integrated productivity application , audio , QuickTime VR 3D image , or graphic file graphic file . More than 125 million copy of QuickTime Player QuickTime , and more than 150 model of digital camera from version of QuickTime , QuickTime 6 , wa released in July wa released in July of 2002 and feature support for the support for the open-standard MPEG 4 format . QuickTime 6 includes MPEG 4 format . QuickTime 6 includes the new Instant-On Streaming . In addition , QuickTime 6 running on Mac OS X OS X now support JPEG 2000 , the next generation JPEG than ever before . QuickTime 6 also includes Advanced Audio Coding feature to QuickTime movie . 7 QuickTime Streaming Server software is version , QuickTime Streaming Server 4 , extends support for standard adding support for both MPEG 4 and MP3 . While QuickTime Broadcaster , QuickTime Streaming Server 4 and QuickTime 6 provides the Streaming Server 4 and QuickTime 6 provides the industry 's first OS X Jaguar , Sherlock® 3 is the Company 's advanced Internet search engine . Sherlock 3 function for user a an web site . In July 2002 , the Company launched .Mac™ POP or web-based access , 100MB of Internet storage , and . Based on the IEEE 802.11b wireless standard and Wi-Fi certified within a radius of approximately 150 foot from an AirPort base feature like firewall protection and 128-bit encryption to protect user data AirPort card slot . During 2002 , the Company released it of data at up to 1 Mbps within a range of within a range of approximately 30 foot . The Company 's in Mac OS X version 10.1.4 or higher . Bluetooth software in the fourth quarter of 2002 , the Company 's new and zero configuration technology to 8 automatically discover and connect device network , including Ethernet or 802.11-based wireless network like the Company educational application . In September 2002 , the Company announced that also referred to a IEEE 1394 , which is a high-speed be included on more than 64 million personal computer and nearly million personal computer and nearly 100 million digital device by the by the end of calendar 2002 . The Company received a . The Company received a 2001 Primetime Emmy Engineering Award for in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors . Apple also provides leasing 9 solution for it education institution to education customer . In 2001 , Apple acquired PowerSchool Inc. education customer in the late 1970s . Over 21 % of the late 1970s . Over 21 % of the Company 's Company 's net sale in 2002 were to education customer in in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors retailer and cataloguer . During 2000 a single distributor , Ingram Inc. , accounted for approximately 11.5 % of net sale . customer accounted for more than 10 % of net sale during % of net sale during 2000 , and no individual customer customer accounted for more than 10 % of net sale in % of net sale in 2002 or 2001 . The Company net sale in 2002 or 2001 . The Company also sell online store totaled approximately $ 2.4 billion and $ 2.0 billion $ 2.4 billion and $ 2.0 billion for fiscal year 2002 2.0 billion for fiscal year 2002 and 2001 , respectively . for fiscal year 2002 and 2001 , respectively . Competition The . The Company 's result 10 of operation and financial condition in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company belief , and Toshiba Corporation . 11 Further discussion relating to availability in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 10 under the subheading `` Concentrations and development , totaled $ 446 million , $ 430 million $ 446 million , $ 430 million , and $ 380 430 million , and $ 380 million in 2002 , 2001 and $ 380 million in 2002 , 2001 , and 2000 380 million in 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . Patents , and service mark . In 1986 , the Company acquired ownership in Part I , Item 3 of this Form 10-K , Item 3 of this Form 10-K , and in Part II in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors largest geographic marketplace . Approximately 57 % of the Company 's 's net sale in fiscal 2002 came from sale to customer tariff and antidumping penalty . 12 Information regarding financial data by in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors The Company also offer a 90-day warranty for Apple software and individual European Union government by 2005 . The Company 's potential which could be significant . 13 Employees As of September 28 13 Employees As of September 28 , 2002 , Apple and As of September 28 , 2002 , Apple and it subsidiary and it subsidiary worldwide had 10,211 employee and an additional 2,030 10,211 employee and an additional 2,030 temporary employee and contractor . employee and contractor . Item 2 . Properties The Company 's Singapore . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company leased approximately , the Company leased approximately 2.7 million square foot of space in the United States includes 395,000 square foot of retail space are generally for term of 5 to 10 year , and for term of 5 to 10 year , and usually provide renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . The Company Singapore , which total approximately 617,000 square foot . The Company The Company also owns a 752,000 square-foot facility in Sacramento , addition , the Company owns 930,000 square foot of facility located owns additional facility totaling approximately 106,000 square foot . The Company in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors Financial Condition . `` Item 3 . Legal Proceedings The Company in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Factors in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 10 under the subheading `` Commitments filed this action in March 1996 in the United States District filed for bankruptcy in November 2000 and is being liquidated a resolution of the liquidation . 14 Bancroft v. Apple Computer , purported class action on January 30 , 2002 in Los Angeles action on January 30 , 2002 in Los Angeles Superior Court system , specifically relating to 2D hardware acceleration , QuickTime movie QuickTime movie hardware acceleration , 3D graphic performance and DVD movie participated in mediation in October 2002 without resolution . The party filed this action on September 5 , 2001 in the United action on September 5 , 2001 in the United States District filed this action on June 6 , 2001 in United States action on June 6 , 2001 in United States District Court patent infringement relating to IEEE 1394 technology , also known a or complies with the IEEE 1394 standard violates the patent . Ethernet standard . In February 2002 , the Federal Circuit affirmed heard the motion on October 4 , 2002 and ha not motion on October 4 , 2002 and ha not yet issued filed this action on February 12 , 2001 in the United action on February 12 , 2001 in the United States District reached a settlement in July 2002 . Settlement of this matter related action ) In October 1997 , Apple began charging all live telephone technical support beyond 90 day after purchase of Apple Apple product . In late 1997 , the Federal Trade Commission During the fourth quarter of 1999 , the 15 regional and quarter of 1999 , the 15 regional and national office of action suit . In November 1999 , two appeal were filed et al Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the filed this action on June 15 , 2000 in Santa Clara action on June 15 , 2000 in Santa Clara County Superior by the Court on October 8 , 2002 . The Company Court on October 8 , 2002 . The Company is administering patent infringement action on June 18 , 2001 in the United action on June 18 , 2001 in the United States District District of Kentucky on February 1 , 2002 and consolidated the Kentucky on February 1 , 2002 and consolidated the case with set for trial on June 8 , 2004 . Sternberg v. trial on June 8 , 2004 . Sternberg v. Apple Computer against the Company on March 17 , 2000 in the Santa Company on March 17 , 2000 in the Santa Clara County the same plaintiff on June 14 , 2000 . This case plaintiff on June 14 , 2000 . This case wa essentially reached a settlement in August 2001 that received final 16 approval August 2001 that received final 16 approval by the Court on by the Court on February 25 , 2002 . The Company Court on February 25 , 2002 . The Company is administering six other defendant on May 8 , 2002 in the Central defendant on May 8 , 2002 in the Central District of 's portable computer manufactured since 1996 infringe these eight patent . invalidity and unenforceability . Item 4 . Submission of Matters to 's fiscal year ended September 28 , 2002 . 17 PART year ended September 28 , 2002 . 17 PART II Item September 28 , 2002 . 17 PART II Item 5 . . 17 PART II Item 5 . Market for the Registrant APCD . As of December 6 , 2002 , there were As of December 6 , 2002 , there were 28,310 shareholder , 2002 , there were 28,310 shareholder of record . On of record . On June 21 , 2000 , the Company . On June 21 , 2000 , the Company effected a of record a of May 19 , 2000 . All share a of May 19 , 2000 . All share price and cash dividend in either fiscal 2002 or 2001 . The Company in either fiscal 2002 or 2001 . The Company anticipates that Second Quarter First Quarter Fiscal 2002 price range per common share range per common share $ 18.74- $ 13.99 $ 26.11- $ common share $ 18.74- $ 13.99 $ 26.11- $ 16.55 $ $ 18.74- $ 13.99 $ 26.11- $ 16.55 $ 25.45- $ $ 13.99 $ 26.11- $ 16.55 $ 25.45- $ 20.78 $ $ 26.11- $ 16.55 $ 25.45- $ 20.78 $ 23.76- $ $ 16.55 $ 25.45- $ 20.78 $ 23.76- $ 14.98 Fiscal $ 25.45- $ 20.78 $ 23.76- $ 14.98 Fiscal 2001 price $ 20.78 $ 23.76- $ 14.98 Fiscal 2001 price range per $ 23.76- $ 14.98 Fiscal 2001 price range per common share range per common share $ 25.22- $ 14.68 $ 27.12- $ common share $ 25.22- $ 14.68 $ 27.12- $ 18.75 $ $ 25.22- $ 14.68 $ 27.12- $ 18.75 $ 23.75- $ $ 14.68 $ 27.12- $ 18.75 $ 23.75- $ 14.44 $ $ 27.12- $ 18.75 $ 23.75- $ 14.44 $ 26.75- $ $ 18.75 $ 23.75- $ 14.44 $ 26.75- $ 13.63 Item $ 23.75- $ 14.44 $ 26.75- $ 13.63 Item 6 . $ 14.44 $ 26.75- $ 13.63 Item 6 . Selected Financial $ 26.75- $ 13.63 Item 6 . Selected Financial Data The read in conjunction with Item 7 , `` Management 's Discussion note thereto included in Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 28 , 2002 ( In million year ended September 28 , 2002 ( In million , except and per share amount ) 2002 2001 2000 1999 1998 Net per share amount ) 2002 2001 2000 1999 1998 Net sale share amount ) 2002 2001 2000 1999 1998 Net sale $ amount ) 2002 2001 2000 1999 1998 Net sale $ 5,742 ) 2002 2001 2000 1999 1998 Net sale $ 5,742 $ 1999 1998 Net sale $ 5,742 $ 5,363 $ 7,983 $ Net sale $ 5,742 $ 5,363 $ 7,983 $ 6,134 $ $ 5,742 $ 5,363 $ 7,983 $ 6,134 $ 5,941 Net $ 5,363 $ 7,983 $ 6,134 $ 5,941 Net income ( $ 7,983 $ 6,134 $ 5,941 Net income ( loss ) income ( loss ) $ 65 $ ( 25 ) $ ) $ 65 $ ( 25 ) $ 786 $ 601 $ ( 25 ) $ 786 $ 601 $ 309 Earnings 25 ) $ 786 $ 601 $ 309 Earnings ( loss $ 786 $ 601 $ 309 Earnings ( loss ) per common share : Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 $ 2.10 $ ( 0.07 ) $ 2.42 $ 2.10 $ 1.17 Diluted 0.07 ) $ 2.42 $ 2.10 $ 1.17 Diluted $ 0.18 $ 2.42 $ 2.10 $ 1.17 Diluted $ 0.18 $ ( 2.10 $ 1.17 Diluted $ 0.18 $ ( 0.07 ) $ Diluted $ 0.18 $ ( 0.07 ) $ 2.18 $ 1.81 $ ( 0.07 ) $ 2.18 $ 1.81 $ 1.05 Cash 0.07 ) $ 2.18 $ 1.81 $ 1.05 Cash dividend declared $ 2.18 $ 1.81 $ 1.05 Cash dividend declared per common in thousand ) : Basic 355,022 345,613 324,568 286,314 263,948 Diluted thousand ) : Basic 355,022 345,613 324,568 286,314 263,948 Diluted 361,785 ) : Basic 355,022 345,613 324,568 286,314 263,948 Diluted 361,785 345,613 : Basic 355,022 345,613 324,568 286,314 263,948 Diluted 361,785 345,613 360,324 Basic 355,022 345,613 324,568 286,314 263,948 Diluted 361,785 345,613 360,324 348,328 345,613 324,568 286,314 263,948 Diluted 361,785 345,613 360,324 348,328 335,834 Cash 324,568 286,314 263,948 Diluted 361,785 345,613 360,324 348,328 335,834 Cash , 286,314 263,948 Diluted 361,785 345,613 360,324 348,328 335,834 Cash , cash 263,948 Diluted 361,785 345,613 360,324 348,328 335,834 Cash , cash equivalent Diluted 361,785 345,613 360,324 348,328 335,834 Cash , cash equivalent , , and short-term investment $ 4,337 $ 4,336 $ 4,027 $ short-term investment $ 4,337 $ 4,336 $ 4,027 $ 3,226 $ $ 4,337 $ 4,336 $ 4,027 $ 3,226 $ 2,300 Total $ 4,336 $ 4,027 $ 3,226 $ 2,300 Total asset $ $ 4,027 $ 3,226 $ 2,300 Total asset $ 6,298 $ $ 2,300 Total asset $ 6,298 $ 6,021 $ 6,803 $ Total asset $ 6,298 $ 6,021 $ 6,803 $ 5,161 $ $ 6,298 $ 6,021 $ 6,803 $ 5,161 $ 4,289 Long-term $ 6,021 $ 6,803 $ 5,161 $ 4,289 Long-term debt $ $ 6,803 $ 5,161 $ 4,289 Long-term debt $ 316 $ $ 4,289 Long-term debt $ 316 $ 317 $ 300 $ Long-term debt $ 316 $ 317 $ 300 $ 300 $ $ 316 $ 317 $ 300 $ 300 $ 954 Total $ 317 $ 300 $ 300 $ 954 Total liability $ $ 300 $ 300 $ 954 Total liability $ 2,203 $ $ 954 Total liability $ 2,203 $ 2,101 $ 2,696 $ Total liability $ 2,203 $ 2,101 $ 2,696 $ 2,057 $ $ 2,203 $ 2,101 $ 2,696 $ 2,057 $ 2,647 Shareholders $ 2,101 $ 2,696 $ 2,057 $ 2,647 Shareholders ' equity $ 2,696 $ 2,057 $ 2,647 Shareholders ' equity $ 4,095 2,647 Shareholders ' equity $ 4,095 $ 3,920 $ 4,107 $ ' equity $ 4,095 $ 3,920 $ 4,107 $ 3,104 $ $ 4,095 $ 3,920 $ 4,107 $ 3,104 $ 1,642 A $ 3,920 $ 4,107 $ 3,104 $ 1,642 A net loss $ 4,107 $ 3,104 $ 1,642 A net loss before tax and equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . Net gain before tax and equity investment of $ 75 million , $ 367 million $ 75 million , $ 367 million , $ 230 million $ 367 million , $ 230 million , and $ 40 230 million , and $ 40 million were recognized in 2001 40 million were recognized in 2001 , 2000 , 1999 , were recognized in 2001 , 2000 , 1999 , and 1998 in 2001 , 2000 , 1999 , and 1998 , respectively 2000 , 1999 , and 1998 , respectively . In 2002 1998 , respectively . In 2002 , the Company acquired Emagic in a charge of approximately 18 $ 1 million for acquired charge of approximately 18 $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 30 million , $ 8 million $ 30 million , $ 8 million , and $ 27 8 million , and $ 27 million were recognized in 2002 27 million were recognized in 2002 , 2000 , and 1999 were recognized in 2002 , 2000 , and 1999 , respectively 2002 , 2000 , and 1999 , respectively . During 2000 1999 , respectively . During 2000 , the Company recognized the the Company of approximately $ 90 million . In 2002 , $ 90 million . In 2002 , of the original $ , of the original $ 90 million accrual , $ 2 90 million accrual , $ 2 million remained unspent and wa and wa reversed . Item 7 . Management 's Discussion and other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and accompanying note . Note 1 of the Notes to Consolidated Consolidated Financial Statements in Item 8 of this Form 10-K describe Item 8 of this Form 10-K describe the significant accounting policy ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial in Financial Statements . SAB 101 , a amended , summarizes . Additionally , certain customer 19 incentive program require management to requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is asset are considered to be 20 impaired , the impairment to identified . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had $ , the Company had $ 85 million in goodwill . The Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . As a result , and requires that : ( 1 ) goodwill be allocated to which it relates ; ( 2 ) the Company estimate the goodwill relates ; and ( 3 ) the Company determine the 's estimate a of September 28 , 2002 , there wa a of September 28 , 2002 , there wa no impairment Equity Investments As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held investment combined carrying value of $ 39 million . These investment , pre-tax impairment loss of $ 50 million related to two of in the fourth quarter of 2002 . As a result , result , a of September 28 , 2002 , the Company a of September 28 , 2002 , the Company had no fair value is other-than-temporary , 21 requiring an impairment loss be sale in thousand ) : 2002 Change 2001 Change 2000 Americas thousand ) : 2002 Change 2001 Change 2000 Americas net sale : 2002 Change 2001 Change 2000 Americas net sale $ 3,088 2000 Americas net sale $ 3,088 3 % $ 2,996 ( Americas net sale $ 3,088 3 % $ 2,996 ( 30 $ 3,088 3 % $ 2,996 ( 30 ) % $ 3 % $ 2,996 ( 30 ) % $ 4,298 Europe ( 30 ) % $ 4,298 Europe net sale 1,251 0 $ 4,298 Europe net sale 1,251 0 % 1,249 ( 31 4,298 Europe net sale 1,251 0 % 1,249 ( 31 ) net sale 1,251 0 % 1,249 ( 31 ) % 1,817 1,251 0 % 1,249 ( 31 ) % 1,817 Japan net 1,249 ( 31 ) % 1,817 Japan net sale 710 0 % 1,817 Japan net sale 710 0 % 713 ( 47 1,817 Japan net sale 710 0 % 713 ( 47 ) net sale 710 0 % 713 ( 47 ) % 1,345 710 0 % 713 ( 47 ) % 1,345 Retail net 713 ( 47 ) % 1,345 Retail net sale 283 — % 1,345 Retail net sale 283 — 19 — — Other Retail net sale 283 — 19 — — Other segment net — Other segment net sale 410 6 % 386 ( 26 Other segment net sale 410 6 % 386 ( 26 ) net sale 410 6 % 386 ( 26 ) % 523 410 6 % 386 ( 26 ) % 523 Total net 386 ( 26 ) % 523 Total net sale $ 5,742 523 Total net sale $ 5,742 7 % $ 5,363 ( Total net sale $ 5,742 7 % $ 5,363 ( 33 $ 5,742 7 % $ 5,363 ( 33 ) % $ 7 % $ 5,363 ( 33 ) % $ 7,983 Americas ( 33 ) % $ 7,983 Americas Macintosh unit sale 1,728 7,983 Americas Macintosh unit sale 1,728 ( 2 ) % 1,768 Macintosh unit sale 1,728 ( 2 ) % 1,768 ( 29 1,728 ( 2 ) % 1,768 ( 29 ) % 2,507 2 ) % 1,768 ( 29 ) % 2,507 Europe Macintosh 1,768 ( 29 ) % 2,507 Europe Macintosh unit sale 722 2,507 Europe Macintosh unit sale 722 ( 4 ) % 754 Macintosh unit sale 722 ( 4 ) % 754 ( 32 722 ( 4 ) % 754 ( 32 ) % 1,110 4 ) % 754 ( 32 ) % 1,110 Japan Macintosh 754 ( 32 ) % 1,110 Japan Macintosh unit sale 386 1,110 Japan Macintosh unit sale 386 ( 2 ) % 394 Macintosh unit sale 386 ( 2 ) % 394 ( 46 386 ( 2 ) % 394 ( 46 ) % 730 2 ) % 394 ( 46 ) % 730 Retail Macintosh 394 ( 46 ) % 730 Retail Macintosh unit sale 92 730 Retail Macintosh unit sale 92 — 7 — — Other Macintosh unit sale 92 — 7 — — Other segment Macintosh Other segment Macintosh unit sale 173 5 % 164 ( 22 segment Macintosh unit sale 173 5 % 164 ( 22 ) unit sale 173 5 % 164 ( 22 ) % 211 173 5 % 164 ( 22 ) % 211 Total Macintosh 164 ( 22 ) % 211 Total Macintosh unit sale 3,101 211 Total Macintosh unit sale 3,101 0 % 3,087 ( 32 Total Macintosh unit sale 3,101 0 % 3,087 ( 32 ) unit sale 3,101 0 % 3,087 ( 32 ) % 4,558 3,101 0 % 3,087 ( 32 ) % 4,558 Power Macintosh 3,087 ( 32 ) % 4,558 Power Macintosh net sale ( sale ( a ) $ 1,380 ( 17 ) % $ a ) $ 1,380 ( 17 ) % $ 1,664 ( ( 17 ) % $ 1,664 ( 39 ) % $ ) % $ 1,664 ( 39 ) % $ 2,747 PowerBook ( 39 ) % $ 2,747 PowerBook net sale 831 2 $ 2,747 PowerBook net sale 831 2 % 813 ( 14 2,747 PowerBook net sale 831 2 % 813 ( 14 ) net sale 831 2 % 813 ( 14 ) % 948 831 2 % 813 ( 14 ) % 948 iMac net 813 ( 14 ) % 948 iMac net sale 1,448 30 % 948 iMac net sale 1,448 30 % 1,117 ( 53 948 iMac net sale 1,448 30 % 1,117 ( 53 ) net sale 1,448 30 % 1,117 ( 53 ) % 2,381 1,448 30 % 1,117 ( 53 ) % 2,381 iBook net 1,117 ( 53 ) % 2,381 iBook net sale 875 8 % 2,381 iBook net sale 875 8 % 809 0 % 2,381 iBook net sale 875 8 % 809 0 % 809 net sale 875 8 % 809 0 % 809 Software , sale 875 8 % 809 0 % 809 Software , Service 8 % 809 0 % 809 Software , Service , and , and Other net sale 1,208 26 % 960 ( 13 and Other net sale 1,208 26 % 960 ( 13 ) net sale 1,208 26 % 960 ( 13 ) % 1,098 1,208 26 % 960 ( 13 ) % 1,098 Total net 960 ( 13 ) % 1,098 Total net sale $ 5,742 1,098 Total net sale $ 5,742 7 % $ 5,363 ( Total net sale $ 5,742 7 % $ 5,363 ( 33 $ 5,742 7 % $ 5,363 ( 33 ) % $ 7 % $ 5,363 ( 33 ) % $ 7,983 Power ( 33 ) % $ 7,983 Power Macintosh unit sale ( unit sale ( a ) 766 ( 18 ) % 937 ( a ) 766 ( 18 ) % 937 ( 35 766 ( 18 ) % 937 ( 35 ) % 1,436 18 ) % 937 ( 35 ) % 1,436 PowerBook unit 937 ( 35 ) % 1,436 PowerBook unit sale 357 3 % 1,436 PowerBook unit sale 357 3 % 346 ( 10 1,436 PowerBook unit sale 357 3 % 346 ( 10 ) unit sale 357 3 % 346 ( 10 ) % 383 357 3 % 346 ( 10 ) % 383 iMac unit 346 ( 10 ) % 383 iMac unit sale 1,301 8 % 383 iMac unit sale 1,301 8 % 1,208 ( 45 383 iMac unit sale 1,301 8 % 1,208 ( 45 ) unit sale 1,301 8 % 1,208 ( 45 ) % 2,194 1,301 8 % 1,208 ( 45 ) % 2,194 iBook unit 1,208 ( 45 ) % 2,194 iBook unit sale 677 14 % 2,194 iBook unit sale 677 14 % 596 9 % 2,194 iBook unit sale 677 14 % 596 9 % 545 unit sale 677 14 % 596 9 % 545 Total Macintosh sale 677 14 % 596 9 % 545 Total Macintosh unit 14 % 596 9 % 545 Total Macintosh unit sale 3,101 545 Total Macintosh unit sale 3,101 0 % 3,087 ( 32 Total Macintosh unit sale 3,101 0 % 3,087 ( 32 ) unit sale 3,101 0 % 3,087 ( 32 ) % 4,558 3,101 0 % 3,087 ( 32 ) % 4,558 Net sale 3,087 ( 32 ) % 4,558 Net sale per Macintosh unit sold ( b ) $ 1,462 $ 1,426 $ 1,510 ( b ) $ 1,462 $ 1,426 $ 1,510 ( a ) $ 1,462 $ 1,426 $ 1,510 ( a ) Includes server . Net sale increased $ 379 million or 7 % during increased $ 379 million or 7 % during 2002 compared to million or 7 % during 2002 compared to 2001 , while % during 2002 compared to 2001 , while Macintosh unit sale relatively flat year-over-year at approximately 3.1 million unit . On a Japanese market remained sluggish throughout 2002 . The Company 's net Company 's net sale in 2002 were positively influenced by a and other source rose $ 248 million or 26 % in rose $ 248 million or 26 % in 2002 versus 2001 million or 26 % in 2002 versus 2001 . This increase 26 % in 2002 versus 2001 . This increase wa driven by several factor including a 28 % increase in combined third-party in combined third-party and Apple- 22 branded software sale ; $ branded software sale ; $ 143 million in net sale of in the first half of 2002 ; a 9 % increase half of 2002 ; a 9 % increase in the sale computer accessory ; and a 14 % increase in service revenue Macintosh portable system grew by 92,000 unit or 10 % in grew by 92,000 unit or 10 % in 2002 reflecting a unit or 10 % in 2002 reflecting a general trend in towards portable system . During 2002 , portable Macintosh system represented , portable Macintosh system represented 33 % of total system sale of total system sale versus 31 % in 2001 and 20 sale versus 31 % in 2001 and 20 % in 2000 31 % in 2001 and 20 % in 2000 . Growth 2001 and 20 % in 2000 . Growth in this area . iBook unit sale increased 14 % in 2002 and 9 sale increased 14 % in 2002 and 9 % in 2001 14 % in 2002 and 9 % in 2001 . Third 2002 and 9 % in 2001 . Third , the Company 's Retail segment grew from 8 store at the end of store at the end of 2001 to 40 store at the the end of 2001 to 40 store at the end of store at the end of 2002 . The Retail segment 's net sale grew from $ 19 million in 2001 to $ from $ 19 million in 2001 to $ 283 million in million in 2001 to $ 283 million in 2002 . While to $ 283 million in 2002 . While the Retail segment pricing remained relatively stable during 2002 a a result of various per Macintosh unit sold during 2002 of $ 1,462 per unit sold during 2002 of $ 1,462 per unit reflects the shift new iMac design introduced during 2002 . The impact of these on comparative Macintosh system during 2002 for most of the Company comparison of net sale in 2002 versus 2001 must consider the net sale in 2002 versus 2001 must consider the effect of during the first quarter of 2001 . As discussed below , factor at the beginning of 2001 , including continuing deterioration in cost the Company approximately $ 138 million , and a plan during the first quarter of 2001 to reduce substantially the level in channel inventory of approximately 300,000 unit during that quarter . during the first quarter of 2001 are discussed in more detail Company 's net sale in 2002 were negatively impacted by several of Power Macintosh system fell 18 % during 2002 a compared system fell 18 % during 2002 a compared to 2001 . during 2002 a compared to 2001 . This followed a 35 2001 . This followed a 35 % decline in Power Macintosh Power Macintosh unit sale in 2001 from 2000 . The Company unit sale in 2001 from 2000 . The Company continues to introduction of Adobe 's PhotoShop 7 during 2002 . Additionally , Adobe 's PhotoShop 7 during 2002 . Additionally , many professional in the fourth quarter of 2002 . Others may have delayed X such a QuarkXpress . 23 Second , despite the overall increase in net sale during 2002 in the Americas , the sale in this channel fell 15 % in 2002 and 4 channel fell 15 % in 2002 and 4 % in 2001 15 % in 2002 and 4 % in 2001 . These 2002 and 4 % in 2001 . These decline are consistent this trend will affect fiscal 2003 and to anticipate when and consumer oriented Macintosh system during 2002 , consumer sale remain far far below level experienced in 2000 and earlier . Worsening global . Net sale decreased $ 2.6 billion or 33 % during decreased $ 2.6 billion or 33 % during 2001 compared to billion or 33 % during 2001 compared to 2000 , while % during 2001 compared to 2000 , while Macintosh unit sale while Macintosh unit sale fell 32 % from 2000 . Demand sale fell 32 % from 2000 . Demand for all of segment wa negatively impacted throughout 2001 by unfavorable global economic condition decline in net sale during 2001 . First , a discussed the first three quarter of 2001 to reduce substantially the level channel inventory fell by approximately 450,000 unit during the first nine the first nine month of 2001 . Second , the Company decline in net sale during 2001 . The net sale per sold remained relatively strong during 2001 after adjusting for the $ after adjusting for the $ 138 million impact to net sale during the first quarter of 2001 , falling only about 2.5 2001 , falling only about 2.5 % from 2000 . The only about 2.5 % from 2000 . The relatively strong per strong per unit sale in 2001 reflects somewhat lower year-over-year pricing and iBook system accounted for 58 % of total Macintosh unit total Macintosh unit sale in 2001 and 60 % in 2000 unit sale in 2001 and 60 % in 2000 . Second 2001 and 60 % in 2000 . Second , combined unit and PowerBook , actually rose 2 % during 2001 despite the actually rose 2 % during 2001 despite the negative economic climate during the third quarter of 2001 and for the Titanium PowerBook during the second quarter of 2001 . Third , a small small decline in net sale 24 in the U.S. education market the U.S. education market during 2001 compared to 2000 wa partially market during 2001 compared to 2000 wa partially mitigated by a wa partially mitigated by a 7 % increase in U.S. education U.S. education unit sale during 2001 . First quarter 2001 net during 2001 . First quarter 2001 net sale decreased 57 % quarter 2001 net sale decreased 57 % to $ 1.007 billion decreased 57 % to $ 1.007 billion compared to the same to the same quarter in 2000 and decreased 46 % from quarter in 2000 and decreased 46 % from the fourth quarter from the fourth quarter of 2000 . Both the year-over-year and during the first quarter of 2001 were attributable to several factor cost the Company approximately $ 138 million . In addition , at the end of fiscal 2000 to lower level by the of the first quarter of 2001 . The Company ended fiscal . The Company ended fiscal 2000 with substantially more inventory in the first quarter by approximately 300,000 unit . These factor contributed These factor contributed to the 52 % year-over-year decline during the during the first quarter of 2001 to $ 1,476 , a quarter of 2001 to $ 1,476 , a decline of approximately , a decline of approximately 12 % from the same period from the same period in 2000 . Segment Operating Performance The in Part II , Item 8 on this Form 10-K in Item 8 on this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and for the Americas segment increased 3 % or $ 92 million increased 3 % or $ 92 million in 2002 . As or $ 92 million in 2002 . As discussed above , in U.S. education sale in 2002 of $ 215 million . sale in 2002 of $ 215 million . The Americas segment Americas segment also experienced a 17 % decline in Power Macintosh the substantial decline experienced in 2001 , rising a combined 31 2001 , rising a combined 31 % in 2002 . Sales a combined 31 % in 2002 . Sales of software , up in the Americas during 2002 . Growth in unit sale of consumer oriented system during 2002 in the Americas is somewhat in the first quarter of 2001 discussed above . However , in the U.S. More than 70 % of the Retail segment 's Macintosh unit sale during 2002 were for iMacs and iBooks . The Americas segment 's 2001 net sale and unit sale sale and unit sale declined 30 % and 29 % , sale declined 30 % and 29 % , respectively , from % , respectively , from 2000 . The operating performance of of the Americas segment for 2001 reflects the Company 's overall the last three quarter of 2001 . Net sale in the in the Americas segment during 2001 were also negatively affected by 's consumer oriented iMac fell 64 % in 2001 . The iMac fell 64 % in 2001 . The effect of falling in U.S. education market rose 7 % in 2001 driven by market rose 7 % in 2001 driven by the acceptance of by the acceptance of the 25 Company 's new portable product . Portable system accounted for 28 % of total unit sale 's U.S. education market in 2001 compared to 18 % during market in 2001 compared to 18 % during 2000 . During compared to 18 % during 2000 . During 2002 and 2001 % during 2000 . During 2002 and 2001 , the Americas 2000 . During 2002 and 2001 , the Americas segment represented the Americas segment represented approximately 54 % and 56 % , represented approximately 54 % and 56 % , respectively , of net sale and represented approximately 56 % and 57 % , represented approximately 56 % and 57 % , respectively , of in Europe remained weak throughout 2002 , and the overall demand that region remained flat during 2002 versus 2001 . Unit sale remained flat during 2002 versus 2001 . Unit sale in Europe Unit sale in Europe for 2002 reflect relatively stronger demand for iBook whose unit sale increased 27 % in 2002 , offset sale increased 27 % in 2002 , offset by decline in sale in Europe fell $ 568 million or 31 % during fell $ 568 million or 31 % during 2001 compared to million or 31 % during 2001 compared to 2000 , while % during 2001 compared to 2000 , while Europe 's unit Europe 's unit sale fell 32 % . Europe 's result in the latter half of 2001 and reduction in channel inventory Europe were particularly impacted during 2001 , falling 40 % from impacted during 2001 , falling 40 % from 2000 . Japan , falling 40 % from 2000 . Japan Net sale in in Japan remained flat during 2002 versus 2001 , with a remained flat during 2002 versus 2001 , with a slight decline decline in unit sale of 2 % . Consistent with the geographic operating segment , during 2002 Japan showed growth in unit 's iMac unit sale increased 85 % in 2002 . However sale increased 85 % in 2002 . However , in the in iMac unit shipment in 2002 versus 2001 wa primarily the unit shipment in 2002 versus 2001 wa primarily the result of in the first quarter of 2001 discussed above . Additionally , comparative basis generally worsened a 2002 progressed reflecting particularly poor economic unit sale in Japan fell 47 % and 46 % , Japan fell 47 % and 46 % , respectively , in % , respectively , in 2001 versus 2000 . Although unit respectively , in 2001 versus 2000 . Although unit sale and have generally trended upwards a 2001 progressed , the Japan segment of iMacs and iBooks during 2001 were down 58 % from iBooks during 2001 were down 58 % from 2000 , and were down 58 % from 2000 , and professionally oriented system oriented system unit sale fell 30 % . Retail By the By the end of September 2002 , the Company had 40 2002 , the Company had 40 retail store operating in the in the United States , 32 of which were opened during which were opened during fiscal 2002 . The Company ha opened . The Company ha opened 11 additional store during the first during the first quarter of 2003 . During 2002 , approximately quarter of 2003 . During 2002 , approximately 39 % of . During 2002 , approximately 39 % of the Retail segment software . This compare to 21 % for the Company a . With an average of 35 store open , the Retail fourth quarter of approximately $ 12 million and had approximately 2.25 12 million and had approximately 2.25 million visitor . The Retail a loss for all of 2002 of $ 22 million , all of 2002 of $ 22 million , and a loss for the fourth quarter of 2002 of $ 3 million . quarter of 2002 of $ 3 million . Expansion of the the Retail segment totaled $ 106 million in 2002 and $ totaled $ 106 million in 2002 and $ 92 million in million in 2002 and $ 92 million in 2001 . As and $ 92 million in 2001 . As of September 28 2001 . As of September 28 , 2002 , the Retail As of September 28 , 2002 , the Retail segment had , the Retail segment had 807 employee and had outstanding operating and related facility of $ 209 million . The Company would and financial condition . Investment 26 in a new business model three fiscal year ended September 28 , 2002 are a follows year ended September 28 , 2002 are a follows ( in gross margin percentage ) : 2002 2001 2000 Net sale $ margin percentage ) : 2002 2001 2000 Net sale $ 5,742 percentage ) : 2002 2001 2000 Net sale $ 5,742 $ 2001 2000 Net sale $ 5,742 $ 5,363 $ 7,983 Cost Net sale $ 5,742 $ 5,363 $ 7,983 Cost of sale $ 5,742 $ 5,363 $ 7,983 Cost of sale 4,139 4,128 $ 7,983 Cost of sale 4,139 4,128 5,817 Gross margin $ 7,983 Cost of sale 4,139 4,128 5,817 Gross margin $ 1,603 Cost of sale 4,139 4,128 5,817 Gross margin $ 1,603 $ 4,128 5,817 Gross margin $ 1,603 $ 1,235 $ 2,166 Gross Gross margin $ 1,603 $ 1,235 $ 2,166 Gross margin percentage $ 1,603 $ 1,235 $ 2,166 Gross margin percentage 28 % $ 2,166 Gross margin percentage 28 % 23 % 27 % Gross margin percentage 28 % 23 % 27 % Gross margin percentage 28 % 23 % 27 % Gross margin increased to % Gross margin increased to 28 % of net sale in % of net sale in 2002 from 23 % in 2001 net sale in 2002 from 23 % in 2001 . As 2002 from 23 % in 2001 . As discussed below , below , gross margin in 2001 wa unusually low resulting from from negative gross margin of 2 % experienced in the first in the first quarter of 2001 . As a percentage of gross margin declined during fiscal 2002 from 31 % in the declined during fiscal 2002 from 31 % in the first quarter the first quarter down to 26 % in the fourth quarter remain under pressure throughout fiscal 2003 in light of weak economic regarding anticipated gross margin in 2003 and the general demand for demand for personal computer during 2003 are forward-looking . Gross margin account anticipated change in foreign 27 currency exchange rate over time . Gross margin declined to 23 % of net sale in % of net sale in 2001 from 27 % in 2000 net sale in 2001 from 27 % in 2000 . This 2001 from 27 % in 2000 . This decline resulted primarily from gross margin of negative 2 % experienced during the first during the first quarter of 2001 compared to 26 % gross quarter of 2001 compared to 26 % gross margin for the for the same quarter in 2000 . In addition to lower net sale , first quarter 2001 margin were negatively impacted by decreased revenue by approximately $ 138 million . Additionally , actual during the first quarter of 2001 approximately $ 122 million of quarter of 2001 approximately $ 122 million of charge associated with for the first quarter of 2001 would have been approximately 21 2001 would have been approximately 21 % , and gross margin gross margin for all of 2001 would have been approximately 27 2001 would have been approximately 27 % . As a percentage margin increased each quarter a 2001 progressed reaching 30 % during quarter a 2001 progressed reaching 30 % during the fourth quarter reflects the favorable impact during 2001 of declining component cost , three fiscal year ended September 28 , 2002 are a follows year ended September 28 , 2002 are a follows ( in except for percentage ) : 2002 2001 2000 Research and development for percentage ) : 2002 2001 2000 Research and development $ percentage ) : 2002 2001 2000 Research and development $ 446 2000 Research and development $ 446 $ 430 $ 380 Percentage and development $ 446 $ 430 $ 380 Percentage of net $ 446 $ 430 $ 380 Percentage of net sale 8 380 Percentage of net sale 8 % 8 % 5 % of net sale 8 % 8 % 5 % Selling , sale 8 % 8 % 5 % Selling , general , , and administrative expense $ 1,111 $ 1,138 $ 1,166 Percentage administrative expense $ 1,111 $ 1,138 $ 1,166 Percentage of net $ 1,111 $ 1,138 $ 1,166 Percentage of net sale 19 1,166 Percentage of net sale 19 % 21 % 15 % of net sale 19 % 21 % 15 % Research and sale 19 % 21 % 15 % Research and Development ( R & D expense increased 4 % or $ 16 million increased 4 % or $ 16 million to $ 446 million $ 16 million to $ 446 million in 2002 a compared to $ 446 million in 2002 a compared to 2001 . in 2002 a compared to 2001 . This followed a $ . This followed a $ 50 million or 13 % increase a $ 50 million or 13 % increase in 2001 a or 13 % increase in 2001 a compared to 2000 . in 2001 a compared to 2000 . The overall increase in R & D spending in 2002 also included capitalized software development development cost of approximately $ 13.3 million associated with the development X Jaguar and approximately $ 6 million associated with the new R & D spending in 2001 also included capitalized software development development cost of approximately $ 5.4 million associated with the development in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial SG & A decreased $ 27 million or 2 % during decreased $ 27 million or 2 % during 2002 a compared million or 2 % during 2002 a compared to 2001 . during 2002 a compared to 2001 . The decrease in SG in SG & A in 2002 is primarily the result of to the Company 's restructuring 28 action in 2002 and 2001 's restructuring 28 action in 2002 and 2001 . These decrease 28 action in 2002 and 2001 . These decrease were partially by higher sale expense in 2002 resulting from increased operating expense & A expenditure decreased $ 28 million or 2 % during decreased $ 28 million or 2 % during 2001 a compared million or 2 % during 2001 a compared to 2000 . during 2001 a compared to 2000 . Declines in SG & & A spending in both 2002 and 2001 reflect the Company spending in both 2002 and 2001 reflect the Company 's overall three fiscal year ended September 28 , 2002 are a follows year ended September 28 , 2002 are a follows ( in ( in million ) : 2002 2001 2000 Restructuring cost $ in million ) : 2002 2001 2000 Restructuring cost $ 30 million ) : 2002 2001 2000 Restructuring cost $ 30 — 2001 2000 Restructuring cost $ 30 — $ 8 Purchased in-process cost $ 30 — $ 8 Purchased in-process research and development in-process research and development $ 1 $ 11 — Executive bonus and development $ 1 $ 11 — Executive bonus $ ( — Executive bonus $ ( 2 ) — $ 90 2002 ( 2 ) — $ 90 2002 Restructuring Actions During fiscal 2 ) — $ 90 2002 Restructuring Actions During fiscal 2002 2002 Restructuring Actions During fiscal 2002 , the Company recorded total total restructuring charge of $ 30 million related to action intended operating expense of approximately $ 10 million . Of the $ million . Of the $ 30 million restructuring charge for fiscal million restructuring charge for fiscal 2002 , $ 6 million wa for fiscal 2002 , $ 6 million wa incurred in the in the fourth quarter of 2002 related to action designed to in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million . The shift in in the amount of $ 4.5 million . The remaining charge . The remaining charge in 2002 of $ 24 million wa charge in 2002 of $ 24 million wa incurred in the in the first quarter of 2002 and will ultimately result in in the elimination of approximately 425 position worldwide , 415 of approximately 425 position worldwide , 415 of which were eliminated by which were eliminated by September 28 , 2002 , at a eliminated by September 28 , 2002 , at a cost of at a cost of $ 8 million . Positions were eliminated contract cancellation charge totaled $ 12 million , and charge for for asset impairment totaled $ 4 million . Of the total Of the total charge in 2002 of $ 30 million , charge in 2002 of $ 30 million , substantially all had had been spent by September 28 , 2002 , except for spent by September 28 , 2002 , except for approximately $ , except for approximately $ 1 million related primarily to future on abandoned operating lease . 2000 Restructuring Actions During the first During the first quarter of 2000 , the Company initiated restructuring in recognition of an $ 8 million restructuring charge . This charge wa comprised of $ 3 million for the write-off of various operating asset and $ 5 million for severance payment to for severance payment to approximately 95 employee associated with consolidation of function . Of the $ 5 million accrued for severance , accrued for severance , $ 2.5 million had been spent before spent before the end of 2000 , and the remainder wa the remainder wa spent in 2001 . Of the $ 3 2001 . Of the $ 3 million accrued for the write-off utilized before the end of 2000 . 29 Purchased In-Process Research the end of 2000 . 29 Purchased In-Process Research and Development During the fourth quarter of 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 551,000 of which wa allocated to product under development were between 43 % -83 % complete , during the Company 's fiscal 2003 at a cost of approximately a cost of approximately $ 415,000 . The remaining effort include using a discount rate of 25 % . In May 2001 25 % . In May 2001 , the Company acquired PowerSchool total purchase consideration of $ 66.1 million , $ 10.8 million $ 66.1 million , $ 10.8 million wa allocated to IPR product under development wa approximately 50 % complete , and it wa expected that the remaining 50 % would be completed during during the Company 's fiscal 2002 at a cost of approximately a cost of approximately $ 9.25 million . The remaining effort , which were completed during 2002 , included completion of coding using a discount rate of 25 % . Executive Bonus During During the first quarter of 2000 , the Company 's Board the Company of approximately $ 90 million , the majority of In the fourth quarter of 2002 , all significant work and . Of the original $ 90 million accrual , $ 2.4 90 million accrual , $ 2.4 million remained unspent at the at the end of fiscal 2002 and wa reversed . 30 2002 and wa reversed . 30 Other Income and Expense Other three fiscal year ended September 28 , 2002 are a follows year ended September 28 , 2002 are a follows ( in ( in million ) : 2002 2001 2000 Gains ( loss in million ) : 2002 2001 2000 Gains ( loss ) million ) : 2002 2001 2000 Gains ( loss ) on investment , net $ ( 42 ) $ 88 $ 367 $ ( 42 ) $ 88 $ 367 Unrealized loss on 42 ) $ 88 $ 367 Unrealized loss on convertible security convertible security $ — ( 13 ) $ — Interest income $ — Interest income $ 118 $ 218 $ 210 Interest Interest income $ 118 $ 218 $ 210 Interest expense ( $ 118 $ 218 $ 210 Interest expense ( 11 ) $ 210 Interest expense ( 11 ) ( 16 ) ( expense ( 11 ) ( 16 ) ( 21 ) Miscellaneous ) ( 16 ) ( 21 ) Miscellaneous other income and Miscellaneous other income and expense 5 15 14 Interest and other other income and expense 5 15 14 Interest and other income income and expense 5 15 14 Interest and other income , other income , net $ 112 $ 217 $ 203 Total , net $ 112 $ 217 $ 203 Total other income $ 112 $ 217 $ 203 Total other income and expense other income and expense $ 70 $ 292 $ 570 Gains and expense $ 70 $ 292 $ 570 Gains and Losses $ 70 $ 292 $ 570 Gains and Losses on Non-current in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 2 of Notes this Form 10-K at Note 2 of Notes to Consolidated Financial Consolidated Financial Statements . During 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to EarthLink ) , a $ 6 million charge to earnings to ) , and a $ 15 million charge to earnings to investment . These loss in 2002 were partially offset by the offset by the sale of 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 , the sale of 250,000 223,000 , the sale of 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 , and the sale of and the sale of approximately 4.7 million share of ARM Holdings gain before tax of $ 21 million . During 2001 , $ 21 million . During 2001 , the Company sold a sold a total of approximately 1 million share of Akamai stock for net proceeds of $ 39 million and recorded a gain gain before tax of $ 36 million , and sold a sold a total of approximately 29.8 million share of ARM stock for net proceeds of $ 176 million and recorded a gain gain before tax of $ 174 million . These gain during million . These gain during 2001 were partially offset by a partially offset by a $ 114 million charge to earnings that in EarthLink and an $ 8 million charge that reflected an private company investment . During 2000 , the Company sold a sold a total of approximately 45.2 million share of ARM stock for net proceeds of $ 372 million and a gain before gain before tax of $ 367 million . The combined carrying and ARM a of September 28 , 2002 , wa $ a of September 28 , 2002 , wa $ 39 million , 2002 , wa $ 39 million . The Company belief investment in the future . 31 Accounting for Derivatives and Cumulative of Accounting Change On October 1 , 2000 , the Company Change On October 1 , 2000 , the Company adopted Statement ( SFAS ) No . 133 , Accounting for Derivative Instruments Activities . SFAS No . 133 established accounting and reporting standard tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type net income of approximately $ 12 million for the first quarter for the first quarter of 2001 . The $ 17 million of 2001 . The $ 17 million gross transition adjustment wa wa comprised of a $ 23 million favorable adjustment for the derivative . SFAS No . 133 also required the Company to during the first quarter of 2001 , the before tax effect unrealized loss of approximately $ 13 million . Interest and Other and other income wa $ 112 million in fiscal 2002 , $ 112 million in fiscal 2002 , compared to $ 217 2002 , compared to $ 217 million in fiscal 2001 . $ 217 million in fiscal 2001 . This $ 105 million fiscal 2001 . This $ 105 million or 48 % decrease This $ 105 million or 48 % decrease is primarily the and short-term investment fell to 2.85 % in 2002 compared to fell to 2.85 % in 2002 compared to 5.38 % in % in 2002 compared to 5.38 % in 2001 . Net compared to 5.38 % in 2001 . Net interest and other and other income increased $ 14 million or 7 % to increased $ 14 million or 7 % to $ 217 million or 7 % to $ 217 million during 2001 . The to $ 217 million during 2001 . The increase wa due cash and invested balance in 2001 , partially offset by declining and short-term investment fell to 5.38 % in 2001 compared to fell to 5.38 % in 2001 compared to 6.12 % in % in 2001 compared to 6.12 % in 2000 . The compared to 6.12 % in 2000 . The Company expects interest net to decline substantially in 2003 a decline in interest rate 's effective tax rate for 2002 wa 25 % compared to tax rate for 2002 wa 25 % compared to the higher allowance . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had deferred and tax credit of $ 369 million before being offset against asset . As of September 28 , 2002 , a valuation As of September 28 , 2002 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the of the valuation allowance . 32 The Internal Revenue Service ( federal income tax return through 1997 . Substantially all IRS audit audit issue for year through 1997 have been resolved . Management Recent Accounting Pronouncements In June 2001 , the Financial Accounting Standards Board issued SFAS No . 143 , Accounting for Asset Retirement asset . SFAS No . 143 requires that the fair value provision of SFAS No . 143 for the first quarter of first quarter of it fiscal 2003 . Management doe not expect adoption of SFAS No . 143 to have a material impact financial statement . In August 2001 , the Financial Accounting Standards Board issued SFAS No . 144 , Accounting for the Impairment of Long-Lived Assets ( Statement 144 ) , which supersedes both supersedes both SFAS No . 121 , Accounting for the Impairment of APB Opinion No . 30 ( Opinion 30 ) , No . 30 ( Opinion 30 ) , Reporting the Results ) . SFAS No . 144 retains the fundamental provision in provision in SFAS No . 121 for recognizing and measuring impairment associated with SFAS No . 121 . For example , SFAS example , SFAS No . 144 provides guidance on how a sale . SFAS No . 144 retains the basic provision of the basic provision of Opinion 30 on how to present discontinued . Unlike SFAS No . 121 , an impairment assessment under assessment under SFAS No . 144 will never result in a SFAS No . No . 142 , Goodwill and Other Intangible provision of SFAS No . 144 for the first quarter of first quarter of it fiscal 2003 . Management doe not expect adoption of SFAS No . 144 for long-lived asset held for assessment under SFAS No . 144 is largely unchanged from SFAS unchanged from SFAS No . 121 . The provision of SFAS provision of SFAS No . 144 for asset held for sale disposal activity . In June 2002 , the Financial Accounting Standards Board issued SFAS No . 146 , Accounting for Costs Associated Activities . SFAS No . 146 supersedes Emerging Issues Task Force Task Force Issue No . 94-3 , Liability Recognition for Certain plan . SFAS No . 146 also establishes that the liability disposal activity initiated after December 31 , 2002 . The provision initiated after December 31 , 2002 . The provision of SFAS provision of SFAS No . 146 are required to be applied a the amount recognized . 33 Liquidity and Capital Resources The dollar in million ) : 2002 2001 2000 Cash , cash in million ) : 2002 2001 2000 Cash , cash equivalent million ) : 2002 2001 2000 Cash , cash equivalent , , and short-term investment $ 4,337 $ 4,336 $ 4,027 Accounts short-term investment $ 4,337 $ 4,336 $ 4,027 Accounts receivable , $ 4,337 $ 4,336 $ 4,027 Accounts receivable , net $ Accounts receivable , net $ 565 $ 466 $ 953 Inventory , net $ 565 $ 466 $ 953 Inventory $ 45 $ 565 $ 466 $ 953 Inventory $ 45 $ 11 466 $ 953 Inventory $ 45 $ 11 $ 33 Working 953 Inventory $ 45 $ 11 $ 33 Working capital $ $ 45 $ 11 $ 33 Working capital $ 3,730 $ $ 33 Working capital $ 3,730 $ 3,625 $ 3,494 Days Working capital $ 3,730 $ 3,625 $ 3,494 Days sale in $ 3,730 $ 3,625 $ 3,494 Days sale in account receivable account receivable ( a ) 36 29 46 Days of supply receivable ( a ) 36 29 46 Days of supply in ( a ) 36 29 46 Days of supply in inventory in inventory ( b ) 4 1 2 Annual operating cash inventory ( b ) 4 1 2 Annual operating cash flow ( b ) 4 1 2 Annual operating cash flow $ Annual operating cash flow $ 89 $ 185 $ 868 ( cash flow $ 89 $ 185 $ 868 ( a ) $ 89 $ 185 $ 868 ( a ) Based on period . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had $ , the Company had $ 4.337 billion in cash , cash from the end of fiscal 2001 . The primary source of and short-term investment in fiscal 2002 were $ 89 million in in fiscal 2002 were $ 89 million in cash generated by by operating activity and $ 105 million in proceeds from the and asset acquisition of $ 52 million and capital expenditure of and capital expenditure of $ 174 million . The Company belief existing operation over the next 12 month . Lease Commitments As Lease Commitments As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had total noncancelable operating lease of $ 464 million , $ 209 million $ 464 million , $ 209 million of which related to existing operating lease range from 1 to 12 year . Subsequent lease range from 1 to 12 year . Subsequent to September year . Subsequent to September 28 , 2002 , the Company Subsequent to September 28 , 2002 , the Company entered into future lease commitment totaling $ 65 million for period ranging from million for period ranging from 5 to 10 year . Long-Term period ranging from 5 to 10 year . Long-Term Debt The in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note . The The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note pay semiannually and mature on February 15 , 2004 . Purchase Commitments mature on February 15 , 2004 . Purchase Commitments with Contract typically cover period ranging from 1 to 3 month . The period ranging from 1 to 3 month . The Company also requirement for period ranging from 30 to 130 day . As period ranging from 30 to 130 day . As of September day . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had outstanding purchase commitment of approximately $ 525 million . 34 Capital Expenditures approximately $ 525 million . 34 Capital Expenditures Of total capital Of total capital expenditure in 2002 of $ 174 million , expenditure in 2002 of $ 174 million , $ 106 million $ 174 million , $ 106 million wa for retail store 's Retail segment and $ 68 million wa for corporate infrastructure it will utilize approximately $ 160 million for capital expenditure during million for capital expenditure during 2003 , approximately $ 77 million during 2003 , approximately $ 77 million of which is expected Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock period of time . During 2002 and 2001 , the Company time . During 2002 and 2001 , the Company repurchased no during the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . Since inception of to repurchase a total of 6.55 million share of it common at a cost of $ 217 million . Non-Current Debt and of these investment wa $ 39 million , $ 128 million $ 39 million , $ 128 million , and $ 786 128 million , and $ 786 million a of the end of the end of fiscal 2002 , 2001 , and 2000 end of fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . The Company in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 2 of Notes this Form 10-K at Note 2 of Notes to Consolidated Financial For much of the past 3 year , demand for the that took place on September 11 , 2001 , disrupted commerce place on September 11 , 2001 , disrupted commerce throughout the long-term effect of the September 11 , 2001 attack on the of the September 11 , 2001 attack on the Company 's , and the potential for 35 war in the Middle East the second half of calendar 2000 . The Company 's result it operating cost structure . 36 The Company must successfully manage result of operation . During 2001 , the Company introduced a , Mac OS X version 10.1 . During 2002 , the X version 10.1 . During 2002 , the Company delivered another requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company 's the supplier ' yield have 37 matured . The Company and be beyond it control . 38 There can be no assurance uncertainty . Since May of 2001 , the Company ha opened , the Company ha opened 51 retail store in the United opening more store in calendar 2003 . The Company 's retail with lease term ranging from 5 to 12 year . The term ranging from 5 to 12 year . The Company would location have term ranging from 5 to 10 year with total term ranging from 5 to 10 year with total commitment per lease term ranging from $ 25 million to $ 50 million $ 25 million to $ 50 million . Closure or poor of Power Macintosh system fell 18 % during 2002 a compared system fell 18 % during 2002 a compared to 2001 and during 2002 a compared to 2001 and fell 35 % in compared to 2001 and fell 35 % in 2001 from 2000 and fell 35 % in 2001 from 2000 . Power Macintosh 35 % in 2001 from 2000 . Power Macintosh unit sale total Macintosh unit sale from 38 % in 1999 to 25 sale from 38 % in 1999 to 25 % in 2002 38 % in 1999 to 25 % in 2002 . The 1999 to 25 % in 2002 . The Company belief that individual gross margin than the 39 Company 's other Macintosh system in these market fell to 21 % of the Company 's 's total net sale in 2002 from 26 % in 2001 net sale in 2002 from 26 % in 2001 . This 2002 from 26 % in 2001 . This drop reflects decline sale in these market of 15 % and 14 % , market of 15 % and 14 % , respectively , in , respectively , in fiscal 2002 compared to 2001 . These in fiscal 2002 compared to 2001 . These development are consistent in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading `` Markets 's result of operation . 40 Margins on sale of Apple in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading `` Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 2 this Form 10-K at Notes 1 and 2 of Notes to 10-K at Notes 1 and 2 of Notes to Consolidated Financial at all . In August 1997 , the Company and Microsoft of five year through August 2002 , and subject to certain it product subsequent to August 2002 . While the Company belief available on acceptable term . 41 Because of technological change in in Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . In the opinion of in Part I , Item 3 of this Form 10-K or Item 3 of this Form 10-K or should several of these employee . As of September 28 , 2002 , a substantial As of September 28 , 2002 , a substantial majority of cost and/or availability , the 42 Company doe not have insurance market value of approximately $ 39 million a of September 28 39 million a of September 28 , 2002 . These investment a of September 28 , 2002 . These investment are in European Union government by June 2004 , while the producer ' are scheduled to start June 2005 . The Company 's potential which could be significant . 43 Business interruption could adversely affect stock in the future . 44 Item 7A . Disclosures About the future . 44 Item 7A . Disclosures About Market Risk Financial Accounting Standard No . 133 , Accounting for Derivative Instruments Activities , a of October 1 , 2000 . SFAS No a of October 1 , 2000 . SFAS No . 133 2000 . SFAS No . 133 establishes accounting and reporting standard application of SFAS No . 133 will significantly alter the Company the investment process . During 1994 , the Company issued $ , the Company issued $ 300 million aggregate principal amount of million aggregate principal amount of 6.5 % unsecured note in a The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note pay semiannually and mature on February 15 , 2004 . The Company mature on February 15 , 2004 . The Company 's exposure investment . As of September 28 , 2002 , $ 1.087 As of September 28 , 2002 , $ 1.087 billion of 28 , 2002 , $ 1.087 billion of the Company 's security with maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 29 , 2001 , $ 313 As of September 29 , 2001 , $ 313 million of 29 , 2001 , $ 313 million of the Company 's with underlying maturity ranging from 1 to 4 year . The maturity ranging from 1 to 4 year . The remainder all all had underlying maturity between 3 and 12 month . Due underlying maturity between 3 and 12 month . Due to liquidity management of the Company 's 45 investment portfolio , the Company recognized net gain of $ 7 million in 2002 and $ of $ 7 million in 2002 and $ 1 million in million in 2002 and $ 1 million in 2001 . In and $ 1 million in 2001 . In order to provide the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 28 , 2002 , a hypothetical a of September 28 , 2002 , a hypothetical 100 basis , 2002 , a hypothetical 100 basis point increase in interest would result in a $ 37.7 million decline in the fair portfolio . As of September 29 , 2001 , a similar As of September 29 , 2001 , a similar 100 basis , 2001 , a similar 100 basis point shift in the have resulted in a $ 17.8 million decline in fair value converted the Company 's fixed-rate 10-year debt to floating-rate debt and market interest rate , during 2002 the Company entered into and realizing a gain of $ 6 million . During 2001 the $ 6 million . During 2001 the Company closed out all realizing a gain of $ 17 million . Both the gain . Both the gain in 2001 and 2002 were deferred , the gain in 2001 and 2002 were deferred , recognized in swap outstanding a of September 30 , 2000 , had a a of September 30 , 2000 , had a weighted-average receive a weighted-average receive rate of 5.50 % and a weighted-average pay a weighted-average pay rate of 6.66 % . The unrealized loss asset swap a of September 30 , 2000 , of $ a of September 30 , 2000 , of $ 5.7 million , 2000 , of $ 5.7 million wa deferred and then then recognized in income in 2001 a part of the SFAS of the SFAS No . 133 transition adjustment effective on October transition adjustment effective on October 1 , 2000 . The Company effective on October 1 , 2000 . The Company closed out interest rate asset swap during 2001 realizing a gain of $ realizing a gain of $ 1.1 million . Foreign Currency Risk foreign currency exchange rate . 46 The Company enters into foreign Monte Carlo simulation to generate 3000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 3.8 million a of September 28 3.8 million a of September 28 , 2002 compared to a a of September 28 , 2002 compared to a maximum one-day maximum one-day loss of $ 6.8 million a of September 29 6.8 million a of September 29 , 2001 . Because the a of September 29 , 2001 . Because the Company us analysis performed a of September 28 , 2002 due to the a of September 28 , 2002 due to the inherent limitation actual exposure and position . 47 Item 8 . Financial Statements and position . 47 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 49 Consolidated Statements , and September 29 , 2001 49 Consolidated Statements of Operations and September 29 , 2001 49 Consolidated Statements of Operations for three fiscal year ended September 28 , 2002 50 Consolidated Statements year ended September 28 , 2002 50 Consolidated Statements of Shareholders ended September 28 , 2002 50 Consolidated Statements of Shareholders ' three fiscal year ended September 28 , 2002 51 Consolidated Statements year ended September 28 , 2002 51 Consolidated Statements of Cash ended September 28 , 2002 51 Consolidated Statements of Cash Flows three fiscal year ended September 28 , 2002 52 Notes to year ended September 28 , 2002 52 Notes to Consolidated Financial ended September 28 , 2002 52 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 53 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 87 Report of Independent Auditors , Independent Auditors , KPMG LLP 89 All financial statement schedule have Statements and Notes thereto . 48 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 28 , 2002 September 29 , amount ) September 28 , 2002 September 29 , 2001 ASSETS September 28 , 2002 September 29 , 2001 ASSETS : Current , 2002 September 29 , 2001 ASSETS : Current asset : Cash and cash equivalent $ 2,252 $ 2,310 Short-term investment 2,085 cash equivalent $ 2,252 $ 2,310 Short-term investment 2,085 2,026 Accounts 2,252 $ 2,310 Short-term investment 2,085 2,026 Accounts receivable , le $ 2,310 Short-term investment 2,085 2,026 Accounts receivable , le allowance , le allowance of $ 51 and $ 51 , respectively of $ 51 and $ 51 , respectively 565 466 Inventories and $ 51 , respectively 565 466 Inventories 45 11 Deferred $ 51 , respectively 565 466 Inventories 45 11 Deferred tax , respectively 565 466 Inventories 45 11 Deferred tax asset 166 respectively 565 466 Inventories 45 11 Deferred tax asset 166 169 45 11 Deferred tax asset 166 169 Other current asset 275 11 Deferred tax asset 166 169 Other current asset 275 161 166 169 Other current asset 275 161 Total current asset 5,388 169 Other current asset 275 161 Total current asset 5,388 5,143 275 161 Total current asset 5,388 5,143 Property , plant , 161 Total current asset 5,388 5,143 Property , plant , and , and equipment , net 621 564 Non-current debt and equity and equipment , net 621 564 Non-current debt and equity investment Non-current debt and equity investment 39 128 Acquired intangible asset 119 debt and equity investment 39 128 Acquired intangible asset 119 76 39 128 Acquired intangible asset 119 76 Other asset 131 110 128 Acquired intangible asset 119 76 Other asset 131 110 Total asset 119 76 Other asset 131 110 Total asset $ 6,298 119 76 Other asset 131 110 Total asset $ 6,298 $ 131 110 Total asset $ 6,298 $ 6,021 LIABILITIES AND SHAREHOLDERS Total asset $ 6,298 $ 6,021 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 911 $ 801 Accrued expense 747 Accounts payable $ 911 $ 801 Accrued expense 747 717 Total 911 $ 801 Accrued expense 747 717 Total current liability 1,658 $ 801 Accrued expense 747 717 Total current liability 1,658 1,518 747 717 Total current liability 1,658 1,518 Long-term debt 316 317 717 Total current liability 1,658 1,518 Long-term debt 316 317 Deferred liability 1,658 1,518 Long-term debt 316 317 Deferred tax liability 229 1,658 1,518 Long-term debt 316 317 Deferred tax liability 229 266 316 317 Deferred tax liability 229 266 Total liability 2,203 2,101 317 Deferred tax liability 229 266 Total liability 2,203 2,101 Commitments liability 229 266 Total liability 2,203 2,101 Commitments and contingency Shareholders 229 266 Total liability 2,203 2,101 Commitments and contingency Shareholders ' , no par value ; 900,000,000 share authorized ; 358,958,989 and ; 900,000,000 share authorized ; 358,958,989 and 350,921,661 share issued and share authorized ; 358,958,989 and 350,921,661 share issued and outstanding , issued and outstanding , respectively 1,826 1,693 Acquisition-related deferred stock compensation and outstanding , respectively 1,826 1,693 Acquisition-related deferred stock compensation ( Acquisition-related deferred stock compensation ( 7 ) ( 11 ) Retained compensation ( 7 ) ( 11 ) Retained earnings 2,325 2,260 ( 11 ) Retained earnings 2,325 2,260 Accumulated other comprehensive income 11 ) Retained earnings 2,325 2,260 Accumulated other comprehensive income ( income ( loss ) ( 49 ) ( 22 ) Total ) ( 49 ) ( 22 ) Total shareholder ' equity ) Total shareholder ' equity 4,095 3,920 Total liability and shareholder Total shareholder ' equity 4,095 3,920 Total liability and shareholder ' and shareholder ' equity $ 6,298 $ 6,021 See accompanying note ' equity $ 6,298 $ 6,021 See accompanying note to consolidated to consolidated financial statement . 49 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 28 , 2002 2002 2001 2000 year ended September 28 , 2002 2002 2001 2000 Net sale ended September 28 , 2002 2002 2001 2000 Net sale $ September 28 , 2002 2002 2001 2000 Net sale $ 5,742 28 , 2002 2002 2001 2000 Net sale $ 5,742 $ 2001 2000 Net sale $ 5,742 $ 5,363 $ 7,983 Cost Net sale $ 5,742 $ 5,363 $ 7,983 Cost of sale $ 5,742 $ 5,363 $ 7,983 Cost of sale 4,139 4,128 $ 7,983 Cost of sale 4,139 4,128 5,817 Gross margin 1,603 7,983 Cost of sale 4,139 4,128 5,817 Gross margin 1,603 1,235 Cost of sale 4,139 4,128 5,817 Gross margin 1,603 1,235 2,166 4,139 4,128 5,817 Gross margin 1,603 1,235 2,166 Operating expense : 4,128 5,817 Gross margin 1,603 1,235 2,166 Operating expense : Research 5,817 Gross margin 1,603 1,235 2,166 Operating expense : Research and expense : Research and development 446 430 380 Selling , general : Research and development 446 430 380 Selling , general , Research and development 446 430 380 Selling , general , and , general , and administrative 1,111 1,138 1,166 Special charge : general , and administrative 1,111 1,138 1,166 Special charge : Restructuring , and administrative 1,111 1,138 1,166 Special charge : Restructuring cost Special charge : Restructuring cost 30 — 8 In-process research and : Restructuring cost 30 — 8 In-process research and development 1 8 In-process research and development 1 11 — Executive bonus ( In-process research and development 1 11 — Executive bonus ( 2 11 — Executive bonus ( 2 ) — 90 Total operating bonus ( 2 ) — 90 Total operating expense 1,586 1,579 — 90 Total operating expense 1,586 1,579 1,644 Operating income ( 90 Total operating expense 1,586 1,579 1,644 Operating income ( loss Total operating expense 1,586 1,579 1,644 Operating income ( loss ) Operating income ( loss ) 17 ( 344 ) 522 Other ( loss ) 17 ( 344 ) 522 Other income and ) 17 ( 344 ) 522 Other income and expense : non-current investment , net ( 42 ) 88 367 Unrealized loss , net ( 42 ) 88 367 Unrealized loss on convertible net ( 42 ) 88 367 Unrealized loss on convertible security on convertible security — ( 13 ) — Interest and other and other income , net 112 217 203 Total other income other income , net 112 217 203 Total other income and income , net 112 217 203 Total other income and expense Total other income and expense 70 292 570 Income ( loss other income and expense 70 292 570 Income ( loss ) income and expense 70 292 570 Income ( loss ) before before provision for income tax 87 ( 52 ) 1,092 Provision for income tax 87 ( 52 ) 1,092 Provision for ( tax 87 ( 52 ) 1,092 Provision for ( benefit from benefit from ) income tax 22 ( 15 ) 306 Income ) income tax 22 ( 15 ) 306 Income ( loss tax 22 ( 15 ) 306 Income ( loss ) before loss ) before accounting change 65 ( 37 ) 786 Cumulative before accounting change 65 ( 37 ) 786 Cumulative effect of change 65 ( 37 ) 786 Cumulative effect of accounting change of income tax of $ 5 — 12 — Net income tax of $ 5 — 12 — Net income ( loss income ( loss ) $ 65 $ ( 25 ) $ ) $ 65 $ ( 25 ) $ 786 Earnings ( $ ( 25 ) $ 786 Earnings ( loss ) per accounting change : Basic $ 0.18 $ ( 0.11 ) $ Basic $ 0.18 $ ( 0.11 ) $ 2.42 Diluted $ $ ( 0.11 ) $ 2.42 Diluted $ 0.18 $ ( ) $ 2.42 Diluted $ 0.18 $ ( 0.11 ) $ Diluted $ 0.18 $ ( 0.11 ) $ 2.18 Earnings ( $ ( 0.11 ) $ 2.18 Earnings ( loss ) per common share : Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.18 $ ( ) $ 2.42 Diluted $ 0.18 $ ( 0.07 ) $ Diluted $ 0.18 $ ( 0.07 ) $ 2.18 Shares used $ ( 0.07 ) $ 2.18 Shares used in computing earnings in thousand ) : Basic 355,022 345,613 324,568 Diluted 361,785 345,613 thousand ) : Basic 355,022 345,613 324,568 Diluted 361,785 345,613 360,324 ) : Basic 355,022 345,613 324,568 Diluted 361,785 345,613 360,324 See Basic 355,022 345,613 324,568 Diluted 361,785 345,613 360,324 See accompanying note 355,022 345,613 324,568 Diluted 361,785 345,613 360,324 See accompanying note to 345,613 324,568 Diluted 361,785 345,613 360,324 See accompanying note to consolidated to consolidated financial statement . 50 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ' Amount Balances a of September 25 , 1999 150 $ 150 a of September 25 , 1999 150 $ 150 321,598 $ of September 25 , 1999 150 $ 150 321,598 $ 1,349 25 , 1999 150 $ 150 321,598 $ 1,349 $ 1,499 , 1999 150 $ 150 321,598 $ 1,349 $ 1,499 $ 150 $ 150 321,598 $ 1,349 $ 1,499 $ — $ 150 321,598 $ 1,349 $ 1,499 $ — $ 106 $ $ 1,499 $ — $ 106 $ 3,104 Components of comprehensive $ — $ 106 $ 3,104 Components of comprehensive income : comprehensive income : Net income 786 786 Foreign currency translation — income : Net income 786 786 Foreign currency translation — — — — — — ( 17 ) ( 17 ) Change — ( 17 ) ( 17 ) Change in unrealized gain — — — — — 155 155 Total comprehensive income 924 — — — — 155 155 Total comprehensive income 924 Common 155 155 Total comprehensive income 924 Common stock issued under stock and purchase plan — — 7,632 85 — — — 85 purchase plan — — 7,632 85 — — — 85 Conversion 7,632 85 — — — 85 Conversion of Series A preferred Series A preferred stock ( 74 ) ( 74 ) 9,000 stock ( 74 ) ( 74 ) 9,000 74 — — 74 ) ( 74 ) 9,000 74 — — — — ) ( 74 ) 9,000 74 — — — — Common stock repurchased — — ( 2,553 ) ( 116 ) — — ( 2,553 ) ( 116 ) — — — ( ) — — — ( 116 ) Tax benefit related to stock option — — — 110 — — — 110 Balances — 110 — — — 110 Balances a of September 30 110 Balances a of September 30 , 2000 76 $ 76 a of September 30 , 2000 76 $ 76 335,677 $ of September 30 , 2000 76 $ 76 335,677 $ 1,502 30 , 2000 76 $ 76 335,677 $ 1,502 $ 2,285 , 2000 76 $ 76 335,677 $ 1,502 $ 2,285 $ 76 $ 76 335,677 $ 1,502 $ 2,285 $ — $ 76 335,677 $ 1,502 $ 2,285 $ — $ 244 $ $ 2,285 $ — $ 244 $ 4,107 Components of comprehensive $ — $ 244 $ 4,107 Components of comprehensive income ( income ( loss ) ( 25 ) ( 25 ) Foreign ) ( 25 ) ( 25 ) Foreign currency translation — — — — — ( 3 ) ( 3 ) Change — ( 3 ) ( 3 ) Change in unrealized gain — — — — ( 267 ) ( 267 ) Change — ( 267 ) ( 267 ) Change in unrealized gain — — — — — 4 4 Total comprehensive income ( — — — — 4 4 Total comprehensive income ( loss income ( loss ) ( 291 ) Issuance of common stock connection with acquisition — — 2,403 66 — ( 13 ) with acquisition — — 2,403 66 — ( 13 ) — — 2,403 66 — ( 13 ) — 53 Amortization of — ( 13 ) — 53 Amortization of acquisition-related deferred stock — — — — — 2 — 2 Common stock issued — — — 2 — 2 Common stock issued under stock and purchase plan — — 3,660 42 — — 42 Conversion purchase plan — — 3,660 42 — — 42 Conversion of — 3,660 42 — — 42 Conversion of Series A preferred Series A preferred stock ( 76 ) ( 76 ) 9,182 stock ( 76 ) ( 76 ) 9,182 76 — — 76 ) ( 76 ) 9,182 76 — — — — ) ( 76 ) 9,182 76 — — — — Tax stock option — — — 7 — — — 7 Balances — 7 — — — 7 Balances a of September 29 7 Balances a of September 29 , 2001 — $ — a of September 29 , 2001 — $ — 350,922 $ , 2001 — $ — 350,922 $ 1,693 $ 2,260 $ — $ — 350,922 $ 1,693 $ 2,260 $ ( 11 — 350,922 $ 1,693 $ 2,260 $ ( 11 ) $ 1,693 $ 2,260 $ ( 11 ) $ ( 22 ) ( 11 ) $ ( 22 ) $ 3,920 Components of $ ( 22 ) $ 3,920 Components of comprehensive income ( Net income ( loss ) 65 65 Foreign currency translation — income ( loss ) 65 65 Foreign currency translation — — — — — — — 5 5 Change in unrealized gain — — — — 5 5 Change in unrealized gain on — — — — ( 17 ) ( 17 ) Change — ( 17 ) ( 17 ) Change in unrealized gain — — — — ( 15 ) ( 15 ) Total — ( 15 ) ( 15 ) Total comprehensive income ( comprehensive income ( loss ) 38 Amortization of acquisition-related deferred stock — — — — — 4 — 4 Common stock issued — — — 4 — 4 Common stock issued under stock and purchase plan — — 8,037 105 — — 105 Tax purchase plan — — 8,037 105 — — 105 Tax benefit — 8,037 105 — — 105 Tax benefit related to stock stock option — — — 28 — — — 28 Balances — 28 — — — 28 Balances a of September 28 28 Balances a of September 28 , 2002 — $ — a of September 28 , 2002 — $ — 358,959 $ , 2002 — $ — 358,959 $ 1,826 $ 2,325 $ — $ — 358,959 $ 1,826 $ 2,325 $ ( 7 — 358,959 $ 1,826 $ 2,325 $ ( 7 ) $ 1,826 $ 2,325 $ ( 7 ) $ ( 49 ) ( 7 ) $ ( 49 ) $ 4,095 See accompanying $ ( 49 ) $ 4,095 See accompanying note to consolidated to consolidated financial statement . 51 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 28 , 2002 2002 2001 2000 year ended September 28 , 2002 2002 2001 2000 Cash and ended September 28 , 2002 2002 2001 2000 Cash and cash September 28 , 2002 2002 2001 2000 Cash and cash equivalent 28 , 2002 2002 2001 2000 Cash and cash equivalent , beginning of the year $ 2,310 $ 1,191 $ 1,326 Operating the year $ 2,310 $ 1,191 $ 1,326 Operating : Net $ 2,310 $ 1,191 $ 1,326 Operating : Net income ( Net income ( loss ) 65 ( 25 ) 786 Cumulative ( loss ) 65 ( 25 ) 786 Cumulative effect of ) 65 ( 25 ) 786 Cumulative effect of accounting change net of tax — ( 12 ) — Adjustments to reconcile activity : Depreciation and amortization 118 102 84 Provision for deferred : Depreciation and amortization 118 102 84 Provision for deferred income Depreciation and amortization 118 102 84 Provision for deferred income tax for deferred income tax ( 34 ) ( 36 ) 163 tax ( 34 ) ( 36 ) 163 Loss on disposition 34 ) ( 36 ) 163 Loss on disposition of property , plant , and equipment 7 9 10 ( Gains ) plant , and equipment 7 9 10 ( Gains ) loss , and equipment 7 9 10 ( Gains ) loss on loss on investment , net 35 ( 88 ) ( 367 investment , net 35 ( 88 ) ( 367 ) Unrealized 35 ( 88 ) ( 367 ) Unrealized loss on convertible loss on convertible security — 13 — Purchased in-process research and Purchased in-process research and development 1 11 — Changes in operating in-process research and development 1 11 — Changes in operating asset liability : Accounts receivable ( 99 ) 487 ( 272 ) Accounts receivable ( 99 ) 487 ( 272 ) Inventories ( ( 99 ) 487 ( 272 ) Inventories ( 34 ) ( 272 ) Inventories ( 34 ) 22 ( 13 ) ) Inventories ( 34 ) 22 ( 13 ) Other current ( 34 ) 22 ( 13 ) Other current asset ( ) Other current asset ( 114 ) 106 ( 37 ) current asset ( 114 ) 106 ( 37 ) Other asset ( 114 ) 106 ( 37 ) Other asset ( 11 37 ) Other asset ( 11 ) 12 20 Accounts payable Other asset ( 11 ) 12 20 Accounts payable 110 ( asset ( 11 ) 12 20 Accounts payable 110 ( 356 ) 12 20 Accounts payable 110 ( 356 ) 318 Other 20 Accounts payable 110 ( 356 ) 318 Other current liability payable 110 ( 356 ) 318 Other current liability 45 ( ) 318 Other current liability 45 ( 60 ) 176 Cash Other current liability 45 ( 60 ) 176 Cash generated by liability 45 ( 60 ) 176 Cash generated by operating activity Cash generated by operating activity 89 185 868 Investing : Purchase generated by operating activity 89 185 868 Investing : Purchase of by operating activity 89 185 868 Investing : Purchase of short-term Purchase of short-term investment ( 4,144 ) ( 4,268 ) ( investment ( 4,144 ) ( 4,268 ) ( 4,267 ) Proceeds ) ( 4,268 ) ( 4,267 ) Proceeds from maturity of from maturity of short-term investment 2,846 4,811 3,075 Proceeds from sale maturity of short-term investment 2,846 4,811 3,075 Proceeds from sale of of short-term investment 2,846 4,811 3,075 Proceeds from sale of short-term from sale of short-term investment 1,254 278 256 Purchases of long-term sale of short-term investment 1,254 278 256 Purchases of long-term investment of short-term investment 1,254 278 256 Purchases of long-term investment — of long-term investment — ( 1 ) ( 232 ) Purchase — ( 1 ) ( 232 ) Purchase of property , plant , and equipment ( 174 ) ( 232 ) ( equipment ( 174 ) ( 232 ) ( 142 ) Proceeds ) ( 232 ) ( 142 ) Proceeds from sale of from sale of equity investment 25 340 372 Cash used for sale of equity investment 25 340 372 Cash used for business of equity investment 25 340 372 Cash used for business acquisition used for business acquisition ( 52 ) — — Other ( ) — — Other ( 7 ) ( 36 ) ( Other ( 7 ) ( 36 ) ( 34 ) Cash ) ( 36 ) ( 34 ) Cash generated by ( for ) investing activity ( 252 ) 892 ( 972 ) investing activity ( 252 ) 892 ( 972 ) Financing : ( 252 ) 892 ( 972 ) Financing : Proceeds from from issuance of common stock 105 42 85 Cash used for issuance of common stock 105 42 85 Cash used for repurchase of common stock 105 42 85 Cash used for repurchase of common stock — — ( 116 ) Cash generated by ( used for ) financing activity 105 42 ( 31 ) Increase for ) financing activity 105 42 ( 31 ) Increase ( financing activity 105 42 ( 31 ) Increase ( decrease ) cash and cash equivalent ( 58 ) 1,119 ( 135 ) cash equivalent ( 58 ) 1,119 ( 135 ) Cash and ( 58 ) 1,119 ( 135 ) Cash and cash equivalent end of the year $ 2,252 $ 2,310 $ 1,191 Supplemental the year $ 2,252 $ 2,310 $ 1,191 Supplemental cash flow $ 2,252 $ 2,310 $ 1,191 Supplemental cash flow disclosure : the year for interest $ 20 $ 20 $ 20 Cash for interest $ 20 $ 20 $ 20 Cash paid for $ 20 $ 20 $ 20 Cash paid for income tax income tax , net $ 11 $ 42 $ 47 Noncash , net $ 11 $ 42 $ 47 Noncash transaction : $ 11 $ 42 $ 47 Noncash transaction : Issuance of preferred stock $ — $ 76 $ 74 Issuance of common $ — $ 76 $ 74 Issuance of common stock in with acquisition $ — $ 66 $ — See accompanying note to consolidated financial statement . 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple of September . Fiscal year 2002 and 2001 were each 52-week . Fiscal year 2002 and 2001 were each 52-week year . 2002 and 2001 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it the first quarter of fiscal 2000 . All information presented herein Derivative Financial Instruments On October 1 , 2000 , the Company Instruments On October 1 , 2000 , the Company adopted Statement ( SFAS ) No . 133 , Accounting for Derivative Instruments Activities . SFAS No . 133 establishes accounting and reporting standard definition . SFAS No . 133 requires that all derivative be tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 million , all of which wa reclassified to earnings during 2001 . Management doe not believe application of SFAS No . 133 will significantly alter the Company gain or loss on the 53 derivative instrument is reported a defined in SFAS No . 133 . Inventories Inventories are stated the asset , which are 30 year for building , from year for building , from 2 to 5 year for equipment building , from 2 to 5 year for equipment , and asset , which range from 3 to 5 year . Prior which range from 3 to 5 year . Prior to the to the fourth quarter of 2001 , the Company had classified . Effective a of September 29 , 2001 , and for a of September 29 , 2001 , and for all other flow from investing activity . 54 Non-Current Debt and Equity Investments the three year ended September 28 , 2002 , the Company year ended September 28 , 2002 , the Company ha made restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment test a of October 1 , 2001 , and August a of October 1 , 2001 , and August 30 , , 2001 , and August 30 , 2002 , respectively , , and August 30 , 2002 , respectively , and found unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 , Accounting for the Impairment life over period ranging from 3 to 7 year . Foreign period ranging from 3 to 7 year . Foreign Currency Translation and liability at year-end exchange 55 rate , and inventory , ( SOP ) No . 97-2 , Software Revenue Recognition , third and fourth quarter of 2002 , the Company incurred substantial of Mac OS X version 10.2 ( code-named `` Jaguar `` a developer beta in May 2002 and prior to release of the Company capitalized approximately $ 13.3 million of development cost associated cost associated with development of 56 Jaguar . Amortization of this on a straight-line basis over 3 year . In addition , . In addition , during 2002 , the Company also began , amounted to approximately $ 6 million during the first nine first nine month of fiscal 2002 . The final version of released in July . During 2001 the Company incurred substantial development the Company capitalized approximately $ 5.4 million of development cost during million of development cost during 2001 associated with development of Mac life of the asset of 8 year . Total amortization related software development cost wa $ 1.2 million and $ 350,000 in $ 1.2 million and $ 350,000 in 2002 and 2001 , million and $ 350,000 in 2002 and 2001 , respectively . $ 350,000 in 2002 and 2001 , respectively . Advertising Costs . Advertising expense wa $ 209 million , $ 261 million $ 209 million , $ 261 million , and $ 281 261 million , and $ 281 million for 2002 , 2001 and $ 281 million for 2002 , 2001 , and 2000 281 million for 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . Stock-Based Compensation Board ( APB ) Opinion 25 , Accounting for Stock Issued to follow APB No . 25 because , a discussed below for under SFAS No . 123 , Accounting for Stock-Based Compensation Under APB Opinion No . 25 , when the exercise price required by SFAS No . 123 and ha been determined a plan purchase subsequent to September 29 , 1995 , under the subsequent to September 29 , 1995 , under the fair value stock purchase plan share . 57 For purpose of the pro pursuant to SFAS No . 123 provided in the Company 's Company 's annual report through 2002 , the expected volatility assumption per common share for fiscal 2001 because their effect would have . Stock Split On June 21 , 2000 , the Company Split On June 21 , 2000 , the Company affected a of record a of May 19 , 2000 . All per a of May 19 , 2000 . All per share data is also disclosed . Note 2—Financial Instruments The carrying amount of maturity of those instrument . 58 Cash , Cash Equivalents and short-term investment a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 ( in million , and September 29 , 2001 ( in million ) : in million ) : September 28 , 2002 September 29 , ) : September 28 , 2002 September 29 , 2001 Cash September 28 , 2002 September 29 , 2001 Cash $ 161 , 2002 September 29 , 2001 Cash $ 161 $ 138 29 , 2001 Cash $ 161 $ 138 U.S. Treasury and 2001 Cash $ 161 $ 138 U.S. Treasury and Agency security U.S. Treasury and Agency security 47 — U.S. corporate security 1,952 47 — U.S. corporate security 1,952 1,998 Foreign security 92 174 — U.S. corporate security 1,952 1,998 Foreign security 92 174 Total security 1,952 1,998 Foreign security 92 174 Total cash equivalent 2,091 1,952 1,998 Foreign security 92 174 Total cash equivalent 2,091 2,172 92 174 Total cash equivalent 2,091 2,172 U.S. Treasury and Agency 174 Total cash equivalent 2,091 2,172 U.S. Treasury and Agency security U.S. Treasury and Agency security 681 1,042 U.S. corporate security 988 Treasury and Agency security 681 1,042 U.S. corporate security 988 692 681 1,042 U.S. corporate security 988 692 Foreign security 416 292 1,042 U.S. corporate security 988 692 Foreign security 416 292 Total security 988 692 Foreign security 416 292 Total short-term investment 2,085 988 692 Foreign security 416 292 Total short-term investment 2,085 2,026 416 292 Total short-term investment 2,085 2,026 Total cash , cash 292 Total short-term investment 2,085 2,026 Total cash , cash equivalent , and short-term investment $ 4,337 $ 4,336 The Company 's short-term investment $ 4,337 $ 4,336 The Company 's U.S. corporate with stated maturity greater than 1 year , were $ 20 1 year , were $ 20 million a of September 28 20 million a of September 28 , 2002 and $ 11 a of September 28 , 2002 and $ 11 million a 28 , 2002 and $ 11 million a of September 29 11 million a of September 29 , 2001 . The Company a of September 29 , 2001 . The Company occasionally sell recognized net gain of $ 7 million in 2002 and $ of $ 7 million in 2002 and $ 1 million in million in 2002 and $ 1 million in 2001 . These and $ 1 million in 2001 . These net gain were net . As of September 28 , 2002 , approximately $ As of September 28 , 2002 , approximately $ 1.087 billion , 2002 , approximately $ 1.087 billion of the Company 's had underlying maturity of between 1 and 5 year . The maturity of between 1 and 5 year . The remaining short-term short-term investment a of September 28 , 2002 all had maturity a of September 28 , 2002 all had maturity of between all had maturity of between 3 and 12 month . As maturity of between 3 and 12 month . As of September month . As of September 29 , 2001 , approximately $ As of September 29 , 2001 , approximately $ 313 million , 2001 , approximately $ 313 million of the Company 's had underlying maturity of between 1 and 4 year . The maturity of between 1 and 4 year . The remaining short-term short-term investment a of September 29 , 2001 , all had a of September 29 , 2001 , all had maturity of all had maturity of between 3 and 12 month . Accounts maturity of between 3 and 12 month . Accounts Receivable Trade Inc. , accounted for approximately 10.8 % and 9.4 % of for approximately 10.8 % and 9.4 % of net account receivable account receivable a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . 59 The , 2001 , respectively . 59 The following table summarizes the ( in million ) . 2002 2001 2000 Beginning allowance balance in million ) . 2002 2001 2000 Beginning allowance balance $ million ) . 2002 2001 2000 Beginning allowance balance $ 51 2000 Beginning allowance balance $ 51 $ 64 $ 68 Charged allowance balance $ 51 $ 64 $ 68 Charged to cost $ 51 $ 64 $ 68 Charged to cost and expense Charged to cost and expense 10 7 5 Deductions ( a to cost and expense 10 7 5 Deductions ( a ) cost and expense 10 7 5 Deductions ( a ) ( Deductions ( a ) ( 10 ) ( 20 ) ( ) ( 10 ) ( 20 ) ( 9 ) Ending ) ( 20 ) ( 9 ) Ending allowance balance $ ) Ending allowance balance $ 51 $ 51 $ 64 ( allowance balance $ 51 $ 51 $ 64 ( a ) $ 51 $ 51 $ 64 ( a ) Represent amount current asset , totaled $ 142 million and $ 68 million $ 142 million and $ 68 million a of September 28 68 million a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . The Company . Inventory Prepayment In April 2002 , the Company made a the Company made a $ 100 million prepayment to an Asian consecutive fiscal quarter ending December 28 , 2002 . If the quarter ending December 28 , 2002 . If the supplier fails a penalty . Approximately $ 53 million of this deposit remained remained unused a of September 28 , 2002 , and is a of September 28 , 2002 , and is reflected in Company on or before December 31 , 2002 , is refundable or before December 31 , 2002 , is refundable to the to the Company by January 31 , 2003 . Although the Company by January 31 , 2003 . Although the supplier 's sheet at fair value . 60 The following table show the currency instrument a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 ( in million 2002 and September 29 , 2001 ( in million ) . in million ) . September 28 , 2002 September 29 , ) . September 28 , 2002 September 29 , 2001 Notional September 28 , 2002 September 29 , 2001 Notional Principal Fair , 2002 September 29 , 2001 Notional Principal Fair Value Credit Spot/Forward contract , net $ 462 $ 1 $ 1 $ , net $ 462 $ 1 $ 1 $ 562 $ $ 462 $ 1 $ 1 $ 562 $ 8 $ $ 1 $ 1 $ 562 $ 8 $ 8 Purchased $ 1 $ 562 $ 8 $ 8 Purchased option , $ 562 $ 8 $ 8 Purchased option , net $ Purchased option , net $ 196 $ — $ — $ $ — $ — $ 551 $ 11 $ 11 Sold $ — $ 551 $ 11 $ 11 Sold option , $ 551 $ 11 $ 11 Sold option , net $ Sold option , net $ 392 $ ( 4 ) $ net $ 392 $ ( 4 ) $ — $ 712 4 ) $ — $ 712 $ ( 8 ) $ — $ 712 $ ( 8 ) $ — Transactions other Spot/Forward contract , net $ 302 $ — $ — $ $ — $ — $ 455 $ ( 4 ) $ — $ 455 $ ( 4 ) $ — Purchased option $ — $ — $ 334 $ 1 $ 1 Sold $ — $ 334 $ 1 $ 1 Sold option , $ 334 $ 1 $ 1 Sold option , net $ $ — $ — $ 354 $ ( 1 ) $ — $ 354 $ ( 1 ) $ — The notional market information a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 . In certain 2002 and September 29 , 2001 . In certain instance where of appropriate hedging instrument . 61 In accordance with SFAS No accordance with SFAS No . 133 , hedge related to probable over a time horizon of 3 to 9 month . The time horizon of 3 to 9 month . The Company also time period or within a 62 subsequent 2 month time period or within a 62 subsequent 2 month time period . Deferred of other transaction . During 2002 , the Company recorded net recorded net gain of $ 2.5 million in other income and prevailing market condition . During 2001 , the Company recorded a a net gain of $ 5.1 million in other income and management . As of September 30 , 2000 , the Company As of September 30 , 2000 , the Company had entered converted the Company 's fixed-rate 10-year debt to floating-rate debt and defined in SFAS No . 133 for fair value hedge of rate swap . During fiscal 2001 , the Company closed out realizing a gain of $ 17 million . This gain wa asset swap a of September 30 , 2000 , of $ a of September 30 , 2000 , of $ 5.7 million , 2000 , of $ 5.7 million wa deferred and then then recognized in income in 2001 a part of the SFAS of the SFAS No . 133 transition adjustment effective on October transition adjustment effective on October 1 , 2000 . The Company effective on October 1 , 2000 . The Company closed out interest rate asset swap during 2001 realizing a gain of $ realizing a gain of $ 1.1 million . As of September million . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had no interest rate swap in early 2002 . These interest rate swap converted the Company 's fixed-rate 10-year debt to floating-rate debt . defined in SFAS No . 133 for fair 63 value hedge No . 133 for fair 63 value hedge of debt instrument interest rate swap during fiscal 2002 until the Company closed out out the position in late 2002 due to prevailing market interest a realized gain of $ 6 million . This gain wa debt . Long-Term Debt During 1994 , the Company issued $ , the Company issued $ 300 million aggregate principal amount of million aggregate principal amount of 6.5 % unsecured note in a The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note pay semiannually and mature on February 15 , 2004 . As of mature on February 15 , 2004 . As of September 28 2004 . As of September 28 , 2002 and September 29 As of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 , the carrying 2002 and September 29 , 2001 , the carrying amount of rate swap , wa $ 316 million and $ 317 million $ 316 million and $ 317 million , respectively , while the fair value wa $ 299 million and $ 295 million $ 299 million and $ 295 million , respectively . The market value a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 . Non-Current Debt 2002 and September 29 , 2001 . Non-Current Debt and Equity combined fair value wa $ 39 million and $ 128 million $ 39 million and $ 128 million a of September 28 128 million a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after January 4 , 2001 , into approximately 7.1 million , 2001 , into approximately 7.1 million share of EarthLink common During the second quarter of 2001 , the Company determined that the Company recognized a $ 114 million charge to earnings to investment in EarthLink to $ 86 million . This charge wa During the fourth quarter of 2001 , the Company sold a sold a total of approximately 425,000 share of EarthLink stock for net proceeds of approximately $ 6 million and recorded a gain before tax of approximately $ 800,000 . As of September 29 800,000 . As of September 29 , 2001 , the Company As of September 29 , 2001 , the Company held 6.7 2001 , the Company held 6.7 million share of EarthLink stock fair value of approximately $ 102 million . During the first During the first quarter of 2002 , the Company sold 117,000 2002 , the Company sold 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 . No sale of EarthLink the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to basis of it investment in 64 EarthLink to $ 35 million in 64 EarthLink to $ 35 million . This charge wa net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company hold 6.5 2002 , the Company hold 6.5 million share of EarthLink stock EarthLink stock valued at $ 35 million . Akamai In June million . Akamai In June 1999 , the Company invested $ , the Company invested $ 12.5 million in Akamai , a preferred stock that converted into 4.1 million share of Akamai common initial public offering in October 1999 . Beginning in the first in the first quarter of 2000 , the Company categorized it in Akamai wa approximately $ 216 million a of September 30 216 million a of September 30 , 2000 . During 2001 a of September 30 , 2000 . During 2001 , the 30 , 2000 . During 2001 , the Company sold a sold a total of approximately 1 million share of Akamai stock net proceeds of approximately $ 39 million and recorded a gain before tax of approximately $ 36 million . As of September million . As of September 29 , 2001 , the Company As of September 29 , 2001 , the Company held 3.1 2001 , the Company held 3.1 million share of Akamai stock Akamai stock valued at $ 9 million . During the first During the first quarter of 2002 , the Company sold 250,000 2002 , the Company sold 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 . No sale of Akamai the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined that the Company recognized a $ 6 million charge to earnings to investment in Akamai to $ 3 million . This charge wa net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company hold 2.9 2002 , the Company hold 2.9 million share of Akamai stock Akamai stock valued at $ 3 million . ARM Holdings ARM During the first quarter of 2002 , the Company sold 4.7 2002 , the Company sold 4.7 million share of ARM stock gain before tax of $ 21 million . No sale of the subsequent quarter of fiscal 2002 . As of September 28 2002 . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company hold 278,000 2002 , the Company hold 278,000 share of ARM stock valued ARM stock valued at $ 578,000 . During 2001 , the at $ 578,000 . During 2001 , the Company sold a sold a total of approximately 29.8 million share of ARM stock net proceeds of approximately $ 176 million and recorded a gain before tax of approximately $ 174 million . As of September million . As of September 29 , 2001 , the Company As of September 29 , 2001 , the Company held 5 2001 , the Company held 5 million share of ARM stock ARM stock valued at $ 17 million . During 2000 , $ 17 million . During 2000 , the Company sold a sold a total of approximately 45.2 million share of ARM stock net proceeds of approximately $ 372 million and recorded a gain before tax of approximately $ 367 million . Samsung During the During the fourth quarter of 1999 , the Company invested $ , the Company invested $ 100 million in Samsung to assist which were convertible into approximately 550,000 share of Samsung common stock common stock beginning in July 2000 . The bond carried an an annual coupon rate of 2 % and pay a total total yield to maturity of 5 % if redeemed at their in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . Prior to a of September 30 , 2000 . Prior to it sale in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . With the a of September 30 , 2000 . With the adoption of adoption of SFAS No . 133 on October 1 , 2000 No . 133 on October 1 , 2000 , the Company 133 on October 1 , 2000 , the Company wa required conversion option embedded in the 65 Samsung bond separately from the . Included in the $ 17 million gross SFAS No . million gross SFAS No . 133 transition adjustment recorded in earnings the first quarter of fiscal 2001 wa a $ 23 million fiscal 2001 wa a $ 23 million favorable adjustment for the fair value a of October 1 , 2000 , of the a of October 1 , 2000 , of the derivative component fair value a of December 30 , 2000 , the Company a of December 30 , 2000 , the Company recognized an unrealized loss of approximately $ 13 million during the first quarter during the first quarter of 2001 . During the second quarter During the second quarter of 2001 , the Company sold this net proceeds of approximately $ 117 million . Other Strategic Investments not fully developed . During 2001 the Company determined that the to earnings of approximately $ 8 million . This charge wa investment , net . During 2002 , the Company determined that charge to earnings of $ 15 million . These charge were net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company ha no consolidated balance sheet . Note 3—Consolidated Financial Statement Details Inventories ( Inventories ( in million ) 2002 2001 Purchased part $ 9 ( in million ) 2002 2001 Purchased part $ 9 $ 2002 2001 Purchased part $ 9 $ 1 Work in process Purchased part $ 9 $ 1 Work in process — — process — — Finished good 36 10 Total inventory $ 45 — — Finished good 36 10 Total inventory $ 45 $ 36 10 Total inventory $ 45 $ 11 Property , Plant Total inventory $ 45 $ 11 Property , Plant , and Equipment ( in million ) 2002 2001 Land and building $ ( in million ) 2002 2001 Land and building $ 342 2001 Land and building $ 342 $ 337 Machinery and equipment and building $ 342 $ 337 Machinery and equipment 183 182 $ 337 Machinery and equipment 183 182 Office furniture and equipment 337 Machinery and equipment 183 182 Office furniture and equipment 67 182 Office furniture and equipment 67 63 Internal-use software 184 192 Office furniture and equipment 67 63 Internal-use software 184 192 Leasehold equipment 67 63 Internal-use software 184 192 Leasehold improvement 281 186 67 63 Internal-use software 184 192 Leasehold improvement 281 186 1,057 software 184 192 Leasehold improvement 281 186 1,057 960 Accumulated depreciation 184 192 Leasehold improvement 281 186 1,057 960 Accumulated depreciation and 192 Leasehold improvement 281 186 1,057 960 Accumulated depreciation and amortization Leasehold improvement 281 186 1,057 960 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 436 ) ( 396 ) Net amortization ( 436 ) ( 396 ) Net property , plant plant , and equipment $ 621 $ 564 66 Accrued Expenses and equipment $ 621 $ 564 66 Accrued Expenses ( in equipment $ 621 $ 564 66 Accrued Expenses ( in million Expenses ( in million ) 2002 2001 Accrued compensation and employee ( in million ) 2002 2001 Accrued compensation and employee benefit compensation and employee benefit $ 93 $ 88 Accrued marketing and employee benefit $ 93 $ 88 Accrued marketing and sale program Accrued marketing and sale program 136 131 Deferred revenue 253 184 marketing and sale program 136 131 Deferred revenue 253 184 Accrued program 136 131 Deferred revenue 253 184 Accrued warranty and related 136 131 Deferred revenue 253 184 Accrued warranty and related cost Accrued warranty and related cost 69 87 Other current liability 196 warranty and related cost 69 87 Other current liability 196 227 69 87 Other current liability 196 227 Total accrued expense $ 87 Other current liability 196 227 Total accrued expense $ 747 227 Total accrued expense $ 747 $ 717 Interest and Other accrued expense $ 747 $ 717 Interest and Other Income , Net ( in million ) 2002 2001 2000 Interest income $ ( in million ) 2002 2001 2000 Interest income $ 118 in million ) 2002 2001 2000 Interest income $ 118 $ 2001 2000 Interest income $ 118 $ 218 $ 210 Interest Interest income $ 118 $ 218 $ 210 Interest expense ( $ 118 $ 218 $ 210 Interest expense ( 11 ) $ 210 Interest expense ( 11 ) ( 16 ) ( expense ( 11 ) ( 16 ) ( 21 ) Foreign ) ( 16 ) ( 21 ) Foreign currency gain ( ( loss ) , net 4 15 1 Net premium and loss ) , net 4 15 1 Net premium and discount ) , net 4 15 1 Net premium and discount on on foreign exchange instrument ( 11 ) ( 8 ) 7 instrument ( 11 ) ( 8 ) 7 Miscellaneous other income 11 ) ( 8 ) 7 Miscellaneous other income and expense Miscellaneous other income and expense 12 8 6 Total interest and other income and expense 12 8 6 Total interest and other income and expense 12 8 6 Total interest and other income other income , net $ 112 $ 217 $ 203 Note , net $ 112 $ 217 $ 203 Note 4—Acquisitions Goodwill $ 112 $ 217 $ 203 Note 4—Acquisitions Goodwill and Other $ 217 $ 203 Note 4—Acquisitions Goodwill and Other Acquisition-Related Intangibles in million ) : September 28 , 2002 September 29 , ) : September 28 , 2002 September 29 , 2001 Gross September 28 , 2002 September 29 , 2001 Gross Carrying Amount , 2002 September 29 , 2001 Gross Carrying Amount Accumulated Amortization Goodwill ( a ) $ 85 — $ 85 $ 66 ) $ 85 — $ 85 $ 66 — $ 66 85 — $ 85 $ 66 — $ 66 Other acquired 85 $ 66 — $ 66 Other acquired intangible asset 5 66 Other acquired intangible asset 5 ( 5 ) — 5 acquired intangible asset 5 ( 5 ) — 5 ( 4 5 ( 5 ) — 5 ( 4 ) 1 Acquired 5 ) — 5 ( 4 ) 1 Acquired technology 42 — 5 ( 4 ) 1 Acquired technology 42 ( 8 4 ) 1 Acquired technology 42 ( 8 ) 34 12 1 Acquired technology 42 ( 8 ) 34 12 ( 3 technology 42 ( 8 ) 34 12 ( 3 ) 9 42 ( 8 ) 34 12 ( 3 ) 9 Total 8 ) 34 12 ( 3 ) 9 Total acquired intangible 34 12 ( 3 ) 9 Total acquired intangible asset $ Total acquired intangible asset $ 132 $ ( 13 ) $ asset $ 132 $ ( 13 ) $ 119 $ 83 $ ( 13 ) $ 119 $ 83 $ ( 7 13 ) $ 119 $ 83 $ ( 7 ) $ 119 $ 83 $ ( 7 ) $ 76 ( a $ ( 7 ) $ 76 ( a ) Accumulated amortization related to goodwill of $ 55 million arising prior to the adoption of SFAS No . 142 ha been reflected in the of goodwill a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 . 67 Expected 2002 and September 29 , 2001 . 67 Expected annual amortization September 29 , 2001 . 67 Expected annual amortization expense related ) : Fiscal Years : 2003 $ 9 2004 7 2005 Fiscal Years : 2003 $ 9 2004 7 2005 6 2006 Years : 2003 $ 9 2004 7 2005 6 2006 3 : 2003 $ 9 2004 7 2005 6 2006 3 Thereafter 2003 $ 9 2004 7 2005 6 2006 3 Thereafter 9 $ 9 2004 7 2005 6 2006 3 Thereafter 9 Total 9 2004 7 2005 6 2006 3 Thereafter 9 Total expected 2004 7 2005 6 2006 3 Thereafter 9 Total expected annual 2005 6 2006 3 Thereafter 9 Total expected annual amortization expense expected annual amortization expense $ 34 Amortization expense related to acquired ( in million ) : 2002 2001 2000 Goodwill amortization $ in million ) : 2002 2001 2000 Goodwill amortization $ — million ) : 2002 2001 2000 Goodwill amortization $ — $ Goodwill amortization $ — $ 16 $ 21 Other acquired intangible $ — $ 16 $ 21 Other acquired intangible asset amortization Other acquired intangible asset amortization 1 3 3 Acquired technology amortization acquired intangible asset amortization 1 3 3 Acquired technology amortization 5 intangible asset amortization 1 3 3 Acquired technology amortization 5 2 3 3 Acquired technology amortization 5 2 — Total amortization $ 3 Acquired technology amortization 5 2 — Total amortization $ 6 2 — Total amortization $ 6 $ 21 $ 24 Net Total amortization $ 6 $ 21 $ 24 Net income ( $ 6 $ 21 $ 24 Net income ( loss ) in fiscal period prior to 2002 follows ( in million , per share amount ) : 2002 2001 2000 Net income ( share amount ) : 2002 2001 2000 Net income ( loss amount ) : 2002 2001 2000 Net income ( loss ) ) , a reported $ 65 $ ( 25 ) $ reported $ 65 $ ( 25 ) $ 786 Add : $ ( 25 ) $ 786 Add : goodwill amortization $ goodwill amortization $ — $ 16 $ 21 Net income ( $ — $ 16 $ 21 Net income ( loss ) ) , a adjusted $ 65 $ ( 9 ) $ adjusted $ 65 $ ( 9 ) $ 807 Basic earnings $ ( 9 ) $ 807 Basic earnings ( loss ) share , a reported $ 0.18 $ ( 0.07 ) $ reported $ 0.18 $ ( 0.07 ) $ 2.42 Add : $ ( 0.07 ) $ 2.42 Add : goodwill amortization $ goodwill amortization $ — $ 0.04 $ 0.06 Basic earnings ( $ — $ 0.04 $ 0.06 Basic earnings ( loss ) share , a adjusted $ 0.18 $ ( 0.03 ) $ adjusted $ 0.18 $ ( 0.03 ) $ 2.48 Diluted earnings $ ( 0.03 ) $ 2.48 Diluted earnings ( loss ) share , a reported $ 0.18 $ ( 0.07 ) $ reported $ 0.18 $ ( 0.07 ) $ 2.18 Add : $ ( 0.07 ) $ 2.18 Add : goodwill amortization $ goodwill amortization $ — $ 0.04 $ 0.06 Diluted earnings ( $ — $ 0.04 $ 0.06 Diluted earnings ( loss ) share , a adjusted $ 0.18 $ ( 0.03 ) $ adjusted $ 0.18 $ ( 0.03 ) $ 2.24 Acquisition of $ ( 0.03 ) $ 2.24 Acquisition of Emagic During the During the fourth quarter of 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 26 million of which wa paid of the deal and $ 4 million of which wa held-back appropriate period over the next 3 year . The acquisition ha the purchase price allocated to 68 acquired technology and to tradename their estimated useful life of 3 year . Total consideration wa Net tangible asset acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and development 0.5 0.8 In-process research and development 0.5 Goodwill 18.6 Total consideration $ research and development 0.5 Goodwill 18.6 Total consideration $ 26.0 The Goodwill 18.6 Total consideration $ 26.0 The amount of the purchase product under development were between 43 % -83 % complete , during the Company 's fiscal 2003 at a cost of approximately a cost of approximately $ 415,000 . The remaining effort include using a discount rate of 25 % . Acquisition of certain and Silicon Grail During fiscal 2002 the Company acquired certain technology for a total of $ 20 million in cash . These acquisition , except for $ 1 million identified a contingent consideration compensation expense over the next 3 year , ha been allocated on a straight-line basis over 3 year , except for certain that will be amortized over 10 year . Acquisition of Nothing During the second quarter of 2002 , the Company acquired certain market . Of the $ 15 million purchase price , the the Company ha allocated $ 7 million to acquired technology , over it estimated life of 5 year . The remaining $ year . The remaining $ 8 million , which ha been appropriate period over the next 3 year . Acquisition of Spruce , Inc . In July 2001 , the Company acquired Spruce authoring product , for $ 14.9 million in cash . Goodwill provision of SFAS No . 142 . 69 The consolidated financial SFAS No . 142 . 69 The consolidated financial statement include tangible liability assumed $ ( 0.7 ) Identifiable intangible asset 5.9 0.7 ) Identifiable intangible asset 5.9 Goodwill 9.7 Total consideration $ Identifiable intangible asset 5.9 Goodwill 9.7 Total consideration $ 14.9 Acquisition Goodwill 9.7 Total consideration $ 14.9 Acquisition of PowerSchool , Inc , Inc . In May 2001 , the Company acquired PowerSchool purchase price of approximately $ 66.1 million consisted of the issuance of the issuance of approximately 2.4 million share of the Company a fair value of $ 61.2 million , the issuance of a fair value of $ 4.5 million , and $ 300,000 4.5 million , and $ 300,000 of direct transaction cost . following assumption : volatility of 67 % , expected life of % , expected life of 4 year , dividend rate of year , dividend rate of 0 % , and risk-free rate , and risk-free rate of 4.73 % . Total consideration wa Net tangible asset acquired $ 0.2 Deferred stock compensation 12.8 Identifiable $ 0.2 Deferred stock compensation 12.8 Identifiable intangible asset 2.6 In-process compensation 12.8 Identifiable intangible asset 2.6 In-process research and development 10.8 2.6 In-process research and development 10.8 Goodwill 39.7 Total consideration $ research and development 10.8 Goodwill 39.7 Total consideration $ 66.1 The Goodwill 39.7 Total consideration $ 66.1 The amount of the purchase product under development wa approximately 50 % complete , and it wa expected that the remaining 50 % would be completed during during the Company 's fiscal 2002 at a cost of approximately a cost of approximately $ 9.25 million . The remaining effort , which were completed in 2002 , included completion of coding using a discount rate of 25 % . The acquired intangible period of three year . 70 In the fourth quarter of In the fourth quarter of 2001 , an adjustment wa made acquisition of PowerSchool by $ 5.9 million due to the identification Compensation The Company allocated $ 12.8 million of it purchase consideration by employee and related to 445,000 common share issued contingent on and Spruce , acquired in 2001 , had been acquired at acquired at the beginning of 2000 and includes the effect of place at the beginning of 2000 . Pro forma information follows per share amount ) : 2001 2000 Net sale $ 5,370 share amount ) : 2001 2000 Net sale $ 5,370 $ 2001 2000 Net sale $ 5,370 $ 7,994 Net income ( Net sale $ 5,370 $ 7,994 Net income ( loss ) ( loss ) $ ( 44 ) $ 767 Basic earnings $ ( 44 ) $ 767 Basic earnings ( loss ) per common share $ ( 0.13 ) $ 2.35 Diluted earnings $ ( 0.13 ) $ 2.35 Diluted earnings ( loss ) per common share $ ( 0.13 ) $ 2.11 Note 5—Special $ ( 0.13 ) $ 2.11 Note 5—Special Charges Restructuring Actions 0.13 ) $ 2.11 Note 5—Special Charges Restructuring Actions 2002 Restructuring Note 5—Special Charges Restructuring Actions 2002 Restructuring Actions During fiscal 2002 2002 Restructuring Actions During fiscal 2002 , the Company recorded total restructuring charge of approximately $ 30 million related to action intended During the fourth quarter of 2002 , the Company 's management total cost of approximately $ 6 million designed to reduce headcount in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million , 161 of which of $ 1.8 million , 161 of which were eliminated by which were eliminated by September 28 , 2002 . Eliminated position eliminated by September 28 , 2002 . Eliminated position were primarily in the amount of $ 4.5 million . As of September million . As of September 28 , 2002 , substantially all As of September 28 , 2002 , substantially all of the substantially all of the $ 6 million accrual had been utilized related cost associated with the 19 remaining position . 71 During the 19 remaining position . 71 During the first quarter of During the first quarter of 2002 , the Company 's management total cost of approximately $ 24 million . These restructuring action in the elimination of approximately 425 position worldwide , 415 of approximately 425 position worldwide , 415 of which were eliminated by which were eliminated by September 28 , 2002 , at a eliminated by September 28 , 2002 , at a cost of at a cost of $ 8 million . Positions were eliminated contract cancellation charge totaled $ 12 million , and charge for for asset impairment totaled $ 4 million . Of the original . Of the original $ 24 million restructuring charge made during during the first quarter of 2002 , approximately $ 23 million of 2002 , approximately $ 23 million had been spent a been spent a of September 28 , 2002 and approximately $ a of September 28 , 2002 and approximately $ 250,000 wa , 2002 and approximately $ 250,000 wa reversed during the second during the second quarter of 2002 due to lower actual cost benefit . The remaining $ 1 million accrual relates primarily to on abandoned operating lease . 2000 Restructuring Actions During the first During the first quarter of 2000 , the Company initiated restructuring in recognition of an $ 8 million restructuring charge . This charge wa comprised of $ 3 million for the write-off of various operating asset and $ 5 million for severance payment to for severance payment to approximately 95 employee associated with consolidation of function . Of the $ 5 million accrued for severance , accrued for severance , $ 2.5 million had been spent before spent before the end of 2000 , and the remainder wa the remainder wa spent in 2001 . Of the $ 3 2001 . Of the $ 3 million accrued for the write-off utilized before the end of 2000 . Executive Bonus During the During the first quarter of 2000 , the Company 's Board the Company of approximately $ 90 million , the majority of In the fourth quarter of 2002 , all significant work and . Of the original $ 90 million accrual , $ 2.4 90 million accrual , $ 2.4 million remained unspent at the at the end of fiscal 2002 and wa reversed . Technology Acquisition As discussed in Note 4 , during both 2002 and Note 4 , during both 2002 and 2001 in it acquisition , during both 2002 and 2001 in it acquisition of Emagic in the amount of $ 551,000 for Emagic and $ 10.8 551,000 for Emagic and $ 10.8 million for PowerSchool , which to operation upon acquisition . 72 Note 6—Income Taxes The provision upon acquisition . 72 Note 6—Income Taxes The provision for income ( in million ) : 2002 2001 2000 Federal : Current in million ) : 2002 2001 2000 Federal : Current $ million ) : 2002 2001 2000 Federal : Current $ 8 2000 Federal : Current $ 8 $ ( 20 ) $ Current $ 8 $ ( 20 ) $ 9 Deferred ( $ ( 20 ) $ 9 Deferred ( 28 ) ( ) $ 9 Deferred ( 28 ) ( 8 ) 239 Deferred ( 28 ) ( 8 ) 239 ( 20 ) 28 ) ( 8 ) 239 ( 20 ) ( 28 ( 8 ) 239 ( 20 ) ( 28 ) 248 239 ( 20 ) ( 28 ) 248 State : Current 20 ) ( 28 ) 248 State : Current 2 — ) 248 State : Current 2 — — Deferred 7 ( Current 2 — — Deferred 7 ( 10 ) 23 9 — — Deferred 7 ( 10 ) 23 9 ( 10 Deferred 7 ( 10 ) 23 9 ( 10 ) 23 7 ( 10 ) 23 9 ( 10 ) 23 Foreign 10 ) 23 9 ( 10 ) 23 Foreign : Current 23 9 ( 10 ) 23 Foreign : Current 29 21 ) 23 Foreign : Current 29 21 37 Deferred 4 2 23 Foreign : Current 29 21 37 Deferred 4 2 ( Foreign : Current 29 21 37 Deferred 4 2 ( 2 Current 29 21 37 Deferred 4 2 ( 2 ) 33 29 21 37 Deferred 4 2 ( 2 ) 33 23 37 Deferred 4 2 ( 2 ) 33 23 35 Provision 4 2 ( 2 ) 33 23 35 Provision for income 2 ( 2 ) 33 23 35 Provision for income tax ( 2 ) 33 23 35 Provision for income tax $ Provision for income tax $ 22 $ ( 15 ) $ tax $ 22 $ ( 15 ) $ 306 The foreign $ ( 15 ) $ 306 The foreign provision for income pretax earnings of approximately $ 284 million , $ 363 million $ 284 million , $ 363 million and $ 1.019 billion $ 363 million and $ 1.019 billion in 2002 , 2001 and $ 1.019 billion in 2002 , 2001 , and 2000 1.019 billion in 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . As of respectively . As of September 28 , 2002 , approximately half As of September 28 , 2002 , approximately half of the a cumulative total of $ 755 million of such earnings . be recovered or settled . 73 As of September 28 , . 73 As of September 28 , 2002 and September 29 As of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 , the significant 2002 and September 29 , 2001 , the significant component of ( in million ) : 2002 2001 Deferred tax asset : in million ) : 2002 2001 Deferred tax asset : Accounts receivable and inventory reserve $ 23 $ 26 Accrued liability and inventory reserve $ 23 $ 26 Accrued liability and other reserve Accrued liability and other reserve 102 110 Basis of capital asset liability and other reserve 102 110 Basis of capital asset and of capital asset and investment 35 54 Tax loss and credit capital asset and investment 35 54 Tax loss and credit 209 54 Tax loss and credit 209 319 Total deferred tax asset Tax loss and credit 209 319 Total deferred tax asset 369 319 Total deferred tax asset 369 509 Less valuation allowance 30 Total deferred tax asset 369 509 Less valuation allowance 30 33 369 509 Less valuation allowance 30 33 Net deferred tax asset 509 Less valuation allowance 30 33 Net deferred tax asset 339 33 Net deferred tax asset 339 476 Deferred tax liability : Net deferred tax asset 339 476 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 308 489 Available-for-sale security 1 14 Unremitted earnings of subsidiary 308 489 Available-for-sale security 1 14 Other subsidiary 308 489 Available-for-sale security 1 14 Other 26 18 Total 308 489 Available-for-sale security 1 14 Other 26 18 Total deferred Available-for-sale security 1 14 Other 26 18 Total deferred tax liability security 1 14 Other 26 18 Total deferred tax liability 335 18 Total deferred tax liability 335 521 Net deferred tax asset Total deferred tax liability 335 521 Net deferred tax asset ( asset ( liability ) $ 4 $ ( 45 ) As ) $ 4 $ ( 45 ) As of September 28 45 ) As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had operating tax purpose of approximately $ 72 million , which expire from million , which expire from 2009 through 2021 . These carryforwards which expire from 2009 through 2021 . These carryforwards are comprised of which is approximately $ 94 million and which expire between million and which expire between 2003 and 2022 . The remaining which expire between 2003 and 2022 . The remaining benefit from expire . As of September 28 , 2002 , a valuation As of September 28 , 2002 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the remaining deferred tax asset . 74 A reconciliation of the provision federal income tax rate ( 35 % in 2001 , 2000 rate ( 35 % in 2001 , 2000 , and 1999 35 % in 2001 , 2000 , and 1999 ) to 2001 , 2000 , and 1999 ) to income ( loss ( in million ) : 2002 2001 2000 Computed expected tax in million ) : 2002 2001 2000 Computed expected tax ( million ) : 2002 2001 2000 Computed expected tax ( benefit tax ( benefit ) $ 30 $ ( 18 ) $ ) $ 30 $ ( 18 ) $ 382 State tax $ ( 18 ) $ 382 State tax , net of , net of federal effect 7 ( 7 ) 15 Indefinitely of federal effect 7 ( 7 ) 15 Indefinitely invested earnings effect 7 ( 7 ) 15 Indefinitely invested earnings of foreign foreign subsidiary — — ( 82 ) Nondeductible executive compensation ( ) Nondeductible executive compensation ( 1 ) — 32 Purchase accounting compensation ( 1 ) — 32 Purchase accounting and asset acquisition Purchase accounting and asset acquisition 3 10 — Change in valuation accounting and asset acquisition 3 10 — Change in valuation allowance Change in valuation allowance ( 16 ) — ( 27 ) ( 16 ) — ( 27 ) Research & development credit development credit , net ( 8 ) ( 5 ) ( net ( 8 ) ( 5 ) ( 5 ) Nondeductible ) ( 5 ) ( 5 ) Nondeductible expense 4 3 ( 5 ) Nondeductible expense 4 3 — Other item 3 5 ) Nondeductible expense 4 3 — Other item 3 2 4 3 — Other item 3 2 ( 9 ) Provision 3 — Other item 3 2 ( 9 ) Provision for Other item 3 2 ( 9 ) Provision for ( benefit from ) income tax $ 22 $ ( 15 ) $ tax $ 22 $ ( 15 ) $ 306 Effective tax $ ( 15 ) $ 306 Effective tax rate 25 % $ 306 Effective tax rate 25 % 30 % 28 % Effective tax rate 25 % 30 % 28 % The Internal rate 25 % 30 % 28 % The Internal Revenue Service federal income tax return through 1997 . Substantially all IRS audit audit issue for year through 1997 have been resolved . The tax return for fiscal year 1998 through 2000 . Management belief for fiscal year 1998 through 2000 . Management belief that adequate from tax examination . Note 7—Shareholders ' Equity Stock Repurchase Plan Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock period of time . During 2000 , the Company repurchased a Company repurchased a total of 2.55 million share of it common at a cost of $ 116 million . During the fourth During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . The Company engaged stock repurchase plan in fiscal 2002 . Since inception of the to repurchase a total of 6.55 million share of it common at a cost of $ 217 million . Preferred Stock In . Preferred Stock In August 1997 , the Company and Microsoft In addition , Microsoft purchased 150,000 share of Apple Series A stock `` ) for $ 150 million . These share were convertible by Microsoft after August 5 , 2000 , into share Microsoft after August 5 , 2000 , into share of the a conversion price of $ 8.25 per share . During 2000 8.25 per share . During 2000 , 74,250 share of preferred share . During 2000 , 74,250 share of preferred stock were preferred stock were converted to 9 million share of the Company 's common stock . During 2001 , the remaining 75,750 preferred During 2001 , the remaining 75,750 preferred share were converted into preferred share were converted into 9.2 million share of the Company Company 's common stock . 75 Comprehensive Income The following table ( in million ) : 2002 2001 2000 Unrealized gain on in million ) : 2002 2001 2000 Unrealized gain on available-for-sale million ) : 2002 2001 2000 Unrealized gain on available-for-sale security gain on available-for-sale security $ 13 $ 30 $ 297 Unrealized available-for-sale security $ 13 $ 30 $ 297 Unrealized gain ( $ 13 $ 30 $ 297 Unrealized gain ( loss ) ) on derivative investment ( 11 ) 4 — Cumulative translation derivative investment ( 11 ) 4 — Cumulative translation adjustment ( — Cumulative translation adjustment ( 51 ) ( 56 ) ( adjustment ( 51 ) ( 56 ) ( 53 ) Accumulated ) ( 56 ) ( 53 ) Accumulated other comprehensive income ( loss ) $ ( 49 ) $ ( 22 ) ( 49 ) $ ( 22 ) $ 244 The following $ ( 22 ) $ 244 The following table summarizes activity ( in million ) : 2002 2001 2000 Change in fair in million ) : 2002 2001 2000 Change in fair value million ) : 2002 2001 2000 Change in fair value of of available-for-sale security $ ( 49 ) $ ( 183 ) ( 49 ) $ ( 183 ) $ 427 Less : $ ( 183 ) $ 427 Less : adjustment for net and included in net income 32 ( 84 ) ( 272 in net income 32 ( 84 ) ( 272 ) Change 32 ( 84 ) ( 272 ) Change in unrealized gain on available-for-sale security $ ( 17 ) $ ( 267 ) ( 17 ) $ ( 267 ) $ 155 The tax $ ( 267 ) $ 155 The tax effect related to on available-for-sale security wa $ 10 million , $ 157 million $ 10 million , $ 157 million , $ ( 91 157 million , $ ( 91 ) million for fiscal 2002 91 ) million for fiscal 2002 , 2001 , and 2000 million for fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . The tax in net income wa $ 10 million , $ 35 million $ 10 million , $ 35 million and $ 94 million $ 35 million and $ 94 million for fiscal 2002 , $ 94 million for fiscal 2002 , 2001 , and 2000 million for fiscal 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . The following ( in million ) : 2002 2001 Cumulative effect of adopting in million ) : 2002 2001 Cumulative effect of adopting SFAS of adopting SFAS No . 133 $ — $ 12 Changes . 133 $ — $ 12 Changes in fair value of in fair value of derivative 4 45 Less : adjustment for fair value of derivative 4 45 Less : adjustment for net included in net income ( 19 ) ( 53 ) Change income ( 19 ) ( 53 ) Change in unrealized gain gain on derivative $ ( 15 ) $ 4 The tax $ ( 15 ) $ 4 The tax effect related to of adopting SFAS No . 133 wa $ ( 5 ) . 133 wa $ ( 5 ) a of September 29 5 ) a of September 29 , 2001 . The tax a of September 29 , 2001 . The tax effect related of derivative wa $ ( 2 ) million and $ ( ) million and $ ( 19 ) million for fiscal 2002 19 ) million for fiscal 2002 and 2001 , respectively . million for fiscal 2002 and 2001 , respectively . The tax reclassified from OCI wa $ 8 million and $ 23 million $ 8 million and $ 23 million for fiscal 2002 and $ 23 million for fiscal 2002 and 2001 , respectively . million for fiscal 2002 and 2001 , respectively . Note 8—Employee 2001 , respectively . Note 8—Employee Benefit Plans 1998 Executive Officer . Note 8—Employee Benefit Plans 1998 Executive Officer Stock Plan The Executive Officer Stock Plan The 1998 Executive Officer Stock Plan ( Officer Stock Plan ( the 1998 Plan ) is a shareholder approved plan which replaced the 1990 Stock Option Plan terminated in Option Plan terminated in April 1998 , the 1981 Stock Option in April 1998 , the 1981 Stock Option Plan terminated in Option Plan terminated in October 1990 , and the 1987 Executive October 1990 , and the 1987 Executive Long Term Stock Option Option Plan terminated in July 1995 . Options granted before these may be granted under the 1998 Plan to the Chairman of of the Company at the 76 level of Senior Vice President exercisable over a period of 4 year , based on continued employment , and generally expire 10 year after the grant date the grant date . The 1998 Plan permit the granting of and stock purchase right . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Board of Directors approved the 1997 Employee Stock Option Plan ( Stock Option Plan ( the 1997 Plan ) , a non-shareholder may be granted under the 1997 Plan to employee at not exercisable over a period of 4 year , based on continued employment , and generally expire 10 year after the grant date after the grant date . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at adoption of the DSOP , 60,000 option were granted in total at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee 's to a maximum of $ 25,000 in any calendar year . any calendar year . During 2002 , 2001 , and 2000 year . During 2002 , 2001 , and 2000 , 1.8 2002 , 2001 , and 2000 , 1.8 million , 1.8 2001 , and 2000 , 1.8 million , 1.8 million and 2000 , 1.8 million , 1.8 million and 766,000 share , million , 1.8 million and 766,000 share , respectively , were Plan . As of September 28 , 2002 , approximately 2.1 As of September 28 , 2002 , approximately 2.1 million share 28 , 2002 , approximately 2.1 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 11,000 for calendar year 2002 ) $ 11,000 for calendar year 2002 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee 's , up to a maximum 6 % of the employee 's Savings Plan were approximately $ 19 million , $ 17 million $ 19 million , $ 17 million , and $ 16 17 million , and $ 16 million in 2002 , 2001 and $ 16 million in 2002 , 2001 , and 2000 16 million in 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . 77 Stock and 2000 , respectively . 77 Stock Option Activity A summary for the year ended September 28 , 2002 , September 29 year ended September 28 , 2002 , September 29 , 2001 28 , 2002 , September 29 , 2001 and September 30 2002 , September 29 , 2001 and September 30 , 2000 29 , 2001 and September 30 , 2000 follows ( option 2001 and September 30 , 2000 follows ( option amount are Average Exercise Price Balance at 9/25/99 41,727 36,808 $ 13.20 Additional Exercise Price Balance at 9/25/99 41,727 36,808 $ 13.20 Additional Options Price Balance at 9/25/99 41,727 36,808 $ 13.20 Additional Options Authorized at 9/25/99 41,727 36,808 $ 13.20 Additional Options Authorized 13,500 — $ 13.20 Additional Options Authorized 13,500 — — Options Granted ( — — Options Granted ( 45,662 ) 45,662 $ 46.52 Options Options Granted ( 45,662 ) 45,662 $ 46.52 Options Cancelled 4,846 ( 45,662 ) 45,662 $ 46.52 Options Cancelled 4,846 ( 4,846 45,662 $ 46.52 Options Cancelled 4,846 ( 4,846 ) $ 28.42 46.52 Options Cancelled 4,846 ( 4,846 ) $ 28.42 Options Exercised 4,846 ( 4,846 ) $ 28.42 Options Exercised — ( 6,866 28.42 Options Exercised — ( 6,866 ) $ 9.62 Plan Shares — ( 6,866 ) $ 9.62 Plan Shares Expired ( 2,881 9.62 Plan Shares Expired ( 2,881 ) — — Balance at ) — — Balance at 9/30/00 11,530 70,758 $ 34.01 Additional — — Balance at 9/30/00 11,530 70,758 $ 34.01 Additional Options — Balance at 9/30/00 11,530 70,758 $ 34.01 Additional Options Authorized at 9/30/00 11,530 70,758 $ 34.01 Additional Options Authorized 27,000 — $ 34.01 Additional Options Authorized 27,000 — — Options Granted ( — — Options Granted ( 34,857 ) 34,857 $ 18.58 Options Options Granted ( 34,857 ) 34,857 $ 18.58 Options Cancelled 6,605 ( 34,857 ) 34,857 $ 18.58 Options Cancelled 6,605 ( 6,605 34,857 $ 18.58 Options Cancelled 6,605 ( 6,605 ) $ 29.32 18.58 Options Cancelled 6,605 ( 6,605 ) $ 29.32 Options Exercised 6,605 ( 6,605 ) $ 29.32 Options Exercised — ( 1,831 29.32 Options Exercised — ( 1,831 ) $ 10.05 Plan Shares — ( 1,831 ) $ 10.05 Plan Shares Expired ( 203 10.05 Plan Shares Expired ( 203 ) — — Balance at ) — — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional — — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional Options — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional Options Authorized at 9/29/01 10,075 97,179 $ 29.24 Additional Options Authorized 15,000 — $ 29.24 Additional Options Authorized 15,000 — — Options Granted ( — — Options Granted ( 23,239 ) 23,239 $ 19.89 Options Options Granted ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 Options Exercised 4,737 ( 4,737 ) $ 30.98 Options Exercised — ( 6,251 30.98 Options Exercised — ( 6,251 ) $ 11.99 Plan Shares — ( 6,251 ) $ 11.99 Plan Shares Expired ( 2 11.99 Plan Shares Expired ( 2 ) — — Balance at ) — — Balance at 9/28/02 6,571 109,430 $ 28.17 78 — — Balance at 9/28/02 6,571 109,430 $ 28.17 78 The — Balance at 9/28/02 6,571 109,430 $ 28.17 78 The option at 9/28/02 6,571 109,430 $ 28.17 78 The option outstanding a 9/28/02 6,571 109,430 $ 28.17 78 The option outstanding a of option outstanding a of September 28 , 2002 , have been a of September 28 , 2002 , have been segregated into Options Outstanding a of September 28 , 2002 Weighted-Average Remaining Contractual a of September 28 , 2002 Weighted-Average Remaining Contractual Life in Options Exercisable a of September 28 , 2002 Weighted Average Exercise a of September 28 , 2002 Weighted Average Exercise Price $ Weighted Average Exercise Price $ 0.83- $ 17.31 22,000 6.63 $ Exercise Price $ 0.83- $ 17.31 22,000 6.63 $ 14.26 13,459 Price $ 0.83- $ 17.31 22,000 6.63 $ 14.26 13,459 $ $ 0.83- $ 17.31 22,000 6.63 $ 14.26 13,459 $ 12.74 $ 17.31 22,000 6.63 $ 14.26 13,459 $ 12.74 $ 17.32- 17.31 22,000 6.63 $ 14.26 13,459 $ 12.74 $ 17.32- $ 6.63 $ 14.26 13,459 $ 12.74 $ 17.32- $ 18.50 26,785 14.26 13,459 $ 12.74 $ 17.32- $ 18.50 26,785 8.32 $ $ 12.74 $ 17.32- $ 18.50 26,785 8.32 $ 18.40 10,138 12.74 $ 17.32- $ 18.50 26,785 8.32 $ 18.40 10,138 $ $ 17.32- $ 18.50 26,785 8.32 $ 18.40 10,138 $ 18.38 $ 18.50 26,785 8.32 $ 18.40 10,138 $ 18.38 $ 18.51- 18.50 26,785 8.32 $ 18.40 10,138 $ 18.38 $ 18.51- $ 8.32 $ 18.40 10,138 $ 18.38 $ 18.51- $ 25.93 20,851 18.40 10,138 $ 18.38 $ 18.51- $ 25.93 20,851 8.86 $ $ 18.38 $ 18.51- $ 25.93 20,851 8.86 $ 21.35 4,902 18.38 $ 18.51- $ 25.93 20,851 8.86 $ 21.35 4,902 $ $ 18.51- $ 25.93 20,851 8.86 $ 21.35 4,902 $ 21.14 $ 25.93 20,851 8.86 $ 21.35 4,902 $ 21.14 $ 25.94- 25.93 20,851 8.86 $ 21.35 4,902 $ 21.14 $ 25.94- $ 8.86 $ 21.35 4,902 $ 21.14 $ 25.94- $ 43.59 21,492 21.35 4,902 $ 21.14 $ 25.94- $ 43.59 21,492 7.27 $ $ 21.14 $ 25.94- $ 43.59 21,492 7.27 $ 42.92 20,896 21.14 $ 25.94- $ 43.59 21,492 7.27 $ 42.92 20,896 $ $ 25.94- $ 43.59 21,492 7.27 $ 42.92 20,896 $ 43.16 $ 43.59 21,492 7.27 $ 42.92 20,896 $ 43.16 $ 43.60- 43.59 21,492 7.27 $ 42.92 20,896 $ 43.16 $ 43.60- $ 7.27 $ 42.92 20,896 $ 43.16 $ 43.60- $ 69.78 18,302 42.92 20,896 $ 43.16 $ 43.60- $ 69.78 18,302 7.37 $ $ 43.16 $ 43.60- $ 69.78 18,302 7.37 $ 49.64 8,529 43.16 $ 43.60- $ 69.78 18,302 7.37 $ 49.64 8,529 $ $ 43.60- $ 69.78 18,302 7.37 $ 49.64 8,529 $ 49.71 $ 69.78 18,302 7.37 $ 49.64 8,529 $ 49.71 $ 0.83- 69.78 18,302 7.37 $ 49.64 8,529 $ 49.71 $ 0.83- $ 7.37 $ 49.64 8,529 $ 49.71 $ 0.83- $ 69.78 109,430 49.64 8,529 $ 49.71 $ 0.83- $ 69.78 109,430 7.72 $ $ 49.71 $ 0.83- $ 69.78 109,430 7.72 $ 28.17 57,924 49.71 $ 0.83- $ 69.78 109,430 7.72 $ 28.17 57,924 $ $ 0.83- $ 69.78 109,430 7.72 $ 28.17 57,924 $ 30.85 $ 69.78 109,430 7.72 $ 28.17 57,924 $ 30.85 The Company 69.78 109,430 7.72 $ 28.17 57,924 $ 30.85 The Company had 7.72 $ 28.17 57,924 $ 30.85 The Company had exercisable option had exercisable option to purchase 42.1 million share outstanding a of share outstanding a of September 29 , 2001 with a weighted a of September 29 , 2001 with a weighted average exercise average exercise price of $ 32.15 . As of September 30 32.15 . As of September 30 , 2000 , the Company As of September 30 , 2000 , the Company had exercisable exercisable option outstanding to purchase 23.7 million share with a weighted average exercise price of $ 31.94 . Note 9—Stock-Based Compensation Pro of $ 31.94 . Note 9—Stock-Based Compensation Pro forma information regarding required by SFAS No . 123 and ha been determined a plan purchase subsequent to September 29 , 1995 , under the subsequent to September 29 , 1995 , under the fair value year are a follows : 2002 2001 2000 Expected life of are a follows : 2002 2001 2000 Expected life of stock a follows : 2002 2001 2000 Expected life of stock option Expected life of stock option 4 year 4 year 4 year of stock option 4 year 4 year 4 year Expected life option 4 year 4 year 4 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 2.90 6 month Interest rate—stock option 2.90 % 4.90 % 6.20 % Interest rate—stock option 2.90 % 4.90 % 6.20 % Interest rate—stock option 2.90 % 4.90 % 6.20 % Interest rate—stock purchase 2.71 6.20 % Interest rate—stock purchase 2.71 % 5.97 % 6.21 % Interest rate—stock purchase 2.71 % 5.97 % 6.21 % Volatility—stock option purchase 2.71 % 5.97 % 6.21 % Volatility—stock option 64 % % 6.21 % Volatility—stock option 64 % 66 % 67 % % Volatility—stock option 64 % 66 % 67 % Volatility—stock purchase option 64 % 66 % 67 % Volatility—stock purchase 51 % % 67 % Volatility—stock purchase 51 % 90 % 60 % % Volatility—stock purchase 51 % 90 % 60 % Dividend yield purchase 51 % 90 % 60 % Dividend yield 0 0 % 60 % Dividend yield 0 0 0 Weighted-average fair value 60 % Dividend yield 0 0 0 Weighted-average fair value of % Dividend yield 0 0 0 Weighted-average fair value of option granted during the year $ 10.11 $ 10.15 $ 25.92 Weighted-average the year $ 10.11 $ 10.15 $ 25.92 Weighted-average fair value $ 10.11 $ 10.15 $ 25.92 Weighted-average fair value of stock purchase during the year $ 6.73 $ 11.15 $ 10.66 79 the year $ 6.73 $ 11.15 $ 10.66 79 For purpose $ 6.73 $ 11.15 $ 10.66 79 For purpose of pro 6.73 $ 11.15 $ 10.66 79 For purpose of pro forma per share amount ) : 2002 2001 2000 Net income ( share amount ) : 2002 2001 2000 Net income ( loss amount ) : 2002 2001 2000 Net income ( loss ) loss ) —as reported $ 65 $ ( 25 ) $ reported $ 65 $ ( 25 ) $ 786 Net income $ ( 25 ) $ 786 Net income ( loss ) ) —pro forma $ ( 164 ) $ ( 396 ) ( 164 ) $ ( 396 ) $ 483 Net income $ ( 396 ) $ 483 Net income ( loss ) common share—as reported Basic $ 0.18 $ ( 0.07 ) $ Basic $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.18 $ ( ) $ 2.42 Diluted $ 0.18 $ ( 0.07 ) $ Diluted $ 0.18 $ ( 0.07 ) $ 2.18 Net income $ ( 0.07 ) $ 2.18 Net income ( loss ) share—pro forma Basic $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) $ 1.49 Diluted $ $ ( 1.15 ) $ 1.49 Diluted $ ( 0.46 ) $ 1.49 Diluted $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) $ 1.38 Note 10—Commitments $ ( 1.15 ) $ 1.38 Note 10—Commitments and Contingencies Lease 1.15 ) $ 1.38 Note 10—Commitments and Contingencies Lease Commitments The lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 12 year and often for term of 5 to 12 year and often contain multi-year noncancelable lease , wa $ 92 million , $ 80 million $ 92 million , $ 80 million , and $ 72 80 million , and $ 72 million in 2002 , 2001 and $ 72 million in 2002 , 2001 , and 2000 72 million in 2002 , 2001 , and 2000 , respectively 2002 , 2001 , and 2000 , respectively . Future minimum one year a of September 28 , 2002 , are a a of September 28 , 2002 , are a follows ( million ) : Fiscal Years 2003 $ 83 2004 78 2005 : Fiscal Years 2003 $ 83 2004 78 2005 66 2006 Fiscal Years 2003 $ 83 2004 78 2005 66 2006 55 Years 2003 $ 83 2004 78 2005 66 2006 55 2007 2003 $ 83 2004 78 2005 66 2006 55 2007 42 $ 83 2004 78 2005 66 2006 55 2007 42 Later 83 2004 78 2005 66 2006 55 2007 42 Later year 2004 78 2005 66 2006 55 2007 42 Later year 140 78 2005 66 2006 55 2007 42 Later year 140 Total 2005 66 2006 55 2007 42 Later year 140 Total minimum 55 2007 42 Later year 140 Total minimum lease payment $ Total minimum lease payment $ 464 Concentrations in the Available Sources the event a key manufacturing 80 vendor delay shipment of completed . Contingencies Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the European Union government by June 2004 , while the producer ' are scheduled to start June 2005 . The Company 's potential which could be significant . 81 Note 11—Segment Information and Geographic be significant . 81 Note 11—Segment Information and Geographic Data The Significant Accounting Policies in Note 1 , except a described below the Retail segment were $ 106 million in 2002 and $ were $ 106 million in 2002 and $ 92 million in million in 2002 and $ 92 million in 2001 . Operating and $ 92 million in 2001 . Operating income for all the twelve-month period ended September 28 , 2002 and September 29 period ended September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 , this resulted 2002 and September 29 , 2001 , this resulted in the corporate expense of approximately $ 52 million and $ 4 million $ 52 million and $ 4 million , respectively . Second the twelve-month period ended September 28 , 2002 , this resulted period ended September 28 , 2002 , this resulted in the ' net sale of $ 4.8 million . This amount wa This amount wa insignificant in 2001 . Third , a portion corporate event , and brand 82 awareness . Allocated operating cost Los Angeles a of September 28 , 2002 , both of a of September 28 , 2002 , both of which were which were opened in fiscal 2002 . Expenses allocated to corporate these two store wa $ 1 million in 2002 . Summary wa $ 1 million in 2002 . Summary information by operating ( in million ) : 2002 2001 2000 Americas : Net in million ) : 2002 2001 2000 Americas : Net sale million ) : 2002 2001 2000 Americas : Net sale $ Americas : Net sale $ 3,088 $ 2,996 $ 4,298 Operating Net sale $ 3,088 $ 2,996 $ 4,298 Operating income $ $ 3,088 $ 2,996 $ 4,298 Operating income $ 280 $ $ 4,298 Operating income $ 280 $ 133 $ 614 Depreciation Operating income $ 280 $ 133 $ 614 Depreciation and amortization $ 280 $ 133 $ 614 Depreciation and amortization $ 4 614 Depreciation and amortization $ 4 $ 4 $ 5 Segment and amortization $ 4 $ 4 $ 5 Segment asset ( $ 4 $ 4 $ 5 Segment asset ( a ) asset ( a ) $ 395 $ 334 $ 618 Europe a ) $ 395 $ 334 $ 618 Europe : Net $ 395 $ 334 $ 618 Europe : Net sale $ Europe : Net sale $ 1,251 $ 1,249 $ 1,817 Operating Net sale $ 1,251 $ 1,249 $ 1,817 Operating income $ $ 1,251 $ 1,249 $ 1,817 Operating income $ 122 $ $ 1,817 Operating income $ 122 $ 68 $ 243 Depreciation Operating income $ 122 $ 68 $ 243 Depreciation and amortization $ 122 $ 68 $ 243 Depreciation and amortization $ 4 243 Depreciation and amortization $ 4 $ 6 $ 4 Segment and amortization $ 4 $ 6 $ 4 Segment asset $ $ 4 $ 6 $ 4 Segment asset $ 165 $ $ 4 Segment asset $ 165 $ 137 $ 248 Japan Segment asset $ 165 $ 137 $ 248 Japan : Net $ 165 $ 137 $ 248 Japan : Net sale $ Japan : Net sale $ 710 $ 713 $ 1,345 Operating Net sale $ 710 $ 713 $ 1,345 Operating income $ $ 710 $ 713 $ 1,345 Operating income $ 140 $ $ 1,345 Operating income $ 140 $ 98 $ 352 Depreciation Operating income $ 140 $ 98 $ 352 Depreciation and amortization $ 140 $ 98 $ 352 Depreciation and amortization $ 2 352 Depreciation and amortization $ 2 $ 2 $ 2 Segment and amortization $ 2 $ 2 $ 2 Segment asset $ $ 2 $ 2 $ 2 Segment asset $ 50 $ $ 2 Segment asset $ 50 $ 44 $ 137 Retail Segment asset $ 50 $ 44 $ 137 Retail : Net $ 50 $ 44 $ 137 Retail : Net sale $ Retail : Net sale $ 283 $ 19 — Operating income Net sale $ 283 $ 19 — Operating income $ ( — Operating income $ ( 22 ) $ ( 21 ) ( 22 ) $ ( 21 ) — Depreciation and amortization amortization ( b ) $ 16 $ 2 — Segment asset b ) $ 16 $ 2 — Segment asset ( b asset ( b ) $ 141 $ 46 — Other Segment b ) $ 141 $ 46 — Other Segment : Net Segment : Net sale $ 410 $ 386 $ 523 Operating Net sale $ 410 $ 386 $ 523 Operating income $ $ 410 $ 386 $ 523 Operating income $ 88 $ $ 523 Operating income $ 88 $ 63 $ 137 Depreciation Operating income $ 88 $ 63 $ 137 Depreciation and amortization $ 88 $ 63 $ 137 Depreciation and amortization $ 2 137 Depreciation and amortization $ 2 $ 2 $ 3 Segment and amortization $ 2 $ 2 $ 3 Segment asset $ $ 2 $ 2 $ 3 Segment asset $ 67 $ $ 3 Segment asset $ 67 $ 70 $ 95 ( Segment asset $ 67 $ 70 $ 95 ( a ) $ 67 $ 70 $ 95 ( a ) The Americas reflected in corporate asset . 83 A reconciliation of the Company ( in million ) : 2002 2001 2000 Segment operating income in million ) : 2002 2001 2000 Segment operating income $ million ) : 2002 2001 2000 Segment operating income $ 608 2000 Segment operating income $ 608 $ 341 $ 1,346 Corporate operating income $ 608 $ 341 $ 1,346 Corporate expense , $ 608 $ 341 $ 1,346 Corporate expense , net ( Corporate expense , net ( 562 ) ( 674 ) ( net ( 562 ) ( 674 ) ( 726 ) Purchased ) ( 674 ) ( 726 ) Purchased in-process research and in-process research and development ( 1 ) ( 11 ) — development ( 1 ) ( 11 ) — Restructuring cost ( ) — Restructuring cost ( 30 ) — ( 8 ) ( 30 ) — ( 8 ) Executive bonus 2 — ( 8 ) Executive bonus 2 — ( 90 ) Consolidated Executive bonus 2 — ( 90 ) Consolidated operating income $ ) Consolidated operating income $ 17 $ ( 344 ) $ income $ 17 $ ( 344 ) $ 522 Segment asset $ ( 344 ) $ 522 Segment asset $ 818 $ $ 522 Segment asset $ 818 $ 630 $ 1,098 Corporate Segment asset $ 818 $ 630 $ 1,098 Corporate asset $ $ 818 $ 630 $ 1,098 Corporate asset $ 5,480 $ $ 1,098 Corporate asset $ 5,480 $ 5,391 $ 5,705 Consolidated Corporate asset $ 5,480 $ 5,391 $ 5,705 Consolidated asset $ $ 5,480 $ 5,391 $ 5,705 Consolidated asset $ 6,298 $ $ 5,705 Consolidated asset $ 6,298 $ 6,021 $ 6,803 Segment Consolidated asset $ 6,298 $ 6,021 $ 6,803 Segment depreciation and $ 6,298 $ 6,021 $ 6,803 Segment depreciation and amortization $ Segment depreciation and amortization $ 28 $ 16 $ 14 Corporate and amortization $ 28 $ 16 $ 14 Corporate depreciation and $ 28 $ 16 $ 14 Corporate depreciation and amortization 90 14 Corporate depreciation and amortization 90 86 70 Consolidated depreciation and Corporate depreciation and amortization 90 86 70 Consolidated depreciation and amortization depreciation and amortization 90 86 70 Consolidated depreciation and amortization $ Consolidated depreciation and amortization $ 118 $ 102 $ 84 A and amortization $ 118 $ 102 $ 84 A large portion $ 118 $ 102 $ 84 A large portion of the and freight charge . During 2000 , a single distributor , Micro Inc. accounted for approximately 11.5 % of the Company 's sale . Net sale during 2000 to Ingram Micro Inc. in and Europe segment were $ 651 million and $ 255 million $ 651 million and $ 255 million , respectively . Net all other segment were $ 14 million . No other single customer accounted for more than 10 % of net sale in % of net sale in 2000 . No single customer accounted customer accounted for more than 10 % of net sale in % of net sale in 2002 or 2001 . 84 Net net sale in 2002 or 2001 . 84 Net sale and in 2002 or 2001 . 84 Net sale and long-lived asset ( in million ) : 2002 2001 2000 Net Sales : in million ) : 2002 2001 2000 Net Sales : United million ) : 2002 2001 2000 Net Sales : United States Sales : United States $ 3,272 $ 2,936 $ 4,145 Japan United States $ 3,272 $ 2,936 $ 4,145 Japan 710 713 $ 3,272 $ 2,936 $ 4,145 Japan 710 713 1,345 Other $ 2,936 $ 4,145 Japan 710 713 1,345 Other Foreign Countries 2,936 $ 4,145 Japan 710 713 1,345 Other Foreign Countries 1,760 $ 4,145 Japan 710 713 1,345 Other Foreign Countries 1,760 1,714 713 1,345 Other Foreign Countries 1,760 1,714 2,493 Total Net Sales 1,345 Other Foreign Countries 1,760 1,714 2,493 Total Net Sales $ Other Foreign Countries 1,760 1,714 2,493 Total Net Sales $ 5,742 2,493 Total Net Sales $ 5,742 $ 5,363 $ 7,983 Long-Lived Net Sales $ 5,742 $ 5,363 $ 7,983 Long-Lived Assets : $ 5,742 $ 5,363 $ 7,983 Long-Lived Assets : United States Assets : United States $ 561 $ 498 $ 387 Japan United States $ 561 $ 498 $ 387 Japan 2 3 $ 561 $ 498 $ 387 Japan 2 3 5 Other $ 498 $ 387 Japan 2 3 5 Other Foreign Countries 498 $ 387 Japan 2 3 5 Other Foreign Countries 69 $ 387 Japan 2 3 5 Other Foreign Countries 69 77 3 5 Other Foreign Countries 69 77 52 Total Long-Lived Assets 5 Other Foreign Countries 69 77 52 Total Long-Lived Assets $ Other Foreign Countries 69 77 52 Total Long-Lived Assets $ 632 52 Total Long-Lived Assets $ 632 $ 578 $ 444 Information Long-Lived Assets $ 632 $ 578 $ 444 Information regarding net $ 632 $ 578 $ 444 Information regarding net sale by ( in million ) : 2002 2001 2000 Net Sales : in million ) : 2002 2001 2000 Net Sales : Power million ) : 2002 2001 2000 Net Sales : Power Macintosh Macintosh ( a ) $ 1,380 $ 1,664 $ 2,747 PowerBook a ) $ 1,380 $ 1,664 $ 2,747 PowerBook 831 813 $ 1,380 $ 1,664 $ 2,747 PowerBook 831 813 948 iMac $ 1,664 $ 2,747 PowerBook 831 813 948 iMac 1,448 1,117 1,664 $ 2,747 PowerBook 831 813 948 iMac 1,448 1,117 2,381 $ 2,747 PowerBook 831 813 948 iMac 1,448 1,117 2,381 iBook PowerBook 831 813 948 iMac 1,448 1,117 2,381 iBook 875 809 831 813 948 iMac 1,448 1,117 2,381 iBook 875 809 809 813 948 iMac 1,448 1,117 2,381 iBook 875 809 809 Software iMac 1,448 1,117 2,381 iBook 875 809 809 Software , Service 1,448 1,117 2,381 iBook 875 809 809 Software , Service , 1,117 2,381 iBook 875 809 809 Software , Service , and , and Other Net Sales 1,208 960 1,098 Total Net Sales and Other Net Sales 1,208 960 1,098 Total Net Sales $ Other Net Sales 1,208 960 1,098 Total Net Sales $ 5,742 1,098 Total Net Sales $ 5,742 $ 5,363 $ 7,983 ( Net Sales $ 5,742 $ 5,363 $ 7,983 ( a ) $ 5,742 $ 5,363 $ 7,983 ( a ) Includes server reported a G4 Cube . 85 Note 12—Earnings Per Common Share G4 Cube . 85 Note 12—Earnings Per Common Share The following For the Years Ended September 28 , 2002 September 29 , Years Ended September 28 , 2002 September 29 , 2001 September September 28 , 2002 September 29 , 2001 September 30 , , 2002 September 29 , 2001 September 30 , 2000 Numerator September 29 , 2001 September 30 , 2000 Numerator ( in , 2001 September 30 , 2000 Numerator ( in million ) ) before accounting change $ 65 $ ( 37 ) $ change $ 65 $ ( 37 ) $ 786 Denominator : $ ( 37 ) $ 786 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 355,022 345,613 324,568 Effect of dilutive : Weighted-average share outstanding 355,022 345,613 324,568 Effect of dilutive security Weighted-average share outstanding 355,022 345,613 324,568 Effect of dilutive security : Convertible preferred stock — — 17,914 Dilutive option 6,763 — 17,842 — — 17,914 Dilutive option 6,763 — 17,842 Dilutive potential common 17,914 Dilutive option 6,763 — 17,842 Dilutive potential common share 6,763 17,842 Dilutive potential common share 6,763 — 35,756 Denominator for diluted potential common share 6,763 — 35,756 Denominator for diluted earnings ( ( loss ) per share 361,785 345,613 360,324 Basic earnings ( loss ) per share 361,785 345,613 360,324 Basic earnings ( loss ) per share 361,785 345,613 360,324 Basic earnings ( loss ) share before accounting change $ 0.18 $ ( 0.11 ) $ change $ 0.18 $ ( 0.11 ) $ 2.42 Cumulative effect $ ( 0.11 ) $ 2.42 Cumulative effect of accounting change net of tax — $ 0.04 — Basic earnings ( loss share after accounting change $ 0.18 $ ( 0.07 ) $ change $ 0.18 $ ( 0.07 ) $ 2.42 Diluted earnings $ ( 0.07 ) $ 2.42 Diluted earnings ( loss ) share before accounting change $ 0.18 $ ( 0.11 ) $ change $ 0.18 $ ( 0.11 ) $ 2.18 Cumulative effect $ ( 0.11 ) $ 2.18 Cumulative effect of accounting change net of tax — $ 0.04 — Diluted earnings ( loss share after accounting change $ 0.18 $ ( 0.07 ) $ change $ 0.18 $ ( 0.07 ) $ 2.18 Options to $ ( 0.07 ) $ 2.18 Options to purchase 101.8 million $ 2.18 Options to purchase 101.8 million share of common stock outstanding at the end of 2002 that were not included in be antidilutive . At September 29 , 2001 , the Company . At September 29 , 2001 , the Company had option Company had option to purchase 97.2 million share of it common diluted loss per share for 2001 because the effect would have antidilutive . Options to purchase 2.5 million share of common stock outstanding at the end of 2000 that were not included in would be antidilutive . Note 13—Related Party Transactions Mr. Jerome York MicroWarehouse `` ) in January 2000 . He also serf a including product made by the 86 Company , through it MacWarehouse catalog . MicroWarehouse accounted for 3.3 % and 2.89 % of accounted for 3.3 % and 2.89 % of the Company 's Company 's net sale in 2002 and 2001 , respectively . net sale in 2002 and 2001 , respectively . Trade receivables receivables from MicroWarehouse were $ 20.9 million and $ 7.6 million $ 20.9 million and $ 7.6 million a of September 28 7.6 million a of September 28 , 2002 , and September a of September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 , respectively . , and September 29 , 2001 , respectively . These receivables purchase amounted to approximately $ 2.9 million in 2002 and $ approximately $ 2.9 million in 2002 and $ 3.4 million in million in 2002 and $ 3.4 million in 2001 . In and $ 3.4 million in 2001 . In March 2002 , in 2001 . In March 2002 , the Company entered into of the plane in May 2001 . During 2002 , the in May 2001 . During 2002 , the Company recognized a recognized a total of $ 1,168,000 in expense pursuant to this incurred by Mr. Jobs during 2001 and 2002 . In connection Mr. Jobs during 2001 and 2002 . In connection with a President , Retail , $ 1.5 million for the purchase of due and payable in May 2004 . Under the term of to the lesser of ( 1 ) an amount equal to ) an amount equal to 50 % of the total net the option ; or ( 2 ) $ 375,000 multiplied by or ( 2 ) $ 375,000 multiplied by the number of of the loan . Note 14—Selected Quarterly Financial Information ( Unaudited except per share amount ) 2002 Net sale $ 1,443 $ ) 2002 Net sale $ 1,443 $ 1,429 $ 1,495 $ Net sale $ 1,443 $ 1,429 $ 1,495 $ 1,375 Gross $ 1,443 $ 1,429 $ 1,495 $ 1,375 Gross margin $ $ 1,429 $ 1,495 $ 1,375 Gross margin $ 381 $ $ 1,375 Gross margin $ 381 $ 391 $ 409 $ Gross margin $ 381 $ 391 $ 409 $ 422 Net $ 381 $ 391 $ 409 $ 422 Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ 0.11 Diluted $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 2001 0.13 ) $ 0.09 $ 0.11 $ 0.11 2001 Net sale $ 0.09 $ 0.11 $ 0.11 2001 Net sale $ 1,450 0.09 $ 0.11 $ 0.11 2001 Net sale $ 1,450 $ 0.11 2001 Net sale $ 1,450 $ 1,475 $ 1,431 $ Net sale $ 1,450 $ 1,475 $ 1,431 $ 1,007 Gross $ 1,450 $ 1,475 $ 1,431 $ 1,007 Gross margin $ $ 1,475 $ 1,431 $ 1,007 Gross margin $ 437 $ $ 1,007 Gross margin $ 437 $ 434 $ 385 $ Gross margin $ 437 $ 434 $ 385 $ ( 21 $ 437 $ 434 $ 385 $ ( 21 ) Net 434 $ 385 $ ( 21 ) Net income ( loss income ( loss ) $ 66 $ 61 $ 43 $ loss ) $ 66 $ 61 $ 43 $ ( 195 $ 66 $ 61 $ 43 $ ( 195 ) Earnings 61 $ 43 $ ( 195 ) Earnings ( loss ) common share : Basic $ 0.19 $ 0.17 $ 0.12 $ : Basic $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 ) Diluted 0.17 $ 0.12 $ ( 0.58 ) Diluted $ 0.19 $ ( 0.58 ) Diluted $ 0.19 $ 0.17 $ 0.12 $ ) Diluted $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 $ 0.19 $ 0.17 $ 0.12 $ ( 0.58 ) Basic 0.17 $ 0.12 $ ( 0.58 ) Basic and diluted earnings for the fourth quarter of 2002 included several non-recurring item , certain equity investment totaling $ 49 million ; a restructuring charge a restructuring charge of $ 4 million ; an in-process research development charge of approximately $ 1 million ; and the reversal a portion of a previous 87 executive compensation expense resulting in a favorable impact of $ 2 million . Net income for for the first quarter of 2002 included a restructuring charge , net of tax , $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 million related to non-current investment , and first quarter of 2001 included after-tax net gain related to non-current investment of $ 1 million , $ 8 million $ 1 million , $ 8 million , $ 4 million $ 8 million , $ 4 million , and $ 41 4 million , and $ 41 million , respectively . Net for the third quarter of 2001 included an after-tax charge for IPR & D of $ 8 million associated with the Company for the first quarter of 2001 includes an after-tax favorable cumulative-effect-type adoption of SFAS No . 133 of $ 12 million . No . 133 of $ 12 million . Item 9 . $ 12 million . Item 9 . Changes in and Disagreements Financial Disclosure Not applicable . 88 REPORT OF INDEPENDENT AUDITORS The and subsidiary a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 , and the 2002 and September 29 , 2001 , and the related consolidated the three-year period ended September 28 , 2002 . These consolidated period ended September 28 , 2002 . These consolidated financial statement and subsidiary a of September 28 , 2002 and September 29 a of September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 , and the 2002 and September 29 , 2001 , and the result of the three-year period ended September 28 , 2002 , in conformity period ended September 28 , 2002 , in conformity with accounting . As discussed in Note 1 to the consolidated financial statement of accounting for goodwill in 2002 and changed it method of instrument and hedging activity in 2001 . KPMG LLP Mountain View Mountain View , California October 15 , 2002 89 PART III , California October 15 , 2002 89 PART III Item 10 California October 15 , 2002 89 PART III Item 10 . 2002 89 PART III Item 10 . Directors and Executive Officers Since William V. Campbell Director 62 1997 Millard S. Drexler Director William V. Campbell Director 62 1997 Millard S. Drexler Director 58 1997 Millard S. Drexler Director 58 1999 Steven P. Jobs Director Millard S. Drexler Director 58 1999 Steven P. Jobs Director and Director and Chief Executive Officer 47 1997 Arthur D. Levinson Director and Chief Executive Officer 47 1997 Arthur D. Levinson Director 52 1997 Arthur D. Levinson Director 52 2000 Jerome B. York Director Arthur D. Levinson Director 52 2000 Jerome B. York Director 64 2000 Jerome B. York Director 64 1997 William V. Campbell ha Jerome B. York Director 64 1997 William V. Campbell ha been ( Intuit ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From April 1994 to August 1998 , Mr. From April 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Officer of Gap Inc. from 1995 and President from 1987 until from 1995 and President from 1987 until September 2002 . Mr. President from 1987 until September 2002 . Mr. Drexler wa also of Gap Inc. from November 1983 until October 2002 . He from November 1983 until October 2002 . He also served a of the Gap Division from 1983 to 1987 . Steven P. Gap Division from 1983 to 1987 . Steven P. Jobs is Executive Officer of NeXT from 1985 until 1997 when NeXT wa of NeXT from 1985 until 1997 when NeXT wa acquired by ( Genentech ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Jerome B. & D from 1993 to 1995 . Jerome B. York is of Tracinda Corporation from September 1995 to October 1999 . In from September 1995 to October 1999 . In May 1993 , October 1999 . In May 1993 , he joined International Business director of IBM from January 1995 to August 1995 . Prior from January 1995 to August 1995 . Prior to joining IBM Chief Financial Officer from May 1990 to May 1993 . He from May 1990 to May 1993 . He also served a director of Chrysler Corporation from 1992 to 1993 . Mr. York Chrysler Corporation from 1992 to 1993 . Mr. York is also , Inc . In September 2002 , Lawrence J. Ellison resigned served a a director since 1997 . Executive Officers The following entitled `` Directors . `` 90 Fred D. Anderson , Executive Chief Financial Officer ( age 58 ) , joined the Company joined the Company in April 1996 . Prior to joining the position he held from August 1992 to March 1996 . Mr. from August 1992 to March 1996 . Mr. Anderson also serf serf a a director of 3Com Corporation . Timothy D. Cook Sales and Operations ( age 42 ) , joined the Company joined the Company in February 1998 . Prior to joining the . Mr. Cook also spent 12 year with IBM , most Counsel and Secretary ( age 46 ) , joined the Company joined the Company in September 1997 . Prior to joining the Directors at NeXT from February 1994 until the acquisition of NeXT by the Company in February 1997 . Ronald B. Johnson , President , Retail ( age 44 ) , joined the Company joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 10 year with Target Stores , and Corporate Controller ( age 40 ) , joined the Company joined the Company in July 1996 . Mr. Oppenheimer also served , Hardware Engineering ( age 46 ) , joined the Company joined the Company in February 1997 . Before joining the Company Systems Incorporated , from May 1993 to August 1996 . Mr. from May 1993 to August 1996 . Mr. Rubinstein also serf Worldwide Product Marketing ( age 42 ) , rejoined the Company , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 and wa from December 1995 to March 1997 and wa Director of Product FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that Mr. President , Applications ( age 45 ) , joined the Company joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the , Software Engineering ( age 41 ) , joined the Company joined the Company in February 1997 upon the Company 's acquisition , Engineering , from April 1995 to February 1997 . Prior from April 1995 to February 1997 . Prior to April 1995 1997 . Prior to April 1995 , Dr. Tevanian worked a several management position . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , requires ten percent shareholder also are 91 required by rule promulgated by with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company that , during fiscal year 2002 , it officer , director complied with all applicable Section 16 ( a ) filing requirement ) filing requirement . Item 11 . Executive Compensation Information Regarding P. Jobs Chief Executive Officer 2002 2001 2000 1 1 1 Jobs Chief Executive Officer 2002 2001 2000 1 1 1 2,268,698 Chief Executive Officer 2002 2001 2000 1 1 1 2,268,698 43,511,534 Executive Officer 2002 2001 2000 1 1 1 2,268,698 43,511,534 ( Officer 2002 2001 2000 1 1 1 2,268,698 43,511,534 ( 1 2002 2001 2000 1 1 1 2,268,698 43,511,534 ( 1 ) 2001 2000 1 1 1 2,268,698 43,511,534 ( 1 ) ( 2000 1 1 1 2,268,698 43,511,534 ( 1 ) ( 1 1 1 2,268,698 43,511,534 ( 1 ) ( 1 ) 7,500,000 43,511,534 ( 1 ) ( 1 ) 7,500,000 — 20,000,000 1,302,795 1 ) ( 1 ) 7,500,000 — 20,000,000 1,302,795 40,484,594 — ( 1 ) 7,500,000 — 20,000,000 1,302,795 40,484,594 — ( 1 1 ) 7,500,000 — 20,000,000 1,302,795 40,484,594 — ( 1 ) ) 7,500,000 — 20,000,000 1,302,795 40,484,594 — ( 1 ) ( 20,000,000 1,302,795 40,484,594 — ( 1 ) ( 1 ) Fred — ( 1 ) ( 1 ) Fred D. Anderson Executive President and Chief Financial Officer 2002 2001 2000 656,631 657,039 660,414 and Chief Financial Officer 2002 2001 2000 656,631 657,039 660,414 — Chief Financial Officer 2002 2001 2000 656,631 657,039 660,414 — — Financial Officer 2002 2001 2000 656,631 657,039 660,414 — — — Officer 2002 2001 2000 656,631 657,039 660,414 — — — — 2002 2001 2000 656,631 657,039 660,414 — — — — 1,000,000 660,414 — — — — 1,000,000 — 11,000 7,312 6,750 ( — — — 1,000,000 — 11,000 7,312 6,750 ( 2 ) — — 1,000,000 — 11,000 7,312 6,750 ( 2 ) ( — 1,000,000 — 11,000 7,312 6,750 ( 2 ) ( 2 — 11,000 7,312 6,750 ( 2 ) ( 2 ) ( 6,750 ( 2 ) ( 2 ) ( 2 ) Timothy ) ( 2 ) ( 2 ) Timothy D. Cook Executive , Worldwide Sales and Operations 2002 2001 2000 563,829 452,219 451,673 Worldwide Sales and Operations 2002 2001 2000 563,829 452,219 451,673 — Sales and Operations 2002 2001 2000 563,829 452,219 451,673 — 500,000 and Operations 2002 2001 2000 563,829 452,219 451,673 — 500,000 — Operations 2002 2001 2000 563,829 452,219 451,673 — 500,000 — ( 2002 2001 2000 563,829 452,219 451,673 — 500,000 — ( 3 2000 563,829 452,219 451,673 — 500,000 — ( 3 ) — 451,673 — 500,000 — ( 3 ) — 1,000,000 — 8,025 — ( 3 ) — 1,000,000 — 8,025 7,875 6,352 ( 3 ) — 1,000,000 — 8,025 7,875 6,352 ( 2 ) ) — 1,000,000 — 8,025 7,875 6,352 ( 2 ) ( — 1,000,000 — 8,025 7,875 6,352 ( 2 ) ( 2 — 8,025 7,875 6,352 ( 2 ) ( 2 ) ( 6,352 ( 2 ) ( 2 ) ( 2 ) Jonathan ) ( 2 ) ( 2 ) Jonathan Rubinstein Senior Vice Vice President , Hardware Engineering 2002 2001 2000 452,588 469,737 451,949 President , Hardware Engineering 2002 2001 2000 452,588 469,737 451,949 — , Hardware Engineering 2002 2001 2000 452,588 469,737 451,949 — — Hardware Engineering 2002 2001 2000 452,588 469,737 451,949 — — — Engineering 2002 2001 2000 452,588 469,737 451,949 — — — — 2002 2001 2000 452,588 469,737 451,949 — — — — 1,000,000 451,949 — — — — 1,000,000 — 9,996 7,875 6,577 ( — — — 1,000,000 — 9,996 7,875 6,577 ( 2 ) — — 1,000,000 — 9,996 7,875 6,577 ( 2 ) ( — 1,000,000 — 9,996 7,875 6,577 ( 2 ) ( 2 — 9,996 7,875 6,577 ( 2 ) ( 2 ) ( 6,577 ( 2 ) ( 2 ) ( 2 ) Avadis ) ( 2 ) ( 2 ) Avadis Tevanian , Jr. Vice President , Software Engineering 2002 2001 2000 492,212 460,873 451,673 President , Software Engineering 2002 2001 2000 492,212 460,873 451,673 — , Software Engineering 2002 2001 2000 492,212 460,873 451,673 — 500 Software Engineering 2002 2001 2000 492,212 460,873 451,673 — 500 — Engineering 2002 2001 2000 492,212 460,873 451,673 — 500 — ( 2002 2001 2000 492,212 460,873 451,673 — 500 — ( 4 2000 492,212 460,873 451,673 — 500 — ( 4 ) — 451,673 — 500 — ( 4 ) — 1,000,000 — 10,700 — ( 4 ) — 1,000,000 — 10,700 10,200 10,200 ( 4 ) — 1,000,000 — 10,700 10,200 10,200 ( 2 ) ) — 1,000,000 — 10,700 10,200 10,200 ( 2 ) ( — 1,000,000 — 10,700 10,200 10,200 ( 2 ) ( 2 — 10,700 10,200 10,200 ( 2 ) ( 2 ) ( 10,200 ( 2 ) ( 2 ) ( 2 ) ( ) ( 2 ) ( 2 ) ( 1 ) In ) ( 2 ) ( 1 ) In December 1999 , ( 1 ) In December 1999 , Mr. Jobs wa given the Company of approximately $ 90,000,000 . This amount wa previously a bonus for fiscal year 2000 in the Company 's 2000 2000 in the Company 's 2000 Form 10-K and 2000 Proxy the Company 's 2000 Form 10-K and 2000 Proxy Statement . 's 2000 Form 10-K and 2000 Proxy Statement . Because the transferred to Mr. Jobs in 2001 , the amount of approximately the amount of approximately $ 43.5 million paid by the Company the Company during fiscal year 2001 towards the purchase of the tax assistance of approximately $ 40.5 million wa reported a income Mr. Jobs . In fiscal 2002 , approximately $ 2.27 million fiscal 2002 , approximately $ 2.27 million paid by the Company the plane and approximately $ 1.3 million in related tax assistance . Accordingly , the $ 90 million previously reported a a reported a a bonus in 2000 ha been removed from the aircraft during each of fiscal 2001 and 2002 is reported a each of fiscal 2001 and 2002 is reported a compensation . reported a compensation . ( 2 ) Consists of matching contribution with the term of the 401 ( k ) plan . k ) plan . ( 3 ) A special executive bonus President Operations . In January 2002 , Mr. Cook wa named Sales and Operations . ( 4 ) Patent award . 92 4 ) Patent award . 92 Option Grants in Last Fiscal Executive Officers during fiscal year 2002 . OPTION GRANTS IN LAST Employees in Fiscal Year ( 1 ) Potential Realizable Value at Appreciation for Option Term ( 3 ) Name Exercise or Base ( $ /Sh ) ( 2 ) Expiration Date 5 % ( 2 ) Expiration Date 5 % ( $ ) 10 5 % ( $ ) 10 % ( $ ) Steven $ ) Steven P. Jobs 7,500,000 32.27 % $ 18.30 10/19/2011 ) Steven P. Jobs 7,500,000 32.27 % $ 18.30 10/19/2011 $ Jobs 7,500,000 32.27 % $ 18.30 10/19/2011 $ 86,315,788 $ 218,741,153 7,500,000 32.27 % $ 18.30 10/19/2011 $ 86,315,788 $ 218,741,153 Fred % $ 18.30 10/19/2011 $ 86,315,788 $ 218,741,153 Fred D. Anderson 18.30 10/19/2011 $ 86,315,788 $ 218,741,153 Fred D. Anderson — — — — — — ( 1 ) Based on an aggregate Based on an aggregate of 23,239,444 option granted to all employee all employee during fiscal year 2002 . Options granted in fiscal Options granted in fiscal year 2002 typically vest over four year granted to Mr. Jobs , 25 % were vested a of date of grant . ( 2 ) All option were granted date of grant . ( 3 ) Potential gain are net may not be achieved . 93 Options Exercised and Year-End Option Executive Officers during fiscal year 2002 and stock option held by Year-End ( $ ) ( 2 ) Name Shares Acquired on Realized ( $ ) ( 1 ) Exercisable Unexercisable Exercisable Unexercisable Steven P. Jobs — — 21,935,000 ( 3 ) 5,625,000 $ Jobs — — 21,935,000 ( 3 ) 5,625,000 $ 193,200 $ — 21,935,000 ( 3 ) 5,625,000 $ 193,200 $ 0 Fred ( 3 ) 5,625,000 $ 193,200 $ 0 Fred D. Anderson ) 5,625,000 $ 193,200 $ 0 Fred D. Anderson 583,332 $ $ 0 Fred D. Anderson 583,332 $ 10,122,169 600,000 1,350,000 $ Fred D. Anderson 583,332 $ 10,122,169 600,000 1,350,000 $ 0 $ D. Anderson 583,332 $ 10,122,169 600,000 1,350,000 $ 0 $ 0 Anderson 583,332 $ 10,122,169 600,000 1,350,000 $ 0 $ 0 Timothy $ 10,122,169 600,000 1,350,000 $ 0 $ 0 Timothy D. Cook 600,000 1,350,000 $ 0 $ 0 Timothy D. Cook 700,000 $ $ 0 Timothy D. Cook 700,000 $ 10,710,393 250,000 1,350,000 $ Timothy D. Cook 700,000 $ 10,710,393 250,000 1,350,000 $ 0 $ D. Cook 700,000 $ 10,710,393 250,000 1,350,000 $ 0 $ 0 Cook 700,000 $ 10,710,393 250,000 1,350,000 $ 0 $ 0 Jonathan $ 10,710,393 250,000 1,350,000 $ 0 $ 0 Jonathan Rubinstein — 250,000 1,350,000 $ 0 $ 0 Jonathan Rubinstein — — 1,050,000 0 Jonathan Rubinstein — — 1,050,000 1,350,000 $ 3,960,000 $ 0 Jonathan Rubinstein — — 1,050,000 1,350,000 $ 3,960,000 $ 0 Avadis — — 1,050,000 1,350,000 $ 3,960,000 $ 0 Avadis Tevanian , 1,050,000 1,350,000 $ 3,960,000 $ 0 Avadis Tevanian , Jr. 87,920 0 Avadis Tevanian , Jr. 87,920 $ 1,514,782 1,050,000 1,350,000 $ Tevanian , Jr. 87,920 $ 1,514,782 1,050,000 1,350,000 $ 2,996,283 $ , Jr. 87,920 $ 1,514,782 1,050,000 1,350,000 $ 2,996,283 $ 0 Jr. 87,920 $ 1,514,782 1,050,000 1,350,000 $ 2,996,283 $ 0 ( $ 1,514,782 1,050,000 1,350,000 $ 2,996,283 $ 0 ( 1 ) 1,050,000 1,350,000 $ 2,996,283 $ 0 ( 1 ) Market value $ 2,996,283 $ 0 ( 1 ) Market value of underlying the exercise price . ( 2 ) Market value of security the end of fiscal year 2002 ( based on $ 14.72 2002 ( based on $ 14.72 per share , the closing Nasdaq National Market on September 28 , 2002 ) , minus Market on September 28 , 2002 ) , minus the exercise the exercise price . ( 3 ) Includes 60,000 option granted . ( 3 ) Includes 60,000 option granted to Mr. Jobs a director pursuant to the 1997 Director Stock Option Plan . Plan . Director Compensation In 1997 , the Company ended it the Apple Computer , Inc. 1997 Director Stock Option Plan ( by the shareholder in April 1998 and 800,000 share have been shareholder in April 1998 and 800,000 share have been reserved for granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 360,000 share outstanding under the Director NASDAQ rule . During fiscal 2002 , William V. Campbell , the Company in fiscal year 2002 served on the Compensation Committee Committee . During fiscal year 2002 , Mr. Jobs served a director of Gap in September 2002 . Mr. Drexler resigned a CEO of Gap in September 2002 and resigned a a 94 2002 and resigned a a 94 director of Gap in October director of Gap in October 2002 . Subsequently , in November . Subsequently , in November 2002 , Mr. York resigned from of the Company . Item 12 . Security Ownership of Certain certain information a of October 31 , 2002 ( the `` a of October 31 , 2002 ( the `` Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 359,007,837 share of Common Stock were Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Lord , Abbett & Co 29,381,015 ( 2 ) 7.56 % Abbett & Co 29,381,015 ( 2 ) 7.56 % Steven P. Co 29,381,015 ( 2 ) 7.56 % Steven P. Jobs 23,810,002 7.56 % Steven P. Jobs 23,810,002 ( 3 ) 6.22 % Steven P. Jobs 23,810,002 ( 3 ) 6.22 % Fred D. Jobs 23,810,002 ( 3 ) 6.22 % Fred D. Anderson 602,672 6.22 % Fred D. Anderson 602,672 ( 4 ) * William Fred D. Anderson 602,672 ( 4 ) * William V. Campbell ) * William V. Campbell 80,502 ( 5 ) * Timothy William V. Campbell 80,502 ( 5 ) * Timothy D. Cook ) * Timothy D. Cook 253,091 ( 6 ) * Millard Timothy D. Cook 253,091 ( 6 ) * Millard S. Drexler ) * Millard S. Drexler 80,000 ( 7 ) * Arthur Millard S. Drexler 80,000 ( 7 ) * Arthur D. Levinson ) * Arthur D. Levinson 221,600 ( 8 ) * Jonathan Arthur D. Levinson 221,600 ( 8 ) * Jonathan Rubinstein 1,058,275 8 ) * Jonathan Rubinstein 1,058,275 ( 9 ) * Avadis * Jonathan Rubinstein 1,058,275 ( 9 ) * Avadis Tevanian , * Avadis Tevanian , Jr. 1,051,252 ( 10 ) * Jerome Tevanian , Jr. 1,051,252 ( 10 ) * Jerome B. York ) * Jerome B. York 100,000 ( 5 ) * All Jerome B. York 100,000 ( 5 ) * All executive officer director a a group ( 14 person ) 29,376,803 7.56 % group ( 14 person ) 29,376,803 7.56 % ( 1 ) ( 14 person ) 29,376,803 7.56 % ( 1 ) Represents ) 29,376,803 7.56 % ( 1 ) Represents share of Common the Table Date or within 60 day thereafter . ( 2 60 day thereafter . ( 2 ) Based on a Form ) Based on a Form 13F-HR/A filed October 10 , 2002 a Form 13F-HR/A filed October 10 , 2002 by Lord , 13F-HR/A filed October 10 , 2002 by Lord , Abbett & , Abbett & Co. , 767 Fith Avenue , New York , New York , NY 10153 . ( 3 ) Includes , NY 10153 . ( 3 ) Includes 23,810,000 share of . ( 3 ) Includes 23,810,000 share of Common Stock which of stock option . ( 4 ) Includes 600,000 share of . ( 4 ) Includes 600,000 share of Common Stock which of stock option . ( 5 ) Includes 80,000 share of . ( 5 ) Includes 80,000 share of Common Stock which exercise of stock option . 95 ( 6 ) Includes 250,000 stock option . 95 ( 6 ) Includes 250,000 share of 95 ( 6 ) Includes 250,000 share of Common Stock which of stock option . ( 7 ) Includes 60,000 share of . ( 7 ) Includes 60,000 share of Common Stock which of stock option . ( 8 ) Includes 1,400 share of . ( 8 ) Includes 1,400 share of Common Stock which Mr. Levinson hold indirectly and 20,000 share of Common Stock which of stock option . ( 9 ) Includes 1,050,000 share of . ( 9 ) Includes 1,050,000 share of Common Stock which of stock option . ( 10 ) Includes 1,050,000 share of . ( 10 ) Includes 1,050,000 share of Common Stock which . * Represents le than 1 % of the issued and information , a of September 28 , 2002 , concerning share a of September 28 , 2002 , concerning share of common compensation plan approved by shareholder 44,867 $ 29.75 7,497 ( 1 approved by shareholder 44,867 $ 29.75 7,497 ( 1 ) Equity by shareholder 44,867 $ 29.75 7,497 ( 1 ) Equity compensation 44,867 $ 29.75 7,497 ( 1 ) Equity compensation plan not plan not approved by shareholder 64,563 $ 27.07 1,221 ( 2 approved by shareholder 64,563 $ 27.07 1,221 ( 2 ) Total by shareholder 64,563 $ 27.07 1,221 ( 2 ) Total equity 64,563 $ 27.07 1,221 ( 2 ) Total equity compensation plan ) Total equity compensation plan 109,430 $ 28.17 8,718 ( 1 equity compensation plan 109,430 $ 28.17 8,718 ( 1 ) This compensation plan 109,430 $ 28.17 8,718 ( 1 ) This number 109,430 $ 28.17 8,718 ( 1 ) This number includes 2,146,906 1 ) This number includes 2,146,906 share of common stock reserved Employee Stock Purchase Plan , 360,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 4,989,890 share available for issuance under available for issuance under the 1998 Executive Officer Stock Plan . not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) Reflects share authorized for for future issuance under the 1997 Employee Stock Option Plan . Employee Stock Option Plan . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Board of Directors approved the 1997 Employee Stock Option Plan ( Stock Option Plan ( the 1997 Plan ) , a non-shareholder may be granted under the 1997 Plan to employee at not exercisable over a period of 4 year , based on continued employment , and generally expire 10 year after the grant date Plan provides that upon a 96 `` change in control `` acquisition by any person of 50 % or more of the annual base salary . Item 13 . Certain Relationships and Related President , Retail ) $ 1,500,000 for the purchase of his due and payable in May 2004 . Under the term of to the lesser of ( 1 ) an amount equal to ) an amount equal to 50 % of the total net the option ; or ( 2 ) $ 375,000 multiplied by or ( 2 ) $ 375,000 multiplied by the number of this loan during fiscal year 2002 wa $ 1,500,000 . Mr. fiscal year 2002 wa $ 1,500,000 . Mr. Jerome York , ( MicroWarehouse ) in January 2000 . He also serf a catalogue . During fiscal year 2002 , MicroWarehouse accounted for 3.3 2002 , MicroWarehouse accounted for 3.3 % of the Company 's internal use . In March 2002 , the Company entered into of the plane in May 2001 . During 2002 , the in May 2001 . During 2002 , the Company recognized a recognized a total of $ 1,168,000 in expense pursuant to this incurred by Mr. Jobs during 2001 and 2002 . Item 14 Mr. Jobs during 2001 and 2002 . Item 14 . Controls 2001 and 2002 . Item 14 . Controls and Procedures Based a of a date within 90 day of the filing date this Annual Report on Form 10-K , the Company 's principal ( a defined in Rules 13a-14 ( c ) and 15d-14 13a-14 ( c ) and 15d-14 ( c ) under the the Securities Exchange Act of 1934 , a amended ( Exchange Commission rule and form . 97 There were no significant change regardless of how remote . 98 PART IV Item 15 . . 98 PART IV Item 15 . Exhibits ( a ) a Part of Report : 1 . Financial Statements The financial of this report on Form 10-K are set forth in the under Part II , Item 8 of this Form 10-K. 2 Item 8 of this Form 10-K. 2 . Financial Statement Schedules 8 of this Form 10-K. 2 . Financial Statement Schedules All under Part II , Item 8 of this Form 10-K. 3 Item 8 of this Form 10-K. 3 . Exhibits The following 8 of this Form 10-K. 3 . Exhibits The following exhibit a part of this Form 10-K. Exhibit Number Description 10.A.49 * Form 10-K. Exhibit Number Description 10.A.49 * * 1997 Employee Stock Number Description 10.A.49 * * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 21 Subsidiaries amended through October 19 , 2001 . 21 Subsidiaries of Apple October 19 , 2001 . 21 Subsidiaries of Apple Computer , of Apple Computer , Inc. 23.1 Consent of KPMG LLP 99.1 23.1 Consent of KPMG LLP 99.1 Certificate of Apple Computer , Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 . * * Represents a b ) Reports on Form 8-K The Company filed a current a current report on Form 8-K on August 8 , 2002 on Form 8-K on August 8 , 2002 , to report 8-K on August 8 , 2002 , to report that the with the SEC 's June 27 , 2002 Order requiring the SEC 's June 27 , 2002 Order requiring the filing of sworn statement pursuant to Section 21 ( a ) ( 1 21 ( a ) ( 1 ) of the Securities and Securities and Exchange Act of 1934 . The Company filed a a current report on Form 8-K on August 1 , 2002 on Form 8-K on August 1 , 2002 , to report 8-K on August 1 , 2002 , to report the filing filing of a SEC Form 4 Statement of Changes in Beneficial Mr. Arthur Levinson on August 2 , 2002 . ( c Levinson on August 2 , 2002 . ( c ) Exhibits Exhibit Number Notes * Description 3.1 88-S3 Restated Articles of Incorporation Number Notes * Description 3.1 88-S3 Restated Articles of Incorporation , State of California on January 27 , 1988 . 3.2 00/3Q California on January 27 , 1988 . 3.2 00/3Q Amendment to January 27 , 1988 . 3.2 00/3Q Amendment to Restated Articles 27 , 1988 . 3.2 00/3Q Amendment to Restated Articles of State of California on May 4 , 2000 . 3.3 00/3Q California on May 4 , 2000 . 3.3 00/3Q By-Laws of May 4 , 2000 . 3.3 00/3Q By-Laws of the Company 4 , 2000 . 3.3 00/3Q By-Laws of the Company , , a amended through April 20 , 2000 . 4.2 94/2Q amended through April 20 , 2000 . 4.2 94/2Q Indenture dated April 20 , 2000 . 4.2 94/2Q Indenture dated a of 20 , 2000 . 4.2 94/2Q Indenture dated a of February Indenture dated a of February 1 , 1994 , between the a of February 1 , 1994 , between the Company and the Indenture `` ) . 99 4.3 94/2Q Supplemental Indenture dated Indenture `` ) . 99 4.3 94/2Q Supplemental Indenture dated a `` ) . 99 4.3 94/2Q Supplemental Indenture dated a of Indenture dated a of February 1 , 1994 , among the a of February 1 , 1994 , among the Company , , a successor trustee . 4.5 94/2Q Form of the Company a successor trustee . 4.5 94/2Q Form of the Company 's Form of the Company 's 6 1/2 % Notes due 2004 of the Company 's 6 1/2 % Notes due 2004 . 6 1/2 % Notes due 2004 . 4.8 96-S3/A Registration Rights % Notes due 2004 . 4.8 96-S3/A Registration Rights Agreement , Notes due 2004 . 4.8 96-S3/A Registration Rights Agreement , dated Rights Agreement , dated June 7 , 1996 among the Company , dated June 7 , 1996 among the Company and Goldman & Co . Incorporated . 4.9 97K Certificate of Determination of Co . Incorporated . 4.9 97K Certificate of Determination of Preferences Stock of Apple Computer Inc. 10.A.1 93/3Q * * 1981 Stock of Apple Computer Inc. 10.A.1 93/3Q * * 1981 Stock Option Inc. 10.A.1 93/3Q * * 1981 Stock Option Plan , a Plan , a amended . 10.A.3 91K * * Apple Computer , a amended . 10.A.3 91K * * Apple Computer , restated effective a of October 1 , 1990 . 10.A.3-1 92K a of October 1 , 1990 . 10.A.3-1 92K * * October 1 , 1990 . 10.A.3-1 92K * * Amendment of 1 , 1990 . 10.A.3-1 92K * * Amendment of Apple and Investment Plan dated March 1 , 1992 . 10.A.3-2 97/2Q Plan dated March 1 , 1992 . 10.A.3-2 97/2Q * * March 1 , 1992 . 10.A.3-2 97/2Q * * Amendment No 1 , 1992 . 10.A.3-2 97/2Q * * Amendment No . * * Amendment No . 2 to the Apple Computer , Savings and Investment Plan . 10.A.5 98/1Q * * 1990 Stock and Investment Plan . 10.A.5 98/1Q * * 1990 Stock Option . 10.A.5 98/1Q * * 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10.A.6 99K amended through November 5 , 1997 . 10.A.6 99K * * November 5 , 1997 . 10.A.6 99K * * Apple Computer 5 , 1997 . 10.A.6 99K * * Apple Computer , , a amended through October 6 , 1999 . 10.A.8 97K amended through October 6 , 1999 . 10.A.8 97K * * October 6 , 1999 . 10.A.8 97K * * Form of 6 , 1999 . 10.A.8 97K * * Form of Indemnification officer of the Registrant . 10.A.43 97/2Q * * NeXT Computer of the Registrant . 10.A.43 97/2Q * * NeXT Computer , * NeXT Computer , Inc. 1990 Stock Option Plan , a Plan , a amended . 10.A.50 98/2Q * * 1997 Director , a amended . 10.A.50 98/2Q * * 1997 Director Stock . 10.A.50 98/2Q * * 1997 Director Stock Option Plan . Director Stock Option Plan . 10.A.51 02/3Q * * 1998 Executive Stock Option Plan . 10.A.51 02/3Q * * 1998 Executive Officer . 10.A.51 02/3Q * * 1998 Executive Officer Stock Plan , , a amended through April 24 , 2002 . 10.A.52 02/3Q amended through April 24 , 2002 . 10.A.52 02/3Q * * April 24 , 2002 . 10.A.52 02/3Q * * Reimbursement Agreement 24 , 2002 . 10.A.52 02/3Q * * Reimbursement Agreement . * * Reimbursement Agreement . 10.B.8 91-8K-8 Participation in the Customer * Reimbursement Agreement . 10.B.8 91-8K-8 Participation in the Customer Design Registrant dated a of September 30 , 1991 between IBM and a of September 30 , 1991 between IBM and the Registrant IBM and the Registrant . 10.B.9 91-8K-9 Agreement for Purchase of and the Registrant . 10.B.9 91-8K-9 Agreement for Purchase of IBM ) dated a of September 30 , 1991 between IBM and a of September 30 , 1991 between IBM and the Registrant IBM and the Registrant . 10.B.12 92K Microprocessor Requirements Agreement dated and the Registrant . 10.B.12 92K Microprocessor Requirements Agreement dated January Microprocessor Requirements Agreement dated January 31 , 1992 between the Registrant Agreement dated January 31 , 1992 between the Registrant and Motorola Registrant and Motorola , Inc. 10.B.16 96/3Q Fountain Manufacturing Agreement dated and Motorola , Inc. 10.B.16 96/3Q Fountain Manufacturing Agreement dated May Fountain Manufacturing Agreement dated May 31 , 1996 between Registrant and Agreement dated May 31 , 1996 between Registrant and SCI Systems and SCI Systems , Inc. 24.1 02K Power of Attorney . SCI Systems , Inc. 24.1 02K Power of Attorney . * * Notes appear on page 101 . * * Represents a or compensatory plan or arrangement 100 NOTES 88-S3 Incorporated by reference plan or arrangement 100 NOTES 88-S3 Incorporated by reference to Exhibit Incorporated by reference to Exhibit 4.1 to the Company 's Registration S-3 ( file no . 33-23317 ) filed July 27 , . 33-23317 ) filed July 27 , 1988 . 91K Incorporated ) filed July 27 , 1988 . 91K Incorporated by reference July 27 , 1988 . 91K Incorporated by reference to the 's Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 27 , 1991 ( the `` year ended September 27 , 1991 ( the `` 1991 Form , 1991 ( the `` 1991 Form 10-K `` ) . ( the `` 1991 Form 10-K `` ) . 91-8K-8 Incorporated Form 10-K `` ) . 91-8K-8 Incorporated by reference to Exhibit Incorporated by reference to Exhibit 8 to the October 1991 Form Exhibit 8 to the October 1991 Form 8-K. 91-8K-9 Incorporated by to the October 1991 Form 8-K. 91-8K-9 Incorporated by reference to the October 1991 Form 8-K. 91-8K-9 Incorporated by reference to Exhibit Incorporated by reference to Exhibit 9 to the October 1991 Form Exhibit 9 to the October 1991 Form 8-K. 92K Incorporated by to the October 1991 Form 8-K. 92K Incorporated by reference to the October 1991 Form 8-K. 92K Incorporated by reference to the 's Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 25 , 1992 ( the `` year ended September 25 , 1992 ( the `` 1992 Form , 1992 ( the `` 1992 Form 10-K `` ) . ( the `` 1992 Form 10-K `` ) . 93/3Q Incorporated Form 10-K `` ) . 93/3Q Incorporated by reference to Exhibit Incorporated by reference to Exhibit 10.A.1 to the Company 's Quarterly 's Quarterly Report on Form 10-Q for the quarter ended June for the quarter ended June 25 , 1993 . 94/2Q Incorporated quarter ended June 25 , 1993 . 94/2Q Incorporated by reference June 25 , 1993 . 94/2Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended April for the quarter ended April 1 , 1994 . 96/2Q Incorporated quarter ended April 1 , 1994 . 96/2Q Incorporated by reference April 1 , 1994 . 96/2Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended March for the quarter ended March 29 , 1996 . 96-S3/A-4.1.1 , quarter ended March 29 , 1996 . 96-S3/A-4.1.1 , - -4.2.1 March 29 , 1996 . 96-S3/A-4.1.1 , - -4.2.1 , -4.3.1 by reference to the exhibit 4.1 , 4.2 , 4.3 , to the exhibit 4.1 , 4.2 , 4.3 , and 4.8 exhibit 4.1 , 4.2 , 4.3 , and 4.8 , respectively 4.2 , 4.3 , and 4.8 , respectively , in the S-3/A ( file no . 333-10961 ) filed October 30 , . 333-10961 ) filed October 30 , 1996 . 97/2Q Incorporated ) filed October 30 , 1996 . 97/2Q Incorporated by reference October 30 , 1996 . 97/2Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended March for the quarter ended March 28 , 1997 . 97K Incorporated quarter ended March 28 , 1997 . 97K Incorporated by reference March 28 , 1997 . 97K Incorporated by reference to the 's Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 26 , 1997 ( the `` year ended September 26 , 1997 ( the `` 1997 Form , 1997 ( the `` 1997 Form 10-K `` ) . ( the `` 1997 Form 10-K `` ) . 98/1Q Incorporated Form 10-K `` ) . 98/1Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended December for the quarter ended December 26 , 1997 . 98/2Q Incorporated quarter ended December 26 , 1997 . 98/2Q Incorporated by reference December 26 , 1997 . 98/2Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended March for the quarter ended March 27 , 1998 . 99K Incorporated quarter ended March 27 , 1998 . 99K Incorporated by reference March 27 , 1998 . 99K Incorporated by reference to the 's Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 25 , 1999 ( the `` year ended September 25 , 1999 ( the `` 1999 Form , 1999 ( the `` 1999 Form 10-K `` ) . ( the `` 1999 Form 10-K `` ) . 00/3Q Incorporated Form 10-K `` ) . 00/3Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended July for the quarter ended July 1 , 2000 . 02/3Q Incorporated quarter ended July 1 , 2000 . 02/3Q Incorporated by reference July 1 , 2000 . 02/3Q Incorporated by reference to the 's Quarterly Report on Form 10-Q for the quarter ended June for the quarter ended June 29 , 2002 . 02K Incorporated quarter ended June 29 , 2002 . 02K Incorporated by reference June 29 , 2002 . 02K Incorporated by reference to Page Incorporated by reference to Page 102 of this Annual Report on this Annual Report on Form 10-K for the fiscal year ended the fiscal year ended September 28 , 2002 ( the `` year ended September 28 , 2002 ( the `` 2002 Form , 2002 ( the `` 2002 Form 10-K `` ) . ( the `` 2002 Form 10-K `` ) . 101 SIGNATURES Form 10-K `` ) . 101 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly thereunto duly authorized , this 19th day of December 2002 . this 19th day of December 2002 . APPLE COMPUTER , INC. this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) December 19 , 2002 /s/ FRED D. Officer ) December 19 , 2002 /s/ FRED D. ANDERSON FRED Principal Financial Officer ) December 19 , 2002 /s/ WILLIAM V. Officer ) December 19 , 2002 /s/ WILLIAM V. CAMPBELL WILLIAM WILLIAM V. CAMPBELL Director December 19 , 2002 /s/ MILLARD S. CAMPBELL Director December 19 , 2002 /s/ MILLARD S. DREXLER MILLARD MILLARD S. DREXLER Director December 19 , 2002 /s/ ARTHUR D. DREXLER Director December 19 , 2002 /s/ ARTHUR D. LEVINSON ARTHUR ARTHUR D. LEVINSON Director December 19 , 2002 /s/ JEROME B. LEVINSON Director December 19 , 2002 /s/ JEROME B. YORK JEROME JEROME B. YORK Director December 19 , 2002 102 I , YORK Director December 19 , 2002 102 I , Steven P. Director December 19 , 2002 102 I , Steven P. Jobs Jobs , certify that : 1 . I have reviewed this this annual report on Form 10-K of Apple Computer , Inc. Apple Computer , Inc. ; 2 . Based on my knowledge by this annual report ; 3 . Based on my knowledge in this annual report ; 4 . The registrant 's other defined in Exchange Act Rules 13a-14 and 15d-14 ) for the Exchange Act Rules 13a-14 and 15d-14 ) for the registrant and a of a date within 90 day prior to the filing of the Evaluation Date ; 5 . The registrant 's other 's internal control ; and 6 . The registrant 's other and material weakness . December 19 , 2002 By : /s/ weakness . December 19 , 2002 By : /s/ STEVEN P. P. Jobs Chief Executive Officer 103 I , Fred D. Anderson Anderson , certify that : 1 . I have reviewed this this annual report on Form 10-K of Apple Computer , Inc. Apple Computer , Inc. ; 2 . Based on my knowledge by this annual report ; 3 . Based on my knowledge in this annual report ; 4 . The registrant 's other defined in Exchange Act Rules 13a-14 and 15d-14 ) for the Exchange Act Rules 13a-14 and 15d-14 ) for the registrant and a of a date within 90 day prior to the filing of the Evaluation Date ; 5 . The registrant 's other 's internal control ; and 6 . The registrant 's other and material weakness . December 19 , 2002 By : /s/ weakness . December 19 , 2002 By : /s/ FRED D. President and Chief Financial Officer 104 QuickLinks PART I Item 1. 104 QuickLinks PART I Item 1. Business Item 2 . Properties I Item 1. Business Item 2 . Properties Item 3 . Item 2 . Properties Item 3 . Legal Proceedings Item 4 3 . Legal Proceedings Item 4 . Submission of Matters to Security Holders PART II Item 5 . Market for the Registrant and Related Shareholder Matters Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Disclosures About Market Risk Disclosures About Market Risk Item 8 . Financial Statements and Supplementary TO CONSOLIDATED FINANCIAL STATEMENTS Item 9 . Changes in and Disagreements INDEPENDENT AUDITORS PART III Item 10 . Directors and Executive Officers Officers of the Registrant Item 11 . Executive Compensation SUMMARY COMPENSATION FISCAL YEAR-END OPTION VALUES Item 12 . Security Ownership of Certain Nominees and Executive Officers Item 13 . Certain Relationships and Related Relationships and Related Transactions Item 14 . Controls and Procedures PART and Procedures PART IV Item 15 . Exhibits SIGNATURES \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-03-041604/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-03-041604/full-submission.txt new file mode 100644 index 0000000..92d66da --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-03-041604/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 27 , 2003 OR o TRANSITION year ended September 27 , 2003 OR o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 0-10030 APPLE COMPUTER , INC. ( of incorporation or organization ) 942404110 ( I.R.S . Employer Identification Employer Identification No . ) 1 Infinite Loop Cupertino , California of principal executive office ) 95014 ( Zip Code ) Registrant including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. o Indicate by check mark ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 29 , 2003 , wa approximately a of March 29 , 2003 , wa approximately $ 4,479,669,616 2003 , wa approximately $ 4,479,669,616 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 367,734,960 share of Common Stock Issued and Outstanding a of December 5 , 2003 PART I The a of December 5 , 2003 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , information presented in this Form 10-K is based on the Company of it retail initiative in 2001 , the Company ha opened , the Company ha opened 65 retail store in the United United States through fiscal year 2003 and during the first quarter during the first quarter of 2004 opened 9 additional store , first quarter of 2004 opened 9 additional store , including it it store at high traffic 1 location in quality shopping mall . Education For more than 25 year , the Company ha the first quarter of fiscal 2004 , opened it first international Australia and Asia except for 2 Japan , and the Company in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Segment in Part II , Item 8 on this Form 10-K in Item 8 on this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and and featuring up to a 1 GHz front-side bus and the ability to address up to 8GB of memory , the current current Power Mac G5 utilizes 64-bit processing technology for advanced 64-bit 64-bit processing technology for advanced 64-bit computation , while running existing computation , while running existing 32-bit application natively . The PowerPC . The system also support 54 Mbps AirPort Extreme® wireless networking Power Mac G5 in August 2003 , the Company 's Power line during most of fiscal 2003 featured PowerPC G4 processor in with a single or dual 1.25 Ghz processor configuration . Xserve® large database . In February 2003 , the Company upgraded it the Company upgraded it Xserve 1U rack server with more powerful capacity , and a FireWire 800 interface . At the same system that hold up to 14 hot-swapable drive module capable of capable of holding up to 3.5 terabyte of data . Xserve Xserve RAID provides RAID level 5 throughput that support affordable real-time high definition ( HD ) 1080i video editing . PowerBook ® advanced consumer user . The 17-inch PowerBook G4 feature a 17-inch 17-inch PowerBook G4 feature a 17-inch wide-format active-matrix display , is aluminum alloy enclosure , is 1-inch thick , and weighs a and weighs a little a 6.9 pound . The 17-inch PowerBook a 6.9 pound . The 17-inch PowerBook G4 also feature built-in built-in support for AirPort Extreme 54 Mbps 802.11g wireless networking , for AirPort Extreme 54 Mbps 802.11g wireless networking , new high-speed networking , new high-speed FireWire 800 , a backlit keyboard with Bluetooth equipped peripheral . The 12-inch PowerBook G4 feature a 12-inch 12-inch PowerBook G4 feature a 12-inch , active-matrix display housed in aluminum alloy enclosure weighing approximately 4.6 pound . The 12-inch PowerBook approximately 4.6 pound . The 12-inch PowerBook G4 feature a high-speed wireless networking , and battery 3 life of up to five single charge . In September 2003 , the Company introduced a the Company introduced a new 15-inch PowerBook G4 , which feature G4 , which feature a 15.2-inch widescreen display , and is design weighing a little a 5.6 pound . This product line two PowerBook model , the 12-inch and 17-inch PowerBook G4s that model , the 12-inch and 17-inch PowerBook G4s that were introduced that were introduced in January 2003 and updated in September 2003. 2003 and updated in September 2003. iMac® The iMac line of design that incorporates an adjustable 15-inch or 17-inch thin film transistor incorporates an adjustable 15-inch or 17-inch thin film transistor ( TFT ultra-compact base . In November 2003 , a new 20-inch iMac November 2003 , a new 20-inch iMac model wa released . PowerPC G4 processor , fast 333 MHz DDR memory , NVIDIA NVIDIA graphic , two FireWire 400 and three high-speed USB 2.0 400 and three high-speed USB 2.0 port . The iMac also wireless communication with support for 54 Mbps AirPort Extreme and Bluetooth processor , a high resolution 17-inch flat cathode ray tube ( iBooks , upgraded in October 2003 , feature PowerPC G4 processor G4 processor and either a 12-inch or 14-inch display . These and either a 12-inch or 14-inch display . These system offer , and certain model include 256 MB of DDR memory and and weighs a little a 4.9 pound . Peripheral Products The with storage capacity of either 10GB , 20GB , or 40GB capacity of either 10GB , 20GB , or 40GB ; the 10GB , 20GB , or 40GB ; the latter holding up the latter holding up to 10,000 song . In addition to feature solid-state interface and the 20GB and 40GB model include the interface and the 20GB and 40GB model include the iPod Dock , and Services . `` 4 iSight™ The Company introduced the AV software application in June 2003 . Together they enable high-quality full-motion video at up to 30 frame per second . iSight panel display , including the 23-inch Cinema HD Display® , 20-inch 23-inch Cinema HD Display® , 20-inch Apple Cinema Display® and the Apple Cinema Display® and the 17-inch Apple Studio Display® , produce . Operating System Software During 2001 , the Company introduced the , Mac OS X version 10.1 . At it introduction , introduction of the Macintosh in 1984 . Mac OS X feature X includes Apple 's Quartz™® 2D graphic engine ( based on support , OpenGL for enhanced 3D graphic and gaming , and new functionality . In January 2002 , the Company made Mac Macintosh system . In August 2002 , the Company introduced Mac introduced Mac OS X version 10.2 ( code named `` Jaguar foundation with enhancement including FreeBSD 4.4 and GCC 3.1-based developer tool including FreeBSD 4.4 and GCC 3.1-based developer tool . In October developer tool . In October 2003 , the Company released Mac released Mac OS X version 10.3 ( code named `` Panther X. Panther incorporates more than 150 new feature including a completely of a home directory with 128-bit AES encryption ; iChat AV use on Windows-based network . 5 Server Software and Server Solutions wa initially introduced in May 2001 , followed by Mac OS Mac OS X Server version 10.2 ( code named `` Jaguar that wa released in August 2002 . Jaguar Server delivers high-performance email access . In October 2003 , the Company began shipping Mac OS X Server version 10.3 `` Panther Server . `` multiple server ; Open Directory 2 for hosting scalable LDAP directory Kerberos authentication service ; Samba 3 for providing login and home audio . Final Cut Pro 4 , released in June 2003 4 , released in June 2003 , introduced RT Extreme , and HD video , and 32-bit floating point ( per channel processing . Final Cut Pro 4 also includes three completely new directly from Final Cut Pro 4 's timeline . Version 4.1 4 's timeline . Version 4.1 of Final Cut Pro wa Pro wa released in November 2003 and included optimization for the X Panther . Shake ® 3 , an upgrade of the , wa announced in April 2003 and released in June 2003 2003 and released in June 2003 . Shake 3 includes new in June 2003 . Shake 3 includes new Mac OS X Macintosh computer for enhanced performance 6 and efficiency . Shake 3 6 and efficiency . Shake 3 also includes new visual effect during the fourth quarter of 2002 . Emagic 's most popular also offer MIDI timing with 960 PPQN and sends and receives . DVD Studio Pro ® 2 wa announced in April 2003 2 wa announced in April 2003 and released in August 2003 2003 and released in August 2003 . It is a completely Application Software Introduced in January 2003 , iLife™ is the Company an iPod . In July 2002 , the Company introduced iTunes , the Company introduced iTunes 3 , featuring Smart Playlists , volume playback . In April 2003 , the Company launched iTunes , the Company launched iTunes 4 , which integrated the Company Services . `` In October 2003 , the Company launched iTunes easily design and order custom- 7 printed , linen-covered hard bound Express , introduced in January 2003 , is based on Apple presentation software introduced in January 2003 that give user the ability sharing of presentation . AppleWorks® 6.2 is an integrated productivity application iTunes Music Store™ In April 2003 , the Company launched the , and download music for 99 cent per song or , in most case , $ 9.99 per album . The iTunes content of the entire music 8 store to locate song by also listen to a free 30-second preview of any song in user became available in October 2003 . New feature of the Store . Safari™ In June 2003 , the Company introduced Safari , the Company introduced Safari 1.0 , the Company 's new version of QuickTime , QuickTime 6 , feature support for the support for the open-standard MPEG 4 format . QuickTime 6 includes MPEG 4 format . QuickTime 6 includes the new Instant-On Streaming . In addition , QuickTime 6 running on Mac OS X OS X now support JPEG 2000 , the next generation JPEG than ever before . QuickTime 6 also includes AAC , the POP or web-based access , 100MB of iDisk Internet storage , Extreme , introduced in January 2003 , is the Company 's based on the new ultra-fast 802.11g standard . With speed up . With speed up to 54 Mbps , AirPort Extreme delivers data rate of today 's 802.11b based product , yet is compatible with the million of 802.11b Wi-Fi device around the world Base Stations can serve up 9 to 50 Macintosh and Windows can serve up 9 to 50 Macintosh and Windows user simultaneously of data at up to 1 Mbps within a range of within a range of approximately 30 foot . The Company 's in Mac OS X version 10.1.4 or higher . The Company network , including Ethernet or 802.11-based wireless network like the Company also referred to a IEEE 1394 , which is a high-speed mobility between classroom ; and 10 three special Digital Media Studio to education customer . In 2001 , Apple acquired PowerSchool Inc. education customer in the late 1970s . Over 18 % of the late 1970s . Over 18 % of the Company 's Company 's net sale in 2003 were to education customer in customer accounted for more than 10 % of net sale in % of net sale in 2003 , 2002 or 2001 . net sale in 2003 , 2002 or 2001 . The Company in 2003 , 2002 or 2001 . The Company also sell online store totaled approximately $ 2.9 billion , $ 2.4 billion $ 2.9 billion , $ 2.4 billion , and $ 2.0 2.4 billion , and $ 2.0 billion for fiscal year 2003 2.0 billion for fiscal year 2003 , 2002 and 2001 , for fiscal year 2003 , 2002 and 2001 , respectively . year 2003 , 2002 and 2001 , respectively . Competition The advantage over competing platform . 11 The Company 's initial success requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company belief and development , totaled $ 471 million , $ 446 million $ 471 million , $ 446 million , and $ 430 446 million , and $ 430 million in 2003 , 2002 and $ 430 million in 2003 , 2002 , and 2001 430 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . 12 Patents and 2001 , respectively . 12 Patents , Trademarks , Copyrights largest geographic marketplace . Approximately 58 % of the Company 's 's net sale in fiscal 2003 came from sale to customer in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and The Company also offer a 90-day basic warranty for Apple software backlog often increase in anticipation 13 of or immediately following new . Employees As of September 27 , 2003 , Apple and As of September 27 , 2003 , Apple and it subsidiary and it subsidiary worldwide had 10,912 employee and an additional 2,654 10,912 employee and an additional 2,654 temporary employee and contractor . Available Information Beginning in fiscal 2003 , the Company 's Annual 's Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are 's Public Reference Room at 450 Fifth Street , NW , NW , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 2 . Properties The Company 's Ireland . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company leased approximately , the Company leased approximately 3.2 million square foot of space in the United States includes 538,000 square foot of retail space lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 15 year and often for term of 5 to 15 year and often contain multi-year Ireland , which ha approximately 352,000 square foot . The Company The Company also owns a 752,000 square-foot facility in Sacramento , and Cork facility also house 14 customer support call center . addition , the Company owns 930,000 square foot of facility located owns additional facility totaling approximately 169,000 square foot . The Company for it product . Item 3 . Legal Proceedings The Company settled certain legal matter in 2003 , which did not individually filed this action on September 5 , 2003 in the United action on September 5 , 2003 in the United States District and other defendant of patent 5,754,961 relating to a `` Method filed this action on July 4 , 2003 in the High action on July 4 , 2003 in the High Court of the Company ha breached a 1991 agreement which resolved earlier trademark filed a motion on October 13 , 2003 , challenging jurisdiction motion on October 13 , 2003 , challenging jurisdiction in the in the U.K. On October 8 , 2003 , the Company U.K. On October 8 , 2003 , the Company filed a Company ha not breached the 1991 agreement . Articulate Systems , filed this action in March 1996 in the United States District filed for bankruptcy in November 2000 and is being liquidated a been inactive since approximately May 2002 , pending the resolution of H bankruptcy and liquidation . 15 Bancroft v. Apple Computer , purported class action on January 30 , 2002 in Los Angeles action on January 30 , 2002 in Los Angeles Superior Court system , specifically relating to 2D hardware acceleration , QuickTime movie QuickTime movie hardware acceleration , 3D graphic performance and DVD movie granted preliminary approval on September 2 , 2003 . The final approval on September 2 , 2003 . The final approval hearing hearing is set for January 26 , 2004 . Settlement of set for January 26 , 2004 . Settlement of the matter filed this action on September 5 , 2001 in the United action on September 5 , 2001 in the United States District settled this case in August 2003 and the matter is concluded purported class action on September 22 , 2003 in Los Angeles action on September 22 , 2003 in Los Angeles Superior Court violation of Civil Code Section 17200 ( `` Unfair Competition `` filed this action on April 25 , 2003 in the United action on April 25 , 2003 in the United States District infringement of two patent , 4,975,950 and 5,121,345 , related to two patent , 4,975,950 and 5,121,345 , related to a `` County Superior Court on February 4 , 2003 alleging that the Court on February 4 , 2003 alleging that the Company and Company wa served on February 10 , 2003 . Apple filed served on February 10 , 2003 . Apple filed a response filed a response on March 12 , 2003 . The party response on March 12 , 2003 . The party are in filed this action on June 6 , 2001 in United States action on June 6 , 2001 in United States District Court patent infringement relating to IEEE 1394 technology , also known a or complies with the IEEE 1394 standard violates the patent . are seeking to amend the 16 pleading to assert a counterclaim Ethernet standard . In February 2002 , the Federal Circuit affirmed heard the motion on October 4 , 2002 and granted summary motion on October 4 , 2002 and granted summary judgment in of the defendant on February 11 , 2003 . Dynacore ha defendant on February 11 , 2003 . Dynacore ha appealed the Federal Circuit Court on January 5 , 2004 . Hawaii Structural Court on January 5 , 2004 . Hawaii Structural Iron Workers et al Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the their amended complaint on January 31 , 2003 , and on complaint on January 31 , 2003 , and on March 17 2003 , and on March 17 , 2003 , the Company and on March 17 , 2003 , the Company filed a Company 's motion on July 11 , 2003 and dismissed Plaintiff motion on July 11 , 2003 and dismissed Plaintiff 's claim claim with prejudice on August 12 , 2003 . Plaintiffs have prejudice on August 12 , 2003 . Plaintiffs have appealed the County Superior Court on December 5 , 2002 , alleging that Court on December 5 , 2002 , alleging that the Company Company wa served on December 11 , 2002 and is continuing served on December 11 , 2002 and is continuing it investigation filed a motion on October 29 , 2003 to disqualify Plaintiff motion on October 29 , 2003 to disqualify Plaintiff 's counsel set for trial on February 23 , 2004 . MacTech v. trial on February 23 , 2004 . MacTech v. Apple Computer in discovery . On October 1 , 2003 , one of . On October 1 , 2003 , one of the resellers injunction is scheduled for December 18 , 2003 . Palmieri v. scheduled for December 18 , 2003 . Palmieri v. Apple Computer purported class action on September 5 , 2003 in Los Angeles action on September 5 , 2003 in Los Angeles Superior Court violation of Civil Code Section 17200 ( Unfair Competition ) and dead pixel in the LCD 17 screen . Plaintiffs amended their additional defect in the new 15 `` PowerBook , introduced in , introduced in September , 2003 , which purportedly cause `` filed this case on August 27 , 2003 in United States case on August 27 , 2003 in United States District Court six other defendant on May 8 , 2002 in the Central defendant on May 8 , 2002 in the Central District of 's portable computer manufactured since 1996 infringe these eight patent . set for trial on March 16 , 2004 . Item 4 trial on March 16 , 2004 . Item 4 . Submission 16 , 2004 . Item 4 . Submission of Matters to 's fiscal year ended September 27 , 2003 . 18 PART year ended September 27 , 2003 . 18 PART II Item September 27 , 2003 . 18 PART II Item 5 . . 18 PART II Item 5 . Market for the Registrant APCD . As of December 5 , 2003 , there were As of December 5 , 2003 , there were 29,015 shareholder , 2003 , there were 29,015 shareholder of record . On of record . On June 21 , 2000 , the Company . On June 21 , 2000 , the Company effected a of record a of May 19 , 2000 . All share a of May 19 , 2000 . All share price and cash dividend in either fiscal 2003 or 2002 . The Company in either fiscal 2003 or 2002 . The Company anticipates that Second Quarter First Quarter Fiscal 2003 price range per common share range per common share $ 23.10- $ 19.06 $ 19.29- $ common share $ 23.10- $ 19.06 $ 19.29- $ 13.12 $ $ 23.10- $ 19.06 $ 19.29- $ 13.12 $ 15.27- $ $ 19.06 $ 19.29- $ 13.12 $ 15.27- $ 13.80 $ $ 19.29- $ 13.12 $ 15.27- $ 13.80 $ 17.22- $ $ 13.12 $ 15.27- $ 13.80 $ 17.22- $ 13.59 Fiscal $ 15.27- $ 13.80 $ 17.22- $ 13.59 Fiscal 2002 price $ 13.80 $ 17.22- $ 13.59 Fiscal 2002 price range per $ 17.22- $ 13.59 Fiscal 2002 price range per common share range per common share $ 18.74- $ 13.99 $ 26.11- $ common share $ 18.74- $ 13.99 $ 26.11- $ 16.55 $ $ 18.74- $ 13.99 $ 26.11- $ 16.55 $ 25.45- $ $ 13.99 $ 26.11- $ 16.55 $ 25.45- $ 20.78 $ $ 26.11- $ 16.55 $ 25.45- $ 20.78 $ 23.76- $ $ 16.55 $ 25.45- $ 20.78 $ 23.76- $ 14.98 Item $ 25.45- $ 20.78 $ 23.76- $ 14.98 Item 6 . $ 20.78 $ 23.76- $ 14.98 Item 6 . Selected Financial $ 23.76- $ 14.98 Item 6 . Selected Financial Data The read in conjunction with Item 7 , `` Management 's Discussion note thereto included in Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 27 , 2003 ( In million year ended September 27 , 2003 ( In million , except and per share amount ) 2003 2002 2001 2000 1999 Net per share amount ) 2003 2002 2001 2000 1999 Net sale share amount ) 2003 2002 2001 2000 1999 Net sale $ amount ) 2003 2002 2001 2000 1999 Net sale $ 6,207 ) 2003 2002 2001 2000 1999 Net sale $ 6,207 $ 2000 1999 Net sale $ 6,207 $ 5,742 $ 5,363 $ Net sale $ 6,207 $ 5,742 $ 5,363 $ 7,983 $ $ 6,207 $ 5,742 $ 5,363 $ 7,983 $ 6,134 Net $ 5,742 $ 5,363 $ 7,983 $ 6,134 Net income ( $ 5,363 $ 7,983 $ 6,134 Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) $ 69 $ 65 $ ( 25 ) $ 786 $ 601 $ ( 25 ) $ 786 $ 601 Earnings ( loss 25 ) $ 786 $ 601 Earnings ( loss ) per common share : Basic $ 0.19 $ 0.18 $ ( 0.07 : Basic $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.42 $ 2.10 $ ( 0.07 ) $ 2.42 $ 2.10 Diluted $ 0.19 0.07 ) $ 2.42 $ 2.10 Diluted $ 0.19 $ 0.18 2.42 $ 2.10 Diluted $ 0.19 $ 0.18 $ ( 0.07 2.10 Diluted $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.18 $ 1.81 $ ( 0.07 ) $ 2.18 $ 1.81 Cash dividend declared 0.07 ) $ 2.18 $ 1.81 Cash dividend declared per common in thousand ) : Basic 360,631 355,022 345,613 324,568 286,314 Diluted thousand ) : Basic 360,631 355,022 345,613 324,568 286,314 Diluted 363,466 ) : Basic 360,631 355,022 345,613 324,568 286,314 Diluted 363,466 361,785 : Basic 360,631 355,022 345,613 324,568 286,314 Diluted 363,466 361,785 345,613 Basic 360,631 355,022 345,613 324,568 286,314 Diluted 363,466 361,785 345,613 360,324 355,022 345,613 324,568 286,314 Diluted 363,466 361,785 345,613 360,324 348,328 Cash 345,613 324,568 286,314 Diluted 363,466 361,785 345,613 360,324 348,328 Cash , 324,568 286,314 Diluted 363,466 361,785 345,613 360,324 348,328 Cash , cash 286,314 Diluted 363,466 361,785 345,613 360,324 348,328 Cash , cash equivalent Diluted 363,466 361,785 345,613 360,324 348,328 Cash , cash equivalent , , and short-term investment $ 4,566 $ 4,337 $ 4,336 $ short-term investment $ 4,566 $ 4,337 $ 4,336 $ 4,027 $ $ 4,566 $ 4,337 $ 4,336 $ 4,027 $ 3,226 Total $ 4,337 $ 4,336 $ 4,027 $ 3,226 Total asset $ $ 4,336 $ 4,027 $ 3,226 Total asset $ 6,815 $ $ 3,226 Total asset $ 6,815 $ 6,298 $ 6,021 $ Total asset $ 6,815 $ 6,298 $ 6,021 $ 6,803 $ $ 6,815 $ 6,298 $ 6,021 $ 6,803 $ 5,161 Long-term $ 6,298 $ 6,021 $ 6,803 $ 5,161 Long-term debt ( $ 6,021 $ 6,803 $ 5,161 Long-term debt ( including current including current maturity ) $ 304 $ 316 $ 317 $ maturity ) $ 304 $ 316 $ 317 $ 300 $ $ 304 $ 316 $ 317 $ 300 $ 300 Total $ 316 $ 317 $ 300 $ 300 Total liability $ $ 317 $ 300 $ 300 Total liability $ 2,592 $ $ 300 Total liability $ 2,592 $ 2,203 $ 2,101 $ Total liability $ 2,592 $ 2,203 $ 2,101 $ 2,696 $ $ 2,592 $ 2,203 $ 2,101 $ 2,696 $ 2,057 Shareholders $ 2,203 $ 2,101 $ 2,696 $ 2,057 Shareholders ' equity $ 2,101 $ 2,696 $ 2,057 Shareholders ' equity $ 4,223 2,057 Shareholders ' equity $ 4,223 $ 4,095 $ 3,920 $ ' equity $ 4,223 $ 4,095 $ 3,920 $ 4,107 $ $ 4,223 $ 4,095 $ 3,920 $ 4,107 $ 3,104 Net $ 4,095 $ 3,920 $ 4,107 $ 3,104 Net gain before $ 3,920 $ 4,107 $ 3,104 Net gain before tax related and equity investment of $ 10 million , $ 75 million $ 10 million , $ 75 million , $ 367 million $ 75 million , $ 367 million , and $ 230 367 million , and $ 230 million were recognized in 2003 230 million were recognized in 2003 , 2001 , 2000 , were recognized in 2003 , 2001 , 2000 , and 1999 in 2003 , 2001 , 2000 , and 1999 , respectively 2001 , 2000 , and 1999 , respectively . A net and equity investment of $ 42 million wa 19 recognized in of $ 42 million wa 19 recognized in 2002 . In million wa 19 recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 26 million , $ 30 million $ 26 million , $ 30 million , $ 8 million $ 30 million , $ 8 million , and $ 27 8 million , and $ 27 million were recognized in 2003 27 million were recognized in 2003 , 2002 , 2000 , were recognized in 2003 , 2002 , 2000 , and 1999 in 2003 , 2002 , 2000 , and 1999 , respectively 2002 , 2000 , and 1999 , respectively . During 2000 1999 , respectively . During 2000 , the Company recognized the the Company of approximately $ 90 million . In 2002 , $ 90 million . In 2002 , of the original $ , of the original $ 90 million accrual , $ 2 90 million accrual , $ 2 million remained unspent and wa and wa reversed . In 2003 , settlement of the Company in a gain of $ 6 million . Favorable cumulative-effect type cumulative-effect type adjustment of $ 1 million and $ 12 million $ 1 million and $ 12 million were recognized in 2003 12 million were recognized in 2003 and 2001 , respectively . were recognized in 2003 and 2001 , respectively . Item 7 2001 , respectively . Item 7 . Management 's Discussion and other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and accompanying note . Note 1 of the Notes to Consolidated Consolidated Financial Statements in Item 8 of this Form 10-K describe Item 8 of this Form 10-K describe the significant accounting policy ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial because the Company legally retains 20 a portion of the risk the Company may be required 21 to record additional write-down which requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is ( SFAS ) No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . As a result , and requires that : ( 1 ) goodwill be allocated to which it relates ; ( 2 ) the Company estimate the goodwill relates ; and ( 3 ) the Company determine the 's estimate a of September 27 , 2003 , there wa a of September 27 , 2003 , there wa no impairment liability and adjusts the amount 22 a necessary . If actual accordance with SFAS No . 109 , Accounting for Income Taxes operation and financial position . 23 Net Sales Net sale and sale in thousand ) : 2003 Change 2002 Change 2001 Net thousand ) : 2003 Change 2002 Change 2001 Net Sales by : 2003 Change 2002 Change 2001 Net Sales by Operating Segment sale ( a ) $ 3,181 2 % $ 3,131 3 ( a ) $ 3,181 2 % $ 3,131 3 % $ 3,181 2 % $ 3,131 3 % $ 3,037 Europe 3,181 2 % $ 3,131 3 % $ 3,037 Europe net $ 3,131 3 % $ 3,037 Europe net sale 1,309 5 $ 3,037 Europe net sale 1,309 5 % 1,251 0 % 3,037 Europe net sale 1,309 5 % 1,251 0 % 1,249 net sale 1,309 5 % 1,251 0 % 1,249 Japan net sale 1,309 5 % 1,251 0 % 1,249 Japan net sale 5 % 1,251 0 % 1,249 Japan net sale 698 ( % 1,249 Japan net sale 698 ( 2 ) % 710 Japan net sale 698 ( 2 ) % 710 0 % 698 ( 2 ) % 710 0 % 713 Retail net ( 2 ) % 710 0 % 713 Retail net sale ) % 710 0 % 713 Retail net sale 621 119 % 713 Retail net sale 621 119 % 283 — 19 713 Retail net sale 621 119 % 283 — 19 Other net sale 621 119 % 283 — 19 Other segment net 621 119 % 283 — 19 Other segment net sale ( net sale ( a ) 398 8 % 367 6 % sale ( a ) 398 8 % 367 6 % 345 a ) 398 8 % 367 6 % 345 Total net ) 398 8 % 367 6 % 345 Total net sale 8 % 367 6 % 345 Total net sale $ 6,207 345 Total net sale $ 6,207 8 % $ 5,742 7 Total net sale $ 6,207 8 % $ 5,742 7 % $ 6,207 8 % $ 5,742 7 % $ 5,363 Unit 6,207 8 % $ 5,742 7 % $ 5,363 Unit Sales $ 5,742 7 % $ 5,363 Unit Sales by Operating Segment : Americas Macintosh unit sale 1,620 ( 6 ) % 1,728 Macintosh unit sale 1,620 ( 6 ) % 1,728 ( 2 1,620 ( 6 ) % 1,728 ( 2 ) % 1,768 6 ) % 1,728 ( 2 ) % 1,768 Europe Macintosh 1,728 ( 2 ) % 1,768 Europe Macintosh unit sale 684 1,768 Europe Macintosh unit sale 684 ( 5 ) % 722 Macintosh unit sale 684 ( 5 ) % 722 ( 4 684 ( 5 ) % 722 ( 4 ) % 754 5 ) % 722 ( 4 ) % 754 Japan Macintosh 722 ( 4 ) % 754 Japan Macintosh unit sale 339 754 Japan Macintosh unit sale 339 ( 12 ) % 386 Macintosh unit sale 339 ( 12 ) % 386 ( 2 339 ( 12 ) % 386 ( 2 ) % 394 12 ) % 386 ( 2 ) % 394 Retail Macintosh 386 ( 2 ) % 394 Retail Macintosh unit sale 187 394 Retail Macintosh unit sale 187 103 % 92 — 7 Retail Macintosh unit sale 187 103 % 92 — 7 Other unit sale 187 103 % 92 — 7 Other segment Macintosh 187 103 % 92 — 7 Other segment Macintosh unit sale unit sale ( a ) 182 5 % 173 5 % sale ( a ) 182 5 % 173 5 % 164 a ) 182 5 % 173 5 % 164 Total Macintosh ) 182 5 % 173 5 % 164 Total Macintosh unit 5 % 173 5 % 164 Total Macintosh unit sale 3,012 164 Total Macintosh unit sale 3,012 ( 3 ) % 3,101 Macintosh unit sale 3,012 ( 3 ) % 3,101 0 % 3,012 ( 3 ) % 3,101 0 % 3,087 Net Sales ( 3 ) % 3,101 0 % 3,087 Net Sales by ) % 3,101 0 % 3,087 Net Sales by Product : sale ( b ) $ 1,237 ( 10 ) % $ b ) $ 1,237 ( 10 ) % $ 1,380 ( ( 10 ) % $ 1,380 ( 17 ) % $ ) % $ 1,380 ( 17 ) % $ 1,664 PowerBook ( 17 ) % $ 1,664 PowerBook net sale 1,299 56 $ 1,664 PowerBook net sale 1,299 56 % 831 2 % 1,664 PowerBook net sale 1,299 56 % 831 2 % 813 net sale 1,299 56 % 831 2 % 813 iMac net sale 1,299 56 % 831 2 % 813 iMac net sale 56 % 831 2 % 813 iMac net sale 1,238 ( % 813 iMac net sale 1,238 ( 15 ) % 1,448 iMac net sale 1,238 ( 15 ) % 1,448 30 % 1,238 ( 15 ) % 1,448 30 % 1,117 iBook net ( 15 ) % 1,448 30 % 1,117 iBook net sale ) % 1,448 30 % 1,117 iBook net sale 717 ( % 1,117 iBook net sale 717 ( 18 ) % 875 iBook net sale 717 ( 18 ) % 875 8 % 717 ( 18 ) % 875 8 % 809 Total Macintosh ( 18 ) % 875 8 % 809 Total Macintosh net ) % 875 8 % 809 Total Macintosh net sale 4,491 809 Total Macintosh net sale 4,491 ( 1 ) % 4,534 Macintosh net sale 4,491 ( 1 ) % 4,534 3 % 4,491 ( 1 ) % 4,534 3 % 4,403 Peripherals and ( 1 ) % 4,534 3 % 4,403 Peripherals and other ) % 4,534 3 % 4,403 Peripherals and other hardware ( other hardware ( c ) 1,058 57 % 674 74 % hardware ( c ) 1,058 57 % 674 74 % 387 c ) 1,058 57 % 674 74 % 387 Software ( ) 1,058 57 % 674 74 % 387 Software ( d 57 % 674 74 % 387 Software ( d ) 362 387 Software ( d ) 362 18 % 307 33 % Software ( d ) 362 18 % 307 33 % 230 d ) 362 18 % 307 33 % 230 Service and ) 362 18 % 307 33 % 230 Service and other 18 % 307 33 % 230 Service and other sale 296 230 Service and other sale 296 30 % 227 ( 34 Service and other sale 296 30 % 227 ( 34 ) other sale 296 30 % 227 ( 34 ) % 343 296 30 % 227 ( 34 ) % 343 Total net 227 ( 34 ) % 343 Total net sale $ 6,207 343 Total net sale $ 6,207 8 % $ 5,742 7 Total net sale $ 6,207 8 % $ 5,742 7 % $ 6,207 8 % $ 5,742 7 % $ 5,363 Unit 6,207 8 % $ 5,742 7 % $ 5,363 Unit Sales $ 5,742 7 % $ 5,363 Unit Sales by Product : unit sale ( b ) 667 ( 13 ) % 766 ( b ) 667 ( 13 ) % 766 ( 18 667 ( 13 ) % 766 ( 18 ) % 937 13 ) % 766 ( 18 ) % 937 PowerBook unit 766 ( 18 ) % 937 PowerBook unit sale 604 69 % 937 PowerBook unit sale 604 69 % 357 3 % 937 PowerBook unit sale 604 69 % 357 3 % 346 unit sale 604 69 % 357 3 % 346 iMac unit sale 604 69 % 357 3 % 346 iMac unit sale 69 % 357 3 % 346 iMac unit sale 1,094 ( % 346 iMac unit sale 1,094 ( 16 ) % 1,301 iMac unit sale 1,094 ( 16 ) % 1,301 8 % 1,094 ( 16 ) % 1,301 8 % 1,208 iBook unit ( 16 ) % 1,301 8 % 1,208 iBook unit sale ) % 1,301 8 % 1,208 iBook unit sale 647 ( % 1,208 iBook unit sale 647 ( 4 ) % 677 iBook unit sale 647 ( 4 ) % 677 14 % 647 ( 4 ) % 677 14 % 596 Total Macintosh ( 4 ) % 677 14 % 596 Total Macintosh unit ) % 677 14 % 596 Total Macintosh unit sale 3,012 596 Total Macintosh unit sale 3,012 ( 3 ) % 3,101 Macintosh unit sale 3,012 ( 3 ) % 3,101 0 % 3,012 ( 3 ) % 3,101 0 % 3,087 Net sale ( 3 ) % 3,101 0 % 3,087 Net sale per ) % 3,101 0 % 3,087 Net sale per Macintosh unit sold ( e ) $ 1,491 2 % $ 1,462 3 ( e ) $ 1,491 2 % $ 1,462 3 % $ 1,491 2 % $ 1,462 3 % $ 1,426 iPod 1,491 2 % $ 1,462 3 % $ 1,426 iPod unit $ 1,462 3 % $ 1,426 iPod unit sale 939 146 $ 1,426 iPod unit sale 939 146 % 381 — — 1,426 iPod unit sale 939 146 % 381 — — iPod unit sale 939 146 % 381 — — iPod net sale — iPod net sale $ 345 141 % $ 143 — iPod net sale $ 345 141 % $ 143 — — $ 345 141 % $ 143 — — Notes : ( . Certain net sale in 2002 and 2001 related to recent net sale in 2002 and 2001 related to recent acquisition and sale to conform to the 2003 presentation . 24 ( b to the 2003 presentation . 24 ( b ) Power Macintosh unit sale . Fiscal Year 2003 versus 2002 Net sale increased . Fiscal Year 2003 versus 2002 Net sale increased $ 465 2002 Net sale increased $ 465 million or 8 % during increased $ 465 million or 8 % during 2003 compared to million or 8 % during 2003 compared to 2002 while Macintosh % during 2003 compared to 2002 while Macintosh unit sale declined while Macintosh unit sale declined 3 % year-over-year to approximately 3 3 % year-over-year to approximately 3 million unit in 2003 . approximately 3 million unit in 2003 . Several factor have contributed favorably to net sale during 2003 including : • The Retail net sale grew to $ 621 million during 2003 from $ to $ 621 million during 2003 from $ 283 million in million during 2003 from $ 283 million in 2002 , an from $ 283 million in 2002 , an increase of 119 2002 , an increase of 119 % . While the Company and other hardware rose $ 384 million or 57 % during rose $ 384 million or 57 % during 2003 compared 2002 million or 57 % during 2003 compared 2002 , which follows 57 % during 2003 compared 2002 , which follows a $ , which follows a $ 287 million or 74 % increase a $ 287 million or 74 % increase in 2002 a or 74 % increase in 2002 a compared to 2001 . in 2002 a compared to 2001 . The current year increase primarily driven by the $ 202 million , or 141 % $ 202 million , or 141 % , year-over-year increase in iPod net sale to $ 345 million . All of the sale and unit sale during 2003. iPod sale during 2003 were during 2003. iPod sale during 2003 were favorably affected by the Macintosh operating system in April 2003 . The Company 's iPod expanded this distribution network during 2003 , which ha contributed to in iPod unit sale of 146 % . In addition to peripheral and other hardware during 2003 also reflects an overall increase Macintosh unit sale were down 3 % in 2003 , unit were down 3 % in 2003 , unit sale of the strong primarily due to the 69 % or 247,000 unit increase to the 69 % or 247,000 unit increase in PowerBook unit , slightly offset by a 4 % or 30,000 unit decrease by a 4 % or 30,000 unit decrease in iBook unit PowerBook net sale of $ 468 million or 56 % is of $ 468 million or 56 % is due primarily to of the Company 's new 12-inch , 15-inch and 17-inch model Company 's new 12-inch , 15-inch and 17-inch model that were new 12-inch , 15-inch and 17-inch model that were introduced during model that were introduced during 2003 . The decline in iBook iBook consumer portable sale during 2003 is primarily due to a unit . Portable system represented 42 % of all Macintosh system all Macintosh system sold in 2003 versus 33 % in 2002 system sold in 2003 versus 33 % in 2002 and 31 2003 versus 33 % in 2002 and 31 % in 2001 33 % in 2002 and 31 % in 2001 , which 2002 and 31 % in 2001 , which reflects an overall per Macintosh unit sold increased 2 % to $ 1,491 in increased 2 % to $ 1,491 in 2003 a a result % to $ 1,491 in 2003 a a result of various particularly with the Company 's 25 iBook consumer portable system . Power Macintosh system accounted for 42 % of total unit sale of total unit sale in 2003 versus 36 % in 2002 unit sale in 2003 versus 36 % in 2002 . • 2003 versus 36 % in 2002 . • Net sale of sale of software increased $ 55 million or 18 % during increased $ 55 million or 18 % during 2003 compared to million or 18 % during 2003 compared to the prior year sale of third-party software during 2003 wa particularly strong in the and other sale rose $ 69 million or 30 % during rose $ 69 million or 30 % during 2003 and result million or 30 % during 2003 and result from significant year-over-year Music Store introduced in April 2003 and increased net sale of Company 's net sale during 2003 were negatively impacted by the sale of desktop system fell 15 % during 2003 compared to system fell 15 % during 2003 compared to 2002. iMac system % during 2003 compared to 2002. iMac system unit sale declined iMac system unit sale declined 16 % from 2003 to 2002 sale declined 16 % from 2003 to 2002 resulting from a 16 % from 2003 to 2002 resulting from a shift in cycle by the end of 2003 and did not experience significant until the release of the 20-inch flat-panel iMac in November 2003 20-inch flat-panel iMac in November 2003 . • Unit sale of of Power Macintosh system fell 13 % during 2003 compared to system fell 13 % during 2003 compared to 2002 . For % during 2003 compared to 2002 . For the first nine the first nine month of 2003 compared to the same period to the same period in 2002 , unit sale of Power of Power Macintosh system decreased 24 % , which is representative in the fourth quarter of 2003 with unit sale increasing 26 2003 with unit sale increasing 26 % during the quarter a the Company introduced in June 2003 and began shipping at the at the end of fiscal 2003 . The decline in Power , including Adobe 's PhotoShop 7 and QuarkXPress 6 ; however 's PhotoShop 7 and QuarkXPress 6 ; however , there is it U.S. education channel during 2003 . Net sale and unit sale in U.S. education during 2003 were down 4 % and education during 2003 were down 4 % and 6 % , were down 4 % and 6 % , respectively , a respectively , a compared to 2002 . This decline wa due Portable system accounted for approximately 43 % of total unit sale in the education channel during 2003 , a compared to approximately , a compared to approximately 34 % in 2002 . 26 to approximately 34 % in 2002 . 26 The Company 's 34 % in 2002 . 26 The Company 's one-to-one ( The Company 's one-to-one ( 1:1 ) learning solution are a ha experienced significant competition in 1:1 learning solution and , accordingly below level experienced in fiscal 2000 and earlier . Difficult global upgrade cycle . Fiscal Year 2002 versus 2001 Net sale increased . Fiscal Year 2002 versus 2001 Net sale increased $ 379 2001 Net sale increased $ 379 million or 7 % during increased $ 379 million or 7 % during 2002 compared to million or 7 % during 2002 compared to 2001 , while % during 2002 compared to 2001 , while Macintosh unit sale relatively flat year-over-year at approximately 3.1 million unit . On a segment , which operated during 2002 exclusively in the United States Japanese market remained sluggish throughout 2002 . The Company 's net Company 's net sale in 2002 were positively influenced by a and other source rose $ 248 million or 26 % in rose $ 248 million or 26 % in 2002 versus 2001 million or 26 % in 2002 versus 2001 . This increase 26 % in 2002 versus 2001 . This increase wa driven by several factor including a 28 % increase in combined third-party Apple-branded software sale ; $ 143 million in net sale of in the first half of 2002 ; a 9 % increase half of 2002 ; a 9 % increase in the sale computer accessory ; and a 14 % increase in service revenue Macintosh portable system grew by 92,000 unit or 10 % in grew by 92,000 unit or 10 % in 2002 reflecting a unit or 10 % in 2002 reflecting a general trend in towards portable system . During 2002 , portable Macintosh system represented , portable Macintosh system represented 33 % of total system sale of total system sale versus 31 % in 2001 and 20 sale versus 31 % in 2001 and 20 % in 2000 31 % in 2001 and 20 % in 2000 . Growth 2001 and 20 % in 2000 . Growth in this area . iBook unit sale increased 14 % in 2002 and 9 sale increased 14 % in 2002 and 9 % in 2001 14 % in 2002 and 9 % in 2001 . • 2002 and 9 % in 2001 . • Third , the 's Retail segment grew from 8 store at the end of store at the end of 2001 to 40 store at the the end of 2001 to 40 store at the end of store at the end of 2002 . The Retail segment 's net sale grew from $ 19 million in 2001 to $ from $ 19 million in 2001 to $ 283 million in million in 2001 to $ 283 million in 2002 . While to $ 283 million in 2002 . While the Retail segment Segment Operating Performance . `` 27 • Fourth , the Company 's average unit pricing increased 3 % during 2002 a a pricing increased 3 % during 2002 a a result of various per Macintosh unit sold during 2002 of $ 1,462 per unit sold during 2002 of $ 1,462 per unit reflected the shift new iMac design introduced during 2002 . The impact of these on comparative Macintosh system during 2002 for most of the Company comparison of net sale in 2002 versus 2001 must consider the net sale in 2002 versus 2001 must consider the effect of during the first quarter of 2001 . This wa attributable to factor at the beginning of 2001 , including continued deterioration in cost the Company approximately $ 138 million , and a plan during the first quarter of 2001 that reduced substantially the level in channel inventory of approximately 300,000 unit during that quarter . Company 's net sale in 2002 were negatively impacted by several of Power Macintosh system fell 18 % during 2002 a compared system fell 18 % during 2002 a compared to 2001 . during 2002 a compared to 2001 . This followed a 35 2001 . This followed a 35 % decline in Power Macintosh Power Macintosh unit sale in 2001 from 2000 . The Company unit sale in 2001 from 2000 . The Company believed that introduction of Adobe 's PhotoShop 7 during 2002 . Additionally , Adobe 's PhotoShop 7 during 2002 . Additionally , many professional in the fourth quarter of 2002 . Others may have delayed increase in net sale during 2002 in the Americas , the sale in this channel fell 15 % in 2002 and 4 channel fell 15 % in 2002 and 4 % in 2001 15 % in 2002 and 4 % in 2001 . These 2002 and 4 % in 2001 . These decline were consistent The Retail segment currently operates 28 Apple-owned retail store in the in the first quarter of 2004 . Each reportable operating segment may be found in Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and in the Americas segment during 2003 increased $ 50 million or segment during 2003 increased $ 50 million or 2 % compared increased $ 50 million or 2 % compared to 2002 . or 2 % compared to 2002 . During 2003 and 2002 compared to 2002 . During 2003 and 2002 , the Americas 2002 . During 2003 and 2002 , the Americas segment represented the Americas segment represented approximately 51 % and 55 % , represented approximately 51 % and 55 % , respectively , of net sale and represented approximately 54 % and 56 % , represented approximately 54 % and 56 % , respectively , of software , and service during 2003 compared to 2002 due primarily service during 2003 compared to 2002 due primarily to higher sale the U.S. education channel during 2003 were down 4 % and channel during 2003 were down 4 % and 6 % , were down 4 % and 6 % , respectively , compared to the same period in 2002 . The Company belief this some of the decline during 2003 in net sale and unit U.S. , increased significantly during 2003 . Net sale for the for the Americas segment increased 3 % or $ 94 million increased 3 % or $ 94 million in 2002 compared to or $ 94 million in 2002 compared to 2001 . The million in 2002 compared to 2001 . The Americas segment wa in U.S. education sale in 2002 of $ 215 million . sale in 2002 of $ 215 million . The Americas segment Americas segment also experienced a 17 % decline in Power Macintosh the substantial decline experienced in 2001 , rising a combined 31 2001 , rising a combined 31 % in 2002 . Sales a combined 31 % in 2002 . Sales of software , up in the Americas during 2002 . Growth in unit sale of consumer oriented system during 2002 in the Americas is somewhat in the first quarter of 2001 a discussed above . However in the U.S. More than 70 % of the Retail segment 's Macintosh unit sale during 2002 were for iMacs and iBooks sale in Europe increased $ 58 million or 5 % during increased $ 58 million or 5 % during 2003 a compared million or 5 % during 2003 a compared to 2002 while during 2003 a compared to 2002 while Macintosh unit sale declined Macintosh unit sale declined by 5 % during the same period iMac and iBook system in 2003 , partially offset by strong whose net sale increased by 48 % or $ 100 million by 48 % or $ 100 million from 2002 . Europe or $ 100 million from 2002 . Europe also realized increased in Europe remained weak throughout 2002 , and the overall demand that region remained flat during 2002 versus 2001 . Unit sale remained flat during 2002 versus 2001 . Unit sale in Europe Unit sale in Europe for 2002 reflect relatively stronger demand for iBook whose unit sale increased 27 % in 2002 , offset sale increased 27 % in 2002 , offset by decline in sale in Japan decreased $ 12 million or 2 % during decreased $ 12 million or 2 % during 2003 a compared million or 2 % during 2003 a compared to the same to the same period in 2002 , the weakest year-to-date performance . Japan 's Macintosh unit 29 sale were particularly weak in sale were particularly weak in 2003 , declining 12 % , weak in 2003 , declining 12 % , and were primarily in Japan remained flat during 2002 versus 2001 , with a remained flat during 2002 versus 2001 , with a slight decline decline in unit sale of 2 % . Consistent with the geographic operating segment , during 2002 Japan showed growth in unit 's iMac unit sale increased 85 % in 2002 . However sale increased 85 % in 2002 . However , in the in iMac unit shipment in 2002 versus 2001 wa primarily the unit shipment in 2002 versus 2001 wa primarily the result of in the first quarter of 2001 a discussed above . Additionally comparative basis generally worsened a 2002 progressed reflecting particularly poor economic . Retail The Company opened 25 new retail store during 2003 25 new retail store during 2003 , bringing the total number number of open store to 65 a of September 27 , to 65 a of September 27 , 2003 , which compare a of September 27 , 2003 , which compare to 40 2003 , which compare to 40 open store a of September open store a of September 28 , 2002 and 8 open a of September 28 , 2002 and 8 open store a September 28 , 2002 and 8 open store a of September open store a of September 29 , 2001 . During the a of September 29 , 2001 . During the first quarter the first quarter of fiscal 2004 , the Company opened 9 2004 , the Company opened 9 additional store including it first net sale grew to $ 621 million during 2003 from $ to $ 621 million during 2003 from $ 283 million in million during 2003 from $ 283 million in 2002 and from from $ 283 million in 2002 and from $ 19 million in 2002 and from $ 19 million in 2001 . The from $ 19 million in 2001 . The $ 338 million in 2001 . The $ 338 million or 119 % increase The $ 338 million or 119 % increase in net sale increase in net sale during 2003 reflects the impact from opening reflects the impact from opening 25 new store in 2003 , opening 25 new store in 2003 , the full year impact the full year impact of 2002 store opening , a well sale increased by approximately $ 170 million of which $ 108 170 million of which $ 108 million related to year-over-year increase experienced by the Company during 2003 . During 2003 , approximately Company during 2003 . During 2003 , approximately 45 % of . During 2003 , approximately 45 % of the Retail segment and service a compared to 28 % for the Company a . With an average of 54 store open during 2003 , of 54 store open during 2003 , the Retail segment achieved per store of approximately $ 11.5 million , a compared to a compared to approximately $ 10.2 million based on an average based on an average of 28 store open in 2002 . of 28 store open in 2002 . As measured by the from a loss of $ 22 million during 2002 to a of $ 22 million during 2002 to a loss of $ to a loss of $ 5 million during 2003 . This of $ 5 million during 2003 . This improvement is primarily it inception totaled approximately $ 290 million through the end of through the end of fiscal 2003 , $ 92 million of of fiscal 2003 , $ 92 million of which wa incurred of which wa incurred during 2003 . As of September 27 2003 . As of September 27 , 2003 , the Retail As of September 27 , 2003 , the Retail segment had the Retail segment had approximately 1,300 employee and had outstanding operating and related facility of $ 354 million . The Company would segment 's operating expense . 30 Gross Margin Gross margin for three fiscal year ended September 27 , 2003 are a follows year ended September 27 , 2003 are a follows ( in gross margin percentage ) : 2003 2002 2001 Net sale $ margin percentage ) : 2003 2002 2001 Net sale $ 6,207 percentage ) : 2003 2002 2001 Net sale $ 6,207 $ 2002 2001 Net sale $ 6,207 $ 5,742 $ 5,363 Cost Net sale $ 6,207 $ 5,742 $ 5,363 Cost of sale $ 6,207 $ 5,742 $ 5,363 Cost of sale 4,499 4,139 $ 5,363 Cost of sale 4,499 4,139 4,128 Gross margin $ 5,363 Cost of sale 4,499 4,139 4,128 Gross margin $ 1,708 Cost of sale 4,499 4,139 4,128 Gross margin $ 1,708 $ 4,139 4,128 Gross margin $ 1,708 $ 1,603 $ 1,235 Gross Gross margin $ 1,708 $ 1,603 $ 1,235 Gross margin percentage $ 1,708 $ 1,603 $ 1,235 Gross margin percentage 27.5 % $ 1,235 Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin percentage 27.5 % 27.9 % 23.0 % Gross margin decreased to % Gross margin decreased to 27.5 % of net sale in % of net sale in 2003 from 27.9 % of net net sale in 2003 from 27.9 % of net sale in % of net sale in 2002 . This decline in gross Company beginning in late fiscal 2002 a a result of continued first three fiscal quarter of 2003 , and increased air freight new Power Mac G5 and 15-inch PowerBook , both of which shipping in volume during September 2003 . This decline is also factor affecting gross margin during 2003 were partially offset by the remain under pressure throughout fiscal 2004 in light of weak economic G5 and other product during 2004 . The foregoing statement regarding 's expected gross margin during 2004 , general demand for personal . Gross margin increased to 27.9 % of net sale in % of net sale in 2002 from 23.0 % in 2001 net sale in 2002 from 23.0 % in 2001 . Gross 2002 from 23.0 % in 2001 . Gross margin in 2001 2001 . Gross margin in 2001 wa unusually low resulting from from negative gross margin of 2 % experienced in the first in the first quarter of 2001 . As a 31 percentage of 2001 . As a 31 percentage of net sale , gross margin declined during fiscal 2002 from 31 % in the declined during fiscal 2002 from 31 % in the first quarter the first quarter down to 26 % in the fourth quarter three fiscal year ended September 27 , 2003 are a follows year ended September 27 , 2003 are a follows ( in except for percentage ) : 2003 2002 2001 Research and development for percentage ) : 2003 2002 2001 Research and development $ percentage ) : 2003 2002 2001 Research and development $ 471 2001 Research and development $ 471 $ 446 $ 430 Percentage and development $ 471 $ 446 $ 430 Percentage of net $ 471 $ 446 $ 430 Percentage of net sale 8 430 Percentage of net sale 8 % 8 % 8 % of net sale 8 % 8 % 8 % Selling , sale 8 % 8 % 8 % Selling , general , , and administrative expense $ 1,212 $ 1,109 $ 1,138 Percentage administrative expense $ 1,212 $ 1,109 $ 1,138 Percentage of net $ 1,212 $ 1,109 $ 1,138 Percentage of net sale 20 1,138 Percentage of net sale 20 % 19 % 21 % of net sale 20 % 19 % 21 % Restructuring cost sale 20 % 19 % 21 % Restructuring cost $ 26 21 % Restructuring cost $ 26 $ 30 — Purchased in-process Restructuring cost $ 26 $ 30 — Purchased in-process research and research and development — $ 1 $ 11 Research and Development development — $ 1 $ 11 Research and Development ( R D expense amounted to approximately 8 % of total net sale of total net sale during 2003 , 2002 and 2001 , net sale during 2003 , 2002 and 2001 , up substantially during 2003 , 2002 and 2001 , up substantially from approximately , up substantially from approximately 5 % of total net sale net sale in fiscal year 2000 and recent earlier period . R & D expense increased 6 % or $ 25 million increased 6 % or $ 25 million to $ 471 million $ 25 million to $ 471 million in 2003 a compared to $ 471 million in 2003 a compared to 2002 , in 2003 a compared to 2002 , which follows a $ , which follows a $ 16 million increase in 2002 a $ 16 million increase in 2002 a compared to 2001 . in 2002 a compared to 2001 . The overall increase in development cost of approximately $ 14.7 million related to the development Mac OS X Panther in 2003 ; approximately $ 13.3 million in 2003 ; approximately $ 13.3 million associated with the development X Jaguar and approximately $ 6 million associated with the PowerSchool enterprise student information system in 2002 ; and approximately $ 5.4 2002 ; and approximately $ 5.4 million associated with the development of Mac OS X in 2001 . Further information related to in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial SG & A increased $ 103 million or 9 % during increased $ 103 million or 9 % during 2003 a compared million or 9 % during 2003 a compared to 2002 due during 2003 a compared to 2002 due primarily to the Company by saving resulting from the 2003 and 2002 restructuring activity described resulting from the 2003 and 2002 restructuring activity described below . SG & A decreased $ 29 million or 3 % during decreased $ 29 million or 3 % during 2002 a compared million or 3 % during 2002 a compared to 2001 . during 2002 a compared to 2001 . The decrease in SG in SG & A in 2002 wa primarily the result of Company 's restructuring action in 2002 and 2001 . The decrease restructuring action in 2002 and 2001 . The decrease were partially by higher sale expense in 2002 resulting from increased operating expense Company 's Retail segment . 32 Restructuring Actions During the second During the second quarter of 2003 , the Company 's management total restructuring charge of $ 2.8 million . The primary focus of severance cost of $ 2.4 million for termination of 93 2.4 million for termination of 93 employee , 92 of whom termination of 93 employee , 92 of whom were terminated prior prior to the end of 2003 at a cost of $ at a cost of $ 2.2 million . During the second During the second quarter of 2003 , an additional $ 400,000 2003 , an additional $ 400,000 wa accrued for asset write-off quarterly operating expense by $ 1.5 million . During the first During the first quarter of 2003 , the Company 's management a total cost of $ 24 million that resulted in the at the end of fiscal 2002 , and termination of various result in the elimination of 260 position worldwide , all but eliminated by the end of 2003 . The Company estimate these quarterly operating expense by $ 6 million . During fiscal 2002 6 million . During fiscal 2002 , the Company recorded total total restructuring charge of $ 30 million related to action intended operating expense of approximately $ 10 million . Of the $ million . Of the $ 30 million restructuring charge for fiscal million restructuring charge for fiscal 2002 , $ 6 million wa for fiscal 2002 , $ 6 million wa incurred in the in the fourth quarter of 2002 related to action designed to in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million . The shift in in the amount of $ 4.5 million . The remaining charge . The remaining charge in 2002 of $ 24 million wa charge in 2002 of $ 24 million wa incurred in the in the first quarter of 2002 and resulted in the elimination in the elimination of approximately 425 position worldwide , at a at a cost of $ 8 million . Positions were eliminated contract cancellation charge totaled $ 12 million , and charge for for asset impairment totaled $ 4 million . During the first During the first quarter of 2003 , the Company reversed the remaining unused accrual of $ 600,000 . Purchased In-Process Research and During the fourth quarter of 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 551,000 of which wa allocated to product under development were between 43 % -83 % complete , during the Company 's fiscal 2003 at a cost of approximately a cost of approximately $ 415,000 . The remaining effort , , which were completed in 2003 , included finalizing user interface IPR & D wa determined 33 using the income approach , using a discount rate of 25 % . In May 2001 25 % . In May 2001 , the Company acquired PowerSchool total purchase consideration of $ 66.1 million , $ 10.8 million $ 66.1 million , $ 10.8 million wa allocated to IPR product under development wa approximately 50 % complete , and it wa expected that the remaining 50 % would be completed during during the Company 's fiscal 2002 at a cost of approximately a cost of approximately $ 9.25 million . The remaining effort , which were completed during 2002 , included completion of coding using a discount rate of 25 % . Other Income and three fiscal year ended September 27 , 2003 are a follows year ended September 27 , 2003 are a follows ( in ( in million ) : 2003 2002 2001 Gains ( loss in million ) : 2003 2002 2001 Gains ( loss ) million ) : 2003 2002 2001 Gains ( loss ) on non-current investment , net $ 10 $ ( 42 ) $ net $ 10 $ ( 42 ) $ 88 Unrealized loss $ ( 42 ) $ 88 Unrealized loss on convertible security — $ — $ ( 13 ) Interest income $ 69 13 ) Interest income $ 69 $ 118 $ 218 Interest Interest income $ 69 $ 118 $ 218 Interest expense ( $ 69 $ 118 $ 218 Interest expense ( 8 ) $ 218 Interest expense ( 8 ) ( 11 ) ( expense ( 8 ) ( 11 ) ( 16 ) Gains ) ( 11 ) ( 16 ) Gains on sale of short term investment , net 21 7 — Other income ( term investment , net 21 7 — Other income ( expense expense ) , net ( 5 ) ( 2 ) 15 net ( 5 ) ( 2 ) 15 Gain on forward 5 ) ( 2 ) 15 Gain on forward purchase agreement Gain on forward purchase agreement 6 — — Interest and other other income , net $ 83 $ 112 $ 217 Total , net $ 83 $ 112 $ 217 Total other income $ 83 $ 112 $ 217 Total other income and expense other income and expense $ 93 $ 70 $ 292 Gains and expense $ 93 $ 70 $ 292 Gains and Losses $ 93 $ 70 $ 292 Gains and Losses on Non-current in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 2 of Notes this Form 10-K at Note 2 of Notes to Consolidated Financial Consolidated Financial Statements . During 2003 , the Company sold 1,875,000 2003 , the Company sold 1,875,000 share of Akamai stock for net proceeds of approximately $ 9 million , and a gain before tax of approximately $ 8 million . Additionally , the investment in ARM stock , 278,000 share , for net proceeds net proceeds of approximately $ 295,000 , and a 34 gain $ 295,000 , and a 34 gain before tax of $ gain before tax of $ 270,000 , and sold it remaining investment in EarthLink stock , 6,540,000 share , for net proceeds net proceeds of approximately $ 37 million , and a gain gain before tax of $ 2 million . The fair value in Akamai a of September 27 , 2003 , wa approximately a of September 27 , 2003 , wa approximately $ 5 2003 , wa approximately $ 5 million . During 2002 , $ 5 million . During 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to in EarthLink , a $ 6 million charge to earnings to Akamai , and a $ 15 million charge to earnings to investment . These loss in 2002 were partially offset by the offset by the sale of 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 , the sale of 250,000 223,000 , the sale of 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 , and the sale of and the sale of approximately 4.7 million share of ARM stock gain before tax of $ 21 million . During 2001 , $ 21 million . During 2001 , the Company sold a sold a total of approximately 1 million share of Akamai stock for net proceeds of $ 39 million and recorded a gain gain before tax of $ 36 million , and sold a sold a total of approximately 29.8 million share of ARM stock for net proceeds of $ 176 million and recorded a gain gain before tax of $ 174 million . These gain during million . These gain during 2001 were partially offset by a partially offset by a $ 114 million charge to earnings that in EarthLink and an $ 8 million charge that reflected an on Convertible Securities On October 1 , 2000 , the Company Securities On October 1 , 2000 , the Company adopted Statement ( SFAS ) No . 133 , Accounting for Derivative Instruments Activities . SFAS No . 133 established accounting and reporting standard definition . SFAS No . 133 required the Company to adjust during the first quarter of 2001 , the before tax effect unrealized loss of approximately $ 13 million . Interest and Other and other income decreased $ 29 million or 26 % to decreased $ 29 million or 26 % to $ 83 million or 26 % to $ 83 million during 2003 . The to $ 83 million during 2003 . The decrease is primarily and short-term investment fell to 1.89 % in 2003 compared to fell to 1.89 % in 2003 compared to 2.85 % in % in 2003 compared to 2.85 % in 2002 . The compared to 2.85 % in 2002 . The decrease is offset by the increase of $ 14 million from the gain on and the increase of $ 6 million from the gain on during the fourth quarter of 2003 . Net interest and other and other income wa $ 112 million in fiscal 2002 , $ 112 million in fiscal 2002 , compared to $ 217 2002 , compared to $ 217 million in fiscal 2001 . $ 217 million in fiscal 2001 . This $ 105 million fiscal 2001 . This $ 105 million or 48 % decrease This $ 105 million or 48 % decrease wa primarily the and short-term investment fell to 2.85 % in 2002 compared to fell to 2.85 % in 2002 compared to 5.38 % in % in 2002 compared to 5.38 % in 2001 . Provision compared to 5.38 % in 2001 . Provision for Income Taxes 's effective tax rate for 2003 wa 26 % compared to tax rate for 2003 wa 26 % compared to the higher provided . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had deferred and tax credit of $ 452 million before being offset against sheet . As of September 27 , 2003 , a valuation As of September 27 , 2003 , a valuation allowance of a valuation allowance of $ 30 million wa 35 recorded against of $ 30 million wa 35 recorded against the deferred tax valuation allowance . On April 10 , 2003 , the Internal . On April 10 , 2003 , the Internal Revenue Service tax return for the year 1998 through 2000 , and the for the year 1998 through 2000 , and the Company ha issue for year prior to 1998 have been resolved . Management Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of $ 16.64 per share . The Company forward purchase agreement in August 2003 . The settlement resulted in additional gain of approximately $ 6 million , which is included Asset Retirement Obligations On September 29 , 2002 , the Company Obligations On September 29 , 2002 , the Company adopted SFAS Company adopted SFAS No . 143 , Accounting for Asset Retirement tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect adjustment to net income during 2003 of approximately $ 2 million during 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied Derivatives The adoption of SFAS 133 during 2001 resulted in a adoption of SFAS 133 during 2001 resulted in a favorable cumulative-effect type adjustment of approximately $ 12 million , net of a tax effect of approximately $ 5 million . Further information related adoption of SFAS Nos . 133 , 143 and 150 and SFAS Nos . 133 , 143 and 150 and the resulting . 133 , 143 and 150 and the resulting cumulative accounting in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial APB ) Opinion No . 25 , 36 Accounting for Stock Opinion No . 25 , 36 Accounting for Stock Issued to follow APB Opinion No . 25 because , a further discussed in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of the this Form 10-K at Note 1 of the Notes to Consolidated for under SFAS No . 123 , Accounting for Stock-Based Compensation Under APB Opinion No . 25 , when the exercise price The FASB decided on April 22 , 2003 to require all decided on April 22 , 2003 to require all company to first quarter of calendar year 2004 an exposure draft of a shareholder 's meeting on April 24 , 2003 , shareholder approved meeting on April 24 , 2003 , shareholder approved a proposal in the Company 's Form 10-Q for the period ended March for the period ended March 29 , 2003 , the Company period ended March 29 , 2003 , the Company had decided Recent Accounting Pronouncements In January 2003 , the FASB issued Interpretation FASB issued Interpretation No . 46 ( FIN 46 ) , No . 46 ( FIN 46 ) , Consolidation of Variable Variable Interest Entities . FIN 46 clarifies the application of Accounting Accounting Research Bulletin No . 51 and applied immediately to any interest entity created after January 31 , 2003 and to variable created after January 31 , 2003 and to variable interest entity or acquired prior to February 1 , 2003 , the provision prior to February 1 , 2003 , the provision of FIN , the provision of FIN 46 must be applied for the annual period beginning after December 15 , 2003 . The adoption beginning after December 15 , 2003 . The adoption of the of the provision of FIN 46 related to variable interest created variable interest created after January 31 , 2003 did not have created after January 31 , 2003 did not have a material evaluate the provision of FIN 46 , and doe not believe operation or financial position . 37 In May 2003 , the position . 37 In May 2003 , the FASB 's Emerging on EITF Issue No . 00-21 , Revenue Arrangements with Multiple . EITF Issue No . 00-21 provides guidance on how to of EITF Issue No . 00-21 apply to revenue transaction entered fiscal period beginning after June 15 , 2003 . Additionally , beginning after June 15 , 2003 . Additionally , in August . Additionally , in August 2003 , the EITF reached consensus on EITF Issue No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 , `` Software Revenue Recognition . EITF Issue No . 03-5 provides guidance on determining whether within the scope of SOP 97-2 , and accordingly , whether with EITF Issue No . 00-21 or SOP 97-2 . The No . 00-21 or SOP 97-2 . The Company currently applies requirement of SOP No . 97-2 when accounting for all multiple either EITF Issue Nos . 00-21 or 03-5 will have a Issue Nos . 00-21 or 03-5 will have a significant impact dollar in million ) : 2003 2002 2001 Cash , cash in million ) : 2003 2002 2001 Cash , cash equivalent million ) : 2003 2002 2001 Cash , cash equivalent , , and short-term investment $ 4,566 $ 4,337 $ 4,336 Accounts short-term investment $ 4,566 $ 4,337 $ 4,336 Accounts receivable , $ 4,566 $ 4,337 $ 4,336 Accounts receivable , net $ Accounts receivable , net $ 766 $ 565 $ 466 Inventory , net $ 766 $ 565 $ 466 Inventory $ 56 $ 766 $ 565 $ 466 Inventory $ 56 $ 45 565 $ 466 Inventory $ 56 $ 45 $ 11 Working 466 Inventory $ 56 $ 45 $ 11 Working capital $ $ 56 $ 45 $ 11 Working capital $ 3,530 $ $ 11 Working capital $ 3,530 $ 3,730 $ 3,625 Days Working capital $ 3,530 $ 3,730 $ 3,625 Days sale in $ 3,530 $ 3,730 $ 3,625 Days sale in account receivable DSO ) ( a ) 41 36 29 Days of supply ) ( a ) 41 36 29 Days of supply in ( a ) 41 36 29 Days of supply in inventory in inventory ( b ) 4 4 1 Days payable outstanding inventory ( b ) 4 4 1 Days payable outstanding ( ( b ) 4 4 1 Days payable outstanding ( DPO DPO ) ( c ) 82 77 73 Annual operating cash ) ( c ) 82 77 73 Annual operating cash flow ( c ) 82 77 73 Annual operating cash flow $ Annual operating cash flow $ 289 $ 89 $ 185 ( cash flow $ 289 $ 89 $ 185 ( a ) $ 289 $ 89 $ 185 ( a ) DSO is inventory . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company 's cash short-term investment portfolio totaled $ 4.566 billion , an increase of , an increase of $ 229 million from the end of from the end of fiscal 2002 . The Company 's short-term lower market interest rate during 2003 , the Company ha elected increase . Accordingly , during 2003 the Company increased it holding and short-term investment increased in 2003 , the Company 's working 's working capital at September 27 , 2003 decreased by $ capital at September 27 , 2003 decreased by $ 200 million , 2003 decreased by $ 200 million a compared to the compared to the end of 38 fiscal 2002 due primarily to the end of 38 fiscal 2002 due primarily to the current it scheduled maturity in February 2004 . The primary source of and cash equivalent in fiscal 2003 were $ 289 million in in fiscal 2003 were $ 289 million in cash generated by by operating activity and $ 53 million in proceeds from the , partially offset by $ 164 million utilized for capital expenditure for capital expenditure and $ 26 million for the repurchase of existing operation over the next 12 month . Debt The Company in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note that were that were originally issued in 1994 . The note , which semiannually , were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note , , along with approximately $ 4 million of unamortized deferred gain , are due in February 2004 and therefore have been classified current debt a of September 27 , 2003 . The Company a of September 27 , 2003 . The Company currently anticipates total capital expenditure were $ 164 million during fiscal 2003 , $ 164 million during fiscal 2003 , $ 92 million of during fiscal 2003 , $ 92 million of which were for 's Retail segment and $ 72 million of which were primarily it will utilize approximately $ 160 million for capital expenditure during million for capital expenditure during 2004 , approximately $ 85 million during 2004 , approximately $ 85 million of which is expected Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 27 , 2003 . Off-Balance Sheet a of September 27 , 2003 . Off-Balance Sheet Arrangements The support to the Company . 39 Lease Commitments As of September Lease Commitments As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had total operating lease of approximately $ 600 million , $ 354 million $ 600 million , $ 354 million of which related to existing operating lease range from 1 to 12 year . Subsequent lease range from 1 to 12 year . Subsequent to September year . Subsequent to September 27 , 2003 , the Company Subsequent to September 27 , 2003 , the Company entered into future lease commitment totaling $ 64 million for period ranging from million for period ranging from 10 to 12 year . Purchase period ranging from 10 to 12 year . Purchase Commitments with typically cover period ranging from 1 to 3 month . The period ranging from 1 to 3 month . The Company also requirement for period ranging from 30 to 130 day . As period ranging from 30 to 130 day . As of September day . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had outstanding purchase commitment of approximately $ 848 million . Indemnifications The Company creating economic and political uncertainty 40 that may have a strong and third quarter of fiscal 2003 . Similar travel advisory were the second half of calendar 2000 for personal computing product . operating result and financial condition 41 are substantially dependent on it result of operation . During 2001 , the Company introduced a , Mac OS X version 10.1 . Other major upgrade include Mac OS X Jaguar in 2002 and most recently Mac OS OS X Panther in October 2003 . Inability of the Company Although the Company belief it 42 inventory and related provision are requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company 's operation and financial condition . 43 The Company relies on third-party significant expense to remedy . 44 The Company 's retail initiative and uncertainty . Through November 2003 , the Company ha opened , the Company ha opened 74 retail store including it first with lease term ranging from 5 to 15 year . The term ranging from 5 to 15 year . The Company could location have term ranging from 10 to 15 year with total term ranging from 10 to 15 year with total commitment per lease term ranging from $ 25 million to $ 50 million $ 25 million to $ 50 million . Closure or poor of Power Macintosh system fell 13 % during 2003 a compared system fell 13 % during 2003 a compared to 2002 and during 2003 a compared to 2002 and fell 18 % in compared to 2002 and fell 18 % in 2002 from 2001 and fell 18 % in 2002 from 2001 . Power Macintosh 18 % in 2002 from 2001 . Power Macintosh unit sale total Macintosh unit sale from 30 % in 2001 to 22 sale from 30 % in 2001 to 22 % in 2003 30 % in 2001 to 22 % in 2003 . The 2001 to 22 % in 2003 . The Company belief that Power Macintosh system fail to 45 partially or fully recover , faster Power Macintosh system utilizing 64-bit PowerPC G5 processor during 2003 64-bit PowerPC G5 processor during 2003 , there can be no in these market fell to 18 % of the Company 's 's total net sale in 2003 from 21 % and 26 net sale in 2003 from 21 % and 26 % in 2003 from 21 % and 26 % in 2002 and 2001 % and 26 % in 2002 and 2001 , respectively . 26 % in 2002 and 2001 , respectively . The drop respectively . The drop in 2003 reflects decline in both net sale in these market of 4 % and 6 % , market of 4 % and 6 % , respectively , in , respectively , in fiscal 2003 compared to 2002 . Additionally in fiscal 2003 compared to 2002 . Additionally , several competitor and will continue to pursue 1:1 learning solution in education . solution in education . These 1:1 solution and other strategic sale in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading `` Markets hereby incorporated by reference . 46 The Company 's business is in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading `` Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 2 this Form 10-K at Notes 1 and 2 of Notes to 10-K at Notes 1 and 2 of Notes to Consolidated Financial education customer that could influence 47 the decision of third-party software single application . In August 1997 , the Company and Microsoft of five year through August 2002 , and subject to certain it product subsequent to August 2002 . While the Company belief operation . In June of 2003 , Microsoft stated that it the Company 's introduction during 2003 of it own web browser matter is set forth in 48 Part I , Item 3 48 Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . In the opinion of in Part I , Item 3 of this Form 10-K or Item 3 of this Form 10-K or should several of these 's operating result and financial 49 condition could be materially adversely the likelihood of adverse outcome 50 resulting from these examination to share may become diluted . 51 Item 7A . Quantitative and become diluted . 51 Item 7A . Quantitative and Qualitative Disclosures Company adopted SFAS No . 133 a of October 1 , . 133 a of October 1 , 2000 . SFAS No a of October 1 , 2000 . SFAS No . 133 2000 . SFAS No . 133 established accounting and reporting standard application of SFAS No . 133 will significantly alter the Company the investment process . During 1994 , the Company issued $ , the Company issued $ 300 million aggregate principal amount of million aggregate principal amount of 6.5 % unsecured note in a The note were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note pay semiannually and mature on February 15 , 2004 . The Company mature on February 15 , 2004 . The Company 's exposure investment . As of September 27 , 2003 , approximately $ As of September 27 , 2003 , approximately $ 629 million , 2003 , approximately $ 629 million of the Company 's had underlying maturity ranging from 1 and 5 year . As maturity ranging from 1 and 5 year . As of September year . As of September 28 , 2002 , $ 1.087 As of September 28 , 2002 , $ 1.087 billion of 28 , 2002 , $ 1.087 billion of the Company 's investment had maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remainder all all had underlying maturity between 3 and 12 month . Due underlying maturity between 3 and 12 month . Due to liquidity recognized net gain of $ 21 million in 2003 and $ of $ 21 million in 2003 and $ 7 million in million in 2003 and $ 7 million in 2002 . 52 and $ 7 million in 2002 . 52 In order to 7 million in 2002 . 52 In order to provide a the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 27 , 2003 , a hypothetical a of September 27 , 2003 , a hypothetical 100 basis , 2003 , a hypothetical 100 basis point increase in interest would result in a $ 12.9 million decline in the fair portfolio . As of September 28 , 2002 , a similar As of September 28 , 2002 , a similar 100 basis , 2002 , a similar 100 basis point shift in the have resulted in a $ 37.7 million decline in fair value interest rate asset swap during 2003 or 2002 and had no asset swap during 2003 or 2002 and had no open interest rate asset swap at September 27 , 2003 . In prior swap at September 27 , 2003 . In prior year , converted the Company 's fixed-rate 10-year debt to floating-rate debt and market interest rate , during 2002 the Company entered into and realizing a gain of $ 6 million . During 2001 the $ 6 million . During 2001 the Company closed out all realizing a gain of $ 17 million . Both the gain . Both the gain in 2002 and 2001 were deferred , the gain in 2002 and 2001 were deferred , recognized in Monte Carlo simulation to generate 3000 random market price path . to the Company 's foreign 53 exchange portfolio due to adverse , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 7.5 million a of September 27 7.5 million a of September 27 , 2003 compared to a a of September 27 , 2003 compared to a maximum one-day maximum one-day loss of $ 3.8 million a of September 28 3.8 million a of September 28 , 2002 . Because the a of September 28 , 2002 . Because the Company us analysis performed a of September 27 , 2003 due to the a of September 27 , 2003 due to the inherent limitation actual exposure and position . 54 Item 8 . Financial Statements and position . 54 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 56 Consolidated Statements 2003 and September 28 , 2002 56 Consolidated Statements of Operations and September 28 , 2002 56 Consolidated Statements of Operations for three fiscal year ended September 27 , 2003 57 Consolidated Statements year ended September 27 , 2003 57 Consolidated Statements of Shareholders ended September 27 , 2003 57 Consolidated Statements of Shareholders ' three fiscal year ended September 27 , 2003 58 Consolidated Statements year ended September 27 , 2003 58 Consolidated Statements of Cash ended September 27 , 2003 58 Consolidated Statements of Cash Flows three fiscal year ended September 27 , 2003 59 Notes to year ended September 27 , 2003 59 Notes to Consolidated Financial ended September 27 , 2003 59 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 60 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 100 Report of Independent Auditors , Independent Auditors , KPMG LLP 102 All financial statement schedule have Statements and Notes thereto . 55 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 27 , 2003 September 28 , amount ) September 27 , 2003 September 28 , 2002 ASSETS September 27 , 2003 September 28 , 2002 ASSETS : Current , 2003 September 28 , 2002 ASSETS : Current asset : Cash and cash equivalent $ 3,396 $ 2,252 Short-term investment 1,170 cash equivalent $ 3,396 $ 2,252 Short-term investment 1,170 2,085 Accounts 3,396 $ 2,252 Short-term investment 1,170 2,085 Accounts receivable , le $ 2,252 Short-term investment 1,170 2,085 Accounts receivable , le allowance , le allowance of $ 49 and $ 51 , respectively of $ 49 and $ 51 , respectively 766 565 Inventories and $ 51 , respectively 766 565 Inventories 56 45 Deferred $ 51 , respectively 766 565 Inventories 56 45 Deferred tax , respectively 766 565 Inventories 56 45 Deferred tax asset 190 respectively 766 565 Inventories 56 45 Deferred tax asset 190 166 56 45 Deferred tax asset 190 166 Other current asset 309 45 Deferred tax asset 190 166 Other current asset 309 275 190 166 Other current asset 309 275 Total current asset 5,887 166 Other current asset 309 275 Total current asset 5,887 5,388 309 275 Total current asset 5,887 5,388 Property , plant , 275 Total current asset 5,887 5,388 Property , plant , and , and equipment , net 669 621 Goodwill 85 85 Acquired and equipment , net 669 621 Goodwill 85 85 Acquired intangible , net 669 621 Goodwill 85 85 Acquired intangible asset 24 net 669 621 Goodwill 85 85 Acquired intangible asset 24 34 85 85 Acquired intangible asset 24 34 Other asset 150 170 85 Acquired intangible asset 24 34 Other asset 150 170 Total asset 24 34 Other asset 150 170 Total asset $ 6,815 24 34 Other asset 150 170 Total asset $ 6,815 $ 150 170 Total asset $ 6,815 $ 6,298 LIABILITIES AND SHAREHOLDERS Total asset $ 6,815 $ 6,298 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 1,154 $ 911 Accrued expense 899 Accounts payable $ 1,154 $ 911 Accrued expense 899 747 Current 1,154 $ 911 Accrued expense 899 747 Current debt 304 — $ 911 Accrued expense 899 747 Current debt 304 — Total expense 899 747 Current debt 304 — Total current liability 2,357 304 — Total current liability 2,357 1,658 Long-term debt — 316 — Total current liability 2,357 1,658 Long-term debt — 316 Deferred 2,357 1,658 Long-term debt — 316 Deferred tax liability and other liability and other non-current liability 235 229 Total liability 2,592 2,203 and other non-current liability 235 229 Total liability 2,592 2,203 Commitments liability 235 229 Total liability 2,592 2,203 Commitments and contingency Shareholders 235 229 Total liability 2,592 2,203 Commitments and contingency Shareholders ' , no par value ; 900,000,000 share authorized ; 366,726,584 and ; 900,000,000 share authorized ; 366,726,584 and 358,958,989 share issued and share authorized ; 366,726,584 and 358,958,989 share issued and outstanding , issued and outstanding , respectively 1,926 1,826 Deferred stock compensation ( and outstanding , respectively 1,926 1,826 Deferred stock compensation ( 62 1,826 Deferred stock compensation ( 62 ) ( 7 ) Retained compensation ( 62 ) ( 7 ) Retained earnings 2,394 2,325 ( 7 ) Retained earnings 2,394 2,325 Accumulated other comprehensive income 7 ) Retained earnings 2,394 2,325 Accumulated other comprehensive income ( income ( loss ) ( 35 ) ( 49 ) Total ) ( 35 ) ( 49 ) Total shareholder ' equity ) Total shareholder ' equity 4,223 4,095 Total liability and shareholder Total shareholder ' equity 4,223 4,095 Total liability and shareholder ' and shareholder ' equity $ 6,815 $ 6,298 See accompanying note ' equity $ 6,815 $ 6,298 See accompanying note to consolidated to consolidated financial statement . 56 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 27 , 2003 2003 2002 2001 year ended September 27 , 2003 2003 2002 2001 Net sale ended September 27 , 2003 2003 2002 2001 Net sale $ September 27 , 2003 2003 2002 2001 Net sale $ 6,207 27 , 2003 2003 2002 2001 Net sale $ 6,207 $ 2002 2001 Net sale $ 6,207 $ 5,742 $ 5,363 Cost Net sale $ 6,207 $ 5,742 $ 5,363 Cost of sale $ 6,207 $ 5,742 $ 5,363 Cost of sale 4,499 4,139 $ 5,363 Cost of sale 4,499 4,139 4,128 Gross margin 1,708 5,363 Cost of sale 4,499 4,139 4,128 Gross margin 1,708 1,603 Cost of sale 4,499 4,139 4,128 Gross margin 1,708 1,603 1,235 4,499 4,139 4,128 Gross margin 1,708 1,603 1,235 Operating expense : 4,139 4,128 Gross margin 1,708 1,603 1,235 Operating expense : Research 4,128 Gross margin 1,708 1,603 1,235 Operating expense : Research and expense : Research and development 471 446 430 Selling , general : Research and development 471 446 430 Selling , general , Research and development 471 446 430 Selling , general , and , general , and administrative 1,212 1,109 1,138 Restructuring cost 26 general , and administrative 1,212 1,109 1,138 Restructuring cost 26 30 , and administrative 1,212 1,109 1,138 Restructuring cost 26 30 — 1,212 1,109 1,138 Restructuring cost 26 30 — Purchased in-process research 1,109 1,138 Restructuring cost 26 30 — Purchased in-process research and in-process research and development — 1 11 Total operating expense 1,709 research and development — 1 11 Total operating expense 1,709 1,586 1 11 Total operating expense 1,709 1,586 1,579 Operating income ( 11 Total operating expense 1,709 1,586 1,579 Operating income ( loss Total operating expense 1,709 1,586 1,579 Operating income ( loss ) income ( loss ) ( 1 ) 17 ( 344 ) loss ) ( 1 ) 17 ( 344 ) Other income ( 1 ) 17 ( 344 ) Other income and expense on non-current investment , net 10 ( 42 ) 88 Unrealized investment , net 10 ( 42 ) 88 Unrealized loss on net 10 ( 42 ) 88 Unrealized loss on convertible security convertible security — — ( 13 ) Interest and other income and other income , net 83 112 217 Total other income other income , net 83 112 217 Total other income and income , net 83 112 217 Total other income and expense Total other income and expense 93 70 292 Income ( loss other income and expense 93 70 292 Income ( loss ) income and expense 93 70 292 Income ( loss ) before benefit from ) income tax 92 87 ( 52 ) Provision from ) income tax 92 87 ( 52 ) Provision for income tax 92 87 ( 52 ) Provision for ( benefit benefit from ) income tax 24 22 ( 15 ) Income from ) income tax 24 22 ( 15 ) Income ( income tax 24 22 ( 15 ) Income ( loss ) loss ) before accounting change 68 65 ( 37 ) Cumulative ) before accounting change 68 65 ( 37 ) Cumulative effect accounting change 68 65 ( 37 ) Cumulative effect of accounting , net of income tax 1 — 12 Net income ( of income tax 1 — 12 Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) Earnings 69 $ 65 $ ( 25 ) Earnings ( loss ) accounting change : Basic $ 0.19 $ 0.18 $ ( 0.11 : Basic $ 0.19 $ 0.18 $ ( 0.11 ) Diluted 0.19 $ 0.18 $ ( 0.11 ) Diluted $ 0.19 $ ( 0.11 ) Diluted $ 0.19 $ 0.18 $ ( 0.11 ) Diluted $ 0.19 $ 0.18 $ ( 0.11 ) Earnings 0.19 $ 0.18 $ ( 0.11 ) Earnings ( loss ) common share : Basic $ 0.19 $ 0.18 $ ( 0.07 : Basic $ 0.19 $ 0.18 $ ( 0.07 ) Diluted 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Shares 0.19 $ 0.18 $ ( 0.07 ) Shares used in computing in thousand ) : Basic 360,631 355,022 345,613 Diluted 363,466 361,785 thousand ) : Basic 360,631 355,022 345,613 Diluted 363,466 361,785 345,613 ) : Basic 360,631 355,022 345,613 Diluted 363,466 361,785 345,613 See Basic 360,631 355,022 345,613 Diluted 363,466 361,785 345,613 See accompanying note 360,631 355,022 345,613 Diluted 363,466 361,785 345,613 See accompanying note to 355,022 345,613 Diluted 363,466 361,785 345,613 See accompanying note to consolidated to consolidated financial statement . 57 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ' Amount Balances a of September 30 , 2000 76 $ 76 a of September 30 , 2000 76 $ 76 335,677 $ of September 30 , 2000 76 $ 76 335,677 $ 1,502 30 , 2000 76 $ 76 335,677 $ 1,502 $ 2,285 , 2000 76 $ 76 335,677 $ 1,502 $ 2,285 $ 76 $ 76 335,677 $ 1,502 $ 2,285 $ — $ 76 335,677 $ 1,502 $ 2,285 $ — $ 244 $ $ 2,285 $ — $ 244 $ 4,107 Components of comprehensive $ — $ 244 $ 4,107 Components of comprehensive loss : — — — — ( 25 ) — — ( 25 25 ) — — ( 25 ) Change in foreign currency — — — — ( 3 ) ( 3 ) Change — ( 3 ) ( 3 ) Change in unrealized gain — — — — ( 267 ) ( 267 ) Change — ( 267 ) ( 267 ) Change in unrealized gain — — — — — 4 4 Total comprehensive loss ( — — — — 4 4 Total comprehensive loss ( 291 4 Total comprehensive loss ( 291 ) Issuance of common stock connection with acquisition — — 2,403 66 — ( 13 ) with acquisition — — 2,403 66 — ( 13 ) — — 2,403 66 — ( 13 ) — 53 Amortization of — ( 13 ) — 53 Amortization of deferred stock compensation — — — — — 2 — 2 Common stock issued — — — 2 — 2 Common stock issued under stock under stock plan — — 3,660 42 — — — 42 stock plan — — 3,660 42 — — — 42 Conversion 3,660 42 — — — 42 Conversion of Series A preferred Series A preferred stock ( 76 ) ( 76 ) 9,182 stock ( 76 ) ( 76 ) 9,182 76 — — 76 ) ( 76 ) 9,182 76 — — — — ) ( 76 ) 9,182 76 — — — — Tax stock option — — — 7 — — — 7 Balances — 7 — — — 7 Balances a of September 29 7 Balances a of September 29 , 2001 — $ — a of September 29 , 2001 — $ — 350,922 $ , 2001 — $ — 350,922 $ 1,693 $ 2,260 $ — $ — 350,922 $ 1,693 $ 2,260 $ ( 11 — 350,922 $ 1,693 $ 2,260 $ ( 11 ) $ 1,693 $ 2,260 $ ( 11 ) $ ( 22 ) ( 11 ) $ ( 22 ) $ 3,920 Components of $ ( 22 ) $ 3,920 Components of comprehensive income : income — — — — 65 — — 65 Change in — — 65 — — 65 Change in foreign currency translation — — — — — 5 5 Change in unrealized gain — — — — 5 5 Change in unrealized gain on — — — — ( 17 ) ( 17 ) Change — ( 17 ) ( 17 ) Change in unrealized gain — — — — ( 15 ) ( 15 ) Total — ( 15 ) ( 15 ) Total comprehensive income 38 15 ) Total comprehensive income 38 Amortization of deferred stock compensation — — — — — 4 — 4 Common stock issued — — — 4 — 4 Common stock issued under stock under stock plan — — 8,037 105 — — — 105 stock plan — — 8,037 105 — — — 105 Tax 8,037 105 — — — 105 Tax benefit related to stock stock option — — — 28 — — — 28 Balances — 28 — — — 28 Balances a of September 28 28 Balances a of September 28 , 2002 — $ — a of September 28 , 2002 — $ — 358,959 $ , 2002 — $ — 358,959 $ 1,826 $ 2,325 $ — $ — 358,959 $ 1,826 $ 2,325 $ ( 7 — 358,959 $ 1,826 $ 2,325 $ ( 7 ) $ 1,826 $ 2,325 $ ( 7 ) $ ( 49 ) ( 7 ) $ ( 49 ) $ 4,095 Components of $ ( 49 ) $ 4,095 Components of comprehensive income : income — — — — 69 — — 69 Change in — — 69 — — 69 Change in foreign currency translation — — — — — 31 31 Change in unrealized gain — — — — 31 31 Change in unrealized gain on — — — — ( 12 ) ( 12 ) Change — ( 12 ) ( 12 ) Change in unrealized gain — — — — ( 5 ) ( 5 ) Total — ( 5 ) ( 5 ) Total comprehensive income 83 5 ) Total comprehensive income 83 Amortization of deferred stock compensation — — — — — 15 — 15 Write-off of deferred — — — 15 — 15 Write-off of deferred stock compensation — — — — — 5 — 5 Common stock issued — — — 5 — 5 Common stock issued under stock under stock plan — — 9,299 128 — ( 75 ) stock plan — — 9,299 128 — ( 75 ) — — 9,299 128 — ( 75 ) — 53 Settlement of — ( 75 ) — 53 Settlement of forward purchase agreement purchase agreement — — ( 1,531 ) ( 35 ) — — ( 1,531 ) ( 35 ) — — — ( ) — — — ( 35 ) Tax benefit related to stock option — — — 7 — — — 7 Balances — 7 — — — 7 Balances a of September 27 7 Balances a of September 27 , 2003 — $ — a of September 27 , 2003 — $ — 366,727 $ , 2003 — $ — 366,727 $ 1,926 $ 2,394 $ — $ — 366,727 $ 1,926 $ 2,394 $ ( 62 — 366,727 $ 1,926 $ 2,394 $ ( 62 ) $ 1,926 $ 2,394 $ ( 62 ) $ ( 35 ) ( 62 ) $ ( 35 ) $ 4,223 See accompanying $ ( 35 ) $ 4,223 See accompanying note to consolidated to consolidated financial statement . 58 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 27 , 2003 2003 2002 2001 year ended September 27 , 2003 2003 2002 2001 Cash and ended September 27 , 2003 2003 2002 2001 Cash and cash September 27 , 2003 2003 2002 2001 Cash and cash equivalent 27 , 2003 2003 2002 2001 Cash and cash equivalent , beginning of the year $ 2,252 $ 2,310 $ 1,191 Operating the year $ 2,252 $ 2,310 $ 1,191 Operating Activities : $ 2,252 $ 2,310 $ 1,191 Operating Activities : Net income Net income ( loss ) 69 65 ( 25 ) Cumulative income ( loss ) 69 65 ( 25 ) Cumulative effect loss ) 69 65 ( 25 ) Cumulative effect of accounting , net of tax ( 1 ) — ( 12 ) ( 1 ) — ( 12 ) Adjustments to reconcile net Depreciation , amortization and accretion 113 114 100 Stock based compensation , amortization and accretion 113 114 100 Stock based compensation expense amortization and accretion 113 114 100 Stock based compensation expense 16 100 Stock based compensation expense 16 5 2 Non-cash restructuring 12 Stock based compensation expense 16 5 2 Non-cash restructuring 12 8 based compensation expense 16 5 2 Non-cash restructuring 12 8 — 16 5 2 Non-cash restructuring 12 8 — Benefit from deferred 5 2 Non-cash restructuring 12 8 — Benefit from deferred income from deferred income tax ( 11 ) ( 34 ) ( tax ( 11 ) ( 34 ) ( 36 ) Loss ) ( 34 ) ( 36 ) Loss on disposition of , plant , and equipment 2 7 9 Gains on sale plant , and equipment 2 7 9 Gains on sale of , and equipment 2 7 9 Gains on sale of short-term short-term investment , net ( 21 ) ( 7 ) — net ( 21 ) ( 7 ) — ( Gains ) non-current investment , net ( 10 ) 42 ( 88 ) , net ( 10 ) 42 ( 88 ) Gain on ( 10 ) 42 ( 88 ) Gain on forward purchase on forward purchase agreement ( 6 ) — — Unrealized loss on convertible security — — 13 Purchased in-process research and development in-process research and development — 1 11 Changes in operating asset research and development — 1 11 Changes in operating asset and liability : Accounts receivable ( 201 ) ( 99 ) 487 receivable ( 201 ) ( 99 ) 487 Inventories ( 11 201 ) ( 99 ) 487 Inventories ( 11 ) ( 99 ) 487 Inventories ( 11 ) ( 34 ) 22 Inventories ( 11 ) ( 34 ) 22 Other current asset 11 ) ( 34 ) 22 Other current asset ( 34 22 Other current asset ( 34 ) ( 114 ) 106 asset ( 34 ) ( 114 ) 106 Other asset ( 34 ) ( 114 ) 106 Other asset ( 30 ) ) 106 Other asset ( 30 ) ( 11 ) 12 asset ( 30 ) ( 11 ) 12 Accounts payable 243 30 ) ( 11 ) 12 Accounts payable 243 110 ( 11 ) 12 Accounts payable 243 110 ( 356 ) Other ) 12 Accounts payable 243 110 ( 356 ) Other liability Accounts payable 243 110 ( 356 ) Other liability 159 36 ( 356 ) Other liability 159 36 ( 60 ) Cash 356 ) Other liability 159 36 ( 60 ) Cash generated Other liability 159 36 ( 60 ) Cash generated by operating Cash generated by operating activity 289 89 185 Investing Activities : generated by operating activity 289 89 185 Investing Activities : Purchases by operating activity 289 89 185 Investing Activities : Purchases of Purchases of short-term investment ( 2,648 ) ( 4,144 ) ( investment ( 2,648 ) ( 4,144 ) ( 4,268 ) Proceeds ) ( 4,144 ) ( 4,268 ) Proceeds from maturity of from maturity of short-term investment 2,446 2,846 4,811 Proceeds from sale maturity of short-term investment 2,446 2,846 4,811 Proceeds from sale of of short-term investment 2,446 2,846 4,811 Proceeds from sale of short-term from sale of short-term investment 1,116 1,254 278 Proceeds from sale sale of short-term investment 1,116 1,254 278 Proceeds from sale of of short-term investment 1,116 1,254 278 Proceeds from sale of non-current from sale of non-current investment 45 25 340 Purchases of property sale of non-current investment 45 25 340 Purchases of property , of non-current investment 45 25 340 Purchases of property , plant plant , and equipment ( 164 ) ( 174 ) ( equipment ( 164 ) ( 174 ) ( 232 ) Cash ) ( 174 ) ( 232 ) Cash used for business for business acquisition — ( 52 ) ( 19 ) Other — ( 52 ) ( 19 ) Other 33 ( 7 ) ( 19 ) Other 33 ( 7 ) ( 18 19 ) Other 33 ( 7 ) ( 18 ) Cash 33 ( 7 ) ( 18 ) Cash generated by ( used for ) investing activity 828 ( 252 ) 892 Financing ) investing activity 828 ( 252 ) 892 Financing Activities : activity 828 ( 252 ) 892 Financing Activities : Proceeds from from issuance of common stock 53 105 42 Cash used for issuance of common stock 53 105 42 Cash used for repurchase of common stock 53 105 42 Cash used for repurchase of repurchase of common stock ( 26 ) — — Cash generated Cash generated by financing activity 27 105 42 Increase ( decrease generated by financing activity 27 105 42 Increase ( decrease ) by financing activity 27 105 42 Increase ( decrease ) in in cash and cash equivalent 1,144 ( 58 ) 1,119 Cash and cash equivalent 1,144 ( 58 ) 1,119 Cash and cash equivalent 1,144 ( 58 ) 1,119 Cash and cash equivalent , end of the year $ 3,396 $ 2,252 $ 2,310 Supplemental the year $ 3,396 $ 2,252 $ 2,310 Supplemental cash flow $ 3,396 $ 2,252 $ 2,310 Supplemental cash flow disclosure : the year for interest $ 20 $ 20 $ 20 Cash for interest $ 20 $ 20 $ 20 Cash paid for $ 20 $ 20 $ 20 Cash paid for income tax income tax , net $ 45 $ 11 $ 42 Noncash , net $ 45 $ 11 $ 42 Noncash transaction : $ 45 $ 11 $ 42 Noncash transaction : Issuance of $ — $ — $ 76 Issuance of common stock in $ — $ — $ 66 See accompanying note to consolidated to consolidated financial statement . 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple of September . Fiscal year 2003 , 2002 and 2001 were . Fiscal year 2003 , 2002 and 2001 were each 52-week year 2003 , 2002 and 2001 were each 52-week year . 2002 and 2001 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it us short-term equity derivative to 60 manage potential disposition of non-current Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Company to acquire 1.5 million share of it common an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . The Company settled forward purchase agreement in August 2003 , which resulted in an additional gain of approximately $ 6 million representing the increase in of the agreement from June 29 , 2003 through the settlement agreement from June 29 , 2003 through the settlement date . Derivative Financial Instruments On October 1 , 2000 , the Company Instruments On October 1 , 2000 , the Company adopted SFAS Company adopted SFAS No . 133 , Accounting for Derivative Instruments Activities . SFAS No . 133 establishes accounting and reporting standard definition . SFAS No . 133 requires that all derivative be tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect net income of approximately $ 12 million . Net of the tax effect of approximately $ 5 million , adoption of SFAS adoption of SFAS No . 133 resulted in a favorable cumulative-effect-type comprehensive income of approximately $ 12 million , all of which wa reclassified to earnings during 2001 . Management doe not believe application of SFAS No . 133 will significantly alter the Company component are recognized in current 61 earnings . For derivative instrument defined in SFAS No . 133 . Inventories Inventories are stated the asset , which are 30 year for building , from year for building , from 2 to 5 year for equipment building , from 2 to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Asset which range from 3 to 5 year . Asset Retirement Obligations Asset Retirement Obligations On September 29 , 2002 , the Company Obligations On September 29 , 2002 , the Company adopted SFAS Company adopted SFAS No . 143 , Accounting for Asset Retirement asset . SFAS No . 143 requires that the fair value estimated that a of September 29 , 2002 , gross expected a of September 29 , 2002 , gross expected future cash future cash flow of $ 9.5 million would be required to to fulfill these obligation . 62 As of the date of the Company recorded a $ 6 million long-term asset retirement liability future cash flow of $ 9.5 million and it present value it present value of $ 6 million at September 29 , $ 6 million at September 29 , 2002 , is being million at September 29 , 2002 , is being accreted over tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect during the first quarter of 2003 of approximately $ 2 million of 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied asset retirement liability for fiscal 2003 ( in million ) : retirement liability recorded at September 29 , 2002 $ 5.5 Additional recorded at September 29 , 2002 $ 5.5 Additional asset retirement September 29 , 2002 $ 5.5 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 0.5 Accretion recognized 1.2 Asset retirement obligation recognized 0.5 Accretion recognized 1.2 Asset retirement liability a of retirement liability a of September 27 , 2003 $ 7.2 Long-Lived a of September 27 , 2003 $ 7.2 Long-Lived Assets Including September 27 , 2003 $ 7.2 Long-Lived Assets Including Goodwill and the three year ended September 27 , 2003 , the Company year ended September 27 , 2003 , the Company ha made restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment test a of October 1 , 2001 , and it a of October 1 , 2001 , and it annual goodwill goodwill impairment test at August 30 , 2003 and August 30 test at August 30 , 2003 and August 30 , 2002 30 , 2003 and August 30 , 2002 , respectively , 2003 and August 30 , 2002 , respectively , and found unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 , Accounting for the Impairment life over period ranging from 3 to 10 year . Foreign period ranging from 3 to 10 year . Foreign Currency Translation each period . Revenue and 63 expense for these subsidiary are ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 101 , Revenue Recognition in Financial Company 's historical experience . 64 Generally , the Company doe pursuant to SFAS No . 86 , Computer Software to be third and fourth quarter of 2003 , the Company incurred substantial of Mac OS X version 10.3 ( code-named `` Panther `` a developer beta in June 2003 , and prior to release in the first quarter of 2004 . Therefore , during 2003 2004 . Therefore , during 2003 the Company capitalized approximately $ the Company capitalized approximately $ 14.7 million of development cost associated in the first quarter of 2004 when Panther wa shipped and accordance with SFAS No . 86 over a 3 year estimated No . 86 over a 3 year estimated useful life . third and fourth quarter of 2002 , the Company incurred substantial of Mac OS X version 10.2 ( code-named `` Jaguar `` a developer beta in May 2002 , and prior to release in the fourth quarter of 2002 . As such , the the Company capitalized approximately $ 13.3 million of development cost associated in the fourth quarter of 2002 when Jaguar wa shipped and accordance with SFAS No . 86 over a 3 year estimated No . 86 over a 3 year estimated useful life . . In addition , during 2002 , the Company also began . Capitalization of approximately $ 6 million began upon achievement of in the first quarter of 2002 . The final version of system wa released in July 2002 . During 2001 the Company in July 2002 . During 2001 the Company incurred substantial development the Company capitalized approximately $ 5.4 million of development cost during million of development cost during 2001 associated with development of Mac X . Related amortization is 65 computed by use of the accordance with SFAS No . 86 over a 8 year estimated No . 86 over a 8 year estimated useful life . software development cost wa $ 5.8 million , $ 1.2 million $ 5.8 million , $ 1.2 million and $ 350,000 in $ 1.2 million and $ 350,000 in 2003 , 2002 and million and $ 350,000 in 2003 , 2002 and 2001 , $ 350,000 in 2003 , 2002 and 2001 , respectively . in 2003 , 2002 and 2001 , respectively . Advertising Costs . Advertising expense wa $ 193 million , $ 209 million $ 193 million , $ 209 million , and $ 261 209 million , and $ 261 million for 2003 , 2002 and $ 261 million for 2003 , 2002 , and 2001 261 million for 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Restructuring Charges . Restructuring Charges In June 2002 , the FASB issued SFAS FASB issued SFAS No . 146 , Accounting for Costs Associated Activities . SFAS No . 146 supersedes Emerging Issues Task Force EITF ) Issue No . 94-3 , Liability Recognition for Certain plan . SFAS No . 146 also establishes that the liability disposal activity initiated after December 31 , 2002 . The provision initiated after December 31 , 2002 . The provision of SFAS provision of SFAS No . 146 were required to be applied APB ) Opinion No . 25 , Accounting for Stock Issued provision of SFAS No . 123 , Accounting for Stock-based Compensation amended by SFAS No . 148 , Accounting for Stock-based Compensation—Transition follow APB Opinion No . 25 because , a discussed below for under SFAS No . 123 requires use of option valuation Under APB Opinion No . 25 , when the exercise price required under SFAS No . 123 , the pro forma effect fair value estimate , in 66 management 's opinion , the per share amount ) : 2003 2002 2001 Net income ( share amount ) : 2003 2002 2001 Net income ( loss amount ) : 2003 2002 2001 Net income ( loss ) loss ) —as reported $ 69 $ 65 $ ( 25 —as reported $ 69 $ 65 $ ( 25 ) Add 69 $ 65 $ ( 25 ) Add : Stock-based employee ) , net of tax 15 5 2 Deduct : Stock-based , net of tax 15 5 2 Deduct : Stock-based employee net of tax 15 5 2 Deduct : Stock-based employee compensation , net of tax ( 181 ) ( 234 ) ( tax ( 181 ) ( 234 ) ( 373 ) Net ) ( 234 ) ( 373 ) Net loss—pro forma $ Net loss—pro forma $ ( 97 ) $ ( 164 ) ( 97 ) $ ( 164 ) $ ( 396 ) ( 164 ) $ ( 396 ) Net income ( loss common share—as reported Basic $ 0.19 $ 0.18 $ ( 0.07 reported Basic $ 0.19 $ 0.18 $ ( 0.07 ) Diluted 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Diluted $ 0.19 $ 0.18 $ ( 0.07 ) Net 0.19 $ 0.18 $ ( 0.07 ) Net loss per common share—pro forma Basic $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) Diluted $ ( 0.27 1.15 ) Diluted $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) $ ( 1.15 ) ( 0.46 ) $ ( 1.15 ) Earnings Per Common Share per common share for fiscal 2001 because their effect would have would have been antidilutive . 67 The following table set forth For the Years Ended September 27 , 2003 September 28 , Years Ended September 27 , 2003 September 28 , 2002 September September 27 , 2003 September 28 , 2002 September 29 , , 2003 September 28 , 2002 September 29 , 2001 Numerator September 28 , 2002 September 29 , 2001 Numerator ( in , 2002 September 29 , 2001 Numerator ( in million ) ) before accounting change $ 68 $ 65 $ ( 37 accounting change $ 68 $ 65 $ ( 37 ) Cumulative 68 $ 65 $ ( 37 ) Cumulative effect of accounting net of income tax $ 1 $ — $ 12 Net $ 1 $ — $ 12 Net income ( loss ) income ( loss ) $ 69 $ 65 $ ( 25 loss ) $ 69 $ 65 $ ( 25 ) Denominator 69 $ 65 $ ( 25 ) Denominator ( in thousand ) : Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive : Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive option Weighted-average share outstanding 360,631 355,022 345,613 Effect of dilutive option and option and dilutive restricted stock 2,835 6,763 — Denominator for diluted and dilutive restricted stock 2,835 6,763 — Denominator for diluted earnings ( loss ) per share 363,466 361,785 345,613 Basic earnings ( loss ) per share 363,466 361,785 345,613 Basic earnings ( loss ) per share 363,466 361,785 345,613 Basic earnings ( loss ) share before accounting change $ 0.19 $ 0.18 $ ( 0.11 accounting change $ 0.19 $ 0.18 $ ( 0.11 ) Cumulative 0.19 $ 0.18 $ ( 0.11 ) Cumulative effect of accounting of tax — — $ 0.04 Basic earnings ( loss ) share after accounting change $ 0.19 $ 0.18 $ ( 0.07 accounting change $ 0.19 $ 0.18 $ ( 0.07 ) Diluted 0.19 $ 0.18 $ ( 0.07 ) Diluted earnings ( loss share before accounting change $ 0.19 $ 0.18 $ ( 0.11 accounting change $ 0.19 $ 0.18 $ ( 0.11 ) Cumulative 0.19 $ 0.18 $ ( 0.11 ) Cumulative effect of accounting of tax — — $ 0.04 Diluted earnings ( loss ) share after accounting change $ 0.19 $ 0.18 $ ( 0.07 accounting change $ 0.19 $ 0.18 $ ( 0.07 ) Options 0.19 $ 0.18 $ ( 0.07 ) Options to purchase 50.8 0.07 ) Options to purchase 50.8 million and 58.0 million share to purchase 50.8 million and 58.0 million share of common stock outstanding at the end of 2003 and 2002 , respectively , the end of 2003 and 2002 , respectively , that were be antidilutive . At September 29 , 2001 , the Company . At September 29 , 2001 , the Company had option Company had option to purchase 97.2 million share of it common diluted loss per share for 2001 because the effect would have basis is also disclosed . 68 Note 2—Financial Instruments The carrying also disclosed . 68 Note 2—Financial Instruments The carrying amount of short-term investment a of September 27 , 2003 , and September a of September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 ( in million , and September 28 , 2002 ( in million ) : in million ) : September 27 , 2003 September 28 , ) : September 27 , 2003 September 28 , 2002 Cash September 27 , 2003 September 28 , 2002 Cash $ 158 , 2003 September 28 , 2002 Cash $ 158 $ 161 28 , 2002 Cash $ 158 $ 161 U.S. Treasury and 2002 Cash $ 158 $ 161 U.S. Treasury and Agency security U.S. Treasury and Agency security 87 47 U.S. corporate security 2,368 Treasury and Agency security 87 47 U.S. corporate security 2,368 1,828 87 47 U.S. corporate security 2,368 1,828 Foreign security 783 216 47 U.S. corporate security 2,368 1,828 Foreign security 783 216 Total security 2,368 1,828 Foreign security 783 216 Total cash equivalent 3,238 2,368 1,828 Foreign security 783 216 Total cash equivalent 3,238 2,091 783 216 Total cash equivalent 3,238 2,091 U.S. Treasury and Agency 216 Total cash equivalent 3,238 2,091 U.S. Treasury and Agency security U.S. Treasury and Agency security 454 674 U.S. corporate security 623 Treasury and Agency security 454 674 U.S. corporate security 623 1,330 454 674 U.S. corporate security 623 1,330 Foreign security 93 81 674 U.S. corporate security 623 1,330 Foreign security 93 81 Total security 623 1,330 Foreign security 93 81 Total short-term investment 1,170 623 1,330 Foreign security 93 81 Total short-term investment 1,170 2,085 93 81 Total short-term investment 1,170 2,085 Total cash , cash 81 Total short-term investment 1,170 2,085 Total cash , cash equivalent , and short-term investment $ 4,566 $ 4,337 The Company 's short-term investment $ 4,566 $ 4,337 The Company 's short-term investment net unrealized loss totaling $ 1 million on it investment portfolio with stated maturity greater than 1 year a of September 27 1 year a of September 27 , 2003 and net unrealized a of September 27 , 2003 and net unrealized gain of net unrealized gain of $ 20 million on it investment portfolio with stated maturity greater than 1 year , a of September year , a of September 28 , 2002 . The Company a of September 28 , 2002 . The Company occasionally sell recognized net gain of $ 21 million in 2003 and $ of $ 21 million in 2003 and $ 7 million in million in 2003 and $ 7 million in 2002 . These and $ 7 million in 2002 . These net gain were net . As of September 27 , 2003 , approximately $ As of September 27 , 2003 , approximately $ 629 million , 2003 , approximately $ 629 million of the Company 's had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 27 , 2003 had maturity of a of September 27 , 2003 had maturity of 3 to , 2003 had maturity of 3 to 12 month . As had maturity of 3 to 12 month . As of September month . As of September 28 , 2002 , approximately $ As of September 28 , 2002 , approximately $ 1.087 billion , 2002 , approximately $ 1.087 billion of the Company 's had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 28 , 2002 had maturity of a of September 28 , 2002 had maturity of 3 to , 2002 had maturity of 3 to 12 month . Accounts had maturity of 3 to 12 month . Accounts Receivable Trade and by arranging with third- 69 party financing company to provide Inc. , accounted for approximately 10.3 % and 10.8 % of for approximately 10.3 % and 10.8 % of net account receivable account receivable a of September 27 , 2003 , and September a of September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively . , and September 28 , 2002 , respectively . The following ( in million ) : 2003 2002 2001 Beginning allowance balance in million ) : 2003 2002 2001 Beginning allowance balance $ million ) : 2003 2002 2001 Beginning allowance balance $ 51 2001 Beginning allowance balance $ 51 $ 51 $ 64 Charged allowance balance $ 51 $ 51 $ 64 Charged to cost $ 51 $ 51 $ 64 Charged to cost and expense Charged to cost and expense 4 10 7 Deductions ( a to cost and expense 4 10 7 Deductions ( a ) cost and expense 4 10 7 Deductions ( a ) ( Deductions ( a ) ( 6 ) ( 10 ) ( ) ( 6 ) ( 10 ) ( 20 ) Ending ) ( 10 ) ( 20 ) Ending allowance balance $ ) Ending allowance balance $ 49 $ 51 $ 51 ( allowance balance $ 49 $ 51 $ 51 ( a ) $ 49 $ 51 $ 51 ( a ) Represents amount current asset , totaled $ 184 million and $ 142 million $ 184 million and $ 142 million a of September 27 142 million a of September 27 , 2003 , and September a of September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively . , and September 28 , 2002 , respectively . The Company . Inventory Prepayment In April 2002 , the Company made a the Company made a $ 100 million prepayment to an Asian consecutive fiscal quarter ended December 28 , 2002 . Approximately $ quarter ended December 28 , 2002 . Approximately $ 53 million , 2002 . Approximately $ 53 million of this deposit remained remained unused a of September 28 , 2002 and wa reflected a of September 28 , 2002 and wa reflected in the the first six month of 2003 , the remainder of the deposit wa outstanding at a 3.25 % interest rate to reflect debt . The Company 's 70 accounting policy for these instrument currency instrument a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 ( in million 2003 and September 28 , 2002 ( in million ) : in million ) : September 27 , 2003 September 28 , ) : September 27 , 2003 September 28 , 2002 Notional September 27 , 2003 September 28 , 2002 Notional Principal Fair , 2003 September 28 , 2002 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 464 $ ( 21 ) $ contract $ 464 $ ( 21 ) $ — $ 462 21 ) $ — $ 462 $ 1 $ 1 Purchased $ — $ 462 $ 1 $ 1 Purchased option $ $ 462 $ 1 $ 1 Purchased option $ 512 $ $ 1 Purchased option $ 512 $ 3 $ 3 $ Purchased option $ 512 $ 3 $ 3 $ 196 $ $ 512 $ 3 $ 3 $ 196 $ — $ $ 3 $ 3 $ 196 $ — $ — Sold $ — Sold option $ 645 $ ( 8 ) $ option $ 645 $ ( 8 ) $ — $ 392 8 ) $ — $ 392 $ ( 4 ) $ — $ 392 $ ( 4 ) $ — Foreign exchange hedge : Spot/Forward contract $ 445 $ 3 $ 3 $ Spot/Forward contract $ 445 $ 3 $ 3 $ 302 $ $ 445 $ 3 $ 3 $ 302 $ — $ $ 3 $ 3 $ 302 $ — $ — Purchased $ — Purchased option $ 8 $ — $ — $ $ — Sold option $ 5 $ — $ — $ market information a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 . In certain 2003 and September 28 , 2002 . In certain instance where of appropriate hedging instrument . 71 In accordance with SFAS No accordance with SFAS No . 133 , hedge related to probable over a time horizon of 3 to 9 month . The time horizon of 3 to 9 month . The Company also period or within a subsequent 2 month time period . Deferred other comprehensive income associated with 72 such derivative instrument are immediately of other transaction . During 2002 , the Company recorded net recorded net gain of $ 2.5 million in other income and prevailing market condition . During 2001 , the Company recorded a a net gain of $ 5.1 million in other income and similar nature were recorded in 2003 . Interest Rate Risk Management rate . As of September 30 , 2000 , the Company As of September 30 , 2000 , the Company had entered converted the Company 's fixed-rate 10-year debt to floating-rate debt and defined in SFAS No . 133 for fair value hedge of rate swap . During fiscal 2001 , the Company closed out realizing a gain of $ 17 million . This gain wa asset swap a of September 30 , 2000 , of $ a of September 30 , 2000 , of $ 5.7 million , 2000 , of $ 5.7 million wa deferred and then then recognized in income in 2001 a part of the SFAS of the SFAS No . 133 transition adjustment effective on October transition adjustment effective on October 1 , 2000 . The Company effective on October 1 , 2000 . The Company closed out interest rate asset swap during 2001 realizing a gain of $ realizing a gain of $ 1.1 million . As of September million . As of September 27 , 2003 and September 28 As of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , the Company 2003 and September 28 , 2002 , the Company had no interest rate swap in early 2002 . The interest rate swap converted the Company 's fixed-rate 10-year debt to floating-rate debt . defined in SFAS No . 133 for fair value hedge of interest rate swap during fiscal 2002 until the Company closed out out the position in late 2002 due to prevailing market interest resulted in a realized gain 73 of $ 6 million . realized gain 73 of $ 6 million . This gain wa in the form of $ 300 million of aggregate principal amount million of aggregate principal amount 6.5 % unsecured note that were that were originally issued in 1994 . The note , which semiannually , were sold at 99.925 % of par , for effective yield to maturity of 6.51 % . The note , , along with approximately $ 4 million of related unamortized deferred are due in February of 2004 and therefore have been classified current debt a of September 27 , 2003 . As of a of September 27 , 2003 . As of September 27 2003 . As of September 27 , 2003 and September 28 As of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , the carrying 2003 and September 28 , 2002 , the carrying amount of rate swap , wa $ 304 million and $ 316 million $ 304 million and $ 316 million , respectively , while the fair value wa $ 302 million and $ 299 million $ 302 million and $ 299 million , respectively . The market value a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 . Non-Current Debt 2003 and September 28 , 2002 . Non-Current Debt and Equity by the Company wa $ 5 million and $ 39 million $ 5 million and $ 39 million a of September 27 39 million a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , respectively . 2003 and September 28 , 2002 , respectively . EarthLink In respectively . EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after January 4 , 2001 , into approximately 7.1 million , 2001 , into approximately 7.1 million share of EarthLink common During the first quarter of 2003 , the Company sold 2,580,000 2003 , the Company sold 2,580,000 share of EarthLink stock for net proceeds of approximately $ 13.7 million , an amount that During the third quarter of 2003 , the Company sold all in EarthLink , consisting of 3,960,000 share of stock for net net proceeds of approximately $ 23 million , and a gain gain before tax of $ 2 million . During the first During the first quarter of 2002 , the Company sold 117,000 2002 , the Company sold 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 . No sale of EarthLink the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to investment in EarthLink to $ 35 million . This charge wa net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held 6.5 2002 , the Company held 6.5 million share of EarthLink stock EarthLink stock valued at $ 35 million . 74 During the at $ 35 million . 74 During the second quarter of During the second quarter of 2001 , the Company determined that the Company recognized a $ 114 million charge to earnings to investment in EarthLink to $ 86 million . This charge wa During the fourth quarter of 2001 , the Company sold a sold a total of approximately 425,000 share of EarthLink stock for net proceeds of approximately $ 6 million , recorded a gain before tax of approximately $ 800,000 , and recognized related income income tax of approximately $ 200,000 . Akamai In June 1999 200,000 . Akamai In June 1999 , the Company invested $ , the Company invested $ 12.5 million in Akamai , a preferred stock that converted into 4.1 million share of Akamai common initial public offering in October 1999 . Beginning in the first in the first quarter of 2000 , the Company categorized it During the fourth quarter of 2003 , the Company sold 1,875,000 2003 , the Company sold 1,875,000 share of Akamai stock for for net proceeds of $ 9 million and a gain before gain before tax of $ 8 million . As of September million . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company 's remaining investment in Akamai consists of 986,000 share of Akamai stock valued Akamai stock valued at $ 5 million . During the first During the first quarter of 2002 , the Company sold 250,000 2002 , the Company sold 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 . No sale of Akamai the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined that the Company recognized a $ 6 million charge to earnings to investment in Akamai to $ 3 million . This charge wa net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held 2.9 2002 , the Company held 2.9 million share of Akamai stock Akamai stock valued at $ 3 million . During 2001 , $ 3 million . During 2001 , the Company sold a sold a total of approximately 1 million share of Akamai stock net proceeds of approximately $ 39 million and recorded a gain before tax of approximately $ 36 million . ARM ARM is During the third quarter of 2003 , the Company sold all ARM stock , consisting of 278,000 share for net proceeds of net proceeds of approximately $ 295,000 , and a gain before gain before tax of $ 270,000 . During the first quarter During the first quarter of 2002 , the Company sold 4.7 2002 , the Company sold 4.7 million share of ARM stock gain before tax of $ 21 million . No sale of the subsequent quarter of fiscal 2002 . As of September 28 2002 . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held 278,000 2002 , the Company held 278,000 share of ARM stock valued ARM stock valued at $ 578,000 . During 2001 , the at $ 578,000 . During 2001 , the Company sold a sold a total of approximately 29.8 million share of ARM stock net proceeds of approximately $ 176 million , recorded a gain before tax of approximately $ 174 million , and recognized related tax expense of approximately $ 52 million . 75 Samsung During approximately $ 52 million . 75 Samsung During the fourth quarter During the fourth quarter of 1999 , the Company invested $ , the Company invested $ 100 million in Samsung to assist which were convertible into approximately 550,000 share of Samsung common stock common stock beginning in July 2000 . The bond carried an an annual coupon rate of 2 % and paid a total total yield to maturity of 5 % if redeemed at maturity in Samsung wa approximately $ 123 million a of September 30 123 million a of September 30 , 2000 . With the a of September 30 , 2000 . With the adoption of adoption of SFAS No . 133 on October 1 , 2000 No . 133 on October 1 , 2000 , the Company 133 on October 1 , 2000 , the Company wa required . Included in the $ 17 million gross SFAS No . million gross SFAS No . 133 transition adjustment recorded in earnings the first quarter of fiscal 2001 wa a $ 23 million fiscal 2001 wa a $ 23 million favorable adjustment for the fair value a of October 1 , 2000 , of the a of October 1 , 2000 , of the derivative component fair value a of December 30 , 2000 , the Company a of December 30 , 2000 , the Company recognized an unrealized loss of approximately $ 13 million during the first quarter during the first quarter of 2001 . During the second quarter During the second quarter of 2001 , the Company sold this net proceeds of approximately $ 117 million . Other Strategic Investments not fully developed . During 2002 and 2001 , the Company developed . During 2002 and 2001 , the Company determined that charge to earnings of $ 15 million and $ 8 million $ 15 million and $ 8 million , respectively . These net . As of September 27 , 2003 and September 28 As of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , the Company 2003 and September 28 , 2002 , the Company had no consolidated balance sheet . Note 3—Consolidated Financial Statement Details ( in ( in million ) Inventories 2003 2002 Purchased part $ 2 in million ) Inventories 2003 2002 Purchased part $ 2 $ 2003 2002 Purchased part $ 2 $ 9 Work in process Purchased part $ 2 $ 9 Work in process 4 — $ 9 Work in process 4 — Finished good 50 36 process 4 — Finished good 50 36 Total inventory $ 56 4 — Finished good 50 36 Total inventory $ 56 $ 50 36 Total inventory $ 56 $ 45 76 Other Current Total inventory $ 56 $ 45 76 Other Current Assets 2003 inventory $ 56 $ 45 76 Other Current Assets 2003 2002 45 76 Other Current Assets 2003 2002 Vendor non-trade receivables $ 76 Other Current Assets 2003 2002 Vendor non-trade receivables $ 184 2002 Vendor non-trade receivables $ 184 $ 142 Other current asset non-trade receivables $ 184 $ 142 Other current asset 125 133 $ 142 Other current asset 125 133 Total other current asset 142 Other current asset 125 133 Total other current asset $ Total other current asset $ 309 $ 275 Property , Plant current asset $ 309 $ 275 Property , Plant , and , Plant , and Equipment 2003 2002 Land and building $ Plant , and Equipment 2003 2002 Land and building $ 350 2002 Land and building $ 350 $ 342 Machinery , equipment and building $ 350 $ 342 Machinery , equipment , and equipment , and internal-use software 393 367 Office furniture and equipment , and internal-use software 393 367 Office furniture and equipment 74 367 Office furniture and equipment 74 67 Leasehold improvement 357 281 Office furniture and equipment 74 67 Leasehold improvement 357 281 1,174 equipment 74 67 Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation 74 67 Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and 67 Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and amortization Leasehold improvement 357 281 1,174 1,057 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 505 ) ( 436 ) Net amortization ( 505 ) ( 436 ) Net property , plant plant , and equipment $ 669 $ 621 Other Assets 2003 and equipment $ 669 $ 621 Other Assets 2003 2002 Non-current 669 $ 621 Other Assets 2003 2002 Non-current deferred tax asset $ 621 Other Assets 2003 2002 Non-current deferred tax asset $ Non-current deferred tax asset $ 60 $ 70 Non-current debt and tax asset $ 60 $ 70 Non-current debt and equity investment Non-current debt and equity investment 5 39 Capitalized software development cost debt and equity investment 5 39 Capitalized software development cost , software development cost , net 28 19 Other asset 57 42 development cost , net 28 19 Other asset 57 42 Total net 28 19 Other asset 57 42 Total other asset $ 28 19 Other asset 57 42 Total other asset $ 150 42 Total other asset $ 150 $ 170 Accrued Expenses 2003 other asset $ 150 $ 170 Accrued Expenses 2003 2002 Deferred 150 $ 170 Accrued Expenses 2003 2002 Deferred revenue $ 368 $ 170 Accrued Expenses 2003 2002 Deferred revenue $ 368 $ 2003 2002 Deferred revenue $ 368 $ 240 Accrued marketing and Deferred revenue $ 368 $ 240 Accrued marketing and distribution 124 240 Accrued marketing and distribution 124 136 Accrued compensation and employee Accrued marketing and distribution 124 136 Accrued compensation and employee benefit Accrued compensation and employee benefit 101 93 Accrued warranty and related compensation and employee benefit 101 93 Accrued warranty and related cost Accrued warranty and related cost 67 69 Other current liability 239 warranty and related cost 67 69 Other current liability 239 209 67 69 Other current liability 239 209 Total accrued expense $ 69 Other current liability 239 209 Total accrued expense $ 899 209 Total accrued expense $ 899 $ 747 77 Interest and accrued expense $ 899 $ 747 77 Interest and Other Income expense $ 899 $ 747 77 Interest and Other Income , and Other Income , Net 2003 2002 2001 Interest income $ Other Income , Net 2003 2002 2001 Interest income $ 69 Income , Net 2003 2002 2001 Interest income $ 69 $ 2002 2001 Interest income $ 69 $ 118 $ 218 Interest Interest income $ 69 $ 118 $ 218 Interest expense ( $ 69 $ 118 $ 218 Interest expense ( 8 ) $ 218 Interest expense ( 8 ) ( 11 ) ( expense ( 8 ) ( 11 ) ( 16 ) Gains ) ( 11 ) ( 16 ) Gains on sale of sale of short term investment 21 7 — Other income ( of short term investment 21 7 — Other income ( expense ( expense ) net ( 5 ) ( 2 ) 15 net ( 5 ) ( 2 ) 15 Gain on forward 5 ) ( 2 ) 15 Gain on forward purchase agreement Gain on forward purchase agreement 6 — — Total interest and other income , net $ 83 $ 112 $ 217 Note , net $ 83 $ 112 $ 217 Note 4—Acquisitions Goodwill $ 83 $ 112 $ 217 Note 4—Acquisitions Goodwill and Other $ 112 $ 217 Note 4—Acquisitions Goodwill and Other Intangible Assets life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The Company ceased at the beginning of fiscal 2002 when it adopted SFAS No it adopted SFAS No . 142 . The following table summarizes in million ) : September 27 , 2003 September 28 , ) : September 27 , 2003 September 28 , 2002 Gross September 27 , 2003 September 28 , 2002 Gross Carrying Amount , 2003 September 28 , 2002 Gross Carrying Amount Accumulated Amortization Goodwill ( a ) $ 85 — $ 85 $ 85 ) $ 85 — $ 85 $ 85 — $ 85 85 — $ 85 $ 85 — $ 85 Other acquired 85 $ 85 — $ 85 Other acquired intangible asset 5 85 Other acquired intangible asset 5 ( 5 ) — 5 acquired intangible asset 5 ( 5 ) — 5 ( 5 5 ( 5 ) — 5 ( 5 ) — Acquired 5 ) — 5 ( 5 ) — Acquired technology 42 5 ) — Acquired technology 42 ( 18 ) 24 42 — Acquired technology 42 ( 18 ) 24 42 ( 8 technology 42 ( 18 ) 24 42 ( 8 ) 34 42 ( 18 ) 24 42 ( 8 ) 34 Total 18 ) 24 42 ( 8 ) 34 Total acquired intangible 24 42 ( 8 ) 34 Total acquired intangible asset $ Total acquired intangible asset $ 132 $ ( 23 ) $ asset $ 132 $ ( 23 ) $ 109 $ 132 $ ( 23 ) $ 109 $ 132 $ ( 13 23 ) $ 109 $ 132 $ ( 13 ) $ 109 $ 132 $ ( 13 ) $ 119 ( a $ ( 13 ) $ 119 ( a ) Accumulated amortization related to goodwill of $ 55 million arising prior to the adoption of SFAS No . 142 ha been reflected in the of goodwill a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 . Expected annual 2003 and September 28 , 2002 . Expected annual amortization expense ) : Fiscal Years : 2004 $ 7 2005 5 2006 Fiscal Years : 2004 $ 7 2005 5 2006 3 2007 Years : 2004 $ 7 2005 5 2006 3 2007 2 : 2004 $ 7 2005 5 2006 3 2007 2 Thereafter 2004 $ 7 2005 5 2006 3 2007 2 Thereafter 7 $ 7 2005 5 2006 3 2007 2 Thereafter 7 Total 7 2005 5 2006 3 2007 2 Thereafter 7 Total expected 2005 5 2006 3 2007 2 Thereafter 7 Total expected annual 2006 3 2007 2 Thereafter 7 Total expected annual amortization expense expected annual amortization expense $ 24 78 Amortization expense related to annual amortization expense $ 24 78 Amortization expense related to acquired ( in million ) : 2003 2002 2001 Goodwill amortization $ in million ) : 2003 2002 2001 Goodwill amortization $ — million ) : 2003 2002 2001 Goodwill amortization $ — $ $ — $ — $ 16 Other acquired intangible asset amortization acquired intangible asset amortization — 1 3 Acquired technology amortization 10 intangible asset amortization — 1 3 Acquired technology amortization 10 5 1 3 Acquired technology amortization 10 5 2 Total amortization $ 3 Acquired technology amortization 10 5 2 Total amortization $ 10 Acquired technology amortization 10 5 2 Total amortization $ 10 $ 5 2 Total amortization $ 10 $ 6 $ 21 Net Total amortization $ 10 $ 6 $ 21 Net loss and $ 10 $ 6 $ 21 Net loss and net loss adoption of SFAS No . 142 in fiscal 2002 follows ( No . 142 in fiscal 2002 follows ( in million , per share amount ) : 2001 Net loss , a reported , a reported $ ( 25 ) Add : goodwill amortization Add : goodwill amortization $ 16 Net loss , a adjusted , a adjusted $ ( 9 ) Basic loss per share , a reported $ ( 0.07 ) Add : goodwill amortization Add : goodwill amortization $ 0.04 Basic loss per share , , a adjusted $ ( 0.03 ) Diluted loss per share , a reported $ ( 0.07 ) Add : goodwill amortization Add : goodwill amortization $ 0.04 Diluted loss per share , , a adjusted $ ( 0.03 ) Acquisition of Emagic GmbH During the fourth quarter of 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 26 million of which wa paid of the deal and $ 4 million of which wa held-back appropriate period over the next 3 year . During fiscal 2003 3 year . During fiscal 2003 , contingent consideration totaling $ , contingent consideration totaling $ 1.3 million wa paid . The their estimated useful life of 3 year . Goodwill associated with provision of SFAS No . 142 . Total consideration wa allocated Net tangible asset acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and development 0.5 0.8 In-process research and development 0.5 Goodwill 18.6 Total consideration $ research and development 0.5 Goodwill 18.6 Total consideration $ 26.0 79 Goodwill 18.6 Total consideration $ 26.0 79 The amount of the 18.6 Total consideration $ 26.0 79 The amount of the purchase product under development were between 43 % -83 % complete , during the Company 's fiscal 2003 at a cost of approximately a cost of approximately $ 415,000 . The remaining effort , , which were completed in 2003 , included finalizing user interface using a discount rate of 25 % . Acquisition of certain and Silicon Grail During fiscal 2002 the Company acquired certain technology for a total of $ 20 million in cash . These acquisition , except for $ 1 million identified a contingent consideration compensation expense over the next 3 year , ha been allocated on a straight-line basis over 3 year , except for certain that will be amortized over 10 year . Acquisition of Nothing During the second quarter of 2002 , the Company acquired certain market . Of the $ 15 million purchase price , the the Company ha allocated $ 7 million to acquired technology , over it estimated life of 5 year . The remaining $ year . The remaining $ 8 million , which ha been appropriate period over the next 3 year . Acquisition of Spruce , Inc . In July 2001 , the Company acquired Spruce authoring product , for $ 14.9 million in cash . Goodwill provision of SFAS No . 142 . The consolidated financial statement tangible liability assumed $ ( 0.7 ) Identifiable intangible asset 5.9 0.7 ) Identifiable intangible asset 5.9 Goodwill 9.7 Total consideration $ Identifiable intangible asset 5.9 Goodwill 9.7 Total consideration $ 14.9 Acquisition Goodwill 9.7 Total consideration $ 14.9 Acquisition of PowerSchool , Inc , Inc . In May 2001 , the Company acquired PowerSchool real-time web access to track 80 their child 's progress . purchase price of approximately $ 66.1 million consisted of the issuance of the issuance of approximately 2.4 million share of the Company a fair value of $ 61.2 million , the issuance of a fair value of $ 4.5 million , and $ 300,000 4.5 million , and $ 300,000 of direct transaction cost . following assumption : volatility of 67 % , expected life of % , expected life of 4 year , dividend rate of year , dividend rate of 0 % , and risk-free rate , and risk-free rate of 4.73 % . Total consideration wa Net tangible asset acquired $ 0.2 Deferred stock compensation 12.8 Identifiable $ 0.2 Deferred stock compensation 12.8 Identifiable intangible asset 2.6 In-process compensation 12.8 Identifiable intangible asset 2.6 In-process research and development 10.8 2.6 In-process research and development 10.8 Goodwill 39.7 Total consideration $ research and development 10.8 Goodwill 39.7 Total consideration $ 66.1 The Goodwill 39.7 Total consideration $ 66.1 The amount of the purchase product under development wa approximately 50 % complete , and it wa expected that the remaining 50 % would be completed during during the Company 's fiscal 2002 at a cost of approximately a cost of approximately $ 9.25 million . The remaining effort , which were completed in 2002 , included completion of coding using a discount rate of 25 % . The acquired intangible their estimated useful life of 3 year . Deferred stock compensation required future vesting period of 3 year . In the fourth In the fourth quarter of 2001 , an adjustment wa made acquisition of PowerSchool by $ 5.9 million due to the identification . The Company allocated $ 12.8 million of it purchase consideration by employee and related to 445,000 common share issued contingent on in the first quarter of 2003 resulting in the $ 5 2003 resulting in the $ 5 million recognition of previously deferred stock compensation of approximately $ 294,000 remains a of September 27 294,000 remains a of September 27 , 2003 . Pro Forma a of September 27 , 2003 . Pro Forma Financial Information and Spruce , acquired in 2001 , had been acquired at had been acquired at the 81 beginning of 2001 and includes at the 81 beginning of 2001 and includes the effect of place at the beginning of 2001 . Pro forma information follows per share amount ) : 2001 Net sale $ 5,370 Net : 2001 Net sale $ 5,370 Net loss $ ( 44 5,370 Net loss $ ( 44 ) Basic loss per common per common share $ ( 0.13 ) Diluted loss per common per common share $ ( 0.13 ) Note 5—Restructuring Charges Fiscal $ ( 0.13 ) Note 5—Restructuring Charges Fiscal 2003 Restructuring Actions ) Note 5—Restructuring Charges Fiscal 2003 Restructuring Actions The Company recorded restructuring charge of approximately $ 26.8 million during the year ended during the year ended September 27 , 2003 , including approximately year ended September 27 , 2003 , including approximately $ 7.4 2003 , including approximately $ 7.4 million in severance cost , severance cost , a $ 5.0 million charge to write-off deferred write-off deferred compensation , $ 7.1 million in asset impairment and asset impairment and a $ 7.3 million charge for lease cancellation cancellation . Of the $ 26.8 million , nearly all had spent by the end of 2003 , except for approximately $ , except for approximately $ 400,000 of severance cost and approximately severance cost and approximately $ 4.5 million related to operating lease During the third quarter of 2003 , approximately $ 500,000 of of 2003 , approximately $ 500,000 of the amount originally accrued estimated and an approximately $ 500,000 shortfall wa identified in the During the second quarter of 2003 , the Company 's management total restructuring charge of $ 2.8 million , including $ 2.4 2.8 million , including $ 2.4 million in severance cost and in severance cost and $ 400,000 for asset write-off and lease resulted in the termination of 93 employee , 92 were terminated termination of 93 employee , 92 were terminated prior to the prior to the end of 2003 . During the first quarter During the first quarter of 2003 , the Company 's management a total cost of $ 24 million that resulted in the at the end of fiscal 2002 , and termination of various result in the elimination of 260 position worldwide , all but eliminated by the end of 2003 . Closure of the Company in severance cost of $ 1.8 million and cost of $ million and cost of $ 6.7 million to write-off manufacturing related included severance of approximately $ 550,000 and recognition of $ 5 550,000 and recognition of $ 5 million of previously deferred stock PowerSchool wa acquired by the 82 Company in 2001 related to by the 82 Company in 2001 related to certain PowerSchool employee in the first quarter of 2003 . Termination of sale and in severance cost of $ 2.8 million and accrual of cost on closed facility of $ 6.7 million . The total net net restructuring charge of $ 23 million recognized during the first during the first quarter of 2003 also reflects the reversal of reflects the reversal of $ 600,000 of unused restructuring accrual originally during the first quarter of 2002 . Except for certain cost severance cost of approximately $ 400,000 will be spent by the the first quarter of fiscal 2004 . The following table summarizes restructuring action initiated during fiscal 2003 ( in million ) : Cancellations Totals Total charge $ 7.4 $ 5.0 $ 7.1 $ Total charge $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total spending through $ 7.1 $ 7.3 $ 26.8 Total spending through September 27 26.8 Total spending through September 27 , 2003 ( 7.5 ) spending through September 27 , 2003 ( 7.5 ) — — September 27 , 2003 ( 7.5 ) — — ( 2.3 7.5 ) — — ( 2.3 ) ( 9.8 ) Total — ( 2.3 ) ( 9.8 ) Total non-cash item — Total non-cash item — ( 5.0 ) ( 7.1 ) — — ( 5.0 ) ( 7.1 ) — ( 12.1 ) ( 7.1 ) — ( 12.1 ) Adjustments 0.5 — — — ( 12.1 ) Adjustments 0.5 — — ( 0.5 ) Adjustments 0.5 — — ( 0.5 ) — Accrual at September ) — Accrual at September 27 , 2003 $ 0.4 $ Accrual at September 27 , 2003 $ 0.4 $ — $ September 27 , 2003 $ 0.4 $ — $ — $ $ — $ — $ 4.5 $ 4.9 Fiscal 2002 Restructuring $ — $ 4.5 $ 4.9 Fiscal 2002 Restructuring Actions During $ 4.5 $ 4.9 Fiscal 2002 Restructuring Actions During fiscal 2002 2002 Restructuring Actions During fiscal 2002 , the Company recorded total restructuring charge of approximately $ 30 million related to action intended During the fourth quarter of 2002 , the Company 's management total cost of approximately $ 6 million designed to reduce headcount in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million , all of which which were eliminated by September 27 , 2003 . Eliminated position eliminated by September 27 , 2003 . Eliminated position were primarily in the amount of $ 4.5 million . During the first During the first quarter of 2002 , the Company 's management total cost of approximately $ 24 million . These restructuring action in the elimination of approximately 425 position worldwide at a cost at a cost of $ 8 million . Positions were eliminated asset associated with first quarter 2002 restructuring action during that same contract cancellation charge totaled $ 12 million , and charge for charge for asset impairment totaled 83 $ 4 million . The asset impairment totaled 83 $ 4 million . The first quarter million . The first quarter 2002 restructuring action were primarily related During the first quarter of 2003 , the Company reversed the remaining unused accrual of $ 600,000 . The following table summarizes restructuring action initiated during fiscal 2002 ( in million ) : Cancellations Totals Total charge $ 10 $ 8 $ 12 $ Total charge $ 10 $ 8 $ 12 $ 30 Total $ 10 $ 8 $ 12 $ 30 Total spending through $ 8 $ 12 $ 30 Total spending through September 27 30 Total spending through September 27 , 2003 ( 10 ) spending through September 27 , 2003 ( 10 ) — ( September 27 , 2003 ( 10 ) — ( 11 ) ( 10 ) — ( 11 ) ( 21 ) Total — ( 11 ) ( 21 ) Total non-cash item — Total non-cash item — ( 8 ) — ( 8 ) ( 8 ) — ( 8 ) Adjustments — — ( ) Adjustments — — ( 1 ) ( 1 ) Accrual — ( 1 ) ( 1 ) Accrual at September 27 1 ) Accrual at September 27 , 2003 $ — $ Accrual at September 27 , 2003 $ — $ — $ $ — $ — Note 6—Income Taxes The provision for income ( in million ) : 2003 2002 2001 Federal : Current in million ) : 2003 2002 2001 Federal : Current $ million ) : 2003 2002 2001 Federal : Current $ 18 2001 Federal : Current $ 18 $ 12 $ ( 20 : Current $ 18 $ 12 $ ( 20 ) Deferred 18 $ 12 $ ( 20 ) Deferred ( 7 ) ( 20 ) Deferred ( 7 ) ( 32 ) ( Deferred ( 7 ) ( 32 ) ( 8 ) 11 ) ( 32 ) ( 8 ) 11 ( 20 ) 32 ) ( 8 ) 11 ( 20 ) ( 28 ( 8 ) 11 ( 20 ) ( 28 ) State 11 ( 20 ) ( 28 ) State : Current 4 28 ) State : Current 4 3 — Deferred ( 11 ) State : Current 4 3 — Deferred ( 11 ) 4 3 — Deferred ( 11 ) 6 ( 10 ) — Deferred ( 11 ) 6 ( 10 ) ( 7 ( 11 ) 6 ( 10 ) ( 7 ) 9 6 ( 10 ) ( 7 ) 9 ( 10 ) 10 ) ( 7 ) 9 ( 10 ) Foreign : ( 7 ) 9 ( 10 ) Foreign : Current 21 10 ) Foreign : Current 21 29 21 Deferred ( 1 ) Foreign : Current 21 29 21 Deferred ( 1 ) Foreign : Current 21 29 21 Deferred ( 1 ) 4 21 29 21 Deferred ( 1 ) 4 2 20 33 21 Deferred ( 1 ) 4 2 20 33 23 Provision Deferred ( 1 ) 4 2 20 33 23 Provision for ( 1 ) 4 2 20 33 23 Provision for income 1 ) 4 2 20 33 23 Provision for income tax ) 4 2 20 33 23 Provision for income tax $ Provision for income tax $ 24 $ 22 $ ( 15 income tax $ 24 $ 22 $ ( 15 ) 84 24 $ 22 $ ( 15 ) 84 The foreign provision 22 $ ( 15 ) 84 The foreign provision for income pretax earnings of approximately $ 250 million , $ 284 million $ 250 million , $ 284 million and $ 363 million $ 284 million and $ 363 million in 2003 , 2002 and $ 363 million in 2003 , 2002 , and 2001 363 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . As of respectively . As of September 27 , 2003 , approximately $ As of September 27 , 2003 , approximately $ 2.5 billion , 2003 , approximately $ 2.5 billion of the Company 's a cumulative total of $ 822 million of such earnings . settled . As of September 27 , 2003 and September 28 As of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , the significant 2003 and September 28 , 2002 , the significant component of ( in million ) : 2003 2002 Deferred tax asset : in million ) : 2003 2002 Deferred tax asset : Accounts receivable and inventory reserve $ 35 $ 32 Accrued liability and inventory reserve $ 35 $ 32 Accrued liability and other reserve Accrued liability and other reserve 155 126 Basis of capital asset liability and other reserve 155 126 Basis of capital asset and of capital asset and investment 47 34 Tax loss and credit capital asset and investment 47 34 Tax loss and credit 204 34 Tax loss and credit 204 125 Other 11 11 Total Tax loss and credit 204 125 Other 11 11 Total deferred and credit 204 125 Other 11 11 Total deferred tax asset credit 204 125 Other 11 11 Total deferred tax asset 452 11 Total deferred tax asset 452 328 Less valuation allowance 30 Total deferred tax asset 452 328 Less valuation allowance 30 30 452 328 Less valuation allowance 30 30 Net deferred tax asset 328 Less valuation allowance 30 30 Net deferred tax asset 422 30 Net deferred tax asset 422 298 Deferred tax liability : Net deferred tax asset 422 298 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 398 293 Available-for-sale security — 1 Unremitted earnings of subsidiary 398 293 Available-for-sale security — 1 Total 398 293 Available-for-sale security — 1 Total deferred tax liability 398 1 Total deferred tax liability 398 294 Net deferred tax asset Total deferred tax liability 398 294 Net deferred tax asset $ Net deferred tax asset $ 24 $ 4 As of September tax asset $ 24 $ 4 As of September 27 , $ 4 As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had operating tax purpose of approximately $ 189 million , which expire from million , which expire from 2011 through 2023 . A portion which expire from 2011 through 2023 . A portion of these of which is approximately $ 117 million and which expire between million and which expire between 2004 and 2023 . The remaining which expire between 2004 and 2023 . The remaining benefit from expire . As of September 27 , 2003 , a valuation As of September 27 , 2003 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the a result of certain tax 85 planning strategy , together with federal income tax rate ( 35 % in 2003 , 2002 rate ( 35 % in 2003 , 2002 , and 2001 35 % in 2003 , 2002 , and 2001 ) to 2003 , 2002 , and 2001 ) to income ( loss ( in million ) : 2003 2002 2001 Computed expected tax in million ) : 2003 2002 2001 Computed expected tax ( million ) : 2003 2002 2001 Computed expected tax ( benefit tax ( benefit ) $ 32 $ 30 $ ( 18 benefit ) $ 32 $ 30 $ ( 18 ) State 32 $ 30 $ ( 18 ) State tax , net net of federal effect ( 4 ) 7 ( 7 ) federal effect ( 4 ) 7 ( 7 ) Indefinitely invested ( 4 ) 7 ( 7 ) Indefinitely invested earnings of earnings of foreign subsidiary ( 13 ) — — Nondeductible executive — — Nondeductible executive compensation 5 ( 1 ) — Stock Nondeductible executive compensation 5 ( 1 ) — Stock repurchase ( ) — Stock repurchase ( 2 ) — — Purchase accounting Purchase accounting and asset acquisition 4 3 10 Change in valuation accounting and asset acquisition 4 3 10 Change in valuation allowance and asset acquisition 4 3 10 Change in valuation allowance — in valuation allowance — ( 16 ) — Research & development development credit , net ( 7 ) ( 8 ) ( net ( 7 ) ( 8 ) ( 5 ) Nondeductible ) ( 8 ) ( 5 ) Nondeductible expense 6 4 ( 5 ) Nondeductible expense 6 4 3 Other item 3 5 ) Nondeductible expense 6 4 3 Other item 3 3 ) Nondeductible expense 6 4 3 Other item 3 3 2 6 4 3 Other item 3 3 2 Provision for ( 4 3 Other item 3 3 2 Provision for ( benefit 3 Other item 3 3 2 Provision for ( benefit from from ) income tax $ 24 $ 22 $ ( 15 income tax $ 24 $ 22 $ ( 15 ) Effective 24 $ 22 $ ( 15 ) Effective tax rate 26 15 ) Effective tax rate 26 % 25 % 30 % Effective tax rate 26 % 25 % 30 % On April rate 26 % 25 % 30 % On April 10 , % 30 % On April 10 , 2003 , the Internal % On April 10 , 2003 , the Internal Revenue Service tax return for the year 1998 through 2000 and proposed certain for the year 1998 through 2000 and proposed certain adjustment . issue for year prior to 1998 have been resolved . Management such resolution occurs . Note 7—Shareholders ' Equity CEO Restricted Stock Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company entered into award for the purchase of 27.5 million share of the Company granted to Mr. Jobs in 2000 and 2001 . Mr. Jobs Mr. Jobs in 2000 and 2001 . Mr. Jobs retained option Jobs retained option to purchase 60,000 share of the Company 's stock granted in August of 1997 in his capacity a a a restricted stock award of 5 million share of the Company restricted stock award of $ 74.75 million a a component of a straight-line basis over the 3-year service/vesting period . The value price of the Company 's 86 common stock on the date Total amortization of approximately $ 13 million ha been included in , and administrative expense in 2003 and will continue to be be included at approximately $ 6.2 million per quarter through March million per quarter through March 2006 . The 5 million restricted through March 2006 . The 5 million restricted share have been Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 27 , 2003 . Preferred Stock a of September 27 , 2003 . Preferred Stock In August . Preferred Stock In August 1997 , the Company and Microsoft In addition , Microsoft purchased 150,000 share of Apple Series A stock `` ) for $ 150 million . These share were convertible by Microsoft after August 5 , 2000 , into share Microsoft after August 5 , 2000 , into share of the a conversion price of $ 8.25 per share . During 2000 8.25 per share . During 2000 , 74,250 share of preferred share . During 2000 , 74,250 share of preferred stock were preferred stock were converted to 9 million share of the Company 's common stock . During 2001 , the remaining 75,750 preferred During 2001 , the remaining 75,750 preferred share were converted into preferred share were converted into 9.2 million share of the Company ( in million ) : 2003 2002 2001 Unrealized gain on in million ) : 2003 2002 2001 Unrealized gain on available-for-sale million ) : 2003 2002 2001 Unrealized gain on available-for-sale security gain on available-for-sale security $ 1 $ 13 $ 30 Unrealized available-for-sale security $ 1 $ 13 $ 30 Unrealized gain ( $ 1 $ 13 $ 30 Unrealized gain ( loss ) ) on derivative investment ( 16 ) ( 11 ) 4 investment ( 16 ) ( 11 ) 4 Cumulative foreign currency 16 ) ( 11 ) 4 Cumulative foreign currency translation ( Cumulative foreign currency translation ( 20 ) ( 51 ) ( translation ( 20 ) ( 51 ) ( 56 ) Accumulated ) ( 51 ) ( 56 ) Accumulated other comprehensive income ( loss ) $ ( 35 ) $ ( 49 ) ( 35 ) $ ( 49 ) $ ( 22 ) ( 49 ) $ ( 22 ) 87 The following table ) $ ( 22 ) 87 The following table summarizes activity ( in million ) : 2003 2002 2001 Change in fair in million ) : 2003 2002 2001 Change in fair value million ) : 2003 2002 2001 Change in fair value of value of available-for-sale security $ 11 $ ( 49 ) $ security $ 11 $ ( 49 ) $ ( 183 ) ( 49 ) $ ( 183 ) Adjustment for net ( income ( loss ) ( 23 ) 32 ( 84 ) loss ) ( 23 ) 32 ( 84 ) Change in ( 23 ) 32 ( 84 ) Change in unrealized gain on available-for-sale security $ ( 12 ) $ ( 17 ) ( 12 ) $ ( 17 ) $ ( 267 ) ( 17 ) $ ( 267 ) The tax effect related on available-for-sale security wa $ 6 million , $ 10 million $ 6 million , $ 10 million , $ 157 million $ 10 million , $ 157 million for fiscal 2003 , $ 157 million for fiscal 2003 , 2002 , and 2001 million for fiscal 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . The tax loss ) wa $ ( 8 ) million , $ 10 8 ) million , $ 10 million and $ 35 million $ 10 million and $ 35 million for fiscal 2003 , $ 35 million for fiscal 2003 , 2002 , and 2001 million for fiscal 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . The following ( in million ) : 2003 2002 2001 Changes in fair in million ) : 2003 2002 2001 Changes in fair value million ) : 2003 2002 2001 Changes in fair value of value of derivative $ ( 24 ) $ 4 $ 45 $ ( 24 ) $ 4 $ 45 Adjustment for net 24 ) $ 4 $ 45 Adjustment for net gain realized net income ( loss ) 19 ( 19 ) ( 53 ( loss ) 19 ( 19 ) ( 53 ) Cumulative 19 ( 19 ) ( 53 ) Cumulative effect of adopting of adopting SFAS No . 133 — — 12 Change in No . 133 — — 12 Change in unrealized gain on on derivative instrument $ ( 5 ) $ ( 15 ) ( 5 ) $ ( 15 ) $ 4 The tax $ ( 15 ) $ 4 The tax effect related to of adopting SFAS No . 133 wa $ ( 5 ) . 133 wa $ ( 5 ) a of September 29 5 ) a of September 29 , 2001 . The tax a of September 29 , 2001 . The tax effect related value of derivative wa $ 11 million , $ ( 2 11 million , $ ( 2 ) million and $ ( ) million and $ ( 19 ) million for fiscal 2003 19 ) million for fiscal 2003 , 2002 , and 2001 million for fiscal 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . The tax comprehensive income wa $ ( 7 ) million , $ 8 7 ) million , $ 8 million and $ 23 million $ 8 million and $ 23 million for fiscal 2003 , $ 23 million for fiscal 2003 , 2002 , and 2001 million for fiscal 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Note 8—Employee 2001 , respectively . Note 8—Employee Benefit Plans 2003 Employee Stock . Note 8—Employee Benefit Plans 2003 Employee Stock Option Plan At of Shareholders held on April 24 , 2003 , the shareholder held on April 24 , 2003 , the shareholder approved an approved an amendment to the 1998 Executive Officer Stock Plan to of the plan to the 2003 Employee Stock Option Plan ( Stock Option Plan ( the 2003 Plan ) , to provide employee stock option , including 6-months-plus-1-day option exchange program , without , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued or quarterly vesting . The 2003 Plan permit the granting of and stock purchase right . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Board of Directors approved the 1997 Employee Stock Option Plan ( Stock Option Plan ( the 1997 Plan ) , a non-shareholder may be granted under the 1997 Plan to employee at not , option granted under the 1997 88 Plan generally expire 7 option granted under the 1997 88 Plan generally expire 7 to 1997 88 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued approval of amendment to the 1998 Executive Officer Stock Plan in Officer Stock Plan in April 2003 , the Company terminated the , the Company terminated the 1997 Employee Stock Option Plan and option exchange program in October 2003 . Employee Stock Option Exchange Option Exchange Program On March 20 , 2003 , the Company Program On March 20 , 2003 , the Company announced a price at or above $ 25.00 per share for a predetermined are cancelled . On April 17 , 2003 , in accordance . On April 17 , 2003 , in accordance with the and cancelled option to purchase 16,569,193 share of it common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 6,697,368 share were issued to employee an exercise price of $ 22.76 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee 's to a maximum of $ 25,000 in any calendar year . In the third quarter of 2003 , the Company 's shareholder share authorized for issuance by 4 million share . Beginning with period that started on June 30 , 2003 , the number started on June 30 , 2003 , the number of share limited to a total of 1 million share per offering period per offering period . During 2003 , 2002 , and 2001 period . During 2003 , 2002 , and 2001 , 2.1 2003 , 2002 , and 2001 , 2.1 million , 1.8 2002 , and 2001 , 2.1 million , 1.8 million and 2001 , 2.1 million , 1.8 million and 1.8 million share million , 1.8 million and 1.8 million share , respectively , Plan . As of September 27 , 2003 , approximately 4.0 As of September 27 , 2003 , approximately 4.0 million share 27 , 2003 , approximately 4.0 million share were reserved for under the Purchase Plan . 89 Employee Savings Plan The Company deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 12,000 for calendar year 2003 ) $ 12,000 for calendar year 2003 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee 's , up to a maximum 6 % of the employee 's Savings Plan were approximately $ 21 million , $ 19 million $ 21 million , $ 19 million , and $ 17 19 million , and $ 17 million in 2003 , 2002 and $ 17 million in 2003 , 2002 , and 2001 17 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Stock Option for the year ended September 27 , 2003 , September 28 year ended September 27 , 2003 , September 28 , 2002 27 , 2003 , September 28 , 2002 and September 29 2003 , September 28 , 2002 and September 29 , 2001 28 , 2002 and September 29 , 2001 follows ( option 2002 and September 29 , 2001 follows ( option amount are Average Exercise Price Balance at 9/30/00 11,530 70,758 $ 34.01 Additional Exercise Price Balance at 9/30/00 11,530 70,758 $ 34.01 Additional Options Price Balance at 9/30/00 11,530 70,758 $ 34.01 Additional Options Authorized at 9/30/00 11,530 70,758 $ 34.01 Additional Options Authorized 27,000 — $ 34.01 Additional Options Authorized 27,000 — — Options Granted ( — — Options Granted ( 34,857 ) 34,857 $ 18.58 Options Options Granted ( 34,857 ) 34,857 $ 18.58 Options Cancelled 6,605 ( 34,857 ) 34,857 $ 18.58 Options Cancelled 6,605 ( 6,605 34,857 $ 18.58 Options Cancelled 6,605 ( 6,605 ) $ 29.32 18.58 Options Cancelled 6,605 ( 6,605 ) $ 29.32 Options Exercised 6,605 ( 6,605 ) $ 29.32 Options Exercised — ( 1,831 29.32 Options Exercised — ( 1,831 ) $ 10.05 Plan Shares — ( 1,831 ) $ 10.05 Plan Shares Expired ( 203 10.05 Plan Shares Expired ( 203 ) — — Balance at ) — — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional — — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional Options — Balance at 9/29/01 10,075 97,179 $ 29.24 Additional Options Authorized at 9/29/01 10,075 97,179 $ 29.24 Additional Options Authorized 15,000 — $ 29.24 Additional Options Authorized 15,000 — — Options Granted ( — — Options Granted ( 23,239 ) 23,239 $ 19.89 Options Options Granted ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 Options Exercised 4,737 ( 4,737 ) $ 30.98 Options Exercised — ( 6,251 30.98 Options Exercised — ( 6,251 ) $ 11.99 Plan Shares — ( 6,251 ) $ 11.99 Plan Shares Expired ( 2 11.99 Plan Shares Expired ( 2 ) — — Balance at ) — — Balance at 9/28/02 6,571 109,430 $ 28.17 Restricted — — Balance at 9/28/02 6,571 109,430 $ 28.17 Restricted Stock — Balance at 9/28/02 6,571 109,430 $ 28.17 Restricted Stock Granted at 9/28/02 6,571 109,430 $ 28.17 Restricted Stock Granted ( 5,000 28.17 Restricted Stock Granted ( 5,000 ) — $ 14.95 Options ( 5,000 ) — $ 14.95 Options Granted ( 4,179 ) $ 14.95 Options Granted ( 4,179 ) 4,179 $ 16.38 Options Options Granted ( 4,179 ) 4,179 $ 16.38 Options Cancelled 48,443 ( 4,179 ) 4,179 $ 16.38 Options Cancelled 48,443 ( 48,443 4,179 $ 16.38 Options Cancelled 48,443 ( 48,443 ) $ 39.61 16.38 Options Cancelled 48,443 ( 48,443 ) $ 39.61 Options Exercised 48,443 ( 48,443 ) $ 39.61 Options Exercised — ( 2,154 39.61 Options Exercised — ( 2,154 ) $ 14.04 Plan Shares — ( 2,154 ) $ 14.04 Plan Shares Expired ( 5 14.04 Plan Shares Expired ( 5 ) — — Balance at ) — — Balance at 9/27/03 45,830 63,012 $ 19.08 Total — — Balance at 9/27/03 45,830 63,012 $ 19.08 Total option — Balance at 9/27/03 45,830 63,012 $ 19.08 Total option outstanding at 9/27/03 45,830 63,012 $ 19.08 Total option outstanding at September Total option outstanding at September 27 , 2003 to purchase approximately outstanding at September 27 , 2003 to purchase approximately 63 million , 2003 to purchase approximately 63 million share do not include include option to purchase approximately 6.7 million share that were issued that were issued in October 2003 pursuant to the Exchange Program Exchange Program described above . 90 The option outstanding a of option outstanding a of September 27 , 2003 have been segregated a of September 27 , 2003 have been segregated into six Options Outstanding a of September 27 , 2003 Weighted- Average Remaining a of September 27 , 2003 Weighted- Average Remaining Contractual Life Options Exercisable a of September 27 , 2003 Weighted Average Exercise a of September 27 , 2003 Weighted Average Exercise Price $ Weighted Average Exercise Price $ 0.83- $ 15.59 11,216 5.49 $ Exercise Price $ 0.83- $ 15.59 11,216 5.49 $ 11.83 8,237 Price $ 0.83- $ 15.59 11,216 5.49 $ 11.83 8,237 $ $ 0.83- $ 15.59 11,216 5.49 $ 11.83 8,237 $ 10.83 $ 15.59 11,216 5.49 $ 11.83 8,237 $ 10.83 $ 15.60- 15.59 11,216 5.49 $ 11.83 8,237 $ 10.83 $ 15.60- $ 5.49 $ 11.83 8,237 $ 10.83 $ 15.60- $ 17.31 11,936 11.83 8,237 $ 10.83 $ 15.60- $ 17.31 11,936 6.41 $ $ 10.83 $ 15.60- $ 17.31 11,936 6.41 $ 17.00 7,022 10.83 $ 15.60- $ 17.31 11,936 6.41 $ 17.00 7,022 $ $ 15.60- $ 17.31 11,936 6.41 $ 17.00 7,022 $ 17.07 $ 17.31 11,936 6.41 $ 17.00 7,022 $ 17.07 $ 17.32- 17.31 11,936 6.41 $ 17.00 7,022 $ 17.07 $ 17.32- $ 6.41 $ 17.00 7,022 $ 17.07 $ 17.32- $ 18.50 17,843 17.00 7,022 $ 17.07 $ 17.32- $ 18.50 17,843 7.04 $ $ 17.07 $ 17.32- $ 18.50 17,843 7.04 $ 18.43 11,903 17.07 $ 17.32- $ 18.50 17,843 7.04 $ 18.43 11,903 $ $ 17.32- $ 18.50 17,843 7.04 $ 18.43 11,903 $ 18.43 $ 18.50 17,843 7.04 $ 18.43 11,903 $ 18.43 $ 18.51- 18.50 17,843 7.04 $ 18.43 11,903 $ 18.43 $ 18.51- $ 7.04 $ 18.43 11,903 $ 18.43 $ 18.51- $ 22.21 14,416 18.43 11,903 $ 18.43 $ 18.51- $ 22.21 14,416 7.88 $ $ 18.43 $ 18.51- $ 22.21 14,416 7.88 $ 20.31 6,886 18.43 $ 18.51- $ 22.21 14,416 7.88 $ 20.31 6,886 $ $ 18.51- $ 22.21 14,416 7.88 $ 20.31 6,886 $ 20.27 $ 22.21 14,416 7.88 $ 20.31 6,886 $ 20.27 $ 22.22- 22.21 14,416 7.88 $ 20.31 6,886 $ 20.27 $ 22.22- $ 7.88 $ 20.31 6,886 $ 20.27 $ 22.22- $ 38.81 5,006 20.31 6,886 $ 20.27 $ 22.22- $ 38.81 5,006 7.49 $ $ 20.27 $ 22.22- $ 38.81 5,006 7.49 $ 24.03 2,844 20.27 $ 22.22- $ 38.81 5,006 7.49 $ 24.03 2,844 $ $ 22.22- $ 38.81 5,006 7.49 $ 24.03 2,844 $ 24.29 $ 38.81 5,006 7.49 $ 24.03 2,844 $ 24.29 $ 38.82- 38.81 5,006 7.49 $ 24.03 2,844 $ 24.29 $ 38.82- $ 7.49 $ 24.03 2,844 $ 24.29 $ 38.82- $ 69.78 2,595 24.03 2,844 $ 24.29 $ 38.82- $ 69.78 2,595 6.28 $ $ 24.29 $ 38.82- $ 69.78 2,595 6.28 $ 48.08 1,864 24.29 $ 38.82- $ 69.78 2,595 6.28 $ 48.08 1,864 $ $ 38.82- $ 69.78 2,595 6.28 $ 48.08 1,864 $ 48.11 $ 69.78 2,595 6.28 $ 48.08 1,864 $ 48.11 $ 0.83- 69.78 2,595 6.28 $ 48.08 1,864 $ 48.11 $ 0.83- $ 6.28 $ 48.08 1,864 $ 48.11 $ 0.83- $ 69.78 63,012 48.08 1,864 $ 48.11 $ 0.83- $ 69.78 63,012 6.84 $ $ 48.11 $ 0.83- $ 69.78 63,012 6.84 $ 19.08 38,756 48.11 $ 0.83- $ 69.78 63,012 6.84 $ 19.08 38,756 $ $ 0.83- $ 69.78 63,012 6.84 $ 19.08 38,756 $ 18.75 $ 69.78 63,012 6.84 $ 19.08 38,756 $ 18.75 As of 69.78 63,012 6.84 $ 19.08 38,756 $ 18.75 As of September 6.84 $ 19.08 38,756 $ 18.75 As of September 28 , $ 18.75 As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had exercisable had exercisable option to purchase 57.9 million share outstanding with a average exercise price of $ 30.85 per share . As of share . As of September 29 , 2001 , the Company As of September 29 , 2001 , the Company had exercisable had exercisable option to purchase 42.1 million share outstanding with a average exercise price of $ 32.15 . Note 9—Stock-Based Compensation The of $ 32.15 . Note 9—Stock-Based Compensation The Company ha provided pro forma disclosure in Note 1 of these Notes to Consolidated pursuant to SFAS No . 123 , the option award issued option award issued in October 2003 and the award cancelled a accordance with SFAS No . 123 , the grant date of with restricted share in March 2003 is also being accounted for pursuant to SFAS No . 123 . 91 The assumption used SFAS No . 123 . 91 The assumption used for each year are a follows : 2003 2002 2001 Expected life of are a follows : 2003 2002 2001 Expected life of stock a follows : 2003 2002 2001 Expected life of stock option Expected life of stock option 3.5-4 year 4 year 4 year of stock option 3.5-4 year 4 year 4 year Expected life option 3.5-4 year 4 year 4 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 2.14 6 month Interest rate—stock option 2.14 % -2.45 % 2.90 % option 2.14 % -2.45 % 2.90 % 4.90 % Interest rate—stock % -2.45 % 2.90 % 4.90 % Interest rate—stock purchase 1.10 4.90 % Interest rate—stock purchase 1.10 % -1.77 % 2.71 % purchase 1.10 % -1.77 % 2.71 % 5.97 % Volatility—stock option % -1.77 % 2.71 % 5.97 % Volatility—stock option 40 % % 5.97 % Volatility—stock option 40 % -63 % 64 % option 40 % -63 % 64 % 66 % Volatility—stock purchase % -63 % 64 % 66 % Volatility—stock purchase 35 % % 66 % Volatility—stock purchase 35 % -44 % 51 % purchase 35 % -44 % 51 % 90 % Dividend yield % -44 % 51 % 90 % Dividend yield 0 0 % 90 % Dividend yield 0 0 0 Weighted-average fair value 90 % Dividend yield 0 0 0 Weighted-average fair value of % Dividend yield 0 0 0 Weighted-average fair value of option granted during the year $ 6.63 $ 10.11 $ 10.15 Weighted-average the year $ 6.63 $ 10.11 $ 10.15 Weighted-average fair value $ 6.63 $ 10.11 $ 10.15 Weighted-average fair value of stock purchase during the year $ 4.24 $ 6.73 $ 11.15 For the year $ 4.24 $ 6.73 $ 11.15 For purpose of $ 4.24 $ 6.73 $ 11.15 For purpose of the pro pursuant to SFAS No . 123 , the expected volatility assumption to the third quarter of 2003 have been based solely on in the third quarter of 2003 , the Company ha modified in the third quarter of 2003 , the Company shortened it granted to it employee from 4 year to 3.5 year . employee from 4 year to 3.5 year . The Company base during the third quarter of 2003 wa the result of the option granted to employee from 10 year to 7 year and employee from 10 year to 7 year and changing the vesting option granted to employee from 4 year straight-line annual vesting to year straight-line annual vesting to 4 year straight-line quarterly vesting . straight-line quarterly vesting . Note 10—Commitments and Contingencies Lease Commitments The lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 15 year and often for term of 5 to 15 year and often contain multi-year option . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company 's total noncancelable operating lease were $ 600 million , of which $ million , of which $ 354 million related to lease for noncancelable lease , wa $ 97 million , $ 92 million $ 97 million , $ 92 million , and $ 80 92 million , and $ 80 million in 2003 , 2002 and $ 80 million in 2003 , 2002 , and 2001 80 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Future minimum respectively . Future minimum lease 92 payment under noncancelable operating lease one year a of September 27 , 2003 , are a a of September 27 , 2003 , are a follows ( million ) : Fiscal Years 2004 $ 100 2005 100 2006 : Fiscal Years 2004 $ 100 2005 100 2006 83 2007 Fiscal Years 2004 $ 100 2005 100 2006 83 2007 64 Years 2004 $ 100 2005 100 2006 83 2007 64 2008 2004 $ 100 2005 100 2006 83 2007 64 2008 51 $ 100 2005 100 2006 83 2007 64 2008 51 Later 100 2005 100 2006 83 2007 64 2008 51 Later year 2005 100 2006 83 2007 64 2008 51 Later year 202 100 2006 83 2007 64 2008 51 Later year 202 Total 2006 83 2007 64 2008 51 Later year 202 Total minimum 64 2008 51 Later year 202 Total minimum lease payment $ Total minimum lease payment $ 600 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for Apple software ( in million ) : 2003 2002 2001 Beginning accrued warranty in million ) : 2003 2002 2001 Beginning accrued warranty and million ) : 2003 2002 2001 Beginning accrued warranty and related warranty and related cost $ 69 $ 87 $ 108 Cost related cost $ 69 $ 87 $ 108 Cost of warranty $ 69 $ 87 $ 108 Cost of warranty claim ( Cost of warranty claim ( 71 ) ( 79 ) ( claim ( 71 ) ( 79 ) ( 92 ) Accruals ) ( 79 ) ( 92 ) Accruals for product warranty ) Accruals for product warranty 69 61 71 Ending accrued warranty Accruals for product warranty 69 61 71 Ending accrued warranty and for product warranty 69 61 71 Ending accrued warranty and related warranty and related cost $ 67 $ 69 $ 87 The related cost $ 67 $ 69 $ 87 The Company generally $ 67 $ 69 $ 87 The Company generally doe not cost a of either September 27 , 2003 or September 28 of either September 27 , 2003 or September 28 , 2002 27 , 2003 or September 28 , 2002 . 93 Concentrations 2003 or September 28 , 2002 . 93 Concentrations in the September 28 , 2002 . 93 Concentrations in the Available Sources . Contingencies Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the their amended complaint on January 31 , 2003 , and on complaint on January 31 , 2003 , and on March 17 2003 , and on March 17 , 2003 , the Company and on March 17 , 2003 , the Company filed a Company 's motion on July 11 , 2003 and dismissed Plaintiff motion on July 11 , 2003 and dismissed Plaintiff 's claim claim with prejudice on August 12 , 2003 . Plaintiffs have prejudice on August 12 , 2003 . Plaintiffs have appealed the the requirement to provide customer 94 the ability to return product and financial position . Note 11—Segment Information and Geographic Data The Japan . As of September 27 , 2003 , the Retail As of September 27 , 2003 , the Retail segment currently Significant Accounting Policies in Note 1 , except a described below the Retail segment were $ 92 million , $ 106 million $ 92 million , $ 106 million , and $ 92 106 million , and $ 92 million in 2003 , 2002 and $ 92 million in 2003 , 2002 , and 2001 92 million in 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Operating income For the year ended September 27 , 2003 , September 28 year ended September 27 , 2003 , September 28 , 2002 27 , 2003 , September 28 , 2002 , and September 2003 , September 28 , 2002 , and September 29 , , 2002 , and September 29 , 2001 this resulted in , and September 29 , 2001 this resulted in the 95 2001 this resulted in the 95 recognition of additional cost of corporate expense of approximately $ 106 million , $ 52 million $ 106 million , $ 52 million , and $ 4 52 million , and $ 4 million , respectively . Second For the year ended September 27 , 2003 , this resulted year ended September 27 , 2003 , this resulted in the Americas segment , of $ 30 million and $ 20 million $ 30 million and $ 20 million , respectively . For For the year ended September 28 , 2002 , this resulted year ended September 28 , 2002 , this resulted in the Americas segment , of $ 8 million and $ 6 million $ 8 million and $ 6 million , respectively . These amount were insignificant in fiscal 2001 . Third , a portion and Chicago a of September 27 , 2003 . Expenses allocated a of September 27 , 2003 . Expenses allocated to corporate these three store were $ 6 million and $ 1 million $ 6 million and $ 1 million in fiscal 2003 and $ 1 million in fiscal 2003 and 2002 , respectively . million in fiscal 2003 and 2002 , respectively . 96 Summary and 2002 , respectively . 96 Summary information by operating segment ( in million ) : 2003 2002 2001 Americas : Net in million ) : 2003 2002 2001 Americas : Net sale million ) : 2003 2002 2001 Americas : Net sale $ Americas : Net sale $ 3,181 $ 3,131 $ 3,037 Operating Net sale $ 3,181 $ 3,131 $ 3,037 Operating income $ $ 3,181 $ 3,131 $ 3,037 Operating income $ 323 $ $ 3,037 Operating income $ 323 $ 278 $ 128 Depreciation Operating income $ 323 $ 278 $ 128 Depreciation , amortization $ 323 $ 278 $ 128 Depreciation , amortization and accretion , amortization and accretion $ 5 $ 4 $ 4 Segment and accretion $ 5 $ 4 $ 4 Segment asset ( $ 5 $ 4 $ 4 Segment asset ( a ) asset ( a ) $ 494 $ 395 $ 334 Europe a ) $ 494 $ 395 $ 334 Europe : Net $ 494 $ 395 $ 334 Europe : Net sale $ Europe : Net sale $ 1,309 $ 1,251 $ 1,249 Operating Net sale $ 1,309 $ 1,251 $ 1,249 Operating income $ $ 1,309 $ 1,251 $ 1,249 Operating income $ 130 $ $ 1,249 Operating income $ 130 $ 122 $ 68 Depreciation Operating income $ 130 $ 122 $ 68 Depreciation and amortization $ 130 $ 122 $ 68 Depreciation and amortization $ 4 68 Depreciation and amortization $ 4 $ 4 $ 6 Segment and amortization $ 4 $ 4 $ 6 Segment asset $ $ 4 $ 4 $ 6 Segment asset $ 252 $ $ 6 Segment asset $ 252 $ 165 $ 137 Japan Segment asset $ 252 $ 165 $ 137 Japan : Net $ 252 $ 165 $ 137 Japan : Net sale $ Japan : Net sale $ 698 $ 710 $ 713 Operating Net sale $ 698 $ 710 $ 713 Operating income $ $ 698 $ 710 $ 713 Operating income $ 121 $ $ 713 Operating income $ 121 $ 140 $ 98 Depreciation Operating income $ 121 $ 140 $ 98 Depreciation , amortization $ 121 $ 140 $ 98 Depreciation , amortization and accretion , amortization and accretion $ 3 $ 2 $ 2 Segment and accretion $ 3 $ 2 $ 2 Segment asset $ $ 3 $ 2 $ 2 Segment asset $ 130 $ $ 2 Segment asset $ 130 $ 50 $ 44 Retail Segment asset $ 130 $ 50 $ 44 Retail : Net $ 130 $ 50 $ 44 Retail : Net sale $ Retail : Net sale $ 621 $ 283 $ 19 Operating Net sale $ 621 $ 283 $ 19 Operating loss $ $ 621 $ 283 $ 19 Operating loss $ ( 5 19 Operating loss $ ( 5 ) $ ( 22 ) ( 5 ) $ ( 22 ) $ ( 21 ) ( 22 ) $ ( 21 ) Depreciation , amortization and accretion ( b ) $ 25 $ 16 $ 2 Segment b ) $ 25 $ 16 $ 2 Segment asset ( $ 25 $ 16 $ 2 Segment asset ( b ) asset ( b ) $ 243 $ 141 $ 46 Other b ) $ 243 $ 141 $ 46 Other Segments ( $ 243 $ 141 $ 46 Other Segments ( c ) ) : Net sale $ 398 $ 367 $ 345 Operating Net sale $ 398 $ 367 $ 345 Operating income $ $ 398 $ 367 $ 345 Operating income $ 51 $ $ 345 Operating income $ 51 $ 44 $ 24 Depreciation Operating income $ 51 $ 44 $ 24 Depreciation , amortization $ 51 $ 44 $ 24 Depreciation , amortization and accretion , amortization and accretion $ 2 $ 2 $ 2 Segment and accretion $ 2 $ 2 $ 2 Segment asset $ $ 2 $ 2 $ 2 Segment asset $ 78 $ $ 2 Segment asset $ 78 $ 67 $ 70 ( Segment asset $ 78 $ 67 $ 70 ( a ) $ 78 $ 67 $ 70 ( a ) The Americas segment to conform to the 2003 presentation . 97 A reconciliation to the 2003 presentation . 97 A reconciliation of the Company ( in million ) : 2003 2002 2001 Segment operating income in million ) : 2003 2002 2001 Segment operating income $ million ) : 2003 2002 2001 Segment operating income $ 620 2001 Segment operating income $ 620 $ 562 $ 297 Corporate operating income $ 620 $ 562 $ 297 Corporate expense , $ 620 $ 562 $ 297 Corporate expense , net ( Corporate expense , net ( 595 ) ( 514 ) ( net ( 595 ) ( 514 ) ( 630 ) Purchased ) ( 514 ) ( 630 ) Purchased in-process research and research and development — ( 1 ) ( 11 ) Restructuring — ( 1 ) ( 11 ) Restructuring cost ( 26 11 ) Restructuring cost ( 26 ) ( 30 ) — cost ( 26 ) ( 30 ) — Consolidated operating income ( loss ) $ ( 1 ) $ 17 $ ( $ ( 1 ) $ 17 $ ( 344 ) Segment ) $ 17 $ ( 344 ) Segment asset $ 1,197 344 ) Segment asset $ 1,197 $ 818 $ 631 Corporate Segment asset $ 1,197 $ 818 $ 631 Corporate asset $ $ 1,197 $ 818 $ 631 Corporate asset $ 5,618 $ $ 631 Corporate asset $ 5,618 $ 5,480 $ 5,390 Consolidated Corporate asset $ 5,618 $ 5,480 $ 5,390 Consolidated asset $ $ 5,618 $ 5,480 $ 5,390 Consolidated asset $ 6,815 $ $ 5,390 Consolidated asset $ 6,815 $ 6,298 $ 6,021 Segment Consolidated asset $ 6,815 $ 6,298 $ 6,021 Segment depreciation , $ 6,815 $ 6,298 $ 6,021 Segment depreciation , amortization and , amortization and accretion $ 39 $ 28 $ 16 Corporate and accretion $ 39 $ 28 $ 16 Corporate depreciation , $ 39 $ 28 $ 16 Corporate depreciation , amortization and depreciation , amortization and accretion 74 86 84 Consolidated depreciation , , amortization and accretion 74 86 84 Consolidated depreciation , amortization amortization and accretion 74 86 84 Consolidated depreciation , amortization and , amortization and accretion $ 113 $ 114 $ 100 A and accretion $ 113 $ 114 $ 100 A large portion $ 113 $ 114 $ 100 A large portion of the customer accounted for more than 10 % of net sale in % of net sale in 2003 , 2002 or 2001 . net sale in 2003 , 2002 or 2001 . Net sale in 2003 , 2002 or 2001 . Net sale and long-lived ( in million ) : 2003 2002 2001 Net Sales : in million ) : 2003 2002 2001 Net Sales : United million ) : 2003 2002 2001 Net Sales : United States Sales : United States $ 3,627 $ 3,272 $ 2,936 Japan United States $ 3,627 $ 3,272 $ 2,936 Japan 698 710 $ 3,627 $ 3,272 $ 2,936 Japan 698 710 713 Other $ 3,272 $ 2,936 Japan 698 710 713 Other Foreign Countries 3,272 $ 2,936 Japan 698 710 713 Other Foreign Countries 1,882 $ 2,936 Japan 698 710 713 Other Foreign Countries 1,882 1,760 710 713 Other Foreign Countries 1,882 1,760 1,714 Total Net Sales 713 Other Foreign Countries 1,882 1,760 1,714 Total Net Sales $ Other Foreign Countries 1,882 1,760 1,714 Total Net Sales $ 6,207 1,714 Total Net Sales $ 6,207 $ 5,742 $ 5,363 Long-Lived Net Sales $ 6,207 $ 5,742 $ 5,363 Long-Lived Assets : $ 6,207 $ 5,742 $ 5,363 Long-Lived Assets : United States Assets : United States $ 635 $ 561 $ 498 Japan United States $ 635 $ 561 $ 498 Japan 19 2 $ 635 $ 561 $ 498 Japan 19 2 3 Other $ 561 $ 498 Japan 19 2 3 Other Foreign Countries 561 $ 498 Japan 19 2 3 Other Foreign Countries 60 $ 498 Japan 19 2 3 Other Foreign Countries 60 69 2 3 Other Foreign Countries 60 69 77 Total Long-Lived Assets 3 Other Foreign Countries 60 69 77 Total Long-Lived Assets $ Other Foreign Countries 60 69 77 Total Long-Lived Assets $ 714 77 Total Long-Lived Assets $ 714 $ 632 $ 578 98 Long-Lived Assets $ 714 $ 632 $ 578 98 Information regarding $ 714 $ 632 $ 578 98 Information regarding net sale 714 $ 632 $ 578 98 Information regarding net sale by ( in million ) : 2003 2002 2001 Net Sales : in million ) : 2003 2002 2001 Net Sales : Power million ) : 2003 2002 2001 Net Sales : Power Macintosh Macintosh ( a ) $ 1,237 $ 1,380 $ 1,664 PowerBook a ) $ 1,237 $ 1,380 $ 1,664 PowerBook 1,299 831 $ 1,237 $ 1,380 $ 1,664 PowerBook 1,299 831 813 iMac $ 1,380 $ 1,664 PowerBook 1,299 831 813 iMac 1,238 1,448 1,380 $ 1,664 PowerBook 1,299 831 813 iMac 1,238 1,448 1,117 $ 1,664 PowerBook 1,299 831 813 iMac 1,238 1,448 1,117 iBook PowerBook 1,299 831 813 iMac 1,238 1,448 1,117 iBook 717 875 1,299 831 813 iMac 1,238 1,448 1,117 iBook 717 875 809 831 813 iMac 1,238 1,448 1,117 iBook 717 875 809 Total iMac 1,238 1,448 1,117 iBook 717 875 809 Total Macintosh Net 1,238 1,448 1,117 iBook 717 875 809 Total Macintosh Net Sales 1,448 1,117 iBook 717 875 809 Total Macintosh Net Sales $ Total Macintosh Net Sales $ 4,491 $ 4,534 $ 4,403 Peripherals Net Sales $ 4,491 $ 4,534 $ 4,403 Peripherals and other $ 4,491 $ 4,534 $ 4,403 Peripherals and other hardware ( other hardware ( b ) 1,058 674 387 Software ( c hardware ( b ) 1,058 674 387 Software ( c ) ( b ) 1,058 674 387 Software ( c ) 362 387 Software ( c ) 362 307 230 Service and other Software ( c ) 362 307 230 Service and other Net ( c ) 362 307 230 Service and other Net Sales Service and other Net Sales 296 227 343 Total Net Sales and other Net Sales 296 227 343 Total Net Sales $ other Net Sales 296 227 343 Total Net Sales $ 6,207 343 Total Net Sales $ 6,207 $ 5,742 $ 5,363 ( Net Sales $ 6,207 $ 5,742 $ 5,363 ( a ) $ 6,207 $ 5,742 $ 5,363 ( a ) Power Macintosh of third-party software . Note 12—Related Party Transactions and Certain Other During the first quarter of 2000 , the Company 's Board the Company of approximately $ 90 million , the majority of In the fourth quarter of 2002 , all significant work and . Of the original $ 90 million accrual , $ 2.4 90 million accrual , $ 2.4 million remained unspent at the at the end of fiscal 2002 and wa reversed . In wa reversed . In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 404,000 in expense pursuant to the the Reimbursement Agreement during fiscal 2003 . For fiscal 2002 , fiscal 2003 . For fiscal 2002 , the Company recognized a recognized a total of $ 1,168,000 in expense pursuant to the incurred by Mr. Jobs during 2001 and 2002 . All expense Mr. Jobs during 2001 and 2002 . All expense recognized pursuant President , Retail , $ 1.5 million for the purchase of due and payable in May 2004 . Under the term of to the lesser of ( 1 ) an amount equal to ) an amount equal to 50 % of the total net gain realized from the exercise 99 of the option ; or the option ; or ( 2 ) $ 375,000 multiplied by or ( 2 ) $ 375,000 multiplied by the number of . Mr. Johnson repaid $ 750,000 of this loan in fiscal of this loan in fiscal 2003 . The remaining $ 750,000 2003 . The remaining $ 750,000 is due and payable in due and payable in May 2004 . Mr. Jerome York , ( MicroWarehouse ) in January 2000 . Until September 7 , January 2000 . Until September 7 , 2003 , he also . Until September 7 , 2003 , he also served a the Company . On September 8 , 2003 , CDW Corporation . On September 8 , 2003 , CDW Corporation ( CDW MicroWarehouse subsequently filed for Chapter 11 bankruptcy protection in the United States . MicroWarehouse accounted for 2.4 % , 3.3 % , accounted for 2.4 % , 3.3 % , and 2.9 % , 3.3 % , and 2.9 % of the Company 's 's net sale in fiscal 2003 , 2002 and 2001 , sale in fiscal 2003 , 2002 and 2001 , respectively . fiscal 2003 , 2002 and 2001 , respectively . Trade receivables receivables from MicroWarehouse were $ 9.9 million and $ 20.9 million $ 9.9 million and $ 20.9 million a of September 27 20.9 million a of September 27 , 2003 , and September a of September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively . , and September 28 , 2002 , respectively . The Company purchase amounted to approximately $ 2.3 million , $ 2.9 million $ 2.3 million , $ 2.9 million , and $ 3.4 2.9 million , and $ 3.4 million in fiscal 2003 , $ 3.4 million in fiscal 2003 , 2002 , and 2001 million in fiscal 2003 , 2002 , and 2001 , respectively 2003 , 2002 , and 2001 , respectively . Note 13—Selected 2001 , respectively . Note 13—Selected Quarterly Financial Information ( Unaudited except per share amount ) 2003 Net sale $ 1,715 $ ) 2003 Net sale $ 1,715 $ 1,545 $ 1,475 $ Net sale $ 1,715 $ 1,545 $ 1,475 $ 1,472 Gross $ 1,715 $ 1,545 $ 1,475 $ 1,472 Gross margin $ $ 1,545 $ 1,475 $ 1,472 Gross margin $ 456 $ $ 1,472 Gross margin $ 456 $ 428 $ 418 $ Gross margin $ 456 $ 428 $ 418 $ 406 Net $ 456 $ 428 $ 418 $ 406 Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02 ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) 2002 0.05 $ 0.04 $ ( 0.02 ) 2002 Net sale $ 0.04 $ ( 0.02 ) 2002 Net sale $ 1,443 $ ) 2002 Net sale $ 1,443 $ 1,429 $ 1,495 $ Net sale $ 1,443 $ 1,429 $ 1,495 $ 1,375 Gross $ 1,443 $ 1,429 $ 1,495 $ 1,375 Gross margin $ $ 1,429 $ 1,495 $ 1,375 Gross margin $ 381 $ $ 1,375 Gross margin $ 381 $ 391 $ 409 $ Gross margin $ 381 $ 391 $ 409 $ 422 Net $ 381 $ 391 $ 409 $ 422 Net income ( $ 391 $ 409 $ 422 Net income ( loss ) ( loss ) $ ( 45 ) $ 32 $ 40 $ ( 45 ) $ 32 $ 40 $ 38 Earnings 45 ) $ 32 $ 40 $ 38 Earnings ( loss $ 32 $ 40 $ 38 Earnings ( loss ) per share : Basic $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted 0.13 ) $ 0.09 $ 0.11 $ 0.11 Diluted $ ( $ 0.09 $ 0.11 $ 0.11 Diluted $ ( 0.13 ) $ 0.11 Diluted $ ( 0.13 ) $ 0.09 $ 0.11 $ ( 0.13 ) $ 0.09 $ 0.11 $ 0.11 Basic 0.13 ) $ 0.09 $ 0.11 $ 0.11 Basic and diluted $ 0.09 $ 0.11 $ 0.11 Basic and diluted earnings ( fourth and third quarter of 2003 included after-tax net gain related to non-current investment of $ 5 million and $ 1 million $ 5 million and $ 1 million , respectively . Net in a gain of $ 6 million and a favorable cumulative-effect to the adoption of SFAS 150 of $ 3 million . of SFAS 150 of $ 3 million . Net income ( Net income ( loss ) 100 during the second and first second and first quarter of 2003 included restructuring charge , net of tax , of $ 2 million and $ 18 million $ 2 million and $ 18 million , respectively . Net for the first quarter of 2003 included an after-tax unfavorable cumulative-effect of SFAS No.143 of $ 2 million . Net loss for for the fourth quarter of 2002 included the following item , certain equity investment totaling $ 49 million ; a restructuring charge a restructuring charge of $ 4 million ; an in-process research development charge of approximately $ 1 million ; and the reversal a favorable impact of $ 2 million . Net income for for the first quarter of 2002 included a restructuring charge , of tax , of $ 18 million . Net income during during the first quarter of 2002 also included gain , net of tax , of $ 17 million related to non-current investment related to non-current investment . 101 REPORT OF INDEPENDENT AUDITORS The and subsidiary a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , and the 2003 and September 28 , 2002 , and the related consolidated the three-year period ended September 27 , 2003 . These consolidated period ended September 27 , 2003 . These consolidated financial statement and subsidiary a of September 27 , 2003 and September 28 a of September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , and the 2003 and September 28 , 2002 , and the result of the three-year period ended September 27 , 2003 , in conformity period ended September 27 , 2003 , in conformity with accounting . As discussed in Note 1 to the consolidated financial statement both liability and equity in 2003 , changed it method of of accounting for goodwill in 2002 , and changed it method accounting for hedging activity in 2001 . /s/ KPMG LLP Mountain Mountain View , California October 14 , 2003 102 Item 9 , California October 14 , 2003 102 Item 9 . Changes California October 14 , 2003 102 Item 9 . Changes in 14 , 2003 102 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Based ( a defined in Rules 13a-14 ( c ) and 15d-14 13a-14 ( c ) and 15d-14 ( c ) under the the Securities Exchange Act of 1934 , a amended ( Exchange were effective a of September 27 , 2003 to ensure that a of September 27 , 2003 to ensure that information required the fourth quarter of fiscal 2003 that have materially affected or control over financial reporting . 103 PART III Item 10 . . 103 PART III Item 10 . Directors and Executive Officers Since William V. Campbell Director 63 1997 Millard S. Drexler Director William V. Campbell Director 63 1997 Millard S. Drexler Director 59 1997 Millard S. Drexler Director 59 1999 Albert Gore , Jr. Millard S. Drexler Director 59 1999 Albert Gore , Jr. Director Albert Gore , Jr. Director 56 2003 Steven P. Jobs Director Gore , Jr. Director 56 2003 Steven P. Jobs Director and Director and Chief Executive Officer 48 1997 Arthur D. Levinson Director and Chief Executive Officer 48 1997 Arthur D. Levinson Director 53 1997 Arthur D. Levinson Director 53 2000 Jerome B. York Director Arthur D. Levinson Director 53 2000 Jerome B. York Director 65 2000 Jerome B. York Director 65 1997 William V. Campbell ha Jerome B. York Director 65 1997 William V. Campbell ha been Intuit `` ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From April 1994 to August 1998 , Mr. From April 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Metropolitan West Financial LLC since 2001 . He is a visiting Gore wa inaugurated a the 45th Vice President of the United of the United States in 1993 . He wa re-elected in . He wa re-elected in 1996 and served for a total Group , Inc. since March 2003 . Previously , Mr. Drexler Officer of Gap Inc. from 1995 and President from 1987 until from 1995 and President from 1987 until September 2002 . Mr. President from 1987 until September 2002 . Mr. Drexler wa also of Gap Inc. from November 1983 until October 2002 . Steven from November 1983 until October 2002 . Steven P. Jobs is Executive Officer of NeXT from 1985 until 1997 when NeXT wa of NeXT from 1985 until 1997 when NeXT wa acquired by Genentech `` ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Jerome B. & D from 1993 to 1995 . Jerome B. York ha he control , since September 2003 . From January 2000 until September 2003 . From January 2000 until September 2003 , Mr. From January 2000 until September 2003 , Mr. York wa Chairman peripheral product . From September 1995 to October 1999 , he From September 1995 to October 1999 , he wa Vice Chairman Tracinda Corporation . From May 1993 to September 1995 he wa From May 1993 to September 1995 he wa Senior Vice President Board of Directors from January 1995 to August 1995 . Previously from January 1995 to August 1995 . Previously his career wa Ltd. and Metro-Goldwyn-Mayer , Inc. 104 Role of the Board ; MicroWarehouse , ( see Item 13 . Certain Relationships and Related financial expert `` under Item 401 ( h ) of Regulation term is used in Item 7 ( d ) ( 3 7 ( d ) ( 3 ) ( iv ) of ( iv ) of Schedule 14A under the Exchange Act . this annual report on Form 10-K . The Company intends to Company intends to disclose any 105 change in or waiver from or by filing a Form 8-K. Executive Officers The following set Chief Financial Officer ( age 59 ) , joined the Company joined the Company in April 1996 . Prior to joining the position he held from August 1992 to March 1996 . Mr. from August 1992 to March 1996 . Mr. Anderson also serf Sales and Operations ( age 43 ) , joined the Company joined the Company in February 1998 . Prior to joining the . Mr. Cook also spent 12 year with IBM , most Counsel and Secretary ( age 47 ) , joined the Company joined the Company in September 1997 . Prior to joining the Directors at NeXT from February 1994 until the acquisition of NeXT by the Company in February 1997 . Ronald B. Johnson , President , Retail ( age 45 ) , joined the Company joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , and Corporate Controller ( age 41 ) , joined the Company joined the Company in July 1996 . Mr. Oppenheimer also served , Hardware Engineering ( age 47 ) , joined the Company joined the Company in February 1997 . Before joining the Company Systems Incorporated , from May 1993 to August 1996 . Mr. from May 1993 to August 1996 . Mr. Rubinstein also serf Worldwide Product Marketing ( age 43 ) , rejoined the Company , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 and wa from December 1995 to March 1997 and wa Director of Product FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , , Software Engineering ( age 42 ) , joined the Company joined the Company in February 1997 upon the Company 's acquisition Prior to NeXT , from 1985 to 1989 , Dr. Serlet NeXT , from 1985 to 1989 , Dr. Serlet worked a President , Applications ( age 46 ) , joined the Company joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 106 through March 1997 . with NeXT from September 1996 106 through March 1997 . From September 1996 106 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the Software Technology Officer ( age 42 ) , joined the Company joined the Company in February 1997 upon the Company 's acquisition President , Software Engineering from 1997 to July 2003 . With Engineering from 1997 to July 2003 . With NeXT , Dr. , Engineering , from April 1995 to February 1997 . Prior from April 1995 to February 1997 . Prior to April 1995 1997 . Prior to April 1995 , Dr. Tevanian worked a several management position . Item 11 . Executive Compensation Information Regarding P. Jobs Chief Executive Officer 2003 2002 2001 1 1 1 Jobs Chief Executive Officer 2003 2002 2001 1 1 1 — Chief Executive Officer 2003 2002 2001 1 1 1 — 2,268,698 Executive Officer 2003 2002 2001 1 1 1 — 2,268,698 43,511,534 Officer 2003 2002 2001 1 1 1 — 2,268,698 43,511,534 ( 2003 2002 2001 1 1 1 — 2,268,698 43,511,534 ( 2 2001 1 1 1 — 2,268,698 43,511,534 ( 2 ) ( 1 1 1 — 2,268,698 43,511,534 ( 2 ) ( 2 1 — 2,268,698 43,511,534 ( 2 ) ( 2 ) 74,750,000 43,511,534 ( 2 ) ( 2 ) 74,750,000 ( 1 ) 2 ) ( 2 ) 74,750,000 ( 1 ) — 7,500,000 ( 2 ) 74,750,000 ( 1 ) — 7,500,000 — ( 74,750,000 ( 1 ) — 7,500,000 — ( 1 ) — ) — 7,500,000 — ( 1 ) — 1,302,795 40,484,594 ( — ( 1 ) — 1,302,795 40,484,594 ( 2 ) ( ( 1 ) — 1,302,795 40,484,594 ( 2 ) ( 2 ) — 1,302,795 40,484,594 ( 2 ) ( 2 ) Fred 40,484,594 ( 2 ) ( 2 ) Fred D. Anderson Executive President and Chief Financial Officer 2003 2002 2001 656,631 656,631 657,039 and Chief Financial Officer 2003 2002 2001 656,631 656,631 657,039 — Chief Financial Officer 2003 2002 2001 656,631 656,631 657,039 — — Financial Officer 2003 2002 2001 656,631 656,631 657,039 — — — Officer 2003 2002 2001 656,631 656,631 657,039 — — — — 2003 2002 2001 656,631 656,631 657,039 — — — — — — — — — — 1,000,000 11,450 11,000 7,312 ( 3 — — — — 1,000,000 11,450 11,000 7,312 ( 3 ) — — — 1,000,000 11,450 11,000 7,312 ( 3 ) ( — — 1,000,000 11,450 11,000 7,312 ( 3 ) ( 3 1,000,000 11,450 11,000 7,312 ( 3 ) ( 3 ) ( 7,312 ( 3 ) ( 3 ) ( 3 ) Timothy ) ( 3 ) ( 3 ) Timothy D. Cook Executive , Worldwide Sales and Operations 2003 2002 2001 617,673 563,829 452,219 Worldwide Sales and Operations 2003 2002 2001 617,673 563,829 452,219 — Sales and Operations 2003 2002 2001 617,673 563,829 452,219 — — and Operations 2003 2002 2001 617,673 563,829 452,219 — — 500,000 Operations 2003 2002 2001 617,673 563,829 452,219 — — 500,000 — 2003 2002 2001 617,673 563,829 452,219 — — 500,000 — — 617,673 563,829 452,219 — — 500,000 — — — — — — — — — — 1,000,000 9,929 8,025 7,875 ( 3 — — — — 1,000,000 9,929 8,025 7,875 ( 3 ) — — — 1,000,000 9,929 8,025 7,875 ( 3 ) ( — — 1,000,000 9,929 8,025 7,875 ( 3 ) ( 3 1,000,000 9,929 8,025 7,875 ( 3 ) ( 3 ) ( 7,875 ( 3 ) ( 3 ) ( 3 ) Ronald ) ( 3 ) ( 3 ) Ronald B. Johnson Senior Senior Vice President , Retail 2003 2002 2001 452,404 452,404 452,429 Vice President , Retail 2003 2002 2001 452,404 452,404 452,429 1,500,000 President , Retail 2003 2002 2001 452,404 452,404 452,429 1,500,000 — , Retail 2003 2002 2001 452,404 452,404 452,429 1,500,000 — — Retail 2003 2002 2001 452,404 452,404 452,429 1,500,000 — — — 2003 2002 2001 452,404 452,404 452,429 1,500,000 — — — — 2002 2001 452,404 452,404 452,429 1,500,000 — — — — — — — — — — 300,000 300,000 — — — Avadis — — — — 300,000 300,000 — — — Avadis Tevanian , Chief Software Technology Officer 2003 2002 2001 456,731 492,212 460,873 Chief Software Technology Officer 2003 2002 2001 456,731 492,212 460,873 — Software Technology Officer 2003 2002 2001 456,731 492,212 460,873 — — Technology Officer 2003 2002 2001 456,731 492,212 460,873 — — 500 Officer 2003 2002 2001 456,731 492,212 460,873 — — 500 — 2003 2002 2001 456,731 492,212 460,873 — — 500 — — 456,731 492,212 460,873 — — 500 — — — — — — — — — — 1,000,000 11,962 10,700 10,200 ( 3 — — — — 1,000,000 11,962 10,700 10,200 ( 3 ) — — — 1,000,000 11,962 10,700 10,200 ( 3 ) ( — — 1,000,000 11,962 10,700 10,200 ( 3 ) ( 3 1,000,000 11,962 10,700 10,200 ( 3 ) ( 3 ) ( 10,200 ( 3 ) ( 3 ) ( 3 ) ( ) ( 3 ) ( 3 ) ( 1 ) In ) ( 3 ) ( 1 ) In March 2003 , ( 1 ) In March 2003 , Mr. Jobs voluntarily cancelled a director . In March 2003 , the Board awarded Mr. the grant date . ( 2 ) In December 1999 , ( 2 ) In December 1999 , Mr. Jobs wa given the Company of approximately $ 90,000,000 . Because the aircraft wa transferred to Mr. Jobs in 2001 , the amount of approximately the amount of approximately $ 43.5 million paid by the Company the Company during fiscal year 2001 towards the purchase of the tax assistance of approximately $ 40.5 million wa reported a income Mr. Jobs . In fiscal 2002 , approximately $ 2.27 million fiscal 2002 , approximately $ 2.27 million paid by the Company the plane and approximately $ 1.3 million in related tax assistance to Mr. Jobs . ( 3 ) Consists of matching contribution with the term of the 401 ( k ) plan . ( k ) plan . 107 Option Grants in Last Fiscal Executive Officers during fiscal year 2003 . Options Exercised and Year-End Executive Officers during fiscal year 2003 and stock option held by Year-End ( $ ) ( 1 ) Name Shares Acquired on Steven P. Jobs — — 60,000 ( 2 ) — $ Jobs — — 60,000 ( 2 ) — $ 551,400 — ( 2 ) — $ 551,400 — Fred D. Anderson — Fred D. Anderson — — 1,150,000 800,000 $ 4,134,125 $ 2,952,000 D. Anderson — — 1,150,000 800,000 $ 4,134,125 $ 2,952,000 Timothy — — 1,150,000 800,000 $ 4,134,125 $ 2,952,000 Timothy D. Cook 1,150,000 800,000 $ 4,134,125 $ 2,952,000 Timothy D. Cook — — Timothy D. Cook — — 800,000 800,000 $ 2,952,000 $ 2,952,000 D. Cook — — 800,000 800,000 $ 2,952,000 $ 2,952,000 Ronald — — 800,000 800,000 $ 2,952,000 $ 2,952,000 Ronald B. Johnson 800,000 800,000 $ 2,952,000 $ 2,952,000 Ronald B. Johnson — — Ronald B. Johnson — — 1,181,250 618,750 $ 451,687 $ 205,312 B. Johnson — — 1,181,250 618,750 $ 451,687 $ 205,312 Avadis — — 1,181,250 618,750 $ 451,687 $ 205,312 Avadis Tevanian , 1,181,250 618,750 $ 451,687 $ 205,312 Avadis Tevanian , Jr. — Tevanian , Jr. — — 1,600,000 800,000 $ 9,636,522 $ 2,952,000 , Jr. — — 1,600,000 800,000 $ 9,636,522 $ 2,952,000 ( — — 1,600,000 800,000 $ 9,636,522 $ 2,952,000 ( 1 ) 1,600,000 800,000 $ 9,636,522 $ 2,952,000 ( 1 ) Market value $ 9,636,522 $ 2,952,000 ( 1 ) Market value of security the end of fiscal year 2003 ( based on $ 20.69 2003 ( based on $ 20.69 per share , the closing Nasdaq National Market on September 27 , 2003 ) , minus Market on September 27 , 2003 ) , minus the exercise the exercise price . ( 2 ) Includes 60,000 option granted . ( 2 ) Includes 60,000 option granted to Mr. Jobs a director pursuant to the 1997 Director Stock Option Plan . Option Plan . In March 2003 , Mr. Jobs voluntarily cancelled retainer be equity-based . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan `` ) and 800,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 370,000 share outstanding under the Director Directors also receive a $ 50,000 annual retainer paid in quarterly until his resignation in November 2002 at which time Mr. Drexler Committee . No person who 108 wa an employee of the the Company in fiscal year 2003 served on the Compensation Committee of the Company . Item 12 . Security Ownership of Certain certain information a of October 31 , 2003 ( the `` a of October 31 , 2003 ( the `` Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 367,490,665 share of Common Stock were Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Lord , Abbett & Co. 34,864,239 ( 2 ) 9.49 % Abbett & Co. 34,864,239 ( 2 ) 9.49 % Steven P. Co. 34,864,239 ( 2 ) 9.49 % Steven P. Jobs 5,060,002 9.49 % Steven P. Jobs 5,060,002 ( 3 ) 1.38 % Steven P. Jobs 5,060,002 ( 3 ) 1.38 % Fred D. Jobs 5,060,002 ( 3 ) 1.38 % Fred D. Anderson 1,152,672 1.38 % Fred D. Anderson 1,152,672 ( 4 ) * William Fred D. Anderson 1,152,672 ( 4 ) * William V. Campbell ) * William V. Campbell 90,502 ( 5 ) * Timothy William V. Campbell 90,502 ( 5 ) * Timothy D. Cook ) * Timothy D. Cook 804,334 ( 6 ) * Millard Timothy D. Cook 804,334 ( 6 ) * Millard S. Drexler ) * Millard S. Drexler 90,000 ( 7 ) * Albert Millard S. Drexler 90,000 ( 7 ) * Albert Gore , — * Ronald B. Johnson 1,204,334 ( 8 ) * Arthur Ronald B. Johnson 1,204,334 ( 8 ) * Arthur D. Levinson ) * Arthur D. Levinson 231,600 ( 9 ) * Avadis Arthur D. Levinson 231,600 ( 9 ) * Avadis Tevanian , * Avadis Tevanian , Jr. 1,601,252 ( 10 ) * Jerome Tevanian , Jr. 1,601,252 ( 10 ) * Jerome B. York ) * Jerome B. York 110,000 ( 5 ) * All Jerome B. York 110,000 ( 5 ) * All executive officer director a a group ( 16 person ) 14,715,373 4.00 % group ( 16 person ) 14,715,373 4.00 % ( 1 ) ( 16 person ) 14,715,373 4.00 % ( 1 ) Represents ) 14,715,373 4.00 % ( 1 ) Represents share of Common the Table Date or within 60 day thereafter . ( 2 60 day thereafter . ( 2 ) Based on a Form ) Based on a Form 13F-HR filed October 22 , 2003 a Form 13F-HR filed October 22 , 2003 by Lord , 13F-HR filed October 22 , 2003 by Lord , Abbett & , Abbett & Co. , 767 Fifth Avenue , New York , New York , NY 10153 . ( 3 ) Includes , NY 10153 . ( 3 ) Includes 60,000 share of . ( 3 ) Includes 60,000 share of Common Stock which of stock option . ( 4 ) Includes 1,150,000 share of . ( 4 ) Includes 1,150,000 share of Common Stock which of stock option . ( 5 ) Includes 90,000 share of . ( 5 ) Includes 90,000 share of Common Stock which exercise of stock option . 109 ( 6 ) Includes 800,000 stock option . 109 ( 6 ) Includes 800,000 share of 109 ( 6 ) Includes 800,000 share of Common Stock which of stock option . ( 7 ) Includes 70,000 share of . ( 7 ) Includes 70,000 share of Common Stock which of stock option . ( 8 ) Includes 1,200,000 share of . ( 8 ) Includes 1,200,000 share of Common Stock which of stock option . ( 9 ) Includes 1,400 share of . ( 9 ) Includes 1,400 share of Common Stock which Dr. Levinson hold indirectly and 30,000 share of Common Stock which of stock option . ( 10 ) Includes 1,600,000 share of . ( 10 ) Includes 1,600,000 share of Common Stock which . * Represents le than 1 % of the issued and the Table Date . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , requires with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company Company belief that all Section 16 ( a ) filing requirement were met during fiscal year 2003 , except that Messrs. Campbell York each filed one Form 4 late under the new two-day information , a of September 27 , 2003 , concerning share a of September 27 , 2003 , concerning share of common compensation plan approved by shareholder 19,507,624 $ 18.75 29,142,907 ( 1 approved by shareholder 19,507,624 $ 18.75 29,142,907 ( 1 ) Equity by shareholder 19,507,624 $ 18.75 29,142,907 ( 1 ) Equity compensation 19,507,624 $ 18.75 29,142,907 ( 1 ) Equity compensation plan not plan not approved by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 approved by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 ) Total by shareholder 43,343,560 $ 19.29 20,689,245 ( 2 ) Total equity 43,343,560 $ 19.29 20,689,245 ( 2 ) Total equity compensation plan Total equity compensation plan ( 3 ) 62,851,184 $ 19.12 49,832,152 compensation plan ( 3 ) 62,851,184 $ 19.12 49,832,152 ( 2 ( 3 ) 62,851,184 $ 19.12 49,832,152 ( 2 ) ( 3 ) 62,851,184 $ 19.12 49,832,152 ( 2 ) ( 1 62,851,184 $ 19.12 49,832,152 ( 2 ) ( 1 ) This 49,832,152 ( 2 ) ( 1 ) This number includes 4,002,123 1 ) This number includes 4,002,123 share of common stock reserved Employee Stock Purchase Plan , 310,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 24,830,784 share available for issuance under available for issuance under the 2003 Employee Stock Plan . It not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) On October 22 , ( 2 ) On October 22 , 2003 , the Company ) On October 22 , 2003 , the Company granted 6,697,368 2003 , the Company granted 6,697,368 share under the 1997 Employee granted 6,697,368 share under the 1997 Employee Stock Option Plan ( Option Plan ( the `` 1997 Plan `` ) pursuant to see Part II , Item 8 of this 110 Form 10-K , Item 8 of this 110 Form 10-K in the Notes 8 of this 110 Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 8 , under the heading `` , the Company terminated the 1997 Plan , it only non-shareholder under that plan . ( 3 ) This table doe not This table doe not include 160,975 outstanding option assumed in connection average exercise price of $ 3.69 per share . No additional acquisition by any person of 50 % or more of the annual base salary . Item 13 . Certain Relationships and Related President , Retail ) $ 1,500,000 for the purchase of his due and payable in May 2004 . Under the term of to the lesser of ( 1 ) an amount equal to ) an amount equal to 50 % of the total net the option ; or ( 2 ) $ 375,000 multiplied by or ( 2 ) $ 375,000 multiplied by the number of this loan during fiscal year 2003 wa $ 1,500,000 . Mr. fiscal year 2003 wa $ 1,500,000 . Mr. Johnson repaid the Johnson repaid the Company $ 750,000 during the fiscal year and on the loan is $ 750,000 . Mr. Jerome York , MicroWarehouse `` ) in January 2000 . Until September 2003 , January 2000 . Until September 2003 , he served a it Company . During fiscal year 2003 , MicroWarehouse accounted for 2.4 2003 , MicroWarehouse accounted for 2.4 % of the Company 's it own internal use . 111 In March 2002 , the use . 111 In March 2002 , the Company entered into of the plane in May 2001 . During 2003 , the in May 2001 . During 2003 , the Company recognized a recognized a total of $ 403,766 in expense pursuant to this incurred by Mr. Jobs during 2003 . Item 14 . Principal Jobs during 2003 . Item 14 . Principal Accountant Fees and LLP , during fiscal year 2003 and 2002 . Audit and during fiscal year 2003 and 2002 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2003 2002 Audit Fees $ 3,028,000 Audit and Non-Audit Fees 2003 2002 Audit Fees $ 3,028,000 ( 2003 2002 Audit Fees $ 3,028,000 ( 1 ) $ 2,635,000 Audit Fees $ 3,028,000 ( 1 ) $ 2,635,000 Audit-Related Fees 3,028,000 ( 1 ) $ 2,635,000 Audit-Related Fees $ 144,600 ( $ 2,635,000 Audit-Related Fees $ 144,600 ( 2 ) $ 140,000 Audit-Related Fees $ 144,600 ( 2 ) $ 140,000 Tax Fees 144,600 ( 2 ) $ 140,000 Tax Fees $ 1,017,100 ( $ 140,000 Tax Fees $ 1,017,100 ( 3 ) $ 1,055,000 Tax Fees $ 1,017,100 ( 3 ) $ 1,055,000 All Other 1,017,100 ( 3 ) $ 1,055,000 All Other Fees $ — Other Fees $ — $ 75,000 Total $ 4,189,700 $ 3,905,000 — $ 75,000 Total $ 4,189,700 $ 3,905,000 ( 1 ) 75,000 Total $ 4,189,700 $ 3,905,000 ( 1 ) Audit fee $ 4,189,700 $ 3,905,000 ( 1 ) Audit fee relate to in the Company 's Forms 10-Q , and audit service provided and regulatory filing . ( 2 ) Audit-related fee include professional employee benefit plan . ( 3 ) Tax fee include $ ) Tax fee include $ 901,500 for professional service rendered in tax compliance ; and $ 115,600 for tax consulting and planning of the Sarbanes-Oxley Act of 2002 ( the `` Act `` of the Audit Committee . 112 PART IV Item 15 . . 112 PART IV Item 15 . Exhibits , Financial Statement , and Reports on Form 8-K. ( a ) Items Filed a Part of Report : 1 . Financial Statements The financial of this report on Form 10-K are set forth in the under Part II , Item 8 of this Form 10-K. 2 Item 8 of this Form 10-K. 2 . Financial Statement Schedules 8 of this Form 10-K. 2 . Financial Statement Schedules All under Part II , Item 8 of this Form 10-K. 3 Item 8 of this Form 10-K. 3 . Exhibits Incorporated by 8 of this Form 10-K. 3 . Exhibits Incorporated by Reference Exhibit Description Form Filing Date 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Amendment 27 , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles of State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , , a amended through March 19 , 2003 . 10-Q 5/13/03 amended through March 19 , 2003 . 10-Q 5/13/03 4.2 Indenture March 19 , 2003 . 10-Q 5/13/03 4.2 Indenture dated a 19 , 2003 . 10-Q 5/13/03 4.2 Indenture dated a of , 2003 . 10-Q 5/13/03 4.2 Indenture dated a of February Indenture dated a of February 1 , 1994 , between the a of February 1 , 1994 , between the Company and Company of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a of Indenture dated a of February 1 , 1994 , among the a of February 1 , 1994 , among the Company , , a successor trustee . 10-Q 4/01/94 4.5 Form of the a successor trustee . 10-Q 4/01/94 4.5 Form of the Company successor trustee . 10-Q 4/01/94 4.5 Form of the Company 's Form of the Company 's 6 1 / 2 % Notes of the Company 's 6 1 / 2 % Notes due Company 's 6 1 / 2 % Notes due 2004 . / 2 % Notes due 2004 . 10-Q 4/01/94 4.8 Registration % Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , dated Rights Agreement , dated June 7 , 1996 among the Company , dated June 7 , 1996 among the Company and Goldman Co . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of Preferences of Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Savings restated effective a of October 1 , 1990 . 10-K 9/27/91 a of October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , and Investment Plan dated March 1 , 1992 . 10-K 9/25/92 Plan dated March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 to 9/25/92 10.A.3-2 Amendment No . 2 to the Apple Computer , Savings and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10-Q 12/26/97 amended through November 5 , 1997 . 10-Q 12/26/97 113 10.A.6 November 5 , 1997 . 10-Q 12/26/97 113 10.A.6 Apple Computer 5 , 1997 . 10-Q 12/26/97 113 10.A.6 Apple Computer , , 1997 . 10-Q 12/26/97 113 10.A.6 Apple Computer , Inc 1997 . 10-Q 12/26/97 113 10.A.6 Apple Computer , Inc . , a amended through April 24 , 2003 . S-8 6/24/03 amended through April 24 , 2003 . S-8 6/24/03 10.A.8 Form 24 , 2003 . S-8 6/24/03 10.A.8 Form of Indemnification Agreement , 2003 . S-8 6/24/03 10.A.8 Form of Indemnification Agreement between officer of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. 1990 10.A.43 NeXT Computer , Inc. 1990 Stock Option Plan , a , a amended . S-8 3/21/97 10.A.49 1997 Employee Stock Option a amended . S-8 3/21/97 10.A.49 1997 Employee Stock Option Plan amended . S-8 3/21/97 10.A.49 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan . Director Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Plan Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Plan , , a amended through April 24 , 2003 . 10-Q 6/28/03 amended through April 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement April 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement . 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement . 10-Q , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement . 10-Q 6/29/02 6/28/03 10.A.52 Reimbursement Agreement . 10-Q 6/29/02 10.A.53 Option Cancellation and 10.A.52 Reimbursement Agreement . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted Reimbursement Agreement . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted Stock and Restricted Stock Award Agreement 10-Q 6/28/03 10.B.18 Custom Sales Agreement Restricted Stock Award Agreement 10-Q 6/28/03 10.B.18 Custom Sales Agreement effective Stock Award Agreement 10-Q 6/28/03 10.B.18 Custom Sales Agreement effective October Custom Sales Agreement effective October 21 , 2002 between the Registrant Agreement effective October 21 , 2002 between the Registrant and International Business Machines Corporation . X 14.1 Code of Ethics of the Ethics of the Company X 21 Subsidiaries of Apple Computer , Apple Computer , Inc. X 23.1 Independent Auditors ' Consent X Independent Auditors ' Consent X 31.1 Rule13a-14 ( a ) / Rule13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer X 31.2 Rule13a-14 ( a ) / Rule13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer X 32.1 Section 1350 Certification of Chief Financial Officer X 32.1 Section 1350 Certification of Chief Executive and b ) Reports on Form 8-K The Company filed a current a current report on Form 8-K on October 15 , 2003 on Form 8-K on October 15 , 2003 , to reference 8-K on October 15 , 2003 , to reference and furnish by the Company on October 15 , 2003 . The Company Company on October 15 , 2003 . The Company filed a a current report on Form 8-K on July 16 , 2003 on Form 8-K on July 16 , 2003 , to reference 8-K on July 16 , 2003 , to reference and furnish by the Company on July 16 , 2003 . 114 SIGNATURES Company on July 16 , 2003 . 114 SIGNATURES Pursuant to July 16 , 2003 . 114 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 18th day of December 2003 . this 18th day of December 2003 . APPLE COMPUTER , INC. this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) December 18 , 2003 /s/ FRED D. Officer ) December 18 , 2003 /s/ FRED D. ANDERSON FRED Principal Financial Officer ) December 18 , 2003 /s/ PETER OPPENHEIMER Officer ) December 18 , 2003 /s/ PETER OPPENHEIMER PETER OPPENHEIMER Principal Accounting Officer ) December 18 , 2003 /s/ WILLIAM V. Officer ) December 18 , 2003 /s/ WILLIAM V. CAMPBELL WILLIAM WILLIAM V. CAMPBELL Director December 18 , 2003 /s/ MILLARD S. CAMPBELL Director December 18 , 2003 /s/ MILLARD S. DREXLER MILLARD MILLARD S. DREXLER Director December 18 , 2003 /s/ ALBERT GORE DREXLER Director December 18 , 2003 /s/ ALBERT GORE , JR. GORE , JR. Director December 18 , 2003 /s/ ARTHUR D. JR. Director December 18 , 2003 /s/ ARTHUR D. LEVINSON ARTHUR ARTHUR D. LEVINSON Director December 18 , 2003 /s/ JEROME B. LEVINSON Director December 18 , 2003 /s/ JEROME B. YORK JEROME JEROME B. YORK Director December 18 , 2003 115 QuickLinks PART YORK Director December 18 , 2003 115 QuickLinks PART I Item Director December 18 , 2003 115 QuickLinks PART I Item 1. 115 QuickLinks PART I Item 1. Business Item 2 . Properties I Item 1. Business Item 2 . Properties Item 3 . Item 2 . Properties Item 3 . Legal Proceedings Item 4 3 . Legal Proceedings Item 4 . Submission of Matters to Security Holders PART II Item 5 . Market for the Registrant and Related Shareholder Matters Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Quantitative and Qualitative Disclosures Disclosures About Market Risk Item 8 . Financial Statements and Supplementary REPORT OF INDEPENDENT AUDITORS Item 9 . Changes in and Disagreements Accounting and Financial Disclosure Item 9A . Controls and Procedures PART and Procedures PART III Item 10 . Directors and Executive Officers Officers of the Registrant Item 11 . Executive Compensation SUMMARY COMPENSATION FISCAL YEAR-END OPTION VALUES Item 12 . Security Ownership of Certain Nominees and Executive Officers Item 13 . Certain Relationships and Related Relationships and Related Transactions Item 14 . Principal Accountant Fees and Non-Audit Fees PART IV Item 15 . Exhibits , Financial Statement , and Reports on Form 8-K. SIGNATURES \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-04-035975/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-04-035975/full-submission.txt new file mode 100644 index 0000000..3c99671 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-04-035975/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 25 , 2004 OR o TRANSITION year ended September 25 , 2004 OR o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 0-10030 APPLE COMPUTER , INC. ( of incorporation or organization ) 942404110 ( I.R.S . Employer Identification Employer Identification No . ) 1 Infinite Loop Cupertino , California of principal executive office ) 95014 ( Zip Code ) Registrant including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ý Indicate by check mark ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 27 , 2004 , wa approximately a of March 27 , 2004 , wa approximately $ 8,336,330,708 2004 , wa approximately $ 8,336,330,708 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 402,057,856 share of Common Stock Issued and Outstanding a of November 19 , 2004 PART I The a of November 19 , 2004 PART I The Business section this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , information presented in this Form 10-K is based on the Company and movie camera , CD 1 and DVD player , and of it retail initiative in 2001 , the Company ha opened , the Company ha opened 84 retail store in the U.S. store in the U.S. and 2 international store in Tokyo and the end of fiscal year 2004 . During the first quarter During the first quarter of 2005 , the Company anticipates opening , the Company anticipates opening 14 additional store , and expects the calendar year at approximately 100 store . The Company ha during the first quarter of 2005 are in the new `` during the first quarter of 2005 . One of the goal host customer event and free 2 class , including the popular . Education For more than 25 year , the Company ha in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and Company 's Mac OS® X 3 Version 10.3 `` Panther `` Mac OS® X 3 Version 10.3 `` Panther `` and iLife® the Power Mac G5 utilizes 64-bit processing technology for memory expansion for memory expansion up to 8GB , and advanced 64-bit computation to 8GB , and advanced 64-bit computation while also running existing computation while also running existing 32-bit application natively . The Power come in four processor configurations—single 1.8GHz , dual 1.8GHz , dual processor configurations—single 1.8GHz , dual 1.8GHz , dual 2.0GHz and dual , dual 1.8GHz , dual 2.0GHz and dual 2.5GHz . All , dual 2.0GHz and dual 2.5GHz . All Power Mac G5 and either the NVIDIA GeForceFX 5200 Ultra or the ATI Radeon Ultra or the ATI Radeon 9600 XT graphic card . In including Gigabit Ethernet , FireWire® 800 and FireWire 400 port , , FireWire® 800 and FireWire 400 port , USB 2.0 port FireWire 400 port , USB 2.0 port , optical digital audio output , built-in support for 54 Mbps AirPort® Extreme wireless networking large database . In January 2004 , the Company announced Xserve either a single or dual 2.0 GHz PowerPC G5 processor . system controller with up to 8GB of PC3200 error correcting code module that deliver up to 750GB of storage ; and dual high-performance networking . In January 2004 , the Company also introduced RAID storage system , a 3U high-availability rack storage system , computing environment . In October 2004 , the Company updated it RAID storage system to deliver 5.6 terabyte of storage capacity and dual independent RAID controller with 512MB cache per controller offer sustained offer sustained throughput of over 380MBps—high enough to support two stream support two stream of uncompressed 10-bit HD video editing using protected editing using protected RAID level 5 . PowerBook ® The PowerBook consumer user . In April 2004 , the Company updated it G4 processor . Both the 15-inch and 17-inch PowerBook G4 offer . Both the 15-inch and 17-inch PowerBook G4 offer up to G4 offer up to a 1.5 GHz PowerPC G4 processor , and the ATI Mobility Radeon 9700 graphic processor . The 12-inch 9700 graphic processor . The 12-inch PowerBook G4 feature a 1.33 12-inch PowerBook G4 feature a 1.33 GHz PowerPC processor , an of I/O port including Firewire 400 , USB 2.0. , a including Firewire 400 , USB 2.0. , a built-in 56K v.92 USB 2.0. , a built-in 56K v.92 modem and Ethernet ( v.92 modem and Ethernet ( 10/100BASE-T ) , for connectivity to range of peripheral . The 15-inch and 17-inch PowerBook G4 model peripheral . The 15-inch and 17-inch PowerBook G4 model also include built-in Gigabit Ethernet and Firewire 800. iMac® The iMac line of education market . In August 2004 , the Company introduced the display . The line offer 17- or 20-inch active matrix widescreen The line offer 17- or 20-inch active matrix widescreen LCDs and G5 processor running up to 1.8 GHz . The 17-inch model to 1.8 GHz . The 17-inch model come with either a model come with either a 1.8 GHz PowerPC G5 processor and a SuperDrive , or a 1.6 GHz PowerPC G5 processor and a Combo drive . The 20-inch model ha a 1.8 GHz The 20-inch model ha a 1.8 GHz PowerPC G5 processor and G5 offer up to a 600 MHz front-side bus , 400 600 MHz front-side bus , 400 MHz DDR memory expandable to MHz DDR memory expandable to 2GB , AGP 8X graphic and expandable to 2GB , AGP 8X graphic and 7200 rpm Serial , AGP 8X graphic and 7200 rpm Serial ATA drive holding ATA drive holding up to 250GB . The iMac G5 come USB port ( three USB 2.0 ) and two 4 FireWire® USB 2.0 ) and two 4 FireWire® 400 port , an ) and two 4 FireWire® 400 port , an optional internal optional AirPort Extreme Card for 54 Mbps 802.11g wireless networking , Extreme Card for 54 Mbps 802.11g wireless networking , and also also includes built-in Ethernet ( 10/100BASE-T ) and a 56K V.92 ( 10/100BASE-T ) and a 56K V.92 modem . eMac™ The processor , a high resolution 17-inch flat cathode ray tube display consumer customer . In April 2004 , the Company updated it retail price starting at $ 799 and is available with a retail price starting at $ 999 . The eMac offer PowerPC processor running at up to 1.25 GHz , 333 MHz DDR up to 1.25 GHz , 333 MHz DDR memory , ATI ATI Radeon graphic and USB 2.0 connectivity to peripheral . iBook® consumer user . In October 2004 , the Company upgraded it G4 processor running up to 1.33 GHz , built-in AirPort Extreme GHz , built-in AirPort Extreme 54 Mpbs 802.11g wireless networking and built-in AirPort Extreme 54 Mpbs 802.11g wireless networking and an available available slot-load SuperDrive . The 12-inch model feature a 1.2 GHz The 12-inch model feature a 1.2 GHz PowerPC G4 processor and Combo drive , while the 14-inch model include a 1.33GHz G4 the 14-inch model include a 1.33GHz G4 processor and either a of I/O port including FireWire 400 , USB 2.0 , a including FireWire 400 , USB 2.0 , a built-in 56K v.92 USB 2.0 , a built-in 56K v.92 modem and Ethernet ( v.92 modem and Ethernet ( 10/100BASE-T ) , a well a generated year-over-year revenue growth of 316 % and accounted for 19 316 % and accounted for 19 % of the Company 's total net sale in fiscal 2004. iPod ® In July 2004 2004. iPod ® In July 2004 , the Company introduced the navigation , and up to 12 hour of battery life . The iPod is available in 20GB and 40GB model . The is available in 20GB and 40GB model . The iPod 's Company formed an alliance with 5 Founder Technology Group Corporation , desktop PCs . In October 2004 , the Company introduced the U2 iPod hold up to 5,000 song , feature a black . iPod® photo In October 2004 , the Company introduced iPod® The iPod photo come in 40GB or 60GB model and ha photo come in 40GB or 60GB model and ha an extended that give user up to 15 hour of music playback or music playback or up to 5 hour of slideshows . The photo can hold up to 25,000 digital photo or 15,000 digital to 25,000 digital photo or 15,000 digital song . iPod ® iPod ® mini In January 2004 , the Company introduced the mini ha storage capacity of 4GB and hold up to 1,000 4GB and hold up to 1,000 song , utilizes the patent also listen to a free 30-second preview of any song in the store . Since April 2003 , the iTunes Music Store France and Germany in June 2004 and wa followed by the wa followed by the October 2004 launch of an English language Store in Canada during fiscal 2005 . The iTunes Music Store enables user to automatically deposit 6 fund into an iTunes Music audio . Displays In June 2004 , the Company announced a flat panel display featuring the 30-inch Apple Cinema HD Display , a widescreen active-matrix LCD with 2560-by-1600 pixel resolution , a 23-inch 2560-by-1600 pixel resolution , a 23-inch widescreen Apple Cinema Display with widescreen Apple Cinema Display with 1920-by-1200 pixel resolution and a 20-inch 1920-by-1200 pixel resolution and a 20-inch widescreen Apple Cinema Display with widescreen Apple Cinema Display with 1680-by-1050 pixel resolution . The display dual FireWire and dual USB 2.0 port built into the display released Mac OS X version 10.3 ( code-named `` Panther `` OS X , in October 2003 . Panther incorporates feature including of a home directory with 128-bit AES encryption ; iChat AV Windows-based network . In June 2004 , the Company previewed Mac previewed Mac OS X version 10.4 ( code-named `` Tiger `` the first half of calendar 2005 . Tiger will contain new and video conferencing in a 3D interface . 7 Server Software in a 3D interface . 7 Server Software and Server Solutions and Server Solutions In October 2003 , the Company began shipping Mac OS X Server version 10.3 ( code-named `` Panther Server multiple server ; Open Directory 2 for hosting scalable LDAP directory Kerberos authentication service ; Samba 3 for providing login and home J2EE application . In June 2004 , the Company previewed Mac Mac OS X Server version 10.4 ( code-named `` Tiger Server Server includes native support for 64-bit application ; iChat Server to X Server . In June 2004 , the Company introduced Apple Company introduced Apple Remote Desktop™ 2 , the second generation of performance , Apple Remote Desktop 2 includes more than 50 feature Desktop 2 includes more than 50 feature for centrally managing Mac system . Apple Remote Desktop 2 can perform a wide range report based on more than 200 system information attribute allow administrator a beta version in April 2004 and is expected to be release in the Fall of 2004 . Xsan is a 64-bit 2004 . Xsan is a 64-bit cluster file system for Mac , wa introduced in April 2004 and feature real-time performance of and multi-channel audio output . 8 In April 2004 , the output . 8 In April 2004 , the Company announced DVD Company announced DVD Studio Pro® 3 , the latest version of application . DVD Studio Pro 3 feature Alpha Transitions , which script . DVD Studio Pro 3 also includes Compressor 1.2 , Pro 3 also includes Compressor 1.2 , the latest version of SD , DVD Studio Pro 3 now provides the ability to one step . In August 2004 , the Company began shipping a project . In August 2004 , the Company introduced Production HD , DVD Studio Pro 3 and Apple Motion into a the other application . Shake® 3.5 , an upgrade of the production wa introduced in April 2004 . Shake 3.5 feature shape-based in April 2004 . Shake 3.5 feature shape-based morphing and warping and color correction . Shake 3.5 also improves upon the Shake or computer . Logic® Pro 7 , introduced by the Company by the Company in September 2004 is actively used by musician simulator . Along with over 100 workflow enhancement , mastering plug-in Apple Loops , Logic Pro 7 debut distributed audio processing , Oriented Application Software In January 2004 , the Company introduced iLife® iPod . iTunes support AAC 9 and MP3 encoding from audio networked computer . In October 2004 , the Company 's newest 's newest version , iTunes 4.7 , included support for copying iPod photo . Since April 2003 , the Company 's iTunes and classroom movie . iMovie 4 feature an enhanced user interface and drag-and-drop simplicity . iDVD® 4 includes theme and professional effect GarageBand come with more than 50 software instrument , pre-recorded audio from within iPhoto . iPhoto® 4 ha feature that allow user video editing . In January 2004 , the Company introduced Final Company introduced Final Cut Express 2 , which feature RT Extreme editing capability . Logic® Express 7 , introduced by the Company by the Company in September 2004 , is a streamlined version streamlined version of Logic Pro 7 that provides a basic set advanced hobbyist . Logic Express 7 come with support for project professionally designed theme , advanced 10 typography , professional-quality image resizing sharing of presentation . AppleWorks® 6.2 is an integrated productivity application publishing capability . In March 2004 , the Company introduced FileMaker the Company introduced FileMaker Pro 7 with new architecture and enhancement developer productivity . FileMaker Pro 7 ha been redesigned using a drag tool . FileMaker Pro 7 ha also expanded it data expanded it data capacity to 8 terabyte per file or 4,000 8 terabyte per file or 4,000 time the former limit . video on computer . QuickTime 6 includes the Instant-On Streaming feature . In addition , QuickTime 6 running on Mac OS X OS X now support JPEG 2000 , the next generation JPEG than ever before . QuickTime 6 also includes AAC , the event for online delivery . 11 .Mac ™ The Company 's POP or web-based access and 125MB of storage , iDisk Internet storage capacity of an additional 125MB , and hosting for personalized Extreme , introduced in January 2003 , is the Company 's Extreme is based on the 802.11g standard , which support speed which support speed up to 54 Mbps , and is fully Wi-Fi device which use the 802.11b standard . AirPort Extreme Base Stations can serve up to 50 Macintosh and Windows user simultaneously . AirPort® Express In June 2004 , the Company introduced AirPort® AirPort® Express , the first 802.11g mobile base station that can a single piece design weighing 6.7 ounce . Other Connectivity and of data at up to 1 Mbps within a range of within a range of approximately 30 foot . The Company 's in Mac OS X version 10.1.4 or higher . The Company network , including Ethernet or 802.11-based wireless network like the Company also referred to a IEEE 1394 , which is a high-speed a external hard drive and 12 other high-speed peripheral . FireWire the Company offer one-to-one ( 1:1 ) learning solution , which education customer in the late 1970s . Over 16 % of the late 1970s . Over 16 % of the Company 's Company 's net sale in 2004 were through it U.S. education customer accounted for more than 10 % of net sale in % of net sale in 2004 , 2003 or 2002 . net sale in 2004 , 2003 or 2002 . The Company in 2004 , 2003 or 2002 . The Company also sell online store totaled approximately $ 3.9 billion , $ 2.9 billion $ 3.9 billion , $ 2.9 billion , and $ 2.4 2.9 billion , and $ 2.4 billion for fiscal year 2004 2.4 billion for fiscal year 2004 , 2003 and 2002 , for fiscal year 2004 , 2003 and 2002 , respectively . year 2004 , 2003 and 2002 , respectively . Competition The product and significant price , 13 feature , and performance competition experience such delay during fiscal 2004 , which resulted in the formal purchase order , supplier 14 contract , and open order requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company belief and development expenditure totaled $ 489 million , $ 471 million $ 489 million , $ 471 million , and $ 446 471 million , and $ 446 million in 2004 , 2003 and $ 446 million in 2004 , 2003 , and 2002 446 million in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . Patents , largest geographic marketplace . Approximately 59 % of the Company 's 's net sale in fiscal 2004 came from sale to customer include component obtained from foreign 15 supplier , can be adversely in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and The Company also offer a 90-day basic warranty for Apple service . Employees As of September 25 , 2004 , Apple and As of September 25 , 2004 , Apple and it subsidiary and it subsidiary worldwide had 11,695 employee and an additional 1,731 11,695 employee and an additional 1,731 temporary employee and contractor . 's Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are 's Public Reference Room at 450 Fifth Street , NW , NW , Washington , DC 20549 . The public may obtain information on the operation of 16 the Public Reference Room by by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 2 . Properties The Company 's Ireland . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company leased approximately , the Company leased approximately 3.3 million square foot of space lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for term of 2 to 5 additional year . for term of 2 to 5 additional year . Leased space year . Leased space includes 660,000 square foot of retail space for retail space range from 5 to 16 year , the space range from 5 to 16 year , the majority of majority of which are for 10 year , and often contain Ireland , which ha approximately 352,000 square foot . The Cork The Company also owns a 752,000 square-foot facility in Sacramento , , the Company owns approximately 942,000 square foot of facility located owns additional facility totaling approximately 169,000 square foot . The Company for it product . Item 3 . Legal Proceedings The Company Company settled certain matter in 2004 , which did not individually filed this action on September 5 , 2003 in the United action on September 5 , 2003 in the United States District other defendant of U.S. patent 5,754,961 relating to a `` Method Trial is set for March 2005 . The Court held a a Markman hearing on September 16 , 2004 but ha not hearing on September 16 , 2004 but ha not yet issued yet issued a ruling . 17 Apple Corps Ltd. v. Apple filed this action on July 4 , 2003 in the High action on July 4 , 2003 in the High Court of the Company ha breached a 1991 agreement that resolved earlier trademark filed a motion on October 13 , 2003 , challenging jurisdiction motion on October 13 , 2003 , challenging jurisdiction in the denied the motion on April 7 , 2004 . The Company motion on April 7 , 2004 . The Company filed an this matter . On October 8 , 2003 , the Company . On October 8 , 2003 , the Company filed a Company ha not breached the 1991 agreement . Apple Corps challenged denied that challenge on March 25 , 2004 . Apple Corps challenge on March 25 , 2004 . Apple Corps subsequently prevailed purported class action on January 9 , 2004 in Los Angeles action on January 9 , 2004 in Los Angeles County Superior of California Civil Code Section 17200 ( unfair competition ) and Company wa served on January 21 , 2004 , and filed served on January 21 , 2004 , and filed an answer filed an answer on February 20 , 2004 , denying all answer on February 20 , 2004 , denying all allegation and order is scheduled for January 29 , 2005 . The Company scheduled for January 29 , 2005 . The Company also ha patent infringement action on April 22 , 2004 against the Company action on April 22 , 2004 against the Company and twenty-seven alleging infringement of U.S. patent 4,698,672 . Plaintiff alleges that the trial is expected in October 2005 . On July 2 , October 2005 . On July 2 , 2004 , the Company . On July 2 , 2004 , the Company and several , Inc. ( filed December 23 , 2003 , Santa Clara ( filed December 23 , 2003 , Santa Clara County Superior , Inc. ( filed December 23 , 2003 , San Mateo ( filed December 23 , 2003 , San Mateo County Superior , Inc. ( filed December 23 , 2003 , Santa Clara ( filed December 23 , 2003 , Santa Clara County Superior , Inc. ( filed December 26 , 2003 , San Francisco ( filed December 26 , 2003 , San Francisco County Superior , Inc. ( filed December 30 , 2003 , Alameda County ( filed December 30 , 2003 , Alameda County Superior Court , Inc. ( filed February 19 , 2004 , Alameda County ( filed February 19 , 2004 , Alameda County Superior Court , Inc. ( filed February 24 , 2004 , Los Angeles ( filed February 24 , 2004 , Los Angeles County Superior , Inc. ( filed July 8 , 2004 , Alameda County ( filed July 8 , 2004 , Alameda County Superior Court complaint include cause of action 18 for violation of California Civil of California Civil Code Section 17200 ( unfair competition ) , , New York on June 23 , 2004 alleging violation of York on June 23 , 2004 alleging violation of New York York General Business Law Sections 349 ( unfair competition ) and ( unfair competition ) and 350 ( false advertising ) . County Superior Court on December 5 , 2002 , alleging that Court on December 5 , 2002 , alleging that the Company filed an answer on April 17 , 2003 denying all allegation answer on April 17 , 2003 denying all allegation and asserting it complaint . On October 29 , 2003 , the Company . On October 29 , 2003 , the Company filed a patent infringement action on January 23 , 2004 in the United action on January 23 , 2004 in the United States District other defendant of U.S. patent 6,574,239 relating to `` Virtual Connection case wa re-filed on February 10 , 2004 in the Northern re-filed on February 10 , 2004 in the Northern District of the new complaint on May 17 , 2004 and filed a complaint on May 17 , 2004 and filed a response on filed a response on August 6 , 2004 , denying all response on August 6 , 2004 , denying all allegation and Microsystems , Inc. on April 15 , 2004 in the United Inc. on April 15 , 2004 in the United States District alleging infringement of U.S. patent 5,418,968 related to a `` System the Company 's Mac OS 9 and Mac OS X operating purported class action on September 22 , 2003 in Los Angeles action on September 22 , 2003 in Los Angeles County Superior violation of Civil Code Section 17200 ( unfair competition ) , the decimal method misrepresents the 19 actual size of the drive an amended complaint on March 30 , 2004 and the Company complaint on March 30 , 2004 and the Company filed an filed an answer on September 23 , 2004 , denying all answer on September 23 , 2004 , denying all allegation and al . Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the their amended complaint on January 31 , 2003 , and on complaint on January 31 , 2003 , and on March 17 2003 , and on March 17 , 2003 , the Company and on March 17 , 2003 , the Company filed a Company 's motion on July 11 , 2003 and dismissed Plaintiffs motion on July 11 , 2003 and dismissed Plaintiffs ' claim claim with prejudice on August 12 , 2003 . Plaintiffs have prejudice on August 12 , 2003 . Plaintiffs have appealed the filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District other defendant of U.S. patent 5,280,371 entitled `` Directional Diffuser for Computer International complaint on November 12 , 2003 denying all allegation complaint on November 12 , 2003 denying all allegation and asserting amended complaint . On October 1 , 2003 , one of . On October 1 , 2003 , one of the resellers a preliminary injunction on December 19 , 2003 . Teleshuttle Technologies injunction on December 19 , 2003 . Teleshuttle Technologies , LLC filed this case on July 20 , 2004 in United States case on July 20 , 2004 in United States District Court alleging infringement of U.S. patent 6,557,054 , entitled `` Method and an amended complaint on September 7 , 2004 , adding a complaint on September 7 , 2004 , adding a second patent second patent , US patent 6,769,009 entitled `` Method and System filed an answer on October 18 , 2004 , denying all answer on October 18 , 2004 , denying all allegation and VirginMega/French Competition Council On June 28 , 2004 , VirginMega filed Council On June 28 , 2004 , VirginMega filed a complaint Company to license it FairPlay 20 digital right management ( `` measure took place on October 19 , 2004 . On November place on October 19 , 2004 . On November 9 , , 2004 . On November 9 , 2004 , the French . On November 9 , 2004 , the French Competition Council VirginMega 's complaint . Item 4 . Submission of Matters to 's fiscal year ended September 25 , 2004 . 21 PART year ended September 25 , 2004 . 21 PART II Item September 25 , 2004 . 21 PART II Item 5 . . 21 PART II Item 5 . Market for the Registrant symbol APCD . On November 17 , 2004 , the Company . On November 17 , 2004 , the Company filed an TSE . As of November 19 , 2004 , there were As of November 19 , 2004 , there were 28,518 shareholder , 2004 , there were 28,518 shareholder of record . The cash dividend in either fiscal 2004 or 2003 . The Company in either fiscal 2004 or 2003 . The Company anticipates that Second Quarter First Quarter Fiscal 2004 price range per common share range per common share $ 38.01- $ 29.14 $ 33.70- $ common share $ 38.01- $ 29.14 $ 33.70- $ 25.78 $ $ 38.01- $ 29.14 $ 33.70- $ 25.78 $ 27.68- $ $ 29.14 $ 33.70- $ 25.78 $ 27.68- $ 21.15 $ $ 33.70- $ 25.78 $ 27.68- $ 21.15 $ 24.82- $ $ 25.78 $ 27.68- $ 21.15 $ 24.82- $ 19.70 Fiscal $ 27.68- $ 21.15 $ 24.82- $ 19.70 Fiscal 2003 price $ 21.15 $ 24.82- $ 19.70 Fiscal 2003 price range per $ 24.82- $ 19.70 Fiscal 2003 price range per common share range per common share $ 23.10- $ 19.06 $ 19.29- $ common share $ 23.10- $ 19.06 $ 19.29- $ 13.12 $ $ 23.10- $ 19.06 $ 19.29- $ 13.12 $ 15.27- $ $ 19.06 $ 19.29- $ 13.12 $ 15.27- $ 13.80 $ $ 19.29- $ 13.12 $ 15.27- $ 13.80 $ 17.22- $ $ 13.12 $ 15.27- $ 13.80 $ 17.22- $ 13.59 ( $ 15.27- $ 13.80 $ 17.22- $ 13.59 ( b ) $ 13.80 $ 17.22- $ 13.59 ( b ) Related Shareholder of Equity Securities In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Since inception of the ha repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 25 , 2004 . The Company a of September 25 , 2004 . The Company did not the fourth quarter of fiscal 2004 . Item 6 . Selected of fiscal 2004 . Item 6 . Selected Financial Data The read in conjunction with Item 7 , `` Management 's Discussion related note thereto included in 22 Item 8 of this Form thereto included in 22 Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 25 , 2004 ( In million year ended September 25 , 2004 ( In million , except and per share amount ) 2004 2003 2002 2001 2000 Net per share amount ) 2004 2003 2002 2001 2000 Net sale share amount ) 2004 2003 2002 2001 2000 Net sale $ amount ) 2004 2003 2002 2001 2000 Net sale $ 8,279 ) 2004 2003 2002 2001 2000 Net sale $ 8,279 $ 2001 2000 Net sale $ 8,279 $ 6,207 $ 5,742 $ Net sale $ 8,279 $ 6,207 $ 5,742 $ 5,363 $ $ 8,279 $ 6,207 $ 5,742 $ 5,363 $ 7,983 Net $ 6,207 $ 5,742 $ 5,363 $ 7,983 Net income ( $ 5,742 $ 5,363 $ 7,983 Net income ( loss ) income ( loss ) $ 276 $ 69 $ 65 $ loss ) $ 276 $ 69 $ 65 $ ( 25 $ 276 $ 69 $ 65 $ ( 25 ) $ 69 $ 65 $ ( 25 ) $ 786 Earnings ( $ ( 25 ) $ 786 Earnings ( loss ) per common share : Basic $ 0.74 $ 0.19 $ 0.18 $ : Basic $ 0.74 $ 0.19 $ 0.18 $ ( 0.07 $ 0.74 $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.42 Diluted $ $ ( 0.07 ) $ 2.42 Diluted $ 0.71 $ 0.19 ) $ 2.42 Diluted $ 0.71 $ 0.19 $ 0.18 $ 2.42 Diluted $ 0.71 $ 0.19 $ 0.18 $ ( 0.07 $ 0.71 $ 0.19 $ 0.18 $ ( 0.07 ) $ 0.19 $ 0.18 $ ( 0.07 ) $ 2.18 Cash dividend $ ( 0.07 ) $ 2.18 Cash dividend declared per common in thousand ) : Basic 371,590 360,631 355,022 345,613 324,568 Diluted thousand ) : Basic 371,590 360,631 355,022 345,613 324,568 Diluted 387,311 ) : Basic 371,590 360,631 355,022 345,613 324,568 Diluted 387,311 363,466 : Basic 371,590 360,631 355,022 345,613 324,568 Diluted 387,311 363,466 361,785 Basic 371,590 360,631 355,022 345,613 324,568 Diluted 387,311 363,466 361,785 345,613 360,631 355,022 345,613 324,568 Diluted 387,311 363,466 361,785 345,613 360,324 Cash 355,022 345,613 324,568 Diluted 387,311 363,466 361,785 345,613 360,324 Cash , 345,613 324,568 Diluted 387,311 363,466 361,785 345,613 360,324 Cash , cash 324,568 Diluted 387,311 363,466 361,785 345,613 360,324 Cash , cash equivalent Diluted 387,311 363,466 361,785 345,613 360,324 Cash , cash equivalent , , and short-term investment $ 5,464 $ 4,566 $ 4,337 $ short-term investment $ 5,464 $ 4,566 $ 4,337 $ 4,336 $ $ 5,464 $ 4,566 $ 4,337 $ 4,336 $ 4,027 Total $ 4,566 $ 4,337 $ 4,336 $ 4,027 Total asset $ $ 4,337 $ 4,336 $ 4,027 Total asset $ 8,050 $ $ 4,027 Total asset $ 8,050 $ 6,815 $ 6,298 $ Total asset $ 8,050 $ 6,815 $ 6,298 $ 6,021 $ $ 8,050 $ 6,815 $ 6,298 $ 6,021 $ 6,803 Long-term $ 6,815 $ 6,298 $ 6,021 $ 6,803 Long-term debt ( $ 6,298 $ 6,021 $ 6,803 Long-term debt ( including current maturity ) $ — $ 304 $ 316 $ 317 $ $ — $ 304 $ 316 $ 317 $ 300 Total $ 304 $ 316 $ 317 $ 300 Total liability $ $ 316 $ 317 $ 300 Total liability $ 2,974 $ $ 300 Total liability $ 2,974 $ 2,592 $ 2,203 $ Total liability $ 2,974 $ 2,592 $ 2,203 $ 2,101 $ $ 2,974 $ 2,592 $ 2,203 $ 2,101 $ 2,696 Shareholders $ 2,592 $ 2,203 $ 2,101 $ 2,696 Shareholders ' equity $ 2,203 $ 2,101 $ 2,696 Shareholders ' equity $ 5,076 2,696 Shareholders ' equity $ 5,076 $ 4,223 $ 4,095 $ ' equity $ 5,076 $ 4,223 $ 4,095 $ 3,920 $ $ 5,076 $ 4,223 $ 4,095 $ 3,920 $ 4,107 Net $ 4,223 $ 4,095 $ 3,920 $ 4,107 Net gain before $ 4,095 $ 3,920 $ 4,107 Net gain before tax related and equity investment of $ 4 million , $ 10 million $ 4 million , $ 10 million , $ 75 million $ 10 million , $ 75 million , and $ 367 75 million , and $ 367 million were recognized in 2004 367 million were recognized in 2004 , 2003 , 2001 , were recognized in 2004 , 2003 , 2001 , and 2000 in 2004 , 2003 , 2001 , and 2000 , respectively 2003 , 2001 , and 2000 , respectively . A net and equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , $ 30 million $ 26 million , $ 30 million , and $ 8 30 million , and $ 8 million were recognized in 2004 8 million were recognized in 2004 , 2003 , 2002 , were recognized in 2004 , 2003 , 2002 , and 2000 in 2004 , 2003 , 2002 , and 2000 , respectively 2003 , 2002 , and 2000 , respectively . During 2000 2000 , respectively . During 2000 , the Company recognized the the Company of approximately $ 90 million . In 2002 , $ 90 million . In 2002 , of the original $ , of the original $ 90 million accrual , $ 2 90 million accrual , $ 2 million remained unspent and wa and wa reversed . In 2003 , settlement of the Company in a gain of $ 6 million . Favorable cumulative-effect type of tax , of $ 1 million and $ 12 million $ 1 million and $ 12 million were recognized in 2003 12 million were recognized in 2003 and 2001 , respectively . were recognized in 2003 and 2001 , respectively . Item 7 2001 , respectively . Item 7 . Management 's Discussion and other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is line of portable digital music 23 player along with related accessory in Part I , Item 1 of this document under the internationally . The Company had 86 store open a of September store open a of September 25 , 2004 . The Company a of September 25 , 2004 . The Company ha also music and audio-visual store . 24 Critical Accounting Policies and Estimates and accompanying note . Note 1 of the Notes to Consolidated Financial Statements of this Form 10-K describes the significant accounting policy ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The 's result of operation . 25 Allowance for Doubtful Accounts The requirement for period ranging from 30 to 130 day . If period ranging from 30 to 130 day . If there is which the carrying value of 26 the asset exceeds their fair ( SFAS ) No . 142 , Goodwill and Other Intangible and requires that : ( 1 ) goodwill be allocated to which it relates ; ( 2 ) the Company estimate the goodwill relates ; and ( 3 ) the Company determine the 's estimate a of September 25 , 2004 there wa no a of September 25 , 2004 there wa no impairment of accordance with SFAS No . 109 , Accounting for Income Taxes effect of the deferred tax 27 liability , will be sufficient sale in thousand ) : 2004 Change 2003 Change 2002 Net thousand ) : 2004 Change 2003 Change 2002 Net Sales by : 2004 Change 2003 Change 2002 Net Sales by Operating Segment : Americas net sale $ 4,019 26 % $ 3,181 2 Americas net sale $ 4,019 26 % $ 3,181 2 % $ 4,019 26 % $ 3,181 2 % $ 3,131 Europe 4,019 26 % $ 3,181 2 % $ 3,131 Europe net $ 3,181 2 % $ 3,131 Europe net sale 1,799 37 $ 3,131 Europe net sale 1,799 37 % 1,309 5 % 3,131 Europe net sale 1,799 37 % 1,309 5 % 1,251 net sale 1,799 37 % 1,309 5 % 1,251 Japan net sale 1,799 37 % 1,309 5 % 1,251 Japan net sale 37 % 1,309 5 % 1,251 Japan net sale 677 ( % 1,251 Japan net sale 677 ( 3 ) % 698 Japan net sale 677 ( 3 ) % 698 ( 2 677 ( 3 ) % 698 ( 2 ) % 710 3 ) % 698 ( 2 ) % 710 Retail net 698 ( 2 ) % 710 Retail net sale 1,185 91 % 710 Retail net sale 1,185 91 % 621 119 % 710 Retail net sale 1,185 91 % 621 119 % 283 net sale 1,185 91 % 621 119 % 283 Other segment sale 1,185 91 % 621 119 % 283 Other segment net 91 % 621 119 % 283 Other segment net sale ( net sale ( a ) 599 51 % 398 8 % sale ( a ) 599 51 % 398 8 % 367 a ) 599 51 % 398 8 % 367 Total net ) 599 51 % 398 8 % 367 Total net sale 51 % 398 8 % 367 Total net sale $ 8,279 367 Total net sale $ 8,279 33 % $ 6,207 8 Total net sale $ 8,279 33 % $ 6,207 8 % $ 8,279 33 % $ 6,207 8 % $ 5,742 Unit 8,279 33 % $ 6,207 8 % $ 5,742 Unit Sales $ 6,207 8 % $ 5,742 Unit Sales by Operating Segment : Americas Macintosh unit sale 1,682 4 % 1,620 ( 6 Americas Macintosh unit sale 1,682 4 % 1,620 ( 6 ) unit sale 1,682 4 % 1,620 ( 6 ) % 1,728 1,682 4 % 1,620 ( 6 ) % 1,728 Europe Macintosh 1,620 ( 6 ) % 1,728 Europe Macintosh unit sale 773 1,728 Europe Macintosh unit sale 773 13 % 684 ( 5 Europe Macintosh unit sale 773 13 % 684 ( 5 ) unit sale 773 13 % 684 ( 5 ) % 722 773 13 % 684 ( 5 ) % 722 Japan Macintosh 684 ( 5 ) % 722 Japan Macintosh unit sale 291 722 Japan Macintosh unit sale 291 ( 14 ) % 339 Macintosh unit sale 291 ( 14 ) % 339 ( 12 291 ( 14 ) % 339 ( 12 ) % 386 14 ) % 339 ( 12 ) % 386 Retail Macintosh 339 ( 12 ) % 386 Retail Macintosh unit sale 314 386 Retail Macintosh unit sale 314 68 % 187 103 % Retail Macintosh unit sale 314 68 % 187 103 % 92 unit sale 314 68 % 187 103 % 92 Other segment sale 314 68 % 187 103 % 92 Other segment Macintosh 68 % 187 103 % 92 Other segment Macintosh unit sale unit sale ( a ) 230 26 % 182 5 % sale ( a ) 230 26 % 182 5 % 173 a ) 230 26 % 182 5 % 173 Total Macintosh ) 230 26 % 182 5 % 173 Total Macintosh unit 26 % 182 5 % 173 Total Macintosh unit sale 3,290 173 Total Macintosh unit sale 3,290 9 % 3,012 ( 3 Total Macintosh unit sale 3,290 9 % 3,012 ( 3 ) unit sale 3,290 9 % 3,012 ( 3 ) % 3,101 3,290 9 % 3,012 ( 3 ) % 3,101 Net Sales 3,012 ( 3 ) % 3,101 Net Sales by Product : sale ( b ) $ 1,419 15 % $ 1,237 ( ( b ) $ 1,419 15 % $ 1,237 ( 10 $ 1,419 15 % $ 1,237 ( 10 ) % $ 15 % $ 1,237 ( 10 ) % $ 1,380 PowerBook ( 10 ) % $ 1,380 PowerBook net sale 1,589 22 $ 1,380 PowerBook net sale 1,589 22 % 1,299 56 % 1,380 PowerBook net sale 1,589 22 % 1,299 56 % 831 net sale 1,589 22 % 1,299 56 % 831 iMac net sale 1,589 22 % 1,299 56 % 831 iMac net sale 22 % 1,299 56 % 831 iMac net sale ( c net sale ( c ) 954 ( 23 ) % 1,238 ( c ) 954 ( 23 ) % 1,238 ( 15 954 ( 23 ) % 1,238 ( 15 ) % 1,448 23 ) % 1,238 ( 15 ) % 1,448 iBook net 1,238 ( 15 ) % 1,448 iBook net sale 961 34 % 1,448 iBook net sale 961 34 % 717 ( 18 1,448 iBook net sale 961 34 % 717 ( 18 ) net sale 961 34 % 717 ( 18 ) % 875 961 34 % 717 ( 18 ) % 875 Total Macintosh 717 ( 18 ) % 875 Total Macintosh net sale 4,923 875 Total Macintosh net sale 4,923 10 % 4,491 ( 1 Total Macintosh net sale 4,923 10 % 4,491 ( 1 ) net sale 4,923 10 % 4,491 ( 1 ) % 4,534 4,923 10 % 4,491 ( 1 ) % 4,534 iPod 1,306 4,491 ( 1 ) % 4,534 iPod 1,306 279 % 345 1 ) % 4,534 iPod 1,306 279 % 345 141 % ) % 4,534 iPod 1,306 279 % 345 141 % 143 4,534 iPod 1,306 279 % 345 141 % 143 Other Music iPod 1,306 279 % 345 141 % 143 Other Music Products 279 % 345 141 % 143 Other Music Products ( d Music Products ( d ) 278 672 % 36 800 % Products ( d ) 278 672 % 36 800 % 4 d ) 278 672 % 36 800 % 4 Peripherals and ) 278 672 % 36 800 % 4 Peripherals and Other 672 % 36 800 % 4 Peripherals and Other Hardware ( Other Hardware ( e ) 951 38 % 691 31 % Hardware ( e ) 951 38 % 691 31 % 527 e ) 951 38 % 691 31 % 527 Software ( ) 951 38 % 691 31 % 527 Software ( f 38 % 691 31 % 527 Software ( f ) 502 527 Software ( f ) 502 39 % 362 18 % Software ( f ) 502 39 % 362 18 % 307 f ) 502 39 % 362 18 % 307 Service and ) 502 39 % 362 18 % 307 Service and other 39 % 362 18 % 307 Service and other sale 319 307 Service and other sale 319 13 % 282 24 % Service and other sale 319 13 % 282 24 % 227 other sale 319 13 % 282 24 % 227 Total net sale 319 13 % 282 24 % 227 Total net sale 13 % 282 24 % 227 Total net sale $ 8,279 227 Total net sale $ 8,279 33 % $ 6,207 8 Total net sale $ 8,279 33 % $ 6,207 8 % $ 8,279 33 % $ 6,207 8 % $ 5,742 28 8,279 33 % $ 6,207 8 % $ 5,742 28 Unit $ 6,207 8 % $ 5,742 28 Unit Sales by Product 6,207 8 % $ 5,742 28 Unit Sales by Product : unit sale ( b ) 709 6 % 667 ( 13 sale ( b ) 709 6 % 667 ( 13 ) b ) 709 6 % 667 ( 13 ) % 766 709 6 % 667 ( 13 ) % 766 PowerBook unit 667 ( 13 ) % 766 PowerBook unit sale 785 30 % 766 PowerBook unit sale 785 30 % 604 69 % 766 PowerBook unit sale 785 30 % 604 69 % 357 unit sale 785 30 % 604 69 % 357 iMac unit sale 785 30 % 604 69 % 357 iMac unit sale 30 % 604 69 % 357 iMac unit sale ( c unit sale ( c ) 916 ( 16 ) % 1,094 ( c ) 916 ( 16 ) % 1,094 ( 16 916 ( 16 ) % 1,094 ( 16 ) % 1,301 16 ) % 1,094 ( 16 ) % 1,301 iBook unit 1,094 ( 16 ) % 1,301 iBook unit sale 880 36 % 1,301 iBook unit sale 880 36 % 647 ( 4 1,301 iBook unit sale 880 36 % 647 ( 4 ) unit sale 880 36 % 647 ( 4 ) % 677 880 36 % 647 ( 4 ) % 677 Total Macintosh 647 ( 4 ) % 677 Total Macintosh unit sale 3,290 677 Total Macintosh unit sale 3,290 9 % 3,012 ( 3 Total Macintosh unit sale 3,290 9 % 3,012 ( 3 ) unit sale 3,290 9 % 3,012 ( 3 ) % 3,101 3,290 9 % 3,012 ( 3 ) % 3,101 Net sale 3,012 ( 3 ) % 3,101 Net sale per Macintosh unit sold ( g ) $ 1,496 0 % $ 1,491 2 ( g ) $ 1,496 0 % $ 1,491 2 % $ 1,496 0 % $ 1,491 2 % $ 1,462 iPod 1,496 0 % $ 1,491 2 % $ 1,462 iPod unit $ 1,491 2 % $ 1,462 iPod unit sale 4,416 370 $ 1,462 iPod unit sale 4,416 370 % 939 146 % 1,462 iPod unit sale 4,416 370 % 939 146 % 381 unit sale 4,416 370 % 939 146 % 381 Notes : sale 4,416 370 % 939 146 % 381 Notes : ( 370 % 939 146 % 381 Notes : ( a ) unit sale . Fiscal Year 2004 versus 2003 During fiscal 2004 . Fiscal Year 2004 versus 2003 During fiscal 2004 , net 2004 versus 2003 During fiscal 2004 , net sale increased 33 2004 , net sale increased 33 % or $ 2.1 billion increased 33 % or $ 2.1 billion from fiscal 2003 . $ 2.1 billion from fiscal 2003 . Several factor have contributed favorably to net sale during 2004 : • Net sale of of Macintosh system increased $ 432 million or 10 % during increased $ 432 million or 10 % during fiscal 2004 compared or 10 % during fiscal 2004 compared to 2003 while net during fiscal 2004 compared to 2003 while net sale per Macintosh sale of Macintosh system increased 278,000 unit or 9 % during system increased 278,000 unit or 9 % during fiscal 2004 compared or 9 % during fiscal 2004 compared to 2003 . These during fiscal 2004 compared to 2003 . These increase in net and unit growth during fiscal 2004 compared to 2003 of approximately during fiscal 2004 compared to 2003 of approximately 26 % and compared to 2003 of approximately 26 % and 33 % , of approximately 26 % and 33 % , respectively . Unit of portable system accounted for 51 % of all Macintosh system Macintosh system sold during fiscal 2004 compared to only 42 % fiscal 2004 compared to only 42 % during 2003 . The to only 42 % during 2003 . The Company belief that yielded positive result in fiscal 2004 , including a 15 % fiscal 2004 , including a 15 % and 6 % increase including a 15 % and 6 % increase in net sale at the end of fiscal 2003 . Although Power Macintosh sale in the second half of 2004 a a result of manufacturing sale of iPods rose $ 961 million or 279 % during rose $ 961 million or 279 % during fiscal 2004 compared or 279 % during fiscal 2004 compared to 2003 . Unit during fiscal 2004 compared to 2003 . Unit sale of iPods Unit sale of iPods totaled 4.4 million in fiscal 2004 , totaled 4.4 million in fiscal 2004 , which represents an increase which represents an increase of 370 % from the 939,000 iPod of 370 % from the 939,000 iPod unit sold in fiscal iPod unit sold in fiscal 2003 . Strong demand for the for the iPods during fiscal 2004 continued to be 29 experienced fiscal 2004 continued to be 29 experienced in all of the iPod product line in fiscal 2002 , the Company ha sold the Company ha sold approximately 5.7 million iPods . • The segment 's net sale grew 91 % to $ 1.2 billion grew 91 % to $ 1.2 billion during fiscal 2004 compared $ 1.2 billion during fiscal 2004 compared to 2003 . This during fiscal 2004 compared to 2003 . This increase is largely increase in total store from 65 at the end of 2003 65 at the end of 2003 to 86 at the end the end of 2003 to 86 at the end of 2004 86 at the end of 2004 , a well a a , a well a a 36 % year-over-year increase in average and other hardware rose by 38 % during fiscal 2004 compared by 38 % during fiscal 2004 compared to 2003 primarily due during fiscal 2004 compared to 2003 primarily due to an increase other music product increased $ 242 million or 672 % during increased $ 242 million or 672 % during fiscal 2004 compared or 672 % during fiscal 2004 compared to 2003 . The during fiscal 2004 compared to 2003 . The Company ha experienced iPod unit sale for fiscal 2004 . The increased sale from wa originally introduced in April 2003 , is primarily due to available for Windows in October 2003 and the introduction of the , and Germany in June 2004 . • Net sale of sale of software rose $ 140 million or 39 % during rose $ 140 million or 39 % during fiscal 2004 compared or 39 % during fiscal 2004 compared to 2003 due primarily during fiscal 2004 compared to 2003 due primarily to higher net , Mac OS X version 10.3 `` Panther , `` which which wa released in October 2003 . Net sale of Panther Panther accounted for approximately $ 74 million or over 50 % $ 74 million or over 50 % of the increase in software net sale for fiscal 2004 compared to 2003 . • for fiscal 2004 compared to 2003 . • The Company 's in net sale of approximately 19 % for fiscal 2004 compared approximately 19 % for fiscal 2004 compared to 2003 . Unit for fiscal 2004 compared to 2003 . Unit sale also increased Unit sale also increased by 10 % during fiscal 2004 compared by 10 % during fiscal 2004 compared to 2003 . The during fiscal 2004 compared to 2003 . The increase in U.S. education net sale for fiscal 2004 relates primarily to a 40 2004 relates primarily to a 40 % year-over-year increase in higher lesser extent the Company 's 3 % growth in K-12 net and other sale increased $ 37 million or 13 % during increased $ 37 million or 13 % during fiscal 2004 compared or 13 % during fiscal 2004 compared to 2003 . These during fiscal 2004 compared to 2003 . These increase are the the last several year . 30 Offsetting the favorable factor discussed 's net sale during fiscal 2004 were negatively impacted by the of iMac system were down 23 % and 16 % , were down 23 % and 16 % , respectively , during , respectively , during fiscal 2004 versus 2003 . The decrease , during fiscal 2004 versus 2003 . The decrease in iMac available during most of fiscal 2004 , wa nearly 3 year fiscal 2004 , wa nearly 3 year old by the time G5 began shipping in September 2004 and had experienced decline in with price point below $ 1,000 . The Company introduced a of the eMac in April 2004 with a suggested retail price retail price starting at $ 799 aimed at the price sensitive Company 's Japan segment decreased 3 % and 14 % , segment decreased 3 % and 14 % , respectively , during , respectively , during fiscal 2004 versus 2003 . The Company , during fiscal 2004 versus 2003 . The Company belief these Osaka store opening in fiscal 2004 . Declines in Japan may , such a Quark Xpress 6 , which did not become not become available until September 2004 . When sale from the in Japan resulted in a 3 % year-over-year increase in fiscal % year-over-year increase in fiscal 2004 a compared to 2003 . fiscal 2004 a compared to 2003 . See additional comment below Performance . `` Fiscal Year 2003 versus 2002 Net sale increased `` Fiscal Year 2003 versus 2002 Net sale increased $ 465 2002 Net sale increased $ 465 million or 8 % during increased $ 465 million or 8 % during 2003 compared to million or 8 % during 2003 compared to 2002 while Macintosh % during 2003 compared to 2002 while Macintosh unit sale declined while Macintosh unit sale declined 3 % year-over-year to approximately 3 3 % year-over-year to approximately 3 million unit in 2003 . approximately 3 million unit in 2003 . Several factor contributed favorably favorably to net sale during 2003 including : • The Retail net sale grew to $ 621 million during 2003 from $ to $ 621 million during 2003 from $ 283 million in million during 2003 from $ 283 million in 2002 , an from $ 283 million in 2002 , an increase of 119 2002 , an increase of 119 % . While the Company sale of iPods rose $ 202 million or 141 % during rose $ 202 million or 141 % during 2003 compared to million or 141 % during 2003 compared to 2002 . This % during 2003 compared to 2002 . This increase wa experienced segment . iPod sale during 2003 were favorably affected by the expanded this distribution network during 2003 , which contributed to the , which contributed to the 2003 increase in iPod unit sale in iPod unit sale of 146 % . • The Company and other hardware totaling $ 164 million or 31 % during totaling $ 164 million or 31 % during 2003 compared to million or 31 % during 2003 compared to 2002 , reflecting % during 2003 compared to 2002 , reflecting an overall increase and accessory , increased $ 32 million or 800 % during increased $ 32 million or 800 % during 2003 compared to million or 800 % during 2003 compared to 2002 . This % during 2003 compared to 2002 . This increase wa due Music Store for the Macintosh 31 operating system in April 2003 31 operating system in April 2003 and higher sale of iPod sale and unit sale during 2003 . • Although total Macintosh Macintosh unit sale were down 3 % in 2003 , unit were down 3 % in 2003 , unit sale of the strong primarily due to the 69 % or 247,000 unit increase to the 69 % or 247,000 unit increase in PowerBook unit , slightly offset by a 4 % or 30,000 unit decrease by a 4 % or 30,000 unit decrease in iBook unit PowerBook net sale of $ 468 million or 56 % wa of $ 468 million or 56 % wa due primarily to of the Company 's new 12-inch , 15-inch and 17-inch model Company 's new 12-inch , 15-inch and 17-inch model that were new 12-inch , 15-inch and 17-inch model that were introduced during model that were introduced during 2003 . The decline in iBook iBook consumer portable sale during 2003 wa primarily due to a unit . Portable system represented 42 % of all Macintosh system all Macintosh system sold in 2003 versus 33 % in 2002 system sold in 2003 versus 33 % in 2002 , which 2003 versus 33 % in 2002 , which reflected an overall per Macintosh unit sold increased 2 % to $ 1,491 in increased 2 % to $ 1,491 in 2003 a a result % to $ 1,491 in 2003 a a result of various Power Macintosh system accounted for 42 % of total unit sale of total unit sale in 2003 versus 36 % in 2002 unit sale in 2003 versus 36 % in 2002 . • 2003 versus 36 % in 2002 . • Net sale of sale of software increased $ 55 million or 18 % during increased $ 55 million or 18 % during 2003 compared to million or 18 % during 2003 compared to the prior year new software title during fiscal 2003 including Final Cut Express , sale of third-party software during 2003 wa particularly strong in the and other sale rose $ 55 million or 24 % during rose $ 55 million or 24 % during 2003 which primarily million or 24 % during 2003 which primarily resulted from significant Company 's net sale during 2003 were negatively impacted by the sale of desktop system fell 15 % during 2003 compared to system fell 15 % during 2003 compared to 2002. iMac system % during 2003 compared to 2002. iMac system unit sale declined iMac system unit sale declined 16 % from 2003 to 2002 sale declined 16 % from 2003 to 2002 resulting from a 16 % from 2003 to 2002 resulting from a shift in form factor available during fiscal 2003 wa in the eighth quarter cycle by the end of 2003 . • Unit sale of of Power Macintosh system fell 13 % during 2003 compared to system fell 13 % during 2003 compared to 2002 . For % during 2003 compared to 2002 . For the first nine the first nine month of 2003 compared to the same period to the same period in 2002 , unit sale of Power of Power Macintosh system decreased 24 % , which wa representative in the fourth quarter of 2003 with unit sale increasing 26 2003 with unit sale increasing 26 % during the quarter a the Company introduced in June 2003 and began shipping at the at the end of fiscal 2003 . The decline in Power economic condition over the past 32 several year had a pronounced it U.S. education channel during 2003 . Net sale and unit sale in U.S. education during 2003 were down 4 % and education during 2003 were down 4 % and 6 % , were down 4 % and 6 % , respectively , a respectively , a compared to 2002 . This decline wa due Portable system accounted for approximately 43 % of total unit sale in the education channel during 2003 , a compared to approximately , a compared to approximately 34 % in 2002 . Segment to approximately 34 % in 2002 . Segment Operating Performance The U.S. and Japan during fiscal 2004 . Each reportable geographic operating may be found in Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , `` Segment Information and . `` Americas During fiscal 2004 , net sale in the in the Americas segment grew 26 % or $ 838 million grew 26 % or $ 838 million compared to fiscal 2003 838 million compared to fiscal 2003 . The increase in net increase in net sale during 2004 wa primarily attributable to the Retail segment , which had 84 store in the U.S. a of the end of fiscal 2004 . Macintosh unit sale also unit sale also increased by 4 % in fiscal 2004 compared by 4 % in fiscal 2004 compared to 2003 , driven in fiscal 2004 compared to 2003 , driven primarily by strong in iMac sale . During 2004 and 2003 , the Americas sale . During 2004 and 2003 , the Americas segment represented the Americas segment represented approximately 49 % and 51 % , represented approximately 49 % and 51 % , respectively , of net sale and represented approximately 51 % and 54 % , represented approximately 51 % and 54 % , respectively , of education channel net sale of 19 % for fiscal 2004 compared of 19 % for fiscal 2004 compared to 2003 . Strong for fiscal 2004 compared to 2003 . Strong U.S. education net growth in net sale of 40 % for the higher education higher education channel during fiscal 2004 . The Company 's K-12 net sale grew year-over-year by 3 % during fiscal 2004 , by 3 % during fiscal 2004 , despite the challenge in focus and success with delivering 1:1 education solution . Net sale in the Americas segment during 2003 increased $ 50 million or segment during 2003 increased $ 50 million or 2 % compared increased $ 50 million or 2 % compared to 2002 . or 2 % compared to 2002 . During 2003 and 2002 compared to 2002 . During 2003 and 2002 , the Americas 2002 . During 2003 and 2002 , the Americas segment represented the Americas segment represented approximately 51 % and 55 % , represented approximately 51 % and 55 % , respectively , of net sale and represented approximately 54 % and 56 % , represented approximately 54 % and 56 % , respectively , of software , and service during 2003 compared to 2002 . The service during 2003 compared to 2002 . The Americas segment had it U.S. education channel during 2003 . Total net sale and the U.S. education channel during 2003 33 were down 4 % U.S. education channel during 2003 33 were down 4 % and during 2003 33 were down 4 % and 6 % , were down 4 % and 6 % , respectively , compared to the same period in 2002 . The Company belief this some of the decline during 2003 in net sale and unit U.S. , increased significantly during 2003 . Europe Net sale in in Europe rebounded in fiscal 2004 increasing $ 490 million or in fiscal 2004 increasing $ 490 million or 37 % from increasing $ 490 million or 37 % from 2003 . Total million or 37 % from 2003 . Total Macintosh unit sale the current year by increasing 13 % in fiscal 2004 compared increasing 13 % in fiscal 2004 compared to 2003 . Consistent in fiscal 2004 compared to 2003 . Consistent with the Americas Demand in Europe during fiscal 2004 wa particularly strong for the which experienced year-over-year increase of 29 % and 42 % , increase of 29 % and 42 % , respectively . Similar software were strong in fiscal 2004 . Net sale in Europe sale in Europe increased $ 58 million or 5 % during increased $ 58 million or 5 % during 2003 a compared million or 5 % during 2003 a compared to 2002 while during 2003 a compared to 2002 while Macintosh unit sale declined Macintosh unit sale declined by 5 % during the same period iMac and iBook system in 2003 , partially offset by strong whose net sale increased by 48 % or $ 100 million by 48 % or $ 100 million from 2002 . Europe or $ 100 million from 2002 . Europe also realized increased and unit sale were down 3 % and 14 % , were down 3 % and 14 % , respectively during fiscal % , respectively during fiscal 2004 compared to 2003 , continuing during fiscal 2004 compared to 2003 , continuing to lag behind store in Japan in fiscal 2004 . In addition , such the release of Quark XPress 6 for Mac OS X , did not occur until September 2004 . The decrease in net and iBook sale during fiscal 2004 compared to 2003 . Net during fiscal 2004 compared to 2003 . Net sale in Japan sale in Japan decreased $ 12 million or 2 % during decreased $ 12 million or 2 % during 2003 a compared million or 2 % during 2003 a compared to the same to the same period in 2002 , the weakest year-to-date performance sale were particularly weak in 2003 , declining 12 % , weak in 2003 , declining 12 % , and were primarily . Retail The Company opened 21 new retail store during 2004 21 new retail store during 2004 , including it first two number of open store to 86 a of September 25 , to 86 a of September 25 , 2004 . This compare a of September 25 , 2004 . This compare to 65 2004 . This compare to 65 open store a of September open store a of September 27 , 2003 and 40 open a of September 27 , 2003 and 40 open store a September 27 , 2003 and 40 open store a of September open store a of September 28 , 2002 . During the a of September 28 , 2002 . During the first quarter During the first quarter of 2005 , the Company anticipates opening the Company anticipates opening approximately 14 additional store to end the the calendar year at approximately 100 store . Approximately half of during the first quarter of 2005 will be in the new during the first quarter of 2005 . 34 Net sale of first quarter of 2005 . 34 Net sale of the Retail Retail segment grew to $ 1.185 billion during 2004 from $ to $ 1.185 billion during 2004 from $ 621 million and billion during 2004 from $ 621 million and $ 283 million $ 621 million and $ 283 million , in 2003 and $ 283 million , in 2003 and 2002 , respectively . million , in 2003 and 2002 , respectively . The increase in net sale during both 2004 and 2003 reflect the impact sale during both 2004 and 2003 reflect the impact of new , including the opening of 21 new store in 2004 and of 21 new store in 2004 and 25 new store in new store in 2004 and 25 new store in 2003 . and 25 new store in 2003 . An increase in average 's strong sale in fiscal 2004 . With an average of . With an average of 76 store open during 2004 , of 76 store open during 2004 , the Retail segment achieved per store of approximately $ 15.6 million , a compared to , a compared to $ 11.5 million in 2003 with a to $ 11.5 million in 2003 with a 54 store average million in 2003 with a 54 store average and $ 10.2 54 store average and $ 10.2 million in 2002 with a and $ 10.2 million in 2002 with a 28 store average million in 2002 with a 28 store average . As measured segment reported profit of $ 39 million during fiscal 2004 a $ 39 million during fiscal 2004 a compared to loss of compared to loss of $ 5 million and $ 22 million $ 5 million and $ 22 million during 2003 and 2002 and $ 22 million during 2003 and 2002 , respectively . 22 million during 2003 and 2002 , respectively . This improvement the Retail segment were $ 104 million in fiscal 2004 , $ 104 million in fiscal 2004 , bringing the total capital Retail segment to approximately $ 394 million . As of September million . As of September 25 , 2004 , the Retail As of September 25 , 2004 , the Retail segment had the Retail segment had approximately 2,100 employee and had outstanding operating related facility of approximately $ 436 million . The Company would three fiscal year ended September 25 , 2004 are a follows year ended September 25 , 2004 are a follows ( in gross margin percentage ) : 2004 2003 2002 Net sale $ margin percentage ) : 2004 2003 2002 Net sale $ 8,279 percentage ) : 2004 2003 2002 Net sale $ 8,279 $ 2003 2002 Net sale $ 8,279 $ 6,207 $ 5,742 Cost Net sale $ 8,279 $ 6,207 $ 5,742 Cost of sale $ 8,279 $ 6,207 $ 5,742 Cost of sale 6,020 4,499 $ 5,742 Cost of sale 6,020 4,499 4,139 Gross margin $ 5,742 Cost of sale 6,020 4,499 4,139 Gross margin $ 2,259 Cost of sale 6,020 4,499 4,139 Gross margin $ 2,259 $ 4,499 4,139 Gross margin $ 2,259 $ 1,708 $ 1,603 Gross Gross margin $ 2,259 $ 1,708 $ 1,603 Gross margin percentage $ 2,259 $ 1,708 $ 1,603 Gross margin percentage 27.3 % $ 1,603 Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin percentage 27.3 % 27.5 % 27.9 % Gross margin declined in Gross margin declined in fiscal 2004 to 27.3 % of net declined in fiscal 2004 to 27.3 % of net sale from % of net sale from 27.5 % of net sale in % of net sale in 2003 . The Company 's gross 's gross margin during fiscal 2004 declined due to an increase transitioned during the beginning of 2004 , higher warranty cost on and duty cost during fiscal 2004 . These unfavorable factor were in direct sale and a 39 % year-over-year increase in higher remain under pressure throughout fiscal 2005 in light of price competition during the first quarter of 2005 and possibly beyond . The 's expected gross margin during 2005 , general demand for personal , including continued industry wide 35 global pricing pressure , increased . Gross margin decreased to 27.5 % of net sale in % of net sale in 2003 from 27.9 % of net net sale in 2003 from 27.9 % of net sale in % of net sale in 2002 . This decline in gross Company beginning in late fiscal 2002 a a result of continued first three fiscal quarter of 2003 , and increased air freight new Power Mac G5 and 15-inch PowerBook , both of which shipping in volume during September 2003 . This decline is also factor affecting gross margin during 2003 were partially offset by the three fiscal year ended September 25 , 2004 are a follows year ended September 25 , 2004 are a follows ( in except for percentage ) : 2004 2003 2002 Research and development for percentage ) : 2004 2003 2002 Research and development $ percentage ) : 2004 2003 2002 Research and development $ 489 2002 Research and development $ 489 $ 471 $ 446 Percentage and development $ 489 $ 471 $ 446 Percentage of net $ 489 $ 471 $ 446 Percentage of net sale 6 446 Percentage of net sale 6 % 8 % 8 % of net sale 6 % 8 % 8 % Selling , sale 6 % 8 % 8 % Selling , general , , and administrative expense $ 1,421 $ 1,212 $ 1,109 Percentage administrative expense $ 1,421 $ 1,212 $ 1,109 Percentage of net $ 1,421 $ 1,212 $ 1,109 Percentage of net sale 17 1,109 Percentage of net sale 17 % 20 % 19 % of net sale 17 % 20 % 19 % Restructuring cost sale 17 % 20 % 19 % Restructuring cost $ 23 19 % Restructuring cost $ 23 $ 26 $ 30 Purchased Restructuring cost $ 23 $ 26 $ 30 Purchased in-process research $ 23 $ 26 $ 30 Purchased in-process research and development and development — — $ 1 Research and Development ( R D expense amounted to approximately 6 % of total net sale total net sale during fiscal 2004 down from 8 % of during fiscal 2004 down from 8 % of total net sale total net sale in both 2003 and 2002 . This decrease sale in both 2003 and 2002 . This decrease is due to the significant increase of 33 % in total net sale of the Company for fiscal 2004 . Although R & D total net sale in fiscal 2004 , actual expenditure for R R & D in fiscal 2004 increased $ 18 million or in fiscal 2004 increased $ 18 million or 4 % from increased $ 18 million or 4 % from fiscal 2003 , or 4 % from fiscal 2003 , which follows a 6 2003 , which follows a 6 % or $ 25 million a 6 % or $ 25 million increase in 2003 compared $ 25 million increase in 2003 compared to 2002 . The increase in 2003 compared to 2002 . The overall increase in employee salary merit increase in 2004 . R & D spending development cost of approximately $ 4.5 million related to the 36 4.5 million related to the 36 development of Mac OS X OS X Tiger and $ 2.3 million related to the development the development of FileMaker Pro 7 in 2004 ; $ 14.7 of FileMaker Pro 7 in 2004 ; $ 14.7 million related 7 in 2004 ; $ 14.7 million related to the development Mac OS X Panther in 2003 ; and approximately $ 13.3 2003 ; and approximately $ 13.3 million associated with the development X Jaguar and approximately $ 6 million associated with the PowerSchool enterprise student information system in 2002 . Further information related to in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial SG & A increased $ 209 million or 17 % during increased $ 209 million or 17 % during 2004 compared to million or 17 % during 2004 compared to 2003 . These % during 2004 compared to 2003 . These increase are due of total net sale in 2004 wa 17 % , down net sale in 2004 wa 17 % , down from 20 17 % , down from 20 % in 2003 . This down from 20 % in 2003 . This decrease is due due to the increase of 33 % in total net sale of the Company for fiscal 2004 , reflecting leverage on the SG & A increased $ 103 million or 9 % during increased $ 103 million or 9 % during 2003 a compared million or 9 % during 2003 a compared to 2002 due during 2003 a compared to 2002 due primarily to the Company offset by a decrease in 2003 discretionary spending on marketing and by saving resulting from the 2003 and 2002 restructuring activity described resulting from the 2003 and 2002 restructuring activity described below . activity described below . Fiscal 2004 Restructuring Actions The Company recorded restructuring charge of approximately $ 23 million during the year ended during the year ended September 25 , 2004 , including approximately year ended September 25 , 2004 , including approximately $ 14 2004 , including approximately $ 14 million in severance cost , in severance cost , $ 5.5 million in asset impairment , impairment , and a $ 3.5 million charge for lease cancellation cancellation . Of the $ 23 million charge , $ 14.3 23 million charge , $ 14.3 million had been spent by spent by the end of 2004 , with the remaining $ , with the remaining $ 8.7 million consisting of $ 5.2 8.7 million consisting of $ 5.2 million for employee severance benefit employee severance benefit and $ 3.5 million for lease cancellation . During the fourth quarter of 2004 , the Company recognized restructuring recognized restructuring expense of $ 5.5 million . In conjunction with during the second quarter of 2004 , the Company vacated a during the fourth quarter of 2004 resulting in a charge of in a charge of $ 3.7 million for contract termination and employee termination cost of $ 1.8 million related to the elimination , the Company reversed $ 400,000 of excess restructuring expense from for the fourth quarter of 2004 wa $ 5.1 million , quarter of 2004 wa $ 5.1 million , of which $ million , of which $ 300,000 had been paid prior to prior to the end of 2004 . These action will result result in the termination of 54 position , 4 of which termination of 54 position , 4 of which had been terminated prior to the end of 2004 . During the third quarter During the third quarter of 2004 , the Company finalized restructuring for the third quarter of 2004 wa $ 7.9 million , quarter of 2004 wa $ 7.9 million , of which $ million , of which $ 7.2 million had been paid prior prior to the end of 2004 . These action will result result in the termination of 83 position , 77 of which termination of 83 position , 77 of which had been terminated prior to the end of 2004 . The closing of manufacturing resulted in the elimination of 67 position for a severance cost a severance cost of $ 1.9 million and write-off of $ million and write-off of $ 5.3 million in manufacturing-related fixed asset during the third quarter of 2004 . Termination of sale and resulted in severance of $ 0.7 million for the elimination of million for the elimination of 16 position . During the second During the second quarter of 2004 , the Company 's management in Sacramento and headcount reduction 37 related primarily to various sale of the action wa $ 9.6 million for the termination of million for the termination of 348 position . As of the of the fourth quarter of 2004 , $ 6.8 million had quarter of 2004 , $ 6.8 million had been spent and million had been spent and 310 position had been eliminated related operating expense of approximately $ 2 million . In addition , restructuring action taken in fiscal 2004 will ultimately result in reduced operating expense of approximately $ 6 million . Fiscal 2003 Restructuring $ 6 million . Fiscal 2003 Restructuring Actions The Company recorded restructuring charge of approximately $ 26.8 million during the year ended during the year ended September 27 , 2003 , including approximately year ended September 27 , 2003 , including approximately $ 7.4 2003 , including approximately $ 7.4 million in severance cost , severance cost , a $ 5.0 million charge to write-off deferred write-off deferred compensation , $ 7.1 million in asset impairment and asset impairment and a $ 7.3 million charge for lease cancellation cancellation . Of the $ 26.8 million charge , all had spent by the end of 2004 , except for approximately $ , except for approximately $ 3.0 million related to operating lease During the third quarter of 2003 , approximately $ 500,000 of of 2003 , approximately $ 500,000 of the amount originally accrued estimated and an approximately $ 500,000 shortfall wa identified in the During the second quarter of 2003 , the Company 's management total restructuring charge of $ 2.8 million , including $ 2.4 2.8 million , including $ 2.4 million in severance cost and in severance cost and $ 400,000 for asset write-off and lease resulted in the termination of 93 employee . During the first During the first quarter of 2003 , the Company 's management a total cost of $ 24 million that resulted in the at the end of fiscal 2002 , and termination of various resulted in the elimination of 260 position worldwide . Closure of in severance cost of $ 1.8 million and cost of $ million and cost of $ 6.7 million to write-off manufacturing related included severance of approximately $ 550,000 and recognition of $ 5 550,000 and recognition of $ 5 million of previously deferred stock acquired by the Company in 2001 related to certain PowerSchool employee in the first quarter of 2003 . Termination of sale and in severance cost of $ 2.8 million and accrual of cost on closed facility of $ 6.7 million . The total net net restructuring charge of $ 23 million recognized during the first during the first quarter of 2003 also reflects the reversal of reflects the reversal of $ 600,000 of unused restructuring accrual originally during the first quarter of 2002 . Fiscal 2002 Restructuring Actions quarter of 2002 . Fiscal 2002 Restructuring Actions During fiscal 2002 2002 Restructuring Actions During fiscal 2002 , the Company recorded total restructuring charge of approximately $ 30 million related to action intended Company 's operating expense with 38 existing general economic condition and During the fourth quarter of 2002 , the Company 's management total cost of approximately $ 6 million designed to reduce headcount in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million , all of which which were eliminated by September 27 , 2003 . Eliminated position eliminated by September 27 , 2003 . Eliminated position were primarily in the amount of $ 4.5 million . During the first During the first quarter of 2002 , the Company 's management total cost of approximately $ 24 million . These restructuring action in the elimination of approximately 425 position worldwide at a cost at a cost of $ 8 million . Positions were eliminated asset associated with first quarter 2002 restructuring action during that same contract cancellation charge totaled $ 12 million , and charge for for asset impairment totaled $ 4 million . The first quarter million . The first quarter 2002 restructuring action were primarily related During the first quarter of 2003 , the Company reversed the remaining unused accrual of $ 600,000 . Purchased In-Process Research and IPR & D ) During 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 551,000 of which wa allocated to using a discount rate of 25 % . Other Income and three fiscal year ended September 25 , 2004 are a follows year ended September 25 , 2004 are a follows ( in ( in million ) : 2004 2003 2002 Gains ( loss in million ) : 2004 2003 2002 Gains ( loss ) million ) : 2004 2003 2002 Gains ( loss ) on non-current investment , net $ 4 $ 10 $ ( 42 , net $ 4 $ 10 $ ( 42 ) Interest 4 $ 10 $ ( 42 ) Interest income $ 64 42 ) Interest income $ 64 $ 69 $ 118 Interest Interest income $ 64 $ 69 $ 118 Interest expense ( $ 64 $ 69 $ 118 Interest expense ( 3 ) $ 118 Interest expense ( 3 ) ( 8 ) ( expense ( 3 ) ( 8 ) ( 11 ) Gains ) ( 8 ) ( 11 ) Gains on sale of short term investment , net 1 21 7 Other income ( term investment , net 1 21 7 Other income ( expense investment , net 1 21 7 Other income ( expense ) expense ) , net ( 9 ) ( 5 ) ( net ( 9 ) ( 5 ) ( 2 ) Gain ) ( 5 ) ( 2 ) Gain on forward purchase on forward purchase agreement — 6 — Interest and other income other income , net $ 53 $ 83 $ 112 Total , net $ 53 $ 83 $ 112 Total other income $ 53 $ 83 $ 112 Total other income and expense other income and expense $ 57 $ 93 $ 70 39 and expense $ 57 $ 93 $ 70 39 Gains and $ 57 $ 93 $ 70 39 Gains and Losses on 57 $ 93 $ 70 39 Gains and Losses on Non-current in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 2 of Notes this Form 10-K at Note 2 of Notes to Consolidated Financial Consolidated Financial Statements . During 2004 , the Company sold it the Company sold it remaining 986,000 share of Akamai stock . generated proceeds of approximately $ 5 million and a gain before before tax of approximately $ 4 million . As of September million . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company doe not consolidated balance sheet . During 2003 , the Company sold 1,875,000 2003 , the Company sold 1,875,000 share of Akamai stock for net proceeds of approximately $ 9 million , and a gain before tax of approximately $ 8 million . Additionally , the investment in ARM stock , 278,000 share , for net proceeds net proceeds of approximately $ 295,000 , and a gain before gain before tax of $ 270,000 , and sold it remaining investment in EarthLink stock , 6,540,000 share , for net proceeds net proceeds of approximately $ 37 million , and a gain gain before tax of $ 2 million . During 2002 , $ 2 million . During 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to in EarthLink , a $ 6 million charge to earnings to Akamai , and a $ 15 million charge to earnings to investment . These loss in 2002 were partially offset by the offset by the sale of 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 , the sale of 250,000 223,000 , the sale of 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 , and the sale of and the sale of approximately 4.7 million share of ARM stock gain before tax of $ 21 million . Interest and Other income , net decreased $ 30 million or 36 % to decreased $ 30 million or 36 % to $ 53 million or 36 % to $ 53 million during fiscal 2004 compared $ 53 million during fiscal 2004 compared to $ 83 million fiscal 2004 compared to $ 83 million in 2003 and $ to $ 83 million in 2003 and $ 112 million in million in 2003 and $ 112 million in 2002 . These and $ 112 million in 2002 . These decrease are attributable of short-term investment in fiscal 2004 . The weighted average interest and short-term investment fell to 1.38 % in 2004 compared to fell to 1.38 % in 2004 compared to the 1.89 % in 2004 compared to the 1.89 % and 2.85 % rate to the 1.89 % and 2.85 % rate earned during 2003 2.85 % rate earned during 2003 and 2002 , respectively . rate earned during 2003 and 2002 , respectively . The Company recognized net gain of $ 1 million , $ 21 million $ 1 million , $ 21 million and $ 7 million $ 21 million and $ 7 million during fiscal 2004 , $ 7 million during fiscal 2004 , 2003 and 2002 , million during fiscal 2004 , 2003 and 2002 , respectively . fiscal 2004 , 2003 and 2002 , respectively . The decrease income , net during fiscal 2003 wa also offset by the also offset by the $ 6 million gain related to the during the fourth quarter of 2003 which is further discussed below on the Company 's $ 300 million aggregate principal amount unsecured upon their maturity in February 2004 , partially offset by amortization of deferred gain realized in 2002 and 2001 that resulted from gain realized in 2002 and 2001 that resulted from the closure unsecured note were sold at 99.925 % of par for an effective yield to maturity of 6.51 % . Total deferred gain debt swap of approximately $ 23 million wa fully amortized a notes ' maturity in February 2004 . Provision for Income Taxes for the year ended September 25 , 2004 wa approximately 28 year ended September 25 , 2004 wa approximately 28 % . 25 , 2004 wa approximately 28 % . The Company 's federal income tax rate of 35 % due primarily to certain such earnings are intended to 40 be indefinitely reinvested outside the the U.S. As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had deferred and tax credit of $ 647 million before being offset against asset . As of September 25 , 2004 , a valuation As of September 25 , 2004 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the for all year prior to 2001 and proposed certain adjustment . Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ) issued SFAS No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment represented allowed the Company to acquire 1.5 million share of it common at a price of $ 16.64 per share . The Company forward purchase agreement in August 2003 . The settlement resulted in additional gain of approximately $ 6 million , which is included Asset Retirement Obligations On September 29 , 2002 , the Company Obligations On September 29 , 2002 , the Company adopted SFAS Company adopted SFAS No . 143 , Accounting for Asset Retirement tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect adjustment to net income during 2003 of approximately $ 2 million during 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied Recent Accounting Pronouncements In December 2003 , the Securities and Exchange ( SAB ) No . 104 , Revenue Recognition , which Recognition , which supercedes SAB 101 , Revenue Recognition in Financial in Financial Statements . SAB 104 clarifies existing guidance regarding revenue ( EITF ) No . 00-21 . The adoption of SAB . The adoption of SAB 104 did not have a material operation or financial position . 41 In December 2003 , the position . 41 In December 2003 , the Financial Accounting Standards No . ( FIN ) 46R , a revision to FIN , a revision to FIN 46 , Consolidation of Variable Interest Variable Interest Entities . FIN 46R clarifies some of the provision of the provision of FIN 46 and exempts certain entity from from it requirement . FIN 46R is effective at the end interim period ending after March 15 , 2004 . The adoption ending after March 15 , 2004 . The adoption of FIN . The adoption of FIN 46R did not have a material financial position . In March 2004 , the FASB issued EITF issued EITF Issue No . 03-1 , The Meaning of Other-Than-Temporary to Certain Investments . EITF 03-1 includes new guidance for evaluating temporarily impaired . In September 2004 , the FASB issued FASB issued FASB Staff Position EITF 03-1-1 , which delay the effective and measurement provision of EITF 03-1 to investment in security that annual period ending after June 15 , 2004 . Although the ending after June 15 , 2004 . Although the Company will evaluate the application of EITF 03-1 , management doe not currently APB ) Opinion No . 25 , Accounting for Stock Issued follow APB Opinion No . 25 because , a further discussed in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of the this Form 10-K at Note 1 of the Notes to Consolidated for under SFAS No . 123 , Accounting for Stock-Based Compensation Under APB Opinion No . 25 , when the exercise price is recognized . On March 31 , 2004 , the FASB . On March 31 , 2004 , the FASB issued a using APB Opinion No . 25 and generally would require instead it fourth fiscal quarter of 2005 . At the Company 's annual shareholder meeting on April 24 , 2003 , shareholder approved meeting on April 24 , 2003 , shareholder approved a proposal provision of SFAS No . 123 , instead of the recognition under APB Opinion No . 25 , is described in Part in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of the this Form 10-K at Note 1 of the Notes to Consolidated to Consolidated Financial Statements . 42 Liquidity and Capital Resources The dollar in million ) : 2004 2003 2002 Cash , cash in million ) : 2004 2003 2002 Cash , cash equivalent million ) : 2004 2003 2002 Cash , cash equivalent , , and short-term investment $ 5,464 $ 4,566 $ 4,337 Accounts short-term investment $ 5,464 $ 4,566 $ 4,337 Accounts receivable , $ 5,464 $ 4,566 $ 4,337 Accounts receivable , net $ Accounts receivable , net $ 774 $ 766 $ 565 Inventory , net $ 774 $ 766 $ 565 Inventory $ 101 $ 774 $ 766 $ 565 Inventory $ 101 $ 56 766 $ 565 Inventory $ 101 $ 56 $ 45 Working 565 Inventory $ 101 $ 56 $ 45 Working capital $ $ 101 $ 56 $ 45 Working capital $ 4,375 $ $ 45 Working capital $ 4,375 $ 3,530 $ 3,730 Days Working capital $ 4,375 $ 3,530 $ 3,730 Days sale in $ 4,375 $ 3,530 $ 3,730 Days sale in account receivable DSO ) ( a ) 30 41 36 Days of supply ) ( a ) 30 41 36 Days of supply in ( a ) 30 41 36 Days of supply in inventory in inventory ( b ) 5 4 4 Days payable outstanding inventory ( b ) 5 4 4 Days payable outstanding ( ( b ) 5 4 4 Days payable outstanding ( DPO DPO ) ( c ) 76 82 77 Annual operating cash ) ( c ) 76 82 77 Annual operating cash flow ( c ) 76 82 77 Annual operating cash flow $ Annual operating cash flow $ 934 $ 289 $ 89 ( cash flow $ 934 $ 289 $ 89 ( a ) $ 934 $ 289 $ 89 ( a ) DSO is inventory . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had $ , the Company had $ 5.464 billion in cash , cash , an increase of $ 898 million over the same balance at the end of fiscal 2003 . The principal component of by operating activity of $ 934 million and proceeds of $ million and proceeds of $ 427 million from the issuance of 's outstanding debt of $ 300 million and purchase of property , and equipment of $ 176 million . The Company 's liquid investment . Approximately $ 3.2 billion of this cash , American Jobs Creation Act of 2004 , and may decide to existing operation over the next 12 month . Debt In February month . Debt In February 2004 , the Company retired $ , the Company retired $ 300 million of debt outstanding in outstanding in the form of 6.5 % unsecured note . The note were originally issued in 1994 and were sold at 99.9925 1994 and were sold at 99.9925 % of par for an effective yield to maturity of 6.51 % . The Company currently total capital expenditure were $ 176 million during fiscal 2004 , $ 176 million during fiscal 2004 , $ 104 million of during fiscal 2004 , $ 104 million of which were for 's Retail segment and $ 72 million of which were primarily it will utilize approximately $ 240 million for capital expenditure during million for capital expenditure during 2005 , approximately $ 125 million during 2005 , approximately $ 125 million of which is expected general information technology infrastructure . 43 Stock Repurchase Plan In July Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 25 , 2004 . Off-Balance Sheet a of September 25 , 2004 . Off-Balance Sheet Arrangements and firm commitment a of September 25 , 2004 and excludes amount a of September 25 , 2004 and excludes amount already recorded Payments Due in Less Than 1 year Payments Due in 1-3 1 year Payments Due in 1-3 year Payments Due in 4-5 1-3 year Payments Due in 4-5 year Payments Due in More Payments Due in More Than 5 year Operating Leases $ 617 5 year Operating Leases $ 617 $ 89 $ 170 $ Operating Leases $ 617 $ 89 $ 170 $ 126 $ $ 617 $ 89 $ 170 $ 126 $ 232 Purchase $ 89 $ 170 $ 126 $ 232 Purchase Obligations 1,112 $ 170 $ 126 $ 232 Purchase Obligations 1,112 1,112 — 126 $ 232 Purchase Obligations 1,112 1,112 — — — Asset $ 232 Purchase Obligations 1,112 1,112 — — — Asset Retirement — — Asset Retirement Obligations 12 — 1 2 9 Other Asset Retirement Obligations 12 — 1 2 9 Other Obligations 24 Retirement Obligations 12 — 1 2 9 Other Obligations 24 14 Obligations 12 — 1 2 9 Other Obligations 24 14 10 1 2 9 Other Obligations 24 14 10 — — Total 2 9 Other Obligations 24 14 10 — — Total $ 9 Other Obligations 24 14 10 — — Total $ 1,765 10 — — Total $ 1,765 $ 1,215 $ 181 $ — Total $ 1,765 $ 1,215 $ 181 $ 128 $ $ 1,765 $ 1,215 $ 181 $ 128 $ 241 Lease $ 1,215 $ 181 $ 128 $ 241 Lease Commitments As $ 181 $ 128 $ 241 Lease Commitments As of September Lease Commitments As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had total operating lease of approximately $ 617 million , $ 436 million $ 617 million , $ 436 million of which related to existing operating lease range from 2 to 16 year . Purchase lease range from 2 to 16 year . Purchase Obligations The typically cover period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company also requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The nature of the end of it fiscal 2003 . As of September 25 2003 . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had 44 2004 , the Company had 44 outstanding third-party manufacturing commitment and purchase commitment of approximately $ 1.1 billion . Asset Retirement Obligations termination . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company estimate that cash flow of approximately $ 12 million would be required to other obligation of approximately $ 24 million are primarily related to vendor , are located near 45 major seismic fault . Because the second half of calendar 2000 for personal computing product . advantage over competing platform . 46 The Company is currently focused continue to pursue one-to-one ( 1:1 ) learning solution in education education . The Company 's 1:1 learning solution are a complete a central server . These 1:1 learning solution and other strategic and software it sell . 47 Failure to do so could requirement for period ranging from 30 to 130 day . The period ranging from 30 to 130 day . The Company 's that the relatively slower MHz 48 rating or clock speed of during the second half of 2004 . The inability of IBM 's product caused resellers to 49 reduce their ordering and marketing in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading `` Markets the cost of developing such 50 software product . To the single application . In August 1997 , the Company and Microsoft of five year through August 2002 , and subject to certain it product subsequent to August 2002 . While the Company belief technology . In June of 2003 , Microsoft stated that it the Company 's introduction during 2003 of it own web browser certain patent or other intellectual 51 property right of others . in Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . In the opinion of in Part I , Item 3 of this Form 10-K or Item 3 of this Form 10-K or should several of these and uncertainty . Through September 2004 , the Company ha opened , the Company ha opened 86 retail store . The Company with lease term ranging from 5 to 16 year , the term ranging from 5 to 16 year , the majority of majority of which are for 10 year . The Company could seven such store through November 2004 . Because of their location location have term ranging from 10 to 16 year with total term ranging from 10 to 16 year with total commitment per lease term ranging from $ 25 million to $ 50 million $ 25 million to $ 50 million . Closure or poor partner ; lack of experience 52 in managing retail operation outside operation and financial condition . 53 The Company ha higher research delay or cancellation of customer 54 order , impeding the manufacture in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading `` Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 2 this Form 10-K at Notes 1 and 2 of Notes to 10-K at Notes 1 and 2 of Notes to Consolidated Financial the Company conduct business . 55 Unanticipated change in the Company of earnings per share . 56 Item 7A . Quantitative and per share . 56 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 25 , 2004 , approximately $ As of September 25 , 2004 , approximately $ 180 million , 2004 , approximately $ 180 million of the Company 's had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 27 , 2003 , $ 629 As of September 27 , 2003 , $ 629 million of 27 , 2003 , $ 629 million of the Company 's investment had maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remainder all all had underlying maturity between 3 and 12 month . The underlying maturity between 3 and 12 month . The Company may recognized net gain of $ 1 million in 2004 , $ of $ 1 million in 2004 , $ 21 million in million in 2004 , $ 21 million in 2003 , and , $ 21 million in 2003 , and $ 7 million in 2003 , and $ 7 million in 2002 . In and $ 7 million in 2002 . In order to provide the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 25 , 2004 , a hypothetical a of September 25 , 2004 , a hypothetical 100 basis , 2004 , a hypothetical 100 basis point increase in interest would result in a $ 14.4 million decline in the fair portfolio . As of September 27 , 2003 , a similar As of September 27 , 2003 , a similar 100 basis , 2003 , a similar 100 basis point shift in the have resulted in a $ 12.9 million decline in fair value income on it cash equivalent 57 and short-term investment with it any interest rate derivative during 2004 or 2003 and had no rate derivative during 2004 or 2003 and had no open interest interest rate derivative at September 25 , 2004 . In prior derivative at September 25 , 2004 . In prior year , converted the Company 's fixed-rate 10-year debt to floating-rate debt . market interest rate , during 2001 and 2002 the Company entered rate , during 2001 and 2002 the Company entered into and position realizing gain of $ 23 million . The gain were Monte Carlo simulation to generate 3000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 3.2 million a of September 25 3.2 million a of September 25 , 2004 compared to a a of September 25 , 2004 compared to a maximum one-day maximum one-day loss of $ 7.5 million a of September 27 7.5 million a of September 27 , 2003 . Because the a of September 27 , 2003 . Because the Company us analysis performed a of September 25 , 2004 due to the a of September 25 , 2004 due to the inherent limitation actual exposure and position . 58 Item 8 . Financial Statements and position . 58 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 60 Consolidated Statements 2004 and September 27 , 2003 60 Consolidated Statements of Operations and September 27 , 2003 60 Consolidated Statements of Operations for three fiscal year ended September 25 , 2004 61 Consolidated Statements year ended September 25 , 2004 61 Consolidated Statements of Shareholders ended September 25 , 2004 61 Consolidated Statements of Shareholders ' three fiscal year ended September 25 , 2004 62 Consolidated Statements year ended September 25 , 2004 62 Consolidated Statements of Cash ended September 25 , 2004 62 Consolidated Statements of Cash Flows three fiscal year ended September 25 , 2004 63 Notes to year ended September 25 , 2004 63 Notes to Consolidated Financial ended September 25 , 2004 63 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 64 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 102 Report of Independent Registered Public Accounting Firm , KPMG LLP 103 All financial statement schedule have Statements and Notes thereto . 59 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 25 , 2004 September 27 , amount ) September 25 , 2004 September 27 , 2003 ASSETS September 25 , 2004 September 27 , 2003 ASSETS : Current , 2004 September 27 , 2003 ASSETS : Current asset : Cash and cash equivalent $ 2,969 $ 3,396 Short-term investment 2,495 cash equivalent $ 2,969 $ 3,396 Short-term investment 2,495 1,170 Accounts 2,969 $ 3,396 Short-term investment 2,495 1,170 Accounts receivable , le $ 3,396 Short-term investment 2,495 1,170 Accounts receivable , le allowance , le allowance of $ 47 and $ 49 , respectively of $ 47 and $ 49 , respectively 774 766 Inventories and $ 49 , respectively 774 766 Inventories 101 56 Deferred $ 49 , respectively 774 766 Inventories 101 56 Deferred tax , respectively 774 766 Inventories 101 56 Deferred tax asset 231 respectively 774 766 Inventories 101 56 Deferred tax asset 231 190 101 56 Deferred tax asset 231 190 Other current asset 485 56 Deferred tax asset 231 190 Other current asset 485 309 231 190 Other current asset 485 309 Total current asset 7,055 190 Other current asset 485 309 Total current asset 7,055 5,887 485 309 Total current asset 7,055 5,887 Property , plant , 309 Total current asset 7,055 5,887 Property , plant , and , and equipment , net 707 669 Goodwill 80 85 Acquired and equipment , net 707 669 Goodwill 80 85 Acquired intangible , net 707 669 Goodwill 80 85 Acquired intangible asset 17 net 707 669 Goodwill 80 85 Acquired intangible asset 17 24 80 85 Acquired intangible asset 17 24 Other asset 191 150 85 Acquired intangible asset 17 24 Other asset 191 150 Total asset 17 24 Other asset 191 150 Total asset $ 8,050 17 24 Other asset 191 150 Total asset $ 8,050 $ 191 150 Total asset $ 8,050 $ 6,815 LIABILITIES AND SHAREHOLDERS Total asset $ 8,050 $ 6,815 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 Accounts payable $ 1,451 $ 1,154 Accrued expense 1,229 899 Current 1,451 $ 1,154 Accrued expense 1,229 899 Current debt — 304 $ 1,154 Accrued expense 1,229 899 Current debt — 304 Total 1,229 899 Current debt — 304 Total current liability 2,680 2,357 — 304 Total current liability 2,680 2,357 Deferred tax liability and 304 Total current liability 2,680 2,357 Deferred tax liability and other liability and other non-current liability 294 235 Total liability 2,974 2,592 and other non-current liability 294 235 Total liability 2,974 2,592 Commitments liability 294 235 Total liability 2,974 2,592 Commitments and contingency Shareholders 294 235 Total liability 2,974 2,592 Commitments and contingency Shareholders ' , no par value ; 900,000,000 share authorized ; 391,443,617 and ; 900,000,000 share authorized ; 391,443,617 and 366,726,584 share issued and share authorized ; 391,443,617 and 366,726,584 share issued and outstanding , issued and outstanding , respectively 2,514 1,926 Deferred stock compensation ( and outstanding , respectively 2,514 1,926 Deferred stock compensation ( 93 1,926 Deferred stock compensation ( 93 ) ( 62 ) Retained compensation ( 93 ) ( 62 ) Retained earnings 2,670 2,394 ( 62 ) Retained earnings 2,670 2,394 Accumulated other comprehensive income 62 ) Retained earnings 2,670 2,394 Accumulated other comprehensive income ( income ( loss ) ( 15 ) ( 35 ) Total ) ( 15 ) ( 35 ) Total shareholder ' equity ) Total shareholder ' equity 5,076 4,223 Total liability and shareholder Total shareholder ' equity 5,076 4,223 Total liability and shareholder ' and shareholder ' equity $ 8,050 $ 6,815 See accompanying note ' equity $ 8,050 $ 6,815 See accompanying note to consolidated to consolidated financial statement . 60 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 25 , 2004 2004 2003 2002 year ended September 25 , 2004 2004 2003 2002 Net sale ended September 25 , 2004 2004 2003 2002 Net sale $ September 25 , 2004 2004 2003 2002 Net sale $ 8,279 25 , 2004 2004 2003 2002 Net sale $ 8,279 $ 2003 2002 Net sale $ 8,279 $ 6,207 $ 5,742 Cost Net sale $ 8,279 $ 6,207 $ 5,742 Cost of sale $ 8,279 $ 6,207 $ 5,742 Cost of sale 6,020 4,499 $ 5,742 Cost of sale 6,020 4,499 4,139 Gross margin 2,259 5,742 Cost of sale 6,020 4,499 4,139 Gross margin 2,259 1,708 Cost of sale 6,020 4,499 4,139 Gross margin 2,259 1,708 1,603 6,020 4,499 4,139 Gross margin 2,259 1,708 1,603 Operating expense : 4,499 4,139 Gross margin 2,259 1,708 1,603 Operating expense : Research 4,139 Gross margin 2,259 1,708 1,603 Operating expense : Research and expense : Research and development 489 471 446 Selling , general : Research and development 489 471 446 Selling , general , Research and development 489 471 446 Selling , general , and , general , and administrative 1,421 1,212 1,109 Restructuring cost 23 general , and administrative 1,421 1,212 1,109 Restructuring cost 23 26 , and administrative 1,421 1,212 1,109 Restructuring cost 23 26 30 1,421 1,212 1,109 Restructuring cost 23 26 30 Purchased in-process research 1,212 1,109 Restructuring cost 23 26 30 Purchased in-process research and 1,109 Restructuring cost 23 26 30 Purchased in-process research and development research and development — — 1 Total operating expense 1,933 1,709 — 1 Total operating expense 1,933 1,709 1,586 Operating income ( 1 Total operating expense 1,933 1,709 1,586 Operating income ( loss Total operating expense 1,933 1,709 1,586 Operating income ( loss ) Operating income ( loss ) 326 ( 1 ) 17 Other ( loss ) 326 ( 1 ) 17 Other income and ) 326 ( 1 ) 17 Other income and expense : on non-current investment , net 4 10 ( 42 ) Interest non-current investment , net 4 10 ( 42 ) Interest and , net 4 10 ( 42 ) Interest and other income and other income , net 53 83 112 Total other income other income , net 53 83 112 Total other income and income , net 53 83 112 Total other income and expense Total other income and expense 57 93 70 Income before provision other income and expense 57 93 70 Income before provision for income and expense 57 93 70 Income before provision for income before provision for income tax 383 92 87 Provision for income provision for income tax 383 92 87 Provision for income tax for income tax 383 92 87 Provision for income tax 107 87 Provision for income tax 107 24 22 Income before accounting Provision for income tax 107 24 22 Income before accounting change for income tax 107 24 22 Income before accounting change 276 22 Income before accounting change 276 68 65 Cumulative effect of Income before accounting change 276 68 65 Cumulative effect of accounting before accounting change 276 68 65 Cumulative effect of accounting change net of income tax — 1 — Net income $ 276 1 — Net income $ 276 $ 69 $ 65 Earnings Net income $ 276 $ 69 $ 65 Earnings per common $ 276 $ 69 $ 65 Earnings per common share before accounting change : Basic $ 0.74 $ 0.19 $ 0.18 Diluted : Basic $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Earnings 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Earnings per common $ 0.71 $ 0.19 $ 0.18 Earnings per common share : common share : Basic $ 0.74 $ 0.19 $ 0.18 Diluted : Basic $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Shares 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Shares used in $ 0.71 $ 0.19 $ 0.18 Shares used in computing earnings in thousand ) : Basic 371,590 360,631 355,022 Diluted 387,311 363,466 thousand ) : Basic 371,590 360,631 355,022 Diluted 387,311 363,466 361,785 ) : Basic 371,590 360,631 355,022 Diluted 387,311 363,466 361,785 See Basic 371,590 360,631 355,022 Diluted 387,311 363,466 361,785 See accompanying note 371,590 360,631 355,022 Diluted 387,311 363,466 361,785 See accompanying note to 360,631 355,022 Diluted 387,311 363,466 361,785 See accompanying note to consolidated to consolidated financial statement . 61 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ' Amount Balances a of September 29 , 2001 350,922 $ 1,693 a of September 29 , 2001 350,922 $ 1,693 $ ( of September 29 , 2001 350,922 $ 1,693 $ ( 11 29 , 2001 350,922 $ 1,693 $ ( 11 ) $ 350,922 $ 1,693 $ ( 11 ) $ 2,260 $ ( $ ( 11 ) $ 2,260 $ ( 22 ) $ ) $ 2,260 $ ( 22 ) $ 3,920 Components of $ ( 22 ) $ 3,920 Components of comprehensive income : Net income — — — 65 — 65 Change in foreign — — — 65 — 65 Change in foreign currency translation translation — — — — 5 5 Change in unrealized gain — — — — 5 5 Change in unrealized gain on — — — — ( 17 ) ( 17 ) Change — ( 17 ) ( 17 ) Change in unrealized gain — — — — ( 15 ) ( 15 ) Total — ( 15 ) ( 15 ) Total comprehensive income 38 15 ) Total comprehensive income 38 Amortization of deferred stock compensation deferred stock compensation — — 4 — — 4 Common stock — — 4 — — 4 Common stock issued under stock stock issued under stock plan 8,037 105 — — — 105 issued under stock plan 8,037 105 — — — 105 Tax 8,037 105 — — — 105 Tax benefit related to stock related to stock option — 28 — — — 28 Balances — 28 — — — 28 Balances a of September 28 28 Balances a of September 28 , 2002 358,959 $ 1,826 a of September 28 , 2002 358,959 $ 1,826 $ ( of September 28 , 2002 358,959 $ 1,826 $ ( 7 28 , 2002 358,959 $ 1,826 $ ( 7 ) $ 358,959 $ 1,826 $ ( 7 ) $ 2,325 $ ( $ ( 7 ) $ 2,325 $ ( 49 ) $ ) $ 2,325 $ ( 49 ) $ 4,095 Components of $ ( 49 ) $ 4,095 Components of comprehensive income : Net income — — — 69 — 69 Change in foreign — — — 69 — 69 Change in foreign currency translation translation — — — — 31 31 Change in unrealized gain — — — — 31 31 Change in unrealized gain on — — — — ( 12 ) ( 12 ) Change — ( 12 ) ( 12 ) Change in unrealized gain — — — — ( 5 ) ( 5 ) Total — ( 5 ) ( 5 ) Total comprehensive income 83 5 ) Total comprehensive income 83 Amortization of deferred stock compensation deferred stock compensation — — 15 — — 15 Write-off of — — 15 — — 15 Write-off of deferred stock compensation deferred stock compensation — — 5 — — 5 Common stock — — 5 — — 5 Common stock issued under stock stock issued under stock plan 9,299 128 ( 75 ) — issued under stock plan 9,299 128 ( 75 ) — — stock plan 9,299 128 ( 75 ) — — 53 Settlement ( 75 ) — — 53 Settlement of forward purchase agreement of forward purchase agreement ( 1,531 ) ( 35 ) — agreement ( 1,531 ) ( 35 ) — — — ( ) — — — ( 35 ) Tax benefit related to related to stock option — 7 — — — 7 Balances — 7 — — — 7 Balances a of September 27 7 Balances a of September 27 , 2003 366,727 $ 1,926 a of September 27 , 2003 366,727 $ 1,926 $ ( of September 27 , 2003 366,727 $ 1,926 $ ( 62 27 , 2003 366,727 $ 1,926 $ ( 62 ) $ 366,727 $ 1,926 $ ( 62 ) $ 2,394 $ ( $ ( 62 ) $ 2,394 $ ( 35 ) $ ) $ 2,394 $ ( 35 ) $ 4,223 Components of $ ( 35 ) $ 4,223 Components of comprehensive income : Net income — — — 276 — 276 Change in foreign — — — 276 — 276 Change in foreign currency translation translation — — — — 13 13 Change in unrealized gain — — — — 13 13 Change in unrealized gain on — — — — ( 5 ) ( 5 ) Change — ( 5 ) ( 5 ) Change in unrealized loss tax — — — — 12 12 Total comprehensive income 296 — — — — 12 12 Total comprehensive income 296 Issuance 12 12 Total comprehensive income 296 Issuance of restricted stock unit of restricted stock unit — 64 ( 64 ) — — stock unit — 64 ( 64 ) — — — Adjustment a prior year acquisition ( 79 ) ( 2 ) — acquisition ( 79 ) ( 2 ) — — — ( ) — — — ( 2 ) Amortization of deferred stock deferred stock compensation — — 33 — — 33 Common stock — — 33 — — 33 Common stock issued under stock stock issued under stock plan 24,796 427 — — — 427 issued under stock plan 24,796 427 — — — 427 Tax 24,796 427 — — — 427 Tax benefit related to stock related to stock option — 99 — — — 99 Balances — 99 — — — 99 Balances a of September 25 99 Balances a of September 25 , 2004 391,444 $ 2,514 a of September 25 , 2004 391,444 $ 2,514 $ ( of September 25 , 2004 391,444 $ 2,514 $ ( 93 25 , 2004 391,444 $ 2,514 $ ( 93 ) $ 391,444 $ 2,514 $ ( 93 ) $ 2,670 $ ( $ ( 93 ) $ 2,670 $ ( 15 ) $ ) $ 2,670 $ ( 15 ) $ 5,076 See accompanying $ ( 15 ) $ 5,076 See accompanying note to consolidated to consolidated financial statement . 62 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 25 , 2004 2004 2003 2002 year ended September 25 , 2004 2004 2003 2002 Cash and ended September 25 , 2004 2004 2003 2002 Cash and cash September 25 , 2004 2004 2003 2002 Cash and cash equivalent 25 , 2004 2004 2003 2002 Cash and cash equivalent , beginning of the year $ 3,396 $ 2,252 $ 2,310 Operating the year $ 3,396 $ 2,252 $ 2,310 Operating Activities : $ 3,396 $ 2,252 $ 2,310 Operating Activities : Net income Operating Activities : Net income 276 69 65 Cumulative effect of Activities : Net income 276 69 65 Cumulative effect of accounting : Net income 276 69 65 Cumulative effect of accounting change net of tax — ( 1 ) — Adjustments to reconcile Depreciation , amortization and accretion 150 113 114 Stock-based compensation expense , amortization and accretion 150 113 114 Stock-based compensation expense 33 amortization and accretion 150 113 114 Stock-based compensation expense 33 16 113 114 Stock-based compensation expense 33 16 5 Non-cash restructuring 5 114 Stock-based compensation expense 33 16 5 Non-cash restructuring 5 12 Stock-based compensation expense 33 16 5 Non-cash restructuring 5 12 8 33 16 5 Non-cash restructuring 5 12 8 Provision for ( 16 5 Non-cash restructuring 5 12 8 Provision for ( benefit 5 Non-cash restructuring 5 12 8 Provision for ( benefit from from ) deferred income tax 20 ( 11 ) ( 34 deferred income tax 20 ( 11 ) ( 34 ) Loss 20 ( 11 ) ( 34 ) Loss on disposition of , plant , and equipment 7 2 7 Gains on sale plant , and equipment 7 2 7 Gains on sale of , and equipment 7 2 7 Gains on sale of short-term short-term investment , net ( 1 ) ( 21 ) ( net ( 1 ) ( 21 ) ( 7 ) ( ) ( 21 ) ( 7 ) ( Gains ) loss non-current investment , net ( 4 ) ( 10 ) 42 net ( 4 ) ( 10 ) 42 Gain on forward 4 ) ( 10 ) 42 Gain on forward purchase agreement forward purchase agreement — ( 6 ) — Purchased in-process research research and development — — 1 Changes in operating asset and liability : Accounts receivable ( 8 ) ( 201 ) ( receivable ( 8 ) ( 201 ) ( 99 ) Inventories ) ( 201 ) ( 99 ) Inventories ( 45 ) ( 99 ) Inventories ( 45 ) ( 11 ) ( Inventories ( 45 ) ( 11 ) ( 34 ) Other ) ( 11 ) ( 34 ) Other current asset ( ) Other current asset ( 176 ) ( 34 ) ( asset ( 176 ) ( 34 ) ( 114 ) Other ) ( 34 ) ( 114 ) Other asset ( 39 114 ) Other asset ( 39 ) ( 30 ) ( asset ( 39 ) ( 30 ) ( 11 ) Accounts ) ( 30 ) ( 11 ) Accounts payable 297 243 ( 11 ) Accounts payable 297 243 110 Other liability 419 11 ) Accounts payable 297 243 110 Other liability 419 159 ) Accounts payable 297 243 110 Other liability 419 159 36 297 243 110 Other liability 419 159 36 Cash generated by 243 110 Other liability 419 159 36 Cash generated by operating 110 Other liability 419 159 36 Cash generated by operating activity Cash generated by operating activity 934 289 89 Investing Activities : generated by operating activity 934 289 89 Investing Activities : Purchases by operating activity 934 289 89 Investing Activities : Purchases of Purchases of short-term investment ( 3,270 ) ( 2,648 ) ( investment ( 3,270 ) ( 2,648 ) ( 4,144 ) Proceeds ) ( 2,648 ) ( 4,144 ) Proceeds from maturity of from maturity of short-term investment 1,141 2,446 2,846 Proceeds from sale maturity of short-term investment 1,141 2,446 2,846 Proceeds from sale of of short-term investment 1,141 2,446 2,846 Proceeds from sale of short-term from sale of short-term investment 801 1,116 1,254 Proceeds from sale sale of short-term investment 801 1,116 1,254 Proceeds from sale of of short-term investment 801 1,116 1,254 Proceeds from sale of non-current from sale of non-current investment 5 45 25 Purchases of property sale of non-current investment 5 45 25 Purchases of property , of non-current investment 5 45 25 Purchases of property , plant plant , and equipment ( 176 ) ( 164 ) ( equipment ( 176 ) ( 164 ) ( 174 ) Cash ) ( 164 ) ( 174 ) Cash used for business business acquisition — — ( 52 ) Other 11 33 ( — ( 52 ) Other 11 33 ( 7 ) Cash ( 52 ) Other 11 33 ( 7 ) Cash generated ) Other 11 33 ( 7 ) Cash generated by ( for ) investing activity ( 1,488 ) 828 ( 252 ) investing activity ( 1,488 ) 828 ( 252 ) Financing Activities ( 1,488 ) 828 ( 252 ) Financing Activities : Payment Payment of long-term debt ( 300 ) — — Proceeds from from issuance of common stock 427 53 105 Cash used for issuance of common stock 427 53 105 Cash used for repurchase of common stock 427 53 105 Cash used for repurchase of of common stock — ( 26 ) — Cash generated by Cash generated by financing activity 127 27 105 Increase ( decrease generated by financing activity 127 27 105 Increase ( decrease ) by financing activity 127 27 105 Increase ( decrease ) in cash and cash equivalent ( 427 ) 1,144 ( 58 ) cash equivalent ( 427 ) 1,144 ( 58 ) Cash and ( 427 ) 1,144 ( 58 ) Cash and cash equivalent end of the year $ 2,969 $ 3,396 $ 2,252 Supplemental the year $ 2,969 $ 3,396 $ 2,252 Supplemental cash flow $ 2,969 $ 3,396 $ 2,252 Supplemental cash flow disclosure : the year for interest $ 10 $ 20 $ 20 Cash for interest $ 10 $ 20 $ 20 Cash paid ( $ 10 $ 20 $ 20 Cash paid ( received ) tax , net $ ( 7 ) $ 45 $ 11 $ ( 7 ) $ 45 $ 11 See accompanying note 7 ) $ 45 $ 11 See accompanying note to consolidated to consolidated financial statement . 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple of September . Fiscal year 2004 , 2003 and 2002 were . Fiscal year 2004 , 2003 and 2002 were each 52-week year 2004 , 2003 and 2002 were each 52-week year . 2003 and 2002 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it it first fiscal quarter of 2006 . All information presented herein Liabilities and Equity On May 15 , 2003 , the Financial Equity On May 15 , 2003 , the Financial Accounting Standards ( SFAS ) No . 150 , Accounting for Certain Financial Equity . SFAS No . 150 requires issuer to classify a provision of SFAS No . 150 on June 29 , 2003 No . 150 on June 29 , 2003 , which resulted 150 on June 29 , 2003 , which resulted in a type adjustment of approximately $ 3 million . This adjustment related allowed the Company to acquire 1.5 million share of it common an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . The Company settled forward purchase agreement in August 2003 , which resulted in an in an additional gain of 64 approximately $ 6 million representing gain of 64 approximately $ 6 million representing the increase in of the agreement from June 29 , 2003 through the settlement agreement from June 29 , 2003 through the settlement date . accordance with SFAS No . 133 , hedge related to probable manner a a foreign currency 65 translation adjustment . Any residual the asset , which are 30 year for building , from year for building , from 2 to 5 year for equipment building , from 2 to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Asset which range from 3 to 5 year . Asset Retirement Obligations Asset Retirement Obligations On September 29 , 2002 , the Company Obligations On September 29 , 2002 , the Company adopted SFAS Company adopted SFAS No . 143 , Accounting for Asset Retirement asset . SFAS No . 143 requires that the fair value estimated that a of September 29 , 2002 , gross expected a of September 29 , 2002 , gross expected future cash future cash flow of $ 9.5 million would be required to the Company recorded a $ 6 million long-term asset retirement liability future cash flow of $ 9.5 million and it present value it present value of $ 6 million at September 29 , $ 6 million at September 29 , 2002 , is being million at September 29 , 2002 , is being accreted over tax effect of approximately $ 1 million , adoption of SFAS adoption of SFAS No . 143 resulted in an unfavorable cumulative-effect during the first quarter of 2003 of approximately $ 2 million of 2003 of approximately $ 2 million . This adjustment represents adoption of SFAS No . 143 had the statement been applied they were initially incurred . 66 The following table reconciles change asset retirement liability for fiscal 2003 and 2004 ( in million liability for fiscal 2003 and 2004 ( in million ) : retirement liability a of September 29 , 2002 $ 5.5 Additional a of September 29 , 2002 $ 5.5 Additional asset retirement September 29 , 2002 $ 5.5 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 0.5 Accretion recognized 1.2 Asset retirement obligation recognized 0.5 Accretion recognized 1.2 Asset retirement liability a of retirement liability a of September 27 , 2003 $ 7.2 Additional a of September 27 , 2003 $ 7.2 Additional asset retirement September 27 , 2003 $ 7.2 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 0.5 Accretion recognized 0.5 Asset retirement obligation recognized 0.5 Accretion recognized 0.5 Asset retirement liability a of retirement liability a of September 25 , 2004 $ 8.2 Long-Lived a of September 25 , 2004 $ 8.2 Long-Lived Assets Including September 25 , 2004 $ 8.2 Long-Lived Assets Including Goodwill and the three year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 the Company had , and September 28 , 2002 the Company had no material restructuring action described in Note 5 . The Company adopted SFAS Company adopted SFAS No . 142 , Goodwill and Other Intangible the first quarter of fiscal 2002 . SFAS No . 142 2002 . SFAS No . 142 requires that goodwill and intangible impaired . Prior to fiscal 2002 , goodwill wa amortized using impairment test a of October 1 , 2001 , and it a of October 1 , 2001 , and it annual goodwill goodwill impairment test on August 30 of each year thereafter and unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 , Accounting for the Impairment life over period ranging from 3 to 10 year . Foreign period ranging from 3 to 10 year . Foreign Currency Translation historical rate . Gains and 67 loss from these translation were ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The over the maintenance term . 68 Shipping Costs The Company 's pursuant to SFAS No . 86 , Computer Software to be During the fourth quarter of 2004 , the Company incurred substantial of Mac OS X version 10.4 ( code-named `` Tiger `` by public demonstration in August 2004 and subsequent release of a first half of calendar year 2005 . Therefore , during the during the fourth quarter of 2004 , the Company capitalized approximately the Company capitalized approximately $ 4.5 million of cost associated with be recognized straight-line over a 3 year estimated useful life . During the second quarter of 2004 , the Company incurred substantial cost associated with FileMaker Pro 7 subsequent to achievement of technological of the product in March 2004 . Therefore , during the during the second quarter of 2004 , the Company capitalized approximately the Company capitalized approximately $ 2.3 million of cost associated with the development of FileMaker Pro 7 . In accordance with SFAS accordance with SFAS No . 86 , amortization of this asset this asset began in March 2004 when FileMaker Pro 7 wa March 2004 when FileMaker Pro 7 wa shipped and is being a straight-line basis over a 3 year estimated useful life . third and fourth quarter of 2003 , the Company incurred substantial of Mac OS X version 10.3 ( code-named `` Panther `` a developer beta in June 2003 , and prior to release in the first quarter of 2004 . Therefore , during 2003 2004 . Therefore , during 2003 the Company capitalized approximately $ the Company capitalized approximately $ 14.7 million of development cost associated in the first quarter of 2004 when Panther wa shipped and accordance with SFAS No . 86 over a 3 year estimated No . 86 over a 3 year estimated useful life . third and fourth quarter of 2002 , the Company incurred substantial of Mac OS X version 10.2 ( code-named `` Jaguar `` a developer beta in May 2002 , and prior to release in the fourth quarter of 2002 . As such , the the Company capitalized approximately $ 13.3 million of development cost associated in the fourth quarter of 2002 when Jaguar wa 69 shipped of 2002 when Jaguar wa 69 shipped and is being recognized accordance with SFAS No . 86 over a 3 year estimated No . 86 over a 3 year estimated useful life . . In addition , during 2002 , the Company also began . Capitalization of approximately $ 6 million began upon achievement of in the first quarter of 2002 . The final version of system wa released in July 2002 . Total amortization related to software development cost wa $ 10.7 million , $ 5.8 million $ 10.7 million , $ 5.8 million , and $ 1.2 5.8 million , and $ 1.2 million in 2004 , 2003 and $ 1.2 million in 2004 , 2003 and 2002 , 1.2 million in 2004 , 2003 and 2002 , respectively . in 2004 , 2003 and 2002 , respectively . Advertising Costs . Advertising expense wa $ 206 million , $ 193 million $ 206 million , $ 193 million , and $ 209 193 million , and $ 209 million for 2004 , 2003 and $ 209 million for 2004 , 2003 , and 2002 209 million for 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . Restructuring Charges . Restructuring Charges In June 2002 , the FASB issued SFAS FASB issued SFAS No . 146 , Accounting for Costs Associated Activities . SFAS No . 146 supersedes Emerging Issues Task Force EITF ) Issue No . 94-3 , Liability Recognition for Certain plan . SFAS No . 146 also establishes that the liability disposal activity initiated after December 31 , 2002 . The provision initiated after December 31 , 2002 . The provision of SFAS provision of SFAS No . 146 were required to be applied APB ) Opinion No . 25 , Accounting for Stock Issued provision of SFAS No . 123 , Accounting for Stock-based Compensation amended by SFAS No . 148 , Accounting for Stock-based Compensation—Transition follow APB Opinion No . 25 because , a discussed below for under SFAS No . 123 requires use of option valuation Under APB Opinion No . 25 , when the exercise price required under SFAS No . 123 , the pro forma effect employee stock option and employee 70 stock purchase plan share have per share amount ) : 2004 2003 2002 Net income—as reported share amount ) : 2004 2003 2002 Net income—as reported $ amount ) : 2004 2003 2002 Net income—as reported $ 276 2002 Net income—as reported $ 276 $ 69 $ 65 Add income—as reported $ 276 $ 69 $ 65 Add : Stock-based $ 276 $ 69 $ 65 Add : Stock-based employee compensation income , net of tax 33 15 5 Deduct : Stock-based , net of tax 33 15 5 Deduct : Stock-based employee net of tax 33 15 5 Deduct : Stock-based employee compensation , net of tax ( 141 ) ( 181 ) ( tax ( 141 ) ( 181 ) ( 234 ) Net ) ( 181 ) ( 234 ) Net income ( loss loss ) —pro forma $ 168 $ ( 97 ) $ forma $ 168 $ ( 97 ) $ ( 164 ) ( 97 ) $ ( 164 ) Net income per common common share—as reported Basic $ 0.74 $ 0.19 $ 0.18 Diluted reported Basic $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.74 $ 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 0.19 $ 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Net 0.18 Diluted $ 0.71 $ 0.19 $ 0.18 Net income ( $ 0.71 $ 0.19 $ 0.18 Net income ( loss ) common share—pro forma Basic $ 0.45 $ ( 0.27 ) $ Basic $ 0.45 $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) Diluted $ 0.44 $ ( 0.46 ) Diluted $ 0.44 $ ( 0.27 ) $ Diluted $ 0.44 $ ( 0.27 ) $ ( 0.46 ) ( 0.27 ) $ ( 0.46 ) Earnings Per Common Share on earnings per share . 71 The following table set forth For the Years Ended September 25 , 2004 September 27 , Years Ended September 25 , 2004 September 27 , 2003 September September 25 , 2004 September 27 , 2003 September 28 , , 2004 September 27 , 2003 September 28 , 2002 Numerator September 27 , 2003 September 28 , 2002 Numerator ( in , 2003 September 28 , 2002 Numerator ( in million ) Income before accounting change $ 276 $ 68 $ 65 Cumulative accounting change $ 276 $ 68 $ 65 Cumulative effect of $ 276 $ 68 $ 65 Cumulative effect of accounting change , net of tax — 1 — Net income $ 276 1 — Net income $ 276 $ 69 $ 65 Denominator Net income $ 276 $ 69 $ 65 Denominator ( in $ 276 $ 69 $ 65 Denominator ( in thousand ) , excluding unvested restricted stock 371,590 360,631 355,022 Effect of dilutive excluding unvested restricted stock 371,590 360,631 355,022 Effect of dilutive option unvested restricted stock 371,590 360,631 355,022 Effect of dilutive option , stock unit and restricted stock 15,721 2,835 6,763 Denominator for diluted unit and restricted stock 15,721 2,835 6,763 Denominator for diluted earnings and restricted stock 15,721 2,835 6,763 Denominator for diluted earnings per for diluted earnings per share 387,311 363,466 361,785 Basic earnings per diluted earnings per share 387,311 363,466 361,785 Basic earnings per share earnings per share 387,311 363,466 361,785 Basic earnings per share before share before accounting change $ 0.74 $ 0.19 $ 0.18 Cumulative accounting change $ 0.74 $ 0.19 $ 0.18 Cumulative effect of $ 0.74 $ 0.19 $ 0.18 Cumulative effect of accounting change share after accounting change $ 0.74 $ 0.19 $ 0.18 Diluted accounting change $ 0.74 $ 0.19 $ 0.18 Diluted earnings per $ 0.74 $ 0.19 $ 0.18 Diluted earnings per share before share before accounting change $ 0.71 $ 0.19 $ 0.18 Cumulative accounting change $ 0.71 $ 0.19 $ 0.18 Cumulative effect of $ 0.71 $ 0.19 $ 0.18 Cumulative effect of accounting change share after accounting change $ 0.71 $ 0.19 $ 0.18 Potentially accounting change $ 0.71 $ 0.19 $ 0.18 Potentially dilutive security $ 0.71 $ 0.19 $ 0.18 Potentially dilutive security , including stock , to purchase approximately 4.4 million , 50.8 million , purchase approximately 4.4 million , 50.8 million , and 58.0 million , 50.8 million , and 58.0 million share of common stock for the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively , , and September 28 , 2002 , respectively , were excluded basis is also disclosed . 72 Note 2—Financial Instruments The carrying also disclosed . 72 Note 2—Financial Instruments The carrying amount of short-term investment a of September 25 , 2004 , and September a of September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 ( in million , and September 27 , 2003 ( in million ) : in million ) : September 25 , 2004 September 27 , ) : September 25 , 2004 September 27 , 2003 Cash September 25 , 2004 September 27 , 2003 Cash $ 200 , 2004 September 27 , 2003 Cash $ 200 $ 158 27 , 2003 Cash $ 200 $ 158 U.S. Treasury and 2003 Cash $ 200 $ 158 U.S. Treasury and Agency security U.S. Treasury and Agency security 87 87 U.S. corporate security 1,795 Treasury and Agency security 87 87 U.S. corporate security 1,795 2,368 87 87 U.S. corporate security 1,795 2,368 Foreign security 887 783 87 U.S. corporate security 1,795 2,368 Foreign security 887 783 Total security 1,795 2,368 Foreign security 887 783 Total cash equivalent 2,769 1,795 2,368 Foreign security 887 783 Total cash equivalent 2,769 3,238 887 783 Total cash equivalent 2,769 3,238 U.S. Treasury and Agency 783 Total cash equivalent 2,769 3,238 U.S. Treasury and Agency security U.S. Treasury and Agency security 1,080 454 U.S. corporate security 1,352 Treasury and Agency security 1,080 454 U.S. corporate security 1,352 623 1,080 454 U.S. corporate security 1,352 623 Foreign security 63 93 454 U.S. corporate security 1,352 623 Foreign security 63 93 Total security 1,352 623 Foreign security 63 93 Total short-term investment 2,495 1,352 623 Foreign security 63 93 Total short-term investment 2,495 1,170 63 93 Total short-term investment 2,495 1,170 Total cash , cash 93 Total short-term investment 2,495 1,170 Total cash , cash equivalent , and short-term investment $ 5,464 $ 4,566 The Company 's short-term investment $ 5,464 $ 4,566 The Company 's short-term investment net unrealized loss totaling $ 4 million on it investment portfolio with stated maturity le than 1 year a of September 25 1 year a of September 25 , 2004 and net unrealized a of September 25 , 2004 and net unrealized gain of net unrealized gain of $ 1 million on it investment portfolio with stated maturity greater than 1 year , a of September year , a of September 27 , 2003 . The Company a of September 27 , 2003 . The Company occasionally sell gain before tax of $ 1 million in 2004 , $ of $ 1 million in 2004 , $ 21 million in million in 2004 , $ 21 million in 2003 and $ , $ 21 million in 2003 and $ 7 million in million in 2003 and $ 7 million in 2002 . These and $ 7 million in 2002 . These net gain were net . As of September 25 , 2004 , approximately $ As of September 25 , 2004 , approximately $ 180 million , 2004 , approximately $ 180 million of the Company 's had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 25 , 2004 had maturity of a of September 25 , 2004 had maturity of 3 to , 2004 had maturity of 3 to 12 month . As had maturity of 3 to 12 month . As of September month . As of September 27 , 2003 , approximately $ As of September 27 , 2003 , approximately $ 629 million , 2003 , approximately $ 629 million of the Company 's had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 27 , 2003 had maturity of a of September 27 , 2003 had maturity of 3 to , 2003 had maturity of 3 to 12 month . In had maturity of 3 to 12 month . In accordance with . In accordance with EITF 03-1 , The Meaning of Other-Than-Temporary value of the Company 's 73 investment , aggregated by investment loss position a of September 25 , 2004 ( in million a of September 25 , 2004 ( in million ) : million ) : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Security U.S. Treasury and Agencies $ 1,126 $ ( 4 ) $ Agencies $ 1,126 $ ( 4 ) $ — $ — $ — $ — $ 1,126 $ ( 4 ) Corporate — $ 1,126 $ ( 4 ) Corporate bond 134 — ( 4 ) Corporate bond 134 — 144 ( 1 ) ) Corporate bond 134 — 144 ( 1 ) 278 ( bond 134 — 144 ( 1 ) 278 ( 1 ) — 144 ( 1 ) 278 ( 1 ) Certificate of ( 1 ) 278 ( 1 ) Certificate of deposit 420 1 ) Certificate of deposit 420 ( 1 ) — — Certificate of deposit 420 ( 1 ) — — 420 ( ( 1 ) — — 420 ( 1 ) Asset backed ) — — 420 ( 1 ) Asset backed security 426 1 ) Asset backed security 426 — — — 426 — security 426 — — — 426 — Commercial paper 2,407 ( — 426 — Commercial paper 2,407 ( 1 ) — — — Commercial paper 2,407 ( 1 ) — — 2,407 ( ( 1 ) — — 2,407 ( 1 ) Total $ ) — — 2,407 ( 1 ) Total $ 4,513 $ ( 1 ) Total $ 4,513 $ ( 6 ) $ Total $ 4,513 $ ( 6 ) $ 144 $ ( $ ( 6 ) $ 144 $ ( 1 ) $ ) $ 144 $ ( 1 ) $ 4,657 $ ( $ ( 1 ) $ 4,657 $ ( 7 ) Market ) $ 4,657 $ ( 7 ) Market value were determined customer accounted for more than 10 % of trade receivables a trade receivables a of September 25 , 2004 . Trade receivables a of September 25 , 2004 . Trade receivables from a Inc. , accounted for approximately 10.3 % of net account receivable account receivable a of September 27 , 2003 . The following a of September 27 , 2003 . The following table summarizes ( in million ) : 2004 2003 2002 Beginning allowance balance in million ) : 2004 2003 2002 Beginning allowance balance $ million ) : 2004 2003 2002 Beginning allowance balance $ 49 2002 Beginning allowance balance $ 49 $ 51 $ 51 Charged allowance balance $ 49 $ 51 $ 51 Charged to cost $ 49 $ 51 $ 51 Charged to cost and expense Charged to cost and expense 3 4 10 Deductions ( a to cost and expense 3 4 10 Deductions ( a ) cost and expense 3 4 10 Deductions ( a ) ( Deductions ( a ) ( 5 ) ( 6 ) ( ) ( 5 ) ( 6 ) ( 10 ) Ending ) ( 6 ) ( 10 ) Ending allowance balance $ ) Ending allowance balance $ 47 $ 49 $ 51 ( allowance balance $ 47 $ 49 $ 51 ( a ) $ 47 $ 49 $ 51 ( a ) Represents amount , net of recovery . 74 Vendor Non-Trade Receivables The Company current asset , totaled $ 276 million and $ 184 million $ 276 million and $ 184 million a of September 25 184 million a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , respectively . 2004 and September 27 , 2003 , respectively . The Company . Inventory Prepayment In April 2002 , the Company made a the Company made a $ 100 million prepayment to an Asian consecutive fiscal quarter ended December 28 , 2002 . During the quarter ended December 28 , 2002 . During the first six the first six month of 2003 , the remaining $ 53 2003 , the remaining $ 53 million of the deposit balance deposit wa outstanding at a 3.25 % interest rate to reflect currency instrument a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 ( in million 2004 and September 27 , 2003 ( in million ) : in million ) : September 25 , 2004 September 27 , ) : September 25 , 2004 September 27 , 2003 Notional September 25 , 2004 September 27 , 2003 Notional Principal Fair , 2004 September 27 , 2003 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 598 $ ( 3 ) $ contract $ 598 $ ( 3 ) $ 3 $ 464 $ ( 3 ) $ 3 $ 464 $ ( 21 3 ) $ 3 $ 464 $ ( 21 ) $ 3 $ 464 $ ( 21 ) $ — Purchased option $ — Purchased option $ 482 $ 4 $ 4 $ Purchased option $ 482 $ 4 $ 4 $ 512 $ $ 482 $ 4 $ 4 $ 512 $ 3 $ $ 4 $ 4 $ 512 $ 3 $ 3 Sold $ 4 $ 512 $ 3 $ 3 Sold option $ $ 512 $ 3 $ 3 Sold option $ 521 $ $ 3 Sold option $ 521 $ ( 3 ) $ option $ 521 $ ( 3 ) $ — $ 645 3 ) $ — $ 645 $ ( 8 ) $ — $ 645 $ ( 8 ) $ — Foreign exchange hedge : Spot/Forward contract $ 609 $ 3 $ 4 $ Spot/Forward contract $ 609 $ 3 $ 4 $ 445 $ $ 609 $ 3 $ 4 $ 445 $ 3 $ $ 3 $ 4 $ 445 $ 3 $ 3 Purchased $ 4 $ 445 $ 3 $ 3 Purchased option $ $ 445 $ 3 $ 3 Purchased option $ — $ $ — $ — $ 8 $ — $ — Sold $ — $ — $ 5 $ — $ — The Company 's gross exposure to 75 potential accounting loss on these market information a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 . In certain 2004 and September 27 , 2003 . In certain instance where over a time horizon of 3 to 9 month . Derivative time horizon of 3 to 9 month . Derivative instrument designated period or within a subsequent 2 month time period . Deferred of other transaction . During 2004 , the Company recorded net recorded net loss of $ 2.8 million in other income and similar nature were recorded in 2003 . During 2002 , the recorded in 2003 . During 2002 , the Company recorded net recorded net gain of $ 2.5 million in other income and condition . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had a flow hedge of approximately $ 4.4 million , net of tax the second quarter of fiscal 2005 . 76 The Company may quarter of fiscal 2005 . 76 The Company may enter into converted the Company 's fixed-rate 10-year debt to floating-rate debt . market interest rate , during 2001 and 2002 the Company entered rate , during 2001 and 2002 the Company entered into and position realizing gain of $ 23 million which were deferred over debt . As of September 25 , 2004 and September 27 As of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , the Company 2004 and September 27 , 2003 , the Company had no outstanding . Debt In February 2004 , the Company retired $ , the Company retired $ 300 million of debt outstanding in outstanding in the form of 6.5 % unsecured note . The note were originally issued in 1994 and were sold at 99.9925 1994 and were sold at 99.9925 % of par for an effective yield to maturity of 6.51 % . As of September % . As of September 27 , 2003 , the carrying As of September 27 , 2003 , the carrying amount of rate swap , wa $ 304 million , respectively , while the fair value wa $ 302 million . The fair value market value a of September 27 , 2003 . Non-Current Debt a of September 27 , 2003 . Non-Current Debt and Equity and expense . In fiscal 2004 , the Company sold all investment in public company . 77 EarthLink In January 2000 , . 77 EarthLink In January 2000 , the Company invested $ , the Company invested $ 200 million in EarthLink , an by the Company after January 4 , 2001 , into approximately Company after January 4 , 2001 , into approximately 7.1 million , 2001 , into approximately 7.1 million share of EarthLink common During the first quarter of 2003 , the Company sold 2,580,000 2003 , the Company sold 2,580,000 share of EarthLink stock for net proceeds of approximately $ 13.7 million , an amount that During the third quarter of 2003 , the Company sold all in EarthLink , consisting of 3,960,000 share of stock for net net proceeds of approximately $ 23 million , and a gain gain before tax of $ 2 million . During the first During the first quarter of 2002 , the Company sold 117,000 2002 , the Company sold 117,000 share of EarthLink stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 223,000 . No sale of EarthLink the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined that the Company recognized a $ 44 million charge to earnings to investment in EarthLink to $ 35 million . This charge wa net . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company held 6.5 2002 , the Company held 6.5 million share of EarthLink stock EarthLink stock valued at $ 35 million . Akamai In June million . Akamai In June 1999 , the Company invested $ , the Company invested $ 12.5 million in Akamai , a preferred stock that converted into 4.1 million share of Akamai common initial public offering in October 1999 . Beginning in the first in the first quarter of 2000 , the Company categorized it Akamai a available-for-sale . During 2004 , the Company sold it the Company sold it remaining 986,000 share of Akamai stock . generated proceeds of approximately $ 5 million and a gain before before tax of approximately $ 4 million . During the fourth During the fourth quarter of 2003 , the Company sold 1,875,000 2003 , the Company sold 1,875,000 share of Akamai stock for for net proceeds of $ 9 million and a gain before gain before tax of $ 8 million . As of September million . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company 's remaining investment in Akamai consisted of 986,000 share of Akamai stock valued Akamai stock valued at $ 5 million . During the first During the first quarter of 2002 , the Company sold 250,000 2002 , the Company sold 250,000 share of Akamai stock for for net proceeds of $ 2 million and a gain before gain before tax of $ 710,000 . No sale of Akamai the subsequent quarter of fiscal 2002 . However , during the during the fourth quarter of 2002 , the Company determined the the Company recognized a $ 6 million charge to earnings to investment in Akamai to $ 3 million . This charge wa non-current investment , net . 78 ARM ARM is a publicly During the third quarter of 2003 , the Company sold all ARM stock , consisting of 278,000 share for net proceeds of net proceeds of approximately $ 295,000 , and a gain before gain before tax of $ 270,000 . During the first quarter During the first quarter of 2002 , the Company sold 4.7 2002 , the Company sold 4.7 million share of ARM stock gain before tax of $ 21 million . No sale of the subsequent quarter of fiscal 2002 . Other Strategic Investments The not fully developed . During 2002 , the Company determined the charge to earnings of $ 15 million . These charge were net . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had $ , the Company had $ 1.4 million of equity investment reflected sheet . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had no consolidated balance sheet . Note 3—Consolidated Financial Statement Details ( in ( in million ) Inventories 2004 2003 Purchased part $ 1 in million ) Inventories 2004 2003 Purchased part $ 1 $ 2004 2003 Purchased part $ 1 $ 2 Work in process Purchased part $ 1 $ 2 Work in process — 4 2 Work in process — 4 Finished good 100 50 Total process — 4 Finished good 100 50 Total inventory $ 101 — 4 Finished good 100 50 Total inventory $ 101 $ 100 50 Total inventory $ 101 $ 56 Other Current Assets Total inventory $ 101 $ 56 Other Current Assets 2004 2003 $ 56 Other Current Assets 2004 2003 Vendor non-trade receivables $ 56 Other Current Assets 2004 2003 Vendor non-trade receivables $ 276 2003 Vendor non-trade receivables $ 276 $ 184 Other current asset non-trade receivables $ 276 $ 184 Other current asset 209 125 $ 184 Other current asset 209 125 Total other current asset 184 Other current asset 209 125 Total other current asset $ Total other current asset $ 485 $ 309 79 Property , current asset $ 485 $ 309 79 Property , Plant , asset $ 485 $ 309 79 Property , Plant , and , Plant , and Equipment 2004 2003 Land and building $ Plant , and Equipment 2004 2003 Land and building $ 351 2003 Land and building $ 351 $ 350 Machinery , equipment and building $ 351 $ 350 Machinery , equipment , and equipment , and internal-use software 422 393 Office furniture and equipment , and internal-use software 422 393 Office furniture and equipment 79 393 Office furniture and equipment 79 74 Leasehold improvement 446 357 Office furniture and equipment 79 74 Leasehold improvement 446 357 1,298 equipment 79 74 Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation 79 74 Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and 74 Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and amortization Leasehold improvement 446 357 1,298 1,174 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 591 ) ( 505 ) Net amortization ( 591 ) ( 505 ) Net property , plant plant , and equipment $ 707 $ 669 Other Assets 2004 and equipment $ 707 $ 669 Other Assets 2004 2003 Non-current 707 $ 669 Other Assets 2004 2003 Non-current deferred tax asset $ 669 Other Assets 2004 2003 Non-current deferred tax asset $ Non-current deferred tax asset $ 86 $ 60 Capitalized software development tax asset $ 86 $ 60 Capitalized software development cost , software development cost , net 25 28 Other asset 80 62 development cost , net 25 28 Other asset 80 62 Total net 25 28 Other asset 80 62 Total other asset $ 25 28 Other asset 80 62 Total other asset $ 191 62 Total other asset $ 191 $ 150 Accrued Expenses 2004 other asset $ 191 $ 150 Accrued Expenses 2004 2003 Deferred 191 $ 150 Accrued Expenses 2004 2003 Deferred revenue $ 544 $ 150 Accrued Expenses 2004 2003 Deferred revenue $ 544 $ 2004 2003 Deferred revenue $ 544 $ 368 Accrued marketing and Deferred revenue $ 544 $ 368 Accrued marketing and distribution 147 368 Accrued marketing and distribution 147 124 Accrued compensation and employee Accrued marketing and distribution 147 124 Accrued compensation and employee benefit Accrued compensation and employee benefit 134 101 Accrued warranty and related compensation and employee benefit 134 101 Accrued warranty and related cost Accrued warranty and related cost 105 67 Other current liability 299 warranty and related cost 105 67 Other current liability 299 239 105 67 Other current liability 299 239 Total accrued expense $ 67 Other current liability 299 239 Total accrued expense $ 1,229 239 Total accrued expense $ 1,229 $ 899 Interest and Other accrued expense $ 1,229 $ 899 Interest and Other Income , and Other Income , Net 2004 2003 2002 Interest income $ Other Income , Net 2004 2003 2002 Interest income $ 64 Income , Net 2004 2003 2002 Interest income $ 64 $ 2003 2002 Interest income $ 64 $ 69 $ 118 Interest Interest income $ 64 $ 69 $ 118 Interest expense ( $ 64 $ 69 $ 118 Interest expense ( 3 ) $ 118 Interest expense ( 3 ) ( 8 ) ( expense ( 3 ) ( 8 ) ( 11 ) Gains ) ( 8 ) ( 11 ) Gains on sale of sale of short term investment 1 21 7 Other income ( of short term investment 1 21 7 Other income ( expense short term investment 1 21 7 Other income ( expense ) expense ) , net ( 9 ) ( 5 ) ( net ( 9 ) ( 5 ) ( 2 ) Gain ) ( 5 ) ( 2 ) Gain on forward purchase on forward purchase agreement — 6 — Total interest and other other income , net $ 53 $ 83 $ 112 80 , net $ 53 $ 83 $ 112 80 Note 4—Acquisitions $ 53 $ 83 $ 112 80 Note 4—Acquisitions Goodwill and 53 $ 83 $ 112 80 Note 4—Acquisitions Goodwill and Other 83 $ 112 80 Note 4—Acquisitions Goodwill and Other Intangible Assets life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The Company ceased at the beginning of fiscal 2002 when it adopted SFAS No it adopted SFAS No . 142 . The following table summarizes in million ) : September 25 , 2004 September 27 , ) : September 25 , 2004 September 27 , 2003 Gross September 25 , 2004 September 27 , 2003 Gross Carrying Amount , 2004 September 27 , 2003 Gross Carrying Amount Accumulated Amortization Goodwill ( a ) $ 80 — $ 80 $ 85 ) $ 80 — $ 80 $ 85 — $ 85 80 — $ 80 $ 85 — $ 85 Other acquired 80 $ 85 — $ 85 Other acquired intangible asset 5 85 Other acquired intangible asset 5 ( 5 ) — 5 acquired intangible asset 5 ( 5 ) — 5 ( 5 5 ( 5 ) — 5 ( 5 ) — Acquired 5 ) — 5 ( 5 ) — Acquired technology 42 5 ) — Acquired technology 42 ( 25 ) 17 42 — Acquired technology 42 ( 25 ) 17 42 ( 18 technology 42 ( 25 ) 17 42 ( 18 ) 24 42 ( 25 ) 17 42 ( 18 ) 24 Total 25 ) 17 42 ( 18 ) 24 Total acquired intangible 17 42 ( 18 ) 24 Total acquired intangible asset $ Total acquired intangible asset $ 127 $ ( 30 ) $ asset $ 127 $ ( 30 ) $ 97 $ 132 $ ( 30 ) $ 97 $ 132 $ ( 23 30 ) $ 97 $ 132 $ ( 23 ) $ 97 $ 132 $ ( 23 ) $ 109 ( a $ ( 23 ) $ 109 ( a ) Accumulated amortization related to goodwill of $ 55 million arising prior to the adoption of SFAS No . 142 ha been reflected in the of goodwill a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 . During the 2004 and September 27 , 2003 . During the third quarter During the third quarter of 2004 , the Company recorded an an adjustment of approximately $ 5 million to goodwill related to ( PowerSchool ) in fiscal 2001 . This reduction of goodwill goodwill included the cancellation of 79,167 share of Apple common stock , valued at approximately $ 2 million , that were previously adjustment also included approximately $ 3 million to adjust the original ) : Fiscal Years : 2005 $ 6 2006 3 2007 Fiscal Years : 2005 $ 6 2006 3 2007 2 2008 Years : 2005 $ 6 2006 3 2007 2 2008 1 : 2005 $ 6 2006 3 2007 2 2008 1 2009 2005 $ 6 2006 3 2007 2 2008 1 2009 1 $ 6 2006 3 2007 2 2008 1 2009 1 Thereafter 6 2006 3 2007 2 2008 1 2009 1 Thereafter 4 2006 3 2007 2 2008 1 2009 1 Thereafter 4 Total 3 2007 2 2008 1 2009 1 Thereafter 4 Total expected 2007 2 2008 1 2009 1 Thereafter 4 Total expected annual 2008 1 2009 1 Thereafter 4 Total expected annual amortization expense expected annual amortization expense $ 17 Amortization expense related to acquired ( in million ) : 2004 2003 2002 Other acquired intangible in million ) : 2004 2003 2002 Other acquired intangible asset million ) : 2004 2003 2002 Other acquired intangible asset amortization $ — $ — $ 1 Acquired technology amortization 7 10 $ 1 Acquired technology amortization 7 10 5 Total amortization $ 1 Acquired technology amortization 7 10 5 Total amortization $ 7 Acquired technology amortization 7 10 5 Total amortization $ 7 $ 10 5 Total amortization $ 7 $ 10 $ 6 81 Total amortization $ 7 $ 10 $ 6 81 Acquisition of $ 7 $ 10 $ 6 81 Acquisition of Emagic GmbH 7 $ 10 $ 6 81 Acquisition of Emagic GmbH During During the fourth quarter of 2002 , the Company acquired Emagic production , for approximately $ 30 million in cash ; $ million in cash ; $ 26 million of which wa paid of the deal and $ 4 million of which wa held-back appropriate period over the following 3 year . During fiscal 2003 3 year . During fiscal 2003 , contingent consideration totaling $ , contingent consideration totaling $ 1.3 million wa paid . The their estimated useful life of 3 year . Goodwill associated with provision of SFAS No . 142 . Total consideration wa allocated Net tangible asset acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 acquired $ 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and 2.3 Acquired technology 3.8 Tradename 0.8 In-process research and development 0.5 0.8 In-process research and development 0.5 Goodwill 18.6 Total consideration $ research and development 0.5 Goodwill 18.6 Total consideration $ 26.0 The Goodwill 18.6 Total consideration $ 26.0 The amount of the purchase product under development were between 43 % -83 % complete , during the Company 's fiscal 2003 at a cost of approximately a cost of approximately $ 415,000 . The remaining effort , , which were completed in 2003 , included finalizing user interface using a discount rate of 25 % . Acquisition of certain and Silicon Grail During fiscal 2002 the Company acquired certain technology for a total of $ 20 million in cash . These acquisition , except for $ 1 million identified a contingent consideration compensation expense over the following 3 year , ha been allocated on a straight-line basis over 3 year , except for certain that would be amortized over 10 year . Acquisition of Nothing During the second quarter of 2002 , the Company acquired certain market . Of the $ 15 million purchase price , the the Company ha allocated $ 7 million to acquired technology , over it estimated life of 5 year . The remaining $ year . The remaining $ 8 million , which ha been a an additional component of 82 the cost of the acquired appropriate period over the following 3 year . Note 5—Restructuring Charges following 3 year . Note 5—Restructuring Charges Fiscal 2004 Restructuring Actions . Note 5—Restructuring Charges Fiscal 2004 Restructuring Actions The Company recorded restructuring charge of approximately $ 23 million during the year ended during the year ended September 25 , 2004 , including approximately year ended September 25 , 2004 , including approximately $ 14 2004 , including approximately $ 14 million in severance cost , in severance cost , $ 5.5 million in asset impairment , impairment , and a $ 3.5 million charge for lease cancellation cancellation . Of the $ 23 million charge , $ 14.3 23 million charge , $ 14.3 million had been spent by spent by the end of 2004 , with the remaining $ , with the remaining $ 8.7 million consisting of $ 5.2 8.7 million consisting of $ 5.2 million for employee severance benefit employee severance benefit and $ 3.5 million for lease cancellation . During the fourth quarter of 2004 , the Company recognized restructuring recognized restructuring expense of $ 5.5 million . In conjunction with during the second quarter of 2004 , the Company vacated a during the fourth quarter of 2004 resulting in a charge of in a charge of $ 3.7 million for contract termination and employee termination cost of $ 1.8 million related to the elimination , the Company reversed $ 400,000 of excess restructuring expense from for the fourth quarter of 2004 wa $ 5.1 million , quarter of 2004 wa $ 5.1 million , of which $ million , of which $ 300,000 had been paid prior to prior to the end of 2004 . These action will result result in the termination of 54 position , 4 of which termination of 54 position , 4 of which had been terminated prior to the end of 2004 . During the third quarter During the third quarter of 2004 , the Company finalized restructuring for the third quarter of 2004 wa $ 7.9 million , quarter of 2004 wa $ 7.9 million , of which $ million , of which $ 7.2 million had been paid prior prior to the end of 2004 . These action will result result in the termination of 83 position , 77 of which termination of 83 position , 77 of which had been terminated prior to the end of 2004 . The closing of manufacturing resulted in the elimination of 67 position for a severance cost a severance cost of $ 1.9 million and write-off of $ million and write-off of $ 5.3 million in manufacturing-related fixed asset during the third quarter of 2004 . Termination of sale and resulted in severance of $ 0.7 million for the elimination of million for the elimination of 16 position . During the second During the second quarter of 2004 , the Company 's management of the action wa $ 9.6 million for the termination of million for the termination of 348 position . As of the of the fourth quarter of 2004 , $ 6.8 million had quarter of 2004 , $ 6.8 million had been spent and million had been spent and 310 position had been eliminated related related to these action . 83 The following table summarizes activity restructuring action initiated during fiscal 2004 ( in million ) : Cancellations Totals Total charge $ 14.0 $ 5.5 $ 3.5 $ Total charge $ 14.0 $ 5.5 $ 3.5 $ 23.0 Total $ 14.0 $ 5.5 $ 3.5 $ 23.0 Total spending through $ 5.5 $ 3.5 $ 23.0 Total spending through September 25 23.0 Total spending through September 25 , 2004 ( 8.7 ) spending through September 25 , 2004 ( 8.7 ) — — September 25 , 2004 ( 8.7 ) — — ( 8.7 8.7 ) — — ( 8.7 ) Total non-cash item — Total non-cash item — ( 5.2 ) — ( 5.2 ) ( 5.2 ) — ( 5.2 ) Adjustments ( 0.1 ) ( 5.2 ) Adjustments ( 0.1 ) ( 0.3 ) — Adjustments ( 0.1 ) ( 0.3 ) — ( 0.4 ) ( 0.3 ) — ( 0.4 ) Accrual at September 25 0.4 ) Accrual at September 25 , 2004 $ 5.2 $ Accrual at September 25 , 2004 $ 5.2 $ — $ September 25 , 2004 $ 5.2 $ — $ 3.5 $ $ 5.2 $ — $ 3.5 $ 8.7 Fiscal 2003 Restructuring $ — $ 3.5 $ 8.7 Fiscal 2003 Restructuring Actions The $ 3.5 $ 8.7 Fiscal 2003 Restructuring Actions The Company recorded restructuring charge of approximately $ 26.8 million during the year ended during the year ended September 27 , 2003 , including approximately year ended September 27 , 2003 , including approximately $ 7.4 2003 , including approximately $ 7.4 million in severance cost , severance cost , a $ 5.0 million charge to write-off deferred write-off deferred compensation , $ 7.1 million in asset impairment and asset impairment and a $ 7.3 million charge for lease cancellation cancellation . Of the $ 26.8 million charge , all had spent by the end of 2004 , except for approximately $ , except for approximately $ 3.0 million related to operating lease During the third quarter of 2003 , approximately $ 500,000 of of 2003 , approximately $ 500,000 of the amount originally accrued a shortfall of approximately $ 500,000 wa identified in the severance During the second quarter of 2003 , the Company 's management total restructuring charge of $ 2.8 million , including $ 2.4 2.8 million , including $ 2.4 million in severance cost and in severance cost and $ 400,000 for asset write-off and lease resulted in the termination of 93 employee . During the first During the first quarter of 2003 , the Company 's management a total cost of $ 24 million that resulted in the at the end of fiscal 2002 , and termination of various resulted in the elimination of 260 position worldwide . Closure of in severance cost of $ 1.8 million and cost of $ million and cost of $ 6.7 million to write-off manufacturing related included severance of approximately $ 550,000 and recognition of $ 5 550,000 and recognition of $ 5 million of previously deferred stock acquired by the Company in 2001 related to certain PowerSchool employee in the first quarter of 2003 . Termination of sale and in severance cost of $ 2.8 million and accrual of cost associated with operating lease on 84 closed facility of $ 6.7 84 closed facility of $ 6.7 million . The total net net restructuring charge of $ 23 million recognized during the first during the first quarter of 2003 also reflects the reversal of reflects the reversal of $ 600,000 of unused restructuring accrual originally during the first quarter of 2002 . The following table summarizes restructuring action initiated during fiscal 2003 ( in million ) : Cancellations Totals Total charge $ 7.4 $ 5.0 $ 7.1 $ Total charge $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total spending through $ 7.1 $ 7.3 $ 26.8 Total spending through September 25 26.8 Total spending through September 25 , 2004 ( 7.9 ) spending through September 25 , 2004 ( 7.9 ) — — September 25 , 2004 ( 7.9 ) — — ( 3.8 7.9 ) — — ( 3.8 ) ( 11.7 ) Total — ( 3.8 ) ( 11.7 ) Total non-cash item — Total non-cash item — ( 5.0 ) ( 7.1 ) — — ( 5.0 ) ( 7.1 ) — ( 12.1 ) ( 7.1 ) — ( 12.1 ) Adjustments 0.5 — — — ( 12.1 ) Adjustments 0.5 — — ( 0.5 ) Adjustments 0.5 — — ( 0.5 ) — Accrual at September ) — Accrual at September 25 , 2004 $ — $ Accrual at September 25 , 2004 $ — $ — $ $ — $ — $ 3.0 $ 3.0 Fiscal 2002 Restructuring $ — $ 3.0 $ 3.0 Fiscal 2002 Restructuring Actions During $ 3.0 $ 3.0 Fiscal 2002 Restructuring Actions During fiscal 2002 2002 Restructuring Actions During fiscal 2002 , the Company recorded total restructuring charge of approximately $ 30 million related to action intended During the fourth quarter of 2002 , the Company 's management total cost of approximately $ 6 million designed to reduce headcount in the elimination of approximately 180 position worldwide at a cost at a cost of $ 1.8 million , all of which which were eliminated by September 27 , 2003 . Eliminated position eliminated by September 27 , 2003 . Eliminated position were primarily in the amount of $ 4.5 million . During the first During the first quarter of 2002 , the Company 's management total cost of approximately $ 24 million . These restructuring action in the elimination of approximately 425 position worldwide at a cost at a cost of $ 8 million . Positions were eliminated asset associated with first quarter 2002 restructuring action during that same contract cancellation charge totaled $ 12 million , and charge for for asset impairment totaled $ 4 million . The first quarter million . The first quarter 2002 restructuring action were primarily related During the first quarter of 2003 , the Company reversed the remaining unused accrual of $ 600,000 . All amount associated with amount associated with the fiscal 2002 restructuring action had been spent by the end of fiscal 2003 . 85 Note 6—Income Taxes end of fiscal 2003 . 85 Note 6—Income Taxes The provision fiscal 2003 . 85 Note 6—Income Taxes The provision for income ( in million ) : 2004 2003 2002 Federal : Current in million ) : 2004 2003 2002 Federal : Current $ million ) : 2004 2003 2002 Federal : Current $ 34 2002 Federal : Current $ 34 $ 18 $ 12 Deferred : Current $ 34 $ 18 $ 12 Deferred 56 ( $ 34 $ 18 $ 12 Deferred 56 ( 7 ) $ 18 $ 12 Deferred 56 ( 7 ) ( 32 $ 12 Deferred 56 ( 7 ) ( 32 ) 90 56 ( 7 ) ( 32 ) 90 11 ( 20 7 ) ( 32 ) 90 11 ( 20 ) State ) ( 32 ) 90 11 ( 20 ) State : 32 ) 90 11 ( 20 ) State : Current 5 20 ) State : Current 5 4 3 Deferred ( 18 ) State : Current 5 4 3 Deferred ( 18 ) State : Current 5 4 3 Deferred ( 18 ) ( 5 4 3 Deferred ( 18 ) ( 11 ) 6 Deferred ( 18 ) ( 11 ) 6 ( 13 ) 18 ) ( 11 ) 6 ( 13 ) ( 7 ( 11 ) 6 ( 13 ) ( 7 ) 9 6 ( 13 ) ( 7 ) 9 Foreign : Current 13 ) ( 7 ) 9 Foreign : Current 46 21 ) 9 Foreign : Current 46 21 29 Deferred ( 16 9 Foreign : Current 46 21 29 Deferred ( 16 ) Foreign : Current 46 21 29 Deferred ( 16 ) ( 46 21 29 Deferred ( 16 ) ( 1 ) 4 Deferred ( 16 ) ( 1 ) 4 30 20 33 16 ) ( 1 ) 4 30 20 33 Provision for ) ( 1 ) 4 30 20 33 Provision for income ( 1 ) 4 30 20 33 Provision for income tax 1 ) 4 30 20 33 Provision for income tax $ Provision for income tax $ 107 $ 24 $ 22 The income tax $ 107 $ 24 $ 22 The foreign provision $ 107 $ 24 $ 22 The foreign provision for income pretax earnings of approximately $ 384 million , $ 250 million $ 384 million , $ 250 million and $ 284 million $ 250 million and $ 284 million in 2004 , 2003 and $ 284 million in 2004 , 2003 , and 2002 284 million in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . As of respectively . As of September 25 , 2004 , approximately $ As of September 25 , 2004 , approximately $ 3.2 billion , 2004 , approximately $ 3.2 billion of the Company 's a cumulative total of $ 972 million of such earnings . be recovered or settled . 86 As of September 25 , . 86 As of September 25 , 2004 and September 27 As of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , the significant 2004 and September 27 , 2003 , the significant component of ( in million ) : 2004 2003 Deferred tax asset : in million ) : 2004 2003 Deferred tax asset : Accounts receivable and inventory reserve $ 32 $ 35 Accrued liability and inventory reserve $ 32 $ 35 Accrued liability and other reserve Accrued liability and other reserve 195 155 Basis of capital asset liability and other reserve 195 155 Basis of capital asset and of capital asset and investment 65 47 Tax loss and credit capital asset and investment 65 47 Tax loss and credit 329 47 Tax loss and credit 329 204 Other 26 11 Total Tax loss and credit 329 204 Other 26 11 Total deferred and credit 329 204 Other 26 11 Total deferred tax asset credit 329 204 Other 26 11 Total deferred tax asset 647 11 Total deferred tax asset 647 452 Less valuation allowance 30 Total deferred tax asset 647 452 Less valuation allowance 30 30 647 452 Less valuation allowance 30 30 Net deferred tax asset 452 Less valuation allowance 30 30 Net deferred tax asset 617 30 Net deferred tax asset 617 422 Deferred tax liability : Net deferred tax asset 617 422 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 413 398 Total deferred tax liability Unremitted earnings of subsidiary 413 398 Total deferred tax liability 413 398 Total deferred tax liability 413 398 Net deferred tax asset Total deferred tax liability 413 398 Net deferred tax asset $ Net deferred tax asset $ 204 $ 24 As of September tax asset $ 204 $ 24 As of September 25 , $ 24 As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had operating tax purpose of approximately $ 446 million , which expire from million , which expire from 2011 through 2024 . A portion which expire from 2011 through 2024 . A portion of these of which is approximately $ 132 million and which expire between million and which expire between 2005 and 2024 . The remaining which expire between 2005 and 2024 . The remaining benefit from expire . As of September 25 , 2004 , a valuation As of September 25 , 2004 , a valuation allowance of a valuation allowance of $ 30 million wa recorded against the remaining deferred tax asset . 87 A reconciliation of the provision federal income tax rate ( 35 % in 2004 , 2003 rate ( 35 % in 2004 , 2003 , and 2002 35 % in 2004 , 2003 , and 2002 ) to 2004 , 2003 , and 2002 ) to income before provision ( in million ) : 2004 2003 2002 Computed expected tax in million ) : 2004 2003 2002 Computed expected tax $ million ) : 2004 2003 2002 Computed expected tax $ 134 2002 Computed expected tax $ 134 $ 32 $ 30 State expected tax $ 134 $ 32 $ 30 State tax , $ 134 $ 32 $ 30 State tax , net of net of federal effect ( 5 ) ( 4 ) 7 effect ( 5 ) ( 4 ) 7 Indefinitely invested earnings 5 ) ( 4 ) 7 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 31 ) ( 13 ) — subsidiary ( 31 ) ( 13 ) — Nondeductible executive compensation ) — Nondeductible executive compensation 10 5 ( 1 ) Stock — Nondeductible executive compensation 10 5 ( 1 ) Stock repurchase executive compensation 10 5 ( 1 ) Stock repurchase — ( ) Stock repurchase — ( 2 ) — Purchase accounting and accounting and asset acquisition — 4 3 Change in valuation allowance and asset acquisition — 4 3 Change in valuation allowance — valuation allowance — — ( 16 ) Research and development credit development credit , net ( 5 ) ( 7 ) ( net ( 5 ) ( 7 ) ( 8 ) Nondeductible ) ( 7 ) ( 8 ) Nondeductible expense 2 6 ( 8 ) Nondeductible expense 2 6 4 Other item 2 8 ) Nondeductible expense 2 6 4 Other item 2 3 ) Nondeductible expense 2 6 4 Other item 2 3 3 2 6 4 Other item 2 3 3 Provision for income 6 4 Other item 2 3 3 Provision for income tax 4 Other item 2 3 3 Provision for income tax $ Provision for income tax $ 107 $ 24 $ 22 Effective income tax $ 107 $ 24 $ 22 Effective tax rate $ 107 $ 24 $ 22 Effective tax rate 28 % $ 22 Effective tax rate 28 % 26 % 25 % Effective tax rate 28 % 26 % 25 % The Internal rate 28 % 26 % 25 % The Internal Revenue Service for all year prior to 2001 and proposed certain adjustment . such resolution occurs . Note 7—Shareholders ' Equity Restricted Stock Units Restricted Stock Units During fiscal 2004 , the Company 's Board Directors approved the grant of 2.515 million restricted stock unit to Company ha recorded the $ 64.4 million value of these restricted a straight-line basis over the 4 year requisite service period . amortization will be approximately $ 4.0 million , of which approximately , of which approximately $ 0.5 million will be included in cost of sale ; $ 1.3 million will be included in ; and the remaining $ 2.2 million will be included in Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company entered into The Agreement cancelled stock option 88 award for the purchase of award for the purchase of 27.5 million share of the Company granted to Mr. Jobs in 2000 and 2001 . Mr. Jobs Mr. Jobs in 2000 and 2001 . Mr. Jobs retained option Jobs retained option to purchase 60,000 share of the Company 's stock granted in August of 1997 in his capacity a a a restricted stock award of 5 million share of the Company restricted stock award of $ 74.75 million a a component of a straight-line basis over the 3 year service period . The 's common stock of $ 14.95 on the date of the which amount to approximately $ 6.2 million per quarter , ha administrative expense beginning in March 2003 and will continue to be to be included through March 2006 . The 5 million restricted through March 2006 . The 5 million restricted share have been Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 1.5 million share of it common common stock in September of 2003 at an average price of an average price of $ 16.64 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 22.81 . Other than this forward it common stock since fiscal 2000 . Since inception of the had repurchased a total of 6.55 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 25 , 2004 . Preferred Stock a of September 25 , 2004 . Preferred Stock The Company Preferred Stock The Company ha 5 million share of authorized preferred a cash flow hedge . 89 The following table summarizes the ( in million ) : 2004 2003 2002 Unrealized gain ( in million ) : 2004 2003 2002 Unrealized gain ( loss million ) : 2004 2003 2002 Unrealized gain ( loss ) on available-for-sale security $ ( 4 ) $ 1 $ 13 $ ( 4 ) $ 1 $ 13 Unrealized loss on 4 ) $ 1 $ 13 Unrealized loss on derivative investment loss on derivative investment ( 4 ) ( 16 ) ( investment ( 4 ) ( 16 ) ( 11 ) Cumulative ) ( 16 ) ( 11 ) Cumulative foreign currency translation Cumulative foreign currency translation ( 7 ) ( 20 ) ( translation ( 7 ) ( 20 ) ( 51 ) Accumulated ) ( 20 ) ( 51 ) Accumulated other comprehensive income ( loss ) $ ( 15 ) $ ( 35 ) ( 15 ) $ ( 35 ) $ ( 49 ) ( 35 ) $ ( 49 ) The following table summarizes ( in million ) : 2004 2003 2002 Change in fair in million ) : 2004 2003 2002 Change in fair value million ) : 2004 2003 2002 Change in fair value of of available-for-sale security $ ( 1 ) $ 11 $ ( $ ( 1 ) $ 11 $ ( 49 ) Adjustment ) $ 11 $ ( 49 ) Adjustment for net ( included in net income ( 4 ) ( 23 ) 32 income ( 4 ) ( 23 ) 32 Change in unrealized 4 ) ( 23 ) 32 Change in unrealized gain/loss on on available-for-sale security $ ( 5 ) $ ( 12 ) ( 5 ) $ ( 12 ) $ ( 17 ) ( 12 ) $ ( 17 ) The tax effect related on available-for-sale security wa $ 4 million , $ 6 million $ 4 million , $ 6 million , and $ 10 6 million , and $ 10 million for fiscal 2004 , $ 10 million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . The tax in net income wa $ 1 million , $ ( 8 1 million , $ ( 8 ) million and $ 10 8 ) million and $ 10 million for fiscal 2004 , $ 10 million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . The following ( in million ) : 2004 2003 2002 Changes in fair in million ) : 2004 2003 2002 Changes in fair value million ) : 2004 2003 2002 Changes in fair value of value of derivative $ ( 21 ) $ ( 24 ) ( 21 ) $ ( 24 ) $ 4 Adjustment for $ ( 24 ) $ 4 Adjustment for net gain ( and included in net income 33 19 ( 19 ) Change included in net income 33 19 ( 19 ) Change in net income 33 19 ( 19 ) Change in unrealized gain/loss gain/loss on derivative instrument $ 12 $ ( 5 ) $ instrument $ 12 $ ( 5 ) $ ( 15 ) ( 5 ) $ ( 15 ) The tax effect related value of derivative wa $ 10 million , $ 11million and $ 10 million , $ 11million and $ ( 2 ) $ 11million and $ ( 2 ) million for fiscal 2004 2 ) million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . The tax comprehensive income wa $ ( 13 ) million , $ ( ) million , $ ( 7 ) million and $ 8 7 ) million and $ 8 million for fiscal 2004 , $ 8 million for fiscal 2004 , 2003 , and 2002 million for fiscal 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . Note 8—Employee 2002 , respectively . Note 8—Employee Benefit Plans 2003 Employee Stock . Note 8—Employee Benefit Plans 2003 Employee Stock Option Plan At of Shareholders held on April 24 , 2003 , the shareholder held on April 24 , 2003 , the shareholder approved an approved an amendment to the 1998 Executive Officer Stock Plan to of the plan to the 2003 Employee Stock Option Plan ( Stock Option Plan ( the 2003 Plan ) , to provide employee stock option , including 6-months-plus-1-day option exchange program , without , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued on continued employment , with 90 either annual or quarterly vesting or quarterly vesting . The 2003 Plan permit the granting of and stock purchase right . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Board of Directors approved the 1997 Employee Stock Option Plan ( Stock Option Plan ( the 1997 Plan ) , a non-shareholder , option granted under the 1997 Plan generally expire 7 to the 1997 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued approval of amendment to the 1998 Executive Officer Stock Plan in Officer Stock Plan in April 2003 , the Company terminated the , the Company terminated the 1997 Employee Stock Option Plan and all remaining unissued share totaling 14,295,351 following the completion of an option exchange program in October 2003 . Employee Stock Option Exchange Option Exchange Program On March 20 , 2003 , the Company Program On March 20 , 2003 , the Company announced a price at or above $ 25.00 per share for a predetermined are cancelled . On April 17 , 2003 , in accordance . On April 17 , 2003 , in accordance with the Company cancelled option to purchase 16,569,193 share of it common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 6,697,368 share were issued to employee an exercise price of $ 22.76 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee 's , up to a maximum 91 of $ 25,000 in any a maximum 91 of $ 25,000 in any calendar year . period that started on June 30 , 2003 , the number started on June 30 , 2003 , the number of share limited to a total of 1 million share per offering period per offering period . During 2004 , 2003 , and 2002 period . During 2004 , 2003 , and 2002 , 2.0 2004 , 2003 , and 2002 , 2.0 million , 2.1 2003 , and 2002 , 2.0 million , 2.1 million , 2002 , 2.0 million , 2.1 million , and 1.8 million , 2.1 million , and 1.8 million , respectively were issued Plan . As of September 25 , 2004 , approximately 2 As of September 25 , 2004 , approximately 2 million share 25 , 2004 , approximately 2 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 13,000 for calendar year 2004 ) $ 13,000 for calendar year 2004 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee 's , up to a maximum 6 % of the employee 's Savings Plan were approximately $ 24 million , $ 21 million $ 24 million , $ 21 million , and $ 19 21 million , and $ 19 million in 2004 , 2003 and $ 19 million in 2004 , 2003 , and 2002 19 million in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . Stock Option for the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 and September 28 2004 , September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 follows ( option 2003 and September 28 , 2002 follows ( option amount are Exercise Price Balance at September 29 , 2001 10,075 97,179 $ Balance at September 29 , 2001 10,075 97,179 $ 29.24 Additional at September 29 , 2001 10,075 97,179 $ 29.24 Additional Options September 29 , 2001 10,075 97,179 $ 29.24 Additional Options Authorized , 2001 10,075 97,179 $ 29.24 Additional Options Authorized 15,000 — $ 29.24 Additional Options Authorized 15,000 — — Options Granted ( — — Options Granted ( 23,239 ) 23,239 $ 19.89 Options Options Granted ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 23,239 ) 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 23,239 $ 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 19.89 Options Cancelled 4,737 ( 4,737 ) $ 30.98 Options Exercised 4,737 ( 4,737 ) $ 30.98 Options Exercised — ( 6,251 30.98 Options Exercised — ( 6,251 ) $ 11.99 Plan Shares — ( 6,251 ) $ 11.99 Plan Shares Expired ( 2 11.99 Plan Shares Expired ( 2 ) — — Balance at — — Balance at September 28 , 2002 6,571 109,430 $ Balance at September 28 , 2002 6,571 109,430 $ 28.17 Restricted at September 28 , 2002 6,571 109,430 $ 28.17 Restricted Stock September 28 , 2002 6,571 109,430 $ 28.17 Restricted Stock Granted , 2002 6,571 109,430 $ 28.17 Restricted Stock Granted ( 5,000 28.17 Restricted Stock Granted ( 5,000 ) — — Options Granted — — Options Granted ( 4,179 ) 4,179 $ 16.38 Options Options Granted ( 4,179 ) 4,179 $ 16.38 Options Cancelled 48,443 ( 4,179 ) 4,179 $ 16.38 Options Cancelled 48,443 ( 48,443 4,179 $ 16.38 Options Cancelled 48,443 ( 48,443 ) $ 39.61 16.38 Options Cancelled 48,443 ( 48,443 ) $ 39.61 Options Exercised 48,443 ( 48,443 ) $ 39.61 Options Exercised — ( 2,154 39.61 Options Exercised — ( 2,154 ) $ 14.04 Plan Shares — ( 2,154 ) $ 14.04 Plan Shares Expired ( 5 14.04 Plan Shares Expired ( 5 ) — — Balance at — — Balance at September 27 , 2003 45,830 63,012 $ Balance at September 27 , 2003 45,830 63,012 $ 19.08 Restricted at September 27 , 2003 45,830 63,012 $ 19.08 Restricted Stock September 27 , 2003 45,830 63,012 $ 19.08 Restricted Stock Units , 2003 45,830 63,012 $ 19.08 Restricted Stock Units Granted ( Restricted Stock Units Granted ( 2,515 ) — — Options Granted — — Options Granted ( 18,197 ) 18,197 $ 22.97 Options Options Granted ( 18,197 ) 18,197 $ 22.97 Options Cancelled 3,005 ( 18,197 ) 18,197 $ 22.97 Options Cancelled 3,005 ( 3,005 18,197 $ 22.97 Options Cancelled 3,005 ( 3,005 ) $ 20.70 22.97 Options Cancelled 3,005 ( 3,005 ) $ 20.70 Options Exercised 3,005 ( 3,005 ) $ 20.70 Options Exercised — ( 22,843 20.70 Options Exercised — ( 22,843 ) $ 17.20 Plan Shares — ( 22,843 ) $ 17.20 Plan Shares Expired ( 16,098 17.20 Plan Shares Expired ( 16,098 ) — — Balance at — — Balance at September 25 , 2004 12,025 55,361 $ Balance at September 25 , 2004 12,025 55,361 $ 21.05 92 at September 25 , 2004 12,025 55,361 $ 21.05 92 The September 25 , 2004 12,025 55,361 $ 21.05 92 The option , 2004 12,025 55,361 $ 21.05 92 The option outstanding a 2004 12,025 55,361 $ 21.05 92 The option outstanding a of option outstanding a of September 25 , 2004 have been segregated a of September 25 , 2004 have been segregated into five Options Outstanding a of September 25 , 2004 Weighted- Average Remaining a of September 25 , 2004 Weighted- Average Remaining Contractual Life Options Exercisable a of September 25 , 2004 Weighted Average Exercise a of September 25 , 2004 Weighted Average Exercise Price $ Weighted Average Exercise Price $ 0.83- $ 15.59 6,426 4.65 $ Exercise Price $ 0.83- $ 15.59 6,426 4.65 $ 12.26 4,958 Price $ 0.83- $ 15.59 6,426 4.65 $ 12.26 4,958 $ $ 0.83- $ 15.59 6,426 4.65 $ 12.26 4,958 $ 11.59 $ 15.59 6,426 4.65 $ 12.26 4,958 $ 11.59 $ 15.60- 15.59 6,426 4.65 $ 12.26 4,958 $ 11.59 $ 15.60- $ 4.65 $ 12.26 4,958 $ 11.59 $ 15.60- $ 18.50 15,729 12.26 4,958 $ 11.59 $ 15.60- $ 18.50 15,729 5.87 $ $ 11.59 $ 15.60- $ 18.50 15,729 5.87 $ 17.94 12,969 11.59 $ 15.60- $ 18.50 15,729 5.87 $ 17.94 12,969 $ $ 15.60- $ 18.50 15,729 5.87 $ 17.94 12,969 $ 18.04 $ 18.50 15,729 5.87 $ 17.94 12,969 $ 18.04 $ 18.51- 18.50 15,729 5.87 $ 17.94 12,969 $ 18.04 $ 18.51- $ 5.87 $ 17.94 12,969 $ 18.04 $ 18.51- $ 20.54 9,998 17.94 12,969 $ 18.04 $ 18.51- $ 20.54 9,998 6.91 $ $ 18.04 $ 18.51- $ 20.54 9,998 6.91 $ 20.26 5,769 18.04 $ 18.51- $ 20.54 9,998 6.91 $ 20.26 5,769 $ $ 18.51- $ 20.54 9,998 6.91 $ 20.26 5,769 $ 20.25 $ 20.54 9,998 6.91 $ 20.26 5,769 $ 20.25 $ 20.55- 20.54 9,998 6.91 $ 20.26 5,769 $ 20.25 $ 20.55- $ 6.91 $ 20.26 5,769 $ 20.25 $ 20.55- $ 22.76 15,109 20.26 5,769 $ 20.25 $ 20.55- $ 22.76 15,109 6.23 $ $ 20.25 $ 20.55- $ 22.76 15,109 6.23 $ 22.20 1,401 20.25 $ 20.55- $ 22.76 15,109 6.23 $ 22.20 1,401 $ $ 20.55- $ 22.76 15,109 6.23 $ 22.20 1,401 $ 21.77 $ 22.76 15,109 6.23 $ 22.20 1,401 $ 21.77 $ 22.77- 22.76 15,109 6.23 $ 22.20 1,401 $ 21.77 $ 22.77- $ 6.23 $ 22.20 1,401 $ 21.77 $ 22.77- $ 69.78 8,099 22.20 1,401 $ 21.77 $ 22.77- $ 69.78 8,099 6.24 $ $ 21.77 $ 22.77- $ 69.78 8,099 6.24 $ 32.90 4,926 21.77 $ 22.77- $ 69.78 8,099 6.24 $ 32.90 4,926 $ $ 22.77- $ 69.78 8,099 6.24 $ 32.90 4,926 $ 36.46 $ 69.78 8,099 6.24 $ 32.90 4,926 $ 36.46 $ 0.83- 69.78 8,099 6.24 $ 32.90 4,926 $ 36.46 $ 0.83- $ 6.24 $ 32.90 4,926 $ 36.46 $ 0.83- $ 69.78 55,361 32.90 4,926 $ 36.46 $ 0.83- $ 69.78 55,361 6.07 $ $ 36.46 $ 0.83- $ 69.78 55,361 6.07 $ 21.05 30,023 36.46 $ 0.83- $ 69.78 55,361 6.07 $ 21.05 30,023 $ $ 0.83- $ 69.78 55,361 6.07 $ 21.05 30,023 $ 20.59 $ 69.78 55,361 6.07 $ 21.05 30,023 $ 20.59 As of 69.78 55,361 6.07 $ 21.05 30,023 $ 20.59 As of September 6.07 $ 21.05 30,023 $ 20.59 As of September 27 , $ 20.59 As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had exercisable had exercisable option to purchase 38.8 million share outstanding with a average exercise price of $ 18.75 per share . As of share . As of September 28 , 2002 , the Company As of September 28 , 2002 , the Company had exercisable had exercisable option to purchase 57.9 million share outstanding with a average exercise price of $ 30.85 per share . The Company share . The Company had 2.515 million restricted stock unit outstanding unit outstanding a of September 25 , 2004 , which were a of September 25 , 2004 , which were excluded from were vested a of September 25 , 2004 . The grant a of September 25 , 2004 . The grant of these stock option plan . Note 9—Stock-Based Compensation The Company ha provided pro forma disclosure in Note 1 of these Notes to Consolidated pursuant to SFAS No . 123 , the option award issued option award issued in October 2003 and the award cancelled a accordance with SFAS No . 123 , the grant date of with restricted share in March 2003 is also being accounted for pursuant to SFAS No . 123 . 93 The assumption used SFAS No . 123 . 93 The assumption used for each year are a follows : 2004 2003 2002 Expected life of are a follows : 2004 2003 2002 Expected life of stock a follows : 2004 2003 2002 Expected life of stock option Expected life of stock option 3.5 year 3.5-4 year 4 year of stock option 3.5 year 3.5-4 year 4 year Expected life option 3.5 year 3.5-4 year 4 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 2.33 6 month Interest rate—stock option 2.33 % -3.15 % 2.14 % option 2.33 % -3.15 % 2.14 % -2.45 % 2.90 % % 2.14 % -2.45 % 2.90 % Interest rate—stock purchase 0.96 2.90 % Interest rate—stock purchase 0.96 % -1.67 % 1.10 % purchase 0.96 % -1.67 % 1.10 % -1.77 % 2.71 % % 1.10 % -1.77 % 2.71 % Volatility—stock option 40 % % 2.71 % Volatility—stock option 40 % 40 % -63 % % Volatility—stock option 40 % 40 % -63 % 64 % % 40 % -63 % 64 % Volatility—stock purchase 32 % % 64 % Volatility—stock purchase 32 % -44 % 35 % purchase 32 % -44 % 35 % -44 % 51 % % 35 % -44 % 51 % Dividend yield — — granted during the year $ 7.37 $ 6.63 $ 10.11 Weighted-average the year $ 7.37 $ 6.63 $ 10.11 Weighted-average fair value $ 7.37 $ 6.63 $ 10.11 Weighted-average fair value of stock purchase during the year $ 5.56 $ 4.24 $ 6.73 For the year $ 5.56 $ 4.24 $ 6.73 For purpose of $ 5.56 $ 4.24 $ 6.73 For purpose of the pro pursuant to SFAS No . 123 , the expected volatility assumption to the third quarter of 2003 had been based solely on in the third quarter of 2003 , the Company ha modified in the third quarter of 2003 , the Company shortened it granted to it employee from 4 year to 3.5 year . employee from 4 year to 3.5 year . The Company base during the third quarter of 2003 wa the result of the option granted to employee from 10 year to 7 year and employee from 10 year to 7 year and changing the vesting option granted to employee from 4 year straight-line annual vesting to year straight-line annual vesting to 4 year straight-line quarterly vesting . straight-line quarterly vesting . Note 10—Commitments and Contingencies Lease Commitments The lease are for term of 5 to 10 year and generally for term of 5 to 10 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 16 year and often for term of 5 to 16 year and often contain multi-year option . As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company 's total noncancelable operating lease were $ 617 million , of which $ million , of which $ 436 million related to lease for noncancelable lease , wa $ 103 million , $ 97 million $ 103 million , $ 97 million , and $ 92 97 million , and $ 92 million in 2004 , 2003 and $ 92 million in 2004 , 2003 , and 2002 92 million in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . Future minimum respectively . Future minimum lease 94 payment under noncancelable operating lease one year a of September 25 , 2004 , are a a of September 25 , 2004 , are a follows ( million ) : Fiscal Years 2005 $ 89 2006 91 2007 : Fiscal Years 2005 $ 89 2006 91 2007 79 2008 Fiscal Years 2005 $ 89 2006 91 2007 79 2008 65 Years 2005 $ 89 2006 91 2007 79 2008 65 2009 2005 $ 89 2006 91 2007 79 2008 65 2009 61 $ 89 2006 91 2007 79 2008 65 2009 61 Later 89 2006 91 2007 79 2008 65 2009 61 Later year 2006 91 2007 79 2008 65 2009 61 Later year 232 91 2007 79 2008 65 2009 61 Later year 232 Total 2007 79 2008 65 2009 61 Later year 232 Total minimum 65 2009 61 Later year 232 Total minimum lease payment $ Total minimum lease payment $ 617 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for Apple service ( in million ) : 2004 2003 2002 Beginning accrued warranty in million ) : 2004 2003 2002 Beginning accrued warranty and million ) : 2004 2003 2002 Beginning accrued warranty and related warranty and related cost $ 67 $ 69 $ 87 Cost related cost $ 67 $ 69 $ 87 Cost of warranty $ 67 $ 69 $ 87 Cost of warranty claim ( Cost of warranty claim ( 105 ) ( 71 ) ( claim ( 105 ) ( 71 ) ( 79 ) Accruals ) ( 71 ) ( 79 ) Accruals for product warranty ) Accruals for product warranty 143 69 61 Ending accrued warranty Accruals for product warranty 143 69 61 Ending accrued warranty and for product warranty 143 69 61 Ending accrued warranty and related warranty and related cost $ 105 $ 67 $ 69 The related cost $ 105 $ 67 $ 69 The Company generally $ 105 $ 67 $ 69 The Company generally doe not cost a of either September 25 , 2004 or September 27 of either September 25 , 2004 or September 27 , 2003 25 , 2004 or September 27 , 2003 . 95 Concentrations 2004 or September 27 , 2003 . 95 Concentrations in the September 27 , 2003 . 95 Concentrations in the Available Sources . Contingencies Beginning on September 27 , 2001 , three shareholder Beginning on September 27 , 2001 , three shareholder class action traded common stock between July 19 , 2000 , and September stock between July 19 , 2000 , and September 28 , , 2000 , and September 28 , 2000 . The complaint , and September 28 , 2000 . The complaint allege violation complaint allege violation of the 1934 Securities Exchange Act and seek motion to dismiss on June 4 , 2002 , which wa dismiss on June 4 , 2002 , which wa heard by by the Court on September 13 , 2002 . On December Court on September 13 , 2002 . On December 11 , , 2002 . On December 11 , 2002 , the Court . On December 11 , 2002 , the Court granted the their amended complaint on January 31 , 2003 , and on complaint on January 31 , 2003 , and on March 17 2003 , and on March 17 , 2003 , the Company and on March 17 , 2003 , the Company filed a Company 's motion on July 11 , 2003 and dismissed Plaintiffs motion on July 11 , 2003 and dismissed Plaintiffs ' claim claim with prejudice on August 12 , 2003 . Plaintiffs have prejudice on August 12 , 2003 . Plaintiffs have appealed the the requirement to provide customer 96 the ability to return product and financial position . Note 11—Segment Information and Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of U.S. and Japan during fiscal 2004 . Other operating segment include a those described in Note 1 , `` Summary of Significant the Retail segment were $ 104 million , $ 92 million $ 104 million , $ 92 million and $ 106 million $ 92 million and $ 106 million for 2004 , 2003 and $ 106 million for 2004 , 2003 and 2002 , 106 million for 2004 , 2003 and 2002 , respectively . for 2004 , 2003 and 2002 , respectively . Operating income . Certain manufacturing expense and 97 related adjustment not included in For the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , this resulted , and September 28 , 2002 , this resulted in the corporate expense of approximately $ 213 million , $ 106 million $ 213 million , $ 106 million , and $ 52 106 million , and $ 52 million , respectively . Second For the year ended September 25 , 2004 , this resulted year ended September 25 , 2004 , this resulted in the operating segment , of $ 54 million and $ 37 million $ 54 million and $ 37 million , respectively . For For the year ended September 27 , 2003 , the net year ended September 27 , 2003 , the net sale and and service contract were $ 30 million and $ 20 million $ 30 million and $ 20 million , respectively . For For the year ended September 28 , 2002 , this resulted year ended September 28 , 2002 , this resulted in the the Retail segment of $ 8 million and $ 6 million $ 8 million and $ 6 million , respectively . Third , Japan a of September 25 , 2004 and ha an a of September 25 , 2004 and ha an additional store the end of calendar year 2004 . These high profile store of these store were $ 16 million , $ 6 million $ 16 million , $ 6 million and $ 1 million $ 6 million and $ 1 million for the year ended for the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 respectively . 98 , and September 28 , 2002 respectively . 98 Summary information 28 , 2002 respectively . 98 Summary information by operating segment ( in million ) : 2004 2003 2002 Americas : Net in million ) : 2004 2003 2002 Americas : Net sale million ) : 2004 2003 2002 Americas : Net sale $ Americas : Net sale $ 4,019 $ 3,181 $ 3,131 Operating Net sale $ 4,019 $ 3,181 $ 3,131 Operating income $ $ 4,019 $ 3,181 $ 3,131 Operating income $ 465 $ $ 3,131 Operating income $ 465 $ 323 $ 278 Depreciation Operating income $ 465 $ 323 $ 278 Depreciation , amortization $ 465 $ 323 $ 278 Depreciation , amortization and accretion , amortization and accretion $ 6 $ 5 $ 4 Segment and accretion $ 6 $ 5 $ 4 Segment asset ( $ 6 $ 5 $ 4 Segment asset ( a ) asset ( a ) $ 563 $ 494 $ 395 Europe a ) $ 563 $ 494 $ 395 Europe : Net $ 563 $ 494 $ 395 Europe : Net sale $ Europe : Net sale $ 1,799 $ 1,309 $ 1,251 Operating Net sale $ 1,799 $ 1,309 $ 1,251 Operating income $ $ 1,799 $ 1,309 $ 1,251 Operating income $ 280 $ $ 1,251 Operating income $ 280 $ 130 $ 122 Depreciation Operating income $ 280 $ 130 $ 122 Depreciation , amortization $ 280 $ 130 $ 122 Depreciation , amortization and accretion , amortization and accretion $ 4 $ 4 $ 4 Segment and accretion $ 4 $ 4 $ 4 Segment asset $ $ 4 $ 4 $ 4 Segment asset $ 259 $ $ 4 Segment asset $ 259 $ 252 $ 165 Japan Segment asset $ 259 $ 252 $ 165 Japan : Net $ 259 $ 252 $ 165 Japan : Net sale $ Japan : Net sale $ 677 $ 698 $ 710 Operating Net sale $ 677 $ 698 $ 710 Operating income $ $ 677 $ 698 $ 710 Operating income $ 115 $ $ 710 Operating income $ 115 $ 121 $ 140 Depreciation Operating income $ 115 $ 121 $ 140 Depreciation , amortization $ 115 $ 121 $ 140 Depreciation , amortization and accretion , amortization and accretion $ 2 $ 3 $ 2 Segment and accretion $ 2 $ 3 $ 2 Segment asset $ $ 2 $ 3 $ 2 Segment asset $ 114 $ $ 2 Segment asset $ 114 $ 130 $ 50 Retail Segment asset $ 114 $ 130 $ 50 Retail : Net $ 114 $ 130 $ 50 Retail : Net sale $ Retail : Net sale $ 1,185 $ 621 $ 283 Operating Net sale $ 1,185 $ 621 $ 283 Operating income ( $ 1,185 $ 621 $ 283 Operating income ( loss ) income ( loss ) $ 39 $ ( 5 ) $ ) $ 39 $ ( 5 ) $ ( 22 ) ( 5 ) $ ( 22 ) Depreciation , amortization and accretion ( b ) $ 35 $ 25 $ 16 Segment b ) $ 35 $ 25 $ 16 Segment asset ( $ 35 $ 25 $ 16 Segment asset ( b ) asset ( b ) $ 351 $ 243 $ 141 Other b ) $ 351 $ 243 $ 141 Other Segments ( $ 351 $ 243 $ 141 Other Segments ( c ) ) : Net sale $ 599 $ 398 $ 367 Operating Net sale $ 599 $ 398 $ 367 Operating income $ $ 599 $ 398 $ 367 Operating income $ 90 $ $ 367 Operating income $ 90 $ 51 $ 44 Depreciation Operating income $ 90 $ 51 $ 44 Depreciation , amortization $ 90 $ 51 $ 44 Depreciation , amortization and accretion , amortization and accretion $ 2 $ 2 $ 2 Segment and accretion $ 2 $ 2 $ 2 Segment asset $ $ 2 $ 2 $ 2 Segment asset $ 124 $ $ 2 Segment asset $ 124 $ 78 $ 67 ( Segment asset $ 124 $ 78 $ 67 ( a ) $ 124 $ 78 $ 67 ( a ) The Americas include Asia-Pacific and FileMaker . 99 A reconciliation of the Company ( in million ) : 2004 2003 2002 Segment operating income in million ) : 2004 2003 2002 Segment operating income $ million ) : 2004 2003 2002 Segment operating income $ 989 2002 Segment operating income $ 989 $ 620 $ 562 Corporate operating income $ 989 $ 620 $ 562 Corporate expense , $ 989 $ 620 $ 562 Corporate expense , net ( Corporate expense , net ( 640 ) ( 595 ) ( net ( 640 ) ( 595 ) ( 514 ) Purchased ) ( 595 ) ( 514 ) Purchased in-process research and and development — — ( 1 ) Restructuring cost ( 23 1 ) Restructuring cost ( 23 ) ( 26 ) ( cost ( 23 ) ( 26 ) ( 30 ) Consolidated ) ( 26 ) ( 30 ) Consolidated operating income ( income ( loss ) $ 326 $ ( 1 ) $ ) $ 326 $ ( 1 ) $ 17 Segment asset $ ( 1 ) $ 17 Segment asset $ 1,411 $ $ 17 Segment asset $ 1,411 $ 1,197 $ 818 Corporate Segment asset $ 1,411 $ 1,197 $ 818 Corporate asset 6,639 $ 1,411 $ 1,197 $ 818 Corporate asset 6,639 $ 5,618 1,197 $ 818 Corporate asset 6,639 $ 5,618 $ 5,480 Consolidated 818 Corporate asset 6,639 $ 5,618 $ 5,480 Consolidated asset $ asset 6,639 $ 5,618 $ 5,480 Consolidated asset $ 8,050 $ $ 5,480 Consolidated asset $ 8,050 $ 6,815 $ 6,298 Segment Consolidated asset $ 8,050 $ 6,815 $ 6,298 Segment depreciation , $ 8,050 $ 6,815 $ 6,298 Segment depreciation , amortization and , amortization and accretion $ 49 $ 39 $ 28 Corporate and accretion $ 49 $ 39 $ 28 Corporate depreciation , $ 49 $ 39 $ 28 Corporate depreciation , amortization and depreciation , amortization and accretion 101 74 86 Consolidated depreciation , , amortization and accretion 101 74 86 Consolidated depreciation , amortization amortization and accretion 101 74 86 Consolidated depreciation , amortization and , amortization and accretion $ 150 $ 113 $ 114 A and accretion $ 150 $ 113 $ 114 A large portion $ 150 $ 113 $ 114 A large portion of the customer accounted for more than 10 % of net sale in % of net sale in 2004 , 2003 or 2002 . net sale in 2004 , 2003 or 2002 . Net sale in 2004 , 2003 or 2002 . Net sale and long-lived ( in million ) : 2004 2003 2002 Net Sales : in million ) : 2004 2003 2002 Net Sales : U.S. million ) : 2004 2003 2002 Net Sales : U.S. $ Net Sales : U.S. $ 4,893 $ 3,627 $ 3,272 Japan : U.S. $ 4,893 $ 3,627 $ 3,272 Japan 738 698 $ 4,893 $ 3,627 $ 3,272 Japan 738 698 710 Other $ 3,627 $ 3,272 Japan 738 698 710 Other Countries 2,648 3,627 $ 3,272 Japan 738 698 710 Other Countries 2,648 1,882 $ 3,272 Japan 738 698 710 Other Countries 2,648 1,882 1,760 738 698 710 Other Countries 2,648 1,882 1,760 Total Net Sales 698 710 Other Countries 2,648 1,882 1,760 Total Net Sales $ 710 Other Countries 2,648 1,882 1,760 Total Net Sales $ 8,279 1,760 Total Net Sales $ 8,279 $ 6,207 $ 5,742 Long-Lived Net Sales $ 8,279 $ 6,207 $ 5,742 Long-Lived Assets : $ 8,279 $ 6,207 $ 5,742 Long-Lived Assets : U.S. $ Long-Lived Assets : U.S. $ 637 $ 635 $ 561 Japan : U.S. $ 637 $ 635 $ 561 Japan 52 19 $ 637 $ 635 $ 561 Japan 52 19 2 Other $ 635 $ 561 Japan 52 19 2 Other Countries 72 635 $ 561 Japan 52 19 2 Other Countries 72 60 $ 561 Japan 52 19 2 Other Countries 72 60 69 52 19 2 Other Countries 72 60 69 Total Long-Lived Assets 19 2 Other Countries 72 60 69 Total Long-Lived Assets $ 2 Other Countries 72 60 69 Total Long-Lived Assets $ 761 69 Total Long-Lived Assets $ 761 $ 714 $ 632 100 Long-Lived Assets $ 761 $ 714 $ 632 100 Information regarding $ 761 $ 714 $ 632 100 Information regarding net sale 761 $ 714 $ 632 100 Information regarding net sale by ( in million ) : 2004 2003 2002 Net Sales : in million ) : 2004 2003 2002 Net Sales : Power million ) : 2004 2003 2002 Net Sales : Power Macintosh Macintosh ( a ) $ 1,419 $ 1,237 $ 1,380 PowerBook a ) $ 1,419 $ 1,237 $ 1,380 PowerBook 1,589 1,299 $ 1,419 $ 1,237 $ 1,380 PowerBook 1,589 1,299 831 iMac $ 1,237 $ 1,380 PowerBook 1,589 1,299 831 iMac ( b 1,237 $ 1,380 PowerBook 1,589 1,299 831 iMac ( b ) $ 1,380 PowerBook 1,589 1,299 831 iMac ( b ) 954 831 iMac ( b ) 954 1,238 1,448 iBook 961 717 iMac ( b ) 954 1,238 1,448 iBook 961 717 875 ( b ) 954 1,238 1,448 iBook 961 717 875 Total ) 954 1,238 1,448 iBook 961 717 875 Total Macintosh Net 954 1,238 1,448 iBook 961 717 875 Total Macintosh Net Sales 1,238 1,448 iBook 961 717 875 Total Macintosh Net Sales $ Total Macintosh Net Sales $ 4,923 $ 4,491 $ 4,534 iPod Net Sales $ 4,923 $ 4,491 $ 4,534 iPod 1,306 345 $ 4,923 $ 4,491 $ 4,534 iPod 1,306 345 143 Other $ 4,491 $ 4,534 iPod 1,306 345 143 Other Music Products 4,491 $ 4,534 iPod 1,306 345 143 Other Music Products ( $ 4,534 iPod 1,306 345 143 Other Music Products ( c Music Products ( c ) 278 36 4 Peripherals and other Products ( c ) 278 36 4 Peripherals and other hardware ( c ) 278 36 4 Peripherals and other hardware ( other hardware ( d ) 951 691 527 Software ( e hardware ( d ) 951 691 527 Software ( e ) ( d ) 951 691 527 Software ( e ) 502 527 Software ( e ) 502 362 307 Service and other Software ( e ) 502 362 307 Service and other Net ( e ) 502 362 307 Service and other Net Sales Service and other Net Sales 319 282 227 Total Net Sales and other Net Sales 319 282 227 Total Net Sales $ other Net Sales 319 282 227 Total Net Sales $ 8,279 227 Total Net Sales $ 8,279 $ 6,207 $ 5,742 ( Net Sales $ 8,279 $ 6,207 $ 5,742 ( a ) $ 8,279 $ 6,207 $ 5,742 ( a ) Includes Xserve of third-party software . Note 12—Related Party Transactions and Certain Other Certain Other Transactions In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 483,000 , $ 404,000 , and of $ 483,000 , $ 404,000 , and $ 1,168,000 in $ 404,000 , and $ 1,168,000 in expense pursuant to the to the Reimbursement Agreement during 2004 , 2003 and 2002 , Reimbursement Agreement during 2004 , 2003 and 2002 , respectively . during 2004 , 2003 and 2002 , respectively . All expense , the Company in May 2000 loaned Mr. Ronald B. Johnson President , Retail , $ 1.5 million for the purchase of due and payable in May 2004 . Under the term of to the lesser of ( 1 ) an amount equal to ) an amount equal to 50 % of the total net the option ; or ( 2 ) $ 375,000 multiplied by or ( 2 ) $ 375,000 multiplied by the number of . Mr. Johnson repaid $ 750,000 of this loan in fiscal of this loan in fiscal 2003 and repaid the remaining balance the remaining balance of $ 750,000 in fiscal 2004 . Mr. of $ 750,000 in fiscal 2004 . Mr. Jerome York , ( MicroWarehouse ) in January 2000 . Until September 7 , January 2000 . Until September 7 , 2003 , he also . Until September 7 , 2003 , he also served a including product made by the 101 Company . On September 8 101 Company . On September 8 , 2003 , CDW Corporation . On September 8 , 2003 , CDW Corporation ( CDW MicroWarehouse subsequently filed for Chapter 11 bankruptcy protection in the U.S. U.S. MicroWarehouse accounted for approximately 0.3 % , 2.4 % and for approximately 0.3 % , 2.4 % and 3.3 % of % , 2.4 % and 3.3 % of the Company 's for the year ended September 25 , 2004 , September 27 year ended September 25 , 2004 , September 27 , 2003 25 , 2004 , September 27 , 2003 , and September 2004 , September 27 , 2003 , and September 28 , , 2003 , and September 28 , 2002 , respectively . , and September 28 , 2002 , respectively . Trade receivables receivables from MicroWarehouse were $ 4.3 million and $ 9.9 million $ 4.3 million and $ 9.9 million a of September 25 9.9 million a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , respectively . 2004 and September 27 , 2003 , respectively . The Company purchase amounted to approximately $ 2.3 million and $ 2.9 million $ 2.3 million and $ 2.9 million for the year ended for the year ended September 27 , 2003 and September 28 year ended September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , respectively . 2003 and September 28 , 2002 , respectively . No purchase Company from MicroWarehouse in fiscal 2004 . Note 13—Selected Quarterly Financial in fiscal 2004 . Note 13—Selected Quarterly Financial Information ( Unaudited except per share amount ) 2004 Net sale $ 2,350 $ ) 2004 Net sale $ 2,350 $ 2,014 $ 1,909 $ Net sale $ 2,350 $ 2,014 $ 1,909 $ 2,006 Gross $ 2,350 $ 2,014 $ 1,909 $ 2,006 Gross margin $ $ 2,014 $ 1,909 $ 2,006 Gross margin $ 634 $ $ 2,006 Gross margin $ 634 $ 559 $ 530 $ Gross margin $ 634 $ 559 $ 530 $ 536 Net $ 634 $ 559 $ 530 $ 536 Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.28 $ 0.16 $ 0.13 $ : Basic $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.28 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 0.13 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.12 $ 0.17 Diluted $ 0.26 $ 0.16 $ 0.12 $ 0.17 2003 $ 0.26 $ 0.16 $ 0.12 $ 0.17 2003 Net sale $ 0.16 $ 0.12 $ 0.17 2003 Net sale $ 1,715 0.16 $ 0.12 $ 0.17 2003 Net sale $ 1,715 $ 0.17 2003 Net sale $ 1,715 $ 1,545 $ 1,475 $ Net sale $ 1,715 $ 1,545 $ 1,475 $ 1,472 Gross $ 1,715 $ 1,545 $ 1,475 $ 1,472 Gross margin $ $ 1,545 $ 1,475 $ 1,472 Gross margin $ 456 $ $ 1,472 Gross margin $ 456 $ 428 $ 418 $ Gross margin $ 456 $ 428 $ 418 $ 406 Net $ 456 $ 428 $ 418 $ 406 Net income ( $ 428 $ 418 $ 406 Net income ( loss ) income ( loss ) $ 44 $ 19 $ 14 $ loss ) $ 44 $ 19 $ 14 $ ( 8 $ 44 $ 19 $ 14 $ ( 8 ) Earnings 19 $ 14 $ ( 8 ) Earnings ( loss ) common share : Basic $ 0.12 $ 0.05 $ 0.04 $ : Basic $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Diluted 0.05 $ 0.04 $ ( 0.02 ) Diluted $ 0.12 $ ( 0.02 ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ) Diluted $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 $ 0.12 $ 0.05 $ 0.04 $ ( 0.02 ) Basic 0.05 $ 0.04 $ ( 0.02 ) Basic and diluted earnings , and second quarter of 2004 included restructuring charge , net of tax , of $ 4 million , $ 6 million $ 4 million , $ 6 million , and $ 7 6 million , and $ 7 million , respectively . Net fourth and third quarter of 2003 included after-tax net gain related to non-current investment of $ 5 million and $ 1 million $ 5 million and $ 1 million , respectively . Net in a gain of $ 6 million and a favorable cumulative-effect adoption of SFAS No . 150 of $ 3 million . No . 150 of $ 3 million . Net income ( second and first quarter of 2003 included restructuring charge , net of tax , of $ 2 million and $ 18 million $ 2 million and $ 18 million , respectively . Net for the first quarter of 2003 included an after-tax unfavorable cumulative-effect of SFAS No.143 of $ 2 million . 102 REPORT OF of $ 2 million . 102 REPORT OF INDEPENDENT REGISTERED PUBLIC Company ) a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , and the 2004 and September 27 , 2003 , and the related consolidated the three-year period ended September 25 , 2004 . These consolidated period ended September 25 , 2004 . These consolidated financial statement and subsidiary a of September 25 , 2004 and September 27 a of September 25 , 2004 and September 27 , 2003 25 , 2004 and September 27 , 2003 , and the 2004 and September 27 , 2003 , and the result of the three-year period ended September 25 , 2004 , in conformity period ended September 25 , 2004 , in conformity with U.S. . As discussed in Note 1 to the consolidated financial statement both liability and equity in 2003 and changed it method of of accounting for goodwill in 2002 . /s/ KPMG LLP Mountain Mountain View , California October 12 , 2004 103 Item 9 , California October 12 , 2004 103 Item 9 . Changes California October 12 , 2004 103 Item 9 . Changes in 12 , 2004 103 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Based the Securities Exchange Act of 1934 , a amended ( Exchange were effective a of September 25 , 2004 to ensure that a of September 25 , 2004 to ensure that information required the fourth quarter of fiscal 2004 that have materially affected or control over financial reporting . 104 PART III Item 10 . . 104 PART III Item 10 . Directors and Executive Officers Since Fred D. Anderson Director 60 2004 William V. Campbell Director Fred D. Anderson Director 60 2004 William V. Campbell Director 64 2004 William V. Campbell Director 64 1997 Millard S. Drexler Director William V. Campbell Director 64 1997 Millard S. Drexler Director 60 1997 Millard S. Drexler Director 60 1999 Albert Gore , Jr. Millard S. Drexler Director 60 1999 Albert Gore , Jr. Director Albert Gore , Jr. Director 57 2003 Steven P. Jobs Director Gore , Jr. Director 57 2003 Steven P. Jobs Director and Director and Chief Executive Officer 49 1997 Arthur D. Levinson Director and Chief Executive Officer 49 1997 Arthur D. Levinson Director 54 1997 Arthur D. Levinson Director 54 2000 Jerome B. York Director Arthur D. Levinson Director 54 2000 Jerome B. York Director 66 2000 Jerome B. York Director 66 1997 Fred D. Anderson ha Jerome B. York Director 66 1997 Fred D. Anderson ha been entertainment industry , since July 2004 . Previously , Mr. Anderson Chief Financial Officer from April 1996 to June 2004 . Mr. from April 1996 to June 2004 . Mr. Anderson also serf Intuit `` ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From April 1994 to August 1998 , Mr. From April 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Group , Inc. since January 2003 . Previously , Mr. Drexler Officer of Gap Inc. from 1995 and President from 1987 until from 1995 and President from 1987 until September 2002 . Mr. President from 1987 until September 2002 . Mr. Drexler wa also of Gap Inc. from November 1983 until October 2002 . Albert from November 1983 until October 2002 . Albert Gore , Jr. to Google , Inc. since 2001 . He ha also served Executive Chairman of INdTV since 2002 and a Chairman of Generation of Generation Investment Management since 2004 . He is a visiting Gore wa inaugurated a the 45th Vice President of the U.S. President of the U.S. in 1993 . He wa re-elected in . He wa re-elected in 1996 and served for a total Security Council . Prior to 1993 , he served eight year Executive Officer of NeXT from 1985 until 1997 when NeXT wa of NeXT from 1985 until 1997 when NeXT wa acquired by Genentech `` ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Mr. Levinson & D from 1993 to 1995 . Mr. Levinson also serf he control , since September 2003 . From January 2000 until September 2003 . From January 2000 until September 2003 , Mr. From January 2000 until September 2003 , Mr. York wa Chairman peripheral product . From September 1995 to October 1999 , he From September 1995 to October 1999 , he wa Vice Chairman wa Vice Chairman of Tracinda 105 Corporation . From May 1993 105 Corporation . From May 1993 to September 1995 he wa From May 1993 to September 1995 he wa Senior Vice President Board of Directors from January 1995 to August 1995 . Mr. from January 1995 to August 1995 . Mr. York is also financial expert `` under Item 401 ( h ) of Regulation term is used in Item 7 ( d ) ( 3 7 ( d ) ( 3 ) ( iv ) of ( iv ) of Schedule 14A under the Exchange Act . or by filing a Form 8-K. 106 Executive Officers The following by filing a Form 8-K. 106 Executive Officers The following set Sales and Operations ( age 44 ) , joined the Company joined the Company in February 1998 . Prior to joining the . Mr. Cook also spent 12 year with IBM , most Counsel and Secretary ( age 48 ) , joined the Company joined the Company in September 1997 . Prior to joining the Directors at NeXT from February 1994 until the acquisition of NeXT by the Company in February 1997 . Ronald B. Johnson , President , Retail ( age 46 ) , joined the Company joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , Chief Financial Officer ( age 41 ) , joined the Company joined the Company in July 1996 . Mr. Oppenheimer also served , iPod Division ( age 48 ) , joined the Company joined the Company in February 1997 . Mr. Rubinstein also served Systems Incorporated , from May 1993 to August 1996 . Mr. from May 1993 to August 1996 . Mr. Rubinstein also serf Worldwide Product Marketing ( age 44 ) , rejoined the Company , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 and wa from December 1995 to March 1997 and wa Director of Product FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , , Software Engineering ( age 43 ) , joined the Company joined the Company in February 1997 upon the Company 's acquisition Prior to NeXT , from 1985 to 1989 , Dr. Serlet NeXT , from 1985 to 1989 , Dr. Serlet worked a President , Applications ( age 47 ) , joined the Company joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the Software Technology Officer ( age 43 ) , joined the Company joined the Company in February 1997 upon the Company 's acquisition President , Software Engineering from 1997 to July 2003 . With Engineering from 1997 to July 2003 . With NeXT , Dr. , Engineering , from April 1995 to 107 February 1997 . , from April 1995 to 107 February 1997 . Prior to April 1995 to 107 February 1997 . Prior to April 1995 1997 . Prior to April 1995 , Dr. Tevanian worked a several management position . Item 11 . Executive Compensation Information Regarding P. Jobs Chief Executive Officer 2004 2003 2002 1 1 1 Jobs Chief Executive Officer 2004 2003 2002 1 1 1 — Chief Executive Officer 2004 2003 2002 1 1 1 — — Executive Officer 2004 2003 2002 1 1 1 — — 2,268,698 Officer 2004 2003 2002 1 1 1 — — 2,268,698 ( 2004 2003 2002 1 1 1 — — 2,268,698 ( 2 1 1 1 — — 2,268,698 ( 2 ) — 74,750,000 1 — — 2,268,698 ( 2 ) — 74,750,000 — ( 2,268,698 ( 2 ) — 74,750,000 — ( 1 ) — ) — 74,750,000 — ( 1 ) — — 7,500,000 ( ( 1 ) — — 7,500,000 ( 1 ) — — ) — — 7,500,000 ( 1 ) — — 1,302,795 ( ( 1 ) — — 1,302,795 ( 2 ) Timothy D. ) — — 1,302,795 ( 2 ) Timothy D. Cook Executive , Worldwide Sales and Operations 2004 2003 2002 602,632 617,673 563,829 Worldwide Sales and Operations 2004 2003 2002 602,632 617,673 563,829 — Sales and Operations 2004 2003 2002 602,632 617,673 563,829 — — and Operations 2004 2003 2002 602,632 617,673 563,829 — — — Operations 2004 2003 2002 602,632 617,673 563,829 — — — 7,650,000 2004 2003 2002 602,632 617,673 563,829 — — — 7,650,000 — 617,673 563,829 — — — 7,650,000 — — ( 3 ) — 7,650,000 — — ( 3 ) — — — 12,588 3 ) — — — 12,588 9,929 8,025 ( 4 ) ) — — — 12,588 9,929 8,025 ( 4 ) ( — — — 12,588 9,929 8,025 ( 4 ) ( 4 — 12,588 9,929 8,025 ( 4 ) ( 4 ) ( 8,025 ( 4 ) ( 4 ) ( 4 ) Ronald ) ( 4 ) ( 4 ) Ronald B. Johnson Senior Senior Vice President , Retail 2004 2003 2002 484,836 452,404 452,404 Vice President , Retail 2004 2003 2002 484,836 452,404 452,404 1,500,000 President , Retail 2004 2003 2002 484,836 452,404 452,404 1,500,000 1,500,000 , Retail 2004 2003 2002 484,836 452,404 452,404 1,500,000 1,500,000 — Retail 2004 2003 2002 484,836 452,404 452,404 1,500,000 1,500,000 — 6,375,000 2004 2003 2002 484,836 452,404 452,404 1,500,000 1,500,000 — 6,375,000 — 2003 2002 484,836 452,404 452,404 1,500,000 1,500,000 — 6,375,000 — — 2002 484,836 452,404 452,404 1,500,000 1,500,000 — 6,375,000 — — ( 452,404 452,404 1,500,000 1,500,000 — 6,375,000 — — ( 3 ) — 6,375,000 — — ( 3 ) — — 300,000 — ( 3 ) — — 300,000 — — — Jonathan Rubinstein Vice President , iPod Division 2004 2003 2002 485,216 452,939 452,558 President , iPod Division 2004 2003 2002 485,216 452,939 452,558 — , iPod Division 2004 2003 2002 485,216 452,939 452,558 — — iPod Division 2004 2003 2002 485,216 452,939 452,558 — — — Division 2004 2003 2002 485,216 452,939 452,558 — — — 6,375,000 2004 2003 2002 485,216 452,939 452,558 — — — 6,375,000 — 452,939 452,558 — — — 6,375,000 — — ( 3 ) — 6,375,000 — — ( 3 ) — — — 12,300 3 ) — — — 12,300 11,986 9,996 ( 4 ) ) — — — 12,300 11,986 9,996 ( 4 ) ( — — — 12,300 11,986 9,996 ( 4 ) ( 4 — 12,300 11,986 9,996 ( 4 ) ( 4 ) ( 9,996 ( 4 ) ( 4 ) ( 4 ) Avadis ) ( 4 ) ( 4 ) Avadis Tevanian , Jr. , Chief Software Technology Officer 2004 2003 2002 469,681 456,731 492,212 Chief Software Technology Officer 2004 2003 2002 469,681 456,731 492,212 1,000 Software Technology Officer 2004 2003 2002 469,681 456,731 492,212 1,000 — Technology Officer 2004 2003 2002 469,681 456,731 492,212 1,000 — — Officer 2004 2003 2002 469,681 456,731 492,212 1,000 — — 5,100,000 2004 2003 2002 469,681 456,731 492,212 1,000 — — 5,100,000 — 2003 2002 469,681 456,731 492,212 1,000 — — 5,100,000 — — 456,731 492,212 1,000 — — 5,100,000 — — ( 3 ) — 5,100,000 — — ( 3 ) — — — 12,338 3 ) — — — 12,338 11,962 10,700 ( 4 ) ) — — — 12,338 11,962 10,700 ( 4 ) ( — — — 12,338 11,962 10,700 ( 4 ) ( 4 — 12,338 11,962 10,700 ( 4 ) ( 4 ) ( 10,700 ( 4 ) ( 4 ) ( 4 ) ( ) ( 4 ) ( 4 ) ( 1 ) In ) ( 4 ) ( 1 ) In March 2003 , ( 1 ) In March 2003 , Mr. Jobs voluntarily cancelled a director . In March 2003 , the Board awarded Mr. the grant date . ( 2 ) In December 1999 , ( 2 ) In December 1999 , Mr. Jobs wa given the Company of approximately $ 90,000,000 . In fiscal 2002 , $ 90,000,000 . In fiscal 2002 , approximately $ 2.27 million fiscal 2002 , approximately $ 2.27 million paid by the Company the plane and approximately $ 1.3 million in related tax assistance to Mr. Jobs . ( 3 ) Market value of restricted stock unit granted on March 24 , 2004 ( based on granted on March 24 , 2004 ( based on $ 25.50 2004 ( based on $ 25.50 per share , the closing vest over four year with 50 % of the total number the grant date . ( 4 ) Consists of matching contribution with the term of the 401 ( k ) plan . Executive Officers during fiscal year 2004 , although restricted stock unit Table , were granted . 108 Options Exercised and Year-End Option Executive Officers during fiscal year 2004 and stock option held by Year-End ( $ ) ( 1 ) Name Shares Acquired on Steven P. Jobs — — 60,000 ( 2 ) — $ Jobs — — 60,000 ( 2 ) — $ 1,547,400 ( ( 2 ) — $ 1,547,400 ( 2 ) $ — ) — $ 1,547,400 ( 2 ) $ — Timothy D. $ — Timothy D. Cook 1,350,000 14,719,950 — 250,000 $ — — Timothy D. Cook 1,350,000 14,719,950 — 250,000 $ — $ D. Cook 1,350,000 14,719,950 — 250,000 $ — $ 5,119,375 Ronald — 250,000 $ — $ 5,119,375 Ronald B. Johnson — — Ronald B. Johnson — — 1,631,250 168,750 $ 7,359,188 $ 2,426,813 B. Johnson — — 1,631,250 168,750 $ 7,359,188 $ 2,426,813 Jonathan — — 1,631,250 168,750 $ 7,359,188 $ 2,426,813 Jonathan J. Rubinstein 1,631,250 168,750 $ 7,359,188 $ 2,426,813 Jonathan J. Rubinstein 1,500,000 26,370,700 $ 2,426,813 Jonathan J. Rubinstein 1,500,000 26,370,700 650,000 250,000 $ 12,985,375 2,426,813 Jonathan J. Rubinstein 1,500,000 26,370,700 650,000 250,000 $ 12,985,375 $ Jonathan J. Rubinstein 1,500,000 26,370,700 650,000 250,000 $ 12,985,375 $ 5,119,375 J. Rubinstein 1,500,000 26,370,700 650,000 250,000 $ 12,985,375 $ 5,119,375 Avadis 1,500,000 26,370,700 650,000 250,000 $ 12,985,375 $ 5,119,375 Avadis Tevanian , 650,000 250,000 $ 12,985,375 $ 5,119,375 Avadis Tevanian , Jr. 350,000 5,119,375 Avadis Tevanian , Jr. 350,000 8,828,328 1,800,000 250,000 $ 36,652,959 Avadis Tevanian , Jr. 350,000 8,828,328 1,800,000 250,000 $ 36,652,959 $ Tevanian , Jr. 350,000 8,828,328 1,800,000 250,000 $ 36,652,959 $ 5,119,375 , Jr. 350,000 8,828,328 1,800,000 250,000 $ 36,652,959 $ 5,119,375 ( 350,000 8,828,328 1,800,000 250,000 $ 36,652,959 $ 5,119,375 ( 1 ) 1,800,000 250,000 $ 36,652,959 $ 5,119,375 ( 1 ) Market value $ 36,652,959 $ 5,119,375 ( 1 ) Market value of security the end of fiscal year 2004 ( based on $ 37.29 2004 ( based on $ 37.29 per share , the closing NASDAQ National Market on September 24 , 2004 ) , minus Market on September 24 , 2004 ) , minus the exercise the exercise price . ( 2 ) Consists of 60,000 option ( 2 ) Consists of 60,000 option granted to Mr. Jobs a director pursuant to the 1997 Director Stock Option Plan . Option Plan . In March 2003 , Mr. Jobs voluntarily cancelled retainer on equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan `` ) and 800,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 440,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly the Company in fiscal year 2004 served on the Compensation Committee ii ) served a a 109 director of another entity , of the Company . Item 12 . Security Ownership of Certain certain information a of November 10 , 2004 ( the `` a of November 10 , 2004 ( the `` Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 401,476,094 share of Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . Security Ownership of 5 95014 . Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Private Capital Management , Inc. 20,457,156 ( 2 ) 5.10 % Management , Inc. 20,457,156 ( 2 ) 5.10 % Steven P. Inc. 20,457,156 ( 2 ) 5.10 % Steven P. Jobs 5,060,002 5.10 % Steven P. Jobs 5,060,002 ( 3 ) 1.26 % Steven P. Jobs 5,060,002 ( 3 ) 1.26 % Fred D. Jobs 5,060,002 ( 3 ) 1.26 % Fred D. Anderson 2,672 1.26 % Fred D. Anderson 2,672 * William V. Campbell 100,502 2,672 * William V. Campbell 100,502 ( 4 ) * Timothy William V. Campbell 100,502 ( 4 ) * Timothy D. Cook ) * Timothy D. Cook 5,903 * Millard S. Drexler 100,000 5,903 * Millard S. Drexler 100,000 ( 5 ) * Albert Millard S. Drexler 100,000 ( 5 ) * Albert Gore , * Albert Gore , Jr. 10,000 ( 6 ) * Ronald Gore , Jr. 10,000 ( 6 ) * Ronald B. Johnson ) * Ronald B. Johnson 1,355,903 ( 7 ) * Arthur Ronald B. Johnson 1,355,903 ( 7 ) * Arthur D. Levinson ) * Arthur D. Levinson 201,600 ( 8 ) * Jonathan Arthur D. Levinson 201,600 ( 8 ) * Jonathan J. Rubinstein ) * Jonathan J. Rubinstein 161,087 ( 9 ) * Avadis Jonathan J. Rubinstein 161,087 ( 9 ) * Avadis Tevanian , * Avadis Tevanian , Jr. 1,501,252 ( 10 ) * Jerome Tevanian , Jr. 1,501,252 ( 10 ) * Jerome B. York ) * Jerome B. York 30,000 ( 11 ) * All Jerome B. York 30,000 ( 11 ) * All executive officer director a a group ( 16 person ) 10,203,443 ( 12 group ( 16 person ) 10,203,443 ( 12 ) 2.51 % 16 person ) 10,203,443 ( 12 ) 2.51 % ( 1 ) 10,203,443 ( 12 ) 2.51 % ( 1 ) Represents 12 ) 2.51 % ( 1 ) Represents share of Common the Table Date or within 60 day thereafter . ( 2 60 day thereafter . ( 2 ) Based on a Form ) Based on a Form 13-F showing holding a of September showing holding a of September 30 , 2004 by Private Capital a of September 30 , 2004 by Private Capital Management , Inc. list it address a 8889 Pelican Bay Blvd . , , Naples , FL , 34108 , in such filing . in such filing . ( 3 ) Includes 60,000 share of . ( 3 ) Includes 60,000 share of Common Stock that of stock option . ( 4 ) Includes 100,000 share of . ( 4 ) Includes 100,000 share of Common Stock that of stock option . ( 5 ) Includes 80,000 share of . ( 5 ) Includes 80,000 share of Common Stock that of stock option . ( 6 ) Includes 10,000 share of . ( 6 ) Includes 10,000 share of Common Stock that exercise of stock option . 110 ( 7 ) Includes 1,350,000 stock option . 110 ( 7 ) Includes 1,350,000 share of 110 ( 7 ) Includes 1,350,000 share of Common Stock that of stock option . ( 8 ) Includes 1,400 share of . ( 8 ) Includes 1,400 share of Common Stock that Dr. Levinson hold indirectly and 40,000 share of Common Stock that of stock option . ( 9 ) Includes 150,000 share of . ( 9 ) Includes 150,000 share of Common Stock that of stock option . ( 10 ) Includes 1,500,000 share of . ( 10 ) Includes 1,500,000 share of Common Stock that of stock option . ( 11 ) Includes 10,000 share of . ( 11 ) Includes 10,000 share of Common Stock that of stock option . ( 12 ) Includes 4,956,148 share of . ( 12 ) Includes 4,956,148 share of Common Stock that . * Represents le than 1 % of the issued and the Table Date . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , requires with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company Company belief that all Section 16 ( a ) filing requirement were met during fiscal year 2004 . Equity Compensation Plan Information information , a of September 25 , 2004 , concerning share a of September 25 , 2004 , concerning share of common compensation plan approved by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 approved by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity by shareholder 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity compensation 21,992,912 $ 22.32 14,072,423 ( 1 ) Equity compensation plan not plan not approved by shareholder 33,286,253 $ 20.25 — Total equity approved by shareholder 33,286,253 $ 20.25 — Total equity compensation plan Total equity compensation plan ( 2 ) 55,279,165 $ 21.07 14,072,423 compensation plan ( 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ( 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ) This 2 ) 55,279,165 $ 21.07 14,072,423 ( 1 ) This number 55,279,165 $ 21.07 14,072,423 ( 1 ) This number includes 2,047,911 1 ) This number includes 2,047,911 share of common stock reserved Employee Stock Purchase Plan , 240,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan and Director Stock Option Plan and 14,299,512 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 2,515,000 share of restricted stock unit not include share under the 1990 Stock Option Plan which wa Plan which wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . 111 1990 Stock Option Plan . 111 ( 2 ) This table Option Plan . 111 ( 2 ) This table doe not This table doe not include 81,642 outstanding option assumed in connection average exercise price of $ 4.39 per share . No additional acquisition by any person of 50 % or more of the annual base salary . Item 13 . Certain Relationships and Related President , Retail ) $ 1,500,000 for the purchase of his due and payable in May 2004 . The largest amount of this loan during fiscal year 2004 wa $ 750,000 . Mr. fiscal year 2004 wa $ 750,000 . Mr. Johnson repaid the Johnson repaid the Company $ 750,000 during the fiscal year and in full . In March 2002 , the Company entered into of the plane in May 2001 . During 2004 , the in May 2001 . During 2004 , the Company recognized a recognized a total of $ 483,000 in expense pursuant to this incurred by Mr. Jobs during 2004 . 112 Item 14 . Mr. Jobs during 2004 . 112 Item 14 . Principal Accountant during 2004 . 112 Item 14 . Principal Accountant Fees and LLP , during fiscal year 2004 and 2003 . Audit and during fiscal year 2004 and 2003 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2004 2003 Audit Fees $ 3,402,300 Audit and Non-Audit Fees 2004 2003 Audit Fees $ 3,402,300 ( 2004 2003 Audit Fees $ 3,402,300 ( 1 ) $ 3,028,000 Audit Fees $ 3,402,300 ( 1 ) $ 3,028,000 Audit-Related Fees 3,402,300 ( 1 ) $ 3,028,000 Audit-Related Fees 57,000 ( 2 ) $ 3,028,000 Audit-Related Fees 57,000 ( 2 ) 144,600 Tax 3,028,000 Audit-Related Fees 57,000 ( 2 ) 144,600 Tax Fees 784,500 Fees 57,000 ( 2 ) 144,600 Tax Fees 784,500 ( 3 2 ) 144,600 Tax Fees 784,500 ( 3 ) 1,017,100 All 144,600 Tax Fees 784,500 ( 3 ) 1,017,100 All Other Fees Fees 784,500 ( 3 ) 1,017,100 All Other Fees — — Fees — — Total $ 4,243,800 $ 4,189,700 ( 1 ) — Total $ 4,243,800 $ 4,189,700 ( 1 ) Audit fee $ 4,243,800 $ 4,189,700 ( 1 ) Audit fee relate to in the Company 's Forms 10-Q , and audit service provided and regulatory filing . ( 2 ) Audit-related fee include professional employee benefit plan . ( 3 ) Tax fee include $ ) Tax fee include $ 667,600 for professional service rendered in tax compliance ; and $ 116,900 for tax consulting and planning of the Sarbanes-Oxley Act of 2002 ( the `` Act `` of the Audit Committee . 113 PART IV Item 15 . . 113 PART IV Item 15 . Exhibits , Financial Statement Period End Date Filed herewith 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Amendment 27 , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles of State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , , a amended through June 7 , 2004 . 10-Q 6/26/04 amended through June 7 , 2004 . 10-Q 6/26/04 4.2 Indenture June 7 , 2004 . 10-Q 6/26/04 4.2 Indenture dated a 7 , 2004 . 10-Q 6/26/04 4.2 Indenture dated a of , 2004 . 10-Q 6/26/04 4.2 Indenture dated a of February Indenture dated a of February 1 , 1994 , between the a of February 1 , 1994 , between the Company and Company of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a of Indenture dated a of February 1 , 1994 , among the a of February 1 , 1994 , among the Company , , a successor trustee . 10-Q 4/01/94 4.5 Form of the a successor trustee . 10-Q 4/01/94 4.5 Form of the Company successor trustee . 10-Q 4/01/94 4.5 Form of the Company 's Form of the Company 's 6 1 / 2 % Notes of the Company 's 6 1 / 2 % Notes due Company 's 6 1 / 2 % Notes due 2004 . / 2 % Notes due 2004 . 10-Q 4/01/94 4.8 Registration % Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , dated Rights Agreement , dated June 7 , 1996 among the Company , dated June 7 , 1996 among the Company and Goldman Co . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of Preferences of Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Savings restated effective a of October 1 , 1990 . 10-K 9/27/91 a of October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , and Investment Plan dated March 1 , 1992 . 10-K 9/25/92 Plan dated March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 to 9/25/92 10.A.3-2 Amendment No . 2 to the Apple Computer , Savings and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10-Q 12/26/97 amended through November 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple November 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , Inc , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , Inc . , a amended through April 24 , 2003 . S-8 6/24/03 amended through April 24 , 2003 . S-8 6/24/03 10.A.8 Form 24 , 2003 . S-8 6/24/03 10.A.8 Form of Indemnification Agreement , 2003 . S-8 6/24/03 10.A.8 Form of Indemnification Agreement between officer of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. 1990 10.A.43 NeXT Computer , Inc. 1990 Stock Option Plan , a , a amended . S-8 3/21/97 114 10.A.49 1997 Employee Stock a amended . S-8 3/21/97 114 10.A.49 1997 Employee Stock Option amended . S-8 3/21/97 114 10.A.49 1997 Employee Stock Option Plan . S-8 3/21/97 114 10.A.49 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan . Director Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Plan Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Option Plan , , a amended through April 24 , 2003 . 10-Q 6/28/03 amended through April 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement April 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement dated 24 , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement dated a , 2003 . 10-Q 6/28/03 10.A.52 Reimbursement Agreement dated a of Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Steven P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted Stock Agreement dated a of March 19 , 2003 by and between a of March 19 , 2003 by and between The Registrant and Steven P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Steven P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Stock P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Stock Unit Restricted Stock Unit Award Agreement 10-Q 3/27/04 10.B.18 Custom Sales Agreement Stock Unit Award Agreement 10-Q 3/27/04 10.B.18 Custom Sales Agreement effective Unit Award Agreement 10-Q 3/27/04 10.B.18 Custom Sales Agreement effective October Custom Sales Agreement effective October 21 , 2002 between the Registrant Agreement effective October 21 , 2002 between the Registrant and International International Business Machines Corporation . 10-K 9/27/03 14.1 Code of Ethics Business Machines Corporation . 10-K 9/27/03 14.1 Code of Ethics of Machines Corporation . 10-K 9/27/03 14.1 Code of Ethics of the of Ethics of the Company 10-K 9/27/03 21 Subsidiaries of Apple Ethics of the Company 10-K 9/27/03 21 Subsidiaries of Apple Computer of the Company 10-K 9/27/03 21 Subsidiaries of Apple Computer , Apple Computer , Inc. X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Rule13a-14 ( a ) /15d-14 of Chief Executive Officer X 31.2 Rule13a-14 ( a ) /15d-14 of Chief Financial Officer X 32.1 Section 1350 Certifications of Chief Financial Officer X 32.1 Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer X 115 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 30th day of November 2004 . this 30th day of November 2004 . APPLE COMPUTER , INC. this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 30 , 2004 /s/ PETER OPPENHEIMER Officer ) November 30 , 2004 /s/ PETER OPPENHEIMER PETER OPPENHEIMER Principal Accounting Officer ) November 30 , 2004 /s/ FRED ANDERSON Officer ) November 30 , 2004 /s/ FRED ANDERSON FRED ANDERSON ANDERSON FRED ANDERSON Director November 30 , 2004 /s/ WILLIAM V. ANDERSON Director November 30 , 2004 /s/ WILLIAM V. CAMPBELL WILLIAM WILLIAM V. CAMPBELL Director November 30 , 2004 /s/ MILLARD S. CAMPBELL Director November 30 , 2004 /s/ MILLARD S. DREXLER MILLARD MILLARD S. DREXLER Director November 30 , 2004 /s/ ALBERT GORE DREXLER Director November 30 , 2004 /s/ ALBERT GORE , JR. GORE , JR. Director November 30 , 2004 /s/ ARTHUR D. JR. Director November 30 , 2004 /s/ ARTHUR D. LEVINSON ARTHUR ARTHUR D. LEVINSON Director November 30 , 2004 /s/ JEROME B. LEVINSON Director November 30 , 2004 /s/ JEROME B. YORK JEROME JEROME B. YORK Director November 30 , 2004 116 QuickLinks PART YORK Director November 30 , 2004 116 QuickLinks PART I Item Director November 30 , 2004 116 QuickLinks PART I Item 1. 116 QuickLinks PART I Item 1. Business Item 2 . Properties I Item 1. Business Item 2 . Properties Item 3 . Item 2 . Properties Item 3 . Legal Proceedings Item 4 3 . Legal Proceedings Item 4 . Submission of Matters to Security Holders PART II Item 5 . Market for the Registrant Purchases of Equity Securities Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Quantitative and Qualitative Disclosures Disclosures About Market Risk Item 8 . Financial Statements and Supplementary REGISTERED PUBLIC ACCOUNTING FIRM Item 9 . Changes in and Disagreements Accounting and Financial Disclosure Item 9A . Controls and Procedures PART and Procedures PART III Item 10 . Directors and Executive Officers Officers of the Registrant Item 11 . Executive Compensation SUMMARY COMPENSATION FISCAL YEAR-END OPTION VALUES Item 12 . Security Ownership of Certain and Management Security Ownership of 5 % Holders , Directors , Nominees and Executive Officers Item 13 . Certain Relationships and Related Relationships and Related Transactions Item 14 . Principal Accountant Fees and Non-Audit Fees PART IV Item 15 . Exhibits , Financial Statement \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-07-009340/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-07-009340/full-submission.txt new file mode 100644 index 0000000..5d525ec --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-07-009340/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 29 , 2007 or o TRANSITION year ended September 29 , 2007 or o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 000-10030 APPLE INC. ( Exact name in it charter ) California 942404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the file report pursuant to Section 13 or 15 ( d ) pursuant to Section 13 or 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. o Indicate by check mark accelerated filer `` in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 31 , 2007 , wa approximately a of March 31 , 2007 , wa approximately $ 74,499,000,000 2007 , wa approximately $ 74,499,000,000 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 875,540,274 share of Common Stock Issued and Outstanding a of November 2 , 2007 The Business section a of November 2 , 2007 The Business section and other this Annual Report on Form 10-K ( `` Form 10-K `` Form 10-K ( `` Form 10-K `` ) contain forward-looking statement under Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . The Company assumes no law . PART I Item 1. Business Company Background Apple Inc. 's fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company industry that control the design 1 and development of the entire At the end of fiscal 2007 , the Company had opened had opened a total of 197 of it own retail store own retail store , including 174 store in the U.S. and U.S. and a total of 23 store in Canada , Japan development , and one-to-one ( 1:1 ) learning . A 1:1 1:1 ) learning . A 1:1 learning solution typically consists of graphic and audio technology and 2 feature developer tool to optimize in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading `` Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 9 , `` Segment Information and 's Mac OS X Version 10.5 Leopard™ ( `` Mac OS that became available in October 2007 and iLife® suite of software system wa completed in August 2006 , and it transition for Xserve® wa completed in November 2006 . There are potential risk are further discussed in Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading `` Risk . First introduced in January 2006 , the MacBook Pro includes the MacBook Pro includes a 15-inch or 17-inch widescreen display , Pro includes a 15-inch or 17-inch widescreen display , a built-in power adapter . In June 2007 , the Company updated it include the latest Intel Core 2 Duo processor and the Nvidia processor and the Nvidia GeForce 8600M GT graphic controller . MacBook MacBook Pro includes up to 4GB of 667MHz DDR2 main memory includes up to 4GB of 667MHz DDR2 main memory with an DDR2 main memory with an 800 MHz frontside bus , a every MacBook Pro feature a 1-inch thin aluminum enclosure and includes enclosure and includes AirPort Extreme® 802.11n wireless networking , Bluetooth 2.0+EDR 802.11n wireless networking , Bluetooth 2.0+EDR , Gigabit 3 Ethernet , , Bluetooth 2.0+EDR , Gigabit 3 Ethernet , USB 2.0 and Gigabit 3 Ethernet , USB 2.0 and FireWire® port , audio . First introduced in May 2006 , the MacBook includes a , the MacBook includes a 13-inch widescreen display , a built-in power adapter . In May 2007 , the Company updated it model with faster Intel Core 2 Duo processor running at up processor running at up to 2.16GHz , Intel integrated graphic , , support for up to 4GB of 667MHz DDR2 main memory for up to 4GB of 667MHz DDR2 main memory , a MacBook model include AirPort Extreme 802.11n wireless networking , Bluetooth 2.0+EDR 802.11n wireless networking , Bluetooth 2.0+EDR , Gigabit Ethernet , USB , Gigabit Ethernet , USB 2.0 and FireWire port , audio processor running at up to 3.0GHz , with 4MB and 8MB up to 3.0GHz , with 4MB and 8MB of shared Level 3.0GHz , with 4MB and 8MB of shared Level 2 cache and 8MB of shared Level 2 cache and independent 1.33GHz front-side Level 2 cache and independent 1.33GHz front-side bus , 667MHz fully independent 1.33GHz front-side bus , 667MHz fully buffered memory , and buffered memory , and a 256-bit wide memory architecture . The installation of up to four 750GB Serial ATA hard drive for drive for a total of 3TB of internal storage . Every port , and multiple FireWire 400 , FireWire 800 and USB multiple FireWire 400 , FireWire 800 and USB 2.0 port . , FireWire 800 and USB 2.0 port . iMac® The iMac business customer . In August 2007 , the Company updated the updated the iMac to include 2.0GHz , 2.4GHz or 2.8GHz Intel iMac to include 2.0GHz , 2.4GHz or 2.8GHz Intel Core 2 include 2.0GHz , 2.4GHz or 2.8GHz Intel Core 2 Duo processor 2.4GHz or 2.8GHz Intel Core 2 Duo processor , up to Duo processor , up to 4 GB of 667 MHz DDR2 up to 4 GB of 667 MHz DDR2 SDRAM , a card using ATI Radeon HD 2400 XT or ATI Radeon HD XT or ATI Radeon HD 2600 PRO graphic , and slot-loading video camera , AirPort Extreme 802.11n wireless networking , Bluetooth 2.0+EDR 802.11n wireless networking , Bluetooth 2.0+EDR , built-in Gigabit Ethernet , built-in Gigabit Ethernet , USB 2.0 and Fire Wire port , . Mac® mini In February 2006 , the Company introduced the . The Mac mini offer 1GB of 667MHz memory expandable to Mac mini offer 1GB of 667MHz memory expandable to 2GB and of 667MHz memory expandable to 2GB and either a 1.83GHz or to 2GB and either a 1.83GHz or 2.0GHz Intel processor . and either a 1.83GHz or 2.0GHz Intel processor . Every Mac Gigabit Ethernet , AirPort Extreme 802.11g wireless networking , Bluetooth 2.0+EDR 802.11g wireless networking , Bluetooth 2.0+EDR , a total of four a total of four USB 2.0 port , and one FireWire port , and one FireWire 400 port . Mac mini includes Storage System Xserve is a 1U rack-mount server powered by two server powered by two dual-core 64-bit Intel Xeon processor running at processor running at up to 3.0GHz and feature Mac OS® X feature Mac OS® X Server 10.5 , which became available in which became available in October 2007 . Xserve support up to . Xserve support up to 32GB of RAM , remote management storage drive of up to 2.25TB , with optional internal hardware storage system delivers up to 10.5TB of Fiber Channel attached hardware X and heterogeneous environment . 4 Music Products and Services The . The iPod shuffle contains 1GB of flash memory capable of capable of holding up to 240 song and provides up to song and provides up to 12 hour of battery life . . iPod® nano In September 2007 , the Company introduced a a larger two-inch display with 204 pixel per inch and a steel and ha up to 24 hour of battery life . iPod nano is available in 4GB and 8GB configuration and in is available in 4GB and 8GB configuration and in a variety . iPod® classic In September 2007 , the Company introduced the classic is available in an 80GB model capable of holding up capable of holding up to 20,000 song or 100 hour of up to 20,000 song or 100 hour of video and a hour of video and a 160GB model capable of holding up capable of holding up to 40,000 song or 200 hour of up to 40,000 song or 200 hour of video . The iPod classic feature up to 40 hour of battery life and new all-metal enclosure and a 2.5-inch color screen that can display . iPod® touch In September 2007 , the Company introduced the new flash-memory-based iPod that is 8 mm thin and feature the Multi-Touch™ user interface on a 3.5-inch widescreen display . The iPod iPod touch is available in 8GB and 16 GB configuration and is available in 8GB and 16 GB configuration and feature up configuration and feature up to 22 hour of audio playback and with a touchscreen . iTunes® 7 iTunes is a digital medium and iPod game . In 5 September 2007 , the Company game . In 5 September 2007 , the Company introduced the in the U.S. in April 2003 , the iTunes Store now Store now serf customer in 22 country . iPhone™ In January country . iPhone™ In January 2007 , the Company announced iPhone for data networking , Bluetooth 2.0 , a built-in 2 megapixel Bluetooth 2.0 , a built-in 2 megapixel camera , a 3.5-inch 2 megapixel camera , a 3.5-inch touch screen with 480-by-320 resolution a 3.5-inch touch screen with 480-by-320 resolution at 160 pixel per screen with 480-by-320 resolution at 160 pixel per inch , and , and providing up to 8 hour of talk time , hour of talk time , 6 hour of Internet use , hour of Internet use , 7 hour of video playback or hour of video playback or 24 hour of audio playback . in the U.S. on June 29 , 2007 . On November U.S. on June 29 , 2007 . On November 9 , , 2007 . On November 9 , 2007 , the Company . On November 9 , 2007 , the Company began shipping iPhone in France on November 29 , 2007 . O2 Limited France on November 29 , 2007 . O2 Limited ( `` flat panel display including the 30-inch Apple Cinema HD Display™ , a widescreen active-matrix LCD with 2560-by-1600 pixel resolution , the 23-inch 2560-by-1600 pixel resolution , the 23-inch Apple Cinema HD Display with Apple Cinema HD Display with 1920-by-1200 pixel resolution and the 20-inch 1920-by-1200 pixel resolution and the 20-inch Apple Cinema Display® with 1680-by-1050 20-inch Apple Cinema Display® with 1680-by-1050 pixel resolution . These display dual FireWire and dual USB 2.0 port and use the industry . Apple TV™ In January 2007 , the Company announced Apple Apple TV includes either a 40GB or 160GB hard drive capable includes either a 40GB or 160GB hard drive capable of storing capable of storing up to 200 hour of video , 36,000 200 hour of video , 36,000 song , 6 25,000 photo video , 36,000 song , 6 25,000 photo , or a , 36,000 song , 6 25,000 photo , or a combination high definition resolution up to 720p . Apple TV connects to port . Using high-speed AirPort® 802.11n wireless networking , Apple TV shipping Apple TV in March 2007 . Software Products and Computer and became available in October 2007 . Leopard includes 300 new October 2007 . Leopard includes 300 new feature and introduces a Software iLife® '08 In August 2007 , the Company introduced iLife player . iDVD '08 feature 10 new Apple-designed menu theme in theme in both widescreen ( 16:9 ) and standard ( 4:3 16:9 ) and standard ( 4:3 ) format . GarageBand® is , and music jingle . 7 iWeb™ allows user to create . iWork™ '08 In August 2007 , the Company introduced iWork photo . Final Cut Studio® 2 In April 2007 , the Cut Studio® 2 In April 2007 , the Company introduced Final Company introduced Final Cut Studio® 2 , an upgraded version of professional . Final Cut Studio 2 feature Final Cut Pro® 6 2 feature Final Cut Pro® 6 for video editing , DVD editing , DVD Studio Pro® 4 for DVD authoring , Motion for DVD authoring , Motion 3 for real-time motion graphic , motion graphic , Soundtrack® Pro 2 for audio editing and sound and finishing , and Compressor 3 for encoding medium in multiple offer Final Cut Express HD 3.5 , a consumer version of . Logic® Studio In September 2007 , the Company introduced Logic Logic Studio feature Logic® Pro 8 , an upgraded version of performance application ; Soundtrack® Pro 2 , a professional audio post Instruments , made up of 40 instrument plug-in ; Studio Effects ; Studio Effects , with 80 professional effect plug-in ; and the Company offer Logic® Express 8 , a standalone version of version of the Logic® Pro 8 application that provides an easy publishing capability . In July 2007 , the Company introduced FileMaker the Company introduced FileMaker Pro 9 featuring a new Quick Start experience . Safari™ In October 2007 , the Company made available the Company made available Safari 3 , a web browser compatible and Mac OS X. Safari 3 includes built-in Google search ; SnapBack™ to instantly return to 8 search result ; a way video on computer . QuickTime 7 feature H.264 encoding and can content stream possible . QuickTime 7 also delivers multi-channel audio and other QuickTime product . QuickTime 7 Pro , a suite of and video file . QuickTime 7 Pro allows user to create email storage of up to 10GB for individual and 20GB for to 10GB for individual and 20GB for family . In August for family . In August 2007 , the Company announced update AirPort Extreme Base Station includes 802.11n Wi-Fi wireless networking and support networking and support up to 50 user . Air Port Extreme Port Extreme operates at either 2.4 GHz or 5 GHz frequency at either 2.4 GHz or 5 GHz frequency , providing compatibility AirPort Express is the first 802.11g standard mobile base station that a single piece design weighing 6.7 ounce . Product Support and assistance , and the AppleCare 9 Protection Plan . The AppleCare customer accounted for more than 10 % of net sale in % of net sale in 2007 , 2006 , or 2005 net sale in 2007 , 2006 , or 2005 . The 2007 , 2006 , or 2005 . The Company also sell and to the Company 's 10 hardware , software and service requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company belief and development expenditure totaled $ 782 million , $ 712 million $ 782 million , $ 712 million , and $ 535 712 million , and $ 535 million in 2007 , 2006 and $ 535 million in 2007 , 2006 , and 2005 535 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . 11 Patents and 2005 , respectively . 11 Patents , Trademarks , Copyrights largest geographic marketplace . Approximately 60 % of the Company 's Company 's net sale in 2007 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , `` Segment Information and The Company also offer a 90-day basic warranty for it service of it major market . 12 Backlog In the Company 's . Employees As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had approximately , the Company had approximately 21,600 full-time equivalent employee and an equivalent employee and an additional 2,100 temporary equivalent employee and contractor 's Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are 's Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of prior financial statement in it 2006 Form 10-K have exposed the statement in it 2006 Form 10-K have exposed the Company to government enforcement action . As 13 described in Part I , in Part I , Item 3 , `` Legal Proceedings , full cooperation . On April 24 , 2007 , the SEC . On April 24 , 2007 , the SEC filed an Company 's existing product . 14 The Company is currently the typically cover forecasted component and 15 manufacturing requirement for 30 to and 15 manufacturing requirement for 30 to 150 day . The manufacturing requirement for 30 to 150 day . The Company 's margin percentage in fiscal year 2008 , a compared to level level achieved during fiscal year 2007 , due in part to Czech Republic . Currently , 16 the supply and manufacture of in Part I , Item 3 , `` Legal Proceedings . would individually or in the 17 aggregate have a material adverse in Part I , Item 3 , `` Legal Proceedings , affected . With the June 2007 introduction of iPhone , the and pricing and term of 18 end-user contract , iPhone sale , make it difficult or 19 impossible for the Company to in Part I , Item 3 , `` Legal Proceedings . cost of product component . 20 The Company ha used derivative in Part II , Item 7A , `` Quantitative and Qualitative in Part II , Item 8 , `` Financial Statements and Data , `` at Note 1 , `` Summary of Significant Accounting Polices `` and Note 2 , `` Financial Instruments `` and uncertainty . Through September 29 , 2007 , the Company . Through September 29 , 2007 , the Company had opened , the Company had opened 197 retail store . The Company space with term ranging from 5 to 20 year , the term ranging from 5 to 20 year , the majority of majority of which are for 10 year . Certain store have application may also negatively affect 21 the decision of third-party developer which became available in October 2007 , includes a new feature platform . During calendar year 2006 , the Company transitioned it prepaid a total of $ 1.25 billion under these agreement , agreement , of which $ 208 million had been used a been used a of September 29 , 2007 . While the a of September 29 , 2007 . While the Company ha ha procedure to monitor and 22 limit exposure to credit risk and operating result . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company 's Ireland . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company leased approximately , the Company leased approximately 3.7 million square foot of space are generally for term of 3 to 15 year and generally for term of 3 to 15 year and generally provide renewal renewal option for term of 3 to 7 additional year . for term of 3 to 7 additional year . Leased space . Leased space includes approximately 1.5 million square foot of retail for retail space range from 5 to 20 year , the space range from 5 to 20 year , the majority of majority of which are for 10 year , and often contain . The Company owns a 367,000 square-foot manufacturing facility in Cork . The Company also owns 805,000 square foot of facility in , the Company owns approximately 2.4 million square foot of facility , California , including approximately 1.0 million square foot purchased in million square foot purchased in 2007 and 2006 for the future foot purchased in 2007 and 2006 for the future development of , California , and approximately 107,000 square foot for a data owns additional facility totaling approximately 129,000 square foot . The 23 129,000 square foot . The 23 Company belief it existing facility for it product . Item 3 . Legal Proceedings The Company and claim a of September 29 , 2007 , the end a of September 29 , 2007 , the end of the during the fourth quarter of 2007 that did not individually or Burst.com , Inc. on January 4 , 2006 in the United Inc. on January 4 , 2006 in the United States District that U.S. Patent Nos . 4,963,995 , 5,164,839 , 5,057,932 and Patent Nos . 4,963,995 , 5,164,839 , 5,057,932 and 5,995,705 ( . 4,963,995 , 5,164,839 , 5,057,932 and 5,995,705 ( `` Burst , 5,164,839 , 5,057,932 and 5,995,705 ( `` Burst patent `` answer and counterclaim on April 17 , 2006 adding infringement allegation counterclaim on April 17 , 2006 adding infringement allegation relating to to U.S. Patent No . 5,995,705 . Apple counterclaimed for declaratory claim construction ruling on May 8 , 2007 . The Company ruling on May 8 , 2007 . The Company filed motion judgment of invalidity on January 4 , 2007 and July 13 invalidity on January 4 , 2007 and July 13 , 2007 4 , 2007 and July 13 , 2007 . The court 2007 and July 13 , 2007 . The court held a those pending motion on September 18 , 2007 and ha not motion on September 18 , 2007 and ha not issued a indefiniteness and laches on October 29 , 2007 . Trial is laches on October 29 , 2007 . Trial is set for Trial is set for February 26 , 2008 . Bader v. set for February 26 , 2008 . Bader v. Anderson , Board of Directors on May 19 , 2005 in Santa Clara Directors on May 19 , 2005 in Santa Clara County Superior that the Company 's March 14 , 2005 , proxy statement Company 's March 14 , 2005 , proxy statement wa false annual meeting held on April 21 , 2005 . Plaintiff , held on April 21 , 2005 . Plaintiff , who ostensibly the Company . On July 27 , 2005 , plaintiff filed . On July 27 , 2005 , plaintiff filed an amended individual shareholder . On January 10 , 2006 , the Court . On January 10 , 2006 , the Court sustained defendant sustained defendant ' demurrer to 24 the amended complaint , with second amended complaint on February 7 , 2006 , and the complaint on February 7 , 2006 , and the Company filed After a hearing on June 13 , 2006 , the Court hearing on June 13 , 2006 , the Court sustained the the director . On July 24 , 2006 , plaintiff filed . On July 24 , 2006 , plaintiff filed a third grant to certain officer in 2003 and 2004 and an option certain officer in 2003 and 2004 and an option grant to Company 's CEO in January 2000 . The Company filed a amended complaint . On January 30 , 2007 , the Court . On January 30 , 2007 , the Court sustained the to amend . On May 8 , 2007 , plaintiff filed . On May 8 , 2007 , plaintiff filed a fourth to amend , on October 12 , 2007 . On October , on October 12 , 2007 . On October 25 , , 2007 . On October 25 , 2007 , the Court . On October 25 , 2007 , the Court entered a wa initially filed on January 30 , 2006 in the United filed on January 30 , 2006 in the United States District ) wa filed on January 31 , 2006 in the United filed on January 31 , 2006 in the United States District the four-year period before January 31 , 2006 . The Birdsong period before January 31 , 2006 . The Birdsong action wa motion to dismiss on November 3 , 2006 , plaintiff agreed dismiss on November 3 , 2006 , plaintiff agreed not to second amended complaint on January 16 , 2007 . That complaint complaint on January 16 , 2007 . That complaint alleges California Louisiana sub-class . On March 1 , 2007 , the Company . On March 1 , 2007 , the Company filed a motion to dismiss on June 4 , 2007 but ha not dismiss on June 4 , 2007 but ha not yet issued , Canada , on February 1 , 2006 , seeking authorization , on February 1 , 2006 , seeking authorization to institute County Superior Court on February 17 , 2005 . The initial Court on February 17 , 2005 . The initial complaint alleged other relief . On May 9 , 2005 , the Court . On May 9 , 2005 , the Court granted the Superior Court . On May 2 , 2005 , plaintiff filed . On May 2 , 2005 , plaintiff filed an amended Business & Professions Code § 25 16700 et seq . ) & Professions Code § 25 16700 et seq . ) and in it entirety on November 10 , 2005 . The Court entirety on November 10 , 2005 . The Court granted plaintiff an amended complaint on December 29 , 2005 . Plaintiffs ' complaint on December 29 , 2005 . Plaintiffs ' amended complaint the amended complaint on January 31 , 2006 , which the complaint on January 31 , 2006 , which the Court sustained the Court sustained on March 3 , 2006 on sixteen of sustained on March 3 , 2006 on sixteen of seventeen cause granted in part on September 9 , 2006 . Plaintiffs filed part on September 9 , 2006 . Plaintiffs filed a further further amended complaint on September 21 , 2006 . On October complaint on September 21 , 2006 . On October 2 , , 2006 . On October 2 , 2006 , the Company . On October 2 , 2006 , the Company filed an European Commission . On March 30 , 2007 , the European . On March 30 , 2007 , the European Commission issued sale restriction which violate Article 81 of the European Community Treaty Statements of Objections on June 20 , 2007 . A hearing Objections on June 20 , 2007 . A hearing on the Brussels , Belgium on September 19 , 2007 . Gordon v. Belgium on September 19 , 2007 . Gordon v. Apple Computer purported class action on August 31 , 2006 in the United action on August 31 , 2006 in the United States District class of consumer who purchased 65W Power Adapters for iBooks and iBooks and Powerbooks between November 2002 and the present . The alleges various problem with the 65W Adapter , including fraying , filed an answer on October 20 , 2006 denying the material answer on October 20 , 2006 denying the material allegation and filed this action on August 6 , 2007 in the United action on August 6 , 2007 in the United States District of U.S. Patent No . 6,753,671 entitled `` Recharger for use a proximally located light emitting 26 device `` and U.S. Patent and U.S. Patent No . 6,762,584 entitled `` Recharger for use filed an answer on October 12 , 2007 denying all material answer on October 12 , 2007 denying all material allegation and filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District other defendant of U.S. Patent 5,280,371 entitled `` Directional Diffuser for filed an answer on December 21 , 2004 denying all material answer on December 21 , 2004 denying all material allegation and manufacturer supplier . On May 18 , 2005 the Court stayed . On May 18 , 2005 the Court stayed the case an amended complaint on November 7 , 2005 adding additional defendant complaint on November 7 , 2005 adding additional defendant and expanding Federal Action ) On June 30 , 2006 , a putative ) On June 30 , 2006 , a putative derivative action Company 's announcement on June 29 , 2006 that an internal announcement on June 29 , 2006 that an internal investigation had stock option grant made between 1997 and 2001 , that a grant made between 1997 and 2001 , that a special committee well a claim under Sections 10 ( b ) , 14 10 ( b ) , 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the Complaint wa filed on December 18 , 2006 , and a filed on December 18 , 2006 , and a First Amended Complaint wa filed on March 6 , 2007 . Defendants filed filed on March 6 , 2007 . Defendants filed a motion motion to dismiss on April 20 , 2007 , which wa dismiss on April 20 , 2007 , which wa heard on which wa heard on September 7 , 2007 . On June heard on September 7 , 2007 . On June 12 , , 2007 . On June 12 , 2007 , the Company . On June 12 , 2007 , the Company 's Board Computer , Inc. On July 5 , 2006 , a putative Inc. On July 5 , 2006 , a putative derivative action Derivative Litigation , No . 1:06CV066692 , assigned to the Hon option grant to maximize certain 27 defendants ' profit , failing complaint wa filed on October 5 , 2006 , alleging a filed on October 5 , 2006 , alleging a variety of corporate asset . On December 7 , 2006 , the Court . On December 7 , 2006 , the Court granted the these action . On November 3 , 2006 , the Boston . On November 3 , 2006 , the Boston Retirement Board 's investigation . On January 16 , 2007 , the Company . On January 16 , 2007 , the Company filed a overruling the demurrer on March 13 , 2007 . The Company demurrer on March 13 , 2007 . The Company filed it to the petition on April 5 , 2007 . The trial petition on April 5 , 2007 . The trial took place trial took place on September 24 , 2007 . The Court place on September 24 , 2007 . The Court granted the , Inc. Beginning on October 19 , 2005 , eight complaint Beginning on October 19 , 2005 , eight complaint were filed Whyte pursuant to an April 17 , 2006 order of the to an April 17 , 2006 order of the Judicial Panel Amended Master Complaint on September 21 , 2006 , alleging violation Complaint on September 21 , 2006 , alleging violation of California putative plaintiff class : ( 1 ) all U.S. resident ( the screen ; and ( 2 ) all iPod nano purchaser the Master Complaint on November 20 , 2006 . The two Complaint on November 20 , 2006 . The two California State action were coordinated on May 4 , 2006 , and assigned coordinated on May 4 , 2006 , and assigned to the Class Action Complaint on June 8 , 2006 , alleging violation Complaint on June 8 , 2006 , alleging violation of California Consolidated Amended Complaint on October 6 , 2006 . Two similar Complaint on October 6 , 2006 . Two similar complaint , Quebec , Canada on October 27 , 2005 and November 9 Canada on October 27 , 2005 and November 9 , 2005 27 , 2005 and November 9 , 2005 , respectively , 2005 and November 9 , 2005 , respectively , seeking authorization file wa stayed in May 2006 in favor of the Carpentier Ontario , Canada on January 9 , 2006 seeking authorization to Canada on January 9 , 2006 seeking authorization to institute a of Intent to Defend . 28 Individual Networks , LLC v. against the Company on April 24 , 2007 in the United Company on April 24 , 2007 in the United States District of U.S. Patent No . 7,117,516 , entitled `` Method and filed an answer on July 2 , 2007 , denying all answer on July 2 , 2007 , denying all material allegation of U.S. Patent No . 5,724,567 . The Markman hearing is hearing is set for October 8 , 2008 , and trial set for October 8 , 2008 , and trial is scheduled trial is scheduled for November 9 , 2009 . Intertainer , scheduled for November 9 , 2009 . Intertainer , Inc. v. filed this action on December 29 , 2006 in the United action on December 29 , 2006 in the United States District others of U.S. Patent number 6,925,469 entitled `` Digital Entertainment Service filed an answer on February 21 , 2007 denying all material answer on February 21 , 2007 denying all material allegation and purported class action on June 7 , 2005 , in Superior action on June 7 , 2005 , in Superior Court , action on behalf of Generations 1 , 2 and 3 iPod behalf of Generations 1 , 2 and 3 iPod owner in Generations 1 , 2 and 3 iPod owner in Quebec . in Quebec . On February 2 , 2006 , the Court . On February 2 , 2006 , the Court dismissed plaintiff Ontario , Canada on August 15 , 2005 and September 12 Canada on August 15 , 2005 and September 12 , 2005 15 , 2005 and September 12 , 2005 , respectively . 2005 and September 12 , 2005 , respectively . Counsel subsequently Quebec purchaser . On January 17 , 2006 , the Company . On January 17 , 2006 , the Company filed it Alberta , Canada on October 5 , 2005 , purportedly on Canada on October 5 , 2005 , purportedly on behalf of complaint wa served on September 27 , 2006 . The Company served on September 27 , 2006 . The Company ha reached action wa filed in late 2002 asserting various cause of action filed an answer on December 3 , 2004 denying all allegation answer on December 3 , 2004 denying all allegation and asserting numerous defense . On October 1 , 2003 , Macadam wa . On October 1 , 2003 , Macadam wa deauthorized a a preliminary injunction on December 19 , 2003 . On December injunction on December 19 , 2003 . On December 6 , , 2003 . On December 6 , 2004 , Macadam filed . On December 6 , 2004 , Macadam filed for Chapter , Macadam filed for Chapter 11 bankruptcy in the Northern District the bankruptcy proceeding on February 16 , 2005 . The Macadam proceeding on February 16 , 2005 . The Macadam bankruptcy case case wa converted to Chapter 7 ( liquidation ) on April ( liquidation ) on April 29 , 2005 . The Company ) on April 29 , 2005 . The Company ha reached the Company with the Chapter 7 Bankruptcy Trustee . The Bankruptcy Trustee . The Bankruptcy Court 29 approved the settlement on July approved the settlement on July 17 , 2006 over the objection settlement on July 17 , 2006 over the objection of Tom of Appeals . On December 19 , 2005 , Tom Santos . On December 19 , 2005 , Tom Santos filed a cause of action on January 20 , 2006 . The Court action on January 20 , 2006 . The Court sustained the Sixth Amended Complaint on July 14 , 2006 . The Company Complaint on July 14 , 2006 . The Company filed a which wa granted on September 9 , 2006 . Santos filed granted on September 9 , 2006 . Santos filed a Seventh Complaint in late September , 2006 . The Company filed a denied in part on December 15 , 2006 . Santos filed part on December 15 , 2006 . Santos filed an Eighth Eighth Amended Complaint on January 29 , 2007 . The Company Complaint on January 29 , 2007 . The Company filed a which wa heard on May 7 , 2007 . The court heard on May 7 , 2007 . The court sustained the Ninth Amended Complaint on July 11 , 2007 . The Company Complaint on July 11 , 2007 . The Company filed a complaint against Santos on January 20 , 2006 alleging violation of Santos on January 20 , 2006 alleging violation of California Business Gateway , Inc. on August 28 , 2007 in the United Inc. on August 28 , 2007 in the United States District of U.S. Patent No . 7,009,655 , entitled `` Method and against the Company on January 16 , 2007 in the United Company on January 16 , 2007 in the United States District of U.S. Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , all entitled . 5,710,906 , 5,813,036 and 6,405,291 , all entitled `` Predictive filed an answer on April 17 , 2007 denying all material answer on April 17 , 2007 denying all material allegation and filed this action on November 3 , 2005 in the United action on November 3 , 2005 in the United States District of U.S. Patent Nos . 6,243,725 and 6,763,345 both entitled `` Patent Nos . 6,243,725 and 6,763,345 both entitled `` List Building filed an answer on January 13 , 2006 denying all material answer on January 13 , 2006 denying all material allegation and hearing wa held on May 17 , 2007 and the court held on May 17 , 2007 and the court issued it claim construction ruling on May 23 , 2007 . Trial wa ruling on May 23 , 2007 . Trial wa scheduled for Trial wa scheduled for December 3 , 2007 . The party scheduled for December 3 , 2007 . The party have reached filed this action on December 21 , 2005 in the United action on December 21 , 2005 in the United States District of U.S. Patent No . 5,730,165 entitled `` Time Domain Capacitive other relief . On May 11 , 2006 , Quantum filed . On May 11 , 2006 , Quantum filed an amended a defendant . On July 31 , 2006 , the Company . On July 31 , 2006 , the Company filed an an answer denying all material 30 allegation and asserting numerous affirmative and invalidity . On November 30 , 2006 , plaintiff filed . On November 30 , 2006 , plaintiff filed a reply hearing wa held on May 16 , 2007 . On June held on May 16 , 2007 . On June 7 , , 2007 . On June 7 , 2007 , the court . On June 7 , 2007 , the court issued a Office in Tokyo on January 23 , 2007 alleging infringement by Tokyo on January 23 , 2007 alleging infringement by the Company of Japanese Patent No . 3852854 , entitled `` Touch Operation held a hearing on March 22 , 2007 . The Customs hearing on March 22 , 2007 . The Customs Office rejected action against Saito on February 6 , 2007 , seeking a Saito on February 6 , 2007 , seeking a declaration that against the Company on August 2 , 2007 in the United Company on August 2 , 2007 in the United States District of U.S. Patent No . 6,784,873 entitled `` Method and Medium , Canada , on August 5 , 2005 , seeking authorization , on August 5 , 2005 , seeking authorization to institute price in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 but later declared 2003 and December 14 , 2004 but later declared invalid by certification hearing took place January 13 , 2006 . On February took place January 13 , 2006 . On February 24 , , 2006 . On February 24 , 2006 , the Court . On February 24 , 2006 , the Court granted class the last week of March 2006 . The trial wa conducted trial wa conducted on October 15 and 16 , 2007 . conducted on October 15 and 16 , 2007 . The Court October 15 and 16 , 2007 . The Court ha not and other defendant on February 16 , 2007 in the United defendant on February 16 , 2007 in the United States District of U.S. Patent No . 7,065,417 entitled `` MPEG Portable Sound other relief . On July 12 , 2007 , the Company . On July 12 , 2007 , the Company filed a an amended complaint on August 1 , 2007 , adding the complaint on August 1 , 2007 , adding the iPhone a accused device . On August 2 , 2007 , the Company . On August 2 , 2007 , the Company filed a filed an answer on August 20 , 2007 , denying all answer on August 20 , 2007 , denying all material allegation a purported class action on 31 January 3 , 2005 in class action on 31 January 3 , 2005 in the United on 31 January 3 , 2005 in the United States District alleged violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & motion to dismiss on February 10 , 2005 . On September dismiss on February 10 , 2005 . On September 9 , , 2005 . On September 9 , 2005 , the Court . On September 9 , 2005 , the Court denied the an amended complaint on September 23 , 2005 and the Company complaint on September 23 , 2005 and the Company filed an filed an answer on October 18 , 2005 . In August answer on October 18 , 2005 . In August 2006 , , 2005 . In August 2006 , the court dismissed Slattery Rosen ) . On November 2 , 2006 , the Company . On November 2 , 2006 , the Company filed an purported class action on July 21 , 2006 in the United action on July 21 , 2006 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On November 3 , 2006 , the Company . On November 3 , 2006 , the Company filed a the complaint . On December 20 , 2006 , the Court . On December 20 , 2006 , the Court denied the to dismiss . On January 11 , 2007 , The Company . On January 11 , 2007 , The Company filed an numerous defense . On March 20 , 2007 , the Court . On March 20 , 2007 , the Court consolidated the a consolidated complaint on April 19 , 2007 . On June complaint on April 19 , 2007 . On June 6 , , 2007 . On June 6 , 2007 , the Company . On June 6 , 2007 , the Company filed an , wa filed on August 27 , 2007 in the Circuit filed on August 27 , 2007 in the Circuit Court in District of Florida on September 28 , 2007 , and filed Florida on September 28 , 2007 , and filed a motion District of California on October 12 , 2007 . The Company California on October 12 , 2007 . The Company 's motion transfer wa granted on October 17 , 2007 . Tse v. granted on October 17 , 2007 . Tse v. Apple Computer and other defendant on August 5 , 2005 in the United defendant on August 5 , 2005 in the United States District of U.S. Patent No . 6,665,797 entitled `` Protection of Software filed an answer on October 31 , 2005 denying all material answer on October 31 , 2005 denying all material allegation and affirmative defense . On October 28 , 2005 , the Company . On October 28 , 2005 , the Company and the which wa granted on August 31 , 2006 . On July granted on August 31 , 2006 . On July 24 , , 2006 . On July 24 , 2007 , the Company . On July 24 , 2007 , the Company filed a Office granted . On July 25 , 2007 , the Company . On July 25 , 2007 , the Company filed a the court granted on October 4 , 2007 . Union Fédérale granted on October 4 , 2007 . Union Fédérale de Consummateurs—Que filed this complaint on February 9 , 2005 alleging that the complaint on February 9 , 2005 alleging that the above-listed entity violating consumer law by ( 1 ) omitting to mention that the iPod is allegedly not 32 compatible with music from online with the iPod and ( 2 ) allegedly tying the sale case took place on May 24 , 2005 . The Company place on May 24 , 2005 . The Company 's response complaint wa served on November 8 , 2005 . Plaintiff 's served on November 8 , 2005 . Plaintiff 's responsive pleading pleading wa filed on February 10 , 2006 . The Company filed on February 10 , 2006 . The Company filed a filed a reply on June 6 , 2006 and UFC filed reply on June 6 , 2006 and UFC filed a response filed a response on September 19 , 2006 . Vitt v. response on September 19 , 2006 . Vitt v. Apple Computer purported class action on November 7 , 2006 in the United action on November 7 , 2006 in the United States District motion to dismiss on January 19 , 2007 , which the dismiss on January 19 , 2007 , which the court granted the court granted on March 13 , 2007 . Plaintiffs filed granted on March 13 , 2007 . Plaintiffs filed an amended an amended complaint on March 26 , 2007 . The Company complaint on March 26 , 2007 . The Company filed a motion to dismiss on August 16 , 2007 , which wa dismiss on August 16 , 2007 , which wa heard on which wa heard on October 4 , 2007 . Vogel v. heard on October 4 , 2007 . Vogel v. Jobs et purported class action on August 24 , 2006 , in the action on August 24 , 2006 , in the United States financial statement . On January 19 , 2007 , the Court . On January 19 , 2007 , the Court appointed the lead plaintiff . On March 23 , 2007 , plaintiff filed . On March 23 , 2007 , plaintiff filed a Consolidated and asserts claim under Section 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the motion to dismiss on June 8 , 2007 , which wa dismiss on June 8 , 2007 , which wa heard on which wa heard on September 7 , 2007 . Item 4 heard on September 7 , 2007 . Item 4 . Submission 7 , 2007 . Item 4 . Submission of Matters to 's fiscal year ended September 29 , 2007 . 33 PART year ended September 29 , 2007 . 33 PART II Item September 29 , 2007 . 33 PART II Item 5 . . 33 PART II Item 5 . Market for Registrant 's Second Quarter First Quarter Fiscal 2007 price range per common share range per common share $ 155.00 - $ 111.62 $ 127.61 share $ 155.00 - $ 111.62 $ 127.61 - $ 89.60 155.00 - $ 111.62 $ 127.61 - $ 89.60 $ 97.80 111.62 $ 127.61 - $ 89.60 $ 97.80 - $ 81.90 127.61 - $ 89.60 $ 97.80 - $ 81.90 $ 93.16 89.60 $ 97.80 - $ 81.90 $ 93.16 - $ 72.60 97.80 - $ 81.90 $ 93.16 - $ 72.60 Fiscal 2006 81.90 $ 93.16 - $ 72.60 Fiscal 2006 price range per 93.16 - $ 72.60 Fiscal 2006 price range per common share range per common share $ 77.78 - $ 50.16 $ 73.80 share $ 77.78 - $ 50.16 $ 73.80 - $ 55.41 77.78 - $ 50.16 $ 73.80 - $ 55.41 $ 86.40 50.16 $ 73.80 - $ 55.41 $ 86.40 - $ 57.67 73.80 - $ 55.41 $ 86.40 - $ 57.67 $ 75.46 55.41 $ 86.40 - $ 57.67 $ 75.46 - $ 47.87 86.40 - $ 57.67 $ 75.46 - $ 47.87 Holders As 57.67 $ 75.46 - $ 47.87 Holders As of November 2 47.87 Holders As of November 2 , 2007 , there were As of November 2 , 2007 , there were 30,336 shareholder , 2007 , there were 30,336 shareholder of record . Dividends cash dividend in either fiscal 2007 or 2006 . The Company in either fiscal 2007 or 2006 . The Company anticipates that and Affiliated Purchasers None . 34 Company Stock Performance The following , the S & P 500 Composite Index ( the `` the `` S & P 500 `` ) and the S . The graph assumes $ 100 wa invested in each of , the S & P 500 , and the Industry Index the Industry Index on September 30 , 2002 . Data point Index on September 30 , 2002 . Data point on the stock price performance . Item 6 . Selected Financial Data The read in conjunction with Item 7 , `` Management 's Discussion note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that Five fiscal year ended September 29 , 2007 ( In million year ended September 29 , 2007 ( In million , except and per share amount ) 2007 2006 2005 2004 2003 Net per share amount ) 2007 2006 2005 2004 2003 Net sale share amount ) 2007 2006 2005 2004 2003 Net sale $ amount ) 2007 2006 2005 2004 2003 Net sale $ 24,006 ) 2007 2006 2005 2004 2003 Net sale $ 24,006 $ 2004 2003 Net sale $ 24,006 $ 19,315 $ 13,931 $ Net sale $ 24,006 $ 19,315 $ 13,931 $ 8,279 $ $ 24,006 $ 19,315 $ 13,931 $ 8,279 $ 6,207 Net $ 19,315 $ 13,931 $ 8,279 $ 6,207 Net income $ $ 13,931 $ 8,279 $ 6,207 Net income $ 3,496 $ $ 6,207 Net income $ 3,496 $ 1,989 $ 1,328 $ Net income $ 3,496 $ 1,989 $ 1,328 $ 266 $ $ 3,496 $ 1,989 $ 1,328 $ 266 $ 57 Earnings $ 1,989 $ 1,328 $ 266 $ 57 Earnings per common $ 1,328 $ 266 $ 57 Earnings per common share : common share : Basic $ 4.04 $ 2.36 $ 1.64 $ : Basic $ 4.04 $ 2.36 $ 1.64 $ 0.36 $ $ 4.04 $ 2.36 $ 1.64 $ 0.36 $ 0.08 Diluted $ 2.36 $ 1.64 $ 0.36 $ 0.08 Diluted $ 3.93 $ 1.64 $ 0.36 $ 0.08 Diluted $ 3.93 $ 2.27 0.36 $ 0.08 Diluted $ 3.93 $ 2.27 $ 1.55 $ 0.08 Diluted $ 3.93 $ 2.27 $ 1.55 $ 0.34 $ $ 3.93 $ 2.27 $ 1.55 $ 0.34 $ 0.08 Cash $ 2.27 $ 1.55 $ 0.34 $ 0.08 Cash dividend declared $ 1.55 $ 0.34 $ 0.08 Cash dividend declared per common in thousand ) : Basic 864,595 844,058 808,439 743,180 721,262 Diluted thousand ) : Basic 864,595 844,058 808,439 743,180 721,262 Diluted 889,292 ) : Basic 864,595 844,058 808,439 743,180 721,262 Diluted 889,292 877,526 : Basic 864,595 844,058 808,439 743,180 721,262 Diluted 889,292 877,526 856,878 Basic 864,595 844,058 808,439 743,180 721,262 Diluted 889,292 877,526 856,878 774,776 844,058 808,439 743,180 721,262 Diluted 889,292 877,526 856,878 774,776 723,352 Cash 808,439 743,180 721,262 Diluted 889,292 877,526 856,878 774,776 723,352 Cash , 743,180 721,262 Diluted 889,292 877,526 856,878 774,776 723,352 Cash , cash 721,262 Diluted 889,292 877,526 856,878 774,776 723,352 Cash , cash equivalent Diluted 889,292 877,526 856,878 774,776 723,352 Cash , cash equivalent , , and short-term investment $ 15,386 $ 10,110 $ 8,261 $ short-term investment $ 15,386 $ 10,110 $ 8,261 $ 5,464 $ $ 15,386 $ 10,110 $ 8,261 $ 5,464 $ 4,566 Total $ 10,110 $ 8,261 $ 5,464 $ 4,566 Total asset $ $ 8,261 $ 5,464 $ 4,566 Total asset $ 25,347 $ $ 4,566 Total asset $ 25,347 $ 17,205 $ 11,516 $ Total asset $ 25,347 $ 17,205 $ 11,516 $ 8,039 $ $ 25,347 $ 17,205 $ 11,516 $ 8,039 $ 6,817 Long-term $ 17,205 $ 11,516 $ 8,039 $ 6,817 Long-term debt ( $ 11,516 $ 8,039 $ 6,817 Long-term debt ( including current $ — $ — $ 304 Total liability $ 10,815 $ $ 304 Total liability $ 10,815 $ 7,221 $ 4,088 $ Total liability $ 10,815 $ 7,221 $ 4,088 $ 2,976 $ $ 10,815 $ 7,221 $ 4,088 $ 2,976 $ 2,594 Shareholders $ 7,221 $ 4,088 $ 2,976 $ 2,594 Shareholders ' equity $ 4,088 $ 2,976 $ 2,594 Shareholders ' equity $ 14,532 2,594 Shareholders ' equity $ 14,532 $ 9,984 $ 7,428 $ ' equity $ 14,532 $ 9,984 $ 7,428 $ 5,063 $ $ 14,532 $ 9,984 $ 7,428 $ 5,063 $ 4,223 35 $ 9,984 $ 7,428 $ 5,063 $ 4,223 35 Item 7 $ 7,428 $ 5,063 $ 4,223 35 Item 7 . Management 7,428 $ 5,063 $ 4,223 35 Item 7 . Management 's 5,063 $ 4,223 35 Item 7 . Management 's Discussion and other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading `` Business highly competitive and subject to 36 aggressive pricing . To remain internationally . The Company had 197 store open a of September store open a of September 29 , 2007 . The Company a of September 29 , 2007 . The Company also staff in the U.S. on June 29 , 2007 , in the U.S. on June 29 , 2007 , in the U.K. and U.K. and Germany on November 9 , 2007 and expects to Germany on November 9 , 2007 and expects to begin shipping iPhone in France on November 29 , 2007 . AT & France on November 29 , 2007 . AT & T Mobility and accompanying note . Note 1 `` Summary of Significant Accounting Financial Statements in this Form 10-K describes the significant accounting policy require management to make judgment 37 and estimate about inherently uncertain EITF `` ) No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 to Non-software Deliverables in an SOP `` ) No . 97-2 , Software Revenue Recognition , SAB `` ) No . 104 , Revenue Recognition . The have been met . During 2007 , the Company began shipping accordance with SOP No . 97-2 . The Company recognizes the basis over the currently estimated 24-month economic life of these product such incentive , the Company 38 would be required to record requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is are identified and recorded . 39 Warranty Costs The Company provides pursuant to SOP No . 97-2 , the Company recognizes warranty SFAS `` ) No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( `` SFAS No ( `` SFAS No . 123R `` ) , Share-Based Payment provision of SFAS No . 123R , stock-based compensation cost is accordance with SFAS No . 109 , Accounting for Income Taxes in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading `` Legal Proceedings `` and in Note 8 `` Commitments and Contingencies `` Statements , the Company is 40 subject to various legal proceeding accordance with SFAS No . 5 , Accounting for Contingencies . be materially adversely affected . 41 Net Sales Fiscal year 2007 41 Net Sales Fiscal year 2007 and 2005 spanned 52 week Sales Fiscal year 2007 and 2005 spanned 52 week while fiscal year 2007 and 2005 spanned 52 week while fiscal year 2006 52 week while fiscal year 2006 spanned 53 week . This while fiscal year 2006 spanned 53 week . This additional week in thousand ) : September 29 , 2007 Change September 30 ) : September 29 , 2007 Change September 30 , 2006 29 , 2007 Change September 30 , 2006 Change September 24 2007 Change September 30 , 2006 Change September 24 , 2005 30 , 2006 Change September 24 , 2005 Net Sales by 2006 Change September 24 , 2005 Net Sales by Operating Segment : Americas net sale $ 11,596 23 % $ 9,415 41 Americas net sale $ 11,596 23 % $ 9,415 41 % $ 11,596 23 % $ 9,415 41 % $ 6,658 Europe 11,596 23 % $ 9,415 41 % $ 6,658 Europe net $ 9,415 41 % $ 6,658 Europe net sale 5,460 33 $ 6,658 Europe net sale 5,460 33 % 4,096 33 % 6,658 Europe net sale 5,460 33 % 4,096 33 % 3,073 net sale 5,460 33 % 4,096 33 % 3,073 Japan net sale 5,460 33 % 4,096 33 % 3,073 Japan net sale 33 % 4,096 33 % 3,073 Japan net sale 1,082 ( % 3,073 Japan net sale 1,082 ( 11 ) % 1,211 Japan net sale 1,082 ( 11 ) % 1,211 31 % 1,082 ( 11 ) % 1,211 31 % 924 Retail net ( 11 ) % 1,211 31 % 924 Retail net sale ) % 1,211 31 % 924 Retail net sale 4,115 27 % 924 Retail net sale 4,115 27 % 3,246 42 % 924 Retail net sale 4,115 27 % 3,246 42 % 2,278 net sale 4,115 27 % 3,246 42 % 2,278 Other Segments sale 4,115 27 % 3,246 42 % 2,278 Other Segments net 27 % 3,246 42 % 2,278 Other Segments net sale ( net sale ( b ) 1,753 30 % 1,347 35 % sale ( b ) 1,753 30 % 1,347 35 % 998 b ) 1,753 30 % 1,347 35 % 998 Total net ) 1,753 30 % 1,347 35 % 998 Total net sale 30 % 1,347 35 % 998 Total net sale $ 24,006 998 Total net sale $ 24,006 24 % $ 19,315 39 Total net sale $ 24,006 24 % $ 19,315 39 % $ 24,006 24 % $ 19,315 39 % $ 13,931 Unit 24,006 24 % $ 19,315 39 % $ 13,931 Unit Sales $ 19,315 39 % $ 13,931 Unit Sales by Operating Segment : Americas Mac unit sale 3,019 24 % 2,432 11 % Americas Mac unit sale 3,019 24 % 2,432 11 % 2,184 unit sale 3,019 24 % 2,432 11 % 2,184 Europe Mac sale 3,019 24 % 2,432 11 % 2,184 Europe Mac unit 24 % 2,432 11 % 2,184 Europe Mac unit sale 1,816 2,184 Europe Mac unit sale 1,816 35 % 1,346 18 % Europe Mac unit sale 1,816 35 % 1,346 18 % 1,138 unit sale 1,816 35 % 1,346 18 % 1,138 Japan Mac sale 1,816 35 % 1,346 18 % 1,138 Japan Mac unit 35 % 1,346 18 % 1,138 Japan Mac unit sale 302 1,138 Japan Mac unit sale 302 ( 1 ) % 304 Mac unit sale 302 ( 1 ) % 304 ( 3 302 ( 1 ) % 304 ( 3 ) % 313 1 ) % 304 ( 3 ) % 313 Retail Mac 304 ( 3 ) % 313 Retail Mac unit sale 1,386 313 Retail Mac unit sale 1,386 56 % 886 45 % Retail Mac unit sale 1,386 56 % 886 45 % 609 unit sale 1,386 56 % 886 45 % 609 Other Segments sale 1,386 56 % 886 45 % 609 Other Segments Mac 56 % 886 45 % 609 Other Segments Mac unit sale unit sale ( b ) 528 58 % 335 16 % sale ( b ) 528 58 % 335 16 % 290 b ) 528 58 % 335 16 % 290 Total Mac ) 528 58 % 335 16 % 290 Total Mac unit 58 % 335 16 % 290 Total Mac unit sale 7,051 290 Total Mac unit sale 7,051 33 % 5,303 17 % Total Mac unit sale 7,051 33 % 5,303 17 % 4,534 unit sale 7,051 33 % 5,303 17 % 4,534 Net Sales sale 7,051 33 % 5,303 17 % 4,534 Net Sales by 33 % 5,303 17 % 4,534 Net Sales by Product : Desktops ( c ) $ 4,020 21 % $ 3,319 ( ( c ) $ 4,020 21 % $ 3,319 ( 3 $ 4,020 21 % $ 3,319 ( 3 ) % $ 21 % $ 3,319 ( 3 ) % $ 3,436 Portables ( 3 ) % $ 3,436 Portables ( d ) 6,294 3,436 Portables ( d ) 6,294 55 % 4,056 43 % Portables ( d ) 6,294 55 % 4,056 43 % 2,839 d ) 6,294 55 % 4,056 43 % 2,839 Total Mac ) 6,294 55 % 4,056 43 % 2,839 Total Mac net 55 % 4,056 43 % 2,839 Total Mac net sale 10,314 2,839 Total Mac net sale 10,314 40 % 7,375 18 % Total Mac net sale 10,314 40 % 7,375 18 % 6,275 net sale 10,314 40 % 7,375 18 % 6,275 iPod 8,305 sale 10,314 40 % 7,375 18 % 6,275 iPod 8,305 8 40 % 7,375 18 % 6,275 iPod 8,305 8 % 7,676 7,375 18 % 6,275 iPod 8,305 8 % 7,676 69 % 18 % 6,275 iPod 8,305 8 % 7,676 69 % 4,540 6,275 iPod 8,305 8 % 7,676 69 % 4,540 Other music iPod 8,305 8 % 7,676 69 % 4,540 Other music related 8 % 7,676 69 % 4,540 Other music related product and and service ( e ) 2,496 32 % 1,885 110 % service ( e ) 2,496 32 % 1,885 110 % 899 e ) 2,496 32 % 1,885 110 % 899 iPhone and ) 2,496 32 % 1,885 110 % 899 iPhone and related 32 % 1,885 110 % 899 iPhone and related product and and service ( f ) 123 NM — NM — Peripherals other hardware ( g ) 1,260 15 % 1,100 ( 2 hardware ( g ) 1,260 15 % 1,100 ( 2 ) g ) 1,260 15 % 1,100 ( 2 ) % 1,126 1,260 15 % 1,100 ( 2 ) % 1,126 Software , 1,100 ( 2 ) % 1,126 Software , service , and other sale ( h ) 1,508 18 % 1,279 17 % sale ( h ) 1,508 18 % 1,279 17 % 1,091 h ) 1,508 18 % 1,279 17 % 1,091 Total net ) 1,508 18 % 1,279 17 % 1,091 Total net sale 18 % 1,279 17 % 1,091 Total net sale $ 24,006 1,091 Total net sale $ 24,006 24 % $ 19,315 39 Total net sale $ 24,006 24 % $ 19,315 39 % $ 24,006 24 % $ 19,315 39 % $ 13,931 Unit 24,006 24 % $ 19,315 39 % $ 13,931 Unit Sales $ 19,315 39 % $ 13,931 Unit Sales by Product : : Desktops ( c ) 2,714 12 % 2,434 ( 3 Desktops ( c ) 2,714 12 % 2,434 ( 3 ) c ) 2,714 12 % 2,434 ( 3 ) % 2,520 2,714 12 % 2,434 ( 3 ) % 2,520 Portables ( 2,434 ( 3 ) % 2,520 Portables ( d ) 4,337 2,520 Portables ( d ) 4,337 51 % 2,869 42 % Portables ( d ) 4,337 51 % 2,869 42 % 2,014 d ) 4,337 51 % 2,869 42 % 2,014 Total Mac ) 4,337 51 % 2,869 42 % 2,014 Total Mac unit 51 % 2,869 42 % 2,014 Total Mac unit sale 7,051 2,014 Total Mac unit sale 7,051 33 % 5,303 17 % Total Mac unit sale 7,051 33 % 5,303 17 % 4,534 unit sale 7,051 33 % 5,303 17 % 4,534 Net sale sale 7,051 33 % 5,303 17 % 4,534 Net sale per 33 % 5,303 17 % 4,534 Net sale per Mac unit sold ( i ) $ 1,463 5 % $ 1,391 1 ( i ) $ 1,463 5 % $ 1,391 1 % $ 1,463 5 % $ 1,391 1 % $ 1,384 iPod 1,463 5 % $ 1,391 1 % $ 1,384 iPod unit $ 1,391 1 % $ 1,384 iPod unit sale 51,630 31 $ 1,384 iPod unit sale 51,630 31 % 39,409 75 % 1,384 iPod unit sale 51,630 31 % 39,409 75 % 22,497 unit sale 51,630 31 % 39,409 75 % 22,497 Net sale sale 51,630 31 % 39,409 75 % 22,497 Net sale per 31 % 39,409 75 % 22,497 Net sale per iPod unit sold ( j ) $ 161 ( 17 ) % $ j ) $ 161 ( 17 ) % $ 195 ( ( 17 ) % $ 195 ( 3 ) % $ ) % $ 195 ( 3 ) % $ 202 iPhone ( 3 ) % $ 202 iPhone unit sale 1,389 NM $ 202 iPhone unit sale 1,389 NM — NM — Notes : ( a ) During 2007 , the Company revised the Consolidated Financial Statements at Note 9 , `` Segment Information and . NM = Not Meaningful 42 Fiscal Year 2007 versus 2006 Not Meaningful 42 Fiscal Year 2007 versus 2006 Net sale during 42 Fiscal Year 2007 versus 2006 Net sale during 2007 increased versus 2006 Net sale during 2007 increased 24 % or $ Net sale during 2007 increased 24 % or $ 4.7 billion increased 24 % or $ 4.7 billion from 2006 even though or $ 4.7 billion from 2006 even though the fiscal year though the fiscal year of 2007 spanned 52 week while the fiscal year of 2007 spanned 52 week while the fiscal year while the fiscal year of 2006 spanned 53 week . Several fiscal year of 2006 spanned 53 week . Several factor contributed Mac net sale increased $ 3 billion or 40 % during increased $ 3 billion or 40 % during 2007 compared to billion or 40 % during 2007 compared to 2006 , while % during 2007 compared to 2006 , while Mac unit sale Mac unit sale increased by 1.75 million unit or 33 % by 1.75 million unit or 33 % . The 33 % or 33 % . The 33 % Mac unit sale growth 's portable product accounted for 62 % of the Company 's 's personal computer shipment in 2007 , up from 54 % in 2007 , up from 54 % in 2006 . Net up from 54 % in 2006 . Net sale and unit Company 's portable product increased 55 % and 51 % , product increased 55 % and 51 % , respectively , during % , respectively , during 2007 compared to 2006 . This , during 2007 compared to 2006 . This growth wa due and unit sale increased by 21 % and 12 % , increased by 21 % and 12 % , respectively , during % , respectively , during 2007 due to stronger sale of sale of iPods increased $ 629 million or 8 % during increased $ 629 million or 8 % during 2007 compared to million or 8 % during 2007 compared to 2006 . Unit % during 2007 compared to 2006 . Unit sale of iPods Unit sale of iPods increased 31 % compared to 2006 . increased 31 % compared to 2006 . The iPod growth wa nano and iPod shuffle in 2007 compared to 2006 . • shuffle in 2007 compared to 2006 . • Net sale of product and service were $ 123 million in 2007. iPhone net were $ 123 million in 2007. iPhone net sale include the accounting over the product 's 24-month estimated economic life , a . iPhone unit sale were 1.39 million in 2007 . • sale were 1.39 million in 2007 . • Net sale of product and service increased $ 611 million or 32 % during increased $ 611 million or 32 % during 2007 compared to million or 32 % during 2007 compared to 2006 due to % during 2007 compared to 2006 due to increased net sale and other hardware increased $ 160 million or 15 % compared increased $ 160 million or 15 % compared to 2006 due or 15 % compared to 2006 due to an increase in and other sale rose $ 229 million or 18 % during rose $ 229 million or 18 % during 2007 compared to million or 18 % during 2007 compared to 2006 . This % during 2007 compared to 2006 . This growth wa primarily software product . Fiscal Year 2006 versus 2005 Net sale during . Fiscal Year 2006 versus 2005 Net sale during 2006 increased versus 2005 Net sale during 2006 increased 39 % or $ Net sale during 2006 increased 39 % or $ 5.4 billion increased 39 % or $ 5.4 billion from 2005 . This or $ 5.4 billion from 2005 . This increase wa due part to the fact that 2006 spanned 53 week while 2005 the fact that 2006 spanned 53 week while 2005 spanned 52 2006 spanned 53 week while 2005 spanned 52 week . Several 53 week while 2005 spanned 52 week . Several other factor sale of iPods increased $ 3.1 billion or 69 % during increased $ 3.1 billion or 69 % during 2006 compared to billion or 69 % during 2006 compared to 2005 . Unit % during 2006 compared to 2005 . Unit sale of iPods Unit sale of iPods totaled 39.4 million in 2006 , which iPods totaled 39.4 million in 2006 , which represents an increase which represents an increase of 75 % from the 22.5 million of 75 % from the 22.5 million iPod unit sold in million iPod unit sold in 2005 . Strong iPod sale during . Strong iPod sale during 2006 reflected significant sale of both first introduced in October of 2005 and the iPod nano , nano , introduced in September 2005 , a well a continued iPod distribution point . During 2006 , the net 43 sale During 2006 , the net 43 sale per iPod unit sold iPod unit sold decreased by 3 % compared to 2005 primarily by 3 % compared to 2005 primarily due to an overall Mac net sale increased $ 1.1 billion or 18 % during increased $ 1.1 billion or 18 % during 2006 compared to billion or 18 % during 2006 compared to 2005 . Mac % during 2006 compared to 2005 . Mac unit sale increased Mac unit sale increased by 769,000 unit or 17 % during increased by 769,000 unit or 17 % during 2006 compared to unit or 17 % during 2006 compared to 2005 . These % during 2006 compared to 2005 . These increase were mainly Company 's portable product increased 43 % and 42 % , product increased 43 % and 42 % , respectively , during % , respectively , during 2006 compared to 2005 . Mac , during 2006 compared to 2005 . Mac desktop net sale unit sale both decreased by 3 % during 2006 compared to decreased by 3 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The decrease in sale not begin shipping until August 2006 , and updated software application . A slight increase of 1 % during 2006 in net increase of 1 % during 2006 in net sale per Mac product and service increased $ 986 million or 110 % during increased $ 986 million or 110 % during 2006 compared to million or 110 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The increase wa primarily Store in Japan during August 2005 and Australia during October 2005 2005 and Australia during October 2005 . The increased sale from and other sale increased $ 188 million or 17 % during increased $ 188 million or 17 % during 2006 compared to million or 17 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The growth wa primarily sale were particularly high in 2005 due to the release of OS X Tiger in April 2005 . Offsetting the favorable factor Company 's net sale during 2006 were negatively impacted by the and other hardware declined $ 26 million or 2 % compared declined $ 26 million or 2 % compared to 2005 primarily or 2 % compared to 2005 primarily due to price decrease net sale of display for 2006 is consistent with the overall and similar service . During 2007 , the Company revised the may be found in Note 9 , 44 `` Segment Information found in Note 9 , 44 `` Segment Information and Geographic Financial Statements of this Form 10-K. Americas During 2007 , net this Form 10-K. Americas During 2007 , net sale in the the Americas segment increased $ 2.2 billion , or 23 % $ 2.2 billion , or 23 % , compared to 2006 23 % , compared to 2006 . The main source of MacBook , introduced in May 2006 and updated in May 2007 2006 and updated in May 2007 , a well a the Pro , introduced in January 2006 and updated in June 2007 2006 and updated in June 2007 . Sales of iMacs grew new iMac introduced in August 2007 . Sales of iPods grew the iPod touch in September 2007 . The Company belief that the iTunes Store . During 2007 , the Americas segment represented , the Americas segment represented 48 % of the Company 's net sale a compared to 49 % in the same period in the same period of 2006 . During 2007 , U.S. period of 2006 . During 2007 , U.S. education channel net Mac unit sale increased by 14 % and 18 % , increased by 14 % and 18 % , respectively , compared , respectively , compared to 2006 . Net sale from the the higher education market grew 17 % during 2007 compared to market grew 17 % during 2007 compared to 2006 , while % during 2007 compared to 2006 , while net sale in in the K-12 market grew 10 % during the same period the same period . During 2006 , net sale in the the Americas segment increased $ 2.8 billion , or 41 % $ 2.8 billion , or 41 % , compared to 2005 41 % , compared to 2005 . The primary contributor to with video-playing capability in October 2005 ( now referred to a the iPod nano during September 2005 . The increase in other MacBook and MacBook Pro during 2006 . The overall increase in OS X sale decreased from 2005 since the Company had not Tiger began shipping in April 2005 . During 2006 , the in April 2005 . During 2006 , the Americas segment represented , the Americas segment represented 49 % of the Company 's net sale a compared to 48 % in the same period in the same period of 2005 . Europe Europe segment net segment net sale increased $ 1.4 billion or 33 % during increased $ 1.4 billion or 33 % during 2007 compared to billion or 33 % during 2007 compared to 2006 . Consistent % during 2007 compared to 2006 . Consistent with the Americas new iMac introduced in August 2007 . Sales of iPods grew segment net sale increased $ 1.0 billion or 33 % during increased $ 1.0 billion or 33 % during 2006 compared to billion or 33 % during 2006 compared to 2005 . Consistent % during 2006 compared to 2005 . Consistent with the Americas with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other Pro that were introduced during 2006 . In addition , Europe Mac OS X net sale 45 during 2006 compared to 2005 X net sale 45 during 2006 compared to 2005 . The 45 during 2006 compared to 2005 . The decrease in desktop X sale have decreased from 2005 since the Company ha not Tiger began shipping in April 2005 . Japan Japan 's net net sale declined by $ 129 million or 11 % in by $ 129 million or 11 % in 2007 compared to million or 11 % in 2007 compared to 2006 . Total % in 2007 compared to 2006 . Total Mac unit sale unit sale in Japan declined 1 % during 2007 . The Japan declined 1 % during 2007 . The decrease in the 's net sale increased $ 287 million or 31 % during increased $ 287 million or 31 % during 2006 compared to million or 31 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The Japan segment experienced in October and September of 2005 , respectively . Japan also X sale have decreased from 2005 since the Company had not Tiger began shipping in April 2005 . Total Mac unit sale Total Mac unit sale during 2006 remained relatively flat compared to remained relatively flat compared to 2005 . Retail The Company opened . Retail The Company opened 32 new retail store during 2007 32 new retail store during 2007 , including a total of , including a total of 5 international store in the U.K. number of open store to 197 a of September 29 , to 197 a of September 29 , 2007 . This compare a of September 29 , 2007 . This compare to 165 2007 . This compare to 165 open store a of September open store a of September 30 , 2006 and 124 open a of September 30 , 2006 and 124 open store a September 30 , 2006 and 124 open store a of September open store a of September 24 , 2005 . The Retail a of September 24 , 2005 . The Retail segment 's 's net sale increased by 27 % to $ 4.1 billion by 27 % to $ 4.1 billion during 2007 compared to to $ 4.1 billion during 2007 compared to 2006 . Retail billion during 2007 compared to 2006 . Retail segment Mac unit segment Mac unit sale increased 56 % during 2007 a compared sale increased 56 % during 2007 a compared to 2006 . during 2007 a compared to 2006 . With an average of . With an average of 178 store open during 2007 , of 178 store open during 2007 , average revenue per store revenue per store wa $ 23.1 million , compared to $ million , compared to $ 22.9 million in 2006 and $ to $ 22.9 million in 2006 and $ 21.7 million in million in 2006 and $ 21.7 million in 2005 . The and $ 21.7 million in 2005 . The current year increase 's net sale increased by 42 % to $ 3.3 billion by 42 % to $ 3.3 billion during 2006 compared to to $ 3.3 billion during 2006 compared to 2005 . Retail billion during 2006 compared to 2005 . Retail segment Mac unit segment Mac unit sale increased 45 % during 2006 compared to sale increased 45 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The current year increase with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other reported operating income of $ 875 million during 2007 a compared of $ 875 million during 2007 a compared to operating income to operating income of $ 600 million and $ 396 million $ 600 million and $ 396 million during 2006 and 2005 and $ 396 million during 2006 and 2005 , respectively . 396 million during 2006 and 2005 , respectively . This improvement respectively . This improvement in 2007 wa primarily attributable to an and other operating expense . 46 Capital asset purchase associated with the Retail segment were $ 294 million in 2007 , bringing were $ 294 million in 2007 , bringing the total capital the Retail segment to $ 1.0 billion . As of September billion . As of September 29 , 2007 , the Retail As of September 29 , 2007 , the Retail segment had the Retail segment had approximately 7,900 employee and had outstanding operating and related facility of $ 1.1 billion . The Company would in net sale of $ 406 million , or 30 % $ 406 million , or 30 % during 2007 compared to , or 30 % during 2007 compared to 2006 . This % during 2007 compared to 2006 . This increase related primarily increase related primarily to a 58 % increase in sale of Asia Pacific region . During 2006 , net sale in Other sale in Other Segments increased 35 % compared to 2005 primarily increased 35 % compared to 2005 primarily due to an increase product that translated to a 16 % increase in Mac unit in Mac unit sale during 2006 compared to 2005 . Gross sale during 2006 compared to 2005 . Gross Margin Gross margin margin percentage ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Net September 30 , 2006 September 24 , 2005 Net sale $ , 2006 September 24 , 2005 Net sale $ 24,006 $ , 2005 Net sale $ 24,006 $ 19,315 $ 13,931 Cost Net sale $ 24,006 $ 19,315 $ 13,931 Cost of sale $ 24,006 $ 19,315 $ 13,931 Cost of sale 15,852 13,717 $ 13,931 Cost of sale 15,852 13,717 9,889 Gross margin $ 13,931 Cost of sale 15,852 13,717 9,889 Gross margin $ 8,154 Cost of sale 15,852 13,717 9,889 Gross margin $ 8,154 $ 13,717 9,889 Gross margin $ 8,154 $ 5,598 $ 4,042 Gross Gross margin $ 8,154 $ 5,598 $ 4,042 Gross margin percentage $ 8,154 $ 5,598 $ 4,042 Gross margin percentage 34.0 % $ 4,042 Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage 34.0 % 29.0 % 29.0 % Gross margin percentage of % Gross margin percentage of 34.0 % in 2007 increased significantly percentage of 34.0 % in 2007 increased significantly from 29.0 % in 2007 increased significantly from 29.0 % in 2006 . The significantly from 29.0 % in 2006 . The primary driver of in the first quarter of 2008 primarily a a result of in the fourth quarter of 2007 , lower sale of iLife of Mac OS X Version 10.5 Leopard ( `` Mac OS that became available in October 2007 . The foregoing statement regarding warranty cost and to stimulate 47 demand for certain of it . Gross margin percentage of 29.0 % in 2006 remained flat percentage of 29.0 % in 2006 remained flat compared to 2005 2006 remained flat compared to 2005 . The Company experienced more for percentage ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Research September 30 , 2006 September 24 , 2005 Research and development , 2006 September 24 , 2005 Research and development $ 782 2005 Research and development $ 782 $ 712 $ 535 Percentage and development $ 782 $ 712 $ 535 Percentage of net $ 782 $ 712 $ 535 Percentage of net sale 3 535 Percentage of net sale 3 % 4 % 4 % of net sale 3 % 4 % 4 % Selling , sale 3 % 4 % 4 % Selling , general , , and administrative expense $ 2,963 $ 2,433 $ 1,864 Percentage administrative expense $ 2,963 $ 2,433 $ 1,864 Percentage of net $ 2,963 $ 2,433 $ 1,864 Percentage of net sale 12 1,864 Percentage of net sale 12 % 13 % 13 % of net sale 12 % 13 % 13 % Research and sale 12 % 13 % 13 % Research and Development ( for R & D increased 10 % or $ 70 million increased 10 % or $ 70 million to $ 782 million $ 70 million to $ 782 million in 2007 compared to to $ 782 million in 2007 compared to 2006 . R million in 2007 compared to 2006 . R & D expense software development cost of $ 75 million related to the development in the first quarter of 2007 and the capitalized software development SG & A increased $ 530 million or 22 % during increased $ 530 million or 22 % during 2007 compared to million or 22 % during 2007 compared to 2006 . The % during 2007 compared to 2006 . The increase wa primarily in total net sale in 2007 , the Company 's continued in the first quarter of 2007 . 48 Other Income and first quarter of 2007 . 48 Other Income and Expense Other in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Interest September 30 , 2006 September 24 , 2005 Interest income $ , 2006 September 24 , 2005 Interest income $ 647 $ , 2005 Interest income $ 647 $ 394 $ 183 Other Interest income $ 647 $ 394 $ 183 Other income ( $ 647 $ 394 $ 183 Other income ( expense ) expense ) , net ( 48 ) ( 29 ) ( net ( 48 ) ( 29 ) ( 18 ) Total ) ( 29 ) ( 18 ) Total other income and other income and expense $ 599 $ 365 $ 165 Total and expense $ 599 $ 365 $ 165 Total other income $ 599 $ 365 $ 165 Total other income and expense income and expense increased $ 234 million or 64 % to increased $ 234 million or 64 % to $ 599 million or 64 % to $ 599 million during 2007 a compared to $ 599 million during 2007 a compared to $ 365 2007 a compared to $ 365 million and $ 165 million $ 365 million and $ 165 million in 2006 and 2005 and $ 165 million in 2006 and 2005 , respectively . 165 million in 2006 and 2005 , respectively . The increase respectively . The increase in 2007 is attributable primarily to increased of interest income earned in 2007 . The weighted average interest and short-term investment increased to 5.27 % in 2007 a compared increased to 5.27 % in 2007 a compared to the 4.58 2007 a compared to the 4.58 % and 2.70 % rate to the 4.58 % and 2.70 % rate earned during 2006 2.70 % rate earned during 2006 and 2005 , respectively . rate earned during 2006 and 2005 , respectively . The current currency hedging expense . During 2007 , 2006 and 2005 , expense . During 2007 , 2006 and 2005 , the Company During 2007 , 2006 and 2005 , the Company had no for the year ended September 29 , 2007 wa 30 % year ended September 29 , 2007 wa 30 % . The September 29 , 2007 wa 30 % . The Company 's federal income tax rate of 35 % due primarily to certain a tax benefit of $ 63 million due to the settlement the U.S. As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had deferred and tax credit of $ 1.1 billion before being offset against asset . As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 a valuation allowance 2007 and September 30 , 2006 a valuation allowance of $ a valuation allowance of $ 5 million wa recorded against the tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In Recent Accounting Pronouncements In February 2007 , the Financial Accounting Standards ) issued SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 ( `` SFAS No . ( `` SFAS No . 159 `` ) . SFAS No ) . SFAS No . 159 allows company to choose to at fair value . SFAS 49 No . 159 requires that . SFAS 49 No . 159 requires that unrealized gain and date . SFAS No . 159 is effective for fiscal year fiscal year beginning after November 15 , 2007 and is required beginning after November 15 , 2007 and is required to be the first quarter of fiscal 2009 . Although the Company will application of SFAS No . 159 , management doe not currently operating result . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement measurement . SFAS No . 157 is effective for fiscal year fiscal year beginning after November 15 , 2007 and is required beginning after November 15 , 2007 and is required to be the first quarter of fiscal 2009 . Although the Company will application of SFAS No . 157 , management doe not currently operating result . In June 2006 , the FASB issued FASB ( `` FIN `` ) 48 , Accounting for Uncertainty in of FASB Statement No . 109 . FIN 48 clarifies the No . 109 . FIN 48 clarifies the accounting for uncertainty a tax return . FIN 48 is effective for fiscal year fiscal year beginning after December 15 , 2006 and is required beginning after December 15 , 2006 and is required to be the first quarter of fiscal 2008 . Although the Company will evaluate the application of FIN 48 , management doe not currently in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Cash September 30 , 2006 September 24 , 2005 Cash , cash , 2006 September 24 , 2005 Cash , cash equivalent , , and short-term investment $ 15,386 $ 10,110 $ 8,261 Accounts short-term investment $ 15,386 $ 10,110 $ 8,261 Accounts receivable , $ 15,386 $ 10,110 $ 8,261 Accounts receivable , net $ Accounts receivable , net $ 1,637 $ 1,252 $ 895 Inventory , net $ 1,637 $ 1,252 $ 895 Inventory $ 346 $ 1,637 $ 1,252 $ 895 Inventory $ 346 $ 270 1,252 $ 895 Inventory $ 346 $ 270 $ 165 Working 895 Inventory $ 346 $ 270 $ 165 Working capital $ $ 346 $ 270 $ 165 Working capital $ 12,657 $ $ 165 Working capital $ 12,657 $ 8,066 $ 6,813 Annual Working capital $ 12,657 $ 8,066 $ 6,813 Annual operating cash $ 12,657 $ 8,066 $ 6,813 Annual operating cash flow $ Annual operating cash flow $ 5,470 $ 2,220 $ 2,535 As cash flow $ 5,470 $ 2,220 $ 2,535 As of September $ 5,470 $ 2,220 $ 2,535 As of September 29 , $ 2,535 As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had $ , the Company had $ 15.4 billion in cash , cash , an increase of $ 5.3 billion over the same balance at the end of September 30 , 2006 . The principal end of September 30 , 2006 . The principal component of by operating activity of $ 5.5 billion , proceeds from the under stock plan of $ 365 million and excess tax benefit from stock-based compensation of $ 377 million . These increase were , and equipment of $ 735 million and payment for acquisition of intangible asset of $ 251 million . The Company 's investment . As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , $ 6.5 2007 and September 30 , 2006 , $ 6.5 billion and 30 , 2006 , $ 6.5 billion and $ 4.1 billion $ 6.5 billion and $ 4.1 billion , respectively , of existing operation over the next 12 month . 50 Capital Assets the next 12 month . 50 Capital Assets The Company 's capital asset purchase were $ 822 million during 2007 , consisting were $ 822 million during 2007 , consisting of $ 294 2007 , consisting of $ 294 million for retail store facility retail store facility and $ 528 million for real estate acquisition enhancement . Of the $ 822 million in total capital asset total capital asset purchase during 2007 , $ 87 million were purchase during 2007 , $ 87 million were not yet paid paid for a of September 29 , 2007 . The Company a of September 29 , 2007 . The Company currently anticipates it will utilize approximately $ 1.1 billion for capital asset purchase for capital asset purchase during 2008 , including approximately $ 400 2008 , including approximately $ 400 million for expansion of the segment , and approximately $ 700 million to support normal replacement firm commitment a of September 29 , 2007 and excludes amount a of September 29 , 2007 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 1,425 5 Years Operating lease $ 1,425 $ 155 $ 345 $ Operating lease $ 1,425 $ 155 $ 345 $ 308 $ $ 1,425 $ 155 $ 345 $ 308 $ 617 Purchase $ 155 $ 345 $ 308 $ 617 Purchase obligation 3,179 $ 345 $ 308 $ 617 Purchase obligation 3,179 3,179 — 308 $ 617 Purchase obligation 3,179 3,179 — — — Asset $ 617 Purchase obligation 3,179 3,179 — — — Asset retirement — — Asset retirement obligation 24 3 3 7 11 Other — Asset retirement obligation 24 3 3 7 11 Other obligation Asset retirement obligation 24 3 3 7 11 Other obligation 50 retirement obligation 24 3 3 7 11 Other obligation 50 50 obligation 24 3 3 7 11 Other obligation 50 50 — 3 7 11 Other obligation 50 50 — — — Total 7 11 Other obligation 50 50 — — — Total $ — — — Total $ 4,678 $ 3,387 $ 348 $ — Total $ 4,678 $ 3,387 $ 348 $ 315 $ $ 4,678 $ 3,387 $ 348 $ 315 $ 628 Lease $ 3,387 $ 348 $ 315 $ 628 Lease Commitments As $ 348 $ 315 $ 628 Lease Commitments As of September Lease Commitments As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had total noncancelable operating lease of $ 1.4 billion , $ 1.1 billion $ 1.4 billion , $ 1.1 billion of which related to operating lease generally range from 3 to 15 year . Purchase generally range from 3 to 15 year . Purchase Commitments with typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also requirement for period ranging from 30 to 150 day . In period ranging from 30 to 150 day . In addition , pursuant to SOP No . 97-2 whereby the Company recognizes warranty incurred . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had outstanding and warranty commitment of $ 3.2 billion . During the first During the first quarter of 2006 , the Company entered into flash memory through calendar year 2010 . As part of these . As part of these 51 agreement , the Company prepaid , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 , which will be applied . The Company utilized $ 208 million of the prepayment a the prepayment a of September 29 , 2007 . Asset Retirement a of September 29 , 2007 . Asset Retirement Obligations The termination . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company estimated that future cash flow of $ 24 million would be required to Other outstanding obligation were $ 50 million a of September 29 50 million a of September 29 , 2007 , primarily related a of September 29 , 2007 , primarily related to Internet cost related to the $ 100 store credit the Company offered to the Company 's September 2007 price reduction . Indemnifications The or operating result . Item 7A . Quantitative and Qualitative Disclosures issuer . The Company 's 52 general policy is to limit investment . As of September 29 , 2007 , $ 1.9 As of September 29 , 2007 , $ 1.9 billion of 29 , 2007 , $ 1.9 billion of the Company 's had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remainder all underlying maturity of le than 12 month . The Company may short-term investment of approximately $ 474,000 in 2007 and net loss of approximately $ 474,000 in 2007 and net loss before tax before tax of approximately $ 434,000 and $ 137,000 in 2006 approximately $ 434,000 and $ 137,000 in 2006 and 2005 , 434,000 and $ 137,000 in 2006 and 2005 , respectively . $ 137,000 in 2006 and 2005 , respectively . To provide the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 29 , 2007 , a hypothetical a of September 29 , 2007 , a hypothetical 100 basis , 2007 , a hypothetical 100 basis point increase in interest maturity would result in $ 16 million incremental decline in the portfolio . As of September 30 , 2006 , a similar As of September 30 , 2006 , a similar 100 basis , 2006 , a similar 100 basis point shift in the have resulted in a $ 15 million incremental decline in the Monte Carlo simulation to generate 3,000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 12.8 million a of September 29 12.8 million a of September 29 , 2007 compared to a a of September 29 , 2007 compared to a maximum one-day maximum one-day loss of $ 9.2 million a of September 30 9.2 million a of September 30 , 2006 . Because the a of September 30 , 2006 . Because the Company us analysis performed a of September 29 , 2007 due to the a of September 29 , 2007 due to the inherent limitation actual exposure and position . 53 Item 8 . Financial Statements and position . 53 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 55 Consolidated Statements 2007 and September 30 , 2006 55 Consolidated Statements of Operations and September 30 , 2006 55 Consolidated Statements of Operations for three fiscal year ended September 29 , 2007 56 Consolidated Statements year ended September 29 , 2007 56 Consolidated Statements of Shareholders ended September 29 , 2007 56 Consolidated Statements of Shareholders ' three fiscal year ended September 29 , 2007 57 Consolidated Statements year ended September 29 , 2007 57 Consolidated Statements of Cash ended September 29 , 2007 57 Consolidated Statements of Cash Flows three fiscal year ended September 29 , 2007 58 Notes to year ended September 29 , 2007 58 Notes to Consolidated Financial ended September 29 , 2007 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 90 Reports of Independent Registered Public Accounting Firm , KPMG LLP 91 All financial statement schedule have Statements and Notes thereto . 54 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 29 , 2007 September 30 , amount ) September 29 , 2007 September 30 , 2006 ASSETS September 29 , 2007 September 30 , 2006 ASSETS : Current , 2007 September 30 , 2006 ASSETS : Current asset : Cash and cash equivalent $ 9,352 $ 6,392 Short-term investment 6,034 cash equivalent $ 9,352 $ 6,392 Short-term investment 6,034 3,718 Accounts 9,352 $ 6,392 Short-term investment 6,034 3,718 Accounts receivable , le $ 6,392 Short-term investment 6,034 3,718 Accounts receivable , le allowance , le allowance of $ 47 and $ 52 , respectively of $ 47 and $ 52 , respectively 1,637 1,252 Inventories and $ 52 , respectively 1,637 1,252 Inventories 346 270 Deferred $ 52 , respectively 1,637 1,252 Inventories 346 270 Deferred tax , respectively 1,637 1,252 Inventories 346 270 Deferred tax asset 782 respectively 1,637 1,252 Inventories 346 270 Deferred tax asset 782 607 346 270 Deferred tax asset 782 607 Other current asset 3,805 270 Deferred tax asset 782 607 Other current asset 3,805 2,270 782 607 Other current asset 3,805 2,270 Total current asset 21,956 607 Other current asset 3,805 2,270 Total current asset 21,956 14,509 3,805 2,270 Total current asset 21,956 14,509 Property , plant , 2,270 Total current asset 21,956 14,509 Property , plant , and , and equipment , net 1,832 1,281 Goodwill 38 38 Acquired and equipment , net 1,832 1,281 Goodwill 38 38 Acquired intangible , net 1,832 1,281 Goodwill 38 38 Acquired intangible asset , net 1,832 1,281 Goodwill 38 38 Acquired intangible asset , net Acquired intangible asset , net 299 139 Other asset 1,222 1,238 intangible asset , net 299 139 Other asset 1,222 1,238 Total net 299 139 Other asset 1,222 1,238 Total asset $ 25,347 299 139 Other asset 1,222 1,238 Total asset $ 25,347 $ 1,222 1,238 Total asset $ 25,347 $ 17,205 LIABILITIES AND SHAREHOLDERS Total asset $ 25,347 $ 17,205 LIABILITIES AND SHAREHOLDERS ' EQUITY liability : Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 Accounts payable $ 4,970 $ 3,390 Accrued expense 4,329 3,053 Total 4,970 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 $ 3,390 Accrued expense 4,329 3,053 Total current liability 9,299 6,443 4,329 3,053 Total current liability 9,299 6,443 Non-current liability 1,516 778 3,053 Total current liability 9,299 6,443 Non-current liability 1,516 778 Total liability 9,299 6,443 Non-current liability 1,516 778 Total liability 10,815 7,221 9,299 6,443 Non-current liability 1,516 778 Total liability 10,815 7,221 Commitments liability 1,516 778 Total liability 10,815 7,221 Commitments and contingency Shareholders 1,516 778 Total liability 10,815 7,221 Commitments and contingency Shareholders ' , no par value ; 1,800,000,000 share authorized ; 872,328,972 and ; 1,800,000,000 share authorized ; 872,328,972 and 855,262,568 share issued and share authorized ; 872,328,972 and 855,262,568 share issued and outstanding , issued and outstanding , respectively 5,368 4,355 Retained earnings 9,101 5,607 and outstanding , respectively 5,368 4,355 Retained earnings 9,101 5,607 Accumulated respectively 5,368 4,355 Retained earnings 9,101 5,607 Accumulated other comprehensive income 5,368 4,355 Retained earnings 9,101 5,607 Accumulated other comprehensive income 63 5,607 Accumulated other comprehensive income 63 22 Total shareholder ' equity Accumulated other comprehensive income 63 22 Total shareholder ' equity 14,532 22 Total shareholder ' equity 14,532 9,984 Total liability and shareholder Total shareholder ' equity 14,532 9,984 Total liability and shareholder ' and shareholder ' equity $ 25,347 $ 17,205 See accompanying Notes ' equity $ 25,347 $ 17,205 See accompanying Notes to Consolidated to Consolidated Financial Statements . 55 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 29 , 2007 2007 2006 2005 year ended September 29 , 2007 2007 2006 2005 Net sale ended September 29 , 2007 2007 2006 2005 Net sale $ September 29 , 2007 2007 2006 2005 Net sale $ 24,006 29 , 2007 2007 2006 2005 Net sale $ 24,006 $ 2006 2005 Net sale $ 24,006 $ 19,315 $ 13,931 Cost Net sale $ 24,006 $ 19,315 $ 13,931 Cost of sale $ 24,006 $ 19,315 $ 13,931 Cost of sale ( 1 13,931 Cost of sale ( 1 ) 15,852 13,717 9,889 Gross of sale ( 1 ) 15,852 13,717 9,889 Gross margin 8,154 sale ( 1 ) 15,852 13,717 9,889 Gross margin 8,154 5,598 ( 1 ) 15,852 13,717 9,889 Gross margin 8,154 5,598 4,042 15,852 13,717 9,889 Gross margin 8,154 5,598 4,042 Operating expense : 13,717 9,889 Gross margin 8,154 5,598 4,042 Operating expense : Research 9,889 Gross margin 8,154 5,598 4,042 Operating expense : Research and : Research and development ( 1 ) 782 712 535 Selling and development ( 1 ) 782 712 535 Selling , general development ( 1 ) 782 712 535 Selling , general , ( 1 ) 782 712 535 Selling , general , and general , and administrative ( 1 ) 2,963 2,433 1,864 Total and administrative ( 1 ) 2,963 2,433 1,864 Total operating expense administrative ( 1 ) 2,963 2,433 1,864 Total operating expense 3,745 ( 1 ) 2,963 2,433 1,864 Total operating expense 3,745 3,145 2,433 1,864 Total operating expense 3,745 3,145 2,399 Operating income 4,409 1,864 Total operating expense 3,745 3,145 2,399 Operating income 4,409 2,453 Total operating expense 3,745 3,145 2,399 Operating income 4,409 2,453 1,643 3,745 3,145 2,399 Operating income 4,409 2,453 1,643 Other income and 3,145 2,399 Operating income 4,409 2,453 1,643 Other income and expense 2,399 Operating income 4,409 2,453 1,643 Other income and expense 599 1,643 Other income and expense 599 365 165 Income before provision Other income and expense 599 365 165 Income before provision for income and expense 599 365 165 Income before provision for income before provision for income tax 5,008 2,818 1,808 Provision for income provision for income tax 5,008 2,818 1,808 Provision for income tax for income tax 5,008 2,818 1,808 Provision for income tax 1,512 1,808 Provision for income tax 1,512 829 480 Net income $ Provision for income tax 1,512 829 480 Net income $ 3,496 for income tax 1,512 829 480 Net income $ 3,496 $ 829 480 Net income $ 3,496 $ 1,989 $ 1,328 Earnings Net income $ 3,496 $ 1,989 $ 1,328 Earnings per common $ 3,496 $ 1,989 $ 1,328 Earnings per common share : common share : Basic $ 4.04 $ 2.36 $ 1.64 Diluted : Basic $ 4.04 $ 2.36 $ 1.64 Diluted $ 3.93 $ 4.04 $ 2.36 $ 1.64 Diluted $ 3.93 $ 2.27 2.36 $ 1.64 Diluted $ 3.93 $ 2.27 $ 1.55 Shares 1.64 Diluted $ 3.93 $ 2.27 $ 1.55 Shares used in $ 3.93 $ 2.27 $ 1.55 Shares used in computing earnings in thousand ) : Basic 864,595 844,058 808,439 Diluted 889,292 877,526 thousand ) : Basic 864,595 844,058 808,439 Diluted 889,292 877,526 856,878 ) : Basic 864,595 844,058 808,439 Diluted 889,292 877,526 856,878 ( Basic 864,595 844,058 808,439 Diluted 889,292 877,526 856,878 ( 1 ) 864,595 844,058 808,439 Diluted 889,292 877,526 856,878 ( 1 ) Includes 844,058 808,439 Diluted 889,292 877,526 856,878 ( 1 ) Includes stock-based Diluted 889,292 877,526 856,878 ( 1 ) Includes stock-based compensation expense : Cost of sale $ 35 $ 21 $ 3 Research of sale $ 35 $ 21 $ 3 Research and development $ 35 $ 21 $ 3 Research and development $ 77 3 Research and development $ 77 $ 53 $ 7 Selling and development $ 77 $ 53 $ 7 Selling , general $ 77 $ 53 $ 7 Selling , general , and general , and administrative $ 130 $ 89 $ 39 See and administrative $ 130 $ 89 $ 39 See accompanying Notes $ 130 $ 89 $ 39 See accompanying Notes to Consolidated to Consolidated Financial Statements . 56 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ' Amount Balances a of September 25 , 2004 782,887 $ 2,582 a of September 25 , 2004 782,887 $ 2,582 $ ( of September 25 , 2004 782,887 $ 2,582 $ ( 101 25 , 2004 782,887 $ 2,582 $ ( 101 ) $ 782,887 $ 2,582 $ ( 101 ) $ 2,597 $ ( $ ( 101 ) $ 2,597 $ ( 15 ) $ ) $ 2,597 $ ( 15 ) $ 5,063 Components of $ ( 15 ) $ 5,063 Components of comprehensive income : Net income — — — 1,328 — 1,328 Change in foreign — — — 1,328 — 1,328 Change in foreign currency translation translation — — — — 7 7 Change in unrealized gain — — — — 7 7 Change in unrealized gain on tax — — — — 8 8 Total comprehensive income 1,343 — — — — 8 8 Total comprehensive income 1,343 Issuance 8 8 Total comprehensive income 1,343 Issuance of stock-based compensation award of stock-based compensation award — 7 ( 7 ) — — compensation award — 7 ( 7 ) — — — Stock-based — Stock-based compensation — — 47 — — 47 Common stock — — 47 — — 47 Common stock issued under stock stock issued under stock plan 52,132 547 — — — 547 issued under stock plan 52,132 547 — — — 547 Tax 52,132 547 — — — 547 Tax benefit from employee stock employee stock plan award — 428 — — — 428 Balances — 428 — — — 428 Balances a of September 24 428 Balances a of September 24 , 2005 835,019 3,564 ( a of September 24 , 2005 835,019 3,564 ( 61 ) of September 24 , 2005 835,019 3,564 ( 61 ) 3,925 September 24 , 2005 835,019 3,564 ( 61 ) 3,925 — , 2005 835,019 3,564 ( 61 ) 3,925 — 7,428 Components 835,019 3,564 ( 61 ) 3,925 — 7,428 Components of comprehensive ( 61 ) 3,925 — 7,428 Components of comprehensive income : Net income — — — 1,989 — 1,989 Change in foreign — — — 1,989 — 1,989 Change in foreign currency translation translation — — — — 19 19 Change in unrealized gain — — — — 19 19 Change in unrealized gain on tax — — — — 4 4 Change in unrealized gain — — — — 4 4 Change in unrealized gain on — — — — ( 1 ) ( 1 ) Total — ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) — repurchased ( 4,574 ) ( 48 ) — ( 307 ) ( 48 ) — ( 307 ) — ( 355 ) ( 307 ) — ( 355 ) Stock-based compensation — 163 355 ) Stock-based compensation — 163 — — — 163 Deferred — 163 — — — 163 Deferred compensation — ( 61 163 Deferred compensation — ( 61 ) 61 — — — compensation — ( 61 ) 61 — — — Common stock stock issued under stock plan 24,818 318 — — — 318 issued under stock plan 24,818 318 — — — 318 Tax 24,818 318 — — — 318 Tax benefit from employee stock employee stock plan award — 419 — — — 419 Balances — 419 — — — 419 Balances a of September 30 419 Balances a of September 30 , 2006 855,263 4,355 — a of September 30 , 2006 855,263 4,355 — 5,607 22 of September 30 , 2006 855,263 4,355 — 5,607 22 9,984 September 30 , 2006 855,263 4,355 — 5,607 22 9,984 Components , 2006 855,263 4,355 — 5,607 22 9,984 Components of comprehensive 2006 855,263 4,355 — 5,607 22 9,984 Components of comprehensive income 855,263 4,355 — 5,607 22 9,984 Components of comprehensive income : Net income — — — 3,496 — 3,496 Change in foreign — — — 3,496 — 3,496 Change in foreign currency translation translation — — — — 51 51 Change in unrealized loss — — — — 51 51 Change in unrealized loss on — — — — ( 7 ) ( 7 ) Change — ( 7 ) ( 7 ) Change in unrealized loss — — — — ( 3 ) ( 3 ) Total — ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation — 251 — income 3,537 Stock-based compensation — 251 — — — 251 Common — 251 — — — 251 Common stock issued under stock share withheld for employee tax 17,066 364 — ( 2 ) withheld for employee tax 17,066 364 — ( 2 ) — tax 17,066 364 — ( 2 ) — 362 Tax benefit — ( 2 ) — 362 Tax benefit from employee stock employee stock plan award — 398 — — — 398 Balances — 398 — — — 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 $ 5,368 a of September 29 , 2007 872,329 $ 5,368 $ — of September 29 , 2007 872,329 $ 5,368 $ — $ 29 , 2007 872,329 $ 5,368 $ — $ 9,101 $ $ 5,368 $ — $ 9,101 $ 63 $ 14,532 See $ — $ 9,101 $ 63 $ 14,532 See accompanying Notes $ 9,101 $ 63 $ 14,532 See accompanying Notes to Consolidated to Consolidated Financial Statements . 57 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 29 , 2007 2007 2006 2005 year ended September 29 , 2007 2007 2006 2005 Cash and ended September 29 , 2007 2007 2006 2005 Cash and cash September 29 , 2007 2007 2006 2005 Cash and cash equivalent 29 , 2007 2007 2006 2005 Cash and cash equivalent , beginning of the year $ 6,392 $ 3,491 $ 2,969 Operating the year $ 6,392 $ 3,491 $ 2,969 Operating Activities : $ 6,392 $ 3,491 $ 2,969 Operating Activities : Net income Operating Activities : Net income 3,496 1,989 1,328 Adjustments to reconcile Activities : Net income 3,496 1,989 1,328 Adjustments to reconcile net : Net income 3,496 1,989 1,328 Adjustments to reconcile net income Depreciation , amortization and accretion 317 225 179 Stock-based compensation expense , amortization and accretion 317 225 179 Stock-based compensation expense 242 amortization and accretion 317 225 179 Stock-based compensation expense 242 163 225 179 Stock-based compensation expense 242 163 49 Provision for deferred 179 Stock-based compensation expense 242 163 49 Provision for deferred income Stock-based compensation expense 242 163 49 Provision for deferred income tax Provision for deferred income tax 78 53 50 Excess tax benefit for deferred income tax 78 53 50 Excess tax benefit from deferred income tax 78 53 50 Excess tax benefit from stock from stock option — — 428 Gain on sale of PowerSchool PowerSchool net asset — ( 4 ) — Loss on disposition , plant , and equipment 12 15 9 Changes in operating plant , and equipment 12 15 9 Changes in operating asset , and equipment 12 15 9 Changes in operating asset and Accounts receivable , net ( 385 ) ( 357 ) ( net ( 385 ) ( 357 ) ( 121 ) Inventories ) ( 357 ) ( 121 ) Inventories ( 76 ) ( 121 ) Inventories ( 76 ) ( 105 ) ( Inventories ( 76 ) ( 105 ) ( 64 ) Other ) ( 105 ) ( 64 ) Other current asset ( ) Other current asset ( 1,540 ) ( 1,626 ) ( asset ( 1,540 ) ( 1,626 ) ( 150 ) Other ) ( 1,626 ) ( 150 ) Other asset 81 ( ( 150 ) Other asset 81 ( 1,040 ) ( 35 ) Other asset 81 ( 1,040 ) ( 35 ) Accounts 81 ( 1,040 ) ( 35 ) Accounts payable 1,494 1,611 ( 35 ) Accounts payable 1,494 1,611 328 Other liability 1,751 35 ) Accounts payable 1,494 1,611 328 Other liability 1,751 1,296 ) Accounts payable 1,494 1,611 328 Other liability 1,751 1,296 534 1,494 1,611 328 Other liability 1,751 1,296 534 Cash generated by 1,611 328 Other liability 1,751 1,296 534 Cash generated by operating 328 Other liability 1,751 1,296 534 Cash generated by operating activity Cash generated by operating activity 5,470 2,220 2,535 Investing Activities : generated by operating activity 5,470 2,220 2,535 Investing Activities : Purchases by operating activity 5,470 2,220 2,535 Investing Activities : Purchases of Purchases of short-term investment ( 11,719 ) ( 7,255 ) ( investment ( 11,719 ) ( 7,255 ) ( 11,470 ) Proceeds ) ( 7,255 ) ( 11,470 ) Proceeds from maturity of from maturity of short-term investment 6,483 7,226 8,609 Proceeds from sale maturity of short-term investment 6,483 7,226 8,609 Proceeds from sale of of short-term investment 6,483 7,226 8,609 Proceeds from sale of investment Proceeds from sale of investment 2,941 1,086 586 Purchases of long-term from sale of investment 2,941 1,086 586 Purchases of long-term investment sale of investment 2,941 1,086 586 Purchases of long-term investment ( Purchases of long-term investment ( 17 ) ( 25 ) — investment ( 17 ) ( 25 ) — Proceeds from sale of PowerSchool net asset — 40 — Payment for acquisition of plant , and equipment ( 735 ) ( 657 ) ( equipment ( 735 ) ( 657 ) ( 260 ) Payment ) ( 657 ) ( 260 ) Payment for acquisition of acquisition of intangible asset ( 251 ) — — Other 49 251 ) — — Other 49 ( 58 ) ( 21 — — Other 49 ( 58 ) ( 21 ) Cash 49 ( 58 ) ( 21 ) Cash ( used for generated by investing activity ( 3,249 ) 357 ( 2,556 ) investing activity ( 3,249 ) 357 ( 2,556 ) Financing Activities ( 3,249 ) 357 ( 2,556 ) Financing Activities : Proceeds from issuance of common stock 365 318 543 Excess tax benefit issuance of common stock 365 318 543 Excess tax benefit from of common stock 365 318 543 Excess tax benefit from stock-based tax benefit from stock-based compensation 377 361 — Repurchases of common benefit from stock-based compensation 377 361 — Repurchases of common stock Repurchases of common stock ( 3 ) ( 355 ) — stock ( 3 ) ( 355 ) — Cash generated by Cash generated by financing activity 739 324 543 Increase in cash generated by financing activity 739 324 543 Increase in cash and by financing activity 739 324 543 Increase in cash and cash in cash and cash equivalent 2,960 2,901 522 Cash and cash cash and cash equivalent 2,960 2,901 522 Cash and cash equivalent and cash equivalent 2,960 2,901 522 Cash and cash equivalent , end of the year $ 9,352 $ 6,392 $ 3,491 Supplemental the year $ 9,352 $ 6,392 $ 3,491 Supplemental cash flow $ 9,352 $ 6,392 $ 3,491 Supplemental cash flow disclosure : income tax , net $ 863 $ 194 $ 17 See , net $ 863 $ 194 $ 17 See accompanying Notes $ 863 $ 194 $ 17 See accompanying Notes to Consolidated to Consolidated Financial Statements . 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple 's fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the first quarter of fiscal year 2007 contained 13 week and the of fiscal year 2007 contained 13 week and the first quarter first quarter of fiscal year 2006 contained 14 week . The of fiscal year 2006 contained 14 week . The Company 's The Company 's fiscal year 2007 ended on September 29 , year 2007 ended on September 29 , 2007 and included 52 ended on September 29 , 2007 and included 52 week , 29 , 2007 and included 52 week , while fiscal year week , while fiscal year 2006 included 53 week and fiscal while fiscal year 2006 included 53 week and fiscal year 2005 53 week and fiscal year 2005 included 52 week . Unless and fiscal year 2005 included 52 week . Unless otherwise stated SFAS `` ) No . 133 , Accounting for Derivative Instruments which the hedged transaction affect 59 earnings . The ineffective portion building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 249 million , $ 180 million $ 249 million , $ 180 million , and $ 141 180 million , and $ 141 million during 2007 , 2006 and $ 141 million during 2007 , 2006 , and 2005 141 million during 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Asset Retirement accordance with SFAS No . 143 , Accounting for Asset Retirement asset retirement liability wa $ 18 million and $ 15 million $ 18 million and $ 15 million a of September 29 15 million a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , respectively . 2007 and September 30 , 2006 , respectively . Long-Lived Assets accordance with SFAS No . 144 , Accounting for the Impairment for the Impairment of Long-Lived 60 Assets and for Long-Lived Assets record any material impairment during 2007 , 2006 , and 2005 material impairment during 2007 , 2006 , and 2005 . SFAS 2007 , 2006 , and 2005 . SFAS No . 142 2005 . SFAS No . 142 , Goodwill and Other Intangible test on or about August 31 of each year . The intangible asset impairment charge in 2007 , 2006 , or 2005 impairment charge in 2007 , 2006 , or 2005 . The 2007 , 2006 , or 2005 . The Company established reporting unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 . The Company is currently life over period ranging from 2 to 10 year . Foreign period ranging from 2 to 10 year . Foreign Currency Translation EITF `` ) No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 to Non-Software Deliverables in an SOP `` ) No . 97-2 , Software Revenue Recognition . SAB `` ) No . 104 , Revenue Recognition , for have been transferred . For 61 most of the Company 's accordance with SOP No . 97-2 . If a multiple-element arrangement Company applies EITF No . 00-21 , Revenue Arrangements with Multiple from the SOP No . 97-2 deliverable . If the Company Company applies SOP No . 97-2 to the software and software-related . , SAB No . 104 ) to the deliverable outside scope of SOP No . 97-2 . Revenue on arrangement that value of the specified upgrade 62 right until the future obligation maintenance term . In March 2007 , the Company began shipping Apple TV and in June 2007 began shipping iPhone . For accordance with SOP No . 97-2 . As such , the basis over the currently estimated 24-month economic life of these product pursuant to SOP No . 97-2 , the Company recognizes warranty pursuant to SFAS No . 86 , Computer Software to be have been expensed . In 2007 , the Company determined that both Mac OS X Version 10.5 Leopard ( `` Mac OS achieved technological feasibility . During 2007 , the Company capitalized $ , the Company capitalized $ 75 million of cost associated with accordance with SFAS No . 86 , the capitalized cost related a straight-line basis over a 3 year estimated useful life of of the underlying technology . 63 Total amortization related to capitalized software development cost wa $ 13 million , $ 18 million $ 13 million , $ 18 million , and $ 16 18 million , and $ 16 million in 2007 , 2006 and $ 16 million in 2007 , 2006 , and 2005 16 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Advertising Costs . Advertising expense wa $ 467 million , $ 338 million $ 467 million , $ 338 million , and $ 287 338 million , and $ 287 million for 2007 , 2006 and $ 287 million for 2007 , 2006 , and 2005 287 million for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Stock-Based Compensation . Stock-Based Compensation On September 25 , 2005 , the Company Compensation On September 25 , 2005 , the Company adopted SFAS Company adopted SFAS No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( `` SFAS No ( `` SFAS No . 123R `` ) , Share-Based Payment equity instrument . In January 2005 , the Securities and Exchange ) issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R eliminates the ability to account `` ) Opinion No . 25 , Accounting for Stock Issued award under SFAS No . 123R , consistent with that used disclosure under SFAS No . 123 , Accounting for Stock-Based Compensation Compensation . SFAS No . 123R prohibits recognition of a deferred adoption of SFAS No . 123R , the Company measured compensation by APB Opinion No . 25 . The Company applied the provision of SFAS No . 123 a amended by SFAS No amended by SFAS No . 148 , Accounting for Stock-Based Compensation—Transition Under APB Opinion No . 25 , when the exercise price compensation expense wa recognized . 64 The following table illustrates the provision of SFAS No . 123 to stock-based compensation during 2005 123 to stock-based compensation during 2005 ( in million , except per share amount ) : 2005 Net income $ 1,328 Add : 2005 Net income $ 1,328 Add : Stock-based employee compensation income , net of tax 45 Deduct : Stock-based employee compensation , net of tax ( 118 ) Net income—pro forma $ ) Net income—pro forma $ 1,255 Net income per common share per common share Basic $ 1.64 Diluted $ 1.55 Net income Basic $ 1.64 Diluted $ 1.55 Net income per common share—pro common share—pro forma Basic $ 1.55 Diluted $ 1.47 Further information Basic $ 1.55 Diluted $ 1.47 Further information regarding stock-based compensation can be found in Notes 6 and 7 . Earnings Per found in Notes 6 and 7 . Earnings Per Common Share on earnings per share . 65 The following table set forth Three fiscal year ended September 29 , 2007 2007 2006 2005 year ended September 29 , 2007 2007 2006 2005 Numerator ( ended September 29 , 2007 2007 2006 2005 Numerator ( in September 29 , 2007 2007 2006 2005 Numerator ( in million 29 , 2007 2007 2006 2005 Numerator ( in million ) ) : Net income $ 3,496 $ 1,989 $ 1,328 Denominator Net income $ 3,496 $ 1,989 $ 1,328 Denominator ( in $ 3,496 $ 1,989 $ 1,328 Denominator ( in thousand ) , excluding unvested restricted stock 864,595 844,058 808,439 Effect of dilutive excluding unvested restricted stock 864,595 844,058 808,439 Effect of dilutive security unvested restricted stock 864,595 844,058 808,439 Effect of dilutive security 24,697 808,439 Effect of dilutive security 24,697 33,468 48,439 Denominator for diluted Effect of dilutive security 24,697 33,468 48,439 Denominator for diluted earnings of dilutive security 24,697 33,468 48,439 Denominator for diluted earnings per for diluted earnings per share 889,292 877,526 856,878 Basic earnings per diluted earnings per share 889,292 877,526 856,878 Basic earnings per share earnings per share 889,292 877,526 856,878 Basic earnings per share $ Basic earnings per share $ 4.04 $ 2.36 $ 1.64 Diluted per share $ 4.04 $ 2.36 $ 1.64 Diluted earnings per $ 4.04 $ 2.36 $ 1.64 Diluted earnings per share $ Diluted earnings per share $ 3.93 $ 2.27 $ 1.55 Potentially per share $ 3.93 $ 2.27 $ 1.55 Potentially dilutive security $ 3.93 $ 2.27 $ 1.55 Potentially dilutive security representing 13.7 1.55 Potentially dilutive security representing 13.7 million , 3.9 million , security representing 13.7 million , 3.9 million , and 12.7 million , 3.9 million , and 12.7 million share of common stock for the year ended September 29 , 2007 , September 30 year ended September 29 , 2007 , September 30 , 2006 29 , 2007 , September 30 , 2006 , and September 2007 , September 30 , 2006 , and September 24 , , 2006 , and September 24 , 2005 , respectively , , and September 24 , 2005 , respectively , were excluded basis is also disclosed . 66 Note 2—Financial Instruments Cash , also disclosed . 66 Note 2—Financial Instruments Cash , Cash Equivalents in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 Cash September 29 , 2007 September 30 , 2006 Cash $ 256 , 2007 September 30 , 2006 Cash $ 256 $ 200 30 , 2006 Cash $ 256 $ 200 U.S. Treasury and 2006 Cash $ 256 $ 200 U.S. Treasury and Agency security U.S. Treasury and Agency security 670 52 U.S. Corporate security 5,597 Treasury and Agency security 670 52 U.S. Corporate security 5,597 4,309 670 52 U.S. Corporate security 5,597 4,309 Foreign security 2,829 1,831 52 U.S. Corporate security 5,597 4,309 Foreign security 2,829 1,831 Total security 5,597 4,309 Foreign security 2,829 1,831 Total cash equivalent 9,096 5,597 4,309 Foreign security 2,829 1,831 Total cash equivalent 9,096 6,192 2,829 1,831 Total cash equivalent 9,096 6,192 U.S. Treasury and Agency 1,831 Total cash equivalent 9,096 6,192 U.S. Treasury and Agency security U.S. Treasury and Agency security 358 447 U.S. Corporate security 4,718 Treasury and Agency security 358 447 U.S. Corporate security 4,718 2,701 358 447 U.S. Corporate security 4,718 2,701 Foreign security 958 570 447 U.S. Corporate security 4,718 2,701 Foreign security 958 570 Total security 4,718 2,701 Foreign security 958 570 Total short-term investment 6,034 4,718 2,701 Foreign security 958 570 Total short-term investment 6,034 3,718 958 570 Total short-term investment 6,034 3,718 Total cash , cash 570 Total short-term investment 6,034 3,718 Total cash , cash equivalent , and short-term investment $ 15,386 $ 10,110 The Company 's short-term investment $ 15,386 $ 10,110 The Company 's U.S. Corporate . The Company had $ 11 million in net unrealized loss with stated maturity ranging from 1 to 5 year , a maturity ranging from 1 to 5 year , a of September year , a of September 29 , 2007 , and net a of September 29 , 2007 , and net unrealized loss unrealized loss of approximately $ 687,000 on it investment portfolio , with stated maturity le than 1 year , a of September year , a of September 30 , 2006 . The Company a of September 30 , 2006 . The Company may sell before tax of approximately $ 474,000 in 2007 and net loss of approximately $ 474,000 in 2007 and net loss before tax before tax of approximately $ 434,000 and $ 137,000 in 2006 approximately $ 434,000 and $ 137,000 in 2006 and 2005 , 434,000 and $ 137,000 in 2006 and 2005 , respectively . $ 137,000 in 2006 and 2005 , respectively . As of respectively . As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , $ 1.9 2007 and September 30 , 2006 , $ 1.9 billion and 30 , 2006 , $ 1.9 billion and $ 921 million $ 1.9 billion and $ 921 million , respectively , of had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 had maturity le 2007 and September 30 , 2006 had maturity le than 12 2006 had maturity le than 12 month . In accordance with `` FSP `` ) FAS 115-1 and FAS 124-1 , The ) FAS 115-1 and FAS 124-1 , The Meaning of Other-Than-Temporary unrealized loss position a of 67 September 29 , 2007 and position a of 67 September 29 , 2007 and September 30 of 67 September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , aggregated by 2007 and September 30 , 2006 , aggregated by investment category ( in million ) : 2007 Less than 12 Months 12 ) : 2007 Less than 12 Months 12 Months or Greater 2007 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency security $ 338 $ — $ — $ $ — $ — $ 338 $ — U.S. Corporate security $ — U.S. Corporate security 2,521 ( 12 ) 32 — U.S. Corporate security 2,521 ( 12 ) 32 — 2,553 ( security 2,521 ( 12 ) 32 — 2,553 ( 12 ) ( 12 ) 32 — 2,553 ( 12 ) Foreign security ) 32 — 2,553 ( 12 ) Foreign security 474 ( ( 12 ) Foreign security 474 ( 1 ) 8 — ) Foreign security 474 ( 1 ) 8 — 482 ( security 474 ( 1 ) 8 — 482 ( 1 ) ( 1 ) 8 — 482 ( 1 ) Total $ ) 8 — 482 ( 1 ) Total $ 3,333 $ ( 1 ) Total $ 3,333 $ ( 13 ) $ Total $ 3,333 $ ( 13 ) $ 40 $ — $ ( 13 ) $ 40 $ — $ 3,373 $ $ 40 $ — $ 3,373 $ ( 13 ) 2006 — $ 3,373 $ ( 13 ) 2006 Less than 12 3,373 $ ( 13 ) 2006 Less than 12 Months 12 13 ) 2006 Less than 12 Months 12 Months or Greater 2006 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency security $ 234 $ — $ 26 $ $ 234 $ — $ 26 $ — $ 260 $ $ 26 $ — $ 260 $ — U.S. Corporate security $ — U.S. Corporate security 943 — 102 ( 1 ) U.S. Corporate security 943 — 102 ( 1 ) 1,045 ( security 943 — 102 ( 1 ) 1,045 ( 1 ) — 102 ( 1 ) 1,045 ( 1 ) Foreign security ( 1 ) 1,045 ( 1 ) Foreign security 164 — ( 1 ) Foreign security 164 — 34 — 198 — ) Foreign security 164 — 34 — 198 — Total $ security 164 — 34 — 198 — Total $ 1,341 $ — 198 — Total $ 1,341 $ — $ 162 $ $ 1,341 $ — $ 162 $ ( 1 ) $ — $ 162 $ ( 1 ) $ 1,503 $ ( $ ( 1 ) $ 1,503 $ ( 1 ) The ) $ 1,503 $ ( 1 ) The unrealized loss on the Company 's investment during 2007 in U.S. Corporate security and and foreign security and during 2006 in U.S. Corporate security were temporary in nature . During 2007 , the Company did not security . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company doe not , considerable trade receivables not 68 covered by collateral , third-party One customer accounted for approximately 11 % of trade receivables a trade receivables a of September 29 , 2007 , while no a of September 29 , 2007 , while no customer accounted customer accounted for more than 10 % of trade receivables a trade receivables a of September 30 , 2006 . The following a of September 30 , 2006 . The following table summarizes in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 September September 29 , 2007 September 30 , 2006 September 24 , , 2007 September 30 , 2006 September 24 , 2005 Beginning September 30 , 2006 September 24 , 2005 Beginning allowance balance , 2006 September 24 , 2005 Beginning allowance balance $ 52 2005 Beginning allowance balance $ 52 $ 46 $ 47 Charged allowance balance $ 52 $ 46 $ 47 Charged to cost $ 52 $ 46 $ 47 Charged to cost and expense Charged to cost and expense 12 17 8 Deductions ( 17 to cost and expense 12 17 8 Deductions ( 17 ) cost and expense 12 17 8 Deductions ( 17 ) ( 12 17 8 Deductions ( 17 ) ( 11 ) ( Deductions ( 17 ) ( 11 ) ( 9 ) Ending ) ( 11 ) ( 9 ) Ending allowance balance $ ) Ending allowance balance $ 47 $ 52 $ 46 Vendor allowance balance $ 47 $ 52 $ 46 Vendor Non-Trade Receivables $ 47 $ 52 $ 46 Vendor Non-Trade Receivables The Company current asset , totaled $ 2.4 billion and $ 1.6 billion $ 2.4 billion and $ 1.6 billion a of September 29 1.6 billion a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , respectively . 2007 and September 30 , 2006 , respectively . The Company sheet at fair value . 69 The following table show the currency instrument a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 ( in million 2007 and September 30 , 2006 ( in million ) : in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 Notional September 29 , 2007 September 30 , 2006 Notional Principal Fair , 2007 September 30 , 2006 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 570 $ ( 8 ) $ contract $ 570 $ ( 8 ) $ — $ 351 8 ) $ — $ 351 $ 6 $ 6 Purchased $ — $ 351 $ 6 $ 6 Purchased option $ $ 351 $ 6 $ 6 Purchased option $ 2,564 $ $ 6 Purchased option $ 2,564 $ 10 $ 10 $ Purchased option $ 2,564 $ 10 $ 10 $ 1,256 $ $ 2,564 $ 10 $ 10 $ 1,256 $ 9 $ $ 10 $ 10 $ 1,256 $ 9 $ 9 Sold $ 10 $ 1,256 $ 9 $ 9 Sold option $ $ 1,256 $ 9 $ 9 Sold option $ 1,498 $ $ 9 Sold option $ 1,498 $ ( 2 ) $ option $ 1,498 $ ( 2 ) $ — $ 80 2 ) $ — $ 80 $ ( 1 ) $ — $ 80 $ ( 1 ) $ — Foreign exchange hedge : Spot/Forward contract $ 1,768 $ ( 2 ) $ contract $ 1,768 $ ( 2 ) $ — $ 1,103 2 ) $ — $ 1,103 $ 2 $ 2 Purchased $ — $ 1,103 $ 2 $ 2 Purchased option $ $ 1,103 $ 2 $ 2 Purchased option $ 161 $ $ 2 Purchased option $ 161 $ 1 $ 1 $ Purchased option $ 161 $ 1 $ 1 $ 167 $ $ 161 $ 1 $ 1 $ 167 $ 1 $ $ 1 $ 1 $ 167 $ 1 $ — The $ 1 $ 167 $ 1 $ — The notional principal market information a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 . Although the 2007 and September 30 , 2006 . Although the table above related cost are recognized . 70 Typically , the Company hedge time horizon of up to 6 month . Derivative instrument designated period or within a subsequent 2 month time period . Deferred net gain of approximately $ 672,000 and $ 421,000 in 2007 approximately $ 672,000 and $ 421,000 in 2007 and 2006 , 672,000 and $ 421,000 in 2007 and 2006 , respectively , $ 421,000 in 2007 and 2006 , respectively , and a a net loss of $ 1.6 million in 2005 in other of $ 1.6 million in 2005 in other income and expense condition . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had a flow hedge of approximately $ 468,000 , net of tax , the second quarter of fiscal 2008 . The net gain or For the year ended September 29 , 2007 and September 30 year ended September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , the Company 2007 and September 30 , 2006 , the Company had a a net loss of $ 2.6 million and a net gain a net gain of $ 7.4 million , respectively , included income and expense . Note 3—Consolidated Financial Statement Details ( in million ) Other Current Assets 2007 2006 Vendor non-trade receivables $ ) Other Current Assets 2007 2006 Vendor non-trade receivables $ 2,392 2006 Vendor non-trade receivables $ 2,392 $ 1,593 NAND flash memory non-trade receivables $ 2,392 $ 1,593 NAND flash memory prepayment 417 1,593 NAND flash memory prepayment 417 208 Other current asset 996 NAND flash memory prepayment 417 208 Other current asset 996 469 417 208 Other current asset 996 469 Total other current asset 208 Other current asset 996 469 Total other current asset $ Total other current asset $ 3,805 $ 2,270 71 Property , current asset $ 3,805 $ 2,270 71 Property , Plant , asset $ 3,805 $ 2,270 71 Property , Plant , and , Plant , and Equipment 2007 2006 Land and building $ Plant , and Equipment 2007 2006 Land and building $ 762 2006 Land and building $ 762 $ 626 Machinery , equipment and building $ 762 $ 626 Machinery , equipment , and equipment , and internal-use software 954 595 Office furniture and equipment , and internal-use software 954 595 Office furniture and equipment 106 595 Office furniture and equipment 106 94 Leasehold improvement 1,019 760 Office furniture and equipment 106 94 Leasehold improvement 1,019 760 2,841 equipment 106 94 Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation 106 94 Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and 94 Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and amortization Leasehold improvement 1,019 760 2,841 2,075 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,009 ) ( 794 ) Net amortization ( 1,009 ) ( 794 ) Net property , plant plant , and equipment $ 1,832 $ 1,281 Other Assets 2007 and equipment $ 1,832 $ 1,281 Other Assets 2007 2006 Long-term 1,832 $ 1,281 Other Assets 2007 2006 Long-term NAND flash memory $ 1,281 Other Assets 2007 2006 Long-term NAND flash memory prepayment NAND flash memory prepayment $ 625 $ 1,042 Non-current deferred tax memory prepayment $ 625 $ 1,042 Non-current deferred tax asset 88 1,042 Non-current deferred tax asset 88 — Capitalized software development cost software development cost , net 83 21 Other asset 426 175 development cost , net 83 21 Other asset 426 175 Total net 83 21 Other asset 426 175 Total other asset $ 83 21 Other asset 426 175 Total other asset $ 1,222 175 Total other asset $ 1,222 $ 1,238 Accrued Expenses 2007 other asset $ 1,222 $ 1,238 Accrued Expenses 2007 2006 Deferred 1,222 $ 1,238 Accrued Expenses 2007 2006 Deferred revenue—current $ 1,410 $ 1,238 Accrued Expenses 2007 2006 Deferred revenue—current $ 1,410 $ 2007 2006 Deferred revenue—current $ 1,410 $ 718 Deferred margin on Deferred revenue—current $ 1,410 $ 718 Deferred margin on component sale Deferred margin on component sale 545 324 Other accrued tax liability margin on component sale 545 324 Other accrued tax liability 488 324 Other accrued tax liability 488 388 Accrued marketing and distribution Other accrued tax liability 488 388 Accrued marketing and distribution 288 388 Accrued marketing and distribution 288 298 Accrued compensation and employee Accrued marketing and distribution 288 298 Accrued compensation and employee benefit Accrued compensation and employee benefit 254 221 Accrued warranty and related compensation and employee benefit 254 221 Accrued warranty and related cost Accrued warranty and related cost 230 284 Other current liability 1,114 warranty and related cost 230 284 Other current liability 1,114 820 230 284 Other current liability 1,114 820 Total accrued expense $ 284 Other current liability 1,114 820 Total accrued expense $ 4,329 820 Total accrued expense $ 4,329 $ 3,053 Non-Current Liabilities 2007 accrued expense $ 4,329 $ 3,053 Non-Current Liabilities 2007 2006 Deferred 4,329 $ 3,053 Non-Current Liabilities 2007 2006 Deferred revenue—non-current $ 830 $ 3,053 Non-Current Liabilities 2007 2006 Deferred revenue—non-current $ 830 $ 2007 2006 Deferred revenue—non-current $ 830 $ 383 Deferred tax liability Deferred revenue—non-current $ 830 $ 383 Deferred tax liability 619 381 $ 383 Deferred tax liability 619 381 Other non-current liability 67 383 Deferred tax liability 619 381 Other non-current liability 67 14 619 381 Other non-current liability 67 14 Total non-current liability $ 381 Other non-current liability 67 14 Total non-current liability $ 1,516 14 Total non-current liability $ 1,516 $ 778 72 Other Income non-current liability $ 1,516 $ 778 72 Other Income and Expense liability $ 1,516 $ 778 72 Other Income and Expense 2007 72 Other Income and Expense 2007 2006 2005 Interest income $ Other Income and Expense 2007 2006 2005 Interest income $ 647 Income and Expense 2007 2006 2005 Interest income $ 647 $ 2006 2005 Interest income $ 647 $ 394 $ 183 Other Interest income $ 647 $ 394 $ 183 Other income ( $ 647 $ 394 $ 183 Other income ( expense ) expense ) , net ( 48 ) ( 29 ) ( net ( 48 ) ( 29 ) ( 18 ) Total ) ( 29 ) ( 18 ) Total other income and other income and expense $ 599 $ 365 $ 165 Note and expense $ 599 $ 365 $ 165 Note 4—Goodwill and $ 599 $ 365 $ 165 Note 4—Goodwill and Other Intangible $ 365 $ 165 Note 4—Goodwill and Other Intangible Assets The life over period ranging from 2 to 10 year . The period ranging from 2 to 10 year . The following table in million ) : September 29 , 2007 September 30 , ) : September 29 , 2007 September 30 , 2006 Gross September 29 , 2007 September 30 , 2006 Gross Carrying Amount , 2007 September 30 , 2006 Gross Carrying Amount Accumulated Amortization and amortizable acquired technology $ 276 $ ( 77 ) $ technology $ 276 $ ( 77 ) $ 199 $ 181 $ ( 77 ) $ 199 $ 181 $ ( 42 77 ) $ 199 $ 181 $ ( 42 ) $ 199 $ 181 $ ( 42 ) $ 139 Indefinite lived $ ( 42 ) $ 139 Indefinite lived and unamortizable trademark Indefinite lived and unamortizable trademark 100 — 100 — — — and unamortizable trademark 100 — 100 — — — Total acquired Total acquired intangible asset $ 376 $ ( 77 ) $ asset $ 376 $ ( 77 ) $ 299 $ 181 $ ( 77 ) $ 299 $ 181 $ ( 42 77 ) $ 299 $ 181 $ ( 42 ) $ 299 $ 181 $ ( 42 ) $ 139 Goodwill $ $ ( 42 ) $ 139 Goodwill $ 38 $ — ) $ 139 Goodwill $ 38 $ — $ 38 $ $ 38 $ — $ 38 $ 38 $ — $ $ — $ 38 $ 38 $ — $ 38 As $ 38 $ — $ 38 As of September 29 , $ 38 As of September 29 , 2007 , and September As of September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 , the weighted-average , and September 30 , 2006 , the weighted-average amortization period period for acquired technology wa 7.1 year and 8.5 year , technology wa 7.1 year and 8.5 year , respectively . During year , respectively . During 2006 , the Company sold certain Company reduced goodwill by $ 31 million for the outstanding balance of PowerSchool , Inc. in 2001 and recognized a $ 4 2001 and recognized a $ 4 million pre-tax gain , which ) : Fiscal Years : 2008 $ 52 2009 37 2010 Fiscal Years : 2008 $ 52 2009 37 2010 28 2011 Years : 2008 $ 52 2009 37 2010 28 2011 25 : 2008 $ 52 2009 37 2010 28 2011 25 2012 2008 $ 52 2009 37 2010 28 2011 25 2012 19 $ 52 2009 37 2010 28 2011 25 2012 19 Thereafter 52 2009 37 2010 28 2011 25 2012 19 Thereafter 38 2009 37 2010 28 2011 25 2012 19 Thereafter 38 Total 37 2010 28 2011 25 2012 19 Thereafter 38 Total $ 2010 28 2011 25 2012 19 Thereafter 38 Total $ 199 2011 25 2012 19 Thereafter 38 Total $ 199 Amortization expense 19 Thereafter 38 Total $ 199 Amortization expense related to acquired acquired intangible asset wa $ 35 million , $ 12 million $ 35 million , $ 12 million , and $ 9 12 million , and $ 9 million in 2007 , 2006 and $ 9 million in 2007 , 2006 , and 2005 9 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . 73 Note and 2005 , respectively . 73 Note 5—Income Taxes The provision , respectively . 73 Note 5—Income Taxes The provision for income ( in million ) : 2007 2006 2005 Federal : Current in million ) : 2007 2006 2005 Federal : Current $ million ) : 2007 2006 2005 Federal : Current $ 1,219 2005 Federal : Current $ 1,219 $ 619 $ 305 Deferred : Current $ 1,219 $ 619 $ 305 Deferred 85 56 $ 1,219 $ 619 $ 305 Deferred 85 56 144 1,304 $ 619 $ 305 Deferred 85 56 144 1,304 675 449 619 $ 305 Deferred 85 56 144 1,304 675 449 State $ 305 Deferred 85 56 144 1,304 675 449 State : 305 Deferred 85 56 144 1,304 675 449 State : Current Deferred 85 56 144 1,304 675 449 State : Current 112 85 56 144 1,304 675 449 State : Current 112 56 675 449 State : Current 112 56 66 Deferred 9 14 449 State : Current 112 56 66 Deferred 9 14 ( State : Current 112 56 66 Deferred 9 14 ( 91 Current 112 56 66 Deferred 9 14 ( 91 ) 121 112 56 66 Deferred 9 14 ( 91 ) 121 70 66 Deferred 9 14 ( 91 ) 121 70 ( 25 9 14 ( 91 ) 121 70 ( 25 ) Foreign 14 ( 91 ) 121 70 ( 25 ) Foreign : 91 ) 121 70 ( 25 ) Foreign : Current 103 25 ) Foreign : Current 103 101 59 Deferred ( 16 ) Foreign : Current 103 101 59 Deferred ( 16 ) Foreign : Current 103 101 59 Deferred ( 16 ) ( 103 101 59 Deferred ( 16 ) ( 17 ) ( Deferred ( 16 ) ( 17 ) ( 3 ) 87 ) ( 17 ) ( 3 ) 87 84 56 Provision 17 ) ( 3 ) 87 84 56 Provision for income ) ( 3 ) 87 84 56 Provision for income tax ( 3 ) 87 84 56 Provision for income tax $ Provision for income tax $ 1,512 $ 829 $ 480 The income tax $ 1,512 $ 829 $ 480 The foreign provision $ 1,512 $ 829 $ 480 The foreign provision for income foreign pretax earnings of $ 2.2 billion , $ 1.5 billion $ 2.2 billion , $ 1.5 billion , and $ 922 1.5 billion , and $ 922 million in 2007 , 2006 and $ 922 million in 2007 , 2006 , and 2005 922 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . As of respectively . As of September 29 , 2007 , $ 6.5 As of September 29 , 2007 , $ 6.5 billion of 29 , 2007 , $ 6.5 billion of the Company 's a cumulative total of $ 2.4 billion of such earnings . be recovered or settled . 74 As of September 29 , . 74 As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , the significant 2007 and September 30 , 2006 , the significant component of ( in million ) : 2007 2006 Deferred tax asset : in million ) : 2007 2006 Deferred tax asset : Accrued liability and other reserve $ 679 $ 485 Tax loss and other reserve $ 679 $ 485 Tax loss and credit 8 485 Tax loss and credit 8 55 Basis of capital asset Tax loss and credit 8 55 Basis of capital asset and of capital asset and investment 146 124 Accounts receivable and inventory capital asset and investment 146 124 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 64 45 Other 161 30 Total receivable and inventory reserve 64 45 Other 161 30 Total deferred inventory reserve 64 45 Other 161 30 Total deferred tax asset reserve 64 45 Other 161 30 Total deferred tax asset 1,058 30 Total deferred tax asset 1,058 739 Less valuation allowance 5 Total deferred tax asset 1,058 739 Less valuation allowance 5 5 1,058 739 Less valuation allowance 5 5 Net deferred tax asset 739 Less valuation allowance 5 5 Net deferred tax asset 1,053 5 Net deferred tax asset 1,053 734 Deferred tax liability : Net deferred tax asset 1,053 734 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 803 514 Total deferred tax liability Unremitted earnings of subsidiary 803 514 Total deferred tax liability 803 514 Total deferred tax liability 803 514 Net deferred tax asset Total deferred tax liability 803 514 Net deferred tax asset $ Net deferred tax asset $ 250 $ 220 As of September tax asset $ 250 $ 220 As of September 29 , $ 220 As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company ha tax tax effected amount of $ 8 million . As of September million . As of September 29 , 2007 and September 30 As of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , a valuation 2007 and September 30 , 2006 , a valuation allowance of a valuation allowance of $ 5 million wa recorded against the federal income tax rate ( 35 % in 2007 , 2006 rate ( 35 % in 2007 , 2006 , and 2005 35 % in 2007 , 2006 , and 2005 ) to 2007 , 2006 , and 2005 ) to income before provision ( in million ) : 2007 2006 2005 Computed expected tax in million ) : 2007 2006 2005 Computed expected tax $ million ) : 2007 2006 2005 Computed expected tax $ 1,753 2005 Computed expected tax $ 1,753 $ 987 $ 633 State expected tax $ 1,753 $ 987 $ 633 State tax , $ 1,753 $ 987 $ 633 State tax , net of , net of federal effect 140 86 ( 19 ) Indefinitely net of federal effect 140 86 ( 19 ) Indefinitely invested federal effect 140 86 ( 19 ) Indefinitely invested earnings of earnings of foreign subsidiary ( 297 ) ( 224 ) ( subsidiary ( 297 ) ( 224 ) ( 98 ) Nondeductible ) ( 224 ) ( 98 ) Nondeductible executive compensation 6 98 ) Nondeductible executive compensation 6 11 14 Research and development ) Nondeductible executive compensation 6 11 14 Research and development credit Nondeductible executive compensation 6 11 14 Research and development credit , development credit , net ( 54 ) ( 12 ) ( net ( 54 ) ( 12 ) ( 26 ) Other ) ( 12 ) ( 26 ) Other item ( 36 26 ) Other item ( 36 ) ( 19 ) ( item ( 36 ) ( 19 ) ( 24 ) Provision ) ( 19 ) ( 24 ) Provision for income tax Provision for income tax $ 1,512 $ 829 $ 480 Effective income tax $ 1,512 $ 829 $ 480 Effective tax rate $ 1,512 $ 829 $ 480 Effective tax rate 30 % $ 480 Effective tax rate 30 % 29 % 27 % Effective tax rate 30 % 29 % 27 % The Company rate 30 % 29 % 27 % The Company 's income stock option transaction were $ 398 million , $ 419 million $ 398 million , $ 419 million , and $ 428 419 million , and $ 428 million in 2007 , 2006 and $ 428 million in 2007 , 2006 , and 2005 428 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively , and were of Shareholders ' Equity . 75 The Internal Revenue Service ( tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In such resolution occurs . In 2007 and 2006 , the Company occurs . In 2007 and 2006 , the Company recorded tax recorded tax benefit of $ 63 million and $ 20 million $ 63 million and $ 20 million , respectively , due in the U.S . Note 6—Shareholders ' Equity Preferred Stock The treasury stock method . During 2007 and 2006 , 45,000 and method . During 2007 and 2006 , 45,000 and 2.47 million During 2007 and 2006 , 45,000 and 2.47 million , respectively and 2006 , 45,000 and 2.47 million , respectively , previously total share withheld of approximately 20,000 and 990,000 for 2007 and withheld of approximately 20,000 and 990,000 for 2007 and 2006 , approximately 20,000 and 990,000 for 2007 and 2006 , respectively , and 990,000 for 2007 and 2006 , respectively , wa based the taxing authority were $ 3 million and $ 59 million $ 3 million and $ 59 million in 2007 and 2006 and $ 59 million in 2007 and 2006 , respectively , 59 million in 2007 and 2006 , respectively , and are Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company 's Board 's Board of Directors granted 10 million share of restricted stock CEO that vested on March 19 , 2006 . The amount vested on March 19 , 2006 . The amount of the period . Upon vesting during 2006 , the 10 million share vesting during 2006 , the 10 million share of restricted stock a fair value of $ 646.6 million and had grant-date fair grant-date fair value of $ 7.48 per share . The restricted statutory obligation for the applicable 76 income and other employment tax The total share withheld of 4.6 million were based on the closing stock price of $ 64.66 . The remaining share net the taxing authority wa $ 296 million in 2006 and are wa $ 296 million in 2006 and are reflected a a For the year ended September 30 , 2006 and September 24 year ended September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , compensation expense 2006 and September 24 , 2005 , compensation expense related to to restricted stock wa $ 4.6 million and $ 24.9 million $ 4.6 million and $ 24.9 million , respectively . Stock Stock Repurchase Plan In July 1999 , the Company 's Board to repurchase up to $ 500 million of it common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 29 , 2007 . Comprehensive Income a of September 29 , 2007 . Comprehensive Income Comprehensive income ( in million ) : 2007 2006 2005 Unrealized loss on in million ) : 2007 2006 2005 Unrealized loss on available-for-sale million ) : 2007 2006 2005 Unrealized loss on available-for-sale security on available-for-sale security $ ( 7 ) $ — $ ( ) $ — $ ( 4 ) Unrealized gain on derivative gain on derivative instrument — 3 4 Cumulative foreign currency translation on derivative instrument — 3 4 Cumulative foreign currency translation 70 4 Cumulative foreign currency translation 70 19 — Accumulated other comprehensive Cumulative foreign currency translation 70 19 — Accumulated other comprehensive income Accumulated other comprehensive income $ 63 $ 22 $ — The comprehensive income $ 63 $ 22 $ — The change in comprehensive income wa $ ( 7 ) million , $ 4 7 ) million , $ 4 million , and zero , , net of tax in 2007 , 2006 , and 2005 of tax in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . The tax on available-for-sale security wa $ 4 million , $ ( 2 4 million , $ ( 2 ) million , and zero million , and zero for 2007 , 2006 , and 2005 and zero for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . 77 The and 2005 , respectively . 77 The following table summarizes activity ( in million ) : 2007 2006 2005 Changes in fair in million ) : 2007 2006 2005 Changes in fair value million ) : 2007 2006 2005 Changes in fair value of value of derivative $ ( 1 ) $ 11 $ 7 $ ( 1 ) $ 11 $ 7 Adjustment for net 1 ) $ 11 $ 7 Adjustment for net ( loss included in net income ( 2 ) ( 12 ) 1 income ( 2 ) ( 12 ) 1 Change in unrealized 2 ) ( 12 ) 1 Change in unrealized gain on on derivative instrument $ ( 3 ) $ ( 1 ) ( 3 ) $ ( 1 ) $ 8 The tax $ ( 1 ) $ 8 The tax effect related to value of derivative wa $ 1 million , $ ( 8 1 million , $ ( 8 ) million , and $ million , and $ ( 3 ) million for 2007 , ( 3 ) million for 2007 , 2006 , and 2005 ) million for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . The tax to net income wa $ 2 million , $ 8 million $ 2 million , $ 8 million , and $ ( million , and $ ( 2 ) million for 2007 , ( 2 ) million for 2007 , 2006 , and 2005 ) million for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the `` 2003 Plan `` ) is a , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date or quarterly vesting . The 2003 Plan permit the granting of and performance-based award . During 2007 , the Company 's shareholder approved an amendment to the 2003 Plan to increase the number share authorized for issuance by 28 million share . 1997 Employee by 28 million share . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board Board of Directors approved the 1997 Employee Stock Option Plan ( Option Plan ( the `` 1997 Plan `` ) , a , option granted under the 1997 Plan generally expire 7 to the 1997 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date quarterly vesting . In October 2003 , the Company terminated the , the Company terminated the 1997 Plan and no new option granted from this plan . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company 's Board wa approved by shareholder in 1998 . Pursuant to the Director granted an option to acquire 30,000 share of common stock upon receive an option to acquire 10,000 share of common stock ( date of grant . Rule 10b5-1 Trading Plans Certain of the into trading plan pursuant to 78 Rule 10b5-1 ( c ) plan pursuant to 78 Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee 's to a maximum of $ 25,000 in any calendar year . any calendar year . During 2007 , the Company 's shareholder share authorized for issuance by 6 million share and limit the in any calendar year to 3 million share . As of share . As of September 29 , 2007 , approximately 7 As of September 29 , 2007 , approximately 7 million share 29 , 2007 , approximately 7 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 15,500 for calendar year 2007 ) $ 15,500 for calendar year 2007 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee 's , up to a maximum 6 % of the employee 's the Savings Plan were $ 39 million , $ 33 million $ 39 million , $ 33 million , and $ 28 33 million , and $ 28 million in 2007 , 2006 and $ 28 million in 2007 , 2006 , and 2005 28 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . 79 Stock and 2005 , respectively . 79 Stock Option Activity A summary Intrinsic Value Balance at September 25 , 2004 24,050 110,722 $ Balance at September 25 , 2004 24,050 110,722 $ 10.52 Additional at September 25 , 2004 24,050 110,722 $ 10.52 Additional option September 25 , 2004 24,050 110,722 $ 10.52 Additional option authorized , 2004 24,050 110,722 $ 10.52 Additional option authorized 49,000 — $ 10.52 Additional option authorized 49,000 — — Restricted stock unit Restricted stock unit granted ( 460 ) — — Options granted — — Options granted ( 16,214 ) 16,214 $ 42.52 Options Options granted ( 16,214 ) 16,214 $ 42.52 Options cancelled 3,844 ( 16,214 ) 16,214 $ 42.52 Options cancelled 3,844 ( 3,844 16,214 $ 42.52 Options cancelled 3,844 ( 3,844 ) $ 13.28 42.52 Options cancelled 3,844 ( 3,844 ) $ 13.28 Options exercised 3,844 ( 3,844 ) $ 13.28 Options exercised — ( 49,871 13.28 Options exercised — ( 49,871 ) $ 10.05 Restricted stock — ( 49,871 ) $ 10.05 Restricted stock unit cancelled 230 10.05 Restricted stock unit cancelled 230 — — Plan share expired — Plan share expired ( 1,493 ) — — Balance at — — Balance at September 24 , 2005 58,957 73,221 $ Balance at September 24 , 2005 58,957 73,221 $ 17.79 Restricted at September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock unit , 2005 58,957 73,221 $ 17.79 Restricted stock unit granted ( Restricted stock unit granted ( 2,950 ) — — Options granted — — Options granted ( 3,881 ) 3,881 $ 65.28 Options Options granted ( 3,881 ) 3,881 $ 65.28 Options cancelled 2,325 ( 3,881 ) 3,881 $ 65.28 Options cancelled 2,325 ( 2,325 3,881 $ 65.28 Options cancelled 2,325 ( 2,325 ) $ 29.32 65.28 Options cancelled 2,325 ( 2,325 ) $ 29.32 Restricted stock 2,325 ( 2,325 ) $ 29.32 Restricted stock unit cancelled 625 29.32 Restricted stock unit cancelled 625 — — Options exercised — — Options exercised — ( 21,795 ) $ 11.78 Plan share — ( 21,795 ) $ 11.78 Plan share expired ( 82 11.78 Plan share expired ( 82 ) — — Balance at — — Balance at September 30 , 2006 54,994 52,982 $ Balance at September 30 , 2006 54,994 52,982 $ 23.23 Additional at September 30 , 2006 54,994 52,982 $ 23.23 Additional share September 30 , 2006 54,994 52,982 $ 23.23 Additional share authorized , 2006 54,994 52,982 $ 23.23 Additional share authorized 28,000 — $ 23.23 Additional share authorized 28,000 — — Restricted stock unit Restricted stock unit granted ( 2,640 ) — — Options granted — — Options granted ( 14,010 ) 14,010 $ 94.52 Options Options granted ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 Restricted stock 1,471 ( 1,471 ) $ 55.38 Restricted stock unit cancelled 20 55.38 Restricted stock unit cancelled 20 — — Options exercised — — Options exercised — ( 15,770 ) $ 18.32 Plan share — ( 15,770 ) $ 18.32 Plan share expired ( 8 18.32 Plan share expired ( 8 ) — — Balance at — — Balance at September 29 , 2007 67,827 49,751 $ Balance at September 29 , 2007 67,827 49,751 $ 43.91 4.57 at September 29 , 2007 67,827 49,751 $ 43.91 4.57 $ September 29 , 2007 67,827 49,751 $ 43.91 4.57 $ 5,450,528 , 2007 67,827 49,751 $ 43.91 4.57 $ 5,450,528 Exercisable at 2007 67,827 49,751 $ 43.91 4.57 $ 5,450,528 Exercisable at September 49,751 $ 43.91 4.57 $ 5,450,528 Exercisable at September 29 , $ 5,450,528 Exercisable at September 29 , 2007 27,319 $ 23.13 Exercisable at September 29 , 2007 27,319 $ 23.13 3.80 $ at September 29 , 2007 27,319 $ 23.13 3.80 $ 3,560,682 29 , 2007 27,319 $ 23.13 3.80 $ 3,560,682 Expected to , 2007 27,319 $ 23.13 3.80 $ 3,560,682 Expected to Vest 27,319 $ 23.13 3.80 $ 3,560,682 Expected to Vest after September Expected to Vest after September 29 , 2007 21,260 $ 72.69 Vest after September 29 , 2007 21,260 $ 72.69 5.51 $ after September 29 , 2007 21,260 $ 72.69 5.51 $ 1,717,383 29 , 2007 21,260 $ 72.69 5.51 $ 1,717,383 Aggregate intrinsic , 2007 21,260 $ 72.69 5.51 $ 1,717,383 Aggregate intrinsic value 21,260 $ 72.69 5.51 $ 1,717,383 Aggregate intrinsic value represents the time of exercise wa $ 1.3 billion , $ 1.2 billion $ 1.3 billion , $ 1.2 billion , and $ 1.1 1.2 billion , and $ 1.1 billion for 2007 , 2006 and $ 1.1 billion for 2007 , 2006 , and 2005 1.1 billion for 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . The Company . The Company recognized $ 242 million , $ 163 million $ 242 million , $ 163 million and $ 49 million $ 163 million and $ 49 million of stock-based compensation expense of stock-based compensation expense in 2007 , 2006 and 2005 , compensation expense in 2007 , 2006 and 2005 , respectively . in 2007 , 2006 and 2005 , respectively . Capitalized stock-based stock-based compensation cost were $ 9 million a of September 29 9 million a of September 29 , 2007 . There were a of September 29 , 2007 . There were no stock-based cost capitalized a of September 30 , 2006 . The income a of September 30 , 2006 . The income tax benefit stock-based compensation expense wa $ 81 million and $ 39 million $ 81 million and $ 39 million for the year ended for the year ended September 29 , 2007 and September 30 year ended September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , respectively . 2007 and September 30 , 2006 , respectively . The total expected to vest wa $ 631 million and $ 375 million $ 631 million and $ 375 million a of September 29 375 million a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , respectively . 2007 and September 30 , 2006 , respectively . The total compensation cost a of September 29 , 2007 , is expected a of September 29 , 2007 , is expected to be over a weighted-average period of 2.92 year . 80 Note 6—Shareholders period of 2.92 year . 80 Note 6—Shareholders ' Equity ( 2.92 year . 80 Note 6—Shareholders ' Equity ( Continued ) Continued ) As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company had 4.7 2007 , the Company had 4.7 million RSUs outstanding with a grant-date fair value of $ 249 million that were excluded from value of RSUs granted during 2007 , 2006 , and 2005 RSUs granted during 2007 , 2006 , and 2005 wa $ 2007 , 2006 , and 2005 wa $ 88.51 per share , and 2005 wa $ 88.51 per share , $ 70.92 88.51 per share , $ 70.92 per share , and $ per share , and $ 45.04 per share , respectively . value of RSUs wa $ 701.3 million and $ 262.5 million $ 701.3 million and $ 262.5 million at September 29 , $ 262.5 million at September 29 , 2007 and September 30 million at September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , respectively . 2007 and September 30 , 2006 , respectively . RSUs that . RSUs that vested during 2007 and 2006 totaled 45,000 and that vested during 2007 and 2006 totaled 45,000 and 2.47 million during 2007 and 2006 totaled 45,000 and 2.47 million , respectively and 2006 totaled 45,000 and 2.47 million , respectively , and a fair value of $ 6.1 million and $ 148.5 million $ 6.1 million and $ 148.5 million , respectively , a of RSUs granted after April 2005 have been deducted from the of RSUs granted . Note 7—Stock-Based Compensation The Company ha provided pro forma disclosure in Note 1 of the effect on net for the year ended September 24 , 2005 a if the year ended September 24 , 2005 a if the fair value weighted average assumption used for 2007 , 2006 , and 2005 assumption used for 2007 , 2006 , and 2005 and the 2007 , 2006 , and 2005 and the resulting estimate of period are a follows : 2007 2006 2005 Expected life of are a follows : 2007 2006 2005 Expected life of stock a follows : 2007 2006 2005 Expected life of stock option Expected life of stock option 3.46 year 3.56 year 3.57 year of stock option 3.46 year 3.56 year 3.57 year Expected life option 3.46 year 3.56 year 3.57 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 4.61 6 month Interest rate—stock option 4.61 % 4.60 % 3.73 % Interest rate—stock option 4.61 % 4.60 % 3.73 % Interest rate—stock option 4.61 % 4.60 % 3.73 % Interest rate—stock purchase 5.13 3.73 % Interest rate—stock purchase 5.13 % 4.29 % 2.54 % Interest rate—stock purchase 5.13 % 4.29 % 2.54 % Volatility—stock option purchase 5.13 % 4.29 % 2.54 % Volatility—stock option 38.13 % % 2.54 % Volatility—stock option 38.13 % 40.34 % 39.52 % % Volatility—stock option 38.13 % 40.34 % 39.52 % Volatility—stock purchase option 38.13 % 40.34 % 39.52 % Volatility—stock purchase 39.22 % % 39.52 % Volatility—stock purchase 39.22 % 39.56 % 40.88 % % Volatility—stock purchase 39.22 % 39.56 % 40.88 % Dividend yield purchase 39.22 % 39.56 % 40.88 % Dividend yield — — granted during the year $ 31.86 $ 23.16 $ 14.41 Weighted-average the year $ 31.86 $ 23.16 $ 14.41 Weighted-average fair value $ 31.86 $ 23.16 $ 14.41 Weighted-average fair value of stock purchase during the year $ 20.90 $ 14.06 $ 7.55 Note the year $ 20.90 $ 14.06 $ 7.55 Note 8—Commitments and $ 20.90 $ 14.06 $ 7.55 Note 8—Commitments and Contingencies Lease $ 14.06 $ 7.55 Note 8—Commitments and Contingencies Lease Commitments The are generally for term of 3 to 15 year and generally for term of 3 to 15 year and generally 81 provide to 15 year and generally 81 provide renewal option for term renewal option for term of 3 to 7 additional year . for term of 3 to 7 additional year . Leases for space are for term of 5 to 20 year , the for term of 5 to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 29 , 2007 , the Company As of September 29 , 2007 , the Company 's total noncancelable operating lease were $ 1.4 billion , of which $ billion , of which $ 1.1 billion related to lease for noncancelable lease , wa $ 151 million , $ 138 million $ 151 million , $ 138 million , and $ 140 138 million , and $ 140 million in 2007 , 2006 and $ 140 million in 2007 , 2006 , and 2005 140 million in 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Future minimum one year a of September 29 , 2007 , are a a of September 29 , 2007 , are a follows ( million ) : Fiscal Years 2008 $ 155 2009 172 2010 : Fiscal Years 2008 $ 155 2009 172 2010 173 2011 Fiscal Years 2008 $ 155 2009 172 2010 173 2011 160 Years 2008 $ 155 2009 172 2010 173 2011 160 2012 2008 $ 155 2009 172 2010 173 2011 160 2012 148 $ 155 2009 172 2010 173 2011 160 2012 148 Thereafter 155 2009 172 2010 173 2011 160 2012 148 Thereafter 617 2009 172 2010 173 2011 160 2012 148 Thereafter 617 Total 172 2010 173 2011 160 2012 148 Thereafter 617 Total minimum 2010 173 2011 160 2012 148 Thereafter 617 Total minimum lease 2011 160 2012 148 Thereafter 617 Total minimum lease payment $ Total minimum lease payment $ 1,425 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service pursuant to SOP No . 97-2 , the Company recognizes warranty to develop these update . 82 The following table reconciles change ( in million ) : 2007 2006 2005 Beginning accrued warranty in million ) : 2007 2006 2005 Beginning accrued warranty and million ) : 2007 2006 2005 Beginning accrued warranty and related warranty and related cost $ 284 $ 188 $ 105 Cost related cost $ 284 $ 188 $ 105 Cost of warranty $ 284 $ 188 $ 105 Cost of warranty claim ( Cost of warranty claim ( 281 ) ( 267 ) ( claim ( 281 ) ( 267 ) ( 188 ) Accruals ) ( 267 ) ( 188 ) Accruals for product warranty ) Accruals for product warranty 227 363 271 Ending accrued warranty Accruals for product warranty 227 363 271 Ending accrued warranty and for product warranty 227 363 271 Ending accrued warranty and related warranty and related cost $ 230 $ 284 $ 188 The related cost $ 230 $ 284 $ 188 The Company generally $ 230 $ 284 $ 188 The Company generally doe not cost a of either September 29 , 2007 or September 30 of either September 29 , 2007 or September 30 , 2006 29 , 2007 or September 30 , 2006 . Concentrations in 2007 or September 30 , 2006 . Concentrations in the Available not limited to , assembly 83 of most of the Company During the first quarter of 2006 , the Company entered into flash memory through calendar year 2010 . As part of these , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 , which will be applied . The Company utilized $ 208 million of the prepayment a the prepayment a of September 29 , 2007 . Contingencies The a of September 29 , 2007 . Contingencies The Company is or operating result . Note 9—Segment Information and Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of . Other operating segment include 84 Asia-Pacific , which includes Australia a those described in Note 1 . The Company evaluates the the Retail segment were $ 294 million , $ 200 million $ 294 million , $ 200 million , and $ 132 200 million , and $ 132 million for 2007 , 2006 and $ 132 million for 2007 , 2006 , and 2005 132 million for 2007 , 2006 , and 2005 respectively . 2007 , 2006 , and 2005 respectively . From the establishment the Retail segment in fiscal 2001 through the quarter ended March through the quarter ended March 31 , 2007 , Company management quarter ended March 31 , 2007 , Company management assessed the with the quarter ended June 30 , 2007 , aligning measurement quarter ended June 30 , 2007 , aligning measurement for the operating performance in a manner 85 generally consistent with the Company high-profile store a of September 29 , 2007 . Expenses allocated a of September 29 , 2007 . Expenses allocated to corporate of high-profile store were $ 39 million , $ 33 million $ 39 million , $ 33 million , and $ 31 33 million , and $ 31 million for the year ended for the year ended September 29 , 2007 , September 30 year ended September 29 , 2007 , September 30 , 2006 29 , 2007 , September 30 , 2006 , and September 2007 , September 30 , 2006 , and September 24 , , 2006 , and September 24 , 2005 respectively . 86 , and September 24 , 2005 respectively . 86 Summary information 24 , 2005 respectively . 86 Summary information by operating segment ( in million ) : 2007 2006 2005 Americas : Net in million ) : 2007 2006 2005 Americas : Net sale million ) : 2007 2006 2005 Americas : Net sale $ Americas : Net sale $ 11,596 $ 9,415 $ 6,658 Operating Net sale $ 11,596 $ 9,415 $ 6,658 Operating income $ $ 11,596 $ 9,415 $ 6,658 Operating income $ 2,949 $ $ 6,658 Operating income $ 2,949 $ 1,899 $ 970 Depreciation Operating income $ 2,949 $ 1,899 $ 970 Depreciation , amortization $ 2,949 $ 1,899 $ 970 Depreciation , amortization , and amortization , and accretion $ 9 $ 6 $ 6 Segment and accretion $ 9 $ 6 $ 6 Segment asset ( $ 9 $ 6 $ 6 Segment asset ( a ) asset ( a ) $ 1,497 $ 896 $ 705 Europe a ) $ 1,497 $ 896 $ 705 Europe : Net $ 1,497 $ 896 $ 705 Europe : Net sale $ Europe : Net sale $ 5,460 $ 4,096 $ 3,073 Operating Net sale $ 5,460 $ 4,096 $ 3,073 Operating income $ $ 5,460 $ 4,096 $ 3,073 Operating income $ 1,348 $ $ 3,073 Operating income $ 1,348 $ 627 $ 465 Depreciation Operating income $ 1,348 $ 627 $ 465 Depreciation , amortization $ 1,348 $ 627 $ 465 Depreciation , amortization , and amortization , and accretion $ 6 $ 4 $ 4 Segment and accretion $ 6 $ 4 $ 4 Segment asset $ $ 6 $ 4 $ 4 Segment asset $ 595 $ $ 4 Segment asset $ 595 $ 471 $ 289 Japan Segment asset $ 595 $ 471 $ 289 Japan : Net $ 595 $ 471 $ 289 Japan : Net sale $ Japan : Net sale $ 1,082 $ 1,211 $ 924 Operating Net sale $ 1,082 $ 1,211 $ 924 Operating income $ $ 1,082 $ 1,211 $ 924 Operating income $ 232 $ $ 924 Operating income $ 232 $ 208 $ 147 Depreciation Operating income $ 232 $ 208 $ 147 Depreciation , amortization $ 232 $ 208 $ 147 Depreciation , amortization , and amortization , and accretion $ 3 $ 3 $ 3 Segment and accretion $ 3 $ 3 $ 3 Segment asset $ $ 3 $ 3 $ 3 Segment asset $ 159 $ $ 3 Segment asset $ 159 $ 181 $ 165 Retail Segment asset $ 159 $ 181 $ 165 Retail : Net $ 159 $ 181 $ 165 Retail : Net sale $ Retail : Net sale $ 4,115 $ 3,246 $ 2,278 Operating Net sale $ 4,115 $ 3,246 $ 2,278 Operating income $ $ 4,115 $ 3,246 $ 2,278 Operating income $ 875 $ $ 2,278 Operating income $ 875 $ 600 $ 396 Depreciation Operating income $ 875 $ 600 $ 396 Depreciation , amortization $ 875 $ 600 $ 396 Depreciation , amortization , and accretion ( b ) $ 88 $ 59 $ 43 Segment b ) $ 88 $ 59 $ 43 Segment asset ( $ 88 $ 59 $ 43 Segment asset ( b ) asset ( b ) $ 1,085 $ 651 $ 589 Other b ) $ 1,085 $ 651 $ 589 Other Segments ( $ 1,085 $ 651 $ 589 Other Segments ( c ) ) : Net sale $ 1,753 $ 1,347 $ 998 Operating Net sale $ 1,753 $ 1,347 $ 998 Operating income $ $ 1,753 $ 1,347 $ 998 Operating income $ 388 $ $ 998 Operating income $ 388 $ 235 $ 118 Depreciation Operating income $ 388 $ 235 $ 118 Depreciation , amortization $ 388 $ 235 $ 118 Depreciation , amortization , and amortization , and accretion $ 3 $ 3 $ 2 Segment and accretion $ 3 $ 3 $ 2 Segment asset $ $ 3 $ 3 $ 2 Segment asset $ 252 $ $ 2 Segment asset $ 252 $ 180 $ 133 ( Segment asset $ 252 $ 180 $ 133 ( a ) $ 252 $ 180 $ 133 ( a ) The Americas include Asia-Pacific and FileMaker . 87 A reconciliation of the Company ( in million ) : 2007 2006 2005 Segment operating income in million ) : 2007 2006 2005 Segment operating income $ million ) : 2007 2006 2005 Segment operating income $ 5,792 2005 Segment operating income $ 5,792 $ 3,569 $ 2,096 Other operating income $ 5,792 $ 3,569 $ 2,096 Other corporate expense $ 5,792 $ 3,569 $ 2,096 Other corporate expense , net net ( a ) ( 1,141 ) ( 953 ) ( ) ( 1,141 ) ( 953 ) ( 404 ) Stock-based ) ( 953 ) ( 404 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 242 ) ( 163 ) ( expense ( 242 ) ( 163 ) ( 49 ) Total ) ( 163 ) ( 49 ) Total operating income $ ) Total operating income $ 4,409 $ 2,453 $ 1,643 Segment operating income $ 4,409 $ 2,453 $ 1,643 Segment asset $ $ 4,409 $ 2,453 $ 1,643 Segment asset $ 3,588 $ $ 1,643 Segment asset $ 3,588 $ 2,379 $ 1,881 Corporate Segment asset $ 3,588 $ 2,379 $ 1,881 Corporate asset 21,759 $ 3,588 $ 2,379 $ 1,881 Corporate asset 21,759 14,826 9,635 2,379 $ 1,881 Corporate asset 21,759 14,826 9,635 Consolidated asset $ $ 1,881 Corporate asset 21,759 14,826 9,635 Consolidated asset $ 25,347 1,881 Corporate asset 21,759 14,826 9,635 Consolidated asset $ 25,347 $ 14,826 9,635 Consolidated asset $ 25,347 $ 17,205 $ 11,516 Segment Consolidated asset $ 25,347 $ 17,205 $ 11,516 Segment depreciation , $ 25,347 $ 17,205 $ 11,516 Segment depreciation , amortization , amortization , and accretion $ 109 $ 75 $ 58 Corporate and accretion $ 109 $ 75 $ 58 Corporate depreciation , $ 109 $ 75 $ 58 Corporate depreciation , amortization , , amortization , and accretion 208 150 121 Consolidated depreciation , amortization , and accretion 208 150 121 Consolidated depreciation , amortization , and accretion 208 150 121 Consolidated depreciation , amortization , amortization , and accretion $ 317 $ 225 $ 179 ( and accretion $ 317 $ 225 $ 179 ( a ) $ 317 $ 225 $ 179 ( a ) Corporate expense U.S. accounted for more than 10 % of net sale in % of net sale in 2007 , 2006 , or 2005 net sale in 2007 , 2006 , or 2005 . Net 2007 , 2006 , or 2005 . Net sale and long-lived ( in million ) : 2007 2006 2005 Net sale : in million ) : 2007 2006 2005 Net sale : U.S. million ) : 2007 2006 2005 Net sale : U.S. $ Net sale : U.S. $ 14,128 $ 11,486 $ 8,194 International : U.S. $ 14,128 $ 11,486 $ 8,194 International 9,878 7,829 $ 14,128 $ 11,486 $ 8,194 International 9,878 7,829 5,737 Total $ 11,486 $ 8,194 International 9,878 7,829 5,737 Total net sale 11,486 $ 8,194 International 9,878 7,829 5,737 Total net sale $ $ 8,194 International 9,878 7,829 5,737 Total net sale $ 24,006 5,737 Total net sale $ 24,006 $ 19,315 $ 13,931 Long-lived net sale $ 24,006 $ 19,315 $ 13,931 Long-lived asset : $ 24,006 $ 19,315 $ 13,931 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 1,752 $ 1,150 $ 738 International : U.S. $ 1,752 $ 1,150 $ 738 International 260 218 $ 1,752 $ 1,150 $ 738 International 260 218 175 Total $ 1,150 $ 738 International 260 218 175 Total long-lived asset 1,150 $ 738 International 260 218 175 Total long-lived asset $ $ 738 International 260 218 175 Total long-lived asset $ 2,012 175 Total long-lived asset $ 2,012 $ 1,368 $ 913 88 long-lived asset $ 2,012 $ 1,368 $ 913 88 Information regarding $ 2,012 $ 1,368 $ 913 88 Information regarding net sale 2,012 $ 1,368 $ 913 88 Information regarding net sale by ( in million ) : 2007 2006 2005 Net sale : in million ) : 2007 2006 2005 Net sale : Desktops million ) : 2007 2006 2005 Net sale : Desktops ( Desktops ( a ) $ 4,020 $ 3,319 $ 3,436 Portables a ) $ 4,020 $ 3,319 $ 3,436 Portables ( b $ 4,020 $ 3,319 $ 3,436 Portables ( b ) 6,294 3,436 Portables ( b ) 6,294 4,056 2,839 Total Mac net Portables ( b ) 6,294 4,056 2,839 Total Mac net sale ( b ) 6,294 4,056 2,839 Total Mac net sale 10,314 2,839 Total Mac net sale 10,314 7,375 6,275 iPod 8,305 7,676 Total Mac net sale 10,314 7,375 6,275 iPod 8,305 7,676 4,540 Mac net sale 10,314 7,375 6,275 iPod 8,305 7,676 4,540 Other sale 10,314 7,375 6,275 iPod 8,305 7,676 4,540 Other music related 10,314 7,375 6,275 iPod 8,305 7,676 4,540 Other music related product 7,375 6,275 iPod 8,305 7,676 4,540 Other music related product and and service ( c ) 2,496 1,885 899 iPhone and related service ( c ) 2,496 1,885 899 iPhone and related product ( c ) 2,496 1,885 899 iPhone and related product and and service ( d ) 123 — — Peripherals and other other hardware ( e ) 1,260 1,100 1,126 Software , service hardware ( e ) 1,260 1,100 1,126 Software , service , ( e ) 1,260 1,100 1,126 Software , service , and net sale ( f ) 1,508 1,279 1,091 Total net sale sale ( f ) 1,508 1,279 1,091 Total net sale $ ( f ) 1,508 1,279 1,091 Total net sale $ 24,006 1,091 Total net sale $ 24,006 $ 19,315 $ 13,931 ( net sale $ 24,006 $ 19,315 $ 13,931 ( a ) $ 24,006 $ 19,315 $ 13,931 ( a ) Includes iMac and Internet service . Note 10—Related Party Transactions and Certain Other a total of approximately $ 776,000 , $ 202,000 , and approximately $ 776,000 , $ 202,000 , and $ 1,100,000 in $ 202,000 , and $ 1,100,000 in expense pursuant to the to the Reimbursement Agreement during 2007 , 2006 , and 2005 Reimbursement Agreement during 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . In 2006 2005 , respectively . In 2006 , the Company entered into of Pixar . On May 5 , 2006 , The Walt . On May 5 , 2006 , The Walt Disney Company arrangement with Pixar from September 25 , 2005 through May 5 Pixar from September 25 , 2005 through May 5 , 2006 25 , 2005 through May 5 , 2006 wa le than 2005 through May 5 , 2006 wa le than $ 1 2006 wa le than $ 1 million . 89 Note 11—Selected than $ 1 million . 89 Note 11—Selected Quarterly Financial Information 1 million . 89 Note 11—Selected Quarterly Financial Information ( Unaudited the four quarter ended September 29 , 2007 and September 30 quarter ended September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 ( in million 2007 and September 30 , 2006 ( in million , except Quarter Second Quarter First Quarter 2007 Net sale $ 6,217 $ Quarter 2007 Net sale $ 6,217 $ 5,410 $ 5,264 $ Net sale $ 6,217 $ 5,410 $ 5,264 $ 7,115 Gross $ 6,217 $ 5,410 $ 5,264 $ 7,115 Gross margin $ $ 5,410 $ 5,264 $ 7,115 Gross margin $ 2,090 $ $ 7,115 Gross margin $ 2,090 $ 1,995 $ 1,849 $ Gross margin $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.14 2006 $ 1.01 $ 0.92 $ 0.87 $ 1.14 2006 Net sale $ 0.92 $ 0.87 $ 1.14 2006 Net sale $ 4,837 0.92 $ 0.87 $ 1.14 2006 Net sale $ 4,837 $ 1.14 2006 Net sale $ 4,837 $ 4,370 $ 4,359 $ Net sale $ 4,837 $ 4,370 $ 4,359 $ 5,749 Gross $ 4,837 $ 4,370 $ 4,359 $ 5,749 Gross margin $ $ 4,370 $ 4,359 $ 5,749 Gross margin $ 1,412 $ $ 5,749 Gross margin $ 1,412 $ 1,325 $ 1,297 $ Gross margin $ 1,412 $ 1,325 $ 1,297 $ 1,564 Net $ 1,412 $ 1,325 $ 1,297 $ 1,564 Net income $ $ 1,325 $ 1,297 $ 1,564 Net income $ 542 $ $ 1,564 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.65 Basic $ 0.62 $ 0.54 $ 0.47 $ 0.65 Basic and diluted $ 0.54 $ 0.47 $ 0.65 Basic and diluted earnings per diluted earnings per share . 90 REPORT OF INDEPENDENT REGISTERED PUBLIC Company ) a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , and the 2007 and September 30 , 2006 , and the related consolidated the three-year period ended September 29 , 2007 . These consolidated period ended September 29 , 2007 . These consolidated financial statement and subsidiary a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , and the 2007 and September 30 , 2006 , and the result of the three-year period ended September 29 , 2007 , in conformity period ended September 29 , 2007 , in conformity with U.S. . As discussed in Note 1 to the Consolidated Financial Statements Financial Statements , effective September 25 , 2005 , the Company , effective September 25 , 2005 , the Company adopted the Financial Accounting Standards No . 123R , Share-Based Payment . We financial reporting a of September 29 , 2007 , based on a of September 29 , 2007 , based on criterion established and our report dated November 15 , 2007 expressed an unqualified report dated November 15 , 2007 expressed an unqualified opinion on Mountain View , California November 15 , 2007 91 REPORT OF , California November 15 , 2007 91 REPORT OF INDEPENDENT REGISTERED California November 15 , 2007 91 REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of September 29 , 2007 , based on a of September 29 , 2007 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 29 , 2007 , based on a of September 29 , 2007 , based on criterion established Apple Inc. a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 , and the 2007 and September 30 , 2006 , and the related consolidated the three-year period ended September 29 , 2007 , and our period ended September 29 , 2007 , and our report dated and our report dated November 15 , 2007 expressed an unqualified report dated November 15 , 2007 expressed an unqualified opinion on Mountain View , California November 15 , 2007 92 Item 9 , California November 15 , 2007 92 Item 9 . Changes California November 15 , 2007 92 Item 9 . Changes in 15 , 2007 92 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( `` were effective a of September 29 , 2007 to ensure that a of September 29 , 2007 to ensure that information required ( a defined in Rule 13a-15 ( f ) under the the Securities Exchange Act of 1934 , a amended ) . wa effective a of September 29 , 2007 . The Company a of September 29 , 2007 . The Company 's independent public accounting firm , KPMG 93 LLP , ha issued an financial reporting appears on page 92 of this Form 10-K. Changes page 92 of this Form 10-K. Changes in Internal Control Over the fourth quarter of fiscal 2007 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information On November . Other Information On November 13 , 2007 , the Board Information On November 13 , 2007 , the Board of Directors is attached hereto a Exhibit 3.5 and is incorporated herein by incorporated herein by reference . 94 PART III Item 10 . . 94 PART III Item 10 . Directors , Executive Officers William V. Campbell Co-lead Director 67 1997 Millard S. Drexler Director V. Campbell Co-lead Director 67 1997 Millard S. Drexler Director 63 1997 Millard S. Drexler Director 63 1999 Albert A. Gore , Millard S. Drexler Director 63 1999 Albert A. Gore , Jr. A. Gore , Jr. Director 59 2003 Steven P. Jobs Director Gore , Jr. Director 59 2003 Steven P. Jobs Director and Director and Chief Executive Officer 52 1997 Arthur D. Levinson , and Chief Executive Officer 52 1997 Arthur D. Levinson , Ph.D. Levinson , Ph.D. Co-lead Director 57 2000 Eric E. Schmidt , , Ph.D. Co-lead Director 57 2000 Eric E. Schmidt , Ph.D. E. Schmidt , Ph.D. Director 52 2006 Jerome B. York Director Schmidt , Ph.D. Director 52 2006 Jerome B. York Director 69 2006 Jerome B. York Director 69 1997 William V. Campbell ha Jerome B. York Director 69 1997 William V. Campbell ha been Intuit `` ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From January 1994 to August 1998 , Mr. From January 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Group , Inc. since January 2003 . Previously , Mr. Drexler `` Gap `` ) from 1995 and President from 1987 until from 1995 and President from 1987 until 1995 . Mr. Drexler and President from 1987 until 1995 . Mr. Drexler wa also Directors of Gap from November 1983 until October 2002 . Albert from November 1983 until October 2002 . Albert A. Gore , `` Google `` ) since 2001 . He ha also served Chairman of Current TV since 2002 and a Chairman of Generation of Generation Investment Management since 2004 . He is a visiting Gore wa inaugurated a the 45th Vice President of the United of the United States in 1993 . He wa re-elected in . He wa re-elected in 1996 and served for a total Security Council . Prior to 1993 , he served eight year Genentech `` ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Dr. Levinson & D from 1993 to 1995 . Dr. Levinson also serf Officer of Google since July 2001 and a a member of Board of Directors since March 2001 , where he served a of the Board from March 2001 to April 2004 . In from March 2001 to April 2004 . In April 2004 , April 2004 . In April 2004 , Dr. Schmidt wa named of Directors . From April 1997 to November 2001 , Dr. From April 1997 to November 2001 , Dr. Schmidt served a , and , from April 1997 to July 2001 , a from April 1997 to July 2001 , a the Chief Executive he control , since September 2003 . From January 2000 until September 2003 . From January 2000 until September 2003 , Mr. From January 2000 until September 2003 , Mr. York wa Chairman peripheral product . From September 1995 to October 1999 , 95 From September 1995 to October 1999 , 95 he wa Vice 1995 to October 1999 , 95 he wa Vice Chairman of Tracinda Corporation . From May 1993 to September 1995 he wa From May 1993 to September 1995 he wa Senior Vice President Board of Directors from January 1995 to August 1995 . Mr. from January 1995 to August 1995 . Mr. York is also Committee met a total of 14 time during fiscal year 2007 14 time during fiscal year 2007 . The Compensation Committee is a total of five ( 5 ) time during fiscal year ) time during fiscal year 2007 . The Nominating Committee assist nominee proposed by shareholder . 96 Members of the Nominating Committee a total of three ( 3 ) time during fiscal year ) time during fiscal year 2007 . The Audit , Compensation member set forth in Rule 10A-3 ( b ) ( l the Securities Exchange Act of 1934 , a amended ( the or by filing a Form 8-K. Executive Officers of the Registrant D. Cook Chief Operating Officer 46 Daniel Cooperman Senior Vice President , General Counsel and Secretary 56 Tony Fadell Senior Vice President Vice President , iPod Division 38 Ronald B. Johnson Senior Vice Senior Vice President , Retail 49 Peter Oppenheimer Senior Vice President President and Chief Financial Officer 44 Philip W. Schiller Senior Vice President , Worldwide Product Marketing 47 Bertrand Serlet , Ph.D. Senior Vice President , Software Engineering 46 Sina Tamaddon Senior Vice President Senior Vice President , Applications 50 Timothy D. Cook , Chief joined the Company in March 1998 . Mr. Cook also served Worldwide Sales and Operations from 2002 to 2005 . In 2004 and Operations from 2002 to 2005 . In 2004 , his 2002 to 2005 . In 2004 , his responsibility were expanded Macintosh hardware engineering . From 2000 to 2002 , Mr. Cook engineering . From 2000 to 2002 , Mr. Cook served in Service and Support . From 1998 to 2000 , Mr. Cook Support . From 1998 to 2000 , Mr. Cook served in . Mr. Cook also spent 12 year with IBM , most joined the Company in November 2007 . Prior to joining the of Oracle Corporation since February 1997 . Prior to that , McCutchen LLP ) since October 1977 , and had served a a a partner since June 1983 . From September 1995 until June 1983 . From September 1995 until February 1997 , 97 From September 1995 until February 1997 , 97 Mr. Cooperman wa 1995 until February 1997 , 97 Mr. Cooperman wa Chair of Transactions Group and from April 1989 through September 1995 , he from April 1989 through September 1995 , he served a the , joined the Company in 2001 . From 2004 to April Company in 2001 . From 2004 to April 2006 , Mr. . From 2004 to April 2006 , Mr. Fadell wa Vice of iPod Engineering . From 2001 to 2004 , Mr. Fadell Engineering . From 2001 to 2004 , Mr. Fadell wa the joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , joined the Company in July 1996 . Mr. Oppenheimer also served , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 , and from December 1995 to March 1997 , and wa Director of FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , joined the Company in February 1997 upon the Company 's acquisition Prior to NeXT , from 1985 to 1989 , Dr. Serlet NeXT , from 1985 to 1989 , Dr. Serlet worked a joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the Services with NeXT . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company Company belief that all Section 16 ( a ) filing requirement were met during fiscal year 2007 , except that ( i ( i ) one Form 4 wa filed for William Campbell for William Campbell on October 26 , 2007 with respect to Campbell on October 26 , 2007 with respect to the purchase 's independent money manager of 3,600 , 2,600 and 2,900 share money manager of 3,600 , 2,600 and 2,900 share of the of 3,600 , 2,600 and 2,900 share of the Company 's common stock , in February 2006 , September 2006 and January in February 2006 , September 2006 and January 2007 , respectively , September 2006 and January 2007 , respectively , and the 's independent money manager of 2,200 , 1,400 98 and 2,600 money manager of 2,200 , 1,400 98 and 2,600 share of manager of 2,200 , 1,400 98 and 2,600 share of the 2,200 , 1,400 98 and 2,600 share of the Company 's 's common stock in April 2006 , June 2006 and July in April 2006 , June 2006 and July 2007 , respectively , June 2006 and July 2007 , respectively , and ( ( ii ) one Form 4 wa filed for Tony Fadell for Tony Fadell on November 15 , 2007 with respect to Fadell on November 15 , 2007 with respect to the acquisition Mr. Fadell 's spouse of 40,000 restricted stock unit in December restricted stock unit in December 2006 and 25,000 restricted stock unit unit in December 2006 and 25,000 restricted stock unit in October restricted stock unit in October 2007 . Item 11 . Executive in October 2007 . Item 11 . Executive Compensation COMPENSATION DISCUSSION named executive officer in fiscal 2007 . The officer earned cash earned cash incentive in fiscal 2007 at the maximum amount allowed each officer wa appropriate . 99 Apple 's shareholder have been three-year annualized shareholder return of 101 % through the end of through the end of fiscal 2007 . The Committee belief the . C. EXECUTIVE COMPENSATION OVERVIEW 1 . Three Components The compensation Employee Stock Purchase Plan , 401 ( k ) Plan , basis a other employee . 2 . Mix of Equity , , rapidly changing market . 3 . Elements of Compensation Not following : • Employment contract 100 • Cash bonus other than will fully vest in March 2008 ) • Perquisites or personal the value of equity award 4 . CEO Compensation Apple 's Jobs , currently hold approximately 5.5 million share of Apple common . Since rejoining Apple in 1997 , Mr. Jobs ha never equity grant wa awarded in 2003 , and vested in full and vested in full in 2006 . Mr. Jobs currently hold equity award . In fiscal 2007 , Mr. Jobs 's entire compensation consisted of his $ 1 annual salary . Because Mr. Jobs ha received a $ 1 annual salary since he rejoined since he rejoined Apple in 1997 and began serving a interim a interim CEO . In 1999 , Apple awarded Mr. Jobs option grant , one in 2000 and another in 2001 . in 2000 and another in 2001 . Mr. Jobs never exercised were both cancelled in March 2003 , when Apple awarded Mr. Mr. Jobs a grant of 5 million share of restricted stock of restricted stock . The 2003 restricted stock grant required Mr. grant , which increased to 10 million share when Apple 's 's common stock split in 2005 , vested in full in vested in full in March 2006 . After a portion of Mr. Jobs received the remaining 5,426,447 share . Due in large split ) increased from $ 7.47 on the March 2003 grant $ 7.47 on the March 2003 grant date to $ 64.66 2003 grant date to $ 64.66 on the March 2006 vesting $ 64.66 on the March 2006 vesting date—more than an eight-fold stock price increased from $ 64.66 per share in March 2006 64.66 per share in March 2006 to $ 189.95 per share in March 2006 to $ 189.95 per share a of October per share a of October 31 , 2007—a three-fold increase in a of October 31 , 2007—a three-fold increase in approximately 18 2007—a three-fold increase in approximately 18 month . When he wa 's Board of Directors in 1997 , Mr. Jobs received the 's stock option grant for 30,000 share . Because Mr. Jobs director grant . When the 1997 director grant ( which increased grant ( which increased to 120,000 share after two stock split due to expire in August 2007 , Mr. Jobs exercised the and he currently hold these 120,000 share . D. EXECUTIVE COMPENSATION COMPENSATION PROGRAM DESIGN AND IMPLEMENTATION 1 . Team-Based Compensation The compensation 's area of responsibility . 2 . Independent Compensation Committee Determines of Apple 's management . 101 During the first quarter of 's overall financial performance . 3 . The Crucial Role of , equity award represented approximately 85 % of their target total target total compensation in fiscal 2007 . This compare to approximately . This compare to approximately 70 % at Apple 's peer peer company . • Fiscal 2004 equity award vested 50 % Fiscal 2004 equity award vested 50 % on the second anniversary grant date ; the remaining 50 % will vest on the grant date . • Fiscal 2006 equity award do not vest not vest at all until 2010 , when they vest in Long-Term Focus . Since fiscal 2004 , all equity award to vest . RSUs granted in 2004 also provide for accelerated vesting control , RSUs granted before 2007 provide for accelerated vesting on occurs at interval of no 102 le than two year after named executive officer since fiscal 2004 ( excluding those who were FY09 vesting FY10 vesting Fiscal 2004 RSU ( excluding CEO ) ( excluding CEO ) — 50 % — 50 % Fiscal ) — 50 % — 50 % Fiscal 2006 RSU ( % — 50 % Fiscal 2006 RSU ( excluding CEO ) — — — — — 100 % Vesting Conditions . As award ( which represent approximately 85 % of the officer 's Burn Rate Averages Less Than 2.5 % . In fiscal 2005 2.5 % . In fiscal 2005 , Apple committed to an the fiscal year ) of 2.5 % from fiscal 2005 through of 2.5 % from fiscal 2005 through fiscal 2007 . This from fiscal 2005 through fiscal 2007 . This commitment represented a an average burn rate of 4.8 % from fiscal 2002 through of 4.8 % from fiscal 2002 through fiscal 2004 . In from fiscal 2002 through fiscal 2004 . In fact , Apple annual burn rate from fiscal 2005 through fiscal 2007 wa approximately from fiscal 2005 through fiscal 2007 wa approximately 1.6 % . through fiscal 2007 wa approximately 1.6 % . Overhang from Equity Overhang from Equity Plans at 12.9 % . Overhang ( granted overhang to decline from approximately 14.5 % at the end of at the end of fiscal 2005 to approximately 12.9 % at of fiscal 2005 to approximately 12.9 % at the end of at the end of fiscal 2007 . Frequency and Size of the mix of total compensation 103 • The officer 's experience Apple 's common stock . 4 . The Minor Role of annual base salary of $ 1 since rejoining Apple in 1997 1 since rejoining Apple in 1997 . • The fiscal 2007 1997 . • The fiscal 2007 average base salary for the have not increased since October 2005 , except for a promotion-related Apple 's target payout of 50 % of base salary is target bonus payouts range from 100 % to 160 % of range from 100 % to 160 % of base salary . • The maximum payout of 100 % for exceptional performance is than peer company , where 3 time the target range ( range ( i.e . , 300 % to 480 % of . , 300 % to 480 % of base salary ) modify or waive them . 104 Percentage of Salary Payable As Objective Above Objective Below Objective 0 % 25 % up to Objective Below Objective 0 % 25 % up to 50 % % 25 % up to 50 % Meet Objective 25 % to 50 % Meet Objective 25 % 50 % up to % Meet Objective 25 % 50 % up to 75 % % 50 % up to 75 % Above Objective up to % Above Objective up to 50 % up to 75 % to 50 % up to 75 % up to 100 % to 75 % up to 100 % The performance goal are be made at le than 100 % . For the past in a smaller award . 5 . The Role of Consultants compensation for any executive . 6 . The Role of Peer identified peer company for fiscal 2007 that compete with Apple in & Co. Tween Brands Wal-Mart 105 The Committee review compensation practice equity compensation `` at the 75 th percentile . `` Furthermore the named executive officer . 7 . Tax and Accounting Considerations of Compensation Expense . Section 162 ( m ) of the place a limit of $ 1,000,000 on the amount of compensation an officer of Apple from 1983 to 1987 and an Apple of Apple from 1983 to 1987 and an Apple subsidiary from and an Apple subsidiary from 1987 to 1991 . For this Apple subsidiary from 1987 to 1991 . For this reason , or vote on any Section 162 ( m ) -related matter are exempt from the Section 162 ( m ) limit because compensation for purpose of Section 162 ( m ) because vesting performance goal . See page 103 for an explanation of Apple Implications for Officers . Section 409A of the Internal Revenue Code do not comply with Section 409A . Because Apple doe not for the officer . Section 280G of the Internal Revenue Code the level specified in Section 280G . The named executive officer on the table on page 113 a severance or change of calculated in accordance with SFAS 123R . The Committee belief , expense associated with them . 106 E. Fiscal 2007 Compensation Decisions them . 106 E. Fiscal 2007 Compensation Decisions 1 . No E. Fiscal 2007 Compensation Decisions 1 . No Equity Grants or or Salary Changes In fiscal 2007 , the Committee did not at the beginning of fiscal 2007 had significant retention value , at the end of fiscal 2007 are shown on the Outstanding Equity Awards table on page 110 and 111 . Based on table on page 110 and 111 . Based on a review officer were appropriate for fiscal 2007 without a salary increase . without a salary increase . 2 . 2007 Performance-Based Cash Incentive salary increase . 2 . 2007 Performance-Based Cash Incentive Plan Payments Plan Payments Apple 's fiscal 2007 performance significantly exceeded the revenue officer at the maximum of 100 % of base salary , the payout matrix on page 105 . The specific payment amount Summary Compensation Table at page 108 . Compensation Committee Report ( . Compensation Committee Report ( 1 ) The Compensation Committee ha NASDAQ listing standard . ( 1 ) SEC filing sometimes `` Analysis section of this Form 10-K. Based upon this review and be included in this Form 10-K and the Company 's Proxy 's Proxy Statement for it 2008 Annual Meeting of Shareholders , Albert A. Gore , Jr. 107 Summary Compensation Table The following service rendered during fiscal year 2007 . Name and Principal Position Awards ( $ ) ( 1 ) ( e ) Option Awards ( $ ) ( 1 ) ( f ) Non-Equity Compensation ( $ ) ( 2 ) ( g ) Change P. Jobs Chief Executive Officer 2007 1 — — — — Jobs Chief Executive Officer 2007 1 — — — — — — — — — — 1 Timothy D. Cook Chief Operating D. Cook Chief Operating Officer 2007 700,014 — 6,943,426 — 700,000 Cook Chief Operating Officer 2007 700,014 — 6,943,426 — 700,000 — Operating Officer 2007 700,014 — 6,943,426 — 700,000 — 13,750 ( 2007 700,014 — 6,943,426 — 700,000 — 13,750 ( 3 ) — 6,943,426 — 700,000 — 13,750 ( 3 ) 8,357,190 Peter — 700,000 — 13,750 ( 3 ) 8,357,190 Peter Oppenheimer Senior — 13,750 ( 3 ) 8,357,190 Peter Oppenheimer Senior Vice President President and Chief Financial Officer 2007 600,012 — 4,946,610 — 600,000 and Chief Financial Officer 2007 600,012 — 4,946,610 — 600,000 — Financial Officer 2007 600,012 — 4,946,610 — 600,000 — 598,723 ( 2007 600,012 — 4,946,610 — 600,000 — 598,723 ( 4 ) — 4,946,610 — 600,000 — 598,723 ( 4 ) 6,745,345 Ronald — 600,000 — 598,723 ( 4 ) 6,745,345 Ronald B. Johnson — 598,723 ( 4 ) 6,745,345 Ronald B. Johnson Senior Vice Senior Vice President , Retail 2007 600,012 — 4,946,610 — 600,000 Vice President , Retail 2007 600,012 — 4,946,610 — 600,000 — , Retail 2007 600,012 — 4,946,610 — 600,000 — 379 ( 2007 600,012 — 4,946,610 — 600,000 — 379 ( 5 ) — 4,946,610 — 600,000 — 379 ( 5 ) 6,147,001 Tony — 600,000 — 379 ( 5 ) 6,147,001 Tony Fadell Senior — 379 ( 5 ) 6,147,001 Tony Fadell Senior Vice President Vice President , iPod Division 2007 500,009 6,750 ( 6 ) President , iPod Division 2007 500,009 6,750 ( 6 ) 3,705,832 , iPod Division 2007 500,009 6,750 ( 6 ) 3,705,832 628,628 Division 2007 500,009 6,750 ( 6 ) 3,705,832 628,628 500,000 — 500,009 6,750 ( 6 ) 3,705,832 628,628 500,000 — 13,952 ( 6,750 ( 6 ) 3,705,832 628,628 500,000 — 13,952 ( 7 ( 6 ) 3,705,832 628,628 500,000 — 13,952 ( 7 ) ) 3,705,832 628,628 500,000 — 13,952 ( 7 ) 5,355,171 ( 628,628 500,000 — 13,952 ( 7 ) 5,355,171 ( 1 ) — 13,952 ( 7 ) 5,355,171 ( 1 ) The amount ( 7 ) 5,355,171 ( 1 ) The amount reported in with respect to fiscal year 2007 ( disregarding any estimate of were forfeited during fiscal year 2007 . Detailed information about the in Part II , Item 8 , `` Financial Statements and Data `` of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 7 , `` Stock-Based Compensation . Stock-Based Compensation . `` ( 2 ) As described in the Executive Officer 's fiscal year 2007 bonus opportunity are reported in `` table below . ( 3 ) This amount represents the Cook 's account under it 401 ( k ) plan in in the amount of $ 13,500 and a tax gross-up in in the amount of $ 250 for an iPhone given by than Mr. Jobs . ( 4 ) This amount represents ( Oppenheimer 's account under it 401 ( k ) plan in in the amount of $ 13,500 ; ( ii ) a in the amount of $ 250 for an iPhone given by by the Company of $ 584,973 for payment of a tax under Internal Revenue Code Section 409A . ( 5 ) This Code Section 409A . ( 5 ) This amount represents a in the amount of $ 379 for an iPhone given by than Mr. Jobs . ( 6 ) This amount represents a to Mr. Fadell . ( 7 ) This amount represents ( Fadell 's account under it 401 ( k ) plan in in the amount of $ 13,500 ; and ( ii ) in the amount of $ 379 for an iPhone given by in the amount of $ 73 for an iPod given to Executive Officers in fiscal year 2007 . The primary element of The primary element of each 108 Named Executive Officer 's total a further described in footnote 3 , 4 , 5 and described in footnote 3 , 4 , 5 and 7 to footnote 3 , 4 , 5 and 7 to the table , 4 , 5 and 7 to the table . As award granted in fiscal year 2007 , provides information regarding the Executive Officers in fiscal year 2007 . The Outstanding Equity Awards Executive Officers for fiscal year 2007 . Estimated Future Payouts Under — Timothy D. Cook — 0 350,000 700,000 — — — Timothy D. Cook — 0 350,000 700,000 — — — — D. Cook — 0 350,000 700,000 — — — — — — — Peter Oppenheimer — 0 300,000 600,000 — — — — Peter Oppenheimer — 0 300,000 600,000 — — — — Peter Oppenheimer — 0 300,000 600,000 — — — — — — Ronald B. Johnson — 0 300,000 600,000 — — — Ronald B. Johnson — 0 300,000 600,000 — — — — B. Johnson — 0 300,000 600,000 — — — — — — — Tony Fadell — 0 250,000 500,000 — — — — Tony Fadell — 0 250,000 500,000 — — — — Tony Fadell — 0 250,000 500,000 — — — — — Executive Officers during fiscal year 2007 . Outstanding Equity Awards at Executive Officers a of September 29 , 2007 , including the a of September 29 , 2007 , including the vesting date a of that date . 109 Option Awards Name ( a — — Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 — — — Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 — — 23.72 Ronald B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 — — 23.72 11.73 B. Johnson 2/14/1999 5/21/2002 1,150,000 150,000 — — 23.72 11.73 2/14/2009 5/21/2002 1,150,000 150,000 — — 23.72 11.73 2/14/2009 5/21/2012 Totals 1,300,000 1,150,000 150,000 — — 23.72 11.73 2/14/2009 5/21/2012 Totals 1,300,000 — 150,000 — — 23.72 11.73 2/14/2009 5/21/2012 Totals 1,300,000 — Tony — — 23.72 11.73 2/14/2009 5/21/2012 Totals 1,300,000 — Tony Fadell 23.72 11.73 2/14/2009 5/21/2012 Totals 1,300,000 — Tony Fadell 2/4/2004 6/1/2004 Totals 1,300,000 — Tony Fadell 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 1,300,000 — Tony Fadell 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 — Tony Fadell 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 56,250 Tony Fadell 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 56,250 25,000 Fadell 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 56,250 25,000 ( 2/4/2004 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 56,250 25,000 ( 1 6/1/2004 8/30/2005 19,312 115,250 24,875 12,875 56,250 25,000 ( 1 ) 8/30/2005 19,312 115,250 24,875 12,875 56,250 25,000 ( 1 ) ( 19,312 115,250 24,875 12,875 56,250 25,000 ( 1 ) ( 2 24,875 12,875 56,250 25,000 ( 1 ) ( 2 ) ( 25,000 ( 1 ) ( 2 ) ( 3 ) 10.90 ) ( 2 ) ( 3 ) 10.90 14.03 46.57 2/4/2011 2 ) ( 3 ) 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 ) ( 3 ) 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 Totals ( 3 ) 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 3 ) 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 94,125 ) 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 94,125 ( 10.90 14.03 46.57 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 94,125 ( 1 46.57 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 94,125 ( 1 ) The 2/4/2011 6/1/2011 8/30/2012 Totals 159,437 94,125 ( 1 ) The unvested 8/30/2012 Totals 159,437 94,125 ( 1 ) The unvested portion of to vest in two ( 2 ) substantially equal installment on substantially equal installment on November 4 , 2007 and February 4 installment on November 4 , 2007 and February 4 , 2008 4 , 2007 and February 4 , 2008 . ( 2 2007 and February 4 , 2008 . ( 2 ) The 4 , 2008 . ( 2 ) The unvested portion of to vest in three ( 3 ) substantially equal installment on substantially equal installment on December 1 , 2007 , March 1 installment on December 1 , 2007 , March 1 , 2008 1 , 2007 , March 1 , 2008 and June 1 2007 , March 1 , 2008 and June 1 , 2008 1 , 2008 and June 1 , 2008 . ( 3 2008 and June 1 , 2008 . ( 3 ) The 1 , 2008 . ( 3 ) The unvested portion of to vest in eight ( 8 ) substantially equal installment on substantially equal installment on November 30 , 2007 and each successive installment on November 30 , 2007 and each successive three ( and each successive three ( 3 ) month anniversary of November ) month anniversary of November 30 , 2007 . 110 Stock anniversary of November 30 , 2007 . 110 Stock Awards Name November 30 , 2007 . 110 Stock Awards Name ( a Vested ( $ ) ( 1 ) ( i ) Equity — — Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 — Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) Timothy D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( D. Cook 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( 3 3/24/2004 12/14/2005 300,000 300,000 ( 2 ) ( 3 ) 46,041,000 300,000 ( 2 ) ( 3 ) 46,041,000 46,041,000 — — 2 ) ( 3 ) 46,041,000 46,041,000 — — — — ) ( 3 ) 46,041,000 46,041,000 — — — — Totals — — — — Totals 600,000 92,082,000 — — Peter Oppenheimer — — — Totals 600,000 92,082,000 — — Peter Oppenheimer 3/24/2004 92,082,000 — — Peter Oppenheimer 3/24/2004 12/14/2005 250,000 200,000 ( 2 — — Peter Oppenheimer 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) — Peter Oppenheimer 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( Peter Oppenheimer 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( 3 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( 3 ) 38,367,500 200,000 ( 2 ) ( 3 ) 38,367,500 30,694,000 — — 2 ) ( 3 ) 38,367,500 30,694,000 — — — — ) ( 3 ) 38,367,500 30,694,000 — — — — Totals — — — — Totals 450,000 69,061,500 — — Ronald B. — — — Totals 450,000 69,061,500 — — Ronald B. Johnson — — Ronald B. Johnson 3/24/2004 12/14/2005 250,000 200,000 ( 2 — Ronald B. Johnson 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) Ronald B. Johnson 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( B. Johnson 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( 3 3/24/2004 12/14/2005 250,000 200,000 ( 2 ) ( 3 ) 38,367,500 200,000 ( 2 ) ( 3 ) 38,367,500 30,694,000 — — 2 ) ( 3 ) 38,367,500 30,694,000 — — — — ) ( 3 ) 38,367,500 30,694,000 — — — — Totals — — — — Totals 450,000 69,061,500 — — Tony Fadell — — — Totals 450,000 69,061,500 — — Tony Fadell 8/30/2005 69,061,500 — — Tony Fadell 8/30/2005 2/2/2006 10,000 200,000 ( 4 — — Tony Fadell 8/30/2005 2/2/2006 10,000 200,000 ( 4 ) — Tony Fadell 8/30/2005 2/2/2006 10,000 200,000 ( 4 ) ( Tony Fadell 8/30/2005 2/2/2006 10,000 200,000 ( 4 ) ( 5 8/30/2005 2/2/2006 10,000 200,000 ( 4 ) ( 5 ) 1,534,700 200,000 ( 4 ) ( 5 ) 1,534,700 30,694,000 — — 4 ) ( 5 ) 1,534,700 30,694,000 — — — — ) ( 5 ) 1,534,700 30,694,000 — — — — Totals — — — — Totals 210,000 32,228,700 — — ( 1 — — — Totals 210,000 32,228,700 — — ( 1 ) 210,000 32,228,700 — — ( 1 ) The dollar amount shown by ( y ) $ 153.47 ( the closing price of 's common stock on September 28 , 2007 , the last stock on September 28 , 2007 , the last trading day trading day of fiscal year 2007 ) . ( 2 ) year 2007 ) . ( 2 ) The unvested portion of in it entirety on March 24 , 2008 . ( 3 entirety on March 24 , 2008 . ( 3 ) The 24 , 2008 . ( 3 ) The unvested portion of in it entirety on March 24 , 2010 . ( 4 entirety on March 24 , 2010 . ( 4 ) The 24 , 2010 . ( 4 ) The unvested portion of to vest in two ( 2 ) substantially equal installment on substantially equal installment on August 30 , 2008 and August 30 installment on August 30 , 2008 and August 30 , 2009 30 , 2008 and August 30 , 2009 . ( 5 2008 and August 30 , 2009 . ( 5 ) The 30 , 2009 . ( 5 ) The unvested portion of to vest in two ( 2 ) substantially equal installment on substantially equal installment on March 24 , 2008 and March 24 installment on March 24 , 2008 and March 24 , 2010 24 , 2008 and March 24 , 2010 . 111 Option 2008 and March 24 , 2010 . 111 Option Exercises and March 24 , 2010 . 111 Option Exercises and Stock Vested Executive Officers during fiscal year 2007 , and on the vesting the vesting during fiscal year 2007 of other stock award previously Exercise ( $ ) ( 1 ) ( c ) Number Vesting ( $ ) ( 1 ) ( e ) Steven e ) Steven P. Jobs 120,000 ( 2 ) 14,644,800 — Steven P. Jobs 120,000 ( 2 ) 14,644,800 — — Timothy Jobs 120,000 ( 2 ) 14,644,800 — — Timothy D. Cook — — Ronald B. Johnson 600,000 36,614,020 — — Tony Fadell — Ronald B. Johnson 600,000 36,614,020 — — Tony Fadell 83,313 36,614,020 — — Tony Fadell 83,313 5,946,344 5,000 681,250 ( 1 — — Tony Fadell 83,313 5,946,344 5,000 681,250 ( 1 ) — Tony Fadell 83,313 5,946,344 5,000 681,250 ( 1 ) The Tony Fadell 83,313 5,946,344 5,000 681,250 ( 1 ) The dollar 83,313 5,946,344 5,000 681,250 ( 1 ) The dollar amount shown the vesting date . ( 2 ) These share were acquired by Mr. Jobs on August 13 , 2007 through an exercise Jobs on August 13 , 2007 through an exercise of stock granted to him under the 1997 Director Stock Option Plan that were to expire on August 14 , 2007 . Mr. Jobs expire on August 14 , 2007 . Mr. Jobs ha not for grant made after April 9 , 2007 , the Company made after April 9 , 2007 , the Company 's 2003 2007 , the Company 's 2003 Employee Stock Plan ( the Stock Plan ( the `` 2003 Plan `` ) wa amended to award granted under the 2003 Plan prior to that date Executive Officers prior to January 1 , 2005 generally provide that prior to January 1 , 2005 generally provide that if , granted to them under the 2003 Plan prior to April 9 2003 Plan prior to April 9 , 2007 had a change prior to April 9 , 2007 had a change of control the Company occurred on September 29 , 112 2007 , unless occurred on September 29 , 112 2007 , unless the Compensation on September 29 , 112 2007 , unless the Compensation Committee Jobs — Timothy D. Cook 92,082,000 Peter Oppenheimer 69,061,500 Ronald B. D. Cook 92,082,000 Peter Oppenheimer 69,061,500 Ronald B. Johnson 69,061,500 Tony Oppenheimer 69,061,500 Ronald B. Johnson 69,061,500 Tony Fadell 44,580,353 Director Compensation B. Johnson 69,061,500 Tony Fadell 44,580,353 Director Compensation The following table compensation paid during fiscal year 2007 to member of the Company Awards ( $ ) ( 1 ) ( 2 ) ( ) ( 1 ) ( 2 ) ( 3 ) ( ) ( 2 ) ( 3 ) ( c ) Option Awards ( $ ) ( 1 ) ( 2 ) ( ) ( 1 ) ( 2 ) ( 3 ) ( ) ( 2 ) ( 3 ) ( d ) Non-Equity Compensation ( $ ) ( 4 ) ( g ) Total h ) William V. Campbell 50,000 — 476,200 — — 4,783 William V. Campbell 50,000 — 476,200 — — 4,783 530,983 Millard 50,000 — 476,200 — — 4,783 530,983 Millard S. Drexler 50,000 — 476,200 — — 4,783 530,983 Millard S. Drexler 50,000 — 4,783 530,983 Millard S. Drexler 50,000 — 378,400 — — 7,462 Millard S. Drexler 50,000 — 378,400 — — 7,462 435,862 Albert 50,000 — 378,400 — — 7,462 435,862 Albert A. Gore , — 378,400 — — 7,462 435,862 Albert A. Gore , Jr. Albert A. Gore , Jr. 50,000 — 300,300 — — 15,245 Gore , Jr. 50,000 — 300,300 — — 15,245 365,545 Arthur 50,000 — 300,300 — — 15,245 365,545 Arthur D. Levinson , — 300,300 — — 15,245 365,545 Arthur D. Levinson , Ph.D. Arthur D. Levinson , Ph.D. 50,000 — 448,000 — — 7,592 Levinson , Ph.D. 50,000 — 448,000 — — 7,592 505,592 Eric 50,000 — 448,000 — — 7,592 505,592 Eric E. Schmidt , — 448,000 — — 7,592 505,592 Eric E. Schmidt , Ph.D. — — Jerome B. York 50,000 — 476,200 — — 4,724 Jerome B. York 50,000 — 476,200 — — 4,724 530,924 ( 50,000 — 476,200 — — 4,724 530,924 ( 1 ) The — 476,200 — — 4,724 530,924 ( 1 ) The amount — — 4,724 530,924 ( 1 ) The amount reported in with respect to fiscal year 2007 ( disregarding any estimate of in Part II , Item 8 , `` Financial Statements and Data `` of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 7 , `` Stock-Based Compensation . Stock-Based Compensation . `` ( 2 ) The following table present Non-Employee Directors a of September 29 , 2007 . Director Number a of September 29 , 2007 . Director Number of Shares to Outstanding Options a of 9/29/07 Number of Unvested Shares of of Restricted Stock a of 9/29/07 William V. Campbell 110,000 — of 9/29/07 William V. Campbell 110,000 — Millard S. Drexler 190,000 110,000 — Millard S. Drexler 190,000 — Albert A. Gore , Albert A. Gore , Jr. 70,000 — Arthur D. Levinson , Arthur D. Levinson , Ph.D. 110,000 — Eric E. Schmidt , — — Jerome B. York 50,000 — ( 3 ) As B. York 50,000 — ( 3 ) As described below , ) an option to purchase 10,000 share of the Company 's common stock during fiscal year 2007 . These grant were made : Mr. Campbell , $ 476,200 ; Mr. Drexler , $ ; Mr. Drexler , $ 378,400 ; Mr. Gore , $ ; Mr. Gore , $ 300,300 ; Dr. Levinson , $ ; Dr. Levinson , $ 448,000 ; and Mr. York , and Mr. York , $ 476,200 . See footnote ( 1 476,200 . See footnote ( 1 ) for the assumption used value these award . ( 4 ) The amount reported in of Directors Equipment Program . 113 Compensation of Directors The form . Under the Company 's 1997 Director Stock Option Plan ( granted an option to acquire 30,000 share of the Company 's granted an option to acquire 10,000 share of the Company 's to the Board on August 29 , 2006 , Dr. Schmidt Board on August 29 , 2006 , Dr. Schmidt declined the stock option grant to purchase 30,000 share to which new director Instead , Dr. Schmidt purchased 10,000 share of the Company 's director also receive a $ 50,000 annual retainer paid in quarterly installment . Beginning in the 2008 fiscal year , the chairperson an annual retainer of $ 25,000 , in addition to the during all of fiscal year 2007 . Mr. Campbell formerly served the fiscal year ended September 29 , 2007 . 114 Item year ended September 29 , 2007 . 114 Item 12 . September 29 , 2007 . 114 Item 12 . Security Ownership , 2007 . 114 Item 12 . Security Ownership of Certain information , a of September 29 , 2007 , concerning share a of September 29 , 2007 , concerning share of common compensation plan approved by shareholder 37,597,439 $ 54.75 74,851,763 ( 1 approved by shareholder 37,597,439 $ 54.75 74,851,763 ( 1 ) Equity by shareholder 37,597,439 $ 54.75 74,851,763 ( 1 ) Equity compensation 37,597,439 $ 54.75 74,851,763 ( 1 ) Equity compensation plan not plan not approved by shareholder 12,153,315 $ 10.38 — Total equity approved by shareholder 12,153,315 $ 10.38 — Total equity compensation plan Total equity compensation plan ( 2 ) 49,750,754 $ 43.91 74,851,763 compensation plan ( 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ( 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ) This 2 ) 49,750,754 $ 43.91 74,851,763 ( 1 ) This number 49,750,754 $ 43.91 74,851,763 ( 1 ) This number includes 7,025,104 1 ) This number includes 7,025,104 share of common stock reserved Employee Stock Purchase Plan , 370,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 67,456,659 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 4,675,000 restricted stock unit ha been stock unit granted after April 2005 count against the share available number excludes share under the 1990 Stock Option Plan that wa Plan that wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) This table doe not This table doe not include 350 share of common stock underlying average exercise price of $ 3.42 per share . No additional certain information a of September 29 , 2007 ( the `` a of September 29 , 2007 ( the `` Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 872,328,972 share of the Company 's reached at Apple Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , California 95014 . 115 Security Ownership of Cupertino , California 95014 . 115 Security Ownership of 5 % . 115 Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 56,583,870 ( 2 ) 6.49 % Outstanding Fidelity Investments 56,583,870 ( 2 ) 6.49 % Steven P. Investments 56,583,870 ( 2 ) 6.49 % Steven P. Jobs 5,546,451 6.49 % Steven P. Jobs 5,546,451 * William V. Campbell 112,900 5,546,451 * William V. Campbell 112,900 ( 3 ) * Timothy William V. Campbell 112,900 ( 3 ) * Timothy D. Cook ) * Timothy D. Cook 13,327 ( 4 ) * Millard Timothy D. Cook 13,327 ( 4 ) * Millard S. Drexler ) * Millard S. Drexler 230,000 ( 5 ) * Tony Millard S. Drexler 230,000 ( 5 ) * Tony Fadell 288,702 5 ) * Tony Fadell 288,702 ( 6 ) * Albert * Tony Fadell 288,702 ( 6 ) * Albert A. Gore Albert A. Gore , Jr. 70,000 ( 7 ) * Ronald Gore , Jr. 70,000 ( 7 ) * Ronald B. Johnson ) * Ronald B. Johnson 1,450,620 ( 8 ) * Arthur Ronald B. Johnson 1,450,620 ( 8 ) * Arthur D. Levinson ) * Arthur D. Levinson 365,015 ( 9 ) * Peter Arthur D. Levinson 365,015 ( 9 ) * Peter Oppenheimer 14,873 9 ) * Peter Oppenheimer 14,873 ( 10 ) * Eric * Peter Oppenheimer 14,873 ( 10 ) * Eric E. Schmidt ) * Eric E. Schmidt 12,284 ( 11 ) * Jerome Eric E. Schmidt 12,284 ( 11 ) * Jerome B. York ) * Jerome B. York 90,000 ( 12 ) * All Jerome B. York 90,000 ( 12 ) * All current executive director a a group ( 14 person ) 8,352,396 ( 13 group ( 14 person ) 8,352,396 ( 13 ) 1.00 % 14 person ) 8,352,396 ( 13 ) 1.00 % ( 1 ) 8,352,396 ( 13 ) 1.00 % ( 1 ) Represents 13 ) 1.00 % ( 1 ) Represents share of the the Table Date or within 60 day thereafter . This doe unit that vest more than 60 day after the Table Date the Table Date . ( 2 ) Based on a Form ) Based on a Form 13G/A filed February 14 , 2007 a Form 13G/A filed February 14 , 2007 by FMR Corp. 13G/A filed February 14 , 2007 by FMR Corp. FMR Corp. Corp. list it address a 82 Devonshire Street , Boston , Street , Boston , MA 02109 , in such filing . in such filing . ( 3 ) Includes 110,000 share of . ( 3 ) Includes 110,000 share of the Company 's of stock option . ( 4 ) Excludes 600,000 unvested restricted . ( 4 ) Excludes 600,000 unvested restricted stock unit . restricted stock unit . ( 5 ) Includes 40,000 share of . ( 5 ) Includes 40,000 share of the Company 's Mr. Drexler hold indirectly and 190,000 share of the Company 's of stock option . ( 6 ) Includes 275 share of . ( 6 ) Includes 275 share of the Company 's Mr. Fadell hold indirectly , 165,875 share of the Company 's exercise of stock option within 60 day after the Table Date after the Table Date , 1,157 share of the Company 's Fadell 's spouse , and 117,375 share of the Company 's exercise of stock option within 60 day after the Table Date the Table Date . Excludes 210,000 unvested restricted stock unit held held by Mr. Fadell and 40,000 unvested restricted stock unit held Fadell 's spouse . ( 7 ) Consists of 70,000 share ( 7 ) Consists of 70,000 share of the Company 's of stock option . ( 8 ) Includes 1,300,000 share of . ( 8 ) Includes 1,300,000 share of the Company 's of stock option and excludes 450,000 unvested restricted stock unit . restricted stock unit . ( 9 ) Includes 2,000 share of . ( 9 ) Includes 2,000 share of the Company 's Dr. Levinson 's spouse and 110,000 share of the Company 's of stock option . ( 10 ) Excludes 450,000 unvested restricted . ( 10 ) Excludes 450,000 unvested restricted stock unit . unvested restricted stock unit . 116 ( 11 ) Consists of stock unit . 116 ( 11 ) Consists of 12,284 share ( 11 ) Consists of 12,284 share of the Company 's declined to participate in the 1997 Director Stock Option Plan . Stock Option Plan . ( 12 ) Includes 40,000 share of . ( 12 ) Includes 40,000 share of the Company 's jointly with his spouse and 50,000 share of the Company 's of stock option . ( 13 ) Includes 2,146,546 share of . ( 13 ) Includes 2,146,546 share of the Company 's of stock option and excludes 2,950,000 unvested restricted stock unit . . * Represents le than 1 % of the issued and the Table Date . Item 13 . Certain Relationships and Related is expected to exceed $ 120,000 in a single calendar year 's proxy statement under Item 402 of Regulation S-K promulgated by promulgated by the SEC ; 117 • any transaction with another exceed the greater of $ 1,000,000 , or two percent of exceed the lesser of $ 1,000,000 , or two percent of recognized a total of $ 776,000 , $ 202,000 , and of $ 776,000 , $ 202,000 , and $ 1,100,000 in $ 202,000 , and $ 1,100,000 in expense pursuant to the to the Reimbursement Agreement during 2007 , 2006 , and 2005 Reimbursement Agreement during 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . • The Company . She earned $ 318,467 in salary and $ 218,750 318,467 in salary and $ 218,750 in bonus during fiscal year in bonus during fiscal year 2007 and participates in the Company the director are affiliated . 118 Item 14 . Principal Accountant are affiliated . 118 Item 14 . Principal Accountant Fees and LLP , during fiscal year 2007 and 2006 . Audit and during fiscal year 2007 and 2006 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2007 2006 Audit Fees ( 1 Audit and Non-Audit Fees 2007 2006 Audit Fees ( 1 ) 2007 2006 Audit Fees ( 1 ) $ 7,943,900 $ 7,912,700 Fees ( 1 ) $ 7,943,900 $ 7,912,700 Audit-Related Fees ( 1 ) $ 7,943,900 $ 7,912,700 Audit-Related Fees ( 2 ) $ 7,912,700 Audit-Related Fees ( 2 ) 432,000 28,000 Tax Fees Audit-Related Fees ( 2 ) 432,000 28,000 Tax Fees ( 3 Fees ( 2 ) 432,000 28,000 Tax Fees ( 3 ) 432,000 28,000 Tax Fees ( 3 ) 600,400 820,500 All Other Tax Fees ( 3 ) 600,400 820,500 All Other Fees — Fees ( 3 ) 600,400 820,500 All Other Fees — — Fees — — Total $ 8,976,300 $ 8,761,200 ( 1 ) — Total $ 8,976,300 $ 8,761,200 ( 1 ) Audit fee $ 8,976,300 $ 8,761,200 ( 1 ) Audit fee relate to in the Company 's Forms 10-Q , and audit service provided regulatory filing . Fiscal year 2007 and 2006 includes fee incurred . Fiscal year 2007 and 2006 includes fee incurred in connection stock option practice . ( 2 ) Audit-related fee comprise fee 's financial statement . ( 3 ) The 2007 and 2006 . ( 3 ) The 2007 and 2006 tax fee include 3 ) The 2007 and 2006 tax fee include $ 581,200 2006 tax fee include $ 581,200 and $ 728,600 , respectively include $ 581,200 and $ 728,600 , respectively , for professional tax compliance ; and $ 19,200 and $ 91,900 , respectively and $ 19,200 and $ 91,900 , respectively , for international of the Sarbanes-Oxley Act of 2002 ( the `` Act `` audit partner in fiscal year 2005 in compliance with the Act also rotated other partner in 2007 and 2006 , and will other partner in 2007 and 2006 , and will rotate additional comply with the Act . 119 PART IV Item 15 . . 119 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index Balance Sheets a of September 29 , 2007 and September 30 a of September 29 , 2007 and September 30 , 2006 29 , 2007 and September 30 , 2006 55 Consolidated Statements 2007 and September 30 , 2006 55 Consolidated Statements of Operations and September 30 , 2006 55 Consolidated Statements of Operations for three fiscal year ended September 29 , 2007 56 Consolidated Statements year ended September 29 , 2007 56 Consolidated Statements of Shareholders ended September 29 , 2007 56 Consolidated Statements of Shareholders ' three fiscal year ended September 29 , 2007 57 Consolidated Statements year ended September 29 , 2007 57 Consolidated Statements of Cash ended September 29 , 2007 57 Consolidated Statements of Cash Flows three fiscal year ended September 29 , 2007 58 Notes to year ended September 29 , 2007 58 Notes to Consolidated Financial ended September 29 , 2007 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 90 Reports of Independent Registered Public Accounting Firm , KPMG LLP 91 ( 2 ) Financial Statement , KPMG LLP 91 ( 2 ) Financial Statement Schedules All and Notes thereto . ( 4 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K The information page of this report . 120 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 15th day of November 2007 . this 15th day of November 2007 . APPLE INC. By : this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 15 , 2007 /s/ PETER OPPENHEIMER Officer ) November 15 , 2007 /s/ PETER OPPENHEIMER PETER OPPENHEIMER Principal Accounting Officer ) November 15 , 2007 /s/ WILLIAM V. Officer ) November 15 , 2007 /s/ WILLIAM V. CAMPBELL WILLIAM WILLIAM V. CAMPBELL Director November 15 , 2007 /s/ MILLARD S. CAMPBELL Director November 15 , 2007 /s/ MILLARD S. DREXLER MILLARD MILLARD S. DREXLER Director November 15 , 2007 /s/ ALBERT GORE DREXLER Director November 15 , 2007 /s/ ALBERT GORE , JR. GORE , JR. Director November 15 , 2007 /s/ ARTHUR D. JR. Director November 15 , 2007 /s/ ARTHUR D. LEVINSON ARTHUR ARTHUR D. LEVINSON Director November 15 , 2007 /s/ ERIC E. LEVINSON Director November 15 , 2007 /s/ ERIC E. SCHMIDT ERIC ERIC E. SCHMIDT Director November 15 , 2007 /s/ JEROME B. SCHMIDT Director November 15 , 2007 /s/ JEROME B. YORK JEROME JEROME B. YORK Director November 15 , 2007 121 EXHIBIT INDEX YORK Director November 15 , 2007 121 EXHIBIT INDEX Incorporated by Director November 15 , 2007 121 EXHIBIT INDEX Incorporated by Reference Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Certificate 27 , 1988 . S-3 7/27/88 3.2 Certificate of Amendment to , 1988 . S-3 7/27/88 3.2 Certificate of Amendment to Restated State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 Certificate May 4 , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment 4 , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment to , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment to Restated State of California on February 25 , 2005 . 10-Q 3/26/05 California on February 25 , 2005 . 10-Q 3/26/05 3.4 Certificate February 25 , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination 25 , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination of , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination of Preferences Stock of the Registrant . 10-K 9/26/97 3.5 * * By-Laws of the Registrant . 10-K 9/26/97 3.5 * * By-Laws of the Registrant . 10-K 9/26/97 3.5 * * By-Laws of the , a amended through November 13 , 2007 . 10.1 * amended through November 13 , 2007 . 10.1 * 1990 Stock November 13 , 2007 . 10.1 * 1990 Stock Option Plan , 2007 . 10.1 * 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10-Q 12/26/97 amended through November 5 , 1997 . 10-Q 12/26/97 10.2 * November 5 , 1997 . 10-Q 12/26/97 10.2 * Employee Stock 5 , 1997 . 10-Q 12/26/97 10.2 * Employee Stock Purchase , 1997 . 10-Q 12/26/97 10.2 * Employee Stock Purchase Plan , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.3 * May 10 , 2007 . 8-K 5/16/07 10.3 * Form of 10 , 2007 . 8-K 5/16/07 10.3 * Form of Indemnification , 2007 . 8-K 5/16/07 10.3 * Form of Indemnification Agreement officer of the Registrant . 10-K 9/26/97 10.4 * NeXT Computer of the Registrant . 10-K 9/26/97 10.4 * NeXT Computer , the Registrant . 10-K 9/26/97 10.4 * NeXT Computer , Inc. * NeXT Computer , Inc. 1990 Stock Option Plan , a , a amended . S-8 3/21/97 10.5 * 1997 Employee Stock a amended . S-8 3/21/97 10.5 * 1997 Employee Stock Option . S-8 3/21/97 10.5 * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.6 * October 19 , 2001 . 10-K 9/28/02 10.6 * 1997 Director 19 , 2001 . 10-K 9/28/02 10.6 * 1997 Director Stock , 2001 . 10-K 9/28/02 10.6 * 1997 Director Stock Option . 10-K 9/28/02 10.6 * 1997 Director Stock Option Plan , , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.7 * May 10 , 2007 . 8-K 5/16/07 10.7 * 2003 Employee 10 , 2007 . 8-K 5/16/07 10.7 * 2003 Employee Stock , 2007 . 8-K 5/16/07 10.7 * 2003 Employee Stock Plan . 8-K 5/16/07 10.7 * 2003 Employee Stock Plan , a , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.8 * May 10 , 2007 . 8-K 5/16/07 10.8 * Reimbursement Agreement 10 , 2007 . 8-K 5/16/07 10.8 * Reimbursement Agreement dated , 2007 . 8-K 5/16/07 10.8 * Reimbursement Agreement dated a Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.9 * Form of Steven P. Jobs . 10-Q 6/29/02 10.9 * Form of Restricted P. Jobs . 10-Q 6/29/02 10.9 * Form of Restricted Stock Stock Unit Award Agreement . 10-Q 3/27/04 10.10 * Alternative Form Unit Award Agreement . 10-Q 3/27/04 10.10 * Alternative Form of Award Agreement . 10-Q 3/27/04 10.10 * Alternative Form of Restricted Stock Unit Award Agreement . 10-K 9/24/05 10.11 * Performance Bonus Unit Award Agreement . 10-K 9/24/05 10.11 * Performance Bonus Plan Award Agreement . 10-K 9/24/05 10.11 * Performance Bonus Plan dated Performance Bonus Plan dated April 21 , 2005 . 10-Q 3/26/05 Plan dated April 21 , 2005 . 10-Q 3/26/05 10.12 * April 21 , 2005 . 10-Q 3/26/05 10.12 * Form of 21 , 2005 . 10-Q 3/26/05 10.12 * Form of Election , 2005 . 10-Q 3/26/05 10.12 * Form of Election to Tax Withholding with Stock . 8-K 8/15/05 10.13 * Form of Withholding with Stock . 8-K 8/15/05 10.13 * Form of Option with Stock . 8-K 8/15/05 10.13 * Form of Option Agreements Form of Option Agreements . 10-K 9/24/05 10.14 * Consulting Agreement of Option Agreements . 10-K 9/24/05 10.14 * Consulting Agreement dated Option Agreements . 10-K 9/24/05 10.14 * Consulting Agreement dated a Agreement dated a of April 17 , 2006 by and between a of April 17 , 2006 by and between the Registrant and J.R. Ruby Consulting Corp. 10-Q 7/1/06 10.15 * * Form J.R. Ruby Consulting Corp. 10-Q 7/1/06 10.15 * * Form of Ruby Consulting Corp. 10-Q 7/1/06 10.15 * * Form of Restricted Agreement effective a of August 28 , 2007 . 14.1 Code a of August 28 , 2007 . 14.1 Code of Ethics August 28 , 2007 . 14.1 Code of Ethics of the Ethics of the Registrant . 10-K 9/27/03 21 * * Subsidiaries of the Registrant . 10-K 9/27/03 21 * * Subsidiaries of the Registrant . 10-K 9/27/03 21 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule13a-14 ( a Rule13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule13a-14 ( a Rule13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer * * Furnished herewith . 122 QuickLinks PART I Item 1. 122 QuickLinks PART I Item 1. Business Item 1A . Risk I Item 1. Business Item 1A . Risk Factors Item 1B 1A . Risk Factors Item 1B . Unresolved Staff Comments Item . Unresolved Staff Comments Item 2 . Properties Item 3 . Item 2 . Properties Item 3 . Legal Proceedings Item 4 3 . Legal Proceedings Item 4 . Submission of Matters to Security Holders PART II Item 5 . Market for Registrant 's Purchases of Equity Securities Item 6 . Selected Financial Data Item . Selected Financial Data Item 7 . Management 's Discussion and and Results of Operations Item 7A . Quantitative and Qualitative Disclosures Disclosures About Market Risk Item 8 . Financial Statements and Supplementary TO CONSOLIDATED FINANCIAL STATEMENTS Item 9 . Changes in and Disagreements Accounting and Financial Disclosure Item 9A . Controls and Procedures Item . Controls and Procedures Item 9B . Other Information PART III Other Information PART III Item 10 . Directors , Executive Officers Officers and Corporate Governance Item 11 . Executive Compensation COMPENSATION DISCUSSION COMPENSATION DISCUSSION AND ANALYSIS Item 12 . Security Ownership of Certain and Related Stockholder Matters Item 13 . Certain Relationships and Related , and Director Independence Item 14 . Principal Accountant Fees and \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-97-006960/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001047469-97-006960/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-05-058421/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-05-058421/full-submission.txt new file mode 100644 index 0000000..6cfc874 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-05-058421/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 24 , 2005 or o TRANSITION year ended September 24 , 2005 or o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 0-10030 APPLE COMPUTER , INC. ( in it charter ) CALIFORNIA 942404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark ( a defined in Rule 12b-2 of the Act ) . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 26 , 2005 , wa approximately a of March 26 , 2005 , wa approximately $ 29,434,521,480 2005 , wa approximately $ 29,434,521,480 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 842,767,948 share of Common Stock Issued and Outstanding a of November 18 , 2005 PART I The a of November 18 , 2005 PART I The Business section this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part II , Item 7 of this Form 10-K . Item 7 of this Form 10-K . The Company assumes no required by law . Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , information presented in this Form 10-K is based on the Company a the Company ’ s 1 iPod digital music player , of the retail initiative in 2001 through 2005 , the Company retail initiative in 2001 through 2005 , the Company had opened , the Company had opened 116 retail store in the U.S. store in the U.S. and 8 international store in Canada , U.K . The Company opened 2 additional store in October 2005 2 additional store in October 2005 . The Company ha typically . Education For more than 25 year , the Company ha and the expression and representation 2 of student thought and idea solution , and one-to-one ( 1:1 ) learning solution ( primarily primarily in K-12 ) . 1:1 learning solution typically consist of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , “ Segment Information and s Mac OS® X Version 10.4 Tiger™ and iLife® suite of . Macintosh® Computers In June 2005 , the Company announced it with Intel microprocessor by June 2006 3 and to complete the Intel microprocessor by June 2006 3 and to complete the transition the end of calendar year 2007 . The Company also announced in Part II , Item 7 of this 10-K under the , Item 7 of this 10-K under the heading “ Factors the Power Mac G5 utilizes 64-bit processing technology for memory expansion for memory expansion up to 16GB and advanced 64-bit computation while up to 16GB and advanced 64-bit computation while also running existing computation while also running existing 32-bit application natively . In October application natively . In October 2005 , the Company updated the come in three processor configurations—dual 2.0GHz , dual 2.3GHz , and processor configurations—dual 2.0GHz , dual 2.3GHz , and a quad 2.5GHz 2.3GHz , and a quad 2.5GHz that feature two 2.5GHz dual quad 2.5GHz that feature two 2.5GHz dual processor . All Power SuperDrive™ and a NVIDIA GeForce 6600 graphic card . In addition dual Gigabit Ethernet , FireWire® 800 and FireWire 400 port , , FireWire® 800 and FireWire 400 port , USB 2.0 port FireWire 400 port , USB 2.0 port , optical digital I/O large database . In January 2005 , the Company upgraded Xserve available with either a single 2.0GHz or dual 2.3GHz PowerPC G5 a single 2.0GHz or dual 2.3GHz PowerPC G5 processor . Xserve system controller with up to 16GB of PC3200 error correcting code module that deliver up to 1.5TB of storage ; and dual system wa updated in September 2005 to deliver up to 7 2005 to deliver up to 7 terabyte of storage capacity and dual independent RAID controller with 512MB cache per controller offer sustained offer sustained throughput of over 385 Mbps—high enough to support medium environment using protected RAID level 5. iMac® The iMac line of education market . In October 2005 , the Company introduced the entire computer into either a 17-inch or 20-inch widescreen LCD flat-panel into either a 17-inch or 20-inch widescreen LCD flat-panel display . LCD flat-panel display . The 17-inch and 20-inch model come with display . The 17-inch and 20-inch model come with 1.9GHz and and 20-inch model come with 1.9GHz and 2.1GHz PowerPC G5 Processors model come with 1.9GHz and 2.1GHz PowerPC G5 Processors , respectively . The iMac G5 offer 512MB of 533MHz DDR2 memory expandable iMac G5 offer 512MB of 533MHz DDR2 memory expandable to 2.5GB 533MHz DDR2 memory expandable to 2.5GB and 7200 rpm Serial ATA memory expandable to 2.5GB and 7200 rpm Serial ATA drive expandable ATA drive expandable up to 500GB . The iMac G5 come also offer built-in Ethernet ( 10/100/1000BASE-T ) , three USB 2.0 10/100/1000BASE-T ) , three USB 2.0 and two FireWire 400 port USB 2.0 and two FireWire 400 port . The iMac G5 processor , a high resolution 17-inch flat cathode ray tube display , and preserve the all-in-one 4 compact design of the original processor running at up to 1.42GHz , 333MHz DDR memory , at up to 1.42GHz , 333MHz DDR memory , an optional built-in modem and Ethernet ( 10/100BASE-T ) , ATI Radeon graphic AirPort Extreme-ready , and USB 2.0 and 1.1 port for connectivity , and USB 2.0 and 1.1 port for connectivity to peripheral . Mac® mini In January 2005 , the Company introduced Mac a starting price of $ 499 and weighing a little a and weighing a little a 2.9 pound . In July 2005 2.9 pound . In July 2005 , the Company updated it model and increasing memory to 512MB . The first model includes The first model includes a 1.25GHz PowerPC G4 processor , a PowerPC G4 processor , a 40GB hard drive , and a The second model includes a 1.42GHz PowerPC G4 processor , an PowerPC G4 processor , an 80GB hard drive , and a The third model includes a 1.42GHz PowerPC G4 processor , an PowerPC G4 processor , an 80GB hard drive , and a All model include ATI Radeon 9200 graphic with 32MB of dedicated ATI Radeon 9200 graphic with 32MB of dedicated DDR memory , memory , built-in Ethernet ( 10/100 BASE-T ) , one FireWire BASE-T ) , one FireWire 400 and two USB 2.0 port FireWire 400 and two USB 2.0 port , and a DVI or CRT display . The 1.42GHz model of the Mac mini include built-in AirPort Extreme for 54 Mbps 802.11g wireless networking along AirPort Extreme for 54 Mbps 802.11g wireless networking along with an consumer user . In October 2005 , the Company updated it higher resolution display , including 1440 by 960 pixel in the display , including 1440 by 960 pixel in the 15-inch model by 960 pixel in the 15-inch model and 1680 by 1050 in the 15-inch model and 1680 by 1050 pixel in the 15-inch model and 1680 by 1050 pixel in the 17-inch model by 1050 pixel in the 17-inch model . Both the 15-inch 17-inch model . Both the 15-inch and 17-inch PowerBook G4 offer . Both the 15-inch and 17-inch PowerBook G4 offer a 1.67GHz 17-inch PowerBook G4 offer a 1.67GHz PowerPC G4 processor and the and the ATI Mobility Radeon 9700 graphic processor . The 12-inch 9700 graphic processor . The 12-inch PowerBook G4 feature a 1.5GHz 12-inch PowerBook G4 feature a 1.5GHz PowerPC processor , and the come with a SuperDrive , 512MB of DDR memory , built-in of I/O port including FireWire 400 , USB 2.0 , and including FireWire 400 , USB 2.0 , and a built-in 56K 2.0 , and a built-in 56K V.92 modem and Ethernet ( V.92 modem and Ethernet ( 10/100BASE-T ) , for connectivity to range of peripheral . The 15-inch and 17-inch PowerBook G4 model peripheral . The 15-inch and 17-inch PowerBook G4 model also include built-in Gigabit Ethernet and FireWire 800. iBook® The iBook is designed consumer user . In July 2005 , the Company upgraded it G4 processor running up to 1.42GHz , built-in AirPort Extreme 54 1.42GHz , built-in AirPort Extreme 54 Mpbs 802.11g wireless networking and built-in AirPort Extreme 54 Mpbs 802.11g wireless networking and an available available slot-load SuperDrive . The 12-inch model feature a 1.33GHz PowerPC The 12-inch model feature a 1.33GHz PowerPC G4 processor and a Combo drive , while the 14-inch model includes a 1.42GHz G4 the 14-inch model includes a 1.42GHz G4 processor and a SuperDrive of I/O port including FireWire 400 , USB 2.0 , a including FireWire 400 , USB 2.0 , a built-in 56K V.92 USB 2.0 , a built-in 56K V.92 modem and Ethernet ( V.92 modem and Ethernet ( 10/100BASE-T ) , a well a one-handed navigation . In October 2005 , the Company introduced the the new iPod containing a 2.5-inch color screen that can display The iPod lineup includes a 30GB model holding up to 7,500 30GB model holding up to 7,500 song , 25,000 photo , up to 7,500 song , 25,000 photo , or 5 75 , 25,000 photo , or 5 75 hour of video , 25,000 photo , or 5 75 hour of video , and of video , and a 60GB model holding up to 15,000 60GB model holding up to 15,000 song , 25,000 photo , up to 15,000 song , 25,000 photo , or 150 hour , 25,000 photo , or 150 hour of video . The . iPod® nano In September 2005 , the Company introduced iPod is available in either a 2GB model holding up to 500 2GB model holding up to 500 song or 25,000 photo , up to 500 song or 25,000 photo , or a 4GB 25,000 photo , or a 4GB model holding up to 1,000 4GB model holding up to 1,000 song or 25,000 photo . up to 1,000 song or 25,000 photo . The iPod nano which weighs a little a 1.5 ounce and is .27 inch . iPod® shuffle In January 2005 , the Company introduced iPod flash drive with up to 1GB of storage space . It It is available in a 512MB model holding up to 120 512MB model holding up to 120 song and a 1GB model to 120 song and a 1GB model holding up to 240 1GB model holding up to 240 song . iTunes Music Store® also listen to a free 30-second preview of content available through in the U.S. in April 2003 and now serf customer in and now serf customer in 21 country . The iTunes Music ; and album review . 6 Peripheral Products The Company sell flat panel display featuring the 30-inch Apple Cinema HD Display™ , a widescreen active-matrix LCD with 2560-by-1600 pixel resolution , a 23-inch 2560-by-1600 pixel resolution , a 23-inch widescreen Apple Cinema Display with widescreen Apple Cinema Display with 1920-by-1200 pixel resolution and a 20-inch 1920-by-1200 pixel resolution and a 20-inch widescreen Apple Cinema Display® with widescreen Apple Cinema Display® with 1680-by-1050 pixel resolution . The display dual FireWire and dual USB 2.0 port built into the display Operating System Software In April 2005 , the Company began shipping X. Tiger incorporates more than 200 new feature and innovation including Mac OS X Server version 10.4 , also began shipping in also began shipping in April 2005 . Server Software and Server Server Solutions Apple Remote Desktop™ 2 is the second generation of software . Apple Remote Desktop 2 includes more than 50 feature Desktop 2 includes more than 50 feature for centrally managing Mac system . Apple Remote Desktop 2 can perform a wide range report based on more than 200 system information attribute allow administrator of their Mac OS X 7 system . In addition , , began shipping in January 2005 . Xsan is a 64-bit 2005 . Xsan is a 64-bit cluster file system for Mac Professional Application Software In April 2005 , the Company announced Final that feature Final Cut Pro® 5 , the Company ’ s that complement Final Cut Pro 5 such a Soundtrack® Pro , and repair audio ; Motion 2 , an application that allows ; and DVD Studio Pro® 4 , DVD authoring software that separately . Final Cut Pro® 5 , the latest version of which began shipping in April 2005 , includes editing tool that HD . Final Cut Pro 5 acquires HDV medium via FireWire correction , Final Cut Pro 5 enables user to view and time , group up to 128 source together into multi-clips , time . Final Cut Pro 5 allows user to use external Soundtrack Pro also feature over 50 professional plug-in for creating sound for creating sound , over 5,000 loop , an integrated mixer Final Cut Studio . Motion 2 is a real-time motion graphic to their project . Motion 2 feature interactive animation of text by built-in GPU acceleration at 8-bit , 16-bit , or 32-bit GPU acceleration at 8-bit , 16-bit , or 32-bit float film 8-bit , 16-bit , or 32-bit float film quality . With film quality . With Motion 2 ’ s new design tool movie . DVD Studio Pro® 4 is the latest version of . With DVD Studio Pro 4 and it integrated , scalable DVDs . DVD Studio Pro 4 allows user to preview HD , slideshows , script , 8 and story of a DVD layout . DVD Studio Pro 4 includes Compressor 2 , a Studio Pro 4 includes Compressor 2 , a full-featured video and same time . In April 2005 , the Company announced Shake® , the Company announced Shake® 4 , an upgrade to the which began shipping in June 2005 . Used to create visual film and television , Shake 4 feature 3D multi-plane compositing , television , Shake 4 feature 3D multi-plane compositing , optical flow integration with Final Cut Pro 5 . Users can composite live can composite live action and 3D CGI layer with added realism added realism using OpenGL accelerated 3D multi-plane compositing node . Other and automatic stabilization . Shake 4 also integrates Truelight monitor calibration on film . Logic® Pro 7 is used by musician around Apple Loops , Logic Pro 7 add distributed audio processing , Ethernet network . In October 2005 , the Company announced Aperture™ , began shipping in November 2005 . Aperture is an application Oriented Application Software iLife® ‘ 05 In January 2005 , the iLife® ‘ 05 In January 2005 , the Company introduced iLife the Company introduced iLife ‘ 05 , an upgrade to it , and iTunes® . iPhoto® 5 is the Company ’ s photo software application . iPhoto 5 includes advanced editing tool , each individual slide . iPhoto 5 allows user to create and that generate MPEG-4 video . 9 iDVD® is a consumer-oriented software consumer DVD player . iDVD 5 includes 15 new theme featuring player . iDVD 5 includes 15 new theme featuring moving drop across DVD menu . iDVD 5 also feature OneStep DVD , a compatible SuperDrive™ , iDVD 5 support all recordable single-layer and creation software application . GarageBand 2 add 8-track recording so that application . GarageBand 2 add 8-track recording so that user can track at once . GarageBand 2 can improve out-of-tune note and and real-instrument recording . GarageBand 2 display and edits musical notation the latest , Jam Pack 4 : Symphony Orchestra , GarageBand favorite genre . iLife ‘ 05 also includes iTunes , the of iPods . In October 2005 , the Company introduced iTunes , the Company introduced iTunes 6 , the latest version of it iTunes software . iTunes 6 allows user to purchase and their iPod . In September 2005 , the Company , Motorola user to transfer up to 100 song from the iTunes library mobile phone . iWork™ ‘ 05 In January 2005 , the iWork™ ‘ 05 In January 2005 , the Company introduced iWork the Company introduced iWork ‘ 05 , productivity software designed to OS X and iLife ‘ 05 to help user create , and presentation . iWork ‘ 05 introduced Pages™ , a word , and also feature Keynote™ 2 , an updated version of directly into document . Keynote™ 2 is the Company ’ s , and storyboards . Keynote 2 contains slide animation to synchronize want to display . Keynote 2 can also work with a a timer . In January 2005 , the Company announced Final which began shipping in February 2005 . Final Cut Express HD feature sound editing tool including 99 audio track , real-time volume , which can add HD-quality 10 animated text and motion graphic level intact . Logic® Express 7 is a streamlined version of streamlined version of Logic Pro 7 that provides a basic set high-resolution audio of up to 24-bit/96kHz , the adaptive self-configuring track self-configuring track mixer , and 32-bit floating-point math provide professional sound sound quality . Logic Express 7 come with support for project publishing capability . FileMaker Pro 8 , the newest version of desktop database introduced in August 2005 , feature new way to various type . FileMaker Pro 8 allows user to convert graphic-rich video on computer . QuickTime 7 feature a new video codec low data rate . QuickTime 7 automatically determines a user ’ content stream possible . QuickTime 7 also delivers multi-channel audio and other QuickTime product . QuickTime 7 Pro , a suite of and video file . QuickTime 7 Pro allows user to create friend or colleague ; an 11 updated version of .Mac Backup iDisk and email storage to 1GB for individual and 2GB for to 1GB for individual and 2GB for family . Wireless Connectivity Extreme is based on the 802.11g standard , which support speed which support speed up to 54 Mbps , and is fully Wi-Fi device that use the 802.11b standard . AirPort Extreme Base Stations can serve up to 50 Macintosh and Windows user simultaneously AirPort® Express is the first 802.11g mobile base station that can a single piece design weighing 6.7 ounce . Other Connectivity and of data at up to 3 Mbps within a range of within a range of approximately 30 foot . The Company ’ in Mac OS X version 10.1.4 or higher . Bonjour™ , configuration technology including Ethernet or 802.11-based wireless network like the Company also referred to a IEEE 1394 , which is a high-speed national and regional retailer and 12 cataloguer . No individual customer customer accounted for more than 10 % of net sale in % of net sale in 2005 , 2004 , or 2003 net sale in 2005 , 2004 , or 2003 . The 2005 , 2004 , or 2003 . The Company also sell U.S. and internationally . Over 12 % of the Company ’ ’ s net sale in 2005 were through it U.S. education often initially utilize custom component 13 obtained from only one source did experience such delay during 2004 and 2005 related to PowerPC such delay during 2004 and 2005 related to PowerPC G5 processor s requirement . In June 2005 , the Company announced it the end of calendar year 2007 . The announcement of this requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company belief and development expenditure totaled $ 534 million , $ 489 million $ 534 million , $ 489 million , and $ 471 489 million , and $ 471 million in 2005 , 2004 and $ 471 million in 2005 , 2004 , and 2003 471 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . Patents , depend in part on the 14 ownership thereof , the Company largest geographic marketplace . Approximately 60 % of the Company ’ ’ s net sale in 2005 came from sale to customer in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , “ Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 15 Environmental Laws Compliance with federal . Employees As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had approximately , the Company had approximately 14,800 full-time equivalent employee and an equivalent employee and an additional 2,020 temporary employee and contractor . s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 2 . Properties The Company ’ Ireland . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company leased approximately , the Company leased approximately 3.6 million square foot of space lease are for term of 5 to 15 year and generally for term of 5 to 15 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leased space . Leased space includes approximately 902,000 square foot of retail space for retail space range from 5 to 20 year , the space range from 5 to 20 year , the majority of majority of which are for 10 year , and often contain . The Company owns a 352,000 square-foot manufacturing facility in Cork The Company also owns a 752,000 square-foot facility in Sacramento , , the Company owns approximately 942,000 square foot of facility located owns additional facility totaling approximately 169,000 square foot . The Company demand for it product . 16 Item 3 . Legal Proceedings it product . 16 Item 3 . Legal Proceedings The Company Company settled certain matter during 2005 that did not individually or filed this action on March 3 , 2005 in the United action on March 3 , 2005 in the United States District the Company of U.S. Patent 6,587,403 entitled “ Music Jukebox . filed an answer on May 4 , 2005 denying all material answer on May 4 , 2005 denying all material allegation and filed this action on July 4 , 2003 in the High action on July 4 , 2003 in the High Court of the Company ha breached a 1991 agreement that resolved earlier trademark filed a motion on October 13 , 2003 , challenging jurisdiction motion on October 13 , 2003 , challenging jurisdiction in the denied this motion on April 7 , 2004 . The Company motion on April 7 , 2004 . The Company filed an the appeal . In November 2004 , Plaintiff served the Company of Particulars and on December 23 , 2004 the Company filed and on December 23 , 2004 the Company filed a Defence for the week of March 27 , 2006 . On October week of March 27 , 2006 . On October 8 , , 2006 . On October 8 , 2003 , the Company . On October 8 , 2003 , the Company filed a Company ha not breached the 1991 agreement . Apple Corps challenged denied that challenge on March 25 , 2004 . Apple Corps challenge on March 25 , 2004 . Apple Corps subsequently prevailed Board of Directors on May 19 , 2005 in Santa Clara Directors on May 19 , 2005 in Santa Clara County Superior the Company ’ s March 14 , 2005 proxy statement wa ’ s March 14 , 2005 proxy statement wa false and annual meeting held on April 21 , 2005 . Plaintiff , held on April 21 , 2005 . Plaintiff , who ostensibly the Company . On July 27 , 2005 , Plaintiff filed . On July 27 , 2005 , Plaintiff filed an amended also inflicted injury on her 17 directly a an individual shareholder to be heard on December 6 , 2005 . Baghdasarian , heard on December 6 , 2005 . Baghdasarian , et al County Superior Court on October 31 , 2005 , on behalf Court on October 31 , 2005 , on behalf of a County Superior Court on February 17 , 2005 . The complaint Court on February 17 , 2005 . The complaint alleges violation of the complaint on March 12 , 2005 , and on complaint on March 12 , 2005 , and on March 13 2005 , and on March 13 , 2005 the Company filed and on March 13 , 2005 the Company filed a motion Superior Court . On May 9 , 2005 , the Court . On May 9 , 2005 , the Court granted the Superior Court . On May 2 , 2005 , Plaintiffs filed . On May 2 , 2005 , Plaintiffs filed an amended in it entirety on November 10 , 2005 . The Court entirety on November 10 , 2005 . The Court granted Plaintiffs County Superior Court on February 17 , 2005 alleging false advertising Court on February 17 , 2005 alleging false advertising regarding the filed an answer on April 7 , 2005 denying all allegation answer on April 7 , 2005 denying all allegation and asserting filed this action on August 23 , 2005 , in the action on August 23 , 2005 , in the United States filed an answer on October 19 , 2005 denying the material answer on October 19 , 2005 denying the material allegation and asserting numerous affirmative defense . 18 Cagney v. Apple Computer , purported class action on January 9 , 2004 in Los Angeles action on January 9 , 2004 in Los Angeles County Superior filed an answer on February 20 , 2004 , denying all answer on February 20 , 2004 , denying all allegation and subsequently withdrew . On February 17 , 2005 the Court of . On February 17 , 2005 the Court of Appeal ruled the disqualification order on May 12 , 2005 . On May order on May 12 , 2005 . On May 9 , , 2005 . On May 9 , 2005 Plaintiff substituted new . On May 9 , 2005 Plaintiff substituted new counsel . purported class action on February 2 , 2005 in Santa Clara action on February 2 , 2005 in Santa Clara County Superior of the settlement on April 19 , 2005 . On November settlement on April 19 , 2005 . On November 29 , , 2005 . On November 29 , 2005 , the Court . On November 29 , 2005 , the Court continued the final settlement approval until January 10 , 2006 , when all approval until January 10 , 2006 , when all claim will patent infringement action on April 22 , 2004 against the Company action on April 22 , 2004 against the Company and twenty-seven alleging infringement of U.S. patent 4,698,672 ( the ‘ 672 patent patent 4,698,672 ( the ‘ 672 patent ) . Plaintiff alleges other relief . On July 2 , 2004 , the Company . On July 2 , 2004 , the Company and several with respect to the ‘ 672 patent . Additional action regarding other jurisdiction . On February 16 , 2005 , the Panel . On February 16 , 2005 , the Panel on Multi-District hearing is set for February 13 , 2006 . Contois Music set for February 13 , 2006 . Contois Music Technology LLC filed this action on June 13 , 2005 in the United action on June 13 , 2005 in the United States District of U.S. Patent No . 5,864,868 , entitled “ Computer Control which wa served on October 4 , 2005 , seek unspecified served on October 4 , 2005 , seek unspecified damage and filed an answer on November 23 , 2005 denying all material answer on November 23 , 2005 denying all material allegation and asserting numerous affirmative defense . 19 Craft v. Apple Computer , Inc . ( filed December 23 , 2003 , Santa Clara ( filed December 23 , 2003 , Santa Clara County Superior , Inc. ( filed December 23 , 2003 , San Mateo ( filed December 23 , 2003 , San Mateo County Superior , Inc. ( filed December 23 , 2003 , Santa Clara ( filed December 23 , 2003 , Santa Clara County Superior , Inc. ( filed December 26 , 2003 , San Francisco ( filed December 26 , 2003 , San Francisco County Superior , Inc. ( filed December 30 , 2003 , Alameda County ( filed December 30 , 2003 , Alameda County Superior Court , Inc. ( filed February 19 , 2004 , Alameda County ( filed February 19 , 2004 , Alameda County Superior Court , Inc. ( filed February 24 , 2004 , Los Angeles ( filed February 24 , 2004 , Los Angeles County Superior , Inc. ( filed July 8 , 2004 , Alameda County ( filed July 8 , 2004 , Alameda County Superior Court consolidated complaint . On August 25 , 2004 , the Company . On August 25 , 2004 , the Company filed an of the settlement on May 20 , 2005 . The trial settlement on May 20 , 2005 . The trial court entered to the settlement on August 25 , 2005 . An appeal settlement on August 25 , 2005 . An appeal challenging the settlement wa filed on October 24 , 2005 ; the appeal filed on October 24 , 2005 ; the appeal is pending , New York on June 23 , 2004 alleging violation of York on June 23 , 2004 alleging violation of New York York General Business Law Sections 349 ( unfair competition ) and ( unfair competition ) and 350 ( false advertising ) . , Canada , on June 7 , 2005 , seeking authorization , on June 7 , 2005 , seeking authorization to institute action on behalf of Generations 1 , 2 and 3 iPod behalf of Generations 1 , 2 and 3 iPod owner in Generations 1 , 2 and 3 iPod owner in Quebec . ha been scheduled for January 12 , 2006 . Two similar scheduled for January 12 , 2006 . Two similar complaint relative Ontario , Canada on August 15 , 2005 and September 12 Canada on August 15 , 2005 and September 12 , 2005 15 , 2005 and September 12 , 2005 , respectively . 2005 and September 12 , 2005 , respectively . Both action scheduled for the Spring of 2006 . Davis v. Apple Computer County Superior Court on December 5 , 2002 , alleging that Court on December 5 , 2002 , alleging that the Company filed an answer on April 17 , 2003 denying all allegation answer on April 17 , 2003 denying all allegation and asserting it complaint . On October 29 , 2003 , the Company . On October 29 , 2003 , the Company filed a of Appeal denied the appeal 20 on August 17 , 2005 the appeal 20 on August 17 , 2005 , affirming the 20 on August 17 , 2005 , affirming the trial court which wa denied on November 23 , 2005 . European Commission denied on November 23 , 2005 . European Commission Investigation The investigating the charge under Articles 81 and 82 of the European charge under Articles 81 and 82 of the European Commission Treaty Microsystems , Inc. on April 15 , 2004 in the United Inc. on April 15 , 2004 in the United States District alleging infringement of U.S. patent 5,418,968 related to a “ System Company ’ s Mac OS 9 and Mac OS X operating filed an answer on June 9 , 2004 , denying all answer on June 9 , 2004 , denying all material allegation Markman hearing took place August 9 , 2005 , and the took place August 9 , 2005 , and the Court issued issued a ruling on August 26 , 2005 invalidating one of ruling on August 26 , 2005 invalidating one of Plantiff ’ two claim . On October 18 , 2005 , a Stipulation . On October 18 , 2005 , a Stipulation entered into wa filed removing Mac OS 9 from the case . The trial is scheduled for February 6 , 2006 . Goldberg , scheduled for February 6 , 2006 . Goldberg , et al purported class action on September 22 , 2003 in Los Angeles action on September 22 , 2003 in Los Angeles County Superior an amended complaint on March 30 , 2004 and the Company complaint on March 30 , 2004 and the Company filed an filed an answer on September 23 , 2004 , denying all answer on September 23 , 2004 , denying all allegation and the pleading based upon Proposition 64 . The Court granted both at a hearing on April 6 , 2005 . Plaintiff filed hearing on April 6 , 2005 . Plaintiff filed an amended an amended complaint on May 6 , 2005 . The Defendants complaint on May 6 , 2005 . The Defendants filed a filed a demurrer on June 6 , 2005 , which wa demurrer on June 6 , 2005 , which wa heard on which wa heard on August 22 , 2005 . The Court heard on August 22 , 2005 . The Court granted the filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District other defendant of U.S. patent 5,280,371 entitled “ Directional Diffuser for filed an answer on December 21 , 2004 denying all material answer on December 21 , 2004 denying all material allegation and several supplier . On May 18 , 2005 the Court stayed . On May 18 , 2005 the Court stayed the case an amended complaint on November 7 , 2005 adding additional defendant complaint on November 7 , 2005 adding additional defendant and expanding is not yet due . 21 MacTech Systems v. Apple Computer Computer International complaint on November 12 , 2003 , denying all complaint on November 12 , 2003 , denying all allegation and the Macadam case on December 3 , 2004 denying all allegation case on December 3 , 2004 denying all allegation and asserting filed amended complaint on February 7 , 2005 , and on complaint on February 7 , 2005 , and on March 16 2005 , and on March 16 , 2005 the Company filed and on March 16 , 2005 the Company filed answer to filed a complaint on February 23 , 2005 . The Company complaint on February 23 , 2005 . The Company filed an to this complaint on April 20 , 2005 denying all allegation complaint on April 20 , 2005 denying all allegation and asserting in discovery . On October 1 , 2003 , one of . On October 1 , 2003 , one of the reseller a preliminary injunction on December 19 , 2003 . On December injunction on December 19 , 2003 . On December 6 , , 2003 . On December 6 , 2004 Macadam filed for . On December 6 , 2004 Macadam filed for Chapter 11 2004 Macadam filed for Chapter 11 Bankruptcy in the Northern District the bankruptcy proceeding on February 16 , 2005 . The Company proceeding on February 16 , 2005 . The Company took Macadam s debtor examination in April 2005 . The Company , joined convert the bankruptcy to Chapter 7 ( liquidation ) on April ( liquidation ) on April 29 , 2005 and that motion ) on April 29 , 2005 and that motion wa granted filed this action on November 3 , 2005 in the United action on November 3 , 2005 in the United States District Company of U.S . Patents 6,243,725 and 6,763,345 both entitled “ U.S . Patents 6,243,725 and 6,763,345 both entitled “ List Building purported class action on January 3 , 2005 in the United action on January 3 , 2005 in the United States District alleged violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business and motion to dismiss on February 10 , 2005 . On September dismiss on February 10 , 2005 . On September 9 , , 2005 . On September 9 , 2005 , the Court . On September 9 , 2005 , the Court denied the an amended complaint on September 23 , 2005 and the Company complaint on September 23 , 2005 and the Company filed an filed an answer on October 11 , 2005 . The case answer on October 11 , 2005 . The case is in purported class action on November 12 , 2004 in Circuit Court action on November 12 , 2004 in Circuit Court , Cook defect in Apple ’ s 17-inch Studio Display monitor result in to Federal Court on December 22 , 2004 . The Court Court on December 22 , 2004 . The Court remanded it to State Court on March 22 , 2005 on Plaintiff ’ Court on March 22 , 2005 on Plaintiff ’ s motion motion to dismiss on January 27 , 2005 which wa taken dismiss on January 27 , 2005 which wa taken off calendar off calendar due to the 22 remand . On January 28 22 remand . On January 28 , 2005 a second plaintiff . On January 28 , 2005 a second plaintiff , Allen the Stamm case on September 2 , 2005 . An amended case on September 2 , 2005 . An amended complaint in case wa filed on October 24 , 2005 , adding additional filed on October 24 , 2005 , adding additional named plaintiff to include purchaser of the 20-inch Apple Cinema Display and the Apple Cinema Display and the 23-inch Apple Cinema HD Display . equitable relief . On November 14 , 2005 , the Company . On November 14 , 2005 , the Company filed an to the allegation regarding the 17-inch display and a demurrer/motion to to the allegation regarding the 20-inch and 23-inch display on the allegation regarding the 20-inch and 23-inch display on the ground that a status conference on November 21 , 2005 , the Court conference on November 21 , 2005 , the Court ordered Plantiffs , Canada , on August 5 , 2005 , seeking authorization , on August 5 , 2005 , seeking authorization to institute price in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 but later declared 2003 and December 14 , 2004 but later declared invalid by hearing is scheduled for January 13 , 2006 . The Company scheduled for January 13 , 2006 . The Company ha already filed this case on July 20 , 2004 in United States case on July 20 , 2004 in United States District Court alleging infringement of U.S. patent 6,557,054 , entitled “ Method and an amended complaint on September 7 , 2004 , adding a complaint on September 7 , 2004 , adding a second patent second patent , U.S. patent 6,769,009 entitled “ Method and System filed an answer on October 18 , 2004 , denying all answer on October 18 , 2004 , denying all material allegation affirmative defense . On August 22 , 2005 , the Company . On August 22 , 2005 , the Company filed an are tentatively scheduled for January 13 , 20 , and 27 scheduled for January 13 , 20 , and 27 , 2006 13 , 20 , and 27 , 2006 . Tiger Direct 20 , and 27 , 2006 . Tiger Direct , Inc. District of Florida on April 26 , 2005 alleging infringement of Florida on April 26 , 2005 alleging infringement of the word the TIGER mark on April 27 , 2005 but the motion mark on April 27 , 2005 but the motion wa denied served the Company on April 27 , 2005 and again moved Company on April 27 , 2005 and again moved for a motion wa heard on May 3 , 2005 . On May heard on May 3 , 2005 . On May 11 , , 2005 . On May 11 , 2005 , the Court . On May 11 , 2005 , the Court denied Plaintiff to the complaint on May 17 , 2005 , denying all complaint on May 17 , 2005 , denying all material allegation Tiger Direct . On June 10 , 2005 , Plaintiff filed . On June 10 , 2005 , Plaintiff filed an appeal or result of operation . 23 Tse v. Apple Computer , and other defendant on August 5 , 2005 in the United defendant on August 5 , 2005 in the United States District the Company of U.S. Patent 6,665,797 entitled “ Protection of Software filed an answer on October 31 , 2005 denying all material answer on October 31 , 2005 denying all material allegation and affirmative defense . On October 28 , 2005 , the Company . On October 28 , 2005 , the Company and the Computer , Inc. on October 19 , 2005 in the United Inc. on October 19 , 2005 in the United States District ; amended complaint filed October 26 , 2005 ) ; Moschella complaint filed October 26 , 2005 ) ; Moschella , et , Inc. ( filed October 26 , 2005 United States District ( filed October 26 , 2005 United States District Court for , Inc. ( filed October 26 , 2005 , Los Angeles ( filed October 26 , 2005 , Los Angeles County Superior , Inc. ( filed October 31 , 2005 , United States ( filed October 31 , 2005 , United States District Court , Inc. ( filed November 4 , 2005 , United States ( filed November 4 , 2005 , United States District Court , Canada , on October 27 , 2005 and November 9 , on October 27 , 2005 and November 9 , 2005 27 , 2005 and November 9 , 2005 , respectively , 2005 and November 9 , 2005 , respectively , seeking authorization filed this complaint on February 9 , 2005 alleging that the complaint on February 9 , 2005 alleging that the entity above are violating consumer law by 1 ) omitting to mention that compatible with the iPod and 2 ) allegedly tying the sale case took place on May 24 , 2005 . The Company place on May 24 , 2005 . The Company ’ s complaint wa served on November 8 , 2005 . Item 4 served on November 8 , 2005 . Item 4 . Submission 8 , 2005 . Item 4 . Submission of Matters to s fiscal year ended September 24 , 2005 . 24 PART year ended September 24 , 2005 . 24 PART II Item September 24 , 2005 . 24 PART II Item 5 . . 24 PART II Item 5 . Market for the Registrant symbol APCD . In December 2004 , the Company delisted it Exchange . As of November 18 , 2005 , there were As of November 18 , 2005 , there were 28,333 shareholder , 2005 , there were 28,333 shareholder of record . The pay cash dividend in either 2005 or 2004 . The Company dividend in either 2005 or 2004 . The Company anticipates that each quarter . On February 28 , 2005 , the Company . On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per Second Quarter First Quarter Fiscal 2005 price range per common share range per common share $ 53.20- $ 36.37 $ 43.74- $ common share $ 53.20- $ 36.37 $ 43.74- $ 34.13 $ $ 53.20- $ 36.37 $ 43.74- $ 34.13 $ 45.06- $ $ 36.37 $ 43.74- $ 34.13 $ 45.06- $ 31.58 $ $ 43.74- $ 34.13 $ 45.06- $ 31.58 $ 34.22- $ $ 34.13 $ 45.06- $ 31.58 $ 34.22- $ 18.65 Fiscal $ 45.06- $ 31.58 $ 34.22- $ 18.65 Fiscal 2004 price $ 31.58 $ 34.22- $ 18.65 Fiscal 2004 price range per $ 34.22- $ 18.65 Fiscal 2004 price range per common share range per common share $ 19.00- $ 14.57 $ 16.85- $ common share $ 19.00- $ 14.57 $ 16.85- $ 12.89 $ $ 19.00- $ 14.57 $ 16.85- $ 12.89 $ 13.84- $ $ 14.57 $ 16.85- $ 12.89 $ 13.84- $ 10.57 $ $ 16.85- $ 12.89 $ 13.84- $ 10.57 $ 12.41- $ $ 12.89 $ 13.84- $ 10.57 $ 12.41- $ 9.85 ( $ 13.84- $ 10.57 $ 12.41- $ 9.85 ( b ) $ 10.57 $ 12.41- $ 9.85 ( b ) Related Shareholder of Equity Securities None . 25 Item 6 . Selected Financial Securities None . 25 Item 6 . Selected Financial Data The read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K in Item 8 of this Form 10-K in order to fully understand Five fiscal year ended September 24 , 2005 ( In million year ended September 24 , 2005 ( In million , except and per share amount ) 2005 2004 2003 2002 2001 Net per share amount ) 2005 2004 2003 2002 2001 Net sale share amount ) 2005 2004 2003 2002 2001 Net sale $ amount ) 2005 2004 2003 2002 2001 Net sale $ 13,931 ) 2005 2004 2003 2002 2001 Net sale $ 13,931 $ 2002 2001 Net sale $ 13,931 $ 8,279 $ 6,207 $ Net sale $ 13,931 $ 8,279 $ 6,207 $ 5,742 $ $ 13,931 $ 8,279 $ 6,207 $ 5,742 $ 5,363 Net $ 8,279 $ 6,207 $ 5,742 $ 5,363 Net income ( $ 6,207 $ 5,742 $ 5,363 Net income ( loss ) income ( loss ) $ 1,335 $ 276 $ 69 $ loss ) $ 1,335 $ 276 $ 69 $ 65 $ $ 1,335 $ 276 $ 69 $ 65 $ ( 25 $ 276 $ 69 $ 65 $ ( 25 ) Earnings 69 $ 65 $ ( 25 ) Earnings ( loss ) common share : Basic $ 1.65 $ 0.37 $ 0.10 $ : Basic $ 1.65 $ 0.37 $ 0.10 $ 0.09 $ $ 1.65 $ 0.37 $ 0.10 $ 0.09 $ ( 0.04 $ 0.37 $ 0.10 $ 0.09 $ ( 0.04 ) Diluted 0.10 $ 0.09 $ ( 0.04 ) Diluted $ 1.56 $ ( 0.04 ) Diluted $ 1.56 $ 0.36 $ 0.09 $ ) Diluted $ 1.56 $ 0.36 $ 0.09 $ 0.09 $ $ 1.56 $ 0.36 $ 0.09 $ 0.09 $ ( 0.04 $ 0.36 $ 0.09 $ 0.09 $ ( 0.04 ) Cash 0.09 $ 0.09 $ ( 0.04 ) Cash dividend declared per in thousand ) : Basic 808,439 743,180 721,262 710,044 691,226 Diluted thousand ) : Basic 808,439 743,180 721,262 710,044 691,226 Diluted 856,780 ) : Basic 808,439 743,180 721,262 710,044 691,226 Diluted 856,780 774,622 : Basic 808,439 743,180 721,262 710,044 691,226 Diluted 856,780 774,622 726,932 Basic 808,439 743,180 721,262 710,044 691,226 Diluted 856,780 774,622 726,932 723,570 743,180 721,262 710,044 691,226 Diluted 856,780 774,622 726,932 723,570 691,226 Cash 721,262 710,044 691,226 Diluted 856,780 774,622 726,932 723,570 691,226 Cash , 710,044 691,226 Diluted 856,780 774,622 726,932 723,570 691,226 Cash , cash 691,226 Diluted 856,780 774,622 726,932 723,570 691,226 Cash , cash equivalent Diluted 856,780 774,622 726,932 723,570 691,226 Cash , cash equivalent , , and short-term investment $ 8,261 $ 5,464 $ 4,566 $ short-term investment $ 8,261 $ 5,464 $ 4,566 $ 4,337 $ $ 8,261 $ 5,464 $ 4,566 $ 4,337 $ 4,336 Total $ 5,464 $ 4,566 $ 4,337 $ 4,336 Total asset $ $ 4,566 $ 4,337 $ 4,336 Total asset $ 11,551 $ $ 4,336 Total asset $ 11,551 $ 8,050 $ 6,815 $ Total asset $ 11,551 $ 8,050 $ 6,815 $ 6,298 $ $ 11,551 $ 8,050 $ 6,815 $ 6,298 $ 6,021 Long-term $ 8,050 $ 6,815 $ 6,298 $ 6,021 Long-term debt ( $ 6,815 $ 6,298 $ 6,021 Long-term debt ( including current $ — $ — $ 304 $ 316 $ 317 Total $ — $ 304 $ 316 $ 317 Total liability $ $ 304 $ 316 $ 317 Total liability $ 4,085 $ $ 317 Total liability $ 4,085 $ 2,974 $ 2,592 $ Total liability $ 4,085 $ 2,974 $ 2,592 $ 2,203 $ $ 4,085 $ 2,974 $ 2,592 $ 2,203 $ 2,101 Shareholders $ 2,974 $ 2,592 $ 2,203 $ 2,101 Shareholders ’ equity $ 2,592 $ 2,203 $ 2,101 Shareholders ’ equity $ 7,466 2,101 Shareholders ’ equity $ 7,466 $ 5,076 $ 4,223 $ ’ equity $ 7,466 $ 5,076 $ 4,223 $ 4,095 $ $ 7,466 $ 5,076 $ 4,223 $ 4,095 $ 3,920 Net $ 5,076 $ 4,223 $ 4,095 $ 3,920 Net gain before $ 4,223 $ 4,095 $ 3,920 Net gain before tax related and equity investment of $ 4 million , $ 10 million $ 4 million , $ 10 million , and $ 75 10 million , and $ 75 million were recognized in 2004 75 million were recognized in 2004 , 2003 , and 2001 were recognized in 2004 , 2003 , and 2001 , respectively 2004 , 2003 , and 2001 , respectively . A net and equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . In 2002 , the recognized in 2002 . In 2002 , the Company acquired Emagic a charge of approximately $ 1 million for acquired in-process technology a similar charge of $ 11 million in 2001 related to of $ 11 million in 2001 related to it acquisition of Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , and $ 30 26 million , and $ 30 million were recognized in 2004 30 million were recognized in 2004 , 2003 , and 2002 were recognized in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . In 2003 2002 , respectively . In 2003 , settlement of the Company in a gain of $ 6 million . Net income during million . Net income during 2005 benefited by $ 81 million during 2005 benefited by $ 81 million from the reversal of of tax , of $ 1 million and $ 12 million $ 1 million and $ 12 million were recognized in 2003 12 million were recognized in 2003 and 2001 , respectively . were recognized in 2003 and 2001 , respectively . Item 7 2001 , respectively . Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is the Company ’ s fiscal 26 calendar . The Company assumes in Part I , Item 1 of this document under the brand awareness . In June 2005 , the Company announced it with Intel microprocessor by June 2006 and to complete the transition the end of calendar year 2007 . There are potential risk further belief that providing a 27 high-quality sale and after-sales support internationally . The Company had 124 store open a of September store open a of September 24 , 2005 . The Company a of September 24 , 2005 . The Company also staff and accompanying note . Note 1 of the Notes to Consolidated Financial Statements of this Form 10-K describes the significant accounting policy ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The become due and payable . 28 The Company record reduction to the write-down are recorded . 29 The Company accrues necessary reserve requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is ( SFAS ) No . 109 , Accounting for Income Taxes American Jobs Creation Act of 2004 , which , if implemented operation and financial position . 30 Net Sales Net sale and in thousand ) : September 24 , 2005 Change September 25 ) : September 24 , 2005 Change September 25 , 2004 24 , 2005 Change September 25 , 2004 Change September 27 2005 Change September 25 , 2004 Change September 27 , 2003 25 , 2004 Change September 27 , 2003 Net Sales by 2004 Change September 27 , 2003 Net Sales by Operating Segment : Americas net sale $ 6,590 64 % $ 4,019 26 Americas net sale $ 6,590 64 % $ 4,019 26 % $ 6,590 64 % $ 4,019 26 % $ 3,181 Europe 6,590 64 % $ 4,019 26 % $ 3,181 Europe net $ 4,019 26 % $ 3,181 Europe net sale 3,073 71 $ 3,181 Europe net sale 3,073 71 % 1,799 37 % 3,181 Europe net sale 3,073 71 % 1,799 37 % 1,309 net sale 3,073 71 % 1,799 37 % 1,309 Japan net sale 3,073 71 % 1,799 37 % 1,309 Japan net sale 71 % 1,799 37 % 1,309 Japan net sale 920 36 % 1,309 Japan net sale 920 36 % 677 ( 3 1,309 Japan net sale 920 36 % 677 ( 3 ) net sale 920 36 % 677 ( 3 ) % 698 920 36 % 677 ( 3 ) % 698 Retail net 677 ( 3 ) % 698 Retail net sale 2,350 98 % 698 Retail net sale 2,350 98 % 1,185 91 % 698 Retail net sale 2,350 98 % 1,185 91 % 621 net sale 2,350 98 % 1,185 91 % 621 Other Segments sale 2,350 98 % 1,185 91 % 621 Other Segments net 98 % 1,185 91 % 621 Other Segments net sale ( net sale ( a ) 998 67 % 599 51 % sale ( a ) 998 67 % 599 51 % 398 a ) 998 67 % 599 51 % 398 Total net ) 998 67 % 599 51 % 398 Total net sale 67 % 599 51 % 398 Total net sale $ 13,931 398 Total net sale $ 13,931 68 % $ 8,279 33 Total net sale $ 13,931 68 % $ 8,279 33 % $ 13,931 68 % $ 8,279 33 % $ 6,207 Unit 13,931 68 % $ 8,279 33 % $ 6,207 Unit Sales $ 8,279 33 % $ 6,207 Unit Sales by Operating Segment : Americas Macintosh unit sale 2,184 30 % 1,682 4 % Americas Macintosh unit sale 2,184 30 % 1,682 4 % 1,620 unit sale 2,184 30 % 1,682 4 % 1,620 Europe Macintosh sale 2,184 30 % 1,682 4 % 1,620 Europe Macintosh unit 30 % 1,682 4 % 1,620 Europe Macintosh unit sale 1,138 1,620 Europe Macintosh unit sale 1,138 47 % 773 13 % Europe Macintosh unit sale 1,138 47 % 773 13 % 684 unit sale 1,138 47 % 773 13 % 684 Japan Macintosh sale 1,138 47 % 773 13 % 684 Japan Macintosh unit 47 % 773 13 % 684 Japan Macintosh unit sale 313 684 Japan Macintosh unit sale 313 8 % 291 ( 14 Japan Macintosh unit sale 313 8 % 291 ( 14 ) unit sale 313 8 % 291 ( 14 ) % 339 313 8 % 291 ( 14 ) % 339 Retail Macintosh 291 ( 14 ) % 339 Retail Macintosh unit sale 609 339 Retail Macintosh unit sale 609 94 % 314 68 % Retail Macintosh unit sale 609 94 % 314 68 % 187 unit sale 609 94 % 314 68 % 187 Other Segments sale 609 94 % 314 68 % 187 Other Segments Macintosh 94 % 314 68 % 187 Other Segments Macintosh unit sale unit sale ( a ) 290 26 % 230 26 % sale ( a ) 290 26 % 230 26 % 182 a ) 290 26 % 230 26 % 182 Total Macintosh ) 290 26 % 230 26 % 182 Total Macintosh unit 26 % 230 26 % 182 Total Macintosh unit sale 4,534 182 Total Macintosh unit sale 4,534 38 % 3,290 9 % Total Macintosh unit sale 4,534 38 % 3,290 9 % 3,012 unit sale 4,534 38 % 3,290 9 % 3,012 Net Sales sale 4,534 38 % 3,290 9 % 3,012 Net Sales by 38 % 3,290 9 % 3,012 Net Sales by Product : Desktops ( b ) $ 3,436 45 % $ 2,373 ( ( b ) $ 3,436 45 % $ 2,373 ( 4 $ 3,436 45 % $ 2,373 ( 4 ) % $ 45 % $ 2,373 ( 4 ) % $ 2,475 Portables ( 4 ) % $ 2,475 Portables ( c ) 2,839 2,475 Portables ( c ) 2,839 11 % 2,550 26 % Portables ( c ) 2,839 11 % 2,550 26 % 2,016 c ) 2,839 11 % 2,550 26 % 2,016 Total Macintosh ) 2,839 11 % 2,550 26 % 2,016 Total Macintosh net 11 % 2,550 26 % 2,016 Total Macintosh net sale 6,275 2,016 Total Macintosh net sale 6,275 27 % 4,923 10 % Total Macintosh net sale 6,275 27 % 4,923 10 % 4,491 net sale 6,275 27 % 4,923 10 % 4,491 iPod 4,540 sale 6,275 27 % 4,923 10 % 4,491 iPod 4,540 248 27 % 4,923 10 % 4,491 iPod 4,540 248 % 1,306 4,923 10 % 4,491 iPod 4,540 248 % 1,306 279 % 10 % 4,491 iPod 4,540 248 % 1,306 279 % 345 4,491 iPod 4,540 248 % 1,306 279 % 345 Other music iPod 4,540 248 % 1,306 279 % 345 Other music related 248 % 1,306 279 % 345 Other music related product and and service ( d ) 899 223 % 278 672 % service ( d ) 899 223 % 278 672 % 36 d ) 899 223 % 278 672 % 36 Peripherals and ) 899 223 % 278 672 % 36 Peripherals and other 223 % 278 672 % 36 Peripherals and other hardware ( other hardware ( e ) 1,126 18 % 951 38 % hardware ( e ) 1,126 18 % 951 38 % 691 e ) 1,126 18 % 951 38 % 691 Software , ) 1,126 18 % 951 38 % 691 Software , service 18 % 951 38 % 691 Software , service , and other sale ( f ) 1,091 33 % 821 27 % sale ( f ) 1,091 33 % 821 27 % 644 f ) 1,091 33 % 821 27 % 644 Total net ) 1,091 33 % 821 27 % 644 Total net sale 33 % 821 27 % 644 Total net sale $ 13,931 644 Total net sale $ 13,931 68 % $ 8,279 33 Total net sale $ 13,931 68 % $ 8,279 33 % $ 13,931 68 % $ 8,279 33 % $ 6,207 Unit 13,931 68 % $ 8,279 33 % $ 6,207 Unit Sales $ 8,279 33 % $ 6,207 Unit Sales by Product : : Desktops ( b ) 2,520 55 % 1,625 ( 8 Desktops ( b ) 2,520 55 % 1,625 ( 8 ) b ) 2,520 55 % 1,625 ( 8 ) % 1,761 2,520 55 % 1,625 ( 8 ) % 1,761 Portables ( 1,625 ( 8 ) % 1,761 Portables ( c ) 2,014 1,761 Portables ( c ) 2,014 21 % 1,665 33 % Portables ( c ) 2,014 21 % 1,665 33 % 1,251 c ) 2,014 21 % 1,665 33 % 1,251 Total Macintosh ) 2,014 21 % 1,665 33 % 1,251 Total Macintosh unit 21 % 1,665 33 % 1,251 Total Macintosh unit sale 4,534 1,251 Total Macintosh unit sale 4,534 38 % 3,290 9 % Total Macintosh unit sale 4,534 38 % 3,290 9 % 3,012 unit sale 4,534 38 % 3,290 9 % 3,012 Net sale sale 4,534 38 % 3,290 9 % 3,012 Net sale per 38 % 3,290 9 % 3,012 Net sale per Macintosh unit sold ( g ) $ 1,384 ( 7 ) % $ g ) $ 1,384 ( 7 ) % $ 1,496 0 ( 7 ) % $ 1,496 0 % $ 1,491 iPod 7 ) % $ 1,496 0 % $ 1,491 iPod unit $ 1,496 0 % $ 1,491 iPod unit sale 22,497 409 $ 1,491 iPod unit sale 22,497 409 % 4,416 370 % 1,491 iPod unit sale 22,497 409 % 4,416 370 % 939 unit sale 22,497 409 % 4,416 370 % 939 Net sale sale 22,497 409 % 4,416 370 % 939 Net sale per 409 % 4,416 370 % 939 Net sale per iPod unit sold ( h ) $ 202 ( 32 ) % $ h ) $ 202 ( 32 ) % $ 296 ( ( 32 ) % $ 296 ( 19 ) % $ ) % $ 296 ( 19 ) % $ 367 Notes ( 19 ) % $ 367 Notes : ( a ) total iPod unit sale . 31 Fiscal Year 2005 versus 2004 sale . 31 Fiscal Year 2005 versus 2004 During 2005 , 31 Fiscal Year 2005 versus 2004 During 2005 , net sale Year 2005 versus 2004 During 2005 , net sale increased 68 2005 , net sale increased 68 % or $ 5.7 billion increased 68 % or $ 5.7 billion from 2004 . Several or $ 5.7 billion from 2004 . Several factor contributed favorably favorably to net sale during 2005 : · Net sale of sale of iPods rose $ 3.2 billion or 248 % during rose $ 3.2 billion or 248 % during 2005 compared to billion or 248 % during 2005 compared to 2004 . Unit % during 2005 compared to 2004 . Unit sale of iPods Unit sale of iPods totaled 22.5 million in 2005 , which iPods totaled 22.5 million in 2005 , which represents an increase which represents an increase of 409 % from the 4.4 million of 409 % from the 4.4 million iPod unit sold in million iPod unit sold in 2004 . Strong sale of iPods Strong sale of iPods during 2005 continued to be experienced in iPod shuffle introduced in January 2005 , the release of an the iPod mini in February 2005 , the release of the the iPod nano in September 2005 , and expansion of the per iPod unit sold decreased 32 % primarily due to the priced iPod shuffle in January 2005 and iPod mini pricing reduction mini pricing reduction in February 2005 . From the introduction of introduction of the iPod in 2002 through 2005 , the Company the iPod in 2002 through 2005 , the Company ha sold the Company ha sold approximately 28 million iPods . · Other product and service increased $ 621 million or 223 % during increased $ 621 million or 223 % during 2005 compared to million or 223 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The Company ha experienced overall iPod unit sale for 2005 . The increased sale from Macintosh net sale increased $ 1.4 billion or 27 % during increased $ 1.4 billion or 27 % during 2005 compared to billion or 27 % during 2005 compared to 2004 . Unit % during 2005 compared to 2004 . Unit sale of Macintosh sale of Macintosh system increased 1.2 million unit or 38 % increased 1.2 million unit or 38 % during 2005 compared to unit or 38 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The increase in Macintosh Desktop demand wa stimulated in 2005 due to the new iMac the Mac mini in January 2005 . Net sale and unit sale of desktop product increased 45 % and 55 % , product increased 45 % and 55 % , respectively , during % , respectively , during 2005 compared to 2004 . Macintosh , during 2005 compared to 2004 . Macintosh net sale and portable product , which increased 11 % and 21 % , which increased 11 % and 21 % , respectively , compared , respectively , compared to 2004 . Net sale per Macintosh per Macintosh unit sold decreased 7 % on a year-over-year basis ’ s net sale grew 98 % to $ 2.4 billion grew 98 % to $ 2.4 billion during 2005 compared to to $ 2.4 billion during 2005 compared to 2004 . This billion during 2005 compared to 2004 . This increase is largely increase in total store from 86 at the end of 2004 86 at the end of 2004 to 124 at the end the end of 2004 to 124 at the end of 2005 124 at the end of 2005 , a well a 44 2005 , a well a 44 % year-over-year increase in average and other hardware rose by 18 % during 2005 compared to rose by 18 % during 2005 compared to 2004 primarily due % during 2005 compared to 2004 primarily due to an increase and unit sale of approximately 21 % for 2005 . The of approximately 21 % for 2005 . The increase in U.S. U.S. education net sale for 2005 relates 32 primarily to a net sale for 2005 relates 32 primarily to a 32 % relates 32 primarily to a 32 % year-over-year increase in higher . The Company also experienced 11 % growth in K-12 net increased iBook sale and education 1:1 sale . While net sale market were slightly higher during 2005 than 2004 , the Company slightly higher during 2005 than 2004 , the Company belief this and other sale rose $ 270 million or 33 % during rose $ 270 million or 33 % during 2005 compared to million or 33 % during 2005 compared to 2004 . This % during 2005 compared to 2004 . This growth wa primarily to the release of version 10.4 Tiger in April 2005 . version 10.4 Tiger in April 2005 . Fiscal Year 2004 versus April 2005 . Fiscal Year 2004 versus 2003 During 2004 , . Fiscal Year 2004 versus 2003 During 2004 , net sale Year 2004 versus 2003 During 2004 , net sale increased 33 2004 , net sale increased 33 % or $ 2.1 billion increased 33 % or $ 2.1 billion from 2003 . Several or $ 2.1 billion from 2003 . Several factor contributed favorably favorably to net sale during 2004 : · Net sale of of Macintosh system increased $ 432 million or 10 % during increased $ 432 million or 10 % during 2004 compared to million or 10 % during 2004 compared to 2003 while net % during 2004 compared to 2003 while net sale per Macintosh sale of Macintosh system increased 278,000 unit or 9 % during system increased 278,000 unit or 9 % during 2004 compared to unit or 9 % during 2004 compared to 2003 . These % during 2004 compared to 2003 . These increase in net revenue and unit growth during 2004 compared to 2003 of approximately growth during 2004 compared to 2003 of approximately 26 % and compared to 2003 of approximately 26 % and 33 % , of approximately 26 % and 33 % , respectively . Unit of portable system accounted for 51 % of all Macintosh system all Macintosh system sold during 2004 compared to only 42 % during 2004 compared to only 42 % during 2003 . The to only 42 % during 2003 . The Company belief that also yielded positive result in 2004 over 2003 , including a positive result in 2004 over 2003 , including a 15 % over 2003 , including a 15 % and 6 % increase including a 15 % and 6 % increase in net sale in Power Macintosh sale in 2004 wa due primarily to the shipping at the end of 2003 . Although Power Macintosh sale Power Macintosh sale increased from 2003 , sale of this product in the second half of 2004 a a result of manufacturing sale of iPods rose $ 961 million or 279 % during rose $ 961 million or 279 % during 2004 compared to million or 279 % during 2004 compared to 2003 . Unit % during 2004 compared to 2003 . Unit sale of iPods Unit sale of iPods totaled 4.4 million in 2004 , which iPods totaled 4.4 million in 2004 , which represents an increase which represents an increase of 370 % from the 939,000 iPod of 370 % from the 939,000 iPod unit sold in 2003 939,000 iPod unit sold in 2003 . Strong demand for the demand for the iPods during 2004 were experienced in all of ’ s net sale grew 91 % to $ 1.2 billion grew 91 % to $ 1.2 billion during 2004 compared to to $ 1.2 billion during 2004 compared to 2003 . This billion during 2004 compared to 2003 . This increase wa largely increase in total store from 65 at the end of 2003 65 at the end of 2003 to 86 at the end the end of 2003 to 86 at the end of 2004 86 at the end of 2004 , a well a a , a well a a 36 % year-over-year increase in average and other hardware rose by 38 % during 2004 compared to rose by 38 % during 2004 compared to 2003 primarily due % during 2004 compared to 2003 primarily due to an increase . Net sale of other 33 computer accessory include AirPort card product and service increased $ 242 million or 672 % during increased $ 242 million or 672 % during 2004 compared to million or 672 % during 2004 compared to 2003 . The % during 2004 compared to 2003 . The Company experienced strong overall iPod unit sale for 2004 . The increased sale from wa originally introduced in April 2003 , wa primarily due to available for Windows in October 2003 and the introduction of the , and Germany in June 2004 . · Net sale of sale of software rose $ 140 million or 39 % during rose $ 140 million or 39 % during 2004 compared to million or 39 % during 2004 compared to 2003 due primarily % during 2004 compared to 2003 due primarily to higher net including Mac OS X version 10.3 “ Panther , ” which which wa released in October 2003 . Net sale of Panther Panther accounted for approximately $ 74 million or over 50 % $ 74 million or over 50 % of the increase in in software net sale for 2004 compared to 2003 . · sale for 2004 compared to 2003 . · The Company ’ in net sale of approximately 19 % for 2004 compared to of approximately 19 % for 2004 compared to 2003 . Unit % for 2004 compared to 2003 . Unit sale also increased Unit sale also increased by 10 % during 2004 compared to increased by 10 % during 2004 compared to 2003 . The % during 2004 compared to 2003 . The increase in U.S. U.S. education net sale for 2004 related primarily to a 40 2004 related primarily to a 40 % year-over-year increase in higher extent the Company ’ s 3 % growth in K-12 net and other sale increased $ 37 million or 13 % during increased $ 37 million or 13 % during 2004 compared to million or 13 % during 2004 compared to 2003 . These % during 2004 compared to 2003 . These increase were the ’ s net sale during 2004 were negatively impacted by the of iMac system were down 23 % and 16 % , were down 23 % and 16 % , respectively , during % , respectively , during 2004 versus 2003 . The decrease respectively , during 2004 versus 2003 . The decrease in iMac wa available during most of 2004 , wa nearly 3 year of 2004 , wa nearly 3 year old by the time G5 began shipping in September 2004 and had experienced decline in with price point below $ 1,000 . · Net sale and ’ s Japan segment decreased 3 % and 14 % , segment decreased 3 % and 14 % , respectively , during % , respectively , during 2004 versus 2003 . The Company respectively , during 2004 versus 2003 . The Company belief these and Osaka store opening in 2004 . Declines in net sale , such a Quark Xpress 6 , which did not become not become available until September 2004 . When sale from the in Japan resulted in a 3 % year-over-year increase in 2004 3 % year-over-year increase in 2004 a compared to 2003 . in 2004 a compared to 2003 . See 34 additional comment compared to 2003 . See 34 additional comment below related to , and the U.K. during 2005 . Each reportable geographic operating may be found in Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , “ Segment Information and Data . ” Americas During 2005 , net sale in the in the Americas segment grew 64 % or $ 2.6 billion grew 64 % or $ 2.6 billion compared to 2004 . $ 2.6 billion compared to 2004 . The increase in net increase in net sale during 2005 wa primarily attributable to the Retail segment , which had 117 store in the U.S. and a of the end of 2005 . Macintosh unit sale also unit sale also increased by 30 % in 2005 compared to increased by 30 % in 2005 compared to 2004 , driven % in 2005 compared to 2004 , driven primarily by strong which began shipping in September 2004 , and the Mac mini which wa introduced in January 2005 . During 2005 and 2004 in January 2005 . During 2005 and 2004 , the Americas 2005 . During 2005 and 2004 , the Americas segment represented the Americas segment represented approximately 47 % and 49 % , represented approximately 47 % and 49 % , respectively , of net sale and represented approximately 48 % and 51 % , represented approximately 48 % and 51 % , respectively , of sale and unit sale of 21 % for 2005 compared to sale of 21 % for 2005 compared to 2004 . Strength % for 2005 compared to 2004 . Strength in higher education growth in net sale of 32 % for the higher education the higher education channel during 2005 . Despite challenge in the net sale grew year-over-year by 11 % during 2005 due to year-over-year by 11 % during 2005 due to increased iBook sale to increased iBook sale and 1:1 education sale . During 2004 1:1 education sale . During 2004 , net sale in the in the Americas segment grew 26 % or $ 838 million grew 26 % or $ 838 million compared to 2003 . $ 838 million compared to 2003 . The increase in net increase in net sale during 2004 wa primarily attributable to the Retail segment , which had 84 store in the U.S. a a of the end of 2004 . Macintosh unit sale also unit sale also increased by 4 % in 2004 compared to increased by 4 % in 2004 compared to 2003 , driven % in 2004 compared to 2003 , driven primarily by strong in iMac sale . During 2004 and 2003 , the Americas sale . During 2004 and 2003 , the Americas segment represented the Americas segment represented approximately 49 % and 51 % , represented approximately 49 % and 51 % , respectively , of net sale and represented approximately 51 % and 54 % , represented approximately 51 % and 54 % , respectively , of education channel net sale of 19 % for 2004 compared to sale of 19 % for 2004 compared to 2003 . Strong % for 2004 compared to 2003 . Strong U.S. education net U.S. education net sale for 2004 related primarily to strength in growth in net sale of 40 % for the higher education the higher education channel during 2004 . The Company ’ s net sale grew year-over-year by 3 % during 2004 , despite year-over-year by 3 % during 2004 , despite the challenge in increased competition . Europe During 2005 , net sale in the the Europe segment grew $ 1.3 billion or 71 % from grew $ 1.3 billion or 71 % from 2004 . Total billion or 71 % from 2004 . Total Macintosh unit sale the current year by increasing 47 % in 2005 compared to by increasing 47 % in 2005 compared to 35 2004 . % in 2005 compared to 35 2004 . Consistent with the in 2005 compared to 35 2004 . Consistent with the Americas . Demand in Europe during 2005 wa particularly strong for the experienced a year-over-year increase of 56 % . Similar to the and software were strong in 2005 . Net sale in Europe sale in Europe rebounded in 2004 increasing $ 490 million or rebounded in 2004 increasing $ 490 million or 37 % from increasing $ 490 million or 37 % from 2003 . Total million or 37 % from 2003 . Total Macintosh unit sale Europe also experienced growth in 2004 by increasing 13 % compared growth in 2004 by increasing 13 % compared to 2003 . increasing 13 % compared to 2003 . Consistent with the Americas . Demand in Europe during 2004 wa particularly strong for the which experienced year-over-year increase of 29 % and 42 % , increase of 29 % and 42 % , respectively . Similar and software were strong in 2004 over 2003 . Japan Japan were strong in 2004 over 2003 . Japan Japan ’ s Macintosh unit sale were up 36 % and 8 % , were up 36 % and 8 % , respectively , during % , respectively , during 2005 compared to 2004 . Japan , during 2005 compared to 2004 . Japan experienced increased net and unit sale increased by 31 % and 41 % , increased by 31 % and 41 % , respectively , and and iPod sale increased by 220 % during 2005 compared to increased by 220 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The overall increase in portable system net sale during 2005 compared to 2004 , which sale during 2005 compared to 2004 , which the Company belief additional store in Japan during 2005 . Japan ’ s net Macintosh unit sale were down 3 % and 14 % , were down 3 % and 14 % , respectively , during % , respectively , during 2004 compared to 2003 , which , during 2004 compared to 2003 , which lagged behind all two store in Japan in 2004 . In addition , such the release of Quark XPress 6 for Mac OS X , did not occur until September 2004 . The decrease in net iPod and iBook sale during 2004 compared to 2003 . Retail sale during 2004 compared to 2003 . Retail The Company opened . Retail The Company opened 38 new retail store during 2005 38 new retail store during 2005 , including 6 international store store during 2005 , including 6 international store in the U.K number of open store to 124 a of September 24 , to 124 a of September 24 , 2005 . This compare a of September 24 , 2005 . This compare to 86 2005 . This compare to 86 open store a of September open store a of September 25 , 2004 and 65 open a of September 25 , 2004 and 65 open store a September 25 , 2004 and 65 open store a of September open store a of September 27 , 2003 . Net sale a of September 27 , 2003 . Net sale of the Retail segment grew to $ 2.4 billion during 2005 from $ to $ 2.4 billion during 2005 from $ 1.2 billion and billion during 2005 from $ 1.2 billion and $ 621 million $ 1.2 billion and $ 621 million in 2004 and 2003 and $ 621 million in 2004 and 2003 , respectively . 621 million in 2004 and 2003 , respectively . The increase in net sale during both 2005 and 2004 reflect the impact sale during both 2005 and 2004 reflect the impact of new , including the opening of 38 new store in 2005 and of 38 new store in 2005 and 21 new store in new store in 2005 and 21 new store in 2004 . and 21 new store in 2004 . An increase in average ’ s strong sale in 2005 . With an average of . With an average of 105 store open during 2005 , of 105 store open during 2005 , the Retail segment achieved per store of approximately $ 22.4 million , a compared to , a compared to $ 15.6 million in 2004 with a to $ 15.6 million in 2004 with a 76 store average million in 2004 with a 76 store average , and $ store average , and $ 11.5 million in 2003 with a and $ 11.5 million in 2003 with a 54 store average million in 2003 with a 54 store average . As measured reported operating income of $ 151 million during 2005 a compared of $ 151 million during 2005 a compared to operating income to operating income of $ 39 million during 2004 and an of $ 39 million during 2004 and an operating loss of an operating loss of $ 5 million during 2003 . This of $ 5 million during 2003 . This improvement is primarily and other fixed cost . 36 Expansion of the Retail segment the Retail segment were $ 132 million in 2005 , bringing were $ 132 million in 2005 , bringing the total capital Retail segment to approximately $ 529 million . As of September million . As of September 24 , 2005 , the Retail As of September 24 , 2005 , the Retail segment had the Retail segment had approximately 3,673 employee and had outstanding operating related facility of approximately $ 606 million . The Company would margin percentage ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 September September 24 , 2005 September 25 , 2004 September 27 , , 2005 September 25 , 2004 September 27 , 2003 Net September 25 , 2004 September 27 , 2003 Net sale $ , 2004 September 27 , 2003 Net sale $ 13,931 $ , 2003 Net sale $ 13,931 $ 8,279 $ 6,207 Cost Net sale $ 13,931 $ 8,279 $ 6,207 Cost of sale $ 13,931 $ 8,279 $ 6,207 Cost of sale 9,888 6,020 $ 6,207 Cost of sale 9,888 6,020 4,499 Gross margin $ 6,207 Cost of sale 9,888 6,020 4,499 Gross margin $ 4,043 Cost of sale 9,888 6,020 4,499 Gross margin $ 4,043 $ 6,020 4,499 Gross margin $ 4,043 $ 2,259 $ 1,708 Gross Gross margin $ 4,043 $ 2,259 $ 1,708 Gross margin percentage $ 4,043 $ 2,259 $ 1,708 Gross margin percentage 29.0 % $ 1,708 Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin percentage 29.0 % 27.3 % 27.5 % Gross margin increased in % Gross margin increased in 2005 to 29.0 % of net margin increased in 2005 to 29.0 % of net sale from % of net sale from 27.3 % of net sale in % of net sale in 2004 . The Company ’ s ’ s gross margin during 2005 increased due to more favorable in the first quarter of 2006 primarily a a result of fluctuation in exchange rate . 37 The Company order component for . Gross margin declined in 2004 to 27.3 % of net margin declined in 2004 to 27.3 % of net sale from % of net sale from 27.5 % of net sale in % of net sale in 2003 . The Company ’ s ’ s gross margin during 2004 declined due to an increase transitioned during the beginning of 2004 , higher warranty cost on freight and duty cost during 2004 . These unfavorable factor were in direct sale and a 39 % year-over-year increase in higher for percentage ) : September 24 , September 25 , September : September 24 , September 25 , September 27 , 2005 , September 25 , September 27 , 2005 2004 2003 Research 25 , September 27 , 2005 2004 2003 Research and development , September 27 , 2005 2004 2003 Research and development $ September 27 , 2005 2004 2003 Research and development $ 534 2003 Research and development $ 534 $ 489 $ 471 Percentage and development $ 534 $ 489 $ 471 Percentage of net $ 534 $ 489 $ 471 Percentage of net sale 4 471 Percentage of net sale 4 % 6 % 8 % of net sale 4 % 6 % 8 % Selling , sale 4 % 6 % 8 % Selling , general , , and administrative expense $ 1,859 $ 1,421 $ 1,212 Percentage administrative expense $ 1,859 $ 1,421 $ 1,212 Percentage of net $ 1,859 $ 1,421 $ 1,212 Percentage of net sale 13 1,212 Percentage of net sale 13 % 17 % 20 % of net sale 13 % 17 % 20 % Restructuring cost sale 13 % 17 % 20 % Restructuring cost $ — Restructuring cost $ — $ 23 $ 26 Research and Development $ — $ 23 $ 26 Research and Development ( R D expense amounted to approximately 4 % of total net sale of total net sale during 2005 down from 6 % and sale during 2005 down from 6 % and 8 % of down from 6 % and 8 % of total net sale of total net sale in 2004 and 2003 , respectively . net sale in 2004 and 2003 , respectively . This decrease to the significant increase of 68 % in total net sale sale of the Company for 2005 . Although R & D of total net sale in 2005 , actual expense for R for R & D in 2005 increased $ 45 million or D in 2005 increased $ 45 million or 9 % from increased $ 45 million or 9 % from 2004 , which million or 9 % from 2004 , which follows an $ , which follows an $ 18 million or 4 % increase an $ 18 million or 4 % increase in 2004 compared or 4 % increase in 2004 compared to 2003 . The increase in 2004 compared to 2003 . The overall increase in of employee salary increase in 2005 . R & D expense development cost of approximately $ 29.7 million related to the development Mac OS X Tiger during 2005 ; $ 4.5 million related Tiger during 2005 ; $ 4.5 million related to the development OS X Tiger and $ 2.3 million related to the development the development of FileMaker Pro 7 in 2004 ; and $ of FileMaker Pro 7 in 2004 ; and $ 14.7 million in 2004 ; and $ 14.7 million related to the development Mac OS X Panther in 2003 . Further information related to in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial SG & A increased $ 438 million or 31 % during increased $ 438 million or 31 % during 2005 compared to million or 31 % during 2005 compared to 2004 . These % during 2005 compared to 2004 . These increase are due net sale and employee salary 38 merit increase . SG & of total net sale in 2005 wa 13 % , down net sale in 2005 wa 13 % , down from 17 13 % , down from 17 % in 2004 , which down from 17 % in 2004 , which is due to in total net sale of 68 % for the Company during % for the Company during 2005 . Expenditures for SG & SG & A increased $ 209 million or 17 % during increased $ 209 million or 17 % during 2004 compared to million or 17 % during 2004 compared to 2003 . These % during 2004 compared to 2003 . These increase were due of total net sale in 2004 wa 17 % , down net sale in 2004 wa 17 % , down from 20 17 % , down from 20 % in 2003 due to down from 20 % in 2003 due to the increase in sale for the Company of 33 % during 2004 . Fiscal Company of 33 % during 2004 . Fiscal 2004 Restructuring Actions % during 2004 . Fiscal 2004 Restructuring Actions The Company recorded restructuring charge of approximately $ 23 million during 2004 , including approximately $ 23 million during 2004 , including approximately $ 14 2004 , including approximately $ 14 million in severance cost , in severance cost , $ 5.5 million in asset impairment , impairment , and a $ 3.5 million charge for lease cancellation during the fourth quarter of 2004 related to a European workforce reduction . Of the $ 23 million charge , $ 19.7 23 million charge , $ 19.7 million had been utilized by utilized by the end of 2005 , with the remaining $ , with the remaining $ 3.3 million consisting of $ 0.7 3.3 million consisting of $ 0.7 million for employee severance benefit employee severance benefit and $ 2.6 million for lease cancellation . result in the termination of 461 employee , 448 of which termination of 461 employee , 448 of which had been terminated prior to the end of 2005 . Fiscal 2003 Restructuring Actions end of 2005 . Fiscal 2003 Restructuring Actions The Company recorded restructuring charge of approximately $ 26.8 million during 2003 , including approximately $ 26.8 million during 2003 , including approximately $ 7.4 2003 , including approximately $ 7.4 million in severance cost , severance cost , a $ 5.0 million charge to write-off deferred write-off deferred compensation , $ 7.1 million in asset impairment , impairment , and a $ 7.3 million charge for lease cancellation during the first quarter of 2003 . Of the $ 26.8 2003 . Of the $ 26.8 million charge , all had utilized by the end of 2005 , except for approximately $ , except for approximately $ 1.7 million related to operating lease resulted in the termination of 353 employee . Other Income and in million ) : September 24 , September 25 , September : September 24 , September 25 , September 27 , 2005 , September 25 , September 27 , 2005 2004 2003 Gains 25 , September 27 , 2005 2004 2003 Gains on non-current , September 27 , 2005 2004 2003 Gains on non-current investment September 27 , 2005 2004 2003 Gains on non-current investment , , net $ — $ 4 $ 10 Interest income $ $ — $ 4 $ 10 Interest income $ 183 $ $ 10 Interest income $ 183 $ 64 $ 69 Interest Interest income $ 183 $ 64 $ 69 Interest expense — $ 183 $ 64 $ 69 Interest expense — ( 3 69 Interest expense — ( 3 ) ( 8 ) Gains — ( 3 ) ( 8 ) Gains on sale of term investment , net — 1 21 Other income ( expense investment , net — 1 21 Other income ( expense ) expense ) , net ( 18 ) ( 9 ) 1 net ( 18 ) ( 9 ) 1 Interest and Other 18 ) ( 9 ) 1 Interest and Other Income , Other Income , net $ 165 $ 53 $ 83 Total , net $ 165 $ 53 $ 83 Total other income $ 165 $ 53 $ 83 Total other income and expense other income and expense $ 165 $ 57 $ 93 Gains and expense $ 165 $ 57 $ 93 Gains and Losses $ 165 $ 57 $ 93 Gains and Losses on Non-current in these non-current investment in 2004 and 2003 . Pretax gain non-current investment in 2004 and 2003 . Pretax gain recorded upon these non-current investment were $ 4 million and $ 10 million $ 4 million and $ 10 million in 2004 and 2003 and $ 10 million in 2004 and 2003 , respectively . 10 million in 2004 and 2003 , respectively . 39 Interest and 2003 , respectively . 39 Interest and Other Income , income , net increased $ 112 million or 211 % to increased $ 112 million or 211 % to $ 165 million or 211 % to $ 165 million during 2005 compared to to $ 165 million during 2005 compared to $ 53 million during 2005 compared to $ 53 million in 2004 and $ to $ 53 million in 2004 and $ 83 million in million in 2004 and $ 83 million in 2003 . These and $ 83 million in 2003 . These increase are attributable and short-term investment increased to 2.70 % in 2005 compared to increased to 2.70 % in 2005 compared to the 1.38 % in 2005 compared to the 1.38 % and 1.89 % rate to the 1.38 % and 1.89 % rate earned during 2004 1.89 % rate earned during 2004 and 2003 , respectively . rate earned during 2004 and 2003 , respectively . The Company recognized net loss of $ 137,000 in 2005 and net gain loss of $ 137,000 in 2005 and net gain of $ and net gain of $ 1 million and $ 21 million $ 1 million and $ 21 million during 2004 and 2003 and $ 21 million during 2004 and 2003 , respectively . 21 million during 2004 and 2003 , respectively . Partially offsetting the Company ’ s $ 300 million aggregate principal amount unsecured upon their maturity in February 2004 . The unsecured note were unsecured note were sold at 99.925 % of par for an effective yield to maturity of 6.51 % . Total deferred gain debt swap of approximately $ 23 million wa fully amortized a note ’ maturity in February 2004 . Provision for Income Taxes for the year ended September 24 , 2005 wa approximately 26 year ended September 24 , 2005 wa approximately 26 % . 24 , 2005 wa approximately 26 % . The Company ’ federal income tax rate of 35 % due primarily to certain deferred tax asset wa $ 67 million . In addition , the Company recorded a $ 25 million reduction of the valuation in the future . $ 14 million of the valuation allowance goodwill . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had deferred and tax credit of $ 767 million before being offset against asset . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , a valuation 2005 and September 25 , 2004 , a valuation allowance of a valuation allowance of $ 5 million and $ 30 million $ 5 million and $ 30 million , respectively , wa remaining valuation allowance at September 24 , 2005 relates principally to allowance at September 24 , 2005 relates principally to certain state for all year prior to 2002 and proposed certain adjustment . resolution occurs . On October 22 , 2004 , the American . On October 22 , 2004 , the American Jobs Creation provision for the deduction of 85 % of certain foreign earnings , a defined in the 40 AJCA . The legislation provided of qualifying earnings in either 2005 or 2006 . The Company earnings in either 2005 or 2006 . The Company is continuing to complete the evaluation in 2006 . A maximum of $ . A maximum of $ 755 million may be eligible for Recent Accounting Pronouncements In November 2005 , the FASB issued FASB FSP ) Nos . FAS 115-1 and FAS 124-1 , The . FAS 115-1 and FAS 124-1 , The Meaning of Other-Than-Temporary . FSP Nos . FAS 115-1 and FAS 124-1 amend SFAS . FAS 115-1 and FAS 124-1 amend SFAS No . 115 124-1 amend SFAS No . 115 , Accounting for Certain Investments Securities , SFAS No . 124 , Accounting for Certain Investments a APB Opinion No . 18 , The Equity Method of nullifies certain requirement of EITF 03-1 , The Meaning of Other-Than-Temporary . FSP Nos . FAS 115-1 and FAS 124-1 include guidance . FAS 115-1 and FAS 124-1 include guidance for evaluating and . FSP Nos . FAS 115-1 and FAS 124-1 also require . FAS 115-1 and FAS 124-1 also require other-than-temporary impaired debt . FSP Nos . FAS 115-1 and FAS 124-1 are effective . FAS 115-1 and FAS 124-1 are effective for fiscal year fiscal year beginning after December 15 , 2005 . Although the beginning after December 15 , 2005 . Although the Company will of FSP Nos . FAS 115-1 and FAS 124-1 , management . FAS 115-1 and FAS 124-1 , management doe not currently financial position . In November 2004 , the FASB issued SFAS FASB issued SFAS No . 151 , Inventory Costs , which ( ARB ) No . 43 , Chapter 4 , Inventory No . 43 , Chapter 4 , Inventory Pricing , to ( spoilage ) . ARB 43 , Chapter 4 , previously . ARB 43 , Chapter 4 , previously stated that “ period charges . ” SFAS 151 requires that those item be ” In addition , SFAS 151 requires that allocation of fixed the production facility . SFAS 151 is effective for fiscal year fiscal year beginning after June 15 , 2005 . Although the beginning after June 15 , 2005 . Although the Company will evaluate the application of SFAS 151 , management doe not currently financial position . In December 2004 , the FASB issued FSP , the FASB issued FSP 109-2 , Accounting and Disclosure Guidance American Jobs Creation Act of 2004 . FSP 109-2 provides additional Act of 2004 . FSP 109-2 provides additional time to company for purpose of applying SFAS 109 , Accounting for Income Taxes to complete the evaluation in 2006 . In December 2004 , in 2006 . In December 2004 , the FASB issued SFAS FASB issued SFAS No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( SFAS No . ) ( SFAS No . 123R ) , Share-Based Payment , by the issuance of such 41 equity instrument . SFAS No instrument . SFAS No . 123R eliminates the ability to account APB ) Opinion No . 25 , Accounting for Stock Issued prospective method . In January 2005 , the SEC issued SAB SEC issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R will be effective for the the first quarter of fiscal 2006 . The Company expects the adoption of SFAS No . 123R will result in a reduction common share of approximately $ 0.03 for the first quarter of the first quarter of fiscal 2006 . In March 2005 , fiscal 2006 . In March 2005 , the FASB issued Interpretation No . ( FIN ) 47 , Accounting for Conditional Asset Company plan to adopt FIN 47 in the first quarter of the first quarter of fiscal 2006 , and doe not expect expect the application of FIN 47 to have a material impact financial position . In May 2005 , the FASB issued SFAS FASB issued SFAS No . 154 , Accounting Changes and Error replaces APB Opinion No . 20 Accounting Changes and SFAS No Changes and SFAS No . 3 , Reporting Accounting Changes in of APB Opinion No . 28 . SFAS No . 154 28 . SFAS No . 154 requires retrospective application to prior practicable . SFAS No . 154 is effective for accounting change fiscal year beginning after December 15 , 2005 and is required beginning after December 15 , 2005 and is required to be the first quarter of fiscal 2007 . Although the Company will application of SFAS No . 154 , management doe not currently in million ) : September 24 , September 25 , September : September 24 , September 25 , September 27 , 2005 , September 25 , September 27 , 2005 2004 2003 Cash 25 , September 27 , 2005 2004 2003 Cash , cash , September 27 , 2005 2004 2003 Cash , cash equivalent September 27 , 2005 2004 2003 Cash , cash equivalent , , and short-term investment $ 8,261 $ 5,464 $ 4,566 Accounts short-term investment $ 8,261 $ 5,464 $ 4,566 Accounts receivable , $ 8,261 $ 5,464 $ 4,566 Accounts receivable , net $ Accounts receivable , net $ 895 $ 774 $ 766 Inventory , net $ 895 $ 774 $ 766 Inventory $ 165 $ 895 $ 774 $ 766 Inventory $ 165 $ 101 774 $ 766 Inventory $ 165 $ 101 $ 56 Working 766 Inventory $ 165 $ 101 $ 56 Working capital $ $ 165 $ 101 $ 56 Working capital $ 6,816 $ $ 56 Working capital $ 6,816 $ 4,404 $ 3,530 Days Working capital $ 6,816 $ 4,404 $ 3,530 Days sale in $ 6,816 $ 4,404 $ 3,530 Days sale in account receivable DSO ) ( a ) 22 30 41 Days of supply ) ( a ) 22 30 41 Days of supply in ( a ) 22 30 41 Days of supply in inventory in inventory ( b ) 6 5 4 Days payable outstanding inventory ( b ) 6 5 4 Days payable outstanding ( ( b ) 6 5 4 Days payable outstanding ( DPO DPO ) ( c ) 62 76 82 Annual operating cash ) ( c ) 62 76 82 Annual operating cash flow ( c ) 62 76 82 Annual operating cash flow $ Annual operating cash flow $ 2,535 $ 934 $ 289 ( cash flow $ 2,535 $ 934 $ 289 ( a ) $ 2,535 $ 934 $ 289 ( a ) DSO is inventory . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had $ , the Company had $ 8.261 billion in cash , cash , an increase of $ 2.797 billion over the same balance balance at the end of 2004 . The principal component of by operating activity of $ 2.535 billion and proceeds of $ billion and proceeds of $ 543 million from the issuance of offset by cash used to 42 purchase property , plant , , and equipment of $ 260 million . The Company ’ investment . As of September 24 , 2005 , approximately $ As of September 24 , 2005 , approximately $ 4.3 billion , 2005 , approximately $ 4.3 billion of the Company ’ American Jobs Creation Act of 2004 , and may decide to existing operation over the next 12 month . Capital Expenditures The total capital expenditure were $ 260 million during 2005 , $ were $ 260 million during 2005 , $ 132 million of million during 2005 , $ 132 million of which were for s Retail segment and $ 128 million of which were primarily it will utilize approximately $ 390 million for capital expenditure during million for capital expenditure during 2006 , approximately $ 210 million during 2006 , approximately $ 210 million of which is expected Stock Repurchase Plan In July 1999 , the Company ’ s to repurchase up to $ 500 million of it common stock had repurchased a total of 13.1 million share at a cost at a cost of $ 217 million . The Company ha repurchase it common stock during 2005 or 2004 . The Company common stock during 2005 or 2004 . The Company wa authorized up to an additional $ 283 million of it common stock common stock a of September 24 , 2005 . On February a of September 24 , 2005 . On February 28 , , 2005 . On February 28 , 2005 , the Company . On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per support to the Company . 43 The following table present certain firm commitment a of September 24 , 2005 and excludes amount a of September 24 , 2005 and excludes amount already recorded Payments Due in Less Than 1 year Payments Due in 1-3 1 year Payments Due in 1-3 year Payments Due in 4-5 1-3 year Payments Due in 4-5 year Payments Due in More Payments Due in More Than 5 year Operating Leases $ 865 5 year Operating Leases $ 865 $ 108 $ 211 $ Operating Leases $ 865 $ 108 $ 211 $ 192 $ $ 865 $ 108 $ 211 $ 192 $ 354 Purchase $ 108 $ 211 $ 192 $ 354 Purchase Obligations 1,994 $ 211 $ 192 $ 354 Purchase Obligations 1,994 1,994 — 192 $ 354 Purchase Obligations 1,994 1,994 — — — Asset $ 354 Purchase Obligations 1,994 1,994 — — — Asset Retirement — — Asset Retirement Obligations 14 — 2 2 10 Other Asset Retirement Obligations 14 — 2 2 10 Other Obligations 4 Retirement Obligations 14 — 2 2 10 Other Obligations 4 4 Obligations 14 — 2 2 10 Other Obligations 4 4 — 2 2 10 Other Obligations 4 4 — — — Total 2 10 Other Obligations 4 4 — — — Total $ — — — Total $ 2,877 $ 2,106 $ 213 $ — Total $ 2,877 $ 2,106 $ 213 $ 194 $ $ 2,877 $ 2,106 $ 213 $ 194 $ 364 Lease $ 2,106 $ 213 $ 194 $ 364 Lease Commitments As $ 213 $ 194 $ 364 Lease Commitments As of September Lease Commitments As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had total operating lease of approximately $ 865 million , $ 606 million $ 865 million , $ 606 million of which related to facility operating lease range from 5 to 20 year . Purchase lease range from 5 to 20 year . Purchase Commitments with typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also requirement for period ranging from 30 to 150 day . As period ranging from 30 to 150 day . As of September day . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had outstanding purchase commitment of approximately $ 2.0 billion . Subsequent to September billion . Subsequent to September 24 , 2005 , the Company Subsequent to September 24 , 2005 , the Company entered into flash memory through calendar year 2010 . As part of these prepay a total of $ 1.25 billion for flash memory component of the second quarter of 2006 . Asset Retirement Obligations The termination . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company estimate that cash flow of approximately $ 14 million will be required to other obligation of approximately $ 4 million are primarily related to provision under which the Company 44 could be subject to cost affected by these event . 45 The market for personal computer overall Company gross margin . 46 The Company also face increased continue to pursue one-to-one ( 1:1 ) learning solution in education learning solution in education . 1:1 learning solution typically consist of a central server . These 1:1 learning solution and other strategic numerous risk . In June 2005 , the Company announced it the end of calendar year 2007 . This transition is subject with other industry that have 47 experienced increased demand for their during the second half of 2004 and the first quarter of and the first quarter of 2005 . Manufacturing problem experienced by and software it sell . 48 Failure to do so could requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company ’ could be adversely affected . 49 The Company ’ s future in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading “ Markets able to develop or license 50 such solution at a reasonable at all . In June 2005 , the Company announced it with Intel microprocessor by June 2006 and to complete this transition the end of calendar year 2007 . The Company depends on and result of operation . 51 The Company ’ s business in Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . In the opinion of in Part I , Item 3 of this Form 10-K or Item 3 of this Form 10-K or should several of these and uncertainty . Through October 2005 , the Company had opened , the Company had opened 126 retail store . The Company with lease term ranging from 5 to 20 year , the term ranging from 5 to 20 year , the majority of majority of which are for 10 year . The Company could seven such store through October 2005 . Because of their location location have term ranging from 10 to 14 year with total term ranging from 10 to 14 year with total 52 remaining to 14 year with total 52 remaining commitment per location ranging per location ranging from $ 4 million to $ 46 million $ 4 million to $ 46 million . Closure or poor and operating margin percentage . 53 The Company expects it quarterly prepay a total of $ 1.25 billion under these agreement . , where the majority of 54 the Company ’ s key in foreign exchange rate . 55 Further information related to the in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading “ Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 2 this Form 10-K at Notes 1 and 2 of Notes to 10-K at Notes 1 and 2 of Notes to Consolidated Financial of operation . In December 2004 , the FASB issued new payment , SFAS No . 123R . In April 2005 , . 123R . In April 2005 , the SEC deferred the date of SFAS No . 123R to year beginning after June to year beginning after June 15 , 2005 . Therefore , beginning after June 15 , 2005 . Therefore , SFAS No Therefore , SFAS No . 123R will be effective for the it first quarter of fiscal 2006 . The Company expects the adoption of SFAS No . 123R will result in a reduction common share of approximately $ 0.03 for the first quarter of the first quarter of fiscal 2006 . Although the effect from adoption of SFAS No . 123R is expected to have a of earnings per share . 56 Item 7A . Quantitative and per share . 56 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 24 , 2005 , approximately $ As of September 24 , 2005 , approximately $ 287 million , 2005 , approximately $ 287 million of the Company ’ had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 25 , 2004 , $ 180 As of September 25 , 2004 , $ 180 million of 25 , 2004 , $ 180 million of the Company ’ investment had maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remainder all all had underlying maturity between 3 and 12 month . The underlying maturity between 3 and 12 month . The Company may loss before tax of $ 137,000 in 2005 , and net tax of $ 137,000 in 2005 , and net gain before gain before tax of $ 1 million and $ 21 million $ 1 million and $ 21 million in 2004 , and and $ 21 million in 2004 , and 2003 , respectively million in 2004 , and 2003 , respectively a a result the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 24 , 2005 , a hypothetical a of September 24 , 2005 , a hypothetical 100 basis , 2005 , a hypothetical 100 basis point increase in interest would result in a $ 19.9 million decline in the fair portfolio . As of September 25 , 2004 , a similar As of September 25 , 2004 , a similar 100 basis , 2004 , a similar 100 basis point shift in the have resulted in a $ 14.4 million decline in fair value hold investment to maturity . 57 From time to time , any interest rate derivative during 2005 or 2004 and had no rate derivative during 2005 or 2004 and had no open interest interest rate derivative at September 24 , 2005 . Foreign Currency derivative at September 24 , 2005 . Foreign Currency Risk In Monte Carlo simulation to generate 3000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 10.0 million a of September 24 10.0 million a of September 24 , 2005 compared to a a of September 24 , 2005 compared to a maximum one-day maximum one-day loss of $ 3.2 million a of September 25 3.2 million a of September 25 , 2004 . Because the a of September 25 , 2004 . Because the Company us analysis performed a of September 24 , 2005 due to the a of September 24 , 2005 due to the inherent limitation actual exposure and position . 58 Item 8 . Financial Statements and position . 58 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 60 Consolidated Statements 2005 and September 25 , 2004 60 Consolidated Statements of Operations and September 25 , 2004 60 Consolidated Statements of Operations for three fiscal year ended September 24 , 2005 61 Consolidated Statements year ended September 24 , 2005 61 Consolidated Statements of Shareholders ended September 24 , 2005 61 Consolidated Statements of Shareholders ’ three fiscal year ended September 24 , 2005 62 Consolidated Statements year ended September 24 , 2005 62 Consolidated Statements of Cash ended September 24 , 2005 62 Consolidated Statements of Cash Flows three fiscal year ended September 24 , 2005 63 Notes to year ended September 24 , 2005 63 Notes to Consolidated Financial ended September 24 , 2005 63 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 64 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 97 Reports of Independent Registered Public Accounting Firm , KPMG LLP 98 All financial statement schedule have Statements and Notes thereto . 59 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 24 , 2005 September 25 , amount ) September 24 , 2005 September 25 , 2004 ASSETS September 24 , 2005 September 25 , 2004 ASSETS : Current , 2005 September 25 , 2004 ASSETS : Current asset : Cash and cash equivalent $ 3,491 $ 2,969 Short-term investment 4,770 cash equivalent $ 3,491 $ 2,969 Short-term investment 4,770 2,495 Accounts 3,491 $ 2,969 Short-term investment 4,770 2,495 Accounts receivable , le $ 2,969 Short-term investment 4,770 2,495 Accounts receivable , le allowance , le allowance of $ 46 and $ 47 , respectively of $ 46 and $ 47 , respectively 895 774 Inventories and $ 47 , respectively 895 774 Inventories 165 101 Deferred $ 47 , respectively 895 774 Inventories 165 101 Deferred tax , respectively 895 774 Inventories 165 101 Deferred tax asset 331 respectively 895 774 Inventories 165 101 Deferred tax asset 331 231 165 101 Deferred tax asset 331 231 Other current asset 648 101 Deferred tax asset 331 231 Other current asset 648 485 331 231 Other current asset 648 485 Total current asset 10,300 231 Other current asset 648 485 Total current asset 10,300 7,055 648 485 Total current asset 10,300 7,055 Property , plant , 485 Total current asset 10,300 7,055 Property , plant , and , and equipment , net 817 707 Goodwill 69 80 Acquired and equipment , net 817 707 Goodwill 69 80 Acquired intangible , net 817 707 Goodwill 69 80 Acquired intangible asset , net 817 707 Goodwill 69 80 Acquired intangible asset , net Acquired intangible asset , net 27 17 Other asset 338 191 intangible asset , net 27 17 Other asset 338 191 Total net 27 17 Other asset 338 191 Total asset $ 11,551 27 17 Other asset 338 191 Total asset $ 11,551 $ 338 191 Total asset $ 11,551 $ 8,050 LIABILITIES AND SHAREHOLDERS Total asset $ 11,551 $ 8,050 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 Accounts payable $ 1,779 $ 1,451 Accrued expense 1,705 1,200 Total 1,779 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 $ 1,451 Accrued expense 1,705 1,200 Total current liability 3,484 2,651 1,705 1,200 Total current liability 3,484 2,651 Non-current liability 601 323 1,200 Total current liability 3,484 2,651 Non-current liability 601 323 Total liability 3,484 2,651 Non-current liability 601 323 Total liability 4,085 2,974 3,484 2,651 Non-current liability 601 323 Total liability 4,085 2,974 Commitments liability 601 323 Total liability 4,085 2,974 Commitments and contingency Shareholders 601 323 Total liability 4,085 2,974 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 835,019,364 and ; 1,800,000,000 share authorized ; 835,019,364 and 782,887,234 share issued and share authorized ; 835,019,364 and 782,887,234 share issued and outstanding , issued and outstanding , respectively 3,521 2,514 Deferred stock compensation ( and outstanding , respectively 3,521 2,514 Deferred stock compensation ( 60 2,514 Deferred stock compensation ( 60 ) ( 93 ) Retained compensation ( 60 ) ( 93 ) Retained earnings 4,005 2,670 ( 93 ) Retained earnings 4,005 2,670 Accumulated other comprehensive income 93 ) Retained earnings 4,005 2,670 Accumulated other comprehensive income ( ( loss ) — ( 15 ) Total shareholder ’ equity ) Total shareholder ’ equity 7,466 5,076 Total liability and shareholder Total shareholder ’ equity 7,466 5,076 Total liability and shareholder ’ and shareholder ’ equity $ 11,551 $ 8,050 See accompanying note ’ equity $ 11,551 $ 8,050 See accompanying note to consolidated to consolidated financial statement . 60 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 24 , 2005 2005 2004 2003 year ended September 24 , 2005 2005 2004 2003 Net sale ended September 24 , 2005 2005 2004 2003 Net sale $ September 24 , 2005 2005 2004 2003 Net sale $ 13,931 24 , 2005 2005 2004 2003 Net sale $ 13,931 $ 2004 2003 Net sale $ 13,931 $ 8,279 $ 6,207 Cost Net sale $ 13,931 $ 8,279 $ 6,207 Cost of sale $ 13,931 $ 8,279 $ 6,207 Cost of sale 9,888 6,020 $ 6,207 Cost of sale 9,888 6,020 4,499 Gross margin 4,043 6,207 Cost of sale 9,888 6,020 4,499 Gross margin 4,043 2,259 Cost of sale 9,888 6,020 4,499 Gross margin 4,043 2,259 1,708 9,888 6,020 4,499 Gross margin 4,043 2,259 1,708 Operating expense : 6,020 4,499 Gross margin 4,043 2,259 1,708 Operating expense : Research 4,499 Gross margin 4,043 2,259 1,708 Operating expense : Research and expense : Research and development 534 489 471 Selling , general : Research and development 534 489 471 Selling , general , Research and development 534 489 471 Selling , general , and , general , and administrative 1,859 1,421 1,212 Restructuring cost — general , and administrative 1,859 1,421 1,212 Restructuring cost — 23 , and administrative 1,859 1,421 1,212 Restructuring cost — 23 26 1,421 1,212 Restructuring cost — 23 26 Total operating expense 2,393 1,212 Restructuring cost — 23 26 Total operating expense 2,393 1,933 23 26 Total operating expense 2,393 1,933 1,709 Operating income ( 26 Total operating expense 2,393 1,933 1,709 Operating income ( loss Total operating expense 2,393 1,933 1,709 Operating income ( loss ) Operating income ( loss ) 1,650 326 ( 1 ) Other income ( loss ) 1,650 326 ( 1 ) Other income loss ) 1,650 326 ( 1 ) Other income and expense non-current investment , net — 4 10 Interest and other income investment , net — 4 10 Interest and other income , and other income , net 165 53 83 Total other income other income , net 165 53 83 Total other income and income , net 165 53 83 Total other income and expense Total other income and expense 165 57 93 Income before provision other income and expense 165 57 93 Income before provision for income and expense 165 57 93 Income before provision for income before provision for income tax 1,815 383 92 Provision for income provision for income tax 1,815 383 92 Provision for income tax for income tax 1,815 383 92 Provision for income tax 480 92 Provision for income tax 480 107 24 Income before accounting Provision for income tax 480 107 24 Income before accounting change for income tax 480 107 24 Income before accounting change 1,335 24 Income before accounting change 1,335 276 68 Cumulative effect of Income before accounting change 1,335 276 68 Cumulative effect of accounting before accounting change 1,335 276 68 Cumulative effect of accounting change of income tax — — 1 Net income $ 1,335 $ — 1 Net income $ 1,335 $ 276 $ 69 Earnings Net income $ 1,335 $ 276 $ 69 Earnings per common $ 1,335 $ 276 $ 69 Earnings per common share before accounting change : Basic $ 1.65 $ 0.37 $ 0.09 Diluted : Basic $ 1.65 $ 0.37 $ 0.09 Diluted $ 1.56 $ 1.65 $ 0.37 $ 0.09 Diluted $ 1.56 $ 0.36 0.37 $ 0.09 Diluted $ 1.56 $ 0.36 $ 0.09 Earnings 0.09 Diluted $ 1.56 $ 0.36 $ 0.09 Earnings per common $ 1.56 $ 0.36 $ 0.09 Earnings per common share : common share : Basic $ 1.65 $ 0.37 $ 0.10 Diluted : Basic $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Shares 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Shares used in $ 1.56 $ 0.36 $ 0.09 Shares used in computing earnings in thousand ) : Basic 808,439 743,180 721,262 Diluted 856,780 774,622 thousand ) : Basic 808,439 743,180 721,262 Diluted 856,780 774,622 726,932 ) : Basic 808,439 743,180 721,262 Diluted 856,780 774,622 726,932 See Basic 808,439 743,180 721,262 Diluted 856,780 774,622 726,932 See accompanying note 808,439 743,180 721,262 Diluted 856,780 774,622 726,932 See accompanying note to 743,180 721,262 Diluted 856,780 774,622 726,932 See accompanying note to consolidated to consolidated financial statement . 61 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ Equity Balances a of September 28 , 2002 717,918 $ 1,826 a of September 28 , 2002 717,918 $ 1,826 $ ( of September 28 , 2002 717,918 $ 1,826 $ ( 7 28 , 2002 717,918 $ 1,826 $ ( 7 ) $ 717,918 $ 1,826 $ ( 7 ) $ 2,325 $ ( $ ( 7 ) $ 2,325 $ ( 49 ) $ ) $ 2,325 $ ( 49 ) $ 4,095 Components of $ ( 49 ) $ 4,095 Components of comprehensive income : Net income — — — 69 — 69 Change in foreign — — — 69 — 69 Change in foreign currency translation translation — — — — 31 31 Change in unrealized gain — — — — 31 31 Change in unrealized gain on — — — — ( 12 ) ( 12 ) Change — ( 12 ) ( 12 ) Change in unrealized gain — — — — ( 5 ) ( 5 ) Total — ( 5 ) ( 5 ) Total comprehensive income 83 5 ) Total comprehensive income 83 Amortization of deferred stock compensation deferred stock compensation — — 15 — — 15 Write-off of — — 15 — — 15 Write-off of deferred stock compensation deferred stock compensation — — 5 — — 5 Common stock — — 5 — — 5 Common stock issued under stock stock issued under stock plan 18,598 128 ( 75 ) — issued under stock plan 18,598 128 ( 75 ) — — stock plan 18,598 128 ( 75 ) — — 53 Settlement ( 75 ) — — 53 Settlement of forward purchase agreement of forward purchase agreement ( 3,062 ) ( 35 ) — agreement ( 3,062 ) ( 35 ) — — — ( ) — — — ( 35 ) Tax benefit related to related to stock option — 7 — — — 7 Balances — 7 — — — 7 Balances a of September 27 7 Balances a of September 27 , 2003 733,454 $ 1,926 a of September 27 , 2003 733,454 $ 1,926 $ ( of September 27 , 2003 733,454 $ 1,926 $ ( 62 27 , 2003 733,454 $ 1,926 $ ( 62 ) $ 733,454 $ 1,926 $ ( 62 ) $ 2,394 $ ( $ ( 62 ) $ 2,394 $ ( 35 ) $ ) $ 2,394 $ ( 35 ) $ 4,223 Components of $ ( 35 ) $ 4,223 Components of comprehensive income : Net income — — — 276 — 276 Change in foreign — — — 276 — 276 Change in foreign currency translation translation — — — — 13 13 Change in unrealized gain — — — — 13 13 Change in unrealized gain on — — — — ( 5 ) ( 5 ) Change — ( 5 ) ( 5 ) Change in unrealized loss tax — — — — 12 12 Total comprehensive income 296 — — — — 12 12 Total comprehensive income 296 Issuance 12 12 Total comprehensive income 296 Issuance of restricted stock unit of restricted stock unit — 64 ( 64 ) — — stock unit — 64 ( 64 ) — — — Adjustment a prior year acquisition ( 159 ) ( 2 ) — acquisition ( 159 ) ( 2 ) — — — ( ) — — — ( 2 ) Amortization of deferred stock deferred stock compensation — — 33 — — 33 Common stock — — 33 — — 33 Common stock issued under stock stock issued under stock plan 49,592 427 — — — 427 issued under stock plan 49,592 427 — — — 427 Tax 49,592 427 — — — 427 Tax benefit related to stock related to stock option — 99 — — — 99 Balances — 99 — — — 99 Balances a of September 25 99 Balances a of September 25 , 2004 782,887 $ 2,514 a of September 25 , 2004 782,887 $ 2,514 $ ( of September 25 , 2004 782,887 $ 2,514 $ ( 93 25 , 2004 782,887 $ 2,514 $ ( 93 ) $ 782,887 $ 2,514 $ ( 93 ) $ 2,670 $ ( $ ( 93 ) $ 2,670 $ ( 15 ) $ ) $ 2,670 $ ( 15 ) $ 5,076 Components of $ ( 15 ) $ 5,076 Components of comprehensive income : Net income — — — 1,335 — 1,335 Change in foreign — — — 1,335 — 1,335 Change in foreign currency translation translation — — — — 7 7 Change in unrealized gain — — — — 7 7 Change in unrealized gain on tax — — — — 8 8 Total comprehensive income 1,350 — — — — 8 8 Total comprehensive income 1,350 Issuance 8 8 Total comprehensive income 1,350 Issuance of restricted stock unit stock unit , net — 7 ( 7 ) — — , net — 7 ( 7 ) — — — Amortization deferred stock compensation — — 40 — — 40 Common stock — — 40 — — 40 Common stock issued under stock stock issued under stock plan 52,132 547 — — — 547 issued under stock plan 52,132 547 — — — 547 Tax 52,132 547 — — — 547 Tax benefit related to stock related to stock option — 453 — — — 453 Balances — 453 — — — 453 Balances a of September 24 453 Balances a of September 24 , 2005 835,019 $ 3,521 a of September 24 , 2005 835,019 $ 3,521 $ ( of September 24 , 2005 835,019 $ 3,521 $ ( 60 24 , 2005 835,019 $ 3,521 $ ( 60 ) $ 835,019 $ 3,521 $ ( 60 ) $ 4,005 $ — $ ( 60 ) $ 4,005 $ — $ 7,466 See $ 4,005 $ — $ 7,466 See accompanying note to consolidated to consolidated financial statement . 62 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 24 , 2005 2005 2004 2003 year ended September 24 , 2005 2005 2004 2003 Cash and ended September 24 , 2005 2005 2004 2003 Cash and cash September 24 , 2005 2005 2004 2003 Cash and cash equivalent 24 , 2005 2005 2004 2003 Cash and cash equivalent , beginning of the year $ 2,969 $ 3,396 $ 2,252 Operating the year $ 2,969 $ 3,396 $ 2,252 Operating Activities : $ 2,969 $ 3,396 $ 2,252 Operating Activities : Net income Operating Activities : Net income 1,335 276 69 Cumulative effect of Activities : Net income 1,335 276 69 Cumulative effect of accounting : Net income 1,335 276 69 Cumulative effect of accounting change of tax — — ( 1 ) Adjustments to reconcile net Depreciation , amortization and accretion 179 150 113 Stock-based compensation expense , amortization and accretion 179 150 113 Stock-based compensation expense 42 amortization and accretion 179 150 113 Stock-based compensation expense 42 33 150 113 Stock-based compensation expense 42 33 16 Non-cash restructuring — 113 Stock-based compensation expense 42 33 16 Non-cash restructuring — 5 Stock-based compensation expense 42 33 16 Non-cash restructuring — 5 12 33 16 Non-cash restructuring — 5 12 Provision for ( benefit 16 Non-cash restructuring — 5 12 Provision for ( benefit from from ) deferred income tax 52 20 ( 11 ) Tax ) deferred income tax 52 20 ( 11 ) Tax benefit income tax 52 20 ( 11 ) Tax benefit from stock Tax benefit from stock option 453 99 7 Loss on disposition benefit from stock option 453 99 7 Loss on disposition of from stock option 453 99 7 Loss on disposition of property , plant , and equipment 9 7 2 Gains on sale plant , and equipment 9 7 2 Gains on sale of , and equipment 9 7 2 Gains on sale of short-term investment , net — ( 1 ) ( 21 ) Gains — ( 1 ) ( 21 ) Gains on non-current investment investment , net — ( 4 ) ( 10 ) Gain — ( 4 ) ( 10 ) Gain on forward purchase purchase agreement — — ( 6 ) Changes in operating asset liability : Accounts receivable ( 121 ) ( 8 ) ( receivable ( 121 ) ( 8 ) ( 201 ) Inventories ) ( 8 ) ( 201 ) Inventories ( 64 ) ( 201 ) Inventories ( 64 ) ( 45 ) ( Inventories ( 64 ) ( 45 ) ( 11 ) Other ) ( 45 ) ( 11 ) Other current asset ( ) Other current asset ( 150 ) ( 176 ) ( asset ( 150 ) ( 176 ) ( 34 ) Other ) ( 176 ) ( 34 ) Other asset ( 61 34 ) Other asset ( 61 ) ( 39 ) ( asset ( 61 ) ( 39 ) ( 30 ) Accounts ) ( 39 ) ( 30 ) Accounts payable 328 297 ( 30 ) Accounts payable 328 297 243 Other liability 533 30 ) Accounts payable 328 297 243 Other liability 533 320 ) Accounts payable 328 297 243 Other liability 533 320 152 328 297 243 Other liability 533 320 152 Cash generated by 297 243 Other liability 533 320 152 Cash generated by operating 243 Other liability 533 320 152 Cash generated by operating activity Cash generated by operating activity 2,535 934 289 Investing Activities : generated by operating activity 2,535 934 289 Investing Activities : Purchases by operating activity 2,535 934 289 Investing Activities : Purchases of Purchases of short-term investment ( 11,470 ) ( 3,270 ) ( investment ( 11,470 ) ( 3,270 ) ( 2,648 ) Proceeds ) ( 3,270 ) ( 2,648 ) Proceeds from maturity of from maturity of short-term investment 8,609 1,141 2,446 Proceeds from sale maturity of short-term investment 8,609 1,141 2,446 Proceeds from sale of of short-term investment 8,609 1,141 2,446 Proceeds from sale of short-term from sale of short-term investment 586 801 1,116 Proceeds from sale sale of short-term investment 586 801 1,116 Proceeds from sale of of short-term investment 586 801 1,116 Proceeds from sale of non-current sale of non-current investment — 5 45 Purchases of property , of non-current investment — 5 45 Purchases of property , plant plant , and equipment ( 260 ) ( 176 ) ( equipment ( 260 ) ( 176 ) ( 164 ) Other ) ( 176 ) ( 164 ) Other ( 21 ) ( 164 ) Other ( 21 ) 11 33 Cash ( ) Other ( 21 ) 11 33 Cash ( used for Other ( 21 ) 11 33 Cash ( used for ) generated by investing activity ( 2,556 ) ( 1,488 ) 828 activity ( 2,556 ) ( 1,488 ) 828 Financing Activities : 2,556 ) ( 1,488 ) 828 Financing Activities : Payment of of long-term debt — ( 300 ) — Proceeds from issuance from issuance of common stock 543 427 53 Cash used for issuance of common stock 543 427 53 Cash used for repurchase of common stock 543 427 53 Cash used for repurchase of common stock — — ( 26 ) Cash generated by financing Cash generated by financing activity 543 127 27 Increase ( decrease generated by financing activity 543 127 27 Increase ( decrease ) by financing activity 543 127 27 Increase ( decrease ) in in cash and cash equivalent 522 ( 427 ) 1,144 Cash and cash equivalent 522 ( 427 ) 1,144 Cash and cash equivalent 522 ( 427 ) 1,144 Cash and cash equivalent , end of the year $ 3,491 $ 2,969 $ 3,396 Supplemental the year $ 3,491 $ 2,969 $ 3,396 Supplemental cash flow $ 3,491 $ 2,969 $ 3,396 Supplemental cash flow disclosure : for interest $ — $ 10 $ 20 Cash paid ( $ — $ 10 $ 20 Cash paid ( received ) income tax , net $ 17 $ ( 7 ) $ net $ 17 $ ( 7 ) $ 45 See accompanying $ ( 7 ) $ 45 See accompanying note to consolidated to consolidated financial statement . 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple of September . Fiscal year 2005 , 2004 , and 2003 . Fiscal year 2005 , 2004 , and 2003 were each 2005 , 2004 , and 2003 were each 52-week year . , and 2003 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it quarter of it fiscal year 2006 . All information presented herein Common Stock Split On February 28 , 2005 , the Company Split On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per defined a hedge in SFAS 133 , Accounting for Derivative Instruments in fair value of the 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( the asset , which are 30 year for building , up for building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 141 million , $ 126 million $ 141 million , $ 126 million , and $ 108 126 million , and $ 108 million during 2005 , 2004 and $ 108 million during 2005 , 2004 , and 2003 108 million during 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . 65 NOTES and 2003 , respectively . 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( accordance with SFAS No . 143 , Accounting for Asset Retirement asset retirement liability for fiscal 2004 and 2005 ( in million liability for fiscal 2004 and 2005 ( in million ) : retirement liability a of September 27 , 2003 $ 7.2 Additional a of September 27 , 2003 $ 7.2 Additional asset retirement September 27 , 2003 $ 7.2 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 0.5 Accretion recognized 0.5 Asset retirement obligation recognized 0.5 Accretion recognized 0.5 Asset retirement liability a of retirement liability a of September 25 , 2004 $ 8.2 Additional a of September 25 , 2004 $ 8.2 Additional asset retirement September 25 , 2004 $ 8.2 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 2.8 Accretion recognized 0.7 Asset retirement obligation recognized 2.8 Accretion recognized 0.7 Asset retirement liability a of retirement liability a of September 24 , 2005 $ 11.7 Cumulative a of September 24 , 2005 $ 11.7 Cumulative Effects of September 24 , 2005 $ 11.7 Cumulative Effects of Accounting Changes Effects of Accounting Changes In 2003 , the Company recognized a type adjustment of approximately $ 1 million from the adoption of adoption of SFAS No . 150 , Accounting for Certain Financial Equity and SFAS No . 143 . Long-Lived Assets Including Goodwill three fiscal year ended September 24 , 2005 , the Company year ended September 24 , 2005 , the Company had no restructuring action described in Note 5 of these Notes to Consolidated Statements . SFAS No . 142 , Goodwill and Other Intangible test on or about August 30 of each year . The intangible asset impairment charge in 2005 , 2004 , or 2003 impairment charge in 2005 , 2004 , or 2003 . The 2005 , 2004 , or 2003 . The Company established reporting purpose of testing goodwill for 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( each reporting unit.SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 , Accounting for the Impairment life over period ranging from 3 to 10 year . Foreign period ranging from 3 to 10 year . Foreign Currency Translation ( SOP ) No . 97-2 , Software Revenue Recognition , ( SAB ) No . 104 , Revenue Recognition . The the gross amount billed . 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( for general release to customer 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( pursuant to SFAS No . 86 , Computer Software to be In the fourth quarter of 2004 , the Company began incurring with Mac OS X version 10.4 Tiger subsequent to achievement of by public demonstration in August 2004 and the subsequent release of The Company capitalized approximately $ 29.7 and $ 4.5 million during approximately $ 29.7 and $ 4.5 million during 2005 and 2004 and $ 4.5 million during 2005 and 2004 , respectively , 4.5 million during 2005 and 2004 , respectively , of cost accordance with SFAS No . 86 , amortization of this asset of sale began in April 2005 when the Company began shipping a straight-line basis over a 3 year estimated useful life . During the second quarter of 2004 , the Company incurred substantial cost associated with FileMaker Pro 7 subsequent to achievement of technological of the product in March 2004 . Therefore , during the during the second quarter of 2004 , the Company capitalized approximately the Company capitalized approximately $ 2.3 million of cost associated with the development of FileMaker Pro 7 . In accordance with SFAS accordance with SFAS No . 86 , amortization of this asset of sale began in March 2004 when the Company began shipping Company began shipping FileMaker Pro 7 and is being recognized on a straight-line basis over a 3 year estimated useful life . third and fourth quarter of 2003 , the Company incurred substantial of Mac OS X version 10.3 ( code-named “ Panther ” a developer beta in June 2003 , and prior to release in the first quarter of 2004 . Therefore , during 2003 2004 . Therefore , during 2003 the Company capitalized approximately $ the Company capitalized approximately $ 14.7 million of development cost associated in the first quarter of 2004 when Panther wa shipped and accordance with SFAS No . 86 over a 3 year estimated No . 86 over a 3 year estimated useful life . software development cost wa $ 15.7 million , $ 10.7 million $ 15.7 million , $ 10.7 million , and $ 5.8 10.7 million , and $ 5.8 million in 2005 , 2004 and $ 5.8 million in 2005 , 2004 , and 2003 5.8 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . Advertising Costs . Advertising expense wa $ 287 million , $ 206 million $ 287 million , $ 206 million , and $ 193 206 million , and $ 193 million for 2005 , 2004 and $ 193 million for 2005 , 2004 , and 2003 193 million for 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . Stock-Based Compensation APB ) Opinion No . 25 , Accounting for Stock Issued provision of SFAS No . 123 , Accounting for Stock-based Compensation amended by SFAS No . 148 , Accounting for Stock-based Compensation—Transition Under APB Opinion No . 25 , when the exercise price compensation expense is recognized . 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( required under SFAS No . 123 , the pro forma effect per share amount ) : 2005 2004 2003 Net income—as reported share amount ) : 2005 2004 2003 Net income—as reported $ amount ) : 2005 2004 2003 Net income—as reported $ 1,335 2003 Net income—as reported $ 1,335 $ 276 $ 69 Add income—as reported $ 1,335 $ 276 $ 69 Add : Stock-based $ 1,335 $ 276 $ 69 Add : Stock-based employee compensation income , net of tax 38 33 15 Deduct : Stock-based , net of tax 38 33 15 Deduct : Stock-based employee net of tax 38 33 15 Deduct : Stock-based employee compensation , net of tax ( 114 ) ( 141 ) ( tax ( 114 ) ( 141 ) ( 181 ) Net ) ( 141 ) ( 181 ) Net income ( loss loss ) —pro forma $ 1,259 $ 168 $ ( 97 —pro forma $ 1,259 $ 168 $ ( 97 ) Net 1,259 $ 168 $ ( 97 ) Net income per common common share—as reported Basic $ 1.65 $ 0.37 $ 0.10 Diluted reported Basic $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 1.65 $ 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 0.37 $ 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Net 0.10 Diluted $ 1.56 $ 0.36 $ 0.09 Net income ( $ 1.56 $ 0.36 $ 0.09 Net income ( loss ) common share—pro forma Basic $ 1.56 $ 0.23 $ ( 0.13 forma Basic $ 1.56 $ 0.23 $ ( 0.13 ) Diluted 1.56 $ 0.23 $ ( 0.13 ) Diluted $ 1.47 $ ( 0.13 ) Diluted $ 1.47 $ 0.22 $ ( 0.13 ) Diluted $ 1.47 $ 0.22 $ ( 0.13 ) In 1.47 $ 0.22 $ ( 0.13 ) In December 2004 , ( 0.13 ) In December 2004 , the FASB issued SFAS FASB issued SFAS No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( SFAS No . ) ( SFAS No . 123R ) , Share-Based Payment , instrument . SFAS No . 123R eliminates the ability to account under APB Opinion No . 25 , and requires instead that fair-value-based method . In January 2005 , the SEC issued SAB SEC issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R will be effective for the first quarter of it fiscal 2006 . The Company ’ s adoption of SFAS No . 123R is expected to have a the historical SFAS No . 123 pro forma expense . 70 123 pro forma expense . 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( diluted earnings per share : 2005 2004 2003 Numerator ( in earnings per share : 2005 2004 2003 Numerator ( in million per share : 2005 2004 2003 Numerator ( in million ) Income before accounting change $ 1,335 $ 276 $ 68 Cumulative accounting change $ 1,335 $ 276 $ 68 Cumulative effect of $ 1,335 $ 276 $ 68 Cumulative effect of accounting change net of tax — — 1 Net income $ 1,335 $ — 1 Net income $ 1,335 $ 276 $ 69 Denominator Net income $ 1,335 $ 276 $ 69 Denominator ( in $ 1,335 $ 276 $ 69 Denominator ( in thousand ) , excluding unvested restricted stock 808,439 743,180 721,262 Effect of dilutive excluding unvested restricted stock 808,439 743,180 721,262 Effect of dilutive option unvested restricted stock 808,439 743,180 721,262 Effect of dilutive option , stock unit and restricted stock 48,341 31,442 5,670 Denominator for diluted unit and restricted stock 48,341 31,442 5,670 Denominator for diluted earnings and restricted stock 48,341 31,442 5,670 Denominator for diluted earnings per for diluted earnings per share 856,780 774,622 726,932 Basic earnings per diluted earnings per share 856,780 774,622 726,932 Basic earnings per share earnings per share 856,780 774,622 726,932 Basic earnings per share before share before accounting change $ 1.65 $ 0.37 $ 0.09 Basic accounting change $ 1.65 $ 0.37 $ 0.09 Basic earnings per $ 1.65 $ 0.37 $ 0.09 Basic earnings per share after share after accounting change $ 1.65 $ 0.37 $ 0.10 Diluted accounting change $ 1.65 $ 0.37 $ 0.10 Diluted earnings per $ 1.65 $ 0.37 $ 0.10 Diluted earnings per share before share before accounting change $ 1.56 $ 0.36 $ 0.09 Diluted accounting change $ 1.56 $ 0.36 $ 0.09 Diluted earnings per $ 1.56 $ 0.36 $ 0.09 Diluted earnings per share after share after accounting change $ 1.56 $ 0.36 $ 0.09 Potentially accounting change $ 1.56 $ 0.36 $ 0.09 Potentially dilutive security $ 1.56 $ 0.36 $ 0.09 Potentially dilutive security representing approximately Potentially dilutive security representing approximately 12.4 million , 8.7 million , representing approximately 12.4 million , 8.7 million , and 101.6 million , 8.7 million , and 101.6 million share of common stock for the year ended September 24 , 2005 , September 25 year ended September 24 , 2005 , September 25 , 2004 24 , 2005 , September 25 , 2004 , and September 2005 , September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 , respectively , , and September 27 , 2003 , respectively , were excluded a cash flow hedge . 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( is also disclosed . Note 2—Financial Instruments The carrying amount of in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 Cash September 24 , 2005 September 25 , 2004 Cash $ 127 , 2005 September 25 , 2004 Cash $ 127 $ 200 25 , 2004 Cash $ 127 $ 200 U.S. Treasury and 2004 Cash $ 127 $ 200 U.S. Treasury and Agency security U.S. Treasury and Agency security 89 87 U.S. corporate security 2,030 Treasury and Agency security 89 87 U.S. corporate security 2,030 1,795 89 87 U.S. corporate security 2,030 1,795 Foreign security 1,245 887 87 U.S. corporate security 2,030 1,795 Foreign security 1,245 887 Total security 2,030 1,795 Foreign security 1,245 887 Total cash equivalent 3,364 2,030 1,795 Foreign security 1,245 887 Total cash equivalent 3,364 2,769 1,245 887 Total cash equivalent 3,364 2,769 U.S. Treasury and Agency 887 Total cash equivalent 3,364 2,769 U.S. Treasury and Agency security U.S. Treasury and Agency security 216 1,080 U.S. corporate security 3,662 Treasury and Agency security 216 1,080 U.S. corporate security 3,662 1,352 216 1,080 U.S. corporate security 3,662 1,352 Foreign security 892 63 1,080 U.S. corporate security 3,662 1,352 Foreign security 892 63 Total security 3,662 1,352 Foreign security 892 63 Total short-term investment 4,770 3,662 1,352 Foreign security 892 63 Total short-term investment 4,770 2,495 892 63 Total short-term investment 4,770 2,495 Total cash , cash 63 Total short-term investment 4,770 2,495 Total cash , cash equivalent , and short-term investment $ 8,261 $ 5,464 The Company ’ short-term investment $ 8,261 $ 5,464 The Company ’ s U.S. net unrealized loss totaling $ 5.9 million on it investment portfolio with stated maturity le than 1 year a of September 24 1 year a of September 24 , 2005 and net unrealized a of September 24 , 2005 and net unrealized loss of net unrealized loss of $ 6.3 million on it investment portfolio with stated maturity le than 1 year a of September 25 1 year a of September 25 , 2004 . The Company a of September 25 , 2004 . The Company occasionally sell loss before tax of $ 137,000 in 2005 and net gain tax of $ 137,000 in 2005 and net gain before tax gain before tax of $ 1 million and $ 21 million $ 1 million and $ 21 million in 2004 and 2003 and $ 21 million in 2004 and 2003 , respectively , 21 million in 2004 and 2003 , respectively , a a net . As of September 24 , 2005 , approximately $ As of September 24 , 2005 , approximately $ 287 million , 2005 , approximately $ 287 million of the Company ’ had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 24 , 2005 had maturity of a of September 24 , 2005 had maturity of 3 to , 2005 had maturity of 3 to 12 month . As had maturity of 3 to 12 month . As of September month . As of September 25 , 2004 , approximately $ As of September 25 , 2004 , approximately $ 180 million , 2004 , approximately $ 180 million of the Company ’ had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 25 , 2004 had maturity of a of September 25 , 2004 had maturity of 3 to , 2004 had maturity of 3 to 12 month . 72 had maturity of 3 to 12 month . 72 NOTES TO 3 to 12 month . 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) In ) In accordance with EITF 03-1 , The Meaning of Other-Than-Temporary loss position a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , aggregated by 2005 and September 25 , 2004 , aggregated by investment category ( in million ) : 2005 Less than 12 Months 12 ) : 2005 Less than 12 Months 12 Months or Greater 2005 Less than 12 Months 12 Months or Greater Total Security U.S. Treasury and Agencies $ 160 $ ( 1 ) $ Agencies $ 160 $ ( 1 ) $ 2 $ — $ ( 1 ) $ 2 $ — $ 162 $ $ 2 $ — $ 162 $ ( 1 ) Corporate — $ 162 $ ( 1 ) Corporate bond 468 ( ( 1 ) Corporate bond 468 ( 3 ) 26 — ) Corporate bond 468 ( 3 ) 26 — 494 ( bond 468 ( 3 ) 26 — 494 ( 3 ) ( 3 ) 26 — 494 ( 3 ) Certificate of ) 26 — 494 ( 3 ) Certificate of deposit 288 3 ) Certificate of deposit 288 — — — 288 — deposit 288 — — — 288 — Asset backed security 60 288 — Asset backed security 60 ( 1 ) — — Asset backed security 60 ( 1 ) — — 60 ( ( 1 ) — — 60 ( 1 ) Commercial paper ) — — 60 ( 1 ) Commercial paper 4,526 ( ( 1 ) Commercial paper 4,526 ( 1 ) — — ) Commercial paper 4,526 ( 1 ) — — 4,526 ( ( 1 ) — — 4,526 ( 1 ) Total $ ) — — 4,526 ( 1 ) Total $ 5,502 $ ( 1 ) Total $ 5,502 $ ( 6 ) $ Total $ 5,502 $ ( 6 ) $ 28 $ — $ ( 6 ) $ 28 $ — $ 5,530 $ $ 28 $ — $ 5,530 $ ( 6 ) 2004 — $ 5,530 $ ( 6 ) 2004 Less than 12 5,530 $ ( 6 ) 2004 Less than 12 Months 12 6 ) 2004 Less than 12 Months 12 Months or Greater 2004 Less than 12 Months 12 Months or Greater Total Security U.S. Treasury and Agencies $ 1,126 $ ( 4 ) $ Agencies $ 1,126 $ ( 4 ) $ — $ — $ — $ — $ 1,126 $ ( 4 ) Corporate — $ 1,126 $ ( 4 ) Corporate bond 134 — ( 4 ) Corporate bond 134 — 144 ( 1 ) ) Corporate bond 134 — 144 ( 1 ) 278 ( bond 134 — 144 ( 1 ) 278 ( 1 ) — 144 ( 1 ) 278 ( 1 ) Certificate of ( 1 ) 278 ( 1 ) Certificate of deposit 420 1 ) Certificate of deposit 420 ( 1 ) — — Certificate of deposit 420 ( 1 ) — — 420 ( ( 1 ) — — 420 ( 1 ) Asset backed ) — — 420 ( 1 ) Asset backed security 426 1 ) Asset backed security 426 — — — 426 — security 426 — — — 426 — Commercial paper 2,407 ( — 426 — Commercial paper 2,407 ( 1 ) — — — Commercial paper 2,407 ( 1 ) — — 2,407 ( ( 1 ) — — 2,407 ( 1 ) Total $ ) — — 2,407 ( 1 ) Total $ 4,513 $ ( 1 ) Total $ 4,513 $ ( 6 ) $ Total $ 4,513 $ ( 6 ) $ 144 $ ( $ ( 6 ) $ 144 $ ( 1 ) $ ) $ 144 $ ( 1 ) $ 4,657 $ ( $ ( 1 ) $ 4,657 $ ( 7 ) Market ) $ 4,657 $ ( 7 ) Market value were determined , considerable trade receivables that 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) are customer accounted for more than 10 % of trade receivables a trade receivables a of September 24 , 2005 or September 25 a of September 24 , 2005 or September 25 , 2004 24 , 2005 or September 25 , 2004 . The following 2005 or September 25 , 2004 . The following table summarizes in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 September September 24 , 2005 September 25 , 2004 September 27 , , 2005 September 25 , 2004 September 27 , 2003 Beginning September 25 , 2004 September 27 , 2003 Beginning allowance balance , 2004 September 27 , 2003 Beginning allowance balance $ 47 2003 Beginning allowance balance $ 47 $ 49 $ 51 Charged allowance balance $ 47 $ 49 $ 51 Charged to cost $ 47 $ 49 $ 51 Charged to cost and expense Charged to cost and expense 8 3 4 Deductions ( a to cost and expense 8 3 4 Deductions ( a ) cost and expense 8 3 4 Deductions ( a ) ( Deductions ( a ) ( 9 ) ( 5 ) ( ) ( 9 ) ( 5 ) ( 6 ) Ending ) ( 5 ) ( 6 ) Ending allowance balance $ ) Ending allowance balance $ 46 $ 47 $ 49 ( allowance balance $ 46 $ 47 $ 49 ( a ) $ 46 $ 47 $ 49 ( a ) Represents amount current asset , totaled $ 417 million and $ 276 million $ 417 million and $ 276 million a of September 24 276 million a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , respectively . 2005 and September 25 , 2004 , respectively . The Company sheet at fair value . 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) The currency instrument a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 ( in million 2005 and September 25 , 2004 ( in million ) : in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 Notional September 24 , 2005 September 25 , 2004 Notional Principal Fair , 2005 September 25 , 2004 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 662 $ 10 $ 10 $ Spot/Forward contract $ 662 $ 10 $ 10 $ 598 $ $ 662 $ 10 $ 10 $ 598 $ ( 3 $ 10 $ 10 $ 598 $ ( 3 ) $ 10 $ 598 $ ( 3 ) $ 3 Purchased option $ ( 3 ) $ 3 Purchased option $ 1,668 $ $ 3 Purchased option $ 1,668 $ 17 $ 17 $ Purchased option $ 1,668 $ 17 $ 17 $ 482 $ $ 1,668 $ 17 $ 17 $ 482 $ 4 $ $ 17 $ 17 $ 482 $ 4 $ 4 Sold $ 17 $ 482 $ 4 $ 4 Sold option $ $ 482 $ 4 $ 4 Sold option $ 1,087 $ $ 4 Sold option $ 1,087 $ ( 5 ) $ option $ 1,087 $ ( 5 ) $ — $ 521 5 ) $ — $ 521 $ ( 3 ) $ — $ 521 $ ( 3 ) $ — Foreign exchange hedge : Spot/Forward contract $ 833 $ ( 3 ) $ contract $ 833 $ ( 3 ) $ 1 $ 609 $ ( 3 ) $ 1 $ 609 $ 3 $ 3 ) $ 1 $ 609 $ 3 $ 4 Purchased $ 1 $ 609 $ 3 $ 4 Purchased option $ $ 609 $ 3 $ 4 Purchased option $ 115 $ $ 4 Purchased option $ 115 $ — $ — $ market information a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 . Although the 2005 and September 25 , 2004 . Although the table above net sale in the same 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) period over a time horizon of 3 to 6 month . Derivative time horizon of 3 to 6 month . Derivative instrument designated period or within a subsequent 2 month time period . Deferred recognized net loss of $ 1.6 million and $ 2.8 million $ 1.6 million and $ 2.8 million in 2005 and 2004 and $ 2.8 million in 2005 and 2004 , respectively , 2.8 million in 2005 and 2004 , respectively , in other similar nature were recorded in 2003 . As of September 24 2003 . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had a flow hedge of approximately $ 3.6 million , net of tax the second quarter of fiscal 2006 . The net gain or equity . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , the Company 2005 and September 25 , 2004 , the Company had a a net gain of $ 673,000 and a net loss of a net loss of $ 1.8 million , respectively , included U.S. interest rate . During 2001 and 2002 , the Company rate . During 2001 and 2002 , the Company entered into a realized gain of $ 23 million . These gain were and wa repaid in February 2004 . As of September 24 2004 . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , the Company 2005 and September 25 , 2004 , the Company had no interest rate derivative outstanding . 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) Non-Current in these non-current investment in 2004 and 2003 . Pretax gain non-current investment in 2004 and 2003 . Pretax gain recorded upon these non-current investment were $ 4 million and $ 10 million $ 4 million and $ 10 million in 2004 and 2003 and $ 10 million in 2004 and 2003 , respectively . 10 million in 2004 and 2003 , respectively . Note 3—Consolidated 2003 , respectively . Note 3—Consolidated Financial Statement Details ( in million ) Other Current Assets 2005 2004 Vendor non-trade receivables $ ) Other Current Assets 2005 2004 Vendor non-trade receivables $ 417 2004 Vendor non-trade receivables $ 417 $ 276 Other current asset non-trade receivables $ 417 $ 276 Other current asset 231 209 $ 276 Other current asset 231 209 Total other current asset 276 Other current asset 231 209 Total other current asset $ Total other current asset $ 648 $ 485 Property , Plant current asset $ 648 $ 485 Property , Plant , and , Plant , and Equipment 2005 2004 Land and building $ Plant , and Equipment 2005 2004 Land and building $ 361 2004 Land and building $ 361 $ 351 Machinery , equipment and building $ 361 $ 351 Machinery , equipment , and equipment , and internal-use software 494 422 Office furniture and equipment , and internal-use software 494 422 Office furniture and equipment 81 422 Office furniture and equipment 81 79 Leasehold improvement 545 446 Office furniture and equipment 81 79 Leasehold improvement 545 446 1,481 equipment 81 79 Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation 81 79 Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and 79 Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and amortization Leasehold improvement 545 446 1,481 1,298 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 664 ) ( 591 ) Net amortization ( 664 ) ( 591 ) Net property , plant plant , and equipment $ 817 $ 707 Other Assets 2005 and equipment $ 817 $ 707 Other Assets 2005 2004 Non-current 817 $ 707 Other Assets 2005 2004 Non-current deferred tax asset $ 707 Other Assets 2005 2004 Non-current deferred tax asset $ Non-current deferred tax asset $ 183 $ 86 Capitalized software development tax asset $ 183 $ 86 Capitalized software development cost , software development cost , net 38 25 Other asset 117 80 development cost , net 38 25 Other asset 117 80 Total net 38 25 Other asset 117 80 Total other asset $ 38 25 Other asset 117 80 Total other asset $ 338 80 Total other asset $ 338 $ 191 Accrued Expenses 2005 other asset $ 338 $ 191 Accrued Expenses 2005 2004 Deferred 338 $ 191 Accrued Expenses 2005 2004 Deferred revenue—current $ 501 $ 191 Accrued Expenses 2005 2004 Deferred revenue—current $ 501 $ 2005 2004 Deferred revenue—current $ 501 $ 342 Accrued marketing and Deferred revenue—current $ 501 $ 342 Accrued marketing and distribution 221 342 Accrued marketing and distribution 221 147 Accrued compensation and employee Accrued marketing and distribution 221 147 Accrued compensation and employee benefit Accrued compensation and employee benefit 167 134 Accrued warranty and related compensation and employee benefit 167 134 Accrued warranty and related cost Accrued warranty and related cost 188 105 Other current liability 628 warranty and related cost 188 105 Other current liability 628 472 188 105 Other current liability 628 472 Total accrued expense $ 105 Other current liability 628 472 Total accrued expense $ 1,705 472 Total accrued expense $ 1,705 $ 1,200 77 NOTES TO accrued expense $ 1,705 $ 1,200 77 NOTES TO CONSOLIDATED FINANCIAL expense $ 1,705 $ 1,200 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 3—Consolidated Financial Statement Details ( in ( Continued ) Non-current Liabilities 2005 2004 Deferred revenue—non-current $ 281 Continued ) Non-current Liabilities 2005 2004 Deferred revenue—non-current $ 281 $ 2005 2004 Deferred revenue—non-current $ 281 $ 202 Deferred tax liability Deferred revenue—non-current $ 281 $ 202 Deferred tax liability 308 113 $ 202 Deferred tax liability 308 113 Other non-current liability 12 202 Deferred tax liability 308 113 Other non-current liability 12 8 308 113 Other non-current liability 12 8 Total non-current liability $ 113 Other non-current liability 12 8 Total non-current liability $ 601 8 Total non-current liability $ 601 $ 323 Interest and Other non-current liability $ 601 $ 323 Interest and Other Income , and Other Income , net 2005 2004 2003 Interest income $ Other Income , net 2005 2004 2003 Interest income $ 183 Income , net 2005 2004 2003 Interest income $ 183 $ 2004 2003 Interest income $ 183 $ 64 $ 69 Interest Interest income $ 183 $ 64 $ 69 Interest expense — $ 183 $ 64 $ 69 Interest expense — ( 3 69 Interest expense — ( 3 ) ( 8 ) Gains — ( 3 ) ( 8 ) Gains on sale of of short term investment — 1 21 Other income ( expense short term investment — 1 21 Other income ( expense ) expense ) , net ( 18 ) ( 9 ) 1 net ( 18 ) ( 9 ) 1 Total interest and 18 ) ( 9 ) 1 Total interest and other income other income , net $ 165 $ 53 $ 83 Note , net $ 165 $ 53 $ 83 Note 4—Goodwill and $ 165 $ 53 $ 83 Note 4—Goodwill and Other intangible $ 53 $ 83 Note 4—Goodwill and Other intangible Assets The life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The following table in million ) : September 24 , 2005 September 25 , ) : September 24 , 2005 September 25 , 2004 Gross September 24 , 2005 September 25 , 2004 Gross Carrying Amount , 2005 September 25 , 2004 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Goodwill $ 69 $ — $ 69 $ $ 69 $ — $ 69 $ 80 $ — $ $ — $ 69 $ 80 $ — $ 80 Other $ 80 $ — $ 80 Other acquired intangible asset 5 80 Other acquired intangible asset 5 ( 5 ) — 5 acquired intangible asset 5 ( 5 ) — 5 ( 5 5 ( 5 ) — 5 ( 5 ) — Acquired 5 ) — 5 ( 5 ) — Acquired technology 61 5 ) — Acquired technology 61 ( 34 ) 27 42 — Acquired technology 61 ( 34 ) 27 42 ( 25 technology 61 ( 34 ) 27 42 ( 25 ) 17 61 ( 34 ) 27 42 ( 25 ) 17 Total 34 ) 27 42 ( 25 ) 17 Total acquired intangible 27 42 ( 25 ) 17 Total acquired intangible asset $ Total acquired intangible asset $ 135 $ ( 39 ) $ asset $ 135 $ ( 39 ) $ 96 $ 127 $ ( 39 ) $ 96 $ 127 $ ( 30 39 ) $ 96 $ 127 $ ( 30 ) $ 96 $ 127 $ ( 30 ) $ 97 During the $ ( 30 ) $ 97 During the fourth quarter of During the fourth quarter of 2005 , the Company recorded an an adjustment of approximately $ 11 million to goodwill relating to During the fourth quarter of 2005 , these NOLs were deemed During the third quarter of 2004 , the Company recorded an an adjustment of approximately $ 5 million to goodwill related to Inc. ( PowerSchool ) in 2001 . This reduction of goodwill goodwill included the cancellation of 158,334 share of the Company ’ , valued at approximately $ 2 million , that were previously adjustment also included approximately $ 3 million to adjust the original to actual cost incurred . 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 4—Goodwill and Other intangible Assets ( ) : Fiscal Years : 2006 $ 10 2007 8 2008 Fiscal Years : 2006 $ 10 2007 8 2008 5 2009 Years : 2006 $ 10 2007 8 2008 5 2009 1 : 2006 $ 10 2007 8 2008 5 2009 1 2010 2006 $ 10 2007 8 2008 5 2009 1 2010 1 $ 10 2007 8 2008 5 2009 1 2010 1 Thereafter 10 2007 8 2008 5 2009 1 2010 1 Thereafter 2 2007 8 2008 5 2009 1 2010 1 Thereafter 2 Total 8 2008 5 2009 1 2010 1 Thereafter 2 Total expected 2008 5 2009 1 2010 1 Thereafter 2 Total expected annual 2009 1 2010 1 Thereafter 2 Total expected annual amortization expense expected annual amortization expense $ 27 Amortization expense related to acquired acquired intangible asset wa $ 9 million , $ 7 million $ 9 million , $ 7 million , and $ 10 7 million , and $ 10 million in 2005 , 2004 and $ 10 million in 2005 , 2004 , and 2003 10 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . Note 5—Restructuring 2003 , respectively . Note 5—Restructuring Charges Fiscal 2004 Restructuring Actions . Note 5—Restructuring Charges Fiscal 2004 Restructuring Actions The Company recorded restructuring charge of approximately $ 23 million during the year ended during the year ended September 25 , 2004 , including approximately year ended September 25 , 2004 , including approximately $ 14 2004 , including approximately $ 14 million in severance cost , in severance cost , $ 5.5 million in asset impairment , impairment , and a $ 3.5 million charge for lease cancellation during the fourth quarter of 2004 . Of the $ 23 2004 . Of the $ 23 million charge , $ 19.7 23 million charge , $ 19.7 million had been utilized by utilized by the end of 2005 , with the remaining $ , with the remaining $ 3.3 million consisting of $ 0.7 3.3 million consisting of $ 0.7 million for employee severance benefit employee severance benefit and $ 2.6 million for lease cancellation . result in the termination of 461 employee , 448 of which termination of 461 employee , 448 of which had been terminated prior to the end of 2005 . The following table summarizes with restructuring action initiated during 2004 ( in million ) : Cancellations Totals Total charge $ 14.0 $ 5.5 $ 3.5 $ Total charge $ 14.0 $ 5.5 $ 3.5 $ 23.0 Total $ 14.0 $ 5.5 $ 3.5 $ 23.0 Total spending through $ 5.5 $ 3.5 $ 23.0 Total spending through September 24 23.0 Total spending through September 24 , 2005 ( 12.4 ) spending through September 24 , 2005 ( 12.4 ) — ( September 24 , 2005 ( 12.4 ) — ( 0.9 ) ( 12.4 ) — ( 0.9 ) ( 13.3 ) Total — ( 0.9 ) ( 13.3 ) Total non-cash item — Total non-cash item — ( 5.2 ) — ( 5.2 ) ( 5.2 ) — ( 5.2 ) Adjustments ( 0.9 ) ( 5.2 ) Adjustments ( 0.9 ) ( 0.3 ) — Adjustments ( 0.9 ) ( 0.3 ) — ( 1.2 ) ( 0.3 ) — ( 1.2 ) Accrual at September 24 1.2 ) Accrual at September 24 , 2005 $ 0.7 $ Accrual at September 24 , 2005 $ 0.7 $ — $ September 24 , 2005 $ 0.7 $ — $ 2.6 $ $ 0.7 $ — $ 2.6 $ 3.3 Fiscal 2003 Restructuring $ — $ 2.6 $ 3.3 Fiscal 2003 Restructuring Actions The $ 2.6 $ 3.3 Fiscal 2003 Restructuring Actions The Company recorded restructuring charge of approximately $ 26.8 million during the year ended during the year ended September 27 , 2003 , including approximately year ended September 27 , 2003 , including approximately $ 7.4 2003 , including approximately $ 7.4 million in severance cost , severance cost , a $ 5.0 million charge to write-off deferred write-off deferred compensation , $ 7.1 million in asset impairment , impairment , and a $ 7.3 million charge for lease cancellation during the first quarter of 2003 . Of the $ 26.8 2003 . Of the $ 26.8 million charge , all had utilized by the end of 2005 , except for approximately $ , except for approximately $ 1.7 million related to operating lease During the third quarter of 2003 , approximately $ 500,000 of of 2003 , approximately $ 500,000 of the amount originally accrued originally expected and a shortfall 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 5—Restructuring Charges ( Continued ) of Continued ) of approximately $ 500,000 wa identified in the severance resulted in the termination of 353 employee . The following table with restructuring action initiated during 2003 ( in million ) : Cancellations Totals Total charge $ 7.4 $ 5.0 $ 7.1 $ Total charge $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ $ 7.4 $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total $ 5.0 $ 7.1 $ 7.3 $ 26.8 Total spending through $ 7.1 $ 7.3 $ 26.8 Total spending through September 24 26.8 Total spending through September 24 , 2005 ( 7.9 ) spending through September 24 , 2005 ( 7.9 ) — — September 24 , 2005 ( 7.9 ) — — ( 5.1 7.9 ) — — ( 5.1 ) ( 13.0 ) Total — ( 5.1 ) ( 13.0 ) Total non-cash item — Total non-cash item — ( 5.0 ) ( 7.1 ) — — ( 5.0 ) ( 7.1 ) — ( 12.1 ) ( 7.1 ) — ( 12.1 ) Adjustments 0.5 — — — ( 12.1 ) Adjustments 0.5 — — ( 0.5 ) Adjustments 0.5 — — ( 0.5 ) — Accrual at September ) — Accrual at September 24 , 2005 $ — $ Accrual at September 24 , 2005 $ — $ — $ $ — $ — $ 1.7 $ 1.7 Note 6—Income Taxes $ — $ 1.7 $ 1.7 Note 6—Income Taxes The provision $ 1.7 $ 1.7 Note 6—Income Taxes The provision for income ( in million ) : 2005 2004 2003 Federal : Current in million ) : 2005 2004 2003 Federal : Current $ million ) : 2005 2004 2003 Federal : Current $ 303 2003 Federal : Current $ 303 $ 34 $ 18 Deferred : Current $ 303 $ 34 $ 18 Deferred 146 56 $ 303 $ 34 $ 18 Deferred 146 56 ( 7 $ 34 $ 18 Deferred 146 56 ( 7 ) 449 34 $ 18 Deferred 146 56 ( 7 ) 449 90 18 Deferred 146 56 ( 7 ) 449 90 11 State 146 56 ( 7 ) 449 90 11 State : Current 56 ( 7 ) 449 90 11 State : Current 66 ( 7 ) 449 90 11 State : Current 66 5 90 11 State : Current 66 5 4 Deferred ( 91 11 State : Current 66 5 4 Deferred ( 91 ) State : Current 66 5 4 Deferred ( 91 ) ( 66 5 4 Deferred ( 91 ) ( 18 ) ( Deferred ( 91 ) ( 18 ) ( 11 ) ( ) ( 18 ) ( 11 ) ( 25 ) ( ) ( 11 ) ( 25 ) ( 13 ) ( ) ( 25 ) ( 13 ) ( 7 ) Foreign ) ( 13 ) ( 7 ) Foreign : Current 59 7 ) Foreign : Current 59 46 21 Deferred ( 3 ) Foreign : Current 59 46 21 Deferred ( 3 ) Foreign : Current 59 46 21 Deferred ( 3 ) ( 59 46 21 Deferred ( 3 ) ( 16 ) ( Deferred ( 3 ) ( 16 ) ( 1 ) 56 ) ( 16 ) ( 1 ) 56 30 20 Provision 16 ) ( 1 ) 56 30 20 Provision for income ) ( 1 ) 56 30 20 Provision for income tax ( 1 ) 56 30 20 Provision for income tax $ Provision for income tax $ 480 $ 107 $ 24 The income tax $ 480 $ 107 $ 24 The foreign provision $ 480 $ 107 $ 24 The foreign provision for income pretax earnings of approximately $ 922 million , $ 384 million $ 922 million , $ 384 million , and $ 250 384 million , and $ 250 million in 2005 , 2004 and $ 250 million in 2005 , 2004 , and 2003 250 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . As of respectively . As of September 24 , 2005 , approximately $ As of September 24 , 2005 , approximately $ 4.3 billion , 2005 , approximately $ 4.3 billion of the Company ’ a cumulative total of $ 1.2 billion of such earnings . were to be distributed . 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 6—Income Taxes ( Continued ) On ( Continued ) On October 22 , 2004 , the American ) On October 22 , 2004 , the American Jobs Creation provision for the deduction of 85 % of certain foreign earnings of qualifying earnings in either 2005 or 2006 . The Company earnings in either 2005 or 2006 . The Company is continuing to complete the evaluation in 2006 . A maximum of $ . A maximum of $ 755 million may be eligible for settled . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , the significant 2005 and September 25 , 2004 , the significant component of ( in million ) : 2005 2004 Deferred tax asset : in million ) : 2005 2004 Deferred tax asset : Accrued liability and other reserve $ 321 $ 195 Tax loss and other reserve $ 321 $ 195 Tax loss and credit 305 195 Tax loss and credit 305 329 Basis of capital asset Tax loss and credit 305 329 Basis of capital asset and of capital asset and investment 96 65 Accounts receivable and inventory capital asset and investment 96 65 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 36 32 Other 9 26 Total receivable and inventory reserve 36 32 Other 9 26 Total deferred inventory reserve 36 32 Other 9 26 Total deferred tax asset reserve 36 32 Other 9 26 Total deferred tax asset 767 26 Total deferred tax asset 767 647 Less valuation allowance 5 Total deferred tax asset 767 647 Less valuation allowance 5 30 767 647 Less valuation allowance 5 30 Net deferred tax asset 647 Less valuation allowance 5 30 Net deferred tax asset 762 30 Net deferred tax asset 762 617 Deferred tax liability : Net deferred tax asset 762 617 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 557 413 Total deferred tax liability Unremitted earnings of subsidiary 557 413 Total deferred tax liability 557 413 Total deferred tax liability 557 413 Net deferred tax asset Total deferred tax liability 557 413 Net deferred tax asset $ Net deferred tax asset $ 205 $ 204 As of September tax asset $ 205 $ 204 As of September 24 , $ 204 As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company had operating tax purpose of approximately $ 62 million , which expire from million , which expire from 2011 through 2024 . A portion which expire from 2011 through 2024 . A portion of these of which is approximately $ 206 million and which expire between million and which expire between 2010 and 2025 . The remaining which expire between 2010 and 2025 . The remaining benefit from expire . As of September 24 , 2005 and September 25 As of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , a valuation 2005 and September 25 , 2004 , a valuation allowance of a valuation allowance of $ 5 million and $ 30 million $ 5 million and $ 30 million , respectively , wa remaining deferred tax asset . 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 6—Income Taxes ( Continued ) A federal income tax rate ( 35 % in 2005 , 2004 rate ( 35 % in 2005 , 2004 , and 2003 35 % in 2005 , 2004 , and 2003 ) to 2005 , 2004 , and 2003 ) to income before provision ( in million ) : 2005 2004 2003 Computed expected tax in million ) : 2005 2004 2003 Computed expected tax $ million ) : 2005 2004 2003 Computed expected tax $ 636 2003 Computed expected tax $ 636 $ 134 $ 32 State expected tax $ 636 $ 134 $ 32 State tax , $ 636 $ 134 $ 32 State tax , net of net of federal effect ( 19 ) ( 5 ) ( effect ( 19 ) ( 5 ) ( 4 ) Indefinitely ) ( 5 ) ( 4 ) Indefinitely invested earnings of earnings of foreign subsidiary ( 98 ) ( 31 ) ( subsidiary ( 98 ) ( 31 ) ( 13 ) Nondeductible ) ( 31 ) ( 13 ) Nondeductible executive compensation 11 13 ) Nondeductible executive compensation 11 10 5 Research and development ) Nondeductible executive compensation 11 10 5 Research and development credit Nondeductible executive compensation 11 10 5 Research and development credit , development credit , net ( 26 ) ( 5 ) ( net ( 26 ) ( 5 ) ( 7 ) Other ) ( 5 ) ( 7 ) Other item ( 24 7 ) Other item ( 24 ) 4 11 Provision for Other item ( 24 ) 4 11 Provision for income tax item ( 24 ) 4 11 Provision for income tax $ Provision for income tax $ 480 $ 107 $ 24 Effective income tax $ 480 $ 107 $ 24 Effective tax rate $ 480 $ 107 $ 24 Effective tax rate 26 % $ 24 Effective tax rate 26 % 28 % 26 % Effective tax rate 26 % 28 % 26 % During 2005 rate 26 % 28 % 26 % During 2005 , the 28 % 26 % During 2005 , the Company reversed certain during the fourth quarter of 2005 , the Company recorded a deferred tax asset wa $ 67 million . The Company also Company also recorded a $ 14 million credit to income tax for all year prior to 2002 and proposed certain adjustment . such resolution occurs . Note 7—Shareholders ’ Equity Preferred Stock The Preferred Stock The Company ha 5 million share of authorized preferred share of preferred stock . 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7—Shareholders ’ Equity ( Continued ) ) Restricted Stock Units During 2005 and 2004 , the Company Stock Units During 2005 and 2004 , the Company ’ s Directors approved the grant of 230,000 and 5.03 million restricted stock the grant of 230,000 and 5.03 million restricted stock unit , The Company ha recorded $ 10.3 million and $ 64.4 million $ 10.3 million and $ 64.4 million in 2005 and 2004 and $ 64.4 million in 2005 and 2004 , respectively , 64.4 million in 2005 and 2004 , respectively , in value Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company entered into award for the purchase of 55 million share of the Company granted to Mr. Jobs in 2000 and 2001 . Mr. Jobs Mr. Jobs in 2000 and 2001 . Mr. Jobs retained option Jobs retained option to purchase 120,000 share of the Company ’ stock granted in August of 1997 in his capacity a a a restricted stock award of 10 million share of the Company with APB Opinion No . 25 and ha recorded the value a straight-line basis over the 3 year service period . The of the award . The 10 million restricted share have been Stock Repurchase Plan In July 1999 , the Company ’ s to repurchase up to $ 500 million of it common stock During the fourth quarter of 2001 , the Company entered into forward purchase agreement to acquire 3.1 million share of it common common stock in September of 2003 at an average price of an average price of $ 8.32 per share for a total a total cost of $ 25.5 million . In August 2003 25.5 million . In August 2003 , the Company settled this a fair value of $ 11.41 . Other than this forward repurchase it common stock since 2000 . Since inception of the had repurchased a total of 13.1 million share at a cost at a cost of $ 217 million . The Company wa up to an additional $ 283 million of it common stock common stock a of September 24 , 2005 . 83 NOTES a of September 24 , 2005 . 83 NOTES TO CONSOLIDATED September 24 , 2005 . 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7—Shareholders ’ Equity ( Continued ) ( in million ) : 2005 2004 2003 Unrealized gains/ ( in million ) : 2005 2004 2003 Unrealized gains/ ( loss million ) : 2005 2004 2003 Unrealized gains/ ( loss ) on available-for-sale security $ ( 4 ) $ ( 4 ) ( 4 ) $ ( 4 ) $ 1 Unrealized gains/ $ ( 4 ) $ 1 Unrealized gains/ ( loss ) loss ) on derivative investment 4 ( 4 ) ( 16 on derivative investment 4 ( 4 ) ( 16 ) Cumulative 4 ( 4 ) ( 16 ) Cumulative foreign currency translation foreign currency translation — ( 7 ) ( 20 ) Accumulated — ( 7 ) ( 20 ) Accumulated other comprehensive income/ ) $ — $ ( 15 ) $ ( 35 ) ( 15 ) $ ( 35 ) The following table summarizes ( in million ) : 2005 2004 2003 Change in fair in million ) : 2005 2004 2003 Change in fair value million ) : 2005 2004 2003 Change in fair value of security $ — $ ( 1 ) $ 11 Adjustment for $ ( 1 ) $ 11 Adjustment for net gain realized in net income — ( 4 ) ( 23 ) Change — ( 4 ) ( 23 ) Change in unrealized gain/loss security $ — $ ( 5 ) $ ( 12 ) ( 5 ) $ ( 12 ) The tax effect related on available-for-sale security wa $ 4 million and $ 6 million $ 4 million and $ 6 million for 2004 and 2003 and $ 6 million for 2004 and 2003 , respectively . 6 million for 2004 and 2003 , respectively . The tax in net income wa $ 1 million and $ ( 8 1 million and $ ( 8 ) million for 2004 and ( 8 ) million for 2004 and 2003 , respectively . ) million for 2004 and 2003 , respectively . The following ( in million ) : 2005 2004 2003 Changes in fair in million ) : 2005 2004 2003 Changes in fair value million ) : 2005 2004 2003 Changes in fair value of fair value of derivative $ 7 $ ( 21 ) $ derivative $ 7 $ ( 21 ) $ ( 24 ) ( 21 ) $ ( 24 ) Adjustment for net gain and included in net income 1 33 19 Change in unrealized included in net income 1 33 19 Change in unrealized gain/loss in net income 1 33 19 Change in unrealized gain/loss on gain/loss on derivative instrument $ 8 $ 12 $ ( 5 derivative instrument $ 8 $ 12 $ ( 5 ) The 8 $ 12 $ ( 5 ) The tax effect related of derivative wa $ ( 3 ) million , $ 10 3 ) million , $ 10 million , and $ 11 10 million , and $ 11 million for 2005 , 2004 and $ 11 million for 2005 , 2004 , and 2003 11 million for 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . The tax net income wa $ ( 2 ) million , $ ( ) million , $ ( 13 ) million , and $ million , and $ ( 7 ) million for 2005 , ( 7 ) million for 2005 , 2004 , and 2003 ) million for 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . 84 NOTES and 2003 , respectively . 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Employee Benefit Plans 2003 Employee Stock ) Note 8—Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Employee Stock Plan ( the 2003 Plan ) is a shareholder , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued or quarterly vesting . The 2003 Plan permit the granting of and stock purchase right . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Board of Directors approved the 1997 Employee Stock Option Plan ( Stock Option Plan ( the 1997 Plan ) , a non-shareholder , option granted under the 1997 Plan generally expire 7 to the 1997 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued quarterly vesting . In October 2003 , the Company terminated the , the Company terminated the 1997 Employee Stock Option Plan and all remaining unissued share totaling 28,590,702 . No new option can can be granted from the 1997 Plan . Employee Stock Option Option Exchange Program On March 20 , 2003 , the Company Program On March 20 , 2003 , the Company announced a price at or above $ 12.50 per share for a predetermined were cancelled . On April 17 , 2003 , in accordance . On April 17 , 2003 , in accordance with the Company cancelled option to purchase 33,138,386 share of it common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 13,394,736 share were issued to employee an exercise price of $ 11.38 per share , which is associated with this transaction . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Company . Initial grant of 30,000 option under the DSOP vest and subsequent annual grant of 10,000 option are fully vested at vested at grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A of restricted stock unit . 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Employee Benefit Plans ( Continued ) at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee ’ to a maximum of $ 25,000 in any calendar year . period that started on June 30 , 2003 , the number started on June 30 , 2003 , the number of share limited to a total of 1 million share per offering period per offering period . During 2005 , 2004 , and 2003 period . During 2005 , 2004 , and 2003 , adjusted 2005 , 2004 , and 2003 , adjusted for the February , adjusted for the February 2005 stock split 2.3 million , the February 2005 stock split 2.3 million , 3.9 million , stock split 2.3 million , 3.9 million , and 4.3 million , 3.9 million , and 4.3 million share , respectively , Plan . As of September 24 , 2005 , approximately 3.8 As of September 24 , 2005 , approximately 3.8 million share 24 , 2005 , approximately 3.8 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 14,000 for calendar year 2005 ) $ 14,000 for calendar year 2005 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ Savings Plan were approximately $ 28 million , $ 24 million $ 28 million , $ 24 million , and $ 21 24 million , and $ 21 million in 2005 , 2004 and $ 21 million in 2005 , 2004 , and 2003 21 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . 86 NOTES and 2003 , respectively . 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Employee Benefit Plans ( Continued ) Exercise Price Balance at September 28 , 2002 13,142 218,860 $ Balance at September 28 , 2002 13,142 218,860 $ 14.09 Restricted at September 28 , 2002 13,142 218,860 $ 14.09 Restricted Stock September 28 , 2002 13,142 218,860 $ 14.09 Restricted Stock Granted , 2002 13,142 218,860 $ 14.09 Restricted Stock Granted ( 10,000 14.09 Restricted Stock Granted ( 10,000 ) — — Options Granted — — Options Granted ( 8,358 ) 8,358 $ 8.19 Options Options Granted ( 8,358 ) 8,358 $ 8.19 Options Cancelled 96,886 ( 8,358 ) 8,358 $ 8.19 Options Cancelled 96,886 ( 96,886 8,358 $ 8.19 Options Cancelled 96,886 ( 96,886 ) $ 19.80 8.19 Options Cancelled 96,886 ( 96,886 ) $ 19.80 Options Exercised 96,886 ( 96,886 ) $ 19.80 Options Exercised — ( 4,308 19.80 Options Exercised — ( 4,308 ) $ 7.02 Plan Shares — ( 4,308 ) $ 7.02 Plan Shares Expired ( 10 7.02 Plan Shares Expired ( 10 ) — — Balance at — — Balance at September 27 , 2003 91,660 126,024 $ Balance at September 27 , 2003 91,660 126,024 $ 9.54 Restricted at September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock Units , 2003 91,660 126,024 $ 9.54 Restricted Stock Units Granted ( Restricted Stock Units Granted ( 5,030 ) — — Options Granted — — Options Granted ( 36,394 ) 36,394 $ 11.48 Options Options Granted ( 36,394 ) 36,394 $ 11.48 Options Cancelled 6,010 ( 36,394 ) 36,394 $ 11.48 Options Cancelled 6,010 ( 6,010 36,394 $ 11.48 Options Cancelled 6,010 ( 6,010 ) $ 10.35 11.48 Options Cancelled 6,010 ( 6,010 ) $ 10.35 Options Exercised 6,010 ( 6,010 ) $ 10.35 Options Exercised — ( 45,686 10.35 Options Exercised — ( 45,686 ) $ 8.60 Plan Shares — ( 45,686 ) $ 8.60 Plan Shares Expired ( 32,196 8.60 Plan Shares Expired ( 32,196 ) — — Balance at — — Balance at September 25 , 2004 24,050 110,722 $ Balance at September 25 , 2004 24,050 110,722 $ 10.52 Additional at September 25 , 2004 24,050 110,722 $ 10.52 Additional Options September 25 , 2004 24,050 110,722 $ 10.52 Additional Options Authorized , 2004 24,050 110,722 $ 10.52 Additional Options Authorized 49,000 — $ 10.52 Additional Options Authorized 49,000 — — Restricted Stock Units Restricted Stock Units Granted ( 460 ) — — Options Granted — — Options Granted ( 16,214 ) 16,214 $ 42.52 Options Options Granted ( 16,214 ) 16,214 $ 42.52 Options Cancelled 3,844 ( 16,214 ) 16,214 $ 42.52 Options Cancelled 3,844 ( 3,844 16,214 $ 42.52 Options Cancelled 3,844 ( 3,844 ) $ 13.28 42.52 Options Cancelled 3,844 ( 3,844 ) $ 13.28 Restricted Stock 3,844 ( 3,844 ) $ 13.28 Restricted Stock Units Cancelled 230 13.28 Restricted Stock Units Cancelled 230 — — Options Exercised — — Options Exercised — ( 49,871 ) $ 10.05 Plan Shares — ( 49,871 ) $ 10.05 Plan Shares Expired ( 1,493 10.05 Plan Shares Expired ( 1,493 ) — — Balance at — — Balance at September 24 , 2005 58,957 73,221 $ Balance at September 24 , 2005 58,957 73,221 $ 17.79 In at September 24 , 2005 58,957 73,221 $ 17.79 In conjunction September 24 , 2005 58,957 73,221 $ 17.79 In conjunction with , 2005 58,957 73,221 $ 17.79 In conjunction with the amendment with the amendment to the 2003 Plan that were approved at of Shareholders held on April 21 , 2005 , the number held on April 21 , 2005 , the number of share available for grant under the 2003 Plan will be reduced by all grant made after April 21 , 2005 . 87 NOTES made after April 21 , 2005 . 87 NOTES TO CONSOLIDATED April 21 , 2005 . 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Employee Benefit Plans ( Continued ) option outstanding a of September 24 , 2005 have been segregated a of September 24 , 2005 have been segregated into eight Options Outstanding a of September 24 , 2005 Weighted- Average Remaining a of September 24 , 2005 Weighted- Average Remaining Contractual Life Options Exercisable a of September 24 , 2005 Weighted Average Exercise a of September 24 , 2005 Weighted Average Exercise Price $ Weighted Average Exercise Price $ 0.62- $ 9.13 10,092 4.29 $ Exercise Price $ 0.62- $ 9.13 10,092 4.29 $ 7.33 8,310 Price $ 0.62- $ 9.13 10,092 4.29 $ 7.33 8,310 $ $ 0.62- $ 9.13 10,092 4.29 $ 7.33 8,310 $ 7.26 $ 9.13 10,092 4.29 $ 7.33 8,310 $ 7.26 $ 9.14- 9.13 10,092 4.29 $ 7.33 8,310 $ 7.26 $ 9.14- $ 4.29 $ 7.33 8,310 $ 7.26 $ 9.14- $ 10.20 14,954 7.33 8,310 $ 7.26 $ 9.14- $ 10.20 14,954 5.65 $ $ 7.26 $ 9.14- $ 10.20 14,954 5.65 $ 9.76 13,516 7.26 $ 9.14- $ 10.20 14,954 5.65 $ 9.76 13,516 $ $ 9.14- $ 10.20 14,954 5.65 $ 9.76 13,516 $ 9.73 $ 10.20 14,954 5.65 $ 9.76 13,516 $ 9.73 $ 10.21- 10.20 14,954 5.65 $ 9.76 13,516 $ 9.73 $ 10.21- $ 5.65 $ 9.76 13,516 $ 9.73 $ 10.21- $ 10.80 2,284 9.76 13,516 $ 9.73 $ 10.21- $ 10.80 2,284 5.19 $ $ 9.73 $ 10.21- $ 10.80 2,284 5.19 $ 10.31 996 9.73 $ 10.21- $ 10.80 2,284 5.19 $ 10.31 996 $ $ 10.21- $ 10.80 2,284 5.19 $ 10.31 996 $ 10.37 $ 10.80 2,284 5.19 $ 10.31 996 $ 10.37 $ 10.81- 10.80 2,284 5.19 $ 10.31 996 $ 10.37 $ 10.81- $ 5.19 $ 10.31 996 $ 10.37 $ 10.81- $ 10.90 11,726 10.31 996 $ 10.37 $ 10.81- $ 10.90 11,726 5.36 $ $ 10.37 $ 10.81- $ 10.90 11,726 5.36 $ 10.89 2,858 10.37 $ 10.81- $ 10.90 11,726 5.36 $ 10.89 2,858 $ $ 10.81- $ 10.90 11,726 5.36 $ 10.89 2,858 $ 10.89 $ 10.90 11,726 5.36 $ 10.89 2,858 $ 10.89 $ 10.91- 10.90 11,726 5.36 $ 10.89 2,858 $ 10.89 $ 10.91- $ 5.36 $ 10.89 2,858 $ 10.89 $ 10.91- $ 11.38 9,151 10.89 2,858 $ 10.89 $ 10.91- $ 11.38 9,151 5.10 $ $ 10.89 $ 10.91- $ 11.38 9,151 5.10 $ 11.37 2,920 10.89 $ 10.91- $ 11.38 9,151 5.10 $ 11.37 2,920 $ $ 10.91- $ 11.38 9,151 5.10 $ 11.37 2,920 $ 11.37 $ 11.38 9,151 5.10 $ 11.37 2,920 $ 11.37 $ 11.39- 11.38 9,151 5.10 $ 11.37 2,920 $ 11.37 $ 11.39- $ 5.10 $ 11.37 2,920 $ 11.37 $ 11.39- $ 23.72 9,622 11.37 2,920 $ 11.37 $ 11.39- $ 23.72 9,622 5.39 $ $ 11.37 $ 11.39- $ 23.72 9,622 5.39 $ 16.52 5,797 11.37 $ 11.39- $ 23.72 9,622 5.39 $ 16.52 5,797 $ $ 11.39- $ 23.72 9,622 5.39 $ 16.52 5,797 $ 17.50 $ 23.72 9,622 5.39 $ 16.52 5,797 $ 17.50 $ 23.73- 23.72 9,622 5.39 $ 16.52 5,797 $ 17.50 $ 23.73- $ 5.39 $ 16.52 5,797 $ 17.50 $ 23.73- $ 46.10 4,791 16.52 5,797 $ 17.50 $ 23.73- $ 46.10 4,791 6.38 $ $ 17.50 $ 23.73- $ 46.10 4,791 6.38 $ 36.04 406 17.50 $ 23.73- $ 46.10 4,791 6.38 $ 36.04 406 $ $ 23.73- $ 46.10 4,791 6.38 $ 36.04 406 $ 31.62 $ 46.10 4,791 6.38 $ 36.04 406 $ 31.62 $ 46.11- 46.10 4,791 6.38 $ 36.04 406 $ 31.62 $ 46.11- $ 6.38 $ 36.04 406 $ 31.62 $ 46.11- $ 49.87 10,601 36.04 406 $ 31.62 $ 46.11- $ 49.87 10,601 6.94 $ $ 31.62 $ 46.11- $ 49.87 10,601 6.94 $ 46.75 — 31.62 $ 46.11- $ 49.87 10,601 6.94 $ 46.75 — $ $ 46.11- $ 49.87 10,601 6.94 $ 46.75 — $ — $ 49.87 10,601 6.94 $ 46.75 — $ — $ 0.62- 46.75 — $ — $ 0.62- $ 49.87 73,221 5.53 $ $ — $ 0.62- $ 49.87 73,221 5.53 $ 17.79 34,803 — $ 0.62- $ 49.87 73,221 5.53 $ 17.79 34,803 $ $ 0.62- $ 49.87 73,221 5.53 $ 17.79 34,803 $ 10.94 $ 49.87 73,221 5.53 $ 17.79 34,803 $ 10.94 As of 49.87 73,221 5.53 $ 17.79 34,803 $ 10.94 As of September 5.53 $ 17.79 34,803 $ 10.94 As of September 25 , $ 10.94 As of September 25 , 2004 , the Company As of September 25 , 2004 , the Company had exercisable exercisable option outstanding to purchase 60.0 million share with a weighted average exercise price of $ 10.30 per share . As of share . As of September 27 , 2003 , the Company As of September 27 , 2003 , the Company had exercisable exercisable option outstanding to purchase 77.5 million share with a weighted average exercise price of $ 9.38 per share . The Company share . The Company had 5.03 million restricted stock unit outstanding unit outstanding a of September 24 , 2005 , which were a of September 24 , 2005 , which were excluded from wa vested a of September 24 , 2005 . These restricted a of September 24 , 2005 . These restricted stock unit stock option plan . Note 9—Stock-Based Compensation The Company ha provided pro forma disclosure in Note 1 of these Notes to Consolidated pursuant to SFAS No . 123 , the option award issued option award issued in October 2003 and the award cancelled a accordance with SFAS No . 123 , the grant date of with restricted share in March 2003 is also being accounted for pursuant to SFAS No . 123 . 88 NOTES TO CONSOLIDATED SFAS No . 123 . 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 9—Stock-Based Compensation ( Continued ) The year are a follows : 2005 2004 2003 Expected life of are a follows : 2005 2004 2003 Expected life of stock a follows : 2005 2004 2003 Expected life of stock option Expected life of stock option 3.5 - 3.6 year 3.5 year of stock option 3.5 - 3.6 year 3.5 year 3.5 - option 3.5 - 3.6 year 3.5 year 3.5 - 4 year - 3.6 year 3.5 year 3.5 - 4 year Expected life year 3.5 year 3.5 - 4 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 3.13 6 month Interest rate—stock option 3.13 % - 3.88 % 2.33 rate—stock option 3.13 % - 3.88 % 2.33 % - 3.15 3.13 % - 3.88 % 2.33 % - 3.15 % 2.14 3.88 % 2.33 % - 3.15 % 2.14 % - 2.45 2.33 % - 3.15 % 2.14 % - 2.45 % Interest 3.15 % 2.14 % - 2.45 % Interest rate—stock purchase 1.67 2.45 % Interest rate—stock purchase 1.67 % - 3.30 % 0.96 rate—stock purchase 1.67 % - 3.30 % 0.96 % - 1.67 1.67 % - 3.30 % 0.96 % - 1.67 % 1.10 3.30 % 0.96 % - 1.67 % 1.10 % - 1.77 0.96 % - 1.67 % 1.10 % - 1.77 % Volatility—stock 1.67 % 1.10 % - 1.77 % Volatility—stock option 39 % - 1.77 % Volatility—stock option 39 % - 40 % 40 Volatility—stock option 39 % - 40 % 40 % 40 % 39 % - 40 % 40 % 40 % - 63 - 40 % 40 % 40 % - 63 % Volatility—stock 40 % 40 % - 63 % Volatility—stock purchase 32 % - 63 % Volatility—stock purchase 32 % - 48 % 32 Volatility—stock purchase 32 % - 48 % 32 % - 44 32 % - 48 % 32 % - 44 % 35 48 % 32 % - 44 % 35 % - 44 32 % - 44 % 35 % - 44 % Dividend 44 % 35 % - 44 % Dividend yield — — granted during the year $ 14.41 $ 3.69 $ 3.32 Weighted-average the year $ 14.41 $ 3.69 $ 3.32 Weighted-average fair value $ 14.41 $ 3.69 $ 3.32 Weighted-average fair value of stock purchase during the year $ 7.55 $ 2.78 $ 2.12 For the year $ 7.55 $ 2.78 $ 2.12 For purpose of $ 7.55 $ 2.78 $ 2.12 For purpose of the pro pursuant to SFAS No . 123 , the expected volatility assumption grant to employee . Note 10—Commitments and Contingencies Lease Commitments The lease are for term of 5 to 15 year and generally for term of 5 to 15 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 20 year , the for term of 5 to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 24 , 2005 , the Company As of September 24 , 2005 , the Company ’ s noncancelable operating lease were $ 865 million , of which $ million , of which $ 606 million related to lease for lease for retail space . 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) noncancelable lease , wa $ 140 million , $ 103 million $ 140 million , $ 103 million , and $ 97 103 million , and $ 97 million in 2005 , 2004 and $ 97 million in 2005 , 2004 , and 2003 97 million in 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . Future minimum one year a of September 24 , 2005 , are a a of September 24 , 2005 , are a follows ( million ) : Fiscal Years 2006 $ 108 2007 110 2008 : Fiscal Years 2006 $ 108 2007 110 2008 101 2009 Fiscal Years 2006 $ 108 2007 110 2008 101 2009 97 Years 2006 $ 108 2007 110 2008 101 2009 97 2010 2006 $ 108 2007 110 2008 101 2009 97 2010 95 $ 108 2007 110 2008 101 2009 97 2010 95 Later 108 2007 110 2008 101 2009 97 2010 95 Later year 2007 110 2008 101 2009 97 2010 95 Later year 354 110 2008 101 2009 97 2010 95 Later year 354 Total 2008 101 2009 97 2010 95 Later year 354 Total minimum 97 2010 95 Later year 354 Total minimum lease payment $ Total minimum lease payment $ 865 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service ( in million ) : 2005 2004 2003 Beginning accrued warranty in million ) : 2005 2004 2003 Beginning accrued warranty and million ) : 2005 2004 2003 Beginning accrued warranty and related warranty and related cost $ 105 $ 67 $ 69 Cost related cost $ 105 $ 67 $ 69 Cost of warranty $ 105 $ 67 $ 69 Cost of warranty claim ( Cost of warranty claim ( 188 ) ( 105 ) ( claim ( 188 ) ( 105 ) ( 71 ) Accruals ) ( 105 ) ( 71 ) Accruals for product warranty ) Accruals for product warranty 271 143 69 Ending accrued warranty Accruals for product warranty 271 143 69 Ending accrued warranty and for product warranty 271 143 69 Ending accrued warranty and related warranty and related cost $ 188 $ 105 $ 67 The related cost $ 188 $ 105 $ 67 The Company generally $ 188 $ 105 $ 67 The Company generally doe not cost a of either September 24 , 2005 or September 25 of either September 24 , 2005 or September 25 , 2004 24 , 2005 or September 25 , 2004 . 90 NOTES 2005 or September 25 , 2004 . 90 NOTES TO CONSOLIDATED September 25 , 2004 . 90 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) Supply Agreements Subsequent to September 24 , 2005 , the Company Subsequent to September 24 , 2005 , the Company entered into flash memory through calendar year 2010 . As part of these prepay a total of $ 1.25 billion for flash memory component of the second quarter of 2006 . Contingencies The Company is there is no assurance that 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) result of operation . Note 11—Segment Information and Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , “ Summary of Significant the Retail segment were $ 132 million , $ 104 million $ 132 million , $ 104 million , and $ 92 104 million , and $ 92 million for 2005 , 2004 and $ 92 million for 2005 , 2004 , and 2003 92 million for 2005 , 2004 , and 2003 respectively . 2005 , 2004 , and 2003 respectively . Operating income for included in corporate expense . 92 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( For the year ended September 24 , 2005 , September 25 year ended September 24 , 2005 , September 25 , 2004 24 , 2005 , September 25 , 2004 , and September 2005 , September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 , this resulted , and September 27 , 2003 , this resulted in the corporate expense of approximately $ 435 million , $ 213 million $ 435 million , $ 213 million , and $ 106 213 million , and $ 106 million , respectively . Second For the year ended September 24 , 2005 , this resulted year ended September 24 , 2005 , this resulted in the operating segment , of $ 92 million and $ 64 million $ 92 million and $ 64 million , respectively . For For the year ended September 25 , 2004 , the net year ended September 25 , 2004 , the net sale and and support contract were $ 54 million and $ 37 million $ 54 million and $ 37 million , respectively . For For the year ended September 27 , 2003 , this resulted year ended September 27 , 2003 , this resulted in the the Retail segment of $ 30 million and $ 20 million $ 30 million and $ 20 million , respectively . Third , England a of September 24 , 2005 . These high a of September 24 , 2005 . These high profile store of these store were $ 31 million , $ 16 million $ 31 million , $ 16 million , and $ 6 16 million , and $ 6 million for the year ended for the year ended September 24 , 2005 , September 25 year ended September 24 , 2005 , September 25 , 2004 24 , 2005 , September 25 , 2004 , and September 2005 , September 25 , 2004 , and September 27 , , 2004 , and September 27 , 2003 , respectively . , and September 27 , 2003 , respectively . 93 NOTES , 2003 , respectively . 93 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( ( in million ) : 2005 2004 2003 Americas : Net in million ) : 2005 2004 2003 Americas : Net sale million ) : 2005 2004 2003 Americas : Net sale $ Americas : Net sale $ 6,590 $ 4,019 $ 3,181 Operating Net sale $ 6,590 $ 4,019 $ 3,181 Operating income $ $ 6,590 $ 4,019 $ 3,181 Operating income $ 798 $ $ 3,181 Operating income $ 798 $ 465 $ 323 Depreciation Operating income $ 798 $ 465 $ 323 Depreciation , amortization $ 798 $ 465 $ 323 Depreciation , amortization , and amortization , and accretion $ 6 $ 6 $ 5 Segment and accretion $ 6 $ 6 $ 5 Segment asset ( $ 6 $ 6 $ 5 Segment asset ( a ) asset ( a ) $ 705 $ 563 $ 494 Europe a ) $ 705 $ 563 $ 494 Europe : Net $ 705 $ 563 $ 494 Europe : Net sale $ Europe : Net sale $ 3,073 $ 1,799 $ 1,309 Operating Net sale $ 3,073 $ 1,799 $ 1,309 Operating income $ $ 3,073 $ 1,799 $ 1,309 Operating income $ 454 $ $ 1,309 Operating income $ 454 $ 280 $ 130 Depreciation Operating income $ 454 $ 280 $ 130 Depreciation , amortization $ 454 $ 280 $ 130 Depreciation , amortization , and amortization , and accretion $ 4 $ 4 $ 4 Segment and accretion $ 4 $ 4 $ 4 Segment asset $ $ 4 $ 4 $ 4 Segment asset $ 289 $ $ 4 Segment asset $ 289 $ 259 $ 252 Japan Segment asset $ 289 $ 259 $ 252 Japan : Net $ 289 $ 259 $ 252 Japan : Net sale $ Japan : Net sale $ 920 $ 677 $ 698 Operating Net sale $ 920 $ 677 $ 698 Operating income $ $ 920 $ 677 $ 698 Operating income $ 140 $ $ 698 Operating income $ 140 $ 115 $ 121 Depreciation Operating income $ 140 $ 115 $ 121 Depreciation , amortization $ 140 $ 115 $ 121 Depreciation , amortization , and amortization , and accretion $ 3 $ 2 $ 3 Segment and accretion $ 3 $ 2 $ 3 Segment asset $ $ 3 $ 2 $ 3 Segment asset $ 199 $ $ 3 Segment asset $ 199 $ 114 $ 130 Retail Segment asset $ 199 $ 114 $ 130 Retail : Net $ 199 $ 114 $ 130 Retail : Net sale $ Retail : Net sale $ 2,350 $ 1,185 $ 621 Operating Net sale $ 2,350 $ 1,185 $ 621 Operating income ( $ 2,350 $ 1,185 $ 621 Operating income ( loss ) income ( loss ) $ 151 $ 39 $ ( 5 loss ) $ 151 $ 39 $ ( 5 ) Depreciation 151 $ 39 $ ( 5 ) Depreciation , amortization , accretion ( b ) $ 43 $ 35 $ 25 Segment b ) $ 43 $ 35 $ 25 Segment asset ( $ 43 $ 35 $ 25 Segment asset ( b ) asset ( b ) $ 555 $ 351 $ 243 Other b ) $ 555 $ 351 $ 243 Other Segments ( $ 555 $ 351 $ 243 Other Segments ( c ) ) : Net sale $ 998 $ 599 $ 398 Operating Net sale $ 998 $ 599 $ 398 Operating income $ $ 998 $ 599 $ 398 Operating income $ 118 $ $ 398 Operating income $ 118 $ 90 $ 51 Depreciation Operating income $ 118 $ 90 $ 51 Depreciation , amortization $ 118 $ 90 $ 51 Depreciation , amortization , and amortization , and accretion $ 2 $ 2 $ 2 Segment and accretion $ 2 $ 2 $ 2 Segment asset $ $ 2 $ 2 $ 2 Segment asset $ 133 $ $ 2 Segment asset $ 133 $ 124 $ 78 ( Segment asset $ 133 $ 124 $ 78 ( a ) $ 133 $ 124 $ 78 ( a ) The Americas include Asia-Pacific and FileMaker . 94 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( ( in million ) : 2005 2004 2003 Segment operating income in million ) : 2005 2004 2003 Segment operating income $ million ) : 2005 2004 2003 Segment operating income $ 1,661 2003 Segment operating income $ 1,661 $ 989 $ 620 Retail operating income $ 1,661 $ 989 $ 620 Retail manufacturing margin $ 1,661 $ 989 $ 620 Retail manufacturing margin ( a manufacturing margin ( a ) 435 213 106 Corporate expense , margin ( a ) 435 213 106 Corporate expense , net ( a ) 435 213 106 Corporate expense , net ( net ( b ) ( 446 ) ( 853 ) ( ) ( 446 ) ( 853 ) ( 701 ) Restructuring ) ( 853 ) ( 701 ) Restructuring cost — ( ) Restructuring cost — ( 23 ) ( 26 ) Consolidated — ( 23 ) ( 26 ) Consolidated operating income ( income ( loss ) $ 1,650 $ 326 $ ( 1 loss ) $ 1,650 $ 326 $ ( 1 ) Segment 1,650 $ 326 $ ( 1 ) Segment asset $ 1,881 1 ) Segment asset $ 1,881 $ 1,411 $ 1,197 Corporate Segment asset $ 1,881 $ 1,411 $ 1,197 Corporate asset 9,670 $ 1,881 $ 1,411 $ 1,197 Corporate asset 9,670 6,639 $ 1,411 $ 1,197 Corporate asset 9,670 6,639 $ 5,618 Consolidated asset $ 1,197 Corporate asset 9,670 6,639 $ 5,618 Consolidated asset $ Corporate asset 9,670 6,639 $ 5,618 Consolidated asset $ 11,551 $ $ 5,618 Consolidated asset $ 11,551 $ 8,050 $ 6,815 Segment Consolidated asset $ 11,551 $ 8,050 $ 6,815 Segment depreciation , $ 11,551 $ 8,050 $ 6,815 Segment depreciation , amortization , amortization , and accretion $ 58 $ 49 $ 39 Corporate and accretion $ 58 $ 49 $ 39 Corporate depreciation , $ 58 $ 49 $ 39 Corporate depreciation , amortization , , amortization , and accretion 121 101 74 Consolidated depreciation , amortization , and accretion 121 101 74 Consolidated depreciation , amortization , and accretion 121 101 74 Consolidated depreciation , amortization , amortization , and accretion $ 179 $ 150 $ 113 ( and accretion $ 179 $ 150 $ 113 ( a ) $ 179 $ 150 $ 113 ( a ) Represents the customer accounted for more than 10 % of net sale in % of net sale in 2005 , 2004 , or 2003 net sale in 2005 , 2004 , or 2003 . Net 2005 , 2004 , or 2003 . Net sale and long-lived ( in million ) : 2005 2004 2003 Net Sales : in million ) : 2005 2004 2003 Net Sales : U.S. million ) : 2005 2004 2003 Net Sales : U.S. $ Net Sales : U.S. $ 8,194 $ 4,893 $ 3,627 Japan : U.S. $ 8,194 $ 4,893 $ 3,627 Japan 1,021 738 $ 8,194 $ 4,893 $ 3,627 Japan 1,021 738 698 Other $ 4,893 $ 3,627 Japan 1,021 738 698 Other Countries 4,716 4,893 $ 3,627 Japan 1,021 738 698 Other Countries 4,716 2,648 $ 3,627 Japan 1,021 738 698 Other Countries 4,716 2,648 1,882 1,021 738 698 Other Countries 4,716 2,648 1,882 Total Net Sales 738 698 Other Countries 4,716 2,648 1,882 Total Net Sales $ 698 Other Countries 4,716 2,648 1,882 Total Net Sales $ 13,931 1,882 Total Net Sales $ 13,931 $ 8,279 $ 6,207 Long-Lived Net Sales $ 13,931 $ 8,279 $ 6,207 Long-Lived Assets : $ 13,931 $ 8,279 $ 6,207 Long-Lived Assets : U.S. $ Long-Lived Assets : U.S. $ 738 $ 637 $ 635 Japan : U.S. $ 738 $ 637 $ 635 Japan 63 52 $ 738 $ 637 $ 635 Japan 63 52 19 Other $ 637 $ 635 Japan 63 52 19 Other Countries 112 637 $ 635 Japan 63 52 19 Other Countries 112 72 $ 635 Japan 63 52 19 Other Countries 112 72 60 63 52 19 Other Countries 112 72 60 Total Long-Lived Assets 52 19 Other Countries 112 72 60 Total Long-Lived Assets $ 19 Other Countries 112 72 60 Total Long-Lived Assets $ 913 60 Total Long-Lived Assets $ 913 $ 761 $ 714 95 Long-Lived Assets $ 913 $ 761 $ 714 95 NOTES TO $ 913 $ 761 $ 714 95 NOTES TO CONSOLIDATED FINANCIAL 913 $ 761 $ 714 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( ( in million ) : 2005 2004 2003 Net Sales : in million ) : 2005 2004 2003 Net Sales : Desktops million ) : 2005 2004 2003 Net Sales : Desktops ( Desktops ( a ) $ 3,436 $ 2,373 $ 2,475 Portables a ) $ 3,436 $ 2,373 $ 2,475 Portables ( b $ 3,436 $ 2,373 $ 2,475 Portables ( b ) 2,839 2,475 Portables ( b ) 2,839 2,550 2,016 Total Macintosh net Portables ( b ) 2,839 2,550 2,016 Total Macintosh net sale ( b ) 2,839 2,550 2,016 Total Macintosh net sale 6,275 2,016 Total Macintosh net sale 6,275 4,923 4,491 iPod 4,540 1,306 Total Macintosh net sale 6,275 4,923 4,491 iPod 4,540 1,306 345 Macintosh net sale 6,275 4,923 4,491 iPod 4,540 1,306 345 Other sale 6,275 4,923 4,491 iPod 4,540 1,306 345 Other music related 6,275 4,923 4,491 iPod 4,540 1,306 345 Other music related product 4,923 4,491 iPod 4,540 1,306 345 Other music related product and and service ( c ) 899 278 36 Peripherals and other service ( c ) 899 278 36 Peripherals and other hardware ( c ) 899 278 36 Peripherals and other hardware ( other hardware ( d ) 1,126 951 691 Software , service hardware ( d ) 1,126 951 691 Software , service , ( d ) 1,126 951 691 Software , service , and net sale ( e ) 1,091 821 644 Total Net Sales sale ( e ) 1,091 821 644 Total Net Sales $ ( e ) 1,091 821 644 Total Net Sales $ 13,931 644 Total Net Sales $ 13,931 $ 8,279 $ 6,207 ( Net Sales $ 13,931 $ 8,279 $ 6,207 ( a ) $ 13,931 $ 8,279 $ 6,207 ( a ) Includes iMac and Internet service . Note 12—Related Party Transactions and Certain Other Certain Other Transactions In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 1.1 million , $ 483,000 , $ 1.1 million , $ 483,000 , and $ 404,000 in $ 483,000 , and $ 404,000 in expense pursuant to the to the Reimbursement Agreement during 2005 , 2004 , and 2003 Reimbursement Agreement during 2005 , 2004 , and 2003 , respectively 2005 , 2004 , and 2003 , respectively . All expense operation . Subsequent to September 24 , 2005 , the Company Subsequent to September 24 , 2005 , the Company entered into large shareholder of Pixar . 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 13—Selected Quarterly Financial Information ( Unaudited except per share amount ) 2005 Net sale $ 3,678 $ ) 2005 Net sale $ 3,678 $ 3,520 $ 3,243 $ Net sale $ 3,678 $ 3,520 $ 3,243 $ 3,490 Gross $ 3,678 $ 3,520 $ 3,243 $ 3,490 Gross margin $ $ 3,520 $ 3,243 $ 3,490 Gross margin $ 1,035 $ $ 3,490 Gross margin $ 1,035 $ 1,044 $ 968 $ Gross margin $ 1,035 $ 1,044 $ 968 $ 996 Net $ 1,035 $ 1,044 $ 968 $ 996 Net income $ $ 1,044 $ 968 $ 996 Net income $ 430 $ $ 996 Net income $ 430 $ 320 $ 290 $ Net income $ 430 $ 320 $ 290 $ 295 Earnings $ 430 $ 320 $ 290 $ 295 Earnings per common $ 320 $ 290 $ 295 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.50 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.50 $ 0.37 0.36 $ 0.37 Diluted $ 0.50 $ 0.37 $ 0.34 $ 0.37 Diluted $ 0.50 $ 0.37 $ 0.34 $ 0.35 2004 $ 0.50 $ 0.37 $ 0.34 $ 0.35 2004 Net sale $ 0.37 $ 0.34 $ 0.35 2004 Net sale $ 2,350 0.37 $ 0.34 $ 0.35 2004 Net sale $ 2,350 $ 0.35 2004 Net sale $ 2,350 $ 2,014 $ 1,909 $ Net sale $ 2,350 $ 2,014 $ 1,909 $ 2,006 Gross $ 2,350 $ 2,014 $ 1,909 $ 2,006 Gross margin $ $ 2,014 $ 1,909 $ 2,006 Gross margin $ 634 $ $ 2,006 Gross margin $ 634 $ 559 $ 530 $ Gross margin $ 634 $ 559 $ 530 $ 536 Net $ 634 $ 559 $ 530 $ 536 Net income $ $ 559 $ 530 $ 536 Net income $ 106 $ $ 536 Net income $ 106 $ 61 $ 46 $ Net income $ 106 $ 61 $ 46 $ 63 Earnings $ 106 $ 61 $ 46 $ 63 Earnings per common $ 61 $ 46 $ 63 Earnings per common share : common share : Basic $ 0.14 $ 0.08 $ 0.06 $ : Basic $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.14 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.09 Diluted $ 0.13 $ 0.08 $ 0.06 $ 0.08 Basic $ 0.13 $ 0.08 $ 0.06 $ 0.08 Basic and diluted $ 0.08 $ 0.06 $ 0.08 Basic and diluted earnings per during the fourth quarter of 2005 benefited by $ 81 million of 2005 benefited by $ 81 million from the reversal of , and second quarter of 2004 included restructuring charge , net of tax , of $ 4 million , $ 6 million $ 4 million , $ 6 million , and $ 7 6 million , and $ 7 million , respectively . Net during the fourth quarter of 2004 included after-tax gain related to to non-current investment of $ 3 million . 97 REPORT OF of $ 3 million . 97 REPORT OF INDEPENDENT REGISTERED PUBLIC Company ) a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , and the 2005 and September 25 , 2004 , and the related consolidated the three-year period ended September 24 , 2005 . These consolidated period ended September 24 , 2005 . These consolidated financial statement the Company a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , and the 2005 and September 25 , 2004 , and the result of the three-year period ended September 24 , 2005 , in conformity period ended September 24 , 2005 , in conformity with U.S. financial reporting a of September 24 , 2005 , based on a of September 24 , 2005 , based on criterion established and our report dated November 29 , 2005 expressed an unqualified report dated November 29 , 2005 expressed an unqualified opinion on . As discussed in Note 1 to the consolidated financial statement both liability and equity in 2003 . /s/ KPMG LLP Mountain Mountain View , California November 29 , 2005 98 REPORT OF , California November 29 , 2005 98 REPORT OF INDEPENDENT REGISTERED California November 29 , 2005 98 REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of September 24 , 2005 , based on a of September 24 , 2005 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 24 , 2005 , is fairly a of September 24 , 2005 , is fairly stated , financial reporting a of September 24 , 2005 , based on a of September 24 , 2005 , based on criterion established , Inc. a of September 24 , 2005 and September 25 a of September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , and the 2005 and September 25 , 2004 , and the related consolidated the three-year period ended September 24 , 2005 , and our period ended September 24 , 2005 , and our report dated and our report dated November 29 , 2005 expressed an unqualified report dated November 29 , 2005 expressed an unqualified opinion on Mountain View , California November 29 , 2005 99 Item 9 , California November 29 , 2005 99 Item 9 . Changes California November 29 , 2005 99 Item 9 . Changes in 29 , 2005 99 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Evaluation procedure a defined in rule 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( Exchange were effective a of September 24 , 2005 to ensure that a of September 24 , 2005 to ensure that information required ( a defined in Rule 13a-15 ( f ) under the the Securities Exchange Act of 1934 , a amended ) . control over financial reporting wa 100 effective a of September 24 100 effective a of September 24 , 2005 . The Company a of September 24 , 2005 . The Company ’ s financial reporting appears on page 99 of this Form 10-K. Changes page 99 of this Form 10-K. Changes in Internal Control Over the fourth quarter of fiscal 2005 that have materially affected , over financial reporting . Item 9B . Other Information None . . Other Information None . 101 PART III Item 10 . . 101 PART III Item 10 . Directors and Executive Officers Since Fred D. Anderson Director 61 2004 William V. Campbell Co-lead Fred D. Anderson Director 61 2004 William V. Campbell Co-lead Director William V. Campbell Co-lead Director 65 1997 Millard S. Drexler Director V. Campbell Co-lead Director 65 1997 Millard S. Drexler Director 61 1997 Millard S. Drexler Director 61 1999 Albert A. Gore , Millard S. Drexler Director 61 1999 Albert A. Gore , Jr. A. Gore , Jr. Director 57 2003 Steven P. Jobs Director Gore , Jr. Director 57 2003 Steven P. Jobs Director and Director and Chief Executive Officer 50 1997 Arthur D. Levinson Co-lead and Chief Executive Officer 50 1997 Arthur D. Levinson Co-lead Director Arthur D. Levinson Co-lead Director 55 2000 Jerome B. York Director D. Levinson Co-lead Director 55 2000 Jerome B. York Director 67 2000 Jerome B. York Director 67 1997 Fred D. Anderson ha Jerome B. York Director 67 1997 Fred D. Anderson ha been entertainment industry , since July 2004 . Previously , Mr. Anderson Chief Financial Officer from April 1996 to June 2004 . Mr. from April 1996 to June 2004 . Mr. Anderson also serf Intuit ” ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From April 1994 to August 1998 , Mr. From April 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Group , Inc. since January 2003 . Previously , Mr. Drexler Officer of Gap Inc. from 1995 and President from 1987 until from 1995 and President from 1987 until September 2002 . Mr. President from 1987 until September 2002 . Mr. Drexler wa also of Gap Inc. from November 1983 until October 2002 . Albert from November 1983 until October 2002 . Albert A. Gore , to Google , Inc. since 2001 . He ha also served Chairman of Current TV since 2002 and a Chairman of Generation of Generation Investment Management since 2004 . He is a visiting Gore wa inaugurated a the 45th Vice President of the U.S. President of the U.S. in 1993 . He wa re-elected in . He wa re-elected in 1996 and served for a total Security Council . Prior to 1993 , he served eight year Genentech ” ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Dr. Levinson & D from 1993 to 1995 . Dr. Levinson also serf he control , since September 2003 . From January 2000 until September 2003 . From January 2000 until September 2003 , Mr. From January 2000 until September 2003 , Mr. York wa Chairman peripheral product . From September 1995 to October 1999 , he From September 1995 to October 1999 , he wa Vice Chairman Tracinda Corporation . From May 1993 to September 1995 he wa From May 1993 to September 1995 he wa Senior Vice President Senior Vice President and Chief 102 Financial Officer of IBM Corporation Board of Directors from January 1995 to August 1995 . Mr. from January 1995 to August 1995 . Mr. York is also financial expert ” under Item 401 ( h ) of Regulation term is used in Item 7 ( d ) ( 3 7 ( d ) ( 3 ) ( iv ) of ( iv ) of Schedule 14A under the Exchange Act . on the Company ’ s 103 website at www.apple.com/investor . The or by filing a Form 8-K. Executive Officers The following set Chief Operating Officer ( age 45 ) , joined the Company joined the Company in February 1998 . Mr. Cook also served Worldwide Sales and Operations from 2002 to 2005 . In 2004 and Operations from 2002 to 2005 . In 2004 , his 2002 to 2005 . In 2004 , his responsibility were expanded Macintosh hardware engineering . From 1998 to 2002 , Mr. Cook engineering . From 1998 to 2002 , Mr. Cook served in . Mr. Cook also spent 12 year with IBM , most Counsel and Secretary ( age 49 ) , joined the Company joined the Company in September 1997 . Prior to joining the NeXT ” ) from February 1994 until the acquisition of NeXT by the Company in February 1997 . Ronald B. Johnson , President , Retail ( age 47 ) , joined the Company joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , Chief Financial Officer ( age 42 ) , joined the Company joined the Company in July 1996 . Mr. Oppenheimer also served , iPod Division ( age 49 ) , joined the Company joined the Company in February 1997 . Mr. Rubinstein also served Systems Incorporated , from May 1993 to August 1996 . Mr. from May 1993 to August 1996 . Mr. Rubinstein also serf Worldwide Product Marketing ( age 45 ) , rejoined the Company , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 and wa from December 1995 to March 1997 and wa Director of Product FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , , Software Engineering ( age 44 ) , joined the Company joined the Company in February 1997 upon the Company ’ s Prior to NeXT , from 1985 to 1989 , Dr. Serlet NeXT , from 1985 to 1989 , Dr. Serlet worked a President , Applications ( age 48 ) , joined the Company joined the Company in September 1997 . Mr. Tamaddon ha also Group . Before joining the 104 Company , Mr. Tamaddon held Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the Software Technology Officer ( age 44 ) , joined the Company joined the Company in February 1997 upon the Company ’ s President , Software Engineering from 1997 to July 2003 . With Engineering from 1997 to July 2003 . With NeXT , Dr. , Engineering , from April 1995 to February 1997 . Prior from April 1995 to February 1997 . Prior to April 1995 1997 . Prior to April 1995 , Dr. Tevanian worked a several management position . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , requires with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company Company belief that all Section 16 ( a ) filing requirement were met during fiscal year 2005 . 105 Item 11 . during fiscal year 2005 . 105 Item 11 . Executive Compensation year 2005 . 105 Item 11 . Executive Compensation Information Regarding $ ) Steven P. Jobs 2005 1 — — — — ) Steven P. Jobs 2005 1 — — — — Chief — — Chief Executive Officer 2004 1 — — — — — Chief Executive Officer 2004 1 — — — — 2003 1 — — — — 2003 1 — 74,750,000 ( 1 — — — — 2003 1 — 74,750,000 ( 1 ) — — 2003 1 — 74,750,000 ( 1 ) — — 2003 1 — 74,750,000 ( 1 ) — — Timothy D. — — Timothy D. Cook 2005 602,434 600,239 — — 12,600 — Timothy D. Cook 2005 602,434 600,239 — — 12,600 ( Timothy D. Cook 2005 602,434 600,239 — — 12,600 ( 3 2005 602,434 600,239 — — 12,600 ( 3 ) Chief Operating 600,239 — — 12,600 ( 3 ) Chief Operating Officer 2004 3 ) Chief Operating Officer 2004 602,632 — 7,650,000 ( 2 ) Chief Operating Officer 2004 602,632 — 7,650,000 ( 2 ) Operating Officer 2004 602,632 — 7,650,000 ( 2 ) — 12,588 2004 602,632 — 7,650,000 ( 2 ) — 12,588 ( 3 7,650,000 ( 2 ) — 12,588 ( 3 ) 2003 617,673 2 ) — 12,588 ( 3 ) 2003 617,673 — — — 12,588 ( 3 ) 2003 617,673 — — — 9,929 12,588 ( 3 ) 2003 617,673 — — — 9,929 ( 2003 617,673 — — — 9,929 ( 3 ) Ronald B. — — — 9,929 ( 3 ) Ronald B. Johnson 2005 3 ) Ronald B. Johnson 2005 552,795 550,202 — — — ) Ronald B. Johnson 2005 552,795 550,202 — — — Senior Ronald B. Johnson 2005 552,795 550,202 — — — Senior Vice Senior Vice President , Retail 2004 484,836 1,500,000 6,375,000 ( 2 Vice President , Retail 2004 484,836 1,500,000 6,375,000 ( 2 ) President , Retail 2004 484,836 1,500,000 6,375,000 ( 2 ) — , Retail 2004 484,836 1,500,000 6,375,000 ( 2 ) — — 2004 484,836 1,500,000 6,375,000 ( 2 ) — — 2003 452,404 ( 2 ) — — 2003 452,404 1,500,000 — — — 2 ) — — 2003 452,404 1,500,000 — — — Peter ) — — 2003 452,404 1,500,000 — — — Peter Oppenheimer — — — Peter Oppenheimer 2005 552,189 550,202 — — 21,092 — — Peter Oppenheimer 2005 552,189 550,202 — — 21,092 ( — Peter Oppenheimer 2005 552,189 550,202 — — 21,092 ( 3 2005 552,189 550,202 — — 21,092 ( 3 ) Senior Vice 550,202 — — 21,092 ( 3 ) Senior Vice President and ) Senior Vice President and 2004 450,739 — 6,375,000 ( 2 Senior Vice President and 2004 450,739 — 6,375,000 ( 2 ) President and 2004 450,739 — 6,375,000 ( 2 ) — 3,808 2004 450,739 — 6,375,000 ( 2 ) — 3,808 ( 3 6,375,000 ( 2 ) — 3,808 ( 3 ) Chief Financial 2 ) — 3,808 ( 3 ) Chief Financial Officer 2003 3 ) Chief Financial Officer 2003 402,237 — — — — ) Chief Financial Officer 2003 402,237 — — — — Jonathan — — — Jonathan Rubinstein 2005 552,795 551,239 — — 12,600 — — Jonathan Rubinstein 2005 552,795 551,239 — — 12,600 ( — Jonathan Rubinstein 2005 552,795 551,239 — — 12,600 ( 3 2005 552,795 551,239 — — 12,600 ( 3 ) Senior Vice 551,239 — — 12,600 ( 3 ) Senior Vice President , ) Senior Vice President , 2004 485,216 — 6,375,000 ( 2 Senior Vice President , 2004 485,216 — 6,375,000 ( 2 ) President , 2004 485,216 — 6,375,000 ( 2 ) — 12,300 2004 485,216 — 6,375,000 ( 2 ) — 12,300 ( 3 6,375,000 ( 2 ) — 12,300 ( 3 ) iPod Division 2 ) — 12,300 ( 3 ) iPod Division 2003 452,939 ( 3 ) iPod Division 2003 452,939 — — — 11,986 3 ) iPod Division 2003 452,939 — — — 11,986 ( 2003 452,939 — — — 11,986 ( 3 ) ( 1 — — — 11,986 ( 3 ) ( 1 ) In 11,986 ( 3 ) ( 1 ) In March 2003 , ( 1 ) In March 2003 , Mr. Jobs voluntarily cancelled a Director . In March 2003 , the Board awarded Mr. the Board awarded Mr. Jobs 10 million ( split-adjusted ) restricted the grant date . ( 2 ) Market value of restricted stock unit granted on March 24 , 2004 ( based on granted on March 24 , 2004 ( based on $ 12.75 2004 ( based on $ 12.75 per share , the closing vest over four year with 50 % of the total number the grant date . ( 3 ) Consists of matching contribution with the term of the 401 ( k ) plan . Executive Officers during fiscal year 2005 . 106 Options Exercised and during fiscal year 2005 . 106 Options Exercised and Year-End Option Executive Officers during fiscal year 2005 and stock option held by two-for-one stock split in February 2005 . AGGREGATED OPTION EXERCISES IN Year-End ( $ ) ( 1 ) Name ( # ) Steven P. Jobs — — 120,000 ( 2 ) — ( Jobs — — 120,000 ( 2 ) — ( 3 ) ( 2 ) — ( 3 ) $ 5,694,000 ( 2 — ( 3 ) $ 5,694,000 ( 2 ) — Timothy 3 ) $ 5,694,000 ( 2 ) — Timothy D. Cook ) — Timothy D. Cook 500,000 $ 13,329,677 — — ( Timothy D. Cook 500,000 $ 13,329,677 — — ( 3 ) $ 13,329,677 — — ( 3 ) — — Ronald B. — — Ronald B. Johnson 1,350,000 $ 32,257,127 2,100,000 150,000 ( Ronald B. Johnson 1,350,000 $ 32,257,127 2,100,000 150,000 ( 3 ) B. Johnson 1,350,000 $ 32,257,127 2,100,000 150,000 ( 3 ) $ Johnson 1,350,000 $ 32,257,127 2,100,000 150,000 ( 3 ) $ 61,910,625 $ 32,257,127 2,100,000 150,000 ( 3 ) $ 61,910,625 $ 6,220,500 150,000 ( 3 ) $ 61,910,625 $ 6,220,500 Peter Oppenheimer — 3 ) $ 61,910,625 $ 6,220,500 Peter Oppenheimer — — 1,107,500 6,220,500 Peter Oppenheimer — — 1,107,500 37,500 ( 3 ) $ Peter Oppenheimer — — 1,107,500 37,500 ( 3 ) $ 45,994,859 — — 1,107,500 37,500 ( 3 ) $ 45,994,859 $ 1,560,062 37,500 ( 3 ) $ 45,994,859 $ 1,560,062 Jonathan Rubinstein 1,800,000 3 ) $ 45,994,859 $ 1,560,062 Jonathan Rubinstein 1,800,000 $ 31,012,815 45,994,859 $ 1,560,062 Jonathan Rubinstein 1,800,000 $ 31,012,815 — — ( 1,560,062 Jonathan Rubinstein 1,800,000 $ 31,012,815 — — ( 3 ) $ 31,012,815 — — ( 3 ) — — ( 1 3 ) — — ( 1 ) Market value of security the end of fiscal year 2005 ( based on $ 53.20 2005 ( based on $ 53.20 per share , the closing NASDAQ National Market on September 23 , 2005 ) , minus Market on September 23 , 2005 ) , minus the exercise the exercise price . ( 2 ) Consists of 120,000 option ( 2 ) Consists of 120,000 option granted to Mr. Jobs a director pursuant to the 1997 Director Stock Option Plan . Director Plan . In March 2003 , Mr. Jobs voluntarily cancelled a a director . ( 3 ) This doe not include ) This doe not include 10 million restricted share granted to granted to Mr. Jobs , 600,000 restricted stock unit granted to to Mr. Cook , and 500,000 restricted stock unit granted to retainer on equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan ” ) and 1,600,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 740,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly independent ” director under the 107 applicable NASDAQ rule . There acquisition by any person of 50 % or more of the annual base salary . Item 12 . Security Ownership of Certain certain information a of October 31 , 2005 ( the “ a of October 31 , 2005 ( the “ Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 839,776,934 share of Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . 108 Security Ownership of Cupertino , CA 95014 . 108 Security Ownership of 5 % . 108 Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 58,552,916 ( 2 ) 6.97 % Outstanding Fidelity Investments 58,552,916 ( 2 ) 6.97 % Barclays Global Investments 58,552,916 ( 2 ) 6.97 % Barclays Global Investors 55,223,982 6.97 % Barclays Global Investors 55,223,982 ( 3 ) 6.58 % Barclays Global Investors 55,223,982 ( 3 ) 6.58 % AXA 47,861,070 Investors 55,223,982 ( 3 ) 6.58 % AXA 47,861,070 ( 4 3 ) 6.58 % AXA 47,861,070 ( 4 ) 5.70 % 6.58 % AXA 47,861,070 ( 4 ) 5.70 % Steven P. AXA 47,861,070 ( 4 ) 5.70 % Steven P. Jobs 10,120,004 5.70 % Steven P. Jobs 10,120,004 ( 5 ) 1.21 % Steven P. Jobs 10,120,004 ( 5 ) 1.21 % Fred D. Jobs 10,120,004 ( 5 ) 1.21 % Fred D. Anderson 5,344 1.21 % Fred D. Anderson 5,344 * William V. Campbell 211,004 5,344 * William V. Campbell 211,004 ( 6 ) * Timothy William V. Campbell 211,004 ( 6 ) * Timothy D. Cook ) * Timothy D. Cook 12,597 ( 7 ) * Millard Timothy D. Cook 12,597 ( 7 ) * Millard S. Drexler ) * Millard S. Drexler 210,000 ( 8 ) * Albert Millard S. Drexler 210,000 ( 8 ) * Albert A. Gore Albert A. Gore , Jr. 40,000 ( 9 ) * Ronald Gore , Jr. 40,000 ( 9 ) * Ronald B. Johnson ) * Ronald B. Johnson 2,112,597 ( 10 ) * Arthur Ronald B. Johnson 2,112,597 ( 10 ) * Arthur D. Levinson ) * Arthur D. Levinson 352,400 ( 11 ) * Peter Arthur D. Levinson 352,400 ( 11 ) * Peter Oppenheimer 396,643 11 ) * Peter Oppenheimer 396,643 ( 12 ) * Jonathan * Peter Oppenheimer 396,643 ( 12 ) * Jonathan J. Rubinstein ) * Jonathan J. Rubinstein 22,174 ( 13 ) * Jerome Jonathan J. Rubinstein 22,174 ( 13 ) * Jerome B. York ) * Jerome B. York 70,000 ( 14 ) * All Jerome B. York 70,000 ( 14 ) * All executive officer director a a group ( 16 person ) 16,307,625 ( 15 group ( 16 person ) 16,307,625 ( 15 ) 1.94 % 16 person ) 16,307,625 ( 15 ) 1.94 % ( 1 ) 16,307,625 ( 15 ) 1.94 % ( 1 ) Represents 15 ) 1.94 % ( 1 ) Represents share of Common the Table Date or within 60 day thereafter . This doe stock unit that vest after 60 day . The share number two-for-one stock split in February 2005 . ( 2 ) Based in February 2005 . ( 2 ) Based on a Form ) Based on a Form 13F filed November 14 , 2005 a Form 13F filed November 14 , 2005 by FMR Corp. 13F filed November 14 , 2005 by FMR Corp. FMR Corp. Corp. list it address a 82 Devonshire Street , Boston , , Boston , MA , 02109 , in such filing . in such filing . ( 3 ) Based on a Form ) Based on a Form 13F filed November 14 , 2005 a Form 13F filed November 14 , 2005 , by Barclays 13F filed November 14 , 2005 , by Barclays Global Investors Investors list it address a 45 Fremont Street , San Francisco , San Francisco , CA 94105 . ( 4 ) Based , CA 94105 . ( 4 ) Based on a Form ) Based on a Form 13F filed November 14 , 2005 a Form 13F filed November 14 , 2005 , by AXA 13F filed November 14 , 2005 , by AXA . AXA AXA list it address a 25 , Avenue Matigon , Paris Matigon , Paris , France 10 . ( 5 ) Includes , France 10 . ( 5 ) Includes 120,000 share of . ( 5 ) Includes 120,000 share of Common Stock that of stock option . ( 6 ) Includes 210,000 share of . ( 6 ) Includes 210,000 share of Common Stock that of stock option . ( 7 ) Excludes 600,000 restricted stock . ( 7 ) Excludes 600,000 restricted stock unit . ( restricted stock unit . ( 8 ) Includes 170,000 share of . ( 8 ) Includes 170,000 share of Common Stock that of stock option . ( 9 ) Consists of 40,000 share ( 9 ) Consists of 40,000 share of Common Stock that of stock option . ( 10 ) Includes 2,100,000 share of . ( 10 ) Includes 2,100,000 share of Common Stock that of stock option and excludes 500,000 restricted stock unit . ( restricted stock unit . ( 11 ) Includes 2,000 share of . ( 11 ) Includes 2,000 share of Common Stock that Dr. Levinson hold indirectly and 90,000 share of Common Stock that of stock option . ( 12 ) Includes 382,500 share of . ( 12 ) Includes 382,500 share of Common Stock that of stock option and excludes 500,000 restricted stock unit . 109 500,000 restricted stock unit . 109 ( 13 ) Excludes 500,000 stock unit . 109 ( 13 ) Excludes 500,000 restricted stock 109 ( 13 ) Excludes 500,000 restricted stock unit . ( restricted stock unit . ( 14 ) Includes 30,000 share of . ( 14 ) Includes 30,000 share of Common Stock that of stock option . ( 15 ) Includes 5,870,796 share of . ( 15 ) Includes 5,870,796 share of Common Stock that option . Does not include 4.4 million of restricted stock unit . * Represents le than 1 % of the issued and information , a of September 24 , 2005 , concerning share a of September 24 , 2005 , concerning share of common two-for-one stock split in February 2005 . ( a ) Number compensation plan approved by shareholder 42,365,700 $ 23.27 62,791,724 ( 1 approved by shareholder 42,365,700 $ 23.27 62,791,724 ( 1 ) Equity by shareholder 42,365,700 $ 23.27 62,791,724 ( 1 ) Equity compensation 42,365,700 $ 23.27 62,791,724 ( 1 ) Equity compensation plan not plan not approved by shareholder 30,827,565 $ 10.27 — Total equity approved by shareholder 30,827,565 $ 10.27 — Total equity compensation plan Total equity compensation plan ( 2 ) 73,193,265 $ 17.79 62,791,724 compensation plan ( 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ( 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ) This 2 ) 73,193,265 $ 17.79 62,791,724 ( 1 ) This number 73,193,265 $ 17.79 62,791,724 ( 1 ) This number includes 3,834,300 1 ) This number includes 3,834,300 share of common stock reserved Employee Stock Purchase Plan , 440,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 58,517,424 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 5,260,000 share of restricted stock unit stock unit granted after April 2005 count against the share available not include share under the 1990 Stock Option Plan that wa Plan that wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) This table doe not This table doe not include 28,082 outstanding option assumed in connection average exercise price of $ 3.39 per share . No additional the assumed plan . Item 13 . Certain Relationships and Related and Related Transactions In March 2002 , the Company entered into of the plane in May 2001 . During 2005 , the in May 2001 . During 2005 , the Company recognized a recognized a total of $ 1,075,545 in expense pursuant to this incurred by Mr. Jobs during 2005 . In October 2005 , during 2005 . In October 2005 , the Company entered into large shareholder of Pixar . 110 Item 14 . Principal Accountant of Pixar . 110 Item 14 . Principal Accountant Fees and LLP , during fiscal year 2005 and 2004 . Audit and during fiscal year 2005 and 2004 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2005 2004 Audit Fees $ 6,948,800 Audit and Non-Audit Fees 2005 2004 Audit Fees $ 6,948,800 ( 2005 2004 Audit Fees $ 6,948,800 ( 1 ) $ 3,402,300 Audit Fees $ 6,948,800 ( 1 ) $ 3,402,300 Audit-Related Fees 6,948,800 ( 1 ) $ 3,402,300 Audit-Related Fees 46,700 ( 2 ) $ 3,402,300 Audit-Related Fees 46,700 ( 2 ) 57,000 Tax 3,402,300 Audit-Related Fees 46,700 ( 2 ) 57,000 Tax Fees 923,000 Fees 46,700 ( 2 ) 57,000 Tax Fees 923,000 ( 3 2 ) 57,000 Tax Fees 923,000 ( 3 ) 784,500 All 57,000 Tax Fees 923,000 ( 3 ) 784,500 All Other Fees Fees 923,000 ( 3 ) 784,500 All Other Fees — — Fees — — Total $ 7,918,500 $ 4,243,800 ( 1 ) — Total $ 7,918,500 $ 4,243,800 ( 1 ) Audit fee $ 7,918,500 $ 4,243,800 ( 1 ) Audit fee relate to the Company ’ s Forms 10-Q , and audit service provided and regulatory filing . ( 2 ) Audit-related fee primarily relate employee benefit plan . ( 3 ) Tax fee include $ ) Tax fee include $ 690,000 for professional service rendered in tax compliance ; and $ 233,000 for international tax consulting and of the Sarbanes-Oxley Act of 2002 ( the “ Act ” audit partner for fiscal year 2005 and will rotate other partner comply with the Act . 111 PART IV Item 15 . . 111 PART IV Item 15 . Exhibits and Financial Statement Period End Date Filed herewith 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Amendment 27 , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles of State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , , a amended through June 7 , 2004 . 10-Q 6/26/04 amended through June 7 , 2004 . 10-Q 6/26/04 3.4 Certificate June 7 , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment 7 , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment to , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment to Restated State of California on February 25 , 2005 . 10-Q 3/26/05 California on February 25 , 2005 . 10-Q 3/26/05 4.2 Indenture February 25 , 2005 . 10-Q 3/26/05 4.2 Indenture dated a 25 , 2005 . 10-Q 3/26/05 4.2 Indenture dated a of , 2005 . 10-Q 3/26/05 4.2 Indenture dated a of February Indenture dated a of February 1 , 1994 , between the a of February 1 , 1994 , between the Company and Company of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated of New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a New York . 10-Q 4/01/94 4.3 Supplemental Indenture dated a of Indenture dated a of February 1 , 1994 , among the a of February 1 , 1994 , among the Company , , a successor trustee . 10-Q 4/01/94 4.5 Form of the a successor trustee . 10-Q 4/01/94 4.5 Form of the Company successor trustee . 10-Q 4/01/94 4.5 Form of the Company ’ of the Company ’ s 6 1/2 % Notes due 2004 the Company ’ s 6 1/2 % Notes due 2004 . 6 1/2 % Notes due 2004 . 10-Q 4/01/94 4.8 Registration % Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement Notes due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , due 2004 . 10-Q 4/01/94 4.8 Registration Rights Agreement , dated Rights Agreement , dated June 7 , 1996 among the Company , dated June 7 , 1996 among the Company and Goldman Co . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of Preferences of Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Apple Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Computer , Inc. 10-K 9/26/97 10.A.3 Apple Computer , Inc. Savings restated effective a of October 1 , 1990 . 10-K 9/27/91 a of October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment October 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple 1 , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , 1990 . 10-K 9/27/91 10.A.3-1 Amendment of Apple Computer , and Investment Plan dated March 1 , 1992 . 10-K 9/25/92 Plan dated March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment March 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 1 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 , 1992 . 10-K 9/25/92 10.A.3-2 Amendment No . 2 to 9/25/92 10.A.3-2 Amendment No . 2 to the Apple Computer , Savings and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option and Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan Investment Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , Plan . 10-Q 3/28/97 10.A.5 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10-Q 12/26/97 amended through November 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple November 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , 5 , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , Inc , 1997 . 10-Q 12/26/97 10.A.6 Apple Computer , Inc . , a amended through April 21 , 2005 . 10-Q 3/26/05 amended through April 21 , 2005 . 10-Q 3/26/05 10.A.8 Form April 21 , 2005 . 10-Q 3/26/05 10.A.8 Form of Indemnification 21 , 2005 . 10-Q 3/26/05 10.A.8 Form of Indemnification Agreement , 2005 . 10-Q 3/26/05 10.A.8 Form of Indemnification Agreement between officer of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , of the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. the Registrant . 10-K 9/26/97 10.A.43 NeXT Computer , Inc. 1990 10.A.43 NeXT Computer , Inc. 1990 Stock Option Plan , a , a amended . S-8 3/21/97 112 10.A.49 1997 Employee Stock a amended . S-8 3/21/97 112 10.A.49 1997 Employee Stock Option amended . S-8 3/21/97 112 10.A.49 1997 Employee Stock Option Plan . S-8 3/21/97 112 10.A.49 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 October 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock 19 , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option , 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan 2001 . 10-K 9/28/02 10.A.50 1997 Director Stock Option Plan . Director Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Stock Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Plan Option Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Plan , Plan . 10-Q 3/27/98 10.A.51 2003 Employee Stock Plan , a , a amended through November 9 , 2005. ü 10.A.52 Reimbursement amended through November 9 , 2005. ü 10.A.52 Reimbursement Agreement dated November 9 , 2005. ü 10.A.52 Reimbursement Agreement dated a of Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Steven P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted P. Jobs . 10-Q 6/29/02 10.A.53 Option Cancellation and Restricted Stock Agreement dated a of March 19 , 2003 by and between a of March 19 , 2003 by and between The Registrant and Steven P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Steven P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Stock P. Jobs . 10-Q 6/28/03 10.A.54 Form of Restricted Stock Unit Stock Unit Award Agreement . 10-Q 3/27/04 10.A.54-1 Alternative Form of Unit Award Agreement . 10-Q 3/27/04 10.A.54-1 Alternative Form of Restricted Award Agreement . 10-Q 3/27/04 10.A.54-1 Alternative Form of Restricted Stock Unit Award Agreement . ü 10.A.55 Apple Computer , Inc . Performance Bonus Plan dated April 21 , 2005 . 10-Q 3/26/05 Plan dated April 21 , 2005 . 10-Q 3/26/05 10.A.56 Form April 21 , 2005 . 10-Q 3/26/05 10.A.56 Form of Election 21 , 2005 . 10-Q 3/26/05 10.A.56 Form of Election to , 2005 . 10-Q 3/26/05 10.A.56 Form of Election to Satisfy Tax Withholding with Stock . 8-K 8/15/05 10.A.57 Form of Option Withholding with Stock . 8-K 8/15/05 10.A.57 Form of Option Agreements with Stock . 8-K 8/15/05 10.A.57 Form of Option Agreements . of Option Agreements . ü 10.B.18 * Custom Sales Agreement effective Custom Sales Agreement effective October 21 , 2002 between the Registrant Agreement effective October 21 , 2002 between the Registrant and International International Business Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement Business Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement effective Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement effective August * Purchase Agreement effective August 10 , 2005 between the Registrant Agreement effective August 10 , 2005 between the Registrant and Freescale Freescale Semiconductor , Inc. ü 14.1 Code of Ethics of the Ethics of the Company . 10-K 9/27/03 21 Subsidiaries of Apple of the Company . 10-K 9/27/03 21 Subsidiaries of Apple Computer the Company . 10-K 9/27/03 21 Subsidiaries of Apple Computer , Apple Computer , Inc. ü 23.1 Consent of Independent Registered Public Public Accounting Firm . ü 31.1 Rule13a-14 ( a ) /15d-14 Chief Executive Officer . ü 31.2 Rule13a-14 ( a ) /15d-14 Chief Financial Officer . ü 32.1 Section 1350 Certifications of Chief Officer . ü 32.1 Section 1350 Certifications of Chief Executive Officer portion of this exhibit . 113 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 29 th day of November 2005 29 th day of November 2005 . Apple Computer , Inc. this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 29 , 2005 /s/ PETER OPPENHEIMER Officer ) November 29 , 2005 /s/ PETER OPPENHEIMER PETER OPPENHEIMER Principal Accounting Officer ) November 29 , 2005 /s/ FRED ANDERSON Officer ) November 29 , 2005 /s/ FRED ANDERSON FRED ANDERSON ANDERSON FRED ANDERSON Director November 29 , 2005 /s/ WILLIAM V. ANDERSON Director November 29 , 2005 /s/ WILLIAM V. CAMPBELL WILLIAM WILLIAM V. CAMPBELL Director November 29 , 2005 /s/ MILLARD S. CAMPBELL Director November 29 , 2005 /s/ MILLARD S. DREXLER MILLARD MILLARD S. DREXLER Director November 29 , 2005 /s/ ALBERT GORE DREXLER Director November 29 , 2005 /s/ ALBERT GORE , JR. GORE , JR. Director November 29 , 2005 /s/ ARTHUR D. JR. Director November 29 , 2005 /s/ ARTHUR D. LEVINSON ARTHUR ARTHUR D. LEVINSON Director November 29 , 2005 /s/ JEROME B. LEVINSON Director November 29 , 2005 /s/ JEROME B. YORK JEROME JEROME B. YORK Director November 29 , 2005 114 YORK Director November 29 , 2005 114 Director November 29 , 2005 114 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-06-084288/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-06-084288/full-submission.txt new file mode 100644 index 0000000..26f6040 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001104659-06-084288/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 30 , 2006 or o TRANSITION year ended September 30 , 2006 or o TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from from to Commission file number 000-10030 APPLE COMPUTER , INC. ( in it charter ) CALIFORNIA 942404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. o Indicate by check mark accelerated filer ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of April 1 , 2006 , wa approximately a of April 1 , 2006 , wa approximately $ 45,716,583,100 2006 , wa approximately $ 45,716,583,100 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 859,273,757 share of Common Stock Issued and Outstanding a of December 13 , 2006 The Business section a of December 13 , 2006 The Business section and other this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part I , Item 1A of this Form 10-K . Item 1A of this Form 10-K . The Company assumes no Explanatory Note In this Form 10-K , Apple Computer , Inc. balance sheet a of September 24 , 2005 , and the a of September 24 , 2005 , and the related consolidated the fiscal year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , and each 2005 and September 25 , 2004 , and each of the the quarter in fiscal year 2005 . This Form 10-K also year 2005 . This Form 10-K also reflects the restatement of Financial Data ” in Item 6 for the fiscal year ended the fiscal year ended September 2005 , 2004 , 2003 , year ended September 2005 , 2004 , 2003 , and 2002 September 2005 , 2004 , 2003 , and 2002 , and 2004 , 2003 , and 2002 , and “ Management ’ of Operations ” in Item 7 for the fiscal year ended the fiscal year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 . Previously filed 2005 and September 25 , 2004 . Previously filed annual report filed annual report on Form 10-K and quarterly report on Form and quarterly report on Form 10-Q affected by the restatement have relied on . On June 29 , 2006 , the Company . On June 29 , 2006 , the Company announced that stock option grant made between 1997 and 2001 , including a grant made between 1997 and 2001 , including a grant to granting practice . On October 4 , 2006 , the Company . On October 4 , 2006 , the Company announced the the Company ’ s Form 8-K filed on that date . financial statement in this Form 10-K . These adjustment , after tax , amounted to $ 4 million , $ 7 million $ 4 million , $ 7 million , and $ 10 7 million , and $ 10 million in fiscal year 2006 10 million in fiscal year 2006 , 2005 and 2004 , in fiscal year 2006 , 2005 and 2004 , respectively . year 2006 , 2005 and 2004 , respectively . The adjustment respectively . The adjustment to 2006 wa recorded in the fourth fourth quarter of fiscal year 2006 due to it insignificance . stock option grant made on 259 date . The Investigative Team The Investigative Team spent over 26,500 person-hours searching more than one document and interviewing more than 40 current and former director , and reporting stock option grant 2 did not include sufficient safeguard the measurement date for the 42,077 stock option grant made on stock option grant made on 259 date between October 1996 and on 259 date between October 1996 and January 2003 ( the between October 1996 and January 2003 ( the “ relevant period Company sampled certain grant between 1994 and 1997 and found none certain grant between 1994 and 1997 and found none that required is required are dated December 29 , 1997 . The Company are dated December 29 , 1997 . The Company also examined , in the year after 2002 , Apple made significant change related tax effect . The 42,077 grant were classified a follows classified a follows : ( 1 ) 17 grant to person follows : ( 1 ) 17 grant to person elected or grant ” ) ; ( 2 ) 3,892 grant to employee ) ; ( 2 ) 3,892 grant to employee under the grant ” ) ; ( 3 ) 27,096 grant made in ) ; ( 3 ) 27,096 grant made in broad-based award grant ” ) ; ( 4 ) 9,988 other grant ratified ) ; ( 4 ) 9,988 other grant ratified at meeting grant ” ) ; ( 5 ) 1,082 other grant ratified ) ; ( 5 ) 1,082 other grant ratified by unanimous ” ) ; and ( 6 ) two grant to the actual date of ratification . 3 As discussed below , the originally assigned grant date for 6,428 grant on 42 date are date for 6,428 grant on 42 date are not the proper stock-based compensation expense of $ 105 million on a pre-tax basis were required for the remaining 35,649 grant . The adjustment were were made pursuant to a 1997 plan that dated the grant wa approved by shareholder in 1998 , on the date of . Monday/Tuesday Grants—Beginning in December 1998 , 3,892 new hire grant Grants—Beginning in December 1998 , 3,892 new hire grant and grant ’ start date . For 120 new hire and promotion/retention grant stock-based compensation expense of $ 6 million from 126 grant . of $ 6 million from 126 grant . If other date have ranged from approximately $ 3 million to $ 7 million $ 3 million to $ 7 million . Focal Grants—During the Grants—During the relevant period , 27,096 focal grant were made to Company ha concluded that for 5,595 grant on five date , the Company ha recognized $ 29 million of stock-based compensation expense the five grant date comprising 3,744 grant , the evidence show date represent more than $ 16 million of the total $ million of the total $ 29 million of stock-based compensation expense Committee were held to ratify 9,988 grant that are not Monday/Tuesday , with the exception of 46 grant . Forty-two of these grant . Forty-two of these 46 grant are dated concurrent with have been finalized until a 4 later date . One of date . One of the 46 grant wa approved and dated . Thus , for these 46 grant the Company ha concluded the Company ha recognized $ 2 million of stock-based compensation expense Grants—During the relevant period , 1,082 grant were approved by UWCs Committee . Accordingly , for 660 grant , the Company ha the Company ha recognized $ 48 million of stock-based compensation expense have ranged from approximately $ 35 million to $ 56 million $ 35 million to $ 56 million . CEO Grants—During the first grant , dated January 12 , 2000 , wa for , dated January 12 , 2000 , wa for 10 million , 2000 , wa for 10 million option share . The second grant , dated October 19 , 2001 , wa for , dated October 19 , 2001 , wa for 7.5 million , 2001 , wa for 7.5 million option share . Both grant were cancelled in March 2003 prior to being exercised , , when Mr. Jobs received 5 million share of restricted stock to the grant dated January 12 , 2000 , the Board grant dated January 12 , 2000 , the Board on December , the Board on December 2 , 1999 , authorized a Board on December 2 , 1999 , authorized a special “ grant Mr. Jobs up to 15 million share . The evidence of the grant on January 12 , 2000 , although the grant on January 12 , 2000 , although the Committee ’ a UWC transmitted on January 18 , 2000 . Because the transmitted on January 18 , 2000 . Because the measurement date . The grant dated October 19 , 2001 wa originally approved grant dated October 19 , 2001 wa originally approved at a a Board meeting on August 29 , 2001 , with an meeting on August 29 , 2001 , with an exercise price an exercise price of $ 17.83 . The term of the were not finalized until December 18 , 2001 . The grant finalized until December 18 , 2001 . The grant wa dated The grant wa dated October 19 , 2001 , with an wa dated October 19 , 2001 , with an exercise price an exercise price of $ 18.30 . The approval for the special Board meeting on October 19 , 2001 . Such a meeting on October 19 , 2001 . Such a special Board The Company ha recognized $ 20 million in stock-based compensation expense the exercise price of $ 18.30 and the share price on the share price on December 18 , 2001 of $ 21.01 price on December 18 , 2001 of $ 21.01 . 5 18 , 2001 of $ 21.01 . 5 The incremental impact 2001 of $ 21.01 . 5 The incremental impact from recognizing Income ) After Tax Expense 1998 $ ( 1 ) $ Tax Expense 1998 $ ( 1 ) $ — 1999 8 ( 1 ) $ — 1999 8 6 2000 13 9 1 ) $ — 1999 8 6 2000 13 9 2001 ) $ — 1999 8 6 2000 13 9 2001 19 $ — 1999 8 6 2000 13 9 2001 19 13 — 1999 8 6 2000 13 9 2001 19 13 2002 1999 8 6 2000 13 9 2001 19 13 2002 29 8 6 2000 13 9 2001 19 13 2002 29 23 6 2000 13 9 2001 19 13 2002 29 23 2003 2000 13 9 2001 19 13 2002 29 23 2003 16 13 9 2001 19 13 2002 29 23 2003 16 12 9 2001 19 13 2002 29 23 2003 16 12 Total 2001 19 13 2002 29 23 2003 16 12 Total 1998 19 13 2002 29 23 2003 16 12 Total 1998 – 13 2002 29 23 2003 16 12 Total 1998 – 2003 2002 29 23 2003 16 12 Total 1998 – 2003 impact 23 2003 16 12 Total 1998 – 2003 impact 84 63 16 12 Total 1998 – 2003 impact 84 63 2004 13 Total 1998 – 2003 impact 84 63 2004 13 10 2005 1998 – 2003 impact 84 63 2004 13 10 2005 7 – 2003 impact 84 63 2004 13 10 2005 7 7 2003 impact 84 63 2004 13 10 2005 7 7 2006 impact 84 63 2004 13 10 2005 7 7 2006 1 84 63 2004 13 10 2005 7 7 2006 1 4 63 2004 13 10 2005 7 7 2006 1 4 Total 2004 13 10 2005 7 7 2006 1 4 Total $ 13 10 2005 7 7 2006 1 4 Total $ 105 10 2005 7 7 2006 1 4 Total $ 105 $ 2005 7 7 2006 1 4 Total $ 105 $ 84 2006 1 4 Total $ 105 $ 84 Additionally , the 4 Total $ 105 $ 84 Additionally , the Company ha SFAS ” ) No . 123 in Note 1 of the No . 123 in Note 1 of the Notes to Consolidated Financial Statements of this Form 10-K to reflect the impact of for the year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 . 6 PART 2005 and September 25 , 2004 . 6 PART I Item September 25 , 2004 . 6 PART I Item 1. Business . 6 PART I Item 1. Business Company Background Apple Computer State of California on January 3 , 1977 . The Company California on January 3 , 1977 . The Company design , information presented in this Form 10-K is based on the Company integrated digital lifestyle solution . 7 Expanded Distribution The Company belief By the end of fiscal 2006 , the Company had opened had opened a total of 165 retail store , including 147 165 retail store , including 147 store in the U.S. and U.S. and a total of 18 store in Canada , Japan U.K . The Company opened 5 additional store in October and store in October and November 2006 . The Company ha typically solution , and one-to-one ( 1:1 ) learning solution . A ) learning solution . A 1:1 learning solution typically consist of development , and administration . 8 The Company design it high-end in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements at Note 11 , “ Segment Information and s Mac OS® X Version 10.4 Tiger™ and iLife® suite of . Macintosh® Computers In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new of Mac OS X Version 10.4 Tiger , including the Rosetta™ system wa completed in August 2006 , and it transition for Xserve® wa completed in November 2006 . There are potential risk are further discussed in Item 1A of this 10-K under the in Item 1A of this 10-K under the heading “ Risk user . Introduced in January 2006 , the MacBook Pro includes MacBook Pro includes either a 15-inch or 17-inch widescreen display , includes either a 15-inch or 17-inch widescreen display , a built-in Pro model include Intel Core 2 Duo processor at 2.16GHz or Core 2 Duo processor at 2.16GHz or 2.33GHz , ATI Mobility Duo processor at 2.16GHz or 2.33GHz , ATI Mobility Radeon X1600 Mobility Radeon X1600 graphic , 667MHz DDR2 main memory , a Every MacBook Pro feature a 1-inch thin aluminum enclosure and includes Extreme wireless networking , Bluetooth 2.0+EDR , Gigabit Ethernet , two , two or three USB 2.0 port , FireWire 400 and USB 2.0 port , FireWire 400 and 800 port , combination port , FireWire 400 and 800 port , combination analog and , and backlit keyboard . 9 MacBook™ The MacBook is designed user . Introduced in May 2006 , the MacBook includes a , the MacBook includes a 13-inch widescreen display , a built-in MacBook model include Intel Core 2 Duo processor at 1.83GHz and Core 2 Duo processor at 1.83GHz and 2.0GHz , Intel integrated Duo processor at 1.83GHz and 2.0GHz , Intel integrated GMA 950 2.0GHz , Intel integrated GMA 950 graphic , 667MHz DDR2 main integrated GMA 950 graphic , 667MHz DDR2 main memory , a Extreme wireless networking , Bluetooth 2.0+EDR , Gigabit Ethernet , two Gigabit Ethernet , two USB 2.0 port , one FireWire 400 2.0 port , one FireWire 400 port , combination analog and user . Introduced in August 2006 , the Mac Pro feature dual-core processor running up to 3.0GHz , each with 4MB of to 3.0GHz , each with 4MB of shared Level 2 cache with 4MB of shared Level 2 cache and independent 1.33GHz front-side Level 2 cache and independent 1.33GHz front-side bus , 667MHz fully independent 1.33GHz front-side bus , 667MHz fully buffered memory , and buffered memory , and a 256-bit wide memory architecture . The installation of up to four 750GB Serial ATA hard drive for drive for a total of 3TB of internal storage and support port , and multiple FireWire 400 , FireWire 800 and USB multiple FireWire 400 , FireWire 800 and USB 2.0 port . , FireWire 800 and USB 2.0 port . iMac® The iMac market . Introduced in January 2006 and updated in September 2006 2006 and updated in September 2006 , the Intel-based iMac is currently available with an integrated 17-inch widescreen LCD display , 512MB 17-inch widescreen LCD display , 512MB or 1GB of 667MHz DDR2 LCD display , 512MB or 1GB of 667MHz DDR2 memory expandable , 512MB or 1GB of 667MHz DDR2 memory expandable to 2GB 667MHz DDR2 memory expandable to 2GB or 3GB , a 1.83GHz memory expandable to 2GB or 3GB , a 1.83GHz or 2.0GHz 2GB or 3GB , a 1.83GHz or 2.0GHz Intel Core 2 3GB , a 1.83GHz or 2.0GHz Intel Core 2 Duo processor 1.83GHz or 2.0GHz Intel Core 2 Duo processor , Intel integrated processor , Intel integrated GMA 950 or ATI Radeon X1600 graphic X1600 graphic , and a 160GB Serial ATA hard drive . is also available with a 20-inch or 24-inch widescreen LCD display available with a 20-inch or 24-inch widescreen LCD display , 1GB 24-inch widescreen LCD display , 1GB of 667MHz memory expandable to LCD display , 1GB of 667MHz memory expandable to 3GB , of 667MHz memory expandable to 3GB , a 2.16GHz processor , expandable to 3GB , a 2.16GHz processor , ATI Radeon X1600 Radeon X1600 or NVIDIA GeForce 7300 GT graphic , and 250GB 7300 GT graphic , and 250GB Serial ATA hard drive . video-out port , multiple USB 2.0 and FireWire port , built-in Ethernet , and AirPort Extreme 802.11g wireless networking . Most model model also include built-in Bluetooth 2.0+EDR , the Apple Remote , . Mac® mini In February 2006 , the Company introduced the The new Mac mini offer 512MB of 667MHz memory expandable to Mac mini offer 512MB of 667MHz memory expandable to 2GB and of 667MHz memory expandable to 2GB and either a 1.66GHz or to 2GB and either a 1.66GHz or 1.83GHz Intel Core Duo and either a 1.66GHz or 1.83GHz Intel Core Duo processor . Gigabit Ethernet , AirPort Extreme 802.11g wireless networking , Bluetooth 2.0+EDR 802.11g wireless networking , Bluetooth 2.0+EDR , and a total of a total of four USB 2.0 port . Mac mini includes large database . In November 2006 , the Company began shipping began shipping Xserve , a 64-bit server featuring Mac OS® X featuring Mac OS® X Server 10.4 on two Intel Xeon dual-core Xeon dual-core processor running at 2.0GHz , 2.66GHz , or 3.0GHz processor running at 2.0GHz , 2.66GHz , or 3.0GHz , with 2.0GHz , 2.66GHz , or 3.0GHz , with support for up with support for up to 32GB of memory . Xserve includes includes PCI Express and independent 1.33GHz front side bus with 4MB 1.33GHz front side bus with 4MB of shared Level 2 memory with 4MB of shared Level 2 memory cache . Two eight-lane expansion slot provide up to 2GB of 10 throughput each to provide up to 2GB of 10 throughput each to support fibre . Xserve support up to 2.25TB of hot-plug storage . The storage system delivers up to 7TB of storage capacity and also dual independent RAID controller with 512MB cache per controller offer sustained offer sustained throughput of over 385 Mbps . Music Products and and wa updated in September 2006 . The iPod is available iPod is available in a 30GB model capable of holding up capable of holding up to 7,500 song , 25,000 photo , up to 7,500 song , 25,000 photo , or 75 hour , 25,000 photo , or 75 hour of video , and of video , and an 80GB model capable of holding up capable of holding up to 20,000 song , 25,000 photo , up to 20,000 song , 25,000 photo , or 100 hour , 25,000 photo , or 100 hour of video . The The iPod feature up to 20 hour of battery life and battery life and includes a 2.5-inch color screen that can display . iPod® nano In September 2006 , the Company introduced the aluminum body and up to 24 hour of battery life . iPod nano is available in 2GB , 4GB and 8GB configuration is available in 2GB , 4GB and 8GB configuration and in in 2GB , 4GB and 8GB configuration and in a variety . iPod® shuffle In September 2006 , the Company introduced a capable of holding up to 240 song and provides up to song and provides up to 12 hour of battery life . the store by genre and 11 artist . Originally introduced in in the U.S. in April 2003 , the iTunes Store now Store now serf customer in 22 country . The iTunes Store flat panel display including the 30-inch Apple Cinema HD Display™ , a widescreen active-matrix LCD with 2560-by-1600 pixel resolution , the 23-inch 2560-by-1600 pixel resolution , the 23-inch Apple Cinema HD Display with Apple Cinema HD Display with 1920-by-1200 pixel resolution and the 20-inch 1920-by-1200 pixel resolution and the 20-inch Apple Cinema Display® with 1680-by-1050 20-inch Apple Cinema Display® with 1680-by-1050 pixel resolution . These display dual FireWire and dual USB 2.0 port and use the industry Mac OS X Server version 10.4 is the server version of and Server Solutions In April 2006 , the Company introduced Apple Company introduced Apple Remote Desktop 3 , the Company ’ s application . Apple Remote Desktop 3 is a Universal application , Tiger system and includes over 30 Automator action for automating repetitive when they return online . 12 Xsan® , the Company ’ file system , is a 64-bit cluster file system for Mac Professional Application Software In March 2006 , the Company introduced Final introduced Final Cut Studio ® 5.1 , the Company ’ s Studio feature Final Cut Pro® 5 , Soundtrack® Pro , Motion , Soundtrack® Pro , Motion 2 , and DVD Studio Pro® , and DVD Studio Pro® 4 . All of these application Universal . Final Cut Pro® 5.1 , the latest version of correction , Final Cut Pro 5.1 enables user to view and time , group up to 128 source together into multi-clips , time . DVD Studio Pro® 4 is the latest version of . With DVD Studio Pro 4 user can author Standard Definition environment . DVD Studio Pro 4 includes Compressor 2 , a Studio Pro 4 includes Compressor 2 , a full-featured video and format including H.264 . Motion 2 is a real-time motion graphic to their project . Motion 2 feature interactive animation of text by built-in GPU acceleration at 8-bit , 16-bit , or 32-bit GPU acceleration at 8-bit , 16-bit , or 32-bit float film 8-bit , 16-bit , or 32-bit float film quality . With film quality . With Motion 2 ’ s design tool , Soundtrack Pro also feature over 50 professional plug-in for enhancing sound enhancing sound , and over 5,000 music and sound effect loop effect loop . In February 2006 , the Company introduced Logic® the Company introduced Logic® Pro 7.2 , a Universal version of production software . Logic Pro 7.2 is used by musician around Apple Loops , Logic Pro 7 add distributed audio processing , via an Ethernet network . 13 Consumer , Education , and Oriented Application Software iLife® ‘ 06 In January 2006 , the iLife® ‘ 06 In January 2006 , the Company introduced iLife the Company introduced iLife ‘ 06 , an upgrade to it which feature iWeb™ , iPhoto® 6 , iMovie® HD 6 , iPhoto® 6 , iMovie® HD 6 , iDVD® 6 , GarageBand™ iMovie® HD 6 , iDVD® 6 , GarageBand™ 3 , and , iDVD® 6 , GarageBand™ 3 , and iTunes® . All application in the iLife ‘ 06 suite . iWeb allows user photo software application . iPhoto 6 add new photo management and feature , support up to 250,000 photo , and introduces Photocasting™ software application . iMovie HD 6 includes new real-time effect that video effect . iMovie HD 6 also provides a solution to consumer DVD player . iDVD® 6 allows user to take content high resolution slideshows . iDVD 6 feature 10 new Apple-designed menu slideshows . iDVD 6 feature 10 new Apple-designed menu theme in theme in both widescreen ( 16:9 ) and standard ( 4:3 16:9 ) and standard ( 4:3 ) format . GarageBand™ is to create song . GarageBand 3 allows user to record , music jingle . iLife ‘ 06 also includes iTunes , the of iPods . In September 2006 , the Company introduced iTunes , the Company introduced iTunes 7 , the latest version of it iTunes software . iTunes 7 delivers new feature such a already own . iWork™ ‘ 06 In January 2006 , the iWork™ ‘ 06 In January 2006 , the Company introduced iWork the Company introduced iWork ‘ 06 , a new Universal version and presentation . iWork ‘ 06 includes Pages® 2 and Keynote® iWork ‘ 06 includes Pages® 2 and Keynote® 3 . Pages® includes Pages® 2 and Keynote® 3 . Pages® give user the content and style . Pages 2 feature mail merge with Mac with predefined field . Pages 2 also feature new template for , and invoice . Pages 2 allows user to insert table user can export their Pages 2 document to other format . document to other format . 14 Keynote® is the Company ’ , and storyboards . Keynote 3 offer additional way to create multiple display . In May 2006 , the Company introduced a of Final Cut Express HD 3.5 . Features introduced in this of multi-stream effect , Soundtrack 1.5 with a suite of audio production tool , and LiveType 2.1 with animated text and title and title . In March 2006 , the Company introduced Logic® the Company introduced Logic® Express 7.2 , a Universal version of streamlined version of Logic Pro 7.2 that provides a basic set high-resolution audio of up to 24-bit/96kHz , the adaptive self-configuring track self-configuring track mixer , and 32-bit floating-point math provides professional sound sound quality . Logic Express 7 come with support for project publishing capability . In July 2006 , the Company introduced FileMaker the Company introduced FileMaker Pro 8.5 , a Universal version of New feature of FileMaker Pro 8.5 include FileMaker Web Viewer , video on computer . QuickTime 7 feature H.264 encoding and can content stream possible . QuickTime 7 also delivers multi-channel audio and other QuickTime product . QuickTime 7 Pro , a suite of and video file . QuickTime 7 Pro allows user to create site ; iDisk , a 15 virtual hard drive accessible anywhere email storage of up to 1GB for individual and 2GB for to 1GB for individual and 2GB for family . Wireless Connectivity Extreme is based on the 802.11g standard , which support speed which support speed up to 54 Mbps , and is fully Wi-Fi device that use the 802.11b standard . AirPort Extreme Base Stations can serve up to 50 Macintosh and Windows user simultaneously AirPort Express is the first 802.11g mobile base station that can a single piece design weighing 6.7 ounce . Other Connectivity and of data at up to 3 Mbps within a range of within a range of approximately 30 foot . Bluetooth technology for configuration technology including Ethernet or 802.11-based wireless network like the Company and user diagnostic tool . 16 Markets and Distribution The Company customer accounted for more than 10 % of net sale in % of net sale in 2006 , 2005 , or 2004 net sale in 2006 , 2005 , or 2004 . The 2006 , 2005 , or 2004 . The Company also sell ’ s net sale in 2006 were through it U.S. education and new product introduced by 17 the Company often initially utilize requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company belief and development expenditure totaled $ 712 million , $ 535 million $ 712 million , $ 535 million ( a restated ( million ( a restated ( 1 ) ) , and $ ) ) , and $ 491 million ( a restated ( million ( a restated ( 1 ) ) in 2006 , ( 1 ) ) in 2006 , 2005 , and 2004 ) ) in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Patents , of it personnel . ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. 18 Many of the Company Statements of this Form 10-K. 18 Many of the Company ’ largest geographic marketplace . Approximately 60 % of the Company ’ ’ s net sale in 2006 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in the Notes to Consolidated Financial Statements at Note 11 , “ Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 19 Environmental Laws Compliance with federal . Employees As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had 17,787 2006 , the Company had 17,787 full-time equivalent employee and an equivalent employee and an additional 2,399 temporary equivalent employee and contractor s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of enforcement action . On June 29 , 2006 , the Company . On June 29 , 2006 , the Company announced that stock option grant made between 1997 and 2001 , including a grant made between 1997 and 2001 , including a grant to preceding Part I , Item 1 , and in Note 2 1 , and in Note 2 “ Restatement of Consolidated Financial Financial Statements in this Form 10-K , a a result of stock option grant made in 20 certain prior period . As statement included in this Form 10-K . The internal review , in Part I , Item 3 , “ Legal Proceedings ” cash flow . In August 2006 , the Company received a the Company ’ s Form 10-Q for the quarter ended July for the quarter ended July 1 , 2006 ( the “ quarter ended July 1 , 2006 ( the “ Third Quarter the “ Third Quarter Form 10-Q ” ) , the Company set forth in Marketplace Rule 4310 ( c ) ( 14 4310 ( c ) ( 14 ) and wa therefore subject Stock Market . On October 24 , 2006 , the NASDAQ . On October 24 , 2006 , the NASDAQ Listing Qualifications filing the Third Quarter Form 10-Q , and any required restatement with the SEC by December 29 , 2006 . On December SEC by December 29 , 2006 . On December 29 , , 2006 . On December 29 , 2006 , the Company . On December 29 , 2006 , the Company filed the filed the Third Quarter Form 10-Q with the SEC . With the filing of this Form 10-K , the Company belief that it non-compliance with Marketplace Rule 4310 ( c ) ( 14 4310 ( c ) ( 14 ) , subject to NASDAQ in Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . The Company is also the Company ’ s normal 21 business operation . Should the pressure on gross margin . 22 The personal computer industry ha continue to pursue one-to-one ( 1:1 ) learning solution in education learning solution in education . 1:1 learning solution typically consist of a wireless network . These 1:1 learning solution and other strategic execute profitably on large strategic 23 arrangement . Failure to do of operation . In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new system wa completed in August 2006 , and it transition for Xserve wa completed in November 2006 . This transition ha been be able to maintain it 24 historical gross margin percentage on requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company ’ result and financial condition . 25 Final assembly of product sold owner may seek to limit 26 the Company ’ s access at all . In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new system wa completed in August 2006 , and it transition for Xserve wa completed in November 2006 . The Company depends on software developer to develop or 27 upgrade Macintosh-compatible software product . in Part I , Item 3 of this Form 10-K . Item 3 of this Form 10-K . In the opinion of in Part I , Item 3 of this Form 10-K or Item 3 of this Form 10-K or should several of these and uncertainty . Through September 30 , 2006 , the Company . Through September 30 , 2006 , the Company had opened , the Company had opened 165 retail store . The Company with lease term ranging from 5 to 20 year , the term ranging from 5 to 20 year , the majority of majority of which are for 10 year . The Company could because of personnel cost , 28 depreciation of store construction cost eight such store through September 2006 . Because of their location location have term ranging from 10 to 14 year with total term ranging from 10 to 14 year with total remaining commitment per location ranging from $ 4 million to $ 33 million $ 4 million to $ 33 million . Closure or poor growth in iPod sale without 29 corresponding growth in higher margin prepaid a total of $ 1.25 billion under these agreement . customer or manufacturing vendor . 30 The Company ’ s success in foreign exchange rate . 31 Further information related to the in Part II , Item 7A of this Form 10-K under Item 7A of this Form 10-K under the subheading “ Foreign in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Notes 1 and 3 this Form 10-K at Notes 1 and 3 of Notes to 10-K at Notes 1 and 3 of Notes to Consolidated Financial of operation . In December 2004 , the FASB issued new SFAS ” ) No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( “ SFAS No ( “ SFAS No . 123R ” ) , Share-Based Payment which the Company adopted in 2006 . In 2006 , stock-based adopted in 2006 . In 2006 , stock-based compensation expense reduced common share by approximately $ 0.14 . Although the adoption of adoption of SFAS No . 123R is expected to continue to of earnings per share . 32 Item 1B . Unresolved Staff per share . 32 Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ Ireland . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company leased approximately , the Company leased approximately 3.6 million square foot of space lease are for term of 5 to 15 year and generally for term of 5 to 15 year and generally provide renewal renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leased space . Leased space includes approximately 1.2 million square foot of retail for retail space range from 5 to 20 year , the space range from 5 to 20 year , the majority of majority of which are for 10 year , and often contain . The Company owns a 352,000 square-foot manufacturing facility in Cork . The Company also owns 805,000 square foot of facility in , the Company owns approximately 1.9 million square foot of facility , California , including approximately 948,000 square foot purchased during 2006 948,000 square foot purchased during 2006 for the future development of corporate campus , and approximately 107,000 square foot for a data owns additional facility totaling approximately 169,000 square foot . The Company for it product . Item 3 . Legal Proceedings The Company Company settled certain matter during 2006 that did not individually or Computer , Inc. On January 28 , 2005 , a plaintiff Inc. On January 28 , 2005 , a plaintiff filed a in the Company ’ s 17-inch Studio Display monitor result in an amended complaint on October 24 , 2005 , adding additional complaint on October 24 , 2005 , adding additional named plaintiff to include purchaser of the 20-inch Apple Cinema Display and the Apple Cinema Display and the 23-inch Apple Cinema HD Display . equitable relief . On November 14 , 2005 , the Company . On November 14 , 2005 , the Company 33 filed , 2005 , the Company 33 filed an answer to the to the allegation regarding the 17-inch display and a demurrer/motion to to the allegation regarding the 20-inch and 23-inch display on the allegation regarding the 20-inch and 23-inch display on the ground that a status conference on November 1 , 2005 , the Court conference on November 1 , 2005 , the Court ordered Plaintiffs an amended complaint on December 12 , 2005 , and the complaint on December 12 , 2005 , and the Company answered the Company answered on January 5 , 2006 denying all allegation answered on January 5 , 2006 denying all allegation and asserting by the Court on September 18 , 2006 . The final Court on September 18 , 2006 . The final approval hearing hearing is scheduled for February 15 , 2007 . Settlement of scheduled for February 15 , 2007 . Settlement of this matter Burst.com , Inc. on January 4 , 2006 in the United Inc. on January 4 , 2006 in the United States District that U.S. Patent Nos . 4,963,995 , 5,164,839 , 5,057,932 and Patent Nos . 4,963,995 , 5,164,839 , 5,057,932 and 5,995,705 ( . 4,963,995 , 5,164,839 , 5,057,932 and 5,995,705 ( “ Burst , 5,164,839 , 5,057,932 and 5,995,705 ( “ Burst patent ” answer and counterclaim on April 17 , 2006 . Burst alleges counterclaim on April 17 , 2006 . Burst alleges that the infringe U.S. Patent Nos . 4,963,995 , 5,057,932 , 5,164,839 , Patent Nos . 4,963,995 , 5,057,932 , 5,164,839 , and 5,995,705 . 4,963,995 , 5,057,932 , 5,164,839 , and 5,995,705 ; iTunes 5,057,932 , 5,164,839 , and 5,995,705 ; iTunes Store , iPod hearing is set for February 8 , 2007 . Trial is set for February 8 , 2007 . Trial is set for Trial is set for February 26 , 2008 . Apple Corps set for February 26 , 2008 . Apple Corps Ltd. v. filed this action on July 4 , 2003 in the High action on July 4 , 2003 in the High Court of the Company ha breached a 1991 agreement that resolved earlier trademark filed a motion on October 13 , 2003 , challenging jurisdiction motion on October 13 , 2003 , challenging jurisdiction in the denied this motion on April 7 , 2004 . The Company motion on April 7 , 2004 . The Company filed an the appeal . In November 2004 , Plaintiff served the Company of Particulars and on December 23 , 2004 , the Company and on December 23 , 2004 , the Company filed a a Defence . On November 24 , 2005 , Plaintiff filed . On November 24 , 2005 , Plaintiff filed a Re-Amended filed it Defence on December 16 , 2005 . Trial took Defence on December 16 , 2005 . Trial took place from Trial took place from March 29 , 2006 through April 5 place from March 29 , 2006 through April 5 , 2006 29 , 2006 through April 5 , 2006 . Judgment wa 2006 through April 5 , 2006 . Judgment wa given in of the Company on May 8 , 2006 and Apple Corps Company on May 8 , 2006 and Apple Corps wa ordered be heard in late February 2007 . On October 8 , February 2007 . On October 8 , 2003 , the Company . On October 8 , 2003 , the Company filed a Company ha not breached the 1991 agreement . Apple Corps challenged denied that challenge on March 25 , 2004 . Apple Corps challenge on March 25 , 2004 . Apple Corps subsequently prevailed Board of Directors on May 19 , 2005 in Santa Clara Directors on May 19 , 2005 in Santa Clara County Superior the Company ’ s March 14 , 2005 , proxy statement ’ s March 14 , 2005 , proxy statement wa false , which wa approved by 34 shareholder at the annual meeting annual meeting held on April 21 , 2005 . Plaintiff , held on April 21 , 2005 . Plaintiff , who ostensibly the Company . On July 27 , 2005 , Plaintiff filed . On July 27 , 2005 , Plaintiff filed an amended individual shareholder . On January 10 , 2006 , the Court . On January 10 , 2006 , the Court sustained defendant second amended complaint on February 7 , 2006 , and the complaint on February 7 , 2006 , and the Company filed After a hearing on June 13 , 2006 , the Court hearing on June 13 , 2006 , the Court sustained the the director . On July 24 , 2006 , plaintiff filed . On July 24 , 2006 , plaintiff filed a third grant to certain officer in 2003 and 2004 and an option certain officer in 2003 and 2004 and an option grant to ’ s CEO in January 2000 . A demurrer that the will be heard on January 30 , 2007 . Baghdasarian , heard on January 30 , 2007 . Baghdasarian , et al County Superior Court on October 31 , 2005 , on behalf Court on October 31 , 2005 , on behalf of a equitable remedy . On December 15 , 2005 , the Company . On December 15 , 2005 , the Company filed an purported class action on May 16 , 2006 in the United action on May 16 , 2006 in the United States District of iPod purchaser between May 2002 and the present . The without prejudice , on September 18 , 2006 . Birdsong v. , on September 18 , 2006 . Birdsong v. Apple Computer wa initially filed on January 30 , 2006 in the United filed on January 30 , 2006 in the United States District action wa filed on January 31 , 2006 in the United filed on January 31 , 2006 in the United States District the four-year period before January 31 , 2006 . That action period before January 31 , 2006 . That action alleged breach of California , and the 35 Patterson action wa dismissed . motion to dismiss on November 3 , 2006 . Plaintiffs will dismiss on November 3 , 2006 . Plaintiffs will not oppose second amended complaint by January 15 , 2007 . A similar complaint by January 15 , 2007 . A similar complaint , , Canada , on February 1 , 2006 , seeking authorization , on February 1 , 2006 , seeking authorization to institute certification is scheduled for February 8 and 9 , 2007 , scheduled for February 8 and 9 , 2007 , although Plaintiff February 8 and 9 , 2007 , although Plaintiff counsel ha County Superior Court on February 17 , 2005 . The initial Court on February 17 , 2005 . The initial complaint alleged other relief . On May 9 , 2005 , the Court . On May 9 , 2005 , the Court granted the Superior Court . On May 2 , 2005 , Plaintiffs filed . On May 2 , 2005 , Plaintiffs filed an amended in it entirety on November 10 , 2005 . The Court entirety on November 10 , 2005 . The Court granted Plaintiffs an amended complaint on December 29 , 2005 . Plaintiffs ’ complaint on December 29 , 2005 . Plaintiffs ’ amended complaint the amended complaint on January 31 , 2006 , which the complaint on January 31 , 2006 , which the Court sustained the Court sustained on March 3 , 2006 on sixteen of sustained on March 3 , 2006 on sixteen of seventeen cause granted in part on September 9 , 2006 . Plaintiffs filed part on September 9 , 2006 . Plaintiffs filed a further further amended complaint on September 21 , 2006 . On October complaint on September 21 , 2006 . On October 2 , , 2006 . On October 2 , 2006 , the Company . On October 2 , 2006 , the Company filed an the Butzer action on August 23 , 2005 in the United action on August 23 , 2005 in the United States District action wa filed on January 20 , 2006 in the United filed on January 20 , 2006 in the United States District action wa filed on February 10 , 2006 in the 36 filed on February 10 , 2006 in the 36 United States 10 , 2006 in the 36 United States District Court for the Butzer complaint on October 19 , 2005 denying all material complaint on October 19 , 2005 denying all material allegation and the Wirges action on February 28 , 2006 , and also action on February 28 , 2006 , and also filed a the Blackwell complaint on March 15 , 2006 denying all material complaint on March 15 , 2006 denying all material allegation and purported class action on January 3 , 2005 in the United action on January 3 , 2005 in the United States District alleged violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business and motion to dismiss on February 10 , 2005 . On September dismiss on February 10 , 2005 . On September 9 , , 2005 . On September 9 , 2005 , the Court . On September 9 , 2005 , the Court denied the an amended complaint on September 23 , 2005 and the Company complaint on September 23 , 2005 and the Company filed an filed an answer on October 18 , 2005 . On May answer on October 18 , 2005 . On May 8 , , 2005 . On May 8 , 2006 , the Court . On May 8 , 2006 , the Court heard Plaintiff for Slattery . In August 2006 , the court dismissed Slattery Rosen ) . On November 2 , 2006 , the Company . On November 2 , 2006 , the Company filed an certification is set for April 16 , 2007 . Contois Music set for April 16 , 2007 . Contois Music Technology LLC filed this action on June 13 , 2005 in the United action on June 13 , 2005 in the United States District of U.S. Patent No . 5,864,868 , entitled “ Computer Control filed an answer on November 23 , 2005 denying all material answer on November 23 , 2005 denying all material allegation and hearing wa held on June 13 , 2006 and the court held on June 13 , 2006 and the court issued a claim construction ruling on July 24 , 2006 . The party ruling on July 24 , 2006 . The party agreed to case wa dismissed on August 18 , 2006 . This matter dismissed on August 18 , 2006 . This matter is now Inc. ( filed on May 15 , 2006 , International Trade filed on May 15 , 2006 , International Trade Comission ) Inc. ( filed on May 15 , 2006 , United States filed on May 15 , 2006 , United States District Court , Inc. ( filed May 15 , 2006 , United States ( filed May 15 , 2006 , United States District Court Inc. ( filed on June 1 , 2007 , International Trade filed on June 1 , 2007 , International Trade Comission ) Labs ( filed on June 1 , 2006 , United States filed on June 1 , 2006 , United States District Court of Texas ) On May 15 , 2006 , Creative Labs ) On May 15 , 2006 , Creative Labs , Inc. Company infringed U.S. patent number 6,928,433 ( “ ‘ 433 patent number 6,928,433 ( “ ‘ 433 patent ” ) and seeking United States . On May 15 , 2006 , Creative also . On May 15 , 2006 , Creative also brought suit suit against the Company in 37 the United States District Court the iPod infringed the ‘ 433 patent . The District Court ITC Action . On May 15 , 2006 , the Company . On May 15 , 2006 , the Company brought suit Creative infringed U.S. patent number 5,479,602 ( “ ‘ 602 patent number 5,479,602 ( “ ‘ 602 patent ” ) , U.S. ) , U.S. patent number 5,586,237 ( “ ‘ 237 patent number 5,586,237 ( “ ‘ 237 patent ” ) , U.S. ) , U.S. patent number 5,898,434 ( “ ‘ 434 patent number 5,898,434 ( “ ‘ 434 patent ” ) , and , and U.S. patent number 6,731,312 ( “ ‘ 312 patent number 6,731,312 ( “ ‘ 312 patent ” ) . On ” ) . On May 17 , 2006 , the Company . On May 17 , 2006 , the Company filed an also infringed U.S. patent number 5,341,293 ( “ ‘ 293 patent number 5,341,293 ( “ ‘ 293 patent ” ) , U.S. ) , U.S. patent number 6,047,342 ( “ ‘ 342 patent number 6,047,342 ( “ ‘ 342 patent ” ) , and , and U.S. patent number 5,799,280 ( “ ‘ 280 patent number 5,799,280 ( “ ‘ 280 patent ” ) . On ” ) . On June 1 , 2006 , the Company . On June 1 , 2006 , the Company brought suit Creative infringed U.S. patent number 6,157,363 ( “ ‘ 363 patent number 6,157,363 ( “ ‘ 363 patent ” ) , U.S. ) , U.S. patent number 5,640,566 ( “ ‘ 566 patent number 5,640,566 ( “ ‘ 566 patent ” ) , and , and U.S. patent number 5,504,852 ( “ ‘ 852 patent number 5,504,852 ( “ ‘ 852 patent ” ) . On ” ) . On June 27 , 2006 , the Company . On June 27 , 2006 , the Company filed an also infringed U.S. patent number 7,046,230 ( “ ‘ 230 patent number 7,046,230 ( “ ‘ 230 patent ” ) and U.S. ) and U.S. patent number 6,282,646 ( “ ‘ 646 patent number 6,282,646 ( “ ‘ 646 patent ” ) . At allegation relating to the ‘ 230 patent and the ‘ 646 230 patent and the ‘ 646 patent . On June 1 646 patent . On June 1 , 2006 , the Company . On June 1 , 2006 , the Company filed a that Creative infringed the ‘ 230 patent , the ‘ 293 230 patent , the ‘ 293 patent , and the ‘ patent , and the ‘ 434 patent . On June 5 434 patent . On June 5 , 2006 , the Company . On June 5 , 2006 , the Company filed an Creative also infringed the ‘ 646 patent . The party reached were dismissed a of October 13 , 2006 . These matter a of October 13 , 2006 . These matter are concluded County Superior Court on December 5 , 2002 , alleging that Court on December 5 , 2002 , alleging that the Company filed an answer on April 17 , 2003 denying all allegation answer on April 17 , 2003 denying all allegation and asserting his complaint . On October 29 , 2003 , the Company . On October 29 , 2003 , the Company filed a denied the appeal on August 17 , 2005 , affirming the appeal on August 17 , 2005 , affirming the trial court which wa denied on November 23 , 2005 . The case denied on November 23 , 2005 . The case wa remanded or result of operation . 38 European Commission Investigation The European investigating the charge under Articles 81 and 82 of the European charge under Articles 81 and 82 of the European Commission Treaty infringement case filed on May 16 , 2006 in the United filed on May 16 , 2006 in the United States District filed an answer on July 28 , 2006 denying all material answer on July 28 , 2006 denying all material allegation and set for trial on November 13 , 2007 if no class trial on November 13 , 2007 if no class is certified is certified or on June 10 , 2008 if a class or on June 10 , 2008 if a class is certified an amended complaint on October 23 , 2006 and the Company complaint on October 23 , 2006 and the Company filed an an amended answer on November 28 , 2006 denying all material answer on November 28 , 2006 denying all material allegation and purported class action on December 23 , 2005 in San Diego action on December 23 , 2005 in San Diego County Superior Powerbook G4 computer : the 12-inch , 1.5GHz computer with 512MB computer : the 12-inch , 1.5GHz computer with 512MB of memory 12-inch , 1.5GHz computer with 512MB of memory and a 100GB 512MB of memory and a 100GB hard drive ; and the hard drive ; and the 15-inch , 1.67GHz computer with 1GB ; and the 15-inch , 1.67GHz computer with 1GB of memory 15-inch , 1.67GHz computer with 1GB of memory and a 100GB 1GB of memory and a 100GB hard drive . Plaintiffs alleged other relief . On February 28 , 2006 , the Company . On February 28 , 2006 , the Company filed a purported class action on September 22 , 2003 in Los Angeles action on September 22 , 2003 in Los Angeles County Superior an amended complaint on March 30 , 2004 and the Company complaint on March 30 , 2004 and the Company filed an filed an answer on September 23 , 2004 , denying all answer on September 23 , 2004 , denying all allegation and the pleading based upon Proposition 64 . The Court granted both at a hearing on April 6 , 2005 . Plaintiffs thereafter hearing on April 6 , 2005 . Plaintiffs thereafter filed an an amended complaint on May 6 , 2005 . The Defendants complaint on May 6 , 2005 . The Defendants filed a filed a demurrer on June 6 , 2005 , which the demurrer on June 6 , 2005 , which the Court granted filed an answer on December 15 , 2005 denying all allegation answer on December 15 , 2005 denying all allegation and asserting the Plaintiffs in this action 39 and the matter is concluded purported class action on August 31 , 2006 in the United action on August 31 , 2006 in the United States District class of consumer who purchased 65W Power Adapters for iBooks and iBooks and Powerbooks between November 2002 and the present . The alleges various problem with the 65W Adapter , including fraying , filed an answer on October 20 , 2006 denying the material answer on October 20 , 2006 denying the material allegation and Mediation is set for March 13 , 2007 . Greaves v. set for March 13 , 2007 . Greaves v. Apple Computer Computer , Inc. On June 30 , 2006 Plaintiff filed this Inc. On June 30 , 2006 Plaintiff filed this purported class First Amended Complaint on August 16 , 2006 . The Company Complaint on August 16 , 2006 . The Company filed an filed an answer on October 3 , 2006 denying all allegation answer on October 3 , 2006 denying all allegation and asserting filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District other defendant of U.S. Patent 5,280,371 entitled “ Directional Diffuser for filed an answer on December 21 , 2004 denying all material answer on December 21 , 2004 denying all material allegation and manufacturer supplier . On May 18 , 2005 the Court stayed . On May 18 , 2005 the Court stayed the case an amended complaint on November 7 , 2005 adding additional defendant complaint on November 7 , 2005 adding additional defendant and expanding Federal Action ) On June 30 , 2006 , a putative ) On June 30 , 2006 , a putative derivative action Complaint wa filed on December 18 , 2006 . The action filed on December 18 , 2006 . The action purport to well a claim under Sections 10 ( b ) , 14 10 ( b ) , 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the after the Company ’ s 40 announcement on June 29 , s 40 announcement on June 29 , 2006 that an internal announcement on June 29 , 2006 that an internal investigation had stock option grant made between 1997 and 2001 , that a grant made between 1997 and 2001 , that a special committee Computer , Inc. On July 5 , 2006 , a putative Inc. On July 5 , 2006 , a putative derivative action Derivative Litigation , No . 1:06CV066692 , assigned to the Hon complaint wa filed on October 5 , 2006 , alleging a filed on October 5 , 2006 , alleging a variety of corporate asset . On December 7 , 2006 , the Court . On December 7 , 2006 , the Court granted the these action . On November 3 , 2006 , the Boston . On November 3 , 2006 , the Boston Retirement Board purported class action on June 7 , 2005 , in Superior action on June 7 , 2005 , in Superior Court , action on behalf of Generations 1 , 2 and 3 iPod behalf of Generations 1 , 2 and 3 iPod owner in Generations 1 , 2 and 3 iPod owner in Quebec . in Quebec . On February 2 , 2006 , the Court . On February 2 , 2006 , the Court dismissed Plaintiff will be heard on February 22 , 2007 . Two similar heard on February 22 , 2007 . Two similar complaint relative Ontario , Canada on August 15 , 2005 and September 12 Canada on August 15 , 2005 and September 12 , 2005 15 , 2005 and September 12 , 2005 , respectively . 2005 and September 12 , 2005 , respectively . Both action Calgary , Canada on October 5 , 2005 , purportedly on Canada on October 5 , 2005 , purportedly on behalf of against the Company between late 2002 and early 2006 asserting various between late 2002 and early 2006 asserting various cause of action negligent and intentional interference with 41 economic relationship , negligent misrepresentation Computer International complaint on November 12 , 2003 , denying all complaint on November 12 , 2003 , denying all allegation and the Macadam case on December 3 , 2004 denying all allegation case on December 3 , 2004 denying all allegation and asserting filed amended complaint on February 7 , 2005 , and on complaint on February 7 , 2005 , and on March 16 2005 , and on March 16 , 2005 the Company filed and on March 16 , 2005 the Company filed answer to filed a complaint on February 23 , 2005 . The Company complaint on February 23 , 2005 . The Company filed an to this complaint on April 20 , 2005 denying all allegation complaint on April 20 , 2005 denying all allegation and asserting affirmative defense . On February 28 , 2006 , MacGuys and . On February 28 , 2006 , MacGuys and Creative Online set for trial on November 27 , 2006 . The Company trial on November 27 , 2006 . The Company ha reached of operation . On October 1 , 2003 , one of . On October 1 , 2003 , one of the reseller a preliminary injunction on December 19 , 2003 . On December injunction on December 19 , 2003 . On December 6 , , 2003 . On December 6 , 2004 , Macadam filed . On December 6 , 2004 , Macadam filed for Chapter , Macadam filed for Chapter 11 Bankruptcy in the Northern District the bankruptcy proceeding on February 16 , 2005 . The Macadam proceeding on February 16 , 2005 . The Macadam bankruptcy case case wa converted to Chapter 7 ( liquidation ) on April ( liquidation ) on April 29 , 2005 . The Company ) on April 29 , 2005 . The Company ha reached Macadam case with the Chapter 7 Bankruptcy Trustee . The Bankruptcy approved the settlement on July 17 , 2006 over the objection settlement on July 17 , 2006 over the objection of Tom the settlement . On December 19 , 2005 , Tom Santos . On December 19 , 2005 , Tom Santos , who cause of action on January 20 , 2006 . Those motion action on January 20 , 2006 . Those motion were heard motion were heard on February 17 , 2006 , and the heard on February 17 , 2006 , and the Court sustained further amended complaint on July 14 , 2006 . The Company complaint on July 14 , 2006 . The Company filed a which wa granted on September 9 , 2006 . Santos filed granted on September 9 , 2006 . Santos filed an amended denied in part on December 15 , 2006 . The Company part on December 15 , 2006 . The Company also filed complaint against Santos on January 20 , 2006 alleging violation of Santos on January 20 , 2006 alleging violation of California Business against the Company on January 20 , 2006 alleging breach of Company on January 20 , 2006 alleging breach of contract , an amended complaint on June 5 , 2006 , adding Tech complaint on June 5 , 2006 , adding Tech Data Corporation Tech Data Corporation a a 42 defendant . The Company filed filed an answer on July 5 , 2006 generally denying all answer on July 5 , 2006 generally denying all allegation and set for trial on June 18 , 2007 . PhatRat Technology trial on June 18 , 2007 . PhatRat Technology LLC v. filed this action on October 24 , 2006 in the United action on October 24 , 2006 in the United States District infringement of U.S. Patent number 6,499,000 entitled “ System and Method , ” U.S. Patent number 6,885,971 entitled “ Methods and Systems , ” U.S. Patent number 6,963,818 entitled “ Mobile Speedometer Systems ” and U.S. Patent number 7,092,846 entitled “ Systems and Methods allowed U.S. Patent Application number 11/358,508 entitled “ Shoes Employing Monitoring filed this action on November 3 , 2005 in the United action on November 3 , 2005 in the United States District Company of U.S. Patent number 6,243,725 and 6,763,345 both entitled “ U.S. Patent number 6,243,725 and 6,763,345 both entitled “ List Building filed an answer on January 13 , 2006 denying all material answer on January 13 , 2006 denying all material allegation and hearing is set for May 17 , 2007 and trial is set for May 17 , 2007 and trial is scheduled for trial is scheduled for December 3 , 2007 . Quantum Technology scheduled for December 3 , 2007 . Quantum Technology Management , filed this action on December 21 , 2005 in the United action on December 21 , 2005 in the United States District infringement of U.S. Patent number 5,730,165 entitled “ Time Domain Capacitive other relief . On May 11 , 2006 , Quantum filed . On May 11 , 2006 , Quantum filed an amended a defendant . On July 31 , 2006 , the Company . On July 31 , 2006 , the Company filed an and invalidity . On November 30 , 2006 Plaintiff filed a . On November 30 , 2006 Plaintiff filed a reply to , Canada , on August 5 , 2005 , seeking authorization , on August 5 , 2005 , seeking authorization to institute price in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 but later declared 2003 and December 14 , 2004 but later declared invalid by certification hearing took place January 13 , 2006 . On February took place January 13 , 2006 . On February 24 , , 2006 . On February 24 , 2006 , the Court . On February 24 , 2006 , the Court granted class the last week of March 2006 . Discovery is closed and anticipates will take place in 2007 . Tse v. Apple Computer and other defendant on August 5 , 2005 in the United defendant on August 5 , 2005 in the United States District Company of U.S. Patent number 6,665,797 entitled “ Protection of Software filed an answer on October 31 , 2005 denying all material answer on October 31 , 2005 denying all material allegation and affirmative defense . On October 28 , 2005 , the Company . On October 28 , 2005 , the Company and the which wa granted on August 31 , 2006 . 43 Tucker granted on August 31 , 2006 . 43 Tucker v. Apple August 31 , 2006 . 43 Tucker v. Apple Computer , purported class action on July 21 , 2006 in the United action on July 21 , 2006 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On November 3 , 2006 , the Company . On November 3 , 2006 , the Company filed a which wa heard on November 20 , 2006 . On December heard on November 20 , 2006 . On December 20 , , 2006 . On December 20 , 2006 , the Court . On December 20 , 2006 , the Court denied the filed this complaint on February 9 , 2005 alleging that the complaint on February 9 , 2005 alleging that the above-listed entity violating consumer law by ( 1 ) omitting to mention that with the iPod and ( 2 ) allegedly tying the sale case took place on May 24 , 2005 . The Company place on May 24 , 2005 . The Company ’ s complaint wa served on November 8 , 2005 . Plaintiff ’ served on November 8 , 2005 . Plaintiff ’ s responsive pleading wa filed on February 10 , 2006 . The Company filed on February 10 , 2006 . The Company filed a filed a reply on June 6 , 2006 and UFC filed reply on June 6 , 2006 and UFC filed a response filed a response on September 19 , 2006 . Vitt v. response on September 19 , 2006 . Vitt v. Apple Computer purported class action on November 7 , 2006 in the United action on November 7 , 2006 in the United States District purported class action on August 24 , 2006 , in the action on August 24 , 2006 , in the United States ’ s stock from December 1 , 2005 through August 11 stock from December 1 , 2005 through August 11 , 2006 1 , 2005 through August 11 , 2006 , and asserts 2005 through August 11 , 2006 , and asserts claim under and asserts claim under Sections 10 ( b ) and 14 10 ( b ) and 14 ( a ) of the to be heard on December 4 , 2006 but wa taken heard on December 4 , 2006 but wa taken off calendar Computer , Inc. on October 19 , 2005 in the United Inc. on October 19 , 2005 in the United States District ; amended complaint filed October 26 , 2005 ) ; Moschella complaint filed October 26 , 2005 ) ; Moschella , et , Inc. ( filed October 26 , 2005 United States District ( filed October 26 , 2005 United States District Court for , Inc. ( filed October 26 , 2005 , Los Angeles ( filed October 26 , 2005 , Los Angeles County Superior , Inc. ( filed October 31 , 2005 , United States ( filed October 31 , 2005 , United States District Court , Inc. ( filed November 4 , 2005 , United States ( filed November 4 , 2005 , United States District Court Inc. ( filed on November 23 , 2005 , United States filed on November 23 , 2005 , United States District Court Inc. ( filed on December 7 , 2005 , United States filed on December 7 , 2005 , United States District Court Inc. ( filed on December 22 , 2005 , United States filed on December 22 , 2005 , United States District Court United States District Court for 44 the Northern District of California Inc. ( filed on December 29 , 2005 , United States filed on December 29 , 2005 , United States District Court Inc. ( filed on February 9 , 2006 , San Mateo filed on February 9 , 2006 , San Mateo County Superior First Amended Complaint filed March 16 , 2006 ) These federal Complaint filed March 16 , 2006 ) These federal and state Whyte pursuant to an April 17 , 2006 , order of to an April 17 , 2006 , order of the Judicial Amended Master Complaint on September 21 , 2006 , alleging violation Complaint on September 21 , 2006 , alleging violation of California putative plaintiff class : ( 1 ) all U.S. resident ( the screen ; and ( 2 ) all iPod nano purchaser the Master Complaint on November 20 , 2006 . The two Complaint on November 20 , 2006 . The two California state action were coordinated on May 4 , 2006 , and assigned coordinated on May 4 , 2006 , and assigned to the Class Action Complaint on June 8 , 2006 , alleging violation Complaint on June 8 , 2006 , alleging violation of California Consolidated Amended Complaint on October 6 , 2006 . Two similar Complaint on October 6 , 2006 . Two similar complaint , Quebec , Canada on October 27 , 2005 and November 9 Canada on October 27 , 2005 and November 9 , 2005 27 , 2005 and November 9 , 2005 , respectively , 2005 and November 9 , 2005 , respectively , seeking authorization file wa stayed in May 2006 in favor of the Carpentier will be heard on December 18 , 2006 . No further heard on December 18 , 2006 . No further date have Ontario , Canada on January 9 , 2006 seeking authorization to Canada on January 9 , 2006 seeking authorization to institute a to defend . On December 18 , 2006 , plaintiff ’ . On December 18 , 2006 , plaintiff ’ s counsel , most likely in January 2007 . The file is now new counsel appears . Item 4 . Submission of Matters to s fiscal year ended September 30 , 2006 . 45 PART year ended September 30 , 2006 . 45 PART II Item September 30 , 2006 . 45 PART II Item 5 . . 45 PART II Item 5 . Market for Registrant ’ fiscal year . On February 28 , 2005 , the Company . On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per Second Quarter First Quarter Fiscal 2006 price range per common share range per common share $ 77.78- $ 50.16 $ 73.80- $ common share $ 77.78- $ 50.16 $ 73.80- $ 55.41 $ $ 77.78- $ 50.16 $ 73.80- $ 55.41 $ 86.40- $ $ 50.16 $ 73.80- $ 55.41 $ 86.40- $ 57.67 $ $ 73.80- $ 55.41 $ 86.40- $ 57.67 $ 75.46- $ $ 55.41 $ 86.40- $ 57.67 $ 75.46- $ 47.87 Fiscal $ 86.40- $ 57.67 $ 75.46- $ 47.87 Fiscal 2005 price $ 57.67 $ 75.46- $ 47.87 Fiscal 2005 price range per $ 75.46- $ 47.87 Fiscal 2005 price range per common share range per common share $ 53.20- $ 36.37 $ 43.74- $ common share $ 53.20- $ 36.37 $ 43.74- $ 34.13 $ $ 53.20- $ 36.37 $ 43.74- $ 34.13 $ 45.06- $ $ 36.37 $ 43.74- $ 34.13 $ 45.06- $ 31.58 $ $ 43.74- $ 34.13 $ 45.06- $ 31.58 $ 34.22- $ $ 34.13 $ 45.06- $ 31.58 $ 34.22- $ 18.65 Holders $ 45.06- $ 31.58 $ 34.22- $ 18.65 Holders As of $ 31.58 $ 34.22- $ 18.65 Holders As of December 13 18.65 Holders As of December 13 , 2006 , there were As of December 13 , 2006 , there were 29,317 shareholder , 2006 , there were 29,317 shareholder of record . Dividends pay cash dividend in either 2006 or 2005 . The Company dividend in either 2006 or 2005 . The Company anticipates that by Regulation S-K , Item 201 ( d ) is incorporated to Part III , Item 12 of this Form 10-K . Item 12 of this Form 10-K . Purchases of Equity Securities Affiliated Purchasers None . Item 6 . Selected Financial Data The balance sheet a of September 24 , 2005 and the consolidated a of September 24 , 2005 and the consolidated statement of the fiscal year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 have been restated 2005 and September 25 , 2004 have been restated a set a set forth in the 2006 Form 10-K . The data forth in the 2006 Form 10-K . The data for the balance sheet a of September 2004 , 2003 , and 2002 a of September 2004 , 2003 , and 2002 and the 2004 , 2003 , and 2002 and the consolidated statement of the fiscal year ended September 2003 and 2002 have been restated year ended September 2003 and 2002 have been restated to reflect read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that preceding Part I , Item 1 and in Note 2 , Item 1 and in Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. 46 The Company ha not Statements of this Form 10-K. 46 The Company ha not amended previously-filed Annual Reports on Form 10-K or Quarterly Reports on Form or Quarterly Reports on Form 10-Q for the period affected by this Annual Report on Form 10-K , and the financial statement Five fiscal year ended September 30 , 2006 ( In million year ended September 30 , 2006 ( In million , except and per share amount ) 2006 2005 2004 2003 2002 As per share amount ) 2006 2005 2004 2003 2002 As Restated share amount ) 2006 2005 2004 2003 2002 As Restated ( amount ) 2006 2005 2004 2003 2002 As Restated ( 1 ) 2006 2005 2004 2003 2002 As Restated ( 1 ) 2003 2002 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 2 1 ) As Restated ( 2 ) As Restated ( 2 2 ) As Restated ( 2 ) Net sale $ 19,315 2 ) Net sale $ 19,315 $ 13,931 $ 8,279 $ Net sale $ 19,315 $ 13,931 $ 8,279 $ 6,207 $ $ 19,315 $ 13,931 $ 8,279 $ 6,207 $ 5,742 Net $ 13,931 $ 8,279 $ 6,207 $ 5,742 Net income $ $ 8,279 $ 6,207 $ 5,742 Net income $ 1,989 $ $ 5,742 Net income $ 1,989 $ 1,328 $ 266 $ Net income $ 1,989 $ 1,328 $ 266 $ 57 $ $ 1,989 $ 1,328 $ 266 $ 57 $ 42 Earnings $ 1,328 $ 266 $ 57 $ 42 Earnings per common $ 266 $ 57 $ 42 Earnings per common share : common share : Basic $ 2.36 $ 1.64 $ 0.36 $ : Basic $ 2.36 $ 1.64 $ 0.36 $ 0.08 $ $ 2.36 $ 1.64 $ 0.36 $ 0.08 $ 0.06 Diluted $ 1.64 $ 0.36 $ 0.08 $ 0.06 Diluted $ 2.27 $ 0.36 $ 0.08 $ 0.06 Diluted $ 2.27 $ 1.55 0.08 $ 0.06 Diluted $ 2.27 $ 1.55 $ 0.34 $ 0.06 Diluted $ 2.27 $ 1.55 $ 0.34 $ 0.08 $ $ 2.27 $ 1.55 $ 0.34 $ 0.08 $ 0.06 Cash $ 1.55 $ 0.34 $ 0.08 $ 0.06 Cash dividend declared $ 0.34 $ 0.08 $ 0.06 Cash dividend declared per common in thousand ) : Basic 844,058 808,439 743,180 721,262 710,044 Diluted thousand ) : Basic 844,058 808,439 743,180 721,262 710,044 Diluted 877,526 ) : Basic 844,058 808,439 743,180 721,262 710,044 Diluted 877,526 856,878 : Basic 844,058 808,439 743,180 721,262 710,044 Diluted 877,526 856,878 774,776 Basic 844,058 808,439 743,180 721,262 710,044 Diluted 877,526 856,878 774,776 723,352 808,439 743,180 721,262 710,044 Diluted 877,526 856,878 774,776 723,352 721,445 Cash 743,180 721,262 710,044 Diluted 877,526 856,878 774,776 723,352 721,445 Cash , 721,262 710,044 Diluted 877,526 856,878 774,776 723,352 721,445 Cash , cash 710,044 Diluted 877,526 856,878 774,776 723,352 721,445 Cash , cash equivalent Diluted 877,526 856,878 774,776 723,352 721,445 Cash , cash equivalent , , and short-term investment $ 10,110 $ 8,261 $ 5,464 $ short-term investment $ 10,110 $ 8,261 $ 5,464 $ 4,566 $ $ 10,110 $ 8,261 $ 5,464 $ 4,566 $ 4,337 Total $ 8,261 $ 5,464 $ 4,566 $ 4,337 Total asset $ $ 5,464 $ 4,566 $ 4,337 Total asset $ 17,205 $ $ 4,337 Total asset $ 17,205 $ 11,516 $ 8,039 $ Total asset $ 17,205 $ 11,516 $ 8,039 $ 6,817 $ $ 17,205 $ 11,516 $ 8,039 $ 6,817 $ 6,305 Long-term $ 11,516 $ 8,039 $ 6,817 $ 6,305 Long-term debt ( $ 8,039 $ 6,817 $ 6,305 Long-term debt ( including current $ — $ — $ 304 $ 316 Total liability $ $ — $ 304 $ 316 Total liability $ 7,221 $ $ 316 Total liability $ 7,221 $ 4,088 $ 2,976 $ Total liability $ 7,221 $ 4,088 $ 2,976 $ 2,594 $ $ 7,221 $ 4,088 $ 2,976 $ 2,594 $ 2,205 Shareholders $ 4,088 $ 2,976 $ 2,594 $ 2,205 Shareholders ’ equity $ 2,976 $ 2,594 $ 2,205 Shareholders ’ equity $ 9,984 2,205 Shareholders ’ equity $ 9,984 $ 7,428 $ 5,063 $ ’ equity $ 9,984 $ 7,428 $ 5,063 $ 4,223 $ $ 9,984 $ 7,428 $ 5,063 $ 4,223 $ 4,100 Net $ 7,428 $ 5,063 $ 4,223 $ 4,100 Net gain before $ 5,063 $ 4,223 $ 4,100 Net gain before tax related and equity investment of $ 4 million and $ 10 million $ 4 million and $ 10 million were recognized in 2004 10 million were recognized in 2004 and 2003 , respectively . were recognized in 2004 and 2003 , respectively . A net and equity investment of $ 42 million wa recognized in 2002 42 million wa recognized in 2002 . Net charge related to Company restructuring action of $ 23 million , $ 26 million $ 23 million , $ 26 million , and $ 30 26 million , and $ 30 million were recognized in 2004 30 million were recognized in 2004 , 2003 , and 2002 were recognized in 2004 , 2003 , and 2002 , respectively 2004 , 2003 , and 2002 , respectively . In 2003 2002 , respectively . In 2003 , settlement of the Company in a gain of $ 6 million . Net income during million . Net income during 2005 benefited by $ 81 million during 2005 benefited by $ 81 million from the reversal of net of tax of $ 1 million wa recognized in 2003 1 million wa recognized in 2003 . ( 1 ) See recognized in 2003 . ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. 47 ( 2 ) The Statements of this Form 10-K. 47 ( 2 ) The Selected this Form 10-K. 47 ( 2 ) The Selected Financial Data The Selected Financial Data for 2003 and 2002 ha been restated Financial Data for 2003 and 2002 ha been restated to reflect preceding Part I , Item 1 of this Form 10-K. As Item 1 of this Form 10-K. As a result of these income wa reduced by $ 12 million and $ 23 million $ 12 million and $ 23 million for the year ended for the year ended September 27 , 2003 and September 28 year ended September 27 , 2003 and September 28 , 2002 27 , 2003 and September 28 , 2002 , respectively a 2003 and September 28 , 2002 , respectively a follows : : Fiscal Year Ended September 27 , 2003 Fiscal Year Ended Year Ended September 27 , 2003 Fiscal Year Ended September 28 2003 Fiscal Year Ended September 28 , 2002 As Reported Adjustments Year Ended September 28 , 2002 As Reported Adjustments As Restated As Restated Net sale $ 6,207 $ — $ 6,207 $ $ 6,207 $ — $ 6,207 $ 5,742 $ — $ $ — $ 6,207 $ 5,742 $ — $ 5,742 Cost $ 5,742 $ — $ 5,742 Cost of sale 4,499 1 $ 5,742 Cost of sale 4,499 1 4,500 4,139 3 4,142 5,742 Cost of sale 4,499 1 4,500 4,139 3 4,142 Gross Cost of sale 4,499 1 4,500 4,139 3 4,142 Gross margin of sale 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 sale 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 ( 4,499 1 4,500 4,139 3 4,142 Gross margin 1,708 ( 1 4,139 3 4,142 Gross margin 1,708 ( 1 ) 1,707 1,603 4,142 Gross margin 1,708 ( 1 ) 1,707 1,603 ( 3 margin 1,708 ( 1 ) 1,707 1,603 ( 3 ) 1,600 1,708 ( 1 ) 1,707 1,603 ( 3 ) 1,600 Total 1 ) 1,707 1,603 ( 3 ) 1,600 Total operating expense 1,707 1,603 ( 3 ) 1,600 Total operating expense 1,709 15 ) 1,600 Total operating expense 1,709 15 1,724 1,586 26 1,612 1,600 Total operating expense 1,709 15 1,724 1,586 26 1,612 Operating Total operating expense 1,709 15 1,724 1,586 26 1,612 Operating income operating expense 1,709 15 1,724 1,586 26 1,612 Operating income ( expense 1,709 15 1,724 1,586 26 1,612 Operating income ( loss 1,709 15 1,724 1,586 26 1,612 Operating income ( loss ) income ( loss ) ( 1 ) ( 16 ) ( ) ( 1 ) ( 16 ) ( 17 ) 17 ) ( 16 ) ( 17 ) 17 ( 29 ) 16 ) ( 17 ) 17 ( 29 ) ( 12 ( 17 ) 17 ( 29 ) ( 12 ) Income 17 ( 29 ) ( 12 ) Income before accounting change ) Income before accounting change 68 ( 12 ) 56 65 before accounting change 68 ( 12 ) 56 65 ( 23 change 68 ( 12 ) 56 65 ( 23 ) 42 68 ( 12 ) 56 65 ( 23 ) 42 Cumulative 12 ) 56 65 ( 23 ) 42 Cumulative effect of 56 65 ( 23 ) 42 Cumulative effect of accounting change , net of income tax 1 — 1 — — — of income tax 1 — 1 — — — Net income — — Net income $ 69 $ ( 12 ) $ income $ 69 $ ( 12 ) $ 57 $ 65 $ ( 12 ) $ 57 $ 65 $ ( 23 12 ) $ 57 $ 65 $ ( 23 ) $ 57 $ 65 $ ( 23 ) $ 42 Earnings ( $ ( 23 ) $ 42 Earnings ( loss ) per accounting change : Basic $ 0.09 $ ( 0.01 ) $ Basic $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.06 Diluted $ $ ( 0.03 ) $ 0.06 Diluted $ 0.09 $ ( ) $ 0.06 Diluted $ 0.09 $ ( 0.01 ) $ Diluted $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.06 Earnings per $ ( 0.03 ) $ 0.06 Earnings per common share : common share : Basic $ 0.10 $ ( 0.02 ) $ Basic $ 0.10 $ ( 0.02 ) $ 0.08 $ 0.09 $ ( 0.02 ) $ 0.08 $ 0.09 $ ( 0.03 0.02 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.06 Diluted $ $ ( 0.03 ) $ 0.06 Diluted $ 0.09 $ ( ) $ 0.06 Diluted $ 0.09 $ ( 0.01 ) $ Diluted $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 0.01 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.08 $ 0.09 $ ( 0.03 ) $ 0.06 Item 7 $ ( 0.03 ) $ 0.06 Item 7 . Management ’ 0.03 ) $ 0.06 Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is preceding Part I , Item 1 and in Note 2 , Item 1 and in Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K . The net of tax , which amounted to $ 4 million in 2006 , wa to $ 4 million in 2006 , wa recorded by the in it fourth quarter of 2006 . The net of tax of operation amounted to $ 7 million and $ 10 million $ 7 million and $ 10 million in 2005 and 2004 and $ 10 million in 2005 and 2004 , 48 respectively 10 million in 2005 and 2004 , 48 respectively . The in 2005 and 2004 , 48 respectively . The impact of annual or quarterly period in 2006 , 2005 , and 2004 quarterly period in 2006 , 2005 , and 2004 . Executive 2006 , 2005 , and 2004 . Executive Overview The Company in Part I , Item 1 of this Form 10-K under Item 1 of this Form 10-K under the heading “ Business product and brand awareness . 49 In June 2005 , the awareness . 49 In June 2005 , the Company announced it in it computer . During 2006 , the Company introduced new system wa completed in August 2006 , and it transition for Xserve wa completed in November 2006 . The MacBook Pro , feature Mac OS X version 10.4 Tiger , iLife ‘ 06 10.4 Tiger , iLife ‘ 06 , and the Company ’ are further discussed in Item 1A under the heading “ Risk internationally . The Company had 165 store open a of September store open a of September 30 , 2006 . The Company a of September 30 , 2006 . The Company also staff and accompanying note . Note 1 of the Notes to Consolidated Financial Statements of this Form 10-K describes the significant accounting policy revenue pursuant to applicable accounting 50 standard , including American Institute SOP ” ) No . 97-2 , Software Revenue Recognition , SAB ” ) No . 104 , Revenue Recognition . The debt , the general economic 51 environment , the financial condition requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is accordance with SFAS No . 123R . Under the provision of provision of SFAS No . 123R , stock-based compensation cost is BSM model requires various highly 52 judgmental assumption including volatility , preceding Part I , Item 1 and in Note 2 , Item 1 and in Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. Income Taxes The Company record accordance with SFAS No . 109 , Accounting for Income Taxes operation and financial position . 53 Net Sales Net sale and in thousand ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 Change 2005 Change 24 , September 25 , 2006 Change 2005 Change 2004 Net September 25 , 2006 Change 2005 Change 2004 Net Sales by , 2006 Change 2005 Change 2004 Net Sales by Operating Segment : Americas net sale $ 9,307 41 % $ 6,590 64 Americas net sale $ 9,307 41 % $ 6,590 64 % $ 9,307 41 % $ 6,590 64 % $ 4,019 Europe 9,307 41 % $ 6,590 64 % $ 4,019 Europe net $ 6,590 64 % $ 4,019 Europe net sale 4,094 33 $ 4,019 Europe net sale 4,094 33 % 3,073 71 % 4,019 Europe net sale 4,094 33 % 3,073 71 % 1,799 net sale 4,094 33 % 3,073 71 % 1,799 Japan net sale 4,094 33 % 3,073 71 % 1,799 Japan net sale 33 % 3,073 71 % 1,799 Japan net sale 1,208 31 % 1,799 Japan net sale 1,208 31 % 920 36 % 1,799 Japan net sale 1,208 31 % 920 36 % 677 net sale 1,208 31 % 920 36 % 677 Retail net sale 1,208 31 % 920 36 % 677 Retail net sale 31 % 920 36 % 677 Retail net sale 3,359 43 % 677 Retail net sale 3,359 43 % 2,350 98 % 677 Retail net sale 3,359 43 % 2,350 98 % 1,185 net sale 3,359 43 % 2,350 98 % 1,185 Other Segments sale 3,359 43 % 2,350 98 % 1,185 Other Segments net 43 % 2,350 98 % 1,185 Other Segments net sale ( net sale ( a ) 1,347 35 % 998 67 % sale ( a ) 1,347 35 % 998 67 % 599 a ) 1,347 35 % 998 67 % 599 Total net ) 1,347 35 % 998 67 % 599 Total net sale 35 % 998 67 % 599 Total net sale $ 19,315 599 Total net sale $ 19,315 39 % $ 13,931 68 Total net sale $ 19,315 39 % $ 13,931 68 % $ 19,315 39 % $ 13,931 68 % $ 8,279 Unit 19,315 39 % $ 13,931 68 % $ 8,279 Unit Sales $ 13,931 68 % $ 8,279 Unit Sales by Operating Segment : Americas Macintosh unit sale 2,432 11 % 2,184 30 % Americas Macintosh unit sale 2,432 11 % 2,184 30 % 1,682 unit sale 2,432 11 % 2,184 30 % 1,682 Europe Macintosh sale 2,432 11 % 2,184 30 % 1,682 Europe Macintosh unit 11 % 2,184 30 % 1,682 Europe Macintosh unit sale 1,346 1,682 Europe Macintosh unit sale 1,346 18 % 1,138 47 % Europe Macintosh unit sale 1,346 18 % 1,138 47 % 773 unit sale 1,346 18 % 1,138 47 % 773 Japan Macintosh sale 1,346 18 % 1,138 47 % 773 Japan Macintosh unit 18 % 1,138 47 % 773 Japan Macintosh unit sale 304 773 Japan Macintosh unit sale 304 ( 3 ) % 313 Macintosh unit sale 304 ( 3 ) % 313 8 % 304 ( 3 ) % 313 8 % 291 Retail Macintosh ( 3 ) % 313 8 % 291 Retail Macintosh unit ) % 313 8 % 291 Retail Macintosh unit sale 886 291 Retail Macintosh unit sale 886 45 % 609 94 % Retail Macintosh unit sale 886 45 % 609 94 % 314 unit sale 886 45 % 609 94 % 314 Other Segments sale 886 45 % 609 94 % 314 Other Segments Macintosh 45 % 609 94 % 314 Other Segments Macintosh unit sale unit sale ( a ) 335 16 % 290 26 % sale ( a ) 335 16 % 290 26 % 230 a ) 335 16 % 290 26 % 230 Total Macintosh ) 335 16 % 290 26 % 230 Total Macintosh unit 16 % 290 26 % 230 Total Macintosh unit sale 5,303 230 Total Macintosh unit sale 5,303 17 % 4,534 38 % Total Macintosh unit sale 5,303 17 % 4,534 38 % 3,290 unit sale 5,303 17 % 4,534 38 % 3,290 Net Sales sale 5,303 17 % 4,534 38 % 3,290 Net Sales by 17 % 4,534 38 % 3,290 Net Sales by Product : Desktops ( b ) $ 3,319 ( 3 ) % $ b ) $ 3,319 ( 3 ) % $ 3,436 45 ( 3 ) % $ 3,436 45 % $ 2,373 Portables 3 ) % $ 3,436 45 % $ 2,373 Portables ( $ 3,436 45 % $ 2,373 Portables ( c ) 4,056 2,373 Portables ( c ) 4,056 43 % 2,839 11 % Portables ( c ) 4,056 43 % 2,839 11 % 2,550 c ) 4,056 43 % 2,839 11 % 2,550 Total Macintosh ) 4,056 43 % 2,839 11 % 2,550 Total Macintosh net 43 % 2,839 11 % 2,550 Total Macintosh net sale 7,375 2,550 Total Macintosh net sale 7,375 18 % 6,275 27 % Total Macintosh net sale 7,375 18 % 6,275 27 % 4,923 net sale 7,375 18 % 6,275 27 % 4,923 iPod 7,676 sale 7,375 18 % 6,275 27 % 4,923 iPod 7,676 69 18 % 6,275 27 % 4,923 iPod 7,676 69 % 4,540 6,275 27 % 4,923 iPod 7,676 69 % 4,540 248 % 27 % 4,923 iPod 7,676 69 % 4,540 248 % 1,306 4,923 iPod 7,676 69 % 4,540 248 % 1,306 Other music iPod 7,676 69 % 4,540 248 % 1,306 Other music related 69 % 4,540 248 % 1,306 Other music related product and and service ( d ) 1,885 110 % 899 223 % service ( d ) 1,885 110 % 899 223 % 278 d ) 1,885 110 % 899 223 % 278 Peripherals and ) 1,885 110 % 899 223 % 278 Peripherals and other 110 % 899 223 % 278 Peripherals and other hardware ( other hardware ( e ) 1,100 ( 2 ) % 1,126 ( e ) 1,100 ( 2 ) % 1,126 18 % 1,100 ( 2 ) % 1,126 18 % 951 Software , ( 2 ) % 1,126 18 % 951 Software , service ) % 1,126 18 % 951 Software , service , and other sale ( f ) 1,279 17 % 1,091 33 % sale ( f ) 1,279 17 % 1,091 33 % 821 f ) 1,279 17 % 1,091 33 % 821 Total net ) 1,279 17 % 1,091 33 % 821 Total net sale 17 % 1,091 33 % 821 Total net sale $ 19,315 821 Total net sale $ 19,315 39 % $ 13,931 68 Total net sale $ 19,315 39 % $ 13,931 68 % $ 19,315 39 % $ 13,931 68 % $ 8,279 Unit 19,315 39 % $ 13,931 68 % $ 8,279 Unit Sales $ 13,931 68 % $ 8,279 Unit Sales by Product : : Desktops ( b ) 2,434 ( 3 ) % 2,520 ( b ) 2,434 ( 3 ) % 2,520 55 % 2,434 ( 3 ) % 2,520 55 % 1,625 Portables ( ( 3 ) % 2,520 55 % 1,625 Portables ( c ) % 2,520 55 % 1,625 Portables ( c ) 2,869 1,625 Portables ( c ) 2,869 42 % 2,014 21 % Portables ( c ) 2,869 42 % 2,014 21 % 1,665 c ) 2,869 42 % 2,014 21 % 1,665 Total Macintosh ) 2,869 42 % 2,014 21 % 1,665 Total Macintosh unit 42 % 2,014 21 % 1,665 Total Macintosh unit sale 5,303 1,665 Total Macintosh unit sale 5,303 17 % 4,534 38 % Total Macintosh unit sale 5,303 17 % 4,534 38 % 3,290 unit sale 5,303 17 % 4,534 38 % 3,290 Net sale sale 5,303 17 % 4,534 38 % 3,290 Net sale per 17 % 4,534 38 % 3,290 Net sale per Macintosh unit sold ( g ) $ 1,391 1 % $ 1,384 ( ( g ) $ 1,391 1 % $ 1,384 ( 7 $ 1,391 1 % $ 1,384 ( 7 ) % $ 1 % $ 1,384 ( 7 ) % $ 1,496 iPod ( 7 ) % $ 1,496 iPod unit sale 39,409 75 $ 1,496 iPod unit sale 39,409 75 % 22,497 409 % 1,496 iPod unit sale 39,409 75 % 22,497 409 % 4,416 unit sale 39,409 75 % 22,497 409 % 4,416 Net sale sale 39,409 75 % 22,497 409 % 4,416 Net sale per 75 % 22,497 409 % 4,416 Net sale per iPod unit sold ( h ) $ 195 ( 3 ) % $ h ) $ 195 ( 3 ) % $ 202 ( ( 3 ) % $ 202 ( 32 ) % $ ) % $ 202 ( 32 ) % $ 296 Notes ( 32 ) % $ 296 Notes : ( a ) total iPod unit sale . 54 Fiscal Year 2006 versus 2005 sale . 54 Fiscal Year 2006 versus 2005 Net sale during 54 Fiscal Year 2006 versus 2005 Net sale during 2006 increased versus 2005 Net sale during 2006 increased 39 % or $ Net sale during 2006 increased 39 % or $ 5.4 billion increased 39 % or $ 5.4 billion from 2005 . This or $ 5.4 billion from 2005 . This increase wa due part to the fact that 2006 spanned 53 week while 2005 the fact that 2006 spanned 53 week while 2005 spanned 52 2006 spanned 53 week while 2005 spanned 52 week . Several 53 week while 2005 spanned 52 week . Several other factor sale of iPods increased $ 3.1 billion or 69 % during increased $ 3.1 billion or 69 % during 2006 compared to billion or 69 % during 2006 compared to 2005 . Unit % during 2006 compared to 2005 . Unit sale of iPods Unit sale of iPods totaled 39.4 million in 2006 , which iPods totaled 39.4 million in 2006 , which represents an increase which represents an increase of 75 % from 22.5 million iPod increase of 75 % from 22.5 million iPod unit sold in million iPod unit sold in 2005 . Strong iPod sale during . Strong iPod sale during 2006 reflected significant sale of both first introduced in October of 2005 and the iPod nano , nano , introduced in September 2005 , a well a continued iPod distribution point . During 2006 , the net sale per iPod unit sold decreased by 3 % compared to 2005 primarily by 3 % compared to 2005 primarily due to an overall introduction of the iPod in 2002 through 2006 , the Company the iPod in 2002 through 2006 , the Company ha sold the Company ha sold approximately 68 million iPods . · Macintosh Macintosh net sale increased $ 1.1 billion or 18 % during increased $ 1.1 billion or 18 % during 2006 compared to billion or 18 % during 2006 compared to 2005 . Macintosh % during 2006 compared to 2005 . Macintosh unit sale increased Macintosh unit sale increased by 769,000 unit or 17 % during increased by 769,000 unit or 17 % during 2006 compared to unit or 17 % during 2006 compared to 2005 . These % during 2006 compared to 2005 . These increase were mainly ’ s portable product increased 43 % and 42 % , product increased 43 % and 42 % , respectively , during % , respectively , during 2006 compared to 2005 . Macintosh , during 2006 compared to 2005 . Macintosh desktop net sale unit sale both decreased by 3 % during 2006 compared to decreased by 3 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The decrease in sale not begin shipping until August 2006 , and updated software application . A slight increase of 1 % during 2006 in net increase of 1 % during 2006 in net sale per Macintosh product and service increased $ 986 million or 110 % during increased $ 986 million or 110 % during 2006 compared to million or 110 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The increase wa primarily Store in Japan during August 2005 and Australia during October 2005 2005 and Australia during October 2005 . The increased sale from and other sale increased $ 188 million or 17 % during increased $ 188 million or 17 % during 2006 compared to million or 17 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The growth wa primarily sale were particularly high in 2005 due to the release of OS X Tiger in April 2005 . Offsetting the favorable factor ’ s net sale during 2006 were negatively impacted by the and other hardware declined $ 26 million or 2 % compared declined $ 26 million or 2 % compared to 2005 primarily or 2 % compared to 2005 primarily due to price decrease net sale of display for 2006 is consistent with the overall Macintosh professional desktop system . 55 Fiscal Year 2005 versus 2004 system . 55 Fiscal Year 2005 versus 2004 During 2005 , 55 Fiscal Year 2005 versus 2004 During 2005 , net sale Year 2005 versus 2004 During 2005 , net sale increased 68 2005 , net sale increased 68 % or $ 5.7 billion increased 68 % or $ 5.7 billion from 2004 . Several or $ 5.7 billion from 2004 . Several factor contributed favorably favorably to net sale during 2005 : · Net sale of sale of iPods rose $ 3.2 billion or 248 % during rose $ 3.2 billion or 248 % during 2005 compared to billion or 248 % during 2005 compared to 2004 . Unit % during 2005 compared to 2004 . Unit sale of iPods Unit sale of iPods totaled 22.5 million in 2005 , which iPods totaled 22.5 million in 2005 , which represented an increase which represented an increase of 409 % from the 4.4 million of 409 % from the 4.4 million iPod unit sold in million iPod unit sold in 2004 . Strong sale of iPods Strong sale of iPods during 2005 were experienced in all of iPod shuffle introduced in January 2005 , the release of an the iPod mini in February 2005 , the release of the the iPod nano in September 2005 , and expansion of the per iPod unit sold decreased 32 % primarily due to the priced iPod shuffle in January 2005 and iPod mini pricing reduction mini pricing reduction in February 2005 . From the introduction of introduction of the iPod in 2002 through 2005 , the Company the iPod in 2002 through 2005 , the Company had sold the Company had sold approximately 28 million iPods . · Net product and service increased $ 621 million or 223 % during increased $ 621 million or 223 % during 2005 compared to million or 223 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The Company experienced strong overall iPod unit sale for 2005 . The increased sale from Macintosh net sale increased $ 1.4 billion or 27 % during increased $ 1.4 billion or 27 % during 2005 compared to billion or 27 % during 2005 compared to 2004 . Unit % during 2005 compared to 2004 . Unit sale of Macintosh sale of Macintosh system increased 1.2 million unit or 38 % increased 1.2 million unit or 38 % during 2005 compared to unit or 38 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The increase in Macintosh Desktop demand wa stimulated in 2005 due to the iMac G5 the Mac mini in January 2005 . Net sale and unit sale of desktop product increased 45 % and 55 % , product increased 45 % and 55 % , respectively , during % , respectively , during 2005 compared to 2004 . Macintosh , during 2005 compared to 2004 . Macintosh net sale and portable product , which increased 11 % and 21 % , which increased 11 % and 21 % , respectively , compared , respectively , compared to 2004 . Net sale per Macintosh per Macintosh unit sold decreased 7 % on a year-over-year basis and other hardware rose by 18 % during 2005 compared to rose by 18 % during 2005 compared to 2004 primarily due % during 2005 compared to 2004 primarily due to an increase and other sale rose $ 270 million or 33 % during rose $ 270 million or 33 % during 2005 compared to million or 33 % during 2005 compared to 2004 . This % during 2005 compared to 2004 . This growth wa primarily to the release of version 10.4 Tiger in April 2005 . version 10.4 Tiger in April 2005 . Segment Operating Performance The country a well a the 56 Middle East and Africa . , and the U.K. during 2006 . Each reportable geographic operating may be found in Note 11 , “ Segment Information and Financial Statements of this Form 10-K. Americas During 2006 , net this Form 10-K. Americas During 2006 , net sale in the the Americas segment increased $ 2.7 billion , or 41 % $ 2.7 billion , or 41 % , compared to 2005 41 % , compared to 2005 . The main factor for with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other MacBook and MacBook Pro during 2006 . The overall increase in OS X sale decreased from 2005 since the Company ha not Tiger began shipping in April 2005 . During 2006 , the in April 2005 . During 2006 , the Americas segment represented the Americas segment represented approximately 48 % of the Company ’ net sale a compared to 47 % in the same period in the same period of 2005 . During 2006 , U.S. period of 2005 . During 2006 , U.S. education channel net Macintosh unit sale increased by 13 % and 11 % , increased by 13 % and 11 % , respectively , compared , respectively , compared to 2005 . Net sale from the the higher education market grew 22 % during 2006 compared to market grew 22 % during 2006 compared to 2005 due to % during 2006 compared to 2005 due to strong sale of continued budget constraint . During 2005 , net sale in the in the Americas segment grew 64 % or $ 2.6 billion grew 64 % or $ 2.6 billion compared to 2004 . $ 2.6 billion compared to 2004 . The increase in net increase in net sale during 2005 wa primarily attributable to the Retail segment , which had 117 store in the U.S. and a of the end of 2005 . Macintosh unit sale also unit sale also increased by 30 % in 2005 compared to increased by 30 % in 2005 compared to 2004 , driven % in 2005 compared to 2004 , driven primarily by strong which began shipping in September 2004 , and the Mac mini which wa introduced in January 2005 . During 2005 and 2004 in January 2005 . During 2005 and 2004 , the Americas 2005 . During 2005 and 2004 , the Americas segment represented the Americas segment represented approximately 47 % and 49 % , represented approximately 47 % and 49 % , respectively , of net sale and represented approximately 48 % and 51 % , represented approximately 48 % and 51 % , respectively , of sale and unit sale of 21 % for 2005 compared to sale of 21 % for 2005 compared to 2004 . Strength % for 2005 compared to 2004 . Strength in higher education growth in net sale of 32 % for the higher education the higher education channel during 2005 . Despite challenge in the net sale grew year-over-year by 11 % during 2005 due to year-over-year by 11 % during 2005 due to increased iBook sale to increased iBook sale and 1:1 education sale . Europe Europe segment net sale increased $ 1.0 billion or 33 % during increased $ 1.0 billion or 33 % during 2006 compared to billion or 33 % during 2006 compared to 2005 . Consistent % during 2006 compared to 2005 . Consistent with the Americas with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other Pro that were introduced during 2006 . In addition , Europe a decrease in desktop and 57 Mac OS X net sale OS X net sale during 2006 compared to 2005 . The sale during 2006 compared to 2005 . The decrease in desktop X sale have decreased from 2005 since the Company ha not Tiger began shipping in April 2005 . During 2005 , net in April 2005 . During 2005 , net sale in the the Europe segment grew $ 1.3 billion or 71 % from grew $ 1.3 billion or 71 % from 2004 . Total billion or 71 % from 2004 . Total Macintosh unit sale the current year by increasing 47 % in 2005 compared to by increasing 47 % in 2005 compared to 2004 . Consistent % in 2005 compared to 2004 . Consistent with the Americas . Demand in Europe during 2005 wa particularly strong for the experienced a year-over-year increase of 56 % from 2004 . Similar increase of 56 % from 2004 . Similar to the result and software were strong in 2005 . Japan Japan ’ s s net sale increased $ 288 million or 31 % during increased $ 288 million or 31 % during 2006 compared to million or 31 % during 2006 compared to 2005 . The % during 2006 compared to 2005 . The Japan segment experienced in October and September of 2005 , respectively . Japan also X sale have decreased from 2005 since the Company ha not Tiger began shipping in April 2005 . Total Macintosh unit sale Total Macintosh unit sale during 2006 remained relatively flat compared to remained relatively flat compared to 2005 . The relatively flat growth Macintosh unit sale were up 36 % and 8 % , were up 36 % and 8 % , respectively , during % , respectively , during 2005 compared to 2004 . Japan , during 2005 compared to 2004 . Japan experienced increased net and unit sale increased by 31 % and 41 % , increased by 31 % and 41 % , respectively , and and iPod sale increased by 220 % during 2005 compared to increased by 220 % during 2005 compared to 2004 . The % during 2005 compared to 2004 . The overall increase in portable system net sale during 2005 compared to 2004 , which sale during 2005 compared to 2004 , which the Company belief additional store in Japan during 2005 . Retail The Company opened . Retail The Company opened 41 new retail store during 2006 41 new retail store during 2006 , including a total of , including a total of 10 international store in the U.K. number of open store to 165 a of September 30 , to 165 a of September 30 , 2006 . This compare a of September 30 , 2006 . This compare to 124 2006 . This compare to 124 open store a of September open store a of September 24 , 2005 and 86 open a of September 24 , 2005 and 86 open store a September 24 , 2005 and 86 open store a of September open store a of September 25 , 2004 . The Retail a of September 25 , 2004 . The Retail segment ’ s net sale increased by 43 % to $ 3.4 billion by 43 % to $ 3.4 billion during 2006 compared to to $ 3.4 billion during 2006 compared to 2005 . Retail billion during 2006 compared to 2005 . Retail segment Macintosh unit segment Macintosh unit sale increased 45 % during 2006 compared to sale increased 45 % during 2006 compared to 2005 . With % during 2006 compared to 2005 . With an average of . With an average of 142 store open during 2006 , of 142 store open during 2006 , average revenue per store per store increased to $ 23.6 million compared to $ 22.4 23.6 million compared to $ 22.4 million during 2005 and $ to $ 22.4 million during 2005 and $ 15.6 million in million during 2005 and $ 15.6 million in 2004 . The and $ 15.6 million in 2004 . The current year increase with video-playing capability in October 2005 and the iPod nano during the iPod nano during September 2005 . The increase in other reported operating income of $ 198 million during 2006 a compared of $ 198 million during 2006 a compared to operating income to operating income of $ 151 million during 2005 and 58 of $ 151 million during 2005 and 58 operating income of 151 million during 2005 and 58 operating income of $ 39 58 operating income of $ 39 million during 2004 . This of $ 39 million during 2004 . This improvement wa primarily the Retail segment were $ 200 million in 2006 , bringing were $ 200 million in 2006 , bringing the total capital Retail segment to approximately $ 729 million . As of September million . As of September 30 , 2006 , the Retail As of September 30 , 2006 , the Retail segment had the Retail segment had approximately 5,787 employee and had outstanding operating related facility of approximately $ 887 million . The Company would margin percentage ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 2005 2004 As 24 , September 25 , 2006 2005 2004 As Restated ( , September 25 , 2006 2005 2004 As Restated ( 1 September 25 , 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Net sale $ 19,315 1 ) Net sale $ 19,315 $ 13,931 $ 8,279 Cost Net sale $ 19,315 $ 13,931 $ 8,279 Cost of sale $ 19,315 $ 13,931 $ 8,279 Cost of sale 13,717 9,889 $ 8,279 Cost of sale 13,717 9,889 6,022 Gross margin $ 8,279 Cost of sale 13,717 9,889 6,022 Gross margin $ 5,598 Cost of sale 13,717 9,889 6,022 Gross margin $ 5,598 $ 9,889 6,022 Gross margin $ 5,598 $ 4,042 $ 2,257 Gross Gross margin $ 5,598 $ 4,042 $ 2,257 Gross margin percentage $ 5,598 $ 4,042 $ 2,257 Gross margin percentage 29.0 % $ 2,257 Gross margin percentage 29.0 % 29.0 % 27.3 % Gross margin percentage 29.0 % 29.0 % 27.3 % ( 1 percentage 29.0 % 29.0 % 27.3 % ( 1 ) See 29.0 % 27.3 % ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K . Gross margin percentage of . Gross margin percentage of 29.0 % in 2006 remained flat percentage of 29.0 % in 2006 remained flat a compared to remained flat a compared to 2005 . The Company experienced more in the first quarter of 2007 primarily a a result of change , there is a 59 risk the Company will forecast Gross margin percentage increased in 2005 to 29.0 % of net percentage increased in 2005 to 29.0 % of net sale from % of net sale from 27.3 % of net sale in % of net sale in 2004 . The Company ’ s ’ s gross margin during 2005 increased due to more favorable for percentage ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 2005 2004 As 24 , September 25 , 2006 2005 2004 As Restated ( , September 25 , 2006 2005 2004 As Restated ( 1 September 25 , 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Research and development $ ) Research and development $ 712 $ 535 $ 491 Percentage and development $ 712 $ 535 $ 491 Percentage of net $ 712 $ 535 $ 491 Percentage of net sale 4 491 Percentage of net sale 4 % 4 % 6 % of net sale 4 % 4 % 6 % Selling , sale 4 % 4 % 6 % Selling , general , , and administrative expense $ 2,433 $ 1,864 $ 1,430 Percentage administrative expense $ 2,433 $ 1,864 $ 1,430 Percentage of net $ 2,433 $ 1,864 $ 1,430 Percentage of net sale 13 1,430 Percentage of net sale 13 % 13 % 17 % of net sale 13 % 13 % 17 % Restructuring cost sale 13 % 13 % 17 % Restructuring cost $ — $ — $ — $ 23 ( 1 ) See the $ — $ 23 ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. Research and Development ( R for R & D increased 33 % or $ 177 million increased 33 % or $ 177 million to $ 712 million $ 177 million to $ 712 million in 2006 compared to to $ 712 million in 2006 compared to $ 535 million in 2006 compared to $ 535 million in 2005 . The to $ 535 million in 2005 . The increase wa due , an increase of $ 46 million in stock-based compensation recognized adoption of SFAS No . 123R , and higher overall expense overall expense due to the 14th week added to the first the first fiscal quarter of 2006 to realign the Company ’ . In addition , during 2005 , the Company capitalized approximately the Company capitalized approximately $ 29.7 million of cost associated with development cost were capitalized during 2006 . Further information related to in Part II , Item 8 of this Form 10-K at Item 8 of this Form 10-K at Note 1 of Notes this Form 10-K at Note 1 of Notes to Consolidated Financial sale remained relatively flat in 2006 a compared to 2005 due in 2006 a compared to 2005 due to the significant increase SG & A increased $ 569 million or 31 % during increased $ 569 million or 31 % during 2006 compared to million or 31 % during 2006 compared to 2005 . These % during 2006 compared to 2005 . These increase are due , an increase of $ 50 million in stock-based compensation expense stock-based compensation expense recognized a 60 SG & A expense resulting adoption of SFAS No . 123R , a current year increase the expense associated with the 14th week added to the first the first fiscal quarter of 2006 . Despite the increase in of total net sale in 2006 remained flat a compared to remained flat a compared to 2005 . Expenditures for SG & SG & A increased $ 434 million or 30 % during increased $ 434 million or 30 % during 2005 compared to million or 30 % during 2005 compared to 2004 . These % during 2005 compared to 2004 . These increase are due of total net sale in 2005 wa 13 % , down net sale in 2005 wa 13 % , down from 17 13 % , down from 17 % in 2004 , which down from 17 % in 2004 , which is due to in total net sale of 68 % for the Company during % for the Company during 2005 . Fiscal 2004 Restructuring Actions Company during 2005 . Fiscal 2004 Restructuring Actions During 2004 , Fiscal 2004 Restructuring Actions During 2004 , the Company recorded total restructuring charge of approximately $ 23.0 million , including approximately $ million , including approximately $ 14.0 million in severance cost , in severance cost , $ 5.5 million in asset impairment , asset impairment , and $ 3.5 million for lease cancellation . a European workforce reduction during 2004 . Of the $ 23.0 2004 . Of the $ 23.0 million charge , $ 21.3 23.0 million charge , $ 21.3 million had been utilized by utilized by the end of 2006 , with the remainder consisting the remainder consisting of $ 1.7 million for lease cancellation . resulted in the termination of 452 position . Other Income and in million ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 2005 2004 Gains 24 , September 25 , 2006 2005 2004 Gains on non-current , September 25 , 2006 2005 2004 Gains on non-current investment September 25 , 2006 2005 2004 Gains on non-current investment , $ — $ — $ 4 Interest income $ 394 $ $ 4 Interest income $ 394 $ 183 $ 64 Interest Interest income $ 394 $ 183 $ 64 Interest expense — $ 394 $ 183 $ 64 Interest expense — — ( Interest expense — — ( 3 ) Other income ( expense expense ) , net ( 29 ) ( 18 ) ( net ( 29 ) ( 18 ) ( 8 ) Interest ) ( 18 ) ( 8 ) Interest and other income other income , net $ 365 $ 165 $ 53 Total , net $ 365 $ 165 $ 53 Total other income $ 365 $ 165 $ 53 Total other income and expense other income and expense $ 365 $ 165 $ 57 Gains and expense $ 365 $ 165 $ 57 Gains and Losses $ 365 $ 165 $ 57 Gains and Losses on Non-current in these non-current investment in 2004 and 2003 . Pretax gain non-current investment in 2004 and 2003 . Pretax gain recorded upon these non-current investment were $ 4 million in 2004 . Interest were $ 4 million in 2004 . Interest and Other Income income , net increased $ 200 million or 121 % to increased $ 200 million or 121 % to $ 365 million or 121 % to $ 365 million during 2006 compared to to $ 365 million during 2006 compared to $ 165 million during 2006 compared to $ 165 million in 2005 and $ to $ 165 million in 2005 and $ 53 million in million in 2005 and $ 53 million in 2004 . These and $ 53 million in 2004 . These increase are attributable market interest rate and the 14th week added to the first the first fiscal quarter of 2006 . The weighted average interest and short-term investment increased to 4.58 % in 2006 compared to increased to 4.58 % in 2006 compared to the 2.70 % in 2006 compared to the 2.70 % and 1.38 % rate to the 2.70 % and 1.38 % rate earned during 2005 1.38 % rate earned during 2005 and 2004 , respectively . rate earned during 2005 and 2004 , respectively . The current expense . Interest expense in 2004 consisted primarily of interest on the Company ’ s $ 300 million aggregate principal amount unsecured upon their maturity in February 2004 . The unsecured note 61 2004 . The unsecured note 61 were sold at 99.925 % note 61 were sold at 99.925 % of par for an effective yield to maturity of 6.51 % . Total deferred gain debt swap of approximately $ 23 million wa fully amortized a note ’ maturity in February 2004 . Provision for Income Taxes for the year ended September 30 , 2006 wa approximately 29 year ended September 30 , 2006 wa approximately 29 % . 30 , 2006 wa approximately 29 % . The Company ’ federal income tax rate of 35 % due primarily to certain a tax benefit of $ 20 million due to settlement of a net benefit of $ 20 million resulting from the dividend American Jobs Creation Act of 2004 ( “ AJCA ” ) below . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had deferred and tax credit of $ 739 million before being offset against asset . As of September 30 , 2006 and September 24 As of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , a valuation 2006 and September 24 , 2005 , a valuation allowance of a valuation allowance of $ 5 million wa recorded against the valuation allowance . On October 22 , 2004 , the AJCA . On October 22 , 2004 , the AJCA wa signed provision for the deduction of 85 % of certain foreign earnings , dividend qualifying for the 85 % deduction must be reinvested Board of Directors . During 2006 , the Company repatriated approximately the Company repatriated approximately $ 1.6 billion of foreign earnings . the earnings repatriated , $ 755 million is eligible for the a tax charge of $ 51 million related to the repatriation a tax benefit of $ 71 million resulting from the implementation tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In period such resolution occurs . 62 Quarterly Financial Information The following in the year ended September 30 , 2006 and September 24 year ended September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 ( in million 2006 and September 24 , 2005 ( in million , except per share amount ) : 2006 Fourth Quarter Third Quarter Second First Quarter Net sale $ 4,837 $ 4,370 $ 4,359 $ Net sale $ 4,837 $ 4,370 $ 4,359 $ 5,749 Cost $ 4,837 $ 4,370 $ 4,359 $ 5,749 Cost of sale $ 4,370 $ 4,359 $ 5,749 Cost of sale ( 1 5,749 Cost of sale ( 1 ) 3,425 3,045 3,062 4,185 of sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research and : Research and development ( 1 ) 179 175 176 182 and development ( 1 ) 179 175 176 182 Selling , development ( 1 ) 179 175 176 182 Selling , general ( 1 ) 179 175 176 182 Selling , general , 1 ) 179 175 176 182 Selling , general , and general , and administrative ( 1 ) 625 584 592 632 and administrative ( 1 ) 625 584 592 632 Total operating administrative ( 1 ) 625 584 592 632 Total operating expense ( 1 ) 625 584 592 632 Total operating expense 804 1 ) 625 584 592 632 Total operating expense 804 759 592 632 Total operating expense 804 759 768 814 Operating income 632 Total operating expense 804 759 768 814 Operating income 608 Total operating expense 804 759 768 814 Operating income 608 566 operating expense 804 759 768 814 Operating income 608 566 529 759 768 814 Operating income 608 566 529 750 Other income 768 814 Operating income 608 566 529 750 Other income and 814 Operating income 608 566 529 750 Other income and expense Operating income 608 566 529 750 Other income and expense 113 750 Other income and expense 113 95 76 81 Income before Other income and expense 113 95 76 81 Income before provision income and expense 113 95 76 81 Income before provision for and expense 113 95 76 81 Income before provision for income before provision for income tax 721 661 605 831 Provision for provision for income tax 721 661 605 831 Provision for income for income tax 721 661 605 831 Provision for income tax income tax 721 661 605 831 Provision for income tax 179 831 Provision for income tax 179 189 195 266 Net income Provision for income tax 179 189 195 266 Net income $ for income tax 179 189 195 266 Net income $ 542 income tax 179 189 195 266 Net income $ 542 $ 195 266 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.65 Shares $ 0.62 $ 0.54 $ 0.47 $ 0.65 Shares used in $ 0.54 $ 0.47 $ 0.65 Shares used in computing earnings in thousand ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 thousand ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) Includes 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) Includes stock-based 878,757 876,368 878,537 874,207 ( 1 ) Includes stock-based compensation expense : Cost of sale $ 5 $ 6 $ 5 $ of sale $ 5 $ 6 $ 5 $ 5 Research $ 5 $ 6 $ 5 $ 5 Research and development $ 6 $ 5 $ 5 Research and development $ 13 5 Research and development $ 13 $ 12 $ 13 $ and development $ 13 $ 12 $ 13 $ 15 Selling $ 13 $ 12 $ 13 $ 15 Selling , general $ 12 $ 13 $ 15 Selling , general , and general , and administrative $ 22 $ 19 $ 24 $ and administrative $ 22 $ 19 $ 24 $ 24 The $ 22 $ 19 $ 24 $ 24 The net of $ 19 $ 24 $ 24 The net of tax impact the stock-based compensation adjustment in 2006 , which amounted to $ , which amounted to $ 4 million , wa recorded by in it fourth quarter of 2006 and are described in the preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. 63 2005 Fourth Quarter Third Statements of this Form 10-K. 63 2005 Fourth Quarter Third Quarter of this Form 10-K. 63 2005 Fourth Quarter Third Quarter Second First Quarter As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Net sale $ 3,678 1 ) Net sale $ 3,678 $ 3,520 $ 3,243 $ Net sale $ 3,678 $ 3,520 $ 3,243 $ 3,490 Cost $ 3,678 $ 3,520 $ 3,243 $ 3,490 Cost of sale $ 3,520 $ 3,243 $ 3,490 Cost of sale ( 2 3,490 Cost of sale ( 2 ) 2,643 2,476 2,275 2,495 of sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 968 2,476 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense : 2,495 Gross margin 1,035 1,044 968 995 Operating expense : Research Gross margin 1,035 1,044 968 995 Operating expense : Research and : Research and development ( 2 ) 147 145 120 123 and development ( 2 ) 147 145 120 123 Selling , development ( 2 ) 147 145 120 123 Selling , general ( 2 ) 147 145 120 123 Selling , general , 2 ) 147 145 120 123 Selling , general , and general , and administrative ( 2 ) 471 473 448 472 and administrative ( 2 ) 471 473 448 472 Total operating administrative ( 2 ) 471 473 448 472 Total operating expense ( 2 ) 471 473 448 472 Total operating expense 618 2 ) 471 473 448 472 Total operating expense 618 618 448 472 Total operating expense 618 618 568 595 Operating income 472 Total operating expense 618 618 568 595 Operating income 417 Total operating expense 618 618 568 595 Operating income 417 426 operating expense 618 618 568 595 Operating income 417 426 400 618 568 595 Operating income 417 426 400 400 Other income 568 595 Operating income 417 426 400 400 Other income and 595 Operating income 417 426 400 400 Other income and expense Operating income 417 426 400 400 Other income and expense 60 400 Other income and expense 60 46 33 26 Income before Other income and expense 60 46 33 26 Income before provision income and expense 60 46 33 26 Income before provision for and expense 60 46 33 26 Income before provision for income before provision for income tax 477 472 433 426 Provision for provision for income tax 477 472 433 426 Provision for income for income tax 477 472 433 426 Provision for income tax income tax 477 472 433 426 Provision for income tax 49 426 Provision for income tax 49 153 145 133 Net income Provision for income tax 49 153 145 133 Net income $ for income tax 49 153 145 133 Net income $ 428 income tax 49 153 145 133 Net income $ 428 $ 145 133 Net income $ 428 $ 319 $ 288 $ Net income $ 428 $ 319 $ 288 $ 293 Earnings $ 428 $ 319 $ 288 $ 293 Earnings per common $ 319 $ 288 $ 293 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 $ 0.34 $ 0.37 Diluted $ 0.49 $ 0.37 $ 0.34 $ 0.35 Shares $ 0.49 $ 0.37 $ 0.34 $ 0.35 Shares used in $ 0.37 $ 0.34 $ 0.35 Shares used in computing earnings in thousand ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 thousand ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) See 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) See the 866,483 860,803 857,568 838,805 ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. ( 2 ) Includes stock-based of this Form 10-K. ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 1 Research and development $ — $ 1 $ 1 Research and development $ 1 1 Research and development $ 1 $ 2 $ 2 $ and development $ 1 $ 2 $ 2 $ 2 Selling $ 1 $ 2 $ 2 $ 2 Selling , general $ 2 $ 2 $ 2 Selling , general , and general , and administrative $ 10 $ 10 $ 9 $ and administrative $ 10 $ 10 $ 9 $ 10 The $ 10 $ 10 $ 9 $ 10 The impact of $ 10 $ 9 $ 10 The impact of the stock-based preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K wa not significant to the the interim balance sheet of 2006 and 2005 . 64 The balance sheet of 2006 and 2005 . 64 The following table of 2006 and 2005 . 64 The following table present the reported quarterly financial information during 2005 ( in million , except : Three Months Ended September 24 , 2005 Three Months Ended Months Ended September 24 , 2005 Three Months Ended June 25 2005 Three Months Ended June 25 , 2005 As Reported Adjustments Months Ended June 25 , 2005 As Reported Adjustments ( 1 2005 As Reported Adjustments ( 1 ) As Restated As Reported Restated As Reported Adjustments ( 1 ) As Restated Net sale As Restated Net sale $ 3,678 $ — $ 3,678 $ $ 3,678 $ — $ 3,678 $ 3,520 $ — $ $ — $ 3,678 $ 3,520 $ — $ 3,520 Cost $ 3,520 $ — $ 3,520 Cost of sale ( 2 3,520 Cost of sale ( 2 ) 2,643 — 2,643 2,476 of sale ( 2 ) 2,643 — 2,643 2,476 — 2,476 ( 2 ) 2,643 — 2,643 2,476 — 2,476 Gross margin 2 ) 2,643 — 2,643 2,476 — 2,476 Gross margin 1,035 2,643 — 2,643 2,476 — 2,476 Gross margin 1,035 — 1,035 2,476 — 2,476 Gross margin 1,035 — 1,035 1,044 — 1,044 2,476 Gross margin 1,035 — 1,035 1,044 — 1,044 Operating expense Gross margin 1,035 — 1,035 1,044 — 1,044 Operating expense : 1,035 — 1,035 1,044 — 1,044 Operating expense : Research and : Research and development ( 2 ) 147 — 147 145 and development ( 2 ) 147 — 147 145 — 145 ( 2 ) 147 — 147 145 — 145 Selling , 2 ) 147 — 147 145 — 145 Selling , general 147 — 147 145 — 145 Selling , general , and general , and administrative ( 2 ) 470 1 471 472 and administrative ( 2 ) 470 1 471 472 1 473 administrative ( 2 ) 470 1 471 472 1 473 Total ( 2 ) 470 1 471 472 1 473 Total operating 2 ) 470 1 471 472 1 473 Total operating expense ) 470 1 471 472 1 473 Total operating expense 617 470 1 471 472 1 473 Total operating expense 617 1 1 473 Total operating expense 617 1 618 617 1 618 473 Total operating expense 617 1 618 617 1 618 Operating Total operating expense 617 1 618 617 1 618 Operating income operating expense 617 1 618 617 1 618 Operating income 418 expense 617 1 618 617 1 618 Operating income 418 ( 617 1 618 617 1 618 Operating income 418 ( 1 617 1 618 Operating income 418 ( 1 ) 417 427 618 Operating income 418 ( 1 ) 417 427 ( 1 income 418 ( 1 ) 417 427 ( 1 ) 426 418 ( 1 ) 417 427 ( 1 ) 426 Other 1 ) 417 427 ( 1 ) 426 Other income and 417 427 ( 1 ) 426 Other income and expense 60 426 Other income and expense 60 — 60 46 — 46 income and expense 60 — 60 46 — 46 Income before and expense 60 — 60 46 — 46 Income before provision 60 — 60 46 — 46 Income before provision for income before provision for income tax 478 ( 1 ) 477 473 for income tax 478 ( 1 ) 477 473 ( 1 tax 478 ( 1 ) 477 473 ( 1 ) 472 478 ( 1 ) 477 473 ( 1 ) 472 Provision 1 ) 477 473 ( 1 ) 472 Provision for income 477 473 ( 1 ) 472 Provision for income tax 48 472 Provision for income tax 48 1 49 153 — 153 Provision for income tax 48 1 49 153 — 153 Net for income tax 48 1 49 153 — 153 Net income income tax 48 1 49 153 — 153 Net income $ 48 1 49 153 — 153 Net income $ 430 $ — 153 Net income $ 430 $ ( 2 ) $ income $ 430 $ ( 2 ) $ 428 $ 320 $ ( 2 ) $ 428 $ 320 $ ( 1 2 ) $ 428 $ 320 $ ( 1 ) $ 428 $ 320 $ ( 1 ) $ 319 Earnings per $ ( 1 ) $ 319 Earnings per common share : common share : Basic $ 0.52 $ — $ 0.52 $ $ 0.52 $ — $ 0.52 $ 0.39 $ — $ $ — $ 0.52 $ 0.39 $ — $ 0.39 Diluted $ 0.39 $ — $ 0.39 Diluted $ 0.50 $ ( — $ 0.39 Diluted $ 0.50 $ ( 0.01 ) $ Diluted $ 0.50 $ ( 0.01 ) $ 0.49 $ 0.37 $ ( 0.01 ) $ 0.49 $ 0.37 $ — $ 0.01 ) $ 0.49 $ 0.37 $ — $ 0.37 Shares $ 0.37 $ — $ 0.37 Shares used in computing earnings in thousand ) : Basic 821,420 — 821,420 815,092 — 815,092 ) : Basic 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 : Basic 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 79 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 821,420 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 ) Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 ) See 866,404 79 866,483 860,688 115 860,803 ( 1 ) See the 866,483 860,688 115 860,803 ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. ( 2 ) Includes stock-based of this Form 10-K. ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ — $ — $ — Research and development $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 2 $ — $ $ — $ 1 $ 2 $ — $ 2 Selling $ 2 $ — $ 2 Selling , general , and general , and administrative $ 9 $ 1 $ 10 $ and administrative $ 9 $ 1 $ 10 $ 9 $ $ 9 $ 1 $ 10 $ 9 $ 1 $ $ 1 $ 10 $ 9 $ 1 $ 10 65 $ 10 $ 9 $ 1 $ 10 65 Three Months $ 9 $ 1 $ 10 65 Three Months Ended March 9 $ 1 $ 10 65 Three Months Ended March 26 65 Three Months Ended March 26 , 2005 Three Months Ended Months Ended March 26 , 2005 Three Months Ended December 25 2005 Three Months Ended December 25 , 2004 As Reported Adjustments Months Ended December 25 , 2004 As Reported Adjustments ( 1 2004 As Reported Adjustments ( 1 ) As Restated As Reported Restated As Reported Adjustments ( 1 ) As Restated Net sale As Restated Net sale $ 3,243 $ — $ 3,243 $ $ 3,243 $ — $ 3,243 $ 3,490 $ — $ $ — $ 3,243 $ 3,490 $ — $ 3,490 Cost $ 3,490 $ — $ 3,490 Cost of sale ( 2 3,490 Cost of sale ( 2 ) 2,275 — 2,275 2,494 of sale ( 2 ) 2,275 — 2,275 2,494 1 2,495 ( 2 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 2 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 968 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 968 — 2,275 — 2,275 2,494 1 2,495 Gross margin 968 — 968 2,494 1 2,495 Gross margin 968 — 968 996 ( 1 2,495 Gross margin 968 — 968 996 ( 1 ) 995 Gross margin 968 — 968 996 ( 1 ) 995 Operating 968 — 968 996 ( 1 ) 995 Operating expense : 968 996 ( 1 ) 995 Operating expense : Research and : Research and development ( 2 ) 119 1 120 123 and development ( 2 ) 119 1 120 123 — 123 development ( 2 ) 119 1 120 123 — 123 Selling ( 2 ) 119 1 120 123 — 123 Selling , 2 ) 119 1 120 123 — 123 Selling , general 119 1 120 123 — 123 Selling , general , and general , and administrative ( 2 ) 447 1 448 470 and administrative ( 2 ) 447 1 448 470 2 472 administrative ( 2 ) 447 1 448 470 2 472 Total ( 2 ) 447 1 448 470 2 472 Total operating 2 ) 447 1 448 470 2 472 Total operating expense ) 447 1 448 470 2 472 Total operating expense 566 447 1 448 470 2 472 Total operating expense 566 2 2 472 Total operating expense 566 2 568 593 2 595 472 Total operating expense 566 2 568 593 2 595 Operating Total operating expense 566 2 568 593 2 595 Operating income operating expense 566 2 568 593 2 595 Operating income 402 expense 566 2 568 593 2 595 Operating income 402 ( 566 2 568 593 2 595 Operating income 402 ( 2 593 2 595 Operating income 402 ( 2 ) 400 403 595 Operating income 402 ( 2 ) 400 403 ( 3 income 402 ( 2 ) 400 403 ( 3 ) 400 402 ( 2 ) 400 403 ( 3 ) 400 Other 2 ) 400 403 ( 3 ) 400 Other income and 400 403 ( 3 ) 400 Other income and expense 33 400 Other income and expense 33 — 33 26 — 26 income and expense 33 — 33 26 — 26 Income before and expense 33 — 33 26 — 26 Income before provision 33 — 33 26 — 26 Income before provision for income before provision for income tax 435 ( 2 ) 433 429 for income tax 435 ( 2 ) 433 429 ( 3 tax 435 ( 2 ) 433 429 ( 3 ) 426 435 ( 2 ) 433 429 ( 3 ) 426 Provision 2 ) 433 429 ( 3 ) 426 Provision for income 433 429 ( 3 ) 426 Provision for income tax 145 426 Provision for income tax 145 — 145 134 ( 1 for income tax 145 — 145 134 ( 1 ) 133 income tax 145 — 145 134 ( 1 ) 133 Net 145 — 145 134 ( 1 ) 133 Net income $ 145 134 ( 1 ) 133 Net income $ 290 $ ) 133 Net income $ 290 $ ( 2 ) $ income $ 290 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 293 Earnings per $ ( 2 ) $ 293 Earnings per common share : common share : Basic $ 0.36 $ — $ 0.36 $ $ 0.36 $ — $ 0.36 $ 0.37 $ — $ $ — $ 0.36 $ 0.37 $ — $ 0.37 Diluted $ 0.37 $ — $ 0.37 Diluted $ 0.34 $ — — $ 0.37 Diluted $ 0.34 $ — $ 0.34 $ $ 0.34 $ — $ 0.34 $ 0.35 $ — $ $ — $ 0.34 $ 0.35 $ — $ 0.35 Shares $ 0.35 $ — $ 0.35 Shares used in computing earnings in thousand ) : Basic 808,172 — 808,172 789,032 — 789,032 ) : Basic 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 : Basic 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 557 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 808,172 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 ) Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 ) See 857,011 557 857,568 838,174 631 838,805 ( 1 ) See the 857,568 838,174 631 838,805 ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. ( 2 ) Includes stock-based of this Form 10-K. ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 1 Research and development $ — $ 1 $ 1 Research and development $ 1 1 Research and development $ 1 $ 1 $ 2 $ and development $ 1 $ 1 $ 2 $ 2 $ $ 1 $ 1 $ 2 $ 2 $ — $ $ 1 $ 2 $ 2 $ — $ 2 Selling $ 2 $ — $ 2 Selling , general , and general , and administrative $ 8 $ 1 $ 9 $ and administrative $ 8 $ 1 $ 9 $ 8 $ $ 8 $ 1 $ 9 $ 8 $ 2 $ $ 1 $ 9 $ 8 $ 2 $ 10 Recent $ 9 $ 8 $ 2 $ 10 Recent Accounting Pronouncements $ 8 $ 2 $ 10 Recent Accounting Pronouncements In September Recent Accounting Pronouncements In September 2006 , the SEC issued SAB SEC issued SAB No . 108 , Considering the Effects of Statements . SAB No . 108 provides guidance on how prior misstated . SAB No . 108 is effective for fiscal year fiscal year ending after November 15 , 2006 . Although the ending after November 15 , 2006 . Although the Company will application of SAB No . 108 , management doe not currently financial position . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement measurement . SFAS No . 157 is effective for fiscal year fiscal year beginning after November 15 , 2007 and is required beginning after November 15 , 2007 and is required to be the Company beginning in the 66 first quarter of fiscal 2009 66 first quarter of fiscal 2009 . Although the Company will application of SFAS No . 157 , management doe not currently financial position . In June 2006 , the FASB issued FASB ( “ FIN ” ) 48 , Accounting for Uncertainty in of FASB Statement No . 109 . FIN No . 48 109 . FIN No . 48 clarifies the accounting for uncertainty return . FIN No . 48 is effective for fiscal year fiscal year beginning after December 15 , 2006 and is required beginning after December 15 , 2006 and is required to be the first quarter of fiscal 2008 . Although the Company will application of FIN No . 48 , management doe not currently financial position . In May 2005 , the FASB issued SFAS FASB issued SFAS No . 154 , Accounting Changes and Error replaces APB Opinion No . 20 , Accounting Changes and SFAS Changes and SFAS No . 3 , Reporting Accounting Changes in of APB Opinion No . 28 . SFAS No . 154 28 . SFAS No . 154 requires retrospective application to prior practicable . SFAS No . 154 is effective for accounting change fiscal year beginning after December 15 , 2005 and is required beginning after December 15 , 2005 and is required to be the first quarter of fiscal 2007 . Although the Company will application of SFAS No . 154 , management doe not currently in million ) : September 30 , September 24 , September : September 30 , September 24 , September 25 , 2006 , September 24 , September 25 , 2006 2005 2004 As 24 , September 25 , 2006 2005 2004 As Restated ( , September 25 , 2006 2005 2004 As Restated ( 1 September 25 , 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Cash , cash equivalent , and short-term investment $ 10,110 $ 8,261 $ 5,464 Accounts short-term investment $ 10,110 $ 8,261 $ 5,464 Accounts receivable , $ 10,110 $ 8,261 $ 5,464 Accounts receivable , net $ Accounts receivable , net $ 1,252 $ 895 $ 774 Inventory , net $ 1,252 $ 895 $ 774 Inventory $ 270 $ 1,252 $ 895 $ 774 Inventory $ 270 $ 165 895 $ 774 Inventory $ 270 $ 165 $ 101 Working 774 Inventory $ 270 $ 165 $ 101 Working capital $ $ 270 $ 165 $ 101 Working capital $ 8,038 $ $ 101 Working capital $ 8,038 $ 6,813 $ 4,403 Days Working capital $ 8,038 $ 6,813 $ 4,403 Days sale in $ 8,038 $ 6,813 $ 4,403 Days sale in account receivable DSO ) ( a ) 24 22 30 Days of supply ) ( a ) 24 22 30 Days of supply in ( a ) 24 22 30 Days of supply in inventory in inventory ( b ) 7 6 5 Days payable outstanding inventory ( b ) 7 6 5 Days payable outstanding ( ( b ) 7 6 5 Days payable outstanding ( DPO DPO ) ( c ) 89 62 76 Annual operating cash ) ( c ) 89 62 76 Annual operating cash flow ( c ) 89 62 76 Annual operating cash flow $ Annual operating cash flow $ 2,220 $ 2,535 $ 934 ( cash flow $ 2,220 $ 2,535 $ 934 ( 1 ) $ 2,220 $ 2,535 $ 934 ( 1 ) See the $ 2,535 $ 934 ( 1 ) See the “ Explanatory preceding Part I , Item 1 and Note 2 , “ , Item 1 and Note 2 , “ Restatement of Consolidated Financial Statements of this Form 10-K. ( a ) DSO is inventory . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had $ , the Company had $ 10.11 billion in cash , cash , an increase of $ 1.85 billion over the same balance balance at the end of 2005 . The principal 67 component of 2005 . The principal 67 component of this increase were by operating activity of $ 2.22 billion , proceeds of $ billion , proceeds of $ 318 million from the issuance of from stock-based compensation of $ 361 million , partially offset by , and equipment of $ 657 million and repurchase of common of common stock of $ 355 million in conjunction with net-share the impact of the $ 1.25 billion prepayment for NAND flash investment . As of September 30 , 2006 , approximately $ As of September 30 , 2006 , approximately $ 4.1 billion , 2006 , approximately $ 4.1 billion of the Company ’ existing operation over the next 12 month . Capital Expenditures The total capital expenditure were $ 657 million during 2006 , consisting were $ 657 million during 2006 , consisting of $ 200 2006 , consisting of $ 200 million for retail store facility s Retail segment , $ 263 million for real estate acquisition data center , and $ 194 million for corporate infrastructure , it will utilize approximately $ 675 million for capital expenditure during million for capital expenditure during 2007 , including approximately $ 360 2007 , including approximately $ 360 million for expansion of the Retail segment , approximately $ 50 million for real estate acquisition center , and approximately $ 265 million to support normal replacement Stock Repurchase Plan In July 1999 , the Company ’ s to repurchase up to $ 500 million of it common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 30 , 2006 . Off-Balance Sheet a of September 30 , 2006 . Off-Balance Sheet Arrangements and firm commitment a of September 30 , 2006 and excludes amount a of September 30 , 2006 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating Leases $ 1,154 5 Years Operating Leases $ 1,154 $ 134 $ 268 $ Operating Leases $ 1,154 $ 134 $ 268 $ 254 $ $ 1,154 $ 134 $ 268 $ 254 $ 498 Purchase $ 134 $ 268 $ 254 $ 498 Purchase Obligations 2,306 $ 268 $ 254 $ 498 Purchase Obligations 2,306 2,306 — 254 $ 498 Purchase Obligations 2,306 2,306 — — — Asset $ 498 Purchase Obligations 2,306 2,306 — — — Asset Retirement — — Asset Retirement Obligations 19 3 3 7 6 Other — Asset Retirement Obligations 19 3 3 7 6 Other Obligations Asset Retirement Obligations 19 3 3 7 6 Other Obligations 39 Retirement Obligations 19 3 3 7 6 Other Obligations 39 29 Obligations 19 3 3 7 6 Other Obligations 39 29 10 3 7 6 Other Obligations 39 29 10 — — Total 7 6 Other Obligations 39 29 10 — — Total $ 6 Other Obligations 39 29 10 — — Total $ 3,518 10 — — Total $ 3,518 $ 2,472 $ 281 $ — Total $ 3,518 $ 2,472 $ 281 $ 261 $ $ 3,518 $ 2,472 $ 281 $ 261 $ 504 68 $ 2,472 $ 281 $ 261 $ 504 68 Lease Commitments $ 281 $ 261 $ 504 68 Lease Commitments As of 281 $ 261 $ 504 68 Lease Commitments As of September Lease Commitments As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had total operating lease of approximately $ 1.2 billion , $ 887 million $ 1.2 billion , $ 887 million of which related to facility operating lease range from 5 to 15 year . Purchase lease range from 5 to 15 year . Purchase Commitments with typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also requirement for period ranging from 30 to 150 day . As period ranging from 30 to 150 day . As of September day . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had outstanding purchase commitment of approximately $ 2.3 billion . During 2006 , $ 2.3 billion . During 2006 , the Company entered into flash memory through calendar year 2010 . As part of these , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 . These prepayment will be termination . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company estimate that cash flow of approximately $ 19 million will be required to other obligation of approximately $ 39 million are primarily related to or result of operation . 69 Item 7A . Quantitative and of operation . 69 Item 7A . Quantitative and Qualitative Disclosures investment . As of September 30 , 2006 , approximately $ As of September 30 , 2006 , approximately $ 921 million , 2006 , approximately $ 921 million of the Company ’ had underlying maturity ranging from 1 to 5 year . As maturity ranging from 1 to 5 year . As of September year . As of September 24 , 2005 , $ 287 As of September 24 , 2005 , $ 287 million of 24 , 2005 , $ 287 million of the Company ’ had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remainder all underlying maturity of le than 12 month . The Company may loss before tax of $ 434,000 and $ 137,000 in 2006 of $ 434,000 and $ 137,000 in 2006 and 2005 , 434,000 and $ 137,000 in 2006 and 2005 , respectively , $ 137,000 in 2006 and 2005 , respectively , and a gain before tax of $ 1 million in 2004 a a of $ 1 million in 2004 a a result of such the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 30 , 2006 , a hypothetical a of September 30 , 2006 , a hypothetical 100 basis , 2006 , a hypothetical 100 basis point increase in interest would result in a $ 15.2 million decline in the fair portfolio . As of September 24 , 2005 , a similar As of September 24 , 2005 , a similar 100 basis , 2005 , a similar 100 basis point shift in the have resulted in a $ 19.9 million decline in fair value investment prior to maturity . 70 Foreign Currency Risk In general Monte Carlo simulation to generate 3,000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 9.2 million a of September 30 9.2 million a of September 30 , 2006 compared to a a of September 30 , 2006 compared to a maximum one-day maximum one-day loss of $ 10.0 million a of September 24 10.0 million a of September 24 , 2005 . Because the a of September 24 , 2005 . Because the Company us analysis performed a of September 30 , 2006 due to the a of September 30 , 2006 due to the inherent limitation actual exposure and position . 71 Item 8 . Financial Statements and position . 71 Item 8 . Financial Statements and Supplementary Balance Sheets a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 73 Consolidated Statements 2006 and September 24 , 2005 73 Consolidated Statements of Operations and September 24 , 2005 73 Consolidated Statements of Operations for three fiscal year ended September 30 , 2006 74 Consolidated Statements year ended September 30 , 2006 74 Consolidated Statements of Shareholders ended September 30 , 2006 74 Consolidated Statements of Shareholders ’ three fiscal year ended September 30 , 2006 75 Consolidated Statements year ended September 30 , 2006 75 Consolidated Statements of Cash ended September 30 , 2006 75 Consolidated Statements of Cash Flows three fiscal year ended September 30 , 2006 76 Notes to year ended September 30 , 2006 76 Notes to Consolidated Financial ended September 30 , 2006 76 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 77 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 114 Reports of Independent Registered Public Accounting Firm , KPMG LLP 118 All financial statement schedule have Statements and Notes thereto . 72 CONSOLIDATED BALANCE SHEETS ( In except share amount ) September 30 , 2006 September 24 , amount ) September 30 , 2006 September 24 , 2005 As September 30 , 2006 September 24 , 2005 As Restated ( , 2006 September 24 , 2005 As Restated ( 1 ) , 2005 As Restated ( 1 ) ASSETS : Current asset Cash and cash equivalent $ 6,392 $ 3,491 Short-term investment 3,718 cash equivalent $ 6,392 $ 3,491 Short-term investment 3,718 4,770 Accounts 6,392 $ 3,491 Short-term investment 3,718 4,770 Accounts receivable , le $ 3,491 Short-term investment 3,718 4,770 Accounts receivable , le allowance , le allowance of $ 52 and $ 46 , respectively of $ 52 and $ 46 , respectively 1,252 895 Inventories and $ 46 , respectively 1,252 895 Inventories 270 165 Deferred $ 46 , respectively 1,252 895 Inventories 270 165 Deferred tax , respectively 1,252 895 Inventories 270 165 Deferred tax asset 607 respectively 1,252 895 Inventories 270 165 Deferred tax asset 607 331 270 165 Deferred tax asset 607 331 Other current asset 2,270 165 Deferred tax asset 607 331 Other current asset 2,270 648 607 331 Other current asset 2,270 648 Total current asset 14,509 331 Other current asset 2,270 648 Total current asset 14,509 10,300 2,270 648 Total current asset 14,509 10,300 Property , plant , 648 Total current asset 14,509 10,300 Property , plant , and , and equipment , net 1,281 817 Goodwill 38 69 Acquired and equipment , net 1,281 817 Goodwill 38 69 Acquired intangible , net 1,281 817 Goodwill 38 69 Acquired intangible asset , net 1,281 817 Goodwill 38 69 Acquired intangible asset , net Acquired intangible asset , net 139 27 Other asset 1,238 303 intangible asset , net 139 27 Other asset 1,238 303 Total net 139 27 Other asset 1,238 303 Total asset $ 17,205 139 27 Other asset 1,238 303 Total asset $ 17,205 $ 1,238 303 Total asset $ 17,205 $ 11,516 LIABILITIES AND SHAREHOLDERS Total asset $ 17,205 $ 11,516 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 Accounts payable $ 3,390 $ 1,779 Accrued expense 3,081 1,708 Total 3,390 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 $ 1,779 Accrued expense 3,081 1,708 Total current liability 6,471 3,487 3,081 1,708 Total current liability 6,471 3,487 Non-current liability 750 601 1,708 Total current liability 6,471 3,487 Non-current liability 750 601 Total liability 6,471 3,487 Non-current liability 750 601 Total liability 7,221 4,088 6,471 3,487 Non-current liability 750 601 Total liability 7,221 4,088 Commitments liability 750 601 Total liability 7,221 4,088 Commitments and contingency Shareholders 750 601 Total liability 7,221 4,088 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 855,262,568 and ; 1,800,000,000 share authorized ; 855,262,568 and 835,019,364 share issued and share authorized ; 855,262,568 and 835,019,364 share issued and outstanding , issued and outstanding , respectively 4,355 3,564 Deferred stock compensation — and outstanding , respectively 4,355 3,564 Deferred stock compensation — ( Deferred stock compensation — ( 61 ) Retained earnings 5,607 3,925 ( 61 ) Retained earnings 5,607 3,925 Accumulated other comprehensive income 61 ) Retained earnings 5,607 3,925 Accumulated other comprehensive income 22 3,925 Accumulated other comprehensive income 22 — Total shareholder ’ equity — Total shareholder ’ equity 9,984 7,428 Total liability and shareholder Total shareholder ’ equity 9,984 7,428 Total liability and shareholder ’ and shareholder ’ equity $ 17,205 $ 11,516 ( 1 ) ’ equity $ 17,205 $ 11,516 ( 1 ) See Note $ 17,205 $ 11,516 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated to Consolidated Financial Statements . 73 CONSOLIDATED STATEMENTS OF OPERATIONS ( Three fiscal year ended September 30 , 2006 2006 2005 2004 year ended September 30 , 2006 2006 2005 2004 As Restated ended September 30 , 2006 2006 2005 2004 As Restated ( September 30 , 2006 2006 2005 2004 As Restated ( 1 30 , 2006 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Net sale $ 19,315 1 ) Net sale $ 19,315 $ 13,931 $ 8,279 Cost Net sale $ 19,315 $ 13,931 $ 8,279 Cost of sale $ 19,315 $ 13,931 $ 8,279 Cost of sale ( 2 8,279 Cost of sale ( 2 ) 13,717 9,889 6,022 Gross of sale ( 2 ) 13,717 9,889 6,022 Gross margin 5,598 sale ( 2 ) 13,717 9,889 6,022 Gross margin 5,598 4,042 ( 2 ) 13,717 9,889 6,022 Gross margin 5,598 4,042 2,257 13,717 9,889 6,022 Gross margin 5,598 4,042 2,257 Operating expense : 9,889 6,022 Gross margin 5,598 4,042 2,257 Operating expense : Research 6,022 Gross margin 5,598 4,042 2,257 Operating expense : Research and : Research and development ( 2 ) 712 535 491 Selling and development ( 2 ) 712 535 491 Selling , general development ( 2 ) 712 535 491 Selling , general , ( 2 ) 712 535 491 Selling , general , and general , and administrative ( 2 ) 2,433 1,864 1,430 Restructuring and administrative ( 2 ) 2,433 1,864 1,430 Restructuring cost — administrative ( 2 ) 2,433 1,864 1,430 Restructuring cost — — ( 2 ) 2,433 1,864 1,430 Restructuring cost — — 23 1,430 Restructuring cost — — 23 Total operating expense 3,145 2,399 — 23 Total operating expense 3,145 2,399 1,944 Operating income 2,453 23 Total operating expense 3,145 2,399 1,944 Operating income 2,453 1,643 Total operating expense 3,145 2,399 1,944 Operating income 2,453 1,643 313 3,145 2,399 1,944 Operating income 2,453 1,643 313 Other income and 2,399 1,944 Operating income 2,453 1,643 313 Other income and expense 1,944 Operating income 2,453 1,643 313 Other income and expense 365 313 Other income and expense 365 165 57 Income before provision Other income and expense 365 165 57 Income before provision for income and expense 365 165 57 Income before provision for income before provision for income tax 2,818 1,808 370 Provision for income provision for income tax 2,818 1,808 370 Provision for income tax for income tax 2,818 1,808 370 Provision for income tax 829 370 Provision for income tax 829 480 104 Net income $ Provision for income tax 829 480 104 Net income $ 1,989 for income tax 829 480 104 Net income $ 1,989 $ 480 104 Net income $ 1,989 $ 1,328 $ 266 Earnings Net income $ 1,989 $ 1,328 $ 266 Earnings per common $ 1,989 $ 1,328 $ 266 Earnings per common share : common share : Basic $ 2.36 $ 1.64 $ 0.36 Diluted : Basic $ 2.36 $ 1.64 $ 0.36 Diluted $ 2.27 $ 2.36 $ 1.64 $ 0.36 Diluted $ 2.27 $ 1.55 1.64 $ 0.36 Diluted $ 2.27 $ 1.55 $ 0.34 Shares 0.36 Diluted $ 2.27 $ 1.55 $ 0.34 Shares used in $ 2.27 $ 1.55 $ 0.34 Shares used in computing earnings in thousand ) : Basic 844,058 808,439 743,180 Diluted 877,526 856,878 thousand ) : Basic 844,058 808,439 743,180 Diluted 877,526 856,878 774,776 ) : Basic 844,058 808,439 743,180 Diluted 877,526 856,878 774,776 ( Basic 844,058 808,439 743,180 Diluted 877,526 856,878 774,776 ( 1 ) 844,058 808,439 743,180 Diluted 877,526 856,878 774,776 ( 1 ) See 808,439 743,180 Diluted 877,526 856,878 774,776 ( 1 ) See Note Diluted 877,526 856,878 774,776 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Consolidated Financial Statements . ( 2 ) Includes stock-based compensation expense : Cost of sale $ 21 $ 3 $ 3 Research of sale $ 21 $ 3 $ 3 Research and development $ 21 $ 3 $ 3 Research and development $ 53 3 Research and development $ 53 $ 7 $ 6 Selling and development $ 53 $ 7 $ 6 Selling , general $ 53 $ 7 $ 6 Selling , general , and general , and administrative $ 89 $ 39 $ 37 See and administrative $ 89 $ 39 $ 37 See accompanying Notes $ 89 $ 39 $ 37 See accompanying Notes to Consolidated to Consolidated Financial Statements . 74 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ ) Equity As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Balances a of September ) Balances a of September 27 , 2003 a previously reported a of September 27 , 2003 a previously reported 733,454 $ , 2003 a previously reported 733,454 $ 1,926 $ ( 62 a previously reported 733,454 $ 1,926 $ ( 62 ) $ 733,454 $ 1,926 $ ( 62 ) $ 2,394 $ ( $ ( 62 ) $ 2,394 $ ( 35 ) $ ) $ 2,394 $ ( 35 ) $ 4,223 Adjustments to $ ( 35 ) $ 4,223 Adjustments to opening shareholder ’ opening shareholder ’ equity — 85 ( 22 ) ( 63 ’ equity — 85 ( 22 ) ( 63 ) — 85 ( 22 ) ( 63 ) — — Balance a — Balance a of September 27 , 2003 a restated 733,454 a of September 27 , 2003 a restated 733,454 $ 2,011 27 , 2003 a restated 733,454 $ 2,011 $ ( 84 2003 a restated 733,454 $ 2,011 $ ( 84 ) $ 733,454 $ 2,011 $ ( 84 ) $ 2,331 $ ( $ ( 84 ) $ 2,331 $ ( 35 ) $ ) $ 2,331 $ ( 35 ) $ 4,223 Components of $ ( 35 ) $ 4,223 Components of comprehensive income : Net income — — — 266 — 266 Change in foreign — — — 266 — 266 Change in foreign currency translation translation — — — — 13 13 Change in unrealized gain — — — — 13 13 Change in unrealized gain on — — — — ( 5 ) ( 5 ) Change — ( 5 ) ( 5 ) Change in unrealized loss tax — — — — 12 12 Total comprehensive income 286 — — — — 12 12 Total comprehensive income 286 Issuance 12 12 Total comprehensive income 286 Issuance of stock-based compensation award of stock-based compensation award — 63 ( 63 ) — — compensation award — 63 ( 63 ) — — — Adjustment a prior year acquisition ( 159 ) ( 2 ) — acquisition ( 159 ) ( 2 ) — — — ( ) — — — ( 2 ) Stock-based compensation — — ) Stock-based compensation — — 46 — — 46 Common stock — — 46 — — 46 Common stock issued under stock stock issued under stock plan 49,592 427 — — — 427 issued under stock plan 49,592 427 — — — 427 Tax 49,592 427 — — — 427 Tax benefit related to stock related to stock option — 83 — — — 83 Balances — 83 — — — 83 Balances a of September 25 83 Balances a of September 25 , 2004 782,887 $ 2,582 a of September 25 , 2004 782,887 $ 2,582 $ ( of September 25 , 2004 782,887 $ 2,582 $ ( 101 25 , 2004 782,887 $ 2,582 $ ( 101 ) $ 782,887 $ 2,582 $ ( 101 ) $ 2,597 $ ( $ ( 101 ) $ 2,597 $ ( 15 ) $ ) $ 2,597 $ ( 15 ) $ 5,063 Components of $ ( 15 ) $ 5,063 Components of comprehensive income : Net income — — — 1,328 — 1,328 Change in foreign — — — 1,328 — 1,328 Change in foreign currency translation translation — — — — 7 7 Change in unrealized gain — — — — 7 7 Change in unrealized gain on tax — — — — 8 8 Total comprehensive income 1,343 — — — — 8 8 Total comprehensive income 1,343 Issuance 8 8 Total comprehensive income 1,343 Issuance of stock-based compensation award of stock-based compensation award — 7 ( 7 ) — — compensation award — 7 ( 7 ) — — — Stock-based — Stock-based compensation — — 47 — — 47 Common stock — — 47 — — 47 Common stock issued under stock stock issued under stock plan 52,132 547 — — — 547 issued under stock plan 52,132 547 — — — 547 Tax 52,132 547 — — — 547 Tax benefit related to stock related to stock option — 428 — — — 428 Balances — 428 — — — 428 Balances a of September 24 428 Balances a of September 24 , 2005 835,019 $ 3,564 a of September 24 , 2005 835,019 $ 3,564 $ ( of September 24 , 2005 835,019 $ 3,564 $ ( 61 24 , 2005 835,019 $ 3,564 $ ( 61 ) $ 835,019 $ 3,564 $ ( 61 ) $ 3,925 $ — $ ( 61 ) $ 3,925 $ — $ 7,428 Components $ 3,925 $ — $ 7,428 Components of comprehensive income : Net income — — — 1,989 — 1,989 Change in foreign — — — 1,989 — 1,989 Change in foreign currency translation translation — — — — 19 19 Change in unrealized gain — — — — 19 19 Change in unrealized gain on tax — — — — 4 4 Change in unrealized loss — — — — 4 4 Change in unrealized loss on — — — — ( 1 ) ( 1 ) Total — ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) — repurchased ( 4,574 ) ( 48 ) — ( 307 ) ( 48 ) — ( 307 ) — ( 355 ) ( 307 ) — ( 355 ) Stock-based compensation — 163 355 ) Stock-based compensation — 163 — — — 163 Deferred — 163 — — — 163 Deferred compensation — ( 61 163 Deferred compensation — ( 61 ) 61 — — — compensation — ( 61 ) 61 — — — Common stock stock issued under stock plan 24,818 318 — — — 318 issued under stock plan 24,818 318 — — — 318 Tax 24,818 318 — — — 318 Tax benefit related to stock-based related to stock-based compensation — 419 — — — 419 Balances — 419 — — — 419 Balances a of September 30 419 Balances a of September 30 , 2006 855,263 $ 4,355 a of September 30 , 2006 855,263 $ 4,355 $ — of September 30 , 2006 855,263 $ 4,355 $ — $ 30 , 2006 855,263 $ 4,355 $ — $ 5,607 $ $ 4,355 $ — $ 5,607 $ 22 $ 9,984 ( $ — $ 5,607 $ 22 $ 9,984 ( 1 ) $ 5,607 $ 22 $ 9,984 ( 1 ) See Note $ 22 $ 9,984 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated to Consolidated Financial Statements . 75 CONSOLIDATED STATEMENTS OF CASH FLOWS Three fiscal year ended September 30 , 2006 2006 2005 2004 year ended September 30 , 2006 2006 2005 2004 As Restated ended September 30 , 2006 2006 2005 2004 As Restated ( September 30 , 2006 2006 2005 2004 As Restated ( 1 30 , 2006 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Cash and cash equivalent beginning of the year $ 3,491 $ 2,969 $ 3,396 Operating the year $ 3,491 $ 2,969 $ 3,396 Operating Activities : $ 3,491 $ 2,969 $ 3,396 Operating Activities : Net income Operating Activities : Net income 1,989 1,328 266 Adjustments to reconcile Activities : Net income 1,989 1,328 266 Adjustments to reconcile net : Net income 1,989 1,328 266 Adjustments to reconcile net income Depreciation , amortization and accretion 225 179 150 Stock-based compensation expense , amortization and accretion 225 179 150 Stock-based compensation expense 163 amortization and accretion 225 179 150 Stock-based compensation expense 163 49 179 150 Stock-based compensation expense 163 49 46 Provision for deferred 150 Stock-based compensation expense 163 49 46 Provision for deferred income Stock-based compensation expense 163 49 46 Provision for deferred income tax Provision for deferred income tax 53 50 19 Excess tax benefit for deferred income tax 53 50 19 Excess tax benefit from deferred income tax 53 50 19 Excess tax benefit from stock benefit from stock option — 428 83 Gain on sale of from stock option — 428 83 Gain on sale of PowerSchool of PowerSchool net asset ( 4 ) — — Loss on , plant , and equipment 15 9 7 Gains on sale plant , and equipment 15 9 7 Gains on sale of , and equipment 15 9 7 Gains on sale of investment , net — — ( 5 ) Changes in operating asset liability : Accounts receivable ( 357 ) ( 121 ) ( receivable ( 357 ) ( 121 ) ( 8 ) Inventories ) ( 121 ) ( 8 ) Inventories ( 105 ) ( 8 ) Inventories ( 105 ) ( 64 ) ( Inventories ( 105 ) ( 64 ) ( 45 ) Other ) ( 64 ) ( 45 ) Other current asset ( ) Other current asset ( 1,626 ) ( 150 ) ( asset ( 1,626 ) ( 150 ) ( 176 ) Other ) ( 150 ) ( 176 ) Other asset ( 1,040 176 ) Other asset ( 1,040 ) ( 35 ) ( asset ( 1,040 ) ( 35 ) ( 25 ) Accounts ) ( 35 ) ( 25 ) Accounts payable 1,611 328 ( 25 ) Accounts payable 1,611 328 297 Other liability 1,296 25 ) Accounts payable 1,611 328 297 Other liability 1,296 534 ) Accounts payable 1,611 328 297 Other liability 1,296 534 325 1,611 328 297 Other liability 1,296 534 325 Cash generated by 328 297 Other liability 1,296 534 325 Cash generated by operating 297 Other liability 1,296 534 325 Cash generated by operating activity Cash generated by operating activity 2,220 2,535 934 Investing Activities : generated by operating activity 2,220 2,535 934 Investing Activities : Purchases by operating activity 2,220 2,535 934 Investing Activities : Purchases of Purchases of short-term investment ( 7,255 ) ( 11,470 ) ( investment ( 7,255 ) ( 11,470 ) ( 3,270 ) Proceeds ) ( 11,470 ) ( 3,270 ) Proceeds from maturity of from maturity of short-term investment 7,226 8,609 1,141 Proceeds from sale maturity of short-term investment 7,226 8,609 1,141 Proceeds from sale of of short-term investment 7,226 8,609 1,141 Proceeds from sale of investment Proceeds from sale of investment 1,086 586 806 Purchases of long-term from sale of investment 1,086 586 806 Purchases of long-term investment sale of investment 1,086 586 806 Purchases of long-term investment ( Purchases of long-term investment ( 25 ) — — Proceeds from sale of PowerSchool net asset 40 — — Purchases of property plant , and equipment ( 657 ) ( 260 ) ( equipment ( 657 ) ( 260 ) ( 176 ) Other ) ( 260 ) ( 176 ) Other ( 58 ) ( 176 ) Other ( 58 ) ( 21 ) 11 Other ( 58 ) ( 21 ) 11 Cash generated by 58 ) ( 21 ) 11 Cash generated by ( used used for ) investing activity 357 ( 2,556 ) ( 1,488 ) investing activity 357 ( 2,556 ) ( 1,488 ) Financing 357 ( 2,556 ) ( 1,488 ) Financing Activities : Payment long-term debt — — ( 300 ) Proceeds from issuance of from issuance of common stock 318 543 427 Excess tax benefit issuance of common stock 318 543 427 Excess tax benefit from of common stock 318 543 427 Excess tax benefit from stock-based tax benefit from stock-based compensation 361 — — Repurchases of common Repurchases of common stock ( 355 ) — — Cash generated Cash generated by financing activity 324 543 127 Increase ( decrease generated by financing activity 324 543 127 Increase ( decrease ) by financing activity 324 543 127 Increase ( decrease ) in in cash and cash equivalent 2,901 522 ( 427 ) Cash cash and cash equivalent 2,901 522 ( 427 ) Cash and cash equivalent 2,901 522 ( 427 ) Cash and cash equivalent end of the year $ 6,392 $ 3,491 $ 2,969 Supplemental the year $ 6,392 $ 3,491 $ 2,969 Supplemental cash flow $ 6,392 $ 3,491 $ 2,969 Supplemental cash flow disclosure : $ — $ — $ 10 Cash paid ( received ) income tax , net $ 194 $ 17 $ ( 7 , net $ 194 $ 17 $ ( 7 ) ( 194 $ 17 $ ( 7 ) ( 1 ) See $ ( 7 ) ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated to Consolidated Financial Statements . 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple of September . Fiscal year 2005 and 2004 were each 52-week . Fiscal year 2005 and 2004 were each 52-week year . 2005 and 2004 were each 52-week year . However , approximately , the Company report a 53-week fiscal year to align it quarter of it fiscal year 2006 . All information presented herein Common Stock Split On February 28 , 2005 , the Company Split On February 28 , 2005 , the Company effected a of record a of February 18 , 2005 . All share a of February 18 , 2005 . All share and per SFAS ” ) No . 133 , Accounting for Derivative Instruments nature of the hedge , 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 180 million , $ 141 million $ 180 million , $ 141 million , and $ 126 141 million , and $ 126 million during 2006 , 2005 and $ 126 million during 2006 , 2005 , and 2004 126 million during 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Asset Retirement accordance with SFAS No . 143 , Accounting for Asset Retirement future cash flow and it 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( asset retirement liability for fiscal 2006 and 2005 ( in million liability for fiscal 2006 and 2005 ( in million ) : retirement liability a of September 25 , 2004 $ 8.2 Additional a of September 25 , 2004 $ 8.2 Additional asset retirement September 25 , 2004 $ 8.2 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 2.8 Accretion recognized 0.7 Asset retirement obligation recognized 2.8 Accretion recognized 0.7 Asset retirement liability a of retirement liability a of September 24 , 2005 $ 11.7 Additional a of September 24 , 2005 $ 11.7 Additional asset retirement September 24 , 2005 $ 11.7 Additional asset retirement obligation recognized Additional asset retirement obligation recognized 2.5 Accretion recognized 0.5 Asset retirement obligation recognized 2.5 Accretion recognized 0.5 Asset retirement liability a of retirement liability a of September 30 , 2006 $ 14.7 Long-Lived a of September 30 , 2006 $ 14.7 Long-Lived Assets Including September 30 , 2006 $ 14.7 Long-Lived Assets Including Goodwill and accordance with SFAS No . 144 , Accounting for the Impairment three fiscal year ended September 30 , 2006 , the Company year ended September 30 , 2006 , the Company had no restructuring action described in Note 6 of these Notes to Consolidated Statements . SFAS No . 142 , Goodwill and Other Intangible test on or about August 30 of each year . The intangible asset impairment charge in 2006 , 2005 , or 2004 impairment charge in 2006 , 2005 , or 2004 . The 2006 , 2005 , or 2004 . The Company established reporting unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 . The Company is currently life over period ranging from 3 to 10 year . Foreign period ranging from 3 to 10 year . Foreign Currency Translation charged to foreign currency translation 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( SOP ” ) No . 97-2 , Software Revenue Recognition , SAB ” ) No . 104 , Revenue Recognition . The is recognized a revenue . 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( pursuant to SFAS No . 86 , Computer Software to be been immediately expensed . In 2004 , the Company began incurring with Mac OS X version 10.4 Tiger ( “ Tiger ” by public demonstration in August 2004 and the subsequent release of The Company capitalized approximately $ 29.7 million and $ 4.5 million $ 29.7 million and $ 4.5 million during 2005 and 2004 and $ 4.5 million during 2005 and 2004 , respectively , 4.5 million during 2005 and 2004 , respectively , of cost accordance with SFAS No . 86 , amortization of this asset of sale began in April 2005 when the Company began shipping three-year estimated useful life . 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( Policies ( Continued ) During 2004 , the Company incurred substantial cost associated with FileMaker Pro 7 subsequent to achievement of technological of the product in March 2004 . Therefore , during 2004 2004 . Therefore , during 2004 , the Company capitalized approximately the Company capitalized approximately $ 2.3 million of cost associated with the development of FileMaker Pro 7 . In accordance with SFAS accordance with SFAS No . 86 , amortization of this asset of sale began in March 2004 when the Company began shipping Company began shipping FileMaker Pro 7 and is being recognized on software development cost wa $ 17.8 million , $ 15.7 million $ 17.8 million , $ 15.7 million , and $ 10.7 15.7 million , and $ 10.7 million in 2006 , 2005 and $ 10.7 million in 2006 , 2005 , and 2004 10.7 million in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Advertising Costs . Advertising expense wa $ 338 million , $ 287 million $ 338 million , $ 287 million , and $ 206 287 million , and $ 206 million for 2006 , 2005 and $ 206 million for 2006 , 2005 , and 2004 206 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Stock-Based Compensation . Stock-Based Compensation On September 25 , 2005 , the Company Compensation On September 25 , 2005 , the Company adopted SFAS Company adopted SFAS No . 123 ( revised 2004 ) ( No . 123 ( revised 2004 ) ( “ SFAS No ( “ SFAS No . 123R ” ) , Share-Based Payment equity instrument . In January 2005 , the SEC issued SAB SEC issued SAB No . 107 , which provides supplemental implementation guidance for SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R eliminates the ability to account ” ) Opinion No . 25 , Accounting for Stock Issued award under SFAS No . 123R , consistent with that used disclosure under SFAS No . 123 , Accounting for Stock-Based Compensation permitted by SFAS No . 123R and accordingly prior period have impact of SFAS No . 123R . The modified prospective transition is rendered beginning on September 25 , 2005 , the first beginning on September 25 , 2005 , the first day of Company ’ s fiscal year 2006 . Stock-based compensation expense for award granted prior to September 25 , 2005 is based on prior to September 25 , 2005 is based on the grant-date provision of SFAS No . 123 . The Company recognized incremental stock-based compensation expense of $ 117 million during 2006 a a of $ 117 million during 2006 a a result of the adoption of SFAS No . 123R . Diluted earnings per common share wa reduced by $ 0.10 for the year ended September for the year ended September 30 , 2006 due to the year ended September 30 , 2006 due to the adoption of adoption of SFAS No . 123R . In accordance with SFAS accordance with SFAS No . 123R , beginning in 2006 the . 123R , beginning in 2006 the Company ha presented excess been capitalized a of September 30 , 2006 . The income a of September 30 , 2006 . The income tax benefit stock-based compensation expense wa $ 39 million for the year ended for the year ended September 30 , 2006 . As of year ended September 30 , 2006 . As of September 30 2006 . As of September 30 , 2006 , $ 375.2 As of September 30 , 2006 , $ 375.2 million of 30 , 2006 , $ 375.2 million of total unrecognized compensation over a weighted-average period of 2.91 year . 82 NOTES TO period of 2.91 year . 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( Continued ) SFAS No . 123R prohibits recognition of a deferred adoption of SFAS No . 123R , the Company measured compensation by APB Opinion No . 25 . The Company applied the provision of SFAS No . 123 a amended by SFAS No amended by SFAS No . 148 , Accounting for Stock-Based Compensation—Transition Under APB Opinion No . 25 , when the exercise price provision of SFAS No . 123 to stock-based compensation during 2005 123 to stock-based compensation during 2005 and 2004 ( in million stock-based compensation during 2005 and 2004 ( in million , except per share amount ) : 2005 2004 As Restated ( 1 share amount ) : 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Net income $ 1,328 1 ) Net income $ 1,328 $ 266 Add : Stock-based Net income $ 1,328 $ 266 Add : Stock-based employee compensation income , net of tax 45 43 Deduct : Stock-based employee , net of tax 45 43 Deduct : Stock-based employee compensation , net of tax ( 118 ) ( 148 ) Net tax ( 118 ) ( 148 ) Net income—pro forma $ ) Net income—pro forma $ 1,255 $ 161 Net income per income—pro forma $ 1,255 $ 161 Net income per common share per common share Basic $ 1.64 $ 0.36 Diluted $ 1.55 share Basic $ 1.64 $ 0.36 Diluted $ 1.55 $ 0.34 1.64 $ 0.36 Diluted $ 1.55 $ 0.34 Net income per 0.36 Diluted $ 1.55 $ 0.34 Net income per common share—pro common share—pro forma Basic $ 1.55 $ 0.22 Diluted $ 1.47 forma Basic $ 1.55 $ 0.22 Diluted $ 1.47 $ 0.21 1.55 $ 0.22 Diluted $ 1.47 $ 0.21 ( 1 ) 0.22 Diluted $ 1.47 $ 0.21 ( 1 ) See Note $ 1.47 $ 0.21 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated can be found in Note 9 . Earnings Per Common Share stock method . Under the 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( Three fiscal year ended September 30 , 2006 2006 2005 2004 year ended September 30 , 2006 2006 2005 2004 As Restated ended September 30 , 2006 2006 2005 2004 As Restated ( September 30 , 2006 2006 2005 2004 As Restated ( 1 30 , 2006 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Numerator ( in million ) : Net income $ 1,989 $ 1,328 $ 266 Denominator Net income $ 1,989 $ 1,328 $ 266 Denominator ( in $ 1,989 $ 1,328 $ 266 Denominator ( in thousand ) , excluding unvested restricted stock 844,058 808,439 743,180 Effect of dilutive excluding unvested restricted stock 844,058 808,439 743,180 Effect of dilutive option unvested restricted stock 844,058 808,439 743,180 Effect of dilutive option , unit and unvested restricted stock 33,468 48,439 31,596 Denominator for diluted and unvested restricted stock 33,468 48,439 31,596 Denominator for diluted earnings unvested restricted stock 33,468 48,439 31,596 Denominator for diluted earnings per for diluted earnings per share 877,526 856,878 774,776 Basic earnings per diluted earnings per share 877,526 856,878 774,776 Basic earnings per share earnings per share 877,526 856,878 774,776 Basic earnings per share $ Basic earnings per share $ 2.36 $ 1.64 $ 0.36 Diluted per share $ 2.36 $ 1.64 $ 0.36 Diluted earnings per $ 2.36 $ 1.64 $ 0.36 Diluted earnings per share $ Diluted earnings per share $ 2.27 $ 1.55 $ 0.34 Potentially per share $ 2.27 $ 1.55 $ 0.34 Potentially dilutive security $ 2.27 $ 1.55 $ 0.34 Potentially dilutive security representing approximately Potentially dilutive security representing approximately 3.9 million , 12.7 million ( representing approximately 3.9 million , 12.7 million ( a restated ( million ( a restated ( 1 ) ) , and 8.9 1 ) ) , and 8.9 million ( a restated ( million ( a restated ( 1 ) ) share of common for the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , and September 25 , 2004 , respectively , , and September 25 , 2004 , respectively , were excluded restricted stock unit . ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated basis is also disclosed . 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements The balance sheet a of September 24 , 2005 , and the a of September 24 , 2005 , and the related consolidated the fiscal year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 , and each 2005 and September 25 , 2004 , and each of the the quarter in fiscal year 2005 . Previously filed annual report filed annual report on Form 10-K and quarterly report on Form and quarterly report on Form 10-Q affected by the restatement have relied on . On June 29 , 2006 , the Company . On June 29 , 2006 , the Company announced that stock option grant made between 1997 and 2001 , including a grant made between 1997 and 2001 , including a grant to financial statement in this Form 10-K . These adjustment , after tax , amounted to $ 4 million , $ 7 million $ 4 million , $ 7 million , and $ 10 7 million , and $ 10 million in fiscal year 2006 10 million in fiscal year 2006 , 2005 and 2004 , in fiscal year 2006 , 2005 and 2004 , respectively . year 2006 , 2005 and 2004 , respectively . The adjustment respectively . The adjustment to 2006 wa recorded in the fourth fourth quarter of fiscal year 2006 due to it insignificance . stock option grant made on 259 date . Based on a the measurement date for the 42,077 stock option grant made on stock option grant made on 259 date between October 1996 and on 259 date between October 1996 and January 2003 ( the between October 1996 and January 2003 ( the “ relevant period Company sampled certain grant between 1994 and 1997 and found none certain grant between 1994 and 1997 and found none that required is required are dated December 29 , 1997 . The Company are dated December 29 , 1997 . The Company also examined , in the year after 2002 , Apple made significant change into category based on grant 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( related tax effect . The 42,077 grant were classified a follows classified a follows : ( 1 ) 17 grant to person follows : ( 1 ) 17 grant to person elected or grant ” ) ; ( 2 ) 3,892 grant to employee ) ; ( 2 ) 3,892 grant to employee under the grant ” ) ; ( 3 ) 27,096 grant made in ) ; ( 3 ) 27,096 grant made in broad-based award grant ” ) ; ( 4 ) 9,988 other grant ratified ) ; ( 4 ) 9,988 other grant ratified at meeting grant ” ) ; ( 5 ) 1,082 other grant ratified ) ; ( 5 ) 1,082 other grant ratified by unanimous ” ) ; and ( 6 ) two grant to the share price in this Note 2 have not been adjusted for originally assigned grant date for 6,428 grant on 42 date are date for 6,428 grant on 42 date are not the proper stock-based compensation expense of $ 105 million on a pre-tax basis were required for the remaining 35,649 grant . The adjustment were were made pursuant to a 1997 plan that dated the grant wa approved by shareholder in 1998 , on the date of accounting adjustment are required . 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( ) Monday/Tuesday Grants—Beginning in December 1998 , 3,892 new hire grant Grants—Beginning in December 1998 , 3,892 new hire grant and grant ’ start date . For 120 new hire and promotion/retention grant stock-based compensation expense of $ 6 million from 126 grant . of $ 6 million from 126 grant . Focal Grants—During the Grants—During the relevant period , 27,096 focal grant were made to Company ha concluded that for 5,595 grant on five date , the Company ha recognized $ 29 million of stock-based compensation expense the five grant date comprising 3,744 grant , the evidence show date represent more than $ 16 million of the total $ million of the total $ 29 million of stock-based compensation expense Committee were held to ratify 9,988 grant that are not Monday/Tuesday , with the exception of 46 grant . Forty-two of these grant . Forty-two of these 46 grant are dated concurrent with date . One of the 46 grant wa approved and dated . Thus , for these 46 grant the Company ha concluded the Company ha recognized $ 2 million of stock-based compensation expense Grants—During the relevant period , 1,082 grant were approved by UWCs concluded that these grant were 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( Committee . Accordingly , for 660 grant , the Company ha the Company ha recognized $ 48 million of stock-based compensation expense first grant , dated January 12 , 2000 , wa for , dated January 12 , 2000 , wa for 10 million , 2000 , wa for 10 million option share . The second grant , dated October 19 , 2001 , wa for , dated October 19 , 2001 , wa for 7.5 million , 2001 , wa for 7.5 million option share . Both grant were cancelled in March 2003 prior to being exercised , , when Mr. Jobs received 5 million share of restricted stock to the grant dated January 12 , 2000 , the Board grant dated January 12 , 2000 , the Board on December , the Board on December 2 , 1999 , authorized a Board on December 2 , 1999 , authorized a special “ grant Mr. Jobs up to 15 million share . The evidence of the grant on January 12 , 2000 , although the grant on January 12 , 2000 , although the Committee ’ a UWC transmitted on January 18 , 2000 . Because the transmitted on January 18 , 2000 . Because the measurement date . The grant dated October 19 , 2001 wa originally approved grant dated October 19 , 2001 wa originally approved at a a Board meeting on August 29 , 2001 , with an meeting on August 29 , 2001 , with an exercise price an exercise price of $ 17.83 . The term of the were not finalized until December 18 , 2001 . The grant finalized until December 18 , 2001 . The grant wa dated The grant wa dated October 19 , 2001 , with an wa dated October 19 , 2001 , with an exercise price an exercise price of $ 18.30 . The approval for the special Board meeting on October 19 , 2001 . Such a meeting on October 19 , 2001 . Such a special Board The Company ha recognized $ 20 million in stock-based compensation expense the exercise price of $ 18.30 and the share price on the share price on December 18 , 2001 of $ 21.01 price on December 18 , 2001 of $ 21.01 . The 18 , 2001 of $ 21.01 . The incremental impact from Income ) After Tax Expense 1998 $ ( 1 ) $ Tax Expense 1998 $ ( 1 ) $ — 1999 8 ( 1 ) $ — 1999 8 6 2000 13 9 1 ) $ — 1999 8 6 2000 13 9 2001 ) $ — 1999 8 6 2000 13 9 2001 19 $ — 1999 8 6 2000 13 9 2001 19 13 — 1999 8 6 2000 13 9 2001 19 13 2002 1999 8 6 2000 13 9 2001 19 13 2002 29 8 6 2000 13 9 2001 19 13 2002 29 23 6 2000 13 9 2001 19 13 2002 29 23 2003 2000 13 9 2001 19 13 2002 29 23 2003 16 13 9 2001 19 13 2002 29 23 2003 16 12 9 2001 19 13 2002 29 23 2003 16 12 Total 2001 19 13 2002 29 23 2003 16 12 Total 1998 19 13 2002 29 23 2003 16 12 Total 1998 – 13 2002 29 23 2003 16 12 Total 1998 – 2003 2002 29 23 2003 16 12 Total 1998 – 2003 impact 23 2003 16 12 Total 1998 – 2003 impact 84 63 16 12 Total 1998 – 2003 impact 84 63 2004 13 Total 1998 – 2003 impact 84 63 2004 13 10 2005 1998 – 2003 impact 84 63 2004 13 10 2005 7 – 2003 impact 84 63 2004 13 10 2005 7 7 2003 impact 84 63 2004 13 10 2005 7 7 2006 impact 84 63 2004 13 10 2005 7 7 2006 1 84 63 2004 13 10 2005 7 7 2006 1 4 63 2004 13 10 2005 7 7 2006 1 4 Total 2004 13 10 2005 7 7 2006 1 4 Total $ 13 10 2005 7 7 2006 1 4 Total $ 105 10 2005 7 7 2006 1 4 Total $ 105 $ 2005 7 7 2006 1 4 Total $ 105 $ 84 2006 1 4 Total $ 105 $ 84 Additionally , the 4 Total $ 105 $ 84 Additionally , the Company ha ( SFAS ) No . 123 in Note 1 to reflect No . 123 in Note 1 to reflect the impact of impact of these adjustment . 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( balance sheet a of September 24 , 2005 ( in million a of September 24 , 2005 ( in million , except share amount ) : September 24 , 2005 As Reported Adjustments ) : September 24 , 2005 As Reported Adjustments As Restated Cash and cash equivalent $ 3,491 $ — $ 3,491 Short-term $ 3,491 $ — $ 3,491 Short-term investment 4,770 — 4,770 — $ 3,491 Short-term investment 4,770 — 4,770 Accounts receivable , 3,491 Short-term investment 4,770 — 4,770 Accounts receivable , le allowance , le allowance of $ 46 895 — 895 Inventories 165 le allowance of $ 46 895 — 895 Inventories 165 — of $ 46 895 — 895 Inventories 165 — 165 Deferred 46 895 — 895 Inventories 165 — 165 Deferred tax asset — 895 Inventories 165 — 165 Deferred tax asset 331 — — 165 Deferred tax asset 331 — 331 Other current asset Deferred tax asset 331 — 331 Other current asset 648 — — 331 Other current asset 648 — 648 Total current asset Other current asset 648 — 648 Total current asset 10,300 — — 648 Total current asset 10,300 — 10,300 Property , plant Total current asset 10,300 — 10,300 Property , plant , and , and equipment , net 817 — 817 Goodwill 69 — equipment , net 817 — 817 Goodwill 69 — 69 Acquired net 817 — 817 Goodwill 69 — 69 Acquired intangible asset — 817 Goodwill 69 — 69 Acquired intangible asset , net Acquired intangible asset , net 27 — 27 Other asset 338 asset , net 27 — 27 Other asset 338 ( 35 27 — 27 Other asset 338 ( 35 ) 303 Total 27 Other asset 338 ( 35 ) 303 Total asset $ asset 338 ( 35 ) 303 Total asset $ 11,551 ( ) 303 Total asset $ 11,551 ( 35 ) $ 11,516 Total asset $ 11,551 ( 35 ) $ 11,516 LIABILITIES AND 11,551 ( 35 ) $ 11,516 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 1,779 $ — $ 1,779 Accrued $ 1,779 $ — $ 1,779 Accrued expense 1,705 3 1,708 — $ 1,779 Accrued expense 1,705 3 1,708 Total current liability $ 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 1,779 Accrued expense 1,705 3 1,708 Total current liability 3,484 3 3 1,708 Total current liability 3,484 3 3,487 Non-current liability 601 1,708 Total current liability 3,484 3 3,487 Non-current liability 601 — Total current liability 3,484 3 3,487 Non-current liability 601 — 601 3,484 3 3,487 Non-current liability 601 — 601 Total liability 4,085 3,487 Non-current liability 601 — 601 Total liability 4,085 3 4,088 601 — 601 Total liability 4,085 3 4,088 Commitments and contingency — 601 Total liability 4,085 3 4,088 Commitments and contingency Shareholders 601 Total liability 4,085 3 4,088 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 835,019,364 share ; 1,800,000,000 share authorized ; 835,019,364 share issued and outstanding 3,521 835,019,364 share issued and outstanding 3,521 43 3,564 Deferred stock compensation share issued and outstanding 3,521 43 3,564 Deferred stock compensation ( issued and outstanding 3,521 43 3,564 Deferred stock compensation ( 60 3,564 Deferred stock compensation ( 60 ) ( 1 ) ( compensation ( 60 ) ( 1 ) ( 61 ) Retained ) ( 1 ) ( 61 ) Retained earnings 4,005 ( ( 61 ) Retained earnings 4,005 ( 80 ) 3,925 Accumulated ) Retained earnings 4,005 ( 80 ) 3,925 Accumulated other comprehensive earnings 4,005 ( 80 ) 3,925 Accumulated other comprehensive income — — Total shareholder ’ equity 7,466 ( 38 ) 7,428 Total shareholder ’ equity 7,466 ( 38 ) 7,428 Total liability and equity 7,466 ( 38 ) 7,428 Total liability and shareholder ’ and shareholder ’ equity $ 11,551 ( 35 ) $ 11,516 ’ equity $ 11,551 ( 35 ) $ 11,516 89 NOTES 11,551 ( 35 ) $ 11,516 89 NOTES TO CONSOLIDATED FINANCIAL ( 35 ) $ 11,516 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( : Fiscal Year Ended September 24 , 2005 Fiscal Year Ended Year Ended September 24 , 2005 Fiscal Year Ended September 25 2005 Fiscal Year Ended September 25 , 2004 As Reported Adjustments Year Ended September 25 , 2004 As Reported Adjustments As Restated As Restated Net sale $ 13,931 $ — $ 13,931 $ $ 13,931 $ — $ 13,931 $ 8,279 $ — $ $ — $ 13,931 $ 8,279 $ — $ 8,279 Cost $ 8,279 $ — $ 8,279 Cost of sale ( 1 8,279 Cost of sale ( 1 ) 9,888 1 9,889 6,020 of sale ( 1 ) 9,888 1 9,889 6,020 2 6,022 sale ( 1 ) 9,888 1 9,889 6,020 2 6,022 Gross ( 1 ) 9,888 1 9,889 6,020 2 6,022 Gross margin 1 ) 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ) 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ( 9,888 1 9,889 6,020 2 6,022 Gross margin 4,043 ( 1 6,020 2 6,022 Gross margin 4,043 ( 1 ) 4,042 2,259 6,022 Gross margin 4,043 ( 1 ) 4,042 2,259 ( 2 margin 4,043 ( 1 ) 4,042 2,259 ( 2 ) 2,257 4,043 ( 1 ) 4,042 2,259 ( 2 ) 2,257 Operating 1 ) 4,042 2,259 ( 2 ) 2,257 Operating expense : 4,042 2,259 ( 2 ) 2,257 Operating expense : Research and : Research and development ( 1 ) 534 1 535 489 and development ( 1 ) 534 1 535 489 2 491 development ( 1 ) 534 1 535 489 2 491 Selling ( 1 ) 534 1 535 489 2 491 Selling , 1 ) 534 1 535 489 2 491 Selling , general ) 534 1 535 489 2 491 Selling , general , 534 1 535 489 2 491 Selling , general , and general , and administrative ( 1 ) 1,859 5 1,864 1,421 and administrative ( 1 ) 1,859 5 1,864 1,421 9 1,430 administrative ( 1 ) 1,859 5 1,864 1,421 9 1,430 Restructuring ( 1 ) 1,859 5 1,864 1,421 9 1,430 Restructuring cost 1 ) 1,859 5 1,864 1,421 9 1,430 Restructuring cost — ) 1,859 5 1,864 1,421 9 1,430 Restructuring cost — — 1,859 5 1,864 1,421 9 1,430 Restructuring cost — — — Restructuring cost — — — 23 — 23 Total operating expense — — — 23 — 23 Total operating expense 2,393 6 — 23 Total operating expense 2,393 6 2,399 1,933 11 1,944 23 Total operating expense 2,393 6 2,399 1,933 11 1,944 Operating Total operating expense 2,393 6 2,399 1,933 11 1,944 Operating income operating expense 2,393 6 2,399 1,933 11 1,944 Operating income 1,650 expense 2,393 6 2,399 1,933 11 1,944 Operating income 1,650 ( 2,393 6 2,399 1,933 11 1,944 Operating income 1,650 ( 7 1,933 11 1,944 Operating income 1,650 ( 7 ) 1,643 326 1,944 Operating income 1,650 ( 7 ) 1,643 326 ( 13 income 1,650 ( 7 ) 1,643 326 ( 13 ) 313 1,650 ( 7 ) 1,643 326 ( 13 ) 313 Other 7 ) 1,643 326 ( 13 ) 313 Other income and 1,643 326 ( 13 ) 313 Other income and expense 165 313 Other income and expense 165 — 165 57 — 57 income and expense 165 — 165 57 — 57 Income before and expense 165 — 165 57 — 57 Income before provision 165 — 165 57 — 57 Income before provision for income before provision for income tax 1,815 ( 7 ) 1,808 383 for income tax 1,815 ( 7 ) 1,808 383 ( 13 tax 1,815 ( 7 ) 1,808 383 ( 13 ) 370 1,815 ( 7 ) 1,808 383 ( 13 ) 370 Provision 7 ) 1,808 383 ( 13 ) 370 Provision for income 1,808 383 ( 13 ) 370 Provision for income tax 480 370 Provision for income tax 480 — 480 107 ( 3 for income tax 480 — 480 107 ( 3 ) 104 income tax 480 — 480 107 ( 3 ) 104 Net 480 — 480 107 ( 3 ) 104 Net income $ 480 107 ( 3 ) 104 Net income $ 1,335 $ ) 104 Net income $ 1,335 $ ( 7 ) $ income $ 1,335 $ ( 7 ) $ 1,328 $ 276 $ ( 7 ) $ 1,328 $ 276 $ ( 10 7 ) $ 1,328 $ 276 $ ( 10 ) $ 1,328 $ 276 $ ( 10 ) $ 266 Earnings per $ ( 10 ) $ 266 Earnings per common share : common share : Basic $ 1.65 $ ( 0.01 ) $ Basic $ 1.65 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 1.64 $ 0.37 $ ( 0.01 ) $ 0.36 Diluted $ $ ( 0.01 ) $ 0.36 Diluted $ 1.56 $ ( ) $ 0.36 Diluted $ 1.56 $ ( 0.01 ) $ Diluted $ 1.56 $ ( 0.01 ) $ 1.55 $ 0.36 $ ( 0.01 ) $ 1.55 $ 0.36 $ ( 0.02 0.01 ) $ 1.55 $ 0.36 $ ( 0.02 ) $ 1.55 $ 0.36 $ ( 0.02 ) $ 0.34 Shares used $ ( 0.02 ) $ 0.34 Shares used in computing earnings in thousand ) : Basic 808,439 — 808,439 743,180 — 743,180 ) : Basic 808,439 — 808,439 743,180 — 743,180 Diluted 856,780 : Basic 808,439 — 808,439 743,180 — 743,180 Diluted 856,780 98 808,439 — 808,439 743,180 — 743,180 Diluted 856,780 98 856,878 774,622 808,439 743,180 — 743,180 Diluted 856,780 98 856,878 774,622 154 774,776 743,180 — 743,180 Diluted 856,780 98 856,878 774,622 154 774,776 ( — 743,180 Diluted 856,780 98 856,878 774,622 154 774,776 ( 1 743,180 Diluted 856,780 98 856,878 774,622 154 774,776 ( 1 ) Diluted 856,780 98 856,878 774,622 154 774,776 ( 1 ) Includes 856,780 98 856,878 774,622 154 774,776 ( 1 ) Includes stock-based 856,878 774,622 154 774,776 ( 1 ) Includes stock-based compensation expense : Cost of sale $ 2 $ 1 $ 3 $ of sale $ 2 $ 1 $ 3 $ 1 $ $ 2 $ 1 $ 3 $ 1 $ 2 $ $ 1 $ 3 $ 1 $ 2 $ 3 Research $ 3 $ 1 $ 2 $ 3 Research and development $ 1 $ 2 $ 3 Research and development $ 6 3 Research and development $ 6 $ 1 $ 7 $ and development $ 6 $ 1 $ 7 $ 4 $ $ 6 $ 1 $ 7 $ 4 $ 2 $ $ 1 $ 7 $ 4 $ 2 $ 6 Selling $ 7 $ 4 $ 2 $ 6 Selling , general $ 4 $ 2 $ 6 Selling , general , and general , and administrative $ 34 $ 5 $ 39 $ and administrative $ 34 $ 5 $ 39 $ 28 $ $ 34 $ 5 $ 39 $ 28 $ 9 $ $ 5 $ 39 $ 28 $ 9 $ 37 90 $ 39 $ 28 $ 9 $ 37 90 NOTES TO $ 28 $ 9 $ 37 90 NOTES TO CONSOLIDATED FINANCIAL 28 $ 9 $ 37 90 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 2—Restatement of Consolidated Financial Statements ( Impact to Shareholders ’ Equity 1998 $ 26 $ ( 27 Shareholders ’ Equity 1998 $ 26 $ ( 27 ) $ 1998 $ 26 $ ( 27 ) $ — $ ( ) $ — $ ( 1 ) 1999 36 ( 32 — $ ( 1 ) 1999 36 ( 32 ) ( $ ( 1 ) 1999 36 ( 32 ) ( 6 1 ) 1999 36 ( 32 ) ( 6 ) ( 36 ( 32 ) ( 6 ) ( 2 ) 2000 ) ( 6 ) ( 2 ) 2000 56 ( 43 6 ) ( 2 ) 2000 56 ( 43 ) ( ) ( 2 ) 2000 56 ( 43 ) ( 15 2 ) 2000 56 ( 43 ) ( 15 ) ( 56 ( 43 ) ( 15 ) ( 2 ) 2001 ) ( 15 ) ( 2 ) 2001 81 ( 49 15 ) ( 2 ) 2001 81 ( 49 ) ( ) ( 2 ) 2001 81 ( 49 ) ( 28 2 ) 2001 81 ( 49 ) ( 28 ) 4 81 ( 49 ) ( 28 ) 4 2002 105 ( 49 ) ( 28 ) 4 2002 105 ( 49 ) ) ( 28 ) 4 2002 105 ( 49 ) ( ( 28 ) 4 2002 105 ( 49 ) ( 51 ) 4 2002 105 ( 49 ) ( 51 ) 5 105 ( 49 ) ( 51 ) 5 2003 85 ( 49 ) ( 51 ) 5 2003 85 ( 22 ) ) ( 51 ) 5 2003 85 ( 22 ) ( ( 51 ) 5 2003 85 ( 22 ) ( 63 ) 5 2003 85 ( 22 ) ( 63 ) — 85 ( 22 ) ( 63 ) — 2004 68 ( ) ( 63 ) — 2004 68 ( 8 ) ( ( 63 ) — 2004 68 ( 8 ) ( 73 ) — 2004 68 ( 8 ) ( 73 ) ( 68 ( 8 ) ( 73 ) ( 13 ) 2005 ) ( 73 ) ( 13 ) 2005 43 ( 1 73 ) ( 13 ) 2005 43 ( 1 ) ( ) ( 13 ) 2005 43 ( 1 ) ( 80 13 ) 2005 43 ( 1 ) ( 80 ) ( 43 ( 1 ) ( 80 ) ( 38 ) Note ) ( 80 ) ( 38 ) Note 3—Financial Instruments The ) ( 38 ) Note 3—Financial Instruments The carrying amount of in million ) : September 30 , 2006 September 24 , ) : September 30 , 2006 September 24 , 2005 Cash September 30 , 2006 September 24 , 2005 Cash $ 200 , 2006 September 24 , 2005 Cash $ 200 $ 127 24 , 2005 Cash $ 200 $ 127 U.S. Treasury and 2005 Cash $ 200 $ 127 U.S. Treasury and Agency security U.S. Treasury and Agency security 52 89 U.S. Corporate Securities 4,309 Treasury and Agency security 52 89 U.S. Corporate Securities 4,309 2,030 52 89 U.S. Corporate Securities 4,309 2,030 Foreign Securities 1,831 1,245 89 U.S. Corporate Securities 4,309 2,030 Foreign Securities 1,831 1,245 Total Securities 4,309 2,030 Foreign Securities 1,831 1,245 Total cash equivalent 6,192 4,309 2,030 Foreign Securities 1,831 1,245 Total cash equivalent 6,192 3,364 1,831 1,245 Total cash equivalent 6,192 3,364 U.S. Treasury and Agency 1,245 Total cash equivalent 6,192 3,364 U.S. Treasury and Agency security U.S. Treasury and Agency security 447 216 U.S. Corporate Securities 2,701 Treasury and Agency security 447 216 U.S. Corporate Securities 2,701 3,662 447 216 U.S. Corporate Securities 2,701 3,662 Foreign Securities 570 892 216 U.S. Corporate Securities 2,701 3,662 Foreign Securities 570 892 Total Securities 2,701 3,662 Foreign Securities 570 892 Total short-term investment 3,718 2,701 3,662 Foreign Securities 570 892 Total short-term investment 3,718 4,770 570 892 Total short-term investment 3,718 4,770 Total cash , cash 892 Total short-term investment 3,718 4,770 Total cash , cash equivalent , and short-term investment $ 10,110 $ 8,261 The Company ’ short-term investment $ 10,110 $ 8,261 The Company ’ s U.S. net unrealized loss totaling $ 687,000 on it investment portfolio , with stated maturity le than 1 year , a of September year , a of September 30 , 2006 , and net a of September 30 , 2006 , and net unrealized loss net unrealized loss of $ 5.9 million on it investment portfolio with stated maturity le than 1 year , a of September year , a of September 24 , 2005 . The Company a of September 24 , 2005 . The Company may sell of credit deterioration , or 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 3—Financial Instruments ( Continued ) for loss before tax of $ 434,000 and $ 137,000 in 2006 of $ 434,000 and $ 137,000 in 2006 and 2005 , 434,000 and $ 137,000 in 2006 and 2005 , respectively , $ 137,000 in 2006 and 2005 , respectively , and a gain before tax of $ 1 million in 2004 a a of $ 1 million in 2004 a a result of such net . As of September 30 , 2006 and September 24 As of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , approximately $ 2006 and September 24 , 2005 , approximately $ 921 million , 2005 , approximately $ 921 million and $ 287 million $ 921 million and $ 287 million , respectively , of had underlying maturity ranging from 1 to 5 year . The maturity ranging from 1 to 5 year . The remaining short-term short-term investment a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 had maturity le 2006 and September 24 , 2005 had maturity le than 12 2005 had maturity le than 12 month . In accordance with “ FSP ” ) FAS 115-1 and FAS 124-1 , The ) FAS 115-1 and FAS 124-1 , The Meaning of Other-Than-Temporary loss position a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , aggregated by 2006 and September 24 , 2005 , aggregated by investment category ( in million ) : 2006 Less than 12 Months 12 ) : 2006 Less than 12 Months 12 Months or Greater 2006 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency Securities $ 234 $ — $ 26 $ $ 234 $ — $ 26 $ — $ 260 $ $ 26 $ — $ 260 $ — U.S. Corporate Securities $ — U.S. Corporate Securities 943 — 102 ( 1 ) U.S. Corporate Securities 943 — 102 ( 1 ) 1,045 ( Securities 943 — 102 ( 1 ) 1,045 ( 1 ) — 102 ( 1 ) 1,045 ( 1 ) Foreign Securities ( 1 ) 1,045 ( 1 ) Foreign Securities 164 — ( 1 ) Foreign Securities 164 — 34 — 198 — ) Foreign Securities 164 — 34 — 198 — Total $ Securities 164 — 34 — 198 — Total $ 1,341 $ — 198 — Total $ 1,341 $ — $ 162 $ $ 1,341 $ — $ 162 $ ( 1 ) $ — $ 162 $ ( 1 ) $ 1,503 $ ( $ ( 1 ) $ 1,503 $ ( 1 ) 2005 ) $ 1,503 $ ( 1 ) 2005 Less than 12 1,503 $ ( 1 ) 2005 Less than 12 Months 12 1 ) 2005 Less than 12 Months 12 Months or Greater 2005 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency security $ 160 $ ( 1 ) $ security $ 160 $ ( 1 ) $ 2 $ — $ ( 1 ) $ 2 $ — $ 162 $ $ 2 $ — $ 162 $ ( 1 ) U.S. — $ 162 $ ( 1 ) U.S. corporate security 3,960 1 ) U.S. corporate security 3,960 ( 4 ) 25 — U.S. corporate security 3,960 ( 4 ) 25 — 3,985 ( security 3,960 ( 4 ) 25 — 3,985 ( 4 ) ( 4 ) 25 — 3,985 ( 4 ) Foreign Securities ) 25 — 3,985 ( 4 ) Foreign Securities 1,382 ( ( 4 ) Foreign Securities 1,382 ( 1 ) 1 — ) Foreign Securities 1,382 ( 1 ) 1 — 1,383 ( Securities 1,382 ( 1 ) 1 — 1,383 ( 1 ) ( 1 ) 1 — 1,383 ( 1 ) Total $ ) 1 — 1,383 ( 1 ) Total $ 5,502 $ ( 1 ) Total $ 5,502 $ ( 6 ) $ Total $ 5,502 $ ( 6 ) $ 28 $ — $ ( 6 ) $ 28 $ — $ 5,530 $ $ 28 $ — $ 5,530 $ ( 6 ) The — $ 5,530 $ ( 6 ) The unrealized loss on Company ’ s investment during 2006 in U.S. Government security and U.S. Government security and during 2005 in U.S. Government security , nature . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company doe not recovery in market value . 92 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 3—Financial Instruments ( Continued ) Accounts customer accounted for more than 10 % of trade receivables a trade receivables a of September 30 , 2006 or September 24 a of September 30 , 2006 or September 24 , 2005 30 , 2006 or September 24 , 2005 . The following 2006 or September 24 , 2005 . The following table summarizes in million ) : September 30 , 2006 September 24 , ) : September 30 , 2006 September 24 , 2005 September September 30 , 2006 September 24 , 2005 September 25 , , 2006 September 24 , 2005 September 25 , 2004 Beginning September 24 , 2005 September 25 , 2004 Beginning allowance balance , 2005 September 25 , 2004 Beginning allowance balance $ 46 2004 Beginning allowance balance $ 46 $ 47 $ 49 Charged allowance balance $ 46 $ 47 $ 49 Charged to cost $ 46 $ 47 $ 49 Charged to cost and expense Charged to cost and expense 17 8 3 Deductions ( a to cost and expense 17 8 3 Deductions ( a ) cost and expense 17 8 3 Deductions ( a ) ( Deductions ( a ) ( 11 ) ( 9 ) ( ) ( 11 ) ( 9 ) ( 5 ) Ending ) ( 9 ) ( 5 ) Ending allowance balance $ ) Ending allowance balance $ 52 $ 46 $ 47 ( allowance balance $ 52 $ 46 $ 47 ( a ) $ 52 $ 46 $ 47 ( a ) Represents amount current asset , totaled $ 1.6 billion and $ 417 million $ 1.6 billion and $ 417 million a of September 30 417 million a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , respectively . 2006 and September 24 , 2005 , respectively . The Company sheet at fair value . 93 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 3—Financial Instruments ( Continued ) The currency instrument a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 ( in million 2006 and September 24 , 2005 ( in million ) : in million ) : September 30 , 2006 September 24 , ) : September 30 , 2006 September 24 , 2005 Notional September 30 , 2006 September 24 , 2005 Notional Principal Fair , 2006 September 24 , 2005 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 351 $ 6 $ 6 $ Spot/Forward contract $ 351 $ 6 $ 6 $ 662 $ $ 351 $ 6 $ 6 $ 662 $ 10 $ $ 6 $ 6 $ 662 $ 10 $ 10 Purchased $ 6 $ 662 $ 10 $ 10 Purchased option $ $ 662 $ 10 $ 10 Purchased option $ 1,256 $ $ 10 Purchased option $ 1,256 $ 9 $ 9 $ Purchased option $ 1,256 $ 9 $ 9 $ 1,668 $ $ 1,256 $ 9 $ 9 $ 1,668 $ 17 $ $ 9 $ 9 $ 1,668 $ 17 $ 17 Sold $ 9 $ 1,668 $ 17 $ 17 Sold option $ $ 1,668 $ 17 $ 17 Sold option $ 80 $ $ 17 Sold option $ 80 $ ( 1 ) $ option $ 80 $ ( 1 ) $ — $ 1,087 1 ) $ — $ 1,087 $ ( 5 ) $ — $ 1,087 $ ( 5 ) $ — Foreign exchange hedge : Spot/Forward contract $ 1,103 $ 2 $ 2 $ Spot/Forward contract $ 1,103 $ 2 $ 2 $ 833 $ $ 1,103 $ 2 $ 2 $ 833 $ ( 3 $ 2 $ 2 $ 833 $ ( 3 ) $ 2 $ 833 $ ( 3 ) $ 1 Purchased option $ ( 3 ) $ 1 Purchased option $ 167 $ $ 1 Purchased option $ 167 $ 1 $ — $ Purchased option $ 167 $ 1 $ — $ 115 $ $ 1 $ — $ 115 $ — $ — Sold market information a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 . Although the 2006 and September 24 , 2005 . Although the table above currency . Other comprehensive income 94 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 3—Financial Instruments ( Continued ) associated time horizon of up to 6 month . Derivative instrument designated period or within a subsequent 2 month time period . Deferred net gain of approximately $ 421,000 in 2006 and net loss of approximately $ 421,000 in 2006 and net loss of $ and net loss of $ 1.6 million and $ 2.8 million $ 1.6 million and $ 2.8 million in 2005 and 2004 and $ 2.8 million in 2005 and 2004 , respectively , 2.8 million in 2005 and 2004 , respectively , in other condition . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had a flow hedge of approximately $ 2.8 million , net of tax the second quarter of fiscal 2007 . The net gain or For the year ended September 30 , 2006 and September 24 year ended September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , the Company 2006 and September 24 , 2005 , the Company had net had net gain of $ 7.4 million and $ 673,000 , $ 7.4 million and $ 673,000 , respectively , included in income and expense . Note 4—Consolidated Financial Statement Details ( in million ) Other Current Assets 2006 2005 Vendor non-trade receivables $ ) Other Current Assets 2006 2005 Vendor non-trade receivables $ 1,593 2005 Vendor non-trade receivables $ 1,593 $ 417 NAND flash memory non-trade receivables $ 1,593 $ 417 NAND flash memory prepayment 208 417 NAND flash memory prepayment 208 — Other current asset 469 208 — Other current asset 469 231 Total other current asset — Other current asset 469 231 Total other current asset $ Total other current asset $ 2,270 $ 648 95 NOTES TO current asset $ 2,270 $ 648 95 NOTES TO CONSOLIDATED FINANCIAL asset $ 2,270 $ 648 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 4—Consolidated Financial Statement Details ( in , Plant , and Equipment 2006 2005 Land and building $ Plant , and Equipment 2006 2005 Land and building $ 626 2005 Land and building $ 626 $ 361 Machinery , equipment and building $ 626 $ 361 Machinery , equipment , and equipment , and internal-use software 595 470 Office furniture and equipment , and internal-use software 595 470 Office furniture and equipment 94 470 Office furniture and equipment 94 81 Leasehold improvement 760 569 Office furniture and equipment 94 81 Leasehold improvement 760 569 2,075 equipment 94 81 Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation 94 81 Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and 81 Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and amortization Leasehold improvement 760 569 2,075 1,481 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 794 ) ( 664 ) Net amortization ( 794 ) ( 664 ) Net property , plant plant , and equipment $ 1,281 $ 817 Other Assets 2006 and equipment $ 1,281 $ 817 Other Assets 2006 2005 As 1,281 $ 817 Other Assets 2006 2005 As Restated ( 1 $ 817 Other Assets 2006 2005 As Restated ( 1 ) 2006 2005 As Restated ( 1 ) Long-term NAND flash memory NAND flash memory prepayment $ 1,042 $ — Non-current deferred tax Non-current deferred tax asset — 148 Capitalized software development cost , software development cost , net 21 38 Other asset 175 117 development cost , net 21 38 Other asset 175 117 Total net 21 38 Other asset 175 117 Total other asset $ 21 38 Other asset 175 117 Total other asset $ 1,238 117 Total other asset $ 1,238 $ 303 Accrued Expenses 2006 other asset $ 1,238 $ 303 Accrued Expenses 2006 2005 As 1,238 $ 303 Accrued Expenses 2006 2005 As Restated ( 1 $ 303 Accrued Expenses 2006 2005 As Restated ( 1 ) 2006 2005 As Restated ( 1 ) Deferred revenue—current $ 746 1 ) Deferred revenue—current $ 746 $ 501 Accrued warranty and Deferred revenue—current $ 746 $ 501 Accrued warranty and related cost Accrued warranty and related cost 284 188 Accrued marketing and distribution warranty and related cost 284 188 Accrued marketing and distribution 298 188 Accrued marketing and distribution 298 221 Accrued compensation and employee Accrued marketing and distribution 298 221 Accrued compensation and employee benefit Accrued compensation and employee benefit 221 167 Other accrued tax liability compensation and employee benefit 221 167 Other accrued tax liability 388 167 Other accrued tax liability 388 196 Deferred margin on component Other accrued tax liability 388 196 Deferred margin on component sale Deferred margin on component sale 324 26 Other current liability 820 margin on component sale 324 26 Other current liability 820 409 324 26 Other current liability 820 409 Total accrued expense $ 26 Other current liability 820 409 Total accrued expense $ 3,081 409 Total accrued expense $ 3,081 $ 1,708 Non-Current Liabilities 2006 accrued expense $ 3,081 $ 1,708 Non-Current Liabilities 2006 2005 Deferred 3,081 $ 1,708 Non-Current Liabilities 2006 2005 Deferred tax liability $ $ 1,708 Non-Current Liabilities 2006 2005 Deferred tax liability $ 381 2005 Deferred tax liability $ 381 $ 308 Deferred revenue—non-current 355 tax liability $ 381 $ 308 Deferred revenue—non-current 355 281 Other 381 $ 308 Deferred revenue—non-current 355 281 Other non-current liability 14 $ 308 Deferred revenue—non-current 355 281 Other non-current liability 14 12 355 281 Other non-current liability 14 12 Total non-current liability $ 281 Other non-current liability 14 12 Total non-current liability $ 750 12 Total non-current liability $ 750 $ 601 96 NOTES TO non-current liability $ 750 $ 601 96 NOTES TO CONSOLIDATED FINANCIAL liability $ 750 $ 601 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 4—Consolidated Financial Statement Details ( in ) Other Income and Expense 2006 2005 2004 Gains on non-current Other Income and Expense 2006 2005 2004 Gains on non-current investment Income and Expense 2006 2005 2004 Gains on non-current investment , $ — $ — $ 4 Interest income $ 394 $ $ 4 Interest income $ 394 $ 183 $ 64 Interest Interest income $ 394 $ 183 $ 64 Interest expense — $ 394 $ 183 $ 64 Interest expense — — ( Interest expense — — ( 3 ) Other income ( expense expense ) , net ( 29 ) ( 18 ) ( net ( 29 ) ( 18 ) ( 8 ) Total ) ( 18 ) ( 8 ) Total interest and other and other income , net 365 165 53 Total other income other income , net 365 165 53 Total other income and income , net 365 165 53 Total other income and expense other income and expense $ 365 $ 165 $ 57 ( and expense $ 365 $ 165 $ 57 ( 1 ) $ 365 $ 165 $ 57 ( 1 ) See Note $ 165 $ 57 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Financial Statements . ” Note 5—Goodwill and Other Intangible Assets The life over period ranging from 3 to 10 year . The period ranging from 3 to 10 year . The following table in million ) : September 30 , 2006 September 24 , ) : September 30 , 2006 September 24 , 2005 Gross September 30 , 2006 September 24 , 2005 Gross Carrying Amount , 2006 September 24 , 2005 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Goodwill $ 38 $ — $ 38 $ $ 38 $ — $ 38 $ 69 $ — $ $ — $ 38 $ 69 $ — $ 69 Acquired $ 69 $ — $ 69 Acquired technology 181 ( 42 — $ 69 Acquired technology 181 ( 42 ) 139 61 69 Acquired technology 181 ( 42 ) 139 61 ( 34 technology 181 ( 42 ) 139 61 ( 34 ) 27 181 ( 42 ) 139 61 ( 34 ) 27 Total 42 ) 139 61 ( 34 ) 27 Total acquired intangible 139 61 ( 34 ) 27 Total acquired intangible asset $ Total acquired intangible asset $ 219 $ ( 42 ) $ asset $ 219 $ ( 42 ) $ 177 $ 130 $ ( 42 ) $ 177 $ 130 $ ( 34 42 ) $ 177 $ 130 $ ( 34 ) $ 177 $ 130 $ ( 34 ) $ 96 As of $ ( 34 ) $ 96 As of September 30 , $ 96 As of September 30 , 2006 , and September As of September 30 , 2006 , and September 24 , , 2006 , and September 24 , 2005 , the weighted-average , and September 24 , 2005 , the weighted-average amortization period period for acquired technology wa 8.5 year and 5.5 year , technology wa 8.5 year and 5.5 year , respectively . During year , respectively . During 2006 , the Company sold certain Company reduced goodwill by $ 31 million for the outstanding balance of PowerSchool , Inc. in 2001 and recognized a $ 4 2001 and recognized a $ 4 million pre-tax gain , which statement of operation . During 2005 , the Company recorded an an adjustment of approximately $ 11 million to goodwill relating to previous business combination . During 2005 , these NOLs were deemed time of the acquisition . 97 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 5—Goodwill and Other Intangible Assets ( ) : Fiscal Years : 2007 $ 24 2008 21 2009 Fiscal Years : 2007 $ 24 2008 21 2009 18 2010 Years : 2007 $ 24 2008 21 2009 18 2010 14 : 2007 $ 24 2008 21 2009 18 2010 14 2011 2007 $ 24 2008 21 2009 18 2010 14 2011 13 $ 24 2008 21 2009 18 2010 14 2011 13 Thereafter 24 2008 21 2009 18 2010 14 2011 13 Thereafter 49 2008 21 2009 18 2010 14 2011 13 Thereafter 49 Total 21 2009 18 2010 14 2011 13 Thereafter 49 Total $ 2009 18 2010 14 2011 13 Thereafter 49 Total $ 139 2010 14 2011 13 Thereafter 49 Total $ 139 Amortization expense 13 Thereafter 49 Total $ 139 Amortization expense related to acquired acquired intangible asset wa $ 12 million , $ 9 million $ 12 million , $ 9 million , and $ 7 9 million , and $ 7 million in 2006 , 2005 and $ 7 million in 2006 , 2005 , and 2004 7 million in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Note 6—Restructuring 2004 , respectively . Note 6—Restructuring Charges During 2004 , the . Note 6—Restructuring Charges During 2004 , the Company recorded total restructuring charge of approximately $ 23.0 million , including approximately $ million , including approximately $ 14.0 million in severance cost , in severance cost , $ 5.5 million in asset impairment , asset impairment , and $ 3.5 million for lease cancellation . a European workforce reduction during 2004 . Of the $ 23.0 2004 . Of the $ 23.0 million charge , $ 21.3 23.0 million charge , $ 21.3 million had been utilized by utilized by the end of 2006 , with the remainder consisting the remainder consisting of $ 1.7 million for lease cancellation . resulted in the termination of 452 position . Note 7—Income Taxes of 452 position . Note 7—Income Taxes The provision for income ( in million ) : 2006 2005 2004 As Restated ( in million ) : 2006 2005 2004 As Restated ( 1 million ) : 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Federal : Current $ ) Federal : Current $ 619 $ 305 $ 34 Deferred : Current $ 619 $ 305 $ 34 Deferred 56 144 $ 619 $ 305 $ 34 Deferred 56 144 53 675 $ 305 $ 34 Deferred 56 144 53 675 449 87 305 $ 34 Deferred 56 144 53 675 449 87 State $ 34 Deferred 56 144 53 675 449 87 State : 34 Deferred 56 144 53 675 449 87 State : Current Deferred 56 144 53 675 449 87 State : Current 56 56 144 53 675 449 87 State : Current 56 66 449 87 State : Current 56 66 5 Deferred 14 ( 87 State : Current 56 66 5 Deferred 14 ( 91 State : Current 56 66 5 Deferred 14 ( 91 ) Current 56 66 5 Deferred 14 ( 91 ) ( 18 66 5 Deferred 14 ( 91 ) ( 18 ) 70 14 ( 91 ) ( 18 ) 70 ( 25 ) 91 ) ( 18 ) 70 ( 25 ) ( 13 ( 18 ) 70 ( 25 ) ( 13 ) Foreign 70 ( 25 ) ( 13 ) Foreign : Current 101 13 ) Foreign : Current 101 59 46 Deferred ( 17 ) Foreign : Current 101 59 46 Deferred ( 17 ) Foreign : Current 101 59 46 Deferred ( 17 ) ( 101 59 46 Deferred ( 17 ) ( 3 ) ( Deferred ( 17 ) ( 3 ) ( 16 ) 84 ) ( 3 ) ( 16 ) 84 56 30 Provision 3 ) ( 16 ) 84 56 30 Provision for income ) ( 16 ) 84 56 30 Provision for income tax ( 16 ) 84 56 30 Provision for income tax $ Provision for income tax $ 829 $ 480 $ 104 ( income tax $ 829 $ 480 $ 104 ( 1 ) $ 829 $ 480 $ 104 ( 1 ) See Note $ 480 $ 104 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated pretax earnings of approximately $ 1.5 billion , $ 922 million $ 1.5 billion , $ 922 million , and $ 384 922 million , and $ 384 million in 2006 , 2005 and $ 384 million in 2006 , 2005 , and 2004 384 million in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . As of respectively . As of September 30 , 2006 , 98 NOTES As of September 30 , 2006 , 98 NOTES TO CONSOLIDATED September 30 , 2006 , 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7—Income Taxes ( Continued ) approximately ( Continued ) approximately $ 4.1 billion of the Company ’ a cumulative total of $ 823 million of such earnings . be distributed . On October 22 , 2004 , the American . On October 22 , 2004 , the American Jobs Creation American Jobs Creation Act of 2004 ( “ AJCA ” ) provision for the deduction of 85 % of certain foreign earnings , dividend qualifying for the 85 % deduction must be reinvested Board of Directors . During 2006 , the Company repatriated approximately the Company repatriated approximately $ 1.6 billion of foreign earnings . the earnings repatriated , $ 755 million is eligible for the a tax charge of $ 51 million related to the repatriation a tax benefit of $ 71 million resulting from the implementation settled . As of September 30 , 2006 and September 24 As of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , the significant 2006 and September 24 , 2005 , the significant component of ( in million ) : 2006 2005 As Restated ( 1 in million ) : 2006 2005 As Restated ( 1 ) 2006 2005 As Restated ( 1 ) Deferred tax asset : liability and other reserve $ 485 $ 321 Tax loss and other reserve $ 485 $ 321 Tax loss and credit 55 321 Tax loss and credit 55 262 Basis of capital asset Tax loss and credit 55 262 Basis of capital asset and of capital asset and investment 124 96 Accounts receivable and inventory capital asset and investment 124 96 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 45 36 Other 30 17 Total receivable and inventory reserve 45 36 Other 30 17 Total deferred inventory reserve 45 36 Other 30 17 Total deferred tax asset reserve 45 36 Other 30 17 Total deferred tax asset 739 17 Total deferred tax asset 739 732 Less valuation allowance 5 Total deferred tax asset 739 732 Less valuation allowance 5 5 739 732 Less valuation allowance 5 5 Net deferred tax asset 732 Less valuation allowance 5 5 Net deferred tax asset 734 5 Net deferred tax asset 734 727 Deferred tax liability : Net deferred tax asset 734 727 Deferred tax liability : Unremitted : Unremitted earnings of subsidiary 514 557 Total deferred tax liability Unremitted earnings of subsidiary 514 557 Total deferred tax liability 514 557 Total deferred tax liability 514 557 Net deferred tax asset Total deferred tax liability 514 557 Net deferred tax asset $ Net deferred tax asset $ 220 $ 170 ( 1 ) tax asset $ 220 $ 170 ( 1 ) See Note $ 220 $ 170 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Consolidated Financial Statements . ” 99 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7—Income Taxes ( Continued ) As Continued ) As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company ha state effect of which is $ 55 million . Certain of those effect of which is $ 12 million , expire between 2016 12 million , expire between 2016 a nd 2019 . A expire between 2016 a nd 2019 . A portion of these expire . As of September 30 , 2006 and September 24 As of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , a valuation 2006 and September 24 , 2005 , a valuation allowance of a valuation allowance of $ 5 million wa recorded against the federal income tax rate ( 35 % in 2006 , 2005 rate ( 35 % in 2006 , 2005 , and 2004 35 % in 2006 , 2005 , and 2004 ) to 2006 , 2005 , and 2004 ) to income before provision ( in million ) : 2006 2005 2004 As Restated ( in million ) : 2006 2005 2004 As Restated ( 1 million ) : 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Computed expected tax $ ) Computed expected tax $ 987 $ 633 $ 129 State expected tax $ 987 $ 633 $ 129 State tax , $ 987 $ 633 $ 129 State tax , net of , net of federal effect 86 ( 19 ) ( 5 of federal effect 86 ( 19 ) ( 5 ) Indefinitely 86 ( 19 ) ( 5 ) Indefinitely invested earnings of earnings of foreign subsidiary ( 224 ) ( 98 ) ( subsidiary ( 224 ) ( 98 ) ( 31 ) Nondeductible ) ( 98 ) ( 31 ) Nondeductible executive compensation 11 31 ) Nondeductible executive compensation 11 14 12 Research and development ) Nondeductible executive compensation 11 14 12 Research and development credit Nondeductible executive compensation 11 14 12 Research and development credit , development credit , net ( 12 ) ( 26 ) ( net ( 12 ) ( 26 ) ( 5 ) Other ) ( 26 ) ( 5 ) Other item ( 19 5 ) Other item ( 19 ) ( 24 ) 4 item ( 19 ) ( 24 ) 4 Provision for income 19 ) ( 24 ) 4 Provision for income tax $ Provision for income tax $ 829 $ 480 $ 104 Effective income tax $ 829 $ 480 $ 104 Effective tax rate $ 829 $ 480 $ 104 Effective tax rate 29 % $ 104 Effective tax rate 29 % 27 % 28 % Effective tax rate 29 % 27 % 28 % ( 1 rate 29 % 27 % 28 % ( 1 ) See 27 % 28 % ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated stock option transaction were $ 419 million , $ 428 million $ 419 million , $ 428 million ( a restated ( million ( a restated ( 1 ) ) , and $ ) ) , and $ 83 million ( a restated ( million ( a restated ( 1 ) ) in 2006 , ( 1 ) ) in 2006 , 2005 , and 2004 ) ) in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively , and were of shareholder ’ equity . 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 7—Income Taxes ( Continued ) The tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In such resolution occurs . In 2006 , the Company recorded a a tax benefit of $ 20 million due to the settlement in the U.S . Note 8—Shareholders ’ Equity Preferred Stock The the treasury stock method . 2.47 million previously granted restricted stock restricted stock unit vested during 2006 . A majority of these The total share withheld of 985,833 for 2006 wa based on share withheld of 985,833 for 2006 wa based on the value taxing authority were approximately $ 59 million . These net-share settlement Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company ’ s s Board of Directors granted 10 million share of restricted stock CEO that vested on March 19 , 2006 . The amount vested on March 19 , 2006 . The amount of the three-year requisite service period . 101 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Shareholders ’ Equity ( Continued ) Continued ) Upon vesting during 2006 , the restricted stock award The total share withheld of 4.6 million wa based on the closing stock price of $ 64.66 . The remaining share net taxing authority were approximately $ 296 million . The net-share settlement Stock Repurchase Plan In July 1999 , the Company ’ s to repurchase up to $ 500 million of it common stock ha repurchased a total of 13.1 million share at a cost at a cost of $ 217 million under this plan and up to an additional $ 283 million of it common stock common stock a of September 30 , 2006 . Comprehensive Income a of September 30 , 2006 . Comprehensive Income Comprehensive income ( in million ) : 2006 2005 2004 Unrealized loss on in million ) : 2006 2005 2004 Unrealized loss on available-for-sale million ) : 2006 2005 2004 Unrealized loss on available-for-sale security security $ — $ ( 4 ) $ ( 4 ) ( 4 ) $ ( 4 ) Unrealized gains/ ( loss loss ) on derivative investment 3 4 ( 4 ) Cumulative ) on derivative investment 3 4 ( 4 ) Cumulative foreign derivative investment 3 4 ( 4 ) Cumulative foreign currency translation ) Cumulative foreign currency translation 19 — ( 7 ) Accumulated currency translation 19 — ( 7 ) Accumulated other comprehensive income/ income/ ( loss ) $ 22 $ — $ ( 15 22 $ — $ ( 15 ) The following table summarizes ( in million ) : 2006 2005 2004 Change in fair in million ) : 2006 2005 2004 Change in fair value million ) : 2006 2005 2004 Change in fair value of value of available-for-sale security $ 4 $ — $ ( 1 4 $ — $ ( 1 ) Adjustment for net gains/losses net income — — ( 4 ) Change in unrealized gain/loss gain/loss on available-for-sale security $ 4 $ — $ ( 5 4 $ — $ ( 5 ) The tax effect related available-for-sale security wa $ ( 2 ) million , zero , , zero , and $ 4 million for 2006 , 2005 and $ 4 million for 2006 , 2005 , and 2004 4 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . The tax in net income wa $ 1 million for 2004 . 102 wa $ 1 million for 2004 . 102 NOTES TO CONSOLIDATED 1 million for 2004 . 102 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Shareholders ’ Equity ( Continued ) ( in million ) : 2006 2005 2004 Changes in fair in million ) : 2006 2005 2004 Changes in fair value million ) : 2006 2005 2004 Changes in fair value of fair value of derivative $ 11 $ 7 $ ( 21 of derivative $ 11 $ 7 $ ( 21 ) Adjustment 11 $ 7 $ ( 21 ) Adjustment for net loss included in net income ( 12 ) 1 33 Change in net income ( 12 ) 1 33 Change in unrealized gain/loss income ( 12 ) 1 33 Change in unrealized gain/loss on on derivative instrument $ ( 1 ) $ 8 $ 12 $ ( 1 ) $ 8 $ 12 The tax effect 1 ) $ 8 $ 12 The tax effect related to of derivative wa $ ( 8 ) million , $ ( ) million , $ ( 3 ) million , and $ ) million , and $ 10 million for 2006 , 2005 and $ 10 million for 2006 , 2005 , and 2004 10 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . The tax to net income wa $ 8 million , $ ( 2 8 million , $ ( 2 ) million , and $ million , and $ ( 13 ) million for 2006 , ( 13 ) million for 2006 , 2005 , and 2004 ) million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued or quarterly vesting . The 2003 Plan permit the granting of and stock purchase right . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Board of Directors approved the 1997 Employee Stock Option Plan ( Option Plan ( the “ 1997 Plan ” ) , a , option granted under the 1997 Plan generally expire 7 to the 1997 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date exercisable over a period of 4 year , based on continued quarterly vesting . In October 2003 , the Company terminated the , the Company terminated the 1997 Employee Stock Option Plan and all remaining unissued share totaling 28,590,702 . No new option can can be granted from the 1997 Plan . Employee Stock Option Option Exchange Program On March 20 , 2003 , the Company Program On March 20 , 2003 , the Company announced a price at or above $ 12.50 per share for a predetermined were cancelled . On April 17 , 2003 , in accordance . On April 17 , 2003 , in accordance with the Company cancelled option to purchase 33,138,386 share of it common stock common stock . On October 22 , 2003 , new stock . On October 22 , 2003 , new stock option totaling , new stock option totaling 13,394,736 share were issued to employee an exercise price of $ 11.38 per share , which is associated with this transaction . 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Shareholders ’ Equity ( Continued ) ’ Equity ( Continued ) 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s wa approved by shareholder in 1998 . Pursuant to the Director granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( date of grant . Rule 10b5-1 Trading Plans Certain of the trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended . A at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee ’ to a maximum of $ 25,000 in any calendar year . limited to a total of 1 million share per offering period per offering period . During 2006 , 2005 , and 2004 period . During 2006 , 2005 , and 2004 , adjusted 2006 , 2005 , and 2004 , adjusted for the February , adjusted for the February 2005 stock split , 1.5 million February 2005 stock split , 1.5 million , 2.3 million , split , 1.5 million , 2.3 million , and 3.9 million , 2.3 million , and 3.9 million share , respectively , Plan . As of September 30 , 2006 , approximately 2.3 As of September 30 , 2006 , approximately 2.3 million share 30 , 2006 , approximately 2.3 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 15,000 for calendar year 2006 ) $ 15,000 for calendar year 2006 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ Savings Plan were approximately $ 33 million , $ 28 million $ 33 million , $ 28 million , and $ 24 28 million , and $ 24 million in 2006 , 2005 and $ 24 million in 2006 , 2005 , and 2004 24 million in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . 104 NOTES and 2004 , respectively . 104 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Shareholders ' Equity ( Continued ) Intrinsic Value Balance at September 27 , 2003 91,660 126,024 $ Balance at September 27 , 2003 91,660 126,024 $ 9.54 Restricted at September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock September 27 , 2003 91,660 126,024 $ 9.54 Restricted Stock Granted , 2003 91,660 126,024 $ 9.54 Restricted Stock Granted ( 5,030 9.54 Restricted Stock Granted ( 5,030 ) — — Options Granted — — Options Granted ( 36,394 ) 36,394 $ 11.48 Options Options Granted ( 36,394 ) 36,394 $ 11.48 Options Cancelled 6,010 ( 36,394 ) 36,394 $ 11.48 Options Cancelled 6,010 ( 6,010 36,394 $ 11.48 Options Cancelled 6,010 ( 6,010 ) $ 10.35 11.48 Options Cancelled 6,010 ( 6,010 ) $ 10.35 Options Exercised 6,010 ( 6,010 ) $ 10.35 Options Exercised — ( 45,686 10.35 Options Exercised — ( 45,686 ) $ 8.60 Plan Shares — ( 45,686 ) $ 8.60 Plan Shares Expired ( 32,196 8.60 Plan Shares Expired ( 32,196 ) — — Balance at — — Balance at September 25 , 2004 24,050 110,722 $ Balance at September 25 , 2004 24,050 110,722 $ 10.52 Additional at September 25 , 2004 24,050 110,722 $ 10.52 Additional Options September 25 , 2004 24,050 110,722 $ 10.52 Additional Options Authorized , 2004 24,050 110,722 $ 10.52 Additional Options Authorized 49,000 — $ 10.52 Additional Options Authorized 49,000 — — Restricted Stock Units Restricted Stock Units Granted ( 460 ) — — Options Granted — — Options Granted ( 16,214 ) 16,214 $ 42.52 Options Options Granted ( 16,214 ) 16,214 $ 42.52 Options Cancelled 3,844 ( 16,214 ) 16,214 $ 42.52 Options Cancelled 3,844 ( 3,844 16,214 $ 42.52 Options Cancelled 3,844 ( 3,844 ) $ 13.28 42.52 Options Cancelled 3,844 ( 3,844 ) $ 13.28 Restricted Stock 3,844 ( 3,844 ) $ 13.28 Restricted Stock Units Cancelled 230 13.28 Restricted Stock Units Cancelled 230 — — Options Exercised — — Options Exercised — ( 49,871 ) $ 10.05 Plan Shares — ( 49,871 ) $ 10.05 Plan Shares Expired ( 1,493 10.05 Plan Shares Expired ( 1,493 ) — — Balance at — — Balance at September 24 , 2005 58,957 73,221 $ Balance at September 24 , 2005 58,957 73,221 $ 17.79 Restricted at September 24 , 2005 58,957 73,221 $ 17.79 Restricted Stock September 24 , 2005 58,957 73,221 $ 17.79 Restricted Stock Units , 2005 58,957 73,221 $ 17.79 Restricted Stock Units Granted ( Restricted Stock Units Granted ( 2,950 ) — Options Granted ( ) — Options Granted ( 3,881 ) 3,881 $ 65.28 Options Options Granted ( 3,881 ) 3,881 $ 65.28 Options Cancelled 2,325 ( 3,881 ) 3,881 $ 65.28 Options Cancelled 2,325 ( 2,325 3,881 $ 65.28 Options Cancelled 2,325 ( 2,325 ) $ 29.32 65.28 Options Cancelled 2,325 ( 2,325 ) $ 29.32 Restricted Stock 2,325 ( 2,325 ) $ 29.32 Restricted Stock Units Cancelled 625 29.32 Restricted Stock Units Cancelled 625 — — Options Exercised — — Options Exercised — ( 21,795 ) $ 11.78 Plan Shares — ( 21,795 ) $ 11.78 Plan Shares Expired ( 82 11.78 Plan Shares Expired ( 82 ) — — Balance at — — Balance at September 30 , 2006 54,994 52,982 $ Balance at September 30 , 2006 54,994 52,982 $ 23.23 4.78 at September 30 , 2006 54,994 52,982 $ 23.23 4.78 $ September 30 , 2006 54,994 52,982 $ 23.23 4.78 $ 2,848,896 , 2006 54,994 52,982 $ 23.23 4.78 $ 2,848,896 Exercisable at 2006 54,994 52,982 $ 23.23 4.78 $ 2,848,896 Exercisable at September 52,982 $ 23.23 4.78 $ 2,848,896 Exercisable at September 30 , $ 2,848,896 Exercisable at September 30 , 2006 31,184 $ 14.69 Exercisable at September 30 , 2006 31,184 $ 14.69 4.35 $ at September 30 , 2006 31,184 $ 14.69 4.35 $ 1,942,486 30 , 2006 31,184 $ 14.69 4.35 $ 1,942,486 Expected to , 2006 31,184 $ 14.69 4.35 $ 1,942,486 Expected to Vest 31,184 $ 14.69 4.35 $ 1,942,486 Expected to Vest after September Expected to Vest after September 30 , 2006 21,798 $ 35.40 Vest after September 30 , 2006 21,798 $ 35.40 5.40 $ after September 30 , 2006 21,798 $ 35.40 5.40 $ 906,410 30 , 2006 21,798 $ 35.40 5.40 $ 906,410 In conjunction , 2006 21,798 $ 35.40 5.40 $ 906,410 In conjunction with 21,798 $ 35.40 5.40 $ 906,410 In conjunction with the amendment with the amendment to the 2003 Plan that were approved at of Shareholders held on April 21 , 2005 , the number held on April 21 , 2005 , the number of share available for grant under the 2003 Plan will be reduced by all grant made after April 21 , 2005 . Aggregate intrinsic made after April 21 , 2005 . Aggregate intrinsic value represents time of exercise wa $ 1.2 billion , $ 1.1 billion $ 1.2 billion , $ 1.1 billion , and $ 266.9 1.1 billion , and $ 266.9 million for 2006 , 2005 and $ 266.9 million for 2006 , 2005 , and 2004 266.9 million for 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . As of respectively . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company had 3.41 2006 , the Company had 3.41 million restricted stock unit outstanding grant-date fair value of $ 135.1 million that were excluded from restricted stock unit granted during 2006 , 2005 , and 2004 unit granted during 2006 , 2005 , and 2004 wa $ 2006 , 2005 , and 2004 wa $ 70.92 , $ , and 2004 wa $ 70.92 , $ 45.04 , and wa $ 70.92 , $ 45.04 , and $ 12.81 , $ 45.04 , and $ 12.81 , respectively . Aggregate intrinsic restricted stock unit at September 30 , 2006 wa $ 262.5 unit at September 30 , 2006 wa $ 262.5 million . 30 , 2006 wa $ 262.5 million . Restricted stock unit stock unit that vested during 2006 totaled 2.47 million and had that vested during 2006 totaled 2.47 million and had a fair a fair value of $ 148.5 million a of the vesting s stock option plan . 105 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 8—Shareholders ' Equity ( Continued ) restricted stock that vested during 2006 wa 10 million , which that vested during 2006 wa 10 million , which had a a fair value of $ 646.6 million . The grant-date fair stock that fully vested during 2006 wa $ 7.48 per share vested during 2006 wa $ 7.48 per share . For the For the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , and September 25 , 2004 , compensation expense , and September 25 , 2004 , compensation expense related to to restricted stock wa $ 4.6 million , $ 24.9 million $ 4.6 million , $ 24.9 million , and $ 24.9 24.9 million , and $ 24.9 million , respectively . Note million , respectively . Note 9—Stock-Based Compensation The Company ha provided pro forma disclosure in Note 1 of these Notes to Consolidated for the year ended September 24 , 2005 and September 25 year ended September 24 , 2005 and September 25 , 2004 24 , 2005 and September 25 , 2004 a if the 2005 and September 25 , 2004 a if the fair value weighted average assumption used for 2006 , 2005 , and 2004 assumption used for 2006 , 2005 , and 2004 and the 2006 , 2005 , and 2004 and the resulting estimate of period are a follows : 2006 2005 2004 Expected life of are a follows : 2006 2005 2004 Expected life of stock a follows : 2006 2005 2004 Expected life of stock option Expected life of stock option 3.56 year 3.57 year 3.50 year of stock option 3.56 year 3.57 year 3.50 year Expected life option 3.56 year 3.57 year 3.50 year Expected life of stock Expected life of stock purchase 6 month 6 month 6 month of stock purchase 6 month 6 month 6 month Interest rate—stock purchase 6 month 6 month 6 month Interest rate—stock option 4.60 6 month Interest rate—stock option 4.60 % 3.73 % 2.40 % Interest rate—stock option 4.60 % 3.73 % 2.40 % Interest rate—stock option 4.60 % 3.73 % 2.40 % Interest rate—stock purchase 4.29 2.40 % Interest rate—stock purchase 4.29 % 2.54 % 1.18 % Interest rate—stock purchase 4.29 % 2.54 % 1.18 % Volatility—stock option purchase 4.29 % 2.54 % 1.18 % Volatility—stock option 40.34 % % 1.18 % Volatility—stock option 40.34 % 39.52 % 40.00 % % Volatility—stock option 40.34 % 39.52 % 40.00 % Volatility—stock purchase option 40.34 % 39.52 % 40.00 % Volatility—stock purchase 39.56 % % 40.00 % Volatility—stock purchase 39.56 % 40.88 % 35.82 % % Volatility—stock purchase 39.56 % 40.88 % 35.82 % Dividend yield purchase 39.56 % 40.88 % 35.82 % Dividend yield — — granted during the year $ 23.16 $ 14.41 $ 3.69 Weighted-average the year $ 23.16 $ 14.41 $ 3.69 Weighted-average fair value $ 23.16 $ 14.41 $ 3.69 Weighted-average fair value of stock purchase during the year $ 14.06 $ 7.55 $ 2.78 Pursuant the year $ 14.06 $ 7.55 $ 2.78 Pursuant to SFAS $ 14.06 $ 7.55 $ 2.78 Pursuant to SFAS No . Pursuant to SFAS No . 123R , the expected volatility assumption grant to employee . Note 10—Commitments and Contingencies Lease Commitments The lease are for term of 5 to 15 year and generally for term of 5 to 15 year and generally provide 106 15 year and generally provide 106 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) renewal option for term of 3 to 5 additional year . for term of 3 to 5 additional year . Leases for space are for term of 5 to 20 year , the for term of 5 to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 30 , 2006 , the Company As of September 30 , 2006 , the Company ’ s operating lease were approximately $ 1.2 billion , of which $ billion , of which $ 887 million related to lease for noncancelable lease , wa $ 138 million , $ 140 million $ 138 million , $ 140 million , and $ 103 140 million , and $ 103 million in 2006 , 2005 and $ 103 million in 2006 , 2005 , and 2004 103 million in 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Future minimum one year a of September 30 , 2006 , are a a of September 30 , 2006 , are a follows ( million ) : Fiscal Years 2007 $ 134 2008 134 2009 : Fiscal Years 2007 $ 134 2008 134 2009 134 2010 Fiscal Years 2007 $ 134 2008 134 2009 134 2010 132 Years 2007 $ 134 2008 134 2009 134 2010 132 2011 2007 $ 134 2008 134 2009 134 2010 132 2011 122 $ 134 2008 134 2009 134 2010 132 2011 122 Thereafter 134 2008 134 2009 134 2010 132 2011 122 Thereafter 498 2008 134 2009 134 2010 132 2011 122 Thereafter 498 Total 134 2009 134 2010 132 2011 122 Thereafter 498 Total minimum 2009 134 2010 132 2011 122 Thereafter 498 Total minimum lease 2010 132 2011 122 Thereafter 498 Total minimum lease payment $ Total minimum lease payment $ 1,154 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service ( in million ) : 2006 2005 2004 Beginning accrued warranty in million ) : 2006 2005 2004 Beginning accrued warranty and million ) : 2006 2005 2004 Beginning accrued warranty and related warranty and related cost $ 188 $ 105 $ 67 Cost related cost $ 188 $ 105 $ 67 Cost of warranty $ 188 $ 105 $ 67 Cost of warranty claim ( Cost of warranty claim ( 267 ) ( 188 ) ( claim ( 267 ) ( 188 ) ( 105 ) Accruals ) ( 188 ) ( 105 ) Accruals for product warranty ) Accruals for product warranty 363 271 143 Ending accrued warranty Accruals for product warranty 363 271 143 Ending accrued warranty and for product warranty 363 271 143 Ending accrued warranty and related warranty and related cost $ 284 $ 188 $ 105 107 related cost $ 284 $ 188 $ 105 107 NOTES TO $ 284 $ 188 $ 105 107 NOTES TO CONSOLIDATED FINANCIAL 284 $ 188 $ 105 107 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) cost a of either September 30 , 2006 or September 24 of either September 30 , 2006 or September 24 , 2005 30 , 2006 or September 24 , 2005 . Concentrations in 2006 or September 24 , 2005 . Concentrations in the Available . Long-Term Supply Agreements During 2006 , the Company entered into flash memory through calendar year 2010 . As part of these , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 . These prepayment will be or result of operation . 108 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 10—Commitments and Contingencies ( Continued ) result of operation . Note 11—Segment Information and Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , “ Summary of Significant the Retail segment , capital 109 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( the Retail segment were $ 200 million , $ 132 million $ 200 million , $ 132 million , and $ 104 132 million , and $ 104 million for 2006 , 2005 and $ 104 million for 2006 , 2005 , and 2004 104 million for 2006 , 2005 , and 2004 , respectively.Operating 2006 , 2005 , and 2004 , respectively.Operating income for all For the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , and September 25 , 2004 , this resulted , and September 25 , 2004 , this resulted in the corporate expense of approximately $ 663 million , $ 435 million $ 663 million , $ 435 million , and $ 213 435 million , and $ 213 million , respectively . Second For the year ended September 30 , 2006 , this resulted year ended September 30 , 2006 , this resulted in the operating segment , of $ 159 million and $ 109 million $ 159 million and $ 109 million , respectively . For For the year ended September 24 , 2005 , this resulted year ended September 24 , 2005 , this resulted in the the Retail segment of $ 92 million and $ 64 million $ 92 million and $ 64 million , respectively . For For the year ended September 25 , 2004 , this resulted year ended September 25 , 2004 , this resulted in the the Retail segment of $ 54 million and $ 37 million $ 54 million and $ 37 million , respectively . Third high-profile store a of September 30 , 2006 . These high-profile a of September 30 , 2006 . These high-profile store are allocated to corporate marketing resulting 110 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( of these store were $ 33 million , $ 31 million $ 33 million , $ 31 million , and $ 16 31 million , and $ 16 million for the year ended for the year ended September 30 , 2006 , September 24 year ended September 30 , 2006 , September 24 , 2005 30 , 2006 , September 24 , 2005 , and September 2006 , September 24 , 2005 , and September 25 , , 2005 , and September 25 , 2004 , respectively.Summary information , and September 25 , 2004 , respectively.Summary information by operating ( in million ) : 2006 2005 2004 Americas : Net in million ) : 2006 2005 2004 Americas : Net sale million ) : 2006 2005 2004 Americas : Net sale $ Americas : Net sale $ 9,307 $ 6,590 $ 4,019 Operating Net sale $ 9,307 $ 6,590 $ 4,019 Operating income $ $ 9,307 $ 6,590 $ 4,019 Operating income $ 1,665 $ $ 4,019 Operating income $ 1,665 $ 798 $ 465 Depreciation Operating income $ 1,665 $ 798 $ 465 Depreciation , amortization $ 1,665 $ 798 $ 465 Depreciation , amortization , and amortization , and accretion $ 6 $ 6 $ 6 Segment and accretion $ 6 $ 6 $ 6 Segment asset ( $ 6 $ 6 $ 6 Segment asset ( a ) asset ( a ) $ 896 $ 705 $ 563 Europe a ) $ 896 $ 705 $ 563 Europe : Net $ 896 $ 705 $ 563 Europe : Net sale $ Europe : Net sale $ 4,094 $ 3,073 $ 1,799 Operating Net sale $ 4,094 $ 3,073 $ 1,799 Operating income $ $ 4,094 $ 3,073 $ 1,799 Operating income $ 607 $ $ 1,799 Operating income $ 607 $ 454 $ 280 Depreciation Operating income $ 607 $ 454 $ 280 Depreciation , amortization $ 607 $ 454 $ 280 Depreciation , amortization , and amortization , and accretion $ 4 $ 4 $ 4 Segment and accretion $ 4 $ 4 $ 4 Segment asset $ $ 4 $ 4 $ 4 Segment asset $ 471 $ $ 4 Segment asset $ 471 $ 289 $ 259 Japan Segment asset $ 471 $ 289 $ 259 Japan : Net $ 471 $ 289 $ 259 Japan : Net sale $ Japan : Net sale $ 1,208 $ 920 $ 677 Operating Net sale $ 1,208 $ 920 $ 677 Operating income $ $ 1,208 $ 920 $ 677 Operating income $ 201 $ $ 677 Operating income $ 201 $ 140 $ 115 Depreciation Operating income $ 201 $ 140 $ 115 Depreciation , amortization $ 201 $ 140 $ 115 Depreciation , amortization , and amortization , and accretion $ 3 $ 3 $ 2 Segment and accretion $ 3 $ 3 $ 2 Segment asset $ $ 3 $ 3 $ 2 Segment asset $ 181 $ $ 2 Segment asset $ 181 $ 165 $ 114 Retail Segment asset $ 181 $ 165 $ 114 Retail : Net $ 181 $ 165 $ 114 Retail : Net sale $ Retail : Net sale $ 3,359 $ 2,350 $ 1,185 Operating Net sale $ 3,359 $ 2,350 $ 1,185 Operating income $ $ 3,359 $ 2,350 $ 1,185 Operating income $ 198 $ $ 1,185 Operating income $ 198 $ 151 $ 39 Depreciation Operating income $ 198 $ 151 $ 39 Depreciation , amortization $ 198 $ 151 $ 39 Depreciation , amortization , and accretion ( b ) $ 59 $ 43 $ 35 Segment b ) $ 59 $ 43 $ 35 Segment asset ( $ 59 $ 43 $ 35 Segment asset ( b ) asset ( b ) $ 651 $ 589 $ 351 Other b ) $ 651 $ 589 $ 351 Other Segments ( $ 651 $ 589 $ 351 Other Segments ( c ) ) : Net sale $ 1,347 $ 998 $ 599 Operating Net sale $ 1,347 $ 998 $ 599 Operating income $ $ 1,347 $ 998 $ 599 Operating income $ 235 $ $ 599 Operating income $ 235 $ 118 $ 90 Depreciation Operating income $ 235 $ 118 $ 90 Depreciation , amortization $ 235 $ 118 $ 90 Depreciation , amortization , and amortization , and accretion $ 3 $ 2 $ 2 Segment and accretion $ 3 $ 2 $ 2 Segment asset $ $ 3 $ 2 $ 2 Segment asset $ 180 $ $ 2 Segment asset $ 180 $ 133 $ 124 ( Segment asset $ 180 $ 133 $ 124 ( a ) $ 180 $ 133 $ 124 ( a ) The Americas include Asia-Pacific and FileMaker . 111 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( ( in million ) : 2006 2005 2004 As Restated ( in million ) : 2006 2005 2004 As Restated ( 1 million ) : 2006 2005 2004 As Restated ( 1 ) 2005 2004 As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Segment operating income $ ) Segment operating income $ 2,906 $ 1,661 $ 989 Retail operating income $ 2,906 $ 1,661 $ 989 Retail manufacturing margin $ 2,906 $ 1,661 $ 989 Retail manufacturing margin ( a manufacturing margin ( a ) 663 435 213 Other corporate expense margin ( a ) 663 435 213 Other corporate expense , ( a ) 663 435 213 Other corporate expense , net net ( b ) ( 953 ) ( 404 ) ( ) ( 953 ) ( 404 ) ( 820 ) Stock-based ) ( 404 ) ( 820 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 163 ) ( 49 ) ( expense ( 163 ) ( 49 ) ( 46 ) Restructuring ) ( 49 ) ( 46 ) Restructuring cost — — Restructuring cost — — ( 23 ) Consolidated operating income $ ) Consolidated operating income $ 2,453 $ 1,643 $ 313 Segment operating income $ 2,453 $ 1,643 $ 313 Segment asset $ $ 2,453 $ 1,643 $ 313 Segment asset $ 2,379 $ $ 313 Segment asset $ 2,379 $ 1,881 $ 1,411 Corporate Segment asset $ 2,379 $ 1,881 $ 1,411 Corporate asset 14,826 $ 2,379 $ 1,881 $ 1,411 Corporate asset 14,826 9,635 6,628 1,881 $ 1,411 Corporate asset 14,826 9,635 6,628 Consolidated asset $ $ 1,411 Corporate asset 14,826 9,635 6,628 Consolidated asset $ 17,205 1,411 Corporate asset 14,826 9,635 6,628 Consolidated asset $ 17,205 $ 9,635 6,628 Consolidated asset $ 17,205 $ 11,516 $ 8,039 Segment Consolidated asset $ 17,205 $ 11,516 $ 8,039 Segment depreciation , $ 17,205 $ 11,516 $ 8,039 Segment depreciation , amortization , amortization , and accretion $ 75 $ 58 $ 49 Corporate and accretion $ 75 $ 58 $ 49 Corporate depreciation , $ 75 $ 58 $ 49 Corporate depreciation , amortization , , amortization , and accretion 150 121 101 Consolidated depreciation , amortization , and accretion 150 121 101 Consolidated depreciation , amortization , and accretion 150 121 101 Consolidated depreciation , amortization , amortization , and accretion $ 225 $ 179 $ 150 ( and accretion $ 225 $ 179 $ 150 ( 1 ) $ 225 $ 179 $ 150 ( 1 ) See Note $ 179 $ 150 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated customer accounted for more than 10 % of net sale in % of net sale in 2006 , 2005 , or 2004 net sale in 2006 , 2005 , or 2004 . Net 2006 , 2005 , or 2004 . Net sale and long-lived ( in million ) : 2006 2005 2004 Net sale : in million ) : 2006 2005 2004 Net sale : U.S. million ) : 2006 2005 2004 Net sale : U.S. $ Net sale : U.S. $ 11,486 $ 8,194 $ 4,893 Japan : U.S. $ 11,486 $ 8,194 $ 4,893 Japan 1,327 1,021 $ 11,486 $ 8,194 $ 4,893 Japan 1,327 1,021 738 Other $ 8,194 $ 4,893 Japan 1,327 1,021 738 Other country 6,502 8,194 $ 4,893 Japan 1,327 1,021 738 Other country 6,502 4,716 $ 4,893 Japan 1,327 1,021 738 Other country 6,502 4,716 2,648 1,327 1,021 738 Other country 6,502 4,716 2,648 Total net sale 1,021 738 Other country 6,502 4,716 2,648 Total net sale $ 738 Other country 6,502 4,716 2,648 Total net sale $ 19,315 2,648 Total net sale $ 19,315 $ 13,931 $ 8,279 Long-lived net sale $ 19,315 $ 13,931 $ 8,279 Long-lived asset : $ 19,315 $ 13,931 $ 8,279 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 1,150 $ 738 $ 637 Japan : U.S. $ 1,150 $ 738 $ 637 Japan 64 63 $ 1,150 $ 738 $ 637 Japan 64 63 52 Other $ 738 $ 637 Japan 64 63 52 Other country 154 738 $ 637 Japan 64 63 52 Other country 154 112 $ 637 Japan 64 63 52 Other country 154 112 72 64 63 52 Other country 154 112 72 Total long-lived asset 63 52 Other country 154 112 72 Total long-lived asset $ 52 Other country 154 112 72 Total long-lived asset $ 1,368 72 Total long-lived asset $ 1,368 $ 913 $ 761 112 long-lived asset $ 1,368 $ 913 $ 761 112 NOTES TO $ 1,368 $ 913 $ 761 112 NOTES TO CONSOLIDATED FINANCIAL 1,368 $ 913 $ 761 112 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 11—Segment Information and Geographic Data ( ( in million ) : 2006 2005 2004 Net sale : in million ) : 2006 2005 2004 Net sale : Desktops million ) : 2006 2005 2004 Net sale : Desktops ( Desktops ( a ) $ 3,319 $ 3,436 $ 2,373 Portables a ) $ 3,319 $ 3,436 $ 2,373 Portables ( b $ 3,319 $ 3,436 $ 2,373 Portables ( b ) 4,056 2,373 Portables ( b ) 4,056 2,839 2,550 Total Macintosh net Portables ( b ) 4,056 2,839 2,550 Total Macintosh net sale ( b ) 4,056 2,839 2,550 Total Macintosh net sale 7,375 2,550 Total Macintosh net sale 7,375 6,275 4,923 iPod 7,676 4,540 Total Macintosh net sale 7,375 6,275 4,923 iPod 7,676 4,540 1,306 Macintosh net sale 7,375 6,275 4,923 iPod 7,676 4,540 1,306 Other sale 7,375 6,275 4,923 iPod 7,676 4,540 1,306 Other music related 7,375 6,275 4,923 iPod 7,676 4,540 1,306 Other music related product 6,275 4,923 iPod 7,676 4,540 1,306 Other music related product and and service ( c ) 1,885 899 278 Peripherals and other service ( c ) 1,885 899 278 Peripherals and other hardware ( c ) 1,885 899 278 Peripherals and other hardware ( other hardware ( d ) 1,100 1,126 951 Software , service hardware ( d ) 1,100 1,126 951 Software , service , ( d ) 1,100 1,126 951 Software , service , and net sale ( e ) 1,279 1,091 821 Total net sale sale ( e ) 1,279 1,091 821 Total net sale $ ( e ) 1,279 1,091 821 Total net sale $ 19,315 821 Total net sale $ 19,315 $ 13,931 $ 8,279 ( net sale $ 19,315 $ 13,931 $ 8,279 ( a ) $ 19,315 $ 13,931 $ 8,279 ( a ) Includes iMac and Internet service . Note 12—Related Party Transactions and Certain Other Certain Other Transactions In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 202,000 , $ 1,100,000 , and of $ 202,000 , $ 1,100,000 , and $ 483,000 in $ 1,100,000 , and $ 483,000 in expense pursuant to the to the Reimbursement Agreement during 2006 , 2005 , and 2004 Reimbursement Agreement during 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . All expense statement of operation . In 2006 , the Company entered into of Pixar . On May 5 , 2006 , The Walt . On May 5 , 2006 , The Walt Disney Company arrangement with Pixar from September 25 , 2005 through May 5 Pixar from September 25 , 2005 through May 5 , 2006 25 , 2005 through May 5 , 2006 wa le than 2005 through May 5 , 2006 wa le than $ 1 2006 wa le than $ 1 million . 113 NOTES TO than $ 1 million . 113 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 13—Selected Quarterly Financial Information ( Unaudited the four quarter ended September 30 , 2006 and September 24 quarter ended September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 ( in million 2006 and September 24 , 2005 ( in million , except per share amount ) : 2006 Fourth Quarter Third Quarter Second First Quarter Net sale $ 4,837 $ 4,370 $ 4,359 $ Net sale $ 4,837 $ 4,370 $ 4,359 $ 5,749 Cost $ 4,837 $ 4,370 $ 4,359 $ 5,749 Cost of sale $ 4,370 $ 4,359 $ 5,749 Cost of sale ( 1 5,749 Cost of sale ( 1 ) 3,425 3,045 3,062 4,185 of sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin sale ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 ( 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1 ) 3,425 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 3,045 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense 3,062 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : 4,185 Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research Gross margin 1,412 1,325 1,297 1,564 Operating expense : Research and : Research and development ( 1 ) 179 175 176 182 and development ( 1 ) 179 175 176 182 Selling , development ( 1 ) 179 175 176 182 Selling , general ( 1 ) 179 175 176 182 Selling , general , 1 ) 179 175 176 182 Selling , general , and general , and administrative ( 1 ) 625 584 592 632 and administrative ( 1 ) 625 584 592 632 Total operating administrative ( 1 ) 625 584 592 632 Total operating expense ( 1 ) 625 584 592 632 Total operating expense 804 1 ) 625 584 592 632 Total operating expense 804 759 592 632 Total operating expense 804 759 768 814 Operating income 632 Total operating expense 804 759 768 814 Operating income 608 Total operating expense 804 759 768 814 Operating income 608 566 operating expense 804 759 768 814 Operating income 608 566 529 759 768 814 Operating income 608 566 529 750 Other income 768 814 Operating income 608 566 529 750 Other income and 814 Operating income 608 566 529 750 Other income and expense Operating income 608 566 529 750 Other income and expense 113 750 Other income and expense 113 95 76 81 Income before Other income and expense 113 95 76 81 Income before provision income and expense 113 95 76 81 Income before provision for and expense 113 95 76 81 Income before provision for income before provision for income tax 721 661 605 831 Provision for provision for income tax 721 661 605 831 Provision for income for income tax 721 661 605 831 Provision for income tax income tax 721 661 605 831 Provision for income tax 179 831 Provision for income tax 179 189 195 266 Net income Provision for income tax 179 189 195 266 Net income $ for income tax 179 189 195 266 Net income $ 542 income tax 179 189 195 266 Net income $ 542 $ 195 266 Net income $ 542 $ 472 $ 410 $ Net income $ 542 $ 472 $ 410 $ 565 Earnings $ 542 $ 472 $ 410 $ 565 Earnings per common $ 472 $ 410 $ 565 Earnings per common share : common share : Basic $ 0.63 $ 0.55 $ 0.49 $ : Basic $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.63 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.55 $ 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 0.49 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.68 Diluted $ 0.62 $ 0.54 $ 0.47 $ 0.65 Shares $ 0.62 $ 0.54 $ 0.47 $ 0.65 Shares used in $ 0.54 $ 0.47 $ 0.65 Shares used in computing earnings in thousand ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 thousand ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 ) : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 : Basic 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 854,187 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 851,375 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) 840,910 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) Includes 830,781 Diluted 878,757 876,368 878,537 874,207 ( 1 ) Includes stock-based 878,757 876,368 878,537 874,207 ( 1 ) Includes stock-based compensation expense : Cost of sale $ 5 $ 6 $ 5 $ of sale $ 5 $ 6 $ 5 $ 5 Research $ 5 $ 6 $ 5 $ 5 Research and development $ 6 $ 5 $ 5 Research and development $ 13 5 Research and development $ 13 $ 12 $ 13 $ and development $ 13 $ 12 $ 13 $ 15 Selling $ 13 $ 12 $ 13 $ 15 Selling , general $ 12 $ 13 $ 15 Selling , general , and general , and administrative $ 22 $ 19 $ 24 $ and administrative $ 22 $ 19 $ 24 $ 24 The $ 22 $ 19 $ 24 $ 24 The net of $ 19 $ 24 $ 24 The net of tax impact the stock-based compensation adjustment in 2006 , which amounted to $ , which amounted to $ 4 million , wa recorded by in it fourth quarter of 2006 and is described in Note and is described in Note 2 , “ Restatement of Consolidated during the third quarter of 2006 benefited by $ 20 million of 2006 benefited by $ 20 million resulting from the dividend with the repatriation . Net 114 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 13—Selected Quarterly Financial Information ( Unaudited during the fourth quarter of 2006 benefited by $ 20 million of 2006 benefited by $ 20 million due to the settlement tax audit in the U.S. 2005 Fourth Quarter Third Quarter Second First Quarter As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) As Restated ( 1 1 ) As Restated ( 1 ) Net sale $ 3,678 1 ) Net sale $ 3,678 $ 3,520 $ 3,243 $ Net sale $ 3,678 $ 3,520 $ 3,243 $ 3,490 Cost $ 3,678 $ 3,520 $ 3,243 $ 3,490 Cost of sale $ 3,520 $ 3,243 $ 3,490 Cost of sale ( 2 3,490 Cost of sale ( 2 ) 2,643 2,476 2,275 2,495 of sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin sale ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 ( 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 2 ) 2,643 2,476 2,275 2,495 Gross margin 1,035 1,044 968 2,476 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense 2,275 2,495 Gross margin 1,035 1,044 968 995 Operating expense : 2,495 Gross margin 1,035 1,044 968 995 Operating expense : Research Gross margin 1,035 1,044 968 995 Operating expense : Research and : Research and development ( 2 ) 147 145 120 123 and development ( 2 ) 147 145 120 123 Selling , development ( 2 ) 147 145 120 123 Selling , general ( 2 ) 147 145 120 123 Selling , general , 2 ) 147 145 120 123 Selling , general , and general , and administrative ( 2 ) 471 473 448 472 and administrative ( 2 ) 471 473 448 472 Total operating administrative ( 2 ) 471 473 448 472 Total operating expense ( 2 ) 471 473 448 472 Total operating expense 618 2 ) 471 473 448 472 Total operating expense 618 618 448 472 Total operating expense 618 618 568 595 Operating income 472 Total operating expense 618 618 568 595 Operating income 417 Total operating expense 618 618 568 595 Operating income 417 426 operating expense 618 618 568 595 Operating income 417 426 400 618 568 595 Operating income 417 426 400 400 Other income 568 595 Operating income 417 426 400 400 Other income and 595 Operating income 417 426 400 400 Other income and expense Operating income 417 426 400 400 Other income and expense 60 400 Other income and expense 60 46 33 26 Income before Other income and expense 60 46 33 26 Income before provision income and expense 60 46 33 26 Income before provision for and expense 60 46 33 26 Income before provision for income before provision for income tax 477 472 433 426 Provision for provision for income tax 477 472 433 426 Provision for income for income tax 477 472 433 426 Provision for income tax income tax 477 472 433 426 Provision for income tax 49 426 Provision for income tax 49 153 145 133 Net income Provision for income tax 49 153 145 133 Net income $ for income tax 49 153 145 133 Net income $ 428 income tax 49 153 145 133 Net income $ 428 $ 145 133 Net income $ 428 $ 319 $ 288 $ Net income $ 428 $ 319 $ 288 $ 293 Earnings $ 428 $ 319 $ 288 $ 293 Earnings per common $ 319 $ 288 $ 293 Earnings per common share : common share : Basic $ 0.52 $ 0.39 $ 0.36 $ : Basic $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.52 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.39 $ 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 0.36 $ 0.37 Diluted $ 0.49 $ 0.37 $ 0.34 $ 0.37 Diluted $ 0.49 $ 0.37 $ 0.34 $ 0.35 Shares $ 0.49 $ 0.37 $ 0.34 $ 0.35 Shares used in $ 0.37 $ 0.34 $ 0.35 Shares used in computing earnings in thousand ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 thousand ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 ) : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 : Basic 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 821,420 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 815,092 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) 808,172 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) See 789,032 Diluted 866,483 860,803 857,568 838,805 ( 1 ) See Note 866,483 860,803 857,568 838,805 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Financial Statements . ” ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 1 Research and development $ — $ 1 $ 1 Research and development $ 1 1 Research and development $ 1 $ 2 $ 2 $ and development $ 1 $ 2 $ 2 $ 2 Selling $ 1 $ 2 $ 2 $ 2 Selling , general $ 2 $ 2 $ 2 Selling , general , and general , and administrative $ 10 $ 10 $ 9 $ and administrative $ 10 $ 10 $ 9 $ 10 The $ 10 $ 10 $ 9 $ 10 The impact of $ 10 $ 9 $ 10 The impact of the stock-based balance sheet for fiscal year 2005 . Basic and diluted earnings during the fourth quarter of 2005 benefited by $ 81 million of 2005 benefited by $ 81 million from the reversal of reduction to valuation allowance . 115 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 13—Selected Quarterly Financial Information ( Unaudited financial information a of September 24 , 2005 ( in million a of September 24 , 2005 ( in million , expect : Three Months Ended September 24 , 2005 Three Months Ended Months Ended September 24 , 2005 Three Months Ended June 25 2005 Three Months Ended June 25 , 2005 As Reported Adjustments Months Ended June 25 , 2005 As Reported Adjustments ( 1 2005 As Reported Adjustments ( 1 ) As Restated As Reported Restated As Reported Adjustments ( 1 ) As Restated Net sale As Restated Net sale $ 3,678 $ — $ 3,678 $ $ 3,678 $ — $ 3,678 $ 3,520 $ — $ $ — $ 3,678 $ 3,520 $ — $ 3,520 Cost $ 3,520 $ — $ 3,520 Cost of sale ( 2 3,520 Cost of sale ( 2 ) 2,643 — 2,643 2,476 of sale ( 2 ) 2,643 — 2,643 2,476 — 2,476 ( 2 ) 2,643 — 2,643 2,476 — 2,476 Gross margin 2 ) 2,643 — 2,643 2,476 — 2,476 Gross margin 1,035 2,643 — 2,643 2,476 — 2,476 Gross margin 1,035 — 1,035 2,476 — 2,476 Gross margin 1,035 — 1,035 1,044 — 1,044 2,476 Gross margin 1,035 — 1,035 1,044 — 1,044 Operating expense Gross margin 1,035 — 1,035 1,044 — 1,044 Operating expense : 1,035 — 1,035 1,044 — 1,044 Operating expense : Research and : Research and development ( 2 ) 147 — 147 145 and development ( 2 ) 147 — 147 145 — 145 ( 2 ) 147 — 147 145 — 145 Selling , 2 ) 147 — 147 145 — 145 Selling , general 147 — 147 145 — 145 Selling , general , and general , and administrative ( 2 ) 470 1 471 472 and administrative ( 2 ) 470 1 471 472 1 473 administrative ( 2 ) 470 1 471 472 1 473 Total ( 2 ) 470 1 471 472 1 473 Total operating 2 ) 470 1 471 472 1 473 Total operating expense ) 470 1 471 472 1 473 Total operating expense 617 470 1 471 472 1 473 Total operating expense 617 1 1 473 Total operating expense 617 1 618 617 1 618 473 Total operating expense 617 1 618 617 1 618 Operating Total operating expense 617 1 618 617 1 618 Operating income operating expense 617 1 618 617 1 618 Operating income 418 expense 617 1 618 617 1 618 Operating income 418 ( 617 1 618 617 1 618 Operating income 418 ( 1 617 1 618 Operating income 418 ( 1 ) 417 427 618 Operating income 418 ( 1 ) 417 427 ( 1 income 418 ( 1 ) 417 427 ( 1 ) 426 418 ( 1 ) 417 427 ( 1 ) 426 Other 1 ) 417 427 ( 1 ) 426 Other income and 417 427 ( 1 ) 426 Other income and expense 60 426 Other income and expense 60 — 60 46 — 46 income and expense 60 — 60 46 — 46 Income before and expense 60 — 60 46 — 46 Income before provision 60 — 60 46 — 46 Income before provision for income before provision for income tax 478 ( 1 ) 477 473 for income tax 478 ( 1 ) 477 473 ( 1 tax 478 ( 1 ) 477 473 ( 1 ) 472 478 ( 1 ) 477 473 ( 1 ) 472 Provision 1 ) 477 473 ( 1 ) 472 Provision for income 477 473 ( 1 ) 472 Provision for income tax 48 472 Provision for income tax 48 1 49 153 — 153 Provision for income tax 48 1 49 153 — 153 Net for income tax 48 1 49 153 — 153 Net income income tax 48 1 49 153 — 153 Net income $ 48 1 49 153 — 153 Net income $ 430 $ — 153 Net income $ 430 $ ( 2 ) $ income $ 430 $ ( 2 ) $ 428 $ 320 $ ( 2 ) $ 428 $ 320 $ ( 1 2 ) $ 428 $ 320 $ ( 1 ) $ 428 $ 320 $ ( 1 ) $ 319 Earnings per $ ( 1 ) $ 319 Earnings per common share : common share : Basic $ 0.52 $ — $ 0.52 $ $ 0.52 $ — $ 0.52 $ 0.39 $ — $ $ — $ 0.52 $ 0.39 $ — $ 0.39 Diluted $ 0.39 $ — $ 0.39 Diluted $ 0.50 $ ( — $ 0.39 Diluted $ 0.50 $ ( 0.01 ) $ Diluted $ 0.50 $ ( 0.01 ) $ 0.49 $ 0.37 $ ( 0.01 ) $ 0.49 $ 0.37 $ — $ 0.01 ) $ 0.49 $ 0.37 $ — $ 0.37 Shares $ 0.37 $ — $ 0.37 Shares used in computing earnings in thousand ) : Basic 821,420 — 821,420 815,092 — 815,092 ) : Basic 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 : Basic 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 79 821,420 — 821,420 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 821,420 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 815,092 — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( — 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 815,092 Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 ) Diluted 866,404 79 866,483 860,688 115 860,803 ( 1 ) See 866,404 79 866,483 860,688 115 860,803 ( 1 ) See Note 866,483 860,688 115 860,803 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Financial Statements . ” ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ — $ — $ — Research and development $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 2 $ — $ $ — $ 1 $ 2 $ — $ 2 Selling $ 2 $ — $ 2 Selling , general , and general , and administrative $ 9 $ 1 $ 10 $ and administrative $ 9 $ 1 $ 10 $ 9 $ $ 9 $ 1 $ 10 $ 9 $ 1 $ $ 1 $ 10 $ 9 $ 1 $ 10 116 $ 10 $ 9 $ 1 $ 10 116 NOTES TO $ 9 $ 1 $ 10 116 NOTES TO CONSOLIDATED FINANCIAL 9 $ 1 $ 10 116 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS ( Continued ) Note 13—Selected Quarterly Financial Information ( Unaudited ) Three Months Ended March 26 , 2005 Three Months Ended Months Ended March 26 , 2005 Three Months Ended December 25 2005 Three Months Ended December 25 , 2004 As Reported Adjustments Months Ended December 25 , 2004 As Reported Adjustments ( 1 2004 As Reported Adjustments ( 1 ) As Restated As Reported Restated As Reported Adjustments ( 1 ) As Restated Net sale As Restated Net sale $ 3,243 $ — $ 3,243 $ $ 3,243 $ — $ 3,243 $ 3,490 $ — $ $ — $ 3,243 $ 3,490 $ — $ 3,490 Cost $ 3,490 $ — $ 3,490 Cost of sale ( 2 3,490 Cost of sale ( 2 ) 2,275 — 2,275 2,494 of sale ( 2 ) 2,275 — 2,275 2,494 1 2,495 ( 2 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 2 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 968 ) 2,275 — 2,275 2,494 1 2,495 Gross margin 968 — 2,275 — 2,275 2,494 1 2,495 Gross margin 968 — 968 2,494 1 2,495 Gross margin 968 — 968 996 ( 1 2,495 Gross margin 968 — 968 996 ( 1 ) 995 Gross margin 968 — 968 996 ( 1 ) 995 Operating 968 — 968 996 ( 1 ) 995 Operating expense : 968 996 ( 1 ) 995 Operating expense : Research and : Research and development ( 2 ) 119 1 120 123 and development ( 2 ) 119 1 120 123 — 123 development ( 2 ) 119 1 120 123 — 123 Selling ( 2 ) 119 1 120 123 — 123 Selling , 2 ) 119 1 120 123 — 123 Selling , general 119 1 120 123 — 123 Selling , general , and general , and administrative ( 2 ) 447 1 448 470 and administrative ( 2 ) 447 1 448 470 2 472 administrative ( 2 ) 447 1 448 470 2 472 Total ( 2 ) 447 1 448 470 2 472 Total operating 2 ) 447 1 448 470 2 472 Total operating expense ) 447 1 448 470 2 472 Total operating expense 566 447 1 448 470 2 472 Total operating expense 566 2 2 472 Total operating expense 566 2 568 593 2 595 472 Total operating expense 566 2 568 593 2 595 Operating Total operating expense 566 2 568 593 2 595 Operating income operating expense 566 2 568 593 2 595 Operating income 402 expense 566 2 568 593 2 595 Operating income 402 ( 566 2 568 593 2 595 Operating income 402 ( 2 593 2 595 Operating income 402 ( 2 ) 400 403 595 Operating income 402 ( 2 ) 400 403 ( 3 income 402 ( 2 ) 400 403 ( 3 ) 400 402 ( 2 ) 400 403 ( 3 ) 400 Other 2 ) 400 403 ( 3 ) 400 Other income and 400 403 ( 3 ) 400 Other income and expense 33 400 Other income and expense 33 — 33 26 — 26 income and expense 33 — 33 26 — 26 Income before and expense 33 — 33 26 — 26 Income before provision 33 — 33 26 — 26 Income before provision for income before provision for income tax 435 ( 2 ) 433 429 for income tax 435 ( 2 ) 433 429 ( 3 tax 435 ( 2 ) 433 429 ( 3 ) 426 435 ( 2 ) 433 429 ( 3 ) 426 Provision 2 ) 433 429 ( 3 ) 426 Provision for income 433 429 ( 3 ) 426 Provision for income tax 145 426 Provision for income tax 145 — 145 134 ( 1 for income tax 145 — 145 134 ( 1 ) 133 income tax 145 — 145 134 ( 1 ) 133 Net 145 — 145 134 ( 1 ) 133 Net income $ 145 134 ( 1 ) 133 Net income $ 290 $ ) 133 Net income $ 290 $ ( 2 ) $ income $ 290 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 2 ) $ 288 $ 295 $ ( 2 ) $ 288 $ 295 $ ( 2 ) $ 293 Earnings per $ ( 2 ) $ 293 Earnings per common share : common share : Basic $ 0.36 $ — $ 0.36 $ $ 0.36 $ — $ 0.36 $ 0.37 $ — $ $ — $ 0.36 $ 0.37 $ — $ 0.37 Diluted $ 0.37 $ — $ 0.37 Diluted $ 0.34 $ — — $ 0.37 Diluted $ 0.34 $ — $ 0.34 $ $ 0.34 $ — $ 0.34 $ 0.35 $ — $ $ — $ 0.34 $ 0.35 $ — $ 0.35 Shares $ 0.35 $ — $ 0.35 Shares used in computing earnings in thousand ) : Basic 808,172 — 808,172 789,032 — 789,032 ) : Basic 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 : Basic 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 557 808,172 — 808,172 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 808,172 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 789,032 — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( — 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 789,032 Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 ) Diluted 857,011 557 857,568 838,174 631 838,805 ( 1 ) See 857,011 557 857,568 838,174 631 838,805 ( 1 ) See Note 857,568 838,174 631 838,805 ( 1 ) See Note 2 , ( 1 ) See Note 2 , “ Restatement of Consolidated Financial Statements . ” ( 2 ) Includes stock-based compensation expense : Cost of sale $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ — $ 1 $ $ 1 $ — $ 1 $ 1 Research and development $ — $ 1 $ 1 Research and development $ 1 1 Research and development $ 1 $ 1 $ 2 $ and development $ 1 $ 1 $ 2 $ 2 $ $ 1 $ 1 $ 2 $ 2 $ — $ $ 1 $ 2 $ 2 $ — $ 2 Selling $ 2 $ — $ 2 Selling , general , and general , and administrative $ 8 $ 1 $ 9 $ and administrative $ 8 $ 1 $ 9 $ 8 $ $ 8 $ 1 $ 9 $ 8 $ 2 $ $ 1 $ 9 $ 8 $ 2 $ 10 117 $ 9 $ 8 $ 2 $ 10 117 R eport $ 8 $ 2 $ 10 117 R eport of Independent 8 $ 2 $ 10 117 R eport of Independent Registered Company ) a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , and the 2006 and September 24 , 2005 , and the related consolidated the three-year period ended September 30 , 2006 . These consolidated period ended September 30 , 2006 . These consolidated financial statement the Company a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , and the 2006 and September 24 , 2005 , and the result of the three-year period ended September 30 , 2006 , in conformity period ended September 30 , 2006 , in conformity with accounting . As discussed in Note 2 to the Consolidated Financial Statements financial statement a of September 24 , 2005 and for each a of September 24 , 2005 and for each of the the two-year period ended September 24 , 2005 have been restated period ended September 24 , 2005 have been restated . As . As discussed in Note 1 to the Consolidated Financial Statements Financial Statements , effective September 25 , 2005 , the Company , effective September 25 , 2005 , the Company adopted the Financial Accounting Standards No . 123 ( revised 2004 ) , No . 123 ( revised 2004 ) , Share-Based Payment . financial reporting a of September 30 , 2006 , based on a of September 30 , 2006 , based on criterion established and our report dated December 29 , 2006 expressed an unqualified report dated December 29 , 2006 expressed an unqualified opinion on Mountain View , California December 29 , 2006 118 Report of , California December 29 , 2006 118 Report of Independent Registered California December 29 , 2006 118 Report of Independent Registered Public financial reporting a of September 30 , 2006 , based on a of September 30 , 2006 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 30 , 2006 , is fairly a of September 30 , 2006 , is fairly stated , financial reporting a of September 30 , 2006 , based on a of September 30 , 2006 , based on criterion established , Inc. a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 , and the 2006 and September 24 , 2005 , and the related consolidated the three-year period ended September 30 , 2006 , and our period ended September 30 , 2006 , and our report dated and our report dated December 29 , 2006 expressed an unqualified report dated December 29 , 2006 expressed an unqualified opinion on Mountain View , California December 29 , 2006 119 Item 9 , California December 29 , 2006 119 Item 9 . Changes California December 29 , 2006 119 Item 9 . Changes in 29 , 2006 119 Item 9 . Changes in and Disagreements Disclosure Not applicable . Item 9A . Controls and Procedures Special Part I and in Note 2 in Notes to Consolidated Financial Financial Statements of this Form 10-K , the Company on June , the Company on June 29 , 2006 , announced that Company on June 29 , 2006 , announced that an internal financial statement in this Form 10-K . The internal review and number of occasion between October 1996 and January 2003 ( the between October 1996 and January 2003 ( the “ relevant period appreciate the accounting implication From 2003 through 2005 , the Company accounting implication From 2003 through 2005 , the Company implemented improvement adoption of SFAS No . 123R the practice of using the stock granting and administration function 120 · Certifying stock administration and other control for SOX Section 404 compliance in fiscal year 2005 404 compliance in fiscal year 2005 The internal review and the stock option grant after January 2003 that required accounting adjustment . were effective a of September 30 , 2006 , management considered a of September 30 , 2006 , management considered , among of the fiscal year ended 2006 and 2005 . Management ha fiscal year ended 2006 and 2005 . Management ha concluded , reporting , a of September 30 , 2006 . In addition a of September 30 , 2006 . In addition to the the significant improvement implemented between 2003 and 2005 discussed above , improvement implemented between 2003 and 2005 discussed above , the Company procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( Exchange were effective a of September 30 , 2006 to ensure that a of September 30 , 2006 to ensure that information required decision regarding required disclosure . 121 Inherent Limitations Over Internal Controls ( a defined in Rule 13a-15 ( f ) under the the Securities Exchange Act of 1934 , a amended ) . wa effective a of September 30 , 2006 . The Company a of September 30 , 2006 . The Company ’ s financial reporting appears on page 119 of this Form 10-K. Changes page 119 of this Form 10-K. Changes in Internal Control Over the fourth quarter of fiscal 2006 that have materially affected , over financial reporting . Item 9B . Other Information None . . Other Information None . 122 PART III Item 10 . . 122 PART III Item 10 . Directors and Executive Officers William V. Campbell Co-lead Director 66 1997 Millard S. Drexler Director V. Campbell Co-lead Director 66 1997 Millard S. Drexler Director 62 1997 Millard S. Drexler Director 62 1999 Albert A. Gore , Millard S. Drexler Director 62 1999 Albert A. Gore , Jr. A. Gore , Jr. Director 58 2003 Steven P. Jobs Director Gore , Jr. Director 58 2003 Steven P. Jobs Director and Director and Chief Executive Officer 51 1997 Arthur D. Levinson Co-lead and Chief Executive Officer 51 1997 Arthur D. Levinson Co-lead Director Arthur D. Levinson Co-lead Director 56 2000 Eric E. Schmidt Director D. Levinson Co-lead Director 56 2000 Eric E. Schmidt Director 51 2000 Eric E. Schmidt Director 51 2006 Jerome B. York Director Eric E. Schmidt Director 51 2006 Jerome B. York Director 68 2006 Jerome B. York Director 68 1997 William V. Campbell ha Jerome B. York Director 68 1997 William V. Campbell ha been Intuit ” ) since August 1998 . From September 1999 to August 1998 . From September 1999 to January 2000 , Mr. From September 1999 to January 2000 , Mr. Campbell acted a of Intuit . From April 1994 to August 1998 , Mr. From April 1994 to August 1998 , Mr. Campbell wa President of Intuit . From January 1991 to December 1993 , Mr. From January 1991 to December 1993 , Mr. Campbell wa President Group , Inc. since January 2003 . Previously , Mr. Drexler Officer of Gap Inc. from 1995 and President from 1987 until from 1995 and President from 1987 until September 2002 . Mr. President from 1987 until September 2002 . Mr. Drexler wa also of Gap Inc. from November 1983 until October 2002 . Albert from November 1983 until October 2002 . Albert A. Gore , to Google , Inc. since 2001 . He ha also served Chairman of Current TV since 2002 and a Chairman of Generation of Generation Investment Management since 2004 . He is a visiting Gore wa inaugurated a the 45th Vice President of the United of the United States in 1993 . He wa re-elected in . He wa re-elected in 1996 and served for a total Security Council . Prior to 1993 , he served eight year Genentech ” ) since July 1995 . Dr. Levinson ha been Directors of Genentech since September 1999 . He joined Genentech in . He joined Genentech in 1980 and served in a number of R & D from 1993 to 1995 . Dr. Levinson & D from 1993 to 1995 . Dr. Levinson also serf Google ” ) since July 2001 and a a member of Board of Directors since March 2001 , where he served a of the Board from March 2001 to April 2004 . In from March 2001 to April 2004 . In April 2004 , April 2004 . In April 2004 , Dr. Schmidt wa named of Directors . From April 1997 to November 2001 , Dr. From April 1997 to November 2001 , Dr. Schmidt served a , and , from April 1997 to July 2001 , a from April 1997 to July 2001 , a the Chief Executive of Siebel Systems until January 2006 . Jerome B. York ha he control , since September 2003 . From January 2000 until September 2003 . From January 2000 until September 2003 , Mr. From January 2000 until September 2003 , Mr. York wa 123 2003 , Mr. York wa 123 Chairman and Chief Executive Officer peripheral product . From September 1995 to October 1999 , he From September 1995 to October 1999 , he wa Vice Chairman Tracinda Corporation . From May 1993 to September 1995 he wa From May 1993 to September 1995 he wa Senior Vice President Board of Directors from January 1995 to August 1995 . Mr. from January 1995 to August 1995 . Mr. York is also financial expert ” under Item 401 ( h ) of Regulation term is used in Item 7 ( d ) ( 3 7 ( d ) ( 3 ) ( iv ) of ( iv ) of Schedule 14A under the Exchange Act . copy of this code , 124 “ Ethics : The Way or by filing a Form 8-K. Executive Officers The following set Chief Operating Officer ( age 46 ) , joined the Company joined the Company in March 1998 . Mr. Cook also served Worldwide Sales and Operations from 2002 to 2005 . In 2004 and Operations from 2002 to 2005 . In 2004 , his 2002 to 2005 . In 2004 , his responsibility were expanded Macintosh hardware engineering . From 2000 to 2002 , Mr. Cook engineering . From 2000 to 2002 , Mr. Cook served in Service and Support . From 1998 to 2000 , Mr. Cook Support . From 1998 to 2000 , Mr. Cook served in . Mr. Cook also spent 12 year with IBM , most , iPod Division ( age 37 ) , joined the Company , joined the Company in 2001 . From 2004 to April Company in 2001 . From 2004 to April 2006 , Mr. . From 2004 to April 2006 , Mr. Fadell wa Vice of iPod Engineering . From 2001 to 2004 , Mr. Fadell Engineering . From 2001 to 2004 , Mr. Fadell wa the President , Retail ( age 48 ) , joined the Company joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , Chief Financial Officer ( age 44 ) , joined the Company joined the Company in July 1996 . Mr. Oppenheimer also served Counsel and Secretary ( age 55 ) , joined the Company joined the Company in December 2006 . Prior to joining the the Company Mr. Rosenberg spent 31 year with IBM , most Worldwide Product Marketing ( age 46 ) , rejoined the Company , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 , and from December 1995 to March 1997 , and wa Director of FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , , Software Engineering ( age 46 ) , joined the Company joined the Company in February 1997 upon the Company ’ s Dr. Serlet held several engineering 125 and managerial position , including Prior to NeXT , from 1985 to 1989 , Dr. Serlet NeXT , from 1985 to 1989 , Dr. Serlet worked a President , Applications ( age 49 ) , joined the Company joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon held the Services with NeXT . Section 16 ( a ) Beneficial Ownership Beneficial Ownership Reporting Compliance Section 16 ( a ) of the the Securities Exchange Act of 1934 , a amended , requires with copy of all Section 16 ( a ) form they written representation that no Forms 5 were required , the Company Company belief that all Section 16 ( a ) filing requirement were met during fiscal year 2006 , except for the following ( i ) one Form 4 wa filed for Arthur D. Arthur D. Levinson on August 17 , 2006 to report an Levinson on August 17 , 2006 to report an automatic stock under the Company ’ s 1997 Director Stock Option Plan made Option Plan made on August 14 , 2006 ; and ( made on August 14 , 2006 ; and ( ii ) ( ii ) one Form 4 wa filed for Anthony Fadell for Anthony Fadell on September 1 , 2006 with respect to Fadell on September 1 , 2006 with respect to the purchase Fadell ’ s trust of 300 and 25 share , respectively s trust of 300 and 25 share , respectively , of s Common Stock in June 2006 and August 2006 . 126 in June 2006 and August 2006 . 126 Item 11 . 2006 and August 2006 . 126 Item 11 . Executive Compensation August 2006 . 126 Item 11 . Executive Compensation Information Regarding Award ( $ ) ( 1 ) Securities Underlying Options * $ ) Steven P. Jobs 2006 1 — — ( 2 ) Steven P. Jobs 2006 1 — — ( 2 ) 2006 1 — — ( 2 ) — — Chief Executive — — Chief Executive Officer 2005 1 — — — — — Chief Executive Officer 2005 1 — — — — 2004 1 — — — — 2004 1 — — — — — — — — 2004 1 — — — — Timothy — — Timothy D. Cook 2006 696,880 525,000 21,603,000 ( 3 — Timothy D. Cook 2006 696,880 525,000 21,603,000 ( 3 ) Timothy D. Cook 2006 696,880 525,000 21,603,000 ( 3 ) — D. Cook 2006 696,880 525,000 21,603,000 ( 3 ) — 13,200 2006 696,880 525,000 21,603,000 ( 3 ) — 13,200 ( 5 21,603,000 ( 3 ) — 13,200 ( 5 ) Chief Operating 3 ) — 13,200 ( 5 ) Chief Operating Officer 2005 5 ) Chief Operating Officer 2005 602,434 600,239 — — 12,600 ) Chief Operating Officer 2005 602,434 600,239 — — 12,600 ( Chief Operating Officer 2005 602,434 600,239 — — 12,600 ( 5 2005 602,434 600,239 — — 12,600 ( 5 ) 2004 602,632 600,239 — — 12,600 ( 5 ) 2004 602,632 — 7,650,000 — 12,600 ( 5 ) 2004 602,632 — 7,650,000 ( 4 12,600 ( 5 ) 2004 602,632 — 7,650,000 ( 4 ) 5 ) 2004 602,632 — 7,650,000 ( 4 ) — 12,588 2004 602,632 — 7,650,000 ( 4 ) — 12,588 ( 5 7,650,000 ( 4 ) — 12,588 ( 5 ) Peter Oppenheimer 4 ) — 12,588 ( 5 ) Peter Oppenheimer 2006 615,006 ( 5 ) Peter Oppenheimer 2006 615,006 450,000 14,402,000 ( 3 5 ) Peter Oppenheimer 2006 615,006 450,000 14,402,000 ( 3 ) ) Peter Oppenheimer 2006 615,006 450,000 14,402,000 ( 3 ) — Peter Oppenheimer 2006 615,006 450,000 14,402,000 ( 3 ) — 13,200 2006 615,006 450,000 14,402,000 ( 3 ) — 13,200 ( 5 14,402,000 ( 3 ) — 13,200 ( 5 ) Senior Vice 3 ) — 13,200 ( 5 ) Senior Vice President and ) Senior Vice President and 2005 552,189 550,202 — — 21,092 Senior Vice President and 2005 552,189 550,202 — — 21,092 ( Vice President and 2005 552,189 550,202 — — 21,092 ( 5 2005 552,189 550,202 — — 21,092 ( 5 ) Chief Financial 550,202 — — 21,092 ( 5 ) Chief Financial Officer 2004 5 ) Chief Financial Officer 2004 450,739 — 6,375,000 ( 4 ) Chief Financial Officer 2004 450,739 — 6,375,000 ( 4 ) Financial Officer 2004 450,739 — 6,375,000 ( 4 ) — 3,808 2004 450,739 — 6,375,000 ( 4 ) — 3,808 ( 5 6,375,000 ( 4 ) — 3,808 ( 5 ) Ronald B. 4 ) — 3,808 ( 5 ) Ronald B. Johnson 2006 5 ) Ronald B. Johnson 2006 592,476 450,000 14,402,000 ( 3 ) Ronald B. Johnson 2006 592,476 450,000 14,402,000 ( 3 ) Ronald B. Johnson 2006 592,476 450,000 14,402,000 ( 3 ) — B. Johnson 2006 592,476 450,000 14,402,000 ( 3 ) — — 2006 592,476 450,000 14,402,000 ( 3 ) — — Senior Vice Senior Vice President , Retail 2005 552,795 550,202 — — — Vice President , Retail 2005 552,795 550,202 — — — 2004 President , Retail 2005 552,795 550,202 — — — 2004 484,836 552,795 550,202 — — — 2004 484,836 1,500,000 6,375,000 ( 4 550,202 — — — 2004 484,836 1,500,000 6,375,000 ( 4 ) — — — 2004 484,836 1,500,000 6,375,000 ( 4 ) — — — 2004 484,836 1,500,000 6,375,000 ( 4 ) — — 2004 484,836 1,500,000 6,375,000 ( 4 ) — — Philip W. — — Philip W. Schiller 2006 494,942 375,000 10,801,500 ( 3 — Philip W. Schiller 2006 494,942 375,000 10,801,500 ( 3 ) Philip W. Schiller 2006 494,942 375,000 10,801,500 ( 3 ) — W. Schiller 2006 494,942 375,000 10,801,500 ( 3 ) — 5,769 2006 494,942 375,000 10,801,500 ( 3 ) — 5,769 ( 5 10,801,500 ( 3 ) — 5,769 ( 5 ) Senior Vice 3 ) — 5,769 ( 5 ) Senior Vice President , ) Senior Vice President , 2005 402,244 400,239 — — 5,539 Senior Vice President , 2005 402,244 400,239 — — 5,539 ( Vice President , 2005 402,244 400,239 — — 5,539 ( 5 2005 402,244 400,239 — — 5,539 ( 5 ) Worldwide Product 400,239 — — 5,539 ( 5 ) Worldwide Product Marketing 2004 5 ) Worldwide Product Marketing 2004 402,277 — 6,375,000 ( 4 ) Worldwide Product Marketing 2004 402,277 — 6,375,000 ( 4 ) Product Marketing 2004 402,277 — 6,375,000 ( 4 ) — 5,308 2004 402,277 — 6,375,000 ( 4 ) — 5,308 ( 5 6,375,000 ( 4 ) — 5,308 ( 5 ) ( 1 4 ) — 5,308 ( 5 ) ( 1 ) The 5,308 ( 5 ) ( 1 ) The following table reflects of the end of the 2006 fiscal year and the value restricted stock based on $ 76.98 per share , the closing Global Select Market on September 29 , 2006 ( the last Market on September 29 , 2006 ( the last day of day of trading for the 2006 fiscal year ) . The two-for-one stock split in February 2005 . Named Executive Officer Number Unvested Restricted Shares at September 30 , 2006 ( # ) Shares at September 30 , 2006 ( # ) Value of Unvested Restricted Shares at September 30 , 2006 ( $ ) Shares at September 30 , 2006 ( $ ) Steven P. $ ) Steven P. Jobs 0 0 Timothy D. Cook ( ) Steven P. Jobs 0 0 Timothy D. Cook ( a D. Cook ( a ) 600,000 46,188,000 Peter Oppenheimer ( b Cook ( a ) 600,000 46,188,000 Peter Oppenheimer ( b ) Peter Oppenheimer ( b ) 450,000 34,641,000 Ronald B. Johnson ( Oppenheimer ( b ) 450,000 34,641,000 Ronald B. Johnson ( b B. Johnson ( b ) 450,000 34,641,000 Philip W. Schiller ( Johnson ( b ) 450,000 34,641,000 Philip W. Schiller ( c W. Schiller ( c ) 400,000 30,792,000 ( a ) Includes Schiller ( c ) 400,000 30,792,000 ( a ) Includes 300,000 30,792,000 ( a ) Includes 300,000 unvested restricted stock unit that part of a grant of 600,000 restricted stock unit ( split-adjusted split-adjusted ) made on March 24 , 2004 . Fifty percent made on March 24 , 2004 . Fifty percent ( 50 2004 . Fifty percent ( 50 % ) of such unit such unit vested in March 2006 , and the remainder is scheduled to vest in March 2008 . Also includes 300,000 unvested March 2008 . Also includes 300,000 unvested restricted stock unit that that were granted on December 14 , 2005 , and are granted on December 14 , 2005 , and are scheduled to , and are scheduled to 127 vest in their entirety in in their entirety in March 2010 . The restricted stock unit . ( b ) Includes 250,000 unvested restricted stock unit that part of a grant of 500,000 restricted stock unit ( split-adjusted split-adjusted ) made on March 24 , 2004 . Fifty percent made on March 24 , 2004 . Fifty percent ( 50 2004 . Fifty percent ( 50 % ) of such unit such unit vested in March 2006 , and the remainder is scheduled to vest in March 2008 . Also includes 200,000 unvested March 2008 . Also includes 200,000 unvested restricted stock unit that that were granted on December 14 , 2005 , and are granted on December 14 , 2005 , and are scheduled to in their entirety in March 2010 . The restricted stock unit . ( c ) Includes 250,000 unvested restricted stock unit that part of a grant of 500,000 restricted stock unit ( split-adjusted split-adjusted ) made on March 24 , 2004 . Fifty percent made on March 24 , 2004 . Fifty percent ( 50 2004 . Fifty percent ( 50 % ) of such unit such unit vested in March 2006 , and the remainder is scheduled to vest in March 2008 . Also includes 150,000 unvested March 2008 . Also includes 150,000 unvested restricted stock unit that that were granted on December 14 , 2005 , and are granted on December 14 , 2005 , and are scheduled to in their entirety in March 2010 . The restricted stock unit prior to vesting . ( 2 ) In March 2003 , ( 2 ) In March 2003 , Mr. Jobs voluntarily cancelled a Director . In March 2003 , the Board awarded Mr. the Board awarded Mr. Jobs 10 million ( split-adjusted ) restricted vested in full in March 2006 . ( 3 ) Market in March 2006 . ( 3 ) Market value of restricted stock unit granted on December 14 , 2005 ( based on granted on December 14 , 2005 ( based on $ 72.01 2005 ( based on $ 72.01 per share , the closing stock unit vest in March 2010 . ( 4 ) Market in March 2010 . ( 4 ) Market value of restricted stock unit granted on March 24 , 2004 ( based on granted on March 24 , 2004 ( based on $ 12.75 2004 ( based on $ 12.75 per share , the split-adjusted vest over four year with 50 % of the total number the grant date . ( 5 ) Consists of matching contribution with the term of the 401 ( k ) plan . Executive Officers during fiscal year 2006 . Grants of restricted stock Executive Officers during fiscal year 2006 and stock option held by two-for-one stock split in February 2005 . 128 AGGREGATED OPTION EXERCISES split in February 2005 . 128 AGGREGATED OPTION EXERCISES IN THE Year-End ( $ ) ( 1 ) Name ( # ) Steven P. Jobs — — 120,000 ( 2 ) — $ Jobs — — 120,000 ( 2 ) — $ 8,547,600 ( ( 2 ) — $ 8,547,600 ( 2 ) — Timothy ) — $ 8,547,600 ( 2 ) — Timothy D. Cook — — — — ( 3 ) — — Peter Oppenheimer ) — — Peter Oppenheimer 1,145,000 $ 55,851,613 — — ( — Peter Oppenheimer 1,145,000 $ 55,851,613 — — ( 3 ) $ 55,851,613 — — ( 3 ) — — Ronald B. — — Ronald B. Johnson 350,000 $ 15,653,210 1,900,000 — ( Ronald B. Johnson 350,000 $ 15,653,210 1,900,000 — ( 3 ) B. Johnson 350,000 $ 15,653,210 1,900,000 — ( 3 ) $ $ 15,653,210 1,900,000 — ( 3 ) $ 102,994,688 — Philip — ( 3 ) $ 102,994,688 — Philip W. Schiller 162,500 102,994,688 — Philip W. Schiller 162,500 $ 9,454,728 — — ( Philip W. Schiller 162,500 $ 9,454,728 — — ( 3 ) $ 9,454,728 — — ( 3 ) — — ( 1 3 ) — — ( 1 ) Market value of security the end of fiscal year 2006 ( based on $ 76.98 2006 ( based on $ 76.98 per share , the closing Global Select Market on September 29 , 2006 ) , minus Market on September 29 , 2006 ) , minus the exercise the exercise price . ( 2 ) Consists of 120,000 option ( 2 ) Consists of 120,000 option granted to Mr. Jobs a director pursuant to the 1997 Director Stock Option Plan . Director Plan . In March 2003 , Mr. Jobs voluntarily cancelled a a director . ( 3 ) Excludes 600,000 restricted stock . ( 3 ) Excludes 600,000 restricted stock unit granted to that are currently unvested , 450,000 restricted stock unit granted to are currently unvested , and 400,000 restricted stock unit granted to retainer on equity . In 1998 , shareholder approved the 1997 1998 , shareholder approved the 1997 Director Stock Option Plan ( Director Plan ” ) and 1,600,000 share were reserved for issuance granted an option to acquire 30,000 share of Common Stock upon receive an option to acquire 10,000 share of Common Stock ( , there were option for 760,000 share outstanding under the Director director also receive a $ 50,000 annual retainer paid in quarterly committee of another company . 129 Arrangements with Named Executive Officers granted on or after January 1 , 2005 , will , or after January 1 , 2005 , will , unless otherwise acquisition by any person of 50 % or more of the other officer prior to January 1 , 2005 generally provide that prior to January 1 , 2005 generally provide that in the annual base salary . Item 12 . Security Ownership of Certain certain information a of November 30 , 2006 ( the “ a of November 30 , 2006 ( the “ Table Date belief beneficially hold more than 5 % of the outstanding share On the Table Date , 859,202,448 share of Common Stock were Apple Computer , Inc. , 1 Infinite Loop , Cupertino , Loop , Cupertino , CA 95014 . 130 Security Ownership of Cupertino , CA 95014 . 130 Security Ownership of 5 % . 130 Security Ownership of 5 % Holders , Directors , Common Stock Beneficially Owned ( 1 ) Percent of Common Stock Common Stock Outstanding Fidelity Investments 57,162,311 ( 2 ) 6.65 % Outstanding Fidelity Investments 57,162,311 ( 2 ) 6.65 % AllianceBernstein LP Investments 57,162,311 ( 2 ) 6.65 % AllianceBernstein LP 48,637,731 ( ) 6.65 % AllianceBernstein LP 48,637,731 ( 3 ) 5.66 % % AllianceBernstein LP 48,637,731 ( 3 ) 5.66 % Steven P. LP 48,637,731 ( 3 ) 5.66 % Steven P. Jobs 5,546,451 5.66 % Steven P. Jobs 5,546,451 ( 4 ) * William Steven P. Jobs 5,546,451 ( 4 ) * William V. Campbell ) * William V. Campbell 221,004 ( 5 ) * Timothy William V. Campbell 221,004 ( 5 ) * Timothy D. Cook ) * Timothy D. Cook 12,597 ( 6 ) * Millard Timothy D. Cook 12,597 ( 6 ) * Millard S. Drexler ) * Millard S. Drexler 220,000 ( 7 ) * Albert Millard S. Drexler 220,000 ( 7 ) * Albert A. Gore Albert A. Gore , Jr. 60,000 ( 8 ) * Ronald Gore , Jr. 60,000 ( 8 ) * Ronald B. Johnson ) * Ronald B. Johnson 2,049,890 ( 9 ) * Arthur Ronald B. Johnson 2,049,890 ( 9 ) * Arthur D. Levinson ) * Arthur D. Levinson 362,400 ( 10 ) * Peter Arthur D. Levinson 362,400 ( 10 ) * Peter Oppenheimer 149,768 10 ) * Peter Oppenheimer 149,768 ( 11 ) * Philip * Peter Oppenheimer 149,768 ( 11 ) * Philip W. Schiller ) * Philip W. Schiller 256 ( 12 ) * Eric Philip W. Schiller 256 ( 12 ) * Eric E. Schmidt ) * Eric E. Schmidt 12,284 ( 13 ) * Jerome Eric E. Schmidt 12,284 ( 13 ) * Jerome B. York ) * Jerome B. York 80,000 ( 14 ) * All Jerome B. York 80,000 ( 14 ) * All current executive director a a group ( 15 person ) 9,378,423 ( 15 group ( 15 person ) 9,378,423 ( 15 ) 1.09 % 15 person ) 9,378,423 ( 15 ) 1.09 % ( 1 ) 9,378,423 ( 15 ) 1.09 % ( 1 ) Represents 15 ) 1.09 % ( 1 ) Represents share of Common the Table Date or within 60 day thereafter . This doe stock unit that vest after 60 day . The share number two-for-one stock split in February 2005 . ( 2 ) Based in February 2005 . ( 2 ) Based on a Form ) Based on a Form 13G/A filed February 14 , 2005 a Form 13G/A filed February 14 , 2005 by FMR Corp. 13G/A filed February 14 , 2005 by FMR Corp. FMR Corp. Corp. list it address a 82 Devonshire Street , Boston , Street , Boston , MA 02109 , in such filing . in such filing . ( 3 ) Based on a Form ) Based on a Form 13F filed January 25 , 2006 a Form 13F filed January 25 , 2006 , by Barclays 13F filed January 25 , 2006 , by Barclays Global Investors Investors list it address a 45 Fremont Street , San Francisco , San Francisco , CA 94105 . ( 4 ) Includes , CA 94105 . ( 4 ) Includes 120,000 share of . ( 4 ) Includes 120,000 share of Common Stock that of stock option . ( 5 ) Includes 220,000 share of . ( 5 ) Includes 220,000 share of Common Stock that of stock option . ( 6 ) Excludes 600,000 unvested restricted . ( 6 ) Excludes 600,000 unvested restricted stock unit . restricted stock unit . ( 7 ) Includes 40,000 share of . ( 7 ) Includes 40,000 share of Common Stock that Mr. Drexler hold indirectly and 180,000 share of Common Stock that of stock option . ( 8 ) Consists of 60,000 share ( 8 ) Consists of 60,000 share of Common Stock that of stock option . ( 9 ) Includes 1,900,000 share of . ( 9 ) Includes 1,900,000 share of Common Stock that of stock option and excludes 450,000 unvested restricted stock unit . restricted stock unit . ( 10 ) Includes 2,000 share of . ( 10 ) Includes 2,000 share of Common Stock that Dr. Levinson hold indirectly and 100,000 share of Common Stock that of stock option . ( 11 ) Excludes 450,000 unvested restricted . ( 11 ) Excludes 450,000 unvested restricted stock unit . restricted stock unit . ( 12 ) Excludes 400,000 unvested restricted . ( 12 ) Excludes 400,000 unvested restricted stock unit . unvested restricted stock unit . 131 ( 13 ) Consists of stock unit . 131 ( 13 ) Consists of 12,284 share ( 13 ) Consists of 12,284 share of Common Stock that declined to participate in the 1997 Director Stock Option Plan . Stock Option Plan . ( 14 ) Includes 40,000 share of . ( 14 ) Includes 40,000 share of Common Stock that of stock option . ( 15 ) Includes 3,063,371 share of . ( 15 ) Includes 3,063,371 share of Common Stock that option . Does not include 2.7 million unvested restricted stock unit . * Represents le than 1 % of the issued and information , a of September 30 , 2006 , concerning share a of September 30 , 2006 , concerning share of common two-for-one stock split in February 2005 . Number of Securities to compensation plan approved by shareholder 34,827,183 $ 30.03 57,290,691 ( 1 approved by shareholder 34,827,183 $ 30.03 57,290,691 ( 1 ) Equity by shareholder 34,827,183 $ 30.03 57,290,691 ( 1 ) Equity compensation 34,827,183 $ 30.03 57,290,691 ( 1 ) Equity compensation plan not plan not approved by shareholder 18,137,049 $ 10.19 — Total equity approved by shareholder 18,137,049 $ 10.19 — Total equity compensation plan Total equity compensation plan ( 2 ) 52,964,232 $ 23.24 57,290,691 compensation plan ( 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ( 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ) This 2 ) 52,964,232 $ 23.24 57,290,691 ( 1 ) This number 52,964,232 $ 23.24 57,290,691 ( 1 ) This number includes 2,297,225 1 ) This number includes 2,297,225 share of common stock reserved Employee Stock Purchase Plan , 400,000 share available for issuance under available for issuance under the 1997 Director Stock Option Plan , Stock Option Plan , and 54,593,466 share available for issuance under available for issuance under the 2003 Employee Stock Plan . The Plan . The grant of 3,410,000 restricted stock unit ha been stock unit granted after April 2005 count against the share available not include share under the 1990 Stock Option Plan that wa Plan that wa terminated in 1997 . No new option can can be granted under the 1990 Stock Option Plan . ( Stock Option Plan . ( 2 ) This table doe not This table doe not include 17,266 share of Common Stock underlying average exercise price of $ 4.30 per share . No additional the assumed plan . Item 13 . Certain Relationships and Related and Related Transactions In March 2002 , the Company entered into of the plane in May 2001 . The Company recognized a recognized a total of $ 202,000 in expense pursuant to the to the Reimbursement Agreement during 2006 . In 2006 , the Agreement during 2006 . In 2006 , the Company entered into of Pixar . On May 5 , 2006 , The Walt . On May 5 , 2006 , The Walt Disney Company of Pixar common stock were 132 exchanged for Disney ’ s arrangement with Pixar from September 25 , 2005 through May 5 Pixar from September 25 , 2005 through May 5 , 2006 25 , 2005 through May 5 , 2006 wa le than 2005 through May 5 , 2006 wa le than $ 1 2006 wa le than $ 1 million . Item 14 . $ 1 million . Item 14 . Principal Accountant Fees and LLP , during fiscal year 2006 and 2005 . Audit and during fiscal year 2006 and 2005 . Audit and Non-Audit Fees . Audit and Non-Audit Fees 2006 2005 Audit Fees $ 7,912,700 Audit and Non-Audit Fees 2006 2005 Audit Fees $ 7,912,700 ( 2006 2005 Audit Fees $ 7,912,700 ( 1 ) $ 6,948,800 Audit Fees $ 7,912,700 ( 1 ) $ 6,948,800 Audit-Related Fees 7,912,700 ( 1 ) $ 6,948,800 Audit-Related Fees 28,000 ( 2 ) $ 6,948,800 Audit-Related Fees 28,000 ( 2 ) 46,700 Tax 6,948,800 Audit-Related Fees 28,000 ( 2 ) 46,700 Tax Fees 820,500 Fees 28,000 ( 2 ) 46,700 Tax Fees 820,500 ( 3 2 ) 46,700 Tax Fees 820,500 ( 3 ) 923,000 All 46,700 Tax Fees 820,500 ( 3 ) 923,000 All Other Fees Fees 820,500 ( 3 ) 923,000 All Other Fees — — Fees — — Total $ 8,761,200 $ 7,918,500 ( 1 ) — Total $ 8,761,200 $ 7,918,500 ( 1 ) Audit fee $ 8,761,200 $ 7,918,500 ( 1 ) Audit fee relate to the Company ’ s Forms 10-Q , and audit service provided regulatory filing . Fiscal year 2006 also includes fee incurred in such fee were incurred during 2005 . ( 2 ) Audit-related incurred during 2005 . ( 2 ) Audit-related fee primarily relate employee benefit plan . ( 3 ) 2006 tax fee include plan . ( 3 ) 2006 tax fee include $ 728,600 2006 tax fee include $ 728,600 for professional service rendered in tax compliance ; and $ 91,900 for international tax consulting and of the Sarbanes-Oxley Act of 2002 ( the “ Act ” audit partner in fiscal year 2005 , rotated other partner in , rotated other partner in 2006 , and will rotate additional comply with the Act . 133 PART IV Item 15 . . 133 PART IV Item 15 . Exhibits and Financial Statement part of this report ( 1 ) All financial statement Index Balance Sheets a of September 30 , 2006 and September 24 a of September 30 , 2006 and September 24 , 2005 30 , 2006 and September 24 , 2005 73 Consolidated Statements 2006 and September 24 , 2005 73 Consolidated Statements of Operations and September 24 , 2005 73 Consolidated Statements of Operations for three fiscal year ended September 30 , 2006 74 Consolidated Statements year ended September 30 , 2006 74 Consolidated Statements of Shareholders ended September 30 , 2006 74 Consolidated Statements of Shareholders ’ three fiscal year ended September 30 , 2006 75 Consolidated Statements year ended September 30 , 2006 75 Consolidated Statements of Cash ended September 30 , 2006 75 Consolidated Statements of Cash Flows three fiscal year ended September 30 , 2006 76 Notes to year ended September 30 , 2006 76 Notes to Consolidated Financial ended September 30 , 2006 76 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 77 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 114 Reports of Independent Registered Public Accounting Firm , KPMG LLP 118 All financial statement schedule have and Notes thereto . ( 2 ) Index to Exhibits Incorporated End Date Filed/ Furnished Herewith 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Amendment 27 , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles , 1988 . S-3 7/27/88 3.2 Amendment to Restated Articles of State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws May 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the 4 , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , 2000 . 10-Q 5/11/00 3.3 By-Laws of the Company , , a amended through June 7 , 2004 . 10-Q 6/26/04 amended through June 7 , 2004 . 10-Q 6/26/04 3.4 Certificate June 7 , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment 7 , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment to , 2004 . 10-Q 6/26/04 3.4 Certificate of Amendment to Restated State of California on February 25 , 2005 . 10-Q 3/26/05 California on February 25 , 2005 . 10-Q 3/26/05 4.8 Registration February 25 , 2005 . 10-Q 3/26/05 4.8 Registration Rights Agreement 25 , 2005 . 10-Q 3/26/05 4.8 Registration Rights Agreement , , 2005 . 10-Q 3/26/05 4.8 Registration Rights Agreement , dated Rights Agreement , dated June 7 , 1996 among the Company , dated June 7 , 1996 among the Company and Goldman Co . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of . Incorporated . S-3 8/28/96 4.9 Certificate of Determination of Preferences of Apple Computer , Inc. 10-K 9/26/97 10.A.3 * * Apple Apple Computer , Inc. 10-K 9/26/97 10.A.3 * * Apple Computer Computer , Inc. 10-K 9/26/97 10.A.3 * * Apple Computer , restated effective a of October 1 , 1990 . 10-K 9/27/91 a of October 1 , 1990 . 10-K 9/27/91 10.A.3-1 * October 1 , 1990 . 10-K 9/27/91 10.A.3-1 * * Amendment 1 , 1990 . 10-K 9/27/91 10.A.3-1 * * Amendment of , 1990 . 10-K 9/27/91 10.A.3-1 * * Amendment of Apple and Investment Plan dated March 1 , 1992 . 10-K 9/25/92 Plan dated March 1 , 1992 . 10-K 9/25/92 10.A.3-2 * March 1 , 1992 . 10-K 9/25/92 10.A.3-2 * * Amendment 1 , 1992 . 10-K 9/25/92 10.A.3-2 * * Amendment No , 1992 . 10-K 9/25/92 10.A.3-2 * * Amendment No . * * Amendment No . 2 to the Apple Computer , Savings and Investment Plan . 10-Q 3/28/97 134 10.A.5 * * and Investment Plan . 10-Q 3/28/97 134 10.A.5 * * 1990 Investment Plan . 10-Q 3/28/97 134 10.A.5 * * 1990 Stock Plan . 10-Q 3/28/97 134 10.A.5 * * 1990 Stock Option 3/28/97 134 10.A.5 * * 1990 Stock Option Plan , a , a amended through November 5 , 1997 . 10-Q 12/26/97 amended through November 5 , 1997 . 10-Q 12/26/97 10.A.6 * November 5 , 1997 . 10-Q 12/26/97 10.A.6 * * Apple 5 , 1997 . 10-Q 12/26/97 10.A.6 * * Apple Computer , 1997 . 10-Q 12/26/97 10.A.6 * * Apple Computer , , a amended through April 21 , 2005 . 10-Q 3/26/05 amended through April 21 , 2005 . 10-Q 3/26/05 10.A.8 * April 21 , 2005 . 10-Q 3/26/05 10.A.8 * * Form 21 , 2005 . 10-Q 3/26/05 10.A.8 * * Form of , 2005 . 10-Q 3/26/05 10.A.8 * * Form of Indemnification officer of the Registrant . 10-K 9/26/97 10.A.43 * * NeXT of the Registrant . 10-K 9/26/97 10.A.43 * * NeXT Computer the Registrant . 10-K 9/26/97 10.A.43 * * NeXT Computer , * NeXT Computer , Inc. 1990 Stock Option Plan , a , a amended . S-8 3/21/97 10.A.49 * * 1997 Employee a amended . S-8 3/21/97 10.A.49 * * 1997 Employee Stock S-8 3/21/97 10.A.49 * * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.A.50 * October 19 , 2001 . 10-K 9/28/02 10.A.50 * * 1997 19 , 2001 . 10-K 9/28/02 10.A.50 * * 1997 Director , 2001 . 10-K 9/28/02 10.A.50 * * 1997 Director Stock 10-K 9/28/02 10.A.50 * * 1997 Director Stock Option Plan . Director Stock Option Plan . 10-Q 3/27/98 10.A.51 * * 2003 Stock Option Plan . 10-Q 3/27/98 10.A.51 * * 2003 Employee Option Plan . 10-Q 3/27/98 10.A.51 * * 2003 Employee Stock 10-Q 3/27/98 10.A.51 * * 2003 Employee Stock Plan , a , a amended through November 9 , 2005 . 10-K 9/24/05 amended through November 9 , 2005 . 10-K 9/24/05 10.A.52 * November 9 , 2005 . 10-K 9/24/05 10.A.52 * * Reimbursement 9 , 2005 . 10-K 9/24/05 10.A.52 * * Reimbursement Agreement , 2005 . 10-K 9/24/05 10.A.52 * * Reimbursement Agreement dated Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.A.53 * * Option Steven P. Jobs . 10-Q 6/29/02 10.A.53 * * Option Cancellation P. Jobs . 10-Q 6/29/02 10.A.53 * * Option Cancellation and Agreement dated a of March 19 , 2003 by and between a of March 19 , 2003 by and between the Registrant and Steven P. Jobs . 10-Q 6/28/03 10.A.54 * * Form Steven P. Jobs . 10-Q 6/28/03 10.A.54 * * Form of P. Jobs . 10-Q 6/28/03 10.A.54 * * Form of Restricted Stock Unit Award Agreement . 10-Q 3/27/04 10.A.54-1 * * Alternative Unit Award Agreement . 10-Q 3/27/04 10.A.54-1 * * Alternative Form Award Agreement . 10-Q 3/27/04 10.A.54-1 * * Alternative Form of Stock Unit Award Agreement . 10-K 9/24/05 10.A.55 * * Apple Unit Award Agreement . 10-K 9/24/05 10.A.55 * * Apple Computer Award Agreement . 10-K 9/24/05 10.A.55 * * Apple Computer , Performance Bonus Plan dated April 21 , 2005 . 10-Q 3/26/05 Plan dated April 21 , 2005 . 10-Q 3/26/05 10.A.56 * April 21 , 2005 . 10-Q 3/26/05 10.A.56 * * Form 21 , 2005 . 10-Q 3/26/05 10.A.56 * * Form of , 2005 . 10-Q 3/26/05 10.A.56 * * Form of Election Tax Withholding with Stock . 8-K 8/15/05 10.A.57 * * Form Withholding with Stock . 8-K 8/15/05 10.A.57 * * Form of with Stock . 8-K 8/15/05 10.A.57 * * Form of Option Form of Option Agreements . 10-K 9/24/05 10.B.18 * Custom Sales of Option Agreements . 10-K 9/24/05 10.B.18 * Custom Sales Agreement Option Agreements . 10-K 9/24/05 10.B.18 * Custom Sales Agreement effective Custom Sales Agreement effective October 21 , 2002 between the Registrant Agreement effective October 21 , 2002 between the Registrant and International International Business Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement Business Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement effective Machines Corporation . 10-K 9/27/03 10.B.19 * Purchase Agreement effective August * Purchase Agreement effective August 10 , 2005 between the Registrant Agreement effective August 10 , 2005 between the Registrant and Freescale and Freescale Semiconductor , Inc. 10-K 9/24/05 10.B.20 Consulting Agreement dated Freescale Semiconductor , Inc. 10-K 9/24/05 10.B.20 Consulting Agreement dated a Semiconductor , Inc. 10-K 9/24/05 10.B.20 Consulting Agreement dated a of Agreement dated a of April 17 , 2006 by and between a of April 17 , 2006 by and between the Registrant and J.R. Ruby Consulting Corp. 10-Q 7/1/06 14.1 Code of Ethics J.R. Ruby Consulting Corp. 10-Q 7/1/06 14.1 Code of Ethics of Ruby Consulting Corp. 10-Q 7/1/06 14.1 Code of Ethics of the Ethics of the Company . 10-K 9/27/03 21 * * * of the Company . 10-K 9/27/03 21 * * * Subsidiaries the Company . 10-K 9/27/03 21 * * * Subsidiaries of Apple Computer , Inc. ü 23.1 * * * Consent of Public Accounting Firm . ü 135 24.1 * * * Power Accounting Firm . ü 135 24.1 * * * Power of Attorney ( included on page 137 of this Annual Report on this Annual Report on Form 10-K ) . ü 31.1 * Form 10-K ) . ü 31.1 * * * Rule13a-14 ( Rule13a-14 ( a ) / 15d-14 ( a ) Certification of Chief Executive Officer . ü 31.2 * * * Rule13a-14 ( Rule13a-14 ( a ) / 15d-14 ( a ) Certification of Chief Financial Officer . ü 32.1 * * * * Section * * * * Section 1350 Certifications of Chief Executive Officer * * Furnished herewith . 136 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 29 th day of December 2006 29 th day of December 2006 . APPLE COMPUTER , INC. this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Executive Officer and Director December 29 , 2006 STEVEN P. JOBS and Director December 29 , 2006 STEVEN P. JOBS ( Principal ( Principal Financial and December 29 , 2006 PETER OPPENHEIMER Principal Financial and December 29 , 2006 PETER OPPENHEIMER Principal Accounting Officer WILLIAM V. CAMPBELL Director December 29 , 2006 WILLIAM V. CAMPBELL CAMPBELL Director December 29 , 2006 WILLIAM V. CAMPBELL /s/ MILLARD MILLARD S. DREXLER Director December 29 , 2006 MILLARD S. DREXLER DREXLER Director December 29 , 2006 MILLARD S. DREXLER /s/ ALBERT GORE , JR. Director December 29 , 2006 ALBERT GORE , JR. Director December 29 , 2006 ALBERT GORE , JR. /s/ ARTHUR D. LEVINSON Director December 29 , 2006 ARTHUR D. LEVINSON LEVINSON Director December 29 , 2006 ARTHUR D. LEVINSON /s/ ERIC ERIC E. SCHMIDT Director December 29 , 2006 ERIC E. SCHMIDT SCHMIDT Director December 29 , 2006 ERIC E. SCHMIDT /s/ JEROME JEROME B. YORK Director December 29 , 2006 JEROME B. YORK YORK Director December 29 , 2006 JEROME B. YORK 137 , 2006 JEROME B. YORK 137 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-08-224958/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-08-224958/full-submission.txt new file mode 100644 index 0000000..33e468b --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-08-224958/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 27 , 2008 or ¨ TRANSITION year ended September 27 , 2008 or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 29 , 2008 , wa approximately a of March 29 , 2008 , wa approximately $ 118,441,000,000 2008 , wa approximately $ 118,441,000,000 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 888,935,123 share of Common Stock Issued and Outstanding a of October 24 , 2008 DOCUMENTS INCORPORATED BY a of October 24 , 2008 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2009 Annual Meeting of Shareholders , to be held on February 25 , 2009 , are incorporated held on February 25 , 2009 , are incorporated by reference this Annual Report on Form 10-K where indicated . Table of this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part I , Item 1A of this Form 10-K , Item 1A of this Form 10-K , which are incorporated herein law . PART I Item 1. Business Company Background Apple Inc. s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company also invested in program to 1 Table of Contents enhance reseller At the end of fiscal 2008 , the Company had opened had opened a total of 247 retail store , including 205 247 retail store , including 205 store in the U.S. and U.S. and a total of 42 store internationally . The Company , and one-to-one ( “ 1:1 ” ) learning . A ” ) learning . A 1:1 learning solution typically consists of found in Part II , 2 Table of Contents Item 7 2 Table of Contents Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 9 , “ Segment Information and s Mac OS X Version 10.5 Leopard® ( “ Mac OS . First introduced in January 2006 , the MacBook Pro includes the MacBook Pro includes a 15-inch or 17-inch widescreen display , Pro includes a 15-inch or 17-inch widescreen display , a built-in power adapter . In October 2008 , the Company redesigned it , the Company redesigned it 15-inch MacBook Pro model to include , the latest Intel Core 2 Duo processor running at up processor running at up to 2.8GHz , and a new Nvidia and a new Nvidia GeForce 9600M graphic processor . The 15-inch 9600M graphic processor . The 15-inch MacBook Pro includes up to MacBook Pro includes up to 4GB of 1066MHz synchronous dynamic random includes up to 4GB of 1066MHz synchronous dynamic random access memory SDRAM ” ) with a 1066MHz frontside bus , up to bus , up to a 320GB hard drive , a slot-loading gesture support , AirPort Extreme® 802.11n wireless networking , and Bluetooth wireless networking , and Bluetooth 2.1 . In addition , the , the Company updated it 17-inch MacBook Pro model to include hard drive of up to 320GB , a well a an a well a an optional 128GB solid state drive . MacBook® . First introduced in May 2006 , the MacBook includes a , the MacBook includes a 13-inch widescreen display , a built-in power adapter . In October 2008 , the Company introduced new widescreen display , Intel Core 2 Duo processor running at up processor running at up to 2.4GHz , NVIDIA GeForce 9400M graphic to 2.4GHz , NVIDIA GeForce 9400M graphic processor , support for , support for up to 4GB of 1066MHz SDRAM memory , for up to 4GB of 1066MHz SDRAM memory , up to SDRAM memory , up to 320GB Serial ATA hard drive , , and built-in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1 802.11n wireless networking and Bluetooth 2.1 . MacBook Air™ In October . MacBook Air™ In October 2008 , the Company updated it ultra-slim notebook computer that measure 0.16-inches at it thinnest point and at it thinnest point and 0.76-inches at it maximum height . Air includes an Intel Core 2 Duo processor running at up processor running at up to 1.86GHz with 6MB of Level 2 at up to 1.86GHz with 6MB of Level 2 cache , 1.86GHz with 6MB of Level 2 cache , an NVIDIA GeForce cache , an NVIDIA GeForce 9400M graphic processor , 2GB of GeForce 9400M graphic processor , 2GB of memory , and a of memory , and a 120GB hard drive . The MacBook The MacBook Air includes a 13.3-inch LED-backlit widescreen display , a , and built-in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1 802.11n wireless networking and Bluetooth 2.1 . 3 Table of Contents networking and Bluetooth 2.1 . 3 Table of Contents Mac® Pro Mac user . In January 2008 , the Company introduced the processor running at up to 3.2GHz , 12MB of Level 2 at up to 3.2GHz , 12MB of Level 2 cache per 3.2GHz , 12MB of Level 2 cache per processor and dual-independent cache per processor and dual-independent 1.6GHz front-side bus , and up bus , and up to 32GB of 800MHz fully buffered memory and up to 32GB of 800MHz fully buffered memory . The installation of up to four 1TB hard drive for a total drive for a total of 4TB of internal storage and optional storage and optional AirPort Extreme 802.11n wireless networking and Bluetooth 2.0. 802.11n wireless networking and Bluetooth 2.0. iMac® The iMac desktop computer business customer . In April 2008 , the Company updated the iMac to include Intel Core 2 Duo processor running at up processor running at up to 3.06GHz , up to 4GB of to 3.06GHz , up to 4GB of 800MHz SDRAM memory , , up to 4GB of 800MHz SDRAM memory , a faster card option using NVIDIA GeForce 8800 GS graphic , and a video camera , AirPort Extreme 802.11n wireless networking , and Bluetooth wireless networking , and Bluetooth 2.1 . Mac® mini The Mac Intel-based desktop computer that includes 1GB of 667MHz memory that is computer that includes 1GB of 667MHz memory that is expandable to memory that is expandable to 2GB and either a 1.83GHz or to 2GB and either a 1.83GHz or 2.0GHz Intel Core 2 and either a 1.83GHz or 2.0GHz Intel Core 2 Duo processor 1.83GHz or 2.0GHz Intel Core 2 Duo processor . All Mac Gigabit Ethernet , AirPort Extreme 802.11g wireless networking , Bluetooth 2.0 802.11g wireless networking , Bluetooth 2.0 , a total of four a total of four USB 2.0 port , and one FireWire port , and one FireWire 400 port . Mac mini includes . Xserve® Xserve is a 1U rack-mount server powered by up by up to two Quad-Core 128-bit Intel Xeon processor running at processor running at up to 3.0GHz and feature Mac OS X feature Mac OS X Server 10.5 Leopard , which became available which became available in October 2007 . Xserve support up to . Xserve support up to 32GB of random access memory , storage drive of up to 3TB , and an optional internal iTunes Store . In July 2008 , the Company launched the iPod shuffle is available in 1GB or 2GB flash memory configuration is available in 1GB or 2GB flash memory configuration and is capable of holding up to 240 or 500 song , respectively holding up to 240 or 500 song , respectively . The color and provides up to 12 hour of battery life . . iPod® nano In September 2008 , the Company introduced the incorporates a two-inch display with 204 pixel per inch , a per inch , a built-in 4 Table of Contents accelerometer , iPod nano provides up to 24 hour of audio playback or playback and is available in 8GB and 16GB configuration in a is available in 8GB and 16GB configuration in a variety of music player . In September 2008 , the Company introduced the iPod classic , which ha 120GB of storage and is capable capable of holding up to 30,000 song , 150 hour of up to 30,000 song , 150 hour of video , or hour of video , or 25,000 photo . The iPod classic iPod classic provides up to 36 hour of audio playback or technology , and includes a 2.5-inch color screen that can display . iPod® touch In September 2008 , the Company introduced the a flash-memory-based iPod that is 8.5 mm thin and feature a mm thin and feature a 3.5-inch widescreen display , “ Genius iPod touch is available in 8GB , 16GB and 32GB configuration is available in 8GB , 16GB and 32GB configuration and feature in 8GB , 16GB and 32GB configuration and feature up to configuration and feature up to 36 hour of audio playback and of video playback . iTunes® 8 iTunes is an application for in the U.S. in April 2003 , the iTunes Store now Store now serf customer in 22 country . In September 2008 22 country . In September 2008 , the Company announced iTunes , the Company announced iTunes 8 , which includes the new iTunes Store . In July 2008 , the Company launched the iPod touch . In January 2008 , the Company announced iTunes TV . iPhone™ In June 2008 , the Company announced iPhone the Company announced iPhone ™ 3G , the second-generation iPhone that with a touchscreen . iPhone 3G combine the feature of the which wa released in June 2007 , with 3G networking , in June 2007 , with 3G networking , a built-in global ” ) , and iPhone 2.0 software . iPhone 2.0 software iPhone 2.0 software . iPhone 2.0 software incorporates new enterprise feature VPN ” ) . iPhone 3G is a quad-band GSM phone a quad-band GSM phone featuring 3G , EDGE and Wi-Fi wireless for data networking , Bluetooth 2.0 , a built-in 2.0 megapixel Bluetooth 2.0 , a built-in 2.0 megapixel camera , and a megapixel camera , and a 3.5-inch touch widescreen with 480-by-320 resolution a 3.5-inch touch widescreen with 480-by-320 resolution at 163 pixel per widescreen with 480-by-320 resolution at 163 pixel per inch . iPhone pixel per inch . iPhone 3G provides up to 10 hour iPhone 3G provides up to 10 hour of talk time on hour of talk time on 2G network and five hour using network and five hour using 3G network , up to five playback , or up to 24 hour of audio playback . . It is available in 8GB and 16GB configuration . 5 is available in 8GB and 16GB configuration . 5 Table of 8GB and 16GB configuration . 5 Table of Contents In July Table of Contents In July 2008 , the Company began shipping the Company began shipping iPhone 3G in certain country and made certain country and made iPhone 2.0 software available to all iPhone cellular network service for iPhone 3G in over 70 country . for iPhone 3G in over 70 country . These agreement are Company expects to ship iPhone 3G in over 70 country by ship iPhone 3G in over 70 country by the end of the end of calendar year 2008 . In addition to the flat panel display including the 23-inch and 30-inch Apple Cinema High display including the 23-inch and 30-inch Apple Cinema High Definition ( ) Displays™ , and the 20-inch Apple Cinema Display® . In Cinema Display® . In October 2008 , the Company introduced a , the Company introduced a 24-inch LED Cinema Display that feature camera , microphone , built-in 2.1 speaker system , and MagSafe Apple TV includes either a 40GB or 160GB hard drive capable includes either a 40GB or 160GB hard drive capable of storing capable of storing up to 200 hour of video , 36,000 200 hour of video , 36,000 song , 25,000 photo , video , 36,000 song , 25,000 photo , or a combination high definition resolution up to 720p . Apple TV connects to . Using high-speed AirPort Extreme 802.11n wireless networking , Apple TV and became available in October 2007 . Leopard includes 300 additional October 2007 . Leopard includes 300 additional feature and introduces an content of a Mac . 6 Table of Contents Application Software Contents Application Software iLife® ’ 08 In August 2007 , the iLife® ’ 08 In August 2007 , the Company introduced iLife the Company introduced iLife ’ 08 , the latest release of iWeb™ , and iMovie® ’ 08 . All of these application software application . iPhoto ’ 08 add new feature for organizing fully integrated with iPhoto ’ 08 and iMovie ’ 08 , ’ 08 and iMovie ’ 08 , allowing MobileMe user to the web . iPhoto ’ 08 feature print , photo book ordering service . iMovie® ’ 08 is the latest version of software application . iMovie ’ 08 provides new tool for quick . Projects in iMovie ’ 08 can also be published to DVD player . iDVD ’ 08 feature 10 new Apple-designed menu . iDVD ’ 08 feature 10 new Apple-designed menu theme in theme in both widescreen ( 16:9 ) and standard ( 4:3 16:9 ) and standard ( 4:3 ) format . GarageBand® is create song . GarageBand ’ 08 allows user to export finished editing tool . iWeb ’ 08 offer new feature to make Web Galleries . iWork® ’ 08 In August 2007 , the iWork® ’ 08 In August 2007 , the Company introduced iWork the Company introduced iWork ’ 08 , the latest version of and spreadsheet . iWork ’ 08 includes update to Pages® ’ includes update to Pages® ’ 08 for word processing and page page layout , Keynote® ’ 08 for presentation , and introduces , and introduces Numbers® ’ 08 for spreadsheet . All of photo . Final Cut Studio® 2 In April 2007 , the Cut Studio® 2 In April 2007 , the Company introduced Final introduced Final Cut Studio ® 2 , an upgraded version of professional . Final Cut Studio 2 feature Final Cut Pro® 6 2 feature Final Cut Pro® 6 for video editing , DVD editing , DVD Studio Pro® 4 for DVD authoring , Motion for DVD authoring , Motion 3 for real-time motion graphic , motion graphic , Soundtrack® Pro 2 for audio editing and sound and finishing , and Compressor 3 for encoding medium in multiple offer Final Cut Express HD 3.5 , a consumer version of . Logic® Studio In September 2007 , the Company introduced Logic Logic Studio feature Logic Pro 8 , an upgraded 7 Table Pro 8 , an upgraded 7 Table of Contents version of performance application ; Soundtrack Pro 2 , a professional audio post Instruments , made up of 40 instrument plug-in ; Studio Effects ; Studio Effects , with 80 professional effect plug-in ; and the Company offer Logic Express 8 , a standalone version of version of the Logic Pro 8 application that provides an easy publishing capability . In July 2007 , the Company introduced FileMaker the Company introduced FileMaker Pro 9 featuring a new Quick Start experience . Safari® In March 2008 , the Company made available the Company made available Safari 3.1 , a web browser compatible and Mac OS X. Safari 3.1 includes built-in Google search ; ” ad blocking . Safari 3.1 support the new video and and audio tag in HTML 5 and support Cascading Style Sheets video on computer . QuickTime 7 feature H.264 encoding and can content stream possible . QuickTime 7 also delivers multi-channel audio and other QuickTime product . QuickTime 7 Pro , a suite of and video file . QuickTime 7 Pro allows user to create video . MobileMe™ In June 2008 , the Company introduced MobileMe email and file storage of 20GB for individual and 40GB for of 20GB for individual and 40GB for family with additional storage and user diagnostic tool . 8 Table of Contents Markets and customer accounted for more than 10 % of net sale in % of net sale in 2008 , 2007 , or 2006 net sale in 2008 , 2007 , or 2006 . The 2008 , 2007 , or 2006 . The Company also sell entered into certain agreement for 9 Table of Contents the supply requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company belief and development expenditure totaled $ 1.1 billion , $ 782 million $ 1.1 billion , $ 782 million , and $ 712 782 million , and $ 712 million in 2008 , 2007 and $ 712 million in 2008 , 2007 , and 2006 712 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . 10 Table and 2006 , respectively . 10 Table of Contents Patents , largest geographic marketplace . Approximately 57 % of the Company ’ ’ s net sale in 2008 came from sale to customer in Part II , Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , “ Segment Information and date of purchase by the 11 Table of Contents original end-user The Company also offer a 90-day basic warranty for it service . Employees As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had approximately , the Company had approximately 32,000 full-time equivalent employee and an equivalent employee and an additional 3,100 temporary equivalent employee and contractor s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended , are s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an inactive textual reference only . 12 Table of Contents Executive Officers the Company a of November 1 , 2008 . Name Position a of November 1 , 2008 . Name Position With the D. Cook Chief Operating Officer 47 Daniel Cooperman Senior Vice President , General Counsel and Secretary 57 Tony Fadell Senior Vice President Vice President , iPod Division 39 Scott Forstall Senior Vice President Software Engineering and Platform Experience 39 Steven P. Jobs Director and Director and Chief Executive Officer 53 Ronald B. Johnson Senior Vice Senior Vice President , Retail 50 Robert Mansfield Senior Vice President Vice President , Hardware Engineering 47 Peter Oppenheimer Senior Vice President President and Chief Financial Officer 45 Philip W. Schiller Senior Vice President , Worldwide Product Marketing 48 Bertrand Serlet Senior Vice President Vice President , Software Engineering 47 Sina Tamaddon Senior Vice President Senior Vice President , Applications 51 Timothy D. Cook , Chief joined the Company in March 1998 . Mr. Cook also served Worldwide Sales and Operations from 2002 to 2005 . In 2004 and Operations from 2002 to 2005 . In 2004 , his 2002 to 2005 . In 2004 , his responsibility were expanded Macintosh hardware engineering . From 2000 to 2002 , Mr. Cook engineering . From 2000 to 2002 , Mr. Cook served a Service and Support . From 1998 to 2000 , Mr. Cook Support . From 1998 to 2000 , Mr. Cook served a . Mr. Cook also spent 12 year with IBM , most joined the Company in November 2007 . Prior to joining the of Oracle Corporation since February 1997 . Prior to that , McCutchen LLP ) since October 1977 , and had served a a a partner since June 1983 . From September 1995 until June 1983 . From September 1995 until February 1997 , Mr. From September 1995 until February 1997 , Mr. Cooperman wa Chair Group , and from April 1989 through September 1995 he served from April 1989 through September 1995 he served a Managing Partner , joined the Company in 2001 . From 2004 to April Company in 2001 . From 2004 to April 2006 , Mr. . From 2004 to April 2006 , Mr. Fadell wa Vice of iPod Engineering . From 2001 to 2004 , Mr. Fadell Engineering . From 2001 to 2004 , Mr. Fadell wa the joined the Company in February 1997 upon the Company ’ s joined the Company in January 2000 . Prior to joining the Company , Mr. Johnson spent 16 year with Target Stores , a Senior Merchandising Executive . 13 Table of Contents Robert Mansfield joined the Company in November 1999 a Vice President of Development his current position in May 2008 . Prior to joining the joined the Company in July 1996 . Mr. Oppenheimer also served , rejoined the Company in 1997 . Prior to rejoining the Macromedia , Inc. from December 1995 to March 1997 and Director from December 1995 to March 1997 and Director of Product Marketing FirePower Systems , Inc. from 1993 to December 1995 . Prior Inc. from 1993 to December 1995 . Prior to that , joined the Company in February 1997 upon the Company ’ s engineer at Xerox PARC from 1985 to 1989 . Sina Tamaddon Xerox PARC from 1985 to 1989 . Sina Tamaddon , Senior joined the Company in September 1997 . Mr. Tamaddon ha also Europe with NeXT from September 1996 through March 1997 . From from September 1996 through March 1997 . From August 1994 to March 1997 . From August 1994 to August 1996 , Mr. From August 1994 to August 1996 , Mr. Tamaddon wa Vice Services with NeXT . Item 1A . Risk Factors Because of financial instrument ; impairment charge 14 Table of Contents related to s Annual Report on Form 10-K for the fiscal year September for the fiscal year September 30 , 2006 ( the “ fiscal year September 30 , 2006 ( the “ 2006 Form , 2006 ( the “ 2006 Form 10-K ” ) have ( the “ 2006 Form 10-K ” ) have exposed the in Part I , Item 3 , “ Legal Proceedings , full cooperation . On April 24 , 2007 , the SEC . On April 24 , 2007 , the SEC filed an margin or if other company 15 Table of Contents infringe on amount by which the carrying 16 Table of Contents value of component and manufacturing requirement for 30 to 150 day . Because manufacturing requirement for 30 to 150 day . Because the Company compared to level achieved during 2008 and 2007 , due largely level achieved during 2008 and 2007 , due largely to the to Part II , Item 7 , “ Management ’ s , and are geographically concentrated 17 Table of Contents in single can consume significant time and 18 Table of Contents expense . is vigorously defending more than 21 patent infringement case , 13 21 patent infringement case , 13 of which were filed during which were filed during fiscal 2008 , and several pending claim affected . With the June 2007 introduction of iPhone , the which became available in October 2007 , includes a new feature s device may suffer . 19 Table of Contents The Company condition and operating result . 20 Table of Contents The Company granted , thus lessening the 21 Table of Contents effectiveness of and uncertainty . Through September 27 , 2008 , the Company . Through September 27 , 2008 , the Company had opened , the Company had opened 247 retail store . The Company space with term ranging from 5 to 20 year , the term ranging from 5 to 20 year , the majority of majority of which are for 10 year . Certain store have condition and operating result . 22 Table of Contents Many factor condition and operating result . 23 Table of Contents The Company and operating result . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ Ireland . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company leased approximately , the Company leased approximately 4.2 million square foot of space are generally for term of 3 to 20 year and generally for term of 3 to 20 year and generally provide renewal renewal option for term of 1 to 5 additional year . for term of 1 to 5 additional year . Leased space . Leased space includes approximately 1.8 million square foot of retail for retail space range from 5 to 20 year , the space range from 5 to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company owned a , the Company owned a 367,000 square-foot manufacturing facility in Cork . The Company also owned 805,000 square foot of facility in square foot of facility in 24 Table of Contents Sacramento , , the Company owned approximately 2.3 million square foot of facility , California , including approximately 1.0 million square foot purchased in million square foot purchased in 2007 and 2006 for the future foot purchased in 2007 and 2006 for the future development of , California , and approximately 107,000 square foot for a data owned additional facility totaling approximately 129,000 square foot a of September square foot a of September 27 , 2008 . The Company a of September 27 , 2008 . The Company belief it for it product . Item 3 . Legal Proceedings As of Legal Proceedings As of September 27 , 2008 , the end As of September 27 , 2008 , the end of the during the fourth quarter of 2008 that did not individually or Board of Directors on May 19 , 2005 in Santa Clara Directors on May 19 , 2005 in Santa Clara County Superior the Company ’ s March 14 , 2005 , proxy statement ’ s March 14 , 2005 , proxy statement wa false annual meeting held on April 21 , 2005 . Plaintiff , held on April 21 , 2005 . Plaintiff , who ostensibly the Company . On July 27 , 2005 , plaintiff filed . On July 27 , 2005 , plaintiff filed an amended individual shareholder . On January 10 , 2006 , the Court . On January 10 , 2006 , the Court sustained defendant second amended complaint on February 7 , 2006 , and the complaint on February 7 , 2006 , and the Company filed After a hearing on June 13 , 2006 , the Court hearing on June 13 , 2006 , the Court sustained the the director . On July 24 , 2006 , plaintiff filed . On July 24 , 2006 , plaintiff filed a third grant to certain officer in 2003 and 2004 and an option certain officer in 2003 and 2004 and an option grant to ’ s CEO in January 2000 . The Company filed a amended complaint . On January 30 , 2007 , the Court . On January 30 , 2007 , the Court sustained the to amend . On May 8 , 2007 , plaintiff filed . On May 8 , 2007 , plaintiff filed a fourth to amend , on October 12 , 2007 . On October , on October 12 , 2007 . On October 25 , , 2007 . On October 25 , 2007 , the Court . On October 25 , 2007 , the Court entered a with prejudice . On November 26 , 2007 , plaintiff filed . On November 26 , 2007 , plaintiff filed a notice ’ appeal is pending . 25 Table of Contents Birdsong v. wa initially filed on January 30 , 2006 in the United filed on January 30 , 2006 in the United States District ) wa filed on January 31 , 2006 in the United filed on January 31 , 2006 in the United States District the four-year period before January 31 , 2006 . The Birdsong period before January 31 , 2006 . The Birdsong action wa motion to dismiss on November 3 , 2006 , plaintiff agreed dismiss on November 3 , 2006 , plaintiff agreed not to second amended complaint on January 16 , 2007 . That complaint complaint on January 16 , 2007 . That complaint alleges California Louisiana sub-class . On March 1 , 2007 , the Company . On March 1 , 2007 , the Company filed a which wa heard on June 4 , 2007 . On December heard on June 4 , 2007 . On December 14 , , 2007 . On December 14 , 2007 , the Court . On December 14 , 2007 , the Court issued an third amended complaint on January 11 , 2008 . On February complaint on January 11 , 2008 . On February 15 , , 2008 . On February 15 , 2008 , the Company . On February 15 , 2008 , the Company filed a amended complaint . On June 16 , 2008 , the Court . On June 16 , 2008 , the Court granted the with prejudice . On July 11 , 2008 , plaintiff filed . On July 11 , 2008 , plaintiff filed a notice , Canada , on February 1 , 2006 , seeking authorization , on February 1 , 2006 , seeking authorization to institute County Superior Court on February 17 , 2005 . The initial Court on February 17 , 2005 . The initial complaint alleged other relief . On May 9 , 2005 , the Court . On May 9 , 2005 , the Court granted the Superior Court . On May 2 , 2005 , plaintiff filed . On May 2 , 2005 , plaintiff filed an amended in it entirety on November 10 , 2005 . The Court entirety on November 10 , 2005 . The Court granted plaintiff an amended complaint on December 29 , 2005 . Plaintiffs ’ complaint on December 29 , 2005 . Plaintiffs ’ amended complaint the amended complaint on January 31 , 2006 , which the complaint on January 31 , 2006 , which the Court sustained the Court sustained on March 3 , 2006 on sixteen of sustained on March 3 , 2006 on sixteen of seventeen cause granted in part on September 9 , 2006 . Plaintiffs filed part on September 9 , 2006 . Plaintiffs filed a further further amended complaint on September 21 , 2006 . On October complaint on September 21 , 2006 . On October 2 , , 2006 . On October 2 , 2006 , the Company . On October 2 , 2006 , the Company filed an affirmative defense . On November 30 , 2007 , the Company . On November 30 , 2007 , the Company filed a motion for judgment on the 26 Table of Contents pleading , Fifth Amended Complaint on March 19 , 2008 and a Corrected Complaint on March 19 , 2008 and a Corrected Fifth Amended Fifth Amended Complaint on April 1 , 2008 . The Company Complaint on April 1 , 2008 . The Company filed an Fifth Amended Complaint on April 18 , 2008 . The Company Complaint on April 18 , 2008 . The Company filed a by the Court on June 24 , 2008 , with leave Court on June 24 , 2008 , with leave to amend Sixth Amended Complaint on July 14 , 2008 and a Seventh Complaint on July 14 , 2008 and a Seventh Amended Complaint Seventh Amended Complaint on August 22 , 2008 , adding three Complaint on August 22 , 2008 , adding three new reseller reseller plaintiff . On September 22 , 2008 , the Company . On September 22 , 2008 , the Company filed it which were heard on October 14 , 2008 . The Court heard on October 14 , 2008 . The Court requested further summary adjudication . On August 22 , 2008 , plaintiff filed . On August 22 , 2008 , plaintiff filed a motion consumer class and on October 10 , 2008 , the Company and on October 10 , 2008 , the Company filed it hearing is set for December 19 , 2008 . Gordon v. set for December 19 , 2008 . Gordon v. Apple Computer purported class action on August 31 , 2006 in the United action on August 31 , 2006 in the United States District class of consumer who purchased 65W Power Adapters for iBooks and iBooks and Powerbooks between November 2002 and the present . The alleges various problem with the 65W Adapter , including fraying , filed an answer on October 20 , 2006 denying the material answer on October 20 , 2006 denying the material allegation and filed this action on August 6 , 2007 in the United action on August 6 , 2007 in the United States District of U.S. Patent No . 6,753,671 entitled “ Recharger for use and U.S. Patent No . 6,762,584 entitled “ Recharger for use filed an answer on October 12 , 2007 denying all material answer on October 12 , 2007 denying all material allegation and and invalidity . On April 7 , 2008 , plaintiff filed . On April 7 , 2008 , plaintiff filed an amended of U.S. Patent No . 6,753,671 . On April 28 , . 6,753,671 . On April 28 , 2008 , the Company . On April 28 , 2008 , the Company filed an hearing is set for October 28 , 2009 , and trial set for October 28 , 2009 , and trial is scheduled trial is scheduled for April 5 , 2010 . Honeywell International scheduled for April 5 , 2010 . Honeywell International , Inc. filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District other defendant of U.S. Patent 5,280,371 entitled “ Directional Diffuser for filed an answer on December 21 , 2004 denying all material answer on December 21 , 2004 denying all material allegation and manufacturer supplier . On May 18 , 2005 the Court stayed . On May 18 , 2005 the Court stayed the case an amended complaint on November 7 , 2005 adding additional defendant complaint on November 7 , 2005 adding additional defendant and expanding yet due . On April 2 , 2008 , the Court . On April 2 , 2008 , the Court lifted the are licensed under the ‘ 371 patent . On October 31 371 patent . On October 31 , 2008 , the Company . On October 31 , 2008 , the Company filed a are licensed under the ‘ 371 patent . A hearing on motion is scheduled for December 19 , 2008 . 27 Table scheduled for December 19 , 2008 . 27 Table of Contents December 19 , 2008 . 27 Table of Contents In re Federal Action ) On June 30 , 2006 , a putative ) On June 30 , 2006 , a putative derivative action ’ s announcement on June 29 , 2006 that an internal announcement on June 29 , 2006 that an internal investigation had stock option grant made between 1997 and 2001 , that a grant made between 1997 and 2001 , that a special committee well a claim under Sections 10 ( b ) , 14 10 ( b ) , 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the Complaint wa filed on December 18 , 2006 , and a filed on December 18 , 2006 , and a First Amended Complaint wa filed on March 6 , 2007 . On June filed on March 6 , 2007 . On June 12 , , 2007 . On June 12 , 2007 , the Company . On June 12 , 2007 , the Company ’ s motion to dismiss on April 20 , 2007 , which wa dismiss on April 20 , 2007 , which wa heard on which wa heard on September 7 , 2007 . On November heard on September 7 , 2007 . On November 19 , , 2007 . On November 19 , 2007 , the Court . On November 19 , 2007 , the Court granted the an amended complaint on December 19 , 2007 . Defendants filed complaint on December 19 , 2007 . Defendants filed motion to the amended complaint on January 25 , 2008 . The motion complaint on January 25 , 2008 . The motion to dismiss to be heard on April 4 , 2008 . Pursuant to heard on April 4 , 2008 . Pursuant to a joint joint stipulation filed on April 3 , 2008 , the Court filed on April 3 , 2008 , the Court vacated the Computer , Inc. On July 5 , 2006 , a putative Inc. On July 5 , 2006 , a putative derivative action Derivative Litigation , No . 1:06CV066692 , assigned to the Hon complaint wa filed on October 5 , 2006 , alleging a filed on October 5 , 2006 , alleging a variety of corporate asset . On December 7 , 2006 , the Court . On December 7 , 2006 , the Court granted the is pending . On November 3 , 2006 , the Boston . On November 3 , 2006 , the Boston Retirement Board a trial held on September 24 , 2007 , the Court held on September 24 , 2007 , the Court granted the be produced . On April 16 , 2008 , the Boston . On April 16 , 2008 , the Boston Retirement Board Santa Clara . On July 31 , 2008 , Boston Retirement . On July 31 , 2008 , Boston Retirement Board attempted attempted to serve the new 28 Table of Contents complaint on the Company . On September 15 , 2008 , defendant filed . On September 15 , 2008 , defendant filed a motion of summons . On October 17 , 2008 , the Court . On October 17 , 2008 , the Court denied defendant to quash . On October 20 , 2008 , defendant requested . On October 20 , 2008 , defendant requested consolidation of Derivative Litigation , No . 1:06CV066692 , and a stay of , Inc. Beginning on October 19 , 2005 , eight complaint Beginning on October 19 , 2005 , eight complaint were filed Whyte pursuant to an April 17 , 2006 order of the to an April 17 , 2006 order of the Judicial Panel Amended Master Complaint on September 21 , 2006 , alleging violation Complaint on September 21 , 2006 , alleging violation of California putative plaintiff class : ( 1 ) all U.S. resident ( the screen ; and ( 2 ) all iPod nano purchaser the Master Complaint on November 20 , 2006 . The two Complaint on November 20 , 2006 . The two California State action were coordinated on May 4 , 2006 , and assigned coordinated on May 4 , 2006 , and assigned to the Class Action Complaint on June 8 , 2006 , alleging violation Complaint on June 8 , 2006 , alleging violation of California Consolidated Amended Complaint on October 6 , 2006 . The party Complaint on October 6 , 2006 . The party have reached Quebec , Canada on October 27 , 2005 and November 9 Canada on October 27 , 2005 and November 9 , 2005 27 , 2005 and November 9 , 2005 , respectively , 2005 and November 9 , 2005 , respectively , seeking authorization file wa stayed in May 2006 in favor of the Carpentier Ontario , Canada on January 9 , 2006 seeking authorization to Canada on January 9 , 2006 seeking authorization to institute a against the Company on April 24 , 2007 in the United Company on April 24 , 2007 in the United States District of U.S. Patent No . 7,117,516 , entitled “ Method and filed an answer on July 2 , 2007 , denying all answer on July 2 , 2007 , denying all material allegation of U.S. Patent No . 5,724,567 . The trial is scheduled trial is scheduled for November 9 , 2009 . The Company scheduled for November 9 , 2009 . The Company ha filed of U.S. Patent No . 7,117,516 . The Markman hearing took hearing took place on October 8 , 2008 . The Company place on October 8 , 2008 . The Company awaits the ’ s Markman ruling . 29 Table of Contents Macadam v. action wa filed in late 2002 in Santa Clara County Superior filed an answer on December 3 , 2004 denying all allegation answer on December 3 , 2004 denying all allegation and asserting numerous defense . On October 1 , 2003 , Macadam wa . On October 1 , 2003 , Macadam wa deauthorized a a preliminary injunction on December 19 , 2003 . On December injunction on December 19 , 2003 . On December 6 , , 2003 . On December 6 , 2004 , Macadam filed . On December 6 , 2004 , Macadam filed for Chapter , Macadam filed for Chapter 11 bankruptcy in the Northern District the bankruptcy proceeding on February 16 , 2005 . The Macadam proceeding on February 16 , 2005 . The Macadam bankruptcy case case wa converted to Chapter 7 ( liquidation ) on April ( liquidation ) on April 29 , 2005 . The Company ) on April 29 , 2005 . The Company reached a the Company with the Chapter 7 Bankruptcy Trustee , and the approved the settlement on July 17 , 2006 over the objection settlement on July 17 , 2006 over the objection of Tom appeal wa dismissed on October 3 , 2008 . On December dismissed on October 3 , 2008 . On December 19 , , 2008 . On December 19 , 2005 , Tom Santos . On December 19 , 2005 , Tom Santos filed a cause of action on January 20 , 2006 . The Court action on January 20 , 2006 . The Court sustained the Sixth Amended Complaint on July 14 , 2006 . The Company Complaint on July 14 , 2006 . The Company filed a which wa sustained on September 9 , 2006 . Santos filed sustained on September 9 , 2006 . Santos filed a Seventh Amended Complaint in late September 2006 . The Company filed a denied in part on December 15 , 2006 . Santos filed part on December 15 , 2006 . Santos filed an Eighth Eighth Amended Complaint on January 29 , 2007 . The Company Complaint on January 29 , 2007 . The Company filed a which wa heard on May 7 , 2007 . The court heard on May 7 , 2007 . The court sustained the Ninth Amended Complaint on July 11 , 2007 . The Company Complaint on July 11 , 2007 . The Company filed a complaint against Santos on January 20 , 2006 alleging violation of Santos on January 20 , 2006 alleging violation of California Business Gateway , Inc. on August 28 , 2007 in the United Inc. on August 28 , 2007 in the United States District of U.S. Patent No . 7,009,655 , entitled “ Method and complaint wa served on November 7 , 2007 . The amended served on November 7 , 2007 . The amended complaint seek other relief . On January 25 , 2008 , the Company . On January 25 , 2008 , the Company filed an the Markman hearing for August 4 , 2010 and trial for hearing for August 4 , 2010 and trial for January 4 2010 and trial for January 4 , 2011 . OPTi Inc. trial for January 4 , 2011 . OPTi Inc. v. Apple against the Company on January 16 , 2007 in the United Company on January 16 , 2007 in the United States District of U.S. Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , all entitled . 5,710,906 , 5,813,036 and 6,405,291 , all entitled “ Predictive filed an answer on April 17 , 2007 denying all material answer on April 17 , 2007 denying all material allegation and hearing is set for November 26 , 2008 , and trial set for November 26 , 2008 , and trial is scheduled trial is scheduled for April 6 , 2009 . 30 Table scheduled for April 6 , 2009 . 30 Table of Contents April 6 , 2009 . 30 Table of Contents Quantum Technology filed this action on December 21 , 2005 in the United action on December 21 , 2005 in the United States District of U.S. Patent No . 5,730,165 entitled “ Time Domain Capacitive other relief . On May 11 , 2006 , Quantum filed . On May 11 , 2006 , Quantum filed an amended a defendant . On July 31 , 2006 , the Company . On July 31 , 2006 , the Company filed an and invalidity . On November 30 , 2006 , plaintiff filed . On November 30 , 2006 , plaintiff filed a reply hearing wa held on May 16 , 2007 . On June held on May 16 , 2007 . On June 7 , , 2007 . On June 7 , 2007 , the Court . On June 7 , 2007 , the Court issued a of invalidity . On November 28 , 2007 , the Company . On November 28 , 2007 , the Company filed a state-law claim . On December 27 , 2007 , Quantum filed . On December 27 , 2007 , Quantum filed a motion patent claim . In March 2008 , Quantum wa acquired by Office in Tokyo on January 23 , 2007 alleging infringement by Tokyo on January 23 , 2007 alleging infringement by the Company of Japanese Patent No . 3852854 , entitled “ Touch Operation held a hearing on March 22 , 2007 . The Customs hearing on March 22 , 2007 . The Customs Office rejected action against Saito on February 6 , 2007 in the Tokyo Saito on February 6 , 2007 in the Tokyo District Court a declaration that the ‘ 854 patent is invalid and not , Canada , on August 5 , 2005 , seeking authorization , on August 5 , 2005 , seeking authorization to institute price in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 but later declared 2003 and December 14 , 2004 but later declared invalid by certification hearing took place January 13 , 2006 . On February took place January 13 , 2006 . On February 24 , , 2006 . On February 24 , 2006 , the Court . On February 24 , 2006 , the Court granted class the last week of March 2006 . The trial wa conducted trial wa conducted on October 15 and 16 , 2007 . conducted on October 15 and 16 , 2007 . On January October 15 and 16 , 2007 . On January 11 , , 2007 . On January 11 , 2008 , the Court . On January 11 , 2008 , the Court issued a the class is comprised of 20,000 person who purchased an iPod iPod in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 . The Court 2003 and December 14 , 2004 . The Court ordered the collective recovery award by February 23 , 2008 . On February award by February 23 , 2008 . On February 11 , , 2008 . On February 11 , 2008 , the Company . On February 11 , 2008 , the Company filed an and other defendant on February 16 , 2007 in the United defendant on February 16 , 2007 in the United States District of U.S. Patent No . 7,065,417 entitled “ MPEG Portable Sound other relief . On July 12 , 2007 , the Company . On July 12 , 2007 , the Company filed a an amended complaint on August 1 , 2007 , adding the complaint on August 1 , 2007 , adding the iPhone a accused device . On August 2 , 2007 , the Company . On August 2 , 2007 , the Company filed a filed an answer on August 20 , 2007 , denying all answer on August 20 , 2007 , denying all material allegation hearing is set for March 12 , 2009 , and trial set for March 12 , 2009 , and trial is scheduled trial is scheduled for July 6 , 2009 . 31 Table scheduled for July 6 , 2009 . 31 Table of Contents July 6 , 2009 . 31 Table of Contents The Apple purported class action on January 3 , 2005 in the United action on January 3 , 2005 in the United States District alleged violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & motion to dismiss on February 10 , 2005 . On September dismiss on February 10 , 2005 . On September 9 , , 2005 . On September 9 , 2005 , the Court . On September 9 , 2005 , the Court denied the an amended complaint on September 23 , 2005 and the Company complaint on September 23 , 2005 and the Company filed an filed an answer on October 18 , 2005 . In August answer on October 18 , 2005 . In August 2006 , , 2005 . In August 2006 , the Court dismissed Slattery Rosen ) . On November 2 , 2006 , the Company . On November 2 , 2006 , the Company filed an purported class action on July 21 , 2006 in the United action on July 21 , 2006 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On November 3 , 2006 , the Company . On November 3 , 2006 , the Company filed a the complaint . On December 20 , 2006 , the Court . On December 20 , 2006 , the Court denied the to dismiss . On January 11 , 2007 , The Company . On January 11 , 2007 , The Company filed an numerous defense . On March 20 , 2007 , the Court . On March 20 , 2007 , the Court consolidated the a consolidated complaint on April 19 , 2007 . On June complaint on April 19 , 2007 . On June 6 , , 2007 . On June 6 , 2007 , the Company . On June 6 , 2007 , the Company filed an affirmative defense . On July 17 , 2008 , plaintiff filed . On July 17 , 2008 , plaintiff filed a motion class certification and on October 17 , 2008 , the Company and on October 17 , 2008 , the Company filed it hearing is set for December 15 , 2008 . A related set for December 15 , 2008 . A related class action , wa filed on December 31 , 2007 in the United filed on December 31 , 2007 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On February 21 , 2008 , the Company . On February 21 , 2008 , the Company filed an class certification hearing for April 20 , 2009 . Tse v. hearing for April 20 , 2009 . Tse v. Apple Computer and other defendant on August 5 , 2005 in the United defendant on August 5 , 2005 in the United States District of U.S. Patent No . 6,665,797 entitled “ Protection of Software filed an answer on October 31 , 2005 denying all material answer on October 31 , 2005 denying all material allegation and affirmative defense . On October 28 , 2005 , the Company . On October 28 , 2005 , the Company and the which wa granted on August 31 , 2006 . On July granted on August 31 , 2006 . On July 24 , , 2006 . On July 24 , 2007 , the Company . On July 24 , 2007 , the Company filed a Office granted . On July 25 , 2007 , the Company . On July 25 , 2007 , the Company filed a the Court granted on October 4 , 2007 . 32 Table granted on October 4 , 2007 . 32 Table of Contents October 4 , 2007 . 32 Table of Contents Union Fédérale filed this complaint on February 9 , 2005 alleging that the complaint on February 9 , 2005 alleging that the above-listed entity violating consumer law by ( 1 ) omitting to mention that with the iPod and ( 2 ) allegedly tying the sale case took place on May 24 , 2005 . The Company place on May 24 , 2005 . The Company ’ s complaint wa served on November 8 , 2005 . Plaintiff ’ served on November 8 , 2005 . Plaintiff ’ s responsive pleading wa filed on February 10 , 2006 . The Company filed on February 10 , 2006 . The Company filed a filed a reply on June 6 , 2006 and UFC filed reply on June 6 , 2006 and UFC filed a response filed a response on September 19 , 2006 . Vitt v. response on September 19 , 2006 . Vitt v. Apple Computer purported class action on November 7 , 2006 in the United action on November 7 , 2006 in the United States District motion to dismiss on January 19 , 2007 , which the dismiss on January 19 , 2007 , which the Court granted the Court granted on March 13 , 2007 . Plaintiffs filed granted on March 13 , 2007 . Plaintiffs filed an amended an amended complaint on March 26 , 2007 . The Company complaint on March 26 , 2007 . The Company filed a motion to dismiss on August 16 , 2007 , which wa dismiss on August 16 , 2007 , which wa heard on which wa heard on October 4 , 2007 . The Court heard on October 4 , 2007 . The Court ha not Jobs et al . ( 2006 Action ) Plaintiffs filed this purported class action on August 24 , 2006 , in the action on August 24 , 2006 , in the United States financial statement . On January 19 , 2007 , the Court . On January 19 , 2007 , the Court appointed the lead plaintiff . On March 23 , 2007 , plaintiff filed . On March 23 , 2007 , plaintiff filed a Consolidated and asserts claim under Section 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the motion to dismiss on June 8 , 2007 , which wa dismiss on June 8 , 2007 , which wa heard on which wa heard on September 7 , 2007 . On November heard on September 7 , 2007 . On November 14 , , 2007 . On November 14 , 2007 , the Court . On November 14 , 2007 , the Court issued an derivative case . On December 14 , 2007 , plaintiff filed . On December 14 , 2007 , plaintiff filed a motion action complaint . On January 23 , 2008 , defendant filed . On January 23 , 2008 , defendant filed an opposition motion wa heard on March 21 , 2008 . On May heard on March 21 , 2008 . On May 14 , , 2008 . On May 14 , 2008 , the Court . On May 14 , 2008 , the Court issued an dismissing the case on June 12 , 2008 . On June case on June 12 , 2008 . On June 17 , , 2008 . On June 17 , 2008 , plaintiff filed . On June 17 , 2008 , plaintiff filed a notice , et al . ( 2008 Action ) Plaintiff filed this purported class action on June 27 , 2008 , in the action on June 27 , 2008 , in the United States similar to those in the 2006 Vogel v. Jobs et al that wa dismissed on June 12 , 2008 , a described dismissed on June 12 , 2008 , a described above . and asserts claim under Sections 10 ( b ) and 20 10 ( b ) and 20 ( a ) of the unspecified amount . On July 22 , 2008 , the Court . On July 22 , 2008 , the Court stayed this pending the appeal in the 2006 Action . Item 4 . the 2006 Action . Item 4 . Submission of Matters to of Security Holders None . 33 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Second Quarter First Quarter Fiscal 2008 price range per common share range per common share $ 180.91 - $ 120.68 $ 192.24 share $ 180.91 - $ 120.68 $ 192.24 - $ 142.52 180.91 - $ 120.68 $ 192.24 - $ 142.52 $ 200.50 120.68 $ 192.24 - $ 142.52 $ 200.50 - $ 115.44 192.24 - $ 142.52 $ 200.50 - $ 115.44 $ 202.96 142.52 $ 200.50 - $ 115.44 $ 202.96 - $ 150.63 200.50 - $ 115.44 $ 202.96 - $ 150.63 Fiscal 2007 115.44 $ 202.96 - $ 150.63 Fiscal 2007 price range per 202.96 - $ 150.63 Fiscal 2007 price range per common share range per common share $ 155.00 - $ 111.62 $ 127.61 share $ 155.00 - $ 111.62 $ 127.61 - $ 89.60 155.00 - $ 111.62 $ 127.61 - $ 89.60 $ 97.80 111.62 $ 127.61 - $ 89.60 $ 97.80 - $ 81.90 127.61 - $ 89.60 $ 97.80 - $ 81.90 $ 93.16 89.60 $ 97.80 - $ 81.90 $ 93.16 - $ 72.60 97.80 - $ 81.90 $ 93.16 - $ 72.60 Holders As 81.90 $ 93.16 - $ 72.60 Holders As of October 24 72.60 Holders As of October 24 , 2008 , there were As of October 24 , 2008 , there were 30,445 shareholder , 2008 , there were 30,445 shareholder of record . Dividends cash dividend in either fiscal 2008 or 2007 . The Company in either fiscal 2008 or 2007 . The Company anticipates that and Affiliated Purchasers None . 34 Table of Contents Company Stock , the S & P 500 Composite Index ( the “ the “ S & P 500 ” ) and the S . The graph assumes $ 100 wa invested in each of , the S & P 500 , and the Industry Index the Industry Index on September 30 , 2003 . Data point Index on September 30 , 2003 . Data point on the Sep-07 Sep-08 Apple Inc. $ 100 $ 187 $ 517 $ Apple Inc. $ 100 $ 187 $ 517 $ 743 $ $ 100 $ 187 $ 517 $ 743 $ 1,481 $ $ 187 $ 517 $ 743 $ 1,481 $ 1,097 S $ 517 $ 743 $ 1,481 $ 1,097 S & P $ 743 $ 1,481 $ 1,097 S & P © 500 1,097 S & P © 500 $ 100 $ 114 $ & P © 500 $ 100 $ 114 $ 128 $ © 500 $ 100 $ 114 $ 128 $ 142 $ $ 100 $ 114 $ 128 $ 142 $ 165 $ $ 114 $ 128 $ 142 $ 165 $ 129 S $ 128 $ 142 $ 165 $ 129 S & P $ 142 $ 165 $ 129 S & P © Computer P © Computer Hardware $ 100 $ 104 $ 119 $ Computer Hardware $ 100 $ 104 $ 119 $ 128 $ $ 100 $ 104 $ 119 $ 128 $ 188 $ $ 104 $ 119 $ 128 $ 188 $ 158 Copyright $ 119 $ 128 $ 188 $ 158 Copyright © 2008 $ 128 $ 188 $ 158 Copyright © 2008 , Standard 188 $ 158 Copyright © 2008 , Standard & Poor ’ Inc. All right reserved . 35 Table of Contents Item 6 35 Table of Contents Item 6 . Selected Financial Data The five fiscal year ended September 27 , 2008 , is not year ended September 27 , 2008 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2008 2007 2006 2005 2004 Net share amount ) . 2008 2007 2006 2005 2004 Net sale amount ) . 2008 2007 2006 2005 2004 Net sale $ ) . 2008 2007 2006 2005 2004 Net sale $ 32,479 . 2008 2007 2006 2005 2004 Net sale $ 32,479 $ 2005 2004 Net sale $ 32,479 $ 24,006 $ 19,315 $ Net sale $ 32,479 $ 24,006 $ 19,315 $ 13,931 $ $ 32,479 $ 24,006 $ 19,315 $ 13,931 $ 8,279 Net $ 24,006 $ 19,315 $ 13,931 $ 8,279 Net income $ $ 19,315 $ 13,931 $ 8,279 Net income $ 4,834 $ $ 8,279 Net income $ 4,834 $ 3,496 $ 1,989 $ Net income $ 4,834 $ 3,496 $ 1,989 $ 1,328 $ $ 4,834 $ 3,496 $ 1,989 $ 1,328 $ 266 Earnings $ 3,496 $ 1,989 $ 1,328 $ 266 Earnings per common $ 1,989 $ 1,328 $ 266 Earnings per common share : common share : Basic $ 5.48 $ 4.04 $ 2.36 $ : Basic $ 5.48 $ 4.04 $ 2.36 $ 1.64 $ $ 5.48 $ 4.04 $ 2.36 $ 1.64 $ 0.36 Diluted $ 4.04 $ 2.36 $ 1.64 $ 0.36 Diluted $ 5.36 $ 2.36 $ 1.64 $ 0.36 Diluted $ 5.36 $ 3.93 1.64 $ 0.36 Diluted $ 5.36 $ 3.93 $ 2.27 $ 0.36 Diluted $ 5.36 $ 3.93 $ 2.27 $ 1.55 $ $ 5.36 $ 3.93 $ 2.27 $ 1.55 $ 0.34 Cash $ 3.93 $ 2.27 $ 1.55 $ 0.34 Cash dividend declared $ 2.27 $ 1.55 $ 0.34 Cash dividend declared per common earnings per share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted per share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 share : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 : Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 Basic 881,592 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 864,595 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 774,776 Cash 844,058 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 774,776 Cash , 808,439 743,180 Diluted 902,139 889,292 877,526 856,878 774,776 Cash , cash 743,180 Diluted 902,139 889,292 877,526 856,878 774,776 Cash , cash equivalent Diluted 902,139 889,292 877,526 856,878 774,776 Cash , cash equivalent , , and short-term investment $ 24,490 $ 15,386 $ 10,110 $ short-term investment $ 24,490 $ 15,386 $ 10,110 $ 8,261 $ $ 24,490 $ 15,386 $ 10,110 $ 8,261 $ 5,464 Total $ 15,386 $ 10,110 $ 8,261 $ 5,464 Total asset $ $ 10,110 $ 8,261 $ 5,464 Total asset $ 39,572 $ $ 5,464 Total asset $ 39,572 $ 25,347 $ 17,205 $ Total asset $ 39,572 $ 25,347 $ 17,205 $ 11,516 $ $ 39,572 $ 25,347 $ 17,205 $ 11,516 $ 8,039 Long-term $ 25,347 $ 17,205 $ 11,516 $ 8,039 Long-term debt $ $ 17,205 $ 11,516 $ 8,039 Long-term debt $ — $ $ — Total liability $ 18,542 $ 10,815 $ 7,221 $ Total liability $ 18,542 $ 10,815 $ 7,221 $ 4,088 $ $ 18,542 $ 10,815 $ 7,221 $ 4,088 $ 2,976 Shareholders $ 10,815 $ 7,221 $ 4,088 $ 2,976 Shareholders ’ equity $ 7,221 $ 4,088 $ 2,976 Shareholders ’ equity $ 21,030 2,976 Shareholders ’ equity $ 21,030 $ 14,532 $ 9,984 $ ’ equity $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ $ 21,030 $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item $ 14,532 $ 9,984 $ 7,428 $ 5,063 Item 7 . $ 9,984 $ 7,428 $ 5,063 Item 7 . Management ’ $ 7,428 $ 5,063 Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is , and creative market . 36 Table of Contents The Company internationally . The Company had 247 store open a of September store open a of September 27 , 2008 . The Company a of September 27 , 2008 . The Company ha also cellular network service for iPhone 3G in over 70 country . for iPhone 3G in over 70 country . These agreement are Company expects to ship iPhone 3G in over 70 country by ship iPhone 3G in over 70 country by the end of the end of calendar year 2008 . Critical Accounting Policies and estimate that affect the amount 37 Table of Contents reported in and accompanying note . Note 1 “ Summary of Significant Accounting Financial Statements in this Form 10-K describes the significant accounting policy EITF ” ) No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 to Non-software Deliverables in an SOP ” ) No . 97-2 , Software Revenue Recognition , SAB ” ) No . 104 , Revenue Recognition . The accordance with SOP No . 97-2 . The Company recognizes the basis over the currently estimated 24-month economic life of these product later of the date at 38 Table of Contents which the requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is are identified and recorded . 39 Table of Contents Warranty Costs pursuant to SOP No . 97-2 , the Company recognizes warranty SFAS ” ) No . 123 ( revised 2004 ) , No . 123 ( revised 2004 ) , Share-Based Payment . provision of SFAS No . 123R , stock-based compensation cost is accordance with SFAS No . 109 , Accounting for Income Taxes Effective at the beginning of 2008 , the Company adopted Financial ( “ FIN ” ) 48 , Accounting for Uncertainty in of FASB Statement No . 109 . Further information may be may be found in Note 5 , “ Income Taxes ” Financial Statements of this Form 10-K. Management belief it is more in the application of FIN 48 and other complex tax law in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal Proceedings ” and in Note 8 “ Commitments and Contingencies ” the Company is subject to 40 Table of Contents various legal accordance with SFAS No . 5 , Accounting for Contingencies , . Net Sales Fiscal year 2008 and 2007 spanned 52 week Sales Fiscal year 2008 and 2007 spanned 52 week while fiscal year 2008 and 2007 spanned 52 week while fiscal year 2006 52 week while fiscal year 2006 spanned 53 week . An while fiscal year 2006 spanned 53 week . An additional week three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million , except per unit amount ) : 2008 Change 2007 Change 2006 Net amount ) : 2008 Change 2007 Change 2006 Net Sales by : 2008 Change 2007 Change 2006 Net Sales by Operating Segment : Americas net sale $ 14,573 26 % $ 11,596 23 Americas net sale $ 14,573 26 % $ 11,596 23 % $ 14,573 26 % $ 11,596 23 % $ 9,415 Europe 14,573 26 % $ 11,596 23 % $ 9,415 Europe net $ 11,596 23 % $ 9,415 Europe net sale 7,622 40 $ 9,415 Europe net sale 7,622 40 % 5,460 33 % 9,415 Europe net sale 7,622 40 % 5,460 33 % 4,096 net sale 7,622 40 % 5,460 33 % 4,096 Japan net sale 7,622 40 % 5,460 33 % 4,096 Japan net sale 40 % 5,460 33 % 4,096 Japan net sale 1,509 39 % 4,096 Japan net sale 1,509 39 % 1,082 ( 11 4,096 Japan net sale 1,509 39 % 1,082 ( 11 ) net sale 1,509 39 % 1,082 ( 11 ) % 1,211 1,509 39 % 1,082 ( 11 ) % 1,211 Retail net 1,082 ( 11 ) % 1,211 Retail net sale 6,315 53 % 1,211 Retail net sale 6,315 53 % 4,115 27 % 1,211 Retail net sale 6,315 53 % 4,115 27 % 3,246 net sale 6,315 53 % 4,115 27 % 3,246 Other Segments sale 6,315 53 % 4,115 27 % 3,246 Other Segments net 53 % 4,115 27 % 3,246 Other Segments net sale ( net sale ( a ) 2,460 40 % 1,753 30 % sale ( a ) 2,460 40 % 1,753 30 % 1,347 a ) 2,460 40 % 1,753 30 % 1,347 Total net ) 2,460 40 % 1,753 30 % 1,347 Total net sale 40 % 1,753 30 % 1,347 Total net sale $ 32,479 1,347 Total net sale $ 32,479 35 % $ 24,006 24 Total net sale $ 32,479 35 % $ 24,006 24 % $ 32,479 35 % $ 24,006 24 % $ 19,315 Unit 32,479 35 % $ 24,006 24 % $ 19,315 Unit Sales $ 24,006 24 % $ 19,315 Unit Sales by Operating Segment : Americas Mac unit sale 3,980 32 % 3,019 24 % Americas Mac unit sale 3,980 32 % 3,019 24 % 2,432 unit sale 3,980 32 % 3,019 24 % 2,432 Europe Mac sale 3,980 32 % 3,019 24 % 2,432 Europe Mac unit 32 % 3,019 24 % 2,432 Europe Mac unit sale 2,519 2,432 Europe Mac unit sale 2,519 39 % 1,816 35 % Europe Mac unit sale 2,519 39 % 1,816 35 % 1,346 unit sale 2,519 39 % 1,816 35 % 1,346 Japan Mac sale 2,519 39 % 1,816 35 % 1,346 Japan Mac unit 39 % 1,816 35 % 1,346 Japan Mac unit sale 389 1,346 Japan Mac unit sale 389 29 % 302 ( 1 Japan Mac unit sale 389 29 % 302 ( 1 ) unit sale 389 29 % 302 ( 1 ) % 304 389 29 % 302 ( 1 ) % 304 Retail Mac 302 ( 1 ) % 304 Retail Mac unit sale 2,034 304 Retail Mac unit sale 2,034 47 % 1,386 56 % Retail Mac unit sale 2,034 47 % 1,386 56 % 886 unit sale 2,034 47 % 1,386 56 % 886 Other Segments sale 2,034 47 % 1,386 56 % 886 Other Segments Mac 47 % 1,386 56 % 886 Other Segments Mac unit sale unit sale ( a ) 793 50 % 528 58 % sale ( a ) 793 50 % 528 58 % 335 a ) 793 50 % 528 58 % 335 Total Mac ) 793 50 % 528 58 % 335 Total Mac unit 50 % 528 58 % 335 Total Mac unit sale 9,715 335 Total Mac unit sale 9,715 38 % 7,051 33 % Total Mac unit sale 9,715 38 % 7,051 33 % 5,303 unit sale 9,715 38 % 7,051 33 % 5,303 Net Sales sale 9,715 38 % 7,051 33 % 5,303 Net Sales by 38 % 7,051 33 % 5,303 Net Sales by Product : Desktops ( b ) $ 5,603 39 % $ 4,020 21 ( b ) $ 5,603 39 % $ 4,020 21 % $ 5,603 39 % $ 4,020 21 % $ 3,319 Portables 5,603 39 % $ 4,020 21 % $ 3,319 Portables ( $ 4,020 21 % $ 3,319 Portables ( c ) 8,673 3,319 Portables ( c ) 8,673 38 % 6,294 55 % Portables ( c ) 8,673 38 % 6,294 55 % 4,056 c ) 8,673 38 % 6,294 55 % 4,056 Total Mac ) 8,673 38 % 6,294 55 % 4,056 Total Mac net 38 % 6,294 55 % 4,056 Total Mac net sale 14,276 4,056 Total Mac net sale 14,276 38 % 10,314 40 % Total Mac net sale 14,276 38 % 10,314 40 % 7,375 net sale 14,276 38 % 10,314 40 % 7,375 iPod 9,153 sale 14,276 38 % 10,314 40 % 7,375 iPod 9,153 10 38 % 10,314 40 % 7,375 iPod 9,153 10 % 8,305 10,314 40 % 7,375 iPod 9,153 10 % 8,305 8 % 40 % 7,375 iPod 9,153 10 % 8,305 8 % 7,676 7,375 iPod 9,153 10 % 8,305 8 % 7,676 Other music iPod 9,153 10 % 8,305 8 % 7,676 Other music related 10 % 8,305 8 % 7,676 Other music related product and and service ( d ) 3,340 34 % 2,496 32 % service ( d ) 3,340 34 % 2,496 32 % 1,885 d ) 3,340 34 % 2,496 32 % 1,885 iPhone and ) 3,340 34 % 2,496 32 % 1,885 iPhone and related 34 % 2,496 32 % 1,885 iPhone and related product and and service ( e ) 1,844 N M 123 N M e ) 1,844 N M 123 N M — Peripherals and other hardware ( f ) 1,659 32 % 1,260 15 % hardware ( f ) 1,659 32 % 1,260 15 % 1,100 f ) 1,659 32 % 1,260 15 % 1,100 Software , ) 1,659 32 % 1,260 15 % 1,100 Software , service 32 % 1,260 15 % 1,100 Software , service , and other sale ( g ) 2,207 46 % 1,508 18 % sale ( g ) 2,207 46 % 1,508 18 % 1,279 g ) 2,207 46 % 1,508 18 % 1,279 Total net ) 2,207 46 % 1,508 18 % 1,279 Total net sale 46 % 1,508 18 % 1,279 Total net sale $ 32,479 1,279 Total net sale $ 32,479 35 % $ 24,006 24 Total net sale $ 32,479 35 % $ 24,006 24 % $ 32,479 35 % $ 24,006 24 % $ 19,315 Unit 32,479 35 % $ 24,006 24 % $ 19,315 Unit Sales $ 24,006 24 % $ 19,315 Unit Sales by Product : : Desktops ( b ) 3,712 37 % 2,714 12 % Desktops ( b ) 3,712 37 % 2,714 12 % 2,434 b ) 3,712 37 % 2,714 12 % 2,434 Portables ( ) 3,712 37 % 2,714 12 % 2,434 Portables ( c 37 % 2,714 12 % 2,434 Portables ( c ) 6,003 2,434 Portables ( c ) 6,003 38 % 4,337 51 % Portables ( c ) 6,003 38 % 4,337 51 % 2,869 c ) 6,003 38 % 4,337 51 % 2,869 Total Mac ) 6,003 38 % 4,337 51 % 2,869 Total Mac unit 38 % 4,337 51 % 2,869 Total Mac unit sale 9,715 2,869 Total Mac unit sale 9,715 38 % 7,051 33 % Total Mac unit sale 9,715 38 % 7,051 33 % 5,303 unit sale 9,715 38 % 7,051 33 % 5,303 Net sale sale 9,715 38 % 7,051 33 % 5,303 Net sale per 38 % 7,051 33 % 5,303 Net sale per Mac unit sold ( h ) $ 1,469 — % $ 1,463 5 $ 1,469 — % $ 1,463 5 % $ 1,391 iPod 1,469 — % $ 1,463 5 % $ 1,391 iPod unit $ 1,463 5 % $ 1,391 iPod unit sale 54,828 6 $ 1,391 iPod unit sale 54,828 6 % 51,630 31 % 1,391 iPod unit sale 54,828 6 % 51,630 31 % 39,409 unit sale 54,828 6 % 51,630 31 % 39,409 Net sale sale 54,828 6 % 51,630 31 % 39,409 Net sale per 6 % 51,630 31 % 39,409 Net sale per iPod unit sold ( i ) $ 167 4 % $ 161 ( ( i ) $ 167 4 % $ 161 ( 17 $ 167 4 % $ 161 ( 17 ) % $ 4 % $ 161 ( 17 ) % $ 195 iPhone ( 17 ) % $ 195 iPhone unit sale 11,627 N $ 195 iPhone unit sale 11,627 N M 1,389 N M unit sale 11,627 N M 1,389 N M — 41 Table M 1,389 N M — 41 Table of Contents ( a = Not Meaningful Fiscal Year 2008 versus 2007 Net sale during Meaningful Fiscal Year 2008 versus 2007 Net sale during 2008 increased versus 2007 Net sale during 2008 increased 35 % or $ Net sale during 2008 increased 35 % or $ 8.5 billion increased 35 % or $ 8.5 billion from 2007 . Several or $ 8.5 billion from 2007 . Several factor contributed to Mac net sale increased $ 4.0 billion or 38 % during increased $ 4.0 billion or 38 % during 2008 compared to billion or 38 % during 2008 compared to 2007 , while % during 2008 compared to 2007 , while Mac unit sale Mac unit sale increased by 2.7 million unit or 38 % by 2.7 million unit or 38 % . Net sale related s Mac shipment accounted for 44 % of the Company ’ s portable product accounted for 62 % of the Company ’ personal computer shipment in both 2008 and 2007 . Net sale shipment in both 2008 and 2007 . Net sale and unit portable product both increased by 38 % during 2008 compared to increased by 38 % during 2008 compared to 2007 . This % during 2008 compared to 2007 . This growth wa attributable portable product line in January 2008 . Growth of the Company sale and unit sale of 39 % and 37 % , sale of 39 % and 37 % , respectively , during % , respectively , during 2008 due primarily to strong sale sale of iPods increased $ 848 million or 10 % during increased $ 848 million or 10 % during 2008 compared to million or 10 % during 2008 compared to 2007 whereas unit % during 2008 compared to 2007 whereas unit sale of iPods unit sale of iPods increased 6 % compared to 2007 . increased 6 % compared to 2007 . The iPod unit growth a price reduction in February 2008. iPod net sale grew faster product and service were $ 1.8 billion for 2008 , with were $ 1.8 billion for 2008 , with iPhone handset unit iPhone handset unit sale totaling 11.6 million . During 2008 , totaling 11.6 million . During 2008 , sale of iPhone expanded be shipping iPhones in over 70 country by the end of by the end of December 2008 . Net sale of iPhone product and service were $ 123 million in 2007 , which were $ 123 million in 2007 , which represented sale for over the product ’ s 24-month estimated economic life , a product and service increased $ 844 million or 34 % during increased $ 844 million or 34 % during the 2008 compared or 34 % during the 2008 compared to 2007 , due during the 2008 compared to 2007 , due primarily to significantly and other hardware increased $ 399 million or 32 % compared increased $ 399 million or 32 % compared to 2007 due or 32 % compared to 2007 due to an increase in net sale of display . 42 Table of Contents • Net and other sale rose $ 699 million or 46 % during rose $ 699 million or 46 % during 2008 compared to million or 46 % during 2008 compared to 2007 . This % during 2008 compared to 2007 . This growth wa due support contract . Fiscal Year 2007 versus 2006 Net sale during . Fiscal Year 2007 versus 2006 Net sale during 2007 increased versus 2006 Net sale during 2007 increased 24 % or $ Net sale during 2007 increased 24 % or $ 4.7 billion increased 24 % or $ 4.7 billion from 2006 even though or $ 4.7 billion from 2006 even though fiscal year 2007 2006 even though fiscal year 2007 spanned 52 week while fiscal though fiscal year 2007 spanned 52 week while fiscal year 2006 52 week while fiscal year 2006 spanned 53 week . Several while fiscal year 2006 spanned 53 week . Several factor contributed Mac net sale increased $ 3 billion or 40 % during increased $ 3 billion or 40 % during 2007 compared to billion or 40 % during 2007 compared to 2006 , while % during 2007 compared to 2006 , while Mac unit sale Mac unit sale increased by 1.75 million unit or 33 % by 1.75 million unit or 33 % . The 33 % or 33 % . The 33 % Mac unit sale growth s portable product accounted for 62 % of the Company ’ s personal computer shipment in 2007 , up from 54 % in 2007 , up from 54 % in 2006 . Net up from 54 % in 2006 . Net sale and unit ’ s portable product increased 55 % and 51 % , product increased 55 % and 51 % , respectively , during % , respectively , during 2007 compared to 2006 . This , during 2007 compared to 2006 . This growth wa due and unit sale increased by 21 % and 12 % , increased by 21 % and 12 % , respectively , during % , respectively , during 2007 due to stronger sale of sale of iPods increased $ 629 million or 8 % during increased $ 629 million or 8 % during 2007 compared to million or 8 % during 2007 compared to 2006 . Unit % during 2007 compared to 2006 . Unit sale of iPods Unit sale of iPods increased 31 % compared to 2006 . increased 31 % compared to 2006 . The iPod growth wa nano and iPod shuffle in 2007 compared to 2006 . • shuffle in 2007 compared to 2006 . • Net sale of product and service were $ 123 million in 2007. iPhone net were $ 123 million in 2007. iPhone net sale include the over the product ’ s 24-month estimated economic life , a . iPhone unit sale were 1.39 million in 2007 . • sale were 1.39 million in 2007 . • Net sale of product and service increased $ 611 million or 32 % during increased $ 611 million or 32 % during 2007 compared to million or 32 % during 2007 compared to 2006 due to % during 2007 compared to 2006 due to increased net sale and other hardware increased $ 160 million or 15 % compared increased $ 160 million or 15 % compared to 2006 due or 15 % compared to 2006 due to an increase in and other sale rose $ 229 million or 18 % during rose $ 229 million or 18 % during 2007 compared to million or 18 % during 2007 compared to 2006 . This % during 2007 compared to 2006 . This growth wa attributable may be found in Note 9 , “ Segment Information and Financial Statements of this Form 10-K. 43 Table of Contents Americas Statements of this Form 10-K. 43 Table of Contents Americas During Table of Contents Americas During 2008 , net sale in the the Americas segment increased $ 3.0 billion or 26 % compared increased $ 3.0 billion or 26 % compared to 2007 . or 26 % compared to 2007 . The primary driver of began shipping iPhone in June 2007 and the growth in iPhone growth in iPhone sale in 2008 resulted from a full year Mac net sale of $ 1.3 billion or 30 % and of $ 1.3 billion or 30 % and Mac unit sale and Mac unit sale of 961 million or 32 % is sale of 961 million or 32 % is attributable to growth which wa upgraded in June 2008 . In 2008 , the in June 2008 . In 2008 , the Americas segment represented , the Americas segment represented 45 % of the Company ’ net sale a compared to 48 % in the same period in the same period of 2007 . During 2008 , U.S. period of 2007 . During 2008 , U.S. education channel net Mac unit sale increased by 14 % and 19 % , increased by 14 % and 19 % , respectively , compared , respectively , compared to 2007 . Net sale from the the higher education market grew 15 % during 2008 compared to market grew 15 % during 2008 compared to 2007 , while % during 2008 compared to 2007 , while net sale in in the K-12 market grew 12 % during the same period the same period . During 2007 , net sale in the the Americas segment increased $ 2.2 billion , or 23 % $ 2.2 billion , or 23 % , compared to 2006 23 % , compared to 2006 . The main source of MacBook , introduced in May 2006 and updated in May 2007 2006 and updated in May 2007 , a well a the Pro , introduced in January 2006 and updated in June 2007 2006 and updated in June 2007 . Sales of iMacs grew new iMac introduced in August 2007 . Sales of iPods grew the iPod touch in September 2007 . During 2007 , the in September 2007 . During 2007 , the Americas segment represented , the Americas segment represented 48 % of the Company ’ net sale a compared to 49 % in the same period in the same period of 2006 . During 2007 , U.S. period of 2006 . During 2007 , U.S. education channel net Mac unit sale increased by 14 % and 18 % , increased by 14 % and 18 % , respectively , compared , respectively , compared to 2006 . Net sale from the the higher education market grew 17 % during 2007 compared to market grew 17 % during 2007 compared to 2006 , while % during 2007 compared to 2006 , while net sale in in the K-12 market grew 10 % during the same period same period . Europe For 2008 , net sale and unit unit sale in Europe increased 40 % and 39 % , Europe increased 40 % and 39 % , respectively , compared to the same period in 2007 . The main driver of which wa upgraded in June 2008 . Sales of Mac portable , both updated in February 2008 , a well a the Air , introduced in January 2008 . Mac desktop sale also which wa updated in April 2008 . Sales from the iTunes iTunes Store grew substantially by 79 % from 2007 a a substantially by 79 % from 2007 a a result of heightened . The Europe segment represented 23 % of total net sale of total net sale in 2008 , consistent with 2007 . in 2008 , consistent with 2007 . Europe segment net sale segment net sale increased $ 1.4 billion or 33 % during increased $ 1.4 billion or 33 % during 2007 compared to billion or 33 % during 2007 compared to 2006 . Consistent % during 2007 compared to 2006 . Consistent with the Americas new iMac introduced in August 2007 . Sales of iPods grew Japan net sale increased $ 427 million or 39 % in increased $ 427 million or 39 % in 2008 compared to million or 39 % in 2008 compared to 2007 . The % in 2008 compared to 2007 . The primary contributor to price of iPods increased during 2008 compared to 2007 , driven increased during 2008 compared to 2007 , driven by strong demand sale and unit sale grew 42 % and 29 % , sale grew 42 % and 29 % , respectively , in % , respectively , in 2008 compared to 2007 due to , in 2008 compared to 2007 due to increase in sale of MacBook Air in January 2008 . 44 Table of Contents Air in January 2008 . 44 Table of Contents Japan ’ net sale declined by $ 129 million or 11 % in by $ 129 million or 11 % in 2007 compared to million or 11 % in 2007 compared to 2006 . Total % in 2007 compared to 2006 . Total Mac unit sale unit sale in Japan declined 1 % during 2007 . The Japan declined 1 % during 2007 . The decrease in the Retail net sale grew by 53 % during 2008 compared to grew by 53 % during 2008 compared to 2007 , due % during 2008 compared to 2007 , due in large part opening . The Company opened 50 new retail store during 2008 50 new retail store during 2008 , including a total of , including a total of 19 international store , bringing the number of open store to 247 a of September 27 , to 247 a of September 27 , 2008 . This compare a of September 27 , 2008 . This compare to 197 2008 . This compare to 197 open store a of September open store a of September 29 , 2007 and 165 open a of September 29 , 2007 and 165 open store a September 29 , 2007 and 165 open store a of September open store a of September 30 , 2006 . With an a of September 30 , 2006 . With an average of . With an average of 211 store and 178 store opened average of 211 store and 178 store opened during 2008 and and 178 store opened during 2008 and 2007 , respectively , store opened during 2008 and 2007 , respectively , average revenue per store increased to $ 29.9 million for 2008 , compared to $ 29.9 million for 2008 , compared to $ 23.1 2008 , compared to $ 23.1 million in 2007 . Retail to $ 23.1 million in 2007 . Retail Mac net sale Mac unit sale grew by 42 % and 47 % , grew by 42 % and 47 % , respectively , during % , respectively , during 2008 compared to the 2007 , during 2008 compared to the 2007 , due primarily to strong Air , introduced in January 2008 . Net sale of iPods which wa upgraded in June 2008 , and a higher average average selling price compared to 2007 . The higher iPod average s net sale increased by 27 % to $ 4.1 billion by 27 % to $ 4.1 billion during 2007 compared to to $ 4.1 billion during 2007 compared to 2006 . Retail billion during 2007 compared to 2006 . Retail segment Mac unit segment Mac unit sale increased 56 % during 2007 a compared sale increased 56 % during 2007 a compared to 2006 . during 2007 a compared to 2006 . With an average of . With an average of 178 store open during 2007 , of 178 store open during 2007 , average revenue per store revenue per store wa $ 23.1 million , compared to $ million , compared to $ 22.9 million in 2006 . The to $ 22.9 million in 2006 . The increase in Retail Retail segment net sale during 2007 compared to 2006 wa due sale during 2007 compared to 2006 wa due primarily to stronger reported operating income of $ 1.3 billion during 2008 a compared of $ 1.3 billion during 2008 a compared to operating income to operating income of $ 875 million and $ 600 million $ 875 million and $ 600 million during 2007 and 2006 and $ 600 million during 2007 and 2006 , respectively . 600 million during 2007 and 2006 , respectively . This improvement respectively . This improvement in 2008 wa attributable primarily to the Retail net sale growth of 53 % a compared to 2007 53 % a compared to 2007 . Expansion of the Retail the Retail segment were $ 389 million in 2008 , bringing were $ 389 million in 2008 , bringing the total capital the Retail segment to $ 1.4 billion . As of September billion . As of September 27 , 2008 , the Retail As of September 27 , 2008 , the Retail segment had the Retail segment had approximately 15,900 full-time equivalent employee and had and related facility of $ 1.4 billion . The Company would in net sale of $ 707 million , or 40 % $ 707 million , or 40 % during 2008 a compared , or 40 % during 2008 a compared to 2007 . during 2008 a compared to 2007 . These increase are related Pacific region grew significantly by 109 % over 2007 . Mac significantly by 109 % over 2007 . Mac net sale and and unit sale grew by 52 % and 50 % , grew by 52 % and 50 % , respectively , due in net sale of $ 406 million , or 30 % $ 406 million , or 30 % during 2007 compared to , or 30 % during 2007 compared to 2006 . This % during 2007 compared to 2006 . This increase related primarily increase related primarily to a 58 % increase in sale of s Asia Pacific region . 45 Table of Contents Gross Margin three fiscal year ended September 27 , 2008 , are a year ended September 27 , 2008 , are a follows ( gross margin percentage ) : 2008 2007 2006 Net sale $ margin percentage ) : 2008 2007 2006 Net sale $ 32,479 percentage ) : 2008 2007 2006 Net sale $ 32,479 $ 2007 2006 Net sale $ 32,479 $ 24,006 $ 19,315 Cost Net sale $ 32,479 $ 24,006 $ 19,315 Cost of sale $ 32,479 $ 24,006 $ 19,315 Cost of sale 21,334 15,852 $ 19,315 Cost of sale 21,334 15,852 13,717 Gross margin $ 19,315 Cost of sale 21,334 15,852 13,717 Gross margin $ 11,145 Cost of sale 21,334 15,852 13,717 Gross margin $ 11,145 $ 15,852 13,717 Gross margin $ 11,145 $ 8,154 $ 5,598 Gross Gross margin $ 11,145 $ 8,154 $ 5,598 Gross margin percentage $ 11,145 $ 8,154 $ 5,598 Gross margin percentage 34.3 % $ 5,598 Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage 34.3 % 34.0 % 29.0 % Gross margin percentage wa percentage wa relatively flat in 2008 a compared to 2007 . in 2008 a compared to 2007 . Gross margin percentage of . Gross margin percentage of 34.0 % in 2007 increased significantly percentage of 34.0 % in 2007 increased significantly from 29.0 % in 2007 increased significantly from 29.0 % in 2006 . The significantly from 29.0 % in 2006 . The primary driver of compared to level achieved during 2008 and 2007 , and anticipates level achieved during 2008 and 2007 , and anticipates gross margin gross margin level of about 30 % in 2009 . This of about 30 % in 2009 . This expected decline is in Part I , Item 1A , “ Risk Factors ” three fiscal year ended September 27 , 2008 , are a year ended September 27 , 2008 , are a follows ( except for percentage ) : 2008 2007 2006 Research and development for percentage ) : 2008 2007 2006 Research and development $ percentage ) : 2008 2007 2006 Research and development $ 1,109 2006 Research and development $ 1,109 $ 782 $ 712 Percentage and development $ 1,109 $ 782 $ 712 Percentage of net $ 1,109 $ 782 $ 712 Percentage of net sale 3.4 712 Percentage of net sale 3.4 % 3.3 % 3.7 % of net sale 3.4 % 3.3 % 3.7 % Selling , sale 3.4 % 3.3 % 3.7 % Selling , general , general , and administrative $ 3,761 $ 2,963 $ 2,433 Percentage and administrative $ 3,761 $ 2,963 $ 2,433 Percentage of net $ 3,761 $ 2,963 $ 2,433 Percentage of net sale 11.6 2,433 Percentage of net sale 11.6 % 12.3 % 12.6 % of net sale 11.6 % 12.3 % 12.6 % Research and sale 11.6 % 12.3 % 12.6 % Research and Development ( for R & D increased 42 % or $ 327 million increased 42 % or $ 327 million to $ 1.1 billion $ 327 million to $ 1.1 billion in 2008 compared to to $ 1.1 billion in 2008 compared to 2007 . These billion in 2008 compared to 2007 . These increase were due stock-based compensation expense . In 2008 , $ 11 million of . In 2008 , $ 11 million of software development cost software development cost were capitalized 46 Table of Contents related to to Mac OS X Version 10.6 Snow Leopard and excluded from R & D expense for 2007 excluded $ 75 million of expense for 2007 excluded $ 75 million of capitalized software development R & D expense increased 42 % during 2008 , it expense increased 42 % during 2008 , it remained relatively flat of net sale given the 35 % increase in revenue during % increase in revenue during 2008 . The Company continues to for R & D increased 10 % or $ 70 million increased 10 % or $ 70 million to $ 782 million $ 70 million to $ 782 million in 2007 compared to to $ 782 million in 2007 compared to 2006 . The million in 2007 compared to 2006 . The increase in R R & D headcount in 2007 to support expanded R & in the first quarter of 2007 and the capitalized software development SG & A increased $ 798 million or 27 % to increased $ 798 million or 27 % to $ 3.8 billion or 27 % to $ 3.8 billion in 2008 compared to to $ 3.8 billion in 2008 compared to 2007 . These billion in 2008 compared to 2007 . These increase are due on marketing and advertising during 2008 compared to 2007 . Expenditures advertising during 2008 compared to 2007 . Expenditures for SG & SG & A increased $ 530 million or 22 % during increased $ 530 million or 22 % during 2007 compared to million or 22 % during 2007 compared to 2006 . The % during 2007 compared to 2006 . The increase wa due in total net sale in 2007 , the Company ’ s in the first quarter of 2007 . Other Income and Expense three fiscal year ended September 27 , 2008 , are a year ended September 27 , 2008 , are a follows ( ( in million ) : 2008 2007 2006 Interest income $ in million ) : 2008 2007 2006 Interest income $ 653 million ) : 2008 2007 2006 Interest income $ 653 $ 2007 2006 Interest income $ 653 $ 647 $ 394 Other Interest income $ 653 $ 647 $ 394 Other income ( $ 653 $ 647 $ 394 Other income ( expense ) expense ) , net ( 33 ) ( 48 ) ( net ( 33 ) ( 48 ) ( 29 ) Total ) ( 48 ) ( 29 ) Total other income and other income and expense $ 620 $ 599 $ 365 Total and expense $ 620 $ 599 $ 365 Total other income $ 620 $ 599 $ 365 Total other income and expense income and expense increased $ 21 million to $ 620 million $ 21 million to $ 620 million during 2008 a compared to $ 620 million during 2008 a compared to $ 599 2008 a compared to $ 599 million and $ 365 million $ 599 million and $ 365 million in 2007 and 2006 and $ 365 million in 2007 and 2006 , respectively . 365 million in 2007 and 2006 , respectively . While the short-term investment balance increased by 59 % in 2008 , other increased by 59 % in 2008 , other income and expense income and expense increased only 4 % due to the decline average interest rate earned of 3.44 % . The overall increase decline in interest rate during 2008 a compared to 2007 . during 2008 a compared to 2007 . The weighted average interest , and short-term investment wa 5.27 % and 4.58 % during investment wa 5.27 % and 4.58 % during 2007 and 2006 % and 4.58 % during 2007 and 2006 , respectively . 4.58 % during 2007 and 2006 , respectively . During 2008 2006 , respectively . During 2008 , 2007 and 2006 , respectively . During 2008 , 2007 and 2006 , the Company During 2008 , 2007 and 2006 , the Company had no s effective tax rate were 30 % for the year ended for the year ended September 27 , 2008 and September 29 year ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and 29 2008 and September 29 , 2007 , and 29 % for 29 , 2007 , and 29 % for the year ended for the year ended September 30 , 2006 . The Company year ended September 30 , 2006 . The Company ’ s federal income tax rate of 35 % due primarily to certain the U.S. As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had deferred and tax credit of $ 2.1 billion before being offset against that forecasted income , including 47 Table of Contents income that a valuation allowance of $ 5 million since it ha been tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In Recent Accounting Pronouncements In September 2006 , the Financial Accounting Standards ) issued SFAS No . 157 , Fair Value Measurements , measurement . SFAS No . 157 applies to other accounting pronouncement value measurement . In February 2008 , the FASB issued FASB ” ) No . FAS 157-1 , Application of FASB Statement of FASB Statement No . 157 to FASB Statement No . to FASB Statement No . 13 and Other Accounting Pronouncements That Classification or Measurement under Statement 13 and FSP No . FAS and FSP No . FAS 157-2 , Effective Date of FASB of FASB Statement No . 157 . FSP 157-1 amends SFAS No . 157 . FSP 157-1 amends SFAS No . 157 157-1 amends SFAS No . 157 to remove certain leasing transaction from it scope . FSP 157-2 delay the effective date of date of SFAS No . 157 to fiscal year beginning after fiscal year beginning after November 15 , 2008 for all non-financial beginning after November 15 , 2008 for all non-financial asset and the first quarter of fiscal 2010 . In October 2008 , fiscal 2010 . In October 2008 , the FASB issued FSP FASB issued FSP No . 157-3 , Determining the Fair Value clarify the application of SFAS 157 in inactive market for financial for financial asset . FSP 157-3 became effective upon issuance and issuance and SFAS No . 157 is effective for fiscal year fiscal year beginning after November 15 , 2007 and will be beginning after November 15 , 2007 and will be adopted by the first quarter of fiscal 2009 . Although the Company will application of SFAS No . 157 , management doe not currently operating result . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 . SFAS No . 159 115 . SFAS No . 159 allows company to choose to value . SFAS No . 159 requires that unrealized gain and date . SFAS No . 159 is effective for fiscal year fiscal year beginning after November 15 , 2007 and will be beginning after November 15 , 2007 and will be adopted by the first quarter of fiscal 2009 . Although the Company will application of SFAS No . 159 , management doe not currently operating result . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141 ( revised 2007 ) , No . 141 ( revised 2007 ) , Business Combinations , combination . SFAS No . 141R also establishes principle around how combination . SFAS No . 141R is effective for fiscal year beginning on or after December 15 , 2008 and will be or after December 15 , 2008 and will be adopted by the first quarter of fiscal 2010 . Although the Company will application of SFAS No . 141R , management doe not currently condition or operating result . 48 Table of Contents In March Table of Contents In March 2008 , the FASB issued SFAS FASB issued SFAS No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 , which requires company to for under SFAS No . 133 , Accounting for Derivative Instruments statement . SFAS No . 161 also requires company to disclose position . SFAS No . 161 is effective for fiscal year interim period beginning after November 15 , 2008 and is required beginning after November 15 , 2008 and is required to be the second quarter of fiscal 2009 . Although the Company will application of SFAS No . 161 , management doe not currently three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Cash , cash in million ) : 2008 2007 2006 Cash , cash equivalent million ) : 2008 2007 2006 Cash , cash equivalent , , and short-term investment $ 24,490 $ 15,386 $ 10,110 Accounts short-term investment $ 24,490 $ 15,386 $ 10,110 Accounts receivable , $ 24,490 $ 15,386 $ 10,110 Accounts receivable , net $ Accounts receivable , net $ 2,422 $ 1,637 $ 1,252 Inventory , net $ 2,422 $ 1,637 $ 1,252 Inventory $ 509 $ 2,422 $ 1,637 $ 1,252 Inventory $ 509 $ 346 1,637 $ 1,252 Inventory $ 509 $ 346 $ 270 Working 1,252 Inventory $ 509 $ 346 $ 270 Working capital $ $ 509 $ 346 $ 270 Working capital $ 20,598 $ $ 270 Working capital $ 20,598 $ 12,676 $ 8,066 Annual Working capital $ 20,598 $ 12,676 $ 8,066 Annual operating cash $ 20,598 $ 12,676 $ 8,066 Annual operating cash flow $ Annual operating cash flow $ 9,596 $ 5,470 $ 2,220 As cash flow $ 9,596 $ 5,470 $ 2,220 As of September $ 9,596 $ 5,470 $ 2,220 As of September 27 , $ 2,220 As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had $ , the Company had $ 24.5 billion in cash , cash , an increase of $ 9.1 billion from September 29 , $ 9.1 billion from September 29 , 2007 . The principal billion from September 29 , 2007 . The principal component of by operating activity of $ 9.6 billion , proceeds from the under stock plan of $ 483 million and excess tax benefit from stock-based compensation of $ 757 million . These increase were , and equipment of $ 1.1 billion , payment made in cash acquired , of $ 220 million and payment for acquisition of intangible asset of $ 108 million . The Company ’ single-A . As of September 27 , 2008 and September 29 As of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , $ 11.3 2008 and September 29 , 2007 , $ 11.3 billion and 29 , 2007 , $ 11.3 billion and $ 6.5 billion $ 11.3 billion and $ 6.5 billion , respectively , of . The Company had $ 117 million in net unrealized loss year , a of September 27 , 2008 , and net a of September 27 , 2008 , and net unrealized loss unrealized loss of approximately $ 11 million on it investment portfolio year , a of September 29 , 2007 . The Company a of September 29 , 2007 . The Company ha the existing operation over the next 12 month . Capital Assets The capital asset purchase were $ 1.1 billion during 2008 , consisting were $ 1.1 billion during 2008 , consisting of $ 389 2008 , consisting of $ 389 million for retail store facility retail store facility and $ 702 million for real estate acquisition Company anticipates utilizing approximately $ 1.5 billion for capital asset purchase for capital asset purchase during 2009 , including approximately $ 400 2009 , including approximately $ 400 million for Retail facility and Retail facility and approximately $ 1.1 billion for corporate facility and corporate facility and infrastructure . 49 Table of Contents Off-Balance Sheet firm commitment a of September 27 , 2008 and excludes amount a of September 27 , 2008 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 1,760 5 Years Operating lease $ 1,760 $ 195 $ 409 $ Operating lease $ 1,760 $ 195 $ 409 $ 368 $ $ 1,760 $ 195 $ 409 $ 368 $ 788 Purchase $ 195 $ 409 $ 368 $ 788 Purchase obligation 5,378 $ 409 $ 368 $ 788 Purchase obligation 5,378 5,378 — 368 $ 788 Purchase obligation 5,378 5,378 — — — Asset $ 788 Purchase obligation 5,378 5,378 — — — Asset retirement — — Asset retirement obligation 28 — 8 7 13 Other Asset retirement obligation 28 — 8 7 13 Other obligation 471 retirement obligation 28 — 8 7 13 Other obligation 471 242 obligation 28 — 8 7 13 Other obligation 471 242 124 8 7 13 Other obligation 471 242 124 105 — Total 7 13 Other obligation 471 242 124 105 — Total $ 13 Other obligation 471 242 124 105 — Total $ 7,637 Other obligation 471 242 124 105 — Total $ 7,637 $ 124 105 — Total $ 7,637 $ 5,815 $ 541 $ — Total $ 7,637 $ 5,815 $ 541 $ 480 $ $ 7,637 $ 5,815 $ 541 $ 480 $ 801 Lease $ 5,815 $ 541 $ 480 $ 801 Lease Commitments As $ 541 $ 480 $ 801 Lease Commitments As of September Lease Commitments As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had total noncancelable operating lease of $ 1.8 billion , $ 1.4 billion $ 1.8 billion , $ 1.4 billion of which related to are generally for term of 3 to 20 year and generally for term of 3 to 20 year and generally provide renewal renewal option for term of 1 to 5 additional year . for term of 1 to 5 additional year . Leases for space are for term of 5 to 20 year , the for term of 5 to 20 year , the majority of majority of which are for 10 year , and often contain typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also requirement for period ranging from 30 to 150 day . In period ranging from 30 to 150 day . In addition , pursuant to SOP No . 97-2 whereby the Company recognizes warranty incurred . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had outstanding estimated warranty commitment of $ 5.4 billion . During 2006 , $ 5.4 billion . During 2006 , the Company entered into flash memory through calendar year 2010 . As part of these , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 , which will be applied . The Company utilized $ 567 million of the prepayment a the prepayment a of September 27 , 2008 . Asset Retirement a of September 27 , 2008 . Asset Retirement Obligations The termination . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company estimated that future cash flow of $ 28 million would be required to to fulfill these obligation . 50 Table of Contents Other Obligations Other outstanding obligation were $ 471 million a of September 27 471 million a of September 27 , 2008 , which related a of September 27 , 2008 , which related to advertising During the first quarter of 2008 , the Company adopted the adopted the provision of FIN 48 . The Company had historically with the adoption of FIN 48 the Company ha reclassified gross Sheet . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company recorded gross unrecognized tax benefit of $ 506 million and gross interest and interest and penalty of $ 219 million , both of which cost a of either September 27 , 2008 or September 29 of either September 27 , 2008 or September 29 , 2007 27 , 2008 or September 29 , 2007 . Item 7A 2008 or September 29 , 2007 . Item 7A . Quantitative 29 , 2007 . Item 7A . Quantitative and Qualitative Disclosures purchase are classified a cash 51 Table of Contents equivalent , investment . As of September 27 , 2008 and September 29 As of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , approximately $ 2008 and September 29 , 2007 , approximately $ 2.4 billion , 2007 , approximately $ 2.4 billion and $ 1.9 billion $ 2.4 billion and $ 1.9 billion , respectively , of underlying maturity of le than 12 month . The Company may net gain or loss during 2008 , 2007 and 2006 related or loss during 2008 , 2007 and 2006 related to such during 2008 , 2007 and 2006 related to such sale . the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 27 , 2008 , a hypothetical a of September 27 , 2008 , a hypothetical 100 basis , 2008 , a hypothetical 100 basis point increase in interest would result in a $ 46 million incremental decline in the portfolio . As of September 29 , 2007 , a similar As of September 29 , 2007 , a similar 100 basis , 2007 , a similar 100 basis point shift in the have resulted in a $ 16 million incremental decline in the Monte Carlo simulation to generate 3,000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 60 million a of September 27 60 million a of September 27 , 2008 compared to a a of September 27 , 2008 compared to a maximum one-day in fair value of $ 13 million a of September 29 13 million a of September 29 , 2007 . Because the a of September 29 , 2007 . Because the Company us analysis performed a of September 27 , 2008 due to the a of September 27 , 2008 due to the inherent limitation actual exposure and position . 52 Table of Contents Item 8 52 Table of Contents Item 8 . Financial Statements and Supplementary Balance Sheets a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 54 Consolidated Statements 2008 and September 29 , 2007 54 Consolidated Statements of Operations and September 29 , 2007 54 Consolidated Statements of Operations for three fiscal year ended September 27 , 2008 55 Consolidated Statements year ended September 27 , 2008 55 Consolidated Statements of Shareholders ended September 27 , 2008 55 Consolidated Statements of Shareholders ’ three fiscal year ended September 27 , 2008 56 Consolidated Statements year ended September 27 , 2008 56 Consolidated Statements of Cash ended September 27 , 2008 56 Consolidated Statements of Cash Flows three fiscal year ended September 27 , 2008 57 Notes to year ended September 27 , 2008 57 Notes to Consolidated Financial ended September 27 , 2008 57 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 58 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 87 Reports of Independent Registered Public Accounting Firm , KPMG LLP 88 All financial statement schedule have Statements and Notes thereto . 53 Table of Contents CONSOLIDATED BALANCE except share amount ) September 27 , 2008 September 29 , amount ) September 27 , 2008 September 29 , 2007 ASSETS September 27 , 2008 September 29 , 2007 ASSETS : Current , 2008 September 29 , 2007 ASSETS : Current asset : Cash and cash equivalent $ 11,875 $ 9,352 Short-term investment 12,615 cash equivalent $ 11,875 $ 9,352 Short-term investment 12,615 6,034 Accounts 11,875 $ 9,352 Short-term investment 12,615 6,034 Accounts receivable , le $ 9,352 Short-term investment 12,615 6,034 Accounts receivable , le allowance , le allowance of $ 47 in each period 2,422 1,637 $ 47 in each period 2,422 1,637 Inventories 509 346 Deferred 47 in each period 2,422 1,637 Inventories 509 346 Deferred tax each period 2,422 1,637 Inventories 509 346 Deferred tax asset 1,447 period 2,422 1,637 Inventories 509 346 Deferred tax asset 1,447 782 509 346 Deferred tax asset 1,447 782 Other current asset 5,822 346 Deferred tax asset 1,447 782 Other current asset 5,822 3,805 1,447 782 Other current asset 5,822 3,805 Total current asset 34,690 782 Other current asset 5,822 3,805 Total current asset 34,690 21,956 5,822 3,805 Total current asset 34,690 21,956 Property , plant , 3,805 Total current asset 34,690 21,956 Property , plant , and , and equipment , net 2,455 1,832 Goodwill 207 38 Acquired and equipment , net 2,455 1,832 Goodwill 207 38 Acquired intangible , net 2,455 1,832 Goodwill 207 38 Acquired intangible asset , net 2,455 1,832 Goodwill 207 38 Acquired intangible asset , net Acquired intangible asset , net 285 299 Other asset 1,935 1,222 intangible asset , net 285 299 Other asset 1,935 1,222 Total net 285 299 Other asset 1,935 1,222 Total asset $ 39,572 285 299 Other asset 1,935 1,222 Total asset $ 39,572 $ 1,935 1,222 Total asset $ 39,572 $ 25,347 LIABILITIES AND SHAREHOLDERS Total asset $ 39,572 $ 25,347 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 Accounts payable $ 5,520 $ 4,970 Accrued expense 8,572 4,310 Total 5,520 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 $ 4,970 Accrued expense 8,572 4,310 Total current liability 14,092 9,280 8,572 4,310 Total current liability 14,092 9,280 Non-current liability 4,450 1,535 4,310 Total current liability 14,092 9,280 Non-current liability 4,450 1,535 Total liability 14,092 9,280 Non-current liability 4,450 1,535 Total liability 18,542 10,815 14,092 9,280 Non-current liability 4,450 1,535 Total liability 18,542 10,815 Commitments liability 4,450 1,535 Total liability 18,542 10,815 Commitments and contingency Shareholders 4,450 1,535 Total liability 18,542 10,815 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 888,325,973 and ; 1,800,000,000 share authorized ; 888,325,973 and 872,328,972 share issued and share authorized ; 888,325,973 and 872,328,972 share issued and outstanding , issued and outstanding , respectively 7,177 5,368 Retained earnings 13,845 9,101 and outstanding , respectively 7,177 5,368 Retained earnings 13,845 9,101 Accumulated respectively 7,177 5,368 Retained earnings 13,845 9,101 Accumulated other comprehensive income 7,177 5,368 Retained earnings 13,845 9,101 Accumulated other comprehensive income 8 9,101 Accumulated other comprehensive income 8 63 Total shareholder ’ equity Accumulated other comprehensive income 8 63 Total shareholder ’ equity 21,030 63 Total shareholder ’ equity 21,030 14,532 Total liability and shareholder Total shareholder ’ equity 21,030 14,532 Total liability and shareholder ’ and shareholder ’ equity $ 39,572 $ 25,347 See accompanying Notes ’ equity $ 39,572 $ 25,347 See accompanying Notes to Consolidated to Consolidated Financial Statements . 54 Table of Contents CONSOLIDATED STATEMENTS Three fiscal year ended September 27 , 2008 2008 2007 2006 year ended September 27 , 2008 2008 2007 2006 Net sale ended September 27 , 2008 2008 2007 2006 Net sale $ September 27 , 2008 2008 2007 2006 Net sale $ 32,479 27 , 2008 2008 2007 2006 Net sale $ 32,479 $ 2007 2006 Net sale $ 32,479 $ 24,006 $ 19,315 Cost Net sale $ 32,479 $ 24,006 $ 19,315 Cost of sale $ 32,479 $ 24,006 $ 19,315 Cost of sale ( 1 19,315 Cost of sale ( 1 ) 21,334 15,852 13,717 Gross of sale ( 1 ) 21,334 15,852 13,717 Gross margin 11,145 sale ( 1 ) 21,334 15,852 13,717 Gross margin 11,145 8,154 ( 1 ) 21,334 15,852 13,717 Gross margin 11,145 8,154 5,598 21,334 15,852 13,717 Gross margin 11,145 8,154 5,598 Operating expense : 15,852 13,717 Gross margin 11,145 8,154 5,598 Operating expense : Research 13,717 Gross margin 11,145 8,154 5,598 Operating expense : Research and : Research and development ( 1 ) 1,109 782 712 Selling and development ( 1 ) 1,109 782 712 Selling , general development ( 1 ) 1,109 782 712 Selling , general , ( 1 ) 1,109 782 712 Selling , general , and general , and administrative ( 1 ) 3,761 2,963 2,433 Total and administrative ( 1 ) 3,761 2,963 2,433 Total operating expense administrative ( 1 ) 3,761 2,963 2,433 Total operating expense 4,870 ( 1 ) 3,761 2,963 2,433 Total operating expense 4,870 3,745 2,963 2,433 Total operating expense 4,870 3,745 3,145 Operating income 6,275 2,433 Total operating expense 4,870 3,745 3,145 Operating income 6,275 4,409 Total operating expense 4,870 3,745 3,145 Operating income 6,275 4,409 2,453 4,870 3,745 3,145 Operating income 6,275 4,409 2,453 Other income and 3,745 3,145 Operating income 6,275 4,409 2,453 Other income and expense 3,145 Operating income 6,275 4,409 2,453 Other income and expense 620 2,453 Other income and expense 620 599 365 Income before provision Other income and expense 620 599 365 Income before provision for income and expense 620 599 365 Income before provision for income before provision for income tax 6,895 5,008 2,818 Provision for income provision for income tax 6,895 5,008 2,818 Provision for income tax for income tax 6,895 5,008 2,818 Provision for income tax 2,061 2,818 Provision for income tax 2,061 1,512 829 Net income $ Provision for income tax 2,061 1,512 829 Net income $ 4,834 for income tax 2,061 1,512 829 Net income $ 4,834 $ 1,512 829 Net income $ 4,834 $ 3,496 $ 1,989 Earnings Net income $ 4,834 $ 3,496 $ 1,989 Earnings per common $ 4,834 $ 3,496 $ 1,989 Earnings per common share : common share : Basic $ 5.48 $ 4.04 $ 2.36 Diluted : Basic $ 5.48 $ 4.04 $ 2.36 Diluted $ 5.36 $ 5.48 $ 4.04 $ 2.36 Diluted $ 5.36 $ 3.93 4.04 $ 2.36 Diluted $ 5.36 $ 3.93 $ 2.27 Shares 2.36 Diluted $ 5.36 $ 3.93 $ 2.27 Shares used in $ 5.36 $ 3.93 $ 2.27 Shares used in computing earnings earnings per share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 per share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 share : Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( Basic 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) 881,592 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) Includes 864,595 844,058 Diluted 902,139 889,292 877,526 ( 1 ) Includes stock-based Diluted 902,139 889,292 877,526 ( 1 ) Includes stock-based compensation expense : Cost of sale $ 80 $ 35 $ 21 Research of sale $ 80 $ 35 $ 21 Research and development $ 80 $ 35 $ 21 Research and development $ 185 21 Research and development $ 185 $ 77 $ 53 Selling and development $ 185 $ 77 $ 53 Selling , general $ 185 $ 77 $ 53 Selling , general , and general , and administrative $ 251 $ 130 $ 89 See and administrative $ 251 $ 130 $ 89 See accompanying Notes $ 251 $ 130 $ 89 See accompanying Notes to Consolidated to Consolidated Financial Statements . 55 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 24 , 2005 835,019 $ 3,564 a of September 24 , 2005 835,019 $ 3,564 $ ( of September 24 , 2005 835,019 $ 3,564 $ ( 61 24 , 2005 835,019 $ 3,564 $ ( 61 ) $ 835,019 $ 3,564 $ ( 61 ) $ 3,925 $ — $ ( 61 ) $ 3,925 $ — $ 7,428 Components $ 3,925 $ — $ 7,428 Components of comprehensive income : Net income — — — 1,989 — 1,989 Change in foreign — — — 1,989 — 1,989 Change in foreign currency translation translation — — — — 19 19 Change in unrealized gain — — — — 19 19 Change in unrealized gain on tax — — — — 4 4 Change in unrealized gain — — — — 4 4 Change in unrealized gain on — — — — ( 1 ) ( 1 ) Total — ( 1 ) ( 1 ) Total comprehensive income 2,011 1 ) Total comprehensive income 2,011 Common stock repurchased ( 4,574 2,011 Common stock repurchased ( 4,574 ) ( 48 ) — repurchased ( 4,574 ) ( 48 ) — ( 307 ) ( 48 ) — ( 307 ) — ( 355 ) ( 307 ) — ( 355 ) Stock-based compensation — 163 355 ) Stock-based compensation — 163 — — — 163 Deferred — 163 — — — 163 Deferred compensation — ( 61 163 Deferred compensation — ( 61 ) 61 — — — compensation — ( 61 ) 61 — — — Common stock stock issued under stock plan 24,818 318 — — — 318 issued under stock plan 24,818 318 — — — 318 Tax 24,818 318 — — — 318 Tax benefit from employee stock employee stock plan award — 419 — — — 419 Balances — 419 — — — 419 Balances a of September 30 419 Balances a of September 30 , 2006 855,263 4,355 — a of September 30 , 2006 855,263 4,355 — 5,607 22 of September 30 , 2006 855,263 4,355 — 5,607 22 9,984 September 30 , 2006 855,263 4,355 — 5,607 22 9,984 Components , 2006 855,263 4,355 — 5,607 22 9,984 Components of comprehensive 2006 855,263 4,355 — 5,607 22 9,984 Components of comprehensive income 855,263 4,355 — 5,607 22 9,984 Components of comprehensive income : Net income — — — 3,496 — 3,496 Change in foreign — — — 3,496 — 3,496 Change in foreign currency translation translation — — — — 51 51 Change in unrealized loss — — — — 51 51 Change in unrealized loss on — — — — ( 7 ) ( 7 ) Change — ( 7 ) ( 7 ) Change in unrealized gain — — — — ( 3 ) ( 3 ) Total — ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation — 251 — income 3,537 Stock-based compensation — 251 — — — 251 Common — 251 — — — 251 Common stock issued under stock share withheld for employee tax 17,066 364 — ( 2 ) withheld for employee tax 17,066 364 — ( 2 ) — tax 17,066 364 — ( 2 ) — 362 Tax benefit — ( 2 ) — 362 Tax benefit from employee stock employee stock plan award — 398 — — — 398 Balances — 398 — — — 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 5,368 — a of September 29 , 2007 872,329 5,368 — 9,101 63 of September 29 , 2007 872,329 5,368 — 9,101 63 14,532 September 29 , 2007 872,329 5,368 — 9,101 63 14,532 Cumulative , 2007 872,329 5,368 — 9,101 63 14,532 Cumulative effect of 2007 872,329 5,368 — 9,101 63 14,532 Cumulative effect of change 872,329 5,368 — 9,101 63 14,532 Cumulative effect of change in change in accounting principle — 45 — 11 — 56 Components accounting principle — 45 — 11 — 56 Components of comprehensive — 45 — 11 — 56 Components of comprehensive income : Net income — — — 4,834 4,834 Change in foreign currency income — — — 4,834 4,834 Change in foreign currency translation — — — — ( 11 ) ( 11 ) Change — ( 11 ) ( 11 ) Change in unrealized loss — — — — ( 63 ) ( 63 ) Change — ( 63 ) ( 63 ) Change in unrealized gain tax — — — — 19 19 Total comprehensive income 4,779 — — — — 19 19 Total comprehensive income 4,779 Stock-based 19 19 Total comprehensive income 4,779 Stock-based compensation — 513 — income 4,779 Stock-based compensation — 513 — — — 513 Common — 513 — — — 513 Common stock issued under stock share withheld for employee tax 15,888 460 — ( 101 ) withheld for employee tax 15,888 460 — ( 101 ) — tax 15,888 460 — ( 101 ) — 359 Issuance of — ( 101 ) — 359 Issuance of common stock in connection with an asset acquisition 109 21 — — — 21 with an asset acquisition 109 21 — — — 21 Tax 109 21 — — — 21 Tax benefit from employee stock employee stock plan award — 770 — — — 770 Balances — 770 — — — 770 Balances a of September 27 770 Balances a of September 27 , 2008 888,326 $ 7,177 a of September 27 , 2008 888,326 $ 7,177 $ — of September 27 , 2008 888,326 $ 7,177 $ — $ 27 , 2008 888,326 $ 7,177 $ — $ 13,845 $ $ 7,177 $ — $ 13,845 $ 8 $ 21,030 See $ — $ 13,845 $ 8 $ 21,030 See accompanying Notes $ 13,845 $ 8 $ 21,030 See accompanying Notes to Consolidated to Consolidated Financial Statements . 56 Table of Contents CONSOLIDATED STATEMENTS Three fiscal year ended September 27 , 2008 2008 2007 2006 year ended September 27 , 2008 2008 2007 2006 Cash and ended September 27 , 2008 2008 2007 2006 Cash and cash September 27 , 2008 2008 2007 2006 Cash and cash equivalent 27 , 2008 2008 2007 2006 Cash and cash equivalent , beginning of the year $ 9,352 $ 6,392 $ 3,491 Operating the year $ 9,352 $ 6,392 $ 3,491 Operating Activities : $ 9,352 $ 6,392 $ 3,491 Operating Activities : Net income Operating Activities : Net income 4,834 3,496 1,989 Adjustments to reconcile Activities : Net income 4,834 3,496 1,989 Adjustments to reconcile net : Net income 4,834 3,496 1,989 Adjustments to reconcile net income Depreciation , amortization and accretion 473 317 225 Stock-based compensation expense , amortization and accretion 473 317 225 Stock-based compensation expense 516 amortization and accretion 473 317 225 Stock-based compensation expense 516 242 317 225 Stock-based compensation expense 516 242 163 Provision for deferred 225 Stock-based compensation expense 516 242 163 Provision for deferred income Stock-based compensation expense 516 242 163 Provision for deferred income tax for deferred income tax ( 368 ) 78 53 Loss on income tax ( 368 ) 78 53 Loss on disposition of tax ( 368 ) 78 53 Loss on disposition of property , plant , and equipment 22 12 15 Changes in operating plant , and equipment 22 12 15 Changes in operating asset , and equipment 22 12 15 Changes in operating asset and Accounts receivable , net ( 785 ) ( 385 ) ( net ( 785 ) ( 385 ) ( 357 ) Inventories ) ( 385 ) ( 357 ) Inventories ( 163 ) ( 357 ) Inventories ( 163 ) ( 76 ) ( Inventories ( 163 ) ( 76 ) ( 105 ) Other ) ( 76 ) ( 105 ) Other current asset ( ) Other current asset ( 1,958 ) ( 1,540 ) ( asset ( 1,958 ) ( 1,540 ) ( 1,626 ) Other ) ( 1,540 ) ( 1,626 ) Other asset ( 492 1,626 ) Other asset ( 492 ) 81 ( 1,040 ) Other asset ( 492 ) 81 ( 1,040 ) Accounts payable ( 492 ) 81 ( 1,040 ) Accounts payable 596 1,494 ( 1,040 ) Accounts payable 596 1,494 1,611 Deferred revenue 5,642 1,040 ) Accounts payable 596 1,494 1,611 Deferred revenue 5,642 1,139 ) Accounts payable 596 1,494 1,611 Deferred revenue 5,642 1,139 319 596 1,494 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 1,494 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 612 1,611 Deferred revenue 5,642 1,139 319 Other liability 1,279 612 973 5,642 1,139 319 Other liability 1,279 612 973 Cash generated by 1,139 319 Other liability 1,279 612 973 Cash generated by operating 319 Other liability 1,279 612 973 Cash generated by operating activity Cash generated by operating activity 9,596 5,470 2,220 Investing Activities : generated by operating activity 9,596 5,470 2,220 Investing Activities : Purchases by operating activity 9,596 5,470 2,220 Investing Activities : Purchases of Purchases of short-term investment ( 22,965 ) ( 11,719 ) ( investment ( 22,965 ) ( 11,719 ) ( 7,255 ) Proceeds ) ( 11,719 ) ( 7,255 ) Proceeds from maturity of from maturity of short-term investment 11,804 6,483 7,226 Proceeds from sale maturity of short-term investment 11,804 6,483 7,226 Proceeds from sale of of short-term investment 11,804 6,483 7,226 Proceeds from sale of short-term from sale of short-term investment 4,439 2,941 1,086 Purchases of long-term sale of short-term investment 4,439 2,941 1,086 Purchases of long-term investment of short-term investment 4,439 2,941 1,086 Purchases of long-term investment ( Purchases of long-term investment ( 38 ) ( 17 ) ( investment ( 38 ) ( 17 ) ( 25 ) Payments ) ( 17 ) ( 25 ) Payments made in connection net of cash acquired ( 220 ) — — Payment for plant , and equipment ( 1,091 ) ( 735 ) ( equipment ( 1,091 ) ( 735 ) ( 657 ) Payment ) ( 735 ) ( 657 ) Payment for acquisition of acquisition of intangible asset ( 108 ) ( 251 ) ( asset ( 108 ) ( 251 ) ( 28 ) Other ) ( 251 ) ( 28 ) Other ( 10 ) ( 28 ) Other ( 10 ) 49 10 Cash ( ) Other ( 10 ) 49 10 Cash ( used in Other ( 10 ) 49 10 Cash ( used in ) /generated by investing activity ( 8,189 ) ( 3,249 ) 357 activity ( 8,189 ) ( 3,249 ) 357 Financing Activities : 8,189 ) ( 3,249 ) 357 Financing Activities : Proceeds from from issuance of common stock 483 365 318 Excess tax benefit issuance of common stock 483 365 318 Excess tax benefit from of common stock 483 365 318 Excess tax benefit from stock-based tax benefit from stock-based compensation 757 377 361 Cash used to benefit from stock-based compensation 757 377 361 Cash used to net from stock-based compensation 757 377 361 Cash used to net share share settle equity award ( 124 ) ( 3 ) ( award ( 124 ) ( 3 ) ( 355 ) Cash ) ( 3 ) ( 355 ) Cash generated by financing Cash generated by financing activity 1,116 739 324 Increase in cash generated by financing activity 1,116 739 324 Increase in cash and by financing activity 1,116 739 324 Increase in cash and cash in cash and cash equivalent 2,523 2,960 2,901 Cash and cash cash and cash equivalent 2,523 2,960 2,901 Cash and cash equivalent and cash equivalent 2,523 2,960 2,901 Cash and cash equivalent , end of the year $ 11,875 $ 9,352 $ 6,392 Supplemental the year $ 11,875 $ 9,352 $ 6,392 Supplemental cash flow $ 11,875 $ 9,352 $ 6,392 Supplemental cash flow disclosure : income tax , net $ 1,267 $ 863 $ 194 See , net $ 1,267 $ 863 $ 194 See accompanying Notes $ 1,267 $ 863 $ 194 See accompanying Notes to Consolidated to Consolidated Financial Statements . 57 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies Apple s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the first quarter of fiscal year 2008 and 2007 contained 13 week of fiscal year 2008 and 2007 contained 13 week and the year 2008 and 2007 contained 13 week and the first quarter first quarter of fiscal year 2006 contained 14 week . The of fiscal year 2006 contained 14 week . The Company ’ Company ’ s fiscal year 2008 and 2007 ended on September s fiscal year 2008 and 2007 ended on September 27 , and 2007 ended on September 27 , 2008 and September 29 ended on September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , respectively , 2008 and September 29 , 2007 , respectively , included 52 2007 , respectively , included 52 week , while fiscal year week , while fiscal year 2006 ended on September 30 , year 2006 ended on September 30 , 2006 included 53 week ended on September 30 , 2006 included 53 week . Unless September 30 , 2006 included 53 week . Unless otherwise stated SFAS ” ) No . 133 , Accounting for Derivative Instruments value hedge , the net 58 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( building is the lesser of 30 year or the remaining life underlying building , up to 5 year for equipment , and shorter of lease term or 10 year for leasehold improvement . asset , which range from 3 to 5 year . Depreciation which range from 3 to 5 year . Depreciation and amortization property and equipment wa $ 363 million , $ 249 million $ 363 million , $ 249 million , and $ 180 249 million , and $ 180 million during 2008 , 2007 and $ 180 million during 2008 , 2007 , and 2006 180 million during 2008 , 2007 , and 2006 respectively . 2008 , 2007 , and 2006 respectively . Asset Retirement Obligations accordance with SFAS No . 143 , Accounting for Asset Retirement asset retirement liability wa $ 21 million and $ 18 million $ 21 million and $ 18 million a of September 27 18 million a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , respectively . 2008 and September 29 , 2007 , respectively . Long-Lived Assets accordance with SFAS No . 144 , Accounting for the Impairment record any material impairment during 2008 , 2007 , and 2006 material impairment during 2008 , 2007 , and 2006 . 59 2008 , 2007 , and 2006 . 59 Table of Contents 2007 , and 2006 . 59 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( Continued ) SFAS No . 142 , Goodwill and Other Intangible test on or about August 31 of each year . The intangible asset impairment charge in 2008 , 2007 , or 2006 impairment charge in 2008 , 2007 , or 2006 . The 2008 , 2007 , or 2006 . The Company established reporting unit . SFAS No . 142 also requires that intangible asset accordance with SFAS No . 144 . The Company is currently life over period ranging from 1 to 10 year . Foreign period ranging from 1 to 10 year . Foreign Currency Translation EITF ” ) No . 03-5 , Applicability of AICPA Statement of AICPA Statement of Position 97-2 to Non-Software Deliverables in an SOP ” ) No . 97-2 , Software Revenue Recognition , SAB ” ) No . 104 , Revenue Recognition , for s one-year limited warranty . 60 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( accordance with SOP No . 97-2 . If a multiple-element arrangement Company applies EITF No . 00-21 , Revenue Arrangements with Multiple from the SOP No . 97-2 deliverable . If the Company Company applies SOP No . 97-2 to the software and software-related . , SAB No . 104 ) to the deliverable outside scope of SOP No . 97-2 . Revenue on arrangement that the maintenance term . In 2007 , the Company began shipping accordance with SOP No . 97-2 . As such , the basis over the currently estimated 24-month economic life of these product are expensed a incurred . 61 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( pursuant to SOP No . 97-2 , the Company recognizes warranty pursuant to SFAS No . 86 , Computer Software to be have been expensed . During 2008 , the Company capitalized $ , the Company capitalized $ 11 million of cost associated with of Mac OS X Version 10.6 Snow Leopard . In 2007 10.6 Snow Leopard . In 2007 , the Company determined that both Mac OS X Version 10.5 Leopard ( “ Mac OS achieved technological feasibility . During 2007 , the Company capitalized $ , the Company capitalized $ 75 million of cost associated with accordance with SFAS No . 86 , the capitalized cost related a straight-line basis over a 3 year estimated useful life of software development cost wa $ 27 million , $ 13 million $ 27 million , $ 13 million , and $ 18 13 million , and $ 18 million in 2008 , 2007 and $ 18 million in 2008 , 2007 , and 2006 18 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Advertising Costs . Advertising expense wa $ 486 million , $ 467 million $ 486 million , $ 467 million , and $ 338 467 million , and $ 338 million for 2008 , 2007 and $ 338 million for 2008 , 2007 , and 2006 338 million for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Stock-Based Compensation Company applies SFAS No . 123 ( revised 2004 ) , No . 123 ( revised 2004 ) , Share-Based Payment , award under SFAS No . 123R . SFAS No . 123R 123R . SFAS No . 123R prohibits recognition of a deferred an incremental tax benefit is 62 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( can be found in Note 6 , “ Shareholders ’ Equity Equity , ” and Note 7 , “ Stock-Based Compensation . accordance with SFAS No . 109 , Accounting for Income Taxes to be realized . During 2008 , the Company adopted the ( “ FIN ” ) 48 , Accounting for Uncertainty in of FASB Statement No . 109 . FIN 48 change the No . 109 . FIN 48 change the accounting for uncertainty financial statement . Under FIN 48 , the Company may recognize that ha a greater than 50 % likelihood of being realized realized upon settlement . FIN 48 also provides guidance on the tax disclosure . See Note 5 , “ Income Taxes ” from potentially dilutive security . 63 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 1—Summary of Significant Accounting Policies ( three fiscal year ended September 27 , 2008 ( in thousand year ended September 27 , 2008 ( in thousand , except per share amount ) : 2008 2007 2006 Numerator : Net share amount ) : 2008 2007 2006 Numerator : Net income amount ) : 2008 2007 2006 Numerator : Net income $ Numerator : Net income $ 4,834 $ 3,496 $ 1,989 Denominator Net income $ 4,834 $ 3,496 $ 1,989 Denominator : Weighted-average $ 4,834 $ 3,496 $ 1,989 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 881,592 864,595 844,058 Effect of dilutive : Weighted-average share outstanding 881,592 864,595 844,058 Effect of dilutive security Weighted-average share outstanding 881,592 864,595 844,058 Effect of dilutive security 20,547 844,058 Effect of dilutive security 20,547 24,697 33,468 Denominator for diluted Effect of dilutive security 20,547 24,697 33,468 Denominator for diluted earnings of dilutive security 20,547 24,697 33,468 Denominator for diluted earnings per for diluted earnings per share 902,139 889,292 877,526 Basic earnings per diluted earnings per share 902,139 889,292 877,526 Basic earnings per share earnings per share 902,139 889,292 877,526 Basic earnings per share $ Basic earnings per share $ 5.48 $ 4.04 $ 2.36 Diluted per share $ 5.48 $ 4.04 $ 2.36 Diluted earnings per $ 5.48 $ 4.04 $ 2.36 Diluted earnings per share $ Diluted earnings per share $ 5.36 $ 3.93 $ 2.27 Potentially per share $ 5.36 $ 3.93 $ 2.27 Potentially dilutive security $ 5.36 $ 3.93 $ 2.27 Potentially dilutive security representing 10.3 2.27 Potentially dilutive security representing 10.3 million , 13.7 million , security representing 10.3 million , 13.7 million , and 3.9 million , 13.7 million , and 3.9 million share of common stock for the year ended September 27 , 2008 , September 29 year ended September 27 , 2008 , September 29 , 2007 27 , 2008 , September 29 , 2007 , and September 2008 , September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 , respectively , , and September 30 , 2006 , respectively , were excluded basis is also disclosed . 64 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 2—Financial Instruments Cash , Cash Equivalents short-term investment a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million ) : ( in million ) : 2008 2007 Cash $ 368 $ in million ) : 2008 2007 Cash $ 368 $ 256 : 2008 2007 Cash $ 368 $ 256 U.S. Treasury and 2007 Cash $ 368 $ 256 U.S. Treasury and Agency Securities U.S. Treasury and Agency Securities 2,916 670 U.S. Corporate Securities 4,975 Treasury and Agency Securities 2,916 670 U.S. Corporate Securities 4,975 5,597 2,916 670 U.S. Corporate Securities 4,975 5,597 Foreign Securities 3,616 2,829 670 U.S. Corporate Securities 4,975 5,597 Foreign Securities 3,616 2,829 Total Securities 4,975 5,597 Foreign Securities 3,616 2,829 Total cash equivalent 11,507 4,975 5,597 Foreign Securities 3,616 2,829 Total cash equivalent 11,507 9,096 3,616 2,829 Total cash equivalent 11,507 9,096 U.S. Treasury and Agency 2,829 Total cash equivalent 11,507 9,096 U.S. Treasury and Agency Securities U.S. Treasury and Agency Securities 7,018 358 U.S. Corporate Securities 4,305 Treasury and Agency Securities 7,018 358 U.S. Corporate Securities 4,305 4,718 7,018 358 U.S. Corporate Securities 4,305 4,718 Foreign Securities 1,292 958 358 U.S. Corporate Securities 4,305 4,718 Foreign Securities 1,292 958 Total Securities 4,305 4,718 Foreign Securities 1,292 958 Total short-term investment 12,615 4,305 4,718 Foreign Securities 1,292 958 Total short-term investment 12,615 6,034 1,292 958 Total short-term investment 12,615 6,034 Total cash , cash 958 Total short-term investment 12,615 6,034 Total cash , cash equivalent , and short-term investment $ 24,490 $ 15,386 The Company ’ short-term investment $ 24,490 $ 15,386 The Company ’ s U.S. dollar . As of September 27 , 2008 and September 29 As of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , approximately $ 2008 and September 29 , 2007 , approximately $ 2.4 billion , 2007 , approximately $ 2.4 billion and $ 1.9 billion $ 2.4 billion and $ 1.9 billion , respectively , of investment had maturity le than 12 month . The Company had . The Company had $ 117 million in net unrealized loss year , a of September 27 , 2008 , and net a of September 27 , 2008 , and net unrealized loss unrealized loss of approximately $ 11 million on it investment portfolio year , a of September 29 , 2007 . The Company a of September 29 , 2007 . The Company may sell net gain or loss during 2008 , 2007 and 2006 related or loss during 2008 , 2007 and 2006 related to such during 2008 , 2007 and 2006 related to such sale . related to such sale . 65 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) In “ FSP ” ) FAS 115-1 and FAS 124-1 , The ) FAS 115-1 and FAS 124-1 , The Meaning of Other-Than-Temporary loss position a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , aggregated by 2008 and September 29 , 2007 , aggregated by investment category ( in million ) : 2008 Less than 12 Months 12 ) : 2008 Less than 12 Months 12 Months or Greater 2008 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency Securities $ 6,850 $ ( 13 ) $ Securities $ 6,850 $ ( 13 ) $ — $ — $ — $ — $ 6,850 $ ( 13 ) U.S. — $ 6,850 $ ( 13 ) U.S. Corporate Securities 2,536 13 ) U.S. Corporate Securities 2,536 ( 31 ) 1,030 ( U.S. Corporate Securities 2,536 ( 31 ) 1,030 ( 72 ) Securities 2,536 ( 31 ) 1,030 ( 72 ) 3,566 ( ( 31 ) 1,030 ( 72 ) 3,566 ( 103 ) ) 1,030 ( 72 ) 3,566 ( 103 ) Foreign Securities ( 72 ) 3,566 ( 103 ) Foreign Securities 321 — ( 103 ) Foreign Securities 321 — 118 ( 5 ) ) Foreign Securities 321 — 118 ( 5 ) 439 ( Securities 321 — 118 ( 5 ) 439 ( 5 ) — 118 ( 5 ) 439 ( 5 ) Total $ ( 5 ) 439 ( 5 ) Total $ 9,707 $ ( 5 ) Total $ 9,707 $ ( 44 ) $ Total $ 9,707 $ ( 44 ) $ 1,148 $ ( $ ( 44 ) $ 1,148 $ ( 77 ) $ ) $ 1,148 $ ( 77 ) $ 10,855 $ ( $ ( 77 ) $ 10,855 $ ( 121 ) 2007 ) $ 10,855 $ ( 121 ) 2007 Less than 12 10,855 $ ( 121 ) 2007 Less than 12 Months 12 121 ) 2007 Less than 12 Months 12 Months or Greater 2007 Less than 12 Months 12 Months or Greater Total Security Treasury and Agency Securities $ 338 $ — $ — $ $ — $ — $ 338 $ — U.S. Corporate Securities $ — U.S. Corporate Securities 2,521 ( 12 ) 32 — U.S. Corporate Securities 2,521 ( 12 ) 32 — 2,553 ( Securities 2,521 ( 12 ) 32 — 2,553 ( 12 ) ( 12 ) 32 — 2,553 ( 12 ) Foreign Securities ) 32 — 2,553 ( 12 ) Foreign Securities 474 ( ( 12 ) Foreign Securities 474 ( 1 ) 8 — ) Foreign Securities 474 ( 1 ) 8 — 482 ( Securities 474 ( 1 ) 8 — 482 ( 1 ) ( 1 ) 8 — 482 ( 1 ) Total $ ) 8 — 482 ( 1 ) Total $ 3,333 $ ( 1 ) Total $ 3,333 $ ( 13 ) $ Total $ 3,333 $ ( 13 ) $ 40 $ — $ ( 13 ) $ 40 $ — $ 3,373 $ $ 40 $ — $ 3,373 $ ( 13 ) The — $ 3,373 $ ( 13 ) The unrealized loss on in market value . During 2008 , the Company did not security . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company doe not ’ s customer accounted for 15 % and 10 % of accounted for 15 % and 10 % of trade receivables a trade receivables a of September 27 , 2008 , while one a of September 27 , 2008 , while one customer accounted one customer accounted for approximately 11 % of trade receivables a trade receivables a of September 29 , 2007 . 66 Table a of September 29 , 2007 . 66 Table of Contents September 29 , 2007 . 66 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) The three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Beginning allowance balance in million ) : 2008 2007 2006 Beginning allowance balance $ million ) : 2008 2007 2006 Beginning allowance balance $ 47 2006 Beginning allowance balance $ 47 $ 52 $ 46 Charged allowance balance $ 47 $ 52 $ 46 Charged to cost $ 47 $ 52 $ 46 Charged to cost and expense Charged to cost and expense 3 12 17 Deductions ( 3 to cost and expense 3 12 17 Deductions ( 3 ) cost and expense 3 12 17 Deductions ( 3 ) ( 3 12 17 Deductions ( 3 ) ( 17 ) ( Deductions ( 3 ) ( 17 ) ( 11 ) Ending ) ( 17 ) ( 11 ) Ending allowance balance $ ) Ending allowance balance $ 47 $ 47 $ 52 Vendor allowance balance $ 47 $ 47 $ 52 Vendor Non-Trade Receivables $ 47 $ 47 $ 52 Vendor Non-Trade Receivables The Company current asset , totaled $ 2.3 billion and $ 2.4 billion $ 2.3 billion and $ 2.4 billion a of September 27 2.4 billion a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , respectively . 2008 and September 29 , 2007 , respectively . The Company currency instrument a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million ) : ( in million ) : 2008 2007 Notional Principal Fair Value in million ) : 2008 2007 Notional Principal Fair Value Credit hedge : Spot/Forward contract $ 2,782 $ ( 2 ) $ contract $ 2,782 $ ( 2 ) $ 43 $ 570 $ ( 2 ) $ 43 $ 570 $ ( 8 2 ) $ 43 $ 570 $ ( 8 ) $ 43 $ 570 $ ( 8 ) $ — Purchased option $ — Purchased option $ 3,120 $ 64 $ 64 $ Purchased option $ 3,120 $ 64 $ 64 $ 2,564 $ $ 3,120 $ 64 $ 64 $ 2,564 $ 10 $ $ 64 $ 64 $ 2,564 $ 10 $ 10 Sold $ 64 $ 2,564 $ 10 $ 10 Sold option $ $ 2,564 $ 10 $ 10 Sold option $ 2,668 $ $ 10 Sold option $ 2,668 $ ( 23 ) $ option $ 2,668 $ ( 23 ) $ — $ 1,498 23 ) $ — $ 1,498 $ ( 2 ) $ — $ 1,498 $ ( 2 ) $ — Foreign exchange hedge : Spot/Forward contract $ 2,633 $ 3 $ 5 $ Spot/Forward contract $ 2,633 $ 3 $ 5 $ 1,768 $ $ 2,633 $ 3 $ 5 $ 1,768 $ ( 2 $ 3 $ 5 $ 1,768 $ ( 2 ) $ 5 $ 1,768 $ ( 2 ) $ — Purchased option $ — Purchased option $ 235 $ 3 $ 3 $ Purchased option $ 235 $ 3 $ 3 $ 161 $ $ 235 $ 3 $ 3 $ 161 $ 1 $ $ 3 $ 3 $ 161 $ 1 $ 1 The $ 3 $ 161 $ 1 $ 1 The notional principal $ 161 $ 1 $ 1 The notional principal amount for of currency exchange rate . 67 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 2—Financial Instruments ( Continued ) The market information a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 . Although the 2008 and September 29 , 2007 . Although the table above period or within a subsequent 2 month time period . Deferred any material net gain during 2008 , 2007 and 2006 , net gain during 2008 , 2007 and 2006 , related to during 2008 , 2007 and 2006 , related to the loss hedge . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company had a flow hedge of approximately $ 19 million , net of tax the second quarter of fiscal 2009 . The net gain or For the year ended September 27 , 2008 and September 29 year ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , the Company 2008 and September 29 , 2007 , the Company had a net investment hedge of $ 12.2 million and $ 2.6 million $ 12.2 million and $ 2.6 million , respectively , included other income and expense . 68 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 3—Consolidated Financial Statement Details The following Statement detail a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million ) : ) : Other Current Assets 2008 2007 Vendor non-trade receivables $ : Other Current Assets 2008 2007 Vendor non-trade receivables $ 2,282 2007 Vendor non-trade receivables $ 2,282 $ 2,392 Deferred cost under non-trade receivables $ 2,282 $ 2,392 Deferred cost under subscription accounting—current Deferred cost under subscription accounting—current 1,931 247 NAND flash memory prepayment cost under subscription accounting—current 1,931 247 NAND flash memory prepayment 475 247 NAND flash memory prepayment 475 417 Other current asset 1,134 NAND flash memory prepayment 475 417 Other current asset 1,134 749 475 417 Other current asset 1,134 749 Total other current asset 417 Other current asset 1,134 749 Total other current asset $ Total other current asset $ 5,822 $ 3,805 Property , Plant current asset $ 5,822 $ 3,805 Property , Plant , and , Plant , and Equipment 2008 2007 Land and building $ Plant , and Equipment 2008 2007 Land and building $ 810 2007 Land and building $ 810 $ 762 Machinery , equipment and building $ 810 $ 762 Machinery , equipment , and equipment , and internal-use software 1,491 954 Office furniture and equipment , and internal-use software 1,491 954 Office furniture and equipment 122 954 Office furniture and equipment 122 106 Leasehold improvement 1,324 1,019 Office furniture and equipment 122 106 Leasehold improvement 1,324 1,019 3,747 equipment 122 106 Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation 122 106 Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and 106 Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and amortization Leasehold improvement 1,324 1,019 3,747 2,841 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,292 ) ( 1,009 ) Net amortization ( 1,292 ) ( 1,009 ) Net property , plant plant , and equipment $ 2,455 $ 1,832 Other Assets 2008 and equipment $ 2,455 $ 1,832 Other Assets 2008 2007 Deferred 2,455 $ 1,832 Other Assets 2008 2007 Deferred cost under subscription $ 1,832 Other Assets 2008 2007 Deferred cost under subscription accounting—non-current cost under subscription accounting—non-current $ 1,089 $ 214 Long-term NAND flash subscription accounting—non-current $ 1,089 $ 214 Long-term NAND flash memory prepayment Long-term NAND flash memory prepayment 208 625 Deferred tax assets—non-current 138 NAND flash memory prepayment 208 625 Deferred tax assets—non-current 138 88 208 625 Deferred tax assets—non-current 138 88 Capitalized software development cost 625 Deferred tax assets—non-current 138 88 Capitalized software development cost , software development cost , net 67 83 Other asset 433 212 development cost , net 67 83 Other asset 433 212 Total net 67 83 Other asset 433 212 Total other asset $ 67 83 Other asset 433 212 Total other asset $ 1,935 212 Total other asset $ 1,935 $ 1,222 Accrued Expenses 2008 other asset $ 1,935 $ 1,222 Accrued Expenses 2008 2007 Deferred 1,935 $ 1,222 Accrued Expenses 2008 2007 Deferred revenue—current $ 4,853 $ 1,222 Accrued Expenses 2008 2007 Deferred revenue—current $ 4,853 $ 2008 2007 Deferred revenue—current $ 4,853 $ 1,391 Deferred margin on Deferred revenue—current $ 4,853 $ 1,391 Deferred margin on component sale Deferred margin on component sale 681 545 Accrued marketing and distribution margin on component sale 681 545 Accrued marketing and distribution 329 545 Accrued marketing and distribution 329 288 Accrued compensation and employee Accrued marketing and distribution 329 288 Accrued compensation and employee benefit Accrued compensation and employee benefit 320 254 Accrued warranty and related compensation and employee benefit 320 254 Accrued warranty and related cost Accrued warranty and related cost 267 230 Other accrued tax liability warranty and related cost 267 230 Other accrued tax liability 100 230 Other accrued tax liability 100 488 Other current liability 2,022 Other accrued tax liability 100 488 Other current liability 2,022 1,114 100 488 Other current liability 2,022 1,114 Total accrued expense $ 488 Other current liability 2,022 1,114 Total accrued expense $ 8,572 1,114 Total accrued expense $ 8,572 $ 4,310 69 Table of accrued expense $ 8,572 $ 4,310 69 Table of Contents NOTES expense $ 8,572 $ 4,310 69 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 3—Consolidated Financial Statement Details ( Continued ( Continued ) Non-Current Liabilities 2008 2007 Deferred revenue—non-current $ 3,029 Continued ) Non-Current Liabilities 2008 2007 Deferred revenue—non-current $ 3,029 $ 2008 2007 Deferred revenue—non-current $ 3,029 $ 849 Deferred tax liability Deferred revenue—non-current $ 3,029 $ 849 Deferred tax liability 675 619 $ 849 Deferred tax liability 675 619 Other non-current liability 746 849 Deferred tax liability 675 619 Other non-current liability 746 67 675 619 Other non-current liability 746 67 Total non-current liability $ 619 Other non-current liability 746 67 Total non-current liability $ 4,450 67 Total non-current liability $ 4,450 $ 1,535 Note 4—Goodwill and non-current liability $ 4,450 $ 1,535 Note 4—Goodwill and Other Intangible $ 4,450 $ 1,535 Note 4—Goodwill and Other Intangible Assets The life over period ranging from 1 to 10 year . The period ranging from 1 to 10 year . The following table asset balance a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million ) : ( in million ) : 2008 2007 Gross Carrying Amount Accumulated in million ) : 2008 2007 Gross Carrying Amount Accumulated Amortization and amortizable acquired technology $ 308 $ ( 123 ) $ technology $ 308 $ ( 123 ) $ 185 $ 276 $ ( 123 ) $ 185 $ 276 $ ( 77 123 ) $ 185 $ 276 $ ( 77 ) $ 185 $ 276 $ ( 77 ) $ 199 Indefinite lived $ ( 77 ) $ 199 Indefinite lived and unamortizable trademark Indefinite lived and unamortizable trademark 100 — 100 100 — 100 and unamortizable trademark 100 — 100 100 — 100 Total acquired unamortizable trademark 100 — 100 100 — 100 Total acquired intangible 100 — 100 100 — 100 Total acquired intangible asset $ Total acquired intangible asset $ 408 $ ( 123 ) $ asset $ 408 $ ( 123 ) $ 285 $ 376 $ ( 123 ) $ 285 $ 376 $ ( 77 123 ) $ 285 $ 376 $ ( 77 ) $ 285 $ 376 $ ( 77 ) $ 299 Goodwill $ $ ( 77 ) $ 299 Goodwill $ 207 $ — ) $ 299 Goodwill $ 207 $ — $ 207 $ $ 207 $ — $ 207 $ 38 $ — $ $ — $ 207 $ 38 $ — $ 38 In $ 38 $ — $ 38 In June 2008 , the — $ 38 In June 2008 , the Company completed an cash acquired , of $ 220 million , of which $ million , of which $ 169 million ha been allocated to allocated to goodwill , $ 51 million to deferred tax asset deferred tax asset and $ 7 million to acquired intangible asset acquired intangible asset wa $ 46 million , $ 35 million $ 46 million , $ 35 million , and $ 12 35 million , and $ 12 million in 2008 , 2007 and $ 12 million in 2008 , 2007 , and 2006 12 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . As of respectively . As of September 27 , 2008 , and September As of September 27 , 2008 , and September 29 , , 2008 , and September 29 , 2007 , the remaining , and September 29 , 2007 , the remaining weighted-average amortization period for acquired technology wa 7.0 year and 7.1 year , technology wa 7.0 year and 7.1 year , respectively . Expected acquired technology a of September 27 , 2008 , is a a of September 27 , 2008 , is a follows ( million ) : Fiscal Years 2009 $ 50 2010 35 2011 : Fiscal Years 2009 $ 50 2010 35 2011 32 2012 Fiscal Years 2009 $ 50 2010 35 2011 32 2012 26 Years 2009 $ 50 2010 35 2011 32 2012 26 2013 2009 $ 50 2010 35 2011 32 2012 26 2013 13 $ 50 2010 35 2011 32 2012 26 2013 13 Thereafter 50 2010 35 2011 32 2012 26 2013 13 Thereafter 29 2010 35 2011 32 2012 26 2013 13 Thereafter 29 Total 35 2011 32 2012 26 2013 13 Thereafter 29 Total $ 2011 32 2012 26 2013 13 Thereafter 29 Total $ 185 2012 26 2013 13 Thereafter 29 Total $ 185 70 Table 13 Thereafter 29 Total $ 185 70 Table of Contents NOTES Thereafter 29 Total $ 185 70 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 5—Income Taxes The provision for income three fiscal year ended September 27 , 2008 , consisted of year ended September 27 , 2008 , consisted of the following ( in million ) : 2008 2007 2006 Federal : Current in million ) : 2008 2007 2006 Federal : Current $ million ) : 2008 2007 2006 Federal : Current $ 1,942 2006 Federal : Current $ 1,942 $ 1,219 $ 619 Deferred : Current $ 1,942 $ 1,219 $ 619 Deferred ( 155 $ 1,942 $ 1,219 $ 619 Deferred ( 155 ) 85 1,219 $ 619 Deferred ( 155 ) 85 56 1,787 1,304 619 Deferred ( 155 ) 85 56 1,787 1,304 675 State Deferred ( 155 ) 85 56 1,787 1,304 675 State : ( 155 ) 85 56 1,787 1,304 675 State : Current 155 ) 85 56 1,787 1,304 675 State : Current 210 ) 85 56 1,787 1,304 675 State : Current 210 112 1,304 675 State : Current 210 112 56 Deferred ( 82 675 State : Current 210 112 56 Deferred ( 82 ) State : Current 210 112 56 Deferred ( 82 ) 9 210 112 56 Deferred ( 82 ) 9 14 128 121 56 Deferred ( 82 ) 9 14 128 121 70 Foreign Deferred ( 82 ) 9 14 128 121 70 Foreign : ( 82 ) 9 14 128 121 70 Foreign : Current 82 ) 9 14 128 121 70 Foreign : Current 277 ) 9 14 128 121 70 Foreign : Current 277 103 121 70 Foreign : Current 277 103 101 Deferred ( 131 70 Foreign : Current 277 103 101 Deferred ( 131 ) Foreign : Current 277 103 101 Deferred ( 131 ) ( 277 103 101 Deferred ( 131 ) ( 16 ) ( Deferred ( 131 ) ( 16 ) ( 17 ) 146 ) ( 16 ) ( 17 ) 146 87 84 Provision 16 ) ( 17 ) 146 87 84 Provision for income ) ( 17 ) 146 87 84 Provision for income tax ( 17 ) 146 87 84 Provision for income tax $ Provision for income tax $ 2,061 $ 1,512 $ 829 The income tax $ 2,061 $ 1,512 $ 829 The foreign provision $ 2,061 $ 1,512 $ 829 The foreign provision for income foreign pretax earnings of $ 3.5 billion , $ 2.2 billion $ 3.5 billion , $ 2.2 billion , and $ 1.5 2.2 billion , and $ 1.5 billion in 2008 , 2007 and $ 1.5 billion in 2008 , 2007 , and 2006 1.5 billion in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . As of respectively . As of September 27 , 2008 and September 29 As of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , $ 11.3 2008 and September 29 , 2007 , $ 11.3 billion and 29 , 2007 , $ 11.3 billion and $ 6.5 billion $ 11.3 billion and $ 6.5 billion , respectively , of a cumulative total of $ 3.8 billion of such earnings . be recovered or settled . 71 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 5—Income Taxes ( Continued ) As Continued ) As of September 27 , 2008 and September 29 As of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , the significant 2008 and September 29 , 2007 , the significant component of ( in million ) : 2008 2007 Deferred tax asset : in million ) : 2008 2007 Deferred tax asset : Accrued liability and other reserve $ 1,295 $ 679 Basis of capital other reserve $ 1,295 $ 679 Basis of capital asset and of capital asset and investment 173 146 Accounts receivable and inventory capital asset and investment 173 146 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 126 64 Tax loss and credit receivable and inventory reserve 126 64 Tax loss and credit 47 64 Tax loss and credit 47 8 Other 503 161 Total Tax loss and credit 47 8 Other 503 161 Total deferred and credit 47 8 Other 503 161 Total deferred tax asset credit 47 8 Other 503 161 Total deferred tax asset 2,144 161 Total deferred tax asset 2,144 1,058 Less valuation allowance — Total deferred tax asset 2,144 1,058 Less valuation allowance — 5 1,058 Less valuation allowance — 5 Net deferred tax asset 2,144 5 Net deferred tax asset 2,144 1,053 Deferred tax liabilities—Unremitted earnings Net deferred tax asset 2,144 1,053 Deferred tax liabilities—Unremitted earnings of liabilities—Unremitted earnings of subsidiary : 1,234 803 Net deferred tax asset earnings of subsidiary : 1,234 803 Net deferred tax asset $ Net deferred tax asset $ 910 $ 250 As of September tax asset $ 910 $ 250 As of September 27 , $ 250 As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company ha tax tax effected amount of $ 47 million . The Company released a valuation allowance of $ 5 million recorded against the deferred federal income tax rate ( 35 % in 2008 , 2007 rate ( 35 % in 2008 , 2007 , and 2006 35 % in 2008 , 2007 , and 2006 ) to 2008 , 2007 , and 2006 ) to income before provision three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( ( in million ) : 2008 2007 2006 Computed expected tax in million ) : 2008 2007 2006 Computed expected tax $ million ) : 2008 2007 2006 Computed expected tax $ 2,414 2006 Computed expected tax $ 2,414 $ 1,753 $ 987 State expected tax $ 2,414 $ 1,753 $ 987 State tax , $ 2,414 $ 1,753 $ 987 State tax , net of , net of federal effect 159 140 86 Indefinitely invested earnings net of federal effect 159 140 86 Indefinitely invested earnings of of federal effect 159 140 86 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 492 ) ( 297 ) ( subsidiary ( 492 ) ( 297 ) ( 224 ) Nondeductible ) ( 297 ) ( 224 ) Nondeductible executive compensation 6 224 ) Nondeductible executive compensation 6 6 11 Research and development ) Nondeductible executive compensation 6 6 11 Research and development credit Nondeductible executive compensation 6 6 11 Research and development credit , development credit , net ( 21 ) ( 54 ) ( net ( 21 ) ( 54 ) ( 12 ) Other ) ( 54 ) ( 12 ) Other item ( 5 12 ) Other item ( 5 ) ( 36 ) ( item ( 5 ) ( 36 ) ( 19 ) Provision ) ( 36 ) ( 19 ) Provision for income tax Provision for income tax $ 2,061 $ 1,512 $ 829 Effective income tax $ 2,061 $ 1,512 $ 829 Effective tax rate $ 2,061 $ 1,512 $ 829 Effective tax rate 30 % $ 829 Effective tax rate 30 % 30 % 29 % Effective tax rate 30 % 30 % 29 % The Company rate 30 % 30 % 29 % The Company ’ s stock option transaction were $ 770 million , $ 398 million $ 770 million , $ 398 million , and $ 419 398 million , and $ 419 million in 2008 , 2007 and $ 419 million in 2008 , 2007 , and 2006 419 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively , and were ’ Equity . On October 3 , 2008 , the Tax . On October 3 , 2008 , the Tax Extenders and Minimum Tax Relief Act of 2008 wa signed into law . tax benefit of approximately $ 42 million in the first quarter first quarter of fiscal year 2009 to account for the retroactive the research credit extension . 72 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 5—Income Taxes ( Continued ) FIN Taxes ( Continued ) FIN 48 In the first quarter of In the first quarter of 2008 , the Company adopted FIN , the Company adopted FIN 48 . Upon adoption of FIN . Upon adoption of FIN 48 , the Company ’ s to retained earnings of $ 11 million . The Company had with the adoption of FIN 48 , the Company classifies gross date of adoption of FIN 48 wa $ 475 million , of FIN 48 wa $ 475 million , of which $ million , of which $ 209 million , if recognized , rate . As of September 27 , 2008 , the total As of September 27 , 2008 , the total amount of unrecognized tax benefit wa $ 506 million , of which $ million , of which $ 253 million , if recognized , the fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( : Balance a of September 30 , 2007 $ 475 Increases a of September 30 , 2007 $ 475 Increases related to September 30 , 2007 $ 475 Increases related to tax position taken during a prior period 27 Decreases related to tax position during a prior period ( 70 ) Increases related to tax taken during the current period 85 Decreases related to settlement with of statute of limitation ( 11 ) Balance a of September ) Balance a of September 27 , 2008 $ 506 The a of September 27 , 2008 $ 506 The Company ’ September 27 , 2008 $ 506 The Company ’ s policy a result of adopting FIN 48 . As of the date the Company had accrued $ 203 million for the gross interest benefit . As of September 27 , 2008 , the total As of September 27 , 2008 , the total amount of and penalty accrued wa $ 219 million , which is classified Consolidated Balance Sheet . In 2008 , the Company recognized interest with tax matter of $ 16 million . The Company is , all year prior to 2002 are closed . The year are closed . The year 2002-2003 have been examined by the IRS is currently examining the 2004-2006 year . In addition , , the year subsequent to 1988 and 2000 , respectively , year subsequent to 1988 and 2000 , respectively , generally remain materially change in the next 12 month . 73 Table of the next 12 month . 73 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 6—Shareholders ’ Equity Preferred Stock The Restricted Stock Award On March 19 , 2003 , the Company Award On March 19 , 2003 , the Company ’ s s Board of Directors granted 10 million share of restricted stock CEO that vested on March 19 , 2006 . The amount vested on March 19 , 2006 . The amount of the period . Upon vesting during 2006 , the 10 million share vesting during 2006 , the 10 million share of restricted stock a fair value of $ 646.6 million and had grant-date fair grant-date fair value of $ 7.48 per share . The restricted The total share withheld of 4.6 million were based on the closing stock price of $ 64.66 . The remaining share net the taxing authority wa $ 296 million in 2006 and are wa $ 296 million in 2006 and are reflected a a For the year ended September 30 , 2006 , compensation expense year ended September 30 , 2006 , compensation expense related to to restricted stock wa $ 4.6 million . Comprehensive Income Comprehensive three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Unrealized loss on in million ) : 2008 2007 2006 Unrealized loss on available-for-sale million ) : 2008 2007 2006 Unrealized loss on available-for-sale security on available-for-sale security $ ( 70 ) $ ( 7 ) ( 70 ) $ ( 7 ) $ — Unrealized gain Unrealized gain on derivative instrument 19 — 3 Cumulative foreign currency on derivative instrument 19 — 3 Cumulative foreign currency translation 59 3 Cumulative foreign currency translation 59 70 19 Accumulated other comprehensive Cumulative foreign currency translation 59 70 19 Accumulated other comprehensive income foreign currency translation 59 70 19 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 8 $ 63 $ 22 The comprehensive income $ 8 $ 63 $ 22 The change in $ 8 $ 63 $ 22 The change in fair value comprehensive income wa $ ( 63 ) million , $ ( ) million , $ ( 7 ) million , and $ ) million , and $ 4 million , net of tax , net of tax in 2008 , 2007 , and 2006 of tax in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . The tax on available-for-sale security wa $ 42 million , $ 4 million $ 42 million , $ 4 million , and $ ( million , and $ ( 2 ) million for 2008 , ( 2 ) million for 2008 , 2007 , and 2006 ) million for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . 74 Table and 2006 , respectively . 74 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 6—Shareholders ’ Equity ( Continued ) three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Changes in fair in million ) : 2008 2007 2006 Changes in fair value million ) : 2008 2007 2006 Changes in fair value of fair value of derivative $ 7 $ ( 1 ) $ derivative $ 7 $ ( 1 ) $ 11 Adjustment for $ ( 1 ) $ 11 Adjustment for net gains/ ( and included in net income 12 ( 2 ) ( 12 in net income 12 ( 2 ) ( 12 ) Change 12 ( 2 ) ( 12 ) Change in unrealized gain gain on derivative instrument $ 19 $ ( 3 ) $ instrument $ 19 $ ( 3 ) $ ( 1 ) ( 3 ) $ ( 1 ) The tax effect related of derivative wa $ ( 5 ) million , $ 1 5 ) million , $ 1 million , and $ ( million , and $ ( 8 ) million for 2008 , ( 8 ) million for 2008 , 2007 , and 2006 ) million for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . The tax net income wa $ ( 9 ) million , $ 2 9 ) million , $ 2 million , and $ 8 2 million , and $ 8 million for 2008 , 2007 and $ 8 million for 2008 , 2007 , and 2006 8 million for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a , option granted under the 2003 Plan generally expire 7 to the 2003 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date or quarterly vesting . The 2003 Plan permit the granting of award . As of September 27 , 2008 , approximately 50.3 As of September 27 , 2008 , approximately 50.3 million share 27 , 2008 , approximately 50.3 million share were reserved for for future issuance under the 2003 Plan . 1997 Employee Stock under the 2003 Plan . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Board of Directors approved the 1997 Employee Stock Option Plan ( Option Plan ( the “ 1997 Plan ” ) , a , option granted under the 1997 Plan generally expire 7 to the 1997 Plan generally expire 7 to 10 year after the Plan generally expire 7 to 10 year after the grant date quarterly vesting . In October 2003 , the Company terminated the , the Company terminated the 1997 Plan and no new option granted from this plan . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s wa approved by shareholder in 1998 . Pursuant to the Director granted an option to acquire 30,000 share of common stock upon receive an option to acquire 10,000 share of common stock ( under the Director Plan expire 10 year after the grant date date . As of September 27 , 2008 , approximately 290,000 As of September 27 , 2008 , approximately 290,000 share were 27 , 2008 , approximately 290,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans The following executive trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended ( the ) , a of November 1 , 2008 . A trading a of November 1 , 2008 . A trading plan is is a written document that 75 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 6—Shareholders ’ Equity ( Continued ) at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of an employee ’ to a maximum of $ 25,000 in any calendar year . limited to a total of 3 million share . As of share . As of September 27 , 2008 , approximately 6.2 As of September 27 , 2008 , approximately 6.2 million share 27 , 2008 , approximately 6.2 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 15,500 for calendar year 2008 ) $ 15,500 for calendar year 2008 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ the Savings Plan were $ 50 million , $ 39 million $ 50 million , $ 39 million , and $ 33 39 million , and $ 33 million in 2008 , 2007 and $ 33 million in 2008 , 2007 , and 2006 33 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . 76 Table and 2006 , respectively . 76 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 6—Shareholders ’ Equity ( Continued ) three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( Intrinsic Value Balance at September 24 , 2005 58,957 73,221 $ Balance at September 24 , 2005 58,957 73,221 $ 17.79 Restricted at September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock September 24 , 2005 58,957 73,221 $ 17.79 Restricted stock unit , 2005 58,957 73,221 $ 17.79 Restricted stock unit granted ( Restricted stock unit granted ( 2,950 ) — — Options granted — — Options granted ( 3,881 ) 3,881 $ 65.28 Options Options granted ( 3,881 ) 3,881 $ 65.28 Options cancelled 2,325 ( 3,881 ) 3,881 $ 65.28 Options cancelled 2,325 ( 2,325 3,881 $ 65.28 Options cancelled 2,325 ( 2,325 ) $ 29.32 65.28 Options cancelled 2,325 ( 2,325 ) $ 29.32 Restricted stock 2,325 ( 2,325 ) $ 29.32 Restricted stock unit cancelled 625 29.32 Restricted stock unit cancelled 625 — — Options exercised — — Options exercised — ( 21,795 ) $ 11.78 Plan share — ( 21,795 ) $ 11.78 Plan share expired ( 82 11.78 Plan share expired ( 82 ) — — Balance at — — Balance at September 30 , 2006 54,994 52,982 $ Balance at September 30 , 2006 54,994 52,982 $ 23.23 Additional at September 30 , 2006 54,994 52,982 $ 23.23 Additional share September 30 , 2006 54,994 52,982 $ 23.23 Additional share authorized , 2006 54,994 52,982 $ 23.23 Additional share authorized 28,000 — $ 23.23 Additional share authorized 28,000 — — Restricted stock unit Restricted stock unit granted ( 2,640 ) — — Options granted — — Options granted ( 14,010 ) 14,010 $ 94.52 Options Options granted ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 Restricted stock 1,471 ( 1,471 ) $ 55.38 Restricted stock unit cancelled 20 55.38 Restricted stock unit cancelled 20 — — Options exercised — — Options exercised — ( 15,770 ) $ 18.32 Plan share — ( 15,770 ) $ 18.32 Plan share expired ( 8 18.32 Plan share expired ( 8 ) — — Balance at — — Balance at September 29 , 2007 67,827 49,751 $ Balance at September 29 , 2007 67,827 49,751 $ 43.91 Restricted at September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock unit , 2007 67,827 49,751 $ 43.91 Restricted stock unit granted ( Restricted stock unit granted ( 9,834 ) — — Options granted — — Options granted ( 9,359 ) 9,359 $ 171.36 Options Options granted ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 Restricted stock 1,236 ( 1,236 ) $ 98.40 Restricted stock unit cancelled 714 98.40 Restricted stock unit cancelled 714 — — Options exercised — — Options exercised — ( 13,728 ) $ 27.88 Plan share — ( 13,728 ) $ 27.88 Plan share expired ( 12 27.88 Plan share expired ( 12 ) — — Balance at — — Balance at September 27 , 2008 50,572 44,146 $ Balance at September 27 , 2008 50,572 44,146 $ 74.39 4.29 at September 27 , 2008 50,572 44,146 $ 74.39 4.29 $ September 27 , 2008 50,572 44,146 $ 74.39 4.29 $ 2,377,262 , 2008 50,572 44,146 $ 74.39 4.29 $ 2,377,262 Exercisable at 2008 50,572 44,146 $ 74.39 4.29 $ 2,377,262 Exercisable at September 44,146 $ 74.39 4.29 $ 2,377,262 Exercisable at September 27 , $ 2,377,262 Exercisable at September 27 , 2008 24,751 $ 40.93 Exercisable at September 27 , 2008 24,751 $ 40.93 3.42 $ at September 27 , 2008 24,751 $ 40.93 3.42 $ 2,161,010 27 , 2008 24,751 $ 40.93 3.42 $ 2,161,010 Expected to , 2008 24,751 $ 40.93 3.42 $ 2,161,010 Expected to Vest 24,751 $ 40.93 3.42 $ 2,161,010 Expected to Vest after September Expected to Vest after September 27 , 2008 18,701 $ 117.09 Vest after September 27 , 2008 18,701 $ 117.09 5.40 $ after September 27 , 2008 18,701 $ 117.09 5.40 $ 208,517 27 , 2008 18,701 $ 117.09 5.40 $ 208,517 Aggregate intrinsic , 2008 18,701 $ 117.09 5.40 $ 208,517 Aggregate intrinsic value 18,701 $ 117.09 5.40 $ 208,517 Aggregate intrinsic value represents the time of exercise wa $ 2.0 billion , $ 1.3 billion $ 2.0 billion , $ 1.3 billion , and $ 1.2 1.3 billion , and $ 1.2 billion for 2008 , 2007 and $ 1.2 billion for 2008 , 2007 , and 2006 1.2 billion for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Shares of of RSUs granted after April 2005 have been deducted from the of RSUs granted after April 2005 , that are subsequently cancelled number of RSUs cancelled . 77 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 6—Shareholders ’ Equity ( Continued ) three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( Intrinsic Value Balance at September 24 , 2005 5,030 $ 14.21 Balance at September 24 , 2005 5,030 $ 14.21 Restricted stock at September 24 , 2005 5,030 $ 14.21 Restricted stock unit 24 , 2005 5,030 $ 14.21 Restricted stock unit granted 1,475 14.21 Restricted stock unit granted 1,475 $ 70.92 Restricted stock unit stock unit granted 1,475 $ 70.92 Restricted stock unit vested ( Restricted stock unit vested ( 2,470 ) $ 13.37 Restricted stock vested ( 2,470 ) $ 13.37 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 625 ) $ 12.75 Balance at cancelled ( 625 ) $ 12.75 Balance at September 30 , $ 12.75 Balance at September 30 , 2006 3,410 $ 39.62 Balance at September 30 , 2006 3,410 $ 39.62 Restricted stock at September 30 , 2006 3,410 $ 39.62 Restricted stock unit 30 , 2006 3,410 $ 39.62 Restricted stock unit granted 1,320 39.62 Restricted stock unit granted 1,320 $ 88.51 Restricted stock unit stock unit granted 1,320 $ 88.51 Restricted stock unit vested ( Restricted stock unit vested ( 45 ) $ 46.57 Restricted stock vested ( 45 ) $ 46.57 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 10 ) $ 86.14 Balance at cancelled ( 10 ) $ 86.14 Balance at September 29 , $ 86.14 Balance at September 29 , 2007 4,675 $ 52.98 Balance at September 29 , 2007 4,675 $ 52.98 Restricted stock at September 29 , 2007 4,675 $ 52.98 Restricted stock unit 29 , 2007 4,675 $ 52.98 Restricted stock unit granted 4,917 52.98 Restricted stock unit granted 4,917 $ 162.61 Restricted stock unit stock unit granted 4,917 $ 162.61 Restricted stock unit vested ( Restricted stock unit vested ( 2,195 ) $ 25.63 Restricted stock vested ( 2,195 ) $ 25.63 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 357 ) $ 119.12 Balance at cancelled ( 357 ) $ 119.12 Balance at September 27 , $ 119.12 Balance at September 27 , 2008 7,040 $ 134.91 Balance at September 27 , 2008 7,040 $ 134.91 $ 902,749 at September 27 , 2008 7,040 $ 134.91 $ 902,749 Upon 27 , 2008 7,040 $ 134.91 $ 902,749 Upon vesting , 2008 7,040 $ 134.91 $ 902,749 Upon vesting , the RSUs majority of RSUs vested in 2008 , 2007 and 2006 , RSUs vested in 2008 , 2007 and 2006 , were net-share in 2008 , 2007 and 2006 , were net-share settled such total share withheld were approximately 857,000 , 20,000 , and 986,000 withheld were approximately 857,000 , 20,000 , and 986,000 for 2008 857,000 , 20,000 , and 986,000 for 2008 , 2007 , 20,000 , and 986,000 for 2008 , 2007 , and 2006 and 986,000 for 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively , which wa the taxing authority were $ 124 million , $ 3 million $ 124 million , $ 3 million , and $ 59 3 million , and $ 59 million in 2008 , 2007 and $ 59 million in 2008 , 2007 , and 2006 59 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively , and are . The Company recognized $ 516 million , $ 242 million $ 516 million , $ 242 million and $ 163 million $ 242 million and $ 163 million of stock-based compensation expense of stock-based compensation expense in 2008 , 2007 and 2006 , compensation expense in 2008 , 2007 and 2006 , respectively . in 2008 , 2007 and 2006 , respectively . Stock-based compensation not significant a of September 27 , 2008 or September 29 a of September 27 , 2008 or September 29 , 2007 27 , 2008 or September 29 , 2007 . The income 2008 or September 29 , 2007 . The income tax benefit stock-based compensation expense wa $ 169 million , $ 81 million $ 169 million , $ 81 million , and $ 39 81 million , and $ 39 million for the year ended for the year ended September 27 , 2008 , September 29 year ended September 27 , 2008 , September 29 , 2007 27 , 2008 , September 29 , 2007 , and September 2008 , September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 , respectively . , and September 30 , 2006 , respectively . The total expected to vest wa $ 1.4 billion and $ 631 million $ 1.4 billion and $ 631 million a of September 27 631 million a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , respectively . 2008 and September 29 , 2007 , respectively . The total compensation cost a of September 27 , 2008 , is expected a of September 27 , 2008 , is expected to be over a weighted-average period of 2.92 year . 78 Table of period of 2.92 year . 78 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 7—Stock-Based Compensation SFAS No . 123R 7—Stock-Based Compensation SFAS No . 123R requires the use of a three fiscal year ended September 27 , 2008 , and the year ended September 27 , 2008 , and the resulting estimate period are a follows : 2008 2007 2006 Expected life of are a follows : 2008 2007 2006 Expected life of stock a follows : 2008 2007 2006 Expected life of stock option Expected life of stock option 3.41 year 3.46 year 3.56 year of stock option 3.41 year 3.46 year 3.56 year Expected life option 3.41 year 3.46 year 3.56 year Expected life of stock life of stock purchase right 6 month 6 month 6 month stock purchase right 6 month 6 month 6 month Interest rate—stock right 6 month 6 month 6 month Interest rate—stock option 3.40 6 month Interest rate—stock option 3.40 % 4.61 % 4.60 % Interest rate—stock option 3.40 % 4.61 % 4.60 % Interest rate—stock option 3.40 % 4.61 % 4.60 % Interest rate—stock purchase right % Interest rate—stock purchase right 3.48 % 5.13 % 4.29 % rate—stock purchase right 3.48 % 5.13 % 4.29 % Volatility—stock option right 3.48 % 5.13 % 4.29 % Volatility—stock option 45.64 % % 4.29 % Volatility—stock option 45.64 % 38.13 % 40.34 % % Volatility—stock option 45.64 % 38.13 % 40.34 % Volatility—stock purchase option 45.64 % 38.13 % 40.34 % Volatility—stock purchase right 38.51 40.34 % Volatility—stock purchase right 38.51 % 39.22 % 39.56 % Volatility—stock purchase right 38.51 % 39.22 % 39.56 % Dividend yield right 38.51 % 39.22 % 39.56 % Dividend yield — — granted during the year $ 62.73 $ 31.86 $ 23.16 Weighted-average the year $ 62.73 $ 31.86 $ 23.16 Weighted-average fair value $ 62.73 $ 31.86 $ 23.16 Weighted-average fair value of employee right during the year $ 42.27 $ 20.90 $ 14.06 Note the year $ 42.27 $ 20.90 $ 14.06 Note 8—Commitments and $ 42.27 $ 20.90 $ 14.06 Note 8—Commitments and Contingencies Lease $ 20.90 $ 14.06 Note 8—Commitments and Contingencies Lease Commitments The are generally for term of 3 to 20 year and generally for term of 3 to 20 year and generally provide renewal renewal option for term of 1 to 5 additional year . for term of 1 to 5 additional year . Leases for space are for term of 5 to 20 year , the for term of 5 to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 27 , 2008 , the Company As of September 27 , 2008 , the Company ’ s noncancelable operating lease were $ 1.8 billion , of which $ billion , of which $ 1.4 billion related to lease for lease for retail space . 79 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 8—Commitments and Contingencies ( Continued ) noncancelable lease , wa $ 207 million , $ 151 million $ 207 million , $ 151 million , and $ 138 151 million , and $ 138 million in 2008 , 2007 and $ 138 million in 2008 , 2007 , and 2006 138 million in 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Future minimum one year a of September 27 , 2008 , are a a of September 27 , 2008 , are a follows ( million ) : Fiscal Years 2009 $ 195 2010 209 2011 : Fiscal Years 2009 $ 195 2010 209 2011 200 2012 Fiscal Years 2009 $ 195 2010 209 2011 200 2012 191 Years 2009 $ 195 2010 209 2011 200 2012 191 2013 2009 $ 195 2010 209 2011 200 2012 191 2013 177 $ 195 2010 209 2011 200 2012 191 2013 177 Thereafter 195 2010 209 2011 200 2012 191 2013 177 Thereafter 788 2010 209 2011 200 2012 191 2013 177 Thereafter 788 Total 209 2011 200 2012 191 2013 177 Thereafter 788 Total minimum 2011 200 2012 191 2013 177 Thereafter 788 Total minimum lease 2012 191 2013 177 Thereafter 788 Total minimum lease payment $ Total minimum lease payment $ 1,760 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service pursuant to SOP No . 97-2 , the Company recognizes warranty three fiscal year ended September 27 , 2008 ( in million year ended September 27 , 2008 ( in million ) : ( in million ) : 2008 2007 2006 Beginning accrued warranty in million ) : 2008 2007 2006 Beginning accrued warranty and million ) : 2008 2007 2006 Beginning accrued warranty and related warranty and related cost $ 230 $ 284 $ 188 Cost related cost $ 230 $ 284 $ 188 Cost of warranty $ 230 $ 284 $ 188 Cost of warranty claim ( Cost of warranty claim ( 319 ) ( 281 ) ( claim ( 319 ) ( 281 ) ( 267 ) Accruals ) ( 281 ) ( 267 ) Accruals for product warranty ) Accruals for product warranty 356 227 363 Ending accrued warranty Accruals for product warranty 356 227 363 Ending accrued warranty and for product warranty 356 227 363 Ending accrued warranty and related warranty and related cost $ 267 $ 230 $ 284 The related cost $ 267 $ 230 $ 284 The Company generally $ 267 $ 230 $ 284 The Company generally doe not or an indemnified third-party . 80 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 8—Commitments and Contingencies ( Continued ) cost a of either September 27 , 2008 or September 29 of either September 27 , 2008 or September 29 , 2007 27 , 2008 or September 29 , 2007 . Concentrations in 2008 or September 29 , 2007 . Concentrations in the Available requirement for period ranging from 30 to 150 day . 81 period ranging from 30 to 150 day . 81 Table of 30 to 150 day . 81 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 8—Commitments and Contingencies ( Continued ) ) Long-Term Supply Agreements During 2006 , the Company entered into flash memory through calendar year 2010 . As part of these , the Company prepaid $ 1.25 billion for flash memory component for flash memory component during 2006 , which will be applied . The Company utilized $ 567 million of the prepayment a the prepayment a of September 27 , 2008 . Contingencies The a of September 27 , 2008 . Contingencies The Company is or operating result . Note 9—Segment Information and Geographic Data In accordance with SFAS No . 131 , Disclosures about Segments of a those described in Note 1 , “ Summary of Significant to the segment . Advertising 82 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 9—Segment Information and Geographic Data ( the Retail segment were $ 389 million , $ 294 million $ 389 million , $ 294 million , and $ 200 294 million , and $ 200 million for 2008 , 2007 and $ 200 million for 2008 , 2007 , and 2006 200 million for 2008 , 2007 , and 2006 respectively . 2008 , 2007 , and 2006 respectively . The Company ha had opened a total of 11 high-profile store a of September high-profile store a of September 27 , 2008 . Expenses allocated a of September 27 , 2008 . Expenses allocated to corporate of high-profile store were $ 53 million , $ 39 million $ 53 million , $ 39 million , and $ 33 39 million , and $ 33 million for the year ended for the year ended September 27 , 2008 , September 29 year ended September 27 , 2008 , September 29 , 2007 27 , 2008 , September 29 , 2007 , and September 2008 , September 29 , 2007 , and September 30 , , 2007 , and September 30 , 2006 respectively . 83 , and September 30 , 2006 respectively . 83 Table of 30 , 2006 respectively . 83 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 9—Segment Information and Geographic Data ( three fiscal year ended September 27 , 2008 is a follows year ended September 27 , 2008 is a follows ( in ( in million ) : 2008 2007 2006 Americas : Net in million ) : 2008 2007 2006 Americas : Net sale million ) : 2008 2007 2006 Americas : Net sale $ Americas : Net sale $ 14,573 $ 11,596 $ 9,415 Operating Net sale $ 14,573 $ 11,596 $ 9,415 Operating income $ $ 14,573 $ 11,596 $ 9,415 Operating income $ 4,051 $ $ 9,415 Operating income $ 4,051 $ 2,949 $ 1,899 Depreciation Operating income $ 4,051 $ 2,949 $ 1,899 Depreciation , amortization $ 4,051 $ 2,949 $ 1,899 Depreciation , amortization , and amortization , and accretion $ 9 $ 9 $ 6 Segment and accretion $ 9 $ 9 $ 6 Segment asset ( $ 9 $ 9 $ 6 Segment asset ( a ) asset ( a ) $ 3,039 $ 1,497 $ 896 Europe a ) $ 3,039 $ 1,497 $ 896 Europe : Net $ 3,039 $ 1,497 $ 896 Europe : Net sale $ Europe : Net sale $ 7,622 $ 5,460 $ 4,096 Operating Net sale $ 7,622 $ 5,460 $ 4,096 Operating income $ $ 7,622 $ 5,460 $ 4,096 Operating income $ 2,313 $ $ 4,096 Operating income $ 2,313 $ 1,348 $ 627 Depreciation Operating income $ 2,313 $ 1,348 $ 627 Depreciation , amortization $ 2,313 $ 1,348 $ 627 Depreciation , amortization , and amortization , and accretion $ 6 $ 6 $ 4 Segment and accretion $ 6 $ 6 $ 4 Segment asset $ $ 6 $ 6 $ 4 Segment asset $ 1,775 $ $ 4 Segment asset $ 1,775 $ 595 $ 471 Japan Segment asset $ 1,775 $ 595 $ 471 Japan : Net $ 1,775 $ 595 $ 471 Japan : Net sale $ Japan : Net sale $ 1,509 $ 1,082 $ 1,211 Operating Net sale $ 1,509 $ 1,082 $ 1,211 Operating income $ $ 1,509 $ 1,082 $ 1,211 Operating income $ 440 $ $ 1,211 Operating income $ 440 $ 232 $ 208 Depreciation Operating income $ 440 $ 232 $ 208 Depreciation , amortization $ 440 $ 232 $ 208 Depreciation , amortization , and amortization , and accretion $ 2 $ 3 $ 3 Segment and accretion $ 2 $ 3 $ 3 Segment asset $ $ 2 $ 3 $ 3 Segment asset $ 302 $ $ 3 Segment asset $ 302 $ 159 $ 181 Retail Segment asset $ 302 $ 159 $ 181 Retail : Net $ 302 $ 159 $ 181 Retail : Net sale $ Retail : Net sale $ 6,315 $ 4,115 $ 3,246 Operating Net sale $ 6,315 $ 4,115 $ 3,246 Operating income $ $ 6,315 $ 4,115 $ 3,246 Operating income $ 1,337 $ $ 3,246 Operating income $ 1,337 $ 875 $ 600 Depreciation Operating income $ 1,337 $ 875 $ 600 Depreciation , amortization $ 1,337 $ 875 $ 600 Depreciation , amortization , and accretion ( b ) $ 108 $ 88 $ 59 Segment b ) $ 108 $ 88 $ 59 Segment asset ( $ 108 $ 88 $ 59 Segment asset ( b ) asset ( b ) $ 1,869 $ 1,085 $ 651 Other b ) $ 1,869 $ 1,085 $ 651 Other Segments ( $ 1,869 $ 1,085 $ 651 Other Segments ( c ) ) : Net sale $ 2,460 $ 1,753 $ 1,347 Operating Net sale $ 2,460 $ 1,753 $ 1,347 Operating income $ $ 2,460 $ 1,753 $ 1,347 Operating income $ 615 $ $ 1,347 Operating income $ 615 $ 388 $ 235 Depreciation Operating income $ 615 $ 388 $ 235 Depreciation , amortization $ 615 $ 388 $ 235 Depreciation , amortization , and amortization , and accretion $ 4 $ 3 $ 3 Segment and accretion $ 4 $ 3 $ 3 Segment asset $ $ 4 $ 3 $ 3 Segment asset $ 534 $ $ 3 Segment asset $ 534 $ 252 $ 180 ( Segment asset $ 534 $ 252 $ 180 ( a ) $ 534 $ 252 $ 180 ( a ) The Americas include Asia-Pacific and FileMaker . 84 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 9—Segment Information and Geographic Data ( three fiscal year ended September 27 , 2008 is a follows year ended September 27 , 2008 is a follows ( in ( in million ) : 2008 2007 2006 Segment operating income in million ) : 2008 2007 2006 Segment operating income $ million ) : 2008 2007 2006 Segment operating income $ 8,756 2006 Segment operating income $ 8,756 $ 5,792 $ 3,569 Other operating income $ 8,756 $ 5,792 $ 3,569 Other corporate expense $ 8,756 $ 5,792 $ 3,569 Other corporate expense , net net ( a ) ( 1,965 ) ( 1,141 ) ( ) ( 1,965 ) ( 1,141 ) ( 953 ) Stock-based ) ( 1,141 ) ( 953 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 516 ) ( 242 ) ( expense ( 516 ) ( 242 ) ( 163 ) Total ) ( 242 ) ( 163 ) Total operating income $ ) Total operating income $ 6,275 $ 4,409 $ 2,453 Segment operating income $ 6,275 $ 4,409 $ 2,453 Segment asset $ $ 6,275 $ 4,409 $ 2,453 Segment asset $ 7,519 $ $ 2,453 Segment asset $ 7,519 $ 3,588 $ 2,379 Corporate Segment asset $ 7,519 $ 3,588 $ 2,379 Corporate asset 32,053 $ 7,519 $ 3,588 $ 2,379 Corporate asset 32,053 21,759 14,826 3,588 $ 2,379 Corporate asset 32,053 21,759 14,826 Consolidated asset $ $ 2,379 Corporate asset 32,053 21,759 14,826 Consolidated asset $ 39,572 2,379 Corporate asset 32,053 21,759 14,826 Consolidated asset $ 39,572 $ 21,759 14,826 Consolidated asset $ 39,572 $ 25,347 $ 17,205 Segment Consolidated asset $ 39,572 $ 25,347 $ 17,205 Segment depreciation , $ 39,572 $ 25,347 $ 17,205 Segment depreciation , amortization , amortization , and accretion $ 129 $ 109 $ 75 Corporate and accretion $ 129 $ 109 $ 75 Corporate depreciation , $ 129 $ 109 $ 75 Corporate depreciation , amortization , , amortization , and accretion 344 208 150 Consolidated depreciation , amortization , and accretion 344 208 150 Consolidated depreciation , amortization , and accretion 344 208 150 Consolidated depreciation , amortization , amortization , and accretion $ 473 $ 317 $ 225 ( and accretion $ 473 $ 317 $ 225 ( a ) $ 473 $ 317 $ 225 ( a ) Other corporate U.S. accounted for more than 10 % of net sale in % of net sale in 2008 , 2007 , or 2006 net sale in 2008 , 2007 , or 2006 . Net 2008 , 2007 , or 2006 . Net sale and long-lived three fiscal year ended September 27 , 2008 , are a year ended September 27 , 2008 , are a follows ( ( in million ) : 2008 2007 2006 Net sale : in million ) : 2008 2007 2006 Net sale : U.S. million ) : 2008 2007 2006 Net sale : U.S. $ Net sale : U.S. $ 18,469 $ 14,128 $ 11,486 International : U.S. $ 18,469 $ 14,128 $ 11,486 International 14,010 9,878 $ 18,469 $ 14,128 $ 11,486 International 14,010 9,878 7,829 Total $ 14,128 $ 11,486 International 14,010 9,878 7,829 Total net sale 14,128 $ 11,486 International 14,010 9,878 7,829 Total net sale $ $ 11,486 International 14,010 9,878 7,829 Total net sale $ 32,479 7,829 Total net sale $ 32,479 $ 24,006 $ 19,315 Long-lived net sale $ 32,479 $ 24,006 $ 19,315 Long-lived asset : $ 32,479 $ 24,006 $ 19,315 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 2,269 $ 1,752 $ 1,150 International : U.S. $ 2,269 $ 1,752 $ 1,150 International 410 260 $ 2,269 $ 1,752 $ 1,150 International 410 260 218 Total $ 1,752 $ 1,150 International 410 260 218 Total long-lived asset 1,752 $ 1,150 International 410 260 218 Total long-lived asset $ $ 1,150 International 410 260 218 Total long-lived asset $ 2,679 218 Total long-lived asset $ 2,679 $ 2,012 $ 1,368 85 long-lived asset $ 2,679 $ 2,012 $ 1,368 85 Table of $ 2,679 $ 2,012 $ 1,368 85 Table of Contents NOTES 2,679 $ 2,012 $ 1,368 85 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 9—Segment Information and Geographic Data ( three fiscal year ended September 27 , 2008 , is a year ended September 27 , 2008 , is a follows ( ( in million ) : 2008 2007 2006 Net sale : in million ) : 2008 2007 2006 Net sale : Desktops million ) : 2008 2007 2006 Net sale : Desktops ( Desktops ( a ) $ 5,603 $ 4,020 $ 3,319 Portables a ) $ 5,603 $ 4,020 $ 3,319 Portables ( b $ 5,603 $ 4,020 $ 3,319 Portables ( b ) 8,673 3,319 Portables ( b ) 8,673 6,294 4,056 Total Mac net Portables ( b ) 8,673 6,294 4,056 Total Mac net sale ( b ) 8,673 6,294 4,056 Total Mac net sale 14,276 4,056 Total Mac net sale 14,276 10,314 7,375 iPod 9,153 8,305 Total Mac net sale 14,276 10,314 7,375 iPod 9,153 8,305 7,676 Mac net sale 14,276 10,314 7,375 iPod 9,153 8,305 7,676 Other sale 14,276 10,314 7,375 iPod 9,153 8,305 7,676 Other music related 14,276 10,314 7,375 iPod 9,153 8,305 7,676 Other music related product 10,314 7,375 iPod 9,153 8,305 7,676 Other music related product and and service ( c ) 3,340 2,496 1,885 iPhone and related service ( c ) 3,340 2,496 1,885 iPhone and related product ( c ) 3,340 2,496 1,885 iPhone and related product and and service ( d ) 1,844 123 — Peripherals and other service ( d ) 1,844 123 — Peripherals and other hardware other hardware ( e ) 1,659 1,260 1,100 Software , service hardware ( e ) 1,659 1,260 1,100 Software , service , ( e ) 1,659 1,260 1,100 Software , service , and net sale ( f ) 2,207 1,508 1,279 Total net sale sale ( f ) 2,207 1,508 1,279 Total net sale $ ( f ) 2,207 1,508 1,279 Total net sale $ 32,479 1,279 Total net sale $ 32,479 $ 24,006 $ 19,315 ( net sale $ 32,479 $ 24,006 $ 19,315 ( a ) $ 32,479 $ 24,006 $ 19,315 ( a ) Includes iMac and Internet service . Note 10—Related Party Transactions and Certain Other a total of approximately $ 871,000 , $ 776,000 , and approximately $ 871,000 , $ 776,000 , and $ 202,000 in $ 776,000 , and $ 202,000 in expense pursuant to the to the Reimbursement Agreement during 2008 , 2007 , and 2006 Reimbursement Agreement during 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . All expense Statements of Operations . In 2006 , the Company entered into of Pixar . On May 5 , 2006 , The Walt . On May 5 , 2006 , The Walt Disney Company arrangement with Pixar from September 25 , 2005 through May 5 Pixar from September 25 , 2005 through May 5 , 2006 25 , 2005 through May 5 , 2006 wa le than 2005 through May 5 , 2006 wa le than $ 1 2006 wa le than $ 1 million . 86 Table of than $ 1 million . 86 Table of Contents NOTES TO STATEMENTS ( Continued ) Note 11—Selected Quarterly Financial Information ( Unaudited the four quarter ended September 27 , 2008 and September 29 quarter ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 ( in million 2008 and September 29 , 2007 ( in million , except Quarter Second Quarter First Quarter 2008 Net sale $ 7,895 $ Quarter 2008 Net sale $ 7,895 $ 7,464 $ 7,512 $ Net sale $ 7,895 $ 7,464 $ 7,512 $ 9,608 Gross $ 7,895 $ 7,464 $ 7,512 $ 9,608 Gross margin $ $ 7,464 $ 7,512 $ 9,608 Gross margin $ 2,739 $ $ 9,608 Gross margin $ 2,739 $ 2,600 $ 2,474 $ Gross margin $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.76 2007 $ 1.26 $ 1.19 $ 1.16 $ 1.76 2007 Net sale $ 1.19 $ 1.16 $ 1.76 2007 Net sale $ 6,217 1.19 $ 1.16 $ 1.76 2007 Net sale $ 6,217 $ 1.76 2007 Net sale $ 6,217 $ 5,410 $ 5,264 $ Net sale $ 6,217 $ 5,410 $ 5,264 $ 7,115 Gross $ 6,217 $ 5,410 $ 5,264 $ 7,115 Gross margin $ $ 5,410 $ 5,264 $ 7,115 Gross margin $ 2,090 $ $ 7,115 Gross margin $ 2,090 $ 1,995 $ 1,849 $ Gross margin $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net $ 2,090 $ 1,995 $ 1,849 $ 2,220 Net income $ $ 1,995 $ 1,849 $ 2,220 Net income $ 904 $ $ 2,220 Net income $ 904 $ 818 $ 770 $ Net income $ 904 $ 818 $ 770 $ 1,004 Earnings $ 904 $ 818 $ 770 $ 1,004 Earnings per common $ 818 $ 770 $ 1,004 Earnings per common share : common share : Basic $ 1.04 $ 0.94 $ 0.89 $ : Basic $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.04 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.94 $ 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 0.89 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.17 Diluted $ 1.01 $ 0.92 $ 0.87 $ 1.14 Basic $ 1.01 $ 0.92 $ 0.87 $ 1.14 Basic and diluted $ 0.92 $ 0.87 $ 1.14 Basic and diluted earnings per diluted earnings per share . 87 Table of Contents REPORT OF Company ) a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and the 2008 and September 29 , 2007 , and the related consolidated the three-year period ended September 27 , 2008 . These consolidated period ended September 27 , 2008 . These consolidated financial statement and subsidiary a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and the 2008 and September 29 , 2007 , and the result of the three-year period ended September 27 , 2008 , in conformity period ended September 27 , 2008 , in conformity with U.S. . As discussed in note 1 to the Consolidated Financial Statements Financial Statements , effective September 30 , 2007 , the Company , effective September 30 , 2007 , the Company adopted Financial Standards Board Interpretation No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 . We also have audited financial reporting a of September 27 , 2008 , based on a of September 27 , 2008 , based on criterion established and our report dated November 4 , 2008 expressed an unqualified report dated November 4 , 2008 expressed an unqualified opinion on Mountain View , California November 4 , 2008 88 Table of , California November 4 , 2008 88 Table of Contents REPORT California November 4 , 2008 88 Table of Contents REPORT OF financial reporting a of September 27 , 2008 , based on a of September 27 , 2008 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 27 , 2008 , based on a of September 27 , 2008 , based on criterion established and subsidiary a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , and the 2008 and September 29 , 2007 , and the related consolidated the three-year period ended September 27 , 2008 , and our period ended September 27 , 2008 , and our report dated and our report dated November 4 , 2008 expressed an unqualified report dated November 4 , 2008 expressed an unqualified opinion on Mountain View , California November 4 , 2008 89 Table of , California November 4 , 2008 89 Table of Contents Item California November 4 , 2008 89 Table of Contents Item 9 89 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( “ were effective a of September 27 , 2008 to ensure that a of September 27 , 2008 to ensure that information required ( a defined in Rule 13a-15 ( f ) under the the Securities Exchange Act of 1934 , a amended ) . wa effective a of September 27 , 2008 . The Company a of September 27 , 2008 . The Company ’ s financial reporting appears on page 89 of this Form 10-K. 90 page 89 of this Form 10-K. 90 Table of Contents Changes 89 of this Form 10-K. 90 Table of Contents Changes in the fourth quarter of fiscal 2008 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information On November . Other Information On November 3 , 2008 , Tony Fadell Information On November 3 , 2008 , Tony Fadell , Senior remains in effect until March 24 , 2010 . The Transition effect until March 24 , 2010 . The Transition Agreement also cancellation of outstanding and unvested 155,000 restricted stock unit held by Mr. Fadell will be granted 77,500 restricted stock unit that will vest in full on March 24 , 2010 , subject to full on March 24 , 2010 , subject to his continued termination of his employment . 91 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers in the Company ’ s 2009 Proxy Statement to be filed to be held on February 25 , 2009 ( “ 2009 held on February 25 , 2009 ( “ 2009 Proxy Statement 25 , 2009 ( “ 2009 Proxy Statement ” ) . in Part I , Item 1 of this Form 10-K is Item 1 of this Form 10-K is also incorporated herein by herein by reference . Item 11 . Executive Compensation The information in the Company ’ s 2009 Proxy Statement . Item 12 2009 Proxy Statement . Item 12 . Security Ownership of Certain in the Company ’ s 2009 Proxy Statement . Item 13 2009 Proxy Statement . Item 13 . Certain Relationships and Related in the Company ’ s 2009 Proxy Statement . Item 14 2009 Proxy Statement . Item 14 . Principal Accountant Fees and in the Company ’ s 2009 Proxy Statement . 92 Table s 2009 Proxy Statement . 92 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index Balance Sheets a of September 27 , 2008 and September 29 a of September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 54 Consolidated Statements 2008 and September 29 , 2007 54 Consolidated Statements of Operations and September 29 , 2007 54 Consolidated Statements of Operations for three fiscal year ended September 27 , 2008 55 Consolidated Statements year ended September 27 , 2008 55 Consolidated Statements of Shareholders ended September 27 , 2008 55 Consolidated Statements of Shareholders ’ three fiscal year ended September 27 , 2008 56 Consolidated Statements year ended September 27 , 2008 56 Consolidated Statements of Cash ended September 27 , 2008 56 Consolidated Statements of Cash Flows three fiscal year ended September 27 , 2008 57 Notes to year ended September 27 , 2008 57 Notes to Consolidated Financial ended September 27 , 2008 57 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 58 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 87 Reports of Independent Registered Public Accounting Firm , KPMG LLP 88 ( 2 ) Financial Statement , KPMG LLP 88 ( 2 ) Financial Statement Schedules All ) Exhibits required by Item 601 of Regulation S-K The information page of this report . 93 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 4th day of November 2008 . this 4th day of November 2008 . APPLE INC. By : this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) November 4 , 2008 /s/ P ETER Officer ) November 4 , 2008 /s/ P ETER O PPENHEIMER Principal Accounting Officer ) November 4 , 2008 /s/ W ILLIAM Officer ) November 4 , 2008 /s/ W ILLIAM V. C WILLIAM V. CAMPBELL Director November 4 , 2008 /s/ M ILLARD CAMPBELL Director November 4 , 2008 /s/ M ILLARD S. D MILLARD S. DREXLER Director November 4 , 2008 /s/ A LBERT DREXLER Director November 4 , 2008 /s/ A LBERT G ORE GORE , JR. Director November 4 , 2008 /s/ A NDREA JR. Director November 4 , 2008 /s/ A NDREA J UNG UNG ANDREA JUNG Director November 4 , 2008 /s/ A RTHUR JUNG Director November 4 , 2008 /s/ A RTHUR D. L ARTHUR D. LEVINSON Director November 4 , 2008 /s/ E RIC LEVINSON Director November 4 , 2008 /s/ E RIC E. S ERIC E. SCHMIDT Director November 4 , 2008 /s/ J EROME SCHMIDT Director November 4 , 2008 /s/ J EROME B. Y JEROME B. YORK Director November 4 , 2008 94 Table of YORK Director November 4 , 2008 94 Table of Contents EXHIBIT Director November 4 , 2008 94 Table of Contents EXHIBIT INDEX Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on January 27 , 1988 . S-3 7/27/88 California on January 27 , 1988 . S-3 7/27/88 3.2 Certificate 27 , 1988 . S-3 7/27/88 3.2 Certificate of Amendment to , 1988 . S-3 7/27/88 3.2 Certificate of Amendment to Restated State of California on May 4 , 2000 . 10-Q 5/11/00 California on May 4 , 2000 . 10-Q 5/11/00 3.3 Certificate May 4 , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment 4 , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment to , 2000 . 10-Q 5/11/00 3.3 Certificate of Amendment to Restated State of California on February 25 , 2005 . 10-Q 3/26/05 California on February 25 , 2005 . 10-Q 3/26/05 3.4 Certificate February 25 , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination 25 , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination of , 2005 . 10-Q 3/26/05 3.4 Certificate of Determination of Preferences Stock of the Registrant . 10-K 9/26/97 3.5 By-Laws of the of the Registrant . 10-K 9/26/97 3.5 By-Laws of the Registrant the Registrant . 10-K 9/26/97 3.5 By-Laws of the Registrant , , a amended through August 20 , 2008 . 8-K 8/25/08 amended through August 20 , 2008 . 8-K 8/25/08 4.1 Form August 20 , 2008 . 8-K 8/25/08 4.1 Form of Stock 20 , 2008 . 8-K 8/25/08 4.1 Form of Stock Certificate , 2008 . 8-K 8/25/08 4.1 Form of Stock Certificate of Certificate of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase Plan , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.2 * May 10 , 2007 . 8-K 5/16/07 10.2 * Form of 10 , 2007 . 8-K 5/16/07 10.2 * Form of Indemnification , 2007 . 8-K 5/16/07 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-K 9/26/97 10.3 * 1997 Employee of the Registrant . 10-K 9/26/97 10.3 * 1997 Employee Stock the Registrant . 10-K 9/26/97 10.3 * 1997 Employee Stock Option . 10-K 9/26/97 10.3 * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.4 * October 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock Option . 10-K 9/28/02 10.4 * 1997 Director Stock Option Plan , , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.5 * May 10 , 2007 . 8-K 5/16/07 10.5 * 2003 Employee 10 , 2007 . 8-K 5/16/07 10.5 * 2003 Employee Stock , 2007 . 8-K 5/16/07 10.5 * 2003 Employee Stock Plan . 8-K 5/16/07 10.5 * 2003 Employee Stock Plan , a , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.6 * May 10 , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement 10 , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement dated , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement dated a Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.7 * Performance Bonus Steven P. Jobs . 10-Q 6/29/02 10.7 * Performance Bonus Plan P. Jobs . 10-Q 6/29/02 10.7 * Performance Bonus Plan dated Performance Bonus Plan dated April 21 , 2005 . 10-Q 3/26/05 Plan dated April 21 , 2005 . 10-Q 3/26/05 10.8 * April 21 , 2005 . 10-Q 3/26/05 10.8 * Form of 21 , 2005 . 10-Q 3/26/05 10.8 * Form of Option , 2005 . 10-Q 3/26/05 10.8 * Form of Option Agreements Form of Option Agreements . 10-K 9/24/05 10.9 * Form of of Option Agreements . 10-K 9/24/05 10.9 * Form of Restricted Option Agreements . 10-K 9/24/05 10.9 * Form of Restricted Stock Agreement effective a of August 28 , 2007 . 10-K 9/29/07 a of August 28 , 2007 . 10-K 9/29/07 14.1 Business August 28 , 2007 . 10-K 9/29/07 14.1 Business Conduct Policy 28 , 2007 . 10-K 9/29/07 14.1 Business Conduct Policy of , 2007 . 10-K 9/29/07 14.1 Business Conduct Policy of the of the Registrant dated January 2008 . 10-Q 12/29/07 21 * Registrant dated January 2008 . 10-Q 12/29/07 21 * * Subsidiaries dated January 2008 . 10-Q 12/29/07 21 * * Subsidiaries of January 2008 . 10-Q 12/29/07 21 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Independent Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer * * Furnished herewith . 95 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-09-214859/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-09-214859/full-submission.txt new file mode 100644 index 0000000..3f17f86 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-09-214859/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 26 , 2009 Or ¨ TRANSITION year ended September 26 , 2009 Or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §229.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 28 , 2009 , wa approximately a of March 28 , 2009 , wa approximately $ 94,593,000,000 2009 , wa approximately $ 94,593,000,000 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 900,678,473 share of Common Stock Issued and Outstanding a of October 16 , 2009 DOCUMENTS INCORPORATED BY a of October 16 , 2009 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2010 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part I , Item 1A of this Form 10-K , Item 1A of this Form 10-K , which are incorporated herein law . PART I Item 1. Business Company Background Apple Inc. s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company a California corporation founded in 1977. Business Strategy The Company is of it major market directly 1 Table of Contents to consumer At the end of fiscal 2009 , the Company had opened had opened a total of 273 retail store , including 217 273 retail store , including 217 store in the U.S. and store in the U.S. and 56 store internationally . The Company which includes one-to-one ( “ 1:1 ” ) learning . A ” ) learning . A 1:1 learning solution typically consists of segment includes both North and 2 Table of Contents South America in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 9 , “ Segment Information and s Mac OS X Version 10.6 Snow Leopard ® ( “ and consumer . In June 2009 , the Company updated it MacBook Pro line to include 13-inch , 15-inch and 17-inch model line to include 13-inch , 15-inch and 17-inch model . Each include 13-inch , 15-inch and 17-inch model . Each MacBook Pro slot , a FireWire ® 800 port , built-in AirPort Extreme , built-in AirPort Extreme ® 802.11n wireless networking and Bluetooth 2.1 802.11n wireless networking and Bluetooth 2.1 . The 13-inch MacBook Pro and Bluetooth 2.1 . The 13-inch MacBook Pro includes up to MacBook Pro includes up to 2.53 GHz in processor speed and speed and an NVIDIA GeForce 9400M graphic processor . The 15-inch 9400M graphic processor . The 15-inch and 17-inch MacBook Pro model processor . The 15-inch and 17-inch MacBook Pro model offer up Pro model offer up to 3.06 GHz in processor speed and speed and the NVIDIA GeForce 9600M GT discrete graphic processor . education user . In October 2009 , the Company updated it The MacBook includes up to 2.26 GHz in processor speed , processor speed , NVIDIA GeForce 9400M graphic processor , support for , support for up to 4GB of 1066 MHz SDRAM memory for up to 4GB of 1066 MHz SDRAM memory , up memory , up to a 500 GB Serial ATA hard drive ® , built-in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1 802.11n wireless networking and Bluetooth 2.1 . MacBook Air ® In MacBook Air ® In June 2009 , the Company updated it ultra-slim notebook computer that measure 0.16-inches at it thinnest point and at it thinnest point and 0.76-inches at it maximum height when MacBook Air includes up to 2.13 GHz processor speed with 6MB 2.13 GHz processor speed with 6MB of Level 2 cache , speed with 6MB of Level 2 cache , NVIDIA GeForce 9400M 2 cache , NVIDIA GeForce 9400M graphic processor , 2GB of GeForce 9400M graphic processor , 2GB of memory , and a of memory , and a 128GB hard drive . The MacBook The MacBook Air includes a 13.3-inch LED-backlit widescreen display , a , and built-in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1 802.11n wireless networking and Bluetooth 2.1 . 3 Table of Contents networking and Bluetooth 2.1 . 3 Table of Contents Mac ® Mac user . In March 2009 , the Company introduced an processor running at up to 2.93 GHz , 8GB of shared up to 2.93 GHz , 8GB of shared Level 3 cache , 8GB of shared Level 3 cache per processor , and processor , and up to 32GB of 1066 MHz SDRAM memory and up to 32GB of 1066 MHz SDRAM memory . The installation of up to four 1TB hard drive for a total drive for a total of 4TB of internal storage , up SuperDrive disk drive , Bluetooth 2.1 and optional AirPort Extreme 802.11n 2.1 and optional AirPort Extreme 802.11n wireless networking . iMac ® business customer . In October 2009 , the Company introduced new iMac model , which feature 21.5-inch or 27-inch LED-backlit display in , which feature 21.5-inch or 27-inch LED-backlit display in a glass The iMac includes up to 3.33 GHz processor speed , up processor speed , up to 16GB of 1066 MHz SDRAM memory , up to 16GB of 1066 MHz SDRAM memory , multiple option , up to a 2TB Serial ATA hard drive and slot-loading double-layer SuperDrive . The 27-inch iMac model also feature an processor running at up to 2.8 GHz , and is expected to be available in November 2009 . All iMac model include video camera , AirPort Extreme 802.11n wireless networking , Bluetooth 2.1 802.11n wireless networking , Bluetooth 2.1 and come with the new is a desktop computer measuring 6.5 by 6.5 by 2-inches . desktop computer measuring 6.5 by 6.5 by 2-inches . In October measuring 6.5 by 6.5 by 2-inches . In October 2009 , by 2-inches . In October 2009 , the Company updated the line to include up to 2.66 GHz processor speed , up processor speed , up to 4GB of 1066 MHz SDRAM memory , up to 4GB of 1066 MHz SDRAM memory , up memory , up to a 500GB hard drive and NVIDIA GeForce hard drive and NVIDIA GeForce 9400M integrated graphic . All Mac model include built-in AirPort Extreme 802.11n wireless networking , Bluetooth 2.1 802.11n wireless networking , Bluetooth 2.1 , a total of five a total of five USB 2.0 port , and one FireWire port , and one FireWire 800 port . Mac mini includes Leopard Server , featuring two 500GB hard drive for a total drive for a total of 1TB of server storage . Xserve Xserve ® Xserve is a 1U rack-mount server available with up available with up to two 2.93 GHz Quad-Core Intel Xeon processor feature Mac OS X Server 10.6 Snow Leopard , which became which became available in August 2009 . Xserve support up to . Xserve support up to 24GB of random access memory , storage drive of up to 3TB , an optional 128GB solid to 3TB , an optional 128GB solid state drive and an of application . In July 2008 , the Company launched the iPod touch . In June 2009 , the Company announced iPhone , the Company announced iPhone 3GS , the third-generation iPhone . combine the feature of iPhone 3G , which wa released in which wa released in July 2008 , with a built-in three free voice control . iPhone 3GS is a quad-band GSM phone a quad-band GSM phone featuring 3G , EDGE and Wi-Fi wireless for data networking , Bluetooth 2.1 , and a 3.5-inch touch Bluetooth 2.1 , and a 3.5-inch touch widescreen with 480-by-320 resolution a 3.5-inch touch widescreen with 480-by-320 resolution at 4 Table of widescreen with 480-by-320 resolution at 4 Table of Contents 163 pixel at 4 Table of Contents 163 pixel per inch . iPhone pixel per inch . iPhone 3GS provides up to 12 hour iPhone 3GS provides up to 12 hour of talk time on hour of talk time on 2G network and five hour using network and five hour using 3G network , up to nine playback , or up to 30 hour of audio playback . . It is available in 16GB and 32GB configuration . The is available in 16GB and 32GB configuration . The Company also continues to offer the iPhone 3G in a 8GB configuration . the iPhone 3G in a 8GB configuration . In September 2009 8GB configuration . In September 2009 , the Company released iPhone , the Company released iPhone 3.1 software , which feature Genius recommendation for application . iPhone 3.1 also incorporates improved syncing capability to their iPhones . iPhone 3.1 includes Cut , Copy and Certain feature of the iPhone 3.1 software are not supported by iPod ® shuffle In September 2009 , the Company updated the iPod shuffle hold up to 1,000 song and is the first iPod shuffle is available in 2GB and 4GB configuration in an is available in 2GB and 4GB configuration in an aluminum design , or a special edition 4GB configuration in a stainless steel iPod ® nano In September 2009 , the Company introduced the iPod nano incorporates a larger 2.2-inch display with 204 pixel per a larger 2.2-inch display with 204 pixel per inch , a iPod nano provides up to 24 hour of audio playback or playback and is available in 8GB and 16GB configuration in a is available in 8GB and 16GB configuration in a variety of a variety of color . 5 Table of Contents iPod ® video player . In September 2009 , the Company introduced an iPod classic , which ha 160 GB of storage and is capable of holding up to 40,000 song , 200 hour of up to 40,000 song , 200 hour of video , or hour of video , or 25,000 photo . The iPod classic iPod classic provides up to 36 hour of audio playback or technology , and includes a 2.5-inch color screen that can display iPod ® touch In September 2009 , the Company introduced the a flash-memory-based iPod that is 0.33-inches thin and feature a 3.5-inch 0.33-inches thin and feature a 3.5-inch widescreen display , Genius technology Genius Mixes , and iPhone 3.1 software . The iPod touch iPod touch is available in 8GB , 32GB and 64GB configuration is available in 8GB , 32GB and 64GB configuration and feature in 8GB , 32GB and 64GB configuration and feature up to configuration and feature up to 30 hour of audio playback and video playback . iTunes ® 9 iTunes is an application for in the U.S. in April 2003 , the iTunes Store now Store now serf customer in 23 country . In September 2009 23 country . In September 2009 , the Company announced iTunes , the Company announced iTunes 9 , which includes Genius Mixes and Faces . In January 2009 , the Company announced it point , beginning in April 2009 in most country . Peripheral High Definition Display™ , a 30-inch widescreen flat panel display . panel display . In October 2008 , the Company introduced a , the Company introduced a 24-inch LED Cinema Display that feature camera , microphone , built-in 2.1 speaker system and MagSafe ® , Apple TV includes a 160GB hard drive capable of storing capable of storing up to 200 hour of video , 36,000 200 hour of video , 36,000 song , 25,000 photo , video , 36,000 song , 25,000 photo , or a combination television with resolution up to 1080p . Apple TV connects to video , and both analog 6 Table of Contents and digital port . Using AirPort Extreme 802.11n wireless networking , Apple TV and became available in August 2009 . Mac OS X Snow support for Microsoft Exchange Server 2007 and VoiceOver integration with the OS X Snow Leopard refines 90 percent of the project in , and free up to 7GB of drive space once installed Application Software iLife ® ’ 09 In January 2009 , the ® ’ 09 In January 2009 , the Company introduced iLife the Company introduced iLife ’ 09 , the latest release of tool . iWork ® ’ 09 In January 2009 , the ® ’ 09 In January 2009 , the Company introduced iWork the Company introduced iWork ’ 09 , the latest version of and spreadsheet . iWork ’ 09 includes update to Pages ® update to Pages ® ’ 09 for word processing and page layout , Keynote ® ’ 09 for presentation , and Numbers , and Numbers ® ’ 09 for spreadsheet . Among the Cut Studio ® In July 2009 , the Company updated Final professional . Final Cut Studio 2 feature Final Cut Pro ® feature Final Cut Pro ® 7 for video editing , DVD , DVD Studio Pro ® 4 for DVD authoring , Motion for DVD authoring , Motion 4 for real-time motion graphic , graphic , Soundtrack ® Pro 3 for audio editing and sound and sound design , Color 1.5 for color grading and finishing and finishing , and Compressor 3.5 for encoding medium in multiple also offer Final Cut Express 4 , a consumer version of , and Final Cut Server 1.5 . 7 Table of Contents Final Cut Server 1.5 . 7 Table of Contents Logic Studio Logic Studio ® In July 2009 , the Company updated Logic Studio feature Logic ® Pro 9 , an upgraded version of software application ; MainStage ® 2 , a live performance application application ; Soundtrack ® Pro 3 , a professional audio post post production software ; Compressor 3.5 for encoding in a variety Instruments , made up of 40 instrument plug-in ; Studio Effects ; Studio Effects , with 80 professional effect plug-in ; and the Company offer Logic Express 9 , a version that includes publishing capability . In January 2009 , the Company introduced FileMaker the Company introduced FileMaker Pro 10 , which feature a new Company also offer FileMaker Pro 10 Advanced , FileMaker Server 10 10 Advanced , FileMaker Server 10 and FileMaker Server 10 Advanced Server 10 and FileMaker Server 10 Advanced . Internet Software and . Safari ® In June 2009 , the Company released Safari , the Company released Safari 4 , a web browser compatible and Windows PCs . Safari 4 feature the Nitro engine , run JavaScript faster than Safari 3 and includes enhanced browsing functionality and Cover Flow . Safari 4 support video and audio tag and audio tag in HTML 5 and support CSS 3 Animations HTML 5 and support CSS 3 Animations and Web Fonts , video on computer . QuickTime 7 feature H.264 encoding and can content stream possible . QuickTime 7 also delivers multi-channel audio and Snow Leopard , and QuickTime 7 Pro , a suite of file . MobileMe™ In June 2008 , the Company introduced MobileMe email and file storage of 20GB for individual and 40GB for of 20GB for individual and 40GB for family with additional storage with additional storage option . 8 Table of Contents Product Support customer accounted for more than 10 % of net sale in % of net sale in 2009 , 2008 or 2007 . net sale in 2009 , 2008 or 2007 . The Company in 2009 , 2008 or 2007 . The Company also sell those they currently offer . 9 Table of Contents The Company requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company belief include , without limitation , 3M Co. , Advanced Micro Devices , Avago Technologies Ltd. , 10 Table of Contents Broadcom Corp. and development expenditure totaled $ 1.3 billion , $ 1.1 billion $ 1.3 billion , $ 1.1 billion and $ 782 million $ 1.1 billion and $ 782 million in 2009 , 2008 and $ 782 million in 2009 , 2008 and 2007 , 782 million in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . Patents , right of third party . 11 Table of Contents Foreign and largest geographic marketplace . Approximately 54 % of the Company ’ ’ s net sale in 2009 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , “ Segment Information and The Company also offer a 90-day basic warranty for it service condition or operating result . 12 Table of Contents Employees As Contents Employees As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had approximately , the Company had approximately 34,300 full-time equivalent employee and an equivalent employee and an additional 2,500 full-time equivalent temporary employee and s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( “ s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of currently assigned to them . 13 Table of Contents Uncertainty about intensify a competitor attempt to 14 Table of Contents imitate the component and manufacturing requirement for 30 to 150 day . Because manufacturing requirement for 30 to 150 day . Because the Company source , the Company is 15 Table of Contents subject to compared to level achieved during 2009 and 2008 , due largely level achieved during 2009 and 2008 , due largely to the to Part II , Item 7 , “ Management ’ s of substantially all of the 16 Table of Contents Company ’ is vigorously defending more than 47 patent infringement case , 27 47 patent infringement case , 27 of which were filed during which were filed during fiscal 2009 , and several pending claim predicted with certainty . Should 17 Table of Contents the Company affected . With the June 2007 introduction of iPhone , the . Mac OS X Version 10.5 Leopard ( “ Mac OS which became available in October 2007 , includes a new feature s device may suffer . 18 Table of Contents The Company and uncertainty . Through September 26 , 2009 , the Company . Through September 26 , 2009 , the Company had opened , the Company had opened 273 retail store . The Company term ranging from five to 20 year , the majority of s due diligence . Because 19 Table of Contents these new award for retaining employee . 20 Table of Contents Political event condition and operating result . 21 Table of Contents The Company , the Company ha investment 22 Table of Contents both domestically the Annual Report on Form 10-K for the year ended September for the year ended September 30 , 2006 gave rise to year ended September 30 , 2006 gave rise to litigation and in Part I , Item 3 , “ Legal Proceedings , jurisdiction in which the Company 23 Table of Contents operates , and operating result . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company owned and Company owned and leased approximately 19.7 million square foot of space total leased space wa approximately 4.5 million square foot , of foot , of which approximately 2.0 million square foot wa retail the U.S. As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company owned a , California and , during 2009 , purchased additional land in demand for it product . 24 Table of Contents Item 3 24 Table of Contents Item 3 . Legal Proceedings As of Legal Proceedings As of September 26 , 2009 , the end As of September 26 , 2009 , the end of the during the fourth quarter of 2009 that did not individually or Board of Directors on May 19 , 2005 in Santa Clara Directors on May 19 , 2005 in Santa Clara County Superior the Company ’ s March 14 , 2005 , proxy statement ’ s March 14 , 2005 , proxy statement wa false annual meeting held on April 21 , 2005 . Plaintiff , held on April 21 , 2005 . Plaintiff , who ostensibly the Company . On July 27 , 2005 , plaintiff filed . On July 27 , 2005 , plaintiff filed an amended individual shareholder . On January 10 , 2006 , the Court . On January 10 , 2006 , the Court sustained defendant second amended complaint on February 7 , 2006 , and the complaint on February 7 , 2006 , and the Company filed After a hearing on June 13 , 2006 , the Court hearing on June 13 , 2006 , the Court sustained the the director . On July 24 , 2006 , plaintiff filed . On July 24 , 2006 , plaintiff filed a third grant to certain officer in 2003 and 2004 and an option certain officer in 2003 and 2004 and an option grant to ’ s CEO in January 2000 . The Company filed a amended complaint . On January 30 , 2007 , the Court . On January 30 , 2007 , the Court sustained the to amend . On May 8 , 2007 , plaintiff filed . On May 8 , 2007 , plaintiff filed a fourth to amend , on October 12 , 2007 . On October , on October 12 , 2007 . On October 25 , , 2007 . On October 25 , 2007 , the Court . On October 25 , 2007 , the Court entered a with prejudice . On November 26 , 2007 , plaintiff filed . On November 26 , 2007 , plaintiff filed a notice appeal is scheduled for October 29 , 2009 . Birdsong v. scheduled for October 29 , 2009 . Birdsong v. Apple Computer wa initially filed on January 30 , 2006 in the United filed on January 30 , 2006 in the United States District ) wa filed on January 31 , 2006 in the United filed on January 31 , 2006 in the United States District the four-year period before January 31 , 2006 . The Birdsong period before January 31 , 2006 . The Birdsong action wa Company filed a motion to 25 Table of Contents dismiss on of Contents dismiss on November 3 , 2006 , plaintiff agreed dismiss on November 3 , 2006 , plaintiff agreed not to second amended complaint on January 16 , 2007 . That complaint complaint on January 16 , 2007 . That complaint alleges California Louisiana sub-class . On March 1 , 2007 , the Company . On March 1 , 2007 , the Company filed a which wa heard on June 4 , 2007 . On December heard on June 4 , 2007 . On December 14 , , 2007 . On December 14 , 2007 , the Court . On December 14 , 2007 , the Court issued an the complaint . On January 11 , 2008 , plaintiff filed . On January 11 , 2008 , plaintiff filed a third ’ fee . On February 15 , 2008 , the Company . On February 15 , 2008 , the Company filed a amended complaint . On June 16 , 2008 , the Court . On June 16 , 2008 , the Court granted the with prejudice . On July 11 , 2008 , plaintiff filed . On July 11 , 2008 , plaintiff filed a notice appeal took place on October 8 , 2009 . A similar place on October 8 , 2009 . A similar complaint , , Canada , on February 1 , 2006 , seeking authorization , on February 1 , 2006 , seeking authorization to institute amend took place on April 24 , 2009 , and the place on April 24 , 2009 , and the Court denied County Superior Court on February 17 , 2005 . The initial Court on February 17 , 2005 . The initial complaint alleged other relief . On May 2 , 2005 , plaintiff filed . On May 2 , 2005 , plaintiff filed an amended false advertising . On May 9 , 2005 , the Court . On May 9 , 2005 , the Court granted the in it entirety on November 10 , 2005 . The Court entirety on November 10 , 2005 . The Court granted plaintiff an amended complaint on December 29 , 2005 . Plaintiffs ’ complaint on December 29 , 2005 . Plaintiffs ’ amended complaint the amended complaint on January 31 , 2006 , which the complaint on January 31 , 2006 , which the Court sustained the Court sustained on March 3 , 2006 on sixteen of sustained on March 3 , 2006 on sixteen of seventeen cause granted in part on September 9 , 2006 . Plaintiffs filed part on September 9 , 2006 . Plaintiffs filed a further further amended complaint on September 21 , 2006 . On October complaint on September 21 , 2006 . On October 2 , , 2006 . On October 2 , 2006 , the Company . On October 2 , 2006 , the Company filed an affirmative defense . On November 30 , 2007 , the Company . On November 30 , 2007 , the Company filed a Fifth Amended Complaint on March 19 , 2008 and a Corrected Complaint on March 19 , 2008 and a Corrected Fifth Amended Fifth Amended Complaint on April 1 , 2008 . The Company Complaint on April 1 , 2008 . The Company filed an Fifth Amended Complaint on April 18 , 2008 . The Company Complaint on April 18 , 2008 . The Company filed a by the Court on June 24 , 2008 , with leave Court on June 24 , 2008 , with leave to amend Sixth Amended Complaint on July 14 , 2008 and a Seventh Complaint on July 14 , 2008 and a Seventh Amended Complaint Seventh Amended Complaint on August 22 , 2008 , adding three Complaint on August 22 , 2008 , adding three new reseller reseller plaintiff . On August 22 , 2008 , plaintiff also . On August 22 , 2008 , plaintiff also filed a consumer class . On September 22 , 2008 , the Company . On September 22 , 2008 , the Company filed it , and also filed a 26 Table of Contents demurrer to the Court heard on January 30 , 2009 . The Court heard on January 30 , 2009 . The Court sustained the the reseller claim on February 24 , 2009 , and on claim on February 24 , 2009 , and on March 26 2009 , and on March 26 , 2009 , the Company and on March 26 , 2009 , the Company filed a the Court granted on November 10 , 2008 . Plaintiffs petitioned granted on November 10 , 2008 . Plaintiffs petitioned the Court of Appeal denied on December 17 , 2008 . On December denied on December 17 , 2008 . On December 19 , , 2008 . On December 19 , 2008 , the Court . On December 19 , 2008 , the Court held a take place because on February 23 , 2009 , Hon . because on February 23 , 2009 , Hon . Jamie A. of Appeal denied on May 19 , 2009 . The case denied on May 19 , 2009 . The case ha been claim took place on July 14 , 2009 . The Company place on July 14 , 2009 . The Company ha filed reseller class is due November 16 , 2009 . Harvey v. is due November 16 , 2009 . Harvey v. Apple Inc filed this action on August 6 , 2007 in the United action on August 6 , 2007 in the United States District of U.S. Patent No . 6,753,671 entitled “ Recharger for use and U.S. Patent No . 6,762,584 entitled “ Recharger for use filed an answer on October 12 , 2007 denying all material answer on October 12 , 2007 denying all material allegation and and invalidity . On April 7 , 2008 , plaintiff filed . On April 7 , 2008 , plaintiff filed an amended of U.S. Patent No . 6,753,671 . On April 28 , . 6,753,671 . On April 28 , 2008 , the Company . On April 28 , 2008 , the Company filed an hearing is set for October 28 , 2009 , and trial set for October 28 , 2009 , and trial is scheduled trial is scheduled for April 5 , 2010 . On February scheduled for April 5 , 2010 . On February 3 , , 2010 . On February 3 , 2009 , the Court . On February 3 , 2009 , the Court stayed the s allowance of the ‘ 671 reissue patent . On July reissue patent . On July 7 , 2009 , the Company . On July 7 , 2009 , the Company filed a of California . On September 19 , 2009 , the Company . On September 19 , 2009 , the Company filed a Markman hearing set for October 28 , 2009 , given the set for October 28 , 2009 , given the still pending regarding U.S. Patent No . 6,753,671 . Honeywell International , Inc. filed this action on October 6 , 2004 in the United action on October 6 , 2004 in the United States District of U.S. Patent No . 5,280,371 entitled “ Directional Diffuser for filed an answer on December 21 , 2004 denying all material answer on December 21 , 2004 denying all material allegation and manufacturer supplier . On May 18 , 2005 the Court stayed . On May 18 , 2005 the Court stayed the case an amended complaint on November 7 , 2005 adding additional defendant complaint on November 7 , 2005 adding additional defendant and expanding yet due . On April 2 , 2008 , the Court . On April 2 , 2008 , the Court lifted the are licensed under the ‘ 371 patent . On October 31 371 patent . On October 31 , 2008 , the Company . On October 31 , 2008 , the Company filed a are licensed under the ‘ 371 patent . A hearing on ha not been rescheduled . 27 Table of Contents In re , Inc. Beginning on October 19 , 2005 , eight complaint Beginning on October 19 , 2005 , eight complaint were filed Whyte pursuant to an April 17 , 2006 order of the to an April 17 , 2006 order of the Judicial Panel Amended Master Complaint on September 21 , 2006 , alleging violation Complaint on September 21 , 2006 , alleging violation of California putative plaintiff class : ( 1 ) all U.S. resident ( the screen ; and ( 2 ) all iPod nano purchaser the Master Complaint on November 20 , 2006 . The two Complaint on November 20 , 2006 . The two California State action were coordinated on May 4 , 2006 , and assigned coordinated on May 4 , 2006 , and assigned to the Class Action Complaint on June 8 , 2006 , alleging violation Complaint on June 8 , 2006 , alleging violation of California Consolidated Amended Complaint on October 6 , 2006 . The party Complaint on October 6 , 2006 . The party have reached a settlement and on April 28 , 2009 , the Court and on April 28 , 2009 , the Court granted final the settlement . On May 21 , 2009 , an objector . On May 21 , 2009 , an objector filed a against the Company on April 24 , 2007 in the United Company on April 24 , 2007 in the United States District of U.S. Patent No . 7,117,516 , entitled “ Method and filed an answer on July 2 , 2007 , denying all answer on July 2 , 2007 , denying all material allegation of U.S. Patent No . 5,724,567 . The trial is scheduled trial is scheduled for November 9 , 2009 . The Company scheduled for November 9 , 2009 . The Company ha filed of U.S. Patent No . 7,117,516 . The Markman hearing took hearing took place on October 8 , 2008 , and the place on October 8 , 2008 , and the Court issued it Markman ruling on January 12 , 2009 . The Company ruling on January 12 , 2009 . The Company filed a of inequitable conduct on April 10 , 2009 , and filed conduct on April 10 , 2009 , and filed motion for of written description on April 30 , 2009 . The Company description on April 30 , 2009 . The Company ha also to U.S. Patent No . 5,724,567 . The Company ha also Gateway , Inc. on August 28 , 2007 in the United Inc. on August 28 , 2007 in the United States District of U.S. Patent No . 7,009,655 , entitled “ Method and complaint wa served on November 7 , 2007 . The amended served on November 7 , 2007 . The amended complaint seek other relief . On January 25 , 2008 , the Company . On January 25 , 2008 , the Company filed an filed an answer to the 28 Table of Contents complaint denying hearing is set for August 4 , 2010 and trial is set for August 4 , 2010 and trial is scheduled for trial is scheduled for January 4 , 2011 . Nokia Corporation scheduled for January 4 , 2011 . Nokia Corporation v. Apple against the Company on October 22 , 2009 in the United Company on October 22 , 2009 in the United States District of U.S. Patent No . 5,802,465 , U.S. Patent No . , U.S. Patent No . 5,862,178 , U.S. Patent No . , U.S. Patent No . 5,946,651 , U.S. Patent No . , U.S. Patent No . 6,359,904 , U.S. Patent No . , U.S. Patent No . 6,694,135 , U.S. Patent No . , U.S. Patent No . 6,755,548 , U.S. Patent No . , U.S. Patent No . 6,882,727 , U.S. Patent No . , U.S. Patent No . 7,009,940 , U.S. Patent No . , U.S. Patent No . 7,092,672 , and U.S. Patent No and U.S. Patent No . 7,403,621 . The complaint alleges that the GSM , UMTS and 802.11 wireless communication standard , and against the Company on January 16 , 2007 in the United Company on January 16 , 2007 in the United States District of U.S. Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , Patent Nos . 5,710,906 , 5,813,036 and 6,405,291 , all entitled . 5,710,906 , 5,813,036 and 6,405,291 , all entitled “ Predictive filed an answer on April 17 , 2007 denying all material answer on April 17 , 2007 denying all material allegation and hearing took place on November 26 , 2008 and the Court place on November 26 , 2008 and the Court issued it it Markman ruling on December 5 , 2008 . On April ruling on December 5 , 2008 . On April 3 , , 2008 . On April 3 , 2009 , the Court . On April 3 , 2009 , the Court ruled that the accused computer sold between 2005 and 2007 infringed the ’ computer sold between 2005 and 2007 infringed the ’ 291 patent and 2007 infringed the ’ 291 patent . A trial regarding and willfulness commenced on April 17 , 2009 . On April commenced on April 17 , 2009 . On April 23 , , 2009 . On April 23 , 2009 , the jury . On April 23 , 2009 , the jury returned a infringed , and awarded $ 19 million in damage . On in damage . On May 1 , 2009 , plaintiff filed . On May 1 , 2009 , plaintiff filed a motion seeking a total of $ 31 million plus attorney ’ fee Office in Tokyo on January 23 , 2007 alleging infringement by Tokyo on January 23 , 2007 alleging infringement by the Company of Japanese Patent No . 3852854 , entitled “ Touch Operation held a hearing on March 22 , 2007 . The Customs hearing on March 22 , 2007 . The Customs Office rejected action against Saito on February 6 , 2007 in the Tokyo Saito on February 6 , 2007 in the Tokyo District Court a declaration that the ‘ 854 patent is invalid and not at a hearing on June 30 , 2009 . St-Germain v. hearing on June 30 , 2009 . St-Germain v. Apple Canada , Canada , on August 5 , 2005 , seeking authorization , on August 5 , 2005 , seeking authorization to institute wa applied to the iPod 29 Table of Contents purchase price price in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 but later declared 2003 and December 14 , 2004 but later declared invalid by certification hearing took place January 13 , 2006 . On February took place January 13 , 2006 . On February 24 , , 2006 . On February 24 , 2006 , the Court . On February 24 , 2006 , the Court granted class the last week of March 2006 . The trial wa conducted trial wa conducted on October 15 and 16 , 2007 . conducted on October 15 and 16 , 2007 . On January October 15 and 16 , 2007 . On January 11 , , 2007 . On January 11 , 2008 , the Court . On January 11 , 2008 , the Court issued a the class is comprised of 20,000 person who purchased an iPod iPod in Quebec between December 12 , 2003 and December 14 Quebec between December 12 , 2003 and December 14 , 2004 12 , 2003 and December 14 , 2004 . The Court 2003 and December 14 , 2004 . The Court ordered the collective recovery award by February 23 , 2008 . On February award by February 23 , 2008 . On February 11 , , 2008 . On February 11 , 2008 , the Company . On February 11 , 2008 , the Company filed an appeal is set for October 27 , 2009 . The Apple set for October 27 , 2009 . The Apple iPod iTunes purported class action on January 3 , 2005 in the United action on January 3 , 2005 in the United States District alleged violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & motion to dismiss on February 10 , 2005 . On September dismiss on February 10 , 2005 . On September 9 , , 2005 . On September 9 , 2005 , the Court . On September 9 , 2005 , the Court denied the an amended complaint on September 23 , 2005 and the Company complaint on September 23 , 2005 and the Company filed an filed an answer on October 18 , 2005 . In August answer on October 18 , 2005 . In August 2006 , , 2005 . In August 2006 , the Court dismissed Slattery Rosen ) . On November 2 , 2006 , the Company . On November 2 , 2006 , the Company filed an purported class action on July 21 , 2006 in the United action on July 21 , 2006 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On November 3 , 2006 , the Company . On November 3 , 2006 , the Company filed a the complaint . On December 20 , 2006 , the Court . On December 20 , 2006 , the Court denied the to dismiss . On January 11 , 2007 , the Company . On January 11 , 2007 , the Company filed an numerous defense . On March 20 , 2007 , the Court . On March 20 , 2007 , the Court consolidated the a consolidated complaint on April 19 , 2007 . On June complaint on April 19 , 2007 . On June 6 , , 2007 . On June 6 , 2007 , the Company . On June 6 , 2007 , the Company filed an affirmative defense . On July 17 , 2008 , plaintiff filed . On July 17 , 2008 , plaintiff filed a motion class certification and on October 17 , 2008 , the Company and on October 17 , 2008 , the Company filed it hearing took place on December 16 , 2008 . On December place on December 16 , 2008 . On December 22 , , 2008 . On December 22 , 2008 , the Court . On December 22 , 2008 , the Court granted certification to dismiss . On February 13 , 2009 , the Company . On February 13 , 2009 , the Company filed a tying claim . On May 15 , 2009 , the Court . On May 15 , 2009 , the Court issued an pursue a rule of reason 30 Table of Contents tying claim tying claim . On July 17 , 2009 , the Court . On July 17 , 2009 , the Court invited the relief sought . On August 3 , 2009 , the Company . On August 3 , 2009 , the Company filed a tying claim . On August 31 , 2009 , the Company . On August 31 , 2009 , the Company filed a seeking decertification of the Rule 23 ( b ) ( 3 23 ( b ) ( 3 ) damage class or alternatively claim took place on October 5 , 2009 . A related place on October 5 , 2009 . A related complaint , , wa filed on December 31 , 2007 in the United filed on December 31 , 2007 in the United States District alleges violation of §§1 and 2 of the Sherman Act ( of the Sherman Act ( 15 U.S.C . §§1 and 2 15 U.S.C . §§1 and 2 ) , California Business & other relief . On February 21 , 2008 , the Company . On February 21 , 2008 , the Company filed an numerous defense . On February 23 , 2009 , plaintiff filed . On February 23 , 2009 , plaintiff filed a motion class certification and on April 20 , 2009 , the Company and on April 20 , 2009 , the Company filed it motion took place on June 30 , 2009 . On July place on June 30 , 2009 . On July 17 , , 2009 . On July 17 , 2009 , the Court . On July 17 , 2009 , the Court denied certification and other defendant on August 5 , 2005 in the United defendant on August 5 , 2005 in the United States District of U.S. Patent No . 6,665,797 entitled “ Protection of Software filed an answer on October 31 , 2005 denying all material answer on October 31 , 2005 denying all material allegation and affirmative defense . On October 28 , 2005 , the Company . On October 28 , 2005 , the Company and the which wa granted on August 31 , 2006 . On July granted on August 31 , 2006 . On July 24 , , 2006 . On July 24 , 2007 , the Company . On July 24 , 2007 , the Company filed a Office granted . On July 25 , 2007 , the Company . On July 25 , 2007 , the Company filed a the Court granted on October 4 , 2007 . On July granted on October 4 , 2007 . On July 21 , , 2007 . On July 21 , 2009 , the U.S. . On July 21 , 2009 , the U.S. Patent and asserted claim except for claim 16 . On September 20 , claim 16 . On September 20 , 2009 , plaintiff filed . On September 20 , 2009 , plaintiff filed a Notice purported class action on November 7 , 2006 in the United action on November 7 , 2006 in the United States District motion to dismiss on January 19 , 2007 , which the dismiss on January 19 , 2007 , which the Court granted the Court granted on March 13 , 2007 . Plaintiffs filed granted on March 13 , 2007 . Plaintiffs filed an amended an amended complaint on March 26 , 2007 . The Company complaint on March 26 , 2007 . The Company filed a motion to dismiss on August 16 , 2007 , which wa dismiss on August 16 , 2007 , which wa heard on which wa heard on October 4 , 2007 . The Court heard on October 4 , 2007 . The Court ha not Jobs et al . ( 2006 Action ) Plaintiffs filed this purported class action on August 24 , 2006 , in the action on August 24 , 2006 , in the United States current and former officer and 31 Table of Contents director alleging financial statement . On January 19 , 2007 , the Court . On January 19 , 2007 , the Court appointed the lead plaintiff . On March 23 , 2007 , plaintiff filed . On March 23 , 2007 , plaintiff filed a Consolidated and asserts claim under Section 14 ( a ) and 20 14 ( a ) and 20 ( a ) of the motion to dismiss on June 8 , 2007 , which wa dismiss on June 8 , 2007 , which wa heard on which wa heard on September 7 , 2007 . On November heard on September 7 , 2007 . On November 14 , , 2007 . On November 14 , 2007 , the Court . On November 14 , 2007 , the Court issued an derivative case . On December 14 , 2007 , plaintiff filed . On December 14 , 2007 , plaintiff filed a motion action complaint . On January 23 , 2008 , defendant filed . On January 23 , 2008 , defendant filed an opposition motion wa heard on March 21 , 2008 . On May heard on March 21 , 2008 . On May 14 , , 2008 . On May 14 , 2008 , the Court . On May 14 , 2008 , the Court issued an dismissing the case on June 12 , 2008 . On June case on June 12 , 2008 . On June 17 , , 2008 . On June 17 , 2008 , plaintiff filed . On June 17 , 2008 , plaintiff filed a notice appeal took place on October 7 , 2009 . Vogel v. place on October 7 , 2009 . Vogel v. Apple Inc. , et al . ( 2008 Action ) Plaintiff filed this purported class action on June 27 , 2008 , in the action on June 27 , 2008 , in the United States similar to those in the 2006 Vogel v. Jobs et al that wa dismissed on June 12 , 2008 , a described dismissed on June 12 , 2008 , a described above . and asserts claim under Sections 10 ( b ) and 20 10 ( b ) and 20 ( a ) of the unspecified amount . On July 22 , 2008 , the Court . On July 22 , 2008 , the Court stayed this pending the appeal in the 2006 Action . Item 4 . the 2006 Action . Item 4 . Submission of Matters to of Security Holders None . 32 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Second Quarter First Quarter Fiscal 2009 price range per common share range per common share $ 188.90 - $ 134.42 $ 146.40 share $ 188.90 - $ 134.42 $ 146.40 - $ 102.61 188.90 - $ 134.42 $ 146.40 - $ 102.61 $ 109.98 134.42 $ 146.40 - $ 102.61 $ 109.98 - $ 78.20 146.40 - $ 102.61 $ 109.98 - $ 78.20 $ 119.68 102.61 $ 109.98 - $ 78.20 $ 119.68 - $ 79.14 109.98 - $ 78.20 $ 119.68 - $ 79.14 Fiscal 2008 78.20 $ 119.68 - $ 79.14 Fiscal 2008 price range per 119.68 - $ 79.14 Fiscal 2008 price range per common share range per common share $ 180.91 - $ 120.68 $ 192.24 share $ 180.91 - $ 120.68 $ 192.24 - $ 142.52 180.91 - $ 120.68 $ 192.24 - $ 142.52 $ 200.50 120.68 $ 192.24 - $ 142.52 $ 200.50 - $ 115.44 192.24 - $ 142.52 $ 200.50 - $ 115.44 $ 202.96 142.52 $ 200.50 - $ 115.44 $ 202.96 - $ 150.63 200.50 - $ 115.44 $ 202.96 - $ 150.63 Holders As 115.44 $ 202.96 - $ 150.63 Holders As of October 16 150.63 Holders As of October 16 , 2009 , there were As of October 16 , 2009 , there were 30,573 shareholder , 2009 , there were 30,573 shareholder of record . Dividends pay cash dividend in either 2009 or 2008 . The Company dividend in either 2009 or 2008 . The Company anticipates that and Affiliated Purchasers None . 33 Table of Contents Company Stock , the S & P 500 Composite Index and the S . The graph assumes $ 100 wa invested in each of , the S & P 500 Composite Index , and the Computer Hardware Index on September 30 , 2004 . Data point Index on September 30 , 2004 . Data point on the stock price performance . September 2004 September 2005 September 2006 September performance . September 2004 September 2005 September 2006 September 2007 September September 2004 September 2005 September 2006 September 2007 September 2008 September September 2005 September 2006 September 2007 September 2008 September 2009 Apple September 2006 September 2007 September 2008 September 2009 Apple Inc. $ September 2007 September 2008 September 2009 Apple Inc. $ 100 $ September 2009 Apple Inc. $ 100 $ 277 $ 397 $ Apple Inc. $ 100 $ 277 $ 397 $ 792 $ $ 100 $ 277 $ 397 $ 792 $ 587 $ $ 277 $ 397 $ 792 $ 587 $ 957 S $ 397 $ 792 $ 587 $ 957 S & P $ 792 $ 587 $ 957 S & P 500 Composite $ 957 S & P 500 Composite Index $ 100 $ P 500 Composite Index $ 100 $ 112 $ 124 $ Composite Index $ 100 $ 112 $ 124 $ 145 $ $ 100 $ 112 $ 124 $ 145 $ 113 $ $ 112 $ 124 $ 145 $ 113 $ 105 S $ 124 $ 145 $ 113 $ 105 S & P $ 145 $ 113 $ 105 S & P Computer Hardware P Computer Hardware Index $ 100 $ 115 $ 123 $ Hardware Index $ 100 $ 115 $ 123 $ 181 $ $ 100 $ 115 $ 123 $ 181 $ 152 $ $ 115 $ 123 $ 181 $ 152 $ 180 34 $ 123 $ 181 $ 152 $ 180 34 Table of $ 181 $ 152 $ 180 34 Table of Contents Item 181 $ 152 $ 180 34 Table of Contents Item 6 34 Table of Contents Item 6 . Selected Financial Data The the five year ended September 26 , 2009 , is not year ended September 26 , 2009 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2009 2008 2007 2006 2005 Net share amount ) . 2009 2008 2007 2006 2005 Net sale amount ) . 2009 2008 2007 2006 2005 Net sale $ ) . 2009 2008 2007 2006 2005 Net sale $ 36,537 . 2009 2008 2007 2006 2005 Net sale $ 36,537 $ 2006 2005 Net sale $ 36,537 $ 32,479 $ 24,006 $ Net sale $ 36,537 $ 32,479 $ 24,006 $ 19,315 $ $ 36,537 $ 32,479 $ 24,006 $ 19,315 $ 13,931 Net $ 32,479 $ 24,006 $ 19,315 $ 13,931 Net income $ $ 24,006 $ 19,315 $ 13,931 Net income $ 5,704 $ $ 13,931 Net income $ 5,704 $ 4,834 $ 3,496 $ Net income $ 5,704 $ 4,834 $ 3,496 $ 1,989 $ $ 5,704 $ 4,834 $ 3,496 $ 1,989 $ 1,328 Earnings $ 4,834 $ 3,496 $ 1,989 $ 1,328 Earnings per common $ 3,496 $ 1,989 $ 1,328 Earnings per common share : common share : Basic $ 6.39 $ 5.48 $ 4.04 $ : Basic $ 6.39 $ 5.48 $ 4.04 $ 2.36 $ $ 6.39 $ 5.48 $ 4.04 $ 2.36 $ 1.64 Diluted $ 5.48 $ 4.04 $ 2.36 $ 1.64 Diluted $ 6.29 $ 4.04 $ 2.36 $ 1.64 Diluted $ 6.29 $ 5.36 2.36 $ 1.64 Diluted $ 6.29 $ 5.36 $ 3.93 $ 1.64 Diluted $ 6.29 $ 5.36 $ 3.93 $ 2.27 $ $ 6.29 $ 5.36 $ 3.93 $ 2.27 $ 1.55 Cash $ 5.36 $ 3.93 $ 2.27 $ 1.55 Cash dividend declared $ 3.93 $ 2.27 $ 1.55 Cash dividend declared per common earnings per share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted per share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 share : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 : Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 Basic 893,016 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 881,592 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 856,878 Cash 864,595 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 856,878 Cash , 844,058 808,439 Diluted 907,005 902,139 889,292 877,526 856,878 Cash , cash 808,439 Diluted 907,005 902,139 889,292 877,526 856,878 Cash , cash equivalent Diluted 907,005 902,139 889,292 877,526 856,878 Cash , cash equivalent and equivalent and marketable security $ 33,992 $ 24,490 $ 15,386 $ marketable security $ 33,992 $ 24,490 $ 15,386 $ 10,110 $ $ 33,992 $ 24,490 $ 15,386 $ 10,110 $ 8,261 Total $ 24,490 $ 15,386 $ 10,110 $ 8,261 Total asset $ $ 15,386 $ 10,110 $ 8,261 Total asset $ 53,851 $ $ 8,261 Total asset $ 53,851 $ 39,572 $ 25,347 $ Total asset $ 53,851 $ 39,572 $ 25,347 $ 17,205 $ $ 53,851 $ 39,572 $ 25,347 $ 17,205 $ 11,516 Long-term $ 39,572 $ 25,347 $ 17,205 $ 11,516 Long-term debt $ $ 25,347 $ 17,205 $ 11,516 Long-term debt $ — $ $ — Total liability $ 26,019 $ 18,542 $ 10,815 $ Total liability $ 26,019 $ 18,542 $ 10,815 $ 7,221 $ $ 26,019 $ 18,542 $ 10,815 $ 7,221 $ 4,088 Shareholders $ 18,542 $ 10,815 $ 7,221 $ 4,088 Shareholders ’ equity $ 10,815 $ 7,221 $ 4,088 Shareholders ’ equity $ 27,832 4,088 Shareholders ’ equity $ 27,832 $ 21,030 $ 14,532 $ ’ equity $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ $ 27,832 $ 21,030 $ 14,532 $ 9,984 $ 7,428 Item $ 21,030 $ 14,532 $ 9,984 $ 7,428 Item 7 . $ 14,532 $ 9,984 $ 7,428 Item 7 . Management ’ $ 9,984 $ 7,428 Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is , and creative market . 35 Table of Contents The Company market . The Company had 273 store open a of September store open a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company ha also Company distributes iPhone in over 80 country , through it direct and certain other country . 36 Table of Contents The Company and accompanying note . Note 1 , “ Summary of Significant Financial Statements in this Form 10-K describes the significant accounting policy basis over the currently estimated 24-month economic life of these product subscription accounting change , the 37 Table of Contents future rate and retail channel partner . 38 Table of Contents The allowance requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is to develop these update . 39 Table of Contents Income Taxes that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal Proceedings ” and in Note 8 , “ Commitments and Contingencies . Net Sales Fiscal year 2009 , 2008 and 2007 spanned Sales Fiscal year 2009 , 2008 and 2007 spanned 52 week year 2009 , 2008 and 2007 spanned 52 week . An , 2008 and 2007 spanned 52 week . An additional week quarter with calendar quarter . 40 Table of Contents The following the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million , except per unit amount ) : 2009 Change 2008 Change 2007 Net amount ) : 2009 Change 2008 Change 2007 Net Sales by : 2009 Change 2008 Change 2007 Net Sales by Operating Segment : Americas net sale $ 16,142 11 % $ 14,573 26 Americas net sale $ 16,142 11 % $ 14,573 26 % $ 16,142 11 % $ 14,573 26 % $ 11,596 Europe 16,142 11 % $ 14,573 26 % $ 11,596 Europe net $ 14,573 26 % $ 11,596 Europe net sale 9,365 23 $ 11,596 Europe net sale 9,365 23 % 7,622 40 % 11,596 Europe net sale 9,365 23 % 7,622 40 % 5,460 net sale 9,365 23 % 7,622 40 % 5,460 Japan net sale 9,365 23 % 7,622 40 % 5,460 Japan net sale 23 % 7,622 40 % 5,460 Japan net sale 1,831 21 % 5,460 Japan net sale 1,831 21 % 1,509 39 % 5,460 Japan net sale 1,831 21 % 1,509 39 % 1,082 net sale 1,831 21 % 1,509 39 % 1,082 Retail net sale 1,831 21 % 1,509 39 % 1,082 Retail net sale 21 % 1,509 39 % 1,082 Retail net sale 6,574 4 % 1,082 Retail net sale 6,574 4 % 6,315 53 % 1,082 Retail net sale 6,574 4 % 6,315 53 % 4,115 net sale 6,574 4 % 6,315 53 % 4,115 Other Segments sale 6,574 4 % 6,315 53 % 4,115 Other Segments net 4 % 6,315 53 % 4,115 Other Segments net sale ( net sale ( a ) 2,625 7 % 2,460 40 % sale ( a ) 2,625 7 % 2,460 40 % 1,753 a ) 2,625 7 % 2,460 40 % 1,753 Total net ) 2,625 7 % 2,460 40 % 1,753 Total net sale 7 % 2,460 40 % 1,753 Total net sale $ 36,537 1,753 Total net sale $ 36,537 12 % $ 32,479 35 Total net sale $ 36,537 12 % $ 32,479 35 % $ 36,537 12 % $ 32,479 35 % $ 24,006 Mac 36,537 12 % $ 32,479 35 % $ 24,006 Mac Unit $ 32,479 35 % $ 24,006 Mac Unit Sales by Operating : Americas Mac unit sale 4,120 4 % 3,980 32 % Americas Mac unit sale 4,120 4 % 3,980 32 % 3,019 unit sale 4,120 4 % 3,980 32 % 3,019 Europe Mac sale 4,120 4 % 3,980 32 % 3,019 Europe Mac unit 4 % 3,980 32 % 3,019 Europe Mac unit sale 2,840 3,019 Europe Mac unit sale 2,840 13 % 2,519 39 % Europe Mac unit sale 2,840 13 % 2,519 39 % 1,816 unit sale 2,840 13 % 2,519 39 % 1,816 Japan Mac sale 2,840 13 % 2,519 39 % 1,816 Japan Mac unit 13 % 2,519 39 % 1,816 Japan Mac unit sale 395 1,816 Japan Mac unit sale 395 2 % 389 29 % Japan Mac unit sale 395 2 % 389 29 % 302 unit sale 395 2 % 389 29 % 302 Retail Mac sale 395 2 % 389 29 % 302 Retail Mac unit 2 % 389 29 % 302 Retail Mac unit sale 2,115 302 Retail Mac unit sale 2,115 4 % 2,034 47 % Retail Mac unit sale 2,115 4 % 2,034 47 % 1,386 unit sale 2,115 4 % 2,034 47 % 1,386 Other Segments sale 2,115 4 % 2,034 47 % 1,386 Other Segments Mac 4 % 2,034 47 % 1,386 Other Segments Mac unit sale unit sale ( a ) 926 17 % 793 50 % sale ( a ) 926 17 % 793 50 % 528 a ) 926 17 % 793 50 % 528 Total Mac ) 926 17 % 793 50 % 528 Total Mac unit 17 % 793 50 % 528 Total Mac unit sale 10,396 528 Total Mac unit sale 10,396 7 % 9,715 38 % Total Mac unit sale 10,396 7 % 9,715 38 % 7,051 unit sale 10,396 7 % 9,715 38 % 7,051 Net Sales sale 10,396 7 % 9,715 38 % 7,051 Net Sales by 7 % 9,715 38 % 7,051 Net Sales by Product : Desktops ( b ) $ 4,308 ( 23 ) % $ b ) $ 4,308 ( 23 ) % $ 5,603 39 ( 23 ) % $ 5,603 39 % $ 4,020 Portables 23 ) % $ 5,603 39 % $ 4,020 Portables ( $ 5,603 39 % $ 4,020 Portables ( c ) 9,472 4,020 Portables ( c ) 9,472 9 % 8,673 38 % Portables ( c ) 9,472 9 % 8,673 38 % 6,294 c ) 9,472 9 % 8,673 38 % 6,294 Total Mac ) 9,472 9 % 8,673 38 % 6,294 Total Mac net 9 % 8,673 38 % 6,294 Total Mac net sale 13,780 6,294 Total Mac net sale 13,780 ( 3 ) % 14,276 Mac net sale 13,780 ( 3 ) % 14,276 38 % 13,780 ( 3 ) % 14,276 38 % 10,314 iPod 8,091 ( 3 ) % 14,276 38 % 10,314 iPod 8,091 ( ) % 14,276 38 % 10,314 iPod 8,091 ( 12 ) 14,276 38 % 10,314 iPod 8,091 ( 12 ) % 9,153 % 10,314 iPod 8,091 ( 12 ) % 9,153 10 % 8,091 ( 12 ) % 9,153 10 % 8,305 Other music ( 12 ) % 9,153 10 % 8,305 Other music related ) % 9,153 10 % 8,305 Other music related product and and service ( d ) 4,036 21 % 3,340 34 % service ( d ) 4,036 21 % 3,340 34 % 2,496 d ) 4,036 21 % 3,340 34 % 2,496 iPhone and ) 4,036 21 % 3,340 34 % 2,496 iPhone and related 21 % 3,340 34 % 2,496 iPhone and related product and and service ( e ) 6,754 266 % 1,844 NM 123 service ( e ) 6,754 266 % 1,844 NM 123 Peripherals e ) 6,754 266 % 1,844 NM 123 Peripherals and other 6,754 266 % 1,844 NM 123 Peripherals and other hardware ( other hardware ( f ) 1,470 ( 11 ) % 1,659 ( f ) 1,470 ( 11 ) % 1,659 32 % 1,470 ( 11 ) % 1,659 32 % 1,260 Software , ( 11 ) % 1,659 32 % 1,260 Software , service ) % 1,659 32 % 1,260 Software , service and other other sale ( g ) 2,406 9 % 2,207 46 % sale ( g ) 2,406 9 % 2,207 46 % 1,508 g ) 2,406 9 % 2,207 46 % 1,508 Total net ) 2,406 9 % 2,207 46 % 1,508 Total net sale 9 % 2,207 46 % 1,508 Total net sale $ 36,537 1,508 Total net sale $ 36,537 12 % $ 32,479 35 Total net sale $ 36,537 12 % $ 32,479 35 % $ 36,537 12 % $ 32,479 35 % $ 24,006 Unit 36,537 12 % $ 32,479 35 % $ 24,006 Unit Sales $ 32,479 35 % $ 24,006 Unit Sales by Product : : Desktops ( b ) 3,182 ( 14 ) % 3,712 ( b ) 3,182 ( 14 ) % 3,712 37 % 3,182 ( 14 ) % 3,712 37 % 2,714 Portables ( ( 14 ) % 3,712 37 % 2,714 Portables ( c ) % 3,712 37 % 2,714 Portables ( c ) 7,214 2,714 Portables ( c ) 7,214 20 % 6,003 38 % Portables ( c ) 7,214 20 % 6,003 38 % 4,337 c ) 7,214 20 % 6,003 38 % 4,337 Total Mac ) 7,214 20 % 6,003 38 % 4,337 Total Mac unit 20 % 6,003 38 % 4,337 Total Mac unit sale 10,396 4,337 Total Mac unit sale 10,396 7 % 9,715 38 % Total Mac unit sale 10,396 7 % 9,715 38 % 7,051 unit sale 10,396 7 % 9,715 38 % 7,051 Net sale sale 10,396 7 % 9,715 38 % 7,051 Net sale per 7 % 9,715 38 % 7,051 Net sale per Mac unit sold ( h ) $ 1,326 ( 10 ) % $ h ) $ 1,326 ( 10 ) % $ 1,469 — ( 10 ) % $ 1,469 — % $ 1,463 iPod $ 1,469 — % $ 1,463 iPod unit sale 54,132 ( $ 1,463 iPod unit sale 54,132 ( 1 ) % 54,828 iPod unit sale 54,132 ( 1 ) % 54,828 6 % 54,132 ( 1 ) % 54,828 6 % 51,630 Net sale ( 1 ) % 54,828 6 % 51,630 Net sale per ) % 54,828 6 % 51,630 Net sale per iPod unit sold ( i ) $ 149 ( 11 ) % $ i ) $ 149 ( 11 ) % $ 167 4 ( 11 ) % $ 167 4 % $ 161 iPhone 11 ) % $ 167 4 % $ 161 iPhone unit $ 167 4 % $ 161 iPhone unit sale 20,731 78 $ 161 iPhone unit sale 20,731 78 % 11,627 NM 1,389 161 iPhone unit sale 20,731 78 % 11,627 NM 1,389 ( unit sale 20,731 78 % 11,627 NM 1,389 ( a ) 20,731 78 % 11,627 NM 1,389 ( a ) Other Segments and other hardware accessory . 41 Table of Contents ( g = Not Meaningful Fiscal Year 2009 versus 2008 Net sale during Meaningful Fiscal Year 2009 versus 2008 Net sale during 2009 increased versus 2008 Net sale during 2009 increased $ 4.1 billion or sale during 2009 increased $ 4.1 billion or 12 % compared increased $ 4.1 billion or 12 % compared to 2008 . or 12 % compared to 2008 . Several factor contributed positively and service amounted to $ 6.8 billion in 2009 , an to $ 6.8 billion in 2009 , an increase of $ , an increase of $ 4.9 billion or 266 % compared of $ 4.9 billion or 266 % compared to 2008. iPhone or 266 % compared to 2008. iPhone handset unit sale totaled iPhone handset unit sale totaled 20.7 million during 2009 , which sale totaled 20.7 million during 2009 , which represents an increase which represents an increase of 9.1 million or 78 % during increase of 9.1 million or 78 % during 2009 compared to million or 78 % during 2009 compared to 2008 . This % during 2009 compared to 2008 . This growth is attributed demand for iPhones . iPhone 3GS wa released in the U.S. in the U.S. on June 19 , 2009 and in many U.S. on June 19 , 2009 and in many other country country over the remainder of 2009. iPhone revenue includes the portion product ’ s currently estimated 24-month economic life , a well handset unit sale in both 2009 and 2008 , which generated sale in both 2009 and 2008 , which generated significant amount product and service increased $ 696 million or 21 % during increased $ 696 million or 21 % during 2009 compared to million or 21 % during 2009 compared to 2008 . The % during 2009 compared to 2008 . The increase wa due ’ s geographic segment during 2009 compared to the same period to the same period in 2008 . The Company belief this above , net sale during 2009 were negatively impacted by certain • Mac net sale declined 3 % during 2009 compared to sale declined 3 % during 2009 compared to 2008 , although % during 2009 compared to 2008 , although Mac unit sale Mac unit sale increased by 7 % over the same period Mac unit sold decreased by 10 % during 2009 compared to decreased by 10 % during 2009 compared to 2008 , due % during 2009 compared to 2008 , due primarily to lower sale of Macs accounted for 38 % of the Company ’ s total net sale for 2009 . During 2009 , Mac sale for 2009 . During 2009 , Mac portable system net and unit sale increased by 9 % and 20 % , increased by 9 % and 20 % , respectively , compared , respectively , compared to 2008 . This growth wa driven which wa updated in June 2009 and October 2008 , and in June 2009 and October 2008 , and experienced double digit to the same period in 2008 . The Company also had Mac desktop system decreased by 23 % and 14 % , decreased by 23 % and 14 % , respectively , during % , respectively , during 2009 compared to 2008 . The , during 2009 compared to 2008 . The decrease in net sale of iPods decreased $ 1.1 billion or 12 % during decreased $ 1.1 billion or 12 % during 2009 compared to billion or 12 % during 2009 compared to 2008. iPod unit % during 2009 compared to 2008. iPod unit sale decreased slightly unit sale decreased slightly by 1 % during 2009 compared to slightly by 1 % during 2009 compared to 2008 . Net % during 2009 compared to 2008 . Net sale per iPod per iPod unit sold decreased 11 % to $ 149 in decreased 11 % to $ 149 in 2009 compared to 2008 % to $ 149 in 2009 compared to 2008 , resulting 149 in 2009 compared to 2008 , resulting from lower average introduction of new iPods in 42 Table of Contents September 2009 42 Table of Contents September 2009 and September 2008 and a Contents September 2009 and September 2008 and a stronger U.S. dollar iPod touch . Fiscal Year 2008 versus 2007 Net sale during . Fiscal Year 2008 versus 2007 Net sale during 2008 increased versus 2007 Net sale during 2008 increased 35 % or $ Net sale during 2008 increased 35 % or $ 8.5 billion increased 35 % or $ 8.5 billion from 2007 . Several or $ 8.5 billion from 2007 . Several factor contributed to Mac net sale increased $ 4.0 billion or 38 % during increased $ 4.0 billion or 38 % during 2008 compared to billion or 38 % during 2008 compared to 2007 , while % during 2008 compared to 2007 , while Mac unit sale Mac unit sale increased by 2.7 million unit or 38 % by 2.7 million unit or 38 % . Net sale related s Mac shipment accounted for 44 % of the Company ’ Mac portable product accounted for 62 % of the Company ’ personal computer shipment in both 2008 and 2007 . Net sale shipment in both 2008 and 2007 . Net sale and unit portable product both increased by 38 % during 2008 compared to increased by 38 % during 2008 compared to 2007 . This % during 2008 compared to 2007 . This growth wa attributable portable product line in January 2008 . Growth of the Company sale and unit sale of 39 % and 37 % , sale of 39 % and 37 % , respectively , during % , respectively , during 2008 due primarily to strong sale sale of iPods increased $ 848 million or 10 % during increased $ 848 million or 10 % during 2008 compared to million or 10 % during 2008 compared to 2007 whereas unit % during 2008 compared to 2007 whereas unit sale of iPods unit sale of iPods increased 6 % compared to 2007 . increased 6 % compared to 2007 . The iPod unit growth a price reduction in February 2008. iPod net sale grew faster product and service were $ 1.8 billion for 2008 , with were $ 1.8 billion for 2008 , with iPhone handset unit iPhone handset unit sale totaling 11.6 million . Net sale of product and service were $ 123 million in 2007 , which were $ 123 million in 2007 , which represented sale for product ’ s currently estimated 24-month economic life , a well product and service increased $ 844 million or 34 % during increased $ 844 million or 34 % during 2008 compared to million or 34 % during 2008 compared to 2007 , due % during 2008 compared to 2007 , due primarily to significantly may be found in Note 9 , “ Segment Information and Financial Statements of this Form 10-K. 43 Table of Contents Americas Statements of this Form 10-K. 43 Table of Contents Americas During Table of Contents Americas During 2009 , net sale in the the Americas segment increased $ 1.6 billion or 11 % compared increased $ 1.6 billion or 11 % compared to 2008 . or 11 % compared to 2008 . The increase in net increase in net sale during 2009 wa attributable to the significant Americas Mac net sale decreased 6 % due primarily to lower Mac unit sale increased by 4 % on a year-over-year basis which wa updated in June 2009 and October 2008 . The in June 2009 and October 2008 . The Americas segment represented The Americas segment represented approximately 44 % and 45 % of represented approximately 44 % and 45 % of the Company ’ s total net sale in 2009 and 2008 , respectively . net sale in 2009 and 2008 , respectively . During 2008 2008 , respectively . During 2008 , net sale in the the Americas segment increased $ 3.0 billion or 26 % compared increased $ 3.0 billion or 26 % compared to 2007 . or 26 % compared to 2007 . The primary driver of began shipping iPhone in June 2007 and the growth in iPhone growth in iPhone sale in 2008 resulted from a full year in the fourth quarter of 2008 . The increase in Mac Mac net sale of $ 1.3 billion or 30 % and of $ 1.3 billion or 30 % and Mac unit sale and Mac unit sale of 961 million or 32 % is sale of 961 million or 32 % is attributable to growth which wa upgraded in June 2008 . In 2008 , the in June 2008 . In 2008 , the Americas segment represented , the Americas segment represented 45 % of the Company ’ net sale a compared to 48 % in the same period in the same period of 2007 . Europe During 2009 , of 2007 . Europe During 2009 , net sale in Europe sale in Europe increased $ 1.7 billion or 23 % compared increased $ 1.7 billion or 23 % compared to 2008 . or 23 % compared to 2008 . The increase in net . Mac unit sale increased 13 % in 2009 compared to sale increased 13 % in 2009 compared to 2008 , which % in 2009 compared to 2008 , which wa driven primarily . The Europe segment represented 26 % and 23 % of segment represented 26 % and 23 % of total net sale of total net sale in 2009 and 2008 , respectively . net sale in 2009 and 2008 , respectively . Europe ’ and Mac unit sale increased 40 % and 39 % , sale increased 40 % and 39 % , respectively , during % , respectively , during 2008 compared to 2007 . The , during 2008 compared to 2007 . The main driver of which wa upgraded in June 2008 . Sales of Mac portable , both updated in February 2008 , a well a sale Air , introduced in January 2008 . Mac desktop sale also which wa updated in April 2008 . The Europe segment represented . The Europe segment represented 23 % of total net sale of total net sale in 2008 , consistent with 2007 . in 2008 , consistent with 2007 . Japan Japan ’ s s net sale increased $ 322 million or 21 % in increased $ 322 million or 21 % in 2009 compared to million or 21 % in 2009 compared to 2008 . The % in 2009 compared to 2008 . The key contributor to Mac portable system increased during 2009 compared to 2008 , driven increased during 2009 compared to 2008 , driven primarily by stronger which wa updated in June 2009 and October 2008 . Net in June 2009 and October 2008 . Net sale and unit sale of iPods increased during 2009 compared to 2008 , driven increased during 2009 compared to 2008 , driven by strong demand Japan net sale increased $ 427 million or 39 % in increased $ 427 million or 39 % in 2008 compared to million or 39 % in 2008 compared to 2007 . The % in 2008 compared to 2007 . The primary contributor to price of iPods increased during 2008 compared to 2007 , driven increased during 2008 compared to 2007 , driven by 44 Table to 2007 , driven by 44 Table of Contents strong demand sale and unit sale grew 42 % and 29 % , sale grew 42 % and 29 % , respectively , in % , respectively , in 2008 compared to 2007 due to , in 2008 compared to 2007 due to increase in sale of MacBook Air in January 2008 . Retail Retail net sale Retail net sale increased $ 259 million or 4 % during increased $ 259 million or 4 % during 2009 compared to million or 4 % during 2009 compared to 2008 . The % during 2009 compared to 2008 . The growth in net system . The Company opened 26 new retail store during 2009 26 new retail store during 2009 , including a total of , including a total of 14 international store , ending the , ending the year with 273 store open . This compare open . This compare to 247 store open a of September store open a of September 27 , 2008 and 197 open a of September 27 , 2008 and 197 open store a September 27 , 2008 and 197 open store a of September open store a of September 29 , 2007 . The year-over-year a of September 29 , 2007 . The year-over-year growth rate . With an average of 254 store and 211 store opened average of 254 store and 211 store opened during 2009 and and 211 store opened during 2009 and 2008 , respectively , store opened during 2009 and 2008 , respectively , average revenue per store decreased to $ 25.9 million for 2009 from $ to $ 25.9 million for 2009 from $ 29.9 million in million for 2009 from $ 29.9 million in 2008 . The from $ 29.9 million in 2008 . The Retail segment ’ s net sale grew by 53 % during 2008 compared to grew by 53 % during 2008 compared to 2007 , due % during 2008 compared to 2007 , due in large part opening . The Company opened 50 new retail store during 2008 50 new retail store during 2008 , bringing the total number number of open store to 247 a of September 27 , to 247 a of September 27 , 2008 . This compare a of September 27 , 2008 . This compare to 197 2008 . This compare to 197 open store a of September open store a of September 29 , 2007 . With an a of September 29 , 2007 . With an average of . With an average of 211 store and 178 store opened average of 211 store and 178 store opened during 2008 and and 178 store opened during 2008 and 2007 , respectively , store opened during 2008 and 2007 , respectively , average revenue per store increased to $ 29.9 million for 2008 from $ to $ 29.9 million for 2008 from $ 23.1 million in million for 2008 from $ 23.1 million in 2007 . As from $ 23.1 million in 2007 . As measured by the reported operating income of $ 1.4 billion during 2009 , a of $ 1.4 billion during 2009 , a compared to operating to operating income of $ 1.3 billion and $ 875 million $ 1.3 billion and $ 875 million during 2008 and 2007 and $ 875 million during 2008 and 2007 , respectively . 875 million during 2008 and 2007 , respectively . This increase increase in operating income in 2009 wa driven by increased total net sale attributable to a 20 % increase in average store operating income increased by $ 462 million during 2008 a compared by $ 462 million during 2008 a compared to 2007 due during 2008 a compared to 2007 due primarily to the significant Retail net sale growth of 53 % a compared to 2007 53 % a compared to 2007 . Expansion of the Retail the Retail segment were $ 369 million in 2009 , bringing were $ 369 million in 2009 , bringing the total capital the Retail segment to $ 1.8 billion . As of September billion . As of September 26 , 2009 , the Retail As of September 26 , 2009 , the Retail segment had the Retail segment had approximately 16,500 full-time equivalent employee and had and related facility of $ 1.5 billion . The Company would in net sale of $ 165 million , or 7 % $ 165 million , or 7 % , during 2009 a or 7 % , during 2009 a compared to 2008 reflecting during 2009 a compared to 2008 reflecting strong growth in sale the Asia Pacific region by 4 % and 17 % , region by 4 % and 17 % , respectively , due in net sale of $ 707 million , or 40 % $ 707 million , or 40 % during 2008 a compared , or 40 % during 2008 a compared to 2007 . during 2008 a compared to 2007 . These increase are related all Mac portable system , 45 Table of Contents iPods , s Asia Pacific region grew 109 % compared to 2007 . grew 109 % compared to 2007 . Gross Margin Gross margin the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( gross margin percentage ) : 2009 2008 2007 Net sale $ margin percentage ) : 2009 2008 2007 Net sale $ 36,537 percentage ) : 2009 2008 2007 Net sale $ 36,537 $ 2008 2007 Net sale $ 36,537 $ 32,479 $ 24,006 Cost Net sale $ 36,537 $ 32,479 $ 24,006 Cost of sale $ 36,537 $ 32,479 $ 24,006 Cost of sale 23,397 21,334 $ 24,006 Cost of sale 23,397 21,334 15,852 Gross margin $ 24,006 Cost of sale 23,397 21,334 15,852 Gross margin $ 13,140 Cost of sale 23,397 21,334 15,852 Gross margin $ 13,140 $ 21,334 15,852 Gross margin $ 13,140 $ 11,145 $ 8,154 Gross Gross margin $ 13,140 $ 11,145 $ 8,154 Gross margin percentage $ 13,140 $ 11,145 $ 8,154 Gross margin percentage 36.0 % $ 8,154 Gross margin percentage 36.0 % 34.3 % 34.0 % Gross margin percentage 36.0 % 34.3 % 34.0 % The gross percentage 36.0 % 34.3 % 34.0 % The gross margin percentage The gross margin percentage in 2009 wa 36.0 % compared to margin percentage in 2009 wa 36.0 % compared to 34.3 % wa 36.0 % compared to 34.3 % in 2008 . The compared to 34.3 % in 2008 . The primary driver of driver of the increase in 2009 a compared to 2008 were in 2009 a compared to 2008 were significantly lower commodity and percentage wa relatively flat in 2008 a compared to 2007 . in 2008 a compared to 2007 . The Company expects it compared to level achieved during 2009 and anticipates gross margin level gross margin level of about 34 % in the first quarter in the first quarter of 2010 . This expected decline is in Part I , Item 1A , “ Risk Factors ” the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( except for percentage ) : 2009 2008 2007 Research and development for percentage ) : 2009 2008 2007 Research and development $ percentage ) : 2009 2008 2007 Research and development $ 1,333 2007 Research and development $ 1,333 $ 1,109 $ 782 Percentage and development $ 1,333 $ 1,109 $ 782 Percentage of net $ 1,333 $ 1,109 $ 782 Percentage of net sale 3.6 782 Percentage of net sale 3.6 % 3.4 % 3.3 % of net sale 3.6 % 3.4 % 3.3 % Selling , sale 3.6 % 3.4 % 3.3 % Selling , general and , general and administrative $ 4,149 $ 3,761 $ 2,963 Percentage and administrative $ 4,149 $ 3,761 $ 2,963 Percentage of net $ 4,149 $ 3,761 $ 2,963 Percentage of net sale 11.4 2,963 Percentage of net sale 11.4 % 11.6 % 12.3 % of net sale 11.4 % 11.6 % 12.3 % 46 Table sale 11.4 % 11.6 % 12.3 % 46 Table of Contents % 11.6 % 12.3 % 46 Table of Contents Research and R & D expenditure increased 20 % or $ 224 million increased 20 % or $ 224 million to $ 1.3 billion $ 224 million to $ 1.3 billion in 2009 compared to to $ 1.3 billion in 2009 compared to 2008 . These billion in 2009 compared to 2008 . These increase were due . In addition , $ 71 million of software development cost R & D expense during 2009 , compared to $ 11 2009 , compared to $ 11 million of software development cost software development cost capitalized during 2008 . Although total R & R & D expense increased 20 % during 2009 , it expense increased 20 % during 2009 , it remained relatively flat of net sale given the 12 % increase in revenue in % increase in revenue in 2009 . The Company continues to for R & D increased 42 % or $ 327 million increased 42 % or $ 327 million to $ 1.1 billion $ 327 million to $ 1.1 billion in 2008 compared to to $ 1.1 billion in 2008 compared to 2007 . These billion in 2008 compared to 2007 . These increase were due an increase in headcount in 2008 and higher stock-based compensation expense stock-based compensation expense . In 2008 , $ 11 million of . In 2008 , $ 11 million of software development cost R & D expense for 2007 excluded $ 75 million of expense for 2007 excluded $ 75 million of capitalized software development R & D expense increased 42 % during 2008 , it expense increased 42 % during 2008 , it remained relatively flat of net sale given the 35 % increase in revenue during % increase in revenue during 2008 . Selling , General and & A expenditure increased $ 388 million or 10 % to increased $ 388 million or 10 % to $ 4.1 billion or 10 % to $ 4.1 billion in 2009 compared to to $ 4.1 billion in 2009 compared to 2008 . These billion in 2009 compared to 2008 . These increase are due SG & A increased $ 798 million or 27 % to increased $ 798 million or 27 % to $ 3.8 billion or 27 % to $ 3.8 billion in 2008 compared to to $ 3.8 billion in 2008 compared to 2007 . These billion in 2008 compared to 2007 . These increase are due on marketing and advertising during 2008 compared to 2007 . Other advertising during 2008 compared to 2007 . Other Income and Expense the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( ( in million ) : 2009 2008 2007 Interest income $ in million ) : 2009 2008 2007 Interest income $ 407 million ) : 2009 2008 2007 Interest income $ 407 $ 2008 2007 Interest income $ 407 $ 653 $ 647 Other Interest income $ 407 $ 653 $ 647 Other income ( $ 407 $ 653 $ 647 Other income ( expense ) expense ) , net ( 81 ) ( 33 ) ( net ( 81 ) ( 33 ) ( 48 ) Total ) ( 33 ) ( 48 ) Total other income and other income and expense $ 326 $ 620 $ 599 Total and expense $ 326 $ 620 $ 599 Total other income $ 326 $ 620 $ 599 Total other income and expense income and expense decreased $ 294 million or 47 % to decreased $ 294 million or 47 % to $ 326 million or 47 % to $ 326 million during 2009 compared to to $ 326 million during 2009 compared to $ 620 million during 2009 compared to $ 620 million and $ 599 million $ 620 million and $ 599 million in 2008 and 2007 and $ 599 million in 2008 and 2007 , respectively . 599 million in 2008 and 2007 , respectively . The overall decline in interest rate during 2009 compared to 2008 and 2007 rate during 2009 compared to 2008 and 2007 , partially offset 2009 compared to 2008 and 2007 , partially offset by the equivalent and marketable security wa 1.43 % , 3.44 % and security wa 1.43 % , 3.44 % and 5.27 % during % , 3.44 % and 5.27 % during 2009 , 2008 % and 5.27 % during 2009 , 2008 and 2007 , 5.27 % during 2009 , 2008 and 2007 , respectively . during 2009 , 2008 and 2007 , respectively . During 2009 2007 , respectively . During 2009 , 2008 and 2007 , respectively . During 2009 , 2008 and 2007 , the Company During 2009 , 2008 and 2007 , the Company had no gross unrealized loss of $ 16 million and $ 121 million $ 16 million and $ 121 million a of September 26 121 million a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively , 2009 and September 27 , 2008 , respectively , which were gross unrealized gain of $ 73 million and $ 4 million $ 73 million and $ 4 million a of September 26 4 million a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . The net . The net unrealized gain 47 Table of Contents a of of Contents a of September 26 , 2009 and the net a of September 26 , 2009 and the net unrealized loss unrealized loss a of September 27 , 2008 related primarily to a of September 27 , 2008 related primarily to long-term marketable Consolidated Statements of Operations during 2009 , 2008 and 2007 . of Operations during 2009 , 2008 and 2007 . The Company during 2009 , 2008 and 2007 . The Company may sell net gain or loss during 2009 , 2008 and 2007 related or loss during 2009 , 2008 and 2007 related to such during 2009 , 2008 and 2007 related to such sale . s effective tax rate were 29 % , 30 % and rate were 29 % , 30 % and 30 % for % , 30 % and 30 % for 2009 , 2008 % and 30 % for 2009 , 2008 and 2007 , 30 % for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The Company federal income tax rate of 35 % due primarily to certain the U.S. As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had deferred and tax credit of $ 3.2 billion before being offset against certain deferred liability of $ 1.8 billion for presentation on the tax return for the year 2002 through 2003 and proposed certain for the year 2002 through 2003 and proposed certain adjustment . issue for year prior to 2002 have been resolved . In Recent Accounting Pronouncements In September 2009 , the Financial Accounting Standards ( “ ASU ” ) 2009-14 , Software ( Topic 985 2009-14 , Software ( Topic 985 ) : Certain Revenue Arrangements Software Elements , and ASU 2009-13 , Revenue Recognition ( Topic , Revenue Recognition ( Topic 605 ) : Multiple-Deliverable Revenue Arrangements . As summarized in ASU 2009-14 , ASC Topic 985 ha ASU 2009-14 , ASC Topic 985 ha been amended to remove . As summarized in ASU 2009-13 , ASC Topic 605 ha ASU 2009-13 , ASC Topic 605 ha been amended ( 1 605 ha been amended ( 1 ) to provide updated guidance the consideration allocated ; ( 2 ) to require an entity selling price ; and ( 3 ) to eliminate the use accounting change summarized in ASU 2009-14 and ASU 2009-13 are both in ASU 2009-14 and ASU 2009-13 are both effective for fiscal beginning on or after June 15 , 2010 , with early or after June 15 , 2010 , with early adoption permitted or by retrospective application . 48 Table of Contents The Company adoption . As of September 26 , 2009 , total iPhone As of September 26 , 2009 , total iPhone and Apple and deferred cost were $ 12.1 billion and $ 5.2 billion $ 12.1 billion and $ 5.2 billion , respectively . The basis over the currently estimated 24-month economic life of the product During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 820 , Fair Value Measurements and SFAS ” ) No . 157 , Fair Value Measurements ) value measurement . In February 2008 , the FASB issued supplemental fiscal year beginning after November 15 , 2008 for all non-financial beginning after November 15 , 2008 for all non-financial asset and in the first quarter of 2010 . Although the Company will operating result . In December 2007 , the FASB issued FASB the FASB issued FASB ASC 805 , Business Combinations ( formerly referenced a SFAS No . 141 ( revised 2007 ) , No . 141 ( revised 2007 ) , Business Combinations ) business combination . In April 2009 , the FASB amended this beginning on or after December 15 , 2008 and will be or after December 15 , 2008 and will be adopted by in the first quarter of 2010 and will apply prospectively to the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Cash , cash in million ) : 2009 2008 2007 Cash , cash equivalent million ) : 2009 2008 2007 Cash , cash equivalent and equivalent and marketable security $ 33,992 $ 24,490 $ 15,386 Accounts marketable security $ 33,992 $ 24,490 $ 15,386 Accounts receivable , $ 33,992 $ 24,490 $ 15,386 Accounts receivable , net $ Accounts receivable , net $ 3,361 $ 2,422 $ 1,637 Inventories , net $ 3,361 $ 2,422 $ 1,637 Inventories $ 455 $ 3,361 $ 2,422 $ 1,637 Inventories $ 455 $ 509 2,422 $ 1,637 Inventories $ 455 $ 509 $ 346 Working 1,637 Inventories $ 455 $ 509 $ 346 Working capital $ $ 455 $ 509 $ 346 Working capital $ 16,983 $ $ 346 Working capital $ 16,983 $ 18,219 $ 10,728 Annual Working capital $ 16,983 $ 18,219 $ 10,728 Annual operating cash $ 16,983 $ 18,219 $ 10,728 Annual operating cash flow $ Annual operating cash flow $ 10,159 $ 9,596 $ 5,470 As cash flow $ 10,159 $ 9,596 $ 5,470 As of September $ 10,159 $ 9,596 $ 5,470 As of September 26 , $ 5,470 As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had $ , the Company had $ 34.0 billion in cash , cash , an increase of $ 9.5 billion from September 27 , $ 9.5 billion from September 27 , 2008 . The principal billion from September 27 , 2008 . The principal component of by operating activity of $ 10.2 billion , which wa partially plant and equipment of $ 1.1 billion . The Company ’ subscription accounting for iPhone . 49 Table of Contents The Company equivalent . As of September 26 , 2009 and September 27 As of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , $ 17.4 2009 and September 27 , 2008 , $ 17.4 billion and 27 , 2008 , $ 17.4 billion and $ 11.3 billion $ 17.4 billion and $ 11.3 billion , respectively , of existing operation over the next 12 month . Capital Assets The capital asset purchase were $ 1.1 billion during 2009 , consisting were $ 1.1 billion during 2009 , consisting of $ 369 2009 , consisting of $ 369 million for retail store facility retail store facility and $ 775 million for real estate acquisition Company anticipates utilizing approximately $ 1.9 billion for capital asset purchase for capital asset purchase during 2010 , including approximately $ 400 2010 , including approximately $ 400 million for Retail facility and Retail facility and approximately $ 1.5 billion for corporate facility , the Company ha opened between 25 and 50 new retail store ha opened between 25 and 50 new retail store per year store per year . During 2010 , the Company expects to firm commitment a of September 26 , 2009 and excludes amount a of September 26 , 2009 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 1,922 5 Years Operating lease $ 1,922 $ 222 $ 462 $ Operating lease $ 1,922 $ 222 $ 462 $ 413 $ $ 1,922 $ 222 $ 462 $ 413 $ 825 Purchase $ 222 $ 462 $ 413 $ 825 Purchase obligation 4,783 $ 462 $ 413 $ 825 Purchase obligation 4,783 4,783 — 413 $ 825 Purchase obligation 4,783 4,783 — — — Asset $ 825 Purchase obligation 4,783 4,783 — — — Asset retirement — — Asset retirement obligation 32 4 8 4 16 Other — Asset retirement obligation 32 4 8 4 16 Other obligation Asset retirement obligation 32 4 8 4 16 Other obligation 356 retirement obligation 32 4 8 4 16 Other obligation 356 175 obligation 32 4 8 4 16 Other obligation 356 175 129 8 4 16 Other obligation 356 175 129 52 — Total 4 16 Other obligation 356 175 129 52 — Total $ 16 Other obligation 356 175 129 52 — Total $ 7,093 Other obligation 356 175 129 52 — Total $ 7,093 $ 129 52 — Total $ 7,093 $ 5,184 $ 599 $ — Total $ 7,093 $ 5,184 $ 599 $ 469 $ $ 7,093 $ 5,184 $ 599 $ 469 $ 841 Lease $ 5,184 $ 599 $ 469 $ 841 Lease Commitments As $ 599 $ 469 $ 841 Lease Commitments As of September Lease Commitments As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had total noncancelable operating lease of $ 1.9 billion , $ 1.5 billion $ 1.9 billion , $ 1.5 billion of which related to for term of one to 20 year and generally provide renewal for term of five to 20 year , the majority of These contract manufacturer acquire component 50 Table of Contents and build typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also requirement for period ranging from 30 to 150 day . In period ranging from 30 to 150 day . In addition , incurred . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had outstanding estimated warranty commitment of $ 4.8 billion . The Company ha During the first quarter of 2009 , a long-term supply agreement remaining prepaid balance of $ 167 million wa repaid to the second and fourth quarter of 2009 , the Company made a made a prepayment of $ 500 million to LG Display for and a prepayment of $ 500 million to Toshiba to purchase respectively . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had a had a total of $ 1.2 billion of inventory component prepayment termination . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company estimated that future cash flow of $ 32 million would be required to Other outstanding obligation were $ 356 million a of September 26 356 million a of September 26 , 2009 , which related a of September 26 , 2009 , which related to advertising obligation . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had gross unrecognized tax benefit of $ 971 million and an additional $ million and an additional $ 291 million for gross interest and tax benefit by between $ 105 million and $ 145 million $ 105 million and $ 145 million in the next 12 145 million in the next 12 month . At this time cost a of either September 26 , 2009 or September 27 of either September 26 , 2009 or September 27 , 2008 26 , 2009 or September 27 , 2008 . The Company 2009 or September 27 , 2008 . The Company ha entered advance expense incurred by such 51 Table of Contents individual in or operating result . Item 7A . Quantitative and Qualitative Disclosures security have maturity le than 12 month , while all long-term net gain or loss during 2009 , 2008 and 2007 related or loss during 2009 , 2008 and 2007 related to such during 2009 , 2008 and 2007 related to such sale . the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 26 , 2009 , a hypothetical a of September 26 , 2009 , a hypothetical 100 basis , 2009 , a hypothetical 100 basis point increase in interest would result in a $ 176 million incremental decline in the portfolio . As of September 27 , 2008 , a similar As of September 27 , 2008 , a similar 100 basis , 2008 , a similar 100 basis point shift in the have resulted in a $ 46 million incremental decline in the investment prior to maturity . 52 Table of Contents Foreign Currency Monte Carlo simulation to generate 3,000 random market price path . , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 44 million a of September 26 44 million a of September 26 , 2009 compared to a a of September 26 , 2009 compared to a maximum one-day in fair value of $ 60 million a of September 27 60 million a of September 27 , 2008 . Because the a of September 27 , 2008 . Because the Company us analysis performed a of September 26 , 2009 due to the a of September 26 , 2009 due to the inherent limitation actual exposure and position . 53 Table of Contents Item 8 53 Table of Contents Item 8 . Financial Statements and Supplementary Balance Sheets a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 55 Consolidated Statements 2009 and September 27 , 2008 55 Consolidated Statements of Operations and September 27 , 2008 55 Consolidated Statements of Operations for the three year ended September 26 , 2009 56 Consolidated Statements year ended September 26 , 2009 56 Consolidated Statements of Shareholders ended September 26 , 2009 56 Consolidated Statements of Shareholders ’ the three year ended September 26 , 2009 57 Consolidated Statements year ended September 26 , 2009 57 Consolidated Statements of Cash ended September 26 , 2009 57 Consolidated Statements of Cash Flows the three year ended September 26 , 2009 58 Notes to year ended September 26 , 2009 58 Notes to Consolidated Financial ended September 26 , 2009 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 88 Reports of Ernst & Young Independent Registered Public Accounting Firm 89 Report of KPMG LLP , Independent Registered Public Accounting Firm 91 All financial statement schedule have statement and note thereto . 54 Table of Contents CONSOLIDATED BALANCE except share amount ) September 26 , 2009 September 27 , amount ) September 26 , 2009 September 27 , 2008 ASSETS September 26 , 2009 September 27 , 2008 ASSETS : Current , 2009 September 27 , 2008 ASSETS : Current asset : Cash and cash equivalent $ 5,263 $ 11,875 Short-term marketable security cash equivalent $ 5,263 $ 11,875 Short-term marketable security 18,201 10,236 $ 11,875 Short-term marketable security 18,201 10,236 Accounts receivable , le 11,875 Short-term marketable security 18,201 10,236 Accounts receivable , le allowance , le allowance of $ 52 and $ 47 , respectively of $ 52 and $ 47 , respectively 3,361 2,422 Inventories and $ 47 , respectively 3,361 2,422 Inventories 455 509 Deferred $ 47 , respectively 3,361 2,422 Inventories 455 509 Deferred tax , respectively 3,361 2,422 Inventories 455 509 Deferred tax asset 2,101 respectively 3,361 2,422 Inventories 455 509 Deferred tax asset 2,101 1,447 455 509 Deferred tax asset 2,101 1,447 Other current asset 6,884 509 Deferred tax asset 2,101 1,447 Other current asset 6,884 5,822 2,101 1,447 Other current asset 6,884 5,822 Total current asset 36,265 1,447 Other current asset 6,884 5,822 Total current asset 36,265 32,311 6,884 5,822 Total current asset 36,265 32,311 Long-term marketable security 10,528 5,822 Total current asset 36,265 32,311 Long-term marketable security 10,528 2,379 36,265 32,311 Long-term marketable security 10,528 2,379 Property , plant and 32,311 Long-term marketable security 10,528 2,379 Property , plant and equipment plant and equipment , net 2,954 2,455 Goodwill 206 207 Acquired and equipment , net 2,954 2,455 Goodwill 206 207 Acquired intangible , net 2,954 2,455 Goodwill 206 207 Acquired intangible asset , net 2,954 2,455 Goodwill 206 207 Acquired intangible asset , net Acquired intangible asset , net 247 285 Other asset 3,651 1,935 intangible asset , net 247 285 Other asset 3,651 1,935 Total net 247 285 Other asset 3,651 1,935 Total asset $ 53,851 247 285 Other asset 3,651 1,935 Total asset $ 53,851 $ 3,651 1,935 Total asset $ 53,851 $ 39,572 LIABILITIES AND SHAREHOLDERS Total asset $ 53,851 $ 39,572 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 Accounts payable $ 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred 5,601 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 $ 5,520 Accrued expense 3,376 3,719 Deferred revenue 10,305 4,853 Total expense 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 3,376 3,719 Deferred revenue 10,305 4,853 Total current liability 19,282 14,092 10,305 4,853 Total current liability 19,282 14,092 Deferred revenue - non-current 4,853 Total current liability 19,282 14,092 Deferred revenue - non-current 4,485 14,092 Deferred revenue - non-current 4,485 3,029 Other non-current liability 2,252 Deferred revenue - non-current 4,485 3,029 Other non-current liability 2,252 1,421 4,485 3,029 Other non-current liability 2,252 1,421 Total liability 26,019 18,542 3,029 Other non-current liability 2,252 1,421 Total liability 26,019 18,542 Commitments liability 2,252 1,421 Total liability 26,019 18,542 Commitments and contingency Shareholders 2,252 1,421 Total liability 26,019 18,542 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 899,805,500 and ; 1,800,000,000 share authorized ; 899,805,500 and 888,325,973 share issued and share authorized ; 899,805,500 and 888,325,973 share issued and outstanding , issued and outstanding , respectively 8,210 7,177 Retained earnings 19,538 13,845 and outstanding , respectively 8,210 7,177 Retained earnings 19,538 13,845 Accumulated respectively 8,210 7,177 Retained earnings 19,538 13,845 Accumulated other comprehensive income 8,210 7,177 Retained earnings 19,538 13,845 Accumulated other comprehensive income 84 13,845 Accumulated other comprehensive income 84 8 Total shareholder ’ equity Accumulated other comprehensive income 84 8 Total shareholder ’ equity 27,832 8 Total shareholder ’ equity 27,832 21,030 Total liability and shareholder Total shareholder ’ equity 27,832 21,030 Total liability and shareholder ’ and shareholder ’ equity $ 53,851 $ 39,572 See accompanying Notes ’ equity $ 53,851 $ 39,572 See accompanying Notes to Consolidated to Consolidated Financial Statements . 55 Table of Contents CONSOLIDATED STATEMENTS ) Three year ended September 26 , 2009 2009 2008 2007 year ended September 26 , 2009 2009 2008 2007 Net sale ended September 26 , 2009 2009 2008 2007 Net sale $ September 26 , 2009 2009 2008 2007 Net sale $ 36,537 26 , 2009 2009 2008 2007 Net sale $ 36,537 $ 2008 2007 Net sale $ 36,537 $ 32,479 $ 24,006 Cost Net sale $ 36,537 $ 32,479 $ 24,006 Cost of sale $ 36,537 $ 32,479 $ 24,006 Cost of sale 23,397 21,334 $ 24,006 Cost of sale 23,397 21,334 15,852 Gross margin 13,140 24,006 Cost of sale 23,397 21,334 15,852 Gross margin 13,140 11,145 Cost of sale 23,397 21,334 15,852 Gross margin 13,140 11,145 8,154 23,397 21,334 15,852 Gross margin 13,140 11,145 8,154 Operating expense : 21,334 15,852 Gross margin 13,140 11,145 8,154 Operating expense : Research 15,852 Gross margin 13,140 11,145 8,154 Operating expense : Research and expense : Research and development 1,333 1,109 782 Selling , general : Research and development 1,333 1,109 782 Selling , general and Research and development 1,333 1,109 782 Selling , general and administrative Selling , general and administrative 4,149 3,761 2,963 Total operating expense , general and administrative 4,149 3,761 2,963 Total operating expense 5,482 general and administrative 4,149 3,761 2,963 Total operating expense 5,482 4,870 3,761 2,963 Total operating expense 5,482 4,870 3,745 Operating income 7,658 2,963 Total operating expense 5,482 4,870 3,745 Operating income 7,658 6,275 Total operating expense 5,482 4,870 3,745 Operating income 7,658 6,275 4,409 5,482 4,870 3,745 Operating income 7,658 6,275 4,409 Other income and 4,870 3,745 Operating income 7,658 6,275 4,409 Other income and expense 3,745 Operating income 7,658 6,275 4,409 Other income and expense 326 4,409 Other income and expense 326 620 599 Income before provision Other income and expense 326 620 599 Income before provision for income and expense 326 620 599 Income before provision for income before provision for income tax 7,984 6,895 5,008 Provision for income provision for income tax 7,984 6,895 5,008 Provision for income tax for income tax 7,984 6,895 5,008 Provision for income tax 2,280 5,008 Provision for income tax 2,280 2,061 1,512 Net income $ Provision for income tax 2,280 2,061 1,512 Net income $ 5,704 for income tax 2,280 2,061 1,512 Net income $ 5,704 $ 2,061 1,512 Net income $ 5,704 $ 4,834 $ 3,496 Earnings Net income $ 5,704 $ 4,834 $ 3,496 Earnings per common $ 5,704 $ 4,834 $ 3,496 Earnings per common share : common share : Basic $ 6.39 $ 5.48 $ 4.04 Diluted : Basic $ 6.39 $ 5.48 $ 4.04 Diluted $ 6.29 $ 6.39 $ 5.48 $ 4.04 Diluted $ 6.29 $ 5.36 5.48 $ 4.04 Diluted $ 6.29 $ 5.36 $ 3.93 Shares 4.04 Diluted $ 6.29 $ 5.36 $ 3.93 Shares used in $ 6.29 $ 5.36 $ 3.93 Shares used in computing earnings earnings per share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 per share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 share : Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See Basic 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes 893,016 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes to 881,592 864,595 Diluted 907,005 902,139 889,292 See accompanying Notes to Consolidated to Consolidated Financial Statements . 56 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 30 , 2006 855,263 $ 4,355 a of September 30 , 2006 855,263 $ 4,355 $ 5,607 of September 30 , 2006 855,263 $ 4,355 $ 5,607 $ 30 , 2006 855,263 $ 4,355 $ 5,607 $ 22 $ 2006 855,263 $ 4,355 $ 5,607 $ 22 $ 9,984 Components $ 4,355 $ 5,607 $ 22 $ 9,984 Components of comprehensive $ 5,607 $ 22 $ 9,984 Components of comprehensive income : : Net income — — 3,496 — 3,496 Change in foreign income — — 3,496 — 3,496 Change in foreign currency translation currency translation — — — 51 51 Change in unrealized loss translation — — — 51 51 Change in unrealized loss on tax — — — ( 7 ) ( 7 ) Change — ( 7 ) ( 7 ) Change in unrealized gain tax — — — ( 3 ) ( 3 ) Total — ( 3 ) ( 3 ) Total comprehensive income 3,537 3 ) Total comprehensive income 3,537 Stock-based compensation — 251 — income 3,537 Stock-based compensation — 251 — — 251 Common stock compensation — 251 — — 251 Common stock issued under stock share withheld for employee tax 17,066 364 ( 2 ) — withheld for employee tax 17,066 364 ( 2 ) — 362 employee tax 17,066 364 ( 2 ) — 362 Tax benefit 364 ( 2 ) — 362 Tax benefit from employee stock employee stock plan award — 398 — — 398 Balances a award — 398 — — 398 Balances a of September 29 398 Balances a of September 29 , 2007 872,329 5,368 9,101 a of September 29 , 2007 872,329 5,368 9,101 63 14,532 of September 29 , 2007 872,329 5,368 9,101 63 14,532 Cumulative September 29 , 2007 872,329 5,368 9,101 63 14,532 Cumulative effect 29 , 2007 872,329 5,368 9,101 63 14,532 Cumulative effect of , 2007 872,329 5,368 9,101 63 14,532 Cumulative effect of change 2007 872,329 5,368 9,101 63 14,532 Cumulative effect of change in change in accounting principle — 45 11 — 56 Components of in accounting principle — 45 11 — 56 Components of comprehensive principle — 45 11 — 56 Components of comprehensive income : : Net income — — 4,834 4,834 Change in foreign currency Net income — — 4,834 4,834 Change in foreign currency translation translation — — — ( 11 ) ( 11 ) Change — ( 11 ) ( 11 ) Change in unrealized loss tax — — — ( 63 ) ( 63 ) Change — ( 63 ) ( 63 ) Change in unrealized gain of tax — — — 19 19 Total comprehensive income 4,779 tax — — — 19 19 Total comprehensive income 4,779 Stock-based 19 19 Total comprehensive income 4,779 Stock-based compensation — 513 — income 4,779 Stock-based compensation — 513 — — 513 Common stock compensation — 513 — — 513 Common stock issued under stock share withheld for employee tax 15,888 460 ( 101 ) — withheld for employee tax 15,888 460 ( 101 ) — 359 employee tax 15,888 460 ( 101 ) — 359 Issuance of 460 ( 101 ) — 359 Issuance of common stock in connection with an asset acquisition 109 21 — — 21 Tax with an asset acquisition 109 21 — — 21 Tax benefit acquisition 109 21 — — 21 Tax benefit from employee stock employee stock plan award — 770 — — 770 Balances a award — 770 — — 770 Balances a of September 27 770 Balances a of September 27 , 2008 888,326 7,177 13,845 a of September 27 , 2008 888,326 7,177 13,845 8 21,030 of September 27 , 2008 888,326 7,177 13,845 8 21,030 Components September 27 , 2008 888,326 7,177 13,845 8 21,030 Components of 27 , 2008 888,326 7,177 13,845 8 21,030 Components of comprehensive , 2008 888,326 7,177 13,845 8 21,030 Components of comprehensive income 2008 888,326 7,177 13,845 8 21,030 Components of comprehensive income : : Net income — — 5,704 — 5,704 Change in foreign income — — 5,704 — 5,704 Change in foreign currency translation translation — — — ( 54 ) ( 54 ) Change — ( 54 ) ( 54 ) Change in unrealized loss of tax — — — 118 118 Change in unrealized gain tax — — — 118 118 Change in unrealized gain on of tax — — — 12 12 Total comprehensive income 5,780 tax — — — 12 12 Total comprehensive income 5,780 Stock-based 12 12 Total comprehensive income 5,780 Stock-based compensation — 707 — income 5,780 Stock-based compensation — 707 — — 707 Common stock compensation — 707 — — 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) — withheld for employee tax 11,480 404 ( 11 ) — 393 employee tax 11,480 404 ( 11 ) — 393 Tax benefit 404 ( 11 ) — 393 Tax benefit from employee stock transfer pricing adjustment — ( 78 ) — — ( 78 78 ) — — ( 78 ) Balances a of September ) Balances a of September 26 , 2009 899,806 $ 8,210 a of September 26 , 2009 899,806 $ 8,210 $ 19,538 of September 26 , 2009 899,806 $ 8,210 $ 19,538 $ 26 , 2009 899,806 $ 8,210 $ 19,538 $ 84 $ 2009 899,806 $ 8,210 $ 19,538 $ 84 $ 27,832 See $ 8,210 $ 19,538 $ 84 $ 27,832 See accompanying Notes $ 19,538 $ 84 $ 27,832 See accompanying Notes to Consolidated to Consolidated Financial Statements . 57 Table of Contents CONSOLIDATED STATEMENTS ) Three year ended September 26 , 2009 2009 2008 2007 year ended September 26 , 2009 2009 2008 2007 Cash and ended September 26 , 2009 2009 2008 2007 Cash and cash September 26 , 2009 2009 2008 2007 Cash and cash equivalent 26 , 2009 2009 2008 2007 Cash and cash equivalent , beginning of the year $ 11,875 $ 9,352 $ 6,392 Operating the year $ 11,875 $ 9,352 $ 6,392 Operating Activities : $ 11,875 $ 9,352 $ 6,392 Operating Activities : Net income Operating Activities : Net income 5,704 4,834 3,496 Adjustments to reconcile Activities : Net income 5,704 4,834 3,496 Adjustments to reconcile net : Net income 5,704 4,834 3,496 Adjustments to reconcile net income Depreciation , amortization and accretion 703 473 317 Stock-based compensation expense , amortization and accretion 703 473 317 Stock-based compensation expense 710 amortization and accretion 703 473 317 Stock-based compensation expense 710 516 473 317 Stock-based compensation expense 710 516 242 Deferred income tax 317 Stock-based compensation expense 710 516 242 Deferred income tax ( Stock-based compensation expense 710 516 242 Deferred income tax ( benefit ( benefit ) /expense ( 519 ) ( 368 ) 78 /expense ( 519 ) ( 368 ) 78 Loss on disposition 519 ) ( 368 ) 78 Loss on disposition of property property , plant and equipment 26 22 12 Changes in operating , plant and equipment 26 22 12 Changes in operating asset plant and equipment 26 22 12 Changes in operating asset and Accounts receivable , net ( 939 ) ( 785 ) ( net ( 939 ) ( 785 ) ( 385 ) Inventories ) ( 785 ) ( 385 ) Inventories 54 ( 163 ) ( 385 ) Inventories 54 ( 163 ) ( 76 385 ) Inventories 54 ( 163 ) ( 76 ) Other 54 ( 163 ) ( 76 ) Other current asset ( ) Other current asset ( 1,050 ) ( 1,958 ) ( asset ( 1,050 ) ( 1,958 ) ( 1,540 ) Other ) ( 1,958 ) ( 1,540 ) Other asset ( 1,346 1,540 ) Other asset ( 1,346 ) ( 492 ) 81 asset ( 1,346 ) ( 492 ) 81 Accounts payable 92 1,346 ) ( 492 ) 81 Accounts payable 92 596 1,494 492 ) 81 Accounts payable 92 596 1,494 Deferred revenue 6,908 ) 81 Accounts payable 92 596 1,494 Deferred revenue 6,908 5,642 81 Accounts payable 92 596 1,494 Deferred revenue 6,908 5,642 1,139 92 596 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 596 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 184 1,494 Deferred revenue 6,908 5,642 1,139 Other liability ( 184 ) 5,642 1,139 Other liability ( 184 ) 1,279 612 Cash generated Other liability ( 184 ) 1,279 612 Cash generated by operating liability ( 184 ) 1,279 612 Cash generated by operating activity Cash generated by operating activity 10,159 9,596 5,470 Investing Activities : generated by operating activity 10,159 9,596 5,470 Investing Activities : Purchases by operating activity 10,159 9,596 5,470 Investing Activities : Purchases of Purchases of marketable security ( 46,724 ) ( 22,965 ) ( security ( 46,724 ) ( 22,965 ) ( 11,719 ) Proceeds ) ( 22,965 ) ( 11,719 ) Proceeds from maturity of from maturity of marketable security 19,790 11,804 6,483 Proceeds from sale maturity of marketable security 19,790 11,804 6,483 Proceeds from sale of of marketable security 19,790 11,804 6,483 Proceeds from sale of marketable from sale of marketable security 10,888 4,439 2,941 Purchases of other sale of marketable security 10,888 4,439 2,941 Purchases of other long-term of marketable security 10,888 4,439 2,941 Purchases of other long-term investment of other long-term investment ( 101 ) ( 38 ) ( investment ( 101 ) ( 38 ) ( 17 ) Payments ) ( 38 ) ( 17 ) Payments made in connection of cash acquired — ( 220 ) — Payment for acquisition , plant and equipment ( 1,144 ) ( 1,091 ) ( equipment ( 1,144 ) ( 1,091 ) ( 735 ) Payment ) ( 1,091 ) ( 735 ) Payment for acquisition of acquisition of intangible asset ( 69 ) ( 108 ) ( asset ( 69 ) ( 108 ) ( 251 ) Other ) ( 108 ) ( 251 ) Other ( 74 ) ( 251 ) Other ( 74 ) ( 10 ) 49 Other ( 74 ) ( 10 ) 49 Cash used in 74 ) ( 10 ) 49 Cash used in investing activity used in investing activity ( 17,434 ) ( 8,189 ) ( activity ( 17,434 ) ( 8,189 ) ( 3,249 ) Financing ) ( 8,189 ) ( 3,249 ) Financing Activities : Proceeds from issuance of common stock 475 483 365 Excess tax benefit issuance of common stock 475 483 365 Excess tax benefit from of common stock 475 483 365 Excess tax benefit from stock-based tax benefit from stock-based compensation 270 757 377 Cash used to benefit from stock-based compensation 270 757 377 Cash used to net from stock-based compensation 270 757 377 Cash used to net share share settle equity award ( 82 ) ( 124 ) ( award ( 82 ) ( 124 ) ( 3 ) Cash ) ( 124 ) ( 3 ) Cash generated by financing Cash generated by financing activity 663 1,116 739 ( Decrease ) generated by financing activity 663 1,116 739 ( Decrease ) /increase by financing activity 663 1,116 739 ( Decrease ) /increase in cash and cash equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent equivalent ( 6,612 ) 2,523 2,960 Cash and cash equivalent , end of the year $ 5,263 $ 11,875 $ 9,352 Supplemental the year $ 5,263 $ 11,875 $ 9,352 Supplemental cash flow $ 5,263 $ 11,875 $ 9,352 Supplemental cash flow disclosure : income tax , net $ 2,997 $ 1,267 $ 863 See , net $ 2,997 $ 1,267 $ 863 See accompanying Notes $ 2,997 $ 1,267 $ 863 See accompanying Notes to Consolidated to Consolidated Financial Statements . 58 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Summary of Significant Accounting During the first quarter of 2009 , the Company reclassified $ , the Company reclassified $ 2.4 billion of certain fixed-income security marketable security in the September 27 , 2008 Consolidated Balance Sheet in the September 27 , 2008 Consolidated Balance Sheet . The security with maturity le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term accounting presentation . See Note 2 , “ Financial Instruments ” Instruments ” of this Form 10-K for additional information . The s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2009 , 2008 and 2007 ended s fiscal year 2009 , 2008 and 2007 ended on September year 2009 , 2008 and 2007 ended on September 26 , and 2007 ended on September 26 , 2009 , September 27 ended on September 26 , 2009 , September 27 , 2008 26 , 2009 , September 27 , 2008 and September 29 2009 , September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 , respectively , 2008 and September 29 , 2007 , respectively , and included , respectively , and included 52 week each . An additional fiscal year . In May 2009 , the Financial Accounting Standards ( “ ASC ” ) 855 , Subsequent Events ( formerly SFAS ” ) No . 165 , Subsequent Events ) , during the third quarter of 2009 . The Company ha evaluated statement were issued on October 27 , 2009 . Financial Instruments issued on October 27 , 2009 . Financial Instruments Cash Equivalents investment in debt security at 59 Table of Contents the time with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term During the second quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 815 , Derivatives and Hedging ( referenced a SFAS No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 ) , which requires additional on these derivative instrument during 2009 , 2008 and 2007 . derivative instrument during 2009 , 2008 and 2007 . The net during 2009 , 2008 and 2007 . The net gain or During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 820 , Fair Value Measurements and referenced a SFAS No . 157 , Fair Value Measurements ) During the first quarter of 2009 , the Company adopted FASB the Company adopted FASB ASC 825 , Financial Instruments ( formerly referenced a SFAS No . 159 , The Fair Value Option and Financial Liabilities – Including 60 Table of Contents an amendment of FASB Statement No . 115 ) , which allows company building is the lesser of 30 year or the remaining life property and equipment wa $ 577 million , $ 363 million $ 577 million , $ 363 million and $ 249 million $ 363 million and $ 249 million during 2009 , 2008 and $ 249 million during 2009 , 2008 and 2007 , 249 million during 2009 , 2008 and 2007 , respectively . during 2009 , 2008 and 2007 , respectively . Asset Retirement asset retirement liability wa $ 25 million and $ 21 million $ 25 million and $ 21 million a of September 26 21 million a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . Long-Lived Assets record any material impairment during 2009 , 2008 and 2007 . material impairment during 2009 , 2008 and 2007 . The Company during 2009 , 2008 and 2007 . The Company doe not test on or about August 31 of each year . The intangible asset impairment charge in 2009 , 2008 and 2007 . impairment charge in 2009 , 2008 and 2007 . The Company in 2009 , 2008 and 2007 . The Company established reporting to each reporting unit . 61 Table of Contents The Company each element based on the 62 Table of Contents relative fair basis over the currently estimated 24-month economic life of these product warranty expense a incurred . 63 Table of Contents Software Development have been expensed . In 2009 and 2008 , the Company expensed . In 2009 and 2008 , the Company capitalized $ , the Company capitalized $ 71 million and $ 11 million $ 71 million and $ 11 million , respectively , of of Mac OS X Version 10.6 Snow Leopard ( “ Mac during the fourth quarter of 2009 . During 2007 , the quarter of 2009 . During 2007 , the Company capitalized $ , the Company capitalized $ 75 million of cost associated with of Mac OS X Version 10.5 Leopard ( “ Mac OS software development cost wa $ 25 million , $ 27 million $ 25 million , $ 27 million and $ 13 million $ 27 million and $ 13 million in 2009 , 2008 and $ 13 million in 2009 , 2008 and 2007 , 13 million in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . Advertising Costs . Advertising expense wa $ 501 million , $ 486 million $ 501 million , $ 486 million and $ 467 million $ 486 million and $ 467 million for 2009 , 2008 and $ 467 million for 2009 , 2008 and 2007 , 467 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Stock-Based Compensation can be found in Note 7 , “ Shareholders ’ Equity to be realized . During 2008 , the Company adopted FASB ( “ ASC ” ) 740 , Income Taxes ( formerly FASB Financial Interpretation No . 48 , Accounting for Uncertainty in in Income Taxes – an 64 Table of Contents interpretation of of FASB Statement No . 109 ) , which changed the that ha a greater than 50 % likelihood of being realized upon settlement . See Note 6 , “ Income Taxes ” the three year ended September 26 , 2009 ( in thousand year ended September 26 , 2009 ( in thousand , except per share amount ) : 2009 2008 2007 Numerator : Net share amount ) : 2009 2008 2007 Numerator : Net income amount ) : 2009 2008 2007 Numerator : Net income $ Numerator : Net income $ 5,704 $ 4,834 $ 3,496 Denominator Net income $ 5,704 $ 4,834 $ 3,496 Denominator : Weighted-average $ 5,704 $ 4,834 $ 3,496 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 893,016 881,592 864,595 Effect of dilutive : Weighted-average share outstanding 893,016 881,592 864,595 Effect of dilutive security Weighted-average share outstanding 893,016 881,592 864,595 Effect of dilutive security 13,989 864,595 Effect of dilutive security 13,989 20,547 24,697 Weighted-average share diluted Effect of dilutive security 13,989 20,547 24,697 Weighted-average share diluted 907,005 of dilutive security 13,989 20,547 24,697 Weighted-average share diluted 907,005 902,139 20,547 24,697 Weighted-average share diluted 907,005 902,139 889,292 Basic earnings per 24,697 Weighted-average share diluted 907,005 902,139 889,292 Basic earnings per common Weighted-average share diluted 907,005 902,139 889,292 Basic earnings per common share earnings per common share $ 6.39 $ 5.48 $ 4.04 Diluted common share $ 6.39 $ 5.48 $ 4.04 Diluted earnings per $ 6.39 $ 5.48 $ 4.04 Diluted earnings per common share earnings per common share $ 6.29 $ 5.36 $ 3.93 Potentially common share $ 6.29 $ 5.36 $ 3.93 Potentially dilutive security $ 6.29 $ 5.36 $ 3.93 Potentially dilutive security representing 12.6 3.93 Potentially dilutive security representing 12.6 million , 10.3 million and security representing 12.6 million , 10.3 million and 13.7 million share million , 10.3 million and 13.7 million share of common stock share of common stock for 2009 , 2008 and 2007 , common stock for 2009 , 2008 and 2007 , respectively , for 2009 , 2008 and 2007 , respectively , were excluded basis is also disclosed . 65 Table of Contents Note 2 65 Table of Contents Note 2 – Financial Instruments Cash , marketable security a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : in million ) : September 26 , 2009 September 27 , ) : September 26 , 2009 September 27 , 2008 Cash September 26 , 2009 September 27 , 2008 Cash $ 1,139 , 2009 September 27 , 2008 Cash $ 1,139 $ 368 27 , 2008 Cash $ 1,139 $ 368 Money market fund 2008 Cash $ 1,139 $ 368 Money market fund 1,608 1,536 $ 368 Money market fund 1,608 1,536 U.S. Treasury security 289 368 Money market fund 1,608 1,536 U.S. Treasury security 289 118 1,608 1,536 U.S. Treasury security 289 118 U.S. agency security 273 1,536 U.S. Treasury security 289 118 U.S. agency security 273 2,798 289 118 U.S. agency security 273 2,798 Certificates of deposit and 118 U.S. agency security 273 2,798 Certificates of deposit and time of deposit and time deposit 572 2,560 Commercial paper 1,381 4,429 deposit and time deposit 572 2,560 Commercial paper 1,381 4,429 Corporate deposit 572 2,560 Commercial paper 1,381 4,429 Corporate security — 66 572 2,560 Commercial paper 1,381 4,429 Corporate security — 66 Municipal 1,381 4,429 Corporate security — 66 Municipal security 1 — Total security — 66 Municipal security 1 — Total cash equivalent 4,124 1 — Total cash equivalent 4,124 11,507 U.S. Treasury security 2,843 — Total cash equivalent 4,124 11,507 U.S. Treasury security 2,843 343 4,124 11,507 U.S. Treasury security 2,843 343 U.S. agency security 8,582 11,507 U.S. Treasury security 2,843 343 U.S. agency security 8,582 5,823 2,843 343 U.S. agency security 8,582 5,823 Non-U.S. government security 219 343 U.S. agency security 8,582 5,823 Non-U.S. government security 219 83 8,582 5,823 Non-U.S. government security 219 83 Certificates of deposit and 5,823 Non-U.S. government security 219 83 Certificates of deposit and time of deposit and time deposit 1,142 486 Commercial paper 2,816 1,254 deposit and time deposit 1,142 486 Commercial paper 2,816 1,254 Corporate deposit 1,142 486 Commercial paper 2,816 1,254 Corporate security 2,466 2,247 1,142 486 Commercial paper 2,816 1,254 Corporate security 2,466 2,247 Municipal paper 2,816 1,254 Corporate security 2,466 2,247 Municipal security 133 — 2,816 1,254 Corporate security 2,466 2,247 Municipal security 133 — Total security 2,466 2,247 Municipal security 133 — Total short-term marketable security — Total short-term marketable security 18,201 10,236 U.S. Treasury security 484 Total short-term marketable security 18,201 10,236 U.S. Treasury security 484 100 18,201 10,236 U.S. Treasury security 484 100 U.S. agency security 2,252 10,236 U.S. Treasury security 484 100 U.S. agency security 2,252 751 484 100 U.S. agency security 2,252 751 Non-U.S. government security 102 100 U.S. agency security 2,252 751 Non-U.S. government security 102 — 2,252 751 Non-U.S. government security 102 — Certificates of deposit and deposit and time deposit — 32 Corporate security 7,320 1,496 Municipal deposit — 32 Corporate security 7,320 1,496 Municipal security 370 — — 32 Corporate security 7,320 1,496 Municipal security 370 — Total security 7,320 1,496 Municipal security 370 — Total long-term marketable security — Total long-term marketable security 10,528 2,379 Total cash , cash Total long-term marketable security 10,528 2,379 Total cash , cash equivalent equivalent and marketable security $ 33,992 $ 24,490 During the first marketable security $ 33,992 $ 24,490 During the first quarter of During the first quarter of 2009 , the Company changed it with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term certain fixed-income investment totaling $ 2.4 billion have been reclassified from marketable security in the September 27 , 2008 Consolidated Balance Sheet in the September 27 , 2008 Consolidated Balance Sheet to conform change in accounting presentation . 66 Table of Contents The following investment category a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : in million ) : September 26 , 2009 Adjusted Cost Unrealized ) : September 26 , 2009 Adjusted Cost Unrealized Gains Unrealized Value Money market fund $ 1,608 $ — $ — $ $ — $ — $ 1,608 U.S. Treasury security 3,610 6 $ 1,608 U.S. Treasury security 3,610 6 — 3,616 U.S. agency 1,608 U.S. Treasury security 3,610 6 — 3,616 U.S. agency security Treasury security 3,610 6 — 3,616 U.S. agency security 11,085 22 — 3,616 U.S. agency security 11,085 22 — 11,107 Non-U.S. government 3,616 U.S. agency security 11,085 22 — 11,107 Non-U.S. government security agency security 11,085 22 — 11,107 Non-U.S. government security 320 1 — 11,107 Non-U.S. government security 320 1 — 321 Certificates of 11,107 Non-U.S. government security 320 1 — 321 Certificates of deposit government security 320 1 — 321 Certificates of deposit and time of deposit and time deposit 1,714 — — 1,714 Commercial paper time deposit 1,714 — — 1,714 Commercial paper 4,197 — — — — 1,714 Commercial paper 4,197 — — 4,197 Corporate security Commercial paper 4,197 — — 4,197 Corporate security 9,760 42 ( — — 4,197 Corporate security 9,760 42 ( 16 ) 9,786 — 4,197 Corporate security 9,760 42 ( 16 ) 9,786 Municipal Corporate security 9,760 42 ( 16 ) 9,786 Municipal security 502 9,760 42 ( 16 ) 9,786 Municipal security 502 2 — 16 ) 9,786 Municipal security 502 2 — 504 Total cash ) 9,786 Municipal security 502 2 — 504 Total cash equivalent Municipal security 502 2 — 504 Total cash equivalent and marketable equivalent and marketable security $ 32,796 $ 73 $ ( 16 marketable security $ 32,796 $ 73 $ ( 16 ) $ 32,796 $ 73 $ ( 16 ) $ 32,853 September 27 $ ( 16 ) $ 32,853 September 27 , 2008 Adjusted 16 ) $ 32,853 September 27 , 2008 Adjusted Cost Unrealized $ 32,853 September 27 , 2008 Adjusted Cost Unrealized Gains Unrealized Value Money market fund $ 1,536 $ — $ — $ $ — $ — $ 1,536 U.S. Treasury security 559 2 $ 1,536 U.S. Treasury security 559 2 — 561 U.S. agency 1,536 U.S. Treasury security 559 2 — 561 U.S. agency security Treasury security 559 2 — 561 U.S. agency security 9,383 2 — 561 U.S. agency security 9,383 2 ( 13 ) 9,372 561 U.S. agency security 9,383 2 ( 13 ) 9,372 Non-U.S. agency security 9,383 2 ( 13 ) 9,372 Non-U.S. government security 9,383 2 ( 13 ) 9,372 Non-U.S. government security 83 — ) 9,372 Non-U.S. government security 83 — — 83 Certificates of government security 83 — — 83 Certificates of deposit and time of deposit and time deposit 3,078 — — 3,078 Commercial paper time deposit 3,078 — — 3,078 Commercial paper 5,683 — — — — 3,078 Commercial paper 5,683 — — 5,683 Corporate security Commercial paper 5,683 — — 5,683 Corporate security 3,917 — ( — — 5,683 Corporate security 3,917 — ( 108 ) 3,809 Corporate security 3,917 — ( 108 ) 3,809 Total cash equivalent 3,917 — ( 108 ) 3,809 Total cash equivalent and marketable equivalent and marketable security $ 24,239 $ 4 $ ( 121 marketable security $ 24,239 $ 4 $ ( 121 ) $ 24,239 $ 4 $ ( 121 ) $ 24,122 The Company $ ( 121 ) $ 24,122 The Company had net unrealized it investment portfolio of $ 57 million a of September 26 57 million a of September 26 , 2009 and net unrealized a of September 26 , 2009 and net unrealized loss on it investment portfolio of $ 117 million a of September 27 117 million a of September 27 , 2008 . The net a of September 27 , 2008 . The net unrealized gain unrealized gain a of September 26 , 2009 and the net a of September 26 , 2009 and the net unrealized loss unrealized loss a of September 27 , 2008 related primarily to a of September 27 , 2008 related primarily to long-term marketable net gain or loss during 2009 , 2008 and 2007 related or loss during 2009 , 2008 and 2007 related to such during 2009 , 2008 and 2007 related to such sale . loss position a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , aggregated by 2009 and September 27 , 2008 , aggregated by investment category in million ) : September 26 , 2009 Less than 12 ) : September 26 , 2009 Less than 12 Months 12 26 , 2009 Less than 12 Months 12 Months or Greater 2009 Less than 12 Months 12 Months or Greater Total Security Unrealized Loss Corporate security $ 1,667 $ ( 3 ) $ security $ 1,667 $ ( 3 ) $ 719 $ ( $ ( 3 ) $ 719 $ ( 13 ) $ ) $ 719 $ ( 13 ) $ 2,386 $ ( $ ( 13 ) $ 2,386 $ ( 16 ) Total ) $ 2,386 $ ( 16 ) Total $ 1,667 $ ( 16 ) Total $ 1,667 $ ( 3 ) $ Total $ 1,667 $ ( 3 ) $ 719 $ ( $ ( 3 ) $ 719 $ ( 13 ) $ ) $ 719 $ ( 13 ) $ 2,386 $ ( $ ( 13 ) $ 2,386 $ ( 16 ) September ) $ 2,386 $ ( 16 ) September 27 , 2008 $ ( 16 ) September 27 , 2008 Less than 12 16 ) September 27 , 2008 Less than 12 Months 12 27 , 2008 Less than 12 Months 12 Months or Greater 2008 Less than 12 Months 12 Months or Greater Total Security Loss U.S. agency security $ 6,822 $ ( 13 ) $ security $ 6,822 $ ( 13 ) $ — $ — $ — $ — $ 6,822 $ ( 13 ) Corporate — $ 6,822 $ ( 13 ) Corporate security 2,147 ( ( 13 ) Corporate security 2,147 ( 31 ) 1,148 ( ) Corporate security 2,147 ( 31 ) 1,148 ( 77 ) security 2,147 ( 31 ) 1,148 ( 77 ) 3,295 ( ( 31 ) 1,148 ( 77 ) 3,295 ( 108 ) ) 1,148 ( 77 ) 3,295 ( 108 ) Total $ ( 77 ) 3,295 ( 108 ) Total $ 8,969 $ ( 108 ) Total $ 8,969 $ ( 44 ) $ Total $ 8,969 $ ( 44 ) $ 1,148 $ ( $ ( 44 ) $ 1,148 $ ( 77 ) $ ) $ 1,148 $ ( 77 ) $ 10,117 $ ( $ ( 77 ) $ 10,117 $ ( 121 ) 67 ) $ 10,117 $ ( 121 ) 67 Table of Contents 10,117 $ ( 121 ) 67 Table of Contents The Company During the year ended September 26 , 2009 and September 27 year ended September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , the Company 2009 and September 27 , 2008 , the Company did not charge . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company doe not flow hedge of approximately $ 31 million and $ 19 million $ 31 million and $ 19 million , net of tax comprehensive income a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . Other comprehensive occur . As of September 26 , 2009 , the hedged As of September 26 , 2009 , the hedged transaction are occur within six month . 68 Table of Contents Derivative instrument discontinued cash flow hedge during 2009 , 2008 and 2007 . flow hedge during 2009 , 2008 and 2007 . The Company during 2009 , 2008 and 2007 . The Company had an net investment hedge of $ 2 million and $ 1 million $ 2 million and $ 1 million , net of tax ” ) a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . The ineffective a net gain of $ 133 million on foreign currency forward during the year ended September 26 , 2009 . The following year ended September 26 , 2009 . The following table show instrument outstanding a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : ( in million ) : 2009 2008 Notional Principal Credit Risk in million ) : 2009 2008 Notional Principal Credit Risk Amounts : Foreign exchange contract $ 4,422 $ 31 $ 5,902 $ exchange contract $ 4,422 $ 31 $ 5,902 $ 107 Instruments $ 4,422 $ 31 $ 5,902 $ 107 Instruments other than $ 31 $ 5,902 $ 107 Instruments other than accounting hedge : Foreign exchange contract $ 3,416 $ 10 $ 2,868 $ exchange contract $ 3,416 $ 10 $ 2,868 $ 8 The $ 3,416 $ 10 $ 2,868 $ 8 The notional principal $ 10 $ 2,868 $ 8 The notional principal amount for volume outstanding a of September 26 , 2009 , and do a of September 26 , 2009 , and do not represent netting arrangement a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company did not additional collateral a of September 26 , 2009 . The estimate a of September 26 , 2009 . The estimate of fair market information a of September 26 , 2009 . Refer to a of September 26 , 2009 . Refer to Note 3 2009 . Refer to Note 3 , “ Fair Value Measurements Measurements ” of this Form 10-K , 69 Table of Contents of this Form 10-K , 69 Table of Contents for additional Balance Sheets a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : in million ) : September 26 , 2009 Fair Value of ) : September 26 , 2009 Fair Value of Derivatives Designated : Foreign exchange contract $ 27 $ 10 $ 37 Derivative exchange contract $ 27 $ 10 $ 37 Derivative liability ( $ 27 $ 10 $ 37 Derivative liability ( b ) : Foreign exchange contract $ 24 $ 1 $ 25 September exchange contract $ 24 $ 1 $ 25 September 27 , $ 24 $ 1 $ 25 September 27 , 2008 Fair $ 1 $ 25 September 27 , 2008 Fair Value of $ 25 September 27 , 2008 Fair Value of Derivatives Designated : Foreign exchange contract $ 107 $ 8 $ 115 Derivative exchange contract $ 107 $ 8 $ 115 Derivative liability ( $ 107 $ 8 $ 115 Derivative liability ( b ) : Foreign exchange contract $ 68 $ 2 $ 70 ( exchange contract $ 68 $ 2 $ 70 ( a ) $ 68 $ 2 $ 70 ( a ) All derivative for the year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ) : Year Ended September 26 , 2009 Gain or ( Year Ended September 26 , 2009 Gain or ( Loss ) : Foreign exchange contract $ 283 Net sale $ 251 Other $ 283 Net sale $ 251 Other income and expense $ income and expense $ ( 83 ) Foreign exchange contract 55 83 ) Foreign exchange contract 55 Cost of sale 72 Other contract 55 Cost of sale 72 Other income and expense ( Other income and expense ( 14 ) Net investment hedge : : Foreign exchange contract ( 44 ) Other income and expense — Other income and expense 3 Total $ 294 $ 323 and expense 3 Total $ 294 $ 323 $ ( 94 3 Total $ 294 $ 323 $ ( 94 ) ( 294 $ 323 $ ( 94 ) ( a ) Refer a ) Refer to Note 7 , “ Shareholders ’ Equity Compensation ” of this Form 10-K , which summarizes the activity income related to derivative . 70 Table of Contents Accounts Receivable ’ s customer accounted for 16 % of trade receivables a trade receivables a of September 26 , 2009 and two of a of September 26 , 2009 and two of the Company ’ s customer accounted for 15 % and 10 % , accounted for 15 % and 10 % , respectively , of trade receivables a of September 27 , 2008 . The following a of September 27 , 2008 . The following table summarizes the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Beginning allowance balance in million ) : 2009 2008 2007 Beginning allowance balance $ million ) : 2009 2008 2007 Beginning allowance balance $ 47 2007 Beginning allowance balance $ 47 $ 47 $ 52 Charged allowance balance $ 47 $ 47 $ 52 Charged to cost $ 47 $ 47 $ 52 Charged to cost and expense Charged to cost and expense 25 3 12 Deductions ( 20 to cost and expense 25 3 12 Deductions ( 20 ) cost and expense 25 3 12 Deductions ( 20 ) ( 25 3 12 Deductions ( 20 ) ( 3 ) ( Deductions ( 20 ) ( 3 ) ( 17 ) Ending ) ( 3 ) ( 17 ) Ending allowance balance $ ) Ending allowance balance $ 52 $ 47 $ 47 Vendor allowance balance $ 52 $ 47 $ 47 Vendor Non-Trade Receivables $ 52 $ 47 $ 47 Vendor Non-Trade Receivables The Company current asset , totaled $ 1.7 billion and $ 2.3 billion $ 1.7 billion and $ 2.3 billion a of September 26 2.3 billion a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively . 2009 and September 27 , 2008 , respectively . Vendor non-trade ’ s vendor accounted for 40 % and 36 % , accounted for 40 % and 36 % , respectively , of non-trade receivables a of September 26 , 2009 and two of a of September 26 , 2009 and two of the Company ’ s vendor accounted for 47 % and 38 % , accounted for 47 % and 38 % , respectively , of non-trade receivables a of September 27 , 2008 . The Company a of September 27 , 2008 . The Company doe not cost of sale . Note 3 – Fair Value Measurements The restriction and credit risk . 71 Table of Contents The Company fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally recurring basis a of September 26 , 2009 ( in million a of September 26 , 2009 ( in million ) : in million ) : September 26 , 2009 Quoted Prices in ) : September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) : Money market fund $ 1,608 $ — $ — $ $ — $ — $ 1,608 U.S. Treasury security — 3,616 1,608 U.S. Treasury security — 3,616 — 3,616 U.S. agency security Treasury security — 3,616 — 3,616 U.S. agency security — 11,107 3,616 U.S. agency security — 11,107 — 11,107 Non-U.S. government security agency security — 11,107 — 11,107 Non-U.S. government security — 321 11,107 Non-U.S. government security — 321 — 321 Certificates of deposit government security — 321 — 321 Certificates of deposit and time deposit and time deposit — 1,714 — 1,714 Commercial paper — time deposit — 1,714 — 1,714 Commercial paper — 4,197 — — 1,714 Commercial paper — 4,197 — 4,197 Corporate security — Commercial paper — 4,197 — 4,197 Corporate security — 9,786 — — 4,197 Corporate security — 9,786 — 9,786 Municipal security — Corporate security — 9,786 — 9,786 Municipal security — 504 — — 9,786 Municipal security — 504 — 504 Marketable equity security Municipal security — 504 — 504 Marketable equity security 61 — — 504 Marketable equity security 61 — — 61 Derivative asset equity security 61 — — 61 Derivative asset — 37 — — 61 Derivative asset — 37 — 37 Total asset measured Derivative asset — 37 — 37 Total asset measured at fair measured at fair value $ 1,669 $ 31,282 $ — $ fair value $ 1,669 $ 31,282 $ — $ 32,951 Liabilities $ 31,282 $ — $ 32,951 Liabilities : Derivative liability $ Derivative liability $ — $ 25 $ — $ 25 Total $ 25 $ — $ 25 Total liability measured at fair fair value $ — $ 25 $ — $ 25 ( $ 25 $ — $ 25 ( a ) The total the related carrying amount . 72 Table of Contents The following Balance Sheet a of September 26 , 2009 ( in million a of September 26 , 2009 ( in million ) : in million ) : September 26 , 2009 Quoted Prices in ) : September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) Assets : Cash equivalent $ 1,608 $ 2,516 $ — $ Cash equivalent $ 1,608 $ 2,516 $ — $ 4,124 Short-term $ 2,516 $ — $ 4,124 Short-term marketable security — 18,201 4,124 Short-term marketable security — 18,201 — 18,201 Long-term marketable security marketable security — 18,201 — 18,201 Long-term marketable security — 10,528 18,201 Long-term marketable security — 10,528 — 10,528 Other current asset marketable security — 10,528 — 10,528 Other current asset — 37 10,528 Other current asset — 37 — 37 Other asset 61 current asset — 37 — 37 Other asset 61 — — 37 — 37 Other asset 61 — — 61 Total asset Other asset 61 — — 61 Total asset measured at fair measured at fair value $ 1,669 $ 31,282 $ — $ fair value $ 1,669 $ 31,282 $ — $ 32,951 Liabilities $ 31,282 $ — $ 32,951 Liabilities : Other current liability current liability $ — $ 25 $ — $ 25 Total $ 25 $ — $ 25 Total liability measured at fair fair value $ — $ 25 $ — $ 25 ( $ 25 $ — $ 25 ( a ) The total related carrying amount . Note 4 – Consolidated Financial Statement Details statement detail a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : ) : Other Current Assets 2009 2008 Deferred cost under subscription : Other Current Assets 2009 2008 Deferred cost under subscription accounting subscription accounting - current $ 3,703 $ 1,931 Vendor non-trade receivables - current $ 3,703 $ 1,931 Vendor non-trade receivables 1,696 2,282 $ 1,931 Vendor non-trade receivables 1,696 2,282 Inventory component prepayment - 1,931 Vendor non-trade receivables 1,696 2,282 Inventory component prepayment - current Inventory component prepayment - current 309 475 Other current asset 1,176 component prepayment - current 309 475 Other current asset 1,176 1,134 309 475 Other current asset 1,176 1,134 Total other current asset 475 Other current asset 1,176 1,134 Total other current asset $ Total other current asset $ 6,884 $ 5,822 Property , Plant current asset $ 6,884 $ 5,822 Property , Plant and Equipment Property , Plant and Equipment 2009 2008 Land and building $ , Plant and Equipment 2009 2008 Land and building $ 955 2008 Land and building $ 955 $ 810 Machinery , equipment and building $ 955 $ 810 Machinery , equipment and internal-use , equipment and internal-use software 1,932 1,491 Office furniture and equipment equipment and internal-use software 1,932 1,491 Office furniture and equipment 115 1,491 Office furniture and equipment 115 122 Leasehold improvement 1,665 1,324 Office furniture and equipment 115 122 Leasehold improvement 1,665 1,324 Gross equipment 115 122 Leasehold improvement 1,665 1,324 Gross property , plant 115 122 Leasehold improvement 1,665 1,324 Gross property , plant and property , plant and equipment 4,667 3,747 Accumulated depreciation and amortization , plant and equipment 4,667 3,747 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 1,713 ) ( 1,292 ) Net amortization ( 1,713 ) ( 1,292 ) Net property , plant , plant and equipment $ 2,954 $ 2,455 73 Table of and equipment $ 2,954 $ 2,455 73 Table of Contents Other equipment $ 2,954 $ 2,455 73 Table of Contents Other Assets Table of Contents Other Assets 2009 2008 Deferred cost under subscription of Contents Other Assets 2009 2008 Deferred cost under subscription accounting subscription accounting - non-current $ 1,468 $ 1,089 Inventory component prepayment - non-current $ 1,468 $ 1,089 Inventory component prepayment - non-current Inventory component prepayment - non-current 844 208 Deferred tax asset - component prepayment - non-current 844 208 Deferred tax asset - non-current Deferred tax asset - non-current 259 138 Capitalized software development cost tax asset - non-current 259 138 Capitalized software development cost , software development cost , net 106 67 Other asset 974 433 development cost , net 106 67 Other asset 974 433 Total net 106 67 Other asset 974 433 Total other asset $ 106 67 Other asset 974 433 Total other asset $ 3,651 433 Total other asset $ 3,651 $ 1,935 Accrued Expenses 2009 other asset $ 3,651 $ 1,935 Accrued Expenses 2009 2008 Income 3,651 $ 1,935 Accrued Expenses 2009 2008 Income tax payable $ $ 1,935 Accrued Expenses 2009 2008 Income tax payable $ 439 2008 Income tax payable $ 439 $ 502 Accrued marketing and tax payable $ 439 $ 502 Accrued marketing and distribution 359 502 Accrued marketing and distribution 359 329 Accrued compensation and employee Accrued marketing and distribution 359 329 Accrued compensation and employee benefit Accrued compensation and employee benefit 357 320 Deferred margin on component compensation and employee benefit 357 320 Deferred margin on component sale Deferred margin on component sale 225 681 Accrued warranty and related margin on component sale 225 681 Accrued warranty and related cost Accrued warranty and related cost 210 267 Other current liability 1,786 warranty and related cost 210 267 Other current liability 1,786 1,620 210 267 Other current liability 1,786 1,620 Total accrued expense $ 267 Other current liability 1,786 1,620 Total accrued expense $ 3,376 1,620 Total accrued expense $ 3,376 $ 3,719 Non-Current Liabilities 2009 accrued expense $ 3,376 $ 3,719 Non-Current Liabilities 2009 2008 Deferred 3,376 $ 3,719 Non-Current Liabilities 2009 2008 Deferred tax liability $ $ 3,719 Non-Current Liabilities 2009 2008 Deferred tax liability $ 966 2008 Deferred tax liability $ 966 $ 675 Other non-current liability tax liability $ 966 $ 675 Other non-current liability 1,286 746 $ 675 Other non-current liability 1,286 746 Total other non-current liability 675 Other non-current liability 1,286 746 Total other non-current liability $ Total other non-current liability $ 2,252 $ 1,421 Note 5 – non-current liability $ 2,252 $ 1,421 Note 5 – Goodwill and $ 2,252 $ 1,421 Note 5 – Goodwill and Other Intangible asset balance a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million ) : ( in million ) : 2009 2008 Gross Carrying Amount Accumulated in million ) : 2009 2008 Gross Carrying Amount Accumulated Amortization and amortizable acquired technology $ 323 $ ( 176 ) $ technology $ 323 $ ( 176 ) $ 147 $ 308 $ ( 176 ) $ 147 $ 308 $ ( 123 176 ) $ 147 $ 308 $ ( 123 ) $ 147 $ 308 $ ( 123 ) $ 185 Indefinite lived $ ( 123 ) $ 185 Indefinite lived and unamortizable trademark Indefinite lived and unamortizable trademark 100 — 100 100 — 100 and unamortizable trademark 100 — 100 100 — 100 Total acquired unamortizable trademark 100 — 100 100 — 100 Total acquired intangible 100 — 100 100 — 100 Total acquired intangible asset $ Total acquired intangible asset $ 423 $ ( 176 ) $ asset $ 423 $ ( 176 ) $ 247 $ 408 $ ( 176 ) $ 247 $ 408 $ ( 123 176 ) $ 247 $ 408 $ ( 123 ) $ 247 $ 408 $ ( 123 ) $ 285 Goodwill $ $ ( 123 ) $ 285 Goodwill $ 206 $ — ) $ 285 Goodwill $ 206 $ — $ 206 $ $ 206 $ — $ 206 $ 207 $ — $ $ — $ 206 $ 207 $ — $ 207 In $ 207 $ — $ 207 In 2008 , the Company $ — $ 207 In 2008 , the Company completed an cash acquired , of $ 220 million , of which $ million , of which $ 169 million ha been allocated to allocated to goodwill , $ 51 million to deferred tax asset deferred tax asset and $ 7 million to acquired intangible asset to acquired intangible asset . 74 Table of Contents The Company acquired intangible asset wa $ 53 million , $ 46 million $ 53 million , $ 46 million and $ 35 million $ 46 million and $ 35 million in 2009 , 2008 and $ 35 million in 2009 , 2008 and 2007 , 35 million in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . As of respectively . As of September 26 , 2009 and September 27 As of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , the remaining 2009 and September 27 , 2008 , the remaining weighted-average amortization period for acquired technology wa 7.2 year and 7.0 year , technology wa 7.2 year and 7.0 year , respectively . Expected acquired technology a of September 26 , 2009 , is a a of September 26 , 2009 , is a follows ( in million ) : Years 2010 $ 40 2011 37 2012 ) : Years 2010 $ 40 2011 37 2012 28 2013 : Years 2010 $ 40 2011 37 2012 28 2013 13 Years 2010 $ 40 2011 37 2012 28 2013 13 2014 2010 $ 40 2011 37 2012 28 2013 13 2014 10 $ 40 2011 37 2012 28 2013 13 2014 10 Thereafter 40 2011 37 2012 28 2013 13 2014 10 Thereafter 19 2011 37 2012 28 2013 13 2014 10 Thereafter 19 Total 37 2012 28 2013 13 2014 10 Thereafter 19 Total $ 2012 28 2013 13 2014 10 Thereafter 19 Total $ 147 2013 13 2014 10 Thereafter 19 Total $ 147 Note 6 10 Thereafter 19 Total $ 147 Note 6 – Income Taxes 19 Total $ 147 Note 6 – Income Taxes The provision the three year ended September 26 , 2009 , consisted of year ended September 26 , 2009 , consisted of the following ( in million ) : 2009 2008 2007 Federal : Current in million ) : 2009 2008 2007 Federal : Current $ million ) : 2009 2008 2007 Federal : Current $ 2,162 2007 Federal : Current $ 2,162 $ 1,942 $ 1,219 Deferred : Current $ 2,162 $ 1,942 $ 1,219 Deferred ( 207 $ 2,162 $ 1,942 $ 1,219 Deferred ( 207 ) ( 1,942 $ 1,219 Deferred ( 207 ) ( 155 ) 85 Deferred ( 207 ) ( 155 ) 85 1,955 1,787 1,304 207 ) ( 155 ) 85 1,955 1,787 1,304 State : ) ( 155 ) 85 1,955 1,787 1,304 State : Current ( 155 ) 85 1,955 1,787 1,304 State : Current 279 155 ) 85 1,955 1,787 1,304 State : Current 279 210 1,787 1,304 State : Current 279 210 112 Deferred ( 113 1,304 State : Current 279 210 112 Deferred ( 113 ) State : Current 279 210 112 Deferred ( 113 ) ( 279 210 112 Deferred ( 113 ) ( 82 ) 9 Deferred ( 113 ) ( 82 ) 9 166 128 121 113 ) ( 82 ) 9 166 128 121 Foreign : ) ( 82 ) 9 166 128 121 Foreign : Current ( 82 ) 9 166 128 121 Foreign : Current 358 82 ) 9 166 128 121 Foreign : Current 358 277 128 121 Foreign : Current 358 277 103 Deferred ( 199 121 Foreign : Current 358 277 103 Deferred ( 199 ) Foreign : Current 358 277 103 Deferred ( 199 ) ( 358 277 103 Deferred ( 199 ) ( 131 ) ( Deferred ( 199 ) ( 131 ) ( 16 ) 159 ) ( 131 ) ( 16 ) 159 146 87 Provision 131 ) ( 16 ) 159 146 87 Provision for income ) ( 16 ) 159 146 87 Provision for income tax ( 16 ) 159 146 87 Provision for income tax $ Provision for income tax $ 2,280 $ 2,061 $ 1,512 The income tax $ 2,280 $ 2,061 $ 1,512 The foreign provision $ 2,280 $ 2,061 $ 1,512 The foreign provision for income foreign pretax earnings of $ 4.4 billion , $ 3.5 billion $ 4.4 billion , $ 3.5 billion and $ 2.2 billion $ 3.5 billion and $ 2.2 billion in 2009 , 2008 and $ 2.2 billion in 2009 , 2008 and 2007 , 2.2 billion in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . As of respectively . As of September 26 , 2009 and September 27 As of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , $ 17.4 2009 and September 27 , 2008 , $ 17.4 billion and 27 , 2008 , $ 17.4 billion and $ 11.3 billion $ 17.4 billion and $ 11.3 billion , respectively , of a cumulative total of $ 5.1 billion of such earnings . were to be distributed . 75 Table of Contents Deferred tax settled . As of September 26 , 2009 and September 27 As of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , the significant 2009 and September 27 , 2008 , the significant component of ( in million ) : 2009 2008 Deferred tax asset : in million ) : 2009 2008 Deferred tax asset : Accrued liability and other reserve $ 2,133 $ 1,295 Basis of capital other reserve $ 2,133 $ 1,295 Basis of capital asset and of capital asset and investment 180 173 Accounts receivable and inventory capital asset and investment 180 173 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 172 126 Other 683 550 Total receivable and inventory reserve 172 126 Other 683 550 Total deferred inventory reserve 172 126 Other 683 550 Total deferred tax asset reserve 172 126 Other 683 550 Total deferred tax asset 3,168 550 Total deferred tax asset 3,168 2,144 Less valuation allowance — Total deferred tax asset 3,168 2,144 Less valuation allowance — — , net of valuation allowance 3,168 2,144 Deferred tax liability - net of valuation allowance 3,168 2,144 Deferred tax liability - Unremitted Unremitted earnings of foreign subsidiary 1,778 1,234 Net deferred tax asset earnings of foreign subsidiary 1,778 1,234 Net deferred tax asset $ Net deferred tax asset $ 1,390 $ 910 A reconciliation of tax asset $ 1,390 $ 910 A reconciliation of the provision federal income tax rate ( 35 % in 2009 , 2008 rate ( 35 % in 2009 , 2008 and 2007 ) 35 % in 2009 , 2008 and 2007 ) to income in 2009 , 2008 and 2007 ) to income before provision the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( ( in million ) : 2009 2008 2007 Computed expected tax in million ) : 2009 2008 2007 Computed expected tax $ million ) : 2009 2008 2007 Computed expected tax $ 2,795 2007 Computed expected tax $ 2,795 $ 2,414 $ 1,753 State expected tax $ 2,795 $ 2,414 $ 1,753 State tax , $ 2,795 $ 2,414 $ 1,753 State tax , net of , net of federal effect 228 159 140 Indefinitely invested earnings net of federal effect 228 159 140 Indefinitely invested earnings of of federal effect 228 159 140 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 658 ) ( 492 ) ( subsidiary ( 658 ) ( 492 ) ( 297 ) Nondeductible ) ( 492 ) ( 297 ) Nondeductible executive compensation 13 297 ) Nondeductible executive compensation 13 6 6 Research and development ) Nondeductible executive compensation 13 6 6 Research and development credit Nondeductible executive compensation 13 6 6 Research and development credit , development credit , net ( 84 ) ( 21 ) ( net ( 84 ) ( 21 ) ( 54 ) Other ) ( 21 ) ( 54 ) Other ( 14 ) ( 54 ) Other ( 14 ) ( 5 ) ( Other ( 14 ) ( 5 ) ( 36 ) Provision ) ( 5 ) ( 36 ) Provision for income tax Provision for income tax $ 2,280 $ 2,061 $ 1,512 Effective income tax $ 2,280 $ 2,061 $ 1,512 Effective tax rate $ 2,280 $ 2,061 $ 1,512 Effective tax rate 29 % $ 1,512 Effective tax rate 29 % 30 % 30 % Effective tax rate 29 % 30 % 30 % The Company rate 29 % 30 % 30 % The Company ’ s stock plan award of $ 246 million , $ 770 million $ 246 million , $ 770 million and $ 398 million $ 770 million and $ 398 million in 2009 , 2008 and $ 398 million in 2009 , 2008 and 2007 , 398 million in 2009 , 2008 and 2007 , respectively , in 2009 , 2008 and 2007 , respectively , which were common stock . On October 3 , 2008 , the Tax . On October 3 , 2008 , the Tax Extenders and Minimum Tax Relief Act of 2008 wa signed into law . a tax benefit of $ 42 million in the first quarter in the first quarter of 2009 to account for the retroactive Positions As discussed in Note 1 , “ Summary of Significant for uncertain tax position in 2008 . Under these new principle than not that a tax 76 Table of Contents position will benefit that is greater than 50 percent likely of being realized to retained earnings of $ 11 million . The Company had date of adoption wa $ 475 million , of which $ million , of which $ 209 million , if recognized , Sheets . As of September 26 , 2009 , the total As of September 26 , 2009 , the total amount of unrecognized tax benefit wa $ 971 million , of which $ million , of which $ 307 million , if recognized , rate . As of September 27 , 2008 , the total As of September 27 , 2008 , the total amount of unrecognized tax benefit wa $ 506 million , of which $ million , of which $ 253 million , if recognized , tax rate . On May 27 , 2009 , the United . On May 27 , 2009 , the United States Court tax benefit by approximately $ 86 million and decreased shareholder ’ ’ equity by approximately $ 78 million in the year ended in the year ended September 26 , 2009 . The aggregate year ended September 26 , 2009 . The aggregate change in the two year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( : Balance a of September 30 , 2007 $ 475 Increases a of September 30 , 2007 $ 475 Increases related to September 30 , 2007 $ 475 Increases related to tax position taken during a prior period 27 Decreases related to tax position during a prior period ( 70 ) Increases related to tax taken during the current period 85 Decreases related to settlement with of statute of limitation ( 11 ) Balance a of September ) Balance a of September 27 , 2008 506 Increases related a of September 27 , 2008 506 Increases related to tax of September 27 , 2008 506 Increases related to tax position taken during a prior period 341 Decreases related to tax position during a prior period ( 24 ) Increases related to tax taken during the current period 151 Decreases related to settlement with of statute of limitation ( 3 ) Balance a of September ) Balance a of September 26 , 2009 $ 971 The a of September 26 , 2009 $ 971 The Company ’ September 26 , 2009 $ 971 The Company ’ s policy for uncertain tax position in 2008 . As of the date the Company had accrued $ 203 million for the gross interest benefit . As of September 26 , 2009 and September 27 As of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , the total 2009 and September 27 , 2008 , the total amount of and penalty accrued wa $ 291 million and $ 219 million $ 291 million and $ 219 million , respectively , which Consolidated Balance Sheets . In 2009 and 2008 , the Company Sheets . In 2009 and 2008 , the Company recognized interest with tax matter of $ 64 million and $ 16 million $ 64 million and $ 16 million , respectively . The , all year prior to 2002 are closed . The year are closed . The year 2002-2003 have been examined by the disputed issue have been taken 77 Table of Contents to administrative IRS is currently examining the 2004-2006 year . In addition , , the year subsequent to 1988 and 2000 , respectively , year subsequent to 1988 and 2000 , respectively , generally remain tax benefit by between $ 105 million and $ 145 million $ 105 million and $ 145 million in the next 12 145 million in the next 12 month . Note 7 – next 12 month . Note 7 – Shareholders ’ Equity and the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Net unrealized gains/losses in million ) : 2009 2008 2007 Net unrealized gains/losses on million ) : 2009 2008 2007 Net unrealized gains/losses on available-for-sale gains/losses on available-for-sale security $ 48 $ ( 70 ) $ security $ 48 $ ( 70 ) $ ( 7 ) ( 70 ) $ ( 7 ) Net unrecognized gain on unrecognized gain on derivative instrument 31 19 — Cumulative foreign currency gain on derivative instrument 31 19 — Cumulative foreign currency translation — Cumulative foreign currency translation 5 59 70 Accumulated other comprehensive Cumulative foreign currency translation 5 59 70 Accumulated other comprehensive income foreign currency translation 5 59 70 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 84 $ 8 $ 63 The comprehensive income $ 84 $ 8 $ 63 The change in $ 84 $ 8 $ 63 The change in fair value other comprehensive income wa $ 118 million , $ ( 63 118 million , $ ( 63 ) million and $ ( ) million and $ ( 7 ) million , net of , net of tax in 2009 , 2008 and 2007 , of tax in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . The tax available-for-sale security wa $ ( 78 ) million , $ 42 78 ) million , $ 42 million and $ 4 million $ 42 million and $ 4 million for 2009 , 2008 and $ 4 million for 2009 , 2008 and 2007 , 4 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The following the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Changes in fair in million ) : 2009 2008 2007 Changes in fair value million ) : 2009 2008 2007 Changes in fair value of fair value of derivative $ 90 $ 7 $ ( 1 of derivative $ 90 $ 7 $ ( 1 ) Adjustment 90 $ 7 $ ( 1 ) Adjustment for net gains/losses included in net income ( 78 ) 12 ( 2 ) net income ( 78 ) 12 ( 2 ) Change in ( 78 ) 12 ( 2 ) Change in unrecognized gains/losses gains/losses on derivative instrument $ 12 $ 19 $ ( 3 derivative instrument $ 12 $ 19 $ ( 3 ) 78 12 $ 19 $ ( 3 ) 78 Table of Contents 19 $ ( 3 ) 78 Table of Contents The tax of derivative wa $ ( 60 ) million , $ ( ) million , $ ( 5 ) million and $ 1 5 ) million and $ 1 million for 2009 , 2008 and $ 1 million for 2009 , 2008 and 2007 , 1 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The tax to net income wa $ 54 million , $ ( 9 54 million , $ ( 9 ) million and $ 2 9 ) million and $ 2 million for 2009 , 2008 and $ 2 million for 2009 , 2008 and 2007 , 2 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a including executive officer . The 2003 Plan permit the granting of , option granted under the 2003 Plan generally expire seven to , RSUs granted under the 2003 Plan vest over two to date . As of September 26 , 2009 , approximately 37 As of September 26 , 2009 , approximately 37 million share 26 , 2009 , approximately 37 million share were reserved for for future issuance under the 2003 Plan . 1997 Employee Stock under the 2003 Plan . 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Board of Directors approved the 1997 Employee Stock Option Plan ( Option Plan ( the “ 1997 Plan ” ) , a , option granted under the 1997 Plan generally expire seven to stock option granted under the 1997 Plan are fully vested . fully vested . In October 2003 , the Company terminated the , the Company terminated the 1997 Plan , and no new granted from this plan . 1997 Director Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s wa approved by shareholder in 1998 . Pursuant to the Director granted an option to acquire 30,000 share of common stock upon receive an option to acquire 10,000 share of common stock ( date . As of September 26 , 2009 , approximately 240,000 As of September 26 , 2009 , approximately 240,000 share were 26 , 2009 , approximately 240,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans As of October Trading Plans As of October 16 , 2009 , executive officer As of October 16 , 2009 , executive officer Timothy D. trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended ( the at a price equal to 85 % of the lower of offering period . Stock purchase 79 Table of Contents under the Purchase Plan are limited to 10 % of an employee ’ to a maximum of $ 25,000 in any calendar year . limited to a total of 3 million share . As of share . As of September 26 , 2009 , approximately 4.7 As of September 26 , 2009 , approximately 4.7 million share 26 , 2009 , approximately 4.7 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 16,500 for calendar year 2009 ) $ 16,500 for calendar year 2009 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ the Savings Plan were $ 59 million , $ 50 million $ 59 million , $ 50 million and $ 39 million $ 50 million and $ 39 million in 2009 , 2008 and $ 39 million in 2009 , 2008 and 2007 , 39 million in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . Restricted Stock with the Company ’ s 2009 equity compensation program change , the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( Intrinsic Value Balance at September 30 , 2006 3,410 $ 39.62 Balance at September 30 , 2006 3,410 $ 39.62 Restricted stock at September 30 , 2006 3,410 $ 39.62 Restricted stock unit 30 , 2006 3,410 $ 39.62 Restricted stock unit granted 1,320 39.62 Restricted stock unit granted 1,320 $ 88.51 Restricted stock unit stock unit granted 1,320 $ 88.51 Restricted stock unit vested ( Restricted stock unit vested ( 45 ) $ 46.57 Restricted stock vested ( 45 ) $ 46.57 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 10 ) $ 86.14 Balance at cancelled ( 10 ) $ 86.14 Balance at September 29 , $ 86.14 Balance at September 29 , 2007 4,675 $ 52.98 Balance at September 29 , 2007 4,675 $ 52.98 Restricted stock at September 29 , 2007 4,675 $ 52.98 Restricted stock unit 29 , 2007 4,675 $ 52.98 Restricted stock unit granted 4,917 52.98 Restricted stock unit granted 4,917 $ 162.61 Restricted stock unit stock unit granted 4,917 $ 162.61 Restricted stock unit vested ( Restricted stock unit vested ( 2,195 ) $ 25.63 Restricted stock vested ( 2,195 ) $ 25.63 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 357 ) $ 119.12 Balance at cancelled ( 357 ) $ 119.12 Balance at September 27 , $ 119.12 Balance at September 27 , 2008 7,040 $ 134.91 Balance at September 27 , 2008 7,040 $ 134.91 Restricted stock at September 27 , 2008 7,040 $ 134.91 Restricted stock unit 27 , 2008 7,040 $ 134.91 Restricted stock unit granted 7,786 134.91 Restricted stock unit granted 7,786 $ 111.80 Restricted stock unit stock unit granted 7,786 $ 111.80 Restricted stock unit vested ( Restricted stock unit vested ( 1,935 ) $ 124.87 Restricted stock vested ( 1,935 ) $ 124.87 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 628 ) $ 121.28 Balance at cancelled ( 628 ) $ 121.28 Balance at September 26 , $ 121.28 Balance at September 26 , 2009 12,263 $ 122.52 Balance at September 26 , 2009 12,263 $ 122.52 $ 2,236,305 at September 26 , 2009 12,263 $ 122.52 $ 2,236,305 The 26 , 2009 12,263 $ 122.52 $ 2,236,305 The fair value 2009 12,263 $ 122.52 $ 2,236,305 The fair value a of RSUs that vested wa $ 221 million , $ 320 million $ 221 million , $ 320 million and $ 6 million $ 320 million and $ 6 million for 2009 , 2008 and $ 6 million for 2009 , 2008 and 2007 , 6 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Upon vesting majority of RSUs vested in 2009 , 2008 and 2007 , RSUs vested in 2009 , 2008 and 2007 , were net-share in 2009 , 2008 and 2007 , were net-share settled such total share withheld were approximately 707,000 , 857,000 and 20,000 for withheld were approximately 707,000 , 857,000 and 20,000 for 2009 , approximately 707,000 , 857,000 and 20,000 for 2009 , 2008 and , 857,000 and 20,000 for 2009 , 2008 and 2007 , and 20,000 for 2009 , 2008 and 2007 , respectively , for 2009 , 2008 and 2007 , respectively , and were the taxing authority were $ 82 million , $ 124 million $ 82 million , $ 124 million and $ 3 million $ 124 million and $ 3 million in 2009 , 2008 and $ 3 million in 2009 , 2008 and 2007 , 3 million in 2009 , 2008 and 2007 , respectively , in 2009 , 2008 and 2007 , respectively , and are expense to the Company . 80 Table of Contents Stock Option the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( Intrinsic Value Balance at September 30 , 2006 54,994 52,982 $ Balance at September 30 , 2006 54,994 52,982 $ 23.23 Additional at September 30 , 2006 54,994 52,982 $ 23.23 Additional share September 30 , 2006 54,994 52,982 $ 23.23 Additional share authorized , 2006 54,994 52,982 $ 23.23 Additional share authorized 28,000 — $ 23.23 Additional share authorized 28,000 — $ — Restricted stock Restricted stock unit granted ( 2,640 ) — $ — Options $ — Options granted ( 14,010 ) 14,010 $ 94.52 Options Options granted ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 14,010 ) 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 14,010 $ 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 94.52 Options cancelled 1,471 ( 1,471 ) $ 55.38 Restricted stock 1,471 ( 1,471 ) $ 55.38 Restricted stock unit cancelled 20 55.38 Restricted stock unit cancelled 20 — $ — Options exercised — Options exercised — ( 15,770 ) $ 18.32 Plan share — ( 15,770 ) $ 18.32 Plan share expired ( 8 18.32 Plan share expired ( 8 ) — $ — Balance $ — Balance at September 29 , 2007 67,827 49,751 $ Balance at September 29 , 2007 67,827 49,751 $ 43.91 Restricted at September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock unit , 2007 67,827 49,751 $ 43.91 Restricted stock unit granted ( Restricted stock unit granted ( 9,834 ) — $ — Options $ — Options granted ( 9,359 ) 9,359 $ 171.36 Options Options granted ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 Restricted stock 1,236 ( 1,236 ) $ 98.40 Restricted stock unit cancelled 714 98.40 Restricted stock unit cancelled 714 — $ — Options exercised — Options exercised — ( 13,728 ) $ 27.88 Plan share — ( 13,728 ) $ 27.88 Plan share expired ( 12 27.88 Plan share expired ( 12 ) — $ — Balance $ — Balance at September 27 , 2008 50,572 44,146 $ Balance at September 27 , 2008 50,572 44,146 $ 74.39 Restricted at September 27 , 2008 50,572 44,146 $ 74.39 Restricted stock September 27 , 2008 50,572 44,146 $ 74.39 Restricted stock unit , 2008 50,572 44,146 $ 74.39 Restricted stock unit granted ( Restricted stock unit granted ( 15,572 ) — $ — Options $ — Options granted ( 234 ) 234 $ 106.84 Options Options granted ( 234 ) 234 $ 106.84 Options cancelled 1,241 ( 234 ) 234 $ 106.84 Options cancelled 1,241 ( 1,241 234 $ 106.84 Options cancelled 1,241 ( 1,241 ) $ 122.98 106.84 Options cancelled 1,241 ( 1,241 ) $ 122.98 Restricted stock 1,241 ( 1,241 ) $ 122.98 Restricted stock unit cancelled 1,256 122.98 Restricted stock unit cancelled 1,256 — $ — Options exercised — Options exercised — ( 8,764 ) $ 41.78 Plan share — ( 8,764 ) $ 41.78 Plan share expired ( 2 41.78 Plan share expired ( 2 ) — $ — Balance $ — Balance at September 26 , 2009 37,261 34,375 $ Balance at September 26 , 2009 37,261 34,375 $ 81.17 3.52 at September 26 , 2009 37,261 34,375 $ 81.17 3.52 $ September 26 , 2009 37,261 34,375 $ 81.17 3.52 $ 3,482,530 , 2009 37,261 34,375 $ 81.17 3.52 $ 3,482,530 Exercisable at 2009 37,261 34,375 $ 81.17 3.52 $ 3,482,530 Exercisable at September 34,375 $ 81.17 3.52 $ 3,482,530 Exercisable at September 26 , $ 3,482,530 Exercisable at September 26 , 2009 24,685 $ 60.62 Exercisable at September 26 , 2009 24,685 $ 60.62 3.01 $ at September 26 , 2009 24,685 $ 60.62 3.01 $ 3,006,829 26 , 2009 24,685 $ 60.62 3.01 $ 3,006,829 Expected to , 2009 24,685 $ 60.62 3.01 $ 3,006,829 Expected to Vest 24,685 $ 60.62 3.01 $ 3,006,829 Expected to Vest after September Expected to Vest after September 26 , 2009 9,479 $ 133.28 Vest after September 26 , 2009 9,479 $ 133.28 4.82 $ after September 26 , 2009 9,479 $ 133.28 4.82 $ 465,321 26 , 2009 9,479 $ 133.28 4.82 $ 465,321 Aggregate intrinsic , 2009 9,479 $ 133.28 4.82 $ 465,321 Aggregate intrinsic value 9,479 $ 133.28 4.82 $ 465,321 Aggregate intrinsic value represents the time of exercise wa $ 827 million , $ 2.0 billion $ 827 million , $ 2.0 billion and $ 1.3 billion $ 2.0 billion and $ 1.3 billion for 2009 , 2008 and $ 1.3 billion for 2009 , 2008 and 2007 , 1.3 billion for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . RSUs granted is estimated at the grant 81 Table of Contents date based the three year ended September 26 , 2009 , and the year ended September 26 , 2009 , and the resulting estimate period are a follows : 2009 2008 2007 Expected life of are a follows : 2009 2008 2007 Expected life of stock a follows : 2009 2008 2007 Expected life of stock option Expected life of stock option 4.54 year ( a ) 3.41 4.54 year ( a ) 3.41 year 3.46 year Expected life ( a ) 3.41 year 3.46 year Expected life of stock life of stock purchase right 6 month 6 month 6 month stock purchase right 6 month 6 month 6 month Interest rate right 6 month 6 month 6 month Interest rate - stock Interest rate - stock option 2.04 % ( a ) 3.40 2.04 % ( a ) 3.40 % 4.61 % Interest rate ( a ) 3.40 % 4.61 % Interest rate - stock rate - stock purchase right 0.58 % 3.48 % 5.13 % stock purchase right 0.58 % 3.48 % 5.13 % Volatility - right 0.58 % 3.48 % 5.13 % Volatility - stock option % Volatility - stock option 50.98 % ( a ) 45.64 50.98 % ( a ) 45.64 % 38.13 % Volatility - ( a ) 45.64 % 38.13 % Volatility - stock purchase Volatility - stock purchase right 52.16 % 38.51 % 39.22 % stock purchase right 52.16 % 38.51 % 39.22 % Dividend yield right 52.16 % 38.51 % 39.22 % Dividend yield — — granted during the year $ 46.71 $ 62.73 $ 31.86 Weighted-average the year $ 46.71 $ 62.73 $ 31.86 Weighted-average fair value $ 46.71 $ 62.73 $ 31.86 Weighted-average fair value of employee right during the year $ 30.62 $ 42.27 $ 20.90 ( the year $ 30.62 $ 42.27 $ 20.90 ( a ) $ 30.62 $ 42.27 $ 20.90 ( a ) In conjunction with the Company ’ s 2009 equity compensation program change , the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Cost of sale in million ) : 2009 2008 2007 Cost of sale $ million ) : 2009 2008 2007 Cost of sale $ 114 2007 Cost of sale $ 114 $ 80 $ 35 Research of sale $ 114 $ 80 $ 35 Research and development $ 114 $ 80 $ 35 Research and development 258 185 $ 35 Research and development 258 185 77 Selling , general 35 Research and development 258 185 77 Selling , general and Research and development 258 185 77 Selling , general and administrative Selling , general and administrative 338 251 130 Total stock-based compensation , general and administrative 338 251 130 Total stock-based compensation expense general and administrative 338 251 130 Total stock-based compensation expense $ Total stock-based compensation expense $ 710 $ 516 $ 242 Stock-based compensation expense $ 710 $ 516 $ 242 Stock-based compensation expense $ 710 $ 516 $ 242 Stock-based compensation expense capitalized a not significant a of September 26 , 2009 or September 27 a of September 26 , 2009 or September 27 , 2008 26 , 2009 or September 27 , 2008 . The income 2009 or September 27 , 2008 . The income tax benefit stock-based compensation expense wa $ 266 million , $ 169 million $ 266 million , $ 169 million and $ 81 million $ 169 million and $ 81 million for 2009 , 2008 and $ 81 million for 2009 , 2008 and 2007 , 81 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The total expected to vest wa $ 1.4 billion a of September 26 1.4 billion a of September 26 , 2009 , which is a of September 26 , 2009 , which is expected to over a weighted-average period of 2.53 year . Note 8 – of 2.53 year . Note 8 – Commitments and Contingencies Lease sheet financing arrangement . The 82 Table of Contents major facility for term of one to 20 year and generally provide renewal for term of five to 20 year , the majority of option . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company ’ s noncancelable operating lease were $ 1.9 billion , of which $ billion , of which $ 1.5 billion related to lease for noncancelable lease , wa $ 231 million , $ 207 million $ 231 million , $ 207 million and $ 151 million $ 207 million and $ 151 million in 2009 , 2008 and $ 151 million in 2009 , 2008 and 2007 , 151 million in 2009 , 2008 and 2007 , respectively . in 2009 , 2008 and 2007 , respectively . Future minimum one year a of September 26 , 2009 , are a a of September 26 , 2009 , are a follows ( in million ) : Years 2010 $ 222 2011 234 2012 ) : Years 2010 $ 222 2011 234 2012 228 2013 : Years 2010 $ 222 2011 234 2012 228 2013 214 Years 2010 $ 222 2011 234 2012 228 2013 214 2014 2010 $ 222 2011 234 2012 228 2013 214 2014 199 $ 222 2011 234 2012 228 2013 214 2014 199 Thereafter 222 2011 234 2012 228 2013 214 2014 199 Thereafter 825 2011 234 2012 228 2013 214 2014 199 Thereafter 825 Total 234 2012 228 2013 214 2014 199 Thereafter 825 Total minimum 2012 228 2013 214 2014 199 Thereafter 825 Total minimum lease 2013 214 2014 199 Thereafter 825 Total minimum lease payment $ Total minimum lease payment $ 1,922 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service the three year ended September 26 , 2009 ( in million year ended September 26 , 2009 ( in million ) : ( in million ) : 2009 2008 2007 Beginning accrued warranty in million ) : 2009 2008 2007 Beginning accrued warranty and million ) : 2009 2008 2007 Beginning accrued warranty and related warranty and related cost $ 267 $ 230 $ 284 Cost related cost $ 267 $ 230 $ 284 Cost of warranty $ 267 $ 230 $ 284 Cost of warranty claim ( Cost of warranty claim ( 294 ) ( 319 ) ( claim ( 294 ) ( 319 ) ( 281 ) Accruals ) ( 319 ) ( 281 ) Accruals for product warranty ) Accruals for product warranty 237 356 227 Ending accrued warranty Accruals for product warranty 237 356 227 Ending accrued warranty and for product warranty 237 356 227 Ending accrued warranty and related warranty and related cost $ 210 $ 267 $ 230 The related cost $ 210 $ 267 $ 230 The Company generally $ 210 $ 267 $ 230 The Company generally doe not or an indemnified third-party . 83 Table of Contents However , cost a of either September 26 , 2009 or September 27 of either September 26 , 2009 or September 27 , 2008 26 , 2009 or September 27 , 2008 . The Company 2009 or September 27 , 2008 . The Company ha entered s desktop product . Although 84 Table of Contents the Company requirement for period ranging from 30 to 150 day . Long-Term period ranging from 30 to 150 day . Long-Term Supply Agreements During the first quarter of 2009 , a long-term supply agreement remaining prepaid balance of $ 167 million wa repaid to the second and fourth quarter of 2009 , the Company made a made a prepayment of $ 500 million to LG Display for and a prepayment of $ 500 million to Toshiba to purchase respectively . As of September 26 , 2009 , the Company As of September 26 , 2009 , the Company had a had a total of $ 1.2 billion of inventory component prepayment in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal or operating result . Note 9 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant segment includes net sale to 85 Table of Contents third party the Retail segment were $ 369 million , $ 389 million $ 369 million , $ 389 million and $ 294 million $ 389 million and $ 294 million for 2009 , 2008 and $ 294 million for 2009 , 2008 and 2007 , 294 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . The Company had opened a total of 11 high-profile store a of September high-profile store a of September 26 , 2009 . Expenses allocated a of September 26 , 2009 . Expenses allocated to corporate of high-profile store were $ 65 million , $ 53 million $ 65 million , $ 53 million and $ 39 million $ 53 million and $ 39 million for 2009 , 2008 and $ 39 million for 2009 , 2008 and 2007 , 39 million for 2009 , 2008 and 2007 , respectively . for 2009 , 2008 and 2007 , respectively . Summary information the three year ended September 26 , 2009 is a follows year ended September 26 , 2009 is a follows ( in ( in million ) : 2009 2008 2007 Americas : Net in million ) : 2009 2008 2007 Americas : Net sale million ) : 2009 2008 2007 Americas : Net sale $ Americas : Net sale $ 16,142 $ 14,573 $ 11,596 Operating Net sale $ 16,142 $ 14,573 $ 11,596 Operating income $ $ 16,142 $ 14,573 $ 11,596 Operating income $ 4,772 $ $ 11,596 Operating income $ 4,772 $ 4,051 $ 2,949 Depreciation Operating income $ 4,772 $ 4,051 $ 2,949 Depreciation , amortization $ 4,772 $ 4,051 $ 2,949 Depreciation , amortization and accretion , amortization and accretion $ 11 $ 9 $ 9 Segment and accretion $ 11 $ 9 $ 9 Segment asset ( $ 11 $ 9 $ 9 Segment asset ( a ) asset ( a ) $ 4,290 $ 3,039 $ 1,497 Europe a ) $ 4,290 $ 3,039 $ 1,497 Europe : Net $ 4,290 $ 3,039 $ 1,497 Europe : Net sale $ Europe : Net sale $ 9,365 $ 7,622 $ 5,460 Operating Net sale $ 9,365 $ 7,622 $ 5,460 Operating income $ $ 9,365 $ 7,622 $ 5,460 Operating income $ 2,913 $ $ 5,460 Operating income $ 2,913 $ 2,313 $ 1,348 Depreciation Operating income $ 2,913 $ 2,313 $ 1,348 Depreciation , amortization $ 2,913 $ 2,313 $ 1,348 Depreciation , amortization and accretion , amortization and accretion $ 7 $ 6 $ 6 Segment and accretion $ 7 $ 6 $ 6 Segment asset $ $ 7 $ 6 $ 6 Segment asset $ 2,994 $ $ 6 Segment asset $ 2,994 $ 1,775 $ 595 Japan Segment asset $ 2,994 $ 1,775 $ 595 Japan : Net $ 2,994 $ 1,775 $ 595 Japan : Net sale $ Japan : Net sale $ 1,831 $ 1,509 $ 1,082 Operating Net sale $ 1,831 $ 1,509 $ 1,082 Operating income $ $ 1,831 $ 1,509 $ 1,082 Operating income $ 657 $ $ 1,082 Operating income $ 657 $ 440 $ 232 Depreciation Operating income $ 657 $ 440 $ 232 Depreciation , amortization $ 657 $ 440 $ 232 Depreciation , amortization and accretion , amortization and accretion $ 2 $ 2 $ 3 Segment and accretion $ 2 $ 2 $ 3 Segment asset $ $ 2 $ 2 $ 3 Segment asset $ 638 $ $ 3 Segment asset $ 638 $ 302 $ 159 Retail Segment asset $ 638 $ 302 $ 159 Retail : Net $ 638 $ 302 $ 159 Retail : Net sale $ Retail : Net sale $ 6,574 $ 6,315 $ 4,115 Operating Net sale $ 6,574 $ 6,315 $ 4,115 Operating income $ $ 6,574 $ 6,315 $ 4,115 Operating income $ 1,392 $ $ 4,115 Operating income $ 1,392 $ 1,337 $ 875 Depreciation Operating income $ 1,392 $ 1,337 $ 875 Depreciation , amortization $ 1,392 $ 1,337 $ 875 Depreciation , amortization and accretion accretion ( b ) $ 146 $ 108 $ 88 Segment b ) $ 146 $ 108 $ 88 Segment asset ( $ 146 $ 108 $ 88 Segment asset ( b ) asset ( b ) $ 1,929 $ 1,869 $ 1,085 Other b ) $ 1,929 $ 1,869 $ 1,085 Other Segments ( $ 1,929 $ 1,869 $ 1,085 Other Segments ( c ) ) : Net sale $ 2,625 $ 2,460 $ 1,753 Operating Net sale $ 2,625 $ 2,460 $ 1,753 Operating income $ $ 2,625 $ 2,460 $ 1,753 Operating income $ 748 $ $ 1,753 Operating income $ 748 $ 615 $ 388 Depreciation Operating income $ 748 $ 615 $ 388 Depreciation , amortization $ 748 $ 615 $ 388 Depreciation , amortization and accretion , amortization and accretion $ 4 $ 4 $ 3 Segment and accretion $ 4 $ 4 $ 3 Segment asset $ $ 4 $ 4 $ 3 Segment asset $ 953 $ $ 3 Segment asset $ 953 $ 534 $ 252 86 Segment asset $ 953 $ 534 $ 252 86 Table of $ 953 $ 534 $ 252 86 Table of Contents ( 953 $ 534 $ 252 86 Table of Contents ( a the three year ended September 26 , 2009 is a follows year ended September 26 , 2009 is a follows ( in ( in million ) : 2009 2008 2007 Segment operating income in million ) : 2009 2008 2007 Segment operating income $ million ) : 2009 2008 2007 Segment operating income $ 10,482 2007 Segment operating income $ 10,482 $ 8,756 $ 5,792 Other operating income $ 10,482 $ 8,756 $ 5,792 Other corporate expense $ 10,482 $ 8,756 $ 5,792 Other corporate expense , net net ( a ) ( 2,114 ) ( 1,965 ) ( ) ( 2,114 ) ( 1,965 ) ( 1,141 ) Stock-based ) ( 1,965 ) ( 1,141 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 710 ) ( 516 ) ( expense ( 710 ) ( 516 ) ( 242 ) Total ) ( 516 ) ( 242 ) Total operating income $ ) Total operating income $ 7,658 $ 6,275 $ 4,409 Segment operating income $ 7,658 $ 6,275 $ 4,409 Segment asset $ $ 7,658 $ 6,275 $ 4,409 Segment asset $ 10,804 $ $ 4,409 Segment asset $ 10,804 $ 7,519 $ 3,588 Corporate Segment asset $ 10,804 $ 7,519 $ 3,588 Corporate asset 43,047 $ 10,804 $ 7,519 $ 3,588 Corporate asset 43,047 32,053 21,759 7,519 $ 3,588 Corporate asset 43,047 32,053 21,759 Consolidated asset $ $ 3,588 Corporate asset 43,047 32,053 21,759 Consolidated asset $ 53,851 3,588 Corporate asset 43,047 32,053 21,759 Consolidated asset $ 53,851 $ 32,053 21,759 Consolidated asset $ 53,851 $ 39,572 $ 25,347 Segment Consolidated asset $ 53,851 $ 39,572 $ 25,347 Segment depreciation , $ 53,851 $ 39,572 $ 25,347 Segment depreciation , amortization and , amortization and accretion $ 170 $ 129 $ 109 Corporate and accretion $ 170 $ 129 $ 109 Corporate depreciation , $ 170 $ 129 $ 109 Corporate depreciation , amortization and depreciation , amortization and accretion 533 344 208 Consolidated depreciation , , amortization and accretion 533 344 208 Consolidated depreciation , amortization amortization and accretion 533 344 208 Consolidated depreciation , amortization and , amortization and accretion $ 703 $ 473 $ 317 ( and accretion $ 703 $ 473 $ 317 ( a ) $ 703 $ 473 $ 317 ( a ) Other corporate U.S. accounted for more than 10 % of net sale in % of net sale in 2009 , 2008 or 2007 . net sale in 2009 , 2008 or 2007 . Net sale in 2009 , 2008 or 2007 . Net sale and long-lived the three year ended September 26 , 2009 , are a year ended September 26 , 2009 , are a follows ( ( in million ) : 2009 2008 2007 Net sale : in million ) : 2009 2008 2007 Net sale : U.S. million ) : 2009 2008 2007 Net sale : U.S. $ Net sale : U.S. $ 19,870 $ 18,469 $ 14,128 International : U.S. $ 19,870 $ 18,469 $ 14,128 International 16,667 14,010 $ 19,870 $ 18,469 $ 14,128 International 16,667 14,010 9,878 Total $ 18,469 $ 14,128 International 16,667 14,010 9,878 Total net sale 18,469 $ 14,128 International 16,667 14,010 9,878 Total net sale $ $ 14,128 International 16,667 14,010 9,878 Total net sale $ 36,537 9,878 Total net sale $ 36,537 $ 32,479 $ 24,006 Long-lived net sale $ 36,537 $ 32,479 $ 24,006 Long-lived asset : $ 36,537 $ 32,479 $ 24,006 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 2,698 $ 2,269 $ 1,752 International : U.S. $ 2,698 $ 2,269 $ 1,752 International 495 410 $ 2,698 $ 2,269 $ 1,752 International 495 410 260 Total $ 2,269 $ 1,752 International 495 410 260 Total long-lived asset 2,269 $ 1,752 International 495 410 260 Total long-lived asset $ $ 1,752 International 495 410 260 Total long-lived asset $ 3,193 260 Total long-lived asset $ 3,193 $ 2,679 $ 2,012 87 long-lived asset $ 3,193 $ 2,679 $ 2,012 87 Table of $ 3,193 $ 2,679 $ 2,012 87 Table of Contents Information 3,193 $ 2,679 $ 2,012 87 Table of Contents Information regarding the three year ended September 26 , 2009 , is a year ended September 26 , 2009 , is a follows ( ( in million ) : 2009 2008 2007 Net sale : in million ) : 2009 2008 2007 Net sale : Desktops million ) : 2009 2008 2007 Net sale : Desktops ( Desktops ( a ) $ 4,308 $ 5,603 $ 4,020 Portables a ) $ 4,308 $ 5,603 $ 4,020 Portables ( b $ 4,308 $ 5,603 $ 4,020 Portables ( b ) 9,472 4,020 Portables ( b ) 9,472 8,673 6,294 Total Mac net Portables ( b ) 9,472 8,673 6,294 Total Mac net sale ( b ) 9,472 8,673 6,294 Total Mac net sale 13,780 6,294 Total Mac net sale 13,780 14,276 10,314 iPod 8,091 9,153 Total Mac net sale 13,780 14,276 10,314 iPod 8,091 9,153 8,305 Mac net sale 13,780 14,276 10,314 iPod 8,091 9,153 8,305 Other sale 13,780 14,276 10,314 iPod 8,091 9,153 8,305 Other music related 13,780 14,276 10,314 iPod 8,091 9,153 8,305 Other music related product 14,276 10,314 iPod 8,091 9,153 8,305 Other music related product and and service ( c ) 4,036 3,340 2,496 iPhone and related service ( c ) 4,036 3,340 2,496 iPhone and related product ( c ) 4,036 3,340 2,496 iPhone and related product and and service ( d ) 6,754 1,844 123 Peripherals and other service ( d ) 6,754 1,844 123 Peripherals and other hardware ( d ) 6,754 1,844 123 Peripherals and other hardware ( other hardware ( e ) 1,470 1,659 1,260 Software , service hardware ( e ) 1,470 1,659 1,260 Software , service and ( e ) 1,470 1,659 1,260 Software , service and other net sale ( f ) 2,406 2,207 1,508 Total net sale sale ( f ) 2,406 2,207 1,508 Total net sale $ ( f ) 2,406 2,207 1,508 Total net sale $ 36,537 1,508 Total net sale $ 36,537 $ 32,479 $ 24,006 ( net sale $ 36,537 $ 32,479 $ 24,006 ( a ) $ 36,537 $ 32,479 $ 24,006 ( a ) Includes iMac and Internet service . Note 10 – Related Party Transactions and a total of approximately $ 4,000 , $ 871,000 and $ approximately $ 4,000 , $ 871,000 and $ 776,000 in expense , $ 871,000 and $ 776,000 in expense pursuant to the to the Reimbursement Agreement during 2009 , 2008 and 2007 , Reimbursement Agreement during 2009 , 2008 and 2007 , respectively . during 2009 , 2008 and 2007 , respectively . All expense Statements of Operations . Note 11 – Selected Quarterly Financial Information the four quarter ended September 26 , 2009 and September 27 quarter ended September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 ( in million 2009 and September 27 , 2008 ( in million , except Quarter Second Quarter First Quarter 2009 Net sale $ 9,870 $ Quarter 2009 Net sale $ 9,870 $ 8,337 $ 8,163 $ Net sale $ 9,870 $ 8,337 $ 8,163 $ 10,167 Gross $ 9,870 $ 8,337 $ 8,163 $ 10,167 Gross margin $ $ 8,337 $ 8,163 $ 10,167 Gross margin $ 3,614 $ $ 10,167 Gross margin $ 3,614 $ 3,023 $ 2,971 $ Gross margin $ 3,614 $ 3,023 $ 2,971 $ 3,532 Net $ 3,614 $ 3,023 $ 2,971 $ 3,532 Net income $ $ 3,023 $ 2,971 $ 3,532 Net income $ 1,665 $ $ 3,532 Net income $ 1,665 $ 1,229 $ 1,205 $ Net income $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings $ 1,665 $ 1,229 $ 1,205 $ 1,605 Earnings per common $ 1,229 $ 1,205 $ 1,605 Earnings per common share : common share : Basic $ 1.85 $ 1.38 $ 1.35 $ : Basic $ 1.85 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.85 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.82 $ 1.38 $ 1.35 $ 1.81 Diluted $ 1.82 $ 1.35 1.35 $ 1.81 Diluted $ 1.82 $ 1.35 $ 1.33 $ 1.81 Diluted $ 1.82 $ 1.35 $ 1.33 $ 1.78 2008 $ 1.82 $ 1.35 $ 1.33 $ 1.78 2008 Net sale $ 1.35 $ 1.33 $ 1.78 2008 Net sale $ 7,895 1.35 $ 1.33 $ 1.78 2008 Net sale $ 7,895 $ 1.78 2008 Net sale $ 7,895 $ 7,464 $ 7,512 $ Net sale $ 7,895 $ 7,464 $ 7,512 $ 9,608 Gross $ 7,895 $ 7,464 $ 7,512 $ 9,608 Gross margin $ $ 7,464 $ 7,512 $ 9,608 Gross margin $ 2,739 $ $ 9,608 Gross margin $ 2,739 $ 2,600 $ 2,474 $ Gross margin $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net $ 2,739 $ 2,600 $ 2,474 $ 3,332 Net income $ $ 2,600 $ 2,474 $ 3,332 Net income $ 1,136 $ $ 3,332 Net income $ 1,136 $ 1,072 $ 1,045 $ Net income $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings $ 1,136 $ 1,072 $ 1,045 $ 1,581 Earnings per common $ 1,072 $ 1,045 $ 1,581 Earnings per common share : common share : Basic $ 1.28 $ 1.21 $ 1.19 $ : Basic $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.28 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.21 $ 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 1.19 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.81 Diluted $ 1.26 $ 1.19 $ 1.16 $ 1.76 Basic $ 1.26 $ 1.19 $ 1.16 $ 1.76 Basic and diluted $ 1.19 $ 1.16 $ 1.76 Basic and diluted earnings per diluted earnings per share . 88 Table of Contents Report of Apple Inc. a of September 26 , 2009 , and the a of September 26 , 2009 , and the related consolidated of Apple Inc. at September 26 , 2009 , and the Inc. at September 26 , 2009 , and the consolidated result financial reporting a of September 26 , 2009 , based on a of September 26 , 2009 , based on criterion established and our report dated October 27 , 2009 expressed an unqualified report dated October 27 , 2009 expressed an unqualified opinion thereon San Jose , California October 27 , 2009 89 Table of , California October 27 , 2009 89 Table of Contents Report California October 27 , 2009 89 Table of Contents Report of financial reporting a of September 26 , 2009 , based on a of September 26 , 2009 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 26 , 2009 , based on a of September 26 , 2009 , based on the COSO for the year ended September 26 , 2009 and our report year ended September 26 , 2009 and our report dated October and our report dated October 27 , 2009 expressed an unqualified report dated October 27 , 2009 expressed an unqualified opinion thereon San Jose , California October 27 , 2009 90 Table of , California October 27 , 2009 90 Table of Contents Report California October 27 , 2009 90 Table of Contents Report of Company ) a of September 27 , 2008 , and the a of September 27 , 2008 , and the related consolidated for the year ended September 27 , 2008 and September 29 year ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 . These consolidated 2008 and September 29 , 2007 . These consolidated financial statement and subsidiary a of September 27 , 2008 and the result a of September 27 , 2008 and the result of their for the year ended September 27 , 2008 and September 29 year ended September 27 , 2008 and September 29 , 2007 27 , 2008 and September 29 , 2007 in conformity with 2008 and September 29 , 2007 in conformity with U.S. generally . As discussed in note 1 to the Consolidated Financial Statements Financial Statements , effective September 30 , 2007 , the Company , effective September 30 , 2007 , the Company adopted Financial Standards Board Interpretation No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 . /s/ KPMG LLP Mountain Mountain View , California November 4 , 2008 91 Table of , California November 4 , 2008 91 Table of Contents Item California November 4 , 2008 91 Table of Contents Item 9 91 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 26 , 2009 to provide reasonable a of September 26 , 2009 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the wa effective a of September 26 , 2009 to provide reasonable a of September 26 , 2009 to provide reasonable assurance regarding financial reporting appears on page 90 of this Form 10-K. 92 page 90 of this Form 10-K. 92 Table of Contents Changes 90 of this Form 10-K. 92 Table of Contents Changes in the fourth quarter of fiscal 2009 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information None . . Other Information None . 93 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers in the Company ’ s 2010 Proxy Statement to be filed for the Company ’ s 2010 Annual Meeting of Shareholders ( Meeting of Shareholders ( “ 2010 Proxy Statement ” ) . filed with the SEC within 120 day after the end of this report relates . Item 11 . Executive Compensation The information in the Company ’ s 2010 Proxy Statement . Item 12 2010 Proxy Statement . Item 12 . Security Ownership of Certain in the Company ’ s 2010 Proxy Statement . Item 13 2010 Proxy Statement . Item 13 . Certain Relationships and Related in the Company ’ s 2010 Proxy Statement . Item 14 2010 Proxy Statement . Item 14 . Principal Accountant Fees and in the Company ’ s 2010 Proxy Statement . 94 Table s 2010 Proxy Statement . 94 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index Balance Sheets a of September 26 , 2009 and September 27 a of September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 55 Consolidated Statements 2009 and September 27 , 2008 55 Consolidated Statements of Operations and September 27 , 2008 55 Consolidated Statements of Operations for the three year ended September 26 , 2009 56 Consolidated Statements year ended September 26 , 2009 56 Consolidated Statements of Shareholders ended September 26 , 2009 56 Consolidated Statements of Shareholders ’ the three year ended September 26 , 2009 57 Consolidated Statements year ended September 26 , 2009 57 Consolidated Statements of Cash ended September 26 , 2009 57 Consolidated Statements of Cash Flows the three year ended September 26 , 2009 58 Notes to year ended September 26 , 2009 58 Notes to Consolidated Financial ended September 26 , 2009 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 88 Reports of Ernst & Young Independent Registered Public Accounting Firm 89 Report of KPMG LLP , Independent Registered Public Accounting Firm 91 ( 2 ) Financial Statement Public Accounting Firm 91 ( 2 ) Financial Statement Schedules All ) Exhibits required by Item 601 of Regulation S-K The information page of this report . 95 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 27th day of October 2009 . this 27th day of October 2009 . APPLE INC. By : this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 27 , 2009 /s/ Peter Oppenheimer Officer ) October 27 , 2009 /s/ Peter Oppenheimer PETER OPPENHEIMER Principal Financial Officer ) October 27 , 2009 /s/ Betsy Rafael Officer ) October 27 , 2009 /s/ Betsy Rafael BETSY RAFAEL Principal Accounting Officer ) October 27 , 2009 /s/ William V. Officer ) October 27 , 2009 /s/ William V. Campbell WILLIAM WILLIAM V. CAMPBELL Director October 27 , 2009 /s/ Millard S. CAMPBELL Director October 27 , 2009 /s/ Millard S. Drexler MILLARD MILLARD S. DREXLER Director October 27 , 2009 /s/ Albert Gore DREXLER Director October 27 , 2009 /s/ Albert Gore , Jr. GORE , JR. Director October 27 , 2009 /s/ Andrea Jung JR. Director October 27 , 2009 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 27 , 2009 /s/ Arthur D. JUNG Director October 27 , 2009 /s/ Arthur D. Levinson ARTHUR ARTHUR D. LEVINSON Director October 27 , 2009 /s/ Jerome B. LEVINSON Director October 27 , 2009 /s/ Jerome B. York JEROME JEROME B. YORK Director October 27 , 2009 96 Table of YORK Director October 27 , 2009 96 Table of Contents EXHIBIT Director October 27 , 2009 96 Table of Contents EXHIBIT INDEX Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on July 10 , 2009 . 10-Q 6/27/09 California on July 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws July 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws of the 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws of the Registrant , 2009 . 10-Q 6/27/09 3.2 By-Laws of the Registrant , , a amended through May 27 , 2009 . 8-K 6/2/09 amended through May 27 , 2009 . 8-K 6/2/09 4.1 Form May 27 , 2009 . 8-K 6/2/09 4.1 Form of Stock 27 , 2009 . 8-K 6/2/09 4.1 Form of Stock Certificate , 2009 . 8-K 6/2/09 4.1 Form of Stock Certificate of Certificate of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase Plan , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.2 * May 10 , 2007 . 8-K 5/16/07 10.2 * Form of 10 , 2007 . 8-K 5/16/07 10.2 * Form of Indemnification , 2007 . 8-K 5/16/07 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee of the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee Stock the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee Stock Option . 10-Q 6/27/09 10.3 * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.4 * October 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock Option . 10-K 9/28/02 10.4 * 1997 Director Stock Option Plan , , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.5 * May 10 , 2007 . 8-K 5/16/07 10.5 * 2003 Employee 10 , 2007 . 8-K 5/16/07 10.5 * 2003 Employee Stock , 2007 . 8-K 5/16/07 10.5 * 2003 Employee Stock Plan . 8-K 5/16/07 10.5 * 2003 Employee Stock Plan , a , a amended through May 10 , 2007 . 8-K 5/16/07 amended through May 10 , 2007 . 8-K 5/16/07 10.6 * May 10 , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement 10 , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement dated , 2007 . 8-K 5/16/07 10.6 * Reimbursement Agreement dated a Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.7 * Form of Steven P. Jobs . 10-Q 6/29/02 10.7 * Form of Option P. Jobs . 10-Q 6/29/02 10.7 * Form of Option Agreement Form of Option Agreement . 10-K 9/24/05 10.8 * Form of of Option Agreement . 10-K 9/24/05 10.8 * Form of Restricted Option Agreement . 10-K 9/24/05 10.8 * Form of Restricted Stock Agreement effective a of August 28 , 2007 . 10-K 9/29/07 a of August 28 , 2007 . 10-K 9/29/07 10.9 * August 28 , 2007 . 10-K 9/29/07 10.9 * Form of 28 , 2007 . 10-K 9/29/07 10.9 * Form of Restricted , 2007 . 10-K 9/29/07 10.9 * Form of Restricted Stock Agreement effective a of November 11 , 2008 . 10-Q 12/27/08 a of November 11 , 2008 . 10-Q 12/27/08 10.10 * November 11 , 2008 . 10-Q 12/27/08 10.10 * Transition Agreement 11 , 2008 . 10-Q 12/27/08 10.10 * Transition Agreement and , 2008 . 10-Q 12/27/08 10.10 * Transition Agreement and Settlement Release dated a of November 3 , 2008 by and between a of November 3 , 2008 by and between the Registrant Registrant and Anthony Fadell . 10-Q 12/27/08 14.1 Business Conduct Policy and Anthony Fadell . 10-Q 12/27/08 14.1 Business Conduct Policy of Anthony Fadell . 10-Q 12/27/08 14.1 Business Conduct Policy of the of the Registrant dated February 2009 . 10-Q 3/28/09 21.1 * Registrant dated February 2009 . 10-Q 3/28/09 21.1 * * Subsidiaries dated February 2009 . 10-Q 3/28/09 21.1 * * Subsidiaries of February 2009 . 10-Q 3/28/09 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 23.2 * * Consent of KPMG Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * * * XBRL * * XBRL Instance Document 101.SCH * * * * XBRL XBRL Taxonomy Extension Schema Document 101.CAL * * * * XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * * * * XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * * * * XBRL Taxonomy Extension Label Linkbase Document 101.PRE * * * * XBRL that , pursuant to Rule 406T , these interactive data file not subject to liability . 97 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-10-238044/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-10-238044/full-submission.txt new file mode 100644 index 0000000..65ba6c2 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-10-238044/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 25 , 2010 or ¨ TRANSITION year ended September 25 , 2010 or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 27 , 2010 , wa approximately a of March 27 , 2010 , wa approximately $ 208,565,000,000 2010 , wa approximately $ 208,565,000,000 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 917,307,099 share of Common Stock Issued and Outstanding a of October 15 , 2010 DOCUMENTS INCORPORATED BY a of October 15 , 2010 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2011 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part I , Item 1A of this Form 10-K , Item 1A of this Form 10-K , which are incorporated herein law . PART I Item 1. Business Company Background Apple Inc. s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company a California corporation founded in 1977. Business Strategy The Company is lifestyle and productivity solution . 1 Table of Contents Consumer and expertise . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had opened had opened a total of 317 retail store , including 233 317 retail store , including 233 store in the U.S. and store in the U.S. and 84 store internationally . The Company , Europe , Japan and 2 Table of Contents Asia-Pacific reportable in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements at Note 9 , “ Segment Information and s Mac OS X Version 10.6 Snow Leopard ® ( “ and Windows-based computer . iTunes 10 feature Ping , a music-oriented Store currently serf customer in 23 country . The iTunes Store iPad or iPod touch . 3 Table of Contents iPhone iPhone and application . In June 2010 , the Company introduced the the Company introduced the iPhone 4 featuring an all-new design , resolution Retina™ display , a 5 megapixel camera with LED flash s A4 processor and a 3-axis gyroscope . In addition to the U.S. iPad In January 2010 , the Company introduced iPad touch , introduced in September 2010 , includes feature such a nano , introduced in September 2010 , is a flash-memory-based iPod which wa updated in September 2010 , is a flash-memory-based iPod computing product and supply . 4 Table of Contents Apple TV and became available in August 2009 . Mac OS X Snow support for Microsoft Exchange Server 2007 and VoiceOver integration with the iPod touch . In June 2010 , the Company launched iOS , the Company launched iOS 4 , the latest version of mobile operating system . iOS 4 feature Multitasking that allows customer are currently using . iOS 4 became available for iPhone 3G 4 became available for iPhone 3G , iPhone 3GS , iPhone for iPhone 3G , iPhone 3GS , iPhone 4 , and , iPhone 3GS , iPhone 4 , and second and third generation iPod touch in June 2010 , and is expected to available for iPad in November 2010 . Certain feature of the Certain feature of the iOS 4 software will not function on Application Software iLife iLife ’ 11 is the latest version of . iWork ® iWork ’ 09 is the latest version of and spreadsheet . iWork ’ 09 includes update to Pages ® update to Pages ® ’ 09 for 5 Table of Contents Pages ® ’ 09 for 5 Table of Contents word processing layout , Keynote ® ’ 09 for presentation , and Numbers , and Numbers ® ’ 09 for spreadsheet . In January for spreadsheet . In January 2010 , the Company also introduced ® , Logic ® Express 9 , Logic Studio ® Pro optimized user experience . Safari 5 ® is the latest version , and product expertise . 6 Table of Contents One of ’ s customer accounted for 11 % of net sale in % of net sale in 2009 ; there wa no single that accounted for more than 10 % of net sale in % of net sale in 2010 or 2008 . Competition The net sale in 2010 or 2008 . Competition The Company is condition and operating result . 7 Table of Contents The Company requirement for period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company source and development expense wa $ 1.8 billion , $ 1.3 billion $ 1.8 billion , $ 1.3 billion and $ 1.1 billion $ 1.3 billion and $ 1.1 billion in 2010 , 2009 and $ 1.1 billion in 2010 , 2009 and 2008 , 1.1 billion in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . Patents , single patent or copyright is 8 Table of Contents solely responsible largest geographic marketplace . Approximately 44 % of the Company ’ ’ s net sale in 2010 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements at Note 9 , “ Segment Information and The Company also offer a 90-day basic warranty for it service revenue or financial performance . 9 Table of Contents Environmental Laws . Employees As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had approximately , the Company had approximately 46,600 full-time equivalent employee and an equivalent employee and an additional 2,800 full-time equivalent temporary employee and s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( “ s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of condition and operating result . 10 Table of Contents In the platform to maintain functional and 11 Table of Contents design advantage condition and operating result . 12 Table of Contents The Company component and manufacturing requirement for 30 to 150 day . Because manufacturing requirement for 30 to 150 day . Because the Company compared to level achieved during 2010 , largely due to a to Part II , Item 7 , “ Management ’ s the quality or quantity of 13 Table of Contents product or licensing agreement , although no 14 Table of Contents assurance can the introduction of iPhones and 3G enabled iPads , the Company to develop , maintain , 15 Table of Contents and upgrade term ranging from five to 20 year , the majority of at a reasonable cost . 16 Table of Contents Investment in , such a iPhones and 3G enabled iPads , are subject and retain key personnel . 17 Table of Contents Political event condition and operating result . 18 Table of Contents The Company hedge are in place . 19 Table of Contents The Company trade receivables a of September 25 , 2010 . The Company a of September 25 , 2010 . The Company also ha non-trade receivables a of September 25 , 2010 . In addition a of September 25 , 2010 . In addition , the the Annual Report on Form 10-K for the year ended September for the year ended September 30 , 2006 gave rise to year ended September 30 , 2006 gave rise to litigation and in Part I , Item 3 , “ Legal Proceedings , condition and operating result . 20 Table of Contents The Company and operating result . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company owned or Company owned or leased approximately 10.6 million square foot of building Of that amount , approximately 5.6 million square foot wa leased leased , of which approximately 2.5 million square foot wa retail Company owns a total of 480 acre of land in various location . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company owned a facility for various purpose . 21 Table of Contents The Company for it product . Item 3 . Legal Proceedings As of Legal Proceedings As of September 25 , 2010 , the end As of September 25 , 2010 , the end of the during the fourth quarter of 2010 that did not individually or against the Company on February 17 , 2005 on behalf of Company on February 17 , 2005 on behalf of putative class set for hearing on November 2 , 2010 . In re hearing on November 2 , 2010 . In re Apple & release of iPhone software update 1.1.1 . On July 8 , update 1.1.1 . On July 8 , 2010 , the Court . On July 8 , 2010 , the Court granted Apple . In the same July 8 , 2010 order the Court the same July 8 , 2010 order the Court granted in Judge is held on November 15 , 2010 . Mediostream , held on November 15 , 2010 . Mediostream , Inc. v. Gateway , Inc. on August 28 , 2007 , in the Inc. on August 28 , 2007 , in the United States of U.S. Patent No . 7,009,655 . Plaintiff seek unspecified damage against the Company on March 14 , 2008 , in the Company on March 14 , 2008 , in the United States infringed U.S. Patent Nos . 6,006,227 , 6,638,313 and 6,725,427 . Patent Nos . 6,006,227 , 6,638,313 and 6,725,427 . On October . 6,006,227 , 6,638,313 and 6,725,427 . On October 1 , and 6,725,427 . On October 1 , 2010 , a jury . On October 1 , 2010 , a jury returned a the Company had infringed all 22 Table of Contents three patent and awarding damage of $ 208 million per patent . The a hearing date of December 9 , 2010 . The Company date of December 9 , 2010 . The Company is challenging the GSM , UMTS , 802.16e and 802.11 wireless communication standard , UMTS , 802.16e and 802.11 wireless communication standard , and the GSM , UMTS and 802.11 wireless communication standard , and . , filed on January 3 , 2005 ) and Tucker filed on January 3 , 2005 ) and Tucker v. Apple . ( filed on July 21 , 2006 ) . The filed on July 21 , 2006 ) . The second listed which wa filed on December 31 , 2007 , also in filed on December 31 , 2007 , also in the United market power under §§1 and 2 of the Sherman Act , et al . On August 24 , 2006 , plaintiff filed . On August 24 , 2006 , plaintiff filed a purported financial statement . On June 27 , 2008 , plaintiff filed . On June 27 , 2008 , plaintiff filed another , obtained preliminary court approval . 23 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Second Quarter First Quarter Fiscal 2010 price range per common share range per common share $ 293.53 - $ 235.56 $ 279.01 share $ 293.53 - $ 235.56 $ 279.01 - $ 199.25 293.53 - $ 235.56 $ 279.01 - $ 199.25 $ 231.95 235.56 $ 279.01 - $ 199.25 $ 231.95 - $ 190.25 279.01 - $ 199.25 $ 231.95 - $ 190.25 $ 209.35 199.25 $ 231.95 - $ 190.25 $ 209.35 - $ 180.70 231.95 - $ 190.25 $ 209.35 - $ 180.70 Fiscal 2009 190.25 $ 209.35 - $ 180.70 Fiscal 2009 price range per 209.35 - $ 180.70 Fiscal 2009 price range per common share range per common share $ 188.90 - $ 134.42 $ 146.40 share $ 188.90 - $ 134.42 $ 146.40 - $ 102.61 188.90 - $ 134.42 $ 146.40 - $ 102.61 $ 109.98 134.42 $ 146.40 - $ 102.61 $ 109.98 - $ 78.20 146.40 - $ 102.61 $ 109.98 - $ 78.20 $ 119.68 102.61 $ 109.98 - $ 78.20 $ 119.68 - $ 79.14 109.98 - $ 78.20 $ 119.68 - $ 79.14 Holders As 78.20 $ 119.68 - $ 79.14 Holders As of October 15 79.14 Holders As of October 15 , 2010 , there were As of October 15 , 2010 , there were 29,405 shareholder , 2010 , there were 29,405 shareholder of record . Dividends pay cash dividend in either 2010 or 2009 . The Company dividend in either 2010 or 2009 . The Company anticipates that and Affiliated Purchasers None . 24 Table of Contents Company Stock , the S & P 500 Composite Index , the S . The graph assumes $ 100 wa invested in each of , the S & P 500 Composite Index , the S U.S. Technology Index on September 30 , 2005 . Data point Index on September 30 , 2005 . Data point on the price performance . * $ 100 invested on 9/30/05 in stock * $ 100 invested on 9/30/05 in stock or index , of dividend . Copyright © 2010 S & P , a right reserved . Copyright © 2010 Dow Jones & Co. All All right reserved . September 30 , 2005 September 30 , reserved . September 30 , 2005 September 30 , 2006 September September 30 , 2005 September 30 , 2006 September 30 , , 2005 September 30 , 2006 September 30 , 2007 September September 30 , 2006 September 30 , 2007 September 30 , , 2006 September 30 , 2007 September 30 , 2008 September September 30 , 2007 September 30 , 2008 September 30 , , 2007 September 30 , 2008 September 30 , 2009 September September 30 , 2008 September 30 , 2009 September 30 , , 2008 September 30 , 2009 September 30 , 2010 Apple September 30 , 2009 September 30 , 2010 Apple Inc. $ , 2009 September 30 , 2010 Apple Inc. $ 100 $ , 2010 Apple Inc. $ 100 $ 144 $ 286 $ Apple Inc. $ 100 $ 144 $ 286 $ 212 $ $ 100 $ 144 $ 286 $ 212 $ 346 $ $ 144 $ 286 $ 212 $ 346 $ 529 S $ 286 $ 212 $ 346 $ 529 S & P $ 212 $ 346 $ 529 S & P 500 $ $ 529 S & P 500 $ 100 $ 111 $ S & P 500 $ 100 $ 111 $ 129 $ P 500 $ 100 $ 111 $ 129 $ 101 $ $ 100 $ 111 $ 129 $ 101 $ 94 $ $ 111 $ 129 $ 101 $ 94 $ 103 S $ 129 $ 101 $ 94 $ 103 S & P $ 101 $ 94 $ 103 S & P Computer Hardware & P Computer Hardware $ 100 $ 107 $ 158 $ Computer Hardware $ 100 $ 107 $ 158 $ 132 $ $ 100 $ 107 $ 158 $ 132 $ 157 $ $ 107 $ 158 $ 132 $ 157 $ 186 Dow $ 158 $ 132 $ 157 $ 186 Dow Jones US $ 132 $ 157 $ 186 Dow Jones US Technology $ Dow Jones US Technology $ 100 $ 106 $ 131 $ US Technology $ 100 $ 106 $ 131 $ 100 $ $ 100 $ 106 $ 131 $ 100 $ 111 $ $ 106 $ 131 $ 100 $ 111 $ 124 25 $ 131 $ 100 $ 111 $ 124 25 Table of $ 100 $ 111 $ 124 25 Table of Contents Item 100 $ 111 $ 124 25 Table of Contents Item 6 25 Table of Contents Item 6 . Selected Financial Data The the five year ended September 25 , 2010 , is not year ended September 25 , 2010 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2010 2009 2008 2007 2006 Net share amount ) . 2010 2009 2008 2007 2006 Net sale amount ) . 2010 2009 2008 2007 2006 Net sale $ ) . 2010 2009 2008 2007 2006 Net sale $ 65,225 . 2010 2009 2008 2007 2006 Net sale $ 65,225 $ 2007 2006 Net sale $ 65,225 $ 42,905 $ 37,491 $ Net sale $ 65,225 $ 42,905 $ 37,491 $ 24,578 $ $ 65,225 $ 42,905 $ 37,491 $ 24,578 $ 19,315 Net $ 42,905 $ 37,491 $ 24,578 $ 19,315 Net income $ $ 37,491 $ 24,578 $ 19,315 Net income $ 14,013 $ $ 19,315 Net income $ 14,013 $ 8,235 $ 6,119 $ Net income $ 14,013 $ 8,235 $ 6,119 $ 3,495 $ $ 14,013 $ 8,235 $ 6,119 $ 3,495 $ 1,989 Earnings $ 8,235 $ 6,119 $ 3,495 $ 1,989 Earnings per common $ 6,119 $ 3,495 $ 1,989 Earnings per common share : common share : Basic $ 15.41 $ 9.22 $ 6.94 $ : Basic $ 15.41 $ 9.22 $ 6.94 $ 4.04 $ $ 15.41 $ 9.22 $ 6.94 $ 4.04 $ 2.36 Diluted $ 9.22 $ 6.94 $ 4.04 $ 2.36 Diluted $ 15.15 $ 6.94 $ 4.04 $ 2.36 Diluted $ 15.15 $ 9.08 4.04 $ 2.36 Diluted $ 15.15 $ 9.08 $ 6.78 $ 2.36 Diluted $ 15.15 $ 9.08 $ 6.78 $ 3.93 $ $ 15.15 $ 9.08 $ 6.78 $ 3.93 $ 2.27 Cash $ 9.08 $ 6.78 $ 3.93 $ 2.27 Cash dividend declared $ 6.78 $ 3.93 $ 2.27 Cash dividend declared per common declared per common share $ 0 $ 0 $ 0 $ common share $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 Shares $ 0 $ 0 $ 0 $ 0 Shares used in $ 0 $ 0 $ 0 Shares used in computing earnings earnings per share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted per share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 share : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 : Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 Basic 909,461 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 893,016 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 877,526 Total 881,592 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 877,526 Total cash 864,595 844,058 Diluted 924,712 907,005 902,139 889,292 877,526 Total cash , 844,058 Diluted 924,712 907,005 902,139 889,292 877,526 Total cash , cash Diluted 924,712 907,005 902,139 889,292 877,526 Total cash , cash equivalent equivalent and marketable security $ 51,011 $ 33,992 $ 24,490 $ marketable security $ 51,011 $ 33,992 $ 24,490 $ 15,386 $ $ 51,011 $ 33,992 $ 24,490 $ 15,386 $ 10,110 Total $ 33,992 $ 24,490 $ 15,386 $ 10,110 Total asset $ $ 24,490 $ 15,386 $ 10,110 Total asset $ 75,183 $ $ 10,110 Total asset $ 75,183 $ 47,501 $ 36,171 $ Total asset $ 75,183 $ 47,501 $ 36,171 $ 24,878 $ $ 75,183 $ 47,501 $ 36,171 $ 24,878 $ 17,205 Total $ 47,501 $ 36,171 $ 24,878 $ 17,205 Total long-term obligation $ 36,171 $ 24,878 $ 17,205 Total long-term obligation ( a obligation ( a ) $ 5,531 $ 3,502 $ 1,745 $ a ) $ 5,531 $ 3,502 $ 1,745 $ 687 $ $ 5,531 $ 3,502 $ 1,745 $ 687 $ 395 Total $ 3,502 $ 1,745 $ 687 $ 395 Total liability $ $ 1,745 $ 687 $ 395 Total liability $ 27,392 $ $ 395 Total liability $ 27,392 $ 15,861 $ 13,874 $ Total liability $ 27,392 $ 15,861 $ 13,874 $ 10,347 $ $ 27,392 $ 15,861 $ 13,874 $ 10,347 $ 7,221 Total $ 15,861 $ 13,874 $ 10,347 $ 7,221 Total shareholder ’ $ 13,874 $ 10,347 $ 7,221 Total shareholder ’ equity $ Total shareholder ’ equity $ 47,791 $ 31,640 $ 22,297 $ ’ equity $ 47,791 $ 31,640 $ 22,297 $ 14,531 $ $ 47,791 $ 31,640 $ 22,297 $ 14,531 $ 9,984 ( $ 31,640 $ 22,297 $ 14,531 $ 9,984 ( a ) $ 22,297 $ 14,531 $ 9,984 ( a ) The Company the five year ended September 25 , 2010 . Long-term obligation year ended September 25 , 2010 . Long-term obligation excludes non-current excludes non-current deferred revenue . 26 Table of Contents Item 7 26 Table of Contents Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is system ; application software for 27 Table of Contents the Mac and accompanying note . Note 1 , “ Summary of Significant Financial Statements in this Form 10-K describes the significant accounting policy bundled with hardware that is 28 Table of Contents essential to iPod touch beginning in June 2010 , the Company indicated it a straight-line basis over the 24-month estimated life of each of these device could change . 29 Table of Contents Beginning in in the third quarter of 2010 in conjunction with the announcement with the announcement of iOS 4 , the Company ’ s an advertising component . iOS 4 support iAd , the Company the write-down were recorded . 30 Table of Contents The Company requirement for period ranging from 30 to 150 day . If period ranging from 30 to 150 day . If there is that ha a greater than 50 % likelihood of being realized condition and operating result . 31 Table of Contents Legal and in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal Proceedings ” and in Note 8 “ Commitments and Contingencies ” be materially adversely affected . 32 Table of Contents Net Sales Contents Net Sales Fiscal year 2010 , 2009 and 2008 each Sales Fiscal year 2010 , 2009 and 2008 each spanned 52 year 2010 , 2009 and 2008 each spanned 52 week . 2009 and 2008 each spanned 52 week . An additional week the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million , except per unit amount ) : 2010 Change 2009 Change 2008 Net amount ) : 2010 Change 2009 Change 2008 Net Sales by : 2010 Change 2009 Change 2008 Net Sales by Operating Segment : Americas net sale $ 24,498 29 % $ 18,981 15 Americas net sale $ 24,498 29 % $ 18,981 15 % $ 24,498 29 % $ 18,981 15 % $ 16,552 Europe 24,498 29 % $ 18,981 15 % $ 16,552 Europe net $ 18,981 15 % $ 16,552 Europe net sale 18,692 58 $ 16,552 Europe net sale 18,692 58 % 11,810 28 % 16,552 Europe net sale 18,692 58 % 11,810 28 % 9,233 net sale 18,692 58 % 11,810 28 % 9,233 Japan net sale 18,692 58 % 11,810 28 % 9,233 Japan net sale 58 % 11,810 28 % 9,233 Japan net sale 3,981 75 % 9,233 Japan net sale 3,981 75 % 2,279 32 % 9,233 Japan net sale 3,981 75 % 2,279 32 % 1,728 net sale 3,981 75 % 2,279 32 % 1,728 Asia-Pacific net sale 3,981 75 % 2,279 32 % 1,728 Asia-Pacific net sale 75 % 2,279 32 % 1,728 Asia-Pacific net sale 8,256 160 % 1,728 Asia-Pacific net sale 8,256 160 % 3,179 18 % 1,728 Asia-Pacific net sale 8,256 160 % 3,179 18 % 2,686 net sale 8,256 160 % 3,179 18 % 2,686 Retail net sale 8,256 160 % 3,179 18 % 2,686 Retail net sale 160 % 3,179 18 % 2,686 Retail net sale 9,798 47 % 2,686 Retail net sale 9,798 47 % 6,656 ( 9 2,686 Retail net sale 9,798 47 % 6,656 ( 9 ) net sale 9,798 47 % 6,656 ( 9 ) % 7,292 9,798 47 % 6,656 ( 9 ) % 7,292 Total net 6,656 ( 9 ) % 7,292 Total net sale $ 65,225 7,292 Total net sale $ 65,225 52 % $ 42,905 14 Total net sale $ 65,225 52 % $ 42,905 14 % $ 65,225 52 % $ 42,905 14 % $ 37,491 Mac 65,225 52 % $ 42,905 14 % $ 37,491 Mac Unit $ 42,905 14 % $ 37,491 Mac Unit Sales by Operating : Americas Mac unit sale 4,976 21 % 4,120 4 % Americas Mac unit sale 4,976 21 % 4,120 4 % 3,980 unit sale 4,976 21 % 4,120 4 % 3,980 Europe Mac sale 4,976 21 % 4,120 4 % 3,980 Europe Mac unit 21 % 4,120 4 % 3,980 Europe Mac unit sale 3,859 3,980 Europe Mac unit sale 3,859 36 % 2,840 13 % Europe Mac unit sale 3,859 36 % 2,840 13 % 2,519 unit sale 3,859 36 % 2,840 13 % 2,519 Japan Mac sale 3,859 36 % 2,840 13 % 2,519 Japan Mac unit 36 % 2,840 13 % 2,519 Japan Mac unit sale 481 2,519 Japan Mac unit sale 481 22 % 395 2 % Japan Mac unit sale 481 22 % 395 2 % 389 unit sale 481 22 % 395 2 % 389 Asia-Pacific Mac sale 481 22 % 395 2 % 389 Asia-Pacific Mac unit 22 % 395 2 % 389 Asia-Pacific Mac unit sale 1,500 389 Asia-Pacific Mac unit sale 1,500 62 % 926 17 % Asia-Pacific Mac unit sale 1,500 62 % 926 17 % 793 unit sale 1,500 62 % 926 17 % 793 Retail Mac sale 1,500 62 % 926 17 % 793 Retail Mac unit 62 % 926 17 % 793 Retail Mac unit sale 2,846 793 Retail Mac unit sale 2,846 35 % 2,115 4 % Retail Mac unit sale 2,846 35 % 2,115 4 % 2,034 unit sale 2,846 35 % 2,115 4 % 2,034 Total Mac sale 2,846 35 % 2,115 4 % 2,034 Total Mac unit 35 % 2,115 4 % 2,034 Total Mac unit sale 13,662 2,034 Total Mac unit sale 13,662 31 % 10,396 7 % Total Mac unit sale 13,662 31 % 10,396 7 % 9,715 unit sale 13,662 31 % 10,396 7 % 9,715 Net Sales sale 13,662 31 % 10,396 7 % 9,715 Net Sales by 31 % 10,396 7 % 9,715 Net Sales by Product : Desktops ( a ) $ 6,201 43 % $ 4,324 ( ( a ) $ 6,201 43 % $ 4,324 ( 23 $ 6,201 43 % $ 4,324 ( 23 ) % $ 43 % $ 4,324 ( 23 ) % $ 5,622 Portables ( 23 ) % $ 5,622 Portables ( b ) 11,278 5,622 Portables ( b ) 11,278 18 % 9,535 9 % Portables ( b ) 11,278 18 % 9,535 9 % 8,732 b ) 11,278 18 % 9,535 9 % 8,732 Total Mac ) 11,278 18 % 9,535 9 % 8,732 Total Mac net 18 % 9,535 9 % 8,732 Total Mac net sale 17,479 8,732 Total Mac net sale 17,479 26 % 13,859 ( 3 Total Mac net sale 17,479 26 % 13,859 ( 3 ) net sale 17,479 26 % 13,859 ( 3 ) % 14,354 17,479 26 % 13,859 ( 3 ) % 14,354 iPod 8,274 13,859 ( 3 ) % 14,354 iPod 8,274 2 % 8,091 3 ) % 14,354 iPod 8,274 2 % 8,091 ( 12 ) % 14,354 iPod 8,274 2 % 8,091 ( 12 ) 14,354 iPod 8,274 2 % 8,091 ( 12 ) % 9,153 8,274 2 % 8,091 ( 12 ) % 9,153 Other music 8,091 ( 12 ) % 9,153 Other music related product and and service ( c ) 4,948 23 % 4,036 21 % service ( c ) 4,948 23 % 4,036 21 % 3,340 c ) 4,948 23 % 4,036 21 % 3,340 iPhone and ) 4,948 23 % 4,036 21 % 3,340 iPhone and related 23 % 4,036 21 % 3,340 iPhone and related product and and service ( d ) 25,179 93 % 13,033 93 % service ( d ) 25,179 93 % 13,033 93 % 6,742 d ) 25,179 93 % 13,033 93 % 6,742 iPad and ) 25,179 93 % 13,033 93 % 6,742 iPad and related 93 % 13,033 93 % 6,742 iPad and related product and and service ( e ) 4,958 NM 0 NM 0 Peripherals ( e ) 4,958 NM 0 NM 0 Peripherals and other ) 4,958 NM 0 NM 0 Peripherals and other hardware ( other hardware ( f ) 1,814 23 % 1,475 ( 13 hardware ( f ) 1,814 23 % 1,475 ( 13 ) f ) 1,814 23 % 1,475 ( 13 ) % 1,694 1,814 23 % 1,475 ( 13 ) % 1,694 Software , 1,475 ( 13 ) % 1,694 Software , service and other other sale ( g ) 2,573 7 % 2,411 9 % sale ( g ) 2,573 7 % 2,411 9 % 2,208 g ) 2,573 7 % 2,411 9 % 2,208 Total net ) 2,573 7 % 2,411 9 % 2,208 Total net sale 7 % 2,411 9 % 2,208 Total net sale $ 65,225 2,208 Total net sale $ 65,225 52 % $ 42,905 14 Total net sale $ 65,225 52 % $ 42,905 14 % $ 65,225 52 % $ 42,905 14 % $ 37,491 Unit 65,225 52 % $ 42,905 14 % $ 37,491 Unit Sales $ 42,905 14 % $ 37,491 Unit Sales by Product : : Desktops ( a ) 4,627 45 % 3,182 ( 14 Desktops ( a ) 4,627 45 % 3,182 ( 14 ) a ) 4,627 45 % 3,182 ( 14 ) % 3,712 4,627 45 % 3,182 ( 14 ) % 3,712 Portables ( 3,182 ( 14 ) % 3,712 Portables ( b ) 9,035 3,712 Portables ( b ) 9,035 25 % 7,214 20 % Portables ( b ) 9,035 25 % 7,214 20 % 6,003 b ) 9,035 25 % 7,214 20 % 6,003 Total Mac ) 9,035 25 % 7,214 20 % 6,003 Total Mac unit 25 % 7,214 20 % 6,003 Total Mac unit sale 13,662 6,003 Total Mac unit sale 13,662 31 % 10,396 7 % Total Mac unit sale 13,662 31 % 10,396 7 % 9,715 unit sale 13,662 31 % 10,396 7 % 9,715 Net sale sale 13,662 31 % 10,396 7 % 9,715 Net sale per 31 % 10,396 7 % 9,715 Net sale per Mac unit sold ( h ) $ 1,279 ( 4 ) % $ h ) $ 1,279 ( 4 ) % $ 1,333 ( ( 4 ) % $ 1,333 ( 10 ) % $ ) % $ 1,333 ( 10 ) % $ 1,478 iPod ( 10 ) % $ 1,478 iPod unit sale 50,312 ( $ 1,478 iPod unit sale 50,312 ( 7 ) % 54,132 iPod unit sale 50,312 ( 7 ) % 54,132 ( 1 50,312 ( 7 ) % 54,132 ( 1 ) % 54,828 7 ) % 54,132 ( 1 ) % 54,828 Net sale 54,132 ( 1 ) % 54,828 Net sale per iPod unit sold ( h ) $ 164 10 % $ 149 ( ( h ) $ 164 10 % $ 149 ( 11 $ 164 10 % $ 149 ( 11 ) % $ 10 % $ 149 ( 11 ) % $ 167 iPhone ( 11 ) % $ 167 iPhone unit sold 39,989 93 $ 167 iPhone unit sold 39,989 93 % 20,731 78 % 167 iPhone unit sold 39,989 93 % 20,731 78 % 11,627 unit sold 39,989 93 % 20,731 78 % 11,627 iPad unit sold 39,989 93 % 20,731 78 % 11,627 iPad unit sold 93 % 20,731 78 % 11,627 iPad unit sold 7,458 NM % 11,627 iPad unit sold 7,458 NM 0 NM 0 ( iPad unit sold 7,458 NM 0 NM 0 ( a ) sold 7,458 NM 0 NM 0 ( a ) Includes iMac MacBook Pro product line . 33 Table of Contents ( c = Not Meaningful Fiscal Year 2010 versus 2009 Net sale during Meaningful Fiscal Year 2010 versus 2009 Net sale during 2010 increased versus 2009 Net sale during 2010 increased $ 22.3 billion or sale during 2010 increased $ 22.3 billion or 52 % compared increased $ 22.3 billion or 52 % compared to 2009 . or 52 % compared to 2009 . Several factor contributed positively product and service were $ 25.2 billion in 2010 representing an were $ 25.2 billion in 2010 representing an increase of $ representing an increase of $ 12.1 billion or 93 % compared of $ 12.1 billion or 93 % compared to 2009 . or 93 % compared to 2009 . Net sale of iPhone product and service accounted for 39 % of the Company ’ . iPhone unit sale totaled 40 million in 2010 , which sale totaled 40 million in 2010 , which represents an increase which represents an increase of 19.3 million or 93 % compared increase of 19.3 million or 93 % compared to 2009. iPhone or 93 % compared to 2009. iPhone year-over-year growth wa attributable and strong demand for iPhone 4 , which wa released in in the U.S. in June 2010 and in many other country country over the remainder of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company distributed iPhone the Company distributed iPhone in 89 country through 166 carrier . iPhone in 89 country through 166 carrier . • Net sale product and service were $ 5.0 billion and unit sale of unit sale of iPad were 7.5 million during 2010. iPad wa iPad were 7.5 million during 2010. iPad wa released in the in the U.S. in April 2010 and in various other country country over the remainder of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company distributed iPad the Company distributed iPad in 26 country . The Company distributes product and service accounted for 8 % of the Company ’ s total net sale for 2010 , reflecting the strong demand net sale increased by $ 3.6 billion or 26 % in by $ 3.6 billion or 26 % in 2010 compared to billion or 26 % in 2010 compared to 2009 , and % in 2010 compared to 2009 , and Mac unit sale Mac unit sale increased by 3.3 million or 31 % in increased by 3.3 million or 31 % in 2010 compared to million or 31 % in 2010 compared to 2009 . Net % in 2010 compared to 2009 . Net sale per Mac Mac unit sold decreased by 4 % in 2010 compared to decreased by 4 % in 2010 compared to 2009 due primarily % in 2010 compared to 2009 due primarily to lower average ’ s Macs accounted for 27 % of the Company ’ s total net sale in 2010 compared to 32 % in sale in 2010 compared to 32 % in 2009 . During compared to 32 % in 2009 . During 2010 , net % in 2009 . During 2010 , net sale and unit Mac portable system increased by 18 % and 25 % , increased by 18 % and 25 % , respectively , primarily which wa updated in April 2010 . Net sale and unit Mac desktop system increased by 43 % and 45 % , increased by 43 % and 45 % , respectively , a which wa updated in July 2010 . • Net sale of product and service increased $ 912 million or 23 % during increased $ 912 million or 23 % during 2010 compared to million or 23 % during 2010 compared to 2009 . This % during 2010 compared to 2009 . This increase wa due total net sale of $ 4.1 billion for 2010 . The of $ 4.1 billion for 2010 . The result of the product and service accounted for 8 % of the Company ’ s total net sale for 2010 . • Net sale of sale of iPods increased $ 183 million or 2 % during increased $ 183 million or 2 % during 2010 , while million or 2 % during 2010 , while iPod unit sale iPod unit sale declined by 7 % during 2010 compared to declined by 7 % during 2010 compared to 2009 . Net % during 2010 compared to 2009 . Net sale per iPod iPod unit sold increased by 10 % to $ 164 in by 10 % to $ 164 in 2010 compared to 2009 % to $ 164 in 2010 compared to 2009 , due 164 in 2010 compared to 2009 , due to a shift sale of iPods accounted for 13 % of the Company ’ for the year compared to 19 % in 2009 . 34 compared to 19 % in 2009 . 34 Table of Contents 19 % in 2009 . 34 Table of Contents Fiscal Year Table of Contents Fiscal Year 2009 versus 2008 Net sale during Contents Fiscal Year 2009 versus 2008 Net sale during 2009 increased versus 2008 Net sale during 2009 increased $ 5.4 billion or sale during 2009 increased $ 5.4 billion or 14 % compared increased $ 5.4 billion or 14 % compared to 2008 . or 14 % compared to 2008 . Several factor contributed positively and service amounted to $ 13.0 billion in 2009 , an to $ 13.0 billion in 2009 , an increase of $ , an increase of $ 6.3 billion or 93 % compared of $ 6.3 billion or 93 % compared to 2008 . or 93 % compared to 2008 . The year-over-year iPhone revenue iPhone handset unit sale totaled 20.7 million during 2009 , which sale totaled 20.7 million during 2009 , which represents an increase which represents an increase of 9.1 million or 78 % during increase of 9.1 million or 78 % during 2009 compared to million or 78 % during 2009 compared to 2008 . This % during 2009 compared to 2008 . This growth is attributed demand for iPhones . iPhone 3GS wa released in the U.S. in the U.S. on June 19 , 2009 and in many U.S. on June 19 , 2009 and in many other country country over the remainder of 2009 . • Net sale of product and service increased $ 696 million or 21 % during increased $ 696 million or 21 % during 2009 compared to million or 21 % during 2009 compared to 2008 . The % during 2009 compared to 2008 . The increase wa due ’ s geographic segment during 2009 compared to the same period to the same period in 2008 . The Company belief this above , net sale during 2009 were negatively impacted by certain sale of iPods decreased $ 1.1 billion or 12 % during decreased $ 1.1 billion or 12 % during 2009 compared to billion or 12 % during 2009 compared to 2008. iPod unit % during 2009 compared to 2008. iPod unit sale decreased by iPod unit sale decreased by 1 % during 2009 compared to decreased by 1 % during 2009 compared to 2008 . Net % during 2009 compared to 2008 . Net sale per iPod per iPod unit sold decreased 11 % to $ 149 in decreased 11 % to $ 149 in 2009 compared to 2008 % to $ 149 in 2009 compared to 2008 , resulting 149 in 2009 compared to 2008 , resulting from lower average of new iPods in September 2009 and September 2008 and a in September 2009 and September 2008 and a stronger U.S. dollar • Mac net sale declined 3 % during 2009 compared to sale declined 3 % during 2009 compared to 2008 , while % during 2009 compared to 2008 , while Mac unit sale Mac unit sale increased by 7 % over the same period Mac unit sold decreased by 10 % during 2009 compared to decreased by 10 % during 2009 compared to 2008 , due % during 2009 compared to 2008 , due primarily to lower sale of Macs accounted for 32 % of the Company ’ s total net sale for 2009 . During 2009 , Mac sale for 2009 . During 2009 , Mac portable system net and unit sale increased by 9 % and 20 % , increased by 9 % and 20 % , respectively , compared , respectively , compared to 2008 . This growth wa driven which wa updated in June 2009 and October 2008 , and in June 2009 and October 2008 , and which experienced double-digit to the same period in 2008 . The Company also had Mac desktop system decreased by 23 % and 14 % , decreased by 23 % and 14 % , respectively , during % , respectively , during 2009 compared to 2008 . The , during 2009 compared to 2008 . The decrease in net operates Apple retail store in 11 country , including the U.S. may be found in Note 9 , “ Segment Information and Financial Statements of this Form 10-K. 35 Table of Contents Americas Statements of this Form 10-K. 35 Table of Contents Americas During Table of Contents Americas During 2010 , net sale in the the Americas segment increased $ 5.5 billion or 29 % compared increased $ 5.5 billion or 29 % compared to 2009 . or 29 % compared to 2009 . This increase in net sale and unit sale increased 18 % and 21 % , sale increased 18 % and 21 % , respectively , during % , respectively , during 2010 compared to 2009 , largely , during 2010 compared to 2009 , largely due to strong . The Americas segment represented 37 % and 44 % of segment represented 37 % and 44 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . During 2009 2009 , respectively . During 2009 , net sale in the the Americas segment increased $ 2.4 billion or 15 % compared increased $ 2.4 billion or 15 % compared to 2008 . or 15 % compared to 2008 . The increase in net increase in net sale during 2009 wa attributable to the significant Americas Mac net sale decreased 6 % due primarily to lower Mac unit sale increased by 4 % on a year-over-year basis The Americas segment represented approximately 44 % of the Company ’ total net sale in both 2009 and 2008 . Europe During sale in both 2009 and 2008 . Europe During 2010 , and 2008 . Europe During 2010 , net sale in Europe sale in Europe increased $ 6.9 billion or 58 % compared increased $ 6.9 billion or 58 % compared to 2009 . or 58 % compared to 2009 . The growth in net sale and unit sale increased 32 % and 36 % , sale increased 32 % and 36 % , respectively , during . The Europe segment represented 29 % and 28 % of segment represented 29 % and 28 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . During 2009 2009 , respectively . During 2009 , net sale in Europe sale in Europe increased $ 2.6 billion or 28 % compared increased $ 2.6 billion or 28 % compared to 2008 . or 28 % compared to 2008 . The increase in net . Mac unit sale increased 13 % in 2009 compared to sale increased 13 % in 2009 compared to 2008 , which % in 2009 compared to 2008 , which wa driven primarily . The Europe segment represented 28 % and 25 % of segment represented 28 % and 25 % of total net sale of total net sale in 2009 and 2008 , respectively . net sale in 2009 and 2008 , respectively . Japan During , respectively . Japan During 2010 , Japan ’ s net s net sale increased $ 1.7 billion or 75 % compared increased $ 1.7 billion or 75 % compared to 2009 . or 75 % compared to 2009 . The primary contributor to Mac net sale increased by 8 % driven by a 22 8 % driven by a 22 % increase in unit sale . The Japan segment represented 6 % and 5 % of segment represented 6 % and 5 % of the Company ’ s total net sale for 2010 and 2009 , respectively . net sale for 2010 and 2009 , respectively . Japan ’ s net sale increased $ 551 million or 32 % in increased $ 551 million or 32 % in 2009 compared to million or 32 % in 2009 compared to 2008 . The % in 2009 compared to 2008 . The primary contributor to Mac portable system increased during 2009 compared to 2008 , driven increased during 2009 compared to 2008 , driven primarily by stronger sale of iPods increased during 2009 compared to 2008 , driven increased during 2009 compared to 2008 , driven by strong demand The Japan segment represented approximately 5 % of the Company ’ total net sale in both 2009 and 2008 . 36 Table sale in both 2009 and 2008 . 36 Table of Contents both 2009 and 2008 . 36 Table of Contents Asia-Pacific Net sale in Asia-Pacific increased $ 5.1 billion or 160 % during increased $ 5.1 billion or 160 % during 2010 compared to billion or 160 % during 2010 compared to 2009 . The % during 2010 compared to 2009 . The significant growth in . The Asia-Pacific segment represented 13 % and 7 % of segment represented 13 % and 7 % of the Company ’ s total net sale for 2010 and 2009 , respectively . net sale for 2010 and 2009 , respectively . Net sale sale in Asia-Pacific increased $ 493 million or 18 % during increased $ 493 million or 18 % during 2009 compared to million or 18 % during 2009 compared to 2008 reflecting strong % during 2009 compared to 2008 reflecting strong growth in sale in the Asia-Pacific region by 4 % and 17 % , region by 4 % and 17 % , respectively , due The Asia-Pacific segment represented approximately 7 % of the Company ’ total net sale in both 2009 and 2008 . Retail Retail sale in both 2009 and 2008 . Retail Retail net sale Retail net sale increased $ 3.1 billion or 47 % during increased $ 3.1 billion or 47 % during 2010 compared to billion or 47 % during 2010 compared to 2009 . The % during 2010 compared to 2009 . The increase in net in the Retail segment by 25 % and 35 % , segment by 25 % and 35 % , respectively , during % , respectively , during 2010 . The Company opened 44 2010 . The Company opened 44 new retail store during the store during the year , 28 of which were international store , ending the year with 317 store open compared to 273 317 store open compared to 273 store at the end of store at the end of 2009 . With an average of . With an average of 288 store and 254 store opened average of 288 store and 254 store opened during 2010 and and 254 store opened during 2010 and 2009 , respectively , store opened during 2010 and 2009 , respectively , average revenue per store increased to $ 34.1 million in 2010 , compared to $ 34.1 million in 2010 , compared to $ 26.2 2010 , compared to $ 26.2 million in 2009 . The to $ 26.2 million in 2009 . The Retail segment represented . The Retail segment represented 15 % and 16 % of segment represented 15 % and 16 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . Retail net Retail net sale decreased $ 636 million or 9 % during decreased $ 636 million or 9 % during 2009 compared to million or 9 % during 2009 compared to 2008 . The % during 2009 compared to 2008 . The decline in net the challenging consumer-spending environment in 2009 . The Company opened 26 2009 . The Company opened 26 new retail store during 2009 26 new retail store during 2009 , including 14 international store store during 2009 , including 14 international store , ending the , ending the year with 273 store open . This compare open . This compare to 247 store open a of September store open a of September 27 , 2008 . With an a of September 27 , 2008 . With an average of . With an average of 254 store and 211 store opened average of 254 store and 211 store opened during 2009 and and 211 store opened during 2009 and 2008 , respectively , store opened during 2009 and 2008 , respectively , average revenue per store decreased to $ 26.2 million for 2009 from $ to $ 26.2 million for 2009 from $ 34.6 million in million for 2009 from $ 34.6 million in 2008 . The from $ 34.6 million in 2008 . The Retail segment reported reported operating income of $ 2.4 billion during 2010 and $ of $ 2.4 billion during 2010 and $ 1.7 billion during billion during 2010 and $ 1.7 billion during both 2009 and $ 1.7 billion during both 2009 and 2008 . The increase billion during both 2009 and 2008 . The increase in Retail in Retail operating income during 2010 compared to 2009 wa attributable income during 2010 compared to 2009 wa attributable to higher overall in Retail net sale during 2009 compared to 2008 , the sale during 2009 compared to 2008 , the Retail segment ’ income wa flat at $ 1.7 billion in 2009 compared to at $ 1.7 billion in 2009 compared to 2008 due primarily billion in 2009 compared to 2008 due primarily to a higher higher gross margin percentage in 2009 consistent with that experienced by since it inception totaled $ 2.2 billion through the end of billion through the end of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Retail As of September 25 , 2010 , the Retail segment had the Retail segment had approximately 26,500 full-time equivalent employee and had and related facility of $ 1.7 billion . The Company would condition and operating result . 37 Table of Contents Gross Margin the three year ended September 25 , 2010 , are a year ended September 25 , 2010 , are a follows ( gross margin percentage ) : 2010 2009 2008 Net sale $ margin percentage ) : 2010 2009 2008 Net sale $ 65,225 percentage ) : 2010 2009 2008 Net sale $ 65,225 $ 2009 2008 Net sale $ 65,225 $ 42,905 $ 37,491 Cost Net sale $ 65,225 $ 42,905 $ 37,491 Cost of sale $ 65,225 $ 42,905 $ 37,491 Cost of sale 39,541 25,683 $ 37,491 Cost of sale 39,541 25,683 24,294 Gross margin $ 37,491 Cost of sale 39,541 25,683 24,294 Gross margin $ 25,684 Cost of sale 39,541 25,683 24,294 Gross margin $ 25,684 $ 25,683 24,294 Gross margin $ 25,684 $ 17,222 $ 13,197 Gross Gross margin $ 25,684 $ 17,222 $ 13,197 Gross margin percentage $ 25,684 $ 17,222 $ 13,197 Gross margin percentage 39.4 % $ 13,197 Gross margin percentage 39.4 % 40.1 % 35.2 % Gross margin percentage 39.4 % 40.1 % 35.2 % The gross percentage 39.4 % 40.1 % 35.2 % The gross margin percentage The gross margin percentage in 2010 wa 39.4 % compared to margin percentage in 2010 wa 39.4 % compared to 40.1 % wa 39.4 % compared to 40.1 % in 2009 . This compared to 40.1 % in 2009 . This decline in gross The gross margin percentage in 2009 wa 40.1 % compared to margin percentage in 2009 wa 40.1 % compared to 35.2 % wa 40.1 % compared to 35.2 % in 2008 . The compared to 35.2 % in 2008 . The primary contributor to contributor to the increase in 2009 a compared to 2008 were in 2009 a compared to 2008 were a favorable sale mix compared to level achieved during 2010 and anticipates gross margin level gross margin level of about 36 % in the first quarter in the first quarter of 2011 . This expected decline is in Part I , Item 1A , “ Risk Factors ” the three year ended September 25 , 2010 , are a year ended September 25 , 2010 , are a follows ( except for percentage ) : 2010 2009 2008 Research and development for percentage ) : 2010 2009 2008 Research and development $ percentage ) : 2010 2009 2008 Research and development $ 1,782 2008 Research and development $ 1,782 $ 1,333 $ 1,109 Percentage and development $ 1,782 $ 1,333 $ 1,109 Percentage of net $ 1,782 $ 1,333 $ 1,109 Percentage of net sale 2.7 1,109 Percentage of net sale 2.7 % 3.1 % 3.0 % of net sale 2.7 % 3.1 % 3.0 % Selling , sale 2.7 % 3.1 % 3.0 % Selling , general and , general and administrative $ 5,517 $ 4,149 $ 3,761 Percentage and administrative $ 5,517 $ 4,149 $ 3,761 Percentage of net $ 5,517 $ 4,149 $ 3,761 Percentage of net sale 8.5 3,761 Percentage of net sale 8.5 % 9.7 % 10.0 % of net sale 8.5 % 9.7 % 10.0 % 38 Table sale 8.5 % 9.7 % 10.0 % 38 Table of Contents % 9.7 % 10.0 % 38 Table of Contents Research and R & D expense increased 34 % or $ 449 million increased 34 % or $ 449 million to $ 1.8 billion $ 449 million to $ 1.8 billion in 2010 compared to to $ 1.8 billion in 2010 compared to 2009 . This billion in 2010 compared to 2009 . This increase wa due R & D expense in 2010 wa the capitalization in 2009 2010 wa the capitalization in 2009 of software development cost of software development cost of $ 71 million related to Mac OS R & D expense increased 34 % during 2010 , it expense increased 34 % during 2010 , it declined a a of net sale given the 52 % year-over-year increase in net increase in net sale in 2010 . The Company continues to R & D expense increased 20 % or $ 224 million increased 20 % or $ 224 million to $ 1.3 billion $ 224 million to $ 1.3 billion in 2009 compared to to $ 1.3 billion in 2009 compared to 2008 . This billion in 2009 compared to 2008 . This increase wa due an increase in headcount in 2009 to support expanded R & expense . Additionally , $ 71 million of software development cost R & D expense during 2009 , compared to $ 11 2009 , compared to $ 11 million of software development cost software development cost capitalized during 2008 . Although total R & R & D expense increased 20 % during 2009 , it expense increased 20 % during 2009 , it remained relatively flat of net sale given the 14 % increase in revenue in % increase in revenue in 2009 . Selling , General and & A expense increased $ 1.4 billion or 33 % to increased $ 1.4 billion or 33 % to $ 5.5 billion or 33 % to $ 5.5 billion in 2010 compared to to $ 5.5 billion in 2010 compared to 2009 . This billion in 2010 compared to 2009 . This increase wa due & A expense increased $ 388 million or 10 % to increased $ 388 million or 10 % to $ 4.1 billion or 10 % to $ 4.1 billion in 2009 compared to to $ 4.1 billion in 2009 compared to 2008 . This billion in 2009 compared to 2008 . This increase wa due the three year ended September 25 , 2010 , are a year ended September 25 , 2010 , are a follows ( ( in million ) : 2010 2009 2008 Interest income $ in million ) : 2010 2009 2008 Interest income $ 311 million ) : 2010 2009 2008 Interest income $ 311 $ 2009 2008 Interest income $ 311 $ 407 $ 653 Other Interest income $ 311 $ 407 $ 653 Other income ( $ 311 $ 407 $ 653 Other income ( expense ) expense ) , net ( 156 ) ( 81 ) ( net ( 156 ) ( 81 ) ( 33 ) Total ) ( 81 ) ( 33 ) Total other income and other income and expense $ 155 $ 326 $ 620 Total and expense $ 155 $ 326 $ 620 Total other income $ 155 $ 326 $ 620 Total other income and expense income and expense decreased $ 171 million or 52 % to decreased $ 171 million or 52 % to $ 155 million or 52 % to $ 155 million during 2010 compared to to $ 155 million during 2010 compared to $ 326 million during 2010 compared to $ 326 million and $ 620 million $ 326 million and $ 620 million in 2009 and 2008 and $ 620 million in 2009 and 2008 , respectively . 620 million in 2009 and 2008 , respectively . The overall equivalent and marketable security wa 0.75 % , 1.43 % and security wa 0.75 % , 1.43 % and 3.44 % during % , 1.43 % and 3.44 % during 2010 , 2009 % and 3.44 % during 2010 , 2009 and 2008 , 3.44 % during 2010 , 2009 and 2008 , respectively . during 2010 , 2009 and 2008 , respectively . Additionally the income and expense . During 2010 , 2009 and 2008 , expense . During 2010 , 2009 and 2008 , the Company During 2010 , 2009 and 2008 , the Company had no s effective tax rate were 24 % , 32 % and rate were 24 % , 32 % and 32 % for % , 32 % and 32 % for 2010 , 2009 % and 32 % for 2010 , 2009 and 2008 , 32 % for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The Company federal income tax rate of 35 % due 39 Table of rate of 35 % due 39 Table of Contents primarily to lower effective tax rate in 2010 a compared to 2009 is in 2010 a compared to 2009 is due primarily to an the U.S. As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had deferred and tax credit of $ 2.4 billion , and deferred tax deferred tax liability of $ 5.0 billion . Management belief it tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . All IRS examining the year 2007 through 2009 . All IRS audit issue issue for year prior to 2004 have been resolved . During During the third quarter of 2010 , the Company reached a the IRS for the year 2002 through 2003 . In addition for the year 2002 through 2003 . In addition , the the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Cash , cash in million ) : 2010 2009 2008 Cash , cash equivalent million ) : 2010 2009 2008 Cash , cash equivalent and equivalent and marketable security $ 51,011 $ 33,992 $ 24,490 Accounts marketable security $ 51,011 $ 33,992 $ 24,490 Accounts receivable , $ 51,011 $ 33,992 $ 24,490 Accounts receivable , net $ Accounts receivable , net $ 5,510 $ 3,361 $ 2,422 Inventories , net $ 5,510 $ 3,361 $ 2,422 Inventories $ 1,051 $ 5,510 $ 3,361 $ 2,422 Inventories $ 1,051 $ 455 3,361 $ 2,422 Inventories $ 1,051 $ 455 $ 509 Working 2,422 Inventories $ 1,051 $ 455 $ 509 Working capital $ $ 1,051 $ 455 $ 509 Working capital $ 20,956 $ $ 509 Working capital $ 20,956 $ 20,049 $ 18,645 Annual Working capital $ 20,956 $ 20,049 $ 18,645 Annual operating cash $ 20,956 $ 20,049 $ 18,645 Annual operating cash flow $ Annual operating cash flow $ 18,595 $ 10,159 $ 9,596 As cash flow $ 18,595 $ 10,159 $ 9,596 As of September $ 18,595 $ 10,159 $ 9,596 As of September 25 , $ 9,596 As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had $ , the Company had $ 51 billion in cash , cash , an increase of $ 17 billion from September 26 , $ 17 billion from September 26 , 2009 . The principal billion from September 26 , 2009 . The principal component of by operating activity of $ 18.6 billion , which wa partially plant and equipment of $ 2 billion and payment made in cash acquired , of $ 638 million . The Company ’ equivalent . As of September 25 , 2010 and September 26 As of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , $ 30.8 2010 and September 26 , 2009 , $ 30.8 billion and 26 , 2009 , $ 30.8 billion and $ 17.4 billion $ 30.8 billion and $ 17.4 billion , respectively , of existing operation over the next 12 month . 40 Table of the next 12 month . 40 Table of Contents Capital Assets s capital expenditure were $ 2.6 billion during 2010 , consisting were $ 2.6 billion during 2010 , consisting of approximately $ , consisting of approximately $ 404 million for retail store facility retail store facility and $ 2.2 billion for other capital expenditure payment for capital expenditure during 2010 were $ 2 billion . expenditure during 2010 were $ 2 billion . The Company anticipates Company anticipates utilizing approximately $ 4.0 billion for capital expenditure during billion for capital expenditure during 2011 , including approximately $ 600 2011 , including approximately $ 600 million for retail store facility store facility and approximately $ 3.4 billion for product tooling and the Company ha opened between 25 and 50 new retail store ha opened between 25 and 50 new retail store per year store per year . During 2011 , the Company expects to the Company expects to open 40 to 50 new store , expects to open 40 to 50 new store , over half firm commitment a of September 25 , 2010 and excludes amount a of September 25 , 2010 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 2,089 5 Years Operating lease $ 2,089 $ 266 $ 527 $ Operating lease $ 2,089 $ 266 $ 527 $ 470 $ $ 2,089 $ 266 $ 527 $ 470 $ 826 Purchase $ 266 $ 527 $ 470 $ 826 Purchase obligation 8,700 $ 527 $ 470 $ 826 Purchase obligation 8,700 8,700 0 470 $ 826 Purchase obligation 8,700 8,700 0 0 0 Other $ 826 Purchase obligation 8,700 8,700 0 0 0 Other obligation 826 Purchase obligation 8,700 8,700 0 0 0 Other obligation 1,096 Purchase obligation 8,700 8,700 0 0 0 Other obligation 1,096 912 obligation 8,700 8,700 0 0 0 Other obligation 1,096 912 176 0 0 0 Other obligation 1,096 912 176 6 2 Total 0 0 Other obligation 1,096 912 176 6 2 Total $ 0 Other obligation 1,096 912 176 6 2 Total $ 11,885 Other obligation 1,096 912 176 6 2 Total $ 11,885 $ obligation 1,096 912 176 6 2 Total $ 11,885 $ 9,878 176 6 2 Total $ 11,885 $ 9,878 $ 703 $ 2 Total $ 11,885 $ 9,878 $ 703 $ 476 $ $ 11,885 $ 9,878 $ 703 $ 476 $ 828 Lease $ 9,878 $ 703 $ 476 $ 828 Lease Commitments As $ 703 $ 476 $ 828 Lease Commitments As of September Lease Commitments As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had total noncancelable operating lease of $ 2.1 billion , $ 1.7 billion $ 2.1 billion , $ 1.7 billion of which related to typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of typically cover period ranging from 30 to 150 day . The period ranging from 30 to 150 day . The Company also on projected demand information . 41 Table of Contents Such purchase requirement for period ranging from 30 to 150 day . As period ranging from 30 to 150 day . As of September day . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had outstanding component purchase commitment of $ 8.2 billion . The Company ha , which generally expire between 2011 and 2015 . In August generally expire between 2011 and 2015 . In August 2010 , and 2015 . In August 2010 , the Company entered into ha committed to prepay $ 500 million in 2011 . These prepay $ 500 million in 2011 . These prepayment will be Other outstanding obligation were $ 1.1 billion a of September 25 1.1 billion a of September 25 , 2010 , which related a of September 25 , 2010 , which related to advertising penalty . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had non-current deferred tax liability of $ 4.3 billion . Additionally , a Additionally , a of September 25 , 2010 , the Company a of September 25 , 2010 , the Company had gross unrecognized tax benefit of $ 943 million and an additional $ million and an additional $ 247 million for gross interest and cost a of either September 25 , 2010 or September 26 of either September 25 , 2010 or September 26 , 2009 25 , 2010 or September 26 , 2009 . The Company 2010 or September 26 , 2009 . The Company ha entered or operating result . Item 7A . Quantitative and Qualitative Disclosures the financial impact resulting from 42 Table of Contents movement in security have maturity le than 12 month , while all long-term net gain or loss during 2010 , 2009 and 2008 related or loss during 2010 , 2009 and 2008 related to such during 2010 , 2009 and 2008 related to such sale . the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 25 , 2010 , a hypothetical a of September 25 , 2010 , a hypothetical 100 basis , 2010 , a hypothetical 100 basis point increase in interest would result in a $ 477 million incremental decline in the portfolio . As of September 26 , 2009 , a similar As of September 26 , 2009 , a similar 100 basis , 2009 , a similar 100 basis point shift in the have resulted in a $ 176 million incremental decline in the three to six month . 43 Table of Contents However , , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 103 million a of September 25 103 million a of September 25 , 2010 compared to a a of September 25 , 2010 compared to a maximum one-day in fair value of $ 44 million a of September 26 44 million a of September 26 , 2009 . Because the a of September 26 , 2009 . Because the Company us analysis performed a of September 25 , 2010 due to the a of September 25 , 2010 due to the inherent limitation actual exposure and position . 44 Table of Contents Item 8 44 Table of Contents Item 8 . Financial Statements and Supplementary the three year ended September 25 , 2010 46 Consolidated Balance year ended September 25 , 2010 46 Consolidated Balance Sheets a ended September 25 , 2010 46 Consolidated Balance Sheets a of Balance Sheets a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 47 Consolidated Statements 2010 and September 26 , 2009 47 Consolidated Statements of Shareholders and September 26 , 2009 47 Consolidated Statements of Shareholders ’ the three year ended September 25 , 2010 48 Consolidated Statements year ended September 25 , 2010 48 Consolidated Statements of Cash ended September 25 , 2010 48 Consolidated Statements of Cash Flows the three year ended September 25 , 2010 49 Notes to year ended September 25 , 2010 49 Notes to Consolidated Financial ended September 25 , 2010 49 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 50 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 82 Reports of Ernst & Young Independent Registered Public Accounting Firm 83 Report of KPMG LLP , Independent Registered Public Accounting Firm 85 All financial statement schedule have statement and note thereto . 45 Table of Contents CONSOLIDATED STATEMENTS ) Three year ended September 25 , 2010 2010 2009 2008 year ended September 25 , 2010 2010 2009 2008 Net sale ended September 25 , 2010 2010 2009 2008 Net sale $ September 25 , 2010 2010 2009 2008 Net sale $ 65,225 25 , 2010 2010 2009 2008 Net sale $ 65,225 $ 2009 2008 Net sale $ 65,225 $ 42,905 $ 37,491 Cost Net sale $ 65,225 $ 42,905 $ 37,491 Cost of sale $ 65,225 $ 42,905 $ 37,491 Cost of sale 39,541 25,683 $ 37,491 Cost of sale 39,541 25,683 24,294 Gross margin 25,684 37,491 Cost of sale 39,541 25,683 24,294 Gross margin 25,684 17,222 Cost of sale 39,541 25,683 24,294 Gross margin 25,684 17,222 13,197 39,541 25,683 24,294 Gross margin 25,684 17,222 13,197 Operating expense : 25,683 24,294 Gross margin 25,684 17,222 13,197 Operating expense : Research 24,294 Gross margin 25,684 17,222 13,197 Operating expense : Research and expense : Research and development 1,782 1,333 1,109 Selling , general : Research and development 1,782 1,333 1,109 Selling , general and Research and development 1,782 1,333 1,109 Selling , general and administrative Selling , general and administrative 5,517 4,149 3,761 Total operating expense , general and administrative 5,517 4,149 3,761 Total operating expense 7,299 general and administrative 5,517 4,149 3,761 Total operating expense 7,299 5,482 4,149 3,761 Total operating expense 7,299 5,482 4,870 Operating income 18,385 3,761 Total operating expense 7,299 5,482 4,870 Operating income 18,385 11,740 Total operating expense 7,299 5,482 4,870 Operating income 18,385 11,740 8,327 7,299 5,482 4,870 Operating income 18,385 11,740 8,327 Other income and 5,482 4,870 Operating income 18,385 11,740 8,327 Other income and expense 4,870 Operating income 18,385 11,740 8,327 Other income and expense 155 8,327 Other income and expense 155 326 620 Income before provision Other income and expense 155 326 620 Income before provision for income and expense 155 326 620 Income before provision for income before provision for income tax 18,540 12,066 8,947 Provision for income provision for income tax 18,540 12,066 8,947 Provision for income tax for income tax 18,540 12,066 8,947 Provision for income tax 4,527 8,947 Provision for income tax 4,527 3,831 2,828 Net income $ Provision for income tax 4,527 3,831 2,828 Net income $ 14,013 for income tax 4,527 3,831 2,828 Net income $ 14,013 $ 3,831 2,828 Net income $ 14,013 $ 8,235 $ 6,119 Earnings Net income $ 14,013 $ 8,235 $ 6,119 Earnings per common $ 14,013 $ 8,235 $ 6,119 Earnings per common share : common share : Basic $ 15.41 $ 9.22 $ 6.94 Diluted : Basic $ 15.41 $ 9.22 $ 6.94 Diluted $ 15.15 $ 15.41 $ 9.22 $ 6.94 Diluted $ 15.15 $ 9.08 9.22 $ 6.94 Diluted $ 15.15 $ 9.08 $ 6.78 Shares 6.94 Diluted $ 15.15 $ 9.08 $ 6.78 Shares used in $ 15.15 $ 9.08 $ 6.78 Shares used in computing earnings earnings per share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 per share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 share : Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See Basic 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes 909,461 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes to 893,016 881,592 Diluted 924,712 907,005 902,139 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 Table of Contents CONSOLIDATED BALANCE except share amount ) September 25 , 2010 September 26 , amount ) September 25 , 2010 September 26 , 2009 ASSETS September 25 , 2010 September 26 , 2009 ASSETS : Current , 2010 September 26 , 2009 ASSETS : Current asset : Cash and cash equivalent $ 11,261 $ 5,263 Short-term marketable security cash equivalent $ 11,261 $ 5,263 Short-term marketable security 14,359 18,201 $ 5,263 Short-term marketable security 14,359 18,201 Accounts receivable , le 5,263 Short-term marketable security 14,359 18,201 Accounts receivable , le allowance , le allowance of $ 55 and $ 52 , respectively of $ 55 and $ 52 , respectively 5,510 3,361 Inventories and $ 52 , respectively 5,510 3,361 Inventories 1,051 455 Deferred $ 52 , respectively 5,510 3,361 Inventories 1,051 455 Deferred tax , respectively 5,510 3,361 Inventories 1,051 455 Deferred tax asset 1,636 respectively 5,510 3,361 Inventories 1,051 455 Deferred tax asset 1,636 1,135 1,051 455 Deferred tax asset 1,636 1,135 Vendor non-trade receivables 4,414 455 Deferred tax asset 1,636 1,135 Vendor non-trade receivables 4,414 1,696 1,636 1,135 Vendor non-trade receivables 4,414 1,696 Other current asset 3,447 1,135 Vendor non-trade receivables 4,414 1,696 Other current asset 3,447 1,444 4,414 1,696 Other current asset 3,447 1,444 Total current asset 41,678 1,696 Other current asset 3,447 1,444 Total current asset 41,678 31,555 3,447 1,444 Total current asset 41,678 31,555 Long-term marketable security 25,391 1,444 Total current asset 41,678 31,555 Long-term marketable security 25,391 10,528 41,678 31,555 Long-term marketable security 25,391 10,528 Property , plant and 31,555 Long-term marketable security 25,391 10,528 Property , plant and equipment plant and equipment , net 4,768 2,954 Goodwill 741 206 Acquired and equipment , net 4,768 2,954 Goodwill 741 206 Acquired intangible , net 4,768 2,954 Goodwill 741 206 Acquired intangible asset , net 4,768 2,954 Goodwill 741 206 Acquired intangible asset , net Acquired intangible asset , net 342 247 Other asset 2,263 2,011 intangible asset , net 342 247 Other asset 2,263 2,011 Total net 342 247 Other asset 2,263 2,011 Total asset $ 75,183 342 247 Other asset 2,263 2,011 Total asset $ 75,183 $ 2,263 2,011 Total asset $ 75,183 $ 47,501 LIABILITIES AND SHAREHOLDERS Total asset $ 75,183 $ 47,501 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 Accounts payable $ 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred 12,015 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 $ 5,601 Accrued expense 5,723 3,852 Deferred revenue 2,984 2,053 Total expense 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 5,723 3,852 Deferred revenue 2,984 2,053 Total current liability 20,722 11,506 2,984 2,053 Total current liability 20,722 11,506 Deferred revenue – non-current 2,053 Total current liability 20,722 11,506 Deferred revenue – non-current 1,139 11,506 Deferred revenue – non-current 1,139 853 Other non-current liability 5,531 Deferred revenue – non-current 1,139 853 Other non-current liability 5,531 3,502 1,139 853 Other non-current liability 5,531 3,502 Total liability 27,392 15,861 853 Other non-current liability 5,531 3,502 Total liability 27,392 15,861 Commitments liability 5,531 3,502 Total liability 27,392 15,861 Commitments and contingency Shareholders 5,531 3,502 Total liability 27,392 15,861 Commitments and contingency Shareholders ’ , no par value ; 1,800,000,000 share authorized ; 915,970,050 and ; 1,800,000,000 share authorized ; 915,970,050 and 899,805,500 share issued and share authorized ; 915,970,050 and 899,805,500 share issued and outstanding , issued and outstanding , respectively 10,668 8,210 Retained earnings 37,169 23,353 and outstanding , respectively 10,668 8,210 Retained earnings 37,169 23,353 Accumulated respectively 10,668 8,210 Retained earnings 37,169 23,353 Accumulated other comprehensive ( 10,668 8,210 Retained earnings 37,169 23,353 Accumulated other comprehensive ( loss ( loss ) /income ( 46 ) 77 Total shareholder ’ ) /income ( 46 ) 77 Total shareholder ’ equity 47,791 77 Total shareholder ’ equity 47,791 31,640 Total liability and shareholder Total shareholder ’ equity 47,791 31,640 Total liability and shareholder ’ and shareholder ’ equity $ 75,183 $ 47,501 See accompanying Notes ’ equity $ 75,183 $ 47,501 See accompanying Notes to Consolidated to Consolidated Financial Statements . 47 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 29 , 2007 872,329 $ 5,368 a of September 29 , 2007 872,329 $ 5,368 $ 9,100 of September 29 , 2007 872,329 $ 5,368 $ 9,100 $ 29 , 2007 872,329 $ 5,368 $ 9,100 $ 63 $ 2007 872,329 $ 5,368 $ 9,100 $ 63 $ 14,531 Cumulative $ 5,368 $ 9,100 $ 63 $ 14,531 Cumulative effect of $ 9,100 $ 63 $ 14,531 Cumulative effect of change in of change in accounting principle 0 45 11 0 56 Components change in accounting principle 0 45 11 0 56 Components of in accounting principle 0 45 11 0 56 Components of comprehensive accounting principle 0 45 11 0 56 Components of comprehensive income principle 0 45 11 0 56 Components of comprehensive income : comprehensive income : Net income 0 0 6,119 0 6,119 Change income : Net income 0 0 6,119 0 6,119 Change in : Net income 0 0 6,119 0 6,119 Change in foreign Net income 0 0 6,119 0 6,119 Change in foreign currency income 0 0 6,119 0 6,119 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 28 ) in foreign currency translation 0 0 0 ( 28 ) ( foreign currency translation 0 0 0 ( 28 ) ( 28 translation 0 0 0 ( 28 ) ( 28 ) Change 0 ( 28 ) ( 28 ) Change in unrealized loss security , net of tax 0 0 0 ( 63 ) , net of tax 0 0 0 ( 63 ) ( net of tax 0 0 0 ( 63 ) ( 63 tax 0 0 0 ( 63 ) ( 63 ) Change 0 ( 63 ) ( 63 ) Change in unrealized gain instrument , net of tax 0 0 0 19 19 Total , net of tax 0 0 0 19 19 Total comprehensive net of tax 0 0 0 19 19 Total comprehensive income of tax 0 0 0 19 19 Total comprehensive income 6,047 tax 0 0 0 19 19 Total comprehensive income 6,047 Stock-based 19 19 Total comprehensive income 6,047 Stock-based compensation 0 513 0 comprehensive income 6,047 Stock-based compensation 0 513 0 0 513 Common income 6,047 Stock-based compensation 0 513 0 0 513 Common stock 6,047 Stock-based compensation 0 513 0 0 513 Common stock issued Stock-based compensation 0 513 0 0 513 Common stock issued under compensation 0 513 0 0 513 Common stock issued under stock share withheld for employee tax 15,888 460 ( 101 ) 0 withheld for employee tax 15,888 460 ( 101 ) 0 359 employee tax 15,888 460 ( 101 ) 0 359 Issuance of 15,888 460 ( 101 ) 0 359 Issuance of common stock 460 ( 101 ) 0 359 Issuance of common stock in connection with an asset acquisition 109 21 0 0 21 Tax with an asset acquisition 109 21 0 0 21 Tax benefit an asset acquisition 109 21 0 0 21 Tax benefit from asset acquisition 109 21 0 0 21 Tax benefit from employee acquisition 109 21 0 0 21 Tax benefit from employee stock from employee stock plan award 0 770 0 0 770 Balances employee stock plan award 0 770 0 0 770 Balances a stock plan award 0 770 0 0 770 Balances a of plan award 0 770 0 0 770 Balances a of September award 0 770 0 0 770 Balances a of September 27 770 Balances a of September 27 , 2008 888,326 7,177 15,129 a of September 27 , 2008 888,326 7,177 15,129 ( 9 of September 27 , 2008 888,326 7,177 15,129 ( 9 ) September 27 , 2008 888,326 7,177 15,129 ( 9 ) 22,297 27 , 2008 888,326 7,177 15,129 ( 9 ) 22,297 Components 2008 888,326 7,177 15,129 ( 9 ) 22,297 Components of comprehensive 7,177 15,129 ( 9 ) 22,297 Components of comprehensive income : comprehensive income : Net income 0 0 8,235 0 8,235 Change income : Net income 0 0 8,235 0 8,235 Change in : Net income 0 0 8,235 0 8,235 Change in foreign Net income 0 0 8,235 0 8,235 Change in foreign currency income 0 0 8,235 0 8,235 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 14 ) in foreign currency translation 0 0 0 ( 14 ) ( foreign currency translation 0 0 0 ( 14 ) ( 14 translation 0 0 0 ( 14 ) ( 14 ) Change 0 ( 14 ) ( 14 ) Change in unrealized loss security , net of tax 0 0 0 118 118 Change , net of tax 0 0 0 118 118 Change in net of tax 0 0 0 118 118 Change in unrealized of tax 0 0 0 118 118 Change in unrealized gain tax 0 0 0 118 118 Change in unrealized gain on instrument , net of tax 0 0 0 ( 18 ) , net of tax 0 0 0 ( 18 ) ( net of tax 0 0 0 ( 18 ) ( 18 tax 0 0 0 ( 18 ) ( 18 ) Total 0 ( 18 ) ( 18 ) Total comprehensive income 8,321 18 ) Total comprehensive income 8,321 Stock-based compensation 0 707 0 comprehensive income 8,321 Stock-based compensation 0 707 0 0 707 Common income 8,321 Stock-based compensation 0 707 0 0 707 Common stock 8,321 Stock-based compensation 0 707 0 0 707 Common stock issued Stock-based compensation 0 707 0 0 707 Common stock issued under compensation 0 707 0 0 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) 0 withheld for employee tax 11,480 404 ( 11 ) 0 393 employee tax 11,480 404 ( 11 ) 0 393 Tax benefit 11,480 404 ( 11 ) 0 393 Tax benefit from employee 404 ( 11 ) 0 393 Tax benefit from employee stock , including transfer pricing adjustment 0 ( 78 ) 0 0 transfer pricing adjustment 0 ( 78 ) 0 0 ( 78 adjustment 0 ( 78 ) 0 0 ( 78 ) Balances 0 ( 78 ) 0 0 ( 78 ) Balances a 78 ) 0 0 ( 78 ) Balances a of September ) Balances a of September 26 , 2009 899,806 8,210 23,353 a of September 26 , 2009 899,806 8,210 23,353 77 31,640 of September 26 , 2009 899,806 8,210 23,353 77 31,640 Components September 26 , 2009 899,806 8,210 23,353 77 31,640 Components of 26 , 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive , 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive income 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive income : comprehensive income : Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gain translation 0 0 0 7 7 Change in unrealized gain on security , net of tax 0 0 0 123 123 Change , net of tax 0 0 0 123 123 Change in net of tax 0 0 0 123 123 Change in unrealized of tax 0 0 0 123 123 Change in unrealized gain tax 0 0 0 123 123 Change in unrealized gain on instrument , net of tax 0 0 0 ( 253 ) , net of tax 0 0 0 ( 253 ) ( net of tax 0 0 0 ( 253 ) ( 253 tax 0 0 0 ( 253 ) ( 253 ) Total 0 ( 253 ) ( 253 ) Total comprehensive income 13,890 253 ) Total comprehensive income 13,890 Stock-based compensation 0 876 0 comprehensive income 13,890 Stock-based compensation 0 876 0 0 876 Common income 13,890 Stock-based compensation 0 876 0 0 876 Common stock 13,890 Stock-based compensation 0 876 0 0 876 Common stock issued Stock-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from employee 703 ( 197 ) 0 506 Tax benefit from employee stock , including transfer pricing adjustment 0 879 0 0 879 Balances including transfer pricing adjustment 0 879 0 0 879 Balances a transfer pricing adjustment 0 879 0 0 879 Balances a of pricing adjustment 0 879 0 0 879 Balances a of September adjustment 0 879 0 0 879 Balances a of September 25 879 Balances a of September 25 , 2010 915,970 $ 10,668 a of September 25 , 2010 915,970 $ 10,668 $ 37,169 of September 25 , 2010 915,970 $ 10,668 $ 37,169 $ 25 , 2010 915,970 $ 10,668 $ 37,169 $ ( 46 2010 915,970 $ 10,668 $ 37,169 $ ( 46 ) $ 10,668 $ 37,169 $ ( 46 ) $ 47,791 See accompanying $ ( 46 ) $ 47,791 See accompanying Notes to Consolidated to Consolidated Financial Statements . 48 Table of Contents CONSOLIDATED STATEMENTS ) Three year ended September 25 , 2010 2010 2009 2008 year ended September 25 , 2010 2010 2009 2008 Cash and ended September 25 , 2010 2010 2009 2008 Cash and cash September 25 , 2010 2010 2009 2008 Cash and cash equivalent 25 , 2010 2010 2009 2008 Cash and cash equivalent , beginning of the year $ 5,263 $ 11,875 $ 9,352 Operating the year $ 5,263 $ 11,875 $ 9,352 Operating activity : $ 5,263 $ 11,875 $ 9,352 Operating activity : Net income Operating activity : Net income 14,013 8,235 6,119 Adjustments to reconcile activity : Net income 14,013 8,235 6,119 Adjustments to reconcile net : Net income 14,013 8,235 6,119 Adjustments to reconcile net income Depreciation , amortization and accretion 1,027 734 496 Stock-based compensation expense , amortization and accretion 1,027 734 496 Stock-based compensation expense 879 amortization and accretion 1,027 734 496 Stock-based compensation expense 879 710 734 496 Stock-based compensation expense 879 710 516 Deferred income tax 496 Stock-based compensation expense 879 710 516 Deferred income tax expense Stock-based compensation expense 879 710 516 Deferred income tax expense 1,440 516 Deferred income tax expense 1,440 1,040 398 Loss on disposition Deferred income tax expense 1,440 1,040 398 Loss on disposition of income tax expense 1,440 1,040 398 Loss on disposition of property property , plant and equipment 24 26 22 Changes in operating , plant and equipment 24 26 22 Changes in operating asset plant and equipment 24 26 22 Changes in operating asset and Accounts receivable , net ( 2,142 ) ( 939 ) ( net ( 2,142 ) ( 939 ) ( 785 ) Inventories ) ( 939 ) ( 785 ) Inventories ( 596 ) ( 785 ) Inventories ( 596 ) 54 ( 163 ) ) Inventories ( 596 ) 54 ( 163 ) Vendor non-trade ( 596 ) 54 ( 163 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 2,718 ) 586 110 Other current non-trade receivables ( 2,718 ) 586 110 Other current asset ( receivables ( 2,718 ) 586 110 Other current asset ( 1,514 110 Other current asset ( 1,514 ) 163 ( 384 ) current asset ( 1,514 ) 163 ( 384 ) Other asset ( 1,514 ) 163 ( 384 ) Other asset ( 120 384 ) Other asset ( 120 ) ( 902 ) 289 asset ( 120 ) ( 902 ) 289 Accounts payable 6,307 120 ) ( 902 ) 289 Accounts payable 6,307 92 596 902 ) 289 Accounts payable 6,307 92 596 Deferred revenue 1,217 ) 289 Accounts payable 6,307 92 596 Deferred revenue 1,217 521 289 Accounts payable 6,307 92 596 Deferred revenue 1,217 521 718 6,307 92 596 Deferred revenue 1,217 521 718 Other liability 778 92 596 Deferred revenue 1,217 521 718 Other liability 778 ( 596 Deferred revenue 1,217 521 718 Other liability 778 ( 161 1,217 521 718 Other liability 778 ( 161 ) 1,664 Cash 718 Other liability 778 ( 161 ) 1,664 Cash generated by liability 778 ( 161 ) 1,664 Cash generated by operating activity Cash generated by operating activity 18,595 10,159 9,596 Investing activity : generated by operating activity 18,595 10,159 9,596 Investing activity : Purchases by operating activity 18,595 10,159 9,596 Investing activity : Purchases of Purchases of marketable security ( 57,793 ) ( 46,724 ) ( security ( 57,793 ) ( 46,724 ) ( 22,965 ) Proceeds ) ( 46,724 ) ( 22,965 ) Proceeds from maturity of from maturity of marketable security 24,930 19,790 11,804 Proceeds from sale maturity of marketable security 24,930 19,790 11,804 Proceeds from sale of of marketable security 24,930 19,790 11,804 Proceeds from sale of marketable from sale of marketable security 21,788 10,888 4,439 Purchases of other sale of marketable security 21,788 10,888 4,439 Purchases of other long-term of marketable security 21,788 10,888 4,439 Purchases of other long-term investment of other long-term investment ( 18 ) ( 101 ) ( investment ( 18 ) ( 101 ) ( 38 ) Payments ) ( 101 ) ( 38 ) Payments made in connection net of cash acquired ( 638 ) 0 ( 220 ) cash acquired ( 638 ) 0 ( 220 ) Payments for ( 638 ) 0 ( 220 ) Payments for acquisition of , plant and equipment ( 2,005 ) ( 1,144 ) ( equipment ( 2,005 ) ( 1,144 ) ( 1,091 ) Payments ) ( 1,144 ) ( 1,091 ) Payments for acquisition of acquisition of intangible asset ( 116 ) ( 69 ) ( asset ( 116 ) ( 69 ) ( 108 ) Other ) ( 69 ) ( 108 ) Other ( 2 ) ( 108 ) Other ( 2 ) ( 74 ) ( Other ( 2 ) ( 74 ) ( 10 ) Cash ) ( 74 ) ( 10 ) Cash used in investing used in investing activity ( 13,854 ) ( 17,434 ) ( activity ( 13,854 ) ( 17,434 ) ( 8,189 ) Financing ) ( 17,434 ) ( 8,189 ) Financing activity : Proceeds from issuance of common stock 912 475 483 Excess tax benefit issuance of common stock 912 475 483 Excess tax benefit from of common stock 912 475 483 Excess tax benefit from stock-based tax benefit from stock-based compensation 751 270 757 Taxes paid related benefit from stock-based compensation 751 270 757 Taxes paid related to from stock-based compensation 751 270 757 Taxes paid related to net settlement of equity award ( 406 ) ( 82 ) ( award ( 406 ) ( 82 ) ( 124 ) Cash ) ( 82 ) ( 124 ) Cash generated by financing Cash generated by financing activity 1,257 663 1,116 Increase/ ( decrease generated by financing activity 1,257 663 1,116 Increase/ ( decrease ) by financing activity 1,257 663 1,116 Increase/ ( decrease ) in in cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent 5,998 ( 6,612 ) 2,523 Cash and cash equivalent , end of the year $ 11,261 $ 5,263 $ 11,875 Supplemental the year $ 11,261 $ 5,263 $ 11,875 Supplemental cash flow $ 11,261 $ 5,263 $ 11,875 Supplemental cash flow disclosure : income tax , net $ 2,697 $ 2,997 $ 1,267 See , net $ 2,697 $ 2,997 $ 1,267 See accompanying Notes $ 2,697 $ 2,997 $ 1,267 See accompanying Notes to Consolidated to Consolidated Financial Statements . 49 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2010 , 2009 and 2008 ended s fiscal year 2010 , 2009 and 2008 ended on September year 2010 , 2009 and 2008 ended on September 25 , and 2008 ended on September 25 , 2010 , September 26 ended on September 25 , 2010 , September 26 , 2009 25 , 2010 , September 26 , 2009 and September 27 2010 , September 26 , 2009 and September 27 , 2008 26 , 2009 and September 27 , 2008 , respectively , 2009 and September 27 , 2008 , respectively , and included , respectively , and included 52 week each . An additional New Accounting Principles In September 2009 , the Financial Accounting Standards during the first quarter of 2010 . Under the historical accounting iPod touch beginning in June 2010 . The new accounting principle and all product cost from 50 Table of Contents the sale that amount ratably over the 24-month estimated life of the related Explanatory Note ” and Note 2 , “ Retrospective Adoption of Accounting Principles ” in the 2009 Form 10-K for additional information ” in the 2009 Form 10-K for additional information on the the relevant government authority . 51 Table of Contents Revenue Recognition iPod touch beginning in June 2010 , the Company ha indicated a straight-line basis over the 24-month estimated life of each of in the third quarter of 2010 in conjunction with the announcement with the announcement of iOS 4 , the Company ’ s an advertising component . iOS 4 support iAd , the Company Apple TV sold is $ 10 . The Company ’ s each iPhone sold through the 52 Table of Contents Company ’ ’ s second quarter of 2010 wa $ 25 . Beginning quarter of 2010 wa $ 25 . Beginning in April 2010 25 . Beginning in April 2010 in conjunction with the Company ’ s announcement of iOS 4 for iPhone , the Company with each iPhone to $ 10 . Beginning with initial sale sale of iPad in April 2010 , the Company ha also of each iPad is $ 10 . In June 2010 , $ 10 . In June 2010 , the Company announced that receive an upgrade to iOS 4 free of charge and indicated touch device running on iOS 4 may from time-to-time receive future touch sold beginning in June 2010 is $ 5 . The in June 2010 is $ 5 . The Company account for any software development cost during 2010 . In 2009 and 2008 cost during 2010 . In 2009 and 2008 , the Company 2010 . In 2009 and 2008 , the Company capitalized $ , the Company capitalized $ 71 million and $ 11 million $ 71 million and $ 11 million , respectively , of development of Mac OS X 53 Table of Contents Version 10.6 53 Table of Contents Version 10.6 Snow Leopard ( “ Mac during the fourth quarter of 2009 . The capitalized cost are software development cost wa $ 48 million , $ 25 million $ 48 million , $ 25 million and $ 27 million $ 25 million and $ 27 million in 2010 , 2009 and $ 27 million in 2010 , 2009 and 2008 , 27 million in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . Advertising Costs . Advertising expense wa $ 691 million , $ 501 million $ 691 million , $ 501 million and $ 486 million $ 501 million and $ 486 million for 2010 , 2009 and $ 486 million for 2010 , 2009 and 2008 , 486 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . Stock-Based Compensation can be found in Note 7 , “ Shareholders ’ Equity Compensation ” of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 6 , “ Income Taxes ” Taxes ” of this Form 10-K for additional information . Earnings security had been issued . 54 Table of Contents Potentially dilutive the three year ended September 25 , 2010 ( in thousand year ended September 25 , 2010 ( in thousand , except per share amount ) : 2010 2009 2008 Numerator : Net share amount ) : 2010 2009 2008 Numerator : Net income amount ) : 2010 2009 2008 Numerator : Net income $ Numerator : Net income $ 14,013 $ 8,235 $ 6,119 Denominator Net income $ 14,013 $ 8,235 $ 6,119 Denominator : Weighted-average $ 14,013 $ 8,235 $ 6,119 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 909,461 893,016 881,592 Effect of dilutive : Weighted-average share outstanding 909,461 893,016 881,592 Effect of dilutive security Weighted-average share outstanding 909,461 893,016 881,592 Effect of dilutive security 15,251 881,592 Effect of dilutive security 15,251 13,989 20,547 Weighted-average diluted share Effect of dilutive security 15,251 13,989 20,547 Weighted-average diluted share 924,712 of dilutive security 15,251 13,989 20,547 Weighted-average diluted share 924,712 907,005 13,989 20,547 Weighted-average diluted share 924,712 907,005 902,139 Basic earnings per 20,547 Weighted-average diluted share 924,712 907,005 902,139 Basic earnings per common Weighted-average diluted share 924,712 907,005 902,139 Basic earnings per common share earnings per common share $ 15.41 $ 9.22 $ 6.94 Diluted common share $ 15.41 $ 9.22 $ 6.94 Diluted earnings per $ 15.41 $ 9.22 $ 6.94 Diluted earnings per common share earnings per common share $ 15.15 $ 9.08 $ 6.78 Potentially common share $ 15.15 $ 9.08 $ 6.78 Potentially dilutive security $ 15.15 $ 9.08 $ 6.78 Potentially dilutive security representing 1.6 6.78 Potentially dilutive security representing 1.6 million , 12.6 million and security representing 1.6 million , 12.6 million and 10.3 million share million , 12.6 million and 10.3 million share of common stock share of common stock for 2010 , 2009 and 2008 , common stock for 2010 , 2009 and 2008 , respectively , for 2010 , 2009 and 2008 , respectively , were excluded with maturity of le than 12 month are classified a short-term security with maturity greater than 12 month are classified a long-term the hedged item attributable to 55 Table of Contents the hedged on these derivative instrument during 2010 , 2009 and 2008 . derivative instrument during 2010 , 2009 and 2008 . The net during 2010 , 2009 and 2008 . The net gain or building is the lesser of 30 year or the remaining life property and equipment wa $ 815 million , $ 606 million $ 815 million , $ 606 million and $ 387 million $ 606 million and $ 387 million during 2010 , 2009 and $ 387 million during 2010 , 2009 and 2008 , 387 million during 2010 , 2009 and 2008 , respectively . during 2010 , 2009 and 2008 , respectively . Long-Lived Assets record any significant impairment during 2010 , 2009 and 2008 . significant impairment during 2010 , 2009 and 2008 . The Company during 2010 , 2009 and 2008 . The Company doe not test on or about August 31 of each year . The intangible asset impairment charge in 2010 , 2009 and 2008 . impairment charge in 2010 , 2009 and 2008 . The Company in 2010 , 2009 and 2008 . The Company established reporting three to ten year . 56 Table of Contents Fair Value Contents Fair Value Measurements During 2009 , the Company adopted the During the first quarter of 2010 , the Company adopted the . Business Combinations In December 2007 , the FASB issued a disclosure requirement . In April 2009 , the FASB amended this in the first quarter of 2010 and applied these principle to after the first quarter of 2010 . The adoption of the condition or operating result . 57 Table of Contents Note 2 57 Table of Contents Note 2 – Financial Instruments Cash , marketable security a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 September 26 , ) : September 25 , 2010 September 26 , 2009 Cash September 25 , 2010 September 26 , 2009 Cash $ 1,690 , 2010 September 26 , 2009 Cash $ 1,690 $ 1,139 26 , 2009 Cash $ 1,690 $ 1,139 Money market fund 2009 Cash $ 1,690 $ 1,139 Money market fund 2,753 1,608 $ 1,139 Money market fund 2,753 1,608 U.S. Treasury security 2,571 1,139 Money market fund 2,753 1,608 U.S. Treasury security 2,571 289 2,753 1,608 U.S. Treasury security 2,571 289 U.S. agency security 1,916 1,608 U.S. Treasury security 2,571 289 U.S. agency security 1,916 273 2,571 289 U.S. agency security 1,916 273 Non-U.S. government security 10 289 U.S. agency security 1,916 273 Non-U.S. government security 10 0 1,916 273 Non-U.S. government security 10 0 Certificates of deposit and 273 Non-U.S. government security 10 0 Certificates of deposit and time of deposit and time deposit 374 572 Commercial paper 1,889 1,381 deposit and time deposit 374 572 Commercial paper 1,889 1,381 Corporate deposit 374 572 Commercial paper 1,889 1,381 Corporate security 58 0 374 572 Commercial paper 1,889 1,381 Corporate security 58 0 Municipal paper 1,889 1,381 Corporate security 58 0 Municipal security 0 1 1,889 1,381 Corporate security 58 0 Municipal security 0 1 Total security 58 0 Municipal security 0 1 Total cash equivalent 9,571 58 0 Municipal security 0 1 Total cash equivalent 9,571 4,124 0 1 Total cash equivalent 9,571 4,124 U.S. Treasury security 2,130 1 Total cash equivalent 9,571 4,124 U.S. Treasury security 2,130 2,843 9,571 4,124 U.S. Treasury security 2,130 2,843 U.S. agency security 4,339 4,124 U.S. Treasury security 2,130 2,843 U.S. agency security 4,339 8,582 2,130 2,843 U.S. agency security 4,339 8,582 Non-U.S. government security 865 2,843 U.S. agency security 4,339 8,582 Non-U.S. government security 865 219 4,339 8,582 Non-U.S. government security 865 219 Certificates of deposit and 8,582 Non-U.S. government security 865 219 Certificates of deposit and time of deposit and time deposit 850 1,142 Commercial paper 1,279 2,816 deposit and time deposit 850 1,142 Commercial paper 1,279 2,816 Corporate deposit 850 1,142 Commercial paper 1,279 2,816 Corporate security 4,522 2,466 850 1,142 Commercial paper 1,279 2,816 Corporate security 4,522 2,466 Municipal paper 1,279 2,816 Corporate security 4,522 2,466 Municipal security 374 133 1,279 2,816 Corporate security 4,522 2,466 Municipal security 374 133 Total security 4,522 2,466 Municipal security 374 133 Total short-term marketable security 4,522 2,466 Municipal security 374 133 Total short-term marketable security 14,359 133 Total short-term marketable security 14,359 18,201 U.S. Treasury security 5,213 Total short-term marketable security 14,359 18,201 U.S. Treasury security 5,213 484 14,359 18,201 U.S. Treasury security 5,213 484 U.S. agency security 2,472 18,201 U.S. Treasury security 5,213 484 U.S. agency security 2,472 2,252 5,213 484 U.S. agency security 2,472 2,252 Non-U.S. government security 1,786 484 U.S. agency security 2,472 2,252 Non-U.S. government security 1,786 102 2,472 2,252 Non-U.S. government security 1,786 102 Certificates of deposit and 2,252 Non-U.S. government security 1,786 102 Certificates of deposit and time of deposit and time deposit 1,515 0 Corporate security 12,862 7,320 deposit and time deposit 1,515 0 Corporate security 12,862 7,320 Municipal deposit 1,515 0 Corporate security 12,862 7,320 Municipal security 1,543 370 1,515 0 Corporate security 12,862 7,320 Municipal security 1,543 370 Total security 12,862 7,320 Municipal security 1,543 370 Total long-term marketable security 12,862 7,320 Municipal security 1,543 370 Total long-term marketable security 25,391 370 Total long-term marketable security 25,391 10,528 Total cash , cash Total long-term marketable security 25,391 10,528 Total cash , cash equivalent equivalent and marketable security $ 51,011 $ 33,992 58 Table of marketable security $ 51,011 $ 33,992 58 Table of Contents The security $ 51,011 $ 33,992 58 Table of Contents The following investment category a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Adjusted Cost Unrealized ) : September 25 , 2010 Adjusted Cost Unrealized Gains Unrealized Value Money market fund $ 2,753 $ 0 $ 0 $ market fund $ 2,753 $ 0 $ 0 $ 2,753 U.S. $ 2,753 $ 0 $ 0 $ 2,753 U.S. Treasury security $ 0 $ 0 $ 2,753 U.S. Treasury security 9,872 42 $ 2,753 U.S. Treasury security 9,872 42 0 9,914 U.S. agency 2,753 U.S. Treasury security 9,872 42 0 9,914 U.S. agency security U.S. Treasury security 9,872 42 0 9,914 U.S. agency security 8,717 Treasury security 9,872 42 0 9,914 U.S. agency security 8,717 10 0 9,914 U.S. agency security 8,717 10 0 8,727 Non-U.S. government 9,914 U.S. agency security 8,717 10 0 8,727 Non-U.S. government security U.S. agency security 8,717 10 0 8,727 Non-U.S. government security 2,648 agency security 8,717 10 0 8,727 Non-U.S. government security 2,648 13 0 8,727 Non-U.S. government security 2,648 13 0 2,661 Certificates of 8,727 Non-U.S. government security 2,648 13 0 2,661 Certificates of deposit Non-U.S. government security 2,648 13 0 2,661 Certificates of deposit and government security 2,648 13 0 2,661 Certificates of deposit and time of deposit and time deposit 2,735 5 ( 1 ) 2,739 deposit and time deposit 2,735 5 ( 1 ) 2,739 Commercial time deposit 2,735 5 ( 1 ) 2,739 Commercial paper 3,168 2,735 5 ( 1 ) 2,739 Commercial paper 3,168 0 0 1 ) 2,739 Commercial paper 3,168 0 0 3,168 Corporate security ) 2,739 Commercial paper 3,168 0 0 3,168 Corporate security 17,349 2,739 Commercial paper 3,168 0 0 3,168 Corporate security 17,349 102 Commercial paper 3,168 0 0 3,168 Corporate security 17,349 102 ( 0 0 3,168 Corporate security 17,349 102 ( 9 ) 17,442 0 3,168 Corporate security 17,349 102 ( 9 ) 17,442 Municipal Corporate security 17,349 102 ( 9 ) 17,442 Municipal security 1,899 17,349 102 ( 9 ) 17,442 Municipal security 1,899 19 ( 9 ) 17,442 Municipal security 1,899 19 ( 1 ) 1,917 ) 17,442 Municipal security 1,899 19 ( 1 ) 1,917 Total Municipal security 1,899 19 ( 1 ) 1,917 Total cash equivalent 1,899 19 ( 1 ) 1,917 Total cash equivalent and marketable equivalent and marketable security $ 49,141 $ 191 $ ( 11 marketable security $ 49,141 $ 191 $ ( 11 ) $ 49,141 $ 191 $ ( 11 ) $ 49,321 September 26 $ ( 11 ) $ 49,321 September 26 , 2009 Adjusted 11 ) $ 49,321 September 26 , 2009 Adjusted Cost Unrealized $ 49,321 September 26 , 2009 Adjusted Cost Unrealized Gains Unrealized Value Money market fund $ 1,608 $ 0 $ 0 $ market fund $ 1,608 $ 0 $ 0 $ 1,608 U.S. $ 1,608 $ 0 $ 0 $ 1,608 U.S. Treasury security $ 0 $ 0 $ 1,608 U.S. Treasury security 3,610 6 $ 1,608 U.S. Treasury security 3,610 6 0 3,616 U.S. agency 1,608 U.S. Treasury security 3,610 6 0 3,616 U.S. agency security U.S. Treasury security 3,610 6 0 3,616 U.S. agency security 11,085 Treasury security 3,610 6 0 3,616 U.S. agency security 11,085 22 0 3,616 U.S. agency security 11,085 22 0 11,107 Non-U.S. government 3,616 U.S. agency security 11,085 22 0 11,107 Non-U.S. government security U.S. agency security 11,085 22 0 11,107 Non-U.S. government security 320 agency security 11,085 22 0 11,107 Non-U.S. government security 320 1 0 11,107 Non-U.S. government security 320 1 0 321 Certificates of 11,107 Non-U.S. government security 320 1 0 321 Certificates of deposit Non-U.S. government security 320 1 0 321 Certificates of deposit and government security 320 1 0 321 Certificates of deposit and time of deposit and time deposit 1,714 0 0 1,714 Commercial paper deposit and time deposit 1,714 0 0 1,714 Commercial paper 4,197 and time deposit 1,714 0 0 1,714 Commercial paper 4,197 0 time deposit 1,714 0 0 1,714 Commercial paper 4,197 0 0 0 0 1,714 Commercial paper 4,197 0 0 4,197 Corporate security 0 1,714 Commercial paper 4,197 0 0 4,197 Corporate security 9,760 1,714 Commercial paper 4,197 0 0 4,197 Corporate security 9,760 42 Commercial paper 4,197 0 0 4,197 Corporate security 9,760 42 ( 0 0 4,197 Corporate security 9,760 42 ( 16 ) 9,786 0 4,197 Corporate security 9,760 42 ( 16 ) 9,786 Municipal Corporate security 9,760 42 ( 16 ) 9,786 Municipal security 502 9,760 42 ( 16 ) 9,786 Municipal security 502 2 0 16 ) 9,786 Municipal security 502 2 0 504 Total cash ) 9,786 Municipal security 502 2 0 504 Total cash equivalent 9,786 Municipal security 502 2 0 504 Total cash equivalent and Municipal security 502 2 0 504 Total cash equivalent and marketable equivalent and marketable security $ 32,796 $ 73 $ ( 16 marketable security $ 32,796 $ 73 $ ( 16 ) $ 32,796 $ 73 $ ( 16 ) $ 32,853 The Company $ ( 16 ) $ 32,853 The Company had net unrealized it investment portfolio of $ 180 million and $ 57 million $ 180 million and $ 57 million a of September 25 57 million a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . The net unrealized gain a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 related primarily to 2010 and September 26 , 2009 related primarily to long-term marketable realized gain or loss during 2010 , 2009 and 2008 related or loss during 2010 , 2009 and 2008 related to such during 2010 , 2009 and 2008 related to such sale . year to five year . 59 Table of Contents The following loss position a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , aggregated by 2010 and September 26 , 2009 , aggregated by investment category in million ) : September 25 , 2010 Less than 12 ) : September 25 , 2010 Less than 12 Months 12 25 , 2010 Less than 12 Months 12 Months or Greater 2010 Less than 12 Months 12 Months or Greater Total Fair deposit and time deposit $ 802 $ ( 1 ) $ deposit $ 802 $ ( 1 ) $ 54 $ 0 $ ( 1 ) $ 54 $ 0 $ 856 $ 1 ) $ 54 $ 0 $ 856 $ ( 1 $ 54 $ 0 $ 856 $ ( 1 ) Corporate 0 $ 856 $ ( 1 ) Corporate security 3,579 ( ( 1 ) Corporate security 3,579 ( 7 ) 275 ( ) Corporate security 3,579 ( 7 ) 275 ( 2 ) security 3,579 ( 7 ) 275 ( 2 ) 3,854 ( ( 7 ) 275 ( 2 ) 3,854 ( 9 ) ) 275 ( 2 ) 3,854 ( 9 ) Municipal security ( 2 ) 3,854 ( 9 ) Municipal security 298 ( ( 9 ) Municipal security 298 ( 1 ) 0 0 ) Municipal security 298 ( 1 ) 0 0 298 ( security 298 ( 1 ) 0 0 298 ( 1 ) 298 ( 1 ) 0 0 298 ( 1 ) Total ( 1 ) 0 0 298 ( 1 ) Total $ ) 0 0 298 ( 1 ) Total $ 4,679 $ ( 1 ) Total $ 4,679 $ ( 9 ) $ Total $ 4,679 $ ( 9 ) $ 329 $ ( $ ( 9 ) $ 329 $ ( 2 ) $ ) $ 329 $ ( 2 ) $ 5,008 $ ( $ ( 2 ) $ 5,008 $ ( 11 ) September ) $ 5,008 $ ( 11 ) September 26 , 2009 $ ( 11 ) September 26 , 2009 Less than 12 11 ) September 26 , 2009 Less than 12 Months 12 26 , 2009 Less than 12 Months 12 Months or Greater 2009 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Corporate security $ 1,667 $ ( 3 ) $ security $ 1,667 $ ( 3 ) $ 719 $ ( $ ( 3 ) $ 719 $ ( 13 ) $ ) $ 719 $ ( 13 ) $ 2,386 $ ( $ ( 13 ) $ 2,386 $ ( 16 ) The ) $ 2,386 $ ( 16 ) The Company considers the During the year ended September 25 , 2010 and September 26 year ended September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , the Company 2010 and September 26 , 2009 , the Company did not charge . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company doe not foreign currency exchange rate . 60 Table of Contents The Company flow hedge of approximately $ 252 million and a net deferred net deferred gain of $ 1 million , net of tax comprehensive income a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . Other comprehensive hedged transaction a of September 25 , 2010 are expected to a of September 25 , 2010 are expected to occur within discontinued cash flow hedge during 2010 , 2009 and 2008 . flow hedge during 2010 , 2009 and 2008 . The Company during 2010 , 2009 and 2008 . The Company had an net investment hedge of $ 9 million and $ 2 million $ 9 million and $ 2 million , net of tax ” ) a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . The ineffective a net loss of $ 123 million and $ 133 million $ 123 million and $ 133 million on foreign currency forward during the year ended September 25 , 2010 and September 26 year ended September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . These amount instrument outstanding a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : ( in million ) : 2010 2009 Notional Principal Credit Risk in million ) : 2010 2009 Notional Principal Credit Risk Amounts : Foreign exchange contract $ 13,957 $ 62 $ 4,422 $ exchange contract $ 13,957 $ 62 $ 4,422 $ 31 Instruments $ 13,957 $ 62 $ 4,422 $ 31 Instruments other than $ 62 $ 4,422 $ 31 Instruments other than accounting hedge : Foreign exchange contract $ 10,727 $ 45 $ 3,416 $ exchange contract $ 10,727 $ 45 $ 3,416 $ 10 The $ 10,727 $ 45 $ 3,416 $ 10 The notional principal $ 45 $ 3,416 $ 10 The notional principal amount for may be further mitigated by 61 Table of Contents collateral received value . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company ha posted collateral security arrangement of $ 445 million and recorded the offsetting netting arrangement a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company did not additional collateral a of September 25 , 2010 or September 26 a of September 25 , 2010 or September 26 , 2009 25 , 2010 or September 26 , 2009 . The estimate 2010 or September 26 , 2009 . The estimate of fair market information a of September 25 , 2010 . Refer to a of September 25 , 2010 . Refer to Note 3 2010 . Refer to Note 3 , “ Fair Value Measurements Measurements ” of this Form 10-K , for additional information on Balance Sheets a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Fair Value of ) : September 25 , 2010 Fair Value of Derivatives Designated : Foreign exchange contract $ 62 $ 45 $ 107 Derivative exchange contract $ 62 $ 45 $ 107 Derivative liability ( $ 62 $ 45 $ 107 Derivative liability ( b ) : Foreign exchange contract $ 488 $ 118 $ 606 September exchange contract $ 488 $ 118 $ 606 September 26 , $ 488 $ 118 $ 606 September 26 , 2009 Fair $ 118 $ 606 September 26 , 2009 Fair Value of $ 606 September 26 , 2009 Fair Value of Derivatives Designated : Foreign exchange contract $ 27 $ 10 $ 37 Derivative exchange contract $ 27 $ 10 $ 37 Derivative liability ( $ 27 $ 10 $ 37 Derivative liability ( b ) : Foreign exchange contract $ 24 $ 1 $ 25 ( exchange contract $ 24 $ 1 $ 25 ( a ) $ 24 $ 1 $ 25 ( a ) All derivative the Consolidated Balance Sheets . 62 Table of Contents The following for the year ended September 25 , 2010 and September 26 year ended September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : Excluded from Effectiveness Testing September 25 , 2010 September 26 , Effectiveness Testing September 25 , 2010 September 26 , 2009 September September 25 , 2010 September 26 , 2009 September 25 , , 2010 September 26 , 2009 September 25 , 2010 ( September 26 , 2009 September 25 , 2010 ( a ) , 2009 September 25 , 2010 ( a ) September 26 2010 ( a ) September 26 , 2009 ( b ) a ) September 26 , 2009 ( b ) Location September ( b ) Location September 25 , 2010 September 26 , ) Location September 25 , 2010 September 26 , 2009 Cash September 25 , 2010 September 26 , 2009 Cash flow hedge , 2010 September 26 , 2009 Cash flow hedge : Foreign Foreign exchange contract $ ( 267 ) $ 338 $ 115 $ ( 267 ) $ 338 $ 115 $ 370 Other 267 ) $ 338 $ 115 $ 370 Other income and $ 338 $ 115 $ 370 Other income and expense $ income and expense $ ( 175 ) $ ( 97 ) ( 175 ) $ ( 97 ) Net investment hedge : : Foreign exchange contract ( 41 ) ( 44 ) 0 contract ( 41 ) ( 44 ) 0 0 Other income 41 ) ( 44 ) 0 0 Other income and expense ) ( 44 ) 0 0 Other income and expense 1 0 Other income and expense 1 3 Total $ ( 308 Other income and expense 1 3 Total $ ( 308 ) 1 3 Total $ ( 308 ) $ 294 $ 115 $ ( 308 ) $ 294 $ 115 $ 370 $ 308 ) $ 294 $ 115 $ 370 $ ( 174 $ 294 $ 115 $ 370 $ ( 174 ) $ 115 $ 370 $ ( 174 ) $ ( 94 ) ( 174 ) $ ( 94 ) ( a ) Includes hedge , of which $ 158 million and ( $ 43 158 million and ( $ 43 ) million were recognized within for the year ended September 25 , 2010 . There were year ended September 25 , 2010 . There were no amount for the year ended September 25 , 2010 . ( b year ended September 25 , 2010 . ( b ) Includes hedge , of which $ 302 million and $ 68 million $ 302 million and $ 68 million were recognized within net for the year ended September 26 , 2009 . There were year ended September 26 , 2009 . There were no amount for the year ended September 26 , 2009 . ( c year ended September 26 , 2009 . ( c ) Refer c ) Refer to Note 7 , “ Shareholders ’ Equity Compensation ” of this Form 10-K , which summarizes the activity ’ s customer accounted for 15 % and 12 % of accounted for 15 % and 12 % of trade receivables a trade receivables a of September 25 , 2010 and one of a of September 25 , 2010 and one of the Company ’ s customer accounted for 16 % of trade receivables a trade receivables a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company ’ s cellular network carrier accounted for 64 % and 51 % of accounted for 64 % and 51 % of trade receivables a trade receivables a of September 25 , 2010 and a of a of September 25 , 2010 and a of September 26 2010 and a of September 26 , 2009 , respectively . a of September 26 , 2009 , respectively . The addition allowance for doubtful account during 2010 , 2009 and 2008 were doubtful account during 2010 , 2009 and 2008 were not significant during 2010 , 2009 and 2008 were not significant . Vendor ’ s vendor accounted for 57 % and 24 % , accounted for 57 % and 24 % , respectively , of non-trade receivables a of September 25 , 2010 and two of a of September 25 , 2010 and two of the Company ’ s vendor accounted for 40 % and 36 % , accounted for 40 % and 36 % , respectively , of non-trade receivables a of September 26 , 2009 . The Company a of September 26 , 2009 . The Company doe not of cost of sale . 63 Table of Contents Note 3 63 Table of Contents Note 3 – Fair Value Measurements The fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally recurring basis a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Quoted Prices in ) : September 25 , 2010 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) : Money market fund $ 2,753 $ 0 $ 0 $ market fund $ 2,753 $ 0 $ 0 $ 2,753 U.S. $ 2,753 $ 0 $ 0 $ 2,753 U.S. Treasury security $ 0 $ 0 $ 2,753 U.S. Treasury security 0 9,914 $ 2,753 U.S. Treasury security 0 9,914 0 9,914 U.S. agency 2,753 U.S. Treasury security 0 9,914 0 9,914 U.S. agency security U.S. Treasury security 0 9,914 0 9,914 U.S. agency security 0 Treasury security 0 9,914 0 9,914 U.S. agency security 0 8,727 0 9,914 U.S. agency security 0 8,727 0 8,727 Non-U.S. government 9,914 U.S. agency security 0 8,727 0 8,727 Non-U.S. government security U.S. agency security 0 8,727 0 8,727 Non-U.S. government security 0 agency security 0 8,727 0 8,727 Non-U.S. government security 0 2,661 0 8,727 Non-U.S. government security 0 2,661 0 2,661 Certificates of 8,727 Non-U.S. government security 0 2,661 0 2,661 Certificates of deposit Non-U.S. government security 0 2,661 0 2,661 Certificates of deposit and government security 0 2,661 0 2,661 Certificates of deposit and time of deposit and time deposit 0 2,739 0 2,739 Commercial paper deposit and time deposit 0 2,739 0 2,739 Commercial paper 0 and time deposit 0 2,739 0 2,739 Commercial paper 0 3,168 time deposit 0 2,739 0 2,739 Commercial paper 0 3,168 0 2,739 0 2,739 Commercial paper 0 3,168 0 3,168 Corporate security 0 2,739 Commercial paper 0 3,168 0 3,168 Corporate security 0 2,739 Commercial paper 0 3,168 0 3,168 Corporate security 0 17,442 Commercial paper 0 3,168 0 3,168 Corporate security 0 17,442 0 3,168 0 3,168 Corporate security 0 17,442 0 17,442 Municipal security 0 3,168 Corporate security 0 17,442 0 17,442 Municipal security 0 3,168 Corporate security 0 17,442 0 17,442 Municipal security 0 1,917 Corporate security 0 17,442 0 17,442 Municipal security 0 1,917 0 17,442 0 17,442 Municipal security 0 1,917 0 1,917 Marketable equity 0 17,442 Municipal security 0 1,917 0 1,917 Marketable equity security 17,442 Municipal security 0 1,917 0 1,917 Marketable equity security 132 Municipal security 0 1,917 0 1,917 Marketable equity security 132 0 0 1,917 Marketable equity security 132 0 0 132 Foreign exchange 1,917 Marketable equity security 132 0 0 132 Foreign exchange contract Marketable equity security 132 0 0 132 Foreign exchange contract 0 equity security 132 0 0 132 Foreign exchange contract 0 107 0 132 Foreign exchange contract 0 107 0 107 Total asset 132 Foreign exchange contract 0 107 0 107 Total asset measured Foreign exchange contract 0 107 0 107 Total asset measured at exchange contract 0 107 0 107 Total asset measured at fair measured at fair value $ 2,885 $ 46,675 $ 0 $ fair value $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities : Foreign $ 46,675 $ 0 $ 49,560 Liabilities : Foreign exchange contract : Foreign exchange contract $ 0 $ 606 $ 0 $ exchange contract $ 0 $ 606 $ 0 $ 606 64 $ 0 $ 606 $ 0 $ 606 64 Table of $ 606 $ 0 $ 606 64 Table of Contents September 606 $ 0 $ 606 64 Table of Contents September 26 64 Table of Contents September 26 , 2009 Quoted Prices in of Contents September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) : Money market fund $ 1,608 $ 0 $ 0 $ market fund $ 1,608 $ 0 $ 0 $ 1,608 U.S. $ 1,608 $ 0 $ 0 $ 1,608 U.S. Treasury security $ 0 $ 0 $ 1,608 U.S. Treasury security 0 3,616 $ 1,608 U.S. Treasury security 0 3,616 0 3,616 U.S. agency 1,608 U.S. Treasury security 0 3,616 0 3,616 U.S. agency security U.S. Treasury security 0 3,616 0 3,616 U.S. agency security 0 Treasury security 0 3,616 0 3,616 U.S. agency security 0 11,107 0 3,616 U.S. agency security 0 11,107 0 11,107 Non-U.S. government 3,616 U.S. agency security 0 11,107 0 11,107 Non-U.S. government security U.S. agency security 0 11,107 0 11,107 Non-U.S. government security 0 agency security 0 11,107 0 11,107 Non-U.S. government security 0 321 0 11,107 Non-U.S. government security 0 321 0 321 Certificates of 11,107 Non-U.S. government security 0 321 0 321 Certificates of deposit Non-U.S. government security 0 321 0 321 Certificates of deposit and government security 0 321 0 321 Certificates of deposit and time of deposit and time deposit 0 1,714 0 1,714 Commercial paper deposit and time deposit 0 1,714 0 1,714 Commercial paper 0 and time deposit 0 1,714 0 1,714 Commercial paper 0 4,197 time deposit 0 1,714 0 1,714 Commercial paper 0 4,197 0 1,714 0 1,714 Commercial paper 0 4,197 0 4,197 Corporate security 0 1,714 Commercial paper 0 4,197 0 4,197 Corporate security 0 1,714 Commercial paper 0 4,197 0 4,197 Corporate security 0 9,786 Commercial paper 0 4,197 0 4,197 Corporate security 0 9,786 0 4,197 0 4,197 Corporate security 0 9,786 0 9,786 Municipal security 0 4,197 Corporate security 0 9,786 0 9,786 Municipal security 0 4,197 Corporate security 0 9,786 0 9,786 Municipal security 0 504 Corporate security 0 9,786 0 9,786 Municipal security 0 504 0 9,786 0 9,786 Municipal security 0 504 0 504 Marketable equity 0 9,786 Municipal security 0 504 0 504 Marketable equity security 9,786 Municipal security 0 504 0 504 Marketable equity security 61 Municipal security 0 504 0 504 Marketable equity security 61 0 0 504 Marketable equity security 61 0 0 61 Foreign exchange 504 Marketable equity security 61 0 0 61 Foreign exchange contract Marketable equity security 61 0 0 61 Foreign exchange contract 0 equity security 61 0 0 61 Foreign exchange contract 0 37 0 61 Foreign exchange contract 0 37 0 37 Total asset 61 Foreign exchange contract 0 37 0 37 Total asset measured Foreign exchange contract 0 37 0 37 Total asset measured at exchange contract 0 37 0 37 Total asset measured at fair measured at fair value $ 1,669 $ 31,282 $ 0 $ fair value $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities : Foreign $ 31,282 $ 0 $ 32,951 Liabilities : Foreign exchange contract : Foreign exchange contract $ 0 $ 25 $ 0 $ exchange contract $ 0 $ 25 $ 0 $ 25 ( $ 0 $ 25 $ 0 $ 25 ( a ) $ 25 $ 0 $ 25 ( a ) The total Balance Sheet a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : in million ) : September 25 , 2010 Quoted Prices in ) : September 25 , 2010 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) Assets : Cash equivalent $ 2,753 $ 6,818 $ 0 $ Cash equivalent $ 2,753 $ 6,818 $ 0 $ 9,571 Short-term $ 2,753 $ 6,818 $ 0 $ 9,571 Short-term marketable security $ 6,818 $ 0 $ 9,571 Short-term marketable security 0 14,359 $ 9,571 Short-term marketable security 0 14,359 0 14,359 Long-term marketable 9,571 Short-term marketable security 0 14,359 0 14,359 Long-term marketable security Short-term marketable security 0 14,359 0 14,359 Long-term marketable security 0 marketable security 0 14,359 0 14,359 Long-term marketable security 0 25,391 0 14,359 Long-term marketable security 0 25,391 0 25,391 Other current 14,359 Long-term marketable security 0 25,391 0 25,391 Other current asset Long-term marketable security 0 25,391 0 25,391 Other current asset 0 marketable security 0 25,391 0 25,391 Other current asset 0 107 0 25,391 Other current asset 0 107 0 107 Other asset 25,391 Other current asset 0 107 0 107 Other asset 132 Other current asset 0 107 0 107 Other asset 132 0 current asset 0 107 0 107 Other asset 132 0 0 107 0 107 Other asset 132 0 0 132 Total asset 0 107 Other asset 132 0 0 132 Total asset measured 107 Other asset 132 0 0 132 Total asset measured at Other asset 132 0 0 132 Total asset measured at fair measured at fair value $ 2,885 $ 46,675 $ 0 $ fair value $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities $ 2,885 $ 46,675 $ 0 $ 49,560 Liabilities : Other $ 46,675 $ 0 $ 49,560 Liabilities : Other current liability : Other current liability $ 0 $ 606 $ 0 $ current liability $ 0 $ 606 $ 0 $ 606 65 $ 0 $ 606 $ 0 $ 606 65 Table of $ 606 $ 0 $ 606 65 Table of Contents September 606 $ 0 $ 606 65 Table of Contents September 26 65 Table of Contents September 26 , 2009 Quoted Prices in of Contents September 26 , 2009 Quoted Prices in Active Markets for Identical Instruments ( Level 1 ) Significant Other Observable Inputs Other Observable Inputs ( Level 2 ) Significant Unobservable Inputs ( Significant Unobservable Inputs ( Level 3 ) Total ( a ) Assets : Cash equivalent $ 1,608 $ 2,516 $ 0 $ Cash equivalent $ 1,608 $ 2,516 $ 0 $ 4,124 Short-term $ 1,608 $ 2,516 $ 0 $ 4,124 Short-term marketable security $ 2,516 $ 0 $ 4,124 Short-term marketable security 0 18,201 $ 4,124 Short-term marketable security 0 18,201 0 18,201 Long-term marketable 4,124 Short-term marketable security 0 18,201 0 18,201 Long-term marketable security Short-term marketable security 0 18,201 0 18,201 Long-term marketable security 0 marketable security 0 18,201 0 18,201 Long-term marketable security 0 10,528 0 18,201 Long-term marketable security 0 10,528 0 10,528 Other current 18,201 Long-term marketable security 0 10,528 0 10,528 Other current asset Long-term marketable security 0 10,528 0 10,528 Other current asset 0 marketable security 0 10,528 0 10,528 Other current asset 0 37 0 10,528 Other current asset 0 37 0 37 Other asset 10,528 Other current asset 0 37 0 37 Other asset 61 Other current asset 0 37 0 37 Other asset 61 0 current asset 0 37 0 37 Other asset 61 0 0 37 0 37 Other asset 61 0 0 61 Total asset 0 37 Other asset 61 0 0 61 Total asset measured 37 Other asset 61 0 0 61 Total asset measured at Other asset 61 0 0 61 Total asset measured at fair measured at fair value $ 1,669 $ 31,282 $ 0 $ fair value $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities $ 1,669 $ 31,282 $ 0 $ 32,951 Liabilities : Other $ 31,282 $ 0 $ 32,951 Liabilities : Other current liability : Other current liability $ 0 $ 25 $ 0 $ current liability $ 0 $ 25 $ 0 $ 25 ( $ 0 $ 25 $ 0 $ 25 ( a ) $ 25 $ 0 $ 25 ( a ) The total related carrying amount . Note 4 – Consolidated Financial Statement Details statement detail a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : Property , Plant and Equipment 2010 2009 Land and building $ , Plant and Equipment 2010 2009 Land and building $ 1,471 2009 Land and building $ 1,471 $ 955 Machinery , equipment and building $ 1,471 $ 955 Machinery , equipment and internal-use , equipment and internal-use software 3,589 1,932 Office furniture and equipment equipment and internal-use software 3,589 1,932 Office furniture and equipment 144 1,932 Office furniture and equipment 144 115 Leasehold improvement 2,030 1,665 Office furniture and equipment 144 115 Leasehold improvement 2,030 1,665 Gross equipment 144 115 Leasehold improvement 2,030 1,665 Gross property , plant 144 115 Leasehold improvement 2,030 1,665 Gross property , plant and property , plant and equipment 7,234 4,667 Accumulated depreciation and amortization , plant and equipment 7,234 4,667 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 2,466 ) ( 1,713 ) Net amortization ( 2,466 ) ( 1,713 ) Net property , plant , plant and equipment $ 4,768 $ 2,954 Accrued Expenses 2010 and equipment $ 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued 4,768 $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related $ 2,954 Accrued Expenses 2010 2009 Accrued warranty and related cost warranty and related cost $ 761 $ 577 Deferred margin on related cost $ 761 $ 577 Deferred margin on component sale Deferred margin on component sale 663 225 Accrued compensation and employee margin on component sale 663 225 Accrued compensation and employee benefit Accrued compensation and employee benefit 436 357 Accrued marketing and distribution compensation and employee benefit 436 357 Accrued marketing and distribution 396 357 Accrued marketing and distribution 396 359 Income tax payable 210 Accrued marketing and distribution 396 359 Income tax payable 210 430 396 359 Income tax payable 210 430 Other current liability 3,257 359 Income tax payable 210 430 Other current liability 3,257 1,904 210 430 Other current liability 3,257 1,904 Total accrued expense $ 430 Other current liability 3,257 1,904 Total accrued expense $ 5,723 1,904 Total accrued expense $ 5,723 $ 3,852 Non-Current Liabilities 2010 accrued expense $ 5,723 $ 3,852 Non-Current Liabilities 2010 2009 Deferred 5,723 $ 3,852 Non-Current Liabilities 2010 2009 Deferred tax liability $ $ 3,852 Non-Current Liabilities 2010 2009 Deferred tax liability $ 4,300 2009 Deferred tax liability $ 4,300 $ 2,216 Other non-current liability tax liability $ 4,300 $ 2,216 Other non-current liability 1,231 1,286 $ 2,216 Other non-current liability 1,231 1,286 Total other non-current liability 2,216 Other non-current liability 1,231 1,286 Total other non-current liability $ Total other non-current liability $ 5,531 $ 3,502 66 Table of non-current liability $ 5,531 $ 3,502 66 Table of Contents Note liability $ 5,531 $ 3,502 66 Table of Contents Note 5 66 Table of Contents Note 5 – Goodwill and Other Intangible asset balance a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million ) : ( in million ) : 2010 2009 Gross Carrying Amount Accumulated in million ) : 2010 2009 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 487 $ ( 245 ) $ asset $ 487 $ ( 245 ) $ 242 $ 323 $ ( 245 ) $ 242 $ 323 $ ( 176 245 ) $ 242 $ 323 $ ( 176 ) $ 242 $ 323 $ ( 176 ) $ 147 Indefinite lived $ ( 176 ) $ 147 Indefinite lived and unamortizable trademark Indefinite lived and unamortizable trademark 100 0 100 100 0 100 lived and unamortizable trademark 100 0 100 100 0 100 Total and unamortizable trademark 100 0 100 100 0 100 Total acquired unamortizable trademark 100 0 100 100 0 100 Total acquired intangible trademark 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset $ Total acquired intangible asset $ 587 $ ( 245 ) $ asset $ 587 $ ( 245 ) $ 342 $ 423 $ ( 245 ) $ 342 $ 423 $ ( 176 245 ) $ 342 $ 423 $ ( 176 ) $ 342 $ 423 $ ( 176 ) $ 247 During 2010 $ ( 176 ) $ 247 During 2010 , the Company 176 ) $ 247 During 2010 , the Company completed various cash acquired , of $ 638 million , of which $ million , of which $ 535 million wa allocated to goodwill allocated to goodwill and $ 107 million to acquired intangible asset amount of goodwill wa $ 741 million and $ 206 million $ 741 million and $ 206 million a of September 25 206 million a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively . 2010 and September 26 , 2009 , respectively . The Company have any goodwill impairment during 2010 , 2009 or 2008 . goodwill impairment during 2010 , 2009 or 2008 . The Company during 2010 , 2009 or 2008 . The Company ’ s acquired intangible asset wa $ 69 million , $ 53 million $ 69 million , $ 53 million and $ 46 million $ 53 million and $ 46 million in 2010 , 2009 and $ 46 million in 2010 , 2009 and 2008 , 46 million in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . As of respectively . As of September 25 , 2010 and September 26 As of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , the weighted-average 2010 and September 26 , 2009 , the weighted-average amortization period for acquired intangible asset wa 5.5 year and 7.2 year , asset wa 5.5 year and 7.2 year , respectively . Expected intangible asset a of September 25 , 2010 , is a a of September 25 , 2010 , is a follows ( in million ) : Years 2011 $ 83 2012 74 2013 ) : Years 2011 $ 83 2012 74 2013 39 2014 : Years 2011 $ 83 2012 74 2013 39 2014 18 Years 2011 $ 83 2012 74 2013 39 2014 18 2015 2011 $ 83 2012 74 2013 39 2014 18 2015 17 $ 83 2012 74 2013 39 2014 18 2015 17 Thereafter 83 2012 74 2013 39 2014 18 2015 17 Thereafter 11 2012 74 2013 39 2014 18 2015 17 Thereafter 11 Total 74 2013 39 2014 18 2015 17 Thereafter 11 Total $ 2013 39 2014 18 2015 17 Thereafter 11 Total $ 242 2014 18 2015 17 Thereafter 11 Total $ 242 67 Table 17 Thereafter 11 Total $ 242 67 Table of Contents Note Thereafter 11 Total $ 242 67 Table of Contents Note 6 67 Table of Contents Note 6 – Income Taxes The provision the three year ended September 25 , 2010 , consisted of year ended September 25 , 2010 , consisted of the following ( in million ) : 2010 2009 2008 Federal : Current in million ) : 2010 2009 2008 Federal : Current $ million ) : 2010 2009 2008 Federal : Current $ 2,150 2008 Federal : Current $ 2,150 $ 1,922 $ 1,796 Deferred : Current $ 2,150 $ 1,922 $ 1,796 Deferred 1,676 1,077 $ 2,150 $ 1,922 $ 1,796 Deferred 1,676 1,077 498 3,826 $ 1,922 $ 1,796 Deferred 1,676 1,077 498 3,826 2,999 2,294 1,922 $ 1,796 Deferred 1,676 1,077 498 3,826 2,999 2,294 State $ 1,796 Deferred 1,676 1,077 498 3,826 2,999 2,294 State : 1,796 Deferred 1,676 1,077 498 3,826 2,999 2,294 State : Current Deferred 1,676 1,077 498 3,826 2,999 2,294 State : Current 655 1,676 1,077 498 3,826 2,999 2,294 State : Current 655 524 2,999 2,294 State : Current 655 524 359 Deferred ( 115 2,294 State : Current 655 524 359 Deferred ( 115 ) State : Current 655 524 359 Deferred ( 115 ) ( 655 524 359 Deferred ( 115 ) ( 2 ) ( Deferred ( 115 ) ( 2 ) ( 25 ) 540 ) ( 2 ) ( 25 ) 540 522 334 Foreign 2 ) ( 25 ) 540 522 334 Foreign : Current ) ( 25 ) 540 522 334 Foreign : Current 282 ( 25 ) 540 522 334 Foreign : Current 282 345 522 334 Foreign : Current 282 345 275 Deferred ( 121 334 Foreign : Current 282 345 275 Deferred ( 121 ) Foreign : Current 282 345 275 Deferred ( 121 ) ( 282 345 275 Deferred ( 121 ) ( 35 ) ( Deferred ( 121 ) ( 35 ) ( 75 ) 161 ) ( 35 ) ( 75 ) 161 310 200 Provision 35 ) ( 75 ) 161 310 200 Provision for income ) ( 75 ) 161 310 200 Provision for income tax ( 75 ) 161 310 200 Provision for income tax $ Provision for income tax $ 4,527 $ 3,831 $ 2,828 The income tax $ 4,527 $ 3,831 $ 2,828 The foreign provision $ 4,527 $ 3,831 $ 2,828 The foreign provision for income foreign pretax earnings of $ 13.0 billion , $ 6.6 billion $ 13.0 billion , $ 6.6 billion and $ 4.6 billion $ 6.6 billion and $ 4.6 billion in 2010 , 2009 and $ 4.6 billion in 2010 , 2009 and 2008 , 4.6 billion in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . The Company the U.S. As of September 25 , 2010 , U.S. income As of September 25 , 2010 , U.S. income tax have a cumulative total of $ 12.3 billion of such earnings . estimated to be approximately $ 4.0 billion . As of September billion . As of September 25 , 2010 and September 26 As of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , $ 30.8 2010 and September 26 , 2009 , $ 30.8 billion and 26 , 2009 , $ 30.8 billion and $ 17.4 billion $ 30.8 billion and $ 17.4 billion , respectively , of be recovered or settled . 68 Table of Contents As of of Contents As of September 25 , 2010 and September 26 As of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , the significant 2010 and September 26 , 2009 , the significant component of ( in million ) : 2010 2009 Deferred tax asset : in million ) : 2010 2009 Deferred tax asset : Accrued liability and other reserve $ 1,300 $ 1,030 Basis of capital other reserve $ 1,300 $ 1,030 Basis of capital asset and of capital asset and investment 179 180 Accounts receivable and inventory capital asset and investment 179 180 Accounts receivable and inventory reserve Accounts receivable and inventory reserve 68 172 Stock-based compensation 308 87 receivable and inventory reserve 68 172 Stock-based compensation 308 87 Other reserve 68 172 Stock-based compensation 308 87 Other 558 383 Total 68 172 Stock-based compensation 308 87 Other 558 383 Total deferred Stock-based compensation 308 87 Other 558 383 Total deferred tax asset compensation 308 87 Other 558 383 Total deferred tax asset 2,413 383 Total deferred tax asset 2,413 1,852 Less valuation allowance 0 Total deferred tax asset 2,413 1,852 Less valuation allowance 0 0 2,413 1,852 Less valuation allowance 0 0 Deferred tax asset , 1,852 Less valuation allowance 0 0 Deferred tax asset , net , net of valuation allowance 2,413 1,852 Deferred tax liability - net of valuation allowance 2,413 1,852 Deferred tax liability - Unremitted Unremitted earnings of foreign subsidiary 4,979 2,774 Net deferred tax liability earnings of foreign subsidiary 4,979 2,774 Net deferred tax liability $ deferred tax liability $ ( 2,566 ) $ ( 922 ) ( 2,566 ) $ ( 922 ) A reconciliation of the federal income tax rate ( 35 % in 2010 , 2009 rate ( 35 % in 2010 , 2009 and 2008 ) 35 % in 2010 , 2009 and 2008 ) to income in 2010 , 2009 and 2008 ) to income before provision the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( ( in million ) : 2010 2009 2008 Computed expected tax in million ) : 2010 2009 2008 Computed expected tax $ million ) : 2010 2009 2008 Computed expected tax $ 6,489 2008 Computed expected tax $ 6,489 $ 4,223 $ 3,131 State expected tax $ 6,489 $ 4,223 $ 3,131 State tax , $ 6,489 $ 4,223 $ 3,131 State tax , net of , net of federal effect 351 339 217 Indefinitely invested earnings net of federal effect 351 339 217 Indefinitely invested earnings of of federal effect 351 339 217 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 2,125 ) ( 647 ) ( subsidiary ( 2,125 ) ( 647 ) ( 500 ) Research ) ( 647 ) ( 500 ) Research and development credit development credit , net ( 23 ) ( 84 ) ( net ( 23 ) ( 84 ) ( 21 ) Other ) ( 84 ) ( 21 ) Other ( 165 ) ( 21 ) Other ( 165 ) 0 1 Provision for ) Other ( 165 ) 0 1 Provision for income tax Other ( 165 ) 0 1 Provision for income tax $ Provision for income tax $ 4,527 $ 3,831 $ 2,828 Effective income tax $ 4,527 $ 3,831 $ 2,828 Effective tax rate $ 4,527 $ 3,831 $ 2,828 Effective tax rate 24 % $ 2,828 Effective tax rate 24 % 32 % 32 % Effective tax rate 24 % 32 % 32 % The Company rate 24 % 32 % 32 % The Company ’ s stock plan award of $ 742 million , $ 246 million $ 742 million , $ 246 million and $ 770 million $ 246 million and $ 770 million in 2010 , 2009 and $ 770 million in 2010 , 2009 and 2008 , 770 million in 2010 , 2009 and 2008 , respectively , in 2010 , 2009 and 2008 , respectively , which were benefit that is greater than 50 % likely of being realized Sheets . As of September 25 , 2010 , the total As of September 25 , 2010 , the total amount of unrecognized tax benefit wa $ 943 million , of which $ million , of which $ 404 million , if recognized , rate . As of September 26 , 2009 , the total As of September 26 , 2009 , the total amount of unrecognized tax benefit wa $ 971 million , of which $ million , of which $ 307 million , if recognized , s effective tax rate . 69 Table of Contents The aggregate the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( ( in million ) : 2010 2009 2008 Beginning Balance $ in million ) : 2010 2009 2008 Beginning Balance $ 971 million ) : 2010 2009 2008 Beginning Balance $ 971 506 2009 2008 Beginning Balance $ 971 506 $ 475 Increases related 2008 Beginning Balance $ 971 506 $ 475 Increases related to Balance $ 971 506 $ 475 Increases related to tax position taken during a prior year 61 341 27 Decreases related to during a prior year 61 341 27 Decreases related to tax a prior year 61 341 27 Decreases related to tax position during a prior year ( 224 ) ( 24 ) ( year ( 224 ) ( 24 ) ( 70 ) Increases ) ( 24 ) ( 70 ) Increases related to tax taken during the current year 240 151 85 Decreases related to during the current year 240 151 85 Decreases related to settlement the current year 240 151 85 Decreases related to settlement with settlement with taxing authority ( 102 ) 0 0 Decreases related taxing authority ( 102 ) 0 0 Decreases related to expiration authority ( 102 ) 0 0 Decreases related to expiration of of statute of limitation ( 3 ) ( 3 ) ( limitation ( 3 ) ( 3 ) ( 11 ) Ending ) ( 3 ) ( 11 ) Ending Balance $ 943 11 ) Ending Balance $ 943 $ 971 $ 506 The Ending Balance $ 943 $ 971 $ 506 The Company includes $ 943 $ 971 $ 506 The Company includes interest and tax . As of September 25 , 2010 and September 26 As of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , the total 2010 and September 26 , 2009 , the total amount of and penalty accrued wa $ 247 million and $ 291 million $ 247 million and $ 291 million , respectively , which Consolidated Balance Sheets . In 2010 and 2009 , the Company Sheets . In 2010 and 2009 , the Company recognized an an interest benefit of $ 43 million and interest expense of and interest expense of $ 64 million , respectively , in , all year prior to 2004 are closed . The Internal tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . During the examining the year 2007 through 2009 . During the third quarter During the third quarter of 2010 , the Company reached a the IRS for the year 2002 through 2003 . In connection for the year 2002 through 2003 . In connection with the unrecognized tax benefit by $ 100 million and recognized a $ million and recognized a $ 52 million tax benefit in the in the third quarter of 2010 . In addition , the , the year subsequent to 1988 and 2001 , respectively , year subsequent to 1988 and 2001 , respectively , generally remain materially change in the next 12 month . Note 7 – next 12 month . Note 7 – Shareholders ’ Equity and s other comprehensive income consists 70 Table of Contents of foreign the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Net unrealized gains/losses in million ) : 2010 2009 2008 Net unrealized gains/losses on million ) : 2010 2009 2008 Net unrealized gains/losses on marketable gains/losses on marketable security $ 171 $ 48 $ ( 70 marketable security $ 171 $ 48 $ ( 70 ) Net 171 $ 48 $ ( 70 ) Net unrecognized gains/losses on gains/losses on derivative instrument ( 252 ) 1 19 Cumulative foreign derivative instrument ( 252 ) 1 19 Cumulative foreign currency translation instrument ( 252 ) 1 19 Cumulative foreign currency translation 35 19 Cumulative foreign currency translation 35 28 42 Accumulated other comprehensive Cumulative foreign currency translation 35 28 42 Accumulated other comprehensive income/ foreign currency translation 35 28 42 Accumulated other comprehensive income/ ( ( loss ) $ ( 46 ) $ 77 $ ( $ ( 46 ) $ 77 $ ( 9 ) The ) $ 77 $ ( 9 ) The change in fair other comprehensive income wa $ 123 million , $ 118 million $ 123 million , $ 118 million and $ ( 63 118 million and $ ( 63 ) million , net of , net of tax in 2010 , 2009 and 2008 , of tax in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . The tax available-for-sale security wa $ ( 72 ) million , $ ( ) million , $ ( 78 ) million and $ 42 78 ) million and $ 42 million for 2010 , 2009 and $ 42 million for 2010 , 2009 and 2008 , 42 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The following the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Changes in fair in million ) : 2010 2009 2008 Changes in fair value million ) : 2010 2009 2008 Changes in fair value of value of derivative $ ( 180 ) $ 204 $ 7 $ ( 180 ) $ 204 $ 7 Adjustment for net 180 ) $ 204 $ 7 Adjustment for net gains/losses realized included in net income ( 73 ) ( 222 ) 12 income ( 73 ) ( 222 ) 12 Change in unrecognized 73 ) ( 222 ) 12 Change in unrecognized gains/losses on on derivative instrument $ ( 253 ) $ ( 18 ) ( 253 ) $ ( 18 ) $ 19 The tax $ ( 18 ) $ 19 The tax effect related to value of derivative wa $ 97 million , $ ( 135 97 million , $ ( 135 ) million and $ ( ) million and $ ( 5 ) million for 2010 , ( 5 ) million for 2010 , 2009 and 2008 , ) million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The tax to net income wa $ 43 million , $ 149 million $ 43 million , $ 149 million and $ ( 9 149 million and $ ( 9 ) million for 2010 , ( 9 ) million for 2010 , 2009 and 2008 , ) million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a including executive officer . The 2003 Plan permit the granting of . Options granted under the 2003 Plan generally expire seven to , RSUs granted under the 2003 Plan vest over two to At the Company ’ s 2010 annual meeting of shareholder , meeting of shareholder , the 2003 Plan wa amended to ( to award granted under the 2003 Plan by an additional 36,000,000 2003 Plan by an additional 36,000,000 share and ( ii ) to grant award under the 2003 Plan intended to qualify a within the meaning of Section 162 ( m ) of the Internal Revenue Code through the 2015 annual meeting of shareholder . shareholder . As of September 25 , 2010 , approximately 62.5 As of September 25 , 2010 , approximately 62.5 million share 25 , 2010 , approximately 62.5 million share were reserved for for future issuance under the 2003 Plan . 71 Table of under the 2003 Plan . 71 Table of Contents 1997 Employee . 71 Table of Contents 1997 Employee Stock Option Plan In Stock Option Plan In August 1997 , the Company ’ s Board of Directors approved the 1997 Employee Stock Option Plan ( Option Plan ( the “ 1997 Plan ” ) , a . Options granted under the 1997 Plan generally expire seven to stock option granted under the 1997 Plan are fully vested . fully vested . In October 2003 , the Company terminated the , the Company terminated the 1997 Plan , and no new granted from this plan . 1997 Director Stock Plan In August Director Stock Plan In August 1997 , the Company ’ s which wa subsequently renamed the 1997 Director Stock Plan ( the ( ii ) beginning February 25 , 2010 , provides for ) beginning February 25 , 2010 , provides for automatic initial The Director Plan expires November 9 , 2019 . As of Plan expires November 9 , 2019 . As of September 25 2019 . As of September 25 , 2010 , approximately 199,000 As of September 25 , 2010 , approximately 199,000 share were 25 , 2010 , approximately 199,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans During the fourth During the fourth quarter of 2010 , executive officer Timothy D. trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended ( the at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock for any calendar Additionally , no more than 1,000,000 share may be purchased in period . As of September 25 , 2010 , approximately 3.8 As of September 25 , 2010 , approximately 3.8 million share 25 , 2010 , approximately 3.8 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 16,500 for calendar year 2010 ) $ 16,500 for calendar year 2010 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ the Savings Plan were $ 72 million , $ 59 million $ 72 million , $ 59 million and $ 50 million $ 59 million and $ 50 million in 2010 , 2009 and $ 50 million in 2010 , 2009 and 2008 , 50 million in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . 72 Table and 2008 , respectively . 72 Table of Contents Restricted Stock the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( Intrinsic Value Balance at September 29 , 2007 4,675 $ 52.98 Balance at September 29 , 2007 4,675 $ 52.98 Restricted stock at September 29 , 2007 4,675 $ 52.98 Restricted stock unit 29 , 2007 4,675 $ 52.98 Restricted stock unit granted 4,917 52.98 Restricted stock unit granted 4,917 $ 162.61 Restricted stock unit stock unit granted 4,917 $ 162.61 Restricted stock unit vested ( Restricted stock unit vested ( 2,195 ) $ 25.63 Restricted stock vested ( 2,195 ) $ 25.63 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 357 ) $ 119.12 Balance at cancelled ( 357 ) $ 119.12 Balance at September 27 , $ 119.12 Balance at September 27 , 2008 7,040 $ 134.91 Balance at September 27 , 2008 7,040 $ 134.91 Restricted stock at September 27 , 2008 7,040 $ 134.91 Restricted stock unit 27 , 2008 7,040 $ 134.91 Restricted stock unit granted 7,786 134.91 Restricted stock unit granted 7,786 $ 111.80 Restricted stock unit stock unit granted 7,786 $ 111.80 Restricted stock unit vested ( Restricted stock unit vested ( 1,935 ) $ 124.87 Restricted stock vested ( 1,935 ) $ 124.87 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 628 ) $ 121.28 Balance at cancelled ( 628 ) $ 121.28 Balance at September 26 , $ 121.28 Balance at September 26 , 2009 12,263 $ 122.52 Balance at September 26 , 2009 12,263 $ 122.52 Restricted stock at September 26 , 2009 12,263 $ 122.52 Restricted stock unit 26 , 2009 12,263 $ 122.52 Restricted stock unit granted 6,178 122.52 Restricted stock unit granted 6,178 $ 214.37 Restricted stock unit stock unit granted 6,178 $ 214.37 Restricted stock unit vested ( Restricted stock unit vested ( 4,685 ) $ 119.85 Restricted stock vested ( 4,685 ) $ 119.85 Restricted stock unit cancelled ( Restricted stock unit cancelled ( 722 ) $ 147.56 Balance at cancelled ( 722 ) $ 147.56 Balance at September 25 , $ 147.56 Balance at September 25 , 2010 13,034 $ 165.63 Balance at September 25 , 2010 13,034 $ 165.63 $ 3,810,287 at September 25 , 2010 13,034 $ 165.63 $ 3,810,287 The 25 , 2010 13,034 $ 165.63 $ 3,810,287 The fair value 2010 13,034 $ 165.63 $ 3,810,287 The fair value a of date of RSUs wa $ 1 billion , $ 221 million $ 1 billion , $ 221 million and $ 320 million $ 221 million and $ 320 million for 2010 , 2009 and $ 320 million for 2010 , 2009 and 2008 , 320 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . Upon vesting of RSUs that vested in 2010 , 2009 and 2008 , that vested in 2010 , 2009 and 2008 , were net-share in 2010 , 2009 and 2008 , were net-share settled such total share withheld were approximately 1.8 million , 707,000 and 857,000 were approximately 1.8 million , 707,000 and 857,000 for 2010 , 1.8 million , 707,000 and 857,000 for 2010 , 2009 and , 707,000 and 857,000 for 2010 , 2009 and 2008 , and 857,000 for 2010 , 2009 and 2008 , respectively , for 2010 , 2009 and 2008 , respectively , and were the taxing authority were $ 406 million , $ 82 million $ 406 million , $ 82 million and $ 124 million $ 82 million and $ 124 million in 2010 , 2009 and $ 124 million in 2010 , 2009 and 2008 , 124 million in 2010 , 2009 and 2008 , respectively , in 2010 , 2009 and 2008 , respectively , and are expense to the Company . 73 Table of Contents Stock Option the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( Intrinsic Value Balance at September 29 , 2007 67,827 49,751 $ Balance at September 29 , 2007 67,827 49,751 $ 43.91 Restricted at September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock September 29 , 2007 67,827 49,751 $ 43.91 Restricted stock unit , 2007 67,827 49,751 $ 43.91 Restricted stock unit granted ( Restricted stock unit granted ( 9,834 ) 0 $ 0 Options unit granted ( 9,834 ) 0 $ 0 Options granted ( ( 9,834 ) 0 $ 0 Options granted ( 9,359 ) $ 0 Options granted ( 9,359 ) 9,359 $ 171.36 Options Options granted ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 9,359 ) 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 9,359 $ 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 171.36 Options cancelled 1,236 ( 1,236 ) $ 98.40 Restricted stock 1,236 ( 1,236 ) $ 98.40 Restricted stock unit cancelled 714 98.40 Restricted stock unit cancelled 714 0 $ 0 Options exercised Restricted stock unit cancelled 714 0 $ 0 Options exercised 0 unit cancelled 714 0 $ 0 Options exercised 0 ( 13,728 0 $ 0 Options exercised 0 ( 13,728 ) $ 27.88 0 Options exercised 0 ( 13,728 ) $ 27.88 Plan share 0 ( 13,728 ) $ 27.88 Plan share expired ( 12 27.88 Plan share expired ( 12 ) 0 $ 0 Balance share expired ( 12 ) 0 $ 0 Balance at September ( 12 ) 0 $ 0 Balance at September 27 , $ 0 Balance at September 27 , 2008 50,572 44,146 $ Balance at September 27 , 2008 50,572 44,146 $ 74.39 Restricted at September 27 , 2008 50,572 44,146 $ 74.39 Restricted stock September 27 , 2008 50,572 44,146 $ 74.39 Restricted stock unit , 2008 50,572 44,146 $ 74.39 Restricted stock unit granted ( Restricted stock unit granted ( 15,572 ) 0 $ 0 Options unit granted ( 15,572 ) 0 $ 0 Options granted ( ( 15,572 ) 0 $ 0 Options granted ( 234 ) $ 0 Options granted ( 234 ) 234 $ 106.84 Options Options granted ( 234 ) 234 $ 106.84 Options cancelled 1,241 ( 234 ) 234 $ 106.84 Options cancelled 1,241 ( 1,241 234 $ 106.84 Options cancelled 1,241 ( 1,241 ) $ 122.98 106.84 Options cancelled 1,241 ( 1,241 ) $ 122.98 Restricted stock 1,241 ( 1,241 ) $ 122.98 Restricted stock unit cancelled 1,256 122.98 Restricted stock unit cancelled 1,256 0 $ 0 Options exercised Restricted stock unit cancelled 1,256 0 $ 0 Options exercised 0 unit cancelled 1,256 0 $ 0 Options exercised 0 ( 8,764 0 $ 0 Options exercised 0 ( 8,764 ) $ 41.78 0 Options exercised 0 ( 8,764 ) $ 41.78 Plan share 0 ( 8,764 ) $ 41.78 Plan share expired ( 2 41.78 Plan share expired ( 2 ) 0 $ 0 Balance share expired ( 2 ) 0 $ 0 Balance at September ( 2 ) 0 $ 0 Balance at September 26 , $ 0 Balance at September 26 , 2009 37,261 34,375 $ Balance at September 26 , 2009 37,261 34,375 $ 81.17 Additional at September 26 , 2009 37,261 34,375 $ 81.17 Additional share September 26 , 2009 37,261 34,375 $ 81.17 Additional share authorized , 2009 37,261 34,375 $ 81.17 Additional share authorized 36,000 0 $ 81.17 Additional share authorized 36,000 0 $ 0 Restricted stock 81.17 Additional share authorized 36,000 0 $ 0 Restricted stock unit share authorized 36,000 0 $ 0 Restricted stock unit granted ( Restricted stock unit granted ( 12,356 ) 0 $ 0 Options unit granted ( 12,356 ) 0 $ 0 Options granted ( ( 12,356 ) 0 $ 0 Options granted ( 34 ) $ 0 Options granted ( 34 ) 34 $ 202.00 Options Options granted ( 34 ) 34 $ 202.00 Options assumed 0 ( 34 ) 34 $ 202.00 Options assumed 0 98 $ 34 $ 202.00 Options assumed 0 98 $ 11.99 Options cancelled $ 202.00 Options assumed 0 98 $ 11.99 Options cancelled 430 Options assumed 0 98 $ 11.99 Options cancelled 430 ( 430 98 $ 11.99 Options cancelled 430 ( 430 ) $ 136.27 11.99 Options cancelled 430 ( 430 ) $ 136.27 Restricted stock 430 ( 430 ) $ 136.27 Restricted stock unit cancelled 1,444 136.27 Restricted stock unit cancelled 1,444 0 $ 0 Options exercised Restricted stock unit cancelled 1,444 0 $ 0 Options exercised 0 unit cancelled 1,444 0 $ 0 Options exercised 0 ( 12,352 0 $ 0 Options exercised 0 ( 12,352 ) $ 62.69 0 Options exercised 0 ( 12,352 ) $ 62.69 Plan share 0 ( 12,352 ) $ 62.69 Plan share expired ( 8 62.69 Plan share expired ( 8 ) 0 $ 0 Balance share expired ( 8 ) 0 $ 0 Balance at September ( 8 ) 0 $ 0 Balance at September 25 , $ 0 Balance at September 25 , 2010 62,737 21,725 $ Balance at September 25 , 2010 62,737 21,725 $ 90.46 2.85 at September 25 , 2010 62,737 21,725 $ 90.46 2.85 $ September 25 , 2010 62,737 21,725 $ 90.46 2.85 $ 4,385,291 , 2010 62,737 21,725 $ 90.46 2.85 $ 4,385,291 Exercisable at 2010 62,737 21,725 $ 90.46 2.85 $ 4,385,291 Exercisable at September 21,725 $ 90.46 2.85 $ 4,385,291 Exercisable at September 25 , $ 4,385,291 Exercisable at September 25 , 2010 17,791 $ 77.74 Exercisable at September 25 , 2010 17,791 $ 77.74 2.57 $ at September 25 , 2010 17,791 $ 77.74 2.57 $ 3,817,663 25 , 2010 17,791 $ 77.74 2.57 $ 3,817,663 Expected to , 2010 17,791 $ 77.74 2.57 $ 3,817,663 Expected to vest 17,791 $ 77.74 2.57 $ 3,817,663 Expected to vest after September Expected to vest after September 25 , 2010 3,880 $ 148.03 vest after September 25 , 2010 3,880 $ 148.03 4.12 $ after September 25 , 2010 3,880 $ 148.03 4.12 $ 559,882 25 , 2010 3,880 $ 148.03 4.12 $ 559,882 Aggregate intrinsic , 2010 3,880 $ 148.03 4.12 $ 559,882 Aggregate intrinsic value 3,880 $ 148.03 4.12 $ 559,882 Aggregate intrinsic value represents the time of exercise wa $ 2.0 billion , $ 827 million $ 2.0 billion , $ 827 million and $ 2.0 billion $ 827 million and $ 2.0 billion for 2010 , 2009 and $ 2.0 billion for 2010 , 2009 and 2008 , 2.0 billion for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . RSUs granted stock option activity table . 74 Table of Contents Stock-Based Compensation during the year ended September 25 , 2010 . The weighted-average year ended September 25 , 2010 . The weighted-average fair value during the year ended September 25 , 2010 wa $ 216.82 year ended September 25 , 2010 wa $ 216.82 . There 25 , 2010 wa $ 216.82 . There were no stock no stock option assumed during 2009 and 2008 . The weighted-average option assumed during 2009 and 2008 . The weighted-average assumption used the three year ended September 25 , 2010 , and the year ended September 25 , 2010 , and the resulting estimate period are a follows : 2010 2009 2008 Expected life of are a follows : 2010 2009 2008 Expected life of stock a follows : 2010 2009 2008 Expected life of stock option Expected life of stock option 10 year 4.54 year 3.41 year of stock option 10 year 4.54 year 3.41 year Expected life option 10 year 4.54 year 3.41 year Expected life of stock life of stock purchase right 6 month 6 month 6 month stock purchase right 6 month 6 month 6 month Interest rate right 6 month 6 month 6 month Interest rate - stock Interest rate - stock option 3.71 % 2.04 % 3.40 % - stock option 3.71 % 2.04 % 3.40 % Interest rate option 3.71 % 2.04 % 3.40 % Interest rate - stock rate - stock purchase right 0.25 % 0.58 % 3.48 % stock purchase right 0.25 % 0.58 % 3.48 % Volatility - right 0.25 % 0.58 % 3.48 % Volatility - stock option % Volatility - stock option 36.30 % 50.98 % 45.64 % - stock option 36.30 % 50.98 % 45.64 % Volatility - option 36.30 % 50.98 % 45.64 % Volatility - stock purchase Volatility - stock purchase right 33.28 % 52.16 % 38.51 % stock purchase right 33.28 % 52.16 % 38.51 % Dividend yield right 33.28 % 52.16 % 38.51 % Dividend yield 0 0 % 38.51 % Dividend yield 0 0 0 Weighted-average fair value 38.51 % Dividend yield 0 0 0 Weighted-average fair value of % Dividend yield 0 0 0 Weighted-average fair value of stock granted during the year $ 108.58 $ 46.71 $ 62.73 Weighted-average the year $ 108.58 $ 46.71 $ 62.73 Weighted-average fair value $ 108.58 $ 46.71 $ 62.73 Weighted-average fair value of stock right during the year $ 45.03 $ 30.62 $ 42.27 The the year $ 45.03 $ 30.62 $ 42.27 The following table $ 45.03 $ 30.62 $ 42.27 The following table provides a the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Cost of sale in million ) : 2010 2009 2008 Cost of sale $ million ) : 2010 2009 2008 Cost of sale $ 151 2008 Cost of sale $ 151 $ 114 $ 80 Research of sale $ 151 $ 114 $ 80 Research and development $ 151 $ 114 $ 80 Research and development 323 258 $ 80 Research and development 323 258 185 Selling , general 80 Research and development 323 258 185 Selling , general and Research and development 323 258 185 Selling , general and administrative Selling , general and administrative 405 338 251 Total stock-based compensation , general and administrative 405 338 251 Total stock-based compensation expense general and administrative 405 338 251 Total stock-based compensation expense $ Total stock-based compensation expense $ 879 $ 710 $ 516 Stock-based compensation expense $ 879 $ 710 $ 516 Stock-based compensation expense $ 879 $ 710 $ 516 Stock-based compensation expense capitalized a not significant a of September 25 , 2010 or September 26 a of September 25 , 2010 or September 26 , 2009 25 , 2010 or September 26 , 2009 . The income 2010 or September 26 , 2009 . The income tax benefit stock-based compensation expense wa $ 314 million , $ 266 million $ 314 million , $ 266 million and $ 169 million $ 266 million and $ 169 million for 2010 , 2009 and $ 169 million for 2010 , 2009 and 2008 , 169 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The total expected to vest wa $ 1.9 billion a of September 25 1.9 billion a of September 25 , 2010 , which is a of September 25 , 2010 , which is expected to over a weighted-average period of 2.73 year . Note 8 – of 2.73 year . Note 8 – Commitments and Contingencies Lease sheet financing arrangement . The 75 Table of Contents major facility typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of option . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company ’ s noncancelable operating lease were $ 2.1 billion , of which $ billion , of which $ 1.7 billion related to lease for noncancelable lease , wa $ 271 million , $ 231 million $ 271 million , $ 231 million and $ 207 million $ 231 million and $ 207 million in 2010 , 2009 and $ 207 million in 2010 , 2009 and 2008 , 207 million in 2010 , 2009 and 2008 , respectively . in 2010 , 2009 and 2008 , respectively . Future minimum one year a of September 25 , 2010 , are a a of September 25 , 2010 , are a follows ( in million ) : Years 2011 $ 266 2012 267 2013 ) : Years 2011 $ 266 2012 267 2013 260 2014 : Years 2011 $ 266 2012 267 2013 260 2014 244 Years 2011 $ 266 2012 267 2013 260 2014 244 2015 2011 $ 266 2012 267 2013 260 2014 244 2015 226 $ 266 2012 267 2013 260 2014 244 2015 226 Thereafter 266 2012 267 2013 260 2014 244 2015 226 Thereafter 826 2012 267 2013 260 2014 244 2015 226 Thereafter 826 Total 267 2013 260 2014 244 2015 226 Thereafter 826 Total minimum 2013 260 2014 244 2015 226 Thereafter 826 Total minimum lease 2014 244 2015 226 Thereafter 826 Total minimum lease payment $ Total minimum lease payment $ 2,089 Accrued Warranty and Indemnifications The The Company also offer a 90-day basic warranty for it service the three year ended September 25 , 2010 ( in million year ended September 25 , 2010 ( in million ) : ( in million ) : 2010 2009 2008 Beginning accrued warranty in million ) : 2010 2009 2008 Beginning accrued warranty and million ) : 2010 2009 2008 Beginning accrued warranty and related warranty and related cost $ 577 $ 671 $ 363 Cost related cost $ 577 $ 671 $ 363 Cost of warranty $ 577 $ 671 $ 363 Cost of warranty claim ( Cost of warranty claim ( 713 ) ( 534 ) ( claim ( 713 ) ( 534 ) ( 493 ) Accruals ) ( 534 ) ( 493 ) Accruals for product warranty ) Accruals for product warranty 897 440 801 Ending accrued warranty Accruals for product warranty 897 440 801 Ending accrued warranty and for product warranty 897 440 801 Ending accrued warranty and related warranty and related cost $ 761 $ 577 $ 671 The related cost $ 761 $ 577 $ 671 The Company generally $ 761 $ 577 $ 671 The Company generally doe not Other agreement entered into by 76 Table of Contents the Company cost a of either September 25 , 2010 or September 26 of either September 25 , 2010 or September 26 , 2009 25 , 2010 or September 26 , 2009 . The Company 2010 or September 26 , 2009 . The Company ha entered not limited to final assembly 77 Table of Contents of substantially requirement for period ranging from 30 to 150 day . Long-Term period ranging from 30 to 150 day . Long-Term Supply Agreements , which generally expire between 2011 and 2015 . As of generally expire between 2011 and 2015 . As of September 25 2015 . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company had a had a total of $ 956 million of inventory component prepayment outstanding , of which $ 157 million is classified a other other current asset and $ 799 million is classified a other Balance Sheets . In August 2010 , the Company entered into ha committed to prepay $ 500 million in 2011 . The prepay $ 500 million in 2011 . The Company had a had a total of $ 1.2 billion of inventory component prepayment prepayment outstanding a of September 26 , 2009 . These prepayment a of September 26 , 2009 . These prepayment will be in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal adversely affected . On March 14 , 2008 , Mirror Worlds . On March 14 , 2008 , Mirror Worlds , LLC display file . On October 1 , 2010 , a jury . On October 1 , 2010 , a jury returned a and awarded damage of $ 208 million per patent for each or operating result . Note 9 – Segment Information and Geographic a the Middle East and 78 Table of Contents Africa . operates Apple retail store in 11 country , including the U.S. a those described in Note 1 , “ Summary of Significant the Retail segment were $ 392 million , $ 369 million $ 392 million , $ 369 million and $ 389 million $ 369 million and $ 389 million for 2010 , 2009 and $ 389 million for 2010 , 2009 and 2008 , 389 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . The Company had opened a total of 15 high-profile store a of September high-profile store a of September 25 , 2010 . Amounts allocated a of September 25 , 2010 . Amounts allocated to corporate of high-profile store were $ 75 million , $ 65 million $ 75 million , $ 65 million and $ 53 million $ 65 million and $ 53 million for 2010 , 2009 and $ 53 million for 2010 , 2009 and 2008 , 53 million for 2010 , 2009 and 2008 , respectively . for 2010 , 2009 and 2008 , respectively . 79 Table and 2008 , respectively . 79 Table of Contents Summary information the three year ended September 25 , 2010 is a follows year ended September 25 , 2010 is a follows ( in ( in million ) : 2010 2009 2008 Americas : Net in million ) : 2010 2009 2008 Americas : Net sale million ) : 2010 2009 2008 Americas : Net sale $ Americas : Net sale $ 24,498 $ 18,981 $ 16,552 Operating Net sale $ 24,498 $ 18,981 $ 16,552 Operating income $ $ 24,498 $ 18,981 $ 16,552 Operating income $ 7,590 $ $ 16,552 Operating income $ 7,590 $ 6,658 $ 4,901 Depreciation Operating income $ 7,590 $ 6,658 $ 4,901 Depreciation , amortization $ 7,590 $ 6,658 $ 4,901 Depreciation , amortization and accretion , amortization and accretion $ 12 $ 12 $ 10 Segment and accretion $ 12 $ 12 $ 10 Segment asset ( $ 12 $ 12 $ 10 Segment asset ( a ) asset ( a ) $ 2,809 $ 1,896 $ 1,693 Europe a ) $ 2,809 $ 1,896 $ 1,693 Europe : Net $ 2,809 $ 1,896 $ 1,693 Europe : Net sale $ Europe : Net sale $ 18,692 $ 11,810 $ 9,233 Operating Net sale $ 18,692 $ 11,810 $ 9,233 Operating income $ $ 18,692 $ 11,810 $ 9,233 Operating income $ 7,524 $ $ 9,233 Operating income $ 7,524 $ 4,296 $ 3,022 Depreciation Operating income $ 7,524 $ 4,296 $ 3,022 Depreciation , amortization $ 7,524 $ 4,296 $ 3,022 Depreciation , amortization and accretion , amortization and accretion $ 9 $ 7 $ 6 Segment and accretion $ 9 $ 7 $ 6 Segment asset $ $ 9 $ 7 $ 6 Segment asset $ 1,926 $ $ 6 Segment asset $ 1,926 $ 1,352 $ 1,069 Japan Segment asset $ 1,926 $ 1,352 $ 1,069 Japan : Net $ 1,926 $ 1,352 $ 1,069 Japan : Net sale $ Japan : Net sale $ 3,981 $ 2,279 $ 1,728 Operating Net sale $ 3,981 $ 2,279 $ 1,728 Operating income $ $ 3,981 $ 2,279 $ 1,728 Operating income $ 1,846 $ $ 1,728 Operating income $ 1,846 $ 961 $ 549 Depreciation Operating income $ 1,846 $ 961 $ 549 Depreciation , amortization $ 1,846 $ 961 $ 549 Depreciation , amortization and accretion , amortization and accretion $ 3 $ 2 $ 2 Segment and accretion $ 3 $ 2 $ 2 Segment asset $ $ 3 $ 2 $ 2 Segment asset $ 991 $ $ 2 Segment asset $ 991 $ 483 $ 272 Asia-Pacific Segment asset $ 991 $ 483 $ 272 Asia-Pacific : Net $ 991 $ 483 $ 272 Asia-Pacific : Net sale $ Asia-Pacific : Net sale $ 8,256 $ 3,179 $ 2,686 Operating Net sale $ 8,256 $ 3,179 $ 2,686 Operating income $ $ 8,256 $ 3,179 $ 2,686 Operating income $ 3,647 $ $ 2,686 Operating income $ 3,647 $ 1,100 $ 748 Depreciation Operating income $ 3,647 $ 1,100 $ 748 Depreciation , amortization $ 3,647 $ 1,100 $ 748 Depreciation , amortization and accretion , amortization and accretion $ 3 $ 3 $ 3 Segment and accretion $ 3 $ 3 $ 3 Segment asset $ $ 3 $ 3 $ 3 Segment asset $ 1,622 $ $ 3 Segment asset $ 1,622 $ 529 $ 390 Retail Segment asset $ 1,622 $ 529 $ 390 Retail : Net $ 1,622 $ 529 $ 390 Retail : Net sale $ Retail : Net sale $ 9,798 $ 6,656 $ 7,292 Operating Net sale $ 9,798 $ 6,656 $ 7,292 Operating income $ $ 9,798 $ 6,656 $ 7,292 Operating income $ 2,364 $ $ 7,292 Operating income $ 2,364 $ 1,677 $ 1,661 Depreciation Operating income $ 2,364 $ 1,677 $ 1,661 Depreciation , amortization $ 2,364 $ 1,677 $ 1,661 Depreciation , amortization and accretion accretion ( b ) $ 163 $ 146 $ 108 Segment b ) $ 163 $ 146 $ 108 Segment asset ( $ 163 $ 146 $ 108 Segment asset ( b ) asset ( b ) $ 1,829 $ 1,344 $ 1,139 ( b ) $ 1,829 $ 1,344 $ 1,139 ( a ) $ 1,829 $ 1,344 $ 1,139 ( a ) The Americas the three year ended September 25 , 2010 is a follows year ended September 25 , 2010 is a follows ( in ( in million ) : 2010 2009 2008 Segment operating income in million ) : 2010 2009 2008 Segment operating income $ million ) : 2010 2009 2008 Segment operating income $ 22,971 2008 Segment operating income $ 22,971 $ 14,692 $ 10,881 Other operating income $ 22,971 $ 14,692 $ 10,881 Other corporate expense $ 22,971 $ 14,692 $ 10,881 Other corporate expense , net net ( a ) ( 3,707 ) ( 2,242 ) ( ) ( 3,707 ) ( 2,242 ) ( 2,038 ) Stock-based ) ( 2,242 ) ( 2,038 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 879 ) ( 710 ) ( expense ( 879 ) ( 710 ) ( 516 ) Total ) ( 710 ) ( 516 ) Total operating income $ ) Total operating income $ 18,385 $ 11,740 $ 8,327 Segment operating income $ 18,385 $ 11,740 $ 8,327 Segment asset $ $ 18,385 $ 11,740 $ 8,327 Segment asset $ 9,177 $ $ 8,327 Segment asset $ 9,177 $ 5,604 $ 4,563 Corporate Segment asset $ 9,177 $ 5,604 $ 4,563 Corporate asset 66,006 $ 9,177 $ 5,604 $ 4,563 Corporate asset 66,006 41,897 31,608 5,604 $ 4,563 Corporate asset 66,006 41,897 31,608 Consolidated asset $ $ 4,563 Corporate asset 66,006 41,897 31,608 Consolidated asset $ 75,183 4,563 Corporate asset 66,006 41,897 31,608 Consolidated asset $ 75,183 $ 41,897 31,608 Consolidated asset $ 75,183 $ 47,501 $ 36,171 Segment Consolidated asset $ 75,183 $ 47,501 $ 36,171 Segment depreciation , $ 75,183 $ 47,501 $ 36,171 Segment depreciation , amortization and , amortization and accretion $ 190 $ 170 $ 129 Corporate and accretion $ 190 $ 170 $ 129 Corporate depreciation , $ 190 $ 170 $ 129 Corporate depreciation , amortization and depreciation , amortization and accretion 837 564 367 Consolidated depreciation , , amortization and accretion 837 564 367 Consolidated depreciation , amortization amortization and accretion 837 564 367 Consolidated depreciation , amortization and , amortization and accretion $ 1,027 $ 734 $ 496 80 and accretion $ 1,027 $ 734 $ 496 80 Table of $ 1,027 $ 734 $ 496 80 Table of Contents ( 1,027 $ 734 $ 496 80 Table of Contents ( a U.S. accounted for more than 10 % of net sale in % of net sale in 2010 , 2009 or 2008 . net sale in 2010 , 2009 or 2008 . One of in 2010 , 2009 or 2008 . One of the Company ’ s customer accounted for 11 % of net sale in % of net sale in 2009 ; there wa no single that accounted for more than 10 % of net sale in % of net sale in 2010 or 2008 . Net sale net sale in 2010 or 2008 . Net sale and long-lived the three year ended September 25 , 2010 , are a year ended September 25 , 2010 , are a follows ( ( in million ) : 2010 2009 2008 Net sale : in million ) : 2010 2009 2008 Net sale : U.S. million ) : 2010 2009 2008 Net sale : U.S. $ Net sale : U.S. $ 28,633 $ 22,325 $ 20,893 International : U.S. $ 28,633 $ 22,325 $ 20,893 International 36,592 20,580 $ 28,633 $ 22,325 $ 20,893 International 36,592 20,580 16,598 Total $ 22,325 $ 20,893 International 36,592 20,580 16,598 Total net sale 22,325 $ 20,893 International 36,592 20,580 16,598 Total net sale $ $ 20,893 International 36,592 20,580 16,598 Total net sale $ 65,225 16,598 Total net sale $ 65,225 $ 42,905 $ 37,491 Long-lived net sale $ 65,225 $ 42,905 $ 37,491 Long-lived asset : $ 65,225 $ 42,905 $ 37,491 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 4,292 $ 2,698 $ 2,269 International : U.S. $ 4,292 $ 2,698 $ 2,269 International 710 495 $ 4,292 $ 2,698 $ 2,269 International 710 495 410 Total $ 2,698 $ 2,269 International 710 495 410 Total long-lived asset 2,698 $ 2,269 International 710 495 410 Total long-lived asset $ $ 2,269 International 710 495 410 Total long-lived asset $ 5,002 410 Total long-lived asset $ 5,002 $ 3,193 $ 2,679 Information long-lived asset $ 5,002 $ 3,193 $ 2,679 Information regarding net $ 5,002 $ 3,193 $ 2,679 Information regarding net sale by the three year ended September 25 , 2010 , is a year ended September 25 , 2010 , is a follows ( ( in million ) : 2010 2009 2008 Desktops ( a in million ) : 2010 2009 2008 Desktops ( a ) million ) : 2010 2009 2008 Desktops ( a ) $ Desktops ( a ) $ 6,201 $ 4,324 $ 5,622 Portables a ) $ 6,201 $ 4,324 $ 5,622 Portables ( b $ 6,201 $ 4,324 $ 5,622 Portables ( b ) 11,278 5,622 Portables ( b ) 11,278 9,535 8,732 Total Mac net Portables ( b ) 11,278 9,535 8,732 Total Mac net sale ( b ) 11,278 9,535 8,732 Total Mac net sale 17,479 8,732 Total Mac net sale 17,479 13,859 14,354 iPod 8,274 8,091 Total Mac net sale 17,479 13,859 14,354 iPod 8,274 8,091 9,153 Mac net sale 17,479 13,859 14,354 iPod 8,274 8,091 9,153 Other sale 17,479 13,859 14,354 iPod 8,274 8,091 9,153 Other music related 17,479 13,859 14,354 iPod 8,274 8,091 9,153 Other music related product 13,859 14,354 iPod 8,274 8,091 9,153 Other music related product and and service ( c ) 4,948 4,036 3,340 iPhone and related service ( c ) 4,948 4,036 3,340 iPhone and related product ( c ) 4,948 4,036 3,340 iPhone and related product and and service ( d ) 25,179 13,033 6,742 iPad and related service ( d ) 25,179 13,033 6,742 iPad and related product ( d ) 25,179 13,033 6,742 iPad and related product and and service ( e ) 4,958 0 0 Peripherals and other service ( e ) 4,958 0 0 Peripherals and other hardware ( e ) 4,958 0 0 Peripherals and other hardware ( other hardware ( f ) 1,814 1,475 1,694 Software , service hardware ( f ) 1,814 1,475 1,694 Software , service and ( f ) 1,814 1,475 1,694 Software , service and other net sale ( g ) 2,573 2,411 2,208 Total net sale sale ( g ) 2,573 2,411 2,208 Total net sale $ ( g ) 2,573 2,411 2,208 Total net sale $ 65,225 2,208 Total net sale $ 65,225 $ 42,905 $ 37,491 ( net sale $ 65,225 $ 42,905 $ 37,491 ( a ) $ 65,225 $ 42,905 $ 37,491 ( a ) Includes iMac and Internet service . Note 10 – Related Party Transactions and a total of approximately $ 248,000 , $ 4,000 and $ approximately $ 248,000 , $ 4,000 and $ 871,000 in expense , $ 4,000 and $ 871,000 in expense pursuant to the expense pursuant to the Reimbursement 81 Table of Contents Agreement during Table of Contents Agreement during 2010 , 2009 and 2008 , Contents Agreement during 2010 , 2009 and 2008 , respectively . during 2010 , 2009 and 2008 , respectively . All expense Statements of Operations . Note 11 – Selected Quarterly Financial Information the four quarter ended September 25 , 2010 and September 26 quarter ended September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 ( in million 2010 and September 26 , 2009 ( in million , except Quarter Second Quarter First Quarter 2010 Net sale $ 20,343 $ Quarter 2010 Net sale $ 20,343 $ 15,700 $ 13,499 $ Net sale $ 20,343 $ 15,700 $ 13,499 $ 15,683 Gross $ 20,343 $ 15,700 $ 13,499 $ 15,683 Gross margin $ $ 15,700 $ 13,499 $ 15,683 Gross margin $ 7,512 $ $ 15,683 Gross margin $ 7,512 $ 6,136 $ 5,625 $ Gross margin $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.67 2009 $ 4.64 $ 3.51 $ 3.33 $ 3.67 2009 Net sale $ 3.51 $ 3.33 $ 3.67 2009 Net sale $ 12,207 3.51 $ 3.33 $ 3.67 2009 Net sale $ 12,207 $ 3.67 2009 Net sale $ 12,207 $ 9,734 $ 9,084 $ Net sale $ 12,207 $ 9,734 $ 9,084 $ 11,880 Gross $ 12,207 $ 9,734 $ 9,084 $ 11,880 Gross margin $ $ 9,734 $ 9,084 $ 11,880 Gross margin $ 5,105 $ $ 11,880 Gross margin $ 5,105 $ 3,983 $ 3,627 $ Gross margin $ 5,105 $ 3,983 $ 3,627 $ 4,507 Net $ 5,105 $ 3,983 $ 3,627 $ 4,507 Net income $ $ 3,983 $ 3,627 $ 4,507 Net income $ 2,532 $ $ 4,507 Net income $ 2,532 $ 1,828 $ 1,620 $ Net income $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings $ 2,532 $ 1,828 $ 1,620 $ 2,255 Earnings per common $ 1,828 $ 1,620 $ 2,255 Earnings per common share : common share : Basic $ 2.82 $ 2.05 $ 1.82 $ : Basic $ 2.82 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.82 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.77 $ 2.05 $ 1.82 $ 2.54 Diluted $ 2.77 $ 2.01 1.82 $ 2.54 Diluted $ 2.77 $ 2.01 $ 1.79 $ 2.54 Diluted $ 2.77 $ 2.01 $ 1.79 $ 2.50 Basic $ 2.77 $ 2.01 $ 1.79 $ 2.50 Basic and diluted $ 2.01 $ 1.79 $ 2.50 Basic and diluted earnings per diluted earnings per share . 82 Table of Contents Report of Apple Inc. a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , and the 2010 and September 26 , 2009 , and the related consolidated of Apple Inc. at September 25 , 2010 and September 26 Inc. at September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , and the 2010 and September 26 , 2009 , and the consolidated result financial reporting a of September 25 , 2010 , based on a of September 25 , 2010 , based on criterion established and our report dated October 27 , 2010 expressed an unqualified report dated October 27 , 2010 expressed an unqualified opinion thereon San Jose , California October 27 , 2010 83 Table of , California October 27 , 2010 83 Table of Contents Report California October 27 , 2010 83 Table of Contents Report of financial reporting a of September 25 , 2010 , based on a of September 25 , 2010 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 25 , 2010 , based on a of September 25 , 2010 , based on the COSO United States ) , the 2010 consolidated financial statement of Apple and our report dated October 27 , 2010 expressed an unqualified report dated October 27 , 2010 expressed an unqualified opinion thereon San Jose , California October 27 , 2010 84 Table of , California October 27 , 2010 84 Table of Contents Report California October 27 , 2010 84 Table of Contents Report of for the year ended September 27 , 2008 . These consolidated year ended September 27 , 2008 . These consolidated financial statement for the year ended September 27 , 2008 in conformity with year ended September 27 , 2008 in conformity with U.S. generally . As discussed in note 1 , the consolidated financial statement for the year ended September 27 , 2008 have been restated year ended September 27 , 2008 have been restated to give Mountain View , California November 4 , 2008 , except a , California November 4 , 2008 , except a to note , except a to note 1 , which is a of which is a of January 25 , 2010 85 Table of a of January 25 , 2010 85 Table of Contents Item of January 25 , 2010 85 Table of Contents Item 9 85 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 25 , 2010 to provide reasonable a of September 25 , 2010 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the wa effective a of September 25 , 2010 to provide reasonable a of September 25 , 2010 to provide reasonable assurance regarding financial reporting appears on page 84 of this Form 10-K. 86 page 84 of this Form 10-K. 86 Table of Contents Changes 84 of this Form 10-K. 86 Table of Contents Changes in the fourth quarter of fiscal 2010 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable Other Information Not applicable . 87 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers in the Company ’ s 2011 Proxy Statement to be filed for the Company ’ s 2011 Annual Meeting of Shareholders ( Meeting of Shareholders ( “ 2011 Proxy Statement ” ) and filed with the SEC within 120 day after the end of this report relates . Item 11 . Executive Compensation The information in the Company ’ s 2011 Proxy Statement and is incorporated herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2011 Proxy Statement and is incorporated herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2011 Proxy Statement and is incorporated herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2011 Proxy Statement and is incorporated incorporated herein by reference . 88 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index the three year ended September 25 , 2010 46 Consolidated Balance year ended September 25 , 2010 46 Consolidated Balance Sheets a ended September 25 , 2010 46 Consolidated Balance Sheets a of Balance Sheets a of September 25 , 2010 and September 26 a of September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 47 Consolidated Statements 2010 and September 26 , 2009 47 Consolidated Statements of Shareholders and September 26 , 2009 47 Consolidated Statements of Shareholders ’ the three year ended September 25 , 2010 48 Consolidated Statements year ended September 25 , 2010 48 Consolidated Statements of Cash ended September 25 , 2010 48 Consolidated Statements of Cash Flows the three year ended September 25 , 2010 49 Notes to year ended September 25 , 2010 49 Notes to Consolidated Financial ended September 25 , 2010 49 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 50 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 82 Reports of Ernst & Young Independent Registered Public Accounting Firm 83 Report of KPMG LLP , Independent Registered Public Accounting Firm 85 ( 2 ) Financial Statement Public Accounting Firm 85 ( 2 ) Financial Statement Schedules All ) Exhibits required by Item 601 of Regulation S-K The information page of this report . 89 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 27th day of October 2010 . this 27th day of October 2010 . APPLE INC. By : this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 27 , 2010 /s/ Peter Oppenheimer Officer ) October 27 , 2010 /s/ Peter Oppenheimer PETER OPPENHEIMER Principal Financial Officer ) October 27 , 2010 /s/ Betsy Rafael Officer ) October 27 , 2010 /s/ Betsy Rafael BETSY RAFAEL Principal Accounting Officer ) October 27 , 2010 /s/ William V. Officer ) October 27 , 2010 /s/ William V. Campbell WILLIAM WILLIAM V. CAMPBELL Director October 27 , 2010 /s/ Millard S. CAMPBELL Director October 27 , 2010 /s/ Millard S. Drexler MILLARD MILLARD S. DREXLER Director October 27 , 2010 /s/ Albert Gore DREXLER Director October 27 , 2010 /s/ Albert Gore , Jr. GORE , JR. Director October 27 , 2010 /s/ Andrea Jung JR. Director October 27 , 2010 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 27 , 2010 /s/ Arthur D. JUNG Director October 27 , 2010 /s/ Arthur D. Levinson ARTHUR ARTHUR D. LEVINSON Director October 27 , 2010 90 Table of LEVINSON Director October 27 , 2010 90 Table of Contents EXHIBIT Director October 27 , 2010 90 Table of Contents EXHIBIT INDEX Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on July 10 , 2009 . 10-Q 6/27/09 California on July 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws July 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws of the 10 , 2009 . 10-Q 6/27/09 3.2 By-Laws of the Registrant , 2009 . 10-Q 6/27/09 3.2 By-Laws of the Registrant , , a amended through May 27 , 2009 . 8-K 6/2/09 amended through May 27 , 2009 . 8-K 6/2/09 4.1 Form May 27 , 2009 . 8-K 6/2/09 4.1 Form of Stock 27 , 2009 . 8-K 6/2/09 4.1 Form of Stock Certificate , 2009 . 8-K 6/2/09 4.1 Form of Stock Certificate of Certificate of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase Plan , a amended through March 8 , 2010 . 10-Q 3/27/10 amended through March 8 , 2010 . 10-Q 3/27/10 10.2 * March 8 , 2010 . 10-Q 3/27/10 10.2 * Form of 8 , 2010 . 10-Q 3/27/10 10.2 * Form of Indemnification , 2010 . 10-Q 3/27/10 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee of the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee Stock the Registrant . 10-Q 6/27/09 10.3 * 1997 Employee Stock Option . 10-Q 6/27/09 10.3 * 1997 Employee Stock Option Plan , , a amended through October 19 , 2001 . 10-K 9/28/02 amended through October 19 , 2001 . 10-K 9/28/02 10.4 * October 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director 19 , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock , 2001 . 10-K 9/28/02 10.4 * 1997 Director Stock Plan . 10-K 9/28/02 10.4 * 1997 Director Stock Plan , a , a amended through February 25 , 2010 . 8-K 3/1/10 amended through February 25 , 2010 . 8-K 3/1/10 10.5 * February 25 , 2010 . 8-K 3/1/10 10.5 * 2003 Employee 25 , 2010 . 8-K 3/1/10 10.5 * 2003 Employee Stock , 2010 . 8-K 3/1/10 10.5 * 2003 Employee Stock Plan . 8-K 3/1/10 10.5 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 3/1/10 amended through February 25 , 2010 . 8-K 3/1/10 10.6 * February 25 , 2010 . 8-K 3/1/10 10.6 * Reimbursement Agreement 25 , 2010 . 8-K 3/1/10 10.6 * Reimbursement Agreement dated , 2010 . 8-K 3/1/10 10.6 * Reimbursement Agreement dated a Agreement dated a of May 25 , 2001 by and between a of May 25 , 2001 by and between the Registrant and Steven P. Jobs . 10-Q 6/29/02 10.7 * Form of Steven P. Jobs . 10-Q 6/29/02 10.7 * Form of Option P. Jobs . 10-Q 6/29/02 10.7 * Form of Option Agreement Form of Option Agreement . 10-K 9/24/05 10.8 * Form of of Option Agreement . 10-K 9/24/05 10.8 * Form of Restricted Option Agreement . 10-K 9/24/05 10.8 * Form of Restricted Stock Agreement effective a of August 28 , 2007 . 10-K 9/29/07 a of August 28 , 2007 . 10-K 9/29/07 10.9 * August 28 , 2007 . 10-K 9/29/07 10.9 * Form of 28 , 2007 . 10-K 9/29/07 10.9 * Form of Restricted , 2007 . 10-K 9/29/07 10.9 * Form of Restricted Stock Agreement effective a of November 11 , 2008 . 10-Q 12/27/08 a of November 11 , 2008 . 10-Q 12/27/08 14.1 * November 11 , 2008 . 10-Q 12/27/08 14.1 * * Business 11 , 2008 . 10-Q 12/27/08 14.1 * * Business Conduct , 2008 . 10-Q 12/27/08 14.1 * * Business Conduct Policy of the Registrant dated July 2010 . 21.1 * * Subsidiaries Registrant dated July 2010 . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 23.2 * * Consent of KPMG Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * * * XBRL * * XBRL Instance Document 101.SCH * * * * XBRL XBRL Taxonomy Extension Schema Document 101.CAL * * * * XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * * * * XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * * * * XBRL Taxonomy Extension Label Linkbase Document 101.PRE * * * * XBRL Taxonomy Extension Presentation Linkbase Document 91 Table of Contents * Indicates that , pursuant to Rule 406T , these interactive data file not subject to liability . 92 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-11-282113/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-11-282113/full-submission.txt new file mode 100644 index 0000000..c1d0d4e --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-11-282113/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 24 , 2011 Or ¨ TRANSITION year ended September 24 , 2011 Or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 25 , 2011 , the last a of March 25 , 2011 , the last business day quarter , wa approximately $ 322,921,000,000 based upon the closing price person who hold more than 5 % of the outstanding share determination for other purpose . 929,409,000 share of Common Stock Issued and Outstanding a of October 14 , 2011 DOCUMENTS INCORPORATED BY a of October 14 , 2011 DOCUMENTS INCORPORATED BY REFERENCE ( DOCUMENTS INCORPORATED BY REFERENCE ( 1 ) Portions of the registrant Proxy Statement relating to it 2012 Annual Meeting of Shareholders are this Annual Report on Form 10-K where indicated . Such Proxy Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement under Part I , Item 1A of this Form 10-K , Item 1A of this Form 10-K , which are incorporated herein law . PART I Item 1. Business Company Background Apple Inc. s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company a California corporation established in 1977. Business Strategy The Company is touch ® . In January 2011 , the Company opened the and post-sales support experience . 1 Consumer and Small and Mid-Sized in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in Notes to Consolidated Financial Consolidated Financial Statements in Note 8 , “ Segment Information and and Geographic Data . ” 2 Products The Company offer a and application . In October 2011 , the Company launched iPhone , the Company launched iPhone 4S , it latest version of and application . In March 2011 , the Company introduced iPad , the Company introduced iPad 2 , it second-generation iPad . or from third party . 3 The iPod touch , based and Windows-based computer . iTunes 10 is the latest version of Mac App Store In January 2011 , the Company opened the Store . iCloud In October 2011 , the Company launched iCloud using a device running iOS 5 or a Mac running Mac iOS device . In October 2011 , the Company released iOS , the Company released iOS 5 , which support iCloud and newspaper and magazine subscription . 4 Mac OS X Mac OS and became available in July 2011 . Mac OS X Lion Application Software iLife iLife ’ 11 is the latest version of tool . iWork iWork ’ 09 is the latest version of and spreadsheet . iWork ’ 09 includes Pages ® ’ 09 09 includes Pages ® ’ 09 for word processing and page layout , Keynote ® ’ 09 for presentation , and Numbers , and Numbers ® ’ 09 for spreadsheet . The Company ® , Logic ® Express 9 , Logic Studio ® Pro release of iCloud in October 2011 , content purchased on Apple dedicated web-based support resource . 5 Markets and Distribution The Company customer accounted for more than 10 % of net sale in % of net sale in 2011 or 2010 . One of net sale in 2011 or 2010 . One of the Company ’ s customer accounted for 11 % of net sale in % of net sale in 2009 . Competition The market for market it competes in . 6 Supply of Components Although most requirement for period up to 150 day . Research and Development and development expense wa $ 2.4 billion , $ 1.8 billion $ 2.4 billion , $ 1.8 billion and $ 1.3 billion $ 1.8 billion and $ 1.3 billion in 2011 , 2010 and $ 1.3 billion in 2011 , 2010 and 2009 , 1.3 billion in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . Patents , ability of it personnel . 7 The Company regularly file patent largest geographic market . Approximately 39 % of the Company ’ ’ s net sale in 2011 came from sale to customer in Part II , Item 7 and Item 8 of this , Item 7 and Item 8 of this Form 10-K and Item 8 of this Form 10-K and in Notes to Consolidated Consolidated Financial Statements in Note 8 , “ Segment Information and The Company also offer a 90-day basic warranty for it service is often reduced once customer 8 believe they can obtain sufficient . Employees As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had approximately , the Company had approximately 60,400 full-time equivalent employee and an equivalent employee and an additional 2,900 full-time equivalent temporary employee and s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( “ s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of ; cash balance ; and 9 change in fair value of functional and design advantage . 10 There can be no assurance requirement for period up to 150 day . Because the Company affect the Company ’ s 11 financial condition and operating result compared to level achieved during 2011 , largely due to a difficult or impossible for the 12 Company to license their content condition and operating result . 13 With respect to it Mac Company ’ s product . 14 The Company ’ s Retail and infringement , tax , 15 import and export requirement , be materially adversely affected . 16 Please also refer to the risk related to the March 11 , 2011 , Japan earthquake to the March 11 , 2011 , Japan earthquake and tsunami in Part II , Item 7 , “ Management ’ s passed new law in this 17 area , and other jurisdiction comply with these law and 18 regulation , a violation by trade receivables a of September 24 , 2011 . The 19 a of September 24 , 2011 . The 19 Company also 24 , 2011 . The 19 Company also ha unsecured vendor non-trade receivables a of September 24 , 2011 . In addition a of September 24 , 2011 . In addition , the and operating result . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company owned or Company owned or leased approximately 13.2 million square foot of building . Of that amount approximately 7.0 million square foot wa leased space , which includes approximately 3.0 million square foot related to owned building space , approximately 2.6 million square foot that is Company owns a total of 584 acre of land in various location . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company owned a owned facility for research and 20 development and corporate function in for it product . Item 3 . Legal Proceedings As of Legal Proceedings As of September 24 , 2011 , the end As of September 24 , 2011 , the end of the in Part I , Item 1A of this Annual Report on this Annual Report on Form 10-K under the heading “ Risk during the fourth quarter of 2011 that did not individually or attorney fee . On July 8 , 2010 the Court granted . On July 8 , 2010 the Court granted in part have been filed on January 3 , 2005 , July 21 filed on January 3 , 2005 , July 21 , 2006 3 , 2005 , July 21 , 2006 and December 31 2005 , July 21 , 2006 and December 31 , 2007 21 , 2006 and December 31 , 2007 in the United 2006 and December 31 , 2007 in the United States District market power under §§1 and 2 of the Sherman Act , case are currently pending . 21 PART II Item 5 . . 21 PART II Item 5 . Market for Registrant ’ Second Quarter First Quarter Fiscal 2011 price range per common share range per common share $ 422.86 - $ 327.25 $ 355.13 share $ 422.86 - $ 327.25 $ 355.13 - $ 310.50 422.86 - $ 327.25 $ 355.13 - $ 310.50 $ 364.90 327.25 $ 355.13 - $ 310.50 $ 364.90 - $ 321.31 355.13 - $ 310.50 $ 364.90 - $ 321.31 $ 325.72 310.50 $ 364.90 - $ 321.31 $ 325.72 - $ 275.00 364.90 - $ 321.31 $ 325.72 - $ 275.00 Fiscal 2010 321.31 $ 325.72 - $ 275.00 Fiscal 2010 price range per 325.72 - $ 275.00 Fiscal 2010 price range per common share range per common share $ 293.53 - $ 235.56 $ 279.01 share $ 293.53 - $ 235.56 $ 279.01 - $ 199.25 293.53 - $ 235.56 $ 279.01 - $ 199.25 $ 231.95 235.56 $ 279.01 - $ 199.25 $ 231.95 - $ 190.25 279.01 - $ 199.25 $ 231.95 - $ 190.25 $ 209.35 199.25 $ 231.95 - $ 190.25 $ 209.35 - $ 180.70 231.95 - $ 190.25 $ 209.35 - $ 180.70 Holders As 190.25 $ 209.35 - $ 180.70 Holders As of October 14 180.70 Holders As of October 14 , 2011 , there were As of October 14 , 2011 , there were 28,543 shareholder , 2011 , there were 28,543 shareholder of record . Dividends pay cash dividend in either 2011 or 2010 . The Company dividend in either 2011 or 2010 . The Company anticipates that and Affiliated Purchasers None . 22 Company Stock Performance The following , the S & P 500 Composite Index , the S . The graph assumes $ 100 wa invested in each of , the S & P 500 Composite Index , the S U.S. Technology Index on September 30 , 2006 . Data point Index on September 30 , 2006 . Data point on the stock price performance . September 30 , 2006 September 30 , performance . September 30 , 2006 September 30 , 2007 September September 30 , 2006 September 30 , 2007 September 30 , , 2006 September 30 , 2007 September 30 , 2008 September September 30 , 2007 September 30 , 2008 September 30 , , 2007 September 30 , 2008 September 30 , 2009 September September 30 , 2008 September 30 , 2009 September 30 , , 2008 September 30 , 2009 September 30 , 2010 September September 30 , 2009 September 30 , 2010 September 30 , , 2009 September 30 , 2010 September 30 , 2011 Apple September 30 , 2010 September 30 , 2011 Apple Inc. $ , 2010 September 30 , 2011 Apple Inc. $ 100 $ , 2011 Apple Inc. $ 100 $ 199 $ 148 $ Apple Inc. $ 100 $ 199 $ 148 $ 241 $ $ 100 $ 199 $ 148 $ 241 $ 369 $ $ 199 $ 148 $ 241 $ 369 $ 495 S $ 148 $ 241 $ 369 $ 495 S & P $ 241 $ 369 $ 495 S & P 500 $ $ 495 S & P 500 $ 100 $ 116 $ S & P 500 $ 100 $ 116 $ 91 $ P 500 $ 100 $ 116 $ 91 $ 85 $ $ 100 $ 116 $ 91 $ 85 $ 93 $ $ 116 $ 91 $ 85 $ 93 $ 94 S $ 91 $ 85 $ 93 $ 94 S & P $ 85 $ 93 $ 94 S & P Computer Hardware & P Computer Hardware $ 100 $ 148 $ 124 $ Computer Hardware $ 100 $ 148 $ 124 $ 147 $ $ 100 $ 148 $ 124 $ 147 $ 174 $ $ 148 $ 124 $ 147 $ 174 $ 197 Dow $ 124 $ 147 $ 174 $ 197 Dow Jones US $ 147 $ 174 $ 197 Dow Jones US Technology $ Dow Jones US Technology $ 100 $ 123 $ 94 $ US Technology $ 100 $ 123 $ 94 $ 104 $ $ 100 $ 123 $ 94 $ 104 $ 117 $ $ 123 $ 94 $ 104 $ 117 $ 120 23 $ 94 $ 104 $ 117 $ 120 23 Item 6 $ 104 $ 117 $ 120 23 Item 6 . Selected 104 $ 117 $ 120 23 Item 6 . Selected Financial 117 $ 120 23 Item 6 . Selected Financial Data The the five year ended September 24 , 2011 , is not year ended September 24 , 2011 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s note thereto included in Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2011 2010 2009 2008 2007 Net share amount ) . 2011 2010 2009 2008 2007 Net sale amount ) . 2011 2010 2009 2008 2007 Net sale $ ) . 2011 2010 2009 2008 2007 Net sale $ 108,249 . 2011 2010 2009 2008 2007 Net sale $ 108,249 $ 2008 2007 Net sale $ 108,249 $ 65,225 $ 42,905 $ Net sale $ 108,249 $ 65,225 $ 42,905 $ 37,491 $ $ 108,249 $ 65,225 $ 42,905 $ 37,491 $ 24,578 Net $ 65,225 $ 42,905 $ 37,491 $ 24,578 Net income $ $ 42,905 $ 37,491 $ 24,578 Net income $ 25,922 $ $ 24,578 Net income $ 25,922 $ 14,013 $ 8,235 $ Net income $ 25,922 $ 14,013 $ 8,235 $ 6,119 $ $ 25,922 $ 14,013 $ 8,235 $ 6,119 $ 3,495 Earnings $ 14,013 $ 8,235 $ 6,119 $ 3,495 Earnings per common $ 8,235 $ 6,119 $ 3,495 Earnings per common share : common share : Basic $ 28.05 $ 15.41 $ 9.22 $ : Basic $ 28.05 $ 15.41 $ 9.22 $ 6.94 $ $ 28.05 $ 15.41 $ 9.22 $ 6.94 $ 4.04 Diluted $ 15.41 $ 9.22 $ 6.94 $ 4.04 Diluted $ 27.68 $ 9.22 $ 6.94 $ 4.04 Diluted $ 27.68 $ 15.15 6.94 $ 4.04 Diluted $ 27.68 $ 15.15 $ 9.08 $ 4.04 Diluted $ 27.68 $ 15.15 $ 9.08 $ 6.78 $ $ 27.68 $ 15.15 $ 9.08 $ 6.78 $ 3.93 Cash $ 15.15 $ 9.08 $ 6.78 $ 3.93 Cash dividend declared $ 9.08 $ 6.78 $ 3.93 Cash dividend declared per common declared per common share $ 0 $ 0 $ 0 $ common share $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 Shares $ 0 $ 0 $ 0 $ 0 Shares used in $ 0 $ 0 $ 0 Shares used in computing earnings earnings per share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted per share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 share : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 : Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 Basic 924,258 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 909,461 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 889,292 Total 893,016 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 889,292 Total cash 881,592 864,595 Diluted 936,645 924,712 907,005 902,139 889,292 Total cash , 864,595 Diluted 936,645 924,712 907,005 902,139 889,292 Total cash , cash Diluted 936,645 924,712 907,005 902,139 889,292 Total cash , cash equivalent equivalent and marketable security $ 81,570 $ 51,011 $ 33,992 $ marketable security $ 81,570 $ 51,011 $ 33,992 $ 24,490 $ $ 81,570 $ 51,011 $ 33,992 $ 24,490 $ 15,386 Total $ 51,011 $ 33,992 $ 24,490 $ 15,386 Total asset $ $ 33,992 $ 24,490 $ 15,386 Total asset $ 116,371 $ $ 15,386 Total asset $ 116,371 $ 75,183 $ 47,501 $ Total asset $ 116,371 $ 75,183 $ 47,501 $ 36,171 $ $ 116,371 $ 75,183 $ 47,501 $ 36,171 $ 24,878 Total $ 75,183 $ 47,501 $ 36,171 $ 24,878 Total long-term obligation $ 47,501 $ 36,171 $ 24,878 Total long-term obligation ( a obligation ( a ) $ 10,100 $ 5,531 $ 3,502 $ a ) $ 10,100 $ 5,531 $ 3,502 $ 1,745 $ $ 10,100 $ 5,531 $ 3,502 $ 1,745 $ 687 Total $ 5,531 $ 3,502 $ 1,745 $ 687 Total liability $ $ 3,502 $ 1,745 $ 687 Total liability $ 39,756 $ $ 687 Total liability $ 39,756 $ 27,392 $ 15,861 $ Total liability $ 39,756 $ 27,392 $ 15,861 $ 13,874 $ $ 39,756 $ 27,392 $ 15,861 $ 13,874 $ 10,347 Total $ 27,392 $ 15,861 $ 13,874 $ 10,347 Total shareholder ’ $ 15,861 $ 13,874 $ 10,347 Total shareholder ’ equity $ Total shareholder ’ equity $ 76,615 $ 47,791 $ 31,640 $ ’ equity $ 76,615 $ 47,791 $ 31,640 $ 22,297 $ $ 76,615 $ 47,791 $ 31,640 $ 22,297 $ 14,531 ( $ 47,791 $ 31,640 $ 22,297 $ 14,531 ( a ) $ 31,640 $ 22,297 $ 14,531 ( a ) The Company the five year ended September 24 , 2011 . Long-term obligation year ended September 24 , 2011 . Long-term obligation exclude non-current exclude non-current deferred revenue . 24 Item 7 . Management ’ deferred revenue . 24 Item 7 . Management ’ s Discussion other part of this Form 10-K contain forward-looking statement that involve note thereto included in Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is iPod touch . In January 2011 , the Company opened the software and online service . 25 The Company us a variety and Thailand Flooding On March 11 , 2011 , the northeast Flooding On March 11 , 2011 , the northeast coast of in the first quarter of 2012 unless condition worsen , including Beyond the first quarter of 2012 , uncertainty exists with respect in the first quarter of 2012 ; however , because the and accompanying note . Note 1 , “ Summary of Significant Financial Statements in this Form 10-K describes the significant accounting policy difference may be material . 26 Management belief the Company ’ iPod touch beginning in June 2010 , and for sale of of Mac beginning in June 2011 , the Company ha indicated to customer . In June 2011 , the Company announced it device , which range from 24 to 48 month . The which range from 24 to 48 month . The Company ’ right would also change . 27 The Company record reduction to requirement for period up to 150 day . If there is Company may be required to 28 record additional accrual for cancellation that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal Proceedings ” and in Note 7 , “ Commitments and Contingencies be materially adversely affected . 29 Net Sales Fiscal year 2011 29 Net Sales Fiscal year 2011 , 2010 and 2009 each Sales Fiscal year 2011 , 2010 and 2009 each spanned 52 year 2011 , 2010 and 2009 each spanned 52 week . 2010 and 2009 each spanned 52 week . An additional week calendar quarter . Fiscal year 2012 will end on September 29 2012 will end on September 29 , 2012 and will span end on September 29 , 2012 and will span 53 week , 2012 and will span 53 week , with a 14th 53 week , with a 14th week added to the first to the first quarter of 2012 . The following table summarizes the three year ended September 24 , 2011 ( in million year ended September 24 , 2011 ( in million , except per unit amount ) : 2011 Change 2010 Change 2009 Net amount ) : 2011 Change 2010 Change 2009 Net Sales by : 2011 Change 2010 Change 2009 Net Sales by Operating Segment : Americas net sale $ 38,315 56 % $ 24,498 29 Americas net sale $ 38,315 56 % $ 24,498 29 % $ 38,315 56 % $ 24,498 29 % $ 18,981 Europe 38,315 56 % $ 24,498 29 % $ 18,981 Europe net $ 24,498 29 % $ 18,981 Europe net sale 27,778 49 $ 18,981 Europe net sale 27,778 49 % 18,692 58 % 18,981 Europe net sale 27,778 49 % 18,692 58 % 11,810 net sale 27,778 49 % 18,692 58 % 11,810 Japan net sale 27,778 49 % 18,692 58 % 11,810 Japan net sale 49 % 18,692 58 % 11,810 Japan net sale 5,437 37 % 11,810 Japan net sale 5,437 37 % 3,981 75 % 11,810 Japan net sale 5,437 37 % 3,981 75 % 2,279 net sale 5,437 37 % 3,981 75 % 2,279 Asia-Pacific net sale 5,437 37 % 3,981 75 % 2,279 Asia-Pacific net sale 37 % 3,981 75 % 2,279 Asia-Pacific net sale 22,592 174 % 2,279 Asia-Pacific net sale 22,592 174 % 8,256 160 % 2,279 Asia-Pacific net sale 22,592 174 % 8,256 160 % 3,179 net sale 22,592 174 % 8,256 160 % 3,179 Retail net sale 22,592 174 % 8,256 160 % 3,179 Retail net sale 174 % 8,256 160 % 3,179 Retail net sale 14,127 44 % 3,179 Retail net sale 14,127 44 % 9,798 47 % 3,179 Retail net sale 14,127 44 % 9,798 47 % 6,656 net sale 14,127 44 % 9,798 47 % 6,656 Total net sale 14,127 44 % 9,798 47 % 6,656 Total net sale 44 % 9,798 47 % 6,656 Total net sale $ 108,249 6,656 Total net sale $ 108,249 66 % $ 65,225 52 Total net sale $ 108,249 66 % $ 65,225 52 % $ 108,249 66 % $ 65,225 52 % $ 42,905 Net 108,249 66 % $ 65,225 52 % $ 42,905 Net Sales $ 65,225 52 % $ 42,905 Net Sales by Product : Desktops ( a ) $ 6,439 4 % $ 6,201 43 ( a ) $ 6,439 4 % $ 6,201 43 % $ 6,439 4 % $ 6,201 43 % $ 4,324 Portables 6,439 4 % $ 6,201 43 % $ 4,324 Portables ( $ 6,201 43 % $ 4,324 Portables ( b ) 15,344 4,324 Portables ( b ) 15,344 36 % 11,278 18 % Portables ( b ) 15,344 36 % 11,278 18 % 9,535 b ) 15,344 36 % 11,278 18 % 9,535 Total Mac ) 15,344 36 % 11,278 18 % 9,535 Total Mac net 36 % 11,278 18 % 9,535 Total Mac net sale 21,783 9,535 Total Mac net sale 21,783 25 % 17,479 26 % Total Mac net sale 21,783 25 % 17,479 26 % 13,859 net sale 21,783 25 % 17,479 26 % 13,859 iPod 7,453 sale 21,783 25 % 17,479 26 % 13,859 iPod 7,453 ( 25 % 17,479 26 % 13,859 iPod 7,453 ( 10 ) 17,479 26 % 13,859 iPod 7,453 ( 10 ) % 8,274 % 13,859 iPod 7,453 ( 10 ) % 8,274 2 % 7,453 ( 10 ) % 8,274 2 % 8,091 Other music ( 10 ) % 8,274 2 % 8,091 Other music related ) % 8,274 2 % 8,091 Other music related product and and service ( c ) 6,314 28 % 4,948 23 % service ( c ) 6,314 28 % 4,948 23 % 4,036 c ) 6,314 28 % 4,948 23 % 4,036 iPhone and ) 6,314 28 % 4,948 23 % 4,036 iPhone and related 28 % 4,948 23 % 4,036 iPhone and related product and and service ( d ) 47,057 87 % 25,179 93 % service ( d ) 47,057 87 % 25,179 93 % 13,033 d ) 47,057 87 % 25,179 93 % 13,033 iPad and ) 47,057 87 % 25,179 93 % 13,033 iPad and related 87 % 25,179 93 % 13,033 iPad and related product and and service ( e ) 20,358 311 % 4,958 NM 0 service ( e ) 20,358 311 % 4,958 NM 0 Peripherals e ) 20,358 311 % 4,958 NM 0 Peripherals and other 20,358 311 % 4,958 NM 0 Peripherals and other hardware ( other hardware ( f ) 2,330 28 % 1,814 23 % hardware ( f ) 2,330 28 % 1,814 23 % 1,475 f ) 2,330 28 % 1,814 23 % 1,475 Software , ) 2,330 28 % 1,814 23 % 1,475 Software , service 28 % 1,814 23 % 1,475 Software , service and other other sale ( g ) 2,954 15 % 2,573 7 % sale ( g ) 2,954 15 % 2,573 7 % 2,411 g ) 2,954 15 % 2,573 7 % 2,411 Total net ) 2,954 15 % 2,573 7 % 2,411 Total net sale 15 % 2,573 7 % 2,411 Total net sale $ 108,249 2,411 Total net sale $ 108,249 66 % $ 65,225 52 Total net sale $ 108,249 66 % $ 65,225 52 % $ 108,249 66 % $ 65,225 52 % $ 42,905 Unit 108,249 66 % $ 65,225 52 % $ 42,905 Unit Sales $ 65,225 52 % $ 42,905 Unit Sales by Product : : Desktops ( a ) 4,669 1 % 4,627 45 % Desktops ( a ) 4,669 1 % 4,627 45 % 3,182 a ) 4,669 1 % 4,627 45 % 3,182 Portables ( ) 4,669 1 % 4,627 45 % 3,182 Portables ( b 1 % 4,627 45 % 3,182 Portables ( b ) 12,066 3,182 Portables ( b ) 12,066 34 % 9,035 25 % Portables ( b ) 12,066 34 % 9,035 25 % 7,214 b ) 12,066 34 % 9,035 25 % 7,214 Total Mac ) 12,066 34 % 9,035 25 % 7,214 Total Mac unit 34 % 9,035 25 % 7,214 Total Mac unit sale 16,735 7,214 Total Mac unit sale 16,735 22 % 13,662 31 % Total Mac unit sale 16,735 22 % 13,662 31 % 10,396 unit sale 16,735 22 % 13,662 31 % 10,396 iPod unit sale 16,735 22 % 13,662 31 % 10,396 iPod unit sale 22 % 13,662 31 % 10,396 iPod unit sale 42,620 ( % 10,396 iPod unit sale 42,620 ( 15 ) % 50,312 iPod unit sale 42,620 ( 15 ) % 50,312 ( 7 42,620 ( 15 ) % 50,312 ( 7 ) % 54,132 15 ) % 50,312 ( 7 ) % 54,132 iPhone unit 50,312 ( 7 ) % 54,132 iPhone unit sold 72,293 81 % 54,132 iPhone unit sold 72,293 81 % 39,989 93 % 54,132 iPhone unit sold 72,293 81 % 39,989 93 % 20,731 unit sold 72,293 81 % 39,989 93 % 20,731 iPad unit sold 72,293 81 % 39,989 93 % 20,731 iPad unit sold 81 % 39,989 93 % 20,731 iPad unit sold 32,394 334 % 20,731 iPad unit sold 32,394 334 % 7,458 NM 0 20,731 iPad unit sold 32,394 334 % 7,458 NM 0 ( unit sold 32,394 334 % 7,458 NM 0 ( a ) 32,394 334 % 7,458 NM 0 ( a ) Includes iMac . NM = Not Meaningful 30 Fiscal Year 2011 versus 2010 Not Meaningful 30 Fiscal Year 2011 versus 2010 Net sale during 30 Fiscal Year 2011 versus 2010 Net sale during 2011 increased versus 2010 Net sale during 2011 increased $ 43.0 billion or sale during 2011 increased $ 43.0 billion or 66 % compared increased $ 43.0 billion or 66 % compared to 2010 . or 66 % compared to 2010 . Several factor contributed positively product and service were $ 47.1 billion in 2011 , representing were $ 47.1 billion in 2011 , representing an increase of representing an increase of $ 21.9 billion or 87 % compared of $ 21.9 billion or 87 % compared to 2010. iPhone or 87 % compared to 2010. iPhone handset unit sale totaled iPhone handset unit sale totaled 72.3 million during 2011 , representing sale totaled 72.3 million during 2011 , representing an increase of , representing an increase of 32.3 million unit or 81 % of 32.3 million unit or 81 % compared to 2010. iPhone or 81 % compared to 2010. iPhone year-over-year net sale growth reflected strong demand for iPhone 4 in all of the Company Wireless network beginning in February 2011 , continued expansion into new iPhone . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company distributed iPhone the Company distributed iPhone in 105 country through 228 carrier . iPhone in 105 country through 228 carrier . Additionally , the product and service accounted for 43 % of the Company ’ s total net sale for 2011 . • Net sale of in the third quarter of 2010 , were $ 20.4 billion of 2010 , were $ 20.4 billion in 2011 , representing were $ 20.4 billion in 2011 , representing an increase of representing an increase of $ 15.4 billion or 311 % compared of $ 15.4 billion or 311 % compared to 2010 . or 311 % compared to 2010 . Unit sale of iPad Unit sale of iPad were 32.4 million during 2011 , an iPad were 32.4 million during 2011 , an increase of 334 2011 , an increase of 334 % from 2010 . The increase of 334 % from 2010 . The year-over-year unit growth The Company distributed iPad in 90 country a of September 24 90 country a of September 24 , 2011 compared to 26 a of September 24 , 2011 compared to 26 country a 24 , 2011 compared to 26 country a of September 25 26 country a of September 25 , 2010 . Net sale a of September 25 , 2010 . Net sale of iPad product and service accounted for 19 % of the Company ’ s total net sale for 2011 . • Mac net sale Mac net sale were $ 21.8 billion in 2011 , representing were $ 21.8 billion in 2011 , representing an increase of representing an increase of $ 4.3 billion or 25 % compared of $ 4.3 billion or 25 % compared to 2010 . or 25 % compared to 2010 . Mac unit sale increased Mac unit sale increased by 3.1 million or 22 % in increased by 3.1 million or 22 % in 2011 compared to million or 22 % in 2011 compared to 2010 . The % in 2011 compared to 2010 . The year-over-year growth in which were updated in July 2011 and February 2011 , respectively in July 2011 and February 2011 , respectively . The year-over-year for portable and desktop wa 36 % and 4 % , desktop wa 36 % and 4 % , respectively . Net ’ s Macs accounted for 20 % of the Company ’ s total net sale for 2011 . • Net sale of product and service were $ 6.3 billion in 2011 , representing were $ 6.3 billion in 2011 , representing an increase of representing an increase of $ 1.4 billion or 28 % compared of $ 1.4 billion or 28 % compared to 2010 . or 28 % compared to 2010 . The increase wa due s geographic segment . During 2011 , the combined net sale Store and iBookstore wa $ 5.4 billion , representing an increase , representing an increase of 33 % compared to 2010 . of 33 % compared to 2010 . The Company belief this product and service accounted for 6 % of the Company ’ s total net sale for 2011 . Partially offsetting the positive iPod net sale of $ 821 million or 10 % during of $ 821 million or 10 % during 2011 compared to million or 10 % during 2011 compared to 2010 . Similarly % during 2011 compared to 2010 . Similarly , iPod unit iPod unit sale decreased by 15 % in 2011 compared to decreased by 15 % in 2011 compared to 2010 . However % in 2011 compared to 2010 . However , net sale iPod unit sold increased during 2011 compared to 2010 due primarily increased during 2011 compared to 2010 due primarily to a shift sale of iPod accounted for 7 % of the Company ’ s total net sale for 2011 . 31 Fiscal Year 2010 net sale for 2011 . 31 Fiscal Year 2010 versus 2009 2011 . 31 Fiscal Year 2010 versus 2009 Net sale during 31 Fiscal Year 2010 versus 2009 Net sale during 2010 increased versus 2009 Net sale during 2010 increased $ 22.3 billion or sale during 2010 increased $ 22.3 billion or 52 % compared increased $ 22.3 billion or 52 % compared to 2009 . or 52 % compared to 2009 . Several factor contributed positively product and service were $ 25.2 billion in 2010 representing an were $ 25.2 billion in 2010 representing an increase of $ representing an increase of $ 12.1 billion or 93 % compared of $ 12.1 billion or 93 % compared to 2009. iPhone or 93 % compared to 2009. iPhone unit sale totaled 40 2009. iPhone unit sale totaled 40 million in 2010 , which sale totaled 40 million in 2010 , which represents an increase which represents an increase of 19.3 million or 93 % compared increase of 19.3 million or 93 % compared to 2009. iPhone or 93 % compared to 2009. iPhone year-over-year growth wa attributable and strong demand for iPhone 4 , which wa released in in the U.S. in June 2010 and in many other country country over the remainder of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company distributed iPhone the Company distributed iPhone in 89 country through 166 carrier . iPhone in 89 country through 166 carrier . Net sale of product and service accounted for 39 % of the Company ’ s total net sale for 2010 compared to 30 % in sale for 2010 compared to 30 % in 2009 . • compared to 30 % in 2009 . • Net sale of product and service were $ 5.0 billion and unit sale of unit sale of iPad were 7.5 million during 2010. iPad wa iPad were 7.5 million during 2010. iPad wa released in the in the U.S. in April 2010 and in various other country country over the remainder of 2010 . As of September 25 2010 . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company distributed iPad the Company distributed iPad in 26 country . The Company distributes product and service accounted for 8 % of the Company ’ s total net sale for 2010 , reflecting the strong demand net sale increased by $ 3.6 billion or 26 % in by $ 3.6 billion or 26 % in 2010 compared to billion or 26 % in 2010 compared to 2009 , and % in 2010 compared to 2009 , and Mac unit sale Mac unit sale increased by 3.3 million or 31 % in increased by 3.3 million or 31 % in 2010 compared to million or 31 % in 2010 compared to 2009 . Net % in 2010 compared to 2009 . Net sale per Mac Mac unit sold decreased by 4 % in 2010 compared to decreased by 4 % in 2010 compared to 2009 due primarily % in 2010 compared to 2009 due primarily to lower average Mac portable system . During 2010 , net sale and unit Mac portable system increased by 18 % and 25 % , increased by 18 % and 25 % , respectively , primarily which wa updated in April 2010 . Net sale and unit Mac desktop system increased by 43 % and 45 % , increased by 43 % and 45 % , respectively , a which wa updated in July 2010 . Net sale of the ’ s Macs accounted for 27 % of the Company ’ s total net sale in 2010 compared to 32 % in sale in 2010 compared to 32 % in 2009 . • compared to 32 % in 2009 . • Net sale of product and service increased $ 912 million or 23 % during increased $ 912 million or 23 % during 2010 compared to million or 23 % during 2010 compared to 2009 . This % during 2010 compared to 2009 . This increase wa due total net sale of $ 4.1 billion for 2010 . The of $ 4.1 billion for 2010 . The result of the product and service accounted for 8 % of the Company ’ s total net sale for 2010 compared to 9 % in sale for 2010 compared to 9 % in 2009 . • compared to 9 % in 2009 . • Net sale of sale of iPods increased $ 183 million or 2 % during increased $ 183 million or 2 % during 2010 , while million or 2 % during 2010 , while iPod unit sale iPod unit sale declined by 7 % during 2010 compared to declined by 7 % during 2010 compared to 2009 . Net % during 2010 compared to 2009 . Net sale per iPod iPod unit sold increased by 10 % to $ 164 in by 10 % to $ 164 in 2010 compared to 2009 % to $ 164 in 2010 compared to 2009 , due 164 in 2010 compared to 2009 , due to a shift sale of iPods accounted for 13 % of the Company ’ s total net sale for 2010 compared to 19 % in sale for 2010 compared to 19 % in 2009 . Segment compared to 19 % in 2009 . Segment Operating Performance The segment includes Australia and Asian 32 country , other than Japan operates Apple retail store in 11 country . Each reportable operating may be found in Note 8 , “ Segment Information and Financial Statements of this Form 10-K. Americas During 2011 , net this Form 10-K. Americas During 2011 , net sale in the the Americas segment increased $ 13.8 billion or 56 % compared increased $ 13.8 billion or 56 % compared to 2010 . or 56 % compared to 2010 . The primary contributor to and strong demand for iPhone 4 and increased sale of iPad an increase in sale during 2011 . The Americas segment represented The Americas segment represented approximately 35 % and 37 % of represented approximately 35 % and 37 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . During 2010 2010 , respectively . During 2010 , net sale in the the Americas segment increased $ 5.5 billion or 29 % compared increased $ 5.5 billion or 29 % compared to 2009 . or 29 % compared to 2009 . This increase in net . The Americas segment represented 37 % and 44 % of segment represented 37 % and 44 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . Europe For , respectively . Europe For 2011 , net sale in the the Europe segment increased $ 9.1 billion or 49 % , increased $ 9.1 billion or 49 % , compared to 2010 49 % , compared to 2010 . The increase in net increase in net sale during 2011 wa attributable primarily to the and strong demand for iPhone 4 , and increased sale of . The Europe segment represented 26 % and 29 % of segment represented 26 % and 29 % of total net sale of total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . During 2010 2010 , respectively . During 2010 , net sale in Europe sale in Europe increased $ 6.9 billion or 58 % compared increased $ 6.9 billion or 58 % compared to 2009 . or 58 % compared to 2009 . The growth in net . The Europe segment represented 29 % and 28 % of segment represented 29 % and 28 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . Japan Japan s net sale increased $ 1.5 billion or 37 % during increased $ 1.5 billion or 37 % during 2011 compared to billion or 37 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The key contributor to . The Japan segment represented 5 % and 6 % of segment represented 5 % and 6 % of total net sale of total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . The recent result of operation . During 2010 , Japan ’ s net s net sale increased $ 1.7 billion or 75 % compared increased $ 1.7 billion or 75 % compared to 2009 . or 75 % compared to 2009 . The primary contributor to . The Japan segment represented 6 % and 5 % of segment represented 6 % and 5 % of the Company ’ s total net sale for 2010 and 2009 , respectively . net sale for 2010 and 2009 , respectively . 33 Asia-Pacific and 2009 , respectively . 33 Asia-Pacific Net sale in the Asia Pacific segment increased $ 14.3 billion or 174 % during increased $ 14.3 billion or 174 % during 2011 compared to billion or 174 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The Company experienced particularly it Asia Pacific segment during 2011 , especially in Greater China the strong demand for iPhone 4 and carrier expansion , strong The Asia Pacific segment represented 21 % and 13 % of segment represented 21 % and 13 % of total net sale of total net sale in 2011 and 2010 , respectively . net sale in 2011 and 2010 , respectively . Net sale sale in Asia-Pacific increased $ 5.1 billion or 160 % during increased $ 5.1 billion or 160 % during 2010 compared to billion or 160 % during 2010 compared to 2009 . The % during 2010 compared to 2009 . The significant growth in . The Asia-Pacific segment represented 13 % and 7 % of segment represented 13 % and 7 % of the Company ’ s total net sale for 2010 and 2009 , respectively . net sale for 2010 and 2009 , respectively . Retail Retail segment net sale increased $ 4.3 billion or 44 % during increased $ 4.3 billion or 44 % during 2011 compared to billion or 44 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The increase in net revenue . The Company opened 40 new retail store during 2011 40 new retail store during 2011 , 28 of which were retail store during 2011 , 28 of which were outside the , ending the year with 357 store open compared to 317 357 store open compared to 317 store at the end of store at the end of 2010 . As of September 24 2010 . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had a Company had a total of 245 U.S. retail store and 112 245 U.S. retail store and 112 international retail store . During international retail store . During 2011 , the Company had an Company had an average of 326 store compared to an average compared to an average of 288 store during 2010 . The average of 288 store during 2010 . The average revenue per average revenue per store increased 27 % to $ 43.3 million increased 27 % to $ 43.3 million in 2011 compared to to $ 43.3 million in 2011 compared to $ 34.1 million in 2011 compared to $ 34.1 million in 2010 . The to $ 34.1 million in 2010 . The Retail segment represented . The Retail segment represented 13 % and 15 % of segment represented 13 % and 15 % of total net sale of total net sale in 2011 and 2010 , respectively . net sale in 2011 and 2010 , respectively . Retail net Retail net sale increased $ 3.1 billion or 47 % during increased $ 3.1 billion or 47 % during 2010 compared to billion or 47 % during 2010 compared to 2009 . The % during 2010 compared to 2009 . The increase in net revenue . The Company opened 44 new retail store during 2010 44 new retail store during 2010 , 28 of which were retail store during 2010 , 28 of which were outside the , ending the year with 317 store open compared to 273 317 store open compared to 273 store at the end of store at the end of 2009 . With an average of . With an average of 288 store and 254 store opened average of 288 store and 254 store opened during 2010 and and 254 store opened during 2010 and 2009 , respectively , store opened during 2010 and 2009 , respectively , average revenue per store increased to $ 34.1 million in 2010 , compared to $ 34.1 million in 2010 , compared to $ 26.2 2010 , compared to $ 26.2 million in 2009 . The to $ 26.2 million in 2009 . The Retail segment represented . The Retail segment represented 15 % and 16 % of segment represented 15 % and 16 % of the Company ’ s total net sale in 2010 and 2009 , respectively . net sale in 2010 and 2009 , respectively . The Retail reported operating income of $ 3.3 billion during 2011 compared to of $ 3.3 billion during 2011 compared to $ 2.4 billion during 2011 compared to $ 2.4 billion during 2010 . The to $ 2.4 billion during 2010 . The year-over-year increase in average revenue per store during 2011 compared to 2010 . The store during 2011 compared to 2010 . The Retail segment reported reported operating income of $ 1.7 billion during 2009 . The of $ 1.7 billion during 2009 . The increase in Retail in Retail operating income during 2010 compared to 2009 wa attributable income during 2010 compared to 2009 wa attributable to higher overall segment since inception totaled $ 2.8 billion through the end of billion through the end of 2011 . As of September 24 2011 . As of September 24 , 2011 , the Retail As of September 24 , 2011 , the Retail segment had the Retail segment had approximately 36,000 full-time equivalent employee and had and related facility of $ 2.4 billion . The Company would condition and operating result . 34 Gross Margin Gross margin for the three year ended September 24 , 2011 , are a year ended September 24 , 2011 , are a follows ( gross margin percentage ) : 2011 2010 2009 Net sale $ margin percentage ) : 2011 2010 2009 Net sale $ 108,249 percentage ) : 2011 2010 2009 Net sale $ 108,249 $ 2010 2009 Net sale $ 108,249 $ 65,225 $ 42,905 Cost Net sale $ 108,249 $ 65,225 $ 42,905 Cost of sale $ 108,249 $ 65,225 $ 42,905 Cost of sale 64,431 39,541 $ 42,905 Cost of sale 64,431 39,541 25,683 Gross margin $ 42,905 Cost of sale 64,431 39,541 25,683 Gross margin $ 43,818 Cost of sale 64,431 39,541 25,683 Gross margin $ 43,818 $ 39,541 25,683 Gross margin $ 43,818 $ 25,684 $ 17,222 Gross Gross margin $ 43,818 $ 25,684 $ 17,222 Gross margin percentage $ 43,818 $ 25,684 $ 17,222 Gross margin percentage 40.5 % $ 17,222 Gross margin percentage 40.5 % 39.4 % 40.1 % Gross margin percentage 40.5 % 39.4 % 40.1 % The gross percentage 40.5 % 39.4 % 40.1 % The gross margin percentage The gross margin percentage in 2011 wa 40.5 % , compared margin percentage in 2011 wa 40.5 % , compared to 39.4 40.5 % , compared to 39.4 % in 2010 . This compared to 39.4 % in 2010 . This year-over-year increase in The gross margin percentage in 2010 wa 39.4 % compared to margin percentage in 2010 wa 39.4 % compared to 40.1 % wa 39.4 % compared to 40.1 % in 2009 . This compared to 40.1 % in 2009 . This year-over-year decline in compared to level achieved during 2011 , largely due to a in Part I , Item 1A , “ Risk Factors ” the three year ended September 24 , 2011 , are a year ended September 24 , 2011 , are a follows ( except for percentage ) : 2011 2010 2009 Research and development for percentage ) : 2011 2010 2009 Research and development $ percentage ) : 2011 2010 2009 Research and development $ 2,429 2009 Research and development $ 2,429 $ 1,782 $ 1,333 Percentage and development $ 2,429 $ 1,782 $ 1,333 Percentage of net $ 2,429 $ 1,782 $ 1,333 Percentage of net sale 2 1,333 Percentage of net sale 2 % 3 % 3 % of net sale 2 % 3 % 3 % Selling , sale 2 % 3 % 3 % Selling , general and , general and administrative $ 7,599 $ 5,517 $ 4,149 Percentage and administrative $ 7,599 $ 5,517 $ 4,149 Percentage of net $ 7,599 $ 5,517 $ 4,149 Percentage of net sale 7 4,149 Percentage of net sale 7 % 8 % 10 % of net sale 7 % 8 % 10 % Research and sale 7 % 8 % 10 % Research and Development Expense & D expense increased $ 647 million or 36 % to increased $ 647 million or 36 % to $ 2.4 billion or 36 % to $ 2.4 billion in 2011 compared to to $ 2.4 billion in 2011 compared to 2010 . This billion in 2011 compared to 2010 . This increase wa due D activity . Although total 35 R & D expense increased R & D expense increased 36 % during 2011 compared to expense increased 36 % during 2011 compared to 2010 , it % during 2011 compared to 2010 , it declined slightly a sale , due to the 66 % year-over-year growth in the ’ s net sale during 2011 . R & D expense R & D expense increased 34 % or $ 449 million increased 34 % or $ 449 million to $ 1.8 billion $ 449 million to $ 1.8 billion in 2010 compared to to $ 1.8 billion in 2010 compared to 2009 . This billion in 2010 compared to 2009 . This increase wa due R & D expense in 2010 wa the capitalization in 2009 2010 wa the capitalization in 2009 of software development cost of software development cost of $ 71 million related to Mac OS R & D expense increased 34 % during 2010 , it expense increased 34 % during 2010 , it declined a a of net sale given the 52 % year-over-year increase in net increase in net sale in 2010 . The Company continues to & A expense increased $ 2.1 billion or 38 % to increased $ 2.1 billion or 38 % to $ 7.6 billion or 38 % to $ 7.6 billion during 2011 compared to to $ 7.6 billion during 2011 compared to 2010 . This billion during 2011 compared to 2010 . This increase wa due & A expense increased $ 1.4 billion or 33 % to increased $ 1.4 billion or 33 % to $ 5.5 billion or 33 % to $ 5.5 billion in 2010 compared to to $ 5.5 billion in 2010 compared to 2009 . This billion in 2010 compared to 2009 . This increase wa due the three year ended September 24 , 2011 , are a year ended September 24 , 2011 , are a follows ( ( in million ) : 2011 2010 2009 Interest and dividend in million ) : 2011 2010 2009 Interest and dividend income million ) : 2011 2010 2009 Interest and dividend income $ Interest and dividend income $ 519 $ 311 $ 407 Other dividend income $ 519 $ 311 $ 407 Other expense , $ 519 $ 311 $ 407 Other expense , net ( Other expense , net ( 104 ) ( 156 ) ( net ( 104 ) ( 156 ) ( 81 ) Total ) ( 156 ) ( 81 ) Total other income and other income and expense $ 415 $ 155 $ 326 Total and expense $ 415 $ 155 $ 326 Total other income $ 415 $ 155 $ 326 Total other income and expense income and expense increased $ 260 million or 168 % to increased $ 260 million or 168 % to $ 415 million or 168 % to $ 415 million during 2011 compared to to $ 415 million during 2011 compared to $ 155 million during 2011 compared to $ 155 million and $ 326 million $ 155 million and $ 326 million in 2010 and 2009 and $ 326 million in 2010 and 2009 , respectively . 326 million in 2010 and 2009 , respectively . The year-over-year other income and expense during 2011 wa due primarily to higher other income and expense in 2010 compared to 2009 wa attributable expense in 2010 compared to 2009 wa attributable to the significant equivalent and marketable security wa 0.77 % , 0.75 % and security wa 0.77 % , 0.75 % and 1.43 % during % , 0.75 % and 1.43 % during 2011 , 2010 % and 1.43 % during 2011 , 2010 and 2009 , 1.43 % during 2011 , 2010 and 2009 , respectively . during 2011 , 2010 and 2009 , respectively . During 2011 2009 , respectively . During 2011 , 2010 and 2009 , respectively . During 2011 , 2010 and 2009 , the Company During 2011 , 2010 and 2009 , the Company had no effective tax rate were approximately 24.2 % , 24.4 % and were approximately 24.2 % , 24.4 % and 31.8 % for % , 24.4 % and 31.8 % for 2011 , 2010 % and 31.8 % for 2011 , 2010 and 2009 , 31.8 % for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The Company federal income tax rate of 36 35 % due primarily to income tax rate of 36 35 % due primarily to certain the U.S. As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had deferred and tax credit of $ 3.2 billion , and deferred tax deferred tax liability of $ 9.2 billion . Management belief it tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . All IRS examining the year 2007 through 2009 . All IRS audit issue issue for year prior to 2004 have been resolved . In the three year ended September 24 , 2011 ( in million year ended September 24 , 2011 ( in million ) : ( in million ) : 2011 2010 2009 Cash , cash in million ) : 2011 2010 2009 Cash , cash equivalent million ) : 2011 2010 2009 Cash , cash equivalent and equivalent and marketable security $ 81,570 $ 51,011 $ 33,992 Accounts marketable security $ 81,570 $ 51,011 $ 33,992 Accounts receivable , $ 81,570 $ 51,011 $ 33,992 Accounts receivable , net $ Accounts receivable , net $ 5,369 $ 5,510 $ 3,361 Inventories , net $ 5,369 $ 5,510 $ 3,361 Inventories $ 776 $ 5,369 $ 5,510 $ 3,361 Inventories $ 776 $ 1,051 5,510 $ 3,361 Inventories $ 776 $ 1,051 $ 455 Working 3,361 Inventories $ 776 $ 1,051 $ 455 Working capital $ $ 776 $ 1,051 $ 455 Working capital $ 17,018 $ $ 455 Working capital $ 17,018 $ 20,956 $ 20,049 Annual Working capital $ 17,018 $ 20,956 $ 20,049 Annual operating cash $ 17,018 $ 20,956 $ 20,049 Annual operating cash flow $ Annual operating cash flow $ 37,529 $ 18,595 $ 10,159 Cash cash flow $ 37,529 $ 18,595 $ 10,159 Cash , cash $ 37,529 $ 18,595 $ 10,159 Cash , cash equivalent and and marketable security increased $ 30.6 billion or 60 % during increased $ 30.6 billion or 60 % during 2011 . The billion or 60 % during 2011 . The principal component of by operating activity of $ 37.5 billion , which wa partially plant and equipment of $ 4.3 billion , payment for acquisition of intangible asset of $ 3.2 billion and payment made in cash acquired , of $ 244 million . The Company belief existing operation over the next 12 month . The Company ’ loss . As of September 24 , 2011 and September 25 As of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , $ 54.3 2011 and September 25 , 2010 , $ 54.3 billion and 25 , 2010 , $ 54.3 billion and $ 30.8 billion $ 54.3 billion and $ 30.8 billion , respectively , of s capital expenditure were $ 4.6 billion during 2011 , consisting were $ 4.6 billion during 2011 , consisting of approximately $ , consisting of approximately $ 614 million for retail store facility retail store facility and $ 4.0 billion for other capital expenditure including product tooling and manufacturing 37 process equipment , real estate payment for capital expenditure during 2011 were $ 4.3 billion , expenditure during 2011 were $ 4.3 billion , of which $ billion , of which $ 612 million relates to retail store Company anticipates utilizing approximately $ 8.0 billion for capital expenditure during billion for capital expenditure during 2012 , including approximately $ 900 2012 , including approximately $ 900 million for retail store facility store facility and approximately $ 7.1 billion for product tooling and software and enhancement . During 2012 , the Company expects to Company expects to open about 40 new retail store , approximately firm commitment a of September 24 , 2011 and excludes amount a of September 24 , 2011 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 3,032 5 Years Operating lease $ 3,032 $ 338 $ 727 $ Operating lease $ 3,032 $ 338 $ 727 $ 665 $ $ 3,032 $ 338 $ 727 $ 665 $ 1,302 Purchase $ 338 $ 727 $ 665 $ 1,302 Purchase obligation 13,949 $ 727 $ 665 $ 1,302 Purchase obligation 13,949 13,949 0 665 $ 1,302 Purchase obligation 13,949 13,949 0 0 0 Other $ 1,302 Purchase obligation 13,949 13,949 0 0 0 Other obligation 1,302 Purchase obligation 13,949 13,949 0 0 0 Other obligation 2,415 Purchase obligation 13,949 13,949 0 0 0 Other obligation 2,415 2,297 obligation 13,949 13,949 0 0 0 Other obligation 2,415 2,297 114 0 0 0 Other obligation 2,415 2,297 114 4 0 Total 0 0 Other obligation 2,415 2,297 114 4 0 Total $ 0 Other obligation 2,415 2,297 114 4 0 Total $ 19,396 Other obligation 2,415 2,297 114 4 0 Total $ 19,396 $ obligation 2,415 2,297 114 4 0 Total $ 19,396 $ 16,584 114 4 0 Total $ 19,396 $ 16,584 $ 841 $ 0 Total $ 19,396 $ 16,584 $ 841 $ 669 $ $ 19,396 $ 16,584 $ 841 $ 669 $ 1,302 Lease $ 16,584 $ 841 $ 669 $ 1,302 Lease Commitments The $ 841 $ 669 $ 1,302 Lease Commitments The Company ’ typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company ’ s noncancelable operating lease were $ 3.0 billion , of which $ billion , of which $ 2.4 billion related to lease for typically cover period up to 150 day . The Company also information . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had outstanding component purchase commitment of $ 13.9 billion . 38 Other Obligations of $ 13.9 billion . 38 Other Obligations Other outstanding obligation Other outstanding obligation were $ 2.4 billion a of September 24 2.4 billion a of September 24 , 2011 , and were a of September 24 , 2011 , and were comprised mainly penalty . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had non-current deferred tax liability of $ 8.2 billion . Additionally , a Additionally , a of September 24 , 2011 , the Company a of September 24 , 2011 , the Company had gross unrecognized tax benefit of $ 1.4 billion and an additional $ billion and an additional $ 261 million for gross interest and indemnification a of either September 24 , 2011 or September 25 of either September 24 , 2011 or September 25 , 2010 24 , 2011 or September 25 , 2010 . The Company 2011 or September 25 , 2010 . The Company ha entered not been material . Item 7A . Quantitative and Qualitative Disclosures condition and operating result . 39 Interest Rate Risk While the the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 24 , 2011 , a hypothetical a of September 24 , 2011 , a hypothetical 100 basis , 2011 , a hypothetical 100 basis point increase in interest would result in a $ 913 million incremental decline in the portfolio . As of September 25 , 2010 , a similar As of September 25 , 2010 , a similar 100 basis , 2010 , a similar 100 basis point shift in the have resulted in a $ 477 million incremental decline in the , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 161 million a of September 24 161 million a of September 24 , 2011 compared to a a of September 24 , 2011 compared to a 40 maximum , 2011 compared to a 40 maximum one-day loss in fair in fair value of $ 103 million a of September 25 103 million a of September 25 , 2010 . Because the a of September 25 , 2010 . Because the Company us analysis performed a of September 24 , 2011 due to the a of September 24 , 2011 due to the inherent limitation actual exposure and position . 41 Item 8 . Financial Statements and position . 41 Item 8 . Financial Statements and Supplementary the three year ended September 24 , 2011 43 Consolidated Balance year ended September 24 , 2011 43 Consolidated Balance Sheets a ended September 24 , 2011 43 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 44 Consolidated Statements 2011 and September 25 , 2010 44 Consolidated Statements of Shareholders and September 25 , 2010 44 Consolidated Statements of Shareholders ’ the three year ended September 24 , 2011 45 Consolidated Statements year ended September 24 , 2011 45 Consolidated Statements of Cash ended September 24 , 2011 45 Consolidated Statements of Cash Flows the three year ended September 24 , 2011 46 Notes to year ended September 24 , 2011 46 Notes to Consolidated Financial ended September 24 , 2011 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 75 Reports of Ernst & Young Independent Registered Public Accounting Firm 76 All financial statement schedule have statement and note thereto . 42 CONSOLIDATED STATEMENTS OF OPERATIONS ( ) Three year ended September 24 , 2011 2011 2010 2009 year ended September 24 , 2011 2011 2010 2009 Net sale ended September 24 , 2011 2011 2010 2009 Net sale $ September 24 , 2011 2011 2010 2009 Net sale $ 108,249 24 , 2011 2011 2010 2009 Net sale $ 108,249 $ 2010 2009 Net sale $ 108,249 $ 65,225 $ 42,905 Cost Net sale $ 108,249 $ 65,225 $ 42,905 Cost of sale $ 108,249 $ 65,225 $ 42,905 Cost of sale 64,431 39,541 $ 42,905 Cost of sale 64,431 39,541 25,683 Gross margin 43,818 42,905 Cost of sale 64,431 39,541 25,683 Gross margin 43,818 25,684 Cost of sale 64,431 39,541 25,683 Gross margin 43,818 25,684 17,222 64,431 39,541 25,683 Gross margin 43,818 25,684 17,222 Operating expense : 39,541 25,683 Gross margin 43,818 25,684 17,222 Operating expense : Research 25,683 Gross margin 43,818 25,684 17,222 Operating expense : Research and expense : Research and development 2,429 1,782 1,333 Selling , general : Research and development 2,429 1,782 1,333 Selling , general and Research and development 2,429 1,782 1,333 Selling , general and administrative Selling , general and administrative 7,599 5,517 4,149 Total operating expense , general and administrative 7,599 5,517 4,149 Total operating expense 10,028 general and administrative 7,599 5,517 4,149 Total operating expense 10,028 7,299 5,517 4,149 Total operating expense 10,028 7,299 5,482 Operating income 33,790 4,149 Total operating expense 10,028 7,299 5,482 Operating income 33,790 18,385 Total operating expense 10,028 7,299 5,482 Operating income 33,790 18,385 11,740 10,028 7,299 5,482 Operating income 33,790 18,385 11,740 Other income and 7,299 5,482 Operating income 33,790 18,385 11,740 Other income and expense 5,482 Operating income 33,790 18,385 11,740 Other income and expense 415 11,740 Other income and expense 415 155 326 Income before provision Other income and expense 415 155 326 Income before provision for income and expense 415 155 326 Income before provision for income before provision for income tax 34,205 18,540 12,066 Provision for income provision for income tax 34,205 18,540 12,066 Provision for income tax for income tax 34,205 18,540 12,066 Provision for income tax 8,283 12,066 Provision for income tax 8,283 4,527 3,831 Net income $ Provision for income tax 8,283 4,527 3,831 Net income $ 25,922 for income tax 8,283 4,527 3,831 Net income $ 25,922 $ 4,527 3,831 Net income $ 25,922 $ 14,013 $ 8,235 Earnings Net income $ 25,922 $ 14,013 $ 8,235 Earnings per common $ 25,922 $ 14,013 $ 8,235 Earnings per common share : common share : Basic $ 28.05 $ 15.41 $ 9.22 Diluted : Basic $ 28.05 $ 15.41 $ 9.22 Diluted $ 27.68 $ 28.05 $ 15.41 $ 9.22 Diluted $ 27.68 $ 15.15 15.41 $ 9.22 Diluted $ 27.68 $ 15.15 $ 9.08 Shares 9.22 Diluted $ 27.68 $ 15.15 $ 9.08 Shares used in $ 27.68 $ 15.15 $ 9.08 Shares used in computing earnings earnings per share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 per share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 share : Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See Basic 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes 924,258 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes to 909,461 893,016 Diluted 936,645 924,712 907,005 See accompanying Notes to Consolidated to Consolidated Financial Statements . 43 CONSOLIDATED BALANCE SHEETS ( In reflected in thousand ) September 24 , 2011 September 25 , thousand ) September 24 , 2011 September 25 , 2010 ASSETS September 24 , 2011 September 25 , 2010 ASSETS : Current , 2011 September 25 , 2010 ASSETS : Current asset : Cash and cash equivalent $ 9,815 $ 11,261 Short-term marketable security cash equivalent $ 9,815 $ 11,261 Short-term marketable security 16,137 14,359 $ 11,261 Short-term marketable security 16,137 14,359 Accounts receivable , le 11,261 Short-term marketable security 16,137 14,359 Accounts receivable , le allowance , le allowance of $ 53 and $ 55 , respectively of $ 53 and $ 55 , respectively 5,369 5,510 Inventories and $ 55 , respectively 5,369 5,510 Inventories 776 1,051 Deferred $ 55 , respectively 5,369 5,510 Inventories 776 1,051 Deferred tax , respectively 5,369 5,510 Inventories 776 1,051 Deferred tax asset 2,014 respectively 5,369 5,510 Inventories 776 1,051 Deferred tax asset 2,014 1,636 776 1,051 Deferred tax asset 2,014 1,636 Vendor non-trade receivables 6,348 1,051 Deferred tax asset 2,014 1,636 Vendor non-trade receivables 6,348 4,414 2,014 1,636 Vendor non-trade receivables 6,348 4,414 Other current asset 4,529 1,636 Vendor non-trade receivables 6,348 4,414 Other current asset 4,529 3,447 6,348 4,414 Other current asset 4,529 3,447 Total current asset 44,988 4,414 Other current asset 4,529 3,447 Total current asset 44,988 41,678 4,529 3,447 Total current asset 44,988 41,678 Long-term marketable security 55,618 3,447 Total current asset 44,988 41,678 Long-term marketable security 55,618 25,391 44,988 41,678 Long-term marketable security 55,618 25,391 Property , plant and 41,678 Long-term marketable security 55,618 25,391 Property , plant and equipment plant and equipment , net 7,777 4,768 Goodwill 896 741 Acquired and equipment , net 7,777 4,768 Goodwill 896 741 Acquired intangible , net 7,777 4,768 Goodwill 896 741 Acquired intangible asset , net 7,777 4,768 Goodwill 896 741 Acquired intangible asset , net Acquired intangible asset , net 3,536 342 Other asset 3,556 2,263 intangible asset , net 3,536 342 Other asset 3,556 2,263 Total net 3,536 342 Other asset 3,556 2,263 Total asset $ 116,371 3,536 342 Other asset 3,556 2,263 Total asset $ 116,371 $ 3,556 2,263 Total asset $ 116,371 $ 75,183 LIABILITIES AND SHAREHOLDERS Total asset $ 116,371 $ 75,183 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 Accounts payable $ 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred 14,632 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 $ 12,015 Accrued expense 9,247 5,723 Deferred revenue 4,091 2,984 Total expense 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 9,247 5,723 Deferred revenue 4,091 2,984 Total current liability 27,970 20,722 4,091 2,984 Total current liability 27,970 20,722 Deferred revenue – non-current 2,984 Total current liability 27,970 20,722 Deferred revenue – non-current 1,686 20,722 Deferred revenue – non-current 1,686 1,139 Other non-current liability 10,100 Deferred revenue – non-current 1,686 1,139 Other non-current liability 10,100 5,531 1,686 1,139 Other non-current liability 10,100 5,531 Total liability 39,756 27,392 1,139 Other non-current liability 10,100 5,531 Total liability 39,756 27,392 Commitments liability 10,100 5,531 Total liability 39,756 27,392 Commitments and contingency Shareholders 10,100 5,531 Total liability 39,756 27,392 Commitments and contingency Shareholders ’ , no par value ; 1,800,000 share authorized ; 929,277 and ; 1,800,000 share authorized ; 929,277 and 915,970 share issued and share authorized ; 929,277 and 915,970 share issued and outstanding , issued and outstanding , respectively 13,331 10,668 Retained earnings 62,841 37,169 and outstanding , respectively 13,331 10,668 Retained earnings 62,841 37,169 Accumulated respectively 13,331 10,668 Retained earnings 62,841 37,169 Accumulated other comprehensive income/ 13,331 10,668 Retained earnings 62,841 37,169 Accumulated other comprehensive income/ ( comprehensive income/ ( loss ) 443 ( 46 ) Total shareholder ( loss ) 443 ( 46 ) Total shareholder ’ equity ) Total shareholder ’ equity 76,615 47,791 Total liability and shareholder Total shareholder ’ equity 76,615 47,791 Total liability and shareholder ’ and shareholder ’ equity $ 116,371 $ 75,183 See accompanying Notes ’ equity $ 116,371 $ 75,183 See accompanying Notes to Consolidated to Consolidated Financial Statements . 44 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ Amount Balances a of September 27 , 2008 888,326 $ 7,177 a of September 27 , 2008 888,326 $ 7,177 $ 15,129 of September 27 , 2008 888,326 $ 7,177 $ 15,129 $ 27 , 2008 888,326 $ 7,177 $ 15,129 $ ( 9 2008 888,326 $ 7,177 $ 15,129 $ ( 9 ) $ 7,177 $ 15,129 $ ( 9 ) $ 22,297 Components of $ ( 9 ) $ 22,297 Components of comprehensive income : comprehensive income : Net income 0 0 8,235 0 8,235 Change income : Net income 0 0 8,235 0 8,235 Change in : Net income 0 0 8,235 0 8,235 Change in foreign Net income 0 0 8,235 0 8,235 Change in foreign currency income 0 0 8,235 0 8,235 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 14 ) in foreign currency translation 0 0 0 ( 14 ) ( foreign currency translation 0 0 0 ( 14 ) ( 14 translation 0 0 0 ( 14 ) ( 14 ) Change 0 ( 14 ) ( 14 ) Change in unrealized gains/losses security , net of tax 0 0 0 118 118 Change , net of tax 0 0 0 118 118 Change in net of tax 0 0 0 118 118 Change in unrecognized of tax 0 0 0 118 118 Change in unrecognized gains/losses tax 0 0 0 118 118 Change in unrecognized gains/losses on instrument , net of tax 0 0 0 ( 18 ) , net of tax 0 0 0 ( 18 ) ( net of tax 0 0 0 ( 18 ) ( 18 tax 0 0 0 ( 18 ) ( 18 ) Total 0 ( 18 ) ( 18 ) Total comprehensive income 8,321 18 ) Total comprehensive income 8,321 Share-based compensation 0 707 0 comprehensive income 8,321 Share-based compensation 0 707 0 0 707 Common income 8,321 Share-based compensation 0 707 0 0 707 Common stock 8,321 Share-based compensation 0 707 0 0 707 Common stock issued Share-based compensation 0 707 0 0 707 Common stock issued under compensation 0 707 0 0 707 Common stock issued under stock share withheld for employee tax 11,480 404 ( 11 ) 0 withheld for employee tax 11,480 404 ( 11 ) 0 393 employee tax 11,480 404 ( 11 ) 0 393 Tax benefit 11,480 404 ( 11 ) 0 393 Tax benefit from equity 404 ( 11 ) 0 393 Tax benefit from equity award , including transfer pricing adjustment 0 ( 78 ) 0 0 transfer pricing adjustment 0 ( 78 ) 0 0 ( 78 adjustment 0 ( 78 ) 0 0 ( 78 ) Balances 0 ( 78 ) 0 0 ( 78 ) Balances a 78 ) 0 0 ( 78 ) Balances a of September ) Balances a of September 26 , 2009 899,806 8,210 23,353 a of September 26 , 2009 899,806 8,210 23,353 77 31,640 of September 26 , 2009 899,806 8,210 23,353 77 31,640 Components September 26 , 2009 899,806 8,210 23,353 77 31,640 Components of 26 , 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive , 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive income 2009 899,806 8,210 23,353 77 31,640 Components of comprehensive income : comprehensive income : Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gains/losses translation 0 0 0 7 7 Change in unrealized gains/losses on security , net of tax 0 0 0 123 123 Change , net of tax 0 0 0 123 123 Change in net of tax 0 0 0 123 123 Change in unrecognized of tax 0 0 0 123 123 Change in unrecognized gains/losses tax 0 0 0 123 123 Change in unrecognized gains/losses on instrument , net of tax 0 0 0 ( 253 ) , net of tax 0 0 0 ( 253 ) ( net of tax 0 0 0 ( 253 ) ( 253 tax 0 0 0 ( 253 ) ( 253 ) Total 0 ( 253 ) ( 253 ) Total comprehensive income 13,890 253 ) Total comprehensive income 13,890 Share-based compensation 0 876 0 comprehensive income 13,890 Share-based compensation 0 876 0 0 876 Common income 13,890 Share-based compensation 0 876 0 0 876 Common stock 13,890 Share-based compensation 0 876 0 0 876 Common stock issued Share-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Balances including transfer pricing adjustment 0 879 0 0 879 Balances a transfer pricing adjustment 0 879 0 0 879 Balances a of pricing adjustment 0 879 0 0 879 Balances a of September adjustment 0 879 0 0 879 Balances a of September 25 879 Balances a of September 25 , 2010 915,970 10,668 37,169 a of September 25 , 2010 915,970 10,668 37,169 ( 46 of September 25 , 2010 915,970 10,668 37,169 ( 46 ) September 25 , 2010 915,970 10,668 37,169 ( 46 ) 47,791 25 , 2010 915,970 10,668 37,169 ( 46 ) 47,791 Components 2010 915,970 10,668 37,169 ( 46 ) 47,791 Components of comprehensive 10,668 37,169 ( 46 ) 47,791 Components of comprehensive income : comprehensive income : Net income 0 0 25,922 0 25,922 Change income : Net income 0 0 25,922 0 25,922 Change in : Net income 0 0 25,922 0 25,922 Change in foreign Net income 0 0 25,922 0 25,922 Change in foreign currency income 0 0 25,922 0 25,922 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 12 ) in foreign currency translation 0 0 0 ( 12 ) ( foreign currency translation 0 0 0 ( 12 ) ( 12 translation 0 0 0 ( 12 ) ( 12 ) Change 0 ( 12 ) ( 12 ) Change in unrealized gains/losses security , net of tax 0 0 0 ( 41 ) , net of tax 0 0 0 ( 41 ) ( net of tax 0 0 0 ( 41 ) ( 41 tax 0 0 0 ( 41 ) ( 41 ) Change 0 ( 41 ) ( 41 ) Change in unrecognized gains/losses instrument , net of tax 0 0 0 542 542 Total , net of tax 0 0 0 542 542 Total comprehensive net of tax 0 0 0 542 542 Total comprehensive income of tax 0 0 0 542 542 Total comprehensive income 26,411 tax 0 0 0 542 542 Total comprehensive income 26,411 Share-based 542 542 Total comprehensive income 26,411 Share-based compensation 0 1,168 0 comprehensive income 26,411 Share-based compensation 0 1,168 0 0 1,168 Common income 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 $ 13,331 a of September 24 , 2011 929,277 $ 13,331 $ 62,841 of September 24 , 2011 929,277 $ 13,331 $ 62,841 $ 24 , 2011 929,277 $ 13,331 $ 62,841 $ 443 $ 2011 929,277 $ 13,331 $ 62,841 $ 443 $ 76,615 See $ 13,331 $ 62,841 $ 443 $ 76,615 See accompanying Notes $ 62,841 $ 443 $ 76,615 See accompanying Notes to Consolidated to Consolidated Financial Statements . 45 CONSOLIDATED STATEMENTS OF CASH FLOWS ) Three year ended September 24 , 2011 2011 2010 2009 year ended September 24 , 2011 2011 2010 2009 Cash and ended September 24 , 2011 2011 2010 2009 Cash and cash September 24 , 2011 2011 2010 2009 Cash and cash equivalent 24 , 2011 2011 2010 2009 Cash and cash equivalent , beginning of the year $ 11,261 $ 5,263 $ 11,875 Operating the year $ 11,261 $ 5,263 $ 11,875 Operating activity : $ 11,261 $ 5,263 $ 11,875 Operating activity : Net income Operating activity : Net income 25,922 14,013 8,235 Adjustments to reconcile activity : Net income 25,922 14,013 8,235 Adjustments to reconcile net : Net income 25,922 14,013 8,235 Adjustments to reconcile net income Depreciation , amortization and accretion 1,814 1,027 734 Share-based compensation expense , amortization and accretion 1,814 1,027 734 Share-based compensation expense 1,168 amortization and accretion 1,814 1,027 734 Share-based compensation expense 1,168 879 1,027 734 Share-based compensation expense 1,168 879 710 Deferred income tax 734 Share-based compensation expense 1,168 879 710 Deferred income tax expense Share-based compensation expense 1,168 879 710 Deferred income tax expense 2,868 710 Deferred income tax expense 2,868 1,440 1,040 Changes in operating Deferred income tax expense 2,868 1,440 1,040 Changes in operating asset income tax expense 2,868 1,440 1,040 Changes in operating asset and : Accounts receivable , net 143 ( 2,142 ) ( 939 receivable , net 143 ( 2,142 ) ( 939 ) Inventories 143 ( 2,142 ) ( 939 ) Inventories 275 ( 596 ) ( 939 ) Inventories 275 ( 596 ) 54 Vendor 939 ) Inventories 275 ( 596 ) 54 Vendor non-trade receivables Inventories 275 ( 596 ) 54 Vendor non-trade receivables ( 1,934 54 Vendor non-trade receivables ( 1,934 ) ( 2,718 ) 586 receivables ( 1,934 ) ( 2,718 ) 586 Other current and 1,934 ) ( 2,718 ) 586 Other current and non-current asset current and non-current asset ( 1,391 ) ( 1,610 ) ( asset ( 1,391 ) ( 1,610 ) ( 713 ) Accounts ) ( 1,610 ) ( 713 ) Accounts payable 2,515 6,307 ( 713 ) Accounts payable 2,515 6,307 92 Deferred revenue 1,654 713 ) Accounts payable 2,515 6,307 92 Deferred revenue 1,654 1,217 ) Accounts payable 2,515 6,307 92 Deferred revenue 1,654 1,217 521 2,515 6,307 92 Deferred revenue 1,654 1,217 521 Other current and 6,307 92 Deferred revenue 1,654 1,217 521 Other current and non-current 92 Deferred revenue 1,654 1,217 521 Other current and non-current liability Other current and non-current liability 4,495 778 ( 161 ) Cash current and non-current liability 4,495 778 ( 161 ) Cash generated non-current liability 4,495 778 ( 161 ) Cash generated by operating Cash generated by operating activity 37,529 18,595 10,159 Investing activity : generated by operating activity 37,529 18,595 10,159 Investing activity : Purchases by operating activity 37,529 18,595 10,159 Investing activity : Purchases of Purchases of marketable security ( 102,317 ) ( 57,793 ) ( security ( 102,317 ) ( 57,793 ) ( 46,724 ) Proceeds ) ( 57,793 ) ( 46,724 ) Proceeds from maturity of from maturity of marketable security 20,437 24,930 19,790 Proceeds from sale maturity of marketable security 20,437 24,930 19,790 Proceeds from sale of of marketable security 20,437 24,930 19,790 Proceeds from sale of marketable from sale of marketable security 49,416 21,788 10,888 Payments made in sale of marketable security 49,416 21,788 10,888 Payments made in connection of marketable security 49,416 21,788 10,888 Payments made in connection with net of cash acquired ( 244 ) ( 638 ) 0 acquired ( 244 ) ( 638 ) 0 Payments for acquisition 244 ) ( 638 ) 0 Payments for acquisition of property , plant and equipment ( 4,260 ) ( 2,005 ) ( equipment ( 4,260 ) ( 2,005 ) ( 1,144 ) Payments ) ( 2,005 ) ( 1,144 ) Payments for acquisition of acquisition of intangible asset ( 3,192 ) ( 116 ) ( asset ( 3,192 ) ( 116 ) ( 69 ) Other ) ( 116 ) ( 69 ) Other ( 259 ) ( 69 ) Other ( 259 ) ( 20 ) ( Other ( 259 ) ( 20 ) ( 175 ) Cash ) ( 20 ) ( 175 ) Cash used in investing used in investing activity ( 40,419 ) ( 13,854 ) ( activity ( 40,419 ) ( 13,854 ) ( 17,434 ) Financing ) ( 13,854 ) ( 17,434 ) Financing activity : Proceeds from issuance of common stock 831 912 475 Excess tax benefit issuance of common stock 831 912 475 Excess tax benefit from of common stock 831 912 475 Excess tax benefit from equity tax benefit from equity award 1,133 751 270 Taxes paid related benefit from equity award 1,133 751 270 Taxes paid related to from equity award 1,133 751 270 Taxes paid related to net settlement of equity award ( 520 ) ( 406 ) ( award ( 520 ) ( 406 ) ( 82 ) Cash ) ( 406 ) ( 82 ) Cash generated by financing Cash generated by financing activity 1,444 1,257 663 ( Decrease ) generated by financing activity 1,444 1,257 663 ( Decrease ) /increase by financing activity 1,444 1,257 663 ( Decrease ) /increase in cash and cash equivalent ( 1,446 ) 5,998 ( 6,612 ) cash equivalent ( 1,446 ) 5,998 ( 6,612 ) Cash and ( 1,446 ) 5,998 ( 6,612 ) Cash and cash equivalent end of the year $ 9,815 $ 11,261 $ 5,263 Supplemental the year $ 9,815 $ 11,261 $ 5,263 Supplemental cash flow $ 9,815 $ 11,261 $ 5,263 Supplemental cash flow disclosure : income tax , net $ 3,338 $ 2,697 $ 2,997 See , net $ 3,338 $ 2,697 $ 2,997 See accompanying Notes $ 3,338 $ 2,697 $ 2,997 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2011 , 2010 and 2009 ended s fiscal year 2011 , 2010 and 2009 ended on September year 2011 , 2010 and 2009 ended on September 24 , and 2009 ended on September 24 , 2011 , September 25 ended on September 24 , 2011 , September 25 , 2010 24 , 2011 , September 25 , 2010 and September 26 2011 , September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 , respectively , 2010 and September 26 , 2009 , respectively , and included , respectively , and included 52 week each . An additional calendar quarter . Fiscal year 2012 will end on September 29 2012 will end on September 29 , 2012 , and will end on September 29 , 2012 , and will span 53 2012 , and will span 53 week , with a 14th 53 week , with a 14th week added to the first to the first quarter of 2012 . Unless otherwise stated , During the first quarter of 2011 , the Company adopted the functionality of the hardware . 47 The Company sell software and iPod touch beginning in June 2010 , and for sale of of Mac beginning in June 2011 , the Company ha indicated and iLife . In June 2011 , the Company announced it essential software . The third 48 deliverable is the non-software service device , which range from 24 to 48 month . Cost which range from 24 to 48 month . Cost of sale the Company ’ s June 2011 announcement of the upcoming release are a follows : $ 16 for iPhone and iPad , iPhone and iPad , $ 11 for iPod touch , and iPod touch , and $ 22 for Mac . The Company each Apple TV is $ 5 for 2011 and $ 10 TV is $ 5 for 2011 and $ 10 for fiscal 5 for 2011 and $ 10 for fiscal year prior to for fiscal year prior to 2011 . Amounts allocated to the on a straight-line basis over 24 month , and amount allocated on a straight-line basis over 48 month . The Company ’ introduction of iPhone in June 2007 through the Company ’ s ’ s second quarter of 2010 wa $ 25 . Beginning quarter of 2010 wa $ 25 . Beginning in April 2010 25 . Beginning in April 2010 in conjunction with the Company ’ s announcement of iOS 4 for iPhone , the Company with each iPhone to $ 10 . Beginning with initial sale sale of iPad in April 2010 , the Company ’ s of each iPad is $ 10 , and the Company ’ touch sold beginning in June 2010 is $ 5 . The in June 2010 is $ 5 . The Company account for in accordance with industry specific 49 software accounting guidance . For element . Beginning in July 2011 , the sale of certain Therefore , beginning in July 2011 the Company defers all revenue and recognizes it ratably over 36 month . Shipping Costs For any software development cost during 2011 and 2010 . In 2009 development cost during 2011 and 2010 . In 2009 , the 2011 and 2010 . In 2009 , the Company capitalized $ , the Company capitalized $ 71 million of cost associated with of Mac OS X Version 10.6 Snow Leopard ( “ Mac during the fourth quarter of 2009 . The capitalized cost are software development cost wa $ 30 million , $ 48 million $ 30 million , $ 48 million and $ 25 million $ 48 million and $ 25 million in 2011 , 2010 and $ 25 million in 2011 , 2010 and 2009 , 25 million in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . Advertising Costs . Advertising expense wa $ 933 million , $ 691 million $ 933 million , $ 691 million and $ 501 million $ 691 million and $ 501 million for 2011 , 2010 and $ 501 million for 2011 , 2010 and 2009 , 501 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . Share-based Compensation expense ratably on a straight-line 50 basis over the requisite service can be found in Note 6 , “ Shareholders ’ Equity Compensation ” of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” Taxes ” of this Form 10-K for additional information . Earnings the three year ended September 24 , 2011 ( in thousand year ended September 24 , 2011 ( in thousand , except per share amount ) : 2011 2010 2009 Numerator : Net share amount ) : 2011 2010 2009 Numerator : Net income amount ) : 2011 2010 2009 Numerator : Net income $ Numerator : Net income $ 25,922 $ 14,013 $ 8,235 Denominator Net income $ 25,922 $ 14,013 $ 8,235 Denominator : Weighted-average $ 25,922 $ 14,013 $ 8,235 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 924,258 909,461 893,016 Effect of dilutive : Weighted-average share outstanding 924,258 909,461 893,016 Effect of dilutive security Weighted-average share outstanding 924,258 909,461 893,016 Effect of dilutive security 12,387 893,016 Effect of dilutive security 12,387 15,251 13,989 Weighted-average diluted share Effect of dilutive security 12,387 15,251 13,989 Weighted-average diluted share 936,645 of dilutive security 12,387 15,251 13,989 Weighted-average diluted share 936,645 924,712 15,251 13,989 Weighted-average diluted share 936,645 924,712 907,005 Basic earnings per 13,989 Weighted-average diluted share 936,645 924,712 907,005 Basic earnings per common Weighted-average diluted share 936,645 924,712 907,005 Basic earnings per common share earnings per common share $ 28.05 $ 15.41 $ 9.22 Diluted common share $ 28.05 $ 15.41 $ 9.22 Diluted earnings per $ 28.05 $ 15.41 $ 9.22 Diluted earnings per common share earnings per common share $ 27.68 $ 15.15 $ 9.08 Potentially common share $ 27.68 $ 15.15 $ 9.08 Potentially dilutive security $ 27.68 $ 15.15 $ 9.08 Potentially dilutive security representing 1.7 9.08 Potentially dilutive security representing 1.7 million , 1.6 million and security representing 1.7 million , 1.6 million and 12.6 million share million , 1.6 million and 12.6 million share of common stock share of common stock for 2011 , 2010 and 2009 , common stock for 2011 , 2010 and 2009 , respectively , for 2011 , 2010 and 2009 , respectively , were excluded would have been antidilutive . 51 Financial Instruments Cash Equivalents and debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term no fair value hedge in 2011 , 2010 and 2009 . value hedge in 2011 , 2010 and 2009 . The net in 2011 , 2010 and 2009 . The net gain or for all period presented . 52 Property , Plant and Equipment building is the lesser of 30 year or the remaining life property and equipment wa $ 1.6 billion , $ 815 million $ 1.6 billion , $ 815 million and $ 606 million $ 815 million and $ 606 million during 2011 , 2010 and $ 606 million during 2011 , 2010 and 2009 , 606 million during 2011 , 2010 and 2009 , respectively . during 2011 , 2010 and 2009 , respectively . Long-Lived Assets record any significant impairment during 2011 , 2010 and 2009 . significant impairment during 2011 , 2010 and 2009 . The Company during 2011 , 2010 and 2009 . The Company doe not intangible asset impairment charge in 2011 , 2010 and 2009 . impairment charge in 2011 , 2010 and 2009 . The Company in 2011 , 2010 and 2009 . The Company established reporting fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than the asset or liability . 53 Level 3 – Inputs that or liability . 53 Level 3 – Inputs that are generally basis is also disclosed . 54 Note 2 – Financial Instruments also disclosed . 54 Note 2 – Financial Instruments Cash , marketable security a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : in million ) : September 24 , 2011 Adjusted Cost Unrealized ) : September 24 , 2011 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 2,903 $ 0 $ 0 $ Securities Cash $ 2,903 $ 0 $ 0 $ 2,903 $ $ 2,903 $ 0 $ 0 $ 2,903 $ 2,903 $ $ 0 $ 0 $ 2,903 $ 2,903 $ 0 $ $ 0 $ 2,903 $ 2,903 $ 0 $ 0 Level $ 2,903 $ 2,903 $ 0 $ 0 Level 1 : $ 2,903 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,911 1 : Money market fund 1,911 0 0 1,911 1,911 0 : Money market fund 1,911 0 0 1,911 1,911 0 0 Money market fund 1,911 0 0 1,911 1,911 0 0 Mutual market fund 1,911 0 0 1,911 1,911 0 0 Mutual fund fund 1,911 0 0 1,911 1,911 0 0 Mutual fund 1,227 1,911 0 0 1,911 1,911 0 0 Mutual fund 1,227 0 0 0 1,911 1,911 0 0 Mutual fund 1,227 0 ( 1,911 0 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 1,193 0 1,227 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 3,104 0 1,193 0 Subtotal 3,138 0 ( 34 ) 3,104 1,911 0 Subtotal 3,138 0 ( 34 ) 3,104 1,911 1,193 0 3,138 0 ( 34 ) 3,104 1,911 1,193 0 Level 2 0 ( 34 ) 3,104 1,911 1,193 0 Level 2 : ( 34 ) 3,104 1,911 1,193 0 Level 2 : U.S. 34 ) 3,104 1,911 1,193 0 Level 2 : U.S. Treasury 3,104 1,911 1,193 0 Level 2 : U.S. Treasury security 10,717 2 : U.S. Treasury security 10,717 39 ( 3 ) 10,753 : U.S. Treasury security 10,717 39 ( 3 ) 10,753 1,250 Treasury security 10,717 39 ( 3 ) 10,753 1,250 2,149 7,354 10,717 39 ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency 39 ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency security ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency security 13,467 3 ) 10,753 1,250 2,149 7,354 U.S. agency security 13,467 24 2,149 7,354 U.S. agency security 13,467 24 ( 3 ) 13,488 7,354 U.S. agency security 13,467 24 ( 3 ) 13,488 225 agency security 13,467 24 ( 3 ) 13,488 225 1,818 11,445 13,467 24 ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government 24 ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government security ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government security 5,559 3 ) 13,488 225 1,818 11,445 Non-U.S. government security 5,559 11 1,818 11,445 Non-U.S. government security 5,559 11 ( 2 ) 5,568 11,445 Non-U.S. government security 5,559 11 ( 2 ) 5,568 551 government security 5,559 11 ( 2 ) 5,568 551 1,548 3,469 5,559 11 ( 2 ) 5,568 551 1,548 3,469 Certificates of 11 ( 2 ) 5,568 551 1,548 3,469 Certificates of deposit ( 2 ) 5,568 551 1,548 3,469 Certificates of deposit and 2 ) 5,568 551 1,548 3,469 Certificates of deposit and time of deposit and time deposit 4,175 2 ( 2 ) 4,175 deposit and time deposit 4,175 2 ( 2 ) 4,175 728 time deposit 4,175 2 ( 2 ) 4,175 728 977 2,470 4,175 2 ( 2 ) 4,175 728 977 2,470 Commercial paper 2 ( 2 ) 4,175 728 977 2,470 Commercial paper 2,853 ( 2 ) 4,175 728 977 2,470 Commercial paper 2,853 0 2 ) 4,175 728 977 2,470 Commercial paper 2,853 0 0 728 977 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 977 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 0 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 0 Corporate Commercial paper 2,853 0 0 2,853 2,237 616 0 Corporate security paper 2,853 0 0 2,853 2,237 616 0 Corporate security 35,241 2,853 0 0 2,853 2,237 616 0 Corporate security 35,241 132 0 0 2,853 2,237 616 0 Corporate security 35,241 132 ( 2,237 616 0 Corporate security 35,241 132 ( 114 ) 35,259 616 0 Corporate security 35,241 132 ( 114 ) 35,259 10 Corporate security 35,241 132 ( 114 ) 35,259 10 7,241 28,008 35,241 132 ( 114 ) 35,259 10 7,241 28,008 Municipal security 132 ( 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 ( 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 56 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 56 0 10 7,241 28,008 Municipal security 3,411 56 0 3,467 0 595 7,241 28,008 Municipal security 3,411 56 0 3,467 0 595 2,872 28,008 Municipal security 3,411 56 0 3,467 0 595 2,872 Subtotal Municipal security 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 security 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 264 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 264 ( 56 0 3,467 0 595 2,872 Subtotal 75,423 264 ( 124 3,467 0 595 2,872 Subtotal 75,423 264 ( 124 ) 75,563 0 595 2,872 Subtotal 75,423 264 ( 124 ) 75,563 5,001 2,872 Subtotal 75,423 264 ( 124 ) 75,563 5,001 14,944 55,618 75,423 264 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 264 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 $ 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 $ 264 5,001 14,944 55,618 Total $ 81,464 $ 264 $ ( 158 55,618 Total $ 81,464 $ 264 $ ( 158 ) $ 81,464 $ 264 $ ( 158 ) $ 81,570 $ 9,815 $ ( 158 ) $ 81,570 $ 9,815 $ 16,137 $ 158 ) $ 81,570 $ 9,815 $ 16,137 $ 55,618 September $ 81,570 $ 9,815 $ 16,137 $ 55,618 September 25 , $ 9,815 $ 16,137 $ 55,618 September 25 , 2010 Adjusted $ 16,137 $ 55,618 September 25 , 2010 Adjusted Cost Unrealized $ 55,618 September 25 , 2010 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 1,690 $ 0 $ 0 $ Securities Cash $ 1,690 $ 0 $ 0 $ 1,690 $ $ 1,690 $ 0 $ 0 $ 1,690 $ 1,690 $ $ 0 $ 0 $ 1,690 $ 1,690 $ 0 $ $ 0 $ 1,690 $ 1,690 $ 0 $ 0 Level $ 1,690 $ 1,690 $ 0 $ 0 Level 1 : $ 1,690 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 2,753 1 : Money market fund 2,753 0 0 2,753 2,753 0 : Money market fund 2,753 0 0 2,753 2,753 0 0 Money market fund 2,753 0 0 2,753 2,753 0 0 Level market fund 2,753 0 0 2,753 2,753 0 0 Level 2 fund 2,753 0 0 2,753 2,753 0 0 Level 2 : 2,753 0 0 2,753 2,753 0 0 Level 2 : U.S. 0 0 2,753 2,753 0 0 Level 2 : U.S. Treasury 2,753 2,753 0 0 Level 2 : U.S. Treasury security 9,872 2 : U.S. Treasury security 9,872 42 0 9,914 2,571 2,130 : U.S. Treasury security 9,872 42 0 9,914 2,571 2,130 5,213 U.S. Treasury security 9,872 42 0 9,914 2,571 2,130 5,213 U.S. Treasury security 9,872 42 0 9,914 2,571 2,130 5,213 U.S. agency security 9,872 42 0 9,914 2,571 2,130 5,213 U.S. agency security 9,872 42 0 9,914 2,571 2,130 5,213 U.S. agency security 8,717 42 0 9,914 2,571 2,130 5,213 U.S. agency security 8,717 10 2,130 5,213 U.S. agency security 8,717 10 0 8,727 1,916 4,339 5,213 U.S. agency security 8,717 10 0 8,727 1,916 4,339 2,472 U.S. agency security 8,717 10 0 8,727 1,916 4,339 2,472 Non-U.S. agency security 8,717 10 0 8,727 1,916 4,339 2,472 Non-U.S. government security 8,717 10 0 8,727 1,916 4,339 2,472 Non-U.S. government security 8,717 10 0 8,727 1,916 4,339 2,472 Non-U.S. government security 2,648 10 0 8,727 1,916 4,339 2,472 Non-U.S. government security 2,648 13 4,339 2,472 Non-U.S. government security 2,648 13 0 2,661 10 865 2,472 Non-U.S. government security 2,648 13 0 2,661 10 865 1,786 Non-U.S. government security 2,648 13 0 2,661 10 865 1,786 Certificates government security 2,648 13 0 2,661 10 865 1,786 Certificates of security 2,648 13 0 2,661 10 865 1,786 Certificates of deposit 2,648 13 0 2,661 10 865 1,786 Certificates of deposit and 13 0 2,661 10 865 1,786 Certificates of deposit and time of deposit and time deposit 2,735 5 ( 1 ) 2,739 deposit and time deposit 2,735 5 ( 1 ) 2,739 374 time deposit 2,735 5 ( 1 ) 2,739 374 850 1,515 2,735 5 ( 1 ) 2,739 374 850 1,515 Commercial paper 5 ( 1 ) 2,739 374 850 1,515 Commercial paper 3,168 ( 1 ) 2,739 374 850 1,515 Commercial paper 3,168 0 1 ) 2,739 374 850 1,515 Commercial paper 3,168 0 0 374 850 1,515 Commercial paper 3,168 0 0 3,168 1,889 1,279 850 1,515 Commercial paper 3,168 0 0 3,168 1,889 1,279 0 1,515 Commercial paper 3,168 0 0 3,168 1,889 1,279 0 Corporate Commercial paper 3,168 0 0 3,168 1,889 1,279 0 Corporate security paper 3,168 0 0 3,168 1,889 1,279 0 Corporate security 17,349 3,168 0 0 3,168 1,889 1,279 0 Corporate security 17,349 102 0 0 3,168 1,889 1,279 0 Corporate security 17,349 102 ( 1,889 1,279 0 Corporate security 17,349 102 ( 9 ) 17,442 1,279 0 Corporate security 17,349 102 ( 9 ) 17,442 58 Corporate security 17,349 102 ( 9 ) 17,442 58 4,522 12,862 17,349 102 ( 9 ) 17,442 58 4,522 12,862 Municipal security 102 ( 9 ) 17,442 58 4,522 12,862 Municipal security 1,899 ( 9 ) 17,442 58 4,522 12,862 Municipal security 1,899 19 9 ) 17,442 58 4,522 12,862 Municipal security 1,899 19 ( 58 4,522 12,862 Municipal security 1,899 19 ( 1 ) 1,917 4,522 12,862 Municipal security 1,899 19 ( 1 ) 1,917 0 Municipal security 1,899 19 ( 1 ) 1,917 0 374 1,543 1,899 19 ( 1 ) 1,917 0 374 1,543 Subtotal 46,388 19 ( 1 ) 1,917 0 374 1,543 Subtotal 46,388 191 ( 1 ) 1,917 0 374 1,543 Subtotal 46,388 191 ( 1 ) 1,917 0 374 1,543 Subtotal 46,388 191 ( 11 1,917 0 374 1,543 Subtotal 46,388 191 ( 11 ) 46,568 0 374 1,543 Subtotal 46,388 191 ( 11 ) 46,568 6,818 1,543 Subtotal 46,388 191 ( 11 ) 46,568 6,818 14,359 25,391 46,388 191 ( 11 ) 46,568 6,818 14,359 25,391 Total $ 191 ( 11 ) 46,568 6,818 14,359 25,391 Total $ 50,831 ( 11 ) 46,568 6,818 14,359 25,391 Total $ 50,831 $ 11 ) 46,568 6,818 14,359 25,391 Total $ 50,831 $ 191 6,818 14,359 25,391 Total $ 50,831 $ 191 $ ( 11 25,391 Total $ 50,831 $ 191 $ ( 11 ) $ 50,831 $ 191 $ ( 11 ) $ 51,011 $ 11,261 $ ( 11 ) $ 51,011 $ 11,261 $ 14,359 $ 11 ) $ 51,011 $ 11,261 $ 14,359 $ 25,391 55 $ 51,011 $ 11,261 $ 14,359 $ 25,391 55 The net $ 11,261 $ 14,359 $ 25,391 55 The net unrealized gain 11,261 $ 14,359 $ 25,391 55 The net unrealized gain a unrealized gain a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 related primarily to 2011 and September 25 , 2010 related primarily to long-term marketable net realized gain of $ 110 million during 2011 and no of $ 110 million during 2011 and no significant net realized realized gain or loss during 2010 and 2009 related to such or loss during 2010 and 2009 related to such sale . year . As of September 24 , 2011 and September 25 As of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , gross unrealized 2011 and September 25 , 2010 , gross unrealized loss related a continuous loss position for 12 month or longer were not amortized cost basis . During 2011 , 2010 and 2009 , basis . During 2011 , 2010 and 2009 , the Company During 2011 , 2010 and 2009 , the Company did not charge . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company doe not cash flow hedge and net 56 investment hedge are recorded in flow hedge of approximately $ 290 million and a net deferred flow hedge of approximately $ 252 million , net of tax in AOCI a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . Deferred gain hedged transaction a of September 24 , 2011 are expected to a of September 24 , 2011 are expected to occur within discontinued cash flow hedge during 2011 , 2010 and 2009 . flow hedge during 2011 , 2010 and 2009 . The Company during 2011 , 2010 and 2009 . The Company ’ s not significant a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . The ineffective a net loss of $ 158 million , $ 123 million $ 158 million , $ 123 million and $ 133 million $ 123 million and $ 133 million on foreign currency forward designated a hedging instrument during 2011 , 2010 and 2009 , hedging instrument during 2011 , 2010 and 2009 , respectively . during 2011 , 2010 and 2009 , respectively . These amount derivative instrument a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : ( in million ) : 2011 2010 Notional Principal Credit Risk in million ) : 2011 2010 Notional Principal Credit Risk Amounts : Foreign exchange contract $ 13,705 $ 537 $ 13,957 $ exchange contract $ 13,705 $ 537 $ 13,957 $ 62 Instruments $ 13,705 $ 537 $ 13,957 $ 62 Instruments other than $ 537 $ 13,957 $ 62 Instruments other than accounting hedge : Foreign exchange contract $ 9,891 $ 56 $ 10,727 $ exchange contract $ 9,891 $ 56 $ 10,727 $ 45 The $ 9,891 $ 56 $ 10,727 $ 45 The notional principal $ 56 $ 10,727 $ 45 The notional principal amount for and transaction that the foreign 57 exchange instrument are intended to value . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company received cash collateral security arrangement of $ 288 million , which it recorded Sheet . As of September 25 , 2010 , the Company As of September 25 , 2010 , the Company posted cash collateral security arrangement of $ 445 million , which it recorded additional collateral a of September 24 , 2011 or September 25 a of September 24 , 2011 or September 25 , 2010 24 , 2011 or September 25 , 2010 . The following 2011 or September 25 , 2010 . The following table summarize Balance Sheets a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : in million ) : September 24 , 2011 Fair Value of ) : September 24 , 2011 Fair Value of Derivatives Designated : Foreign exchange contract $ 460 $ 56 $ 516 Derivative exchange contract $ 460 $ 56 $ 516 Derivative liability ( $ 460 $ 56 $ 516 Derivative liability ( b ) : Foreign exchange contract $ 72 $ 37 $ 109 September exchange contract $ 72 $ 37 $ 109 September 25 , $ 72 $ 37 $ 109 September 25 , 2010 Fair $ 37 $ 109 September 25 , 2010 Fair Value of $ 109 September 25 , 2010 Fair Value of Derivatives Designated : Foreign exchange contract $ 62 $ 45 $ 107 Derivative exchange contract $ 62 $ 45 $ 107 Derivative liability ( $ 62 $ 45 $ 107 Derivative liability ( b ) : Foreign exchange contract $ 488 $ 118 $ 606 ( exchange contract $ 488 $ 118 $ 606 ( a ) $ 488 $ 118 $ 606 ( a ) The fair asset is measured using Level 2 fair value input and is liability is measured using Level 2 fair value input and is the Consolidated Balance Sheets . 58 The following table summarizes the for the year ended September 24 , 2011 and September 25 year ended September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : Excluded from Effectiveness Testing September 24 , 2011 September 25 , Effectiveness Testing September 24 , 2011 September 25 , 2010 September September 24 , 2011 September 25 , 2010 September 24 , , 2011 September 25 , 2010 September 24 , 2011 ( September 25 , 2010 September 24 , 2011 ( a ) , 2010 September 24 , 2011 ( a ) September 25 2011 ( a ) September 25 , 2010 ( b ) a ) September 25 , 2010 ( b ) Location September ( b ) Location September 24 , 2011 September 25 , ) Location September 24 , 2011 September 25 , 2010 Cash September 24 , 2011 September 25 , 2010 Cash flow hedge , 2011 September 25 , 2010 Cash flow hedge : Foreign : Foreign exchange contract $ 153 $ ( 267 ) $ contract $ 153 $ ( 267 ) $ ( 704 ) ( 267 ) $ ( 704 ) $ 115 Other income $ ( 704 ) $ 115 Other income and expense $ income and expense $ ( 213 ) $ ( 175 ) ( 213 ) $ ( 175 ) Net investment hedge : : Foreign exchange contract ( 43 ) ( 41 ) 0 contract ( 43 ) ( 41 ) 0 0 Other income 43 ) ( 41 ) 0 0 Other income and expense ) ( 41 ) 0 0 Other income and expense 1 0 Other income and expense 1 1 Total $ 110 $ Other income and expense 1 1 Total $ 110 $ ( expense 1 1 Total $ 110 $ ( 308 ) $ Total $ 110 $ ( 308 ) $ ( 704 ) ( 308 ) $ ( 704 ) $ 115 $ ( $ ( 704 ) $ 115 $ ( 212 ) $ ) $ 115 $ ( 212 ) $ ( 174 ) ( 212 ) $ ( 174 ) ( a ) Includes , of which $ ( 349 ) million and $ ( ) million and $ ( 355 ) million were recognized within for the year ended September 24 , 2011 . There were year ended September 24 , 2011 . There were no amount for the year ended September 24 , 2011 . ( b year ended September 24 , 2011 . ( b ) Includes hedge , of which $ 158 million and $ ( 43 158 million and $ ( 43 ) million were recognized within for the year ended September 25 , 2010 . There were year ended September 25 , 2010 . There were no amount for the year ended September 25 , 2010 . ( c year ended September 25 , 2010 . ( c ) Refer c ) Refer to Note 6 , “ Shareholders ’ Equity Compensation ” of this Form 10-K , which summarizes the activity arrangement . As of September 24 , 2011 , there were As of September 24 , 2011 , there were no customer no customer that accounted for 10 % or more of the ’ s customer accounted for 15 % and 12 % of accounted for 15 % and 12 % of total trade receivables trade receivables a of September 25 , 2010 . The Company a of September 25 , 2010 . The Company ’ s cellular network carrier accounted for 52 % and 64 % of accounted for 52 % and 64 % of trade receivables a trade receivables a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . The addition allowance for doubtful account during 2011 , 2010 and 2009 were doubtful account during 2011 , 2010 and 2009 were not significant during 2011 , 2010 and 2009 were not significant . 59 2009 were not significant . 59 Vendor Non-Trade Receivables The Company ’ s vendor accounted for 53 % and 29 % of accounted for 53 % and 29 % of total non-trade receivables non-trade receivables a of September 24 , 2011 and vendor non-trade a of September 24 , 2011 and vendor non-trade receivables from ’ s vendor accounted for 57 % and 24 % of accounted for 57 % and 24 % of total non-trade receivables non-trade receivables a of September 25 , 2010 . The Company a of September 25 , 2010 . The Company doe not cost of sale . Note 3 – Consolidated Financial Statement Details statement detail a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : Property , Plant and Equipment 2011 2010 Land and building $ , Plant and Equipment 2011 2010 Land and building $ 2,059 2010 Land and building $ 2,059 $ 1,471 Machinery , equipment and building $ 2,059 $ 1,471 Machinery , equipment and internal-use , equipment and internal-use software 6,926 3,589 Office furniture and equipment equipment and internal-use software 6,926 3,589 Office furniture and equipment 184 3,589 Office furniture and equipment 184 144 Leasehold improvement 2,599 2,030 Office furniture and equipment 184 144 Leasehold improvement 2,599 2,030 Gross equipment 184 144 Leasehold improvement 2,599 2,030 Gross property , plant 184 144 Leasehold improvement 2,599 2,030 Gross property , plant and property , plant and equipment 11,768 7,234 Accumulated depreciation and amortization , plant and equipment 11,768 7,234 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 3,991 ) ( 2,466 ) Net amortization ( 3,991 ) ( 2,466 ) Net property , plant , plant and equipment $ 7,777 $ 4,768 Accrued Expenses 2011 and equipment $ 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred 7,777 $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component $ 4,768 Accrued Expenses 2011 2010 Deferred margin on component sale margin on component sale $ 2,038 $ 663 Accrued warranty and component sale $ 2,038 $ 663 Accrued warranty and related cost Accrued warranty and related cost 1,240 761 Accrued tax 1,140 658 warranty and related cost 1,240 761 Accrued tax 1,140 658 Accrued cost 1,240 761 Accrued tax 1,140 658 Accrued marketing and selling 1,240 761 Accrued tax 1,140 658 Accrued marketing and selling expense Accrued marketing and selling expense 598 396 Accrued compensation and employee marketing and selling expense 598 396 Accrued compensation and employee benefit Accrued compensation and employee benefit 590 436 Other current liability 3,641 compensation and employee benefit 590 436 Other current liability 3,641 2,809 590 436 Other current liability 3,641 2,809 Total accrued expense $ 436 Other current liability 3,641 2,809 Total accrued expense $ 9,247 2,809 Total accrued expense $ 9,247 $ 5,723 Non-Current Liabilities 2011 accrued expense $ 9,247 $ 5,723 Non-Current Liabilities 2011 2010 Deferred 9,247 $ 5,723 Non-Current Liabilities 2011 2010 Deferred tax liability $ $ 5,723 Non-Current Liabilities 2011 2010 Deferred tax liability $ 8,159 2010 Deferred tax liability $ 8,159 $ 4,300 Other non-current liability tax liability $ 8,159 $ 4,300 Other non-current liability 1,941 1,231 $ 4,300 Other non-current liability 1,941 1,231 Total other non-current liability 4,300 Other non-current liability 1,941 1,231 Total other non-current liability $ Total other non-current liability $ 10,100 $ 5,531 60 Note 4 non-current liability $ 10,100 $ 5,531 60 Note 4 – Goodwill liability $ 10,100 $ 5,531 60 Note 4 – Goodwill and 10,100 $ 5,531 60 Note 4 – Goodwill and Other Intangible asset balance a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million ) : ( in million ) : 2011 2010 Gross Carrying Amount Accumulated in million ) : 2011 2010 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 3,873 $ ( 437 ) $ asset $ 3,873 $ ( 437 ) $ 3,436 $ 487 $ ( 437 ) $ 3,436 $ 487 $ ( 245 437 ) $ 3,436 $ 487 $ ( 245 ) $ 3,436 $ 487 $ ( 245 ) $ 242 Indefinite lived $ ( 245 ) $ 242 Indefinite lived and non-amortizable trademark Indefinite lived and non-amortizable trademark 100 0 100 100 0 100 lived and non-amortizable trademark 100 0 100 100 0 100 Total and non-amortizable trademark 100 0 100 100 0 100 Total acquired non-amortizable trademark 100 0 100 100 0 100 Total acquired intangible trademark 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset $ Total acquired intangible asset $ 3,973 $ ( 437 ) $ asset $ 3,973 $ ( 437 ) $ 3,536 $ 587 $ ( 437 ) $ 3,536 $ 587 $ ( 245 437 ) $ 3,536 $ 587 $ ( 245 ) $ 3,536 $ 587 $ ( 245 ) $ 342 During 2011 $ ( 245 ) $ 342 During 2011 and 2010 , 245 ) $ 342 During 2011 and 2010 , the Company $ 342 During 2011 and 2010 , the Company completed various various business acquisition . In 2011 , the aggregate cash consideration cash acquired , wa $ 244 million , of which $ million , of which $ 167 million wa allocated to goodwill allocated to goodwill and $ 77 million to acquired intangible asset acquired intangible asset . In 2010 , the aggregate cash consideration cash acquired , wa $ 638 million , of which $ million , of which $ 535 million wa allocated to goodwill allocated to goodwill and $ 107 million to acquired intangible asset acquired intangible asset . During 2011 , the Company , a overall purchase price of $ 4.5 billion , of which the s contribution wa approximately $ 2.6 billion . The majority of amount of goodwill wa $ 896 million and $ 741 million $ 896 million and $ 741 million a of September 24 741 million a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , respectively . 2011 and September 25 , 2010 , respectively . The Company have any goodwill impairment during 2011 , 2010 or 2009 . goodwill impairment during 2011 , 2010 or 2009 . The Company during 2011 , 2010 or 2009 . The Company ’ s acquired intangible asset wa $ 192 million , $ 69 million $ 192 million , $ 69 million and $ 53 million $ 69 million and $ 53 million in 2011 , 2010 and $ 53 million in 2011 , 2010 and 2009 , 53 million in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . As of respectively . As of September 24 , 2011 the weighted-average amortization As of September 24 , 2011 the weighted-average amortization period for for acquired intangible asset wa 6.2 year . The expected annual intangible asset a of September 24 , 2011 , is a a of September 24 , 2011 , is a follows ( in million ) : Years 2012 $ 520 2013 596 2014 ) : Years 2012 $ 520 2013 596 2014 608 2015 : Years 2012 $ 520 2013 596 2014 608 2015 441 Years 2012 $ 520 2013 596 2014 608 2015 441 2016 2012 $ 520 2013 596 2014 608 2015 441 2016 426 $ 520 2013 596 2014 608 2015 441 2016 426 Thereafter 520 2013 596 2014 608 2015 441 2016 426 Thereafter 845 2013 596 2014 608 2015 441 2016 426 Thereafter 845 Total 596 2014 608 2015 441 2016 426 Thereafter 845 Total $ 2014 608 2015 441 2016 426 Thereafter 845 Total $ 3,436 2015 441 2016 426 Thereafter 845 Total $ 3,436 61 Note 426 Thereafter 845 Total $ 3,436 61 Note 5 – Income Thereafter 845 Total $ 3,436 61 Note 5 – Income Taxes Total $ 3,436 61 Note 5 – Income Taxes The provision the three year ended September 24 , 2011 , consisted of year ended September 24 , 2011 , consisted of the following ( in million ) : 2011 2010 2009 Federal : Current in million ) : 2011 2010 2009 Federal : Current $ million ) : 2011 2010 2009 Federal : Current $ 3,884 2009 Federal : Current $ 3,884 $ 2,150 $ 1,922 Deferred : Current $ 3,884 $ 2,150 $ 1,922 Deferred 2,998 1,676 $ 3,884 $ 2,150 $ 1,922 Deferred 2,998 1,676 1,077 6,882 $ 2,150 $ 1,922 Deferred 2,998 1,676 1,077 6,882 3,826 2,999 2,150 $ 1,922 Deferred 2,998 1,676 1,077 6,882 3,826 2,999 State $ 1,922 Deferred 2,998 1,676 1,077 6,882 3,826 2,999 State : 1,922 Deferred 2,998 1,676 1,077 6,882 3,826 2,999 State : Current Deferred 2,998 1,676 1,077 6,882 3,826 2,999 State : Current 762 2,998 1,676 1,077 6,882 3,826 2,999 State : Current 762 655 3,826 2,999 State : Current 762 655 524 Deferred 37 ( 2,999 State : Current 762 655 524 Deferred 37 ( 115 State : Current 762 655 524 Deferred 37 ( 115 ) Current 762 655 524 Deferred 37 ( 115 ) ( 2 655 524 Deferred 37 ( 115 ) ( 2 ) 799 37 ( 115 ) ( 2 ) 799 540 522 Foreign 115 ) ( 2 ) 799 540 522 Foreign : Current ) ( 2 ) 799 540 522 Foreign : Current 769 ( 2 ) 799 540 522 Foreign : Current 769 282 540 522 Foreign : Current 769 282 345 Deferred ( 167 522 Foreign : Current 769 282 345 Deferred ( 167 ) Foreign : Current 769 282 345 Deferred ( 167 ) ( 769 282 345 Deferred ( 167 ) ( 121 ) ( Deferred ( 167 ) ( 121 ) ( 35 ) 602 ) ( 121 ) ( 35 ) 602 161 310 Provision 121 ) ( 35 ) 602 161 310 Provision for income ) ( 35 ) 602 161 310 Provision for income tax ( 35 ) 602 161 310 Provision for income tax $ Provision for income tax $ 8,283 $ 4,527 $ 3,831 The income tax $ 8,283 $ 4,527 $ 3,831 The foreign provision $ 8,283 $ 4,527 $ 3,831 The foreign provision for income foreign pretax earnings of $ 24.0 billion , $ 13.0 billion $ 24.0 billion , $ 13.0 billion and $ 6.6 billion $ 13.0 billion and $ 6.6 billion in 2011 , 2010 and $ 6.6 billion in 2011 , 2010 and 2009 , 6.6 billion in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . The Company the U.S. As of September 24 , 2011 , U.S. income As of September 24 , 2011 , U.S. income tax have a cumulative total of $ 23.4 billion of such earnings . estimated to be approximately $ 8.0 billion . As of September billion . As of September 24 , 2011 and September 25 As of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , $ 54.3 2011 and September 25 , 2010 , $ 54.3 billion and 25 , 2010 , $ 54.3 billion and $ 30.8 billion $ 54.3 billion and $ 30.8 billion , respectively , of be recovered or settled . 62 As of September 24 , . 62 As of September 24 , 2011 and September 25 As of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , the significant 2011 and September 25 , 2010 , the significant component of ( in million ) : 2011 2010 Deferred tax asset : in million ) : 2011 2010 Deferred tax asset : Accrued liability and other reserve $ 1,610 $ 1,369 Basis of capital other reserve $ 1,610 $ 1,369 Basis of capital asset and of capital asset and investment 390 179 Share-based compensation 355 308 capital asset and investment 390 179 Share-based compensation 355 308 Other investment 390 179 Share-based compensation 355 308 Other 795 707 Total 390 179 Share-based compensation 355 308 Other 795 707 Total deferred Share-based compensation 355 308 Other 795 707 Total deferred tax asset compensation 355 308 Other 795 707 Total deferred tax asset 3,150 707 Total deferred tax asset 3,150 2,563 Less valuation allowance 0 Total deferred tax asset 3,150 2,563 Less valuation allowance 0 0 3,150 2,563 Less valuation allowance 0 0 Deferred tax asset , 2,563 Less valuation allowance 0 0 Deferred tax asset , net , net of valuation allowance 3,150 2,563 Deferred tax liability : net of valuation allowance 3,150 2,563 Deferred tax liability : Unremitted Unremitted earning of foreign subsidiary 8,896 4,979 Other 272 150 Total earning of foreign subsidiary 8,896 4,979 Other 272 150 Total deferred foreign subsidiary 8,896 4,979 Other 272 150 Total deferred tax liability subsidiary 8,896 4,979 Other 272 150 Total deferred tax liability 9,168 150 Total deferred tax liability 9,168 5,129 Net deferred tax liability Total deferred tax liability 9,168 5,129 Net deferred tax liability $ deferred tax liability $ ( 6,018 ) $ ( 2,566 ) ( 6,018 ) $ ( 2,566 ) A reconciliation of the federal income tax rate ( 35 % in 2011 , 2010 rate ( 35 % in 2011 , 2010 and 2009 ) 35 % in 2011 , 2010 and 2009 ) to income in 2011 , 2010 and 2009 ) to income before provision the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( ( in million ) : 2011 2010 2009 Computed expected tax in million ) : 2011 2010 2009 Computed expected tax $ million ) : 2011 2010 2009 Computed expected tax $ 11,973 2009 Computed expected tax $ 11,973 $ 6,489 $ 4,223 State expected tax $ 11,973 $ 6,489 $ 4,223 State tax , $ 11,973 $ 6,489 $ 4,223 State tax , net of , net of federal effect 552 351 339 Indefinitely invested earnings net of federal effect 552 351 339 Indefinitely invested earnings of of federal effect 552 351 339 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 3,898 ) ( 2,125 ) ( subsidiary ( 3,898 ) ( 2,125 ) ( 647 ) Research ) ( 2,125 ) ( 647 ) Research and development credit development credit , net ( 167 ) ( 23 ) ( net ( 167 ) ( 23 ) ( 84 ) Domestic ) ( 23 ) ( 84 ) Domestic production activity deduction Domestic production activity deduction ( 168 ) ( 48 ) ( deduction ( 168 ) ( 48 ) ( 36 ) Other ) ( 48 ) ( 36 ) Other ( 9 ) ( 36 ) Other ( 9 ) ( 117 ) 36 Other ( 9 ) ( 117 ) 36 Provision for income 9 ) ( 117 ) 36 Provision for income tax $ Provision for income tax $ 8,283 $ 4,527 $ 3,831 Effective income tax $ 8,283 $ 4,527 $ 3,831 Effective tax rate $ 8,283 $ 4,527 $ 3,831 Effective tax rate 24.2 % $ 3,831 Effective tax rate 24.2 % 24.4 % 31.8 % Effective tax rate 24.2 % 24.4 % 31.8 % The Company rate 24.2 % 24.4 % 31.8 % The Company ’ s from equity award of $ 1.1 billion , $ 742 million $ 1.1 billion , $ 742 million and $ 246 million $ 742 million and $ 246 million in 2011 , 2010 and $ 246 million in 2011 , 2010 and 2009 , 246 million in 2011 , 2010 and 2009 , respectively , in 2011 , 2010 and 2009 , respectively , which were benefit that is greater than 50 % likely of being realized the Consolidated Balance Sheets . 63 As of September 24 , . 63 As of September 24 , 2011 , the total As of September 24 , 2011 , the total amount of unrecognized tax benefit wa $ 1.4 billion , of which $ billion , of which $ 563 million , if recognized , rate . As of September 25 , 2010 , the total As of September 25 , 2010 , the total amount of unrecognized tax benefit wa $ 943 million , of which $ million , of which $ 404 million , if recognized , the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( ( in million ) : 2011 2010 2009 Beginning Balance $ in million ) : 2011 2010 2009 Beginning Balance $ 943 million ) : 2011 2010 2009 Beginning Balance $ 943 971 2010 2009 Beginning Balance $ 943 971 $ 506 Increases related 2009 Beginning Balance $ 943 971 $ 506 Increases related to Balance $ 943 971 $ 506 Increases related to tax position taken during a prior year 49 61 341 Decreases related to during a prior year 49 61 341 Decreases related to tax a prior year 49 61 341 Decreases related to tax position during a prior year ( 39 ) ( 224 ) ( year ( 39 ) ( 224 ) ( 24 ) Increases ) ( 224 ) ( 24 ) Increases related to tax taken during the current year 425 240 151 Decreases related to during the current year 425 240 151 Decreases related to settlement the current year 425 240 151 Decreases related to settlement with to settlement with taxing authority 0 ( 102 ) 0 Decreases with taxing authority 0 ( 102 ) 0 Decreases related to authority 0 ( 102 ) 0 Decreases related to expiration of of statute of limitation ( 3 ) ( 3 ) ( limitation ( 3 ) ( 3 ) ( 3 ) Ending ) ( 3 ) ( 3 ) Ending Balance $ 1,375 3 ) Ending Balance $ 1,375 $ 943 $ 971 The Ending Balance $ 1,375 $ 943 $ 971 The Company includes $ 1,375 $ 943 $ 971 The Company includes interest and tax . As of September 24 , 2011 and September 25 As of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , the total 2011 and September 25 , 2010 , the total amount of and penalty accrued wa $ 261 million and $ 247 million $ 261 million and $ 247 million , respectively , which Company recognized interest expense in 2011 and 2009 of $ 14 interest expense in 2011 and 2009 of $ 14 million and 2011 and 2009 of $ 14 million and $ 64 million $ 14 million and $ 64 million , respectively , and , respectively , and in 2010 the Company recognized an interest an interest benefit of $ 43 million . The Company is , all year prior to 2004 are closed . The Internal tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . In addition examining the year 2007 through 2009 . In addition , the , the year subsequent to 1988 and 2001 , respectively , year subsequent to 1988 and 2001 , respectively , generally remain materially change in the next 12 month . Note 6 – next 12 month . Note 6 – Shareholders ’ Equity and are recorded a an element 64 of shareholder ’ equity but tax , a of September 24 , 2011 , September 25 a of September 24 , 2011 , September 25 , 2010 24 , 2011 , September 25 , 2010 , and September 2011 , September 25 , 2010 , and September 26 , , 2010 , and September 26 , 2009 ( in million , and September 26 , 2009 ( in million ) : ( in million ) : 2011 2010 2009 Net unrealized gains/losses in million ) : 2011 2010 2009 Net unrealized gains/losses on million ) : 2011 2010 2009 Net unrealized gains/losses on marketable gains/losses on marketable security $ 130 $ 171 $ 48 Net marketable security $ 130 $ 171 $ 48 Net unrecognized gains/losses $ 130 $ 171 $ 48 Net unrecognized gains/losses on derivative unrecognized gains/losses on derivative instrument 290 ( 252 ) 1 Cumulative on derivative instrument 290 ( 252 ) 1 Cumulative foreign currency instrument 290 ( 252 ) 1 Cumulative foreign currency translation 23 1 Cumulative foreign currency translation 23 35 28 Accumulated other comprehensive Cumulative foreign currency translation 23 35 28 Accumulated other comprehensive income/ foreign currency translation 23 35 28 Accumulated other comprehensive income/ ( income/ ( loss ) $ 443 $ ( 46 ) $ ) $ 443 $ ( 46 ) $ 77 The change $ ( 46 ) $ 77 The change in fair value comprehensive income wa $ ( 41 ) million , $ 123 41 ) million , $ 123 million and $ 118 million $ 123 million and $ 118 million , net of tax , net of tax in 2011 , 2010 and 2009 , of tax in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . The tax on available-for-sale security wa $ 24 million , $ ( 72 24 million , $ ( 72 ) million and $ ( ) million and $ ( 78 ) million for 2011 , ( 78 ) million for 2011 , 2010 and 2009 , ) million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The following the three year ended September 24 , 2011 ( in million year ended September 24 , 2011 ( in million ) : ( in million ) : 2011 2010 2009 Changes in fair in million ) : 2011 2010 2009 Changes in fair value million ) : 2011 2010 2009 Changes in fair value of fair value of derivative $ 92 $ ( 180 ) $ derivative $ 92 $ ( 180 ) $ 204 Adjustment for $ ( 180 ) $ 204 Adjustment for net gains/losses realized and included in net income 450 ( 73 ) ( 222 in net income 450 ( 73 ) ( 222 ) Change 450 ( 73 ) ( 222 ) Change in unrecognized gains/losses gains/losses on derivative instrument $ 542 $ ( 253 ) $ instrument $ 542 $ ( 253 ) $ ( 18 ) ( 253 ) $ ( 18 ) The tax effect related of derivative wa $ ( 50 ) million , $ 97 50 ) million , $ 97 million and $ ( 135 97 million and $ ( 135 ) million for 2011 , ( 135 ) million for 2011 , 2010 and 2009 , ) million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The tax to income wa $ ( 250 ) million , $ 43 250 ) million , $ 43 million and $ 149 million $ 43 million and $ 149 million for 2011 , 2010 and $ 149 million for 2011 , 2010 and 2009 , 149 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . Employee Benefit respectively . Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a including executive officer . The 2003 Plan permit the granting of . Options granted under the 2003 Plan generally expire seven to , RSUs granted under the 2003 Plan vest over two to an award granted under the 2003 Plan ( other than a basis . As of September 24 , 2011 , approximately 50.8 As of September 24 , 2011 , approximately 50.8 million share 24 , 2011 , approximately 50.8 million share were reserved for for future issuance under the 2003 Plan . 65 1997 Director under the 2003 Plan . 65 1997 Director Stock Plan The the 2003 Plan . 65 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . As of Plan expires November 9 , 2019 . As of September 24 2019 . As of September 24 , 2011 , approximately 190,000 As of September 24 , 2011 , approximately 190,000 share were 24 , 2011 , approximately 190,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans During the fourth During the fourth quarter of 2011 , executive officer Timothy D. trading plan pursuant to Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) of the Securities Exchange the Securities Exchange Act of 1934 , a amended ( the at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 24 , 2011 , approximately 3.1 As of September 24 , 2011 , approximately 3.1 million share 24 , 2011 , approximately 3.1 million share were reserved for deferred salary arrangement under Section 401 ( k ) of the annual contribution limit ( $ 16,500 for calendar year 2011 ) $ 16,500 for calendar year 2011 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ the Savings Plan were $ 90 million , $ 72 million $ 90 million , $ 72 million and $ 59 million $ 72 million and $ 59 million in 2011 , 2010 and $ 59 million in 2011 , 2010 and 2009 , 59 million in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . 66 Restricted and 2009 , respectively . 66 Restricted Stock Units A summary the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( Intrinsic Value Balance at September 27 , 2008 7,040 $ 134.91 Balance at September 27 , 2008 7,040 $ 134.91 RSUs unit at September 27 , 2008 7,040 $ 134.91 RSUs unit granted 27 , 2008 7,040 $ 134.91 RSUs unit granted 7,786 $ $ 134.91 RSUs unit granted 7,786 $ 111.80 RSUs vested ( RSUs unit granted 7,786 $ 111.80 RSUs vested ( 1,935 ) $ 111.80 RSUs vested ( 1,935 ) $ 124.87 RSUs cancelled vested ( 1,935 ) $ 124.87 RSUs cancelled ( 628 ) $ 124.87 RSUs cancelled ( 628 ) $ 121.28 Balance at cancelled ( 628 ) $ 121.28 Balance at September 26 , $ 121.28 Balance at September 26 , 2009 12,263 $ 122.52 Balance at September 26 , 2009 12,263 $ 122.52 RSUs unit at September 26 , 2009 12,263 $ 122.52 RSUs unit granted 26 , 2009 12,263 $ 122.52 RSUs unit granted 6,178 $ $ 122.52 RSUs unit granted 6,178 $ 214.37 RSUs vested ( RSUs unit granted 6,178 $ 214.37 RSUs vested ( 4,685 ) $ 214.37 RSUs vested ( 4,685 ) $ 119.85 RSUs cancelled vested ( 4,685 ) $ 119.85 RSUs cancelled ( 722 ) $ 119.85 RSUs cancelled ( 722 ) $ 147.56 Balance at cancelled ( 722 ) $ 147.56 Balance at September 25 , $ 147.56 Balance at September 25 , 2010 13,034 $ 165.63 Balance at September 25 , 2010 13,034 $ 165.63 RSUs unit at September 25 , 2010 13,034 $ 165.63 RSUs unit granted 25 , 2010 13,034 $ 165.63 RSUs unit granted 6,667 $ $ 165.63 RSUs unit granted 6,667 $ 312.63 RSUs vested ( RSUs unit granted 6,667 $ 312.63 RSUs vested ( 4,513 ) $ 312.63 RSUs vested ( 4,513 ) $ 168.08 RSUs cancelled vested ( 4,513 ) $ 168.08 RSUs cancelled ( 742 ) $ 168.08 RSUs cancelled ( 742 ) $ 189.08 Balance at cancelled ( 742 ) $ 189.08 Balance at September 24 , $ 189.08 Balance at September 24 , 2011 14,446 $ 231.49 Balance at September 24 , 2011 14,446 $ 231.49 $ 5,840,503 at September 24 , 2011 14,446 $ 231.49 $ 5,840,503 The 24 , 2011 14,446 $ 231.49 $ 5,840,503 The fair value 2011 14,446 $ 231.49 $ 5,840,503 The fair value a of date of RSUs wa $ 1.5 billion , $ 1.0 billion $ 1.5 billion , $ 1.0 billion and $ 221 million $ 1.0 billion and $ 221 million for 2011 , 2010 and $ 221 million for 2011 , 2010 and 2009 , 221 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The majority of RSUs that vested in 2011 , 2010 and 2009 , that vested in 2011 , 2010 and 2009 , were net-share in 2011 , 2010 and 2009 , were net-share settled such total share withheld were approximately 1.6 million , 1.8 million and were approximately 1.6 million , 1.8 million and 707,000 for 2011 million , 1.8 million and 707,000 for 2011 , 2010 and 1.8 million and 707,000 for 2011 , 2010 and 2009 , and 707,000 for 2011 , 2010 and 2009 , respectively , for 2011 , 2010 and 2009 , respectively , and were the taxing authority were $ 520 million , $ 406 million $ 520 million , $ 406 million and $ 82 million $ 406 million and $ 82 million in 2011 , 2010 and $ 82 million in 2011 , 2010 and 2009 , 82 million in 2011 , 2010 and 2009 , respectively , in 2011 , 2010 and 2009 , respectively , and are expense to the Company . 67 Stock Option Activity A summary the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( Intrinsic Value Balance at September 27 , 2008 44,146 $ 74.39 Balance at September 27 , 2008 44,146 $ 74.39 Options granted at September 27 , 2008 44,146 $ 74.39 Options granted 234 27 , 2008 44,146 $ 74.39 Options granted 234 $ 106.84 44,146 $ 74.39 Options granted 234 $ 106.84 Options cancelled ( 74.39 Options granted 234 $ 106.84 Options cancelled ( 1,241 ) $ 106.84 Options cancelled ( 1,241 ) $ 122.98 Options exercised cancelled ( 1,241 ) $ 122.98 Options exercised ( 8,764 ) $ 122.98 Options exercised ( 8,764 ) $ 41.78 Balance at exercised ( 8,764 ) $ 41.78 Balance at September 26 , $ 41.78 Balance at September 26 , 2009 34,375 $ 81.17 Balance at September 26 , 2009 34,375 $ 81.17 Options granted at September 26 , 2009 34,375 $ 81.17 Options granted 34 26 , 2009 34,375 $ 81.17 Options granted 34 $ 202.00 34,375 $ 81.17 Options granted 34 $ 202.00 Options assumed 98 81.17 Options granted 34 $ 202.00 Options assumed 98 $ 11.99 34 $ 202.00 Options assumed 98 $ 11.99 Options cancelled ( 202.00 Options assumed 98 $ 11.99 Options cancelled ( 430 ) $ 11.99 Options cancelled ( 430 ) $ 136.27 Options exercised cancelled ( 430 ) $ 136.27 Options exercised ( 12,352 ) $ 136.27 Options exercised ( 12,352 ) $ 62.69 Balance at exercised ( 12,352 ) $ 62.69 Balance at September 25 , $ 62.69 Balance at September 25 , 2010 21,725 $ 90.46 Balance at September 25 , 2010 21,725 $ 90.46 Options granted at September 25 , 2010 21,725 $ 90.46 Options granted 1 25 , 2010 21,725 $ 90.46 Options granted 1 $ 342.62 21,725 $ 90.46 Options granted 1 $ 342.62 Options cancelled ( 90.46 Options granted 1 $ 342.62 Options cancelled ( 163 ) $ 342.62 Options cancelled ( 163 ) $ 128.42 Options exercised cancelled ( 163 ) $ 128.42 Options exercised ( 9,697 ) $ 128.42 Options exercised ( 9,697 ) $ 67.63 Balance at exercised ( 9,697 ) $ 67.63 Balance at September 24 , $ 67.63 Balance at September 24 , 2011 11,866 $ 108.64 Balance at September 24 , 2011 11,866 $ 108.64 2.38 $ at September 24 , 2011 11,866 $ 108.64 2.38 $ 3,508,243 24 , 2011 11,866 $ 108.64 2.38 $ 3,508,243 Exercisable at , 2011 11,866 $ 108.64 2.38 $ 3,508,243 Exercisable at September 11,866 $ 108.64 2.38 $ 3,508,243 Exercisable at September 24 , $ 3,508,243 Exercisable at September 24 , 2011 11,089 $ 104.97 Exercisable at September 24 , 2011 11,089 $ 104.97 2.31 $ at September 24 , 2011 11,089 $ 104.97 2.31 $ 3,319,374 24 , 2011 11,089 $ 104.97 2.31 $ 3,319,374 Expected to , 2011 11,089 $ 104.97 2.31 $ 3,319,374 Expected to vest 11,089 $ 104.97 2.31 $ 3,319,374 Expected to vest after September Expected to vest after September 24 , 2011 777 $ 161.23 vest after September 24 , 2011 777 $ 161.23 3.38 $ after September 24 , 2011 777 $ 161.23 3.38 $ 188,869 24 , 2011 777 $ 161.23 3.38 $ 188,869 Aggregate intrinsic , 2011 777 $ 161.23 3.38 $ 188,869 Aggregate intrinsic value 777 $ 161.23 3.38 $ 188,869 Aggregate intrinsic value represents the time of exercise wa $ 2.6 billion , $ 2.0 billion $ 2.6 billion , $ 2.0 billion and $ 827 million $ 2.0 billion and $ 827 million for 2011 , 2010 and $ 827 million for 2011 , 2010 and 2009 , 827 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . Share-based Compensation period . The Company granted 1,370 stock option , 34,000 stock granted 1,370 stock option , 34,000 stock option and 234,000 stock , 34,000 stock option and 234,000 stock option during 2011 , and 234,000 stock option during 2011 , 2010 and 2009 , stock option during 2011 , 2010 and 2009 , respectively . during 2011 , 2010 and 2009 , respectively . The weighted-average of stock option granted during 2011 , 2010 and 2009 wa option granted during 2011 , 2010 and 2009 wa $ 181.13 during 2011 , 2010 and 2009 wa $ 181.13 , $ 2010 and 2009 wa $ 181.13 , $ 108.58 and $ wa $ 181.13 , $ 108.58 and $ 46.71 per share , $ 108.58 and $ 46.71 per share , respectively . per share , respectively . 68 The Company did not assume conjunction with business combination during 2011 or 2009 . During 2010 business combination during 2011 or 2009 . During 2010 , the 2011 or 2009 . During 2010 , the Company assumed 98,000 2010 , the Company assumed 98,000 stock option , which had weighted-average fair value of $ 216.82 per share . The weighted-average right per share wa $ 71.47 , $ 45.03 and $ wa $ 71.47 , $ 45.03 and $ 30.62 during 2011 , $ 45.03 and $ 30.62 during 2011 , 2010 and 45.03 and $ 30.62 during 2011 , 2010 and 2009 , $ 30.62 during 2011 , 2010 and 2009 , respectively . during 2011 , 2010 and 2009 , respectively . The following the three year ended September 24 , 2011 ( in million year ended September 24 , 2011 ( in million ) : ( in million ) : 2011 2010 2009 Cost of sale in million ) : 2011 2010 2009 Cost of sale $ million ) : 2011 2010 2009 Cost of sale $ 200 2009 Cost of sale $ 200 $ 151 $ 114 Research of sale $ 200 $ 151 $ 114 Research and development $ 200 $ 151 $ 114 Research and development 450 323 $ 114 Research and development 450 323 258 Selling , general 114 Research and development 450 323 258 Selling , general and Research and development 450 323 258 Selling , general and administrative Selling , general and administrative 518 405 338 Total share-based compensation , general and administrative 518 405 338 Total share-based compensation expense general and administrative 518 405 338 Total share-based compensation expense $ Total share-based compensation expense $ 1,168 $ 879 $ 710 The compensation expense $ 1,168 $ 879 $ 710 The income tax $ 1,168 $ 879 $ 710 The income tax benefit related share-based compensation expense wa $ 467 million , $ 314 million $ 467 million , $ 314 million and $ 266 million $ 314 million and $ 266 million for 2011 , 2010 and $ 266 million for 2011 , 2010 and 2009 , 266 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . As of respectively . As of September 24 , 2011 , the total As of September 24 , 2011 , the total unrecognized compensation option and RSUs wa $ 2.6 billion , which the Company over a weighted-average period of 3.7 year . Note 7 – of 3.7 year . Note 7 – Commitments and Contingencies Accrued The Company also offer a 90-day basic warranty for it service the three year ended September 24 , 2011 ( in million year ended September 24 , 2011 ( in million ) : ( in million ) : 2011 2010 2009 Beginning accrued warranty in million ) : 2011 2010 2009 Beginning accrued warranty and million ) : 2011 2010 2009 Beginning accrued warranty and related warranty and related cost $ 761 $ 577 $ 671 Cost related cost $ 761 $ 577 $ 671 Cost of warranty $ 761 $ 577 $ 671 Cost of warranty claim ( Cost of warranty claim ( 1,147 ) ( 713 ) ( claim ( 1,147 ) ( 713 ) ( 534 ) Accruals ) ( 713 ) ( 534 ) Accruals for product warranty ) Accruals for product warranty 1,626 897 440 Ending accrued warranty Accruals for product warranty 1,626 897 440 Ending accrued warranty and for product warranty 1,626 897 440 Ending accrued warranty and related warranty and related cost $ 1,240 $ 761 $ 577 The related cost $ 1,240 $ 761 $ 577 The Company generally $ 1,240 $ 761 $ 577 The Company generally doe not management , there wa not 69 at least a reasonable possibility indemnification a of either September 24 , 2011 or September 25 of either September 24 , 2011 or September 25 , 2010 24 , 2011 or September 25 , 2010 . The Company 2011 or September 25 , 2010 . The Company ha entered requirement for period up to 150 day . Long-Term Supply Agreements These agreement generally expire between 2012 and 2022 . As of generally expire between 2012 and 2022 . As of September 24 2022 . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had a had a total of $ 2.3 billion of inventory component prepayment outstanding , of which $ 728 million are classified a other million are classified a other 70 current asset and $ 1.6 70 current asset and $ 1.6 billion are classified a other had a total of $ 956 million of inventory component prepayment prepayment outstanding a of September 25 , 2010 . The Company a of September 25 , 2010 . The Company ’ s typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of option . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company ’ s noncancelable operating lease were $ 3.0 billion , of which $ billion , of which $ 2.4 billion related to lease for noncancelable lease , wa $ 338 million , $ 271 million $ 338 million , $ 271 million and $ 231 million $ 271 million and $ 231 million in 2011 , 2010 and $ 231 million in 2011 , 2010 and 2009 , 231 million in 2011 , 2010 and 2009 , respectively . in 2011 , 2010 and 2009 , respectively . Future minimum one year a of September 24 , 2011 , are a a of September 24 , 2011 , are a follows ( in million ) : Years 2012 $ 338 2013 365 2014 ) : Years 2012 $ 338 2013 365 2014 362 2015 : Years 2012 $ 338 2013 365 2014 362 2015 345 Years 2012 $ 338 2013 365 2014 362 2015 345 2016 2012 $ 338 2013 365 2014 362 2015 345 2016 320 $ 338 2013 365 2014 362 2015 345 2016 320 Thereafter 338 2013 365 2014 362 2015 345 2016 320 Thereafter 1,302 2013 365 2014 362 2015 345 2016 320 Thereafter 1,302 Total 365 2014 362 2015 345 2016 320 Thereafter 1,302 Total minimum 2014 362 2015 345 2016 320 Thereafter 1,302 Total minimum lease 2015 345 2016 320 Thereafter 1,302 Total minimum lease payment $ Total minimum lease payment $ 3,032 Other Commitments As of September Other Commitments As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had outstanding and component purchase of $ 13.9 billion . Additionally , other other outstanding obligation were $ 2.4 billion a of September 24 2.4 billion a of September 24 , 2011 , and were a of September 24 , 2011 , and were comprised mainly in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal and in Part I Item 1A under the heading “ Risk be materially adversely affected . 71 Note 8 – Segment Information adversely affected . 71 Note 8 – Segment Information and Geographic operates Apple retail store in 11 country . Each reportable operating a those described in Note 1 , “ Summary of Significant the Retail segment were $ 612 million , $ 392 million $ 612 million , $ 392 million and $ 369 million $ 392 million and $ 369 million for 2011 , 2010 and $ 369 million for 2011 , 2010 and 2009 , 369 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . The Company had opened a total of 19 high-profile store a of September high-profile store a of September 24 , 2011 . Amounts allocated a of September 24 , 2011 . Amounts allocated to corporate of high-profile store were $ 102 million , $ 75 million $ 102 million , $ 75 million and $ 65 million $ 75 million and $ 65 million for 2011 , 2010 and $ 65 million for 2011 , 2010 and 2009 , 65 million for 2011 , 2010 and 2009 , respectively . for 2011 , 2010 and 2009 , respectively . 72 Summary and 2009 , respectively . 72 Summary information by operating segment the three year ended September 24 , 2011 is a follows year ended September 24 , 2011 is a follows ( in ( in million ) : 2011 2010 2009 Americas : Net in million ) : 2011 2010 2009 Americas : Net sale million ) : 2011 2010 2009 Americas : Net sale $ Americas : Net sale $ 38,315 $ 24,498 $ 18,981 Operating Net sale $ 38,315 $ 24,498 $ 18,981 Operating income $ $ 38,315 $ 24,498 $ 18,981 Operating income $ 13,538 $ $ 18,981 Operating income $ 13,538 $ 7,590 $ 6,658 Depreciation Operating income $ 13,538 $ 7,590 $ 6,658 Depreciation , amortization $ 13,538 $ 7,590 $ 6,658 Depreciation , amortization and accretion , amortization and accretion $ 15 $ 12 $ 12 Segment and accretion $ 15 $ 12 $ 12 Segment asset ( $ 15 $ 12 $ 12 Segment asset ( a ) asset ( a ) $ 3,807 $ 2,809 $ 1,896 Europe a ) $ 3,807 $ 2,809 $ 1,896 Europe : Net $ 3,807 $ 2,809 $ 1,896 Europe : Net sale $ Europe : Net sale $ 27,778 $ 18,692 $ 11,810 Operating Net sale $ 27,778 $ 18,692 $ 11,810 Operating income $ $ 27,778 $ 18,692 $ 11,810 Operating income $ 11,528 $ $ 11,810 Operating income $ 11,528 $ 7,524 $ 4,296 Depreciation Operating income $ 11,528 $ 7,524 $ 4,296 Depreciation , amortization $ 11,528 $ 7,524 $ 4,296 Depreciation , amortization and accretion , amortization and accretion $ 9 $ 9 $ 7 Segment and accretion $ 9 $ 9 $ 7 Segment asset $ $ 9 $ 9 $ 7 Segment asset $ 2,985 $ $ 7 Segment asset $ 2,985 $ 1,926 $ 1,352 Japan Segment asset $ 2,985 $ 1,926 $ 1,352 Japan : Net $ 2,985 $ 1,926 $ 1,352 Japan : Net sale $ Japan : Net sale $ 5,437 $ 3,981 $ 2,279 Operating Net sale $ 5,437 $ 3,981 $ 2,279 Operating income $ $ 5,437 $ 3,981 $ 2,279 Operating income $ 2,481 $ $ 2,279 Operating income $ 2,481 $ 1,846 $ 961 Depreciation Operating income $ 2,481 $ 1,846 $ 961 Depreciation , amortization $ 2,481 $ 1,846 $ 961 Depreciation , amortization and accretion , amortization and accretion $ 3 $ 3 $ 2 Segment and accretion $ 3 $ 3 $ 2 Segment asset $ $ 3 $ 3 $ 2 Segment asset $ 804 $ $ 2 Segment asset $ 804 $ 991 $ 483 Asia-Pacific Segment asset $ 804 $ 991 $ 483 Asia-Pacific : Net $ 804 $ 991 $ 483 Asia-Pacific : Net sale $ Asia-Pacific : Net sale $ 22,592 $ 8,256 $ 3,179 Operating Net sale $ 22,592 $ 8,256 $ 3,179 Operating income $ $ 22,592 $ 8,256 $ 3,179 Operating income $ 9,587 $ $ 3,179 Operating income $ 9,587 $ 3,647 $ 1,100 Depreciation Operating income $ 9,587 $ 3,647 $ 1,100 Depreciation , amortization $ 9,587 $ 3,647 $ 1,100 Depreciation , amortization and accretion , amortization and accretion $ 3 $ 3 $ 3 Segment and accretion $ 3 $ 3 $ 3 Segment asset $ $ 3 $ 3 $ 3 Segment asset $ 1,913 $ $ 3 Segment asset $ 1,913 $ 1,622 $ 529 Retail Segment asset $ 1,913 $ 1,622 $ 529 Retail : Net $ 1,913 $ 1,622 $ 529 Retail : Net sale $ Retail : Net sale $ 14,127 $ 9,798 $ 6,656 Operating Net sale $ 14,127 $ 9,798 $ 6,656 Operating income $ $ 14,127 $ 9,798 $ 6,656 Operating income $ 3,344 $ $ 6,656 Operating income $ 3,344 $ 2,364 $ 1,677 Depreciation Operating income $ 3,344 $ 2,364 $ 1,677 Depreciation , amortization $ 3,344 $ 2,364 $ 1,677 Depreciation , amortization and accretion accretion ( b ) $ 223 $ 163 $ 146 Segment b ) $ 223 $ 163 $ 146 Segment asset ( $ 223 $ 163 $ 146 Segment asset ( b ) asset ( b ) $ 2,940 $ 1,829 $ 1,344 ( b ) $ 2,940 $ 1,829 $ 1,344 ( a ) $ 2,940 $ 1,829 $ 1,344 ( a ) The Americas the three year ended September 24 , 2011 is a follows year ended September 24 , 2011 is a follows ( in ( in million ) : 2011 2010 2009 Segment operating income in million ) : 2011 2010 2009 Segment operating income $ million ) : 2011 2010 2009 Segment operating income $ 40,478 2009 Segment operating income $ 40,478 $ 22,971 $ 14,692 Other operating income $ 40,478 $ 22,971 $ 14,692 Other corporate expense $ 40,478 $ 22,971 $ 14,692 Other corporate expense , net net ( a ) ( 5,520 ) ( 3,707 ) ( ) ( 5,520 ) ( 3,707 ) ( 2,242 ) Share-based ) ( 3,707 ) ( 2,242 ) Share-based compensation expense ( ) Share-based compensation expense ( 1,168 ) ( 879 ) ( expense ( 1,168 ) ( 879 ) ( 710 ) Total ) ( 879 ) ( 710 ) Total operating income $ ) Total operating income $ 33,790 $ 18,385 $ 11,740 Segment operating income $ 33,790 $ 18,385 $ 11,740 Segment asset $ $ 33,790 $ 18,385 $ 11,740 Segment asset $ 12,449 $ $ 11,740 Segment asset $ 12,449 $ 9,177 $ 5,604 Corporate Segment asset $ 12,449 $ 9,177 $ 5,604 Corporate asset 103,922 $ 12,449 $ 9,177 $ 5,604 Corporate asset 103,922 66,006 41,897 9,177 $ 5,604 Corporate asset 103,922 66,006 41,897 Consolidated asset $ $ 5,604 Corporate asset 103,922 66,006 41,897 Consolidated asset $ 116,371 5,604 Corporate asset 103,922 66,006 41,897 Consolidated asset $ 116,371 $ 66,006 41,897 Consolidated asset $ 116,371 $ 75,183 $ 47,501 Segment Consolidated asset $ 116,371 $ 75,183 $ 47,501 Segment depreciation , $ 116,371 $ 75,183 $ 47,501 Segment depreciation , amortization and , amortization and accretion $ 253 $ 190 $ 170 Corporate and accretion $ 253 $ 190 $ 170 Corporate depreciation , $ 253 $ 190 $ 170 Corporate depreciation , amortization and depreciation , amortization and accretion 1,561 837 564 Consolidated depreciation , , amortization and accretion 1,561 837 564 Consolidated depreciation , amortization amortization and accretion 1,561 837 564 Consolidated depreciation , amortization and , amortization and accretion $ 1,814 $ 1,027 $ 734 73 and accretion $ 1,814 $ 1,027 $ 734 73 ( a $ 1,814 $ 1,027 $ 734 73 ( a ) Other 1,814 $ 1,027 $ 734 73 ( a ) Other corporate that accounted for more than 10 % of Company ’ s ’ s net sale in 2011 . No single country other U.S. accounted for more than 10 % of net sale in % of net sale in 2010 or 2009 . There wa net sale in 2010 or 2009 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2011 or 2010 . One of net sale in 2011 or 2010 . One of the Company ’ s customer accounted for 11 % of net sale in % of net sale in 2009 . Net sale for the the three year ended September 24 , 2011 and long-lived asset year ended September 24 , 2011 and long-lived asset a of long-lived asset a of September 24 , 2011 , September 25 a of September 24 , 2011 , September 25 , 2010 24 , 2011 , September 25 , 2010 and September 26 2011 , September 25 , 2010 and September 26 , 2009 25 , 2010 and September 26 , 2009 are a follows 2010 and September 26 , 2009 are a follows ( in ( in million ) : 2011 2010 2009 Net sale : in million ) : 2011 2010 2009 Net sale : U.S. million ) : 2011 2010 2009 Net sale : U.S. $ Net sale : U.S. $ 41,812 $ 28,633 $ 22,325 China : U.S. $ 41,812 $ 28,633 $ 22,325 China ( a $ 41,812 $ 28,633 $ 22,325 China ( a ) 12,472 22,325 China ( a ) 12,472 2,764 769 Other country 53,965 China ( a ) 12,472 2,764 769 Other country 53,965 33,828 ( a ) 12,472 2,764 769 Other country 53,965 33,828 19,811 12,472 2,764 769 Other country 53,965 33,828 19,811 Total net sale 2,764 769 Other country 53,965 33,828 19,811 Total net sale $ 769 Other country 53,965 33,828 19,811 Total net sale $ 108,249 19,811 Total net sale $ 108,249 $ 65,225 $ 42,905 Long-lived net sale $ 108,249 $ 65,225 $ 42,905 Long-lived asset : $ 108,249 $ 65,225 $ 42,905 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 4,375 $ 3,096 $ 2,348 China : U.S. $ 4,375 $ 3,096 $ 2,348 China ( a $ 4,375 $ 3,096 $ 2,348 China ( a ) 2,613 2,348 China ( a ) 2,613 1,245 365 Other country 1,090 China ( a ) 2,613 1,245 365 Other country 1,090 661 ( a ) 2,613 1,245 365 Other country 1,090 661 480 2,613 1,245 365 Other country 1,090 661 480 Total long-lived asset 1,245 365 Other country 1,090 661 480 Total long-lived asset $ 365 Other country 1,090 661 480 Total long-lived asset $ 8,078 480 Total long-lived asset $ 8,078 $ 5,002 $ 3,193 ( long-lived asset $ 8,078 $ 5,002 $ 3,193 ( a ) $ 8,078 $ 5,002 $ 3,193 ( a ) China includes the three year ended September 24 , 2011 , is a year ended September 24 , 2011 , is a follows ( ( in million ) : 2011 2010 2009 Desktops ( a in million ) : 2011 2010 2009 Desktops ( a ) million ) : 2011 2010 2009 Desktops ( a ) $ Desktops ( a ) $ 6,439 $ 6,201 $ 4,324 Portables a ) $ 6,439 $ 6,201 $ 4,324 Portables ( b $ 6,439 $ 6,201 $ 4,324 Portables ( b ) 15,344 4,324 Portables ( b ) 15,344 11,278 9,535 Total Mac net Portables ( b ) 15,344 11,278 9,535 Total Mac net sale ( b ) 15,344 11,278 9,535 Total Mac net sale 21,783 9,535 Total Mac net sale 21,783 17,479 13,859 iPod 7,453 8,274 Total Mac net sale 21,783 17,479 13,859 iPod 7,453 8,274 8,091 Mac net sale 21,783 17,479 13,859 iPod 7,453 8,274 8,091 Other sale 21,783 17,479 13,859 iPod 7,453 8,274 8,091 Other music related 21,783 17,479 13,859 iPod 7,453 8,274 8,091 Other music related product 17,479 13,859 iPod 7,453 8,274 8,091 Other music related product and and service ( c ) 6,314 4,948 4,036 iPhone and related service ( c ) 6,314 4,948 4,036 iPhone and related product ( c ) 6,314 4,948 4,036 iPhone and related product and and service ( d ) 47,057 25,179 13,033 iPad and related service ( d ) 47,057 25,179 13,033 iPad and related product ( d ) 47,057 25,179 13,033 iPad and related product and and service ( e ) 20,358 4,958 0 Peripherals and other service ( e ) 20,358 4,958 0 Peripherals and other hardware ( e ) 20,358 4,958 0 Peripherals and other hardware ( other hardware ( f ) 2,330 1,814 1,475 Software , service hardware ( f ) 2,330 1,814 1,475 Software , service and ( f ) 2,330 1,814 1,475 Software , service and other net sale ( g ) 2,954 2,573 2,411 Total net sale sale ( g ) 2,954 2,573 2,411 Total net sale $ ( g ) 2,954 2,573 2,411 Total net sale $ 108,249 2,411 Total net sale $ 108,249 $ 65,225 $ 42,905 ( net sale $ 108,249 $ 65,225 $ 42,905 ( a ) $ 108,249 $ 65,225 $ 42,905 ( a ) Includes iMac Mac and Internet service . 74 Note 9 – Selected Quarterly Internet service . 74 Note 9 – Selected Quarterly Financial Information the four quarter ended September 24 , 2011 and September 25 quarter ended September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 ( in million 2011 and September 25 , 2010 ( in million , except Quarter Second Quarter First Quarter 2011 Net sale $ 28,270 $ Quarter 2011 Net sale $ 28,270 $ 28,571 $ 24,667 $ Net sale $ 28,270 $ 28,571 $ 24,667 $ 26,741 Gross $ 28,270 $ 28,571 $ 24,667 $ 26,741 Gross margin $ $ 28,571 $ 24,667 $ 26,741 Gross margin $ 11,380 $ $ 26,741 Gross margin $ 11,380 $ 11,922 $ 10,218 $ Gross margin $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per common $ 7,308 $ 5,987 $ 6,004 Earnings per common share : common share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Basic $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.43 Fourth $ 7.05 $ 7.79 $ 6.40 $ 6.43 Fourth Quarter Third $ 7.79 $ 6.40 $ 6.43 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2010 Net sale $ 20,343 $ Quarter 2010 Net sale $ 20,343 $ 15,700 $ 13,499 $ Net sale $ 20,343 $ 15,700 $ 13,499 $ 15,683 Gross $ 20,343 $ 15,700 $ 13,499 $ 15,683 Gross margin $ $ 15,700 $ 13,499 $ 15,683 Gross margin $ 7,512 $ $ 15,683 Gross margin $ 7,512 $ 6,136 $ 5,625 $ Gross margin $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net $ 7,512 $ 6,136 $ 5,625 $ 6,411 Net income $ $ 6,136 $ 5,625 $ 6,411 Net income $ 4,308 $ $ 6,411 Net income $ 4,308 $ 3,253 $ 3,074 $ Net income $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings $ 4,308 $ 3,253 $ 3,074 $ 3,378 Earnings per common $ 3,253 $ 3,074 $ 3,378 Earnings per common share : common share : Basic $ 4.71 $ 3.57 $ 3.39 $ : Basic $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.71 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.57 $ 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 3.39 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.74 Diluted $ 4.64 $ 3.51 $ 3.33 $ 3.67 Basic $ 4.64 $ 3.51 $ 3.33 $ 3.67 Basic and diluted $ 3.51 $ 3.33 $ 3.67 Basic and diluted earnings per diluted earnings per share . 75 Report of Ernst & Young Apple Inc. a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , and the 2011 and September 25 , 2010 , and the related consolidated in the period ended September 24 , 2011 . These financial period ended September 24 , 2011 . These financial statement are of Apple Inc. at September 24 , 2011 and September 25 Inc. at September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 , and the 2011 and September 25 , 2010 , and the consolidated result in the period ended September 24 , 2011 , in conformity period ended September 24 , 2011 , in conformity with U.S. financial reporting a of September 24 , 2011 , based on a of September 24 , 2011 , based on criterion established and our report dated October 26 , 2011 expressed an unqualified report dated October 26 , 2011 expressed an unqualified opinion thereon San Jose , California October 26 , 2011 76 Report of , California October 26 , 2011 76 Report of Ernst & California October 26 , 2011 76 Report of Ernst & Young financial reporting a of September 24 , 2011 , based on a of September 24 , 2011 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 24 , 2011 , based on a of September 24 , 2011 , based on the COSO United States ) , the 2011 consolidated financial statement of Apple and our report dated October 26 , 2011 expressed an unqualified report dated October 26 , 2011 expressed an unqualified opinion thereon San Jose , California October 26 , 2011 77 Item 9 , California October 26 , 2011 77 Item 9 . Changes California October 26 , 2011 77 Item 9 . Changes in 26 , 2011 77 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 24 , 2011 to provide reasonable a of September 24 , 2011 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the wa effective a of September 24 , 2011 to provide reasonable a of September 24 , 2011 to provide reasonable assurance regarding , which appears in Item 15 ( a ) of this this Annual Report on Form 10-K. 78 Changes in Internal Control Annual Report on Form 10-K. 78 Changes in Internal Control Over the fourth quarter of fiscal 2011 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable Other Information Not applicable . 79 PART III Item 10 . . 79 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2012 Proxy Statement to be filed for the Company ’ s 2012 Annual Meeting of Shareholders ( Meeting of Shareholders ( “ 2012 Proxy Statement ” ) and filed with the SEC within 120 day after the end of this report relates . Item 11 . Executive Compensation The information in the Company ’ s 2012 Proxy Statement and is incorporated herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2012 Proxy Statement and is incorporated herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2012 Proxy Statement and is incorporated herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2012 Proxy Statement and is incorporated incorporated herein by reference . 80 PART IV Item 15 . . 80 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index the three year ended September 24 , 2011 43 Consolidated Balance year ended September 24 , 2011 43 Consolidated Balance Sheets a ended September 24 , 2011 43 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2011 and September 25 a of September 24 , 2011 and September 25 , 2010 24 , 2011 and September 25 , 2010 44 Consolidated Statements 2011 and September 25 , 2010 44 Consolidated Statements of Shareholders and September 25 , 2010 44 Consolidated Statements of Shareholders ’ the three year ended September 24 , 2011 45 Consolidated Statements year ended September 24 , 2011 45 Consolidated Statements of Cash ended September 24 , 2011 45 Consolidated Statements of Cash Flows the three year ended September 24 , 2011 46 Notes to year ended September 24 , 2011 46 Notes to Consolidated Financial ended September 24 , 2011 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 75 Reports of Ernst & Young Independent Registered Public Accounting Firm 76 ( 2 ) Financial Statement Public Accounting Firm 76 ( 2 ) Financial Statement Schedule s ) Exhibits required by Item 601 of Regulation S-K The information page of this report . 81 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly thereunto duly authorized , this 26th day of October 2011 . this 26th day of October 2011 . APPLE INC. By : this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 26 , 2011 /s/ Peter Oppenheimer Officer ) October 26 , 2011 /s/ Peter Oppenheimer PETER OPPENHEIMER Principal Financial Officer ) October 26 , 2011 /s/ Betsy Rafael Officer ) October 26 , 2011 /s/ Betsy Rafael BETSY RAFAEL Principal Accounting Officer ) October 26 , 2011 /s/ William V. Officer ) October 26 , 2011 /s/ William V. Campbell WILLIAM WILLIAM V. CAMPBELL Director October 26 , 2011 /s/ Millard S. CAMPBELL Director October 26 , 2011 /s/ Millard S. Drexler MILLARD MILLARD S. DREXLER Director October 26 , 2011 /s/ Albert Gore DREXLER Director October 26 , 2011 /s/ Albert Gore , Jr. GORE , JR. Director October 26 , 2011 /s/ Andrea Jung JR. Director October 26 , 2011 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 26 , 2011 /s/ Arthur D. JUNG Director October 26 , 2011 /s/ Arthur D. Levinson ARTHUR ARTHUR D. LEVINSON Director October 26 , 2011 /s/ Ronald D. LEVINSON Director October 26 , 2011 /s/ Ronald D. Sugar RONALD RONALD D. SUGAR Director October 26 , 2011 82 EXHIBIT INDEX SUGAR Director October 26 , 2011 82 EXHIBIT INDEX Exhibit Number Director October 26 , 2011 82 EXHIBIT INDEX Exhibit Number Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on July 10 , 2009 . 10-Q 6/27/09 California on July 10 , 2009 . 10-Q 6/27/09 3.2 Bylaws July 10 , 2009 . 10-Q 6/27/09 3.2 Bylaws of the 10 , 2009 . 10-Q 6/27/09 3.2 Bylaws of the Registrant , 2009 . 10-Q 6/27/09 3.2 Bylaws of the Registrant , , a amended through April 20 , 2011 . 10-Q 3/26/11 amended through April 20 , 2011 . 10-Q 3/26/11 4.1 Form April 20 , 2011 . 10-Q 3/26/11 4.1 Form of Stock 20 , 2011 . 10-Q 3/26/11 4.1 Form of Stock Certificate , 2011 . 10-Q 3/26/11 4.1 Form of Stock Certificate of Certificate of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock of the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase the Registrant . 10-Q 12/30/06 10.1 * Employee Stock Purchase Plan , a amended through March 8 , 2010 . 10-Q 3/27/10 amended through March 8 , 2010 . 10-Q 3/27/10 10.2 * March 8 , 2010 . 10-Q 3/27/10 10.2 * Form of 8 , 2010 . 10-Q 3/27/10 10.2 * Form of Indemnification , 2010 . 10-Q 3/27/10 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 6/27/09 10.3 * 1997 Director of the Registrant . 10-Q 6/27/09 10.3 * 1997 Director Stock the Registrant . 10-Q 6/27/09 10.3 * 1997 Director Stock Plan . 10-Q 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through February 25 , 2010 . 8-K 3/1/10 amended through February 25 , 2010 . 8-K 3/1/10 10.4 * February 25 , 2010 . 8-K 3/1/10 10.4 * 2003 Employee 25 , 2010 . 8-K 3/1/10 10.4 * 2003 Employee Stock , 2010 . 8-K 3/1/10 10.4 * 2003 Employee Stock Plan . 8-K 3/1/10 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 3/1/10 amended through February 25 , 2010 . 8-K 3/1/10 10.5 * February 25 , 2010 . 8-K 3/1/10 10.5 * Form of 25 , 2010 . 8-K 3/1/10 10.5 * Form of Restricted , 2010 . 8-K 3/1/10 10.5 * Form of Restricted Stock Agreement effective a of August 28 , 2007 . 10-K 9/29/07 a of August 28 , 2007 . 10-K 9/29/07 10.6 * August 28 , 2007 . 10-K 9/29/07 10.6 * Form of 28 , 2007 . 10-K 9/29/07 10.6 * Form of Restricted , 2007 . 10-K 9/29/07 10.6 * Form of Restricted Stock Agreement effective a of November 11 , 2008 . 10-Q 12/27/08 a of November 11 , 2008 . 10-Q 12/27/08 10.7 * November 11 , 2008 . 10-Q 12/27/08 10.7 * Form of 11 , 2008 . 10-Q 12/27/08 10.7 * Form of Restricted , 2008 . 10-Q 12/27/08 10.7 * Form of Restricted Stock Agreement effective a of November 16 , 2010 . 10-Q 12/25/10 a of November 16 , 2010 . 10-Q 12/25/10 14.1 * November 16 , 2010 . 10-Q 12/25/10 14.1 * * Business 16 , 2010 . 10-Q 12/25/10 14.1 * * Business Conduct , 2010 . 10-Q 12/25/10 14.1 * * Business Conduct Policy of the Registrant dated July 2011 . 21.1 * * Subsidiaries Registrant dated July 2011 . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS XBRL Instance Document 101.SCH XBRL . 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase * * Furnished herewith . 83 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-12-444068/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-12-444068/full-submission.txt new file mode 100644 index 0000000..a5d97cf --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-12-444068/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 29 , 2012 or ¨ TRANSITION year ended September 29 , 2012 or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( section of Regulation S-K ( section 229.405 of this chapter ) is Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 30 , 2012 , the last a of March 30 , 2012 , the last business day quarter , wa approximately $ 560,356,000,000 based upon the closing price for any other purpose . 940,692,000 share of common stock were and outstanding a of October 19 , 2012 . DOCUMENTS INCORPORATED a of October 19 , 2012 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2013 annual meeting of shareholder ( of shareholder ( the “ 2013 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2013 10-K where indicated . The 2013 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company a California corporation established in 1977. Business Strategy The Company is and post-sales support experience . 1 Table of Contents Consumer and operates Apple retail store in 13 country , including the U.S. in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 8 , “ Segment Information and and Geographic Data . ” 2 Table of Contents Products The and application . In September 2012 , the Company launched iPhone , the Company launched iPhone 5 , it latest version of and application . In March 2012 , the Company launched the iPad , and in October 2012 , the Company announced it to be available in November 2012 . In addition to the iPod shuffle is a flash-memory- 3 Table of Contents based iPod iOS device . In September 2012 , the Company released iOS , the Company released iOS 6 , the latest version of on qualifying iOS device . 4 Table of Contents OS X and became available in July 2012 . OS X Mountain Lion service offered by APP . 5 Table of Contents Markets and customer accounted for more than 10 % of net sale in % of net sale in 2012 , 2011 or 2010 . net sale in 2012 , 2011 or 2010 . Competition The in 2012 , 2011 or 2010 . Competition The market for Company ’ s offering . 6 Table of Contents Supply of requirement for period up to 150 day . Research and Development and development expense wa $ 3.4 billion , $ 2.4 billion $ 3.4 billion , $ 2.4 billion , and $ 1.8 2.4 billion , and $ 1.8 billion in 2012 , 2011 and $ 1.8 billion in 2012 , 2011 , and 2010 1.8 billion in 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . Patents , Over time , the Company 7 Table of Contents ha accumulated Operations and Geographic Data During 2012 , the Company ’ s international net sale accounted for 39 % and 61 % , accounted for 39 % and 61 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 8 , “ Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 7 , “ Commitments and Contingencies The Company also offer a 90-day basic warranty for it service in anticipation of or immediately 8 Table of Contents following new . Employees As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had approximately , the Company had approximately 72,800 full-time equivalent employee and an equivalent employee and an additional 3,300 full-time equivalent temporary employee and employee and contractor . Approximately 42,400 of the total full-time equivalent s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors Because of to obtain credit to finance 9 Table of Contents development and/or competitor . Price competition ha 10 Table of Contents been particularly requirement for period up to 150 day . Because the Company . The follow-on effect from 11 Table of Contents global economic compared to level achieved during 2012 , largely due to a owner , provider or distributor 12 Table of Contents may seek Company ’ s product . 13 Table of Contents With respect substantially more investment than the 14 Table of Contents Company ’ change in these law and 15 Table of Contents regulation or , email address , contact 16 Table of Contents preference , associated gross margin than it 17 Table of Contents indirect sale adversely affecting gross margin . 18 Table of Contents The Company component . As of September 29 , 2012 , a significant As of September 29 , 2012 , a significant portion of in country with differing statutory 19 Table of Contents tax rate of these examination . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company owned or Company owned or leased approximately 17.3 million square foot of building . Of that amount approximately 10.9 million square foot wa leased space , which includes approximately 4.1 million square foot related to owned building space , approximately 2.6 million square foot that is Company owns a total of 1,077 acre of land in various location . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company owned a for it product . Item 3 . Legal Proceedings The Company in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2012 that did not individually or and result of operation . 20 Table of Contents The Apple have been filed on January 3 , 2005 , July 21 filed on January 3 , 2005 , July 21 , 2006 3 , 2005 , July 21 , 2006 and December 31 2005 , July 21 , 2006 and December 31 , 2007 21 , 2006 and December 31 , 2007 in the United 2006 and December 31 , 2007 in the United States District market power under §§1 and 2 of the Sherman Act , al . ) On April 11 , 2012 , the U.S. ) On April 11 , 2012 , the U.S. Department of DOJ complaint in late May 2012 , denying the DOJ ’ trial date set for June 2013 . Three of the five approved the settlement on September 6 , 2012 and , accordingly settlement on September 6 , 2012 and , accordingly , these with the Company . Item 4 . Mine Safety Disclosures Not Safety Disclosures Not applicable . 21 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Quarter Second Quarter First Quarter 2012 price range per share $ price range per share $ 705.07 - $ 570.00 $ 644.00 share $ 705.07 - $ 570.00 $ 644.00 - $ 522.18 705.07 - $ 570.00 $ 644.00 - $ 522.18 $ 621.45 570.00 $ 644.00 - $ 522.18 $ 621.45 - $ 409.00 644.00 - $ 522.18 $ 621.45 - $ 409.00 $ 426.70 522.18 $ 621.45 - $ 409.00 $ 426.70 - $ 354.24 621.45 - $ 409.00 $ 426.70 - $ 354.24 2011 price 409.00 $ 426.70 - $ 354.24 2011 price range per share $ 426.70 - $ 354.24 2011 price range per share $ price range per share $ 422.86 - $ 327.25 $ 355.13 share $ 422.86 - $ 327.25 $ 355.13 - $ 310.50 422.86 - $ 327.25 $ 355.13 - $ 310.50 $ 364.90 327.25 $ 355.13 - $ 310.50 $ 364.90 - $ 321.31 355.13 - $ 310.50 $ 364.90 - $ 321.31 $ 325.72 310.50 $ 364.90 - $ 321.31 $ 325.72 - $ 275.00 364.90 - $ 321.31 $ 325.72 - $ 275.00 Holders As 321.31 $ 325.72 - $ 275.00 Holders As of October 19 275.00 Holders As of October 19 , 2012 , there were As of October 19 , 2012 , there were 27,696 shareholder , 2012 , there were 27,696 shareholder of record . Dividends During the fourth quarter of 2012 , the Company paid a a quarterly dividend of $ 2.65 per share and expects to the first three quarter of 2012 or during 2011 . Purchases quarter of 2012 or during 2011 . Purchases of Equity Securities and Affiliated Purchasers None . 22 Table of Contents Company Stock , the S & P 500 Composite Index , the S . The graph assumes $ 100 wa invested in each of , the S & P 500 Composite Index , the S the market close on September 30 , 2007 . Data point close on September 30 , 2007 . Data point on the price performance . * $ 100 invested on 9/30/07 in stock * $ 100 invested on 9/30/07 in stock or index , . Fiscal year ending September 30 . Copyright © 2012 S September 30 . Copyright © 2012 S & P , a All right reserved . September 30 , 2007 September 30 , reserved . September 30 , 2007 September 30 , 2008 September September 30 , 2007 September 30 , 2008 September 30 , , 2007 September 30 , 2008 September 30 , 2009 September September 30 , 2008 September 30 , 2009 September 30 , , 2008 September 30 , 2009 September 30 , 2010 September September 30 , 2009 September 30 , 2010 September 30 , , 2009 September 30 , 2010 September 30 , 2011 September September 30 , 2010 September 30 , 2011 September 30 , , 2010 September 30 , 2011 September 30 , 2012 Apple September 30 , 2011 September 30 , 2012 Apple Inc. $ , 2011 September 30 , 2012 Apple Inc. $ 100 $ , 2012 Apple Inc. $ 100 $ 74 $ 121 $ Apple Inc. $ 100 $ 74 $ 121 $ 185 $ $ 100 $ 74 $ 121 $ 185 $ 248 $ $ 74 $ 121 $ 185 $ 248 $ 437 S $ 121 $ 185 $ 248 $ 437 S & P $ 185 $ 248 $ 437 S & P 500 $ $ 437 S & P 500 $ 100 $ 78 $ S & P 500 $ 100 $ 78 $ 73 $ P 500 $ 100 $ 78 $ 73 $ 80 $ $ 100 $ 78 $ 73 $ 80 $ 81 $ $ 78 $ 73 $ 80 $ 81 $ 105 S $ 73 $ 80 $ 81 $ 105 S & P $ 80 $ 81 $ 105 S & P Computer Hardware & P Computer Hardware $ 100 $ 84 $ 99 $ Computer Hardware $ 100 $ 84 $ 99 $ 118 $ $ 100 $ 84 $ 99 $ 118 $ 134 $ $ 84 $ 99 $ 118 $ 134 $ 214 Dow $ 99 $ 118 $ 134 $ 214 Dow Jones US $ 118 $ 134 $ 214 Dow Jones US Technology $ Dow Jones US Technology $ 100 $ 76 $ 85 $ US Technology $ 100 $ 76 $ 85 $ 95 $ $ 100 $ 76 $ 85 $ 95 $ 98 $ $ 76 $ 85 $ 95 $ 98 $ 127 23 $ 85 $ 95 $ 98 $ 127 23 Table of $ 95 $ 98 $ 127 23 Table of Contents Item 95 $ 98 $ 127 23 Table of Contents Item 6 23 Table of Contents Item 6 . Selected Financial Data The the five year ended September 29 , 2012 , is not year ended September 29 , 2012 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2012 2011 2010 2009 2008 Net share amount ) . 2012 2011 2010 2009 2008 Net sale amount ) . 2012 2011 2010 2009 2008 Net sale $ ) . 2012 2011 2010 2009 2008 Net sale $ 156,508 . 2012 2011 2010 2009 2008 Net sale $ 156,508 $ 2009 2008 Net sale $ 156,508 $ 108,249 $ 65,225 $ Net sale $ 156,508 $ 108,249 $ 65,225 $ 42,905 $ $ 156,508 $ 108,249 $ 65,225 $ 42,905 $ 37,491 Net $ 108,249 $ 65,225 $ 42,905 $ 37,491 Net income $ $ 65,225 $ 42,905 $ 37,491 Net income $ 41,733 $ $ 37,491 Net income $ 41,733 $ 25,922 $ 14,013 $ Net income $ 41,733 $ 25,922 $ 14,013 $ 8,235 $ $ 41,733 $ 25,922 $ 14,013 $ 8,235 $ 6,119 Earnings $ 25,922 $ 14,013 $ 8,235 $ 6,119 Earnings per share $ 14,013 $ 8,235 $ 6,119 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 $ : Basic $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ $ 44.64 $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 28.05 $ 15.41 $ 9.22 $ 6.94 Diluted $ 44.15 $ 15.41 $ 9.22 $ 6.94 Diluted $ 44.15 $ 27.68 9.22 $ 6.94 Diluted $ 44.15 $ 27.68 $ 15.15 $ 6.94 Diluted $ 44.15 $ 27.68 $ 15.15 $ 9.08 $ $ 44.15 $ 27.68 $ 15.15 $ 9.08 $ 6.78 Cash $ 27.68 $ 15.15 $ 9.08 $ 6.78 Cash dividend declared $ 15.15 $ 9.08 $ 6.78 Cash dividend declared per share share ( a ) $ 2.65 $ 0 $ 0 $ a ) $ 2.65 $ 0 $ 0 $ 0 $ $ 2.65 $ 0 $ 0 $ 0 $ 0 Shares $ 0 $ 0 $ 0 $ 0 Shares used in $ 0 $ 0 $ 0 Shares used in computing earnings earnings per share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted per share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 share : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 : Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 Basic 934,818 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 924,258 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 902,139 Total 909,461 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 902,139 Total cash 893,016 881,592 Diluted 945,355 936,645 924,712 907,005 902,139 Total cash , 881,592 Diluted 945,355 936,645 924,712 907,005 902,139 Total cash , cash Diluted 945,355 936,645 924,712 907,005 902,139 Total cash , cash equivalent equivalent and marketable security $ 121,251 $ 81,570 $ 51,011 $ marketable security $ 121,251 $ 81,570 $ 51,011 $ 33,992 $ $ 121,251 $ 81,570 $ 51,011 $ 33,992 $ 24,490 Total $ 81,570 $ 51,011 $ 33,992 $ 24,490 Total asset $ $ 51,011 $ 33,992 $ 24,490 Total asset $ 176,064 $ $ 24,490 Total asset $ 176,064 $ 116,371 $ 75,183 $ Total asset $ 176,064 $ 116,371 $ 75,183 $ 47,501 $ $ 176,064 $ 116,371 $ 75,183 $ 47,501 $ 36,171 Total $ 116,371 $ 75,183 $ 47,501 $ 36,171 Total long-term obligation $ 75,183 $ 47,501 $ 36,171 Total long-term obligation ( b obligation ( b ) $ 16,664 $ 10,100 $ 5,531 $ b ) $ 16,664 $ 10,100 $ 5,531 $ 3,502 $ $ 16,664 $ 10,100 $ 5,531 $ 3,502 $ 1,745 Total $ 10,100 $ 5,531 $ 3,502 $ 1,745 Total liability $ $ 5,531 $ 3,502 $ 1,745 Total liability $ 57,854 $ $ 1,745 Total liability $ 57,854 $ 39,756 $ 27,392 $ Total liability $ 57,854 $ 39,756 $ 27,392 $ 15,861 $ $ 57,854 $ 39,756 $ 27,392 $ 15,861 $ 13,874 Total $ 39,756 $ 27,392 $ 15,861 $ 13,874 Total shareholder ’ $ 27,392 $ 15,861 $ 13,874 Total shareholder ’ equity $ Total shareholder ’ equity $ 118,210 $ 76,615 $ 47,791 $ ’ equity $ 118,210 $ 76,615 $ 47,791 $ 31,640 $ $ 118,210 $ 76,615 $ 47,791 $ 31,640 $ 22,297 ( $ 76,615 $ 47,791 $ 31,640 $ 22,297 ( a ) $ 47,791 $ 31,640 $ 22,297 ( a ) The Company declared a dividend of $ 2.65 per share in the fourth in the fourth quarter of 2012 . ( b ) The the five year ended September 29 , 2012 . Long-term obligation year ended September 29 , 2012 . Long-term obligation exclude non-current exclude non-current deferred revenue . 24 Table of Contents Item 7 24 Table of Contents Item 7 . Management ’ s Discussion Results of Operations This Item 7 , “ Management ’ s other part of this Form 10-K contain forward-looking statement , within Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is a a leading innovator in 25 Table of Contents the market and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy sale of hardware product , 26 Table of Contents software bundled other comprehensive income , net 27 Table of Contents of tax requirement for period up to 150 day . If there is . The Company record a 28 Table of Contents valuation allowance that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 7 , “ Commitments and Contingencies s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2012 , 2011 and 2010 ended s fiscal year 2012 , 2011 and 2010 ended on September year 2012 , 2011 and 2010 ended on September 29 , and 2010 ended on September 29 , 2012 , September 24 ended on September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 , respectively . , and September 25 , 2010 , respectively . Fiscal year , respectively . Fiscal year 2012 spanned 53 week , with . Fiscal year 2012 spanned 53 week , with a 14 53 week , with a 14 th week included in the in the first quarter of 2012 , a is done approximately of the additional week in 2012 increased the Company ’ s the year . Fiscal year 2011 and 2010 spanned 52 week . Fiscal year 2011 and 2010 spanned 52 week each . year 2011 and 2010 spanned 52 week each . Unless otherwise of those fiscal year . 29 Table of Contents Net Sales unit sale by product during 2012 , 2011 , and 2010 by product during 2012 , 2011 , and 2010 ( dollar 2012 , 2011 , and 2010 ( dollar in million and unit in thousand ) : 2012 Change 2011 Change 2010 Net thousand ) : 2012 Change 2011 Change 2010 Net Sales by : 2012 Change 2011 Change 2010 Net Sales by Operating Segment : Americas net sale $ 57,512 50 % $ 38,315 56 Americas net sale $ 57,512 50 % $ 38,315 56 % $ 57,512 50 % $ 38,315 56 % $ 24,498 Europe 57,512 50 % $ 38,315 56 % $ 24,498 Europe net $ 38,315 56 % $ 24,498 Europe net sale 36,323 31 $ 24,498 Europe net sale 36,323 31 % 27,778 49 % 24,498 Europe net sale 36,323 31 % 27,778 49 % 18,692 net sale 36,323 31 % 27,778 49 % 18,692 Japan net sale 36,323 31 % 27,778 49 % 18,692 Japan net sale 31 % 27,778 49 % 18,692 Japan net sale 10,571 94 % 18,692 Japan net sale 10,571 94 % 5,437 37 % 18,692 Japan net sale 10,571 94 % 5,437 37 % 3,981 net sale 10,571 94 % 5,437 37 % 3,981 Asia-Pacific net sale 10,571 94 % 5,437 37 % 3,981 Asia-Pacific net sale 94 % 5,437 37 % 3,981 Asia-Pacific net sale 33,274 47 % 3,981 Asia-Pacific net sale 33,274 47 % 22,592 174 % 3,981 Asia-Pacific net sale 33,274 47 % 22,592 174 % 8,256 net sale 33,274 47 % 22,592 174 % 8,256 Retail net sale 33,274 47 % 22,592 174 % 8,256 Retail net sale 47 % 22,592 174 % 8,256 Retail net sale 18,828 33 % 8,256 Retail net sale 18,828 33 % 14,127 44 % 8,256 Retail net sale 18,828 33 % 14,127 44 % 9,798 net sale 18,828 33 % 14,127 44 % 9,798 Total net sale 18,828 33 % 14,127 44 % 9,798 Total net sale 33 % 14,127 44 % 9,798 Total net sale $ 156,508 9,798 Total net sale $ 156,508 45 % $ 108,249 66 Total net sale $ 156,508 45 % $ 108,249 66 % $ 156,508 45 % $ 108,249 66 % $ 65,225 Net 156,508 45 % $ 108,249 66 % $ 65,225 Net Sales $ 108,249 66 % $ 65,225 Net Sales by Product : ) ( i ) $ 6,040 ( 6 ) % $ i ) $ 6,040 ( 6 ) % $ 6,439 4 ( 6 ) % $ 6,439 4 % $ 6,201 Portables 6 ) % $ 6,439 4 % $ 6,201 Portables ( $ 6,439 4 % $ 6,201 Portables ( b ) ( b ) ( i ) 17,181 12 % 15,344 36 % ) ( i ) 17,181 12 % 15,344 36 % 11,278 i ) 17,181 12 % 15,344 36 % 11,278 Total Mac ) 17,181 12 % 15,344 36 % 11,278 Total Mac net 12 % 15,344 36 % 11,278 Total Mac net sale 23,221 11,278 Total Mac net sale 23,221 7 % 21,783 25 % Total Mac net sale 23,221 7 % 21,783 25 % 17,479 net sale 23,221 7 % 21,783 25 % 17,479 iPod ( sale 23,221 7 % 21,783 25 % 17,479 iPod ( c 7 % 21,783 25 % 17,479 iPod ( c ) ( c ) ( i ) 5,615 ( 25 ) % 7,453 ( i ) 5,615 ( 25 ) % 7,453 ( 10 5,615 ( 25 ) % 7,453 ( 10 ) % 8,274 25 ) % 7,453 ( 10 ) % 8,274 Other music 7,453 ( 10 ) % 8,274 Other music related product and and service ( d ) 8,534 35 % 6,314 28 % service ( d ) 8,534 35 % 6,314 28 % 4,948 d ) 8,534 35 % 6,314 28 % 4,948 iPhone and ) 8,534 35 % 6,314 28 % 4,948 iPhone and related 35 % 6,314 28 % 4,948 iPhone and related product and e ) ( i ) 80,477 71 % 47,057 87 % ) ( i ) 80,477 71 % 47,057 87 % 25,179 i ) 80,477 71 % 47,057 87 % 25,179 iPad and ) 80,477 71 % 47,057 87 % 25,179 iPad and related 71 % 47,057 87 % 25,179 iPad and related product and f ) ( i ) 32,424 59 % 20,358 311 % ) ( i ) 32,424 59 % 20,358 311 % 4,958 i ) 32,424 59 % 20,358 311 % 4,958 Peripherals and ) 32,424 59 % 20,358 311 % 4,958 Peripherals and other 59 % 20,358 311 % 4,958 Peripherals and other hardware ( other hardware ( g ) 2,778 19 % 2,330 28 % hardware ( g ) 2,778 19 % 2,330 28 % 1,814 g ) 2,778 19 % 2,330 28 % 1,814 Software , ) 2,778 19 % 2,330 28 % 1,814 Software , service 19 % 2,330 28 % 1,814 Software , service and other other sale ( h ) 3,459 17 % 2,954 15 % sale ( h ) 3,459 17 % 2,954 15 % 2,573 h ) 3,459 17 % 2,954 15 % 2,573 Total net ) 3,459 17 % 2,954 15 % 2,573 Total net sale 17 % 2,954 15 % 2,573 Total net sale $ 156,508 2,573 Total net sale $ 156,508 45 % $ 108,249 66 Total net sale $ 156,508 45 % $ 108,249 66 % $ 156,508 45 % $ 108,249 66 % $ 65,225 Unit 156,508 45 % $ 108,249 66 % $ 65,225 Unit Sales $ 108,249 66 % $ 65,225 Unit Sales by Product : : Desktops ( a ) 4,656 0 % 4,669 1 % Desktops ( a ) 4,656 0 % 4,669 1 % 4,627 a ) 4,656 0 % 4,669 1 % 4,627 Portables ( ) 4,656 0 % 4,669 1 % 4,627 Portables ( b 0 % 4,669 1 % 4,627 Portables ( b ) 13,502 4,627 Portables ( b ) 13,502 12 % 12,066 34 % Portables ( b ) 13,502 12 % 12,066 34 % 9,035 b ) 13,502 12 % 12,066 34 % 9,035 Total Mac ) 13,502 12 % 12,066 34 % 9,035 Total Mac unit 12 % 12,066 34 % 9,035 Total Mac unit sale 18,158 9,035 Total Mac unit sale 18,158 9 % 16,735 22 % Total Mac unit sale 18,158 9 % 16,735 22 % 13,662 unit sale 18,158 9 % 16,735 22 % 13,662 iPod unit sale 18,158 9 % 16,735 22 % 13,662 iPod unit sale 9 % 16,735 22 % 13,662 iPod unit sale 35,165 ( % 13,662 iPod unit sale 35,165 ( 17 ) % 42,620 iPod unit sale 35,165 ( 17 ) % 42,620 ( 15 35,165 ( 17 ) % 42,620 ( 15 ) % 50,312 17 ) % 42,620 ( 15 ) % 50,312 iPhone unit 42,620 ( 15 ) % 50,312 iPhone unit sold 125,046 73 % 50,312 iPhone unit sold 125,046 73 % 72,293 81 % 50,312 iPhone unit sold 125,046 73 % 72,293 81 % 39,989 unit sold 125,046 73 % 72,293 81 % 39,989 iPad unit sold 125,046 73 % 72,293 81 % 39,989 iPad unit sold 73 % 72,293 81 % 39,989 iPad unit sold 58,310 80 % 39,989 iPad unit sold 58,310 80 % 32,394 334 % 39,989 iPad unit sold 58,310 80 % 32,394 334 % 7,458 unit sold 58,310 80 % 32,394 334 % 7,458 ( a sold 58,310 80 % 32,394 334 % 7,458 ( a ) 80 % 32,394 334 % 7,458 ( a ) Includes revenue embedded software upgrade right . 30 Table of Contents Fiscal Year Table of Contents Fiscal Year 2012 versus 2011 Net sale during Contents Fiscal Year 2012 versus 2011 Net sale during 2012 increased versus 2011 Net sale during 2012 increased $ 48.3 billion or sale during 2012 increased $ 48.3 billion or 45 % compared increased $ 48.3 billion or 45 % compared to 2011 . or 45 % compared to 2011 . Several factor contributed positively including the addition of a 14 th week in the first in the first quarter of 2012 , a well a the product and service were $ 80.5 billion in 2012 , representing were $ 80.5 billion in 2012 , representing an increase of representing an increase of $ 33.4 billion or 71 % compared of $ 33.4 billion or 71 % compared to 2011. iPhone or 71 % compared to 2011. iPhone unit sale totaled 125.0 2011. iPhone unit sale totaled 125.0 million during 2012 , representing sale totaled 125.0 million during 2012 , representing an increase of , representing an increase of 52.8 million unit or 73 % of 52.8 million unit or 73 % compared to 2011 . or 73 % compared to 2011 . The year-over-year growth in sale and unit sale during 2012 reflects strong demand for iPhone of the launch of iPhone 4S in the first quarter of in the first quarter of 2012 and iPhone 5 in the quarter of 2012 and iPhone 5 in the fourth quarter of in the fourth quarter of 2012 , ongoing demand for iPhone , ongoing demand for iPhone 4 and iPhone 3GS , and for iPhone 4 and iPhone 3GS , and expanded distribution with related product and service were 51 % and 43 % of service were 51 % and 43 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . • Net product and service were $ 32.4 billion in 2012 , representing were $ 32.4 billion in 2012 , representing an increase of representing an increase of $ 12.1 billion or 59 % compared of $ 12.1 billion or 59 % compared to 2011 . or 59 % compared to 2011 . Unit sale of iPad Unit sale of iPad were 58.3 million during 2012 , an iPad were 58.3 million during 2012 , an increase of 80 2012 , an increase of 80 % from 2011 . The increase of 80 % from 2011 . The year-over-year increase in sale and unit sale during 2012 wa driven by strong demand the new iPad in March 2012 , continued demand for iPad , continued demand for iPad 2 , and expanded distribution with of iPad net sale during 2012 due to a reduction of the price reduction for iPad 2 and an increase in indirect related product and service were 21 % and 19 % of service were 21 % and 19 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . • Mac Mac net sale were $ 23.2 billion in 2012 , representing were $ 23.2 billion in 2012 , representing an increase of representing an increase of $ 1.4 billion or 7 % compared of $ 1.4 billion or 7 % compared to 2011 . or 7 % compared to 2011 . Mac unit sale totaled . Mac unit sale totaled 18.2 million during 2012 , representing sale totaled 18.2 million during 2012 , representing an increase of , representing an increase of 1.4 million or 9 % compared increase of 1.4 million or 9 % compared to 2011 . or 9 % compared to 2011 . The year-over-year growth in sale and unit sale during 2012 reflects increased demand for Mac s operating segment driven by 2012 release of updated model of with Retina display in June 2012 . Partially offsetting the increase for desktop personal computer during 2012 . Additionally , the Company it Mac desktop product in 2012 . Mac net sale were . Mac net sale were 15 % and 20 % of sale were 15 % and 20 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . • Net product and service were $ 8.5 billion in 2012 , representing were $ 8.5 billion in 2012 , representing an increase of representing an increase of $ 2.2 billion or 35 % compared of $ 2.2 billion or 35 % compared to 2011 . or 35 % compared to 2011 . The increase wa due total net sale of $ 7.5 billion for 2012 compared to of $ 7.5 billion for 2012 compared to net sale of to net sale of $ 5.4 billion during 2011 . The of $ 5.4 billion during 2011 . The strong result of related product and service were 5 % and 6 % of service were 5 % and 6 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . Partially offsetting iPod net sale were $ 5.6 billion in 2012 , a were $ 5.6 billion in 2012 , a decrease of $ , a decrease of $ 1.8 billion or 25 % compared of $ 1.8 billion or 25 % compared to 2011 . or 25 % compared to 2011 . Similarly , iPod unit iPod unit sale decreased by 17 % in 2012 compared to decreased by 17 % in 2012 compared to 2011 . Declines % in 2012 compared to 2011 . Declines in net sale Net sale of iPod were 4 % and 7 % of iPod were 4 % and 7 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . The Company timing of new product introduction 31 Table of Contents by the the first six month of 2012 , rising $ 34.1 billion of 2012 , rising $ 34.1 billion or 66 % compared rising $ 34.1 billion or 66 % compared to the same to the same period in 2011 . The net sale growth the first six month of 2012 reflects the launch of iPhone reflects the launch of iPhone 4S in the first quarter of in the first quarter of 2012 and the Company ’ s demand more quickly for iPhone 4S when compared to the iPhone when compared to the iPhone 4 launch . Growth during the during the first half of 2012 wa also favorably impacted by by the addition of a 14 th week in the first in the first quarter of 2012 and strong unit sale of season , resulting in a 111 % increase in iPad unit during the first quarter of 2012 compared to the same quarter to the same quarter in 2011 . Fiscal Year 2011 versus in 2011 . Fiscal Year 2011 versus 2010 Net sale during . Fiscal Year 2011 versus 2010 Net sale during 2011 increased versus 2010 Net sale during 2011 increased $ 43.0 billion or sale during 2011 increased $ 43.0 billion or 66 % compared increased $ 43.0 billion or 66 % compared to 2010 . or 66 % compared to 2010 . Several factor contributed positively product and service were $ 47.1 billion in 2011 , representing were $ 47.1 billion in 2011 , representing an increase of representing an increase of $ 21.9 billion or 87 % compared of $ 21.9 billion or 87 % compared to 2010. iPhone or 87 % compared to 2010. iPhone unit sale totaled 72.3 2010. iPhone unit sale totaled 72.3 million during 2011 , representing sale totaled 72.3 million during 2011 , representing an increase of , representing an increase of 32.3 million unit or 81 % of 32.3 million unit or 81 % compared to 2010. iPhone or 81 % compared to 2010. iPhone year-over-year net sale growth reflected strong demand for iPhone 4 in all of the Company Wireless network beginning in February 2011 , continued expansion into new product and service accounted for 43 % and 39 % of accounted for 43 % and 39 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . • Net in the third quarter of 2010 , were $ 20.4 billion of 2010 , were $ 20.4 billion in 2011 , representing were $ 20.4 billion in 2011 , representing an increase of representing an increase of $ 15.4 billion or 311 % compared of $ 15.4 billion or 311 % compared to 2010 . or 311 % compared to 2010 . Unit sale of iPad Unit sale of iPad were 32.4 million during 2011 , an iPad were 32.4 million during 2011 , an increase of 334 2011 , an increase of 334 % from 2010 . The increase of 334 % from 2010 . The year-over-year unit growth product and service accounted for 19 % and 8 % of accounted for 19 % and 8 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . • Mac Mac net sale were $ 21.8 billion in 2011 , representing were $ 21.8 billion in 2011 , representing an increase of representing an increase of $ 4.3 billion or 25 % compared of $ 4.3 billion or 25 % compared to 2010 . or 25 % compared to 2010 . Mac unit sale increased Mac unit sale increased by 3.1 million or 22 % in increased by 3.1 million or 22 % in 2011 compared to million or 22 % in 2011 compared to 2010 . The % in 2011 compared to 2010 . The year-over-year growth in which were updated in July 2011 and February 2011 , respectively in July 2011 and February 2011 , respectively . The year-over-year for portable and desktop wa 36 % and 4 % , desktop wa 36 % and 4 % , respectively . Mac Mac net sale accounted for 20 % and 27 % of accounted for 20 % and 27 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . • Net product and service were $ 6.3 billion in 2011 , representing were $ 6.3 billion in 2011 , representing an increase of representing an increase of $ 1.4 billion or 28 % compared of $ 1.4 billion or 28 % compared to 2010 . or 28 % compared to 2010 . The increase wa due s geographic segment . During 2011 , net sale for the Store and iBookstore wa $ 5.4 billion , representing an increase , representing an increase of 33 % compared to 2010 . of 33 % compared to 2010 . The Company belief this product and service accounted for 6 % and 8 % of accounted for 6 % and 8 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . Partially offsetting iPod net sale of $ 821 million or 10 % during of $ 821 million or 10 % during 2011 compared to million or 10 % during 2011 compared to 2010 . Similarly % during 2011 compared to 2010 . Similarly , iPod unit iPod unit sale decreased by 15 % in 2011 compared to decreased by 15 % in 2011 compared to 2010 . However % in 2011 compared to 2010 . However , net sale iPod unit sold increased during 2011 compared to 2010 due primarily increased during 2011 compared to 2010 due primarily 32 Table of compared to 2010 due primarily 32 Table of Contents to a sale of iPod accounted for 7 % and 13 % of accounted for 7 % and 13 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . Segment Operating operates Apple retail store in 13 country , including the U.S. in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 8 , “ Segment Information and the Americas segment increased $ 19.2 billion or 50 % during increased $ 19.2 billion or 50 % during 2012 compared to billion or 50 % during 2012 compared to 2011 . The % during 2012 compared to 2011 . The growth in net growth in net sale during 2012 wa primarily driven by increased following the launch of iPhone 4S and iPhone 5 , strong of iPhone 4S and iPhone 5 , strong demand for the the new iPad and iPad 2 , and higher sale from The Americas segment represented approximately 37 % and 35 % of represented approximately 37 % and 35 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . Net sale the Americas segment increased $ 13.8 billion or 56 % during increased $ 13.8 billion or 56 % during 2011 compared to billion or 56 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The primary contributor to and strong demand for iPhone 4 and increased sale of iPad increase in net sale during 2011 . The Americas segment represented The Americas segment represented approximately 35 % and 37 % of represented approximately 35 % and 37 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . Europe Net the Europe segment increased $ 8.5 billion or 31 % during increased $ 8.5 billion or 31 % during 2012 compared to billion or 31 % during 2012 compared to 2011 . The % during 2012 compared to 2011 . The growth in net growth in net sale during 2012 wa primarily driven by strong the new iPad and iPad 2 , higher sale from the from the launch of iPhone 4S . iPhone 5 wa launched of iPhone 4S . iPhone 5 wa launched in a limited of the fourth quarter of 2012 and did not contribute to in the Europe segment during 2012 compared to the Company ’ The Europe segment represented approximately 23 % and 26 % of represented approximately 23 % and 26 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . Net sale the Europe segment increased $ 9.1 billion or 49 % during increased $ 9.1 billion or 49 % during 2011 compared to billion or 49 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The increase in net increase in net sale during 2011 wa attributable primarily to the and strong demand for iPhone 4 , and increased sale of . The Europe segment represented 26 % and 29 % of segment represented 26 % and 29 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . 33 Table and 2010 , respectively . 33 Table of Contents Japan Net the Japan segment increased $ 5.1 billion or 94 % during increased $ 5.1 billion or 94 % during 2012 compared to billion or 94 % during 2012 compared to 2011 . The % during 2012 compared to 2011 . The growth in net growth in net sale during 2012 wa primarily driven by increased following the launch of iPhone 4S and iPhone 5 , expanded of iPhone 4S and iPhone 5 , expanded distribution with a the new iPad and iPad 2 , higher sale from the The Japan segment represented approximately 7 % and 5 % of represented approximately 7 % and 5 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . Net sale the Japan segment increased $ 1.5 billion or 37 % during increased $ 1.5 billion or 37 % during 2011 compared to billion or 37 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The key contributor to . The Japan segment represented 5 % and 6 % of segment represented 5 % and 6 % of the Company ’ s total net sale for 2011 and 2010 , respectively . net sale for 2011 and 2010 , respectively . Asia-Pacific Net the Asia-Pacific segment increased $ 10.7 billion or 47 % during increased $ 10.7 billion or 47 % during 2012 compared to billion or 47 % during 2012 compared to 2011 . The % during 2012 compared to 2011 . The growth in net growth in net sale during 2012 wa mainly due to increased from the launch of iPhone 4S , strong demand for the the new iPad and iPad 2 , and higher Mac sale iPad product launch . iPhone 5 wa launched in a limited during the fourth quarter of 2012 and wa not launched in not launched in China during 2012 , and the new iPad by the Company in March 2012 wa not launched in China until the fourth quarter of 2012 . The Asia-Pacific segment represented The Asia-Pacific segment represented approximately 21 % of the Company ’ total net sale in both 2012 and 2011 . Net sale sale in both 2012 and 2011 . Net sale in the Asia Pacific segment increased $ 14.3 billion or 174 % during increased $ 14.3 billion or 174 % during 2011 compared to billion or 174 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The Company experienced particularly it Asia Pacific segment during 2011 , especially in Greater China the strong demand for iPhone 4 and carrier expansion , strong The Asia Pacific segment represented 21 % and 13 % of segment represented 21 % and 13 % of the Company ’ s total net sale in 2011 and 2010 , respectively . net sale in 2011 and 2010 , respectively . Retail Net the Retail segment increased $ 4.7 billion or 33 % during increased $ 4.7 billion or 33 % during 2012 compared to billion or 33 % during 2012 compared to 2011 . The % during 2012 compared to 2011 . The growth in net growth in net sale during 2012 wa driven primarily by increased following the launch of iPhone 4S and iPhone 5 , strong of iPhone 4S and iPhone 5 , strong demand for the the new iPad and iPad 2 , and higher Mac net in the Retail segment during 2012 compared to the Company ’ The Retail segment accounted for 12 % and 13 % of accounted for 12 % and 13 % of the Company ’ s total net sale for 2012 and 2011 , respectively . net sale for 2012 and 2011 , respectively . The Company respectively . The Company opened 33 new retail store during 2012 33 new retail store during 2012 , 28 of which were retail store during 2012 , 28 of which were outside the , ending the year with 390 store open compared to 357 390 store open compared to 357 store at the end of store at the end of 2011 . As of September 29 2011 . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had a Company had a total of 250 U.S. retail store and 140 250 U.S. retail store and 140 international retail store . With . With an average of 365 store and 326 store during average of 365 store and 326 store during 2012 and 2011 store and 326 store during 2012 and 2011 , respectively , 326 store during 2012 and 2011 , respectively , average revenue average revenue per store increased 19 % to $ 51.5 million increased 19 % to $ 51.5 million in 2012 compared to to $ 51.5 million in 2012 compared to $ 43.3 million in 2012 compared to $ 43.3 million in 2011 . Net to $ 43.3 million in 2011 . Net sale in the the Retail segment increased $ 4.3 billion or 44 % during increased $ 4.3 billion or 44 % during 2011 compared to billion or 44 % during 2011 compared to 2010 . The % during 2011 compared to 2010 . The increase in net sale . The Company opened 40 new retail store during 2011 40 new retail store during 2011 , 28 of which were retail store during 2011 , 28 of which were outside the , ending the year with 357 store open compared to 317 357 store open compared to 317 store at the end of store at the end of 2010 . As of September 24 2010 . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company had a Company had a total of 245 U.S. retail store and 112 245 U.S. retail store and 112 international retail store . During international retail store . During 2011 , the Company had an Company had an average of 326 store compared to an average compared to an average of 288 store during 2010 . The average of 288 store during 2010 . The average revenue per average revenue per store increased 27 % to 34 Table of store increased 27 % to 34 Table of Contents $ 43.3 34 Table of Contents $ 43.3 million in 2011 compared to Contents $ 43.3 million in 2011 compared to $ 34.1 million in 2011 compared to $ 34.1 million in 2010 . The to $ 34.1 million in 2010 . The Retail segment represented . The Retail segment represented 13 % and 15 % of segment represented 13 % and 15 % of the Company ’ s total net sale in 2011 and 2010 , respectively . net sale in 2011 and 2010 , respectively . The Retail s operating income wa $ 4.7 billion , $ 3.2 billion $ 4.7 billion , $ 3.2 billion , and $ 2.3 3.2 billion , and $ 2.3 billion during 2012 , 2011 and $ 2.3 billion during 2012 , 2011 , and 2010 2.3 billion during 2012 , 2011 , and 2010 respectively . 2012 , 2011 , and 2010 respectively . These year-over-year increase Gross Margin Gross margin for 2012 , 2011 and 2010 are Gross margin for 2012 , 2011 and 2010 are a follows for 2012 , 2011 and 2010 are a follows ( in gross margin percentage ) : 2012 2011 2010 Net sale $ margin percentage ) : 2012 2011 2010 Net sale $ 156,508 percentage ) : 2012 2011 2010 Net sale $ 156,508 $ 2011 2010 Net sale $ 156,508 $ 108,249 $ 65,225 Cost Net sale $ 156,508 $ 108,249 $ 65,225 Cost of sale $ 156,508 $ 108,249 $ 65,225 Cost of sale 87,846 64,431 $ 65,225 Cost of sale 87,846 64,431 39,541 Gross margin $ 65,225 Cost of sale 87,846 64,431 39,541 Gross margin $ 68,662 Cost of sale 87,846 64,431 39,541 Gross margin $ 68,662 $ 64,431 39,541 Gross margin $ 68,662 $ 43,818 $ 25,684 Gross Gross margin $ 68,662 $ 43,818 $ 25,684 Gross margin percentage $ 68,662 $ 43,818 $ 25,684 Gross margin percentage 43.9 % $ 25,684 Gross margin percentage 43.9 % 40.5 % 39.4 % Gross margin percentage 43.9 % 40.5 % 39.4 % The gross percentage 43.9 % 40.5 % 39.4 % The gross margin percentage The gross margin percentage in 2012 wa 43.9 % , compared margin percentage in 2012 wa 43.9 % , compared to 40.5 43.9 % , compared to 40.5 % in 2011 . This compared to 40.5 % in 2011 . This year-over-year increase in during the first half of 2012 wa 45.9 % compared to first half of 2012 wa 45.9 % compared to 41.4 % wa 45.9 % compared to 41.4 % during the second half during the second half of 2012 . The primary driver of in the first half of 2012 compared to the second half in the second half of 2012 wa also affected by the The gross margin percentage in 2011 wa 40.5 % , compared margin percentage in 2011 wa 40.5 % , compared to 39.4 40.5 % , compared to 39.4 % in 2010 . This compared to 39.4 % in 2010 . This year-over-year increase in compared to level achieved during 2012 , and the Company anticipates anticipates gross margin of about 36 % during the first quarter during the first quarter of 2013 . Expected future decline in including the first quarter of 2013 , are forward-looking and could in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk fluctuation in exchange rate . 35 Table of Contents Operating Expenses Operating Expenses Operating expense for 2012 , 2011 , and 2010 Operating expense for 2012 , 2011 , and 2010 are a 2012 , 2011 , and 2010 are a follows ( in except for percentage ) : 2012 2011 2010 Research and development for percentage ) : 2012 2011 2010 Research and development $ percentage ) : 2012 2011 2010 Research and development $ 3,381 2010 Research and development $ 3,381 $ 2,429 $ 1,782 Percentage and development $ 3,381 $ 2,429 $ 1,782 Percentage of net $ 3,381 $ 2,429 $ 1,782 Percentage of net sale 2 1,782 Percentage of net sale 2 % 2 % 3 % of net sale 2 % 2 % 3 % Selling , sale 2 % 2 % 3 % Selling , general and , general and administrative $ 10,040 $ 7,599 $ 5,517 Percentage and administrative $ 10,040 $ 7,599 $ 5,517 Percentage of net $ 10,040 $ 7,599 $ 5,517 Percentage of net sale 6 5,517 Percentage of net sale 6 % 7 % 8 % of net sale 6 % 7 % 8 % Research and sale 6 % 7 % 8 % Research and Development ( & D expense increased $ 952 million or 39 % in increased $ 952 million or 39 % in 2012 compared to million or 39 % in 2012 compared to 2011 and $ % in 2012 compared to 2011 and $ 647 million or compared to 2011 and $ 647 million or 36 % in and $ 647 million or 36 % in 2011 compared to million or 36 % in 2011 compared to 2010 . The % in 2011 compared to 2010 . The growth in R R & D expense increased 39 % and 36 % in expense increased 39 % and 36 % in 2012 and 2011 % and 36 % in 2012 and 2011 , respectively , 36 % in 2012 and 2011 , respectively , it remained & A expense increased $ 2.4 billion or 32 % during increased $ 2.4 billion or 32 % during 2012 compared to billion or 32 % during 2012 compared to 2011 and $ % during 2012 compared to 2011 and $ 2.1 billion or compared to 2011 and $ 2.1 billion or 38 % during and $ 2.1 billion or 38 % during 2011 compared to billion or 38 % during 2011 compared to 2010 . These % during 2011 compared to 2010 . These increase were primarily Other income and expense for 2012 , 2011 , and 2010 and expense for 2012 , 2011 , and 2010 are a 2012 , 2011 , and 2010 are a follows ( in ( in million ) : 2012 2011 2010 Interest and dividend in million ) : 2012 2011 2010 Interest and dividend income million ) : 2012 2011 2010 Interest and dividend income $ Interest and dividend income $ 1,088 $ 519 $ 311 Other dividend income $ 1,088 $ 519 $ 311 Other expense , $ 1,088 $ 519 $ 311 Other expense , net ( Other expense , net ( 566 ) ( 104 ) ( net ( 566 ) ( 104 ) ( 156 ) Total ) ( 104 ) ( 156 ) Total other income/ ( expense ) , net $ 522 $ 415 $ 155 Total , net $ 522 $ 415 $ 155 Total other income $ 522 $ 415 $ 155 Total other income and expense income and expense increased $ 107 million or 26 % to increased $ 107 million or 26 % to $ 522 million or 26 % to $ 522 million during 2012 compared to to $ 522 million during 2012 compared to $ 415 million during 2012 compared to $ 415 million and $ 155 million $ 415 million and $ 155 million in 2011 and 2010 and $ 155 million in 2011 and 2010 , respectively . 155 million in 2011 and 2010 , respectively . The year-over-year other income and expense during 2012 wa due primarily to higher other income and expense in 2011 compared to 2010 wa attributable expense in 2011 compared to 2010 wa attributable to higher interest equivalent and marketable security wa 1.03 % , 0.77 % , security wa 1.03 % , 0.77 % , and 0.75 % , 0.77 % , and 0.75 % during 2012 , 2011 , and 0.75 % during 2012 , 2011 , and 2010 0.75 % during 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . During 2012 2010 , respectively . During 2012 , 2011 , and 2010 respectively . During 2012 , 2011 , and 2010 , the 2012 , 2011 , and 2010 , the Company had no effective tax rate were approximately 25.2 % , 24.2 % , were approximately 25.2 % , 24.2 % , and 24.4 % , 24.2 % , and 24.4 % for 2012 , 2011 , and 24.4 % for 2012 , 2011 , and 2010 24.4 % for 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . The Company federal income tax rate of 36 Table of Contents 35 % of 36 Table of Contents 35 % due primarily to certain the U.S. As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had deferred and tax credit of $ 4.0 billion , and deferred tax deferred tax liability of $ 14.9 billion . Management belief it tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . All IRS examining the year 2007 through 2009 . All IRS audit issue issue for year prior to 2004 have been resolved . In for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 ( in million , and September 25 , 2010 ( in million ) : ( in million ) : 2012 2011 2010 Cash , cash in million ) : 2012 2011 2010 Cash , cash equivalent million ) : 2012 2011 2010 Cash , cash equivalent and equivalent and marketable security $ 121,251 $ 81,570 $ 51,011 Accounts marketable security $ 121,251 $ 81,570 $ 51,011 Accounts receivable , $ 121,251 $ 81,570 $ 51,011 Accounts receivable , net $ Accounts receivable , net $ 10,930 $ 5,369 $ 5,510 Inventories , net $ 10,930 $ 5,369 $ 5,510 Inventories $ 791 $ 10,930 $ 5,369 $ 5,510 Inventories $ 791 $ 776 5,369 $ 5,510 Inventories $ 791 $ 776 $ 1,051 Working 5,510 Inventories $ 791 $ 776 $ 1,051 Working capital $ $ 791 $ 776 $ 1,051 Working capital $ 19,111 $ $ 1,051 Working capital $ 19,111 $ 17,018 $ 20,956 Annual Working capital $ 19,111 $ 17,018 $ 20,956 Annual operating cash $ 19,111 $ 17,018 $ 20,956 Annual operating cash flow $ Annual operating cash flow $ 50,856 $ 37,529 $ 18,595 As cash flow $ 50,856 $ 37,529 $ 18,595 As of September $ 50,856 $ 37,529 $ 18,595 As of September 29 , $ 18,595 As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had $ , the Company had $ 121.3 billion in cash , cash , an increase of $ 39.7 billion or 49 % from of $ 39.7 billion or 49 % from September 24 , or 49 % from September 24 , 2011 . The principal % from September 24 , 2011 . The principal component of by operating activity of $ 50.9 billion , which wa partially plant and equipment of $ 8.3 billion , payment for acquisition of intangible asset of $ 1.1 billion and payment of dividend dividend equivalent right of $ 2.5 billion . The Company ’ loss . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , $ 82.6 2012 and September 24 , 2011 , $ 82.6 billion and 24 , 2011 , $ 82.6 billion and $ 54.3 billion $ 82.6 billion and $ 54.3 billion , respectively , of existing operation over the next 12 month . Capital Assets The s capital expenditure were $ 10.3 billion during 2012 , consisting were $ 10.3 billion during 2012 , consisting of $ 865 2012 , consisting of $ 865 million for retail store facility retail store facility and $ 9.5 billion for other capital expenditure product tooling and manufacturing process 37 Table of Contents equipment , payment for capital expenditure during 2012 were $ 8.3 billion . expenditure during 2012 were $ 8.3 billion . The Company anticipates Company anticipates utilizing approximately $ 10 billion for capital expenditure during billion for capital expenditure during 2013 , including approximately $ 850 2013 , including approximately $ 850 million for retail store facility store facility and approximately $ 9.15 billion for other capital expenditure software and enhancement . During 2013 , the Company expects to Company expects to open about 30 to 35 new retail store to open about 30 to 35 new retail store , with Stock Repurchase Program In March 2012 , the Board of Directors , quarterly dividend of $ 2.65 per share . The Company expects to pay approximately $ 2.5 billion each quarter in conjunction declared dividend . In March 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ s common stock beginning in 2013 . The repurchase program is it will utilize approximately $ 45 billion of domestic cash to firm commitment a of September 29 , 2012 and excludes amount a of September 29 , 2012 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Operating lease $ 4,414 5 Years Operating lease $ 4,414 $ 516 $ 1,098 $ Operating lease $ 4,414 $ 516 $ 1,098 $ 999 $ $ 4,414 $ 516 $ 1,098 $ 999 $ 1,801 Purchase $ 516 $ 1,098 $ 999 $ 1,801 Purchase obligation 21,053 $ 1,098 $ 999 $ 1,801 Purchase obligation 21,053 21,053 0 999 $ 1,801 Purchase obligation 21,053 21,053 0 0 0 Other $ 1,801 Purchase obligation 21,053 21,053 0 0 0 Other obligation 1,801 Purchase obligation 21,053 21,053 0 0 0 Other obligation 988 Purchase obligation 21,053 21,053 0 0 0 Other obligation 988 937 obligation 21,053 21,053 0 0 0 Other obligation 988 937 49 0 0 0 Other obligation 988 937 49 2 0 Total 0 0 Other obligation 988 937 49 2 0 Total $ 0 Other obligation 988 937 49 2 0 Total $ 26,455 Other obligation 988 937 49 2 0 Total $ 26,455 $ obligation 988 937 49 2 0 Total $ 26,455 $ 22,506 49 2 0 Total $ 26,455 $ 22,506 $ 1,147 $ 0 Total $ 26,455 $ 22,506 $ 1,147 $ 1,001 $ $ 26,455 $ 22,506 $ 1,147 $ 1,001 $ 1,801 Lease $ 22,506 $ 1,147 $ 1,001 $ 1,801 Lease Commitments The $ 1,147 $ 1,001 $ 1,801 Lease Commitments The Company ’ typically for term not exceeding 10 year and generally provide renewal are for term ranging from 38 Table of Contents five to Table of Contents five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company ’ s noncancelable operating lease were $ 4.4 billion , of which $ billion , of which $ 3.1 billion related to lease for typically cover period up to 150 day . The Company also information . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had outstanding component purchase commitment of $ 21.1 billion . Other Obligations In had outstanding obligation of $ 988 million a of September 29 988 million a of September 29 , 2012 , that were a of September 29 , 2012 , that were comprised mainly penalty . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had non-current deferred tax liability of $ 13.8 billion . Additionally , a Additionally , a of September 29 , 2012 , the Company a of September 29 , 2012 , the Company had gross unrecognized tax benefit of $ 2.1 billion and an additional $ billion and an additional $ 401 million for gross interest and to indemnification a of September 29 , 2012 or September 24 a of September 29 , 2012 or September 24 , 2011 29 , 2012 or September 24 , 2011 . The Company 2012 or September 24 , 2011 . The Company ha entered have not been material . 39 Table of Contents Item 7A 39 Table of Contents Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 29 , 2012 , a hypothetical a of September 29 , 2012 , a hypothetical 100 basis , 2012 , a hypothetical 100 basis point increase in interest would result in a $ 2.1 billion incremental decline in the portfolio . As of September 24 , 2011 , a similar As of September 24 , 2011 , a similar 100 basis , 2011 , a similar 100 basis point shift in the would result in a $ 913 million incremental decline in the of hedging particular exposure . 40 Table of Contents To provide , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 200 million a of September 29 200 million a of September 29 , 2012 compared to a a of September 29 , 2012 compared to a maximum one-day in fair value of $ 161 million a of September 24 161 million a of September 24 , 2011 . Because the a of September 24 , 2011 . Because the Company us analysis performed a of September 29 , 2012 due to the a of September 29 , 2012 due to the inherent limitation actual exposure and position . 41 Table of Contents Item 8 41 Table of Contents Item 8 . Financial Statements and Supplementary for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 43 Consolidated Balance , and September 25 , 2010 43 Consolidated Balance Sheets a and September 25 , 2010 43 Consolidated Balance Sheets a of Balance Sheets a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 44 Consolidated Statements 2012 and September 24 , 2011 44 Consolidated Statements of Shareholders and September 24 , 2011 44 Consolidated Statements of Shareholders ’ for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 45 Consolidated Statements , and September 25 , 2010 45 Consolidated Statements of Cash and September 25 , 2010 45 Consolidated Statements of Cash Flows for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 46 Notes to , and September 25 , 2010 46 Notes to Consolidated Financial and September 25 , 2010 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 74 Reports of Ernst & Young Independent Registered Public Accounting Firm 75 All financial statement schedule have statement and note thereto . 42 Table of Contents CONSOLIDATED STATEMENTS amount ) Years ended September 29 , 2012 September 24 , Years ended September 29 , 2012 September 24 , 2011 September September 29 , 2012 September 24 , 2011 September 25 , , 2012 September 24 , 2011 September 25 , 2010 Net September 24 , 2011 September 25 , 2010 Net sale $ , 2011 September 25 , 2010 Net sale $ 156,508 $ , 2010 Net sale $ 156,508 $ 108,249 $ 65,225 Cost Net sale $ 156,508 $ 108,249 $ 65,225 Cost of sale $ 156,508 $ 108,249 $ 65,225 Cost of sale 87,846 64,431 $ 65,225 Cost of sale 87,846 64,431 39,541 Gross margin 68,662 65,225 Cost of sale 87,846 64,431 39,541 Gross margin 68,662 43,818 Cost of sale 87,846 64,431 39,541 Gross margin 68,662 43,818 25,684 87,846 64,431 39,541 Gross margin 68,662 43,818 25,684 Operating expense : 64,431 39,541 Gross margin 68,662 43,818 25,684 Operating expense : Research 39,541 Gross margin 68,662 43,818 25,684 Operating expense : Research and expense : Research and development 3,381 2,429 1,782 Selling , general : Research and development 3,381 2,429 1,782 Selling , general and Research and development 3,381 2,429 1,782 Selling , general and administrative Selling , general and administrative 10,040 7,599 5,517 Total operating expense , general and administrative 10,040 7,599 5,517 Total operating expense 13,421 general and administrative 10,040 7,599 5,517 Total operating expense 13,421 10,028 7,599 5,517 Total operating expense 13,421 10,028 7,299 Operating income 55,241 5,517 Total operating expense 13,421 10,028 7,299 Operating income 55,241 33,790 Total operating expense 13,421 10,028 7,299 Operating income 55,241 33,790 18,385 13,421 10,028 7,299 Operating income 55,241 33,790 18,385 Other income/ ( 10,028 7,299 Operating income 55,241 33,790 18,385 Other income/ ( expense 7,299 Operating income 55,241 33,790 18,385 Other income/ ( expense ) ( expense ) , net 522 415 155 Income before provision expense ) , net 522 415 155 Income before provision for ) , net 522 415 155 Income before provision for income before provision for income tax 55,763 34,205 18,540 Provision for income provision for income tax 55,763 34,205 18,540 Provision for income tax for income tax 55,763 34,205 18,540 Provision for income tax 14,030 18,540 Provision for income tax 14,030 8,283 4,527 Net income $ Provision for income tax 14,030 8,283 4,527 Net income $ 41,733 for income tax 14,030 8,283 4,527 Net income $ 41,733 $ 8,283 4,527 Net income $ 41,733 $ 25,922 $ 14,013 Earnings Net income $ 41,733 $ 25,922 $ 14,013 Earnings per share $ 41,733 $ 25,922 $ 14,013 Earnings per share : Basic per share : Basic $ 44.64 $ 28.05 $ 15.41 Diluted : Basic $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 44.64 $ 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 28.05 $ 15.41 Diluted $ 44.15 $ 27.68 $ 15.15 Shares 15.41 Diluted $ 44.15 $ 27.68 $ 15.15 Shares used in $ 44.15 $ 27.68 $ 15.15 Shares used in computing earnings earnings per share : Basic 934,818 924,258 909,461 Diluted 945,355 936,645 per share : Basic 934,818 924,258 909,461 Diluted 945,355 936,645 924,712 share : Basic 934,818 924,258 909,461 Diluted 945,355 936,645 924,712 Cash Basic 934,818 924,258 909,461 Diluted 945,355 936,645 924,712 Cash dividend declared 934,818 924,258 909,461 Diluted 945,355 936,645 924,712 Cash dividend declared per 924,258 909,461 Diluted 945,355 936,645 924,712 Cash dividend declared per common declared per common share $ 2.65 $ 0.00 $ 0.00 See common share $ 2.65 $ 0.00 $ 0.00 See accompanying Notes $ 2.65 $ 0.00 $ 0.00 See accompanying Notes to Consolidated to Consolidated Financial Statements . 43 Table of Contents CONSOLIDATED BALANCE reflected in thousand ) September 29 , 2012 September 24 , thousand ) September 29 , 2012 September 24 , 2011 ASSETS September 29 , 2012 September 24 , 2011 ASSETS : Current , 2012 September 24 , 2011 ASSETS : Current asset : Cash and cash equivalent $ 10,746 $ 9,815 Short-term marketable security cash equivalent $ 10,746 $ 9,815 Short-term marketable security 18,383 16,137 $ 9,815 Short-term marketable security 18,383 16,137 Accounts receivable , le 9,815 Short-term marketable security 18,383 16,137 Accounts receivable , le allowance , le allowance of $ 98 and $ 53 , respectively of $ 98 and $ 53 , respectively 10,930 5,369 Inventories and $ 53 , respectively 10,930 5,369 Inventories 791 776 Deferred $ 53 , respectively 10,930 5,369 Inventories 791 776 Deferred tax , respectively 10,930 5,369 Inventories 791 776 Deferred tax asset 2,583 respectively 10,930 5,369 Inventories 791 776 Deferred tax asset 2,583 2,014 791 776 Deferred tax asset 2,583 2,014 Vendor non-trade receivables 7,762 776 Deferred tax asset 2,583 2,014 Vendor non-trade receivables 7,762 6,348 2,583 2,014 Vendor non-trade receivables 7,762 6,348 Other current asset 6,458 2,014 Vendor non-trade receivables 7,762 6,348 Other current asset 6,458 4,529 7,762 6,348 Other current asset 6,458 4,529 Total current asset 57,653 6,348 Other current asset 6,458 4,529 Total current asset 57,653 44,988 6,458 4,529 Total current asset 57,653 44,988 Long-term marketable security 92,122 4,529 Total current asset 57,653 44,988 Long-term marketable security 92,122 55,618 57,653 44,988 Long-term marketable security 92,122 55,618 Property , plant and 44,988 Long-term marketable security 92,122 55,618 Property , plant and equipment plant and equipment , net 15,452 7,777 Goodwill 1,135 896 Acquired and equipment , net 15,452 7,777 Goodwill 1,135 896 Acquired intangible , net 15,452 7,777 Goodwill 1,135 896 Acquired intangible asset , net 15,452 7,777 Goodwill 1,135 896 Acquired intangible asset , net Acquired intangible asset , net 4,224 3,536 Other asset 5,478 3,556 intangible asset , net 4,224 3,536 Other asset 5,478 3,556 Total net 4,224 3,536 Other asset 5,478 3,556 Total asset $ 176,064 4,224 3,536 Other asset 5,478 3,556 Total asset $ 176,064 $ 5,478 3,556 Total asset $ 176,064 $ 116,371 LIABILITIES AND SHAREHOLDERS Total asset $ 176,064 $ 116,371 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 Accounts payable $ 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred 21,175 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 $ 14,632 Accrued expense 11,414 9,247 Deferred revenue 5,953 4,091 Total expense 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 11,414 9,247 Deferred revenue 5,953 4,091 Total current liability 38,542 27,970 5,953 4,091 Total current liability 38,542 27,970 Deferred revenue - non-current 4,091 Total current liability 38,542 27,970 Deferred revenue - non-current 2,648 27,970 Deferred revenue - non-current 2,648 1,686 Other non-current liability 16,664 Deferred revenue - non-current 2,648 1,686 Other non-current liability 16,664 10,100 2,648 1,686 Other non-current liability 16,664 10,100 Total liability 57,854 39,756 1,686 Other non-current liability 16,664 10,100 Total liability 57,854 39,756 Commitments liability 16,664 10,100 Total liability 57,854 39,756 Commitments and contingency Shareholders 16,664 10,100 Total liability 57,854 39,756 Commitments and contingency Shareholders ’ , no par value ; 1,800,000 share authorized ; 939,208 and ; 1,800,000 share authorized ; 939,208 and 929,277 share issued and share authorized ; 939,208 and 929,277 share issued and outstanding , issued and outstanding , respectively 16,422 13,331 Retained earnings 101,289 62,841 and outstanding , respectively 16,422 13,331 Retained earnings 101,289 62,841 Accumulated respectively 16,422 13,331 Retained earnings 101,289 62,841 Accumulated other comprehensive income 16,422 13,331 Retained earnings 101,289 62,841 Accumulated other comprehensive income 499 62,841 Accumulated other comprehensive income 499 443 Total shareholder ’ equity Accumulated other comprehensive income 499 443 Total shareholder ’ equity 118,210 443 Total shareholder ’ equity 118,210 76,615 Total liability and shareholder Total shareholder ’ equity 118,210 76,615 Total liability and shareholder ’ and shareholder ’ equity $ 176,064 $ 116,371 See accompanying Notes ’ equity $ 176,064 $ 116,371 See accompanying Notes to Consolidated to Consolidated Financial Statements . 44 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 26 , 2009 899,806 $ 8,210 a of September 26 , 2009 899,806 $ 8,210 $ 23,353 of September 26 , 2009 899,806 $ 8,210 $ 23,353 $ 26 , 2009 899,806 $ 8,210 $ 23,353 $ 77 $ 2009 899,806 $ 8,210 $ 23,353 $ 77 $ 31,640 Components $ 8,210 $ 23,353 $ 77 $ 31,640 Components of comprehensive $ 23,353 $ 77 $ 31,640 Components of comprehensive income : comprehensive income : Net income 0 0 14,013 0 14,013 Change income : Net income 0 0 14,013 0 14,013 Change in : Net income 0 0 14,013 0 14,013 Change in foreign Net income 0 0 14,013 0 14,013 Change in foreign currency income 0 0 14,013 0 14,013 Change in foreign currency translation Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in foreign currency translation 0 0 0 7 7 Change in unrealized currency translation 0 0 0 7 7 Change in unrealized gains/losses translation 0 0 0 7 7 Change in unrealized gains/losses on security , net of tax 0 0 0 123 123 Change , net of tax 0 0 0 123 123 Change in net of tax 0 0 0 123 123 Change in unrecognized of tax 0 0 0 123 123 Change in unrecognized gains/losses tax 0 0 0 123 123 Change in unrecognized gains/losses on instrument , net of tax 0 0 0 ( 253 ) , net of tax 0 0 0 ( 253 ) ( net of tax 0 0 0 ( 253 ) ( 253 tax 0 0 0 ( 253 ) ( 253 ) Total 0 ( 253 ) ( 253 ) Total comprehensive income 13,890 253 ) Total comprehensive income 13,890 Share-based compensation 0 876 0 comprehensive income 13,890 Share-based compensation 0 876 0 0 876 Common income 13,890 Share-based compensation 0 876 0 0 876 Common stock 13,890 Share-based compensation 0 876 0 0 876 Common stock issued Share-based compensation 0 876 0 0 876 Common stock issued under compensation 0 876 0 0 876 Common stock issued under stock share withheld for employee tax 16,164 703 ( 197 ) 0 withheld for employee tax 16,164 703 ( 197 ) 0 506 employee tax 16,164 703 ( 197 ) 0 506 Tax benefit 16,164 703 ( 197 ) 0 506 Tax benefit from equity 703 ( 197 ) 0 506 Tax benefit from equity award , including transfer pricing adjustment 0 879 0 0 879 Balances including transfer pricing adjustment 0 879 0 0 879 Balances a transfer pricing adjustment 0 879 0 0 879 Balances a of pricing adjustment 0 879 0 0 879 Balances a of September adjustment 0 879 0 0 879 Balances a of September 25 879 Balances a of September 25 , 2010 915,970 10,668 37,169 a of September 25 , 2010 915,970 10,668 37,169 ( 46 of September 25 , 2010 915,970 10,668 37,169 ( 46 ) September 25 , 2010 915,970 10,668 37,169 ( 46 ) 47,791 25 , 2010 915,970 10,668 37,169 ( 46 ) 47,791 Components 2010 915,970 10,668 37,169 ( 46 ) 47,791 Components of comprehensive 10,668 37,169 ( 46 ) 47,791 Components of comprehensive income : comprehensive income : Net income 0 0 25,922 0 25,922 Change income : Net income 0 0 25,922 0 25,922 Change in : Net income 0 0 25,922 0 25,922 Change in foreign Net income 0 0 25,922 0 25,922 Change in foreign currency income 0 0 25,922 0 25,922 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 12 ) in foreign currency translation 0 0 0 ( 12 ) ( foreign currency translation 0 0 0 ( 12 ) ( 12 translation 0 0 0 ( 12 ) ( 12 ) Change 0 ( 12 ) ( 12 ) Change in unrealized gains/losses security , net of tax 0 0 0 ( 41 ) , net of tax 0 0 0 ( 41 ) ( net of tax 0 0 0 ( 41 ) ( 41 tax 0 0 0 ( 41 ) ( 41 ) Change 0 ( 41 ) ( 41 ) Change in unrecognized gains/losses instrument , net of tax 0 0 0 542 542 Total , net of tax 0 0 0 542 542 Total comprehensive net of tax 0 0 0 542 542 Total comprehensive income of tax 0 0 0 542 542 Total comprehensive income 26,411 tax 0 0 0 542 542 Total comprehensive income 26,411 Share-based 542 542 Total comprehensive income 26,411 Share-based compensation 0 1,168 0 comprehensive income 26,411 Share-based compensation 0 1,168 0 0 1,168 Common income 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock 26,411 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 13,331 62,841 a of September 24 , 2011 929,277 13,331 62,841 443 76,615 of September 24 , 2011 929,277 13,331 62,841 443 76,615 Components September 24 , 2011 929,277 13,331 62,841 443 76,615 Components of 24 , 2011 929,277 13,331 62,841 443 76,615 Components of comprehensive , 2011 929,277 13,331 62,841 443 76,615 Components of comprehensive income 2011 929,277 13,331 62,841 443 76,615 Components of comprehensive income : comprehensive income : Net income 0 0 41,733 0 41,733 Change income : Net income 0 0 41,733 0 41,733 Change in : Net income 0 0 41,733 0 41,733 Change in foreign Net income 0 0 41,733 0 41,733 Change in foreign currency income 0 0 41,733 0 41,733 Change in foreign currency translation Change in foreign currency translation 0 0 0 ( 15 ) in foreign currency translation 0 0 0 ( 15 ) ( foreign currency translation 0 0 0 ( 15 ) ( 15 translation 0 0 0 ( 15 ) ( 15 ) Change 0 ( 15 ) ( 15 ) Change in unrealized gains/losses security , net of tax 0 0 0 601 601 Change , net of tax 0 0 0 601 601 Change in net of tax 0 0 0 601 601 Change in unrecognized of tax 0 0 0 601 601 Change in unrecognized gains/losses tax 0 0 0 601 601 Change in unrecognized gains/losses on instrument , net of tax 0 0 0 ( 530 ) , net of tax 0 0 0 ( 530 ) ( net of tax 0 0 0 ( 530 ) ( 530 tax 0 0 0 ( 530 ) ( 530 ) Total 0 ( 530 ) ( 530 ) Total comprehensive income 41,789 530 ) Total comprehensive income 41,789 Dividends and dividend equivalent right and dividend equivalent right declared 0 0 ( 2,523 ) 0 dividend equivalent right declared 0 0 ( 2,523 ) 0 ( right declared 0 0 ( 2,523 ) 0 ( 2,523 ) 0 0 ( 2,523 ) 0 ( 2,523 ) Share-based compensation ( 2,523 ) 0 ( 2,523 ) Share-based compensation 0 1,740 ( 2,523 ) Share-based compensation 0 1,740 0 0 1,740 Common 2,523 ) Share-based compensation 0 1,740 0 0 1,740 Common stock ) Share-based compensation 0 1,740 0 0 1,740 Common stock issued Share-based compensation 0 1,740 0 0 1,740 Common stock issued under compensation 0 1,740 0 0 1,740 Common stock issued under stock share withheld for employee tax 9,931 200 ( 762 ) 0 withheld for employee tax 9,931 200 ( 762 ) 0 ( employee tax 9,931 200 ( 762 ) 0 ( 562 ) 9,931 200 ( 762 ) 0 ( 562 ) Tax benefit ( 762 ) 0 ( 562 ) Tax benefit from equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including transfer pricing adjustment 0 1,151 0 0 1,151 Balances a transfer pricing adjustment 0 1,151 0 0 1,151 Balances a of pricing adjustment 0 1,151 0 0 1,151 Balances a of September adjustment 0 1,151 0 0 1,151 Balances a of September 29 1,151 Balances a of September 29 , 2012 939,208 $ 16,422 a of September 29 , 2012 939,208 $ 16,422 $ 101,289 of September 29 , 2012 939,208 $ 16,422 $ 101,289 $ 29 , 2012 939,208 $ 16,422 $ 101,289 $ 499 $ 2012 939,208 $ 16,422 $ 101,289 $ 499 $ 118,210 See $ 16,422 $ 101,289 $ 499 $ 118,210 See accompanying Notes $ 101,289 $ 499 $ 118,210 See accompanying Notes to Consolidated to Consolidated Financial Statements . 45 Table of Contents CONSOLIDATED STATEMENTS million ) Years ended September 29 , 2012 September 24 , Years ended September 29 , 2012 September 24 , 2011 September September 29 , 2012 September 24 , 2011 September 25 , , 2012 September 24 , 2011 September 25 , 2010 Cash September 24 , 2011 September 25 , 2010 Cash and cash , 2011 September 25 , 2010 Cash and cash equivalent , beginning of the year $ 9,815 $ 11,261 $ 5,263 Operating the year $ 9,815 $ 11,261 $ 5,263 Operating activity : $ 9,815 $ 11,261 $ 5,263 Operating activity : Net income Operating activity : Net income 41,733 25,922 14,013 Adjustments to reconcile activity : Net income 41,733 25,922 14,013 Adjustments to reconcile net : Net income 41,733 25,922 14,013 Adjustments to reconcile net income activity : Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense : Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense 1,740 Depreciation and amortization 3,277 1,814 1,027 Share-based compensation expense 1,740 1,168 1,814 1,027 Share-based compensation expense 1,740 1,168 879 Deferred income tax 1,027 Share-based compensation expense 1,740 1,168 879 Deferred income tax expense Share-based compensation expense 1,740 1,168 879 Deferred income tax expense 4,405 879 Deferred income tax expense 4,405 2,868 1,440 Changes in operating Deferred income tax expense 4,405 2,868 1,440 Changes in operating asset income tax expense 4,405 2,868 1,440 Changes in operating asset and Accounts receivable , net ( 5,551 ) 143 ( 2,142 ) , net ( 5,551 ) 143 ( 2,142 ) Inventories ( ( 5,551 ) 143 ( 2,142 ) Inventories ( 15 ) ( 2,142 ) Inventories ( 15 ) 275 ( 596 ) ) Inventories ( 15 ) 275 ( 596 ) Vendor non-trade ( 15 ) 275 ( 596 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 1,414 ) ( 1,934 ) ( receivables ( 1,414 ) ( 1,934 ) ( 2,718 ) Other ) ( 1,934 ) ( 2,718 ) Other current and non-current current and non-current asset ( 3,162 ) ( 1,391 ) ( asset ( 3,162 ) ( 1,391 ) ( 1,610 ) Accounts ) ( 1,391 ) ( 1,610 ) Accounts payable 4,467 2,515 ( 1,610 ) Accounts payable 4,467 2,515 6,307 Deferred revenue 2,824 1,610 ) Accounts payable 4,467 2,515 6,307 Deferred revenue 2,824 1,654 ) Accounts payable 4,467 2,515 6,307 Deferred revenue 2,824 1,654 1,217 4,467 2,515 6,307 Deferred revenue 2,824 1,654 1,217 Other current and 2,515 6,307 Deferred revenue 2,824 1,654 1,217 Other current and non-current 6,307 Deferred revenue 2,824 1,654 1,217 Other current and non-current liability Other current and non-current liability 2,552 4,495 778 Cash generated by current and non-current liability 2,552 4,495 778 Cash generated by operating and non-current liability 2,552 4,495 778 Cash generated by operating activity Cash generated by operating activity 50,856 37,529 18,595 Investing activity : generated by operating activity 50,856 37,529 18,595 Investing activity : Purchases by operating activity 50,856 37,529 18,595 Investing activity : Purchases of Purchases of marketable security ( 151,232 ) ( 102,317 ) ( security ( 151,232 ) ( 102,317 ) ( 57,793 ) Proceeds ) ( 102,317 ) ( 57,793 ) Proceeds from maturity of from maturity of marketable security 13,035 20,437 24,930 Proceeds from sale maturity of marketable security 13,035 20,437 24,930 Proceeds from sale of of marketable security 13,035 20,437 24,930 Proceeds from sale of marketable from sale of marketable security 99,770 49,416 21,788 Payments made in sale of marketable security 99,770 49,416 21,788 Payments made in connection of marketable security 99,770 49,416 21,788 Payments made in connection with net of cash acquired ( 350 ) ( 244 ) ( acquired ( 350 ) ( 244 ) ( 638 ) Payments ) ( 244 ) ( 638 ) Payments for acquisition of , plant and equipment ( 8,295 ) ( 4,260 ) ( equipment ( 8,295 ) ( 4,260 ) ( 2,005 ) Payments ) ( 4,260 ) ( 2,005 ) Payments for acquisition of acquisition of intangible asset ( 1,107 ) ( 3,192 ) ( asset ( 1,107 ) ( 3,192 ) ( 116 ) Other ) ( 3,192 ) ( 116 ) Other ( 48 ) ( 116 ) Other ( 48 ) ( 259 ) ( Other ( 48 ) ( 259 ) ( 20 ) Cash ) ( 259 ) ( 20 ) Cash used in investing used in investing activity ( 48,227 ) ( 40,419 ) ( activity ( 48,227 ) ( 40,419 ) ( 13,854 ) Financing ) ( 40,419 ) ( 13,854 ) Financing activity : Proceeds from issuance of common stock 665 831 912 Excess tax benefit issuance of common stock 665 831 912 Excess tax benefit from of common stock 665 831 912 Excess tax benefit from equity tax benefit from equity award 1,351 1,133 751 Dividends and dividend benefit from equity award 1,351 1,133 751 Dividends and dividend equivalent from equity award 1,351 1,133 751 Dividends and dividend equivalent right dividend equivalent right paid ( 2,488 ) 0 0 Taxes paid right paid ( 2,488 ) 0 0 Taxes paid related to paid ( 2,488 ) 0 0 Taxes paid related to net settlement of equity award ( 1,226 ) ( 520 ) ( award ( 1,226 ) ( 520 ) ( 406 ) Cash ) ( 520 ) ( 406 ) Cash ( used in /generated by financing activity ( 1,698 ) 1,444 1,257 Increase/ ( financing activity ( 1,698 ) 1,444 1,257 Increase/ ( decrease ) activity ( 1,698 ) 1,444 1,257 Increase/ ( decrease ) in in cash and cash equivalent 931 ( 1,446 ) 5,998 Cash and cash equivalent 931 ( 1,446 ) 5,998 Cash and cash equivalent 931 ( 1,446 ) 5,998 Cash and cash equivalent , end of the year $ 10,746 $ 9,815 $ 11,261 Supplemental the year $ 10,746 $ 9,815 $ 11,261 Supplemental cash flow $ 10,746 $ 9,815 $ 11,261 Supplemental cash flow disclosure : income tax , net $ 7,682 $ 3,338 $ 2,697 See , net $ 7,682 $ 3,338 $ 2,697 See accompanying Notes $ 7,682 $ 3,338 $ 2,697 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 Table of Contents NOTES TO TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Summary of Significant Accounting presentation . Refer to Note 8 , “ Segment Information and Data ” of this Form 10-K . The Company ’ s s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2012 , 2011 and 2010 ended s fiscal year 2012 , 2011 and 2010 ended on September year 2012 , 2011 and 2010 ended on September 29 , and 2010 ended on September 29 , 2012 , September 24 ended on September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 , respectively . , and September 25 , 2010 , respectively . An additional calendar quarter . Fiscal year 2012 spanned 53 week , with . Fiscal year 2012 spanned 53 week , with a 14th 53 week , with a 14th week included in the first in the first quarter of 2012 . Fiscal year 2011 and of 2012 . Fiscal year 2011 and 2010 spanned 52 week . Fiscal year 2011 and 2010 spanned 52 week each . year 2011 and 2010 spanned 52 week each . Unless otherwise for amount billed to it 47 Table of Contents customer . The Company allocates revenue between 48 Table of Contents these deliverable the three year ended September 29 , 2012 , the Company year ended September 29 , 2012 , the Company ’ s device have ranged from $ 5 to $ 25 . Revenue from $ 5 to $ 25 . Revenue allocated to such product ’ s technological feasibility 49 Table of Contents ha been were expensed a incurred during 2012 , 2011 and 2010 . a incurred during 2012 , 2011 and 2010 . Advertising Costs during 2012 , 2011 and 2010 . Advertising Costs Advertising cost . Advertising expense wa $ 1.0 billion , $ 933 million $ 1.0 billion , $ 933 million and $ 691 million $ 933 million and $ 691 million for 2012 , 2011 and $ 691 million for 2012 , 2011 and 2010 , 691 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . Share-based Compensation can be found in Note 6 , “ Shareholders ’ Equity Compensation ” of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” Taxes ” of this Form 10-K for additional information . Earnings method , an increase in 50 Table of Contents the fair diluted earnings per share for 2012 , 2011 , and 2010 per share for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in thousand , except per share amount ) : 2012 2011 2010 Numerator : Net share amount ) : 2012 2011 2010 Numerator : Net income amount ) : 2012 2011 2010 Numerator : Net income $ Numerator : Net income $ 41,733 $ 25,922 $ 14,013 Denominator Net income $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average $ 41,733 $ 25,922 $ 14,013 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 934,818 924,258 909,461 Effect of dilutive : Weighted-average share outstanding 934,818 924,258 909,461 Effect of dilutive security Weighted-average share outstanding 934,818 924,258 909,461 Effect of dilutive security 10,537 909,461 Effect of dilutive security 10,537 12,387 15,251 Weighted-average diluted share Effect of dilutive security 10,537 12,387 15,251 Weighted-average diluted share 945,355 of dilutive security 10,537 12,387 15,251 Weighted-average diluted share 945,355 936,645 12,387 15,251 Weighted-average diluted share 945,355 936,645 924,712 Basic earnings per 15,251 Weighted-average diluted share 945,355 936,645 924,712 Basic earnings per share Weighted-average diluted share 945,355 936,645 924,712 Basic earnings per share $ Basic earnings per share $ 44.64 $ 28.05 $ 15.41 Diluted per share $ 44.64 $ 28.05 $ 15.41 Diluted earnings per $ 44.64 $ 28.05 $ 15.41 Diluted earnings per share $ Diluted earnings per share $ 44.15 $ 27.68 $ 15.15 Potentially per share $ 44.15 $ 27.68 $ 15.15 Potentially dilutive security $ 44.15 $ 27.68 $ 15.15 Potentially dilutive security representing 1.0 15.15 Potentially dilutive security representing 1.0 million , 1.7 million and security representing 1.0 million , 1.7 million and 1.6 million share million , 1.7 million and 1.6 million share of common stock share of common stock for 2012 , 2011 and 2010 , common stock for 2012 , 2011 and 2010 , respectively , for 2012 , 2011 and 2010 , respectively , were excluded debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term Company had no fair value 51 Table of Contents hedge in Table of Contents hedge in 2012 , 2011 and 2010 . Contents hedge in 2012 , 2011 and 2010 . The net in 2012 , 2011 and 2010 . The net gain or building is the lesser of 30 year or the remaining life property and equipment wa $ 2.6 billion , $ 1.6 billion $ 2.6 billion , $ 1.6 billion and $ 815 million $ 1.6 billion and $ 815 million during 2012 , 2011 and $ 815 million during 2012 , 2011 and 2010 , 815 million during 2012 , 2011 and 2010 , respectively . during 2012 , 2011 and 2010 , respectively . Long-Lived Assets record any significant impairment during 2012 , 2011 and 2010 . significant impairment during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company doe not indefinite lived intangible asset during 2012 , 2011 and 2010 . intangible asset during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company established reporting each reporting unit . In 2012 and 2011 , the Company unit . In 2012 and 2011 , the Company ’ s Europe reportable operating segment . 52 Table of Contents The Company fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally s result of operation . 53 Table of Contents Note 2 53 Table of Contents Note 2 – Financial Instruments Cash , marketable security a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 3,109 $ 0 $ 0 $ Securities Cash $ 3,109 $ 0 $ 0 $ 3,109 $ $ 3,109 $ 0 $ 0 $ 3,109 $ 3,109 $ $ 0 $ 0 $ 3,109 $ 3,109 $ 0 $ $ 0 $ 3,109 $ 3,109 $ 0 $ 0 Level $ 3,109 $ 3,109 $ 0 $ 0 Level 1 : $ 3,109 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,460 1 : Money market fund 1,460 0 0 1,460 1,460 0 : Money market fund 1,460 0 0 1,460 1,460 0 0 Money market fund 1,460 0 0 1,460 1,460 0 0 Mutual market fund 1,460 0 0 1,460 1,460 0 0 Mutual fund fund 1,460 0 0 1,460 1,460 0 0 Mutual fund 2,385 1,460 0 0 1,460 1,460 0 0 Mutual fund 2,385 79 0 0 1,460 1,460 0 0 Mutual fund 2,385 79 ( 1,460 0 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 2,462 0 2,385 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 3,922 0 2,462 0 Subtotal 3,845 79 ( 2 ) 3,922 1,460 0 Subtotal 3,845 79 ( 2 ) 3,922 1,460 2,462 0 3,845 79 ( 2 ) 3,922 1,460 2,462 0 Level 2 79 ( 2 ) 3,922 1,460 2,462 0 Level 2 : ( 2 ) 3,922 1,460 2,462 0 Level 2 : U.S. 2 ) 3,922 1,460 2,462 0 Level 2 : U.S. Treasury 3,922 1,460 2,462 0 Level 2 : U.S. Treasury security 20,088 2 : U.S. Treasury security 20,088 21 ( 1 ) 20,108 : U.S. Treasury security 20,088 21 ( 1 ) 20,108 2,608 Treasury security 20,088 21 ( 1 ) 20,108 2,608 3,525 13,975 20,088 21 ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency 21 ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency security ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency security 19,540 1 ) 20,108 2,608 3,525 13,975 U.S. agency security 19,540 58 3,525 13,975 U.S. agency security 19,540 58 ( 1 ) 19,597 13,975 U.S. agency security 19,540 58 ( 1 ) 19,597 1,460 agency security 19,540 58 ( 1 ) 19,597 1,460 1,884 16,253 19,540 58 ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government 58 ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security 5,483 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security 5,483 183 1,884 16,253 Non-U.S. government security 5,483 183 ( 2 ) 5,664 16,253 Non-U.S. government security 5,483 183 ( 2 ) 5,664 84 government security 5,483 183 ( 2 ) 5,664 84 1,034 4,546 5,483 183 ( 2 ) 5,664 84 1,034 4,546 Certificates of 183 ( 2 ) 5,664 84 1,034 4,546 Certificates of deposit ( 2 ) 5,664 84 1,034 4,546 Certificates of deposit and 2 ) 5,664 84 1,034 4,546 Certificates of deposit and time of deposit and time deposit 2,189 2 0 2,191 1,106 202 deposit and time deposit 2,189 2 0 2,191 1,106 202 883 and time deposit 2,189 2 0 2,191 1,106 202 883 Commercial time deposit 2,189 2 0 2,191 1,106 202 883 Commercial paper deposit 2,189 2 0 2,191 1,106 202 883 Commercial paper 2,112 2,189 2 0 2,191 1,106 202 883 Commercial paper 2,112 0 2 0 2,191 1,106 202 883 Commercial paper 2,112 0 0 1,106 202 883 Commercial paper 2,112 0 0 2,112 909 1,203 202 883 Commercial paper 2,112 0 0 2,112 909 1,203 0 883 Commercial paper 2,112 0 0 2,112 909 1,203 0 Corporate Commercial paper 2,112 0 0 2,112 909 1,203 0 Corporate security paper 2,112 0 0 2,112 909 1,203 0 Corporate security 46,261 2,112 0 0 2,112 909 1,203 0 Corporate security 46,261 568 0 0 2,112 909 1,203 0 Corporate security 46,261 568 ( 909 1,203 0 Corporate security 46,261 568 ( 8 ) 46,821 1,203 0 Corporate security 46,261 568 ( 8 ) 46,821 10 Corporate security 46,261 568 ( 8 ) 46,821 10 7,455 39,356 46,261 568 ( 8 ) 46,821 10 7,455 39,356 Municipal security 568 ( 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 ( 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 74 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 74 0 10 7,455 39,356 Municipal security 5,645 74 0 5,719 0 618 7,455 39,356 Municipal security 5,645 74 0 5,719 0 618 5,101 39,356 Municipal security 5,645 74 0 5,719 0 618 5,101 Mortgage- Municipal security 5,645 74 0 5,719 0 618 5,101 Mortgage- and security 5,645 74 0 5,719 0 618 5,101 Mortgage- and asset-backed 5,645 74 0 5,719 0 618 5,101 Mortgage- and asset-backed security 74 0 5,719 0 618 5,101 Mortgage- and asset-backed security 11,948 5,101 Mortgage- and asset-backed security 11,948 66 ( 6 ) 12,008 Mortgage- and asset-backed security 11,948 66 ( 6 ) 12,008 0 asset-backed security 11,948 66 ( 6 ) 12,008 0 0 12,008 11,948 66 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 66 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 18 12,008 0 0 12,008 Subtotal 113,266 972 ( 18 ) 114,220 0 0 12,008 Subtotal 113,266 972 ( 18 ) 114,220 6,177 12,008 Subtotal 113,266 972 ( 18 ) 114,220 6,177 15,921 92,122 113,266 972 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 972 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 $ 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 $ 1,051 6,177 15,921 92,122 Total $ 120,220 $ 1,051 $ ( 20 92,122 Total $ 120,220 $ 1,051 $ ( 20 ) $ 120,220 $ 1,051 $ ( 20 ) $ 121,251 $ 10,746 $ ( 20 ) $ 121,251 $ 10,746 $ 18,383 $ 20 ) $ 121,251 $ 10,746 $ 18,383 $ 92,122 2011 $ 121,251 $ 10,746 $ 18,383 $ 92,122 2011 Adjusted Cost $ 10,746 $ 18,383 $ 92,122 2011 Adjusted Cost Unrealized Gains 10,746 $ 18,383 $ 92,122 2011 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 2,903 $ 0 $ 0 $ Securities Cash $ 2,903 $ 0 $ 0 $ 2,903 $ $ 2,903 $ 0 $ 0 $ 2,903 $ 2,903 $ $ 0 $ 0 $ 2,903 $ 2,903 $ 0 $ $ 0 $ 2,903 $ 2,903 $ 0 $ 0 Level $ 2,903 $ 2,903 $ 0 $ 0 Level 1 : $ 2,903 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,911 1 : Money market fund 1,911 0 0 1,911 1,911 0 : Money market fund 1,911 0 0 1,911 1,911 0 0 Money market fund 1,911 0 0 1,911 1,911 0 0 Mutual market fund 1,911 0 0 1,911 1,911 0 0 Mutual fund fund 1,911 0 0 1,911 1,911 0 0 Mutual fund 1,227 1,911 0 0 1,911 1,911 0 0 Mutual fund 1,227 0 0 0 1,911 1,911 0 0 Mutual fund 1,227 0 ( 1,911 0 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 Mutual fund 1,227 0 ( 34 ) 1,193 0 1,193 0 1,227 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 1,193 0 1,193 0 Subtotal 3,138 0 ( 34 ) 3,104 0 1,193 0 Subtotal 3,138 0 ( 34 ) 3,104 1,911 0 Subtotal 3,138 0 ( 34 ) 3,104 1,911 1,193 0 3,138 0 ( 34 ) 3,104 1,911 1,193 0 Level 2 0 ( 34 ) 3,104 1,911 1,193 0 Level 2 : ( 34 ) 3,104 1,911 1,193 0 Level 2 : U.S. 34 ) 3,104 1,911 1,193 0 Level 2 : U.S. Treasury 3,104 1,911 1,193 0 Level 2 : U.S. Treasury security 10,717 2 : U.S. Treasury security 10,717 39 ( 3 ) 10,753 : U.S. Treasury security 10,717 39 ( 3 ) 10,753 1,250 Treasury security 10,717 39 ( 3 ) 10,753 1,250 2,149 7,354 10,717 39 ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency 39 ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency security ( 3 ) 10,753 1,250 2,149 7,354 U.S. agency security 13,467 3 ) 10,753 1,250 2,149 7,354 U.S. agency security 13,467 24 2,149 7,354 U.S. agency security 13,467 24 ( 3 ) 13,488 7,354 U.S. agency security 13,467 24 ( 3 ) 13,488 225 agency security 13,467 24 ( 3 ) 13,488 225 1,818 11,445 13,467 24 ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government 24 ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government security ( 3 ) 13,488 225 1,818 11,445 Non-U.S. government security 5,559 3 ) 13,488 225 1,818 11,445 Non-U.S. government security 5,559 11 1,818 11,445 Non-U.S. government security 5,559 11 ( 2 ) 5,568 11,445 Non-U.S. government security 5,559 11 ( 2 ) 5,568 551 government security 5,559 11 ( 2 ) 5,568 551 1,548 3,469 5,559 11 ( 2 ) 5,568 551 1,548 3,469 Certificates of 11 ( 2 ) 5,568 551 1,548 3,469 Certificates of deposit ( 2 ) 5,568 551 1,548 3,469 Certificates of deposit and 2 ) 5,568 551 1,548 3,469 Certificates of deposit and time of deposit and time deposit 4,175 2 ( 2 ) 4,175 deposit and time deposit 4,175 2 ( 2 ) 4,175 728 time deposit 4,175 2 ( 2 ) 4,175 728 977 2,470 4,175 2 ( 2 ) 4,175 728 977 2,470 Commercial paper 2 ( 2 ) 4,175 728 977 2,470 Commercial paper 2,853 ( 2 ) 4,175 728 977 2,470 Commercial paper 2,853 0 2 ) 4,175 728 977 2,470 Commercial paper 2,853 0 0 728 977 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 977 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 0 2,470 Commercial paper 2,853 0 0 2,853 2,237 616 0 Corporate Commercial paper 2,853 0 0 2,853 2,237 616 0 Corporate security paper 2,853 0 0 2,853 2,237 616 0 Corporate security 35,241 2,853 0 0 2,853 2,237 616 0 Corporate security 35,241 132 0 0 2,853 2,237 616 0 Corporate security 35,241 132 ( 2,237 616 0 Corporate security 35,241 132 ( 114 ) 35,259 616 0 Corporate security 35,241 132 ( 114 ) 35,259 10 Corporate security 35,241 132 ( 114 ) 35,259 10 7,241 28,008 35,241 132 ( 114 ) 35,259 10 7,241 28,008 Municipal security 132 ( 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 ( 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 56 114 ) 35,259 10 7,241 28,008 Municipal security 3,411 56 0 10 7,241 28,008 Municipal security 3,411 56 0 3,467 0 595 7,241 28,008 Municipal security 3,411 56 0 3,467 0 595 2,872 28,008 Municipal security 3,411 56 0 3,467 0 595 2,872 Subtotal Municipal security 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 security 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 264 3,411 56 0 3,467 0 595 2,872 Subtotal 75,423 264 ( 56 0 3,467 0 595 2,872 Subtotal 75,423 264 ( 124 3,467 0 595 2,872 Subtotal 75,423 264 ( 124 ) 75,563 0 595 2,872 Subtotal 75,423 264 ( 124 ) 75,563 5,001 2,872 Subtotal 75,423 264 ( 124 ) 75,563 5,001 14,944 55,618 75,423 264 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 264 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 ( 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 $ 124 ) 75,563 5,001 14,944 55,618 Total $ 81,464 $ 264 5,001 14,944 55,618 Total $ 81,464 $ 264 $ ( 158 55,618 Total $ 81,464 $ 264 $ ( 158 ) $ 81,464 $ 264 $ ( 158 ) $ 81,570 $ 9,815 $ ( 158 ) $ 81,570 $ 9,815 $ 16,137 $ 158 ) $ 81,570 $ 9,815 $ 16,137 $ 55,618 54 $ 81,570 $ 9,815 $ 16,137 $ 55,618 54 Table of $ 9,815 $ 16,137 $ 55,618 54 Table of Contents The 9,815 $ 16,137 $ 55,618 54 Table of Contents The net unrealized gain a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 are related primarily 2012 and September 24 , 2011 are related primarily to long-term gain or loss recognized during 2012 and 2011 were $ 183 loss recognized during 2012 and 2011 were $ 183 million and 2012 and 2011 were $ 183 million and $ 110 million $ 183 million and $ 110 million , respectively , and realized gain or loss during 2010 related to such sale . year . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , gross unrealized 2012 and September 24 , 2011 , gross unrealized loss related a continuous loss position for 12 month or longer were not significant . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company considers the s cost basis . During 2012 , 2011 and 2010 , basis . During 2012 , 2011 and 2010 , the Company During 2012 , 2011 and 2010 , the Company did not cash flow hedge and net 55 Table of Contents investment hedge flow hedge of approximately $ 240 million and a net deferred deferred gain of approximately $ 290 million , net of tax in AOCI a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . Deferred gain hedged transaction a of September 29 , 2012 are expected to a of September 29 , 2012 are expected to occur within discontinued cash flow hedge during 2012 , 2011 and 2010 . flow hedge during 2012 , 2011 and 2010 . The Company during 2012 , 2011 and 2010 . The Company ’ s not significant a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . The ineffective instrument wa not significant during 2012 , 2011 and 2010 , not significant during 2012 , 2011 and 2010 , respectively . during 2012 , 2011 and 2010 , respectively . These amount derivative instrument a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Notional Principal Credit Risk in million ) : 2012 2011 Notional Principal Credit Risk Amounts : Foreign exchange contract $ 41,970 $ 140 $ 13,705 $ exchange contract $ 41,970 $ 140 $ 13,705 $ 537 Instruments $ 41,970 $ 140 $ 13,705 $ 537 Instruments not designated $ 140 $ 13,705 $ 537 Instruments not designated a accounting : Foreign exchange contract $ 13,403 $ 12 $ 9,891 $ exchange contract $ 13,403 $ 12 $ 9,891 $ 56 The $ 13,403 $ 12 $ 9,891 $ 56 The notional principal $ 12 $ 9,891 $ 56 The notional principal amount for Company ’ s foreign exchange 56 Table of Contents instrument , value . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company posted cash collateral security arrangement of $ 278 million , which it recorded Sheet . As of September 24 , 2011 , the Company As of September 24 , 2011 , the Company received cash collateral security arrangement of $ 288 million , which it recorded additional collateral a of September 29 , 2012 or September 24 a of September 29 , 2012 or September 24 , 2011 29 , 2012 or September 24 , 2011 . The following 2012 or September 24 , 2011 . The following table show Balance Sheets a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 Fair Value of Derivatives Designated : Foreign exchange contract $ 138 $ 12 $ 150 Derivative exchange contract $ 138 $ 12 $ 150 Derivative liability ( $ 138 $ 12 $ 150 Derivative liability ( b ) : Foreign exchange contract $ 516 $ 41 $ 557 2011 exchange contract $ 516 $ 41 $ 557 2011 Fair Value $ 516 $ 41 $ 557 2011 Fair Value of Derivatives 516 $ 41 $ 557 2011 Fair Value of Derivatives Designated : Foreign exchange contract $ 460 $ 56 $ 516 Derivative exchange contract $ 460 $ 56 $ 516 Derivative liability ( $ 460 $ 56 $ 516 Derivative liability ( b ) : Foreign exchange contract $ 72 $ 37 $ 109 ( exchange contract $ 72 $ 37 $ 109 ( a ) $ 72 $ 37 $ 109 ( a ) The fair asset is measured using Level 2 fair value input and is liability is measured using Level 2 fair value input and is the Consolidated Balance Sheets . 57 Table of Contents The following for the year ended September 29 , 2012 and September 24 year ended September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : Excluded from Effectiveness Testing September 29 , 2012 September 24 , Effectiveness Testing September 29 , 2012 September 24 , 2011 September September 29 , 2012 September 24 , 2011 September 29 , , 2012 September 24 , 2011 September 29 , 2012 ( September 24 , 2011 September 29 , 2012 ( a ) , 2011 September 29 , 2012 ( a ) September 24 2012 ( a ) September 24 , 2011 ( b ) a ) September 24 , 2011 ( b ) Location September ( b ) Location September 29 , 2012 September 24 , ) Location September 29 , 2012 September 24 , 2011 Cash September 29 , 2012 September 24 , 2011 Cash flow hedge , 2012 September 24 , 2011 Cash flow hedge : Foreign Foreign exchange contract $ ( 175 ) $ 153 $ 607 $ ( 175 ) $ 153 $ 607 $ ( 704 175 ) $ 153 $ 607 $ ( 704 ) Other 153 $ 607 $ ( 704 ) Other income and expense income and expense $ ( 658 ) $ ( 213 ) ( 658 ) $ ( 213 ) Net investment hedge : : Foreign exchange contract ( 5 ) ( 43 ) 0 contract ( 5 ) ( 43 ) 0 0 Other income 5 ) ( 43 ) 0 0 Other income and expense ) ( 43 ) 0 0 Other income and expense 3 0 Other income and expense 3 1 Total $ ( 180 Other income and expense 3 1 Total $ ( 180 ) 3 1 Total $ ( 180 ) $ 110 $ 607 $ ( 180 ) $ 110 $ 607 $ ( 704 180 ) $ 110 $ 607 $ ( 704 ) $ 110 $ 607 $ ( 704 ) $ ( 655 ) ( 704 ) $ ( 655 ) $ ( 212 ) ( 655 ) $ ( 212 ) ( a ) Includes hedge , of which $ 537 million and $ 70 million $ 537 million and $ 70 million were recognized within net for the year ended September 29 , 2012 . There were year ended September 29 , 2012 . There were no amount for the year ended September 29 , 2012 . ( b year ended September 29 , 2012 . ( b ) Includes , of which $ ( 349 ) million and $ ( ) million and $ ( 355 ) million were recognized within for the year ended September 24 , 2011 . There were year ended September 24 , 2011 . There were no amount for the year ended September 24 , 2011 . ( c year ended September 24 , 2011 . ( c ) Refer c ) Refer to Note 6 , “ Shareholders ’ Equity Compensation ” of this Form 10-K , which summarizes the activity arrangement . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had two had two customer that represented 10 % or more of total one of which accounted for 14 % and the other 10 14 % and the other 10 % . As of September % . As of September 24 , 2011 , there were As of September 24 , 2011 , there were no customer no customer that accounted for 10 % or more of the cellular network carrier accounted for 66 % and 52 % of accounted for 66 % and 52 % of trade receivables a trade receivables a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . The addition allowance for doubtful account during 2012 , 2011 and 2010 were doubtful account during 2012 , 2011 and 2010 were not significant during 2012 , 2011 and 2010 were not significant . 58 2010 were not significant . 58 Table of Contents Vendor Non-Trade ’ s vendor accounted for 45 % , 21 % and accounted for 45 % , 21 % and 12 % of % , 21 % and 12 % of total non-trade receivables non-trade receivables a of September 29 , 2012 and vendor non-trade a of September 29 , 2012 and vendor non-trade receivables from ’ s vendor accounted for 53 % and 29 % of accounted for 53 % and 29 % of total non-trade receivables non-trade receivables a of September 24 , 2011 . The Company a of September 24 , 2011 . The Company doe not cost of sale . Note 3 – Consolidated Financial Statement Details statement detail a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : Property , Plant and Equipment 2012 2011 Land and building $ , Plant and Equipment 2012 2011 Land and building $ 2,439 2011 Land and building $ 2,439 $ 2,059 Machinery , equipment and building $ 2,439 $ 2,059 Machinery , equipment and internal-use , equipment and internal-use software 15,743 6,926 Office furniture and equipment equipment and internal-use software 15,743 6,926 Office furniture and equipment 241 6,926 Office furniture and equipment 241 184 Leasehold improvement 3,464 2,599 Office furniture and equipment 241 184 Leasehold improvement 3,464 2,599 Gross equipment 241 184 Leasehold improvement 3,464 2,599 Gross property , plant 241 184 Leasehold improvement 3,464 2,599 Gross property , plant and property , plant and equipment 21,887 11,768 Accumulated depreciation and amortization , plant and equipment 21,887 11,768 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 6,435 ) ( 3,991 ) Net amortization ( 6,435 ) ( 3,991 ) Net property , plant , plant and equipment $ 15,452 $ 7,777 Accrued Expenses 2012 and equipment $ 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued 15,452 $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related $ 7,777 Accrued Expenses 2012 2011 Accrued warranty and related cost warranty and related cost $ 1,638 $ 1,240 Accrued tax 1,535 related cost $ 1,638 $ 1,240 Accrued tax 1,535 1,140 Deferred 1,638 $ 1,240 Accrued tax 1,535 1,140 Deferred margin on component $ 1,240 Accrued tax 1,535 1,140 Deferred margin on component sale Deferred margin on component sale 1,492 2,038 Accrued marketing and selling margin on component sale 1,492 2,038 Accrued marketing and selling expense Accrued marketing and selling expense 910 598 Accrued compensation and employee marketing and selling expense 910 598 Accrued compensation and employee benefit Accrued compensation and employee benefit 735 590 Other current liability 5,104 compensation and employee benefit 735 590 Other current liability 5,104 3,641 735 590 Other current liability 5,104 3,641 Total accrued expense $ 590 Other current liability 5,104 3,641 Total accrued expense $ 11,414 3,641 Total accrued expense $ 11,414 $ 9,247 Non-Current Liabilities 2012 accrued expense $ 11,414 $ 9,247 Non-Current Liabilities 2012 2011 Deferred 11,414 $ 9,247 Non-Current Liabilities 2012 2011 Deferred tax liability $ $ 9,247 Non-Current Liabilities 2012 2011 Deferred tax liability $ 13,847 2011 Deferred tax liability $ 13,847 $ 8,159 Other non-current liability tax liability $ 13,847 $ 8,159 Other non-current liability 2,817 1,941 $ 8,159 Other non-current liability 2,817 1,941 Total other non-current liability 8,159 Other non-current liability 2,817 1,941 Total other non-current liability $ Total other non-current liability $ 16,664 $ 10,100 59 Table of non-current liability $ 16,664 $ 10,100 59 Table of Contents Note liability $ 16,664 $ 10,100 59 Table of Contents Note 4 59 Table of Contents Note 4 – Goodwill and Other Intangible asset balance a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Gross Carrying Amount Accumulated in million ) : 2012 2011 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 5,166 $ ( 1,042 ) $ asset $ 5,166 $ ( 1,042 ) $ 4,124 $ 3,873 $ ( 1,042 ) $ 4,124 $ 3,873 $ ( 437 1,042 ) $ 4,124 $ 3,873 $ ( 437 ) $ 4,124 $ 3,873 $ ( 437 ) $ 3,436 Indefinite lived $ ( 437 ) $ 3,436 Indefinite lived and non-amortizable trademark Indefinite lived and non-amortizable trademark 100 0 100 100 0 100 lived and non-amortizable trademark 100 0 100 100 0 100 Total and non-amortizable trademark 100 0 100 100 0 100 Total acquired non-amortizable trademark 100 0 100 100 0 100 Total acquired intangible trademark 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset $ Total acquired intangible asset $ 5,266 $ ( 1,042 ) $ asset $ 5,266 $ ( 1,042 ) $ 4,224 $ 3,973 $ ( 1,042 ) $ 4,224 $ 3,973 $ ( 437 1,042 ) $ 4,224 $ 3,973 $ ( 437 ) $ 4,224 $ 3,973 $ ( 437 ) $ 3,536 During 2012 $ ( 437 ) $ 3,536 During 2012 and 2011 , 437 ) $ 3,536 During 2012 and 2011 , the Company $ 3,536 During 2012 and 2011 , the Company completed various various business acquisition . In 2012 , the aggregate cash consideration cash acquired , wa $ 350 million , of which $ million , of which $ 245 million wa allocated to goodwill allocated to goodwill , $ 113 million to acquired intangible asset acquired intangible asset and $ 8 million to liability assumed . to liability assumed . In 2011 , the aggregate cash consideration cash acquired , wa $ 244 million , of which $ million , of which $ 167 million wa allocated to goodwill allocated to goodwill and $ 77 million to acquired intangible asset amount of goodwill wa $ 1.1 billion and $ 896 million $ 1.1 billion and $ 896 million a of September 29 896 million a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . The Company have any goodwill impairment during 2012 , 2011 or 2010 . goodwill impairment during 2012 , 2011 or 2010 . Amortization expense during 2012 , 2011 or 2010 . Amortization expense related to acquired intangible asset wa $ 605 million , $ 192 million $ 605 million , $ 192 million and $ 69 million $ 192 million and $ 69 million in 2012 , 2011 and $ 69 million in 2012 , 2011 and 2010 , 69 million in 2012 , 2011 and 2010 , respectively . in 2012 , 2011 and 2010 , respectively . As of respectively . As of September 29 , 2012 the remaining weighted-average As of September 29 , 2012 the remaining weighted-average amortization period for acquired intangible asset is 5.2 year . The expected annual intangible asset a of September 29 , 2012 , is a a of September 29 , 2012 , is a follows ( ( in million ) : 2013 $ 673 2014 737 2015 million ) : 2013 $ 673 2014 737 2015 753 2016 ) : 2013 $ 673 2014 737 2015 753 2016 758 : 2013 $ 673 2014 737 2015 753 2016 758 2017 2013 $ 673 2014 737 2015 753 2016 758 2017 635 $ 673 2014 737 2015 753 2016 758 2017 635 Thereafter 673 2014 737 2015 753 2016 758 2017 635 Thereafter 568 2014 737 2015 753 2016 758 2017 635 Thereafter 568 Total 737 2015 753 2016 758 2017 635 Thereafter 568 Total $ 2015 753 2016 758 2017 635 Thereafter 568 Total $ 4,124 2016 758 2017 635 Thereafter 568 Total $ 4,124 60 Table 635 Thereafter 568 Total $ 4,124 60 Table of Contents Note Thereafter 568 Total $ 4,124 60 Table of Contents Note 5 60 Table of Contents Note 5 – Income Taxes The provision provision for income tax for 2012 , 2011 , and 2010 income tax for 2012 , 2011 , and 2010 , consisted 2012 , 2011 , and 2010 , consisted of the following ( in million ) : 2012 2011 2010 Federal : Current in million ) : 2012 2011 2010 Federal : Current $ million ) : 2012 2011 2010 Federal : Current $ 7,240 2010 Federal : Current $ 7,240 $ 3,884 $ 2,150 Deferred : Current $ 7,240 $ 3,884 $ 2,150 Deferred 5,018 2,998 $ 7,240 $ 3,884 $ 2,150 Deferred 5,018 2,998 1,676 12,258 $ 3,884 $ 2,150 Deferred 5,018 2,998 1,676 12,258 6,882 3,826 3,884 $ 2,150 Deferred 5,018 2,998 1,676 12,258 6,882 3,826 State $ 2,150 Deferred 5,018 2,998 1,676 12,258 6,882 3,826 State : 2,150 Deferred 5,018 2,998 1,676 12,258 6,882 3,826 State : Current Deferred 5,018 2,998 1,676 12,258 6,882 3,826 State : Current 1,182 5,018 2,998 1,676 12,258 6,882 3,826 State : Current 1,182 762 6,882 3,826 State : Current 1,182 762 655 Deferred ( 123 3,826 State : Current 1,182 762 655 Deferred ( 123 ) State : Current 1,182 762 655 Deferred ( 123 ) 37 1,182 762 655 Deferred ( 123 ) 37 ( 115 ) 655 Deferred ( 123 ) 37 ( 115 ) 1,059 799 ( 123 ) 37 ( 115 ) 1,059 799 540 Foreign ) 37 ( 115 ) 1,059 799 540 Foreign : Current 37 ( 115 ) 1,059 799 540 Foreign : Current 1,203 ( 115 ) 1,059 799 540 Foreign : Current 1,203 769 799 540 Foreign : Current 1,203 769 282 Deferred ( 490 540 Foreign : Current 1,203 769 282 Deferred ( 490 ) Foreign : Current 1,203 769 282 Deferred ( 490 ) ( 1,203 769 282 Deferred ( 490 ) ( 167 ) ( Deferred ( 490 ) ( 167 ) ( 121 ) 713 ) ( 167 ) ( 121 ) 713 602 161 Provision 167 ) ( 121 ) 713 602 161 Provision for income ) ( 121 ) 713 602 161 Provision for income tax ( 121 ) 713 602 161 Provision for income tax $ Provision for income tax $ 14,030 $ 8,283 $ 4,527 The income tax $ 14,030 $ 8,283 $ 4,527 The foreign provision $ 14,030 $ 8,283 $ 4,527 The foreign provision for income foreign pretax earnings of $ 36.8 billion , $ 24.0 billion $ 36.8 billion , $ 24.0 billion and $ 13.0 billion $ 24.0 billion and $ 13.0 billion in 2012 , 2011 and $ 13.0 billion in 2012 , 2011 and 2010 , 13.0 billion in 2012 , 2011 and 2010 , respectively . in 2012 , 2011 and 2010 , respectively . The Company the U.S. As of September 29 , 2012 , U.S. income As of September 29 , 2012 , U.S. income tax have a cumulative total of $ 40.4 billion of such earnings . estimated to be approximately $ 13.8 billion . As of September billion . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , $ 82.6 2012 and September 24 , 2011 , $ 82.6 billion and 24 , 2011 , $ 82.6 billion and $ 54.3 billion $ 82.6 billion and $ 54.3 billion , respectively , of federal income tax rate ( 35 % in 2012 , 2011 rate ( 35 % in 2012 , 2011 and 2010 ) 35 % in 2012 , 2011 and 2010 ) to income in 2012 , 2011 and 2010 ) to income before provision provision for income tax for 2012 , 2011 , and 2010 income tax for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Computed expected tax in million ) : 2012 2011 2010 Computed expected tax $ million ) : 2012 2011 2010 Computed expected tax $ 19,517 2010 Computed expected tax $ 19,517 $ 11,973 $ 6,489 State expected tax $ 19,517 $ 11,973 $ 6,489 State tax , $ 19,517 $ 11,973 $ 6,489 State tax , net of , net of federal effect 677 552 351 Indefinitely invested earnings net of federal effect 677 552 351 Indefinitely invested earnings of of federal effect 677 552 351 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 5,895 ) ( 3,898 ) ( subsidiary ( 5,895 ) ( 3,898 ) ( 2,125 ) Research ) ( 3,898 ) ( 2,125 ) Research and development credit development credit , net ( 103 ) ( 167 ) ( net ( 103 ) ( 167 ) ( 23 ) Domestic ) ( 167 ) ( 23 ) Domestic production activity deduction Domestic production activity deduction ( 328 ) ( 168 ) ( deduction ( 328 ) ( 168 ) ( 48 ) Other ) ( 168 ) ( 48 ) Other 162 ( 9 ) ( 48 ) Other 162 ( 9 ) ( 117 48 ) Other 162 ( 9 ) ( 117 ) Provision 162 ( 9 ) ( 117 ) Provision for income tax Provision for income tax $ 14,030 $ 8,283 $ 4,527 Effective income tax $ 14,030 $ 8,283 $ 4,527 Effective tax rate $ 14,030 $ 8,283 $ 4,527 Effective tax rate 25.2 % $ 4,527 Effective tax rate 25.2 % 24.2 % 24.4 % Effective tax rate 25.2 % 24.2 % 24.4 % The Company rate 25.2 % 24.2 % 24.4 % The Company ’ s tax effect of the difference 61 Table of Contents between the from equity award of $ 1.4 billion , $ 1.1 billion $ 1.4 billion , $ 1.1 billion and $ 742 million $ 1.1 billion and $ 742 million in 2012 , 2011 and $ 742 million in 2012 , 2011 and 2010 , 742 million in 2012 , 2011 and 2010 , respectively , in 2012 , 2011 and 2010 , respectively , which were stock . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , the significant 2012 and September 24 , 2011 , the significant component of ( in million ) : 2012 2011 Deferred tax asset : in million ) : 2012 2011 Deferred tax asset : Accrued liability and other reserve $ 2,101 $ 1,610 Basis of capital other reserve $ 2,101 $ 1,610 Basis of capital asset and of capital asset and investment 447 390 Share-based compensation 395 355 capital asset and investment 447 390 Share-based compensation 395 355 Other investment 447 390 Share-based compensation 395 355 Other 1,094 795 Total 447 390 Share-based compensation 395 355 Other 1,094 795 Total deferred Share-based compensation 395 355 Other 1,094 795 Total deferred tax asset compensation 395 355 Other 1,094 795 Total deferred tax asset 4,037 795 Total deferred tax asset 4,037 3,150 Less valuation allowance 0 Total deferred tax asset 4,037 3,150 Less valuation allowance 0 0 4,037 3,150 Less valuation allowance 0 0 Deferred tax asset , 3,150 Less valuation allowance 0 0 Deferred tax asset , net , net of valuation allowance 4,037 3,150 Deferred tax liability : net of valuation allowance 4,037 3,150 Deferred tax liability : Unremitted Unremitted earnings of foreign subsidiary 14,712 8,896 Other 193 272 Total earnings of foreign subsidiary 14,712 8,896 Other 193 272 Total deferred foreign subsidiary 14,712 8,896 Other 193 272 Total deferred tax liability subsidiary 14,712 8,896 Other 193 272 Total deferred tax liability 14,905 272 Total deferred tax liability 14,905 9,168 Net deferred tax liability Total deferred tax liability 14,905 9,168 Net deferred tax liability $ deferred tax liability $ ( 10,868 ) $ ( 6,018 ) ( 10,868 ) $ ( 6,018 ) Deferred tax asset and benefit that is greater than 50 % likely of being realized Sheets . As of September 29 , 2012 , the total As of September 29 , 2012 , the total amount of unrecognized tax benefit wa $ 2.1 billion , of which $ billion , of which $ 889 million , if recognized , rate . As of September 24 , 2011 , the total As of September 24 , 2011 , the total amount of unrecognized tax benefit wa $ 1.4 billion , of which $ billion , of which $ 563 million , if recognized , s effective tax rate . 62 Table of Contents The aggregate interest and penalty , for 2012 , 2011 , and 2010 penalty , for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Beginning Balance $ in million ) : 2012 2011 2010 Beginning Balance $ 1,375 million ) : 2012 2011 2010 Beginning Balance $ 1,375 $ 2011 2010 Beginning Balance $ 1,375 $ 943 $ 971 Increases Beginning Balance $ 1,375 $ 943 $ 971 Increases related to $ 1,375 $ 943 $ 971 Increases related to tax position taken during a prior year 340 49 61 Decreases related to during a prior year 340 49 61 Decreases related to tax a prior year 340 49 61 Decreases related to tax position during a prior year ( 107 ) ( 39 ) ( year ( 107 ) ( 39 ) ( 224 ) Increases ) ( 39 ) ( 224 ) Increases related to tax taken during the current year 467 425 240 Decreases related to during the current year 467 425 240 Decreases related to settlement the current year 467 425 240 Decreases related to settlement with settlement with taxing authority ( 3 ) 0 ( 102 ) taxing authority ( 3 ) 0 ( 102 ) Decreases related ( 3 ) 0 ( 102 ) Decreases related to expiration of statute of limitation ( 10 ) ( 3 ) ( limitation ( 10 ) ( 3 ) ( 3 ) Ending ) ( 3 ) ( 3 ) Ending Balance $ 2,062 3 ) Ending Balance $ 2,062 $ 1,375 $ 943 The Ending Balance $ 2,062 $ 1,375 $ 943 The Company includes $ 2,062 $ 1,375 $ 943 The Company includes interest and tax . As of September 29 , 2012 and September 24 As of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , the total 2012 and September 24 , 2011 , the total amount of and penalty accrued wa $ 401 million and $ 261 million $ 401 million and $ 261 million , respectively , which Company recognized interest expense in 2012 and 2011 of $ 140 interest expense in 2012 and 2011 of $ 140 million and 2012 and 2011 of $ 140 million and $ 14 million $ 140 million and $ 14 million , respectively , and , respectively , and in 2010 the Company recognized an interest an interest benefit of $ 43 million . The Company is , all year prior to 2004 are closed . The Internal tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2009 . In addition examining the year 2007 through 2009 . In addition , the , the year subsequent to 1989 and 2002 , respectively , year subsequent to 1989 and 2002 , respectively , generally remain tax benefit by between $ 120 million and $ 170 million $ 120 million and $ 170 million in the next 12 170 million in the next 12 month . Note 6 – next 12 month . Note 6 – Shareholders ’ Equity and and Stock Repurchase Program In 2012 , the Board of Directors , quarterly dividend of $ 2.65 per share . On July per share . On July 24 , 2012 , the Board . On July 24 , 2012 , the Board of Directors declared a dividend of $ 2.65 per share to shareholder of close of business on August 13 , 2012 . The Company business on August 13 , 2012 . The Company paid $ . The Company paid $ 2.5 billion in conjunction with this with this dividend on August 16 , 2012 . No dividend dividend on August 16 , 2012 . No dividend were declared the first three quarter of 2012 or in 2011 and 2010 quarter of 2012 or in 2011 and 2010 . 63 Table 2012 or in 2011 and 2010 . 63 Table of Contents in 2011 and 2010 . 63 Table of Contents In 2012 63 Table of Contents In 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ s common stock beginning in 2013 . The repurchase program is of share . In August 2012 , the Company entered into Company entered into a Rule 10b5-1 compliant accelerated share repurchase ( to purchase up to $ 2 billion of the Company ’ ’ s common stock during 2013 . The total number of tax , a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Net unrealized gains/losses on in million ) : 2012 2011 Net unrealized gains/losses on marketable gains/losses on marketable security $ 731 $ 130 Net unrecognized gains/losses marketable security $ 731 $ 130 Net unrecognized gains/losses on derivative gains/losses on derivative instrument ( 240 ) 290 Cumulative foreign currency derivative instrument ( 240 ) 290 Cumulative foreign currency translation 8 290 Cumulative foreign currency translation 8 23 Accumulated other comprehensive income Cumulative foreign currency translation 8 23 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 499 $ 443 The change in comprehensive income $ 499 $ 443 The change in fair value other comprehensive income wa $ 601 million , $ ( 41 601 million , $ ( 41 ) million and $ 123 41 ) million and $ 123 million , net of tax , net of tax in 2012 , 2011 and 2010 , of tax in 2012 , 2011 and 2010 , respectively . in 2012 , 2011 and 2010 , respectively . The tax available-for-sale security wa $ ( 353 ) million , $ 24 353 ) million , $ 24 million and $ ( 72 24 million and $ ( 72 ) million for 2012 , ( 72 ) million for 2012 , 2011 and 2010 , ) million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . The following held by the Company during 2012 , 2011 , and 2010 the Company during 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in million ) : ( in million ) : 2012 2011 2010 Change in fair in million ) : 2012 2011 2010 Change in fair value million ) : 2012 2011 2010 Change in fair value of value of derivative $ ( 131 ) $ 92 $ ( $ ( 131 ) $ 92 $ ( 180 ) Adjustment ) $ 92 $ ( 180 ) Adjustment for net gains/losses included in net income ( 399 ) 450 ( 73 ) net income ( 399 ) 450 ( 73 ) Change in ( 399 ) 450 ( 73 ) Change in unrecognized gains/losses on derivative instrument $ ( 530 ) $ 542 $ ( $ ( 530 ) $ 542 $ ( 253 ) The ) $ 542 $ ( 253 ) The tax effect related value of derivative wa $ 73 million , $ ( 50 73 million , $ ( 50 ) million and $ 97 50 ) million and $ 97 million for 2012 , 2011 and $ 97 million for 2012 , 2011 and 2010 , 97 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . The tax income to income wa $ 220 million , $ ( 250 220 million , $ ( 250 ) million and $ 43 250 ) million and $ 43 million for 2012 , 2011 and $ 43 million for 2012 , 2011 and 2010 , 43 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . 64 Table and 2010 , respectively . 64 Table of Contents Employee Benefit of Contents Employee Benefit Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a including executive officer . The 2003 Plan permit the granting of . Options granted under the 2003 Plan generally expire seven to , RSUs granted under the 2003 Plan vest over two to an award granted under the 2003 Plan ( other than a Officer , granted under the 2003 Plan have dividend equivalent right vest . As of September 29 , 2012 , approximately 37.1 As of September 29 , 2012 , approximately 37.1 million share 29 , 2012 , approximately 37.1 million share were reserved for for future issuance under the 2003 Plan . 1997 Director Stock under the 2003 Plan . 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . All RSUs Plan expires November 9 , 2019 . All RSUs granted under DER . As of September 29 , 2012 , approximately 184,000 As of September 29 , 2012 , approximately 184,000 share were 29 , 2012 , approximately 184,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans During the fourth During the fourth quarter of 2012 , executive officer Timothy D. adopted in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Securities Exchange the Securities Exchange Act of 1934 , a amended ( the at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 29 , 2012 , approximately 2.5 As of September 29 , 2012 , approximately 2.5 million share 29 , 2012 , approximately 2.5 million share were reserved for under the Purchase Plan . 65 Table of Contents 401 ( . 65 Table of Contents 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan ( ) Plan ( the “ 401 ( k ) Plan ” deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 17,000 for calendar year 2012 ) $ 17,000 for calendar year 2012 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 114 million , $ 90 million $ 114 million , $ 90 million and $ 72 million $ 90 million and $ 72 million in 2012 , 2011 and $ 72 million in 2012 , 2011 and 2010 , 72 million in 2012 , 2011 and 2010 , respectively . in 2012 , 2011 and 2010 , respectively . Restricted Stock activity and related information for 2012 , 2011 , and 2010 related information for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows : million ) Balance at September 26 , 2009 12,263 $ 122.52 Balance at September 26 , 2009 12,263 $ 122.52 RSUs granted at September 26 , 2009 12,263 $ 122.52 RSUs granted 6,178 26 , 2009 12,263 $ 122.52 RSUs granted 6,178 $ 214.37 12,263 $ 122.52 RSUs granted 6,178 $ 214.37 RSUs vested ( 122.52 RSUs granted 6,178 $ 214.37 RSUs vested ( 4,685 ) $ 214.37 RSUs vested ( 4,685 ) $ 119.85 RSUs cancelled vested ( 4,685 ) $ 119.85 RSUs cancelled ( 722 ) $ 119.85 RSUs cancelled ( 722 ) $ 147.56 Balance at cancelled ( 722 ) $ 147.56 Balance at September 25 , $ 147.56 Balance at September 25 , 2010 13,034 $ 165.63 Balance at September 25 , 2010 13,034 $ 165.63 RSUs granted at September 25 , 2010 13,034 $ 165.63 RSUs granted 6,667 25 , 2010 13,034 $ 165.63 RSUs granted 6,667 $ 312.63 13,034 $ 165.63 RSUs granted 6,667 $ 312.63 RSUs vested ( 165.63 RSUs granted 6,667 $ 312.63 RSUs vested ( 4,513 ) $ 312.63 RSUs vested ( 4,513 ) $ 168.08 RSUs cancelled vested ( 4,513 ) $ 168.08 RSUs cancelled ( 742 ) $ 168.08 RSUs cancelled ( 742 ) $ 189.08 Balance at cancelled ( 742 ) $ 189.08 Balance at September 24 , $ 189.08 Balance at September 24 , 2011 14,446 $ 231.49 Balance at September 24 , 2011 14,446 $ 231.49 RSUs granted at September 24 , 2011 14,446 $ 231.49 RSUs granted 7,799 24 , 2011 14,446 $ 231.49 RSUs granted 7,799 $ 431.35 14,446 $ 231.49 RSUs granted 7,799 $ 431.35 RSUs vested ( 231.49 RSUs granted 7,799 $ 431.35 RSUs vested ( 6,305 ) $ 431.35 RSUs vested ( 6,305 ) $ 205.27 RSUs cancelled vested ( 6,305 ) $ 205.27 RSUs cancelled ( 935 ) $ 205.27 RSUs cancelled ( 935 ) $ 256.01 Balance at cancelled ( 935 ) $ 256.01 Balance at September 29 , $ 256.01 Balance at September 29 , 2012 15,005 $ 344.87 Balance at September 29 , 2012 15,005 $ 344.87 $ 10,010 at September 29 , 2012 15,005 $ 344.87 $ 10,010 The 29 , 2012 15,005 $ 344.87 $ 10,010 The fair value 2012 15,005 $ 344.87 $ 10,010 The fair value a of date of RSUs wa $ 3.3 billion , $ 1.5 billion $ 3.3 billion , $ 1.5 billion and $ 1.0 billion $ 1.5 billion and $ 1.0 billion for 2012 , 2011 and $ 1.0 billion for 2012 , 2011 and 2010 , 1.0 billion for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . The majority of RSUs that vested in 2012 , 2011 and 2010 were that vested in 2012 , 2011 and 2010 were net-share settled in 2012 , 2011 and 2010 were net-share settled such that total share withheld were approximately 2.3 million , 1.6 million and were approximately 2.3 million , 1.6 million and 1.8 million for million , 1.6 million and 1.8 million for 2012 , 2011 million and 1.8 million for 2012 , 2011 and 2010 , 1.8 million for 2012 , 2011 and 2010 , respectively , for 2012 , 2011 and 2010 , respectively , and were to taxing authority were $ 1.2 billion , $ 520 million $ 1.2 billion , $ 520 million and $ 406 million $ 520 million and $ 406 million in 2012 , 2011 and $ 406 million in 2012 , 2011 and 2010 , 406 million in 2012 , 2011 and 2010 , respectively , in 2012 , 2011 and 2010 , respectively , and are expense to the Company . 66 Table of Contents Stock Option activity and related information for 2012 , 2011 , and 2010 related information for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows : million ) Balance at September 26 , 2009 34,375 $ 81.17 Balance at September 26 , 2009 34,375 $ 81.17 Options granted at September 26 , 2009 34,375 $ 81.17 Options granted 34 26 , 2009 34,375 $ 81.17 Options granted 34 $ 202.00 34,375 $ 81.17 Options granted 34 $ 202.00 Options assumed 98 81.17 Options granted 34 $ 202.00 Options assumed 98 $ 11.99 34 $ 202.00 Options assumed 98 $ 11.99 Options cancelled ( 202.00 Options assumed 98 $ 11.99 Options cancelled ( 430 ) $ 11.99 Options cancelled ( 430 ) $ 136.27 Options exercised cancelled ( 430 ) $ 136.27 Options exercised ( 12,352 ) $ 136.27 Options exercised ( 12,352 ) $ 62.69 Balance at exercised ( 12,352 ) $ 62.69 Balance at September 25 , $ 62.69 Balance at September 25 , 2010 21,725 $ 90.46 Balance at September 25 , 2010 21,725 $ 90.46 Options granted at September 25 , 2010 21,725 $ 90.46 Options granted 1 25 , 2010 21,725 $ 90.46 Options granted 1 $ 342.62 21,725 $ 90.46 Options granted 1 $ 342.62 Options cancelled ( 90.46 Options granted 1 $ 342.62 Options cancelled ( 163 ) $ 342.62 Options cancelled ( 163 ) $ 128.42 Options exercised cancelled ( 163 ) $ 128.42 Options exercised ( 9,697 ) $ 128.42 Options exercised ( 9,697 ) $ 67.63 Balance at exercised ( 9,697 ) $ 67.63 Balance at September 24 , $ 67.63 Balance at September 24 , 2011 11,866 $ 108.64 Balance at September 24 , 2011 11,866 $ 108.64 Options assumed at September 24 , 2011 11,866 $ 108.64 Options assumed 41 24 , 2011 11,866 $ 108.64 Options assumed 41 $ 30.86 11,866 $ 108.64 Options assumed 41 $ 30.86 Options cancelled ( 108.64 Options assumed 41 $ 30.86 Options cancelled ( 25 ) $ 30.86 Options cancelled ( 25 ) $ 103.22 Options exercised cancelled ( 25 ) $ 103.22 Options exercised ( 5,337 ) $ 103.22 Options exercised ( 5,337 ) $ 84.85 Balance at exercised ( 5,337 ) $ 84.85 Balance at September 29 , $ 84.85 Balance at September 29 , 2012 6,545 $ 127.56 Balance at September 29 , 2012 6,545 $ 127.56 1.9 $ at September 29 , 2012 6,545 $ 127.56 1.9 $ 3,531 29 , 2012 6,545 $ 127.56 1.9 $ 3,531 Exercisable at , 2012 6,545 $ 127.56 1.9 $ 3,531 Exercisable at September 6,545 $ 127.56 1.9 $ 3,531 Exercisable at September 29 , $ 3,531 Exercisable at September 29 , 2012 6,505 $ 128.03 Exercisable at September 29 , 2012 6,505 $ 128.03 1.8 $ at September 29 , 2012 6,505 $ 128.03 1.8 $ 3,507 29 , 2012 6,505 $ 128.03 1.8 $ 3,507 Expected to , 2012 6,505 $ 128.03 1.8 $ 3,507 Expected to vest 6,505 $ 128.03 1.8 $ 3,507 Expected to vest after September Expected to vest after September 29 , 2012 40 $ 51.07 vest after September 29 , 2012 40 $ 51.07 6.7 $ after September 29 , 2012 40 $ 51.07 6.7 $ 24 29 , 2012 40 $ 51.07 6.7 $ 24 Aggregate intrinsic , 2012 40 $ 51.07 6.7 $ 24 Aggregate intrinsic value 40 $ 51.07 6.7 $ 24 Aggregate intrinsic value represents the time of exercise wa $ 2.3 billion , $ 2.6 billion $ 2.3 billion , $ 2.6 billion and $ 2.0 billion $ 2.6 billion and $ 2.0 billion for 2012 , 2011 and $ 2.0 billion for 2012 , 2011 and 2010 , 2.0 billion for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . Share-based Compensation grant any stock option during 2012 . The Company granted 1,370 2012 . The Company granted 1,370 and 34,000 stock option during The Company granted 1,370 and 34,000 stock option during 2011 and and 34,000 stock option during 2011 and 2010 , respectively . stock option during 2011 and 2010 , respectively . The weighted-average of stock option granted during 2011 and 2010 wa $ 181.13 option granted during 2011 and 2010 wa $ 181.13 and $ 2011 and 2010 wa $ 181.13 and $ 108.58 , respectively wa $ 181.13 and $ 108.58 , respectively . During 2012 108.58 , respectively . During 2012 and 2010 , in conjunction respectively . During 2012 and 2010 , in conjunction with certain combination , the Company assumed 41,000 and 98,000 stock option , the Company assumed 41,000 and 98,000 stock option , respectively , value per share of $ 405.39 and $ 216.82 , respectively of $ 405.39 and $ 216.82 , respectively . The Company assume any stock option during 2011 . The weighted-average fair value right per share wa $ 108.44 , $ 71.47 and $ wa $ 108.44 , $ 71.47 and $ 45.03 during 2012 , $ 71.47 and $ 45.03 during 2012 , 2011 and 71.47 and $ 45.03 during 2012 , 2011 and 2010 , $ 45.03 during 2012 , 2011 and 2010 , respectively . during 2012 , 2011 and 2010 , respectively . 67 Table and 2010 , respectively . 67 Table of Contents The following Consolidated Statements of Operations for 2012 , 2011 , and 2010 of Operations for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in million ) : ( in million ) : 2012 2011 2010 Cost of sale in million ) : 2012 2011 2010 Cost of sale $ million ) : 2012 2011 2010 Cost of sale $ 265 2010 Cost of sale $ 265 $ 200 $ 151 Research of sale $ 265 $ 200 $ 151 Research and development $ 265 $ 200 $ 151 Research and development 668 450 $ 151 Research and development 668 450 323 Selling , general 151 Research and development 668 450 323 Selling , general and Research and development 668 450 323 Selling , general and administrative Selling , general and administrative 807 518 405 Total share-based compensation , general and administrative 807 518 405 Total share-based compensation expense general and administrative 807 518 405 Total share-based compensation expense $ Total share-based compensation expense $ 1,740 $ 1,168 $ 879 The compensation expense $ 1,740 $ 1,168 $ 879 The income tax $ 1,740 $ 1,168 $ 879 The income tax benefit related share-based compensation expense wa $ 567 million , $ 467 million $ 567 million , $ 467 million and $ 314 million $ 467 million and $ 314 million for 2012 , 2011 and $ 314 million for 2012 , 2011 and 2010 , 314 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . As of respectively . As of September 29 , 2012 , the total As of September 29 , 2012 , the total unrecognized compensation option and RSUs wa $ 4.2 billion , which the Company over a weighted-average period of 3.3 year . Note 7 – of 3.3 year . Note 7 – Commitments and Contingencies Accrued The Company also offer a 90-day basic warranty for it service warranty and related cost for 2012 , 2011 , and 2010 related cost for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in million ) : ( in million ) : 2012 2011 2010 Beginning accrued warranty in million ) : 2012 2011 2010 Beginning accrued warranty and million ) : 2012 2011 2010 Beginning accrued warranty and related warranty and related cost $ 1,240 $ 761 $ 577 Cost related cost $ 1,240 $ 761 $ 577 Cost of warranty $ 1,240 $ 761 $ 577 Cost of warranty claim ( Cost of warranty claim ( 1,786 ) ( 1,147 ) ( claim ( 1,786 ) ( 1,147 ) ( 713 ) Accruals ) ( 1,147 ) ( 713 ) Accruals for product warranty ) Accruals for product warranty 2,184 1,626 897 Ending accrued warranty Accruals for product warranty 2,184 1,626 897 Ending accrued warranty and for product warranty 2,184 1,626 897 Ending accrued warranty and related warranty and related cost $ 1,638 $ 1,240 $ 761 The related cost $ 1,638 $ 1,240 $ 761 The Company generally $ 1,638 $ 1,240 $ 761 The Company generally doe not indemnification a of either September 29 , 2012 or September 24 of either September 29 , 2012 or September 24 , 2011 29 , 2012 or September 24 , 2011 . The Company 2012 or September 24 , 2011 . The Company ha entered advance expense incurred by such 68 Table of Contents individual in requirement for period up to 150 day . Long-Term Supply Agreements agreement , which expire between 2012 and 2022 , the Company which expire between 2012 and 2022 , the Company ha made component . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had a had a total of $ 4.2 billion of inventory component prepayment outstanding , of which $ 1.2 billion are classified a other other current asset and $ 3.0 billion are classified a other had a total of $ 2.3 billion of inventory component prepayment prepayment outstanding a of September 24 , 2011 . The Company a of September 24 , 2011 . The Company ’ s . The Company utilized $ 943 million and $ 173 million $ 943 million and $ 173 million of inventory component prepayment of inventory component prepayment during 2012 and 2011 , respectively . component prepayment during 2012 and 2011 , respectively . 69 Table and 2011 , respectively . 69 Table of Contents Other Off-Balance typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company ’ s noncancelable operating lease were $ 4.4 billion , of which $ billion , of which $ 3.1 billion related to lease for noncancelable lease , wa $ 488 million , $ 338 million $ 488 million , $ 338 million and $ 271 million $ 338 million and $ 271 million in 2012 , 2011 and $ 271 million in 2012 , 2011 and 2010 , 271 million in 2012 , 2011 and 2010 , respectively . in 2012 , 2011 and 2010 , respectively . Future minimum one year a of September 29 , 2012 , are a a of September 29 , 2012 , are a follows ( ( in million ) : 2013 $ 516 2014 556 2015 million ) : 2013 $ 516 2014 556 2015 542 2016 ) : 2013 $ 516 2014 556 2015 542 2016 513 : 2013 $ 516 2014 556 2015 542 2016 513 2017 2013 $ 516 2014 556 2015 542 2016 513 2017 486 $ 516 2014 556 2015 542 2016 513 2017 486 Thereafter 516 2014 556 2015 542 2016 513 2017 486 Thereafter 1,801 2014 556 2015 542 2016 513 2017 486 Thereafter 1,801 Total 556 2015 542 2016 513 2017 486 Thereafter 1,801 Total minimum 2015 542 2016 513 2017 486 Thereafter 1,801 Total minimum lease 2016 513 2017 486 Thereafter 1,801 Total minimum lease payment $ Total minimum lease payment $ 4,414 Other Commitments As of September Other Commitments As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had outstanding component purchase commitment of $ 21.1 billion . In addition to had outstanding obligation of $ 988 million a of September 29 988 million a of September 29 , 2012 , which were a of September 29 , 2012 , which were comprised mainly in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk et al . On August 24 , 2012 , a jury . On August 24 , 2012 , a jury returned a verdict awarding the Company $ 1.05 billion in it lawsuit against for the year ended September 29 , 2012 . 70 Table year ended September 29 , 2012 . 70 Table of Contents September 29 , 2012 . 70 Table of Contents Note 8 70 Table of Contents Note 8 – Segment Information and Geographic operates Apple retail store in 13 country , including the U.S. a those described in Note 1 , “ Summary of Significant administrative cost . Prior to 2012 , the Company allocated to marketing activity . Beginning in 2012 , the Company no longer corporate expense and reclassified $ 102 million and $ 75 million $ 102 million and $ 75 million of such cost from to Retail segment expense for 2011 and 2010 , respectively . segment expense for 2011 and 2010 , respectively . The Company the Retail segment were $ 858 million , $ 612 million $ 858 million , $ 612 million and $ 392 million $ 612 million and $ 392 million for 2012 , 2011 and $ 392 million for 2012 , 2011 and 2010 , 392 million for 2012 , 2011 and 2010 , respectively . for 2012 , 2011 and 2010 , respectively . The Company depreciation and amortization wa $ 3.3 billion , $ 1.8 billion $ 3.3 billion , $ 1.8 billion and $ 1.0 billion $ 1.8 billion and $ 1.0 billion in 2012 , 2011 and $ 1.0 billion in 2012 , 2011 and 2010 , 1.0 billion in 2012 , 2011 and 2010 , respectively , in 2012 , 2011 and 2010 , respectively , of which respectively , of which $ 319 million , $ 273 million $ 319 million , $ 273 million and $ 198 million $ 273 million and $ 198 million wa related to the segment wa not significant . 71 Table of Contents The following information by operating segment for 2012 , 2011 , and 2010 operating segment for 2012 , 2011 , and 2010 ( in 2012 , 2011 , and 2010 ( in million ) : ( in million ) : 2012 2011 2010 Americas : Net in million ) : 2012 2011 2010 Americas : Net sale million ) : 2012 2011 2010 Americas : Net sale $ Americas : Net sale $ 57,512 $ 38,315 $ 24,498 Operating Net sale $ 57,512 $ 38,315 $ 24,498 Operating income $ $ 57,512 $ 38,315 $ 24,498 Operating income $ 23,733 $ $ 24,498 Operating income $ 23,733 $ 13,538 $ 7,590 Europe Operating income $ 23,733 $ 13,538 $ 7,590 Europe : Net $ 23,733 $ 13,538 $ 7,590 Europe : Net sale $ Europe : Net sale $ 36,323 $ 27,778 $ 18,692 Operating Net sale $ 36,323 $ 27,778 $ 18,692 Operating income $ $ 36,323 $ 27,778 $ 18,692 Operating income $ 15,015 $ $ 18,692 Operating income $ 15,015 $ 11,528 $ 7,524 Japan Operating income $ 15,015 $ 11,528 $ 7,524 Japan : Net $ 15,015 $ 11,528 $ 7,524 Japan : Net sale $ Japan : Net sale $ 10,571 $ 5,437 $ 3,981 Operating Net sale $ 10,571 $ 5,437 $ 3,981 Operating income $ $ 10,571 $ 5,437 $ 3,981 Operating income $ 5,915 $ $ 3,981 Operating income $ 5,915 $ 2,481 $ 1,846 Asia-Pacific Operating income $ 5,915 $ 2,481 $ 1,846 Asia-Pacific : Net $ 5,915 $ 2,481 $ 1,846 Asia-Pacific : Net sale $ Asia-Pacific : Net sale $ 33,274 $ 22,592 $ 8,256 Operating Net sale $ 33,274 $ 22,592 $ 8,256 Operating income $ $ 33,274 $ 22,592 $ 8,256 Operating income $ 14,234 $ $ 8,256 Operating income $ 14,234 $ 9,587 $ 3,647 Retail Operating income $ 14,234 $ 9,587 $ 3,647 Retail : Net $ 14,234 $ 9,587 $ 3,647 Retail : Net sale $ Retail : Net sale $ 18,828 $ 14,127 $ 9,798 Operating Net sale $ 18,828 $ 14,127 $ 9,798 Operating income $ $ 18,828 $ 14,127 $ 9,798 Operating income $ 4,719 $ $ 9,798 Operating income $ 4,719 $ 3,242 $ 2,289 A Operating income $ 4,719 $ 3,242 $ 2,289 A reconciliation of $ 4,719 $ 3,242 $ 2,289 A reconciliation of the Company the consolidated financial statement for 2012 , 2011 , and 2010 financial statement for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Segment operating income in million ) : 2012 2011 2010 Segment operating income $ million ) : 2012 2011 2010 Segment operating income $ 63,616 2010 Segment operating income $ 63,616 $ 40,376 $ 22,896 Other operating income $ 63,616 $ 40,376 $ 22,896 Other corporate expense $ 63,616 $ 40,376 $ 22,896 Other corporate expense , net net ( a ) ( 6,635 ) ( 5,418 ) ( ) ( 6,635 ) ( 5,418 ) ( 3,632 ) Share-based ) ( 5,418 ) ( 3,632 ) Share-based compensation expense ( ) Share-based compensation expense ( 1,740 ) ( 1,168 ) ( expense ( 1,740 ) ( 1,168 ) ( 879 ) Total ) ( 1,168 ) ( 879 ) Total operating income $ ) Total operating income $ 55,241 $ 33,790 $ 18,385 ( operating income $ 55,241 $ 33,790 $ 18,385 ( a ) $ 55,241 $ 33,790 $ 18,385 ( a ) Other corporate financial statement a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2012 2011 Segment asset : Americas in million ) : 2012 2011 Segment asset : Americas $ Segment asset : Americas $ 5,525 $ 2,782 Europe 3,095 1,520 : Americas $ 5,525 $ 2,782 Europe 3,095 1,520 Japan 1,698 $ 5,525 $ 2,782 Europe 3,095 1,520 Japan 1,698 637 Asia-Pacific 5,525 $ 2,782 Europe 3,095 1,520 Japan 1,698 637 Asia-Pacific 2,234 2,782 Europe 3,095 1,520 Japan 1,698 637 Asia-Pacific 2,234 1,710 Retail Europe 3,095 1,520 Japan 1,698 637 Asia-Pacific 2,234 1,710 Retail 2,725 1,520 Japan 1,698 637 Asia-Pacific 2,234 1,710 Retail 2,725 2,151 Total Japan 1,698 637 Asia-Pacific 2,234 1,710 Retail 2,725 2,151 Total segment 637 Asia-Pacific 2,234 1,710 Retail 2,725 2,151 Total segment asset 15,277 Asia-Pacific 2,234 1,710 Retail 2,725 2,151 Total segment asset 15,277 8,800 2,725 2,151 Total segment asset 15,277 8,800 Corporate asset 160,787 107,571 2,151 Total segment asset 15,277 8,800 Corporate asset 160,787 107,571 Total asset 15,277 8,800 Corporate asset 160,787 107,571 Total asset $ 176,064 15,277 8,800 Corporate asset 160,787 107,571 Total asset $ 176,064 $ 160,787 107,571 Total asset $ 176,064 $ 116,371 The U.S. and Total asset $ 176,064 $ 116,371 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2012 and 2011 . No single net sale in 2012 and 2011 . No single country other U.S. accounted for more than 10 % of net sale in % of net sale in 2010 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2012 , 2011 or 2010 . net sale in 2012 , 2011 or 2010 . Net sale in 2012 , 2011 or 2010 . Net sale for 2012 2010 . Net sale for 2012 , 72 Table of Contents Net sale for 2012 , 72 Table of Contents 2011 , , 72 Table of Contents 2011 , and 2010 and long-lived of Contents 2011 , and 2010 and long-lived asset a of long-lived asset a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 are a follows 2012 and September 24 , 2011 are a follows ( in ( in million ) : 2012 2011 2010 Net sale : in million ) : 2012 2011 2010 Net sale : U.S. million ) : 2012 2011 2010 Net sale : U.S. $ Net sale : U.S. $ 60,949 $ 41,812 $ 28,633 China : U.S. $ 60,949 $ 41,812 $ 28,633 China ( a $ 60,949 $ 41,812 $ 28,633 China ( a ) 22,797 28,633 China ( a ) 22,797 12,472 2,764 Other country 72,762 China ( a ) 22,797 12,472 2,764 Other country 72,762 53,965 ( a ) 22,797 12,472 2,764 Other country 72,762 53,965 33,828 22,797 12,472 2,764 Other country 72,762 53,965 33,828 Total net sale 12,472 2,764 Other country 72,762 53,965 33,828 Total net sale $ 2,764 Other country 72,762 53,965 33,828 Total net sale $ 156,508 33,828 Total net sale $ 156,508 $ 108,249 $ 65,225 2012 net sale $ 156,508 $ 108,249 $ 65,225 2012 2011 Long-lived $ 156,508 $ 108,249 $ 65,225 2012 2011 Long-lived asset : 156,508 $ 108,249 $ 65,225 2012 2011 Long-lived asset : U.S. $ 108,249 $ 65,225 2012 2011 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 6,012 $ 4,375 China ( a : U.S. $ 6,012 $ 4,375 China ( a ) 7,314 4,375 China ( a ) 7,314 2,613 Other country 2,560 1,090 China ( a ) 7,314 2,613 Other country 2,560 1,090 Total ) 7,314 2,613 Other country 2,560 1,090 Total long-lived asset $ 7,314 2,613 Other country 2,560 1,090 Total long-lived asset $ 15,886 1,090 Total long-lived asset $ 15,886 $ 8,078 ( a ) long-lived asset $ 15,886 $ 8,078 ( a ) China includes net sale by product for 2012 , 2011 , and 2010 by product for 2012 , 2011 , and 2010 , is 2012 , 2011 , and 2010 , is a follows ( ( in million ) : 2012 2011 2010 Mac desktop ( in million ) : 2012 2011 2010 Mac desktop ( a million ) : 2012 2011 2010 Mac desktop ( a ) ) ( i ) $ 6,040 $ 6,439 $ 6,201 Mac i ) $ 6,040 $ 6,439 $ 6,201 Mac portable ( $ 6,040 $ 6,439 $ 6,201 Mac portable ( b ) b ) ( i ) 17,181 15,344 11,278 Total Mac net ) ( i ) 17,181 15,344 11,278 Total Mac net sale ( i ) 17,181 15,344 11,278 Total Mac net sale 23,221 11,278 Total Mac net sale 23,221 21,783 17,479 iPod ( c Total Mac net sale 23,221 21,783 17,479 iPod ( c ) Mac net sale 23,221 21,783 17,479 iPod ( c ) ( c ) ( i ) 5,615 7,453 8,274 Other music related ) ( i ) 5,615 7,453 8,274 Other music related product ( i ) 5,615 7,453 8,274 Other music related product and and service ( d ) 8,534 6,314 4,948 iPhone and related service ( d ) 8,534 6,314 4,948 iPhone and related product ( d ) 8,534 6,314 4,948 iPhone and related product and e ) ( i ) 80,477 47,057 25,179 iPad and related ) ( i ) 80,477 47,057 25,179 iPad and related product ( i ) 80,477 47,057 25,179 iPad and related product and f ) ( i ) 32,424 20,358 4,958 Peripherals and other ) ( i ) 32,424 20,358 4,958 Peripherals and other hardware ( i ) 32,424 20,358 4,958 Peripherals and other hardware ( other hardware ( g ) 2,778 2,330 1,814 Software , service hardware ( g ) 2,778 2,330 1,814 Software , service and ( g ) 2,778 2,330 1,814 Software , service and other net sale ( h ) 3,459 2,954 2,573 Total net sale sale ( h ) 3,459 2,954 2,573 Total net sale $ ( h ) 3,459 2,954 2,573 Total net sale $ 156,508 2,573 Total net sale $ 156,508 $ 108,249 $ 65,225 ( net sale $ 156,508 $ 108,249 $ 65,225 ( a ) $ 156,508 $ 108,249 $ 65,225 ( a ) Includes revenue embedded software upgrade right . 73 Table of Contents Note 9 73 Table of Contents Note 9 – Selected Quarterly Financial Information of the four quarter of 2012 and 2011 ( in million four quarter of 2012 and 2011 ( in million , except Quarter Second Quarter First Quarter 2012 Net sale $ 35,966 $ Quarter 2012 Net sale $ 35,966 $ 35,023 $ 39,186 $ Net sale $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross margin $ $ 35,023 $ 39,186 $ 46,333 Gross margin $ 14,401 $ $ 46,333 Gross margin $ 14,401 $ 14,994 $ 18,564 $ Gross margin $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share : Basic per share : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 13.87 Fourth $ 8.67 $ 9.32 $ 12.30 $ 13.87 Fourth Quarter Third $ 9.32 $ 12.30 $ 13.87 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2011 Net sale $ 28,270 $ Quarter 2011 Net sale $ 28,270 $ 28,571 $ 24,667 $ Net sale $ 28,270 $ 28,571 $ 24,667 $ 26,741 Gross $ 28,270 $ 28,571 $ 24,667 $ 26,741 Gross margin $ $ 28,571 $ 24,667 $ 26,741 Gross margin $ 11,380 $ $ 26,741 Gross margin $ 11,380 $ 11,922 $ 10,218 $ Gross margin $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net $ 11,380 $ 11,922 $ 10,218 $ 10,298 Net income $ $ 11,922 $ 10,218 $ 10,298 Net income $ 6,623 $ $ 10,298 Net income $ 6,623 $ 7,308 $ 5,987 $ Net income $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings $ 6,623 $ 7,308 $ 5,987 $ 6,004 Earnings per share $ 7,308 $ 5,987 $ 6,004 Earnings per share : Basic per share : Basic $ 7.13 $ 7.89 $ 6.49 $ : Basic $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.13 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.89 $ 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 6.49 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.53 Diluted $ 7.05 $ 7.79 $ 6.40 $ 6.43 Basic $ 7.05 $ 7.79 $ 6.40 $ 6.43 Basic and diluted $ 7.79 $ 6.40 $ 6.43 Basic and diluted earnings per diluted earnings per share . 74 Table of Contents Report of Apple Inc. a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , and the 2012 and September 24 , 2011 , and the related consolidated in the period ended September 29 , 2012 . These financial period ended September 29 , 2012 . These financial statement are of Apple Inc. at September 29 , 2012 and September 24 Inc. at September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , and the 2012 and September 24 , 2011 , and the consolidated result in the period ended September 29 , 2012 , in conformity period ended September 29 , 2012 , in conformity with U.S. financial reporting a of September 29 , 2012 , based on a of September 29 , 2012 , based on criterion established and our report dated October 31 , 2012 expressed an unqualified report dated October 31 , 2012 expressed an unqualified opinion thereon San Jose , California October 31 , 2012 75 Table of , California October 31 , 2012 75 Table of Contents Report California October 31 , 2012 75 Table of Contents Report of financial reporting a of September 29 , 2012 , based on a of September 29 , 2012 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 29 , 2012 , based on a of September 29 , 2012 , based on the COSO United States ) , the 2012 consolidated financial statement of Apple and our report dated October 31 , 2012 expressed an unqualified report dated October 31 , 2012 expressed an unqualified opinion thereon San Jose , California October 31 , 2012 76 Table of , California October 31 , 2012 76 Table of Contents Item California October 31 , 2012 76 Table of Contents Item 9 76 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 29 , 2012 to provide reasonable a of September 29 , 2012 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the wa effective a of September 29 , 2012 to provide reasonable a of September 29 , 2012 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. 77 Item 8 of this Form 10-K. 77 Table of Contents Changes 8 of this Form 10-K. 77 Table of Contents Changes in the fourth quarter of fiscal 2012 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Effective October . Other Information Effective October 29 , 2012 , Scott Forstall Information Effective October 29 , 2012 , Scott Forstall , the Executive Officer . Effective October 30 , 2012 , the Company . Effective October 30 , 2012 , the Company appointed Peter s Principal Financial Officer . 78 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers Governance ” and “ Section 16 ( a ) Beneficial Ownership in the Company ’ s 2013 Proxy Statement to be filed “ SEC ” ) within 120 day after September 29 , within 120 day after September 29 , 2012 in connection with day after September 29 , 2012 in connection with the solicitation for the Company ’ s 2013 annual meeting of shareholder and herein by reference . Item 11 . Executive Compensation The information in the Company ’ s 2013 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2012 and is incorporated day after September 29 , 2012 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2013 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2012 and is incorporated day after September 29 , 2012 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2013 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2012 and is incorporated day after September 29 , 2012 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and under “ Proposal No . 2 Ratification of Appointment of Independent in the Company ’ s 2013 Proxy Statement to be filed filed with the SEC within 120 day after September 29 , within 120 day after September 29 , 2012 and is incorporated day after September 29 , 2012 and is incorporated herein by incorporated herein by reference . 79 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 43 Consolidated Balance , and September 25 , 2010 43 Consolidated Balance Sheets a and September 25 , 2010 43 Consolidated Balance Sheets a of Balance Sheets a of September 29 , 2012 and September 24 a of September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 44 Consolidated Statements 2012 and September 24 , 2011 44 Consolidated Statements of Shareholders and September 24 , 2011 44 Consolidated Statements of Shareholders ’ for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 45 Consolidated Statements , and September 25 , 2010 45 Consolidated Statements of Cash and September 25 , 2010 45 Consolidated Statements of Cash Flows for the year ended September 29 , 2012 , September 24 year ended September 29 , 2012 , September 24 , 2011 29 , 2012 , September 24 , 2011 , and September 2012 , September 24 , 2011 , and September 25 , , 2011 , and September 25 , 2010 46 Notes to , and September 25 , 2010 46 Notes to Consolidated Financial and September 25 , 2010 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 74 Reports of Ernst & Young Independent Registered Public Accounting Firm 75 ( 2 ) Financial Statement Public Accounting Firm 75 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K The information Section ( a ) ( 3 ) of Item 15 is ( 3 ) of Item 15 is set forth on the Signatures page of this Form 10-K. 80 Table of Contents SIGNATURES page of this Form 10-K. 80 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly authorized . Date : October 31 , 2012 APPLE INC. By Date : October 31 , 2012 APPLE INC. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 31 , 2012 /s/ Peter Oppenheimer Officer ) October 31 , 2012 /s/ Peter Oppenheimer PETER OPPENHEIMER Principal Accounting Officer ) October 31 , 2012 /s/ William V. Officer ) October 31 , 2012 /s/ William V. Campbell WILLIAM WILLIAM V. CAMPBELL Director October 31 , 2012 /s/ Millard S. CAMPBELL Director October 31 , 2012 /s/ Millard S. Drexler MILLARD MILLARD S. DREXLER Director October 31 , 2012 /s/ Al Gore DREXLER Director October 31 , 2012 /s/ Al Gore AL GORE Gore AL GORE Director October 31 , 2012 /s/ Robert A. GORE Director October 31 , 2012 /s/ Robert A. Iger ROBERT ROBERT A. IGER Director October 31 , 2012 /s/ Andrea Jung IGER Director October 31 , 2012 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 31 , 2012 /s/ Arthur D. JUNG Director October 31 , 2012 /s/ Arthur D. Levinson ARTHUR ARTHUR D. LEVINSON Director October 31 , 2012 /s/ Ronald D. LEVINSON Director October 31 , 2012 /s/ Ronald D. Sugar RONALD RONALD D. SUGAR Director October 31 , 2012 81 Table of SUGAR Director October 31 , 2012 81 Table of Contents EXHIBIT Director October 31 , 2012 81 Table of Contents EXHIBIT INDEX Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on July 10 , 2009 . 10-Q 3.1 California on July 10 , 2009 . 10-Q 3.1 6/27/09 3.2 July 10 , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws 10 , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of the 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of the Registrant Registrant , a of April 20 , 2011 . 10-Q 3.2 a of April 20 , 2011 . 10-Q 3.2 3/26/11 4.1 April 20 , 2011 . 10-Q 3.2 3/26/11 4.1 Form of 20 , 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common , 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended of the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee the Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee Stock Registrant . 10-Q 4.1 12/30/06 10.1 * Amended Employee Stock Purchase , effective a of March 8 , 2010 . 10-Q 10.1 a of March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form of , 2010 . 10-Q 10.1 3/27/10 10.2 * Form of Indemnification 2010 . 10-Q 10.1 3/27/10 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through May 24 , 2012 . 10-Q 10.3 amended through May 24 , 2012 . 10-Q 10.3 6/30/12 10.4 May 24 , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 24 , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock Plan 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Agreement effective a of November 11 , 2008 . 10-Q 10.10 a of November 11 , 2008 . 10-Q 10.10 12/27/08 10.6 November 11 , 2008 . 10-Q 10.10 12/27/08 10.6 * Form 11 , 2008 . 10-Q 10.10 12/27/08 10.6 * Form of , 2008 . 10-Q 10.10 12/27/08 10.6 * Form of Restricted 2008 . 10-Q 10.10 12/27/08 10.6 * Form of Restricted Stock Agreement effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.7 November 16 , 2010 . 10-Q 10.10 12/25/10 10.7 * Form 16 , 2010 . 10-Q 10.10 12/25/10 10.7 * Form of , 2010 . 10-Q 10.10 12/25/10 10.7 * Form of Restricted 2010 . 10-Q 10.10 12/25/10 10.7 * Form of Restricted Stock Agreement effective a of April 6 , 2012 . 10-Q 10.8 a of April 6 , 2012 . 10-Q 10.8 3/31/12 10.8 April 6 , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary 6 , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description of 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description of Amendment , effective a of May 24 , 2012 , to certain a of May 24 , 2012 , to certain Restricted Stock Agreements outstanding a of April 5 , 2012 . 10-Q 10.8 a of April 5 , 2012 . 10-Q 10.8 6/30/12 21.1 April 5 , 2012 . 10-Q 10.8 6/30/12 21.1 * * 5 , 2012 . 10-Q 10.8 6/30/12 21.1 * * Subsidiaries , 2012 . 10-Q 10.8 6/30/12 21.1 * * Subsidiaries of 2012 . 10-Q 10.8 6/30/12 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * * Furnished herewith . 82 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-13-416534/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-13-416534/full-submission.txt new file mode 100644 index 0000000..7eff335 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-13-416534/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 28 , 2013 Or ¨ TRANSITION year ended September 28 , 2013 Or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number : 000-10030 APPLE INC. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive including area code : ( 408 ) 996-1010 Securities registered pursuant code : ( 408 ) 996-1010 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . registrant , a of March 29 , 2013 , the last a of March 29 , 2013 , the last business day quarter , wa approximately $ 416,005,000,000 . Solely for purpose of for any other purpose . 899,738,000 share of common stock were and outstanding a of October 18 , 2013 . DOCUMENTS INCORPORATED a of October 18 , 2013 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2014 annual meeting of shareholder ( of shareholder ( the “ 2014 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2014 10-K where indicated . The 2014 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of of Contents Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 28 , 2013 TABLE OF CONTENTS Year Ended September 28 , 2013 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 9 Item Item 1A . Risk Factors 9 Item 1B . Unresolved Staff . Risk Factors 9 Item 1B . Unresolved Staff Comments 20 1B . Unresolved Staff Comments 20 Item 2 . Properties 20 Unresolved Staff Comments 20 Item 2 . Properties 20 Item 3 20 Item 2 . Properties 20 Item 3 . Legal Proceedings 2 . Properties 20 Item 3 . Legal Proceedings 21 Item Item 3 . Legal Proceedings 21 Item 4 . Mine Safety . Legal Proceedings 21 Item 4 . Mine Safety Disclosures 21 4 . Mine Safety Disclosures 21 Part II Item 5 . Disclosures 21 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 22 Item 6 . Selected Financial of Equity Securities 22 Item 6 . Selected Financial Data 24 6 . Selected Financial Data 24 Item 7 . Management ’ Selected Financial Data 24 Item 7 . Management ’ s Discussion Condition and Results of Operations 25 Item 7A . Quantitative and Results of Operations 25 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 42 Item 8 . Financial Statements About Market Risk 42 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 44 Item 9 . Changes in and Supplementary Data 44 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 81 Item 9A . Controls and and Financial Disclosure 81 Item 9A . Controls and Procedures 81 9A . Controls and Procedures 81 Item 9B . Other Information Controls and Procedures 81 Item 9B . Other Information 82 Part Item 9B . Other Information 82 Part III Item 10 . Information 82 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 83 Item 11 . Executive Compensation and Corporate Governance 83 Item 11 . Executive Compensation 83 Item Item 11 . Executive Compensation 83 Item 12 . Security Ownership . Executive Compensation 83 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 83 Item 13 . Certain Relationships Related Stockholder Matters 83 Item 13 . Certain Relationships and Related Related Transactions and Director Independence 83 Item 14 . Principal Accounting and Director Independence 83 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 83 Part IV Item 15 . Services 83 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 84 Table of Contents The Business this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the information presented in this Form 10-K is based on the Company a California corporation established in 1977. Business Strategy The Company is and post-sales support experience . 1 Table of Contents Business Organization operates Apple retail store in 13 country , including the U.S. in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and iOS , beginning in September 2013 , free downloads of iPhoto version , introduced in September 2013 , are iPhone 5c and September 2013 , are iPhone 5c and iPhone 5 . iPad are iPhone 5c and iPhone 5 . iPad iPad and iPad device , beginning in September 2013 , iPhoto , iMovie and iCloud service . In October 2013 , the Company announced iPad ® . Beginning in October 2013 , the Company ’ s iPod with an integrated photo 2 Table of Contents and video iOS , beginning in September 2013 , iPhoto , iMovie and Apple TV . In September 2013 , Apple introduced iTunes Radio™ for iOS device . iOS 7 is the current version and and wa released in September 2013 . Apps delivered with iOS Mavericks , released in October 2013 , is the tenth major content and apps from the 3 Table of Contents iTunes Store , and beginning in September 2013 , both iPhoto and iMovie spreadsheet . Beginning in October 2013 , the iWork suite of and , beginning in September 2013 , they all became available ; and the latest software 4 Table of Contents development kit and value-added resellers . During 2013 , the Company ’ s indirect distribution channel accounted for 30 % and 70 % , accounted for 30 % and 70 % , respectively , of online and retail store . 5 Table of Contents The Company customer accounted for more than 10 % of net sale in % of net sale in 2013 , 2012 or 2011 . net sale in 2013 , 2012 or 2011 . Competition The in 2013 , 2012 or 2011 . Competition The market for condition and operating result . 6 Table of Contents The Company requirement for period up to 150 day . Research and Development and development expense wa $ 4.5 billion , $ 3.4 billion $ 4.5 billion , $ 3.4 billion and $ 2.4 billion $ 3.4 billion and $ 2.4 billion in 2013 , 2012 and $ 2.4 billion in 2013 , 2012 and 2011 , 2.4 billion in 2013 , 2012 and 2011 , respectively . in 2013 , 2012 and 2011 , respectively . Patents , life of it product . 7 Table of Contents Many of Operations and Geographic Data During 2013 , the Company ’ s international net sale accounted for 39 % and 61 % , accounted for 39 % and 61 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies The Company also offer a 90-day basic warranty for it service revenue or financial performance . 8 Table of Contents Employees As Contents Employees As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had approximately , the Company had approximately 80,300 full-time equivalent employee and an equivalent employee and an additional 4,100 full-time equivalent temporary employee and employee and contractor . Approximately 42,800 of the total full-time equivalent s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an textual reference only . Item 1A . Risk Factors The following any statement in this Form 10-K or elsewhere . The following with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K. Because of the following factor inability to obtain credit to 9 Table of Contents finance development , and a larger installed 10 Table of Contents customer base event or circumstance indicate the 11 Table of Contents carrying amount requirement for period up to 150 day . Because the Company final assembly of substantially all 12 Table of Contents of the Company ’ s product . 13 Table of Contents With respect or selling certain product . 14 Table of Contents In certain , data privacy requirement , 15 Table of Contents environmental law processing and financial reporting . 16 Table of Contents There may payment card transaction cost . 17 Table of Contents The Company belief it stock price reflects 18 Table of Contents expectation of component . As of September 28 , 2013 , a significant As of September 28 , 2013 , a significant portion of ’ s trade receivables wa 19 Table of Contents concentrated within be adversely affected . Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company owned or Company owned or leased approximately 19.1 million square foot of building . Of that amount approximately 12.0 million square foot wa leased space , which includes approximately 4.6 million square foot related to owned building space , approximately 2.6 million square foot that is Company owns a total of 1,428 acre of land in various location . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company owned a demand for it product . 20 Table of Contents Item 3 20 Table of Contents Item 3 . Legal Proceedings The Company in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2013 that did not individually or case were filed on January 3 , 2005 , July 21 filed on January 3 , 2005 , July 21 , 2006 3 , 2005 , July 21 , 2006 and December 31 2005 , July 21 , 2006 and December 31 , 2007 21 , 2006 and December 31 , 2007 in the United 2006 and December 31 , 2007 in the United States District market power under §§1 and 2 of the Sherman Act , music player . On September 3 , 2013 , the U.S. . On September 3 , 2013 , the U.S. Ninth Circuit al . ) On April 11 , 2012 , the U.S. ) On April 11 , 2012 , the U.S. Department of DOJ complaint in late May 2012 , denying the DOJ ’ the DOJ . On July 10 , 2013 , the District . On July 10 , 2013 , the District Court found which took effect on October 6 , 2013 and will be effect on October 6 , 2013 and will be in effect trial is set for May 2014 . The Company ha appealed ’ s decision . Item 4 . Mine Safety Disclosures Not Safety Disclosures Not applicable . 21 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Quarter Second Quarter First Quarter 2013 price range per share $ price range per share $ 513.74 - $ 401.22 $ 465.75 share $ 513.74 - $ 401.22 $ 465.75 - $ 385.10 513.74 - $ 401.22 $ 465.75 - $ 385.10 $ 555.00 401.22 $ 465.75 - $ 385.10 $ 555.00 - $ 419.00 465.75 - $ 385.10 $ 555.00 - $ 419.00 $ 676.75 385.10 $ 555.00 - $ 419.00 $ 676.75 - $ 501.23 555.00 - $ 419.00 $ 676.75 - $ 501.23 2012 price 419.00 $ 676.75 - $ 501.23 2012 price range per share $ 676.75 - $ 501.23 2012 price range per share $ price range per share $ 705.07 - $ 570.00 $ 644.00 share $ 705.07 - $ 570.00 $ 644.00 - $ 522.18 705.07 - $ 570.00 $ 644.00 - $ 522.18 $ 621.45 570.00 $ 644.00 - $ 522.18 $ 621.45 - $ 409.00 644.00 - $ 522.18 $ 621.45 - $ 409.00 $ 426.70 522.18 $ 621.45 - $ 409.00 $ 426.70 - $ 354.24 621.45 - $ 409.00 $ 426.70 - $ 354.24 Holders As 409.00 $ 426.70 - $ 354.24 Holders As of October 18 354.24 Holders As of October 18 , 2013 , there were As of October 18 , 2013 , there were 24,710 shareholder , 2013 , there were 24,710 shareholder of record . Dividends paid a total of $ 10.5 billion and $ 2.5 billion $ 10.5 billion and $ 2.5 billion in dividend during 2013 2.5 billion in dividend during 2013 and 2012 , respectively , in dividend during 2013 and 2012 , respectively , and expects pay quarterly dividend of $ 3.05 per common share each quarter the three month ended September 28 , 2013 wa a follows month ended September 28 , 2013 wa a follows ( in Programs ( a ) June 30 , 2013 to August 3 a ) June 30 , 2013 to August 3 , 2013 30 , 2013 to August 3 , 2013 2,193 $ 451.49 2013 to August 3 , 2013 2,193 $ 451.49 2,193 August to August 3 , 2013 2,193 $ 451.49 2,193 August 4 3 , 2013 2,193 $ 451.49 2,193 August 4 , 2013 , 2013 2,193 $ 451.49 2,193 August 4 , 2013 to 2,193 $ 451.49 2,193 August 4 , 2013 to August 31 451.49 2,193 August 4 , 2013 to August 31 , 2013 4 , 2013 to August 31 , 2013 7,061 $ 487.17 2013 to August 31 , 2013 7,061 $ 487.17 7,061 September to August 31 , 2013 7,061 $ 487.17 7,061 September 1 31 , 2013 7,061 $ 487.17 7,061 September 1 , 2013 , 2013 7,061 $ 487.17 7,061 September 1 , 2013 to 7,061 $ 487.17 7,061 September 1 , 2013 to September 28 487.17 7,061 September 1 , 2013 to September 28 , 2013 1 , 2013 to September 28 , 2013 1,184 $ 481.33 2013 to September 28 , 2013 1,184 $ 481.33 1,184 Total to September 28 , 2013 1,184 $ 481.33 1,184 Total 10,438 28 , 2013 1,184 $ 481.33 1,184 Total 10,438 $ 37,050 , 2013 1,184 $ 481.33 1,184 Total 10,438 $ 37,050 ( 1,184 $ 481.33 1,184 Total 10,438 $ 37,050 ( a ) 481.33 1,184 Total 10,438 $ 37,050 ( a ) In 2012 37,050 ( a ) In 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ s common stock beginning in 2013 . In April 2013 , in 2013 . In April 2013 , the Company ’ s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion . The Company ’ under plan complying with Rule 10b5-1 of the Exchange Act . Exchange Act . The $ 37.1 billion represents the remaining amount the authorized repurchase program . 22 Table of Contents Company Stock , the S & P 500 Index , the S & . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 30 , 2008 . Data point close on September 30 , 2008 . Data point on the price performance . * $ 100 invested on 9/30/08 in stock * $ 100 invested on 9/30/08 in stock or index , . Fiscal year ending September 30 . Copyright © 2013 S September 30 . Copyright © 2013 S & P , a right reserved . Copyright © 2013 Dow Jones & Co. All All right reserved . September 30 , 2008 September 30 , reserved . September 30 , 2008 September 30 , 2009 September September 30 , 2008 September 30 , 2009 September 30 , , 2008 September 30 , 2009 September 30 , 2010 September September 30 , 2009 September 30 , 2010 September 30 , , 2009 September 30 , 2010 September 30 , 2011 September September 30 , 2010 September 30 , 2011 September 30 , , 2010 September 30 , 2011 September 30 , 2012 September September 30 , 2011 September 30 , 2012 September 30 , , 2011 September 30 , 2012 September 30 , 2013 Apple September 30 , 2012 September 30 , 2013 Apple Inc. $ , 2012 September 30 , 2013 Apple Inc. $ 100 $ , 2013 Apple Inc. $ 100 $ 163 $ 250 $ Apple Inc. $ 100 $ 163 $ 250 $ 335 $ $ 100 $ 163 $ 250 $ 335 $ 589 $ $ 163 $ 250 $ 335 $ 589 $ 431 S $ 250 $ 335 $ 589 $ 431 S & P $ 335 $ 589 $ 431 S & P 500 Index $ 431 S & P 500 Index $ 100 $ 93 & P 500 Index $ 100 $ 93 $ 103 $ 500 Index $ 100 $ 93 $ 103 $ 104 $ $ 100 $ 93 $ 103 $ 104 $ 135 $ $ 93 $ 103 $ 104 $ 135 $ 161 S $ 103 $ 104 $ 135 $ 161 S & P $ 104 $ 135 $ 161 S & P Computer Hardware P Computer Hardware Index $ 100 $ 118 $ 140 $ Hardware Index $ 100 $ 118 $ 140 $ 159 $ $ 100 $ 118 $ 140 $ 159 $ 255 $ $ 118 $ 140 $ 159 $ 255 $ 197 Dow $ 140 $ 159 $ 255 $ 197 Dow Jones US $ 159 $ 255 $ 197 Dow Jones US Technology Supersector US Technology Supersector Index $ 100 $ 111 $ 124 $ Supersector Index $ 100 $ 111 $ 124 $ 128 $ $ 100 $ 111 $ 124 $ 128 $ 166 $ $ 111 $ 124 $ 128 $ 166 $ 175 23 $ 124 $ 128 $ 166 $ 175 23 Table of $ 128 $ 166 $ 175 23 Table of Contents Item 128 $ 166 $ 175 23 Table of Contents Item 6 23 Table of Contents Item 6 . Selected Financial Data The the five year ended September 28 , 2013 , is not year ended September 28 , 2013 , is not necessarily indicative read in conjunction with Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2013 2012 2011 2010 2009 Net share amount ) . 2013 2012 2011 2010 2009 Net sale amount ) . 2013 2012 2011 2010 2009 Net sale $ ) . 2013 2012 2011 2010 2009 Net sale $ 170,910 . 2013 2012 2011 2010 2009 Net sale $ 170,910 $ 2010 2009 Net sale $ 170,910 $ 156,508 $ 108,249 $ Net sale $ 170,910 $ 156,508 $ 108,249 $ 65,225 $ $ 170,910 $ 156,508 $ 108,249 $ 65,225 $ 42,905 Net $ 156,508 $ 108,249 $ 65,225 $ 42,905 Net income $ $ 108,249 $ 65,225 $ 42,905 Net income $ 37,037 $ $ 42,905 Net income $ 37,037 $ 41,733 $ 25,922 $ Net income $ 37,037 $ 41,733 $ 25,922 $ 14,013 $ $ 37,037 $ 41,733 $ 25,922 $ 14,013 $ 8,235 Earnings $ 41,733 $ 25,922 $ 14,013 $ 8,235 Earnings per share $ 25,922 $ 14,013 $ 8,235 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 $ : Basic $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ $ 40.03 $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 44.64 $ 28.05 $ 15.41 $ 9.22 Diluted $ 39.75 $ 28.05 $ 15.41 $ 9.22 Diluted $ 39.75 $ 44.15 15.41 $ 9.22 Diluted $ 39.75 $ 44.15 $ 27.68 $ 9.22 Diluted $ 39.75 $ 44.15 $ 27.68 $ 15.15 $ $ 39.75 $ 44.15 $ 27.68 $ 15.15 $ 9.08 Cash $ 44.15 $ 27.68 $ 15.15 $ 9.08 Cash dividend declared $ 27.68 $ 15.15 $ 9.08 Cash dividend declared per share dividend declared per share $ 11.40 $ 2.65 $ 0 $ per share $ 11.40 $ 2.65 $ 0 $ 0 $ $ 11.40 $ 2.65 $ 0 $ 0 $ 0 Shares $ 2.65 $ 0 $ 0 $ 0 Shares used in $ 0 $ 0 $ 0 Shares used in computing earnings earnings per share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted per share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 share : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 : Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 Basic 925,331 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 934,818 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 907,005 Total 924,258 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 907,005 Total cash 909,461 893,016 Diluted 931,662 945,355 936,645 924,712 907,005 Total cash , 893,016 Diluted 931,662 945,355 936,645 924,712 907,005 Total cash , cash Diluted 931,662 945,355 936,645 924,712 907,005 Total cash , cash equivalent equivalent and marketable security $ 146,761 $ 121,251 $ 81,570 $ marketable security $ 146,761 $ 121,251 $ 81,570 $ 51,011 $ $ 146,761 $ 121,251 $ 81,570 $ 51,011 $ 33,992 Total $ 121,251 $ 81,570 $ 51,011 $ 33,992 Total asset $ $ 81,570 $ 51,011 $ 33,992 Total asset $ 207,000 $ $ 33,992 Total asset $ 207,000 $ 176,064 $ 116,371 $ Total asset $ 207,000 $ 176,064 $ 116,371 $ 75,183 $ $ 207,000 $ 176,064 $ 116,371 $ 75,183 $ 47,501 Long-term $ 176,064 $ 116,371 $ 75,183 $ 47,501 Long-term debt $ $ 116,371 $ 75,183 $ 47,501 Long-term debt $ 16,960 $ $ 47,501 Long-term debt $ 16,960 $ 0 $ 0 $ Long-term debt $ 16,960 $ 0 $ 0 $ 0 $ $ 16,960 $ 0 $ 0 $ 0 $ 0 Long-term $ 0 $ 0 $ 0 $ 0 Long-term obligation ( $ 0 $ 0 $ 0 Long-term obligation ( a ) obligation ( a ) $ 20,208 $ 16,664 $ 10,100 $ a ) $ 20,208 $ 16,664 $ 10,100 $ 5,531 $ $ 20,208 $ 16,664 $ 10,100 $ 5,531 $ 3,502 Total $ 16,664 $ 10,100 $ 5,531 $ 3,502 Total liability $ $ 10,100 $ 5,531 $ 3,502 Total liability $ 83,451 $ $ 3,502 Total liability $ 83,451 $ 57,854 $ 39,756 $ Total liability $ 83,451 $ 57,854 $ 39,756 $ 27,392 $ $ 83,451 $ 57,854 $ 39,756 $ 27,392 $ 15,861 Total $ 57,854 $ 39,756 $ 27,392 $ 15,861 Total shareholder ’ $ 39,756 $ 27,392 $ 15,861 Total shareholder ’ equity $ Total shareholder ’ equity $ 123,549 $ 118,210 $ 76,615 $ ’ equity $ 123,549 $ 118,210 $ 76,615 $ 47,791 $ $ 123,549 $ 118,210 $ 76,615 $ 47,791 $ 31,640 ( $ 118,210 $ 76,615 $ 47,791 $ 31,640 ( a ) $ 76,615 $ 47,791 $ 31,640 ( a ) Long-term obligation exclude non-current deferred revenue . 24 Table of Contents Item 7 24 Table of Contents Item 7 . Management ’ s Discussion Results of Operations This Item 7 , “ Management ’ s other part of this Form 10-K contain forward-looking statement , within Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and government customer . Fiscal 2013 Highlights Net sale rose 9 2013 Highlights Net sale rose 9 % or $ 14.4 billion rose 9 % or $ 14.4 billion during 2013 compared to or $ 14.4 billion during 2013 compared to 2012 . This billion during 2013 compared to 2012 . This resulted from growth and iPad . Growth in 2013 reflects strong sale of iPhone reflects strong sale of iPhone 5 , strong continuing sale of strong continuing sale of iPhone 4 and 4 , the introduction sale of iPhone 4 and 4 , the introduction of iPhone , the introduction of iPhone 5c and 5 , strong performance introduction of iPhone 5c and 5 , strong performance of the experienced increased net sale in 2013 , with net sale growth operating segment . Similar to 2012 , growth in total net during the first half of 2013 , rising $ 12.6 billion of 2013 , rising $ 12.6 billion or 14.7 % over rising $ 12.6 billion or 14.7 % over the same period over the same period in 2012 . First half growth in . First half growth in 2013 wa driven by iPhone and or near the beginning of 2013 . During the first quarter During the first quarter of 2013 , the Company introduced the expanded the rollout of iPhone 5 which began in September 2012 5 which began in September 2012 . In June 2013 at September 2012 . In June 2013 at it Worldwide Developer Conference , the Company announced iOS 7 and OS X Mavericks , expected to be introduced during 2014 . In September 2013 , during 2014 . In September 2013 , the Company introduced iPhone , the Company introduced iPhone 5 and iPhone 5c , released introduced iPhone 5 and iPhone 5c , released iOS 7 , iPhone 5c , released iOS 7 , launched iTunes Radio , announced that beginning in September 2013 iPhoto , iMovie and iWork iPod touch . In October 2013 , the Company announced iPad mini with Retina display . 25 Table of Contents In April Table of Contents In April 2013 the Company announced a significant for the program through December 2015 to $ 100 billion . through December 2015 to $ 100 billion . This included increasing share repurchase authorization to $ 60 billion and raising it quarterly it quarterly dividend to $ 3.05 per common share beginning in common share beginning in May 2013 . During 2013 , the in May 2013 . During 2013 , the Company utilized $ , the Company utilized $ 23.0 billion to repurchase common share and paid dividend of $ 10.5 billion or $ 11.40 per $ 10.5 billion or $ 11.40 per common share . In return program , in May 2013 the Company issued $ 17.0 2013 the Company issued $ 17.0 billion of note with varying note with varying maturity through 2043 . Fiscal 2012 Highlights Overall maturity through 2043 . Fiscal 2012 Highlights Overall net sale during Highlights Overall net sale during 2012 increased $ 48.3 billion or sale during 2012 increased $ 48.3 billion or 45 % compared increased $ 48.3 billion or 45 % compared to 2011 . or 45 % compared to 2011 . All of the Company experienced increased net sale during 2012 , primarily a result of the first six month of 2012 , rising $ 34.1 billion of 2012 , rising $ 34.1 billion or 66 % compared rising $ 34.1 billion or 66 % compared to the same to the same period in 2011 . The net sale growth the first six month of 2012 reflected the launch of iPhone reflected the launch of iPhone 4 in the first quarter of in the first quarter of 2012 and the Company ’ s demand more quickly for iPhone 4 when compared to the iPhone when compared to the iPhone 4 launch . Growth during the during the first half of 2012 wa also favorably impacted by season , resulting in a 111 % increase in iPad unit during the first quarter of 2012 compared to the same quarter to the same quarter in 2011 . Partially offsetting these positive operating segment . In October 2011 , the Company introduced iPhone , the Company introduced iPhone 4 and launched iCloud , the with Retina display in March 2012 and in June 2012 introduced March 2012 and in June 2012 introduced the MacBook Pro with During the fourth quarter of 2012 , OS X Mountain Lion Lion wa released and iPhone 5 wa introduced . In March wa introduced . In March 2012 , the Company announced a the Company announced a $ 10 billion share repurchase program that in the fourth quarter of 2012 . During the fourth quarter Company paid dividend of $ 2.5 billion or $ 2.65 per $ 2.5 billion or $ 2.65 per common share . 26 2.65 per common share . 26 Table of Contents Sales Data unit sale by product during 2013 , 2012 and 2011 ( by product during 2013 , 2012 and 2011 ( dollar in during 2013 , 2012 and 2011 ( dollar in million and unit in thousand ) : 2013 Change 2012 Change 2011 Net thousand ) : 2013 Change 2012 Change 2011 Net Sales by : 2013 Change 2012 Change 2011 Net Sales by Operating Segment Operating Segment : Americas $ 62,739 9 % $ 57,512 50 Segment : Americas $ 62,739 9 % $ 57,512 50 % $ 62,739 9 % $ 57,512 50 % $ 38,315 Europe 62,739 9 % $ 57,512 50 % $ 38,315 Europe 37,883 $ 57,512 50 % $ 38,315 Europe 37,883 4 % 36,323 50 % $ 38,315 Europe 37,883 4 % 36,323 31 % % $ 38,315 Europe 37,883 4 % 36,323 31 % 27,778 38,315 Europe 37,883 4 % 36,323 31 % 27,778 Greater China Europe 37,883 4 % 36,323 31 % 27,778 Greater China ( 4 % 36,323 31 % 27,778 Greater China ( a ) Greater China ( a ) 25,417 13 % 22,533 78 % China ( a ) 25,417 13 % 22,533 78 % 12,690 a ) 25,417 13 % 22,533 78 % 12,690 Japan 13,462 ) 25,417 13 % 22,533 78 % 12,690 Japan 13,462 27 13 % 22,533 78 % 12,690 Japan 13,462 27 % 10,571 22,533 78 % 12,690 Japan 13,462 27 % 10,571 94 % 78 % 12,690 Japan 13,462 27 % 10,571 94 % 5,437 12,690 Japan 13,462 27 % 10,571 94 % 5,437 Rest of Japan 13,462 27 % 10,571 94 % 5,437 Rest of Asia 27 % 10,571 94 % 5,437 Rest of Asia Pacific 11,181 5,437 Rest of Asia Pacific 11,181 4 % 10,741 8 % Rest of Asia Pacific 11,181 4 % 10,741 8 % 9,902 Asia Pacific 11,181 4 % 10,741 8 % 9,902 Retail 20,228 Pacific 11,181 4 % 10,741 8 % 9,902 Retail 20,228 7 4 % 10,741 8 % 9,902 Retail 20,228 7 % 18,828 10,741 8 % 9,902 Retail 20,228 7 % 18,828 33 % 8 % 9,902 Retail 20,228 7 % 18,828 33 % 14,127 9,902 Retail 20,228 7 % 18,828 33 % 14,127 Total net Retail 20,228 7 % 18,828 33 % 14,127 Total net sale 7 % 18,828 33 % 14,127 Total net sale $ 170,910 14,127 Total net sale $ 170,910 9 % $ 156,508 45 Total net sale $ 170,910 9 % $ 156,508 45 % $ 170,910 9 % $ 156,508 45 % $ 108,249 Net 170,910 9 % $ 156,508 45 % $ 108,249 Net Sales $ 156,508 45 % $ 108,249 Net Sales by Product : iPhone ( b ) $ 91,279 16 % $ 78,692 71 ( b ) $ 91,279 16 % $ 78,692 71 % $ 91,279 16 % $ 78,692 71 % $ 45,998 iPad 91,279 16 % $ 78,692 71 % $ 45,998 iPad ( $ 78,692 71 % $ 45,998 iPad ( b ) 31,980 45,998 iPad ( b ) 31,980 3 % 30,945 61 % iPad ( b ) 31,980 3 % 30,945 61 % 19,168 b ) 31,980 3 % 30,945 61 % 19,168 Mac ( ) 31,980 3 % 30,945 61 % 19,168 Mac ( b 3 % 30,945 61 % 19,168 Mac ( b ) 21,483 19,168 Mac ( b ) 21,483 ( 7 ) % 23,221 ( b ) 21,483 ( 7 ) % 23,221 7 % 21,483 ( 7 ) % 23,221 7 % 21,783 iPod ( ( 7 ) % 23,221 7 % 21,783 iPod ( b ) % 23,221 7 % 21,783 iPod ( b ) 4,411 21,783 iPod ( b ) 4,411 ( 21 ) % 5,615 ( b ) 4,411 ( 21 ) % 5,615 ( 25 4,411 ( 21 ) % 5,615 ( 25 ) % 7,453 21 ) % 5,615 ( 25 ) % 7,453 iTunes , 5,615 ( 25 ) % 7,453 iTunes , software and service and service ( c ) 16,051 25 % 12,890 38 % service ( c ) 16,051 25 % 12,890 38 % 9,373 c ) 16,051 25 % 12,890 38 % 9,373 Accessories ( ) 16,051 25 % 12,890 38 % 9,373 Accessories ( d 25 % 12,890 38 % 9,373 Accessories ( d ) 5,706 9,373 Accessories ( d ) 5,706 11 % 5,145 15 % Accessories ( d ) 5,706 11 % 5,145 15 % 4,474 d ) 5,706 11 % 5,145 15 % 4,474 Total net ) 5,706 11 % 5,145 15 % 4,474 Total net sale 11 % 5,145 15 % 4,474 Total net sale $ 170,910 4,474 Total net sale $ 170,910 9 % $ 156,508 45 Total net sale $ 170,910 9 % $ 156,508 45 % $ 170,910 9 % $ 156,508 45 % $ 108,249 Unit 170,910 9 % $ 156,508 45 % $ 108,249 Unit Sales $ 156,508 45 % $ 108,249 Unit Sales by Product : Sales by Product : iPhone 150,257 20 % 125,046 73 % by Product : iPhone 150,257 20 % 125,046 73 % 72,293 : iPhone 150,257 20 % 125,046 73 % 72,293 iPad 71,033 iPhone 150,257 20 % 125,046 73 % 72,293 iPad 71,033 22 20 % 125,046 73 % 72,293 iPad 71,033 22 % 58,310 125,046 73 % 72,293 iPad 71,033 22 % 58,310 80 % 73 % 72,293 iPad 71,033 22 % 58,310 80 % 32,394 72,293 iPad 71,033 22 % 58,310 80 % 32,394 Mac 16,341 iPad 71,033 22 % 58,310 80 % 32,394 Mac 16,341 ( 22 % 58,310 80 % 32,394 Mac 16,341 ( 10 ) 58,310 80 % 32,394 Mac 16,341 ( 10 ) % 18,158 % 32,394 Mac 16,341 ( 10 ) % 18,158 9 % 16,341 ( 10 ) % 18,158 9 % 16,735 iPod 26,379 ( 10 ) % 18,158 9 % 16,735 iPod 26,379 ( ) % 18,158 9 % 16,735 iPod 26,379 ( 25 ) 18,158 9 % 16,735 iPod 26,379 ( 25 ) % 35,165 % 16,735 iPod 26,379 ( 25 ) % 35,165 ( 17 26,379 ( 25 ) % 35,165 ( 17 ) % 42,620 25 ) % 35,165 ( 17 ) % 42,620 ( a 35,165 ( 17 ) % 42,620 ( a ) Greater China s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2013 , 2012 and 2011 ended s fiscal year 2013 , 2012 and 2011 ended on September year 2013 , 2012 and 2011 ended on September 28 , and 2011 ended on September 28 , 2013 , September 29 ended on September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . Both fiscal respectively . Both fiscal year 2013 and 2011 spanned 52 week Both fiscal year 2013 and 2011 spanned 52 week . Fiscal year 2013 and 2011 spanned 52 week . Fiscal year 2012 52 week . Fiscal year 2012 spanned 53 week , with . Fiscal year 2012 spanned 53 week , with a 14 53 week , with a 14 th week added to the to the first quarter of 2012 , a is done approximately of the additional week in 2012 increased the Company ’ s expense for the year . 27 Table of Contents Product Performance and unit sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( net sale for 2013 , 2012 and 2011 ( net sale in million unit in thousand ) : 2013 Change 2012 Change 2011 Net thousand ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 91,279 16 Change 2011 Net sale $ 91,279 16 % $ 78,692 71 2011 Net sale $ 91,279 16 % $ 78,692 71 % $ 91,279 16 % $ 78,692 71 % $ 45,998 Percentage 91,279 16 % $ 78,692 71 % $ 45,998 Percentage of $ 78,692 71 % $ 45,998 Percentage of total net sale Percentage of total net sale 53 % 50 % 42 % total net sale 53 % 50 % 42 % Unit sale sale 53 % 50 % 42 % Unit sale 150,257 20 % 42 % Unit sale 150,257 20 % 125,046 73 % 42 % Unit sale 150,257 20 % 125,046 73 % 72,293 Unit sale 150,257 20 % 125,046 73 % 72,293 The growth sale 150,257 20 % 125,046 73 % 72,293 The growth in 20 % 125,046 73 % 72,293 The growth in iPhone net sale and unit sale during 2013 resulted from increased demand for to the launch of iPhone 5 beginning in September 2012 and iPhone 5 beginning in September 2012 and strong ongoing demand for strong ongoing demand for iPhone 4 and 4 . All of demand for iPhone 4 and 4 . All of the Company unit sale of iPhone during 2013 compared to 2012 . The iPhone during 2013 compared to 2012 . The year-over-year impact of higher iPhone unit sale in 2013 wa partially offset by a wa partially offset by a 3 % decline in iPhone average “ ASPs ” ) in 2013 compared to 2012 primarily a ) in 2013 compared to 2012 primarily a a result of iPhone model , particularly iPhone 4 . All of the Company decline in iPhone ASPs during 2013 . The year-over-year growth in sale and unit sale during 2012 reflects strong demand for iPhone Growth in iPhone sale during 2012 is primarily a result of of the launch of iPhone 4 in the first quarter of in the first quarter of 2012 and iPhone 5 in the quarter of 2012 and iPhone 5 in the fourth quarter of in the fourth quarter of 2012 , ongoing demand during 2012 2012 , ongoing demand during 2012 for iPhone 4 and iPhone demand during 2012 for iPhone 4 and iPhone 3GS , and for iPhone 4 and iPhone 3GS , and expanded distribution with and unit sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( net sale for 2013 , 2012 and 2011 ( net sale in million unit in thousand ) : 2013 Change 2012 Change 2011 Net thousand ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 31,980 3 Change 2011 Net sale $ 31,980 3 % $ 30,945 61 2011 Net sale $ 31,980 3 % $ 30,945 61 % $ 31,980 3 % $ 30,945 61 % $ 19,168 Percentage 31,980 3 % $ 30,945 61 % $ 19,168 Percentage of $ 30,945 61 % $ 19,168 Percentage of total net sale Percentage of total net sale 19 % 20 % 18 % total net sale 19 % 20 % 18 % Unit sale sale 19 % 20 % 18 % Unit sale 71,033 22 % 18 % Unit sale 71,033 22 % 58,310 80 % 18 % Unit sale 71,033 22 % 58,310 80 % 32,394 Unit sale 71,033 22 % 58,310 80 % 32,394 The growth sale 71,033 22 % 58,310 80 % 32,394 The growth in 22 % 58,310 80 % 32,394 The growth in net sale unit sale of iPad during 2013 resulted from growth in iPad in the first quarter of 2013 . The year-over-year growth rate total iPad net sale for 2013 due to a reduction in reduction in iPad ASPs of 15 % in 2013 compared to ASPs of 15 % in 2013 compared to 2012 . This % in 2013 compared to 2012 . This decline resulted primarily the price reduction on iPad 2 made in 2012 . The on iPad 2 made in 2012 . The decline in iPad sale and unit sale during 2012 wa driven by strong demand third generation iPad in March 2012 , continued demand for iPad , continued demand for iPad 2 , and expanded distribution with of iPad net sale during 2012 due to a 10 % during 2012 due to a 10 % reduction in ASPs a a price reduction on iPad 2 and an increase in indirect distribution through third-party resellers . 28 Table of Contents Mac The and unit sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( net sale for 2013 , 2012 and 2011 ( net sale in million unit in thousand ) : 2013 Change 2012 Change 2011 Net thousand ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 21,483 ( Change 2011 Net sale $ 21,483 ( 7 ) % $ Net sale $ 21,483 ( 7 ) % $ 23,221 7 ( 7 ) % $ 23,221 7 % $ 21,783 Percentage 7 ) % $ 23,221 7 % $ 21,783 Percentage of $ 23,221 7 % $ 21,783 Percentage of total net sale Percentage of total net sale 13 % 15 % 20 % total net sale 13 % 15 % 20 % Unit sale sale 13 % 15 % 20 % Unit sale 16,341 ( % 20 % Unit sale 16,341 ( 10 ) % 18,158 % Unit sale 16,341 ( 10 ) % 18,158 9 % 16,341 ( 10 ) % 18,158 9 % 16,735 Mac net ( 10 ) % 18,158 9 % 16,735 Mac net sale ) % 18,158 9 % 16,735 Mac net sale and unit sale and unit sale for 2013 were down or relatively flat sale and unit sale during 2012 reflects increased demand for Mac s operating segment driven by 2012 release of updated model of with Retina display in June 2012 . Partially offsetting the increase for desktop personal computer during 2012 . Additionally , the Company it Mac desktop product in 2012. iTunes , Software and Services , software and service for 2013 , 2012 and 2011 ( and service for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 iTunes million ) : 2013 Change 2012 Change 2011 iTunes , software : 2013 Change 2012 Change 2011 iTunes , software and service , software and service $ 16,051 25 % $ 12,890 38 software and service $ 16,051 25 % $ 12,890 38 % $ 16,051 25 % $ 12,890 38 % $ 9,373 Percentage 16,051 25 % $ 12,890 38 % $ 9,373 Percentage of $ 12,890 38 % $ 9,373 Percentage of total net sale Percentage of total net sale 9 % 8 % 9 % total net sale 9 % 8 % 9 % The increase sale 9 % 8 % 9 % The increase in net , software and service in 2013 compared to 2012 wa primarily service in 2013 compared to 2012 wa primarily due to growth generated a total of $ 9.3 billion in net sale during billion in net sale during 2013 , a 24 % increase sale during 2013 , a 24 % increase from 2012 . a 24 % increase from 2012 . Growth in the iTunes , software and service in 2012 compared to 2011 wa due service in 2012 compared to 2011 wa due primarily to growth total net sale of $ 7.5 billion for 2012 compared to of $ 7.5 billion for 2012 compared to net sale of to net sale of $ 5.4 billion during 2011 . The of $ 5.4 billion during 2011 . The strong result of of the iTunes Store in 2012 reflect growth of the App via the iTunes Store . 29 Table of Contents Segment Operating operates Apple retail store in 13 country , including the U.S may be found in Note 11 , “ Segment Information and Americas net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 Net million ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 62,739 9 Change 2011 Net sale $ 62,739 9 % $ 57,512 50 2011 Net sale $ 62,739 9 % $ 57,512 50 % $ 62,739 9 % $ 57,512 50 % $ 38,315 Percentage 62,739 9 % $ 57,512 50 % $ 38,315 Percentage of $ 57,512 50 % $ 38,315 Percentage of total net sale Percentage of total net sale 37 % 37 % 35 % total net sale 37 % 37 % 35 % The growth sale 37 % 37 % 35 % The growth in the Americas segment net sale during 2013 wa driven by increased sale following the introduction of iPhone 5 in September 2012 and iPhone of iPhone 5 in September 2012 and iPhone 5 and 5c in September 2012 and iPhone 5 and 5c in September 2013 2012 and iPhone 5 and 5c in September 2013 , increased 5 and 5c in September 2013 , increased sale from the growth in net sale during 2012 wa primarily driven by increased following the launch of iPhone 4 and iPhone 5 , strong of iPhone 4 and iPhone 5 , strong demand for the third generation iPad and iPad 2 , and higher sale from Europe net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 Net million ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 37,883 4 Change 2011 Net sale $ 37,883 4 % $ 36,323 31 2011 Net sale $ 37,883 4 % $ 36,323 31 % $ 37,883 4 % $ 36,323 31 % $ 27,778 Percentage 37,883 4 % $ 36,323 31 % $ 27,778 Percentage of $ 36,323 31 % $ 27,778 Percentage of total net sale Percentage of total net sale 22 % 23 % 26 % total net sale 22 % 23 % 26 % Similar to sale 22 % 23 % 26 % Similar to the Americas in the Europe segment during 2013 wa primarily driven by increased region reflected by second half 2013 net sale falling 4 % half 2013 net sale falling 4 % compared to the second to the second half of 2012 , which followed an 11 2012 , which followed an 11 % increase in net sale during the first half of 2013 . The growth in net growth in net sale during 2012 wa primarily driven by strong third generation iPad and iPad 2 , higher sale from the from the launch of iPhone 4 . iPhone 5 wa launched of iPhone 4 . iPhone 5 wa launched in a limited of the fourth quarter of 2012 and did not contribute to in the Europe segment during 2012 compared to the Company ’ Net sale in the Europe 30 Table of Contents segment were China net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 Net million ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 25,417 13 Change 2011 Net sale $ 25,417 13 % $ 22,533 78 2011 Net sale $ 25,417 13 % $ 22,533 78 % $ 25,417 13 % $ 22,533 78 % $ 12,690 Percentage 25,417 13 % $ 22,533 78 % $ 12,690 Percentage of $ 22,533 78 % $ 12,690 Percentage of total net sale Percentage of total net sale 15 % 14 % 12 % total net sale 15 % 14 % 12 % The growth sale 15 % 14 % 12 % The growth in net the Greater China segment during 2013 resulted from two major iPhone during the year , iPhone 5 in December 2012 and iPhone , iPhone 5 in December 2012 and iPhone 5c and iPhone in December 2012 and iPhone 5c and iPhone 5 in September and iPhone 5c and iPhone 5 in September 2013 . Further and iPhone 5 in September 2013 . Further contributing to the contributing to the growth in 2013 wa the introduction of the during the second quarter of 2013 and an increase in iPhone a of the end of 2013 compared to the end of compared to the end of 2012 . While net sale in the China segment were up 13 % for all of 2013 13 % for all of 2013 , net sale for the for the second half of 2013 declined 4 % compared to second half of 2013 declined 4 % compared to the second to the second half of 2012 . The growth in net growth in net sale during 2012 wa mainly due to increased following the launch of iPhone 4 and strong demand for the third generation iPad and iPad 2 . Growth in the Greater iPad product launch . iPhone 5 wa not launched in China not launched in China during 2012 , and the third generation by the Company in March 2012 wa not launched in China until the fourth quarter of 2012 . Japan The following table Japan net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 Net million ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 13,462 27 Change 2011 Net sale $ 13,462 27 % $ 10,571 94 2011 Net sale $ 13,462 27 % $ 10,571 94 % $ 13,462 27 % $ 10,571 94 % $ 5,437 Percentage 13,462 27 % $ 10,571 94 % $ 5,437 Percentage of $ 10,571 94 % $ 5,437 Percentage of total net sale Percentage of total net sale 8 % 7 % 5 % total net sale 8 % 7 % 5 % The increase sale 8 % 7 % 5 % The increase in net in the Japan segment during 2013 reflects significant increase in unit a of the end of 2013 compared to the end of compared to the end of 2012 . These positive factor were growth in net sale during 2012 wa primarily driven by increased following the launch of iPhone 4 and iPhone 5 , expanded of iPhone 4 and iPhone 5 , expanded distribution with a third generation iPad and iPad 2 , higher sale from the Pacific net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 Change 2012 Change 2011 Net million ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 11,181 4 Change 2011 Net sale $ 11,181 4 % $ 10,741 8 2011 Net sale $ 11,181 4 % $ 10,741 8 % $ 11,181 4 % $ 10,741 8 % $ 9,902 Percentage 11,181 4 % $ 10,741 8 % $ 9,902 Percentage of $ 10,741 8 % $ 9,902 Percentage of total net sale Percentage of total net sale 7 % 7 % 9 % total net sale 7 % 7 % 9 % The growth sale 7 % 7 % 9 % The growth in net growth in net sale during 2013 wa primarily driven by the by the launch of iPhone 5 and higher sale from iTunes of iPad and Mac . 31 Table of Contents The growth growth in net sale during 2012 wa mainly due to strong reflects the timing of iPhone 5 launch in the Rest of during the fourth quarter of 2012 . Retail The following table Retail net sale information for 2013 , 2012 and 2011 ( sale information for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million , except for store count ) : 2013 Change 2012 Change 2011 Net count ) : 2013 Change 2012 Change 2011 Net sale $ : 2013 Change 2012 Change 2011 Net sale $ 20,228 7 Change 2011 Net sale $ 20,228 7 % $ 18,828 33 2011 Net sale $ 20,228 7 % $ 18,828 33 % $ 20,228 7 % $ 18,828 33 % $ 14,127 Percentage 20,228 7 % $ 18,828 33 % $ 14,127 Percentage of $ 18,828 33 % $ 14,127 Percentage of total net sale Percentage of total net sale 12 % 12 % 13 % total net sale 12 % 12 % 13 % U.S. store sale 12 % 12 % 13 % U.S. store 254 250 % 13 % U.S. store 254 250 245 International store 162 13 % U.S. store 254 250 245 International store 162 140 % U.S. store 254 250 245 International store 162 140 112 254 250 245 International store 162 140 112 Total store count 250 245 International store 162 140 112 Total store count 416 245 International store 162 140 112 Total store count 416 390 140 112 Total store count 416 390 357 The growth in 112 Total store count 416 390 357 The growth in net Total store count 416 390 357 The growth in net sale growth in net sale during 2013 wa primarily driven by increased in the first half of 2013 and increased sale of service . With an average of 403 and 365 open store during an average of 403 and 365 open store during 2013 and and 365 open store during 2013 and 2012 , respectively , open store during 2013 and 2012 , respectively , average revenue per store decreased to $ 50.2 million in 2013 , compared to $ 50.2 million in 2013 , compared to $ 51.5 2013 , compared to $ 51.5 million in 2012 . The to $ 51.5 million in 2012 . The growth in net growth in net sale during 2012 wa driven primarily by increased following the launch of iPhone 4 and iPhone 5 , strong of iPhone 4 and iPhone 5 , strong demand for the third generation iPad and iPad 2 , and higher Mac net in the Retail segment during 2012 compared to the Company ’ . With an average of 365 store and 326 store during average of 365 store and 326 store during 2012 and 2011 store and 326 store during 2012 and 2011 , respectively , 326 store during 2012 and 2011 , respectively , average revenue average revenue per store increased 19 % to $ 51.5 million increased 19 % to $ 51.5 million in 2012 compared to to $ 51.5 million in 2012 compared to $ 43.3 million in 2012 compared to $ 43.3 million in 2011 . The to $ 43.3 million in 2011 . The Retail segment ’ s operating income wa $ 4.0 billion , $ 4.6 billion $ 4.0 billion , $ 4.6 billion and $ 3.1 billion $ 4.6 billion and $ 3.1 billion during 2013 , 2012 and $ 3.1 billion during 2013 , 2012 , and 2011 3.1 billion during 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . The year-over-year in Retail operating income in 2013 is primarily attributable to lower in Retail operating income in 2012 is primarily attributable to higher average revenue per store during 2012 . Gross Margin Gross margin Gross Margin Gross margin for 2013 , 2012 and 2011 are Gross margin for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in gross margin percentage ) : 2013 2012 2011 Net sale $ margin percentage ) : 2013 2012 2011 Net sale $ 170,910 percentage ) : 2013 2012 2011 Net sale $ 170,910 $ 2012 2011 Net sale $ 170,910 $ 156,508 $ 108,249 Cost Net sale $ 170,910 $ 156,508 $ 108,249 Cost of sale $ 170,910 $ 156,508 $ 108,249 Cost of sale 106,606 87,846 $ 108,249 Cost of sale 106,606 87,846 64,431 Gross margin $ 108,249 Cost of sale 106,606 87,846 64,431 Gross margin $ 64,304 Cost of sale 106,606 87,846 64,431 Gross margin $ 64,304 $ 87,846 64,431 Gross margin $ 64,304 $ 68,662 $ 43,818 Gross Gross margin $ 64,304 $ 68,662 $ 43,818 Gross margin percentage $ 64,304 $ 68,662 $ 43,818 Gross margin percentage 37.6 % $ 43,818 Gross margin percentage 37.6 % 43.9 % 40.5 % Gross margin percentage 37.6 % 43.9 % 40.5 % The gross percentage 37.6 % 43.9 % 40.5 % The gross margin percentage The gross margin percentage in 2013 wa 37.6 % compared to margin percentage in 2013 wa 37.6 % compared to 43.9 % wa 37.6 % compared to 43.9 % in 2012 . The compared to 43.9 % in 2012 . The year-over-year decrease in decrease in gross margin in 2013 compared to 2012 wa driven margin in 2013 compared to 2012 wa driven by multiple factor s service policy and other 32 Table of Contents warranty cost certain product , including iPad 2 and iPhone 4 ; and including iPad 2 and iPhone 4 ; and unfavorable impact from The gross margin percentage in 2012 wa 43.9 % , compared margin percentage in 2012 wa 43.9 % , compared to 40.5 43.9 % , compared to 40.5 % in 2011 . This compared to 40.5 % in 2011 . This year-over-year increase in during the first half of 2012 wa 45.9 % compared to first half of 2012 wa 45.9 % compared to 41.4 % wa 45.9 % compared to 41.4 % during the second half during the second half of 2012 . The primary driver of in the first half of 2012 compared to the second half in the second half of 2012 wa also affected by the during the first quarter of 2014 to be between 36.5 % of 2014 to be between 36.5 % and 37.5 % . be between 36.5 % and 37.5 % . The foregoing statement in the first quarter of 2014 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2013 , 2012 and 2011 are Operating expense for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in except for percentage ) : 2013 Change 2012 Change 2011 Research percentage ) : 2013 Change 2012 Change 2011 Research and development : 2013 Change 2012 Change 2011 Research and development $ 4,475 2011 Research and development $ 4,475 32 % $ 3,381 39 Research and development $ 4,475 32 % $ 3,381 39 % $ 4,475 32 % $ 3,381 39 % $ 2,429 Percentage 4,475 32 % $ 3,381 39 % $ 2,429 Percentage of $ 3,381 39 % $ 2,429 Percentage of total net sale Percentage of total net sale 3 % 2 % 2 % total net sale 3 % 2 % 2 % Selling , sale 3 % 2 % 2 % Selling , general and , general and administrative $ 10,830 8 % $ 10,040 32 general and administrative $ 10,830 8 % $ 10,040 32 % $ 10,830 8 % $ 10,040 32 % $ 7,599 Percentage 10,830 8 % $ 10,040 32 % $ 7,599 Percentage of $ 10,040 32 % $ 7,599 Percentage of total net sale Percentage of total net sale 6 % 6 % 7 % total net sale 6 % 6 % 7 % Total operating sale 6 % 6 % 7 % Total operating expense $ % Total operating expense $ 15,305 14 % $ 13,421 34 Total operating expense $ 15,305 14 % $ 13,421 34 % $ 15,305 14 % $ 13,421 34 % $ 10,028 Percentage 15,305 14 % $ 13,421 34 % $ 10,028 Percentage of $ 13,421 34 % $ 10,028 Percentage of total net sale Percentage of total net sale 9 % 9 % 9 % total net sale 9 % 9 % 9 % Research and sale 9 % 9 % 9 % Research and Development ( R & D expense increased 32 % and 39 % in expense increased 32 % and 39 % in 2013 and 2012 % and 39 % in 2013 and 2012 , respectively , 39 % in 2013 and 2012 , respectively , it remained in SG & A during 2013 wa primarily due to the by decreased spending on professional 33 Table of Contents service . in SG & A during 2012 wa primarily due to the Other income and expense for 2013 , 2012 and 2011 are and expense for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in ( in million ) : 2013 Change 2012 Change 2011 Interest million ) : 2013 Change 2012 Change 2011 Interest and dividend : 2013 Change 2012 Change 2011 Interest and dividend income $ Interest and dividend income $ 1,616 $ 1,088 $ 519 Interest dividend income $ 1,616 $ 1,088 $ 519 Interest expense ( $ 1,616 $ 1,088 $ 519 Interest expense ( 136 ) $ 519 Interest expense ( 136 ) 0 0 Other expense Interest expense ( 136 ) 0 0 Other expense , net expense ( 136 ) 0 0 Other expense , net ( Other expense , net ( 324 ) ( 566 ) ( net ( 324 ) ( 566 ) ( 104 ) Total ) ( 566 ) ( 104 ) Total other income/ ( expense ) , net $ 1,156 121 % $ 522 26 ) , net $ 1,156 121 % $ 522 26 % $ 1,156 121 % $ 522 26 % $ 415 The 1,156 121 % $ 522 26 % $ 415 The year-over-year $ 522 26 % $ 415 The year-over-year increase in other other income and expense during 2013 wa due primarily to higher in the third quarter of 2013 and remeasurement loss from foreign other income and expense in 2012 compared to 2011 wa attributable expense in 2012 compared to 2011 wa attributable to higher interest equivalent and marketable security wa 1.03 % during 2013 and 2012 security wa 1.03 % during 2013 and 2012 and 0.77 % 1.03 % during 2013 and 2012 and 0.77 % during 2011 during 2013 and 2012 and 0.77 % during 2011 . The 2012 and 0.77 % during 2011 . The Company had no had no debt outstanding during 2012 and 2011 and accordingly did debt outstanding during 2012 and 2011 and accordingly did not incur and effective tax rate for 2013 , 2012 and 2011 are tax rate for 2013 , 2012 and 2011 are a follows for 2013 , 2012 and 2011 are a follows ( in ( in million ) : 2013 2012 2011 Provision for income in million ) : 2013 2012 2011 Provision for income tax million ) : 2013 2012 2011 Provision for income tax $ Provision for income tax $ 13,118 $ 14,030 $ 8,283 Effective income tax $ 13,118 $ 14,030 $ 8,283 Effective tax rate $ 13,118 $ 14,030 $ 8,283 Effective tax rate 26.2 % $ 8,283 Effective tax rate 26.2 % 25.2 % 24.2 % Effective tax rate 26.2 % 25.2 % 24.2 % The Company rate 26.2 % 25.2 % 24.2 % The Company ’ s federal income tax rate of 35 % due primarily to certain the U.S. As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had deferred and tax credit of $ 4.2 billion , and deferred tax deferred tax liability of $ 16.5 billion . Management belief it tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2012 . All IRS examining the year 2007 through 2012 . All IRS audit issue issue for year prior to 2004 have been resolved . In have been made for any 34 Table of Contents adjustment that for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 ( in million 2012 and September 24 , 2011 ( in million ) : ( in million ) : 2013 2012 2011 Cash , cash in million ) : 2013 2012 2011 Cash , cash equivalent million ) : 2013 2012 2011 Cash , cash equivalent and equivalent and marketable security $ 146,761 $ 121,251 $ 81,570 Property marketable security $ 146,761 $ 121,251 $ 81,570 Property , plant $ 146,761 $ 121,251 $ 81,570 Property , plant and equipment and equipment , net $ 16,597 $ 15,452 $ 7,777 Long-term , net $ 16,597 $ 15,452 $ 7,777 Long-term debt $ $ 16,597 $ 15,452 $ 7,777 Long-term debt $ 16,960 $ $ 7,777 Long-term debt $ 16,960 $ 0 $ 0 Working Long-term debt $ 16,960 $ 0 $ 0 Working capital $ $ 16,960 $ 0 $ 0 Working capital $ 29,628 $ $ 0 Working capital $ 29,628 $ 19,111 $ 17,018 Cash Working capital $ 29,628 $ 19,111 $ 17,018 Cash generated by $ 29,628 $ 19,111 $ 17,018 Cash generated by operating activity generated by operating activity $ 53,666 $ 50,856 $ 37,529 Cash operating activity $ 53,666 $ 50,856 $ 37,529 Cash used in $ 53,666 $ 50,856 $ 37,529 Cash used in investing activity in investing activity $ ( 33,774 ) $ ( 48,227 ) ( 33,774 ) $ ( 48,227 ) $ ( 40,419 ) ( 48,227 ) $ ( 40,419 ) Cash generated/ ( used by financing activity $ ( 16,379 ) $ ( 1,698 ) ( 16,379 ) $ ( 1,698 ) $ 1,444 The Company $ ( 1,698 ) $ 1,444 The Company belief it existing existing operation over the next 12 month . The Company anticipates borrowing . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , $ 111.3 2013 and September 29 , 2012 , $ 111.3 billion and 29 , 2012 , $ 111.3 billion and $ 82.6 billion $ 111.3 billion and $ 82.6 billion , respectively , of of principal loss . During 2013 , cash generated from operating from operating activity of $ 53.7 billion wa a result of wa a result of $ 37.0 billion of net income , to net income of $ 10.2 billion and an increase in asset and liability of $ 6.5 billion . Cash used in in investing activity of $ 33.8 billion during 2013 consisted primarily of $ 33.8 billion during 2013 consisted primarily of net purchase of marketable security of $ 24.0 billion and cash used to plant and equipment of $ 8.2 billion . Cash used in used in financing activity during 2013 consisted primarily of cash used repurchase common stock of $ 22.9 billion and cash used to dividend equivalent right of $ 10.6 billion , partially offset by of long-term debt of $ 16.9 billion . During 2012 , $ 16.9 billion . During 2012 , cash generated from operating from operating activity of $ 50.9 billion wa a result of wa a result of $ 41.7 billion of net income and to net income of $ 9.4 billion , partially offset by asset and liability of $ 299 million . Cash used in used in investing activity during 2012 of $ 48.2 billion consisted activity during 2012 of $ 48.2 billion consisted primarily of net of marketable security of $ 38.4 billion and cash used to plant and equipment of $ 8.3 billion . Cash used in used in financing activity during 2012 of $ 1.7 billion consisted activity during 2012 of $ 1.7 billion consisted primarily of cash dividend equivalent right of $ 2.5 billion . Capital Assets The s capital expenditure were $ 7.0 billion during 2013 , consisting were $ 7.0 billion during 2013 , consisting of $ 499 2013 , consisting of $ 499 million for retail store facility retail store facility and $ 6.5 billion for other capital expenditure payment for capital expenditure during 2013 were $ 8.2 billion . expenditure during 2013 were $ 8.2 billion . 35 Table of were $ 8.2 billion . 35 Table of Contents The Company Company anticipates utilizing approximately $ 11.0 billion for capital expenditure during billion for capital expenditure during 2014 , including approximately $ 550 2014 , including approximately $ 550 million for retail store facility store facility and approximately $ 10.5 billion for other capital expenditure software and enhancement . During 2014 , the Company expects to Company expects to open about 30 new retail store , with outside of the U.S. During 2014 , the Company also expects also expects to remodel approximately 20 of it existing store . In the third quarter of 2013 , the Company issued $ , the Company issued $ 17.0 billion of long-term debt , debt , which included $ 3.0 billion of floating-rate note . aggregate notional amount of $ 3.0 billion , which , in aggregate principal amount of $ 17.0 billion , $ 2.5 billion $ 17.0 billion , $ 2.5 billion is due in 2016 2.5 billion is due in 2016 and $ 14.5 billion is due in 2016 and $ 14.5 billion is due in 2018 14.5 billion is due in 2018 through 2043. Dividend and Stock is due in 2018 through 2043. Dividend and Stock Repurchase Program In the third quarter of 2013 , the Company raised it raised it cash dividend by 15 % to $ 3.05 per by 15 % to $ 3.05 per common share . The pay quarterly dividend of $ 3.05 per common share each quarter Board of Directors . In 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ common stock . In April 2013 , the Company ’ s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion , of which $ billion , of which $ 23.0 billion had been utilized a been utilized a of September 28 , 2013 . The share a of September 28 , 2013 . The share repurchase program to be completed by December 2015 . The Company ’ s under plan complying with Rule 10b5-1 of the Exchange Act . Act . Beginning in August 2012 through December 2015 , the in August 2012 through December 2015 , the Company anticipates it it will utilize approximately $ 100 billion to pay dividend and unit , of which $ 37.1 billion had been utilized through had been utilized through September 28 , 2013 . The following utilized through September 28 , 2013 . The following table present net share settlement activity for 2013 and 2012 since the start settlement activity for 2013 and 2012 since the start of the Settlement of Equity Awards Total 2012 $ 2,488 $ 0 $ Equity Awards Total 2012 $ 2,488 $ 0 $ 0 $ Total 2012 $ 2,488 $ 0 $ 0 $ 56 $ $ 2,488 $ 0 $ 0 $ 56 $ 2,544 2013 $ 0 $ 0 $ 56 $ 2,544 2013 10,564 13,950 $ 0 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 0 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 $ 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total 56 $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total $ $ 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total $ 13,052 2,544 2013 10,564 13,950 9,000 1,082 34,596 Total $ 13,052 $ 2013 10,564 13,950 9,000 1,082 34,596 Total $ 13,052 $ 13,950 9,000 1,082 34,596 Total $ 13,052 $ 13,950 $ 9,000 $ 34,596 Total $ 13,052 $ 13,950 $ 9,000 $ 1,138 $ $ 13,052 $ 13,950 $ 9,000 $ 1,138 $ 37,140 Off-Balance $ 13,950 $ 9,000 $ 1,138 $ 37,140 Off-Balance Sheet Arrangements $ 9,000 $ 1,138 $ 37,140 Off-Balance Sheet Arrangements and Contractual support to the Company . 36 Table of Contents The following firm commitment a of September 28 , 2013 and excludes amount a of September 28 , 2013 and excludes amount already recorded Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Total Long-term debt $ Years Total Long-term debt $ 0 $ 2,500 $ 6,000 $ Long-term debt $ 0 $ 2,500 $ 6,000 $ 8,500 $ $ 0 $ 2,500 $ 6,000 $ 8,500 $ 17,000 Operating $ 2,500 $ 6,000 $ 8,500 $ 17,000 Operating lease 610 $ 6,000 $ 8,500 $ 17,000 Operating lease 610 1,200 1,056 8,500 $ 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase $ 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase obligation 17,000 Operating lease 610 1,200 1,056 1,855 4,721 Purchase obligation 18,616 Operating lease 610 1,200 1,056 1,855 4,721 Purchase obligation 18,616 0 lease 610 1,200 1,056 1,855 4,721 Purchase obligation 18,616 0 0 1,056 1,855 4,721 Purchase obligation 18,616 0 0 0 18,616 Other 1,855 4,721 Purchase obligation 18,616 0 0 0 18,616 Other obligation 4,721 Purchase obligation 18,616 0 0 0 18,616 Other obligation 1,081 Purchase obligation 18,616 0 0 0 18,616 Other obligation 1,081 248 obligation 18,616 0 0 0 18,616 Other obligation 1,081 248 16 0 0 18,616 Other obligation 1,081 248 16 3 1,348 Total 0 18,616 Other obligation 1,081 248 16 3 1,348 Total $ 18,616 Other obligation 1,081 248 16 3 1,348 Total $ 20,307 Other obligation 1,081 248 16 3 1,348 Total $ 20,307 $ obligation 1,081 248 16 3 1,348 Total $ 20,307 $ 3,948 16 3 1,348 Total $ 20,307 $ 3,948 $ 7,072 $ 1,348 Total $ 20,307 $ 3,948 $ 7,072 $ 10,358 $ $ 20,307 $ 3,948 $ 7,072 $ 10,358 $ 41,685 Lease $ 3,948 $ 7,072 $ 10,358 $ 41,685 Lease Commitments The $ 7,072 $ 10,358 $ 41,685 Lease Commitments The Company ’ typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company ’ s noncancelable operating lease were $ 4.7 billion , of which $ billion , of which $ 3.5 billion related to lease for typically cover period up to 150 day . The Company also supplier . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had outstanding component purchase commitment of $ 18.6 billion . Other Obligations In had outstanding obligation of $ 1.3 billion a of September 28 1.3 billion a of September 28 , 2013 , that consisted a of September 28 , 2013 , that consisted mainly of penalty . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had non-current deferred tax liability of $ 16.5 billion . Additionally , a Additionally , a of September 28 , 2013 , the Company a of September 28 , 2013 , the Company had gross unrecognized tax benefit of $ 2.7 billion and an additional $ billion and an additional $ 590 million for gross interest and Other agreement entered into by 37 Table of Contents the Company to indemnification a of September 28 , 2013 or September 29 a of September 28 , 2013 or September 29 , 2012 28 , 2013 or September 29 , 2012 . The Company 2013 or September 29 , 2012 . The Company ha entered and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy recognition accounting guidance . The 38 Table of Contents Company recognizes fair value of available-for-sale security 39 Table of Contents impact the requirement for period up to 150 day . If there is quarter , the Company reevaluates 40 Table of Contents these estimate that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies be materially adversely affected . 41 Table of Contents Item 7A 41 Table of Contents Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 28 , 2013 , a hypothetical a of September 28 , 2013 , a hypothetical 100 basis , 2013 , a hypothetical 100 basis point increase in interest would result in a $ 2.7 billion incremental decline in the portfolio . As of September 29 , 2012 , a similar As of September 29 , 2012 , a similar 100 basis , 2012 , a similar 100 basis point increase in the have resulted in a $ 2.1 billion incremental decline in the In the third quarter of 2013 , the Company issued $ , the Company issued $ 17.0 billion of long-term debt , debt , which included $ 3.0 billion of floating-rate note . aggregate notional amount of $ 3.0 billion , which , in will have to adjust local 42 Table of Contents currency product , typically for up to 12 month . However , the , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 201 million a of September 28 201 million a of September 28 , 2013 compared to a a of September 28 , 2013 compared to a maximum one-day in fair value of $ 200 million a of September 29 200 million a of September 29 , 2012 . Because the a of September 29 , 2012 . Because the Company us analysis performed a of September 28 , 2013 due to the a of September 28 , 2013 due to the inherent limitation actual exposure and position . 43 Table of Contents Item 8 43 Table of Contents Item 8 . Financial Statements and Supplementary for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 , and September 2013 , September 29 , 2012 , and September 24 , , 2012 , and September 24 , 2011 45 Consolidated Statements , and September 24 , 2011 45 Consolidated Statements of Comprehensive and September 24 , 2011 45 Consolidated Statements of Comprehensive Income for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 , and September 2013 , September 29 , 2012 , and September 24 , , 2012 , and September 24 , 2011 46 Consolidated Balance , and September 24 , 2011 46 Consolidated Balance Sheets a and September 24 , 2011 46 Consolidated Balance Sheets a of Balance Sheets a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 47 Consolidated Statements 2013 and September 29 , 2012 47 Consolidated Statements of Shareholders and September 29 , 2012 47 Consolidated Statements of Shareholders ’ for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 , and September 2013 , September 29 , 2012 , and September 24 , , 2012 , and September 24 , 2011 48 Consolidated Statements , and September 24 , 2011 48 Consolidated Statements of Cash and September 24 , 2011 48 Consolidated Statements of Cash Flows for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 , and September 2013 , September 29 , 2012 , and September 24 , , 2012 , and September 24 , 2011 49 Notes to , and September 24 , 2011 49 Notes to Consolidated Financial and September 24 , 2011 49 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 50 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 78 Reports of Ernst & Young Independent Registered Public Accounting Firm 79 All financial statement schedule have statement and note thereto . 44 Table of Contents CONSOLIDATED STATEMENTS amount ) Years ended September 28 , 2013 September 29 , Years ended September 28 , 2013 September 29 , 2012 September September 28 , 2013 September 29 , 2012 September 24 , , 2013 September 29 , 2012 September 24 , 2011 Net September 29 , 2012 September 24 , 2011 Net sale $ , 2012 September 24 , 2011 Net sale $ 170,910 $ , 2011 Net sale $ 170,910 $ 156,508 $ 108,249 Cost Net sale $ 170,910 $ 156,508 $ 108,249 Cost of sale $ 170,910 $ 156,508 $ 108,249 Cost of sale 106,606 87,846 $ 108,249 Cost of sale 106,606 87,846 64,431 Gross margin 64,304 108,249 Cost of sale 106,606 87,846 64,431 Gross margin 64,304 68,662 Cost of sale 106,606 87,846 64,431 Gross margin 64,304 68,662 43,818 106,606 87,846 64,431 Gross margin 64,304 68,662 43,818 Operating expense : 87,846 64,431 Gross margin 64,304 68,662 43,818 Operating expense : Research 64,431 Gross margin 64,304 68,662 43,818 Operating expense : Research and expense : Research and development 4,475 3,381 2,429 Selling , general : Research and development 4,475 3,381 2,429 Selling , general and Research and development 4,475 3,381 2,429 Selling , general and administrative Selling , general and administrative 10,830 10,040 7,599 Total operating expense , general and administrative 10,830 10,040 7,599 Total operating expense 15,305 general and administrative 10,830 10,040 7,599 Total operating expense 15,305 13,421 10,040 7,599 Total operating expense 15,305 13,421 10,028 Operating income 48,999 7,599 Total operating expense 15,305 13,421 10,028 Operating income 48,999 55,241 Total operating expense 15,305 13,421 10,028 Operating income 48,999 55,241 33,790 15,305 13,421 10,028 Operating income 48,999 55,241 33,790 Other income/ ( 13,421 10,028 Operating income 48,999 55,241 33,790 Other income/ ( expense 10,028 Operating income 48,999 55,241 33,790 Other income/ ( expense ) ( expense ) , net 1,156 522 415 Income before provision expense ) , net 1,156 522 415 Income before provision for ) , net 1,156 522 415 Income before provision for income before provision for income tax 50,155 55,763 34,205 Provision for income provision for income tax 50,155 55,763 34,205 Provision for income tax for income tax 50,155 55,763 34,205 Provision for income tax 13,118 34,205 Provision for income tax 13,118 14,030 8,283 Net income $ Provision for income tax 13,118 14,030 8,283 Net income $ 37,037 for income tax 13,118 14,030 8,283 Net income $ 37,037 $ 14,030 8,283 Net income $ 37,037 $ 41,733 $ 25,922 Earnings Net income $ 37,037 $ 41,733 $ 25,922 Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 40.03 $ 44.64 $ 28.05 Diluted : Basic $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 40.03 $ 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 44.64 $ 28.05 Diluted $ 39.75 $ 44.15 $ 27.68 Shares 28.05 Diluted $ 39.75 $ 44.15 $ 27.68 Shares used in $ 39.75 $ 44.15 $ 27.68 Shares used in computing earnings earnings per share : Basic 925,331 934,818 924,258 Diluted 931,662 945,355 per share : Basic 925,331 934,818 924,258 Diluted 931,662 945,355 936,645 share : Basic 925,331 934,818 924,258 Diluted 931,662 945,355 936,645 Cash Basic 925,331 934,818 924,258 Diluted 931,662 945,355 936,645 Cash dividend declared 925,331 934,818 924,258 Diluted 931,662 945,355 936,645 Cash dividend declared per 934,818 924,258 Diluted 931,662 945,355 936,645 Cash dividend declared per common declared per common share $ 11.40 $ 2.65 $ 0.00 See common share $ 11.40 $ 2.65 $ 0.00 See accompanying Notes $ 11.40 $ 2.65 $ 0.00 See accompanying Notes to Consolidated to Consolidated Financial Statements . 45 Table of Contents CONSOLIDATED STATEMENTS million ) Years ended September 28 , 2013 September 29 , Years ended September 28 , 2013 September 29 , 2012 September September 28 , 2013 September 29 , 2012 September 24 , , 2013 September 29 , 2012 September 24 , 2011 Net September 29 , 2012 September 24 , 2011 Net income $ , 2012 September 24 , 2011 Net income $ 37,037 $ , 2011 Net income $ 37,037 $ 41,733 $ 25,922 Other Net income $ 37,037 $ 41,733 $ 25,922 Other comprehensive income/ $ 37,037 $ 41,733 $ 25,922 Other comprehensive income/ ( loss of tax effect of $ 35 , $ 13 and $ of $ 35 , $ 13 and $ 18 , respectively , $ 13 and $ 18 , respectively ( 112 ) $ 18 , respectively ( 112 ) ( 15 ) ( respectively ( 112 ) ( 15 ) ( 12 ) Change ) ( 15 ) ( 12 ) Change in unrecognized gains/losses expense ) of $ ( 351 ) , $ 73 and ( 351 ) , $ 73 and $ ( 50 ) $ 73 and $ ( 50 ) , respectively 522 ( ( 50 ) , respectively 522 ( 131 ) 92 Adjustment ) , respectively 522 ( 131 ) 92 Adjustment for net respectively 522 ( 131 ) 92 Adjustment for net losses/ ( ( benefit ) of $ 255 , $ 220 and $ of $ 255 , $ 220 and $ ( 250 ) $ 220 and $ ( 250 ) , respectively ( 458 250 ) , respectively ( 458 ) ( 399 ) 450 respectively ( 458 ) ( 399 ) 450 Total change in 458 ) ( 399 ) 450 Total change in unrecognized gains/losses instrument , net of tax 64 ( 530 ) 542 Change net of tax 64 ( 530 ) 542 Change in unrealized tax 64 ( 530 ) 542 Change in unrealized gains/losses on ( expense ) of $ 458 , $ ( 421 ) $ 458 , $ ( 421 ) and $ 17 , ( 421 ) and $ 17 , respectively ( 791 ) $ 17 , respectively ( 791 ) 715 29 Adjustment for , respectively ( 791 ) 715 29 Adjustment for net losses/ respectively ( 791 ) 715 29 Adjustment for net losses/ ( ( benefit ) of $ 82 , $ 68 and $ of $ 82 , $ 68 and $ ( 40 ) $ 68 and $ ( 40 ) , respectively ( 131 40 ) , respectively ( 131 ) ( 114 ) ( respectively ( 131 ) ( 114 ) ( 70 ) Total ) ( 114 ) ( 70 ) Total change in unrealized , net of tax ( 922 ) 601 ( 41 ) of tax ( 922 ) 601 ( 41 ) Total other ( 922 ) 601 ( 41 ) Total other comprehensive income/ income/ ( loss ) ( 970 ) 56 489 Total comprehensive loss ) ( 970 ) 56 489 Total comprehensive income $ ) ( 970 ) 56 489 Total comprehensive income $ 36,067 489 Total comprehensive income $ 36,067 $ 41,789 $ 26,411 See comprehensive income $ 36,067 $ 41,789 $ 26,411 See accompanying Notes $ 36,067 $ 41,789 $ 26,411 See accompanying Notes to Consolidated to Consolidated Financial Statements . 46 Table of Contents CONSOLIDATED BALANCE reflected in thousand ) September 28 , 2013 September 29 , thousand ) September 28 , 2013 September 29 , 2012 ASSETS September 28 , 2013 September 29 , 2012 ASSETS : Current , 2013 September 29 , 2012 ASSETS : Current asset : Cash and cash equivalent $ 14,259 $ 10,746 Short-term marketable security cash equivalent $ 14,259 $ 10,746 Short-term marketable security 26,287 18,383 $ 10,746 Short-term marketable security 26,287 18,383 Accounts receivable , le 10,746 Short-term marketable security 26,287 18,383 Accounts receivable , le allowance , le allowance of $ 99 and $ 98 , respectively of $ 99 and $ 98 , respectively 13,102 10,930 Inventories and $ 98 , respectively 13,102 10,930 Inventories 1,764 791 Deferred $ 98 , respectively 13,102 10,930 Inventories 1,764 791 Deferred tax , respectively 13,102 10,930 Inventories 1,764 791 Deferred tax asset 3,453 respectively 13,102 10,930 Inventories 1,764 791 Deferred tax asset 3,453 2,583 1,764 791 Deferred tax asset 3,453 2,583 Vendor non-trade receivables 7,539 791 Deferred tax asset 3,453 2,583 Vendor non-trade receivables 7,539 7,762 3,453 2,583 Vendor non-trade receivables 7,539 7,762 Other current asset 6,882 2,583 Vendor non-trade receivables 7,539 7,762 Other current asset 6,882 6,458 7,539 7,762 Other current asset 6,882 6,458 Total current asset 73,286 7,762 Other current asset 6,882 6,458 Total current asset 73,286 57,653 6,882 6,458 Total current asset 73,286 57,653 Long-term marketable security 106,215 6,458 Total current asset 73,286 57,653 Long-term marketable security 106,215 92,122 73,286 57,653 Long-term marketable security 106,215 92,122 Property , plant and 57,653 Long-term marketable security 106,215 92,122 Property , plant and equipment plant and equipment , net 16,597 15,452 Goodwill 1,577 1,135 Acquired and equipment , net 16,597 15,452 Goodwill 1,577 1,135 Acquired intangible , net 16,597 15,452 Goodwill 1,577 1,135 Acquired intangible asset , net 16,597 15,452 Goodwill 1,577 1,135 Acquired intangible asset , net Acquired intangible asset , net 4,179 4,224 Other asset 5,146 5,478 intangible asset , net 4,179 4,224 Other asset 5,146 5,478 Total net 4,179 4,224 Other asset 5,146 5,478 Total asset $ 207,000 4,179 4,224 Other asset 5,146 5,478 Total asset $ 207,000 $ 5,146 5,478 Total asset $ 207,000 $ 176,064 LIABILITIES AND SHAREHOLDERS Total asset $ 207,000 $ 176,064 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 Accounts payable $ 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred 22,367 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 $ 21,175 Accrued expense 13,856 11,414 Deferred revenue 7,435 5,953 Total expense 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 13,856 11,414 Deferred revenue 7,435 5,953 Total current liability 43,658 38,542 7,435 5,953 Total current liability 43,658 38,542 Deferred revenue – non-current 5,953 Total current liability 43,658 38,542 Deferred revenue – non-current 2,625 38,542 Deferred revenue – non-current 2,625 2,648 Long-term debt 16,960 0 Deferred revenue – non-current 2,625 2,648 Long-term debt 16,960 0 Other non-current 2,625 2,648 Long-term debt 16,960 0 Other non-current liability 20,208 2,625 2,648 Long-term debt 16,960 0 Other non-current liability 20,208 16,664 16,960 0 Other non-current liability 20,208 16,664 Total liability 83,451 57,854 0 Other non-current liability 20,208 16,664 Total liability 83,451 57,854 Commitments liability 20,208 16,664 Total liability 83,451 57,854 Commitments and contingency Shareholders 20,208 16,664 Total liability 83,451 57,854 Commitments and contingency Shareholders ’ , no par value ; 1,800,000 share authorized ; 899,213 and ; 1,800,000 share authorized ; 899,213 and 939,208 share issued and share authorized ; 899,213 and 939,208 share issued and outstanding , issued and outstanding , respectively 19,764 16,422 Retained earnings 104,256 101,289 and outstanding , respectively 19,764 16,422 Retained earnings 104,256 101,289 Accumulated respectively 19,764 16,422 Retained earnings 104,256 101,289 Accumulated other comprehensive income/ 19,764 16,422 Retained earnings 104,256 101,289 Accumulated other comprehensive income/ ( income/ ( loss ) ( 471 ) 499 Total shareholder ’ loss ) ( 471 ) 499 Total shareholder ’ equity 123,549 499 Total shareholder ’ equity 123,549 118,210 Total liability and shareholder Total shareholder ’ equity 123,549 118,210 Total liability and shareholder ’ and shareholder ’ equity $ 207,000 $ 176,064 See accompanying Notes ’ equity $ 207,000 $ 176,064 See accompanying Notes to Consolidated to Consolidated Financial Statements . 47 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 25 , 2010 915,970 $ 10,668 a of September 25 , 2010 915,970 $ 10,668 $ 37,169 of September 25 , 2010 915,970 $ 10,668 $ 37,169 $ 25 , 2010 915,970 $ 10,668 $ 37,169 $ ( 46 2010 915,970 $ 10,668 $ 37,169 $ ( 46 ) $ 10,668 $ 37,169 $ ( 46 ) $ 47,791 Net income $ ( 46 ) $ 47,791 Net income 0 0 25,922 ) $ 47,791 Net income 0 0 25,922 0 25,922 Other $ 47,791 Net income 0 0 25,922 0 25,922 Other comprehensive 47,791 Net income 0 0 25,922 0 25,922 Other comprehensive income/ Net income 0 0 25,922 0 25,922 Other comprehensive income/ ( income 0 0 25,922 0 25,922 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 489 489 Share-based income/ ( loss ) 0 0 0 489 489 Share-based compensation ( loss ) 0 0 0 489 489 Share-based compensation 0 loss ) 0 0 0 489 489 Share-based compensation 0 1,168 ) 0 0 0 489 489 Share-based compensation 0 1,168 0 0 489 489 Share-based compensation 0 1,168 0 0 1,168 Common 489 489 Share-based compensation 0 1,168 0 0 1,168 Common stock 489 Share-based compensation 0 1,168 0 0 1,168 Common stock issued Share-based compensation 0 1,168 0 0 1,168 Common stock issued under compensation 0 1,168 0 0 1,168 Common stock issued under stock share withheld for employee tax 13,307 561 ( 250 ) 0 withheld for employee tax 13,307 561 ( 250 ) 0 311 employee tax 13,307 561 ( 250 ) 0 311 Tax benefit 13,307 561 ( 250 ) 0 311 Tax benefit from equity 561 ( 250 ) 0 311 Tax benefit from equity award , including transfer pricing adjustment 0 934 0 0 934 Balances including transfer pricing adjustment 0 934 0 0 934 Balances a transfer pricing adjustment 0 934 0 0 934 Balances a of pricing adjustment 0 934 0 0 934 Balances a of September adjustment 0 934 0 0 934 Balances a of September 24 934 Balances a of September 24 , 2011 929,277 13,331 62,841 a of September 24 , 2011 929,277 13,331 62,841 443 76,615 of September 24 , 2011 929,277 13,331 62,841 443 76,615 Net September 24 , 2011 929,277 13,331 62,841 443 76,615 Net income 24 , 2011 929,277 13,331 62,841 443 76,615 Net income 0 , 2011 929,277 13,331 62,841 443 76,615 Net income 0 0 2011 929,277 13,331 62,841 443 76,615 Net income 0 0 41,733 62,841 443 76,615 Net income 0 0 41,733 0 41,733 Other 443 76,615 Net income 0 0 41,733 0 41,733 Other comprehensive 76,615 Net income 0 0 41,733 0 41,733 Other comprehensive income/ Net income 0 0 41,733 0 41,733 Other comprehensive income/ ( income 0 0 41,733 0 41,733 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 56 56 Dividends income/ ( loss ) 0 0 0 56 56 Dividends and ( loss ) 0 0 0 56 56 Dividends and dividend loss ) 0 0 0 56 56 Dividends and dividend equivalent ) 0 0 0 56 56 Dividends and dividend equivalent right and dividend equivalent right declared 0 0 ( 2,523 ) 0 dividend equivalent right declared 0 0 ( 2,523 ) 0 ( right declared 0 0 ( 2,523 ) 0 ( 2,523 ) 0 0 ( 2,523 ) 0 ( 2,523 ) Share-based compensation ( 2,523 ) 0 ( 2,523 ) Share-based compensation 0 1,740 ( 2,523 ) Share-based compensation 0 1,740 0 0 1,740 Common 2,523 ) Share-based compensation 0 1,740 0 0 1,740 Common stock ) Share-based compensation 0 1,740 0 0 1,740 Common stock issued Share-based compensation 0 1,740 0 0 1,740 Common stock issued under compensation 0 1,740 0 0 1,740 Common stock issued under stock share withheld for employee tax 9,931 200 ( 762 ) 0 withheld for employee tax 9,931 200 ( 762 ) 0 ( employee tax 9,931 200 ( 762 ) 0 ( 562 ) 9,931 200 ( 762 ) 0 ( 562 ) Tax benefit ( 762 ) 0 ( 562 ) Tax benefit from equity , including transfer pricing adjustment 0 1,151 0 0 1,151 Balances including transfer pricing adjustment 0 1,151 0 0 1,151 Balances a transfer pricing adjustment 0 1,151 0 0 1,151 Balances a of pricing adjustment 0 1,151 0 0 1,151 Balances a of September adjustment 0 1,151 0 0 1,151 Balances a of September 29 1,151 Balances a of September 29 , 2012 939,208 16,422 101,289 a of September 29 , 2012 939,208 16,422 101,289 499 118,210 of September 29 , 2012 939,208 16,422 101,289 499 118,210 Net September 29 , 2012 939,208 16,422 101,289 499 118,210 Net income 29 , 2012 939,208 16,422 101,289 499 118,210 Net income 0 , 2012 939,208 16,422 101,289 499 118,210 Net income 0 0 2012 939,208 16,422 101,289 499 118,210 Net income 0 0 37,037 101,289 499 118,210 Net income 0 0 37,037 0 37,037 Other 499 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive income/ Net income 0 0 37,037 0 37,037 Other comprehensive income/ ( income 0 0 37,037 0 37,037 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 ( 970 ) income/ ( loss ) 0 0 0 ( 970 ) ( ( loss ) 0 0 0 ( 970 ) ( 970 ) 0 0 0 ( 970 ) ( 970 ) Dividends 0 ( 970 ) ( 970 ) Dividends and dividend equivalent and dividend equivalent right declared 0 0 ( 10,676 ) 0 dividend equivalent right declared 0 0 ( 10,676 ) 0 ( right declared 0 0 ( 10,676 ) 0 ( 10,676 ) 0 0 ( 10,676 ) 0 ( 10,676 ) Repurchase of ( 10,676 ) 0 ( 10,676 ) Repurchase of common stock Repurchase of common stock ( 46,976 ) 0 ( 22,950 ) common stock ( 46,976 ) 0 ( 22,950 ) 0 ( ( 46,976 ) 0 ( 22,950 ) 0 ( 22,950 ) ) 0 ( 22,950 ) 0 ( 22,950 ) Share-based compensation ( 22,950 ) 0 ( 22,950 ) Share-based compensation 0 2,253 ( 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common stock ) Share-based compensation 0 2,253 0 0 2,253 Common stock issued Share-based compensation 0 2,253 0 0 2,253 Common stock issued under compensation 0 2,253 0 0 2,253 Common stock issued under stock share withheld for employee tax 6,981 ( 143 ) ( 444 for employee tax 6,981 ( 143 ) ( 444 ) 0 6,981 ( 143 ) ( 444 ) 0 ( 587 ) 143 ) ( 444 ) 0 ( 587 ) Tax benefit ( 444 ) 0 ( 587 ) Tax benefit from equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 1,232 Balances a of September 28 1,232 Balances a of September 28 , 2013 899,213 $ 19,764 a of September 28 , 2013 899,213 $ 19,764 $ 104,256 of September 28 , 2013 899,213 $ 19,764 $ 104,256 $ 28 , 2013 899,213 $ 19,764 $ 104,256 $ ( 471 2013 899,213 $ 19,764 $ 104,256 $ ( 471 ) $ 19,764 $ 104,256 $ ( 471 ) $ 123,549 See accompanying $ ( 471 ) $ 123,549 See accompanying Notes to Consolidated to Consolidated Financial Statements . 48 Table of Contents CONSOLIDATED STATEMENTS million ) Years ended September 28 , 2013 September 29 , Years ended September 28 , 2013 September 29 , 2012 September September 28 , 2013 September 29 , 2012 September 24 , , 2013 September 29 , 2012 September 24 , 2011 Cash September 29 , 2012 September 24 , 2011 Cash and cash , 2012 September 24 , 2011 Cash and cash equivalent , beginning of the year $ 10,746 $ 9,815 $ 11,261 Operating the year $ 10,746 $ 9,815 $ 11,261 Operating activity : $ 10,746 $ 9,815 $ 11,261 Operating activity : Net income Operating activity : Net income 37,037 41,733 25,922 Adjustments to reconcile activity : Net income 37,037 41,733 25,922 Adjustments to reconcile net : Net income 37,037 41,733 25,922 Adjustments to reconcile net income activity : Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense : Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense 2,253 Depreciation and amortization 6,757 3,277 1,814 Share-based compensation expense 2,253 1,740 3,277 1,814 Share-based compensation expense 2,253 1,740 1,168 Deferred income tax 1,814 Share-based compensation expense 2,253 1,740 1,168 Deferred income tax expense Share-based compensation expense 2,253 1,740 1,168 Deferred income tax expense 1,141 1,168 Deferred income tax expense 1,141 4,405 2,868 Changes in operating Deferred income tax expense 1,141 4,405 2,868 Changes in operating asset income tax expense 1,141 4,405 2,868 Changes in operating asset and Accounts receivable , net ( 2,172 ) ( 5,551 ) 143 net ( 2,172 ) ( 5,551 ) 143 Inventories ( 973 2,172 ) ( 5,551 ) 143 Inventories ( 973 ) ( 5,551 ) 143 Inventories ( 973 ) ( 15 ) 275 Inventories ( 973 ) ( 15 ) 275 Vendor non-trade receivables 973 ) ( 15 ) 275 Vendor non-trade receivables 223 ( ) 275 Vendor non-trade receivables 223 ( 1,414 ) ( 1,934 Vendor non-trade receivables 223 ( 1,414 ) ( 1,934 ) Other 223 ( 1,414 ) ( 1,934 ) Other current and non-current Other current and non-current asset 1,080 ( 3,162 ) ( 1,391 and non-current asset 1,080 ( 3,162 ) ( 1,391 ) Accounts 1,080 ( 3,162 ) ( 1,391 ) Accounts payable 2,340 4,467 ( 1,391 ) Accounts payable 2,340 4,467 2,515 Deferred revenue 1,459 1,391 ) Accounts payable 2,340 4,467 2,515 Deferred revenue 1,459 2,824 ) Accounts payable 2,340 4,467 2,515 Deferred revenue 1,459 2,824 1,654 2,340 4,467 2,515 Deferred revenue 1,459 2,824 1,654 Other current and 4,467 2,515 Deferred revenue 1,459 2,824 1,654 Other current and non-current 2,515 Deferred revenue 1,459 2,824 1,654 Other current and non-current liability Other current and non-current liability 4,521 2,552 4,495 Cash generated by current and non-current liability 4,521 2,552 4,495 Cash generated by operating and non-current liability 4,521 2,552 4,495 Cash generated by operating activity Cash generated by operating activity 53,666 50,856 37,529 Investing activity : generated by operating activity 53,666 50,856 37,529 Investing activity : Purchases by operating activity 53,666 50,856 37,529 Investing activity : Purchases of Purchases of marketable security ( 148,489 ) ( 151,232 ) ( security ( 148,489 ) ( 151,232 ) ( 102,317 ) Proceeds ) ( 151,232 ) ( 102,317 ) Proceeds from maturity of from maturity of marketable security 20,317 13,035 20,437 Proceeds from sale maturity of marketable security 20,317 13,035 20,437 Proceeds from sale of of marketable security 20,317 13,035 20,437 Proceeds from sale of marketable from sale of marketable security 104,130 99,770 49,416 Payments made in sale of marketable security 104,130 99,770 49,416 Payments made in connection of marketable security 104,130 99,770 49,416 Payments made in connection with business acquisition , net ( 496 ) ( 350 ) ( net ( 496 ) ( 350 ) ( 244 ) Payments ) ( 350 ) ( 244 ) Payments for acquisition of , plant and equipment ( 8,165 ) ( 8,295 ) ( equipment ( 8,165 ) ( 8,295 ) ( 4,260 ) Payments ) ( 8,295 ) ( 4,260 ) Payments for acquisition of acquisition of intangible asset ( 911 ) ( 1,107 ) ( asset ( 911 ) ( 1,107 ) ( 3,192 ) Other ) ( 1,107 ) ( 3,192 ) Other ( 160 ) ( 3,192 ) Other ( 160 ) ( 48 ) ( Other ( 160 ) ( 48 ) ( 259 ) Cash ) ( 48 ) ( 259 ) Cash used in investing used in investing activity ( 33,774 ) ( 48,227 ) ( activity ( 33,774 ) ( 48,227 ) ( 40,419 ) Financing ) ( 48,227 ) ( 40,419 ) Financing activity : Proceeds from issuance of common stock 530 665 831 Excess tax benefit issuance of common stock 530 665 831 Excess tax benefit from of common stock 530 665 831 Excess tax benefit from equity tax benefit from equity award 701 1,351 1,133 Taxes paid related benefit from equity award 701 1,351 1,133 Taxes paid related to from equity award 701 1,351 1,133 Taxes paid related to net settlement of equity award ( 1,082 ) ( 1,226 ) ( award ( 1,082 ) ( 1,226 ) ( 520 ) Dividends ) ( 1,226 ) ( 520 ) Dividends and dividend equivalent dividend equivalent right paid ( 10,564 ) ( 2,488 ) 0 paid ( 10,564 ) ( 2,488 ) 0 Repurchase of common 10,564 ) ( 2,488 ) 0 Repurchase of common stock ( Repurchase of common stock ( 22,860 ) 0 0 Proceeds from common stock ( 22,860 ) 0 0 Proceeds from issuance of stock ( 22,860 ) 0 0 Proceeds from issuance of long-term of long-term debt , net 16,896 0 0 Cash generated by/ long-term debt , net 16,896 0 0 Cash generated by/ ( debt , net 16,896 0 0 Cash generated by/ ( used in ) financing activity ( 16,379 ) ( 1,698 ) 1,444 activity ( 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease 16,379 ) ( 1,698 ) 1,444 Increase/ ( decrease ) in in cash and cash equivalent 3,513 931 ( 1,446 ) Cash cash and cash equivalent 3,513 931 ( 1,446 ) Cash and cash equivalent 3,513 931 ( 1,446 ) Cash and cash equivalent end of the year $ 14,259 $ 10,746 $ 9,815 Supplemental the year $ 14,259 $ 10,746 $ 9,815 Supplemental cash flow $ 14,259 $ 10,746 $ 9,815 Supplemental cash flow disclosure : income tax , net $ 9,128 $ 7,682 $ 3,338 See , net $ 9,128 $ 7,682 $ 3,338 See accompanying Notes $ 9,128 $ 7,682 $ 3,338 See accompanying Notes to Consolidated to Consolidated Financial Statements . 49 Table of Contents Notes to to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2013 , 2012 and 2011 ended s fiscal year 2013 , 2012 and 2011 ended on September year 2013 , 2012 and 2011 ended on September 28 , and 2011 ended on September 28 , 2013 , September 29 ended on September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 , respectively . 2012 and September 24 , 2011 , respectively . An additional calendar quarter . Fiscal year 2012 spanned 53 week , with . Fiscal year 2012 spanned 53 week , with a 14th 53 week , with a 14th week included in the first in the first quarter of 2012 . Fiscal year 2013 and of 2012 . Fiscal year 2013 and 2011 spanned 52 week . Fiscal year 2013 and 2011 spanned 52 week each . year 2013 and 2011 spanned 52 week each . Unless otherwise During the first quarter of 2013 , the Company adopted amended software accounting guidance for the 50 Table of Contents following type iOS device and Mac . 51 Table of Contents The Company provide such service . In 2013 , 2012 and 2011 , service . In 2013 , 2012 and 2011 , the Company In 2013 , 2012 and 2011 , the Company ’ s device have ranged from $ 5 to $ 25 . Beginning from $ 5 to $ 25 . Beginning in September 2013 25 . Beginning in September 2013 , the combined ESPs for increased by up to $ 5 to reflect addition to unspecified and iPad a of September 2013 is $ 15 to $ of September 2013 is $ 15 to $ 25 . Beginning is $ 15 to $ 25 . Beginning in October 2013 25 . Beginning in October 2013 , the Company anticipates increasing ESPs for Mac from $ 20 to $ 40 to reflect from $ 20 to $ 40 to reflect addition to unspecified in cost of sale . 52 Table of Contents Warranty Expense were expensed a incurred during 2013 , 2012 and 2011 . a incurred during 2013 , 2012 and 2011 . Advertising Costs during 2013 , 2012 and 2011 . Advertising Costs Advertising cost . Advertising expense wa $ 1.1 billion , $ 1.0 billion $ 1.1 billion , $ 1.0 billion and $ 933 million $ 1.0 billion and $ 933 million for 2013 , 2012 and $ 933 million for 2013 , 2012 and 2011 , 933 million for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . Share-based Compensation can be found in Note 9 , “ Benefit Plans ” Plans ” of this Form 10-K. Income Taxes The provision for that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” Taxes ” of this Form 10-K for additional information . 53 10-K for additional information . 53 Table of Contents Earnings Per diluted earnings per share for 2013 , 2012 , and 2011 per share for 2013 , 2012 , and 2011 ( in 2013 , 2012 , and 2011 ( in thousand , except per share amount ) : 2013 2012 2011 Numerator : Net share amount ) : 2013 2012 2011 Numerator : Net income amount ) : 2013 2012 2011 Numerator : Net income $ Numerator : Net income $ 37,037 $ 41,733 $ 25,922 Denominator Net income $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average $ 37,037 $ 41,733 $ 25,922 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 925,331 934,818 924,258 Effect of dilutive : Weighted-average share outstanding 925,331 934,818 924,258 Effect of dilutive security Weighted-average share outstanding 925,331 934,818 924,258 Effect of dilutive security 6,331 924,258 Effect of dilutive security 6,331 10,537 12,387 Weighted-average diluted share Effect of dilutive security 6,331 10,537 12,387 Weighted-average diluted share 931,662 of dilutive security 6,331 10,537 12,387 Weighted-average diluted share 931,662 945,355 10,537 12,387 Weighted-average diluted share 931,662 945,355 936,645 Basic earnings per 12,387 Weighted-average diluted share 931,662 945,355 936,645 Basic earnings per share Weighted-average diluted share 931,662 945,355 936,645 Basic earnings per share $ Basic earnings per share $ 40.03 $ 44.64 $ 28.05 Diluted per share $ 40.03 $ 44.64 $ 28.05 Diluted earnings per $ 40.03 $ 44.64 $ 28.05 Diluted earnings per share $ Diluted earnings per share $ 39.75 $ 44.15 $ 27.68 Potentially per share $ 39.75 $ 44.15 $ 27.68 Potentially dilutive security $ 39.75 $ 44.15 $ 27.68 Potentially dilutive security representing 4.2 27.68 Potentially dilutive security representing 4.2 million , 1.0 million and security representing 4.2 million , 1.0 million and 1.7 million share million , 1.0 million and 1.7 million share of common stock share of common stock for 2013 , 2012 and 2011 , common stock for 2013 , 2012 and 2011 , respectively , for 2013 , 2012 and 2011 , respectively , were excluded debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term portion of the gain or 54 Table of Contents loss on no fair value hedge in 2013 , 2012 and 2011 . value hedge in 2013 , 2012 and 2011 . The net in 2013 , 2012 and 2011 . The net gain or building is the lesser of 30 year or the remaining life property and equipment wa $ 5.8 billion , $ 2.6 billion $ 5.8 billion , $ 2.6 billion and $ 1.6 billion $ 2.6 billion and $ 1.6 billion during 2013 , 2012 and $ 1.6 billion during 2013 , 2012 and 2011 , 1.6 billion during 2013 , 2012 and 2011 , respectively . during 2013 , 2012 and 2011 , respectively . Long-Lived Assets record any significant impairment during 2013 , 2012 and 2011 . significant impairment during 2013 , 2012 and 2011 . The Company during 2013 , 2012 and 2011 . The Company doe not any impairment charge related to 55 Table of Contents goodwill or indefinite lived intangible asset during 2013 , 2012 and 2011 . intangible asset during 2013 , 2012 and 2011 . The Company during 2013 , 2012 and 2011 . The Company established reporting each reporting unit . In 2013 and 2012 , the Company unit . In 2013 and 2012 , the Company ’ s fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally s result of operation . 56 Table of Contents Note 2 56 Table of Contents Note 2 – Financial Instruments Cash , marketable security a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 8,705 $ 0 $ 0 $ Securities Cash $ 8,705 $ 0 $ 0 $ 8,705 $ $ 8,705 $ 0 $ 0 $ 8,705 $ 8,705 $ $ 0 $ 0 $ 8,705 $ 8,705 $ 0 $ $ 0 $ 8,705 $ 8,705 $ 0 $ 0 Level $ 8,705 $ 8,705 $ 0 $ 0 Level 1 : $ 8,705 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,793 1 : Money market fund 1,793 0 0 1,793 1,793 0 : Money market fund 1,793 0 0 1,793 1,793 0 0 Money market fund 1,793 0 0 1,793 1,793 0 0 Mutual market fund 1,793 0 0 1,793 1,793 0 0 Mutual fund fund 1,793 0 0 1,793 1,793 0 0 Mutual fund 3,999 1,793 0 0 1,793 1,793 0 0 Mutual fund 3,999 0 0 0 1,793 1,793 0 0 Mutual fund 3,999 0 ( 1,793 0 0 Mutual fund 3,999 0 ( 197 ) 3,802 0 0 Mutual fund 3,999 0 ( 197 ) 3,802 0 Mutual fund 3,999 0 ( 197 ) 3,802 0 3,802 0 3,999 0 ( 197 ) 3,802 0 3,802 0 Subtotal 5,792 0 ( 197 ) 3,802 0 3,802 0 Subtotal 5,792 0 ( 197 ) 3,802 0 3,802 0 Subtotal 5,792 0 ( 197 ) 3,802 0 3,802 0 Subtotal 5,792 0 ( 197 3,802 0 3,802 0 Subtotal 5,792 0 ( 197 ) 5,595 0 3,802 0 Subtotal 5,792 0 ( 197 ) 5,595 1,793 0 Subtotal 5,792 0 ( 197 ) 5,595 1,793 3,802 0 5,792 0 ( 197 ) 5,595 1,793 3,802 0 Level 2 0 ( 197 ) 5,595 1,793 3,802 0 Level 2 : ( 197 ) 5,595 1,793 3,802 0 Level 2 : U.S. 197 ) 5,595 1,793 3,802 0 Level 2 : U.S. Treasury 5,595 1,793 3,802 0 Level 2 : U.S. Treasury security 27,642 2 : U.S. Treasury security 27,642 24 ( 47 ) 27,619 : U.S. Treasury security 27,642 24 ( 47 ) 27,619 431 Treasury security 27,642 24 ( 47 ) 27,619 431 7,554 19,634 27,642 24 ( 47 ) 27,619 431 7,554 19,634 U.S. agency 24 ( 47 ) 27,619 431 7,554 19,634 U.S. agency security ( 47 ) 27,619 431 7,554 19,634 U.S. agency security 16,878 47 ) 27,619 431 7,554 19,634 U.S. agency security 16,878 12 7,554 19,634 U.S. agency security 16,878 12 ( 52 ) 16,838 19,634 U.S. agency security 16,878 12 ( 52 ) 16,838 177 agency security 16,878 12 ( 52 ) 16,838 177 3,412 13,249 16,878 12 ( 52 ) 16,838 177 3,412 13,249 Non-U.S. government 12 ( 52 ) 16,838 177 3,412 13,249 Non-U.S. government security ( 52 ) 16,838 177 3,412 13,249 Non-U.S. government security 5,545 52 ) 16,838 177 3,412 13,249 Non-U.S. government security 5,545 35 3,412 13,249 Non-U.S. government security 5,545 35 ( 137 ) 5,443 13,249 Non-U.S. government security 5,545 35 ( 137 ) 5,443 50 government security 5,545 35 ( 137 ) 5,443 50 313 5,080 5,545 35 ( 137 ) 5,443 50 313 5,080 Certificates of 35 ( 137 ) 5,443 50 313 5,080 Certificates of deposit ( 137 ) 5,443 50 313 5,080 Certificates of deposit and 137 ) 5,443 50 313 5,080 Certificates of deposit and time of deposit and time deposit 2,344 0 0 2,344 1,264 844 deposit and time deposit 2,344 0 0 2,344 1,264 844 236 and time deposit 2,344 0 0 2,344 1,264 844 236 Commercial time deposit 2,344 0 0 2,344 1,264 844 236 Commercial paper deposit 2,344 0 0 2,344 1,264 844 236 Commercial paper 2,998 2,344 0 0 2,344 1,264 844 236 Commercial paper 2,998 0 0 0 2,344 1,264 844 236 Commercial paper 2,998 0 0 1,264 844 236 Commercial paper 2,998 0 0 2,998 1,835 1,163 844 236 Commercial paper 2,998 0 0 2,998 1,835 1,163 0 236 Commercial paper 2,998 0 0 2,998 1,835 1,163 0 Corporate Commercial paper 2,998 0 0 2,998 1,835 1,163 0 Corporate security paper 2,998 0 0 2,998 1,835 1,163 0 Corporate security 54,586 2,998 0 0 2,998 1,835 1,163 0 Corporate security 54,586 275 0 0 2,998 1,835 1,163 0 Corporate security 54,586 275 ( 1,835 1,163 0 Corporate security 54,586 275 ( 252 ) 54,609 1,163 0 Corporate security 54,586 275 ( 252 ) 54,609 0 Corporate security 54,586 275 ( 252 ) 54,609 0 8,077 46,532 54,586 275 ( 252 ) 54,609 0 8,077 46,532 Municipal security 275 ( 252 ) 54,609 0 8,077 46,532 Municipal security 6,257 ( 252 ) 54,609 0 8,077 46,532 Municipal security 6,257 45 252 ) 54,609 0 8,077 46,532 Municipal security 6,257 45 ( 0 8,077 46,532 Municipal security 6,257 45 ( 22 ) 6,280 8,077 46,532 Municipal security 6,257 45 ( 22 ) 6,280 4 Municipal security 6,257 45 ( 22 ) 6,280 4 1,114 5,162 6,257 45 ( 22 ) 6,280 4 1,114 5,162 Mortgage- and 45 ( 22 ) 6,280 4 1,114 5,162 Mortgage- and asset-backed ( 22 ) 6,280 4 1,114 5,162 Mortgage- and asset-backed security 22 ) 6,280 4 1,114 5,162 Mortgage- and asset-backed security 16,396 5,162 Mortgage- and asset-backed security 16,396 23 ( 89 ) 16,330 Mortgage- and asset-backed security 16,396 23 ( 89 ) 16,330 0 asset-backed security 16,396 23 ( 89 ) 16,330 0 8 16,322 16,396 23 ( 89 ) 16,330 0 8 16,322 Subtotal 132,646 23 ( 89 ) 16,330 0 8 16,322 Subtotal 132,646 414 ( 89 ) 16,330 0 8 16,322 Subtotal 132,646 414 ( 89 ) 16,330 0 8 16,322 Subtotal 132,646 414 ( 599 16,330 0 8 16,322 Subtotal 132,646 414 ( 599 ) 132,461 0 8 16,322 Subtotal 132,646 414 ( 599 ) 132,461 3,761 16,322 Subtotal 132,646 414 ( 599 ) 132,461 3,761 22,485 106,215 132,646 414 ( 599 ) 132,461 3,761 22,485 106,215 Total $ 414 ( 599 ) 132,461 3,761 22,485 106,215 Total $ 147,143 ( 599 ) 132,461 3,761 22,485 106,215 Total $ 147,143 $ 599 ) 132,461 3,761 22,485 106,215 Total $ 147,143 $ 414 3,761 22,485 106,215 Total $ 147,143 $ 414 $ ( 796 106,215 Total $ 147,143 $ 414 $ ( 796 ) $ 147,143 $ 414 $ ( 796 ) $ 146,761 $ 14,259 $ ( 796 ) $ 146,761 $ 14,259 $ 26,287 $ 796 ) $ 146,761 $ 14,259 $ 26,287 $ 106,215 2012 $ 146,761 $ 14,259 $ 26,287 $ 106,215 2012 Adjusted Cost $ 14,259 $ 26,287 $ 106,215 2012 Adjusted Cost Unrealized Gains 14,259 $ 26,287 $ 106,215 2012 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 3,109 $ 0 $ 0 $ Securities Cash $ 3,109 $ 0 $ 0 $ 3,109 $ $ 3,109 $ 0 $ 0 $ 3,109 $ 3,109 $ $ 0 $ 0 $ 3,109 $ 3,109 $ 0 $ $ 0 $ 3,109 $ 3,109 $ 0 $ 0 Level $ 3,109 $ 3,109 $ 0 $ 0 Level 1 : $ 3,109 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,460 1 : Money market fund 1,460 0 0 1,460 1,460 0 : Money market fund 1,460 0 0 1,460 1,460 0 0 Money market fund 1,460 0 0 1,460 1,460 0 0 Mutual market fund 1,460 0 0 1,460 1,460 0 0 Mutual fund fund 1,460 0 0 1,460 1,460 0 0 Mutual fund 2,385 1,460 0 0 1,460 1,460 0 0 Mutual fund 2,385 79 0 0 1,460 1,460 0 0 Mutual fund 2,385 79 ( 1,460 0 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 Mutual fund 2,385 79 ( 2 ) 2,462 0 2,462 0 2,385 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 2,462 0 2,462 0 Subtotal 3,845 79 ( 2 ) 3,922 0 2,462 0 Subtotal 3,845 79 ( 2 ) 3,922 1,460 0 Subtotal 3,845 79 ( 2 ) 3,922 1,460 2,462 0 3,845 79 ( 2 ) 3,922 1,460 2,462 0 Level 2 79 ( 2 ) 3,922 1,460 2,462 0 Level 2 : ( 2 ) 3,922 1,460 2,462 0 Level 2 : U.S. 2 ) 3,922 1,460 2,462 0 Level 2 : U.S. Treasury 3,922 1,460 2,462 0 Level 2 : U.S. Treasury security 20,088 2 : U.S. Treasury security 20,088 21 ( 1 ) 20,108 : U.S. Treasury security 20,088 21 ( 1 ) 20,108 2,608 Treasury security 20,088 21 ( 1 ) 20,108 2,608 3,525 13,975 20,088 21 ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency 21 ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency security ( 1 ) 20,108 2,608 3,525 13,975 U.S. agency security 19,540 1 ) 20,108 2,608 3,525 13,975 U.S. agency security 19,540 58 3,525 13,975 U.S. agency security 19,540 58 ( 1 ) 19,597 13,975 U.S. agency security 19,540 58 ( 1 ) 19,597 1,460 agency security 19,540 58 ( 1 ) 19,597 1,460 1,884 16,253 19,540 58 ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government 58 ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security ( 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security 5,483 1 ) 19,597 1,460 1,884 16,253 Non-U.S. government security 5,483 183 1,884 16,253 Non-U.S. government security 5,483 183 ( 2 ) 5,664 16,253 Non-U.S. government security 5,483 183 ( 2 ) 5,664 84 government security 5,483 183 ( 2 ) 5,664 84 1,034 4,546 5,483 183 ( 2 ) 5,664 84 1,034 4,546 Certificates of 183 ( 2 ) 5,664 84 1,034 4,546 Certificates of deposit ( 2 ) 5,664 84 1,034 4,546 Certificates of deposit and 2 ) 5,664 84 1,034 4,546 Certificates of deposit and time of deposit and time deposit 2,189 2 0 2,191 1,106 202 deposit and time deposit 2,189 2 0 2,191 1,106 202 883 and time deposit 2,189 2 0 2,191 1,106 202 883 Commercial time deposit 2,189 2 0 2,191 1,106 202 883 Commercial paper deposit 2,189 2 0 2,191 1,106 202 883 Commercial paper 2,112 2,189 2 0 2,191 1,106 202 883 Commercial paper 2,112 0 2 0 2,191 1,106 202 883 Commercial paper 2,112 0 0 1,106 202 883 Commercial paper 2,112 0 0 2,112 909 1,203 202 883 Commercial paper 2,112 0 0 2,112 909 1,203 0 883 Commercial paper 2,112 0 0 2,112 909 1,203 0 Corporate Commercial paper 2,112 0 0 2,112 909 1,203 0 Corporate security paper 2,112 0 0 2,112 909 1,203 0 Corporate security 46,261 2,112 0 0 2,112 909 1,203 0 Corporate security 46,261 568 0 0 2,112 909 1,203 0 Corporate security 46,261 568 ( 909 1,203 0 Corporate security 46,261 568 ( 8 ) 46,821 1,203 0 Corporate security 46,261 568 ( 8 ) 46,821 10 Corporate security 46,261 568 ( 8 ) 46,821 10 7,455 39,356 46,261 568 ( 8 ) 46,821 10 7,455 39,356 Municipal security 568 ( 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 ( 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 74 8 ) 46,821 10 7,455 39,356 Municipal security 5,645 74 0 10 7,455 39,356 Municipal security 5,645 74 0 5,719 0 618 7,455 39,356 Municipal security 5,645 74 0 5,719 0 618 5,101 39,356 Municipal security 5,645 74 0 5,719 0 618 5,101 Mortgage- Municipal security 5,645 74 0 5,719 0 618 5,101 Mortgage- and security 5,645 74 0 5,719 0 618 5,101 Mortgage- and asset-backed 5,645 74 0 5,719 0 618 5,101 Mortgage- and asset-backed security 74 0 5,719 0 618 5,101 Mortgage- and asset-backed security 11,948 5,101 Mortgage- and asset-backed security 11,948 66 ( 6 ) 12,008 Mortgage- and asset-backed security 11,948 66 ( 6 ) 12,008 0 asset-backed security 11,948 66 ( 6 ) 12,008 0 0 12,008 11,948 66 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 66 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 6 ) 12,008 0 0 12,008 Subtotal 113,266 972 ( 18 12,008 0 0 12,008 Subtotal 113,266 972 ( 18 ) 114,220 0 0 12,008 Subtotal 113,266 972 ( 18 ) 114,220 6,177 12,008 Subtotal 113,266 972 ( 18 ) 114,220 6,177 15,921 92,122 113,266 972 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 972 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 ( 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 $ 18 ) 114,220 6,177 15,921 92,122 Total $ 120,220 $ 1,051 6,177 15,921 92,122 Total $ 120,220 $ 1,051 $ ( 20 92,122 Total $ 120,220 $ 1,051 $ ( 20 ) $ 120,220 $ 1,051 $ ( 20 ) $ 121,251 $ 10,746 $ ( 20 ) $ 121,251 $ 10,746 $ 18,383 $ 20 ) $ 121,251 $ 10,746 $ 18,383 $ 92,122 The $ 121,251 $ 10,746 $ 18,383 $ 92,122 The net unrealized $ 10,746 $ 18,383 $ 92,122 The net unrealized loss a unrealized loss a of September 28 , 2013 and the net a of September 28 , 2013 and the net unrealized gain unrealized gain a of September 29 , 2012 are related primarily a of September 29 , 2012 are related primarily to long-term and duration management . During 2013 , 2012 and 2011 , management . During 2013 , 2012 and 2011 , the net During 2013 , 2012 and 2011 , the net realized gain one to five year . 57 Table of Contents As of of Contents As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , gross unrealized 2013 and September 29 , 2012 , gross unrealized loss related a continuous loss position for 12 month or longer were not significant . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company considered the s cost basis . During 2013 , 2012 and 2011 the basis . During 2013 , 2012 and 2011 the Company did During 2013 , 2012 and 2011 the Company did not recognize , typically for up to 12 month . To help protect which the derivative relates . 58 Table of Contents The Company net deferred loss of $ 175 million and $ 240 million $ 175 million and $ 240 million associated with cash flow in AOCI a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , respectively . 2013 and September 29 , 2012 , respectively . Deferred gain rate transaction a of September 28 , 2013 are expected to a of September 28 , 2013 are expected to occur within are expected to occur within 12 month and five year , discontinued cash flow hedge during 2013 , 2012 and 2011 . flow hedge during 2013 , 2012 and 2011 . The Company during 2013 , 2012 and 2011 . The Company ’ s not significant a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 . The ineffective 2013 and September 29 , 2012 . The ineffective portion of instrument wa not significant during 2013 , 2012 and 2011 , not significant during 2013 , 2012 and 2011 , respectively . during 2013 , 2012 and 2011 , respectively . These amount derivative instrument a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 2012 Notional Principal Credit Risk in million ) : 2013 2012 Notional Principal Credit Risk Amounts : Foreign exchange contract $ 35,013 $ 159 $ 41,970 $ exchange contract $ 35,013 $ 159 $ 41,970 $ 140 Interest $ 35,013 $ 159 $ 41,970 $ 140 Interest rate contract $ 159 $ 41,970 $ 140 Interest rate contract $ 3,000 140 Interest rate contract $ 3,000 $ 44 $ 0 $ rate contract $ 3,000 $ 44 $ 0 $ 0 Instruments $ 3,000 $ 44 $ 0 $ 0 Instruments not designated $ 44 $ 0 $ 0 Instruments not designated a accounting : Foreign exchange contract $ 16,131 $ 25 $ 13,403 $ exchange contract $ 16,131 $ 25 $ 13,403 $ 12 The $ 16,131 $ 25 $ 13,403 $ 12 The notional principal $ 25 $ 13,403 $ 12 The notional principal amount for life of the instrument . 59 Table of Contents The Company value . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , the Company 2013 and September 29 , 2012 , the Company posted $ , the Company posted $ 164 million and $ 278 million $ 164 million and $ 278 million , respectively , of additional collateral a of September 28 , 2013 or September 29 a of September 28 , 2013 or September 29 , 2012 28 , 2013 or September 29 , 2012 . The following 2013 or September 29 , 2012 . The following table show Balance Sheets a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 Fair Value of Derivatives Designated : Foreign exchange contract $ 145 $ 25 $ 170 Interest exchange contract $ 145 $ 25 $ 170 Interest rate contract $ 145 $ 25 $ 170 Interest rate contract $ 44 170 Interest rate contract $ 44 $ 0 $ 44 Derivative rate contract $ 44 $ 0 $ 44 Derivative liability ( $ 44 $ 0 $ 44 Derivative liability ( b ) : Foreign exchange contract $ 389 $ 46 $ 435 2012 exchange contract $ 389 $ 46 $ 435 2012 Fair Value $ 389 $ 46 $ 435 2012 Fair Value of Derivatives 389 $ 46 $ 435 2012 Fair Value of Derivatives Designated : Foreign exchange contract $ 138 $ 12 $ 150 Derivative exchange contract $ 138 $ 12 $ 150 Derivative liability ( $ 138 $ 12 $ 150 Derivative liability ( b ) : Foreign exchange contract $ 516 $ 41 $ 557 ( exchange contract $ 516 $ 41 $ 557 ( a ) $ 516 $ 41 $ 557 ( a ) The fair asset is measured using Level 2 fair value input and is liability is measured using Level 2 fair value input and is the Consolidated Balance Sheets . 60 Table of Contents The following for the year ended September 28 , 2013 and September 29 year ended September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : Excluded from Effectiveness Testing September 28 , 2013 September 29 , Effectiveness Testing September 28 , 2013 September 29 , 2012 September September 28 , 2013 September 29 , 2012 September 28 , , 2013 September 29 , 2012 September 28 , 2013 ( September 29 , 2012 September 28 , 2013 ( a ) , 2012 September 28 , 2013 ( a ) September 29 2013 ( a ) September 29 , 2012 ( b ) a ) September 29 , 2012 ( b ) Location September ( b ) Location September 28 , 2013 September 29 , ) Location September 28 , 2013 September 29 , 2012 Cash September 28 , 2013 September 29 , 2012 Cash flow hedge , 2013 September 29 , 2012 Cash flow hedge : Foreign : Foreign exchange contract $ 891 $ ( 175 ) $ contract $ 891 $ ( 175 ) $ 676 $ 607 $ ( 175 ) $ 676 $ 607 Other income/ ( 175 ) $ 676 $ 607 Other income/ ( expense ) ) , net $ ( 301 ) $ ( 658 ) ( 301 ) $ ( 658 ) Interest rate contract 12 658 ) Interest rate contract 12 0 ( 6 ) 0 ) Interest rate contract 12 0 ( 6 ) 0 Other rate contract 12 0 ( 6 ) 0 Other income/ ( 12 0 ( 6 ) 0 Other income/ ( expense ) ( expense ) , net 0 0 Net investment hedge : expense ) , net 0 0 Net investment hedge : Foreign hedge : Foreign exchange contract 143 ( 5 ) 0 0 Foreign exchange contract 143 ( 5 ) 0 0 Other income/ contract 143 ( 5 ) 0 0 Other income/ ( expense 143 ( 5 ) 0 0 Other income/ ( expense ) ( expense ) , net 1 3 Total $ 1,046 $ expense ) , net 1 3 Total $ 1,046 $ ( net 1 3 Total $ 1,046 $ ( 180 ) $ Total $ 1,046 $ ( 180 ) $ 670 $ 607 $ ( 180 ) $ 670 $ 607 $ ( 300 180 ) $ 670 $ 607 $ ( 300 ) $ 670 $ 607 $ ( 300 ) $ ( 655 ) ( 300 ) $ ( 655 ) ( a ) Includes hedge , of which $ 44 million , $ 632 million $ 44 million , $ 632 million and $ ( 6 632 million and $ ( 6 ) million were recognized within for the year ended September 28 , 2013 . ( b year ended September 28 , 2013 . ( b ) Includes hedge , of which $ 537 million and $ 70 million $ 537 million and $ 70 million were recognized within net for the year ended September 29 , 2012 . Accounts Receivable year ended September 29 , 2012 . Accounts Receivable Trade Receivables arrangement . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had two had two customer that represented 10 % or more of total one of which accounted for 13 % and the other 10 13 % and the other 10 % . As of September % . As of September 29 , 2012 , the Company As of September 29 , 2012 , the Company had two had two customer that represented 10 % or more of total one of which accounted for 14 % and the other 10 14 % and the other 10 % . The Company ’ cellular network carrier accounted for 68 % and 66 % of accounted for 68 % and 66 % of trade receivables a trade receivables a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , respectively . 2013 and September 29 , 2012 , respectively . The addition allowance for doubtful account during 2013 , 2012 and 2011 were doubtful account during 2013 , 2012 and 2011 were not significant during 2013 , 2012 and 2011 were not significant . Vendor ’ s vendor accounted for 47 % , 21 % and accounted for 47 % , 21 % and 15 % of % , 21 % and 15 % of total non-trade receivables non-trade receivables a of September 28 , 2013 and vendor non-trade a of September 28 , 2013 and vendor non-trade receivables from ’ s vendor accounted for 45 % , 21 % and accounted for 45 % , 21 % and 12 % of % , 21 % and 12 % of total non-trade receivables non-trade receivables a of September 29 , 2012 . The Company a of September 29 , 2012 . The Company doe not of cost of sale . 61 Table of Contents Note 3 61 Table of Contents Note 3 – Consolidated Financial Statement Details sheet detail a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : in million ) : Inventories 2013 2012 Components $ 683 $ million ) : Inventories 2013 2012 Components $ 683 $ 124 Inventories 2013 2012 Components $ 683 $ 124 Finished good 1,081 2012 Components $ 683 $ 124 Finished good 1,081 667 Total 683 $ 124 Finished good 1,081 667 Total inventory $ 1,764 $ 124 Finished good 1,081 667 Total inventory $ 1,764 $ 1,081 667 Total inventory $ 1,764 $ 791 Property , Plant Total inventory $ 1,764 $ 791 Property , Plant and Equipment Property , Plant and Equipment 2013 2012 Land and building $ , Plant and Equipment 2013 2012 Land and building $ 3,309 2012 Land and building $ 3,309 $ 2,439 Machinery , equipment and building $ 3,309 $ 2,439 Machinery , equipment and internal-use , equipment and internal-use software 21,242 15,984 Leasehold improvement 3,968 3,464 equipment and internal-use software 21,242 15,984 Leasehold improvement 3,968 3,464 Gross software 21,242 15,984 Leasehold improvement 3,968 3,464 Gross property , plant 21,242 15,984 Leasehold improvement 3,968 3,464 Gross property , plant and property , plant and equipment 28,519 21,887 Accumulated depreciation and amortization , plant and equipment 28,519 21,887 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 11,922 ) ( 6,435 ) Net amortization ( 11,922 ) ( 6,435 ) Net property , plant , plant and equipment $ 16,597 $ 15,452 Accrued Expenses 2013 and equipment $ 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued 16,597 $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related $ 15,452 Accrued Expenses 2013 2012 Accrued warranty and related cost warranty and related cost $ 2,967 $ 1,638 Accrued tax 1,200 related cost $ 2,967 $ 1,638 Accrued tax 1,200 1,535 Deferred 2,967 $ 1,638 Accrued tax 1,200 1,535 Deferred margin on component $ 1,638 Accrued tax 1,200 1,535 Deferred margin on component sale Deferred margin on component sale 1,262 1,492 Accrued marketing and selling margin on component sale 1,262 1,492 Accrued marketing and selling expense Accrued marketing and selling expense 1,291 910 Accrued compensation and employee marketing and selling expense 1,291 910 Accrued compensation and employee benefit Accrued compensation and employee benefit 959 735 Other current liability 6,177 compensation and employee benefit 959 735 Other current liability 6,177 5,104 959 735 Other current liability 6,177 5,104 Total accrued expense $ 735 Other current liability 6,177 5,104 Total accrued expense $ 13,856 5,104 Total accrued expense $ 13,856 $ 11,414 Non-Current Liabilities 2013 accrued expense $ 13,856 $ 11,414 Non-Current Liabilities 2013 2012 Deferred 13,856 $ 11,414 Non-Current Liabilities 2013 2012 Deferred tax liability $ $ 11,414 Non-Current Liabilities 2013 2012 Deferred tax liability $ 16,489 2012 Deferred tax liability $ 16,489 $ 13,847 Other non-current liability tax liability $ 16,489 $ 13,847 Other non-current liability 3,719 2,817 $ 13,847 Other non-current liability 3,719 2,817 Total other non-current liability 13,847 Other non-current liability 3,719 2,817 Total other non-current liability $ Total other non-current liability $ 20,208 $ 16,664 Other Income and non-current liability $ 20,208 $ 16,664 Other Income and Expense The other income and expense for 2013 , 2012 and 2011 ( and expense for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 2012 2011 Interest and dividend in million ) : 2013 2012 2011 Interest and dividend income million ) : 2013 2012 2011 Interest and dividend income $ Interest and dividend income $ 1,616 $ 1,088 $ 519 Interest dividend income $ 1,616 $ 1,088 $ 519 Interest expense ( $ 1,616 $ 1,088 $ 519 Interest expense ( 136 ) $ 519 Interest expense ( 136 ) 0 0 Other expense Interest expense ( 136 ) 0 0 Other expense , net expense ( 136 ) 0 0 Other expense , net ( Other expense , net ( 324 ) ( 566 ) ( net ( 324 ) ( 566 ) ( 104 ) Total ) ( 566 ) ( 104 ) Total other income/ ( expense ) , net $ 1,156 $ 522 $ 415 62 , net $ 1,156 $ 522 $ 415 62 Table of $ 1,156 $ 522 $ 415 62 Table of Contents Note 1,156 $ 522 $ 415 62 Table of Contents Note 4 62 Table of Contents Note 4 – Goodwill and Other Intangible asset balance a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 2012 Gross Carrying Amount Accumulated in million ) : 2013 2012 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 6,081 $ ( 2,002 ) $ asset $ 6,081 $ ( 2,002 ) $ 4,079 $ 5,166 $ ( 2,002 ) $ 4,079 $ 5,166 $ ( 1,042 2,002 ) $ 4,079 $ 5,166 $ ( 1,042 ) $ 4,079 $ 5,166 $ ( 1,042 ) $ 4,124 Indefinite lived $ ( 1,042 ) $ 4,124 Indefinite lived and non-amortizable trademark Indefinite lived and non-amortizable trademark 100 0 100 100 0 100 lived and non-amortizable trademark 100 0 100 100 0 100 Total and non-amortizable trademark 100 0 100 100 0 100 Total acquired non-amortizable trademark 100 0 100 100 0 100 Total acquired intangible trademark 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset $ Total acquired intangible asset $ 6,181 $ ( 2,002 ) $ asset $ 6,181 $ ( 2,002 ) $ 4,179 $ 5,266 $ ( 2,002 ) $ 4,179 $ 5,266 $ ( 1,042 2,002 ) $ 4,179 $ 5,266 $ ( 1,042 ) $ 4,179 $ 5,266 $ ( 1,042 ) $ 4,224 During 2013 $ ( 1,042 ) $ 4,224 During 2013 and 2012 , 1,042 ) $ 4,224 During 2013 and 2012 , the Company $ 4,224 During 2013 and 2012 , the Company completed various various business acquisition . In 2013 , the aggregate cash consideration cash acquired , wa $ 496 million , of which $ million , of which $ 419 million wa allocated to goodwill allocated to goodwill , $ 179 million to acquired intangible asset acquired intangible asset and $ 102 million to net liability assumed net liability assumed . In 2012 , the aggregate cash consideration cash acquired , wa $ 350 million , of which $ million , of which $ 245 million wa allocated to goodwill allocated to goodwill , $ 113 million to acquired intangible asset acquired intangible asset and $ 8 million to net liability assumed amount of goodwill wa $ 1.6 billion and $ 1.1 billion $ 1.6 billion and $ 1.1 billion a of September 28 1.1 billion a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , respectively . 2013 and September 29 , 2012 , respectively . The Company have any goodwill impairment during 2013 , 2012 or 2011 . goodwill impairment during 2013 , 2012 or 2011 . Amortization expense during 2013 , 2012 or 2011 . Amortization expense related to acquired intangible asset wa $ 960 million , $ 605 million $ 960 million , $ 605 million and $ 192 million $ 605 million and $ 192 million in 2013 , 2012 and $ 192 million in 2013 , 2012 and 2011 , 192 million in 2013 , 2012 and 2011 , respectively . in 2013 , 2012 and 2011 , respectively . As of respectively . As of September 28 , 2013 the remaining weighted-average As of September 28 , 2013 the remaining weighted-average amortization period for acquired intangible asset is 4.5 year . The expected annual intangible asset a of September 28 , 2013 , is a a of September 28 , 2013 , is a follows ( ( in million ) : 2014 $ 1,050 2015 985 2016 million ) : 2014 $ 1,050 2015 985 2016 833 2017 ) : 2014 $ 1,050 2015 985 2016 833 2017 606 : 2014 $ 1,050 2015 985 2016 833 2017 606 2018 2014 $ 1,050 2015 985 2016 833 2017 606 2018 434 $ 1,050 2015 985 2016 833 2017 606 2018 434 Thereafter 1,050 2015 985 2016 833 2017 606 2018 434 Thereafter 171 2015 985 2016 833 2017 606 2018 434 Thereafter 171 Total 985 2016 833 2017 606 2018 434 Thereafter 171 Total $ 2016 833 2017 606 2018 434 Thereafter 171 Total $ 4,079 2017 606 2018 434 Thereafter 171 Total $ 4,079 63 Table 434 Thereafter 171 Total $ 4,079 63 Table of Contents Note Thereafter 171 Total $ 4,079 63 Table of Contents Note 5 63 Table of Contents Note 5 – Income Taxes The provision provision for income tax for 2013 , 2012 and 2011 , income tax for 2013 , 2012 and 2011 , consisted of for 2013 , 2012 and 2011 , consisted of the following ( in million ) : 2013 2012 2011 Federal : Current in million ) : 2013 2012 2011 Federal : Current $ million ) : 2013 2012 2011 Federal : Current $ 9,334 2011 Federal : Current $ 9,334 $ 7,240 $ 3,884 Deferred : Current $ 9,334 $ 7,240 $ 3,884 Deferred 1,878 5,018 $ 9,334 $ 7,240 $ 3,884 Deferred 1,878 5,018 2,998 11,212 $ 7,240 $ 3,884 Deferred 1,878 5,018 2,998 11,212 12,258 6,882 7,240 $ 3,884 Deferred 1,878 5,018 2,998 11,212 12,258 6,882 State $ 3,884 Deferred 1,878 5,018 2,998 11,212 12,258 6,882 State : 3,884 Deferred 1,878 5,018 2,998 11,212 12,258 6,882 State : Current Deferred 1,878 5,018 2,998 11,212 12,258 6,882 State : Current 1,084 1,878 5,018 2,998 11,212 12,258 6,882 State : Current 1,084 1,182 12,258 6,882 State : Current 1,084 1,182 762 Deferred ( 311 6,882 State : Current 1,084 1,182 762 Deferred ( 311 ) State : Current 1,084 1,182 762 Deferred ( 311 ) ( 1,084 1,182 762 Deferred ( 311 ) ( 123 ) 37 Deferred ( 311 ) ( 123 ) 37 773 1,059 799 311 ) ( 123 ) 37 773 1,059 799 Foreign : ) ( 123 ) 37 773 1,059 799 Foreign : Current ( 123 ) 37 773 1,059 799 Foreign : Current 1,559 123 ) 37 773 1,059 799 Foreign : Current 1,559 1,203 1,059 799 Foreign : Current 1,559 1,203 769 Deferred ( 426 799 Foreign : Current 1,559 1,203 769 Deferred ( 426 ) Foreign : Current 1,559 1,203 769 Deferred ( 426 ) ( 1,559 1,203 769 Deferred ( 426 ) ( 490 ) ( Deferred ( 426 ) ( 490 ) ( 167 ) 1,133 ) ( 490 ) ( 167 ) 1,133 713 602 Provision 490 ) ( 167 ) 1,133 713 602 Provision for income ) ( 167 ) 1,133 713 602 Provision for income tax ( 167 ) 1,133 713 602 Provision for income tax $ Provision for income tax $ 13,118 $ 14,030 $ 8,283 The income tax $ 13,118 $ 14,030 $ 8,283 The foreign provision $ 13,118 $ 14,030 $ 8,283 The foreign provision for income foreign pre-tax earnings of $ 30.5 billion , $ 36.8 billion $ 30.5 billion , $ 36.8 billion and $ 24.0 billion $ 36.8 billion and $ 24.0 billion in 2013 , 2012 and $ 24.0 billion in 2013 , 2012 and 2011 , 24.0 billion in 2013 , 2012 and 2011 , respectively . in 2013 , 2012 and 2011 , respectively . The Company a statutory tax rate of 12.5 % . As of September % . As of September 28 , 2013 , U.S. income As of September 28 , 2013 , U.S. income tax have a cumulative total of $ 54.4 billion of such earnings . estimated to be approximately $ 18.4 billion . As of September billion . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , $ 111.3 2013 and September 29 , 2012 , $ 111.3 billion and 29 , 2012 , $ 111.3 billion and $ 82.6 billion $ 111.3 billion and $ 82.6 billion , respectively , of federal income tax rate ( 35 % in 2013 , 2012 rate ( 35 % in 2013 , 2012 and 2011 ) 35 % in 2013 , 2012 and 2011 ) to income in 2013 , 2012 and 2011 ) to income before provision provision for income tax for 2013 , 2012 and 2011 , income tax for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Computed expected tax in million ) : 2013 2012 2011 Computed expected tax $ million ) : 2013 2012 2011 Computed expected tax $ 17,554 2011 Computed expected tax $ 17,554 $ 19,517 $ 11,973 State expected tax $ 17,554 $ 19,517 $ 11,973 State tax , $ 17,554 $ 19,517 $ 11,973 State tax , net of , net of federal effect 508 677 552 Indefinitely invested earnings net of federal effect 508 677 552 Indefinitely invested earnings of of federal effect 508 677 552 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 4,614 ) ( 5,895 ) ( subsidiary ( 4,614 ) ( 5,895 ) ( 3,898 ) Research ) ( 5,895 ) ( 3,898 ) Research and development credit development credit , net ( 287 ) ( 103 ) ( net ( 287 ) ( 103 ) ( 167 ) Domestic ) ( 103 ) ( 167 ) Domestic production activity deduction Domestic production activity deduction ( 308 ) ( 328 ) ( deduction ( 308 ) ( 328 ) ( 168 ) Other ) ( 328 ) ( 168 ) Other 265 162 ( ) ( 168 ) Other 265 162 ( 9 ) Provision ( 168 ) Other 265 162 ( 9 ) Provision for ) Other 265 162 ( 9 ) Provision for income tax Provision for income tax $ 13,118 $ 14,030 $ 8,283 Effective income tax $ 13,118 $ 14,030 $ 8,283 Effective tax rate $ 13,118 $ 14,030 $ 8,283 Effective tax rate 26.2 % $ 8,283 Effective tax rate 26.2 % 25.2 % 24.2 % Effective tax rate 26.2 % 25.2 % 24.2 % The Company rate 26.2 % 25.2 % 24.2 % The Company ’ s tax effect of the difference 64 Table of Contents between the from equity award of $ 643 million , $ 1.4 billion $ 643 million , $ 1.4 billion and $ 1.1 billion $ 1.4 billion and $ 1.1 billion in 2013 , 2012 and $ 1.1 billion in 2013 , 2012 and 2011 , 1.1 billion in 2013 , 2012 and 2011 , respectively , in 2013 , 2012 and 2011 , respectively , which were stock . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , the significant 2013 and September 29 , 2012 , the significant component of ( in million ) : 2013 2012 Deferred tax asset : in million ) : 2013 2012 Deferred tax asset : Accrued liability and other reserve $ 1,892 $ 1,346 Deferred revenue 1,475 other reserve $ 1,892 $ 1,346 Deferred revenue 1,475 1,145 Basis 1,892 $ 1,346 Deferred revenue 1,475 1,145 Basis of capital asset $ 1,346 Deferred revenue 1,475 1,145 Basis of capital asset and of capital asset and investment 1,020 451 Share-based compensation 458 411 capital asset and investment 1,020 451 Share-based compensation 458 411 Other investment 1,020 451 Share-based compensation 458 411 Other 1,029 947 Total 1,020 451 Share-based compensation 458 411 Other 1,029 947 Total deferred Share-based compensation 458 411 Other 1,029 947 Total deferred tax asset compensation 458 411 Other 1,029 947 Total deferred tax asset 5,874 947 Total deferred tax asset 5,874 4,300 Less valuation allowance 0 Total deferred tax asset 5,874 4,300 Less valuation allowance 0 0 5,874 4,300 Less valuation allowance 0 0 Deferred tax asset , 4,300 Less valuation allowance 0 0 Deferred tax asset , net , net of valuation allowance 5,874 4,300 Deferred tax liability : net of valuation allowance 5,874 4,300 Deferred tax liability : Unremitted Unremitted earnings of foreign subsidiary 18,044 14,712 Other 112 456 Total earnings of foreign subsidiary 18,044 14,712 Other 112 456 Total deferred foreign subsidiary 18,044 14,712 Other 112 456 Total deferred tax liability subsidiary 18,044 14,712 Other 112 456 Total deferred tax liability 18,156 456 Total deferred tax liability 18,156 15,168 Net deferred tax liability Total deferred tax liability 18,156 15,168 Net deferred tax liability $ deferred tax liability $ ( 12,282 ) $ ( 10,868 ) ( 12,282 ) $ ( 10,868 ) Deferred tax asset and benefit that is greater than 50 % likely of being realized Sheets . As of September 28 , 2013 , the total As of September 28 , 2013 , the total amount of unrecognized tax benefit wa $ 2.7 billion , of which $ billion , of which $ 1.4 billion , if recognized , rate . As of September 29 , 2012 , the total As of September 29 , 2012 , the total amount of unrecognized tax benefit wa $ 2.1 billion , of which $ billion , of which $ 889 million , if recognized , s effective tax rate . 65 Table of Contents The aggregate interest and penalty , for 2013 , 2012 and 2011 , penalty , for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Beginning Balance $ in million ) : 2013 2012 2011 Beginning Balance $ 2,062 million ) : 2013 2012 2011 Beginning Balance $ 2,062 $ 2012 2011 Beginning Balance $ 2,062 $ 1,375 $ 943 Increases Beginning Balance $ 2,062 $ 1,375 $ 943 Increases related to $ 2,062 $ 1,375 $ 943 Increases related to tax position taken during a prior year 745 340 49 Decreases related to during a prior year 745 340 49 Decreases related to tax a prior year 745 340 49 Decreases related to tax position during a prior year ( 118 ) ( 107 ) ( year ( 118 ) ( 107 ) ( 39 ) Increases ) ( 107 ) ( 39 ) Increases related to tax taken during the current year 626 467 425 Decreases related to during the current year 626 467 425 Decreases related to settlement the current year 626 467 425 Decreases related to settlement with settlement with taxing authority ( 592 ) ( 3 ) 0 authority ( 592 ) ( 3 ) 0 Decreases related to 592 ) ( 3 ) 0 Decreases related to expiration of of statute of limitation ( 9 ) ( 10 ) ( limitation ( 9 ) ( 10 ) ( 3 ) Ending ) ( 10 ) ( 3 ) Ending Balance $ 2,714 3 ) Ending Balance $ 2,714 $ 2,062 $ 1,375 The Ending Balance $ 2,714 $ 2,062 $ 1,375 The Company includes $ 2,714 $ 2,062 $ 1,375 The Company includes interest and tax . As of September 28 , 2013 and September 29 As of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , the total 2013 and September 29 , 2012 , the total amount of and penalty accrued wa $ 590 million and $ 401 million $ 590 million and $ 401 million , respectively , which interest and penalty expense in 2013 , 2012 and 2011 of penalty expense in 2013 , 2012 and 2011 of $ 189 in 2013 , 2012 and 2011 of $ 189 million , 2012 and 2011 of $ 189 million , $ 140 million $ 189 million , $ 140 million and $ 14 million $ 140 million and $ 14 million , respectively . The , all year prior to 2004 are closed . The Internal tax return for the year 2004 through 2006 and proposed certain for the year 2004 through 2006 and proposed certain adjustment . is currently examining the year 2007 through 2012 . In addition examining the year 2007 through 2012 . In addition , the , the year subsequent to 1989 and 2002 , respectively , year subsequent to 1989 and 2002 , respectively , generally remain tax benefit by between $ 125 million and $ 225 million $ 125 million and $ 225 million in the next 12 225 million in the next 12 month . Note 6 – next 12 month . Note 6 – Long-Term Debt In May – Long-Term Debt In May 2013 , the Company issued floating- aggregate principal amount of $ 17.0 billion ( collectively the “ the Notes a of September 28 , 2013 , are a a of September 28 , 2013 , are a follows : Rate Floating-rate note , due 2016 $ 1,000 0.51 % Floating-rate note , due 2016 $ 1,000 0.51 % Floating-rate note , , due 2016 $ 1,000 0.51 % Floating-rate note , due % Floating-rate note , due 2018 2,000 1.10 % Fixed-rate 0.45 Floating-rate note , due 2018 2,000 1.10 % Fixed-rate 0.45 % note , due 2018 2,000 1.10 % Fixed-rate 0.45 % note 2018 2,000 1.10 % Fixed-rate 0.45 % note due 2016 1,500 Fixed-rate 0.45 % note due 2016 1,500 0.51 % Fixed-rate 1.00 0.45 % note due 2016 1,500 0.51 % Fixed-rate 1.00 % % note due 2016 1,500 0.51 % Fixed-rate 1.00 % note 2016 1,500 0.51 % Fixed-rate 1.00 % note due 2018 4,000 Fixed-rate 1.00 % note due 2018 4,000 1.08 % Fixed-rate 2.40 1.00 % note due 2018 4,000 1.08 % Fixed-rate 2.40 % % note due 2018 4,000 1.08 % Fixed-rate 2.40 % note 2018 4,000 1.08 % Fixed-rate 2.40 % note due 2023 5,500 Fixed-rate 2.40 % note due 2023 5,500 2.44 % Fixed-rate 3.85 2.40 % note due 2023 5,500 2.44 % Fixed-rate 3.85 % % note due 2023 5,500 2.44 % Fixed-rate 3.85 % note 2023 5,500 2.44 % Fixed-rate 3.85 % note due 2043 3,000 Fixed-rate 3.85 % note due 2043 3,000 3.91 % Total $ 3.85 % note due 2043 3,000 3.91 % Total $ 17,000 % note due 2043 3,000 3.91 % Total $ 17,000 66 3,000 3.91 % Total $ 17,000 66 Table of Contents The 3.91 % Total $ 17,000 66 Table of Contents The floating-rate Contents The floating-rate note due 2016 and 2018 bear interest at floating-rate note due 2016 and 2018 bear interest at the three-month “ LIBOR ” ) plus 0.05 % and 0.25 % , ) plus 0.05 % and 0.25 % , respectively . To aggregate notional amount of $ 3.0 billion designated a cash flow . The Company recognized $ 136 million of interest expense for for the year ended September 28 , 2013 . As of year ended September 28 , 2013 . As of September 28 2013 . As of September 28 , 2013 , the aggregate As of September 28 , 2013 , the aggregate unamortized discount ’ s Notes wa $ 40 million . Future principal payment s Notes a of September 28 , 2013 , are a a of September 28 , 2013 , are a follows ( ( in million ) : 2014 $ 0 2015 0 2016 million ) : 2014 $ 0 2015 0 2016 2,500 2017 ) : 2014 $ 0 2015 0 2016 2,500 2017 0 : 2014 $ 0 2015 0 2016 2,500 2017 0 2018 2014 $ 0 2015 0 2016 2,500 2017 0 2018 6,000 $ 0 2015 0 2016 2,500 2017 0 2018 6,000 Thereafter 0 2015 0 2016 2,500 2017 0 2018 6,000 Thereafter 8,500 2015 0 2016 2,500 2017 0 2018 6,000 Thereafter 8,500 Total 0 2016 2,500 2017 0 2018 6,000 Thereafter 8,500 Total $ 2016 2,500 2017 0 2018 6,000 Thereafter 8,500 Total $ 17,000 2017 0 2018 6,000 Thereafter 8,500 Total $ 17,000 As of 6,000 Thereafter 8,500 Total $ 17,000 As of September 28 , $ 17,000 As of September 28 , 2013 , the fair As of September 28 , 2013 , the fair value of Notes , based on Level 2 input , wa $ 15.9 2 input , wa $ 15.9 billion . Note 7 – $ 15.9 billion . Note 7 – Shareholders ’ Equity Preferred period presented a follows : 2013 Dividends Per Share Amount ( million ) First quarter $ 2.65 $ 2,486 Second quarter $ First quarter $ 2.65 $ 2,486 Second quarter $ 2.65 2,490 $ 2,486 Second quarter $ 2.65 2,490 Third quarter $ 3.05 2,486 Second quarter $ 2.65 2,490 Third quarter $ 3.05 2,789 2.65 2,490 Third quarter $ 3.05 2,789 Fourth quarter $ 3.05 2,490 Third quarter $ 3.05 2,789 Fourth quarter $ 3.05 2,763 3.05 2,789 Fourth quarter $ 3.05 2,763 $ 10,528 The Company 2,789 Fourth quarter $ 3.05 2,763 $ 10,528 The Company paid quarter $ 3.05 2,763 $ 10,528 The Company paid cash dividend paid cash dividend of $ 2.65 per share , totaling $ per share , totaling $ 2.5 billion , during the fourth during the fourth quarter of 2012 . Future dividend are subject Board of Directors . In 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ s common stock beginning in 2013 . In April 2013 , in 2013 . In April 2013 , the Company ’ s repurchase program authorization from $ 10 billion to $ 60 billion $ 10 billion to $ 60 billion , of which $ billion , of which $ 23.0 billion had been utilized 67 23.0 billion had been utilized 67 Table of Contents a of of Contents a of September 28 , 2013 . The Company a of September 28 , 2013 . The Company ’ s under plan complying with Rule 10b5-1 of the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the ” ) . In August 2012 , the Company entered into to purchase up to $ 1.95 billion of the Company ’ ’ s common stock in 2013 . In the first quarter In the first quarter of 2013 , 2.6 million share were first quarter of 2013 , 2.6 million share were initially delivered the Company . In April 2013 , the purchase period for ASR ended and an additional 1.5 million share were delivered to Company . In total , 4.1 million share were delivered under average repurchase price of $ 478.20 per share . The share the up-front payment of $ 1.95 billion wa accounted for a in the first quarter of 2013 . In April 2013 , of 2013 . In April 2013 , the Company entered into to purchase up to $ 12 billion of the Company ’ for up-front payment totaling $ 12 billion , the financial institution , which will end during 2014 . The total number of During the third quarter of 2013 , 23.5 million share were third quarter of 2013 , 23.5 million share were initially delivered The up-front payment of $ 12 billion were accounted for a a derivative instrument . During 2013 , the Company repurchased 19.4 2013 , the Company repurchased 19.4 million share of it common an average price of $ 464.11 per share for a total for a total of $ 9.0 billion . These share were retired upon repurchase . Note 8 – Comprehensive Income Comprehensive income tax , a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 2012 Cumulative foreign currency translation in million ) : 2013 2012 Cumulative foreign currency translation $ foreign currency translation $ ( 105 ) $ 8 Net unrecognized $ ( 105 ) $ 8 Net unrecognized gains/losses on derivative gains/losses on derivative instrument ( 175 ) ( 240 ) Net instrument ( 175 ) ( 240 ) Net unrealized gains/losses on gains/losses on marketable security ( 191 ) 731 Accumulated other comprehensive marketable security ( 191 ) 731 Accumulated other comprehensive income/ ( ( loss ) $ ( 471 ) $ 499 68 Table $ ( 471 ) $ 499 68 Table of Contents Note ( 471 ) $ 499 68 Table of Contents Note 9 68 Table of Contents Note 9 – Benefit Plans Stock Plans – Benefit Plans Stock Plans 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) is a including executive officer . The 2003 Plan permit the granting of . Options granted under the 2003 Plan generally expire seven to . RSUs granted under the 2003 Plan generally vest over two an award granted under the 2003 Plan ( other than a Officer , granted under the 2003 Plan have dividend equivalent right vest . As of September 28 , 2013 , approximately 28.3 As of September 28 , 2013 , approximately 28.3 million share 28 , 2013 , approximately 28.3 million share were reserved for for future issuance under the 2003 Plan . 1997 Director Stock under the 2003 Plan . 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . All RSUs Plan expires November 9 , 2019 . All RSUs granted under DER . As of September 28 , 2013 , approximately 176,000 As of September 28 , 2013 , approximately 176,000 share were 28 , 2013 , approximately 176,000 share were reserved for future the Director Plan . Rule 10b5-1 Trading Plans During the fourth During the fourth quarter of 2013 , executive officer Timothy D. place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 28 , 2013 , approximately 1.8 As of September 28 , 2013 , approximately 1.8 million share 28 , 2013 , approximately 1.8 million share were reserved for under the Purchase Plan . 69 Table of Contents 401 ( . 69 Table of Contents 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan ( ) Plan ( the “ 401 ( k ) Plan ” deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 17,500 for calendar year 2013 ) $ 17,500 for calendar year 2013 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 135 million , $ 114 million $ 135 million , $ 114 million and $ 90 million $ 114 million and $ 90 million in 2013 , 2012 and $ 90 million in 2013 , 2012 and 2011 , 90 million in 2013 , 2012 and 2011 , respectively . in 2013 , 2012 and 2011 , respectively . Restricted Stock activity and related information for 2013 , 2012 and 2011 , related information for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows : million ) Balance at September 25 , 2010 13,034 $ 165.63 Balance at September 25 , 2010 13,034 $ 165.63 RSUs granted at September 25 , 2010 13,034 $ 165.63 RSUs granted 6,667 25 , 2010 13,034 $ 165.63 RSUs granted 6,667 $ 312.63 13,034 $ 165.63 RSUs granted 6,667 $ 312.63 RSUs vested ( 165.63 RSUs granted 6,667 $ 312.63 RSUs vested ( 4,513 ) $ 312.63 RSUs vested ( 4,513 ) $ 168.08 RSUs cancelled vested ( 4,513 ) $ 168.08 RSUs cancelled ( 742 ) $ 168.08 RSUs cancelled ( 742 ) $ 189.08 Balance at cancelled ( 742 ) $ 189.08 Balance at September 24 , $ 189.08 Balance at September 24 , 2011 14,446 $ 231.49 Balance at September 24 , 2011 14,446 $ 231.49 RSUs granted at September 24 , 2011 14,446 $ 231.49 RSUs granted 7,799 24 , 2011 14,446 $ 231.49 RSUs granted 7,799 $ 431.35 14,446 $ 231.49 RSUs granted 7,799 $ 431.35 RSUs vested ( 231.49 RSUs granted 7,799 $ 431.35 RSUs vested ( 6,305 ) $ 431.35 RSUs vested ( 6,305 ) $ 205.27 RSUs cancelled vested ( 6,305 ) $ 205.27 RSUs cancelled ( 935 ) $ 205.27 RSUs cancelled ( 935 ) $ 256.01 Balance at cancelled ( 935 ) $ 256.01 Balance at September 29 , $ 256.01 Balance at September 29 , 2012 15,005 $ 344.87 Balance at September 29 , 2012 15,005 $ 344.87 RSUs granted at September 29 , 2012 15,005 $ 344.87 RSUs granted 5,631 29 , 2012 15,005 $ 344.87 RSUs granted 5,631 $ 547.62 15,005 $ 344.87 RSUs granted 5,631 $ 547.62 RSUs vested ( 344.87 RSUs granted 5,631 $ 547.62 RSUs vested ( 6,042 ) $ 547.62 RSUs vested ( 6,042 ) $ 321.73 RSUs cancelled vested ( 6,042 ) $ 321.73 RSUs cancelled ( 1,268 ) $ 321.73 RSUs cancelled ( 1,268 ) $ 401.17 Balance at cancelled ( 1,268 ) $ 401.17 Balance at September 28 , $ 401.17 Balance at September 28 , 2013 13,326 $ 435.70 Balance at September 28 , 2013 13,326 $ 435.70 $ 6,433 at September 28 , 2013 13,326 $ 435.70 $ 6,433 The 28 , 2013 13,326 $ 435.70 $ 6,433 The fair value 2013 13,326 $ 435.70 $ 6,433 The fair value a of date of RSUs wa $ 3.1 billion , $ 3.3 billion $ 3.1 billion , $ 3.3 billion and $ 1.5 billion $ 3.3 billion and $ 1.5 billion for 2013 , 2012 and $ 1.5 billion for 2013 , 2012 and 2011 , 1.5 billion for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . The majority of RSUs that vested in 2013 , 2012 and 2011 were that vested in 2013 , 2012 and 2011 were net-share settled in 2013 , 2012 and 2011 were net-share settled such that total share withheld were approximately 2.2 million , 2.3 million and were approximately 2.2 million , 2.3 million and 1.6 million for million , 2.3 million and 1.6 million for 2013 , 2012 million and 1.6 million for 2013 , 2012 and 2011 , 1.6 million for 2013 , 2012 and 2011 , respectively , for 2013 , 2012 and 2011 , respectively , and were to taxing authority were $ 1.1 billion , $ 1.2 billion $ 1.1 billion , $ 1.2 billion and $ 520 million $ 1.2 billion and $ 520 million in 2013 , 2012 and $ 520 million in 2013 , 2012 and 2011 , 520 million in 2013 , 2012 and 2011 , respectively , in 2013 , 2012 and 2011 , respectively , and are expense to the Company . 70 Table of Contents Stock Options activity and related information for 2013 , 2012 and 2011 , related information for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows : million ) Balance at September 25 , 2010 21,725 $ 90.46 Balance at September 25 , 2010 21,725 $ 90.46 Options granted at September 25 , 2010 21,725 $ 90.46 Options granted 1 25 , 2010 21,725 $ 90.46 Options granted 1 $ 342.62 21,725 $ 90.46 Options granted 1 $ 342.62 Options cancelled ( 90.46 Options granted 1 $ 342.62 Options cancelled ( 163 ) $ 342.62 Options cancelled ( 163 ) $ 128.42 Options exercised cancelled ( 163 ) $ 128.42 Options exercised ( 9,697 ) $ 128.42 Options exercised ( 9,697 ) $ 67.63 Balance at exercised ( 9,697 ) $ 67.63 Balance at September 24 , $ 67.63 Balance at September 24 , 2011 11,866 $ 108.64 Balance at September 24 , 2011 11,866 $ 108.64 Options assumed at September 24 , 2011 11,866 $ 108.64 Options assumed 41 24 , 2011 11,866 $ 108.64 Options assumed 41 $ 30.86 11,866 $ 108.64 Options assumed 41 $ 30.86 Options cancelled ( 108.64 Options assumed 41 $ 30.86 Options cancelled ( 25 ) $ 30.86 Options cancelled ( 25 ) $ 103.22 Options exercised cancelled ( 25 ) $ 103.22 Options exercised ( 5,337 ) $ 103.22 Options exercised ( 5,337 ) $ 84.85 Balance at exercised ( 5,337 ) $ 84.85 Balance at September 29 , $ 84.85 Balance at September 29 , 2012 6,545 $ 127.56 Balance at September 29 , 2012 6,545 $ 127.56 Options granted at September 29 , 2012 6,545 $ 127.56 Options granted 8 29 , 2012 6,545 $ 127.56 Options granted 8 $ 30.36 6,545 $ 127.56 Options granted 8 $ 30.36 Options assumed 29 127.56 Options granted 8 $ 30.36 Options assumed 29 $ 210.08 8 $ 30.36 Options assumed 29 $ 210.08 Options cancelled ( 30.36 Options assumed 29 $ 210.08 Options cancelled ( 8 ) $ 210.08 Options cancelled ( 8 ) $ 108.87 Options exercised cancelled ( 8 ) $ 108.87 Options exercised ( 2,480 ) $ 108.87 Options exercised ( 2,480 ) $ 108.33 Balance at exercised ( 2,480 ) $ 108.33 Balance at September 28 , $ 108.33 Balance at September 28 , 2013 4,094 $ 139.65 Balance at September 28 , 2013 4,094 $ 139.65 1.1 $ at September 28 , 2013 4,094 $ 139.65 1.1 $ 1,405 28 , 2013 4,094 $ 139.65 1.1 $ 1,405 Exercisable at , 2013 4,094 $ 139.65 1.1 $ 1,405 Exercisable at September 4,094 $ 139.65 1.1 $ 1,405 Exercisable at September 28 , $ 1,405 Exercisable at September 28 , 2013 4,072 $ 140.07 Exercisable at September 28 , 2013 4,072 $ 140.07 1.0 $ at September 28 , 2013 4,072 $ 140.07 1.0 $ 1,396 28 , 2013 4,072 $ 140.07 1.0 $ 1,396 Expected to , 2013 4,072 $ 140.07 1.0 $ 1,396 Expected to vest 4,072 $ 140.07 1.0 $ 1,396 Expected to vest after September Expected to vest after September 28 , 2013 22 $ 61.93 vest after September 28 , 2013 22 $ 61.93 7.8 $ after September 28 , 2013 22 $ 61.93 7.8 $ 9 28 , 2013 22 $ 61.93 7.8 $ 9 Aggregate intrinsic , 2013 22 $ 61.93 7.8 $ 9 Aggregate intrinsic value 22 $ 61.93 7.8 $ 9 Aggregate intrinsic value represents the time of exercise wa $ 1.0 billion , $ 2.3 billion $ 1.0 billion , $ 2.3 billion and $ 2.6 billion $ 2.3 billion and $ 2.6 billion for 2013 , 2012 and $ 2.6 billion for 2013 , 2012 and 2011 , 2.6 billion for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . Share-based Compensation Share-based Compensation The Company granted 8,000 and 1,370 stock option during The Company granted 8,000 and 1,370 stock option during 2013 and and 1,370 stock option during 2013 and 2011 , respectively . stock option during 2013 and 2011 , respectively . The weighted-average of stock option granted during 2013 and 2011 wa $ 294.84 option granted during 2013 and 2011 wa $ 294.84 and $ 2013 and 2011 wa $ 294.84 and $ 181.13 , respectively wa $ 294.84 and $ 181.13 , respectively . The Company grant any stock option during 2012 . During 2013 and 2012 option during 2012 . During 2013 and 2012 , in conjunction 2012 . During 2013 and 2012 , in conjunction with certain combination , the Company assumed 29,000 and 41,000 stock option , the Company assumed 29,000 and 41,000 stock option , respectively , value per share of $ 407.80 and $ 405.39 , respectively of $ 407.80 and $ 405.39 , respectively . The Company assume any stock option during 2011 . The weighted-average fair value right per share wa $ 115.19 , $ 108.44 and $ wa $ 115.19 , $ 108.44 and $ 71.47 during 2013 , $ 108.44 and $ 71.47 during 2013 , 2012 and 108.44 and $ 71.47 during 2013 , 2012 and 2011 , $ 71.47 during 2013 , 2012 and 2011 , respectively . during 2013 , 2012 and 2011 , respectively . 71 Table and 2011 , respectively . 71 Table of Contents The following Consolidated Statements of Operations for 2013 , 2012 and 2011 ( of Operations for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 2012 2011 Cost of sale in million ) : 2013 2012 2011 Cost of sale $ million ) : 2013 2012 2011 Cost of sale $ 350 2011 Cost of sale $ 350 $ 265 $ 200 Research of sale $ 350 $ 265 $ 200 Research and development $ 350 $ 265 $ 200 Research and development 917 668 $ 200 Research and development 917 668 450 Selling , general 200 Research and development 917 668 450 Selling , general and Research and development 917 668 450 Selling , general and administrative Selling , general and administrative 986 807 518 Total share-based compensation , general and administrative 986 807 518 Total share-based compensation expense general and administrative 986 807 518 Total share-based compensation expense $ Total share-based compensation expense $ 2,253 $ 1,740 $ 1,168 The compensation expense $ 2,253 $ 1,740 $ 1,168 The income tax $ 2,253 $ 1,740 $ 1,168 The income tax benefit related share-based compensation expense wa $ 816 million , $ 567 million $ 816 million , $ 567 million and $ 467 million $ 567 million and $ 467 million for 2013 , 2012 and $ 467 million for 2013 , 2012 and 2011 , 467 million for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . As of respectively . As of September 28 , 2013 , the total As of September 28 , 2013 , the total unrecognized compensation option and RSUs wa $ 4.7 billion , which the Company over a weighted-average period of 3.0 year . Note 10 – of 3.0 year . Note 10 – Commitments and Contingencies Accrued The Company also offer a 90-day basic warranty for it service warranty and related cost for 2013 , 2012 and 2011 ( related cost for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 2012 2011 Beginning accrued warranty in million ) : 2013 2012 2011 Beginning accrued warranty and million ) : 2013 2012 2011 Beginning accrued warranty and related warranty and related cost $ 1,638 $ 1,240 $ 761 Cost related cost $ 1,638 $ 1,240 $ 761 Cost of warranty $ 1,638 $ 1,240 $ 761 Cost of warranty claim ( Cost of warranty claim ( 3,703 ) ( 1,786 ) ( claim ( 3,703 ) ( 1,786 ) ( 1,147 ) Accruals ) ( 1,786 ) ( 1,147 ) Accruals for product warranty ) Accruals for product warranty 5,032 2,184 1,626 Ending accrued warranty Accruals for product warranty 5,032 2,184 1,626 Ending accrued warranty and for product warranty 5,032 2,184 1,626 Ending accrued warranty and related warranty and related cost $ 2,967 $ 1,638 $ 1,240 The related cost $ 2,967 $ 1,638 $ 1,240 The Company generally $ 2,967 $ 1,638 $ 1,240 The Company generally doe not indemnification a of either September 28 , 2013 or September 29 of either September 28 , 2013 or September 29 , 2012 28 , 2013 or September 29 , 2012 . The Company 2013 or September 29 , 2012 . The Company ha entered advance expense incurred by such 72 Table of Contents individual in requirement for period up to 150 day . Other Off-Balance Sheet typically for term not exceeding 10 year and generally provide renewal term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company ’ s noncancelable operating lease were $ 4.7 billion , of which $ billion , of which $ 3.5 billion related to lease for lease for retail space . 73 Table of Contents Rent expense noncancelable lease , wa $ 645 million , $ 488 million $ 645 million , $ 488 million and $ 338 million $ 488 million and $ 338 million in 2013 , 2012 and $ 338 million in 2013 , 2012 and 2011 , 338 million in 2013 , 2012 and 2011 , respectively . in 2013 , 2012 and 2011 , respectively . Future minimum one year a of September 28 , 2013 , are a a of September 28 , 2013 , are a follows ( ( in million ) : 2014 $ 610 2015 613 2016 million ) : 2014 $ 610 2015 613 2016 587 2017 ) : 2014 $ 610 2015 613 2016 587 2017 551 : 2014 $ 610 2015 613 2016 587 2017 551 2018 2014 $ 610 2015 613 2016 587 2017 551 2018 505 $ 610 2015 613 2016 587 2017 551 2018 505 Thereafter 610 2015 613 2016 587 2017 551 2018 505 Thereafter 1,855 2015 613 2016 587 2017 551 2018 505 Thereafter 1,855 Total 613 2016 587 2017 551 2018 505 Thereafter 1,855 Total minimum 2016 587 2017 551 2018 505 Thereafter 1,855 Total minimum lease 2017 551 2018 505 Thereafter 1,855 Total minimum lease payment $ Total minimum lease payment $ 4,721 Other Commitments As of September Other Commitments As of September 28 , 2013 , the Company As of September 28 , 2013 , the Company had outstanding component purchase commitment of $ 18.6 billion . In addition to had outstanding obligation of $ 1.3 billion a of September 28 1.3 billion a of September 28 , 2013 , which consisted a of September 28 , 2013 , which consisted mainly of et al . On August 24 , 2012 , a jury . On August 24 , 2012 , a jury returned a verdict awarding the Company $ 1.05 billion in it lawsuit against Jose Division . On March 1 , 2013 , the District . On March 1 , 2013 , the District Court upheld the District Court upheld $ 599 million of the jury ’ et al . On August 11 , 2010 , VirnetX , . On August 11 , 2010 , VirnetX , Inc. filed communication technology . On November 6 , 2012 , a jury . On November 6 , 2012 , a jury returned a and awarded damage of $ 368 million . The Company is accrual at this time . 74 Table of Contents Note 11 74 Table of Contents Note 11 – Segment Information and Geographic operates Apple retail store in 13 country , including the U.S a those described in Note 1 , “ Summary of Significant the Retail segment were $ 495 million , $ 858 million $ 495 million , $ 858 million and $ 612 million $ 858 million and $ 612 million for 2013 , 2012 and $ 612 million for 2013 , 2012 and 2011 , 612 million for 2013 , 2012 and 2011 , respectively . for 2013 , 2012 and 2011 , respectively . The Company depreciation and amortization wa $ 6.8 billion , $ 3.3 billion $ 6.8 billion , $ 3.3 billion and $ 1.8 billion $ 3.3 billion and $ 1.8 billion in 2013 , 2012 and $ 1.8 billion in 2013 , 2012 and 2011 , 1.8 billion in 2013 , 2012 and 2011 , respectively , in 2013 , 2012 and 2011 , respectively , of which respectively , of which $ 382 million , $ 319 million $ 382 million , $ 319 million and $ 273 million $ 319 million and $ 273 million wa related to the segment wa not significant . 75 Table of Contents The following information by operating segment for 2013 , 2012 and 2011 ( operating segment for 2013 , 2012 and 2011 ( in million for 2013 , 2012 and 2011 ( in million ) : ( in million ) : 2013 2012 2011 Americas : Net in million ) : 2013 2012 2011 Americas : Net sale million ) : 2013 2012 2011 Americas : Net sale $ Americas : Net sale $ 62,739 $ 57,512 $ 38,315 Operating Net sale $ 62,739 $ 57,512 $ 38,315 Operating income $ $ 62,739 $ 57,512 $ 38,315 Operating income $ 22,817 $ $ 38,315 Operating income $ 22,817 $ 23,414 $ 13,111 Europe Operating income $ 22,817 $ 23,414 $ 13,111 Europe : Net $ 22,817 $ 23,414 $ 13,111 Europe : Net sale $ Europe : Net sale $ 37,883 $ 36,323 $ 27,778 Operating Net sale $ 37,883 $ 36,323 $ 27,778 Operating income $ $ 37,883 $ 36,323 $ 27,778 Operating income $ 13,025 $ $ 27,778 Operating income $ 13,025 $ 14,869 $ 11,209 Greater Operating income $ 13,025 $ 14,869 $ 11,209 Greater China : $ 13,025 $ 14,869 $ 11,209 Greater China : Net sale China : Net sale $ 25,417 $ 22,533 $ 12,690 Operating Net sale $ 25,417 $ 22,533 $ 12,690 Operating income $ $ 25,417 $ 22,533 $ 12,690 Operating income $ 8,541 $ $ 12,690 Operating income $ 8,541 $ 9,843 $ 5,246 Japan Operating income $ 8,541 $ 9,843 $ 5,246 Japan : Net $ 8,541 $ 9,843 $ 5,246 Japan : Net sale $ Japan : Net sale $ 13,462 $ 10,571 $ 5,437 Operating Net sale $ 13,462 $ 10,571 $ 5,437 Operating income $ $ 13,462 $ 10,571 $ 5,437 Operating income $ 6,819 $ $ 5,437 Operating income $ 6,819 $ 5,861 $ 2,415 Rest Operating income $ 6,819 $ 5,861 $ 2,415 Rest of Asia $ 6,819 $ 5,861 $ 2,415 Rest of Asia Pacific : Pacific : Net sale $ 11,181 $ 10,741 $ 9,902 Operating Net sale $ 11,181 $ 10,741 $ 9,902 Operating income $ $ 11,181 $ 10,741 $ 9,902 Operating income $ 3,753 $ $ 9,902 Operating income $ 3,753 $ 4,253 $ 4,004 Retail Operating income $ 3,753 $ 4,253 $ 4,004 Retail : Net $ 3,753 $ 4,253 $ 4,004 Retail : Net sale $ Retail : Net sale $ 20,228 $ 18,828 $ 14,127 Operating Net sale $ 20,228 $ 18,828 $ 14,127 Operating income $ $ 20,228 $ 18,828 $ 14,127 Operating income $ 4,025 $ $ 14,127 Operating income $ 4,025 $ 4,613 $ 3,075 A Operating income $ 4,025 $ 4,613 $ 3,075 A reconciliation of $ 4,025 $ 4,613 $ 3,075 A reconciliation of the Company the consolidated financial statement for 2013 , 2012 and 2011 , financial statement for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Segment operating income in million ) : 2013 2012 2011 Segment operating income $ million ) : 2013 2012 2011 Segment operating income $ 58,980 2011 Segment operating income $ 58,980 $ 62,853 $ 39,060 Other operating income $ 58,980 $ 62,853 $ 39,060 Other corporate expense $ 58,980 $ 62,853 $ 39,060 Other corporate expense , net corporate expense , net ( 7,728 ) ( 5,872 ) ( net ( 7,728 ) ( 5,872 ) ( 4,102 ) Share-based ) ( 5,872 ) ( 4,102 ) Share-based compensation expense ( ) Share-based compensation expense ( 2,253 ) ( 1,740 ) ( expense ( 2,253 ) ( 1,740 ) ( 1,168 ) Total ) ( 1,740 ) ( 1,168 ) Total operating income $ ) Total operating income $ 48,999 $ 55,241 $ 33,790 The operating income $ 48,999 $ 55,241 $ 33,790 The following table $ 48,999 $ 55,241 $ 33,790 The following table show total financial statement a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 ( in million 2013 and September 29 , 2012 ( in million ) : ( in million ) : 2013 2012 Segment asset : Americas in million ) : 2013 2012 Segment asset : Americas $ Segment asset : Americas $ 5,653 $ 5,525 Europe 3,134 3,095 : Americas $ 5,653 $ 5,525 Europe 3,134 3,095 Greater China $ 5,653 $ 5,525 Europe 3,134 3,095 Greater China 2,943 1,321 5,653 $ 5,525 Europe 3,134 3,095 Greater China 2,943 1,321 Japan Europe 3,134 3,095 Greater China 2,943 1,321 Japan 2,932 1,698 Rest 3,134 3,095 Greater China 2,943 1,321 Japan 2,932 1,698 Rest of Greater China 2,943 1,321 Japan 2,932 1,698 Rest of Asia-Pacific 923 China 2,943 1,321 Japan 2,932 1,698 Rest of Asia-Pacific 923 913 2,932 1,698 Rest of Asia-Pacific 923 913 Retail 3,329 2,725 Total 1,698 Rest of Asia-Pacific 923 913 Retail 3,329 2,725 Total segment of Asia-Pacific 923 913 Retail 3,329 2,725 Total segment asset 18,914 Asia-Pacific 923 913 Retail 3,329 2,725 Total segment asset 18,914 15,277 3,329 2,725 Total segment asset 18,914 15,277 Corporate asset 188,086 160,787 2,725 Total segment asset 18,914 15,277 Corporate asset 188,086 160,787 Total asset 18,914 15,277 Corporate asset 188,086 160,787 Total asset $ 207,000 18,914 15,277 Corporate asset 188,086 160,787 Total asset $ 207,000 $ 188,086 160,787 Total asset $ 207,000 $ 176,064 76 Table of Total asset $ 207,000 $ 176,064 76 Table of Contents The asset $ 207,000 $ 176,064 76 Table of Contents The U.S. that accounted for more than 10 % of the Company ’ ’ s net sale in 2013 , 2012 and 2011 . net sale in 2013 , 2012 and 2011 . There wa in 2013 , 2012 and 2011 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2013 , 2012 or 2011 . net sale in 2013 , 2012 or 2011 . Net sale in 2013 , 2012 or 2011 . Net sale for 2013 2011 . Net sale for 2013 , 2012 and 2011 and Net sale for 2013 , 2012 and 2011 and long-lived asset for 2013 , 2012 and 2011 and long-lived asset a of long-lived asset a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 are a follows 2013 and September 29 , 2012 are a follows ( in ( in million ) : 2013 2012 2011 Net sale : in million ) : 2013 2012 2011 Net sale : U.S. million ) : 2013 2012 2011 Net sale : U.S. $ Net sale : U.S. $ 66,197 $ 60,949 $ 41,812 China : U.S. $ 66,197 $ 60,949 $ 41,812 China ( a $ 66,197 $ 60,949 $ 41,812 China ( a ) 25,946 41,812 China ( a ) 25,946 22,797 12,472 Other country 78,767 China ( a ) 25,946 22,797 12,472 Other country 78,767 72,762 ( a ) 25,946 22,797 12,472 Other country 78,767 72,762 53,965 25,946 22,797 12,472 Other country 78,767 72,762 53,965 Total net sale 22,797 12,472 Other country 78,767 72,762 53,965 Total net sale $ 12,472 Other country 78,767 72,762 53,965 Total net sale $ 170,910 53,965 Total net sale $ 170,910 $ 156,508 $ 108,249 2013 net sale $ 170,910 $ 156,508 $ 108,249 2013 2012 Long-lived $ 170,910 $ 156,508 $ 108,249 2013 2012 Long-lived asset : 170,910 $ 156,508 $ 108,249 2013 2012 Long-lived asset : U.S. $ 156,508 $ 108,249 2013 2012 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 7,399 $ 6,012 China ( a : U.S. $ 7,399 $ 6,012 China ( a ) 7,403 6,012 China ( a ) 7,403 7,314 Other country 2,786 2,560 China ( a ) 7,403 7,314 Other country 2,786 2,560 Total ) 7,403 7,314 Other country 2,786 2,560 Total long-lived asset $ 7,403 7,314 Other country 2,786 2,560 Total long-lived asset $ 17,588 2,560 Total long-lived asset $ 17,588 $ 15,886 ( a ) long-lived asset $ 17,588 $ 15,886 ( a ) China includes net sale by product for 2013 , 2012 and 2011 , by product for 2013 , 2012 and 2011 , is a for 2013 , 2012 and 2011 , is a follows ( ( in million ) : 2013 2012 2011 Net Sales by in million ) : 2013 2012 2011 Net Sales by Product million ) : 2013 2012 2011 Net Sales by Product : iPhone ( a ) $ 91,279 $ 78,692 $ 45,998 iPad a ) $ 91,279 $ 78,692 $ 45,998 iPad ( a $ 91,279 $ 78,692 $ 45,998 iPad ( a ) 31,980 45,998 iPad ( a ) 31,980 30,945 19,168 Mac ( a iPad ( a ) 31,980 30,945 19,168 Mac ( a ) ( a ) 31,980 30,945 19,168 Mac ( a ) 21,483 19,168 Mac ( a ) 21,483 23,221 21,783 iPod ( a Mac ( a ) 21,483 23,221 21,783 iPod ( a ) ( a ) 21,483 23,221 21,783 iPod ( a ) 4,411 21,783 iPod ( a ) 4,411 5,615 7,453 iTunes , Software iPod ( a ) 4,411 5,615 7,453 iTunes , Software and ( a ) 4,411 5,615 7,453 iTunes , Software and Services and Services ( b ) 16,051 12,890 9,373 Accessories ( c Services ( b ) 16,051 12,890 9,373 Accessories ( c ) ( b ) 16,051 12,890 9,373 Accessories ( c ) 5,706 9,373 Accessories ( c ) 5,706 5,145 4,474 Total net sale Accessories ( c ) 5,706 5,145 4,474 Total net sale $ ( c ) 5,706 5,145 4,474 Total net sale $ 170,910 4,474 Total net sale $ 170,910 $ 156,508 $ 108,249 ( net sale $ 170,910 $ 156,508 $ 108,249 ( a ) $ 170,910 $ 156,508 $ 108,249 ( a ) Includes deferral , Mac and iPod . 77 Table of Contents Note 12 77 Table of Contents Note 12 – Selected Quarterly Financial Information of the four quarter of 2013 and 2012 ( in million four quarter of 2013 and 2012 ( in million , except Quarter Second Quarter First Quarter 2013 Net sale $ 37,472 $ Quarter 2013 Net sale $ 37,472 $ 35,323 $ 43,603 $ Net sale $ 37,472 $ 35,323 $ 43,603 $ 54,512 Gross $ 37,472 $ 35,323 $ 43,603 $ 54,512 Gross margin $ $ 35,323 $ 43,603 $ 54,512 Gross margin $ 13,871 $ $ 54,512 Gross margin $ 13,871 $ 13,024 $ 16,349 $ Gross margin $ 13,871 $ 13,024 $ 16,349 $ 21,060 Net $ 13,871 $ 13,024 $ 16,349 $ 21,060 Net income $ $ 13,024 $ 16,349 $ 21,060 Net income $ 7,512 $ $ 21,060 Net income $ 7,512 $ 6,900 $ 9,547 $ Net income $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings $ 7,512 $ 6,900 $ 9,547 $ 13,078 Earnings per share $ 6,900 $ 9,547 $ 13,078 Earnings per share ( a a ) : Basic $ 8.31 $ 7.51 $ 10.16 $ : Basic $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.31 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.51 $ 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 10.16 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10.09 $ 13.93 Diluted $ 8.26 $ 7.47 $ 10.09 $ 13.81 Fourth $ 8.26 $ 7.47 $ 10.09 $ 13.81 Fourth Quarter Third $ 7.47 $ 10.09 $ 13.81 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2012 Net sale $ 35,966 $ Quarter 2012 Net sale $ 35,966 $ 35,023 $ 39,186 $ Net sale $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross $ 35,966 $ 35,023 $ 39,186 $ 46,333 Gross margin $ $ 35,023 $ 39,186 $ 46,333 Gross margin $ 14,401 $ $ 46,333 Gross margin $ 14,401 $ 14,994 $ 18,564 $ Gross margin $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net $ 14,401 $ 14,994 $ 18,564 $ 20,703 Net income $ $ 14,994 $ 18,564 $ 20,703 Net income $ 8,223 $ $ 20,703 Net income $ 8,223 $ 8,824 $ 11,622 $ Net income $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings $ 8,223 $ 8,824 $ 11,622 $ 13,064 Earnings per share $ 8,824 $ 11,622 $ 13,064 Earnings per share ( a a ) : Basic $ 8.76 $ 9.42 $ 12.45 $ : Basic $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.76 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.42 $ 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 12.45 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 14.03 Diluted $ 8.67 $ 9.32 $ 12.30 $ 13.87 ( $ 8.67 $ 9.32 $ 12.30 $ 13.87 ( a ) $ 9.32 $ 12.30 $ 13.87 ( a ) Basic and diluted earnings per share . 78 Table of Contents REPORT OF Apple Inc. a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , and the 2013 and September 29 , 2012 , and the related consolidated in the period ended September 28 , 2013 . These financial period ended September 28 , 2013 . These financial statement are of Apple Inc. at September 28 , 2013 and September 29 Inc. at September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 , and the 2013 and September 29 , 2012 , and the consolidated result in the period ended September 28 , 2013 , in conformity period ended September 28 , 2013 , in conformity with U.S. financial reporting a of September 28 , 2013 , based on a of September 28 , 2013 , based on criterion established of the Treadway Commission ( 1992 framework ) and our report and our report dated October 29 , 2013 expressed an unqualified report dated October 29 , 2013 expressed an unqualified opinion thereon San Jose , California October 29 , 2013 79 Table of , California October 29 , 2013 79 Table of Contents REPORT California October 29 , 2013 79 Table of Contents REPORT OF financial reporting a of September 28 , 2013 , based on a of September 28 , 2013 , based on criterion established of the Treadway Commission ( 1992 framework ) ( “ the policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 28 , 2013 , based on a of September 28 , 2013 , based on the COSO United States ) , the 2013 consolidated financial statement of Apple and our report dated October 29 , 2013 expressed an unqualified report dated October 29 , 2013 expressed an unqualified opinion thereon San Jose , California October 29 , 2013 80 Table of , California October 29 , 2013 80 Table of Contents Item California October 29 , 2013 80 Table of Contents Item 9 80 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( “ were effective a of September 28 , 2013 to provide reasonable a of September 28 , 2013 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 1992 framework ) . Based on wa effective a of September 28 , 2013 to provide reasonable a of September 28 , 2013 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. 81 Item 8 of this Form 10-K. 81 Table of Contents Changes 8 of this Form 10-K. 81 Table of Contents Changes in during the fourth quarter of 2013 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable Other Information Not applicable . 82 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers Governance ” and “ Section 16 ( a ) Beneficial Ownership in the Company ’ s 2014 Proxy Statement to be filed “ SEC ” ) within 120 day after September 28 , within 120 day after September 28 , 2013 in connection with day after September 28 , 2013 in connection with the solicitation for the Company ’ s 2014 annual meeting of shareholder and herein by reference . Item 11 . Executive Compensation The information in the Company ’ s 2014 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2013 and is incorporated day after September 28 , 2013 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2014 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2013 and is incorporated day after September 28 , 2013 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2014 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2013 and is incorporated day after September 28 , 2013 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2014 Proxy Statement to be filed filed with the SEC within 120 day after September 28 , within 120 day after September 28 , 2013 and is incorporated day after September 28 , 2013 and is incorporated herein by incorporated herein by reference . 83 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 45 Consolidated Statements 2012 and September 24 , 2011 45 Consolidated Statements of Comprehensive and September 24 , 2011 45 Consolidated Statements of Comprehensive Income for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 , and September 2013 , September 29 , 2012 , and September 24 , , 2012 , and September 24 , 2011 46 Consolidated Balance , and September 24 , 2011 46 Consolidated Balance Sheets a and September 24 , 2011 46 Consolidated Balance Sheets a of Balance Sheets a of September 28 , 2013 and September 29 a of September 28 , 2013 and September 29 , 2012 28 , 2013 and September 29 , 2012 47 Consolidated Statements 2013 and September 29 , 2012 47 Consolidated Statements of Shareholders and September 29 , 2012 47 Consolidated Statements of Shareholders ’ for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 48 Consolidated Statements 2012 and September 24 , 2011 48 Consolidated Statements of Cash and September 24 , 2011 48 Consolidated Statements of Cash Flows for the year ended September 28 , 2013 , September 29 year ended September 28 , 2013 , September 29 , 2012 28 , 2013 , September 29 , 2012 and September 24 2013 , September 29 , 2012 and September 24 , 2011 29 , 2012 and September 24 , 2011 49 Notes to 2012 and September 24 , 2011 49 Notes to Consolidated Financial and September 24 , 2011 49 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 50 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 78 Reports of Ernst & Young Independent Registered Public Accounting Firm 79 ( 2 ) Financial Statement Public Accounting Firm 79 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K The information Section ( a ) ( 3 ) of Item 15 is ( 3 ) of Item 15 is set forth on the Signatures page of this Form 10-K. 84 Table of Contents SIGNATURES page of this Form 10-K. 84 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly INC . Date : October 29 , 2013 By : /s/ Date : October 29 , 2013 By : /s/ Peter Oppenheimer this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 29 , 2013 /s/ Peter Oppenheimer Officer ) October 29 , 2013 /s/ Peter Oppenheimer PETER OPPENHEIMER Principal Financial Officer ) October 29 , 2013 /s/ Luca Maestri Officer ) October 29 , 2013 /s/ Luca Maestri LUCA MAESTRI Principal Accounting Officer ) October 29 , 2013 /s/ William V. Officer ) October 29 , 2013 /s/ William V. Campbell WILLIAM WILLIAM V. CAMPBELL Director October 29 , 2013 /s/ Millard S. CAMPBELL Director October 29 , 2013 /s/ Millard S. Drexler MILLARD MILLARD S. DREXLER Director October 29 , 2013 /s/ Al Gore DREXLER Director October 29 , 2013 /s/ Al Gore AL GORE Gore AL GORE Director October 29 , 2013 /s/ Robert A. GORE Director October 29 , 2013 /s/ Robert A. Iger ROBERT ROBERT A. IGER Director October 29 , 2013 /s/ Andrea Jung IGER Director October 29 , 2013 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 29 , 2013 85 Table of JUNG Director October 29 , 2013 85 Table of Contents Name Director October 29 , 2013 85 Table of Contents Name Title ARTHUR D. LEVINSON Director October 29 , 2013 /s/ Ronald D. LEVINSON Director October 29 , 2013 /s/ Ronald D. Sugar RONALD RONALD D. SUGAR Director October 29 , 2013 86 Table of SUGAR Director October 29 , 2013 86 Table of Contents EXHIBIT Director October 29 , 2013 86 Table of Contents EXHIBIT INDEX Filing Date/ Period End Date 3.1 Restated Articles of Incorporation , State of California on July 10 , 2009 . 10-Q 3.1 California on July 10 , 2009 . 10-Q 3.1 6/27/09 3.2 July 10 , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws 10 , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of , 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of the 2009 . 10-Q 3.1 6/27/09 3.2 Amended Bylaws of the Registrant Registrant , a of April 20 , 2011 . 10-Q 3.2 a of April 20 , 2011 . 10-Q 3.2 3/26/11 4.1 April 20 , 2011 . 10-Q 3.2 3/26/11 4.1 Form of 20 , 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common , 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock 2011 . 10-Q 3.2 3/26/11 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 10.1 % Notes due 2043 . 8-K 4.1 5/3/13 10.1 * Amended Notes due 2043 . 8-K 4.1 5/3/13 10.1 * Amended Employee due 2043 . 8-K 4.1 5/3/13 10.1 * Amended Employee Stock 2043 . 8-K 4.1 5/3/13 10.1 * Amended Employee Stock Purchase , effective a of March 8 , 2010 . 10-Q 10.1 a of March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 March 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form 8 , 2010 . 10-Q 10.1 3/27/10 10.2 * Form of , 2010 . 10-Q 10.1 3/27/10 10.2 * Form of Indemnification 2010 . 10-Q 10.1 3/27/10 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through May 24 , 2012 . 10-Q 10.3 amended through May 24 , 2012 . 10-Q 10.3 6/30/12 10.4 May 24 , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 24 , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee , 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock 2012 . 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock Plan 10-Q 10.3 6/30/12 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Agreement effective a of November 11 , 2008 . 10-Q 10.10 a of November 11 , 2008 . 10-Q 10.10 12/27/08 10.6 November 11 , 2008 . 10-Q 10.10 12/27/08 10.6 * Form 11 , 2008 . 10-Q 10.10 12/27/08 10.6 * Form of , 2008 . 10-Q 10.10 12/27/08 10.6 * Form of Restricted 2008 . 10-Q 10.10 12/27/08 10.6 * Form of Restricted Stock Agreement effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.7 November 16 , 2010 . 10-Q 10.10 12/25/10 10.7 * Form 16 , 2010 . 10-Q 10.10 12/25/10 10.7 * Form of , 2010 . 10-Q 10.10 12/25/10 10.7 * Form of Restricted 2010 . 10-Q 10.10 12/25/10 10.7 * Form of Restricted Stock Agreement effective a of April 6 , 2012 . 10-Q 10.8 a of April 6 , 2012 . 10-Q 10.8 3/31/12 10.8 April 6 , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary 6 , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description , 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description of 2012 . 10-Q 10.8 3/31/12 10.8 * Summary Description of Amendment , effective a of May 24 , 2012 , to certain a of May 24 , 2012 , to certain Restricted Stock Agreements outstanding a of April 5 , 2012 . 10-Q 10.8 a of April 5 , 2012 . 10-Q 10.8 6/30/12 12.1 April 5 , 2012 . 10-Q 10.8 6/30/12 12.1 * * 5 , 2012 . 10-Q 10.8 6/30/12 12.1 * * Computation , 2012 . 10-Q 10.8 6/30/12 12.1 * * Computation of 2012 . 10-Q 10.8 6/30/12 12.1 * * Computation of Ratio Earnings to Fixed Charges . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 87 Table of Contents Exhibit Number Filing Date/ Period End Date 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * * Furnished herewith . 88 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-15-356351/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-15-356351/full-submission.txt new file mode 100644 index 0000000..14a0604 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001193125-15-356351/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 26 , 2015 or ¨ TRANSITION year ended September 26 , 2015 or ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the : Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.625 share 1.000 % Notes due 2022 1.625 % Notes due 2026 1.000 % Notes due 2022 1.625 % Notes due 2026 3.05 2022 1.625 % Notes due 2026 3.05 % Notes due 2029 1.625 % Notes due 2026 3.05 % Notes due 2029 3.60 2026 3.05 % Notes due 2029 3.60 % Notes due 2042 3.05 % Notes due 2029 3.60 % Notes due 2042 1.375 2029 3.60 % Notes due 2042 1.375 % Notes due 2024 3.60 % Notes due 2042 1.375 % Notes due 2024 2.000 2042 1.375 % Notes due 2024 2.000 % Notes due 2027 1.375 % Notes due 2024 2.000 % Notes due 2027 The 2024 2.000 % Notes due 2027 The NASDAQ Stock Market LLC Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 27 , 2015 , the last a of March 27 , 2015 , the last business day quarter , wa approximately $ 709,923,000,000 . Solely for purpose of for any other purpose . 5,575,331,000 share of common stock were and outstanding a of October 9 , 2015 . DOCUMENTS INCORPORATED a of October 9 , 2015 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2016 annual meeting of shareholder ( of shareholder ( the “ 2016 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2016 10-K where indicated . The 2016 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of of Contents Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 26 , 2015 TABLE OF CONTENTS Year Ended September 26 , 2015 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 8 Item Item 1A . Risk Factors 8 Item 1B . Unresolved Staff . Risk Factors 8 Item 1B . Unresolved Staff Comments 18 1B . Unresolved Staff Comments 18 Item 2 . Properties 18 Unresolved Staff Comments 18 Item 2 . Properties 18 Item 3 18 Item 2 . Properties 18 Item 3 . Legal Proceedings 2 . Properties 18 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Mine Safety . Legal Proceedings 18 Item 4 . Mine Safety Disclosures 18 4 . Mine Safety Disclosures 18 Part II Item 5 . Disclosures 18 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 22 6 . Selected Financial Data 22 Item 7 . Management ’ Selected Financial Data 22 Item 7 . Management ’ s Discussion Condition and Results of Operations 23 Item 7A . Quantitative and Results of Operations 23 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 38 Item 9 . Changes in and Supplementary Data 38 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 71 Item 9A . Controls and and Financial Disclosure 71 Item 9A . Controls and Procedures 71 9A . Controls and Procedures 71 Item 9B . Other Information Controls and Procedures 71 Item 9B . Other Information 71 Part Item 9B . Other Information 71 Part III Item 10 . Information 71 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 72 Item 11 . Executive Compensation and Corporate Governance 72 Item 11 . Executive Compensation 72 Item Item 11 . Executive Compensation 72 Item 12 . Security Ownership . Executive Compensation 72 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 72 Item 13 . Certain Relationships Related Stockholder Matters 72 Item 13 . Certain Relationships and Related Related Transactions and Director Independence 72 Item 14 . Principal Accounting and Director Independence 72 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 72 Part IV Item 15 . Services 72 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 73 Table of Contents This Annual This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company support offering . In September 2015 , the Company announced a by the end of October 2015 . The Company sell and s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the a California corporation established in 1977. Business Strategy The Company is technology . Apple Inc. | 2015 Form 10-K | 1 Table Apple Inc. | 2015 Form 10-K | 1 Table of Contents | 2015 Form 10-K | 1 Table of Contents Business Organization a geographic basis . In 2015 , the Company changed it in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and qualifying device . In September 2015 , the Company introduced iPhone , the Company introduced iPhone 6 and 6 Plus , featuring Company introduced iPhone 6 and 6 Plus , featuring 3D Touch and 6 Plus , featuring 3D Touch , which sens force qualifying device . In September 2015 , the Company announced the iPad Pro™ , featuring a 12.9-inch Retina ® display , which to be available in November 2015. iPad work with the iTunes computer include iMac ® , 21.5 ” iMac with Retina 4K 21.5 ” iMac with Retina 4K Display , 27 ” iMac with Retina 4K Display , 27 ” iMac with Retina 5K 27 ” iMac with Retina 5K Display , Mac Pro ® iCloud service . In September 2015 , the Company released iOS , the Company released iOS 9 , which provides more search improved Siri feature . iOS 9 also introduced new multitasking feature Capitan , released in September 2015 , is the 12 th September 2015 , is the 12 th major release of OS application . Apple Inc. | 2015 Form 10-K | 2 Table Apple Inc. | 2015 Form 10-K | 2 Table of Contents | 2015 Form 10-K | 2 Table of Contents watchOS watchOS Watch . Released in September 2015 , watchOS 2 is the in September 2015 , watchOS 2 is the first major software and Digital Touch . watchOS 2 also give developer the ability Watch . tvOS In September 2015 , the Company announced tvOS at the end of October 2015 . The tvOS operating system Music library . In September 2015 , the Company announced the card . Apple Inc. | 2015 Form 10-K | 3 Table Apple Inc. | 2015 Form 10-K | 3 Table of Contents | 2015 Form 10-K | 3 Table of Contents Other Products iOS device . In September 2015 , the Company announced the at the end of October 2015 . Apple Watch Apple Watch and value-added resellers . During 2015 , the Company ’ s indirect distribution channel accounted for 26 % and 74 % , accounted for 26 % and 74 % , respectively , of product . Apple Inc. | 2015 Form 10-K | 4 Table Apple Inc. | 2015 Form 10-K | 4 Table of Contents | 2015 Form 10-K | 4 Table of Contents The Company customer accounted for more than 10 % of net sale in % of net sale in 2015 , 2014 or 2013 . net sale in 2015 , 2014 or 2013 . Competition The in 2015 , 2014 or 2013 . Competition The market for result . Apple Inc. | 2015 Form 10-K | 5 Table Apple Inc. | 2015 Form 10-K | 5 Table of Contents | 2015 Form 10-K | 5 Table of Contents The Company requirement for period up to 150 day . Research and Development & D expense wa $ 8.1 billion , $ 6.0 billion $ 8.1 billion , $ 6.0 billion and $ 4.5 billion $ 6.0 billion and $ 4.5 billion in 2015 , 2014 and $ 4.5 billion in 2015 , 2014 and 2013 , 4.5 billion in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . Patents , Operations and Geographic Data During 2015 , the Company ’ s international net sale accounted for 35 % and 65 % , accounted for 35 % and 65 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and . ” Apple Inc. | 2015 Form 10-K | 6 Table Apple Inc. | 2015 Form 10-K | 6 Table of Contents | 2015 Form 10-K | 6 Table of Contents While some in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies The Company also offer a 90-day basic warranty for it service . Employees As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had approximately , the Company had approximately 110,000 full-time equivalent employee . Available s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an only . Apple Inc. | 2015 Form 10-K | 7 Table Apple Inc. | 2015 Form 10-K | 7 Table of Contents | 2015 Form 10-K | 7 Table of Contents Item 1A 7 Table of Contents Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial affected . Apple Inc. | 2015 Form 10-K | 8 Table Apple Inc. | 2015 Form 10-K | 8 Table of Contents | 2015 Form 10-K | 8 Table of Contents The Company carrier . Apple Inc. | 2015 Form 10-K | 9 Table Apple Inc. | 2015 Form 10-K | 9 Table of Contents | 2015 Form 10-K | 9 Table of Contents Many resellers requirement for period up to 150 day . Because the Company Company . Apple Inc. | 2015 Form 10-K | 10 Table Apple Inc. | 2015 Form 10-K | 10 Table of Contents | 2015 Form 10-K | 10 Table of Contents The Company provider . Apple Inc. | 2015 Form 10-K | 11 Table Apple Inc. | 2015 Form 10-K | 11 Table of Contents | 2015 Form 10-K | 11 Table of Contents The Company expense . Apple Inc. | 2015 Form 10-K | 12 Table Apple Inc. | 2015 Form 10-K | 12 Table of Contents | 2015 Form 10-K | 12 Table of Contents Regardless of loss . Apple Inc. | 2015 Form 10-K | 13 Table Apple Inc. | 2015 Form 10-K | 13 Table of Contents | 2015 Form 10-K | 13 Table of Contents The Company order . Apple Inc. | 2015 Form 10-K | 14 Table Apple Inc. | 2015 Form 10-K | 14 Table of Contents | 2015 Form 10-K | 14 Table of Contents The Company operation . Apple Inc. | 2015 Form 10-K | 15 Table Apple Inc. | 2015 Form 10-K | 15 Table of Contents | 2015 Form 10-K | 15 Table of Contents The Company loss . Apple Inc. | 2015 Form 10-K | 16 Table Apple Inc. | 2015 Form 10-K | 16 Table of Contents | 2015 Form 10-K | 16 Table of Contents The Company component . As of September 26 , 2015 , a significant As of September 26 , 2015 , a significant portion of For example , in June 2014 , the European Commission opened a period of up to 10 year reflective of the disallowed affected . Apple Inc. | 2015 Form 10-K | 17 Table Apple Inc. | 2015 Form 10-K | 17 Table of Contents | 2015 Form 10-K | 17 Table of Contents Item 1B 17 Table of Contents Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company owned or the Company owned or leased 25.6 million square foot of building owned or leased building space 18.5 million square foot wa leased space , which includes approximately 5.3 million square foot related to Company owns a total of 1,757 acre of land in various location . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company owned a for it product . Item 3 . Legal Proceedings The Company in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2015 that did not individually or al . ) On April 11 , 2012 , the U.S. ) On April 11 , 2012 , the U.S. Department of such agreement . On July 10 , 2013 , the District . On July 10 , 2013 , the District Court found which took effect on October 6 , 2013 and will be effect on October 6 , 2013 and will be in effect District Court ended in October 2015 . The Company appealed the settlement agreement reached in June 2014 , any damage the Company of all appeal . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2015 Form 10-K | 18 Table Apple Inc. | 2015 Form 10-K | 18 Table of Contents | 2015 Form 10-K | 18 Table of Contents PART II of Contents PART II Item 5 . Market for Registrant ’ Quarter Second Quarter First Quarter 2015 price range per share $ price range per share $ 132.97 - $ 92.00 $ 134.54 share $ 132.97 - $ 92.00 $ 134.54 - $ 123.10 132.97 - $ 92.00 $ 134.54 - $ 123.10 $ 133.60 92.00 $ 134.54 - $ 123.10 $ 133.60 - $ 104.63 134.54 - $ 123.10 $ 133.60 - $ 104.63 $ 119.75 123.10 $ 133.60 - $ 104.63 $ 119.75 - $ 95.18 133.60 - $ 104.63 $ 119.75 - $ 95.18 2014 price 104.63 $ 119.75 - $ 95.18 2014 price range per share $ 119.75 - $ 95.18 2014 price range per share $ price range per share $ 103.74 - $ 92.09 $ 95.05 share $ 103.74 - $ 92.09 $ 95.05 - $ 73.05 103.74 - $ 92.09 $ 95.05 - $ 73.05 $ 80.18 92.09 $ 95.05 - $ 73.05 $ 80.18 - $ 70.51 95.05 - $ 73.05 $ 80.18 - $ 70.51 $ 82.16 73.05 $ 80.18 - $ 70.51 $ 82.16 - $ 67.77 80.18 - $ 70.51 $ 82.16 - $ 67.77 Holders As 70.51 $ 82.16 - $ 67.77 Holders As of October 9 67.77 Holders As of October 9 , 2015 , there were As of October 9 , 2015 , there were 25,924 shareholder , 2015 , there were 25,924 shareholder of record . Dividends paid a total of $ 11.4 billion and $ 11.0 billion $ 11.4 billion and $ 11.0 billion in dividend during 2015 11.0 billion in dividend during 2015 and 2014 , respectively , in dividend during 2015 and 2014 , respectively , and expects pay quarterly dividend of $ 0.52 per common share each quarter Directors . Apple Inc. | 2015 Form 10-K | 19 Table Apple Inc. | 2015 Form 10-K | 19 Table of Contents | 2015 Form 10-K | 19 Table of Contents Purchases of the three month ended September 26 , 2015 wa a follows month ended September 26 , 2015 wa a follows ( in the Plans or Programs ( 1 ) June 28 , 2015 Programs ( 1 ) June 28 , 2015 to August 1 1 ) June 28 , 2015 to August 1 , 2015 28 , 2015 to August 1 , 2015 : May 2015 2015 to August 1 , 2015 : May 2015 ASR 9,973 1 , 2015 : May 2015 ASR 9,973 ( 2 ) 2015 : May 2015 ASR 9,973 ( 2 ) ( 2 May 2015 ASR 9,973 ( 2 ) ( 2 ) 9,973 9,973 ( 2 ) ( 2 ) 9,973 ( 2 ) 2 ) ( 2 ) 9,973 ( 2 ) Open market ( 2 ) 9,973 ( 2 ) Open market and privately market and privately negotiated purchase 15,882 $ 124.66 15,882 August 2 privately negotiated purchase 15,882 $ 124.66 15,882 August 2 , 2015 negotiated purchase 15,882 $ 124.66 15,882 August 2 , 2015 to 15,882 $ 124.66 15,882 August 2 , 2015 to August 29 124.66 15,882 August 2 , 2015 to August 29 , 2015 2 , 2015 to August 29 , 2015 : Open market 2015 to August 29 , 2015 : Open market and privately market and privately negotiated purchase 68,526 $ 114.15 68,526 August 30 privately negotiated purchase 68,526 $ 114.15 68,526 August 30 , 2015 negotiated purchase 68,526 $ 114.15 68,526 August 30 , 2015 to 68,526 $ 114.15 68,526 August 30 , 2015 to September 26 114.15 68,526 August 30 , 2015 to September 26 , 2015 30 , 2015 to September 26 , 2015 : Open market 2015 to September 26 , 2015 : Open market and privately market and privately negotiated purchase 37,394 $ 112.94 37,394 Total 131,775 privately negotiated purchase 37,394 $ 112.94 37,394 Total 131,775 $ 36,024 negotiated purchase 37,394 $ 112.94 37,394 Total 131,775 $ 36,024 ( 37,394 $ 112.94 37,394 Total 131,775 $ 36,024 ( 1 ) 112.94 37,394 Total 131,775 $ 36,024 ( 1 ) In 2012 Total 131,775 $ 36,024 ( 1 ) In 2012 , the 36,024 ( 1 ) In 2012 , the Company ’ s to repurchase up to $ 10 billion of the Company ’ s common stock beginning in 2013 . The Company ’ s s common stock to $ 60 billion in April 2013 , $ 60 billion in April 2013 , to $ 90 billion April 2013 , to $ 90 billion in April 2014 and $ 90 billion in April 2014 and to $ 140 billion April 2014 and to $ 140 billion in April 2015 . $ 140 billion in April 2015 . As of September 26 2015 . As of September 26 , 2015 , $ 104 As of September 26 , 2015 , $ 104 billion of 26 , 2015 , $ 104 billion of the $ 140 104 billion of the $ 140 billion had been utilized . utilized . The remaining $ 36 billion in the table represents repurchase program a of September 26 , 2015 . The Company a of September 26 , 2015 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In May 2015 , ( 2 ) In May 2015 , the Company entered into to purchase up to $ 6.0 billion of the Company ’ common stock . In July 2015 , the purchase period for ASR ended and an additional 10.0 million share were delivered and retired . In total , 48.3 million net share were delivered average repurchase price of $ 124.24 . Apple Inc. | 2015 124.24 . Apple Inc. | 2015 Form 10-K | 20 Table Apple Inc. | 2015 Form 10-K | 20 Table of Contents | 2015 Form 10-K | 20 Table of Contents Company Stock , the S & P 500 Index , the S & the five year ended September 26 , 2015 . The graph year ended September 26 , 2015 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 24 , 2010 . Note that close on September 24 , 2010 . Note that historic stock price performance . * $ 100 invested on 9/25/10 in stock * $ 100 invested on 9/25/10 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2015 S & P , a right reserved . Copyright © 2015 Dow Jones & Co. All All right reserved . September 2010 September 2011 September 2012 September reserved . September 2010 September 2011 September 2012 September 2013 September September 2010 September 2011 September 2012 September 2013 September 2014 September September 2011 September 2012 September 2013 September 2014 September 2015 Apple September 2012 September 2013 September 2014 September 2015 Apple Inc. $ September 2013 September 2014 September 2015 Apple Inc. $ 100 $ September 2015 Apple Inc. $ 100 $ 138 $ 229 $ Apple Inc. $ 100 $ 138 $ 229 $ 170 $ $ 100 $ 138 $ 229 $ 170 $ 254 $ $ 138 $ 229 $ 170 $ 254 $ 294 S $ 229 $ 170 $ 254 $ 294 S & P $ 170 $ 254 $ 294 S & P 500 Index $ 294 S & P 500 Index $ 100 $ 101 & P 500 Index $ 100 $ 101 $ 132 $ 500 Index $ 100 $ 101 $ 132 $ 157 $ $ 100 $ 101 $ 132 $ 157 $ 188 $ $ 101 $ 132 $ 157 $ 188 $ 187 S $ 132 $ 157 $ 188 $ 187 S & P $ 157 $ 188 $ 187 S & P Information Technology P Information Technology Index $ 100 $ 104 $ 137 $ Technology Index $ 100 $ 104 $ 137 $ 147 $ $ 100 $ 104 $ 137 $ 147 $ 190 $ $ 104 $ 137 $ 147 $ 190 $ 194 Dow $ 137 $ 147 $ 190 $ 194 Dow Jones U.S. $ 147 $ 190 $ 194 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 103 $ 134 $ Supersector Index $ 100 $ 103 $ 134 $ 141 $ $ 100 $ 103 $ 134 $ 141 $ 183 $ $ 103 $ 134 $ 141 $ 183 $ 183 Apple $ 134 $ 141 $ 183 $ 183 Apple Inc. | $ 141 $ 183 $ 183 Apple Inc. | 2015 Form $ 183 Apple Inc. | 2015 Form 10-K | 21 Table Apple Inc. | 2015 Form 10-K | 21 Table of Contents | 2015 Form 10-K | 21 Table of Contents Item 6 21 Table of Contents Item 6 . Selected Financial Data The the five year ended September 26 , 2015 , is not year ended September 26 , 2015 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2015 2014 2013 2012 2011 Net share amount ) . 2015 2014 2013 2012 2011 Net sale amount ) . 2015 2014 2013 2012 2011 Net sale $ ) . 2015 2014 2013 2012 2011 Net sale $ 233,715 . 2015 2014 2013 2012 2011 Net sale $ 233,715 $ 2012 2011 Net sale $ 233,715 $ 182,795 $ 170,910 $ Net sale $ 233,715 $ 182,795 $ 170,910 $ 156,508 $ $ 233,715 $ 182,795 $ 170,910 $ 156,508 $ 108,249 Net $ 182,795 $ 170,910 $ 156,508 $ 108,249 Net income $ $ 170,910 $ 156,508 $ 108,249 Net income $ 53,394 $ $ 108,249 Net income $ 53,394 $ 39,510 $ 37,037 $ Net income $ 53,394 $ 39,510 $ 37,037 $ 41,733 $ $ 53,394 $ 39,510 $ 37,037 $ 41,733 $ 25,922 Earnings $ 39,510 $ 37,037 $ 41,733 $ 25,922 Earnings per share $ 37,037 $ 41,733 $ 25,922 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 $ : Basic $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ $ 9.28 $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 6.49 $ 5.72 $ 6.38 $ 4.01 Diluted $ 9.22 $ 5.72 $ 6.38 $ 4.01 Diluted $ 9.22 $ 6.45 6.38 $ 4.01 Diluted $ 9.22 $ 6.45 $ 5.68 $ 4.01 Diluted $ 9.22 $ 6.45 $ 5.68 $ 6.31 $ $ 9.22 $ 6.45 $ 5.68 $ 6.31 $ 3.95 Cash $ 6.45 $ 5.68 $ 6.31 $ 3.95 Cash dividend declared $ 5.68 $ 6.31 $ 3.95 Cash dividend declared per share dividend declared per share $ 1.98 $ 1.82 $ 1.64 $ per share $ 1.98 $ 1.82 $ 1.64 $ 0.38 $ $ 1.98 $ 1.82 $ 1.64 $ 0.38 $ 0 Shares $ 1.82 $ 1.64 $ 0.38 $ 0 Shares used in $ 1.64 $ 0.38 $ 0 Shares used in computing earnings earnings per share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted per share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 share : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 : Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 Basic 5,753,421 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,085,572 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,556,514 Total 6,477,320 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,556,514 Total cash 6,543,726 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,556,514 Total cash , 6,469,806 Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,556,514 Total cash , cash Diluted 5,793,069 6,122,663 6,521,634 6,617,483 6,556,514 Total cash , cash equivalent equivalent and marketable security $ 205,666 $ 155,239 $ 146,761 $ marketable security $ 205,666 $ 155,239 $ 146,761 $ 121,251 $ $ 205,666 $ 155,239 $ 146,761 $ 121,251 $ 81,570 Total $ 155,239 $ 146,761 $ 121,251 $ 81,570 Total asset $ $ 146,761 $ 121,251 $ 81,570 Total asset $ 290,479 $ $ 81,570 Total asset $ 290,479 $ 231,839 $ 207,000 $ Total asset $ 290,479 $ 231,839 $ 207,000 $ 176,064 $ $ 290,479 $ 231,839 $ 207,000 $ 176,064 $ 116,371 Commercial $ 231,839 $ 207,000 $ 176,064 $ 116,371 Commercial paper $ $ 207,000 $ 176,064 $ 116,371 Commercial paper $ 8,499 $ $ 116,371 Commercial paper $ 8,499 $ 6,308 $ 0 $ Commercial paper $ 8,499 $ 6,308 $ 0 $ 0 $ $ 8,499 $ 6,308 $ 0 $ 0 $ 0 Total $ 6,308 $ 0 $ 0 $ 0 Total term debt $ 0 $ 0 $ 0 Total term debt ( 2 0 Total term debt ( 2 ) $ 55,963 $ 28,987 debt ( 2 ) $ 55,963 $ 28,987 $ 16,960 $ 2 ) $ 55,963 $ 28,987 $ 16,960 $ 0 $ $ 55,963 $ 28,987 $ 16,960 $ 0 $ 0 Other $ 28,987 $ 16,960 $ 0 $ 0 Other long-term obligation $ 16,960 $ 0 $ 0 Other long-term obligation ( 1 0 Other long-term obligation ( 1 ) $ 33,427 $ 24,826 obligation ( 1 ) $ 33,427 $ 24,826 $ 20,208 $ 1 ) $ 33,427 $ 24,826 $ 20,208 $ 16,664 $ $ 33,427 $ 24,826 $ 20,208 $ 16,664 $ 10,100 Total $ 24,826 $ 20,208 $ 16,664 $ 10,100 Total liability $ $ 20,208 $ 16,664 $ 10,100 Total liability $ 171,124 $ $ 10,100 Total liability $ 171,124 $ 120,292 $ 83,451 $ Total liability $ 171,124 $ 120,292 $ 83,451 $ 57,854 $ $ 171,124 $ 120,292 $ 83,451 $ 57,854 $ 39,756 Total $ 120,292 $ 83,451 $ 57,854 $ 39,756 Total shareholder ’ $ 83,451 $ 57,854 $ 39,756 Total shareholder ’ equity $ Total shareholder ’ equity $ 119,355 $ 111,547 $ 123,549 $ ’ equity $ 119,355 $ 111,547 $ 123,549 $ 118,210 $ $ 119,355 $ 111,547 $ 123,549 $ 118,210 $ 76,615 ( $ 111,547 $ 123,549 $ 118,210 $ 76,615 ( 1 ) $ 123,549 $ 118,210 $ 76,615 ( 1 ) Other long-term $ 118,210 $ 76,615 ( 1 ) Other long-term obligation exclude non-current deferred revenue . ( 2 ) Includes current and long-term debt . Apple Inc. | 2015 Form 10-K | 22 Table Apple Inc. | 2015 Form 10-K | 22 Table of Contents | 2015 Form 10-K | 22 Table of Contents Item 7 22 Table of Contents Item 7 . Management ’ s Discussion this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and government customer . Fiscal 2015 Highlights Net sale rose 28 2015 Highlights Net sale rose 28 % or $ 50.9 billion rose 28 % or $ 50.9 billion during 2015 compared to or $ 50.9 billion during 2015 compared to 2014 , driven billion during 2015 compared to 2014 , driven by a 52 2014 , driven by a 52 % year-over-year increase in iPhone sale and unit sale in 2015 increased in all of the during the third quarter of 2015 , accounted for more than , accounted for more than 100 % of the year-over-year growth . Net sale growth during 2015 wa partially offset by the where year-over-year net sale increased 84 % . In April 2015 84 % . In April 2015 , the Company announced a of the program to $ 200 billion through March 2017 . $ 200 billion through March 2017 . This included increasing it share repurchase authorization to $ 140 billion and raising it quarterly it quarterly dividend to $ 0.52 per share beginning in May per share beginning in May 2015 . During 2015 , the in May 2015 . During 2015 , the Company spent $ , the Company spent $ 36.0 billion to repurchase share of and dividend equivalent of $ 11.6 billion . Additionally , the , the Company issued $ 14.5 billion of U.S. dollar-denominated , of U.S. dollar-denominated , € 4.8 billion of euro-denominated , SFr1.3 British pound-denominated , A $ 2.3 billion of Australian dollar-denominated and Japanese yen-denominated term debt during 2015 . Fiscal 2014 Highlights Net debt during 2015 . Fiscal 2014 Highlights Net sale rose 7 2014 Highlights Net sale rose 7 % or $ 11.9 billion rose 7 % or $ 11.9 billion during 2014 compared to or $ 11.9 billion during 2014 compared to 2013 . This billion during 2014 compared to 2013 . This wa driven by the successful introduction of iPhone 5 and 5c in the latter introduction of iPhone 5 and 5c in the latter half of latter half of calendar year 2013 , the successful launch of the successful launch of iPhone 6 and 6 Plus beginning in launch of iPhone 6 and 6 Plus beginning in the fourth in the fourth quarter of 2014 , and expanded distribution . ® which were updated in 2014 with faster processor and offered experienced increased net sale in 2014 , with growth being strongest Japan operating segment . During 2014 , the Company completed various software . Apple Inc. | 2015 Form 10-K | 23 Table Apple Inc. | 2015 Form 10-K | 23 Table of Contents | 2015 Form 10-K | 23 Table of Contents In April Table of Contents In April 2014 , the Company increased it share repurchase authorization to $ 90 billion and the quarterly dividend dividend wa raised to $ 0.47 per common share , resulting capital return program from $ 100 billion to over $ 130 100 billion to over $ 130 billion . During 2014 , $ 130 billion . During 2014 , the Company utilized $ , the Company utilized $ 45 billion to repurchase it common and dividend equivalent of $ 11.1 billion . The Company also The Company also issued $ 12.0 billion of long-term debt during billion of long-term debt during 2014 , with varying maturity through , with varying maturity through 2044 , and launched a commercial paper program , with $ 6.3 billion outstanding a of September billion outstanding a of September 27 , 2014 . Sales Data a of September 27 , 2014 . Sales Data The following unit sale by product during 2015 , 2014 and 2013 ( by product during 2015 , 2014 and 2013 ( dollar in during 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Change 2014 Change 2013 Net thousand ) : 2015 Change 2014 Change 2013 Net Sales by : 2015 Change 2014 Change 2013 Net Sales by Operating Segment Operating Segment : Americas $ 93,864 17 % $ 80,095 4 Segment : Americas $ 93,864 17 % $ 80,095 4 % $ 93,864 17 % $ 80,095 4 % $ 77,093 Europe 93,864 17 % $ 80,095 4 % $ 77,093 Europe 50,337 $ 80,095 4 % $ 77,093 Europe 50,337 14 % 44,285 4 % $ 77,093 Europe 50,337 14 % 44,285 8 % % $ 77,093 Europe 50,337 14 % 44,285 8 % 40,980 77,093 Europe 50,337 14 % 44,285 8 % 40,980 Greater China Europe 50,337 14 % 44,285 8 % 40,980 Greater China 58,715 14 % 44,285 8 % 40,980 Greater China 58,715 84 % 8 % 40,980 Greater China 58,715 84 % 31,853 18 % % 40,980 Greater China 58,715 84 % 31,853 18 % 27,016 Greater China 58,715 84 % 31,853 18 % 27,016 Japan 15,706 China 58,715 84 % 31,853 18 % 27,016 Japan 15,706 3 84 % 31,853 18 % 27,016 Japan 15,706 3 % 15,314 31,853 18 % 27,016 Japan 15,706 3 % 15,314 11 % 18 % 27,016 Japan 15,706 3 % 15,314 11 % 13,782 27,016 Japan 15,706 3 % 15,314 11 % 13,782 Rest of Japan 15,706 3 % 15,314 11 % 13,782 Rest of Asia 3 % 15,314 11 % 13,782 Rest of Asia Pacific 15,093 13,782 Rest of Asia Pacific 15,093 34 % 11,248 ( 7 Rest of Asia Pacific 15,093 34 % 11,248 ( 7 ) Asia Pacific 15,093 34 % 11,248 ( 7 ) % 12,039 15,093 34 % 11,248 ( 7 ) % 12,039 Total net 11,248 ( 7 ) % 12,039 Total net sale $ 233,715 12,039 Total net sale $ 233,715 28 % $ 182,795 7 Total net sale $ 233,715 28 % $ 182,795 7 % $ 233,715 28 % $ 182,795 7 % $ 170,910 Net 233,715 28 % $ 182,795 7 % $ 170,910 Net Sales $ 182,795 7 % $ 170,910 Net Sales by Product : by Product : iPhone ( 1 ) $ 155,041 52 % iPhone ( 1 ) $ 155,041 52 % $ 101,991 12 ( 1 ) $ 155,041 52 % $ 101,991 12 % $ 155,041 52 % $ 101,991 12 % $ 91,279 iPad 155,041 52 % $ 101,991 12 % $ 91,279 iPad ( $ 101,991 12 % $ 91,279 iPad ( 1 ) 23,227 % $ 91,279 iPad ( 1 ) 23,227 ( 23 ) 91,279 iPad ( 1 ) 23,227 ( 23 ) % 30,283 ( 1 ) 23,227 ( 23 ) % 30,283 ( 5 23,227 ( 23 ) % 30,283 ( 5 ) % 31,980 23 ) % 30,283 ( 5 ) % 31,980 Mac ( 30,283 ( 5 ) % 31,980 Mac ( 1 ) 25,471 ) % 31,980 Mac ( 1 ) 25,471 6 % 24,079 31,980 Mac ( 1 ) 25,471 6 % 24,079 12 % Mac ( 1 ) 25,471 6 % 24,079 12 % 21,483 1 ) 25,471 6 % 24,079 12 % 21,483 Services ( ) 25,471 6 % 24,079 12 % 21,483 Services ( 2 6 % 24,079 12 % 21,483 Services ( 2 ) 19,909 12 % 21,483 Services ( 2 ) 19,909 10 % 18,063 21,483 Services ( 2 ) 19,909 10 % 18,063 13 % Services ( 2 ) 19,909 10 % 18,063 13 % 16,051 2 ) 19,909 10 % 18,063 13 % 16,051 Other Products ) 19,909 10 % 18,063 13 % 16,051 Other Products ( 10 % 18,063 13 % 16,051 Other Products ( 1 ) % 16,051 Other Products ( 1 ) ( 3 ) 10,067 Products ( 1 ) ( 3 ) 10,067 20 % 8,379 1 ) ( 3 ) 10,067 20 % 8,379 ( 17 ) ( 3 ) 10,067 20 % 8,379 ( 17 ) 3 ) 10,067 20 % 8,379 ( 17 ) % 10,117 10,067 20 % 8,379 ( 17 ) % 10,117 Total net 8,379 ( 17 ) % 10,117 Total net sale $ 233,715 10,117 Total net sale $ 233,715 28 % $ 182,795 7 Total net sale $ 233,715 28 % $ 182,795 7 % $ 233,715 28 % $ 182,795 7 % $ 170,910 Unit 233,715 28 % $ 182,795 7 % $ 170,910 Unit Sales $ 182,795 7 % $ 170,910 Unit Sales by Product : Sales by Product : iPhone 231,218 37 % 169,219 13 % by Product : iPhone 231,218 37 % 169,219 13 % 150,257 : iPhone 231,218 37 % 169,219 13 % 150,257 iPad 54,856 iPhone 231,218 37 % 169,219 13 % 150,257 iPad 54,856 ( 37 % 169,219 13 % 150,257 iPad 54,856 ( 19 ) 169,219 13 % 150,257 iPad 54,856 ( 19 ) % 67,977 % 150,257 iPad 54,856 ( 19 ) % 67,977 ( 4 54,856 ( 19 ) % 67,977 ( 4 ) % 71,033 19 ) % 67,977 ( 4 ) % 71,033 Mac 20,587 67,977 ( 4 ) % 71,033 Mac 20,587 9 % 18,906 4 ) % 71,033 Mac 20,587 9 % 18,906 16 % ) % 71,033 Mac 20,587 9 % 18,906 16 % 16,341 71,033 Mac 20,587 9 % 18,906 16 % 16,341 ( 1 Mac 20,587 9 % 18,906 16 % 16,341 ( 1 ) 9 % 18,906 16 % 16,341 ( 1 ) Includes deferral 18,906 16 % 16,341 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from the and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2015 Form 10-K | 24 Table Apple Inc. | 2015 Form 10-K | 24 Table of Contents | 2015 Form 10-K | 24 Table of Contents Product Performance and unit sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Change 2014 Change 2013 Net thousand ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 155,041 52 Change 2013 Net sale $ 155,041 52 % $ 101,991 12 2013 Net sale $ 155,041 52 % $ 101,991 12 % $ 155,041 52 % $ 101,991 12 % $ 91,279 Percentage 155,041 52 % $ 101,991 12 % $ 91,279 Percentage of $ 101,991 12 % $ 91,279 Percentage of total net sale Percentage of total net sale 66 % 56 % 53 % total net sale 66 % 56 % 53 % Unit sale sale 66 % 56 % 53 % Unit sale 231,218 37 % 53 % Unit sale 231,218 37 % 169,219 13 % 53 % Unit sale 231,218 37 % 169,219 13 % 150,257 Unit sale 231,218 37 % 169,219 13 % 150,257 The year-over-year sale 231,218 37 % 169,219 13 % 150,257 The year-over-year growth 37 % 169,219 13 % 150,257 The year-over-year growth in iPhone sale and unit sale during 2015 primarily resulted from strong demand from strong demand for iPhone 6 and 6 Plus during 2015 demand for iPhone 6 and 6 Plus during 2015 . Overall 6 and 6 Plus during 2015 . Overall average selling price ) for iPhone increased by 11 % during 2015 compared to increased by 11 % during 2015 compared to 2014 , due % during 2015 compared to 2014 , due primarily to the to the introduction of iPhone 6 and 6 Plus in September introduction of iPhone 6 and 6 Plus in September 2014 , and 6 Plus in September 2014 , partially offset by the sale and unit sale in 2014 resulted primarily from the successful latter half of calendar year 2013 , the successful launch of the successful launch of iPhone 6 and 6 Plus beginning in launch of iPhone 6 and 6 Plus beginning in September 2014 6 Plus beginning in September 2014 , and expanded distribution . iPhone were relatively flat in 2014 compared to 2013 , with flat in 2014 compared to 2013 , with growth in ASPs and unit sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Change 2014 Change 2013 Net thousand ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 23,227 ( Change 2013 Net sale $ 23,227 ( 23 ) % $ Net sale $ 23,227 ( 23 ) % $ 30,283 ( ( 23 ) % $ 30,283 ( 5 ) % $ ) % $ 30,283 ( 5 ) % $ 31,980 Percentage ( 5 ) % $ 31,980 Percentage of total net sale Percentage of total net sale 10 % 17 % 19 % total net sale 10 % 17 % 19 % Unit sale sale 10 % 17 % 19 % Unit sale 54,856 ( % 19 % Unit sale 54,856 ( 19 ) % 67,977 % Unit sale 54,856 ( 19 ) % 67,977 ( 4 54,856 ( 19 ) % 67,977 ( 4 ) % 71,033 19 ) % 67,977 ( 4 ) % 71,033 Net sale 67,977 ( 4 ) % 71,033 Net sale and unit sale sale for iPad declined during 2015 compared to 2014 . The declined during 2015 compared to 2014 . The Company belief the . iPad ASPs declined by 5 % during 2015 compared to declined by 5 % during 2015 compared to 2014 , primarily % during 2015 compared to 2014 , primarily a a result sale for iPad declined in 2014 compared to 2013. iPad net declined in 2014 compared to 2013. iPad net sale and unit ASPs were relatively flat in 2014 compared to 2013 with a flat in 2014 compared to 2013 with a shift in mix being offset by the October 2013 price reduction of iPad mini™ and unit sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million and unit in thousand ) : 2015 Change 2014 Change 2013 Net thousand ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 25,471 6 Change 2013 Net sale $ 25,471 6 % $ 24,079 12 2013 Net sale $ 25,471 6 % $ 24,079 12 % $ 25,471 6 % $ 24,079 12 % $ 21,483 Percentage 25,471 6 % $ 24,079 12 % $ 21,483 Percentage of $ 24,079 12 % $ 21,483 Percentage of total net sale Percentage of total net sale 11 % 13 % 13 % total net sale 11 % 13 % 13 % Unit sale sale 11 % 13 % 13 % Unit sale 20,587 9 % 13 % Unit sale 20,587 9 % 18,906 16 % 13 % Unit sale 20,587 9 % 18,906 16 % 16,341 Unit sale 20,587 9 % 18,906 16 % 16,341 The year-over-year sale 20,587 9 % 18,906 16 % 16,341 The year-over-year growth 9 % 18,906 16 % 16,341 The year-over-year growth in Mac sale and unit sale during 2015 wa driven by strong demand portable . Mac ASPs declined 3 % during 2015 compared to ASPs declined 3 % during 2015 compared to 2014 largely due % during 2015 compared to 2014 largely due to the effect sale and unit sale for 2014 wa primarily driven by increased . Mac ASPs decreased during 2014 compared to 2013 primarily due decreased during 2014 compared to 2013 primarily due to price reduction system . Apple Inc. | 2015 Form 10-K | 25 Table Apple Inc. | 2015 Form 10-K | 25 Table of Contents | 2015 Form 10-K | 25 Table of Contents Services The sale information of Services for 2015 , 2014 and 2013 ( of Services for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 19,909 10 Change 2013 Net sale $ 19,909 10 % $ 18,063 13 2013 Net sale $ 19,909 10 % $ 18,063 13 % $ 19,909 10 % $ 18,063 13 % $ 16,051 Percentage 19,909 10 % $ 18,063 13 % $ 16,051 Percentage of $ 18,063 13 % $ 16,051 Percentage of total net sale Percentage of total net sale 9 % 10 % 9 % total net sale 9 % 10 % 9 % The increase sale 9 % 10 % 9 % The increase in net net sale of Services during 2015 compared to 2014 wa primarily Services during 2015 compared to 2014 wa primarily due to growth year-over-year net sale growth of 29 % . The increase in net sale of Services in 2014 compared to 2013 wa primarily Services in 2014 compared to 2013 wa primarily due to growth generated a total of $ 10.2 billion in net sale during billion in net sale during 2014 compared to $ 9.3 billion during 2014 compared to $ 9.3 billion during 2013 . Growth to $ 9.3 billion during 2013 . Growth in net sale in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and Americas net sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 93,864 17 Change 2013 Net sale $ 93,864 17 % $ 80,095 4 2013 Net sale $ 93,864 17 % $ 80,095 4 % $ 93,864 17 % $ 80,095 4 % $ 77,093 Percentage 93,864 17 % $ 80,095 4 % $ 77,093 Percentage of $ 80,095 4 % $ 77,093 Percentage of total net sale Percentage of total net sale 40 % 44 % 45 % total net sale 40 % 44 % 45 % The year-over-year sale 40 % 44 % 45 % The year-over-year growth in in Americas net sale during 2015 wa driven primarily by growth in the Americas segment in 2014 wa due to increased net the U.S. dollar compared to 2013. iPhone growth resulted primarily from the successful introduction of iPhone 5 and 5c in September 2013 introduction of iPhone 5 and 5c in September 2013 and the 5 and 5c in September 2013 and the successful launch of the successful launch of iPhone 6 and 6 Plus in September launch of iPhone 6 and 6 Plus in September 2014 . and 6 Plus in September 2014 . Mac growth wa driven Europe net sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 50,337 14 Change 2013 Net sale $ 50,337 14 % $ 44,285 8 2013 Net sale $ 50,337 14 % $ 44,285 8 % $ 50,337 14 % $ 44,285 8 % $ 40,980 Percentage 50,337 14 % $ 44,285 8 % $ 40,980 Percentage of $ 44,285 8 % $ 40,980 Percentage of total net sale Percentage of total net sale 22 % 24 % 24 % total net sale 22 % 24 % 24 % The year-over-year sale 22 % 24 % 24 % The year-over-year increase in in Europe net sale during 2015 wa driven primarily by growth in the Europe segment in 2014 wa due to increased net the successful introduction of iPhone 5 and 5c in the second introduction of iPhone 5 and 5c in the second half of the second half of calendar 2013 and the successful launch of the successful launch of iPhone 6 and 6 Plus in over launch of iPhone 6 and 6 Plus in over 20 country and 6 Plus in over 20 country in Europe in September country in Europe in September 2014 . Mac growth wa driven Pro . Apple Inc. | 2015 Form 10-K | 26 Table Apple Inc. | 2015 Form 10-K | 26 Table of Contents | 2015 Form 10-K | 26 Table of Contents Greater China China net sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 58,715 84 Change 2013 Net sale $ 58,715 84 % $ 31,853 18 2013 Net sale $ 58,715 84 % $ 31,853 18 % $ 58,715 84 % $ 31,853 18 % $ 27,016 Percentage 58,715 84 % $ 31,853 18 % $ 27,016 Percentage of $ 31,853 18 % $ 27,016 Percentage of total net sale Percentage of total net sale 25 % 17 % 16 % total net sale 25 % 17 % 16 % Greater China sale 25 % 17 % 16 % Greater China experienced strong increase in net sale during 2015 driven primarily by iPhone sale growth in net sale in 2014 that wa significantly higher than the successful launch of iPhone 5 and 5c in Mainland China launch of iPhone 5 and 5c in Mainland China and Hong and Hong Kong in September 2013 , the successful launch of the successful launch of iPhone 6 and 6 Plus in Hong launch of iPhone 6 and 6 Plus in Hong Kong in in Hong Kong in September 2014 , increased demand for the in the second quarter of 2014 . Japan The following table Japan net sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 15,706 3 Change 2013 Net sale $ 15,706 3 % $ 15,314 11 2013 Net sale $ 15,706 3 % $ 15,314 11 % $ 15,706 3 % $ 15,314 11 % $ 13,782 Percentage 15,706 3 % $ 15,314 11 % $ 13,782 Percentage of $ 15,314 11 % $ 13,782 Percentage of total net sale Percentage of total net sale 7 % 8 % 8 % total net sale 7 % 8 % 8 % The year-over-year sale 7 % 8 % 8 % The year-over-year increase in in Japan net sale during 2015 wa driven primarily by growth the U.S. dollar . In 2014 the Japan segment generated year-over-year the successful launch of iPhone 5 and 5c in September 2013 launch of iPhone 5 and 5c in September 2013 , the 5 and 5c in September 2013 , the successful launch of the successful launch of iPhone 6 and 6 Plus in September launch of iPhone 6 and 6 Plus in September 2014 , and 6 Plus in September 2014 , increased demand for the in the fourth quarter of 2013 . These positive factor were Pacific net sale information for 2015 , 2014 and 2013 ( sale information for 2015 , 2014 and 2013 ( dollar in for 2015 , 2014 and 2013 ( dollar in million ) dollar in million ) : 2015 Change 2014 Change 2013 Net million ) : 2015 Change 2014 Change 2013 Net sale $ : 2015 Change 2014 Change 2013 Net sale $ 15,093 34 Change 2013 Net sale $ 15,093 34 % $ 11,248 ( 2013 Net sale $ 15,093 34 % $ 11,248 ( 7 $ 15,093 34 % $ 11,248 ( 7 ) % $ 34 % $ 11,248 ( 7 ) % $ 12,039 Percentage ( 7 ) % $ 12,039 Percentage of total net sale Percentage of total net sale 6 % 6 % 7 % total net sale 6 % 6 % 7 % The year-over-year sale 6 % 6 % 7 % The year-over-year increase in Asia Pacific net sale during 2015 primarily reflects strong growth in Asia Pacific segment declined in 2014 compared to 2013 due to declined in 2014 compared to 2013 due to year-over-year reduction in iPad . Net sale in 2014 were also negatively affected by dollar . Apple Inc. | 2015 Form 10-K | 27 Table Apple Inc. | 2015 Form 10-K | 27 Table of Contents | 2015 Form 10-K | 27 Table of Contents Gross Margin Gross Margin Gross margin for 2015 , 2014 and 2013 is Gross margin for 2015 , 2014 and 2013 is a follows for 2015 , 2014 and 2013 is a follows ( dollar dollar in million ) : 2015 2014 2013 Net sale $ in million ) : 2015 2014 2013 Net sale $ 233,715 million ) : 2015 2014 2013 Net sale $ 233,715 $ 2014 2013 Net sale $ 233,715 $ 182,795 $ 170,910 Cost Net sale $ 233,715 $ 182,795 $ 170,910 Cost of sale $ 233,715 $ 182,795 $ 170,910 Cost of sale 140,089 112,258 $ 170,910 Cost of sale 140,089 112,258 106,606 Gross margin $ 170,910 Cost of sale 140,089 112,258 106,606 Gross margin $ 93,626 Cost of sale 140,089 112,258 106,606 Gross margin $ 93,626 $ 112,258 106,606 Gross margin $ 93,626 $ 70,537 $ 64,304 Gross Gross margin $ 93,626 $ 70,537 $ 64,304 Gross margin percentage $ 93,626 $ 70,537 $ 64,304 Gross margin percentage 40.1 % $ 64,304 Gross margin percentage 40.1 % 38.6 % 37.6 % Gross margin percentage 40.1 % 38.6 % 37.6 % The year-over-year percentage 40.1 % 38.6 % 37.6 % The year-over-year increase in the gross margin percentage in 2015 wa driven primarily by a the gross margin percentage in 2014 wa driven by multiple factor during the first quarter of 2016 to be between 39 % of 2016 to be between 39 % and 40 % . be between 39 % and 40 % . The foregoing statement in the first quarter of 2016 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2015 , 2014 and 2013 are Operating expense for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( dollar dollar in million ) : 2015 Change 2014 Change 2013 Research million ) : 2015 Change 2014 Change 2013 Research and development : 2015 Change 2014 Change 2013 Research and development $ 8,067 2013 Research and development $ 8,067 34 % $ 6,041 35 Research and development $ 8,067 34 % $ 6,041 35 % $ 8,067 34 % $ 6,041 35 % $ 4,475 Percentage 8,067 34 % $ 6,041 35 % $ 4,475 Percentage of $ 6,041 35 % $ 4,475 Percentage of total net sale Percentage of total net sale 3 % 3 % 3 % total net sale 3 % 3 % 3 % Selling , sale 3 % 3 % 3 % Selling , general and , general and administrative $ 14,329 19 % $ 11,993 11 general and administrative $ 14,329 19 % $ 11,993 11 % $ 14,329 19 % $ 11,993 11 % $ 10,830 Percentage 14,329 19 % $ 11,993 11 % $ 10,830 Percentage of $ 11,993 11 % $ 10,830 Percentage of total net sale Percentage of total net sale 6 % 7 % 6 % total net sale 6 % 7 % 6 % Total operating sale 6 % 7 % 6 % Total operating expense $ % Total operating expense $ 22,396 24 % $ 18,034 18 Total operating expense $ 22,396 24 % $ 18,034 18 % $ 22,396 24 % $ 18,034 18 % $ 15,305 Percentage 22,396 24 % $ 18,034 18 % $ 15,305 Percentage of $ 18,034 18 % $ 15,305 Percentage of total net sale Percentage of total net sale 10 % 10 % 9 % total net sale 10 % 10 % 9 % Research and sale 10 % 10 % 9 % Research and Development The R & D expense in 2015 and 2014 wa driven primarily D expense in 2015 and 2014 wa driven primarily by an general and administrative expense in 2015 and 2014 wa primarily due administrative expense in 2015 and 2014 wa primarily due to increased advertising . Apple Inc. | 2015 Form 10-K | 28 Table Apple Inc. | 2015 Form 10-K | 28 Table of Contents | 2015 Form 10-K | 28 Table of Contents Other Income/ expense ) , net for 2015 , 2014 and 2013 are , net for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( dollar dollar in million ) : 2015 Change 2014 Change 2013 Interest million ) : 2015 Change 2014 Change 2013 Interest and dividend : 2015 Change 2014 Change 2013 Interest and dividend income $ Interest and dividend income $ 2,921 $ 1,795 $ 1,616 Interest dividend income $ 2,921 $ 1,795 $ 1,616 Interest expense ( $ 2,921 $ 1,795 $ 1,616 Interest expense ( 733 ) $ 1,616 Interest expense ( 733 ) ( 384 ) ( expense ( 733 ) ( 384 ) ( 136 ) Other ) ( 384 ) ( 136 ) Other expense , net Other expense , net ( 903 ) ( 431 ) ( net ( 903 ) ( 431 ) ( 324 ) Total ) ( 431 ) ( 324 ) Total other income/ ( expense ) , net $ 1,285 31 % $ 980 ( ) , net $ 1,285 31 % $ 980 ( 15 $ 1,285 31 % $ 980 ( 15 ) % $ 31 % $ 980 ( 15 ) % $ 1,156 The ( 15 ) % $ 1,156 The increase in other income/ expense ) , net during 2015 compared to 2014 wa due net during 2015 compared to 2014 wa due primarily to higher other income and expense during 2014 compared to 2013 wa due expense during 2014 compared to 2013 wa due primarily to higher equivalent and marketable security wa 1.49 % , 1.11 % and security wa 1.49 % , 1.11 % and 1.03 % in % , 1.11 % and 1.03 % in 2015 , 2014 % and 1.03 % in 2015 , 2014 and 2013 , 1.03 % in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . Provision for and effective tax rate for 2015 , 2014 and 2013 are tax rate for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( dollar dollar in million ) : 2015 2014 2013 Provision for income in million ) : 2015 2014 2013 Provision for income tax million ) : 2015 2014 2013 Provision for income tax $ Provision for income tax $ 19,121 $ 13,973 $ 13,118 Effective income tax $ 19,121 $ 13,973 $ 13,118 Effective tax rate $ 19,121 $ 13,973 $ 13,118 Effective tax rate 26.4 % $ 13,118 Effective tax rate 26.4 % 26.1 % 26.2 % Effective tax rate 26.4 % 26.1 % 26.2 % The Company rate 26.4 % 26.1 % 26.2 % The Company ’ s s effective tax rate for 2015 , 2014 and 2013 differ tax rate for 2015 , 2014 and 2013 differ from the for 2015 , 2014 and 2013 differ from the statutory federal federal income tax rate of 35 % due primarily to certain higher effective tax rate during 2015 compared to 2014 wa due rate during 2015 compared to 2014 wa due primarily to higher The effective tax rate in 2014 compared to 2013 wa relatively rate in 2014 compared to 2013 wa relatively flat . As flat . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had deferred and tax credit of $ 7.8 billion and deferred tax liability deferred tax liability of $ 24.1 billion . Management belief it is currently examining the year 2010 through 2012 , and all examining the year 2010 through 2012 , and all year prior and all year prior to 2010 are closed . In addition , the year subsequent to 2003 generally remain open and could resolution occurs . On June 11 , 2014 , the European . On June 11 , 2014 , the European Commission issued a period of up to 10 year reflective of the disallowed material , a of September 26 , 2015 the Company is a of September 26 , 2015 the Company is unable to impact . Apple Inc. | 2015 Form 10-K | 29 Table Apple Inc. | 2015 Form 10-K | 29 Table of Contents | 2015 Form 10-K | 29 Table of Contents Recent Accounting Recent Accounting Pronouncements In May 2014 , the Financial Accounting Standards ASU ” ) No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( “ ASU 2014-09 606 ) ( “ ASU 2014-09 ” ) , which amends for revenue recognition . ASU 2014-09 is based on principle that original effective date for ASU 2014-09 would have required the Company in it first quarter of 2018 . In August 2015 , of 2018 . In August 2015 , the FASB issued ASU FASB issued ASU No . 2015-14 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) – Deferral of the the effective date of ASU 2014-09 for one year and permit original effective date of ASU 2014-09 . Accordingly , the Company either it first quarter of 2018 or 2019 . The new first quarter of 2018 or 2019 . The new revenue standard for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 ( in million 2014 and September 28 , 2013 ( in million ) : ( in million ) : 2015 2014 2013 Cash , cash in million ) : 2015 2014 2013 Cash , cash equivalent million ) : 2015 2014 2013 Cash , cash equivalent and equivalent and marketable security $ 205,666 $ 155,239 $ 146,761 Property marketable security $ 205,666 $ 155,239 $ 146,761 Property , plant $ 205,666 $ 155,239 $ 146,761 Property , plant and equipment and equipment , net $ 22,471 $ 20,624 $ 16,597 Commercial , net $ 22,471 $ 20,624 $ 16,597 Commercial paper $ $ 22,471 $ 20,624 $ 16,597 Commercial paper $ 8,499 $ $ 16,597 Commercial paper $ 8,499 $ 6,308 $ 0 Total Commercial paper $ 8,499 $ 6,308 $ 0 Total term debt $ 8,499 $ 6,308 $ 0 Total term debt $ 55,963 0 Total term debt $ 55,963 $ 28,987 $ 16,960 Working term debt $ 55,963 $ 28,987 $ 16,960 Working capital $ $ 55,963 $ 28,987 $ 16,960 Working capital $ 8,768 $ $ 16,960 Working capital $ 8,768 $ 5,083 $ 29,628 Cash Working capital $ 8,768 $ 5,083 $ 29,628 Cash generated by $ 8,768 $ 5,083 $ 29,628 Cash generated by operating activity generated by operating activity $ 81,266 $ 59,713 $ 53,666 Cash operating activity $ 81,266 $ 59,713 $ 53,666 Cash used in $ 81,266 $ 59,713 $ 53,666 Cash used in investing activity in investing activity $ ( 56,274 ) $ ( 22,579 ) ( 56,274 ) $ ( 22,579 ) $ ( 33,774 ) ( 22,579 ) $ ( 33,774 ) Cash used in financing in financing activity $ ( 17,716 ) $ ( 37,549 ) ( 17,716 ) $ ( 37,549 ) $ ( 16,379 ) ( 37,549 ) $ ( 16,379 ) The Company belief it existing operation over the next 12 month . The Company currently borrowing . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company ’ s by foreign subsidiary were $ 186.9 billion and $ 137.1 billion $ 186.9 billion and $ 137.1 billion , respectively , and of principal loss . During 2015 , cash generated from operating from operating activity of $ 81.3 billion wa a result of wa a result of $ 53.4 billion of net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.7 billion . Cash used in in investing activity of $ 56.3 billion during 2015 consisted primarily of $ 56.3 billion during 2015 consisted primarily of cash used and maturity , of $ 44.4 billion and cash used to plant and equipment of $ 11.2 billion . Cash used in in financing activity of $ 17.7 billion during 2015 consisted primarily of $ 17.7 billion during 2015 consisted primarily of cash used repurchase common stock of $ 35.3 billion and cash used to and dividend equivalent of $ 11.6 billion , partially offset by of term debt of $ 27.1 billion . During 2014 , $ 27.1 billion . During 2014 , cash generated from operating from operating activity of $ 59.7 billion wa a result of wa a result of $ 39.5 billion of net income , to net income of $ 13.2 billion and an increase in asset and liability of $ 7.0 billion . Cash used in in investing activity of $ 22.6 billion during 2014 consisted primarily of $ 22.6 billion during 2014 consisted primarily of cash used and maturity , of $ 9.0 billion ; cash used to plant and equipment of $ 9.6 billion ; and cash paid cash acquired , of $ 3.8 billion . Cash used in in financing activity of $ 37.5 billion during 2014 consisted primarily of $ 37.5 billion during 2014 consisted primarily of cash used repurchase common stock of $ 45.0 billion and cash used to and dividend equivalent of $ 11.1 billion , partially offset by and commercial paper of $ 12.0 billion and $ 6.3 billion $ 12.0 billion and $ 6.3 billion , respectively . Apple respectively . Apple Inc. | 2015 Form 10-K | 30 Table Apple Inc. | 2015 Form 10-K | 30 Table of Contents | 2015 Form 10-K | 30 Table of Contents Capital Assets s capital expenditure were $ 11.2 billion during 2015 . The were $ 11.2 billion during 2015 . The Company anticipates utilizing Company anticipates utilizing approximately $ 15.0 billion for capital expenditure during billion for capital expenditure during 2016 , which includes product tooling store facility . Debt In 2014 , the Board of Directors repurchase . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had $ , the Company had $ 8.5 billion of Commercial Paper outstanding a weighted-average interest rate of 0.14 % and maturity generally le month . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company ha outstanding aggregate principal amount of $ 55.7 billion ( collectively the “ s Notes a of September 26 , 2015 are a follows a of September 26 , 2015 are a follows ( in ( in million ) : 2016 $ 2,500 2017 3,500 2018 million ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total term 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt $ 55,701 34,345 Total term debt $ 55,701 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to the Consolidated Financial Statements in Note 2 , “ Financial Instruments ” Financial Instruments ” and Note 6 , “ Debt . ” Capital Return Program In April 2015 , the Company ’ s repurchase program authorization from $ 90 billion to $ 140 billion $ 90 billion to $ 140 billion of the Company ’ capital return program to $ 200 billion . The Company expects by the end of March 2017 by paying dividend and dividend internationally . As of September 26 , 2015 , $ 104 As of September 26 , 2015 , $ 104 billion of 26 , 2015 , $ 104 billion of the share repurchase under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended . In a amended . In April 2015 , the Company ’ s the quarterly cash dividend by 11 % . The Company plan capital return program in August 2012 through September 26 , 2015 in August 2012 through September 26 , 2015 ( in million 2012 through September 26 , 2015 ( in million ) : Settlement of Equity Awards Total 2015 $ 11,561 $ 6,000 $ Equity Awards Total 2015 $ 11,561 $ 6,000 $ 30,026 $ Total 2015 $ 11,561 $ 6,000 $ 30,026 $ 1,499 $ $ 11,561 $ 6,000 $ 30,026 $ 1,499 $ 49,086 2014 $ 6,000 $ 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 $ 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 30,026 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 $ 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 1,499 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 $ 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 0 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 0 0 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 0 0 56 10,564 13,950 9,000 1,082 34,596 2012 2,488 0 0 56 2,544 13,950 9,000 1,082 34,596 2012 2,488 0 0 56 2,544 Total 9,000 1,082 34,596 2012 2,488 0 0 56 2,544 Total $ 1,082 34,596 2012 2,488 0 0 56 2,544 Total $ 35,739 34,596 2012 2,488 0 0 56 2,544 Total $ 35,739 $ 2012 2,488 0 0 56 2,544 Total $ 35,739 $ 40,950 0 56 2,544 Total $ 35,739 $ 40,950 $ 63,026 $ 2,544 Total $ 35,739 $ 40,950 $ 63,026 $ 3,795 $ $ 35,739 $ 40,950 $ 63,026 $ 3,795 $ 143,510 Apple $ 40,950 $ 63,026 $ 3,795 $ 143,510 Apple Inc. | $ 63,026 $ 3,795 $ 143,510 Apple Inc. | 2015 Form $ 143,510 Apple Inc. | 2015 Form 10-K | 31 Table Apple Inc. | 2015 Form 10-K | 31 Table of Contents | 2015 Form 10-K | 31 Table of Contents Off-Balance Sheet firm commitment a of September 26 , 2015 , and excludes a of September 26 , 2015 , and excludes amount already Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Total Term debt $ Years Total Term debt $ 2,500 $ 9,500 $ 9,356 $ Term debt $ 2,500 $ 9,500 $ 9,356 $ 34,345 $ $ 2,500 $ 9,500 $ 9,356 $ 34,345 $ 55,701 Operating $ 9,500 $ 9,356 $ 34,345 $ 55,701 Operating lease 772 $ 9,356 $ 34,345 $ 55,701 Operating lease 772 1,518 1,389 34,345 $ 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase $ 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase commitment 55,701 Operating lease 772 1,518 1,389 2,592 6,271 Purchase commitment 29,464 Operating lease 772 1,518 1,389 2,592 6,271 Purchase commitment 29,464 0 lease 772 1,518 1,389 2,592 6,271 Purchase commitment 29,464 0 0 1,389 2,592 6,271 Purchase commitment 29,464 0 0 0 29,464 Other 2,592 6,271 Purchase commitment 29,464 0 0 0 29,464 Other obligation 6,271 Purchase commitment 29,464 0 0 0 29,464 Other obligation 4,553 Purchase commitment 29,464 0 0 0 29,464 Other obligation 4,553 1,898 commitment 29,464 0 0 0 29,464 Other obligation 4,553 1,898 53 0 0 29,464 Other obligation 4,553 1,898 53 757 7,261 Total 0 29,464 Other obligation 4,553 1,898 53 757 7,261 Total $ 29,464 Other obligation 4,553 1,898 53 757 7,261 Total $ 37,289 Other obligation 4,553 1,898 53 757 7,261 Total $ 37,289 $ obligation 4,553 1,898 53 757 7,261 Total $ 37,289 $ 12,916 53 757 7,261 Total $ 37,289 $ 12,916 $ 10,798 $ 7,261 Total $ 37,289 $ 12,916 $ 10,798 $ 37,694 $ $ 37,289 $ 12,916 $ 10,798 $ 37,694 $ 98,697 Operating $ 12,916 $ 10,798 $ 37,694 $ 98,697 Operating Leases The $ 10,798 $ 37,694 $ 98,697 Operating Leases The Company ’ typically for term not exceeding 10 year and generally contain multi-year option . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had a Company had a total of 463 retail store . Leases for term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company ’ s noncancelable operating lease were $ 6.3 billion , of which $ billion , of which $ 3.6 billion related to lease for typically cover period up to 150 day . The Company also supplier . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had outstanding component purchase commitment of $ 29.5 billion . Other Obligations The penalty . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had non-current deferred tax liability of $ 24.1 billion . Additionally , a Additionally , a of September 26 , 2015 , the Company a of September 26 , 2015 , the Company had gross unrecognized tax benefit of $ 6.9 billion and an additional $ billion and an additional $ 1.3 billion for gross interest and to indemnification a of September 26 , 2015 or September 27 a of September 26 , 2015 or September 27 , 2014 26 , 2015 or September 27 , 2014 . Apple Inc. 2015 or September 27 , 2014 . Apple Inc. | 2015 2014 . Apple Inc. | 2015 Form 10-K | 32 Table Apple Inc. | 2015 Form 10-K | 32 Table of Contents | 2015 Form 10-K | 32 Table of Contents In September Table of Contents In September 2015 , the Company introduced the customer who purchase an iPhone 6 and 6 Plus in one purchase an iPhone 6 and 6 Plus in one of it and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy basis . Apple Inc. | 2015 Form 10-K | 33 Table Apple Inc. | 2015 Form 10-K | 33 Table of Contents | 2015 Form 10-K | 33 Table of Contents For sale recorded . Apple Inc. | 2015 Form 10-K | 34 Table Apple Inc. | 2015 Form 10-K | 34 Table of Contents | 2015 Form 10-K | 34 Table of Contents The Company requirement for period up to 150 day . If there is that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies affected . Apple Inc. | 2015 Form 10-K | 35 Table Apple Inc. | 2015 Form 10-K | 35 Table of Contents | 2015 Form 10-K | 35 Table of Contents Item 7A 35 Table of Contents Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , a hypothetical 2015 and September 27 , 2014 , a hypothetical 100 basis , 2014 , a hypothetical 100 basis point increase in interest would result in a $ 4.3 billion and $ 3.4 billion $ 4.3 billion and $ 3.4 billion incremental decline in the maturity . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company had outstanding aggregate carrying amount of $ 56.0 billion and $ 29.0 billion $ 56.0 billion and $ 29.0 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 to increase by 2015 and September 27 , 2014 to increase by $ 200 2014 to increase by $ 200 million and $ 110 million $ 200 million and $ 110 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , “ Debt . ” , typically for up to 12 month . However , the exposure . Apple Inc. | 2015 Form 10-K | 36 Table Apple Inc. | 2015 Form 10-K | 36 Table of Contents | 2015 Form 10-K | 36 Table of Contents To provide , the Company estimate with 95 % confidence a maximum one-day in fair value of $ 342 million a of September 26 342 million a of September 26 , 2015 compared to a a of September 26 , 2015 compared to a maximum one-day in fair value of $ 240 million a of September 27 240 million a of September 27 , 2014 . Because the a of September 27 , 2014 . Because the Company us analysis performed a of September 26 , 2015 due to the a of September 26 , 2015 due to the inherent limitation position . Apple Inc. | 2015 Form 10-K | 37 Table Apple Inc. | 2015 Form 10-K | 37 Table of Contents | 2015 Form 10-K | 37 Table of Contents Item 8 37 Table of Contents Item 8 . Financial Statements and Supplementary for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 , and September 2015 , September 27 , 2014 , and September 28 , , 2014 , and September 28 , 2013 39 Consolidated Statements , and September 28 , 2013 39 Consolidated Statements of Comprehensive and September 28 , 2013 39 Consolidated Statements of Comprehensive Income for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 , and September 2015 , September 27 , 2014 , and September 28 , , 2014 , and September 28 , 2013 40 Consolidated Balance , and September 28 , 2013 40 Consolidated Balance Sheets a and September 28 , 2013 40 Consolidated Balance Sheets a of Balance Sheets a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 41 Consolidated Statements 2015 and September 27 , 2014 41 Consolidated Statements of Shareholders and September 27 , 2014 41 Consolidated Statements of Shareholders ’ for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 , and September 2015 , September 27 , 2014 , and September 28 , , 2014 , and September 28 , 2013 42 Consolidated Statements , and September 28 , 2013 42 Consolidated Statements of Cash and September 28 , 2013 42 Consolidated Statements of Cash Flows for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 , and September 2015 , September 27 , 2014 , and September 28 , , 2014 , and September 28 , 2013 43 Notes to , and September 28 , 2013 43 Notes to Consolidated Financial and September 28 , 2013 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 68 Reports of Ernst & Young Independent Registered Public Accounting Firm 69 All financial statement schedule have thereto . Apple Inc. | 2015 Form 10-K | 38 Table Apple Inc. | 2015 Form 10-K | 38 Table of Contents | 2015 Form 10-K | 38 Table of Contents CONSOLIDATED STATEMENTS amount ) Years ended September 26 , 2015 September 27 , Years ended September 26 , 2015 September 27 , 2014 September September 26 , 2015 September 27 , 2014 September 28 , , 2015 September 27 , 2014 September 28 , 2013 Net September 27 , 2014 September 28 , 2013 Net sale $ , 2014 September 28 , 2013 Net sale $ 233,715 $ , 2013 Net sale $ 233,715 $ 182,795 $ 170,910 Cost Net sale $ 233,715 $ 182,795 $ 170,910 Cost of sale $ 233,715 $ 182,795 $ 170,910 Cost of sale 140,089 112,258 $ 170,910 Cost of sale 140,089 112,258 106,606 Gross margin 93,626 170,910 Cost of sale 140,089 112,258 106,606 Gross margin 93,626 70,537 Cost of sale 140,089 112,258 106,606 Gross margin 93,626 70,537 64,304 140,089 112,258 106,606 Gross margin 93,626 70,537 64,304 Operating expense : 112,258 106,606 Gross margin 93,626 70,537 64,304 Operating expense : Research 106,606 Gross margin 93,626 70,537 64,304 Operating expense : Research and expense : Research and development 8,067 6,041 4,475 Selling , general : Research and development 8,067 6,041 4,475 Selling , general and Research and development 8,067 6,041 4,475 Selling , general and administrative Selling , general and administrative 14,329 11,993 10,830 Total operating expense , general and administrative 14,329 11,993 10,830 Total operating expense 22,396 general and administrative 14,329 11,993 10,830 Total operating expense 22,396 18,034 11,993 10,830 Total operating expense 22,396 18,034 15,305 Operating income 71,230 10,830 Total operating expense 22,396 18,034 15,305 Operating income 71,230 52,503 Total operating expense 22,396 18,034 15,305 Operating income 71,230 52,503 48,999 22,396 18,034 15,305 Operating income 71,230 52,503 48,999 Other income/ ( 18,034 15,305 Operating income 71,230 52,503 48,999 Other income/ ( expense 15,305 Operating income 71,230 52,503 48,999 Other income/ ( expense ) ( expense ) , net 1,285 980 1,156 Income before provision expense ) , net 1,285 980 1,156 Income before provision for ) , net 1,285 980 1,156 Income before provision for income before provision for income tax 72,515 53,483 50,155 Provision for income provision for income tax 72,515 53,483 50,155 Provision for income tax for income tax 72,515 53,483 50,155 Provision for income tax 19,121 50,155 Provision for income tax 19,121 13,973 13,118 Net income $ Provision for income tax 19,121 13,973 13,118 Net income $ 53,394 for income tax 19,121 13,973 13,118 Net income $ 53,394 $ 13,973 13,118 Net income $ 53,394 $ 39,510 $ 37,037 Earnings Net income $ 53,394 $ 39,510 $ 37,037 Earnings per share $ 53,394 $ 39,510 $ 37,037 Earnings per share : Basic per share : Basic $ 9.28 $ 6.49 $ 5.72 Diluted : Basic $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 9.28 $ 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 6.49 $ 5.72 Diluted $ 9.22 $ 6.45 $ 5.68 Shares 5.72 Diluted $ 9.22 $ 6.45 $ 5.68 Shares used in $ 9.22 $ 6.45 $ 5.68 Shares used in computing earnings earnings per share : Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 per share : Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 6,521,634 share : Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 6,521,634 Cash Basic 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 6,521,634 Cash dividend declared 5,753,421 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 6,521,634 Cash dividend declared per 6,085,572 6,477,320 Diluted 5,793,069 6,122,663 6,521,634 Cash dividend declared per share dividend declared per share $ 1.98 $ 1.82 $ 1.64 See per share $ 1.98 $ 1.82 $ 1.64 See accompanying Notes $ 1.98 $ 1.82 $ 1.64 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 39 Table Apple Inc. | 2015 Form 10-K | 39 Table of Contents | 2015 Form 10-K | 39 Table of Contents CONSOLIDATED STATEMENTS million ) Years ended September 26 , 2015 September 27 , Years ended September 26 , 2015 September 27 , 2014 September September 26 , 2015 September 27 , 2014 September 28 , , 2015 September 27 , 2014 September 28 , 2013 Net September 27 , 2014 September 28 , 2013 Net income $ , 2014 September 28 , 2013 Net income $ 53,394 $ , 2013 Net income $ 53,394 $ 39,510 $ 37,037 Other Net income $ 53,394 $ 39,510 $ 37,037 Other comprehensive income/ $ 53,394 $ 39,510 $ 37,037 Other comprehensive income/ ( loss of tax effect of $ 201 , $ 50 and $ of $ 201 , $ 50 and $ 35 , respectively , $ 50 and $ 35 , respectively ( 411 ) $ 35 , respectively ( 411 ) ( 137 ) ( respectively ( 411 ) ( 137 ) ( 112 ) Change ) ( 137 ) ( 112 ) Change in unrealized gains/losses expense ) of $ ( 441 ) , $ ( 297 441 ) , $ ( 297 ) and $ ( 351 297 ) and $ ( 351 ) , respectively 2,905 1,390 ( 351 ) , respectively 2,905 1,390 522 Adjustment for net 351 ) , respectively 2,905 1,390 522 Adjustment for net ( ) , respectively 2,905 1,390 522 Adjustment for net ( gain ( benefit ) of $ 630 , $ ( 36 ) $ 630 , $ ( 36 ) and $ 255 , ( 36 ) and $ 255 , respectively ( 3,497 ) $ 255 , respectively ( 3,497 ) 149 ( 458 ) , respectively ( 3,497 ) 149 ( 458 ) Total change ( 3,497 ) 149 ( 458 ) Total change in unrealized , net of tax ( 592 ) 1,539 64 Change in of tax ( 592 ) 1,539 64 Change in unrealized gains/losses tax ( 592 ) 1,539 64 Change in unrealized gains/losses on ( expense ) of $ 264 , $ ( 153 ) $ 264 , $ ( 153 ) and $ 458 , ( 153 ) and $ 458 , respectively ( 483 ) $ 458 , respectively ( 483 ) 285 ( 791 ) , respectively ( 483 ) 285 ( 791 ) Adjustment for ( 483 ) 285 ( 791 ) Adjustment for net ( benefit ) of $ ( 32 ) , $ 71 and ( 32 ) , $ 71 and $ 82 , respectively , $ 71 and $ 82 , respectively 59 ( 134 and $ 82 , respectively 59 ( 134 ) ( 131 82 , respectively 59 ( 134 ) ( 131 ) Total 59 ( 134 ) ( 131 ) Total change in unrealized , net of tax ( 424 ) 151 ( 922 ) of tax ( 424 ) 151 ( 922 ) Total other ( 424 ) 151 ( 922 ) Total other comprehensive income/ income/ ( loss ) ( 1,427 ) 1,553 ( 970 ) loss ) ( 1,427 ) 1,553 ( 970 ) Total comprehensive ( 1,427 ) 1,553 ( 970 ) Total comprehensive income $ ) Total comprehensive income $ 51,967 $ 41,063 $ 36,067 See comprehensive income $ 51,967 $ 41,063 $ 36,067 See accompanying Notes $ 51,967 $ 41,063 $ 36,067 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 40 Table Apple Inc. | 2015 Form 10-K | 40 Table of Contents | 2015 Form 10-K | 40 Table of Contents CONSOLIDATED BALANCE and par value ) September 26 , 2015 September 27 , value ) September 26 , 2015 September 27 , 2014 ASSETS September 26 , 2015 September 27 , 2014 ASSETS : Current , 2015 September 27 , 2014 ASSETS : Current asset : Cash and cash equivalent $ 21,120 $ 13,844 Short-term marketable security cash equivalent $ 21,120 $ 13,844 Short-term marketable security 20,481 11,233 $ 13,844 Short-term marketable security 20,481 11,233 Accounts receivable , le 13,844 Short-term marketable security 20,481 11,233 Accounts receivable , le allowance , le allowance of $ 82 and $ 86 , respectively of $ 82 and $ 86 , respectively 16,849 17,460 Inventories and $ 86 , respectively 16,849 17,460 Inventories 2,349 2,111 Deferred $ 86 , respectively 16,849 17,460 Inventories 2,349 2,111 Deferred tax , respectively 16,849 17,460 Inventories 2,349 2,111 Deferred tax asset 5,546 respectively 16,849 17,460 Inventories 2,349 2,111 Deferred tax asset 5,546 4,318 2,349 2,111 Deferred tax asset 5,546 4,318 Vendor non-trade receivables 13,494 2,111 Deferred tax asset 5,546 4,318 Vendor non-trade receivables 13,494 9,759 5,546 4,318 Vendor non-trade receivables 13,494 9,759 Other current asset 9,539 4,318 Vendor non-trade receivables 13,494 9,759 Other current asset 9,539 9,806 13,494 9,759 Other current asset 9,539 9,806 Total current asset 89,378 9,759 Other current asset 9,539 9,806 Total current asset 89,378 68,531 9,539 9,806 Total current asset 89,378 68,531 Long-term marketable security 164,065 9,806 Total current asset 89,378 68,531 Long-term marketable security 164,065 130,162 89,378 68,531 Long-term marketable security 164,065 130,162 Property , plant and 68,531 Long-term marketable security 164,065 130,162 Property , plant and equipment plant and equipment , net 22,471 20,624 Goodwill 5,116 4,616 Acquired and equipment , net 22,471 20,624 Goodwill 5,116 4,616 Acquired intangible , net 22,471 20,624 Goodwill 5,116 4,616 Acquired intangible asset , net 22,471 20,624 Goodwill 5,116 4,616 Acquired intangible asset , net Acquired intangible asset , net 3,893 4,142 Other asset 5,556 3,764 intangible asset , net 3,893 4,142 Other asset 5,556 3,764 Total net 3,893 4,142 Other asset 5,556 3,764 Total asset $ 290,479 3,893 4,142 Other asset 5,556 3,764 Total asset $ 290,479 $ 5,556 3,764 Total asset $ 290,479 $ 231,839 LIABILITIES AND SHAREHOLDERS Total asset $ 290,479 $ 231,839 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 Accounts payable $ 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred 35,490 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 $ 30,196 Accrued expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial expense 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 25,181 18,453 Deferred revenue 8,940 8,491 Commercial paper 8,499 6,308 Current revenue 8,940 8,491 Commercial paper 8,499 6,308 Current portion of long-term 8,940 8,491 Commercial paper 8,499 6,308 Current portion of long-term debt Current portion of long-term debt 2,500 0 Total current liability 80,610 portion of long-term debt 2,500 0 Total current liability 80,610 63,448 2,500 0 Total current liability 80,610 63,448 Deferred revenue , non-current 0 Total current liability 80,610 63,448 Deferred revenue , non-current 3,624 63,448 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Deferred revenue , non-current 3,624 3,031 Long-term debt 53,463 28,987 Other non-current 3,624 3,031 Long-term debt 53,463 28,987 Other non-current liability 33,427 3,624 3,031 Long-term debt 53,463 28,987 Other non-current liability 33,427 24,826 53,463 28,987 Other non-current liability 33,427 24,826 Total liability 171,124 120,292 28,987 Other non-current liability 33,427 24,826 Total liability 171,124 120,292 Commitments liability 33,427 24,826 Total liability 171,124 120,292 Commitments and contingency Shareholders 33,427 24,826 Total liability 171,124 120,292 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.00001 par value : 12,600,000 share authorized ; 5,578,753 and : 12,600,000 share authorized ; 5,578,753 and 5,866,161 share issued and share authorized ; 5,578,753 and 5,866,161 share issued and outstanding , issued and outstanding , respectively 27,416 23,313 Retained earnings 92,284 87,152 and outstanding , respectively 27,416 23,313 Retained earnings 92,284 87,152 Accumulated respectively 27,416 23,313 Retained earnings 92,284 87,152 Accumulated other comprehensive income 27,416 23,313 Retained earnings 92,284 87,152 Accumulated other comprehensive income ( Accumulated other comprehensive income ( 345 ) 1,082 Total shareholder ’ comprehensive income ( 345 ) 1,082 Total shareholder ’ equity 119,355 1,082 Total shareholder ’ equity 119,355 111,547 Total liability and shareholder Total shareholder ’ equity 119,355 111,547 Total liability and shareholder ’ and shareholder ’ equity $ 290,479 $ 231,839 See accompanying Notes ’ equity $ 290,479 $ 231,839 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 41 Table Apple Inc. | 2015 Form 10-K | 41 Table of Contents | 2015 Form 10-K | 41 Table of Contents CONSOLIDATED STATEMENTS Amount Balances a of September 29 , 2012 6,574,458 $ 16,422 a of September 29 , 2012 6,574,458 $ 16,422 $ 101,289 of September 29 , 2012 6,574,458 $ 16,422 $ 101,289 $ 29 , 2012 6,574,458 $ 16,422 $ 101,289 $ 499 $ 2012 6,574,458 $ 16,422 $ 101,289 $ 499 $ 118,210 Net $ 16,422 $ 101,289 $ 499 $ 118,210 Net income 0 $ 101,289 $ 499 $ 118,210 Net income 0 0 37,037 499 $ 118,210 Net income 0 0 37,037 0 37,037 Other $ 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive 118,210 Net income 0 0 37,037 0 37,037 Other comprehensive income/ Net income 0 0 37,037 0 37,037 Other comprehensive income/ ( income 0 0 37,037 0 37,037 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 ( 970 ) income/ ( loss ) 0 0 0 ( 970 ) ( ( loss ) 0 0 0 ( 970 ) ( 970 ) 0 0 0 ( 970 ) ( 970 ) Dividends 0 ( 970 ) ( 970 ) Dividends and dividend equivalent Dividends and dividend equivalent declared 0 0 ( 10,676 ) 0 and dividend equivalent declared 0 0 ( 10,676 ) 0 ( equivalent declared 0 0 ( 10,676 ) 0 ( 10,676 ) 0 0 ( 10,676 ) 0 ( 10,676 ) Repurchase of ( 10,676 ) 0 ( 10,676 ) Repurchase of common stock Repurchase of common stock ( 328,837 ) 0 ( 22,950 ) common stock ( 328,837 ) 0 ( 22,950 ) 0 ( ( 328,837 ) 0 ( 22,950 ) 0 ( 22,950 ) ) 0 ( 22,950 ) 0 ( 22,950 ) Share-based compensation ( 22,950 ) 0 ( 22,950 ) Share-based compensation 0 2,253 ( 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common 22,950 ) Share-based compensation 0 2,253 0 0 2,253 Common stock ) Share-based compensation 0 2,253 0 0 2,253 Common stock issued Share-based compensation 0 2,253 0 0 2,253 Common stock issued , compensation 0 2,253 0 0 2,253 Common stock issued , net share withheld for employee tax 48,873 ( 143 ) ( 444 for employee tax 48,873 ( 143 ) ( 444 ) 0 48,873 ( 143 ) ( 444 ) 0 ( 587 ) 143 ) ( 444 ) 0 ( 587 ) Tax benefit ( 444 ) 0 ( 587 ) Tax benefit from equity , including transfer pricing adjustment 0 1,232 0 0 1,232 Balances including transfer pricing adjustment 0 1,232 0 0 1,232 Balances a transfer pricing adjustment 0 1,232 0 0 1,232 Balances a of pricing adjustment 0 1,232 0 0 1,232 Balances a of September adjustment 0 1,232 0 0 1,232 Balances a of September 28 1,232 Balances a of September 28 , 2013 6,294,494 19,764 104,256 a of September 28 , 2013 6,294,494 19,764 104,256 ( 471 of September 28 , 2013 6,294,494 19,764 104,256 ( 471 ) September 28 , 2013 6,294,494 19,764 104,256 ( 471 ) 123,549 28 , 2013 6,294,494 19,764 104,256 ( 471 ) 123,549 Net 2013 6,294,494 19,764 104,256 ( 471 ) 123,549 Net income 0 19,764 104,256 ( 471 ) 123,549 Net income 0 0 39,510 471 ) 123,549 Net income 0 0 39,510 0 39,510 Other ) 123,549 Net income 0 0 39,510 0 39,510 Other comprehensive 123,549 Net income 0 0 39,510 0 39,510 Other comprehensive income/ Net income 0 0 39,510 0 39,510 Other comprehensive income/ ( income 0 0 39,510 0 39,510 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 1,553 1,553 Dividends income/ ( loss ) 0 0 0 1,553 1,553 Dividends and ( loss ) 0 0 0 1,553 1,553 Dividends and dividend loss ) 0 0 0 1,553 1,553 Dividends and dividend equivalent ) 0 0 0 1,553 1,553 Dividends and dividend equivalent declared Dividends and dividend equivalent declared 0 0 ( 11,215 ) 0 and dividend equivalent declared 0 0 ( 11,215 ) 0 ( equivalent declared 0 0 ( 11,215 ) 0 ( 11,215 ) 0 0 ( 11,215 ) 0 ( 11,215 ) Repurchase of ( 11,215 ) 0 ( 11,215 ) Repurchase of common stock Repurchase of common stock ( 488,677 ) 0 ( 45,000 ) common stock ( 488,677 ) 0 ( 45,000 ) 0 ( ( 488,677 ) 0 ( 45,000 ) 0 ( 45,000 ) ) 0 ( 45,000 ) 0 ( 45,000 ) Share-based compensation ( 45,000 ) 0 ( 45,000 ) Share-based compensation 0 2,863 ( 45,000 ) Share-based compensation 0 2,863 0 0 2,863 Common 45,000 ) Share-based compensation 0 2,863 0 0 2,863 Common stock ) Share-based compensation 0 2,863 0 0 2,863 Common stock issued Share-based compensation 0 2,863 0 0 2,863 Common stock issued , compensation 0 2,863 0 0 2,863 Common stock issued , net share withheld for employee tax 60,344 ( 49 ) ( 399 for employee tax 60,344 ( 49 ) ( 399 ) 0 60,344 ( 49 ) ( 399 ) 0 ( 448 ) 49 ) ( 399 ) 0 ( 448 ) Tax benefit ( 399 ) 0 ( 448 ) Tax benefit from equity , including transfer pricing adjustment 0 735 0 0 735 Balances including transfer pricing adjustment 0 735 0 0 735 Balances a transfer pricing adjustment 0 735 0 0 735 Balances a of pricing adjustment 0 735 0 0 735 Balances a of September adjustment 0 735 0 0 735 Balances a of September 27 735 Balances a of September 27 , 2014 5,866,161 23,313 87,152 a of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 0 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 0 0 53,394 87,152 1,082 111,547 Net income 0 0 53,394 0 53,394 Other 1,082 111,547 Net income 0 0 53,394 0 53,394 Other comprehensive 111,547 Net income 0 0 53,394 0 53,394 Other comprehensive income/ Net income 0 0 53,394 0 53,394 Other comprehensive income/ ( income 0 0 53,394 0 53,394 Other comprehensive income/ ( loss comprehensive income/ ( loss ) 0 0 0 ( 1,427 ) income/ ( loss ) 0 0 0 ( 1,427 ) ( ( loss ) 0 0 0 ( 1,427 ) ( 1,427 ) 0 0 0 ( 1,427 ) ( 1,427 ) Dividends 0 ( 1,427 ) ( 1,427 ) Dividends and dividend equivalent Dividends and dividend equivalent declared 0 0 ( 11,627 ) 0 and dividend equivalent declared 0 0 ( 11,627 ) 0 ( equivalent declared 0 0 ( 11,627 ) 0 ( 11,627 ) 0 0 ( 11,627 ) 0 ( 11,627 ) Repurchase of ( 11,627 ) 0 ( 11,627 ) Repurchase of common stock Repurchase of common stock ( 325,032 ) 0 ( 36,026 ) common stock ( 325,032 ) 0 ( 36,026 ) 0 ( ( 325,032 ) 0 ( 36,026 ) 0 ( 36,026 ) ) 0 ( 36,026 ) 0 ( 36,026 ) Share-based compensation ( 36,026 ) 0 ( 36,026 ) Share-based compensation 0 3,586 ( 36,026 ) Share-based compensation 0 3,586 0 0 3,586 Common 36,026 ) Share-based compensation 0 3,586 0 0 3,586 Common stock ) Share-based compensation 0 3,586 0 0 3,586 Common stock issued Share-based compensation 0 3,586 0 0 3,586 Common stock issued , compensation 0 3,586 0 0 3,586 Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) 0 37,624 ( 231 ) ( 609 ) 0 ( 840 ) 231 ) ( 609 ) 0 ( 840 ) Tax benefit ( 609 ) 0 ( 840 ) Tax benefit from equity , including transfer pricing adjustment 0 748 0 0 748 Balances including transfer pricing adjustment 0 748 0 0 748 Balances a transfer pricing adjustment 0 748 0 0 748 Balances a of pricing adjustment 0 748 0 0 748 Balances a of September adjustment 0 748 0 0 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 $ 27,416 a of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 of September 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ 26 , 2015 5,578,753 $ 27,416 $ 92,284 $ ( 345 2015 5,578,753 $ 27,416 $ 92,284 $ ( 345 ) $ 27,416 $ 92,284 $ ( 345 ) $ 119,355 See accompanying $ ( 345 ) $ 119,355 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 42 Table Apple Inc. | 2015 Form 10-K | 42 Table of Contents | 2015 Form 10-K | 42 Table of Contents CONSOLIDATED STATEMENTS million ) Years ended September 26 , 2015 September 27 , Years ended September 26 , 2015 September 27 , 2014 September September 26 , 2015 September 27 , 2014 September 28 , , 2015 September 27 , 2014 September 28 , 2013 Cash September 27 , 2014 September 28 , 2013 Cash and cash , 2014 September 28 , 2013 Cash and cash equivalent , beginning of the year $ 13,844 $ 14,259 $ 10,746 Operating the year $ 13,844 $ 14,259 $ 10,746 Operating activity : $ 13,844 $ 14,259 $ 10,746 Operating activity : Net income Operating activity : Net income 53,394 39,510 37,037 Adjustments to reconcile activity : Net income 53,394 39,510 37,037 Adjustments to reconcile net : Net income 53,394 39,510 37,037 Adjustments to reconcile net income activity : Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense : Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense 3,586 Depreciation and amortization 11,257 7,946 6,757 Share-based compensation expense 3,586 2,863 7,946 6,757 Share-based compensation expense 3,586 2,863 2,253 Deferred income tax 6,757 Share-based compensation expense 3,586 2,863 2,253 Deferred income tax expense Share-based compensation expense 3,586 2,863 2,253 Deferred income tax expense 1,382 2,253 Deferred income tax expense 1,382 2,347 1,141 Changes in operating Deferred income tax expense 1,382 2,347 1,141 Changes in operating asset income tax expense 1,382 2,347 1,141 Changes in operating asset and : Accounts receivable , net 611 ( 4,232 ) ( 2,172 receivable , net 611 ( 4,232 ) ( 2,172 ) Inventories 611 ( 4,232 ) ( 2,172 ) Inventories ( 238 ) ( 2,172 ) Inventories ( 238 ) ( 76 ) ( Inventories ( 238 ) ( 76 ) ( 973 ) Vendor ) ( 76 ) ( 973 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 3,735 ) ( 2,220 ) 223 receivables ( 3,735 ) ( 2,220 ) 223 Other current and 3,735 ) ( 2,220 ) 223 Other current and non-current asset current and non-current asset ( 179 ) 167 1,080 Accounts payable non-current asset ( 179 ) 167 1,080 Accounts payable 5,400 5,938 asset ( 179 ) 167 1,080 Accounts payable 5,400 5,938 2,340 ) 167 1,080 Accounts payable 5,400 5,938 2,340 Deferred revenue 1,042 167 1,080 Accounts payable 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,080 Accounts payable 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,459 5,400 5,938 2,340 Deferred revenue 1,042 1,460 1,459 Other current and 5,938 2,340 Deferred revenue 1,042 1,460 1,459 Other current and non-current 2,340 Deferred revenue 1,042 1,460 1,459 Other current and non-current liability Other current and non-current liability 8,746 6,010 4,521 Cash generated by current and non-current liability 8,746 6,010 4,521 Cash generated by operating and non-current liability 8,746 6,010 4,521 Cash generated by operating activity Cash generated by operating activity 81,266 59,713 53,666 Investing activity : generated by operating activity 81,266 59,713 53,666 Investing activity : Purchases by operating activity 81,266 59,713 53,666 Investing activity : Purchases of Purchases of marketable security ( 166,402 ) ( 217,128 ) ( security ( 166,402 ) ( 217,128 ) ( 148,489 ) Proceeds ) ( 217,128 ) ( 148,489 ) Proceeds from maturity of from maturity of marketable security 14,538 18,810 20,317 Proceeds from sale maturity of marketable security 14,538 18,810 20,317 Proceeds from sale of of marketable security 14,538 18,810 20,317 Proceeds from sale of marketable from sale of marketable security 107,447 189,301 104,130 Payments made in sale of marketable security 107,447 189,301 104,130 Payments made in connection of marketable security 107,447 189,301 104,130 Payments made in connection with business acquisition , net ( 343 ) ( 3,765 ) ( net ( 343 ) ( 3,765 ) ( 496 ) Payments ) ( 3,765 ) ( 496 ) Payments for acquisition of , plant and equipment ( 11,247 ) ( 9,571 ) ( equipment ( 11,247 ) ( 9,571 ) ( 8,165 ) Payments ) ( 9,571 ) ( 8,165 ) Payments for acquisition of acquisition of intangible asset ( 241 ) ( 242 ) ( asset ( 241 ) ( 242 ) ( 911 ) Other ) ( 242 ) ( 911 ) Other ( 26 ) ( 911 ) Other ( 26 ) 16 ( 160 ) ) Other ( 26 ) 16 ( 160 ) Cash used ( 26 ) 16 ( 160 ) Cash used in investing used in investing activity ( 56,274 ) ( 22,579 ) ( activity ( 56,274 ) ( 22,579 ) ( 33,774 ) Financing ) ( 22,579 ) ( 33,774 ) Financing activity : Proceeds from issuance of common stock 543 730 530 Excess tax benefit issuance of common stock 543 730 530 Excess tax benefit from of common stock 543 730 530 Excess tax benefit from equity tax benefit from equity award 749 739 701 Taxes paid related benefit from equity award 749 739 701 Taxes paid related to from equity award 749 739 701 Taxes paid related to net settlement of equity award ( 1,499 ) ( 1,158 ) ( award ( 1,499 ) ( 1,158 ) ( 1,082 ) Dividends ) ( 1,158 ) ( 1,082 ) Dividends and dividend equivalent and dividend equivalent paid ( 11,561 ) ( 11,126 ) ( paid ( 11,561 ) ( 11,126 ) ( 10,564 ) Repurchase ) ( 11,126 ) ( 10,564 ) Repurchase of common stock Repurchase of common stock ( 35,253 ) ( 45,000 ) ( stock ( 35,253 ) ( 45,000 ) ( 22,860 ) Proceeds ) ( 45,000 ) ( 22,860 ) Proceeds from issuance of of term debt , net 27,114 11,960 16,896 Change in commercial term debt , net 27,114 11,960 16,896 Change in commercial paper debt , net 27,114 11,960 16,896 Change in commercial paper , in commercial paper , net 2,191 6,306 0 Cash used in commercial paper , net 2,191 6,306 0 Cash used in financing paper , net 2,191 6,306 0 Cash used in financing activity used in financing activity ( 17,716 ) ( 37,549 ) ( activity ( 17,716 ) ( 37,549 ) ( 16,379 ) Increase/ ) ( 37,549 ) ( 16,379 ) Increase/ ( decrease ) in cash and cash equivalent 7,276 ( 415 ) 3,513 Cash and cash equivalent 7,276 ( 415 ) 3,513 Cash and cash equivalent 7,276 ( 415 ) 3,513 Cash and cash equivalent , end of the year $ 21,120 $ 13,844 $ 14,259 Supplemental the year $ 21,120 $ 13,844 $ 14,259 Supplemental cash flow $ 21,120 $ 13,844 $ 14,259 Supplemental cash flow disclosure : income tax , net $ 13,252 $ 10,026 $ 9,128 Cash , net $ 13,252 $ 10,026 $ 9,128 Cash paid for $ 13,252 $ 10,026 $ 9,128 Cash paid for interest $ Cash paid for interest $ 514 $ 339 $ 0 See for interest $ 514 $ 339 $ 0 See accompanying Notes $ 514 $ 339 $ 0 See accompanying Notes to Consolidated Statements . Apple Inc. | 2015 Form 10-K | 43 Table Apple Inc. | 2015 Form 10-K | 43 Table of Contents | 2015 Form 10-K | 43 Table of Contents Notes to to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the Company ’ s fiscal year 2015 , 2014 and 2013 ended s fiscal year 2015 , 2014 and 2013 ended on September year 2015 , 2014 and 2013 ended on September 26 , and 2013 ended on September 26 , 2015 , September 27 ended on September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 , respectively . 2014 and September 28 , 2013 , respectively . An additional calendar quarter . Fiscal year 2015 , 2014 and 2013 each . Fiscal year 2015 , 2014 and 2013 each spanned 52 year 2015 , 2014 and 2013 each spanned 52 week . 2014 and 2013 each spanned 52 week . Unless otherwise stated Operations . Apple Inc. | 2015 Form 10-K | 44 Table Apple Inc. | 2015 Form 10-K | 44 Table of Contents | 2015 Form 10-K | 44 Table of Contents The Company product . Beginning in September 2015 , the Company reduced the device and Mac between $ 5 and $ 10 to reflect between $ 5 and $ 10 to reflect the increase in sale . Apple Inc. | 2015 Form 10-K | 45 Table Apple Inc. | 2015 Form 10-K | 45 Table of Contents | 2015 Form 10-K | 45 Table of Contents Warranty Costs . Advertising expense wa $ 1.8 billion , $ 1.2 billion $ 1.8 billion , $ 1.2 billion and $ 1.1 billion $ 1.2 billion and $ 1.1 billion for 2015 , 2014 and $ 1.1 billion for 2015 , 2014 and 2013 , 1.1 billion for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . Share-based Compensation can be found in Note 9 , “ Benefit Plans . that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” security . Apple Inc. | 2015 Form 10-K | 46 Table Apple Inc. | 2015 Form 10-K | 46 Table of Contents | 2015 Form 10-K | 46 Table of Contents The following diluted earnings per share for 2015 , 2014 and 2013 ( per share for 2015 , 2014 and 2013 ( net income for 2015 , 2014 and 2013 ( net income in million share in thousand ) : 2015 2014 2013 Numerator : Net in thousand ) : 2015 2014 2013 Numerator : Net income thousand ) : 2015 2014 2013 Numerator : Net income $ Numerator : Net income $ 53,394 $ 39,510 $ 37,037 Denominator Net income $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average $ 53,394 $ 39,510 $ 37,037 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,753,421 6,085,572 6,477,320 Effect of dilutive : Weighted-average share outstanding 5,753,421 6,085,572 6,477,320 Effect of dilutive security Weighted-average share outstanding 5,753,421 6,085,572 6,477,320 Effect of dilutive security 39,648 6,477,320 Effect of dilutive security 39,648 37,091 44,314 Weighted-average diluted share Effect of dilutive security 39,648 37,091 44,314 Weighted-average diluted share 5,793,069 of dilutive security 39,648 37,091 44,314 Weighted-average diluted share 5,793,069 6,122,663 37,091 44,314 Weighted-average diluted share 5,793,069 6,122,663 6,521,634 Basic earnings per 44,314 Weighted-average diluted share 5,793,069 6,122,663 6,521,634 Basic earnings per share Weighted-average diluted share 5,793,069 6,122,663 6,521,634 Basic earnings per share $ Basic earnings per share $ 9.28 $ 6.49 $ 5.72 Diluted per share $ 9.28 $ 6.49 $ 5.72 Diluted earnings per $ 9.28 $ 6.49 $ 5.72 Diluted earnings per share $ Diluted earnings per share $ 9.22 $ 6.45 $ 5.68 Potentially per share $ 9.22 $ 6.45 $ 5.68 Potentially dilutive security $ 9.22 $ 6.45 $ 5.68 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2015 Form 10-K | 47 Table Apple Inc. | 2015 Form 10-K | 47 Table of Contents | 2015 Form 10-K | 47 Table of Contents Allowance for period . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company ’ s building is the lesser of 30 year or the remaining life property and equipment wa $ 9.2 billion , $ 6.9 billion $ 9.2 billion , $ 6.9 billion and $ 5.8 billion $ 6.9 billion and $ 5.8 billion during 2015 , 2014 and $ 5.8 billion during 2015 , 2014 and 2013 , 5.8 billion during 2015 , 2014 and 2013 , respectively . during 2015 , 2014 and 2013 , respectively . Long-Lived Assets indefinite lived intangible asset during 2015 , 2014 and 2013 . intangible asset during 2015 , 2014 and 2013 . The Company during 2015 , 2014 and 2013 . The Company established reporting each reporting unit . In 2015 and 2014 , the Company unit . In 2015 and 2014 , the Company ’ s fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally liability . Apple Inc. | 2015 Form 10-K | 48 Table Apple Inc. | 2015 Form 10-K | 48 Table of Contents | 2015 Form 10-K | 48 Table of Contents The Company at historical rate . Note 2 – Financial Instruments Cash , marketable security a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 11,389 $ 0 $ 0 $ Securities Cash $ 11,389 $ 0 $ 0 $ 11,389 $ $ 11,389 $ 0 $ 0 $ 11,389 $ 11,389 $ $ 0 $ 0 $ 11,389 $ 11,389 $ 0 $ $ 0 $ 11,389 $ 11,389 $ 0 $ 0 Level $ 11,389 $ 11,389 $ 0 $ 0 Level 1 : $ 11,389 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,798 1 : Money market fund 1,798 0 0 1,798 1,798 0 : Money market fund 1,798 0 0 1,798 1,798 0 0 Money market fund 1,798 0 0 1,798 1,798 0 0 Mutual market fund 1,798 0 0 1,798 1,798 0 0 Mutual fund fund 1,798 0 0 1,798 1,798 0 0 Mutual fund 1,772 1,798 0 0 1,798 1,798 0 0 Mutual fund 1,772 0 0 0 1,798 1,798 0 0 Mutual fund 1,772 0 ( 1,798 0 0 Mutual fund 1,772 0 ( 144 ) 1,628 0 0 Mutual fund 1,772 0 ( 144 ) 1,628 0 Mutual fund 1,772 0 ( 144 ) 1,628 0 1,628 0 1,772 0 ( 144 ) 1,628 0 1,628 0 Subtotal 3,570 0 ( 144 ) 1,628 0 1,628 0 Subtotal 3,570 0 ( 144 ) 1,628 0 1,628 0 Subtotal 3,570 0 ( 144 ) 1,628 0 1,628 0 Subtotal 3,570 0 ( 144 1,628 0 1,628 0 Subtotal 3,570 0 ( 144 ) 3,426 0 1,628 0 Subtotal 3,570 0 ( 144 ) 3,426 1,798 0 Subtotal 3,570 0 ( 144 ) 3,426 1,798 1,628 0 3,570 0 ( 144 ) 3,426 1,798 1,628 0 Level 2 0 ( 144 ) 3,426 1,798 1,628 0 Level 2 : ( 144 ) 3,426 1,798 1,628 0 Level 2 : U.S. 144 ) 3,426 1,798 1,628 0 Level 2 : U.S. Treasury 3,426 1,798 1,628 0 Level 2 : U.S. Treasury security 34,902 2 : U.S. Treasury security 34,902 181 ( 1 ) 35,082 : U.S. Treasury security 34,902 181 ( 1 ) 35,082 0 Treasury security 34,902 181 ( 1 ) 35,082 0 3,498 31,584 34,902 181 ( 1 ) 35,082 0 3,498 31,584 U.S. agency 181 ( 1 ) 35,082 0 3,498 31,584 U.S. agency security ( 1 ) 35,082 0 3,498 31,584 U.S. agency security 5,864 1 ) 35,082 0 3,498 31,584 U.S. agency security 5,864 14 3,498 31,584 U.S. agency security 5,864 14 0 5,878 841 767 31,584 U.S. agency security 5,864 14 0 5,878 841 767 4,270 U.S. agency security 5,864 14 0 5,878 841 767 4,270 Non-U.S. agency security 5,864 14 0 5,878 841 767 4,270 Non-U.S. government security 5,864 14 0 5,878 841 767 4,270 Non-U.S. government security 5,864 14 0 5,878 841 767 4,270 Non-U.S. government security 6,356 14 0 5,878 841 767 4,270 Non-U.S. government security 6,356 45 767 4,270 Non-U.S. government security 6,356 45 ( 167 ) 6,234 4,270 Non-U.S. government security 6,356 45 ( 167 ) 6,234 43 government security 6,356 45 ( 167 ) 6,234 43 135 6,056 6,356 45 ( 167 ) 6,234 43 135 6,056 Certificates of 45 ( 167 ) 6,234 43 135 6,056 Certificates of deposit ( 167 ) 6,234 43 135 6,056 Certificates of deposit and 167 ) 6,234 43 135 6,056 Certificates of deposit and time of deposit and time deposit 4,347 0 0 4,347 2,065 1,405 deposit and time deposit 4,347 0 0 4,347 2,065 1,405 877 and time deposit 4,347 0 0 4,347 2,065 1,405 877 Commercial time deposit 4,347 0 0 4,347 2,065 1,405 877 Commercial paper deposit 4,347 0 0 4,347 2,065 1,405 877 Commercial paper 6,016 4,347 0 0 4,347 2,065 1,405 877 Commercial paper 6,016 0 0 0 4,347 2,065 1,405 877 Commercial paper 6,016 0 0 2,065 1,405 877 Commercial paper 6,016 0 0 6,016 4,981 1,035 1,405 877 Commercial paper 6,016 0 0 6,016 4,981 1,035 0 877 Commercial paper 6,016 0 0 6,016 4,981 1,035 0 Corporate Commercial paper 6,016 0 0 6,016 4,981 1,035 0 Corporate security paper 6,016 0 0 6,016 4,981 1,035 0 Corporate security 116,908 6,016 0 0 6,016 4,981 1,035 0 Corporate security 116,908 242 0 0 6,016 4,981 1,035 0 Corporate security 116,908 242 ( 4,981 1,035 0 Corporate security 116,908 242 ( 985 ) 116,165 1,035 0 Corporate security 116,908 242 ( 985 ) 116,165 3 Corporate security 116,908 242 ( 985 ) 116,165 3 11,948 104,214 116,908 242 ( 985 ) 116,165 3 11,948 104,214 Municipal security 242 ( 985 ) 116,165 3 11,948 104,214 Municipal security 947 ( 985 ) 116,165 3 11,948 104,214 Municipal security 947 5 985 ) 116,165 3 11,948 104,214 Municipal security 947 5 0 3 11,948 104,214 Municipal security 947 5 0 952 0 48 11,948 104,214 Municipal security 947 5 0 952 0 48 904 104,214 Municipal security 947 5 0 952 0 48 904 Mortgage- Municipal security 947 5 0 952 0 48 904 Mortgage- and security 947 5 0 952 0 48 904 Mortgage- and asset-backed 947 5 0 952 0 48 904 Mortgage- and asset-backed security 5 0 952 0 48 904 Mortgage- and asset-backed security 16,121 904 Mortgage- and asset-backed security 16,121 87 ( 31 ) 16,177 Mortgage- and asset-backed security 16,121 87 ( 31 ) 16,177 0 asset-backed security 16,121 87 ( 31 ) 16,177 0 17 16,160 16,121 87 ( 31 ) 16,177 0 17 16,160 Subtotal 191,461 87 ( 31 ) 16,177 0 17 16,160 Subtotal 191,461 574 ( 31 ) 16,177 0 17 16,160 Subtotal 191,461 574 ( 31 ) 16,177 0 17 16,160 Subtotal 191,461 574 ( 1,184 16,177 0 17 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 0 17 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 7,933 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 7,933 18,853 164,065 191,461 574 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 574 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 $ 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 $ 574 7,933 18,853 164,065 Total $ 206,420 $ 574 $ ( 1,328 164,065 Total $ 206,420 $ 574 $ ( 1,328 ) $ 206,420 $ 574 $ ( 1,328 ) $ 205,666 $ 21,120 $ ( 1,328 ) $ 205,666 $ 21,120 $ 20,481 $ 1,328 ) $ 205,666 $ 21,120 $ 20,481 $ 164,065 Apple $ 205,666 $ 21,120 $ 20,481 $ 164,065 Apple Inc. | $ 21,120 $ 20,481 $ 164,065 Apple Inc. | 2015 Form $ 164,065 Apple Inc. | 2015 Form 10-K | 49 Table Apple Inc. | 2015 Form 10-K | 49 Table of Contents | 2015 Form 10-K | 49 Table of Contents 2014 Adjusted | 49 Table of Contents 2014 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 10,232 $ 0 $ 0 $ Securities Cash $ 10,232 $ 0 $ 0 $ 10,232 $ $ 10,232 $ 0 $ 0 $ 10,232 $ 10,232 $ $ 0 $ 0 $ 10,232 $ 10,232 $ 0 $ $ 0 $ 10,232 $ 10,232 $ 0 $ 0 Level $ 10,232 $ 10,232 $ 0 $ 0 Level 1 : $ 10,232 $ 0 $ 0 Level 1 : Money market $ 0 $ 0 Level 1 : Money market fund 1,546 1 : Money market fund 1,546 0 0 1,546 1,546 0 : Money market fund 1,546 0 0 1,546 1,546 0 0 Money market fund 1,546 0 0 1,546 1,546 0 0 Mutual market fund 1,546 0 0 1,546 1,546 0 0 Mutual fund fund 1,546 0 0 1,546 1,546 0 0 Mutual fund 2,531 1,546 0 0 1,546 1,546 0 0 Mutual fund 2,531 1 0 0 1,546 1,546 0 0 Mutual fund 2,531 1 ( 1,546 0 0 Mutual fund 2,531 1 ( 132 ) 2,400 0 0 Mutual fund 2,531 1 ( 132 ) 2,400 0 Mutual fund 2,531 1 ( 132 ) 2,400 0 2,400 0 2,531 1 ( 132 ) 2,400 0 2,400 0 Subtotal 4,077 1 ( 132 ) 2,400 0 2,400 0 Subtotal 4,077 1 ( 132 ) 2,400 0 2,400 0 Subtotal 4,077 1 ( 132 ) 2,400 0 2,400 0 Subtotal 4,077 1 ( 132 2,400 0 2,400 0 Subtotal 4,077 1 ( 132 ) 3,946 0 2,400 0 Subtotal 4,077 1 ( 132 ) 3,946 1,546 0 Subtotal 4,077 1 ( 132 ) 3,946 1,546 2,400 0 4,077 1 ( 132 ) 3,946 1,546 2,400 0 Level 2 1 ( 132 ) 3,946 1,546 2,400 0 Level 2 : ( 132 ) 3,946 1,546 2,400 0 Level 2 : U.S. 132 ) 3,946 1,546 2,400 0 Level 2 : U.S. Treasury 3,946 1,546 2,400 0 Level 2 : U.S. Treasury security 23,140 2 : U.S. Treasury security 23,140 15 ( 9 ) 23,146 : U.S. Treasury security 23,140 15 ( 9 ) 23,146 12 Treasury security 23,140 15 ( 9 ) 23,146 12 607 22,527 23,140 15 ( 9 ) 23,146 12 607 22,527 U.S. agency 15 ( 9 ) 23,146 12 607 22,527 U.S. agency security ( 9 ) 23,146 12 607 22,527 U.S. agency security 7,373 9 ) 23,146 12 607 22,527 U.S. agency security 7,373 3 607 22,527 U.S. agency security 7,373 3 ( 11 ) 7,365 22,527 U.S. agency security 7,373 3 ( 11 ) 7,365 652 agency security 7,373 3 ( 11 ) 7,365 652 157 6,556 7,373 3 ( 11 ) 7,365 652 157 6,556 Non-U.S. government 3 ( 11 ) 7,365 652 157 6,556 Non-U.S. government security ( 11 ) 7,365 652 157 6,556 Non-U.S. government security 6,925 11 ) 7,365 652 157 6,556 Non-U.S. government security 6,925 69 157 6,556 Non-U.S. government security 6,925 69 ( 69 ) 6,925 6,556 Non-U.S. government security 6,925 69 ( 69 ) 6,925 0 government security 6,925 69 ( 69 ) 6,925 0 204 6,721 6,925 69 ( 69 ) 6,925 0 204 6,721 Certificates of 69 ( 69 ) 6,925 0 204 6,721 Certificates of deposit ( 69 ) 6,925 0 204 6,721 Certificates of deposit and 69 ) 6,925 0 204 6,721 Certificates of deposit and time of deposit and time deposit 3,832 0 0 3,832 1,230 1,233 deposit and time deposit 3,832 0 0 3,832 1,230 1,233 1,369 and time deposit 3,832 0 0 3,832 1,230 1,233 1,369 Commercial time deposit 3,832 0 0 3,832 1,230 1,233 1,369 Commercial paper deposit 3,832 0 0 3,832 1,230 1,233 1,369 Commercial paper 475 3,832 0 0 3,832 1,230 1,233 1,369 Commercial paper 475 0 0 0 3,832 1,230 1,233 1,369 Commercial paper 475 0 0 1,230 1,233 1,369 Commercial paper 475 0 0 475 166 309 1,233 1,369 Commercial paper 475 0 0 475 166 309 0 1,369 Commercial paper 475 0 0 475 166 309 0 Corporate Commercial paper 475 0 0 475 166 309 0 Corporate security paper 475 0 0 475 166 309 0 Corporate security 85,431 475 0 0 475 166 309 0 Corporate security 85,431 296 0 0 475 166 309 0 Corporate security 85,431 296 ( 166 309 0 Corporate security 85,431 296 ( 241 ) 85,486 309 0 Corporate security 85,431 296 ( 241 ) 85,486 6 Corporate security 85,431 296 ( 241 ) 85,486 6 6,298 79,182 85,431 296 ( 241 ) 85,486 6 6,298 79,182 Municipal security 296 ( 241 ) 85,486 6 6,298 79,182 Municipal security 940 ( 241 ) 85,486 6 6,298 79,182 Municipal security 940 8 241 ) 85,486 6 6,298 79,182 Municipal security 940 8 0 6 6,298 79,182 Municipal security 940 8 0 948 0 0 6,298 79,182 Municipal security 940 8 0 948 0 0 948 79,182 Municipal security 940 8 0 948 0 0 948 Mortgage- Municipal security 940 8 0 948 0 0 948 Mortgage- and security 940 8 0 948 0 0 948 Mortgage- and asset-backed 940 8 0 948 0 0 948 Mortgage- and asset-backed security 8 0 948 0 0 948 Mortgage- and asset-backed security 12,907 948 Mortgage- and asset-backed security 12,907 26 ( 49 ) 12,884 Mortgage- and asset-backed security 12,907 26 ( 49 ) 12,884 0 asset-backed security 12,907 26 ( 49 ) 12,884 0 25 12,859 12,907 26 ( 49 ) 12,884 0 25 12,859 Subtotal 141,023 26 ( 49 ) 12,884 0 25 12,859 Subtotal 141,023 417 ( 49 ) 12,884 0 25 12,859 Subtotal 141,023 417 ( 49 ) 12,884 0 25 12,859 Subtotal 141,023 417 ( 379 12,884 0 25 12,859 Subtotal 141,023 417 ( 379 ) 141,061 0 25 12,859 Subtotal 141,023 417 ( 379 ) 141,061 2,066 12,859 Subtotal 141,023 417 ( 379 ) 141,061 2,066 8,833 130,162 141,023 417 ( 379 ) 141,061 2,066 8,833 130,162 Total $ 417 ( 379 ) 141,061 2,066 8,833 130,162 Total $ 155,332 ( 379 ) 141,061 2,066 8,833 130,162 Total $ 155,332 $ 379 ) 141,061 2,066 8,833 130,162 Total $ 155,332 $ 418 2,066 8,833 130,162 Total $ 155,332 $ 418 $ ( 511 130,162 Total $ 155,332 $ 418 $ ( 511 ) $ 155,332 $ 418 $ ( 511 ) $ 155,239 $ 13,844 $ ( 511 ) $ 155,239 $ 13,844 $ 11,233 $ 511 ) $ 155,239 $ 13,844 $ 11,233 $ 130,162 The $ 155,239 $ 13,844 $ 11,233 $ 130,162 The Company may $ 13,844 $ 11,233 $ 130,162 The Company may sell certain year . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company considers the , typically for up to 12 month . To help protect hedge . Apple Inc. | 2015 Form 10-K | 50 Table Apple Inc. | 2015 Form 10-K | 50 Table of Contents | 2015 Form 10-K | 50 Table of Contents The Company rate transaction a of September 26 , 2015 are expected to a of September 26 , 2015 are expected to be recognized expected to be recognized within 10 year . Cash Flow Hedges fair value a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,442 $ 109 $ 1,551 Interest exchange contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 394 1,551 Interest rate contract $ 394 $ 0 $ 394 Derivative rate contract $ 394 $ 0 $ 394 Derivative liability ( $ 394 $ 0 $ 394 Derivative liability ( 2 ) $ 394 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 905 $ 94 $ 999 Interest exchange contract $ 905 $ 94 $ 999 Interest rate contract $ 905 $ 94 $ 999 Interest rate contract $ 13 999 Interest rate contract $ 13 $ 0 $ 13 Apple rate contract $ 13 $ 0 $ 13 Apple Inc. | $ 13 $ 0 $ 13 Apple Inc. | 2015 Form $ 13 Apple Inc. | 2015 Form 10-K | 51 Table Apple Inc. | 2015 Form 10-K | 51 Table of Contents | 2015 Form 10-K | 51 Table of Contents 2014 Fair | 51 Table of Contents 2014 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,332 $ 222 $ 1,554 Interest exchange contract $ 1,332 $ 222 $ 1,554 Interest rate contract $ 1,332 $ 222 $ 1,554 Interest rate contract $ 81 1,554 Interest rate contract $ 81 $ 0 $ 81 Derivative rate contract $ 81 $ 0 $ 81 Derivative liability ( $ 81 $ 0 $ 81 Derivative liability ( 2 ) $ 81 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 41 $ 40 $ 81 ( exchange contract $ 41 $ 40 $ 81 ( 1 ) $ 41 $ 40 $ 81 ( 1 ) The fair $ 40 $ 81 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Consolidated Statements of Operations for 2015 , 2014 and 2013 ( of Operations for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Gains/ ( Losses in million ) : 2015 2014 2013 Gains/ ( Losses ) million ) : 2015 2014 2013 Gains/ ( Losses ) recognized : Foreign exchange contract $ 3,592 $ 1,750 $ 891 Interest exchange contract $ 3,592 $ 1,750 $ 891 Interest rate contract $ 3,592 $ 1,750 $ 891 Interest rate contract ( 111 891 Interest rate contract ( 111 ) ( 15 ) 12 contract ( 111 ) ( 15 ) 12 Total $ 3,481 111 ) ( 15 ) 12 Total $ 3,481 $ 1,735 15 ) 12 Total $ 3,481 $ 1,735 $ 903 Net 12 Total $ 3,481 $ 1,735 $ 903 Net investment hedge $ 3,481 $ 1,735 $ 903 Net investment hedge : Foreign : Foreign exchange contract $ 167 $ 53 $ 143 Foreign exchange contract $ 167 $ 53 $ 143 Foreign currency debt $ 167 $ 53 $ 143 Foreign currency debt ( 71 143 Foreign currency debt ( 71 ) 0 0 Total $ currency debt ( 71 ) 0 0 Total $ 96 $ debt ( 71 ) 0 0 Total $ 96 $ 53 ) 0 0 Total $ 96 $ 53 $ 143 Gains/ 0 Total $ 96 $ 53 $ 143 Gains/ ( Losses $ 96 $ 53 $ 143 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 4,092 $ ( 154 ) $ contract $ 4,092 $ ( 154 ) $ 676 Interest rate $ ( 154 ) $ 676 Interest rate contract ( 17 676 Interest rate contract ( 17 ) ( 16 ) ( contract ( 17 ) ( 16 ) ( 6 ) Total ) ( 16 ) ( 6 ) Total $ 4,075 $ ( 6 ) Total $ 4,075 $ ( 170 ) $ Total $ 4,075 $ ( 170 ) $ 670 Gains/ ( $ ( 170 ) $ 670 Gains/ ( Losses ) on : Interest rate contract $ 337 $ 39 $ 0 Gains/ rate contract $ 337 $ 39 $ 0 Gains/ ( Losses $ 337 $ 39 $ 0 Gains/ ( Losses ) related Interest rate contract $ ( 337 ) $ ( 39 ) ( 337 ) $ ( 39 ) $ 0 The following $ ( 39 ) $ 0 The following table show the derivative instrument a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 2014 Notional Amount Credit Risk in million ) : 2015 2014 Notional Amount Credit Risk Amount : Foreign exchange contract $ 70,054 $ 1,385 $ 42,945 $ exchange contract $ 70,054 $ 1,385 $ 42,945 $ 1,333 Interest $ 70,054 $ 1,385 $ 42,945 $ 1,333 Interest rate contract $ 1,385 $ 42,945 $ 1,333 Interest rate contract $ 18,750 1,333 Interest rate contract $ 18,750 $ 394 $ 12,000 $ rate contract $ 18,750 $ 394 $ 12,000 $ 89 Instruments $ 18,750 $ 394 $ 12,000 $ 89 Instruments not designated $ 394 $ 12,000 $ 89 Instruments not designated a accounting : Foreign exchange contract $ 49,190 $ 109 $ 38,510 $ exchange contract $ 49,190 $ 109 $ 38,510 $ 222 Apple $ 49,190 $ 109 $ 38,510 $ 222 Apple Inc. | $ 109 $ 38,510 $ 222 Apple Inc. | 2015 Form $ 222 Apple Inc. | 2015 Form 10-K | 52 Table Apple Inc. | 2015 Form 10-K | 52 Table of Contents | 2015 Form 10-K | 52 Table of Contents The notional collateral security arrangement wa $ 1.0 billion a of September 26 1.0 billion a of September 26 , 2015 and $ 2.1 a of September 26 , 2015 and $ 2.1 billion a 26 , 2015 and $ 2.1 billion a of September 27 2.1 billion a of September 27 , 2014 . Under master a of September 27 , 2014 . Under master netting arrangement other . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the potential 2015 and September 27 , 2014 , the potential effect of and derivative liability of $ 2.2 billion and $ 1.6 billion $ 2.2 billion and $ 1.6 billion , respectively , resulting net derivative liability of $ 78 million and $ 549 million $ 78 million and $ 549 million , respectively . Accounts arrangement . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 12 % . As of September % . As of September 27 , 2014 , the Company As of September 27 , 2014 , the Company had two had two customer that represented 10 % or more of total one of which accounted for 16 % and the other 13 16 % and the other 13 % . The Company ’ cellular network carrier accounted for 71 % and 72 % of accounted for 71 % and 72 % of trade receivables a trade receivables a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , respectively . 2015 and September 27 , 2014 , respectively . Vendor Non-Trade ’ s vendor accounted for 38 % , 18 % and accounted for 38 % , 18 % and 14 % of % , 18 % and 14 % of total vendor non-trade non-trade receivables a of September 26 , 2015 and three of a of September 26 , 2015 and three of the Company ’ s vendor accounted for 51 % , 16 % and accounted for 51 % , 16 % and 14 % of % , 16 % and 14 % of total vendor non-trade non-trade receivables a of September 27 , 2014 . Note 3 a of September 27 , 2014 . Note 3 – Consolidated 27 , 2014 . Note 3 – Consolidated Financial Statement Details statement detail a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : Plant and Equipment , Net 2015 2014 Land and building $ and Equipment , Net 2015 2014 Land and building $ 6,956 2014 Land and building $ 6,956 $ 4,863 Machinery , equipment and building $ 6,956 $ 4,863 Machinery , equipment and internal-use , equipment and internal-use software 37,038 29,639 Leasehold improvement 5,263 4,513 equipment and internal-use software 37,038 29,639 Leasehold improvement 5,263 4,513 Gross software 37,038 29,639 Leasehold improvement 5,263 4,513 Gross property , plant 37,038 29,639 Leasehold improvement 5,263 4,513 Gross property , plant and property , plant and equipment 49,257 39,015 Accumulated depreciation and amortization , plant and equipment 49,257 39,015 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 26,786 ) ( 18,391 ) Total amortization ( 26,786 ) ( 18,391 ) Total property , plant and equipment , net $ 22,471 $ 20,624 Apple Inc. | , net $ 22,471 $ 20,624 Apple Inc. | 2015 Form $ 20,624 Apple Inc. | 2015 Form 10-K | 53 Table Apple Inc. | 2015 Form 10-K | 53 Table of Contents | 2015 Form 10-K | 53 Table of Contents Other Non-Current of Contents Other Non-Current Liabilities 2015 2014 Deferred tax liability $ Contents Other Non-Current Liabilities 2015 2014 Deferred tax liability $ 24,062 2014 Deferred tax liability $ 24,062 $ 20,259 Other non-current liability tax liability $ 24,062 $ 20,259 Other non-current liability 9,365 4,567 $ 20,259 Other non-current liability 9,365 4,567 Total other non-current liability 20,259 Other non-current liability 9,365 4,567 Total other non-current liability $ Total other non-current liability $ 33,427 $ 24,826 Other Income/ ( non-current liability $ 33,427 $ 24,826 Other Income/ ( Expense ) expense ) , net for 2015 , 2014 and 2013 ( , net for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Interest and dividend in million ) : 2015 2014 2013 Interest and dividend income million ) : 2015 2014 2013 Interest and dividend income $ Interest and dividend income $ 2,921 $ 1,795 $ 1,616 Interest dividend income $ 2,921 $ 1,795 $ 1,616 Interest expense ( $ 2,921 $ 1,795 $ 1,616 Interest expense ( 733 ) $ 1,616 Interest expense ( 733 ) ( 384 ) ( expense ( 733 ) ( 384 ) ( 136 ) Other ) ( 384 ) ( 136 ) Other expense , net Other expense , net ( 903 ) ( 431 ) ( net ( 903 ) ( 431 ) ( 324 ) Total ) ( 431 ) ( 324 ) Total other income/ ( expense ) , net $ 1,285 $ 980 $ 1,156 Note , net $ 1,285 $ 980 $ 1,156 Note 4 – $ 1,285 $ 980 $ 1,156 Note 4 – Goodwill and $ 980 $ 1,156 Note 4 – Goodwill and Other Intangible Other Intangible Assets On July 31 , 2014 , the Company Assets On July 31 , 2014 , the Company completed the for these acquisition wa $ 2.6 billion , which consisted primarily cash , of which $ 2.2 billion wa allocated to goodwill allocated to goodwill , $ 636 million to acquired intangible asset acquired intangible asset and $ 258 million to net liability assumed , the Company repaid $ 295 million of existing Beats outstanding , the Company issued approximately 5.1 million share of it common wa valued at approximately $ 485 million based on the Company , valued at approximately $ 417 million , will vest over various other business acquisition during 2014 for an aggregate cash consideration cash acquired , of $ 957 million , of which $ million , of which $ 828 million wa allocated to goodwill allocated to goodwill , $ 257 million to acquired intangible asset acquired intangible asset and $ 128 million to net liability assumed asset balance a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2015 2014 Gross Carrying Amount Accumulated in million ) : 2015 2014 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 8,125 $ ( 4,332 ) $ asset $ 8,125 $ ( 4,332 ) $ 3,793 $ 7,127 $ ( 4,332 ) $ 3,793 $ 7,127 $ ( 3,085 4,332 ) $ 3,793 $ 7,127 $ ( 3,085 ) $ 3,793 $ 7,127 $ ( 3,085 ) $ 4,042 Indefinite-lived and $ ( 3,085 ) $ 4,042 Indefinite-lived and non-amortizable acquired intangible and non-amortizable acquired intangible asset 100 0 100 100 0 100 non-amortizable acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset 100 0 100 100 0 100 Total acquired intangible asset $ Total acquired intangible asset $ 8,225 $ ( 4,332 ) $ asset $ 8,225 $ ( 4,332 ) $ 3,893 $ 7,227 $ ( 4,332 ) $ 3,893 $ 7,227 $ ( 3,085 4,332 ) $ 3,893 $ 7,227 $ ( 3,085 ) $ 3,893 $ 7,227 $ ( 3,085 ) $ 4,142 Amortization expense $ ( 3,085 ) $ 4,142 Amortization expense related to acquired acquired intangible asset wa $ 1.3 billion , $ 1.1 billion $ 1.3 billion , $ 1.1 billion and $ 960 million $ 1.1 billion and $ 960 million in 2015 , 2014 and $ 960 million in 2015 , 2014 and 2013 , 960 million in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . As of respectively . As of September 26 , 2015 , the remaining As of September 26 , 2015 , the remaining weighted-average amortization for acquired intangible asset is 3.6 year . The expected annual intangible asset a of September 26 , 2015 , is a a of September 26 , 2015 , is a follows ( ( in million ) : 2016 $ 1,288 2017 1,033 2018 million ) : 2016 $ 1,288 2017 1,033 2018 786 2019 ) : 2016 $ 1,288 2017 1,033 2018 786 2019 342 : 2016 $ 1,288 2017 1,033 2018 786 2019 342 2020 2016 $ 1,288 2017 1,033 2018 786 2019 342 2020 166 $ 1,288 2017 1,033 2018 786 2019 342 2020 166 Thereafter 1,288 2017 1,033 2018 786 2019 342 2020 166 Thereafter 178 2017 1,033 2018 786 2019 342 2020 166 Thereafter 178 Total 1,033 2018 786 2019 342 2020 166 Thereafter 178 Total $ 2018 786 2019 342 2020 166 Thereafter 178 Total $ 3,793 2019 342 2020 166 Thereafter 178 Total $ 3,793 Apple Inc. 166 Thereafter 178 Total $ 3,793 Apple Inc. | 2015 Form $ 3,793 Apple Inc. | 2015 Form 10-K | 54 Table Apple Inc. | 2015 Form 10-K | 54 Table of Contents | 2015 Form 10-K | 54 Table of Contents Note 5 54 Table of Contents Note 5 – Income Taxes The provision provision for income tax for 2015 , 2014 and 2013 , income tax for 2015 , 2014 and 2013 , consisted of for 2015 , 2014 and 2013 , consisted of the following ( in million ) : 2015 2014 2013 Federal : Current in million ) : 2015 2014 2013 Federal : Current $ million ) : 2015 2014 2013 Federal : Current $ 11,730 2013 Federal : Current $ 11,730 $ 8,624 $ 9,334 Deferred : Current $ 11,730 $ 8,624 $ 9,334 Deferred 3,408 3,183 $ 11,730 $ 8,624 $ 9,334 Deferred 3,408 3,183 1,878 15,138 $ 8,624 $ 9,334 Deferred 3,408 3,183 1,878 15,138 11,807 11,212 8,624 $ 9,334 Deferred 3,408 3,183 1,878 15,138 11,807 11,212 State $ 9,334 Deferred 3,408 3,183 1,878 15,138 11,807 11,212 State : 9,334 Deferred 3,408 3,183 1,878 15,138 11,807 11,212 State : Current Deferred 3,408 3,183 1,878 15,138 11,807 11,212 State : Current 1,265 3,408 3,183 1,878 15,138 11,807 11,212 State : Current 1,265 855 11,807 11,212 State : Current 1,265 855 1,084 Deferred ( 220 11,212 State : Current 1,265 855 1,084 Deferred ( 220 ) State : Current 1,265 855 1,084 Deferred ( 220 ) ( 1,265 855 1,084 Deferred ( 220 ) ( 178 ) ( Deferred ( 220 ) ( 178 ) ( 311 ) 1,045 ) ( 178 ) ( 311 ) 1,045 677 773 Foreign 178 ) ( 311 ) 1,045 677 773 Foreign : Current ) ( 311 ) 1,045 677 773 Foreign : Current 4,744 ( 311 ) 1,045 677 773 Foreign : Current 4,744 2,147 677 773 Foreign : Current 4,744 2,147 1,559 Deferred ( 1,806 773 Foreign : Current 4,744 2,147 1,559 Deferred ( 1,806 ) Foreign : Current 4,744 2,147 1,559 Deferred ( 1,806 ) ( 4,744 2,147 1,559 Deferred ( 1,806 ) ( 658 ) ( Deferred ( 1,806 ) ( 658 ) ( 426 ) 2,938 ) ( 658 ) ( 426 ) 2,938 1,489 1,133 Provision 658 ) ( 426 ) 2,938 1,489 1,133 Provision for income ) ( 426 ) 2,938 1,489 1,133 Provision for income tax ( 426 ) 2,938 1,489 1,133 Provision for income tax $ Provision for income tax $ 19,121 $ 13,973 $ 13,118 The income tax $ 19,121 $ 13,973 $ 13,118 The foreign provision $ 19,121 $ 13,973 $ 13,118 The foreign provision for income foreign pre-tax earnings of $ 47.6 billion , $ 33.6 billion $ 47.6 billion , $ 33.6 billion and $ 30.5 billion $ 33.6 billion and $ 30.5 billion in 2015 , 2014 and $ 30.5 billion in 2015 , 2014 and 2013 , 30.5 billion in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . The Company a statutory tax rate of 12.5 % . As of September % . As of September 26 , 2015 , U.S. income As of September 26 , 2015 , U.S. income tax have a cumulative total of $ 91.5 billion of such earnings . is estimated to be $ 30.0 billion . As of September billion . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , $ 186.9 2015 and September 27 , 2014 , $ 186.9 billion and 27 , 2014 , $ 186.9 billion and $ 137.1 billion $ 186.9 billion and $ 137.1 billion , respectively , of federal income tax rate ( 35 % in 2015 , 2014 rate ( 35 % in 2015 , 2014 and 2013 ) 35 % in 2015 , 2014 and 2013 ) to income in 2015 , 2014 and 2013 ) to income before provision provision for income tax for 2015 , 2014 and 2013 , income tax for 2015 , 2014 and 2013 , is a for 2015 , 2014 and 2013 , is a follows ( dollar in million ) : 2015 2014 2013 Computed expected tax in million ) : 2015 2014 2013 Computed expected tax $ million ) : 2015 2014 2013 Computed expected tax $ 25,380 2013 Computed expected tax $ 25,380 $ 18,719 $ 17,554 State expected tax $ 25,380 $ 18,719 $ 17,554 State tax , $ 25,380 $ 18,719 $ 17,554 State tax , net of , net of federal effect 680 469 508 Indefinitely invested earnings net of federal effect 680 469 508 Indefinitely invested earnings of of federal effect 680 469 508 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 6,470 ) ( 4,744 ) ( subsidiary ( 6,470 ) ( 4,744 ) ( 4,614 ) Domestic ) ( 4,744 ) ( 4,614 ) Domestic production activity deduction Domestic production activity deduction ( 426 ) ( 495 ) ( deduction ( 426 ) ( 495 ) ( 308 ) Research ) ( 495 ) ( 308 ) Research and development credit development credit , net ( 171 ) ( 88 ) ( net ( 171 ) ( 88 ) ( 287 ) Other ) ( 88 ) ( 287 ) Other 128 112 265 ) ( 287 ) Other 128 112 265 Provision for income ( 287 ) Other 128 112 265 Provision for income tax 287 ) Other 128 112 265 Provision for income tax $ Provision for income tax $ 19,121 $ 13,973 $ 13,118 Effective income tax $ 19,121 $ 13,973 $ 13,118 Effective tax rate $ 19,121 $ 13,973 $ 13,118 Effective tax rate 26.4 % $ 13,118 Effective tax rate 26.4 % 26.1 % 26.2 % Effective tax rate 26.4 % 26.1 % 26.2 % The Company rate 26.4 % 26.1 % 26.2 % The Company ’ s from equity award of $ 748 million , $ 706 million $ 748 million , $ 706 million and $ 643 million $ 706 million and $ 643 million in 2015 , 2014 and $ 643 million in 2015 , 2014 and 2013 , 643 million in 2015 , 2014 and 2013 , respectively , in 2015 , 2014 and 2013 , respectively , which were stock . Apple Inc. | 2015 Form 10-K | 55 Table Apple Inc. | 2015 Form 10-K | 55 Table of Contents | 2015 Form 10-K | 55 Table of Contents As of of Contents As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the significant 2015 and September 27 , 2014 , the significant component of ( in million ) : 2015 2014 Deferred tax asset : in million ) : 2015 2014 Deferred tax asset : Accrued liability and other reserve $ 4,205 $ 3,326 Basis of capital other reserve $ 4,205 $ 3,326 Basis of capital asset and of capital asset and investment 2,238 898 Deferred revenue 1,941 1,787 capital asset and investment 2,238 898 Deferred revenue 1,941 1,787 Deferred investment 2,238 898 Deferred revenue 1,941 1,787 Deferred cost sharing 667 2,238 898 Deferred revenue 1,941 1,787 Deferred cost sharing 667 0 1,941 1,787 Deferred cost sharing 667 0 Share-based compensation 575 454 1,787 Deferred cost sharing 667 0 Share-based compensation 575 454 Unrealized sharing 667 0 Share-based compensation 575 454 Unrealized loss 564 130 667 0 Share-based compensation 575 454 Unrealized loss 564 130 Other compensation 575 454 Unrealized loss 564 130 Other 721 227 Total 575 454 Unrealized loss 564 130 Other 721 227 Total deferred Unrealized loss 564 130 Other 721 227 Total deferred tax asset loss 564 130 Other 721 227 Total deferred tax asset , of valuation allowance of $ 0 10,911 6,822 Deferred tax liability valuation allowance of $ 0 10,911 6,822 Deferred tax liability : allowance of $ 0 10,911 6,822 Deferred tax liability : Unremitted Unremitted earnings of foreign subsidiary 26,868 21,544 Other 303 398 Total earnings of foreign subsidiary 26,868 21,544 Other 303 398 Total deferred foreign subsidiary 26,868 21,544 Other 303 398 Total deferred tax liability subsidiary 26,868 21,544 Other 303 398 Total deferred tax liability 27,171 398 Total deferred tax liability 27,171 21,942 Net deferred tax liability Total deferred tax liability 27,171 21,942 Net deferred tax liability $ deferred tax liability $ ( 16,260 ) $ ( 15,120 ) ( 16,260 ) $ ( 15,120 ) Deferred tax asset and benefit that is greater than 50 % likely of being realized Sheets . As of September 26 , 2015 , the total As of September 26 , 2015 , the total amount of unrecognized tax benefit wa $ 6.9 billion , of which $ billion , of which $ 2.5 billion , if recognized , rate . As of September 27 , 2014 , the total As of September 27 , 2014 , the total amount of unrecognized tax benefit wa $ 4.0 billion , of which $ billion , of which $ 1.4 billion , if recognized , interest and penalty , for 2015 , 2014 and 2013 , penalty , for 2015 , 2014 and 2013 , is a for 2015 , 2014 and 2013 , is a follows ( ( in million ) : 2015 2014 2013 Beginning Balance $ in million ) : 2015 2014 2013 Beginning Balance $ 4,033 million ) : 2015 2014 2013 Beginning Balance $ 4,033 $ 2014 2013 Beginning Balance $ 4,033 $ 2,714 $ 2,062 Increases Beginning Balance $ 4,033 $ 2,714 $ 2,062 Increases related to $ 4,033 $ 2,714 $ 2,062 Increases related to tax position taken during a prior year 2,056 1,295 745 Decreases related to during a prior year 2,056 1,295 745 Decreases related to tax a prior year 2,056 1,295 745 Decreases related to tax position during a prior year ( 345 ) ( 280 ) ( year ( 345 ) ( 280 ) ( 118 ) Increases ) ( 280 ) ( 118 ) Increases related to tax taken during the current year 1,278 882 626 Decreases related to during the current year 1,278 882 626 Decreases related to settlement the current year 1,278 882 626 Decreases related to settlement with settlement with taxing authority ( 109 ) ( 574 ) ( authority ( 109 ) ( 574 ) ( 592 ) Decreases ) ( 574 ) ( 592 ) Decreases related to expiration of statute of limitation ( 13 ) ( 4 ) ( limitation ( 13 ) ( 4 ) ( 9 ) Ending ) ( 4 ) ( 9 ) Ending Balance $ 6,900 9 ) Ending Balance $ 6,900 $ 4,033 $ 2,714 The Ending Balance $ 6,900 $ 4,033 $ 2,714 The Company includes $ 6,900 $ 4,033 $ 2,714 The Company includes interest and tax . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the total 2015 and September 27 , 2014 , the total amount of and penalty accrued wa $ 1.3 billion and $ 630 million $ 1.3 billion and $ 630 million , respectively , which interest and penalty expense in 2015 , 2014 and 2013 of penalty expense in 2015 , 2014 and 2013 of $ 709 in 2015 , 2014 and 2013 of $ 709 million , 2014 and 2013 of $ 709 million , $ 40 million $ 709 million , $ 40 million and $ 189 million $ 40 million and $ 189 million , respectively . Apple respectively . Apple Inc. | 2015 Form 10-K | 56 Table Apple Inc. | 2015 Form 10-K | 56 Table of Contents | 2015 Form 10-K | 56 Table of Contents The Company is currently examining the year 2010 through 2012 , and all examining the year 2010 through 2012 , and all year prior and all year prior to 2010 are closed . In addition , the year subsequent to 2003 generally remain open and could materially change in the next 12 month . On June 11 12 month . On June 11 , 2014 , the European . On June 11 , 2014 , the European Commission issued a period of up to 10 year reflective of the disallowed material , a of September 26 , 2015 the Company is a of September 26 , 2015 the Company is unable to estimate the impact . Note 6 – Debt Commercial Paper In – Debt Commercial Paper In 2014 , the Board of Directors repurchase . As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the Company 2015 and September 27 , 2014 , the Company had $ , the Company had $ 8.5 billion and $ 6.3 billion $ 8.5 billion and $ 6.3 billion of Commercial Paper outstanding a weighted-average interest rate of 0.14 % and 0.12 % , rate of 0.14 % and 0.12 % , respectively , and maturity of Commercial Paper for 2015 and 2014 ( in million Commercial Paper for 2015 and 2014 ( in million ) : ( in million ) : 2015 2014 Maturities le than 90 in million ) : 2015 2014 Maturities le than 90 day 2015 2014 Maturities le than 90 day : Proceeds from ( commercial paper , net $ 5,293 $ 1,865 Maturities greater than , net $ 5,293 $ 1,865 Maturities greater than 90 day $ 1,865 Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 3,851 4,771 Repayments of commercial paper Proceeds from commercial paper 3,851 4,771 Repayments of commercial paper ( Repayments of commercial paper ( 6,953 ) ( 330 ) Maturities paper ( 6,953 ) ( 330 ) Maturities greater than 90 330 ) Maturities greater than 90 day , net ( 3,102 90 day , net ( 3,102 ) 4,441 Total change in , net ( 3,102 ) 4,441 Total change in commercial paper commercial paper , net $ 2,191 $ 6,306 Long-Term Debt As , net $ 2,191 $ 6,306 Long-Term Debt As of September Long-Term Debt As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had outstanding aggregate principal amount of $ 55.7 billion ( collectively the “ note . Apple Inc. | 2015 Form 10-K | 57 Table Apple Inc. | 2015 Form 10-K | 57 Table of Contents | 2015 Form 10-K | 57 Table of Contents The following term debt a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 : 2015 2014 2015 and September 27 , 2014 : 2015 2014 Maturities Amount September 27 , 2014 : 2015 2014 Maturities Amount ( in 27 , 2014 : 2015 2014 Maturities Amount ( in million million ) Effective Interest Rate 2013 debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2016 17.0 billion : Floating-rate note 2016 – 2018 $ 3,000 0.51 : Floating-rate note 2016 – 2018 $ 3,000 0.51 % – note 2016 – 2018 $ 3,000 0.51 % – 1.10 % 2016 – 2018 $ 3,000 0.51 % – 1.10 % $ $ 3,000 0.51 % – 1.10 % $ 3,000 0.51 % % – 1.10 % $ 3,000 0.51 % – 1.10 % – 1.10 % $ 3,000 0.51 % – 1.10 % Fixed-rate $ 3,000 0.51 % – 1.10 % Fixed-rate 0.45 % – % – 1.10 % Fixed-rate 0.45 % – 3.85 % note % Fixed-rate 0.45 % – 3.85 % note 2016 – 2043 % – 3.85 % note 2016 – 2043 14,000 0.51 % 3.85 % note 2016 – 2043 14,000 0.51 % – 3.91 % note 2016 – 2043 14,000 0.51 % – 3.91 % note 2016 – 2043 14,000 0.51 % – 3.91 % 14,000 2043 14,000 0.51 % – 3.91 % 14,000 0.51 % – 0.51 % – 3.91 % 14,000 0.51 % – 3.91 % % – 3.91 % 14,000 0.51 % – 3.91 % 2014 % 14,000 0.51 % – 3.91 % 2014 debt issuance of 0.51 % – 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2017 12.0 billion : Floating-rate note 2017 – 2019 2,000 0.37 % : Floating-rate note 2017 – 2019 2,000 0.37 % – 0.60 Floating-rate note 2017 – 2019 2,000 0.37 % – 0.60 % note 2017 – 2019 2,000 0.37 % – 0.60 % 2,000 2019 2,000 0.37 % – 0.60 % 2,000 0.31 % – 0.37 % – 0.60 % 2,000 0.31 % – 0.54 % % – 0.60 % 2,000 0.31 % – 0.54 % Fixed-rate % 2,000 0.31 % – 0.54 % Fixed-rate 1.05 % – % – 0.54 % Fixed-rate 1.05 % – 4.45 % note % Fixed-rate 1.05 % – 4.45 % note 2017 – 2044 % – 4.45 % note 2017 – 2044 10,000 0.37 % 4.45 % note 2017 – 2044 10,000 0.37 % – 4.48 % note 2017 – 2044 10,000 0.37 % – 4.48 % note 2017 – 2044 10,000 0.37 % – 4.48 % 10,000 2044 10,000 0.37 % – 4.48 % 10,000 0.30 % – 0.37 % – 4.48 % 10,000 0.30 % – 4.48 % % – 4.48 % 10,000 0.30 % – 4.48 % First % 10,000 0.30 % – 4.48 % First quarter 2015 euro-denominated – 4.48 % First quarter 2015 euro-denominated debt issuance of € euro-denominated debt issuance of € 2.8 billion : Fixed-rate 1.000 % € 2.8 billion : Fixed-rate 1.000 % note 2022 1,558 2.94 : Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.000 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 % note 2022 1,558 2.94 % 0 0 Fixed-rate 1.625 % note 2026 2.94 % 0 0 Fixed-rate 1.625 % note 2026 1,558 3.45 0 Fixed-rate 1.625 % note 2026 1,558 3.45 % 0 0 Fixed-rate 1.625 % note 2026 1,558 3.45 % 0 0 Second 1.625 % note 2026 1,558 3.45 % 0 0 Second quarter note 2026 1,558 3.45 % 0 0 Second quarter 2015 debt 2026 1,558 3.45 % 0 0 Second quarter 2015 debt issuance % 0 0 Second quarter 2015 debt issuance of $ 6.5 2015 debt issuance of $ 6.5 billion : Floating-rate note 2020 6.5 billion : Floating-rate note 2020 500 0.56 % 0 0 billion : Floating-rate note 2020 500 0.56 % 0 0 Fixed-rate : Floating-rate note 2020 500 0.56 % 0 0 Fixed-rate 1.55 note 2020 500 0.56 % 0 0 Fixed-rate 1.55 % note 2020 500 0.56 % 0 0 Fixed-rate 1.55 % note 2020 0.56 % 0 0 Fixed-rate 1.55 % note 2020 1,250 0.56 0 Fixed-rate 1.55 % note 2020 1,250 0.56 % 0 0 Fixed-rate 1.55 % note 2020 1,250 0.56 % 0 0 Fixed-rate 1.55 % note 2020 1,250 0.56 % 0 0 Fixed-rate 2.15 note 2020 1,250 0.56 % 0 0 Fixed-rate 2.15 % note 2020 1,250 0.56 % 0 0 Fixed-rate 2.15 % note 2022 0.56 % 0 0 Fixed-rate 2.15 % note 2022 1,250 0.87 0 Fixed-rate 2.15 % note 2022 1,250 0.87 % 0 0 Fixed-rate 2.15 % note 2022 1,250 0.87 % 0 0 Fixed-rate 2.15 % note 2022 1,250 0.87 % 0 0 Fixed-rate 2.50 note 2022 1,250 0.87 % 0 0 Fixed-rate 2.50 % note 2022 1,250 0.87 % 0 0 Fixed-rate 2.50 % note 2025 0.87 % 0 0 Fixed-rate 2.50 % note 2025 1,500 2.60 0 Fixed-rate 2.50 % note 2025 1,500 2.60 % 0 0 Fixed-rate 2.50 % note 2025 1,500 2.60 % 0 0 Fixed-rate 2.50 % note 2025 1,500 2.60 % 0 0 Fixed-rate 3.45 note 2025 1,500 2.60 % 0 0 Fixed-rate 3.45 % note 2025 1,500 2.60 % 0 0 Fixed-rate 3.45 % note 2045 2.60 % 0 0 Fixed-rate 3.45 % note 2045 2,000 3.58 0 Fixed-rate 3.45 % note 2045 2,000 3.58 % 0 0 Fixed-rate 3.45 % note 2045 2,000 3.58 % 0 0 Second 3.45 % note 2045 2,000 3.58 % 0 0 Second quarter note 2045 2,000 3.58 % 0 0 Second quarter 2015 Swiss 2045 2,000 3.58 % 0 0 Second quarter 2015 Swiss franc-denominated % 0 0 Second quarter 2015 Swiss franc-denominated debt issuance of of SFr1.25 billion : Fixed-rate 0.375 % note 2024 895 0.28 : Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.375 % note 2024 895 0.28 % 0 0 Fixed-rate 0.750 note 2024 895 0.28 % 0 0 Fixed-rate 0.750 % note 2024 895 0.28 % 0 0 Fixed-rate 0.750 % note 2030 0.28 % 0 0 Fixed-rate 0.750 % note 2030 384 0.74 0 Fixed-rate 0.750 % note 2030 384 0.74 % 0 0 Fixed-rate 0.750 % note 2030 384 0.74 % 0 0 Third 0.750 % note 2030 384 0.74 % 0 0 Third quarter note 2030 384 0.74 % 0 0 Third quarter 2015 debt 2030 384 0.74 % 0 0 Third quarter 2015 debt issuance % 0 0 Third quarter 2015 debt issuance of $ 8.0 2015 debt issuance of $ 8.0 billion : Floating-rate note 2017 8.0 billion : Floating-rate note 2017 250 0.36 % 0 0 billion : Floating-rate note 2017 250 0.36 % 0 0 Floating-rate : Floating-rate note 2017 250 0.36 % 0 0 Floating-rate note note 2017 250 0.36 % 0 0 Floating-rate note 2020 500 2017 250 0.36 % 0 0 Floating-rate note 2020 500 0.61 % 0 0 Floating-rate note 2020 500 0.61 % 0 0 0 0 Floating-rate note 2020 500 0.61 % 0 0 Fixed-rate 0 Floating-rate note 2020 500 0.61 % 0 0 Fixed-rate 0.900 note 2020 500 0.61 % 0 0 Fixed-rate 0.900 % note 2020 500 0.61 % 0 0 Fixed-rate 0.900 % note 2017 0.61 % 0 0 Fixed-rate 0.900 % note 2017 750 0.35 0 Fixed-rate 0.900 % note 2017 750 0.35 % 0 0 Fixed-rate 0.900 % note 2017 750 0.35 % 0 0 Fixed-rate 0.900 % note 2017 750 0.35 % 0 0 Fixed-rate 2.000 note 2017 750 0.35 % 0 0 Fixed-rate 2.000 % note 2017 750 0.35 % 0 0 Fixed-rate 2.000 % note 2020 0.35 % 0 0 Fixed-rate 2.000 % note 2020 1,250 0.61 0 Fixed-rate 2.000 % note 2020 1,250 0.61 % 0 0 Fixed-rate 2.000 % note 2020 1,250 0.61 % 0 0 Fixed-rate 2.000 % note 2020 1,250 0.61 % 0 0 Fixed-rate 2.700 note 2020 1,250 0.61 % 0 0 Fixed-rate 2.700 % note 2020 1,250 0.61 % 0 0 Fixed-rate 2.700 % note 2022 0.61 % 0 0 Fixed-rate 2.700 % note 2022 1,250 0.99 0 Fixed-rate 2.700 % note 2022 1,250 0.99 % 0 0 Fixed-rate 2.700 % note 2022 1,250 0.99 % 0 0 Fixed-rate 2.700 % note 2022 1,250 0.99 % 0 0 Fixed-rate 3.200 note 2022 1,250 0.99 % 0 0 Fixed-rate 3.200 % note 2022 1,250 0.99 % 0 0 Fixed-rate 3.200 % note 2025 0.99 % 0 0 Fixed-rate 3.200 % note 2025 2,000 1.22 0 Fixed-rate 3.200 % note 2025 2,000 1.22 % 0 0 Fixed-rate 3.200 % note 2025 2,000 1.22 % 0 0 Fixed-rate 3.200 % note 2025 2,000 1.22 % 0 0 Fixed-rate 4.375 note 2025 2,000 1.22 % 0 0 Fixed-rate 4.375 % note 2025 2,000 1.22 % 0 0 Fixed-rate 4.375 % note 2045 1.22 % 0 0 Fixed-rate 4.375 % note 2045 2,000 4.40 0 Fixed-rate 4.375 % note 2045 2,000 4.40 % 0 0 Fixed-rate 4.375 % note 2045 2,000 4.40 % 0 0 Third 4.375 % note 2045 2,000 4.40 % 0 0 Third quarter note 2045 2,000 4.40 % 0 0 Third quarter 2015 Japanese 2045 2,000 4.40 % 0 0 Third quarter 2015 Japanese yen-denominated % 0 0 Third quarter 2015 Japanese yen-denominated debt issuance of of ¥250.0 billion : Fixed-rate 0.35 % note 2020 2,081 0.35 : Fixed-rate 0.35 % note 2020 2,081 0.35 % 0 0 Fixed-rate 0.35 % note 2020 2,081 0.35 % 0 0 Fourth 0.35 % note 2020 2,081 0.35 % 0 0 Fourth quarter note 2020 2,081 0.35 % 0 0 Fourth quarter 2015 British 2020 2,081 0.35 % 0 0 Fourth quarter 2015 British pound-denominated % 0 0 Fourth quarter 2015 British pound-denominated debt issuance of of £1.25 billion : Fixed-rate 3.05 % note 2029 1,148 3.79 : Fixed-rate 3.05 % note 2029 1,148 3.79 % 0 0 Fixed-rate 3.05 % note 2029 1,148 3.79 % 0 0 Fixed-rate 3.05 % note 2029 1,148 3.79 % 0 0 Fixed-rate 3.60 note 2029 1,148 3.79 % 0 0 Fixed-rate 3.60 % note 2029 1,148 3.79 % 0 0 Fixed-rate 3.60 % note 2042 3.79 % 0 0 Fixed-rate 3.60 % note 2042 766 4.51 0 Fixed-rate 3.60 % note 2042 766 4.51 % 0 0 Fixed-rate 3.60 % note 2042 766 4.51 % 0 0 Fourth 3.60 % note 2042 766 4.51 % 0 0 Fourth quarter note 2042 766 4.51 % 0 0 Fourth quarter 2015 Australian 2042 766 4.51 % 0 0 Fourth quarter 2015 Australian dollar-denominated % 0 0 Fourth quarter 2015 Australian dollar-denominated debt issuance of debt issuance of A $ 2.25 billion : Floating-rate note 2019 2.25 billion : Floating-rate note 2019 493 1.87 % 0 0 billion : Floating-rate note 2019 493 1.87 % 0 0 Fixed-rate : Floating-rate note 2019 493 1.87 % 0 0 Fixed-rate 2.85 note 2019 493 1.87 % 0 0 Fixed-rate 2.85 % note 2019 493 1.87 % 0 0 Fixed-rate 2.85 % note 2019 1.87 % 0 0 Fixed-rate 2.85 % note 2019 282 1.89 0 Fixed-rate 2.85 % note 2019 282 1.89 % 0 0 Fixed-rate 2.85 % note 2019 282 1.89 % 0 0 Fixed-rate 2.85 % note 2019 282 1.89 % 0 0 Fixed-rate 3.70 note 2019 282 1.89 % 0 0 Fixed-rate 3.70 % note 2019 282 1.89 % 0 0 Fixed-rate 3.70 % note 2022 1.89 % 0 0 Fixed-rate 3.70 % note 2022 810 2.79 0 Fixed-rate 3.70 % note 2022 810 2.79 % 0 0 Fixed-rate 3.70 % note 2022 810 2.79 % 0 0 Fourth 3.70 % note 2022 810 2.79 % 0 0 Fourth quarter note 2022 810 2.79 % 0 0 Fourth quarter 2015 euro-denominated 2022 810 2.79 % 0 0 Fourth quarter 2015 euro-denominated debt % 0 0 Fourth quarter 2015 euro-denominated debt issuance of € euro-denominated debt issuance of € 2.0 billion : Fixed-rate 1.375 % € 2.0 billion : Fixed-rate 1.375 % note 2024 1,113 3.30 : Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 1.375 % note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 % note 2024 1,113 3.30 % 0 0 Fixed-rate 2.000 % note 2027 3.30 % 0 0 Fixed-rate 2.000 % note 2027 1,113 3.85 0 Fixed-rate 2.000 % note 2027 1,113 3.85 % 0 0 Fixed-rate 2.000 % note 2027 1,113 3.85 % 0 0 Total 2.000 % note 2027 1,113 3.85 % 0 0 Total term note 2027 1,113 3.85 % 0 0 Total term debt 55,701 2027 1,113 3.85 % 0 0 Total term debt 55,701 29,000 0 0 Total term debt 55,701 29,000 Unamortized discount ( 114 0 Total term debt 55,701 29,000 Unamortized discount ( 114 ) 55,701 29,000 Unamortized discount ( 114 ) ( 52 ) Hedge discount ( 114 ) ( 52 ) Hedge accounting fair value Hedge accounting fair value adjustment 376 39 Less : Current portion accounting fair value adjustment 376 39 Less : Current portion of portion of long-term debt ( 2,500 ) 0 Total long-term debt long-term debt ( 2,500 ) 0 Total long-term debt $ 53,463 0 Total long-term debt $ 53,463 $ 28,987 To manage foreign long-term debt $ 53,463 $ 28,987 To manage foreign currency risk in the first quarter of 2015 and the British pound-denominated , in the fourth quarter of 2015 , the Company entered into aggregate notional amount of $ 3.5 billion , $ 1.9 billion $ 3.5 billion , $ 1.9 billion , $ 1.6 billion $ 1.9 billion , $ 1.6 billion and $ 2.2 billion $ 1.6 billion and $ 2.2 billion , respectively , which note . Apple Inc. | 2015 Form 10-K | 58 Table Apple Inc. | 2015 Form 10-K | 58 Table of Contents | 2015 Form 10-K | 58 Table of Contents To manage in the second quarter of 2015 and maturing in 2020 and of 2015 and maturing in 2020 and 2022 , the Company and maturing in 2020 and 2022 , the Company entered into aggregate notional amount of $ 2.5 billion . To manage interest in the third quarter of 2015 and maturing in 2017 , of 2015 and maturing in 2017 , 2020 , 2022 and and maturing in 2017 , 2020 , 2022 and 2025 , in 2017 , 2020 , 2022 and 2025 , the Company , 2020 , 2022 and 2025 , the Company entered into aggregate notional amount of $ 4.3 billion . These interest rate rate . As of September 26 , 2015 , ¥250.0 billion As of September 26 , 2015 , ¥250.0 billion of the adjustment . As of September 26 , 2015 , the carrying As of September 26 , 2015 , the carrying value of net investment hedge wa $ 2.1 billion . For further discussion Financial Instruments section of Note 2 , “ Financial Instruments . . The Company recognized $ 722 million , $ 381 million $ 722 million , $ 381 million and $ 136 million $ 381 million and $ 136 million of interest expense on on it term debt for 2015 , 2014 and 2013 , term debt for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . The future s Notes a of September 26 , 2015 are a follows a of September 26 , 2015 are a follows ( in ( in million ) : 2016 $ 2,500 2017 3,500 2018 million ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 ) : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 : 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 2016 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 $ 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 2,500 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 2017 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total 3,500 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total term 2018 6,000 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt 2019 3,775 2020 5,581 Thereafter 34,345 Total term debt $ 55,701 34,345 Total term debt $ 55,701 As of September 26 , $ 55,701 As of September 26 , 2015 and September 27 As of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , the fair 2015 and September 27 , 2014 , the fair value of Notes , based on Level 2 input , wa $ 54.9 2 input , wa $ 54.9 billion and $ 28.5 billion $ 54.9 billion and $ 28.5 billion , respectively . Note billion , respectively . Note 7 – Shareholders ’ Equity Dividends Amount ( in million ) 2015 : Fourth quarter $ 0.52 2015 : Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 2,997 Second 0.52 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 Total quarter 0.47 2,734 First quarter 0.47 2,750 Total cash dividend declared 0.47 2,734 First quarter 0.47 2,750 Total cash dividend declared and dividend declared and paid $ 1.98 $ 11,431 2014 : Fourth and paid $ 1.98 $ 11,431 2014 : Fourth quarter $ paid $ 1.98 $ 11,431 2014 : Fourth quarter $ 0.47 2014 : Fourth quarter $ 0.47 $ 2,807 Third quarter 0.47 Fourth quarter $ 0.47 $ 2,807 Third quarter 0.47 2,830 Second 0.47 $ 2,807 Third quarter 0.47 2,830 Second quarter 0.44 2,655 $ 2,807 Third quarter 0.47 2,830 Second quarter 0.44 2,655 First quarter 0.47 2,830 Second quarter 0.44 2,655 First quarter 0.44 2,739 0.47 2,830 Second quarter 0.44 2,655 First quarter 0.44 2,739 Total quarter 0.44 2,655 First quarter 0.44 2,739 Total cash dividend declared 0.44 2,655 First quarter 0.44 2,739 Total cash dividend declared and dividend declared and paid $ 1.82 $ 11,031 Future dividend are and paid $ 1.82 $ 11,031 Future dividend are subject to Directors . Apple Inc. | 2015 Form 10-K | 59 Table Apple Inc. | 2015 Form 10-K | 59 Table of Contents | 2015 Form 10-K | 59 Table of Contents Share Repurchase In the third quarter of 2015 , the Company ’ s share repurchase authorization to $ 140 billion of the Company ’ stock , of which $ 104 billion had been utilized a been utilized a of September 26 , 2015 . The Company a of September 26 , 2015 . The Company ’ s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the during the year ended September 26 , 2015 and September 27 year ended September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 : Purchase Period 2015 and September 27 , 2014 : Purchase Period End Date ( in million ) May 2015 ASR July 2015 48,293 ( ) May 2015 ASR July 2015 48,293 ( 1 ) $ May 2015 ASR July 2015 48,293 ( 1 ) $ 124.24 ASR July 2015 48,293 ( 1 ) $ 124.24 $ 6,000 48,293 ( 1 ) $ 124.24 $ 6,000 August 2014 ASR 1 ) $ 124.24 $ 6,000 August 2014 ASR February 2015 $ 124.24 $ 6,000 August 2014 ASR February 2015 81,525 ( 6,000 August 2014 ASR February 2015 81,525 ( 2 ) $ August 2014 ASR February 2015 81,525 ( 2 ) $ 110.40 ASR February 2015 81,525 ( 2 ) $ 110.40 $ 9,000 81,525 ( 2 ) $ 110.40 $ 9,000 January 2014 ASR 2 ) $ 110.40 $ 9,000 January 2014 ASR December 2014 $ 110.40 $ 9,000 January 2014 ASR December 2014 134,247 $ 9,000 January 2014 ASR December 2014 134,247 $ 89.39 $ 12,000 January 2014 ASR December 2014 134,247 $ 89.39 $ 12,000 April ASR December 2014 134,247 $ 89.39 $ 12,000 April 2013 ASR 2014 134,247 $ 89.39 $ 12,000 April 2013 ASR March 2014 $ 89.39 $ 12,000 April 2013 ASR March 2014 172,548 $ 12,000 April 2013 ASR March 2014 172,548 $ 69.55 $ 12,000 April 2013 ASR March 2014 172,548 $ 69.55 $ 12,000 ( ASR March 2014 172,548 $ 69.55 $ 12,000 ( 1 ) 2014 172,548 $ 69.55 $ 12,000 ( 1 ) Includes 38.3 $ 69.55 $ 12,000 ( 1 ) Includes 38.3 million share 12,000 ( 1 ) Includes 38.3 million share delivered and retired in the third quarter of 2015 and 10.0 million share delivered third quarter of 2015 and 10.0 million share delivered and retired in the fourth quarter of 2015 . ( 2 ) Includes quarter of 2015 . ( 2 ) Includes 59.9 million share . ( 2 ) Includes 59.9 million share delivered and retired in the fourth quarter of 2014 , 8.3 million net share fourth quarter of 2014 , 8.3 million net share delivered and in the first quarter of 2015 and 13.3 million share delivered first quarter of 2015 and 13.3 million share delivered and retired in the second quarter of 2015 . Additionally , the Company Amount ( in million ) 2015 : Fourth quarter 121,802 $ ) 2015 : Fourth quarter 121,802 $ 115.15 $ 14,026 Third : Fourth quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 $ 128.08 115.15 $ 14,026 Third quarter 31,231 $ 128.08 4,000 Second quarter 14,026 Third quarter 31,231 $ 128.08 4,000 Second quarter 56,400 $ Third quarter 31,231 $ 128.08 4,000 Second quarter 56,400 $ 124.11 $ 128.08 4,000 Second quarter 56,400 $ 124.11 7,000 First quarter 4,000 Second quarter 56,400 $ 124.11 7,000 First quarter 45,704 $ Second quarter 56,400 $ 124.11 7,000 First quarter 45,704 $ 109.40 $ 124.11 7,000 First quarter 45,704 $ 109.40 5,000 Total open 7,000 First quarter 45,704 $ 109.40 5,000 Total open market common First quarter 45,704 $ 109.40 5,000 Total open market common stock open market common stock repurchase 255,137 $ 30,026 2014 : Fourth common stock repurchase 255,137 $ 30,026 2014 : Fourth quarter 81,255 stock repurchase 255,137 $ 30,026 2014 : Fourth quarter 81,255 $ 30,026 2014 : Fourth quarter 81,255 $ 98.46 $ 8,000 Third : Fourth quarter 81,255 $ 98.46 $ 8,000 Third quarter 58,661 quarter 81,255 $ 98.46 $ 8,000 Third quarter 58,661 $ 85.23 98.46 $ 8,000 Third quarter 58,661 $ 85.23 5,000 Second quarter 8,000 Third quarter 58,661 $ 85.23 5,000 Second quarter 79,749 $ Third quarter 58,661 $ 85.23 5,000 Second quarter 79,749 $ 75.24 $ 85.23 5,000 Second quarter 79,749 $ 75.24 6,000 First quarter 5,000 Second quarter 79,749 $ 75.24 6,000 First quarter 66,847 $ Second quarter 79,749 $ 75.24 6,000 First quarter 66,847 $ 74.79 $ 75.24 6,000 First quarter 66,847 $ 74.79 5,000 Total open 6,000 First quarter 66,847 $ 74.79 5,000 Total open market common First quarter 66,847 $ 74.79 5,000 Total open market common stock open market common stock repurchase 286,512 $ 24,000 Apple Inc. | common stock repurchase 286,512 $ 24,000 Apple Inc. | 2015 Form $ 24,000 Apple Inc. | 2015 Form 10-K | 60 Table Apple Inc. | 2015 Form 10-K | 60 Table of Contents | 2015 Form 10-K | 60 Table of Contents Note 8 60 Table of Contents Note 8 – Comprehensive Income Comprehensive income statement line item , for 2015 and 2014 ( in million item , for 2015 and 2014 ( in million ) : Components Financial Statement Line Item 2015 2014 Unrealized ( gain ) Financial Statement Line Item 2015 2014 Unrealized ( gain ) /losses exchange contract Revenue $ ( 2,432 ) $ 449 Cost of $ ( 2,432 ) $ 449 Cost of sale ( 2,168 449 Cost of sale ( 2,168 ) ( 295 ) Other sale ( 2,168 ) ( 295 ) Other income/ ( expense ( expense ) , net 456 15 Interest rate contract Other expense ) , net 456 15 Interest rate contract Other income/ ( expense ) , net 17 16 ( 4,127 ) 185 expense ) , net 17 16 ( 4,127 ) 185 Unrealized , net 17 16 ( 4,127 ) 185 Unrealized ( gain 17 16 ( 4,127 ) 185 Unrealized ( gain ) /losses ( expense ) , net 91 ( 205 ) Total amount ) , net 91 ( 205 ) Total amount reclassified from reclassified from AOCI $ ( 4,036 ) $ ( 20 ) ( 4,036 ) $ ( 20 ) The following table show in AOCI by component for 2015 ( in million ) : Securities Total Balance at September 28 , 2013 $ ( 105 Balance at September 28 , 2013 $ ( 105 ) $ 28 , 2013 $ ( 105 ) $ ( 175 ) ( 105 ) $ ( 175 ) $ ( 191 ) ( 175 ) $ ( 191 ) $ ( 471 ) ( 191 ) $ ( 471 ) Other comprehensive income/ ( loss ) before reclassification ( 187 ) 1,687 438 1,938 Amounts before reclassification ( 187 ) 1,687 438 1,938 Amounts reclassified from reclassification ( 187 ) 1,687 438 1,938 Amounts reclassified from AOCI ( 187 ) 1,687 438 1,938 Amounts reclassified from AOCI 0 1,938 Amounts reclassified from AOCI 0 185 ( 205 ) ( Amounts reclassified from AOCI 0 185 ( 205 ) ( 20 from AOCI 0 185 ( 205 ) ( 20 ) Tax 185 ( 205 ) ( 20 ) Tax effect 50 ( ( 20 ) Tax effect 50 ( 333 ) ( 82 ) Tax effect 50 ( 333 ) ( 82 ) ( 50 ( 333 ) ( 82 ) ( 365 ) Other ) ( 82 ) ( 365 ) Other comprehensive income/ ( income/ ( loss ) ( 137 ) 1,539 151 1,553 Balance loss ) ( 137 ) 1,539 151 1,553 Balance at September ) ( 137 ) 1,539 151 1,553 Balance at September 27 ( 137 ) 1,539 151 1,553 Balance at September 27 , 151 1,553 Balance at September 27 , 2014 ( 242 ) Balance at September 27 , 2014 ( 242 ) 1,364 ( September 27 , 2014 ( 242 ) 1,364 ( 40 ) , 2014 ( 242 ) 1,364 ( 40 ) 1,082 Other ( 242 ) 1,364 ( 40 ) 1,082 Other comprehensive income/ ) 1,364 ( 40 ) 1,082 Other comprehensive income/ ( loss loss ) before reclassification ( 612 ) 3,346 ( 747 ) before reclassification ( 612 ) 3,346 ( 747 ) 1,987 Amounts ( 612 ) 3,346 ( 747 ) 1,987 Amounts reclassified from ) 3,346 ( 747 ) 1,987 Amounts reclassified from AOCI 0 1,987 Amounts reclassified from AOCI 0 ( 4,127 ) 91 ( reclassified from AOCI 0 ( 4,127 ) 91 ( 4,036 ) AOCI 0 ( 4,127 ) 91 ( 4,036 ) Tax effect ( 4,127 ) 91 ( 4,036 ) Tax effect 201 189 ( 4,036 ) Tax effect 201 189 232 622 Other comprehensive 4,036 ) Tax effect 201 189 232 622 Other comprehensive income/ ) Tax effect 201 189 232 622 Other comprehensive income/ ( Tax effect 201 189 232 622 Other comprehensive income/ ( loss income/ ( loss ) ( 411 ) ( 592 ) ( ) ( 411 ) ( 592 ) ( 424 ) ( ) ( 592 ) ( 424 ) ( 1,427 ) Balance ) ( 424 ) ( 1,427 ) Balance at September 26 1,427 ) Balance at September 26 , 2015 $ ( 653 Balance at September 26 , 2015 $ ( 653 ) $ 26 , 2015 $ ( 653 ) $ 772 $ ( $ ( 653 ) $ 772 $ ( 464 ) $ ) $ 772 $ ( 464 ) $ ( 345 ) ( 464 ) $ ( 345 ) Apple Inc. | 2015 345 ) Apple Inc. | 2015 Form 10-K | 61 Table Apple Inc. | 2015 Form 10-K | 61 Table of Contents | 2015 Form 10-K | 61 Table of Contents Note 9 61 Table of Contents Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 26 , 2015 , approximately 442.9 As of September 26 , 2015 , approximately 442.9 million share 26 , 2015 , approximately 442.9 million share were reserved for for future issuance under the 2014 Plan . 2003 Employee Stock under the 2014 Plan . 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Plan is a shareholder approved including executive officer . The 2003 Plan permitted the granting of . Options granted under the 2003 Plan generally expire seven to . RSUs granted under the 2003 Plan generally vest over two Officer , granted under the 2003 Plan have DERs . DERs In the second quarter of 2014 , the Company terminated the grant new award under the 2003 Plan . 1997 Director Stock under the 2003 Plan . 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . All RSUs Plan expires November 9 , 2019 . All RSUs granted under vest . As of September 26 , 2015 , approximately 1.2 As of September 26 , 2015 , approximately 1.2 million share 26 , 2015 , approximately 1.2 million share were reserved for the Director Plan . Rule 10b5-1 Trading Plans During the fourth During the fourth quarter of 2015 , Section 16 officer Timothy quarter of 2015 , Section 16 officer Timothy D. Cook , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 26 , 2015 , approximately 53.0 As of September 26 , 2015 , approximately 53.0 million share 26 , 2015 , approximately 53.0 million share were reserved for Plan . Apple Inc. | 2015 Form 10-K | 62 Table Apple Inc. | 2015 Form 10-K | 62 Table of Contents | 2015 Form 10-K | 62 Table of Contents 401 ( | 62 Table of Contents 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2015 ) $ 18,000 for calendar year 2015 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ s matching contribution to the 401 ( k ) Plan were k ) Plan were $ 200 million , $ 163 million $ 200 million , $ 163 million and $ 135 million $ 163 million and $ 135 million in 2015 , 2014 and $ 135 million in 2015 , 2014 and 2013 , 135 million in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . Restricted Stock activity and related information for 2015 , 2014 and 2013 , related information for 2015 , 2014 and 2013 , is a for 2015 , 2014 and 2013 , is a follows : million ) Balance at September 29 , 2012 105,037 $ 49.27 Balance at September 29 , 2012 105,037 $ 49.27 RSUs granted at September 29 , 2012 105,037 $ 49.27 RSUs granted 39,415 29 , 2012 105,037 $ 49.27 RSUs granted 39,415 $ 78.23 105,037 $ 49.27 RSUs granted 39,415 $ 78.23 RSUs vested ( 49.27 RSUs granted 39,415 $ 78.23 RSUs vested ( 42,291 ) $ 78.23 RSUs vested ( 42,291 ) $ 45.96 RSUs cancelled vested ( 42,291 ) $ 45.96 RSUs cancelled ( 8,877 ) $ 45.96 RSUs cancelled ( 8,877 ) $ 57.31 Balance at cancelled ( 8,877 ) $ 57.31 Balance at September 28 , $ 57.31 Balance at September 28 , 2013 93,284 $ 62.24 Balance at September 28 , 2013 93,284 $ 62.24 RSUs granted at September 28 , 2013 93,284 $ 62.24 RSUs granted 59,269 28 , 2013 93,284 $ 62.24 RSUs granted 59,269 $ 74.54 93,284 $ 62.24 RSUs granted 59,269 $ 74.54 RSUs vested ( 62.24 RSUs granted 59,269 $ 74.54 RSUs vested ( 43,111 ) $ 74.54 RSUs vested ( 43,111 ) $ 57.29 RSUs cancelled vested ( 43,111 ) $ 57.29 RSUs cancelled ( 5,620 ) $ 57.29 RSUs cancelled ( 5,620 ) $ 68.47 Balance at cancelled ( 5,620 ) $ 68.47 Balance at September 27 , $ 68.47 Balance at September 27 , 2014 103,822 $ 70.98 Balance at September 27 , 2014 103,822 $ 70.98 RSUs granted at September 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 41,684 ) $ 105.51 RSUs vested ( 41,684 ) $ 71.32 RSUs cancelled vested ( 41,684 ) $ 71.32 RSUs cancelled ( 6,258 ) $ 71.32 RSUs cancelled ( 6,258 ) $ 80.34 Balance at cancelled ( 6,258 ) $ 80.34 Balance at September 26 , $ 80.34 Balance at September 26 , 2015 101,467 $ 85.77 Balance at September 26 , 2015 101,467 $ 85.77 $ 11,639 at September 26 , 2015 101,467 $ 85.77 $ 11,639 The 26 , 2015 101,467 $ 85.77 $ 11,639 The fair value 2015 101,467 $ 85.77 $ 11,639 The fair value a of date of RSUs wa $ 4.8 billion , $ 3.4 billion $ 4.8 billion , $ 3.4 billion and $ 3.1 billion $ 3.4 billion and $ 3.1 billion for 2015 , 2014 and $ 3.1 billion for 2015 , 2014 and 2013 , 3.1 billion for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . The majority of RSUs that vested in 2015 , 2014 and 2013 were that vested in 2015 , 2014 and 2013 were net-share settled in 2015 , 2014 and 2013 were net-share settled such that total share withheld were approximately 14.1 million , 15.6 million and were approximately 14.1 million , 15.6 million and 15.5 million for million , 15.6 million and 15.5 million for 2015 , 2014 million and 15.5 million for 2015 , 2014 and 2013 , 15.5 million for 2015 , 2014 and 2013 , respectively , for 2015 , 2014 and 2013 , respectively , and were to taxing authority were $ 1.6 billion , $ 1.2 billion $ 1.6 billion , $ 1.2 billion and $ 1.1 billion $ 1.2 billion and $ 1.1 billion in 2015 , 2014 and $ 1.1 billion in 2015 , 2014 and 2013 , 1.1 billion in 2015 , 2014 and 2013 , respectively , in 2015 , 2014 and 2013 , respectively , and are Stock Options The Company had 1.2 million stock option outstanding a option outstanding a of September 26 , 2015 , with a a of September 26 , 2015 , with a weighted-average exercise price per share of $ 15.08 and weighted-average remaining contractual term weighted-average remaining contractual term of 4.1 year , substantially all of option outstanding a of September 26 , 2015 wa $ 120 a of September 26 , 2015 wa $ 120 million , 26 , 2015 wa $ 120 million , which represents the time of exercise wa $ 479 million , $ 1.5 billion $ 479 million , $ 1.5 billion and $ 1.0 billion $ 1.5 billion and $ 1.0 billion for 2015 , 2014 and $ 1.0 billion for 2015 , 2014 and 2013 , 1.0 billion for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . Apple Inc. respectively . Apple Inc. | 2015 Form 10-K | 63 Table Apple Inc. | 2015 Form 10-K | 63 Table of Contents | 2015 Form 10-K | 63 Table of Contents Share-based Compensation Consolidated Statements of Operations for 2015 , 2014 and 2013 ( of Operations for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Cost of sale in million ) : 2015 2014 2013 Cost of sale $ million ) : 2015 2014 2013 Cost of sale $ 575 2013 Cost of sale $ 575 $ 450 $ 350 Research of sale $ 575 $ 450 $ 350 Research and development $ 575 $ 450 $ 350 Research and development 1,536 1,216 $ 350 Research and development 1,536 1,216 917 Selling , general 350 Research and development 1,536 1,216 917 Selling , general and Research and development 1,536 1,216 917 Selling , general and administrative Selling , general and administrative 1,475 1,197 986 Total share-based compensation , general and administrative 1,475 1,197 986 Total share-based compensation expense general and administrative 1,475 1,197 986 Total share-based compensation expense $ Total share-based compensation expense $ 3,586 $ 2,863 $ 2,253 The compensation expense $ 3,586 $ 2,863 $ 2,253 The income tax $ 3,586 $ 2,863 $ 2,253 The income tax benefit related share-based compensation expense wa $ 1.2 billion , $ 1.0 billion $ 1.2 billion , $ 1.0 billion and $ 816 million $ 1.0 billion and $ 816 million for 2015 , 2014 and $ 816 million for 2015 , 2014 and 2013 , 816 million for 2015 , 2014 and 2013 , respectively . for 2015 , 2014 and 2013 , respectively . As of respectively . As of September 26 , 2015 , the total As of September 26 , 2015 , the total unrecognized compensation and restricted stock wa $ 6.8 billion , which the Company over a weighted-average period of 2.7 year . Note 10 – of 2.7 year . Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2015 , 2014 and 2013 ( related cost for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Beginning accrued warranty in million ) : 2015 2014 2013 Beginning accrued warranty and million ) : 2015 2014 2013 Beginning accrued warranty and related warranty and related cost $ 4,159 $ 2,967 $ 1,638 Cost related cost $ 4,159 $ 2,967 $ 1,638 Cost of warranty $ 4,159 $ 2,967 $ 1,638 Cost of warranty claim ( Cost of warranty claim ( 4,401 ) ( 3,760 ) ( claim ( 4,401 ) ( 3,760 ) ( 3,703 ) Accruals ) ( 3,760 ) ( 3,703 ) Accruals for product warranty ) Accruals for product warranty 5,022 4,952 5,032 Ending accrued warranty Accruals for product warranty 5,022 4,952 5,032 Ending accrued warranty and for product warranty 5,022 4,952 5,032 Ending accrued warranty and related warranty and related cost $ 4,780 $ 4,159 $ 2,967 The related cost $ 4,780 $ 4,159 $ 2,967 The Company generally $ 4,780 $ 4,159 $ 2,967 The Company generally doe not to indemnification a of September 26 , 2015 or September 27 a of September 26 , 2015 or September 27 , 2014 26 , 2015 or September 27 , 2014 . In September 2015 or September 27 , 2014 . In September 2015 , , 2014 . In September 2015 , the Company introduced the customer who purchase an iPhone 6 and 6 Plus in one purchase an iPhone 6 and 6 Plus in one of it result . Apple Inc. | 2015 Form 10-K | 64 Table Apple Inc. | 2015 Form 10-K | 64 Table of Contents | 2015 Form 10-K | 64 Table of Contents The Company requirement for period up to 150 day . Other Off-Balance Sheet typically for term not exceeding 10 year and generally contain multi-year option . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had a Company had a total of 463 retail store . Leases for term ranging from five to 20 year , the majority of majority of which are for 10 year , and often contain option . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company ’ s noncancelable operating lease were $ 6.3 billion , of which $ billion , of which $ 3.6 billion related to lease for noncancelable lease , wa $ 794 million , $ 717 million $ 794 million , $ 717 million and $ 645 million $ 717 million and $ 645 million in 2015 , 2014 and $ 645 million in 2015 , 2014 and 2013 , 645 million in 2015 , 2014 and 2013 , respectively . in 2015 , 2014 and 2013 , respectively . Future minimum one year a of September 26 , 2015 , are a a of September 26 , 2015 , are a follows ( ( in million ) : 2016 $ 772 2017 774 2018 million ) : 2016 $ 772 2017 774 2018 744 2019 ) : 2016 $ 772 2017 774 2018 744 2019 715 : 2016 $ 772 2017 774 2018 744 2019 715 2020 2016 $ 772 2017 774 2018 744 2019 715 2020 674 $ 772 2017 774 2018 744 2019 715 2020 674 Thereafter 772 2017 774 2018 744 2019 715 2020 674 Thereafter 2,592 2017 774 2018 744 2019 715 2020 674 Thereafter 2,592 Total 774 2018 744 2019 715 2020 674 Thereafter 2,592 Total $ 2018 744 2019 715 2020 674 Thereafter 2,592 Total $ 6,271 2019 715 2020 674 Thereafter 2,592 Total $ 6,271 Other Commitments 674 Thereafter 2,592 Total $ 6,271 Other Commitments The Company utilizes typically cover period up to 150 day . The Company also supplier . As of September 26 , 2015 , the Company As of September 26 , 2015 , the Company had outstanding component purchase commitment of $ 29.5 billion . Apple Inc. | billion . Apple Inc. | 2015 Form 10-K | 65 Table Apple Inc. | 2015 Form 10-K | 65 Table of Contents | 2015 Form 10-K | 65 Table of Contents In addition off-balance sheet obligation of $ 7.3 billion a of September 26 7.3 billion a of September 26 , 2015 that consisted of a of September 26 , 2015 that consisted of commitment to in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal et al . On August 24 , 2012 , a jury . On August 24 , 2012 , a jury returned a verdict awarding the Company $ 1.05 billion in it lawsuit against Jose Division . On March 6 , 2014 , the District . On March 6 , 2014 , the District Court entered the amount of approximately $ 930 million . On May 18 930 million . On May 18 , 2015 , the U.S. . On May 18 , 2015 , the U.S. Court of the amount of approximately $ 548 million , with the District result of operation . Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant purpose . Apple Inc. | 2015 Form 10-K | 66 Table Apple Inc. | 2015 Form 10-K | 66 Table of Contents | 2015 Form 10-K | 66 Table of Contents The following by reportable operating segment for 2015 , 2014 and 2013 ( operating segment for 2015 , 2014 and 2013 ( in million for 2015 , 2014 and 2013 ( in million ) : ( in million ) : 2015 2014 2013 Americas : Net in million ) : 2015 2014 2013 Americas : Net sale million ) : 2015 2014 2013 Americas : Net sale $ Americas : Net sale $ 93,864 $ 80,095 $ 77,093 Operating Net sale $ 93,864 $ 80,095 $ 77,093 Operating income $ $ 93,864 $ 80,095 $ 77,093 Operating income $ 31,186 $ $ 77,093 Operating income $ 31,186 $ 26,158 $ 24,829 Europe Operating income $ 31,186 $ 26,158 $ 24,829 Europe : Net $ 31,186 $ 26,158 $ 24,829 Europe : Net sale $ Europe : Net sale $ 50,337 $ 44,285 $ 40,980 Operating Net sale $ 50,337 $ 44,285 $ 40,980 Operating income $ $ 50,337 $ 44,285 $ 40,980 Operating income $ 16,527 $ $ 40,980 Operating income $ 16,527 $ 14,434 $ 12,767 Greater Operating income $ 16,527 $ 14,434 $ 12,767 Greater China : $ 16,527 $ 14,434 $ 12,767 Greater China : Net sale China : Net sale $ 58,715 $ 31,853 $ 27,016 Operating Net sale $ 58,715 $ 31,853 $ 27,016 Operating income $ $ 58,715 $ 31,853 $ 27,016 Operating income $ 23,002 $ $ 27,016 Operating income $ 23,002 $ 11,039 $ 8,499 Japan Operating income $ 23,002 $ 11,039 $ 8,499 Japan : Net $ 23,002 $ 11,039 $ 8,499 Japan : Net sale $ Japan : Net sale $ 15,706 $ 15,314 $ 13,782 Operating Net sale $ 15,706 $ 15,314 $ 13,782 Operating income $ $ 15,706 $ 15,314 $ 13,782 Operating income $ 7,617 $ $ 13,782 Operating income $ 7,617 $ 6,904 $ 6,668 Rest Operating income $ 7,617 $ 6,904 $ 6,668 Rest of Asia $ 7,617 $ 6,904 $ 6,668 Rest of Asia Pacific : Pacific : Net sale $ 15,093 $ 11,248 $ 12,039 Operating Net sale $ 15,093 $ 11,248 $ 12,039 Operating income $ $ 15,093 $ 11,248 $ 12,039 Operating income $ 5,518 $ $ 12,039 Operating income $ 5,518 $ 3,674 $ 3,762 A Operating income $ 5,518 $ 3,674 $ 3,762 A reconciliation of $ 5,518 $ 3,674 $ 3,762 A reconciliation of the Company Consolidated Statements of Operations for 2015 , 2014 and 2013 is of Operations for 2015 , 2014 and 2013 is a follows for 2015 , 2014 and 2013 is a follows ( in ( in million ) : 2015 2014 2013 Segment operating income in million ) : 2015 2014 2013 Segment operating income $ million ) : 2015 2014 2013 Segment operating income $ 83,850 2013 Segment operating income $ 83,850 $ 62,209 $ 56,525 Research operating income $ 83,850 $ 62,209 $ 56,525 Research and development $ 83,850 $ 62,209 $ 56,525 Research and development expense ( Research and development expense ( 8,067 ) ( 6,041 ) ( expense ( 8,067 ) ( 6,041 ) ( 4,475 ) Other ) ( 6,041 ) ( 4,475 ) Other corporate expense , corporate expense , net ( 4,553 ) ( 3,665 ) ( net ( 4,553 ) ( 3,665 ) ( 3,051 ) Total ) ( 3,665 ) ( 3,051 ) Total operating income $ ) Total operating income $ 71,230 $ 52,503 $ 48,999 The operating income $ 71,230 $ 52,503 $ 48,999 The U.S. and $ 71,230 $ 52,503 $ 48,999 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2015 , 2014 and 2013 . net sale in 2015 , 2014 and 2013 . There wa in 2015 , 2014 and 2013 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2015 , 2014 or 2013 . net sale in 2015 , 2014 or 2013 . Net sale in 2015 , 2014 or 2013 . Net sale for 2015 2013 . Net sale for 2015 , 2014 and 2013 and Net sale for 2015 , 2014 and 2013 and long-lived asset for 2015 , 2014 and 2013 and long-lived asset a of long-lived asset a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 are a follows 2015 and September 27 , 2014 are a follows ( in ( in million ) : 2015 2014 2013 Net sale : in million ) : 2015 2014 2013 Net sale : U.S. million ) : 2015 2014 2013 Net sale : U.S. $ Net sale : U.S. $ 81,732 $ 68,909 $ 66,197 China : U.S. $ 81,732 $ 68,909 $ 66,197 China ( 1 $ 81,732 $ 68,909 $ 66,197 China ( 1 ) 56,547 68,909 $ 66,197 China ( 1 ) 56,547 30,638 25,946 Other 66,197 China ( 1 ) 56,547 30,638 25,946 Other country 95,436 China ( 1 ) 56,547 30,638 25,946 Other country 95,436 83,248 ( 1 ) 56,547 30,638 25,946 Other country 95,436 83,248 78,767 56,547 30,638 25,946 Other country 95,436 83,248 78,767 Total net sale 30,638 25,946 Other country 95,436 83,248 78,767 Total net sale $ 25,946 Other country 95,436 83,248 78,767 Total net sale $ 233,715 78,767 Total net sale $ 233,715 $ 182,795 $ 170,910 2015 net sale $ 233,715 $ 182,795 $ 170,910 2015 2014 Long-lived $ 233,715 $ 182,795 $ 170,910 2015 2014 Long-lived asset : 233,715 $ 182,795 $ 170,910 2015 2014 Long-lived asset : U.S. $ 182,795 $ 170,910 2015 2014 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 12,022 $ 9,108 China ( 1 : U.S. $ 12,022 $ 9,108 China ( 1 ) 8,722 12,022 $ 9,108 China ( 1 ) 8,722 9,477 Other country 9,108 China ( 1 ) 8,722 9,477 Other country 3,040 2,917 China ( 1 ) 8,722 9,477 Other country 3,040 2,917 Total ) 8,722 9,477 Other country 3,040 2,917 Total long-lived asset $ 8,722 9,477 Other country 3,040 2,917 Total long-lived asset $ 23,784 2,917 Total long-lived asset $ 23,784 $ 21,502 ( 1 ) long-lived asset $ 23,784 $ 21,502 ( 1 ) China includes $ 23,784 $ 21,502 ( 1 ) China includes Hong Kong infrastructure . Apple Inc. | 2015 Form 10-K | 67 Table Apple Inc. | 2015 Form 10-K | 67 Table of Contents | 2015 Form 10-K | 67 Table of Contents Net sale Net sale by product for 2015 , 2014 and 2013 are by product for 2015 , 2014 and 2013 are a follows for 2015 , 2014 and 2013 are a follows ( in ( in million ) : 2015 2014 2013 Net Sales by in million ) : 2015 2014 2013 Net Sales by Product million ) : 2015 2014 2013 Net Sales by Product : by Product : iPhone ( 1 ) $ 155,041 $ 101,991 iPhone ( 1 ) $ 155,041 $ 101,991 $ 91,279 iPad 1 ) $ 155,041 $ 101,991 $ 91,279 iPad ( 1 $ 155,041 $ 101,991 $ 91,279 iPad ( 1 ) 23,227 101,991 $ 91,279 iPad ( 1 ) 23,227 30,283 31,980 Mac 91,279 iPad ( 1 ) 23,227 30,283 31,980 Mac ( 1 iPad ( 1 ) 23,227 30,283 31,980 Mac ( 1 ) ( 1 ) 23,227 30,283 31,980 Mac ( 1 ) 25,471 23,227 30,283 31,980 Mac ( 1 ) 25,471 24,079 21,483 Services 31,980 Mac ( 1 ) 25,471 24,079 21,483 Services ( 2 Mac ( 1 ) 25,471 24,079 21,483 Services ( 2 ) ( 1 ) 25,471 24,079 21,483 Services ( 2 ) 19,909 25,471 24,079 21,483 Services ( 2 ) 19,909 18,063 16,051 Other 21,483 Services ( 2 ) 19,909 18,063 16,051 Other Products ( Services ( 2 ) 19,909 18,063 16,051 Other Products ( 1 ( 2 ) 19,909 18,063 16,051 Other Products ( 1 ) 18,063 16,051 Other Products ( 1 ) ( 3 ) 10,067 Products ( 1 ) ( 3 ) 10,067 8,379 10,117 Total 1 ) ( 3 ) 10,067 8,379 10,117 Total net sale ) ( 3 ) 10,067 8,379 10,117 Total net sale $ ( 3 ) 10,067 8,379 10,117 Total net sale $ 233,715 10,117 Total net sale $ 233,715 $ 182,795 $ 170,910 ( net sale $ 233,715 $ 182,795 $ 170,910 ( 1 ) $ 233,715 $ 182,795 $ 170,910 ( 1 ) Includes deferral $ 182,795 $ 170,910 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from the and other service . ( 3 ) Includes sale of Apple and third-party accessory . Note 12 – Selected Quarterly Financial Information of the four quarter of 2015 and 2014 ( in million four quarter of 2015 and 2014 ( in million , except Quarter Second Quarter First Quarter 2015 : Net sale $ 51,501 2015 : Net sale $ 51,501 $ 49,605 $ 58,010 $ Net sale $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross margin $ $ 49,605 $ 58,010 $ 74,599 Gross margin $ 20,548 $ $ 74,599 Gross margin $ 20,548 $ 19,681 $ 23,656 $ Gross margin $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.06 Fourth $ 1.96 $ 1.85 $ 2.33 $ 3.06 Fourth Quarter Third $ 1.85 $ 2.33 $ 3.06 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2014 : Net sale $ 42,123 2014 : Net sale $ 42,123 $ 37,432 $ 45,646 $ Net sale $ 42,123 $ 37,432 $ 45,646 $ 57,594 Gross $ 42,123 $ 37,432 $ 45,646 $ 57,594 Gross margin $ $ 37,432 $ 45,646 $ 57,594 Gross margin $ 16,009 $ $ 57,594 Gross margin $ 16,009 $ 14,735 $ 17,947 $ Gross margin $ 16,009 $ 14,735 $ 17,947 $ 21,846 Net $ 16,009 $ 14,735 $ 17,947 $ 21,846 Net income $ $ 14,735 $ 17,947 $ 21,846 Net income $ 8,467 $ $ 21,846 Net income $ 8,467 $ 7,748 $ 10,223 $ Net income $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings $ 8,467 $ 7,748 $ 10,223 $ 13,072 Earnings per share $ 7,748 $ 10,223 $ 13,072 Earnings per share ( 1 13,072 Earnings per share ( 1 ) : Basic $ 1.43 1 ) : Basic $ 1.43 $ 1.29 $ 1.67 $ : Basic $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.43 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.29 $ 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 1.67 $ 2.08 Diluted $ 1.42 $ 1.28 $ 1.66 $ 2.08 Diluted $ 1.42 $ 1.28 $ 1.66 $ 2.07 ( $ 1.42 $ 1.28 $ 1.66 $ 2.07 ( 1 ) $ 1.28 $ 1.66 $ 2.07 ( 1 ) Basic and $ 1.66 $ 2.07 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2015 Form 10-K | 68 Table Apple Inc. | 2015 Form 10-K | 68 Table of Contents | 2015 Form 10-K | 68 Table of Contents Report of Apple Inc. a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , and the 2015 and September 27 , 2014 , and the related consolidated in the period ended September 26 , 2015 . These financial period ended September 26 , 2015 . These financial statement are of Apple Inc. at September 26 , 2015 and September 27 Inc. at September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , and the 2015 and September 27 , 2014 , and the consolidated result in the period ended September 26 , 2015 , in conformity period ended September 26 , 2015 , in conformity with U.S. financial reporting a of September 26 , 2015 , based on a of September 26 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 28 , 2015 expressed an unqualified report dated October 28 , 2015 expressed an unqualified opinion thereon San Jose , California October 28 , 2015 Apple Inc. | , California October 28 , 2015 Apple Inc. | 2015 Form , 2015 Apple Inc. | 2015 Form 10-K | 69 Table Apple Inc. | 2015 Form 10-K | 69 Table of Contents | 2015 Form 10-K | 69 Table of Contents Report of financial reporting a of September 26 , 2015 , based on a of September 26 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) ( “ the policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 26 , 2015 , based on a of September 26 , 2015 , based on the COSO United States ) , the 2015 consolidated financial statement of Apple and our report dated October 28 , 2015 expressed an unqualified report dated October 28 , 2015 expressed an unqualified opinion thereon San Jose , California October 28 , 2015 Apple Inc. | , California October 28 , 2015 Apple Inc. | 2015 Form , 2015 Apple Inc. | 2015 Form 10-K | 70 Table Apple Inc. | 2015 Form 10-K | 70 Table of Contents | 2015 Form 10-K | 70 Table of Contents Item 9 70 Table of Contents Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the the Securities Exchange Act of 1934 , a amended ( the were effective a of September 26 , 2015 to provide reasonable a of September 26 , 2015 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 26 , 2015 to provide reasonable a of September 26 , 2015 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control Over during the fourth quarter of 2015 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable applicable . Apple Inc. | 2015 Form 10-K | 71 Table Apple Inc. | 2015 Form 10-K | 71 Table of Contents | 2015 Form 10-K | 71 Table of Contents PART III of Contents PART III Item 10 . Directors , Executive Officers in the Company ’ s 2016 Proxy Statement to be filed “ SEC ” ) within 120 day after September 26 , within 120 day after September 26 , 2015 in connection with day after September 26 , 2015 in connection with the solicitation for the Company ’ s 2016 annual meeting of shareholder and or by filing a Form 8-K , in each case to Stock Market LLC . Item 11 . Executive Compensation The information in the Company ’ s 2016 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2015 and is incorporated day after September 26 , 2015 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2016 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2015 and is incorporated day after September 26 , 2015 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2016 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2015 and is incorporated day after September 26 , 2015 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2016 Proxy Statement to be filed filed with the SEC within 120 day after September 26 , within 120 day after September 26 , 2015 and is incorporated day after September 26 , 2015 and is incorporated herein by reference . Apple Inc. | 2015 Form 10-K | 72 Table Apple Inc. | 2015 Form 10-K | 72 Table of Contents | 2015 Form 10-K | 72 Table of Contents PART IV of Contents PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 39 Consolidated Statements 2014 and September 28 , 2013 39 Consolidated Statements of Comprehensive and September 28 , 2013 39 Consolidated Statements of Comprehensive Income for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 40 Consolidated Balance 2014 and September 28 , 2013 40 Consolidated Balance Sheets a and September 28 , 2013 40 Consolidated Balance Sheets a of Balance Sheets a of September 26 , 2015 and September 27 a of September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 41 Consolidated Statements 2015 and September 27 , 2014 41 Consolidated Statements of Shareholders and September 27 , 2014 41 Consolidated Statements of Shareholders ’ for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 42 Consolidated Statements 2014 and September 28 , 2013 42 Consolidated Statements of Cash and September 28 , 2013 42 Consolidated Statements of Cash Flows for the year ended September 26 , 2015 , September 27 year ended September 26 , 2015 , September 27 , 2014 26 , 2015 , September 27 , 2014 and September 28 2015 , September 27 , 2014 and September 28 , 2013 27 , 2014 and September 28 , 2013 43 Notes to 2014 and September 28 , 2013 43 Notes to Consolidated Financial and September 28 , 2013 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 68 Reports of Ernst & Young Independent Registered Public Accounting Firm 69 ( 2 ) Financial Statement Public Accounting Firm 69 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K The information Section ( a ) ( 3 ) of Item 15 is ( 3 ) of Item 15 is set forth on the Signatures page of this Form 10-K. Apple Inc. | 2015 Form Form 10-K. Apple Inc. | 2015 Form 10-K | 73 Table Apple Inc. | 2015 Form 10-K | 73 Table of Contents | 2015 Form 10-K | 73 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 28 , 2015 Apple Inc. By Date : October 28 , 2015 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 28 , 2015 /s/ Luca Maestri Officer ) October 28 , 2015 /s/ Luca Maestri LUCA MAESTRI Principal Financial Officer ) October 28 , 2015 /s/ Chris Kondo Officer ) October 28 , 2015 /s/ Chris Kondo CHRIS KONDO Principal Accounting Officer ) October 28 , 2015 /s/ Al Gore Officer ) October 28 , 2015 /s/ Al Gore AL GORE Gore AL GORE Director October 28 , 2015 /s/ Robert A. GORE Director October 28 , 2015 /s/ Robert A. Iger ROBERT ROBERT A. IGER Director October 28 , 2015 /s/ Andrea Jung IGER Director October 28 , 2015 /s/ Andrea Jung ANDREA JUNG Jung ANDREA JUNG Director October 28 , 2015 /s/ Arthur D. JUNG Director October 28 , 2015 /s/ Arthur D. Levinson ARTHUR ARTHUR D. LEVINSON Director October 28 , 2015 /s/ Ronald D. LEVINSON Director October 28 , 2015 /s/ Ronald D. Sugar RONALD RONALD D. SUGAR Director October 28 , 2015 /s/ Susan L. SUGAR Director October 28 , 2015 /s/ Susan L. Wagner SUSAN SUSAN L. WAGNER Director October 28 , 2015 Apple Inc. | WAGNER Director October 28 , 2015 Apple Inc. | 2015 Form , 2015 Apple Inc. | 2015 Form 10-K | 74 Table Apple Inc. | 2015 Form 10-K | 74 Table of Contents | 2015 Form 10-K | 74 Table of Contents EXHIBIT INDEX of Contents EXHIBIT INDEX ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of Registrant effective a of June 6 , 2014 . 8-K 3.1 a of June 6 , 2014 . 8-K 3.1 6/6/14 3.2 June 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws of Registrant effective a of February 28 , 2014 . 8-K 3.2 a of February 28 , 2014 . 8-K 3.2 3/5/14 4.1 February 28 , 2014 . 8-K 3.2 3/5/14 4.1 Form of 28 , 2014 . 8-K 3.2 3/5/14 4.1 Form of Common , 2014 . 8-K 3.2 3/5/14 4.1 Form of Common Stock 2014 . 8-K 3.2 3/5/14 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of June 10 , 2015 , including form a of June 10 , 2015 , including form of global of global note representing the 0.35 % Notes due 2020 . the 0.35 % Notes due 2020 . 8-K 4.1 6/10/15 4.9 % Notes due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ Notes due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s Certificate 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 10.1 % Notes due 2027 . 8-K 4.1 9/17/15 10.1 * Employee Notes due 2027 . 8-K 4.1 9/17/15 10.1 * Employee Stock due 2027 . 8-K 4.1 9/17/15 10.1 * Employee Stock Purchase 2027 . 8-K 4.1 9/17/15 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through August 23 , 2012 . 10-Q 10.3 amended through August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of April 6 , 2012 . 10-Q 10.8 a of April 6 , 2012 . 10-Q 10.8 3/31/12 Apple April 6 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 6 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 2015 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 2015 Form 10.8 3/31/12 Apple Inc. | 2015 Form 10-K | 75 Table Apple Inc. | 2015 Form 10-K | 75 Table of Contents | 2015 Form 10-K | 75 Table of Contents Incorporated by Filing Date/ Period End Date 10.7 * Summary Description of Amendment , effective a of May 24 , 2012 , to certain a of May 24 , 2012 , to certain Restricted Stock Agreements outstanding a of April 5 , 2012 . 10-Q 10.8 a of April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock Plan 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock Plan . 8-K 2014 Employee Stock Plan . 8-K 10.1 3/5/14 10.9 * Form Employee Stock Plan . 8-K 10.1 3/5/14 10.9 * Form of Stock Plan . 8-K 10.1 3/5/14 10.9 * Form of Restricted Plan . 8-K 10.1 3/5/14 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan a of Stock Plan a of February 28 , 2014 . 8-K 10.2 a of February 28 , 2014 . 8-K 10.2 3/5/14 10.10 February 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form of , 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of February 28 , 2014 . 8-K 10.3 a of February 28 , 2014 . 8-K 10.3 3/5/14 10.11 February 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form of , 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.11 a of August 26 , 2014 . 10-K 10.11 9/27/14 10.12 August 26 , 2014 . 10-K 10.11 9/27/14 10.12 * Form 26 , 2014 . 10-K 10.11 9/27/14 10.12 * Form of , 2014 . 10-K 10.11 9/27/14 10.12 * Form of Performance 2014 . 10-K 10.11 9/27/14 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.12 a of August 26 , 2014 . 10-K 10.12 9/27/14 10.13 August 26 , 2014 . 10-K 10.12 9/27/14 10.13 * Form 26 , 2014 . 10-K 10.12 9/27/14 10.13 * Form of , 2014 . 10-K 10.12 9/27/14 10.13 * Form of Amendment 2014 . 10-K 10.12 9/27/14 10.13 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.13 a of August 26 , 2014 . 10-K 10.13 9/27/14 10.14 August 26 , 2014 . 10-K 10.13 9/27/14 10.14 * Offer 26 , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.13 9/27/14 10.14 * Offer Letter , dated Offer Letter , dated August 1 , 2013 , from the , dated August 1 , 2013 , from the Registrant to Registrant to Angela Ahrendts . 10-Q 10.14 12/27/14 12.1 * * to Angela Ahrendts . 10-Q 10.14 12/27/14 12.1 * * Computation Angela Ahrendts . 10-Q 10.14 12/27/14 12.1 * * Computation of Ahrendts . 10-Q 10.14 12/27/14 12.1 * * Computation of Ratio Earnings to Fixed Charges . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of instrument . Apple Inc. | 2015 Form 10-K | 76 Apple Inc. | 2015 Form 10-K | 76 | 2015 Form 10-K | 76 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/AAPL/10-K/0001628280-16-020309/full-submission.txt b/src/data/processed-numeric-contexts/AAPL/10-K/0001628280-16-020309/full-submission.txt new file mode 100644 index 0000000..63193a4 --- /dev/null +++ b/src/data/processed-numeric-contexts/AAPL/10-K/0001628280-16-020309/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 Form 10-K ( Mark One Washington , D.C. 20549 Form 10-K ( Mark One ) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended September 24 , 2016 or ☐ TRANSITION year ended September 24 , 2016 or ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number : 001-36743 Apple Inc. ( Exact name in it charter ) California 94-2404110 ( State or other jurisdiction Employer Identification No . ) 1 Infinite Loop Cupertino , California Infinite Loop Cupertino , California 95014 ( Address of principal executive ( Zip Code ) ( 408 ) 996-1010 ( Registrant ’ Code ) ( 408 ) 996-1010 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the : Common Stock , $ 0.00001 par value per share 1.000 0.00001 par value per share 1.000 % Notes due 2022 1.375 share 1.000 % Notes due 2022 1.375 % Notes due 2024 1.000 % Notes due 2022 1.375 % Notes due 2024 1.625 2022 1.375 % Notes due 2024 1.625 % Notes due 2026 1.375 % Notes due 2024 1.625 % Notes due 2026 2.000 2024 1.625 % Notes due 2026 2.000 % Notes due 2027 1.625 % Notes due 2026 2.000 % Notes due 2027 3.050 2026 2.000 % Notes due 2027 3.050 % Notes due 2029 2.000 % Notes due 2027 3.050 % Notes due 2029 3.600 2027 3.050 % Notes due 2029 3.600 % Notes due 2042 3.050 % Notes due 2029 3.600 % Notes due 2042 The 2029 3.600 % Notes due 2042 The NASDAQ Stock Market LLC Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the Registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ☐ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Act ) . Registrant , a of March 25 , 2016 , the last a of March 25 , 2016 , the last business day quarter , wa approximately $ 578,807,000,000 . Solely for purpose of for any other purpose . 5,332,313,000 share of common stock were and outstanding a of October 14 , 2016 . DOCUMENTS INCORPORATED a of October 14 , 2016 . DOCUMENTS INCORPORATED BY REFERENCE proxy statement relating to it 2017 annual meeting of shareholder ( of shareholder ( the “ 2017 Proxy Statement ” ) are this Annual Report on Form 10-K where indicated . The 2017 10-K where indicated . The 2017 Proxy Statement will be filed Securities and Exchange Commission within 120 day after the end of relates . Apple Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended September 24 , 2016 TABLE OF CONTENTS Year Ended September 24 , 2016 TABLE OF CONTENTS Page Part CONTENTS Page Part I Item 1. Business 1 Item 1A . Part I Item 1. Business 1 Item 1A . Risk Factors Item 1. Business 1 Item 1A . Risk Factors 8 Item Item 1A . Risk Factors 8 Item 1B . Unresolved Staff . Risk Factors 8 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 17 Unresolved Staff Comments 17 Item 2 . Properties 17 Item 3 17 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Mine Safety . Legal Proceedings 17 Item 4 . Mine Safety Disclosures 17 4 . Mine Safety Disclosures 17 Part II Item 5 . Disclosures 17 Part II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 36 Item 8 . Financial Statements About Market Risk 36 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 38 Item 9 . Changes in and Supplementary Data 38 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 72 Item 9A . Controls and and Financial Disclosure 72 Item 9A . Controls and Procedures 72 9A . Controls and Procedures 72 Item 9B . Other Information Controls and Procedures 72 Item 9B . Other Information 72 Part Item 9B . Other Information 72 Part III Item 10 . Information 72 Part III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 73 Item 11 . Executive Compensation and Corporate Governance 73 Item 11 . Executive Compensation 73 Item Item 11 . Executive Compensation 73 Item 12 . Security Ownership . Executive Compensation 73 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 73 Item 13 . Certain Relationships Related Stockholder Matters 73 Item 13 . Certain Relationships and Related Related Transactions and Director Independence 73 Item 14 . Principal Accounting and Director Independence 73 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 73 Part IV Item 15 . Services 73 Part IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 74 This Annual Report on Form This Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contains forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the heading “ Management in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk law . PART I Item 1. Business Company Background The Company s fiscal year is the 52 or 53-week period that end year is the 52 or 53-week period that end on the a California corporation established in 1977. Business Strategy The Company is in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and . ” Apple Inc. | 2016 Form 10-K | 1 Products Apple Inc. | 2016 Form 10-K | 1 Products iPhone iPhone | 2016 Form 10-K | 1 Products iPhone iPhone is the qualifying device . In September 2016 , the Company introduced iPhone , the Company introduced iPhone 7 and 7 Plus , featuring Company introduced iPhone 7 and 7 Plus , featuring new camera During the third quarter of 2016 , the Company also began SE , which ha a 4-inch Retina ® display . iPhone computer include iMac ® , 21.5 ” iMac with Retina 4K 21.5 ” iMac with Retina 4K display , 27 ” iMac with Retina 4K display , 27 ” iMac with Retina 5K 27 ” iMac with Retina 5K display , Mac Pro ® iCloud service . In September 2016 , the Company released iOS , the Company released iOS 10 , which introduces the ability Sierra , released in September 2016 , is the 13th major September 2016 , is the 13th major release of macOS and Watch . Released in September 2016 , watchOS 3 provides improved in September 2016 , watchOS 3 provides improved performance with the tvOS , released in September 2016 , incorporates new Siri capability device . Apple Inc. | 2016 Form 10-K | 2 Services Apple Inc. | 2016 Form 10-K | 2 Services Internet Services | 2016 Form 10-K | 2 Services Internet Services The iTunes and supply . In September 2016 , the Company introduced AirPods™ Apple Pay . In September 2016 , the Company introduced Apple Company introduced Apple Watch Series 2 , featuring new fitness and , built-in GPS and a 50-meter water resistance rating for swimming swimming . Apple Inc. | 2016 Form 10-K | 3 iPod Apple Inc. | 2016 Form 10-K | 3 iPod iPod is | 2016 Form 10-K | 3 iPod iPod is the Company and value-added resellers . During 2016 , the Company ’ s indirect distribution channel accounted for 25 % and 75 % , accounted for 25 % and 75 % , respectively , of customer accounted for more than 10 % of net sale in % of net sale in 2016 , 2015 and 2014 . net sale in 2016 , 2015 and 2014 . Apple Inc. in 2016 , 2015 and 2014 . Apple Inc. | 2016 2014 . Apple Inc. | 2016 Form 10-K | 4 Competition Apple Inc. | 2016 Form 10-K | 4 Competition The market | 2016 Form 10-K | 4 Competition The market for the requirement for period up to 150 day . Apple Inc. | day . Apple Inc. | 2016 Form 10-K | 5 Research Apple Inc. | 2016 Form 10-K | 5 Research and Development | 2016 Form 10-K | 5 Research and Development Because the & D expense wa $ 10.0 billion , $ 8.1 billion $ 10.0 billion , $ 8.1 billion and $ 6.0 billion $ 8.1 billion and $ 6.0 billion in 2016 , 2015 and $ 6.0 billion in 2016 , 2015 and 2014 , 6.0 billion in 2016 , 2015 and 2014 , respectively . in 2016 , 2015 and 2014 , respectively . Patents , Operations and Geographic Data During 2016 , the Company ’ s international net sale accounted for 35 % and 65 % , accounted for 35 % and 65 % , respectively , of in Part II , Item 7 of this Form 10-K under Item 7 of this Form 10-K under the subheading “ Segment in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies The Company also offer a 90-day basic warranty for it service product . Apple Inc. | 2016 Form 10-K | 6 Backlog Apple Inc. | 2016 Form 10-K | 6 Backlog In the | 2016 Form 10-K | 6 Backlog In the Company ’ . Employees As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had approximately , the Company had approximately 116,000 full-time equivalent employee . Available s Annual Report on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and amendment to report report filed pursuant to Sections 13 ( a ) and 15 13 ( a ) and 15 ( d ) of the the Securities Exchange Act of 1934 , a amended ( the s Public Reference Room at 100 F Street , NE , Street , NE , Room 1580 , Washington , DC 20549 1580 , Washington , DC 20549 . The public may obtain by calling the SEC at 1-800-SEC-0330 . The SEC maintains an only . Apple Inc. | 2016 Form 10-K | 7 Item Apple Inc. | 2016 Form 10-K | 7 Item 1A . | 2016 Form 10-K | 7 Item 1A . Risk Factors Form 10-K | 7 Item 1A . Risk Factors The following other statement in this Form 10-K . The following information should with Part II , Item 7 , “ Management ’ s in Part II , Item 8 , “ Financial Statements and Data ” of this Form 10-K . The business , financial affected . Apple Inc. | 2016 Form 10-K | 8 The Apple Inc. | 2016 Form 10-K | 8 The Company market | 2016 Form 10-K | 8 The Company market certain mobile product . Apple Inc. | 2016 Form 10-K | 9 The Apple Inc. | 2016 Form 10-K | 9 The Company face | 2016 Form 10-K | 9 The Company face substantial inventory requirement for period up to 150 day . Because the Company impacted . Apple Inc. | 2016 Form 10-K | 10 The Apple Inc. | 2016 Form 10-K | 10 The Company ’ | 2016 Form 10-K | 10 The Company ’ s product suffer . Apple Inc. | 2016 Form 10-K | 11 The Apple Inc. | 2016 Form 10-K | 11 The Company relies | 2016 Form 10-K | 11 The Company relies on access product . Apple Inc. | 2016 Form 10-K | 12 Compliance Apple Inc. | 2016 Form 10-K | 12 Compliance with these | 2016 Form 10-K | 12 Compliance with these law , reporting . Apple Inc. | 2016 Form 10-K | 13 There Apple Inc. | 2016 Form 10-K | 13 There may be | 2016 Form 10-K | 13 There may be breach of located . Apple Inc. | 2016 Form 10-K | 14 The Apple Inc. | 2016 Form 10-K | 14 The Company ’ | 2016 Form 10-K | 14 The Company ’ s business retention . Apple Inc. | 2016 Form 10-K | 15 The Apple Inc. | 2016 Form 10-K | 15 The Company ’ | 2016 Form 10-K | 15 The Company ’ s financial component . As of September 24 , 2016 , a significant As of September 24 , 2016 , a significant portion of affected . Apple Inc. | 2016 Form 10-K | 16 Item Apple Inc. | 2016 Form 10-K | 16 Item 1B . | 2016 Form 10-K | 16 Item 1B . Unresolved Staff Form 10-K | 16 Item 1B . Unresolved Staff Comments None Staff Comments None . Item 2 . Properties The Company ’ California . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company owned 7.1 2016 , the Company owned 7.1 million square foot and leased million square foot and leased 22.3 million square foot of building Company owned a total of 2,583 acre of land primarily in the U.S. As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company owned facility for it product . Item 3 . Legal Proceedings The Company in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk during the fourth quarter of 2016 that did not individually or or operating result . Item 4 . Mine Safety Disclosures Not applicable . Apple Inc. | 2016 Form 10-K | 17 PART Apple Inc. | 2016 Form 10-K | 17 PART II Item | 2016 Form 10-K | 17 PART II Item 5 . | 17 PART II Item 5 . Market for Registrant ’ Quarter Second Quarter First Quarter 2016 price range per share $ price range per share $ 116.18 - $ 91.50 $ 112.39 share $ 116.18 - $ 91.50 $ 112.39 - $ 89.47 116.18 - $ 91.50 $ 112.39 - $ 89.47 $ 109.43 91.50 $ 112.39 - $ 89.47 $ 109.43 - $ 92.39 112.39 - $ 89.47 $ 109.43 - $ 92.39 $ 123.82 89.47 $ 109.43 - $ 92.39 $ 123.82 - $ 105.57 109.43 - $ 92.39 $ 123.82 - $ 105.57 2015 price 92.39 $ 123.82 - $ 105.57 2015 price range per share $ 123.82 - $ 105.57 2015 price range per share $ price range per share $ 132.97 - $ 92.00 $ 134.54 share $ 132.97 - $ 92.00 $ 134.54 - $ 123.10 132.97 - $ 92.00 $ 134.54 - $ 123.10 $ 133.60 92.00 $ 134.54 - $ 123.10 $ 133.60 - $ 104.63 134.54 - $ 123.10 $ 133.60 - $ 104.63 $ 119.75 123.10 $ 133.60 - $ 104.63 $ 119.75 - $ 95.18 133.60 - $ 104.63 $ 119.75 - $ 95.18 Holders As 104.63 $ 119.75 - $ 95.18 Holders As of October 14 95.18 Holders As of October 14 , 2016 , there were As of October 14 , 2016 , there were 25,641 shareholder , 2016 , there were 25,641 shareholder of record . Dividends paid a total of $ 12.0 billion and $ 11.4 billion $ 12.0 billion and $ 11.4 billion in dividend during 2016 11.4 billion in dividend during 2016 and 2015 , respectively , in dividend during 2016 and 2015 , respectively , and expects pay quarterly dividend of $ 0.57 per common share each quarter Directors . Apple Inc. | 2016 Form 10-K | 18 Purchases Apple Inc. | 2016 Form 10-K | 18 Purchases of Equity | 2016 Form 10-K | 18 Purchases of Equity Securities by the three month ended September 24 , 2016 wa a follows month ended September 24 , 2016 wa a follows ( in the Plans or Programs ( 1 ) June 26 , 2016 Programs ( 1 ) June 26 , 2016 to July 30 1 ) June 26 , 2016 to July 30 , 2016 26 , 2016 to July 30 , 2016 : Open market 2016 to July 30 , 2016 : Open market and privately market and privately negotiated purchase 9,036 $ 96.83 9,036 July 31 privately negotiated purchase 9,036 $ 96.83 9,036 July 31 , 2016 negotiated purchase 9,036 $ 96.83 9,036 July 31 , 2016 to 9,036 $ 96.83 9,036 July 31 , 2016 to August 27 96.83 9,036 July 31 , 2016 to August 27 , 2016 31 , 2016 to August 27 , 2016 : May 2016 2016 to August 27 , 2016 : May 2016 ASR 12,269 27 , 2016 : May 2016 ASR 12,269 ( 2 ) 2016 : May 2016 ASR 12,269 ( 2 ) 12,269 Open May 2016 ASR 12,269 ( 2 ) 12,269 Open market and ASR 12,269 ( 2 ) 12,269 Open market and privately negotiated market and privately negotiated purchase 11,919 $ 108.11 11,919 August 28 privately negotiated purchase 11,919 $ 108.11 11,919 August 28 , 2016 negotiated purchase 11,919 $ 108.11 11,919 August 28 , 2016 to 11,919 $ 108.11 11,919 August 28 , 2016 to September 24 108.11 11,919 August 28 , 2016 to September 24 , 2016 28 , 2016 to September 24 , 2016 : August 2016 2016 to September 24 , 2016 : August 2016 ASR 22,468 24 , 2016 : August 2016 ASR 22,468 ( 3 ) 2016 : August 2016 ASR 22,468 ( 3 ) ( 3 August 2016 ASR 22,468 ( 3 ) ( 3 ) 22,468 22,468 ( 3 ) ( 3 ) 22,468 ( 3 ) 3 ) ( 3 ) 22,468 ( 3 ) Open market ( 3 ) 22,468 ( 3 ) Open market and privately market and privately negotiated purchase 7,624 $ 109.71 7,624 Total 63,316 privately negotiated purchase 7,624 $ 109.71 7,624 Total 63,316 $ 42,024 negotiated purchase 7,624 $ 109.71 7,624 Total 63,316 $ 42,024 ( 7,624 $ 109.71 7,624 Total 63,316 $ 42,024 ( 1 ) 109.71 7,624 Total 63,316 $ 42,024 ( 1 ) In April Total 63,316 $ 42,024 ( 1 ) In April 2016 , ( 1 ) In April 2016 , the Company ’ s repurchase program authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion of the Company ’ stock . As of September 24 , 2016 , $ 133 As of September 24 , 2016 , $ 133 billion of 24 , 2016 , $ 133 billion of the $ 175 133 billion of the $ 175 billion had been utilized . utilized . The remaining $ 42 billion in the table represents repurchase program a of September 24 , 2016 . The Company a of September 24 , 2016 . The Company ’ s under plan complying with Rule 10b5-1 under the Exchange Act . the Exchange Act . ( 2 ) In May 2016 , ( 2 ) In May 2016 , the Company entered into to purchase up to $ 6.0 billion of the Company 's common stock . In August 2016 , the purchase period for ASR ended and an additional 12.3 million share were delivered and retired . In total , 60.5 million share were delivered under average repurchase price of $ 99.25 . ( 3 ) In of $ 99.25 . ( 3 ) In August 2016 , ( 3 ) In August 2016 , the Company entered into to purchase up to $ 3.0 billion of the Company ’ an up-front payment of $ 3.0 billion , the financial institution end in or before November 2016 . The total number of period . Apple Inc. | 2016 Form 10-K | 19 Company Apple Inc. | 2016 Form 10-K | 19 Company Stock Performance | 2016 Form 10-K | 19 Company Stock Performance The following , the S & P 500 Index , the S & the five year ended September 24 , 2016 . The graph year ended September 24 , 2016 . The graph assumes $ . The graph assumes $ 100 wa invested in each of , the S & P 500 Index , the S & the market close on September 23 , 2011 . Note that close on September 23 , 2011 . Note that historic stock price performance . * $ 100 invested on 9/23/11 in stock * $ 100 invested on 9/23/11 in stock or index , s common stock and September 30th for index . Copyright © for index . Copyright © 2016 S & P , a right reserved . Copyright © 2016 Dow Jones & Co. All All right reserved . September 2011 September 2012 September 2013 September reserved . September 2011 September 2012 September 2013 September 2014 September September 2011 September 2012 September 2013 September 2014 September 2015 September September 2012 September 2013 September 2014 September 2015 September 2016 Apple September 2013 September 2014 September 2015 September 2016 Apple Inc. $ September 2014 September 2015 September 2016 Apple Inc. $ 100 $ September 2016 Apple Inc. $ 100 $ 166 $ 123 $ Apple Inc. $ 100 $ 166 $ 123 $ 183 $ $ 100 $ 166 $ 123 $ 183 $ 212 $ $ 166 $ 123 $ 183 $ 212 $ 213 S $ 123 $ 183 $ 212 $ 213 S & P $ 183 $ 212 $ 213 S & P 500 Index $ 213 S & P 500 Index $ 100 $ 130 & P 500 Index $ 100 $ 130 $ 155 $ 500 Index $ 100 $ 130 $ 155 $ 186 $ $ 100 $ 130 $ 155 $ 186 $ 185 $ $ 130 $ 155 $ 186 $ 185 $ 213 S $ 155 $ 186 $ 185 $ 213 S & P $ 186 $ 185 $ 213 S & P Information Technology P Information Technology Index $ 100 $ 132 $ 142 $ Technology Index $ 100 $ 132 $ 142 $ 183 $ $ 100 $ 132 $ 142 $ 183 $ 187 $ $ 132 $ 142 $ 183 $ 187 $ 230 Dow $ 142 $ 183 $ 187 $ 230 Dow Jones U.S. $ 183 $ 187 $ 230 Dow Jones U.S. Technology Supersector U.S. Technology Supersector Index $ 100 $ 130 $ 137 $ Supersector Index $ 100 $ 130 $ 137 $ 178 $ $ 100 $ 130 $ 137 $ 178 $ 177 $ $ 130 $ 137 $ 178 $ 177 $ 217 Apple $ 137 $ 178 $ 177 $ 217 Apple Inc. | $ 178 $ 177 $ 217 Apple Inc. | 2016 Form $ 217 Apple Inc. | 2016 Form 10-K | 20 Item Apple Inc. | 2016 Form 10-K | 20 Item 6 . | 2016 Form 10-K | 20 Item 6 . Selected Financial Form 10-K | 20 Item 6 . Selected Financial Data The the five year ended September 24 , 2016 , is not year ended September 24 , 2016 , is not necessarily indicative with Part II , Item 7 , “ Management ’ s in Part II , Item 8 of this Form 10-K to Item 8 of this Form 10-K to fully understand factor that per share amount ) . 2016 2015 2014 2013 2012 Net share amount ) . 2016 2015 2014 2013 2012 Net sale amount ) . 2016 2015 2014 2013 2012 Net sale $ ) . 2016 2015 2014 2013 2012 Net sale $ 215,639 . 2016 2015 2014 2013 2012 Net sale $ 215,639 $ 2013 2012 Net sale $ 215,639 $ 233,715 $ 182,795 $ Net sale $ 215,639 $ 233,715 $ 182,795 $ 170,910 $ $ 215,639 $ 233,715 $ 182,795 $ 170,910 $ 156,508 Net $ 233,715 $ 182,795 $ 170,910 $ 156,508 Net income $ $ 182,795 $ 170,910 $ 156,508 Net income $ 45,687 $ $ 156,508 Net income $ 45,687 $ 53,394 $ 39,510 $ Net income $ 45,687 $ 53,394 $ 39,510 $ 37,037 $ $ 45,687 $ 53,394 $ 39,510 $ 37,037 $ 41,733 Earnings $ 53,394 $ 39,510 $ 37,037 $ 41,733 Earnings per share $ 39,510 $ 37,037 $ 41,733 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 $ : Basic $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ $ 8.35 $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 9.28 $ 6.49 $ 5.72 $ 6.38 Diluted $ 8.31 $ 6.49 $ 5.72 $ 6.38 Diluted $ 8.31 $ 9.22 5.72 $ 6.38 Diluted $ 8.31 $ 9.22 $ 6.45 $ 6.38 Diluted $ 8.31 $ 9.22 $ 6.45 $ 5.68 $ $ 8.31 $ 9.22 $ 6.45 $ 5.68 $ 6.31 Cash $ 9.22 $ 6.45 $ 5.68 $ 6.31 Cash dividend declared $ 6.45 $ 5.68 $ 6.31 Cash dividend declared per share dividend declared per share $ 2.18 $ 1.98 $ 1.82 $ per share $ 2.18 $ 1.98 $ 1.82 $ 1.64 $ $ 2.18 $ 1.98 $ 1.82 $ 1.64 $ 0.38 Shares $ 1.98 $ 1.82 $ 1.64 $ 0.38 Shares used in $ 1.82 $ 1.64 $ 0.38 Shares used in computing earnings earnings per share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted per share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 share : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 : Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 Basic 5,470,820 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 5,753,421 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 6,617,483 Total 6,085,572 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 6,617,483 Total cash 6,477,320 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 6,617,483 Total cash , 6,543,726 Diluted 5,500,281 5,793,069 6,122,663 6,521,634 6,617,483 Total cash , cash Diluted 5,500,281 5,793,069 6,122,663 6,521,634 6,617,483 Total cash , cash equivalent equivalent and marketable security $ 237,585 $ 205,666 $ 155,239 $ marketable security $ 237,585 $ 205,666 $ 155,239 $ 146,761 $ $ 237,585 $ 205,666 $ 155,239 $ 146,761 $ 121,251 Total $ 205,666 $ 155,239 $ 146,761 $ 121,251 Total asset $ $ 155,239 $ 146,761 $ 121,251 Total asset $ 321,686 $ $ 121,251 Total asset $ 321,686 $ 290,345 $ 231,839 $ Total asset $ 321,686 $ 290,345 $ 231,839 $ 207,000 $ $ 321,686 $ 290,345 $ 231,839 $ 207,000 $ 176,064 Commercial $ 290,345 $ 231,839 $ 207,000 $ 176,064 Commercial paper $ $ 231,839 $ 207,000 $ 176,064 Commercial paper $ 8,105 $ $ 176,064 Commercial paper $ 8,105 $ 8,499 $ 6,308 $ Commercial paper $ 8,105 $ 8,499 $ 6,308 $ — $ $ 8,105 $ 8,499 $ 6,308 $ — $ — Total — Total term debt ( 1 ) $ 78,927 $ 55,829 debt ( 1 ) $ 78,927 $ 55,829 $ 28,987 $ 1 ) $ 78,927 $ 55,829 $ 28,987 $ 16,960 $ $ 78,927 $ 55,829 $ 28,987 $ 16,960 $ — Other $ 55,829 $ 28,987 $ 16,960 $ — Other long-term obligation — Other long-term obligation ( 2 ) $ 36,074 $ 33,427 obligation ( 2 ) $ 36,074 $ 33,427 $ 24,826 $ 2 ) $ 36,074 $ 33,427 $ 24,826 $ 20,208 $ $ 36,074 $ 33,427 $ 24,826 $ 20,208 $ 16,664 Total $ 33,427 $ 24,826 $ 20,208 $ 16,664 Total liability $ $ 24,826 $ 20,208 $ 16,664 Total liability $ 193,437 $ $ 16,664 Total liability $ 193,437 $ 170,990 $ 120,292 $ Total liability $ 193,437 $ 170,990 $ 120,292 $ 83,451 $ $ 193,437 $ 170,990 $ 120,292 $ 83,451 $ 57,854 Total $ 170,990 $ 120,292 $ 83,451 $ 57,854 Total shareholder ’ $ 120,292 $ 83,451 $ 57,854 Total shareholder ’ equity $ Total shareholder ’ equity $ 128,249 $ 119,355 $ 111,547 $ ’ equity $ 128,249 $ 119,355 $ 111,547 $ 123,549 $ $ 128,249 $ 119,355 $ 111,547 $ 123,549 $ 118,210 ( $ 119,355 $ 111,547 $ 123,549 $ 118,210 ( 1 ) $ 111,547 $ 123,549 $ 118,210 ( 1 ) Includes current $ 123,549 $ 118,210 ( 1 ) Includes current and long-term of term debt . ( 2 ) Other long-term obligation excludes revenue . Apple Inc. | 2016 Form 10-K | 21 Item Apple Inc. | 2016 Form 10-K | 21 Item 7 . | 2016 Form 10-K | 21 Item 7 . Management ’ Form 10-K | 21 Item 7 . Management ’ s Discussion this Annual Report on Form 10-K ( “ Form 10-K ” Form 10-K ( “ Form 10-K ” ) contain forward-looking statement Securities Litigation Reform Act of 1995 , that involve risk and in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part II , Item 8 of this Form 10-K. All Item 8 of this Form 10-K. All information presented herein is and government customer . Fiscal 2016 Highlights Net sale declined 8 2016 Highlights Net sale declined 8 % or $ 18.1 billion declined 8 % or $ 18.1 billion during 2016 compared to or $ 18.1 billion during 2016 compared to 2015 , primarily billion during 2016 compared to 2015 , primarily driven by a in Services . In April 2016 , the Company announced a of the program from $ 200 billion to $ 250 billion $ 200 billion to $ 250 billion through March 2018 . $ 250 billion through March 2018 . This included increasing it share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion and raising it quarterly it quarterly dividend from $ 0.52 to $ 0.57 per share from $ 0.52 to $ 0.57 per share beginning in May per share beginning in May 2016 . During 2016 , the in May 2016 . During 2016 , the Company spent $ , the Company spent $ 29.0 billion to repurchase share of and dividend equivalent of $ 12.2 billion . Additionally , the , the Company issued $ 23.9 billion of U.S. dollar-denominated term term debt and A $ 1.4 billion of Australian dollar-denominated term Australian dollar-denominated term debt during 2016 . Fiscal 2015 Highlights Net debt during 2016 . Fiscal 2015 Highlights Net sale rose 28 2015 Highlights Net sale rose 28 % or $ 50.9 billion rose 28 % or $ 50.9 billion during 2015 compared to or $ 50.9 billion during 2015 compared to 2014 , driven billion during 2015 compared to 2014 , driven by a year-over-year sale and unit sale in 2015 increased in all of the during the third quarter of 2015 , accounted for more than , accounted for more than 100 % of the year-over-year growth . Net sale growth during 2015 wa partially offset by the where year-over-year net sale increased 84 % . In April 2015 84 % . In April 2015 , the Company announced a of the program to $ 200 billion through March 2017 . $ 200 billion through March 2017 . This included increasing it share repurchase authorization to $ 140 billion and raising it quarterly it quarterly dividend to $ 0.52 per share beginning in May per share beginning in May 2015 . During 2015 , the in May 2015 . During 2015 , the Company spent $ , the Company spent $ 36.0 billion to repurchase share of and dividend equivalent of $ 11.6 billion . Additionally , the , the Company issued $ 14.5 billion of U.S. dollar-denominated , British pound-denominated , A $ 2.3 billion of Australian dollar-denominated and Japanese yen-denominated term debt during 2015 . Apple Inc. | 2016 2015 . Apple Inc. | 2016 Form 10-K | 22 Sales Apple Inc. | 2016 Form 10-K | 22 Sales Data The | 2016 Form 10-K | 22 Sales Data The following table unit sale by product during 2016 , 2015 and 2014 ( by product during 2016 , 2015 and 2014 ( dollar in during 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net Sales by : 2016 Change 2015 Change 2014 Net Sales by Operating Segment Operating Segment : Americas $ 86,613 ( 8 ) % $ : Americas $ 86,613 ( 8 ) % $ 93,864 17 ( 8 ) % $ 93,864 17 % $ 80,095 Europe 8 ) % $ 93,864 17 % $ 80,095 Europe 49,952 $ 93,864 17 % $ 80,095 Europe 49,952 ( 1 ) 17 % $ 80,095 Europe 49,952 ( 1 ) % 50,337 $ 80,095 Europe 49,952 ( 1 ) % 50,337 14 % 49,952 ( 1 ) % 50,337 14 % 44,285 Greater China ( 1 ) % 50,337 14 % 44,285 Greater China 48,492 ) % 50,337 14 % 44,285 Greater China 48,492 ( 17 14 % 44,285 Greater China 48,492 ( 17 ) % 58,715 44,285 Greater China 48,492 ( 17 ) % 58,715 84 % 48,492 ( 17 ) % 58,715 84 % 31,853 Japan 16,928 ( 17 ) % 58,715 84 % 31,853 Japan 16,928 8 ) % 58,715 84 % 31,853 Japan 16,928 8 % 15,706 58,715 84 % 31,853 Japan 16,928 8 % 15,706 3 % 84 % 31,853 Japan 16,928 8 % 15,706 3 % 15,314 31,853 Japan 16,928 8 % 15,706 3 % 15,314 Rest of Japan 16,928 8 % 15,706 3 % 15,314 Rest of Asia 8 % 15,706 3 % 15,314 Rest of Asia Pacific 13,654 15,314 Rest of Asia Pacific 13,654 ( 10 ) % 15,093 of Asia Pacific 13,654 ( 10 ) % 15,093 34 % 13,654 ( 10 ) % 15,093 34 % 11,248 Total net ( 10 ) % 15,093 34 % 11,248 Total net sale ) % 15,093 34 % 11,248 Total net sale $ 215,639 11,248 Total net sale $ 215,639 ( 8 ) % $ net sale $ 215,639 ( 8 ) % $ 233,715 28 ( 8 ) % $ 233,715 28 % $ 182,795 Net 8 ) % $ 233,715 28 % $ 182,795 Net Sales $ 233,715 28 % $ 182,795 Net Sales by Product : by Product : iPhone ( 1 ) $ 136,700 ( 12 iPhone ( 1 ) $ 136,700 ( 12 ) % $ 1 ) $ 136,700 ( 12 ) % $ 155,041 52 ( 12 ) % $ 155,041 52 % $ 101,991 iPad 12 ) % $ 155,041 52 % $ 101,991 iPad ( $ 155,041 52 % $ 101,991 iPad ( 1 ) 20,628 % $ 101,991 iPad ( 1 ) 20,628 ( 11 ) 101,991 iPad ( 1 ) 20,628 ( 11 ) % 23,227 ( 1 ) 20,628 ( 11 ) % 23,227 ( 23 20,628 ( 11 ) % 23,227 ( 23 ) % 30,283 11 ) % 23,227 ( 23 ) % 30,283 Mac ( 23,227 ( 23 ) % 30,283 Mac ( 1 ) 22,831 ) % 30,283 Mac ( 1 ) 22,831 ( 10 ) 30,283 Mac ( 1 ) 22,831 ( 10 ) % 25,471 ( 1 ) 22,831 ( 10 ) % 25,471 6 % 22,831 ( 10 ) % 25,471 6 % 24,079 Services ( ( 10 ) % 25,471 6 % 24,079 Services ( 2 ) % 25,471 6 % 24,079 Services ( 2 ) 24,348 6 % 24,079 Services ( 2 ) 24,348 22 % 19,909 24,079 Services ( 2 ) 24,348 22 % 19,909 10 % Services ( 2 ) 24,348 22 % 19,909 10 % 18,063 2 ) 24,348 22 % 19,909 10 % 18,063 Other Products ) 24,348 22 % 19,909 10 % 18,063 Other Products ( 22 % 19,909 10 % 18,063 Other Products ( 1 ) % 18,063 Other Products ( 1 ) ( 3 ) 11,132 Products ( 1 ) ( 3 ) 11,132 11 % 10,067 1 ) ( 3 ) 11,132 11 % 10,067 20 % ) ( 3 ) 11,132 11 % 10,067 20 % 8,379 3 ) 11,132 11 % 10,067 20 % 8,379 Total net ) 11,132 11 % 10,067 20 % 8,379 Total net sale 11 % 10,067 20 % 8,379 Total net sale $ 215,639 8,379 Total net sale $ 215,639 ( 8 ) % $ net sale $ 215,639 ( 8 ) % $ 233,715 28 ( 8 ) % $ 233,715 28 % $ 182,795 Unit 8 ) % $ 233,715 28 % $ 182,795 Unit Sales $ 233,715 28 % $ 182,795 Unit Sales by Product : Sales by Product : iPhone 211,884 ( 8 ) % 231,218 Product : iPhone 211,884 ( 8 ) % 231,218 37 % 211,884 ( 8 ) % 231,218 37 % 169,219 iPad 45,590 ( 8 ) % 231,218 37 % 169,219 iPad 45,590 ( ) % 231,218 37 % 169,219 iPad 45,590 ( 17 ) 231,218 37 % 169,219 iPad 45,590 ( 17 ) % 54,856 % 169,219 iPad 45,590 ( 17 ) % 54,856 ( 19 45,590 ( 17 ) % 54,856 ( 19 ) % 67,977 17 ) % 54,856 ( 19 ) % 67,977 Mac 18,484 54,856 ( 19 ) % 67,977 Mac 18,484 ( 10 ) 19 ) % 67,977 Mac 18,484 ( 10 ) % 20,587 % 67,977 Mac 18,484 ( 10 ) % 20,587 9 % 18,484 ( 10 ) % 20,587 9 % 18,906 ( 1 ( 10 ) % 20,587 9 % 18,906 ( 1 ) ) % 20,587 9 % 18,906 ( 1 ) Includes deferral 20,587 9 % 18,906 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from Internet and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2016 Form 10-K | 23 Product Apple Inc. | 2016 Form 10-K | 23 Product Performance iPhone | 2016 Form 10-K | 23 Product Performance iPhone The following and unit sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 136,700 ( Change 2014 Net sale $ 136,700 ( 12 ) % $ Net sale $ 136,700 ( 12 ) % $ 155,041 52 ( 12 ) % $ 155,041 52 % $ 101,991 Percentage 12 ) % $ 155,041 52 % $ 101,991 Percentage of $ 155,041 52 % $ 101,991 Percentage of total net sale Percentage of total net sale 63 % 66 % 56 % total net sale 63 % 66 % 56 % Unit sale sale 63 % 66 % 56 % Unit sale 211,884 ( % 56 % Unit sale 211,884 ( 8 ) % 231,218 % Unit sale 211,884 ( 8 ) % 231,218 37 % 211,884 ( 8 ) % 231,218 37 % 169,219 iPhone net ( 8 ) % 231,218 37 % 169,219 iPhone net sale ) % 231,218 37 % 169,219 iPhone net sale and unit and unit sale decreased during 2016 compared to 2015 . The decreased during 2016 compared to 2015 . The Company belief the rate of iPhone upgrade during 2016 compared to 2015 and challenging upgrade during 2016 compared to 2015 and challenging macroeconomic condition in number of major market in 2016 . Average selling price ( iPhone were lower year-over-year during 2016 due primarily to a different the iPhone SE introduced in 2016 , and the effect of sale and unit sale during 2015 primarily resulted from strong demand from strong demand for iPhone 6 and 6 Plus during 2015 demand for iPhone 6 and 6 Plus during 2015 . Overall 6 and 6 Plus during 2015 . Overall ASPs for iPhone ASPs for iPhone increased during 2015 compared to 2014 , due increased during 2015 compared to 2014 , due primarily to the to the introduction of iPhone 6 and 6 Plus in September introduction of iPhone 6 and 6 Plus in September 2014 , and 6 Plus in September 2014 , partially offset by the and unit sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 20,628 ( Change 2014 Net sale $ 20,628 ( 11 ) % $ Net sale $ 20,628 ( 11 ) % $ 23,227 ( ( 11 ) % $ 23,227 ( 23 ) % $ ) % $ 23,227 ( 23 ) % $ 30,283 Percentage ( 23 ) % $ 30,283 Percentage of total net sale Percentage of total net sale 10 % 10 % 17 % total net sale 10 % 10 % 17 % Unit sale sale 10 % 10 % 17 % Unit sale 45,590 ( % 17 % Unit sale 45,590 ( 17 ) % 54,856 % Unit sale 45,590 ( 17 ) % 54,856 ( 19 45,590 ( 17 ) % 54,856 ( 19 ) % 67,977 17 ) % 54,856 ( 19 ) % 67,977 iPad net 54,856 ( 19 ) % 67,977 iPad net sale decreased during iPad net sale decreased during 2016 compared to 2015 primarily due decreased during 2016 compared to 2015 primarily due to lower unit sale for iPad declined during 2015 compared to 2014 . The declined during 2015 compared to 2014 . The Company belief the . iPad ASPs declined during 2015 compared to 2014 , primarily declined during 2015 compared to 2014 , primarily a a result and unit sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million and unit in thousand ) : 2016 Change 2015 Change 2014 Net thousand ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 22,831 ( Change 2014 Net sale $ 22,831 ( 10 ) % $ Net sale $ 22,831 ( 10 ) % $ 25,471 6 ( 10 ) % $ 25,471 6 % $ 24,079 Percentage 10 ) % $ 25,471 6 % $ 24,079 Percentage of $ 25,471 6 % $ 24,079 Percentage of total net sale Percentage of total net sale 11 % 11 % 13 % total net sale 11 % 11 % 13 % Unit sale sale 11 % 11 % 13 % Unit sale 18,484 ( % 13 % Unit sale 18,484 ( 10 ) % 20,587 % Unit sale 18,484 ( 10 ) % 20,587 9 % 18,484 ( 10 ) % 20,587 9 % 18,906 Mac net ( 10 ) % 20,587 9 % 18,906 Mac net sale ) % 20,587 9 % 18,906 Mac net sale and unit and unit sale decreased during 2016 compared to 2015 . The decreased during 2016 compared to 2015 . The year-over-year decline in in Mac unit sale during 2016 wa at rate similar to sale and unit sale during 2015 wa driven by strong demand . Mac ASPs declined during 2015 compared to 2014 largely due declined during 2015 compared to 2014 largely due to the effect dollar . Apple Inc. | 2016 Form 10-K | 24 Services Apple Inc. | 2016 Form 10-K | 24 Services The following | 2016 Form 10-K | 24 Services The following table present sale information of Services for 2016 , 2015 and 2014 ( of Services for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 24,348 22 Change 2014 Net sale $ 24,348 22 % $ 19,909 10 2014 Net sale $ 24,348 22 % $ 19,909 10 % $ 24,348 22 % $ 19,909 10 % $ 18,063 Percentage 24,348 22 % $ 19,909 10 % $ 18,063 Percentage of $ 19,909 10 % $ 18,063 Percentage of total net sale Percentage of total net sale 11 % 9 % 10 % total net sale 11 % 9 % 10 % The year-over-year sale 11 % 9 % 10 % The year-over-year increase in net sale of Services in 2016 wa due primarily to growth During the first quarter of 2016 , the Company received $ , the Company received $ 548 million from Samsung Electronics Co. net sale of Services during 2015 compared to 2014 wa primarily Services during 2015 compared to 2014 wa primarily due to growth in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 11 , “ Segment Information and Americas net sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 86,613 ( Change 2014 Net sale $ 86,613 ( 8 ) % $ Net sale $ 86,613 ( 8 ) % $ 93,864 17 ( 8 ) % $ 93,864 17 % $ 80,095 Percentage 8 ) % $ 93,864 17 % $ 80,095 Percentage of $ 93,864 17 % $ 80,095 Percentage of total net sale Percentage of total net sale 40 % 40 % 44 % total net sale 40 % 40 % 44 % Americas net sale 40 % 40 % 44 % Americas net sale decreased Americas net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net in Americas net sale during 2015 wa driven primarily by growth Europe net sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 49,952 ( Change 2014 Net sale $ 49,952 ( 1 ) % $ Net sale $ 49,952 ( 1 ) % $ 50,337 14 ( 1 ) % $ 50,337 14 % $ 44,285 Percentage 1 ) % $ 50,337 14 % $ 44,285 Percentage of $ 50,337 14 % $ 44,285 Percentage of total net sale Percentage of total net sale 23 % 22 % 24 % total net sale 23 % 22 % 24 % Europe net sale 23 % 22 % 24 % Europe net sale decreased Europe net sale decreased during 2016 compared to 2015 driven primarily decreased during 2016 compared to 2015 driven primarily by the effect in Europe net sale during 2015 wa driven primarily by growth iPad . Apple Inc. | 2016 Form 10-K | 25 Greater Apple Inc. | 2016 Form 10-K | 25 Greater China The | 2016 Form 10-K | 25 Greater China The following table China net sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 48,492 ( Change 2014 Net sale $ 48,492 ( 17 ) % $ Net sale $ 48,492 ( 17 ) % $ 58,715 84 ( 17 ) % $ 58,715 84 % $ 31,853 Percentage 17 ) % $ 58,715 84 % $ 31,853 Percentage of $ 58,715 84 % $ 31,853 Percentage of total net sale Percentage of total net sale 22 % 25 % 17 % total net sale 22 % 25 % 17 % Greater China sale 22 % 25 % 17 % Greater China net sale China net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net increase in net sale during 2015 driven primarily by iPhone sale Japan net sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 16,928 8 Change 2014 Net sale $ 16,928 8 % $ 15,706 3 2014 Net sale $ 16,928 8 % $ 15,706 3 % $ 16,928 8 % $ 15,706 3 % $ 15,314 Percentage 16,928 8 % $ 15,706 3 % $ 15,314 Percentage of $ 15,706 3 % $ 15,314 Percentage of total net sale Percentage of total net sale 8 % 7 % 8 % total net sale 8 % 7 % 8 % Japan net sale 8 % 7 % 8 % Japan net sale increased Japan net sale increased during 2016 compared to 2015 due primarily increased during 2016 compared to 2015 due primarily to higher net in Japan net sale during 2015 wa driven primarily by growth Pacific net sale information for 2016 , 2015 and 2014 ( sale information for 2016 , 2015 and 2014 ( dollar in for 2016 , 2015 and 2014 ( dollar in million ) dollar in million ) : 2016 Change 2015 Change 2014 Net million ) : 2016 Change 2015 Change 2014 Net sale $ : 2016 Change 2015 Change 2014 Net sale $ 13,654 ( Change 2014 Net sale $ 13,654 ( 10 ) % $ Net sale $ 13,654 ( 10 ) % $ 15,093 34 ( 10 ) % $ 15,093 34 % $ 11,248 Percentage 10 ) % $ 15,093 34 % $ 11,248 Percentage of $ 15,093 34 % $ 11,248 Percentage of total net sale Percentage of total net sale 6 % 6 % 6 % total net sale 6 % 6 % 6 % Rest of sale 6 % 6 % 6 % Rest of Asia Pacific Pacific net sale decreased during 2016 compared to 2015 due primarily decreased during 2016 compared to 2015 due primarily to lower net Asia Pacific net sale during 2015 primarily reflects strong growth in Gross Margin Gross margin for 2016 , 2015 and 2014 is Gross margin for 2016 , 2015 and 2014 is a follows for 2016 , 2015 and 2014 is a follows ( dollar dollar in million ) : 2016 2015 2014 Net sale $ in million ) : 2016 2015 2014 Net sale $ 215,639 million ) : 2016 2015 2014 Net sale $ 215,639 $ 2015 2014 Net sale $ 215,639 $ 233,715 $ 182,795 Cost Net sale $ 215,639 $ 233,715 $ 182,795 Cost of sale $ 215,639 $ 233,715 $ 182,795 Cost of sale 131,376 140,089 $ 182,795 Cost of sale 131,376 140,089 112,258 Gross margin $ 182,795 Cost of sale 131,376 140,089 112,258 Gross margin $ 84,263 Cost of sale 131,376 140,089 112,258 Gross margin $ 84,263 $ 140,089 112,258 Gross margin $ 84,263 $ 93,626 $ 70,537 Gross Gross margin $ 84,263 $ 93,626 $ 70,537 Gross margin percentage $ 84,263 $ 93,626 $ 70,537 Gross margin percentage 39.1 % $ 70,537 Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin percentage 39.1 % 40.1 % 38.6 % Gross margin decreased in % Gross margin decreased in 2016 compared to 2015 due primarily decreased in 2016 compared to 2015 due primarily to the effect the gross margin percentage in 2015 wa driven primarily by a dollar . Apple Inc. | 2016 Form 10-K | 26 The Apple Inc. | 2016 Form 10-K | 26 The Company anticipates | 2016 Form 10-K | 26 The Company anticipates gross margin during the first quarter of 2017 to be between 38 % of 2017 to be between 38 % and 38.5 % . be between 38 % and 38.5 % . The foregoing statement in the first quarter of 2017 is forward-looking and could differ in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk Operating Expenses Operating expense for 2016 , 2015 and 2014 are Operating expense for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( dollar dollar in million ) : 2016 Change 2015 Change 2014 Research million ) : 2016 Change 2015 Change 2014 Research and development : 2016 Change 2015 Change 2014 Research and development $ 10,045 2014 Research and development $ 10,045 25 % $ 8,067 34 Research and development $ 10,045 25 % $ 8,067 34 % $ 10,045 25 % $ 8,067 34 % $ 6,041 Percentage 10,045 25 % $ 8,067 34 % $ 6,041 Percentage of $ 8,067 34 % $ 6,041 Percentage of total net sale Percentage of total net sale 5 % 3 % 3 % total net sale 5 % 3 % 3 % Selling , sale 5 % 3 % 3 % Selling , general and , general and administrative $ 14,194 ( 1 ) % $ and administrative $ 14,194 ( 1 ) % $ 14,329 19 ( 1 ) % $ 14,329 19 % $ 11,993 Percentage 1 ) % $ 14,329 19 % $ 11,993 Percentage of $ 14,329 19 % $ 11,993 Percentage of total net sale Percentage of total net sale 7 % 6 % 7 % total net sale 7 % 6 % 7 % Total operating sale 7 % 6 % 7 % Total operating expense $ % Total operating expense $ 24,239 8 % $ 22,396 24 Total operating expense $ 24,239 8 % $ 22,396 24 % $ 24,239 8 % $ 22,396 24 % $ 18,034 Percentage 24,239 8 % $ 22,396 24 % $ 18,034 Percentage of $ 22,396 24 % $ 18,034 Percentage of total net sale Percentage of total net sale 11 % 10 % 10 % total net sale 11 % 10 % 10 % Research and sale 11 % 10 % 10 % Research and Development The R & D expense in 2016 and 2015 wa driven primarily D expense in 2016 and 2015 wa driven primarily by an general and administrative expense in 2016 compared to 2015 wa due expense in 2016 compared to 2015 wa due primarily to lower general and administrative expense in 2015 wa primarily due to increased expense ) , net for 2016 , 2015 and 2014 are , net for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( dollar dollar in million ) : 2016 Change 2015 Change 2014 Interest million ) : 2016 Change 2015 Change 2014 Interest and dividend : 2016 Change 2015 Change 2014 Interest and dividend income $ Interest and dividend income $ 3,999 $ 2,921 $ 1,795 Interest dividend income $ 3,999 $ 2,921 $ 1,795 Interest expense ( $ 3,999 $ 2,921 $ 1,795 Interest expense ( 1,456 ) $ 1,795 Interest expense ( 1,456 ) ( 733 ) ( expense ( 1,456 ) ( 733 ) ( 384 ) Other ) ( 733 ) ( 384 ) Other expense , net Other expense , net ( 1,195 ) ( 903 ) ( net ( 1,195 ) ( 903 ) ( 431 ) Total ) ( 903 ) ( 431 ) Total other income/ ( expense ) , net $ 1,348 5 % $ 1,285 31 ) , net $ 1,348 5 % $ 1,285 31 % $ 1,348 5 % $ 1,285 31 % $ 980 The 1,348 5 % $ 1,285 31 % $ 980 The year-over-year $ 1,285 31 % $ 980 The year-over-year increase in other expense ) , net during 2016 and 2015 wa due primarily , net during 2016 and 2015 wa due primarily to higher equivalent and marketable security wa 1.73 % , 1.49 % and security wa 1.73 % , 1.49 % and 1.11 % in % , 1.49 % and 1.11 % in 2016 , 2015 % and 1.11 % in 2016 , 2015 and 2014 , 1.11 % in 2016 , 2015 and 2014 , respectively . in 2016 , 2015 and 2014 , respectively . Apple Inc. respectively . Apple Inc. | 2016 Form 10-K | 27 Provision Apple Inc. | 2016 Form 10-K | 27 Provision for Income | 2016 Form 10-K | 27 Provision for Income Taxes Provision and effective tax rate for 2016 , 2015 and 2014 are tax rate for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( dollar dollar in million ) : 2016 2015 2014 Provision for income in million ) : 2016 2015 2014 Provision for income tax million ) : 2016 2015 2014 Provision for income tax 15,685 2014 Provision for income tax 15,685 $ 19,121 $ 13,973 Effective for income tax 15,685 $ 19,121 $ 13,973 Effective tax rate tax 15,685 $ 19,121 $ 13,973 Effective tax rate 25.6 % $ 13,973 Effective tax rate 25.6 % 26.4 % 26.1 % Effective tax rate 25.6 % 26.4 % 26.1 % The Company rate 25.6 % 26.4 % 26.1 % The Company ’ s s effective tax rate for 2016 , 2015 and 2014 differ tax rate for 2016 , 2015 and 2014 differ from the for 2016 , 2015 and 2014 differ from the statutory federal federal income tax rate of 35 % due primarily to certain lower effective tax rate in 2016 compared to 2015 wa due rate in 2016 compared to 2015 wa due primarily to greater higher effective tax rate during 2015 compared to 2014 wa due rate during 2015 compared to 2014 wa due primarily to higher tax . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had deferred and tax credit of $ 4.1 billion and deferred tax liability deferred tax liability of $ 26.0 billion . Management belief it During the fourth quarter of 2016 , the Company reached a it examination of the year 2010 through 2012 . In connection of the year 2010 through 2012 . In connection with this in the fourth quarter of 2016 that wa not significant to . All year prior to 2013 are closed , except for , except for the year 2010 through 2012 relating to R for the year 2010 through 2012 relating to R & D , the year subsequent to 2003 generally remain open and could resolution occurs . On August 30 , 2016 , the European . On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through September 2014 . Irish period June 2003 through September 2014 . Irish legislative change , a of the beginning of 2015 , eliminated the application of Pronouncements Income Taxes In October 2016 , the Financial Accounting Standards ( “ ASU ” ) 2016-16 , Income Taxes ( Topic , Income Taxes ( Topic 740 ) : Intra-Entity Transfer of than Inventory ( `` ASU 2016-16 `` ) , which requires the transfer occurs . ASU 2016-06 will be effective for the in it first quarter of 2019 . The Company is currently the impact of adopting ASU 2016-16 on it consolidated financial statement . Stock Compensation In March 2016 , the FASB issued ASU FASB issued ASU No . 2016-09 , Compensation – Stock Compensation – Stock Compensation ( Topic 718 ) : Improvements to Employee Payment Accounting ( “ ASU 2016-09 ” ) , which simplified of cash flow . ASU 2016-09 will be effective for the in it first quarter of 2018 . The Company is currently the impact of adopting ASU 2016-09 on it consolidated financial statement statement . Apple Inc. | 2016 Form 10-K | 28 Leases Apple Inc. | 2016 Form 10-K | 28 Leases In February | 2016 Form 10-K | 28 Leases In February 2016 , | 28 Leases In February 2016 , the FASB issued ASU FASB issued ASU No . 2016-02 , Leases ( Topic 842 2016-02 , Leases ( Topic 842 ) ( “ ASU 2016-02 842 ) ( “ ASU 2016-02 ” ) , which modified about leasing arrangement . ASU 2016-02 will be effective for the in it first quarter of 2020 , and early adoption is the impact of adopting ASU 2016-02 on it consolidated financial statement . Financial Instruments In January 2016 , the FASB issued ASU FASB issued ASU No . 2016-01 , Financial Instruments – Overall Instruments – Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities ( “ ASU 2016-01 ” ) , which update of financial instrument . ASU 2016-01 will be effective for the in it first quarter of 2019 . The Company doe not believe the adoption of ASU 2016-01 will have a material impact financial statement . In June 2016 , the FASB issued ASU FASB issued ASU No . 2016-13 , Financial Instruments – Credit – Credit Losses ( Topic 326 ) : Measurement of Credit Financial Instruments ( “ ASU 2016-13 ” ) , which modifies certain financial instrument . ASU 2016-13 will be effective for the in it first quarter of 2021 and early adoption is permitted believe the adoption of ASU 2016-13 will have a material impact . Revenue Recognition In May 2014 , the FASB issued ASU FASB issued ASU No . 2014-09 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) ( “ ASU 2014-09 606 ) ( “ ASU 2014-09 ” ) , which amends for revenue recognition . ASU 2014-09 is based on principle that transferred to customer . ASU 2014-09 will be effective for the in it first quarter of 2019 , and early adoption is following standard related to ASU 2014-09 : ASU No . 2016-08 2014-09 : ASU No . 2016-08 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Principal versus Agent Agent Considerations ( “ ASU 2016-08 ” ) ; ASU No ) ; ASU No . 2016-10 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Identifying Performance Obligations and Licensing ( “ ASU 2016-10 ” ) ; and ASU ; and ASU No . 2016-12 , Revenue from Contracts with Contracts with Customers ( Topic 606 ) : Narrow-Scope Improvements and Practical Expedients ( “ ASU 2016-12 ” ) . The Company The Company must adopt ASU 2016-08 , ASU 2016-10 and ASU adopt ASU 2016-08 , ASU 2016-10 and ASU 2016-12 with ASU , ASU 2016-10 and ASU 2016-12 with ASU 2014-09 ( collectively and ASU 2016-12 with ASU 2014-09 ( collectively , the “ in it first quarter of 2018 utilizing the full retrospective transition for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 ( in million 2015 and September 27 , 2014 ( in million ) : ( in million ) : 2016 2015 2014 Cash , cash in million ) : 2016 2015 2014 Cash , cash equivalent million ) : 2016 2015 2014 Cash , cash equivalent and equivalent and marketable security $ 237,585 $ 205,666 $ 155,239 Property marketable security $ 237,585 $ 205,666 $ 155,239 Property , plant $ 237,585 $ 205,666 $ 155,239 Property , plant and equipment and equipment , net $ 27,010 $ 22,471 $ 20,624 Commercial , net $ 27,010 $ 22,471 $ 20,624 Commercial paper $ $ 27,010 $ 22,471 $ 20,624 Commercial paper $ 8,105 $ $ 20,624 Commercial paper $ 8,105 $ 8,499 $ 6,308 Total Commercial paper $ 8,105 $ 8,499 $ 6,308 Total term debt $ 8,105 $ 8,499 $ 6,308 Total term debt $ 78,927 6,308 Total term debt $ 78,927 $ 55,829 $ 28,987 Working term debt $ 78,927 $ 55,829 $ 28,987 Working capital $ $ 78,927 $ 55,829 $ 28,987 Working capital $ 27,863 $ $ 28,987 Working capital $ 27,863 $ 8,768 $ 5,083 Cash Working capital $ 27,863 $ 8,768 $ 5,083 Cash generated by $ 27,863 $ 8,768 $ 5,083 Cash generated by operating activity generated by operating activity $ 65,824 $ 81,266 $ 59,713 Cash operating activity $ 65,824 $ 81,266 $ 59,713 Cash used in $ 65,824 $ 81,266 $ 59,713 Cash used in investing activity in investing activity $ ( 45,977 ) $ ( 56,274 ) ( 45,977 ) $ ( 56,274 ) $ ( 22,579 ) ( 56,274 ) $ ( 22,579 ) Cash used in financing in financing activity $ ( 20,483 ) $ ( 17,716 ) ( 20,483 ) $ ( 17,716 ) $ ( 37,549 ) ( 17,716 ) $ ( 37,549 ) The Company belief it existing operation over the next 12 month . The Company currently borrowing . Apple Inc. | 2016 Form 10-K | 29 As Apple Inc. | 2016 Form 10-K | 29 As of September | 2016 Form 10-K | 29 As of September 24 , | 29 As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company ’ s by foreign subsidiary were $ 216.0 billion and $ 186.9 billion $ 216.0 billion and $ 186.9 billion , respectively , and of principal loss . During 2016 , cash generated from operating from operating activity of $ 65.8 billion wa a result of wa a result of $ 45.7 billion of net income , to net income of $ 19.7 billion and an increase in asset and liability of $ 484 million . Cash used in in investing activity of $ 46.0 billion during 2016 consisted primarily of $ 46.0 billion during 2016 consisted primarily of cash used and maturity , of $ 30.6 billion and cash used to plant and equipment of $ 12.7 billion . Cash used in in financing activity of $ 20.5 billion during 2016 consisted primarily of $ 20.5 billion during 2016 consisted primarily of cash used repurchase common stock of $ 29.7 billion , cash used to and dividend equivalent of $ 12.2 billion and cash used to repay term debt of $ 2.5 billion , partially offset by of term debt of $ 25.0 billion . During 2015 , $ 25.0 billion . During 2015 , cash generated from operating from operating activity of $ 81.3 billion wa a result of wa a result of $ 53.4 billion of net income , to net income of $ 16.2 billion and an increase in asset and liability of $ 11.6 billion . Cash used in in investing activity of $ 56.3 billion during 2015 consisted primarily of $ 56.3 billion during 2015 consisted primarily of cash used and maturity , of $ 44.4 billion and cash used to plant and equipment of $ 11.2 billion . Cash used in in financing activity of $ 17.7 billion during 2015 consisted primarily of $ 17.7 billion during 2015 consisted primarily of cash used repurchase common stock of $ 35.3 billion and cash used to and dividend equivalent of $ 11.6 billion , partially offset by of term debt of $ 27.1 billion . Capital Assets The s capital expenditure were $ 12.8 billion during 2016 . The were $ 12.8 billion during 2016 . The Company anticipates utilizing Company anticipates utilizing approximately $ 16.0 billion for capital expenditure during billion for capital expenditure during 2017 , which includes product tooling repurchase . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had $ , the Company had $ 8.1 billion of Commercial Paper outstanding a weighted-average interest rate of 0.45 % and maturity generally le month . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company ha outstanding aggregate principal amount of $ 78.4 billion ( collectively the “ Notes ” ) . During 2016 , the Company repaid $ , the Company repaid $ 2.5 billion of it Notes upon s Notes a of September 24 , 2016 are a follows a of September 24 , 2016 are a follows ( in ( in million ) : 2017 $ 3,500 2018 6,500 2019 million ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total term 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt $ 78,384 47,346 Total term debt $ 78,384 Further information regarding the Company in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to the Consolidated Financial Statements in Note 2 , “ Financial Instruments ” Financial Instruments ” and Note 6 , “ Debt . ” . ” Apple Inc. | 2016 Form 10-K | 30 Capital Apple Inc. | 2016 Form 10-K | 30 Capital Return Program | 2016 Form 10-K | 30 Capital Return Program In April Capital Return Program In April 2016 , the Company ’ s repurchase program authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion of the Company ’ capital return program from $ 200 billion to $ 250 billion $ 200 billion to $ 250 billion . Additionally in April billion . Additionally in April 2016 , the Company announced that 's quarterly cash dividend by 10 % from $ 0.52 to by 10 % from $ 0.52 to $ 0.57 per share from $ 0.52 to $ 0.57 per share , beginning with during the third quarter of 2016 . The Company intends to Directors . As of September 24 , 2016 , $ 133 As of September 24 , 2016 , $ 133 billion of 24 , 2016 , $ 133 billion of the share repurchase under plan complying with Rule 10b5-1 under the Exchange Act . capital return program in August 2012 through September 24 , 2016 in August 2012 through September 24 , 2016 ( in million 2012 through September 24 , 2016 ( in million ) : Settlement of Equity Awards Total 2016 $ 12,150 $ 12,000 $ Equity Awards Total 2016 $ 12,150 $ 12,000 $ 17,000 $ Total 2016 $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ $ 12,150 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 $ 12,000 $ 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 $ 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 17,000 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 $ 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 1,570 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 $ 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 42,720 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 2015 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 11,561 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 6,000 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 30,026 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 1,499 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 49,086 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 2014 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 11,126 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 21,000 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 24,000 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 1,158 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — 57,284 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 2013 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 56 10,564 13,950 9,000 1,082 34,596 2012 2,488 — — 56 2,544 13,950 9,000 1,082 34,596 2012 2,488 — — 56 2,544 Total 34,596 2012 2,488 — — 56 2,544 Total $ 47,889 $ 2012 2,488 — — 56 2,544 Total $ 47,889 $ 52,950 — 56 2,544 Total $ 47,889 $ 52,950 $ 80,026 $ 2,544 Total $ 47,889 $ 52,950 $ 80,026 $ 5,365 $ $ 47,889 $ 52,950 $ 80,026 $ 5,365 $ 186,230 The $ 52,950 $ 80,026 $ 5,365 $ 186,230 The Company expects $ 80,026 $ 5,365 $ 186,230 The Company expects to execute by the end of March 2018 by paying dividend and dividend firm commitment a of September 24 , 2016 , and excludes a of September 24 , 2016 , and excludes amount already Payments Due in Less Than 1 Year Payments Due in 1-3 1 Year Payments Due in 1-3 Years Payments Due in 4-5 1-3 Years Payments Due in 4-5 Years Payments Due in More Payments Due in More Than 5 Years Total Term debt $ Years Total Term debt $ 3,500 $ 13,334 $ 14,204 $ Term debt $ 3,500 $ 13,334 $ 14,204 $ 47,346 $ $ 3,500 $ 13,334 $ 14,204 $ 47,346 $ 78,384 Operating $ 13,334 $ 14,204 $ 47,346 $ 78,384 Operating lease 929 $ 14,204 $ 47,346 $ 78,384 Operating lease 929 1,834 1,725 47,346 $ 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing $ 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase 78,384 Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase obligation Operating lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase obligation 24,695 lease 929 1,834 1,725 3,139 7,627 Manufacturing purchase obligation 24,695 939 3,139 7,627 Manufacturing purchase obligation 24,695 939 1,830 1,127 28,591 Other 7,627 Manufacturing purchase obligation 24,695 939 1,830 1,127 28,591 Other purchase Manufacturing purchase obligation 24,695 939 1,830 1,127 28,591 Other purchase obligation purchase obligation 24,695 939 1,830 1,127 28,591 Other purchase obligation 3,503 obligation 24,695 939 1,830 1,127 28,591 Other purchase obligation 3,503 1,732 1,127 28,591 Other purchase obligation 3,503 1,732 653 732 6,620 Total 28,591 Other purchase obligation 3,503 1,732 653 732 6,620 Total $ Other purchase obligation 3,503 1,732 653 732 6,620 Total $ 32,627 purchase obligation 3,503 1,732 653 732 6,620 Total $ 32,627 $ obligation 3,503 1,732 653 732 6,620 Total $ 32,627 $ 17,839 653 732 6,620 Total $ 32,627 $ 17,839 $ 18,412 $ 6,620 Total $ 32,627 $ 17,839 $ 18,412 $ 52,344 $ $ 32,627 $ 17,839 $ 18,412 $ 52,344 $ 121,222 Operating $ 17,839 $ 18,412 $ 52,344 $ 121,222 Operating Leases As $ 18,412 $ 52,344 $ 121,222 Operating Leases As of September Operating Leases As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company ’ s noncancelable operating lease were $ 7.6 billion . The Company ’ typically for term not exceeding 10 year and generally contain multi-year option . Apple Inc. | 2016 Form 10-K | 31 Manufacturing Apple Inc. | 2016 Form 10-K | 31 Manufacturing Purchase Obligations | 2016 Form 10-K | 31 Manufacturing Purchase Obligations The Company typically cover period up to 150 day . The Company also information . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had manufacturing manufacturing purchase obligation of $ 28.6 billion . Other Purchase Obligations obligation . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had other other purchase obligation of $ 6.6 billion . The Company ’ penalty . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had non-current deferred tax liability of $ 26.0 billion . Additionally , a Additionally , a of September 24 , 2016 , the Company a of September 24 , 2016 , the Company had gross unrecognized tax benefit of $ 7.7 billion and an additional $ billion and an additional $ 1.0 billion for gross interest and and accompanying note . Note 1 , “ Summary of Significant in Part II , Item 8 of this Form 10-K describes Item 8 of this Form 10-K describes the significant accounting policy Directors . Apple Inc. | 2016 Form 10-K | 32 Revenue Apple Inc. | 2016 Form 10-K | 32 Revenue Recognition Net | 2016 Form 10-K | 32 Revenue Recognition Net sale consist result . Apple Inc. | 2016 Form 10-K | 33 Valuation Apple Inc. | 2016 Form 10-K | 33 Valuation and Impairment | 2016 Form 10-K | 33 Valuation and Impairment of Marketable requirement for period up to 150 day . If there is result . Apple Inc. | 2016 Form 10-K | 34 Income Apple Inc. | 2016 Form 10-K | 34 Income Taxes The | 2016 Form 10-K | 34 Income Taxes The Company record that ha a greater than 50 % likelihood of being realized in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 10 , “ Commitments and Contingencies affected . Apple Inc. | 2016 Form 10-K | 35 Item Apple Inc. | 2016 Form 10-K | 35 Item 7A . | 2016 Form 10-K | 35 Item 7A . Quantitative and Form 10-K | 35 Item 7A . Quantitative and Qualitative Disclosures the investment portfolio assuming a 100 basis point parallel shift in investment position a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , a hypothetical 2016 and September 26 , 2015 , a hypothetical 100 basis , 2015 , a hypothetical 100 basis point increase in interest would result in a $ 4.9 billion and $ 4.3 billion $ 4.9 billion and $ 4.3 billion incremental decline in the maturity . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company had outstanding aggregate carrying amount of $ 78.9 billion and $ 55.8 billion $ 78.9 billion and $ 55.8 billion , respectively . The related hedging instrument . A 100 basis point increase in market s debt a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 to increase by 2016 and September 26 , 2015 to increase by $ 271 2015 to increase by $ 271 million and $ 200 million $ 271 million and $ 200 million on an annualized basis in Part II , Item 8 of this Form 10-K in Item 8 of this Form 10-K in the Notes to Consolidated Consolidated Financial Statements in Note 6 , “ Debt . ” , typically for up to 12 month . However , the exposure . Apple Inc. | 2016 Form 10-K | 36 To Apple Inc. | 2016 Form 10-K | 36 To provide a | 2016 Form 10-K | 36 To provide a meaningful assessment , the Company estimate with 95 % confidence , a maximum in fair value of $ 434 million a of September 24 434 million a of September 24 , 2016 compared to a a of September 24 , 2016 compared to a maximum one-day in fair value of $ 342 million a of September 26 342 million a of September 26 , 2015 . Because the a of September 26 , 2015 . Because the Company us analysis performed a of September 24 , 2016 due to the a of September 24 , 2016 due to the inherent limitation position . Apple Inc. | 2016 Form 10-K | 37 Item Apple Inc. | 2016 Form 10-K | 37 Item 8 . | 2016 Form 10-K | 37 Item 8 . Financial Statements Form 10-K | 37 Item 8 . Financial Statements and Supplementary for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 39 Consolidated Statements 2015 and September 27 , 2014 39 Consolidated Statements of Comprehensive and September 27 , 2014 39 Consolidated Statements of Comprehensive Income for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 40 Consolidated Balance 2015 and September 27 , 2014 40 Consolidated Balance Sheets a and September 27 , 2014 40 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 41 Consolidated Statements 2016 and September 26 , 2015 41 Consolidated Statements of Shareholders and September 26 , 2015 41 Consolidated Statements of Shareholders ’ for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 42 Consolidated Statements 2015 and September 27 , 2014 42 Consolidated Statements of Cash and September 27 , 2014 42 Consolidated Statements of Cash Flows for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 43 Notes to 2015 and September 27 , 2014 43 Notes to Consolidated Financial and September 27 , 2014 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 69 Reports of Ernst & Young Independent Registered Public Accounting Firm 70 All financial statement schedule have thereto . Apple Inc. | 2016 Form 10-K | 38 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 38 CONSOLIDATED STATEMENTS OF | 2016 Form 10-K | 38 CONSOLIDATED STATEMENTS OF OPERATIONS ( amount ) Years ended September 24 , 2016 September 26 , Years ended September 24 , 2016 September 26 , 2015 September September 24 , 2016 September 26 , 2015 September 27 , , 2016 September 26 , 2015 September 27 , 2014 Net September 26 , 2015 September 27 , 2014 Net sale $ , 2015 September 27 , 2014 Net sale $ 215,639 $ , 2014 Net sale $ 215,639 $ 233,715 $ 182,795 Cost Net sale $ 215,639 $ 233,715 $ 182,795 Cost of sale $ 215,639 $ 233,715 $ 182,795 Cost of sale 131,376 140,089 $ 182,795 Cost of sale 131,376 140,089 112,258 Gross margin 84,263 182,795 Cost of sale 131,376 140,089 112,258 Gross margin 84,263 93,626 Cost of sale 131,376 140,089 112,258 Gross margin 84,263 93,626 70,537 131,376 140,089 112,258 Gross margin 84,263 93,626 70,537 Operating expense : 140,089 112,258 Gross margin 84,263 93,626 70,537 Operating expense : Research 112,258 Gross margin 84,263 93,626 70,537 Operating expense : Research and expense : Research and development 10,045 8,067 6,041 Selling , general : Research and development 10,045 8,067 6,041 Selling , general and Research and development 10,045 8,067 6,041 Selling , general and administrative Selling , general and administrative 14,194 14,329 11,993 Total operating expense , general and administrative 14,194 14,329 11,993 Total operating expense 24,239 general and administrative 14,194 14,329 11,993 Total operating expense 24,239 22,396 14,329 11,993 Total operating expense 24,239 22,396 18,034 Operating income 60,024 11,993 Total operating expense 24,239 22,396 18,034 Operating income 60,024 71,230 Total operating expense 24,239 22,396 18,034 Operating income 60,024 71,230 52,503 24,239 22,396 18,034 Operating income 60,024 71,230 52,503 Other income/ ( 22,396 18,034 Operating income 60,024 71,230 52,503 Other income/ ( expense 18,034 Operating income 60,024 71,230 52,503 Other income/ ( expense ) ( expense ) , net 1,348 1,285 980 Income before provision expense ) , net 1,348 1,285 980 Income before provision for ) , net 1,348 1,285 980 Income before provision for income before provision for income tax 61,372 72,515 53,483 Provision for income provision for income tax 61,372 72,515 53,483 Provision for income tax for income tax 61,372 72,515 53,483 Provision for income tax 15,685 53,483 Provision for income tax 15,685 19,121 13,973 Net income $ Provision for income tax 15,685 19,121 13,973 Net income $ 45,687 for income tax 15,685 19,121 13,973 Net income $ 45,687 $ 19,121 13,973 Net income $ 45,687 $ 53,394 $ 39,510 Earnings Net income $ 45,687 $ 53,394 $ 39,510 Earnings per share $ 45,687 $ 53,394 $ 39,510 Earnings per share : Basic per share : Basic $ 8.35 $ 9.28 $ 6.49 Diluted : Basic $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 8.35 $ 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 9.28 $ 6.49 Diluted $ 8.31 $ 9.22 $ 6.45 Shares 6.49 Diluted $ 8.31 $ 9.22 $ 6.45 Shares used in $ 8.31 $ 9.22 $ 6.45 Shares used in computing earnings earnings per share : Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 per share : Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 6,122,663 share : Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 6,122,663 Cash Basic 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 6,122,663 Cash dividend declared 5,470,820 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 6,122,663 Cash dividend declared per 5,753,421 6,085,572 Diluted 5,500,281 5,793,069 6,122,663 Cash dividend declared per share dividend declared per share $ 2.18 $ 1.98 $ 1.82 See per share $ 2.18 $ 1.98 $ 1.82 See accompanying Notes $ 2.18 $ 1.98 $ 1.82 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 39 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 39 CONSOLIDATED STATEMENTS OF | 2016 Form 10-K | 39 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME million ) Years ended September 24 , 2016 September 26 , Years ended September 24 , 2016 September 26 , 2015 September September 24 , 2016 September 26 , 2015 September 27 , , 2016 September 26 , 2015 September 27 , 2014 Net September 26 , 2015 September 27 , 2014 Net income $ , 2015 September 27 , 2014 Net income $ 45,687 $ , 2014 Net income $ 45,687 $ 53,394 $ 39,510 Other Net income $ 45,687 $ 53,394 $ 39,510 Other comprehensive income/ $ 45,687 $ 53,394 $ 39,510 Other comprehensive income/ ( loss of tax effect of $ 8 , $ 201 and $ of $ 8 , $ 201 and $ 50 , respectively , $ 201 and $ 50 , respectively 75 ( 411 and $ 50 , respectively 75 ( 411 ) ( 137 50 , respectively 75 ( 411 ) ( 137 ) Change 75 ( 411 ) ( 137 ) Change in unrealized gains/losses expense ) of $ ( 7 ) , $ ( 441 7 ) , $ ( 441 ) and $ ( 297 441 ) and $ ( 297 ) , respectively 7 2,905 ( 297 ) , respectively 7 2,905 1,390 Adjustment for net 297 ) , respectively 7 2,905 1,390 Adjustment for net ( ) , respectively 7 2,905 1,390 Adjustment for net ( gain ( benefit ) of $ 131 , $ 630 and $ of $ 131 , $ 630 and $ ( 36 ) $ 630 and $ ( 36 ) , respectively ( 741 36 ) , respectively ( 741 ) ( 3,497 ) 149 respectively ( 741 ) ( 3,497 ) 149 Total change in 741 ) ( 3,497 ) 149 Total change in unrealized gains/losses , net of tax ( 734 ) ( 592 ) 1,539 tax ( 734 ) ( 592 ) 1,539 Change in unrealized 734 ) ( 592 ) 1,539 Change in unrealized gains/losses on expense ) of $ ( 863 ) , $ 264 and ( 863 ) , $ 264 and $ ( 153 ) $ 264 and $ ( 153 ) , respectively 1,582 ( ( 153 ) , respectively 1,582 ( 483 ) 285 Adjustment ) , respectively 1,582 ( 483 ) 285 Adjustment for net respectively 1,582 ( 483 ) 285 Adjustment for net ( gain benefit ) of $ ( 31 ) , $ ( 32 31 ) , $ ( 32 ) and $ 71 , ( 32 ) and $ 71 , respectively 56 59 ( and $ 71 , respectively 56 59 ( 134 ) Total $ 71 , respectively 56 59 ( 134 ) Total change , respectively 56 59 ( 134 ) Total change in unrealized security , net of tax 1,638 ( 424 ) 151 Total net of tax 1,638 ( 424 ) 151 Total other comprehensive tax 1,638 ( 424 ) 151 Total other comprehensive income/ ( comprehensive income/ ( loss ) 979 ( 1,427 ) 1,553 Total ( loss ) 979 ( 1,427 ) 1,553 Total comprehensive income ) 979 ( 1,427 ) 1,553 Total comprehensive income $ 46,666 1,553 Total comprehensive income $ 46,666 $ 51,967 $ 41,063 See comprehensive income $ 46,666 $ 51,967 $ 41,063 See accompanying Notes $ 46,666 $ 51,967 $ 41,063 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 40 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 40 CONSOLIDATED BALANCE SHEETS | 2016 Form 10-K | 40 CONSOLIDATED BALANCE SHEETS ( In and par value ) September 24 , 2016 September 26 , value ) September 24 , 2016 September 26 , 2015 ASSETS September 24 , 2016 September 26 , 2015 ASSETS : Current , 2016 September 26 , 2015 ASSETS : Current asset : Cash and cash equivalent $ 20,484 $ 21,120 Short-term marketable security cash equivalent $ 20,484 $ 21,120 Short-term marketable security 46,671 20,481 $ 21,120 Short-term marketable security 46,671 20,481 Accounts receivable , le 21,120 Short-term marketable security 46,671 20,481 Accounts receivable , le allowance , le allowance of $ 53 and $ 63 , respectively of $ 53 and $ 63 , respectively 15,754 16,849 Inventories and $ 63 , respectively 15,754 16,849 Inventories 2,132 2,349 Vendor $ 63 , respectively 15,754 16,849 Inventories 2,132 2,349 Vendor non-trade , respectively 15,754 16,849 Inventories 2,132 2,349 Vendor non-trade receivables 13,545 respectively 15,754 16,849 Inventories 2,132 2,349 Vendor non-trade receivables 13,545 13,494 2,132 2,349 Vendor non-trade receivables 13,545 13,494 Other current asset 8,283 2,349 Vendor non-trade receivables 13,545 13,494 Other current asset 8,283 15,085 13,545 13,494 Other current asset 8,283 15,085 Total current asset 106,869 13,494 Other current asset 8,283 15,085 Total current asset 106,869 89,378 8,283 15,085 Total current asset 106,869 89,378 Long-term marketable security 170,430 15,085 Total current asset 106,869 89,378 Long-term marketable security 170,430 164,065 106,869 89,378 Long-term marketable security 170,430 164,065 Property , plant and 89,378 Long-term marketable security 170,430 164,065 Property , plant and equipment plant and equipment , net 27,010 22,471 Goodwill 5,414 5,116 Acquired and equipment , net 27,010 22,471 Goodwill 5,414 5,116 Acquired intangible , net 27,010 22,471 Goodwill 5,414 5,116 Acquired intangible asset , net 27,010 22,471 Goodwill 5,414 5,116 Acquired intangible asset , net Acquired intangible asset , net 3,206 3,893 Other non-current asset 8,757 intangible asset , net 3,206 3,893 Other non-current asset 8,757 5,422 3,206 3,893 Other non-current asset 8,757 5,422 Total asset $ 321,686 3,893 Other non-current asset 8,757 5,422 Total asset $ 321,686 $ 8,757 5,422 Total asset $ 321,686 $ 290,345 LIABILITIES AND SHAREHOLDERS Total asset $ 321,686 $ 290,345 LIABILITIES AND SHAREHOLDERS ’ EQUITY liability : Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 Accounts payable $ 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred 37,294 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 $ 35,490 Accrued expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial expense 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 22,027 25,181 Deferred revenue 8,080 8,940 Commercial paper 8,105 8,499 Current revenue 8,080 8,940 Commercial paper 8,105 8,499 Current portion of long-term 8,080 8,940 Commercial paper 8,105 8,499 Current portion of long-term debt Current portion of long-term debt 3,500 2,500 Total current liability 79,006 portion of long-term debt 3,500 2,500 Total current liability 79,006 80,610 3,500 2,500 Total current liability 79,006 80,610 Deferred revenue , non-current 2,500 Total current liability 79,006 80,610 Deferred revenue , non-current 2,930 80,610 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Deferred revenue , non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liability 36,074 2,930 3,624 Long-term debt 75,427 53,329 Other non-current liability 36,074 33,427 75,427 53,329 Other non-current liability 36,074 33,427 Total liability 193,437 170,990 53,329 Other non-current liability 36,074 33,427 Total liability 193,437 170,990 Commitments liability 36,074 33,427 Total liability 193,437 170,990 Commitments and contingency Shareholders 36,074 33,427 Total liability 193,437 170,990 Commitments and contingency Shareholders ’ additional paid-in capital , $ 0.00001 par value : 12,600,000 share $ 0.00001 par value : 12,600,000 share authorized ; 5,336,166 and : 12,600,000 share authorized ; 5,336,166 and 5,578,753 share issued and share authorized ; 5,336,166 and 5,578,753 share issued and outstanding , issued and outstanding , respectively 31,251 27,416 Retained earnings 96,364 92,284 and outstanding , respectively 31,251 27,416 Retained earnings 96,364 92,284 Accumulated respectively 31,251 27,416 Retained earnings 96,364 92,284 Accumulated other comprehensive income/ 31,251 27,416 Retained earnings 96,364 92,284 Accumulated other comprehensive income/ ( comprehensive income/ ( loss ) 634 ( 345 ) Total shareholder ( loss ) 634 ( 345 ) Total shareholder ’ equity ) Total shareholder ’ equity 128,249 119,355 Total liability and shareholder Total shareholder ’ equity 128,249 119,355 Total liability and shareholder ’ and shareholder ’ equity $ 321,686 $ 290,345 See accompanying Notes ’ equity $ 321,686 $ 290,345 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 41 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 41 CONSOLIDATED STATEMENTS OF | 2016 Form 10-K | 41 CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ Amount Balances a of September 28 , 2013 6,294,494 $ 19,764 a of September 28 , 2013 6,294,494 $ 19,764 $ 104,256 of September 28 , 2013 6,294,494 $ 19,764 $ 104,256 $ 28 , 2013 6,294,494 $ 19,764 $ 104,256 $ ( 471 2013 6,294,494 $ 19,764 $ 104,256 $ ( 471 ) $ 19,764 $ 104,256 $ ( 471 ) $ 123,549 Net income $ ( 471 ) $ 123,549 Net income — — 39,510 123,549 Net income — — 39,510 — 39,510 Other comprehensive income/ income — — 39,510 — 39,510 Other comprehensive income/ ( loss loss ) — — — 1,553 1,553 Dividends and dividend equivalent ) — — — 1,553 1,553 Dividends and dividend equivalent declared equivalent declared — — ( 11,215 ) — ( 11,215 ) ( 11,215 ) — ( 11,215 ) Repurchase of common stock Repurchase of common stock ( 488,677 ) — ( 45,000 ) ( 488,677 ) — ( 45,000 ) — ( 45,000 ) ( 45,000 ) — ( 45,000 ) Share-based compensation — 2,863 45,000 ) Share-based compensation — 2,863 — — 2,863 Common stock compensation — 2,863 — — 2,863 Common stock issued , net share withheld for employee tax 60,344 ( 49 ) ( 399 for employee tax 60,344 ( 49 ) ( 399 ) — 60,344 ( 49 ) ( 399 ) — ( 448 ) ( 399 ) — ( 448 ) Tax benefit from equity including transfer pricing adjustment — 735 — — 735 Balances a adjustment — 735 — — 735 Balances a of September 27 735 Balances a of September 27 , 2014 5,866,161 23,313 87,152 a of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 of September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net September 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income 27 , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income — , 2014 5,866,161 23,313 87,152 1,082 111,547 Net income — — 2014 5,866,161 23,313 87,152 1,082 111,547 Net income — — 53,394 111,547 Net income — — 53,394 — 53,394 Other comprehensive income/ income — — 53,394 — 53,394 Other comprehensive income/ ( loss ) — — — ( 1,427 ) ( 1,427 ) Dividends — ( 1,427 ) ( 1,427 ) Dividends and dividend equivalent equivalent declared — — ( 11,627 ) — ( 11,627 ) ( 11,627 ) — ( 11,627 ) Repurchase of common stock Repurchase of common stock ( 325,032 ) — ( 36,026 ) ( 325,032 ) — ( 36,026 ) — ( 36,026 ) ( 36,026 ) — ( 36,026 ) Share-based compensation — 3,586 36,026 ) Share-based compensation — 3,586 — — 3,586 Common stock compensation — 3,586 — — 3,586 Common stock issued , net share withheld for employee tax 37,624 ( 231 ) ( 609 for employee tax 37,624 ( 231 ) ( 609 ) — 37,624 ( 231 ) ( 609 ) — ( 840 ) ( 609 ) — ( 840 ) Tax benefit from equity including transfer pricing adjustment — 748 — — 748 Balances a adjustment — 748 — — 748 Balances a of September 26 748 Balances a of September 26 , 2015 5,578,753 27,416 92,284 a of September 26 , 2015 5,578,753 27,416 92,284 ( 345 of September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) September 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 26 , 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net 2015 5,578,753 27,416 92,284 ( 345 ) 119,355 Net income — 27,416 92,284 ( 345 ) 119,355 Net income — — 45,687 119,355 Net income — — 45,687 — 45,687 Other comprehensive income/ income — — 45,687 — 45,687 Other comprehensive income/ ( loss loss ) — — — 979 979 Dividends and dividend equivalent ) — — — 979 979 Dividends and dividend equivalent declared equivalent declared — — ( 12,188 ) — ( 12,188 ) ( 12,188 ) — ( 12,188 ) Repurchase of common stock Repurchase of common stock ( 279,609 ) — ( 29,000 ) ( 279,609 ) — ( 29,000 ) — ( 29,000 ) ( 29,000 ) — ( 29,000 ) Share-based compensation — 4,262 29,000 ) Share-based compensation — 4,262 — — 4,262 Common stock compensation — 4,262 — — 4,262 Common stock issued , net share withheld for employee tax 37,022 ( 806 ) ( 419 for employee tax 37,022 ( 806 ) ( 419 ) — 37,022 ( 806 ) ( 419 ) — ( 1,225 ) ( 419 ) — ( 1,225 ) Tax benefit from equity including transfer pricing adjustment — 379 — — 379 Balances a adjustment — 379 — — 379 Balances a of September 24 379 Balances a of September 24 , 2016 5,336,166 $ 31,251 a of September 24 , 2016 5,336,166 $ 31,251 $ 96,364 of September 24 , 2016 5,336,166 $ 31,251 $ 96,364 $ 24 , 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 128,249 See $ 31,251 $ 96,364 $ 634 $ 128,249 See accompanying Notes $ 96,364 $ 634 $ 128,249 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 42 CONSOLIDATED Apple Inc. | 2016 Form 10-K | 42 CONSOLIDATED STATEMENTS OF | 2016 Form 10-K | 42 CONSOLIDATED STATEMENTS OF CASH FLOWS million ) Years ended September 24 , 2016 September 26 , Years ended September 24 , 2016 September 26 , 2015 September September 24 , 2016 September 26 , 2015 September 27 , , 2016 September 26 , 2015 September 27 , 2014 Cash September 26 , 2015 September 27 , 2014 Cash and cash , 2015 September 27 , 2014 Cash and cash equivalent , beginning of the year $ 21,120 $ 13,844 $ 14,259 Operating the year $ 21,120 $ 13,844 $ 14,259 Operating activity : $ 21,120 $ 13,844 $ 14,259 Operating activity : Net income Operating activity : Net income 45,687 53,394 39,510 Adjustments to reconcile activity : Net income 45,687 53,394 39,510 Adjustments to reconcile net : Net income 45,687 53,394 39,510 Adjustments to reconcile net income activity : Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense : Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense 4,210 Depreciation and amortization 10,505 11,257 7,946 Share-based compensation expense 4,210 3,586 11,257 7,946 Share-based compensation expense 4,210 3,586 2,863 Deferred income tax 7,946 Share-based compensation expense 4,210 3,586 2,863 Deferred income tax expense Share-based compensation expense 4,210 3,586 2,863 Deferred income tax expense 4,938 2,863 Deferred income tax expense 4,938 1,382 2,347 Changes in operating Deferred income tax expense 4,938 1,382 2,347 Changes in operating asset income tax expense 4,938 1,382 2,347 Changes in operating asset and : Accounts receivable , net 1,095 611 ( 4,232 ) Inventories Accounts receivable , net 1,095 611 ( 4,232 ) Inventories 217 , net 1,095 611 ( 4,232 ) Inventories 217 ( 238 611 ( 4,232 ) Inventories 217 ( 238 ) ( 76 4,232 ) Inventories 217 ( 238 ) ( 76 ) Vendor 217 ( 238 ) ( 76 ) Vendor non-trade receivables ( ) Vendor non-trade receivables ( 51 ) ( 3,735 ) ( receivables ( 51 ) ( 3,735 ) ( 2,220 ) Other ) ( 3,735 ) ( 2,220 ) Other current and non-current Other current and non-current asset 1,090 ( 179 ) 167 Accounts and non-current asset 1,090 ( 179 ) 167 Accounts payable 1,791 asset 1,090 ( 179 ) 167 Accounts payable 1,791 5,400 5,938 179 ) 167 Accounts payable 1,791 5,400 5,938 Deferred revenue ( ) 167 Accounts payable 1,791 5,400 5,938 Deferred revenue ( 1,554 167 Accounts payable 1,791 5,400 5,938 Deferred revenue ( 1,554 ) 5,400 5,938 Deferred revenue ( 1,554 ) 1,042 1,460 Other current Deferred revenue ( 1,554 ) 1,042 1,460 Other current and non-current revenue ( 1,554 ) 1,042 1,460 Other current and non-current liability current and non-current liability ( 2,104 ) 8,746 6,010 Cash generated non-current liability ( 2,104 ) 8,746 6,010 Cash generated by operating liability ( 2,104 ) 8,746 6,010 Cash generated by operating activity Cash generated by operating activity 65,824 81,266 59,713 Investing activity : generated by operating activity 65,824 81,266 59,713 Investing activity : Purchases by operating activity 65,824 81,266 59,713 Investing activity : Purchases of Purchases of marketable security ( 142,428 ) ( 166,402 ) ( security ( 142,428 ) ( 166,402 ) ( 217,128 ) Proceeds ) ( 166,402 ) ( 217,128 ) Proceeds from maturity of from maturity of marketable security 21,258 14,538 18,810 Proceeds from sale maturity of marketable security 21,258 14,538 18,810 Proceeds from sale of of marketable security 21,258 14,538 18,810 Proceeds from sale of marketable from sale of marketable security 90,536 107,447 189,301 Payments made in sale of marketable security 90,536 107,447 189,301 Payments made in connection of marketable security 90,536 107,447 189,301 Payments made in connection with business acquisition , net ( 297 ) ( 343 ) ( net ( 297 ) ( 343 ) ( 3,765 ) Payments ) ( 343 ) ( 3,765 ) Payments for acquisition of , plant and equipment ( 12,734 ) ( 11,247 ) ( equipment ( 12,734 ) ( 11,247 ) ( 9,571 ) Payments ) ( 11,247 ) ( 9,571 ) Payments for acquisition of acquisition of intangible asset ( 814 ) ( 241 ) ( asset ( 814 ) ( 241 ) ( 242 ) Payments ) ( 241 ) ( 242 ) Payments for strategic investment Payments for strategic investment ( 1,388 ) — ( 10 ) ( 1,388 ) — ( 10 ) Other ( 110 ) ( 10 ) Other ( 110 ) ( 26 ) 26 Other ( 110 ) ( 26 ) 26 Cash used in 110 ) ( 26 ) 26 Cash used in investing activity used in investing activity ( 45,977 ) ( 56,274 ) ( activity ( 45,977 ) ( 56,274 ) ( 22,579 ) Financing ) ( 56,274 ) ( 22,579 ) Financing activity : Proceeds from issuance of common stock 495 543 730 Excess tax benefit issuance of common stock 495 543 730 Excess tax benefit from of common stock 495 543 730 Excess tax benefit from equity tax benefit from equity award 407 749 739 Payments for tax benefit from equity award 407 749 739 Payments for tax related from equity award 407 749 739 Payments for tax related to settlement of equity award ( 1,570 ) ( 1,499 ) ( award ( 1,570 ) ( 1,499 ) ( 1,158 ) Payments ) ( 1,499 ) ( 1,158 ) Payments for dividend and dividend and dividend equivalent ( 12,150 ) ( 11,561 ) ( equivalent ( 12,150 ) ( 11,561 ) ( 11,126 ) Repurchases ) ( 11,561 ) ( 11,126 ) Repurchases of common stock Repurchases of common stock ( 29,722 ) ( 35,253 ) ( stock ( 29,722 ) ( 35,253 ) ( 45,000 ) Proceeds ) ( 35,253 ) ( 45,000 ) Proceeds from issuance of of term debt , net 24,954 27,114 11,960 Repayments of term term debt , net 24,954 27,114 11,960 Repayments of term debt debt , net 24,954 27,114 11,960 Repayments of term debt ( Repayments of term debt ( 2,500 ) — — Change in commercial paper , net ( 397 ) 2,191 6,306 Cash used , net ( 397 ) 2,191 6,306 Cash used in financing net ( 397 ) 2,191 6,306 Cash used in financing activity used in financing activity ( 20,483 ) ( 17,716 ) ( activity ( 20,483 ) ( 17,716 ) ( 37,549 ) Increase/ ) ( 17,716 ) ( 37,549 ) Increase/ ( Decrease ) cash and cash equivalent ( 636 ) 7,276 ( 415 ) cash equivalent ( 636 ) 7,276 ( 415 ) Cash and ( 636 ) 7,276 ( 415 ) Cash and cash equivalent end of the year $ 20,484 $ 21,120 $ 13,844 Supplemental the year $ 20,484 $ 21,120 $ 13,844 Supplemental cash flow $ 20,484 $ 21,120 $ 13,844 Supplemental cash flow disclosure : income tax , net $ 10,444 $ 13,252 $ 10,026 Cash , net $ 10,444 $ 13,252 $ 10,026 Cash paid for $ 10,444 $ 13,252 $ 10,026 Cash paid for interest $ Cash paid for interest $ 1,316 $ 514 $ 339 See for interest $ 1,316 $ 514 $ 339 See accompanying Notes $ 1,316 $ 514 $ 339 See accompanying Notes to Consolidated Statements . Apple Inc. | 2016 Form 10-K | 43 Notes Apple Inc. | 2016 Form 10-K | 43 Notes to Consolidated | 2016 Form 10-K | 43 Notes to Consolidated Financial Statements to Consolidated Financial Statements Note 1 – Summary of Significant Accounting s fiscal year is the 52 or 53 -week period that year is the 52 or 53 -week period that end on Company ’ s fiscal year 2016 , 2015 and 2014 ended s fiscal year 2016 , 2015 and 2014 ended on September year 2016 , 2015 and 2014 ended on September 24 , and 2014 ended on September 24 , 2016 , September 26 ended on September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 , respectively , 2015 and September 27 , 2014 , respectively , and each respectively , and each spanned 52 week . An additional week 's fiscal year ending September 30 , 2017 . Unless otherwise year ending September 30 , 2017 . Unless otherwise stated , those fiscal year . During 2016 , the Company adopted an this Annual Report on Form 10-K were not adjusted to conform Operations . Apple Inc. | 2016 Form 10-K | 44 The Apple Inc. | 2016 Form 10-K | 44 The Company record | 2016 Form 10-K | 44 The Company record deferred revenue estimate . Apple Inc. | 2016 Form 10-K | 45 Software Apple Inc. | 2016 Form 10-K | 45 Software Development Costs | 2016 Form 10-K | 45 Software Development Costs Research and can be found in Note 9 , “ Benefit Plans . that ha a greater than 50 % likelihood of being realized upon settlement . See Note 5 , “ Income Taxes ” security . Apple Inc. | 2016 Form 10-K | 46 The Apple Inc. | 2016 Form 10-K | 46 The following table | 2016 Form 10-K | 46 The following table show the diluted earnings per share for 2016 , 2015 and 2014 ( per share for 2016 , 2015 and 2014 ( net income for 2016 , 2015 and 2014 ( net income in million share in thousand ) : 2016 2015 2014 Numerator : Net in thousand ) : 2016 2015 2014 Numerator : Net income thousand ) : 2016 2015 2014 Numerator : Net income $ Numerator : Net income $ 45,687 $ 53,394 $ 39,510 Denominator Net income $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average $ 45,687 $ 53,394 $ 39,510 Denominator : Weighted-average share outstanding Denominator : Weighted-average share outstanding 5,470,820 5,753,421 6,085,572 Effect of dilutive : Weighted-average share outstanding 5,470,820 5,753,421 6,085,572 Effect of dilutive security Weighted-average share outstanding 5,470,820 5,753,421 6,085,572 Effect of dilutive security 29,461 6,085,572 Effect of dilutive security 29,461 39,648 37,091 Weighted-average diluted share Effect of dilutive security 29,461 39,648 37,091 Weighted-average diluted share 5,500,281 of dilutive security 29,461 39,648 37,091 Weighted-average diluted share 5,500,281 5,793,069 39,648 37,091 Weighted-average diluted share 5,500,281 5,793,069 6,122,663 Basic earnings per 37,091 Weighted-average diluted share 5,500,281 5,793,069 6,122,663 Basic earnings per share Weighted-average diluted share 5,500,281 5,793,069 6,122,663 Basic earnings per share $ Basic earnings per share $ 8.35 $ 9.28 $ 6.49 Diluted per share $ 8.35 $ 9.28 $ 6.49 Diluted earnings per $ 8.35 $ 9.28 $ 6.49 Diluted earnings per share $ Diluted earnings per share $ 8.31 $ 9.22 $ 6.45 Potentially per share $ 8.31 $ 9.22 $ 6.45 Potentially dilutive security $ 8.31 $ 9.22 $ 6.45 Potentially dilutive security whose effect debt security with maturity of 12 month or le are classified security with maturity greater than 12 month are classified a long-term period . Apple Inc. | 2016 Form 10-K | 47 Allowance Apple Inc. | 2016 Form 10-K | 47 Allowance for Doubtful | 2016 Form 10-K | 47 Allowance for Doubtful Accounts The period . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company ’ s building is the lesser of 30 year or the remaining life property and equipment wa $ 8.3 billion , $ 9.2 billion $ 8.3 billion , $ 9.2 billion and $ 6.9 billion $ 9.2 billion and $ 6.9 billion during 2016 , 2015 and $ 6.9 billion during 2016 , 2015 and 2014 , 6.9 billion during 2016 , 2015 and 2014 , respectively . during 2016 , 2015 and 2014 , respectively . Long-Lived Assets indefinite lived intangible asset during 2016 , 2015 and 2014 . intangible asset during 2016 , 2015 and 2014 . For purpose during 2016 , 2015 and 2014 . For purpose of testing each reporting unit . In 2016 and 2015 , the Company unit . In 2016 and 2015 , the Company ’ s fair value measurement : Level 1 – Quoted price in active asset or liability . Level 2 – Observable input other than asset or liability . Level 3 – Inputs that are generally liability . Apple Inc. | 2016 Form 10-K | 48 The Apple Inc. | 2016 Form 10-K | 48 The Company ’ | 2016 Form 10-K | 48 The Company ’ s valuation at historical rate . Note 2 – Financial Instruments Cash , marketable security a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 8,601 $ — $ — $ $ — $ — $ 8,601 $ 8,601 $ — $ $ — $ 8,601 $ 8,601 $ — $ — Level $ — $ — Level 1 : Money market fund 3,666 1 : Money market fund 3,666 — — 3,666 3,666 — market fund 3,666 — — 3,666 3,666 — — Mutual fund fund 3,666 — — 3,666 3,666 — — Mutual fund 1,407 3,666 — — Mutual fund 1,407 — ( 146 ) 1,261 Mutual fund 1,407 — ( 146 ) 1,261 — 1,261 — 1,407 — ( 146 ) 1,261 — 1,261 — Subtotal 5,073 ( 146 ) 1,261 — 1,261 — Subtotal 5,073 — ( 1,261 — 1,261 — Subtotal 5,073 — ( 146 ) 4,927 — Subtotal 5,073 — ( 146 ) 4,927 3,666 1,261 — 5,073 — ( 146 ) 4,927 3,666 1,261 — Level 2 — ( 146 ) 4,927 3,666 1,261 — Level 2 : ( 146 ) 4,927 3,666 1,261 — Level 2 : U.S. 4,927 3,666 1,261 — Level 2 : U.S. Treasury security 41,697 2 : U.S. Treasury security 41,697 319 ( 4 ) 42,012 : U.S. Treasury security 41,697 319 ( 4 ) 42,012 1,527 Treasury security 41,697 319 ( 4 ) 42,012 1,527 13,492 26,993 41,697 319 ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency 319 ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency security ( 4 ) 42,012 1,527 13,492 26,993 U.S. agency security 7,543 4 ) 42,012 1,527 13,492 26,993 U.S. agency security 7,543 16 13,492 26,993 U.S. agency security 7,543 16 — 7,559 2,762 2,441 26,993 U.S. agency security 7,543 16 — 7,559 2,762 2,441 2,356 agency security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,543 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,609 16 — 7,559 2,762 2,441 2,356 Non-U.S. government security 7,609 259 2,441 2,356 Non-U.S. government security 7,609 259 ( 27 ) 7,841 2,356 Non-U.S. government security 7,609 259 ( 27 ) 7,841 110 government security 7,609 259 ( 27 ) 7,841 110 818 6,913 7,609 259 ( 27 ) 7,841 110 818 6,913 Certificates of 259 ( 27 ) 7,841 110 818 6,913 Certificates of deposit ( 27 ) 7,841 110 818 6,913 Certificates of deposit and 27 ) 7,841 110 818 6,913 Certificates of deposit and time of deposit and time deposit 6,598 — — 6,598 1,108 3,897 time deposit 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper deposit 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 6,598 — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 — — — 6,598 1,108 3,897 1,593 Commercial paper 7,433 — — 1,108 3,897 1,593 Commercial paper 7,433 — — 7,433 2,468 4,965 Commercial paper 7,433 — — 7,433 2,468 4,965 — Corporate security paper 7,433 — — 7,433 2,468 4,965 — Corporate security 131,166 7,433 — — 7,433 2,468 4,965 — Corporate security 131,166 1,409 2,468 4,965 — Corporate security 131,166 1,409 ( 206 ) 132,369 4,965 — Corporate security 131,166 1,409 ( 206 ) 132,369 242 Corporate security 131,166 1,409 ( 206 ) 132,369 242 19,599 112,528 131,166 1,409 ( 206 ) 132,369 242 19,599 112,528 Municipal security 1,409 ( 206 ) 132,369 242 19,599 112,528 Municipal security 956 ( 206 ) 132,369 242 19,599 112,528 Municipal security 956 5 206 ) 132,369 242 19,599 112,528 Municipal security 956 5 — 242 19,599 112,528 Municipal security 956 5 — 961 — 167 19,599 112,528 Municipal security 956 5 — 961 — 167 794 Municipal security 956 5 — 961 — 167 794 Mortgage- and 956 5 — 961 — 167 794 Mortgage- and asset-backed security 5 — 961 — 167 794 Mortgage- and asset-backed security 19,134 794 Mortgage- and asset-backed security 19,134 178 ( 28 ) 19,284 Mortgage- and asset-backed security 19,134 178 ( 28 ) 19,284 — asset-backed security 19,134 178 ( 28 ) 19,284 — 31 19,253 19,134 178 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 28 ) 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 265 19,284 — 31 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 — 31 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 8,217 19,253 Subtotal 222,136 2,186 ( 265 ) 224,057 8,217 45,410 170,430 222,136 2,186 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 2,186 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 ( 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 $ 265 ) 224,057 8,217 45,410 170,430 Total $ 235,810 $ 2,186 8,217 45,410 170,430 Total $ 235,810 $ 2,186 $ ( 411 170,430 Total $ 235,810 $ 2,186 $ ( 411 ) $ 235,810 $ 2,186 $ ( 411 ) $ 237,585 $ 20,484 $ ( 411 ) $ 237,585 $ 20,484 $ 46,671 $ 411 ) $ 237,585 $ 20,484 $ 46,671 $ 170,430 Apple $ 237,585 $ 20,484 $ 46,671 $ 170,430 Apple Inc. | $ 20,484 $ 46,671 $ 170,430 Apple Inc. | 2016 Form $ 170,430 Apple Inc. | 2016 Form 10-K | 49 2015 Apple Inc. | 2016 Form 10-K | 49 2015 Adjusted Cost | 2016 Form 10-K | 49 2015 Adjusted Cost Unrealized Gains 2016 Form 10-K | 49 2015 Adjusted Cost Unrealized Gains Unrealized Long-Term Marketable Securities Cash $ 11,389 $ — $ — $ $ — $ — $ 11,389 $ 11,389 $ — $ $ — $ 11,389 $ 11,389 $ — $ — Level $ — $ — Level 1 : Money market fund 1,798 1 : Money market fund 1,798 — — 1,798 1,798 — market fund 1,798 — — 1,798 1,798 — — Mutual fund fund 1,798 — — 1,798 1,798 — — Mutual fund 1,772 1,798 — — Mutual fund 1,772 — ( 144 ) 1,628 Mutual fund 1,772 — ( 144 ) 1,628 — 1,628 — 1,772 — ( 144 ) 1,628 — 1,628 — Subtotal 3,570 ( 144 ) 1,628 — 1,628 — Subtotal 3,570 — ( 1,628 — 1,628 — Subtotal 3,570 — ( 144 ) 3,426 — Subtotal 3,570 — ( 144 ) 3,426 1,798 1,628 — 3,570 — ( 144 ) 3,426 1,798 1,628 — Level 2 — ( 144 ) 3,426 1,798 1,628 — Level 2 : ( 144 ) 3,426 1,798 1,628 — Level 2 : U.S. 3,426 1,798 1,628 — Level 2 : U.S. Treasury security 34,902 2 : U.S. Treasury security 34,902 181 ( 1 ) 35,082 : U.S. Treasury security 34,902 181 ( 1 ) 35,082 — Treasury security 34,902 181 ( 1 ) 35,082 — 3,498 31,584 34,902 181 ( 1 ) 35,082 — 3,498 31,584 U.S. agency ( 1 ) 35,082 — 3,498 31,584 U.S. agency security 5,864 1 ) 35,082 — 3,498 31,584 U.S. agency security 5,864 14 3,498 31,584 U.S. agency security 5,864 14 — 5,878 841 767 31,584 U.S. agency security 5,864 14 — 5,878 841 767 4,270 agency security 5,864 14 — 5,878 841 767 4,270 Non-U.S. government security 5,864 14 — 5,878 841 767 4,270 Non-U.S. government security 5,864 14 — 5,878 841 767 4,270 Non-U.S. government security 6,356 14 — 5,878 841 767 4,270 Non-U.S. government security 6,356 45 767 4,270 Non-U.S. government security 6,356 45 ( 167 ) 6,234 4,270 Non-U.S. government security 6,356 45 ( 167 ) 6,234 43 government security 6,356 45 ( 167 ) 6,234 43 135 6,056 6,356 45 ( 167 ) 6,234 43 135 6,056 Certificates of 45 ( 167 ) 6,234 43 135 6,056 Certificates of deposit ( 167 ) 6,234 43 135 6,056 Certificates of deposit and 167 ) 6,234 43 135 6,056 Certificates of deposit and time of deposit and time deposit 4,347 — — 4,347 2,065 1,405 time deposit 4,347 — — 4,347 2,065 1,405 877 Commercial paper deposit 4,347 — — 4,347 2,065 1,405 877 Commercial paper 6,016 4,347 — — 4,347 2,065 1,405 877 Commercial paper 6,016 — — — 4,347 2,065 1,405 877 Commercial paper 6,016 — — 2,065 1,405 877 Commercial paper 6,016 — — 6,016 4,981 1,035 Commercial paper 6,016 — — 6,016 4,981 1,035 — Corporate security paper 6,016 — — 6,016 4,981 1,035 — Corporate security 116,908 6,016 — — 6,016 4,981 1,035 — Corporate security 116,908 242 4,981 1,035 — Corporate security 116,908 242 ( 985 ) 116,165 1,035 — Corporate security 116,908 242 ( 985 ) 116,165 3 Corporate security 116,908 242 ( 985 ) 116,165 3 11,948 104,214 116,908 242 ( 985 ) 116,165 3 11,948 104,214 Municipal security 242 ( 985 ) 116,165 3 11,948 104,214 Municipal security 947 ( 985 ) 116,165 3 11,948 104,214 Municipal security 947 5 985 ) 116,165 3 11,948 104,214 Municipal security 947 5 — 3 11,948 104,214 Municipal security 947 5 — 952 — 48 11,948 104,214 Municipal security 947 5 — 952 — 48 904 Municipal security 947 5 — 952 — 48 904 Mortgage- and 947 5 — 952 — 48 904 Mortgage- and asset-backed security 5 — 952 — 48 904 Mortgage- and asset-backed security 16,121 904 Mortgage- and asset-backed security 16,121 87 ( 31 ) 16,177 Mortgage- and asset-backed security 16,121 87 ( 31 ) 16,177 — asset-backed security 16,121 87 ( 31 ) 16,177 — 17 16,160 16,121 87 ( 31 ) 16,177 — 17 16,160 Subtotal 191,461 ( 31 ) 16,177 — 17 16,160 Subtotal 191,461 574 ( 31 ) 16,177 — 17 16,160 Subtotal 191,461 574 ( 1,184 16,177 — 17 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 — 17 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 7,933 16,160 Subtotal 191,461 574 ( 1,184 ) 190,851 7,933 18,853 164,065 191,461 574 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 574 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 ( 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 $ 1,184 ) 190,851 7,933 18,853 164,065 Total $ 206,420 $ 574 7,933 18,853 164,065 Total $ 206,420 $ 574 $ ( 1,328 164,065 Total $ 206,420 $ 574 $ ( 1,328 ) $ 206,420 $ 574 $ ( 1,328 ) $ 205,666 $ 21,120 $ ( 1,328 ) $ 205,666 $ 21,120 $ 20,481 $ 1,328 ) $ 205,666 $ 21,120 $ 20,481 $ 164,065 The $ 205,666 $ 21,120 $ 20,481 $ 164,065 The Company may $ 21,120 $ 20,481 $ 164,065 The Company may sell certain basis . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company doe not , typically for up to 12 month . Apple Inc. | month . Apple Inc. | 2016 Form 10-K | 50 To Apple Inc. | 2016 Form 10-K | 50 To help protect | 2016 Form 10-K | 50 To help protect the net rate transaction a of September 24 , 2016 are expected to a of September 24 , 2016 are expected to be recognized expected to be recognized within 10 year . Cash Flow Hedges fair value a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 518 $ 153 $ 671 Interest exchange contract $ 518 $ 153 $ 671 Interest rate contract $ 518 $ 153 $ 671 Interest rate contract $ 728 671 Interest rate contract $ 728 $ — $ 728 Derivative $ 728 $ — $ 728 Derivative liability ( 2 ) $ 728 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 935 $ 134 $ 1,069 Interest exchange contract $ 935 $ 134 $ 1,069 Interest rate contract $ 935 $ 134 $ 1,069 Interest rate contract $ 7 1,069 Interest rate contract $ 7 $ — $ 7 Apple $ 7 $ — $ 7 Apple Inc. | 2016 Form $ 7 Apple Inc. | 2016 Form 10-K | 51 2015 Apple Inc. | 2016 Form 10-K | 51 2015 Fair Value | 2016 Form 10-K | 51 2015 Fair Value of Derivatives 2016 Form 10-K | 51 2015 Fair Value of Derivatives Designated Fair Value Derivative asset ( 1 ) : Foreign exchange contract : Foreign exchange contract $ 1,442 $ 109 $ 1,551 Interest exchange contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 1,442 $ 109 $ 1,551 Interest rate contract $ 394 1,551 Interest rate contract $ 394 $ — $ 394 Derivative $ 394 $ — $ 394 Derivative liability ( 2 ) $ 394 Derivative liability ( 2 ) : Foreign exchange contract : Foreign exchange contract $ 905 $ 94 $ 999 Interest exchange contract $ 905 $ 94 $ 999 Interest rate contract $ 905 $ 94 $ 999 Interest rate contract $ 13 999 Interest rate contract $ 13 $ — $ 13 ( $ 13 $ — $ 13 ( 1 ) The fair $ — $ 13 ( 1 ) The fair value of asset is measured using Level 2 fair value input and is Consolidated Balance Sheets . ( 2 ) The fair value of liability is measured using Level 2 fair value input and is Consolidated Statements of Operations for 2016 , 2015 and 2014 ( of Operations for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Gains/ ( Losses in million ) : 2016 2015 2014 Gains/ ( Losses ) million ) : 2016 2015 2014 Gains/ ( Losses ) recognized : Foreign exchange contract $ 109 $ 3,592 $ 1,750 Interest exchange contract $ 109 $ 3,592 $ 1,750 Interest rate contract $ 109 $ 3,592 $ 1,750 Interest rate contract ( 57 1,750 Interest rate contract ( 57 ) ( 111 ) ( contract ( 57 ) ( 111 ) ( 15 ) Total ) ( 111 ) ( 15 ) Total $ 52 $ ( 15 ) Total $ 52 $ 3,481 $ 1,735 Net ) Total $ 52 $ 3,481 $ 1,735 Net investment hedge $ 52 $ 3,481 $ 1,735 Net investment hedge : Foreign exchange contract $ — $ 167 $ 53 Foreign currency debt $ — $ 167 $ 53 Foreign currency debt ( 258 53 Foreign currency debt ( 258 ) ( 71 ) — debt ( 258 ) ( 71 ) — Total $ ( ) — Total $ ( 258 ) $ 96 $ 53 $ ( 258 ) $ 96 $ 53 Gains/ ( Losses 258 ) $ 96 $ 53 Gains/ ( Losses ) reclassified : Foreign exchange contract $ 885 $ 4,092 $ ( 154 exchange contract $ 885 $ 4,092 $ ( 154 ) Interest 885 $ 4,092 $ ( 154 ) Interest rate contract ( ) Interest rate contract ( 11 ) ( 17 ) ( contract ( 11 ) ( 17 ) ( 16 ) Total ) ( 17 ) ( 16 ) Total $ 874 $ ( 16 ) Total $ 874 $ 4,075 $ ( 170 ) Total $ 874 $ 4,075 $ ( 170 ) Gains/ 874 $ 4,075 $ ( 170 ) Gains/ ( Losses ) : Interest rate contract $ 341 $ 337 $ 39 Gains/ rate contract $ 341 $ 337 $ 39 Gains/ ( Losses $ 341 $ 337 $ 39 Gains/ ( Losses ) related Interest rate contract $ ( 341 ) $ ( 337 ) ( 341 ) $ ( 337 ) $ ( 39 ) ( 337 ) $ ( 39 ) Apple Inc. | 2016 39 ) Apple Inc. | 2016 Form 10-K | 52 The Apple Inc. | 2016 Form 10-K | 52 The following table | 2016 Form 10-K | 52 The following table show the derivative instrument a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 2015 Notional Amount Credit Risk in million ) : 2016 2015 Notional Amount Credit Risk Amount : Foreign exchange contract $ 44,678 $ 518 $ 70,054 $ exchange contract $ 44,678 $ 518 $ 70,054 $ 1,385 Interest $ 44,678 $ 518 $ 70,054 $ 1,385 Interest rate contract $ 518 $ 70,054 $ 1,385 Interest rate contract $ 24,500 1,385 Interest rate contract $ 24,500 $ 728 $ 18,750 $ rate contract $ 24,500 $ 728 $ 18,750 $ 394 Instruments $ 24,500 $ 728 $ 18,750 $ 394 Instruments not designated $ 728 $ 18,750 $ 394 Instruments not designated a accounting : Foreign exchange contract $ 54,305 $ 153 $ 49,190 $ exchange contract $ 54,305 $ 153 $ 49,190 $ 109 The $ 54,305 $ 153 $ 49,190 $ 109 The notional amount $ 153 $ 49,190 $ 109 The notional amount for outstanding collateral security arrangement wa $ 163 million a of September 24 163 million a of September 24 , 2016 and $ 1.0 a of September 24 , 2016 and $ 1.0 billion a 24 , 2016 and $ 1.0 billion a of September 26 1.0 billion a of September 26 , 2015 , which were a of September 26 , 2015 , which were recorded a other . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the potential 2016 and September 26 , 2015 , the potential effect of and derivative liability of $ 1.5 billion and $ 2.2 billion $ 1.5 billion and $ 2.2 billion , respectively , resulting net derivative asset of $ 160 million and a net derivative net derivative liability of $ 78 million , respectively . Accounts arrangement . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company had one had one customer that represented 10 % or more of total receivables , which accounted for 10 % and 12 % , accounted for 10 % and 12 % , respectively . The cellular network carrier accounted for 63 % and 71 % of accounted for 63 % and 71 % of trade receivables a trade receivables a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , respectively . 2016 and September 26 , 2015 , respectively . Vendor Non-Trade ’ s vendor accounted for 47 % and 21 % of accounted for 47 % and 21 % of total vendor non-trade non-trade receivables a of September 24 , 2016 and three of a of September 24 , 2016 and three of the Company ’ s vendor accounted for 38 % , 18 % and accounted for 38 % , 18 % and 14 % of % , 18 % and 14 % of total vendor non-trade non-trade receivables a of September 26 , 2015 . Apple Inc. a of September 26 , 2015 . Apple Inc. | 2016 2015 . Apple Inc. | 2016 Form 10-K | 53 Note Apple Inc. | 2016 Form 10-K | 53 Note 3 – | 2016 Form 10-K | 53 Note 3 – Consolidated Financial Form 10-K | 53 Note 3 – Consolidated Financial Statement Details statement detail a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : Plant and Equipment , Net 2016 2015 Land and building $ and Equipment , Net 2016 2015 Land and building $ 10,185 2015 Land and building $ 10,185 $ 6,956 Machinery , equipment and building $ 10,185 $ 6,956 Machinery , equipment and internal-use , equipment and internal-use software 44,543 37,038 Leasehold improvement 6,517 5,263 equipment and internal-use software 44,543 37,038 Leasehold improvement 6,517 5,263 Gross software 44,543 37,038 Leasehold improvement 6,517 5,263 Gross property , plant 44,543 37,038 Leasehold improvement 6,517 5,263 Gross property , plant and property , plant and equipment 61,245 49,257 Accumulated depreciation and amortization , plant and equipment 61,245 49,257 Accumulated depreciation and amortization ( Accumulated depreciation and amortization ( 34,235 ) ( 26,786 ) Total amortization ( 34,235 ) ( 26,786 ) Total property , plant and equipment , net $ 27,010 $ 22,471 Other Non-Current Liabilities , net $ 27,010 $ 22,471 Other Non-Current Liabilities 2016 2015 $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liability $ 22,471 Other Non-Current Liabilities 2016 2015 Deferred tax liability $ 26,019 2015 Deferred tax liability $ 26,019 $ 24,062 Other non-current liability tax liability $ 26,019 $ 24,062 Other non-current liability 10,055 9,365 $ 24,062 Other non-current liability 10,055 9,365 Total other non-current liability 24,062 Other non-current liability 10,055 9,365 Total other non-current liability $ Total other non-current liability $ 36,074 $ 33,427 Other Income/ ( non-current liability $ 36,074 $ 33,427 Other Income/ ( Expense ) expense ) , net for 2016 , 2015 and 2014 ( , net for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Interest and dividend in million ) : 2016 2015 2014 Interest and dividend income million ) : 2016 2015 2014 Interest and dividend income $ Interest and dividend income $ 3,999 $ 2,921 $ 1,795 Interest dividend income $ 3,999 $ 2,921 $ 1,795 Interest expense ( $ 3,999 $ 2,921 $ 1,795 Interest expense ( 1,456 ) $ 1,795 Interest expense ( 1,456 ) ( 733 ) ( expense ( 1,456 ) ( 733 ) ( 384 ) Other ) ( 733 ) ( 384 ) Other expense , net Other expense , net ( 1,195 ) ( 903 ) ( net ( 1,195 ) ( 903 ) ( 431 ) Total ) ( 903 ) ( 431 ) Total other income/ ( expense ) , net $ 1,348 $ 1,285 $ 980 Note , net $ 1,348 $ 1,285 $ 980 Note 4 – $ 1,348 $ 1,285 $ 980 Note 4 – Acquired Intangible $ 1,285 $ 980 Note 4 – Acquired Intangible Assets The asset balance a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 ( in million 2016 and September 26 , 2015 ( in million ) : ( in million ) : 2016 2015 Gross Carrying Amount Accumulated in million ) : 2016 2015 Gross Carrying Amount Accumulated Amortization amortizable acquired intangible asset $ 8,912 $ ( 5,806 ) $ asset $ 8,912 $ ( 5,806 ) $ 3,106 $ 8,125 $ ( 5,806 ) $ 3,106 $ 8,125 $ ( 4,332 5,806 ) $ 3,106 $ 8,125 $ ( 4,332 ) $ 3,106 $ 8,125 $ ( 4,332 ) $ 3,793 Indefinite-lived and $ ( 4,332 ) $ 3,793 Indefinite-lived and non-amortizable acquired intangible and non-amortizable acquired intangible asset 100 — 100 100 — 100 acquired intangible asset 100 — 100 100 — 100 Total acquired intangible asset 100 — 100 100 — 100 Total acquired intangible 100 — 100 100 — 100 Total acquired intangible asset $ Total acquired intangible asset $ 9,012 $ ( 5,806 ) $ asset $ 9,012 $ ( 5,806 ) $ 3,206 $ 8,225 $ ( 5,806 ) $ 3,206 $ 8,225 $ ( 4,332 5,806 ) $ 3,206 $ 8,225 $ ( 4,332 ) $ 3,206 $ 8,225 $ ( 4,332 ) $ 3,893 Apple Inc. $ ( 4,332 ) $ 3,893 Apple Inc. | 2016 Form $ 3,893 Apple Inc. | 2016 Form 10-K | 54 Amortization Apple Inc. | 2016 Form 10-K | 54 Amortization expense related | 2016 Form 10-K | 54 Amortization expense related to acquired acquired intangible asset wa $ 1.5 billion , $ 1.3 billion $ 1.5 billion , $ 1.3 billion and $ 1.1 billion $ 1.3 billion and $ 1.1 billion in 2016 , 2015 and $ 1.1 billion in 2016 , 2015 and 2014 , 1.1 billion in 2016 , 2015 and 2014 , respectively . in 2016 , 2015 and 2014 , respectively . As of respectively . As of September 24 , 2016 , the remaining As of September 24 , 2016 , the remaining weighted-average amortization for acquired intangible asset is 3.4 year . The expected annual intangible asset a of September 24 , 2016 , is a a of September 24 , 2016 , is a follows ( ( in million ) : 2017 $ 1,197 2018 902 2019 million ) : 2017 $ 1,197 2018 902 2019 449 2020 ) : 2017 $ 1,197 2018 902 2019 449 2020 255 : 2017 $ 1,197 2018 902 2019 449 2020 255 2021 2017 $ 1,197 2018 902 2019 449 2020 255 2021 175 $ 1,197 2018 902 2019 449 2020 255 2021 175 Thereafter 1,197 2018 902 2019 449 2020 255 2021 175 Thereafter 128 2018 902 2019 449 2020 255 2021 175 Thereafter 128 Total 902 2019 449 2020 255 2021 175 Thereafter 128 Total $ 2019 449 2020 255 2021 175 Thereafter 128 Total $ 3,106 2020 255 2021 175 Thereafter 128 Total $ 3,106 Note 5 175 Thereafter 128 Total $ 3,106 Note 5 – Income Taxes 128 Total $ 3,106 Note 5 – Income Taxes The provision provision for income tax for 2016 , 2015 and 2014 , income tax for 2016 , 2015 and 2014 , consisted of for 2016 , 2015 and 2014 , consisted of the following ( in million ) : 2016 2015 2014 Federal : Current in million ) : 2016 2015 2014 Federal : Current $ million ) : 2016 2015 2014 Federal : Current $ 7,652 2014 Federal : Current $ 7,652 $ 11,730 $ 8,624 Deferred : Current $ 7,652 $ 11,730 $ 8,624 Deferred 5,043 3,408 $ 7,652 $ 11,730 $ 8,624 Deferred 5,043 3,408 3,183 12,695 $ 11,730 $ 8,624 Deferred 5,043 3,408 3,183 12,695 15,138 11,807 11,730 $ 8,624 Deferred 5,043 3,408 3,183 12,695 15,138 11,807 State $ 8,624 Deferred 5,043 3,408 3,183 12,695 15,138 11,807 State : 8,624 Deferred 5,043 3,408 3,183 12,695 15,138 11,807 State : Current Deferred 5,043 3,408 3,183 12,695 15,138 11,807 State : Current 990 5,043 3,408 3,183 12,695 15,138 11,807 State : Current 990 1,265 15,138 11,807 State : Current 990 1,265 855 Deferred ( 138 11,807 State : Current 990 1,265 855 Deferred ( 138 ) State : Current 990 1,265 855 Deferred ( 138 ) ( 990 1,265 855 Deferred ( 138 ) ( 220 ) ( Deferred ( 138 ) ( 220 ) ( 178 ) 852 ) ( 220 ) ( 178 ) 852 1,045 677 Foreign 220 ) ( 178 ) 852 1,045 677 Foreign : Current ) ( 178 ) 852 1,045 677 Foreign : Current 2,105 ( 178 ) 852 1,045 677 Foreign : Current 2,105 4,744 1,045 677 Foreign : Current 2,105 4,744 2,147 Deferred 33 ( 677 Foreign : Current 2,105 4,744 2,147 Deferred 33 ( 1,806 Foreign : Current 2,105 4,744 2,147 Deferred 33 ( 1,806 ) Current 2,105 4,744 2,147 Deferred 33 ( 1,806 ) ( 658 4,744 2,147 Deferred 33 ( 1,806 ) ( 658 ) 2,138 33 ( 1,806 ) ( 658 ) 2,138 2,938 1,489 Provision 1,806 ) ( 658 ) 2,138 2,938 1,489 Provision for income ) ( 658 ) 2,138 2,938 1,489 Provision for income tax ( 658 ) 2,138 2,938 1,489 Provision for income tax $ Provision for income tax $ 15,685 $ 19,121 $ 13,973 The income tax $ 15,685 $ 19,121 $ 13,973 The foreign provision $ 15,685 $ 19,121 $ 13,973 The foreign provision for income foreign pre-tax earnings of $ 41.1 billion , $ 47.6 billion $ 41.1 billion , $ 47.6 billion and $ 33.6 billion $ 47.6 billion and $ 33.6 billion in 2016 , 2015 and $ 33.6 billion in 2016 , 2015 and 2014 , 33.6 billion in 2016 , 2015 and 2014 , respectively . in 2016 , 2015 and 2014 , respectively . The Company a statutory tax rate of 12.5 % . As of September % . As of September 24 , 2016 , U.S. income As of September 24 , 2016 , U.S. income tax have a cumulative total of $ 109.8 billion of such earnings . is estimated to be $ 35.9 billion . As of September billion . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , $ 216.0 2016 and September 26 , 2015 , $ 216.0 billion and 26 , 2015 , $ 216.0 billion and $ 186.9 billion $ 216.0 billion and $ 186.9 billion , respectively , of the U.S. Apple Inc. | 2016 Form 10-K | 55 A Apple Inc. | 2016 Form 10-K | 55 A reconciliation of | 2016 Form 10-K | 55 A reconciliation of the provision federal income tax rate ( 35 % in 2016 , 2015 rate ( 35 % in 2016 , 2015 and 2014 ) 35 % in 2016 , 2015 and 2014 ) to income in 2016 , 2015 and 2014 ) to income before provision provision for income tax for 2016 , 2015 and 2014 , income tax for 2016 , 2015 and 2014 , is a for 2016 , 2015 and 2014 , is a follows ( dollar in million ) : 2016 2015 2014 Computed expected tax in million ) : 2016 2015 2014 Computed expected tax $ million ) : 2016 2015 2014 Computed expected tax $ 21,480 2014 Computed expected tax $ 21,480 $ 25,380 $ 18,719 State expected tax $ 21,480 $ 25,380 $ 18,719 State tax , $ 21,480 $ 25,380 $ 18,719 State tax , net of , net of federal effect 553 680 469 Indefinitely invested earnings net of federal effect 553 680 469 Indefinitely invested earnings of of federal effect 553 680 469 Indefinitely invested earnings of foreign earnings of foreign subsidiary ( 5,582 ) ( 6,470 ) ( subsidiary ( 5,582 ) ( 6,470 ) ( 4,744 ) Domestic ) ( 6,470 ) ( 4,744 ) Domestic production activity deduction Domestic production activity deduction ( 382 ) ( 426 ) ( deduction ( 382 ) ( 426 ) ( 495 ) Research ) ( 426 ) ( 495 ) Research and development credit development credit , net ( 371 ) ( 171 ) ( net ( 371 ) ( 171 ) ( 88 ) Other ) ( 171 ) ( 88 ) Other ( 13 ) ( 88 ) Other ( 13 ) 128 112 Provision for ) Other ( 13 ) 128 112 Provision for income tax Other ( 13 ) 128 112 Provision for income tax $ Provision for income tax $ 15,685 $ 19,121 $ 13,973 Effective income tax $ 15,685 $ 19,121 $ 13,973 Effective tax rate $ 15,685 $ 19,121 $ 13,973 Effective tax rate 25.6 % $ 13,973 Effective tax rate 25.6 % 26.4 % 26.1 % Effective tax rate 25.6 % 26.4 % 26.1 % The Company rate 25.6 % 26.4 % 26.1 % The Company ’ s from equity award of $ 379 million , $ 748 million $ 379 million , $ 748 million and $ 706 million $ 748 million and $ 706 million in 2016 , 2015 and $ 706 million in 2016 , 2015 and 2014 , 706 million in 2016 , 2015 and 2014 , respectively , in 2016 , 2015 and 2014 , respectively , which were stock . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the significant 2016 and September 26 , 2015 , the significant component of ( in million ) : 2016 2015 Deferred tax asset : in million ) : 2016 2015 Deferred tax asset : Accrued liability and other reserve $ 4,135 $ 4,205 Basis of capital other reserve $ 4,135 $ 4,205 Basis of capital asset 2,107 4,205 Basis of capital asset 2,107 2,238 Deferred revenue 1,717 1,941 Basis of capital asset 2,107 2,238 Deferred revenue 1,717 1,941 Deferred asset 2,107 2,238 Deferred revenue 1,717 1,941 Deferred cost sharing 667 2,107 2,238 Deferred revenue 1,717 1,941 Deferred cost sharing 667 667 1,717 1,941 Deferred cost sharing 667 667 Share-based compensation 601 575 1,941 Deferred cost sharing 667 667 Share-based compensation 601 575 Unrealized sharing 667 667 Share-based compensation 601 575 Unrealized loss — 564 667 667 Share-based compensation 601 575 Unrealized loss — 564 Other 601 575 Unrealized loss — 564 Other 788 721 Total deferred Unrealized loss — 564 Other 788 721 Total deferred tax asset loss — 564 Other 788 721 Total deferred tax asset , of valuation allowance of $ 0 10,015 10,911 Deferred tax liability valuation allowance of $ 0 10,015 10,911 Deferred tax liability : allowance of $ 0 10,015 10,911 Deferred tax liability : Unremitted Unremitted earnings of foreign subsidiary 31,436 26,868 Other 485 303 Total earnings of foreign subsidiary 31,436 26,868 Other 485 303 Total deferred foreign subsidiary 31,436 26,868 Other 485 303 Total deferred tax liability subsidiary 31,436 26,868 Other 485 303 Total deferred tax liability 31,921 303 Total deferred tax liability 31,921 27,171 Net deferred tax liability Total deferred tax liability 31,921 27,171 Net deferred tax liability $ deferred tax liability $ ( 21,906 ) $ ( 16,260 ) ( 21,906 ) $ ( 16,260 ) Deferred tax asset and benefit that is greater than 50 % likely of being realized Sheets . As of September 24 , 2016 , the total As of September 24 , 2016 , the total amount of unrecognized tax benefit wa $ 7.7 billion , of which $ billion , of which $ 2.8 billion , if recognized , rate . As of September 26 , 2015 , the total As of September 26 , 2015 , the total amount of unrecognized tax benefit wa $ 6.9 billion , of which $ billion , of which $ 2.5 billion , if recognized , rate . Apple Inc. | 2016 Form 10-K | 56 The Apple Inc. | 2016 Form 10-K | 56 The aggregate change | 2016 Form 10-K | 56 The aggregate change in the interest and penalty , for 2016 , 2015 and 2014 , penalty , for 2016 , 2015 and 2014 , is a for 2016 , 2015 and 2014 , is a follows ( ( in million ) : 2016 2015 2014 Beginning Balance $ in million ) : 2016 2015 2014 Beginning Balance $ 6,900 million ) : 2016 2015 2014 Beginning Balance $ 6,900 $ 2015 2014 Beginning Balance $ 6,900 $ 4,033 $ 2,714 Increases Beginning Balance $ 6,900 $ 4,033 $ 2,714 Increases related to $ 6,900 $ 4,033 $ 2,714 Increases related to tax position taken during a prior year 1,121 2,056 1,295 Decreases related to during a prior year 1,121 2,056 1,295 Decreases related to tax a prior year 1,121 2,056 1,295 Decreases related to tax position during a prior year ( 257 ) ( 345 ) ( year ( 257 ) ( 345 ) ( 280 ) Increases ) ( 345 ) ( 280 ) Increases related to tax taken during the current year 1,578 1,278 882 Decreases related to during the current year 1,578 1,278 882 Decreases related to settlement the current year 1,578 1,278 882 Decreases related to settlement with settlement with taxing authority ( 1,618 ) ( 109 ) ( authority ( 1,618 ) ( 109 ) ( 574 ) Decreases ) ( 109 ) ( 574 ) Decreases related to expiration statute of limitation — ( 13 ) ( 4 ) Ending — ( 13 ) ( 4 ) Ending Balance $ 7,724 4 ) Ending Balance $ 7,724 $ 6,900 $ 4,033 The Ending Balance $ 7,724 $ 6,900 $ 4,033 The Company includes $ 7,724 $ 6,900 $ 4,033 The Company includes interest and tax . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the total 2016 and September 26 , 2015 , the total amount of and penalty accrued wa $ 1.0 billion and $ 1.3 billion $ 1.0 billion and $ 1.3 billion , respectively , which interest and penalty expense in 2016 , 2015 and 2014 of penalty expense in 2016 , 2015 and 2014 of $ 295 in 2016 , 2015 and 2014 of $ 295 million , 2015 and 2014 of $ 295 million , $ 709 million $ 295 million , $ 709 million and $ 40 million $ 709 million and $ 40 million , respectively . The During the fourth quarter of 2016 , the Company reached a it examination of the year 2010 through 2012 . In connection of the year 2010 through 2012 . In connection with this in the fourth quarter of 2016 that wa not significant to . All year prior to 2013 are closed , except for , except for the year 2010 through 2012 relating to R for the year 2010 through 2012 relating to R & D , the year subsequent to 2003 generally remain open and could both ) in the next 12 month by up to $ month by up to $ 850 million . On August 30 850 million . On August 30 , 2016 , the European . On August 30 , 2016 , the European Commission announced by providing tax opinion in 1991 and 2007 concerning the tax tax opinion in 1991 and 2007 concerning the tax allocation of Company for the period June 2003 through September 2014 . Irish period June 2003 through September 2014 . Irish legislative change , a of the beginning of 2015 , eliminated the application of tax . Apple Inc. | 2016 Form 10-K | 57 Note Apple Inc. | 2016 Form 10-K | 57 Note 6 – | 2016 Form 10-K | 57 Note 6 – Debt Commercial Form 10-K | 57 Note 6 – Debt Commercial Paper The repurchase . As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the Company 2016 and September 26 , 2015 , the Company had $ , the Company had $ 8.1 billion and $ 8.5 billion $ 8.1 billion and $ 8.5 billion of Commercial Paper outstanding ’ s Commercial Paper wa 0.45 % a of September 24 0.45 % a of September 24 , 2016 and 0.14 % a of September 24 , 2016 and 0.14 % a of September 24 , 2016 and 0.14 % a of September 26 0.14 % a of September 26 , 2015 . The following a of September 26 , 2015 . The following table provides maturity of Commercial Paper for 2016 and 2015 ( in million Commercial Paper for 2016 and 2015 ( in million ) : ( in million ) : 2016 2015 Maturities le than 90 in million ) : 2016 2015 Maturities le than 90 day 2016 2015 Maturities le than 90 day : Proceeds from ( paper , net $ ( 869 ) $ 5,293 Maturities greater $ ( 869 ) $ 5,293 Maturities greater than 90 day $ 5,293 Maturities greater than 90 day : Proceeds from commercial : Proceeds from commercial paper 3,632 3,851 Repayments of commercial paper Proceeds from commercial paper 3,632 3,851 Repayments of commercial paper ( Repayments of commercial paper ( 3,160 ) ( 6,953 ) Maturities paper ( 3,160 ) ( 6,953 ) Maturities greater than 90 6,953 ) Maturities greater than 90 day , net 472 ( than 90 day , net 472 ( 3,102 ) Total change day , net 472 ( 3,102 ) Total change in commercial paper , net $ ( 397 ) $ 2,191 Long-Term Debt $ ( 397 ) $ 2,191 Long-Term Debt As of September Long-Term Debt As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company had outstanding aggregate principal amount of $ 78.4 billion ( collectively the “ note . Apple Inc. | 2016 Form 10-K | 58 The Apple Inc. | 2016 Form 10-K | 58 The following table | 2016 Form 10-K | 58 The following table provides a term debt a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 : Maturities 2016 2016 and September 26 , 2015 : Maturities 2016 2015 Amount 26 , 2015 : Maturities 2016 2015 Amount ( in million , 2015 : Maturities 2016 2015 Amount ( in million ) million ) Effective Interest Rate 2013 debt issuance of $ 17.0 2013 debt issuance of $ 17.0 billion : Floating-rate note 2018 17.0 billion : Floating-rate note 2018 $ 2,000 1.10 % $ : Floating-rate note 2018 $ 2,000 1.10 % $ 3,000 0.51 Floating-rate note 2018 $ 2,000 1.10 % $ 3,000 0.51 % $ 2,000 1.10 % $ 3,000 0.51 % - 1.10 % 2,000 1.10 % $ 3,000 0.51 % - 1.10 % Fixed-rate $ 3,000 0.51 % - 1.10 % Fixed-rate 1.000 % - % - 1.10 % Fixed-rate 1.000 % - 3.850 % note % Fixed-rate 1.000 % - 3.850 % note 2018 - 2043 % - 3.850 % note 2018 - 2043 12,500 1.08 % 3.850 % note 2018 - 2043 12,500 1.08 % - 3.91 % note 2018 - 2043 12,500 1.08 % - 3.91 % note 2018 - 2043 12,500 1.08 % - 3.91 % 14,000 2043 12,500 1.08 % - 3.91 % 14,000 0.51 % - 1.08 % - 3.91 % 14,000 0.51 % - 3.91 % % - 3.91 % 14,000 0.51 % - 3.91 % 2014 % 14,000 0.51 % - 3.91 % 2014 debt issuance of 0.51 % - 3.91 % 2014 debt issuance of $ 12.0 2014 debt issuance of $ 12.0 billion : Floating-rate note 2017 12.0 billion : Floating-rate note 2017 - 2019 2,000 0.86 % : Floating-rate note 2017 - 2019 2,000 0.86 % - 1.09 Floating-rate note 2017 - 2019 2,000 0.86 % - 1.09 % note 2017 - 2019 2,000 0.86 % - 1.09 % 2,000 2019 2,000 0.86 % - 1.09 % 2,000 0.37 % - 0.86 % - 1.09 % 2,000 0.37 % - 0.60 % % - 1.09 % 2,000 0.37 % - 0.60 % Fixed-rate % 2,000 0.37 % - 0.60 % Fixed-rate 1.050 % - % - 0.60 % Fixed-rate 1.050 % - 4.450 % note % Fixed-rate 1.050 % - 4.450 % note 2017 - 2044 % - 4.450 % note 2017 - 2044 10,000 0.85 % 4.450 % note 2017 - 2044 10,000 0.85 % - 4.48 % note 2017 - 2044 10,000 0.85 % - 4.48 % note 2017 - 2044 10,000 0.85 % - 4.48 % 10,000 2044 10,000 0.85 % - 4.48 % 10,000 0.37 % - 0.85 % - 4.48 % 10,000 0.37 % - 4.48 % % - 4.48 % 10,000 0.37 % - 4.48 % 2015 % 10,000 0.37 % - 4.48 % 2015 debt issuance of 0.37 % - 4.48 % 2015 debt issuance of $ 27.3 2015 debt issuance of $ 27.3 billion : Floating-rate note 2017 27.3 billion : Floating-rate note 2017 - 2020 1,781 0.87 % : Floating-rate note 2017 - 2020 1,781 0.87 % - 1.87 Floating-rate note 2017 - 2020 1,781 0.87 % - 1.87 % note 2017 - 2020 1,781 0.87 % - 1.87 % 1,743 2020 1,781 0.87 % - 1.87 % 1,743 0.36 % - 0.87 % - 1.87 % 1,743 0.36 % - 1.87 % % - 1.87 % 1,743 0.36 % - 1.87 % Fixed-rate % 1,743 0.36 % - 1.87 % Fixed-rate 0.350 % - % - 1.87 % Fixed-rate 0.350 % - 4.375 % note % Fixed-rate 0.350 % - 4.375 % note 2017 - 2045 % - 4.375 % note 2017 - 2045 25,144 0.28 % 4.375 % note 2017 - 2045 25,144 0.28 % - 4.51 % note 2017 - 2045 25,144 0.28 % - 4.51 % note 2017 - 2045 25,144 0.28 % - 4.51 % 24,958 2045 25,144 0.28 % - 4.51 % 24,958 0.28 % - 0.28 % - 4.51 % 24,958 0.28 % - 4.51 % % - 4.51 % 24,958 0.28 % - 4.51 % Second % 24,958 0.28 % - 4.51 % Second quarter 2016 debt - 4.51 % Second quarter 2016 debt issuance of $ 15.5 2016 debt issuance of $ 15.5 billion : Floating-rate note 2019 15.5 billion : Floating-rate note 2019 500 1.64 % — — billion : Floating-rate note 2019 500 1.64 % — — Floating-rate : Floating-rate note 2019 500 1.64 % — — Floating-rate note % — — Floating-rate note 2021 500 1.95 % — — — — Floating-rate note 2021 500 1.95 % — — Fixed-rate — Floating-rate note 2021 500 1.95 % — — Fixed-rate 1.300 1.95 % — — Fixed-rate 1.300 % note 2018 500 1.32 — Fixed-rate 1.300 % note 2018 500 1.32 % — — Fixed-rate 1.300 % note 2018 500 1.32 % — — Fixed-rate 1.300 % note 2018 500 1.32 % — — Fixed-rate 1.700 1.32 % — — Fixed-rate 1.700 % note 2019 1,000 1.71 — Fixed-rate 1.700 % note 2019 1,000 1.71 % — — Fixed-rate 1.700 % note 2019 1,000 1.71 % — — Fixed-rate 1.700 % note 2019 1,000 1.71 % — — Fixed-rate 2.250 1.71 % — — Fixed-rate 2.250 % note 2021 3,000 1.91 — Fixed-rate 2.250 % note 2021 3,000 1.91 % — — Fixed-rate 2.250 % note 2021 3,000 1.91 % — — Fixed-rate 2.250 % note 2021 3,000 1.91 % — — Fixed-rate 2.850 1.91 % — — Fixed-rate 2.850 % note 2023 1,500 2.58 — Fixed-rate 2.850 % note 2023 1,500 2.58 % — — Fixed-rate 2.850 % note 2023 1,500 2.58 % — — Fixed-rate 2.850 % note 2023 1,500 2.58 % — — Fixed-rate 3.250 2.58 % — — Fixed-rate 3.250 % note 2026 3,250 2.51 — Fixed-rate 3.250 % note 2026 3,250 2.51 % — — Fixed-rate 3.250 % note 2026 3,250 2.51 % — — Fixed-rate 3.250 % note 2026 3,250 2.51 % — — Fixed-rate 4.500 2.51 % — — Fixed-rate 4.500 % note 2036 1,250 4.54 — Fixed-rate 4.500 % note 2036 1,250 4.54 % — — Fixed-rate 4.500 % note 2036 1,250 4.54 % — — Fixed-rate 4.500 % note 2036 1,250 4.54 % — — Fixed-rate 4.650 4.54 % — — Fixed-rate 4.650 % note 2046 4,000 4.58 — Fixed-rate 4.650 % note 2046 4,000 4.58 % — — Fixed-rate 4.650 % note 2046 4,000 4.58 % — — Third 4.650 % note 2046 4,000 4.58 % — — Third quarter % — — Third quarter 2016 Australian dollar-denominated debt issuance of debt issuance of A $ 1.4 billion : Fixed-rate 2.650 % $ 1.4 billion : Fixed-rate 2.650 % note 2020 493 1.92 : Fixed-rate 2.650 % note 2020 493 1.92 % — — Fixed-rate 2.650 % note 2020 493 1.92 % — — Fixed-rate 2.650 % note 2020 493 1.92 % — — Fixed-rate 3.350 1.92 % — — Fixed-rate 3.350 % note 2024 342 2.61 — Fixed-rate 3.350 % note 2024 342 2.61 % — — Fixed-rate 3.350 % note 2024 342 2.61 % — — Fixed-rate 3.350 % note 2024 342 2.61 % — — Fixed-rate 3.600 2.61 % — — Fixed-rate 3.600 % note 2026 247 2.84 — Fixed-rate 3.600 % note 2026 247 2.84 % — — Fixed-rate 3.600 % note 2026 247 2.84 % — — Third 3.600 % note 2026 247 2.84 % — — Third quarter % — — Third quarter 2016 debt issuance of $ 1.4 2016 debt issuance of $ 1.4 billion : Fixed-rate 4.150 % $ 1.4 billion : Fixed-rate 4.150 % note 2046 1,377 4.15 : Fixed-rate 4.150 % note 2046 1,377 4.15 % — — Fixed-rate 4.150 % note 2046 1,377 4.15 % — — Fourth 4.150 % note 2046 1,377 4.15 % — — Fourth quarter % — — Fourth quarter 2016 debt issuance of $ 7.0 2016 debt issuance of $ 7.0 billion : Floating-rate note 2019 7.0 billion : Floating-rate note 2019 350 0.91 % — — billion : Floating-rate note 2019 350 0.91 % — — Fixed-rate : Floating-rate note 2019 350 0.91 % — — Fixed-rate 1.100 0.91 % — — Fixed-rate 1.100 % note 2019 1,150 1.13 — Fixed-rate 1.100 % note 2019 1,150 1.13 % — — Fixed-rate 1.100 % note 2019 1,150 1.13 % — — Fixed-rate 1.100 % note 2019 1,150 1.13 % — — Fixed-rate 1.550 1.13 % — — Fixed-rate 1.550 % note 2021 1,250 1.40 — Fixed-rate 1.550 % note 2021 1,250 1.40 % — — Fixed-rate 1.550 % note 2021 1,250 1.40 % — — Fixed-rate 1.550 % note 2021 1,250 1.40 % — — Fixed-rate 2.450 1.40 % — — Fixed-rate 2.450 % note 2026 2,250 2.15 — Fixed-rate 2.450 % note 2026 2,250 2.15 % — — Fixed-rate 2.450 % note 2026 2,250 2.15 % — — Fixed-rate 2.450 % note 2026 2,250 2.15 % — — Fixed-rate 3.850 2.15 % — — Fixed-rate 3.850 % note 2046 2,000 3.86 — Fixed-rate 3.850 % note 2046 2,000 3.86 % — — Fixed-rate 3.850 % note 2046 2,000 3.86 % — — Total 3.850 % note 2046 2,000 3.86 % — — Total term — — Total term debt 78,384 55,701 Unamortized premium/ ( discount — Total term debt 78,384 55,701 Unamortized premium/ ( discount ) issuance cost , net ( 174 ) ( 248 ) Hedge net ( 174 ) ( 248 ) Hedge accounting fair value Hedge accounting fair value adjustment 717 376 Less : Current portion accounting fair value adjustment 717 376 Less : Current portion of long-term debt , net ( 3,500 ) ( 2,500 ) Total net ( 3,500 ) ( 2,500 ) Total long-term debt $ ) Total long-term debt $ 75,427 $ 53,329 To manage foreign long-term debt $ 75,427 $ 53,329 To manage foreign currency risk in the third quarter of 2016 , the Company entered into aggregate notional amount of $ 1.0 billion , which effectively converted in the second quarter of 2016 and maturing in 2021 , of 2016 and maturing in 2021 , 2023 and 2026 , and maturing in 2021 , 2023 and 2026 , the Company in 2021 , 2023 and 2026 , the Company entered into aggregate notional amount of $ 5.0 billion . To manage interest in the fourth quarter of 2016 and maturing in 2021 and of 2016 and maturing in 2021 and 2026 , the Company and maturing in 2021 and 2026 , the Company entered into aggregate notional amount of $ 1.8 billion . These interest rate note . Apple Inc. | 2016 Form 10-K | 59 As Apple Inc. | 2016 Form 10-K | 59 As of September | 2016 Form 10-K | 59 As of September 24 , | 59 As of September 24 , 2016 , ¥195.5 billion As of September 24 , 2016 , ¥195.5 billion of the adjustment . As of September 24 , 2016 , the carrying As of September 24 , 2016 , the carrying value of net investment hedge wa $ 1.9 billion . For further discussion Financial Instruments section of Note 2 , “ Financial Instruments . . The Company recognized $ 1.4 billion , $ 722 million $ 1.4 billion , $ 722 million and $ 381 million $ 722 million and $ 381 million of interest expense on on it term debt for 2016 , 2015 and 2014 , term debt for 2016 , 2015 and 2014 , respectively . for 2016 , 2015 and 2014 , respectively . The future s Notes a of September 24 , 2016 are a follows a of September 24 , 2016 are a follows ( in ( in million ) : 2017 $ 3,500 2018 6,500 2019 million ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 ) : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 : 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 2017 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 $ 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 3,500 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 2018 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total 6,500 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total term 2019 6,834 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt 2020 6,454 2021 7,750 Thereafter 47,346 Total term debt $ 78,384 47,346 Total term debt $ 78,384 As of September 24 , $ 78,384 As of September 24 , 2016 and September 26 As of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , the fair 2016 and September 26 , 2015 , the fair value of Notes , based on Level 2 input , wa $ 81.7 2 input , wa $ 81.7 billion and $ 54.9 billion $ 81.7 billion and $ 54.9 billion , respectively . Note billion , respectively . Note 7 – Shareholders ’ Equity Dividends Amount ( in million ) 2016 : Fourth quarter $ 0.57 2016 : Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 Fourth quarter $ 0.57 $ 3,071 Third quarter 0.57 3,117 Second 0.57 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 $ 3,071 Third quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 0.57 3,117 Second quarter 0.52 2,879 First quarter 0.52 2,898 Total quarter 0.52 2,879 First quarter 0.52 2,898 Total cash dividend declared 0.52 2,879 First quarter 0.52 2,898 Total cash dividend declared and dividend declared and paid $ 2.18 $ 11,965 2015 : Fourth and paid $ 2.18 $ 11,965 2015 : Fourth quarter $ paid $ 2.18 $ 11,965 2015 : Fourth quarter $ 0.52 2015 : Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 Fourth quarter $ 0.52 $ 2,950 Third quarter 0.52 2,997 Second 0.52 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 $ 2,950 Third quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 0.52 2,997 Second quarter 0.47 2,734 First quarter 0.47 2,750 Total quarter 0.47 2,734 First quarter 0.47 2,750 Total cash dividend declared 0.47 2,734 First quarter 0.47 2,750 Total cash dividend declared and dividend declared and paid $ 1.98 $ 11,431 Future dividend are and paid $ 1.98 $ 11,431 Future dividend are subject to Share Repurchase Program In April 2016 , the Company ’ s share repurchase authorization from $ 140 billion to $ 175 billion $ 140 billion to $ 175 billion of the Company ’ stock , of which $ 133 billion had been utilized a been utilized a of September 24 , 2016 . The Company a of September 24 , 2016 . The Company ’ s under plan complying with Rule 10b5-1 under the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the ) . Apple Inc. | 2016 Form 10-K | 60 The Apple Inc. | 2016 Form 10-K | 60 The Company ha | 2016 Form 10-K | 60 The Company ha entered , during the year ended September 24 , 2016 and September 26 year ended September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 : Purchase Period 2016 and September 26 , 2015 : Purchase Period End Date ( in million ) August 2016 ASR November 2016 22,468 ( ) August 2016 ASR November 2016 22,468 ( 1 ) ( August 2016 ASR November 2016 22,468 ( 1 ) ( 1 ASR November 2016 22,468 ( 1 ) ( 1 ) $ 22,468 ( 1 ) ( 1 ) $ 3,000 May 2016 ) ( 1 ) $ 3,000 May 2016 ASR August 2016 1 ) $ 3,000 May 2016 ASR August 2016 60,452 ( 3,000 May 2016 ASR August 2016 60,452 ( 2 ) $ May 2016 ASR August 2016 60,452 ( 2 ) $ 99.25 ASR August 2016 60,452 ( 2 ) $ 99.25 $ 6,000 60,452 ( 2 ) $ 99.25 $ 6,000 November 2015 ASR 2 ) $ 99.25 $ 6,000 November 2015 ASR April 2016 $ 99.25 $ 6,000 November 2015 ASR April 2016 29,122 $ 6,000 November 2015 ASR April 2016 29,122 $ 103.02 $ 3,000 November 2015 ASR April 2016 29,122 $ 103.02 $ 3,000 May ASR April 2016 29,122 $ 103.02 $ 3,000 May 2015 ASR 2016 29,122 $ 103.02 $ 3,000 May 2015 ASR July 2015 $ 103.02 $ 3,000 May 2015 ASR July 2015 48,293 $ 3,000 May 2015 ASR July 2015 48,293 $ 124.24 $ 6,000 May 2015 ASR July 2015 48,293 $ 124.24 $ 6,000 August ASR July 2015 48,293 $ 124.24 $ 6,000 August 2014 ASR 2015 48,293 $ 124.24 $ 6,000 August 2014 ASR February 2015 $ 124.24 $ 6,000 August 2014 ASR February 2015 81,525 $ 6,000 August 2014 ASR February 2015 81,525 $ 110.40 $ 9,000 August 2014 ASR February 2015 81,525 $ 110.40 $ 9,000 January ASR February 2015 81,525 $ 110.40 $ 9,000 January 2014 ASR 2015 81,525 $ 110.40 $ 9,000 January 2014 ASR December 2014 $ 110.40 $ 9,000 January 2014 ASR December 2014 134,247 $ 9,000 January 2014 ASR December 2014 134,247 $ 89.39 $ 12,000 January 2014 ASR December 2014 134,247 $ 89.39 $ 12,000 ( ASR December 2014 134,247 $ 89.39 $ 12,000 ( 1 ) 2014 134,247 $ 89.39 $ 12,000 ( 1 ) “ Number $ 89.39 $ 12,000 ( 1 ) “ Number of Shares that period . The August 2016 ASR purchase period will end end in or before November 2016 . ( 2 ) Includes before November 2016 . ( 2 ) Includes 48.2 million share . ( 2 ) Includes 48.2 million share delivered and retired in the third quarter of 2016 , and 12.3 million share quarter of 2016 , and 12.3 million share delivered and retired in the fourth quarter of 2016 . Additionally , the Company Amount ( in million ) 2016 : Fourth quarter 28,579 $ ) 2016 : Fourth quarter 28,579 $ 104.97 $ 3,000 Third : Fourth quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 quarter 28,579 $ 104.97 $ 3,000 Third quarter 41,238 $ 97.00 104.97 $ 3,000 Third quarter 41,238 $ 97.00 4,000 Second quarter 3,000 Third quarter 41,238 $ 97.00 4,000 Second quarter 71,766 $ Third quarter 41,238 $ 97.00 4,000 Second quarter 71,766 $ 97.54 $ 97.00 4,000 Second quarter 71,766 $ 97.54 7,000 First quarter 4,000 Second quarter 71,766 $ 97.54 7,000 First quarter 25,984 $ Second quarter 71,766 $ 97.54 7,000 First quarter 25,984 $ 115.45 $ 97.54 7,000 First quarter 25,984 $ 115.45 3,000 Total open 7,000 First quarter 25,984 $ 115.45 3,000 Total open market common First quarter 25,984 $ 115.45 3,000 Total open market common stock open market common stock repurchase 167,567 $ 17,000 2015 : Fourth common stock repurchase 167,567 $ 17,000 2015 : Fourth quarter 121,802 stock repurchase 167,567 $ 17,000 2015 : Fourth quarter 121,802 $ 17,000 2015 : Fourth quarter 121,802 $ 115.15 $ 14,026 Third : Fourth quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 quarter 121,802 $ 115.15 $ 14,026 Third quarter 31,231 $ 128.08 115.15 $ 14,026 Third quarter 31,231 $ 128.08 4,000 Second quarter 14,026 Third quarter 31,231 $ 128.08 4,000 Second quarter 56,400 $ Third quarter 31,231 $ 128.08 4,000 Second quarter 56,400 $ 124.11 $ 128.08 4,000 Second quarter 56,400 $ 124.11 7,000 First quarter 4,000 Second quarter 56,400 $ 124.11 7,000 First quarter 45,704 $ Second quarter 56,400 $ 124.11 7,000 First quarter 45,704 $ 109.40 $ 124.11 7,000 First quarter 45,704 $ 109.40 5,000 Total open 7,000 First quarter 45,704 $ 109.40 5,000 Total open market common First quarter 45,704 $ 109.40 5,000 Total open market common stock open market common stock repurchase 255,137 $ 30,026 Note 8 – common stock repurchase 255,137 $ 30,026 Note 8 – Comprehensive Income repurchase 255,137 $ 30,026 Note 8 – Comprehensive Income Comprehensive income available-for-sale . Apple Inc. | 2016 Form 10-K | 61 The Apple Inc. | 2016 Form 10-K | 61 The following table | 2016 Form 10-K | 61 The following table show the statement line item , for 2016 and 2015 ( in million item , for 2016 and 2015 ( in million ) : Components Financial Statement Line Item 2016 2015 Unrealized ( gain ) Financial Statement Line Item 2016 2015 Unrealized ( gain ) /losses exchange contract Revenue $ ( 865 ) $ ( 2,432 ) ( 865 ) $ ( 2,432 ) Cost of sale ( ) Cost of sale ( 130 ) ( 2,168 ) Other sale ( 130 ) ( 2,168 ) Other income/ ( expense ( expense ) , net 111 456 Interest rate contract Other expense ) , net 111 456 Interest rate contract Other income/ ( expense ) , net 12 17 ( 872 ) ( expense ) , net 12 17 ( 872 ) ( 4,127 , net 12 17 ( 872 ) ( 4,127 ) Unrealized 17 ( 872 ) ( 4,127 ) Unrealized ( gain ) ( expense ) , net 87 91 Total amount reclassified from expense ) , net 87 91 Total amount reclassified from AOCI reclassified from AOCI $ ( 785 ) $ ( 4,036 ) ( 785 ) $ ( 4,036 ) The following table show in AOCI by component for 2016 and 2015 ( in million by component for 2016 and 2015 ( in million ) : Securities Total Balance at September 27 , 2014 $ ( 242 Balance at September 27 , 2014 $ ( 242 ) $ 27 , 2014 $ ( 242 ) $ 1,364 $ ( $ ( 242 ) $ 1,364 $ ( 40 ) $ ) $ 1,364 $ ( 40 ) $ 1,082 Other comprehensive $ ( 40 ) $ 1,082 Other comprehensive income/ ( loss loss ) before reclassification ( 612 ) 3,346 ( 747 ) before reclassification ( 612 ) 3,346 ( 747 ) 1,987 Amounts ( 612 ) 3,346 ( 747 ) 1,987 Amounts reclassified from ) 3,346 ( 747 ) 1,987 Amounts reclassified from AOCI — reclassified from AOCI — ( 4,127 ) 91 ( 4,036 ) AOCI — ( 4,127 ) 91 ( 4,036 ) Tax effect ( 4,127 ) 91 ( 4,036 ) Tax effect 201 189 ( 4,036 ) Tax effect 201 189 232 622 Other comprehensive 4,036 ) Tax effect 201 189 232 622 Other comprehensive income/ ) Tax effect 201 189 232 622 Other comprehensive income/ ( Tax effect 201 189 232 622 Other comprehensive income/ ( loss income/ ( loss ) ( 411 ) ( 592 ) ( ) ( 411 ) ( 592 ) ( 424 ) ( ) ( 592 ) ( 424 ) ( 1,427 ) Balance ) ( 424 ) ( 1,427 ) Balance at September 26 1,427 ) Balance at September 26 , 2015 ( 653 ) Balance at September 26 , 2015 ( 653 ) 772 ( September 26 , 2015 ( 653 ) 772 ( 464 ) , 2015 ( 653 ) 772 ( 464 ) ( 345 ( 653 ) 772 ( 464 ) ( 345 ) Other 772 ( 464 ) ( 345 ) Other comprehensive income/ ( ( loss ) before reclassification 67 14 2,445 2,526 Amounts reclassified loss ) before reclassification 67 14 2,445 2,526 Amounts reclassified from ) before reclassification 67 14 2,445 2,526 Amounts reclassified from AOCI before reclassification 67 14 2,445 2,526 Amounts reclassified from AOCI — reclassified from AOCI — ( 872 ) 87 ( 785 ) AOCI — ( 872 ) 87 ( 785 ) Tax effect ( 872 ) 87 ( 785 ) Tax effect 8 124 ( 785 ) Tax effect 8 124 ( 894 ) ( 785 ) Tax effect 8 124 ( 894 ) ( 762 Tax effect 8 124 ( 894 ) ( 762 ) Other 124 ( 894 ) ( 762 ) Other comprehensive income/ ( comprehensive income/ ( loss ) 75 ( 734 ) 1,638 979 ( loss ) 75 ( 734 ) 1,638 979 Balance at ) 75 ( 734 ) 1,638 979 Balance at September 24 75 ( 734 ) 1,638 979 Balance at September 24 , 1,638 979 Balance at September 24 , 2016 $ ( 578 Balance at September 24 , 2016 $ ( 578 ) $ 24 , 2016 $ ( 578 ) $ 38 $ 1,174 $ ( 578 ) $ 38 $ 1,174 $ 634 Note 578 ) $ 38 $ 1,174 $ 634 Note 9 – $ 38 $ 1,174 $ 634 Note 9 – Benefit Plans $ 1,174 $ 634 Note 9 – Benefit Plans 2014 Employee Note 9 – Benefit Plans 2014 Employee Stock Plan In the In the second quarter of 2014 , shareholder approved the 2014 2014 , shareholder approved the 2014 Employee Stock Plan ( the Stock Plan ( the “ 2014 Plan ” ) and terminated grant new award under the 2003 Employee Stock Plan ( the Stock Plan ( the “ 2003 Plan ” ) . The Plan ” ) . The 2014 Plan provides for broad-based equity . RSUs granted under the 2014 Plan generally vest over four to RSUs granted under the 2014 Plan reduces the number of available for grant under the 2014 Plan utilizing a factor of all RSUs granted under the 2014 Plan have dividend equivalent right . Upon approval of the 2014 Plan , the Company reserved Plan , the Company reserved 385 million share plus the number but not issued under the 2003 Plan . Shares subject to to outstanding award under the 2003 Plan that expire , are available for award under the 2014 Plan . As of September Plan . As of September 24 , 2016 , approximately 386.4 As of September 24 , 2016 , approximately 386.4 million share 24 , 2016 , approximately 386.4 million share were reserved for for future issuance under the 2014 Plan . Apple Inc. | Plan . Apple Inc. | 2016 Form 10-K | 62 2003 Apple Inc. | 2016 Form 10-K | 62 2003 Employee Stock | 2016 Form 10-K | 62 2003 Employee Stock Plan The 2016 Form 10-K | 62 2003 Employee Stock Plan The 2003 2003 Employee Stock Plan The 2003 Plan is a shareholder approved including executive officer . The 2003 Plan permitted the granting of . Options granted under the 2003 Plan generally expire seven to . RSUs granted under the 2003 Plan generally vest over two Officer , granted under the 2003 Plan have DERs . DERs In the second quarter of 2014 , the Company terminated the grant new award under the 2003 Plan . 1997 Director Stock under the 2003 Plan . 1997 Director Stock Plan The 1997 1997 Director Stock Plan The 1997 Director Stock Plan ( the The Director Plan expires November 9 , 2019 . All RSUs Plan expires November 9 , 2019 . All RSUs granted under vest . As of September 24 , 2016 , approximately 1.1 As of September 24 , 2016 , approximately 1.1 million share 24 , 2016 , approximately 1.1 million share were reserved for the Director Plan . Rule 10b5-1 Trading Plans During the three the three month ended September 24 , 2016 , Section 16 month ended September 24 , 2016 , Section 16 officer Timothy 24 , 2016 , Section 16 officer Timothy D. Cook , place in accordance with Rule 10b5-1 ( c ) ( 1 10b5-1 ( c ) ( 1 ) under the Exchange Act at a price equal to 85 % of the lower of Purchase Plan are limited to 10 % of the employee ’ not purchase more than $ 25,000 of stock during any calendar year . As of September 24 , 2016 , approximately 47.0 As of September 24 , 2016 , approximately 47.0 million share 24 , 2016 , approximately 47.0 million share were reserved for under the Purchase Plan . 401 ( k ) Plan The Plan The Company ’ s 401 ( k ) Plan is deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under the 401 ( k ) Plan , annual contribution limit ( $ 18,000 for calendar year 2016 ) $ 18,000 for calendar year 2016 ) . The Company match ) . The Company match 50 % to 100 % of Company match 50 % to 100 % of each employee ’ , up to a maximum 6 % of the employee ’ earnings . Apple Inc. | 2016 Form 10-K | 63 Restricted Apple Inc. | 2016 Form 10-K | 63 Restricted Stock Units | 2016 Form 10-K | 63 Restricted Stock Units A summary activity and related information for 2016 , 2015 and 2014 , related information for 2016 , 2015 and 2014 , is a for 2016 , 2015 and 2014 , is a follows : million ) Balance at September 28 , 2013 93,284 $ 62.24 Balance at September 28 , 2013 93,284 $ 62.24 RSUs granted at September 28 , 2013 93,284 $ 62.24 RSUs granted 59,269 28 , 2013 93,284 $ 62.24 RSUs granted 59,269 $ 74.54 93,284 $ 62.24 RSUs granted 59,269 $ 74.54 RSUs vested ( 62.24 RSUs granted 59,269 $ 74.54 RSUs vested ( 43,111 ) $ 74.54 RSUs vested ( 43,111 ) $ 57.29 RSUs cancelled vested ( 43,111 ) $ 57.29 RSUs cancelled ( 5,620 ) $ 57.29 RSUs cancelled ( 5,620 ) $ 68.47 Balance at cancelled ( 5,620 ) $ 68.47 Balance at September 27 , $ 68.47 Balance at September 27 , 2014 103,822 $ 70.98 Balance at September 27 , 2014 103,822 $ 70.98 RSUs granted at September 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 27 , 2014 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 103,822 $ 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 70.98 RSUs granted 45,587 $ 105.51 RSUs vested ( 41,684 ) $ 105.51 RSUs vested ( 41,684 ) $ 71.32 RSUs cancelled vested ( 41,684 ) $ 71.32 RSUs cancelled ( 6,258 ) $ 71.32 RSUs cancelled ( 6,258 ) $ 80.34 Balance at cancelled ( 6,258 ) $ 80.34 Balance at September 26 , $ 80.34 Balance at September 26 , 2015 101,467 $ 85.77 Balance at September 26 , 2015 101,467 $ 85.77 RSUs granted at September 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 26 , 2015 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 101,467 $ 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 85.77 RSUs granted 49,468 $ 109.28 RSUs vested ( 46,313 ) $ 109.28 RSUs vested ( 46,313 ) $ 84.44 RSUs cancelled vested ( 46,313 ) $ 84.44 RSUs cancelled ( 5,533 ) $ 84.44 RSUs cancelled ( 5,533 ) $ 96.48 Balance at cancelled ( 5,533 ) $ 96.48 Balance at September 24 , $ 96.48 Balance at September 24 , 2016 99,089 $ 97.54 Balance at September 24 , 2016 99,089 $ 97.54 $ 11,168 at September 24 , 2016 99,089 $ 97.54 $ 11,168 The 24 , 2016 99,089 $ 97.54 $ 11,168 The fair value 2016 99,089 $ 97.54 $ 11,168 The fair value a of date of RSUs wa $ 5.1 billion , $ 4.8 billion $ 5.1 billion , $ 4.8 billion and $ 3.4 billion $ 4.8 billion and $ 3.4 billion for 2016 , 2015 and $ 3.4 billion for 2016 , 2015 and 2014 , 3.4 billion for 2016 , 2015 and 2014 , respectively . for 2016 , 2015 and 2014 , respectively . The majority of RSUs that vested in 2016 , 2015 and 2014 were that vested in 2016 , 2015 and 2014 were net-share settled in 2016 , 2015 and 2014 were net-share settled such that total share withheld were approximately 15.9 million , 14.1 million and were approximately 15.9 million , 14.1 million and 15.6 million for million , 14.1 million and 15.6 million for 2016 , 2015 million and 15.6 million for 2016 , 2015 and 2014 , 15.6 million for 2016 , 2015 and 2014 , respectively , for 2016 , 2015 and 2014 , respectively , and were to taxing authority were $ 1.7 billion , $ 1.6 billion $ 1.7 billion , $ 1.6 billion and $ 1.2 billion $ 1.6 billion and $ 1.2 billion in 2016 , 2015 and $ 1.2 billion in 2016 , 2015 and 2014 , 1.2 billion in 2016 , 2015 and 2014 , respectively , in 2016 , 2015 and 2014 , respectively , and are Consolidated Statements of Operations for 2016 , 2015 and 2014 ( of Operations for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Cost of sale in million ) : 2016 2015 2014 Cost of sale $ million ) : 2016 2015 2014 Cost of sale $ 769 2014 Cost of sale $ 769 $ 575 $ 450 Research of sale $ 769 $ 575 $ 450 Research and development $ 769 $ 575 $ 450 Research and development 1,889 1,536 $ 450 Research and development 1,889 1,536 1,216 Selling , general 450 Research and development 1,889 1,536 1,216 Selling , general and Research and development 1,889 1,536 1,216 Selling , general and administrative Selling , general and administrative 1,552 1,475 1,197 Total share-based compensation , general and administrative 1,552 1,475 1,197 Total share-based compensation expense general and administrative 1,552 1,475 1,197 Total share-based compensation expense $ Total share-based compensation expense $ 4,210 $ 3,586 $ 2,863 The compensation expense $ 4,210 $ 3,586 $ 2,863 The income tax $ 4,210 $ 3,586 $ 2,863 The income tax benefit related share-based compensation expense wa $ 1.4 billion , $ 1.2 billion $ 1.4 billion , $ 1.2 billion and $ 1.0 billion $ 1.2 billion and $ 1.0 billion for 2016 , 2015 and $ 1.0 billion for 2016 , 2015 and 2014 , 1.0 billion for 2016 , 2015 and 2014 , respectively . for 2016 , 2015 and 2014 , respectively . As of respectively . As of September 24 , 2016 , the total As of September 24 , 2016 , the total unrecognized compensation and restricted stock wa $ 7.5 billion , which the Company over a weighted-average period of 2.6 year . Apple Inc. | year . Apple Inc. | 2016 Form 10-K | 64 Note Apple Inc. | 2016 Form 10-K | 64 Note 10 – | 2016 Form 10-K | 64 Note 10 – Commitments and Form 10-K | 64 Note 10 – Commitments and Contingencies Accrued warranty and related cost for 2016 , 2015 and 2014 ( related cost for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Beginning accrued warranty in million ) : 2016 2015 2014 Beginning accrued warranty and million ) : 2016 2015 2014 Beginning accrued warranty and related warranty and related cost $ 4,780 $ 4,159 $ 2,967 Cost related cost $ 4,780 $ 4,159 $ 2,967 Cost of warranty $ 4,780 $ 4,159 $ 2,967 Cost of warranty claim ( Cost of warranty claim ( 4,663 ) ( 4,401 ) ( claim ( 4,663 ) ( 4,401 ) ( 3,760 ) Accruals ) ( 4,401 ) ( 3,760 ) Accruals for product warranty ) Accruals for product warranty 3,585 5,022 4,952 Ending accrued warranty Accruals for product warranty 3,585 5,022 4,952 Ending accrued warranty and for product warranty 3,585 5,022 4,952 Ending accrued warranty and related warranty and related cost $ 3,702 $ 4,780 $ 4,159 The related cost $ 3,702 $ 4,780 $ 4,159 The Company generally $ 3,702 $ 4,780 $ 4,159 The Company generally doe not requirement for period up to 150 day . Apple Inc. | day . Apple Inc. | 2016 Form 10-K | 65 Other Apple Inc. | 2016 Form 10-K | 65 Other Off-Balance Sheet | 2016 Form 10-K | 65 Other Off-Balance Sheet Commitments Operating arrangement . As of September 24 , 2016 , the Company As of September 24 , 2016 , the Company ’ s noncancelable operating lease were $ 7.6 billion . The Company 's typically for term not exceeding 10 year and generally contain multi-year noncancelable lease , wa $ 939 million , $ 794 million $ 939 million , $ 794 million and $ 717 million $ 794 million and $ 717 million in 2016 , 2015 and $ 717 million in 2016 , 2015 and 2014 , 717 million in 2016 , 2015 and 2014 , respectively . in 2016 , 2015 and 2014 , respectively . Future minimum one year a of September 24 , 2016 , are a a of September 24 , 2016 , are a follows ( ( in million ) : 2017 $ 929 2018 919 2019 million ) : 2017 $ 929 2018 919 2019 915 2020 ) : 2017 $ 929 2018 919 2019 915 2020 889 : 2017 $ 929 2018 919 2019 915 2020 889 2021 2017 $ 929 2018 919 2019 915 2020 889 2021 836 $ 929 2018 919 2019 915 2020 889 2021 836 Thereafter 929 2018 919 2019 915 2020 889 2021 836 Thereafter 3,139 2018 919 2019 915 2020 889 2021 836 Thereafter 3,139 Total 919 2019 915 2020 889 2021 836 Thereafter 3,139 Total $ 2019 915 2020 889 2021 836 Thereafter 3,139 Total $ 7,627 2020 889 2021 836 Thereafter 3,139 Total $ 7,627 Contingencies The 836 Thereafter 3,139 Total $ 7,627 Contingencies The Company is subject in Part I , Item 1A of this Form 10-K under Item 1A of this Form 10-K under the heading “ Risk in Part I , Item 3 of this Form 10-K under Item 3 of this Form 10-K under the heading “ Legal et al . On August 24 , 2012 , a jury . On August 24 , 2012 , a jury returned a verdict awarding the Company $ 1.05 billion in it lawsuit against Jose Division . On March 6 , 2014 , the District . On March 6 , 2014 , the District Court entered the amount of approximately $ 930 million . On May 18 930 million . On May 18 , 2015 , the U.S. . On May 18 , 2015 , the U.S. Court of the amount of approximately $ 548 million , with the District part . Samsung paid $ 548 million to the Company in to the Company in December 2015 , which wa included in of operation . On October 11 , 2016 , the United . On October 11 , 2016 , the United States Supreme appeal related to the $ 548 million in damage . Note million in damage . Note 11 – Segment Information and Geographic a those described in Note 1 , “ Summary of Significant . ” Apple Inc. | 2016 Form 10-K | 66 The Apple Inc. | 2016 Form 10-K | 66 The Company evaluates | 2016 Form 10-K | 66 The Company evaluates the performance by reportable operating segment for 2016 , 2015 and 2014 ( operating segment for 2016 , 2015 and 2014 ( in million for 2016 , 2015 and 2014 ( in million ) : ( in million ) : 2016 2015 2014 Americas : Net in million ) : 2016 2015 2014 Americas : Net sale million ) : 2016 2015 2014 Americas : Net sale $ Americas : Net sale $ 86,613 $ 93,864 $ 80,095 Operating Net sale $ 86,613 $ 93,864 $ 80,095 Operating income $ $ 86,613 $ 93,864 $ 80,095 Operating income $ 28,172 $ $ 80,095 Operating income $ 28,172 $ 31,186 $ 26,158 Europe Operating income $ 28,172 $ 31,186 $ 26,158 Europe : Net $ 28,172 $ 31,186 $ 26,158 Europe : Net sale $ Europe : Net sale $ 49,952 $ 50,337 $ 44,285 Operating Net sale $ 49,952 $ 50,337 $ 44,285 Operating income $ $ 49,952 $ 50,337 $ 44,285 Operating income $ 15,348 $ $ 44,285 Operating income $ 15,348 $ 16,527 $ 14,434 Greater Operating income $ 15,348 $ 16,527 $ 14,434 Greater China : $ 15,348 $ 16,527 $ 14,434 Greater China : Net sale China : Net sale $ 48,492 $ 58,715 $ 31,853 Operating Net sale $ 48,492 $ 58,715 $ 31,853 Operating income $ $ 48,492 $ 58,715 $ 31,853 Operating income $ 18,835 $ $ 31,853 Operating income $ 18,835 $ 23,002 $ 11,039 Japan Operating income $ 18,835 $ 23,002 $ 11,039 Japan : Net $ 18,835 $ 23,002 $ 11,039 Japan : Net sale $ Japan : Net sale $ 16,928 $ 15,706 $ 15,314 Operating Net sale $ 16,928 $ 15,706 $ 15,314 Operating income $ $ 16,928 $ 15,706 $ 15,314 Operating income $ 7,165 $ $ 15,314 Operating income $ 7,165 $ 7,617 $ 6,904 Rest Operating income $ 7,165 $ 7,617 $ 6,904 Rest of Asia $ 7,165 $ 7,617 $ 6,904 Rest of Asia Pacific : Pacific : Net sale $ 13,654 $ 15,093 $ 11,248 Operating Net sale $ 13,654 $ 15,093 $ 11,248 Operating income $ $ 13,654 $ 15,093 $ 11,248 Operating income $ 4,781 $ $ 11,248 Operating income $ 4,781 $ 5,518 $ 3,674 A Operating income $ 4,781 $ 5,518 $ 3,674 A reconciliation of $ 4,781 $ 5,518 $ 3,674 A reconciliation of the Company Consolidated Statements of Operations for 2016 , 2015 and 2014 is of Operations for 2016 , 2015 and 2014 is a follows for 2016 , 2015 and 2014 is a follows ( in ( in million ) : 2016 2015 2014 Segment operating income in million ) : 2016 2015 2014 Segment operating income $ million ) : 2016 2015 2014 Segment operating income $ 74,301 2014 Segment operating income $ 74,301 $ 83,850 $ 62,209 Research operating income $ 74,301 $ 83,850 $ 62,209 Research and development $ 74,301 $ 83,850 $ 62,209 Research and development expense ( Research and development expense ( 10,045 ) ( 8,067 ) ( expense ( 10,045 ) ( 8,067 ) ( 6,041 ) Other ) ( 8,067 ) ( 6,041 ) Other corporate expense , corporate expense , net ( 4,232 ) ( 4,553 ) ( net ( 4,232 ) ( 4,553 ) ( 3,665 ) Total ) ( 4,553 ) ( 3,665 ) Total operating income $ ) Total operating income $ 60,024 $ 71,230 $ 52,503 Apple operating income $ 60,024 $ 71,230 $ 52,503 Apple Inc. | $ 60,024 $ 71,230 $ 52,503 Apple Inc. | 2016 Form $ 52,503 Apple Inc. | 2016 Form 10-K | 67 The Apple Inc. | 2016 Form 10-K | 67 The U.S. and | 2016 Form 10-K | 67 The U.S. and China were that accounted for more than 10 % of the Company ’ ’ s net sale in 2016 , 2015 and 2014 . net sale in 2016 , 2015 and 2014 . There wa in 2016 , 2015 and 2014 . There wa no single that accounted for more than 10 % of net sale in % of net sale in 2016 , 2015 or 2014 . net sale in 2016 , 2015 or 2014 . Net sale in 2016 , 2015 or 2014 . Net sale for 2016 2014 . Net sale for 2016 , 2015 and 2014 and Net sale for 2016 , 2015 and 2014 and long-lived asset for 2016 , 2015 and 2014 and long-lived asset a of long-lived asset a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 are a follows 2016 and September 26 , 2015 are a follows ( in ( in million ) : 2016 2015 2014 Net sale : in million ) : 2016 2015 2014 Net sale : U.S. million ) : 2016 2015 2014 Net sale : U.S. $ Net sale : U.S. $ 75,667 $ 81,732 $ 68,909 China : U.S. $ 75,667 $ 81,732 $ 68,909 China ( 1 $ 75,667 $ 81,732 $ 68,909 China ( 1 ) 46,349 81,732 $ 68,909 China ( 1 ) 46,349 56,547 30,638 Other 68,909 China ( 1 ) 46,349 56,547 30,638 Other country 93,623 China ( 1 ) 46,349 56,547 30,638 Other country 93,623 95,436 ( 1 ) 46,349 56,547 30,638 Other country 93,623 95,436 83,248 46,349 56,547 30,638 Other country 93,623 95,436 83,248 Total net sale 56,547 30,638 Other country 93,623 95,436 83,248 Total net sale $ 30,638 Other country 93,623 95,436 83,248 Total net sale $ 215,639 83,248 Total net sale $ 215,639 $ 233,715 $ 182,795 2016 net sale $ 215,639 $ 233,715 $ 182,795 2016 2015 Long-lived $ 215,639 $ 233,715 $ 182,795 2016 2015 Long-lived asset : 215,639 $ 233,715 $ 182,795 2016 2015 Long-lived asset : U.S. $ 233,715 $ 182,795 2016 2015 Long-lived asset : U.S. $ Long-lived asset : U.S. $ 16,364 $ 12,022 China ( 1 : U.S. $ 16,364 $ 12,022 China ( 1 ) 7,807 16,364 $ 12,022 China ( 1 ) 7,807 8,722 Other country 12,022 China ( 1 ) 7,807 8,722 Other country 2,839 3,040 China ( 1 ) 7,807 8,722 Other country 2,839 3,040 Total ) 7,807 8,722 Other country 2,839 3,040 Total long-lived asset $ 7,807 8,722 Other country 2,839 3,040 Total long-lived asset $ 27,010 3,040 Total long-lived asset $ 27,010 $ 23,784 ( 1 ) long-lived asset $ 27,010 $ 23,784 ( 1 ) China includes $ 27,010 $ 23,784 ( 1 ) China includes Hong Kong Net sale by product for 2016 , 2015 and 2014 are by product for 2016 , 2015 and 2014 are a follows for 2016 , 2015 and 2014 are a follows ( in ( in million ) : 2016 2015 2014 iPhone ( 1 in million ) : 2016 2015 2014 iPhone ( 1 ) million ) : 2016 2015 2014 iPhone ( 1 ) $ 2016 2015 2014 iPhone ( 1 ) $ 136,700 $ 155,041 iPhone ( 1 ) $ 136,700 $ 155,041 $ 101,991 iPad 1 ) $ 136,700 $ 155,041 $ 101,991 iPad ( 1 $ 136,700 $ 155,041 $ 101,991 iPad ( 1 ) 20,628 155,041 $ 101,991 iPad ( 1 ) 20,628 23,227 30,283 Mac 101,991 iPad ( 1 ) 20,628 23,227 30,283 Mac ( 1 iPad ( 1 ) 20,628 23,227 30,283 Mac ( 1 ) ( 1 ) 20,628 23,227 30,283 Mac ( 1 ) 22,831 20,628 23,227 30,283 Mac ( 1 ) 22,831 25,471 24,079 Services 30,283 Mac ( 1 ) 22,831 25,471 24,079 Services ( 2 Mac ( 1 ) 22,831 25,471 24,079 Services ( 2 ) ( 1 ) 22,831 25,471 24,079 Services ( 2 ) 24,348 22,831 25,471 24,079 Services ( 2 ) 24,348 19,909 18,063 Other 24,079 Services ( 2 ) 24,348 19,909 18,063 Other Products ( Services ( 2 ) 24,348 19,909 18,063 Other Products ( 1 ( 2 ) 24,348 19,909 18,063 Other Products ( 1 ) 19,909 18,063 Other Products ( 1 ) ( 3 ) 11,132 Products ( 1 ) ( 3 ) 11,132 10,067 8,379 Total 1 ) ( 3 ) 11,132 10,067 8,379 Total net sale ) ( 3 ) 11,132 10,067 8,379 Total net sale $ ( 3 ) 11,132 10,067 8,379 Total net sale $ 215,639 8,379 Total net sale $ 215,639 $ 233,715 $ 182,795 ( net sale $ 215,639 $ 233,715 $ 182,795 ( 1 ) $ 215,639 $ 233,715 $ 182,795 ( 1 ) Includes deferral $ 233,715 $ 182,795 ( 1 ) Includes deferral and amortization and non-software service . ( 2 ) Includes revenue from iTunes and other service . ( 3 ) Includes sale of Apple accessory . Apple Inc. | 2016 Form 10-K | 68 Note Apple Inc. | 2016 Form 10-K | 68 Note 12 – | 2016 Form 10-K | 68 Note 12 – Selected Quarterly Form 10-K | 68 Note 12 – Selected Quarterly Financial Information of the four quarter of 2016 and 2015 ( in million four quarter of 2016 and 2015 ( in million , except Quarter Second Quarter First Quarter 2016 : Net sale $ 46,852 2016 : Net sale $ 46,852 $ 42,358 $ 50,557 $ Net sale $ 46,852 $ 42,358 $ 50,557 $ 75,872 Gross $ 46,852 $ 42,358 $ 50,557 $ 75,872 Gross margin $ $ 42,358 $ 50,557 $ 75,872 Gross margin $ 17,813 $ $ 75,872 Gross margin $ 17,813 $ 16,106 $ 19,921 $ Gross margin $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net $ 17,813 $ 16,106 $ 19,921 $ 30,423 Net income $ $ 16,106 $ 19,921 $ 30,423 Net income $ 9,014 $ $ 30,423 Net income $ 9,014 $ 7,796 $ 10,516 $ Net income $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings $ 9,014 $ 7,796 $ 10,516 $ 18,361 Earnings per share $ 7,796 $ 10,516 $ 18,361 Earnings per share ( 1 18,361 Earnings per share ( 1 ) : Basic $ 1.68 1 ) : Basic $ 1.68 $ 1.43 $ 1.91 $ : Basic $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.68 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.43 $ 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 1.91 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.30 Diluted $ 1.67 $ 1.42 $ 1.90 $ 3.28 Fourth $ 1.67 $ 1.42 $ 1.90 $ 3.28 Fourth Quarter Third $ 1.42 $ 1.90 $ 3.28 Fourth Quarter Third Quarter Second Quarter Second Quarter First Quarter 2015 : Net sale $ 51,501 2015 : Net sale $ 51,501 $ 49,605 $ 58,010 $ Net sale $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross $ 51,501 $ 49,605 $ 58,010 $ 74,599 Gross margin $ $ 49,605 $ 58,010 $ 74,599 Gross margin $ 20,548 $ $ 74,599 Gross margin $ 20,548 $ 19,681 $ 23,656 $ Gross margin $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net $ 20,548 $ 19,681 $ 23,656 $ 29,741 Net income $ $ 19,681 $ 23,656 $ 29,741 Net income $ 11,124 $ $ 29,741 Net income $ 11,124 $ 10,677 $ 13,569 $ Net income $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings $ 11,124 $ 10,677 $ 13,569 $ 18,024 Earnings per share $ 10,677 $ 13,569 $ 18,024 Earnings per share ( 1 18,024 Earnings per share ( 1 ) : Basic $ 1.97 1 ) : Basic $ 1.97 $ 1.86 $ 2.34 $ : Basic $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.97 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.86 $ 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 2.34 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.08 Diluted $ 1.96 $ 1.85 $ 2.33 $ 3.06 ( $ 1.96 $ 1.85 $ 2.33 $ 3.06 ( 1 ) $ 1.85 $ 2.33 $ 3.06 ( 1 ) Basic and $ 2.33 $ 3.06 ( 1 ) Basic and diluted earnings share . Apple Inc. | 2016 Form 10-K | 69 Report Apple Inc. | 2016 Form 10-K | 69 Report of Ernst | 2016 Form 10-K | 69 Report of Ernst & Young Apple Inc. a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , and the 2016 and September 26 , 2015 , and the related consolidated in the period ended September 24 , 2016 . These financial period ended September 24 , 2016 . These financial statement are of Apple Inc. at September 24 , 2016 and September 26 Inc. at September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 , and the 2016 and September 26 , 2015 , and the consolidated result in the period ended September 24 , 2016 , in conformity period ended September 24 , 2016 , in conformity with U.S. financial reporting a of September 24 , 2016 , based on a of September 24 , 2016 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated October 26 , 2016 expressed an unqualified report dated October 26 , 2016 expressed an unqualified opinion thereon San Jose , California October 26 , 2016 Apple Inc. | , California October 26 , 2016 Apple Inc. | 2016 Form , 2016 Apple Inc. | 2016 Form 10-K | 70 Report Apple Inc. | 2016 Form 10-K | 70 Report of Ernst | 2016 Form 10-K | 70 Report of Ernst & Young financial reporting a of September 24 , 2016 , based on a of September 24 , 2016 , based on criterion established of the Treadway Commission ( 2013 framework ) ( “ the policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of September 24 , 2016 , based on a of September 24 , 2016 , based on the COSO United States ) , the 2016 consolidated financial statement of Apple and our report dated October 26 , 2016 expressed an unqualified report dated October 26 , 2016 expressed an unqualified opinion thereon San Jose , California October 26 , 2016 Apple Inc. | , California October 26 , 2016 Apple Inc. | 2016 Form , 2016 Apple Inc. | 2016 Form 10-K | 71 Item Apple Inc. | 2016 Form 10-K | 71 Item 9 . | 2016 Form 10-K | 71 Item 9 . Changes in Form 10-K | 71 Item 9 . Changes in and Disagreements Financial Disclosure None . Item 9A . Controls and Procedures Evaluation procedure a defined in Rules 13a-15 ( e ) and 15d-15 13a-15 ( e ) and 15d-15 ( e ) under the were effective a of September 24 , 2016 to provide reasonable a of September 24 , 2016 to provide reasonable assurance that ( a defined in Rule 13a-15 ( f ) under the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of September 24 , 2016 to provide reasonable a of September 24 , 2016 to provide reasonable assurance regarding in Part II , Item 8 of this Form 10-K. Changes Item 8 of this Form 10-K. Changes in Internal Control Over during the fourth quarter of 2016 , which were identified in ( d ) of rule 13a-15 and 15d-15 under the Exchange ) of rule 13a-15 and 15d-15 under the Exchange Act , over financial reporting . Item 9B . Other Information Not applicable applicable . Apple Inc. | 2016 Form 10-K | 72 PART Apple Inc. | 2016 Form 10-K | 72 PART III Item | 2016 Form 10-K | 72 PART III Item 10 . | 72 PART III Item 10 . Directors , Executive Officers in the Company ’ s 2017 Proxy Statement to be filed filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2016 in connection with day after September 24 , 2016 in connection with the solicitation for the Company ’ s 2017 annual meeting of shareholder and or by filing a Form 8-K , in each case to SEC or NASDAQ . Item 11 . Executive Compensation The information ” and “ Director Compensation- 2016 ” under the heading “ in the Company ’ s 2017 Proxy Statement to be filed filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2016 and is incorporated day after September 24 , 2016 and is incorporated herein by herein by reference . Item 12 . Security Ownership of Certain in the Company ’ s 2017 Proxy Statement to be filed filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2016 and is incorporated day after September 24 , 2016 and is incorporated herein by herein by reference . Item 13 . Certain Relationships and Related in the Company ’ s 2017 Proxy Statement to be filed filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2016 and is incorporated day after September 24 , 2016 and is incorporated herein by herein by reference . Item 14 . Principal Accounting Fees and in the Company ’ s 2017 Proxy Statement to be filed filed with the SEC within 120 day after September 24 , within 120 day after September 24 , 2016 and is incorporated day after September 24 , 2016 and is incorporated herein by reference . Apple Inc. | 2016 Form 10-K | 73 PART Apple Inc. | 2016 Form 10-K | 73 PART IV Item | 2016 Form 10-K | 73 PART IV Item 15 . | 73 PART IV Item 15 . Exhibits , Financial Statement part of this report ( 1 ) All financial statement Index for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 39 Consolidated Statements 2015 and September 27 , 2014 39 Consolidated Statements of Comprehensive and September 27 , 2014 39 Consolidated Statements of Comprehensive Income for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 40 Consolidated Balance 2015 and September 27 , 2014 40 Consolidated Balance Sheets a and September 27 , 2014 40 Consolidated Balance Sheets a of Balance Sheets a of September 24 , 2016 and September 26 a of September 24 , 2016 and September 26 , 2015 24 , 2016 and September 26 , 2015 41 Consolidated Statements 2016 and September 26 , 2015 41 Consolidated Statements of Shareholders and September 26 , 2015 41 Consolidated Statements of Shareholders ’ for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 42 Consolidated Statements 2015 and September 27 , 2014 42 Consolidated Statements of Cash and September 27 , 2014 42 Consolidated Statements of Cash Flows for the year ended September 24 , 2016 , September 26 year ended September 24 , 2016 , September 26 , 2015 24 , 2016 , September 26 , 2015 and September 27 2016 , September 26 , 2015 and September 27 , 2014 26 , 2015 and September 27 , 2014 43 Notes to 2015 and September 27 , 2014 43 Notes to Consolidated Financial and September 27 , 2014 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 44 Selected Quarterly Financial Information ( Financial Information ( Unaudited ) 69 Reports of Ernst & Young Independent Registered Public Accounting Firm 70 ( 2 ) Financial Statement Public Accounting Firm 70 ( 2 ) Financial Statement Schedules All thereto included in this Form 10-K. ( 3 ) Exhibits required in this Form 10-K. ( 3 ) Exhibits required by Item ) Exhibits required by Item 601 of Regulation S-K The information Section ( a ) ( 3 ) of Item 15 is ( 3 ) of Item 15 is set forth on the Signatures page of this Form 10-K. Apple Inc. | 2016 Form Form 10-K. Apple Inc. | 2016 Form 10-K | 74 SIGNATURES Apple Inc. | 2016 Form 10-K | 74 SIGNATURES Pursuant to | 2016 Form 10-K | 74 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly authorized . Date : October 26 , 2016 Apple Inc. By Date : October 26 , 2016 Apple Inc. By : /s/ this Annual Report on Form 10-K , and to file the the Securities Exchange Act of 1934 , this report ha been Principal Executive Officer ) October 26 , 2016 TIMOTHY D. COOK Officer ) October 26 , 2016 TIMOTHY D. COOK /s/ Luca Principal Financial Officer ) October 26 , 2016 LUCA MAESTRI /s/ Officer ) October 26 , 2016 LUCA MAESTRI /s/ Chris Kondo Principal Accounting Officer ) October 26 , 2016 CHRIS KONDO /s/ Officer ) October 26 , 2016 CHRIS KONDO /s/ James A A . Bell Director October 26 , 2016 JAMES A . Bell Director October 26 , 2016 JAMES A . BELL /s/ /s/ Al Gore Director October 26 , 2016 AL GORE /s/ Gore Director October 26 , 2016 AL GORE /s/ Robert A. Robert A. Iger Director October 26 , 2016 ROBERT A. IGER Iger Director October 26 , 2016 ROBERT A. IGER /s/ Andrea /s/ Andrea Jung Director October 26 , 2016 ANDREA JUNG /s/ Jung Director October 26 , 2016 ANDREA JUNG /s/ Arthur D. Arthur D. Levinson Director October 26 , 2016 ARTHUR D. LEVINSON Levinson Director October 26 , 2016 ARTHUR D. LEVINSON /s/ Ronald Ronald D. Sugar Director October 26 , 2016 RONALD D. SUGAR Sugar Director October 26 , 2016 RONALD D. SUGAR /s/ Susan Susan L. Wagner Director October 26 , 2016 SUSAN L. WAGNER Wagner Director October 26 , 2016 SUSAN L. WAGNER Apple Inc. L. WAGNER Apple Inc. | 2016 Form 10-K | 75 EXHIBIT Apple Inc. | 2016 Form 10-K | 75 EXHIBIT INDEX ( | 2016 Form 10-K | 75 EXHIBIT INDEX ( 1 ) | 75 EXHIBIT INDEX ( 1 ) Incorporated by Reference Exhibit Filing Date/ Period End Date 3.1 Restated Articles of Incorporation of Registrant effective a of June 6 , 2014 . 8-K 3.1 a of June 6 , 2014 . 8-K 3.1 6/6/14 3.2 June 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and 6 , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated , 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws 2014 . 8-K 3.1 6/6/14 3.2 Amended and Restated Bylaws of Registrant effective a of December 21 , 2015 . 8-K 3.2 a of December 21 , 2015 . 8-K 3.2 12/22/15 4.1 December 21 , 2015 . 8-K 3.2 12/22/15 4.1 Form of 21 , 2015 . 8-K 3.2 12/22/15 4.1 Form of Common , 2015 . 8-K 3.2 12/22/15 4.1 Form of Common Stock 2015 . 8-K 3.2 12/22/15 4.1 Form of Common Stock Certificate Certificate of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , of the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated the Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a Registrant . 10-Q 4.1 12/30/06 4.2 Indenture , dated a of , dated a of April 29 , 2013 , between the a of April 29 , 2013 , between the Registrant and , a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s a Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate Trustee . S-3 4.1 4/29/13 4.3 Officer ’ s Certificate of , dated a of May 3 , 2013 , including form a of May 3 , 2013 , including form of global the Floating Rate Notes due 2016 , Floating Rate Notes due , Floating Rate Notes due 2018 , 0.45 % Notes due Rate Notes due 2018 , 0.45 % Notes due 2016 , , 0.45 % Notes due 2016 , 1.00 % Notes due % Notes due 2016 , 1.00 % Notes due 2018 , , 1.00 % Notes due 2018 , 2.40 % Notes due % Notes due 2018 , 2.40 % Notes due 2023 and , 2.40 % Notes due 2023 and 3.85 % Notes due % Notes due 2023 and 3.85 % Notes due 2043 . and 3.85 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 % Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ Notes due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s due 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate 2043 . 8-K 4.1 5/3/13 4.4 Officer ’ s Certificate of , dated a of May 6 , 2014 , including form a of May 6 , 2014 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2019 , 1.05 % Notes due Rate Notes due 2019 , 1.05 % Notes due 2017 , , 1.05 % Notes due 2017 , 2.10 % Notes due % Notes due 2017 , 2.10 % Notes due 2019 , , 2.10 % Notes due 2019 , 2.85 % Notes due % Notes due 2019 , 2.85 % Notes due 2021 , , 2.85 % Notes due 2021 , 3.45 % Notes due % Notes due 2021 , 3.45 % Notes due 2024 and , 3.45 % Notes due 2024 and 4.45 % Notes due % Notes due 2024 and 4.45 % Notes due 2044 . and 4.45 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 % Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ Notes due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s due 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate 2044 . 8-K 4.1 5/6/14 4.5 Officer ’ s Certificate of , dated a of November 10 , 2014 , including form a of November 10 , 2014 , including form of global of global note representing the 1.000 % Notes due 2022 and the 1.000 % Notes due 2022 and 1.625 % Notes due % Notes due 2022 and 1.625 % Notes due 2026 . and 1.625 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 % Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ Notes due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s due 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate 2026 . 8-K 4.1 11/10/14 4.6 Officer ’ s Certificate of , dated a of February 9 , 2015 , including form a of February 9 , 2015 , including form of global the Floating Rate Notes due 2020 , 1.55 % Notes due Rate Notes due 2020 , 1.55 % Notes due 2020 , , 1.55 % Notes due 2020 , 2.15 % Notes due % Notes due 2020 , 2.15 % Notes due 2022 , , 2.15 % Notes due 2022 , 2.50 % Notes due % Notes due 2022 , 2.50 % Notes due 2025 and , 2.50 % Notes due 2025 and 3.45 % Notes due % Notes due 2025 and 3.45 % Notes due 2045 . and 3.45 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 % Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ Notes due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s due 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate 2045 . 8-K 4.1 2/9/15 4.7 Officer ’ s Certificate of , dated a of May 13 , 2015 , including form a of May 13 , 2015 , including form of global the Floating Rate Notes due 2017 , Floating Rate Notes due , Floating Rate Notes due 2020 , 0.900 % Notes due Rate Notes due 2020 , 0.900 % Notes due 2017 , , 0.900 % Notes due 2017 , 2.000 % Notes due % Notes due 2017 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.700 % Notes due % Notes due 2020 , 2.700 % Notes due 2022 , , 2.700 % Notes due 2022 , 3.200 % Notes due % Notes due 2022 , 3.200 % Notes due 2025 , , 3.200 % Notes due 2025 , and 4.375 % Notes Notes due 2025 , and 4.375 % Notes due 2045 . and 4.375 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 % Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ Notes due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s due 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate 2045 . 8-K 4.1 5/13/15 4.8 Officer ’ s Certificate of , dated a of June 10 , 2015 , including form a of June 10 , 2015 , including form of global of global note representing the 0.35 % Notes due 2020 . the 0.35 % Notes due 2020 . 8-K 4.1 6/10/15 4.9 % Notes due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ Notes due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s due 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s Certificate 2020 . 8-K 4.1 6/10/15 4.9 Officer ’ s Certificate of , dated a of July 31 , 2015 , including form a of July 31 , 2015 , including form of global of global note representing the 3.05 % Notes due 2029 and the 3.05 % Notes due 2029 and 3.60 % Notes due % Notes due 2029 and 3.60 % Notes due 2042 . and 3.60 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 % Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ Notes due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s due 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate 2042 . 8-K 4.1 7/31/15 4.10 Officer ’ s Certificate of , dated a of September 17 , 2015 , including form a of September 17 , 2015 , including form of global of global note representing the 1.375 % Notes due 2024 and the 1.375 % Notes due 2024 and 2.000 % Notes due % Notes due 2024 and 2.000 % Notes due 2027 . and 2.000 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 % Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ Notes due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s due 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate 2027 . 8-K 4.1 9/17/15 4.11 Officer ’ s Certificate of , dated a of February 23 , 2016 , including form a of February 23 , 2016 , including form of global the Floating Rate Notes due 2019 , Floating Rate Notes due , Floating Rate Notes due 2021 , 1.300 % Notes due Rate Notes due 2021 , 1.300 % Notes due 2018 , , 1.300 % Notes due 2018 , 1.700 % Notes due % Notes due 2018 , 1.700 % Notes due 2019 , , 1.700 % Notes due 2019 , 2.250 % Notes due % Notes due 2019 , 2.250 % Notes due 2021 , , 2.250 % Notes due 2021 , 2.850 % Notes due % Notes due 2021 , 2.850 % Notes due 2023 , , 2.850 % Notes due 2023 , 3.250 % Notes due % Notes due 2023 , 3.250 % Notes due 2026 , , 3.250 % Notes due 2026 , 4.500 % Notes due % Notes due 2026 , 4.500 % Notes due 2036 and , 4.500 % Notes due 2036 and 4.650 % Notes due % Notes due 2036 and 4.650 % Notes due 2046 . and 4.650 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 % Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No Notes due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . due 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 2046 . 8-K 4.1 2/23/16 4.12 Supplement No . 1 to 2/23/16 4.12 Supplement No . 1 to the Officer 's Certificate , dated a of March 24 , 2016 . 8-K 4.1 a of March 24 , 2016 . 8-K 4.1 3/24/16 4.13 March 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ 24 , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s , 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate 2016 . 8-K 4.1 3/24/16 4.13 Officer ’ s Certificate of , dated a of June 22 , 2016 , including form a of June 22 , 2016 , including form of global form of global note representing 4.150 % Notes due 2046 . representing 4.150 % Notes due 2046 . 10-Q 4.1 6/22/16 4.14 % Notes due 2046 . 10-Q 4.1 6/22/16 4.14 Officer ’ Notes due 2046 . 10-Q 4.1 6/22/16 4.14 Officer ’ s due 2046 . 10-Q 4.1 6/22/16 4.14 Officer ’ s Certificate 2046 . 10-Q 4.1 6/22/16 4.14 Officer ’ s Certificate of , dated a of August 4 , 2016 , including form a of August 4 , 2016 , including form of global the Floating Rate Notes due 2019 , 1.100 % Notes due Rate Notes due 2019 , 1.100 % Notes due 2019 , , 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.450 % Notes due % Notes due 2021 , 2.450 % Notes due 2026 and , 2.450 % Notes due 2026 and 3.850 % Notes due % Notes due 2026 and 3.850 % Notes due 2046 . and 3.850 % Notes due 2046 . 8-K 4.1 8/4/16 10.1 % Notes due 2046 . 8-K 4.1 8/4/16 10.1 * Employee Notes due 2046 . 8-K 4.1 8/4/16 10.1 * Employee Stock due 2046 . 8-K 4.1 8/4/16 10.1 * Employee Stock Purchase 2046 . 8-K 4.1 8/4/16 10.1 * Employee Stock Purchase Plan and restated a of March 10 , 2015 . 8-K 10.1 a of March 10 , 2015 . 8-K 10.1 3/13/15 10.2 March 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form 10 , 2015 . 8-K 10.1 3/13/15 10.2 * Form of , 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification 2015 . 8-K 10.1 3/13/15 10.2 * Form of Indemnification Agreement officer of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 of the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director the Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Registrant . 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan 10-Q 10.2 6/27/09 10.3 * 1997 Director Stock Plan , a , a amended through August 23 , 2012 . 10-Q 10.3 amended through August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 August 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 23 , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee , 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock 2012 . 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan 10-Q 10.3 12/28/13 10.4 * 2003 Employee Stock Plan , a , a amended through February 25 , 2010 . 8-K 10.1 amended through February 25 , 2010 . 8-K 10.1 3/1/10 10.5 February 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form 25 , 2010 . 8-K 10.1 3/1/10 10.5 * Form of , 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted 2010 . 8-K 10.1 3/1/10 10.5 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of November 16 , 2010 . 10-Q 10.10 a of November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 November 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form 16 , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of , 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted 2010 . 10-Q 10.10 12/25/10 10.6 * Form of Restricted Stock Stock Unit Award Agreement under 2003 Employee Stock Plan effective a Plan effective a of April 6 , 2012 . 10-Q 10.8 a of April 6 , 2012 . 10-Q 10.8 3/31/12 Apple April 6 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 6 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 2016 , 2012 . 10-Q 10.8 3/31/12 Apple Inc. | 2016 Form 10.8 3/31/12 Apple Inc. | 2016 Form 10-K | 76 Incorporated Apple Inc. | 2016 Form 10-K | 76 Incorporated by Reference | 2016 Form 10-K | 76 Incorporated by Reference Exhibit Number Filing Date/ Period End Date 10.7 * Summary Description of Amendment , effective a of May 24 , 2012 , to certain a of May 24 , 2012 , to certain Restricted Stock Agreements outstanding a of April 5 , 2012 . 10-Q 10.8 a of April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 April 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 5 , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee , 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock 2012 . 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock Plan 10-Q 10.8 6/30/12 10.8 * 2014 Employee Stock Plan , a and restated a of February 26 , 2016 . 8-K 10.1 a of February 26 , 2016 . 8-K 10.1 3/1/16 10.9 February 26 , 2016 . 8-K 10.1 3/1/16 10.9 * Form 26 , 2016 . 8-K 10.1 3/1/16 10.9 * Form of , 2016 . 8-K 10.1 3/1/16 10.9 * Form of Restricted 2016 . 8-K 10.1 3/1/16 10.9 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan a of Stock Plan a of February 28 , 2014 . 8-K 10.2 a of February 28 , 2014 . 8-K 10.2 3/5/14 10.10 February 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form 28 , 2014 . 8-K 10.2 3/5/14 10.10 * Form of , 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance 2014 . 8-K 10.2 3/5/14 10.10 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of February 28 , 2014 . 8-K 10.3 a of February 28 , 2014 . 8-K 10.3 3/5/14 10.11 February 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form 28 , 2014 . 8-K 10.3 3/5/14 10.11 * Form of , 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted 2014 . 8-K 10.3 3/5/14 10.11 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.1 a of August 26 , 2014 . 10-K 10.1 9/27/14 10.12 August 26 , 2014 . 10-K 10.1 9/27/14 10.12 * Form 26 , 2014 . 10-K 10.1 9/27/14 10.12 * Form of , 2014 . 10-K 10.1 9/27/14 10.12 * Form of Performance 2014 . 10-K 10.1 9/27/14 10.12 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of August 26 , 2014 . 10-K 10.1 a of August 26 , 2014 . 10-K 10.1 9/27/14 10.13 August 26 , 2014 . 10-K 10.1 9/27/14 10.13 * Form 26 , 2014 . 10-K 10.1 9/27/14 10.13 * Form of , 2014 . 10-K 10.1 9/27/14 10.13 * Form of Amendment 2014 . 10-K 10.1 9/27/14 10.13 * Form of Amendment , , effective a of August 26 , 2014 , to Restricted a of August 26 , 2014 , to Restricted Stock Unit Agreements outstanding a of August 26 , 2014 . 10-K 10.1 a of August 26 , 2014 . 10-K 10.1 9/27/14 10.14 August 26 , 2014 . 10-K 10.1 9/27/14 10.14 * Offer 26 , 2014 . 10-K 10.1 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.1 9/27/14 10.14 * Offer Letter , 2014 . 10-K 10.1 9/27/14 10.14 * Offer Letter , dated Offer Letter , dated August 1 , 2013 , from the , dated August 1 , 2013 , from the Registrant to Registrant to Angela Ahrendts . 10-Q 10.1 12/27/14 10.15 * Form to Angela Ahrendts . 10-Q 10.1 12/27/14 10.15 * Form of Angela Ahrendts . 10-Q 10.1 12/27/14 10.15 * Form of Restricted Ahrendts . 10-Q 10.1 12/27/14 10.15 * Form of Restricted Stock Unit Award Agreement under the 1997 Director Stock Plan a of Stock Plan a of November 17 , 2015 . 10-Q 10.15 a of November 17 , 2015 . 10-Q 10.15 12/26/15 10.16 November 17 , 2015 . 10-Q 10.15 12/26/15 10.16 * Form 17 , 2015 . 10-Q 10.15 12/26/15 10.16 * Form of , 2015 . 10-Q 10.15 12/26/15 10.16 * Form of Restricted 2015 . 10-Q 10.15 12/26/15 10.16 * Form of Restricted Stock Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.16 a of October 5 , 2015 . 10-Q 10.16 3/26/16 10.17 October 5 , 2015 . 10-Q 10.16 3/26/16 10.17 * Form 5 , 2015 . 10-Q 10.16 3/26/16 10.17 * Form of , 2015 . 10-Q 10.16 3/26/16 10.17 * Form of Performance 2015 . 10-Q 10.16 3/26/16 10.17 * Form of Performance Award of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 5 , 2015 . 10-Q 10.17 a of October 5 , 2015 . 10-Q 10.17 3/26/16 10.18 October 5 , 2015 . 10-Q 10.17 3/26/16 10.18 * , 5 , 2015 . 10-Q 10.17 3/26/16 10.18 * , * , 2015 . 10-Q 10.17 3/26/16 10.18 * , * * 2015 . 10-Q 10.17 3/26/16 10.18 * , * * Form Stock Unit Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 10.19 * a of October 14 , 2016 . 10.19 * , * October 14 , 2016 . 10.19 * , * * Form of Performance Award Agreement under 2014 Employee Stock Plan effective a Plan effective a of October 14 , 2016 . 12.1 * a of October 14 , 2016 . 12.1 * * Computation October 14 , 2016 . 12.1 * * Computation of Ratio Earnings to Fixed Charges . 21.1 * * Subsidiaries of the Subsidiaries of the Registrant . 23.1 * * Consent of Ernst Registered Public Accounting Firm . 24.1 * * Power of Attorney this Annual Report on Form 10-K ) . 31.1 * * on Form 10-K ) . 31.1 * * Rule 13a-14 ( . 31.1 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Executive Officer . 31.2 * * Rule 13a-14 ( . 31.2 * * Rule 13a-14 ( a ) / 15d-14 13a-14 ( a ) / 15d-14 ( a ) Certification of of Chief Financial Officer . 32.1 * * * Section 1350 32.1 * * * Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer . 101.INS * * XBRL Instance Document * XBRL Instance Document . 101.SCH * * XBRL Taxonomy Extension Taxonomy Extension Schema Document . 101.CAL * * XBRL Taxonomy Extension Extension Calculation Linkbase Document . 101.DEF * * XBRL Taxonomy Extension Extension Definition Linkbase Document . 101.LAB * * XBRL Taxonomy Extension Extension Label Linkbase Document . 101.PRE * * XBRL Taxonomy Extension * Furnished herewith . ( 1 ) Certain instrument defining the are omitted pursuant to Item 601 ( b ) ( 4 601 ( b ) ( 4 ) ( iii ) of instrument . Apple Inc. | 2016 Form 10-K | 77 Apple Inc. | 2016 Form 10-K | 77 | 2016 Form 10-K | 77 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-16-000012/full-submission.txt b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-16-000012/full-submission.txt new file mode 100644 index 0000000..7dd7689 --- /dev/null +++ b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-16-000012/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ( Mark One Washington , D.C. 20549 FORM 10-K ( Mark One ) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2015 OR ¨ TRANSITION year ended December 31 , 2015 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from No . Delaware Alphabet Inc. 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( 650 ) 253-0000 001-37580 View , CA 94043 ( 650 ) 253-0000 001-37580 61-1767919 Delaware CA 94043 ( 650 ) 253-0000 001-37580 61-1767919 Delaware Google Inc. 94043 ( 650 ) 253-0000 001-37580 61-1767919 Delaware Google Inc. 1600 ( 650 ) 253-0000 001-37580 61-1767919 Delaware Google Inc. 1600 Amphitheatre 001-37580 61-1767919 Delaware Google Inc. 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( 650 ) 253-0000 001-36380 View , CA 94043 ( 650 ) 253-0000 001-36380 77-0493581 ___________________________________________ CA 94043 ( 650 ) 253-0000 001-36380 77-0493581 ___________________________________________ Securities registered 94043 ( 650 ) 253-0000 001-36380 77-0493581 ___________________________________________ Securities registered pursuant ( 650 ) 253-0000 001-36380 77-0493581 ___________________________________________ Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the Class A Common Stock $ 0.001 par value Nasdaq Stock Market Class C Capital Stock $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Alphabet Inc . and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K . Alphabet Inc. ¨ Google reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No ý As of June 30 , 2015 , the aggregate As of June 30 , 2015 , the aggregate market value predecessor issuer pursuant to Rule 12g-3 ( a ) under the Global Select Market on June 30 , 2015 ) wa approximately Market on June 30 , 2015 ) wa approximately $ 311.0 2015 ) wa approximately $ 311.0 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of February 1 , Form 10-K. As of February 1 , 2016 , the following As of February 1 , 2016 , the following amount were successor issuer pursuant to Rule 12g-3 ( a ) under the Exchange Act a of October 2 , 2015 ) ( Alphabet a of October 2 , 2015 ) ( Alphabet ) : ) ( Alphabet ) : 292,580,627 share of Alphabet 's Class Class A common stock ; 50,199,837 share of Alphabet ’ s B common stock ; and 345,539,303 share of Alphabet ’ s s Proxy Statement for the 2016 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2015 . Table of year ended December 31 , 2015 . Table of Contents Alphabet This Annual Report on Form 10-K is a combined report being in General Instruction I ( 1 ) ( a ) , ( d ) of Form 10-K and is therefore filing it it information within this Form 10-K with the reduced disclosure format this Annual Report on Form 10-K , we refer to Alphabet Inc. and Google Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2015 TABLE OF CONTENTS Year Ended December 31 , 2015 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 1 PART I Item 1. Business Statements 1 PART I Item 1. Business 2 Item 1A . PART I Item 1. Business 2 Item 1A . Risk Factors Item 1. Business 2 Item 1A . Risk Factors 6 Item Item 1A . Risk Factors 6 Item 1B . Unresolved Staff . Risk Factors 6 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 17 Unresolved Staff Comments 17 Item 2 . Properties 17 Item 3 17 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Mine Safety . Legal Proceedings 18 Item 4 . Mine Safety Disclosures 18 4 . Mine Safety Disclosures 18 PART II Item 5 . Disclosures 18 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management ’ Selected Financial Data 20 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 41 Item 8 . Financial Statements About Market Risk 41 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 43 Item 9 . Changes in and Supplementary Data 43 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 98 Item 9A . Controls and and Financial Disclosure 98 Item 9A . Controls and Procedures 98 9A . Controls and Procedures 98 Item 9B . Other Information Controls and Procedures 98 Item 9B . Other Information 99 PART Item 9B . Other Information 99 PART III Item 10 . Information 99 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 100 Item 11 . Executive Compensation and Corporate Governance 100 Item 11 . Executive Compensation 100 Item Item 11 . Executive Compensation 100 Item 12 . Security Ownership . Executive Compensation 100 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 100 Item 13 . Certain Relationships Related Stockholder Matters 100 Item 13 . Certain Relationships and Related Transactions , and Director Independence 100 Item 14 . Principal Accountant and Director Independence 100 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 100 PART IV Item 15 . Services 100 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 101 i Table of Contents Alphabet This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , Risk Factors `` in Item 1A of this report and those any of these company . 1 Table of Contents Alphabet Inc. Google Inc. PART I ITEM 1. BUSINESS Overview As our founder we announced plan in August 2015 to create a new public while driving measurable result . 2 Table of Contents Alphabet Inc. content . Bringing the Next 5 Billion Online Fast search and invest for the long-term . 3 Table of Contents Alphabet Inc. As we said in the 2004 Founders ' IPO Letter , from our CEO in August 2015 , our Alphabet reorganization wa associated cost , were $ 7.1 billion , $ 9.8 billion $ 7.1 billion , $ 9.8 billion , and $ 12.3 9.8 billion , and $ 12.3 billion in 2013 , 2014 and $ 12.3 billion in 2013 , 2014 and 2015 , 12.3 billion in 2013 , 2014 and 2015 , respectively , in 2013 , 2014 and 2015 , respectively , which included stock-based compensation expense of $ 1.6 billion , $ 2.2 billion $ 1.6 billion , $ 2.2 billion , and $ 2.7 2.2 billion , and $ 2.7 billion , respectively . We in the U.S. and foreign 4 Table of Contents Alphabet Inc. employee . As of December 31 , 2015 , we had As of December 31 , 2015 , we had 61,814 full-time , 2015 , we had 61,814 full-time employee : 23,336 in had 61,814 full-time employee : 23,336 in research and development , in research and development , 19,082 in sale and marketing , in sale and marketing , 10,944 in operation , and 8,452 10,944 in operation , and 8,452 in general and administrative function Areas Please refer to Note 16 of the Notes to Consolidated this Annual Report on Form 10-K. Other Matters As part of Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , and our Proxy Statements 's Public Reference Room at 100 F Street , NE , NE , Washington , D.C. 20549 . You can get information by calling the SEC at 1-800-SEC-0330 . We webcast via our this Annual Report on Form 10-K or in any other report inactive textual reference only . 5 Table of Contents Alphabet Inc. and Google Inc . ITEM 1A . RISK FACTORS Our operation , and operating result . 6 Table of Contents Alphabet Inc. our business . We generated 90 % of total Google segment segment revenue from advertising in 2015 . Many of our advertiser our margin could be impacted 7 Table of Contents Alphabet Inc. associated with specific country . 8 Table of Contents Alphabet Inc. processed within that country . 9 Table of Contents Alphabet Inc. thus diminishing our brand . 10 Table of Contents Alphabet Inc. to gain access to our 11 Table of Contents Alphabet Inc. content to help them improve 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2015 . In certain international market not violate our policy . 13 Table of Contents Alphabet Inc. motivate our existing employee . 14 Table of Contents Alphabet Inc. For example , from January 1 , 2015 through December 31 , from January 1 , 2015 through December 31 , 2015 1 , 2015 through December 31 , 2015 , the closing 2015 through December 31 , 2015 , the closing price of common stock ranged from $ 497.06 per share to $ 793.96 497.06 per share to $ 793.96 per share , and the capital stock ranged from $ 492.55 to $ 776.60 per share from $ 492.55 to $ 776.60 per share . The trading those of our competitor . 15 Table of Contents Alphabet Inc. cash reserve . In October 2015 , our board of director to repurchase up to $ 5,099,019,513.59 of our Class C capital capital stock and in January 2016 , our board of director an additional amount of approximately 514 thousand share . The repurchase Class B common stock ha 10 vote per share , our right . As of December 31 , 2015 , Larry , As of December 31 , 2015 , Larry , Sergey , and Eric beneficially owned approximately 92.5 % of our outstanding Class stock , which represented approximately 58.5 % of the voting power provision include the following : 16 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it it subsidiary . On October 2 , 2015 , we completed . On October 2 , 2015 , we completed a reorganization new holding company . ITEM 1B . UNRESOLVED STAFF COMMENTS There unresolved staff comment at December 31 , 2015 . ITEM 2 comment at December 31 , 2015 . ITEM 2 . PROPERTIES 31 , 2015 . ITEM 2 . PROPERTIES Our headquarters are , where we own approximately 4.8 million square foot of office center in the U.S. , 17 Table of Contents Alphabet Inc. of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 11 “ Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not applicable . PART II ITEM 5 . MARKET FOR REGISTRANT ’ During the fourth quarter of 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the Exchange Act a of October 2 , 2015 . Price Range a of October 2 , 2015 . Price Range of Common “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public Select Market . Fiscal Year 2015 Quarters Ended : High Low Ended : High Low March 31 , 2015 $ 581.44 $ High Low March 31 , 2015 $ 581.44 $ 497.06 June March 31 , 2015 $ 581.44 $ 497.06 June 30 , , 2015 $ 581.44 $ 497.06 June 30 , 2015 573.66 $ 581.44 $ 497.06 June 30 , 2015 573.66 532.74 September $ 497.06 June 30 , 2015 573.66 532.74 September 30 , 497.06 June 30 , 2015 573.66 532.74 September 30 , 2015 June 30 , 2015 573.66 532.74 September 30 , 2015 699.62 , 2015 573.66 532.74 September 30 , 2015 699.62 541.70 December 573.66 532.74 September 30 , 2015 699.62 541.70 December 31 , 532.74 September 30 , 2015 699.62 541.70 December 31 , 2015 September 30 , 2015 699.62 541.70 December 31 , 2015 793.96 , 2015 699.62 541.70 December 31 , 2015 793.96 642.00 Fiscal 699.62 541.70 December 31 , 2015 793.96 642.00 Fiscal Year 2014 541.70 December 31 , 2015 793.96 642.00 Fiscal Year 2014 Quarters December 31 , 2015 793.96 642.00 Fiscal Year 2014 Quarters Ended 2015 793.96 642.00 Fiscal Year 2014 Quarters Ended : High Low Ended : High Low March 31 , 2014 $ 610.70 $ High Low March 31 , 2014 $ 610.70 $ 551.17 June March 31 , 2014 $ 610.70 $ 551.17 June 30 , , 2014 $ 610.70 $ 551.17 June 30 , 2014 585.93 $ 610.70 $ 551.17 June 30 , 2014 585.93 518.00 September $ 551.17 June 30 , 2014 585.93 518.00 September 30 , 551.17 June 30 , 2014 585.93 518.00 September 30 , 2014 June 30 , 2014 585.93 518.00 September 30 , 2014 605.40 , 2014 585.93 518.00 September 30 , 2014 605.40 571.81 December 585.93 518.00 September 30 , 2014 605.40 571.81 December 31 , 518.00 September 30 , 2014 605.40 571.81 December 31 , 2014 September 30 , 2014 605.40 571.81 December 31 , 2014 587.78 , 2014 605.40 571.81 December 31 , 2014 587.78 498.16 Our 605.40 571.81 December 31 , 2014 587.78 498.16 Our Class B 571.81 December 31 , 2014 587.78 498.16 Our Class B common December 31 , 2014 587.78 498.16 Our Class B common stock “ GOOG ” since April 3 , 2014 . Prior to ” since April 3 , 2014 . Prior to that time Select Market . Fiscal Year 2015 Quarters Ended : High Low Ended : High Low March 31 , 2015 $ 575.33 $ High Low March 31 , 2015 $ 575.33 $ 492.55 June March 31 , 2015 $ 575.33 $ 492.55 June 30 , , 2015 $ 575.33 $ 492.55 June 30 , 2015 565.06 $ 575.33 $ 492.55 June 30 , 2015 565.06 520.51 September $ 492.55 June 30 , 2015 565.06 520.51 September 30 , 492.55 June 30 , 2015 565.06 520.51 September 30 , 2015 June 30 , 2015 565.06 520.51 September 30 , 2015 672.93 , 2015 565.06 520.51 September 30 , 2015 672.93 516.83 December 565.06 520.51 September 30 , 2015 672.93 516.83 December 31 , 520.51 September 30 , 2015 672.93 516.83 December 31 , 2015 September 30 , 2015 672.93 516.83 December 31 , 2015 776.60 , 2015 672.93 516.83 December 31 , 2015 776.60 611.29 Fiscal 672.93 516.83 December 31 , 2015 776.60 611.29 Fiscal Year 2014 516.83 December 31 , 2015 776.60 611.29 Fiscal Year 2014 Quarters December 31 , 2015 776.60 611.29 Fiscal Year 2014 Quarters Ended 2015 776.60 611.29 Fiscal Year 2014 Quarters Ended : High Low Ended : High Low March 31 , 2014 $ — $ High Low March 31 , 2014 $ — $ — June $ — $ — June 30 , 2014 578.65 509.96 September $ — June 30 , 2014 578.65 509.96 September 30 , — June 30 , 2014 578.65 509.96 September 30 , 2014 June 30 , 2014 578.65 509.96 September 30 , 2014 596.08 , 2014 578.65 509.96 September 30 , 2014 596.08 562.73 December 578.65 509.96 September 30 , 2014 596.08 562.73 December 31 , 509.96 September 30 , 2014 596.08 562.73 December 31 , 2014 September 30 , 2014 596.08 562.73 December 31 , 2014 577.35 , 2014 596.08 562.73 December 31 , 2014 577.35 495.39 18 596.08 562.73 December 31 , 2014 577.35 495.39 18 Table of 562.73 December 31 , 2014 577.35 495.39 18 Table of Contents December 31 , 2014 577.35 495.39 18 Table of Contents Alphabet 31 , 2014 577.35 495.39 18 Table of Contents Alphabet Inc. of Record As of December 31 , 2015 , there were As of December 31 , 2015 , there were approximately , , there were approximately , 2,279 and 2,173 stockholder of record were approximately , 2,279 and 2,173 stockholder of record of our C capital stock were $ 778.01 and $ 758.88 per share were $ 778.01 and $ 758.88 per share , respectively , holder . As of December 31 , 2015 , there were As of December 31 , 2015 , there were approximately 68 2015 , there were approximately 68 stockholder of record of our during the quarter ended December 31 , 2015 . Period Total quarter ended December 31 , 2015 . Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 0 $ 0.00 million ) October 1 - 31 0 $ 0.00 0 $ ) October 1 - 31 0 $ 0.00 0 $ 5,099 1 - 31 0 $ 0.00 0 $ 5,099 November 1 - 31 0 $ 0.00 0 $ 5,099 November 1 - 0 $ 0.00 0 $ 5,099 November 1 - 30 1,500 0.00 0 $ 5,099 November 1 - 30 1,500 $ 737.72 $ 5,099 November 1 - 30 1,500 $ 737.72 1,500 $ 5,099 November 1 - 30 1,500 $ 737.72 1,500 $ 3,934 1 - 30 1,500 $ 737.72 1,500 $ 3,934 December 1 - 30 1,500 $ 737.72 1,500 $ 3,934 December 1 - 1,500 $ 737.72 1,500 $ 3,934 December 1 - 31 891 737.72 1,500 $ 3,934 December 1 - 31 891 $ 757.04 $ 3,934 December 1 - 31 891 $ 757.04 891 $ 3,934 December 1 - 31 891 $ 757.04 891 $ 3,319 1 - 31 891 $ 757.04 891 $ 3,319 Total 2,391 - 31 891 $ 757.04 891 $ 3,319 Total 2,391 $ 891 $ 757.04 891 $ 3,319 Total 2,391 $ 744.68 2,391 757.04 891 $ 3,319 Total 2,391 $ 744.68 2,391 ( 1 $ 3,319 Total 2,391 $ 744.68 2,391 ( 1 ) In 3,319 Total 2,391 $ 744.68 2,391 ( 1 ) In October 2,391 $ 744.68 2,391 ( 1 ) In October 2015 , ( 1 ) In October 2015 , the board of director to repurchase up to $ 5,099,019,513.59 of it Class C capital in the fourth quarter of 2015 . The repurchase are being including through the use of 10b5-1 plan . The repurchase program date . Refer to Note 13 in Part II , Item in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per of Equity Securities On December 17 , 2015 , we issued Securities On December 17 , 2015 , we issued an aggregate issued an aggregate of approximately 514 thousand share of our Class The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2010 and it relative index on December 31 , 2010 and it relative performance is performance is tracked through December 31 , 2015 . The return tracked through December 31 , 2015 . The return shown are to suggest future performance . 19 Table of Contents Alphabet Inc. Google Inc . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2010 in stock or invested on December 31 , 2010 in stock or index , . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a ” for purpose of Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the under the Securities Act of 1933 , a amended , or in such filing . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are in any future period . 20 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2011 ( 1 ) Year Ended December 31 , 2011 ( 1 ) 2012 ( December 31 , 2011 ( 1 ) 2012 ( 1 ) , 2011 ( 1 ) 2012 ( 1 ) 2013 ( ( 1 ) 2012 ( 1 ) 2013 ( 1 ) ) 2012 ( 1 ) 2013 ( 1 ) 2014 ( ( 1 ) 2013 ( 1 ) 2014 ( 1 ) ) 2013 ( 1 ) 2014 ( 1 ) 2015 ( ( 1 ) 2014 ( 1 ) 2015 ( in million ) 2014 ( 1 ) 2015 ( in million ) Consolidated Income Data : Revenues $ 37,905 $ 46,039 $ 55,519 $ : Revenues $ 37,905 $ 46,039 $ 55,519 $ 66,001 $ $ 37,905 $ 46,039 $ 55,519 $ 66,001 $ 74,989 Income $ 46,039 $ 55,519 $ 66,001 $ 74,989 Income from operation $ 55,519 $ 66,001 $ 74,989 Income from operation 11,742 13,834 $ 74,989 Income from operation 11,742 13,834 15,403 16,496 19,360 Net 74,989 Income from operation 11,742 13,834 15,403 16,496 19,360 Net income Income from operation 11,742 13,834 15,403 16,496 19,360 Net income from from operation 11,742 13,834 15,403 16,496 19,360 Net income from continuing operation 11,742 13,834 15,403 16,496 19,360 Net income from continuing operation Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income from continuing operation 9,706 11,435 13,160 13,620 16,348 Net income ( continuing operation 9,706 11,435 13,160 13,620 16,348 Net income ( loss operation 9,706 11,435 13,160 13,620 16,348 Net income ( loss ) loss ) from discontinued operation 0 ( 816 ) ( 427 from discontinued operation 0 ( 816 ) ( 427 ) 516 0 ( 816 ) ( 427 ) 516 0 Net income 816 ) ( 427 ) 516 0 Net income 9,706 10,619 ) ( 427 ) 516 0 Net income 9,706 10,619 12,733 ) 516 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 516 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 1 0 Net income 9,706 10,619 12,733 14,136 16,348 ( 1 ) Net income 9,706 10,619 12,733 14,136 16,348 ( 1 ) In income 9,706 10,619 12,733 14,136 16,348 ( 1 ) In the 10,619 12,733 14,136 16,348 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K . The basic and diluted for Google pursuant to Rule 12g-3 ( a ) ) : ) : Year Ended December 31 , 2011 ( 1 ) Year Ended December 31 , 2011 ( 1 ) 2012 ( December 31 , 2011 ( 1 ) 2012 ( 1 ) , 2011 ( 1 ) 2012 ( 1 ) 2013 ( ( 1 ) 2012 ( 1 ) 2013 ( 1 ) ) 2012 ( 1 ) 2013 ( 1 ) 2014 ( ( 1 ) 2013 ( 1 ) 2014 ( 1 ) ) 2013 ( 1 ) 2014 ( 1 ) 2015 ( ( 1 ) 2014 ( 1 ) 2015 ( in million ) 2014 ( 1 ) 2015 ( in million , except stock : Continuing operation $ 15.04 $ 17.47 $ 19.77 $ Continuing operation $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ 23.11 Discontinued $ 17.47 $ 19.77 $ 20.15 $ 23.11 Discontinued operation 0.00 $ 19.77 $ 20.15 $ 23.11 Discontinued operation 0.00 ( 1.25 20.15 $ 23.11 Discontinued operation 0.00 ( 1.25 ) ( 0.64 23.11 Discontinued operation 0.00 ( 1.25 ) ( 0.64 ) 0.76 0.00 ( 1.25 ) ( 0.64 ) 0.76 0.00 Basic net 1.25 ) ( 0.64 ) 0.76 0.00 Basic net income per ) ( 0.64 ) 0.76 0.00 Basic net income per share and B common stock $ 15.04 $ 16.22 $ 19.13 $ common stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic $ 16.22 $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 15.04 $ 17.47 $ 19.77 $ Continuing operation $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ $ 15.04 $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued $ 17.47 $ 19.77 $ 20.15 $ 24.63 Discontinued operation 0.00 $ 19.77 $ 20.15 $ 24.63 Discontinued operation 0.00 ( 1.25 20.15 $ 24.63 Discontinued operation 0.00 ( 1.25 ) ( 0.64 24.63 Discontinued operation 0.00 ( 1.25 ) ( 0.64 ) 0.76 0.00 ( 1.25 ) ( 0.64 ) 0.76 0.00 Basic net 1.25 ) ( 0.64 ) 0.76 0.00 Basic net income per ) ( 0.64 ) 0.76 0.00 Basic net income per share Class C capital stock $ 15.04 $ 16.22 $ 19.13 $ capital stock $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ $ 15.04 $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted $ 16.22 $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 22.84 Discontinued operation 0.00 $ 19.42 $ 19.82 $ 22.84 Discontinued operation 0.00 ( 1.23 19.82 $ 22.84 Discontinued operation 0.00 ( 1.23 ) ( 0.63 22.84 Discontinued operation 0.00 ( 1.23 ) ( 0.63 ) 0.75 0.00 ( 1.23 ) ( 0.63 ) 0.75 0.00 Diluted net 1.23 ) ( 0.63 ) 0.75 0.00 Diluted net income per ) ( 0.63 ) 0.75 0.00 Diluted net income per share and B common stock $ 14.83 $ 15.98 $ 18.79 $ common stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted $ 15.98 $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 14.83 $ 17.21 $ 19.42 $ Continuing operation $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ $ 14.83 $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontinued $ 17.21 $ 19.42 $ 19.82 $ 24.34 Discontinued operation 0.00 $ 19.42 $ 19.82 $ 24.34 Discontinued operation 0.00 ( 1.23 19.82 $ 24.34 Discontinued operation 0.00 ( 1.23 ) ( 0.63 24.34 Discontinued operation 0.00 ( 1.23 ) ( 0.63 ) 0.75 0.00 ( 1.23 ) ( 0.63 ) 0.75 0.00 Diluted net 1.23 ) ( 0.63 ) 0.75 0.00 Diluted net income per ) ( 0.63 ) 0.75 0.00 Diluted net income per share Class C capital stock $ 14.83 $ 15.98 $ 18.79 $ capital stock $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ $ 14.83 $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( $ 15.98 $ 18.79 $ 20.57 $ 24.34 ( 1 ) $ 18.79 $ 20.57 $ 24.34 ( 1 ) In the $ 20.57 $ 24.34 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K 21 Table of Contents Alphabet Annual Report on Form 10-K 21 Table of Contents Alphabet Inc. presented : As of December 31 , 2011 ( 1 ) As of December 31 , 2011 ( 1 ) ( 2 December 31 , 2011 ( 1 ) ( 2 ) 2012 2011 ( 1 ) ( 2 ) 2012 ( 1 ) 1 ) ( 2 ) 2012 ( 1 ) ( 2 ( 2 ) 2012 ( 1 ) ( 2 ) 2013 2012 ( 1 ) ( 2 ) 2013 ( 1 ) 1 ) ( 2 ) 2013 ( 1 ) ( 2 ( 2 ) 2013 ( 1 ) ( 2 ) 2014 2013 ( 1 ) ( 2 ) 2014 ( 1 ) 1 ) ( 2 ) 2014 ( 1 ) ( 2 ( 2 ) 2014 ( 1 ) ( 2 ) 2015 2014 ( 1 ) ( 2 ) 2015 ( in million 1 ) ( 2 ) 2015 ( in million ) Consolidated , and marketable security $ 44,626 $ 48,088 $ 58,717 $ marketable security $ 44,626 $ 48,088 $ 58,717 $ 64,395 $ $ 44,626 $ 48,088 $ 58,717 $ 64,395 $ 73,066 Total $ 48,088 $ 58,717 $ 64,395 $ 73,066 Total asset 72,359 $ 58,717 $ 64,395 $ 73,066 Total asset 72,359 92,711 109,050 64,395 $ 73,066 Total asset 72,359 92,711 109,050 129,187 147,461 Total $ 73,066 Total asset 72,359 92,711 109,050 129,187 147,461 Total long-term 73,066 Total asset 72,359 92,711 109,050 129,187 147,461 Total long-term liability Total asset 72,359 92,711 109,050 129,187 147,461 Total long-term liability 5,294 asset 72,359 92,711 109,050 129,187 147,461 Total long-term liability 5,294 6,662 129,187 147,461 Total long-term liability 5,294 6,662 6,165 8,548 7,820 Total 147,461 Total long-term liability 5,294 6,662 6,165 8,548 7,820 Total stockholder Total long-term liability 5,294 6,662 6,165 8,548 7,820 Total stockholder ’ long-term liability 5,294 6,662 6,165 8,548 7,820 Total stockholder ’ equity liability 5,294 6,662 6,165 8,548 7,820 Total stockholder ’ equity 58,118 7,820 Total stockholder ’ equity 58,118 71,570 86,977 103,860 120,331 ( Total stockholder ’ equity 58,118 71,570 86,977 103,860 120,331 ( 1 stockholder ’ equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) ’ equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) In equity 58,118 71,570 86,977 103,860 120,331 ( 1 ) In the 71,570 86,977 103,860 120,331 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. ( 2 ) Includes reclassification Report on Form 10-K. ( 2 ) Includes reclassification of deferred and liability related to ASU 2015-17 “ Income Taxes ( Topic “ Income Taxes ( Topic 740 ) : Balance Sheet Classification ” Please refer to Note 1 of the Notes to Consolidated this Annual Report on Form 10-K . ITEM 7 . MANAGEMENT on Form 10-K . ITEM 7 . MANAGEMENT ’ S DISCUSSION related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business The rate impact such revenue . 22 Table of Contents Alphabet Inc. employee . As of December 31 , 2015 , we had As of December 31 , 2015 , we had 61,814 full-time , 2015 , we had 61,814 full-time employee : 23,336 in had 61,814 full-time employee : 23,336 in research and development , in research and development , 19,082 in sale and marketing , in sale and marketing , 10,944 in operation , and 8,452 10,944 in operation , and 8,452 in general and administrative , administrative , an increase of 8,214 total headcount from December 31 8,214 total headcount from December 31 , 2014 . Executive Overview headcount from December 31 , 2014 . Executive Overview of Results the fiscal year ended December 31 , 2015 ( consolidated unless year ended December 31 , 2015 ( consolidated unless otherwise noted : • Revenues of $ 75.0 billion and revenue growth of billion and revenue growth of 14 % year over year , constant currency revenue growth of 20 % year over year . Google segment revenue of $ 74.5 billion with revenue growth of billion with revenue growth of 14 % and Other Bets revenue Other Bets revenue of $ 0.4 billion . • Revenues from Rest of World were $ 34.8 billion , $ 7.1 billion $ 34.8 billion , $ 7.1 billion , and $ 33.1 7.1 billion , and $ 33.1 billion , respectively . • Cost of revenue wa $ 28.2 billion , consisting of traffic traffic acquisition cost of $ 14.4 billion and other cost of cost of revenue of $ 13.8 billion . Our traffic acquisition percentage of advertising revenue wa 21 % . • Operating expense of revenue ) were $ 27.5 billion . • Income from Income from operation wa $ 19.4 billion . • Effective tax • Effective tax rate of 17 % . • Net income • Net income wa $ 16.3 billion with diluted net income B common stock of $ 22.84 and for Class C capital C capital stock of $ 24.34 . • Operating cash flow Operating cash flow wa $ 26.0 billion . • Capital expenditure • Capital expenditure were $ 9.9 billion . 23 Table of were $ 9.9 billion . 23 Table of Contents Alphabet Inc. Google Inc. • Headcount wa 61,814 a of December 31 , wa 61,814 a of December 31 , 2015 . Information about a of December 31 , 2015 . Information about Segments In in the fourth quarter of 2015 , we implemented legal and . Please refer to Note 16 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Consolidated presented : Year Ended December 31 , 2013 ( 1 ) Year Ended December 31 , 2013 ( 1 ) ( 2 December 31 , 2013 ( 1 ) ( 2 ) 2014 2013 ( 1 ) ( 2 ) 2014 ( 1 ) 1 ) ( 2 ) 2014 ( 1 ) ( 2 ( 2 ) 2014 ( 1 ) ( 2 ) 2015 2014 ( 1 ) ( 2 ) 2015 Consolidated Statements of 1 ) ( 2 ) 2015 Consolidated Statements of Income Data of Income Data : Revenues 100.0 % 100.0 % 100.0 % Data : Revenues 100.0 % 100.0 % 100.0 % Costs and Revenues 100.0 % 100.0 % 100.0 % Costs and expense : expense : Cost of revenue 39.6 38.9 37.6 Research and development : Cost of revenue 39.6 38.9 37.6 Research and development 12.9 Cost of revenue 39.6 38.9 37.6 Research and development 12.9 14.9 38.9 37.6 Research and development 12.9 14.9 16.3 Sales and marketing 37.6 Research and development 12.9 14.9 16.3 Sales and marketing 11.8 Research and development 12.9 14.9 16.3 Sales and marketing 11.8 12.3 14.9 16.3 Sales and marketing 11.8 12.3 12.1 General and administrative 16.3 Sales and marketing 11.8 12.3 12.1 General and administrative 8.0 Sales and marketing 11.8 12.3 12.1 General and administrative 8.0 8.9 12.3 12.1 General and administrative 8.0 8.9 8.2 Total cost and 12.1 General and administrative 8.0 8.9 8.2 Total cost and expense General and administrative 8.0 8.9 8.2 Total cost and expense 72.3 8.2 Total cost and expense 72.3 % 75.0 % 74.2 % cost and expense 72.3 % 75.0 % 74.2 % Income from expense 72.3 % 75.0 % 74.2 % Income from operation 27.7 74.2 % Income from operation 27.7 25.0 25.8 Other income ( % Income from operation 27.7 25.0 25.8 Other income ( expense Income from operation 27.7 25.0 25.8 Other income ( expense ) ( expense ) , net 0.9 1.1 0.4 Income from continuing expense ) , net 0.9 1.1 0.4 Income from continuing operation ) , net 0.9 1.1 0.4 Income from continuing operation before continuing operation before income tax 28.6 26.1 26.2 Provision for income operation before income tax 28.6 26.1 26.2 Provision for income tax before income tax 28.6 26.1 26.2 Provision for income tax 4.9 26.2 Provision for income tax 4.9 5.5 4.4 Net income from Provision for income tax 4.9 5.5 4.4 Net income from continuing for income tax 4.9 5.5 4.4 Net income from continuing operation Net income from continuing operation 23.7 20.6 21.8 Net income ( income from continuing operation 23.7 20.6 21.8 Net income ( loss from continuing operation 23.7 20.6 21.8 Net income ( loss ) ) from discontinued operation ( 0.8 ) 0.8 0.0 Net income discontinued operation ( 0.8 ) 0.8 0.0 Net income 22.9 % operation ( 0.8 ) 0.8 0.0 Net income 22.9 % 21.4 ) 0.8 0.0 Net income 22.9 % 21.4 % 21.8 % 0.0 Net income 22.9 % 21.4 % 21.8 % ( 1 income 22.9 % 21.4 % 21.8 % ( 1 ) Financial 21.4 % 21.8 % ( 1 ) Financial result of Motorola for the year ended December 31 , 2013 . Financial result year ended December 31 , 2013 . Financial result of Motorola for the year ended December 31 , 2013 and 2014 . year ended December 31 , 2013 and 2014 . ( 2 December 31 , 2013 and 2014 . ( 2 ) In 2013 and 2014 . ( 2 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. 24 Table of Contents Alphabet Annual Report on Form 10-K. 24 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google segment Google Ended December 31 , 2013 2014 2015 Google segment Google website December 31 , 2013 2014 2015 Google segment Google website $ Google segment Google website $ 37,422 $ 45,085 $ 52,357 Google Google website $ 37,422 $ 45,085 $ 52,357 Google Network Members $ 37,422 $ 45,085 $ 52,357 Google Network Members ' website Network Members ' website ( 1 ) 13,650 14,539 15,033 Google ' website ( 1 ) 13,650 14,539 15,033 Google advertising revenue website ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 59,624 14,539 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue ( Google advertising revenue 51,072 59,624 67,390 Google other revenue ( 1 67,390 Google other revenue ( 1 ) 4,435 6,050 7,151 Google other revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( 1 ) $ 55,519 $ 66,001 $ 74,989 ( 1 ) Prior period $ 66,001 $ 74,989 ( 1 ) Prior period amount have presented : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google segment revenue Ended December 31 , 2013 2014 2015 Google segment revenue $ December 31 , 2013 2014 2015 Google segment revenue $ 55,507 2015 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Google segment revenue a a a percentage of consolidated revenue 100.0 % 99.5 % 99.4 % of consolidated revenue 100.0 % 99.5 % 99.4 % Aggregate paid revenue 100.0 % 99.5 % 99.4 % Aggregate paid click change % Aggregate paid click change 20 % 22 % Aggregate cost-per-click paid click change 20 % 22 % Aggregate cost-per-click change ( % Aggregate cost-per-click change ( 5 ) % ( 11 ) ( 5 ) % ( 11 ) % Use of Monetization various factor , including : 25 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google website $ Ended December 31 , 2013 2014 2015 Google website $ 37,422 December 31 , 2013 2014 2015 Google website $ 37,422 $ 2014 2015 Google website $ 37,422 $ 45,085 $ 52,357 Google Google website $ 37,422 $ 45,085 $ 52,357 Google website a $ 37,422 $ 45,085 $ 52,357 Google website a a percentage percentage of Google segment revenue 67.4 % 68.6 % 70.2 % Google segment revenue 67.4 % 68.6 % 70.2 % Paid click revenue 67.4 % 68.6 % 70.2 % Paid click change 29 70.2 % Paid click change 29 % 33 % Cost-per-click change Paid click change 29 % 33 % Cost-per-click change ( 7 33 % Cost-per-click change ( 7 ) % ( 15 ) ( 7 ) % ( 15 ) % Google website revenue Google website revenue increased $ 7,272 million from 2014 to 2015 increased $ 7,272 million from 2014 to 2015 and also increased 7,272 million from 2014 to 2015 and also increased a a our advertising program increased from 2014 to 2015 due to an program increased from 2014 to 2015 due to an increase in Google website revenue increased $ 7,663 million from 2013 to 2014 increased $ 7,663 million from 2013 to 2014 and also increased 7,663 million from 2013 to 2014 and also increased a a to certain foreign currency . 26 Table of Contents Alphabet Inc. through our advertising program from 2013 to 2014 wa due to advertising program from 2013 to 2014 wa due to certain monetization ) : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google Network Members Ended December 31 , 2013 2014 2015 Google Network Members ' December 31 , 2013 2014 2015 Google Network Members ' website Network Members ' website ( 1 ) $ 13,650 $ 14,539 website ( 1 ) $ 13,650 $ 14,539 $ 15,033 Google 1 ) $ 13,650 $ 14,539 $ 15,033 Google Network Members $ 13,650 $ 14,539 $ 15,033 Google Network Members ' website of Google segment revenue ( 1 ) 24.6 % 22.1 % segment revenue ( 1 ) 24.6 % 22.1 % 20.2 % ( 1 ) 24.6 % 22.1 % 20.2 % Paid click ) 24.6 % 22.1 % 20.2 % Paid click change 2 20.2 % Paid click change 2 % ( 7 ) % click change 2 % ( 7 ) % Cost-per-click change ( ) % Cost-per-click change ( 6 ) % ( 3 ) ( 6 ) % ( 3 ) % ( 1 ) ( 3 ) % ( 1 ) Prior period amount have ' website revenue increased $ 494 million from 2014 to 2015 increased $ 494 million from 2014 to 2015 . The increase 494 million from 2014 to 2015 . The increase wa primarily paid by our advertiser from 2014 to 2015 were primarily driven our advertiser from 2014 to 2015 were primarily driven by ongoing ' website revenue increased $ 889 million from 2013 to 2014 increased $ 889 million from 2013 to 2014 . The increase 889 million from 2013 to 2014 . The increase wa mainly increase in paid click from 2013 to 2014 wa due to paid click from 2013 to 2014 wa due to certain monetization in the average cost-per-click from 2013 to 2014 wa due to average cost-per-click from 2013 to 2014 wa due to various factor to certain foreign currency . 27 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google other revenue Ended December 31 , 2013 2014 2015 Google other revenue ( December 31 , 2013 2014 2015 Google other revenue ( 1 2015 Google other revenue ( 1 ) $ 4,435 $ 6,050 revenue ( 1 ) $ 4,435 $ 6,050 $ 7,151 Google 1 ) $ 4,435 $ 6,050 $ 7,151 Google other revenue $ 4,435 $ 6,050 $ 7,151 Google other revenue a a of Google segment revenue ( 1 ) 8.0 % 9.3 % segment revenue ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) 8.0 % 9.3 % 9.6 % ( 1 ) Prior 9.3 % 9.6 % ( 1 ) Prior period amount have Google other revenue increased $ 1,101 million from 2014 to 2015 increased $ 1,101 million from 2014 to 2015 and increased a 1,101 million from 2014 to 2015 and increased a a percentage Google other revenue increased $ 1,615 million from 2013 to 2014 increased $ 1,615 million from 2013 to 2014 and increased a 1,615 million from 2013 to 2014 and increased a a percentage presented : Year Ended December 31 , 2013 2014 2015 Other Year Ended December 31 , 2013 2014 2015 Other Bets revenue Ended December 31 , 2013 2014 2015 Other Bets revenue $ December 31 , 2013 2014 2015 Other Bets revenue $ 12 2015 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue $ 12 $ 327 $ 448 Other Bets revenue a a a percentage of consolidated revenue 0.0 % 0.5 % 0.6 % of consolidated revenue 0.0 % 0.5 % 0.6 % Other Bets revenue 0.0 % 0.5 % 0.6 % Other Bets revenue consist Other Bets revenue increased $ 121 million from 2014 to 2015 increased $ 121 million from 2014 to 2015 and remained relatively 121 million from 2014 to 2015 and remained relatively flat a Nest wa acquired in February 2014 , the increase in our partial year of revenue in 2014 a compared to a full to a full year in 2015 . Our Other Bets revenue Other Bets revenue increased $ 315 million from 2013 to 2014 increased $ 315 million from 2013 to 2014 and increased a 315 million from 2013 to 2014 and increased a a percentage the acquisition of Nest in 2014 a well a an increase increase of licensing revenue . 28 Table of Contents Alphabet Inc. customer : Year Ended December 31 , 2013 2014 2015 United Year Ended December 31 , 2013 2014 2015 United States 46 Ended December 31 , 2013 2014 2015 United States 46 % December 31 , 2013 2014 2015 United States 46 % 45 2013 2014 2015 United States 46 % 45 % 46 % 2015 United States 46 % 45 % 46 % United Kingdom States 46 % 45 % 46 % United Kingdom 10 % % 46 % United Kingdom 10 % 10 % 10 % % United Kingdom 10 % 10 % 10 % Rest of Kingdom 10 % 10 % 10 % Rest of the world % Rest of the world 44 % 45 % 44 % of the world 44 % 45 % 44 % For the world 44 % 45 % 44 % For the amount of , please refer to Note 16 of the Notes to Consolidated this Annual Report on Form 10-K. Use of Constant Currency and ) : Year Ended December 31 , 2013 2014 2015 United Year Ended December 31 , 2013 2014 2015 United Kingdom revenue Ended December 31 , 2013 2014 2015 United Kingdom revenue $ December 31 , 2013 2014 2015 United Kingdom revenue $ 5,600 2015 United Kingdom revenue $ 5,600 $ 6,483 $ 7,067 Exclude Kingdom revenue $ 5,600 $ 6,483 $ 7,067 Exclude : Foreign $ 5,600 $ 6,483 $ 7,067 Exclude : Foreign exchange impact revenue using prior period rate 67 ( 304 ) 538 Exclude prior period rate 67 ( 304 ) 538 Exclude : Hedging rate 67 ( 304 ) 538 Exclude : Hedging gain recognized : Hedging gain recognized ( 63 ) ( 3 ) ( recognized ( 63 ) ( 3 ) ( 133 ) Constant ) ( 3 ) ( 133 ) Constant currency United Kingdom currency United Kingdom revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue $ 5,604 $ 6,176 $ 7,472 United Kingdom revenue growth rate United Kingdom revenue growth rate 16 % 9 % United Kingdom revenue growth rate 16 % 9 % United Kingdom constant currency constant currency revenue growth rate 12 % 15 % In 2015 revenue growth rate 12 % 15 % In 2015 , our 12 % 15 % In 2015 , our revenue from the the British pound . In 2014 , our revenue from the to the British pound . 29 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Rest Year Ended December 31 , 2013 2014 2015 Rest of the Ended December 31 , 2013 2014 2015 Rest of the world December 31 , 2013 2014 2015 Rest of the world revenue of the world revenue ( 1 ) $ 24,332 $ 30,036 revenue ( 1 ) $ 24,332 $ 30,036 $ 33,112 Exclude 1 ) $ 24,332 $ 30,036 $ 33,112 Exclude : Foreign $ 24,332 $ 30,036 $ 33,112 Exclude : Foreign exchange impact revenue using prior period rate 535 857 5,052 Exclude : Hedging using prior period rate 535 857 5,052 Exclude : Hedging gain prior period rate 535 857 5,052 Exclude : Hedging gain recognized : Hedging gain recognized ( 32 ) ( 169 ) ( recognized ( 32 ) ( 169 ) ( 1,267 ) Constant ) ( 169 ) ( 1,267 ) Constant currency Rest of of the world revenue $ 24,835 $ 30,724 $ 36,897 Rest world revenue $ 24,835 $ 30,724 $ 36,897 Rest of the $ 24,835 $ 30,724 $ 36,897 Rest of the world revenue the world revenue growth rate 23 % 10 % Rest of revenue growth rate 23 % 10 % Rest of the world constant currency revenue growth rate 26 % 24 % United States revenue growth rate 26 % 24 % United States revenue ( % United States revenue ( 1 ) $ 25,587 $ 29,482 revenue ( 1 ) $ 25,587 $ 29,482 $ 34,810 United 1 ) $ 25,587 $ 29,482 $ 34,810 United States revenue $ 25,587 $ 29,482 $ 34,810 United States revenue growth rate United States revenue growth rate 15 % 18 % Total consolidated revenue growth rate 15 % 18 % Total consolidated revenue $ % Total consolidated revenue $ 55,519 $ 66,001 $ 74,989 Constant consolidated revenue $ 55,519 $ 66,001 $ 74,989 Constant currency total $ 55,519 $ 66,001 $ 74,989 Constant currency total consolidated revenue currency total consolidated revenue $ 56,026 $ 66,382 $ 79,179 Total consolidated revenue $ 56,026 $ 66,382 $ 79,179 Total consolidated revenue $ 56,026 $ 66,382 $ 79,179 Total consolidated revenue growth rate Total consolidated revenue growth rate 19 % 14 % Constant currency revenue growth rate 19 % 14 % Constant currency total consolidated total consolidated revenue growth rate 20 % 20 % ( 1 revenue growth rate 20 % 20 % ( 1 ) In 20 % 20 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated Annual report t on Form 10-K for further information . In for further information . In 2015 , our revenue from the and Japanese yen . In 2014 , our revenue from the ( in million ) : 30 Table of Contents Alphabet Inc. Google Inc. Year Ended December 31 , 2013 2014 2015 Traffic Year Ended December 31 , 2013 2014 2015 Traffic acquisition cost Ended December 31 , 2013 2014 2015 Traffic acquisition cost $ December 31 , 2013 2014 2015 Traffic acquisition cost $ 12,258 2015 Traffic acquisition cost $ 12,258 $ 13,497 $ 14,343 Other acquisition cost $ 12,258 $ 13,497 $ 14,343 Other cost of $ 12,258 $ 13,497 $ 14,343 Other cost of revenue 9,735 14,343 Other cost of revenue 9,735 12,194 13,821 Total cost of Other cost of revenue 9,735 12,194 13,821 Total cost of revenue cost of revenue 9,735 12,194 13,821 Total cost of revenue $ Total cost of revenue $ 21,993 $ 25,691 $ 28,164 Total of revenue $ 21,993 $ 25,691 $ 28,164 Total cost of $ 21,993 $ 25,691 $ 28,164 Total cost of revenue a a a percentage of revenue 39.6 % 38.9 % 37.6 % percentage of revenue 39.6 % 38.9 % 37.6 % Year Ended revenue 39.6 % 38.9 % 37.6 % Year Ended December 31 37.6 % Year Ended December 31 , 2013 2014 2015 Traffic Year Ended December 31 , 2013 2014 2015 Traffic acquisition cost Ended December 31 , 2013 2014 2015 Traffic acquisition cost to December 31 , 2013 2014 2015 Traffic acquisition cost to Google to Google Network Members $ 9,293 $ 9,864 $ 10,242 Traffic Network Members $ 9,293 $ 9,864 $ 10,242 Traffic acquisition cost $ 9,293 $ 9,864 $ 10,242 Traffic acquisition cost to distribution acquisition cost to distribution partner 2,965 3,633 4,101 Traffic acquisition cost cost to distribution partner 2,965 3,633 4,101 Traffic acquisition cost $ to distribution partner 2,965 3,633 4,101 Traffic acquisition cost $ 12,258 4,101 Traffic acquisition cost $ 12,258 $ 13,497 $ 14,343 Traffic acquisition cost $ 12,258 $ 13,497 $ 14,343 Traffic acquisition cost $ 12,258 $ 13,497 $ 14,343 Traffic acquisition cost a a a percentage of advertising revenue 24.0 % 22.6 % 21.3 % of advertising revenue 24.0 % 22.6 % 21.3 % The cost revenue 24.0 % 22.6 % 21.3 % The cost of revenue Cost of revenue increased $ 2,473 million from 2014 to 2015 increased $ 2,473 million from 2014 to 2015 . The increase 2,473 million from 2014 to 2015 . The increase wa primarily traffic acquisition cost of $ 846 million , resulting from more an impairment charge of $ 378 million recognized in 2014 related $ 378 million recognized in 2014 related to a patent licensing that did not recur in 2015 . The decrease in aggregate Cost of revenue increased $ 3,698 million from 2013 to 2014 increased $ 3,698 million from 2013 to 2014 . The increase 3,698 million from 2013 to 2014 . The increase wa partially traffic acquisition cost of $ 1,239 million resulting from more distribution percentage of total revenue in 2016 and future period , based the related revenue generated . 31 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Research Year Ended December 31 , 2013 2014 2015 Research and development Ended December 31 , 2013 2014 2015 Research and development expense December 31 , 2013 2014 2015 Research and development expense $ Research and development expense $ 7,137 $ 9,832 $ 12,282 Research development expense $ 7,137 $ 9,832 $ 12,282 Research and development $ 7,137 $ 9,832 $ 12,282 Research and development expense a a a percentage of revenue 12.9 % 14.9 % 16.3 % percentage of revenue 12.9 % 14.9 % 16.3 % R & revenue 12.9 % 14.9 % 16.3 % R & D expense & D expense increased $ 2,450 million and increased a a a percentage of revenue from 2014 to 2015 . These increase of revenue from 2014 to 2015 . These increase s were and facilities-related cost of $ 1,502 million and an increase in stock-based compensation expense of $ 487 million , both largely a a a result of a 16 % increase in R & equipment-related expense of approximately $ 248 million and an increase in in professional service of $ 174 million due to additional expense & D expense increased $ 2,695 million and increased a a a percentage of revenue from 2013 to 2014 . These increase of revenue from 2013 to 2014 . These increase were primarily and facilities-related cost of $ 1,289 million and an increase in stock-based compensation expense of $ 559 million , both largely a a a result of a 27 % increase in R & and equipment-related expense of $ 425 million and an increase in in professional service of $ 371 million due to additional expense a percentage of revenue in 2016 and future period . Sales ) : Year Ended December 31 , 2013 2014 2015 Sales Year Ended December 31 , 2013 2014 2015 Sales and marketing Ended December 31 , 2013 2014 2015 Sales and marketing expense December 31 , 2013 2014 2015 Sales and marketing expense $ Sales and marketing expense $ 6,554 $ 8,131 $ 9,047 Sales marketing expense $ 6,554 $ 8,131 $ 9,047 Sales and marketing $ 6,554 $ 8,131 $ 9,047 Sales and marketing expense a a a percentage of revenue 11.8 % 12.3 % 12.1 % percentage of revenue 11.8 % 12.3 % 12.1 % Sales and revenue 11.8 % 12.3 % 12.1 % Sales and marketing expense and marketing expense increased $ 916 million and remained relatively flat a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar and facilities-related cost of $ 329 million and an increase in stock-based compensation expense of $ 184 million , largely resulting from , largely resulting from a 12 % increase in sale and and promotional expense of $ 184 million and an increase in professional service fee of $ 158 million due to additional expense and marketing expense increased $ 1,577 million from 2013 to 2014 increased $ 1,577 million from 2013 to 2014 and increased a 1,577 million from 2013 to 2014 and increased a a percentage a percentage of revenue from 2013 to 2014 . These increase of revenue from 2013 to 2014 . These increase were primarily and promotional expense of $ 614 million . In addition , and facilities-related cost of $ 571 million and an increase in stock-based compensation expense of $ 163 million , both largely resulting both largely resulting from a 15 % increase in sale and sale and marketing headcount . 32 Table of Contents Alphabet Inc. a percentage of revenue in 2016 and future period . General ) : Year Ended December 31 , 2013 2014 2015 General Year Ended December 31 , 2013 2014 2015 General and administrative Ended December 31 , 2013 2014 2015 General and administrative expense December 31 , 2013 2014 2015 General and administrative expense $ General and administrative expense $ 4,432 $ 5,851 $ 6,136 General administrative expense $ 4,432 $ 5,851 $ 6,136 General and administrative $ 4,432 $ 5,851 $ 6,136 General and administrative expense a a a percentage of revenue 8.0 % 8.9 % 8.2 % percentage of revenue 8.0 % 8.9 % 8.2 % General and revenue 8.0 % 8.9 % 8.2 % General and administrative expense and administrative expense increased $ 285 million and decreased a a a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar stock-based compensation expense of $ 136 million and an increase in and facilities-related cost of $ 69 million , both largely resulting both largely resulting from a 15 % increase in general and and equipment-related expense of $ 121 million and an increase of and an increase of $ 80 million of miscellaneous general and fee and expense of $ 128 million , primarily due to and administrative expense increased $ 1,419 million and increased a a a percentage of revenue from 2013 to 2014 . The increase of revenue from 2013 to 2014 . The increase s were and facilities-related cost of $ 576 million and an increase in stock-based compensation expense of $ 260 million , both largely resulting both largely resulting from a 24 % increase in general and service related expense of $ 314 million due to higher legal a percentage of revenue in 2016 and future period . Stock-Based ) : Year Ended December 31 , 2013 2014 2015 Stock-based Year Ended December 31 , 2013 2014 2015 Stock-based compensation $ Ended December 31 , 2013 2014 2015 Stock-based compensation $ 3,127 December 31 , 2013 2014 2015 Stock-based compensation $ 3,127 $ 2014 2015 Stock-based compensation $ 3,127 $ 4,175 $ 5,203 Stock-based Stock-based compensation $ 3,127 $ 4,175 $ 5,203 Stock-based compensation a $ 3,127 $ 4,175 $ 5,203 Stock-based compensation a a percentage a a percentage of revenue 5.6 % 6.3 % 6.9 % percentage of revenue 5.6 % 6.3 % 6.9 % Stock-based compensation revenue 5.6 % 6.3 % 6.9 % Stock-based compensation related to equity settled award increased $ 1,028 million from 2014 to 2015 increased $ 1,028 million from 2014 to 2015 and $ 1,048 1,028 million from 2014 to 2015 and $ 1,048 million from 2014 to 2015 and $ 1,048 million from 2013 to 2014 and $ 1,048 million from 2013 to 2014 , and increased 1,048 million from 2013 to 2014 , and increased a a settled in cash of $ 0 million , $ 0 million $ 0 million , $ 0 million , and $ 50 0 million , and $ 50 million in the year ended in the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , respectively 2013 , 2014 , and 2015 , respectively . We estimate expense to be approximately $ 5.3 billion in 2016 and $ approximately $ 5.3 billion in 2016 and $ 5.8 billion thereafter billion in 2016 and $ 5.8 billion thereafter related to stock award outstanding a of December 31 , 2015 . This estimate a of December 31 , 2015 . This estimate doe not stock-based award granted after December 31 , 2015 . If forfeiture granted after December 31 , 2015 . If forfeiture rate are different from our expectation . 33 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Other Year Ended December 31 , 2013 2014 2015 Other income ( Ended December 31 , 2013 2014 2015 Other income ( expense December 31 , 2013 2014 2015 Other income ( expense ) expense ) , net $ 496 $ 763 $ 291 Other , net $ 496 $ 763 $ 291 Other income ( $ 496 $ 763 $ 291 Other income ( expense ) a a percentage of revenue 0.9 % 1.1 % 0.4 % percentage of revenue 0.9 % 1.1 % 0.4 % Other income revenue 0.9 % 1.1 % 0.4 % Other income ( expense , net , decreased $ 472 million from 2014 to 2015 decreased $ 472 million from 2014 to 2015 . This decrease 472 million from 2014 to 2015 . This decrease wa primarily non-marketable investment a compared to 2014 . These decrease were partially , net , increased $ 267 million from 2013 to 2014 increased $ 267 million from 2013 to 2014 . This increase 267 million from 2013 to 2014 . This increase wa primarily non-marketable equity investment of $ 159 million and previously-held equity interest previously-held equity interest of $ 126 million , a well a than Motorola Home ) in 2013 . These increase were partially currency exchange loss of $ 23 million and a decrease in in interest income of $ 20 million . The cost of management program may increase in 2016 and future period . Consolidated ) : Year Ended December 31 , 2013 ( 1 ) Year Ended December 31 , 2013 ( 1 ) 2014 ( December 31 , 2013 ( 1 ) 2014 ( 1 ) , 2013 ( 1 ) 2014 ( 1 ) 2015 Provision ( 1 ) 2014 ( 1 ) 2015 Provision for income ) 2014 ( 1 ) 2015 Provision for income tax $ Provision for income tax $ 2,739 $ 3,639 $ 3,303 Effective income tax $ 2,739 $ 3,639 $ 3,303 Effective tax rate $ 2,739 $ 3,639 $ 3,303 Effective tax rate 17.2 % $ 3,303 Effective tax rate 17.2 % 21.1 % 16.8 % Effective tax rate 17.2 % 21.1 % 16.8 % ( 1 rate 17.2 % 21.1 % 16.8 % ( 1 ) In 21.1 % 16.8 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. Our provision for income tax effective tax rate decreased from 2014 to 2015 , largely due rate decreased from 2014 to 2015 , largely due to a a discrete benefit recognized in 2015 a a result of the effective tax rate increased from 2013 to 2014 , largely due rate increased from 2013 to 2014 , largely due to proportionately and more benefit recognized in 2013 relative to 2014 due to recognized in 2013 relative to 2014 due to the retroactive extension the retroactive extension of the 2012 federal research and development credit a capital loss carryforward in 2014 . A reconciliation of the is set forth in Note 15 of Notes to Consolidated Financial in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Our future effective tax rate of the statute of limitation 34 Table of Contents Alphabet Inc. can be found in Notes 11 and 15 of Part II found in Notes 11 and 15 of Part II , Item of Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. See Critical Accounting Policies and related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2015 . This table quarter ended December 31 , 2015 . This table includes all rate . Quarter Ended Mar 31 , 2014 ( 1 ) Quarter Ended Mar 31 , 2014 ( 1 ) Jun 30 Mar 31 , 2014 ( 1 ) Jun 30 , 2014 2014 ( 1 ) Jun 30 , 2014 ( 1 ) 1 ) Jun 30 , 2014 ( 1 ) Sep 30 Jun 30 , 2014 ( 1 ) Sep 30 , 2014 2014 ( 1 ) Sep 30 , 2014 ( 1 ) 1 ) Sep 30 , 2014 ( 1 ) Dec 31 Sep 30 , 2014 ( 1 ) Dec 31 , 2014 2014 ( 1 ) Dec 31 , 2014 ( 1 ) 1 ) Dec 31 , 2014 ( 1 ) Mar 31 Dec 31 , 2014 ( 1 ) Mar 31 , 2015 2014 ( 1 ) Mar 31 , 2015 ( 1 ) 1 ) Mar 31 , 2015 ( 1 ) Jun 30 Mar 31 , 2015 ( 1 ) Jun 30 , 2015 2015 ( 1 ) Jun 30 , 2015 Sep 30 , 1 ) Jun 30 , 2015 Sep 30 , 2015 Dec Jun 30 , 2015 Sep 30 , 2015 Dec 31 , , 2015 Sep 30 , 2015 Dec 31 , 2015 ( Sep 30 , 2015 Dec 31 , 2015 ( In million , 2015 Dec 31 , 2015 ( In million , except Income Data : Revenues $ 15,420 $ 15,955 $ 16,523 $ : Revenues $ 15,420 $ 15,955 $ 16,523 $ 18,103 $ $ 15,420 $ 15,955 $ 16,523 $ 18,103 $ 17,258 $ $ 15,955 $ 16,523 $ 18,103 $ 17,258 $ 17,727 $ $ 16,523 $ 18,103 $ 17,258 $ 17,727 $ 18,675 $ $ 18,103 $ 17,258 $ 17,727 $ 18,675 $ 21,329 Costs $ 17,258 $ 17,727 $ 18,675 $ 21,329 Costs and expense $ 17,727 $ 18,675 $ 21,329 Costs and expense : Cost expense : Cost of revenue 5,961 6,114 6,695 6,921 6,356 6,583 : Cost of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 Cost of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 of revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research revenue 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and 5,961 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and development 6,114 6,695 6,921 6,356 6,583 7,037 8,188 Research and development 2,126 6,695 6,921 6,356 6,583 7,037 8,188 Research and development 2,126 2,238 7,037 8,188 Research and development 2,126 2,238 2,655 2,813 2,753 2,789 8,188 Research and development 2,126 2,238 2,655 2,813 2,753 2,789 3,230 Research and development 2,126 2,238 2,655 2,813 2,753 2,789 3,230 3,510 and development 2,126 2,238 2,655 2,813 2,753 2,789 3,230 3,510 Sales development 2,126 2,238 2,655 2,813 2,753 2,789 3,230 3,510 Sales and 2,126 2,238 2,655 2,813 2,753 2,789 3,230 3,510 Sales and marketing 2,238 2,655 2,813 2,753 2,789 3,230 3,510 Sales and marketing 1,729 2,655 2,813 2,753 2,789 3,230 3,510 Sales and marketing 1,729 1,941 3,230 3,510 Sales and marketing 1,729 1,941 2,084 2,377 2,065 2,080 3,510 Sales and marketing 1,729 1,941 2,084 2,377 2,065 2,080 2,223 Sales and marketing 1,729 1,941 2,084 2,377 2,065 2,080 2,223 2,679 and marketing 1,729 1,941 2,084 2,377 2,065 2,080 2,223 2,679 General marketing 1,729 1,941 2,084 2,377 2,065 2,080 2,223 2,679 General and 1,729 1,941 2,084 2,377 2,065 2,080 2,223 2,679 General and administrative 1,941 2,084 2,377 2,065 2,080 2,223 2,679 General and administrative 1,489 2,084 2,377 2,065 2,080 2,223 2,679 General and administrative 1,489 1,404 2,223 2,679 General and administrative 1,489 1,404 1,365 1,593 1,637 1,450 2,679 General and administrative 1,489 1,404 1,365 1,593 1,637 1,450 1,477 General and administrative 1,489 1,404 1,365 1,593 1,637 1,450 1,477 1,572 and administrative 1,489 1,404 1,365 1,593 1,637 1,450 1,477 1,572 Total administrative 1,489 1,404 1,365 1,593 1,637 1,450 1,477 1,572 Total cost 1,489 1,404 1,365 1,593 1,637 1,450 1,477 1,572 Total cost and 1,404 1,365 1,593 1,637 1,450 1,477 1,572 Total cost and expense 1,365 1,593 1,637 1,450 1,477 1,572 Total cost and expense 11,305 1,572 Total cost and expense 11,305 11,697 12,799 13,704 12,811 12,902 Total cost and expense 11,305 11,697 12,799 13,704 12,811 12,902 13,967 cost and expense 11,305 11,697 12,799 13,704 12,811 12,902 13,967 15,949 and expense 11,305 11,697 12,799 13,704 12,811 12,902 13,967 15,949 Income expense 11,305 11,697 12,799 13,704 12,811 12,902 13,967 15,949 Income from 11,305 11,697 12,799 13,704 12,811 12,902 13,967 15,949 Income from operation 11,697 12,799 13,704 12,811 12,902 13,967 15,949 Income from operation 4,115 12,799 13,704 12,811 12,902 13,967 15,949 Income from operation 4,115 4,258 13,967 15,949 Income from operation 4,115 4,258 3,724 4,399 4,447 4,825 15,949 Income from operation 4,115 4,258 3,724 4,399 4,447 4,825 4,708 Income from operation 4,115 4,258 3,724 4,399 4,447 4,825 4,708 5,380 from operation 4,115 4,258 3,724 4,399 4,447 4,825 4,708 5,380 Other operation 4,115 4,258 3,724 4,399 4,447 4,825 4,708 5,380 Other income 4,115 4,258 3,724 4,399 4,447 4,825 4,708 5,380 Other income ( 4,258 3,724 4,399 4,447 4,825 4,708 5,380 Other income ( expense 3,724 4,399 4,447 4,825 4,708 5,380 Other income ( expense ) ( expense ) , net 357 145 133 128 157 131 expense ) , net 357 145 133 128 157 131 183 ) , net 357 145 133 128 157 131 183 ( , net 357 145 133 128 157 131 183 ( 180 net 357 145 133 128 157 131 183 ( 180 ) 357 145 133 128 157 131 183 ( 180 ) Income 145 133 128 157 131 183 ( 180 ) Income from 128 157 131 183 ( 180 ) Income from continuing operation continuing operation before income tax 4,472 4,403 3,857 4,527 4,604 4,956 operation before income tax 4,472 4,403 3,857 4,527 4,604 4,956 4,891 before income tax 4,472 4,403 3,857 4,527 4,604 4,956 4,891 5,200 income tax 4,472 4,403 3,857 4,527 4,604 4,956 4,891 5,200 Provision tax 4,472 4,403 3,857 4,527 4,604 4,956 4,891 5,200 Provision for 4,472 4,403 3,857 4,527 4,604 4,956 4,891 5,200 Provision for income 4,403 3,857 4,527 4,604 4,956 4,891 5,200 Provision for income tax 3,857 4,527 4,604 4,956 4,891 5,200 Provision for income tax 903 5,200 Provision for income tax 903 984 933 819 1,089 1,025 Provision for income tax 903 984 933 819 1,089 1,025 912 for income tax 903 984 933 819 1,089 1,025 912 277 income tax 903 984 933 819 1,089 1,025 912 277 Net tax 903 984 933 819 1,089 1,025 912 277 Net income 903 984 933 819 1,089 1,025 912 277 Net income from 984 933 819 1,089 1,025 912 277 Net income from continuing 933 819 1,089 1,025 912 277 Net income from continuing operation income from continuing operation $ 3,569 $ 3,419 $ 2,924 $ continuing operation $ 3,569 $ 3,419 $ 2,924 $ 3,708 $ $ 3,569 $ 3,419 $ 2,924 $ 3,708 $ 3,515 $ $ 3,419 $ 2,924 $ 3,708 $ 3,515 $ 3,931 $ $ 2,924 $ 3,708 $ 3,515 $ 3,931 $ 3,979 $ $ 3,708 $ 3,515 $ 3,931 $ 3,979 $ 4,923 Net $ 3,515 $ 3,931 $ 3,979 $ 4,923 Net income ( $ 3,931 $ 3,979 $ 4,923 Net income ( loss ) ) from discontinued operation ( 198 ) ( 68 ) ( operation ( 198 ) ( 68 ) ( 185 ) 967 ) ( 68 ) ( 185 ) 967 0 0 0 68 ) ( 185 ) 967 0 0 0 0 Net ) ( 185 ) 967 0 0 0 0 Net income ( 185 ) 967 0 0 0 0 Net income $ 185 ) 967 0 0 0 0 Net income $ 3,371 ) 967 0 0 0 0 Net income $ 3,371 $ 0 0 Net income $ 3,371 $ 3,351 $ 2,739 $ Net income $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ 3,931 $ $ 2,739 $ 4,675 $ 3,515 $ 3,931 $ 3,979 $ $ 4,675 $ 3,515 $ 3,931 $ 3,979 $ 4,923 Less $ 3,515 $ 3,931 $ 3,979 $ 4,923 Less : Adjustment $ 3,931 $ 3,979 $ 4,923 Less : Adjustment Payment to to Class C capital stockholder 0 0 0 0 0 522 Class C capital stockholder 0 0 0 0 0 522 0 C capital stockholder 0 0 0 0 0 522 0 0 capital stockholder 0 0 0 0 0 522 0 0 Net stockholder 0 0 0 0 0 522 0 0 Net income 0 0 0 0 0 522 0 0 Net income available 0 0 0 0 522 0 0 Net income available to 0 0 0 522 0 0 Net income available to all available to all stockholder $ 3,371 $ 3,351 $ 2,739 $ all stockholder $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ $ 3,371 $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ $ 3,351 $ 2,739 $ 4,675 $ 3,515 $ 3,409 $ $ 2,739 $ 4,675 $ 3,515 $ 3,409 $ 3,979 $ $ 4,675 $ 3,515 $ 3,409 $ 3,979 $ 4,923 ( $ 3,515 $ 3,409 $ 3,979 $ 4,923 ( 1 ) $ 3,409 $ 3,979 $ 4,923 ( 1 ) In the $ 3,979 $ 4,923 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. 35 Table of Contents Alphabet Annual Report on Form 10-K. 35 Table of Contents Alphabet Inc. for Google pursuant to Rule 12g-3 ( a ) ) : ) : Quarter Ended Mar 31 , 2014 ( 1 ) Quarter Ended Mar 31 , 2014 ( 1 ) Jun 30 Mar 31 , 2014 ( 1 ) Jun 30 , 2014 2014 ( 1 ) Jun 30 , 2014 ( 1 ) 1 ) Jun 30 , 2014 ( 1 ) Sep 30 Jun 30 , 2014 ( 1 ) Sep 30 , 2014 2014 ( 1 ) Sep 30 , 2014 ( 1 ) 1 ) Sep 30 , 2014 ( 1 ) Dec 31 Sep 30 , 2014 ( 1 ) Dec 31 , 2014 2014 ( 1 ) Dec 31 , 2014 ( 1 ) 1 ) Dec 31 , 2014 ( 1 ) Mar 31 Dec 31 , 2014 ( 1 ) Mar 31 , 2015 2014 ( 1 ) Mar 31 , 2015 ( 1 ) 1 ) Mar 31 , 2015 ( 1 ) Jun 30 Mar 31 , 2015 ( 1 ) Jun 30 , 2015 2015 ( 1 ) Jun 30 , 2015 Sep 30 , 1 ) Jun 30 , 2015 Sep 30 , 2015 Dec Jun 30 , 2015 Sep 30 , 2015 Dec 31 , , 2015 Sep 30 , 2015 Dec 31 , 2015 ( Sep 30 , 2015 Dec 31 , 2015 ( unaudited ) , 2015 Dec 31 , 2015 ( unaudited ) Basic net stock : Continuing operation $ 5.30 $ 5.06 $ 4.32 $ Continuing operation $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ 4.99 $ $ 4.32 $ 5.46 $ 5.16 $ 4.99 $ 5.80 $ $ 5.46 $ 5.16 $ 4.99 $ 5.80 $ 7.16 Discontinued $ 5.16 $ 4.99 $ 5.80 $ 7.16 Discontinued operation ( $ 4.99 $ 5.80 $ 7.16 Discontinued operation ( 0.29 ) $ 7.16 Discontinued operation ( 0.29 ) ( 0.10 ) ( operation ( 0.29 ) ( 0.10 ) ( 0.27 ) 1.43 ) ( 0.10 ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.10 ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income per ) 1.43 0.00 0.00 0.00 0.00 Basic net income per share and B common stock $ 5.01 $ 4.96 $ 4.05 $ common stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ $ 4.05 $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ $ 6.89 $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic $ 5.16 $ 4.99 $ 5.80 $ 7.16 Basic net income $ 4.99 $ 5.80 $ 7.16 Basic net income ( loss stock : Continuing operation $ 5.30 $ 5.06 $ 4.32 $ Continuing operation $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ $ 5.30 $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ $ 5.06 $ 4.32 $ 5.46 $ 5.16 $ 6.51 $ $ 4.32 $ 5.46 $ 5.16 $ 6.51 $ 5.80 $ $ 5.46 $ 5.16 $ 6.51 $ 5.80 $ 7.16 Discontinued $ 5.16 $ 6.51 $ 5.80 $ 7.16 Discontinued operation ( $ 6.51 $ 5.80 $ 7.16 Discontinued operation ( 0.29 ) $ 7.16 Discontinued operation ( 0.29 ) ( 0.10 ) ( operation ( 0.29 ) ( 0.10 ) ( 0.27 ) 1.43 ) ( 0.10 ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.10 ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic ) ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net ( 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income 0.27 ) 1.43 0.00 0.00 0.00 0.00 Basic net income per ) 1.43 0.00 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 5.01 $ 4.96 $ 4.05 $ capital stock $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ $ 5.01 $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ $ 4.96 $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ $ 4.05 $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ $ 6.89 $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted $ 5.16 $ 6.51 $ 5.80 $ 7.16 Diluted net income $ 6.51 $ 5.80 $ 7.16 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Continuing operation $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ 4.93 $ $ 4.25 $ 5.38 $ 5.10 $ 4.93 $ 5.73 $ $ 5.38 $ 5.10 $ 4.93 $ 5.73 $ 7.06 Discontinued $ 5.10 $ 4.93 $ 5.73 $ 7.06 Discontinued operation ( $ 4.93 $ 5.73 $ 7.06 Discontinued operation ( 0.29 ) $ 7.06 Discontinued operation ( 0.29 ) ( 0.10 ) ( operation ( 0.29 ) ( 0.10 ) ( 0.27 ) 1.41 ) ( 0.10 ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.10 ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per share and B common stock $ 4.92 $ 4.88 $ 3.98 $ common stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ $ 3.98 $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ $ 6.79 $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted $ 5.10 $ 4.93 $ 5.73 $ 7.06 Diluted net income $ 4.93 $ 5.73 $ 7.06 Diluted net income ( loss stock : Continuing operation $ 5.21 $ 4.98 $ 4.25 $ Continuing operation $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ $ 5.21 $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ $ 4.98 $ 4.25 $ 5.38 $ 5.10 $ 6.43 $ $ 4.25 $ 5.38 $ 5.10 $ 6.43 $ 5.73 $ $ 5.38 $ 5.10 $ 6.43 $ 5.73 $ 7.06 Discontinued $ 5.10 $ 6.43 $ 5.73 $ 7.06 Discontinued operation ( $ 6.43 $ 5.73 $ 7.06 Discontinued operation ( 0.29 ) $ 7.06 Discontinued operation ( 0.29 ) ( 0.10 ) ( operation ( 0.29 ) ( 0.10 ) ( 0.27 ) 1.41 ) ( 0.10 ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.10 ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted ) ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net ( 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income 0.27 ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per ) 1.41 0.00 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 4.92 $ 4.88 $ 3.98 $ capital stock $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ $ 4.92 $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ $ 4.88 $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ $ 3.98 $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ $ 6.79 $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( $ 5.10 $ 6.43 $ 5.73 $ 7.06 ( 1 ) $ 6.43 $ 5.73 $ 7.06 ( 1 ) In the $ 5.73 $ 7.06 ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. 36 Table of Contents Alphabet Annual Report on Form 10-K. 36 Table of Contents Alphabet Inc. the eight quarter ended December 31 , 2015 : Quarter Ended quarter ended December 31 , 2015 : Quarter Ended Mar 31 2015 : Quarter Ended Mar 31 , 2014 ( 1 ) Quarter Ended Mar 31 , 2014 ( 1 ) Jun 30 Mar 31 , 2014 ( 1 ) Jun 30 , 2014 2014 ( 1 ) Jun 30 , 2014 ( 1 ) 1 ) Jun 30 , 2014 ( 1 ) Sep 30 Jun 30 , 2014 ( 1 ) Sep 30 , 2014 2014 ( 1 ) Sep 30 , 2014 ( 1 ) 1 ) Sep 30 , 2014 ( 1 ) Dec 31 Sep 30 , 2014 ( 1 ) Dec 31 , 2014 2014 ( 1 ) Dec 31 , 2014 ( 1 ) 1 ) Dec 31 , 2014 ( 1 ) Mar 31 Dec 31 , 2014 ( 1 ) Mar 31 , 2015 2014 ( 1 ) Mar 31 , 2015 ( 1 ) 1 ) Mar 31 , 2015 ( 1 ) Jun 30 Mar 31 , 2015 ( 1 ) Jun 30 , 2015 2015 ( 1 ) Jun 30 , 2015 Sep 30 , 1 ) Jun 30 , 2015 Sep 30 , 2015 Dec Jun 30 , 2015 Sep 30 , 2015 Dec 31 , , 2015 Sep 30 , 2015 Dec 31 , 2015 ( Sep 30 , 2015 Dec 31 , 2015 ( unaudited ) , 2015 Dec 31 , 2015 ( unaudited ) Revenues 100.0 2015 ( unaudited ) Revenues 100.0 % 100.0 % 100.0 % unaudited ) Revenues 100.0 % 100.0 % 100.0 % 100.0 % Revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % % 100.0 % 100.0 % 100.0 % 100.0 % Costs and % 100.0 % 100.0 % 100.0 % Costs and expense : expense : Cost of revenue 38.7 38.3 40.5 38.2 36.8 37.1 : Cost of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 Cost of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 of revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research revenue 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and 38.7 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 38.3 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 13.8 40.5 38.2 36.8 37.1 37.7 38.4 Research and development 13.8 14.0 37.7 38.4 Research and development 13.8 14.0 16.1 15.5 16.0 15.7 38.4 Research and development 13.8 14.0 16.1 15.5 16.0 15.7 17.3 Research and development 13.8 14.0 16.1 15.5 16.0 15.7 17.3 16.4 and development 13.8 14.0 16.1 15.5 16.0 15.7 17.3 16.4 Sales development 13.8 14.0 16.1 15.5 16.0 15.7 17.3 16.4 Sales and 13.8 14.0 16.1 15.5 16.0 15.7 17.3 16.4 Sales and marketing 14.0 16.1 15.5 16.0 15.7 17.3 16.4 Sales and marketing 11.2 16.1 15.5 16.0 15.7 17.3 16.4 Sales and marketing 11.2 12.2 17.3 16.4 Sales and marketing 11.2 12.2 12.6 13.1 12.0 11.8 16.4 Sales and marketing 11.2 12.2 12.6 13.1 12.0 11.8 11.9 Sales and marketing 11.2 12.2 12.6 13.1 12.0 11.8 11.9 12.6 and marketing 11.2 12.2 12.6 13.1 12.0 11.8 11.9 12.6 General marketing 11.2 12.2 12.6 13.1 12.0 11.8 11.9 12.6 General and 11.2 12.2 12.6 13.1 12.0 11.8 11.9 12.6 General and administrative 12.2 12.6 13.1 12.0 11.8 11.9 12.6 General and administrative 9.6 12.6 13.1 12.0 11.8 11.9 12.6 General and administrative 9.6 8.8 11.9 12.6 General and administrative 9.6 8.8 8.3 8.9 9.4 8.2 12.6 General and administrative 9.6 8.8 8.3 8.9 9.4 8.2 7.9 General and administrative 9.6 8.8 8.3 8.9 9.4 8.2 7.9 7.4 and administrative 9.6 8.8 8.3 8.9 9.4 8.2 7.9 7.4 Total administrative 9.6 8.8 8.3 8.9 9.4 8.2 7.9 7.4 Total cost 9.6 8.8 8.3 8.9 9.4 8.2 7.9 7.4 Total cost and 8.8 8.3 8.9 9.4 8.2 7.9 7.4 Total cost and expense 8.3 8.9 9.4 8.2 7.9 7.4 Total cost and expense 73.3 7.4 Total cost and expense 73.3 73.3 77.5 75.7 74.2 72.8 Total cost and expense 73.3 73.3 77.5 75.7 74.2 72.8 74.8 cost and expense 73.3 73.3 77.5 75.7 74.2 72.8 74.8 74.8 and expense 73.3 73.3 77.5 75.7 74.2 72.8 74.8 74.8 Income expense 73.3 73.3 77.5 75.7 74.2 72.8 74.8 74.8 Income from 73.3 73.3 77.5 75.7 74.2 72.8 74.8 74.8 Income from operation 73.3 77.5 75.7 74.2 72.8 74.8 74.8 Income from operation 26.7 77.5 75.7 74.2 72.8 74.8 74.8 Income from operation 26.7 26.7 74.8 74.8 Income from operation 26.7 26.7 22.5 24.3 25.8 27.2 74.8 Income from operation 26.7 26.7 22.5 24.3 25.8 27.2 25.2 Income from operation 26.7 26.7 22.5 24.3 25.8 27.2 25.2 25.2 from operation 26.7 26.7 22.5 24.3 25.8 27.2 25.2 25.2 Other operation 26.7 26.7 22.5 24.3 25.8 27.2 25.2 25.2 Other income 26.7 26.7 22.5 24.3 25.8 27.2 25.2 25.2 Other income ( 26.7 22.5 24.3 25.8 27.2 25.2 25.2 Other income ( expense 22.5 24.3 25.8 27.2 25.2 25.2 Other income ( expense ) ( expense ) , net 2.3 0.9 0.8 0.7 0.9 0.8 expense ) , net 2.3 0.9 0.8 0.7 0.9 0.8 1.0 ) , net 2.3 0.9 0.8 0.7 0.9 0.8 1.0 ( , net 2.3 0.9 0.8 0.7 0.9 0.8 1.0 ( 0.8 net 2.3 0.9 0.8 0.7 0.9 0.8 1.0 ( 0.8 ) 2.3 0.9 0.8 0.7 0.9 0.8 1.0 ( 0.8 ) Income 0.9 0.8 0.7 0.9 0.8 1.0 ( 0.8 ) Income from 0.7 0.9 0.8 1.0 ( 0.8 ) Income from continuing operation continuing operation before income tax 29.0 27.6 23.3 25.0 26.7 28.0 operation before income tax 29.0 27.6 23.3 25.0 26.7 28.0 26.2 before income tax 29.0 27.6 23.3 25.0 26.7 28.0 26.2 24.4 income tax 29.0 27.6 23.3 25.0 26.7 28.0 26.2 24.4 Provision tax 29.0 27.6 23.3 25.0 26.7 28.0 26.2 24.4 Provision for 29.0 27.6 23.3 25.0 26.7 28.0 26.2 24.4 Provision for income 27.6 23.3 25.0 26.7 28.0 26.2 24.4 Provision for income tax 23.3 25.0 26.7 28.0 26.2 24.4 Provision for income tax 5.8 24.4 Provision for income tax 5.8 6.2 5.6 4.5 6.3 5.8 Provision for income tax 5.8 6.2 5.6 4.5 6.3 5.8 4.9 for income tax 5.8 6.2 5.6 4.5 6.3 5.8 4.9 1.3 income tax 5.8 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net tax 5.8 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net income 5.8 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net income from 6.2 5.6 4.5 6.3 5.8 4.9 1.3 Net income from continuing 5.6 4.5 6.3 5.8 4.9 1.3 Net income from continuing operation Net income from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 income from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 from continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 continuing operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net operation 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net income 23.2 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net income ( 21.4 17.7 20.5 20.4 22.2 21.3 23.1 Net income ( loss 17.7 20.5 20.4 22.2 21.3 23.1 Net income ( loss ) ) from discontinued operation ( 1.3 ) ( 0.4 ) ( operation ( 1.3 ) ( 0.4 ) ( 1.1 ) 5.3 ) ( 0.4 ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.4 ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net ) ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income ( 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 1.1 ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 % ) 5.3 0.0 0.0 0.0 0.0 Net income 21.9 % 21.0 0.0 0.0 0.0 Net income 21.9 % 21.0 % 16.6 % 0.0 Net income 21.9 % 21.0 % 16.6 % 25.8 % income 21.9 % 21.0 % 16.6 % 25.8 % 20.4 % % 21.0 % 16.6 % 25.8 % 20.4 % 22.2 % % 16.6 % 25.8 % 20.4 % 22.2 % 21.3 % % 25.8 % 20.4 % 22.2 % 21.3 % 23.1 % % 20.4 % 22.2 % 21.3 % 23.1 % Less : % 22.2 % 21.3 % 23.1 % Less : Adjustment Payment to Class C capital stockholder 0.0 % 0.0 % 0.0 % C capital stockholder 0.0 % 0.0 % 0.0 % 0.0 % stockholder 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % % 0.0 % 0.0 % 0.0 % 0.0 % 2.9 % % 0.0 % 0.0 % 0.0 % 2.9 % 0.0 % % 0.0 % 0.0 % 2.9 % 0.0 % 0.0 % % 0.0 % 2.9 % 0.0 % 0.0 % Net income % 2.9 % 0.0 % 0.0 % Net income available to income available to all stockholder 21.9 % 21.0 % 16.6 % to all stockholder 21.9 % 21.0 % 16.6 % 25.8 % stockholder 21.9 % 21.0 % 16.6 % 25.8 % 20.4 % % 21.0 % 16.6 % 25.8 % 20.4 % 19.2 % % 16.6 % 25.8 % 20.4 % 19.2 % 21.3 % % 25.8 % 20.4 % 19.2 % 21.3 % 23.1 % % 20.4 % 19.2 % 21.3 % 23.1 % ( 1 % 19.2 % 21.3 % 23.1 % ( 1 ) In 21.3 % 23.1 % ( 1 ) In the second quarter In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 . Please refer to Note . Please refer to Note 1 and Note 17 of the to Note 1 and Note 17 of the Notes to Consolidated this Annual Report on Form 10-K. Capital Resources and Liquidity As and Liquidity As of December 31 , 2015 , we had As of December 31 , 2015 , we had $ 73.1 2015 , we had $ 73.1 billion of cash , cash public . As of December 31 , 2015 , $ 42.9 As of December 31 , 2015 , $ 42.9 billion of 31 , 2015 , $ 42.9 billion of the $ 73.1 42.9 billion of the $ 73.1 billion of cash , cash operation . As of December 31 , 2015 , we had As of December 31 , 2015 , we had unused letter of credit of approximately $ 752 million . We believe that through at least the next 12 month . Our liquidity could raise additional capital through future 37 Table of Contents Alphabet Inc. program of up to $ 3.0 billion through the issuance of purpose . As of December 31 , 2015 , we had As of December 31 , 2015 , we had $ 2.0 2015 , we had $ 2.0 billion of commercial paper outstanding a weighted-average interest rate of 0.2 % that matures at various at various date through February 2016 . In conjunction with this , we have a $ 3.0 billion revolving credit facility expiring credit facility expiring in July 2016 . The interest rate for rate . As of December 31 , 2015 , we were As of December 31 , 2015 , we were in compliance company level . In January 2016 , the board of director to issue up to $ 5.0 billion of commercial paper from to enter into a $ 4.0 billion revolving credit facility to replace Google 's existing $ 3.0 billion revolving credit facility . credit facility . In May 2011 , we issued $ 3.0 2011 , we issued $ 3.0 billion of unsecured senior note of unsecured senior note ( 2011 Notes ) in three equal equal tranche , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 . The 2014 , 2016 , and 2021 . The net proceeds from from the sale of the 2011 Notes were used to repay corporate purpose . In February 2014 , we issued $ 1.0 2014 , we issued $ 1.0 billion of unsecured senior note of unsecured senior note ( 2014 Notes ) due in 2024 2014 Notes ) due in 2024 , which wa used to wa used to repay $ 1.0 billion of the first tranche the first tranche of our 2011 Notes that matured in May Notes that matured in May 2014 and for general corporate purpose purpose . As of December 31 , 2015 , the outstanding As of December 31 , 2015 , the outstanding note had total carrying value of $ 3.0 billion and a total estimated estimated fair value of $ 3.1 billion . We are not the note . In August 2013 , we entered into a we entered into a $ 258 million capital lease obligation on on certain property expiring in 2028 . We intend to exercise to purchase the property in 2016 . The effective rate of market rate . In October 2015 , the board of director to repurchase up to $ 5,099,019,513.59 of it Class C capital in the fourth quarter of 2015 . The repurchase are being including through the use of 10b5-1 plan . The repurchase program date . As of December 31 , 2015 , Alphabet repurchased As of December 31 , 2015 , Alphabet repurchased and subsequently repurchased and subsequently retired $ 1.8 billion of it Class C in the year ended December 31 , 2015 were funded by year ended December 31 , 2015 were funded by Google via to Alphabet . In January 2016 , the board of director an additional amount of approximately 514 thousand share . For 2013 514 thousand share . For 2013 , 2014 and 2015 , share . For 2013 , 2014 and 2015 , our cash For 2013 , 2014 and 2015 , our cash flow were ) : Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net cash provided Ended December 31 , 2013 2014 2015 Net cash provided by December 31 , 2013 2014 2015 Net cash provided by operating provided by operating activity $ 18,659 $ 22,376 $ 26,024 Net operating activity $ 18,659 $ 22,376 $ 26,024 Net cash used $ 18,659 $ 22,376 $ 26,024 Net cash used in investing used in investing activity ( 13,679 ) ( 21,055 ) ( activity ( 13,679 ) ( 21,055 ) ( 23,711 ) Net ) ( 21,055 ) ( 23,711 ) Net cash used in used in financing activity ( 857 ) ( 1,439 ) ( activity ( 857 ) ( 1,439 ) ( 3,677 ) Cash ) ( 1,439 ) ( 3,677 ) Cash Provided by Operating to it divestiture in October 2014 , we also generated cash by operating activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to increased net change in working capital . 38 Table of Contents Alphabet Inc. by operating activity increased from 2013 to 2014 primarily due to activity increased from 2013 to 2014 primarily due to increased net in investing activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to net increase in investing activity increased from 2013 to 2014 primarily due to activity increased from 2013 to 2014 primarily due to increase in and lower proceeds received in 2014 from divestiture of business compared divestiture of business compared to 2013 . This increase wa partially in financing activity increased from 2014 to 2015 primarily driven by activity increased from 2014 to 2015 primarily driven by the repurchase in financing activity increased from 2014 to 2015 is primarily driven activity increased from 2014 to 2015 is primarily driven by capital in financing activity increased from 2013 to 2014 is primarily driven activity increased from 2013 to 2014 is primarily driven by an Contractual Obligations a of December 31 , 2015 The following summarizes a of December 31 , 2015 The following summarizes our contractual operation , a of December 31 , 2015 ( in million a of December 31 , 2015 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation , of sublease income amount ( 1 ) $ 7,406 $ 646 amount ( 1 ) $ 7,406 $ 646 $ 1,573 $ 1 ) $ 7,406 $ 646 $ 1,573 $ 1,482 $ $ 7,406 $ 646 $ 1,573 $ 1,482 $ 3,705 Purchase $ 646 $ 1,573 $ 1,482 $ 3,705 Purchase obligation ( $ 1,573 $ 1,482 $ 3,705 Purchase obligation ( 2 ) $ 3,705 Purchase obligation ( 2 ) 1,697 946 298 150 Purchase obligation ( 2 ) 1,697 946 298 150 303 Long-term obligation ( 2 ) 1,697 946 298 150 303 Long-term debt ( 2 ) 1,697 946 298 150 303 Long-term debt obligation 2 ) 1,697 946 298 150 303 Long-term debt obligation , ) 1,697 946 298 150 303 Long-term debt obligation , including including capital lease obligation ( 3 ) 3,722 1,306 140 140 lease obligation ( 3 ) 3,722 1,306 140 140 2,136 Other obligation ( 3 ) 3,722 1,306 140 140 2,136 Other long-term ( 3 ) 3,722 1,306 140 140 2,136 Other long-term liability 3 ) 3,722 1,306 140 140 2,136 Other long-term liability reflected ) 3,722 1,306 140 140 2,136 Other long-term liability reflected on on our balance sheet ( 4 ) 1,580 356 430 367 balance sheet ( 4 ) 1,580 356 430 367 427 Total sheet ( 4 ) 1,580 356 430 367 427 Total contractual ( 4 ) 1,580 356 430 367 427 Total contractual obligation 4 ) 1,580 356 430 367 427 Total contractual obligation $ ) 1,580 356 430 367 427 Total contractual obligation $ 14,405 427 Total contractual obligation $ 14,405 $ 3,254 $ 2,441 $ contractual obligation $ 14,405 $ 3,254 $ 2,441 $ 2,139 $ $ 14,405 $ 3,254 $ 2,441 $ 2,139 $ 6,571 ( $ 3,254 $ 2,441 $ 2,139 $ 6,571 ( 1 ) $ 2,441 $ 2,139 $ 6,571 ( 1 ) For further $ 2,139 $ 6,571 ( 1 ) For further information , information , refer to Note 11 of the Notes to Consolidated this Annual Report on Form 10-K. ( 2 ) Purchase obligation Report on Form 10-K. ( 2 ) Purchase obligation represent non-cancelable purchase of inventory . ( 3 ) For further information , information , refer to Note 4 of the Notes to Consolidated this Annual Report on Form 10-K. ( 4 ) Other long-term Report on Form 10-K. ( 4 ) Other long-term liability represent long-term tax payable of $ 3.7 billion a of December 31 3.7 billion a of December 31 , 2015 primarily related to a of December 31 , 2015 primarily related to uncertain tax payment in individual year beyond 12 month due to uncertainty in in the above table . 39 Table of Contents Alphabet Inc. Sheet Arrangements As of December 31 , 2015 , we did As of December 31 , 2015 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of director . Please see Note 1 of Part II , Item of Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for the summary of significant cash flow . See Note 11 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency When determining the fair value 40 Table of Contents Alphabet Inc. more fully discussed in Note 6 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated unit . As of December 31 , 2015 , no impairment As of December 31 , 2015 , no impairment of goodwill we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis ) , net . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES currency . As of December 31 , 2015 , our most As of December 31 , 2015 , our most significant currency change in exchange rate of 20 % could be experienced in the U.S. dollar weakened by 20 % a of December 31 20 % a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 , the amount 2014 and December 31 , 2015 , the amount recorded in intrinsic value related to our 41 Table of Contents Alphabet Inc. would have been approximately $ 686 million and $ 280 million $ 686 million and $ 280 million lower a of December million lower a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 , and the 2014 and December 31 , 2015 , and the total amount would have been approximately $ 90 million and $ 275 million $ 90 million and $ 275 million higher in the year in the year ended December 31 , 2014 and December 31 year ended December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 . If the 2014 and December 31 , 2015 . If the U.S. dollar the U.S. dollar strengthened by 20 % a of December 31 20 % a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 , the amount 2014 and December 31 , 2015 , the amount recorded in would have been approximately $ 2.5 billion and $ 3.1 billion $ 2.5 billion and $ 3.1 billion higher a of December billion higher a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 , and the 2014 and December 31 , 2015 , and the total amount would have been approximately $ 164 million and $ 372 million $ 164 million and $ 372 million higher in the year in the year ended December 31 , 2014 and December 31 year ended December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 . In both 2014 and December 31 , 2015 . In both scenario , change in exchange rate of 20 % for all currency could change in exchange rate of 20 % were applied to total income tax of approximately $ 93 million and $ 122 million $ 93 million and $ 122 million a of December 31 122 million a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 . The adverse 2014 and December 31 , 2015 . The adverse impact a adverse impact a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 is after consideration 2014 and December 31 , 2015 is after consideration of the offsetting effect of approximately $ 948 million and $ 1.1 billion $ 948 million and $ 1.1 billion from foreign exchange contract for the month of December 31 , 2014 and December 31 month of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 . Interest Rate 2014 and December 31 , 2015 . Interest Rate Risk Our fall . As of December 31 , 2014 and December 31 As of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 , unrealized loss 2014 and December 31 , 2015 , unrealized loss on our that an adverse change of 100 basis point could be experienced near term . A hypothetical 1.00 % ( 100 basis point A hypothetical 1.00 % ( 100 basis point ) increase in marketable security of approximately $ 1.2 billion and $ 1.3 billion $ 1.2 billion and $ 1.3 billion a of December 31 1.3 billion a of December 31 , 2014 and December 31 a of December 31 , 2014 and December 31 , 2015 31 , 2014 and December 31 , 2015 . 42 Table 2014 and December 31 , 2015 . 42 Table of Contents December 31 , 2015 . 42 Table of Contents Alphabet Inc. and Google Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 45 Financial Statements of Alphabet Inc. Inc. : Consolidated Balance Sheets 48 Consolidated Statements of Income 49 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Financial Statements of Google Inc. Inc. : Consolidated Balance Sheets 53 Consolidated Statements of Income 54 53 Consolidated Statements of Income 54 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 55 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 56 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 57 Notes to Consolidated Financial Statements Inc. and Google Inc. ) 58 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 43 Table of Contents Alphabet Inc. Alphabet Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the related consolidated in the period ended December 31 , 2015 . Our audit period ended December 31 , 2015 . Our audit also included in the Index at Item 15 ( a ) 2 . Item 15 ( a ) 2 . These financial statement and Alphabet Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the consolidated result in the period ended December 31 , 2015 , in conformity period ended December 31 , 2015 , in conformity with U.S. financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 11 , 2016 expressed an unqualified report dated February 11 , 2016 expressed an unqualified opinion thereon San Jose , California February 11 , 2016 44 Table of , California February 11 , 2016 44 Table of Contents Alphabet California February 11 , 2016 44 Table of Contents Alphabet Inc. Google Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the related consolidated in the period ended December 31 , 2015 . Our audit period ended December 31 , 2015 . Our audit also included in the Index at Item 15 ( a ) 2 . Item 15 ( a ) 2 . These financial statement and Google Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the consolidated result in the period ended December 31 , 2015 , in conformity period ended December 31 , 2015 , in conformity with U.S. financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 11 , 2016 expressed an unqualified report dated February 11 , 2016 expressed an unqualified opinion thereon San Jose , California February 11 , 2016 45 Table of , California February 11 , 2016 45 Table of Contents Alphabet California February 11 , 2016 45 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on the COSO Alphabet Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the related consolidated in the period ended December 31 , 2015 of Alphabet Inc. period ended December 31 , 2015 of Alphabet Inc. and our and our report dated February 11 , 2016 expressed an unqualified report dated February 11 , 2016 expressed an unqualified opinion thereon San Jose , California February 11 , 2016 46 Table of , California February 11 , 2016 46 Table of Contents Alphabet California February 11 , 2016 46 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of December 31 , 2015 , based on a of December 31 , 2015 , based on the COSO Google Inc. a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , and the December 31 , 2014 and 2015 , and the related consolidated in the period ended December 31 , 2015 of Google Inc. period ended December 31 , 2015 of Google Inc. and our and our report dated February 11 , 2016 expressed an unqualified report dated February 11 , 2016 expressed an unqualified opinion thereon San Jose , California February 11 , 2016 47 Table of , California February 11 , 2016 47 Table of Contents Alphabet California February 11 , 2016 47 Table of Contents Alphabet Inc. amount ) As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Assets Current asset As of December 31 , 2015 Assets Current asset : Cash Cash and cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 56,517 Total 18,347 $ 16,549 Marketable security 46,048 56,517 Total cash , cash $ 16,549 Marketable security 46,048 56,517 Total cash , cash equivalent including security loaned of $ 4,058 and $ 4,531 ) 64,395 of $ 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable , net and $ 4,531 ) 64,395 73,066 Accounts receivable , net of net of allowance of $ 225 and $ 296 9,383 11,556 of $ 225 and $ 296 9,383 11,556 Receivable under reverse $ 225 and $ 296 9,383 11,556 Receivable under reverse repurchase 225 and $ 296 9,383 11,556 Receivable under reverse repurchase agreement Receivable under reverse repurchase agreement 875 450 Income tax receivable , under reverse repurchase agreement 875 450 Income tax receivable , net Income tax receivable , net 591 1,903 Prepaid revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred non-current 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred income tax 176 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred income tax 176 251 3,079 5,183 Deferred income tax 176 251 Property and equipment , 5,183 Deferred income tax 176 251 Property and equipment , net Property and equipment , net 23,883 29,016 Intangible asset , net and equipment , net 23,883 29,016 Intangible asset , net 4,607 29,016 Intangible asset , net 4,607 3,847 Goodwill 15,599 15,869 Total Intangible asset , net 4,607 3,847 Goodwill 15,599 15,869 Total asset , net 4,607 3,847 Goodwill 15,599 15,869 Total asset $ 129,187 net 4,607 3,847 Goodwill 15,599 15,869 Total asset $ 129,187 $ 15,599 15,869 Total asset $ 129,187 $ 147,461 Liabilities and Stockholders Total asset $ 129,187 $ 147,461 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued revenue share 1,952 and other current liability 4,408 4,768 Accrued revenue share 1,952 2,329 4,408 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 2,428 1,952 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 Income payable 2,778 2,428 Deferred revenue 752 788 Income tax payable , 2,778 2,428 Deferred revenue 752 788 Income tax payable , net Income tax payable , net 96 302 Total current liability 16,779 tax payable , net 96 302 Total current liability 16,779 19,310 96 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferred income tax 758 189 3,340 3,663 Deferred income tax 758 189 Other long-term liability 1,118 3,663 Deferred income tax 758 189 Other long-term liability 1,118 1,822 758 189 Other long-term liability 1,118 1,822 Commitments and contingency ( 189 Other long-term liability 1,118 1,822 Commitments and contingency ( Note Commitments and contingency ( Note 11 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 680,172 ( Class Class C 3,000,000 ) ; 680,172 ( Class A 286,560 , ; 680,172 ( Class A 286,560 , Class B 53,213 , A 286,560 , Class B 53,213 , Class C 340,399 ) B 53,213 , Class C 340,399 ) and par value of and par value of $ 680 ( Class A $ 287 680 ( Class A $ 287 , Class B $ 53 287 , Class B $ 53 , Class C $ 340 53 , Class C $ 340 ) and 687,348 ( Class C $ 340 ) and 687,348 ( Class A 292,297 , and 687,348 ( Class A 292,297 , Class B 50,295 , A 292,297 , Class B 50,295 , Class C 344,756 ) B 50,295 , Class C 344,756 ) and par value of and par value of $ 687 ( Class A $ 292 687 ( Class A $ 292 , Class B $ 50 292 , Class B $ 50 , Class C $ 345 50 , Class C $ 345 ) share issued and outstanding ) share issued and outstanding 28,767 32,982 Accumulated other comprehensive income share issued and outstanding 28,767 32,982 Accumulated other comprehensive income ( comprehensive income ( loss ) 27 ( 1,874 ) Retained earnings ( loss ) 27 ( 1,874 ) Retained earnings 75,066 89,223 ( 1,874 ) Retained earnings 75,066 89,223 Total stockholder ’ equity 1,874 ) Retained earnings 75,066 89,223 Total stockholder ’ equity 103,860 89,223 Total stockholder ’ equity 103,860 120,331 Total liability and stockholder Total stockholder ’ equity 103,860 120,331 Total liability and stockholder ’ and stockholder ’ equity $ 129,187 $ 147,461 See accompanying note ’ equity $ 129,187 $ 147,461 See accompanying note . 48 147,461 See accompanying note . 48 Table of Contents Alphabet Inc. amount ) Year Ended December 31 , 2013 2014 2015 Revenues Year Ended December 31 , 2013 2014 2015 Revenues $ 55,519 Ended December 31 , 2013 2014 2015 Revenues $ 55,519 $ December 31 , 2013 2014 2015 Revenues $ 55,519 $ 66,001 2013 2014 2015 Revenues $ 55,519 $ 66,001 $ 74,989 Costs 2015 Revenues $ 55,519 $ 66,001 $ 74,989 Costs and expense $ 55,519 $ 66,001 $ 74,989 Costs and expense : Cost expense : Cost of revenue 21,993 25,691 28,164 Research and development : Cost of revenue 21,993 25,691 28,164 Research and development 7,137 Cost of revenue 21,993 25,691 28,164 Research and development 7,137 9,832 25,691 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 8,131 9,832 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative 4,432 Sales and marketing 6,554 8,131 9,047 General and administrative 4,432 5,851 8,131 9,047 General and administrative 4,432 5,851 6,136 Total cost and 9,047 General and administrative 4,432 5,851 6,136 Total cost and expense General and administrative 4,432 5,851 6,136 Total cost and expense 40,116 6,136 Total cost and expense 40,116 49,505 55,629 Income from operation Total cost and expense 40,116 49,505 55,629 Income from operation 15,403 cost and expense 40,116 49,505 55,629 Income from operation 15,403 16,496 49,505 55,629 Income from operation 15,403 16,496 19,360 Other income ( 55,629 Income from operation 15,403 16,496 19,360 Other income ( expense Income from operation 15,403 16,496 19,360 Other income ( expense ) ( expense ) , net 496 763 291 Income from continuing expense ) , net 496 763 291 Income from continuing operation ) , net 496 763 291 Income from continuing operation before continuing operation before income tax 15,899 17,259 19,651 Provision for income operation before income tax 15,899 17,259 19,651 Provision for income tax before income tax 15,899 17,259 19,651 Provision for income tax 2,739 19,651 Provision for income tax 2,739 3,639 3,303 Net income from Provision for income tax 2,739 3,639 3,303 Net income from continuing for income tax 2,739 3,639 3,303 Net income from continuing operation income from continuing operation $ 13,160 $ 13,620 $ 16,348 Net continuing operation $ 13,160 $ 13,620 $ 16,348 Net income ( $ 13,160 $ 13,620 $ 16,348 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 Net income discontinued operation ( 427 ) 516 0 Net income $ 12,733 operation ( 427 ) 516 0 Net income $ 12,733 $ 516 0 Net income $ 12,733 $ 14,136 $ 16,348 Less Net income $ 12,733 $ 14,136 $ 16,348 Less : Adjustment $ 12,733 $ 14,136 $ 16,348 Less : Adjustment Payment to to Class C capital stockholder 0 0 522 Net income available Class C capital stockholder 0 0 522 Net income available to C capital stockholder 0 0 522 Net income available to all available to all stockholder $ 12,733 $ 14,136 $ 15,826 Basic all stockholder $ 12,733 $ 14,136 $ 15,826 Basic net income $ 12,733 $ 14,136 $ 15,826 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 23.11 Discontinued Continuing operation $ 19.77 $ 20.15 $ 23.11 Discontinued operation ( $ 19.77 $ 20.15 $ 23.11 Discontinued operation ( 0.64 ) $ 23.11 Discontinued operation ( 0.64 ) 0.76 0.00 Basic net Discontinued operation ( 0.64 ) 0.76 0.00 Basic net income per operation ( 0.64 ) 0.76 0.00 Basic net income per share and B common stock $ 19.13 $ 20.91 $ 23.11 Basic common stock $ 19.13 $ 20.91 $ 23.11 Basic net income $ 19.13 $ 20.91 $ 23.11 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued Continuing operation $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( $ 19.77 $ 20.15 $ 24.63 Discontinued operation ( 0.64 ) $ 24.63 Discontinued operation ( 0.64 ) 0.76 0.00 Basic net Discontinued operation ( 0.64 ) 0.76 0.00 Basic net income per operation ( 0.64 ) 0.76 0.00 Basic net income per share Class C capital stock $ 19.13 $ 20.91 $ 24.63 Diluted capital stock $ 19.13 $ 20.91 $ 24.63 Diluted net income $ 19.13 $ 20.91 $ 24.63 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued Continuing operation $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( $ 19.42 $ 19.82 $ 22.84 Discontinued operation ( 0.63 ) $ 22.84 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net income per operation ( 0.63 ) 0.75 0.00 Diluted net income per share and B common stock $ 18.79 $ 20.57 $ 22.84 Diluted common stock $ 18.79 $ 20.57 $ 22.84 Diluted net income $ 18.79 $ 20.57 $ 22.84 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued Continuing operation $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( $ 19.42 $ 19.82 $ 24.34 Discontinued operation ( 0.63 ) $ 24.34 Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net Discontinued operation ( 0.63 ) 0.75 0.00 Diluted net income per operation ( 0.63 ) 0.75 0.00 Diluted net income per share Class C capital stock $ 18.79 $ 20.57 $ 24.34 See capital stock $ 18.79 $ 20.57 $ 24.34 See accompanying note $ 18.79 $ 20.57 $ 24.34 See accompanying note . 49 24.34 See accompanying note . 49 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net income $ Ended December 31 , 2013 2014 2015 Net income $ 12,733 December 31 , 2013 2014 2015 Net income $ 12,733 $ 2014 2015 Net income $ 12,733 $ 14,136 $ 16,348 Other Net income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income ( loss in foreign currency translation adjustment 89 ( 996 ) ( 1,067 currency translation adjustment 89 ( 996 ) ( 1,067 ) Available-for-sale 89 ( 996 ) ( 1,067 ) Available-for-sale investment : Change gain ( loss ) ( 392 ) 505 ( 715 ) loss ) ( 392 ) 505 ( 715 ) Less : ( 392 ) 505 ( 715 ) Less : reclassification adjustment included in net income ( 162 ) ( 134 ) 208 income ( 162 ) ( 134 ) 208 Net change ( 162 ) ( 134 ) 208 Net change ( net of of tax effect of $ 212 , $ 60 , and of $ 212 , $ 60 , and $ 29 ) $ 60 , and $ 29 ) ( 554 ) 371 and $ 29 ) ( 554 ) 371 ( 507 ) 29 ) ( 554 ) 371 ( 507 ) Cash flow ( 554 ) 371 ( 507 ) Cash flow hedge : Change in net unrealized gain 112 651 676 Less : reclassification in net unrealized gain 112 651 676 Less : reclassification adjustment net unrealized gain 112 651 676 Less : reclassification adjustment for included in net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 115 ) 52 527 ( 327 ) Other comprehensive 115 ) 52 527 ( 327 ) Other comprehensive loss ( ) Other comprehensive loss ( 413 ) ( 98 ) ( loss ( 413 ) ( 98 ) ( 1,901 ) Comprehensive ) ( 98 ) ( 1,901 ) Comprehensive income $ 12,320 1,901 ) Comprehensive income $ 12,320 $ 14,038 $ 14,447 See Comprehensive income $ 12,320 $ 14,038 $ 14,447 See accompanying note $ 12,320 $ 14,038 $ 14,447 See accompanying note . 50 14,447 See accompanying note . 50 Table of Contents Alphabet Inc. Amount Balance a of December 31 , 2012 659,958 $ 22,835 a of December 31 , 2012 659,958 $ 22,835 $ 538 of December 31 , 2012 659,958 $ 22,835 $ 538 $ 31 , 2012 659,958 $ 22,835 $ 538 $ 48,197 $ 2012 659,958 $ 22,835 $ 538 $ 48,197 $ 71,570 Common $ 22,835 $ 538 $ 48,197 $ 71,570 Common stock issued $ 538 $ 48,197 $ 71,570 Common stock issued 11,706 1,174 $ 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 0 0 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation tax Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation tax benefit compensation expense 3,343 0 0 3,343 Stock-based compensation tax benefit 449 3,343 Stock-based compensation tax benefit 449 0 0 449 Tax withholding Stock-based compensation tax benefit 449 0 0 449 Tax withholding related compensation tax benefit 449 0 0 449 Tax withholding related to tax benefit 449 0 0 449 Tax withholding related to vesting of restricted stock unit ( 1,879 ) 0 0 ( 1,879 stock unit ( 1,879 ) 0 0 ( 1,879 ) Net unit ( 1,879 ) 0 0 ( 1,879 ) Net income 1,879 ) 0 0 ( 1,879 ) Net income 0 0 ( 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive loss ) Net income 0 0 12,733 12,733 Other comprehensive loss 0 Net income 0 0 12,733 12,733 Other comprehensive loss 0 ( 12,733 12,733 Other comprehensive loss 0 ( 413 ) 0 ( Other comprehensive loss 0 ( 413 ) 0 ( 413 ) loss 0 ( 413 ) 0 ( 413 ) Balance a ( 413 ) 0 ( 413 ) Balance a of December ) Balance a of December 31 , 2013 671,664 25,922 125 a of December 31 , 2013 671,664 25,922 125 60,930 86,977 of December 31 , 2013 671,664 25,922 125 60,930 86,977 Common December 31 , 2013 671,664 25,922 125 60,930 86,977 Common and 31 , 2013 671,664 25,922 125 60,930 86,977 Common and capital , 2013 671,664 25,922 125 60,930 86,977 Common and capital stock 2013 671,664 25,922 125 60,930 86,977 Common and capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit 625 4,279 Stock-based compensation tax benefit 625 0 0 625 Tax withholding Stock-based compensation tax benefit 625 0 0 625 Tax withholding related compensation tax benefit 625 0 0 625 Tax withholding related to tax benefit 625 0 0 625 Tax withholding related to vesting of restricted stock unit ( 2,524 ) 0 0 ( 2,524 stock unit ( 2,524 ) 0 0 ( 2,524 ) Net unit ( 2,524 ) 0 0 ( 2,524 ) Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of December 31 , 2014 680,172 28,767 27 75,066 103,860 of December 31 , 2014 680,172 28,767 27 75,066 103,860 Common December 31 , 2014 680,172 28,767 27 75,066 103,860 Common and 31 , 2014 680,172 28,767 27 75,066 103,860 Common and capital , 2014 680,172 28,767 27 75,066 103,860 Common and capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 0 0 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit 815 5,151 Stock-based compensation tax benefit 815 0 0 815 Tax withholding Stock-based compensation tax benefit 815 0 0 815 Tax withholding related compensation tax benefit 815 0 0 815 Tax withholding related to tax benefit 815 0 0 815 Tax withholding related to vesting of restricted stock unit ( 2,779 ) 0 0 ( 2,779 stock unit ( 2,779 ) 0 0 ( 2,779 ) Repurchases unit ( 2,779 ) 0 0 ( 2,779 ) Repurchases of 2,779 ) 0 0 ( 2,779 ) Repurchases of capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 687,348 $ 32,982 a of December 31 , 2015 687,348 $ 32,982 $ ( of December 31 , 2015 687,348 $ 32,982 $ ( 1,874 31 , 2015 687,348 $ 32,982 $ ( 1,874 ) $ 687,348 $ 32,982 $ ( 1,874 ) $ 89,223 $ 120,331 $ ( 1,874 ) $ 89,223 $ 120,331 See accompanying note 1,874 ) $ 89,223 $ 120,331 See accompanying note . 51 120,331 See accompanying note . 51 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Operating Year Ended December 31 , 2013 2014 2015 Operating activity Net Ended December 31 , 2013 2014 2015 Operating activity Net income December 31 , 2013 2014 2015 Operating activity Net income $ Operating activity Net income $ 12,733 $ 14,136 $ 16,348 Adjustments Net income $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation and impairment impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of intangible and impairment of intangible asset 1,158 1,456 931 Stock-based compensation expense impairment of intangible asset 1,158 1,456 931 Stock-based compensation expense 3,343 of intangible asset 1,158 1,456 931 Stock-based compensation expense 3,343 4,279 1,456 931 Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit 931 Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit from Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit from stock-based from stock-based award activity ( 481 ) ( 648 ) ( activity ( 481 ) ( 648 ) ( 548 ) Deferred ) ( 648 ) ( 548 ) Deferred income tax ( ) Deferred income tax ( 437 ) ( 104 ) ( tax ( 437 ) ( 104 ) ( 179 ) Gain ) ( 104 ) ( 179 ) Gain on divestiture of on divestiture of business ( 700 ) ( 740 ) 0 business ( 700 ) ( 740 ) 0 ( Gain ) 700 ) ( 740 ) 0 ( Gain ) loss on non-marketable investment , net ( 166 ) ( 390 ) 334 net ( 166 ) ( 390 ) 334 Other 272 192 166 ) ( 390 ) 334 Other 272 192 212 Changes ( 390 ) 334 Other 272 192 212 Changes in asset 390 ) 334 Other 272 192 212 Changes in asset and ) 334 Other 272 192 212 Changes in asset and liability acquisition : Accounts receivable ( 1,307 ) ( 1,641 ) ( receivable ( 1,307 ) ( 1,641 ) ( 2,094 ) Income ) ( 1,641 ) ( 2,094 ) Income tax , net ) Income tax , net 588 591 ( 179 ) Prepaid Income tax , net 588 591 ( 179 ) Prepaid revenue , net 588 591 ( 179 ) Prepaid revenue share , expense and other asset ( 930 ) 459 ( 318 ) other asset ( 930 ) 459 ( 318 ) Accounts payable ( 930 ) 459 ( 318 ) Accounts payable 605 436 ( 318 ) Accounts payable 605 436 203 Accrued expense and 318 ) Accounts payable 605 436 203 Accrued expense and other ) Accounts payable 605 436 203 Accrued expense and other liability Accrued expense and other liability 713 757 1,597 Accrued revenue share expense and other liability 713 757 1,597 Accrued revenue share 254 and other liability 713 757 1,597 Accrued revenue share 254 245 757 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 ( Accrued revenue share 254 245 339 Deferred revenue 233 ( 175 254 245 339 Deferred revenue 233 ( 175 ) 43 Net 339 Deferred revenue 233 ( 175 ) 43 Net cash provided revenue 233 ( 175 ) 43 Net cash provided by operating cash provided by operating activity 18,659 22,376 26,024 Investing activity Purchases provided by operating activity 18,659 22,376 26,024 Investing activity Purchases of by operating activity 18,659 22,376 26,024 Investing activity Purchases of property of property and equipment ( 7,358 ) ( 10,959 ) ( equipment ( 7,358 ) ( 10,959 ) ( 9,915 ) Purchases ) ( 10,959 ) ( 9,915 ) Purchases of marketable security Purchases of marketable security ( 45,444 ) ( 56,310 ) ( security ( 45,444 ) ( 56,310 ) ( 74,368 ) Maturities ) ( 56,310 ) ( 74,368 ) Maturities and sale of and sale of marketable security 38,314 51,315 62,905 Purchases of non-marketable sale of marketable security 38,314 51,315 62,905 Purchases of non-marketable investment of marketable security 38,314 51,315 62,905 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 569 ) ( 1,227 ) ( investment ( 569 ) ( 1,227 ) ( 2,172 ) Cash ) ( 1,227 ) ( 2,172 ) Cash collateral related to related to security lending ( 299 ) 1,403 ( 350 ) security lending ( 299 ) 1,403 ( 350 ) Investments in ( 299 ) 1,403 ( 350 ) Investments in reverse repurchase Investments in reverse repurchase agreement 600 ( 775 ) 425 Proceeds reverse repurchase agreement 600 ( 775 ) 425 Proceeds from divestiture agreement 600 ( 775 ) 425 Proceeds from divestiture of business Proceeds from divestiture of business 2,525 386 0 Acquisitions , net from divestiture of business 2,525 386 0 Acquisitions , net of divestiture of business 2,525 386 0 Acquisitions , net of cash intangible and other asset ( 1,448 ) ( 4,888 ) ( asset ( 1,448 ) ( 4,888 ) ( 236 ) Net ) ( 4,888 ) ( 236 ) Net cash used in used in investing activity ( 13,679 ) ( 21,055 ) ( activity ( 13,679 ) ( 21,055 ) ( 23,711 ) Financing ) ( 21,055 ) ( 23,711 ) Financing activity Net payment to stock-based award activity ( 781 ) ( 2,069 ) ( activity ( 781 ) ( 2,069 ) ( 2,375 ) Excess ) ( 2,069 ) ( 2,375 ) Excess tax benefit from benefit from stock-based award activity 481 648 548 Adjustment Payment to from stock-based award activity 481 648 548 Adjustment Payment to Class stock-based award activity 481 648 548 Adjustment Payment to Class C to Class C capital stockholder 0 0 ( 47 ) Repurchases Class C capital stockholder 0 0 ( 47 ) Repurchases of capital stockholder 0 0 ( 47 ) Repurchases of capital stock ) Repurchases of capital stock 0 0 ( 1,780 ) Proceeds Repurchases of capital stock 0 0 ( 1,780 ) Proceeds from capital stock 0 0 ( 1,780 ) Proceeds from issuance of debt , net of cost 10,768 11,625 13,705 Repayments of debt , net of cost 10,768 11,625 13,705 Repayments of debt ( net of cost 10,768 11,625 13,705 Repayments of debt ( 11,325 13,705 Repayments of debt ( 11,325 ) ( 11,643 ) ( debt ( 11,325 ) ( 11,643 ) ( 13,728 ) Net ) ( 11,643 ) ( 13,728 ) Net cash used in used in financing activity ( 857 ) ( 1,439 ) ( activity ( 857 ) ( 1,439 ) ( 3,677 ) Effect ) ( 1,439 ) ( 3,677 ) Effect of exchange rate cash and cash equivalent ( 3 ) ( 433 ) ( equivalent ( 3 ) ( 433 ) ( 434 ) Net ) ( 433 ) ( 434 ) Net increase ( decrease in cash and cash equivalent 4,120 ( 551 ) ( 1,798 and cash equivalent 4,120 ( 551 ) ( 1,798 ) Cash 4,120 ( 551 ) ( 1,798 ) Cash and cash equivalent equivalent at beginning of period 14,778 18,898 18,347 Cash and cash at beginning of period 14,778 18,898 18,347 Cash and cash equivalent beginning of period 14,778 18,898 18,347 Cash and cash equivalent at at end of period $ 18,898 $ 18,347 $ 16,549 Supplemental of period $ 18,898 $ 18,347 $ 16,549 Supplemental disclosure of $ 18,898 $ 18,347 $ 16,549 Supplemental disclosure of cash flow Cash paid for tax $ 1,932 $ 2,819 $ 3,338 Cash for tax $ 1,932 $ 2,819 $ 3,338 Cash paid for $ 1,932 $ 2,819 $ 3,338 Cash paid for interest 72 3,338 Cash paid for interest 72 86 96 See accompanying note Cash paid for interest 72 86 96 See accompanying note . paid for interest 72 86 96 See accompanying note . 52 96 See accompanying note . 52 Table of Contents Alphabet Inc. amount ) As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Assets Current asset As of December 31 , 2015 Assets Current asset : Cash Cash and cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 cash equivalent $ 18,347 $ 16,549 Marketable security 46,048 56,517 Total 18,347 $ 16,549 Marketable security 46,048 56,517 Total cash , cash $ 16,549 Marketable security 46,048 56,517 Total cash , cash equivalent including security loaned of $ 4,058 and $ 4,531 ) 64,395 of $ 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable 4,058 and $ 4,531 ) 64,395 73,066 Accounts receivable , net and $ 4,531 ) 64,395 73,066 Accounts receivable , net of net of allowance of $ 225 and $ 296 9,383 11,556 of $ 225 and $ 296 9,383 11,556 Receivable under reverse $ 225 and $ 296 9,383 11,556 Receivable under reverse repurchase 225 and $ 296 9,383 11,556 Receivable under reverse repurchase agreement Receivable under reverse repurchase agreement 875 450 Income tax receivable , under reverse repurchase agreement 875 450 Income tax receivable , net Income tax receivable , net 591 1,903 Prepaid revenue share , tax receivable , net 591 1,903 Prepaid revenue share , expense , expense and other asset 3,412 3,139 Total current asset 78,656 expense and other asset 3,412 3,139 Total current asset 78,656 90,114 3,412 3,139 Total current asset 78,656 90,114 Prepaid revenue share , 3,139 Total current asset 78,656 90,114 Prepaid revenue share , expense and other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 other asset , non-current 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred non-current 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred income tax 176 3,187 3,181 Non-marketable investment 3,079 5,183 Deferred income tax 176 251 3,079 5,183 Deferred income tax 176 251 Property and equipment , 5,183 Deferred income tax 176 251 Property and equipment , net Property and equipment , net 23,883 29,016 Intangible asset , net and equipment , net 23,883 29,016 Intangible asset , net 4,607 29,016 Intangible asset , net 4,607 3,847 Goodwill 15,599 15,869 Total Intangible asset , net 4,607 3,847 Goodwill 15,599 15,869 Total asset , net 4,607 3,847 Goodwill 15,599 15,869 Total asset $ 129,187 net 4,607 3,847 Goodwill 15,599 15,869 Total asset $ 129,187 $ 15,599 15,869 Total asset $ 129,187 $ 147,461 Liabilities and Stockholders Total asset $ 129,187 $ 147,461 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 Accounts payable $ 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued 1,715 $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit $ 1,931 Short-term debt 2,009 3,225 Accrued compensation and benefit 3,069 3,225 Accrued compensation and benefit 3,069 3,539 Accrued expense and other Accrued compensation and benefit 3,069 3,539 Accrued expense and other current expense and other current liability 4,408 4,768 Accrued revenue share 1,952 and other current liability 4,408 4,768 Accrued revenue share 1,952 2,329 4,408 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 4,768 Accrued revenue share 1,952 2,329 Securities lending payable 2,778 2,428 1,952 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 2,329 Securities lending payable 2,778 2,428 Deferred revenue 752 788 Income payable 2,778 2,428 Deferred revenue 752 788 Income tax payable , 2,778 2,428 Deferred revenue 752 788 Income tax payable , net Income tax payable , net 96 302 Total current liability 16,779 tax payable , net 96 302 Total current liability 16,779 19,310 96 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 302 Total current liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred liability 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 16,779 19,310 Long-term debt 3,228 1,995 Deferred revenue , non-current 104 1,995 Deferred revenue , non-current 104 151 Income tax payable , Deferred revenue , non-current 104 151 Income tax payable , non-current Income tax payable , non-current 3,340 3,663 Deferred income tax 758 tax payable , non-current 3,340 3,663 Deferred income tax 758 189 3,340 3,663 Deferred income tax 758 189 Other long-term liability 1,118 3,663 Deferred income tax 758 189 Other long-term liability 1,118 1,822 758 189 Other long-term liability 1,118 1,822 Commitments and contingency ( 189 Other long-term liability 1,118 1,822 Commitments and contingency ( Note Commitments and contingency ( Note 11 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share ; par value per share ; 100,000 share authorized , no share share issued and outstanding ; 0.5 share authorized , no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 680,172 ( Class Class C 3,000,000 ) ; 680,172 ( Class A 286,560 , ; 680,172 ( Class A 286,560 , Class B 53,213 , A 286,560 , Class B 53,213 , Class C 340,399 ) B 53,213 , Class C 340,399 ) , and par value and par value of $ 680 ( Class A $ 287 680 ( Class A $ 287 , Class B $ 53 287 , Class B $ 53 , Class C $ 340 53 , Class C $ 340 ) ; and 1.5 share $ 340 ) ; and 1.5 share authorized ( Class A share authorized ( Class A 0.5 , Class B 0.5 , A 0.5 , Class B 0.5 , Class C 0.5 ) B 0.5 , Class C 0.5 ) ; 0.3 ( Class Class C 0.5 ) ; 0.3 ( Class A 0.1 , ; 0.3 ( Class A 0.1 , Class B 0.1 , A 0.1 , Class B 0.1 , Class C 0.1 ) B 0.1 , Class C 0.1 ) , and par value and par value of $ 0 , share issued and outstanding , share issued and outstanding 28,767 31,313 Accumulated other comprehensive income share issued and outstanding 28,767 31,313 Accumulated other comprehensive income ( comprehensive income ( loss ) 27 ( 1,874 ) Retained earnings ( loss ) 27 ( 1,874 ) Retained earnings 75,066 90,892 ( 1,874 ) Retained earnings 75,066 90,892 Total stockholder ’ equity 1,874 ) Retained earnings 75,066 90,892 Total stockholder ’ equity 103,860 90,892 Total stockholder ’ equity 103,860 120,331 Total liability and stockholder Total stockholder ’ equity 103,860 120,331 Total liability and stockholder ’ and stockholder ’ equity $ 129,187 $ 147,461 See accompanying note ’ equity $ 129,187 $ 147,461 See accompanying note . 53 147,461 See accompanying note . 53 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Revenues Year Ended December 31 , 2013 2014 2015 Revenues $ 55,519 Ended December 31 , 2013 2014 2015 Revenues $ 55,519 $ December 31 , 2013 2014 2015 Revenues $ 55,519 $ 66,001 2013 2014 2015 Revenues $ 55,519 $ 66,001 $ 74,989 Costs 2015 Revenues $ 55,519 $ 66,001 $ 74,989 Costs and expense $ 55,519 $ 66,001 $ 74,989 Costs and expense : Cost expense : Cost of revenue 21,993 25,691 28,164 Research and development : Cost of revenue 21,993 25,691 28,164 Research and development 7,137 Cost of revenue 21,993 25,691 28,164 Research and development 7,137 9,832 25,691 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 28,164 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 Research and development 7,137 9,832 12,282 Sales and marketing 6,554 8,131 9,832 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative 12,282 Sales and marketing 6,554 8,131 9,047 General and administrative 4,432 Sales and marketing 6,554 8,131 9,047 General and administrative 4,432 5,851 8,131 9,047 General and administrative 4,432 5,851 6,136 Total cost and 9,047 General and administrative 4,432 5,851 6,136 Total cost and expense General and administrative 4,432 5,851 6,136 Total cost and expense 40,116 6,136 Total cost and expense 40,116 49,505 55,629 Income from operation Total cost and expense 40,116 49,505 55,629 Income from operation 15,403 cost and expense 40,116 49,505 55,629 Income from operation 15,403 16,496 49,505 55,629 Income from operation 15,403 16,496 19,360 Other income ( 55,629 Income from operation 15,403 16,496 19,360 Other income ( expense Income from operation 15,403 16,496 19,360 Other income ( expense ) ( expense ) , net 496 763 291 Income from continuing expense ) , net 496 763 291 Income from continuing operation ) , net 496 763 291 Income from continuing operation before continuing operation before income tax 15,899 17,259 19,651 Provision for income operation before income tax 15,899 17,259 19,651 Provision for income tax before income tax 15,899 17,259 19,651 Provision for income tax 2,739 19,651 Provision for income tax 2,739 3,639 3,303 Net income from Provision for income tax 2,739 3,639 3,303 Net income from continuing for income tax 2,739 3,639 3,303 Net income from continuing operation income from continuing operation $ 13,160 $ 13,620 $ 16,348 Net continuing operation $ 13,160 $ 13,620 $ 16,348 Net income ( $ 13,160 $ 13,620 $ 16,348 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 Net income discontinued operation ( 427 ) 516 0 Net income $ 12,733 operation ( 427 ) 516 0 Net income $ 12,733 $ 516 0 Net income $ 12,733 $ 14,136 $ 16,348 Less Net income $ 12,733 $ 14,136 $ 16,348 Less : Adjustment $ 12,733 $ 14,136 $ 16,348 Less : Adjustment Payment to to Class C capital stockholder 0 0 522 Net income available Class C capital stockholder 0 0 522 Net income available to C capital stockholder 0 0 522 Net income available to all available to all stockholder $ 12,733 $ 14,136 $ 15,826 See all stockholder $ 12,733 $ 14,136 $ 15,826 See accompanying note $ 12,733 $ 14,136 $ 15,826 See accompanying note . 54 15,826 See accompanying note . 54 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Net Year Ended December 31 , 2013 2014 2015 Net income $ Ended December 31 , 2013 2014 2015 Net income $ 12,733 December 31 , 2013 2014 2015 Net income $ 12,733 $ 2014 2015 Net income $ 12,733 $ 14,136 $ 16,348 Other Net income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income $ 12,733 $ 14,136 $ 16,348 Other comprehensive income ( loss in foreign currency translation adjustment 89 ( 996 ) ( 1,067 currency translation adjustment 89 ( 996 ) ( 1,067 ) Available-for-sale 89 ( 996 ) ( 1,067 ) Available-for-sale investment : Change gain ( loss ) ( 392 ) 505 ( 715 ) loss ) ( 392 ) 505 ( 715 ) Less : ( 392 ) 505 ( 715 ) Less : reclassification adjustment included in net income ( 162 ) ( 134 ) 208 income ( 162 ) ( 134 ) 208 Net change ( 162 ) ( 134 ) 208 Net change ( net of of tax effect of $ 212 , $ 60 , and of $ 212 , $ 60 , and $ 29 ) $ 60 , and $ 29 ) ( 554 ) 371 and $ 29 ) ( 554 ) 371 ( 507 ) 29 ) ( 554 ) 371 ( 507 ) Cash flow ( 554 ) 371 ( 507 ) Cash flow hedge : Change in net unrealized gain 112 651 676 Less : reclassification in net unrealized gain 112 651 676 Less : reclassification adjustment net unrealized gain 112 651 676 Less : reclassification adjustment for included in net income ( 60 ) ( 124 ) ( income ( 60 ) ( 124 ) ( 1,003 ) Net ) ( 124 ) ( 1,003 ) Net change ( net of tax effect of $ 30 , $ 196 , and of $ 30 , $ 196 , and $ 115 ) $ 196 , and $ 115 ) 52 527 ( 327 , and $ 115 ) 52 527 ( 327 ) Other and $ 115 ) 52 527 ( 327 ) Other comprehensive 115 ) 52 527 ( 327 ) Other comprehensive loss ( ) Other comprehensive loss ( 413 ) ( 98 ) ( loss ( 413 ) ( 98 ) ( 1,901 ) Comprehensive ) ( 98 ) ( 1,901 ) Comprehensive income $ 12,320 1,901 ) Comprehensive income $ 12,320 $ 14,038 $ 14,447 See Comprehensive income $ 12,320 $ 14,038 $ 14,447 See accompanying note $ 12,320 $ 14,038 $ 14,447 See accompanying note . 55 14,447 See accompanying note . 55 Table of Contents Alphabet Inc. Amount Balance a of December 31 , 2012 659,958 $ 22,835 a of December 31 , 2012 659,958 $ 22,835 $ 538 of December 31 , 2012 659,958 $ 22,835 $ 538 $ 31 , 2012 659,958 $ 22,835 $ 538 $ 48,197 $ 2012 659,958 $ 22,835 $ 538 $ 48,197 $ 71,570 Common $ 22,835 $ 538 $ 48,197 $ 71,570 Common stock issued $ 538 $ 48,197 $ 71,570 Common stock issued 11,706 1,174 $ 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based 71,570 Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 0 0 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation tax Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation tax benefit compensation expense 3,343 0 0 3,343 Stock-based compensation tax benefit 449 3,343 Stock-based compensation tax benefit 449 0 0 449 Tax withholding Stock-based compensation tax benefit 449 0 0 449 Tax withholding related compensation tax benefit 449 0 0 449 Tax withholding related to tax benefit 449 0 0 449 Tax withholding related to vesting of restricted stock unit ( 1,879 ) 0 0 ( 1,879 stock unit ( 1,879 ) 0 0 ( 1,879 ) Net unit ( 1,879 ) 0 0 ( 1,879 ) Net income 1,879 ) 0 0 ( 1,879 ) Net income 0 0 ( 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive 1,879 ) Net income 0 0 12,733 12,733 Other comprehensive loss ) Net income 0 0 12,733 12,733 Other comprehensive loss 0 Net income 0 0 12,733 12,733 Other comprehensive loss 0 ( 12,733 12,733 Other comprehensive loss 0 ( 413 ) 0 ( Other comprehensive loss 0 ( 413 ) 0 ( 413 ) loss 0 ( 413 ) 0 ( 413 ) Balance a ( 413 ) 0 ( 413 ) Balance a of December ) Balance a of December 31 , 2013 671,664 25,922 125 a of December 31 , 2013 671,664 25,922 125 60,930 86,977 of December 31 , 2013 671,664 25,922 125 60,930 86,977 Common December 31 , 2013 671,664 25,922 125 60,930 86,977 Common and 31 , 2013 671,664 25,922 125 60,930 86,977 Common and capital , 2013 671,664 25,922 125 60,930 86,977 Common and capital stock 2013 671,664 25,922 125 60,930 86,977 Common and capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit 625 4,279 Stock-based compensation tax benefit 625 0 0 625 Tax withholding Stock-based compensation tax benefit 625 0 0 625 Tax withholding related compensation tax benefit 625 0 0 625 Tax withholding related to tax benefit 625 0 0 625 Tax withholding related to vesting of restricted stock unit ( 2,524 ) 0 0 ( 2,524 stock unit ( 2,524 ) 0 0 ( 2,524 ) Net unit ( 2,524 ) 0 0 ( 2,524 ) Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of December 31 , 2014 680,172 28,767 27 75,066 103,860 of December 31 , 2014 680,172 28,767 27 75,066 103,860 Common December 31 , 2014 680,172 28,767 27 75,066 103,860 Common and 31 , 2014 680,172 28,767 27 75,066 103,860 Common and capital , 2014 680,172 28,767 27 75,066 103,860 Common and capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 6,659 331 0 0 331 Stock-based and capital stock issued 6,659 331 0 0 331 Stock-based compensation capital stock issued 6,659 331 0 0 331 Stock-based compensation expense stock issued 6,659 331 0 0 331 Stock-based compensation expense 5,151 issued 6,659 331 0 0 331 Stock-based compensation expense 5,151 0 0 331 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 331 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit 815 5,151 Stock-based compensation tax benefit 815 0 0 815 Tax withholding Stock-based compensation tax benefit 815 0 0 815 Tax withholding related compensation tax benefit 815 0 0 815 Tax withholding related to tax benefit 815 0 0 815 Tax withholding related to vesting of restricted stock unit ( 1,954 ) 0 0 ( 1,954 stock unit ( 1,954 ) 0 0 ( 1,954 ) Alphabet unit ( 1,954 ) 0 0 ( 1,954 ) Alphabet share 1,954 ) 0 0 ( 1,954 ) Alphabet share exchange ( ) Alphabet share exchange ( 687,684 ) 0 0 0 0 share exchange ( 687,684 ) 0 0 0 0 Capital transaction exchange ( 687,684 ) 0 0 0 0 Capital transaction with ( 687,684 ) 0 0 0 0 Capital transaction with Alphabet 687,684 ) 0 0 0 0 Capital transaction with Alphabet ( Capital transaction with Alphabet ( 2,272 ) 0 0 ( 2,272 with Alphabet ( 2,272 ) 0 0 ( 2,272 ) Adjustment Alphabet ( 2,272 ) 0 0 ( 2,272 ) Adjustment Payment 2,272 ) 0 0 ( 2,272 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 0 $ 31,313 a of December 31 , 2015 0 $ 31,313 $ ( of December 31 , 2015 0 $ 31,313 $ ( 1,874 31 , 2015 0 $ 31,313 $ ( 1,874 ) $ 0 $ 31,313 $ ( 1,874 ) $ 90,892 $ 120,331 $ ( 1,874 ) $ 90,892 $ 120,331 See accompanying note 1,874 ) $ 90,892 $ 120,331 See accompanying note . 56 120,331 See accompanying note . 56 Table of Contents Alphabet Inc. million ) Year Ended December 31 , 2013 2014 2015 Operating Year Ended December 31 , 2013 2014 2015 Operating activity Net Ended December 31 , 2013 2014 2015 Operating activity Net income December 31 , 2013 2014 2015 Operating activity Net income $ Operating activity Net income $ 12,733 $ 14,136 $ 16,348 Adjustments Net income $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation $ 12,733 $ 14,136 $ 16,348 Adjustments : Depreciation and impairment impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of property and equipment 2,781 3,523 4,132 Amortization and impairment of intangible and impairment of intangible asset 1,158 1,456 931 Stock-based compensation expense impairment of intangible asset 1,158 1,456 931 Stock-based compensation expense 3,343 of intangible asset 1,158 1,456 931 Stock-based compensation expense 3,343 4,279 1,456 931 Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit 931 Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit from Stock-based compensation expense 3,343 4,279 5,203 Excess tax benefit from stock-based from stock-based award activity ( 481 ) ( 648 ) ( activity ( 481 ) ( 648 ) ( 548 ) Deferred ) ( 648 ) ( 548 ) Deferred income tax ( ) Deferred income tax ( 437 ) ( 104 ) ( tax ( 437 ) ( 104 ) ( 179 ) Gain ) ( 104 ) ( 179 ) Gain on divestiture of on divestiture of business ( 700 ) ( 740 ) 0 business ( 700 ) ( 740 ) 0 ( Gain ) 700 ) ( 740 ) 0 ( Gain ) loss on non-marketable investment , net ( 166 ) ( 390 ) 334 net ( 166 ) ( 390 ) 334 Other 272 192 166 ) ( 390 ) 334 Other 272 192 212 Changes ( 390 ) 334 Other 272 192 212 Changes in asset 390 ) 334 Other 272 192 212 Changes in asset and ) 334 Other 272 192 212 Changes in asset and liability acquisition : Accounts receivable ( 1,307 ) ( 1,641 ) ( receivable ( 1,307 ) ( 1,641 ) ( 2,094 ) Income ) ( 1,641 ) ( 2,094 ) Income tax , net ) Income tax , net 588 591 ( 179 ) Prepaid Income tax , net 588 591 ( 179 ) Prepaid revenue , net 588 591 ( 179 ) Prepaid revenue share , expense and other asset ( 930 ) 459 ( 318 ) other asset ( 930 ) 459 ( 318 ) Accounts payable ( 930 ) 459 ( 318 ) Accounts payable 605 436 ( 318 ) Accounts payable 605 436 203 Accrued expense and 318 ) Accounts payable 605 436 203 Accrued expense and other ) Accounts payable 605 436 203 Accrued expense and other liability Accrued expense and other liability 713 757 1,597 Accrued revenue share expense and other liability 713 757 1,597 Accrued revenue share 254 and other liability 713 757 1,597 Accrued revenue share 254 245 757 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 1,597 Accrued revenue share 254 245 339 Deferred revenue 233 ( Accrued revenue share 254 245 339 Deferred revenue 233 ( 175 254 245 339 Deferred revenue 233 ( 175 ) 43 Net 339 Deferred revenue 233 ( 175 ) 43 Net cash provided revenue 233 ( 175 ) 43 Net cash provided by operating cash provided by operating activity 18,659 22,376 26,024 Investing activity Purchases provided by operating activity 18,659 22,376 26,024 Investing activity Purchases of by operating activity 18,659 22,376 26,024 Investing activity Purchases of property of property and equipment ( 7,358 ) ( 10,959 ) ( equipment ( 7,358 ) ( 10,959 ) ( 9,915 ) Purchases ) ( 10,959 ) ( 9,915 ) Purchases of marketable security Purchases of marketable security ( 45,444 ) ( 56,310 ) ( security ( 45,444 ) ( 56,310 ) ( 74,368 ) Maturities ) ( 56,310 ) ( 74,368 ) Maturities and sale of and sale of marketable security 38,314 51,315 62,905 Purchases of non-marketable sale of marketable security 38,314 51,315 62,905 Purchases of non-marketable investment of marketable security 38,314 51,315 62,905 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 569 ) ( 1,227 ) ( investment ( 569 ) ( 1,227 ) ( 2,172 ) Cash ) ( 1,227 ) ( 2,172 ) Cash collateral related to related to security lending ( 299 ) 1,403 ( 350 ) security lending ( 299 ) 1,403 ( 350 ) Investments in ( 299 ) 1,403 ( 350 ) Investments in reverse repurchase Investments in reverse repurchase agreement 600 ( 775 ) 425 Proceeds reverse repurchase agreement 600 ( 775 ) 425 Proceeds from divestiture agreement 600 ( 775 ) 425 Proceeds from divestiture of business Proceeds from divestiture of business 2,525 386 0 Acquisitions , net from divestiture of business 2,525 386 0 Acquisitions , net of divestiture of business 2,525 386 0 Acquisitions , net of cash intangible and other asset ( 1,448 ) ( 4,888 ) ( asset ( 1,448 ) ( 4,888 ) ( 236 ) Net ) ( 4,888 ) ( 236 ) Net cash used in used in investing activity ( 13,679 ) ( 21,055 ) ( activity ( 13,679 ) ( 21,055 ) ( 23,711 ) Financing ) ( 21,055 ) ( 23,711 ) Financing activity Net payment to stock-based award activity ( 781 ) ( 2,069 ) ( activity ( 781 ) ( 2,069 ) ( 1,612 ) Excess ) ( 2,069 ) ( 1,612 ) Excess tax benefit from benefit from stock-based award activity 481 648 548 Adjustment Payment to from stock-based award activity 481 648 548 Adjustment Payment to Class stock-based award activity 481 648 548 Adjustment Payment to Class C to Class C capital stockholder 0 0 ( 47 ) Capital Class C capital stockholder 0 0 ( 47 ) Capital transaction capital stockholder 0 0 ( 47 ) Capital transaction with Alphabet ) Capital transaction with Alphabet 0 0 ( 2,543 ) Proceeds Capital transaction with Alphabet 0 0 ( 2,543 ) Proceeds from with Alphabet 0 0 ( 2,543 ) Proceeds from issuance of debt , net of cost 10,768 11,625 13,705 Repayments of debt , net of cost 10,768 11,625 13,705 Repayments of debt ( net of cost 10,768 11,625 13,705 Repayments of debt ( 11,325 13,705 Repayments of debt ( 11,325 ) ( 11,643 ) ( debt ( 11,325 ) ( 11,643 ) ( 13,728 ) Net ) ( 11,643 ) ( 13,728 ) Net cash used in used in financing activity ( 857 ) ( 1,439 ) ( activity ( 857 ) ( 1,439 ) ( 3,677 ) Effect ) ( 1,439 ) ( 3,677 ) Effect of exchange rate cash and cash equivalent ( 3 ) ( 433 ) ( equivalent ( 3 ) ( 433 ) ( 434 ) Net ) ( 433 ) ( 434 ) Net increase ( decrease in cash and cash equivalent 4,120 ( 551 ) ( 1,798 and cash equivalent 4,120 ( 551 ) ( 1,798 ) Cash 4,120 ( 551 ) ( 1,798 ) Cash and cash equivalent equivalent at beginning of period 14,778 18,898 18,347 Cash and cash at beginning of period 14,778 18,898 18,347 Cash and cash equivalent beginning of period 14,778 18,898 18,347 Cash and cash equivalent at at end of period $ 18,898 $ 18,347 $ 16,549 Supplemental of period $ 18,898 $ 18,347 $ 16,549 Supplemental disclosure of $ 18,898 $ 18,347 $ 16,549 Supplemental disclosure of cash flow Cash paid for tax $ 1,932 $ 2,819 $ 3,338 Cash for tax $ 1,932 $ 2,819 $ 3,338 Cash paid for $ 1,932 $ 2,819 $ 3,338 Cash paid for interest 72 3,338 Cash paid for interest 72 86 96 See accompanying note Cash paid for interest 72 86 96 See accompanying note . paid for interest 72 86 96 See accompanying note . 57 96 See accompanying note . 57 Table of Contents Alphabet Inc. TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . We generate revenue primarily online advertising . On April 17 , 2013 , we sold . On April 17 , 2013 , we sold the Motorola for the year ended December 31 , 2013 . See Note year ended December 31 , 2013 . See Note 9 for , 2013 . See Note 9 for further discussion of the the sale . On April 2 , 2014 , we completed . On April 2 , 2014 , we completed a two Stock Split . See Note 12 for additional information about the Stock Split . On October 29 , 2014 , we sold . On October 29 , 2014 , we sold the Motorola for the year ended December 31 , 2013 and 2014 . year ended December 31 , 2013 and 2014 . See Note December 31 , 2013 and 2014 . See Note 9 for and 2014 . See Note 9 for further discussion of the the sale . On August 10 , 2015 , we announced . On August 10 , 2015 , we announced plan to operating structure . On October 2 , 2015 , we implemented . On October 2 , 2015 , we implemented the holding holding company reorganization on October 2 , 2015 wa accounted for reorganization on October 2 , 2015 wa accounted for a a transaction . Refer to Note 13 for additional information . Basis of asset and liability . 58 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Google Year Ended December 31 , 2013 2014 2015 Google segment Google Ended December 31 , 2013 2014 2015 Google segment Google website December 31 , 2013 2014 2015 Google segment Google website $ Google segment Google website $ 37,422 $ 45,085 $ 52,357 Google Google website $ 37,422 $ 45,085 $ 52,357 Google Network Members $ 37,422 $ 45,085 $ 52,357 Google Network Members ' website Network Members ' website ( 1 ) 13,650 14,539 15,033 Google ' website ( 1 ) 13,650 14,539 15,033 Google advertising revenue website ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 ( 1 ) 13,650 14,539 15,033 Google advertising revenue 51,072 59,624 14,539 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue 15,033 Google advertising revenue 51,072 59,624 67,390 Google other revenue ( Google advertising revenue 51,072 59,624 67,390 Google other revenue ( 1 67,390 Google other revenue ( 1 ) 4,435 6,050 7,151 Google other revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue revenue ( 1 ) 4,435 6,050 7,151 Google segment revenue $ ( 1 ) 4,435 6,050 7,151 Google segment revenue $ 55,507 7,151 Google segment revenue $ 55,507 $ 65,674 $ 74,541 Other segment revenue $ 55,507 $ 65,674 $ 74,541 Other Bets Other $ 55,507 $ 65,674 $ 74,541 Other Bets Other Bets revenue Bets Other Bets revenue $ 12 $ 327 $ 448 Consolidated Bets revenue $ 12 $ 327 $ 448 Consolidated revenue $ $ 12 $ 327 $ 448 Consolidated revenue $ 55,519 $ $ 448 Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( Consolidated revenue $ 55,519 $ 66,001 $ 74,989 ( 1 ) $ 55,519 $ 66,001 $ 74,989 ( 1 ) Prior period $ 66,001 $ 74,989 ( 1 ) Prior period amount have ( i ) vendor-specific objective 59 Table of Contents Alphabet Inc. During the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , the 2013 , 2014 , and 2015 , the amount of cash of stock option wa $ 1,174 million , $ 465 million $ 1,174 million , $ 465 million , and $ 393 465 million , and $ 393 million , respectively . We during the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , wa 2013 , 2014 , and 2015 , wa $ 1,195 million and 2015 , wa $ 1,195 million , $ 1,356 million $ 1,195 million , $ 1,356 million , and $ 1,544 1,356 million , and $ 1,544 million , respectively . Certain with high credit standing . 60 Table of Contents Alphabet Inc. around the world . In 2013 , 2014 , and 2015 world . In 2013 , 2014 , and 2015 , we 2013 , 2014 , and 2015 , we generated approximately 46 2015 , we generated approximately 46 % , 45 % , generated approximately 46 % , 45 % , and 46 % , 45 % , and 46 % of our revenue from affiliated customer represented more than 10 % of our revenue in % of our revenue in 2013 , 2014 , or 2015 our revenue in 2013 , 2014 , or 2015 . Fair 2013 , 2014 , or 2015 . Fair Value of Financial measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Include other input that and credit rating . Level 3 - Unobservable input that are liquid security with maturity beyond 12 month a current asset under under the cost method . 61 Table of Contents Alphabet Inc. liquidate them in the next 12 month , we have classified we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis building over period up to 25 year . We amortize leasehold an asset may not be 62 Table of Contents Alphabet Inc. fair market value . In 2014 , we recorded impairment of including an impairment of $ 378 million in the third quarter in the third quarter of 2014 related to a patent licensing asset were not material in 2015 . We allocate goodwill to benefit that is greater than 50 % likely to be realized For the year ended December 31 , 2013 , 2014 and year ended December 31 , 2013 , 2014 and 2015 , December 31 , 2013 , 2014 and 2015 , advertising and , 2013 , 2014 and 2015 , advertising and promotional expense promotional expense totaled approximately $ 2,389 million , $ 3,004 million $ 2,389 million , $ 3,004 million , and $ 3,186 3,004 million , and $ 3,186 million . Recent Accounting Pronouncements Recent Accounting Pronouncements In May 2014 , the Financial Accounting Standards Accounting Standards Update No . 2014-09 ( ASU 2014-09 ) `` No . 2014-09 ( ASU 2014-09 ) `` Revenue from Contracts with Customers . `` ASU 2014-09 supersedes the revenue recognition requirement “ Revenue Recognition ( Topic 605 ) ” , and requires issued and amended , ASU 2014-09 is effective for annual reporting reporting period beginning after December 15 , 2017 , including interim beginning after December 15 , 2017 , including interim period within reporting period beginning after December 15 , 2016 . We are beginning after December 15 , 2016 . We are currently in of the adoption of ASU 2014-09 on our consolidated financial statement disclosure requirement . In June 2014 , the FASB issued Accounting Accounting Standards Update No . 2014-10 ( ASU 2014-10 ) `` No . 2014-10 ( ASU 2014-10 ) `` Development Stage Entities Development Stage Entities ( Topic 915 ) : Elimination of Certain Interest Entities Guidance in Topic 810 , Consolidation . `` ASU , Consolidation . `` ASU 2014-10 remove the definition of a interest entity under ASC Topic 810 , Consolidation . We will standard in the first quarter 63 Table of Contents Alphabet Inc. Inc. and Google Inc. of 2016 on a retrospective basis . financial statement . In February 2015 , the FASB issued Accounting Accounting Standards Update No . 2015-02 ( ASU 2015-02 ) `` No . 2015-02 ( ASU 2015-02 ) `` Consolidation ( Topic ) `` Consolidation ( Topic 810 ) : Amendments to the Consolidation Analysis . `` ASU 2015-02 change the analysis that a in the first quarter of 2016 on a retrospective basis . additional disclosure . In November 2015 , the FASB issued Accounting Accounting Standards Update No . 2015-17 ( ASU 2015-17 ) “ No . 2015-17 ( ASU 2015-17 ) “ Income Taxes ( “ Income Taxes ( Topic 740 ) : Balance Sheet Classification Deferred Taxes ” . ASU 2015-17 simplifies the presentation of deferred annual period beginning after December 15 , 2016 , and interim beginning after December 15 , 2016 , and interim period therein in the fourth quarter of 2015 on a retrospective basis . of the adoption of ASU 2015-17 , the Company made the the following adjustment to the 2014 balance sheet : a $ balance sheet : a $ 1,322 million decrease to current deferred tax asset , a $ 83 million increase to noncurrent deferred tax asset , a $ 26 million decrease to current deferred and a decrease of $ 1,213 million to noncurrent deferred tax tax liability . In January 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-01 ( ASU 2016-01 ) `` No . 2016-01 ( ASU 2016-01 ) `` Financial Instruments-Overall ( `` Financial Instruments-Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities . `` ASU 2016-01 amends various aspect of the asset and liability . ASU 2016-01 is effective for annual reporting those year beginning after December 15 , 2017 . Early adoption beginning after December 15 , 2017 . Early adoption by public In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 in the cumulative amount of the cumulative amount of $ 711 million . We evaluated the in the quarter ended June 30 , 2015 would not be quarter ended June 30 , 2015 would not be material to for the year ending December 31 , 2015 . Consolidated revenue year ending December 31 , 2015 . Consolidated revenue are not impacted . Refer to Note 17 for additional information . Prior current period presentation . Note 2 . Financial Instruments We classify and marketable security within Level 1 or Level 2 in the within Level 1 or Level 2 in the fair value hierarchy derivative contract primarily within Level 2 in the fair value hierarchy investment category a of December 31 , 2014 and 2015 ( a of December 31 , 2014 and 2015 ( in million December 31 , 2014 and 2015 ( in million ) : ( in million ) : 64 Table of Contents Alphabet Inc. Google Inc. As of December 31 , 2014 Adjusted Cost Gross As of December 31 , 2014 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 9,863 $ 0 $ 0 $ Securities Cash $ 9,863 $ 0 $ 0 $ 9,863 $ $ 9,863 $ 0 $ 0 $ 9,863 $ 9,863 $ $ 0 $ 0 $ 9,863 $ 9,863 $ 0 Level $ 0 $ 9,863 $ 9,863 $ 0 Level 1 : $ 9,863 $ 9,863 $ 0 Level 1 : Money market $ 9,863 $ 0 Level 1 : Money market and other Money market and other fund 2,532 0 0 2,532 2,532 0 market and other fund 2,532 0 0 2,532 2,532 0 U.S. and other fund 2,532 0 0 2,532 2,532 0 U.S. government other fund 2,532 0 0 2,532 2,532 0 U.S. government note fund 2,532 0 0 2,532 2,532 0 U.S. government note 15,320 2,532 0 0 2,532 2,532 0 U.S. government note 15,320 37 2,532 0 U.S. government note 15,320 37 ( 4 ) 15,353 0 U.S. government note 15,320 37 ( 4 ) 15,353 1,128 government note 15,320 37 ( 4 ) 15,353 1,128 14,225 Marketable 15,320 37 ( 4 ) 15,353 1,128 14,225 Marketable equity security 37 ( 4 ) 15,353 1,128 14,225 Marketable equity security 988 ( 4 ) 15,353 1,128 14,225 Marketable equity security 988 428 1,128 14,225 Marketable equity security 988 428 ( 64 ) 1,352 14,225 Marketable equity security 988 428 ( 64 ) 1,352 0 equity security 988 428 ( 64 ) 1,352 0 1,352 18,840 988 428 ( 64 ) 1,352 0 1,352 18,840 465 ( 428 ( 64 ) 1,352 0 1,352 18,840 465 ( 68 ( 64 ) 1,352 0 1,352 18,840 465 ( 68 ) 64 ) 1,352 0 1,352 18,840 465 ( 68 ) 19,237 ) 1,352 0 1,352 18,840 465 ( 68 ) 19,237 3,660 0 1,352 18,840 465 ( 68 ) 19,237 3,660 15,577 Level 18,840 465 ( 68 ) 19,237 3,660 15,577 Level 2 : 465 ( 68 ) 19,237 3,660 15,577 Level 2 : Time ( 68 ) 19,237 3,660 15,577 Level 2 : Time deposit ) 19,237 3,660 15,577 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 2,409 0 0 2,409 Time deposit ( 1 ) 2,409 0 0 2,409 2,309 100 deposit ( 1 ) 2,409 0 0 2,409 2,309 100 Money ( 1 ) 2,409 0 0 2,409 2,309 100 Money market 1 ) 2,409 0 0 2,409 2,309 100 Money market and ) 2,409 0 0 2,409 2,309 100 Money market and other 2,409 0 0 2,409 2,309 100 Money market and other fund market and other fund ( 2 ) 1,762 0 0 1,762 other fund ( 2 ) 1,762 0 0 1,762 1,762 0 fund ( 2 ) 1,762 0 0 1,762 1,762 0 Fixed-income ( 2 ) 1,762 0 0 1,762 1,762 0 Fixed-income bond 2 ) 1,762 0 0 1,762 1,762 0 Fixed-income bond fund ) 1,762 0 0 1,762 1,762 0 Fixed-income bond fund ( 1,762 0 0 1,762 1,762 0 Fixed-income bond fund ( 3 0 Fixed-income bond fund ( 3 ) 385 0 ( 38 bond fund ( 3 ) 385 0 ( 38 ) 347 fund ( 3 ) 385 0 ( 38 ) 347 0 3 ) 385 0 ( 38 ) 347 0 347 U.S. 385 0 ( 38 ) 347 0 347 U.S. government agency 0 ( 38 ) 347 0 347 U.S. government agency 2,327 ( 38 ) 347 0 347 U.S. government agency 2,327 8 0 347 U.S. government agency 2,327 8 ( 1 ) 2,334 347 U.S. government agency 2,327 8 ( 1 ) 2,334 750 government agency 2,327 8 ( 1 ) 2,334 750 1,584 Foreign 2,327 8 ( 1 ) 2,334 750 1,584 Foreign government bond 8 ( 1 ) 2,334 750 1,584 Foreign government bond 1,828 ( 1 ) 2,334 750 1,584 Foreign government bond 1,828 22 750 1,584 Foreign government bond 1,828 22 ( 10 ) 1,840 1,584 Foreign government bond 1,828 22 ( 10 ) 1,840 0 government bond 1,828 22 ( 10 ) 1,840 0 1,840 Municipal 1,828 22 ( 10 ) 1,840 0 1,840 Municipal security 3,370 22 ( 10 ) 1,840 0 1,840 Municipal security 3,370 33 ( 10 ) 1,840 0 1,840 Municipal security 3,370 33 ( 1,840 0 1,840 Municipal security 3,370 33 ( 6 ) 3,397 0 1,840 Municipal security 3,370 33 ( 6 ) 3,397 3 Municipal security 3,370 33 ( 6 ) 3,397 3 3,394 Corporate 3,370 33 ( 6 ) 3,397 3 3,394 Corporate debt security 33 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 ( 6 ) 3,397 3 3,394 Corporate debt security 11,499 114 3 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 3,394 Corporate debt security 11,499 114 ( 122 ) 11,491 0 debt security 11,499 114 ( 122 ) 11,491 0 11,491 Agency 11,499 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 114 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 ( 122 ) 11,491 0 11,491 Agency mortgage-backed security 8,196 109 0 11,491 Agency mortgage-backed security 8,196 109 ( 42 ) 8,263 11,491 Agency mortgage-backed security 8,196 109 ( 42 ) 8,263 0 mortgage-backed security 8,196 109 ( 42 ) 8,263 0 8,263 Asset-backed 8,196 109 ( 42 ) 8,263 0 8,263 Asset-backed security 3,456 109 ( 42 ) 8,263 0 8,263 Asset-backed security 3,456 1 ( 42 ) 8,263 0 8,263 Asset-backed security 3,456 1 ( 8,263 0 8,263 Asset-backed security 3,456 1 ( 5 ) 3,452 0 8,263 Asset-backed security 3,456 1 ( 5 ) 3,452 0 Asset-backed security 3,456 1 ( 5 ) 3,452 0 3,452 35,232 3,456 1 ( 5 ) 3,452 0 3,452 35,232 287 ( 1 ( 5 ) 3,452 0 3,452 35,232 287 ( 224 ( 5 ) 3,452 0 3,452 35,232 287 ( 224 ) 5 ) 3,452 0 3,452 35,232 287 ( 224 ) 35,295 ) 3,452 0 3,452 35,232 287 ( 224 ) 35,295 4,824 0 3,452 35,232 287 ( 224 ) 35,295 4,824 30,471 Total 35,232 287 ( 224 ) 35,295 4,824 30,471 Total $ 63,935 287 ( 224 ) 35,295 4,824 30,471 Total $ 63,935 $ ( 224 ) 35,295 4,824 30,471 Total $ 63,935 $ 752 35,295 4,824 30,471 Total $ 63,935 $ 752 $ ( 292 30,471 Total $ 63,935 $ 752 $ ( 292 ) $ 63,935 $ 752 $ ( 292 ) $ 64,395 $ 18,347 $ ( 292 ) $ 64,395 $ 18,347 $ 46,048 As 292 ) $ 64,395 $ 18,347 $ 46,048 As of December $ 64,395 $ 18,347 $ 46,048 As of December 31 , $ 46,048 As of December 31 , 2015 Adjusted Cost Gross As of December 31 , 2015 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 7,380 $ 0 $ 0 $ Securities Cash $ 7,380 $ 0 $ 0 $ 7,380 $ $ 7,380 $ 0 $ 0 $ 7,380 $ 7,380 $ $ 0 $ 0 $ 7,380 $ 7,380 $ 0 Level $ 0 $ 7,380 $ 7,380 $ 0 Level 1 : $ 7,380 $ 7,380 $ 0 Level 1 : Money market $ 7,380 $ 0 Level 1 : Money market and other Money market and other fund 5,623 0 0 5,623 5,623 0 market and other fund 5,623 0 0 5,623 5,623 0 U.S. and other fund 5,623 0 0 5,623 5,623 0 U.S. government other fund 5,623 0 0 5,623 5,623 0 U.S. government note fund 5,623 0 0 5,623 5,623 0 U.S. government note 20,922 5,623 0 0 5,623 5,623 0 U.S. government note 20,922 27 5,623 0 U.S. government note 20,922 27 ( 48 ) 20,901 0 U.S. government note 20,922 27 ( 48 ) 20,901 258 government note 20,922 27 ( 48 ) 20,901 258 20,643 Marketable 20,922 27 ( 48 ) 20,901 258 20,643 Marketable equity security 27 ( 48 ) 20,901 258 20,643 Marketable equity security 692 ( 48 ) 20,901 258 20,643 Marketable equity security 692 155 258 20,643 Marketable equity security 692 155 0 847 0 847 20,643 Marketable equity security 692 155 0 847 0 847 27,237 Marketable equity security 692 155 0 847 0 847 27,237 182 equity security 692 155 0 847 0 847 27,237 182 ( security 692 155 0 847 0 847 27,237 182 ( 48 692 155 0 847 0 847 27,237 182 ( 48 ) 155 0 847 0 847 27,237 182 ( 48 ) 27,371 0 847 0 847 27,237 182 ( 48 ) 27,371 5,881 0 847 27,237 182 ( 48 ) 27,371 5,881 21,490 Level 27,237 182 ( 48 ) 27,371 5,881 21,490 Level 2 : 182 ( 48 ) 27,371 5,881 21,490 Level 2 : Time ( 48 ) 27,371 5,881 21,490 Level 2 : Time deposit ) 27,371 5,881 21,490 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 3,223 0 0 3,223 Time deposit ( 1 ) 3,223 0 0 3,223 2,012 1,211 deposit ( 1 ) 3,223 0 0 3,223 2,012 1,211 Money ( 1 ) 3,223 0 0 3,223 2,012 1,211 Money market 1 ) 3,223 0 0 3,223 2,012 1,211 Money market and ) 3,223 0 0 3,223 2,012 1,211 Money market and other 3,223 0 0 3,223 2,012 1,211 Money market and other fund market and other fund ( 2 ) 1,140 0 0 1,140 other fund ( 2 ) 1,140 0 0 1,140 1,140 0 fund ( 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income ( 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income bond 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ) 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ( 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ( 3 0 Fixed-income bond fund ( 3 ) 219 0 0 219 bond fund ( 3 ) 219 0 0 219 0 219 fund ( 3 ) 219 0 0 219 0 219 U.S. ( 3 ) 219 0 0 219 0 219 U.S. government 3 ) 219 0 0 219 0 219 U.S. government agency ) 219 0 0 219 0 219 U.S. government agency 1,367 219 0 0 219 0 219 U.S. government agency 1,367 2 0 219 U.S. government agency 1,367 2 ( 3 ) 1,366 219 U.S. government agency 1,367 2 ( 3 ) 1,366 0 government agency 1,367 2 ( 3 ) 1,366 0 1,366 Foreign 1,367 2 ( 3 ) 1,366 0 1,366 Foreign government bond 2 ( 3 ) 1,366 0 1,366 Foreign government bond 2,242 ( 3 ) 1,366 0 1,366 Foreign government bond 2,242 14 0 1,366 Foreign government bond 2,242 14 ( 23 ) 2,233 1,366 Foreign government bond 2,242 14 ( 23 ) 2,233 0 government bond 2,242 14 ( 23 ) 2,233 0 2,233 Municipal 2,242 14 ( 23 ) 2,233 0 2,233 Municipal security 3,812 14 ( 23 ) 2,233 0 2,233 Municipal security 3,812 47 ( 23 ) 2,233 0 2,233 Municipal security 3,812 47 ( 2,233 0 2,233 Municipal security 3,812 47 ( 4 ) 3,855 0 2,233 Municipal security 3,812 47 ( 4 ) 3,855 0 Municipal security 3,812 47 ( 4 ) 3,855 0 3,855 Corporate 3,812 47 ( 4 ) 3,855 0 3,855 Corporate debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13,448 Agency mortgage-backed security 9,680 48 ( 57 ) 9,671 13,448 Agency mortgage-backed security 9,680 48 ( 57 ) 9,671 0 mortgage-backed security 9,680 48 ( 57 ) 9,671 0 9,671 Asset-backed 9,680 48 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 48 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 0 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 0 ( 9,671 0 9,671 Asset-backed security 3,032 0 ( 8 ) 3,024 0 9,671 Asset-backed security 3,032 0 ( 8 ) 3,024 0 Asset-backed security 3,032 0 ( 8 ) 3,024 0 3,024 38,524 3,032 0 ( 8 ) 3,024 0 3,024 38,524 164 ( 0 ( 8 ) 3,024 0 3,024 38,524 164 ( 373 ( 8 ) 3,024 0 3,024 38,524 164 ( 373 ) 8 ) 3,024 0 3,024 38,524 164 ( 373 ) 38,315 ) 3,024 0 3,024 38,524 164 ( 373 ) 38,315 3,288 0 3,024 38,524 164 ( 373 ) 38,315 3,288 35,027 Total 38,524 164 ( 373 ) 38,315 3,288 35,027 Total $ 73,141 164 ( 373 ) 38,315 3,288 35,027 Total $ 73,141 $ ( 373 ) 38,315 3,288 35,027 Total $ 73,141 $ 346 38,315 3,288 35,027 Total $ 73,141 $ 346 $ ( 421 35,027 Total $ 73,141 $ 346 $ ( 421 ) $ 73,141 $ 346 $ ( 421 ) $ 73,066 $ 16,549 $ ( 421 ) $ 73,066 $ 16,549 $ 56,517 ( 421 ) $ 73,066 $ 16,549 $ 56,517 ( 1 ) $ 73,066 $ 16,549 $ 56,517 ( 1 ) The majority $ 16,549 $ 56,517 ( 1 ) The majority of our are foreign deposit . ( 2 ) The balance a of The balance a of December 31 , 2014 and 2015 were a of December 31 , 2014 and 2015 were related to December 31 , 2014 and 2015 were related to cash collateral of this program . ( 3 ) Fixed-inco me bond fund gross realized gain of $ 416 million , $ 238 million $ 416 million , $ 238 million , and $ 357 238 million , and $ 357 million for the year ended for the year ended December 31 , 65 Table of Contents year ended December 31 , 65 Table of Contents Alphabet Inc. Alphabet Inc. and Google Inc. 2013 , 2014 , and 2015 and Google Inc. 2013 , 2014 , and 2015 . We 2013 , 2014 , and 2015 . We recognized gross realized gross realized loss of $ 258 million , $ 85 million $ 258 million , $ 85 million , and $ 565 85 million , and $ 565 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . We 2013 , 2014 , and 2015 . We reflect these gain ) : As of December 31 , 2015 Due in 1 As of December 31 , 2015 Due in 1 year $ 31 , 2015 Due in 1 year $ 7,900 Due in Due in 1 year $ 7,900 Due in 1 year through year $ 7,900 Due in 1 year through 5 year 30,141 Due in 1 year through 5 year 30,141 Due in 5 1 year through 5 year 30,141 Due in 5 year through 5 year 30,141 Due in 5 year through 10 year 7,199 Due in 5 year through 10 year 7,199 Due after 10 5 year through 10 year 7,199 Due after 10 year 10,211 10 year 7,199 Due after 10 year 10,211 Total $ 55,451 7,199 Due after 10 year 10,211 Total $ 55,451 The following 10 year 10,211 Total $ 55,451 The following table present gross loss position a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , aggregated by December 31 , 2014 and 2015 , aggregated by investment category ) : As of December 31 , 2014 Less than 12 As of December 31 , 2014 Less than 12 Months 12 31 , 2014 Less than 12 Months 12 Months or Greater 2014 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 4,490 $ ( 4 ) $ note $ 4,490 $ ( 4 ) $ 0 $ 0 $ ( 4 ) $ 0 $ 0 $ 4,490 $ 4 ) $ 0 $ 0 $ 4,490 $ ( 4 $ 0 $ 0 $ 4,490 $ ( 4 ) U.S. 0 $ 4,490 $ ( 4 ) U.S. government agency 830 4 ) U.S. government agency 830 ( 1 ) 0 0 U.S. government agency 830 ( 1 ) 0 0 830 ( agency 830 ( 1 ) 0 0 830 ( 1 ) 830 ( 1 ) 0 0 830 ( 1 ) Foreign ( 1 ) 0 0 830 ( 1 ) Foreign government ) 0 0 830 ( 1 ) Foreign government bond 255 1 ) Foreign government bond 255 ( 7 ) 43 ( Foreign government bond 255 ( 7 ) 43 ( 3 ) bond 255 ( 7 ) 43 ( 3 ) 298 ( ( 7 ) 43 ( 3 ) 298 ( 10 ) ) 43 ( 3 ) 298 ( 10 ) Municipal security ( 3 ) 298 ( 10 ) Municipal security 877 ( ( 10 ) Municipal security 877 ( 3 ) 174 ( ) Municipal security 877 ( 3 ) 174 ( 3 ) security 877 ( 3 ) 174 ( 3 ) 1,051 ( ( 3 ) 174 ( 3 ) 1,051 ( 6 ) ) 174 ( 3 ) 1,051 ( 6 ) Corporate debt ( 3 ) 1,051 ( 6 ) Corporate debt security 5,851 6 ) Corporate debt security 5,851 ( 112 ) 225 ( Corporate debt security 5,851 ( 112 ) 225 ( 10 ) security 5,851 ( 112 ) 225 ( 10 ) 6,076 ( ( 112 ) 225 ( 10 ) 6,076 ( 122 ) ) 225 ( 10 ) 6,076 ( 122 ) Agency mortgage-backed ( 10 ) 6,076 ( 122 ) Agency mortgage-backed security 609 122 ) Agency mortgage-backed security 609 ( 1 ) 2,168 ( Agency mortgage-backed security 609 ( 1 ) 2,168 ( 41 ) security 609 ( 1 ) 2,168 ( 41 ) 2,777 ( ( 1 ) 2,168 ( 41 ) 2,777 ( 42 ) ) 2,168 ( 41 ) 2,777 ( 42 ) Asset-backed security ( 41 ) 2,777 ( 42 ) Asset-backed security 2,388 ( ( 42 ) Asset-backed security 2,388 ( 4 ) 174 ( ) Asset-backed security 2,388 ( 4 ) 174 ( 1 ) security 2,388 ( 4 ) 174 ( 1 ) 2,562 ( ( 4 ) 174 ( 1 ) 2,562 ( 5 ) ) 174 ( 1 ) 2,562 ( 5 ) Fixed-income bond ( 1 ) 2,562 ( 5 ) Fixed-income bond fund 347 5 ) Fixed-income bond fund 347 ( 38 ) 0 0 Fixed-income bond fund 347 ( 38 ) 0 0 347 ( fund 347 ( 38 ) 0 0 347 ( 38 ) 347 ( 38 ) 0 0 347 ( 38 ) Marketable ( 38 ) 0 0 347 ( 38 ) Marketable equity ) 0 0 347 ( 38 ) Marketable equity security 690 38 ) Marketable equity security 690 ( 64 ) 0 0 Marketable equity security 690 ( 64 ) 0 0 690 ( security 690 ( 64 ) 0 0 690 ( 64 ) 690 ( 64 ) 0 0 690 ( 64 ) Total ( 64 ) 0 0 690 ( 64 ) Total $ ) 0 0 690 ( 64 ) Total $ 16,337 $ ( 64 ) Total $ 16,337 $ ( 234 ) $ Total $ 16,337 $ ( 234 ) $ 2,784 $ ( $ ( 234 ) $ 2,784 $ ( 58 ) $ ) $ 2,784 $ ( 58 ) $ 19,121 $ ( $ ( 58 ) $ 19,121 $ ( 292 ) As ) $ 19,121 $ ( 292 ) As of December 31 292 ) As of December 31 , 2015 Less than 12 As of December 31 , 2015 Less than 12 Months 12 31 , 2015 Less than 12 Months 12 Months or Greater 2015 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 13,757 $ ( 48 ) $ note $ 13,757 $ ( 48 ) $ 0 $ 0 $ ( 48 ) $ 0 $ 0 $ 13,757 $ 48 ) $ 0 $ 0 $ 13,757 $ ( 48 $ 0 $ 0 $ 13,757 $ ( 48 ) U.S. 0 $ 13,757 $ ( 48 ) U.S. government agency 864 48 ) U.S. government agency 864 ( 3 ) 0 0 U.S. government agency 864 ( 3 ) 0 0 864 ( agency 864 ( 3 ) 0 0 864 ( 3 ) 864 ( 3 ) 0 0 864 ( 3 ) Foreign ( 3 ) 0 0 864 ( 3 ) Foreign government ) 0 0 864 ( 3 ) Foreign government bond 885 3 ) Foreign government bond 885 ( 18 ) 36 ( Foreign government bond 885 ( 18 ) 36 ( 5 ) bond 885 ( 18 ) 36 ( 5 ) 921 ( ( 18 ) 36 ( 5 ) 921 ( 23 ) ) 36 ( 5 ) 921 ( 23 ) Municipal security ( 5 ) 921 ( 23 ) Municipal security 1,116 ( ( 23 ) Municipal security 1,116 ( 3 ) 41 ( ) Municipal security 1,116 ( 3 ) 41 ( 1 ) security 1,116 ( 3 ) 41 ( 1 ) 1,157 ( ( 3 ) 41 ( 1 ) 1,157 ( 4 ) ) 41 ( 1 ) 1,157 ( 4 ) Corporate debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 ) 6,504 ( 57 ) ) 721 ( 23 ) 6,504 ( 57 ) Asset-backed security ( 23 ) 6,504 ( 57 ) Asset-backed security 2,508 ( ( 57 ) Asset-backed security 2,508 ( 7 ) 386 ( ) Asset-backed security 2,508 ( 7 ) 386 ( 1 ) security 2,508 ( 7 ) 386 ( 1 ) 2,894 ( ( 7 ) 386 ( 1 ) 2,894 ( 8 ) ) 386 ( 1 ) 2,894 ( 8 ) Total $ ( 1 ) 2,894 ( 8 ) Total $ 34,105 $ ( 8 ) Total $ 34,105 $ ( 315 ) $ Total $ 34,105 $ ( 315 ) $ 1,968 $ ( $ ( 315 ) $ 1,968 $ ( 106 ) $ ) $ 1,968 $ ( 106 ) $ 36,073 $ ( $ ( 106 ) $ 36,073 $ ( 421 ) During ) $ 36,073 $ ( 421 ) During the year ended During the year ended December 31 , 2013 and 2014 , year ended December 31 , 2013 and 2014 , we did December 31 , 2013 and 2014 , we did not recognize During the year ended December 31 , 2015 , we recognized year ended December 31 , 2015 , we recognized $ 281 2015 , we recognized $ 281 million of other-than-temporary impairment loss of Income . See Note 10 for further detail on other net . Securities Lending Program 66 Table of Contents Alphabet Inc. ) : As of December 31 , 2015 Remaining Contractual Maturity As of December 31 , 2015 Remaining Contractual Maturity of the Overnight and Continuous Up to 30 day 30 - 90 Days Continuous Up to 30 day 30 - 90 Days Greater Than to 30 day 30 - 90 Days Greater Than 90 Days - 90 Days Greater Than 90 Days Total U.S. government note Total U.S. government note $ 1,322 $ 31 $ 0 $ government note $ 1,322 $ 31 $ 0 $ 306 $ $ 1,322 $ 31 $ 0 $ 306 $ 1,659 U.S. $ 31 $ 0 $ 306 $ 1,659 U.S. government agency $ 0 $ 306 $ 1,659 U.S. government agency 504 77 $ 1,659 U.S. government agency 504 77 0 0 581 Corporate 1,659 U.S. government agency 504 77 0 0 581 Corporate debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $ 0 $ 306 $ 2,428 Gross $ 108 $ 0 $ 306 $ 2,428 Gross amount of $ 0 $ 306 $ 2,428 Gross amount of recognized liability lending in offsetting disclosure $ 2,428 Amounts related to agreement not lending in offsetting disclosure $ 0 Derivative Financial Instruments We recognize default . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we received December 31 , 2014 and 2015 , we received cash collateral collateral security arrangement of $ 268 million and $ 192 million $ 268 million and $ 192 million . Cash Flow Hedges these contract wa approximately $ 13.6 billion and $ 16.4 billion $ 13.6 billion and $ 16.4 billion a of December 31 16.4 billion a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . These foreign December 31 , 2014 and 2015 . These foreign exchange contract exchange contract have maturity of 36 month or le . In month or le . In 2012 , we entered into forward-starting total notional amount of $ 1.0 billion and term calling for anticipated debt issuance of $ 1.0 billion in 2014 . We of $ 1.0 billion in 2014 . We issued $ 1.0 2014 . We issued $ 1.0 billion of unsecured senior note unsecured senior note in February 2014 ( See detail in Note ( See detail in Note 4 ) . As a result for the year ended December 31 , 2014 , consistent with year ended December 31 , 2014 , consistent with the impact of the option from our 67 Table of Contents Alphabet Inc. net . As of December 31 , 2015 , the effective As of December 31 , 2015 , the effective portion of before tax effect wa $ 375 million , of which $ million , of which $ 293 million is expected to be into earnings within the next 12 month . Fair Value Hedges of these contract wa $ 1.5 billion and $ 1.8 billion $ 1.5 billion and $ 1.8 billion a of December 31 1.8 billion a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . We use December 31 , 2014 and 2015 . We use interest rate of these contract wa $ 175 million and $ 295 million $ 175 million and $ 295 million a of December 31 295 million a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . Gains and December 31 , 2014 and 2015 . Gains and loss on exchange contract outstanding wa $ 6.2 billion and $ 7.5 billion $ 6.2 billion and $ 7.5 billion a of December 31 7.5 billion a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . We also December 31 , 2014 and 2015 . We also use exchange-traded rate contract outstanding were $ 150 million and $ 50 million $ 150 million and $ 50 million a of December 31 50 million a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . 68 Table December 31 , 2014 and 2015 . 68 Table of Contents , 2014 and 2015 . 68 Table of Contents Alphabet Inc. ) : As of December 31 , 2014 Balance Sheet Location As of December 31 , 2014 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 851 $ 0 $ 851 Interest and non-current $ 851 $ 0 $ 851 Interest rate contract $ 851 $ 0 $ 851 Interest rate contract Prepaid revenue asset , current and non-current 1 0 1 Total $ 852 , current and non-current 1 0 1 Total $ 852 $ current and non-current 1 0 1 Total $ 852 $ 0 1 0 1 Total $ 852 $ 0 $ 852 Derivative 1 Total $ 852 $ 0 $ 852 Derivative Liabilities : $ 852 $ 0 $ 852 Derivative Liabilities : Level 2 852 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 0 $ 3 $ 3 Interest current liability $ 0 $ 3 $ 3 Interest rate contract $ 0 $ 3 $ 3 Interest rate contract Accrued expense liability , current and non-current 1 0 1 Total $ 1 , current and non-current 1 0 1 Total $ 1 $ current and non-current 1 0 1 Total $ 1 $ 3 1 0 1 Total $ 1 $ 3 $ 4 As 1 Total $ 1 $ 3 $ 4 As of December $ 1 $ 3 $ 4 As of December 31 , $ 4 As of December 31 , 2015 Balance Sheet Location As of December 31 , 2015 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 626 $ 2 $ 628 Total and non-current $ 626 $ 2 $ 628 Total $ 626 $ 626 $ 2 $ 628 Total $ 626 $ 2 2 $ 628 Total $ 626 $ 2 $ 628 Derivative 628 Total $ 626 $ 2 $ 628 Derivative Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued and other current liability $ 1 $ 13 $ 14 Interest current liability $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 $ 14 Interest rate contract Accrued expense liability , current and non-current 2 0 2 Total $ 3 , current and non-current 2 0 2 Total $ 3 $ current and non-current 2 0 2 Total $ 3 $ 13 2 0 2 Total $ 3 $ 13 $ 16 69 2 Total $ 3 $ 13 $ 16 69 Table of $ 3 $ 13 $ 16 69 Table of Contents Alphabet 3 $ 13 $ 16 69 Table of Contents Alphabet Inc. Portion ) Year Ended December 31 , Derivatives in Cash Flow in Cash Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract Cash Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract $ Flow Hedging Relationship 2013 2014 2015 Foreign exchange contract $ 92 2015 Foreign exchange contract $ 92 $ 929 $ 964 Interest exchange contract $ 92 $ 929 $ 964 Interest rate contract $ 92 $ 929 $ 964 Interest rate contract 86 ( $ 964 Interest rate contract 86 ( 31 ) 0 Total Interest rate contract 86 ( 31 ) 0 Total $ 178 contract 86 ( 31 ) 0 Total $ 178 $ 898 31 ) 0 Total $ 178 $ 898 $ 964 Gains 0 Total $ 178 $ 898 $ 964 Gains Reclassified from $ 178 $ 898 $ 964 Gains Reclassified from AOCI into Portion ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Revenues Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Revenues $ Foreign exchange contract Revenues $ 95 $ 171 $ 1,399 Interest contract Revenues $ 95 $ 171 $ 1,399 Interest rate contract $ 95 $ 171 $ 1,399 Interest rate contract Other income ( expense ) , net 0 4 5 Total $ 95 expense ) , net 0 4 5 Total $ 95 $ ) , net 0 4 5 Total $ 95 $ 175 0 4 5 Total $ 95 $ 175 $ 1,404 Gains 5 Total $ 95 $ 175 $ 1,404 Gains ( Losses $ 95 $ 175 $ 1,404 Gains ( Losses ) Recognized and Ineffective Portion ) ( 1 ) Year Ended December 31 1 ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Other Hedging Relationship Location 2013 2014 2015 Foreign exchange contract Other income ) , net $ ( 280 ) $ ( 279 ) ( 280 ) $ ( 279 ) $ ( 297 ) ( 279 ) $ ( 297 ) Interest rate contract Other ( expense ) , net 0 4 0 Total $ ( expense ) , net 0 4 0 Total $ ( 280 ) , net 0 4 0 Total $ ( 280 ) 4 0 Total $ ( 280 ) $ ( 275 ) ( 280 ) $ ( 275 ) $ ( 297 ) ( 275 ) $ ( 297 ) ( 1 ) Gains $ ( 297 ) ( 1 ) Gains ( loss ) in Income on Derivatives ( 2 ) Year Ended December 31 2 ) Year Ended December 31 , Derivatives in Fair Value Fair Value Hedging Relationship Location 2013 2014 2015 Foreign Exchange Hedges Value Hedging Relationship Location 2013 2014 2015 Foreign Exchange Hedges : Hedging Relationship Location 2013 2014 2015 Foreign Exchange Hedges : Foreign expense ) , net $ 16 $ 115 $ 170 Hedged , net $ 16 $ 115 $ 170 Hedged item Other $ 16 $ 115 $ 170 Hedged item Other income ( expense ) , net ( 25 ) ( 123 ) ( net ( 25 ) ( 123 ) ( 176 ) Total ) ( 123 ) ( 176 ) Total $ ( 9 176 ) Total $ ( 9 ) $ ( 8 ) ( 9 ) $ ( 8 ) $ ( 6 ) ( 8 ) $ ( 6 ) Interest Rate Hedges : expense ) , net $ 0 $ 0 $ ( 2 , net $ 0 $ 0 $ ( 2 ) Hedged 0 $ 0 $ ( 2 ) Hedged item Other income ( expense ) , net 0 0 2 Total $ 0 expense ) , net 0 0 2 Total $ 0 $ ) , net 0 0 2 Total $ 0 $ 0 0 0 2 Total $ 0 $ 0 $ 0 ( 2 Total $ 0 $ 0 $ 0 ( 2 ) $ 0 $ 0 $ 0 ( 2 ) Losses related $ 0 $ 0 ( 2 ) Losses related to the of the hedge were $ 9 million , $ 8 million $ 9 million , $ 8 million , and $ 6 8 million , and $ 6 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . 70 2013 , 2014 , and 2015 . 70 Table of Contents 2014 , and 2015 . 70 Table of Contents Alphabet Inc. on Derivatives Year Ended December 31 , Derivatives Not Designated As Designated As Hedging Instruments Location 2013 2014 2015 Foreign exchange contract As Hedging Instruments Location 2013 2014 2015 Foreign exchange contract Other Hedging Instruments Location 2013 2014 2015 Foreign exchange contract Other income loss from discontinued operation $ 118 $ 237 $ 198 Interest discontinued operation $ 118 $ 237 $ 198 Interest rate contract $ 118 $ 237 $ 198 Interest rate contract Other income ( expense ) , net 4 2 1 Total $ 122 expense ) , net 4 2 1 Total $ 122 $ ) , net 4 2 1 Total $ 122 $ 239 4 2 1 Total $ 122 $ 239 $ 199 Offsetting 1 Total $ 122 $ 239 $ 199 Offsetting of Derivatives $ 122 $ 239 $ 199 Offsetting of Derivatives , Securities condition . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , information related December 31 , 2014 and 2015 , information related to these of Assets As of December 31 , 2014 Gross Amounts Not As of December 31 , 2014 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 852 $ 0 $ 852 $ Exposed Derivatives $ 852 $ 0 $ 852 $ ( 1 $ 852 $ 0 $ 852 $ ( 1 ) ( 0 $ 852 $ ( 1 ) ( 1 ) $ $ ( 1 ) ( 1 ) $ ( 251 ) ( 1 ) $ ( 251 ) $ ( 412 ) ( 251 ) $ ( 412 ) $ 188 Reverse repurchase $ ( 412 ) $ 188 Reverse repurchase agreement 2,637 0 $ 188 Reverse repurchase agreement 2,637 0 2,637 ( 2 ) 188 Reverse repurchase agreement 2,637 0 2,637 ( 2 ) 0 Reverse repurchase agreement 2,637 0 2,637 ( 2 ) 0 0 agreement 2,637 0 2,637 ( 2 ) 0 0 ( 2,637 0 2,637 ( 2 ) 0 0 ( 2,637 ) 0 2,637 ( 2 ) 0 0 ( 2,637 ) 0 Total 2 ) 0 0 ( 2,637 ) 0 Total $ 3,489 0 0 ( 2,637 ) 0 Total $ 3,489 $ 0 2,637 ) 0 Total $ 3,489 $ 0 $ 3,489 $ 0 Total $ 3,489 $ 0 $ 3,489 $ ( 1 $ 3,489 $ 0 $ 3,489 $ ( 1 ) $ 0 $ 3,489 $ ( 1 ) $ ( 251 ) ( 1 ) $ ( 251 ) $ ( 3,049 ) ( 251 ) $ ( 3,049 ) $ 188 As of $ ( 3,049 ) $ 188 As of December 31 , $ 188 As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 628 $ 0 $ 628 $ Exposed Derivatives $ 628 $ 0 $ 628 $ ( 13 $ 628 $ 0 $ 628 $ ( 13 ) ( 0 $ 628 $ ( 13 ) ( 1 ) $ $ ( 13 ) ( 1 ) $ ( 189 ) ( 1 ) $ ( 189 ) $ ( 214 ) ( 189 ) $ ( 214 ) $ 212 Reverse repurchase $ ( 214 ) $ 212 Reverse repurchase agreement 1,590 0 $ 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 0 agreement 1,590 0 1,590 ( 2 ) 0 0 ( 1,590 0 1,590 ( 2 ) 0 0 ( 1,590 ) 0 1,590 ( 2 ) 0 0 ( 1,590 ) 0 Total 2 ) 0 0 ( 1,590 ) 0 Total $ 2,218 0 0 ( 1,590 ) 0 Total $ 2,218 $ 0 1,590 ) 0 Total $ 2,218 $ 0 $ 2,218 $ 0 Total $ 2,218 $ 0 $ 2,218 $ ( 13 $ 2,218 $ 0 $ 2,218 $ ( 13 ) $ 0 $ 2,218 $ ( 13 ) $ ( 189 ) ( 13 ) $ ( 189 ) $ ( 1,804 ) ( 189 ) $ ( 1,804 ) $ 212 ( 1 $ ( 1,804 ) $ 212 ( 1 ) The balance 1,804 ) $ 212 ( 1 ) The balance a of The balance a of December 31 , 2014 and 2015 were a of December 31 , 2014 and 2015 were related to December 31 , 2014 and 2015 were related to derivative liability master netting agreement . ( 2 ) The balance a of The balance a of December 31 , 2014 and 2015 included a of December 31 , 2014 and 2015 included $ 1,762 December 31 , 2014 and 2015 included $ 1,762 million and 2014 and 2015 included $ 1,762 million and $ 1,140 million $ 1,762 million and $ 1,140 million recorded in cash and , respectively , and $ 875 million and $ 450 million $ 875 million and $ 450 million recorded in receivable under repurchase agreement , respectively . 71 Table of Contents Alphabet Inc. of Liabilities As of December 31 , 2014 Gross Amounts Not As of December 31 , 2014 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 4 $ 0 $ 4 $ Liabilities Derivatives $ 4 $ 0 $ 4 $ ( 1 $ 4 $ 0 $ 4 $ ( 1 ) ( 0 $ 4 $ ( 1 ) ( 3 ) $ $ ( 1 ) ( 3 ) $ 0 $ 0 ) ( 3 ) $ 0 $ 0 $ 3 Securities 3 ) $ 0 $ 0 $ 3 Securities lending agreement $ 0 $ 0 $ 3 Securities lending agreement 2,778 0 $ 3 Securities lending agreement 2,778 0 2,778 0 0 ( 3 Securities lending agreement 2,778 0 2,778 0 0 ( 2,740 Securities lending agreement 2,778 0 2,778 0 0 ( 2,740 ) lending agreement 2,778 0 2,778 0 0 ( 2,740 ) 38 agreement 2,778 0 2,778 0 0 ( 2,740 ) 38 Total 0 2,778 0 0 ( 2,740 ) 38 Total $ 2,782 0 0 ( 2,740 ) 38 Total $ 2,782 $ 0 2,740 ) 38 Total $ 2,782 $ 0 $ 2,782 $ 38 Total $ 2,782 $ 0 $ 2,782 $ ( 1 $ 2,782 $ 0 $ 2,782 $ ( 1 ) $ 0 $ 2,782 $ ( 1 ) $ 0 $ ( $ ( 1 ) $ 0 $ ( 2,740 ) $ ) $ 0 $ ( 2,740 ) $ 41 As of $ ( 2,740 ) $ 41 As of December 31 , $ 41 As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 16 $ 0 $ 16 $ Liabilities Derivatives $ 16 $ 0 $ 16 $ ( 13 $ 16 $ 0 $ 16 $ ( 13 ) ( 0 $ 16 $ ( 13 ) ( 3 ) $ $ ( 13 ) ( 3 ) $ ( 3 ) ( 3 ) $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 $ 0 Securities lending agreement 3 ) $ 0 $ 0 Securities lending agreement 2,428 0 $ 0 Securities lending agreement 2,428 0 2,428 0 0 ( 0 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 ) lending agreement 2,428 0 2,428 0 0 ( 2,401 ) 27 agreement 2,428 0 2,428 0 0 ( 2,401 ) 27 Total 0 2,428 0 0 ( 2,401 ) 27 Total $ 2,444 0 0 ( 2,401 ) 27 Total $ 2,444 $ 0 2,401 ) 27 Total $ 2,444 $ 0 $ 2,444 $ 27 Total $ 2,444 $ 0 $ 2,444 $ ( 13 $ 2,444 $ 0 $ 2,444 $ ( 13 ) $ 0 $ 2,444 $ ( 13 ) $ ( 3 ) ( 13 ) $ ( 3 ) $ ( 2,401 ) ( 3 ) $ ( 2,401 ) $ 27 ( 3 $ ( 2,401 ) $ 27 ( 3 ) The balance 2,401 ) $ 27 ( 3 ) The balance a of The balance a of December 31 , 2014 and 2015 were a of December 31 , 2014 and 2015 were related to December 31 , 2014 and 2015 were related to derivative asset master netting agreement . Note 3 . Non-Marketable Investments Our non-marketable model . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , these investment December 31 , 2014 and 2015 , these investment accounted for carrying value of approximately $ 1.3 billion and $ 1.6 billion $ 1.3 billion and $ 1.6 billion , respectively , and a carrying value of $ 1.8 billion and $ 2.6 billion $ 1.8 billion and $ 2.6 billion , respectively . For fair value wa approximately $ 7.5 billion a of December 31 7.5 billion a of December 31 , 2015 . The fair a of December 31 , 2015 . The fair value of and are classified within Level 3 in the fair value hierarchy for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . Our 2013 , 2014 , and 2015 . Our share of gain for the year ended December 31 , 2015 wa a net year ended December 31 , 2015 wa a net loss of net loss of approximately $ 227 million and not material for for the year ended December 31 , 2013 and 2014 . year ended December 31 , 2013 and 2014 . We reflect December 31 , 2013 and 2014 . We reflect these loss that are VIEs is $ 302 million a of December 31 302 million a of December 31 , 2015 with the maximum a of December 31 , 2015 with the maximum exposure of the maximum exposure of $ 316 million . The maximum exposure arrangement and capital structure . 72 Table of Contents Alphabet Inc. are categorized accordingly a Level 3 in the fair value hierarchy above and a of December 31 , 2014 and 2015 , a of December 31 , 2014 and 2015 , the fair December 31 , 2014 and 2015 , the fair value recorded for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . The 2013 , 2014 , and 2015 . The following table present significant unobservable input ( Level 3 ) ( in million ) in million ) : Level 3 Balance a of December 31 3 Balance a of December 31 , 2014 $ 90 Purchases a of December 31 , 2014 $ 90 Purchases , issuance December 31 , 2014 $ 90 Purchases , issuance , and issuance , and settlement ( 1 ) 934 Balance a of and settlement ( 1 ) 934 Balance a of December 31 934 Balance a of December 31 , 2015 $ 1,024 ( a of December 31 , 2015 $ 1,024 ( 1 ) December 31 , 2015 $ 1,024 ( 1 ) Purchases of , 2015 $ 1,024 ( 1 ) Purchases of security included of security included our $ 900 million investment in SpaceX , company , made during January 2015 . Note 4 . Debt during January 2015 . Note 4 . Debt Short-Term Debt We program of up to $ 3.0 billion through the issuance of purpose . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we had December 31 , 2014 and 2015 , we had $ 2.0 2015 , we had $ 2.0 billion of outstanding commercial paper a weighted-average interest rate of 0.1 % and 0.2 % , rate of 0.1 % and 0.2 % , respectively . In , we have a $ 3.0 billion revolving credit facility expiring credit facility expiring in July 2016 . The interest rate for rate . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we were December 31 , 2014 and 2015 , we were in compliance credit facility a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . The estimated December 31 , 2014 and 2015 . The estimated fair value carrying value a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . 73 Table December 31 , 2014 and 2015 . 73 Table of Contents , 2014 and 2015 . 73 Table of Contents Alphabet Inc. Long-Term Debt We issued $ 1.0 billion of unsecured senior note senior note ( the `` 2014 Notes `` ) in February Notes `` ) in February 2014 and $ 3.0 billion of in February 2014 and $ 3.0 billion of unsecured senior note ( collectively , the `` 2011 Notes `` ) in May Notes `` ) in May 2011 . We used the net from the issuance of the 2011 Notes to repay a portion from the issuance of the 2014 Notes for the repayment of the principal amount of our 2011 Notes which matured on May Notes which matured on May 19 , 2014 and for general matured on May 19 , 2014 and for general corporate purpose ) : As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Short-Term Portion of As of December 31 , 2015 Short-Term Portion of Long-Term Debt Short-Term Portion of Long-Term Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 0 $ due on May 19 , 2016 $ 0 $ 1,000 Capital May 19 , 2016 $ 0 $ 1,000 Capital Lease Obligation , 2016 $ 0 $ 1,000 Capital Lease Obligation 10 225 $ 1,000 Capital Lease Obligation 10 225 Total Short-Term Portion of 1,000 Capital Lease Obligation 10 225 Total Short-Term Portion of Long-Term Portion of Long-Term Debt $ 10 $ 1,225 Long-Term Debt 2.125 Long-Term Debt $ 10 $ 1,225 Long-Term Debt 2.125 % Notes 10 $ 1,225 Long-Term Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 1,000 $ due on May 19 , 2016 $ 1,000 $ 0 3.625 May 19 , 2016 $ 1,000 $ 0 3.625 % Notes , 2016 $ 1,000 $ 0 3.625 % Notes due on 2016 $ 1,000 $ 0 3.625 % Notes due on May % Notes due on May 19 , 2021 1,000 1,000 3.375 due on May 19 , 2021 1,000 1,000 3.375 % Notes on May 19 , 2021 1,000 1,000 3.375 % Notes due May 19 , 2021 1,000 1,000 3.375 % Notes due on 19 , 2021 1,000 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 Unamortized due on February 25 , 2024 1,000 1,000 Unamortized discount for on February 25 , 2024 1,000 1,000 Unamortized discount for the February 25 , 2024 1,000 1,000 Unamortized discount for the Notes for the Notes above ( 8 ) ( 5 ) Subtotal above ( 8 ) ( 5 ) Subtotal 2,992 1,995 Capital ) ( 5 ) Subtotal 2,992 1,995 Capital Lease Obligation 236 ( 5 ) Subtotal 2,992 1,995 Capital Lease Obligation 236 0 2,992 1,995 Capital Lease Obligation 236 0 Total Long-Term Debt $ 1,995 Capital Lease Obligation 236 0 Total Long-Term Debt $ 3,228 0 Total Long-Term Debt $ 3,228 $ 1,995 The effective interest Long-Term Debt $ 3,228 $ 1,995 The effective interest yield of of the Notes due in 2016 , 2021 , and 2024 Notes due in 2016 , 2021 , and 2024 were 2.241 2016 , 2021 , and 2024 were 2.241 % , 3.734 2021 , and 2024 were 2.241 % , 3.734 % , 2024 were 2.241 % , 3.734 % , and 3.377 % , 3.734 % , and 3.377 % , respectively . Interest respectively . Interest on the 2011 and 2014 Notes is payable Interest on the 2011 and 2014 Notes is payable semi-annually . is payable semi-annually . The 2011 and 2014 Notes rank equally semi-annually . The 2011 and 2014 Notes rank equally with each . We may redeem the 2011 and 2014 Notes at any may redeem the 2011 and 2014 Notes at any time in any financial covenant under the 2011 Notes or the 2014 Notes the 2011 Notes or the 2014 Notes . The total estimated estimated fair value of the 2011 and 2014 Notes wa approximately value of the 2011 and 2014 Notes wa approximately $ 3.1 2014 Notes wa approximately $ 3.1 billion at both December 31 3.1 billion at both December 31 , 2014 and 2015 . at both December 31 , 2014 and 2015 . The fair December 31 , 2014 and 2015 . The fair value of fair value of the outstanding 2011 and 2014 Notes wa determined of the outstanding 2011 and 2014 Notes wa determined based on is categorized accordingly a Level 2 in the fair value hierarchy value hierarchy . In August 2013 , we entered into a on certain property expiring in 2028 . We intend to exercise to purchase the property in 2016 , and a such the carrying value a of December 31 , 2014 and 2015 . a of December 31 , 2014 and 2015 . As of December 31 , 2014 and 2015 . As of December 31 2015 . As of December 31 , 2015 , aggregate future As of December 31 , 2015 , aggregate future principal payment million ) : Years Ending 2016 $ 1,225 2017 0 2018 : Years Ending 2016 $ 1,225 2017 0 2018 0 2019 Years Ending 2016 $ 1,225 2017 0 2018 0 2019 0 Ending 2016 $ 1,225 2017 0 2018 0 2019 0 Thereafter 2016 $ 1,225 2017 0 2018 0 2019 0 Thereafter 2,000 $ 1,225 2017 0 2018 0 2019 0 Thereafter 2,000 Total 1,225 2017 0 2018 0 2019 0 Thereafter 2,000 Total $ 2017 0 2018 0 2019 0 Thereafter 2,000 Total $ 3,225 2018 0 2019 0 Thereafter 2,000 Total $ 3,225 In January 0 Thereafter 2,000 Total $ 3,225 In January 2016 , the Total $ 3,225 In January 2016 , the board of director to issue up to $ 5.0 billion of commercial paper from to enter into a $ 4.0 billion revolving credit facility to replace Google 's existing $ 3.0 billion revolving credit facility . billion revolving credit facility . 74 Table of Contents Alphabet Inc. and Google Inc . Note 5 . Balance Sheet Components Property ) : As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Land and building As of December 31 , 2015 Land and building $ 13,326 2015 Land and building $ 13,326 $ 16,518 Information technology asset and building $ 13,326 $ 16,518 Information technology asset 10,918 13,645 $ 16,518 Information technology asset 10,918 13,645 Construction in progress 6,555 16,518 Information technology asset 10,918 13,645 Construction in progress 6,555 7,324 10,918 13,645 Construction in progress 6,555 7,324 Leasehold improvement 1,868 2,576 13,645 Construction in progress 6,555 7,324 Leasehold improvement 1,868 2,576 Furniture progress 6,555 7,324 Leasehold improvement 1,868 2,576 Furniture and fixture 79 6,555 7,324 Leasehold improvement 1,868 2,576 Furniture and fixture 79 83 1,868 2,576 Furniture and fixture 79 83 Property and equipment , 2,576 Furniture and fixture 79 83 Property and equipment , gross Property and equipment , gross 32,746 40,146 Less : accumulated depreciation and equipment , gross 32,746 40,146 Less : accumulated depreciation and accumulated depreciation and amortization ( 8,863 ) ( 11,130 ) Property amortization ( 8,863 ) ( 11,130 ) Property and equipment , and equipment , net $ 23,883 $ 29,016 Property under capital , net $ 23,883 $ 29,016 Property under capital lease with a cost basis of $ 258 million wa included in land and building a of December 31 , 2015 . Prepaid Revenue a of December 31 , 2015 . Prepaid Revenue Share , Motorola Mobile business on October 29 , 2014 ( see Note business on October 29 , 2014 ( see Note 9 for , 2014 ( see Note 9 for additional information ) , Receivable `` ) due October 2017 from Lenovo . The Note an effective interest rate of 4.5 % . The outstanding balance ) : As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Principal of the As of December 31 , 2015 Principal of the Note Receivable of the Note Receivable $ 1,500 $ 1,448 Less : unamortized Note Receivable $ 1,500 $ 1,448 Less : unamortized discount for for the Note Receivable ( 175 ) ( 112 ) Total Receivable ( 175 ) ( 112 ) Total $ 1,325 $ ( 112 ) Total $ 1,325 $ 1,336 As of December ) Total $ 1,325 $ 1,336 As of December 31 , $ 1,336 As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we did December 31 , 2014 and 2015 , we did not recognize Total Balance a of December 31 , 2012 $ ( 73 a of December 31 , 2012 $ ( 73 ) $ 31 , 2012 $ ( 73 ) $ 604 $ 7 $ ( 73 ) $ 604 $ 7 $ 538 Other 73 ) $ 604 $ 7 $ 538 Other comprehensive income $ 604 $ 7 $ 538 Other comprehensive income ( loss ( loss ) before reclassification 89 ( 392 ) 112 ( ) before reclassification 89 ( 392 ) 112 ( 191 ) reclassification 89 ( 392 ) 112 ( 191 ) Amounts reclassified ( 392 ) 112 ( 191 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 162 ) ( 60 reclassified from AOCI 0 ( 162 ) ( 60 ) ( 0 ( 162 ) ( 60 ) ( 222 ) Other ) ( 60 ) ( 222 ) Other comprehensive income ( comprehensive income ( loss ) 89 ( 554 ) 52 ( ( loss ) 89 ( 554 ) 52 ( 413 ) ) 89 ( 554 ) 52 ( 413 ) Balance a ( 554 ) 52 ( 413 ) Balance a of December ) Balance a of December 31 , 2013 $ 16 $ a of December 31 , 2013 $ 16 $ 50 $ December 31 , 2013 $ 16 $ 50 $ 59 $ , 2013 $ 16 $ 50 $ 59 $ 125 75 $ 16 $ 50 $ 59 $ 125 75 Table of $ 50 $ 59 $ 125 75 Table of Contents Alphabet 50 $ 59 $ 125 75 Table of Contents Alphabet Inc. Total Balance a of December 31 , 2013 $ 16 $ a of December 31 , 2013 $ 16 $ 50 $ December 31 , 2013 $ 16 $ 50 $ 59 $ , 2013 $ 16 $ 50 $ 59 $ 125 Other $ 16 $ 50 $ 59 $ 125 Other comprehensive income $ 50 $ 59 $ 125 Other comprehensive income ( loss loss ) before reclassification ( 996 ) 505 651 160 Amounts before reclassification ( 996 ) 505 651 160 Amounts reclassified from reclassification ( 996 ) 505 651 160 Amounts reclassified from AOCI ( 996 ) 505 651 160 Amounts reclassified from AOCI 0 160 Amounts reclassified from AOCI 0 ( 134 ) ( 124 reclassified from AOCI 0 ( 134 ) ( 124 ) ( 0 ( 134 ) ( 124 ) ( 258 ) Other ) ( 124 ) ( 258 ) Other comprehensive income ( income ( loss ) ( 996 ) 371 527 ( 98 loss ) ( 996 ) 371 527 ( 98 ) Balance ) ( 996 ) 371 527 ( 98 ) Balance a 996 ) 371 527 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 $ ( 980 a of December 31 , 2014 $ ( 980 ) $ 31 , 2014 $ ( 980 ) $ 421 $ 586 $ ( 980 ) $ 421 $ 586 $ 27 Foreign 980 ) $ 421 $ 586 $ 27 Foreign Currency Translation $ 421 $ 586 $ 27 Foreign Currency Translation Adjustments Unrealized Total Balance a of December 31 , 2014 $ ( 980 a of December 31 , 2014 $ ( 980 ) $ 31 , 2014 $ ( 980 ) $ 421 $ 586 $ ( 980 ) $ 421 $ 586 $ 27 Other 980 ) $ 421 $ 586 $ 27 Other comprehensive income $ 421 $ 586 $ 27 Other comprehensive income ( loss loss ) before reclassification ( 1,067 ) ( 715 ) 676 reclassification ( 1,067 ) ( 715 ) 676 ( 1,106 ) 1,067 ) ( 715 ) 676 ( 1,106 ) Amounts reclassified ( 715 ) 676 ( 1,106 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 208 ( 1,003 ) ( Amounts reclassified from AOCI 0 208 ( 1,003 ) ( 795 from AOCI 0 208 ( 1,003 ) ( 795 ) Other 208 ( 1,003 ) ( 795 ) Other comprehensive income ( income ( loss ) ( 1,067 ) ( 507 ) ( ) ( 1,067 ) ( 507 ) ( 327 ) ( ) ( 507 ) ( 327 ) ( 1,901 ) Balance ) ( 327 ) ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 $ ( 2,047 a of December 31 , 2015 $ ( 2,047 ) $ 31 , 2015 $ ( 2,047 ) $ ( 86 ) ( 2,047 ) $ ( 86 ) $ 259 $ ( $ ( 86 ) $ 259 $ ( 1,874 ) The ) $ 259 $ ( 1,874 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2013 31 , AOCI Components Location 2013 2014 2015 Unrealized gain ( , AOCI Components Location 2013 2014 2015 Unrealized gain ( loss AOCI Components Location 2013 2014 2015 Unrealized gain ( loss ) expense ) , net $ 158 $ 153 $ ( 208 , net $ 158 $ 153 $ ( 208 ) Net 158 $ 153 $ ( 208 ) Net Income ( loss loss ) from discontinued operation 43 0 0 Provision for income ) from discontinued operation 43 0 0 Provision for income tax from discontinued operation 43 0 0 Provision for income tax ( Provision for income tax ( 39 ) ( 19 ) 0 tax ( 39 ) ( 19 ) 0 Net of tax 39 ) ( 19 ) 0 Net of tax $ 162 0 Net of tax $ 162 $ 134 $ ( 208 of tax $ 162 $ 134 $ ( 208 ) Unrealized 162 $ 134 $ ( 208 ) Unrealized gain on cash Foreign exchange contract Revenue $ 95 $ 171 $ 1,399 Interest contract Revenue $ 95 $ 171 $ 1,399 Interest rate contract $ 95 $ 171 $ 1,399 Interest rate contract Other income ( expense ) , net 0 4 5 Provision for income expense ) , net 0 4 5 Provision for income tax ) , net 0 4 5 Provision for income tax ( Provision for income tax ( 35 ) ( 51 ) ( tax ( 35 ) ( 51 ) ( 401 ) Net ) ( 51 ) ( 401 ) Net of tax $ ) Net of tax $ 60 $ 124 $ 1,003 Total of tax $ 60 $ 124 $ 1,003 Total amount reclassified $ 60 $ 124 $ 1,003 Total amount reclassified , net , net of tax $ 222 $ 258 $ 795 Note of tax $ 222 $ 258 $ 795 Note 6 . $ 222 $ 258 $ 795 Note 6 . Acquisitions 2015 $ 258 $ 795 Note 6 . Acquisitions 2015 Acquisitions bebop 795 Note 6 . Acquisitions 2015 Acquisitions bebop Technologies In December Acquisitions bebop Technologies In December 2015 , we completed the acquisition with the close wa $ 272 million , of which $ million , of which $ 1 million wa paid in cash paid in cash and $ 271 million wa paid in the issued a total of approximately 514 thousand share of Alphabet Class of Alphabet Class C capital 76 Table of Contents Alphabet Inc. total purchase price of $ 272 million , $ 28 million $ 272 million , $ 28 million wa cash acquired , wa cash acquired , $ 59 million wa attributed to intangible to intangible asset , $ 206 million wa attributed to goodwill to goodwill , and $ 21 million wa attributed to net . The goodwill of $ 206 million is primarily attributable to During the year ended December 31 , 2015 , we completed year ended December 31 , 2015 , we completed other acquisition total consideration of approximately $ 263 million . In aggregate , . In aggregate , $ 4 million wa cash acquired , wa cash acquired , $ 88 million wa attributed to intangible to intangible asset , $ 138 million wa attributed to goodwill to goodwill , and $ 33 million wa attributed to net tax purpose is approximately $ 20 million . Pro forma result during the year ended December 31 , 2015 , patent and year ended December 31 , 2015 , patent and developed technology a weighted-average useful life of 4.1 year , customer relationship have a weighted-average useful life of 4.0 year , and trade name a weighted-average useful life of 6.8 year . 2014 Acquisitions Nest life of 6.8 year . 2014 Acquisitions Nest In February 2014 2014 Acquisitions Nest In February 2014 , we completed the acquisition , we had an approximately 12 % ownership interest in Nest . Of the total $ 2.6 billion purchase price and the held equity interest of $ 152 million , $ 51 million $ 152 million , $ 51 million wa cash acquired , wa cash acquired , $ 430 million wa attributed to intangible to intangible asset , $ 2.3 billion wa attributed to goodwill to goodwill , and $ 84 million wa attributed to net . The goodwill of $ 2.3 billion is primarily attributable to . The gain of $ 103 million a a result of for the year ended December 31 , 2014 . Dropcam In year ended December 31 , 2014 . Dropcam In July 2014 2014 . Dropcam In July 2014 , Nest completed the acquisition video , for approximately $ 517 million in cash . With total purchase price of $ 517 million , $ 11 million $ 517 million , $ 11 million wa cash acquired , wa cash acquired , $ 55 million wa attributed to intangible to intangible asset , $ 452 million wa attributed to goodwill to goodwill , and $ 1 million wa attributed to net . The goodwill of $ 452 million is primarily attributable to purpose . Skybox In August 2014 , we completed the acquisition company , for approximately $ 478 million in cash . We total purchase price of $ 478 million , $ 6 million $ 478 million , $ 6 million wa cash acquired , wa cash acquired , $ 69 million wa attributed to intangible to intangible asset , $ 388 million wa attributed to goodwill to goodwill , and $ 15 million 77 Table of Contents , and $ 15 million 77 Table of Contents Alphabet Inc. . The goodwill of $ 388 million is primarily attributable to During the year ended December 31 , 2014 , we completed year ended December 31 , 2014 , we completed other acquisition total consideration of approximately $ 1,466 million , which includes the held equity interest of $ 33 million . In aggregate , . In aggregate , $ 65 million wa cash acquired , wa cash acquired , $ 405 million wa attributed to intangible to intangible asset , $ 1,045 million wa attributed to goodwill to goodwill , and $ 49 million wa attributed to net tax purpose is approximately $ 55 million . Pro forma result during the year ended December 31 , 2014 , patent and year ended December 31 , 2014 , patent and developed technology a weighted-average useful life of 5.1 year , customer relationship have a weighted-average useful life of 4.5 year , and trade name a weighted-average useful life of 6.9 year . Note 7 . of 6.9 year . Note 7 . Collaboration Agreement On September . Collaboration Agreement On September 18 , 2013 , we announced Agreement On September 18 , 2013 , we announced the formation statement . As of December 31 , 2015 , Google ha As of December 31 , 2015 , Google ha contributed $ , Google ha contributed $ 240 million to Calico in exchange unit . As of December 31 , 2015 , Google ha As of December 31 , 2015 , Google ha also committed to fund an additional $ 490 million on an as-needed basis as-needed basis . In September 2014 , AbbVie Inc. ( AbbVie cancer . As of December 31 , 2015 , AbbVie ha As of December 31 , 2015 , AbbVie ha contributed $ , AbbVie ha contributed $ 750 million to fund the collaboration commitment . As of December 31 , 2015 , Calico ha As of December 31 , 2015 , Calico ha contributed $ , Calico ha contributed $ 250 million and committed up to up to an additional $ 500 million . Calico will use next few year . Note 8 . Goodwill and Other Intangible in the fourth quarter of 2015 , we have multiple operating structure . Refer to Note 16 for further information . In for the year ended December 31 , 2014 and 2015 were year ended December 31 , 2014 and 2015 were a follows December 31 , 2014 and 2015 were a follows ( in ( in million ) : 78 Table of Contents Alphabet Inc. Consolidated Balance a of December 31 , 2013 $ 11,492 $ a of December 31 , 2013 $ 11,492 $ — $ December 31 , 2013 $ 11,492 $ — $ 11,492 Acquisitions $ 11,492 $ — $ 11,492 Acquisitions 4,208 — 4,208 Dispositions $ — $ 11,492 Acquisitions 4,208 — 4,208 Dispositions ( 43 $ 11,492 Acquisitions 4,208 — 4,208 Dispositions ( 43 ) — 4,208 — 4,208 Dispositions ( 43 ) — ( 43 ) ( 43 ) — ( 43 ) Foreign currency translation and translation and other adjustment ( 58 ) — ( 58 ) ( 58 ) — ( 58 ) Balance a of December ) Balance a of December 31 , 2014 $ 15,599 $ a of December 31 , 2014 $ 15,599 $ — $ December 31 , 2014 $ 15,599 $ — $ 15,599 Acquisitions $ 15,599 $ — $ 15,599 Acquisitions 139 — 139 Foreign $ — $ 15,599 Acquisitions 139 — 139 Foreign currency translation $ 15,599 Acquisitions 139 — 139 Foreign currency translation and other translation and other adjustment ( 71 ) — ( 71 ) ( 71 ) — ( 71 ) Allocation in the fourth in the fourth quarter of 2015 ( 416 ) 416 — fourth quarter of 2015 ( 416 ) 416 — Acquisitions 201 of 2015 ( 416 ) 416 — Acquisitions 201 4 205 416 ) 416 — Acquisitions 201 4 205 Foreign currency translation ) 416 — Acquisitions 201 4 205 Foreign currency translation and 416 — Acquisitions 201 4 205 Foreign currency translation and other currency translation and other adjustment 4 ( 7 ) ( 3 and other adjustment 4 ( 7 ) ( 3 ) Balance 4 ( 7 ) ( 3 ) Balance a of December ) Balance a of December 31 , 2015 $ 15,456 $ a of December 31 , 2015 $ 15,456 $ 413 $ December 31 , 2015 $ 15,456 $ 413 $ 15,869 Other , 2015 $ 15,456 $ 413 $ 15,869 Other Intangible Assets $ 15,456 $ 413 $ 15,869 Other Intangible Assets Information regarding ) : As of December 31 , 2014 Gross Carrying Amount As of December 31 , 2014 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 6,547 $ 2,513 $ 4,034 Customer developed technology $ 6,547 $ 2,513 $ 4,034 Customer relationship 1,410 $ 6,547 $ 2,513 $ 4,034 Customer relationship 1,410 1,168 242 2,513 $ 4,034 Customer relationship 1,410 1,168 242 Trade name and $ 4,034 Customer relationship 1,410 1,168 242 Trade name and other 4,034 Customer relationship 1,410 1,168 242 Trade name and other 696 242 Trade name and other 696 365 331 Total $ 8,653 Trade name and other 696 365 331 Total $ 8,653 $ name and other 696 365 331 Total $ 8,653 $ 4,046 696 365 331 Total $ 8,653 $ 4,046 $ 4,607 As 331 Total $ 8,653 $ 4,046 $ 4,607 As of December $ 8,653 $ 4,046 $ 4,607 As of December 31 , $ 4,607 As of December 31 , 2015 Gross Carrying Amount As of December 31 , 2015 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 6,592 $ 3,213 $ 3,379 Customer developed technology $ 6,592 $ 3,213 $ 3,379 Customer relationship 1,343 $ 6,592 $ 3,213 $ 3,379 Customer relationship 1,343 1,201 142 3,213 $ 3,379 Customer relationship 1,343 1,201 142 Trade name and $ 3,379 Customer relationship 1,343 1,201 142 Trade name and other 3,379 Customer relationship 1,343 1,201 142 Trade name and other 795 142 Trade name and other 795 469 326 Total $ 8,730 Trade name and other 795 469 326 Total $ 8,730 $ name and other 795 469 326 Total $ 8,730 $ 4,883 795 469 326 Total $ 8,730 $ 4,883 $ 3,847 Patents 326 Total $ 8,730 $ 4,883 $ 3,847 Patents and developed $ 8,730 $ 4,883 $ 3,847 Patents and developed technology , the date of purchase of 7.8 year , 6.0 year , purchase of 7.8 year , 6.0 year , and 5.4 year , 6.0 year , and 5.4 year , respectively . Amortization purchased intangible asset wa $ 1,011 million , $ 1,079 million $ 1,011 million , $ 1,079 million , and $ 892 1,079 million , and $ 892 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . During 2013 , 2014 , and 2015 . During the year ended During the year ended December 31 , 2014 , we recorded year ended December 31 , 2014 , we recorded an impairment cost of revenue of $ 378 million related to a patent date and fall within level 3 in fair value hierarchy . for the year ended December 31 , 2015 . 79 Table year ended December 31 , 2015 . 79 Table of Contents December 31 , 2015 . 79 Table of Contents Alphabet Inc. Google Inc. As of December 31 , 2015 , expected amortization As of December 31 , 2015 , expected amortization expense for ( in million ) : 2016 $ 806 2017 724 2018 million ) : 2016 $ 806 2017 724 2018 637 2019 ) : 2016 $ 806 2017 724 2018 637 2019 528 : 2016 $ 806 2017 724 2018 637 2019 528 2020 2016 $ 806 2017 724 2018 637 2019 528 2020 434 $ 806 2017 724 2018 637 2019 528 2020 434 Thereafter 806 2017 724 2018 637 2019 528 2020 434 Thereafter 718 2017 724 2018 637 2019 528 2020 434 Thereafter 718 $ 724 2018 637 2019 528 2020 434 Thereafter 718 $ 3,847 2018 637 2019 528 2020 434 Thereafter 718 $ 3,847 Note 2019 528 2020 434 Thereafter 718 $ 3,847 Note 9 . 2020 434 Thereafter 718 $ 3,847 Note 9 . Discontinued Operations Thereafter 718 $ 3,847 Note 9 . Discontinued Operations Motorola Mobile Operations Motorola Mobile On October 29 , 2014 , we closed Mobile On October 29 , 2014 , we closed the sale purchase price of approximately $ 2.9 billion , including $ 1.4 2.9 billion , including $ 1.4 billion paid at close , close , comprised of $ 660 million in cash and $ million in cash and $ 750 million in Lenovo ordinary share in Lenovo ordinary share ( 519.1 million share ) . The ) . The remaining $ 1.5 billion wa paid in the an indemnification liability of $ 130 million . The sale resulted in a gain of $ 740 million , net of tax for the year ended December 31 , 2014 . Incremental to year ended December 31 , 2014 . Incremental to this net recognized additional income of $ 254 million , net of tax for the year ended December 31 , 2014 . The financial year ended December 31 , 2014 . The financial result of for the year ended December 31 , 2013 and 2014 ( year ended December 31 , 2013 and 2014 ( in million December 31 , 2013 and 2014 ( in million ) : ) : Year Ended December 31 , 2013 2014 ( 1 Year Ended December 31 , 2013 2014 ( 1 ) Revenues Ended December 31 , 2013 2014 ( 1 ) Revenues $ 31 , 2013 2014 ( 1 ) Revenues $ 4,306 $ ( 1 ) Revenues $ 4,306 $ 5,486 Loss from discontinued ) Revenues $ 4,306 $ 5,486 Loss from discontinued operation before operation before income tax ( 1,403 ) ( 177 ) Benefits tax ( 1,403 ) ( 177 ) Benefits from/ ( Provision Provision for ) income tax 270 ( 47 ) Gain on ) income tax 270 ( 47 ) Gain on disposal 0 47 ) Gain on disposal 0 740 Net ( loss ) ) Gain on disposal 0 740 Net ( loss ) income from discontinued operation $ ( 1,133 ) $ 516 ( 1 $ ( 1,133 ) $ 516 ( 1 ) The operating 1,133 ) $ 516 ( 1 ) The operating result of Statements of Income from January 1 , 2014 through October 29 Income from January 1 , 2014 through October 29 , 2014 1 , 2014 through October 29 , 2014 , the date 2014 through October 29 , 2014 , the date of divestiture the date of divestiture . 80 Table of Contents Alphabet Inc. Cash and cash equivalent $ 160 Accounts receivable 1,103 Inventories 217 equivalent $ 160 Accounts receivable 1,103 Inventories 217 Prepaid expense and 160 Accounts receivable 1,103 Inventories 217 Prepaid expense and other current expense and other current asset 357 Prepaid expense and other asset and other asset , non-current 290 Property and equipment , net Property and equipment , net 542 Intangible asset , net 985 542 Intangible asset , net 985 Goodwill 43 Total asset $ asset , net 985 Goodwill 43 Total asset $ 3,697 Liabilities Goodwill 43 Total asset $ 3,697 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 1,238 Accrued compensation and benefit 163 1,238 Accrued compensation and benefit 163 Accrued expense and other current expense and other current liability 10 Deferred revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Motorola liability 250 Total liability $ 1,826 Motorola Home On April 17 1,826 Motorola Home On April 17 , 2013 , we sold Home On April 17 , 2013 , we sold the Motorola for consideration of approximately $ 2,412 million in cash , including , including cash of $ 2,238 million received at the date certain post-close adjustment of $ 174 million received in the third in the third quarter of 2013 , and approximately $ 175 2013 , and approximately $ 175 million in Arris ' common Arris ' common stock ( 10.6 million share ) . Subsequent transaction , we own approximately 7.8 % of the outstanding share an indemnification liability of $ 175 million , the majority of a net gain of $ 757 million , which wa presented for the year ended December 31 , 2013 . The financial year ended December 31 , 2013 . The financial result of for the year ended December 31 , 2013 ( in million year ended December 31 , 2013 ( in million ) : ) : Year Ended December 31 , 2013 ( 1 ) Year Ended December 31 , 2013 ( 1 ) Revenues $ December 31 , 2013 ( 1 ) Revenues $ 804 Loss ( 1 ) Revenues $ 804 Loss from discontinued operation before operation before income tax ( 67 ) Benefits from income tax ) Benefits from income tax 16 Gain on disposal 757 Net tax 16 Gain on disposal 757 Net income from discontinued operation income from discontinued operation $ 706 ( 1 ) The operating discontinued operation $ 706 ( 1 ) The operating result of Statements of Income from January 1 , 2013 through April 17 Income from January 1 , 2013 through April 17 , 2013 1 , 2013 through April 17 , 2013 , the date 2013 through April 17 , 2013 , the date of divestiture the date of divestiture . 81 Table of Contents Alphabet Inc. Assets : Accounts receivable $ 424 Inventories 228 Deferred income tax Accounts receivable $ 424 Inventories 228 Deferred income tax , net Deferred income tax , net 144 Prepaid and other current asset Prepaid and other current asset 152 Property and equipment , net Property and equipment , net 282 Intangible asset , net 701 282 Intangible asset , net 701 Other asset , non-current 182 701 Other asset , non-current 182 Total asset $ 2,113 Liabilities non-current 182 Total asset $ 2,113 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 169 Accrued expense and other liability Accrued expense and other liability 289 Total liability $ 458 Note liability 289 Total liability $ 458 Note 10 . Other Income Total liability $ 458 Note 10 . Other Income ( Expense ) : Year Ended December 31 , 2013 2014 2015 Interest Year Ended December 31 , 2013 2014 2015 Interest income $ Ended December 31 , 2013 2014 2015 Interest income $ 766 December 31 , 2013 2014 2015 Interest income $ 766 $ 2014 2015 Interest income $ 766 $ 746 $ 999 Interest Interest income $ 766 $ 746 $ 999 Interest expense ( $ 766 $ 746 $ 999 Interest expense ( 81 ) $ 999 Interest expense ( 81 ) ( 101 ) ( expense ( 81 ) ( 101 ) ( 104 ) Gain ) ( 101 ) ( 104 ) Gain ( loss ) on marketable security , net 158 153 ( 208 ) Foreign marketable security , net 158 153 ( 208 ) Foreign currency , net 158 153 ( 208 ) Foreign currency exchange loss exchange loss , net ( 1 ) ( 379 ) ( net ( 1 ) ( 379 ) ( 402 ) ( ) ( 379 ) ( 402 ) ( 422 ) Gain ) ( 402 ) ( 422 ) Gain ( loss ) on non-marketable investment , net 8 237 ( 126 ) Loss non-marketable investment , net 8 237 ( 126 ) Loss on , net 8 237 ( 126 ) Loss on divestiture of on divestiture of business ( 2 ) ( 57 ) 0 business ( 2 ) ( 57 ) 0 0 Other 81 2 ) ( 57 ) 0 0 Other 81 130 152 ) ( 57 ) 0 0 Other 81 130 152 Other 57 ) 0 0 Other 81 130 152 Other income ( ) 0 0 Other 81 130 152 Other income ( expense 0 0 Other 81 130 152 Other income ( expense ) expense ) , net $ 496 $ 763 $ 291 ( , net $ 496 $ 763 $ 291 ( 1 ) $ 496 $ 763 $ 291 ( 1 ) Our foreign $ 763 $ 291 ( 1 ) Our foreign currency exchange currency transaction loss were $ 121 million , $ 107 million $ 121 million , $ 107 million , and $ 123 107 million , and $ 123 million in 2013 , 2014 and $ 123 million in 2013 , 2014 , and 2015 123 million in 2013 , 2014 , and 2015 , respectively 2013 , 2014 , and 2015 , respectively . ( 2 2015 , respectively . ( 2 ) Gain on divestiture of for the year ended December 31 , 2013 . Gain on year ended December 31 , 2013 . Gain on divestiture of for the year ended December 31 , 2014 . Note 11 year ended December 31 , 2014 . Note 11 . Commitments 31 , 2014 . Note 11 . Commitments and Contingencies Operating lease period expiring primarily between 2016 and 2063 . We are expiring primarily between 2016 and 2063 . We are committed to on a straight-line basis . 82 Table of Contents Alphabet Inc. Google Inc. As of December 31 , 2015 , future minimum As of December 31 , 2015 , future minimum payment under Sub-lease Income Net Operating Leases 2016 672 26 646 2017 794 Income Net Operating Leases 2016 672 26 646 2017 794 13 Net Operating Leases 2016 672 26 646 2017 794 13 781 Operating Leases 2016 672 26 646 2017 794 13 781 2018 Leases 2016 672 26 646 2017 794 13 781 2018 796 2016 672 26 646 2017 794 13 781 2018 796 4 672 26 646 2017 794 13 781 2018 796 4 792 26 646 2017 794 13 781 2018 796 4 792 2019 646 2017 794 13 781 2018 796 4 792 2019 769 2017 794 13 781 2018 796 4 792 2019 769 3 794 13 781 2018 796 4 792 2019 769 3 766 13 781 2018 796 4 792 2019 769 3 766 2020 781 2018 796 4 792 2019 769 3 766 2020 719 2018 796 4 792 2019 769 3 766 2020 719 3 796 4 792 2019 769 3 766 2020 719 3 716 4 792 2019 769 3 766 2020 719 3 716 Thereafter 792 2019 769 3 766 2020 719 3 716 Thereafter 3,706 2019 769 3 766 2020 719 3 716 Thereafter 3,706 1 769 3 766 2020 719 3 716 Thereafter 3,706 1 3,705 3 766 2020 719 3 716 Thereafter 3,706 1 3,705 Total 2020 719 3 716 Thereafter 3,706 1 3,705 Total minimum payment 719 3 716 Thereafter 3,706 1 3,705 Total minimum payment $ 3 716 Thereafter 3,706 1 3,705 Total minimum payment $ 7,456 3,705 Total minimum payment $ 7,456 $ 50 $ 7,406 Certain minimum payment $ 7,456 $ 50 $ 7,406 Certain lease have $ 7,456 $ 50 $ 7,406 Certain lease have adjustment for original lease period expiring between 2021 and 2032 where we are period expiring between 2021 and 2032 where we are the deemed such lease total approximately $ 678 million , of which $ million , of which $ 422 million is included on the Balance Sheet a of December 31 , 2015 . These amount a of December 31 , 2015 . These amount are presented co-location arrangement , wa $ 465 million , $ 570 million $ 465 million , $ 570 million , and $ 734 570 million , and $ 734 million in 2013 , 2014 and $ 734 million in 2013 , 2014 , and 2015 734 million in 2013 , 2014 , and 2015 . Purchase 2013 , 2014 , and 2015 . Purchase Obligations As of Purchase Obligations As of December 31 , 2015 , we had As of December 31 , 2015 , we had $ 1.7 2015 , we had $ 1.7 billion of other non-cancelable contractual of Credit As of December 31 , 2015 , we had As of December 31 , 2015 , we had unused letter letter of credit for $ 752 million . Indemnifications In the period . As of December 31 , 2015 , we did As of December 31 , 2015 , we did not have liability . Please see Note 9 for additional information . Legal Matters Antitrust Investigations On November 30 , 2010 , the European Investigations On November 30 , 2010 , the European Commission 's against u . On April 15 , 2015 , the EC . On April 15 , 2015 , the EC issued a EC issued a Statement of 83 Table of Contents Alphabet Inc. to the SO on August 27 , 2015 and will continue SO on August 27 , 2015 and will continue to cooperate business practice . In August 2015 , we received the CCI and ad . In September 2015 , FAS found that there FAS decision . In July 2015 , the Taiwan Fair Trade from Mississippi issued subpoena in 2011 and 2012 in an antitrust issued subpoena in 2011 and 2012 in an antitrust investigation of agreement will not have a 84 Table of Contents Alphabet Inc. expense . Please see Note 15 for additional information regarding contingency our income tax . Note 12 . Net Income Per Share of Stock Dividend In January 2014 , our board of director a record date of March 27 , 2014 and a payment date of March 27 , 2014 and a payment date of a payment date of April 2 , 2014 . In the date of April 2 , 2014 . In the second quarter In the second quarter of 2015 , in accordance with a close of trading on April 2 , 2015 , the last trading on April 2 , 2015 , the last trading day last trading day of the 365 day period following the first in the amount of $ 522 million wa due to Class of director . On April 22 , 2015 , our board . On April 22 , 2015 , our board of director capital stock . In May 2015 , the Adjustment Payment wa in the issuance of approximately 853 thousand share of Class C capital stock , with $ 475 million reflected in additional-paid in additional-paid in capital and $ 47 million of cash in lieu In the year ended December 31 , 2015 , the Adjustment year ended December 31 , 2015 , the Adjustment Payment wa for the year ended December 31 , 2015 . 85 Table year ended December 31 , 2015 . 85 Table of Contents December 31 , 2015 . 85 Table of Contents Alphabet Inc. In the year ended December 31 , 2013 and 2014 , year ended December 31 , 2013 and 2014 , the net December 31 , 2013 and 2014 , the net income per stock remained unchanged at $ 0.001 per share after the Stock amount equal to the $ 0.001 par value of the Class ) : Year Ended December 31 , 2013 Class A Class Year Ended December 31 , 2013 Class A Class B Class earnings - continuing operation $ 5,407 $ 1,173 $ 6,580 Allocation continuing operation $ 5,407 $ 1,173 $ 6,580 Allocation of undistributed $ 5,407 $ 1,173 $ 6,580 Allocation of undistributed earnings - earnings - discontinued operation ( 175 ) ( 38 ) ( operation ( 175 ) ( 38 ) ( 214 ) Total ) ( 38 ) ( 214 ) Total $ 5,232 $ ( 214 ) Total $ 5,232 $ 1,135 $ 6,366 Denominator ) Total $ 5,232 $ 1,135 $ 6,366 Denominator Number of $ 5,232 $ 1,135 $ 6,366 Denominator Number of share used used in per share computation 273,518 59,328 332,846 Basic net income in per share computation 273,518 59,328 332,846 Basic net income ( per share computation 273,518 59,328 332,846 Basic net income ( loss share : Continuing operation $ 19.77 $ 19.77 $ 19.77 Discontinued Continuing operation $ 19.77 $ 19.77 $ 19.77 Discontinued operation ( $ 19.77 $ 19.77 $ 19.77 Discontinued operation ( 0.64 ) $ 19.77 Discontinued operation ( 0.64 ) ( 0.64 ) ( operation ( 0.64 ) ( 0.64 ) ( 0.64 ) Basic ) ( 0.64 ) ( 0.64 ) Basic net income per net income per share $ 19.13 $ 19.13 $ 19.13 Diluted per share $ 19.13 $ 19.13 $ 19.13 Diluted net income $ 19.13 $ 19.13 $ 19.13 Diluted net income ( loss computation - continuing operation $ 5,407 $ 1,173 $ 6,580 Reallocation continuing operation $ 5,407 $ 1,173 $ 6,580 Reallocation of undistributed $ 5,407 $ 1,173 $ 6,580 Reallocation of undistributed earnings a B to Class A share 1,173 0 0 Reallocation of undistributed to Class A share 1,173 0 0 Reallocation of undistributed earnings Class A share 1,173 0 0 Reallocation of undistributed earnings 0 0 Reallocation of undistributed earnings 0 ( 21 ) 0 Allocation of undistributed earnings 0 ( 21 ) 0 Allocation of undistributed earnings 0 ( 21 ) 0 Allocation of undistributed earnings - earnings - continuing operation $ 6,580 $ 1,152 $ 6,580 Allocation continuing operation $ 6,580 $ 1,152 $ 6,580 Allocation of undistributed $ 6,580 $ 1,152 $ 6,580 Allocation of undistributed earnings for computation - discontinued operation ( 175 ) ( 38 ) ( operation ( 175 ) ( 38 ) ( 214 ) Reallocation ) ( 38 ) ( 214 ) Reallocation of undistributed earnings to Class A share ( 38 ) 0 0 Reallocation of A share ( 38 ) 0 0 Reallocation of undistributed earnings share ( 38 ) 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 1 ) 1 1 Allocation of undistributed earnings ( 1 ) 1 1 Allocation of undistributed earnings earnings ( 1 ) 1 1 Allocation of undistributed earnings - - discontinued operation $ ( 214 ) $ ( 37 ) ( 214 ) $ ( 37 ) $ ( 213 ) ( 37 ) $ ( 213 ) Denominator Number of share share used in basic computation 273,518 59,328 332,846 Weighted-average effect of used in basic computation 273,518 59,328 332,846 Weighted-average effect of dilutive in basic computation 273,518 59,328 332,846 Weighted-average effect of dilutive security Class A common share outstanding 59,328 0 0 Employee stock option A common share outstanding 59,328 0 0 Employee stock option 2,748 common share outstanding 59,328 0 0 Employee stock option 2,748 4 0 0 Employee stock option 2,748 4 2,748 Restricted stock unit 0 Employee stock option 2,748 4 2,748 Restricted stock unit and Employee stock option 2,748 4 2,748 Restricted stock unit and other and other contingently issuable share 3,215 0 3,215 Number of share other contingently issuable share 3,215 0 3,215 Number of share used contingently issuable share 3,215 0 3,215 Number of share used in used in per share computation 338,809 59,332 338,809 Diluted net income in per share computation 338,809 59,332 338,809 Diluted net income ( per share computation 338,809 59,332 338,809 Diluted net income ( loss share : Continuing operation $ 19.42 $ 19.42 $ 19.42 Discontinued Continuing operation $ 19.42 $ 19.42 $ 19.42 Discontinued operation ( $ 19.42 $ 19.42 $ 19.42 Discontinued operation ( 0.63 ) $ 19.42 Discontinued operation ( 0.63 ) ( 0.63 ) ( operation ( 0.63 ) ( 0.63 ) ( 0.63 ) Diluted ) ( 0.63 ) ( 0.63 ) Diluted net income per net income per share $ 18.79 $ 18.79 $ 18.79 86 per share $ 18.79 $ 18.79 $ 18.79 86 Table of $ 18.79 $ 18.79 $ 18.79 86 Table of Contents Alphabet 18.79 $ 18.79 $ 18.79 86 Table of Contents Alphabet Inc. Google Inc. Year Ended December 31 , 2014 Class A Class Year Ended December 31 , 2014 Class A Class B Class earnings - continuing operation $ 5,700 $ 1,107 $ 6,813 Allocation continuing operation $ 5,700 $ 1,107 $ 6,813 Allocation of undistributed $ 5,700 $ 1,107 $ 6,813 Allocation of undistributed earnings - undistributed earnings - discontinued operation 216 42 258 Total $ 5,916 earnings - discontinued operation 216 42 258 Total $ 5,916 $ - discontinued operation 216 42 258 Total $ 5,916 $ 1,149 216 42 258 Total $ 5,916 $ 1,149 $ 7,071 Denominator 258 Total $ 5,916 $ 1,149 $ 7,071 Denominator Number of $ 5,916 $ 1,149 $ 7,071 Denominator Number of share used used in per share computation 282,877 54,928 338,130 Basic net income in per share computation 282,877 54,928 338,130 Basic net income per per share computation 282,877 54,928 338,130 Basic net income per share share : Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per share net income per share $ 20.91 $ 20.91 $ 20.91 Diluted per share $ 20.91 $ 20.91 $ 20.91 Diluted net income $ 20.91 $ 20.91 $ 20.91 Diluted net income per share computation - continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed earnings a B to Class A share 1,107 0 0 Reallocation of undistributed to Class A share 1,107 0 0 Reallocation of undistributed earnings Class A share 1,107 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 20 ) ( 18 ) 20 earnings ( 20 ) ( 18 ) 20 Allocation of undistributed 20 ) ( 18 ) 20 Allocation of undistributed earnings - earnings - continuing operation $ 6,787 $ 1,089 $ 6,833 Allocation continuing operation $ 6,787 $ 1,089 $ 6,833 Allocation of undistributed $ 6,787 $ 1,089 $ 6,833 Allocation of undistributed earnings for basic computation - discontinued operation 216 42 258 Reallocation of undistributed computation - discontinued operation 216 42 258 Reallocation of undistributed earnings - discontinued operation 216 42 258 Reallocation of undistributed earnings a B to Class A share 42 0 0 Reallocation of undistributed to Class A share 42 0 0 Reallocation of undistributed earnings Class A share 42 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 1 ) ( 1 ) 1 earnings ( 1 ) ( 1 ) 1 Allocation of undistributed 1 ) ( 1 ) 1 Allocation of undistributed earnings - earnings - discontinued operation $ 257 $ 41 $ 259 Denominator discontinued operation $ 257 $ 41 $ 259 Denominator Number of $ 257 $ 41 $ 259 Denominator Number of share used share used in basic computation 282,877 54,928 338,130 Weighted-average effect of used in basic computation 282,877 54,928 338,130 Weighted-average effect of dilutive in basic computation 282,877 54,928 338,130 Weighted-average effect of dilutive security Class A common share outstanding 54,928 0 0 Employee stock option A common share outstanding 54,928 0 0 Employee stock option 2,057 common share outstanding 54,928 0 0 Employee stock option 2,057 0 0 0 Employee stock option 2,057 0 2,038 Restricted stock unit 0 Employee stock option 2,057 0 2,038 Restricted stock unit and Employee stock option 2,057 0 2,038 Restricted stock unit and other and other contingently issuable share 2,515 0 4,525 Number of share other contingently issuable share 2,515 0 4,525 Number of share used contingently issuable share 2,515 0 4,525 Number of share used in used in per share computation 342,377 54,928 344,693 Diluted net income in per share computation 342,377 54,928 344,693 Diluted net income per per share computation 342,377 54,928 344,693 Diluted net income per share share : Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per share net income per share $ 20.57 $ 20.57 $ 20.57 87 per share $ 20.57 $ 20.57 $ 20.57 87 Table of $ 20.57 $ 20.57 $ 20.57 87 Table of Contents Alphabet 20.57 $ 20.57 $ 20.57 87 Table of Contents Alphabet Inc. Google Inc. Year Ended December 31 , 2015 Class A Class Year Ended December 31 , 2015 Class A Class B Class stockholder - continuing operation $ 0 $ 0 $ 522 Allocation continuing operation $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings - undistributed earnings - continuing operation 6,695 1,196 7,935 Allocation of undistributed earnings - continuing operation 6,695 1,196 7,935 Allocation of undistributed earnings - continuing operation 6,695 1,196 7,935 Allocation of undistributed earnings - undistributed earnings - discontinued operation 0 0 0 Total $ 6,695 earnings - discontinued operation 0 0 0 Total $ 6,695 $ - discontinued operation 0 0 0 Total $ 6,695 $ 1,196 0 0 0 Total $ 6,695 $ 1,196 $ 8,457 Denominator 0 Total $ 6,695 $ 1,196 $ 8,457 Denominator Number of $ 6,695 $ 1,196 $ 8,457 Denominator Number of share used used in per share computation 289,640 51,745 343,241 Basic net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share share : Continuing operation $ 23.11 $ 23.11 $ 24.63 Discontinued Continuing operation $ 23.11 $ 23.11 $ 24.63 Discontinued operation 0.00 $ 23.11 $ 23.11 $ 24.63 Discontinued operation 0.00 0.00 0.00 23.11 $ 24.63 Discontinued operation 0.00 0.00 0.00 Basic net income $ 24.63 Discontinued operation 0.00 0.00 0.00 Basic net income per 24.63 Discontinued operation 0.00 0.00 0.00 Basic net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share stockholder - continuing operation $ 0 $ 0 $ 522 Allocation continuing operation $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for computation - continuing operation $ 6,695 $ 1,196 $ 7,935 Reallocation continuing operation $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed earnings a B to Class A share 1,196 0 0 Reallocation of undistributed to Class A share 1,196 0 0 Reallocation of undistributed earnings Class A share 1,196 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 39 ) ( 14 ) 39 earnings ( 39 ) ( 14 ) 39 Allocation of undistributed 39 ) ( 14 ) 39 Allocation of undistributed earnings - undistributed earnings - continuing operation 7,852 1,182 7,974 Allocation of undistributed earnings - continuing operation 7,852 1,182 7,974 Allocation of undistributed earnings - continuing operation 7,852 1,182 7,974 Allocation of undistributed earnings for basic computation - discontinued operation 0 0 0 Reallocation of undistributed computation - discontinued operation 0 0 0 Reallocation of undistributed earnings - discontinued operation 0 0 0 Reallocation of undistributed earnings a B to Class A share 0 0 0 Reallocation of undistributed to Class A share 0 0 0 Reallocation of undistributed earnings Class A share 0 0 0 Reallocation of undistributed earnings 0 0 Reallocation of undistributed earnings 0 0 0 Allocation of undistributed Reallocation of undistributed earnings 0 0 0 Allocation of undistributed earnings of undistributed earnings 0 0 0 Allocation of undistributed earnings - earnings - discontinued operation $ 0 $ 0 $ 0 Denominator discontinued operation $ 0 $ 0 $ 0 Denominator Number of $ 0 $ 0 $ 0 Denominator Number of share used share used in basic computation 289,640 51,745 343,241 Weighted-average effect of used in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive security Class A common share outstanding 51,745 0 0 Employee stock option A common share outstanding 51,745 0 0 Employee stock option 1,475 common share outstanding 51,745 0 0 Employee stock option 1,475 0 0 0 Employee stock option 1,475 0 1,428 Restricted stock unit 0 Employee stock option 1,475 0 1,428 Restricted stock unit and Employee stock option 1,475 0 1,428 Restricted stock unit and other and other contingently issuable share 920 0 4,481 Number of share other contingently issuable share 920 0 4,481 Number of share used contingently issuable share 920 0 4,481 Number of share used in used in per share computation 343,780 51,745 349,150 Diluted net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share share : Continuing operation $ 22.84 $ 22.84 $ 24.34 Discontinued Continuing operation $ 22.84 $ 22.84 $ 24.34 Discontinued operation 0.00 $ 22.84 $ 22.84 $ 24.34 Discontinued operation 0.00 0.00 0.00 22.84 $ 24.34 Discontinued operation 0.00 0.00 0.00 Diluted net income $ 24.34 Discontinued operation 0.00 0.00 0.00 Diluted net income per 24.34 Discontinued operation 0.00 0.00 0.00 Diluted net income per share net income per share $ 22.84 $ 22.84 $ 24.34 Google per share $ 22.84 $ 22.84 $ 24.34 Google Net income $ 22.84 $ 22.84 $ 24.34 Google Net income per share not publicly traded . Note 13 . Stockholders ’ Equity Alphabet Equity Alphabet Reorganization On October 2 , 2015 , Google implemented Reorganization On October 2 , 2015 , Google implemented a legal the reorganization , on October 2 , 2015 , the Fourth , on October 2 , 2015 , the Fourth Amended and stock , Class B common 88 Table of Contents Alphabet Inc. stock , par value $ 0.001 per share , from 9 0.001 per share , from 9 billion share , 3 billion from 9 billion share , 3 billion share and 3 billion , 3 billion share and 3 billion share , respectively , share , respectively , to 500 share of each class of stock , par value $ 0.001 per share , wa decreased share , wa decreased from 100 million share to 500 share from 100 million share to 500 share . As of December share . As of December 31 , 2015 , Google had As of December 31 , 2015 , Google had 100 share , 2015 , Google had 100 share of Class A common Class A common stock , 100 share of Class B common B common stock , and 100 share of Class C capital board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , there were December 31 , 2014 and 2015 , there were no share common stock is entitled to 10 vote per share . Class Alphabet reorganization , on October 2 , 2015 , Google transferred , on October 2 , 2015 , Google transferred to Alphabet During the year ended December 31 , 2014 , share reserved year ended December 31 , 2014 , share reserved for future for future grant under the 2004 Stock Plan expired and we began granting award from the 2012 Stock Plan ( “ Stock granted for a term of 10 year . Options and RSUs date . As of December 31 , 2015 , there were As of December 31 , 2015 , there were 23,336,944 share , 2015 , there were 23,336,944 share of stock reserved for ) : Year Ended December 31 , 2013 2014 2015 Cost Year Ended December 31 , 2013 2014 2015 Cost of revenue Ended December 31 , 2013 2014 2015 Cost of revenue $ December 31 , 2013 2014 2015 Cost of revenue $ 469 2015 Cost of revenue $ 469 $ 535 $ 806 Research of revenue $ 469 $ 535 $ 806 Research and development $ 469 $ 535 $ 806 Research and development 1,641 2,200 $ 806 Research and development 1,641 2,200 2,687 Sales and marketing 806 Research and development 1,641 2,200 2,687 Sales and marketing 552 Research and development 1,641 2,200 2,687 Sales and marketing 552 715 2,200 2,687 Sales and marketing 552 715 899 General and administrative 2,687 Sales and marketing 552 715 899 General and administrative 465 Sales and marketing 552 715 899 General and administrative 465 725 715 899 General and administrative 465 725 861 Discontinued operation 216 899 General and administrative 465 725 861 Discontinued operation 216 104 General and administrative 465 725 861 Discontinued operation 216 104 0 465 725 861 Discontinued operation 216 104 0 Total stock-based compensation 725 861 Discontinued operation 216 104 0 Total stock-based compensation expense 861 Discontinued operation 216 104 0 Total stock-based compensation expense $ Total stock-based compensation expense $ 3,343 $ 4,279 $ 5,253 For compensation expense $ 3,343 $ 4,279 $ 5,253 For the year $ 3,343 $ 4,279 $ 5,253 For the year ended December For the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , we 2013 , 2014 , and 2015 , we recognized tax benefit from continuing operation of $ 685 million , $ 867 million $ 685 million , $ 867 million , and $ 1,133 867 million , and $ 1,133 million , respectively , and from discontinued operation of $ 59 million , $ 30 million $ 59 million , $ 30 million and $ 0 million $ 30 million and $ 0 million , respectively . In a tax benefit of $ 522 million related to 2015 stock-based $ 522 million related to 2015 stock-based compensation expense that will sustained . Refer to Note 15 for more detail regarding the in the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , $ 2013 , 2014 , and 2015 , $ 0 million , , and 2015 , $ 0 million , $ 0 million $ 0 million , $ 0 million , and $ 50 0 million , and $ 50 million , respectively , wa the fourth quarter ended December 31 , 2015 , wa treated quarter ended December 31 , 2015 , wa treated a a Alphabet to Google . Stock-based 89 Table of Contents Alphabet Inc. for the year ended December 31 , 2013 , 2014 and year ended December 31 , 2013 , 2014 and 2015 are December 31 , 2013 , 2014 and 2015 are presented a , 2013 , 2014 and 2015 are presented a stock-based compensation for the year ended December 31 , 2015 : Options Outstanding year ended December 31 , 2015 : Options Outstanding Number of ( in million ) ( 1 ) Balance a of December ) Balance a of December 31 , 2014 7,240,419 $ 215.56 a of December 31 , 2014 7,240,419 $ 215.56 Granted 0 of December 31 , 2014 7,240,419 $ 215.56 Granted 0 N/A 31 , 2014 7,240,419 $ 215.56 Granted 0 N/A Exercised ( 2014 7,240,419 $ 215.56 Granted 0 N/A Exercised ( 2,072,550 ) Granted 0 N/A Exercised ( 2,072,550 ) $ 189.64 Forfeited/canceled ( Exercised ( 2,072,550 ) $ 189.64 Forfeited/canceled ( 268,886 ) $ ) $ 189.64 Forfeited/canceled ( 268,886 ) $ 310.47 Balance a Forfeited/canceled ( 268,886 ) $ 310.47 Balance a of December 31 310.47 Balance a of December 31 , 2015 4,898,983 $ 221.31 a of December 31 , 2015 4,898,983 $ 221.31 3.7 $ of December 31 , 2015 4,898,983 $ 221.31 3.7 $ 2,682 31 , 2015 4,898,983 $ 221.31 3.7 $ 2,682 Exercisable a , 2015 4,898,983 $ 221.31 3.7 $ 2,682 Exercisable a of 4,898,983 $ 221.31 3.7 $ 2,682 Exercisable a of December 31 2,682 Exercisable a of December 31 , 2015 4,462,847 $ 212.02 a of December 31 , 2015 4,462,847 $ 212.02 3.4 $ of December 31 , 2015 4,462,847 $ 212.02 3.4 $ 2,484 31 , 2015 4,462,847 $ 212.02 3.4 $ 2,484 Exercisable a , 2015 4,462,847 $ 212.02 3.4 $ 2,484 Exercisable a of 4,462,847 $ 212.02 3.4 $ 2,484 Exercisable a of December 31 2,484 Exercisable a of December 31 , 2015 and expected to a of December 31 , 2015 and expected to vest thereafter expected to vest thereafter ( 2 ) 4,846,996 $ 220.29 3.6 vest thereafter ( 2 ) 4,846,996 $ 220.29 3.6 $ 2,658 ( 2 ) 4,846,996 $ 220.29 3.6 $ 2,658 ( 1 2 ) 4,846,996 $ 220.29 3.6 $ 2,658 ( 1 ) 4,846,996 $ 220.29 3.6 $ 2,658 ( 1 ) The aggregate 220.29 3.6 $ 2,658 ( 1 ) The aggregate intrinsic value closing stock price of $ 778.01 and $ 758.88 of our of $ 778.01 and $ 758.88 of our Class A common , respectively , on December 31 , 2015 . ( 2 , on December 31 , 2015 . ( 2 ) Options 31 , 2015 . ( 2 ) Options expected to vest of stock option vested during 2013 , 2014 and 2015 wa option vested during 2013 , 2014 and 2015 wa $ 223 during 2013 , 2014 and 2015 wa $ 223 million , 2014 and 2015 wa $ 223 million , $ 94 million $ 223 million , $ 94 million , and $ 33 94 million , and $ 33 million . The aggregate intrinsic option and warrant exercised during 2013 , 2014 and 2015 wa warrant exercised during 2013 , 2014 and 2015 wa $ 1,793 during 2013 , 2014 and 2015 wa $ 1,793 million , 2014 and 2015 wa $ 1,793 million , $ 589 million $ 1,793 million , $ 589 million , and $ 867 589 million , and $ 867 million . These amount do wa discontinued a of November 29 , 2013 . As of a of November 29 , 2013 . As of December 31 2013 . As of December 31 , 2015 , there wa As of December 31 , 2015 , there wa $ 12 2015 , there wa $ 12 million of unrecognized compensation cost over a weighted-average period of 0.6 year . To the extent for the year ended December 31 , 2015 : Unvested Restricted year ended December 31 , 2015 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2014 24,619,549 $ 487.80 a of December 31 , 2014 24,619,549 $ 487.80 Granted 14,415,740 of December 31 , 2014 24,619,549 $ 487.80 Granted 14,415,740 $ 31 , 2014 24,619,549 $ 487.80 Granted 14,415,740 $ 546.46 Vested 2014 24,619,549 $ 487.80 Granted 14,415,740 $ 546.46 Vested ( 11,182,606 $ 487.80 Granted 14,415,740 $ 546.46 Vested ( 11,182,606 ) $ 14,415,740 $ 546.46 Vested ( 11,182,606 ) $ 442.01 Forfeited/canceled ( Vested ( 11,182,606 ) $ 442.01 Forfeited/canceled ( 2,111,497 ) $ ) $ 442.01 Forfeited/canceled ( 2,111,497 ) $ 481.37 Unvested a Forfeited/canceled ( 2,111,497 ) $ 481.37 Unvested a of December 31 481.37 Unvested a of December 31 , 2015 25,741,186 $ 531.74 a of December 31 , 2015 25,741,186 $ 531.74 Expected to of December 31 , 2015 25,741,186 $ 531.74 Expected to vest 31 , 2015 25,741,186 $ 531.74 Expected to vest after December Expected to vest after December 31 , 2015 ( 1 ) vest after December 31 , 2015 ( 1 ) 22,672,837 $ December 31 , 2015 ( 1 ) 22,672,837 $ 531.74 ( , 2015 ( 1 ) 22,672,837 $ 531.74 ( 1 ) ( 1 ) 22,672,837 $ 531.74 ( 1 ) RSUs expected ) 22,672,837 $ 531.74 ( 1 ) RSUs expected to vest rate . As of December 31 , 2015 , there wa As of December 31 , 2015 , there wa $ 11.1 2015 , there wa $ 11.1 billion of unrecognized compensation cost over a weighted-average period of 2.7 year . To the extent . Share Repurchases In October 2015 , the board of director to repurchase up to $ 5,099,019,513.59 of it Class C capital in the fourth quarter of 2015 . The repurchase are being opportunity , through open market 90 Table of Contents Alphabet Inc. including through the use of 10b5-1 plan . The repurchase program date . As of December 31 , 2015 , we repurchased As of December 31 , 2015 , we repurchased and subsequently repurchased and subsequently retired approximately 2,391 thousand share of Alphabet Class aggregate amount of approximately $ 1,780 million . Alphabet 's share in the year ended December 31 , 2015 were funded by year ended December 31 , 2015 were funded by Google via to Alphabet . In January 2016 , the board of director an additional amount of approximately 514 thousand share . Google Stockholders the fourth quarter ended December 31 , 2015 a capital transaction quarter ended December 31 , 2015 a capital transaction , which section above , and Note 6 , for description of certain Stockholders ' Equity . Note 14 . 401 ( k ) Equity . Note 14 . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans k ) Savings Plans ( 401 ( k ) Plans ) deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 202 million , $ 259 million $ 202 million , $ 259 million , and $ 309 259 million , and $ 309 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . Note 2013 , 2014 , and 2015 . Note 15 . Income , and 2015 . Note 15 . Income Taxes Income from from domestic operation of $ 7,651 million , $ 8,894 million $ 7,651 million , $ 8,894 million , and $ 8,271 8,894 million , and $ 8,271 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , and 2013 , 2014 , and 2015 , and income from foreign from foreign operation of $ 8,248 million , $ 8,365 million $ 8,248 million , $ 8,365 million , and $ 11,380 8,365 million , and $ 11,380 million for the year ended for the year ended December 31 , 2013 , 2014 , year ended December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 . The 2013 , 2014 , and 2015 . The provision for income ) : Year Ended December 31 , 2013 2014 2015 Current Year Ended December 31 , 2013 2014 2015 Current : Federal Ended December 31 , 2013 2014 2015 Current : Federal $ December 31 , 2013 2014 2015 Current : Federal $ 2,394 2015 Current : Federal $ 2,394 $ 2,716 $ 3,235 State : Federal $ 2,394 $ 2,716 $ 3,235 State 127 157 $ 2,394 $ 2,716 $ 3,235 State 127 157 ( 397 $ 2,716 $ 3,235 State 127 157 ( 397 ) Foreign 2,716 $ 3,235 State 127 157 ( 397 ) Foreign 711 3,235 State 127 157 ( 397 ) Foreign 711 774 723 157 ( 397 ) Foreign 711 774 723 Total 3,232 3,647 ( 397 ) Foreign 711 774 723 Total 3,232 3,647 3,561 397 ) Foreign 711 774 723 Total 3,232 3,647 3,561 Deferred Foreign 711 774 723 Total 3,232 3,647 3,561 Deferred : Federal 711 774 723 Total 3,232 3,647 3,561 Deferred : Federal ( 774 723 Total 3,232 3,647 3,561 Deferred : Federal ( 421 3,561 Deferred : Federal ( 421 ) 29 ( 198 ) : Federal ( 421 ) 29 ( 198 ) State 0 ( 421 ) 29 ( 198 ) State 0 6 ( 29 ( 198 ) State 0 6 ( 43 ) Foreign ( 198 ) State 0 6 ( 43 ) Foreign ( ) State 0 6 ( 43 ) Foreign ( 72 ) ( 43 ) Foreign ( 72 ) ( 43 ) ( Foreign ( 72 ) ( 43 ) ( 17 ) Total ) ( 43 ) ( 17 ) Total ( 493 ) ( 17 ) Total ( 493 ) ( 8 ) ( Total ( 493 ) ( 8 ) ( 258 ) Provision ) ( 8 ) ( 258 ) Provision for income tax Provision for income tax $ 2,739 $ 3,639 $ 3,303 91 income tax $ 2,739 $ 3,639 $ 3,303 91 Table of $ 2,739 $ 3,639 $ 3,303 91 Table of Contents Alphabet 2,739 $ 3,639 $ 3,303 91 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Expected Year Ended December 31 , 2013 2014 2015 Expected provision at Ended December 31 , 2013 2014 2015 Expected provision at federal December 31 , 2013 2014 2015 Expected provision at federal statutory federal statutory tax rate ( 35 % ) $ 5,567 $ ( 35 % ) $ 5,567 $ 6,041 $ 6,878 State % ) $ 5,567 $ 6,041 $ 6,878 State tax , $ 5,567 $ 6,041 $ 6,878 State tax , net of , net of federal benefit 133 132 ( 291 ) Change net of federal benefit 133 132 ( 291 ) Change in federal benefit 133 132 ( 291 ) Change in valuation allowance Change in valuation allowance ( 641 ) ( 164 ) ( allowance ( 641 ) ( 164 ) ( 65 ) Foreign ) ( 164 ) ( 65 ) Foreign rate differential ( ) Foreign rate differential ( 2,482 ) ( 2,109 ) ( differential ( 2,482 ) ( 2,109 ) ( 2,624 ) Federal ) ( 2,109 ) ( 2,624 ) Federal research credit ( ) Federal research credit ( 433 ) ( 318 ) ( credit ( 433 ) ( 318 ) ( 407 ) Basis ) ( 318 ) ( 407 ) Basis difference in investment difference in investment of Arris 644 0 0 Other adjustment ( in investment of Arris 644 0 0 Other adjustment ( 49 investment of Arris 644 0 0 Other adjustment ( 49 ) 0 0 Other adjustment ( 49 ) 57 ( 188 ) Other adjustment ( 49 ) 57 ( 188 ) Provision for ( 49 ) 57 ( 188 ) Provision for income tax Provision for income tax $ 2,739 $ 3,639 $ 3,303 A income tax $ 2,739 $ 3,639 $ 3,303 A retroactive and $ 2,739 $ 3,639 $ 3,303 A retroactive and permanent reinstatement signed into law on December 18 , 2015 in accordance with law on December 18 , 2015 in accordance with the Protecting from Tax Hikes Act of 2015 . As such , our our effective tax rate for 2015 reflects the benefit of the reflects the benefit of the 2015 federal research and development tax A retroactive extension of the 2012 federal research and development credit signed into law on January 2 , 2013 in accordance with law on January 2 , 2013 in accordance with The American The American Taxpayer Act of 2012 . The benefit of $ . The benefit of $ 189 million related to the 2012 189 million related to the 2012 federal research and development credit in the year ended December 31 , 2013 . Our effective year ended December 31 , 2013 . Our effective tax rate Our effective tax rate for 2015 included a discrete tax benefit foreign subsidiary a of December 31 , 2015 because we intend a of December 31 , 2015 because we intend to permanently earnings . As of December 31 , 2015 , the cumulative As of December 31 , 2015 , the cumulative amount of been provided is approximately $ 58.3 billion . Determination of the not practicable . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The government decision on December 28 , 2015 . The government ha 90 2015 . The government ha 90 day from the final decision a tax benefit of $ 3.5 billion related to reimbursement of a tax liability of $ 3.5 billion for the U.S. tax ( in million ) : 92 Table of Contents Alphabet Inc. Google Inc. As of December 31 , 2014 2015 Deferred tax As of December 31 , 2014 2015 Deferred tax asset : of December 31 , 2014 2015 Deferred tax asset : Stock-based : Stock-based compensation expense $ 376 $ 534 State tax 133 compensation expense $ 376 $ 534 State tax 133 119 Investment 376 $ 534 State tax 133 119 Investment loss 133 144 $ 534 State tax 133 119 Investment loss 133 144 Legal tax 133 119 Investment loss 133 144 Legal settlement accrual 175 133 119 Investment loss 133 144 Legal settlement accrual 175 101 133 144 Legal settlement accrual 175 101 Accrued employee benefit 671 144 Legal settlement accrual 175 101 Accrued employee benefit 671 832 175 101 Accrued employee benefit 671 832 Accruals and reserve not 101 Accrued employee benefit 671 832 Accruals and reserve not currently and reserve not currently deductible 175 245 Net operating loss 207 reserve not currently deductible 175 245 Net operating loss 207 230 175 245 Net operating loss 207 230 Tax credit 262 503 245 Net operating loss 207 230 Tax credit 262 503 Basis loss 207 230 Tax credit 262 503 Basis difference in investment 207 230 Tax credit 262 503 Basis difference in investment of difference in investment of Arris 1,347 1,357 Prepaid cost sharing 0 in investment of Arris 1,347 1,357 Prepaid cost sharing 0 3,468 1,347 1,357 Prepaid cost sharing 0 3,468 Other 243 337 Total 1,357 Prepaid cost sharing 0 3,468 Other 243 337 Total deferred cost sharing 0 3,468 Other 243 337 Total deferred tax asset sharing 0 3,468 Other 243 337 Total deferred tax asset 3,722 337 Total deferred tax asset 3,722 7,870 Valuation allowance ( 1,659 Total deferred tax asset 3,722 7,870 Valuation allowance ( 1,659 ) 3,722 7,870 Valuation allowance ( 1,659 ) ( 1,732 ) Total allowance ( 1,659 ) ( 1,732 ) Total deferred tax asset asset net of valuation allowance 2,063 6,138 Deferred tax liability : net of valuation allowance 2,063 6,138 Deferred tax liability : Depreciation : Depreciation and amortization ( 852 ) ( 1,126 ) Identified amortization ( 852 ) ( 1,126 ) Identified intangible ( 965 1,126 ) Identified intangible ( 965 ) ( 787 ) Mark-to-market intangible ( 965 ) ( 787 ) Mark-to-market investment ( 273 787 ) Mark-to-market investment ( 273 ) ( 93 ) Renewable investment ( 273 ) ( 93 ) Renewable energy investment ( ) Renewable energy investment ( 430 ) ( 529 ) Foreign investment ( 430 ) ( 529 ) Foreign earnings 0 ( ( 529 ) Foreign earnings 0 ( 3,468 ) Other ( ) Foreign earnings 0 ( 3,468 ) Other ( 125 ) ( 3,468 ) Other ( 125 ) ( 73 ) Total Other ( 125 ) ( 73 ) Total deferred tax liability Total deferred tax liability ( 2,645 ) ( 6,076 ) Net liability ( 2,645 ) ( 6,076 ) Net deferred tax liability deferred tax liability $ ( 582 ) $ 62 As of $ ( 582 ) $ 62 As of December 31 , $ 62 As of December 31 , 2015 , our federal As of December 31 , 2015 , our federal and state tax purpose were approximately $ 482 million and $ 443 million $ 482 million and $ 443 million . If not utilized will begin to expire in 2021 and the state net operating will begin to expire in 2016 . The net operating loss income tax purpose were $ 263 million that can be carried indefinitely . As of December 31 , 2015 , our California As of December 31 , 2015 , our California research and tax purpose were approximately $ 1,044 million that can be carried tax purpose were approximately $ 223 million that will start to will start to expire in 2025 . We believe it is realized . As of December 31 , 2015 , we maintained As of December 31 , 2015 , we maintained a valuation Home business to Arris in 2013 . Since any future loss capital gain generated a of 2015 . We reassess the valuation deferred tax asset of $ 3.5 billion and a deferred tax deferred tax liability of $ 3.5 billion . Refer to above unrecognized tax benefit from January 1 , 2013 to December 31 benefit from January 1 , 2013 to December 31 , 2015 1 , 2013 to December 31 , 2015 ( in million 2013 to December 31 , 2015 ( in million ) : ( in million ) : 93 Table of Contents Alphabet Inc. Inc. Balance a of January 1 , 2013 $ 1,907 Increases a of January 1 , 2013 $ 1,907 Increases related to January 1 , 2013 $ 1,907 Increases related to prior year to prior year tax position 158 Decreases related to prior year prior year tax position ( 37 ) Decreases related to settlement settlement with tax authority ( 78 ) Increases related to current to current year tax position 552 Balance a of December 31 552 Balance a of December 31 , 2013 2,502 Increases related a of December 31 , 2013 2,502 Increases related to prior of December 31 , 2013 2,502 Increases related to prior year to prior year tax position 66 Decreases related to prior year prior year tax position ( 44 ) Decreases related to settlement settlement with tax authority ( 1 ) Increases related to current to current year tax position 771 Balance a of December 31 771 Balance a of December 31 , 2014 3,294 Increases related a of December 31 , 2014 3,294 Increases related to prior of December 31 , 2014 3,294 Increases related to prior year to prior year tax position 224 Decreases related to prior year prior year tax position ( 176 ) Decreases related to settlement settlement with tax authority ( 27 ) Increases related to current to current year tax position 852 Balance a of December 31 852 Balance a of December 31 , 2015 $ 4,167 The a of December 31 , 2015 $ 4,167 The total amount December 31 , 2015 $ 4,167 The total amount of gross unrecognized tax benefit wa $ 2,502 million , $ 3,294 million $ 2,502 million , $ 3,294 million , and $ 4,167 3,294 million , and $ 4,167 million a of December 31 4,167 million a of December 31 , 2013 , 2014 , a of December 31 , 2013 , 2014 , and 2015 December 31 , 2013 , 2014 , and 2015 , respectively 2013 , 2014 , and 2015 , respectively , of which , of which , $ 2,309 million , $ 2,909 million $ 2,309 million , $ 2,909 million , and $ 3,614 2,909 million , and $ 3,614 million , if recognized , rate . As of December 31 , 2014 and 2015 , As of December 31 , 2014 and 2015 , we had December 31 , 2014 and 2015 , we had accrued $ , we had accrued $ 239 million and $ 348 million $ 239 million and $ 348 million in interest and penalty completed it examination of our 2003 through 2006 tax year ; examination of our 2003 through 2006 tax year ; all issue currently in examination of our 2007 through 2012 tax year . examination of our 2007 through 2012 tax year . We have claim a presented . Our 2013 , 2014 , and 2015 presented . Our 2013 , 2014 , and 2015 tax year 2013 , 2014 , and 2015 tax year remain subject to tax purpose , and our 2011 through 2015 tax year remain , and our 2011 through 2015 tax year remain subject to materially change in the next 12 month . Note 16 . next 12 month . Note 16 . Information about Segments and in the fourth quarter of 2015 , we implemented legal and segment are described below : 94 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Revenues Year Ended December 31 , 2013 2014 2015 Revenues : Google Ended December 31 , 2013 2014 2015 Revenues : Google $ December 31 , 2013 2014 2015 Revenues : Google $ 55,507 2015 Revenues : Google $ 55,507 $ 65,674 $ 74,541 Other : Google $ 55,507 $ 65,674 $ 74,541 Other Bets 12 $ 55,507 $ 65,674 $ 74,541 Other Bets 12 327 448 65,674 $ 74,541 Other Bets 12 327 448 Total revenue $ $ 74,541 Other Bets 12 327 448 Total revenue $ 55,519 74,541 Other Bets 12 327 448 Total revenue $ 55,519 $ 327 448 Total revenue $ 55,519 $ 66,001 $ 74,989 Year Total revenue $ 55,519 $ 66,001 $ 74,989 Year Ended December $ 55,519 $ 66,001 $ 74,989 Year Ended December 31 , $ 74,989 Year Ended December 31 , 2013 2014 2015 Segment Year Ended December 31 , 2013 2014 2015 Segment operating income Ended December 31 , 2013 2014 2015 Segment operating income ( December 31 , 2013 2014 2015 Segment operating income ( loss loss ) : Google $ 16,260 $ 19,011 $ 23,425 Other : Google $ 16,260 $ 19,011 $ 23,425 Other Bets ( $ 16,260 $ 19,011 $ 23,425 Other Bets ( 527 ) $ 23,425 Other Bets ( 527 ) ( 1,942 ) ( Bets ( 527 ) ( 1,942 ) ( 3,567 ) Reconciling ) ( 1,942 ) ( 3,567 ) Reconciling item ( 1 3,567 ) Reconciling item ( 1 ) ( 330 ) ( item ( 1 ) ( 330 ) ( 573 ) ( ) ( 330 ) ( 573 ) ( 498 ) Total ) ( 573 ) ( 498 ) Total income from operation Total income from operation $ 15,403 $ 16,496 $ 19,360 ( from operation $ 15,403 $ 16,496 $ 19,360 ( 1 ) $ 15,403 $ 16,496 $ 19,360 ( 1 ) Reconciling item $ 16,496 $ 19,360 ( 1 ) Reconciling item are primarily segment . Year Ended December 31 , 2013 2014 2015 Capital Year Ended December 31 , 2013 2014 2015 Capital expenditure : Ended December 31 , 2013 2014 2015 Capital expenditure : Google December 31 , 2013 2014 2015 Capital expenditure : Google $ Capital expenditure : Google $ 7,006 $ 11,173 $ 8,849 Other : Google $ 7,006 $ 11,173 $ 8,849 Other Bets 187 $ 7,006 $ 11,173 $ 8,849 Other Bets 187 501 869 11,173 $ 8,849 Other Bets 187 501 869 Reconciling item ( $ 8,849 Other Bets 187 501 869 Reconciling item ( 2 8,849 Other Bets 187 501 869 Reconciling item ( 2 ) 501 869 Reconciling item ( 2 ) 165 ( 715 ) Reconciling item ( 2 ) 165 ( 715 ) 197 Total ( 2 ) 165 ( 715 ) 197 Total capital expenditure ) 165 ( 715 ) 197 Total capital expenditure a presented Statements of Cash Flow $ 7,358 $ 10,959 $ 9,915 ( Cash Flow $ 7,358 $ 10,959 $ 9,915 ( 2 ) $ 7,358 $ 10,959 $ 9,915 ( 2 ) Reconciling item $ 10,959 $ 9,915 ( 2 ) Reconciling item are primarily and other miscellaneous difference . 95 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2013 2014 2015 Stock-based Year Ended December 31 , 2013 2014 2015 Stock-based compensation : Ended December 31 , 2013 2014 2015 Stock-based compensation : Google December 31 , 2013 2014 2015 Stock-based compensation : Google $ Stock-based compensation : Google $ 2,911 $ 3,677 $ 4,587 Other : Google $ 2,911 $ 3,677 $ 4,587 Other Bets 124 $ 2,911 $ 3,677 $ 4,587 Other Bets 124 347 498 3,677 $ 4,587 Other Bets 124 347 498 Reconciling item ( $ 4,587 Other Bets 124 347 498 Reconciling item ( 3 4,587 Other Bets 124 347 498 Reconciling item ( 3 ) 347 498 Reconciling item ( 3 ) 92 151 118 Total Reconciling item ( 3 ) 92 151 118 Total stock based item ( 3 ) 92 151 118 Total stock based compensation ( 3 ) 92 151 118 Total stock based compensation , , excluding discontinued operation ( 4 ) $ 3,127 $ 4,175 operation ( 4 ) $ 3,127 $ 4,175 $ 5,203 Depreciation 4 ) $ 3,127 $ 4,175 $ 5,203 Depreciation , amortization $ 3,127 $ 4,175 $ 5,203 Depreciation , amortization and impairment and impairment : Google $ 3,668 $ 4,778 $ 4,839 Other : Google $ 3,668 $ 4,778 $ 4,839 Other Bets 24 $ 3,668 $ 4,778 $ 4,839 Other Bets 24 148 203 4,778 $ 4,839 Other Bets 24 148 203 Reconciling item ( $ 4,839 Other Bets 24 148 203 Reconciling item ( 5 4,839 Other Bets 24 148 203 Reconciling item ( 5 ) 148 203 Reconciling item ( 5 ) 247 53 21 Total Reconciling item ( 5 ) 247 53 21 Total depreciation , item ( 5 ) 247 53 21 Total depreciation , amortization ( 5 ) 247 53 21 Total depreciation , amortization and Statements of Cash Flow $ 3,939 $ 4,979 $ 5,063 ( Cash Flow $ 3,939 $ 4,979 $ 5,063 ( 3 ) $ 3,939 $ 4,979 $ 5,063 ( 3 ) Reconciling item $ 4,979 $ 5,063 ( 3 ) Reconciling item represent corporate to individual segment . ( 4 ) For purpose of segment for under FASB ASC Topic 718 that we expect to settle from discontinued operation . ( 5 ) Reconciling item primarily represent ) : Year Ended December 31 , 2013 2014 2015 Revenues Year Ended December 31 , 2013 2014 2015 Revenues : United Ended December 31 , 2013 2014 2015 Revenues : United States December 31 , 2013 2014 2015 Revenues : United States $ Revenues : United States $ 25,587 $ 29,482 $ 34,810 United United States $ 25,587 $ 29,482 $ 34,810 United Kingdom 5,600 $ 25,587 $ 29,482 $ 34,810 United Kingdom 5,600 6,483 7,067 29,482 $ 34,810 United Kingdom 5,600 6,483 7,067 Rest of the $ 34,810 United Kingdom 5,600 6,483 7,067 Rest of the world 34,810 United Kingdom 5,600 6,483 7,067 Rest of the world 24,332 7,067 Rest of the world 24,332 30,036 33,112 Total revenue $ Rest of the world 24,332 30,036 33,112 Total revenue $ 55,519 of the world 24,332 30,036 33,112 Total revenue $ 55,519 $ 30,036 33,112 Total revenue $ 55,519 $ 66,001 $ 74,989 As Total revenue $ 55,519 $ 66,001 $ 74,989 As of December $ 55,519 $ 66,001 $ 74,989 As of December 31 , $ 74,989 As of December 31 , 2014 As of December As of December 31 , 2014 As of December 31 , , 2014 As of December 31 , 2015 Long-lived asset : As of December 31 , 2015 Long-lived asset : United States asset : United States $ 37,421 $ 43,686 International 13,110 13,661 United States $ 37,421 $ 43,686 International 13,110 13,661 Total long-lived $ 37,421 $ 43,686 International 13,110 13,661 Total long-lived asset $ 37,421 $ 43,686 International 13,110 13,661 Total long-lived asset $ 50,531 13,661 Total long-lived asset $ 50,531 $ 57,347 Note 17 . long-lived asset $ 50,531 $ 57,347 Note 17 . Revision of $ 50,531 $ 57,347 Note 17 . Revision of Previously Issued In the second quarter of 2015 , we identified an incorrect expense for period beginning in 2008 through the first quarter of through the first quarter of 2015 in the cumulative amount of the cumulative amount of $ 711 million . We have evaluated in the quarter ended June 30 , 2015 is not material quarter ended June 30 , 2015 is not material to our for the year ended December 31 , 2015 . Consolidated revenue year ended December 31 , 2015 . Consolidated revenue are not this Annual Report on Form 10-K for the period impacted to for the corresponding period . 96 Table of Contents Alphabet Inc. line item a of December 31 , 2014 ( in million a of December 31 , 2014 ( in million ) : ) : As of December 31 , 2014 As Previously Reported As of December 31 , 2014 As Previously Reported ( 1 2014 As Previously Reported ( 1 ) Adjustment As Revised Selected tax receivable , net $ 1,298 $ ( 707 ) $ net $ 1,298 $ ( 707 ) $ 591 Total current $ ( 707 ) $ 591 Total current asset 79,363 ( $ 591 Total current asset 79,363 ( 707 ) 78,656 Total Total current asset 79,363 ( 707 ) 78,656 Total asset 129,894 asset 79,363 ( 707 ) 78,656 Total asset 129,894 ( 707 707 ) 78,656 Total asset 129,894 ( 707 ) 129,187 Income 78,656 Total asset 129,894 ( 707 ) 129,187 Income tax payable asset 129,894 ( 707 ) 129,187 Income tax payable , non-current Income tax payable , non-current 3,407 ( 67 ) 3,340 Retained payable , non-current 3,407 ( 67 ) 3,340 Retained earnings 75,706 non-current 3,407 ( 67 ) 3,340 Retained earnings 75,706 ( 640 67 ) 3,340 Retained earnings 75,706 ( 640 ) 75,066 Total 3,340 Retained earnings 75,706 ( 640 ) 75,066 Total stockholder ' earnings 75,706 ( 640 ) 75,066 Total stockholder ' equity 104,500 75,066 Total stockholder ' equity 104,500 ( 640 ) 103,860 Total stockholder ' equity 104,500 ( 640 ) 103,860 Total liability and equity 104,500 ( 640 ) 103,860 Total liability and stockholder ' and stockholder ' equity $ 129,894 $ ( 707 ) $ equity $ 129,894 $ ( 707 ) $ 129,187 ( 1 $ ( 707 ) $ 129,187 ( 1 ) Includes reclassification 707 ) $ 129,187 ( 1 ) Includes reclassification of deferred and liability related to ASU 2015-17 “ Income Taxes ( Topic “ Income Taxes ( Topic 740 ) : Balance Sheet Classification . ” Refer to Note 1 for further information . The for the year ended December 31 , 2013 and 2014 ( year ended December 31 , 2013 and 2014 ( in million December 31 , 2013 and 2014 ( in million , except ) : Year Ended December 31 , 2013 Year Ended December Year Ended December 31 , 2013 Year Ended December 31 , , 2013 Year Ended December 31 , 2014 As Previously Reported Year Ended December 31 , 2014 As Previously Reported Adjustment As Provision for income tax $ 2,552 $ 187 $ 2,739 $ income tax $ 2,552 $ 187 $ 2,739 $ 3,331 $ $ 2,552 $ 187 $ 2,739 $ 3,331 $ 308 $ $ 187 $ 2,739 $ 3,331 $ 308 $ 3,639 Net $ 2,739 $ 3,331 $ 308 $ 3,639 Net income from $ 3,331 $ 308 $ 3,639 Net income from continuing operation Net income from continuing operation 13,347 ( 187 ) $ 13,160 from continuing operation 13,347 ( 187 ) $ 13,160 13,928 ( 13,347 ( 187 ) $ 13,160 13,928 ( 308 ) $ ( 187 ) $ 13,160 13,928 ( 308 ) $ 13,620 ) $ 13,160 13,928 ( 308 ) $ 13,620 Net income 13,928 ( 308 ) $ 13,620 Net income 12,920 ( 187 ) $ 13,620 Net income 12,920 ( 187 ) $ 12,733 13,620 Net income 12,920 ( 187 ) $ 12,733 14,444 ( 12,920 ( 187 ) $ 12,733 14,444 ( 308 ) $ ( 187 ) $ 12,733 14,444 ( 308 ) $ 14,136 ) $ 12,733 14,444 ( 308 ) $ 14,136 Basic net 14,444 ( 308 ) $ 14,136 Basic net income per share share from continuing operation $ 20.05 $ ( 0.28 ) $ operation $ 20.05 $ ( 0.28 ) $ 19.77 $ 20.61 $ ( 0.28 ) $ 19.77 $ 20.61 $ ( 0.46 0.28 ) $ 19.77 $ 20.61 $ ( 0.46 ) $ 19.77 $ 20.61 $ ( 0.46 ) $ 20.15 Basic net $ ( 0.46 ) $ 20.15 Basic net income per share Basic net income per share 19.41 ( 0.28 ) 19.13 21.37 income per share 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 share 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 ) 20.91 19.41 ( 0.28 ) 19.13 21.37 ( 0.46 ) 20.91 Diluted 0.28 ) 19.13 21.37 ( 0.46 ) 20.91 Diluted net income 19.13 21.37 ( 0.46 ) 20.91 Diluted net income per share per share from continuing operation 19.70 ( 0.28 ) 19.42 20.27 from continuing operation 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 operation 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 19.70 ( 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 Diluted 0.28 ) 19.42 20.27 ( 0.45 ) 19.82 Diluted net income 19.42 20.27 ( 0.45 ) 19.82 Diluted net income per share net income per share $ 19.07 $ ( 0.28 ) $ share $ 19.07 $ ( 0.28 ) $ 18.79 $ 21.02 $ ( 0.28 ) $ 18.79 $ 21.02 $ ( 0.45 0.28 ) $ 18.79 $ 21.02 $ ( 0.45 ) $ 18.79 $ 21.02 $ ( 0.45 ) $ 20.57 The following $ ( 0.45 ) $ 20.57 The following table present the for the year ended December 31 , 2013 and 2014 ( year ended December 31 , 2013 and 2014 ( in million December 31 , 2013 and 2014 ( in million ) : ) : Year Ended December 31 , 2013 Year Ended December Year Ended December 31 , 2013 Year Ended December 31 , , 2013 Year Ended December 31 , 2014 As Previously Reported Year Ended December 31 , 2014 As Previously Reported Adjustment As Income Data : Net income 12,920 ( 187 ) 12,733 14,444 : Net income 12,920 ( 187 ) 12,733 14,444 ( 308 income 12,920 ( 187 ) 12,733 14,444 ( 308 ) 14,136 12,920 ( 187 ) 12,733 14,444 ( 308 ) 14,136 Comprehensive 187 ) 12,733 14,444 ( 308 ) 14,136 Comprehensive income 12,507 12,733 14,444 ( 308 ) 14,136 Comprehensive income 12,507 ( 187 308 ) 14,136 Comprehensive income 12,507 ( 187 ) 12,320 14,346 14,136 Comprehensive income 12,507 ( 187 ) 12,320 14,346 ( 308 income 12,507 ( 187 ) 12,320 14,346 ( 308 ) 14,038 12,507 ( 187 ) 12,320 14,346 ( 308 ) 14,038 97 187 ) 12,320 14,346 ( 308 ) 14,038 97 Table of 12,320 14,346 ( 308 ) 14,038 97 Table of Contents Alphabet 14,346 ( 308 ) 14,038 97 Table of Contents Alphabet Inc. for the year ended December 31 , 2013 and 2014 ( year ended December 31 , 2013 and 2014 ( in million December 31 , 2013 and 2014 ( in million ) : ) : Year Ended December 31 , 2013 Year Ended December Year Ended December 31 , 2013 Year Ended December 31 , , 2013 Year Ended December 31 , 2014 As Previously Reported Year Ended December 31 , 2014 As Previously Reported Adjustment As Data : Net income $ 12,920 $ ( 187 ) 12,733 income $ 12,920 $ ( 187 ) 12,733 $ 14,444 $ 12,920 $ ( 187 ) 12,733 $ 14,444 $ ( 308 ( 187 ) 12,733 $ 14,444 $ ( 308 ) $ 12,733 $ 14,444 $ ( 308 ) $ 14,136 Changes in $ ( 308 ) $ 14,136 Changes in income tax , in income tax , net 401 187 588 283 308 591 income tax , net 401 187 588 283 308 591 ITEM tax , net 401 187 588 283 308 591 ITEM 9 , net 401 187 588 283 308 591 ITEM 9 . net 401 187 588 283 308 591 ITEM 9 . CHANGES 401 187 588 283 308 591 ITEM 9 . CHANGES IN 588 283 308 591 ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Alphabet and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2015 , our disclosure a of December 31 , 2015 , our disclosure control and during the quarter ended December 31 , 2015 that have materially quarter ended December 31 , 2015 that have materially affected , , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2015 . Management reviewed a of December 31 , 2015 . Management reviewed the result financial reporting a of December 31 , 2015 ha been audited a of December 31 , 2015 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of relative to their cost . 98 Table of Contents Alphabet Inc. and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2015 , our disclosure a of December 31 , 2015 , our disclosure control and during the quarter ended December 31 , 2015 that have materially quarter ended December 31 , 2015 that have materially affected , , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2015 . Management reviewed a of December 31 , 2015 . Management reviewed the result financial reporting a of December 31 , 2015 ha been audited a of December 31 , 2015 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION On February . OTHER INFORMATION On February 11 , 2016 , we announced INFORMATION On February 11 , 2016 , we announced the appointment Corporate Controller , effective February 16 , 2016 . Jim , , effective February 16 , 2016 . Jim , age 60 2016 . Jim , age 60 , most recently held the at Intel Corporation ( from 2004 to 2016 ) where he Corporation ( from 2004 to 2016 ) where he wa responsible wa at Intel for over 30 year and also led and of World Affairs Council . 99 Table of Contents Alphabet Inc. : • Salary : $ 475,000 • Equity : ◦ $ • Equity : ◦ $ 3.5 million equity grant ( Initial after hire vesting monthly over 12 month ◦ $ 3.5 million over 12 month ◦ $ 3.5 million equity grant to be to be made in Q1 2017 , to start vesting monthly to start vesting monthly over 12 month upon the full vest the Initial Grant • $ 250,000 sign-on bonus , subject to employment end within the first 12 month Jim will also be officer . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2016 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2015 ( 2016 Proxy year ended December 31 , 2015 ( 2016 Proxy Statement ) December 31 , 2015 ( 2016 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be under the caption “ Section 16 ( a ) Beneficial Ownership Reporting Compliance ” in the 2016 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2016 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Compensation Plan Information ” in 2016 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Director Independence ” in the 2016 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2016 Proxy Statement and is incorporated incorporated herein by reference . 100 Table of Contents Alphabet Inc. Google Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 45 Financial Statements of Alphabet Inc. Inc. : Consolidated Balance Sheets 48 Consolidated Statements of Income 49 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Financial Statements of Google Inc. Inc. : Google Balance Sheets 53 Google Statements of Income 54 53 Google Statements of Income 54 Google Statements of Comprehensive Income Google Statements of Comprehensive Income 55 Google Statements of Stockholders ’ Statements of Stockholders ’ Equity 56 Google Statements of Cash Flows Google Statements of Cash Flows 57 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 58 2 . Financial Statement Schedules to Consolidated Financial Statements 58 2 . Financial Statement Schedules Schedule the three year ended December 31 , 2015 ( in million year ended December 31 , 2015 ( in million ) : million ) Year ended December 31 , 2013 $ 581 $ Year ended December 31 , 2013 $ 581 $ 1,128 $ December 31 , 2013 $ 581 $ 1,128 $ ( 1,078 , 2013 $ 581 $ 1,128 $ ( 1,078 ) $ 581 $ 1,128 $ ( 1,078 ) $ 631 Year ended $ ( 1,078 ) $ 631 Year ended December 31 , $ 631 Year ended December 31 , 2014 $ 631 $ Year ended December 31 , 2014 $ 631 $ 1,240 $ December 31 , 2014 $ 631 $ 1,240 $ ( 1,646 , 2014 $ 631 $ 1,240 $ ( 1,646 ) $ 631 $ 1,240 $ ( 1,646 ) $ 225 Year ended $ ( 1,646 ) $ 225 Year ended December 31 , $ 225 Year ended December 31 , 2015 $ 225 $ Year ended December 31 , 2015 $ 225 $ 579 $ December 31 , 2015 $ 225 $ 579 $ ( 508 , 2015 $ 225 $ 579 $ ( 508 ) $ 225 $ 579 $ ( 508 ) $ 296 Note : $ ( 508 ) $ 296 Note : Additions to the For the year ended December 31 , 2013 and 2014 , year ended December 31 , 2013 and 2014 , addition included December 31 , 2013 and 2014 , addition included the impact For the year ended December 31 , 2013 and 2014 , year ended December 31 , 2013 and 2014 , usage include December 31 , 2013 and 2014 , usage include the impact information is otherwise included . 3 . Exhibits See the Exhibit this Annual Report on Form 10-K. 101 Table of Contents Alphabet Annual Report on Form 10-K. 101 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 11 , 2016 ALPHABET INC. By Date : February 11 , 2016 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by of Alphabet Inc. ) February 11 , 2016 Larry Page / Inc. ) February 11 , 2016 Larry Page / S / of Alphabet Inc. ) February 11 , 2016 Ruth Porat / Inc. ) February 11 , 2016 Ruth Porat / S / S CHMIDT Executive Chairman February 11 , 2016 Eric E. Schmidt Executive Chairman February 11 , 2016 Eric E. Schmidt / S , Co-Founder and Director February 11 , 2016 Sergey Brin / and Director February 11 , 2016 Sergey Brin / S / OHN D OERR Director February 11 , 2016 L. John Doerr OERR Director February 11 , 2016 L. John Doerr / S B. G REENE Director February 11 , 2016 Diane B. Greene REENE Director February 11 , 2016 Diane B. Greene / S L. H ENNESSY Director February 11 , 2016 John L. Hennessy ENNESSY Director February 11 , 2016 John L. Hennessy / S NN M ATHER Director February 11 , 2016 Ann Mather / ATHER Director February 11 , 2016 Ann Mather / S / . M ULALLY Director February 11 , 2016 Alan R. Mulally ULALLY Director February 11 , 2016 Alan R. Mulally / S S. O TELLINI Director February 11 , 2016 Paul S. Otellini TELLINI Director February 11 , 2016 Paul S. Otellini / S AM S HRIRAM Director February 11 , 2016 K. Ram Shriram HRIRAM Director February 11 , 2016 K. Ram Shriram / S M. T ILGHMAN Director February 11 , 2016 Shirley M. Tilghman ILGHMAN Director February 11 , 2016 Shirley M. Tilghman Table of to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 11 , 2016 GOOGLE INC. By Date : February 11 , 2016 GOOGLE INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by of Google Inc. ) February 11 , 2016 Sundar Pichai / Inc. ) February 11 , 2016 Sundar Pichai / S / of Google Inc. ) February 11 , 2016 Ruth Porat / Inc. ) February 11 , 2016 Ruth Porat / S / S CHMIDT Executive Chairman February 11 , 2016 Eric E. Schmidt Executive Chairman February 11 , 2016 Eric E. Schmidt / S AGE Co-Founder and Director February 11 , 2016 Larry Page / and Director February 11 , 2016 Larry Page / S / RIN Co-Founder and Director February 11 , 2016 Sergey Brin / and Director February 11 , 2016 Sergey Brin / S / OHN D OERR Director February 11 , 2016 L. John Doerr OERR Director February 11 , 2016 L. John Doerr / S B. G REENE Director February 11 , 2016 Diane B. Greene REENE Director February 11 , 2016 Diane B. Greene / S L. H ENNESSY Director February 11 , 2016 John L. Hennessy ENNESSY Director February 11 , 2016 John L. Hennessy / S NN M ATHER Director February 11 , 2016 Ann Mather / ATHER Director February 11 , 2016 Ann Mather / S / . M ULALLY Director February 11 , 2016 Alan R. Mulally ULALLY Director February 11 , 2016 Alan R. Mulally / S S. O TELLINI Director February 11 , 2016 Paul S. Otellini TELLINI Director February 11 , 2016 Paul S. Otellini / S AM S HRIRAM Director February 11 , 2016 K. Ram Shriram HRIRAM Director February 11 , 2016 K. Ram Shriram / S M. T ILGHMAN Director February 11 , 2016 Shirley M. Tilghman ILGHMAN Director February 11 , 2016 Shirley M. Tilghman Table of by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 000-36380 8-K ( File No . 000-36380 ) and Current Report on and Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of Alphabet Inc. , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of Alphabet Inc. , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.03 Fourth Amended 001-37580 ) October 2 , 2015 3.03 Fourth Amended and Restated ) October 2 , 2015 3.03 Fourth Amended and Restated Certificate Inc. Quarterly Report on Form 10-Q ( File No . 000-50726 10-Q ( File No . 000-50726 ) July 24 , 2012 No . 000-50726 ) July 24 , 2012 3.04 Amended and 000-50726 ) July 24 , 2012 3.04 Amended and Restated Bylaws ) July 24 , 2012 3.04 Amended and Restated Bylaws of Inc. Quarterly Report on Form 10-Q ( File No . 000-50726 10-Q ( File No . 000-50726 ) July 24 , 2012 No . 000-50726 ) July 24 , 2012 3.05 Certificate of 000-50726 ) July 24 , 2012 3.05 Certificate of Merger , ) July 24 , 2012 3.05 Certificate of Merger , dated of Merger , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 000-36380 8-K ( File No . 000-36380 ) October 2 , 2015 No . 000-36380 ) October 2 , 2015 4.01 Specimen Class 000-36380 ) October 2 , 2015 4.01 Specimen Class A Common ) October 2 , 2015 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Indenture , 001-37580 ) October 2 , 2015 4.03 Indenture , dated a ) October 2 , 2015 4.03 Indenture , dated a of , dated a of May 19 , 2011 between Google Inc. a of May 19 , 2011 between Google Inc. and The trustee Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) May 19 , 2011 No . 000-50726 ) May 19 , 2011 4.04 Form of 000-50726 ) May 19 , 2011 4.04 Form of 2.125 % ) May 19 , 2011 4.04 Form of 2.125 % Note , 2011 4.04 Form of 2.125 % Note due 2016 Current of 2.125 % Note due 2016 Current Report on Form 8-K 2016 Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) May 19 , 2011 No . 000-50726 ) May 19 , 2011 4.05 Form of 000-50726 ) May 19 , 2011 4.05 Form of 3.625 % ) May 19 , 2011 4.05 Form of 3.625 % Note , 2011 4.05 Form of 3.625 % Note due 2021 Current of 3.625 % Note due 2021 Current Report on Form 8-K 2021 Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) May 19 , 2011 No . 000-50726 ) May 19 , 2011 4.06 Form of 000-50726 ) May 19 , 2011 4.06 Form of 3.375 % ) May 19 , 2011 4.06 Form of 3.375 % Note , 2011 4.06 Form of 3.375 % Note due 2024 Current of 3.375 % Note due 2024 Current Report on Form 8-K 2024 Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) February 25 , 2014 No . 000-50726 ) February 25 , 2014 4.07 Alphabet Inc 000-50726 ) February 25 , 2014 4.07 Alphabet Inc . Deferred ) February 25 , 2014 4.07 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Terms of 001-37580 ) October 2 , 2015 4.08 Terms of Revised Stipulation ) October 2 , 2015 4.08 Terms of Revised Stipulation of . C.A . No . 7469-CS ) Registration Statement on Form ) Registration Statement on Form 8-A ( File No . 001-36380 8-A ( File No . 001-36380 ) March 26 , 2014 No . 001-36380 ) March 26 , 2014 4.09 Transfer Restriction 001-36380 ) March 26 , 2014 4.09 Transfer Restriction Agreement , ) March 26 , 2014 4.09 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between Alphabet , dated October 2 , 2015 , between Alphabet Inc. and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.10 Transfer Restriction 001-37580 ) October 2 , 2015 4.10 Transfer Restriction Agreement , ) October 2 , 2015 4.10 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between Alphabet , dated October 2 , 2015 , between Alphabet Inc. and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.11 Transfer Restriction 001-37580 ) October 2 , 2015 4.11 Transfer Restriction Agreement , ) October 2 , 2015 4.11 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between Alphabet , dated October 2 , 2015 , between Alphabet Inc. and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.12 Class C 001-37580 ) October 2 , 2015 4.12 Class C Undertaking , ) October 2 , 2015 4.12 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by Alphabet Inc. Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.01 Form of 001-37580 ) October 2 , 2015 10.01 Form of Indemnification Agreement ) October 2 , 2015 10.01 Form of Indemnification Agreement entered officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Offer 001-37580 ) October 2 , 2015 10.02 u Offer Letter , ) October 2 , 2015 10.02 u Offer Letter , dated Offer Letter , dated March 20 , 2015 , between Ruth , dated March 20 , 2015 , between Ruth Porat and Inc. Current Report on Form 8-K ( File No . 001-36380 8-K ( File No . 001-36380 ) March 26 , 2015 No . 001-36380 ) March 26 , 2015 Table of Contents 001-36380 ) March 26 , 2015 Table of Contents Alphabet Inc. by reference herein Form Date 10.03 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Inc. Current Report on Form 8-K ( File No . 000-36380 8-K ( File No . 000-36380 ) and Current Report on and Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Director 001-37580 ) October 2 , 2015 10.04 u Director Arrangements Agreement ) October 2 , 2015 10.04 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Inc. Current Report on Form 8-K ( File No . 000-36380 8-K ( File No . 000-36380 ) and Current Report on and Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Google 001-37580 ) October 2 , 2015 10.05 u Google Restricted Stock ) October 2 , 2015 10.05 u Google Restricted Stock Unit Unit Agreement , dated September 9 , 2015 , between Google , dated September 9 , 2015 , between Google Inc. and Kordestani Quarterly Report on Form 10-Q ( File No . 001-36380 10-Q ( File No . 001-36380 ) October 29 , 2015 No . 001-36380 ) October 29 , 2015 10.06 u Google 001-36380 ) October 29 , 2015 10.06 u Google Inc. 2004 ) October 29 , 2015 10.06 u Google Inc. 2004 Stock 2015 10.06 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.06.1 u Google 000-50726 ) June 7 , 2011 10.06.1 u Google Inc. 2004 ) June 7 , 2011 10.06.1 u Google Inc. 2004 Stock 2011 10.06.1 u Google Inc. 2004 Stock Plan-Form of Stock Option Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.06.2 u Google 000-50726 ) March 30 , 2005 10.06.2 u Google Inc. 2004 ) March 30 , 2005 10.06.2 u Google Inc. 2004 Stock 2005 10.06.2 u Google Inc. 2004 Stock Plan-Form of Restricted Stock Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.06.3 u Google 000-50726 ) March 30 , 2005 10.06.3 u Google Inc. 2004 ) March 30 , 2005 10.06.3 u Google Inc. 2004 Stock 2005 10.06.3 u Google Inc. 2004 Stock Plan-Amendment to Stock Option S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.07 u Alphabet 333-142243 ) April 20 , 2007 10.07 u Alphabet Inc. 2012 ) April 20 , 2007 10.07 u Alphabet Inc. 2012 Stock 2007 10.07 u Alphabet Inc. 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 333-00050726 8-K ( File No . 333-00050726 ) June 26 , 2012 No . 333-00050726 ) June 26 , 2012 10.07.1 u * 333-00050726 ) June 26 , 2012 10.07.1 u * Alphabet Inc. ) June 26 , 2012 10.07.1 u * Alphabet Inc. 2012 10.07.1 u * Alphabet Inc. 2012 Stock Plan - Form of Alphabet Restricted Stock Unit Agreement 10.08 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 10.09 u AdMob 333-181661 ) May 24 , 2012 10.09 u AdMob , Inc. ) May 24 , 2012 10.09 u AdMob , Inc. 2006 10.09 u AdMob , Inc. 2006 Stock Plan and UK Sub-Plan of the AdMob , Inc. 2006 Stock Plan Registration Statement on filed ( File No . 333-167411 ) June 9 , 2010 No . 333-167411 ) June 9 , 2010 10.10 u Click 333-167411 ) June 9 , 2010 10.10 u Click Holding Corp. ) June 9 , 2010 10.10 u Click Holding Corp. 2005 10.10 u Click Holding Corp. 2005 Stock Incentive Plan Registration Statement S-8 ( File No . 333-149956 ) March 28 , 2008 No . 333-149956 ) March 28 , 2008 12 * Computation 333-149956 ) March 28 , 2008 12 * Computation of Earnings ) March 28 , 2008 12 * Computation of Earnings to Earnings to Fixed Charge Ratios 14.01 Code of Conduct of Alphabet of Alphabet Inc. dated October 2 , 2015 Current Report on Inc. dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 21.01 * Subsidiaries 001-37580 ) October 2 , 2015 21.01 * Subsidiaries of the ) October 2 , 2015 21.01 * Subsidiaries of the Registrants * Subsidiaries of the Registrants 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 Table of Contents Alphabet Inc. by reference herein Form Date 31.03 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.04 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.04 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive of Alphabet Inc. pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.02 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.02 ‡ Certifications of Chief Executive of Google Inc. pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-17-000008/full-submission.txt b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-17-000008/full-submission.txt new file mode 100644 index 0000000..8064e8b --- /dev/null +++ b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-17-000008/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( Mark One ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2016 OR ¨ TRANSITION year ended December 31 , 2016 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive ( Zip Code ) ( 650 ) 253-0000 ( Registrant ’ Code ) ( 650 ) 253-0000 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No ý As of June 30 , 2016 , the aggregate As of June 30 , 2016 , the aggregate market value Global Select Market on June 30 , 2016 ) wa approximately Market on June 30 , 2016 ) wa approximately $ 413.8 2016 ) wa approximately $ 413.8 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 26 , Form 10-K. As of January 26 , 2017 , there were As of January 26 , 2017 , there were 297,117,506 share , 2017 , there were 297,117,506 share of the registrant ’ A common stock outstanding , 47,369,687 share of the registrant ’ common stock outstanding , and 346,933,134 share of the registrant ’ s Proxy Statement for the 2017 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2016 . Table of year ended December 31 , 2016 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2016 TABLE OF CONTENTS Year Ended December 31 , 2016 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 1 PART I Item 1. Business Statements 1 PART I Item 1. Business 3 Item 1A . PART I Item 1. Business 3 Item 1A . Risk Factors Item 1. Business 3 Item 1A . Risk Factors 7 Item Item 1A . Risk Factors 7 Item 1B . Unresolved Staff . Risk Factors 7 Item 1B . Unresolved Staff Comments 18 1B . Unresolved Staff Comments 18 Item 2 . Properties 18 Unresolved Staff Comments 18 Item 2 . Properties 18 Item 3 18 Item 2 . Properties 18 Item 3 . Legal Proceedings 2 . Properties 18 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Mine Safety . Legal Proceedings 18 Item 4 . Mine Safety Disclosures 19 4 . Mine Safety Disclosures 19 PART II Item 5 . Disclosures 19 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 37 Item 8 . Financial Statements About Market Risk 37 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 39 Item 9 . Changes in and Supplementary Data 39 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 82 Item 9A . Controls and and Financial Disclosure 82 Item 9A . Controls and Procedures 82 9A . Controls and Procedures 82 Item 9B . Other Information Controls and Procedures 82 Item 9B . Other Information 82 PART Item 9B . Other Information 82 PART III Item 10 . Information 82 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 83 Item 11 . Executive Compensation and Corporate Governance 83 Item 11 . Executive Compensation 83 Item Item 11 . Executive Compensation 83 Item 12 . Security Ownership . Executive Compensation 83 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 83 Item 13 . Certain Relationships Related Stockholder Matters 83 Item 13 . Certain Relationships and Related Transactions , and Director Independence 83 Item 14 . Principal Accountant and Director Independence 83 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 83 PART IV Item 15 . Services 83 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 84 i Table of Contents Alphabet This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , Risk Factors `` in Item 1A of this report and those the context indicates otherwise . 1 Table of Contents Alphabet Inc. any of these company . 2 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder wa founded nearly two decade 3 Table of Contents Alphabet Inc. service , and hardware . 4 Table of Contents Alphabet Inc. right to other party . 5 Table of Contents Alphabet Inc. employee . As of December 31 , 2016 , we had As of December 31 , 2016 , we had 72,053 full-time , 2016 , we had 72,053 full-time employee : 27,169 in had 72,053 full-time employee : 27,169 in research and development , in research and development , 20,902 in sale and marketing , in sale and marketing , 14,287 in operation , and 9,695 14,287 in operation , and 9,695 in general and administrative function our energy consumption . In 2012 , we set a long long term goal to reach 100 % renewable energy for our to achieve that goal in 2017 . We continue to invest this Annual Report on Form 10-K. For information about segment and , please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K. As part of the Alphabet Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , and our Proxy Statements 's Public Reference Room at 100 F Street , NE , NE , Washington , D.C. 20549 . You can get information by calling the SEC at 1-800-SEC-0330 . We webcast via our this Annual Report on Form 10-K or in any other report inactive textual reference only . 6 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 1A . RISK FACTORS Our operation our business . We generated 88 % of total revenue from total revenue from advertising in 2016 . Many of our advertiser a new holding company in 2015 and the investment that we provide product and service that 7 Table of Contents Alphabet Inc. than we have historically . 8 Table of Contents Alphabet Inc. in Europe in May of 2018 , which creates a range face intellectual property litigation , 9 Table of Contents Alphabet Inc. a number of legal challenge 10 Table of Contents Alphabet Inc. be available in every country 11 Table of Contents Alphabet Inc. financial condition or result . 12 Table of Contents Alphabet Inc. utility would rank them . 13 Table of Contents Alphabet Inc International revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2016 . In certain international market not violate our policy . 14 Table of Contents Alphabet Inc impact our future success . 15 Table of Contents Alphabet Inc. For example , from January 1 , 2016 through December 31 , from January 1 , 2016 through December 31 , 2016 1 , 2016 through December 31 , 2016 , the closing 2016 through December 31 , 2016 , the closing price of common stock ranged from $ 681.14 per share to $ 835.74 681.14 per share to $ 835.74 per share , and the capital stock ranged from $ 668.26 to $ 813.11 per share from $ 668.26 to $ 813.11 per share . In addition this Annual Report on Form 10-K , the trading price of change in earnings estimate . 16 Table of Contents Alphabet Inc. cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital Class B common stock ha 10 vote per share , our right . As of December 31 , 2016 , Larry , As of December 31 , 2016 , Larry , Sergey , and Eric beneficially owned approximately 92.4 % of our outstanding Class stock , which represented approximately 56.8 % of the voting power our board of director . 17 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it it subsidiary . On October 2 , 2015 , we completed . On October 2 , 2015 , we completed a reorganization new holding company . ITEM 1B . UNRESOLVED STAFF COMMENTS There unresolved staff comment at December 31 , 2016 . ITEM 2 comment at December 31 , 2016 . ITEM 2 . PROPERTIES 31 , 2016 . ITEM 2 . PROPERTIES Our headquarters are our headquarters ) represent approximately 7.86 million square foot of office/building of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 10 “ Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein incorporated herein by reference . 18 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 4 . MINE SAFETY DISCLOSURES Not applicable . PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public Select Market . Fiscal Year 2016 Quarters Ended : High Low Ended : High Low March 31 , 2016 $ 780.91 $ High Low March 31 , 2016 $ 780.91 $ 701.02 June March 31 , 2016 $ 780.91 $ 701.02 June 30 , , 2016 $ 780.91 $ 701.02 June 30 , 2016 787.68 $ 780.91 $ 701.02 June 30 , 2016 787.68 681.14 September $ 701.02 June 30 , 2016 787.68 681.14 September 30 , 701.02 June 30 , 2016 787.68 681.14 September 30 , 2016 June 30 , 2016 787.68 681.14 September 30 , 2016 815.95 , 2016 787.68 681.14 September 30 , 2016 815.95 704.89 December 787.68 681.14 September 30 , 2016 815.95 704.89 December 31 , 681.14 September 30 , 2016 815.95 704.89 December 31 , 2016 September 30 , 2016 815.95 704.89 December 31 , 2016 835.74 , 2016 815.95 704.89 December 31 , 2016 835.74 753.22 Fiscal 815.95 704.89 December 31 , 2016 835.74 753.22 Fiscal Year 2015 704.89 December 31 , 2016 835.74 753.22 Fiscal Year 2015 Quarters December 31 , 2016 835.74 753.22 Fiscal Year 2015 Quarters Ended 2016 835.74 753.22 Fiscal Year 2015 Quarters Ended : High Low Ended : High Low March 31 , 2015 $ 581.44 $ High Low March 31 , 2015 $ 581.44 $ 497.06 June March 31 , 2015 $ 581.44 $ 497.06 June 30 , , 2015 $ 581.44 $ 497.06 June 30 , 2015 573.66 $ 581.44 $ 497.06 June 30 , 2015 573.66 532.74 September $ 497.06 June 30 , 2015 573.66 532.74 September 30 , 497.06 June 30 , 2015 573.66 532.74 September 30 , 2015 June 30 , 2015 573.66 532.74 September 30 , 2015 699.62 , 2015 573.66 532.74 September 30 , 2015 699.62 541.70 December 573.66 532.74 September 30 , 2015 699.62 541.70 December 31 , 532.74 September 30 , 2015 699.62 541.70 December 31 , 2015 September 30 , 2015 699.62 541.70 December 31 , 2015 793.96 , 2015 699.62 541.70 December 31 , 2015 793.96 642.00 Our 699.62 541.70 December 31 , 2015 793.96 642.00 Our Class B 541.70 December 31 , 2015 793.96 642.00 Our Class B common December 31 , 2015 793.96 642.00 Our Class B common stock “ GOOG ” since April 3 , 2014 . The following ” since April 3 , 2014 . The following table set Select Market . Fiscal Year 2016 Quarters Ended : High Low Ended : High Low March 31 , 2016 $ 764.65 $ High Low March 31 , 2016 $ 764.65 $ 678.11 June March 31 , 2016 $ 764.65 $ 678.11 June 30 , , 2016 $ 764.65 $ 678.11 June 30 , 2016 766.61 $ 764.65 $ 678.11 June 30 , 2016 766.61 668.26 September $ 678.11 June 30 , 2016 766.61 668.26 September 30 , 678.11 June 30 , 2016 766.61 668.26 September 30 , 2016 June 30 , 2016 766.61 668.26 September 30 , 2016 787.21 , 2016 766.61 668.26 September 30 , 2016 787.21 694.49 December 766.61 668.26 September 30 , 2016 787.21 694.49 December 31 , 668.26 September 30 , 2016 787.21 694.49 December 31 , 2016 September 30 , 2016 787.21 694.49 December 31 , 2016 813.11 , 2016 787.21 694.49 December 31 , 2016 813.11 736.08 Fiscal 787.21 694.49 December 31 , 2016 813.11 736.08 Fiscal Year 2015 694.49 December 31 , 2016 813.11 736.08 Fiscal Year 2015 Quarters December 31 , 2016 813.11 736.08 Fiscal Year 2015 Quarters Ended 2016 813.11 736.08 Fiscal Year 2015 Quarters Ended : High Low Ended : High Low March 31 , 2015 $ 575.33 $ High Low March 31 , 2015 $ 575.33 $ 492.55 June March 31 , 2015 $ 575.33 $ 492.55 June 30 , , 2015 $ 575.33 $ 492.55 June 30 , 2015 565.06 $ 575.33 $ 492.55 June 30 , 2015 565.06 520.51 September $ 492.55 June 30 , 2015 565.06 520.51 September 30 , 492.55 June 30 , 2015 565.06 520.51 September 30 , 2015 June 30 , 2015 565.06 520.51 September 30 , 2015 672.93 , 2015 565.06 520.51 September 30 , 2015 672.93 516.83 December 565.06 520.51 September 30 , 2015 672.93 516.83 December 31 , 520.51 September 30 , 2015 672.93 516.83 December 31 , 2015 September 30 , 2015 672.93 516.83 December 31 , 2015 776.60 , 2015 672.93 516.83 December 31 , 2015 776.60 611.29 Holders 672.93 516.83 December 31 , 2015 776.60 611.29 Holders of Record 516.83 December 31 , 2015 776.60 611.29 Holders of Record As December 31 , 2015 776.60 611.29 Holders of Record As of of Record As of December 31 , 2016 , there were As of December 31 , 2016 , there were approximately 2,178 2016 , there were approximately 2,178 and 2,183 stockholder of record there were approximately 2,178 and 2,183 stockholder of record of our C capital stock were $ 792.45 and $ 771.82 per share were $ 792.45 and $ 771.82 per share , respectively , holder . As of December 31 , 2016 , there were As of December 31 , 2016 , there were approximately 67 2016 , there were approximately 67 stockholder of record of our Class B common stock . 19 Table of Contents Alphabet Inc. The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2011 and it relative index on December 31 , 2011 and it relative performance is performance is tracked through December 31 , 2016 . The return tracked through December 31 , 2016 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2011 in stock or invested on December 31 , 2011 in stock or index , . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a ” for purpose of Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the under the Securities Act of 1933 , a amended , or reference in such filing . 20 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are period . Year Ended December 31 , 2012 2013 2014 2015 Year Ended December 31 , 2012 2013 2014 2015 2016 ( Ended December 31 , 2012 2013 2014 2015 2016 ( in December 31 , 2012 2013 2014 2015 2016 ( in million 31 , 2012 2013 2014 2015 2016 ( in million , , 2012 2013 2014 2015 2016 ( in million , except Income Data : Revenues $ 46,039 $ 55,519 $ 66,001 $ : Revenues $ 46,039 $ 55,519 $ 66,001 $ 74,989 $ $ 46,039 $ 55,519 $ 66,001 $ 74,989 $ 90,272 Income $ 55,519 $ 66,001 $ 74,989 $ 90,272 Income from operation $ 66,001 $ 74,989 $ 90,272 Income from operation 13,834 15,403 $ 90,272 Income from operation 13,834 15,403 16,496 19,360 23,716 Net 90,272 Income from operation 13,834 15,403 16,496 19,360 23,716 Net income Income from operation 13,834 15,403 16,496 19,360 23,716 Net income from from operation 13,834 15,403 16,496 19,360 23,716 Net income from continuing operation 13,834 15,403 16,496 19,360 23,716 Net income from continuing operation Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income from continuing operation 11,435 13,160 13,620 16,348 19,478 Net income ( continuing operation 11,435 13,160 13,620 16,348 19,478 Net income ( loss operation 11,435 13,160 13,620 16,348 19,478 Net income ( loss ) ) from discontinued operation ( 816 ) ( 427 ) 516 operation ( 816 ) ( 427 ) 516 0 0 Net 816 ) ( 427 ) 516 0 0 Net income 10,619 ) ( 427 ) 516 0 0 Net income 10,619 12,733 ( 427 ) 516 0 0 Net income 10,619 12,733 14,136 516 0 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic 0 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic net 0 Net income 10,619 12,733 14,136 16,348 19,478 Basic net income Net income 10,619 12,733 14,136 16,348 19,478 Basic net income ( income 10,619 12,733 14,136 16,348 19,478 Basic net income ( loss stock : Continuing operation $ 17.47 $ 19.77 $ 20.15 $ Continuing operation $ 17.47 $ 19.77 $ 20.15 $ 23.11 $ $ 17.47 $ 19.77 $ 20.15 $ 23.11 $ 28.32 Discontinued $ 19.77 $ 20.15 $ 23.11 $ 28.32 Discontinued operation ( $ 20.15 $ 23.11 $ 28.32 Discontinued operation ( 1.25 ) $ 28.32 Discontinued operation ( 1.25 ) ( 0.64 ) 0.76 operation ( 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic net income ) ( 0.64 ) 0.76 0.00 0.00 Basic net income per ( 0.64 ) 0.76 0.00 0.00 Basic net income per share and B common stock $ 16.22 $ 19.13 $ 20.91 $ common stock $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ $ 16.22 $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic $ 19.13 $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income ( loss stock : Continuing operation $ 17.47 $ 19.77 $ 20.15 $ Continuing operation $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ $ 17.47 $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued $ 19.77 $ 20.15 $ 24.63 $ 28.32 Discontinued operation ( $ 20.15 $ 24.63 $ 28.32 Discontinued operation ( 1.25 ) $ 28.32 Discontinued operation ( 1.25 ) ( 0.64 ) 0.76 operation ( 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic 1.25 ) ( 0.64 ) 0.76 0.00 0.00 Basic net income ) ( 0.64 ) 0.76 0.00 0.00 Basic net income per ( 0.64 ) 0.76 0.00 0.00 Basic net income per share Class C capital stock $ 16.22 $ 19.13 $ 20.91 $ capital stock $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ $ 16.22 $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted $ 19.13 $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ $ 17.21 $ 19.42 $ 19.82 $ 22.84 $ 27.85 Discontinued $ 19.42 $ 19.82 $ 22.84 $ 27.85 Discontinued operation ( $ 19.82 $ 22.84 $ 27.85 Discontinued operation ( 1.23 ) $ 27.85 Discontinued operation ( 1.23 ) ( 0.63 ) 0.75 operation ( 1.23 ) ( 0.63 ) 0.75 0.00 0.00 Diluted 1.23 ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income per ( 0.63 ) 0.75 0.00 0.00 Diluted net income per share and B common stock $ 15.98 $ 18.79 $ 20.57 $ common stock $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ $ 15.98 $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted $ 18.79 $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income ( loss stock : Continuing operation $ 17.21 $ 19.42 $ 19.82 $ Continuing operation $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ $ 17.21 $ 19.42 $ 19.82 $ 24.34 $ 27.85 Discontinued $ 19.42 $ 19.82 $ 24.34 $ 27.85 Discontinued operation ( $ 19.82 $ 24.34 $ 27.85 Discontinued operation ( 1.23 ) $ 27.85 Discontinued operation ( 1.23 ) ( 0.63 ) 0.75 operation ( 1.23 ) ( 0.63 ) 0.75 0.00 0.00 Diluted 1.23 ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income ) ( 0.63 ) 0.75 0.00 0.00 Diluted net income per ( 0.63 ) 0.75 0.00 0.00 Diluted net income per share Class C capital stock $ 15.98 $ 18.79 $ 20.57 $ capital stock $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ $ 15.98 $ 18.79 $ 20.57 $ 24.34 $ 27.85 As $ 18.79 $ 20.57 $ 24.34 $ 27.85 As of December $ 20.57 $ 24.34 $ 27.85 As of December 31 , $ 27.85 As of December 31 , 2012 2013 2014 2015 As of December 31 , 2012 2013 2014 2015 2016 ( of December 31 , 2012 2013 2014 2015 2016 ( in December 31 , 2012 2013 2014 2015 2016 ( in million 31 , 2012 2013 2014 2015 2016 ( in million ) , 2012 2013 2014 2015 2016 ( in million ) Consolidated , and marketable security $ 48,088 $ 58,717 $ 64,395 $ marketable security $ 48,088 $ 58,717 $ 64,395 $ 73,066 $ $ 48,088 $ 58,717 $ 64,395 $ 73,066 $ 86,333 Total $ 58,717 $ 64,395 $ 73,066 $ 86,333 Total asset 92,711 $ 64,395 $ 73,066 $ 86,333 Total asset 92,711 109,050 129,187 73,066 $ 86,333 Total asset 92,711 109,050 129,187 147,461 167,497 Total $ 86,333 Total asset 92,711 109,050 129,187 147,461 167,497 Total long-term 86,333 Total asset 92,711 109,050 129,187 147,461 167,497 Total long-term liability Total asset 92,711 109,050 129,187 147,461 167,497 Total long-term liability 6,662 asset 92,711 109,050 129,187 147,461 167,497 Total long-term liability 6,662 6,165 147,461 167,497 Total long-term liability 6,662 6,165 8,548 7,820 11,705 Total 167,497 Total long-term liability 6,662 6,165 8,548 7,820 11,705 Total stockholder Total long-term liability 6,662 6,165 8,548 7,820 11,705 Total stockholder ’ long-term liability 6,662 6,165 8,548 7,820 11,705 Total stockholder ’ equity liability 6,662 6,165 8,548 7,820 11,705 Total stockholder ’ equity 71,570 11,705 Total stockholder ’ equity 71,570 86,977 103,860 120,331 139,036 21 Total stockholder ’ equity 71,570 86,977 103,860 120,331 139,036 21 Table stockholder ’ equity 71,570 86,977 103,860 120,331 139,036 21 Table of ’ equity 71,570 86,977 103,860 120,331 139,036 21 Table of Contents equity 71,570 86,977 103,860 120,331 139,036 21 Table of Contents Alphabet 71,570 86,977 103,860 120,331 139,036 21 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business The revenue could be volatile . 22 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2016 ( consolidated unless year ended December 31 , 2016 ( consolidated unless otherwise noted : • Revenues of $ 90.3 billion and revenue growth of billion and revenue growth of 20 % year over year , constant currency revenue growth of 24 % year over year . Google segment revenue of $ 89.5 billion with revenue growth of billion with revenue growth of 20 % year over year and Other Bets revenue of $ 0.8 billion with revenue growth of billion with revenue growth of 82 % year over year . of the world were $ 42.8 billion , $ 7.8 billion $ 42.8 billion , $ 7.8 billion , and $ 39.7 7.8 billion , and $ 39.7 billion , respectively . • Cost of revenue wa $ 35.1 billion , consisting of traffic traffic acquisition cost of $ 16.8 billion and other cost of cost of revenue of $ 18.3 billion . Our traffic acquisition percentage of advertising revenue wa 21 % . • Operating expense of revenue ) were $ 31.4 billion . • Income from Income from operation wa $ 23.7 billion . • Effective tax • Effective tax rate wa 19 % . • Net income • Net income wa $ 19.5 billion with diluted net income income per share of $ 27.85 . • Operating cash flow Operating cash flow wa $ 36.0 billion . • Capital expenditure • Capital expenditure were $ 10.2 billion . • Headcount increased . • Headcount increased to 72,053 a of December 31 , to 72,053 a of December 31 , 2016 . Information about a of December 31 , 2016 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Prior current period segment presentation . 23 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google segment Google Ended December 31 , 2014 2015 2016 Google segment Google property December 31 , 2014 2015 2016 Google segment Google property $ Google segment Google property $ 45,085 $ 52,357 $ 63,785 Google Google property $ 45,085 $ 52,357 $ 63,785 Google Network Members $ 45,085 $ 52,357 $ 63,785 Google Network Members ' property Google Network Members ' property 14,539 15,033 15,598 Google advertising revenue Network Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 67,390 15,033 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 7,154 67,390 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidated revenue $ 66,001 $ 74,989 $ 90,272 Google Consolidated revenue $ 66,001 $ 74,989 $ 90,272 Google segment The $ 66,001 $ 74,989 $ 90,272 Google segment The following table presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google segment revenue Ended December 31 , 2014 2015 2016 Google segment revenue $ December 31 , 2014 2015 2016 Google segment revenue $ 65,674 2016 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Google segment revenue a a a percentage of consolidated revenue 99.5 % 99.4 % 99.1 % of consolidated revenue 99.5 % 99.4 % 99.1 % Aggregate paid revenue 99.5 % 99.4 % 99.1 % Aggregate paid click change % Aggregate paid click change 22 % 32 % Aggregate cost-per-click paid click change 22 % 32 % Aggregate cost-per-click change ( % Aggregate cost-per-click change ( 11 ) % ( 11 ) ( 11 ) % ( 11 ) % Use of Monetization rate ; • seasonality ; 24 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google property $ Ended December 31 , 2014 2015 2016 Google property $ 45,085 December 31 , 2014 2015 2016 Google property $ 45,085 $ 2015 2016 Google property $ 45,085 $ 52,357 $ 63,785 Google Google property $ 45,085 $ 52,357 $ 63,785 Google property a $ 45,085 $ 52,357 $ 63,785 Google property a a percentage percentage of Google segment revenue 68.6 % 70.2 % 71.3 % Google segment revenue 68.6 % 70.2 % 71.3 % Paid click revenue 68.6 % 70.2 % 71.3 % Paid click change 33 71.3 % Paid click change 33 % 40 % Cost-per-click change Paid click change 33 % 40 % Cost-per-click change ( 15 40 % Cost-per-click change ( 15 ) % ( 13 ) ( 15 ) % ( 13 ) % Google property revenue Google property revenue increased $ 11,428 million from 2015 to 2016 increased $ 11,428 million from 2015 to 2016 and also increased 11,428 million from 2015 to 2016 and also increased a a format and delivery launched during 2016 . We also experienced growth on Google property increased from 2015 to 2016 due to growth property increased from 2015 to 2016 due to growth in the Google property revenue increased $ 7,272 million from 2014 to 2015 increased $ 7,272 million from 2014 to 2015 and also increased 7,272 million from 2014 to 2015 and also increased a a on Google property increased from 2014 to 2015 due to an property increased from 2014 to 2015 due to an increase in partially offset by a decrease 25 Table of Contents Alphabet Inc. presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google Network Members Ended December 31 , 2014 2015 2016 Google Network Members ' December 31 , 2014 2015 2016 Google Network Members ' property Network Members ' property $ 14,539 $ 15,033 $ 15,598 Google ' property $ 14,539 $ 15,033 $ 15,598 Google Network Members $ 14,539 $ 15,033 $ 15,598 Google Network Members ' property percentage of Google segment revenue 22.1 % 20.2 % 17.4 % Google segment revenue 22.1 % 20.2 % 17.4 % Paid click revenue 22.1 % 20.2 % 17.4 % Paid click change ( % Paid click change ( 7 ) % 3 % Cost-per-click change ( 7 ) % 3 % Cost-per-click change ( 3 3 % Cost-per-click change ( 3 ) % ( 13 ) ( 3 ) % ( 13 ) % Google Network Members ' property revenue increased $ 565 million from 2015 to 2016 increased $ 565 million from 2015 to 2016 . The growth 565 million from 2015 to 2016 . The growth wa primarily increase in paid click from 2015 to 2016 resulted from the paid click from 2015 to 2016 resulted from the growth in paid by our advertiser from 2015 to 2016 resulted from change our advertiser from 2015 to 2016 resulted from change in the ' property revenue increased $ 494 million from 2014 to 2015 increased $ 494 million from 2014 to 2015 . The increase 494 million from 2014 to 2015 . The increase wa primarily paid by our advertiser from 2014 to 2015 were primarily driven our advertiser from 2014 to 2015 were primarily driven by ongoing presented : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google other revenue Ended December 31 , 2014 2015 2016 Google other revenue $ December 31 , 2014 2015 2016 Google other revenue $ 6,050 2016 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue $ 6,050 $ 7,154 $ 10,080 Google other revenue a a percentage of Google segment revenue 9.3 % 9.6 % 11.3 % Google segment revenue 9.3 % 9.6 % 11.3 % Google other revenue 9.3 % 9.6 % 11.3 % Google other revenue consist our Google Cloud offering . 26 Table of Contents Alphabet Inc. Google other revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million from 2015 to 2016 and increased a 2,926 million from 2015 to 2016 and increased a a percentage Google other revenue increased $ 1,104 million from 2014 to 2015 increased $ 1,104 million from 2014 to 2015 and increased a 1,104 million from 2014 to 2015 and increased a a percentage presented : Year Ended December 31 , 2014 2015 2016 Other Year Ended December 31 , 2014 2015 2016 Other Bets revenue Ended December 31 , 2014 2015 2016 Other Bets revenue $ December 31 , 2014 2015 2016 Other Bets revenue $ 327 2016 Other Bets revenue $ 327 $ 445 $ 809 Other Bets revenue $ 327 $ 445 $ 809 Other Bets revenue $ 327 $ 445 $ 809 Other Bets revenue a a a percentage of consolidated revenue 0.5 % 0.6 % 0.9 % of consolidated revenue 0.5 % 0.6 % 0.9 % Other Bets revenue 0.5 % 0.6 % 0.9 % Other Bets revenue consist Other Bets revenue increased $ 364 million from 2015 to 2016 increased $ 364 million from 2015 to 2016 and increased a 364 million from 2015 to 2016 and increased a a percentage R & D service from 2015 to 2016 . Our Other D service from 2015 to 2016 . Our Other Bets revenue Other Bets revenue increased $ 118 million from 2014 to 2015 increased $ 118 million from 2014 to 2015 and remained relatively 118 million from 2014 to 2015 and remained relatively flat a Nest wa acquired in February 2014 , the increase in our partial year of revenue in 2014 a compared to a full to a full year in 2015 . Due to the early customer : Year Ended December 31 , 2014 2015 2016 United Year Ended December 31 , 2014 2015 2016 United States 45 Ended December 31 , 2014 2015 2016 United States 45 % December 31 , 2014 2015 2016 United States 45 % 46 2014 2015 2016 United States 45 % 46 % 47 % 2016 United States 45 % 46 % 47 % United Kingdom States 45 % 46 % 47 % United Kingdom 10 % % 47 % United Kingdom 10 % 10 % 9 % % United Kingdom 10 % 10 % 9 % Rest of Kingdom 10 % 10 % 9 % Rest of the world % Rest of the world 45 % 44 % 44 % of the world 45 % 44 % 44 % For the world 45 % 44 % 44 % For the amount of , please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K. Use of Constant Currency Revenues our core operating result . 27 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2014 2015 2016 United Year Ended December 31 , 2014 2015 2016 United Kingdom revenue Ended December 31 , 2014 2015 2016 United Kingdom revenue $ December 31 , 2014 2015 2016 United Kingdom revenue $ 6,483 2016 United Kingdom revenue $ 6,483 $ 7,067 $ 7,787 Exclude Kingdom revenue $ 6,483 $ 7,067 $ 7,787 Exclude : Foreign $ 6,483 $ 7,067 $ 7,787 Exclude : Foreign exchange impact period rate N/A N/A $ 826 Exclude : Hedging ( gain gain ) recognized $ ( 3 ) $ ( 133 ) ( 3 ) $ ( 133 ) $ ( 297 ) ( 133 ) $ ( 297 ) Constant currency United Kingdom currency United Kingdom revenue $ 6,480 $ 6,934 $ 8,316 United Kingdom revenue $ 6,480 $ 6,934 $ 8,316 United Kingdom revenue $ 6,480 $ 6,934 $ 8,316 United Kingdom revenue growth rate United Kingdom revenue growth rate 9 % 10 % United Kingdom revenue growth rate 9 % 10 % United Kingdom constant currency constant currency revenue growth rate 15 % 20 % Rest of revenue growth rate 15 % 20 % Rest of the world of the world revenue $ 30,036 $ 33,112 $ 39,704 Exclude world revenue $ 30,036 $ 33,112 $ 39,704 Exclude : Foreign $ 30,036 $ 33,112 $ 39,704 Exclude : Foreign exchange impact prior period rate N/A N/A 447 Exclude : Hedging ( gain ( gain ) recognized ( 169 ) ( 1,267 ) ( recognized ( 169 ) ( 1,267 ) ( 242 ) Constant ) ( 1,267 ) ( 242 ) Constant currency Rest of of the world revenue $ 29,867 $ 31,845 $ 39,909 Rest world revenue $ 29,867 $ 31,845 $ 39,909 Rest of the $ 29,867 $ 31,845 $ 39,909 Rest of the world revenue the world revenue growth rate 10 % 20 % Rest of revenue growth rate 10 % 20 % Rest of the world constant currency revenue growth rate 24 % 25 % United States revenue growth rate 24 % 25 % United States revenue $ % United States revenue $ 29,482 $ 34,810 $ 42,781 United States revenue $ 29,482 $ 34,810 $ 42,781 United States revenue $ 29,482 $ 34,810 $ 42,781 United States revenue growth rate United States revenue growth rate 18 % 23 % Total consolidated revenue growth rate 18 % 23 % Total consolidated revenue $ % Total consolidated revenue $ 66,001 $ 74,989 $ 90,272 Constant consolidated revenue $ 66,001 $ 74,989 $ 90,272 Constant currency total $ 66,001 $ 74,989 $ 90,272 Constant currency total consolidated revenue currency total consolidated revenue $ 65,829 $ 73,589 $ 91,006 Total consolidated revenue $ 65,829 $ 73,589 $ 91,006 Total consolidated revenue $ 65,829 $ 73,589 $ 91,006 Total consolidated revenue growth rate Total consolidated revenue growth rate 14 % 20 % Constant currency revenue growth rate 14 % 20 % Constant currency total consolidated total consolidated revenue growth rate 20 % 24 % In 2016 revenue growth rate 20 % 24 % In 2016 and in 20 % 24 % In 2016 and in 2015 , our % In 2016 and in 2015 , our revenue from the the U.S. dollar . In 2016 , our revenue from the the Japanese yen . In 2015 , our revenue from the , and Japanese yen . 28 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Traffic Year Ended December 31 , 2014 2015 2016 Traffic acquisition cost Ended December 31 , 2014 2015 2016 Traffic acquisition cost $ December 31 , 2014 2015 2016 Traffic acquisition cost $ 13,497 2016 Traffic acquisition cost $ 13,497 $ 14,343 $ 16,793 Other acquisition cost $ 13,497 $ 14,343 $ 16,793 Other cost of $ 13,497 $ 14,343 $ 16,793 Other cost of revenue 12,194 16,793 Other cost of revenue 12,194 13,821 18,345 Total cost of Other cost of revenue 12,194 13,821 18,345 Total cost of revenue cost of revenue 12,194 13,821 18,345 Total cost of revenue $ Total cost of revenue $ 25,691 $ 28,164 $ 35,138 Total of revenue $ 25,691 $ 28,164 $ 35,138 Total cost of $ 25,691 $ 28,164 $ 35,138 Total cost of revenue a a a percentage of revenue 38.9 % 37.6 % 38.9 % percentage of revenue 38.9 % 37.6 % 38.9 % Year Ended revenue 38.9 % 37.6 % 38.9 % Year Ended December 31 38.9 % Year Ended December 31 , 2014 2015 2016 Traffic Year Ended December 31 , 2014 2015 2016 Traffic acquisition cost Ended December 31 , 2014 2015 2016 Traffic acquisition cost to December 31 , 2014 2015 2016 Traffic acquisition cost to distribution cost to distribution partner $ 3,633 $ 4,101 $ 5,894 Traffic distribution partner $ 3,633 $ 4,101 $ 5,894 Traffic acquisition cost $ 3,633 $ 4,101 $ 5,894 Traffic acquisition cost to distribution Google property TAC rate ) 8.1 % 7.8 % 9.2 % TAC rate ) 8.1 % 7.8 % 9.2 % Traffic acquisition ) 8.1 % 7.8 % 9.2 % Traffic acquisition cost to to Google Network Members $ 9,864 $ 10,242 $ 10,899 Traffic Network Members $ 9,864 $ 10,242 $ 10,899 Traffic acquisition cost $ 9,864 $ 10,242 $ 10,899 Traffic acquisition cost to Google Network Members TAC rate ) 67.8 % 68.1 % 69.9 % TAC rate ) 67.8 % 68.1 % 69.9 % Traffic acquisition ) 67.8 % 68.1 % 69.9 % Traffic acquisition cost $ % Traffic acquisition cost $ 13,497 $ 14,343 $ 16,793 Traffic acquisition cost $ 13,497 $ 14,343 $ 16,793 Traffic acquisition cost $ 13,497 $ 14,343 $ 16,793 Traffic acquisition cost a a ( Aggregate TAC rate ) 22.6 % 21.3 % 21.2 % TAC rate ) 22.6 % 21.3 % 21.2 % The cost ) 22.6 % 21.3 % 21.2 % The cost of revenue Cost of revenue increased $ 6,974 million from 2015 to 2016 increased $ 6,974 million from 2015 to 2016 due to various 6,974 million from 2015 to 2016 due to various factor including traffic acquisition cost of $ 2,450 million wa due to increase cost of revenue of $ 4,524 million wa primarily due to due to increase in ( 1 ) data center cost including of business growth , ( 2 ) content acquisition cost a related to YouTube , ( 3 ) hardware cost associated with hardware launch , and ( 4 ) stock-based compensation . 29 4 ) stock-based compensation . 29 Table of Contents Alphabet Inc rate remained relatively flat from 2015 to 2016 primarily a a relatively flat from 2015 to 2016 primarily a a result of Cost of revenue increased $ 2,473 million from 2014 to 2015 increased $ 2,473 million from 2014 to 2015 . The increase 2,473 million from 2014 to 2015 . The increase wa primarily traffic acquisition cost of $ 846 million , resulting from more an impairment charge of $ 378 million recognized in 2014 related $ 378 million recognized in 2014 related to a patent licensing that did not recur in 2015 . The decrease in aggregate in aggregate TAC rate from 2014 to 2015 wa primarily a TAC rate from 2014 to 2015 wa primarily a result of percentage of total revenue in 2017 and future period based on presented : Year Ended December 31 , 2014 2015 2016 Research Year Ended December 31 , 2014 2015 2016 Research and development Ended December 31 , 2014 2015 2016 Research and development expense December 31 , 2014 2015 2016 Research and development expense $ Research and development expense $ 9,832 $ 12,282 $ 13,948 Research development expense $ 9,832 $ 12,282 $ 13,948 Research and development $ 9,832 $ 12,282 $ 13,948 Research and development expense a a a percentage of revenue 14.9 % 16.3 % 15.5 % percentage of revenue 14.9 % 16.3 % 15.5 % R & revenue 14.9 % 16.3 % 15.5 % R & D expense & D expense increased $ 1,666 million from 2015 to 2016 increased $ 1,666 million from 2015 to 2016 . The increase 1,666 million from 2015 to 2016 . The increase wa primarily stock-based compensation expense of $ 667 million and an increase in and facilities-related cost of $ 326 million both largely a a a a result of a 16 % increase in R & milestone in Other Bets in 2015 . In addition , there equipment-related expense of approximately $ 388 million and an increase in in professional service of $ 267 million due to additional expense & D expense increased $ 2,450 million and increased a a a percentage of revenue from 2014 to 2015 . These increase of revenue from 2014 to 2015 . These increase were primarily and facilities-related cost of $ 1,502 million and an increase in stock-based compensation expense of $ 487 million , both largely a a a result of a 16 % increase in R & equipment-related expense of approximately $ 248 million and an increase in in professional service of $ 174 million due to additional expense consulting and outsourced service . 30 Table of Contents Alphabet Inc. a percentage of revenue in 2017 and future period . Sales presented : Year Ended December 31 , 2014 2015 2016 Sales Year Ended December 31 , 2014 2015 2016 Sales and marketing Ended December 31 , 2014 2015 2016 Sales and marketing expense December 31 , 2014 2015 2016 Sales and marketing expense $ Sales and marketing expense $ 8,131 $ 9,047 $ 10,485 Sales marketing expense $ 8,131 $ 9,047 $ 10,485 Sales and marketing $ 8,131 $ 9,047 $ 10,485 Sales and marketing expense a a a percentage of revenue 12.3 % 12.1 % 11.6 % percentage of revenue 12.3 % 12.1 % 11.6 % Sales and revenue 12.3 % 12.1 % 11.6 % Sales and marketing expense and marketing expense increased $ 1,438 million from 2015 to 2016 increased $ 1,438 million from 2015 to 2016 . The increase 1,438 million from 2015 to 2016 . The increase wa primarily and promotional expense of $ 679 million largely due to increase and facilities-related cost of $ 482 million and stock-based compensation expense stock-based compensation expense of $ 179 million , both largely resulting both largely resulting from a 10 % increase in sale and and marketing expense increased $ 916 million and remained relatively flat a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar and facilities-related cost of $ 329 million and an increase in stock-based compensation expense of $ 184 million , largely resulting from , largely resulting from a 12 % increase in sale and and promotional expense of $ 184 million and an increase in professional service fee of $ 158 million due to additional expense a percentage of revenue in 2017 and future period . General presented : Year Ended December 31 , 2014 2015 2016 General Year Ended December 31 , 2014 2015 2016 General and administrative Ended December 31 , 2014 2015 2016 General and administrative expense December 31 , 2014 2015 2016 General and administrative expense $ General and administrative expense $ 5,851 $ 6,136 $ 6,985 General administrative expense $ 5,851 $ 6,136 $ 6,985 General and administrative $ 5,851 $ 6,136 $ 6,985 General and administrative expense a a a percentage of revenue 8.9 % 8.2 % 7.7 % percentage of revenue 8.9 % 8.2 % 7.7 % General and revenue 8.9 % 8.2 % 7.7 % General and administrative expense and administrative expense increased $ 849 million from 2015 to 2016 increased $ 849 million from 2015 to 2016 . The increase 849 million from 2015 to 2016 . The increase wa primarily and facilities-related cost of $ 460 million and stock-based compensation expense stock-based compensation expense of $ 421 million , both largely resulting both largely resulting from a 15 % increase in general and professional service fee of $ 194 million due to lower legal-related and administrative expense increased $ 285 million and decreased a a a percentage of revenue from 2014 to 2015 . The increase of revenue from 2014 to 2015 . The increase in dollar stock-based compensation expense of $ 136 million and an increase in and facilities-related cost of $ 69 million , both largely resulting both largely resulting from a 15 % increase in general and increase in depreciation and equipment- 31 Table of Contents Alphabet Inc. Inc. related expense of $ 121 million and an increase of and an increase of $ 80 million of miscellaneous general and fee and expense of $ 128 million , primarily due to a percentage of revenue in 2017 and future period . Stock-Based presented : Year Ended December 31 , 2014 2015 2016 Stock-based Year Ended December 31 , 2014 2015 2016 Stock-based compensation $ Ended December 31 , 2014 2015 2016 Stock-based compensation $ 4,175 December 31 , 2014 2015 2016 Stock-based compensation $ 4,175 $ 2015 2016 Stock-based compensation $ 4,175 $ 5,203 $ 6,703 Stock-based Stock-based compensation $ 4,175 $ 5,203 $ 6,703 Stock-based compensation a $ 4,175 $ 5,203 $ 6,703 Stock-based compensation a a percentage a a percentage of revenue 6.3 % 6.9 % 7.4 % percentage of revenue 6.3 % 6.9 % 7.4 % Stock-based compensation revenue 6.3 % 6.9 % 7.4 % Stock-based compensation related to settle in equity increased $ 1,500 million from 2015 to 2016 increased $ 1,500 million from 2015 to 2016 and $ 1,028 1,500 million from 2015 to 2016 and $ 1,028 million from 2015 to 2016 and $ 1,028 million from 2014 to 2015 and $ 1,028 million from 2014 to 2015 . These increase 1,028 million from 2014 to 2015 . These increase s were equity to be approximately $ 6.3 billion in 2017 and $ approximately $ 6.3 billion in 2017 and $ 8.3 billion thereafter billion in 2017 and $ 8.3 billion thereafter related to stock-based award outstanding a of December 31 , 2016 . These estimate a of December 31 , 2016 . These estimate do not stock-based award granted after December 31 , 2016 . Consolidated Other granted after December 31 , 2016 . Consolidated Other Income ( presented : Year Ended December 31 , 2014 2015 2016 Other Year Ended December 31 , 2014 2015 2016 Other income ( Ended December 31 , 2014 2015 2016 Other income ( expense December 31 , 2014 2015 2016 Other income ( expense ) expense ) , net $ 763 $ 291 $ 434 Other , net $ 763 $ 291 $ 434 Other income ( $ 763 $ 291 $ 434 Other income ( expense ) a a percentage of revenue 1.1 % 0.4 % 0.5 % percentage of revenue 1.1 % 0.4 % 0.5 % Other income revenue 1.1 % 0.4 % 0.5 % Other income ( expense , net , increased $ 143 million from 2015 to 2016 increased $ 143 million from 2015 to 2016 . This increase 143 million from 2015 to 2016 . This increase wa primarily , net , decreased $ 472 million from 2014 to 2015 decreased $ 472 million from 2014 to 2015 . This decrease 472 million from 2014 to 2015 . This decrease wa primarily non-marketable investment a compared to 2014 . These decrease were partially in the fourth quarter of 2016 , we expect the hedging net , will decrease in 2017 and future period a a presented : Year Ended December 31 , 2014 2015 2016 Provision Year Ended December 31 , 2014 2015 2016 Provision for income Ended December 31 , 2014 2015 2016 Provision for income tax December 31 , 2014 2015 2016 Provision for income tax $ Provision for income tax $ 3,639 $ 3,303 $ 4,672 Effective income tax $ 3,639 $ 3,303 $ 4,672 Effective tax rate $ 3,639 $ 3,303 $ 4,672 Effective tax rate 21.1 % $ 4,672 Effective tax rate 21.1 % 16.8 % 19.3 % Effective tax rate 21.1 % 16.8 % 19.3 % Our provision rate 21.1 % 16.8 % 19.3 % Our provision for income effective tax rate increased from 2015 to 2016 , largely due rate increased from 2015 to 2016 , largely due to proportionately rate and discrete item in 2015 and 2016 , partially offset discrete item in 2015 and 2016 , partially offset by the Accounting Standards Update No . 2016-09 ( ASU 2016-09 ) . No . 2016-09 ( ASU 2016-09 ) . 32 Table of ( ASU 2016-09 ) . 32 Table of Contents Alphabet Inc. effective tax rate decreased from 2014 to 2015 , largely due rate decreased from 2014 to 2015 , largely due to a a discrete benefit recognized in 2015 a a result of the related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2016 . This table quarter ended December 31 , 2016 . This table includes all rate . Quarter Ended Mar 31 , 2015 Jun 30 , Quarter Ended Mar 31 , 2015 Jun 30 , 2015 Sep Mar 31 , 2015 Jun 30 , 2015 Sep 30 , , 2015 Jun 30 , 2015 Sep 30 , 2015 Dec Jun 30 , 2015 Sep 30 , 2015 Dec 31 , , 2015 Sep 30 , 2015 Dec 31 , 2015 Mar Sep 30 , 2015 Dec 31 , 2015 Mar 31 , , 2015 Dec 31 , 2015 Mar 31 , 2016 Jun Dec 31 , 2015 Mar 31 , 2016 Jun 30 , , 2015 Mar 31 , 2016 Jun 30 , 2016 Sep Mar 31 , 2016 Jun 30 , 2016 Sep 30 , , 2016 Jun 30 , 2016 Sep 30 , 2016 Dec Jun 30 , 2016 Sep 30 , 2016 Dec 31 , , 2016 Sep 30 , 2016 Dec 31 , 2016 ( Sep 30 , 2016 Dec 31 , 2016 ( In million , 2016 Dec 31 , 2016 ( In million , except Income Data : Revenues $ 17,258 $ 17,727 $ 18,675 $ : Revenues $ 17,258 $ 17,727 $ 18,675 $ 21,329 $ $ 17,258 $ 17,727 $ 18,675 $ 21,329 $ 20,257 $ $ 17,727 $ 18,675 $ 21,329 $ 20,257 $ 21,500 $ $ 18,675 $ 21,329 $ 20,257 $ 21,500 $ 22,451 $ $ 21,329 $ 20,257 $ 21,500 $ 22,451 $ 26,064 Costs $ 20,257 $ 21,500 $ 22,451 $ 26,064 Costs and expense $ 21,500 $ 22,451 $ 26,064 Costs and expense : Cost expense : Cost of revenue 6,356 6,583 7,037 8,188 7,648 8,130 : Cost of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 Cost of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 of revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research revenue 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and 6,356 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and development 6,583 7,037 8,188 7,648 8,130 8,699 10,661 Research and development 2,753 7,037 8,188 7,648 8,130 8,699 10,661 Research and development 2,753 2,789 8,699 10,661 Research and development 2,753 2,789 3,230 3,510 3,367 3,363 10,661 Research and development 2,753 2,789 3,230 3,510 3,367 3,363 3,596 Research and development 2,753 2,789 3,230 3,510 3,367 3,363 3,596 3,622 and development 2,753 2,789 3,230 3,510 3,367 3,363 3,596 3,622 Sales development 2,753 2,789 3,230 3,510 3,367 3,363 3,596 3,622 Sales and 2,753 2,789 3,230 3,510 3,367 3,363 3,596 3,622 Sales and marketing 2,789 3,230 3,510 3,367 3,363 3,596 3,622 Sales and marketing 2,065 3,230 3,510 3,367 3,363 3,596 3,622 Sales and marketing 2,065 2,080 3,596 3,622 Sales and marketing 2,065 2,080 2,223 2,679 2,387 2,415 3,622 Sales and marketing 2,065 2,080 2,223 2,679 2,387 2,415 2,565 Sales and marketing 2,065 2,080 2,223 2,679 2,387 2,415 2,565 3,118 and marketing 2,065 2,080 2,223 2,679 2,387 2,415 2,565 3,118 General marketing 2,065 2,080 2,223 2,679 2,387 2,415 2,565 3,118 General and 2,065 2,080 2,223 2,679 2,387 2,415 2,565 3,118 General and administrative 2,080 2,223 2,679 2,387 2,415 2,565 3,118 General and administrative 1,637 2,223 2,679 2,387 2,415 2,565 3,118 General and administrative 1,637 1,450 2,565 3,118 General and administrative 1,637 1,450 1,477 1,572 1,513 1,624 3,118 General and administrative 1,637 1,450 1,477 1,572 1,513 1,624 1,824 General and administrative 1,637 1,450 1,477 1,572 1,513 1,624 1,824 2,024 and administrative 1,637 1,450 1,477 1,572 1,513 1,624 1,824 2,024 Total administrative 1,637 1,450 1,477 1,572 1,513 1,624 1,824 2,024 Total cost 1,637 1,450 1,477 1,572 1,513 1,624 1,824 2,024 Total cost and 1,450 1,477 1,572 1,513 1,624 1,824 2,024 Total cost and expense 1,477 1,572 1,513 1,624 1,824 2,024 Total cost and expense 12,811 2,024 Total cost and expense 12,811 12,902 13,967 15,949 14,915 15,532 Total cost and expense 12,811 12,902 13,967 15,949 14,915 15,532 16,684 cost and expense 12,811 12,902 13,967 15,949 14,915 15,532 16,684 19,425 and expense 12,811 12,902 13,967 15,949 14,915 15,532 16,684 19,425 Income expense 12,811 12,902 13,967 15,949 14,915 15,532 16,684 19,425 Income from 12,811 12,902 13,967 15,949 14,915 15,532 16,684 19,425 Income from operation 12,902 13,967 15,949 14,915 15,532 16,684 19,425 Income from operation 4,447 13,967 15,949 14,915 15,532 16,684 19,425 Income from operation 4,447 4,825 16,684 19,425 Income from operation 4,447 4,825 4,708 5,380 5,342 5,968 19,425 Income from operation 4,447 4,825 4,708 5,380 5,342 5,968 5,767 Income from operation 4,447 4,825 4,708 5,380 5,342 5,968 5,767 6,639 from operation 4,447 4,825 4,708 5,380 5,342 5,968 5,767 6,639 Other operation 4,447 4,825 4,708 5,380 5,342 5,968 5,767 6,639 Other income 4,447 4,825 4,708 5,380 5,342 5,968 5,767 6,639 Other income ( 4,825 4,708 5,380 5,342 5,968 5,767 6,639 Other income ( expense 4,708 5,380 5,342 5,968 5,767 6,639 Other income ( expense ) ( expense ) , net 157 131 183 ( 180 ) expense ) , net 157 131 183 ( 180 ) ( ) , net 157 131 183 ( 180 ) ( 213 net 157 131 183 ( 180 ) ( 213 ) 151 183 ( 180 ) ( 213 ) 151 278 218 Income 180 ) ( 213 ) 151 278 218 Income from continuing ) ( 213 ) 151 278 218 Income from continuing operation ( 213 ) 151 278 218 Income from continuing operation before continuing operation before income tax 4,604 4,956 4,891 5,200 5,129 6,119 operation before income tax 4,604 4,956 4,891 5,200 5,129 6,119 6,045 before income tax 4,604 4,956 4,891 5,200 5,129 6,119 6,045 6,857 income tax 4,604 4,956 4,891 5,200 5,129 6,119 6,045 6,857 Provision tax 4,604 4,956 4,891 5,200 5,129 6,119 6,045 6,857 Provision for 4,604 4,956 4,891 5,200 5,129 6,119 6,045 6,857 Provision for income 4,956 4,891 5,200 5,129 6,119 6,045 6,857 Provision for income tax 4,891 5,200 5,129 6,119 6,045 6,857 Provision for income tax 1,089 6,857 Provision for income tax 1,089 1,025 912 277 922 1,242 Provision for income tax 1,089 1,025 912 277 922 1,242 984 for income tax 1,089 1,025 912 277 922 1,242 984 1,524 income tax 1,089 1,025 912 277 922 1,242 984 1,524 Net tax 1,089 1,025 912 277 922 1,242 984 1,524 Net income 1,089 1,025 912 277 922 1,242 984 1,524 Net income $ 1,025 912 277 922 1,242 984 1,524 Net income $ 3,515 912 277 922 1,242 984 1,524 Net income $ 3,515 $ 984 1,524 Net income $ 3,515 $ 3,931 $ 3,979 $ Net income $ 3,515 $ 3,931 $ 3,979 $ 4,923 $ $ 3,515 $ 3,931 $ 3,979 $ 4,923 $ 4,207 $ $ 3,931 $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ 5,333 Less $ 4,207 $ 4,877 $ 5,061 $ 5,333 Less : Adjustment $ 4,877 $ 5,061 $ 5,333 Less : Adjustment Payment to to Class C capital stockholder 0 522 0 0 0 0 Class C capital stockholder 0 522 0 0 0 0 0 C capital stockholder 0 522 0 0 0 0 0 0 capital stockholder 0 522 0 0 0 0 0 0 Net stockholder 0 522 0 0 0 0 0 0 Net income 0 522 0 0 0 0 0 0 Net income available 522 0 0 0 0 0 0 Net income available to 0 0 0 0 0 0 Net income available to all available to all stockholder $ 3,515 $ 3,409 $ 3,979 $ all stockholder $ 3,515 $ 3,409 $ 3,979 $ 4,923 $ $ 3,515 $ 3,409 $ 3,979 $ 4,923 $ 4,207 $ $ 3,409 $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ $ 3,979 $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ $ 4,923 $ 4,207 $ 4,877 $ 5,061 $ 5,333 Basic $ 4,207 $ 4,877 $ 5,061 $ 5,333 Basic net income $ 4,877 $ 5,061 $ 5,333 Basic net income per share and B common stock $ 5.16 $ 4.99 $ 5.80 $ common stock $ 5.16 $ 4.99 $ 5.80 $ 7.16 $ $ 5.16 $ 4.99 $ 5.80 $ 7.16 $ 6.12 $ $ 4.99 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ 7.73 Basic $ 6.12 $ 7.11 $ 7.36 $ 7.73 Basic net income $ 7.11 $ 7.36 $ 7.73 Basic net income per share Class C capital stock $ 5.16 $ 6.51 $ 5.80 $ capital stock $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ $ 5.16 $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ $ 6.51 $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ $ 5.80 $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ $ 7.16 $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted $ 6.12 $ 7.11 $ 7.36 $ 7.73 Diluted net income $ 7.11 $ 7.36 $ 7.73 Diluted net income per share and B common stock $ 5.10 $ 4.93 $ 5.73 $ common stock $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ $ 5.10 $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ $ 4.93 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ 7.56 Diluted $ 6.02 $ 7.00 $ 7.25 $ 7.56 Diluted net income $ 7.00 $ 7.25 $ 7.56 Diluted net income per share Class C capital stock $ 5.10 $ 6.43 $ 5.73 $ capital stock $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ $ 5.10 $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ $ 6.43 $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ $ 5.73 $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ $ 7.06 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 $ 6.02 $ 7.00 $ 7.25 $ 7.56 33 Table of $ 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet 7.00 $ 7.25 $ 7.56 33 Table of Contents Alphabet Inc. and Liquidity As of December 31 , 2016 , we had As of December 31 , 2016 , we had $ 86.3 2016 , we had $ 86.3 billion of cash , cash public . As of December 31 , 2016 , $ 52.2 As of December 31 , 2016 , $ 52.2 billion of 31 , 2016 , $ 52.2 billion of the $ 86.3 52.2 billion of the $ 86.3 billion of cash , cash program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2016 . In conjunction a of December 31 , 2016 . In conjunction with this , we have a $ 4.0 billion revolving credit facility expiring credit facility expiring in February 2021 . The interest rate for rate . As of December 31 , 2016 , no amount As of December 31 , 2016 , no amount were outstanding through at least the next 12 month . As of December month . As of December 31 , 2016 , we have As of December 31 , 2016 , we have unsecured senior senior note outstanding due in 2021 , 2024 , and 2026 outstanding due in 2021 , 2024 , and 2026 with a 2021 , 2024 , and 2026 with a total carrying value total carrying value of $ 3.9 billion and a total estimated estimated fair value of $ 3.9 billion . In August 2013 3.9 billion . In August 2013 , we entered into a on certain property expiring in 2028 . In September 2016 , in 2028 . In September 2016 , we exercised our option the property for approximately $ 220 million . In October 2015 220 million . In October 2015 , the board of director to repurchase up to $ 5,099,019,513.59 of it Class C capital in the fourth quarter of 2015 . In January 2016 , of 2015 . In January 2016 , the board of director an additional amount of approximately 514 thousand share . We completed repurchase program . In October 2016 , the board of director to repurchase up to $ 7,019,340,976.83 of it Class C capital transaction , including through Rule 10b5-1 plan . No share were No share were repurchased in 2016 under this program . In this program . In January 2017 , Temasek , a Singapore-based for an aggregate of $ 800 million in cash . We of the investment in February 2017 and anticipate closing the second in the second half of 2017 . The following table present presented . Year Ended December 31 , 2014 ( 1 ) Year Ended December 31 , 2014 ( 1 ) 2015 ( December 31 , 2014 ( 1 ) 2015 ( 1 ) , 2014 ( 1 ) 2015 ( 1 ) 2016 Net ( 1 ) 2015 ( 1 ) 2016 Net cash provided ) 2015 ( 1 ) 2016 Net cash provided by operating provided by operating activity $ 23,024 $ 26,572 $ 36,036 Net operating activity $ 23,024 $ 26,572 $ 36,036 Net cash used $ 23,024 $ 26,572 $ 36,036 Net cash used in investing used in investing activity ( 21,055 ) ( 23,711 ) ( activity ( 21,055 ) ( 23,711 ) ( 31,165 ) Net ) ( 23,711 ) ( 31,165 ) Net cash used in used in financing activity ( 2,087 ) ( 4,225 ) ( activity ( 2,087 ) ( 4,225 ) ( 8,332 ) ( ) ( 4,225 ) ( 8,332 ) ( 1 ) Prior ) ( 8,332 ) ( 1 ) Prior period amount have of the adoption of ASU 2016-09 . Refer to Note 1 2016-09 . Refer to Note 1 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Cash , and income tax . 34 Table of Contents Alphabet Inc. by operating activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in cash flow from operation for 2016 compared to 2015 . Net operation for 2016 compared to 2015 . Net cash provided by by operating activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to increased net in investing activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in in investing activity increased from 2014 to 2015 primarily due to activity increased from 2014 to 2015 primarily due to net increase in financing activity increased from 2015 to 2016 primarily driven by activity increased from 2015 to 2016 primarily driven by decrease in in financing activity increased from 2014 to 2015 primarily driven by activity increased from 2014 to 2015 primarily driven by the repurchase Contractual Obligations a of December 31 , 2016 The following summarizes a of December 31 , 2016 The following summarizes our contractual operation , a of December 31 , 2016 ( in million a of December 31 , 2016 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation , of sublease income amount ( 1 ) $ 7,937 $ 828 amount ( 1 ) $ 7,937 $ 828 $ 1,801 $ 1 ) $ 7,937 $ 828 $ 1,801 $ 1,615 $ $ 7,937 $ 828 $ 1,801 $ 1,615 $ 3,693 Purchase $ 828 $ 1,801 $ 1,615 $ 3,693 Purchase obligation ( $ 1,801 $ 1,615 $ 3,693 Purchase obligation ( 2 ) $ 3,693 Purchase obligation ( 2 ) 2,494 1,907 274 99 Purchase obligation ( 2 ) 2,494 1,907 274 99 214 Long-term obligation ( 2 ) 2,494 1,907 274 99 214 Long-term debt ( 2 ) 2,494 1,907 274 99 214 Long-term debt obligation 2 ) 2,494 1,907 274 99 214 Long-term debt obligation ( ) 2,494 1,907 274 99 214 Long-term debt obligation ( 3 214 Long-term debt obligation ( 3 ) 4,816 110 220 1,202 debt obligation ( 3 ) 4,816 110 220 1,202 3,284 Other obligation ( 3 ) 4,816 110 220 1,202 3,284 Other long-term ( 3 ) 4,816 110 220 1,202 3,284 Other long-term liability 3 ) 4,816 110 220 1,202 3,284 Other long-term liability reflected ) 4,816 110 220 1,202 3,284 Other long-term liability reflected on on our balance sheet ( 4 ) 2,093 261 601 525 balance sheet ( 4 ) 2,093 261 601 525 706 Total sheet ( 4 ) 2,093 261 601 525 706 Total contractual ( 4 ) 2,093 261 601 525 706 Total contractual obligation 4 ) 2,093 261 601 525 706 Total contractual obligation $ ) 2,093 261 601 525 706 Total contractual obligation $ 17,340 706 Total contractual obligation $ 17,340 $ 3,106 $ 2,896 $ contractual obligation $ 17,340 $ 3,106 $ 2,896 $ 3,441 $ $ 17,340 $ 3,106 $ 2,896 $ 3,441 $ 7,897 ( $ 3,106 $ 2,896 $ 3,441 $ 7,897 ( 1 ) $ 2,896 $ 3,441 $ 7,897 ( 1 ) For further $ 3,441 $ 7,897 ( 1 ) For further information , information , refer to Note 10 of the Notes to Consolidated this Annual Report on Form 10-K. ( 2 ) Purchase obligation Report on Form 10-K. ( 2 ) Purchase obligation represent non-cancelable purchase of inventory . ( 3 ) For further information , information , refer to Note 4 of the Notes to Consolidated this Annual Report on Form 10-K. ( 4 ) Other long-term Report on Form 10-K. ( 4 ) Other long-term liability represent long-term tax payable of $ 4.7 billion a of December 31 4.7 billion a of December 31 , 2016 primarily related to a of December 31 , 2016 primarily related to uncertain tax to make a reasonably reliable 35 Table of Contents Alphabet Inc. payment in individual year beyond 12 month due to uncertainty in Sheet Arrangements As of December 31 , 2016 , we did As of December 31 , 2016 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of director . Please see Note 1 of Part II , Item of Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for the summary of significant cash flow . See Note 10 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency additional information regarding contingency . 36 Table of Contents Alphabet Inc. more fully discussed in Note 6 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis ) , net . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES currency . As of December 31 , 2016 , our most As of December 31 , 2016 , our most significant currency In the fourth quarter of 2016 , we began using foreign exchange rate change of these 37 Table of Contents Alphabet Inc. change in exchange rate of 10 % could be experienced in the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 , the amount 2015 and December 31 , 2016 , the amount recorded in would have been approximately $ 221 million and $ 920 million $ 221 million and $ 920 million lower a of December million lower a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 , and the 2015 and December 31 , 2016 , and the total amount would have been approximately $ 203 million higher in the year in the year ended December 31 , 2015 and $ 14 year ended December 31 , 2015 and $ 14 million lower 31 , 2015 and $ 14 million lower in the year in the year ended December 31 , 2016 . If the year ended December 31 , 2016 . If the U.S. dollar the U.S. dollar strengthened by 10 % a of December 31 10 % a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 , the amount 2015 and December 31 , 2016 , the amount recorded in would have been approximately $ 1.5 billion and $ 1.0 billion $ 1.5 billion and $ 1.0 billion higher a of December billion higher a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 , and the 2015 and December 31 , 2016 , and the total amount would have been approximately $ 313 million and $ 13 million $ 313 million and $ 13 million higher in the year in the year ended December 31 , 2015 and December 31 year ended December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 . In both 2015 and December 31 , 2016 . In both scenario , change in exchange rate of 10 % for all currency could change in exchange rate of 10 % were applied to total income tax of approximately $ 61 million and $ 40 million $ 61 million and $ 40 million a of December 31 40 million a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 . The adverse 2015 and December 31 , 2016 . The adverse impact a adverse impact a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 is after consideration 2015 and December 31 , 2016 is after consideration of the offsetting effect of approximately $ 539 million and $ 554 million $ 539 million and $ 554 million from foreign exchange contract for the month of December 31 , 2015 and December 31 month of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 . Interest Rate 2015 and December 31 , 2016 . Interest Rate Risk Our fall . As of December 31 , 2015 and December 31 As of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 , unrealized loss 2015 and December 31 , 2016 , unrealized loss on our that an adverse change of 100 basis point could be experienced near term . A hypothetical 1.00 % ( 100 basis point A hypothetical 1.00 % ( 100 basis point ) increase in marketable security of approximately $ 1.3 billion and $ 2.2 billion $ 1.3 billion and $ 2.2 billion a of December 31 2.2 billion a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 . 38 Table 2015 and December 31 , 2016 . 38 Table of Contents December 31 , 2016 . 38 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 40 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 42 Consolidated Statements of Income 43 42 Consolidated Statements of Income 43 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 44 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 45 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 39 Table of Contents Alphabet Inc. Alphabet Inc. a of December 31 , 2015 and 2016 , a of December 31 , 2015 and 2016 , and the December 31 , 2015 and 2016 , and the related consolidated in the period ended December 31 , 2016 . Our audit period ended December 31 , 2016 . Our audit also included in the Index at Item 15 ( a ) 2 . Item 15 ( a ) 2 . These financial statement and of Alphabet Inc. at December 31 , 2015 and 2016 , Inc. at December 31 , 2015 and 2016 , and the December 31 , 2015 and 2016 , and the consolidated result in the period ended December 31 , 2016 , in conformity period ended December 31 , 2016 , in conformity with U.S. . As discussed in Notes 1 and 14 to the consolidated discussed in Notes 1 and 14 to the consolidated financial statement Accounting Standards Update No . 2016-09 , `` Improvements to Employee Accounting , `` effective January 1 , 2016 . We also `` effective January 1 , 2016 . We also have audited financial reporting a of December 31 , 2016 , based on a of December 31 , 2016 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 2 , 2017 expressed an unqualified report dated February 2 , 2017 expressed an unqualified opinion thereon San Jose , California February 2 , 2017 40 Table of , California February 2 , 2017 40 Table of Contents Alphabet California February 2 , 2017 40 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2016 , based on a of December 31 , 2016 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of December 31 , 2016 , based on a of December 31 , 2016 , based on the COSO United States ) , the 2016 consolidated financial statement of Alphabet and our report dated February 2 , 2017 expressed an unqualified report dated February 2 , 2017 expressed an unqualified opinion thereon San Jose , California February 2 , 2017 41 Table of , California February 2 , 2017 41 Table of Contents Alphabet California February 2 , 2017 41 Table of Contents Alphabet Inc amount ) As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Assets Current asset As of December 31 , 2016 Assets Current asset : Cash Cash and cash equivalent $ 16,549 $ 12,918 Marketable security 56,517 cash equivalent $ 16,549 $ 12,918 Marketable security 56,517 73,415 Total 16,549 $ 12,918 Marketable security 56,517 73,415 Total cash , cash $ 12,918 Marketable security 56,517 73,415 Total cash , cash equivalent including security loaned of $ 4,531 and $ 0 ) 73,066 of $ 4,531 and $ 0 ) 73,066 86,333 Accounts receivable 4,531 and $ 0 ) 73,066 86,333 Accounts receivable , net and $ 0 ) 73,066 86,333 Accounts receivable , net of net of allowance of $ 296 and $ 467 11,556 14,137 of $ 296 and $ 467 11,556 14,137 Receivable under reverse $ 296 and $ 467 11,556 14,137 Receivable under reverse repurchase 296 and $ 467 11,556 14,137 Receivable under reverse repurchase agreement Receivable under reverse repurchase agreement 450 0 Income tax receivable , under reverse repurchase agreement 450 0 Income tax receivable , net Income tax receivable , net 1,903 95 Inventory 491 268 Prepaid tax receivable , net 1,903 95 Inventory 491 268 Prepaid revenue , net 1,903 95 Inventory 491 268 Prepaid revenue share , net 1,903 95 Inventory 491 268 Prepaid revenue share , expense , expense and other asset 2,648 4,575 Total current asset 90,114 expense and other asset 2,648 4,575 Total current asset 90,114 105,408 2,648 4,575 Total current asset 90,114 105,408 Prepaid revenue share , 4,575 Total current asset 90,114 105,408 Prepaid revenue share , expense and other asset , non-current 3,181 1,819 Non-marketable investment 5,183 5,878 other asset , non-current 3,181 1,819 Non-marketable investment 5,183 5,878 Deferred non-current 3,181 1,819 Non-marketable investment 5,183 5,878 Deferred income tax 251 3,181 1,819 Non-marketable investment 5,183 5,878 Deferred income tax 251 383 5,183 5,878 Deferred income tax 251 383 Property and equipment , 5,878 Deferred income tax 251 383 Property and equipment , net Property and equipment , net 29,016 34,234 Intangible asset , net and equipment , net 29,016 34,234 Intangible asset , net 3,847 34,234 Intangible asset , net 3,847 3,307 Goodwill 15,869 16,468 Total Intangible asset , net 3,847 3,307 Goodwill 15,869 16,468 Total asset , net 3,847 3,307 Goodwill 15,869 16,468 Total asset $ 147,461 net 3,847 3,307 Goodwill 15,869 16,468 Total asset $ 147,461 $ 15,869 16,468 Total asset $ 147,461 $ 167,497 Liabilities and Stockholders Total asset $ 147,461 $ 167,497 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 Accounts payable $ 1,931 $ 2,041 Short-term debt 3,225 0 Accrued 1,931 $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit $ 2,041 Short-term debt 3,225 0 Accrued compensation and benefit 3,539 0 Accrued compensation and benefit 3,539 3,976 Accrued expense and other Accrued compensation and benefit 3,539 3,976 Accrued expense and other current expense and other current liability 4,768 6,144 Accrued revenue share 2,329 and other current liability 4,768 6,144 Accrued revenue share 2,329 2,942 4,768 6,144 Accrued revenue share 2,329 2,942 Securities lending payable 2,428 6,144 Accrued revenue share 2,329 2,942 Securities lending payable 2,428 0 2,329 2,942 Securities lending payable 2,428 0 Deferred revenue 788 1,099 2,942 Securities lending payable 2,428 0 Deferred revenue 788 1,099 Income payable 2,428 0 Deferred revenue 788 1,099 Income tax payable , 2,428 0 Deferred revenue 788 1,099 Income tax payable , net Income tax payable , net 302 554 Total current liability 19,310 tax payable , net 302 554 Total current liability 19,310 16,756 302 554 Total current liability 19,310 16,756 Long-term debt 1,995 3,935 554 Total current liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred liability 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 19,310 16,756 Long-term debt 1,995 3,935 Deferred revenue , non-current 151 3,935 Deferred revenue , non-current 151 202 Income tax payable , Deferred revenue , non-current 151 202 Income tax payable , non-current Income tax payable , non-current 3,663 4,677 Deferred income tax 189 tax payable , non-current 3,663 4,677 Deferred income tax 189 226 3,663 4,677 Deferred income tax 189 226 Other long-term liability 1,822 4,677 Deferred income tax 189 226 Other long-term liability 1,822 2,665 189 226 Other long-term liability 1,822 2,665 Total liability 27,130 28,461 226 Other long-term liability 1,822 2,665 Total liability 27,130 28,461 Commitments liability 1,822 2,665 Total liability 27,130 28,461 Commitments and Contingencies ( 1,822 2,665 Total liability 27,130 28,461 Commitments and Contingencies ( Note Commitments and Contingencies ( Note 10 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 687,348 ( Class Class C 3,000,000 ) ; 687,348 ( Class A 292,297 , ; 687,348 ( Class A 292,297 , Class B 50,295 , A 292,297 , Class B 50,295 , Class C 344,756 ) B 50,295 , Class C 344,756 ) and 691,293 ( Class Class C 344,756 ) and 691,293 ( Class A 296,992 , and 691,293 ( Class A 296,992 , Class B 47,437 , A 296,992 , Class B 47,437 , Class C 346,864 ) B 47,437 , Class C 346,864 ) share issued and outstanding ) share issued and outstanding 32,982 36,307 Accumulated other comprehensive loss share issued and outstanding 32,982 36,307 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 1,874 ) ( 2,402 ) Retained loss ( 1,874 ) ( 2,402 ) Retained earnings 89,223 105,131 ( 2,402 ) Retained earnings 89,223 105,131 Total stockholder ’ equity 2,402 ) Retained earnings 89,223 105,131 Total stockholder ’ equity 120,331 105,131 Total stockholder ’ equity 120,331 139,036 Total liability and stockholder Total stockholder ’ equity 120,331 139,036 Total liability and stockholder ’ and stockholder ’ equity $ 147,461 $ 167,497 See accompanying note ’ equity $ 147,461 $ 167,497 See accompanying note . 42 167,497 See accompanying note . 42 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2014 2015 2016 Revenues Year Ended December 31 , 2014 2015 2016 Revenues $ 66,001 Ended December 31 , 2014 2015 2016 Revenues $ 66,001 $ December 31 , 2014 2015 2016 Revenues $ 66,001 $ 74,989 2014 2015 2016 Revenues $ 66,001 $ 74,989 $ 90,272 Costs 2016 Revenues $ 66,001 $ 74,989 $ 90,272 Costs and expense $ 66,001 $ 74,989 $ 90,272 Costs and expense : Cost expense : Cost of revenue 25,691 28,164 35,138 Research and development : Cost of revenue 25,691 28,164 35,138 Research and development 9,832 Cost of revenue 25,691 28,164 35,138 Research and development 9,832 12,282 28,164 35,138 Research and development 9,832 12,282 13,948 Sales and marketing 35,138 Research and development 9,832 12,282 13,948 Sales and marketing 8,131 Research and development 9,832 12,282 13,948 Sales and marketing 8,131 9,047 12,282 13,948 Sales and marketing 8,131 9,047 10,485 General and administrative 13,948 Sales and marketing 8,131 9,047 10,485 General and administrative 5,851 Sales and marketing 8,131 9,047 10,485 General and administrative 5,851 6,136 9,047 10,485 General and administrative 5,851 6,136 6,985 Total cost and 10,485 General and administrative 5,851 6,136 6,985 Total cost and expense General and administrative 5,851 6,136 6,985 Total cost and expense 49,505 6,985 Total cost and expense 49,505 55,629 66,556 Income from operation Total cost and expense 49,505 55,629 66,556 Income from operation 16,496 cost and expense 49,505 55,629 66,556 Income from operation 16,496 19,360 55,629 66,556 Income from operation 16,496 19,360 23,716 Other income ( 66,556 Income from operation 16,496 19,360 23,716 Other income ( expense Income from operation 16,496 19,360 23,716 Other income ( expense ) ( expense ) , net 763 291 434 Income before income expense ) , net 763 291 434 Income before income tax ) , net 763 291 434 Income before income tax 17,259 434 Income before income tax 17,259 19,651 24,150 Provision for income Income before income tax 17,259 19,651 24,150 Provision for income tax before income tax 17,259 19,651 24,150 Provision for income tax 3,639 24,150 Provision for income tax 3,639 3,303 4,672 Net income from Provision for income tax 3,639 3,303 4,672 Net income from continuing for income tax 3,639 3,303 4,672 Net income from continuing operation income from continuing operation $ 13,620 $ 16,348 $ 19,478 Net continuing operation $ 13,620 $ 16,348 $ 19,478 Net income from $ 13,620 $ 16,348 $ 19,478 Net income from discontinued operation Net income from discontinued operation 516 0 0 Net income $ income from discontinued operation 516 0 0 Net income $ 14,136 from discontinued operation 516 0 0 Net income $ 14,136 $ 0 0 Net income $ 14,136 $ 16,348 $ 19,478 Less Net income $ 14,136 $ 16,348 $ 19,478 Less : Adjustment $ 14,136 $ 16,348 $ 19,478 Less : Adjustment Payment to to Class C capital stockholder 0 522 0 Net income available Class C capital stockholder 0 522 0 Net income available to C capital stockholder 0 522 0 Net income available to all available to all stockholder $ 14,136 $ 15,826 $ 19,478 Basic all stockholder $ 14,136 $ 15,826 $ 19,478 Basic net income $ 14,136 $ 15,826 $ 19,478 Basic net income per share stock : Continuing operation $ 20.15 $ 23.11 $ 28.32 Discontinued Continuing operation $ 20.15 $ 23.11 $ 28.32 Discontinued operation 0.76 $ 20.15 $ 23.11 $ 28.32 Discontinued operation 0.76 0.00 0.00 23.11 $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per share and B common stock $ 20.91 $ 23.11 $ 28.32 Basic common stock $ 20.91 $ 23.11 $ 28.32 Basic net income $ 20.91 $ 23.11 $ 28.32 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued Continuing operation $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 $ 20.15 $ 24.63 $ 28.32 Discontinued operation 0.76 0.00 0.00 24.63 $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income $ 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per 28.32 Discontinued operation 0.76 0.00 0.00 Basic net income per share Class C capital stock $ 20.91 $ 24.63 $ 28.32 Diluted capital stock $ 20.91 $ 24.63 $ 28.32 Diluted net income $ 20.91 $ 24.63 $ 28.32 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued Continuing operation $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 22.84 $ 27.85 Discontinued operation 0.75 0.00 0.00 22.84 $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per share and B common stock $ 20.57 $ 22.84 $ 27.85 Diluted common stock $ 20.57 $ 22.84 $ 27.85 Diluted net income $ 20.57 $ 22.84 $ 27.85 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued Continuing operation $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 $ 19.82 $ 24.34 $ 27.85 Discontinued operation 0.75 0.00 0.00 24.34 $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income $ 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per 27.85 Discontinued operation 0.75 0.00 0.00 Diluted net income per share Class C capital stock $ 20.57 $ 24.34 $ 27.85 See capital stock $ 20.57 $ 24.34 $ 27.85 See accompanying note $ 20.57 $ 24.34 $ 27.85 See accompanying note . 43 27.85 See accompanying note . 43 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2014 2015 2016 Net Year Ended December 31 , 2014 2015 2016 Net income $ Ended December 31 , 2014 2015 2016 Net income $ 14,136 December 31 , 2014 2015 2016 Net income $ 14,136 $ 2015 2016 Net income $ 14,136 $ 16,348 $ 19,478 Other Net income $ 14,136 $ 16,348 $ 19,478 Other comprehensive ( $ 14,136 $ 16,348 $ 19,478 Other comprehensive ( loss ) foreign currency translation adjustment ( 996 ) ( 1,067 ) ( adjustment ( 996 ) ( 1,067 ) ( 599 ) Available-for-sale ) ( 1,067 ) ( 599 ) Available-for-sale investment : Change unrealized gain ( loss ) 505 ( 715 ) ( 314 ( loss ) 505 ( 715 ) ( 314 ) Less 505 ( 715 ) ( 314 ) Less : reclassification adjustment included in net income ( 134 ) 208 221 Net change net income ( 134 ) 208 221 Net change ( net income ( 134 ) 208 221 Net change ( net of of tax effect of $ 60 , $ 29 , and of $ 60 , $ 29 , and $ 0 ) $ 29 , and $ 0 ) 371 ( 507 ) , and $ 0 ) 371 ( 507 ) ( 93 $ 0 ) 371 ( 507 ) ( 93 ) Cash 371 ( 507 ) ( 93 ) Cash flow hedge : unrealized gain ( loss ) 651 676 515 Less : reclassification gain ( loss ) 651 676 515 Less : reclassification adjustment ( loss ) 651 676 515 Less : reclassification adjustment for included in net income ( 124 ) ( 1,003 ) ( income ( 124 ) ( 1,003 ) ( 351 ) Net ) ( 1,003 ) ( 351 ) Net change ( net of tax effect of $ 196 , $ 115 , and of $ 196 , $ 115 , and $ 64 ) $ 115 , and $ 64 ) 527 ( 327 ) , and $ 64 ) 527 ( 327 ) 164 Other $ 64 ) 527 ( 327 ) 164 Other comprehensive ( ) 527 ( 327 ) 164 Other comprehensive ( loss ) ( loss ) income ( 98 ) ( 1,901 ) ( income ( 98 ) ( 1,901 ) ( 528 ) Comprehensive ) ( 1,901 ) ( 528 ) Comprehensive income $ 14,038 528 ) Comprehensive income $ 14,038 $ 14,447 $ 18,950 See Comprehensive income $ 14,038 $ 14,447 $ 18,950 See accompanying note $ 14,038 $ 14,447 $ 18,950 See accompanying note . 44 18,950 See accompanying note . 44 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2013 671,664 $ 25,922 a of December 31 , 2013 671,664 $ 25,922 $ 125 of December 31 , 2013 671,664 $ 25,922 $ 125 $ 31 , 2013 671,664 $ 25,922 $ 125 $ 60,930 $ 2013 671,664 $ 25,922 $ 125 $ 60,930 $ 86,977 Common $ 25,922 $ 125 $ 60,930 $ 86,977 Common and capital $ 125 $ 60,930 $ 86,977 Common and capital stock issued Common and capital stock issued 8,508 465 0 0 465 Stock-based and capital stock issued 8,508 465 0 0 465 Stock-based compensation capital stock issued 8,508 465 0 0 465 Stock-based compensation expense stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefit 625 4,279 Stock-based compensation tax benefit 625 0 0 625 Tax withholding Stock-based compensation tax benefit 625 0 0 625 Tax withholding related compensation tax benefit 625 0 0 625 Tax withholding related to tax benefit 625 0 0 625 Tax withholding related to vesting of restricted stock unit ( 2,524 ) 0 0 ( 2,524 stock unit ( 2,524 ) 0 0 ( 2,524 ) Net unit ( 2,524 ) 0 0 ( 2,524 ) Net income 2,524 ) 0 0 ( 2,524 ) Net income 0 0 ( 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive 2,524 ) Net income 0 0 14,136 14,136 Other comprehensive loss ) Net income 0 0 14,136 14,136 Other comprehensive loss 0 Net income 0 0 14,136 14,136 Other comprehensive loss 0 ( 14,136 14,136 Other comprehensive loss 0 ( 98 ) 0 ( Other comprehensive loss 0 ( 98 ) 0 ( 98 ) loss 0 ( 98 ) 0 ( 98 ) Balance a ( 98 ) 0 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 680,172 28,767 27 a of December 31 , 2014 680,172 28,767 27 75,066 103,860 of December 31 , 2014 680,172 28,767 27 75,066 103,860 Common December 31 , 2014 680,172 28,767 27 75,066 103,860 Common and 31 , 2014 680,172 28,767 27 75,066 103,860 Common and capital , 2014 680,172 28,767 27 75,066 103,860 Common and capital stock 2014 680,172 28,767 27 75,066 103,860 Common and capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 issued 8,714 664 0 0 664 Stock-based compensation expense 5,151 0 0 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation 664 Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax Stock-based compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit compensation expense 5,151 0 0 5,151 Stock-based compensation tax benefit 815 5,151 Stock-based compensation tax benefit 815 0 0 815 Tax withholding Stock-based compensation tax benefit 815 0 0 815 Tax withholding related compensation tax benefit 815 0 0 815 Tax withholding related to tax benefit 815 0 0 815 Tax withholding related to vesting of restricted stock unit ( 2,779 ) 0 0 ( 2,779 stock unit ( 2,779 ) 0 0 ( 2,779 ) Repurchases unit ( 2,779 ) 0 0 ( 2,779 ) Repurchases of 2,779 ) 0 0 ( 2,779 ) Repurchases of capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 16,348 16,348 Other comprehensive 47 ) Net income 0 0 16,348 16,348 Other comprehensive loss ) Net income 0 0 16,348 16,348 Other comprehensive loss 0 Net income 0 0 16,348 16,348 Other comprehensive loss 0 ( 16,348 16,348 Other comprehensive loss 0 ( 1,901 ) 0 ( Other comprehensive loss 0 ( 1,901 ) 0 ( 1,901 ) loss 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 687,348 32,982 ( a of December 31 , 2015 687,348 32,982 ( 1,874 ) of December 31 , 2015 687,348 32,982 ( 1,874 ) 89,223 December 31 , 2015 687,348 32,982 ( 1,874 ) 89,223 120,331 , 2015 687,348 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect 687,348 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect of accounting 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect of accounting change Cumulative effect of accounting change 0 180 0 ( 133 ) effect of accounting change 0 180 0 ( 133 ) 47 of accounting change 0 180 0 ( 133 ) 47 Common change 0 180 0 ( 133 ) 47 Common and capital 180 0 ( 133 ) 47 Common and capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 6,700 issued 9,106 298 0 0 298 Stock-based compensation expense 6,700 0 0 298 Stock-based compensation expense 6,700 0 0 6,700 Tax withholding 298 Stock-based compensation expense 6,700 0 0 6,700 Tax withholding related Stock-based compensation expense 6,700 0 0 6,700 Tax withholding related to compensation expense 6,700 0 0 6,700 Tax withholding related to vesting of restricted stock unit ( 3,597 ) 0 0 ( 3,597 stock unit ( 3,597 ) 0 0 ( 3,597 ) Repurchases unit ( 3,597 ) 0 0 ( 3,597 ) Repurchases of 3,597 ) 0 0 ( 3,597 ) Repurchases of capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive 3,693 ) Net income 0 0 19,478 19,478 Other comprehensive loss ) Net income 0 0 19,478 19,478 Other comprehensive loss 0 Net income 0 0 19,478 19,478 Other comprehensive loss 0 ( 19,478 19,478 Other comprehensive loss 0 ( 528 ) 0 ( Other comprehensive loss 0 ( 528 ) 0 ( 528 ) loss 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 691,293 $ 36,307 a of December 31 , 2016 691,293 $ 36,307 $ ( of December 31 , 2016 691,293 $ 36,307 $ ( 2,402 31 , 2016 691,293 $ 36,307 $ ( 2,402 ) $ 691,293 $ 36,307 $ ( 2,402 ) $ 105,131 $ 139,036 $ ( 2,402 ) $ 105,131 $ 139,036 See accompanying note 2,402 ) $ 105,131 $ 139,036 See accompanying note . 45 139,036 See accompanying note . 45 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2014 2015 2016 Operating Year Ended December 31 , 2014 2015 2016 Operating activity Net Ended December 31 , 2014 2015 2016 Operating activity Net income December 31 , 2014 2015 2016 Operating activity Net income $ Operating activity Net income $ 14,136 $ 16,348 $ 19,478 Adjustments Net income $ 14,136 $ 16,348 $ 19,478 Adjustments : Depreciation $ 14,136 $ 16,348 $ 19,478 Adjustments : Depreciation and impairment impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of property and equipment 3,523 4,132 5,267 Amortization and impairment of intangible and impairment of intangible asset 1,456 931 877 Stock-based compensation expense impairment of intangible asset 1,456 931 877 Stock-based compensation expense 4,279 of intangible asset 1,456 931 877 Stock-based compensation expense 4,279 5,203 931 877 Stock-based compensation expense 4,279 5,203 6,703 Deferred income tax 877 Stock-based compensation expense 4,279 5,203 6,703 Deferred income tax ( Stock-based compensation expense 4,279 5,203 6,703 Deferred income tax ( 104 6,703 Deferred income tax ( 104 ) ( 179 ) ( tax ( 104 ) ( 179 ) ( 38 ) Gain ) ( 179 ) ( 38 ) Gain on divestiture of on divestiture of business ( 740 ) 0 0 ( Gain of business ( 740 ) 0 0 ( Gain ) loss business ( 740 ) 0 0 ( Gain ) loss on non-marketable investment , net ( 390 ) 334 275 Other 192 , net ( 390 ) 334 275 Other 192 212 174 net ( 390 ) 334 275 Other 192 212 174 Changes 390 ) 334 275 Other 192 212 174 Changes in asset ) 334 275 Other 192 212 174 Changes in asset and 334 275 Other 192 212 174 Changes in asset and liability acquisition : Accounts receivable ( 1,641 ) ( 2,094 ) ( receivable ( 1,641 ) ( 2,094 ) ( 2,578 ) Income ) ( 2,094 ) ( 2,578 ) Income tax , net ) Income tax , net 591 ( 179 ) 3,125 Prepaid tax , net 591 ( 179 ) 3,125 Prepaid revenue share net 591 ( 179 ) 3,125 Prepaid revenue share , expense , expense and other asset 459 ( 318 ) 312 Accounts and other asset 459 ( 318 ) 312 Accounts payable 436 asset 459 ( 318 ) 312 Accounts payable 436 203 110 318 ) 312 Accounts payable 436 203 110 Accrued expense and ) 312 Accounts payable 436 203 110 Accrued expense and other 312 Accounts payable 436 203 110 Accrued expense and other liability Accrued expense and other liability 757 1,597 1,515 Accrued revenue share expense and other liability 757 1,597 1,515 Accrued revenue share 245 and other liability 757 1,597 1,515 Accrued revenue share 245 339 1,597 1,515 Accrued revenue share 245 339 593 Deferred revenue ( 1,515 Accrued revenue share 245 339 593 Deferred revenue ( 175 Accrued revenue share 245 339 593 Deferred revenue ( 175 ) 339 593 Deferred revenue ( 175 ) 43 223 Net cash Deferred revenue ( 175 ) 43 223 Net cash provided by revenue ( 175 ) 43 223 Net cash provided by operating cash provided by operating activity 23,024 26,572 36,036 Investing activity Purchases provided by operating activity 23,024 26,572 36,036 Investing activity Purchases of by operating activity 23,024 26,572 36,036 Investing activity Purchases of property of property and equipment ( 11,014 ) ( 9,950 ) ( equipment ( 11,014 ) ( 9,950 ) ( 10,212 ) Proceeds ) ( 9,950 ) ( 10,212 ) Proceeds from disposal of disposal of property and equipment 55 35 240 Purchases of marketable of property and equipment 55 35 240 Purchases of marketable security property and equipment 55 35 240 Purchases of marketable security ( Purchases of marketable security ( 56,310 ) ( 74,368 ) ( security ( 56,310 ) ( 74,368 ) ( 84,509 ) Maturities ) ( 74,368 ) ( 84,509 ) Maturities and sale of and sale of marketable security 51,315 62,905 66,895 Purchases of non-marketable sale of marketable security 51,315 62,905 66,895 Purchases of non-marketable investment of marketable security 51,315 62,905 66,895 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 1,440 ) ( 2,326 ) ( investment ( 1,440 ) ( 2,326 ) ( 1,109 ) Maturities ) ( 2,326 ) ( 1,109 ) Maturities and sale of and sale of non-marketable investment 213 154 494 Cash collateral related sale of non-marketable investment 213 154 494 Cash collateral related to of non-marketable investment 213 154 494 Cash collateral related to security collateral related to security lending 1,403 ( 350 ) ( 2,428 to security lending 1,403 ( 350 ) ( 2,428 ) Investments 1,403 ( 350 ) ( 2,428 ) Investments in reverse repurchase in reverse repurchase agreement ( 775 ) 425 450 Proceeds from repurchase agreement ( 775 ) 425 450 Proceeds from divestiture of agreement ( 775 ) 425 450 Proceeds from divestiture of business Proceeds from divestiture of business 386 0 0 Acquisitions , net from divestiture of business 386 0 0 Acquisitions , net of divestiture of business 386 0 0 Acquisitions , net of cash purchase of intangible asset ( 4,888 ) ( 236 ) ( asset ( 4,888 ) ( 236 ) ( 986 ) Net ) ( 236 ) ( 986 ) Net cash used in used in investing activity ( 21,055 ) ( 23,711 ) ( activity ( 21,055 ) ( 23,711 ) ( 31,165 ) Financing ) ( 23,711 ) ( 31,165 ) Financing activity Net payment to stock-based award activity ( 2,069 ) ( 2,375 ) ( activity ( 2,069 ) ( 2,375 ) ( 3,304 ) Adjustment ) ( 2,375 ) ( 3,304 ) Adjustment Payment to Class to Class C capital stockholder 0 ( 47 ) 0 Repurchases C capital stockholder 0 ( 47 ) 0 Repurchases of capital stockholder 0 ( 47 ) 0 Repurchases of capital stock 0 0 Repurchases of capital stock 0 ( 1,780 ) ( 3,693 of capital stock 0 ( 1,780 ) ( 3,693 ) Proceeds 0 ( 1,780 ) ( 3,693 ) Proceeds from issuance of debt , net of cost 11,625 13,705 8,729 Repayments of debt , net of cost 11,625 13,705 8,729 Repayments of debt ( net of cost 11,625 13,705 8,729 Repayments of debt ( 11,643 8,729 Repayments of debt ( 11,643 ) ( 13,728 ) ( debt ( 11,643 ) ( 13,728 ) ( 10,064 ) Net ) ( 13,728 ) ( 10,064 ) Net cash used in used in financing activity ( 2,087 ) ( 4,225 ) ( activity ( 2,087 ) ( 4,225 ) ( 8,332 ) Effect ) ( 4,225 ) ( 8,332 ) Effect of exchange rate cash and cash equivalent ( 433 ) ( 434 ) ( equivalent ( 433 ) ( 434 ) ( 170 ) Net ) ( 434 ) ( 170 ) Net decrease in cash cash and cash equivalent ( 551 ) ( 1,798 ) ( equivalent ( 551 ) ( 1,798 ) ( 3,631 ) Cash ) ( 1,798 ) ( 3,631 ) Cash and cash equivalent equivalent at beginning of period 18,898 18,347 16,549 Cash and cash at beginning of period 18,898 18,347 16,549 Cash and cash equivalent beginning of period 18,898 18,347 16,549 Cash and cash equivalent at at end of period $ 18,347 $ 16,549 $ 12,918 Supplemental of period $ 18,347 $ 16,549 $ 12,918 Supplemental disclosure of $ 18,347 $ 16,549 $ 12,918 Supplemental disclosure of cash flow , net of refund $ 3,138 $ 3,651 $ 1,643 Cash of refund $ 3,138 $ 3,651 $ 1,643 Cash paid for $ 3,138 $ 3,651 $ 1,643 Cash paid for interest 86 1,643 Cash paid for interest 86 96 84 See accompanying note Cash paid for interest 86 96 84 See accompanying note . paid for interest 86 96 84 See accompanying note . 46 84 See accompanying note . 46 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . We generate revenue primarily online advertising . On August 10 , 2015 , we announced . On August 10 , 2015 , we announced plan to operating structure . On October 2 , 2015 , we implemented . On October 2 , 2015 , we implemented the holding holding company reorganization on October 2 , 2015 wa accounted for reorganization on October 2 , 2015 wa accounted for a a ) : Year Ended December 31 , 2014 2015 2016 Google Year Ended December 31 , 2014 2015 2016 Google segment Google Ended December 31 , 2014 2015 2016 Google segment Google property December 31 , 2014 2015 2016 Google segment Google property $ Google segment Google property $ 45,085 $ 52,357 $ 63,785 Google Google property $ 45,085 $ 52,357 $ 63,785 Google Network Members $ 45,085 $ 52,357 $ 63,785 Google Network Members ' property Google Network Members ' property 14,539 15,033 15,598 Google advertising revenue Network Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 Members ' property 14,539 15,033 15,598 Google advertising revenue 59,624 67,390 15,033 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 15,598 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 Google advertising revenue 59,624 67,390 79,383 Google other revenue 6,050 7,154 67,390 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue 79,383 Google other revenue 6,050 7,154 10,080 Google segment revenue $ Google other revenue 6,050 7,154 10,080 Google segment revenue $ 65,674 10,080 Google segment revenue $ 65,674 $ 74,544 $ 89,463 Other segment revenue $ 65,674 $ 74,544 $ 89,463 Other Bets Other $ 65,674 $ 74,544 $ 89,463 Other Bets Other Bets revenue Bets Other Bets revenue $ 327 $ 445 $ 809 Consolidated Bets revenue $ 327 $ 445 $ 809 Consolidated revenue $ $ 327 $ 445 $ 809 Consolidated revenue $ 66,001 $ $ 809 Consolidated revenue $ 66,001 $ 74,989 $ 90,272 We Consolidated revenue $ 66,001 $ 74,989 $ 90,272 We generate revenue $ 66,001 $ 74,989 $ 90,272 We generate revenue primarily by on Google Network Members ’ 47 Table of Contents Alphabet Inc. settlement . We recognize stock- 48 Table of Contents Alphabet Inc. With the adoption of ASU 2016-09 on January 1 , 2016 of ASU 2016-09 on January 1 , 2016 , we account 2016-09 on January 1 , 2016 , we account for forfeiture around the world . In 2014 , 2015 , and 2016 world . In 2014 , 2015 , and 2016 , we 2014 , 2015 , and 2016 , we generated approximately 45 2016 , we generated approximately 45 % , 46 % , generated approximately 45 % , 46 % , and 47 % , 46 % , and 47 % of our revenue from affiliated customer represented more than 10 % of our revenue in % of our revenue in 2014 , 2015 , or 2016 our revenue in 2014 , 2015 , or 2016 . Fair 2014 , 2015 , or 2016 . Fair Value of Financial measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Include other input that and credit rating . Level 3 - Unobservable input that are issued by foreign government . 49 Table of Contents Alphabet Inc. liquid security with maturity beyond 12 month a current asset under liquidate them in the next 12 month , we have classified we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis building over period up to 25 year . We generally depreciate asset over period up to 7 year . We amortize leasehold have not yet been placed 50 Table of Contents Alphabet Inc. fair market value . In 2014 , we recorded impairment of including an impairment of $ 378 million in the third quarter in the third quarter of 2014 related to a patent licensing asset were not material in 2015 or 2016 . We allocate not material in 2015 or 2016 . We allocate goodwill to benefit that is greater than 50 % likely to be realized the income tax provision . 51 Table of Contents Alphabet Inc. For the year ended December 31 , 2014 , 2015 and year ended December 31 , 2014 , 2015 and 2016 , December 31 , 2014 , 2015 and 2016 , advertising and , 2014 , 2015 and 2016 , advertising and promotional expense promotional expense totaled approximately $ 3,004 million , $ 3,186 million $ 3,004 million , $ 3,186 million , and $ 3,868 3,186 million , and $ 3,868 million , respectively . Recent not yet adopted In May 2014 , the Financial Accounting Standards Accounting Standards Update No . 2014-09 ( Topic 606 ) `` No . 2014-09 ( Topic 606 ) `` Revenue from Contracts with Customers . `` Topic 606 supersedes the revenue recognition requirement in Accounting Standards Codification Topic 605 , “ Revenue Recognition ” intend to early adopt Topic 606 a of January 1 , Topic 606 a of January 1 , 2017 , using the a of January 1 , 2017 , using the modified retrospective expect the adoption of Topic 606 will not have a material of Income . In January 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-01 ( ASU 2016-01 ) `` No . 2016-01 ( ASU 2016-01 ) `` Financial Instruments-Overall ( `` Financial Instruments-Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities . `` ASU 2016-01 amends various aspect of the for financial instrument . ASU 2016-01 is effective for annual reporting those year beginning after December 15 , 2017 . The most beginning after December 15 , 2017 . The most significant impact that the adoption of ASU 2016-01 will increase the volatility of equity investment . In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases `` . `` Leases `` . Topic 842 supersedes the lease recognition requirement in Accounting Standards Codification Topic 840 , `` Leases `` . Leases `` . Under Topic 842 , lessee are required to finance or operating . Topic 842 is effective for annual reporting those year beginning after December 15 , 2018 . Entities are beginning after December 15 , 2018 . Entities are required to that the adoption of ASU 2016-02 will materially affect our statement practical expedient . In June 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-13 ( ASU 2016-13 ) `` No . 2016-13 ( ASU 2016-13 ) `` Financial Instruments-Credit Losses Financial Instruments-Credit Losses ( Topic 326 ) : Measurement of Credit at amortized cost . ASU 2016-13 replaces the existing incurred loss of credit loss . ASU 2016-13 is effective for annual reporting those year beginning after December 15 , 2019 . We are beginning after December 15 , 2019 . We are currently in adopted accounting pronouncement In June 2014 , the FASB issued Accounting Accounting Standards Update No . 2014-10 ( ASU 2014-10 ) `` No . 2014-10 ( ASU 2014-10 ) `` Development Stage Entities Development Stage Entities ( Topic 915 ) : Elimination of Certain Interest Entities Guidance in Topic 810 , Consolidation . `` ASU , Consolidation . `` ASU 2014-10 remove the definition of a definition of a development stage 52 Table of Contents Alphabet Inc. interest entity under ASC Topic 810 , Consolidation . We adopted in the first quarter of 2016 on a retrospective basis . this standard . See Note 7 for detail . In February for detail . In February 2015 , the FASB issued Accounting Accounting Standards Update No . 2015-02 ( ASU 2015-02 ) `` No . 2015-02 ( ASU 2015-02 ) `` Consolidation ( Topic ) `` Consolidation ( Topic 810 ) : Amendments to the Consolidation Analysis . `` ASU 2015-02 change the analysis that a in the first quarter of 2016 on a retrospective basis . interest entity . In March 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-09 ( ASU 2016-09 ) `` No . 2016-09 ( ASU 2016-09 ) `` Compensation—Stock Compensation ( `` Compensation—Stock Compensation ( Topic 718 ) : Improvements to Employee in the first quarter of 2016 . Stock-based compensation excess tax of the adoption of ASU 2016-09 , the Consolidated Statements of the twelve month ended December 31 , 2014 and 2015 were month ended December 31 , 2014 and 2015 were adjusted a December 31 , 2014 and 2015 were adjusted a follows : adjusted a follows : $ 648 million and $ 548 million $ 648 million and $ 548 million increase to net cash , respectively , and $ 648 million and $ 548 million $ 648 million and $ 548 million increase to net cash During the third quarter of 2016 , we identified an omission current period presentation . Note 2 . Financial Instruments We classify and marketable security within Level 1 or Level 2 in the within Level 1 or Level 2 in the fair value hierarchy derivative contract primarily within Level 2 in the fair value hierarchy data of similar instrument . 53 Table of Contents Alphabet Inc. investment category a of December 31 , 2015 and 2016 ( a of December 31 , 2015 and 2016 ( in million December 31 , 2015 and 2016 ( in million ) : ) : As of December 31 , 2015 Adjusted Cost Gross As of December 31 , 2015 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 7,380 $ 0 $ 0 $ Securities Cash $ 7,380 $ 0 $ 0 $ 7,380 $ $ 7,380 $ 0 $ 0 $ 7,380 $ 7,380 $ $ 0 $ 0 $ 7,380 $ 7,380 $ 0 Level $ 0 $ 7,380 $ 7,380 $ 0 Level 1 : $ 7,380 $ 7,380 $ 0 Level 1 : Money market $ 7,380 $ 0 Level 1 : Money market and other Money market and other fund 5,623 0 0 5,623 5,623 0 market and other fund 5,623 0 0 5,623 5,623 0 U.S. and other fund 5,623 0 0 5,623 5,623 0 U.S. government other fund 5,623 0 0 5,623 5,623 0 U.S. government note fund 5,623 0 0 5,623 5,623 0 U.S. government note 20,922 5,623 0 0 5,623 5,623 0 U.S. government note 20,922 27 5,623 0 U.S. government note 20,922 27 ( 48 ) 20,901 0 U.S. government note 20,922 27 ( 48 ) 20,901 258 government note 20,922 27 ( 48 ) 20,901 258 20,643 Marketable 20,922 27 ( 48 ) 20,901 258 20,643 Marketable equity security 27 ( 48 ) 20,901 258 20,643 Marketable equity security 692 ( 48 ) 20,901 258 20,643 Marketable equity security 692 155 258 20,643 Marketable equity security 692 155 0 847 0 847 20,643 Marketable equity security 692 155 0 847 0 847 27,237 Marketable equity security 692 155 0 847 0 847 27,237 182 equity security 692 155 0 847 0 847 27,237 182 ( security 692 155 0 847 0 847 27,237 182 ( 48 692 155 0 847 0 847 27,237 182 ( 48 ) 155 0 847 0 847 27,237 182 ( 48 ) 27,371 0 847 0 847 27,237 182 ( 48 ) 27,371 5,881 0 847 27,237 182 ( 48 ) 27,371 5,881 21,490 Level 27,237 182 ( 48 ) 27,371 5,881 21,490 Level 2 : 182 ( 48 ) 27,371 5,881 21,490 Level 2 : Time ( 48 ) 27,371 5,881 21,490 Level 2 : Time deposit ) 27,371 5,881 21,490 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 3,223 0 0 3,223 Time deposit ( 1 ) 3,223 0 0 3,223 2,012 1,211 deposit ( 1 ) 3,223 0 0 3,223 2,012 1,211 Money ( 1 ) 3,223 0 0 3,223 2,012 1,211 Money market 1 ) 3,223 0 0 3,223 2,012 1,211 Money market and ) 3,223 0 0 3,223 2,012 1,211 Money market and other 3,223 0 0 3,223 2,012 1,211 Money market and other fund market and other fund ( 2 ) 1,140 0 0 1,140 other fund ( 2 ) 1,140 0 0 1,140 1,140 0 fund ( 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income ( 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income bond 2 ) 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ) 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ( 1,140 0 0 1,140 1,140 0 Fixed-income bond fund ( 3 0 Fixed-income bond fund ( 3 ) 219 0 0 219 bond fund ( 3 ) 219 0 0 219 0 219 fund ( 3 ) 219 0 0 219 0 219 U.S. ( 3 ) 219 0 0 219 0 219 U.S. government 3 ) 219 0 0 219 0 219 U.S. government agency ) 219 0 0 219 0 219 U.S. government agency 1,367 219 0 0 219 0 219 U.S. government agency 1,367 2 0 219 U.S. government agency 1,367 2 ( 3 ) 1,366 219 U.S. government agency 1,367 2 ( 3 ) 1,366 0 government agency 1,367 2 ( 3 ) 1,366 0 1,366 Foreign 1,367 2 ( 3 ) 1,366 0 1,366 Foreign government bond 2 ( 3 ) 1,366 0 1,366 Foreign government bond 2,242 ( 3 ) 1,366 0 1,366 Foreign government bond 2,242 14 0 1,366 Foreign government bond 2,242 14 ( 23 ) 2,233 1,366 Foreign government bond 2,242 14 ( 23 ) 2,233 0 government bond 2,242 14 ( 23 ) 2,233 0 2,233 Municipal 2,242 14 ( 23 ) 2,233 0 2,233 Municipal security 3,812 14 ( 23 ) 2,233 0 2,233 Municipal security 3,812 47 ( 23 ) 2,233 0 2,233 Municipal security 3,812 47 ( 2,233 0 2,233 Municipal security 3,812 47 ( 4 ) 3,855 0 2,233 Municipal security 3,812 47 ( 4 ) 3,855 0 Municipal security 3,812 47 ( 4 ) 3,855 0 3,855 Corporate 3,812 47 ( 4 ) 3,855 0 3,855 Corporate debt security 47 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 ( 4 ) 3,855 0 3,855 Corporate debt security 13,809 53 0 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 3,855 Corporate debt security 13,809 53 ( 278 ) 13,584 136 debt security 13,809 53 ( 278 ) 13,584 136 13,448 Agency 13,809 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 53 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 ( 278 ) 13,584 136 13,448 Agency mortgage-backed security 9,680 48 136 13,448 Agency mortgage-backed security 9,680 48 ( 57 ) 9,671 13,448 Agency mortgage-backed security 9,680 48 ( 57 ) 9,671 0 mortgage-backed security 9,680 48 ( 57 ) 9,671 0 9,671 Asset-backed 9,680 48 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 48 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 0 ( 57 ) 9,671 0 9,671 Asset-backed security 3,032 0 ( 9,671 0 9,671 Asset-backed security 3,032 0 ( 8 ) 3,024 0 9,671 Asset-backed security 3,032 0 ( 8 ) 3,024 0 Asset-backed security 3,032 0 ( 8 ) 3,024 0 3,024 38,524 3,032 0 ( 8 ) 3,024 0 3,024 38,524 164 ( 0 ( 8 ) 3,024 0 3,024 38,524 164 ( 373 ( 8 ) 3,024 0 3,024 38,524 164 ( 373 ) 8 ) 3,024 0 3,024 38,524 164 ( 373 ) 38,315 ) 3,024 0 3,024 38,524 164 ( 373 ) 38,315 3,288 0 3,024 38,524 164 ( 373 ) 38,315 3,288 35,027 Total 38,524 164 ( 373 ) 38,315 3,288 35,027 Total $ 73,141 164 ( 373 ) 38,315 3,288 35,027 Total $ 73,141 $ ( 373 ) 38,315 3,288 35,027 Total $ 73,141 $ 346 38,315 3,288 35,027 Total $ 73,141 $ 346 $ ( 421 35,027 Total $ 73,141 $ 346 $ ( 421 ) $ 73,141 $ 346 $ ( 421 ) $ 73,066 $ 16,549 $ ( 421 ) $ 73,066 $ 16,549 $ 56,517 As 421 ) $ 73,066 $ 16,549 $ 56,517 As of December $ 73,066 $ 16,549 $ 56,517 As of December 31 , $ 56,517 As of December 31 , 2016 Adjusted Cost Gross As of December 31 , 2016 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 7,078 $ 0 $ 0 $ Securities Cash $ 7,078 $ 0 $ 0 $ 7,078 $ $ 7,078 $ 0 $ 0 $ 7,078 $ 7,078 $ $ 0 $ 0 $ 7,078 $ 7,078 $ 0 Level $ 0 $ 7,078 $ 7,078 $ 0 Level 1 : $ 7,078 $ 7,078 $ 0 Level 1 : Money market $ 7,078 $ 0 Level 1 : Money market and other Money market and other fund 4,783 0 0 4,783 4,783 0 market and other fund 4,783 0 0 4,783 4,783 0 U.S. and other fund 4,783 0 0 4,783 4,783 0 U.S. government other fund 4,783 0 0 4,783 4,783 0 U.S. government note fund 4,783 0 0 4,783 4,783 0 U.S. government note 38,454 4,783 0 0 4,783 4,783 0 U.S. government note 38,454 46 4,783 0 U.S. government note 38,454 46 ( 215 ) 38,285 0 U.S. government note 38,454 46 ( 215 ) 38,285 613 government note 38,454 46 ( 215 ) 38,285 613 37,672 Marketable 38,454 46 ( 215 ) 38,285 613 37,672 Marketable equity security 46 ( 215 ) 38,285 613 37,672 Marketable equity security 160 ( 215 ) 38,285 613 37,672 Marketable equity security 160 133 613 37,672 Marketable equity security 160 133 0 293 0 293 37,672 Marketable equity security 160 133 0 293 0 293 43,397 Marketable equity security 160 133 0 293 0 293 43,397 179 equity security 160 133 0 293 0 293 43,397 179 ( security 160 133 0 293 0 293 43,397 179 ( 215 160 133 0 293 0 293 43,397 179 ( 215 ) 133 0 293 0 293 43,397 179 ( 215 ) 43,361 0 293 0 293 43,397 179 ( 215 ) 43,361 5,396 0 293 43,397 179 ( 215 ) 43,361 5,396 37,965 Level 43,397 179 ( 215 ) 43,361 5,396 37,965 Level 2 : 179 ( 215 ) 43,361 5,396 37,965 Level 2 : Time ( 215 ) 43,361 5,396 37,965 Level 2 : Time deposit ) 43,361 5,396 37,965 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 142 0 0 142 Time deposit ( 1 ) 142 0 0 142 140 2 deposit ( 1 ) 142 0 0 142 140 2 Mutual ( 1 ) 142 0 0 142 140 2 Mutual fund 1 ) 142 0 0 142 140 2 Mutual fund ( ) 142 0 0 142 140 2 Mutual fund ( 4 142 0 0 142 140 2 Mutual fund ( 4 ) 140 2 Mutual fund ( 4 ) 204 7 0 211 Mutual fund ( 4 ) 204 7 0 211 0 211 fund ( 4 ) 204 7 0 211 0 211 U.S. ( 4 ) 204 7 0 211 0 211 U.S. government 4 ) 204 7 0 211 0 211 U.S. government agency ) 204 7 0 211 0 211 U.S. government agency 1,826 204 7 0 211 0 211 U.S. government agency 1,826 0 0 211 U.S. government agency 1,826 0 ( 11 ) 1,815 211 U.S. government agency 1,826 0 ( 11 ) 1,815 300 government agency 1,826 0 ( 11 ) 1,815 300 1,515 Foreign 1,826 0 ( 11 ) 1,815 300 1,515 Foreign government bond 0 ( 11 ) 1,815 300 1,515 Foreign government bond 2,345 ( 11 ) 1,815 300 1,515 Foreign government bond 2,345 18 300 1,515 Foreign government bond 2,345 18 ( 7 ) 2,356 1,515 Foreign government bond 2,345 18 ( 7 ) 2,356 0 government bond 2,345 18 ( 7 ) 2,356 0 2,356 Municipal 2,345 18 ( 7 ) 2,356 0 2,356 Municipal security 4,757 18 ( 7 ) 2,356 0 2,356 Municipal security 4,757 15 ( 7 ) 2,356 0 2,356 Municipal security 4,757 15 ( 2,356 0 2,356 Municipal security 4,757 15 ( 65 ) 4,707 0 2,356 Municipal security 4,757 15 ( 65 ) 4,707 2 Municipal security 4,757 15 ( 65 ) 4,707 2 4,705 Corporate 4,757 15 ( 65 ) 4,707 2 4,705 Corporate debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Agency 12,993 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 114 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 ( 116 ) 12,991 2 12,989 Agency mortgage-backed security 12,006 26 2 12,989 Agency mortgage-backed security 12,006 26 ( 216 ) 11,816 12,989 Agency mortgage-backed security 12,006 26 ( 216 ) 11,816 0 mortgage-backed security 12,006 26 ( 216 ) 11,816 0 11,816 Asset-backed 12,006 26 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 26 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 2 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 2 ( 11,816 0 11,816 Asset-backed security 1,855 2 ( 1 ) 1,856 0 11,816 Asset-backed security 1,855 2 ( 1 ) 1,856 0 Asset-backed security 1,855 2 ( 1 ) 1,856 0 1,856 36,128 1,855 2 ( 1 ) 1,856 0 1,856 36,128 182 ( 2 ( 1 ) 1,856 0 1,856 36,128 182 ( 416 ( 1 ) 1,856 0 1,856 36,128 182 ( 416 ) 1 ) 1,856 0 1,856 36,128 182 ( 416 ) 35,894 ) 1,856 0 1,856 36,128 182 ( 416 ) 35,894 444 0 1,856 36,128 182 ( 416 ) 35,894 444 35,450 Total 36,128 182 ( 416 ) 35,894 444 35,450 Total $ 86,603 182 ( 416 ) 35,894 444 35,450 Total $ 86,603 $ ( 416 ) 35,894 444 35,450 Total $ 86,603 $ 361 35,894 444 35,450 Total $ 86,603 $ 361 $ ( 631 35,450 Total $ 86,603 $ 361 $ ( 631 ) $ 86,603 $ 361 $ ( 631 ) $ 86,333 $ 12,918 $ ( 631 ) $ 86,333 $ 12,918 $ 73,415 ( 631 ) $ 86,333 $ 12,918 $ 73,415 ( 1 ) $ 86,333 $ 12,918 $ 73,415 ( 1 ) The majority $ 12,918 $ 73,415 ( 1 ) The majority of our are foreign deposit . ( 2 ) The balance related to discussion of this program . 54 Table of Contents Alphabet Inc. of Contents Alphabet Inc. ( 3 ) Fixed-inco me bond fund and government bond . ( 4 ) The fair value option gross realized gain of $ 238 million , $ 357 million $ 238 million , $ 357 million , and $ 272 357 million , and $ 272 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . We 2014 , 2015 , and 2016 . We recognized gross realized gross realized loss of $ 85 million , $ 565 million $ 85 million , $ 565 million , and $ 482 565 million , and $ 482 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . We 2014 , 2015 , and 2016 . We reflect these gain ) : As of December 31 , 2016 Due in 1 As of December 31 , 2016 Due in 1 year $ 31 , 2016 Due in 1 year $ 13,066 Due in Due in 1 year $ 13,066 Due in 1 year through year $ 13,066 Due in 1 year through 5 year 38,762 Due in 1 year through 5 year 38,762 Due in 5 1 year through 5 year 38,762 Due in 5 year through 5 year 38,762 Due in 5 year through 10 year 8,382 Due in 5 year through 10 year 8,382 Due after 10 5 year through 10 year 8,382 Due after 10 year 12,701 10 year 8,382 Due after 10 year 12,701 Total $ 72,911 8,382 Due after 10 year 12,701 Total $ 72,911 The following 10 year 12,701 Total $ 72,911 The following table present gross loss position a of December 31 , 2015 and 2016 , a of December 31 , 2015 and 2016 , aggregated by December 31 , 2015 and 2016 , aggregated by investment category ) : As of December 31 , 2015 Less than 12 As of December 31 , 2015 Less than 12 Months 12 31 , 2015 Less than 12 Months 12 Months or Greater 2015 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 13,757 $ ( 48 ) $ note $ 13,757 $ ( 48 ) $ 0 $ 0 $ ( 48 ) $ 0 $ 0 $ 13,757 $ 48 ) $ 0 $ 0 $ 13,757 $ ( 48 $ 0 $ 0 $ 13,757 $ ( 48 ) U.S. 0 $ 13,757 $ ( 48 ) U.S. government agency 864 48 ) U.S. government agency 864 ( 3 ) 0 0 U.S. government agency 864 ( 3 ) 0 0 864 ( agency 864 ( 3 ) 0 0 864 ( 3 ) 864 ( 3 ) 0 0 864 ( 3 ) Foreign ( 3 ) 0 0 864 ( 3 ) Foreign government ) 0 0 864 ( 3 ) Foreign government bond 885 3 ) Foreign government bond 885 ( 18 ) 36 ( Foreign government bond 885 ( 18 ) 36 ( 5 ) bond 885 ( 18 ) 36 ( 5 ) 921 ( ( 18 ) 36 ( 5 ) 921 ( 23 ) ) 36 ( 5 ) 921 ( 23 ) Municipal security ( 5 ) 921 ( 23 ) Municipal security 1,116 ( ( 23 ) Municipal security 1,116 ( 3 ) 41 ( ) Municipal security 1,116 ( 3 ) 41 ( 1 ) security 1,116 ( 3 ) 41 ( 1 ) 1,157 ( ( 3 ) 41 ( 1 ) 1,157 ( 4 ) ) 41 ( 1 ) 1,157 ( 4 ) Corporate debt ( 1 ) 1,157 ( 4 ) Corporate debt security 9,192 4 ) Corporate debt security 9,192 ( 202 ) 784 ( Corporate debt security 9,192 ( 202 ) 784 ( 76 ) security 9,192 ( 202 ) 784 ( 76 ) 9,976 ( ( 202 ) 784 ( 76 ) 9,976 ( 278 ) ) 784 ( 76 ) 9,976 ( 278 ) Agency mortgage-backed ( 76 ) 9,976 ( 278 ) Agency mortgage-backed security 5,783 278 ) Agency mortgage-backed security 5,783 ( 34 ) 721 ( Agency mortgage-backed security 5,783 ( 34 ) 721 ( 23 ) security 5,783 ( 34 ) 721 ( 23 ) 6,504 ( ( 34 ) 721 ( 23 ) 6,504 ( 57 ) ) 721 ( 23 ) 6,504 ( 57 ) Asset-backed security ( 23 ) 6,504 ( 57 ) Asset-backed security 2,508 ( ( 57 ) Asset-backed security 2,508 ( 7 ) 386 ( ) Asset-backed security 2,508 ( 7 ) 386 ( 1 ) security 2,508 ( 7 ) 386 ( 1 ) 2,894 ( ( 7 ) 386 ( 1 ) 2,894 ( 8 ) ) 386 ( 1 ) 2,894 ( 8 ) Total $ ( 1 ) 2,894 ( 8 ) Total $ 34,105 $ ( 8 ) Total $ 34,105 $ ( 315 ) $ Total $ 34,105 $ ( 315 ) $ 1,968 $ ( $ ( 315 ) $ 1,968 $ ( 106 ) $ ) $ 1,968 $ ( 106 ) $ 36,073 $ ( $ ( 106 ) $ 36,073 $ ( 421 ) As ) $ 36,073 $ ( 421 ) As of December 31 421 ) As of December 31 , 2016 Less than 12 As of December 31 , 2016 Less than 12 Months 12 31 , 2016 Less than 12 Months 12 Months or Greater 2016 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 26,411 $ ( 215 ) $ note $ 26,411 $ ( 215 ) $ 0 $ 0 $ ( 215 ) $ 0 $ 0 $ 26,411 $ 215 ) $ 0 $ 0 $ 26,411 $ ( 215 $ 0 $ 0 $ 26,411 $ ( 215 ) U.S. 0 $ 26,411 $ ( 215 ) U.S. government agency 1,014 215 ) U.S. government agency 1,014 ( 11 ) 0 0 U.S. government agency 1,014 ( 11 ) 0 0 1,014 ( agency 1,014 ( 11 ) 0 0 1,014 ( 11 ) 1,014 ( 11 ) 0 0 1,014 ( 11 ) Foreign ( 11 ) 0 0 1,014 ( 11 ) Foreign government ) 0 0 1,014 ( 11 ) Foreign government bond 956 11 ) Foreign government bond 956 ( 7 ) 0 0 Foreign government bond 956 ( 7 ) 0 0 956 ( bond 956 ( 7 ) 0 0 956 ( 7 ) 956 ( 7 ) 0 0 956 ( 7 ) Municipal ( 7 ) 0 0 956 ( 7 ) Municipal security ) 0 0 956 ( 7 ) Municipal security 3,461 ( ( 7 ) Municipal security 3,461 ( 63 ) 46 ( ) Municipal security 3,461 ( 63 ) 46 ( 2 ) security 3,461 ( 63 ) 46 ( 2 ) 3,507 ( ( 63 ) 46 ( 2 ) 3,507 ( 65 ) ) 46 ( 2 ) 3,507 ( 65 ) Corporate debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Agency mortgage-backed ( 5 ) 6,350 ( 116 ) Agency mortgage-backed security 10,184 116 ) Agency mortgage-backed security 10,184 ( 206 ) 259 ( Agency mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 ( 10 ) 10,443 ( 216 ) ) 259 ( 10 ) 10,443 ( 216 ) Asset-backed security ( 10 ) 10,443 ( 216 ) Asset-backed security 391 ( ( 216 ) Asset-backed security 391 ( 1 ) 0 0 ) Asset-backed security 391 ( 1 ) 0 0 391 ( security 391 ( 1 ) 0 0 391 ( 1 ) 391 ( 1 ) 0 0 391 ( 1 ) Total ( 1 ) 0 0 391 ( 1 ) Total $ ) 0 0 391 ( 1 ) Total $ 48,601 $ ( 1 ) Total $ 48,601 $ ( 614 ) $ Total $ 48,601 $ ( 614 ) $ 471 $ ( $ ( 614 ) $ 471 $ ( 17 ) $ ) $ 471 $ ( 17 ) $ 49,072 $ ( $ ( 17 ) $ 49,072 $ ( 631 ) During ) $ 49,072 $ ( 631 ) During the year ended During the year ended December 31 , 2014 and 2016 , year ended December 31 , 2014 and 2016 , we did December 31 , 2014 and 2016 , we did not recognize During the year ended December 31 , 2015 , we recognized year ended December 31 , 2015 , we recognized $ 281 2015 , we recognized $ 281 million of other-than-temporary impairment loss of Income . See Note 5 for further detail on other expense ) , net . 55 Table of Contents Alphabet Inc. ) : As of December 31 , 2015 Remaining Contractual Maturity As of December 31 , 2015 Remaining Contractual Maturity of the Overnight and Continuous Up to 30 day 30 - 90 Days Continuous Up to 30 day 30 - 90 Days Greater Than to 30 day 30 - 90 Days Greater Than 90 Days - 90 Days Greater Than 90 Days Total U.S. government note Total U.S. government note $ 1,322 $ 31 $ 0 $ government note $ 1,322 $ 31 $ 0 $ 306 $ $ 1,322 $ 31 $ 0 $ 306 $ 1,659 U.S. $ 31 $ 0 $ 306 $ 1,659 U.S. government agency $ 0 $ 306 $ 1,659 U.S. government agency 504 77 $ 1,659 U.S. government agency 504 77 0 0 581 Corporate 1,659 U.S. government agency 504 77 0 0 581 Corporate debt U.S. government agency 504 77 0 0 581 Corporate debt security government agency 504 77 0 0 581 Corporate debt security 188 agency 504 77 0 0 581 Corporate debt security 188 0 0 581 Corporate debt security 188 0 0 0 188 Total 581 Corporate debt security 188 0 0 0 188 Total $ Corporate debt security 188 0 0 0 188 Total $ 2,014 debt security 188 0 0 0 188 Total $ 2,014 $ security 188 0 0 0 188 Total $ 2,014 $ 108 0 0 188 Total $ 2,014 $ 108 $ 0 $ 188 Total $ 2,014 $ 108 $ 0 $ 306 $ $ 2,014 $ 108 $ 0 $ 306 $ 2,428 Gross $ 108 $ 0 $ 306 $ 2,428 Gross amount of $ 0 $ 306 $ 2,428 Gross amount of recognized liability lending in offsetting disclosure $ 2,428 Amounts related to agreement not lending in offsetting disclosure $ 0 As of December 31 , $ 0 As of December 31 , 2016 , we ended As of December 31 , 2016 , we ended our security default . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , we received December 31 , 2015 and 2016 , we received cash collateral collateral security arrangement of $ 192 million and $ 362 million $ 192 million and $ 362 million . Cash Flow Hedges these contract wa approximately $ 16.4 billion and $ 10.7 billion $ 16.4 billion and $ 10.7 billion a of December 31 10.7 billion a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . These contract December 31 , 2015 and 2016 . These contract have maturity These contract have maturity of 36 month or le . We expense ) , net . 56 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2016 , the effective As of December 31 , 2016 , the effective portion of net accumulated gain of $ 603 million , of which $ million , of which $ 567 million is expected to be into earnings within the next 12 month . Fair Value Hedges of these contract wa $ 1.8 billion and $ 2.4 billion $ 1.8 billion and $ 2.4 billion a of December 31 2.4 billion a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . We have December 31 , 2015 and 2016 . We have used interest of these contract wa $ 295 million and $ 0 million $ 295 million and $ 0 million a of December 31 0 million a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . Gains and December 31 , 2015 and 2016 . Gains and loss on exchange contract outstanding wa $ 7.5 billion and $ 7.9 billion $ 7.5 billion and $ 7.9 billion a of December 31 7.9 billion a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . We also December 31 , 2015 and 2016 . We also use exchange-traded rate contract outstanding were $ 50 million and $ 0 million $ 50 million and $ 0 million a of December 31 0 million a of December 31 , 2015 and 2016 . a of December 31 , 2015 and 2016 . The fair December 31 , 2015 and 2016 . The fair value of ) : As of December 31 , 2015 Balance Sheet Location As of December 31 , 2015 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 626 $ 2 $ 628 Total and non-current $ 626 $ 2 $ 628 Total $ 626 $ 626 $ 2 $ 628 Total $ 626 $ 2 2 $ 628 Total $ 626 $ 2 $ 628 Derivative 628 Total $ 626 $ 2 $ 628 Derivative Liabilities : $ 626 $ 2 $ 628 Derivative Liabilities : Level 2 628 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 1 $ 13 $ 14 Interest and non-current $ 1 $ 13 $ 14 Interest rate contract $ 1 $ 13 $ 14 Interest rate contract Accrued expense liability , current and non-current 2 0 2 Total $ 3 , current and non-current 2 0 2 Total $ 3 $ current and non-current 2 0 2 Total $ 3 $ 13 2 0 2 Total $ 3 $ 13 $ 16 57 2 Total $ 3 $ 13 $ 16 57 Table of $ 3 $ 13 $ 16 57 Table of Contents Alphabet 3 $ 13 $ 16 57 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2016 Balance Sheet Location As of December 31 , 2016 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Prepaid , current and non-current $ 539 $ 57 $ 596 Total and non-current $ 539 $ 57 $ 596 Total $ 539 $ 539 $ 57 $ 596 Total $ 539 $ 57 57 $ 596 Total $ 539 $ 57 $ 596 Derivative 596 Total $ 539 $ 57 $ 596 Derivative Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Interest and non-current $ 4 $ 9 $ 13 Interest rate contract $ 4 $ 9 $ 13 Interest rate contract Accrued expense liability , current and non-current 0 0 0 Total $ 4 , current and non-current 0 0 0 Total $ 4 $ current and non-current 0 0 0 Total $ 4 $ 9 0 0 0 Total $ 4 $ 9 $ 13 The 0 Total $ 4 $ 9 $ 13 The effect of $ 4 $ 9 $ 13 The effect of derivative instrument Portion ) Year Ended December 31 , Derivatives in Cash Flow in Cash Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract Cash Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract $ Flow Hedging Relationship 2014 2015 2016 Foreign exchange contract $ 929 2016 Foreign exchange contract $ 929 $ 964 $ 773 Interest exchange contract $ 929 $ 964 $ 773 Interest rate contract $ 929 $ 964 $ 773 Interest rate contract ( 31 773 Interest rate contract ( 31 ) 0 0 Total $ rate contract ( 31 ) 0 0 Total $ 898 $ contract ( 31 ) 0 0 Total $ 898 $ 964 ) 0 0 Total $ 898 $ 964 $ 773 Gains 0 Total $ 898 $ 964 $ 773 Gains ( Losses $ 898 $ 964 $ 773 Gains ( Losses ) Reclassified Portion ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Revenues Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Revenues $ Foreign exchange contract Revenues $ 171 $ 1,399 $ 539 Interest contract Revenues $ 171 $ 1,399 $ 539 Interest rate contract $ 171 $ 1,399 $ 539 Interest rate contract Other income ( expense ) , net 4 5 5 Total $ 175 expense ) , net 4 5 5 Total $ 175 $ ) , net 4 5 5 Total $ 175 $ 1,404 4 5 5 Total $ 175 $ 1,404 $ 544 Gains 5 Total $ 175 $ 1,404 $ 544 Gains ( Losses $ 175 $ 1,404 $ 544 Gains ( Losses ) Recognized and Ineffective Portion ) ( 1 ) Year Ended December 31 1 ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Flow Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Other Hedging Relationship Location 2014 2015 2016 Foreign exchange contract Other income ) , net $ ( 279 ) $ ( 297 ) ( 279 ) $ ( 297 ) $ ( 381 ) ( 297 ) $ ( 381 ) Interest rate contract Other ( expense ) , net 4 0 0 Total $ ( expense ) , net 4 0 0 Total $ ( 275 ) , net 4 0 0 Total $ ( 275 ) 0 0 Total $ ( 275 ) $ ( 297 ) ( 275 ) $ ( 297 ) $ ( 381 ) ( 297 ) $ ( 381 ) ( 1 ) Gains $ ( 381 ) ( 1 ) Gains ( loss ) in all period presented . 58 Table of Contents Alphabet Inc in Income on Derivatives ( 2 ) Year Ended December 31 2 ) Year Ended December 31 , Derivatives in Fair Value Fair Value Hedging Relationship Location 2014 2015 2016 Foreign Exchange Hedges Value Hedging Relationship Location 2014 2015 2016 Foreign Exchange Hedges : Hedging Relationship Location 2014 2015 2016 Foreign Exchange Hedges : Foreign expense ) , net $ 115 $ 170 $ 145 Hedged , net $ 115 $ 170 $ 145 Hedged item Other $ 115 $ 170 $ 145 Hedged item Other income ( expense ) , net ( 123 ) ( 176 ) ( net ( 123 ) ( 176 ) ( 139 ) Total ) ( 176 ) ( 139 ) Total $ ( 8 139 ) Total $ ( 8 ) $ ( 6 ) ( 8 ) $ ( 6 ) $ 6 Interest Rate $ ( 6 ) $ 6 Interest Rate Hedges : Interest expense ) , net $ 0 $ ( 2 ) $ net $ 0 $ ( 2 ) $ ( 3 ) ( 2 ) $ ( 3 ) Hedged item Other income ( expense ) , net 0 2 3 Total $ 0 expense ) , net 0 2 3 Total $ 0 $ ) , net 0 2 3 Total $ 0 $ 0 0 2 3 Total $ 0 $ 0 $ 0 ( 3 Total $ 0 $ 0 $ 0 ( 2 ) $ 0 $ 0 $ 0 ( 2 ) Amounts excluded $ 0 $ 0 ( 2 ) Amounts excluded from effectiveness on Derivatives Year Ended December 31 , Derivatives Not Designated As Designated As Hedging Instruments Location 2014 2015 2016 Foreign exchange contract As Hedging Instruments Location 2014 2015 2016 Foreign exchange contract Other Hedging Instruments Location 2014 2015 2016 Foreign exchange contract Other income income from discontinued operation $ 237 $ 198 $ 130 Interest discontinued operation $ 237 $ 198 $ 130 Interest rate contract $ 237 $ 198 $ 130 Interest rate contract Other income ( expense ) , net 2 1 ( 11 ) Total expense ) , net 2 1 ( 11 ) Total $ , net 2 1 ( 11 ) Total $ 239 $ ( 11 ) Total $ 239 $ 199 $ 119 Offsetting ) Total $ 239 $ 199 $ 119 Offsetting of Derivatives $ 239 $ 199 $ 119 Offsetting of Derivatives , Securities condition . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , information related December 31 , 2015 and 2016 , information related to these ( in million ) : 59 Table of Contents Alphabet Inc of Assets As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 628 $ 0 $ 628 $ Exposed Derivatives $ 628 $ 0 $ 628 $ ( 13 $ 628 $ 0 $ 628 $ ( 13 ) ( 0 $ 628 $ ( 13 ) ( 1 ) $ $ ( 13 ) ( 1 ) $ ( 189 ) ( 1 ) $ ( 189 ) $ ( 214 ) ( 189 ) $ ( 214 ) $ 212 Reverse repurchase $ ( 214 ) $ 212 Reverse repurchase agreement 1,590 0 $ 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 212 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 Reverse repurchase agreement 1,590 0 1,590 ( 2 ) 0 0 agreement 1,590 0 1,590 ( 2 ) 0 0 ( 1,590 0 1,590 ( 2 ) 0 0 ( 1,590 ) 0 1,590 ( 2 ) 0 0 ( 1,590 ) 0 Total 2 ) 0 0 ( 1,590 ) 0 Total $ 2,218 0 0 ( 1,590 ) 0 Total $ 2,218 $ 0 1,590 ) 0 Total $ 2,218 $ 0 $ 2,218 $ 0 Total $ 2,218 $ 0 $ 2,218 $ ( 13 $ 2,218 $ 0 $ 2,218 $ ( 13 ) $ 0 $ 2,218 $ ( 13 ) $ ( 189 ) ( 13 ) $ ( 189 ) $ ( 1,804 ) ( 189 ) $ ( 1,804 ) $ 212 As of $ ( 1,804 ) $ 212 As of December 31 , $ 212 As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 596 $ 0 $ 596 $ Exposed Derivatives $ 596 $ 0 $ 596 $ ( 11 $ 596 $ 0 $ 596 $ ( 11 ) ( 0 $ 596 $ ( 11 ) ( 1 ) $ $ ( 11 ) ( 1 ) $ ( 337 ) ( 1 ) $ ( 337 ) $ ( 73 ) ( 337 ) $ ( 73 ) $ 175 ( 1 $ ( 73 ) $ 175 ( 1 ) The balance 73 ) $ 175 ( 1 ) The balance a of The balance a of December 31 , 2015 and 2016 were a of December 31 , 2015 and 2016 were related to December 31 , 2015 and 2016 were related to derivative liability master netting agreement . ( 2 ) The balance a of The balance a of December 31 , 2015 included $ 1,140 a of December 31 , 2015 included $ 1,140 million recorded 31 , 2015 included $ 1,140 million recorded in cash and and cash equivalent and $ 450 million recorded in receivable under of Liabilities As of December 31 , 2015 Gross Amounts Not As of December 31 , 2015 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 16 $ 0 $ 16 $ Liabilities Derivatives $ 16 $ 0 $ 16 $ ( 13 $ 16 $ 0 $ 16 $ ( 13 ) ( 0 $ 16 $ ( 13 ) ( 3 ) $ $ ( 13 ) ( 3 ) $ ( 3 ) ( 3 ) $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 $ 0 Securities lending agreement 3 ) $ 0 $ 0 Securities lending agreement 2,428 0 $ 0 Securities lending agreement 2,428 0 2,428 0 0 ( 0 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 Securities lending agreement 2,428 0 2,428 0 0 ( 2,401 ) lending agreement 2,428 0 2,428 0 0 ( 2,401 ) 27 agreement 2,428 0 2,428 0 0 ( 2,401 ) 27 Total 0 2,428 0 0 ( 2,401 ) 27 Total $ 2,444 0 0 ( 2,401 ) 27 Total $ 2,444 $ 0 2,401 ) 27 Total $ 2,444 $ 0 $ 2,444 $ 27 Total $ 2,444 $ 0 $ 2,444 $ ( 13 $ 2,444 $ 0 $ 2,444 $ ( 13 ) $ 0 $ 2,444 $ ( 13 ) $ ( 3 ) ( 13 ) $ ( 3 ) $ ( 2,401 ) ( 3 ) $ ( 2,401 ) $ 27 As of $ ( 2,401 ) $ 27 As of December 31 , $ 27 As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 13 $ 0 $ 13 $ Liabilities Derivatives $ 13 $ 0 $ 13 $ ( 11 $ 13 $ 0 $ 13 $ ( 11 ) ( 0 $ 13 $ ( 11 ) ( 3 ) $ $ ( 11 ) ( 3 ) $ 0 $ 0 ) ( 3 ) $ 0 $ 0 $ 2 ( 3 ) $ 0 $ 0 $ 2 ( 3 ) $ 0 $ 0 $ 2 ( 3 ) The balance $ 0 $ 2 ( 3 ) The balance a of The balance a of December 31 , 2015 and 2016 were a of December 31 , 2015 and 2016 were related to December 31 , 2015 and 2016 were related to derivative asset master netting agreement . Note 3 . Non-Marketable Investments Our non-marketable model . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , investment accounted December 31 , 2015 and 2016 , investment accounted for under carrying value of approximately $ 1.6 billion and $ 1.7 billion $ 1.6 billion and $ 1.7 billion , respectively . Our method investee earnings and loss 60 Table of Contents Alphabet Inc. a net loss of $ 48 million , $ 227 million $ 48 million , $ 227 million , and $ 202 227 million , and $ 202 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , respectively 2014 , 2015 , and 2016 , respectively . As of respectively . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , investment accounted December 31 , 2015 and 2016 , investment accounted for under a carrying value of $ 2.6 billion and $ 3.0 billion $ 2.6 billion and $ 3.0 billion , respectively , and fair value of approximately $ 7.5 billion and $ 8.1 billion $ 7.5 billion and $ 8.1 billion , respectively . The and are classified within Level 3 in the fair value hierarchy of these VIEs wa $ 1.3 billion with a maximum exposure a maximum exposure of $ 1.3 billion a of December 31 1.3 billion a of December 31 , 2015 and $ 1.2 a of December 31 , 2015 and $ 1.2 billion with 31 , 2015 and $ 1.2 billion with a maximum exposure a maximum exposure of $ 1.2 billion a of December 31 1.2 billion a of December 31 , 2016 . The maximum a of December 31 , 2016 . The maximum exposure is of these security wa $ 1.0 billion and $ 1.1 billion $ 1.0 billion and $ 1.1 billion a of December 31 1.1 billion a of December 31 , 2015 and 2016 , a of December 31 , 2015 and 2016 , respectively . December 31 , 2015 and 2016 , respectively . These debt are categorized accordingly a Level 3 in the fair value hierarchy for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . The 2014 , 2015 , and 2016 . The following table present significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 2015 2016 Beginning balance $ : Year Ended December 31 2015 2016 Beginning balance $ 90 Year Ended December 31 2015 2016 Beginning balance $ 90 $ 2015 2016 Beginning balance $ 90 $ 1,024 Total net gain Beginning balance $ 90 $ 1,024 Total net gain or loss Included in other comprehensive income 0 106 Purchases 960 78 Sales in other comprehensive income 0 106 Purchases 960 78 Sales ( comprehensive income 0 106 Purchases 960 78 Sales ( 6 ) income 0 106 Purchases 960 78 Sales ( 6 ) ( Purchases 960 78 Sales ( 6 ) ( 18 ) Settlements Sales ( 6 ) ( 18 ) Settlements ( 20 ) ( 18 ) Settlements ( 20 ) ( 25 ) Ending Settlements ( 20 ) ( 25 ) Ending balance $ 1,024 25 ) Ending balance $ 1,024 $ 1,165 Note 4 . Ending balance $ 1,024 $ 1,165 Note 4 . Debt Short-Term $ 1,024 $ 1,165 Note 4 . Debt Short-Term Debt Google program of up to $ 3.0 billion through the issuance of commercial paper and a $ 3.0 billion revolving credit facility a credit facility a of December 31 , 2015 . In February a of December 31 , 2015 . In February 2016 , , 2015 . In February 2016 , we replaced this program program of up to $ 5.0 billion of commercial paper and commercial paper and a $ 4.0 billion revolving credit facility , , which expires in February 2021 . Net proceeds from these purpose . We had $ 2.0 billion of outstanding commercial paper a weighted-average interest rate of 0.2 % a of December 31 0.2 % a of December 31 , 2015 and no commercial a of December 31 , 2015 and no commercial paper outstanding paper outstanding a of December 31 , 2016 . The estimated a of December 31 , 2016 . The estimated fair value carrying value a of December 31 , 2015 . The interest a of December 31 , 2015 . The interest rate for credit facility a of December 31 , 2015 and December 31 a of December 31 , 2015 and December 31 , 2016 31 , 2015 and December 31 , 2016 . 61 Table 2015 and December 31 , 2016 . 61 Table of Contents December 31 , 2016 . 61 Table of Contents Alphabet Inc Alphabet Inc . In August 2013 , we entered into a on certain property expiring in 2028 . In September 2016 , in 2028 . In September 2016 , we exercised our option the property for approximately $ 220 million . Long-Term Debt Google Long-Term Debt Google issued $ 3.0 billion of unsecured senior note ( collectively , the `` 2011 Notes `` ) in May Notes `` ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 , a 2014 , 2016 , and 2021 , a well a $ , a well a $ 1.0 billion of unsecured senior note senior note ( the `` 2014 Notes `` ) in February Notes `` ) in February 2014 due 2024 . In April ) in February 2014 due 2024 . In April 2016 , due 2024 . In April 2016 , we completed an exchange holder of Google ’ s 2011 Notes due 2021 and 2014 ’ s 2011 Notes due 2021 and 2014 Notes due 2024 2011 Notes due 2021 and 2014 Notes due 2024 ( collectively 2021 and 2014 Notes due 2024 ( collectively , the `` principal amount of approximately $ 1.7 billion of the Google Notes wa exchanged for approximately $ 1.7 billion of Alphabet note with loss recognized . In August 2016 , Alphabet issued $ 2.0 2016 , Alphabet issued $ 2.0 billion of unsecured senior note senior note ( the `` 2016 Notes `` ) due 2026 2016 Notes `` ) due 2026 . The net proceeds from from the issuance of the 2016 Notes were used for general The Alphabet note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 rank equally 2021 , 2024 , and 2026 rank equally with each other ) : As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Short-Term Portion of As of December 31 , 2016 Short-Term Portion of Long-Term Debt Short-Term Portion of Long-Term Debt 2.125 % Notes due on May % Notes due on May 19 , 2016 $ 1,000 $ due on May 19 , 2016 $ 1,000 $ 0 Capital May 19 , 2016 $ 1,000 $ 0 Capital Lease Obligation , 2016 $ 1,000 $ 0 Capital Lease Obligation 225 0 $ 0 Capital Lease Obligation 225 0 Total Short-Term Portion of 0 Capital Lease Obligation 225 0 Total Short-Term Portion of Long-Term Portion of Long-Term Debt $ 1,225 $ 0 Long-Term Debt 3.625 Long-Term Debt $ 1,225 $ 0 Long-Term Debt 3.625 % Notes 1,225 $ 0 Long-Term Debt 3.625 % Notes due on May % Notes due on May 19 , 2021 $ 1,000 $ due on May 19 , 2021 $ 1,000 $ 1,000 3.375 May 19 , 2021 $ 1,000 $ 1,000 3.375 % Notes , 2021 $ 1,000 $ 1,000 3.375 % Notes due on 2021 $ 1,000 $ 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 1.998 due on February 25 , 2024 1,000 1,000 1.998 % Notes on February 25 , 2024 1,000 1,000 1.998 % Notes due February 25 , 2024 1,000 1,000 1.998 % Notes due on 25 , 2024 1,000 1,000 1.998 % Notes due on August % Notes due on August 15 , 2026 0 2,000 Unamortized due on August 15 , 2026 0 2,000 Unamortized discount for on August 15 , 2026 0 2,000 Unamortized discount for the August 15 , 2026 0 2,000 Unamortized discount for the Notes for the Notes above ( 5 ) ( 65 ) Total above ( 5 ) ( 65 ) Total Long-Term Debt ( ) Total Long-Term Debt ( 1 ) $ 1,995 $ 3,935 Debt ( 1 ) $ 1,995 $ 3,935 ( 1 ) 1 ) $ 1,995 $ 3,935 ( 1 ) Includes the $ 1,995 $ 3,935 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 and 2026 were note due in 2021 , 2024 and 2026 were 3.734 % in 2021 , 2024 and 2026 were 3.734 % , 3.377 , 2024 and 2026 were 3.734 % , 3.377 % and 2026 were 3.734 % , 3.377 % and 2.231 % respectively % , 3.377 % and 2.231 % respectively , with interest outstanding note wa approximately $ 3.1 billion a of December 31 3.1 billion a of December 31 , 2015 and $ 3.9 a of December 31 , 2015 and $ 3.9 billion a 31 , 2015 and $ 3.9 billion a of December 31 3.9 billion a of December 31 , 2016 . The fair a of December 31 , 2016 . The fair value wa is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2016 , aggregate future As of December 31 , 2016 , aggregate future principal payment million ) : Years Ending 2017 $ 0 2018 0 2019 : Years Ending 2017 $ 0 2018 0 2019 0 2020 Years Ending 2017 $ 0 2018 0 2019 0 2020 0 Ending 2017 $ 0 2018 0 2019 0 2020 0 Thereafter 2017 $ 0 2018 0 2019 0 2020 0 Thereafter 4,000 $ 0 2018 0 2019 0 2020 0 Thereafter 4,000 Total 0 2018 0 2019 0 2020 0 Thereafter 4,000 Total $ 2018 0 2019 0 2020 0 Thereafter 4,000 Total $ 4,000 2019 0 2020 0 Thereafter 4,000 Total $ 4,000 62 Table 0 Thereafter 4,000 Total $ 4,000 62 Table of Contents Alphabet Thereafter 4,000 Total $ 4,000 62 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 5 . Supplemental Financial Statement Information ) : As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Land and building As of December 31 , 2016 Land and building $ 16,518 2016 Land and building $ 16,518 $ 19,804 Information technology asset and building $ 16,518 $ 19,804 Information technology asset 13,645 16,084 $ 19,804 Information technology asset 13,645 16,084 Construction in progress 7,324 19,804 Information technology asset 13,645 16,084 Construction in progress 7,324 8,166 13,645 16,084 Construction in progress 7,324 8,166 Leasehold improvement 2,576 3,415 16,084 Construction in progress 7,324 8,166 Leasehold improvement 2,576 3,415 Furniture progress 7,324 8,166 Leasehold improvement 2,576 3,415 Furniture and fixture 83 7,324 8,166 Leasehold improvement 2,576 3,415 Furniture and fixture 83 58 2,576 3,415 Furniture and fixture 83 58 Property and equipment , 3,415 Furniture and fixture 83 58 Property and equipment , gross Property and equipment , gross 40,146 47,527 Less : accumulated depreciation and equipment , gross 40,146 47,527 Less : accumulated depreciation and accumulated depreciation and amortization ( 11,130 ) ( 13,293 ) Property amortization ( 11,130 ) ( 13,293 ) Property and equipment , and equipment , net $ 29,016 $ 34,234 As of December , net $ 29,016 $ 34,234 As of December 31 , $ 34,234 As of December 31 , 2016 , asset under As of December 31 , 2016 , asset under capital lease a cost basis of $ 299 million were included in property Motorola Mobile business on October 29 , 2014 ( see Note business on October 29 , 2014 ( see Note 9 for , 2014 ( see Note 9 for additional information ) , Receivable `` ) due October 2017 . The Note Receivable wa non-current , a of December 31 , 2015 , and in a of December 31 , 2015 , and in current asset asset , a of December 31 , 2016 . Based on a of December 31 , 2016 . Based on the general an effective interest rate of 4.5 % . The outstanding balance ) : As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Principal of the As of December 31 , 2016 Principal of the Note Receivable of the Note Receivable $ 1,448 $ 1,448 Less : unamortized Note Receivable $ 1,448 $ 1,448 Less : unamortized discount for for the Note Receivable ( 112 ) ( 51 ) Total Receivable ( 112 ) ( 51 ) Total $ 1,336 $ ( 51 ) Total $ 1,336 $ 1,397 As of December ) Total $ 1,336 $ 1,397 As of December 31 , $ 1,397 As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , we did December 31 , 2015 and 2016 , we did not recognize ) : As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Accrued customer liability As of December 31 , 2016 Accrued customer liability $ 908 2016 Accrued customer liability $ 908 $ 1,256 Other accrued expense customer liability $ 908 $ 1,256 Other accrued expense and current accrued expense and current liability 3,860 4,888 Accrued expense and other expense and current liability 3,860 4,888 Accrued expense and other current and other current liability $ 4,768 $ 6,144 63 Table of current liability $ 4,768 $ 6,144 63 Table of Contents Alphabet liability $ 4,768 $ 6,144 63 Table of Contents Alphabet Inc Total Balance a of December 31 , 2013 $ 16 $ a of December 31 , 2013 $ 16 $ 50 $ December 31 , 2013 $ 16 $ 50 $ 59 $ , 2013 $ 16 $ 50 $ 59 $ 125 Other $ 16 $ 50 $ 59 $ 125 Other comprehensive income $ 50 $ 59 $ 125 Other comprehensive income ( loss loss ) before reclassification ( 996 ) 505 651 160 Amounts before reclassification ( 996 ) 505 651 160 Amounts reclassified from reclassification ( 996 ) 505 651 160 Amounts reclassified from AOCI ( 996 ) 505 651 160 Amounts reclassified from AOCI 0 160 Amounts reclassified from AOCI 0 ( 134 ) ( 124 reclassified from AOCI 0 ( 134 ) ( 124 ) ( 0 ( 134 ) ( 124 ) ( 258 ) Other ) ( 124 ) ( 258 ) Other comprehensive income ( income ( loss ) ( 996 ) 371 527 ( 98 loss ) ( 996 ) 371 527 ( 98 ) Balance ) ( 996 ) 371 527 ( 98 ) Balance a 996 ) 371 527 ( 98 ) Balance a of December ) Balance a of December 31 , 2014 $ ( 980 a of December 31 , 2014 $ ( 980 ) $ 31 , 2014 $ ( 980 ) $ 421 $ 586 $ ( 980 ) $ 421 $ 586 $ 27 Other 980 ) $ 421 $ 586 $ 27 Other comprehensive income $ 421 $ 586 $ 27 Other comprehensive income ( loss loss ) before reclassification ( 1,067 ) ( 715 ) 676 reclassification ( 1,067 ) ( 715 ) 676 ( 1,106 ) 1,067 ) ( 715 ) 676 ( 1,106 ) Amounts reclassified ( 715 ) 676 ( 1,106 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 208 ( 1,003 ) ( Amounts reclassified from AOCI 0 208 ( 1,003 ) ( 795 from AOCI 0 208 ( 1,003 ) ( 795 ) Other 208 ( 1,003 ) ( 795 ) Other comprehensive income ( income ( loss ) ( 1,067 ) ( 507 ) ( ) ( 1,067 ) ( 507 ) ( 327 ) ( ) ( 507 ) ( 327 ) ( 1,901 ) Balance ) ( 327 ) ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 $ ( 2,047 a of December 31 , 2015 $ ( 2,047 ) $ 31 , 2015 $ ( 2,047 ) $ ( 86 ) ( 2,047 ) $ ( 86 ) $ 259 $ ( $ ( 86 ) $ 259 $ ( 1,874 ) Other ) $ 259 $ ( 1,874 ) Other comprehensive income ( loss ) before reclassification ( 599 ) ( 314 ) 515 reclassification ( 599 ) ( 314 ) 515 ( 398 ) 599 ) ( 314 ) 515 ( 398 ) Amounts reclassified ( 314 ) 515 ( 398 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 221 ( 351 ) ( Amounts reclassified from AOCI 0 221 ( 351 ) ( 130 from AOCI 0 221 ( 351 ) ( 130 ) Other 221 ( 351 ) ( 130 ) Other comprehensive income ( income ( loss ) ( 599 ) ( 93 ) 164 ) ( 599 ) ( 93 ) 164 ( 528 ) 599 ) ( 93 ) 164 ( 528 ) Balance a ( 93 ) 164 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 $ ( 2,646 a of December 31 , 2016 $ ( 2,646 ) $ 31 , 2016 $ ( 2,646 ) $ ( 179 ) ( 2,646 ) $ ( 179 ) $ 423 $ ( $ ( 179 ) $ 423 $ ( 2,402 ) The ) $ 423 $ ( 2,402 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2014 31 , AOCI Components Location 2014 2015 2016 Unrealized gain ( , AOCI Components Location 2014 2015 2016 Unrealized gain ( loss AOCI Components Location 2014 2015 2016 Unrealized gain ( loss ) expense ) , net $ 153 $ ( 208 ) $ net $ 153 $ ( 208 ) $ ( 221 ) ( 208 ) $ ( 221 ) Provision for income tax Provision for income tax ( 19 ) 0 0 Net of income tax ( 19 ) 0 0 Net of tax $ tax ( 19 ) 0 0 Net of tax $ 134 0 Net of tax $ 134 $ ( 208 ) $ tax $ 134 $ ( 208 ) $ ( 221 ) ( 208 ) $ ( 221 ) Unrealized gain ( loss Foreign exchange contract Revenue $ 171 $ 1,399 $ 539 Interest contract Revenue $ 171 $ 1,399 $ 539 Interest rate contract $ 171 $ 1,399 $ 539 Interest rate contract Other income ( expense ) , net 4 5 5 Provision for income expense ) , net 4 5 5 Provision for income tax ) , net 4 5 5 Provision for income tax ( Provision for income tax ( 51 ) ( 401 ) ( tax ( 51 ) ( 401 ) ( 193 ) Net ) ( 401 ) ( 193 ) Net of tax $ ) Net of tax $ 124 $ 1,003 $ 351 Total of tax $ 124 $ 1,003 $ 351 Total amount reclassified $ 124 $ 1,003 $ 351 Total amount reclassified , net , net of tax $ 258 $ 795 $ 130 64 of tax $ 258 $ 795 $ 130 64 Table of $ 258 $ 795 $ 130 64 Table of Contents Alphabet 258 $ 795 $ 130 64 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Interest Year Ended December 31 , 2014 2015 2016 Interest income $ Ended December 31 , 2014 2015 2016 Interest income $ 746 December 31 , 2014 2015 2016 Interest income $ 746 $ 2015 2016 Interest income $ 746 $ 999 $ 1,220 Interest Interest income $ 746 $ 999 $ 1,220 Interest expense ( $ 746 $ 999 $ 1,220 Interest expense ( 101 ) $ 1,220 Interest expense ( 101 ) ( 104 ) ( expense ( 101 ) ( 104 ) ( 124 ) Foreign ) ( 104 ) ( 124 ) Foreign currency exchange loss exchange loss , net ( 1 ) ( 402 ) ( net ( 1 ) ( 402 ) ( 422 ) ( ) ( 402 ) ( 422 ) ( 475 ) Gain ) ( 422 ) ( 475 ) Gain ( loss ) on marketable security , net 153 ( 208 ) ( 210 security , net 153 ( 208 ) ( 210 ) Gain 153 ( 208 ) ( 210 ) Gain ( loss ) on non-marketable investment , net 237 ( 126 ) ( 65 investment , net 237 ( 126 ) ( 65 ) Other 237 ( 126 ) ( 65 ) Other 130 152 88 ) ( 65 ) Other 130 152 88 Other income ( ( 65 ) Other 130 152 88 Other income ( expense 65 ) Other 130 152 88 Other income ( expense ) expense ) , net $ 763 $ 291 $ 434 ( , net $ 763 $ 291 $ 434 ( 1 ) $ 763 $ 291 $ 434 ( 1 ) Our foreign $ 291 $ 434 ( 1 ) Our foreign currency exchange currency transaction loss were $ 107 million , $ 123 million $ 107 million , $ 123 million , and $ 112 123 million , and $ 112 million in 2014 , 2015 and $ 112 million in 2014 , 2015 , and 2016 112 million in 2014 , 2015 , and 2016 , respectively 2014 , 2015 , and 2016 , respectively . Note 6 2016 , respectively . Note 6 . Acquisitions 2016 Acquisitions Apigee . Note 6 . Acquisitions 2016 Acquisitions Apigee In October 2016 2016 Acquisitions Apigee In October 2016 , we completed the acquisition management , for approximately $ 571 million in cash . We total purchase price of $ 571 million , $ 41 million $ 571 million , $ 41 million wa cash acquired , wa cash acquired , $ 127 million wa attributed to intangible to intangible asset , $ 376 million wa attributed to goodwill to goodwill , and $ 27 million wa attributed to net During the year ended December 31 , 2016 , we completed year ended December 31 , 2016 , we completed other acquisition total consideration of approximately $ 448 million . In aggregate , . In aggregate , $ 12 million wa cash acquired , wa cash acquired , $ 143 million wa attributed to intangible to intangible asset , $ 288 million wa attributed to goodwill to goodwill , and $ 5 million wa attributed to net tax purpose is approximately $ 67 million . Pro forma result during the year ended December 31 , 2016 , patent and year ended December 31 , 2016 , patent and developed technology a weighted-average useful life of 4.5 year , customer relationship have a weighted-average useful life of 3.4 year , and trade name a weighted-average useful life of 6.2 year . 2015 Acquisitions bebop life of 6.2 year . 2015 Acquisitions bebop Technologies In December Acquisitions bebop Technologies In December 2015 , we completed the acquisition with the close wa $ 272 million , of which $ million , of which $ 1 million wa paid in cash paid in cash and $ 271 million wa paid in the issued a total of approximately 514 thousand share of Alphabet Class , ha joined Google . 65 Table of Contents Alphabet Inc. total purchase price of $ 272 million , $ 28 million $ 272 million , $ 28 million wa cash acquired , wa cash acquired , $ 59 million wa attributed to intangible to intangible asset , $ 206 million wa attributed to goodwill to goodwill , and $ 21 million wa attributed to net During the year ended December 31 , 2015 , we completed year ended December 31 , 2015 , we completed other acquisition total consideration of approximately $ 263 million , which includes the held equity interest of $ 0 million . In aggregate , . In aggregate , $ 4 million wa cash acquired , wa cash acquired , $ 88 million wa attributed to intangible to intangible asset , $ 138 million wa attributed to goodwill to goodwill , and $ 33 million wa attributed to net tax purpose is approximately $ 20 million . Pro forma result during the year ended December 31 , 2015 , patent and year ended December 31 , 2015 , patent and developed technology a weighted-average useful life of 4.1 year , customer relationship have a weighted-average useful life of 4.0 year , and trade name a weighted-average useful life of 6.8 year . Note 7 . of 6.8 year . Note 7 . Calico On September 18 7 . Calico On September 18 , 2013 , we announced Calico On September 18 , 2013 , we announced the formation lifespan . As of December 31 , 2016 , we have As of December 31 , 2016 , we have contributed $ , we have contributed $ 240 million to Calico in exchange to fund an additional $ 490 million on an as-needed basis economic performance . In September 2014 , AbbVie Inc. ( AbbVie cancer . As of December 31 , 2016 , AbbVie ha As of December 31 , 2016 , AbbVie ha contributed $ , AbbVie ha contributed $ 750 million to fund the collaboration commitment . As of December 31 , 2016 , Calico ha As of December 31 , 2016 , Calico ha contributed $ , Calico ha contributed $ 250 million and committed up to up to an additional $ 500 million . Calico ha used next few year . Note 8 . Goodwill and Other Intangible for the year ended December 31 , 2015 and 2016 were year ended December 31 , 2015 and 2016 were a follows December 31 , 2015 and 2016 were a follows ( in Consolidated Balance a of December 31 , 2014 $ 15,599 $ a of December 31 , 2014 $ 15,599 $ 0 $ December 31 , 2014 $ 15,599 $ 0 $ 15,599 Acquisitions , 2014 $ 15,599 $ 0 $ 15,599 Acquisitions 139 0 $ 15,599 $ 0 $ 15,599 Acquisitions 139 0 139 Foreign $ 0 $ 15,599 Acquisitions 139 0 139 Foreign currency translation 0 $ 15,599 Acquisitions 139 0 139 Foreign currency translation and $ 15,599 Acquisitions 139 0 139 Foreign currency translation and other translation and other adjustment ( 71 ) 0 ( 71 ) other adjustment ( 71 ) 0 ( 71 ) Allocation in ( 71 ) 0 ( 71 ) Allocation in the fourth in the fourth quarter of 2015 ( 416 ) 416 0 fourth quarter of 2015 ( 416 ) 416 0 Acquisitions 201 of 2015 ( 416 ) 416 0 Acquisitions 201 4 205 2015 ( 416 ) 416 0 Acquisitions 201 4 205 Foreign 416 ) 416 0 Acquisitions 201 4 205 Foreign currency translation ) 416 0 Acquisitions 201 4 205 Foreign currency translation and 416 0 Acquisitions 201 4 205 Foreign currency translation and other currency translation and other adjustment 4 ( 7 ) ( 3 and other adjustment 4 ( 7 ) ( 3 ) Balance 4 ( 7 ) ( 3 ) Balance a of December ) Balance a of December 31 , 2015 $ 15,456 $ a of December 31 , 2015 $ 15,456 $ 413 $ December 31 , 2015 $ 15,456 $ 413 $ 15,869 Acquisitions , 2015 $ 15,456 $ 413 $ 15,869 Acquisitions 625 39 $ 15,456 $ 413 $ 15,869 Acquisitions 625 39 664 Foreign $ 413 $ 15,869 Acquisitions 625 39 664 Foreign currency translation 413 $ 15,869 Acquisitions 625 39 664 Foreign currency translation and $ 15,869 Acquisitions 625 39 664 Foreign currency translation and other translation and other adjustment ( 54 ) ( 11 ) ( adjustment ( 54 ) ( 11 ) ( 65 ) Balance ) ( 11 ) ( 65 ) Balance a of December ) Balance a of December 31 , 2016 $ 16,027 $ a of December 31 , 2016 $ 16,027 $ 441 $ December 31 , 2016 $ 16,027 $ 441 $ 16,468 66 , 2016 $ 16,027 $ 441 $ 16,468 66 Table of $ 16,027 $ 441 $ 16,468 66 Table of Contents Alphabet 16,027 $ 441 $ 16,468 66 Table of Contents Alphabet Inc. ) : As of December 31 , 2015 Gross Carrying Amount As of December 31 , 2015 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 6,592 $ 3,213 $ 3,379 Customer developed technology $ 6,592 $ 3,213 $ 3,379 Customer relationship 1,343 $ 6,592 $ 3,213 $ 3,379 Customer relationship 1,343 1,201 142 3,213 $ 3,379 Customer relationship 1,343 1,201 142 Trade name and $ 3,379 Customer relationship 1,343 1,201 142 Trade name and other 3,379 Customer relationship 1,343 1,201 142 Trade name and other 795 142 Trade name and other 795 469 326 Total $ 8,730 Trade name and other 795 469 326 Total $ 8,730 $ name and other 795 469 326 Total $ 8,730 $ 4,883 795 469 326 Total $ 8,730 $ 4,883 $ 3,847 As 326 Total $ 8,730 $ 4,883 $ 3,847 As of December $ 8,730 $ 4,883 $ 3,847 As of December 31 , $ 3,847 As of December 31 , 2016 Gross Carrying Amount As of December 31 , 2016 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,542 $ 2,710 $ 2,832 Customer developed technology $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 197 155 2,710 $ 2,832 Customer relationship 352 197 155 Trade name and $ 2,832 Customer relationship 352 197 155 Trade name and other 2,832 Customer relationship 352 197 155 Trade name and other 463 155 Trade name and other 463 143 320 Total $ 6,357 Trade name and other 463 143 320 Total $ 6,357 $ name and other 463 143 320 Total $ 6,357 $ 3,050 463 143 320 Total $ 6,357 $ 3,050 $ 3,307 Patents 320 Total $ 6,357 $ 3,050 $ 3,307 Patents and developed $ 6,357 $ 3,050 $ 3,307 Patents and developed technology , weighted-average remaining useful life of 4.6 year , 2.3 year , life of 4.6 year , 2.3 year , and 4.7 year , 2.3 year , and 4.7 year , respectively . Amortization purchased intangible asset wa $ 1,079 million , $ 892 million $ 1,079 million , $ 892 million , and $ 833 892 million , and $ 833 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , respectively 2014 , 2015 , and 2016 , respectively . As of respectively . As of December 31 , 2016 , $ 2.6 As of December 31 , 2016 , $ 2.6 billion of 31 , 2016 , $ 2.6 billion of intangible asset that During the year ended December 31 , 2014 , we recorded year ended December 31 , 2014 , we recorded an impairment cost of revenue of $ 378 million related to a patent date and fall within level 3 in fair value hierarchy . for the year ended December 31 , 2015 and 2016 . year ended December 31 , 2015 and 2016 . As of December 31 , 2015 and 2016 . As of December 31 2016 . As of December 31 , 2016 , expected amortization As of December 31 , 2016 , expected amortization expense relating ( in million ) : 2017 $ 764 2018 685 2019 million ) : 2017 $ 764 2018 685 2019 579 2020 ) : 2017 $ 764 2018 685 2019 579 2020 487 : 2017 $ 764 2018 685 2019 579 2020 487 2021 2017 $ 764 2018 685 2019 579 2020 487 2021 460 $ 764 2018 685 2019 579 2020 487 2021 460 Thereafter 764 2018 685 2019 579 2020 487 2021 460 Thereafter 332 2018 685 2019 579 2020 487 2021 460 Thereafter 332 $ 685 2019 579 2020 487 2021 460 Thereafter 332 $ 3,307 2019 579 2020 487 2021 460 Thereafter 332 $ 3,307 Note 2020 487 2021 460 Thereafter 332 $ 3,307 Note 9 . 2021 460 Thereafter 332 $ 3,307 Note 9 . Discontinued Operations Thereafter 332 $ 3,307 Note 9 . Discontinued Operations Motorola Mobile Operations Motorola Mobile On October 29 , 2014 , we closed Mobile On October 29 , 2014 , we closed the sale purchase price of approximately $ 2.9 billion , including $ 1.4 2.9 billion , including $ 1.4 billion paid at close , close , comprised of $ 660 million in cash and $ million in cash and $ 750 million in Lenovo ordinary share in Lenovo ordinary share ( 519.1 million share ) . The ) . The remaining $ 1.5 billion wa paid in the continued operation . Additionally , 67 Table of Contents Alphabet Inc. an indemnification liability of $ 130 million . The sale resulted in a gain of $ 740 million , net of tax for the year ended December 31 , 2014 . Incremental to year ended December 31 , 2014 . Incremental to this net recognized additional income of $ 254 million , net of tax for the year ended December 31 , 2014 . The financial year ended December 31 , 2014 . The financial result of for the year ended December 31 , 2014 ( in million year ended December 31 , 2014 ( in million ) : ) : Year Ended December 31 , 2014 ( 1 ) Year Ended December 31 , 2014 ( 1 ) Revenues $ December 31 , 2014 ( 1 ) Revenues $ 5,486 Loss ( 1 ) Revenues $ 5,486 Loss from discontinued operation before operation before income tax ( 177 ) Benefits from/ ( Provision for ) income tax ( 47 ) Gain on disposal 740 47 ) Gain on disposal 740 Net ( loss ) income income from discontinued operation $ 516 ( 1 ) The operating discontinued operation $ 516 ( 1 ) The operating result of Statements of Income from January 1 , 2014 through October 29 Income from January 1 , 2014 through October 29 , 2014 1 , 2014 through October 29 , 2014 , the date 2014 through October 29 , 2014 , the date of divestiture Cash and cash equivalent $ 160 Accounts receivable 1,103 Inventories 217 equivalent $ 160 Accounts receivable 1,103 Inventories 217 Prepaid expense and 160 Accounts receivable 1,103 Inventories 217 Prepaid expense and other current expense and other current asset 357 Prepaid expense and other asset and other asset , non-current 290 Property and equipment , net Property and equipment , net 542 Intangible asset , net 985 542 Intangible asset , net 985 Goodwill 43 Total asset $ asset , net 985 Goodwill 43 Total asset $ 3,697 Liabilities Goodwill 43 Total asset $ 3,697 Liabilities : Accounts payable $ Liabilities : Accounts payable $ 1,238 Accrued compensation and benefit 163 1,238 Accrued compensation and benefit 163 Accrued expense and other current expense and other current liability 10 Deferred revenue , current 165 10 Deferred revenue , current 165 Other long-term liability 250 Total current 165 Other long-term liability 250 Total liability $ 1,826 Note liability 250 Total liability $ 1,826 Note 10 . Commitments and Total liability $ 1,826 Note 10 . Commitments and Contingencies Operating lease period expiring primarily between 2017 and 2063 . We are expiring primarily between 2017 and 2063 . We are committed to these lease agreement . These 68 Table of Contents Alphabet Inc. basis . As of December 31 , 2016 , future minimum As of December 31 , 2016 , future minimum payment under Sub-lease Income Net Operating Leases 2017 843 15 828 2018 902 Income Net Operating Leases 2017 843 15 828 2018 902 6 Net Operating Leases 2017 843 15 828 2018 902 6 896 Operating Leases 2017 843 15 828 2018 902 6 896 2019 Leases 2017 843 15 828 2018 902 6 896 2019 910 2017 843 15 828 2018 902 6 896 2019 910 5 843 15 828 2018 902 6 896 2019 910 5 905 15 828 2018 902 6 896 2019 910 5 905 2020 828 2018 902 6 896 2019 910 5 905 2020 854 2018 902 6 896 2019 910 5 905 2020 854 4 902 6 896 2019 910 5 905 2020 854 4 850 6 896 2019 910 5 905 2020 854 4 850 2021 896 2019 910 5 905 2020 854 4 850 2021 767 2019 910 5 905 2020 854 4 850 2021 767 2 910 5 905 2020 854 4 850 2021 767 2 765 5 905 2020 854 4 850 2021 767 2 765 Thereafter 905 2020 854 4 850 2021 767 2 765 Thereafter 3,694 2020 854 4 850 2021 767 2 765 Thereafter 3,694 1 854 4 850 2021 767 2 765 Thereafter 3,694 1 3,693 4 850 2021 767 2 765 Thereafter 3,694 1 3,693 Total 2021 767 2 765 Thereafter 3,694 1 3,693 Total minimum payment 767 2 765 Thereafter 3,694 1 3,693 Total minimum payment $ 2 765 Thereafter 3,694 1 3,693 Total minimum payment $ 7,970 3,693 Total minimum payment $ 7,970 $ 33 $ 7,937 Certain minimum payment $ 7,970 $ 33 $ 7,937 Certain lease have $ 7,970 $ 33 $ 7,937 Certain lease have adjustment for original lease period expiring between 2021 and 2035 where we are period expiring between 2021 and 2035 where we are the deemed such lease totaling approximately $ 1.4 billion , for which a , for which a $ 940 million liability is included on Balance Sheet a of December 31 , 2016 . Rent expense a of December 31 , 2016 . Rent expense under operating under operating lease wa $ 570 million , $ 734 million $ 570 million , $ 734 million , and $ 897 734 million , and $ 897 million in 2014 , 2015 and $ 897 million in 2014 , 2015 , and 2016 897 million in 2014 , 2015 , and 2016 , respectively 2014 , 2015 , and 2016 , respectively . Purchase Obligations Purchase Obligations As of December 31 , 2016 , we had As of December 31 , 2016 , we had $ 2.5 2016 , we had $ 2.5 billion of other non-cancelable contractual of Credit As of December 31 , 2016 , we had As of December 31 , 2016 , we had unused letter letter of credit for $ 797 million . Indemnifications In the period . As of December 31 , 2016 , we did As of December 31 , 2016 , we did not have liability . Please see Note 9 for additional information . Legal Matters Antitrust Investigations On November 30 , 2010 , the European Investigations On November 30 , 2010 , the European Commission 's against u . On April 15 , 2015 , the EC . On April 15 , 2015 , the EC issued a EC issued a Statement of 69 Table of Contents Alphabet Inc which we responded on August 27 , 2015 . On April responded on August 27 , 2015 . On April 20 , , 2015 . On April 20 , 2016 , the EC . On April 20 , 2016 , the EC issued an distribution practice . On July 14 , 2016 , the EC . On July 14 , 2016 , the EC issued a business practice . In November 2016 , we responded to the and ad . In September 2015 , FAS found that there process continues . In April 2016 , the Canadian Competition Bureau favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided a material adverse effect on 70 Table of Contents Alphabet Inc. tax contingency , see Note 14 . Note 11 . Net see Note 14 . Note 11 . Net Income Per Share In the year ended December 31 , 2014 and 2016 , year ended December 31 , 2014 and 2016 , the net December 31 , 2014 and 2016 , the net income per In the year ended December 31 , 2015 , the Class year ended December 31 , 2015 , the Class C Adjustment for the year ended December 31 , 2015 . The following year ended December 31 , 2015 . The following table set per share amount ) : 71 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2014 Class A Class Year Ended December 31 , 2014 Class A Class B Class earnings - continuing operation $ 5,700 $ 1,107 $ 6,813 Allocation continuing operation $ 5,700 $ 1,107 $ 6,813 Allocation of undistributed $ 5,700 $ 1,107 $ 6,813 Allocation of undistributed earnings - undistributed earnings - discontinued operation 216 42 258 Total $ 5,916 earnings - discontinued operation 216 42 258 Total $ 5,916 $ - discontinued operation 216 42 258 Total $ 5,916 $ 1,149 216 42 258 Total $ 5,916 $ 1,149 $ 7,071 Denominator 258 Total $ 5,916 $ 1,149 $ 7,071 Denominator Number of $ 5,916 $ 1,149 $ 7,071 Denominator Number of share used used in per share computation 282,877 54,928 338,130 Basic net income in per share computation 282,877 54,928 338,130 Basic net income per per share computation 282,877 54,928 338,130 Basic net income per share share : Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued Continuing operation $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 $ 20.15 $ 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 20.15 $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income $ 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per 20.15 Discontinued operation 0.76 0.76 0.76 Basic net income per share net income per share $ 20.91 $ 20.91 $ 20.91 Diluted per share $ 20.91 $ 20.91 $ 20.91 Diluted net income $ 20.91 $ 20.91 $ 20.91 Diluted net income per share computation - continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation continuing operation $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed $ 5,700 $ 1,107 $ 6,813 Reallocation of undistributed earnings a B to Class A share 1,107 0 0 Reallocation of undistributed to Class A share 1,107 0 0 Reallocation of undistributed earnings Class A share 1,107 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 20 ) ( 18 ) 20 earnings ( 20 ) ( 18 ) 20 Allocation of undistributed 20 ) ( 18 ) 20 Allocation of undistributed earnings - earnings - continuing operation $ 6,787 $ 1,089 $ 6,833 Allocation continuing operation $ 6,787 $ 1,089 $ 6,833 Allocation of undistributed $ 6,787 $ 1,089 $ 6,833 Allocation of undistributed earnings for basic computation - discontinued operation 216 42 258 Reallocation of undistributed computation - discontinued operation 216 42 258 Reallocation of undistributed earnings - discontinued operation 216 42 258 Reallocation of undistributed earnings a B to Class A share 42 0 0 Reallocation of undistributed to Class A share 42 0 0 Reallocation of undistributed earnings Class A share 42 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 1 ) ( 1 ) 1 earnings ( 1 ) ( 1 ) 1 Allocation of undistributed 1 ) ( 1 ) 1 Allocation of undistributed earnings - earnings - discontinued operation $ 257 $ 41 $ 259 Denominator discontinued operation $ 257 $ 41 $ 259 Denominator Number of $ 257 $ 41 $ 259 Denominator Number of share used share used in basic computation 282,877 54,928 338,130 Weighted-average effect of used in basic computation 282,877 54,928 338,130 Weighted-average effect of dilutive in basic computation 282,877 54,928 338,130 Weighted-average effect of dilutive security Class A common share outstanding 54,928 0 0 Restricted stock unit A common share outstanding 54,928 0 0 Restricted stock unit and common share outstanding 54,928 0 0 Restricted stock unit and other and other contingently issuable share 4,572 0 6,563 Number of share other contingently issuable share 4,572 0 6,563 Number of share used contingently issuable share 4,572 0 6,563 Number of share used in used in per share computation 342,377 54,928 344,693 Diluted net income in per share computation 342,377 54,928 344,693 Diluted net income per per share computation 342,377 54,928 344,693 Diluted net income per share share : Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued Continuing operation $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 $ 19.82 $ 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 19.82 $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income $ 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per 19.82 Discontinued operation 0.75 0.75 0.75 Diluted net income per share net income per share $ 20.57 $ 20.57 $ 20.57 72 per share $ 20.57 $ 20.57 $ 20.57 72 Table of $ 20.57 $ 20.57 $ 20.57 72 Table of Contents Alphabet 20.57 $ 20.57 $ 20.57 72 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2015 Class A Class Year Ended December 31 , 2015 Class A Class B Class Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 6,695 $ 1,196 $ 7,935 Total undistributed earnings $ 6,695 $ 1,196 $ 7,935 Total $ 6,695 $ 6,695 $ 1,196 $ 7,935 Total $ 6,695 $ 1,196 1,196 $ 7,935 Total $ 6,695 $ 1,196 $ 8,457 Denominator 7,935 Total $ 6,695 $ 1,196 $ 8,457 Denominator Number of $ 6,695 $ 1,196 $ 8,457 Denominator Number of share used used in per share computation 289,640 51,745 343,241 Basic net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for earnings for basic computation $ 6,695 $ 1,196 $ 7,935 Reallocation basic computation $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed earnings a B to Class A share 1,196 0 0 Reallocation of undistributed to Class A share 1,196 0 0 Reallocation of undistributed earnings Class A share 1,196 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 39 ) ( 14 ) 39 earnings ( 39 ) ( 14 ) 39 Allocation of undistributed 39 ) ( 14 ) 39 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 7,852 $ 1,182 $ 7,974 Denominator undistributed earnings $ 7,852 $ 1,182 $ 7,974 Denominator Number of $ 7,852 $ 1,182 $ 7,974 Denominator Number of share used share used in basic computation 289,640 51,745 343,241 Weighted-average effect of used in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive security Class A common share outstanding 51,745 0 0 Restricted stock unit A common share outstanding 51,745 0 0 Restricted stock unit and common share outstanding 51,745 0 0 Restricted stock unit and other and other contingently issuable share 2,395 0 5,909 Number of share other contingently issuable share 2,395 0 5,909 Number of share used contingently issuable share 2,395 0 5,909 Number of share used in used in per share computation 343,780 51,745 349,150 Diluted net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share net income per share $ 22.84 $ 22.84 $ 24.34 73 per share $ 22.84 $ 22.84 $ 24.34 73 Table of $ 22.84 $ 22.84 $ 24.34 73 Table of Contents Alphabet 22.84 $ 22.84 $ 24.34 73 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Numerator Allocation of undistributed earnings 8,332 1,384 9,762 Denominator Number of Allocation of undistributed earnings 8,332 1,384 9,762 Denominator Number of share of undistributed earnings 8,332 1,384 9,762 Denominator Number of share used used in per share computation 294,217 48,859 344,702 Basic net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and subsidiary ( 9 ) ( 2 ) ( subsidiary ( 9 ) ( 2 ) ( 10 ) Allocation ) ( 2 ) ( 10 ) Allocation of undistributed earnings undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings a B to Class A share 1,382 0 0 Reallocation of undistributed to Class A share 1,382 0 0 Reallocation of undistributed earnings Class A share 1,382 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 94 ) ( 21 ) 94 earnings ( 94 ) ( 21 ) 94 Allocation of undistributed 94 ) ( 21 ) 94 Allocation of undistributed earnings 9,611 94 Allocation of undistributed earnings 9,611 1,361 9,846 Denominator Number of Allocation of undistributed earnings 9,611 1,361 9,846 Denominator Number of share of undistributed earnings 9,611 1,361 9,846 Denominator Number of share used share used in basic computation 294,217 48,859 344,702 Weighted-average effect of used in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive security Class A common share outstanding 48,859 0 0 Restricted stock unit A common share outstanding 48,859 0 0 Restricted stock unit and common share outstanding 48,859 0 0 Restricted stock unit and other and other contingently issuable share 2,055 0 8,873 Number of share other contingently issuable share 2,055 0 8,873 Number of share used contingently issuable share 2,055 0 8,873 Number of share used in used in per share computation 345,131 48,859 353,575 Diluted net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 Note per share $ 27.85 $ 27.85 $ 27.85 Note 12 . $ 27.85 $ 27.85 $ 27.85 Note 12 . Stockholders ’ $ 27.85 $ 27.85 Note 12 . Stockholders ’ Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , there were December 31 , 2015 and 2016 , there were no share common stock is entitled to 10 vote per share . Class . Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . Options and RSUs granted to participant under the 2012 Stock Plan generally vest over date . As of December 31 , 2016 , there were As of December 31 , 2016 , there were 26,206,647 share , 2016 , there were 26,206,647 share of stock reserved for under our Stock Plan . 74 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Cost Year Ended December 31 , 2014 2015 2016 Cost of revenue Ended December 31 , 2014 2015 2016 Cost of revenue $ December 31 , 2014 2015 2016 Cost of revenue $ 535 2016 Cost of revenue $ 535 $ 806 $ 1,157 Research of revenue $ 535 $ 806 $ 1,157 Research and development $ 535 $ 806 $ 1,157 Research and development 2,200 2,687 $ 1,157 Research and development 2,200 2,687 3,354 Sales and marketing 1,157 Research and development 2,200 2,687 3,354 Sales and marketing 715 Research and development 2,200 2,687 3,354 Sales and marketing 715 899 2,687 3,354 Sales and marketing 715 899 1,078 General and administrative 3,354 Sales and marketing 715 899 1,078 General and administrative 725 Sales and marketing 715 899 1,078 General and administrative 725 861 899 1,078 General and administrative 725 861 1,282 Discontinued operation 104 1,078 General and administrative 725 861 1,282 Discontinued operation 104 0 General and administrative 725 861 1,282 Discontinued operation 104 0 0 725 861 1,282 Discontinued operation 104 0 0 Total stock-based compensation 861 1,282 Discontinued operation 104 0 0 Total stock-based compensation expense 1,282 Discontinued operation 104 0 0 Total stock-based compensation expense $ Total stock-based compensation expense $ 4,279 $ 5,253 $ 6,871 For compensation expense $ 4,279 $ 5,253 $ 6,871 For the year $ 4,279 $ 5,253 $ 6,871 For the year ended December For the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , we 2014 , 2015 , and 2016 , we recognized tax benefit from continuing operation of $ 867 million , $ 1,133 million $ 867 million , $ 1,133 million , and $ 1,465 1,133 million , and $ 1,465 million , respectively , and from discontinued operation of $ 30 million , $ 0 million $ 30 million , $ 0 million and $ 0 million $ 0 million and $ 0 million , respectively . In a tax benefit of $ 522 million and $ 690 million $ 522 million and $ 690 million related to 2015 and $ 690 million related to 2015 and 2016 stock-based compensation expense million related to 2015 and 2016 stock-based compensation expense , respectively sustained . Refer to Note 14 for more detail regarding the during the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , wa 2014 , 2015 , and 2016 , wa $ 1,356 million and 2016 , wa $ 1,356 million , $ 1,544 million $ 1,356 million , $ 1,544 million , and $ 2,137 1,544 million , and $ 2,137 million , respectively . These in the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , $ 2014 , 2015 , and 2016 , $ 0 million , , and 2016 , $ 0 million , $ 50 million $ 0 million , $ 50 million , and $ 168 50 million , and $ 168 million , respectively , wa Balance Sheets . Beginning January 1 , 2016 , we account . Beginning January 1 , 2016 , we account for forfeiture wa recognized a a $ 133 million reduction to retained earnings retained earnings a of January 1 , 2016 . Stock-Based Award a of January 1 , 2016 . Stock-Based Award Activities The for the year ended December 31 , 2016 : Unvested Restricted year ended December 31 , 2016 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2015 25,741,186 $ 531.74 a of December 31 , 2015 25,741,186 $ 531.74 Granted 13,502,900 of December 31 , 2015 25,741,186 $ 531.74 Granted 13,502,900 $ 31 , 2015 25,741,186 $ 531.74 Granted 13,502,900 $ 713.89 Vested 2015 25,741,186 $ 531.74 Granted 13,502,900 $ 713.89 Vested ( 12,002,071 $ 531.74 Granted 13,502,900 $ 713.89 Vested ( 12,002,071 ) $ 13,502,900 $ 713.89 Vested ( 12,002,071 ) $ 532.87 Forfeited/canceled ( Vested ( 12,002,071 ) $ 532.87 Forfeited/canceled ( 1,893,060 ) $ ) $ 532.87 Forfeited/canceled ( 1,893,060 ) $ 562.03 Unvested a Forfeited/canceled ( 1,893,060 ) $ 562.03 Unvested a of December 31 562.03 Unvested a of December 31 , 2016 25,348,955 $ 624.92 a of December 31 , 2016 25,348,955 $ 624.92 The weighted-average of December 31 , 2016 25,348,955 $ 624.92 The weighted-average grant-date 31 , 2016 25,348,955 $ 624.92 The weighted-average grant-date fair value during the year ended December 31 , 2014 and 2015 , year ended December 31 , 2014 and 2015 , wa $ December 31 , 2014 and 2015 , wa $ 573.71 and and 2015 , wa $ 573.71 and $ 546.46 , respectively wa $ 573.71 and $ 546.46 , respectively . Total fair during the year ended December 31 , 2014 , 2015 and year ended December 31 , 2014 , 2015 and 2016 wa December 31 , 2014 , 2015 and 2016 wa $ 6.0 , 2014 , 2015 and 2016 wa $ 6.0 billion , 2015 and 2016 wa $ 6.0 billion , $ 6.9 billion $ 6.0 billion , $ 6.9 billion , and $ 9.0 6.9 billion , and $ 9.0 billion , respectively . As respectively . As of December 31 , 2016 , there wa As of December 31 , 2016 , there wa $ 14.6 2016 , there wa $ 14.6 billion of unrecognized compensation cost over a weighted-average period of 2.7 year . As of December year . As of December 31 , 2016 , we had As of December 31 , 2016 , we had 3.3 million , 2016 , we had 3.3 million stock option outstanding and and exercisable , and $ 2 million of unrecognized compensation cost During the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , 75 Table December 31 , 2014 , 2015 , 75 Table of Contents , 2014 , 2015 , 75 Table of Contents Alphabet Inc. of Contents Alphabet Inc. and 2016 , the amount of cash of stock option wa $ 465 million , $ 393 million $ 465 million , $ 393 million , and $ 298 393 million , and $ 298 million , respectively . Share . Share Repurchases In October 2015 , the board of director to repurchase up to $ 5,099,019,513.59 of it Class C capital in the fourth quarter of 2015 . In January 2016 , of 2015 . In January 2016 , the board of director an additional amount of approximately 514 thousand share . The repurchase including through the use of 10b5-1 plan . During 2016 , of 10b5-1 plan . During 2016 , we repurchased and subsequently repurchased and subsequently retired approximately 5.2 million share of Alphabet Class aggregate amount of approximately $ 3.7 billion . We completed all repurchase program a of June 30 , 2016 . In October a of June 30 , 2016 . In October 2016 , , 2016 . In October 2016 , the board of director to repurchase up to $ 7,019,340,976.83 of it Class C capital transaction , including through Rule 10b5-1 plan . No share were No share were repurchased in 2016 under this program . Note under this program . Note 13 . 401 ( k ) program . Note 13 . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans k ) Savings Plans ( 401 ( k ) Plans ) deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 259 million , $ 309 million $ 259 million , $ 309 million , and $ 385 309 million , and $ 385 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . Note 2014 , 2015 , and 2016 . Note 14 . Income , and 2016 . Note 14 . Income Taxes Income from from domestic operation of $ 8,894 million , $ 8,271 million $ 8,894 million , $ 8,271 million , and $ 12,020 8,271 million , and $ 12,020 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , and 2014 , 2015 , and 2016 , and income from foreign from foreign operation of $ 8,365 million , $ 11,380 million $ 8,365 million , $ 11,380 million , and $ 12,130 11,380 million , and $ 12,130 million for the year ended for the year ended December 31 , 2014 , 2015 , year ended December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 . The 2014 , 2015 , and 2016 . The provision for income ) : Year Ended December 31 , 2014 2015 2016 Current Year Ended December 31 , 2014 2015 2016 Current : Federal Ended December 31 , 2014 2015 2016 Current : Federal $ December 31 , 2014 2015 2016 Current : Federal $ 2,716 2016 Current : Federal $ 2,716 $ 3,235 $ 3,520 State : Federal $ 2,716 $ 3,235 $ 3,520 State 157 ( $ 2,716 $ 3,235 $ 3,520 State 157 ( 397 ) $ 3,235 $ 3,520 State 157 ( 397 ) 306 Foreign $ 3,520 State 157 ( 397 ) 306 Foreign 774 723 State 157 ( 397 ) 306 Foreign 774 723 966 Total ( 397 ) 306 Foreign 774 723 966 Total 3,647 3,561 397 ) 306 Foreign 774 723 966 Total 3,647 3,561 4,792 ) 306 Foreign 774 723 966 Total 3,647 3,561 4,792 Deferred Foreign 774 723 966 Total 3,647 3,561 4,792 Deferred : Federal 774 723 966 Total 3,647 3,561 4,792 Deferred : Federal 29 723 966 Total 3,647 3,561 4,792 Deferred : Federal 29 ( 3,561 4,792 Deferred : Federal 29 ( 198 ) ( 70 Deferred : Federal 29 ( 198 ) ( 70 ) State 29 ( 198 ) ( 70 ) State 6 ( 43 ) ( 70 ) State 6 ( 43 ) 0 Foreign 70 ) State 6 ( 43 ) 0 Foreign ( 43 State 6 ( 43 ) 0 Foreign ( 43 ) ( 43 ) 0 Foreign ( 43 ) ( 17 ) ( Foreign ( 43 ) ( 17 ) ( 50 ) Total ) ( 17 ) ( 50 ) Total ( 8 ) ( 50 ) Total ( 8 ) ( 258 ) ( Total ( 8 ) ( 258 ) ( 120 ) Provision ) ( 258 ) ( 120 ) Provision for income tax Provision for income tax $ 3,639 $ 3,303 $ 4,672 76 income tax $ 3,639 $ 3,303 $ 4,672 76 Table of $ 3,639 $ 3,303 $ 4,672 76 Table of Contents Alphabet 3,639 $ 3,303 $ 4,672 76 Table of Contents Alphabet Inc follows : Year Ended December 31 , 2014 2015 2016 U.S. Year Ended December 31 , 2014 2015 2016 U.S. federal statutory Ended December 31 , 2014 2015 2016 U.S. federal statutory tax December 31 , 2014 2015 2016 U.S. federal statutory tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 35.0 % statutory tax rate 35.0 % 35.0 % 35.0 % Foreign rate rate 35.0 % 35.0 % 35.0 % Foreign rate differential ( % Foreign rate differential ( 12.2 ) % ( 13.4 ) ( 12.2 ) % ( 13.4 ) % ( 11.0 ) ( 13.4 ) % ( 11.0 ) % Federal research credit % Federal research credit ( 1.8 ) % ( 2.1 ) ( 1.8 ) % ( 2.1 ) % ( 2.0 ) ( 2.1 ) % ( 2.0 ) % Stock-based compensation expense ) % Stock-based compensation expense 0.1 % 0.3 % ( 3.4 Stock-based compensation expense 0.1 % 0.3 % ( 3.4 ) % 0.1 % 0.3 % ( 3.4 ) % Other adjustment 0.0 3.4 ) % Other adjustment 0.0 % ( 3.0 ) % Other adjustment 0.0 % ( 3.0 ) % 0.7 % Effective % ( 3.0 ) % 0.7 % Effective tax rate 21.1 0.7 % Effective tax rate 21.1 % 16.8 % 19.3 % Effective tax rate 21.1 % 16.8 % 19.3 % We adopted rate 21.1 % 16.8 % 19.3 % We adopted ASU 2016-09 19.3 % We adopted ASU 2016-09 on January 1 , 2016 adopted ASU 2016-09 on January 1 , 2016 , which requires 2016-09 on January 1 , 2016 , which requires the excess excess tax benefit recognized in 2016 wa $ 1.0 billion . recognized in 2016 wa $ 1.0 billion . Our effective tax subsidiary . As of December 31 , 2016 , we have As of December 31 , 2016 , we have not recognized a cumulative total of $ 60.7 billion of undistributed earnings and not practicable . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The IRS decision on December 28 , 2015 . The IRS served a Notice of Appeal on February 22 , 2016 . At this Appeal on February 22 , 2016 . At this time , record a tax benefit in 2016 related to reimbursement of cost our consolidated financial statement . 77 Table of Contents Alphabet Inc ) : As of December 31 , 2015 2016 Deferred tax As of December 31 , 2015 2016 Deferred tax asset : of December 31 , 2015 2016 Deferred tax asset : Stock-based : Stock-based compensation expense $ 534 $ 574 Accrued employee benefit compensation expense $ 534 $ 574 Accrued employee benefit 832 939 $ 574 Accrued employee benefit 832 939 Accruals and reserve not 574 Accrued employee benefit 832 939 Accruals and reserve not currently and reserve not currently deductible 245 500 Tax credit 503 631 reserve not currently deductible 245 500 Tax credit 503 631 Basis deductible 245 500 Tax credit 503 631 Basis difference in investment 245 500 Tax credit 503 631 Basis difference in investment of difference in investment of Arris 1,357 1,327 Prepaid cost sharing 3,468 in investment of Arris 1,357 1,327 Prepaid cost sharing 3,468 4,409 1,357 1,327 Prepaid cost sharing 3,468 4,409 Other 931 926 Total 1,327 Prepaid cost sharing 3,468 4,409 Other 931 926 Total deferred cost sharing 3,468 4,409 Other 931 926 Total deferred tax asset sharing 3,468 4,409 Other 931 926 Total deferred tax asset 7,870 926 Total deferred tax asset 7,870 9,306 Valuation allowance ( 1,732 Total deferred tax asset 7,870 9,306 Valuation allowance ( 1,732 ) 7,870 9,306 Valuation allowance ( 1,732 ) ( 2,076 ) Total allowance ( 1,732 ) ( 2,076 ) Total deferred tax asset asset net of valuation allowance 6,138 7,230 Deferred tax liability : net of valuation allowance 6,138 7,230 Deferred tax liability : Depreciation : Depreciation and amortization ( 1,126 ) ( 877 ) Identified amortization ( 1,126 ) ( 877 ) Identified intangible ( 787 877 ) Identified intangible ( 787 ) ( 844 ) Renewable intangible ( 787 ) ( 844 ) Renewable energy investment ( ) Renewable energy investment ( 529 ) ( 788 ) Foreign investment ( 529 ) ( 788 ) Foreign earnings ( 3,468 788 ) Foreign earnings ( 3,468 ) ( 4,409 ) Other earnings ( 3,468 ) ( 4,409 ) Other ( 166 ) ( 4,409 ) Other ( 166 ) ( 155 ) Total Other ( 166 ) ( 155 ) Total deferred tax liability Total deferred tax liability ( 6,076 ) ( 7,073 ) Net liability ( 6,076 ) ( 7,073 ) Net deferred tax asset Net deferred tax asset $ 62 $ 157 As of December tax asset $ 62 $ 157 As of December 31 , $ 157 As of December 31 , 2016 , our federal As of December 31 , 2016 , our federal and state tax purpose were approximately $ 592 million and $ 681 million $ 592 million and $ 681 million . If not utilized will begin to expire in 2021 and the state net operating will begin to expire in 2017 . It is more likely income tax purpose were $ 304 million that will begin to will begin to expire in 2022 . As of December 31 2022 . As of December 31 , 2016 , our California As of December 31 , 2016 , our California research and tax purpose were approximately $ 1,515 million that can be carried tax purpose were approximately $ 166 million that will start to will start to expire in 2025 . We believe it is realized . As of December 31 , 2016 , we maintained As of December 31 , 2016 , we maintained a valuation Home business to Arris in 2013 . Since any future loss capital gain generated a of 2016 . We reassess the valuation deferred tax asset of $ 4.4 billion and a deferred tax deferred tax liability of $ 4.4 billion . Refer to above on the Altera case . 78 Table of Contents Alphabet Inc unrecognized tax benefit from January 1 , 2014 to December 31 benefit from January 1 , 2014 to December 31 , 2016 1 , 2014 to December 31 , 2016 ( in million 2014 to December 31 , 2016 ( in million ) : ( in million ) : 2014 2015 2016 Beginning gross unrecognized in million ) : 2014 2015 2016 Beginning gross unrecognized tax million ) : 2014 2015 2016 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 2,502 $ 3,294 $ 4,167 Increases tax benefit $ 2,502 $ 3,294 $ 4,167 Increases related to $ 2,502 $ 3,294 $ 4,167 Increases related to prior year to prior year tax position 66 224 899 Decreases related to prior year tax position 66 224 899 Decreases related to prior year tax position 66 224 899 Decreases related to prior year prior year tax position ( 44 ) ( 176 ) ( position ( 44 ) ( 176 ) ( 157 ) Decreases ) ( 176 ) ( 157 ) Decreases related to settlement settlement with tax authority ( 1 ) ( 27 ) ( authority ( 1 ) ( 27 ) ( 196 ) Increases ) ( 27 ) ( 196 ) Increases related to current to current year tax position 771 852 680 Ending gross unrecognized current year tax position 771 852 680 Ending gross unrecognized tax year tax position 771 852 680 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 3,294 $ 4,167 $ 5,393 The tax benefit $ 3,294 $ 4,167 $ 5,393 The total amount $ 3,294 $ 4,167 $ 5,393 The total amount of gross unrecognized tax benefit wa $ 3,294 million , $ 4,167 million $ 3,294 million , $ 4,167 million , and $ 5,393 4,167 million , and $ 5,393 million a of December 31 5,393 million a of December 31 , 2014 , 2015 , a of December 31 , 2014 , 2015 , and 2016 December 31 , 2014 , 2015 , and 2016 , respectively 2014 , 2015 , and 2016 , respectively , of which , of which , $ 2,909 million , $ 3,614 million $ 2,909 million , $ 3,614 million , and $ 4,258 3,614 million , and $ 4,258 million if recognized , would rate . As of December 31 , 2015 and 2016 , As of December 31 , 2015 and 2016 , we had December 31 , 2015 and 2016 , we had accrued $ , we had accrued $ 348 million and $ 493 million $ 348 million and $ 493 million in interest and penalty completed it examination through our 2006 tax year ; all issue IRS is currently examining our 2007 through 2012 tax return . currently examining our 2007 through 2012 tax return . We have claim a presented . Our 2013 , 2014 , 2015 , presented . Our 2013 , 2014 , 2015 , and 2016 Our 2013 , 2014 , 2015 , and 2016 tax year 2014 , 2015 , and 2016 tax year remain subject to tax purpose , and our 2011 through 2015 tax year remain , and our 2011 through 2015 tax year remain subject to be concluded within the next 12 month , which could significantly tax benefit a of December 31 , 2016 could possibly decrease a of December 31 , 2016 could possibly decrease by approximately possibly decrease by approximately $ 200 million to $ 700 million $ 200 million to $ 700 million in the next 12 700 million in the next 12 month . Positions that may and non-U.S. matter . Note 15 . Information about Segments and D service through Verily . 79 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Revenues Year Ended December 31 , 2014 2015 2016 Revenues : Google Ended December 31 , 2014 2015 2016 Revenues : Google $ December 31 , 2014 2015 2016 Revenues : Google $ 65,674 2016 Revenues : Google $ 65,674 $ 74,544 $ 89,463 Other : Google $ 65,674 $ 74,544 $ 89,463 Other Bets 327 $ 65,674 $ 74,544 $ 89,463 Other Bets 327 445 809 74,544 $ 89,463 Other Bets 327 445 809 Total revenue $ $ 89,463 Other Bets 327 445 809 Total revenue $ 66,001 89,463 Other Bets 327 445 809 Total revenue $ 66,001 $ 445 809 Total revenue $ 66,001 $ 74,989 $ 90,272 Year Total revenue $ 66,001 $ 74,989 $ 90,272 Year Ended December $ 66,001 $ 74,989 $ 90,272 Year Ended December 31 , $ 90,272 Year Ended December 31 , 2014 2015 2016 Operating Year Ended December 31 , 2014 2015 2016 Operating income ( Ended December 31 , 2014 2015 2016 Operating income ( loss December 31 , 2014 2015 2016 Operating income ( loss ) loss ) : Google $ 18,965 $ 23,319 $ 27,892 Other : Google $ 18,965 $ 23,319 $ 27,892 Other Bets ( $ 18,965 $ 23,319 $ 27,892 Other Bets ( 1,893 ) $ 27,892 Other Bets ( 1,893 ) ( 3,456 ) ( Bets ( 1,893 ) ( 3,456 ) ( 3,578 ) Reconciling ) ( 3,456 ) ( 3,578 ) Reconciling item ( 1 3,578 ) Reconciling item ( 1 ) ( 576 ) ( item ( 1 ) ( 576 ) ( 503 ) ( ) ( 576 ) ( 503 ) ( 598 ) Total ) ( 503 ) ( 598 ) Total income from operation Total income from operation $ 16,496 $ 19,360 $ 23,716 ( from operation $ 16,496 $ 19,360 $ 23,716 ( 1 ) $ 16,496 $ 19,360 $ 23,716 ( 1 ) Reconciling item $ 19,360 $ 23,716 ( 1 ) Reconciling item are primarily segment . Year Ended December 31 , 2014 2015 2016 Capital Year Ended December 31 , 2014 2015 2016 Capital expenditure : Ended December 31 , 2014 2015 2016 Capital expenditure : Google December 31 , 2014 2015 2016 Capital expenditure : Google $ Capital expenditure : Google $ 11,178 $ 8,868 $ 9,417 Other : Google $ 11,178 $ 8,868 $ 9,417 Other Bets 496 $ 11,178 $ 8,868 $ 9,417 Other Bets 496 850 1,385 8,868 $ 9,417 Other Bets 496 850 1,385 Reconciling item ( $ 9,417 Other Bets 496 850 1,385 Reconciling item ( 2 9,417 Other Bets 496 850 1,385 Reconciling item ( 2 ) 850 1,385 Reconciling item ( 2 ) ( 660 ) 232 item ( 2 ) ( 660 ) 232 ( 590 ) 2 ) ( 660 ) 232 ( 590 ) Total capital ( 660 ) 232 ( 590 ) Total capital expenditure a Statements of Cash Flows $ 11,014 $ 9,950 $ 10,212 ( Cash Flows $ 11,014 $ 9,950 $ 10,212 ( 2 ) $ 11,014 $ 9,950 $ 10,212 ( 2 ) Reconciling item $ 9,950 $ 10,212 ( 2 ) Reconciling item are related For the year ended December 31 , 2014 , reconciling item year ended December 31 , 2014 , reconciling item included capital expenditure of Motorola Mobile . 80 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2014 2015 2016 Stock-based Year Ended December 31 , 2014 2015 2016 Stock-based compensation : Ended December 31 , 2014 2015 2016 Stock-based compensation : Google December 31 , 2014 2015 2016 Stock-based compensation : Google $ Stock-based compensation : Google $ 3,686 $ 4,610 $ 5,926 Other : Google $ 3,686 $ 4,610 $ 5,926 Other Bets 338 $ 3,686 $ 4,610 $ 5,926 Other Bets 338 475 647 4,610 $ 5,926 Other Bets 338 475 647 Reconciling item ( $ 5,926 Other Bets 338 475 647 Reconciling item ( 3 5,926 Other Bets 338 475 647 Reconciling item ( 3 ) 475 647 Reconciling item ( 3 ) 151 118 130 Total Reconciling item ( 3 ) 151 118 130 Total stock-based compensation item ( 3 ) 151 118 130 Total stock-based compensation ( ( 3 ) 151 118 130 Total stock-based compensation ( 4 130 Total stock-based compensation ( 4 ) $ 4,175 $ 5,203 compensation ( 4 ) $ 4,175 $ 5,203 $ 6,703 Depreciation 4 ) $ 4,175 $ 5,203 $ 6,703 Depreciation , amortization $ 4,175 $ 5,203 $ 6,703 Depreciation , amortization , and and impairment : Google $ 4,779 $ 4,839 $ 5,800 Other : Google $ 4,779 $ 4,839 $ 5,800 Other Bets 147 $ 4,779 $ 4,839 $ 5,800 Other Bets 147 203 340 4,839 $ 5,800 Other Bets 147 203 340 Reconciling item ( $ 5,800 Other Bets 147 203 340 Reconciling item ( 5 5,800 Other Bets 147 203 340 Reconciling item ( 5 ) 203 340 Reconciling item ( 5 ) 53 21 4 Total Reconciling item ( 5 ) 53 21 4 Total depreciation , item ( 5 ) 53 21 4 Total depreciation , amortization ( 5 ) 53 21 4 Total depreciation , amortization , Statements of Cash Flows $ 4,979 $ 5,063 $ 6,144 ( Cash Flows $ 4,979 $ 5,063 $ 6,144 ( 3 ) $ 4,979 $ 5,063 $ 6,144 ( 3 ) Reconciling item $ 5,063 $ 6,144 ( 3 ) Reconciling item represent corporate to individual segment . ( 4 ) For purpose of segment for under FASB ASC Topic 718 that we expect to settle For the year ended December 31 , 2014 , amount exclude year ended December 31 , 2014 , amount exclude SBC from from discontinued operation . ( 5 ) Reconciling item are primarily For the year ended December 31 , 2014 , reconciling item year ended December 31 , 2014 , reconciling item primarily represent ) : Year Ended December 31 , 2014 2015 2016 Revenues Year Ended December 31 , 2014 2015 2016 Revenues : United Ended December 31 , 2014 2015 2016 Revenues : United States December 31 , 2014 2015 2016 Revenues : United States $ Revenues : United States $ 29,482 $ 34,810 $ 42,781 United United States $ 29,482 $ 34,810 $ 42,781 United Kingdom 6,483 $ 29,482 $ 34,810 $ 42,781 United Kingdom 6,483 7,067 7,787 34,810 $ 42,781 United Kingdom 6,483 7,067 7,787 Rest of the $ 42,781 United Kingdom 6,483 7,067 7,787 Rest of the world 42,781 United Kingdom 6,483 7,067 7,787 Rest of the world 30,036 7,787 Rest of the world 30,036 33,112 39,704 Total revenue $ Rest of the world 30,036 33,112 39,704 Total revenue $ 66,001 of the world 30,036 33,112 39,704 Total revenue $ 66,001 $ 33,112 39,704 Total revenue $ 66,001 $ 74,989 $ 90,272 As Total revenue $ 66,001 $ 74,989 $ 90,272 As of December $ 66,001 $ 74,989 $ 90,272 As of December 31 , $ 90,272 As of December 31 , 2015 As of December As of December 31 , 2015 As of December 31 , , 2015 As of December 31 , 2016 Long-lived asset : As of December 31 , 2016 Long-lived asset : United States asset : United States $ 43,686 $ 47,383 International 13,661 14,706 United States $ 43,686 $ 47,383 International 13,661 14,706 Total long-lived $ 43,686 $ 47,383 International 13,661 14,706 Total long-lived asset $ 43,686 $ 47,383 International 13,661 14,706 Total long-lived asset $ 57,347 14,706 Total long-lived asset $ 57,347 $ 62,089 Note 16 . long-lived asset $ 57,347 $ 62,089 Note 16 . Subsequent Event $ 57,347 $ 62,089 Note 16 . Subsequent Event In January . Subsequent Event In January 2017 , Temasek , a Singapore-based for an aggregate of $ 800 million in cash . We of the investment in February 2017 and anticipate closing the second in the second half of 2017 . The transaction will be gain or loss recognized . 81 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2016 , our disclosure a of December 31 , 2016 , our disclosure control and during the quarter ended December 31 , 2016 that have materially quarter ended December 31 , 2016 that have materially affected , , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2016 . Management reviewed a of December 31 , 2016 . Management reviewed the result financial reporting a of December 31 , 2016 ha been audited a of December 31 , 2016 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 82 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2017 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2016 ( 2017 Proxy year ended December 31 , 2016 ( 2017 Proxy Statement ) December 31 , 2016 ( 2017 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be under the caption “ Section 16 ( a ) Beneficial Ownership Reporting Compliance ” in the 2017 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2017 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Compensation Plan Information ” in 2017 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2017 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2017 Proxy Statement and is incorporated incorporated herein by reference . 83 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 40 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 42 Consolidated Statements of Income 43 42 Consolidated Statements of Income 43 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 44 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 45 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 47 2 . Financial Statement Schedules to Consolidated Financial Statements 47 2 . Financial Statement Schedules Schedule the three year ended December 31 , 2016 ( in million year ended December 31 , 2016 ( in million ) : million ) Year ended December 31 , 2014 $ 631 $ Year ended December 31 , 2014 $ 631 $ 1,240 $ December 31 , 2014 $ 631 $ 1,240 $ ( 1,646 , 2014 $ 631 $ 1,240 $ ( 1,646 ) $ 631 $ 1,240 $ ( 1,646 ) $ 225 Year ended $ ( 1,646 ) $ 225 Year ended December 31 , $ 225 Year ended December 31 , 2015 $ 225 $ Year ended December 31 , 2015 $ 225 $ 579 $ December 31 , 2015 $ 225 $ 579 $ ( 508 , 2015 $ 225 $ 579 $ ( 508 ) $ 225 $ 579 $ ( 508 ) $ 296 Year ended $ ( 508 ) $ 296 Year ended December 31 , $ 296 Year ended December 31 , 2016 $ 296 $ Year ended December 31 , 2016 $ 296 $ 942 $ December 31 , 2016 $ 296 $ 942 $ ( 771 , 2016 $ 296 $ 942 $ ( 771 ) $ 296 $ 942 $ ( 771 ) $ 467 Note : $ ( 771 ) $ 467 Note : Additions to the For the year ended December 31 , 2014 , addition included year ended December 31 , 2014 , addition included the impact information is otherwise included . 3 . Exhibits See the Exhibit this Annual Report on Form 10-K. 84 Table of Contents Alphabet Annual Report on Form 10-K. 84 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 2 , 2017 ALPHABET INC. By Date : February 2 , 2017 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by Principal Executive Officer ) February 2 , 2017 Larry Page / Officer ) February 2 , 2017 Larry Page / S / Principal Financial Officer ) February 2 , 2017 Ruth M. Porat Officer ) February 2 , 2017 Ruth M. Porat / S Principal Accounting Officer ) February 2 , 2017 James G. Campbell Officer ) February 2 , 2017 James G. Campbell / S the Board of Directors February 2 , 2017 Eric E. Schmidt of Directors February 2 , 2017 Eric E. Schmidt / S Co-Founder , and Director February 2 , 2017 Sergey Brin / and Director February 2 , 2017 Sergey Brin / S / OHN D OERR Director February 2 , 2017 L. John Doerr OERR Director February 2 , 2017 L. John Doerr / S ERGUSON , JR. Director February 2 , 2017 Roger W. Ferguson JR. Director February 2 , 2017 Roger W. Ferguson , Jr. B. G REENE Director February 2 , 2017 Diane B. Greene REENE Director February 2 , 2017 Diane B. Greene / S L. H ENNESSY Director February 2 , 2017 John L. Hennessy ENNESSY Director February 2 , 2017 John L. Hennessy / S NN M ATHER Director February 2 , 2017 Ann Mather / ATHER Director February 2 , 2017 Ann Mather / S / . M ULALLY Director February 2 , 2017 Alan R. Mulally ULALLY Director February 2 , 2017 Alan R. Mulally / S S. O TELLINI Director February 2 , 2017 Paul S. Otellini TELLINI Director February 2 , 2017 Paul S. Otellini / S AM S HRIRAM Director February 2 , 2017 K. Ram Shriram HRIRAM Director February 2 , 2017 K. Ram Shriram / S M. T ILGHMAN Director February 2 , 2017 Shirley M. Tilghman ILGHMAN Director February 2 , 2017 Shirley M. Tilghman Table of by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.01 Specimen Class 001-37580 ) October 2 , 2015 4.01 Specimen Class A Common ) October 2 , 2015 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.05 Transfer Restriction 001-37580 ) October 2 , 2015 4.05 Transfer Restriction Agreement , ) October 2 , 2015 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Transfer Restriction 001-37580 ) October 2 , 2015 4.06 Transfer Restriction Agreement , ) October 2 , 2015 4.06 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.07 Class C 001-37580 ) October 2 , 2015 4.07 Class C Undertaking , ) October 2 , 2015 4.07 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Indenture , 001-37580 ) October 2 , 2015 4.08 Indenture , dated February ) October 2 , 2015 4.08 Indenture , dated February 12 4.08 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.09 Registrant Registration 333-209510 ) February 12 , 2016 4.09 Registrant Registration Rights Agreement ) February 12 , 2016 4.09 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.10 First Supplemental 333-209518 ) February 12 , 2016 4.10 First Supplemental Indenture , ) February 12 , 2016 4.10 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.11 Form of 001-37580 ) April 27 , 2016 4.11 Form of the Registrant ) April 27 , 2016 4.11 Form of the Registrant ’ of the Registrant ’ s 3.625 % Notes due 2021 ( s 3.625 % Notes due 2021 ( included in Exhibit 4.10 2021 ( included in Exhibit 4.10 ) 4.12 Form of the included in Exhibit 4.10 ) 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.10 2024 ( included in Exhibit 4.10 ) 4.13 Form of the included in Exhibit 4.10 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 10.01 Form of 001-37580 ) August 9 , 2016 10.01 Form of Indemnification Agreement ) August 9 , 2016 10.01 Form of Indemnification Agreement entered officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Letter 001-37580 ) October 2 , 2015 10.02 u Letter Agreement , ) October 2 , 2015 10.02 u Letter Agreement , dated Letter Agreement , dated June 22 , 2016 , between Roger , dated June 22 , 2016 , between Roger W. Ferguson Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 29 , 2016 No . 001-37580 ) June 29 , 2016 10.03 u Offer 001-37580 ) June 29 , 2016 10.03 u Offer Letter , ) June 29 , 2016 10.03 u Offer Letter , dated Offer Letter , dated March 20 , 2015 , between Ruth , dated March 20 , 2015 , between Ruth Porat and by the Registrant on October 2 , 2015 Current Report on Registrant on October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-36380 8-K ( File No . 001-36380 ) March 26 , 2015 No . 001-36380 ) March 26 , 2015 Table of Contents 001-36380 ) March 26 , 2015 Table of Contents Alphabet Inc. by reference herein Form Date 10.04 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Director 001-37580 ) October 2 , 2015 10.05 u Director Arrangements Agreement ) October 2 , 2015 10.05 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.06 u Alphabet 001-37580 ) October 2 , 2015 10.06 u Alphabet Inc . ) October 2 , 2015 10.06 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.07 u Google 001-37580 ) October 2 , 2015 10.07 u Google Inc. 2004 ) October 2 , 2015 10.07 u Google Inc. 2004 Stock 2015 10.07 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.07.1 u Google 000-50726 ) June 7 , 2011 10.07.1 u Google Inc. 2004 ) June 7 , 2011 10.07.1 u Google Inc. 2004 Stock 2011 10.07.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.07.2 u Google 000-50726 ) March 30 , 2005 10.07.2 u Google Inc. 2004 ) March 30 , 2005 10.07.2 u Google Inc. 2004 Stock 2005 10.07.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.07.3 u Google 000-50726 ) March 30 , 2005 10.07.3 u Google Inc. 2004 ) March 30 , 2005 10.07.3 u Google Inc. 2004 Stock 2005 10.07.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.08 u Alphabet 333-142243 ) April 20 , 2007 10.08 u Alphabet Inc. 2012 ) April 20 , 2007 10.08 u Alphabet Inc. 2012 Stock 2007 10.08 u Alphabet Inc. 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 10 , 2016 No . 001-37580 ) June 10 , 2016 10.08.1 u Amendment 001-37580 ) June 10 , 2016 10.08.1 u Amendment to the ) June 10 , 2016 10.08.1 u Amendment to the Alphabet Amendment to the Alphabet Inc. 2012 Stock Plan Quarterly Report on Plan Quarterly Report on Form 10-Q ( File No . 001-37580 10-Q ( File No . 001-37580 ) November 3 , 2016 No . 001-37580 ) November 3 , 2016 10.08.2 u Alphabet 001-37580 ) November 3 , 2016 10.08.2 u Alphabet Inc. 2012 ) November 3 , 2016 10.08.2 u Alphabet Inc. 2012 Stock 2016 10.08.2 u Alphabet Inc. 2012 Stock Plan - Form of Agreement Quarterly Report on Form 10-Q ( File No . 001-37580 10-Q ( File No . 001-37580 ) November 3 , 2016 No . 001-37580 ) November 3 , 2016 10.09 u Motorola 001-37580 ) November 3 , 2016 10.09 u Motorola Mobility Holdings ) November 3 , 2016 10.09 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 10.10 u AdMob 333-181661 ) May 24 , 2012 10.10 u AdMob , Inc. ) May 24 , 2012 10.10 u AdMob , Inc. 2006 10.10 u AdMob , Inc. 2006 Stock Plan and UK Sub-Plan of the AdMob , Inc. 2006 Stock Plan Registration Statement on filed ( File No . 333-167411 ) June 9 , 2010 No . 333-167411 ) June 9 , 2010 10.11 u Apigee 333-167411 ) June 9 , 2010 10.11 u Apigee Corporation 2015 ) June 9 , 2010 10.11 u Apigee Corporation 2015 Equity 2010 10.11 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.11.1 u Apigee 333-214573 ) November 10 , 2016 10.11.1 u Apigee Corporation 2015 ) November 10 , 2016 10.11.1 u Apigee Corporation 2015 Equity 2016 10.11.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.12 u Apigee 333-214573 ) November 10 , 2016 10.12 u Apigee Corporation 2005 ) November 10 , 2016 10.12 u Apigee Corporation 2005 Stock 2016 10.12 u Apigee Corporation 2005 Stock Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.12.1 u Apigee 333-214573 ) November 10 , 2016 10.12.1 u Apigee Corporation 2005 ) November 10 , 2016 10.12.1 u Apigee Corporation 2005 Stock 2016 10.12.1 u Apigee Corporation 2005 Stock Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 12 * Computation 333-214573 ) November 10 , 2016 12 * Computation of Earnings ) November 10 , 2016 12 * Computation of Earnings to Earnings to Fixed Charge Ratios 14.01 Code of Conduct of the Registrant effective a of October 2 , 2015 Current Report on a of October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 21.01 * Subsidiaries 001-37580 ) October 2 , 2015 21.01 * Subsidiaries of the ) October 2 , 2015 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) Table of Contents Alphabet by reference herein Form Date 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-18-000007/full-submission.txt b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-18-000007/full-submission.txt new file mode 100644 index 0000000..75dd148 --- /dev/null +++ b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-18-000007/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( Mark One ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2017 OR ¨ TRANSITION year ended December 31 , 2017 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive ( Zip Code ) ( 650 ) 253-0000 ( Registrant ’ Code ) ( 650 ) 253-0000 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ý As of June 30 , 2017 , the aggregate As of June 30 , 2017 , the aggregate market value Global Select Market on June 30 , 2017 ) wa approximately Market on June 30 , 2017 ) wa approximately $ 554.3 2017 ) wa approximately $ 554.3 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 31 , Form 10-K. As of January 31 , 2018 , there were As of January 31 , 2018 , there were 298,492,525 share , 2018 , there were 298,492,525 share of the registrant ’ A common stock outstanding , 46,961,288 share of the registrant ’ common stock outstanding , and 349,843,717 share of the registrant ’ s Proxy Statement for the 2018 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2017 . Table of year ended December 31 , 2017 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2017 TABLE OF CONTENTS Year Ended December 31 , 2017 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 1 PART I Item 1. Business Statements 1 PART I Item 1. Business 3 Item 1A . PART I Item 1. Business 3 Item 1A . Risk Factors Item 1. Business 3 Item 1A . Risk Factors 7 Item Item 1A . Risk Factors 7 Item 1B . Unresolved Staff . Risk Factors 7 Item 1B . Unresolved Staff Comments 20 1B . Unresolved Staff Comments 20 Item 2 . Properties 20 Unresolved Staff Comments 20 Item 2 . Properties 20 Item 3 20 Item 2 . Properties 20 Item 3 . Legal Proceedings 2 . Properties 20 Item 3 . Legal Proceedings 20 Item Item 3 . Legal Proceedings 20 Item 4 . Mine Safety . Legal Proceedings 20 Item 4 . Mine Safety Disclosures 20 4 . Mine Safety Disclosures 20 PART II Item 5 . Disclosures 20 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 25 6 . Selected Financial Data 25 Item 7 . Management ’ Selected Financial Data 25 Item 7 . Management ’ s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 43 Item 8 . Financial Statements About Market Risk 43 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 45 Item 9 . Changes in and Supplementary Data 45 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 84 Item 9A . Controls and and Financial Disclosure 84 Item 9A . Controls and Procedures 84 9A . Controls and Procedures 84 Item 9B . Other Information Controls and Procedures 84 Item 9B . Other Information 85 PART Item 9B . Other Information 85 PART III Item 10 . Information 85 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 86 Item 11 . Executive Compensation and Corporate Governance 86 Item 11 . Executive Compensation 86 Item Item 11 . Executive Compensation 86 Item 12 . Security Ownership . Executive Compensation 86 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 86 Item 13 . Certain Relationships Related Stockholder Matters 86 Item 13 . Certain Relationships and Related Transactions , and Director Independence 86 Item 14 . Principal Accountant and Director Independence 86 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 86 PART IV Item 15 . Services 86 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 87 Item 16 . Form 10-K Financial Statement Schedules 87 Item 16 . Form 10-K Summary 90 87 Item 16 . Form 10-K Summary 90 i Table of 16 . Form 10-K Summary 90 i Table of Contents Alphabet This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , Risk Factors `` in Item 1A of this report and those on such forward-looking statement . 1 Table of Contents Alphabet Inc. any of these company . 2 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder For instance , in October 2017 , Project Loon within X internet connectivity to more than 100,000 people in Puerto Rico following s many extraordinary opportunity . 3 Table of Contents Alphabet Inc. Mini and Max , Pixel 2 phone , and Pixelbook laptop their campaign are effective . 4 Table of Contents Alphabet Inc. , and received an $ 800 million investment in 2017 from $ 800 million investment in 2017 from Temasek to accelerate it variety of distribution channel . 5 Table of Contents Alphabet Inc. employee . As of December 31 , 2017 , we had As of December 31 , 2017 , we had 80,110 full-time , 2017 , we had 80,110 full-time employee . Although we our energy consumption . In 2012 , we set a goal set a goal to reach 100 % renewable energy for our for the year , in 2017 , we purchased a total this Annual Report on Form 10-K. For information about segment and , please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K. As part of the Alphabet limited liability company in September 2017 . Available Information Our website Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , and our Proxy Statements 's Public Reference Room at 100 F Street , NE , NE , Washington , D.C. 20549 . You can get information by calling the SEC at 1-800-SEC-0330 . We webcast via our of incorporation , bylaw , 6 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report textual reference only . ITEM 1A . RISK FACTORS Our operation business . We generated over 86 % of total revenue from total revenue from advertising in 2017 . Many of our advertiser revenue and advertising business . 7 Table of Contents Alphabet Inc. a a holding company in 2015 and the investment that we through paid access point . 8 Table of Contents Alphabet Inc. European Union in May of 2018 , which creates a range the European Union on May 13 , 2014 on the ‘ Union on May 13 , 2014 on the ‘ right to decision against Google in June 2017 , and others could treat collect information from minor . 9 Table of Contents Alphabet Inc. may be perceived a not 10 Table of Contents Alphabet Inc. ( EU ) on May 25 , 2018 , will apply ) on May 25 , 2018 , will apply to all possible fine of up to 4 % of global annual turnover the European Commission in July 2016 and the Swiss Government in the Swiss Government in January 2017 approved the EU-U.S. and the adverse to our business . 11 Table of Contents Alphabet Inc. result of operation . We 12 Table of Contents Alphabet Inc. ’ s everyday life . 13 Table of Contents Alphabet Inc. hurt our reputation for delivering 14 Table of Contents Alphabet Inc. International revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2017 . In certain international market and result of operation . 15 Table of Contents Alphabet Inc. impact our future success . 16 Table of Contents Alphabet Inc. which wa enacted on December 22 , 2017 . The Tax enacted on December 22 , 2017 . The Tax Act introduces for the year ended December 31 , 2017 . The U.S. year ended December 31 , 2017 . The U.S. Treasury Department or otherwise administered that is 17 Table of Contents Alphabet Inc. For example , from January 1 , 2017 through December 31 , from January 1 , 2017 through December 31 , 2017 1 , 2017 through December 31 , 2017 , the closing 2017 through December 31 , 2017 , the closing price of common stock ranged from $ 807.77 per share to $ 1,085.09 807.77 per share to $ 1,085.09 per share , and the capital stock ranged from $ 786.14 to $ 1,077.14 per share from $ 786.14 to $ 1,077.14 per share . In addition this Annual Report on Form 10-K , the trading price of cash reserve . In October 2016 , our board of director to repurchase up to $ 7,019,340,976.83 of our Class C capital capital stock . In January 2018 , our board of director up to an additional $ 8,589,869,056 of our Class C capital Class B common stock ha 10 vote per share , our right . As of December 31 , 2017 , Larry , As of December 31 , 2017 , Larry , Sergey , E. Schmidt beneficially owned approximately 92.7 % of our outstanding Class stock , which represented approximately 56.7 % of 18 Table of represented approximately 56.7 % of 18 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it it subsidiary . On October 2 , 2015 , we completed . On October 2 , 2015 , we completed a reorganization circumstance prevent u from taking 19 Table of Contents Alphabet Inc. new holding company . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are our headquarters ) represent approximately 11.1 million square foot of office/building of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 10 “ Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 20 Table of Contents Alphabet Inc. Alphabet Inc. PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public Select Market . Fiscal Year 2017 Quarters Ended : High Low Ended : High Low March 31 , 2017 $ 872.37 $ High Low March 31 , 2017 $ 872.37 $ 807.77 June March 31 , 2017 $ 872.37 $ 807.77 June 30 , , 2017 $ 872.37 $ 807.77 June 30 , 2017 $ $ 872.37 $ 807.77 June 30 , 2017 $ 1,004.28 $ $ 807.77 June 30 , 2017 $ 1,004.28 $ 839.88 September June 30 , 2017 $ 1,004.28 $ 839.88 September 30 , , 2017 $ 1,004.28 $ 839.88 September 30 , 2017 $ $ 1,004.28 $ 839.88 September 30 , 2017 $ 998.31 $ $ 839.88 September 30 , 2017 $ 998.31 $ 919.46 December September 30 , 2017 $ 998.31 $ 919.46 December 31 , , 2017 $ 998.31 $ 919.46 December 31 , 2017 $ $ 998.31 $ 919.46 December 31 , 2017 $ 1,085.09 $ $ 919.46 December 31 , 2017 $ 1,085.09 $ 966.78 Fiscal December 31 , 2017 $ 1,085.09 $ 966.78 Fiscal Year 2016 , 2017 $ 1,085.09 $ 966.78 Fiscal Year 2016 Quarters Ended 1,085.09 $ 966.78 Fiscal Year 2016 Quarters Ended : High Low Ended : High Low March 31 , 2016 $ 780.91 $ High Low March 31 , 2016 $ 780.91 $ 701.02 June March 31 , 2016 $ 780.91 $ 701.02 June 30 , , 2016 $ 780.91 $ 701.02 June 30 , 2016 $ $ 780.91 $ 701.02 June 30 , 2016 $ 787.68 $ $ 701.02 June 30 , 2016 $ 787.68 $ 681.14 September June 30 , 2016 $ 787.68 $ 681.14 September 30 , , 2016 $ 787.68 $ 681.14 September 30 , 2016 $ $ 787.68 $ 681.14 September 30 , 2016 $ 815.95 $ $ 681.14 September 30 , 2016 $ 815.95 $ 704.89 December September 30 , 2016 $ 815.95 $ 704.89 December 31 , , 2016 $ 815.95 $ 704.89 December 31 , 2016 $ $ 815.95 $ 704.89 December 31 , 2016 $ 835.74 $ $ 704.89 December 31 , 2016 $ 835.74 $ 753.22 Our December 31 , 2016 $ 835.74 $ 753.22 Our Class B , 2016 $ 835.74 $ 753.22 Our Class B common stock “ GOOG ” since April 3 , 2014 . The following ” since April 3 , 2014 . The following table set Select Market . Fiscal Year 2017 Quarters Ended : High Low Ended : High Low March 31 , 2017 $ 852.12 $ High Low March 31 , 2017 $ 852.12 $ 786.14 June March 31 , 2017 $ 852.12 $ 786.14 June 30 , , 2017 $ 852.12 $ 786.14 June 30 , 2017 $ $ 852.12 $ 786.14 June 30 , 2017 $ 983.68 $ $ 786.14 June 30 , 2017 $ 983.68 $ 823.35 September June 30 , 2017 $ 983.68 $ 823.35 September 30 , , 2017 $ 983.68 $ 823.35 September 30 , 2017 $ $ 983.68 $ 823.35 September 30 , 2017 $ 980.34 $ $ 823.35 September 30 , 2017 $ 980.34 $ 898.70 December September 30 , 2017 $ 980.34 $ 898.70 December 31 , , 2017 $ 980.34 $ 898.70 December 31 , 2017 $ $ 980.34 $ 898.70 December 31 , 2017 $ 1,077.14 $ $ 898.70 December 31 , 2017 $ 1,077.14 $ 951.68 Fiscal December 31 , 2017 $ 1,077.14 $ 951.68 Fiscal Year 2016 , 2017 $ 1,077.14 $ 951.68 Fiscal Year 2016 Quarters Ended 1,077.14 $ 951.68 Fiscal Year 2016 Quarters Ended : High Low Ended : High Low March 31 , 2016 $ 764.65 $ High Low March 31 , 2016 $ 764.65 $ 678.11 June March 31 , 2016 $ 764.65 $ 678.11 June 30 , , 2016 $ 764.65 $ 678.11 June 30 , 2016 $ $ 764.65 $ 678.11 June 30 , 2016 $ 766.61 $ $ 678.11 June 30 , 2016 $ 766.61 $ 668.26 September June 30 , 2016 $ 766.61 $ 668.26 September 30 , , 2016 $ 766.61 $ 668.26 September 30 , 2016 $ $ 766.61 $ 668.26 September 30 , 2016 $ 787.21 $ $ 668.26 September 30 , 2016 $ 787.21 $ 694.49 December September 30 , 2016 $ 787.21 $ 694.49 December 31 , , 2016 $ 787.21 $ 694.49 December 31 , 2016 $ $ 787.21 $ 694.49 December 31 , 2016 $ 813.11 $ $ 694.49 December 31 , 2016 $ 813.11 $ 736.08 Holders December 31 , 2016 $ 813.11 $ 736.08 Holders of Record , 2016 $ 813.11 $ 736.08 Holders of Record As of of Record As of December 31 , 2017 , there were As of December 31 , 2017 , there were approximately 2,100 2017 , there were approximately 2,100 and 2,101 stockholder of record there were approximately 2,100 and 2,101 stockholder of record of our C capital stock were $ 1,053.40 and $ 1,046.40 per share were $ 1,053.40 and $ 1,046.40 per share , respectively , holder . As of December 31 , 2017 , there were As of December 31 , 2017 , there were approximately 62 2017 , there were approximately 62 stockholder of record of our in the foreseeable future . 21 Table of Contents Alphabet Inc. during the quarter ended December 31 , 2017 : Period Total quarter ended December 31 , 2017 : Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 0 $ 0.00 million ) October 1 - 31 0 $ 0.00 0 $ ) October 1 - 31 0 $ 0.00 0 $ 4,274 1 - 31 0 $ 0.00 0 $ 4,274 November 1 - 31 0 $ 0.00 0 $ 4,274 November 1 - 0 $ 0.00 0 $ 4,274 November 1 - 30 1,231 0.00 0 $ 4,274 November 1 - 30 1,231 $ 1,028.78 $ 4,274 November 1 - 30 1,231 $ 1,028.78 1,231 $ 4,274 November 1 - 30 1,231 $ 1,028.78 1,231 $ 3,008 1 - 30 1,231 $ 1,028.78 1,231 $ 3,008 December 1 - 30 1,231 $ 1,028.78 1,231 $ 3,008 December 1 - 1,231 $ 1,028.78 1,231 $ 3,008 December 1 - 31 806 1,028.78 1,231 $ 3,008 December 1 - 31 806 $ 1,035.28 $ 3,008 December 1 - 31 806 $ 1,035.28 806 $ 3,008 December 1 - 31 806 $ 1,035.28 806 $ 2,173 1 - 31 806 $ 1,035.28 806 $ 2,173 Total 2,037 - 31 806 $ 1,035.28 806 $ 2,173 Total 2,037 $ 806 $ 1,035.28 806 $ 2,173 Total 2,037 $ 1,031.35 2,037 1,035.28 806 $ 2,173 Total 2,037 $ 1,031.35 2,037 ( 1 $ 2,173 Total 2,037 $ 1,031.35 2,037 ( 1 ) In 2,173 Total 2,037 $ 1,031.35 2,037 ( 1 ) In October 2,037 $ 1,031.35 2,037 ( 1 ) In October 2016 , ( 1 ) In October 2016 , the board of director to repurchase up to $ 7.0 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program expiration date . See Note 11 in Part II , Item in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 22 Table of Contents Alphabet Inc. The following graph compare the 5-year cumulative total return to shareholder of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on December 31 , 2012 and it relative index on December 31 , 2012 and it relative performance is performance is tracked through December 31 , 2017 . The return tracked through December 31 , 2017 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2012 in stock or invested on December 31 , 2012 in stock or index , . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a Inc. All right reserved . 23 Table of Contents Alphabet Inc of the S & P 500 index , the RDG Internet . An investment of $ 100 ( with reinvestment of all in each index on April 3 , 2014 and it relative index on April 3 , 2014 and it relative performance is performance is tracked through December 31 , 2017 . The return tracked through December 31 , 2017 . The return shown are , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on April 3 , $ 100 invested on April 3 , 2014 in stock or invested on April 3 , 2014 in stock or index , . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a ” for purpose of Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 , a amended ( the under the Securities Act of 1933 , a amended , or reference in such filing . 24 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are period . Year Ended December 31 , 2013 2014 2015 2016 Year Ended December 31 , 2013 2014 2015 2016 2017 ( Ended December 31 , 2013 2014 2015 2016 2017 ( in December 31 , 2013 2014 2015 2016 2017 ( in million 31 , 2013 2014 2015 2016 2017 ( in million , , 2013 2014 2015 2016 2017 ( in million , except Income Data : Revenues $ 55,519 $ 66,001 $ 74,989 $ : Revenues $ 55,519 $ 66,001 $ 74,989 $ 90,272 $ $ 55,519 $ 66,001 $ 74,989 $ 90,272 $ 110,855 Income $ 66,001 $ 74,989 $ 90,272 $ 110,855 Income from operation $ 74,989 $ 90,272 $ 110,855 Income from operation 15,403 16,496 $ 110,855 Income from operation 15,403 16,496 19,360 23,716 26,146 Net 110,855 Income from operation 15,403 16,496 19,360 23,716 26,146 Net income Income from operation 15,403 16,496 19,360 23,716 26,146 Net income from from operation 15,403 16,496 19,360 23,716 26,146 Net income from continuing operation 15,403 16,496 19,360 23,716 26,146 Net income from continuing operation Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income from continuing operation 13,160 13,620 16,348 19,478 12,662 Net income ( continuing operation 13,160 13,620 16,348 19,478 12,662 Net income ( loss operation 13,160 13,620 16,348 19,478 12,662 Net income ( loss ) ) from discontinued operation ( 427 ) 516 0 0 0 discontinued operation ( 427 ) 516 0 0 0 Net income operation ( 427 ) 516 0 0 0 Net income 12,733 ( 427 ) 516 0 0 0 Net income 12,733 14,136 427 ) 516 0 0 0 Net income 12,733 14,136 16,348 0 0 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic 0 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic net 0 Net income 12,733 14,136 16,348 19,478 12,662 Basic net income Net income 12,733 14,136 16,348 19,478 12,662 Basic net income ( income 12,733 14,136 16,348 19,478 12,662 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 23.11 $ Continuing operation $ 19.77 $ 20.15 $ 23.11 $ 28.32 $ $ 19.77 $ 20.15 $ 23.11 $ 28.32 $ 18.27 Discontinued $ 20.15 $ 23.11 $ 28.32 $ 18.27 Discontinued operation ( $ 23.11 $ 28.32 $ 18.27 Discontinued operation ( 0.64 ) $ 18.27 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net operation ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per share and B common stock $ 19.13 $ 20.91 $ 23.11 $ common stock $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ $ 19.13 $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic $ 20.91 $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income ( loss stock : Continuing operation $ 19.77 $ 20.15 $ 24.63 $ Continuing operation $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ $ 19.77 $ 20.15 $ 24.63 $ 28.32 $ 18.27 Discontinued $ 20.15 $ 24.63 $ 28.32 $ 18.27 Discontinued operation ( $ 24.63 $ 28.32 $ 18.27 Discontinued operation ( 0.64 ) $ 18.27 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Discontinued operation ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net operation ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income ( 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per 0.64 ) 0.76 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 19.13 $ 20.91 $ 24.63 $ capital stock $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ $ 19.13 $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted $ 20.91 $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 22.84 $ Continuing operation $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ $ 19.42 $ 19.82 $ 22.84 $ 27.85 $ 18.00 Discontinued $ 19.82 $ 22.84 $ 27.85 $ 18.00 Discontinued operation ( $ 22.84 $ 27.85 $ 18.00 Discontinued operation ( 0.63 ) $ 18.00 Discontinued operation ( 0.63 ) 0.75 0.00 0.00 0.00 Discontinued operation ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net operation ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per share and B common stock $ 18.79 $ 20.57 $ 22.84 $ common stock $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ $ 18.79 $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted $ 20.57 $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income ( loss stock : Continuing operation $ 19.42 $ 19.82 $ 24.34 $ Continuing operation $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ $ 19.42 $ 19.82 $ 24.34 $ 27.85 $ 18.00 Discontinued $ 19.82 $ 24.34 $ 27.85 $ 18.00 Discontinued operation ( $ 24.34 $ 27.85 $ 18.00 Discontinued operation ( 0.63 ) $ 18.00 Discontinued operation ( 0.63 ) 0.75 0.00 0.00 0.00 Discontinued operation ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net operation ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income ( 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per 0.63 ) 0.75 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 18.79 $ 20.57 $ 24.34 $ capital stock $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ $ 18.79 $ 20.57 $ 24.34 $ 27.85 $ 18.00 As $ 20.57 $ 24.34 $ 27.85 $ 18.00 As of December $ 24.34 $ 27.85 $ 18.00 As of December 31 , $ 18.00 As of December 31 , 2013 2014 2015 2016 As of December 31 , 2013 2014 2015 2016 2017 ( of December 31 , 2013 2014 2015 2016 2017 ( in December 31 , 2013 2014 2015 2016 2017 ( in million 31 , 2013 2014 2015 2016 2017 ( in million ) , 2013 2014 2015 2016 2017 ( in million ) Consolidated , and marketable security $ 58,717 $ 64,395 $ 73,066 $ marketable security $ 58,717 $ 64,395 $ 73,066 $ 86,333 $ $ 58,717 $ 64,395 $ 73,066 $ 86,333 $ 101,871 Total $ 64,395 $ 73,066 $ 86,333 $ 101,871 Total asset $ $ 73,066 $ 86,333 $ 101,871 Total asset $ 109,050 $ $ 101,871 Total asset $ 109,050 $ 129,187 $ 147,461 $ Total asset $ 109,050 $ 129,187 $ 147,461 $ 167,497 $ $ 109,050 $ 129,187 $ 147,461 $ 167,497 $ 197,295 Total $ 129,187 $ 147,461 $ 167,497 $ 197,295 Total long-term liability $ 147,461 $ 167,497 $ 197,295 Total long-term liability $ 6,165 197,295 Total long-term liability $ 6,165 $ 8,548 $ 7,820 $ long-term liability $ 6,165 $ 8,548 $ 7,820 $ 11,705 $ $ 6,165 $ 8,548 $ 7,820 $ 11,705 $ 20,610 Total $ 8,548 $ 7,820 $ 11,705 $ 20,610 Total stockholder ’ $ 7,820 $ 11,705 $ 20,610 Total stockholder ’ equity $ Total stockholder ’ equity $ 86,977 $ 103,860 $ 120,331 $ ’ equity $ 86,977 $ 103,860 $ 120,331 $ 139,036 $ $ 86,977 $ 103,860 $ 120,331 $ 139,036 $ 152,502 25 $ 103,860 $ 120,331 $ 139,036 $ 152,502 25 Table of $ 120,331 $ 139,036 $ 152,502 25 Table of Contents Alphabet 120,331 $ 139,036 $ 152,502 25 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business The revenue could be volatile . 26 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2017 ( consolidated unless year ended December 31 , 2017 ( consolidated unless otherwise noted : • Revenues of $ 110.9 billion and revenue growth of billion and revenue growth of 23 % year over year , constant currency revenue growth of 24 % year over year . Google segment revenue of $ 109.7 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 1.2 billion with revenue growth of billion with revenue growth of 49 % year over year . and Other Americas were $ 52.4 billion , $ 36.0 billion $ 52.4 billion , $ 36.0 billion , $ 16.2 billion $ 36.0 billion , $ 16.2 billion , and $ 6.1 16.2 billion , and $ 6.1 billion , respectively . • Cost of revenue wa $ 45.6 billion , consisting of TAC consisting of TAC of $ 21.7 billion and other cost of cost of revenue of $ 23.9 billion . Our TAC a percentage of advertising revenue wa 23 % . • Operating expense of revenue ) were $ 39.1 billion . • Income from Income from operation wa $ 26.1 billion . • Effective tax • Effective tax rate wa 53 % . • Net income • Net income wa $ 12.7 billion with diluted net income income per share of $ 18.00 . • Operating cash flow Operating cash flow wa $ 37.1 billion . • Capital expenditure • Capital expenditure were $ 13.2 billion . • Number of • Number of employee wa 80,110 a of December 31 , wa 80,110 a of December 31 , 2017 . Information about a of December 31 , 2017 . Information about Segments We . Please refer to Note 15 of the Notes to Consolidated this Annual Report on Form 10-K for further information . 27 10-K for further information . 27 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google segment Google Ended December 31 , 2015 2016 2017 Google segment Google property December 31 , 2015 2016 2017 Google segment Google property revenue segment Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google Network Members $ 52,357 $ 63,785 $ 77,788 Google Network Members ' property Network Members ' property revenue 15,033 15,598 17,587 Google advertising revenue Members ' property revenue 15,033 15,598 17,587 Google advertising revenue 67,390 ' property revenue 15,033 15,598 17,587 Google advertising revenue 67,390 79,383 15,598 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 10,080 79,383 95,375 Google other revenue 7,154 10,080 14,277 Google segment revenue 95,375 Google other revenue 7,154 10,080 14,277 Google segment revenue $ Google other revenue 7,154 10,080 14,277 Google segment revenue $ 74,544 14,277 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Other segment revenue $ 74,544 $ 89,463 $ 109,652 Other Bets Other $ 74,544 $ 89,463 $ 109,652 Other Bets Other Bets revenue Bets Other Bets revenue $ 445 $ 809 $ 1,203 Revenues Bets revenue $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 445 $ 809 $ 1,203 Revenues $ 74,989 $ 90,272 809 $ 1,203 Revenues $ 74,989 $ 90,272 $ 110,855 Google 1,203 Revenues $ 74,989 $ 90,272 $ 110,855 Google segment The $ 74,989 $ 90,272 $ 110,855 Google segment The following table ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google segment revenue Ended December 31 , 2015 2016 2017 Google segment revenue $ December 31 , 2015 2016 2017 Google segment revenue $ 74,544 2017 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue $ 74,544 $ 89,463 $ 109,652 Google segment revenue a a a percentage of total revenue 99.4 % 99.1 % 98.9 % of total revenue 99.4 % 99.1 % 98.9 % Aggregate paid revenue 99.4 % 99.1 % 98.9 % Aggregate paid click change % Aggregate paid click change 34 % 46 % Aggregate cost-per-click paid click change 34 % 46 % Aggregate cost-per-click change ( % Aggregate cost-per-click change ( 11 ) % ( 19 ) ( 11 ) % ( 19 ) % Use of Monetization generated by click activity . 28 Table of Contents Alphabet Inc In the first quarter of 2017 , we refined our methodology Months Ended Year Ended Mar 31 , 2016 Jun 30 , Year Ended Mar 31 , 2016 Jun 30 , 2016 Sep Mar 31 , 2016 Jun 30 , 2016 Sep 30 , , 2016 Jun 30 , 2016 Sep 30 , 2016 Dec Jun 30 , 2016 Sep 30 , 2016 Dec 31 , , 2016 Sep 30 , 2016 Dec 31 , 2016 Dec Sep 30 , 2016 Dec 31 , 2016 Dec 31 , , 2016 Dec 31 , 2016 Dec 31 , 2016 Year-over-year Dec 31 , 2016 Dec 31 , 2016 Year-over-year change Aggregate , 2016 Dec 31 , 2016 Year-over-year change Aggregate paid click Year-over-year change Aggregate paid click 29 % 28 % 32 % Aggregate paid click 29 % 28 % 32 % 39 % click 29 % 28 % 32 % 39 % 34 % % 28 % 32 % 39 % 34 % Paid click % 32 % 39 % 34 % Paid click on Google Paid click on Google property 38 % 36 % 41 % on Google property 38 % 36 % 41 % 47 % property 38 % 36 % 41 % 47 % 43 % % 36 % 41 % 47 % 43 % Paid click % 41 % 47 % 43 % Paid click on Google Google Network Members ' property 2 % 0 % 1 % Members ' property 2 % 0 % 1 % 7 % property 2 % 0 % 1 % 7 % 3 % % 0 % 1 % 7 % 3 % Aggregate cost-per-click % 1 % 7 % 3 % Aggregate cost-per-click ( 8 3 % Aggregate cost-per-click ( 8 ) % ( 6 ) ( 8 ) % ( 6 ) % ( 10 ) ( 6 ) % ( 10 ) % ( 17 ) ( 10 ) % ( 17 ) % ( 11 ) ( 17 ) % ( 11 ) % Cost-per-click on Google Cost-per-click on Google property ( 11 ) % ( 8 ) ( 11 ) % ( 8 ) % ( 12 ) ( 8 ) % ( 12 ) % ( 18 ) ( 12 ) % ( 18 ) % ( 13 ) ( 18 ) % ( 13 ) % Cost-per-click on Google Network Members ' property ( 8 ) % ( 8 ) ( 8 ) % ( 8 ) % ( 14 ) ( 8 ) % ( 14 ) % ( 19 ) ( 14 ) % ( 19 ) % ( 13 ) ( 19 ) % ( 13 ) % Quarter-over-quarter change Aggregate change Aggregate paid click ( 2 ) % 7 % 9 click ( 2 ) % 7 % 9 % 22 % 2 ) % 7 % 9 % 22 % N/A Paid % 7 % 9 % 22 % N/A Paid click on click on Google property ( 3 ) % 9 % 11 property ( 3 ) % 9 % 11 % 25 % 3 ) % 9 % 11 % 25 % N/A Paid % 9 % 11 % 25 % N/A Paid click on Google Network Members ' property 4 % ( 3 ) % ' property 4 % ( 3 ) % 1 % 6 % ( 3 ) % 1 % 6 % N/A Aggregate 3 ) % 1 % 6 % N/A Aggregate cost-per-click ( % N/A Aggregate cost-per-click ( 1 ) % ( 1 ) ( 1 ) % ( 1 ) % ( 5 ) ( 1 ) % ( 5 ) % ( 10 ) ( 5 ) % ( 10 ) % N/A Cost-per-click on N/A Cost-per-click on Google property 1 % ( 2 ) % Google property 1 % ( 2 ) % ( 6 ) ( 2 ) % ( 6 ) % ( 12 ) ( 6 ) % ( 12 ) % N/A Cost-per-click on Network Members ' property ( 12 ) % ( 2 ) ( 12 ) % ( 2 ) % ( 6 ) ( 2 ) % ( 6 ) % 0 % N/A % ( 6 ) % 0 % N/A Our advertising revenue foreign currency exchange rate . 29 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google property revenue Ended December 31 , 2015 2016 2017 Google property revenue $ December 31 , 2015 2016 2017 Google property revenue $ 52,357 2017 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue $ 52,357 $ 63,785 $ 77,788 Google property revenue a a percentage of Google segment revenue 70.2 % 71.3 % 70.9 % Google segment revenue 70.2 % 71.3 % 70.9 % Paid click revenue 70.2 % 71.3 % 70.9 % Paid click change 43 70.9 % Paid click change 43 % 54 % Cost-per-click change Paid click change 43 % 54 % Cost-per-click change ( 13 54 % Cost-per-click change ( 13 ) % ( 21 ) ( 13 ) % ( 21 ) % Google property revenue Google property revenue increased $ 14,003 million from 2016 to 2017 increased $ 14,003 million from 2016 to 2017 . The growth 14,003 million from 2016 to 2017 . The growth wa primarily on Google property increased from 2016 to 2017 due to growth property increased from 2016 to 2017 due to growth in YouTube paid by our advertiser from 2016 to 2017 . The decrease our advertiser from 2016 to 2017 . The decrease in cost-per-click Google property revenue increased $ 11,428 million from 2015 to 2016 increased $ 11,428 million from 2015 to 2016 and also increased 11,428 million from 2015 to 2016 and also increased a a format and delivery launched during 2016 . We also experienced growth on Google property increased from 2015 to 2016 due to growth property increased from 2015 to 2016 due to growth in the ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google Network Members Ended December 31 , 2015 2016 2017 Google Network Members ' December 31 , 2015 2016 2017 Google Network Members ' property Members ' property revenue $ 15,033 $ 15,598 $ 17,587 Google property revenue $ 15,033 $ 15,598 $ 17,587 Google Network Members $ 15,033 $ 15,598 $ 17,587 Google Network Members ' property percentage of Google segment revenue 20.2 % 17.4 % 16.0 % Google segment revenue 20.2 % 17.4 % 16.0 % Paid click revenue 20.2 % 17.4 % 16.0 % Paid click change 3 16.0 % Paid click change 3 % 10 % Cost-per-click change Paid click change 3 % 10 % Cost-per-click change ( 13 10 % Cost-per-click change ( 13 ) % ( 9 ) ( 13 ) % ( 9 ) % 30 Table of % ( 9 ) % 30 Table of Contents Alphabet Inc. ' property revenue increased $ 1,989 million from 2016 to 2017 increased $ 1,989 million from 2016 to 2017 . The growth 1,989 million from 2016 to 2017 . The growth wa primarily increase in paid click from 2016 to 2017 resulted primarily from paid click from 2016 to 2017 resulted primarily from growth in The change in cost-per-click from 2016 to 2017 wa impacted by in cost-per-click from 2016 to 2017 wa impacted by change in ' property revenue increased $ 565 million from 2015 to 2016 increased $ 565 million from 2015 to 2016 . The growth 565 million from 2015 to 2016 . The growth wa primarily increase in paid click from 2015 to 2016 resulted from the paid click from 2015 to 2016 resulted from the growth in paid by our advertiser from 2015 to 2016 resulted from change our advertiser from 2015 to 2016 resulted from change in the ) : Year Ended December 31 , 2015 2016 2017 Google Year Ended December 31 , 2015 2016 2017 Google other revenue Ended December 31 , 2015 2016 2017 Google other revenue $ December 31 , 2015 2016 2017 Google other revenue $ 7,154 2017 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue $ 7,154 $ 10,080 $ 14,277 Google other revenue a a percentage of Google segment revenue 9.6 % 11.3 % 13.0 % Google segment revenue 9.6 % 11.3 % 13.0 % Google other revenue 9.6 % 11.3 % 13.0 % Google other revenue consist Google other revenue increased $ 4,197 million from 2016 to 2017 increased $ 4,197 million from 2016 to 2017 . The increase 4,197 million from 2016 to 2017 . The increase wa primarily Google other revenue increased $ 2,926 million from 2015 to 2016 increased $ 2,926 million from 2015 to 2016 and increased a 2,926 million from 2015 to 2016 and increased a a percentage ) : Year Ended December 31 , 2015 2016 2017 Other Year Ended December 31 , 2015 2016 2017 Other Bets revenue Ended December 31 , 2015 2016 2017 Other Bets revenue $ December 31 , 2015 2016 2017 Other Bets revenue $ 445 2017 Other Bets revenue $ 445 $ 809 $ 1,203 Other Bets revenue $ 445 $ 809 $ 1,203 Other Bets revenue $ 445 $ 809 $ 1,203 Other Bets revenue a a a percentage of total revenue 0.6 % 0.9 % 1.1 % of total revenue 0.6 % 0.9 % 1.1 % Other Bets revenue 0.6 % 0.9 % 1.1 % Other Bets revenue consist • Nest branded hardware . 31 Table of Contents Alphabet Inc. Other Bets revenue increased $ 394 million from 2016 to 2017 increased $ 394 million from 2016 to 2017 . The increase 394 million from 2016 to 2017 . The increase wa primarily Other Bets revenue increased $ 364 million from 2015 to 2016 increased $ 364 million from 2015 to 2016 and increased a 364 million from 2015 to 2016 and increased a a percentage R & D service from 2015 to 2016 . Due to D service from 2015 to 2016 . Due to the early customer : Year Ended December 31 , 2015 2016 2017 United Year Ended December 31 , 2015 2016 2017 United States 46 Ended December 31 , 2015 2016 2017 United States 46 % December 31 , 2015 2016 2017 United States 46 % 47 2015 2016 2017 United States 46 % 47 % 47 % 2017 United States 46 % 47 % 47 % EMEA 35 States 46 % 47 % 47 % EMEA 35 % 34 47 % 47 % EMEA 35 % 34 % 33 % 47 % EMEA 35 % 34 % 33 % APAC 14 EMEA 35 % 34 % 33 % APAC 14 % 14 34 % 33 % APAC 14 % 14 % 15 % 33 % APAC 14 % 14 % 15 % Other Americas APAC 14 % 14 % 15 % Other Americas 5 % % 15 % Other Americas 5 % 5 % 5 % % Other Americas 5 % 5 % 5 % For the Americas 5 % 5 % 5 % For the amount of , please refer to Note 2 of the Notes to Consolidated this Annual Report on Form 10-K. Use of Constant Currency Revenues in accordance with GAAP . 32 Table of Contents Alphabet Inc : Twelve Months Ended December 31 , 2015 2016 2017 EMEA Months Ended December 31 , 2015 2016 2017 EMEA revenue $ Ended December 31 , 2015 2016 2017 EMEA revenue $ 26,368 December 31 , 2015 2016 2017 EMEA revenue $ 26,368 $ 2016 2017 EMEA revenue $ 26,368 $ 30,304 $ 36,046 Exclude EMEA revenue $ 26,368 $ 30,304 $ 36,046 Exclude foreign exchange $ 26,368 $ 30,304 $ 36,046 Exclude foreign exchange impact on revenue using prior year rate 3,802 1,291 ( 5 ) Exclude using prior year rate 3,802 1,291 ( 5 ) Exclude hedging year rate 3,802 1,291 ( 5 ) Exclude hedging impact recognized recognized in current period ( 989 ) ( 479 ) 190 period ( 989 ) ( 479 ) 190 EMEA constant currency 989 ) ( 479 ) 190 EMEA constant currency revenue $ EMEA constant currency revenue $ 29,181 $ 31,116 $ 36,231 Prior currency revenue $ 29,181 $ 31,116 $ 36,231 Prior period EMEA $ 29,181 $ 31,116 $ 36,231 Prior period EMEA revenue , , excluding hedging impact $ 24,497 $ 25,379 $ 29,825 EMEA hedging impact $ 24,497 $ 25,379 $ 29,825 EMEA revenue growth $ 24,497 $ 25,379 $ 29,825 EMEA revenue growth 15 % $ 29,825 EMEA revenue growth 15 % 19 % EMEA constant EMEA revenue growth 15 % 19 % EMEA constant currency revenue EMEA constant currency revenue growth 23 % 21 % APAC revenue currency revenue growth 23 % 21 % APAC revenue $ 9,887 21 % APAC revenue $ 9,887 $ 12,559 $ 16,235 Exclude APAC revenue $ 9,887 $ 12,559 $ 16,235 Exclude foreign exchange $ 9,887 $ 12,559 $ 16,235 Exclude foreign exchange impact on revenue using prior year rate 1,076 ( 362 ) 26 Exclude prior year rate 1,076 ( 362 ) 26 Exclude hedging impact rate 1,076 ( 362 ) 26 Exclude hedging impact recognized in recognized in current period ( 323 ) ( 31 ) ( period ( 323 ) ( 31 ) ( 43 ) APAC ) ( 31 ) ( 43 ) APAC constant currency revenue APAC constant currency revenue $ 10,640 $ 12,166 $ 16,218 Prior currency revenue $ 10,640 $ 12,166 $ 16,218 Prior period APAC $ 10,640 $ 12,166 $ 16,218 Prior period APAC revenue , , excluding hedging impact $ 8,169 $ 9,564 $ 12,528 APAC hedging impact $ 8,169 $ 9,564 $ 12,528 APAC revenue growth $ 8,169 $ 9,564 $ 12,528 APAC revenue growth 27 % $ 12,528 APAC revenue growth 27 % 29 % APAC constant APAC revenue growth 27 % 29 % APAC constant currency revenue APAC constant currency revenue growth 27 % 29 % Other Americas currency revenue growth 27 % 29 % Other Americas revenue $ % Other Americas revenue $ 3,924 $ 4,628 $ 6,125 Exclude Americas revenue $ 3,924 $ 4,628 $ 6,125 Exclude foreign exchange $ 3,924 $ 4,628 $ 6,125 Exclude foreign exchange impact on revenue using prior year rate 712 344 ( 148 ) Exclude using prior year rate 712 344 ( 148 ) Exclude hedging year rate 712 344 ( 148 ) Exclude hedging impact recognized recognized in current period ( 88 ) ( 29 ) 22 period ( 88 ) ( 29 ) 22 Other Americas constant 88 ) ( 29 ) 22 Other Americas constant currency revenue Americas constant currency revenue $ 4,548 $ 4,943 $ 5,999 Prior currency revenue $ 4,548 $ 4,943 $ 5,999 Prior period Other $ 4,548 $ 4,943 $ 5,999 Prior period Other Americas revenue , excluding hedging impact $ 3,681 $ 3,836 $ 4,599 Other hedging impact $ 3,681 $ 3,836 $ 4,599 Other Americas revenue $ 3,681 $ 3,836 $ 4,599 Other Americas revenue growth 18 4,599 Other Americas revenue growth 18 % 32 % Other Americas Americas revenue growth 18 % 32 % Other Americas constant currency Americas constant currency revenue growth 29 % 30 % United States currency revenue growth 29 % 30 % United States revenue $ % United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue $ 34,810 $ 42,781 $ 52,449 United States revenue growth 23 52,449 United States revenue growth 23 % 23 % Total revenue States revenue growth 23 % 23 % Total revenue $ 74,989 23 % Total revenue $ 74,989 $ 90,272 $ 110,855 Total Total revenue $ 74,989 $ 90,272 $ 110,855 Total constant currency $ 74,989 $ 90,272 $ 110,855 Total constant currency revenue $ Total constant currency revenue $ 79,179 $ 91,006 $ 110,897 Total currency revenue $ 79,179 $ 91,006 $ 110,897 Total revenue growth $ 79,179 $ 91,006 $ 110,897 Total revenue growth 20 % $ 110,897 Total revenue growth 20 % 23 % Total constant Total revenue growth 20 % 23 % Total constant currency revenue Total constant currency revenue growth 24 % 24 % Our EMEA currency revenue growth 24 % 24 % Our EMEA revenue from % Our EMEA revenue from 2016 to 2017 were unfavorably impacted EMEA revenue from 2016 to 2017 were unfavorably impacted , primarily . Our EMEA revenue from 2015 to 2016 were unfavorably impacted EMEA revenue from 2015 to 2016 were unfavorably impacted , primarily Our revenue from APAC from 2016 to 2017 were relatively flat from APAC from 2016 to 2017 were relatively flat , primarily . The foreign exchange impact 33 Table of Contents Alphabet Inc. Our revenue from APAC from 2015 to 2016 were relatively flat from APAC from 2015 to 2016 were relatively flat , primarily revenue from Other Americas from 2016 to 2017 were favorably impacted Other Americas from 2016 to 2017 were favorably impacted , primarily revenue from Other Americas from 2015 to 2016 were unfavorably impacted Other Americas from 2015 to 2016 were unfavorably impacted , primarily for hardware we sell . 34 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2015 2016 2017 TAC Year Ended December 31 , 2015 2016 2017 TAC $ 14,343 Ended December 31 , 2015 2016 2017 TAC $ 14,343 $ December 31 , 2015 2016 2017 TAC $ 14,343 $ 16,793 2015 2016 2017 TAC $ 14,343 $ 16,793 $ 21,672 Other 2017 TAC $ 14,343 $ 16,793 $ 21,672 Other cost of $ 14,343 $ 16,793 $ 21,672 Other cost of revenue 13,821 21,672 Other cost of revenue 13,821 18,345 23,911 Total cost of Other cost of revenue 13,821 18,345 23,911 Total cost of revenue cost of revenue 13,821 18,345 23,911 Total cost of revenue $ Total cost of revenue $ 28,164 $ 35,138 $ 45,583 Total of revenue $ 28,164 $ 35,138 $ 45,583 Total cost of $ 28,164 $ 35,138 $ 45,583 Total cost of revenue a a a percentage of revenue 37.6 % 38.9 % 41.1 % percentage of revenue 37.6 % 38.9 % 41.1 % Year Ended revenue 37.6 % 38.9 % 41.1 % Year Ended December 31 41.1 % Year Ended December 31 , 2015 2016 2017 TAC Year Ended December 31 , 2015 2016 2017 TAC to distribution Ended December 31 , 2015 2016 2017 TAC to distribution partner December 31 , 2015 2016 2017 TAC to distribution partner $ TAC to distribution partner $ 4,101 $ 5,894 $ 9,031 TAC distribution partner $ 4,101 $ 5,894 $ 9,031 TAC to distribution $ 4,101 $ 5,894 $ 9,031 TAC to distribution partner a of Google property revenue ( 1 ) ( Google property TAC Google property TAC rate ) 7.8 % 9.2 % 11.6 % TAC rate ) 7.8 % 9.2 % 11.6 % TAC to ) 7.8 % 9.2 % 11.6 % TAC to Google Network to Google Network Members $ 10,242 $ 10,899 $ 12,641 TAC Network Members $ 10,242 $ 10,899 $ 12,641 TAC to Google $ 10,242 $ 10,899 $ 12,641 TAC to Google Network Members Members ' property revenue ( 1 ) ( Network Members TAC Network Members TAC rate ) 68.1 % 69.9 % 71.9 % TAC rate ) 68.1 % 69.9 % 71.9 % TAC $ ) 68.1 % 69.9 % 71.9 % TAC $ 14,343 $ % 71.9 % TAC $ 14,343 $ 16,793 $ 21,672 TAC % TAC $ 14,343 $ 16,793 $ 21,672 TAC a a $ 14,343 $ 16,793 $ 21,672 TAC a a percentage of percentage of advertising revenue ( 1 ) ( Aggregate TAC rate ( Aggregate TAC rate ) 21.3 % 21.2 % 22.7 % TAC rate ) 21.3 % 21.2 % 22.7 % ( 1 ) 21.3 % 21.2 % 22.7 % ( 1 ) Revenues 21.2 % 22.7 % ( 1 ) Revenues include hedging gain Cost of revenue increased $ 10,445 million from 2016 to 2017 increased $ 10,445 million from 2016 to 2017 . The increase 10,445 million from 2016 to 2017 . The increase wa due increase in TAC of $ 4,879 million . The increase in cost of revenue increased $ 5,566 million from 2016 to 2017 increased $ 5,566 million from 2016 to 2017 . The increase 5,566 million from 2016 to 2017 . The increase wa due Cost of revenue increased $ 6,974 million from 2015 to 2016 increased $ 6,974 million from 2015 to 2016 due to various 6,974 million from 2015 to 2016 due to various factor including traffic acquisition cost of $ 2,450 million wa due to increase cost of revenue of $ 4,524 million wa primarily due to due to increase in ( 1 ) data center cost including of business growth , ( 2 ) content acquisition cost a related to YouTube , ( 3 ) hardware cost associated with hardware launch , and ( 4 ) stock-based compensation . The rate remained relatively flat from 2015 to 2016 primarily a a relatively flat from 2015 to 2016 primarily a a result of to programmatic advertising buying . 35 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Research Year Ended December 31 , 2015 2016 2017 Research and development Ended December 31 , 2015 2016 2017 Research and development expense December 31 , 2015 2016 2017 Research and development expense $ Research and development expense $ 12,282 $ 13,948 $ 16,625 Research development expense $ 12,282 $ 13,948 $ 16,625 Research and development $ 12,282 $ 13,948 $ 16,625 Research and development expense a a a percentage of revenue 16.4 % 15.5 % 15.0 % percentage of revenue 16.4 % 15.5 % 15.0 % R & revenue 16.4 % 15.5 % 15.0 % R & D expense & D expense increased $ 2,677 million from 2016 to 2017 increased $ 2,677 million from 2016 to 2017 . The increase 2,677 million from 2016 to 2017 . The increase wa primarily and facilities-related cost of $ 1,886 million , largely resulting from , largely resulting from a 16 % increase in headcount . and equipment-related expense of $ 569 million . R & D & D expense increased $ 1,666 million from 2015 to 2016 increased $ 1,666 million from 2015 to 2016 . The increase 1,666 million from 2015 to 2016 . The increase wa primarily stock-based compensation expense of $ 667 million and an increase in and facilities-related cost of $ 326 million , both largely a a a result of a 16 % increase in R & milestone in Other Bets in 2015 . In addition , there equipment-related expense of approximately $ 388 million and an increase in in professional service of $ 267 million due to additional expense ) : Year Ended December 31 , 2015 2016 2017 Sales Year Ended December 31 , 2015 2016 2017 Sales and marketing Ended December 31 , 2015 2016 2017 Sales and marketing expense December 31 , 2015 2016 2017 Sales and marketing expense $ Sales and marketing expense $ 9,047 $ 10,485 $ 12,893 Sales marketing expense $ 9,047 $ 10,485 $ 12,893 Sales and marketing $ 9,047 $ 10,485 $ 12,893 Sales and marketing expense a a a percentage of revenue 12.1 % 11.6 % 11.6 % percentage of revenue 12.1 % 11.6 % 11.6 % Sales and revenue 12.1 % 11.6 % 11.6 % Sales and marketing expense and marketing expense increased $ 2,408 million from 2016 to 2017 increased $ 2,408 million from 2016 to 2017 . The increase 2,408 million from 2016 to 2017 . The increase wa primarily and promotional expense of $ 1,266 million , largely resulting from and facilities-related cost of $ 853 million , largely resulting from , largely resulting from a 6 % increase in headcount . % increase in headcount . 36 Table of Contents Alphabet Inc and marketing expense increased $ 1,438 million from 2015 to 2016 increased $ 1,438 million from 2015 to 2016 . The increase 1,438 million from 2015 to 2016 . The increase wa primarily and promotional expense of $ 679 million , largely due to and facilities-related cost of $ 482 million , and stock-based compensation stock-based compensation expense of $ 179 million , both largely resulting both largely resulting from a 10 % increase in sale and ) : Year Ended December 31 , 2015 2016 2017 General Year Ended December 31 , 2015 2016 2017 General and administrative Ended December 31 , 2015 2016 2017 General and administrative expense December 31 , 2015 2016 2017 General and administrative expense $ General and administrative expense $ 6,136 $ 6,985 $ 6,872 General administrative expense $ 6,136 $ 6,985 $ 6,872 General and administrative $ 6,136 $ 6,985 $ 6,872 General and administrative expense a a a percentage of revenue 8.2 % 7.7 % 6.2 % percentage of revenue 8.2 % 7.7 % 6.2 % General and revenue 8.2 % 7.7 % 6.2 % General and administrative expense and administrative expense decreased $ 113 million from 2016 to 2017 decreased $ 113 million from 2016 to 2017 . The decrease 113 million from 2016 to 2017 . The decrease wa primarily and facilities-related cost of $ 271 million , largely resulting from , largely resulting from a 9 % increase in headcount . professional service fee of $ 253 million due to additional expense and administrative expense increased $ 849 million from 2015 to 2016 increased $ 849 million from 2015 to 2016 . The increase 849 million from 2015 to 2016 . The increase wa primarily and facilities-related cost of $ 460 million , and stock-based compensation stock-based compensation expense of $ 421 million , both largely resulting both largely resulting from a 15 % increase in general and professional service fee of $ 194 million due to lower legal-related European Commission Fine In June 2017 , the EC announced it €2.42 billion ( approximately $ 2.74 billion a of June 27 2.74 billion a of June 27 , 2017 ) fine , a of June 27 , 2017 ) fine , which wa in the second quarter of 2017 . Other Income ( Expense ) : Year Ended December 31 , 2015 2016 2017 Other Year Ended December 31 , 2015 2016 2017 Other income ( Ended December 31 , 2015 2016 2017 Other income ( expense December 31 , 2015 2016 2017 Other income ( expense ) expense ) , net $ 291 $ 434 $ 1,047 Other , net $ 291 $ 434 $ 1,047 Other income ( $ 291 $ 434 $ 1,047 Other income ( expense ) a a percentage of revenue 0.4 % 0.5 % 0.9 % percentage of revenue 0.4 % 0.5 % 0.9 % Other income revenue 0.4 % 0.5 % 0.9 % Other income ( expense , net , increased $ 613 million from 2016 to 2017 increased $ 613 million from 2016 to 2017 . This increase 613 million from 2016 to 2017 . This increase wa primarily increase in interest income . 37 Table of Contents Alphabet Inc. , net , increased $ 143 million from 2015 to 2016 increased $ 143 million from 2015 to 2016 . This increase 143 million from 2015 to 2016 . This increase wa primarily in the fourth quarter of 2016 . We expect that other rate : Year Ended December 31 , 2015 2016 2017 Provision Year Ended December 31 , 2015 2016 2017 Provision for income Ended December 31 , 2015 2016 2017 Provision for income tax December 31 , 2015 2016 2017 Provision for income tax $ Provision for income tax $ 3,303 $ 4,672 $ 14,531 Effective income tax $ 3,303 $ 4,672 $ 14,531 Effective tax rate $ 3,303 $ 4,672 $ 14,531 Effective tax rate 16.8 % $ 14,531 Effective tax rate 16.8 % 19.3 % 53.4 % Effective tax rate 16.8 % 19.3 % 53.4 % Our provision rate 16.8 % 19.3 % 53.4 % Our provision for income effective tax rate increased from 2016 to 2017 , due to rate increased from 2016 to 2017 , due to the Tax that wa enacted in December 2017 . Please refer to Note . Please refer to Note 14 of the Notes to Consolidated this Annual Report on Form 10-K for further information . Our effective tax rate increased from 2015 to 2016 , largely due rate increased from 2015 to 2016 , largely due to proportionately rate and discrete item in 2015 and 2016 , partially offset discrete item in 2015 and 2016 , partially offset by the Accounting Standards Update No . 2016-09 ( ASU 2016-09 ) . No . 2016-09 ( ASU 2016-09 ) . Our future effective Tax Act . Effective in 2018 , the Tax Act reduces U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax related note included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2017 . This table quarter ended December 31 , 2017 . This table includes all sequential revenue growth rate . 38 Table of Contents Alphabet Inc. Alphabet Inc. Quarter Ended Mar 31 , 2016 Jun 30 , Quarter Ended Mar 31 , 2016 Jun 30 , 2016 Sep Mar 31 , 2016 Jun 30 , 2016 Sep 30 , , 2016 Jun 30 , 2016 Sep 30 , 2016 Dec Jun 30 , 2016 Sep 30 , 2016 Dec 31 , , 2016 Sep 30 , 2016 Dec 31 , 2016 Mar Sep 30 , 2016 Dec 31 , 2016 Mar 31 , , 2016 Dec 31 , 2016 Mar 31 , 2017 Jun Dec 31 , 2016 Mar 31 , 2017 Jun 30 , , 2016 Mar 31 , 2017 Jun 30 , 2017 Sep Mar 31 , 2017 Jun 30 , 2017 Sep 30 , , 2017 Jun 30 , 2017 Sep 30 , 2017 Dec Jun 30 , 2017 Sep 30 , 2017 Dec 31 , , 2017 Sep 30 , 2017 Dec 31 , 2017 ( Sep 30 , 2017 Dec 31 , 2017 ( In million , 2017 Dec 31 , 2017 ( In million , except Income Data : Revenues $ 20,257 $ 21,500 $ 22,451 $ : Revenues $ 20,257 $ 21,500 $ 22,451 $ 26,064 $ $ 20,257 $ 21,500 $ 22,451 $ 26,064 $ 24,750 $ $ 21,500 $ 22,451 $ 26,064 $ 24,750 $ 26,010 $ $ 22,451 $ 26,064 $ 24,750 $ 26,010 $ 27,772 $ $ 26,064 $ 24,750 $ 26,010 $ 27,772 $ 32,323 Costs $ 24,750 $ 26,010 $ 27,772 $ 32,323 Costs and expense $ 26,010 $ 27,772 $ 32,323 Costs and expense : Cost expense : Cost of revenue 7,648 8,130 8,699 10,661 9,795 10,373 : Cost of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 Cost of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 of revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research revenue 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and 7,648 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and development 8,130 8,699 10,661 9,795 10,373 11,148 14,267 Research and development 3,367 8,699 10,661 9,795 10,373 11,148 14,267 Research and development 3,367 3,363 11,148 14,267 Research and development 3,367 3,363 3,596 3,622 3,942 4,172 14,267 Research and development 3,367 3,363 3,596 3,622 3,942 4,172 4,205 Research and development 3,367 3,363 3,596 3,622 3,942 4,172 4,205 4,306 and development 3,367 3,363 3,596 3,622 3,942 4,172 4,205 4,306 Sales development 3,367 3,363 3,596 3,622 3,942 4,172 4,205 4,306 Sales and 3,367 3,363 3,596 3,622 3,942 4,172 4,205 4,306 Sales and marketing 3,363 3,596 3,622 3,942 4,172 4,205 4,306 Sales and marketing 2,387 3,596 3,622 3,942 4,172 4,205 4,306 Sales and marketing 2,387 2,415 4,205 4,306 Sales and marketing 2,387 2,415 2,565 3,118 2,644 2,897 4,306 Sales and marketing 2,387 2,415 2,565 3,118 2,644 2,897 3,042 Sales and marketing 2,387 2,415 2,565 3,118 2,644 2,897 3,042 4,310 and marketing 2,387 2,415 2,565 3,118 2,644 2,897 3,042 4,310 General marketing 2,387 2,415 2,565 3,118 2,644 2,897 3,042 4,310 General and 2,387 2,415 2,565 3,118 2,644 2,897 3,042 4,310 General and administrative 2,415 2,565 3,118 2,644 2,897 3,042 4,310 General and administrative 1,513 2,565 3,118 2,644 2,897 3,042 4,310 General and administrative 1,513 1,624 3,042 4,310 General and administrative 1,513 1,624 1,824 2,024 1,801 1,700 4,310 General and administrative 1,513 1,624 1,824 2,024 1,801 1,700 1,595 General and administrative 1,513 1,624 1,824 2,024 1,801 1,700 1,595 1,776 and administrative 1,513 1,624 1,824 2,024 1,801 1,700 1,595 1,776 European administrative 1,513 1,624 1,824 2,024 1,801 1,700 1,595 1,776 European Commission 1,513 1,624 1,824 2,024 1,801 1,700 1,595 1,776 European Commission fine 1,624 1,824 2,024 1,801 1,700 1,595 1,776 European Commission fine 0 1,824 2,024 1,801 1,700 1,595 1,776 European Commission fine 0 0 1,595 1,776 European Commission fine 0 0 0 0 0 2,736 1,776 European Commission fine 0 0 0 0 0 2,736 0 European Commission fine 0 0 0 0 0 2,736 0 0 Commission fine 0 0 0 0 0 2,736 0 0 Total fine 0 0 0 0 0 2,736 0 0 Total cost 0 0 0 0 0 2,736 0 0 Total cost and 0 0 0 0 2,736 0 0 Total cost and expense 0 0 0 2,736 0 0 Total cost and expense 14,915 0 Total cost and expense 14,915 15,532 16,684 19,425 18,182 21,878 Total cost and expense 14,915 15,532 16,684 19,425 18,182 21,878 19,990 cost and expense 14,915 15,532 16,684 19,425 18,182 21,878 19,990 24,659 and expense 14,915 15,532 16,684 19,425 18,182 21,878 19,990 24,659 Income expense 14,915 15,532 16,684 19,425 18,182 21,878 19,990 24,659 Income from 14,915 15,532 16,684 19,425 18,182 21,878 19,990 24,659 Income from operation 15,532 16,684 19,425 18,182 21,878 19,990 24,659 Income from operation 5,342 16,684 19,425 18,182 21,878 19,990 24,659 Income from operation 5,342 5,968 19,990 24,659 Income from operation 5,342 5,968 5,767 6,639 6,568 4,132 24,659 Income from operation 5,342 5,968 5,767 6,639 6,568 4,132 7,782 Income from operation 5,342 5,968 5,767 6,639 6,568 4,132 7,782 7,664 from operation 5,342 5,968 5,767 6,639 6,568 4,132 7,782 7,664 Other operation 5,342 5,968 5,767 6,639 6,568 4,132 7,782 7,664 Other income 5,342 5,968 5,767 6,639 6,568 4,132 7,782 7,664 Other income ( 5,968 5,767 6,639 6,568 4,132 7,782 7,664 Other income ( expense 5,767 6,639 6,568 4,132 7,782 7,664 Other income ( expense ) expense ) , net ( 213 ) 151 278 218 251 , net ( 213 ) 151 278 218 251 245 197 net ( 213 ) 151 278 218 251 245 197 354 ( 213 ) 151 278 218 251 245 197 354 Income 213 ) 151 278 218 251 245 197 354 Income from ) 151 278 218 251 245 197 354 Income from continuing 151 278 218 251 245 197 354 Income from continuing operation 278 218 251 245 197 354 Income from continuing operation before continuing operation before income tax 5,129 6,119 6,045 6,857 6,819 4,377 operation before income tax 5,129 6,119 6,045 6,857 6,819 4,377 7,979 before income tax 5,129 6,119 6,045 6,857 6,819 4,377 7,979 8,018 income tax 5,129 6,119 6,045 6,857 6,819 4,377 7,979 8,018 Provision tax 5,129 6,119 6,045 6,857 6,819 4,377 7,979 8,018 Provision for 5,129 6,119 6,045 6,857 6,819 4,377 7,979 8,018 Provision for income 6,119 6,045 6,857 6,819 4,377 7,979 8,018 Provision for income tax 6,045 6,857 6,819 4,377 7,979 8,018 Provision for income tax 922 8,018 Provision for income tax 922 1,242 984 1,524 1,393 853 Provision for income tax 922 1,242 984 1,524 1,393 853 1,247 for income tax 922 1,242 984 1,524 1,393 853 1,247 11,038 income tax 922 1,242 984 1,524 1,393 853 1,247 11,038 Net tax 922 1,242 984 1,524 1,393 853 1,247 11,038 Net income 922 1,242 984 1,524 1,393 853 1,247 11,038 Net income $ 1,242 984 1,524 1,393 853 1,247 11,038 Net income $ 4,207 984 1,524 1,393 853 1,247 11,038 Net income $ 4,207 $ 1,247 11,038 Net income $ 4,207 $ 4,877 $ 5,061 $ Net income $ 4,207 $ 4,877 $ 5,061 $ 5,333 $ $ 4,207 $ 4,877 $ 5,061 $ 5,333 $ 5,426 $ $ 4,877 $ 5,061 $ 5,333 $ 5,426 $ 3,524 $ $ 5,061 $ 5,333 $ 5,426 $ 3,524 $ 6,732 $ $ 5,333 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 ) Basic 3,524 $ 6,732 $ ( 3,020 ) Basic net income per Class C capital stock $ 6.12 $ 7.11 $ 7.36 $ capital stock $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ $ 6.12 $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ $ 7.11 $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ $ 7.36 $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ $ 7.73 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 ) Diluted 5.09 $ 9.71 $ ( 4.35 ) Diluted net income per Class C capital stock $ 6.02 $ 7.00 $ 7.25 $ capital stock $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ $ 6.02 $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ $ 7.00 $ 7.25 $ 7.56 $ 7.73 $ 5.01 $ $ 7.25 $ 7.56 $ 7.73 $ 5.01 $ 9.57 $ $ 7.56 $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 ) Capital 5.01 $ 9.57 $ ( 4.35 ) Capital Resources and Liquidity and Liquidity As of December 31 , 2017 , we had As of December 31 , 2017 , we had $ 101.9 2017 , we had $ 101.9 billion in cash , cash and marketable security with $ 62.8 billion held by our foreign go public . On December 22 , 2017 , the Tax . On December 22 , 2017 , the Tax Act wa foreign subsidiary earnings of $ 10.2 billion , of which $ billion , of which $ 890 million and $ 9.3 billion $ 890 million and $ 9.3 billion were presented within “ Balance Sheets a of December 31 , 2017 . As permitted a of December 31 , 2017 . As permitted by the annual interest-free installment beginning in 2018 . Our principal source of program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2017 . We have a of December 31 , 2017 . We have a $ . We have a $ 4.0 billion revolving credit facility expiring credit facility expiring in February 2021 . The interest rate for rate . As of December 31 , 2017 , no amount As of December 31 , 2017 , no amount were outstanding through at least the next 12 month . As of December month . As of December 31 , 2017 , we have As of December 31 , 2017 , we have senior unsecured unsecured note outstanding due in 2021 , 2024 , and 2026 outstanding due in 2021 , 2024 , and 2026 with a 2021 , 2024 , and 2026 with a total carrying value total carrying value of $ 3.9 billion and a total estimated estimated fair value of $ 4.0 billion . In October 2016 4.0 billion . In October 2016 , the Board of Directors repurchase of up to $ 7.0 billion of Alphabet Class C C capital stock . In 2017 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million share of Alphabet Class an aggregate amount of $ 4.8 billion . In January 2018 4.8 billion . In January 2018 , the Board of Directors up to an additional $ 8.6 billion of Alphabet Class C transaction , including through Rule 10b5-1 plan . 39 Table of through Rule 10b5-1 plan . 39 Table of Contents Alphabet Inc Alphabet Inc . In January 2017 , Temasek , a Singapore-based for an aggregate of $ 800 million in cash . We the first tranche of $ 480 million in the first quarter in the first quarter of 2017 and the final tranche of the final tranche of $ 320 million in the third quarter in the third quarter of 2017 . The following table present ) : Year Ended December 31 , 2015 2016 2017 Net Year Ended December 31 , 2015 2016 2017 Net cash provided Ended December 31 , 2015 2016 2017 Net cash provided by December 31 , 2015 2016 2017 Net cash provided by operating provided by operating activity $ 26,572 $ 36,036 $ 37,091 Net operating activity $ 26,572 $ 36,036 $ 37,091 Net cash used $ 26,572 $ 36,036 $ 37,091 Net cash used in investing in investing activity $ ( 23,711 ) $ ( 31,165 ) ( 23,711 ) $ ( 31,165 ) $ ( 31,401 ) ( 31,165 ) $ ( 31,401 ) Net cash used in in financing activity $ ( 4,225 ) $ ( 8,332 ) ( 4,225 ) $ ( 8,332 ) $ ( 8,298 ) ( 8,332 ) $ ( 8,298 ) Cash Provided by Operating by operating activity increased from 2016 to 2017 primarily due to activity increased from 2016 to 2017 primarily due to increase in by operating activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in cash flow from operation for 2016 compared to 2015 . Cash operation for 2016 compared to 2015 . Cash Used in Investing investing activity increased slightly from 2016 to 2017 primarily due to increased slightly from 2016 to 2017 primarily due to increase in in investing activity increased from 2015 to 2016 primarily due to activity increased from 2015 to 2016 primarily due to increase in financing activity decreased slightly from 2016 to 2017 primarily driven by decreased slightly from 2016 to 2017 primarily driven by decrease in in financing activity increased from 2015 to 2016 primarily driven by activity increased from 2015 to 2016 primarily driven by decrease in decrease in debt repayment . 40 Table of Contents Alphabet Inc Contractual Obligations a of December 31 , 2017 The following summarizes a of December 31 , 2017 The following summarizes our contractual contractual obligation a of December 31 , 2017 ( in million a of December 31 , 2017 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation , of sublease income amount ( 1 ) $ 8,753 $ 1,160 amount ( 1 ) $ 8,753 $ 1,160 $ 2,182 $ 1 ) $ 8,753 $ 1,160 $ 2,182 $ 1,796 $ $ 8,753 $ 1,160 $ 2,182 $ 1,796 $ 3,615 Purchase $ 1,160 $ 2,182 $ 1,796 $ 3,615 Purchase obligation ( $ 2,182 $ 1,796 $ 3,615 Purchase obligation ( 2 ) $ 3,615 Purchase obligation ( 2 ) 7,154 4,548 1,910 241 Purchase obligation ( 2 ) 7,154 4,548 1,910 241 455 Long-term obligation ( 2 ) 7,154 4,548 1,910 241 455 Long-term debt ( 2 ) 7,154 4,548 1,910 241 455 Long-term debt obligation 2 ) 7,154 4,548 1,910 241 455 Long-term debt obligation ( ) 7,154 4,548 1,910 241 455 Long-term debt obligation ( 3 455 Long-term debt obligation ( 3 ) 4,744 112 224 1,170 debt obligation ( 3 ) 4,744 112 224 1,170 3,238 Tax obligation ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 3 ) 4,744 112 224 1,170 3,238 Tax payable ( 4 ) 4,744 112 224 1,170 3,238 Tax payable ( 4 ) 1,170 3,238 Tax payable ( 4 ) 10,233 890 1,746 1,746 Tax payable ( 4 ) 10,233 890 1,746 1,746 5,851 Other payable ( 4 ) 10,233 890 1,746 1,746 5,851 Other long-term ( 4 ) 10,233 890 1,746 1,746 5,851 Other long-term liability 4 ) 10,233 890 1,746 1,746 5,851 Other long-term liability reflected ) 10,233 890 1,746 1,746 5,851 Other long-term liability reflected on on our balance sheet ( 5 ) 2,416 348 619 511 balance sheet ( 5 ) 2,416 348 619 511 938 Total sheet ( 5 ) 2,416 348 619 511 938 Total contractual ( 5 ) 2,416 348 619 511 938 Total contractual obligation 5 ) 2,416 348 619 511 938 Total contractual obligation $ ) 2,416 348 619 511 938 Total contractual obligation $ 33,300 938 Total contractual obligation $ 33,300 $ 7,058 $ 6,681 $ contractual obligation $ 33,300 $ 7,058 $ 6,681 $ 5,464 $ $ 33,300 $ 7,058 $ 6,681 $ 5,464 $ 14,097 ( $ 7,058 $ 6,681 $ 5,464 $ 14,097 ( 1 ) $ 6,681 $ 5,464 $ 14,097 ( 1 ) For further $ 5,464 $ 14,097 ( 1 ) For further information , information , refer to Note 10 of the Notes to Consolidated this Annual Report on Form 10-K. ( 2 ) Represents non-cancelable Report on Form 10-K. ( 2 ) Represents non-cancelable contractual obligation and/or pricing a of December 31 , 2017 . Excluded from a of December 31 , 2017 . Excluded from the table support normal operation . ( 3 ) Represents our principal and debt , refer to Note 6 of the Notes to Consolidated this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 3.5 billion a of December 31 3.5 billion a of December 31 , 2017 related to uncertain a of December 31 , 2017 related to uncertain tax position position in individual year beyond 12 month due to uncertainty in tax audit outcome . ( 5 ) Represents cash obligation recorded Sheet Arrangements As of December 31 , 2017 , we did As of December 31 , 2017 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of director . Please see Note 1 of Part II , Item of Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for the summary of significant of significant accounting policy . 41 Table of Contents Alphabet Inc Act wa enacted on December 22 , 2017 and introduces significant enacted on December 22 , 2017 and introduces significant change to tax law . Effective in 2018 , the Tax Act reduces U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax . In addition , in 2017 we are subject to a for the year ended December 31 , 2017 . As we year ended December 31 , 2017 . As we collect and Act will be completed in 2018 . Although we believe we cash flow . See Note 10 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information regarding contingency When determining the fair value 42 Table of Contents Alphabet Inc. more fully discussed in Note 8 of Notes to Consolidated Financial Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Goodwill Goodwill is allocated we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis ) , net . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES forward point and time value 43 Table of Contents Alphabet Inc. change in exchange rate of 10 % could be experienced in the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2016 and December 31 a of December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 , the amount 2016 and December 31 , 2017 , the amount recorded in would have been approximately $ 920 million and $ 950 million $ 920 million and $ 950 million lower a of December million lower a of December 31 , 2016 and December 31 a of December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 , respectively . 2016 and December 31 , 2017 , respectively . The change change in exchange rate of 10 % for all currency could change in exchange rate of 10 % were applied to total income tax of approximately $ 40 million and $ 52 million $ 40 million and $ 52 million a of December 31 52 million a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , respectively . December 31 , 2016 and 2017 , respectively . The adverse adverse impact a of December 31 , 2016 and 2017 is a of December 31 , 2016 and 2017 is after consideration December 31 , 2016 and 2017 is after consideration of the offsetting effect of approximately $ 554 million and $ 374 million $ 554 million and $ 374 million , respectively , from for the month ended December 31 , 2016 and December 31 month ended December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 . Interest Rate 2016 and December 31 , 2017 . Interest Rate Risk Our a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2016 and 2017 are a of December 31 , 2016 and 2017 are shown below December 31 , 2016 and 2017 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2016 2017 2016 2017 As of December 31 , 2016 2017 2016 2017 Risk Category of December 31 , 2016 2017 2016 2017 Risk Category - December 31 , 2016 2017 2016 2017 Risk Category - Interest 31 , 2016 2017 2016 2017 Risk Category - Interest Rate Category - Interest Rate $ 107 $ 84 $ 99 $ Interest Rate $ 107 $ 84 $ 99 $ 87 Actual $ 107 $ 84 $ 99 $ 87 Actual future gain $ 84 $ 99 $ 87 Actual future gain and loss analysis performed a of December 31 , 2016 and 2017 due a of December 31 , 2016 and 2017 due to the December 31 , 2016 and 2017 due to the inherent limitation a a risk estimation . 44 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 46 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 48 Consolidated Statements of Income 49 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 53 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 45 Table of Contents Alphabet Inc. Company ) a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , the related December 31 , 2016 and 2017 , the related consolidated statement in the period ended December 31 , 2017 , and the period ended December 31 , 2017 , and the related note in the Index at Item 15 ( a ) 2 ( Item 15 ( a ) 2 ( collectively referred to a of the Company at December 31 , 2016 and 2017 , Company at December 31 , 2016 and 2017 , and the December 31 , 2016 and 2017 , and the consolidated result in the period ended December 31 , 2017 , in conformity period ended December 31 , 2017 , in conformity with U.S. financial reporting a of December 31 , 2017 , based on a of December 31 , 2017 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report ) and our report February 5 , 2018 expressed an unqualified our report February 5 , 2018 expressed an unqualified opinion thereon the Company 's auditor since 1999 . San Jose , California San Jose , California February 5 , 2018 46 Table of , California February 5 , 2018 46 Table of Contents Alphabet California February 5 , 2018 46 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2017 , based on a of December 31 , 2017 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO financial reporting a of December 31 , 2017 , based on a of December 31 , 2017 , based on the COSO the Company a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , and the December 31 , 2016 and 2017 , and the related consolidated in the period ended December 31 , 2017 , and the period ended December 31 , 2017 , and the related note in the Index at Item 15 ( a ) 2 , Item 15 ( a ) 2 , of the Company and and our report dated February 5 , 2018 expressed an unqualified report dated February 5 , 2018 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 5 , 2018 47 Table of , California February 5 , 2018 47 Table of Contents Alphabet California February 5 , 2018 47 Table of Contents Alphabet Inc amount ) As of December 31 , 2016 As of December As of December 31 , 2016 As of December 31 , , 2016 As of December 31 , 2017 Assets Current asset As of December 31 , 2017 Assets Current asset : Cash Cash and cash equivalent $ 12,918 $ 10,715 Marketable security 73,415 cash equivalent $ 12,918 $ 10,715 Marketable security 73,415 91,156 Total 12,918 $ 10,715 Marketable security 73,415 91,156 Total cash , cash $ 10,715 Marketable security 73,415 91,156 Total cash , cash equivalent equivalent , and marketable security 86,333 101,871 Accounts receivable , net , and marketable security 86,333 101,871 Accounts receivable , net of net of allowance of $ 467 and $ 674 14,137 18,336 of $ 467 and $ 674 14,137 18,336 Income tax receivable $ 467 and $ 674 14,137 18,336 Income tax receivable , 467 and $ 674 14,137 18,336 Income tax receivable , net Income tax receivable , net 95 369 Inventory 268 749 Other tax receivable , net 95 369 Inventory 268 749 Other current , net 95 369 Inventory 268 749 Other current asset 4,575 net 95 369 Inventory 268 749 Other current asset 4,575 2,983 268 749 Other current asset 4,575 2,983 Total current asset 105,408 749 Other current asset 4,575 2,983 Total current asset 105,408 124,308 4,575 2,983 Total current asset 105,408 124,308 Non-marketable investment 5,878 7,813 2,983 Total current asset 105,408 124,308 Non-marketable investment 5,878 7,813 Deferred asset 105,408 124,308 Non-marketable investment 5,878 7,813 Deferred income tax 383 105,408 124,308 Non-marketable investment 5,878 7,813 Deferred income tax 383 680 5,878 7,813 Deferred income tax 383 680 Property and equipment , 7,813 Deferred income tax 383 680 Property and equipment , net Property and equipment , net 34,234 42,383 Intangible asset , net and equipment , net 34,234 42,383 Intangible asset , net 3,307 42,383 Intangible asset , net 3,307 2,692 Goodwill 16,468 16,747 Other Intangible asset , net 3,307 2,692 Goodwill 16,468 16,747 Other non-current , net 3,307 2,692 Goodwill 16,468 16,747 Other non-current asset 1,819 net 3,307 2,692 Goodwill 16,468 16,747 Other non-current asset 1,819 2,672 16,468 16,747 Other non-current asset 1,819 2,672 Total asset $ 167,497 16,747 Other non-current asset 1,819 2,672 Total asset $ 167,497 $ 1,819 2,672 Total asset $ 167,497 $ 197,295 Liabilities and Stockholders Total asset $ 167,497 $ 197,295 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 2,041 $ 3,137 Accrued compensation and Accounts payable $ 2,041 $ 3,137 Accrued compensation and benefit 3,976 3,137 Accrued compensation and benefit 3,976 4,581 Accrued expense and other Accrued compensation and benefit 3,976 4,581 Accrued expense and other current expense and other current liability 6,144 10,177 Accrued revenue share 2,942 and other current liability 6,144 10,177 Accrued revenue share 2,942 3,975 6,144 10,177 Accrued revenue share 2,942 3,975 Deferred revenue 1,099 1,432 10,177 Accrued revenue share 2,942 3,975 Deferred revenue 1,099 1,432 Income share 2,942 3,975 Deferred revenue 1,099 1,432 Income tax payable , 2,942 3,975 Deferred revenue 1,099 1,432 Income tax payable , net Income tax payable , net 554 881 Total current liability 16,756 tax payable , net 554 881 Total current liability 16,756 24,183 554 881 Total current liability 16,756 24,183 Long-term debt 3,935 3,969 881 Total current liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred liability 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 16,756 24,183 Long-term debt 3,935 3,969 Deferred revenue , non-current 202 3,969 Deferred revenue , non-current 202 340 Income tax payable , Deferred revenue , non-current 202 340 Income tax payable , non-current Income tax payable , non-current 4,677 12,812 Deferred income tax 226 tax payable , non-current 4,677 12,812 Deferred income tax 226 430 4,677 12,812 Deferred income tax 226 430 Other long-term liability 2,665 12,812 Deferred income tax 226 430 Other long-term liability 2,665 3,059 226 430 Other long-term liability 2,665 3,059 Total liability 28,461 44,793 430 Other long-term liability 2,665 3,059 Total liability 28,461 44,793 Commitments liability 2,665 3,059 Total liability 28,461 44,793 Commitments and Contingencies ( 2,665 3,059 Total liability 28,461 44,793 Commitments and Contingencies ( Note Commitments and Contingencies ( Note 10 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 691,293 ( Class Class C 3,000,000 ) ; 691,293 ( Class A 296,992 , ; 691,293 ( Class A 296,992 , Class B 47,437 , A 296,992 , Class B 47,437 , Class C 346,864 ) B 47,437 , Class C 346,864 ) and 694,783 ( Class Class C 346,864 ) and 694,783 ( Class A 298,470 , and 694,783 ( Class A 298,470 , Class B 46,972 , A 298,470 , Class B 46,972 , Class C 349,341 ) B 46,972 , Class C 349,341 ) share issued and outstanding ) share issued and outstanding 36,307 40,247 Accumulated other comprehensive loss share issued and outstanding 36,307 40,247 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 2,402 ) ( 992 ) Retained loss ( 2,402 ) ( 992 ) Retained earnings 105,131 113,247 ( 992 ) Retained earnings 105,131 113,247 Total stockholder ’ equity 992 ) Retained earnings 105,131 113,247 Total stockholder ’ equity 139,036 113,247 Total stockholder ’ equity 139,036 152,502 Total liability and stockholder Total stockholder ’ equity 139,036 152,502 Total liability and stockholder ’ and stockholder ’ equity $ 167,497 $ 197,295 See accompanying note ’ equity $ 167,497 $ 197,295 See accompanying note . 48 197,295 See accompanying note . 48 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2015 2016 2017 Revenues Year Ended December 31 , 2015 2016 2017 Revenues $ 74,989 Ended December 31 , 2015 2016 2017 Revenues $ 74,989 $ December 31 , 2015 2016 2017 Revenues $ 74,989 $ 90,272 2015 2016 2017 Revenues $ 74,989 $ 90,272 $ 110,855 Costs 2017 Revenues $ 74,989 $ 90,272 $ 110,855 Costs and expense $ 74,989 $ 90,272 $ 110,855 Costs and expense : Cost expense : Cost of revenue 28,164 35,138 45,583 Research and development : Cost of revenue 28,164 35,138 45,583 Research and development 12,282 Cost of revenue 28,164 35,138 45,583 Research and development 12,282 13,948 35,138 45,583 Research and development 12,282 13,948 16,625 Sales and marketing 45,583 Research and development 12,282 13,948 16,625 Sales and marketing 9,047 Research and development 12,282 13,948 16,625 Sales and marketing 9,047 10,485 13,948 16,625 Sales and marketing 9,047 10,485 12,893 General and administrative 16,625 Sales and marketing 9,047 10,485 12,893 General and administrative 6,136 Sales and marketing 9,047 10,485 12,893 General and administrative 6,136 6,985 10,485 12,893 General and administrative 6,136 6,985 6,872 European Commission fine 12,893 General and administrative 6,136 6,985 6,872 European Commission fine 0 General and administrative 6,136 6,985 6,872 European Commission fine 0 0 6,985 6,872 European Commission fine 0 0 2,736 Total cost and 6,872 European Commission fine 0 0 2,736 Total cost and expense European Commission fine 0 0 2,736 Total cost and expense 55,629 2,736 Total cost and expense 55,629 66,556 84,709 Income from operation Total cost and expense 55,629 66,556 84,709 Income from operation 19,360 cost and expense 55,629 66,556 84,709 Income from operation 19,360 23,716 66,556 84,709 Income from operation 19,360 23,716 26,146 Other income ( 84,709 Income from operation 19,360 23,716 26,146 Other income ( expense Income from operation 19,360 23,716 26,146 Other income ( expense ) ( expense ) , net 291 434 1,047 Income before income expense ) , net 291 434 1,047 Income before income tax ) , net 291 434 1,047 Income before income tax 19,651 1,047 Income before income tax 19,651 24,150 27,193 Provision for income Income before income tax 19,651 24,150 27,193 Provision for income tax before income tax 19,651 24,150 27,193 Provision for income tax 3,303 27,193 Provision for income tax 3,303 4,672 14,531 Net income $ Provision for income tax 3,303 4,672 14,531 Net income $ 16,348 for income tax 3,303 4,672 14,531 Net income $ 16,348 $ 4,672 14,531 Net income $ 16,348 $ 19,478 $ 12,662 Less Net income $ 16,348 $ 19,478 $ 12,662 Less : Adjustment $ 16,348 $ 19,478 $ 12,662 Less : Adjustment Payment to to Class C capital stockholder 522 0 0 Net income available Class C capital stockholder 522 0 0 Net income available to C capital stockholder 522 0 0 Net income available to all available to all stockholder $ 15,826 $ 19,478 $ 12,662 Basic all stockholder $ 15,826 $ 19,478 $ 12,662 Basic net income $ 15,826 $ 19,478 $ 12,662 Basic net income per share and B common stock $ 23.11 $ 28.32 $ 18.27 Basic common stock $ 23.11 $ 28.32 $ 18.27 Basic net income $ 23.11 $ 28.32 $ 18.27 Basic net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 Diluted capital stock $ 24.63 $ 28.32 $ 18.27 Diluted net income $ 24.63 $ 28.32 $ 18.27 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 Diluted common stock $ 22.84 $ 27.85 $ 18.00 Diluted net income $ 22.84 $ 27.85 $ 18.00 Diluted net income per share Class C capital stock $ 24.34 $ 27.85 $ 18.00 See capital stock $ 24.34 $ 27.85 $ 18.00 See accompanying note $ 24.34 $ 27.85 $ 18.00 See accompanying note . 49 18.00 See accompanying note . 49 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2015 2016 2017 Net Year Ended December 31 , 2015 2016 2017 Net income $ Ended December 31 , 2015 2016 2017 Net income $ 16,348 December 31 , 2015 2016 2017 Net income $ 16,348 $ 2016 2017 Net income $ 16,348 $ 19,478 $ 12,662 Other Net income $ 16,348 $ 19,478 $ 12,662 Other comprehensive income $ 16,348 $ 19,478 $ 12,662 Other comprehensive income ( loss foreign currency translation adjustment ( 1,067 ) ( 599 ) 1,543 adjustment ( 1,067 ) ( 599 ) 1,543 Available-for-sale investment : 1,067 ) ( 599 ) 1,543 Available-for-sale investment : Change in gain ( loss ) ( 715 ) ( 314 ) 307 ) ( 715 ) ( 314 ) 307 Less : reclassification 715 ) ( 314 ) 307 Less : reclassification adjustment for loss included in net income 208 221 105 Net change ( included in net income 208 221 105 Net change ( net in net income 208 221 105 Net change ( net of of tax effect of $ 29 , $ 0 , and of $ 29 , $ 0 , and $ 0 ) $ 0 , and $ 0 ) ( 507 ) ( and $ 0 ) ( 507 ) ( 93 ) 412 ) ( 507 ) ( 93 ) 412 Cash flow hedge 507 ) ( 93 ) 412 Cash flow hedge : Change unrealized gain ( loss ) 676 515 ( 638 ) Less gain ( loss ) 676 515 ( 638 ) Less : loss ) 676 515 ( 638 ) Less : reclassification adjustment included in net income ( 1,003 ) ( 351 ) 93 income ( 1,003 ) ( 351 ) 93 Net change ( 1,003 ) ( 351 ) 93 Net change ( net of of tax effect of $ 115 , $ 64 , and of $ 115 , $ 64 , and $ 247 ) $ 64 , and $ 247 ) ( 327 ) 164 and $ 247 ) ( 327 ) 164 ( 545 ) 247 ) ( 327 ) 164 ( 545 ) Other comprehensive ( 327 ) 164 ( 545 ) Other comprehensive income ( income ( loss ) ( 1,901 ) ( 528 ) 1,410 ) ( 1,901 ) ( 528 ) 1,410 Comprehensive income $ 1,901 ) ( 528 ) 1,410 Comprehensive income $ 14,447 $ ) 1,410 Comprehensive income $ 14,447 $ 18,950 $ 14,072 See Comprehensive income $ 14,447 $ 18,950 $ 14,072 See accompanying note $ 14,447 $ 18,950 $ 14,072 See accompanying note . 50 14,072 See accompanying note . 50 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2014 680,172 $ 28,767 a of December 31 , 2014 680,172 $ 28,767 $ 27 of December 31 , 2014 680,172 $ 28,767 $ 27 $ 31 , 2014 680,172 $ 28,767 $ 27 $ 75,066 $ 2014 680,172 $ 28,767 $ 27 $ 75,066 $ 103,860 Common $ 28,767 $ 27 $ 75,066 $ 103,860 Common and capital $ 27 $ 75,066 $ 103,860 Common and capital stock issued Common and capital stock issued 8,714 664 0 0 664 Stock-based and capital stock issued 8,714 664 0 0 664 Stock-based compensation capital stock issued 8,714 664 0 0 664 Stock-based compensation expense stock issued 8,714 664 0 0 664 Stock-based compensation expense 0 issued 8,714 664 0 0 664 Stock-based compensation expense 0 5,151 0 664 Stock-based compensation expense 0 5,151 0 0 5,151 Stock-based 664 Stock-based compensation expense 0 5,151 0 0 5,151 Stock-based compensation Stock-based compensation expense 0 5,151 0 0 5,151 Stock-based compensation tax compensation expense 0 5,151 0 0 5,151 Stock-based compensation tax benefit expense 0 5,151 0 0 5,151 Stock-based compensation tax benefit 0 5,151 Stock-based compensation tax benefit 0 815 0 0 815 Tax Stock-based compensation tax benefit 0 815 0 0 815 Tax withholding compensation tax benefit 0 815 0 0 815 Tax withholding related tax benefit 0 815 0 0 815 Tax withholding related to benefit 0 815 0 0 815 Tax withholding related to vesting vesting of restricted stock unit 0 ( 2,779 ) 0 0 restricted stock unit 0 ( 2,779 ) 0 0 ( 2,779 unit 0 ( 2,779 ) 0 0 ( 2,779 ) Repurchases 0 ( 2,779 ) 0 0 ( 2,779 ) Repurchases of 2,779 ) 0 0 ( 2,779 ) Repurchases of capital stock Repurchases of capital stock ( 2,391 ) ( 111 ) 0 stock ( 2,391 ) ( 111 ) 0 ( 1,669 ) 2,391 ) ( 111 ) 0 ( 1,669 ) ( 1,780 ( 111 ) 0 ( 1,669 ) ( 1,780 ) Adjustment 0 ( 1,669 ) ( 1,780 ) Adjustment Payment to Class to Class C capital stockholder 853 475 0 ( 522 ) Class C capital stockholder 853 475 0 ( 522 ) ( C capital stockholder 853 475 0 ( 522 ) ( 47 stockholder 853 475 0 ( 522 ) ( 47 ) Net 0 ( 522 ) ( 47 ) Net income 0 0 ( 47 ) Net income 0 0 0 16,348 16,348 Other 47 ) Net income 0 0 0 16,348 16,348 Other comprehensive ) Net income 0 0 0 16,348 16,348 Other comprehensive loss Net income 0 0 0 16,348 16,348 Other comprehensive loss 0 income 0 0 0 16,348 16,348 Other comprehensive loss 0 0 16,348 16,348 Other comprehensive loss 0 0 ( 1,901 ) 0 16,348 Other comprehensive loss 0 0 ( 1,901 ) 0 ( comprehensive loss 0 0 ( 1,901 ) 0 ( 1,901 ) 0 0 ( 1,901 ) 0 ( 1,901 ) Balance a ( 1,901 ) 0 ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 687,348 32,982 ( a of December 31 , 2015 687,348 32,982 ( 1,874 ) of December 31 , 2015 687,348 32,982 ( 1,874 ) 89,223 December 31 , 2015 687,348 32,982 ( 1,874 ) 89,223 120,331 , 2015 687,348 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect 687,348 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect of accounting 32,982 ( 1,874 ) 89,223 120,331 Cumulative effect of accounting change Cumulative effect of accounting change 0 180 0 ( 133 ) effect of accounting change 0 180 0 ( 133 ) 47 of accounting change 0 180 0 ( 133 ) 47 Common change 0 180 0 ( 133 ) 47 Common and capital 180 0 ( 133 ) 47 Common and capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 0 issued 9,106 298 0 0 298 Stock-based compensation expense 0 6,700 0 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding related compensation expense 0 6,700 0 0 6,700 Tax withholding related to expense 0 6,700 0 0 6,700 Tax withholding related to vesting vesting of restricted stock unit 0 ( 3,597 ) 0 0 restricted stock unit 0 ( 3,597 ) 0 0 ( 3,597 unit 0 ( 3,597 ) 0 0 ( 3,597 ) Repurchases 0 ( 3,597 ) 0 0 ( 3,597 ) Repurchases of 3,597 ) 0 0 ( 3,597 ) Repurchases of capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehensive loss 0 0 ( 528 ) 0 19,478 Other comprehensive loss 0 0 ( 528 ) 0 ( comprehensive loss 0 0 ( 528 ) 0 ( 528 ) 0 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 691,293 36,307 ( a of December 31 , 2016 691,293 36,307 ( 2,402 ) of December 31 , 2016 691,293 36,307 ( 2,402 ) 105,131 December 31 , 2016 691,293 36,307 ( 2,402 ) 105,131 139,036 , 2016 691,293 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect 691,293 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect of accounting 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 0 ( 15 ) effect of accounting change 0 0 0 ( 15 ) ( of accounting change 0 0 0 ( 15 ) ( 15 change 0 0 0 ( 15 ) ( 15 ) Common 0 ( 15 ) ( 15 ) Common and capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding related compensation expense 0 7,694 0 0 7,694 Tax withholding related to expense 0 7,694 0 0 7,694 Tax withholding related to vesting vesting of restricted stock unit 0 ( 4,373 ) 0 0 restricted stock unit 0 ( 4,373 ) 0 0 ( 4,373 unit 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases of 4,373 ) 0 0 ( 4,373 ) Repurchases of capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of subsidiary share ) Sale of subsidiary share 0 722 0 0 722 Net Sale of subsidiary share 0 722 0 0 722 Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income 0 income 0 0 0 12,662 12,662 Other comprehensive income 0 0 12,662 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance a Other comprehensive income 0 0 1,410 0 1,410 Balance a of comprehensive income 0 0 1,410 0 1,410 Balance a of December income 0 0 1,410 0 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 694,783 $ 40,247 a of December 31 , 2017 694,783 $ 40,247 $ ( of December 31 , 2017 694,783 $ 40,247 $ ( 992 31 , 2017 694,783 $ 40,247 $ ( 992 ) $ 694,783 $ 40,247 $ ( 992 ) $ 113,247 $ 152,502 $ ( 992 ) $ 113,247 $ 152,502 See accompanying note 992 ) $ 113,247 $ 152,502 See accompanying note . 51 152,502 See accompanying note . 51 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2015 2016 2017 Operating Year Ended December 31 , 2015 2016 2017 Operating activity Net Ended December 31 , 2015 2016 2017 Operating activity Net income December 31 , 2015 2016 2017 Operating activity Net income $ Operating activity Net income $ 16,348 $ 19,478 $ 12,662 Adjustments Net income $ 16,348 $ 19,478 $ 12,662 Adjustments : Depreciation $ 16,348 $ 19,478 $ 12,662 Adjustments : Depreciation and impairment impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of property and equipment 4,132 5,267 6,103 Amortization and impairment of intangible and impairment of intangible asset 931 877 812 Stock-based compensation expense impairment of intangible asset 931 877 812 Stock-based compensation expense 5,203 of intangible asset 931 877 812 Stock-based compensation expense 5,203 6,703 877 812 Stock-based compensation expense 5,203 6,703 7,679 Deferred income tax 812 Stock-based compensation expense 5,203 6,703 7,679 Deferred income tax ( Stock-based compensation expense 5,203 6,703 7,679 Deferred income tax ( 179 7,679 Deferred income tax ( 179 ) ( 38 ) 258 tax ( 179 ) ( 38 ) 258 Loss on marketable 179 ) ( 38 ) 258 Loss on marketable and non-marketable and non-marketable investment , net 334 275 194 Other 212 174 non-marketable investment , net 334 275 194 Other 212 174 137 investment , net 334 275 194 Other 212 174 137 Changes net 334 275 194 Other 212 174 137 Changes in asset 334 275 194 Other 212 174 137 Changes in asset and 275 194 Other 212 174 137 Changes in asset and liability acquisition : Accounts receivable ( 2,094 ) ( 2,578 ) ( receivable ( 2,094 ) ( 2,578 ) ( 3,768 ) Income ) ( 2,578 ) ( 3,768 ) Income tax , net Income tax , net ( 179 ) 3,125 8,211 Other asset , net ( 179 ) 3,125 8,211 Other asset ( 318 net ( 179 ) 3,125 8,211 Other asset ( 318 ) 3,125 8,211 Other asset ( 318 ) 312 ( 2,164 ) Other asset ( 318 ) 312 ( 2,164 ) Accounts payable ( 318 ) 312 ( 2,164 ) Accounts payable 203 110 ( 2,164 ) Accounts payable 203 110 731 Accrued expense and 2,164 ) Accounts payable 203 110 731 Accrued expense and other ) Accounts payable 203 110 731 Accrued expense and other liability Accrued expense and other liability 1,597 1,515 4,891 Accrued revenue share expense and other liability 1,597 1,515 4,891 Accrued revenue share 339 and other liability 1,597 1,515 4,891 Accrued revenue share 339 593 1,515 4,891 Accrued revenue share 339 593 955 Deferred revenue 43 4,891 Accrued revenue share 339 593 955 Deferred revenue 43 223 Accrued revenue share 339 593 955 Deferred revenue 43 223 390 339 593 955 Deferred revenue 43 223 390 Net cash provided 593 955 Deferred revenue 43 223 390 Net cash provided by 955 Deferred revenue 43 223 390 Net cash provided by operating cash provided by operating activity 26,572 36,036 37,091 Investing activity Purchases provided by operating activity 26,572 36,036 37,091 Investing activity Purchases of by operating activity 26,572 36,036 37,091 Investing activity Purchases of property of property and equipment ( 9,950 ) ( 10,212 ) ( equipment ( 9,950 ) ( 10,212 ) ( 13,184 ) Proceeds ) ( 10,212 ) ( 13,184 ) Proceeds from disposal of disposal of property and equipment 35 240 99 Purchases of marketable of property and equipment 35 240 99 Purchases of marketable security property and equipment 35 240 99 Purchases of marketable security ( Purchases of marketable security ( 74,368 ) ( 84,509 ) ( security ( 74,368 ) ( 84,509 ) ( 92,195 ) Maturities ) ( 84,509 ) ( 92,195 ) Maturities and sale of and sale of marketable security 62,905 66,895 73,959 Purchases of non-marketable sale of marketable security 62,905 66,895 73,959 Purchases of non-marketable investment of marketable security 62,905 66,895 73,959 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 2,326 ) ( 1,109 ) ( investment ( 2,326 ) ( 1,109 ) ( 1,745 ) Maturities ) ( 1,109 ) ( 1,745 ) Maturities and sale of and sale of non-marketable investment 154 494 533 Cash collateral related sale of non-marketable investment 154 494 533 Cash collateral related to of non-marketable investment 154 494 533 Cash collateral related to security related to security lending ( 350 ) ( 2,428 ) 0 lending ( 350 ) ( 2,428 ) 0 Investments in reverse 350 ) ( 2,428 ) 0 Investments in reverse repurchase agreement Investments in reverse repurchase agreement 425 450 0 Acquisitions , net in reverse repurchase agreement 425 450 0 Acquisitions , net of reverse repurchase agreement 425 450 0 Acquisitions , net of cash purchase of intangible asset ( 236 ) ( 986 ) ( asset ( 236 ) ( 986 ) ( 287 ) Proceeds ) ( 986 ) ( 287 ) Proceeds from collection of from collection of note receivable 0 0 1,419 Net cash used collection of note receivable 0 0 1,419 Net cash used in of note receivable 0 0 1,419 Net cash used in investing used in investing activity ( 23,711 ) ( 31,165 ) ( activity ( 23,711 ) ( 31,165 ) ( 31,401 ) Financing ) ( 31,165 ) ( 31,401 ) Financing activity Net payment to stock-based award activity ( 2,375 ) ( 3,304 ) ( activity ( 2,375 ) ( 3,304 ) ( 4,166 ) Adjustment ) ( 3,304 ) ( 4,166 ) Adjustment Payment to Class Class C capital stockholder ( 47 ) 0 0 Repurchases of capital stockholder ( 47 ) 0 0 Repurchases of capital stock stockholder ( 47 ) 0 0 Repurchases of capital stock ( Repurchases of capital stock ( 1,780 ) ( 3,693 ) ( stock ( 1,780 ) ( 3,693 ) ( 4,846 ) Proceeds ) ( 3,693 ) ( 4,846 ) Proceeds from issuance of debt , net of cost 13,705 8,729 4,291 Repayments of debt , net of cost 13,705 8,729 4,291 Repayments of debt ( net of cost 13,705 8,729 4,291 Repayments of debt ( 13,728 4,291 Repayments of debt ( 13,728 ) ( 10,064 ) ( debt ( 13,728 ) ( 10,064 ) ( 4,377 ) Proceeds ) ( 10,064 ) ( 4,377 ) Proceeds from sale of from sale of subsidiary share 0 0 800 Net cash used sale of subsidiary share 0 0 800 Net cash used in of subsidiary share 0 0 800 Net cash used in financing used in financing activity ( 4,225 ) ( 8,332 ) ( activity ( 4,225 ) ( 8,332 ) ( 8,298 ) Effect ) ( 8,332 ) ( 8,298 ) Effect of exchange rate cash and cash equivalent ( 434 ) ( 170 ) 405 equivalent ( 434 ) ( 170 ) 405 Net decrease in 434 ) ( 170 ) 405 Net decrease in cash and cash and cash equivalent ( 1,798 ) ( 3,631 ) ( equivalent ( 1,798 ) ( 3,631 ) ( 2,203 ) Cash ) ( 3,631 ) ( 2,203 ) Cash and cash equivalent equivalent at beginning of period 18,347 16,549 12,918 Cash and cash at beginning of period 18,347 16,549 12,918 Cash and cash equivalent beginning of period 18,347 16,549 12,918 Cash and cash equivalent at at end of period $ 16,549 $ 12,918 $ 10,715 Supplemental of period $ 16,549 $ 12,918 $ 10,715 Supplemental disclosure of $ 16,549 $ 12,918 $ 10,715 Supplemental disclosure of cash flow , net of refund $ 3,651 $ 1,643 $ 6,191 Cash of refund $ 3,651 $ 1,643 $ 6,191 Cash paid for $ 3,651 $ 1,643 $ 6,191 Cash paid for interest , net of amount capitalized $ 96 $ 84 $ 84 See amount capitalized $ 96 $ 84 $ 84 See accompanying note $ 96 $ 84 $ 84 See accompanying note . 52 84 See accompanying note . 52 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding or service . See Note 2 for further discussion on Revenues for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 . Certain 2015 , 2016 , and 2017 . Certain Risks and Concentrations affiliated customer represented more than 10 % of our revenue in % of our revenue in 2015 , 2016 , or 2017 our revenue in 2015 , 2016 , or 2017 . In 2015 , 2016 , or 2017 . In 2015 , 2016 , or 2017 . In 2015 , 2016 , and 2017 2017 . In 2015 , 2016 , and 2017 , we 2015 , 2016 , and 2017 , we generated approximately 46 2017 , we generated approximately 46 % , 47 % , generated approximately 46 % , 47 % , and 47 % , 47 % , and 47 % of our revenue , in the U.S. See Note 2 for further detail . Fair measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Include other input that and credit rating . Level 3 - Unobservable input that are issued by foreign government . 53 Table of Contents Alphabet Inc. liquid security with maturity beyond 12 month a current asset under the following criterion : ( 1 ) ha the power to the VIE ; and ( 2 ) ha the obligation to we also consider whether ( 1 ) it is more likely cost basis , and ( 2 ) the amortized cost basis building over period up to 25 year . We generally depreciate asset over period up to 7 year . We depreciate leasehold been placed in service for 54 Table of Contents Alphabet Inc. impairment were not material in 2015 , 2016 , or 2017 not material in 2015 , 2016 , or 2017 . We 2015 , 2016 , or 2017 . We allocate goodwill to No goodwill impairment occurred in 2015 , 2016 , or 2017 impairment occurred in 2015 , 2016 , or 2017 . Intangible 2015 , 2016 , or 2017 . Intangible asset with definite benefit that is greater than 50 % likely to be realized and expense . We record 55 Table of Contents Alphabet Inc. For the year ended December 31 , 2015 , 2016 and year ended December 31 , 2015 , 2016 and 2017 , December 31 , 2015 , 2016 and 2017 , advertising and , 2015 , 2016 and 2017 , advertising and promotional expense promotional expense totaled approximately $ 3.2 billion , $ 3.9 billion $ 3.2 billion , $ 3.9 billion , and $ 5.1 3.9 billion , and $ 5.1 billion , respectively . Recent not yet adopted In January 2016 , the Financial Accounting Standards Accounting Standards Update No . 2016-01 ( ASU 2016-01 ) `` No . 2016-01 ( ASU 2016-01 ) `` Financial Instruments-Overall ( `` Financial Instruments-Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities . `` ASU 2016-01 amends various aspect of the that the adoption of ASU 2016-01 will increase the volatility of . We will adopt ASU 2016-01 effective January 1 , 2018 adopt ASU 2016-01 effective January 1 , 2018 . In February 2016-01 effective January 1 , 2018 . In February 2016 , , 2018 . In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases . `` `` Leases . `` Topic 842 supersedes the lease recognition requirement Codification ( ASC ) Topic 840 , `` Leases . `` Leases . `` Under Topic 842 , lessee are required to that the adoption of Topic 842 will materially affect our Consolidated . We will adopt Topic 842 effective January 1 , 2019 adopt Topic 842 effective January 1 , 2019 and expect to 842 effective January 1 , 2019 and expect to elect certain practical expedient . In June 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-13 ( ASU 2016-13 ) `` No . 2016-13 ( ASU 2016-13 ) `` Financial Instruments-Credit Losses Financial Instruments-Credit Losses ( Topic 326 ) : Measurement of Credit at amortized cost . ASU 2016-13 replaces the existing incurred loss of credit loss . ASU 2016-13 is effective for annual reporting year , beginning after December 15 , 2019 . We are beginning after December 15 , 2019 . We are currently in of the adoption of ASU 2016-13 on our consolidated financial statement financial statement . In October 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-16 ( ASU 2016-16 ) `` No . 2016-16 ( ASU 2016-16 ) `` Income Taxes ( `` Income Taxes ( Topic 740 ) : Intra-Entity Transfers of than Inventory . `` ASU 2016-16 generally accelerates the recognition of earnings adjustment of approximately $ 700 million upon adoption related to . We will adopt ASU 2016-16 effective January 1 , 2018 adopt ASU 2016-16 effective January 1 , 2018 . In January 2016-16 effective January 1 , 2018 . In January 2017 , , 2018 . In January 2017 , the FASB issued Accounting Accounting Standards Update No . 2017-04 ( ASU 2017-04 ) “ No . 2017-04 ( ASU 2017-04 ) “ Intangibles-Goodwill and Other Intangibles-Goodwill and Other ( Topic 350 ) : Simplifying the Test Goodwill Impairment . ” ASU 2017-04 eliminates step two of the should be disclosed . ASU 2017-04 is effective for annual or fiscal year beginning after December 15 , 2019 ; early adoption beginning after December 15 , 2019 ; early adoption is permitted that the adoption of ASU 2017-04 will have a material impact adopted accounting pronouncement In May 2014 , the FASB issued Accounting Accounting Standards Update No . 2014-09 ( Topic 606 ) `` No . 2014-09 ( Topic 606 ) `` Revenue from Contracts with Customers . `` Topic 606 supersedes the revenue recognition requirement revenue recognition requirement in Topic 605 “ Revenue 56 Table of in Topic 605 “ Revenue 56 Table of Contents Alphabet Inc . Recognition ” ( Topic 605 ) , and requires entity service . We adopted Topic 606 a of January 1 , Topic 606 a of January 1 , 2017 using the modified a of January 1 , 2017 using the modified retrospective transition transition method . See Note 2 for further detail . In further detail . In January 2017 , the FASB issued Accounting Accounting Standards Update No . 2017-01 ( ASU 2017-01 ) “ No . 2017-01 ( ASU 2017-01 ) “ Business Combinations ( “ Business Combinations ( Topic 805 ) : Clarifying the Definition a Business . ” ASU 2017-01 provides guidance to evaluate whether business . We adopted ASU 2017-01 a of January 1 , ASU 2017-01 a of January 1 , 2017 on a prospective a of January 1 , 2017 on a prospective basis and current period presentation . Note 2 . Revenues Adoption of ASC Revenues Adoption of ASC Topic 606 , `` Revenue from Contracts with Customers `` On January 1 , 2017 , we adopted `` On January 1 , 2017 , we adopted Topic 606 2017 , we adopted Topic 606 using the modified retrospective method not completed a of January 1 , 2017 . Results for a of January 1 , 2017 . Results for reporting period reporting period beginning after January 1 , 2017 are presented under beginning after January 1 , 2017 are presented under Topic 606 2017 are presented under Topic 606 , while prior period amount our historic accounting under Topic 605 . We recorded a net opening retained earnings of $ 15 million , net of tax tax , a of January 1 , 2017 due to the a of January 1 , 2017 due to the cumulative impact cumulative impact of adopting Topic 606 , with the impact primarily a result of applying Topic 606 wa an increase of $ wa an increase of $ 34 million for the twelve month the twelve month ended December 31 , 2017 . Revenue Recognition month ended December 31 , 2017 . Revenue Recognition Revenues are . Twelve Months Ended December 31 , 2015 ( 1 ) Months Ended December 31 , 2015 ( 1 ) 2016 ( December 31 , 2015 ( 1 ) 2016 ( 1 ) , 2015 ( 1 ) 2016 ( 1 ) 2017 Google ( 1 ) 2016 ( 1 ) 2017 Google property $ ) 2016 ( 1 ) 2017 Google property $ 52,357 $ ) 2017 Google property $ 52,357 $ 63,785 $ 77,788 Google Google property $ 52,357 $ 63,785 $ 77,788 Google Network Members $ 52,357 $ 63,785 $ 77,788 Google Network Members ' property Google Network Members ' property 15,033 15,598 17,587 Google advertising revenue Network Members ' property 15,033 15,598 17,587 Google advertising revenue 67,390 Members ' property 15,033 15,598 17,587 Google advertising revenue 67,390 79,383 15,598 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 17,587 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 Google advertising revenue 67,390 79,383 95,375 Google other revenue 7,154 10,080 79,383 95,375 Google other revenue 7,154 10,080 14,277 Other Bets revenue 95,375 Google other revenue 7,154 10,080 14,277 Other Bets revenue 445 Google other revenue 7,154 10,080 14,277 Other Bets revenue 445 809 10,080 14,277 Other Bets revenue 445 809 1,203 Total revenue ( 14,277 Other Bets revenue 445 809 1,203 Total revenue ( 2 Other Bets revenue 445 809 1,203 Total revenue ( 2 ) 809 1,203 Total revenue ( 2 ) $ 74,989 $ 90,272 revenue ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) As noted $ 90,272 $ 110,855 ( 1 ) As noted above , modified retrospective method . ( 2 ) Revenues include hedging gain ( loss ) of $ 1.4 billion , $ 539 million $ 1.4 billion , $ 539 million , and $ ( million , and $ ( 169 ) million for the year for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively , which do from contract with customer . 57 Table of Contents Alphabet Inc : Twelve Months Ended December 31 , 2015 2016 2017 United Months Ended December 31 , 2015 2016 2017 United States $ Ended December 31 , 2015 2016 2017 United States $ 34,810 December 31 , 2015 2016 2017 United States $ 34,810 $ 2016 2017 United States $ 34,810 $ 42,781 $ 52,449 EMEA United States $ 34,810 $ 42,781 $ 52,449 EMEA ( 1 $ 34,810 $ 42,781 $ 52,449 EMEA ( 1 ) 26,368 42,781 $ 52,449 EMEA ( 1 ) 26,368 30,304 36,046 APAC 52,449 EMEA ( 1 ) 26,368 30,304 36,046 APAC ( 1 EMEA ( 1 ) 26,368 30,304 36,046 APAC ( 1 ) ( 1 ) 26,368 30,304 36,046 APAC ( 1 ) 9,887 26,368 30,304 36,046 APAC ( 1 ) 9,887 12,559 16,235 Other 36,046 APAC ( 1 ) 9,887 12,559 16,235 Other Americas ( APAC ( 1 ) 9,887 12,559 16,235 Other Americas ( 1 ( 1 ) 9,887 12,559 16,235 Other Americas ( 1 ) 12,559 16,235 Other Americas ( 1 ) 3,924 4,628 6,125 Total Other Americas ( 1 ) 3,924 4,628 6,125 Total revenue ( Americas ( 1 ) 3,924 4,628 6,125 Total revenue ( 2 ( 1 ) 3,924 4,628 6,125 Total revenue ( 2 ) 4,628 6,125 Total revenue ( 2 ) $ 74,989 $ 90,272 revenue ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 2 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) $ 74,989 $ 90,272 $ 110,855 ( 1 ) Regions represent $ 90,272 $ 110,855 ( 1 ) Regions represent Europe , Other Americas ) . ( 2 ) Revenues include hedging gain the the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 . Advertising 2015 , 2016 , and 2017 . Advertising Revenues We generate developer and end user , 58 Table of Contents Alphabet Inc. the twelve month ended December 31 , 2017 is primarily driven month ended December 31 , 2017 is primarily driven by cash obligation , offset by $ 985 million of revenue recognized that revenue balance a of December 31 , 2016 . Our payment a of December 31 , 2016 . Our payment term vary for service performed . Note 3 . Financial Instruments We classify and marketable security within Level 1 or Level 2 in the within Level 1 or Level 2 in the fair value hierarchy derivative contract primarily within Level 2 in the fair value hierarchy data of similar instrument . 59 Table of Contents Alphabet Inc. investment category a of December 31 , 2016 and 2017 ( a of December 31 , 2016 and 2017 ( in million December 31 , 2016 and 2017 ( in million ) : ) : As of December 31 , 2016 Adjusted Cost Gross As of December 31 , 2016 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 7,078 $ 0 $ 0 $ Securities Cash $ 7,078 $ 0 $ 0 $ 7,078 $ $ 7,078 $ 0 $ 0 $ 7,078 $ 7,078 $ $ 0 $ 0 $ 7,078 $ 7,078 $ 0 Level $ 0 $ 7,078 $ 7,078 $ 0 Level 1 : $ 7,078 $ 7,078 $ 0 Level 1 : Money market $ 7,078 $ 0 Level 1 : Money market and other Money market and other fund 4,783 0 0 4,783 4,783 0 market and other fund 4,783 0 0 4,783 4,783 0 U.S. and other fund 4,783 0 0 4,783 4,783 0 U.S. government other fund 4,783 0 0 4,783 4,783 0 U.S. government note fund 4,783 0 0 4,783 4,783 0 U.S. government note 38,454 4,783 0 0 4,783 4,783 0 U.S. government note 38,454 46 4,783 0 U.S. government note 38,454 46 ( 215 ) 38,285 0 U.S. government note 38,454 46 ( 215 ) 38,285 613 government note 38,454 46 ( 215 ) 38,285 613 37,672 Marketable 38,454 46 ( 215 ) 38,285 613 37,672 Marketable equity security 46 ( 215 ) 38,285 613 37,672 Marketable equity security 160 ( 215 ) 38,285 613 37,672 Marketable equity security 160 133 613 37,672 Marketable equity security 160 133 0 293 0 293 37,672 Marketable equity security 160 133 0 293 0 293 43,397 Marketable equity security 160 133 0 293 0 293 43,397 179 equity security 160 133 0 293 0 293 43,397 179 ( security 160 133 0 293 0 293 43,397 179 ( 215 160 133 0 293 0 293 43,397 179 ( 215 ) 133 0 293 0 293 43,397 179 ( 215 ) 43,361 0 293 0 293 43,397 179 ( 215 ) 43,361 5,396 0 293 43,397 179 ( 215 ) 43,361 5,396 37,965 Level 43,397 179 ( 215 ) 43,361 5,396 37,965 Level 2 : 179 ( 215 ) 43,361 5,396 37,965 Level 2 : Time ( 215 ) 43,361 5,396 37,965 Level 2 : Time deposit ) 43,361 5,396 37,965 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 142 0 0 142 Time deposit ( 1 ) 142 0 0 142 140 2 deposit ( 1 ) 142 0 0 142 140 2 Mutual ( 1 ) 142 0 0 142 140 2 Mutual fund 1 ) 142 0 0 142 140 2 Mutual fund ( ) 142 0 0 142 140 2 Mutual fund ( 2 142 0 0 142 140 2 Mutual fund ( 2 ) 140 2 Mutual fund ( 2 ) 204 7 0 211 Mutual fund ( 2 ) 204 7 0 211 0 211 fund ( 2 ) 204 7 0 211 0 211 U.S. ( 2 ) 204 7 0 211 0 211 U.S. government 2 ) 204 7 0 211 0 211 U.S. government agency ) 204 7 0 211 0 211 U.S. government agency 1,826 204 7 0 211 0 211 U.S. government agency 1,826 0 0 211 U.S. government agency 1,826 0 ( 11 ) 1,815 211 U.S. government agency 1,826 0 ( 11 ) 1,815 300 government agency 1,826 0 ( 11 ) 1,815 300 1,515 Foreign 1,826 0 ( 11 ) 1,815 300 1,515 Foreign government bond 0 ( 11 ) 1,815 300 1,515 Foreign government bond 2,345 ( 11 ) 1,815 300 1,515 Foreign government bond 2,345 18 300 1,515 Foreign government bond 2,345 18 ( 7 ) 2,356 1,515 Foreign government bond 2,345 18 ( 7 ) 2,356 0 government bond 2,345 18 ( 7 ) 2,356 0 2,356 Municipal 2,345 18 ( 7 ) 2,356 0 2,356 Municipal security 4,757 18 ( 7 ) 2,356 0 2,356 Municipal security 4,757 15 ( 7 ) 2,356 0 2,356 Municipal security 4,757 15 ( 2,356 0 2,356 Municipal security 4,757 15 ( 65 ) 4,707 0 2,356 Municipal security 4,757 15 ( 65 ) 4,707 2 Municipal security 4,757 15 ( 65 ) 4,707 2 4,705 Corporate 4,757 15 ( 65 ) 4,707 2 4,705 Corporate debt security 15 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 ( 65 ) 4,707 2 4,705 Corporate debt security 12,993 114 2 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 4,705 Corporate debt security 12,993 114 ( 116 ) 12,991 2 debt security 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed 12,993 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 114 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 116 ) 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 12,991 2 12,989 Mortgage-backed security 12,006 26 ( 216 ) 11,816 2 12,989 Mortgage-backed security 12,006 26 ( 216 ) 11,816 0 Mortgage-backed security 12,006 26 ( 216 ) 11,816 0 11,816 Asset-backed 12,006 26 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 26 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 2 ( 216 ) 11,816 0 11,816 Asset-backed security 1,855 2 ( 11,816 0 11,816 Asset-backed security 1,855 2 ( 1 ) 1,856 0 11,816 Asset-backed security 1,855 2 ( 1 ) 1,856 0 Asset-backed security 1,855 2 ( 1 ) 1,856 0 1,856 36,128 1,855 2 ( 1 ) 1,856 0 1,856 36,128 182 ( 2 ( 1 ) 1,856 0 1,856 36,128 182 ( 416 ( 1 ) 1,856 0 1,856 36,128 182 ( 416 ) 1 ) 1,856 0 1,856 36,128 182 ( 416 ) 35,894 ) 1,856 0 1,856 36,128 182 ( 416 ) 35,894 444 0 1,856 36,128 182 ( 416 ) 35,894 444 35,450 Total 36,128 182 ( 416 ) 35,894 444 35,450 Total $ 86,603 182 ( 416 ) 35,894 444 35,450 Total $ 86,603 $ ( 416 ) 35,894 444 35,450 Total $ 86,603 $ 361 35,894 444 35,450 Total $ 86,603 $ 361 $ ( 631 35,450 Total $ 86,603 $ 361 $ ( 631 ) $ 86,603 $ 361 $ ( 631 ) $ 86,333 $ 12,918 $ ( 631 ) $ 86,333 $ 12,918 $ 73,415 As 631 ) $ 86,333 $ 12,918 $ 73,415 As of December $ 86,333 $ 12,918 $ 73,415 As of December 31 , $ 73,415 As of December 31 , 2017 Adjusted Cost Gross As of December 31 , 2017 Adjusted Cost Gross Unrealized Gains Equivalents Marketable Securities Cash $ 7,158 $ 0 $ 0 $ Securities Cash $ 7,158 $ 0 $ 0 $ 7,158 $ $ 7,158 $ 0 $ 0 $ 7,158 $ 7,158 $ $ 0 $ 0 $ 7,158 $ 7,158 $ 0 Level $ 0 $ 7,158 $ 7,158 $ 0 Level 1 : $ 7,158 $ 7,158 $ 0 Level 1 : Money market $ 7,158 $ 0 Level 1 : Money market and other Money market and other fund 1,833 0 0 1,833 1,833 0 market and other fund 1,833 0 0 1,833 1,833 0 U.S. and other fund 1,833 0 0 1,833 1,833 0 U.S. government other fund 1,833 0 0 1,833 1,833 0 U.S. government note fund 1,833 0 0 1,833 1,833 0 U.S. government note 37,256 1,833 0 0 1,833 1,833 0 U.S. government note 37,256 2 1,833 0 U.S. government note 37,256 2 ( 310 ) 36,948 0 U.S. government note 37,256 2 ( 310 ) 36,948 1,241 government note 37,256 2 ( 310 ) 36,948 1,241 35,707 Marketable 37,256 2 ( 310 ) 36,948 1,241 35,707 Marketable equity security 2 ( 310 ) 36,948 1,241 35,707 Marketable equity security 242 ( 310 ) 36,948 1,241 35,707 Marketable equity security 242 100 1,241 35,707 Marketable equity security 242 100 ( 2 ) 340 35,707 Marketable equity security 242 100 ( 2 ) 340 0 equity security 242 100 ( 2 ) 340 0 340 39,331 242 100 ( 2 ) 340 0 340 39,331 102 ( 100 ( 2 ) 340 0 340 39,331 102 ( 312 ( 2 ) 340 0 340 39,331 102 ( 312 ) 2 ) 340 0 340 39,331 102 ( 312 ) 39,121 ) 340 0 340 39,331 102 ( 312 ) 39,121 3,074 0 340 39,331 102 ( 312 ) 39,121 3,074 36,047 Level 39,331 102 ( 312 ) 39,121 3,074 36,047 Level 2 : 102 ( 312 ) 39,121 3,074 36,047 Level 2 : Time ( 312 ) 39,121 3,074 36,047 Level 2 : Time deposit ) 39,121 3,074 36,047 Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) 359 0 0 359 Time deposit ( 1 ) 359 0 0 359 357 2 deposit ( 1 ) 359 0 0 359 357 2 Mutual ( 1 ) 359 0 0 359 357 2 Mutual fund 1 ) 359 0 0 359 357 2 Mutual fund ( ) 359 0 0 359 357 2 Mutual fund ( 2 359 0 0 359 357 2 Mutual fund ( 2 ) 357 2 Mutual fund ( 2 ) 232 20 0 252 Mutual fund ( 2 ) 232 20 0 252 0 252 fund ( 2 ) 232 20 0 252 0 252 U.S. ( 2 ) 232 20 0 252 0 252 U.S. government 2 ) 232 20 0 252 0 252 U.S. government agency ) 232 20 0 252 0 252 U.S. government agency 3,713 232 20 0 252 0 252 U.S. government agency 3,713 0 0 252 U.S. government agency 3,713 0 ( 29 ) 3,684 252 U.S. government agency 3,713 0 ( 29 ) 3,684 0 government agency 3,713 0 ( 29 ) 3,684 0 3,684 Foreign 3,713 0 ( 29 ) 3,684 0 3,684 Foreign government bond 0 ( 29 ) 3,684 0 3,684 Foreign government bond 2,948 ( 29 ) 3,684 0 3,684 Foreign government bond 2,948 6 0 3,684 Foreign government bond 2,948 6 ( 14 ) 2,940 3,684 Foreign government bond 2,948 6 ( 14 ) 2,940 0 government bond 2,948 6 ( 14 ) 2,940 0 2,940 Municipal 2,948 6 ( 14 ) 2,940 0 2,940 Municipal security 7,631 6 ( 14 ) 2,940 0 2,940 Municipal security 7,631 2 ( 14 ) 2,940 0 2,940 Municipal security 7,631 2 ( 2,940 0 2,940 Municipal security 7,631 2 ( 53 ) 7,580 0 2,940 Municipal security 7,631 2 ( 53 ) 7,580 0 Municipal security 7,631 2 ( 53 ) 7,580 0 7,580 Corporate 7,631 2 ( 53 ) 7,580 0 7,580 Corporate debt security 2 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 ( 53 ) 7,580 0 7,580 Corporate debt security 24,269 21 0 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 7,580 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed 24,269 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 21 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 135 ) 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 24,155 126 24,029 Mortgage-backed security 11,157 9 ( 163 ) 11,003 126 24,029 Mortgage-backed security 11,157 9 ( 163 ) 11,003 0 Mortgage-backed security 11,157 9 ( 163 ) 11,003 0 11,003 Asset-backed 11,157 9 ( 163 ) 11,003 0 11,003 Asset-backed security 5,632 9 ( 163 ) 11,003 0 11,003 Asset-backed security 5,632 4 ( 163 ) 11,003 0 11,003 Asset-backed security 5,632 4 ( 11,003 0 11,003 Asset-backed security 5,632 4 ( 17 ) 5,619 0 11,003 Asset-backed security 5,632 4 ( 17 ) 5,619 0 Asset-backed security 5,632 4 ( 17 ) 5,619 0 5,619 55,941 5,632 4 ( 17 ) 5,619 0 5,619 55,941 62 ( 4 ( 17 ) 5,619 0 5,619 55,941 62 ( 411 ( 17 ) 5,619 0 5,619 55,941 62 ( 411 ) 17 ) 5,619 0 5,619 55,941 62 ( 411 ) 55,592 ) 5,619 0 5,619 55,941 62 ( 411 ) 55,592 483 0 5,619 55,941 62 ( 411 ) 55,592 483 55,109 Total 55,941 62 ( 411 ) 55,592 483 55,109 Total $ 102,430 62 ( 411 ) 55,592 483 55,109 Total $ 102,430 $ ( 411 ) 55,592 483 55,109 Total $ 102,430 $ 164 55,592 483 55,109 Total $ 102,430 $ 164 $ ( 723 55,109 Total $ 102,430 $ 164 $ ( 723 ) $ 102,430 $ 164 $ ( 723 ) $ 101,871 $ 10,715 $ ( 723 ) $ 101,871 $ 10,715 $ 91,156 ( 723 ) $ 101,871 $ 10,715 $ 91,156 ( 1 ) $ 101,871 $ 10,715 $ 91,156 ( 1 ) The majority $ 10,715 $ 91,156 ( 1 ) The majority of our are foreign deposit . ( 2 ) The fair value option gross realized gain of $ 357 million , $ 272 million $ 357 million , $ 272 million , and $ 207 272 million , and $ 207 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . We recognized gross realized loss of $ 565 million , $ 482 million $ 565 million , $ 482 million , and $ 287 482 million , and $ 287 million 60 Table of Contents , and $ 287 million 60 Table of Contents Alphabet Inc. for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . We reflect ) : As of December 31 , 2017 Due in 1 As of December 31 , 2017 Due in 1 year $ 31 , 2017 Due in 1 year $ 19,486 Due in Due in 1 year $ 19,486 Due in 1 year through year $ 19,486 Due in 1 year through 5 year 56,056 Due in 1 year through 5 year 56,056 Due in 5 1 year through 5 year 56,056 Due in 5 year through 5 year 56,056 Due in 5 year through 10 year 2,676 Due in 5 year through 10 year 2,676 Due after 10 5 year through 10 year 2,676 Due after 10 year 12,346 10 year 2,676 Due after 10 year 12,346 Total $ 90,564 2,676 Due after 10 year 12,346 Total $ 90,564 Impairment Considerations 10 year 12,346 Total $ 90,564 Impairment Considerations for Marketable Investments loss position a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , aggregated by December 31 , 2016 and 2017 , aggregated by investment category ) : As of December 31 , 2016 Less than 12 As of December 31 , 2016 Less than 12 Months 12 31 , 2016 Less than 12 Months 12 Months or Greater 2016 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 26,411 $ ( 215 ) $ note $ 26,411 $ ( 215 ) $ 0 $ 0 $ ( 215 ) $ 0 $ 0 $ 26,411 $ 215 ) $ 0 $ 0 $ 26,411 $ ( 215 $ 0 $ 0 $ 26,411 $ ( 215 ) U.S. 0 $ 26,411 $ ( 215 ) U.S. government agency 1,014 215 ) U.S. government agency 1,014 ( 11 ) 0 0 U.S. government agency 1,014 ( 11 ) 0 0 1,014 ( agency 1,014 ( 11 ) 0 0 1,014 ( 11 ) 1,014 ( 11 ) 0 0 1,014 ( 11 ) Foreign ( 11 ) 0 0 1,014 ( 11 ) Foreign government ) 0 0 1,014 ( 11 ) Foreign government bond 956 11 ) Foreign government bond 956 ( 7 ) 0 0 Foreign government bond 956 ( 7 ) 0 0 956 ( bond 956 ( 7 ) 0 0 956 ( 7 ) 956 ( 7 ) 0 0 956 ( 7 ) Municipal ( 7 ) 0 0 956 ( 7 ) Municipal security ) 0 0 956 ( 7 ) Municipal security 3,461 ( ( 7 ) Municipal security 3,461 ( 63 ) 46 ( ) Municipal security 3,461 ( 63 ) 46 ( 2 ) security 3,461 ( 63 ) 46 ( 2 ) 3,507 ( ( 63 ) 46 ( 2 ) 3,507 ( 65 ) ) 46 ( 2 ) 3,507 ( 65 ) Corporate debt ( 2 ) 3,507 ( 65 ) Corporate debt security 6,184 65 ) Corporate debt security 6,184 ( 111 ) 166 ( Corporate debt security 6,184 ( 111 ) 166 ( 5 ) security 6,184 ( 111 ) 166 ( 5 ) 6,350 ( ( 111 ) 166 ( 5 ) 6,350 ( 116 ) ) 166 ( 5 ) 6,350 ( 116 ) Mortgage-backed security ( 5 ) 6,350 ( 116 ) Mortgage-backed security 10,184 ( ( 116 ) Mortgage-backed security 10,184 ( 206 ) 259 ( ) Mortgage-backed security 10,184 ( 206 ) 259 ( 10 ) security 10,184 ( 206 ) 259 ( 10 ) 10,443 ( ( 206 ) 259 ( 10 ) 10,443 ( 216 ) ) 259 ( 10 ) 10,443 ( 216 ) Asset-backed security ( 10 ) 10,443 ( 216 ) Asset-backed security 391 ( ( 216 ) Asset-backed security 391 ( 1 ) 0 0 ) Asset-backed security 391 ( 1 ) 0 0 391 ( security 391 ( 1 ) 0 0 391 ( 1 ) 391 ( 1 ) 0 0 391 ( 1 ) Total ( 1 ) 0 0 391 ( 1 ) Total $ ) 0 0 391 ( 1 ) Total $ 48,601 $ ( 1 ) Total $ 48,601 $ ( 614 ) $ Total $ 48,601 $ ( 614 ) $ 471 $ ( $ ( 614 ) $ 471 $ ( 17 ) $ ) $ 471 $ ( 17 ) $ 49,072 $ ( $ ( 17 ) $ 49,072 $ ( 631 ) As ) $ 49,072 $ ( 631 ) As of December 31 631 ) As of December 31 , 2017 Less than 12 As of December 31 , 2017 Less than 12 Months 12 31 , 2017 Less than 12 Months 12 Months or Greater 2017 Less than 12 Months 12 Months or Greater Total Fair Loss U.S. government note $ 18,325 $ ( 134 ) $ note $ 18,325 $ ( 134 ) $ 16,136 $ ( $ ( 134 ) $ 16,136 $ ( 176 ) $ ) $ 16,136 $ ( 176 ) $ 34,461 $ ( $ ( 176 ) $ 34,461 $ ( 310 ) U.S. ) $ 34,461 $ ( 310 ) U.S. government agency 2,913 310 ) U.S. government agency 2,913 ( 22 ) 767 ( U.S. government agency 2,913 ( 22 ) 767 ( 7 ) agency 2,913 ( 22 ) 767 ( 7 ) 3,680 ( ( 22 ) 767 ( 7 ) 3,680 ( 29 ) ) 767 ( 7 ) 3,680 ( 29 ) Foreign government ( 7 ) 3,680 ( 29 ) Foreign government bond 1,932 29 ) Foreign government bond 1,932 ( 8 ) 342 ( Foreign government bond 1,932 ( 8 ) 342 ( 6 ) bond 1,932 ( 8 ) 342 ( 6 ) 2,274 ( ( 8 ) 342 ( 6 ) 2,274 ( 14 ) ) 342 ( 6 ) 2,274 ( 14 ) Municipal security ( 6 ) 2,274 ( 14 ) Municipal security 5,666 ( ( 14 ) Municipal security 5,666 ( 47 ) 415 ( ) Municipal security 5,666 ( 47 ) 415 ( 6 ) security 5,666 ( 47 ) 415 ( 6 ) 6,081 ( ( 47 ) 415 ( 6 ) 6,081 ( 53 ) ) 415 ( 6 ) 6,081 ( 53 ) Corporate debt ( 6 ) 6,081 ( 53 ) Corporate debt security 18,300 53 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed security ( 21 ) 20,010 ( 135 ) Mortgage-backed security 7,261 ( ( 135 ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( ) Mortgage-backed security 7,261 ( 89 ) 3,314 ( 74 ) security 7,261 ( 89 ) 3,314 ( 74 ) 10,575 ( ( 89 ) 3,314 ( 74 ) 10,575 ( 163 ) ) 3,314 ( 74 ) 10,575 ( 163 ) Asset-backed security ( 74 ) 10,575 ( 163 ) Asset-backed security 3,800 ( ( 163 ) Asset-backed security 3,800 ( 16 ) 135 ( ) Asset-backed security 3,800 ( 16 ) 135 ( 1 ) security 3,800 ( 16 ) 135 ( 1 ) 3,935 ( ( 16 ) 135 ( 1 ) 3,935 ( 17 ) ) 135 ( 1 ) 3,935 ( 17 ) Marketable equity ( 1 ) 3,935 ( 17 ) Marketable equity security 39 17 ) Marketable equity security 39 ( 2 ) 0 0 Marketable equity security 39 ( 2 ) 0 0 39 ( security 39 ( 2 ) 0 0 39 ( 2 ) 39 ( 2 ) 0 0 39 ( 2 ) Total ( 2 ) 0 0 39 ( 2 ) Total $ ) 0 0 39 ( 2 ) Total $ 58,236 $ ( 2 ) Total $ 58,236 $ ( 432 ) $ Total $ 58,236 $ ( 432 ) $ 22,819 $ ( $ ( 432 ) $ 22,819 $ ( 291 ) $ ) $ 22,819 $ ( 291 ) $ 81,055 $ ( $ ( 291 ) $ 81,055 $ ( 723 ) During ) $ 81,055 $ ( 723 ) During the year ended During the year ended December 31 , 2016 and 2017 , year ended December 31 , 2016 and 2017 , there were December 31 , 2016 and 2017 , there were no other-than-temporary During the year ended December 31 , 2015 , we recognized year ended December 31 , 2015 , we recognized $ 281 2015 , we recognized $ 281 million of other-than-temporary impairment loss of Income . See Note 7 for further detail on other in the Consolidated Statements of 61 Table of Contents Alphabet Inc. default . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , we received December 31 , 2016 and 2017 , we received cash collateral collateral security arrangement of $ 362 million and $ 15 million $ 362 million and $ 15 million , respectively . Cash these contract wa approximately $ 10.7 billion and $ 11.7 billion $ 10.7 billion and $ 11.7 billion a of December 31 11.7 billion a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , respectively . December 31 , 2016 and 2017 , respectively . These contract These contract have maturity of 2 year or le . We net . As of December 31 , 2017 , the effective As of December 31 , 2017 , the effective portion of net accumulated loss of $ 187 million , of which a a net loss of $ 219 million is expected to be into earnings within the next 12 month . Fair Value Hedges of these contract wa $ 2.4 billion and $ 2.9 billion $ 2.4 billion and $ 2.9 billion a of December 31 2.9 billion a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , respectively . December 31 , 2016 and 2017 , respectively . Gains and foreign exchange contract wa $ 7.9 billion and $ 15.2 billion $ 7.9 billion and $ 15.2 billion a of December 31 15.2 billion a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , respectively . December 31 , 2016 and 2017 , respectively . 62 Table and 2017 , respectively . 62 Table of Contents Alphabet Inc ) : As of December 31 , 2016 Balance Sheet Location As of December 31 , 2016 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 539 $ 57 $ 596 Total non-current asset $ 539 $ 57 $ 596 Total $ 539 $ 539 $ 57 $ 596 Total $ 539 $ 57 57 $ 596 Total $ 539 $ 57 $ 596 Derivative 596 Total $ 539 $ 57 $ 596 Derivative Liabilities : $ 539 $ 57 $ 596 Derivative Liabilities : Level 2 596 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 4 $ 9 $ 13 Total and non-current $ 4 $ 9 $ 13 Total $ 4 $ 4 $ 9 $ 13 Total $ 4 $ 9 9 $ 13 Total $ 4 $ 9 $ 13 As 13 Total $ 4 $ 9 $ 13 As of December $ 4 $ 9 $ 13 As of December 31 , $ 13 As of December 31 , 2017 Balance Sheet Location As of December 31 , 2017 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 51 $ 29 $ 80 Total non-current asset $ 51 $ 29 $ 80 Total $ 51 $ 51 $ 29 $ 80 Total $ 51 $ 29 29 $ 80 Total $ 51 $ 29 $ 80 Derivative 80 Total $ 51 $ 29 $ 80 Derivative Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total $ 230 $ 122 122 $ 352 Total $ 230 $ 122 $ 352 The 352 Total $ 230 $ 122 $ 352 The effect of $ 230 $ 122 $ 352 The effect of derivative instrument Portion ) Year Ended December 31 , Derivatives in Cash Flow in Cash Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract Cash Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract $ Flow Hedging Relationship 2015 2016 2017 Foreign exchange contract $ 964 2017 Foreign exchange contract $ 964 $ 773 $ ( 955 exchange contract $ 964 $ 773 $ ( 955 ) Gains 964 $ 773 $ ( 955 ) Gains ( Losses ) Portion ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Revenues Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Revenues $ Foreign exchange contract Revenues $ 1,399 $ 539 $ ( 169 contract Revenues $ 1,399 $ 539 $ ( 169 ) Interest 1,399 $ 539 $ ( 169 ) Interest rate contract Other ( expense ) , net 5 5 5 Total $ 1,404 expense ) , net 5 5 5 Total $ 1,404 $ ) , net 5 5 5 Total $ 1,404 $ 544 5 5 5 Total $ 1,404 $ 544 $ ( 164 5 Total $ 1,404 $ 544 $ ( 164 ) 63 1,404 $ 544 $ ( 164 ) 63 Table of Contents 544 $ ( 164 ) 63 Table of Contents Alphabet Inc. and Ineffective Portion ) ( 1 ) Year Ended December 31 1 ) Year Ended December 31 , Derivatives in Cash Flow Cash Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Flow Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Other Hedging Relationship Location 2015 2016 2017 Foreign exchange contract Other income ) , net $ ( 297 ) $ ( 381 ) ( 297 ) $ ( 381 ) $ 83 ( 1 $ ( 381 ) $ 83 ( 1 ) Gains ( 381 ) $ 83 ( 1 ) Gains ( loss ) in Income on Derivatives ( 2 ) Year Ended December 31 2 ) Year Ended December 31 , Derivatives in Fair Value Fair Value Hedging Relationship Location 2015 2016 2017 Foreign Exchange Hedges Value Hedging Relationship Location 2015 2016 2017 Foreign Exchange Hedges : Hedging Relationship Location 2015 2016 2017 Foreign Exchange Hedges : Foreign expense ) , net $ 170 $ 145 $ ( 174 , net $ 170 $ 145 $ ( 174 ) Hedged 170 $ 145 $ ( 174 ) Hedged item Other income expense ) , net ( 176 ) ( 139 ) 197 net ( 176 ) ( 139 ) 197 Total $ ( 176 ) ( 139 ) 197 Total $ ( 6 ) ) 197 Total $ ( 6 ) $ 6 $ 23 $ ( 6 ) $ 6 $ 23 ( 2 ) 6 ) $ 6 $ 23 ( 2 ) Amounts excluded $ 6 $ 23 ( 2 ) Amounts excluded from effectiveness on Derivatives Year Ended December 31 , Derivatives Not Designated As Designated As Hedging Instruments Location 2015 2016 2017 Foreign exchange contract As Hedging Instruments Location 2015 2016 2017 Foreign exchange contract Other Hedging Instruments Location 2015 2016 2017 Foreign exchange contract Other income expense ) , net $ 198 $ 130 $ ( 230 , net $ 198 $ 130 $ ( 230 ) Offsetting 198 $ 130 $ ( 230 ) Offsetting of Derivatives We condition . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , information related December 31 , 2016 and 2017 , information related to these ( in million ) : 64 Table of Contents Alphabet Inc of Assets As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 596 $ 0 $ 596 $ Exposed Derivatives $ 596 $ 0 $ 596 $ ( 11 $ 596 $ 0 $ 596 $ ( 11 ) ( 0 $ 596 $ ( 11 ) ( 1 ) $ $ ( 11 ) ( 1 ) $ ( 337 ) ( 1 ) $ ( 337 ) $ ( 73 ) ( 337 ) $ ( 73 ) $ 175 As of $ ( 73 ) $ 175 As of December 31 , $ 175 As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 102 $ ( 22 ) $ Derivatives $ 102 $ ( 22 ) $ 80 $ ( $ ( 22 ) $ 80 $ ( 64 ) ( ) $ 80 $ ( 64 ) ( 1 ) $ $ ( 64 ) ( 1 ) $ ( 4 ) ( 1 ) $ ( 4 ) $ ( 2 ) ( 4 ) $ ( 2 ) $ 10 ( 1 $ ( 2 ) $ 10 ( 1 ) The balance 2 ) $ 10 ( 1 ) The balance a of The balance a of December 31 , 2016 and 2017 were a of December 31 , 2016 and 2017 were related to December 31 , 2016 and 2017 were related to derivative liability of Liabilities As of December 31 , 2016 Gross Amounts Not As of December 31 , 2016 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 13 $ 0 $ 13 $ Liabilities Derivatives $ 13 $ 0 $ 13 $ ( 11 $ 13 $ 0 $ 13 $ ( 11 ) ( 0 $ 13 $ ( 11 ) ( 2 ) $ $ ( 11 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 2 As 2 ) $ 0 $ 0 $ 2 As of December $ 0 $ 0 $ 2 As of December 31 , $ 2 As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 374 $ ( 22 ) $ Derivatives $ 374 $ ( 22 ) $ 352 $ ( $ ( 22 ) $ 352 $ ( 64 ) ( ) $ 352 $ ( 64 ) ( 2 ) $ $ ( 64 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 288 ( 2 ) $ 0 $ 0 $ 288 ( 2 ) $ 0 $ 0 $ 288 ( 2 ) The balance $ 0 $ 288 ( 2 ) The balance a of The balance a of December 31 , 2016 and 2017 were a of December 31 , 2016 and 2017 were related to December 31 , 2016 and 2017 were related to derivative asset master netting agreement . Note 4 . Non-Marketable Investments Our non-marketable model . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , investment accounted December 31 , 2016 and 2017 , investment accounted for under carrying value of approximately $ 1.7 billion and $ 1.4 billion $ 1.7 billion and $ 1.4 billion , respectively . Our a net loss of $ 227 million , $ 202 million $ 227 million , $ 202 million , and $ 156 202 million , and $ 156 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . As of respectively . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , investment accounted December 31 , 2016 and 2017 , investment accounted for under a carrying value of $ 3.0 billion and $ 4.5 billion $ 3.0 billion and $ 4.5 billion , respectively , and fair value of approximately $ 8.1 billion and $ 8.8 billion $ 8.1 billion and $ 8.8 billion , respectively . The and are classified within Level 3 in the fair value hierarchy reflect our share of equity 65 Table of Contents Alphabet Inc. of these security wa $ 1.1 billion a of December 31 1.1 billion a of December 31 , 2016 and 2017 . a of December 31 , 2016 and 2017 . These debt December 31 , 2016 and 2017 . These debt security do are categorized accordingly a Level 3 in the fair value hierarchy significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 , 2016 2017 Beginning balance Year Ended December 31 , 2016 2017 Beginning balance $ 1,024 Ended December 31 , 2016 2017 Beginning balance $ 1,024 $ 2016 2017 Beginning balance $ 1,024 $ 1,165 Total net gain Beginning balance $ 1,024 $ 1,165 Total net gain ( loss loss ) Included in earnings 0 ( 10 ) Included in Included in earnings 0 ( 10 ) Included in other comprehensive Included in other comprehensive income 106 707 Purchases 78 88 Sales in other comprehensive income 106 707 Purchases 78 88 Sales ( comprehensive income 106 707 Purchases 78 88 Sales ( 18 ) income 106 707 Purchases 78 88 Sales ( 18 ) ( Purchases 78 88 Sales ( 18 ) ( 2 ) Settlements Sales ( 18 ) ( 2 ) Settlements ( 25 ) ( 2 ) Settlements ( 25 ) ( 54 ) Ending Settlements ( 25 ) ( 54 ) Ending balance $ 1,165 54 ) Ending balance $ 1,165 $ 1,894 Note 5 . Ending balance $ 1,165 $ 1,894 Note 5 . Variable Interest $ 1,165 $ 1,894 Note 5 . Variable Interest Entities ( u . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , asset that December 31 , 2016 and 2017 , asset that can only of these VIEs were $ 1.1 billion and $ 1.7 billion $ 1.1 billion and $ 1.7 billion , respectively , and recourse to u were $ 668 million and $ 997 million $ 668 million and $ 997 million , respectively . Calico lifespan . As of December 31 , 2017 , we have As of December 31 , 2017 , we have contributed $ , we have contributed $ 240 million to Calico in exchange to fund an additional $ 490 million on an as-needed basis as-needed basis . In September 2014 , AbbVie Inc. ( AbbVie cancer . As of December 31 , 2017 , AbbVie ha As of December 31 , 2017 , AbbVie ha contributed $ , AbbVie ha contributed $ 750 million to fund the collaboration commitment . As of December 31 , 2017 , Calico ha As of December 31 , 2017 , Calico ha contributed $ , Calico ha contributed $ 250 million and committed up to up to an additional $ 500 million . Calico ha used people enjoy healthier life . 66 Table of Contents Alphabet Inc Alphabet Inc . In January 2017 , Temasek , a Singapore-based for an aggregate of $ 800 million in cash . In in cash . In February 2017 , the first tranche of closed and we received $ 480 million . The second and the investment closed in July 2017 and we received the remaining we received the remaining $ 320 million . The transaction is recognized . Of the $ 800 million received , $ 78 800 million received , $ 78 million wa recorded a noncontrolling a noncontrolling interest and $ 722 million wa recorded a additional for the year ended December 31 , 2017 a the amount year ended December 31 , 2017 a the amount were not of these VIEs were $ 1.2 billion and $ 0.9 billion $ 1.2 billion and $ 0.9 billion a of December 31 0.9 billion a of December 31 , 2016 and 2017 , a of December 31 , 2016 and 2017 , respectively . December 31 , 2016 and 2017 , respectively . The maximum not material a of December 31 , 2016 and 2017 . a of December 31 , 2016 and 2017 . Note 6 December 31 , 2016 and 2017 . Note 6 . Debt 2016 and 2017 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2016 and December 31 a of December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 , respectively . 2016 and December 31 , 2017 , respectively . Long-Term Debt Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 , a 2014 , 2016 , and 2021 , a well a $ , a well a $ 1.0 billion of senior unsecured note of senior unsecured note ( 2014 Notes ) in February 2014 2014 Notes ) in February 2014 due in 2024 . In in February 2014 due in 2024 . In April 2016 , in 2024 . In April 2016 , we completed an exchange holder of Google ’ s 2011 Notes due 2021 and 2014 ’ s 2011 Notes due 2021 and 2014 Notes due 2024 2011 Notes due 2021 and 2014 Notes due 2024 ( collectively 2021 and 2014 Notes due 2024 ( collectively , the Google principal amount of approximately $ 1.7 billion of the Google Notes wa exchanged for approximately $ 1.7 billion of Alphabet note with loss recognized . In August 2016 , Alphabet issued $ 2.0 2016 , Alphabet issued $ 2.0 billion of senior unsecured note of senior unsecured note ( 2016 Notes ) due 2026 . ( 2016 Notes ) due 2026 . The net proceeds from from the issuance of the 2016 Notes were used for general The Alphabet note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 rank equally 2021 , 2024 , and 2026 rank equally with each other ) : As of December 31 , 2016 As of December As of December 31 , 2016 As of December 31 , , 2016 As of December 31 , 2017 3.625 % Notes As of December 31 , 2017 3.625 % Notes due on of December 31 , 2017 3.625 % Notes due on May % Notes due on May 19 , 2021 $ 1,000 $ due on May 19 , 2021 $ 1,000 $ 1,000 3.375 May 19 , 2021 $ 1,000 $ 1,000 3.375 % Notes , 2021 $ 1,000 $ 1,000 3.375 % Notes due on 2021 $ 1,000 $ 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 1.998 due on February 25 , 2024 1,000 1,000 1.998 % Notes on February 25 , 2024 1,000 1,000 1.998 % Notes due February 25 , 2024 1,000 1,000 1.998 % Notes due on 25 , 2024 1,000 1,000 1.998 % Notes due on August % Notes due on August 15 , 2026 2,000 2,000 Unamortized due on August 15 , 2026 2,000 2,000 Unamortized discount for on August 15 , 2026 2,000 2,000 Unamortized discount for the August 15 , 2026 2,000 2,000 Unamortized discount for the Notes for the Notes above ( 65 ) ( 57 ) Subtotal above ( 65 ) ( 57 ) Subtotal ( 1 ) ( 57 ) Subtotal ( 1 ) $ 3,935 $ 3,943 Subtotal ( 1 ) $ 3,935 $ 3,943 Capital lease obligation 1 ) $ 3,935 $ 3,943 Capital lease obligation 0 26 $ 3,943 Capital lease obligation 0 26 Total long-term debt $ 3,943 Capital lease obligation 0 26 Total long-term debt $ 3,935 26 Total long-term debt $ 3,935 $ 3,969 ( 1 ) long-term debt $ 3,935 $ 3,969 ( 1 ) Includes the $ 3,935 $ 3,969 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 , 2024 , and 2026 were 3.734 % , 3.377 2024 , and 2026 were 3.734 % , 3.377 % , 2026 were 3.734 % , 3.377 % , and 2.231 % , 3.377 % , and 2.231 % , respectively , with value of all outstanding note 67 Table of Contents Alphabet Inc. Alphabet Inc. wa approximately $ 3.9 billion a of December 31 3.9 billion a of December 31 , 2016 and $ 4.0 a of December 31 , 2016 and $ 4.0 billion a 31 , 2016 and $ 4.0 billion a of December 31 4.0 billion a of December 31 , 2017 . The fair a of December 31 , 2017 . The fair value wa is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2017 , the aggregate As of December 31 , 2017 , the aggregate future principal ( in million ) : 2018 $ 0 2019 1 2020 million ) : 2018 $ 0 2019 1 2020 1 2021 ) : 2018 $ 0 2019 1 2020 1 2021 1,001 : 2018 $ 0 2019 1 2020 1 2021 1,001 2022 2018 $ 0 2019 1 2020 1 2021 1,001 2022 1 $ 0 2019 1 2020 1 2021 1,001 2022 1 Thereafter 0 2019 1 2020 1 2021 1,001 2022 1 Thereafter 3,022 2019 1 2020 1 2021 1,001 2022 1 Thereafter 3,022 Total 1 2020 1 2021 1,001 2022 1 Thereafter 3,022 Total $ 2020 1 2021 1,001 2022 1 Thereafter 3,022 Total $ 4,026 2021 1,001 2022 1 Thereafter 3,022 Total $ 4,026 Credit Facility 1 Thereafter 3,022 Total $ 4,026 Credit Facility We have a Facility We have a $ 4.0 billion revolving credit facility which facility which expires in February 2021 . The interest rate for credit facility a of December 31 , 2016 and December 31 a of December 31 , 2016 and December 31 , 2017 31 , 2016 and December 31 , 2017 . Note 7 2016 and December 31 , 2017 . Note 7 . Supplemental 31 , 2017 . Note 7 . Supplemental Financial Statement Information ) : As of December 31 , 2016 As of December As of December 31 , 2016 As of December 31 , , 2016 As of December 31 , 2017 Land and building As of December 31 , 2017 Land and building $ 19,804 2017 Land and building $ 19,804 $ 23,183 Information technology asset and building $ 19,804 $ 23,183 Information technology asset 16,084 21,429 $ 23,183 Information technology asset 16,084 21,429 Construction in progress 8,166 23,183 Information technology asset 16,084 21,429 Construction in progress 8,166 10,491 16,084 21,429 Construction in progress 8,166 10,491 Leasehold improvement 3,415 4,496 21,429 Construction in progress 8,166 10,491 Leasehold improvement 3,415 4,496 Furniture progress 8,166 10,491 Leasehold improvement 3,415 4,496 Furniture and fixture 58 8,166 10,491 Leasehold improvement 3,415 4,496 Furniture and fixture 58 48 3,415 4,496 Furniture and fixture 58 48 Property and equipment , 4,496 Furniture and fixture 58 48 Property and equipment , gross Property and equipment , gross 47,527 59,647 Less : accumulated depreciation and equipment , gross 47,527 59,647 Less : accumulated depreciation ( Less : accumulated depreciation ( 13,293 ) ( 17,264 ) Property depreciation ( 13,293 ) ( 17,264 ) Property and equipment , and equipment , net $ 34,234 $ 42,383 As of December , net $ 34,234 $ 42,383 As of December 31 , $ 42,383 As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , asset under December 31 , 2016 and 2017 , asset under capital lease a cost basis of $ 299 million and $ 390 million $ 299 million and $ 390 million were included in property ( Lenovo ) in October 2014 , we received an interest-free Note Receivable ) due October 2017 . The Note Receivable wa current asset a of December 31 , 2016 . Based on a of December 31 , 2016 . Based on the general an effective interest rate of 4.5 % . As of December % . As of December 31 , 2016 , the outstanding As of December 31 , 2016 , the outstanding principal wa the outstanding principal wa $ 1.4 billion with an unamortized discount an unamortized discount of $ 51 million , and we did wa fully repaid in May 2017 . 68 Table of Contents repaid in May 2017 . 68 Table of Contents Alphabet Inc ) : As of December 31 , 2016 As of December As of December 31 , 2016 As of December 31 , , 2016 As of December 31 , 2017 European Commission fine As of December 31 , 2017 European Commission fine ( 1 2017 European Commission fine ( 1 ) $ 0 $ 2,874 fine ( 1 ) $ 0 $ 2,874 Accrued customer liability 1 ) $ 0 $ 2,874 Accrued customer liability 1,256 1,489 $ 2,874 Accrued customer liability 1,256 1,489 Other accrued expense and 2,874 Accrued customer liability 1,256 1,489 Other accrued expense and current accrued expense and current liability 4,888 5,814 Accrued expense and other expense and current liability 4,888 5,814 Accrued expense and other current and other current liability $ 6,144 $ 10,177 ( 1 ) current liability $ 6,144 $ 10,177 ( 1 ) Includes the $ 6,144 $ 10,177 ( 1 ) Includes the effect of Total Balance a of December 31 , 2014 $ ( 980 a of December 31 , 2014 $ ( 980 ) $ 31 , 2014 $ ( 980 ) $ 421 $ 586 $ ( 980 ) $ 421 $ 586 $ 27 Other 980 ) $ 421 $ 586 $ 27 Other comprehensive income $ 421 $ 586 $ 27 Other comprehensive income ( loss loss ) before reclassification ( 1,067 ) ( 715 ) 676 reclassification ( 1,067 ) ( 715 ) 676 ( 1,106 ) 1,067 ) ( 715 ) 676 ( 1,106 ) Amounts reclassified ( 715 ) 676 ( 1,106 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 208 ( 1,003 ) ( Amounts reclassified from AOCI 0 208 ( 1,003 ) ( 795 from AOCI 0 208 ( 1,003 ) ( 795 ) Other 208 ( 1,003 ) ( 795 ) Other comprehensive income ( income ( loss ) ( 1,067 ) ( 507 ) ( ) ( 1,067 ) ( 507 ) ( 327 ) ( ) ( 507 ) ( 327 ) ( 1,901 ) Balance ) ( 327 ) ( 1,901 ) Balance a of December ) Balance a of December 31 , 2015 $ ( 2,047 a of December 31 , 2015 $ ( 2,047 ) $ 31 , 2015 $ ( 2,047 ) $ ( 86 ) ( 2,047 ) $ ( 86 ) $ 259 $ ( $ ( 86 ) $ 259 $ ( 1,874 ) Other ) $ 259 $ ( 1,874 ) Other comprehensive income ( loss ) before reclassification ( 599 ) ( 314 ) 515 reclassification ( 599 ) ( 314 ) 515 ( 398 ) 599 ) ( 314 ) 515 ( 398 ) Amounts reclassified ( 314 ) 515 ( 398 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 221 ( 351 ) ( Amounts reclassified from AOCI 0 221 ( 351 ) ( 130 from AOCI 0 221 ( 351 ) ( 130 ) Other 221 ( 351 ) ( 130 ) Other comprehensive income ( income ( loss ) ( 599 ) ( 93 ) 164 ) ( 599 ) ( 93 ) 164 ( 528 ) 599 ) ( 93 ) 164 ( 528 ) Balance a ( 93 ) 164 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 $ ( 2,646 a of December 31 , 2016 $ ( 2,646 ) $ 31 , 2016 $ ( 2,646 ) $ ( 179 ) ( 2,646 ) $ ( 179 ) $ 423 $ ( $ ( 179 ) $ 423 $ ( 2,402 ) Other ) $ 423 $ ( 2,402 ) Other comprehensive income ( ( loss ) before reclassification 1,543 307 ( 638 ) 1,212 loss ) before reclassification 1,543 307 ( 638 ) 1,212 Amounts before reclassification 1,543 307 ( 638 ) 1,212 Amounts reclassified from 1,543 307 ( 638 ) 1,212 Amounts reclassified from AOCI 0 1,212 Amounts reclassified from AOCI 0 105 93 198 Other comprehensive Amounts reclassified from AOCI 0 105 93 198 Other comprehensive income reclassified from AOCI 0 105 93 198 Other comprehensive income ( from AOCI 0 105 93 198 Other comprehensive income ( loss comprehensive income ( loss ) 1,543 412 ( 545 ) 1,410 income ( loss ) 1,543 412 ( 545 ) 1,410 Balance loss ) 1,543 412 ( 545 ) 1,410 Balance a of 1,543 412 ( 545 ) 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 $ ( 1,103 a of December 31 , 2017 $ ( 1,103 ) $ 31 , 2017 $ ( 1,103 ) $ 233 $ ( $ ( 1,103 ) $ 233 $ ( 122 ) $ ) $ 233 $ ( 122 ) $ ( 992 ) ( 122 ) $ ( 992 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2015 31 , AOCI Components Location 2015 2016 2017 Unrealized gain ( , AOCI Components Location 2015 2016 2017 Unrealized gain ( loss AOCI Components Location 2015 2016 2017 Unrealized gain ( loss ) ) , net $ ( 208 ) $ ( 221 ) ( 208 ) $ ( 221 ) $ ( 105 ) ( 221 ) $ ( 105 ) Provision for income tax ) Provision for income tax 0 0 0 Net of tax Provision for income tax 0 0 0 Net of tax $ for income tax 0 0 0 Net of tax $ ( Net of tax $ ( 208 ) $ ( 221 ) ( 208 ) $ ( 221 ) $ ( 105 ) ( 221 ) $ ( 105 ) Unrealized gain ( loss Foreign exchange contract Revenue $ 1,399 $ 539 $ ( 169 contract Revenue $ 1,399 $ 539 $ ( 169 ) Interest 1,399 $ 539 $ ( 169 ) Interest rate contract Other ( expense ) , net 5 5 5 Benefit ( provision expense ) , net 5 5 5 Benefit ( provision ) ) , net 5 5 5 Benefit ( provision ) for ) for income tax ( 401 ) ( 193 ) 71 tax ( 401 ) ( 193 ) 71 Net of tax 401 ) ( 193 ) 71 Net of tax $ 1,003 71 Net of tax $ 1,003 $ 351 $ ( 93 of tax $ 1,003 $ 351 $ ( 93 ) Total 1,003 $ 351 $ ( 93 ) Total amount reclassified , , net of tax $ 795 $ 130 $ ( 198 of tax $ 795 $ 130 $ ( 198 ) 69 795 $ 130 $ ( 198 ) 69 Table of Contents 130 $ ( 198 ) 69 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Interest Year Ended December 31 , 2015 2016 2017 Interest income $ Ended December 31 , 2015 2016 2017 Interest income $ 999 December 31 , 2015 2016 2017 Interest income $ 999 $ 2016 2017 Interest income $ 999 $ 1,220 $ 1,312 Interest Interest income $ 999 $ 1,220 $ 1,312 Interest expense ( $ 999 $ 1,220 $ 1,312 Interest expense ( 1 ) $ 1,312 Interest expense ( 1 ) ( 104 ) ( expense ( 1 ) ( 104 ) ( 124 ) ( ) ( 104 ) ( 124 ) ( 109 ) Foreign ) ( 124 ) ( 109 ) Foreign currency exchange loss exchange loss , net ( 2 ) ( 422 ) ( net ( 2 ) ( 422 ) ( 475 ) ( ) ( 422 ) ( 475 ) ( 121 ) Loss ) ( 475 ) ( 121 ) Loss on marketable security marketable security , net ( 208 ) ( 210 ) ( net ( 208 ) ( 210 ) ( 80 ) Loss ) ( 210 ) ( 80 ) Loss on non-marketable investment non-marketable investment , net ( 126 ) ( 65 ) ( net ( 126 ) ( 65 ) ( 114 ) Other ) ( 65 ) ( 114 ) Other 152 88 159 ) ( 114 ) Other 152 88 159 Other income ( ( 114 ) Other 152 88 159 Other income ( expense 114 ) Other 152 88 159 Other income ( expense ) expense ) , net $ 291 $ 434 $ 1,047 ( , net $ 291 $ 434 $ 1,047 ( 1 ) $ 291 $ 434 $ 1,047 ( 1 ) Interest expense $ 434 $ 1,047 ( 1 ) Interest expense is net of interest capitalized of $ 0 million , $ 0 million $ 0 million , $ 0 million , and $ 48 0 million , and $ 48 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . ( 2 2017 , respectively . ( 2 ) Our foreign currency exchange currency transaction loss were $ 123 million , $ 112 million $ 123 million , $ 112 million , and $ 226 112 million , and $ 226 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . Note 8 2017 , respectively . Note 8 . Acquisitions 2017 Acquisitions During . Note 8 . Acquisitions 2017 Acquisitions During the year ended During the year ended December 31 , 2017 , we completed year ended December 31 , 2017 , we completed various acquisition total consideration of approximately $ 322 million . In aggregate , . In aggregate , $ 12 million wa cash acquired , wa cash acquired , $ 117 million wa attributed to intangible to intangible asset , $ 221 million wa attributed to goodwill to goodwill , and $ 28 million wa attributed to net tax purpose is approximately $ 60 million . Pro forma result during the year ended December 31 , 2017 , patent and year ended December 31 , 2017 , patent and developed technology a weighted-average useful life of 3.7 year , customer relationship have a weighted-average useful life of 2.0 year , and trade name a weighted-average useful life of 8.8 year . Agreement with HTC ( HTC ) In January 2018 , we completed the acquisition property from HTC for $ 1.1 billion in cash . The in the first quarter of 2018 . 2016 Acquisitions Apigee In first quarter of 2018 . 2016 Acquisitions Apigee In October 2016 2016 Acquisitions Apigee In October 2016 , we completed the acquisition management , for approximately $ 571 million in cash . We total purchase price of $ 571 million , $ 41 million $ 571 million , $ 41 million wa cash acquired , wa cash acquired , $ 127 million wa attributed to intangible to intangible asset , $ 376 million wa attributed to goodwill to goodwill , and $ 27 million wa attributed to net During the year ended December 31 , 2016 , we completed year ended December 31 , 2016 , we completed other acquisition total consideration of approximately $ 448 million . In aggregate , . In aggregate , $ 12 million wa cash acquired , wa cash acquired , $ 143 million wa attributed to intangible to intangible asset , $ 288 million wa attributed to goodwill to goodwill , and $ 5 million wa attributed to net a well a expanding our 70 Table of Contents Alphabet Inc. tax purpose is approximately $ 67 million . Pro forma result during the year ended December 31 , 2016 , patent and year ended December 31 , 2016 , patent and developed technology a weighted-average useful life of 4.5 year , customer relationship have a weighted-average useful life of 3.4 year , and trade name a weighted-average useful life of 6.2 year . Note 9 . of 6.2 year . Note 9 . Goodwill and Other Intangible for the year ended December 31 , 2016 and 2017 were year ended December 31 , 2016 and 2017 were a follows December 31 , 2016 and 2017 were a follows ( in Consolidated Balance a of December 31 , 2015 $ 15,456 $ a of December 31 , 2015 $ 15,456 $ 413 $ December 31 , 2015 $ 15,456 $ 413 $ 15,869 Acquisitions , 2015 $ 15,456 $ 413 $ 15,869 Acquisitions 625 39 $ 15,456 $ 413 $ 15,869 Acquisitions 625 39 664 Foreign $ 413 $ 15,869 Acquisitions 625 39 664 Foreign currency translation 413 $ 15,869 Acquisitions 625 39 664 Foreign currency translation and $ 15,869 Acquisitions 625 39 664 Foreign currency translation and other translation and other adjustment ( 54 ) ( 11 ) ( adjustment ( 54 ) ( 11 ) ( 65 ) Balance ) ( 11 ) ( 65 ) Balance a of December ) Balance a of December 31 , 2016 $ 16,027 $ a of December 31 , 2016 $ 16,027 $ 441 $ December 31 , 2016 $ 16,027 $ 441 $ 16,468 Acquisitions , 2016 $ 16,027 $ 441 $ 16,468 Acquisitions 212 9 $ 16,027 $ 441 $ 16,468 Acquisitions 212 9 221 Foreign $ 441 $ 16,468 Acquisitions 212 9 221 Foreign currency translation 441 $ 16,468 Acquisitions 212 9 221 Foreign currency translation and $ 16,468 Acquisitions 212 9 221 Foreign currency translation and other currency translation and other adjustment 56 2 58 Balance a of translation and other adjustment 56 2 58 Balance a of December and other adjustment 56 2 58 Balance a of December 31 58 Balance a of December 31 , 2017 $ 16,295 $ a of December 31 , 2017 $ 16,295 $ 452 $ December 31 , 2017 $ 16,295 $ 452 $ 16,747 Other , 2017 $ 16,295 $ 452 $ 16,747 Other Intangible Assets $ 16,295 $ 452 $ 16,747 Other Intangible Assets Information regarding ) : As of December 31 , 2016 Gross Carrying Amount As of December 31 , 2016 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,542 $ 2,710 $ 2,832 Customer developed technology $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 $ 5,542 $ 2,710 $ 2,832 Customer relationship 352 197 155 2,710 $ 2,832 Customer relationship 352 197 155 Trade name and $ 2,832 Customer relationship 352 197 155 Trade name and other 2,832 Customer relationship 352 197 155 Trade name and other 463 155 Trade name and other 463 143 320 Total $ 6,357 Trade name and other 463 143 320 Total $ 6,357 $ name and other 463 143 320 Total $ 6,357 $ 3,050 463 143 320 Total $ 6,357 $ 3,050 $ 3,307 As 320 Total $ 6,357 $ 3,050 $ 3,307 As of December $ 6,357 $ 3,050 $ 3,307 As of December 31 , $ 3,307 As of December 31 , 2017 Gross Carrying Amount As of December 31 , 2017 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,260 $ 3,040 $ 2,220 Customer developed technology $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 263 96 3,040 $ 2,220 Customer relationship 359 263 96 Trade name and $ 2,220 Customer relationship 359 263 96 Trade name and other 2,220 Customer relationship 359 263 96 Trade name and other 544 96 Trade name and other 544 168 376 Total $ 6,163 Trade name and other 544 168 376 Total $ 6,163 $ name and other 544 168 376 Total $ 6,163 $ 3,471 544 168 376 Total $ 6,163 $ 3,471 $ 2,692 Patents 376 Total $ 6,163 $ 3,471 $ 2,692 Patents and developed $ 6,163 $ 3,471 $ 2,692 Patents and developed technology , weighted-average remaining useful life of 3.8 year , 1.4 year , life of 3.8 year , 1.4 year , and 4.6 year , 1.4 year , and 4.6 year , respectively . Amortization purchased intangible asset wa $ 892 million , $ 833 million $ 892 million , $ 833 million , and $ 796 833 million , and $ 796 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . 71 Table and 2017 , respectively . 71 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2017 , expected amortization As of December 31 , 2017 , expected amortization expense relating ( in million ) : 2018 $ 728 2019 615 2020 million ) : 2018 $ 728 2019 615 2020 493 2021 ) : 2018 $ 728 2019 615 2020 493 2021 459 : 2018 $ 728 2019 615 2020 493 2021 459 2022 2018 $ 728 2019 615 2020 493 2021 459 2022 212 $ 728 2019 615 2020 493 2021 459 2022 212 Thereafter 728 2019 615 2020 493 2021 459 2022 212 Thereafter 185 2019 615 2020 493 2021 459 2022 212 Thereafter 185 $ 615 2020 493 2021 459 2022 212 Thereafter 185 $ 2,692 2020 493 2021 459 2022 212 Thereafter 185 $ 2,692 Note 2021 459 2022 212 Thereafter 185 $ 2,692 Note 10 . 2022 212 Thereafter 185 $ 2,692 Note 10 . Commitments and Thereafter 185 $ 2,692 Note 10 . Commitments and Contingencies Operating with lease period expiring between 2018 and 2063 . We are period expiring between 2018 and 2063 . We are committed to basis . As of December 31 , 2017 , future minimum As of December 31 , 2017 , future minimum payment under ) : Operating Leases ( 1 ) Sub-lease Income Net Operating Sub-lease Income Net Operating Leases 2018 $ 1,175 $ 15 $ Net Operating Leases 2018 $ 1,175 $ 15 $ 1,160 2019 Leases 2018 $ 1,175 $ 15 $ 1,160 2019 1,133 13 $ 1,175 $ 15 $ 1,160 2019 1,133 13 1,120 2020 1,175 $ 15 $ 1,160 2019 1,133 13 1,120 2020 1,073 $ 15 $ 1,160 2019 1,133 13 1,120 2020 1,073 11 15 $ 1,160 2019 1,133 13 1,120 2020 1,073 11 1,062 $ 1,160 2019 1,133 13 1,120 2020 1,073 11 1,062 2021 1,160 2019 1,133 13 1,120 2020 1,073 11 1,062 2021 975 2019 1,133 13 1,120 2020 1,073 11 1,062 2021 975 7 1,133 13 1,120 2020 1,073 11 1,062 2021 975 7 968 13 1,120 2020 1,073 11 1,062 2021 975 7 968 2022 1,120 2020 1,073 11 1,062 2021 975 7 968 2022 831 2020 1,073 11 1,062 2021 975 7 968 2022 831 3 1,073 11 1,062 2021 975 7 968 2022 831 3 828 11 1,062 2021 975 7 968 2022 831 3 828 Thereafter 1,062 2021 975 7 968 2022 831 3 828 Thereafter 3,616 2021 975 7 968 2022 831 3 828 Thereafter 3,616 1 975 7 968 2022 831 3 828 Thereafter 3,616 1 3,615 7 968 2022 831 3 828 Thereafter 3,616 1 3,615 Total 2022 831 3 828 Thereafter 3,616 1 3,615 Total minimum payment 831 3 828 Thereafter 3,616 1 3,615 Total minimum payment $ 3 828 Thereafter 3,616 1 3,615 Total minimum payment $ 8,803 3,615 Total minimum payment $ 8,803 $ 50 $ 8,753 ( minimum payment $ 8,803 $ 50 $ 8,753 ( 1 ) $ 8,803 $ 50 $ 8,753 ( 1 ) Includes future $ 50 $ 8,753 ( 1 ) Includes future minimum payment with lease period expiring between 2021 and 2044 where we are period expiring between 2021 and 2044 where we are the deemed such lease totaling approximately $ 2.1 billion , for which a , for which a $ 1.3 billion liability is included on Balance Sheets a of December 31 , 2017 . Rent expense a of December 31 , 2017 . Rent expense under operating under operating lease wa $ 734 million , $ 897 million $ 734 million , $ 897 million , and $ 1.1 897 million , and $ 1.1 billion for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . Purchase Obligations Purchase Obligations As of December 31 , 2017 , we had As of December 31 , 2017 , we had $ 7.2 2017 , we had $ 7.2 billion of other non-cancelable contractual . Additionally , we have 72 Table of Contents Alphabet Inc. period . As of December 31 , 2017 , we did As of December 31 , 2017 , we did not have Matters Antitrust Investigations On November 30 , 2010 , the European Investigations On November 30 , 2010 , the European Commission 's against u . On April 15 , 2015 , the EC . On April 15 , 2015 , the EC issued a which we responded on August 27 , 2015 . On July responded on August 27 , 2015 . On July 14 , , 2015 . On July 14 , 2016 , the EC . On July 14 , 2016 , the EC issued a and ad . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it €2.42 billion ( approximately $ 2.74 billion a of June 27 2.74 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC EC decision and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change a charge of approximately $ 2.74 billion for the fine in in the second quarter of 2017 . The fine is included the fine . On April 20 , 2016 , the EC . On April 20 , 2016 , the EC issued an distribution practice . On July 14 , 2016 , the EC . On July 14 , 2016 , the EC issued an business practice . In November 2016 , we responded to the favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided arising from this matter . 73 Table of Contents Alphabet Inc. tax contingency , see Note 14 . Note 11 . Stockholders see Note 14 . Note 11 . Stockholders ’ Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , no share December 31 , 2016 and 2017 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2015 , the board of director to repurchase up to $ 5.1 billion of it Class C in the fourth quarter of 2015 . In January 2016 , of 2015 . In January 2016 , the board of director an additional amount of approximately 514,000 share . The repurchase were including through the use of 10b5-1 plan . During 2016 , of 10b5-1 plan . During 2016 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million share of Alphabet Class an aggregate amount of $ 3.7 billion . We completed all repurchase program a of June 2016 . In October 2016 , June 2016 . In October 2016 , the board of director to repurchase up to $ 7.0 billion of it Class C market purchase or privately negotiated 74 Table of Contents Alphabet Inc. transaction , including through Rule 10b5-1 plan . The repurchase program an expiration date . During 2017 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million share of Alphabet Class an aggregate amount of $ 4.8 billion . Note 12 . $ 4.8 billion . Note 12 . Net Income Per Share In the year ended December 31 , 2016 and 2017 , year ended December 31 , 2016 and 2017 , the net December 31 , 2016 and 2017 , the net income per In the year ended December 31 , 2015 , the Class year ended December 31 , 2015 , the Class C Adjustment for the year ended December 31 , 2015 . The following year ended December 31 , 2015 . The following table set per share amount ) : 75 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2015 Class A Class Year Ended December 31 , 2015 Class A Class B Class Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings 6,695 522 Allocation of undistributed earnings 6,695 1,196 7,935 Total $ 6,695 Allocation of undistributed earnings 6,695 1,196 7,935 Total $ 6,695 $ of undistributed earnings 6,695 1,196 7,935 Total $ 6,695 $ 1,196 6,695 1,196 7,935 Total $ 6,695 $ 1,196 $ 8,457 Denominator 7,935 Total $ 6,695 $ 1,196 $ 8,457 Denominator Number of $ 6,695 $ 1,196 $ 8,457 Denominator Number of share used used in per share computation 289,640 51,745 343,241 Basic net income in per share computation 289,640 51,745 343,241 Basic net income per per share computation 289,640 51,745 343,241 Basic net income per share net income per share $ 23.11 $ 23.11 $ 24.63 Diluted per share $ 23.11 $ 23.11 $ 24.63 Diluted net income $ 23.11 $ 23.11 $ 24.63 Diluted net income per share Class C capital stockholder $ 0 $ 0 $ 522 Allocation capital stockholder $ 0 $ 0 $ 522 Allocation of undistributed $ 0 $ 0 $ 522 Allocation of undistributed earnings for earnings for basic computation $ 6,695 $ 1,196 $ 7,935 Reallocation basic computation $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed $ 6,695 $ 1,196 $ 7,935 Reallocation of undistributed earnings a B to Class A share 1,196 0 0 Reallocation of undistributed to Class A share 1,196 0 0 Reallocation of undistributed earnings Class A share 1,196 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 39 ) ( 14 ) 39 earnings ( 39 ) ( 14 ) 39 Allocation of undistributed 39 ) ( 14 ) 39 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 7,852 $ 1,182 $ 7,974 Denominator undistributed earnings $ 7,852 $ 1,182 $ 7,974 Denominator Number of $ 7,852 $ 1,182 $ 7,974 Denominator Number of share used share used in basic computation 289,640 51,745 343,241 Weighted-average effect of used in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive in basic computation 289,640 51,745 343,241 Weighted-average effect of dilutive security Class A common share outstanding 51,745 0 0 Restricted stock unit A common share outstanding 51,745 0 0 Restricted stock unit and common share outstanding 51,745 0 0 Restricted stock unit and other and other contingently issuable share 2,395 0 5,909 Number of share other contingently issuable share 2,395 0 5,909 Number of share used contingently issuable share 2,395 0 5,909 Number of share used in used in per share computation 343,780 51,745 349,150 Diluted net income in per share computation 343,780 51,745 349,150 Diluted net income per per share computation 343,780 51,745 349,150 Diluted net income per share net income per share $ 22.84 $ 22.84 $ 24.34 76 per share $ 22.84 $ 22.84 $ 24.34 76 Table of $ 22.84 $ 22.84 $ 24.34 76 Table of Contents Alphabet 22.84 $ 22.84 $ 24.34 76 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Allocation of undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator Number of $ 8,332 $ 1,384 $ 9,762 Denominator Number of share used used in per share computation 294,217 48,859 344,702 Basic net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and subsidiary ( 9 ) ( 2 ) ( subsidiary ( 9 ) ( 2 ) ( 10 ) Allocation ) ( 2 ) ( 10 ) Allocation of undistributed earnings undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings a B to Class A share 1,382 0 0 Reallocation of undistributed to Class A share 1,382 0 0 Reallocation of undistributed earnings Class A share 1,382 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 94 ) ( 21 ) 94 earnings ( 94 ) ( 21 ) 94 Allocation of undistributed 94 ) ( 21 ) 94 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 9,611 $ 1,361 $ 9,846 Denominator undistributed earnings $ 9,611 $ 1,361 $ 9,846 Denominator Number of $ 9,611 $ 1,361 $ 9,846 Denominator Number of share used share used in basic computation 294,217 48,859 344,702 Weighted-average effect of used in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive security Class A common share outstanding 48,859 0 0 Restricted stock unit A common share outstanding 48,859 0 0 Restricted stock unit and common share outstanding 48,859 0 0 Restricted stock unit and other and other contingently issuable share 2,055 0 8,873 Number of share other contingently issuable share 2,055 0 8,873 Number of share used contingently issuable share 2,055 0 8,873 Number of share used in used in per share computation 345,131 48,859 353,575 Diluted net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 77 per share $ 27.85 $ 27.85 $ 27.85 77 Table of $ 27.85 $ 27.85 $ 27.85 77 Table of Contents Alphabet 27.85 $ 27.85 $ 27.85 77 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator Number of $ 5,438 $ 862 $ 6,362 Denominator Number of share used used in per share computation 297,604 47,146 348,151 Basic net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a B to Class A share 862 0 0 Reallocation of undistributed to Class A share 862 0 0 Reallocation of undistributed earnings Class A share 862 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 74 ) ( 14 ) 74 earnings ( 74 ) ( 14 ) 74 Allocation of undistributed 74 ) ( 14 ) 74 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator Number of $ 6,226 $ 848 $ 6,436 Denominator Number of share used share used in basic computation 297,604 47,146 348,151 Weighted-average effect of used in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive security Class A common share outstanding 47,146 0 0 Restricted stock unit A common share outstanding 47,146 0 0 Restricted stock unit and common share outstanding 47,146 0 0 Restricted stock unit and other and other contingently issuable share 1,192 0 9,491 Number of share other contingently issuable share 1,192 0 9,491 Number of share used contingently issuable share 1,192 0 9,491 Number of share used in used in per share computation 345,942 47,146 357,642 Diluted net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 Note per share $ 18.00 $ 18.00 $ 18.00 Note 13 . $ 18.00 $ 18.00 $ 18.00 Note 13 . Compensation Plans $ 18.00 $ 18.00 Note 13 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . RSUs granted to granted to participant under the 2012 Stock Plan generally vest over date . As of December 31 , 2017 , there were As of December 31 , 2017 , there were 38,505,768 share , 2017 , there were 38,505,768 share of stock reserved for For the year ended December 31 , 2015 , 2016 and year ended December 31 , 2015 , 2016 and 2017 , December 31 , 2015 , 2016 and 2017 , total stock-based , 2015 , 2016 and 2017 , total stock-based compensation expense stock-based compensation expense wa $ 5.3 billion , $ 6.9 billion $ 5.3 billion , $ 6.9 billion and $ 7.9 billion $ 6.9 billion and $ 7.9 billion , including amount associated in Alphabet stock of $ 5.2 billion , $ 6.7 billion $ 5.2 billion , $ 6.7 billion , and $ 7.7 6.7 billion , and $ 7.7 billion , respectively . For For the year ended December 31 , 2015 , 2016 and year ended December 31 , 2015 , 2016 and 2017 , December 31 , 2015 , 2016 and 2017 , we recognized , 2015 , 2016 and 2017 , we recognized tax benefit of Income , of $ 1.1 billion , $ 1.5 billion $ 1.1 billion , $ 1.5 billion , and $ 1.6 1.5 billion , and $ 1.6 billion , respectively . For For the year ended December 31 , 2015 , 2016 and year ended December 31 , 2015 , 2016 and 2017 , December 31 , 2015 , 2016 and 2017 , tax benefit , 2015 , 2016 and 2017 , tax benefit realized related during the period wa $ 1.5 billion , $ 2.1 billion $ 1.5 billion , $ 2.1 billion and $ 2.7 billion $ 2.1 billion and $ 2.7 billion , respectively . These and development tax credit . 78 Table of Contents Alphabet Inc. for the year ended December 31 , 2017 : Unvested Restricted year ended December 31 , 2017 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2016 25,348,955 $ 624.92 a of December 31 , 2016 25,348,955 $ 624.92 Granted 8,097,708 of December 31 , 2016 25,348,955 $ 624.92 Granted 8,097,708 $ 31 , 2016 25,348,955 $ 624.92 Granted 8,097,708 $ 845.06 Vested 2016 25,348,955 $ 624.92 Granted 8,097,708 $ 845.06 Vested ( 12,071,413 $ 624.92 Granted 8,097,708 $ 845.06 Vested ( 12,071,413 ) $ 8,097,708 $ 845.06 Vested ( 12,071,413 ) $ 623.94 Forfeited/canceled ( Vested ( 12,071,413 ) $ 623.94 Forfeited/canceled ( 1,297,904 ) $ ) $ 623.94 Forfeited/canceled ( 1,297,904 ) $ 659.61 Unvested a Forfeited/canceled ( 1,297,904 ) $ 659.61 Unvested a of December 31 659.61 Unvested a of December 31 , 2017 20,077,346 $ 712.45 a of December 31 , 2017 20,077,346 $ 712.45 The weighted-average of December 31 , 2017 20,077,346 $ 712.45 The weighted-average grant-date 31 , 2017 20,077,346 $ 712.45 The weighted-average grant-date fair value during the year ended December 31 , 2015 and 2016 , year ended December 31 , 2015 and 2016 , wa $ December 31 , 2015 and 2016 , wa $ 546.46 and and 2016 , wa $ 546.46 and $ 713.89 , respectively wa $ 546.46 and $ 713.89 , respectively . Total fair during the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 were $ 2015 , 2016 , and 2017 were $ 6.9 billion , , and 2017 were $ 6.9 billion , $ 9.0 billion $ 6.9 billion , $ 9.0 billion , and $ 11.3 9.0 billion , and $ 11.3 billion , respectively . As respectively . As of December 31 , 2017 , there wa As of December 31 , 2017 , there wa $ 12.9 2017 , there wa $ 12.9 billion of unrecognized compensation cost over a weighted-average period of 2.4 year . 401 ( k period of 2.4 year . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , . We contributed approximately $ 309 million , $ 385 million $ 309 million , $ 385 million , and $ 448 385 million , and $ 448 million for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively . Note 14 2017 , respectively . Note 14 . Income Taxes Income from from domestic operation of $ 8.3 billion , $ 12.0 billion $ 8.3 billion , $ 12.0 billion , and $ 10.7 12.0 billion , and $ 10.7 billion for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , and 2015 , 2016 , and 2017 , and income from foreign from foreign operation of $ 11.4 billion , $ 12.1 billion $ 11.4 billion , $ 12.1 billion , and $ 16.5 12.1 billion , and $ 16.5 billion for the year ended for the year ended December 31 , 2015 , 2016 , year ended December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 . The 2015 , 2016 , and 2017 . The provision for income ) : Year Ended December 31 , 2015 2016 2017 Current Year Ended December 31 , 2015 2016 2017 Current : Federal Ended December 31 , 2015 2016 2017 Current : Federal and December 31 , 2015 2016 2017 Current : Federal and state : Federal and state $ 2,838 $ 3,826 $ 12,608 Foreign and state $ 2,838 $ 3,826 $ 12,608 Foreign 723 966 $ 2,838 $ 3,826 $ 12,608 Foreign 723 966 1,746 Total $ 3,826 $ 12,608 Foreign 723 966 1,746 Total 3,561 4,792 3,826 $ 12,608 Foreign 723 966 1,746 Total 3,561 4,792 14,354 $ 12,608 Foreign 723 966 1,746 Total 3,561 4,792 14,354 Deferred Foreign 723 966 1,746 Total 3,561 4,792 14,354 Deferred : Federal 723 966 1,746 Total 3,561 4,792 14,354 Deferred : Federal and 966 1,746 Total 3,561 4,792 14,354 Deferred : Federal and state : Federal and state ( 241 ) ( 70 ) 220 state ( 241 ) ( 70 ) 220 Foreign ( 17 241 ) ( 70 ) 220 Foreign ( 17 ) ( 70 ) 220 Foreign ( 17 ) ( 50 ) ( Foreign ( 17 ) ( 50 ) ( 43 ) Total ) ( 50 ) ( 43 ) Total ( 258 ) ( 43 ) Total ( 258 ) ( 120 ) 177 Total ( 258 ) ( 120 ) 177 Provision for income 258 ) ( 120 ) 177 Provision for income tax $ Provision for income tax $ 3,303 $ 4,672 $ 14,531 The income tax $ 3,303 $ 4,672 $ 14,531 The U.S. Tax $ 3,303 $ 4,672 $ 14,531 The U.S. Tax Cuts and ) wa enacted on December 22 , 2017 and introduces significant enacted on December 22 , 2017 and introduces significant change to tax law . Effective in 2018 , the Tax Act reduces U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax . In addition , in 2017 we were subject to a financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collect and Act will be completed in 2018 . 79 Table of Contents be completed in 2018 . 79 Table of Contents Alphabet Inc been recorded a of December 31 , 2017 and are subject a of December 31 , 2017 and are subject to change are subject to change during 2018 . One-time transition tax The tax at a rate of 15.5 % to the extent of other net current asset and 8 % on the remaining earnings income tax expense of $ 10.2 billion . We have recorded U.S. statutory tax rate from 35 % to 21 % for rate from 35 % to 21 % for year after 2017 21 % for year after 2017 . Accordingly , we have deferred tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduced rate deferred tax benefit of $ 376 million to reflect the reduced amount recorded a of December 31 , 2017 are provisional . a of December 31 , 2017 are provisional . The net net tax expense recognized in 2017 related to the Tax Act the Tax Act wa $ 9.9 billion . As we complete not reflected a of December 31 , 2017 . The reconciliation a of December 31 , 2017 . The reconciliation of federal follows : Year Ended December 31 , 2015 2016 2017 U.S. Year Ended December 31 , 2015 2016 2017 U.S. federal statutory Ended December 31 , 2015 2016 2017 U.S. federal statutory tax December 31 , 2015 2016 2017 U.S. federal statutory tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 35.0 % statutory tax rate 35.0 % 35.0 % 35.0 % Foreign income rate 35.0 % 35.0 % 35.0 % Foreign income taxed at taxed at different rate ( 13.4 ) % ( 11.0 ) ( 13.4 ) % ( 11.0 ) % ( 14.2 ) ( 11.0 ) % ( 14.2 ) % Impact of the Tax Act One-time transition tax 0.0 % 0.0 % 37.6 % One-time transition tax 0.0 % 0.0 % 37.6 % Deferred tax tax 0.0 % 0.0 % 37.6 % Deferred tax effect 0.0 37.6 % Deferred tax effect 0.0 % 0.0 % ( 1.4 Deferred tax effect 0.0 % 0.0 % ( 1.4 ) % 0.0 % 0.0 % ( 1.4 ) % Federal research credit % Federal research credit ( 2.1 ) % ( 2.0 ) ( 2.1 ) % ( 2.0 ) % ( 1.8 ) ( 2.0 ) % ( 1.8 ) % Stock-based compensation expense ) % Stock-based compensation expense 0.3 % ( 3.4 ) % compensation expense 0.3 % ( 3.4 ) % ( 4.5 ) ( 3.4 ) % ( 4.5 ) % European Commission Fine ) % European Commission Fine 0.0 % 0.0 % 3.5 % European Commission Fine 0.0 % 0.0 % 3.5 % Other adjustment Fine 0.0 % 0.0 % 3.5 % Other adjustment ( 3.0 3.5 % Other adjustment ( 3.0 ) % 0.7 % ( adjustment ( 3.0 ) % 0.7 % ( 0.8 ) % ) % 0.7 % ( 0.8 ) % Effective tax rate ) % Effective tax rate 16.8 % 19.3 % 53.4 % Effective tax rate 16.8 % 19.3 % 53.4 % Our effective rate 16.8 % 19.3 % 53.4 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The IRS decision on December 28 , 2015 . The IRS served a Notice of Appeal on February 22 , 2016 and the case Appeal on February 22 , 2016 and the case is being tax benefit wa remeasured from 35 % to 21 % . remeasured from 35 % to 21 % . We also remeasured liability recorded a of December 31 , 2016 for the U.S. a of December 31 , 2016 for the U.S. tax cost tax system and providing a 100 % dividend received deduction on our consolidated financial statement . 80 Table of Contents Alphabet Inc income tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduction in U.S. statutory tax rate from 35 % to 21 % resulting rate from 35 % to 21 % resulting from the Tax ) : As of December 31 , 2016 2017 Deferred tax As of December 31 , 2016 2017 Deferred tax asset : of December 31 , 2016 2017 Deferred tax asset : Stock-based : Stock-based compensation expense $ 574 $ 251 Accrued employee benefit compensation expense $ 574 $ 251 Accrued employee benefit 939 285 $ 251 Accrued employee benefit 939 285 Accruals and reserve not 251 Accrued employee benefit 939 285 Accruals and reserve not currently and reserve not currently deductible 500 717 Tax credit 631 1,187 reserve not currently deductible 500 717 Tax credit 631 1,187 Basis deductible 500 717 Tax credit 631 1,187 Basis difference in investment 500 717 Tax credit 631 1,187 Basis difference in investment of difference in investment of Arris 1,327 849 Prepaid cost sharing 4,409 in investment of Arris 1,327 849 Prepaid cost sharing 4,409 498 1,327 849 Prepaid cost sharing 4,409 498 Net Operating Losses 305 849 Prepaid cost sharing 4,409 498 Net Operating Losses 305 320 4,409 498 Net Operating Losses 305 320 Other 621 379 Total 498 Net Operating Losses 305 320 Other 621 379 Total deferred Operating Losses 305 320 Other 621 379 Total deferred tax asset Losses 305 320 Other 621 379 Total deferred tax asset 9,306 379 Total deferred tax asset 9,306 4,486 Valuation allowance ( 2,076 Total deferred tax asset 9,306 4,486 Valuation allowance ( 2,076 ) 9,306 4,486 Valuation allowance ( 2,076 ) ( 2,531 ) Total allowance ( 2,076 ) ( 2,531 ) Total deferred tax asset asset net of valuation allowance 7,230 1,955 Deferred tax liability : net of valuation allowance 7,230 1,955 Deferred tax liability : Depreciation : Depreciation and amortization ( 877 ) ( 551 ) Identified amortization ( 877 ) ( 551 ) Identified intangible ( 844 551 ) Identified intangible ( 844 ) ( 419 ) Renewable intangible ( 844 ) ( 419 ) Renewable energy investment ( ) Renewable energy investment ( 788 ) ( 531 ) Foreign investment ( 788 ) ( 531 ) Foreign earnings ( 4,409 531 ) Foreign earnings ( 4,409 ) ( 68 ) Other earnings ( 4,409 ) ( 68 ) Other ( 155 ) ( 68 ) Other ( 155 ) ( 136 ) Total Other ( 155 ) ( 136 ) Total deferred tax liability Total deferred tax liability ( 7,073 ) ( 1,705 ) Net liability ( 7,073 ) ( 1,705 ) Net deferred tax asset Net deferred tax asset $ 157 $ 250 As of December tax asset $ 157 $ 250 As of December 31 , $ 250 As of December 31 , 2017 , our federal As of December 31 , 2017 , our federal and state tax purpose were approximately $ 931 million and $ 785 million $ 931 million and $ 785 million , respectively . If will begin to expire in 2021 and the state net operating will begin to expire in 2018 . It is more likely income tax purpose were $ 327 million that will begin to will begin to expire in 2021 . As of December 31 2021 . As of December 31 , 2017 , our California As of December 31 , 2017 , our California research and tax purpose were approximately $ 1.8 billion that can be carried realized . As of December 31 , 2017 , we maintained As of December 31 , 2017 , we maintained a valuation Home business to Arris in 2013 . Since any future loss gain generated a of December 31 , 2017 . We reassess a of December 31 , 2017 . We reassess the valuation will be recorded accordingly . 81 Table of Contents Alphabet Inc unrecognized tax benefit from January 1 , 2015 to December 31 benefit from January 1 , 2015 to December 31 , 2017 1 , 2015 to December 31 , 2017 ( in million 2015 to December 31 , 2017 ( in million ) : ( in million ) : 2015 2016 2017 Beginning gross unrecognized in million ) : 2015 2016 2017 Beginning gross unrecognized tax million ) : 2015 2016 2017 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 3,294 $ 4,167 $ 5,393 Increases tax benefit $ 3,294 $ 4,167 $ 5,393 Increases related to $ 3,294 $ 4,167 $ 5,393 Increases related to prior year to prior year tax position 224 899 685 Decreases related to prior year tax position 224 899 685 Decreases related to prior year tax position 224 899 685 Decreases related to prior year prior year tax position ( 176 ) ( 157 ) ( position ( 176 ) ( 157 ) ( 257 ) Decreases ) ( 157 ) ( 257 ) Decreases related to settlement settlement with tax authority ( 27 ) ( 196 ) ( authority ( 27 ) ( 196 ) ( 1,875 ) Increases ) ( 196 ) ( 1,875 ) Increases related to current to current year tax position 852 680 750 Ending gross unrecognized current year tax position 852 680 750 Ending gross unrecognized tax year tax position 852 680 750 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 4,167 $ 5,393 $ 4,696 The tax benefit $ 4,167 $ 5,393 $ 4,696 The total amount $ 4,167 $ 5,393 $ 4,696 The total amount of gross unrecognized tax benefit wa $ 4.2 billion , $ 5.4 billion $ 4.2 billion , $ 5.4 billion , and $ 4.7 5.4 billion , and $ 4.7 billion a of December 31 4.7 billion a of December 31 , 2015 , 2016 , a of December 31 , 2015 , 2016 , and 2017 December 31 , 2015 , 2016 , and 2017 , respectively 2015 , 2016 , and 2017 , respectively , of which , of which , $ 3.6 billion , $ 4.3 billion $ 3.6 billion , $ 4.3 billion , and $ 3.0 4.3 billion , and $ 3.0 billion if recognized , would gross unrecognized tax benefit in 2017 wa primarily a a result audit . As of December 31 , 2016 and 2017 , As of December 31 , 2016 and 2017 , we had December 31 , 2016 and 2017 , we had accrued $ , we had accrued $ 493 million and $ 362 million $ 493 million and $ 362 million in interest and penalty completed it examination through our 2012 tax year ; all issue IRS is currently examining our 2013 through 2015 tax return . currently examining our 2013 through 2015 tax return . We have claim a presented . Our 2016 tax year remains subject to tax purpose , and our 2011 through 2016 tax year remain , and our 2011 through 2016 tax year remain subject to be concluded within the next 12 month , which could significantly tax benefit a of December 31 , 2017 could possibly decrease a of December 31 , 2017 could possibly decrease by approximately possibly decrease by approximately $ 500 million in the next 12 500 million in the next 12 month . Positions that may and non-U.S. matter . Note 15 . Information about Segments and , and X . Revenues 82 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Revenues Year Ended December 31 , 2015 2016 2017 Revenues : Google Ended December 31 , 2015 2016 2017 Revenues : Google $ December 31 , 2015 2016 2017 Revenues : Google $ 74,544 2017 Revenues : Google $ 74,544 $ 89,463 $ 109,652 Other : Google $ 74,544 $ 89,463 $ 109,652 Other Bets 445 $ 74,544 $ 89,463 $ 109,652 Other Bets 445 809 1,203 89,463 $ 109,652 Other Bets 445 809 1,203 Total revenue $ $ 109,652 Other Bets 445 809 1,203 Total revenue $ 74,989 109,652 Other Bets 445 809 1,203 Total revenue $ 74,989 $ 809 1,203 Total revenue $ 74,989 $ 90,272 $ 110,855 Year Total revenue $ 74,989 $ 90,272 $ 110,855 Year Ended December $ 74,989 $ 90,272 $ 110,855 Year Ended December 31 , $ 110,855 Year Ended December 31 , 2015 2016 2017 Operating Year Ended December 31 , 2015 2016 2017 Operating income ( Ended December 31 , 2015 2016 2017 Operating income ( loss December 31 , 2015 2016 2017 Operating income ( loss ) loss ) : Google $ 23,319 $ 27,892 $ 32,908 Other : Google $ 23,319 $ 27,892 $ 32,908 Other Bets ( $ 23,319 $ 27,892 $ 32,908 Other Bets ( 3,456 ) $ 32,908 Other Bets ( 3,456 ) ( 3,578 ) ( Bets ( 3,456 ) ( 3,578 ) ( 3,355 ) Reconciling ) ( 3,578 ) ( 3,355 ) Reconciling item ( 1 3,355 ) Reconciling item ( 1 ) ( 503 ) ( item ( 1 ) ( 503 ) ( 598 ) ( ) ( 503 ) ( 598 ) ( 3,407 ) Total ) ( 598 ) ( 3,407 ) Total income from operation Total income from operation $ 19,360 $ 23,716 $ 26,146 ( from operation $ 19,360 $ 23,716 $ 26,146 ( 1 ) $ 19,360 $ 23,716 $ 26,146 ( 1 ) Reconciling item $ 23,716 $ 26,146 ( 1 ) Reconciling item are primarily for the year ended December 31 , 2017 , a well year ended December 31 , 2017 , a well a corporate presented . Year Ended December 31 , 2015 2016 2017 Capital Year Ended December 31 , 2015 2016 2017 Capital expenditure : Ended December 31 , 2015 2016 2017 Capital expenditure : Google December 31 , 2015 2016 2017 Capital expenditure : Google $ Capital expenditure : Google $ 8,868 $ 9,417 $ 12,605 Other : Google $ 8,868 $ 9,417 $ 12,605 Other Bets 850 $ 8,868 $ 9,417 $ 12,605 Other Bets 850 1,385 507 9,417 $ 12,605 Other Bets 850 1,385 507 Reconciling item ( $ 12,605 Other Bets 850 1,385 507 Reconciling item ( 2 12,605 Other Bets 850 1,385 507 Reconciling item ( 2 ) 1,385 507 Reconciling item ( 2 ) 232 ( 590 ) Reconciling item ( 2 ) 232 ( 590 ) 72 Total ( 2 ) 232 ( 590 ) 72 Total capital expenditure ) 232 ( 590 ) 72 Total capital expenditure a presented Statements of Cash Flows $ 9,950 $ 10,212 $ 13,184 ( Cash Flows $ 9,950 $ 10,212 $ 13,184 ( 2 ) $ 9,950 $ 10,212 $ 13,184 ( 2 ) Reconciling item $ 10,212 $ 13,184 ( 2 ) Reconciling item are related and other miscellaneous difference . 83 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2015 2016 2017 Stock-based Year Ended December 31 , 2015 2016 2017 Stock-based compensation : Ended December 31 , 2015 2016 2017 Stock-based compensation : Google December 31 , 2015 2016 2017 Stock-based compensation : Google $ Stock-based compensation : Google $ 4,610 $ 5,926 $ 7,038 Other : Google $ 4,610 $ 5,926 $ 7,038 Other Bets 475 $ 4,610 $ 5,926 $ 7,038 Other Bets 475 647 493 5,926 $ 7,038 Other Bets 475 647 493 Reconciling item ( $ 7,038 Other Bets 475 647 493 Reconciling item ( 3 7,038 Other Bets 475 647 493 Reconciling item ( 3 ) 647 493 Reconciling item ( 3 ) 118 130 148 Total Reconciling item ( 3 ) 118 130 148 Total stock-based compensation item ( 3 ) 118 130 148 Total stock-based compensation ( ( 3 ) 118 130 148 Total stock-based compensation ( 4 148 Total stock-based compensation ( 4 ) $ 5,203 $ 6,703 compensation ( 4 ) $ 5,203 $ 6,703 $ 7,679 Depreciation 4 ) $ 5,203 $ 6,703 $ 7,679 Depreciation , amortization $ 5,203 $ 6,703 $ 7,679 Depreciation , amortization , and and impairment : Google $ 4,839 $ 5,800 $ 6,520 Other : Google $ 4,839 $ 5,800 $ 6,520 Other Bets 203 $ 4,839 $ 5,800 $ 6,520 Other Bets 203 340 395 5,800 $ 6,520 Other Bets 203 340 395 Reconciling item ( $ 6,520 Other Bets 203 340 395 Reconciling item ( 5 6,520 Other Bets 203 340 395 Reconciling item ( 5 ) 340 395 Reconciling item ( 5 ) 21 4 — Total Reconciling item ( 5 ) 21 4 — Total depreciation , item ( 5 ) 21 4 — Total depreciation , amortization Statements of Cash Flows $ 5,063 $ 6,144 $ 6,915 ( Cash Flows $ 5,063 $ 6,144 $ 6,915 ( 3 ) $ 5,063 $ 6,144 $ 6,915 ( 3 ) Reconciling item $ 6,144 $ 6,915 ( 3 ) Reconciling item represent corporate to individual segment . ( 4 ) For purpose of segment in Alphabet stock . ( 5 ) Reconciling item are primarily ) : As of December 31 , 2016 As of December As of December 31 , 2016 As of December 31 , , 2016 As of December 31 , 2017 Long-lived asset : As of December 31 , 2017 Long-lived asset : United States asset : United States $ 47,383 $ 55,113 International 14,706 17,874 United States $ 47,383 $ 55,113 International 14,706 17,874 Total long-lived $ 47,383 $ 55,113 International 14,706 17,874 Total long-lived asset $ 47,383 $ 55,113 International 14,706 17,874 Total long-lived asset $ 62,089 17,874 Total long-lived asset $ 62,089 $ 72,987 For revenue by long-lived asset $ 62,089 $ 72,987 For revenue by geography , by geography , see Note 2 . ITEM 9 . CHANGES see Note 2 . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2017 , our disclosure a of December 31 , 2017 , our disclosure control and during the quarter ended December 31 , 2017 that have materially quarter ended December 31 , 2017 that have materially affected , control over financial reporting . 84 Table of Contents Alphabet Inc. , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2017 . Management reviewed a of December 31 , 2017 . Management reviewed the result financial reporting a of December 31 , 2017 ha been audited a of December 31 , 2017 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 85 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2018 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2017 ( 2018 Proxy year ended December 31 , 2017 ( 2018 Proxy Statement ) December 31 , 2017 ( 2018 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be under the caption “ Section 16 ( a ) Beneficial Ownership Reporting Compliance ” in the 2018 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2018 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Compensation Plan Information ” in 2018 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2018 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2018 Proxy Statement and is incorporated incorporated herein by reference . 86 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 46 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 48 Consolidated Statements of Income 49 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 51 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 53 2 . Financial Statement Schedules to Consolidated Financial Statements 53 2 . Financial Statement Schedules Schedule the three year ended December 31 , 2017 ( in million year ended December 31 , 2017 ( in million ) : of Year Year ended December 31 , 2015 $ 225 $ Year ended December 31 , 2015 $ 225 $ 579 $ December 31 , 2015 $ 225 $ 579 $ ( 508 , 2015 $ 225 $ 579 $ ( 508 ) $ 225 $ 579 $ ( 508 ) $ 296 Year ended $ ( 508 ) $ 296 Year ended December 31 , $ 296 Year ended December 31 , 2016 $ 296 $ Year ended December 31 , 2016 $ 296 $ 942 $ December 31 , 2016 $ 296 $ 942 $ ( 771 , 2016 $ 296 $ 942 $ ( 771 ) $ 296 $ 942 $ ( 771 ) $ 467 Year ended $ ( 771 ) $ 467 Year ended December 31 , $ 467 Year ended December 31 , 2017 $ 467 $ Year ended December 31 , 2017 $ 467 $ 1,131 $ December 31 , 2017 $ 467 $ 1,131 $ ( 924 , 2017 $ 467 $ 1,131 $ ( 924 ) $ 467 $ 1,131 $ ( 924 ) $ 674 Note : $ ( 924 ) $ 674 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.01 Specimen Class 001-37580 ) October 2 , 2015 4.01 Specimen Class A Common ) October 2 , 2015 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 87 Table of 001-37580 ) October 2 , 2015 87 Table of Contents Alphabet ) October 2 , 2015 87 Table of Contents Alphabet Inc. by reference herein Form Date 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Transfer Restriction 001-37580 ) October 2 , 2015 4.06 Transfer Restriction Agreement , ) October 2 , 2015 4.06 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.07 Class C 001-37580 ) October 2 , 2015 4.07 Class C Undertaking , ) October 2 , 2015 4.07 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Indenture , 001-37580 ) October 2 , 2015 4.08 Indenture , dated February ) October 2 , 2015 4.08 Indenture , dated February 12 4.08 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.09 Registrant Registration 333-209510 ) February 12 , 2016 4.09 Registrant Registration Rights Agreement ) February 12 , 2016 4.09 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.10 First Supplemental 333-209518 ) February 12 , 2016 4.10 First Supplemental Indenture , ) February 12 , 2016 4.10 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.11 Form of 001-37580 ) April 27 , 2016 4.11 Form of the Registrant ) April 27 , 2016 4.11 Form of the Registrant ’ of the Registrant ’ s 3.625 % Notes due 2021 ( s 3.625 % Notes due 2021 ( included in Exhibit 4.10 2021 ( included in Exhibit 4.10 ) 4.12 Form of the included in Exhibit 4.10 ) 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.10 2024 ( included in Exhibit 4.10 ) 4.13 Form of the included in Exhibit 4.10 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 10.01 Form of 001-37580 ) August 9 , 2016 10.01 Form of Indemnification Agreement ) August 9 , 2016 10.01 Form of Indemnification Agreement entered officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Compensation 001-37580 ) October 2 , 2015 10.02 u Compensation Plan Agreement ) October 2 , 2015 10.02 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.03 u Director 001-37580 ) October 2 , 2015 10.03 u Director Arrangements Agreement ) October 2 , 2015 10.03 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Alphabet 001-37580 ) October 2 , 2015 10.04 u Alphabet Inc . ) October 2 , 2015 10.04 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Google 001-37580 ) October 2 , 2015 10.05 u Google Inc. 2004 ) October 2 , 2015 10.05 u Google Inc. 2004 Stock 2015 10.05 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.05.1 u Google 000-50726 ) June 7 , 2011 10.05.1 u Google Inc. 2004 ) June 7 , 2011 10.05.1 u Google Inc. 2004 Stock 2011 10.05.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.2 u Google 000-50726 ) March 30 , 2005 10.05.2 u Google Inc. 2004 ) March 30 , 2005 10.05.2 u Google Inc. 2004 Stock 2005 10.05.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.3 u Google 000-50726 ) March 30 , 2005 10.05.3 u Google Inc. 2004 ) March 30 , 2005 10.05.3 u Google Inc. 2004 Stock 2005 10.05.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.06 u Alphabet 333-142243 ) April 20 , 2007 10.06 u Alphabet Inc. 2012 ) April 20 , 2007 10.06 u Alphabet Inc. 2012 Stock 2007 10.06 u Alphabet Inc. 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 9 , 2017 No . 001-37580 ) June 9 , 2017 10.06.1 u Alphabet 001-37580 ) June 9 , 2017 10.06.1 u Alphabet Inc. 2012 ) June 9 , 2017 10.06.1 u Alphabet Inc. 2012 Stock 2017 10.06.1 u Alphabet Inc. 2012 Stock Plan - Form of Agreement Quarterly Report on Form 10-Q ( File No . 001-37580 10-Q ( File No . 001-37580 ) November 3 , 2016 No . 001-37580 ) November 3 , 2016 10.07 u Motorola 001-37580 ) November 3 , 2016 10.07 u Motorola Mobility Holdings ) November 3 , 2016 10.07 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 Table of Contents 333-181661 ) May 24 , 2012 Table of Contents Alphabet Inc. by reference herein Form Date 10.08 u AdMob , Inc. 2006 10.08 u AdMob , Inc. 2006 Stock Plan and UK Sub-Plan of the AdMob , Inc. 2006 Stock Plan Registration Statement on S-8 ( File No . 333-167411 ) June 9 , 2010 No . 333-167411 ) June 9 , 2010 10.09 u Apigee 333-167411 ) June 9 , 2010 10.09 u Apigee Corporation 2015 ) June 9 , 2010 10.09 u Apigee Corporation 2015 Equity 2010 10.09 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.09.1 u Apigee 333-214573 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 Equity 2016 10.09.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 12.01 * Computation 333-214573 ) November 10 , 2016 12.01 * Computation of Earnings ) November 10 , 2016 12.01 * Computation of Earnings to Earnings to Fixed Charge Ratios 14.01 * Code of Conduct of Registrant a amended on September 21 , 2017 21.01 * Subsidiaries amended on September 21 , 2017 21.01 * Subsidiaries of the on September 21 , 2017 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.01 Google blog post dated the Sarbanes-Oxley Act of 2002 99.01 Google blog post dated June Google blog post dated June 27 , 2017 Current Report on post dated June 27 , 2017 Current Report on Form 8-K 2017 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 27 , 2017 No . 001-37580 ) June 27 , 2017 101.INS * XBRL 001-37580 ) June 27 , 2017 101.INS * XBRL Instance Document ) June 27 , 2017 101.INS * XBRL Instance Document 101.SCH 101.INS * XBRL Instance Document 101.SCH * XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema Document 101.CAL * XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase Document 101.DEF * XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase Document 101.LAB * XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase Document 101.PRE * XBRL Taxonomy Extension Presentation Contents Alphabet Inc . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . Table of to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 5 , 2018 ALPHABET INC. By Date : February 5 , 2018 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by Principal Executive Officer ) February 5 , 2018 Larry Page / Officer ) February 5 , 2018 Larry Page / S / Principal Financial Officer ) February 5 , 2018 Ruth M. Porat Officer ) February 5 , 2018 Ruth M. Porat / S Principal Accounting Officer ) February 5 , 2018 James G. Campbell Officer ) February 5 , 2018 James G. Campbell /S/ S Co-Founder , and Director February 5 , 2018 Sergey Brin /S/ and Director February 5 , 2018 Sergey Brin /S/ J OHN ENNESSY Director , Chair February 5 , 2018 John L. Hennessy , Chair February 5 , 2018 John L. Hennessy /s/ E E. S CHMIDT Director February 5 , 2018 Eric E. Schmidt CHMIDT Director February 5 , 2018 Eric E. Schmidt / S OHN D OERR Director February 5 , 2018 L. John Doerr OERR Director February 5 , 2018 L. John Doerr / S J R . Director February 5 , 2018 Roger W. Ferguson . Director February 5 , 2018 Roger W. Ferguson , Jr. B. G REENE Director February 5 , 2018 Diane B. Greene REENE Director February 5 , 2018 Diane B. Greene / S NN M ATHER Director February 5 , 2018 Ann Mather / ATHER Director February 5 , 2018 Ann Mather / S / . M ULALLY Director February 5 , 2018 Alan R. Mulally ULALLY Director February 5 , 2018 Alan R. Mulally /s/ S UNDAR P ICHAI Director February 5 , 2018 Sundar Pichai / ICHAI Director February 5 , 2018 Sundar Pichai / S / AM S HRIRAM Director February 5 , 2018 K. Ram Shriram HRIRAM Director February 5 , 2018 K. Ram Shriram / S M. T ILGHMAN Director February 5 , 2018 Shirley M. Tilghman ILGHMAN Director February 5 , 2018 Shirley M. Tilghman \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-19-000004/full-submission.txt b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-19-000004/full-submission.txt new file mode 100644 index 0000000..458749f --- /dev/null +++ b/src/data/processed-numeric-contexts/GOOGL/10-K/0001652044-19-000004/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( Mark One ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2018 OR ¨ TRANSITION year ended December 31 , 2018 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive ( Zip Code ) ( 650 ) 253-0000 ( Registrant ’ Code ) ( 650 ) 253-0000 ( Registrant ’ s telephone Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value Nasdaq Stock Market C Capital Stock , $ 0.001 par value Nasdaq Stock Market Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ý No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ý As of June 29 , 2018 , the aggregate As of June 29 , 2018 , the aggregate market value Global Select Market on June 29 , 2018 ) wa approximately Market on June 29 , 2018 ) wa approximately $ 680.0 2018 ) wa approximately $ 680.0 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 31 , Form 10-K. As of January 31 , 2019 , there were As of January 31 , 2019 , there were 299,360,029 share , 2019 , there were 299,360,029 share of the registrant ’ A common stock outstanding , 46,535,019 share of the registrant ’ common stock outstanding , and 349,291,348 share of the registrant ’ s Proxy Statement for the 2019 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2018 . Table of year ended December 31 , 2018 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2018 TABLE OF CONTENTS Year Ended December 31 , 2018 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 1 PART I Item 1. Business Statements 1 PART I Item 1. Business 3 Item 1A . PART I Item 1. Business 3 Item 1A . Risk Factors Item 1. Business 3 Item 1A . Risk Factors 7 Item Item 1A . Risk Factors 7 Item 1B . Unresolved Staff . Risk Factors 7 Item 1B . Unresolved Staff Comments 20 1B . Unresolved Staff Comments 20 Item 2 . Properties 20 Unresolved Staff Comments 20 Item 2 . Properties 20 Item 3 20 Item 2 . Properties 20 Item 3 . Legal Proceedings 2 . Properties 20 Item 3 . Legal Proceedings 20 Item Item 3 . Legal Proceedings 20 Item 4 . Mine Safety . Legal Proceedings 20 Item 4 . Mine Safety Disclosures 20 4 . Mine Safety Disclosures 20 PART II Item 5 . Disclosures 20 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 24 6 . Selected Financial Data 24 Item 7 . Management ’ Selected Financial Data 24 Item 7 . Management ’ s Discussion Condition and Results of Operations 25 Item 7A . Quantitative and Results of Operations 25 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 40 Item 8 . Financial Statements About Market Risk 40 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 43 Item 9 . Changes in and Supplementary Data 43 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 82 Item 9A . Controls and and Financial Disclosure 82 Item 9A . Controls and Procedures 82 9A . Controls and Procedures 82 Item 9B . Other Information Controls and Procedures 82 Item 9B . Other Information 83 PART Item 9B . Other Information 83 PART III Item 10 . Information 83 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 84 Item 11 . Executive Compensation and Corporate Governance 84 Item 11 . Executive Compensation 84 Item Item 11 . Executive Compensation 84 Item 12 . Security Ownership . Executive Compensation 84 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 84 Item 13 . Certain Relationships Related Stockholder Matters 84 Item 13 . Certain Relationships and Related Transactions , and Director Independence 84 Item 14 . Principal Accountant and Director Independence 84 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 84 PART IV Item 15 . Services 84 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 85 Item 16 . Form 10-K Financial Statement Schedules 85 Item 16 . Form 10-K Summary 87 85 Item 16 . Form 10-K Summary 87 i Table of 16 . Form 10-K Summary 87 i Table of Contents Alphabet This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , Inc. 's share repurchase ; 1 Table of Contents Alphabet Inc. the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , the risk discussed in Item 1A , `` Risk Factors `` any of these company . 2 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder central Kenya , starting in 2019 . Moonshots Many company get of incredible creativity and innovation 3 Table of Contents Alphabet Inc. of hardware product like Pixel 3 phone and the Google Home their brand-building marketing campaign . 4 Table of Contents Alphabet Inc. on attracting and retaining : 5 Table of Contents Alphabet Inc. employee . As of December 31 , 2018 , we had As of December 31 , 2018 , we had 98,771 full-time , 2018 , we had 98,771 full-time employee . Although we on four dimension : matching 100 % of the electricity consumption Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , and our Proxy Statements this Annual Report on Form 10-K or in any other report inactive textual reference only . 6 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 1A . RISK FACTORS Our operation business . We generated over 85 % of total revenue from total revenue from advertising in 2018 . Many of our advertiser reputation , brand and third-party 7 Table of Contents Alphabet Inc. a a holding company in 2015 and the investment that we The margin we earn on 8 Table of Contents Alphabet Inc. , we are and will 9 Table of Contents Alphabet Inc. the European Union on May 13 , 2014 on the ‘ Union on May 13 , 2014 on the ‘ right to decision against Google in June 2017 , and others could treat California Consumer Privacy Act of 2018 that come into effect in into effect in January of 2020 , and give new data proceeding could also result in 10 Table of Contents Alphabet Inc. perceived breach of our security 11 Table of Contents Alphabet Inc. EU ) beginning on May 25 , 2018 , and applies beginning on May 25 , 2018 , and applies to all up to the higher of 4 % of annual worldwide revenue up to the higher of 2 % of annual worldwide revenue the European Commission in July 2016 and the Swiss Government in the Swiss Government in January 2017 approved the EU-U.S. and the or supplier are found to 12 Table of Contents Alphabet Inc. at the acquired company . 13 Table of Contents Alphabet Inc. our arrangement with them . 14 Table of Contents Alphabet Inc. harm our operating result . 15 Table of Contents Alphabet Inc International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2018 . In addition to risk execute our business strategy . 16 Table of Contents Alphabet Inc. net neutrality rule effective June 11 , 2018 , which could rule effective June 11 , 2018 , which could lead internet to the adoption of ASU 2016-01 “ Financial Instruments ; Overall Instruments ; Overall ( Subtopic 825-10 ) : Recognition and Measurement Financial Liabilities ” in January 2018 , we adjust the carrying income ( expense ) . 17 Table of Contents Alphabet Inc. For example , from January 1 , 2018 through December 31 , from January 1 , 2018 through December 31 , 2018 1 , 2018 through December 31 , 2018 , the closing 2018 through December 31 , 2018 , the closing price of common stock ranged from $ 984.66 per share to $ 1,285.50 984.66 per share to $ 1,285.50 per share , and the capital stock ranged from $ 976.21 to $ 1,268.32 per share from $ 976.21 to $ 1,268.32 per share . In addition performance of those company . 18 Table of Contents Alphabet Inc our cash reserve . In 2016 and 2018 , the board reserve . In 2016 and 2018 , the board of director to repurchase up to $ 7.0 billion and $ 8.6 billion $ 7.0 billion and $ 8.6 billion of it Class C stock , respectively . The 2016 authorization wa completed in 2018 2016 authorization wa completed in 2018 . As of December 31 2018 . As of December 31 , 2018 , $ 1.7 As of December 31 , 2018 , $ 1.7 billion remains 31 , 2018 , $ 1.7 billion remains available for repurchase for repurchase . In January 2019 , our board of director up to an additional $ 12.5 billion of our Class C Class B common stock ha 10 vote per share , our right . As of December 31 , 2018 , Larry Page As of December 31 , 2018 , Larry Page , Sergey E. Schmidt beneficially owned approximately 92.8 % of our outstanding Class stock , which represented approximately 56.5 % of the voting power attempt to acquire u . 19 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it by such restriction . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are our headquarters ) represent approximately 11.2 million square foot of office/building of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 9 “ Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 20 Table of Contents Alphabet Inc. Alphabet Inc. PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public “ GOOG ” since April 3 , 2014 . Holders of ” since April 3 , 2014 . Holders of Record As of Record As of December 31 , 2018 , there were As of December 31 , 2018 , there were approximately 2,026 2018 , there were approximately 2,026 and 2,195 stockholder of record there were approximately 2,026 and 2,195 stockholder of record of our holder . As of December 31 , 2018 , there were As of December 31 , 2018 , there were approximately 65 2018 , there were approximately 65 stockholder of record of our during the quarter ended December 31 , 2018 : Period Total quarter ended December 31 , 2018 : Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 830 $ 1,115.81 million ) October 1 - 31 830 $ 1,115.81 830 $ ) October 1 - 31 830 $ 1,115.81 830 $ 3,412 1 - 31 830 $ 1,115.81 830 $ 3,412 November 1 - 31 830 $ 1,115.81 830 $ 3,412 November 1 - 830 $ 1,115.81 830 $ 3,412 November 1 - 30 859 1,115.81 830 $ 3,412 November 1 - 30 859 $ 1,054.22 $ 3,412 November 1 - 30 859 $ 1,054.22 859 $ 3,412 November 1 - 30 859 $ 1,054.22 859 $ 2,506 1 - 30 859 $ 1,054.22 859 $ 2,506 December 1 - 30 859 $ 1,054.22 859 $ 2,506 December 1 - 859 $ 1,054.22 859 $ 2,506 December 1 - 31 781 1,054.22 859 $ 2,506 December 1 - 31 781 $ 1,048.23 $ 2,506 December 1 - 31 781 $ 1,048.23 781 $ 2,506 December 1 - 31 781 $ 1,048.23 781 $ 1,688 1 - 31 781 $ 1,048.23 781 $ 1,688 Total 2,470 - 31 781 $ 1,048.23 781 $ 1,688 Total 2,470 $ 781 $ 1,048.23 781 $ 1,688 Total 2,470 $ 1,073.02 2,470 1,048.23 781 $ 1,688 Total 2,470 $ 1,073.02 2,470 ( 1 $ 1,688 Total 2,470 $ 1,073.02 2,470 ( 1 ) In 1,688 Total 2,470 $ 1,073.02 2,470 ( 1 ) In January 2,470 $ 1,073.02 2,470 ( 1 ) In January 2018 , ( 1 ) In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program expiration date . See Note 10 in Part II , Item in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 21 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2013 to December 31 ) from December 31 , 2013 to December 31 , 2018 31 , 2013 to December 31 , 2018 . The return 2013 to December 31 , 2018 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2013 in stock or invested on December 31 , 2013 in stock or index , . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a Inc. All right reserved . 22 Table of Contents Alphabet Inc Inc. Class C 's cumulative 57-Month total shareholder return on capital of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our Class C all dividend ) from April 3 , 2014 to December 31 ) from April 3 , 2014 to December 31 , 2018 3 , 2014 to December 31 , 2018 . The return 2014 to December 31 , 2018 . The return shown are , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on April 3 , $ 100 invested on April 3 , 2014 in stock or invested on April 3 , 2014 in stock or in index . Fiscal year ending December 31 . Copyright © 2015 S December 31 . Copyright © 2015 S & P , a Inc. All right reserved . 23 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are period . Year Ended December 31 , 2014 2015 2016 2017 Year Ended December 31 , 2014 2015 2016 2017 2018 ( Ended December 31 , 2014 2015 2016 2017 2018 ( in December 31 , 2014 2015 2016 2017 2018 ( in million 31 , 2014 2015 2016 2017 2018 ( in million , , 2014 2015 2016 2017 2018 ( in million , except Income Data : Revenues $ 66,001 $ 74,989 $ 90,272 $ : Revenues $ 66,001 $ 74,989 $ 90,272 $ 110,855 $ $ 66,001 $ 74,989 $ 90,272 $ 110,855 $ 136,819 Income $ 74,989 $ 90,272 $ 110,855 $ 136,819 Income from operation $ 90,272 $ 110,855 $ 136,819 Income from operation $ 16,496 136,819 Income from operation $ 16,496 $ 19,360 $ 23,716 $ from operation $ 16,496 $ 19,360 $ 23,716 $ 26,146 $ $ 16,496 $ 19,360 $ 23,716 $ 26,146 $ 26,321 Net $ 19,360 $ 23,716 $ 26,146 $ 26,321 Net income from $ 23,716 $ 26,146 $ 26,321 Net income from continuing operation income from continuing operation $ 13,620 $ 16,348 $ 19,478 $ continuing operation $ 13,620 $ 16,348 $ 19,478 $ 12,662 $ $ 13,620 $ 16,348 $ 19,478 $ 12,662 $ 30,736 Net $ 16,348 $ 19,478 $ 12,662 $ 30,736 Net income from $ 19,478 $ 12,662 $ 30,736 Net income from discontinued operation income from discontinued operation $ 516 $ 0 $ 0 $ discontinued operation $ 516 $ 0 $ 0 $ 0 $ $ 516 $ 0 $ 0 $ 0 $ 0 Net $ 0 $ 0 $ 0 $ 0 Net income $ $ 0 $ 0 $ 0 Net income $ 14,136 $ $ 0 Net income $ 14,136 $ 16,348 $ 19,478 $ Net income $ 14,136 $ 16,348 $ 19,478 $ 12,662 $ $ 14,136 $ 16,348 $ 19,478 $ 12,662 $ 30,736 Basic $ 16,348 $ 19,478 $ 12,662 $ 30,736 Basic net income $ 19,478 $ 12,662 $ 30,736 Basic net income per share stock : Continuing operation $ 20.15 $ 23.11 $ 28.32 $ Continuing operation $ 20.15 $ 23.11 $ 28.32 $ 18.27 $ $ 20.15 $ 23.11 $ 28.32 $ 18.27 $ 44.22 Discontinued $ 23.11 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 0.00 0.00 18.27 $ 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic $ 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income per operation 0.76 0.00 0.00 0.00 0.00 Basic net income per share and B common stock $ 20.91 $ 23.11 $ 28.32 $ common stock $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ $ 20.91 $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic $ 23.11 $ 28.32 $ 18.27 $ 44.22 Basic net income $ 28.32 $ 18.27 $ 44.22 Basic net income per share stock : Continuing operation $ 20.15 $ 24.63 $ 28.32 $ Continuing operation $ 20.15 $ 24.63 $ 28.32 $ 18.27 $ $ 20.15 $ 24.63 $ 28.32 $ 18.27 $ 44.22 Discontinued $ 24.63 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 $ 28.32 $ 18.27 $ 44.22 Discontinued operation 0.76 0.00 0.00 18.27 $ 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic $ 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net 44.22 Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income Discontinued operation 0.76 0.00 0.00 0.00 0.00 Basic net income per operation 0.76 0.00 0.00 0.00 0.00 Basic net income per share Class C capital stock $ 20.91 $ 24.63 $ 28.32 $ capital stock $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ $ 20.91 $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted $ 24.63 $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share stock : Continuing operation $ 19.82 $ 22.84 $ 27.85 $ Continuing operation $ 19.82 $ 22.84 $ 27.85 $ 18.00 $ $ 19.82 $ 22.84 $ 27.85 $ 18.00 $ 43.70 Discontinued $ 22.84 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 0.00 0.00 18.00 $ 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted $ 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per share and B common stock $ 20.57 $ 22.84 $ 27.85 $ common stock $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ $ 20.57 $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted $ 22.84 $ 27.85 $ 18.00 $ 43.70 Diluted net income $ 27.85 $ 18.00 $ 43.70 Diluted net income per share stock : Continuing operation $ 19.82 $ 24.34 $ 27.85 $ Continuing operation $ 19.82 $ 24.34 $ 27.85 $ 18.00 $ $ 19.82 $ 24.34 $ 27.85 $ 18.00 $ 43.70 Discontinued $ 24.34 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 $ 27.85 $ 18.00 $ 43.70 Discontinued operation 0.75 0.00 0.00 18.00 $ 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted $ 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net 43.70 Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income Discontinued operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per operation 0.75 0.00 0.00 0.00 0.00 Diluted net income per share Class C capital stock $ 20.57 $ 24.34 $ 27.85 $ capital stock $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ $ 20.57 $ 24.34 $ 27.85 $ 18.00 $ 43.70 As $ 24.34 $ 27.85 $ 18.00 $ 43.70 As of December $ 27.85 $ 18.00 $ 43.70 As of December 31 , $ 43.70 As of December 31 , 2014 2015 2016 2017 As of December 31 , 2014 2015 2016 2017 2018 ( of December 31 , 2014 2015 2016 2017 2018 ( in December 31 , 2014 2015 2016 2017 2018 ( in million 31 , 2014 2015 2016 2017 2018 ( in million ) , 2014 2015 2016 2017 2018 ( in million ) Consolidated , and marketable security $ 64,395 $ 73,066 $ 86,333 $ marketable security $ 64,395 $ 73,066 $ 86,333 $ 101,871 $ $ 64,395 $ 73,066 $ 86,333 $ 101,871 $ 109,140 Total $ 73,066 $ 86,333 $ 101,871 $ 109,140 Total asset $ $ 86,333 $ 101,871 $ 109,140 Total asset $ 129,187 $ $ 109,140 Total asset $ 129,187 $ 147,461 $ 167,497 $ Total asset $ 129,187 $ 147,461 $ 167,497 $ 197,295 $ $ 129,187 $ 147,461 $ 167,497 $ 197,295 $ 232,792 Total $ 147,461 $ 167,497 $ 197,295 $ 232,792 Total long-term liability $ 167,497 $ 197,295 $ 232,792 Total long-term liability $ 8,548 232,792 Total long-term liability $ 8,548 $ 7,820 $ 11,705 $ long-term liability $ 8,548 $ 7,820 $ 11,705 $ 20,610 $ $ 8,548 $ 7,820 $ 11,705 $ 20,610 $ 20,544 Total $ 7,820 $ 11,705 $ 20,610 $ 20,544 Total stockholder ’ $ 11,705 $ 20,610 $ 20,544 Total stockholder ’ equity $ Total stockholder ’ equity $ 103,860 $ 120,331 $ 139,036 $ ’ equity $ 103,860 $ 120,331 $ 139,036 $ 152,502 $ $ 103,860 $ 120,331 $ 139,036 $ 152,502 $ 177,628 24 $ 120,331 $ 139,036 $ 152,502 $ 177,628 24 Table of $ 139,036 $ 152,502 $ 177,628 24 Table of Contents Alphabet 139,036 $ 152,502 $ 177,628 24 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business The revenue could be volatile . 25 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2018 ( consolidated unless year ended December 31 , 2018 ( consolidated unless otherwise noted : • Revenues of $ 136.8 billion and revenue growth of billion and revenue growth of 23 % year over year , constant currency revenue growth of 22 % year over year . Google segment revenue of $ 136.2 billion with revenue growth of billion with revenue growth of 23 % year over year and Other Bets revenue of $ 595 million with revenue growth of million with revenue growth of 25 % year over year . and Other Americas were $ 63.3 billion , $ 44.6 billion $ 63.3 billion , $ 44.6 billion , $ 21.4 billion $ 44.6 billion , $ 21.4 billion , and $ 7.6 21.4 billion , and $ 7.6 billion , respectively . • Cost of revenue wa $ 59.5 billion , consisting of TAC consisting of TAC of $ 26.7 billion and other cost of cost of revenue of $ 32.8 billion . Our TAC a percentage of advertising revenue wa 23 % . • Operating expense of revenue ) were $ 50.9 billion . • Income from Income from operation wa $ 26.3 billion . • Other income , net , wa $ 8.6 billion . • Effective tax • Effective tax rate wa 12 % . • Net income • Net income wa $ 30.7 billion with diluted net income income per share of $ 43.70 . • Operating cash flow Operating cash flow wa $ 48.0 billion . • Capital expenditure • Capital expenditure were $ 25.1 billion . • Number of • Number of employee wa 98,771 a of December 31 , wa 98,771 a of December 31 , 2018 . Information about a of December 31 , 2018 . Information about Segments We through Verily . In Q1 2018 , Nest joined Google ’ result are not affected . 26 Table of Contents Alphabet Inc . Please refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Revenues ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google segment Google Ended December 31 , 2016 2017 2018 Google segment Google property December 31 , 2016 2017 2018 Google segment Google property revenue segment Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google Network Members $ 63,785 $ 77,788 $ 96,336 Google Network Members ' property Network Members ' property revenue 15,598 17,587 19,982 Google advertising revenue Members ' property revenue 15,598 17,587 19,982 Google advertising revenue 79,383 ' property revenue 15,598 17,587 19,982 Google advertising revenue 79,383 95,375 17,587 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 15,003 95,375 116,318 Google other revenue 10,601 15,003 19,906 Google segment revenue 116,318 Google other revenue 10,601 15,003 19,906 Google segment revenue $ Google other revenue 10,601 15,003 19,906 Google segment revenue $ 89,984 19,906 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Other segment revenue $ 89,984 $ 110,378 $ 136,224 Other Bets Other $ 89,984 $ 110,378 $ 136,224 Other Bets Other Bets revenue Bets Other Bets revenue $ 288 $ 477 $ 595 Revenues Bets revenue $ 288 $ 477 $ 595 Revenues $ 90,272 $ 288 $ 477 $ 595 Revenues $ 90,272 $ 110,855 477 $ 595 Revenues $ 90,272 $ 110,855 $ 136,819 Google 595 Revenues $ 90,272 $ 110,855 $ 136,819 Google segment The $ 90,272 $ 110,855 $ 136,819 Google segment The following table ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google segment revenue Ended December 31 , 2016 2017 2018 Google segment revenue $ December 31 , 2016 2017 2018 Google segment revenue $ 89,984 2018 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue $ 89,984 $ 110,378 $ 136,224 Google segment revenue a a a percentage of total revenue 99.7 % 99.6 % 99.6 % of total revenue 99.7 % 99.6 % 99.6 % Use of revenue 99.7 % 99.6 % 99.6 % Use of Monetization Metrics a result , in Q1 2018 , we transitioned our Network various factor , including : 27 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google property revenue Ended December 31 , 2016 2017 2018 Google property revenue $ December 31 , 2016 2017 2018 Google property revenue $ 63,785 2018 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue $ 63,785 $ 77,788 $ 96,336 Google property revenue a a percentage of Google segment revenue 70.9 % 70.5 % 70.7 % Google segment revenue 70.9 % 70.5 % 70.7 % Paid click revenue 70.9 % 70.5 % 70.7 % Paid click change 54 70.7 % Paid click change 54 % 62 % Cost-per-click change Paid click change 54 % 62 % Cost-per-click change ( 21 62 % Cost-per-click change ( 21 ) % ( 25 ) ( 21 ) % ( 25 ) % Google property revenue Google property revenue increased $ 18,548 million from 2017 to 2018 increased $ 18,548 million from 2017 to 2018 and increased $ 18,548 million from 2017 to 2018 and increased $ 14,003 million to 2018 and increased $ 14,003 million from 2016 to 2017 increased $ 14,003 million from 2016 to 2017 . The growth 14,003 million from 2016 to 2017 . The growth during both Additionally , revenue growth from 2017 to 2018 wa favorably affected revenue growth from 2017 to 2018 wa favorably affected by the currency . The growth from 2016 to 2017 wa partially offset The growth from 2016 to 2017 wa partially offset by the on Google property increased from 2017 to 2018 and from 2016 property increased from 2017 to 2018 and from 2016 to 2017 2017 to 2018 and from 2016 to 2017 due to growth 2018 and from 2016 to 2017 due to growth in YouTube paid by our advertiser from 2017 to 2018 and from 2016 our advertiser from 2017 to 2018 and from 2016 to 2017 2017 to 2018 and from 2016 to 2017 . The decrease 2018 and from 2016 to 2017 . The decrease in cost-per-click to certain foreign currency . 28 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google Network Members Ended December 31 , 2016 2017 2018 Google Network Members ' December 31 , 2016 2017 2018 Google Network Members ' property Members ' property revenue $ 15,598 $ 17,587 $ 19,982 Google property revenue $ 15,598 $ 17,587 $ 19,982 Google Network Members $ 15,598 $ 17,587 $ 19,982 Google Network Members ' property percentage of Google segment revenue 17.3 % 15.9 % 14.7 % Google segment revenue 17.3 % 15.9 % 14.7 % Impressions change revenue 17.3 % 15.9 % 14.7 % Impressions change 3 % % 14.7 % Impressions change 3 % 2 % Cost-per-impression change % Impressions change 3 % 2 % Cost-per-impression change 8 % % 2 % Cost-per-impression change 8 % 12 % Google Network % Cost-per-impression change 8 % 12 % Google Network Members ' ' property revenue increased $ 2,395 million from 2017 to 2018 increased $ 2,395 million from 2017 to 2018 . The growth 2,395 million from 2017 to 2018 . The growth wa primarily The increase in impression from 2017 to 2018 resulted primarily from in impression from 2017 to 2018 resulted primarily from growth in ' property revenue increased $ 1,989 million from 2016 to 2017 increased $ 1,989 million from 2016 to 2017 . The growth 1,989 million from 2016 to 2017 . The growth wa primarily The increase in impression from 2016 to 2017 resulted primarily from in impression from 2016 to 2017 resulted primarily from growth in The increase in cost-per-impression from 2016 to 2017 wa primarily due in cost-per-impression from 2016 to 2017 wa primarily due to ongoing ) : Year Ended December 31 , 2016 2017 2018 Google Year Ended December 31 , 2016 2017 2018 Google other revenue Ended December 31 , 2016 2017 2018 Google other revenue $ December 31 , 2016 2017 2018 Google other revenue $ 10,601 2018 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue $ 10,601 $ 15,003 $ 19,906 Google other revenue a a percentage of Google segment revenue 11.8 % 13.6 % 14.6 % Google segment revenue 11.8 % 13.6 % 14.6 % Google other revenue 11.8 % 13.6 % 14.6 % Google other revenue consist Google other revenue increased $ 4,903 million from 2017 to 2018 increased $ 4,903 million from 2017 to 2018 . The increase 4,903 million from 2017 to 2018 . The increase wa primarily Google other revenue increased $ 4,402 million from 2016 to 2017 increased $ 4,402 million from 2016 to 2017 . The increase 4,402 million from 2016 to 2017 . The increase wa primarily payout to developer ) . 29 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Other Year Ended December 31 , 2016 2017 2018 Other Bets revenue Ended December 31 , 2016 2017 2018 Other Bets revenue $ December 31 , 2016 2017 2018 Other Bets revenue $ 288 2018 Other Bets revenue $ 288 $ 477 $ 595 Other Bets revenue $ 288 $ 477 $ 595 Other Bets revenue $ 288 $ 477 $ 595 Other Bets revenue a a a percentage of total revenue 0.3 % 0.4 % 0.4 % of total revenue 0.3 % 0.4 % 0.4 % Other Bets revenue 0.3 % 0.4 % 0.4 % Other Bets revenue consist Other Bets revenue increased $ 118 million from 2017 to 2018 increased $ 118 million from 2017 to 2018 and increased $ 118 million from 2017 to 2018 and increased $ 189 million to 2018 and increased $ 189 million from 2016 to 2017 increased $ 189 million from 2016 to 2017 . These increase 189 million from 2016 to 2017 . These increase were primarily customer : Year Ended December 31 , 2016 2017 2018 United Year Ended December 31 , 2016 2017 2018 United States 47 Ended December 31 , 2016 2017 2018 United States 47 % December 31 , 2016 2017 2018 United States 47 % 47 2016 2017 2018 United States 47 % 47 % 46 % 2018 United States 47 % 47 % 46 % EMEA 34 States 47 % 47 % 46 % EMEA 34 % 33 47 % 46 % EMEA 34 % 33 % 33 % 46 % EMEA 34 % 33 % 33 % APAC 14 EMEA 34 % 33 % 33 % APAC 14 % 15 33 % 33 % APAC 14 % 15 % 15 % 33 % APAC 14 % 15 % 15 % Other Americas APAC 14 % 15 % 15 % Other Americas 5 % % 15 % Other Americas 5 % 5 % 6 % % Other Americas 5 % 5 % 6 % For the Americas 5 % 5 % 6 % For the amount of , please refer to Note 2 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Use of Constant Currency Revenues in accordance with GAAP . 30 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2016 2017 2018 EMEA Year Ended December 31 , 2016 2017 2018 EMEA revenue $ Ended December 31 , 2016 2017 2018 EMEA revenue $ 30,304 December 31 , 2016 2017 2018 EMEA revenue $ 30,304 $ 2017 2018 EMEA revenue $ 30,304 $ 36,046 $ 44,567 Exclude EMEA revenue $ 30,304 $ 36,046 $ 44,567 Exclude foreign exchange $ 30,304 $ 36,046 $ 44,567 Exclude foreign exchange effect on revenue using prior year rate 1,291 ( 5 ) ( 1,325 prior year rate 1,291 ( 5 ) ( 1,325 ) Exclude 1,291 ( 5 ) ( 1,325 ) Exclude hedging effect recognized recognized in current period ( 479 ) 190 172 EMEA constant current period ( 479 ) 190 172 EMEA constant currency revenue period ( 479 ) 190 172 EMEA constant currency revenue $ EMEA constant currency revenue $ 31,116 $ 36,231 $ 43,414 Prior currency revenue $ 31,116 $ 36,231 $ 43,414 Prior period EMEA $ 31,116 $ 36,231 $ 43,414 Prior period EMEA revenue , , excluding hedging effect $ 25,379 $ 29,825 $ 36,236 EMEA hedging effect $ 25,379 $ 29,825 $ 36,236 EMEA revenue growth $ 25,379 $ 29,825 $ 36,236 EMEA revenue growth 19 % $ 36,236 EMEA revenue growth 19 % 24 % EMEA constant EMEA revenue growth 19 % 24 % EMEA constant currency revenue EMEA constant currency revenue growth 21 % 20 % APAC revenue currency revenue growth 21 % 20 % APAC revenue $ 12,559 20 % APAC revenue $ 12,559 $ 16,235 $ 21,374 Exclude APAC revenue $ 12,559 $ 16,235 $ 21,374 Exclude foreign exchange $ 12,559 $ 16,235 $ 21,374 Exclude foreign exchange effect on using prior year rate ( 362 ) 26 ( 49 ) year rate ( 362 ) 26 ( 49 ) Exclude hedging ( 362 ) 26 ( 49 ) Exclude hedging effect recognized recognized in current period ( 31 ) ( 43 ) ( period ( 31 ) ( 43 ) ( 33 ) APAC ) ( 43 ) ( 33 ) APAC constant currency revenue APAC constant currency revenue $ 12,166 $ 16,218 $ 21,292 Prior currency revenue $ 12,166 $ 16,218 $ 21,292 Prior period APAC $ 12,166 $ 16,218 $ 21,292 Prior period APAC revenue , , excluding hedging effect $ 9,564 $ 12,528 $ 16,192 APAC hedging effect $ 9,564 $ 12,528 $ 16,192 APAC revenue growth $ 9,564 $ 12,528 $ 16,192 APAC revenue growth 29 % $ 16,192 APAC revenue growth 29 % 32 % APAC constant APAC revenue growth 29 % 32 % APAC constant currency revenue APAC constant currency revenue growth 29 % 31 % Other Americas currency revenue growth 29 % 31 % Other Americas revenue $ % Other Americas revenue $ 4,628 $ 6,125 $ 7,609 Exclude Americas revenue $ 4,628 $ 6,125 $ 7,609 Exclude foreign exchange $ 4,628 $ 6,125 $ 7,609 Exclude foreign exchange effect on revenue using prior year rate 344 ( 148 ) 404 Exclude prior year rate 344 ( 148 ) 404 Exclude hedging effect rate 344 ( 148 ) 404 Exclude hedging effect recognized in recognized in current period ( 29 ) 22 ( 1 ) current period ( 29 ) 22 ( 1 ) Other Americas ( 29 ) 22 ( 1 ) Other Americas constant currency Americas constant currency revenue $ 4,943 $ 5,999 $ 8,012 Prior currency revenue $ 4,943 $ 5,999 $ 8,012 Prior period Other $ 4,943 $ 5,999 $ 8,012 Prior period Other Americas revenue , excluding hedging effect $ 3,836 $ 4,599 $ 6,147 Other hedging effect $ 3,836 $ 4,599 $ 6,147 Other Americas revenue $ 3,836 $ 4,599 $ 6,147 Other Americas revenue growth 32 6,147 Other Americas revenue growth 32 % 24 % Other Americas Americas revenue growth 32 % 24 % Other Americas constant currency Americas constant currency revenue growth 30 % 30 % United States currency revenue growth 30 % 30 % United States revenue $ % United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue $ 42,781 $ 52,449 $ 63,269 United States revenue growth 23 63,269 United States revenue growth 23 % 21 % Total revenue States revenue growth 23 % 21 % Total revenue $ 90,272 21 % Total revenue $ 90,272 $ 110,855 $ 136,819 Total Total revenue $ 90,272 $ 110,855 $ 136,819 Total constant currency $ 90,272 $ 110,855 $ 136,819 Total constant currency revenue $ Total constant currency revenue $ 91,006 $ 110,897 $ 135,987 Total currency revenue $ 91,006 $ 110,897 $ 135,987 Total revenue growth $ 91,006 $ 110,897 $ 135,987 Total revenue growth 23 % $ 135,987 Total revenue growth 23 % 23 % Total constant Total revenue growth 23 % 23 % Total constant currency revenue Total constant currency revenue growth 24 % 22 % Our EMEA currency revenue growth 24 % 22 % Our EMEA revenue and revenue and revenue growth from 2017 to 2018 were favorably affected revenue growth from 2017 to 2018 were favorably affected by change revenue and revenue growth from 2016 to 2017 were unfavorably affected revenue growth from 2016 to 2017 were unfavorably affected by hedging revenue and revenue growth from 2017 to 2018 were favorably affected revenue growth from 2017 to 2018 were favorably affected by change revenue and revenue growth from 2016 to 2017 were slightly affected revenue growth from 2016 to 2017 were slightly affected by hedging , and Taiwanese dollar . 31 Table of Contents Alphabet Inc. revenue and revenue growth from 2017 to 2018 were unfavorably affected revenue growth from 2017 to 2018 were unfavorably affected by change revenue and revenue growth from 2016 to 2017 were favorably affected revenue growth from 2016 to 2017 were favorably affected by change ) : Year Ended December 31 , 2016 2017 2018 TAC Year Ended December 31 , 2016 2017 2018 TAC $ 16,793 Ended December 31 , 2016 2017 2018 TAC $ 16,793 $ December 31 , 2016 2017 2018 TAC $ 16,793 $ 21,672 2016 2017 2018 TAC $ 16,793 $ 21,672 $ 26,726 Other 2018 TAC $ 16,793 $ 21,672 $ 26,726 Other cost of $ 16,793 $ 21,672 $ 26,726 Other cost of revenue 18,345 26,726 Other cost of revenue 18,345 23,911 32,823 Total cost of Other cost of revenue 18,345 23,911 32,823 Total cost of revenue cost of revenue 18,345 23,911 32,823 Total cost of revenue $ Total cost of revenue $ 35,138 $ 45,583 $ 59,549 Total of revenue $ 35,138 $ 45,583 $ 59,549 Total cost of $ 35,138 $ 45,583 $ 59,549 Total cost of revenue a a a percentage of revenue 38.9 % 41.1 % 43.5 % percentage of revenue 38.9 % 41.1 % 43.5 % Year Ended revenue 38.9 % 41.1 % 43.5 % Year Ended December 31 43.5 % Year Ended December 31 , 2016 2017 2018 TAC Year Ended December 31 , 2016 2017 2018 TAC to distribution Ended December 31 , 2016 2017 2018 TAC to distribution partner December 31 , 2016 2017 2018 TAC to distribution partner $ TAC to distribution partner $ 5,894 $ 9,031 $ 12,572 TAC distribution partner $ 5,894 $ 9,031 $ 12,572 TAC to distribution $ 5,894 $ 9,031 $ 12,572 TAC to distribution partner a of Google property revenue ( 1 ) ( Google property TAC Google property TAC rate ) 9.2 % 11.6 % 13.1 % TAC rate ) 9.2 % 11.6 % 13.1 % TAC to ) 9.2 % 11.6 % 13.1 % TAC to Google Network to Google Network Members $ 10,899 $ 12,641 $ 14,154 TAC Network Members $ 10,899 $ 12,641 $ 14,154 TAC to Google $ 10,899 $ 12,641 $ 14,154 TAC to Google Network Members Members ' property revenue ( 1 ) ( Network Members TAC Network Members TAC rate ) 69.9 % 71.9 % 70.8 % TAC rate ) 69.9 % 71.9 % 70.8 % TAC $ ) 69.9 % 71.9 % 70.8 % TAC $ 16,793 $ % 70.8 % TAC $ 16,793 $ 21,672 $ 26,726 TAC % TAC $ 16,793 $ 21,672 $ 26,726 TAC a a $ 16,793 $ 21,672 $ 26,726 TAC a a percentage of percentage of advertising revenue ( 1 ) ( Aggregate TAC rate ( Aggregate TAC rate ) 21.2 % 22.7 % 23.0 % TAC rate ) 21.2 % 22.7 % 23.0 % ( 1 ) 21.2 % 22.7 % 23.0 % ( 1 ) Revenues 22.7 % 23.0 % ( 1 ) Revenues include hedging gain Cost of revenue increased $ 13,966 million from 2017 to 2018 increased $ 13,966 million from 2017 to 2018 . The increase 13,966 million from 2017 to 2018 . The increase wa due cost of revenue of $ 5,054 million and $ 8,912 million $ 5,054 million and $ 8,912 million , respectively . The TAC to distribution partner from 2017 to 2018 wa a result distribution partner from 2017 to 2018 wa a result of an because more mobile search are 32 Table of Contents Alphabet Inc. to Google Network Members from 2017 to 2018 wa a result Network Members from 2017 to 2018 wa a result of an the aggregate TAC rate from 2017 to 2018 wa a result TAC rate from 2017 to 2018 wa a result of an cost of revenue increased $ 8,912 million from 2017 to 2018 increased $ 8,912 million from 2017 to 2018 . The increase 8,912 million from 2017 to 2018 . The increase wa due Cost of revenue increased $ 10,445 million from 2016 to 2017 increased $ 10,445 million from 2016 to 2017 . The increase 10,445 million from 2016 to 2017 . The increase wa due increase in TAC of $ 4,879 million . The increase in cost of revenue increased $ 5,566 million from 2016 to 2017 increased $ 5,566 million from 2016 to 2017 . The increase 5,566 million from 2016 to 2017 . The increase wa due ) : Year Ended December 31 , 2016 2017 2018 Research Year Ended December 31 , 2016 2017 2018 Research and development Ended December 31 , 2016 2017 2018 Research and development expense December 31 , 2016 2017 2018 Research and development expense $ Research and development expense $ 13,948 $ 16,625 $ 21,419 Research development expense $ 13,948 $ 16,625 $ 21,419 Research and development $ 13,948 $ 16,625 $ 21,419 Research and development expense a a a percentage of revenue 15.5 % 15.0 % 15.7 % percentage of revenue 15.5 % 15.0 % 15.7 % R & revenue 15.5 % 15.0 % 15.7 % R & D expense & D expense increased $ 4,794 million from 2017 to 2018 increased $ 4,794 million from 2017 to 2018 . The increase 4,794 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 3,518 million , largely resulting from , largely resulting from a 24 % increase in headcount . and equipment-related expense of $ 499 33 Table of Contents Alphabet equipment-related expense of $ 499 33 Table of Contents Alphabet Inc. Alphabet Inc. million and $ 318 million , respectively , a professional service fee of $ 305 million due to additional expense & D expense increased $ 2,677 million from 2016 to 2017 increased $ 2,677 million from 2016 to 2017 . The increase 2,677 million from 2016 to 2017 . The increase wa primarily and facilities-related cost of $ 1,886 million , largely resulting from , largely resulting from a 16 % increase in headcount . in depreciation expense of $ 323 million and equipment-related expense of and equipment-related expense of $ 246 million . We expect that ) : Year Ended December 31 , 2016 2017 2018 Sales Year Ended December 31 , 2016 2017 2018 Sales and marketing Ended December 31 , 2016 2017 2018 Sales and marketing expense December 31 , 2016 2017 2018 Sales and marketing expense $ Sales and marketing expense $ 10,485 $ 12,893 $ 16,333 Sales marketing expense $ 10,485 $ 12,893 $ 16,333 Sales and marketing $ 10,485 $ 12,893 $ 16,333 Sales and marketing expense a a a percentage of revenue 11.6 % 11.6 % 11.9 % percentage of revenue 11.6 % 11.6 % 11.9 % Sales and revenue 11.6 % 11.6 % 11.9 % Sales and marketing expense and marketing expense increased $ 3,440 million from 2017 to 2018 increased $ 3,440 million from 2017 to 2018 . The increase 3,440 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 1,418 million , largely resulting from , largely resulting from a 12 % increase in headcount . and promotional expense of $ 1,233 million , largely resulting from and marketing expense increased $ 2,408 million from 2016 to 2017 increased $ 2,408 million from 2016 to 2017 . The increase 2,408 million from 2016 to 2017 . The increase wa primarily and promotional expense of $ 1,266 million , largely resulting from and facilities-related cost of $ 853 million , largely resulting from , largely resulting from a 6 % increase in headcount . ) : Year Ended December 31 , 2016 2017 2018 General Year Ended December 31 , 2016 2017 2018 General and administrative Ended December 31 , 2016 2017 2018 General and administrative expense December 31 , 2016 2017 2018 General and administrative expense $ General and administrative expense $ 6,985 $ 6,872 $ 8,126 General administrative expense $ 6,985 $ 6,872 $ 8,126 General and administrative $ 6,985 $ 6,872 $ 8,126 General and administrative expense a a a percentage of revenue 7.7 % 6.2 % 5.9 % percentage of revenue 7.7 % 6.2 % 5.9 % General and revenue 7.7 % 6.2 % 5.9 % General and administrative expense and administrative expense increased $ 1,254 million from 2017 to 2018 increased $ 1,254 million from 2017 to 2018 . The increase 1,254 million from 2017 to 2018 . The increase wa primarily and facilities-related cost of $ 1,660 million , largely resulting from cost of revenue ) . 34 Table of Contents Alphabet Inc. and administrative expense decreased $ 113 million from 2016 to 2017 decreased $ 113 million from 2016 to 2017 . The decrease 113 million from 2016 to 2017 . The decrease wa primarily and facilities-related cost of $ 271 million , largely resulting from , largely resulting from a 9 % increase in headcount . professional service fee of $ 253 million due to additional expense European Commission Fines In June 2017 , the EC announced it a €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine , a of June 27 , 2017 ) fine , which wa in the second quarter of 2017 . In July 2018 , of 2017 . In July 2018 , the EC announced it a €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine , a of June 30 , 2018 ) fine , which wa in the second quarter of 2018 . Please refer to Note . Please refer to Note 9 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Other ) : Year Ended December 31 , 2016 2017 2018 Other Year Ended December 31 , 2016 2017 2018 Other income ( Ended December 31 , 2016 2017 2018 Other income ( expense December 31 , 2016 2017 2018 Other income ( expense ) expense ) , net $ 434 $ 1,047 $ 8,592 Other , net $ 434 $ 1,047 $ 8,592 Other income ( $ 434 $ 1,047 $ 8,592 Other income ( expense ) a a percentage of revenue 0.5 % 0.9 % 6.3 % percentage of revenue 0.5 % 0.9 % 6.3 % Other income revenue 0.5 % 0.9 % 6.3 % Other income ( expense , net , increased $ 7,545 million from 2017 to 2018 increased $ 7,545 million from 2017 to 2018 . This increase 7,545 million from 2017 to 2018 . This increase wa primarily , net , increased $ 613 million from 2016 to 2017 increased $ 613 million from 2016 to 2017 . This increase 613 million from 2016 to 2017 . This increase wa primarily market dynamic . Beginning in 2018 , change in the value investment , please see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Provision for Income Taxes rate : Year Ended December 31 , 2016 2017 2018 Provision Year Ended December 31 , 2016 2017 2018 Provision for income Ended December 31 , 2016 2017 2018 Provision for income tax December 31 , 2016 2017 2018 Provision for income tax $ Provision for income tax $ 4,672 $ 14,531 $ 4,177 Effective income tax $ 4,672 $ 14,531 $ 4,177 Effective tax rate $ 4,672 $ 14,531 $ 4,177 Effective tax rate 19.3 % $ 4,177 Effective tax rate 19.3 % 53.4 % 12.0 % Effective tax rate 19.3 % 53.4 % 12.0 % Our provision rate 19.3 % 53.4 % 12.0 % Our provision for income effective tax rate decreased from 2017 to 2018 , due to rate decreased from 2017 to 2018 , due to the U.S. which wa enacted in December 2017 . Please refer to Note . Please refer to Note 13 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . 35 10-K for further information . 35 Table of Contents Alphabet Inc. effective tax rate increased from 2016 to 2017 , due to rate increased from 2016 to 2017 , due to the effect income tax . Effective in 2018 , the Tax Act reduces U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and creates new tax in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2018 . This table quarter ended December 31 , 2018 . This table includes all rate . Quarter Ended Mar 31 , 2017 Jun 30 , Quarter Ended Mar 31 , 2017 Jun 30 , 2017 Sept Mar 31 , 2017 Jun 30 , 2017 Sept 30 , , 2017 Jun 30 , 2017 Sept 30 , 2017 Dec Jun 30 , 2017 Sept 30 , 2017 Dec 31 , , 2017 Sept 30 , 2017 Dec 31 , 2017 Mar Sept 30 , 2017 Dec 31 , 2017 Mar 31 , , 2017 Dec 31 , 2017 Mar 31 , 2018 Jun Dec 31 , 2017 Mar 31 , 2018 Jun 30 , , 2017 Mar 31 , 2018 Jun 30 , 2018 Sept Mar 31 , 2018 Jun 30 , 2018 Sept 30 , , 2018 Jun 30 , 2018 Sept 30 , 2018 Dec Jun 30 , 2018 Sept 30 , 2018 Dec 31 , , 2018 Sept 30 , 2018 Dec 31 , 2018 ( Sept 30 , 2018 Dec 31 , 2018 ( In million , 2018 Dec 31 , 2018 ( In million , except Income Data : Revenues $ 24,750 $ 26,010 $ 27,772 $ : Revenues $ 24,750 $ 26,010 $ 27,772 $ 32,323 $ $ 24,750 $ 26,010 $ 27,772 $ 32,323 $ 31,146 $ $ 26,010 $ 27,772 $ 32,323 $ 31,146 $ 32,657 $ $ 27,772 $ 32,323 $ 31,146 $ 32,657 $ 33,740 $ $ 32,323 $ 31,146 $ 32,657 $ 33,740 $ 39,276 Costs $ 31,146 $ 32,657 $ 33,740 $ 39,276 Costs and expense $ 32,657 $ 33,740 $ 39,276 Costs and expense : Cost expense : Cost of revenue 9,795 10,373 11,148 14,267 13,467 13,883 : Cost of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 Cost of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 of revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research revenue 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and 9,795 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and development 10,373 11,148 14,267 13,467 13,883 14,281 17,918 Research and development 3,942 11,148 14,267 13,467 13,883 14,281 17,918 Research and development 3,942 4,172 14,281 17,918 Research and development 3,942 4,172 4,205 4,306 5,039 5,114 17,918 Research and development 3,942 4,172 4,205 4,306 5,039 5,114 5,232 Research and development 3,942 4,172 4,205 4,306 5,039 5,114 5,232 6,034 and development 3,942 4,172 4,205 4,306 5,039 5,114 5,232 6,034 Sales development 3,942 4,172 4,205 4,306 5,039 5,114 5,232 6,034 Sales and 3,942 4,172 4,205 4,306 5,039 5,114 5,232 6,034 Sales and marketing 4,172 4,205 4,306 5,039 5,114 5,232 6,034 Sales and marketing 2,644 4,205 4,306 5,039 5,114 5,232 6,034 Sales and marketing 2,644 2,897 5,232 6,034 Sales and marketing 2,644 2,897 3,042 4,310 3,604 3,780 6,034 Sales and marketing 2,644 2,897 3,042 4,310 3,604 3,780 3,849 Sales and marketing 2,644 2,897 3,042 4,310 3,604 3,780 3,849 5,100 and marketing 2,644 2,897 3,042 4,310 3,604 3,780 3,849 5,100 General marketing 2,644 2,897 3,042 4,310 3,604 3,780 3,849 5,100 General and 2,644 2,897 3,042 4,310 3,604 3,780 3,849 5,100 General and administrative 2,897 3,042 4,310 3,604 3,780 3,849 5,100 General and administrative 1,801 3,042 4,310 3,604 3,780 3,849 5,100 General and administrative 1,801 1,700 3,849 5,100 General and administrative 1,801 1,700 1,595 1,776 2,035 2,002 5,100 General and administrative 1,801 1,700 1,595 1,776 2,035 2,002 2,068 General and administrative 1,801 1,700 1,595 1,776 2,035 2,002 2,068 2,021 and administrative 1,801 1,700 1,595 1,776 2,035 2,002 2,068 2,021 European administrative 1,801 1,700 1,595 1,776 2,035 2,002 2,068 2,021 European Commission 1,801 1,700 1,595 1,776 2,035 2,002 2,068 2,021 European Commission fine 1,700 1,595 1,776 2,035 2,002 2,068 2,021 European Commission fine 0 1,595 1,776 2,035 2,002 2,068 2,021 European Commission fine 0 2,736 2,068 2,021 European Commission fine 0 2,736 0 0 0 5,071 2,021 European Commission fine 0 2,736 0 0 0 5,071 0 European Commission fine 0 2,736 0 0 0 5,071 0 0 Commission fine 0 2,736 0 0 0 5,071 0 0 Total fine 0 2,736 0 0 0 5,071 0 0 Total cost 0 2,736 0 0 0 5,071 0 0 Total cost and 2,736 0 0 0 5,071 0 0 Total cost and expense 0 0 0 5,071 0 0 Total cost and expense 18,182 0 Total cost and expense 18,182 21,878 19,990 24,659 24,145 29,850 Total cost and expense 18,182 21,878 19,990 24,659 24,145 29,850 25,430 cost and expense 18,182 21,878 19,990 24,659 24,145 29,850 25,430 31,073 and expense 18,182 21,878 19,990 24,659 24,145 29,850 25,430 31,073 Income expense 18,182 21,878 19,990 24,659 24,145 29,850 25,430 31,073 Income from 18,182 21,878 19,990 24,659 24,145 29,850 25,430 31,073 Income from operation 21,878 19,990 24,659 24,145 29,850 25,430 31,073 Income from operation 6,568 19,990 24,659 24,145 29,850 25,430 31,073 Income from operation 6,568 4,132 25,430 31,073 Income from operation 6,568 4,132 7,782 7,664 7,001 2,807 31,073 Income from operation 6,568 4,132 7,782 7,664 7,001 2,807 8,310 Income from operation 6,568 4,132 7,782 7,664 7,001 2,807 8,310 8,203 from operation 6,568 4,132 7,782 7,664 7,001 2,807 8,310 8,203 Other operation 6,568 4,132 7,782 7,664 7,001 2,807 8,310 8,203 Other income 6,568 4,132 7,782 7,664 7,001 2,807 8,310 8,203 Other income ( 4,132 7,782 7,664 7,001 2,807 8,310 8,203 Other income ( expense 7,782 7,664 7,001 2,807 8,310 8,203 Other income ( expense ) ( expense ) , net 251 245 197 354 3,542 1,408 expense ) , net 251 245 197 354 3,542 1,408 1,773 ) , net 251 245 197 354 3,542 1,408 1,773 1,869 , net 251 245 197 354 3,542 1,408 1,773 1,869 Income net 251 245 197 354 3,542 1,408 1,773 1,869 Income from 251 245 197 354 3,542 1,408 1,773 1,869 Income from continuing 245 197 354 3,542 1,408 1,773 1,869 Income from continuing operation 197 354 3,542 1,408 1,773 1,869 Income from continuing operation before continuing operation before income tax 6,819 4,377 7,979 8,018 10,543 4,215 operation before income tax 6,819 4,377 7,979 8,018 10,543 4,215 10,083 before income tax 6,819 4,377 7,979 8,018 10,543 4,215 10,083 10,072 income tax 6,819 4,377 7,979 8,018 10,543 4,215 10,083 10,072 Provision tax 6,819 4,377 7,979 8,018 10,543 4,215 10,083 10,072 Provision for 6,819 4,377 7,979 8,018 10,543 4,215 10,083 10,072 Provision for income 4,377 7,979 8,018 10,543 4,215 10,083 10,072 Provision for income tax 7,979 8,018 10,543 4,215 10,083 10,072 Provision for income tax 1,393 10,072 Provision for income tax 1,393 853 1,247 11,038 1,142 1,020 Provision for income tax 1,393 853 1,247 11,038 1,142 1,020 891 for income tax 1,393 853 1,247 11,038 1,142 1,020 891 1,124 income tax 1,393 853 1,247 11,038 1,142 1,020 891 1,124 Net tax 1,393 853 1,247 11,038 1,142 1,020 891 1,124 Net income 1,393 853 1,247 11,038 1,142 1,020 891 1,124 Net income ( 853 1,247 11,038 1,142 1,020 891 1,124 Net income ( loss 1,247 11,038 1,142 1,020 891 1,124 Net income ( loss ) income ( loss ) $ 5,426 $ 3,524 $ 6,732 $ loss ) $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 $ 5,426 $ 3,524 $ 6,732 $ ( 3,020 ) $ 3,524 $ 6,732 $ ( 3,020 ) $ 9,401 $ 3,195 $ ( 3,020 ) $ 9,401 $ 3,195 $ 9,192 $ 3,020 ) $ 9,401 $ 3,195 $ 9,192 $ 8,948 Basic $ 9,401 $ 3,195 $ 9,192 $ 8,948 Basic net income $ 3,195 $ 9,192 $ 8,948 Basic net income ( loss Class C capital stock $ 7.85 $ 5.09 $ 9.71 $ capital stock $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 $ 7.85 $ 5.09 $ 9.71 $ ( 4.35 ) $ 5.09 $ 9.71 $ ( 4.35 ) $ 13.53 $ 4.60 $ ( 4.35 ) $ 13.53 $ 4.60 $ 13.21 $ 4.35 ) $ 13.53 $ 4.60 $ 13.21 $ 12.87 Diluted $ 13.53 $ 4.60 $ 13.21 $ 12.87 Diluted net income $ 4.60 $ 13.21 $ 12.87 Diluted net income ( loss Class C capital stock $ 7.73 $ 5.01 $ 9.57 $ capital stock $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 $ 7.73 $ 5.01 $ 9.57 $ ( 4.35 ) $ 5.01 $ 9.57 $ ( 4.35 ) $ 13.33 $ 4.54 $ ( 4.35 ) $ 13.33 $ 4.54 $ 13.06 $ 4.35 ) $ 13.33 $ 4.54 $ 13.06 $ 12.77 Capital $ 13.33 $ 4.54 $ 13.06 $ 12.77 Capital Resources and $ 4.54 $ 13.06 $ 12.77 Capital Resources and Liquidity As and Liquidity As of December 31 , 2018 , we had As of December 31 , 2018 , we had $ 109.1 2018 , we had $ 109.1 billion in cash , cash time , we may hold 36 Table of Contents Alphabet Inc. go public . In December 2017 , the Tax Act wa foreign subsidiary earnings . After 2017 , our foreign earnings held the U.S. As of December 31 , 2018 , the remaining As of December 31 , 2018 , the remaining long-term tax the Tax Act of $ 7.4 billion is presented within income in annual interest-free installment through 2025 . During the year ended During the year ended December 31 , 2017 and 2018 , year ended December 31 , 2017 and 2018 , the EC December 31 , 2017 and 2018 , the EC announced decision of €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) and €4.3 a of June 27 , 2017 ) and €4.3 billion ( and €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) , respectively a of June 30 , 2018 ) , respectively . While . Please refer to Note 9 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Our program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2018 . We have a of December 31 , 2018 . We have $ 4.0 2018 . We have $ 4.0 billion of revolving credit facility credit facility expiring in July 2023 with no amount outstanding . through at least the next 12 month . As of December month . As of December 31 , 2018 , we have As of December 31 , 2018 , we have senior unsecured unsecured note outstanding due in 2021 , 2024 , and 2026 outstanding due in 2021 , 2024 , and 2026 with a 2021 , 2024 , and 2026 with a total carrying value total carrying value of $ 4.0 billion . In 2016 and $ 4.0 billion . In 2016 and 2018 , the board billion . In 2016 and 2018 , the board of director to repurchase up to $ 7.0 billion and $ 8.6 billion $ 7.0 billion and $ 8.6 billion of it Class C stock , respectively . The 2016 authorization wa completed in 2018 2016 authorization wa completed in 2018 . As of December 31 2018 . As of December 31 , 2018 , $ 1.7 As of December 31 , 2018 , $ 1.7 billion remains 31 , 2018 , $ 1.7 billion remains available for repurchase for repurchase . In January 2019 , our board of director up to an additional $ 12.5 billion of our Class C transaction , including through Rule 10b5-1 plan . The repurchase program . Please refer to Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to ) : Year Ended December 31 , 2016 2017 2018 Net Year Ended December 31 , 2016 2017 2018 Net cash provided Ended December 31 , 2016 2017 2018 Net cash provided by December 31 , 2016 2017 2018 Net cash provided by operating provided by operating activity $ 36,036 $ 37,091 $ 47,971 Net operating activity $ 36,036 $ 37,091 $ 47,971 Net cash used $ 36,036 $ 37,091 $ 47,971 Net cash used in investing in investing activity $ ( 31,165 ) $ ( 31,401 ) ( 31,165 ) $ ( 31,401 ) $ ( 28,504 ) ( 31,401 ) $ ( 28,504 ) Net cash used in in financing activity $ ( 8,332 ) $ ( 8,298 ) ( 8,332 ) $ ( 8,298 ) $ ( 13,179 ) ( 8,298 ) $ ( 13,179 ) Cash Provided by Operating by operating activity increased from 2017 to 2018 primarily due to activity increased from 2017 to 2018 primarily due to increase in revenue and operating expense . 37 Table of Contents Alphabet Inc. by operating activity increased from 2016 to 2017 primarily due to activity increased from 2016 to 2017 primarily due to increase in in investing activity decreased from 2017 to 2018 primarily due to activity decreased from 2017 to 2018 primarily due to a decrease investing activity increased slightly from 2016 to 2017 primarily due to increased slightly from 2016 to 2017 primarily due to an increase in financing activity increased from 2017 to 2018 primarily due to activity increased from 2017 to 2018 primarily due to higher cash financing activity decreased slightly from 2016 to 2017 primarily due to decreased slightly from 2016 to 2017 primarily due to lower net Contractual Obligations a of December 31 , 2018 The following summarizes a of December 31 , 2018 The following summarizes our contractual contractual obligation a of December 31 , 2018 ( in million a of December 31 , 2018 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation , of sublease income amount ( 1 ) $ 10,047 $ 1,303 amount ( 1 ) $ 10,047 $ 1,303 $ 2,711 $ 1 ) $ 10,047 $ 1,303 $ 2,711 $ 2,122 $ $ 10,047 $ 1,303 $ 2,711 $ 2,122 $ 3,911 Purchase $ 1,303 $ 2,711 $ 2,122 $ 3,911 Purchase obligation ( $ 2,711 $ 2,122 $ 3,911 Purchase obligation ( 2 ) $ 3,911 Purchase obligation ( 2 ) 7,433 5,132 1,407 370 Purchase obligation ( 2 ) 7,433 5,132 1,407 370 524 Long-term obligation ( 2 ) 7,433 5,132 1,407 370 524 Long-term debt ( 2 ) 7,433 5,132 1,407 370 524 Long-term debt obligation 2 ) 7,433 5,132 1,407 370 524 Long-term debt obligation ( ) 7,433 5,132 1,407 370 524 Long-term debt obligation ( 3 524 Long-term debt obligation ( 3 ) 4,689 134 1,220 154 debt obligation ( 3 ) 4,689 134 1,220 154 3,181 Tax obligation ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 3 ) 4,689 134 1,220 154 3,181 Tax payable ( 4 ) 4,689 134 1,220 154 3,181 Tax payable ( 4 ) 154 3,181 Tax payable ( 4 ) 7,440 — 2,029 5,411 Tax payable ( 4 ) 7,440 — 2,029 5,411 — Other ( 4 ) 7,440 — 2,029 5,411 — Other long-term liability 4 ) 7,440 — 2,029 5,411 — Other long-term liability reflected on our balance sheet ( 5 ) 2,443 341 638 416 balance sheet ( 5 ) 2,443 341 638 416 1,048 Total sheet ( 5 ) 2,443 341 638 416 1,048 Total contractual ( 5 ) 2,443 341 638 416 1,048 Total contractual obligation 5 ) 2,443 341 638 416 1,048 Total contractual obligation $ ) 2,443 341 638 416 1,048 Total contractual obligation $ 32,052 1,048 Total contractual obligation $ 32,052 $ 6,910 $ 8,005 $ contractual obligation $ 32,052 $ 6,910 $ 8,005 $ 8,473 $ $ 32,052 $ 6,910 $ 8,005 $ 8,473 $ 8,664 ( $ 6,910 $ 8,005 $ 8,473 $ 8,664 ( 1 ) $ 8,005 $ 8,473 $ 8,664 ( 1 ) For further $ 8,473 $ 8,664 ( 1 ) For further information , information , refer to Note 9 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 2 ) Represents non-cancelable Report on Form 10-K. ( 2 ) Represents non-cancelable contractual obligation and/or pricing a of December 31 , 2018 . Excluded from a of December 31 , 2018 . Excluded from the table support normal operation . ( 3 ) Represents our principal and debt , refer to Note 5 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 13 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 3.9 billion a of December 31 3.9 billion a of December 31 , 2018 primarily related to a of December 31 , 2018 primarily related to uncertain tax payment in individual year beyond 12 month due to uncertainty in tax audit outcome . ( 5 ) Represents cash obligation recorded For further information regarding the 38 Table of Contents Alphabet Inc. fine , refer to Note 9 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of Sheet Arrangements As of December 31 , 2018 , we did As of December 31 , 2018 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for a summary of significant be material . Should any 39 Table of Contents Alphabet Inc. Equity Securities Beginning on January 1 , 2018 , our non-marketable Beginning on January 1 , 2018 , our non-marketable equity security upon the adoption of ASU 2016-01 . Under the measurement alternative at fair value . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced in contract . If an adverse 10 % foreign currency exchange rate income tax of approximately $ 52 million and $ 1 million $ 52 million and $ 1 million a of December 31 1 million a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . The adverse adverse effect a of December 31 , 2017 and 2018 is a of December 31 , 2017 and 2018 is after consideration December 31 , 2017 and 2018 is after consideration of the offsetting effect of approximately $ 374 million for both period from for the month ended December 31 , 2017 and December 31 month ended December 31 , 2017 and December 31 , 2018 31 , 2017 and December 31 , 2018 . We use 2017 and December 31 , 2018 . We use foreign currency contract reduce , but do 40 Table of Contents Alphabet Inc. the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2017 and December 31 a of December 31 , 2017 and December 31 , 2018 31 , 2017 and December 31 , 2018 , the amount 2017 and December 31 , 2018 , the amount recorded in would have been approximately $ 950 million and $ 772 million $ 950 million and $ 772 million lower a of December million lower a of December 31 , 2017 and December 31 a of December 31 , 2017 and December 31 , 2018 31 , 2017 and December 31 , 2018 , respectively . 2017 and December 31 , 2018 , respectively . The change revenue when recognized . During 2018 , we entered into foreign the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 635 million lower a of December million lower a of December 31 , 2018 . The change a of December 31 , 2018 . The change in value a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2017 and 2018 are a of December 31 , 2017 and 2018 are shown below December 31 , 2017 and 2018 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2017 2018 2017 2018 As of December 31 , 2017 2018 2017 2018 Risk Category of December 31 , 2017 2018 2017 2018 Risk Category - December 31 , 2017 2018 2017 2018 Risk Category - Interest 31 , 2017 2018 2017 2018 Risk Category - Interest Rate Category - Interest Rate $ 84 $ 58 $ 87 $ Interest Rate $ 84 $ 58 $ 87 $ 66 Actual $ 84 $ 58 $ 87 $ 66 Actual future gain $ 58 $ 87 $ 66 Actual future gain and loss analysis performed a of December 31 , 2017 and 2018 due a of December 31 , 2017 and 2018 due to the December 31 , 2017 and 2018 due to the inherent limitation volatility , and represent $ 1.2 billion of our investment a our investment a of December 31 , 2018 . A hypothetical a of December 31 , 2018 . A hypothetical adverse price hypothetical adverse price change of 10 % , which could be marketable equity security by $ 120 million . Our non-marketable equity ( referred to a the 41 Table of Contents Alphabet Inc. investment . As of December 31 , 2018 , the carrying As of December 31 , 2018 , the carrying value of measurement alternative , wa $ 12.3 billion . Valuations of our , please refer to Note 1 and Note 3 of the to Note 1 and Note 3 of the Notes to Consolidated this Annual Report on Form 10-K. 42 Table of Contents Alphabet Annual Report on Form 10-K. 42 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 44 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 46 Consolidated Statements of Income 47 46 Consolidated Statements of Income 47 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 48 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 49 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 51 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 43 Table of Contents Alphabet Inc. Company ) a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , the related December 31 , 2017 and 2018 , the related consolidated statement in the period ended December 31 , 2018 , and the period ended December 31 , 2018 , and the related note in the Index at Item 15 ( a ) 2 ( Item 15 ( a ) 2 ( collectively referred to a of the Company at December 31 , 2017 and 2018 , Company at December 31 , 2017 and 2018 , and the December 31 , 2017 and 2018 , and the result of in the period ended December 31 , 2018 , in conformity period ended December 31 , 2018 , in conformity with U.S. financial reporting a of December 31 , 2018 , based on a of December 31 , 2018 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 4 , 2019 expressed an unqualified report dated February 4 , 2019 expressed an unqualified opinion thereon Standard As discussed in Note 1 to the consolidated financial statement in the year ended December 31 , 2018 . Basis for year ended December 31 , 2018 . Basis for Opinion These the Company 's auditor since 1999 . San Jose , California San Jose , California February 4 , 2019 44 Table of , California February 4 , 2019 44 Table of Contents Alphabet California February 4 , 2019 44 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2018 , based on a of December 31 , 2018 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO financial reporting a of December 31 , 2018 , based on a of December 31 , 2018 , based on the COSO ( PCAOB ) , the 2018 consolidated financial statement of the and our report dated February 4 , 2019 expressed an unqualified report dated February 4 , 2019 expressed an unqualified opinion thereon in the year ended December 31 , 2018 . Basis for year ended December 31 , 2018 . Basis for Opinion The policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 4 , 2019 45 Table of , California February 4 , 2019 45 Table of Contents Alphabet California February 4 , 2019 45 Table of Contents Alphabet Inc amount ) As of December 31 , 2017 As of December As of December 31 , 2017 As of December 31 , , 2017 As of December 31 , 2018 Assets Current asset As of December 31 , 2018 Assets Current asset : Cash Cash and cash equivalent $ 10,715 $ 16,701 Marketable security 91,156 cash equivalent $ 10,715 $ 16,701 Marketable security 91,156 92,439 Total 10,715 $ 16,701 Marketable security 91,156 92,439 Total cash , cash $ 16,701 Marketable security 91,156 92,439 Total cash , cash equivalent equivalent , and marketable security 101,871 109,140 Accounts receivable , net , and marketable security 101,871 109,140 Accounts receivable , net of net of allowance of $ 674 and $ 729 18,336 20,838 of $ 674 and $ 729 18,336 20,838 Income tax receivable $ 674 and $ 729 18,336 20,838 Income tax receivable , 674 and $ 729 18,336 20,838 Income tax receivable , net Income tax receivable , net 369 355 Inventory 749 1,107 Other tax receivable , net 369 355 Inventory 749 1,107 Other current , net 369 355 Inventory 749 1,107 Other current asset 2,983 net 369 355 Inventory 749 1,107 Other current asset 2,983 4,236 749 1,107 Other current asset 2,983 4,236 Total current asset 124,308 1,107 Other current asset 2,983 4,236 Total current asset 124,308 135,676 2,983 4,236 Total current asset 124,308 135,676 Non-marketable investment 7,813 13,859 4,236 Total current asset 124,308 135,676 Non-marketable investment 7,813 13,859 Deferred asset 124,308 135,676 Non-marketable investment 7,813 13,859 Deferred income tax 680 124,308 135,676 Non-marketable investment 7,813 13,859 Deferred income tax 680 737 7,813 13,859 Deferred income tax 680 737 Property and equipment , 13,859 Deferred income tax 680 737 Property and equipment , net Property and equipment , net 42,383 59,719 Intangible asset , net and equipment , net 42,383 59,719 Intangible asset , net 2,692 59,719 Intangible asset , net 2,692 2,220 Goodwill 16,747 17,888 Other Intangible asset , net 2,692 2,220 Goodwill 16,747 17,888 Other non-current , net 2,692 2,220 Goodwill 16,747 17,888 Other non-current asset 2,672 net 2,692 2,220 Goodwill 16,747 17,888 Other non-current asset 2,672 2,693 16,747 17,888 Other non-current asset 2,672 2,693 Total asset $ 197,295 17,888 Other non-current asset 2,672 2,693 Total asset $ 197,295 $ 2,672 2,693 Total asset $ 197,295 $ 232,792 Liabilities and Stockholders Total asset $ 197,295 $ 232,792 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 3,137 $ 4,378 Accrued compensation and Accounts payable $ 3,137 $ 4,378 Accrued compensation and benefit 4,581 4,378 Accrued compensation and benefit 4,581 6,839 Accrued expense and other Accrued compensation and benefit 4,581 6,839 Accrued expense and other current expense and other current liability 10,177 16,958 Accrued revenue share 3,975 and other current liability 10,177 16,958 Accrued revenue share 3,975 4,592 10,177 16,958 Accrued revenue share 3,975 4,592 Deferred revenue 1,432 1,784 16,958 Accrued revenue share 3,975 4,592 Deferred revenue 1,432 1,784 Income share 3,975 4,592 Deferred revenue 1,432 1,784 Income tax payable , 3,975 4,592 Deferred revenue 1,432 1,784 Income tax payable , net Income tax payable , net 881 69 Total current liability 24,183 tax payable , net 881 69 Total current liability 24,183 34,620 881 69 Total current liability 24,183 34,620 Long-term debt 3,969 4,012 69 Total current liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred liability 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 24,183 34,620 Long-term debt 3,969 4,012 Deferred revenue , non-current 340 4,012 Deferred revenue , non-current 340 396 Income tax payable , Deferred revenue , non-current 340 396 Income tax payable , non-current Income tax payable , non-current 12,812 11,327 Deferred income tax 430 tax payable , non-current 12,812 11,327 Deferred income tax 430 1,264 12,812 11,327 Deferred income tax 430 1,264 Other long-term liability 3,059 11,327 Deferred income tax 430 1,264 Other long-term liability 3,059 3,545 430 1,264 Other long-term liability 3,059 3,545 Total liability 44,793 55,164 1,264 Other long-term liability 3,059 3,545 Total liability 44,793 55,164 Commitments liability 3,059 3,545 Total liability 44,793 55,164 Commitments and Contingencies ( 3,059 3,545 Total liability 44,793 55,164 Commitments and Contingencies ( Note Commitments and Contingencies ( Note 9 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 694,783 ( Class Class C 3,000,000 ) ; 694,783 ( Class A 298,470 , ; 694,783 ( Class A 298,470 , Class B 46,972 , A 298,470 , Class B 46,972 , Class C 349,341 ) B 46,972 , Class C 349,341 ) and 695,556 ( Class Class C 349,341 ) and 695,556 ( Class A 299,242 , and 695,556 ( Class A 299,242 , Class B 46,636 , A 299,242 , Class B 46,636 , Class C 349,678 ) B 46,636 , Class C 349,678 ) share issued and outstanding ) share issued and outstanding 40,247 45,049 Accumulated other comprehensive loss share issued and outstanding 40,247 45,049 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 992 ) ( 2,306 ) Retained loss ( 992 ) ( 2,306 ) Retained earnings 113,247 134,885 ( 2,306 ) Retained earnings 113,247 134,885 Total stockholder ’ equity 2,306 ) Retained earnings 113,247 134,885 Total stockholder ’ equity 152,502 134,885 Total stockholder ’ equity 152,502 177,628 Total liability and stockholder Total stockholder ’ equity 152,502 177,628 Total liability and stockholder ’ and stockholder ’ equity $ 197,295 $ 232,792 See accompanying note ’ equity $ 197,295 $ 232,792 See accompanying note . 46 232,792 See accompanying note . 46 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2016 2017 2018 Revenues Year Ended December 31 , 2016 2017 2018 Revenues $ 90,272 Ended December 31 , 2016 2017 2018 Revenues $ 90,272 $ December 31 , 2016 2017 2018 Revenues $ 90,272 $ 110,855 2016 2017 2018 Revenues $ 90,272 $ 110,855 $ 136,819 Costs 2018 Revenues $ 90,272 $ 110,855 $ 136,819 Costs and expense $ 90,272 $ 110,855 $ 136,819 Costs and expense : Cost expense : Cost of revenue 35,138 45,583 59,549 Research and development : Cost of revenue 35,138 45,583 59,549 Research and development 13,948 Cost of revenue 35,138 45,583 59,549 Research and development 13,948 16,625 45,583 59,549 Research and development 13,948 16,625 21,419 Sales and marketing 59,549 Research and development 13,948 16,625 21,419 Sales and marketing 10,485 Research and development 13,948 16,625 21,419 Sales and marketing 10,485 12,893 16,625 21,419 Sales and marketing 10,485 12,893 16,333 General and administrative 21,419 Sales and marketing 10,485 12,893 16,333 General and administrative 6,985 Sales and marketing 10,485 12,893 16,333 General and administrative 6,985 6,872 12,893 16,333 General and administrative 6,985 6,872 8,126 European Commission fine 16,333 General and administrative 6,985 6,872 8,126 European Commission fine 0 General and administrative 6,985 6,872 8,126 European Commission fine 0 2,736 6,872 8,126 European Commission fine 0 2,736 5,071 Total cost and 8,126 European Commission fine 0 2,736 5,071 Total cost and expense European Commission fine 0 2,736 5,071 Total cost and expense 66,556 5,071 Total cost and expense 66,556 84,709 110,498 Income from operation Total cost and expense 66,556 84,709 110,498 Income from operation 23,716 cost and expense 66,556 84,709 110,498 Income from operation 23,716 26,146 84,709 110,498 Income from operation 23,716 26,146 26,321 Other income ( 110,498 Income from operation 23,716 26,146 26,321 Other income ( expense Income from operation 23,716 26,146 26,321 Other income ( expense ) ( expense ) , net 434 1,047 8,592 Income before income expense ) , net 434 1,047 8,592 Income before income tax ) , net 434 1,047 8,592 Income before income tax 24,150 8,592 Income before income tax 24,150 27,193 34,913 Provision for income Income before income tax 24,150 27,193 34,913 Provision for income tax before income tax 24,150 27,193 34,913 Provision for income tax 4,672 34,913 Provision for income tax 4,672 14,531 4,177 Net income $ Provision for income tax 4,672 14,531 4,177 Net income $ 19,478 for income tax 4,672 14,531 4,177 Net income $ 19,478 $ 14,531 4,177 Net income $ 19,478 $ 12,662 $ 30,736 Basic Net income $ 19,478 $ 12,662 $ 30,736 Basic net income $ 19,478 $ 12,662 $ 30,736 Basic net income per share Class C capital stock $ 28.32 $ 18.27 $ 44.22 Diluted capital stock $ 28.32 $ 18.27 $ 44.22 Diluted net income $ 28.32 $ 18.27 $ 44.22 Diluted net income per share Class C capital stock $ 27.85 $ 18.00 $ 43.70 See capital stock $ 27.85 $ 18.00 $ 43.70 See accompanying note $ 27.85 $ 18.00 $ 43.70 See accompanying note . 47 43.70 See accompanying note . 47 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2016 2017 2018 Net Year Ended December 31 , 2016 2017 2018 Net income $ Ended December 31 , 2016 2017 2018 Net income $ 19,478 December 31 , 2016 2017 2018 Net income $ 19,478 $ 2017 2018 Net income $ 19,478 $ 12,662 $ 30,736 Other Net income $ 19,478 $ 12,662 $ 30,736 Other comprehensive income $ 19,478 $ 12,662 $ 30,736 Other comprehensive income ( loss foreign currency translation adjustment ( 599 ) 1,543 ( 781 ) translation adjustment ( 599 ) 1,543 ( 781 ) Available-for-sale investment ( 599 ) 1,543 ( 781 ) Available-for-sale investment : Change gain ( loss ) ( 314 ) 307 88 Less : loss ) ( 314 ) 307 88 Less : reclassification adjustment ) ( 314 ) 307 88 Less : reclassification adjustment for loss included in net income 221 105 ( 911 ) Net included in net income 221 105 ( 911 ) Net change net income 221 105 ( 911 ) Net change ( net of tax effect of $ 0 , $ 0 , and of $ 0 , $ 0 , and $ 156 ) $ 0 , and $ 156 ) ( 93 ) 412 and $ 156 ) ( 93 ) 412 ( 823 ) 156 ) ( 93 ) 412 ( 823 ) Cash flow ( 93 ) 412 ( 823 ) Cash flow hedge : unrealized gain ( loss ) 515 ( 638 ) 290 Less ( loss ) 515 ( 638 ) 290 Less : reclassification ) 515 ( 638 ) 290 Less : reclassification adjustment for included in net income ( 351 ) 93 98 Net change net income ( 351 ) 93 98 Net change ( net income ( 351 ) 93 98 Net change ( net of of tax effect of $ 64 , $ 247 , and of $ 64 , $ 247 , and $ 103 ) $ 247 , and $ 103 ) 164 ( 545 ) , and $ 103 ) 164 ( 545 ) 388 Other $ 103 ) 164 ( 545 ) 388 Other comprehensive income ) 164 ( 545 ) 388 Other comprehensive income ( loss income ( loss ) ( 528 ) 1,410 ( 1,216 ) loss ) ( 528 ) 1,410 ( 1,216 ) Comprehensive income ( 528 ) 1,410 ( 1,216 ) Comprehensive income $ 18,950 1,216 ) Comprehensive income $ 18,950 $ 14,072 $ 29,520 See Comprehensive income $ 18,950 $ 14,072 $ 29,520 See accompanying note $ 18,950 $ 14,072 $ 29,520 See accompanying note . 48 29,520 See accompanying note . 48 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2015 687,348 $ 32,982 a of December 31 , 2015 687,348 $ 32,982 $ ( of December 31 , 2015 687,348 $ 32,982 $ ( 1,874 31 , 2015 687,348 $ 32,982 $ ( 1,874 ) $ 687,348 $ 32,982 $ ( 1,874 ) $ 89,223 $ 120,331 $ ( 1,874 ) $ 89,223 $ 120,331 Cumulative effect of 1,874 ) $ 89,223 $ 120,331 Cumulative effect of accounting change Cumulative effect of accounting change 0 180 0 ( 133 ) effect of accounting change 0 180 0 ( 133 ) 47 of accounting change 0 180 0 ( 133 ) 47 Common change 0 180 0 ( 133 ) 47 Common and capital 180 0 ( 133 ) 47 Common and capital stock issued Common and capital stock issued 9,106 298 0 0 298 Stock-based and capital stock issued 9,106 298 0 0 298 Stock-based compensation capital stock issued 9,106 298 0 0 298 Stock-based compensation expense stock issued 9,106 298 0 0 298 Stock-based compensation expense 0 issued 9,106 298 0 0 298 Stock-based compensation expense 0 6,700 0 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax 298 Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding Stock-based compensation expense 0 6,700 0 0 6,700 Tax withholding related compensation expense 0 6,700 0 0 6,700 Tax withholding related to expense 0 6,700 0 0 6,700 Tax withholding related to vesting vesting of restricted stock unit 0 ( 3,597 ) 0 0 restricted stock unit 0 ( 3,597 ) 0 0 ( 3,597 unit 0 ( 3,597 ) 0 0 ( 3,597 ) Repurchases 0 ( 3,597 ) 0 0 ( 3,597 ) Repurchases of 3,597 ) 0 0 ( 3,597 ) Repurchases of capital stock Repurchases of capital stock ( 5,161 ) ( 256 ) 0 stock ( 5,161 ) ( 256 ) 0 ( 3,437 ) 5,161 ) ( 256 ) 0 ( 3,437 ) ( 3,693 ( 256 ) 0 ( 3,437 ) ( 3,693 ) Net 0 ( 3,437 ) ( 3,693 ) Net income 0 0 ( 3,693 ) Net income 0 0 0 19,478 19,478 Other 3,693 ) Net income 0 0 0 19,478 19,478 Other comprehensive ) Net income 0 0 0 19,478 19,478 Other comprehensive loss Net income 0 0 0 19,478 19,478 Other comprehensive loss 0 income 0 0 0 19,478 19,478 Other comprehensive loss 0 0 19,478 19,478 Other comprehensive loss 0 0 ( 528 ) 0 19,478 Other comprehensive loss 0 0 ( 528 ) 0 ( comprehensive loss 0 0 ( 528 ) 0 ( 528 ) 0 0 ( 528 ) 0 ( 528 ) Balance a ( 528 ) 0 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 691,293 36,307 ( a of December 31 , 2016 691,293 36,307 ( 2,402 ) of December 31 , 2016 691,293 36,307 ( 2,402 ) 105,131 December 31 , 2016 691,293 36,307 ( 2,402 ) 105,131 139,036 , 2016 691,293 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect 691,293 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect of accounting 36,307 ( 2,402 ) 105,131 139,036 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 0 ( 15 ) effect of accounting change 0 0 0 ( 15 ) ( of accounting change 0 0 0 ( 15 ) ( 15 change 0 0 0 ( 15 ) ( 15 ) Common 0 ( 15 ) ( 15 ) Common and capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding related compensation expense 0 7,694 0 0 7,694 Tax withholding related to expense 0 7,694 0 0 7,694 Tax withholding related to vesting vesting of restricted stock unit 0 ( 4,373 ) 0 0 restricted stock unit 0 ( 4,373 ) 0 0 ( 4,373 unit 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases of 4,373 ) 0 0 ( 4,373 ) Repurchases of capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of subsidiary share ) Sale of subsidiary share 0 722 0 0 722 Net Sale of subsidiary share 0 722 0 0 722 Net income of subsidiary share 0 722 0 0 722 Net income 0 subsidiary share 0 722 0 0 722 Net income 0 0 share 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income 0 income 0 0 0 12,662 12,662 Other comprehensive income 0 0 12,662 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance 12,662 Other comprehensive income 0 0 1,410 0 1,410 Balance a Other comprehensive income 0 0 1,410 0 1,410 Balance a of comprehensive income 0 0 1,410 0 1,410 Balance a of December income 0 0 1,410 0 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 694,783 40,247 ( a of December 31 , 2017 694,783 40,247 ( 992 ) of December 31 , 2017 694,783 40,247 ( 992 ) 113,247 December 31 , 2017 694,783 40,247 ( 992 ) 113,247 152,502 , 2017 694,783 40,247 ( 992 ) 113,247 152,502 Cumulative effect 694,783 40,247 ( 992 ) 113,247 152,502 Cumulative effect of accounting 40,247 ( 992 ) 113,247 152,502 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 98 ) ( effect of accounting change 0 0 ( 98 ) ( 599 accounting change 0 0 ( 98 ) ( 599 ) ( 0 ( 98 ) ( 599 ) ( 697 ) Common ) ( 599 ) ( 697 ) Common and capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding related compensation expense 0 9,353 0 0 9,353 Tax withholding related to expense 0 9,353 0 0 9,353 Tax withholding related to vesting restricted stock unit and other 0 ( 4,782 ) 0 0 unit and other 0 ( 4,782 ) 0 0 ( 4,782 other 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases of 4,782 ) 0 0 ( 4,782 ) Repurchases of capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of subsidiary share ) Sale of subsidiary share 0 659 0 0 659 Net Sale of subsidiary share 0 659 0 0 659 Net income of subsidiary share 0 659 0 0 659 Net income 0 subsidiary share 0 659 0 0 659 Net income 0 0 share 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive loss Net income 0 0 0 30,736 30,736 Other comprehensive loss 0 income 0 0 0 30,736 30,736 Other comprehensive loss 0 0 30,736 30,736 Other comprehensive loss 0 0 ( 1,216 ) 0 30,736 Other comprehensive loss 0 0 ( 1,216 ) 0 ( comprehensive loss 0 0 ( 1,216 ) 0 ( 1,216 ) 0 0 ( 1,216 ) 0 ( 1,216 ) Balance a ( 1,216 ) 0 ( 1,216 ) Balance a of December ) Balance a of December 31 , 2018 695,556 $ 45,049 a of December 31 , 2018 695,556 $ 45,049 $ ( of December 31 , 2018 695,556 $ 45,049 $ ( 2,306 31 , 2018 695,556 $ 45,049 $ ( 2,306 ) $ 695,556 $ 45,049 $ ( 2,306 ) $ 134,885 $ 177,628 $ ( 2,306 ) $ 134,885 $ 177,628 See accompanying note 2,306 ) $ 134,885 $ 177,628 See accompanying note . 49 177,628 See accompanying note . 49 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2016 2017 2018 Operating Year Ended December 31 , 2016 2017 2018 Operating activity Net Ended December 31 , 2016 2017 2018 Operating activity Net income December 31 , 2016 2017 2018 Operating activity Net income $ Operating activity Net income $ 19,478 $ 12,662 $ 30,736 Adjustments Net income $ 19,478 $ 12,662 $ 30,736 Adjustments : Depreciation $ 19,478 $ 12,662 $ 30,736 Adjustments : Depreciation and impairment impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of property and equipment 5,267 6,103 8,164 Amortization and impairment of intangible and impairment of intangible asset 877 812 871 Stock-based compensation expense impairment of intangible asset 877 812 871 Stock-based compensation expense 6,703 of intangible asset 877 812 871 Stock-based compensation expense 6,703 7,679 812 871 Stock-based compensation expense 6,703 7,679 9,353 Deferred income tax 871 Stock-based compensation expense 6,703 7,679 9,353 Deferred income tax ( Stock-based compensation expense 6,703 7,679 9,353 Deferred income tax ( 38 9,353 Deferred income tax ( 38 ) 258 778 ( Gain income tax ( 38 ) 258 778 ( Gain ) loss tax ( 38 ) 258 778 ( Gain ) loss on and equity security , net 73 37 ( 6,650 ) Other equity security , net 73 37 ( 6,650 ) Other 376 , net 73 37 ( 6,650 ) Other 376 294 ( 37 ( 6,650 ) Other 376 294 ( 189 ) Changes ( 6,650 ) Other 376 294 ( 189 ) Changes in ) Other 376 294 ( 189 ) Changes in asset and acquisition : Accounts receivable ( 2,578 ) ( 3,768 ) ( receivable ( 2,578 ) ( 3,768 ) ( 2,169 ) Income ) ( 3,768 ) ( 2,169 ) Income tax , net ) Income tax , net 3,125 8,211 ( 2,251 ) Other Income tax , net 3,125 8,211 ( 2,251 ) Other asset , net 3,125 8,211 ( 2,251 ) Other asset 312 ( ( 2,251 ) Other asset 312 ( 2,164 ) ( 1,207 ) Other asset 312 ( 2,164 ) ( 1,207 ) Accounts 312 ( 2,164 ) ( 1,207 ) Accounts payable 110 731 ( 1,207 ) Accounts payable 110 731 1,067 Accrued expense and 1,207 ) Accounts payable 110 731 1,067 Accrued expense and other ) Accounts payable 110 731 1,067 Accrued expense and other liability Accrued expense and other liability 1,515 4,891 8,614 Accrued revenue share expense and other liability 1,515 4,891 8,614 Accrued revenue share 593 and other liability 1,515 4,891 8,614 Accrued revenue share 593 955 4,891 8,614 Accrued revenue share 593 955 483 Deferred revenue 223 8,614 Accrued revenue share 593 955 483 Deferred revenue 223 390 Accrued revenue share 593 955 483 Deferred revenue 223 390 371 593 955 483 Deferred revenue 223 390 371 Net cash provided 955 483 Deferred revenue 223 390 371 Net cash provided by 483 Deferred revenue 223 390 371 Net cash provided by operating cash provided by operating activity 36,036 37,091 47,971 Investing activity Purchases provided by operating activity 36,036 37,091 47,971 Investing activity Purchases of by operating activity 36,036 37,091 47,971 Investing activity Purchases of property of property and equipment ( 10,212 ) ( 13,184 ) ( equipment ( 10,212 ) ( 13,184 ) ( 25,139 ) Proceeds ) ( 13,184 ) ( 25,139 ) Proceeds from disposal of disposal of property and equipment 240 99 98 Purchases of marketable of property and equipment 240 99 98 Purchases of marketable security property and equipment 240 99 98 Purchases of marketable security ( Purchases of marketable security ( 84,509 ) ( 92,195 ) ( security ( 84,509 ) ( 92,195 ) ( 50,158 ) Maturities ) ( 92,195 ) ( 50,158 ) Maturities and sale of and sale of marketable security 66,895 73,959 48,507 Purchases of non-marketable sale of marketable security 66,895 73,959 48,507 Purchases of non-marketable investment of marketable security 66,895 73,959 48,507 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 1,109 ) ( 1,745 ) ( investment ( 1,109 ) ( 1,745 ) ( 2,073 ) Maturities ) ( 1,745 ) ( 2,073 ) Maturities and sale of and sale of non-marketable investment 494 533 1,752 Cash collateral related sale of non-marketable investment 494 533 1,752 Cash collateral related to of non-marketable investment 494 533 1,752 Cash collateral related to security related to security lending ( 2,428 ) 0 0 Investments in security lending ( 2,428 ) 0 0 Investments in reverse repurchase lending ( 2,428 ) 0 0 Investments in reverse repurchase agreement Investments in reverse repurchase agreement 450 0 0 Acquisitions , net in reverse repurchase agreement 450 0 0 Acquisitions , net of reverse repurchase agreement 450 0 0 Acquisitions , net of cash purchase of intangible asset ( 986 ) ( 287 ) ( asset ( 986 ) ( 287 ) ( 1,491 ) Proceeds ) ( 287 ) ( 1,491 ) Proceeds from collection of from collection of note receivable 0 1,419 0 Net cash used collection of note receivable 0 1,419 0 Net cash used in of note receivable 0 1,419 0 Net cash used in investing used in investing activity ( 31,165 ) ( 31,401 ) ( activity ( 31,165 ) ( 31,401 ) ( 28,504 ) Financing ) ( 31,401 ) ( 28,504 ) Financing activity Net payment to stock-based award activity ( 3,304 ) ( 4,166 ) ( activity ( 3,304 ) ( 4,166 ) ( 4,993 ) Repurchases ) ( 4,166 ) ( 4,993 ) Repurchases of capital stock Repurchases of capital stock ( 3,693 ) ( 4,846 ) ( stock ( 3,693 ) ( 4,846 ) ( 9,075 ) Proceeds ) ( 4,846 ) ( 9,075 ) Proceeds from issuance of debt , net of cost 8,729 4,291 6,766 Repayments of debt , net of cost 8,729 4,291 6,766 Repayments of debt ( net of cost 8,729 4,291 6,766 Repayments of debt ( 10,064 6,766 Repayments of debt ( 10,064 ) ( 4,377 ) ( debt ( 10,064 ) ( 4,377 ) ( 6,827 ) Proceeds ) ( 4,377 ) ( 6,827 ) Proceeds from sale of from sale of subsidiary share 0 800 950 Net cash used sale of subsidiary share 0 800 950 Net cash used in of subsidiary share 0 800 950 Net cash used in financing used in financing activity ( 8,332 ) ( 8,298 ) ( activity ( 8,332 ) ( 8,298 ) ( 13,179 ) Effect ) ( 8,298 ) ( 13,179 ) Effect of exchange rate cash and cash equivalent ( 170 ) 405 ( 302 ) cash equivalent ( 170 ) 405 ( 302 ) Net increase ( 170 ) 405 ( 302 ) Net increase ( decrease cash and cash equivalent ( 3,631 ) ( 2,203 ) 5,986 equivalent ( 3,631 ) ( 2,203 ) 5,986 Cash and cash 3,631 ) ( 2,203 ) 5,986 Cash and cash equivalent at equivalent at beginning of period 16,549 12,918 10,715 Cash and cash at beginning of period 16,549 12,918 10,715 Cash and cash equivalent beginning of period 16,549 12,918 10,715 Cash and cash equivalent at at end of period $ 12,918 $ 10,715 $ 16,701 Supplemental of period $ 12,918 $ 10,715 $ 16,701 Supplemental disclosure of $ 12,918 $ 10,715 $ 16,701 Supplemental disclosure of cash flow , net of refund $ 1,643 $ 6,191 $ 5,671 Cash of refund $ 1,643 $ 6,191 $ 5,671 Cash paid for $ 1,643 $ 6,191 $ 5,671 Cash paid for interest , net of amount capitalized $ 84 $ 84 $ 69 See amount capitalized $ 84 $ 84 $ 69 See accompanying note $ 84 $ 84 $ 69 See accompanying note . 50 69 See accompanying note . 50 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding or service . See Note 2 for further discussion on Revenues the respective Other Bet . 51 Table of Contents Alphabet Inc affiliated customer represented more than 10 % of our revenue in % of our revenue in 2016 , 2017 , or 2018 our revenue in 2016 , 2017 , or 2018 . In 2016 , 2017 , or 2018 . In 2016 , 2017 , or 2018 . In 2016 , 2017 , and 2018 2018 . In 2016 , 2017 , and 2018 , we 2016 , 2017 , and 2018 , we generated approximately 47 2018 , we generated approximately 47 % , 47 % , generated approximately 47 % , 47 % , and 46 % , 47 % , and 46 % of our revenue , in the U.S. See Note 2 for further detail . Fair measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are view these security a available 52 Table of Contents Alphabet Inc. liquid security with maturity beyond 12 month a current asset under method . Beginning on January 1 , 2018 , our non-marketable Beginning on January 1 , 2018 , our non-marketable equity security upon the adoption of ASU 2016-01 . Under the measurement alternative the following criterion : ( 1 ) ha the power to the VIE ; and ( 2 ) ha the obligation to over period of seven to 25 year . We generally depreciate Land is not depreciated . 53 Table of Contents Alphabet Inc benefit that is greater than 50 % likely to be realized expense ) , net . 54 Table of Contents Alphabet Inc. For the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , advertising and , 2016 , 2017 and 2018 , advertising and promotional expense promotional expense totaled approximately $ 3.9 billion , $ 5.1 billion $ 3.9 billion , $ 5.1 billion , and $ 6.4 5.1 billion , and $ 6.4 billion , respectively . Recent not yet adopted In February 2016 , the Financial Accounting Standards Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases . `` `` Leases . `` Topic 842 supersedes the lease requirement in Codification ( ASC ) Topic 840 , `` Leases . `` Leases . `` Under Topic 842 , lessee are required to . We will adopt Topic 842 effective January 1 , 2019 adopt Topic 842 effective January 1 , 2019 using a modified 842 effective January 1 , 2019 using a modified retrospective method of lease a of December 31 , 2018 , approximately $ a of December 31 , 2018 , approximately $ 9 billion , 2018 , approximately $ 9 billion of lease asset and implementation effort . In June 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-13 ( ASU 2016-13 ) `` No . 2016-13 ( ASU 2016-13 ) `` Financial Instruments-Credit Losses Financial Instruments-Credit Losses ( Topic 326 ) : Measurement of Credit at amortized cost . ASU 2016-13 replaces the existing incurred loss . We will adopt ASU 2016-13 effective January 1 , 2020 adopt ASU 2016-13 effective January 1 , 2020 . We are 2016-13 effective January 1 , 2020 . We are currently evaluating of the adoption of ASU 2016-13 on our consolidated financial statement adopted accounting pronouncement In January 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-01 ( ASU 2016-01 ) `` No . 2016-01 ( ASU 2016-01 ) `` Financial Instruments-Overall ( `` Financial Instruments-Overall ( Subtopic 825-10 ) : Recognition and Measurement instrument . We adopted ASU 2016-01 a of January 1 , ASU 2016-01 a of January 1 , 2018 using the modified a of January 1 , 2018 using the modified retrospective method This resulted in a $ 98 million reclassification of net unrealized . The adoption of ASU 2016-01 increase the volatility of our equity security , see Note 3 . In October 2016 , Note 3 . In October 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-16 ( ASU 2016-16 ) `` No . 2016-16 ( ASU 2016-16 ) `` Income Taxes ( `` Income Taxes ( Topic 740 ) : Intra-Entity Transfers of than Inventory . `` ASU 2016-16 generally accelerates the recognition of control . We adopted ASU 2016-16 a of January 1 , ASU 2016-16 a of January 1 , 2018 using a modified a of January 1 , 2018 using a modified retrospective transition , resulting in a $ 701 million reclassification of prepaid income current period presentation . Note 2 . Revenues Adoption of ASC Revenues Adoption of ASC Topic 606 , `` Revenue from Contracts with Customers `` On January 1 , 2017 , we adopted `` On January 1 , 2017 , we adopted Topic 606 2017 , we adopted Topic 606 using the modified retrospective method not completed a of January 1 , 2017 . Results for a of January 1 , 2017 . Results for reporting period reporting period beginning after January 1 , 2017 are presented under beginning after January 1 , 2017 are presented under Topic 606 2017 are presented under Topic 606 , while prior period amount our historic accounting under Topic 605 . The effect from the from the adoption of ASC 606 wa not material to our to our financial statement . 55 Table of Contents Alphabet Inc. revenue . Year Ended December 31 , 2016 ( 1 ) Year Ended December 31 , 2016 ( 1 ) 2017 2018 December 31 , 2016 ( 1 ) 2017 2018 Google property , 2016 ( 1 ) 2017 2018 Google property $ 63,785 2016 ( 1 ) 2017 2018 Google property $ 63,785 $ 2017 2018 Google property $ 63,785 $ 77,788 $ 96,336 Google Google property $ 63,785 $ 77,788 $ 96,336 Google Network Members $ 63,785 $ 77,788 $ 96,336 Google Network Members ' property Google Network Members ' property 15,598 17,587 19,982 Google advertising revenue Network Members ' property 15,598 17,587 19,982 Google advertising revenue 79,383 Members ' property 15,598 17,587 19,982 Google advertising revenue 79,383 95,375 17,587 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 19,982 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 Google advertising revenue 79,383 95,375 116,318 Google other revenue 10,601 15,003 95,375 116,318 Google other revenue 10,601 15,003 19,906 Other Bets revenue 116,318 Google other revenue 10,601 15,003 19,906 Other Bets revenue 288 Google other revenue 10,601 15,003 19,906 Other Bets revenue 288 477 15,003 19,906 Other Bets revenue 288 477 595 Total revenue ( 19,906 Other Bets revenue 288 477 595 Total revenue ( 2 Other Bets revenue 288 477 595 Total revenue ( 2 ) 477 595 Total revenue ( 2 ) $ 90,272 $ 110,855 revenue ( 2 ) $ 90,272 $ 110,855 $ 136,819 ( 2 ) $ 90,272 $ 110,855 $ 136,819 ( 1 ) $ 90,272 $ 110,855 $ 136,819 ( 1 ) As noted $ 110,855 $ 136,819 ( 1 ) As noted above , modified retrospective method . ( 2 ) Revenues include hedging gain ( loss ) of $ 539 million , $ ( 169 539 million , $ ( 169 ) million , and $ million , and $ ( 138 ) million for the year for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively , which do ) : Year Ended December 31 , 2016 2017 2018 United Year Ended December 31 , 2016 2017 2018 United States $ Ended December 31 , 2016 2017 2018 United States $ 42,781 December 31 , 2016 2017 2018 United States $ 42,781 47 2017 2018 United States $ 42,781 47 % $ 52,449 47 2018 United States $ 42,781 47 % $ 52,449 47 % $ 42,781 47 % $ 52,449 47 % $ 63,269 46 42,781 47 % $ 52,449 47 % $ 63,269 46 % $ 52,449 47 % $ 63,269 46 % EMEA ( 1 52,449 47 % $ 63,269 46 % EMEA ( 1 ) 63,269 46 % EMEA ( 1 ) 30,304 34 36,046 33 % EMEA ( 1 ) 30,304 34 36,046 33 44,567 33 EMEA ( 1 ) 30,304 34 36,046 33 44,567 33 APAC ( 1 ) 30,304 34 36,046 33 44,567 33 APAC ( 1 ) 30,304 34 36,046 33 44,567 33 APAC ( 1 ) 30,304 34 36,046 33 44,567 33 APAC ( 1 ) 30,304 34 36,046 33 44,567 33 APAC ( 1 ) 12,559 33 44,567 33 APAC ( 1 ) 12,559 14 16,235 15 33 APAC ( 1 ) 12,559 14 16,235 15 21,374 15 APAC ( 1 ) 12,559 14 16,235 15 21,374 15 Other ( 1 ) 12,559 14 16,235 15 21,374 15 Other Americas 1 ) 12,559 14 16,235 15 21,374 15 Other Americas ( ) 12,559 14 16,235 15 21,374 15 Other Americas ( 1 12,559 14 16,235 15 21,374 15 Other Americas ( 1 ) 21,374 15 Other Americas ( 1 ) 4,628 5 6,125 5 Other Americas ( 1 ) 4,628 5 6,125 5 7,609 6 Americas ( 1 ) 4,628 5 6,125 5 7,609 6 Total ( 1 ) 4,628 5 6,125 5 7,609 6 Total revenue 1 ) 4,628 5 6,125 5 7,609 6 Total revenue ( ) 4,628 5 6,125 5 7,609 6 Total revenue ( 2 4,628 5 6,125 5 7,609 6 Total revenue ( 2 ) 7,609 6 Total revenue ( 2 ) $ 90,272 100 % revenue ( 2 ) $ 90,272 100 % $ 110,855 100 ( 2 ) $ 90,272 100 % $ 110,855 100 % $ 90,272 100 % $ 110,855 100 % $ 136,819 100 90,272 100 % $ 110,855 100 % $ 136,819 100 % $ 110,855 100 % $ 136,819 100 % ( 1 ) 110,855 100 % $ 136,819 100 % ( 1 ) Regions $ 136,819 100 % ( 1 ) Regions represent Europe , Other Americas ) . ( 2 ) Revenues include hedging gain for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 . Advertising 2016 , 2017 , and 2018 . Advertising Revenues We generate amount billed to our customer 56 Table of Contents Alphabet Inc. the twelve month ended December 31 , 2018 is primarily driven month ended December 31 , 2018 is primarily driven by cash obligation , offset by $ 1.5 billion of revenue recognized that revenue balance a of December 31 , 2017 . Our payment a of December 31 , 2017 . Our payment term vary for service performed . Note 3 . Financial Instruments Debt Securities marketable debt security within Level 2 in the fair value hierarchy fair value . In January 2018 , we reclassified our U.S. marketable debt security from Level 1 to Level 2 within the from Level 1 to Level 2 within the fair value hierarchy non-marketable debt security within Level 3 in the fair value hierarchy estimate the fair value of 57 Table of Contents Alphabet Inc. investment category a of December 31 , 2017 and 2018 ( a of December 31 , 2017 and 2018 ( in million December 31 , 2017 and 2018 ( in million ) : ) : As of December 31 , 2017 Adjusted Cost Gross As of December 31 , 2017 Adjusted Cost Gross Unrealized Gains Marketable Securities Non-Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 359 $ 0 deposit ( 1 ) $ 359 $ 0 $ 0 $ 1 ) $ 359 $ 0 $ 0 $ 359 $ $ 359 $ 0 $ 0 $ 359 $ 357 $ $ 0 $ 0 $ 359 $ 357 $ 2 $ $ 0 $ 359 $ 357 $ 2 $ 0 Government $ 359 $ 357 $ 2 $ 0 Government bond ( $ 357 $ 2 $ 0 Government bond ( 2 ) $ 0 Government bond ( 2 ) 51,548 10 ( 406 Government bond ( 2 ) 51,548 10 ( 406 ) 51,152 bond ( 2 ) 51,548 10 ( 406 ) 51,152 1,241 2 ) 51,548 10 ( 406 ) 51,152 1,241 49,911 0 51,548 10 ( 406 ) 51,152 1,241 49,911 0 Corporate debt 10 ( 406 ) 51,152 1,241 49,911 0 Corporate debt security ( 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 406 ) 51,152 1,241 49,911 0 Corporate debt security 24,269 21 49,911 0 Corporate debt security 24,269 21 ( 135 ) 24,155 0 Corporate debt security 24,269 21 ( 135 ) 24,155 126 debt security 24,269 21 ( 135 ) 24,155 126 24,029 0 24,269 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and 21 ( 135 ) 24,155 126 24,029 0 Mortgage-backed and asset-backed ( 135 ) 24,155 126 24,029 0 Mortgage-backed and asset-backed security 135 ) 24,155 126 24,029 0 Mortgage-backed and asset-backed security 16,789 0 Mortgage-backed and asset-backed security 16,789 13 ( 180 ) 16,622 Mortgage-backed and asset-backed security 16,789 13 ( 180 ) 16,622 0 asset-backed security 16,789 13 ( 180 ) 16,622 0 16,622 0 16,789 13 ( 180 ) 16,622 0 16,622 0 92,965 44 13 ( 180 ) 16,622 0 16,622 0 92,965 44 ( ( 180 ) 16,622 0 16,622 0 92,965 44 ( 721 180 ) 16,622 0 16,622 0 92,965 44 ( 721 ) ) 16,622 0 16,622 0 92,965 44 ( 721 ) 92,288 16,622 0 16,622 0 92,965 44 ( 721 ) 92,288 1,724 16,622 0 92,965 44 ( 721 ) 92,288 1,724 90,564 0 92,965 44 ( 721 ) 92,288 1,724 90,564 0 Level 3 44 ( 721 ) 92,288 1,724 90,564 0 Level 3 : ( 721 ) 92,288 1,724 90,564 0 Level 3 : Non-marketable 721 ) 92,288 1,724 90,564 0 Level 3 : Non-marketable debt 92,288 1,724 90,564 0 Level 3 : Non-marketable debt security 1,083 3 : Non-marketable debt security 1,083 811 0 1,894 0 0 : Non-marketable debt security 1,083 811 0 1,894 0 0 1,894 Non-marketable debt security 1,083 811 0 1,894 0 0 1,894 Total debt security 1,083 811 0 1,894 0 0 1,894 Total $ security 1,083 811 0 1,894 0 0 1,894 Total $ 94,048 1,083 811 0 1,894 0 0 1,894 Total $ 94,048 $ 811 0 1,894 0 0 1,894 Total $ 94,048 $ 855 0 0 1,894 Total $ 94,048 $ 855 $ ( 721 1,894 Total $ 94,048 $ 855 $ ( 721 ) $ 94,048 $ 855 $ ( 721 ) $ 94,182 $ 1,724 $ ( 721 ) $ 94,182 $ 1,724 $ 90,564 $ 721 ) $ 94,182 $ 1,724 $ 90,564 $ 1,894 As $ 94,182 $ 1,724 $ 90,564 $ 1,894 As of December $ 1,724 $ 90,564 $ 1,894 As of December 31 , $ 1,894 As of December 31 , 2018 Adjusted Cost Gross As of December 31 , 2018 Adjusted Cost Gross Unrealized Gains Marketable Securities Non-Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,202 $ 0 deposit ( 1 ) $ 2,202 $ 0 $ 0 $ 1 ) $ 2,202 $ 0 $ 0 $ 2,202 $ $ 2,202 $ 0 $ 0 $ 2,202 $ 2,202 $ $ 0 $ 0 $ 2,202 $ 2,202 $ 0 $ $ 0 $ 2,202 $ 2,202 $ 0 $ 0 Government $ 2,202 $ 2,202 $ 0 $ 0 Government bond ( $ 2,202 $ 0 $ 0 Government bond ( 2 ) $ 0 Government bond ( 2 ) 53,634 71 ( 414 Government bond ( 2 ) 53,634 71 ( 414 ) 53,291 bond ( 2 ) 53,634 71 ( 414 ) 53,291 3,717 2 ) 53,634 71 ( 414 ) 53,291 3,717 49,574 0 53,634 71 ( 414 ) 53,291 3,717 49,574 0 Corporate debt 71 ( 414 ) 53,291 3,717 49,574 0 Corporate debt security ( 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 414 ) 53,291 3,717 49,574 0 Corporate debt security 25,383 15 49,574 0 Corporate debt security 25,383 15 ( 316 ) 25,082 0 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 0 25,383 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and 15 ( 316 ) 25,082 44 25,038 0 Mortgage-backed and asset-backed ( 316 ) 25,082 44 25,038 0 Mortgage-backed and asset-backed security 316 ) 25,082 44 25,038 0 Mortgage-backed and asset-backed security 16,918 0 Mortgage-backed and asset-backed security 16,918 11 ( 324 ) 16,605 Mortgage-backed and asset-backed security 16,918 11 ( 324 ) 16,605 0 asset-backed security 16,918 11 ( 324 ) 16,605 0 16,605 0 16,918 11 ( 324 ) 16,605 0 16,605 0 98,137 97 11 ( 324 ) 16,605 0 16,605 0 98,137 97 ( ( 324 ) 16,605 0 16,605 0 98,137 97 ( 1,054 324 ) 16,605 0 16,605 0 98,137 97 ( 1,054 ) ) 16,605 0 16,605 0 98,137 97 ( 1,054 ) 97,180 16,605 0 16,605 0 98,137 97 ( 1,054 ) 97,180 5,963 16,605 0 98,137 97 ( 1,054 ) 97,180 5,963 91,217 0 98,137 97 ( 1,054 ) 97,180 5,963 91,217 0 Level 3 97 ( 1,054 ) 97,180 5,963 91,217 0 Level 3 : ( 1,054 ) 97,180 5,963 91,217 0 Level 3 : Non-marketable 1,054 ) 97,180 5,963 91,217 0 Level 3 : Non-marketable debt 97,180 5,963 91,217 0 Level 3 : Non-marketable debt security 147 3 : Non-marketable debt security 147 116 0 263 0 0 : Non-marketable debt security 147 116 0 263 0 0 263 Non-marketable debt security 147 116 0 263 0 0 263 Total debt security 147 116 0 263 0 0 263 Total $ security 147 116 0 263 0 0 263 Total $ 98,284 147 116 0 263 0 0 263 Total $ 98,284 $ 116 0 263 0 0 263 Total $ 98,284 $ 213 0 0 263 Total $ 98,284 $ 213 $ ( 1,054 263 Total $ 98,284 $ 213 $ ( 1,054 ) $ 98,284 $ 213 $ ( 1,054 ) $ 97,443 $ 5,963 $ ( 1,054 ) $ 97,443 $ 5,963 $ 91,217 $ 1,054 ) $ 97,443 $ 5,963 $ 91,217 $ 263 ( $ 97,443 $ 5,963 $ 91,217 $ 263 ( 1 ) $ 5,963 $ 91,217 $ 263 ( 1 ) As of $ 91,217 $ 263 ( 1 ) As of December 31 1 ) As of December 31 , 2017 , the majority As of December 31 , 2017 , the majority of our deposit . As of December 31 , 2018 , the majority As of December 31 , 2018 , the majority of our are domestic deposit . ( 2 ) Government bond are comprised gross realized gain of $ 251 million , $ 185 million $ 251 million , $ 185 million , and $ 1.3 185 million , and $ 1.3 billion for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . We recognized gross realized loss of $ 304 million , $ 295 million $ 304 million , $ 295 million , and $ 143 295 million , and $ 143 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . We reflect ( in million ) : 58 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2018 Due in 1 As of December 31 , 2018 Due in 1 year $ 31 , 2018 Due in 1 year $ 23,669 Due in Due in 1 year $ 23,669 Due in 1 year through year $ 23,669 Due in 1 year through 5 year 54,504 Due in 1 year through 5 year 54,504 Due in 5 1 year through 5 year 54,504 Due in 5 year through 5 year 54,504 Due in 5 year through 10 year 2,236 Due in 5 year through 10 year 2,236 Due after 10 5 year through 10 year 2,236 Due after 10 year 10,808 10 year 2,236 Due after 10 year 10,808 Total $ 91,217 2,236 Due after 10 year 10,808 Total $ 91,217 The following 10 year 10,808 Total $ 91,217 The following table present gross loss position a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , aggregated by December 31 , 2017 and 2018 , aggregated by investment category ) : As of December 31 , 2017 Less than 12 As of December 31 , 2017 Less than 12 Months 12 31 , 2017 Less than 12 Months 12 Months or Greater 2017 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond ( 1 ) $ 28,836 $ ( bond ( 1 ) $ 28,836 $ ( 211 ) $ ) $ 28,836 $ ( 211 ) $ 17,660 $ ( $ ( 211 ) $ 17,660 $ ( 195 ) $ ) $ 17,660 $ ( 195 ) $ 46,496 $ ( $ ( 195 ) $ 46,496 $ ( 406 ) Corporate ) $ 46,496 $ ( 406 ) Corporate debt security 18,300 406 ) Corporate debt security 18,300 ( 114 ) 1,710 ( Corporate debt security 18,300 ( 114 ) 1,710 ( 21 ) security 18,300 ( 114 ) 1,710 ( 21 ) 20,010 ( ( 114 ) 1,710 ( 21 ) 20,010 ( 135 ) ) 1,710 ( 21 ) 20,010 ( 135 ) Mortgage-backed and ( 21 ) 20,010 ( 135 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,061 ( 105 ) 3,449 ( and asset-backed security 11,061 ( 105 ) 3,449 ( 75 ) security 11,061 ( 105 ) 3,449 ( 75 ) 14,510 ( ( 105 ) 3,449 ( 75 ) 14,510 ( 180 ) ) 3,449 ( 75 ) 14,510 ( 180 ) Total $ ( 75 ) 14,510 ( 180 ) Total $ 58,197 $ ( 180 ) Total $ 58,197 $ ( 430 ) $ Total $ 58,197 $ ( 430 ) $ 22,819 $ ( $ ( 430 ) $ 22,819 $ ( 291 ) $ ) $ 22,819 $ ( 291 ) $ 81,016 $ ( $ ( 291 ) $ 81,016 $ ( 721 ) As ) $ 81,016 $ ( 721 ) As of December 31 721 ) As of December 31 , 2018 Less than 12 As of December 31 , 2018 Less than 12 Months 12 31 , 2018 Less than 12 Months 12 Months or Greater 2018 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond ( 1 ) $ 12,019 $ ( bond ( 1 ) $ 12,019 $ ( 85 ) $ ) $ 12,019 $ ( 85 ) $ 23,877 $ ( $ ( 85 ) $ 23,877 $ ( 329 ) $ ) $ 23,877 $ ( 329 ) $ 35,896 $ ( $ ( 329 ) $ 35,896 $ ( 414 ) Corporate ) $ 35,896 $ ( 414 ) Corporate debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8,519 ( 249 ) 14,053 ( 324 ) ) 8,519 ( 249 ) 14,053 ( 324 ) Total $ ( 249 ) 14,053 ( 324 ) Total $ 27,724 $ ( 324 ) Total $ 27,724 $ ( 267 ) $ Total $ 27,724 $ ( 267 ) $ 43,941 $ ( $ ( 267 ) $ 43,941 $ ( 787 ) $ ) $ 43,941 $ ( 787 ) $ 71,665 $ ( $ ( 787 ) $ 71,665 $ ( 1,054 ) ( ) $ 71,665 $ ( 1,054 ) ( 1 ) Government $ ( 1,054 ) ( 1 ) Government bond are comprised During the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , we did , 2016 , 2017 and 2018 , we did not recognize of Income . See Note 6 for further detail on other significant unobservable input ( Level 3 ) ( in million ) ) : Year Ended December 31 , 2017 2018 Beginning balance Year Ended December 31 , 2017 2018 Beginning balance $ 1,165 Ended December 31 , 2017 2018 Beginning balance $ 1,165 $ 2017 2018 Beginning balance $ 1,165 $ 1,894 Total net gain Beginning balance $ 1,165 $ 1,894 Total net gain ( loss ) Included in earnings ( 10 ) 603 Included in other in earnings ( 10 ) 603 Included in other comprehensive income Included in other comprehensive income 707 ( 1 ) Purchases 88 other comprehensive income 707 ( 1 ) Purchases 88 47 Sales 707 ( 1 ) Purchases 88 47 Sales ( 2 ) ( 1 ) Purchases 88 47 Sales ( 2 ) ( Purchases 88 47 Sales ( 2 ) ( 52 ) Settlements Sales ( 2 ) ( 52 ) Settlements ( 1 ) ( 52 ) Settlements ( 1 ) ( 54 ) ( Settlements ( 1 ) ( 54 ) ( 2,228 ) Ending ) ( 54 ) ( 2,228 ) Ending balance $ 1,894 2,228 ) Ending balance $ 1,894 $ 263 ( 1 ) Ending balance $ 1,894 $ 263 ( 1 ) During the $ 1,894 $ 263 ( 1 ) During the year ended During the year ended December 31 , 2018 the term of year ended December 31 , 2018 the term of a non-marketable resulting in an unrealized $ 1.3 billion gain recognized in other to non-marketable equity security . 59 Table of Contents Alphabet Inc. value and classified within Level 1 and 2 in the fair classified within Level 1 and 2 in the fair value hierarchy market . Prior to January 1 , 2018 , we accounted Prior to January 1 , 2018 , we accounted for the , net . Starting January 1 , 2018 , upon our . Starting January 1 , 2018 , upon our adoption of upon our adoption of ASU 2016-01 , unrealized gain and loss adoption , we reclassified $ 98 million net unrealized gain related investment category a of December 31 , 2017 and 2018 ( a of December 31 , 2017 and 2018 ( in million December 31 , 2017 and 2018 ( in million ) : ) : As of December 31 , 2017 Cash and Cash As of December 31 , 2017 Cash and Cash Equivalents Marketable Cash Equivalents Marketable Securities Level 1 : Money market fund $ : Money market fund $ 1,833 $ 0 Marketable equity security market fund $ 1,833 $ 0 Marketable equity security 0 340 $ 0 Marketable equity security 0 340 1,833 340 Level 2 0 Marketable equity security 0 340 1,833 340 Level 2 : Marketable equity security 0 340 1,833 340 Level 2 : Mutual equity security 0 340 1,833 340 Level 2 : Mutual fund 0 340 1,833 340 Level 2 : Mutual fund ( 1 2 : Mutual fund ( 1 ) 0 252 Total $ Mutual fund ( 1 ) 0 252 Total $ 1,833 $ fund ( 1 ) 0 252 Total $ 1,833 $ 592 ) 0 252 Total $ 1,833 $ 592 ( 1 ) 252 Total $ 1,833 $ 592 ( 1 ) The fair $ 1,833 $ 592 ( 1 ) The fair value option net . As of December 31 , 2018 Cash and Cash As of December 31 , 2018 Cash and Cash Equivalents Marketable Cash Equivalents Marketable Securities Level 1 : Money market fund $ : Money market fund $ 3,493 $ 0 Marketable equity security market fund $ 3,493 $ 0 Marketable equity security 0 994 $ 0 Marketable equity security 0 994 3,493 994 Level 2 0 Marketable equity security 0 994 3,493 994 Level 2 : Marketable equity security 0 994 3,493 994 Level 2 : Mutual equity security 0 994 3,493 994 Level 2 : Mutual fund 0 994 3,493 994 Level 2 : Mutual fund 0 228 Level 2 : Mutual fund 0 228 Total $ 3,493 $ 2 : Mutual fund 0 228 Total $ 3,493 $ 1,222 fund 0 228 Total $ 3,493 $ 1,222 Non-marketable equity security 228 Total $ 3,493 $ 1,222 Non-marketable equity security Our non-marketable value . Prior to January 1 , 2018 , we accounted Prior to January 1 , 2018 , we accounted for our net . As of December 31 , 2017 , non-marketable equity As of December 31 , 2017 , non-marketable equity security accounted a carrying value of $ 4.5 billion and a fair value fair value of approximately $ 8.8 billion . On January 1 8.8 billion . On January 1 , 2018 , we adopted . On January 1 , 2018 , we adopted ASU 2016-01 2018 , we adopted ASU 2016-01 which changed the way we . Because we adopted ASU 2016-01 prospectively , we recognize unrealized gain that occurred in prior 60 Table of Contents Alphabet Inc. the first period after January 1 , 2018 when there is period after January 1 , 2018 when there is an observable during the year ended December 31 , 2018 are classified within year ended December 31 , 2018 are classified within Level 3 2018 are classified within Level 3 in the fair value hierarchy security held a of December 31 , 2018 ( in million a of December 31 , 2018 ( in million ) : : Twelve Months Ended December 31 , 2018 Upward adjustment $ Months Ended December 31 , 2018 Upward adjustment $ 4,285 Downward , 2018 Upward adjustment $ 4,285 Downward adjustment ( including impairment ( including impairment ) ( 178 ) Total unrealized gain ( for non-marketable equity security $ 4,107 The following table summarizes the security held a of December 31 , 2018 including cumulative unrealized a of December 31 , 2018 including cumulative unrealized upward and : Initial cost basis ( 1 ) $ 8,168 Upward adjustment basis ( 1 ) $ 8,168 Upward adjustment 4,285 Downward adjustment ) $ 8,168 Upward adjustment 4,285 Downward adjustment ( including impairment ( including impairment ) ( 178 ) Total carrying value at end of the period $ 12,275 ( 1 ) Includes $ the period $ 12,275 ( 1 ) Includes $ 2.2 billion ( 1 ) Includes $ 2.2 billion for a non-marketable equity a non-marketable debt security during 2018 . During the year ended During the year ended December 31 , 2018 , included in year ended December 31 , 2018 , included in the $ , included in the $ 12.3 billion of non-marketable equity security non-marketable equity security , $ 6.9 billion were measured at fair net unrealized gain of $ 4.1 billion . Gains and loss for the year ended December 31 , 2018 are summarized below year ended December 31 , 2018 are summarized below ( in : Twelve Months Ended December 31 , 2018 Realized gain ( Months Ended December 31 , 2018 Realized gain ( loss ) sold during the period $ 1,458 Unrealized gain ( loss ) end of the period ( 1 ) 4,002 Total gain ( the period ( 1 ) 4,002 Total gain ( loss ) expense ) , net $ 5,460 ( 1 ) Includes $ , net $ 5,460 ( 1 ) Includes $ 4,107 million ( 1 ) Includes $ 4,107 million related to non-marketable equity for the year ended December 31 , 2018 . Equity security year ended December 31 , 2018 . Equity security accounted for Equity Method As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , equity security December 31 , 2017 and 2018 , equity security accounted for carrying value of approximately $ 1.4 billion and $ 1.3 billion $ 1.4 billion and $ 1.3 billion , respectively . Our of Income . See Note 6 for further detail on other derivative contract primarily within Level 2 in the fair value hierarchy Accounting Standard Update No . 2017-12 ( ASU 2017-12 ) `` No . 2017-12 ( ASU 2017-12 ) `` Derivatives and Hedging Derivatives and Hedging ( Topic 815 ) : Targeted Improvements to the hedged item beginning January 1 , 2018 . 61 Table item beginning January 1 , 2018 . 61 Table of Contents January 1 , 2018 . 61 Table of Contents Alphabet Inc. default . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , we received December 31 , 2017 and 2018 , we received cash collateral collateral security arrangement of $ 15 million and $ 327 million $ 15 million and $ 327 million , respectively , which these contract wa approximately $ 11.7 billion and $ 11.8 billion $ 11.7 billion and $ 11.8 billion a of December 31 11.8 billion a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . These contract These contract have maturity of 24 month or le . For net . As of December 31 , 2018 , the net As of December 31 , 2018 , the net gain or net accumulated gain of $ 247 million , of which a a net gain of $ 247 million is expected to be into earnings within the next 12 month . Fair Value Hedges of these contract wa $ 2.9 billion and $ 2.0 billion $ 2.9 billion and $ 2.0 billion a of December 31 2.0 billion a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . Gains and During the year ended December 31 , 2018 , we entered year ended December 31 , 2018 , we entered into forward of these contract wa $ 6.7 billion a of December 31 6.7 billion a of December 31 , 2018 . Gains and a of December 31 , 2018 . Gains and loss on foreign exchange contract wa $ 15.2 billion and $ 20.1 billion $ 15.2 billion and $ 20.1 billion a of December 31 20.1 billion a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . 62 Table and 2018 , respectively . 62 Table of Contents Alphabet Inc ) : As of December 31 , 2017 Balance Sheet Location As of December 31 , 2017 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 51 $ 29 $ 80 Total non-current asset $ 51 $ 29 $ 80 Total $ 51 $ 51 $ 29 $ 80 Total $ 51 $ 29 29 $ 80 Total $ 51 $ 29 $ 80 Derivative 80 Total $ 51 $ 29 $ 80 Derivative Liabilities : $ 51 $ 29 $ 80 Derivative Liabilities : Level 2 80 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 230 $ 122 $ 352 Total and non-current $ 230 $ 122 $ 352 Total $ 230 $ 230 $ 122 $ 352 Total $ 230 $ 122 122 $ 352 Total $ 230 $ 122 $ 352 As 352 Total $ 230 $ 122 $ 352 As of December $ 230 $ 122 $ 352 As of December 31 , $ 352 As of December 31 , 2018 Balance Sheet Location As of December 31 , 2018 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 459 $ 54 $ 513 Total non-current asset $ 459 $ 54 $ 513 Total $ 459 $ 459 $ 54 $ 513 Total $ 459 $ 54 54 $ 513 Total $ 459 $ 54 $ 513 Derivative 513 Total $ 459 $ 54 $ 513 Derivative Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 233 Total $ 5 $ 228 228 $ 233 Total $ 5 $ 228 $ 233 The 233 Total $ 5 $ 228 $ 233 The gain ( $ 5 $ 228 $ 233 The gain ( loss ) Tax Effect Year Ended December 31 , 2016 2017 2018 Derivatives Year Ended December 31 , 2016 2017 2018 Derivatives in Cash Ended December 31 , 2016 2017 2018 Derivatives in Cash Flow December 31 , 2016 2017 2018 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 773 $ ( 955 ) $ effectiveness $ 773 $ ( 955 ) $ 332 Amount excluded $ ( 955 ) $ 332 Amount excluded from the assessment from the assessment of effectiveness 0 0 26 Derivatives in Net the assessment of effectiveness 0 0 26 Derivatives in Net Investment assessment of effectiveness 0 0 26 Derivatives in Net Investment Hedging in the assessment of effectiveness 0 0 136 Total $ 773 the assessment of effectiveness 0 0 136 Total $ 773 $ assessment of effectiveness 0 0 136 Total $ 773 $ ( 0 0 136 Total $ 773 $ ( 955 ) $ Total $ 773 $ ( 955 ) $ 494 63 Table $ ( 955 ) $ 494 63 Table of Contents Alphabet ( 955 ) $ 494 63 Table of Contents Alphabet Inc in Income Year Ended December 31 , 2016 2017 2018 Revenues Year Ended December 31 , 2016 2017 2018 Revenues Other income Ended December 31 , 2016 2017 2018 Revenues Other income ( December 31 , 2016 2017 2018 Revenues Other income ( expense value hedge are recorded $ 90,272 $ 434 $ 110,855 $ are recorded $ 90,272 $ 434 $ 110,855 $ 1,047 $ $ 90,272 $ 434 $ 110,855 $ 1,047 $ 136,819 $ $ 434 $ 110,855 $ 1,047 $ 136,819 $ 8,592 Gains $ 110,855 $ 1,047 $ 136,819 $ 8,592 Gains ( Losses $ 1,047 $ 136,819 $ 8,592 Gains ( Losses ) on from AOCI to income $ 539 $ 0 $ ( 169 to income $ 539 $ 0 $ ( 169 ) $ 539 $ 0 $ ( 169 ) $ 0 $ ( $ ( 169 ) $ 0 $ ( 139 ) $ ) $ 0 $ ( 139 ) $ 0 Amount excluded $ ( 139 ) $ 0 Amount excluded from the assessment based on an amortization approach 0 0 0 0 1 0 on an amortization approach 0 0 0 0 1 0 Amount an amortization approach 0 0 0 0 1 0 Amount excluded amortization approach 0 0 0 0 1 0 Amount excluded from approach 0 0 0 0 1 0 Amount excluded from the 0 0 0 0 1 0 Amount excluded from the assessment from the assessment of effectiveness 0 ( 381 ) 0 83 assessment of effectiveness 0 ( 381 ) 0 83 0 0 effectiveness 0 ( 381 ) 0 83 0 0 Gains ( 0 ( 381 ) 0 83 0 0 Gains ( Losses ( 381 ) 0 83 0 0 Gains ( Losses ) 381 ) 0 83 0 0 Gains ( Losses ) on Foreign exchange contract Hedged item 0 ( 139 ) 0 197 contract Hedged item 0 ( 139 ) 0 197 0 ( item 0 ( 139 ) 0 197 0 ( 96 ) 0 ( 139 ) 0 197 0 ( 96 ) Derivatives ( 139 ) 0 197 0 ( 96 ) Derivatives designated ) 0 197 0 ( 96 ) Derivatives designated a hedging Derivatives designated a hedging instrument 0 139 0 ( 197 ) designated a hedging instrument 0 139 0 ( 197 ) 0 a hedging instrument 0 139 0 ( 197 ) 0 96 instrument 0 139 0 ( 197 ) 0 96 Amount excluded 139 0 ( 197 ) 0 96 Amount excluded from the 0 ( 197 ) 0 96 Amount excluded from the assessment from the assessment of effectiveness 0 6 0 23 0 37 the assessment of effectiveness 0 6 0 23 0 37 Gains assessment of effectiveness 0 6 0 23 0 37 Gains ( of effectiveness 0 6 0 23 0 37 Gains ( Losses effectiveness 0 6 0 23 0 37 Gains ( Losses ) 0 6 0 23 0 37 Gains ( Losses ) on from the assessment of effectiveness 0 0 0 0 0 78 the assessment of effectiveness 0 0 0 0 0 78 Gains assessment of effectiveness 0 0 0 0 0 78 Gains ( of effectiveness 0 0 0 0 0 78 Gains ( Losses effectiveness 0 0 0 0 0 78 Gains ( Losses ) 0 0 0 0 0 78 Gains ( Losses ) on not designated a hedging instrument 0 130 0 ( 230 ) designated a hedging instrument 0 130 0 ( 230 ) 0 a hedging instrument 0 130 0 ( 230 ) 0 54 instrument 0 130 0 ( 230 ) 0 54 Total gain 130 0 ( 230 ) 0 54 Total gain ( loss 0 ( 230 ) 0 54 Total gain ( loss ) gain ( loss ) $ 539 $ ( 245 ) $ ) $ 539 $ ( 245 ) $ ( 169 ) ( 245 ) $ ( 169 ) $ ( 124 ) ( 169 ) $ ( 124 ) $ ( 138 ) ( 124 ) $ ( 138 ) $ 169 Offsetting of $ ( 138 ) $ 169 Offsetting of Derivatives We present condition . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , information related December 31 , 2017 and 2018 , information related to these ( in million ) : 64 Table of Contents Alphabet Inc of Assets As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 102 $ ( 22 ) $ Derivatives $ 102 $ ( 22 ) $ 80 $ ( $ ( 22 ) $ 80 $ ( 64 ) ( ) $ 80 $ ( 64 ) ( 1 ) $ $ ( 64 ) ( 1 ) $ ( 4 ) ( 1 ) $ ( 4 ) $ ( 2 ) ( 4 ) $ ( 2 ) $ 10 As of $ ( 2 ) $ 10 As of December 31 , $ 10 As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 569 $ ( 56 ) $ Derivatives $ 569 $ ( 56 ) $ 513 $ ( $ ( 56 ) $ 513 $ ( 90 ) ( ) $ 513 $ ( 90 ) ( 1 ) $ $ ( 90 ) ( 1 ) $ ( 307 ) ( 1 ) $ ( 307 ) $ ( 14 ) ( 307 ) $ ( 14 ) $ 102 ( 1 $ ( 14 ) $ 102 ( 1 ) The balance 14 ) $ 102 ( 1 ) The balance a of The balance a of December 31 , 2017 and 2018 were a of December 31 , 2017 and 2018 were related to December 31 , 2017 and 2018 were related to derivative liability of Liabilities As of December 31 , 2017 Gross Amounts Not As of December 31 , 2017 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 374 $ ( 22 ) $ Derivatives $ 374 $ ( 22 ) $ 352 $ ( $ ( 22 ) $ 352 $ ( 64 ) ( ) $ 352 $ ( 64 ) ( 2 ) $ $ ( 64 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 288 As 2 ) $ 0 $ 0 $ 288 As of December $ 0 $ 0 $ 288 As of December 31 , $ 288 As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 289 $ ( 56 ) $ Derivatives $ 289 $ ( 56 ) $ 233 $ ( $ ( 56 ) $ 233 $ ( 90 ) ( ) $ 233 $ ( 90 ) ( 2 ) $ $ ( 90 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 143 ( 2 ) $ 0 $ 0 $ 143 ( 2 ) $ 0 $ 0 $ 143 ( 2 ) The balance $ 0 $ 143 ( 2 ) The balance a of The balance a of December 31 , 2017 and 2018 were a of December 31 , 2017 and 2018 were related to December 31 , 2017 and 2018 were related to derivative asset master netting agreement . Note 4 . Variable Interest Entities ( u . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , asset that December 31 , 2017 and 2018 , asset that can only of these VIEs were $ 1.7 billion and $ 2.4 billion $ 1.7 billion and $ 2.4 billion , respectively , and to the VIEs were $ 997 million and $ 909 million $ 997 million and $ 909 million , respectively . Calico biology that control lifespan . 65 Table of Contents Alphabet Inc Alphabet Inc . In September 2014 , AbbVie Inc. ( AbbVie In the second quarter of 2018 , AbbVie and Calico amended commitment . As of December 31 , 2018 , AbbVie ha As of December 31 , 2018 , AbbVie ha contributed $ , AbbVie ha contributed $ 750 million to fund the collaboration committed to an additional $ 500 million which will be paid by the fourth quarter of 2019 . As of December 31 2019 . As of December 31 , 2018 , Calico ha As of December 31 , 2018 , Calico ha contributed $ , Calico ha contributed $ 500 million and ha committed up up to an additional $ 750 million . Calico ha used Calico . As of December 31 , 2018 , we have As of December 31 , 2018 , we have contributed $ , we have contributed $ 480 million to Calico in exchange up to an additional $ 750 million on an as-needed basis enjoy healthier life . In 2017 , Temasek , a Singapore-based for an aggregate of $ 800 million in cash . In in cash . In December 2018 , Verily received $ 900 2018 , Verily received $ 900 million in cash from a in cash from a $ 1.0 billion investment round . The round . The remaining $ 100 million is expected to be in the first quarter of 2019 . These transaction were accounted of these VIEs were $ 896 million and $ 705 million $ 896 million and $ 705 million a of December 31 705 million a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . The maximum not material a of December 31 , 2017 and 2018 . a of December 31 , 2017 and 2018 . Note 5 December 31 , 2017 and 2018 . Note 5 . Debt 2017 and 2018 . Note 5 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2017 and 2018 . a of December 31 , 2017 and 2018 . Long-Term Debt December 31 , 2017 and 2018 . Long-Term Debt Google issued Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 , a 2014 , 2016 , and 2021 , a well a $ , a well a $ 1.0 billion of senior unsecured note of senior unsecured note ( 2014 Notes ) in February 2014 2014 Notes ) in February 2014 due in 2024 . In in February 2014 due in 2024 . In April 2016 , in 2024 . In April 2016 , we completed an exchange holder of Google ’ s 2011 Notes due 2021 and 2014 ’ s 2011 Notes due 2021 and 2014 Notes due 2024 2011 Notes due 2021 and 2014 Notes due 2024 ( collectively 2021 and 2014 Notes due 2024 ( collectively , the Google principal amount of approximately $ 1.7 billion of the Google Notes wa exchanged for approximately $ 1.7 billion of Alphabet note with loss recognized . In August 2016 , Alphabet issued $ 2.0 2016 , Alphabet issued $ 2.0 billion of senior unsecured note of senior unsecured note ( 2016 Notes ) due 2026 . ( 2016 Notes ) due 2026 . The net proceeds from from the issuance of the 2016 Notes were used for general including the repayment of outstanding 66 Table of Contents Alphabet Inc. The Alphabet note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 rank equally 2021 , 2024 , and 2026 rank equally with each other ) : As of December 31 , 2017 As of December As of December 31 , 2017 As of December 31 , , 2017 As of December 31 , 2018 3.625 % Notes As of December 31 , 2018 3.625 % Notes due on of December 31 , 2018 3.625 % Notes due on May % Notes due on May 19 , 2021 $ 1,000 $ due on May 19 , 2021 $ 1,000 $ 1,000 3.375 May 19 , 2021 $ 1,000 $ 1,000 3.375 % Notes , 2021 $ 1,000 $ 1,000 3.375 % Notes due on 2021 $ 1,000 $ 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 1.998 due on February 25 , 2024 1,000 1,000 1.998 % Notes on February 25 , 2024 1,000 1,000 1.998 % Notes due February 25 , 2024 1,000 1,000 1.998 % Notes due on 25 , 2024 1,000 1,000 1.998 % Notes due on August % Notes due on August 15 , 2026 2,000 2,000 Unamortized due on August 15 , 2026 2,000 2,000 Unamortized discount for on August 15 , 2026 2,000 2,000 Unamortized discount for the August 15 , 2026 2,000 2,000 Unamortized discount for the Notes for the Notes above ( 57 ) ( 50 ) Subtotal above ( 57 ) ( 50 ) Subtotal ( 1 ) ( 50 ) Subtotal ( 1 ) 3,943 3,950 Capital lease ) Subtotal ( 1 ) 3,943 3,950 Capital lease obligation 26 Subtotal ( 1 ) 3,943 3,950 Capital lease obligation 26 62 3,943 3,950 Capital lease obligation 26 62 Total long-term debt $ 3,950 Capital lease obligation 26 62 Total long-term debt $ 3,969 62 Total long-term debt $ 3,969 $ 4,012 ( 1 ) long-term debt $ 3,969 $ 4,012 ( 1 ) Includes the $ 3,969 $ 4,012 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 , 2024 , and 2026 were 3.734 % , 3.377 2024 , and 2026 were 3.734 % , 3.377 % , 2026 were 3.734 % , 3.377 % , and 2.231 % , 3.377 % , and 2.231 % , respectively , with outstanding note wa approximately $ 4.0 billion and $ 3.9 billion $ 4.0 billion and $ 3.9 billion a of December 31 3.9 billion a of December 31 , 2017 and 2018 , a of December 31 , 2017 and 2018 , respectively . December 31 , 2017 and 2018 , respectively . The fair is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2018 , the aggregate As of December 31 , 2018 , the aggregate future principal ( in million ) : 2019 $ 0 2020 14 2021 million ) : 2019 $ 0 2020 14 2021 1,003 2022 ) : 2019 $ 0 2020 14 2021 1,003 2022 3 : 2019 $ 0 2020 14 2021 1,003 2022 3 2023 2019 $ 0 2020 14 2021 1,003 2022 3 2023 3 $ 0 2020 14 2021 1,003 2022 3 2023 3 Thereafter 0 2020 14 2021 1,003 2022 3 2023 3 Thereafter 3,039 2020 14 2021 1,003 2022 3 2023 3 Thereafter 3,039 Total 14 2021 1,003 2022 3 2023 3 Thereafter 3,039 Total $ 2021 1,003 2022 3 2023 3 Thereafter 3,039 Total $ 4,062 2022 3 2023 3 Thereafter 3,039 Total $ 4,062 Credit Facility 3 Thereafter 3,039 Total $ 4,062 Credit Facility As of December Credit Facility As of December 31 , 2018 , we have As of December 31 , 2018 , we have $ 4.0 2018 , we have $ 4.0 billion of revolving credit facility facility which expire in July 2023 . The interest rate for credit facility a of December 31 , 2017 and 2018 . a of December 31 , 2017 and 2018 . Note 6 December 31 , 2017 and 2018 . Note 6 . Supplemental 2017 and 2018 . Note 6 . Supplemental Financial Statement Information ) : As of December 31 , 2017 As of December As of December 31 , 2017 As of December 31 , , 2017 As of December 31 , 2018 Land and building As of December 31 , 2018 Land and building $ 23,183 2018 Land and building $ 23,183 $ 30,179 Information technology asset and building $ 23,183 $ 30,179 Information technology asset 21,429 30,119 $ 30,179 Information technology asset 21,429 30,119 Construction in progress 10,491 30,179 Information technology asset 21,429 30,119 Construction in progress 10,491 16,838 21,429 30,119 Construction in progress 10,491 16,838 Leasehold improvement 4,496 5,310 30,119 Construction in progress 10,491 16,838 Leasehold improvement 4,496 5,310 Furniture progress 10,491 16,838 Leasehold improvement 4,496 5,310 Furniture and fixture 48 10,491 16,838 Leasehold improvement 4,496 5,310 Furniture and fixture 48 61 4,496 5,310 Furniture and fixture 48 61 Property and equipment , 5,310 Furniture and fixture 48 61 Property and equipment , gross Property and equipment , gross 59,647 82,507 Less : accumulated depreciation and equipment , gross 59,647 82,507 Less : accumulated depreciation ( Less : accumulated depreciation ( 17,264 ) ( 22,788 ) Property depreciation ( 17,264 ) ( 22,788 ) Property and equipment , and equipment , net $ 42,383 $ 59,719 67 Table of , net $ 42,383 $ 59,719 67 Table of Contents Alphabet net $ 42,383 $ 59,719 67 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , asset under December 31 , 2017 and 2018 , asset under capital lease a cost basis of $ 390 million and $ 648 million $ 390 million and $ 648 million , respectively , were ) : As of December 31 , 2017 As of December As of December 31 , 2017 As of December 31 , , 2017 As of December 31 , 2018 European Commission fine As of December 31 , 2018 European Commission fine ( 1 2018 European Commission fine ( 1 ) $ 2,874 $ 7,754 fine ( 1 ) $ 2,874 $ 7,754 Accrued customer liability 1 ) $ 2,874 $ 7,754 Accrued customer liability 1,489 1,810 $ 7,754 Accrued customer liability 1,489 1,810 Other accrued expense and 7,754 Accrued customer liability 1,489 1,810 Other accrued expense and current accrued expense and current liability 5,814 7,394 Accrued expense and other expense and current liability 5,814 7,394 Accrued expense and other current and other current liability $ 10,177 $ 16,958 ( 1 ) current liability $ 10,177 $ 16,958 ( 1 ) Includes the $ 10,177 $ 16,958 ( 1 ) Includes the effect of and interest . See Note 9 for further detail Accumulated Other Total Balance a of December 31 , 2015 $ ( 2,047 a of December 31 , 2015 $ ( 2,047 ) $ 31 , 2015 $ ( 2,047 ) $ ( 86 ) ( 2,047 ) $ ( 86 ) $ 259 $ ( $ ( 86 ) $ 259 $ ( 1,874 ) Other ) $ 259 $ ( 1,874 ) Other comprehensive income ( loss ) before reclassification ( 599 ) ( 314 ) 515 reclassification ( 599 ) ( 314 ) 515 ( 398 ) 599 ) ( 314 ) 515 ( 398 ) Amounts reclassified ( 314 ) 515 ( 398 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 221 ( 351 ) ( Amounts reclassified from AOCI 0 221 ( 351 ) ( 130 from AOCI 0 221 ( 351 ) ( 130 ) Other 221 ( 351 ) ( 130 ) Other comprehensive income ( income ( loss ) ( 599 ) ( 93 ) 164 ) ( 599 ) ( 93 ) 164 ( 528 ) 599 ) ( 93 ) 164 ( 528 ) Balance a ( 93 ) 164 ( 528 ) Balance a of December ) Balance a of December 31 , 2016 $ ( 2,646 a of December 31 , 2016 $ ( 2,646 ) $ 31 , 2016 $ ( 2,646 ) $ ( 179 ) ( 2,646 ) $ ( 179 ) $ 423 $ ( $ ( 179 ) $ 423 $ ( 2,402 ) Other ) $ 423 $ ( 2,402 ) Other comprehensive income ( ( loss ) before reclassification 1,543 307 ( 638 ) 1,212 loss ) before reclassification 1,543 307 ( 638 ) 1,212 Amounts before reclassification 1,543 307 ( 638 ) 1,212 Amounts reclassified from 1,543 307 ( 638 ) 1,212 Amounts reclassified from AOCI 0 1,212 Amounts reclassified from AOCI 0 105 93 198 Other comprehensive Amounts reclassified from AOCI 0 105 93 198 Other comprehensive income reclassified from AOCI 0 105 93 198 Other comprehensive income ( from AOCI 0 105 93 198 Other comprehensive income ( loss comprehensive income ( loss ) 1,543 412 ( 545 ) 1,410 income ( loss ) 1,543 412 ( 545 ) 1,410 Balance loss ) 1,543 412 ( 545 ) 1,410 Balance a of 1,543 412 ( 545 ) 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 $ ( 1,103 a of December 31 , 2017 $ ( 1,103 ) $ 31 , 2017 $ ( 1,103 ) $ 233 $ ( $ ( 1,103 ) $ 233 $ ( 122 ) $ ) $ 233 $ ( 122 ) $ ( 992 ) ( 122 ) $ ( 992 ) Other comprehensive income ( loss ) before reclassification ( 1 ) ( 781 ) ( reclassification ( 1 ) ( 781 ) ( 10 ) 264 ) ( 781 ) ( 10 ) 264 ( 527 ) 781 ) ( 10 ) 264 ( 527 ) Amounts excluded ( 10 ) 264 ( 527 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified from recorded in AOCI 0 0 26 26 Amounts reclassified from AOCI in AOCI 0 0 26 26 Amounts reclassified from AOCI 0 26 Amounts reclassified from AOCI 0 ( 911 ) 98 ( reclassified from AOCI 0 ( 911 ) 98 ( 813 ) AOCI 0 ( 911 ) 98 ( 813 ) Other comprehensive ( 911 ) 98 ( 813 ) Other comprehensive income ( income ( loss ) ( 781 ) ( 921 ) 388 ) ( 781 ) ( 921 ) 388 ( 1,314 ) 781 ) ( 921 ) 388 ( 1,314 ) Balance a ( 921 ) 388 ( 1,314 ) Balance a of December ) Balance a of December 31 , 2018 $ ( 1,884 a of December 31 , 2018 $ ( 1,884 ) $ 31 , 2018 $ ( 1,884 ) $ ( 688 ) ( 1,884 ) $ ( 688 ) $ 266 $ ( $ ( 688 ) $ 266 $ ( 2,306 ) ( ) $ 266 $ ( 2,306 ) ( 1 ) The $ ( 2,306 ) ( 1 ) The change in unrealized available-for-sale investment included a $ 98 million adjustment of net unrealized of the adoption of ASU 2016-01 on January 1 , 2018 of ASU 2016-01 on January 1 , 2018 . 68 Table 2016-01 on January 1 , 2018 . 68 Table of Contents January 1 , 2018 . 68 Table of Contents Alphabet Inc of Income Year Ended December 31 , AOCI Components Location 2016 31 , AOCI Components Location 2016 2017 2018 Unrealized gain ( , AOCI Components Location 2016 2017 2018 Unrealized gain ( loss AOCI Components Location 2016 2017 2018 Unrealized gain ( loss ) ) , net $ ( 221 ) $ ( 105 ) ( 221 ) $ ( 105 ) $ 1,190 Provision for $ ( 105 ) $ 1,190 Provision for income tax 0 1,190 Provision for income tax 0 0 ( 279 ) Net Provision for income tax 0 0 ( 279 ) Net of income tax 0 0 ( 279 ) Net of tax $ Net of tax $ ( 221 ) $ ( 105 ) ( 221 ) $ ( 105 ) $ 911 Unrealized gain $ ( 105 ) $ 911 Unrealized gain ( loss ) Foreign exchange contract Revenue $ 539 $ ( 169 ) $ Revenue $ 539 $ ( 169 ) $ ( 139 ) ( 169 ) $ ( 139 ) Interest rate contract Other ( expense ) , net 5 5 6 Benefit ( provision expense ) , net 5 5 6 Benefit ( provision ) ) , net 5 5 6 Benefit ( provision ) for ) for income tax ( 193 ) 71 35 Net of income tax ( 193 ) 71 35 Net of tax $ tax ( 193 ) 71 35 Net of tax $ 351 35 Net of tax $ 351 $ ( 93 ) $ tax $ 351 $ ( 93 ) $ ( 98 ) ( 93 ) $ ( 98 ) Total amount reclassified , , net of tax $ 130 $ ( 198 ) $ tax $ 130 $ ( 198 ) $ 813 Other Income $ ( 198 ) $ 813 Other Income ( Expense ) ) : Year Ended December 31 , 2016 2017 2018 Interest Year Ended December 31 , 2016 2017 2018 Interest income $ Ended December 31 , 2016 2017 2018 Interest income $ 1,220 December 31 , 2016 2017 2018 Interest income $ 1,220 $ 2017 2018 Interest income $ 1,220 $ 1,312 $ 1,878 Interest Interest income $ 1,220 $ 1,312 $ 1,878 Interest expense ( $ 1,220 $ 1,312 $ 1,878 Interest expense ( 1 ) $ 1,878 Interest expense ( 1 ) ( 124 ) ( expense ( 1 ) ( 124 ) ( 109 ) ( ) ( 124 ) ( 109 ) ( 114 ) Foreign ) ( 109 ) ( 114 ) Foreign currency exchange loss exchange loss , net ( 2 ) ( 475 ) ( net ( 2 ) ( 475 ) ( 121 ) ( ) ( 475 ) ( 121 ) ( 80 ) Gain ) ( 121 ) ( 80 ) Gain ( loss ) debt security , net ( 3 ) ( 53 ) ( net ( 3 ) ( 53 ) ( 110 ) 1,190 ) ( 53 ) ( 110 ) 1,190 Gain ( loss 53 ) ( 110 ) 1,190 Gain ( loss ) on equity security , net ( 20 ) 73 5,460 Loss and , net ( 20 ) 73 5,460 Loss and impairment from net ( 20 ) 73 5,460 Loss and impairment from equity method investment , net ( 202 ) ( 156 ) ( net ( 202 ) ( 156 ) ( 120 ) Other ) ( 156 ) ( 120 ) Other 88 158 378 ) ( 120 ) Other 88 158 378 Other income ( ( 120 ) Other 88 158 378 Other income ( expense 120 ) Other 88 158 378 Other income ( expense ) expense ) , net $ 434 $ 1,047 $ 8,592 ( , net $ 434 $ 1,047 $ 8,592 ( 1 ) $ 434 $ 1,047 $ 8,592 ( 1 ) Interest expense $ 1,047 $ 8,592 ( 1 ) Interest expense is net of interest capitalized of $ 0 million , $ 48 million $ 0 million , $ 48 million , and $ 92 48 million , and $ 92 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . ( 2 2018 , respectively . ( 2 ) Our foreign currency exchange currency transaction loss were $ 112 million , $ 226 million $ 112 million , $ 226 million , and $ 195 226 million , and $ 195 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . ( 3 2018 , respectively . ( 3 ) During the year ended During the year ended December 31 , 2018 , the term year ended December 31 , 2018 , the term of a resulting in an unrealized $ 1.3 billion gain . Note 7 1.3 billion gain . Note 7 . Acquisitions 2018 Acquisitions HTC . Note 7 . Acquisitions 2018 Acquisitions HTC Corporation ( HTC ( HTC ) In January 2018 , we completed the acquisition property from HTC for $ 1.1 billion in cash . In . In aggregate , $ 10 million wa cash acquired , wa cash acquired , $ 165 million wa attributed to intangible to intangible asset , $ 934 million wa attributed to goodwill to goodwill , and $ 9 million wa attributed to net During the year ended December 31 , 2018 , we completed year ended December 31 , 2018 , we completed other acquisition total consideration of approximately $ 573 million . In aggregate , . In aggregate , $ 10 million wa cash acquired , wa cash acquired , $ 295 million wa attributed to intangible to intangible asset , $ 293 million wa attributed to goodwill to goodwill , and $ 25 million wa attributed to net wa attributed to net liability 69 Table of Contents Alphabet Inc. tax purpose is approximately $ 81 million . Pro forma result during the year ended December 31 , 2018 , patent and year ended December 31 , 2018 , patent and developed technology a weighted-average useful life of 3.7 year , customer relationship have a weighted-average useful life of 2.3 year , and trade name a weighted-average useful life of 3.7 year . 2017 Acquisitions During life of 3.7 year . 2017 Acquisitions During the year ended During the year ended December 31 , 2017 , we completed year ended December 31 , 2017 , we completed various acquisition total consideration of approximately $ 322 million . In aggregate , . In aggregate , $ 12 million wa cash acquired , wa cash acquired , $ 117 million wa attributed to intangible to intangible asset , $ 221 million wa attributed to goodwill to goodwill , and $ 28 million wa attributed to net tax purpose is approximately $ 60 million . Pro forma result during the year ended December 31 , 2017 , patent and year ended December 31 , 2017 , patent and developed technology a weighted-average useful life of 3.7 year , customer relationship have a weighted-average useful life of 2.0 year , and trade name a weighted-average useful life of 8.8 year . Note 8 . of 8.8 year . Note 8 . Goodwill and Other Intangible for the year ended December 31 , 2017 and 2018 were year ended December 31 , 2017 and 2018 were a follows December 31 , 2017 and 2018 were a follows ( in Consolidated Balance a of December 31 , 2016 $ 16,027 $ a of December 31 , 2016 $ 16,027 $ 441 $ December 31 , 2016 $ 16,027 $ 441 $ 16,468 Acquisitions , 2016 $ 16,027 $ 441 $ 16,468 Acquisitions 212 9 $ 16,027 $ 441 $ 16,468 Acquisitions 212 9 221 Foreign $ 441 $ 16,468 Acquisitions 212 9 221 Foreign currency translation 441 $ 16,468 Acquisitions 212 9 221 Foreign currency translation and $ 16,468 Acquisitions 212 9 221 Foreign currency translation and other currency translation and other adjustment 56 2 58 Balance a of translation and other adjustment 56 2 58 Balance a of December and other adjustment 56 2 58 Balance a of December 31 58 Balance a of December 31 , 2017 16,295 452 16,747 a of December 31 , 2017 16,295 452 16,747 Acquisitions 1,227 of December 31 , 2017 16,295 452 16,747 Acquisitions 1,227 0 December 31 , 2017 16,295 452 16,747 Acquisitions 1,227 0 1,227 31 , 2017 16,295 452 16,747 Acquisitions 1,227 0 1,227 Transfers 2017 16,295 452 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 16,295 452 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 80 452 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 80 ) Acquisitions 1,227 0 1,227 Transfers 80 ( 80 ) 0 Foreign 0 1,227 Transfers 80 ( 80 ) 0 Foreign currency translation Transfers 80 ( 80 ) 0 Foreign currency translation and other translation and other adjustment ( 81 ) ( 5 ) ( adjustment ( 81 ) ( 5 ) ( 86 ) Balance ) ( 5 ) ( 86 ) Balance a of December ) Balance a of December 31 , 2018 $ 17,521 $ a of December 31 , 2018 $ 17,521 $ 367 $ December 31 , 2018 $ 17,521 $ 367 $ 17,888 Other , 2018 $ 17,521 $ 367 $ 17,888 Other Intangible Assets $ 17,521 $ 367 $ 17,888 Other Intangible Assets Information regarding ) : As of December 31 , 2017 Gross Carrying Amount As of December 31 , 2017 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,260 $ 3,040 $ 2,220 Customer developed technology $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 $ 5,260 $ 3,040 $ 2,220 Customer relationship 359 263 96 3,040 $ 2,220 Customer relationship 359 263 96 Trade name and $ 2,220 Customer relationship 359 263 96 Trade name and other 2,220 Customer relationship 359 263 96 Trade name and other 544 96 Trade name and other 544 168 376 Total $ 6,163 Trade name and other 544 168 376 Total $ 6,163 $ name and other 544 168 376 Total $ 6,163 $ 3,471 544 168 376 Total $ 6,163 $ 3,471 $ 2,692 70 376 Total $ 6,163 $ 3,471 $ 2,692 70 Table of $ 6,163 $ 3,471 $ 2,692 70 Table of Contents Alphabet 6,163 $ 3,471 $ 2,692 70 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2018 Gross Carrying Amount As of December 31 , 2018 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,125 $ 3,394 $ 1,731 Customer developed technology $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 308 41 3,394 $ 1,731 Customer relationship 349 308 41 Trade name and $ 1,731 Customer relationship 349 308 41 Trade name and other 1,731 Customer relationship 349 308 41 Trade name and other 703 41 Trade name and other 703 255 448 Total $ 6,177 Trade name and other 703 255 448 Total $ 6,177 $ name and other 703 255 448 Total $ 6,177 $ 3,957 703 255 448 Total $ 6,177 $ 3,957 $ 2,220 Patents 448 Total $ 6,177 $ 3,957 $ 2,220 Patents and developed $ 6,177 $ 3,957 $ 2,220 Patents and developed technology , weighted-average remaining useful life of 3.0 year , 0.5 year , life of 3.0 year , 0.5 year , and 3.8 year , 0.5 year , and 3.8 year , respectively . Amortization purchased intangible asset wa $ 833 million , $ 796 million $ 833 million , $ 796 million , and $ 865 796 million , and $ 865 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . As of respectively . As of December 31 , 2018 , expected amortization As of December 31 , 2018 , expected amortization expense relating ( in million ) : 2019 $ 712 2020 585 2021 million ) : 2019 $ 712 2020 585 2021 533 2022 ) : 2019 $ 712 2020 585 2021 533 2022 201 : 2019 $ 712 2020 585 2021 533 2022 201 2023 2019 $ 712 2020 585 2021 533 2022 201 2023 7 $ 712 2020 585 2021 533 2022 201 2023 7 Thereafter 712 2020 585 2021 533 2022 201 2023 7 Thereafter 182 2020 585 2021 533 2022 201 2023 7 Thereafter 182 $ 585 2021 533 2022 201 2023 7 Thereafter 182 $ 2,220 2021 533 2022 201 2023 7 Thereafter 182 $ 2,220 Note 2022 201 2023 7 Thereafter 182 $ 2,220 Note 9 . 2023 7 Thereafter 182 $ 2,220 Note 9 . Commitments and Thereafter 182 $ 2,220 Note 9 . Commitments and Contingencies Operating with lease period expiring between 2019 and 2063 . We are period expiring between 2019 and 2063 . We are committed to basis . As of December 31 , 2018 , future minimum As of December 31 , 2018 , future minimum payment under ) : Operating Leases ( 1 ) Sub-lease Income Net Operating Sub-lease Income Net Operating Leases 2019 $ 1,319 $ 16 $ Net Operating Leases 2019 $ 1,319 $ 16 $ 1,303 2020 Leases 2019 $ 1,319 $ 16 $ 1,303 2020 1,397 13 $ 1,319 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,319 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 980 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 980 3 1,337 10 1,327 2022 1,153 8 1,145 2023 980 3 977 10 1,327 2022 1,153 8 1,145 2023 980 3 977 Thereafter 1,327 2022 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 2022 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 5 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 5 3,911 8 1,145 2023 980 3 977 Thereafter 3,916 5 3,911 Total 2023 980 3 977 Thereafter 3,916 5 3,911 Total minimum payment 980 3 977 Thereafter 3,916 5 3,911 Total minimum payment $ 3 977 Thereafter 3,916 5 3,911 Total minimum payment $ 10,102 3,911 Total minimum payment $ 10,102 $ 55 $ 10,047 ( minimum payment $ 10,102 $ 55 $ 10,047 ( 1 ) $ 10,102 $ 55 $ 10,047 ( 1 ) Includes future $ 55 $ 10,047 ( 1 ) Includes future minimum payment with lease period expiring between 2021 and 2044 where we are period expiring between 2021 and 2044 where we are the deemed such lease totaling approximately $ 3.5 billion , for which a , for which a $ 1.5 billion liability is included on Balance Sheets a of December 31 , 2018 . Rent expense a of December 31 , 2018 . Rent expense under operating under operating lease wa $ 897 million , $ 1.1 billion $ 897 million , $ 1.1 billion , and $ 1.3 1.1 billion , and $ 1.3 billion for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . 71 Table and 2018 , respectively . 71 Table of Contents Alphabet Inc. Purchase Obligations As of December 31 , 2018 , we had As of December 31 , 2018 , we had $ 7.4 2018 , we had $ 7.4 billion of other non-cancelable contractual period . As of December 31 , 2018 , we did As of December 31 , 2018 , we did not have Matters Antitrust Investigations On November 30 , 2010 , the EC Investigations On November 30 , 2010 , the EC 's Directorate against u . On April 15 , 2015 , the EC . On April 15 , 2015 , the EC issued a which we responded on August 27 , 2015 . On July responded on August 27 , 2015 . On July 14 , , 2015 . On July 14 , 2016 , the EC . On July 14 , 2016 , the EC issued a and ad . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it a €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC EC decision and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change recognized a charge of $ 2.7 billion for the fine in in the second quarter of 2017 . While under appeal , the fine . On April 20 , 2016 , the EC . On April 20 , 2016 , the EC issued an informational request . On July 18 , 2018 , the EC . On July 18 , 2018 , the EC announced it a €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine and a of June 30 , 2018 ) fine and directed the at issue . On October 9 , 2018 , we appealed . On October 9 , 2018 , we appealed the EC recognized a charge of $ 5.1 billion for the fine in in the second quarter of 2018 . While under appeal , the fine . On July 14 , 2016 , the EC . On July 14 , 2016 , the EC issued an business practice . In November 2016 , we responded to the and ad . On February 8 , 2018 , the CCI . On February 8 , 2018 , the CCI issued it a fine of approximately $ 21 million , finding no violation fine wa accrued for in 2018 . 72 Table of Contents accrued for in 2018 . 72 Table of Contents Alphabet Inc. affect our business . In 2010 , Oracle America , Inc. favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided Oracle appealed and on March 27 , 2018 , the appeal and on March 27 , 2018 , the appeal court reversed on damage . On May 29 , 2018 , we filed . On May 29 , 2018 , we filed a petition Circuit , and on August 28 , 2018 , the Federal and on August 28 , 2018 , the Federal Circuit denied the petition . On January 24 , 2019 , we filed . On January 24 , 2019 , we filed a petition different from our expectation . 73 Table of Contents Alphabet Inc. tax contingency , see Note 13 . Note 10 . Stockholders see Note 13 . Note 10 . Stockholders ’ Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , no share December 31 , 2017 and 2018 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In October 2016 , the board of director to repurchase up to $ 7.0 billion of it Class C , which wa completed during 2018 . In January 2018 , during 2018 . In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program During the year ended December 31 , 2017 and 2018 , year ended December 31 , 2017 and 2018 , we repurchased December 31 , 2017 and 2018 , we repurchased and subsequently we repurchased and subsequently retired 5.2 million share of Alphabet Class an aggregate amount of $ 4.8 billion and 8.2 million share of $ 4.8 billion and 8.2 million share of Alphabet Class an aggregate amount of $ 9.1 billion , respectively . Note billion , respectively . Note 11 . Net Income Per Share In the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , the net , 2016 , 2017 and 2018 , the net income per of Incorporation of Alphabet Inc. 74 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2016 Class A Class Year Ended December 31 , 2016 Class A Class B Class Allocation of undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator undistributed earnings $ 8,332 $ 1,384 $ 9,762 Denominator Number of $ 8,332 $ 1,384 $ 9,762 Denominator Number of share used used in per share computation 294,217 48,859 344,702 Basic net income in per share computation 294,217 48,859 344,702 Basic net income per per share computation 294,217 48,859 344,702 Basic net income per share net income per share $ 28.32 $ 28.32 $ 28.32 Diluted per share $ 28.32 $ 28.32 $ 28.32 Diluted net income $ 28.32 $ 28.32 $ 28.32 Diluted net income per share earnings for basic computation $ 8,332 $ 1,384 $ 9,762 Effect basic computation $ 8,332 $ 1,384 $ 9,762 Effect of dilutive $ 8,332 $ 1,384 $ 9,762 Effect of dilutive security in method investment and subsidiary ( 9 ) ( 2 ) ( subsidiary ( 9 ) ( 2 ) ( 10 ) Allocation ) ( 2 ) ( 10 ) Allocation of undistributed earnings undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings for diluted computation 8,323 1,382 9,752 Reallocation of undistributed earnings a B to Class A share 1,382 0 0 Reallocation of undistributed to Class A share 1,382 0 0 Reallocation of undistributed earnings Class A share 1,382 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 94 ) ( 21 ) 94 earnings ( 94 ) ( 21 ) 94 Allocation of undistributed 94 ) ( 21 ) 94 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 9,611 $ 1,361 $ 9,846 Denominator undistributed earnings $ 9,611 $ 1,361 $ 9,846 Denominator Number of $ 9,611 $ 1,361 $ 9,846 Denominator Number of share used share used in basic computation 294,217 48,859 344,702 Weighted-average effect of used in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive in basic computation 294,217 48,859 344,702 Weighted-average effect of dilutive security Class A common share outstanding 48,859 0 0 Restricted stock unit A common share outstanding 48,859 0 0 Restricted stock unit and common share outstanding 48,859 0 0 Restricted stock unit and other and other contingently issuable share 2,055 0 8,873 Number of share other contingently issuable share 2,055 0 8,873 Number of share used contingently issuable share 2,055 0 8,873 Number of share used in used in per share computation 345,131 48,859 353,575 Diluted net income in per share computation 345,131 48,859 353,575 Diluted net income per per share computation 345,131 48,859 353,575 Diluted net income per share net income per share $ 27.85 $ 27.85 $ 27.85 Year per share $ 27.85 $ 27.85 $ 27.85 Year Ended December $ 27.85 $ 27.85 $ 27.85 Year Ended December 31 , $ 27.85 Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator Number of $ 5,438 $ 862 $ 6,362 Denominator Number of share used used in per share computation 297,604 47,146 348,151 Basic net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a B to Class A share 862 0 0 Reallocation of undistributed to Class A share 862 0 0 Reallocation of undistributed earnings Class A share 862 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 74 ) ( 14 ) 74 earnings ( 74 ) ( 14 ) 74 Allocation of undistributed 74 ) ( 14 ) 74 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator Number of $ 6,226 $ 848 $ 6,436 Denominator Number of share used share used in basic computation 297,604 47,146 348,151 Weighted-average effect of used in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive security Class A common share outstanding 47,146 0 0 Restricted stock unit A common share outstanding 47,146 0 0 Restricted stock unit and common share outstanding 47,146 0 0 Restricted stock unit and other and other contingently issuable share 1,192 0 9,491 Number of share other contingently issuable share 1,192 0 9,491 Number of share used contingently issuable share 1,192 0 9,491 Number of share used in used in per share computation 345,942 47,146 357,642 Diluted net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 75 per share $ 18.00 $ 18.00 $ 18.00 75 Table of $ 18.00 $ 18.00 $ 18.00 75 Table of Contents Alphabet 18.00 $ 18.00 $ 18.00 75 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator Number of $ 13,200 $ 2,072 $ 15,464 Denominator Number of share used used in per share computation 298,548 46,864 349,728 Basic net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed earnings a B to Class A share 2,072 0 0 Reallocation of undistributed to Class A share 2,072 0 0 Reallocation of undistributed earnings Class A share 2,072 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 146 ) ( 24 ) 146 earnings ( 146 ) ( 24 ) 146 Allocation of undistributed 146 ) ( 24 ) 146 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator Number of $ 15,126 $ 2,048 $ 15,610 Denominator Number of share used share used in basic computation 298,548 46,864 349,728 Weighted-average effect of used in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive security Class A common share outstanding 46,864 0 0 Restricted stock unit A common share outstanding 46,864 0 0 Restricted stock unit and common share outstanding 46,864 0 0 Restricted stock unit and other and other contingently issuable share 689 0 7,456 Number of share other contingently issuable share 689 0 7,456 Number of share used contingently issuable share 689 0 7,456 Number of share used in used in per share computation 346,101 46,864 357,184 Diluted net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 Note per share $ 43.70 $ 43.70 $ 43.70 Note 12 . $ 43.70 $ 43.70 $ 43.70 Note 12 . Compensation Plans $ 43.70 $ 43.70 Note 12 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . RSUs granted to granted to participant under the 2012 Stock Plan generally vest over date . As of December 31 , 2018 , there were As of December 31 , 2018 , there were 31,848,134 share , 2018 , there were 31,848,134 share of stock reserved for For the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , total stock-based , 2016 , 2017 and 2018 , total stock-based compensation expense stock-based compensation expense wa $ 6.9 billion , $ 7.9 billion $ 6.9 billion , $ 7.9 billion and $ 10.0 billion $ 7.9 billion and $ 10.0 billion , including amount associated in Alphabet stock of $ 6.7 billion , $ 7.7 billion $ 6.7 billion , $ 7.7 billion , and $ 9.4 7.7 billion , and $ 9.4 billion , respectively . For For the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , we recognized , 2016 , 2017 and 2018 , we recognized tax benefit of Income , of $ 1.5 billion , $ 1.6 billion $ 1.5 billion , $ 1.6 billion , and $ 1.5 1.6 billion , and $ 1.5 billion , respectively . For For the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 , December 31 , 2016 , 2017 and 2018 , tax benefit , 2016 , 2017 and 2018 , tax benefit realized related during the period wa $ 2.1 billion , $ 2.7 billion $ 2.1 billion , $ 2.7 billion and $ 2.1 billion $ 2.7 billion and $ 2.1 billion , respectively . These and development tax credit . 76 Table of Contents Alphabet Inc. for the year ended December 31 , 2018 : Unvested Restricted year ended December 31 , 2018 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2017 20,077,346 $ 712.45 a of December 31 , 2017 20,077,346 $ 712.45 Granted 12,669,251 of December 31 , 2017 20,077,346 $ 712.45 Granted 12,669,251 $ 31 , 2017 20,077,346 $ 712.45 Granted 12,669,251 $ 1,095.89 Vested 2017 20,077,346 $ 712.45 Granted 12,669,251 $ 1,095.89 Vested ( 12,847,910 $ 712.45 Granted 12,669,251 $ 1,095.89 Vested ( 12,847,910 ) $ 12,669,251 $ 1,095.89 Vested ( 12,847,910 ) $ 756.45 Forfeited/canceled ( Vested ( 12,847,910 ) $ 756.45 Forfeited/canceled ( 1,431,009 ) $ ) $ 756.45 Forfeited/canceled ( 1,431,009 ) $ 814.19 Unvested a Forfeited/canceled ( 1,431,009 ) $ 814.19 Unvested a of December 31 814.19 Unvested a of December 31 , 2018 18,467,678 $ 936.96 a of December 31 , 2018 18,467,678 $ 936.96 The weighted-average of December 31 , 2018 18,467,678 $ 936.96 The weighted-average grant-date 31 , 2018 18,467,678 $ 936.96 The weighted-average grant-date fair value during the year ended December 31 , 2016 and 2017 , year ended December 31 , 2016 and 2017 , wa $ December 31 , 2016 and 2017 , wa $ 713.89 and and 2017 , wa $ 713.89 and $ 845.06 , respectively wa $ 713.89 and $ 845.06 , respectively . Total fair during the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 were $ 2016 , 2017 , and 2018 were $ 9.0 billion , , and 2018 were $ 9.0 billion , $ 11.3 billion $ 9.0 billion , $ 11.3 billion , and $ 14.1 11.3 billion , and $ 14.1 billion , respectively . As respectively . As of December 31 , 2018 , there wa As of December 31 , 2018 , there wa $ 16.2 2018 , there wa $ 16.2 billion of unrecognized compensation cost over a weighted-average period of 2.5 year . 401 ( k period of 2.5 year . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 385 million , $ 448 million $ 385 million , $ 448 million , and $ 691 448 million , and $ 691 million for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . Performance Fees For the year ended December 31 , 2018 , performance fee year ended December 31 , 2018 , performance fee of $ , performance fee of $ 1.2 billion primarily related to gain equity security , see Note 3 ) were accrued and recorded and administrative expense . Note 13 . Income Taxes Income from from domestic operation of $ 12.0 billion , $ 10.7 billion $ 12.0 billion , $ 10.7 billion , and $ 15.8 10.7 billion , and $ 15.8 billion for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively , and income from foreign operation of $ 12.1 billion , $ 16.5 billion $ 12.1 billion , $ 16.5 billion , and $ 19.1 16.5 billion , and $ 19.1 billion for the year ended for the year ended December 31 , 2016 , 2017 , year ended December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively . The provision ) : Year Ended December 31 , 2016 2017 2018 Current Year Ended December 31 , 2016 2017 2018 Current : Federal Ended December 31 , 2016 2017 2018 Current : Federal and December 31 , 2016 2017 2018 Current : Federal and state : Federal and state $ 3,826 $ 12,608 $ 2,153 Foreign and state $ 3,826 $ 12,608 $ 2,153 Foreign 966 1,746 $ 3,826 $ 12,608 $ 2,153 Foreign 966 1,746 1,251 Total $ 12,608 $ 2,153 Foreign 966 1,746 1,251 Total 4,792 14,354 12,608 $ 2,153 Foreign 966 1,746 1,251 Total 4,792 14,354 3,404 $ 2,153 Foreign 966 1,746 1,251 Total 4,792 14,354 3,404 Deferred Foreign 966 1,746 1,251 Total 4,792 14,354 3,404 Deferred : Federal 966 1,746 1,251 Total 4,792 14,354 3,404 Deferred : Federal and 1,746 1,251 Total 4,792 14,354 3,404 Deferred : Federal and state : Federal and state ( 70 ) 220 907 Foreign ( and state ( 70 ) 220 907 Foreign ( 50 ) state ( 70 ) 220 907 Foreign ( 50 ) ( ) 220 907 Foreign ( 50 ) ( 43 ) ( Foreign ( 50 ) ( 43 ) ( 134 ) Total ) ( 43 ) ( 134 ) Total ( 120 ) ( 134 ) Total ( 120 ) 177 773 Provision for ) Total ( 120 ) 177 773 Provision for income tax Total ( 120 ) 177 773 Provision for income tax $ Provision for income tax $ 4,672 $ 14,531 $ 4,177 The income tax $ 4,672 $ 14,531 $ 4,177 The Tax Act $ 4,672 $ 14,531 $ 4,177 The Tax Act enacted on Tax Act enacted on December 22 , 2017 introduced significant change enacted on December 22 , 2017 introduced significant change to U.S. income tax law . Effective 2018 , the Tax Act reduced U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and created new tax and certain related-party payment . 77 Table of Contents Alphabet Inc. financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collected and been completed a of December 31 , 2018 . One-time transition a of December 31 , 2018 . One-time transition tax The tax at a rate of 15.5 % to the extent of other net current asset and 8 % on the remaining earnings income tax expense of $ 10.2 billion a of December 31 10.2 billion a of December 31 , 2017 . Deferred tax a of December 31 , 2017 . Deferred tax effect Due deferred tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduced rate deferred tax benefit of $ 376 million to reflect the reduced Tax Act a of December 31 , 2017 . The reconciliation a of December 31 , 2017 . The reconciliation of federal follows : Year Ended December 31 , 2016 2017 2018 U.S. Year Ended December 31 , 2016 2017 2018 U.S. federal statutory Ended December 31 , 2016 2017 2018 U.S. federal statutory tax December 31 , 2016 2017 2018 U.S. federal statutory tax rate U.S. federal statutory tax rate 35.0 % 35.0 % 21.0 % statutory tax rate 35.0 % 35.0 % 21.0 % Foreign income rate 35.0 % 35.0 % 21.0 % Foreign income taxed at taxed at different rate ( 11.0 ) ( 14.2 ) ( rate ( 11.0 ) ( 14.2 ) ( 4.9 ) Effect ) ( 14.2 ) ( 4.9 ) Effect of the Tax Tax Act One-time transition tax 0.0 37.6 ( 0.1 ) Deferred Act One-time transition tax 0.0 37.6 ( 0.1 ) Deferred tax transition tax 0.0 37.6 ( 0.1 ) Deferred tax effect 0.0 0.1 ) Deferred tax effect 0.0 ( 1.4 ) ( 1.2 Deferred tax effect 0.0 ( 1.4 ) ( 1.2 ) Federal 0.0 ( 1.4 ) ( 1.2 ) Federal research credit ( ) Federal research credit ( 2.0 ) ( 1.8 ) ( credit ( 2.0 ) ( 1.8 ) ( 2.4 ) Stock-based ) ( 1.8 ) ( 2.4 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 3.4 ) ( 4.5 ) ( expense ( 3.4 ) ( 4.5 ) ( 2.2 ) European ) ( 4.5 ) ( 2.2 ) European Commission fine 0.0 2.2 ) European Commission fine 0.0 3.5 3.1 Deferred tax asset ) European Commission fine 0.0 3.5 3.1 Deferred tax asset valuation European Commission fine 0.0 3.5 3.1 Deferred tax asset valuation allowance Deferred tax asset valuation allowance 0.1 0.9 ( 2.0 ) Other tax asset valuation allowance 0.1 0.9 ( 2.0 ) Other adjustment valuation allowance 0.1 0.9 ( 2.0 ) Other adjustment 0.6 ( ( 2.0 ) Other adjustment 0.6 ( 1.7 ) 0.7 Effective ) Other adjustment 0.6 ( 1.7 ) 0.7 Effective tax rate adjustment 0.6 ( 1.7 ) 0.7 Effective tax rate 19.3 % ) 0.7 Effective tax rate 19.3 % 53.4 % 12.0 % Effective tax rate 19.3 % 53.4 % 12.0 % Our effective rate 19.3 % 53.4 % 12.0 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . The IRS decision on December 28 , 2015 . The IRS served a Notice of Appeal on February 22 , 2016 and the case Appeal on February 22 , 2016 and the case is being an opinion issued on July 24 , 2018 , but withdrew issued on July 24 , 2018 , but withdrew that opinion an order issued on August 7 , 2018 to allow time issued on August 7 , 2018 to allow time for a tax benefit wa remeasured from 35 % to 21 % . remeasured from 35 % to 21 % . We also remeasured liability recorded a of December 31 , 2016 for the U.S. a of December 31 , 2016 for the U.S. tax cost tax system and providing a 100 % dividend received deduction on our consolidated financial statement . 78 Table of Contents Alphabet Inc income tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduction in U.S. statutory tax rate from 35 % to 21 % resulting rate from 35 % to 21 % resulting from the Tax ) : As of December 31 , 2017 2018 Deferred tax As of December 31 , 2017 2018 Deferred tax asset : of December 31 , 2017 2018 Deferred tax asset : Stock-based : Stock-based compensation expense $ 251 $ 291 Accrued employee benefit compensation expense $ 251 $ 291 Accrued employee benefit 285 387 $ 291 Accrued employee benefit 285 387 Accruals and reserve not 291 Accrued employee benefit 285 387 Accruals and reserve not currently and reserve not currently deductible 717 1,062 Tax credit 1,187 1,979 reserve not currently deductible 717 1,062 Tax credit 1,187 1,979 Basis deductible 717 1,062 Tax credit 1,187 1,979 Basis difference in investment 717 1,062 Tax credit 1,187 1,979 Basis difference in investment in difference in investment in Arris 849 657 Prepaid cost sharing 498 in investment in Arris 849 657 Prepaid cost sharing 498 597 849 657 Prepaid cost sharing 498 597 Net operating loss 320 657 Prepaid cost sharing 498 597 Net operating loss 320 557 498 597 Net operating loss 320 557 Other 244 251 Total 597 Net operating loss 320 557 Other 244 251 Total deferred operating loss 320 557 Other 244 251 Total deferred tax asset loss 320 557 Other 244 251 Total deferred tax asset 4,351 251 Total deferred tax asset 4,351 5,781 Valuation allowance ( 2,531 Total deferred tax asset 4,351 5,781 Valuation allowance ( 2,531 ) 4,351 5,781 Valuation allowance ( 2,531 ) ( 2,817 ) Total allowance ( 2,531 ) ( 2,817 ) Total deferred tax asset asset net of valuation allowance 1,820 2,964 Deferred tax liability : net of valuation allowance 1,820 2,964 Deferred tax liability : Property : Property and equipment ( 551 ) ( 1,382 ) Identified equipment ( 551 ) ( 1,382 ) Identified intangible ( 419 1,382 ) Identified intangible ( 419 ) ( 229 ) Renewable intangible ( 419 ) ( 229 ) Renewable energy investment ( ) Renewable energy investment ( 531 ) ( 500 ) Investment investment ( 531 ) ( 500 ) Investment gains/losses ( 22 500 ) Investment gains/losses ( 22 ) ( 1,143 ) Other gains/losses ( 22 ) ( 1,143 ) Other ( 47 ) ( 1,143 ) Other ( 47 ) ( 237 ) Total Other ( 47 ) ( 237 ) Total deferred tax liability Total deferred tax liability ( 1,570 ) ( 3,491 ) Net liability ( 1,570 ) ( 3,491 ) Net deferred tax asset asset ( liability ) $ 250 $ ( 527 ) As ) $ 250 $ ( 527 ) As of December 31 527 ) As of December 31 , 2018 , our federal As of December 31 , 2018 , our federal and state tax purpose were approximately $ 1.2 billion and $ 1.4 billion $ 1.2 billion and $ 1.4 billion , respectively . If will begin to expire in 2021 and the state net operating will begin to expire in 2019 . It is more likely income tax purpose were $ 950 million that will begin to will begin to expire in 2021 . As of December 31 2021 . As of December 31 , 2018 , our California As of December 31 , 2018 , our California research and tax purpose were approximately $ 2.4 billion that can be carried realized . As of December 31 , 2018 , we maintained As of December 31 , 2018 , we maintained a valuation from equity security recognized in 2018 , we released the valuation Home business to Arris in 2013 . We continue to reassess expense ) , see Note 1 . 79 Table of Contents , see Note 1 . 79 Table of Contents Alphabet Inc unrecognized tax benefit from January 1 , 2016 to December 31 benefit from January 1 , 2016 to December 31 , 2018 1 , 2016 to December 31 , 2018 ( in million 2016 to December 31 , 2018 ( in million ) : ( in million ) : 2016 2017 2018 Beginning gross unrecognized in million ) : 2016 2017 2018 Beginning gross unrecognized tax million ) : 2016 2017 2018 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 4,167 $ 5,393 $ 4,696 Increases tax benefit $ 4,167 $ 5,393 $ 4,696 Increases related to $ 4,167 $ 5,393 $ 4,696 Increases related to prior year to prior year tax position 899 685 321 Decreases related to prior year tax position 899 685 321 Decreases related to prior year tax position 899 685 321 Decreases related to prior year prior year tax position ( 157 ) ( 257 ) ( position ( 157 ) ( 257 ) ( 623 ) Decreases ) ( 257 ) ( 623 ) Decreases related to settlement settlement with tax authority ( 196 ) ( 1,875 ) ( authority ( 196 ) ( 1,875 ) ( 191 ) Increases ) ( 1,875 ) ( 191 ) Increases related to current to current year tax position 680 750 449 Ending gross unrecognized current year tax position 680 750 449 Ending gross unrecognized tax year tax position 680 750 449 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 5,393 $ 4,696 $ 4,652 The tax benefit $ 5,393 $ 4,696 $ 4,652 The total amount $ 5,393 $ 4,696 $ 4,652 The total amount of gross unrecognized tax benefit wa $ 5.4 billion , $ 4.7 billion $ 5.4 billion , $ 4.7 billion , and $ 4.7 4.7 billion , and $ 4.7 billion a of December 31 4.7 billion a of December 31 , 2016 , 2017 , a of December 31 , 2016 , 2017 , and 2018 December 31 , 2016 , 2017 , and 2018 , respectively 2016 , 2017 , and 2018 , respectively , of which , of which , $ 4.3 billion , $ 3.0 billion $ 4.3 billion , $ 3.0 billion , and $ 2.9 3.0 billion , and $ 2.9 billion , if recognized , gross unrecognized tax benefit in 2017 wa primarily a a result audit . As of December 31 , 2017 and 2018 , As of December 31 , 2017 and 2018 , we had December 31 , 2017 and 2018 , we had accrued $ , we had accrued $ 362 million and $ 490 million $ 362 million and $ 490 million in interest and penalty IRS is currently examining our 2013 through 2015 tax return . currently examining our 2013 through 2015 tax return . We have claim a presented . Our 2016 and 2017 tax year remain presented . Our 2016 and 2017 tax year remain subject to tax purpose , and our 2011 through 2017 tax year remain , and our 2011 through 2017 tax year remain subject to be concluded within the next 12 month , which could significantly tax benefit a of December 31 , 2018 could possibly decrease a of December 31 , 2018 could possibly decrease by approximately possibly decrease by approximately $ 600 million in the next 12 600 million in the next 12 month . Positions that may and non-U.S. matter . Note 14 . Information about Segments and D service through Verily . 80 Table of Contents Alphabet Inc asset information . In Q1 2018 , Nest joined Google ’ ) : Year Ended December 31 , 2016 2017 2018 Revenues Year Ended December 31 , 2016 2017 2018 Revenues : Google Ended December 31 , 2016 2017 2018 Revenues : Google $ December 31 , 2016 2017 2018 Revenues : Google $ 89,984 2018 Revenues : Google $ 89,984 $ 110,378 $ 136,224 Other : Google $ 89,984 $ 110,378 $ 136,224 Other Bets 288 $ 89,984 $ 110,378 $ 136,224 Other Bets 288 477 595 110,378 $ 136,224 Other Bets 288 477 595 Total revenue $ $ 136,224 Other Bets 288 477 595 Total revenue $ 90,272 136,224 Other Bets 288 477 595 Total revenue $ 90,272 $ 477 595 Total revenue $ 90,272 $ 110,855 $ 136,819 Year Total revenue $ 90,272 $ 110,855 $ 136,819 Year Ended December $ 90,272 $ 110,855 $ 136,819 Year Ended December 31 , $ 136,819 Year Ended December 31 , 2016 2017 2018 Operating Year Ended December 31 , 2016 2017 2018 Operating income ( Ended December 31 , 2016 2017 2018 Operating income ( loss December 31 , 2016 2017 2018 Operating income ( loss ) loss ) : Google $ 27,055 $ 32,287 $ 36,517 Other : Google $ 27,055 $ 32,287 $ 36,517 Other Bets ( $ 27,055 $ 32,287 $ 36,517 Other Bets ( 2,741 ) $ 36,517 Other Bets ( 2,741 ) ( 2,734 ) ( Bets ( 2,741 ) ( 2,734 ) ( 3,358 ) Reconciling ) ( 2,734 ) ( 3,358 ) Reconciling item ( 1 3,358 ) Reconciling item ( 1 ) ( 598 ) ( item ( 1 ) ( 598 ) ( 3,407 ) ( ) ( 598 ) ( 3,407 ) ( 6,838 ) Total ) ( 3,407 ) ( 6,838 ) Total income from operation Total income from operation $ 23,716 $ 26,146 $ 26,321 ( from operation $ 23,716 $ 26,146 $ 26,321 ( 1 ) $ 23,716 $ 26,146 $ 26,321 ( 1 ) Reconciling item $ 26,146 $ 26,321 ( 1 ) Reconciling item are primarily for the year ended December 31 , 2017 and 2018 , year ended December 31 , 2017 and 2018 , and performance December 31 , 2017 and 2018 , and performance fee for for the year ended December 31 , 2018 , a well year ended December 31 , 2018 , a well a corporate presented . Year Ended December 31 , 2016 2017 2018 Capital Year Ended December 31 , 2016 2017 2018 Capital expenditure : Ended December 31 , 2016 2017 2018 Capital expenditure : Google December 31 , 2016 2017 2018 Capital expenditure : Google $ Capital expenditure : Google $ 9,437 $ 12,619 $ 25,460 Other : Google $ 9,437 $ 12,619 $ 25,460 Other Bets 1,365 $ 9,437 $ 12,619 $ 25,460 Other Bets 1,365 493 181 12,619 $ 25,460 Other Bets 1,365 493 181 Reconciling item ( $ 25,460 Other Bets 1,365 493 181 Reconciling item ( 2 25,460 Other Bets 1,365 493 181 Reconciling item ( 2 ) 493 181 Reconciling item ( 2 ) ( 590 ) 72 item ( 2 ) ( 590 ) 72 ( 502 ) 2 ) ( 590 ) 72 ( 502 ) Total capital ( 590 ) 72 ( 502 ) Total capital expenditure a Statements of Cash Flows $ 10,212 $ 13,184 $ 25,139 ( Cash Flows $ 10,212 $ 13,184 $ 25,139 ( 2 ) $ 10,212 $ 13,184 $ 25,139 ( 2 ) Reconciling item $ 13,184 $ 25,139 ( 2 ) Reconciling item are related and other miscellaneous difference . 81 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2016 2017 2018 Stock-based Year Ended December 31 , 2016 2017 2018 Stock-based compensation : Ended December 31 , 2016 2017 2018 Stock-based compensation : Google December 31 , 2016 2017 2018 Stock-based compensation : Google $ Stock-based compensation : Google $ 6,201 $ 7,168 $ 8,755 Other : Google $ 6,201 $ 7,168 $ 8,755 Other Bets 372 $ 6,201 $ 7,168 $ 8,755 Other Bets 372 363 489 7,168 $ 8,755 Other Bets 372 363 489 Reconciling item ( $ 8,755 Other Bets 372 363 489 Reconciling item ( 3 8,755 Other Bets 372 363 489 Reconciling item ( 3 ) 363 489 Reconciling item ( 3 ) 130 148 109 Total Reconciling item ( 3 ) 130 148 109 Total stock-based compensation item ( 3 ) 130 148 109 Total stock-based compensation ( ( 3 ) 130 148 109 Total stock-based compensation ( 4 109 Total stock-based compensation ( 4 ) $ 6,703 $ 7,679 compensation ( 4 ) $ 6,703 $ 7,679 $ 9,353 Depreciation 4 ) $ 6,703 $ 7,679 $ 9,353 Depreciation , amortization $ 6,703 $ 7,679 $ 9,353 Depreciation , amortization , and and impairment : Google $ 5,882 $ 6,608 $ 8,708 Other : Google $ 5,882 $ 6,608 $ 8,708 Other Bets 258 $ 5,882 $ 6,608 $ 8,708 Other Bets 258 307 327 6,608 $ 8,708 Other Bets 258 307 327 Reconciling item ( $ 8,708 Other Bets 258 307 327 Reconciling item ( 5 8,708 Other Bets 258 307 327 Reconciling item ( 5 ) 307 327 Reconciling item ( 5 ) 4 — — Total Reconciling item ( 5 ) 4 — — Total depreciation , Statements of Cash Flows $ 6,144 $ 6,915 $ 9,035 ( Cash Flows $ 6,144 $ 6,915 $ 9,035 ( 3 ) $ 6,144 $ 6,915 $ 9,035 ( 3 ) Reconciling item $ 6,915 $ 9,035 ( 3 ) Reconciling item represent corporate to individual segment . ( 4 ) For purpose of segment in Alphabet stock . ( 5 ) Reconciling item are primarily ) : As of December 31 , 2017 As of December As of December 31 , 2017 As of December 31 , , 2017 As of December 31 , 2018 Long-lived asset : As of December 31 , 2018 Long-lived asset : United States asset : United States $ 55,113 $ 74,882 International 17,874 22,234 United States $ 55,113 $ 74,882 International 17,874 22,234 Total long-lived $ 55,113 $ 74,882 International 17,874 22,234 Total long-lived asset $ 55,113 $ 74,882 International 17,874 22,234 Total long-lived asset $ 72,987 22,234 Total long-lived asset $ 72,987 $ 97,116 For revenue by long-lived asset $ 72,987 $ 97,116 For revenue by geography , by geography , see Note 2 . ITEM 9 . CHANGES see Note 2 . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2018 , our disclosure a of December 31 , 2018 , our disclosure control and during the quarter ended December 31 , 2018 that have materially quarter ended December 31 , 2018 that have materially affected , control over financial reporting . 82 Table of Contents Alphabet Inc. , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2018 . Management reviewed a of December 31 , 2018 . Management reviewed the result financial reporting a of December 31 , 2018 ha been audited a of December 31 , 2018 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 83 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2019 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2018 ( 2019 Proxy year ended December 31 , 2018 ( 2019 Proxy Statement ) December 31 , 2018 ( 2019 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be under the caption “ Section 16 ( a ) Beneficial Ownership Reporting Compliance ” in the 2019 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2019 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Plan Information ” in the 2019 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2019 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2019 Proxy Statement and is incorporated incorporated herein by reference . 84 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 44 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 46 Consolidated Statements of Income 47 46 Consolidated Statements of Income 47 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 48 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 49 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 51 2 . Financial Statement Schedules to Consolidated Financial Statements 51 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2016 , 2017 and year ended December 31 , 2016 , 2017 and 2018 ( December 31 , 2016 , 2017 and 2018 ( in million , 2016 , 2017 and 2018 ( in million ) : of Year Year ended December 31 , 2016 $ 296 $ Year ended December 31 , 2016 $ 296 $ 942 $ December 31 , 2016 $ 296 $ 942 $ ( 771 , 2016 $ 296 $ 942 $ ( 771 ) $ 296 $ 942 $ ( 771 ) $ 467 Year ended $ ( 771 ) $ 467 Year ended December 31 , $ 467 Year ended December 31 , 2017 $ 467 $ Year ended December 31 , 2017 $ 467 $ 1,131 $ December 31 , 2017 $ 467 $ 1,131 $ ( 924 , 2017 $ 467 $ 1,131 $ ( 924 ) $ 467 $ 1,131 $ ( 924 ) $ 674 Year ended $ ( 924 ) $ 674 Year ended December 31 , $ 674 Year ended December 31 , 2018 $ 674 $ Year ended December 31 , 2018 $ 674 $ 1,115 $ December 31 , 2018 $ 674 $ 1,115 $ ( 1,060 , 2018 $ 674 $ 1,115 $ ( 1,060 ) $ 674 $ 1,115 $ ( 1,060 ) $ 729 Note : $ ( 1,060 ) $ 729 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.01 Specimen Class 001-37580 ) October 2 , 2015 4.01 Specimen Class A Common ) October 2 , 2015 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 85 Table of 001-37580 ) October 2 , 2015 85 Table of Contents Alphabet ) October 2 , 2015 85 Table of Contents Alphabet Inc. by reference herein Form Date 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Transfer Restriction 001-37580 ) October 2 , 2015 4.06 Transfer Restriction Agreement , ) October 2 , 2015 4.06 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.07 Class C 001-37580 ) October 2 , 2015 4.07 Class C Undertaking , ) October 2 , 2015 4.07 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Indenture , 001-37580 ) October 2 , 2015 4.08 Indenture , dated February ) October 2 , 2015 4.08 Indenture , dated February 12 4.08 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.09 Registrant Registration 333-209510 ) February 12 , 2016 4.09 Registrant Registration Rights Agreement ) February 12 , 2016 4.09 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.10 First Supplemental 333-209518 ) February 12 , 2016 4.10 First Supplemental Indenture , ) February 12 , 2016 4.10 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.11 Form of 001-37580 ) April 27 , 2016 4.11 Form of the Registrant ) April 27 , 2016 4.11 Form of the Registrant ’ of the Registrant ’ s 3.625 % Notes due 2021 ( s 3.625 % Notes due 2021 ( included in Exhibit 4.10 2021 ( included in Exhibit 4.10 ) 4.12 Form of the included in Exhibit 4.10 ) 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.10 2024 ( included in Exhibit 4.10 ) 4.13 Form of the included in Exhibit 4.10 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 10.01 Form of 001-37580 ) August 9 , 2016 10.01 Form of Indemnification Agreement ) August 9 , 2016 10.01 Form of Indemnification Agreement entered officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Compensation 001-37580 ) October 2 , 2015 10.02 u Compensation Plan Agreement ) October 2 , 2015 10.02 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.03 u Director 001-37580 ) October 2 , 2015 10.03 u Director Arrangements Agreement ) October 2 , 2015 10.03 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Alphabet 001-37580 ) October 2 , 2015 10.04 u Alphabet Inc . ) October 2 , 2015 10.04 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Google 001-37580 ) October 2 , 2015 10.05 u Google Inc. 2004 ) October 2 , 2015 10.05 u Google Inc. 2004 Stock 2015 10.05 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.05.1 u Google 000-50726 ) June 7 , 2011 10.05.1 u Google Inc. 2004 ) June 7 , 2011 10.05.1 u Google Inc. 2004 Stock 2011 10.05.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.2 u Google 000-50726 ) March 30 , 2005 10.05.2 u Google Inc. 2004 ) March 30 , 2005 10.05.2 u Google Inc. 2004 Stock 2005 10.05.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.3 u Google 000-50726 ) March 30 , 2005 10.05.3 u Google Inc. 2004 ) March 30 , 2005 10.05.3 u Google Inc. 2004 Stock 2005 10.05.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.06 u Alphabet 333-142243 ) April 20 , 2007 10.06 u Alphabet Inc. 2012 ) April 20 , 2007 10.06 u Alphabet Inc. 2012 Stock 2007 10.06 u Alphabet Inc. 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 8 , 2018 No . 001-37580 ) June 8 , 2018 10.06.1 u Alphabet 001-37580 ) June 8 , 2018 10.06.1 u Alphabet Inc. 2012 ) June 8 , 2018 10.06.1 u Alphabet Inc. 2012 Stock 2018 10.06.1 u Alphabet Inc. 2012 Stock Plan - Form of Agreement Quarterly Report on Form 10-Q ( File No . 001-37580 10-Q ( File No . 001-37580 ) November 3 , 2016 No . 001-37580 ) November 3 , 2016 10.07 u Motorola 001-37580 ) November 3 , 2016 10.07 u Motorola Mobility Holdings ) November 3 , 2016 10.07 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 Table of Contents 333-181661 ) May 24 , 2012 Table of Contents Alphabet Inc. by reference herein Form Date 10.08 u AdMob , Inc. 2006 10.08 u AdMob , Inc. 2006 Stock Plan and UK Sub-Plan of the AdMob , Inc. 2006 Stock Plan Registration Statement on S-8 ( File No . 333-167411 ) June 9 , 2010 No . 333-167411 ) June 9 , 2010 10.09 u Apigee 333-167411 ) June 9 , 2010 10.09 u Apigee Corporation 2015 ) June 9 , 2010 10.09 u Apigee Corporation 2015 Equity 2010 10.09 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.09.1 u Apigee 333-214573 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 ) November 10 , 2016 10.09.1 u Apigee Corporation 2015 Equity 2016 10.09.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 14.01 Code of 333-214573 ) November 10 , 2016 14.01 Code of Conduct of ) November 10 , 2016 14.01 Code of Conduct of the Registrant a amended on September 21 , 2017 Annual Report on amended on September 21 , 2017 Annual Report on Form 10-K 2017 Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 6 , 2018 No . 001-37580 ) February 6 , 2018 21.01 * Subsidiaries 001-37580 ) February 6 , 2018 21.01 * Subsidiaries of the ) February 6 , 2018 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.01 Google blog post dated the Sarbanes-Oxley Act of 2002 99.01 Google blog post dated July Google blog post dated July 18 , 2018 Current Report on post dated July 18 , 2018 Current Report on Form 8-K 2018 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) July 18 , 2018 No . 001-37580 ) July 18 , 2018 101.INS * XBRL 001-37580 ) July 18 , 2018 101.INS * XBRL Instance Document ) July 18 , 2018 101.INS * XBRL Instance Document 101.SCH 101.INS * XBRL Instance Document 101.SCH * XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema Document 101.CAL * XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase Document 101.DEF * XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase Document 101.LAB * XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase Document 101.PRE * XBRL Taxonomy Extension Presentation ‡ Furnished herewith . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . Table of to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 4 , 2019 ALPHABET INC. By Date : February 4 , 2019 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by Principal Executive Officer ) February 4 , 2019 Larry Page / Officer ) February 4 , 2019 Larry Page / S / Principal Financial Officer ) February 4 , 2019 Ruth M. Porat Officer ) February 4 , 2019 Ruth M. Porat / S and Chief Accounting Officer February 4 , 2019 Amie Thuener O'Toole Accounting Officer February 4 , 2019 Amie Thuener O'Toole / S Co-Founder , and Director February 4 , 2019 Sergey Brin / and Director February 4 , 2019 Sergey Brin / S / ENNESSY Director , Chair February 4 , 2019 John L. Hennessy , Chair February 4 , 2019 John L. Hennessy / S E. S CHMIDT Director February 4 , 2019 Eric E. Schmidt CHMIDT Director February 4 , 2019 Eric E. Schmidt / S OHN D OERR Director February 4 , 2019 L. John Doerr OERR Director February 4 , 2019 L. John Doerr / S J R . Director February 4 , 2019 Roger W. Ferguson . Director February 4 , 2019 Roger W. Ferguson , Jr. B. G REENE Director February 4 , 2019 Diane B. Greene REENE Director February 4 , 2019 Diane B. Greene / S NN M ATHER Director February 4 , 2019 Ann Mather / ATHER Director February 4 , 2019 Ann Mather / S / . M ULALLY Director February 4 , 2019 Alan R. Mulally ULALLY Director February 4 , 2019 Alan R. Mulally / S UNDAR P ICHAI Director February 4 , 2019 Sundar Pichai / ICHAI Director February 4 , 2019 Sundar Pichai / S / AM S HRIRAM Director February 4 , 2019 K. Ram Shriram HRIRAM Director February 4 , 2019 K. 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___________________________________________ FORM 10-K ___________________________________________ ( Mark One ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2019 OR ☐ TRANSITION year ended December 31 , 2019 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive including zip code ) ( 650 ) 253-000 ( Registrant 's code ) ( 650 ) 253-000 ( Registrant 's telephone number Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of June 28 , 2019 , the aggregate As of June 28 , 2019 , the aggregate market value Global Select Market on June 28 , 2019 ) wa approximately Market on June 28 , 2019 ) wa approximately $ 663.0 2019 ) wa approximately $ 663.0 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 27 , Form 10-K. As of January 27 , 2020 , there were As of January 27 , 2020 , there were 299,895,185 share , 2020 , there were 299,895,185 share of the registrant ’ A common stock outstanding , 46,411,073 share of the registrant ’ common stock outstanding , and 340,979,832 share of the registrant ’ s Proxy Statement for the 2020 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2019 . Table of year ended December 31 , 2019 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2019 TABLE OF CONTENTS Year Ended December 31 , 2019 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 3 PART I Item 1. Business Statements 3 PART I Item 1. Business 5 Item 1A . PART I Item 1. Business 5 Item 1A . Risk Factors Item 1. Business 5 Item 1A . Risk Factors 9 Item Item 1A . Risk Factors 9 Item 1B . Unresolved Staff . Risk Factors 9 Item 1B . Unresolved Staff Comments 22 1B . Unresolved Staff Comments 22 Item 2 . Properties 22 Unresolved Staff Comments 22 Item 2 . Properties 22 Item 3 22 Item 2 . Properties 22 Item 3 . Legal Proceedings 2 . Properties 22 Item 3 . Legal Proceedings 22 Item Item 3 . Legal Proceedings 22 Item 4 . Mine Safety . Legal Proceedings 22 Item 4 . Mine Safety Disclosures 22 4 . Mine Safety Disclosures 22 PART II Item 5 . Disclosures 22 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 23 Item 6 . Selected Financial of Equity Securities 23 Item 6 . Selected Financial Data 26 6 . Selected Financial Data 26 Item 7 . Management ’ Selected Financial Data 26 Item 7 . Management ’ s Discussion Condition and Results of Operations 27 Item 7A . Quantitative and Results of Operations 27 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 43 Item 8 . Financial Statements About Market Risk 43 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 46 Item 9 . Changes in and Supplementary Data 46 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 90 Item 9A . Controls and and Financial Disclosure 90 Item 9A . Controls and Procedures 90 9A . Controls and Procedures 90 Item 9B . Other Information Controls and Procedures 90 Item 9B . Other Information 90 PART Item 9B . Other Information 90 PART III Item 10 . Information 90 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 91 Item 11 . Executive Compensation and Corporate Governance 91 Item 11 . Executive Compensation 91 Item Item 11 . Executive Compensation 91 Item 12 . Security Ownership . Executive Compensation 91 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 91 Item 13 . Certain Relationships Related Stockholder Matters 91 Item 13 . Certain Relationships and Related Transactions , and Director Independence 91 Item 14 . Principal Accountant and Director Independence 91 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 91 PART IV Item 15 . Services 91 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 92 Item 16 . Form 10-K Financial Statement Schedules 92 Item 16 . Form 10-K Summary 95 92 Item 16 . Form 10-K Summary 95 Signatures 2 Table 16 . Form 10-K Summary 95 Signatures 2 Table of Contents Form 10-K Summary 95 Signatures 2 Table of Contents Alphabet Inc This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , ( ERP ) system ; 3 Table of Contents Alphabet Inc. the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , the risk discussed in Item 1A , `` Risk Factors `` any of these company . 4 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder when we were founded in 1998 . Since then , we . For example , Android 10 ha automatic Live Captions for landmark or find a trailer 5 Table of Contents Alphabet Inc. of hardware product like Pixel 4 phone and the Google Nest to automatically delete activity after 3 or 18 month and incognito delete activity after 3 or 18 month and incognito mode in not fund bad content . 6 Table of Contents Alphabet Inc. with them . Intellectual Property 7 Table of Contents Alphabet Inc. employee . As of December 31 , 2019 , we had As of December 31 , 2019 , we had 118,899 full-time , 2019 , we had 118,899 full-time employee . Although we ha been carbon neutral since 2007 and we are the largest in the world . In 2018 , for the second consecutive consecutive year , we matched 100 % of our electricity consumption , a reported in our 2019 Environmental Report . Some other Environmental Report . Some other 2019 highlight and achievement include : purchase of renewable energy : 18 new energy deal totaling 1,600 18 new energy deal totaling 1,600 megawatt , which is anticipated construction of more than $ 2 billion in new energy infrastructure new energy infrastructure . • 100 % of Nest product launched of Nest product launched in 2019 include recycled plastic content and — which represent more than 70 % of global greenhouse gas gas emission according to the 2016 United Nations Habitat World Cities climate action plan . In 2019 , we expanded this tool this tool to more than 100 city worldwide . We believe of our time . In 2017 , we developed a climate this Annual Report on Form 10-K or in any other report Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and our Proxy Statements furnish with the SEC . 8 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report textual reference only . ITEM 1A . RISK FACTORS Our operation business . We generated over 83 % of total revenue from display of ad online in 2019 . Many of our advertiser competitive . If our competitor 9 Table of Contents Alphabet Inc. of our future performance . 10 Table of Contents Alphabet Inc. center upgrade or expansion . 11 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2019 . In addition to risk in country outside the U.S. 12 Table of Contents Alphabet Inc. malfeasance or system error or 13 Table of Contents Alphabet Inc. to enhanced regulatory oversight . 14 Table of Contents Alphabet Inc. . For example , in 2018 the United States Federal Communications California Consumer Privacy Act of 2018 that came into effect in into effect in January of 2020 , which give new data ( EUCD ) of April 17 , 2019 , which increase ) of April 17 , 2019 , which increase the liability implement the EUCD by June 7 , 2021 . In addition EUCD by June 7 , 2021 . In addition , there processed within that country . 15 Table of Contents Alphabet Inc. ( CJEU ) on May 13 , 2014 on the ‘ ) on May 13 , 2014 on the ‘ right to decision against Google in June 2017 , and others could treat of the CJEU on September 24 , 2019 ruled that a CJEU on September 24 , 2019 ruled that a search engine or via our service . 16 Table of Contents Alphabet Inc. administrative fine of up to 4 % of annual worldwide revenue . Fines of up to 2 % of annual worldwide revenue customer arising from intellectual property 17 Table of Contents Alphabet Inc. cash reserve . In January 2018 , January 2019 , and In January 2018 , January 2019 , and July 2019 , January 2019 , and July 2019 , the board of director to repurchase up to $ 8.6 billion , $ 12.5 billion $ 8.6 billion , $ 12.5 billion , and $ 25.0 12.5 billion , and $ 25.0 billion of it Class C repurchase pursuant to the January 2018 and January 2019 authorization were the January 2018 and January 2019 authorization were completed in 2019 2019 authorization were completed in 2019 . As of December 31 2019 . As of December 31 , 2019 , $ 20.8 As of December 31 , 2019 , $ 20.8 billion remains 31 , 2019 , $ 20.8 billion remains available for repurchase Class B common stock ha 10 vote per share , our right . As of December 31 , 2019 , Larry Page As of December 31 , 2019 , Larry Page and Sergey Sergey Brin beneficially owned approximately 84.3 % of our outstanding Class stock , which represented approximately 51.2 % of the voting power control of our company . 18 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it acquired business or technology . 19 Table of Contents Alphabet Inc. may change over time . 20 Table of Contents Alphabet Inc. other factor . Since January 2018 , we adjust the carrying For example , from January 1 , 2019 through December 31 , from January 1 , 2019 through December 31 , 2019 1 , 2019 through December 31 , 2019 , the closing 2019 through December 31 , 2019 , the closing price of common stock ranged from $ 1,025.47 per share to $ 1,362.47 1,025.47 per share to $ 1,362.47 per share , and the capital stock ranged from $ 1,016.06 to $ 1,361.17 per share from $ 1,016.06 to $ 1,361.17 per share . In addition line with analyst expectation . 21 Table of Contents Alphabet Inc. actual operating performance . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a proceeding , please see Note 10 “ Commitments and Contingencies - Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 22 Table of Contents Alphabet Inc. Alphabet Inc. PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public “ GOOG ” since April 3 , 2014 . Holders of ” since April 3 , 2014 . Holders of Record As of Record As of December 31 , 2019 , there were As of December 31 , 2019 , there were approximately 2,455 2019 , there were approximately 2,455 and 2,030 stockholder of record there were approximately 2,455 and 2,030 stockholder of record of our holder . As of December 31 , 2019 , there were As of December 31 , 2019 , there were approximately 66 2019 , there were approximately 66 stockholder of record of our during the quarter ended December 31 , 2019 : Period Total quarter ended December 31 , 2019 : Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 1,970 $ 1,229.02 million ) October 1 - 31 1,970 $ 1,229.02 1,970 $ ) October 1 - 31 1,970 $ 1,229.02 1,970 $ 24,470 1 - 31 1,970 $ 1,229.02 1,970 $ 24,470 November 1 - 31 1,970 $ 1,229.02 1,970 $ 24,470 November 1 - 1,970 $ 1,229.02 1,970 $ 24,470 November 1 - 30 1,626 1,229.02 1,970 $ 24,470 November 1 - 30 1,626 $ 1,304.00 $ 24,470 November 1 - 30 1,626 $ 1,304.00 1,626 $ 24,470 November 1 - 30 1,626 $ 1,304.00 1,626 $ 22,350 1 - 30 1,626 $ 1,304.00 1,626 $ 22,350 December 1 - 30 1,626 $ 1,304.00 1,626 $ 22,350 December 1 - 1,626 $ 1,304.00 1,626 $ 22,350 December 1 - 31 1,164 1,304.00 1,626 $ 22,350 December 1 - 31 1,164 $ 1,337.16 $ 22,350 December 1 - 31 1,164 $ 1,337.16 1,164 $ 22,350 December 1 - 31 1,164 $ 1,337.16 1,164 $ 20,793 1 - 31 1,164 $ 1,337.16 1,164 $ 20,793 Total 4,760 - 31 1,164 $ 1,337.16 1,164 $ 20,793 Total 4,760 4,760 1,164 $ 1,337.16 1,164 $ 20,793 Total 4,760 4,760 ( 1 1,337.16 1,164 $ 20,793 Total 4,760 4,760 ( 1 ) In 1,164 $ 20,793 Total 4,760 4,760 ( 1 ) In January 20,793 Total 4,760 4,760 ( 1 ) In January and July ) In January and July 2019 , the board of director up to an additional $ 12.5 billion and $ 25.0 billion $ 12.5 billion and $ 25.0 billion of it Class C repurchase pursuant to the January 2019 authorization were completed during the during the fourth quarter of 2019 . The repurchase are being transaction , including through Rule 10b5-1 plan . The repurchase program . Please refer to Note 11 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 23 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2014 to December 31 ) from December 31 , 2014 to December 31 , 2019 31 , 2014 to December 31 , 2019 . The return 2014 to December 31 , 2019 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2014 in stock or invested on December 31 , 2014 in stock or index , . Fiscal year ending December 31 . Copyright © 2020 S December 31 . Copyright © 2020 S & P , a Inc. All right reserved . 24 Table of Contents Alphabet Inc Inc. Class C 's cumulative 5-Year total shareholder return on capital of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our Class C all dividend ) from December 31 , 2014 to December 31 ) from December 31 , 2014 to December 31 , 2019 31 , 2014 to December 31 , 2019 . The return 2014 to December 31 , 2019 . The return shown are , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2014 in stock or invested on December 31 , 2014 in stock or in index . Fiscal year ending December 31 . Copyright © 2020 S December 31 . Copyright © 2020 S & P , a Inc. All right reserved . 25 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are period . Year Ended December 31 , 2015 2016 2017 2018 Year Ended December 31 , 2015 2016 2017 2018 2019 ( Ended December 31 , 2015 2016 2017 2018 2019 ( in December 31 , 2015 2016 2017 2018 2019 ( in million 31 , 2015 2016 2017 2018 2019 ( in million , , 2015 2016 2017 2018 2019 ( in million , except Income Data : Revenues $ 74,989 $ 90,272 $ 110,855 $ : Revenues $ 74,989 $ 90,272 $ 110,855 $ 136,819 $ $ 74,989 $ 90,272 $ 110,855 $ 136,819 $ 161,857 Income $ 90,272 $ 110,855 $ 136,819 $ 161,857 Income from operation $ 110,855 $ 136,819 $ 161,857 Income from operation $ 19,360 161,857 Income from operation $ 19,360 $ 23,737 $ 26,178 $ from operation $ 19,360 $ 23,737 $ 26,178 $ 27,524 $ $ 19,360 $ 23,737 $ 26,178 $ 27,524 $ 34,231 Net $ 23,737 $ 26,178 $ 27,524 $ 34,231 Net income $ $ 26,178 $ 27,524 $ 34,231 Net income $ 16,348 $ $ 34,231 Net income $ 16,348 $ 19,478 $ 12,662 $ Net income $ 16,348 $ 19,478 $ 12,662 $ 30,736 $ $ 16,348 $ 19,478 $ 12,662 $ 30,736 $ 34,343 Basic $ 19,478 $ 12,662 $ 30,736 $ 34,343 Basic net income $ 12,662 $ 30,736 $ 34,343 Basic net income per share and B common stock $ 23.11 $ 28.32 $ 18.27 $ common stock $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ $ 23.11 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic $ 28.32 $ 18.27 $ 44.22 $ 49.59 Basic net income $ 18.27 $ 44.22 $ 49.59 Basic net income per share Class C capital stock $ 24.63 $ 28.32 $ 18.27 $ capital stock $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ $ 24.63 $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted $ 28.32 $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share and B common stock $ 22.84 $ 27.85 $ 18.00 $ common stock $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ $ 22.84 $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted $ 27.85 $ 18.00 $ 43.70 $ 49.16 Diluted net income $ 18.00 $ 43.70 $ 49.16 Diluted net income per share Class C capital stock $ 24.34 $ 27.85 $ 18.00 $ capital stock $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ $ 24.34 $ 27.85 $ 18.00 $ 43.70 $ 49.16 As $ 27.85 $ 18.00 $ 43.70 $ 49.16 As of December $ 18.00 $ 43.70 $ 49.16 As of December 31 , $ 49.16 As of December 31 , 2015 2016 2017 2018 As of December 31 , 2015 2016 2017 2018 2019 ( of December 31 , 2015 2016 2017 2018 2019 ( in December 31 , 2015 2016 2017 2018 2019 ( in million 31 , 2015 2016 2017 2018 2019 ( in million ) , 2015 2016 2017 2018 2019 ( in million ) Consolidated , and marketable security $ 73,066 $ 86,333 $ 101,871 $ marketable security $ 73,066 $ 86,333 $ 101,871 $ 109,140 $ $ 73,066 $ 86,333 $ 101,871 $ 109,140 $ 119,675 Total $ 86,333 $ 101,871 $ 109,140 $ 119,675 Total asset $ $ 101,871 $ 109,140 $ 119,675 Total asset $ 147,461 $ $ 119,675 Total asset $ 147,461 $ 167,497 $ 197,295 $ Total asset $ 147,461 $ 167,497 $ 197,295 $ 232,792 $ $ 147,461 $ 167,497 $ 197,295 $ 232,792 $ 275,909 Total $ 167,497 $ 197,295 $ 232,792 $ 275,909 Total long-term liability $ 197,295 $ 232,792 $ 275,909 Total long-term liability $ 7,820 275,909 Total long-term liability $ 7,820 $ 11,705 $ 20,610 $ long-term liability $ 7,820 $ 11,705 $ 20,610 $ 20,544 $ $ 7,820 $ 11,705 $ 20,610 $ 20,544 $ 29,246 Total $ 11,705 $ 20,610 $ 20,544 $ 29,246 Total stockholder ’ $ 20,610 $ 20,544 $ 29,246 Total stockholder ’ equity $ Total stockholder ’ equity $ 120,331 $ 139,036 $ 152,502 $ ’ equity $ 120,331 $ 139,036 $ 152,502 $ 177,628 $ $ 120,331 $ 139,036 $ 152,502 $ 177,628 $ 201,442 26 $ 139,036 $ 152,502 $ 177,628 $ 201,442 26 Table of $ 152,502 $ 177,628 $ 201,442 26 Table of Contents Alphabet 152,502 $ 177,628 $ 201,442 26 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted discussion of We have omitted discussion of 2017 result where it would be in Part II , Item 7 of our 2018 Annual Report , Item 7 of our 2018 Annual Report on Form 10-K 2018 Annual Report on Form 10-K , a amended . Trends our revenue and earnings . 27 Table of Contents Alphabet Inc. the fiscal year ended December 31 , 2019 ( consolidated unless year ended December 31 , 2019 ( consolidated unless otherwise noted : • Revenues of $ 161.9 billion and revenue growth of billion and revenue growth of 18 % year over year , constant currency revenue growth of 20 % year over year . Google segment revenue of $ 160.7 billion with revenue growth of billion with revenue growth of 18 % year over year and Other Bets revenue of $ 659 million with revenue growth of million with revenue growth of 11 % year over year . and Other Americas were $ 74.8 billion , $ 50.6 billion $ 74.8 billion , $ 50.6 billion , $ 26.9 billion $ 50.6 billion , $ 26.9 billion , and $ 9.0 26.9 billion , and $ 9.0 billion , respectively . • Cost of revenue wa $ 71.9 billion , consisting of TAC consisting of TAC of $ 30.1 billion and other cost of cost of revenue of $ 41.8 billion . Our TAC a ( TAC rate ) wa 22.3 % . • Operating expense of revenue ) were $ 55.7 billion . • Income from Income from operation wa $ 34.2 billion . • Other income , net , wa $ 5.4 billion . • Effective tax • Effective tax rate wa 13 % . • Net income • Net income wa $ 34.3 billion with diluted net income income per share of $ 49.16 . • Operating cash flow Operating cash flow wa $ 54.5 billion . • Capital expenditure • Capital expenditure were $ 23.5 billion . • Number of • Number of employee wa 118,899 a of December 31 , wa 118,899 a of December 31 , 2019 . The majority a of December 31 , 2019 . The majority of new disclosed a Other Bets . 28 Table of Contents Alphabet Inc. presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google Search & other $ 69,811 $ 85,296 $ 98,115 YouTube & other $ 69,811 $ 85,296 $ 98,115 YouTube ad ( $ 69,811 $ 85,296 $ 98,115 YouTube ad ( 1 ) $ 98,115 YouTube ad ( 1 ) 8,150 11,155 15,149 Google YouTube ad ( 1 ) 8,150 11,155 15,149 Google property 77,961 ad ( 1 ) 8,150 11,155 15,149 Google property 77,961 96,451 ( 1 ) 8,150 11,155 15,149 Google property 77,961 96,451 113,264 8,150 11,155 15,149 Google property 77,961 96,451 113,264 Google Network Members 11,155 15,149 Google property 77,961 96,451 113,264 Google Network Members ' 15,149 Google property 77,961 96,451 113,264 Google Network Members ' property Google Network Members ' property 17,616 20,010 21,547 Google advertising 95,577 Network Members ' property 17,616 20,010 21,547 Google advertising 95,577 116,461 Members ' property 17,616 20,010 21,547 Google advertising 95,577 116,461 134,811 17,616 20,010 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 20,010 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 5,838 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 5,838 8,918 95,577 116,461 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 116,461 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 1 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 1 ) 5,838 8,918 Google other ( 1 ) 10,914 14,063 17,014 Google Google other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 595 136,362 160,743 Other Bets revenue 477 595 659 Hedging gain ( 160,743 Other Bets revenue 477 595 659 Hedging gain ( loss Other Bets revenue 477 595 659 Hedging gain ( loss ) gain ( loss ) ( 169 ) ( 138 ) 455 ) ( 169 ) ( 138 ) 455 Total revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 ( Total revenue $ 110,855 $ 136,819 $ 161,857 ( 1 ) $ 110,855 $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising revenue are foreign currency exchange rate . 29 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google Search & other $ 69,811 $ 85,296 $ 98,115 YouTube & other $ 69,811 $ 85,296 $ 98,115 YouTube ad ( $ 69,811 $ 85,296 $ 98,115 YouTube ad ( 1 ) $ 98,115 YouTube ad ( 1 ) 8,150 11,155 15,149 Google YouTube ad ( 1 ) 8,150 11,155 15,149 Google Network Members ad ( 1 ) 8,150 11,155 15,149 Google Network Members ' ( 1 ) 8,150 11,155 15,149 Google Network Members ' property Google Network Members ' property 17,616 20,010 21,547 Google advertising $ Network Members ' property 17,616 20,010 21,547 Google advertising $ 95,577 Members ' property 17,616 20,010 21,547 Google advertising $ 95,577 $ 20,010 21,547 Google advertising $ 95,577 $ 116,461 $ 134,811 Google Google advertising $ 95,577 $ 116,461 $ 134,811 Google advertising revenue $ 95,577 $ 116,461 $ 134,811 Google advertising revenue a a percentage of Google segment revenue 86.5 % 85.4 % 83.9 % Google segment revenue 86.5 % 85.4 % 83.9 % ( 1 revenue 86.5 % 85.4 % 83.9 % ( 1 ) YouTube 85.4 % 83.9 % ( 1 ) YouTube non-advertising revenue are & other revenue increased $ 12,819 million from 2018 to 2019 increased $ 12,819 million from 2018 to 2019 . The growth 12,819 million from 2018 to 2019 . The growth wa primarily & other revenue increased $ 15,485 million from 2017 to 2018 increased $ 15,485 million from 2017 to 2018 . The growth 15,485 million from 2017 to 2018 . The growth wa primarily YouTube ad revenue increased $ 3,994 million from 2018 to 2019 increased $ 3,994 million from 2018 to 2019 and increased $ 3,994 million from 2018 to 2019 and increased $ 3,005 million to 2019 and increased $ 3,005 million from 2017 to 2018 increased $ 3,005 million from 2017 to 2018 . The largest 3,005 million from 2017 to 2018 . The largest contributor to ' property revenue increased $ 1,537 million from 2018 to 2019 increased $ 1,537 million from 2018 to 2019 . The growth 1,537 million from 2018 to 2019 . The growth wa primarily ' property revenue increased $ 2,394 million from 2017 to 2018 increased $ 2,394 million from 2017 to 2018 , primarily driven 2,394 million from 2017 to 2018 , primarily driven by strength each engagement by user . 30 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 Paid click Year Ended December 31 , 2018 2019 Paid click change 62 Ended December 31 , 2018 2019 Paid click change 62 % 2018 2019 Paid click change 62 % 23 % Cost-per-click change Paid click change 62 % 23 % Cost-per-click change ( 25 23 % Cost-per-click change ( 25 ) % ( 7 ) ( 25 ) % ( 7 ) % The number of on Google property increased from 2018 to 2019 due to growth property increased from 2018 to 2019 due to growth in view ) : Year Ended December 31 , 2018 2019 Impressions change Year Ended December 31 , 2018 2019 Impressions change 2 % Ended December 31 , 2018 2019 Impressions change 2 % 9 , 2018 2019 Impressions change 2 % 9 % Cost-per-impression change 2019 Impressions change 2 % 9 % Cost-per-impression change 12 % % 9 % Cost-per-impression change 12 % 1 % Impressions increased % Cost-per-impression change 12 % 1 % Impressions increased from 2018 1 % Impressions increased from 2018 to 2019 primarily due to Impressions increased from 2018 to 2019 primarily due to growth in ) : Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Cloud $ Ended December 31 , 2017 2018 2019 Google Cloud $ 4,056 December 31 , 2017 2018 2019 Google Cloud $ 4,056 $ 2018 2019 Google Cloud $ 4,056 $ 5,838 $ 8,918 Google Google Cloud $ 4,056 $ 5,838 $ 8,918 Google Cloud revenue $ 4,056 $ 5,838 $ 8,918 Google Cloud revenue a a percentage of Google segment revenue 3.7 % 4.3 % 5.5 % Google segment revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue 3.7 % 4.3 % 5.5 % Google Cloud revenue consist Google Cloud revenue increased $ 3,080 million from 2018 to 2019 increased $ 3,080 million from 2018 to 2019 and increased $ 3,080 million from 2018 to 2019 and increased $ 1,782 million to 2019 and increased $ 1,782 million from 2017 to 2018 increased $ 1,782 million from 2017 to 2018 . The growth 1,782 million from 2017 to 2018 . The growth during both of growth in GCP . 31 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google other 10,914 Ended December 31 , 2017 2018 2019 Google other 10,914 14,063 December 31 , 2017 2018 2019 Google other 10,914 14,063 17,014 2017 2018 2019 Google other 10,914 14,063 17,014 Google other revenue 2018 2019 Google other 10,914 14,063 17,014 Google other revenue a 2019 Google other 10,914 14,063 17,014 Google other revenue a a percentage of Google segment revenue 9.9 % 10.3 % 10.6 % Google segment revenue 9.9 % 10.3 % 10.6 % Google other revenue 9.9 % 10.3 % 10.6 % Google other revenue consist Google other revenue increased $ 2,951 million from 2018 to 2019 increased $ 2,951 million from 2018 to 2019 . The growth 2,951 million from 2018 to 2019 . The growth wa primarily Google other revenue increased $ 3,149 million from 2017 to 2018 increased $ 3,149 million from 2017 to 2018 . The growth 3,149 million from 2017 to 2018 . The growth wa primarily ) : Year Ended December 31 , 2017 2018 2019 Other Year Ended December 31 , 2017 2018 2019 Other Bets revenue Ended December 31 , 2017 2018 2019 Other Bets revenue $ December 31 , 2017 2018 2019 Other Bets revenue $ 477 2019 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue $ 477 $ 595 $ 659 Other Bets revenue a a a percentage of total revenue 0.4 % 0.4 % 0.4 % of total revenue 0.4 % 0.4 % 0.4 % Other Bets revenue 0.4 % 0.4 % 0.4 % Other Bets revenue consist customer : Year Ended December 31 , 2018 2019 United States Year Ended December 31 , 2018 2019 United States 46 % Ended December 31 , 2018 2019 United States 46 % 46 , 2018 2019 United States 46 % 46 % EMEA 33 2019 United States 46 % 46 % EMEA 33 % 31 46 % 46 % EMEA 33 % 31 % APAC 15 46 % EMEA 33 % 31 % APAC 15 % 17 33 % 31 % APAC 15 % 17 % Other Americas 31 % APAC 15 % 17 % Other Americas 6 % % 17 % Other Americas 6 % 6 % For further % Other Americas 6 % 6 % For further detail on by geography , see Note 2 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Use of Constant Currency Revenues GAAP ) result help improve 32 Table of Contents Alphabet Inc. in accordance with GAAP . 33 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2018 2019 EMEA revenue Year Ended December 31 , 2018 2019 EMEA revenue $ 44,739 Ended December 31 , 2018 2019 EMEA revenue $ 44,739 $ 2018 2019 EMEA revenue $ 44,739 $ 50,645 Exclude foreign exchange EMEA revenue $ 44,739 $ 50,645 Exclude foreign exchange effect on using prior year rate ( 1,325 ) 2,397 EMEA constant currency year rate ( 1,325 ) 2,397 EMEA constant currency revenue $ EMEA constant currency revenue $ 43,414 $ 53,042 Prior period EMEA currency revenue $ 43,414 $ 53,042 Prior period EMEA revenue $ Prior period EMEA revenue $ 36,236 $ 44,739 EMEA revenue growth EMEA revenue $ 36,236 $ 44,739 EMEA revenue growth 23 % $ 44,739 EMEA revenue growth 23 % 13 % EMEA constant EMEA revenue growth 23 % 13 % EMEA constant currency revenue EMEA constant currency revenue growth 20 % 19 % APAC revenue currency revenue growth 20 % 19 % APAC revenue $ 21,341 19 % APAC revenue $ 21,341 $ 26,928 Exclude foreign exchange APAC revenue $ 21,341 $ 26,928 Exclude foreign exchange effect on using prior year rate ( 49 ) 388 APAC constant currency year rate ( 49 ) 388 APAC constant currency revenue $ APAC constant currency revenue $ 21,292 $ 27,316 Prior period APAC currency revenue $ 21,292 $ 27,316 Prior period APAC revenue $ Prior period APAC revenue $ 16,192 $ 21,341 APAC revenue growth APAC revenue $ 16,192 $ 21,341 APAC revenue growth 32 % $ 21,341 APAC revenue growth 32 % 26 % APAC constant APAC revenue growth 32 % 26 % APAC constant currency revenue APAC constant currency revenue growth 31 % 28 % Other Americas currency revenue growth 31 % 28 % Other Americas revenue $ % Other Americas revenue $ 7,608 $ 8,986 Exclude foreign exchange Americas revenue $ 7,608 $ 8,986 Exclude foreign exchange effect on revenue using prior year rate 404 541 Other Americas constant currency using prior year rate 404 541 Other Americas constant currency revenue Americas constant currency revenue $ 8,012 $ 9,527 Prior period Other currency revenue $ 8,012 $ 9,527 Prior period Other Americas revenue period Other Americas revenue $ 6,147 $ 7,608 Other Americas revenue Americas revenue $ 6,147 $ 7,608 Other Americas revenue growth 24 7,608 Other Americas revenue growth 24 % 18 % Other Americas Americas revenue growth 24 % 18 % Other Americas constant currency Americas constant currency revenue growth 30 % 25 % United States currency revenue growth 30 % 25 % United States revenue $ % United States revenue $ 63,269 $ 74,843 United States revenue States revenue $ 63,269 $ 74,843 United States revenue growth 21 74,843 United States revenue growth 21 % 18 % Hedging gain States revenue growth 21 % 18 % Hedging gain ( loss gain ( loss ) ( 138 ) 455 Total revenue $ loss ) ( 138 ) 455 Total revenue $ 136,819 $ ) 455 Total revenue $ 136,819 $ 161,857 Total constant currency Total revenue $ 136,819 $ 161,857 Total constant currency revenue $ Total constant currency revenue $ 135,987 $ 164,728 Prior period revenue currency revenue $ 135,987 $ 164,728 Prior period revenue , excluding , excluding hedging effect ( 1 ) $ 111,024 $ 136,957 effect ( 1 ) $ 111,024 $ 136,957 Total revenue growth 1 ) $ 111,024 $ 136,957 Total revenue growth 23 % $ 136,957 Total revenue growth 23 % 18 % Total constant Total revenue growth 23 % 18 % Total constant currency revenue Total constant currency revenue growth 22 % 20 % ( 1 currency revenue growth 22 % 20 % ( 1 ) Total 22 % 20 % ( 1 ) Total revenue and hedging for the year ended December 31 , 2017 were $ 110,855 year ended December 31 , 2017 were $ 110,855 million and 31 , 2017 were $ 110,855 million and $ ( 169 110,855 million and $ ( 169 ) million , respectively . Our EMEA revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 wa unfavorably affected by change Our APAC revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 wa unfavorably affected by change Other Americas revenue growth from 2018 to 2019 wa unfavorably affected revenue growth from 2018 to 2019 wa unfavorably affected by change real and Argentine peso . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 TAC $ Year Ended December 31 , 2018 2019 TAC $ 26,726 $ Ended December 31 , 2018 2019 TAC $ 26,726 $ 30,089 , 2018 2019 TAC $ 26,726 $ 30,089 Other cost of 2019 TAC $ 26,726 $ 30,089 Other cost of revenue 32,823 30,089 Other cost of revenue 32,823 41,807 Total cost of revenue Other cost of revenue 32,823 41,807 Total cost of revenue $ Total cost of revenue $ 59,549 $ 71,896 Total cost of of revenue $ 59,549 $ 71,896 Total cost of revenue a a a percentage of revenue 43.5 % 44.4 % Cost of percentage of revenue 43.5 % 44.4 % Cost of revenue increased Cost of revenue increased $ 12,347 million from 2018 to 2019 increased $ 12,347 million from 2018 to 2019 . The increase 12,347 million from 2018 to 2019 . The increase wa due revenue and TAC of $ 8,984 million and $ 3,363 million $ 8,984 million and $ 3,363 million , respectively . The other cost of revenue from 2018 to 2019 wa due to of revenue from 2018 to 2019 wa due to an increase The increase in TAC from 2018 to 2019 wa due to in TAC from 2018 to 2019 wa due to increase in The TAC rate decreased from 22.9 % to 22.3 % , decreased from 22.9 % to 22.3 % , primarily due to to our advertising revenue . 35 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 Research and Year Ended December 31 , 2018 2019 Research and development expense Ended December 31 , 2018 2019 Research and development expense $ Research and development expense $ 21,419 $ 26,018 Research and development development expense $ 21,419 $ 26,018 Research and development expense a a a percentage of revenue 15.7 % 16.1 % R & percentage of revenue 15.7 % 16.1 % R & D expense & D expense increased $ 4,599 million from 2018 to 2019 increased $ 4,599 million from 2018 to 2019 . The increase 4,599 million from 2018 to 2019 . The increase wa primarily and facilities-related cost of $ 3,519 million , largely resulting from , largely resulting from a 23 % increase in headcount . ) : Year Ended December 31 , 2018 2019 Sales and Year Ended December 31 , 2018 2019 Sales and marketing expense Ended December 31 , 2018 2019 Sales and marketing expense $ Sales and marketing expense $ 16,333 $ 18,464 Sales and marketing marketing expense $ 16,333 $ 18,464 Sales and marketing expense a a a percentage of revenue 11.9 % 11.4 % Sales and percentage of revenue 11.9 % 11.4 % Sales and marketing expense and marketing expense increased $ 2,131 million from 2018 to 2019 increased $ 2,131 million from 2018 to 2019 . The increase 2,131 million from 2018 to 2019 . The increase wa primarily and facilities-related cost of $ 1,371 million , largely resulting from , largely resulting from a 15 % increase in headcount . and promotional expense of $ 402 million . Over time , ) : Year Ended December 31 , 2018 2019 General and Year Ended December 31 , 2018 2019 General and administrative expense Ended December 31 , 2018 2019 General and administrative expense $ General and administrative expense $ 6,923 $ 9,551 General and administrative administrative expense $ 6,923 $ 9,551 General and administrative expense a a a percentage of revenue 5.1 % 5.9 % General and percentage of revenue 5.1 % 5.9 % General and administrative expense • Legal-related expense ; and 36 Table of Contents Alphabet Inc. and administrative expense increased $ 2,628 million from 2018 to 2019 increased $ 2,628 million from 2018 to 2019 . The increase 2,628 million from 2018 to 2019 . The increase wa primarily in legal-related expense of $ 1,157 million , including a charge including a charge of $ 554 million from a legal settlement from a legal settlement in 2019 and the effect of a legal settlement gain recorded in 2018 . Additionally , there wa and facilities-related cost of $ 687 million , largely resulting from , largely resulting from a 19 % increase in headcount . . Performance fee of $ 1,203 million have been reclassified from ) , net , for 2018 to conform with current period period presentation . See Note 7 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further detail . Over European Commission Fines In July 2018 , the EC announced it a €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine , a of June 30 , 2018 ) fine , which wa in the second quarter of 2018 . In March 2019 , of 2018 . In March 2019 , the EC announced it a €1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) fine , a of March 20 , 2019 ) fine , which wa in the first quarter of 2019 . Please refer to Note . Please refer to Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Other ) : Year Ended December 31 , 2018 2019 Other income Year Ended December 31 , 2018 2019 Other income ( expense Ended December 31 , 2018 2019 Other income ( expense ) expense ) , net $ 7,389 $ 5,394 Other income ( , net $ 7,389 $ 5,394 Other income ( expense ) a a percentage of revenue 5.4 % 3.3 % Other income percentage of revenue 5.4 % 3.3 % Other income ( expense , net , decreased $ 1,995 million from 2018 to 2019 decreased $ 1,995 million from 2018 to 2019 . This decrease 1,995 million from 2018 to 2019 . This decrease wa primarily security , which were $ 2,649 million in 2019 a compared were $ 2,649 million in 2019 a compared to $ 5,460 2019 a compared to $ 5,460 million in 2018 . The to $ 5,460 million in 2018 . The majority of the an unrealized gain recognized in 2018 resulting from the modification of . Performance fee of $ 1,203 million have been reclassified from ) , net , for 2018 to conform with current period period presentation . See Note 7 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further detail . Over equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. 37 Table of Contents Alphabet Annual Report on Form 10-K. 37 Table of Contents Alphabet Inc rate : Year Ended December 31 , 2018 2019 Provision for Year Ended December 31 , 2018 2019 Provision for income tax Ended December 31 , 2018 2019 Provision for income tax $ Provision for income tax $ 4,177 $ 5,282 Effective tax rate income tax $ 4,177 $ 5,282 Effective tax rate 12.0 % $ 5,282 Effective tax rate 12.0 % 13.3 % Our provision Effective tax rate 12.0 % 13.3 % Our provision for income effective tax rate increased from 2018 to 2019 , due to rate increased from 2018 to 2019 , due to discrete event due to discrete event in 2018 and 2019 . In 2018 discrete event in 2018 and 2019 . In 2018 , we 2018 and 2019 . In 2018 , we released our deferred Act `` ) . In 2019 , we recognized an increase Appeals decision . See Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . As information . As of December 31 , 2019 , we have As of December 31 , 2019 , we have simplified our a certain discrete item . 38 Table of Contents Alphabet Inc. in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2019 . This table quarter ended December 31 , 2019 . This table includes all rate . Quarter Ended Mar 31 , 2018 Jun 30 , Quarter Ended Mar 31 , 2018 Jun 30 , 2018 Sept Mar 31 , 2018 Jun 30 , 2018 Sept 30 , , 2018 Jun 30 , 2018 Sept 30 , 2018 Dec Jun 30 , 2018 Sept 30 , 2018 Dec 31 , , 2018 Sept 30 , 2018 Dec 31 , 2018 Mar Sept 30 , 2018 Dec 31 , 2018 Mar 31 , , 2018 Dec 31 , 2018 Mar 31 , 2019 Jun Dec 31 , 2018 Mar 31 , 2019 Jun 30 , , 2018 Mar 31 , 2019 Jun 30 , 2019 Sept Mar 31 , 2019 Jun 30 , 2019 Sept 30 , , 2019 Jun 30 , 2019 Sept 30 , 2019 Dec Jun 30 , 2019 Sept 30 , 2019 Dec 31 , , 2019 Sept 30 , 2019 Dec 31 , 2019 ( Sept 30 , 2019 Dec 31 , 2019 ( In million , 2019 Dec 31 , 2019 ( In million , except Income Data : Revenues $ 31,146 $ 32,657 $ 33,740 $ : Revenues $ 31,146 $ 32,657 $ 33,740 $ 39,276 $ $ 31,146 $ 32,657 $ 33,740 $ 39,276 $ 36,339 $ $ 32,657 $ 33,740 $ 39,276 $ 36,339 $ 38,944 $ $ 33,740 $ 39,276 $ 36,339 $ 38,944 $ 40,499 $ $ 39,276 $ 36,339 $ 38,944 $ 40,499 $ 46,075 Costs $ 36,339 $ 38,944 $ 40,499 $ 46,075 Costs and expense $ 38,944 $ 40,499 $ 46,075 Costs and expense : Cost expense : Cost of revenue 13,467 13,883 14,281 17,918 16,012 17,296 : Cost of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 Cost of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 of revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research revenue 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and 13,467 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and development 13,883 14,281 17,918 16,012 17,296 17,568 21,020 Research and development 5,039 14,281 17,918 16,012 17,296 17,568 21,020 Research and development 5,039 5,114 17,568 21,020 Research and development 5,039 5,114 5,232 6,034 6,029 6,213 21,020 Research and development 5,039 5,114 5,232 6,034 6,029 6,213 6,554 Research and development 5,039 5,114 5,232 6,034 6,029 6,213 6,554 7,222 and development 5,039 5,114 5,232 6,034 6,029 6,213 6,554 7,222 Sales development 5,039 5,114 5,232 6,034 6,029 6,213 6,554 7,222 Sales and 5,039 5,114 5,232 6,034 6,029 6,213 6,554 7,222 Sales and marketing 5,114 5,232 6,034 6,029 6,213 6,554 7,222 Sales and marketing 3,604 5,232 6,034 6,029 6,213 6,554 7,222 Sales and marketing 3,604 3,780 6,554 7,222 Sales and marketing 3,604 3,780 3,849 5,100 3,905 4,212 7,222 Sales and marketing 3,604 3,780 3,849 5,100 3,905 4,212 4,609 Sales and marketing 3,604 3,780 3,849 5,100 3,905 4,212 4,609 5,738 and marketing 3,604 3,780 3,849 5,100 3,905 4,212 4,609 5,738 General marketing 3,604 3,780 3,849 5,100 3,905 4,212 4,609 5,738 General and 3,604 3,780 3,849 5,100 3,905 4,212 4,609 5,738 General and administrative 3,780 3,849 5,100 3,905 4,212 4,609 5,738 General and administrative 1,403 3,849 5,100 3,905 4,212 4,609 5,738 General and administrative 1,403 1,764 4,609 5,738 General and administrative 1,403 1,764 1,753 2,003 2,088 2,043 5,738 General and administrative 1,403 1,764 1,753 2,003 2,088 2,043 2,591 General and administrative 1,403 1,764 1,753 2,003 2,088 2,043 2,591 2,829 and administrative 1,403 1,764 1,753 2,003 2,088 2,043 2,591 2,829 European administrative 1,403 1,764 1,753 2,003 2,088 2,043 2,591 2,829 European Commission 1,403 1,764 1,753 2,003 2,088 2,043 2,591 2,829 European Commission fine 1,764 1,753 2,003 2,088 2,043 2,591 2,829 European Commission fine 0 1,753 2,003 2,088 2,043 2,591 2,829 European Commission fine 0 5,071 2,591 2,829 European Commission fine 0 5,071 0 0 1,697 0 2,829 European Commission fine 0 5,071 0 0 1,697 0 0 European Commission fine 0 5,071 0 0 1,697 0 0 0 Commission fine 0 5,071 0 0 1,697 0 0 0 Total fine 0 5,071 0 0 1,697 0 0 0 Total cost 0 5,071 0 0 1,697 0 0 0 Total cost and 5,071 0 0 1,697 0 0 0 Total cost and expense 0 0 1,697 0 0 0 Total cost and expense 23,513 0 Total cost and expense 23,513 29,612 25,115 31,055 29,731 29,764 Total cost and expense 23,513 29,612 25,115 31,055 29,731 29,764 31,322 cost and expense 23,513 29,612 25,115 31,055 29,731 29,764 31,322 36,809 and expense 23,513 29,612 25,115 31,055 29,731 29,764 31,322 36,809 Income expense 23,513 29,612 25,115 31,055 29,731 29,764 31,322 36,809 Income from 23,513 29,612 25,115 31,055 29,731 29,764 31,322 36,809 Income from operation 29,612 25,115 31,055 29,731 29,764 31,322 36,809 Income from operation 7,633 25,115 31,055 29,731 29,764 31,322 36,809 Income from operation 7,633 3,045 31,322 36,809 Income from operation 7,633 3,045 8,625 8,221 6,608 9,180 36,809 Income from operation 7,633 3,045 8,625 8,221 6,608 9,180 9,177 Income from operation 7,633 3,045 8,625 8,221 6,608 9,180 9,177 9,266 from operation 7,633 3,045 8,625 8,221 6,608 9,180 9,177 9,266 Other operation 7,633 3,045 8,625 8,221 6,608 9,180 9,177 9,266 Other income 7,633 3,045 8,625 8,221 6,608 9,180 9,177 9,266 Other income ( 3,045 8,625 8,221 6,608 9,180 9,177 9,266 Other income ( expense 8,625 8,221 6,608 9,180 9,177 9,266 Other income ( expense ) ( expense ) , net 2,910 1,170 1,458 1,851 1,538 2,967 expense ) , net 2,910 1,170 1,458 1,851 1,538 2,967 ( ) , net 2,910 1,170 1,458 1,851 1,538 2,967 ( 549 , net 2,910 1,170 1,458 1,851 1,538 2,967 ( 549 ) net 2,910 1,170 1,458 1,851 1,538 2,967 ( 549 ) 1,438 2,910 1,170 1,458 1,851 1,538 2,967 ( 549 ) 1,438 Income 1,458 1,851 1,538 2,967 ( 549 ) 1,438 Income from continuing 1,538 2,967 ( 549 ) 1,438 Income from continuing operation before continuing operation before income tax 10,543 4,215 10,083 10,072 8,146 12,147 operation before income tax 10,543 4,215 10,083 10,072 8,146 12,147 8,628 before income tax 10,543 4,215 10,083 10,072 8,146 12,147 8,628 10,704 income tax 10,543 4,215 10,083 10,072 8,146 12,147 8,628 10,704 Provision tax 10,543 4,215 10,083 10,072 8,146 12,147 8,628 10,704 Provision for 10,543 4,215 10,083 10,072 8,146 12,147 8,628 10,704 Provision for income 4,215 10,083 10,072 8,146 12,147 8,628 10,704 Provision for income tax 10,083 10,072 8,146 12,147 8,628 10,704 Provision for income tax 1,142 10,704 Provision for income tax 1,142 1,020 891 1,124 1,489 2,200 Provision for income tax 1,142 1,020 891 1,124 1,489 2,200 1,560 for income tax 1,142 1,020 891 1,124 1,489 2,200 1,560 33 income tax 1,142 1,020 891 1,124 1,489 2,200 1,560 33 Net tax 1,142 1,020 891 1,124 1,489 2,200 1,560 33 Net income 1,142 1,020 891 1,124 1,489 2,200 1,560 33 Net income $ 1,020 891 1,124 1,489 2,200 1,560 33 Net income $ 9,401 891 1,124 1,489 2,200 1,560 33 Net income $ 9,401 $ 1,560 33 Net income $ 9,401 $ 3,195 $ 9,192 $ Net income $ 9,401 $ 3,195 $ 9,192 $ 8,948 $ $ 9,401 $ 3,195 $ 9,192 $ 8,948 $ 6,657 $ $ 3,195 $ 9,192 $ 8,948 $ 6,657 $ 9,947 $ $ 9,192 $ 8,948 $ 6,657 $ 9,947 $ 7,068 $ $ 8,948 $ 6,657 $ 9,947 $ 7,068 $ 10,671 Basic $ 6,657 $ 9,947 $ 7,068 $ 10,671 Basic net income $ 9,947 $ 7,068 $ 10,671 Basic net income per share Class C capital stock $ 13.53 $ 4.60 $ 13.21 $ capital stock $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ $ 13.53 $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ $ 4.60 $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ $ 13.21 $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ $ 12.87 $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted $ 9.58 $ 14.33 $ 10.20 $ 15.49 Diluted net income $ 14.33 $ 10.20 $ 15.49 Diluted net income per share Class C capital stock $ 13.33 $ 4.54 $ 13.06 $ capital stock $ 13.33 $ 4.54 $ 13.06 $ 12.77 $ $ 13.33 $ 4.54 $ 13.06 $ 12.77 $ 9.50 $ $ 4.54 $ 13.06 $ 12.77 $ 9.50 $ 14.21 $ $ 13.06 $ 12.77 $ 9.50 $ 14.21 $ 10.12 $ $ 12.77 $ 9.50 $ 14.21 $ 10.12 $ 15.35 Capital $ 9.50 $ 14.21 $ 10.12 $ 15.35 Capital Resources and $ 14.21 $ 10.12 $ 15.35 Capital Resources and Liquidity As and Liquidity As of December 31 , 2019 , we had As of December 31 , 2019 , we had $ 119.7 2019 , we had $ 119.7 billion in cash , cash security . As of December 31 , 2019 , we had As of December 31 , 2019 , we had long-term tax long-term tax payable of $ 7.3 billion related to a one-time in annual interest-free installment through 2025 . In 2017 , 2018 installment through 2025 . In 2017 , 2018 and 2019 , 2025 . In 2017 , 2018 and 2019 , the EC In 2017 , 2018 and 2019 , the EC announced decision of €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) , €4.3 a of June 27 , 2017 ) , €4.3 billion ( , €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) , and a of June 30 , 2018 ) , and €1.5 billion and €1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) , respectively a of March 20 , 2019 ) , respectively . While ) for the fine . 39 Table of Contents Alphabet Inc Alphabet Inc . In November 2019 , we entered into an wearable brand , for $ 7.35 per share , representing a purchase price of approximately $ 2.1 billion a of the date expected to be completed in 2020 , subject to customary closing program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2019 . We have a of December 31 , 2019 . We have $ 4.0 2019 . We have $ 4.0 billion of revolving credit facility credit facility expiring in July 2023 with no amount outstanding a amount outstanding a of December 31 , 2019 . The interest a of December 31 , 2019 . The interest rate for through at least the next 12 month . As of December month . As of December 31 , 2019 , we have As of December 31 , 2019 , we have senior unsecured unsecured note outstanding due in 2021 , 2024 , and 2026 outstanding due in 2021 , 2024 , and 2026 with a 2021 , 2024 , and 2026 with a total carrying value total carrying value of $ 4.0 billion . As of December billion . As of December 31 , 2019 , we had As of December 31 , 2019 , we had remaining authorization had remaining authorization of $ 20.8 billion for repurchase of Class transaction , including through Rule 10b5-1 plan . The repurchase program . Please refer to Note 11 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to During the year ended December 31 , 2019 , we spent year ended December 31 , 2019 , we spent $ 23.5 2019 , we spent $ 23.5 billion on capital expenditure and operating lease asset of $ 4.4 billion . As of December billion . As of December 31 , 2019 , the amount As of December 31 , 2019 , the amount of total average remaining lease term of 10 year , wa $ 13.9 10 year , wa $ 13.9 billion . Finance lease were for the year ended December 31 , 2019 . Please refer year ended December 31 , 2019 . Please refer to Note . Please refer to Note 4 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on the ) : Year Ended December 31 , 2018 2019 Net cash Year Ended December 31 , 2018 2019 Net cash provided by Ended December 31 , 2018 2019 Net cash provided by operating provided by operating activity $ 47,971 $ 54,520 Net cash used operating activity $ 47,971 $ 54,520 Net cash used in investing in investing activity $ ( 28,504 ) $ ( 29,491 ) ( 28,504 ) $ ( 29,491 ) Net cash used in in financing activity $ ( 13,179 ) $ ( 23,209 ) ( 13,179 ) $ ( 23,209 ) Cash Provided by Operating by operating activity increased from 2018 to 2019 primarily due to activity increased from 2018 to 2019 primarily due to increase in of purchase of property and 40 Table of Contents Alphabet Inc. in investing activity increased from 2018 to 2019 primarily due to activity increased from 2018 to 2019 primarily due to a net in financing activity increased from 2018 to 2019 primarily due to activity increased from 2018 to 2019 primarily due to an increase Contractual Obligations a of December 31 , 2019 The following summarizes a of December 31 , 2019 The following summarizes our contractual contractual obligation a of December 31 , 2019 ( in million a of December 31 , 2019 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation ( year Operating lease obligation ( 1 ) $ 13,854 $ 1,757 obligation ( 1 ) $ 13,854 $ 1,757 $ 3,525 $ 1 ) $ 13,854 $ 1,757 $ 3,525 $ 2,809 $ $ 13,854 $ 1,757 $ 3,525 $ 2,809 $ 5,763 Obligations $ 1,757 $ 3,525 $ 2,809 $ 5,763 Obligations for lease $ 3,525 $ 2,809 $ 5,763 Obligations for lease that have have not yet commenced ( 1 ) 7,418 249 850 1,314 yet commenced ( 1 ) 7,418 249 850 1,314 5,005 Purchase commenced ( 1 ) 7,418 249 850 1,314 5,005 Purchase obligation ( 1 ) 7,418 249 850 1,314 5,005 Purchase obligation ( 1 ) 7,418 249 850 1,314 5,005 Purchase obligation ( 2 ) 7,418 249 850 1,314 5,005 Purchase obligation ( 2 ) 1,314 5,005 Purchase obligation ( 2 ) 5,660 4,212 933 202 Purchase obligation ( 2 ) 5,660 4,212 933 202 313 Long-term obligation ( 2 ) 5,660 4,212 933 202 313 Long-term debt ( 2 ) 5,660 4,212 933 202 313 Long-term debt obligation 2 ) 5,660 4,212 933 202 313 Long-term debt obligation ( ) 5,660 4,212 933 202 313 Long-term debt obligation ( 3 313 Long-term debt obligation ( 3 ) 5,288 227 1,258 1,224 debt obligation ( 3 ) 5,288 227 1,258 1,224 2,579 Tax obligation ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 3 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 4 ) 5,288 227 1,258 1,224 2,579 Tax payable ( 4 ) 1,224 2,579 Tax payable ( 4 ) 7,315 0 1,166 3,661 Tax payable ( 4 ) 7,315 0 1,166 3,661 2,488 Other payable ( 4 ) 7,315 0 1,166 3,661 2,488 Other long-term ( 4 ) 7,315 0 1,166 3,661 2,488 Other long-term liability 4 ) 7,315 0 1,166 3,661 2,488 Other long-term liability reflected ) 7,315 0 1,166 3,661 2,488 Other long-term liability reflected on on our balance sheet ( 5 ) 1,484 245 643 367 balance sheet ( 5 ) 1,484 245 643 367 229 Total sheet ( 5 ) 1,484 245 643 367 229 Total contractual ( 5 ) 1,484 245 643 367 229 Total contractual obligation 5 ) 1,484 245 643 367 229 Total contractual obligation $ ) 1,484 245 643 367 229 Total contractual obligation $ 41,019 229 Total contractual obligation $ 41,019 $ 6,690 $ 8,375 $ contractual obligation $ 41,019 $ 6,690 $ 8,375 $ 9,577 $ $ 41,019 $ 6,690 $ 8,375 $ 9,577 $ 16,377 ( $ 6,690 $ 8,375 $ 9,577 $ 16,377 ( 1 ) $ 8,375 $ 9,577 $ 16,377 ( 1 ) For further $ 9,577 $ 16,377 ( 1 ) For further information , information , refer to Note 4 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 2 ) Represents non-cancelable Report on Form 10-K. ( 2 ) Represents non-cancelable contractual obligation and/or pricing a of December 31 , 2019 . Excluded from a of December 31 , 2019 . Excluded from the table support normal operation . ( 3 ) Represents our principal and debt , refer to Note 6 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 2.6 billion a of December 31 2.6 billion a of December 31 , 2019 primarily related to a of December 31 , 2019 primarily related to uncertain tax payment in individual year beyond 12 month due to uncertainty in tax audit outcome . ( 5 ) Represents cash obligation recorded fine , refer to Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of Sheet Arrangements As of December 31 , 2019 , we did As of December 31 , 2019 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of is material to investor . 41 Table of Contents Alphabet Inc. in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for a summary of significant undiscounted future cash flow generated 42 Table of Contents Alphabet Inc. at fair value . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced in and liability . The foreign 43 Table of Contents Alphabet Inc. contract . If an adverse 10 % foreign currency exchange rate income tax of approximately $ 1 million and $ 8 million $ 1 million and $ 8 million a of December 31 8 million a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . The adverse adverse effect a of December 31 , 2018 and 2019 is a of December 31 , 2018 and 2019 is after consideration December 31 , 2018 and 2019 is after consideration of the offsetting effect of approximately $ 374 million and $ 662 million $ 374 million and $ 662 million , respectively , from for the year ended December 31 , 2018 and 2019 . year ended December 31 , 2018 and 2019 . We use December 31 , 2018 and 2019 . We use foreign currency the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , the amount December 31 , 2018 and 2019 , the amount recorded in would have been approximately $ 772 million and $ 1.1 billion $ 772 million and $ 1.1 billion lower a of December billion lower a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . The change the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 635 million and $ 936 million $ 635 million and $ 936 million lower a of December million lower a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . The change a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2018 and 2019 are a of December 31 , 2018 and 2019 are shown below December 31 , 2018 and 2019 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2018 2019 2018 2019 As of December 31 , 2018 2019 2018 2019 Risk Category of December 31 , 2018 2019 2018 2019 Risk Category - December 31 , 2018 2019 2018 2019 Risk Category - Interest 31 , 2018 2019 2018 2019 Risk Category - Interest Rate Category - Interest Rate $ 58 $ 104 $ 66 $ Interest Rate $ 58 $ 104 $ 66 $ 90 Actual $ 58 $ 104 $ 66 $ 90 Actual future gain $ 104 $ 66 $ 90 Actual future gain and loss analysis performed a of December 31 , 2018 and 2019 due a of December 31 , 2018 and 2019 due to the December 31 , 2018 and 2019 due to the inherent limitation a a risk estimation . 44 Table of Contents Alphabet Inc. volatility , and represent $ 3.3 billion of our investment a our investment a of December 31 , 2019 . A hypothetical a of December 31 , 2019 . A hypothetical adverse price hypothetical adverse price change of 10 % , which could be marketable equity security by $ 330 million . Our non-marketable equity event . As of December 31 , 2019 , the carrying As of December 31 , 2019 , the carrying value of measurement alternative , wa $ 11.4 billion . Valuations of our , please refer to Note 1 and Note 3 of the to Note 1 and Note 3 of the Notes to Consolidated this Annual Report on Form 10-K. 45 Table of Contents Alphabet Annual Report on Form 10-K. 45 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 47 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 50 Consolidated Statements of Income 51 50 Consolidated Statements of Income 51 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 52 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 53 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 55 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 46 Table of Contents Alphabet Inc. Company ) a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , the related December 31 , 2018 and 2019 , the related consolidated statement in the period ended December 31 , 2019 , and the period ended December 31 , 2019 , and the related note in the Index at Item 15 ( collectively referred to a of the Company at December 31 , 2018 and 2019 , Company at December 31 , 2018 and 2019 , and the December 31 , 2018 and 2019 , and the result of in the period ended December 31 , 2019 , in conformity period ended December 31 , 2019 , in conformity with U.S. financial reporting a of December 31 , 2019 , based on a of December 31 , 2019 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 3 , 2020 expressed an unqualified report dated February 3 , 2020 expressed an unqualified opinion thereon Standard As discussed in Note 1 to the financial statement , in the year ended December 31 , 2018 . Basis for year ended December 31 , 2018 . Basis for Opinion These committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging to which it relates . 47 Table of Contents Alphabet Inc. . As described in Note 10 to the financial statement “ the Company 's auditor since 1999 . San Jose , California San Jose , California February 3 , 2020 48 Table of , California February 3 , 2020 48 Table of Contents Alphabet California February 3 , 2020 48 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2019 , based on a of December 31 , 2019 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO financial reporting a of December 31 , 2019 , based on a of December 31 , 2019 , based on the COSO ( PCAOB ) , the 2019 consolidated financial statement of the and our report dated February 3 , 2020 expressed an unqualified report dated February 3 , 2020 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 3 , 2020 49 Table of , California February 3 , 2020 49 Table of Contents Alphabet California February 3 , 2020 49 Table of Contents Alphabet Inc amount ) As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 Assets Current asset As of December 31 , 2019 Assets Current asset : Cash Cash and cash equivalent $ 16,701 $ 18,498 Marketable security 92,439 cash equivalent $ 16,701 $ 18,498 Marketable security 92,439 101,177 Total 16,701 $ 18,498 Marketable security 92,439 101,177 Total cash , cash $ 18,498 Marketable security 92,439 101,177 Total cash , cash equivalent equivalent , and marketable security 109,140 119,675 Accounts receivable , net , and marketable security 109,140 119,675 Accounts receivable , net of net of allowance of $ 729 and $ 753 20,838 25,326 of $ 729 and $ 753 20,838 25,326 Income tax receivable $ 729 and $ 753 20,838 25,326 Income tax receivable , 729 and $ 753 20,838 25,326 Income tax receivable , net Income tax receivable , net 355 2,166 Inventory 1,107 999 Other tax receivable , net 355 2,166 Inventory 1,107 999 Other current , net 355 2,166 Inventory 1,107 999 Other current asset 4,236 net 355 2,166 Inventory 1,107 999 Other current asset 4,236 4,412 1,107 999 Other current asset 4,236 4,412 Total current asset 135,676 999 Other current asset 4,236 4,412 Total current asset 135,676 152,578 4,236 4,412 Total current asset 135,676 152,578 Non-marketable investment 13,859 13,078 4,412 Total current asset 135,676 152,578 Non-marketable investment 13,859 13,078 Deferred asset 135,676 152,578 Non-marketable investment 13,859 13,078 Deferred income tax 737 135,676 152,578 Non-marketable investment 13,859 13,078 Deferred income tax 737 721 13,859 13,078 Deferred income tax 737 721 Property and equipment , 13,078 Deferred income tax 737 721 Property and equipment , net Property and equipment , net 59,719 73,646 Operating lease asset 0 and equipment , net 59,719 73,646 Operating lease asset 0 10,941 59,719 73,646 Operating lease asset 0 10,941 Intangible asset , net 73,646 Operating lease asset 0 10,941 Intangible asset , net 2,220 10,941 Intangible asset , net 2,220 1,979 Goodwill 17,888 20,624 Other Intangible asset , net 2,220 1,979 Goodwill 17,888 20,624 Other non-current , net 2,220 1,979 Goodwill 17,888 20,624 Other non-current asset 2,693 net 2,220 1,979 Goodwill 17,888 20,624 Other non-current asset 2,693 2,342 17,888 20,624 Other non-current asset 2,693 2,342 Total asset $ 232,792 20,624 Other non-current asset 2,693 2,342 Total asset $ 232,792 $ 2,693 2,342 Total asset $ 232,792 $ 275,909 Liabilities and Stockholders Total asset $ 232,792 $ 275,909 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 4,378 $ 5,561 Accrued compensation and Accounts payable $ 4,378 $ 5,561 Accrued compensation and benefit 6,839 5,561 Accrued compensation and benefit 6,839 8,495 Accrued expense and other Accrued compensation and benefit 6,839 8,495 Accrued expense and other current expense and other current liability 16,958 23,067 Accrued revenue share 4,592 and other current liability 16,958 23,067 Accrued revenue share 4,592 5,916 16,958 23,067 Accrued revenue share 4,592 5,916 Deferred revenue 1,784 1,908 23,067 Accrued revenue share 4,592 5,916 Deferred revenue 1,784 1,908 Income share 4,592 5,916 Deferred revenue 1,784 1,908 Income tax payable , 4,592 5,916 Deferred revenue 1,784 1,908 Income tax payable , net Income tax payable , net 69 274 Total current liability 34,620 tax payable , net 69 274 Total current liability 34,620 45,221 69 274 Total current liability 34,620 45,221 Long-term debt 4,012 4,554 274 Total current liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred liability 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 34,620 45,221 Long-term debt 4,012 4,554 Deferred revenue , non-current 396 4,554 Deferred revenue , non-current 396 358 Income tax payable , Deferred revenue , non-current 396 358 Income tax payable , non-current Income tax payable , non-current 11,327 9,885 Deferred income tax 1,264 tax payable , non-current 11,327 9,885 Deferred income tax 1,264 1,701 11,327 9,885 Deferred income tax 1,264 1,701 Operating lease liability 0 9,885 Deferred income tax 1,264 1,701 Operating lease liability 0 10,214 1,264 1,701 Operating lease liability 0 10,214 Other long-term liability 3,545 1,701 Operating lease liability 0 10,214 Other long-term liability 3,545 2,534 0 10,214 Other long-term liability 3,545 2,534 Total liability 55,164 74,467 10,214 Other long-term liability 3,545 2,534 Total liability 55,164 74,467 Commitments liability 3,545 2,534 Total liability 55,164 74,467 Commitments and Contingencies ( 3,545 2,534 Total liability 55,164 74,467 Commitments and Contingencies ( Note Commitments and Contingencies ( Note 10 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 695,556 ( Class Class C 3,000,000 ) ; 695,556 ( Class A 299,242 , ; 695,556 ( Class A 299,242 , Class B 46,636 , A 299,242 , Class B 46,636 , Class C 349,678 ) B 46,636 , Class C 349,678 ) and 688,335 ( Class Class C 349,678 ) and 688,335 ( Class A 299,828 , and 688,335 ( Class A 299,828 , Class B 46,441 , A 299,828 , Class B 46,441 , Class C 342,066 ) B 46,441 , Class C 342,066 ) share issued and outstanding ) share issued and outstanding 45,049 50,552 Accumulated other comprehensive loss share issued and outstanding 45,049 50,552 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 2,306 ) ( 1,232 ) Retained loss ( 2,306 ) ( 1,232 ) Retained earnings 134,885 152,122 ( 1,232 ) Retained earnings 134,885 152,122 Total stockholder ’ equity 1,232 ) Retained earnings 134,885 152,122 Total stockholder ’ equity 177,628 152,122 Total stockholder ’ equity 177,628 201,442 Total liability and stockholder Total stockholder ’ equity 177,628 201,442 Total liability and stockholder ’ and stockholder ’ equity $ 232,792 $ 275,909 See accompanying note ’ equity $ 232,792 $ 275,909 See accompanying note . 50 275,909 See accompanying note . 50 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2017 2018 2019 Revenues Year Ended December 31 , 2017 2018 2019 Revenues $ 110,855 Ended December 31 , 2017 2018 2019 Revenues $ 110,855 $ December 31 , 2017 2018 2019 Revenues $ 110,855 $ 136,819 2017 2018 2019 Revenues $ 110,855 $ 136,819 $ 161,857 Costs 2019 Revenues $ 110,855 $ 136,819 $ 161,857 Costs and expense $ 110,855 $ 136,819 $ 161,857 Costs and expense : Cost expense : Cost of revenue 45,583 59,549 71,896 Research and development : Cost of revenue 45,583 59,549 71,896 Research and development 16,625 Cost of revenue 45,583 59,549 71,896 Research and development 16,625 21,419 59,549 71,896 Research and development 16,625 21,419 26,018 Sales and marketing 71,896 Research and development 16,625 21,419 26,018 Sales and marketing 12,893 Research and development 16,625 21,419 26,018 Sales and marketing 12,893 16,333 21,419 26,018 Sales and marketing 12,893 16,333 18,464 General and administrative 26,018 Sales and marketing 12,893 16,333 18,464 General and administrative 6,840 Sales and marketing 12,893 16,333 18,464 General and administrative 6,840 6,923 16,333 18,464 General and administrative 6,840 6,923 9,551 European Commission fine 18,464 General and administrative 6,840 6,923 9,551 European Commission fine 2,736 General and administrative 6,840 6,923 9,551 European Commission fine 2,736 5,071 6,923 9,551 European Commission fine 2,736 5,071 1,697 Total cost and 9,551 European Commission fine 2,736 5,071 1,697 Total cost and expense European Commission fine 2,736 5,071 1,697 Total cost and expense 84,677 1,697 Total cost and expense 84,677 109,295 127,626 Income from operation Total cost and expense 84,677 109,295 127,626 Income from operation 26,178 cost and expense 84,677 109,295 127,626 Income from operation 26,178 27,524 109,295 127,626 Income from operation 26,178 27,524 34,231 Other income ( 127,626 Income from operation 26,178 27,524 34,231 Other income ( expense Income from operation 26,178 27,524 34,231 Other income ( expense ) ( expense ) , net 1,015 7,389 5,394 Income before income expense ) , net 1,015 7,389 5,394 Income before income tax ) , net 1,015 7,389 5,394 Income before income tax 27,193 5,394 Income before income tax 27,193 34,913 39,625 Provision for income Income before income tax 27,193 34,913 39,625 Provision for income tax before income tax 27,193 34,913 39,625 Provision for income tax 14,531 39,625 Provision for income tax 14,531 4,177 5,282 Net income $ Provision for income tax 14,531 4,177 5,282 Net income $ 12,662 for income tax 14,531 4,177 5,282 Net income $ 12,662 $ 4,177 5,282 Net income $ 12,662 $ 30,736 $ 34,343 Basic Net income $ 12,662 $ 30,736 $ 34,343 Basic net income $ 12,662 $ 30,736 $ 34,343 Basic net income per share Class C capital stock $ 18.27 $ 44.22 $ 49.59 Diluted capital stock $ 18.27 $ 44.22 $ 49.59 Diluted net income $ 18.27 $ 44.22 $ 49.59 Diluted net income per share Class C capital stock $ 18.00 $ 43.70 $ 49.16 See capital stock $ 18.00 $ 43.70 $ 49.16 See accompanying note $ 18.00 $ 43.70 $ 49.16 See accompanying note . 51 49.16 See accompanying note . 51 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2017 2018 2019 Net Year Ended December 31 , 2017 2018 2019 Net income $ Ended December 31 , 2017 2018 2019 Net income $ 12,662 December 31 , 2017 2018 2019 Net income $ 12,662 $ 2018 2019 Net income $ 12,662 $ 30,736 $ 34,343 Other Net income $ 12,662 $ 30,736 $ 34,343 Other comprehensive income $ 12,662 $ 30,736 $ 34,343 Other comprehensive income ( loss in foreign currency translation adjustment 1,543 ( 781 ) ( 119 currency translation adjustment 1,543 ( 781 ) ( 119 ) Available-for-sale 1,543 ( 781 ) ( 119 ) Available-for-sale investment : Change unrealized gain ( loss ) 307 88 1,611 Less : reclassification gain ( loss ) 307 88 1,611 Less : reclassification adjustment ( loss ) 307 88 1,611 Less : reclassification adjustment for loss included in net income 105 ( 911 ) ( 111 in net income 105 ( 911 ) ( 111 ) Net 105 ( 911 ) ( 111 ) Net change ( net of tax effect of $ 0 , $ 156 , and of $ 0 , $ 156 , and $ 221 ) $ 156 , and $ 221 ) 412 ( 823 ) , and $ 221 ) 412 ( 823 ) 1,500 Cash $ 221 ) 412 ( 823 ) 1,500 Cash flow hedge ) 412 ( 823 ) 1,500 Cash flow hedge : Change gain ( loss ) ( 638 ) 290 22 Less : loss ) ( 638 ) 290 22 Less : reclassification adjustment ) ( 638 ) 290 22 Less : reclassification adjustment for loss included in net income 93 98 ( 299 ) Net included in net income 93 98 ( 299 ) Net change net income 93 98 ( 299 ) Net change ( net of tax effect of $ 247 , $ 103 , and of $ 247 , $ 103 , and $ 42 ) $ 103 , and $ 42 ) ( 545 ) 388 and $ 42 ) ( 545 ) 388 ( 277 ) 42 ) ( 545 ) 388 ( 277 ) Other comprehensive ( 545 ) 388 ( 277 ) Other comprehensive income ( comprehensive income ( loss ) 1,410 ( 1,216 ) 1,104 Comprehensive ( loss ) 1,410 ( 1,216 ) 1,104 Comprehensive income $ ) 1,410 ( 1,216 ) 1,104 Comprehensive income $ 14,072 $ ) 1,104 Comprehensive income $ 14,072 $ 29,520 $ 35,447 See Comprehensive income $ 14,072 $ 29,520 $ 35,447 See accompanying note $ 14,072 $ 29,520 $ 35,447 See accompanying note . 52 35,447 See accompanying note . 52 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2016 691,293 $ 36,307 a of December 31 , 2016 691,293 $ 36,307 $ ( of December 31 , 2016 691,293 $ 36,307 $ ( 2,402 31 , 2016 691,293 $ 36,307 $ ( 2,402 ) $ 691,293 $ 36,307 $ ( 2,402 ) $ 105,131 $ 139,036 $ ( 2,402 ) $ 105,131 $ 139,036 Cumulative effect of 2,402 ) $ 105,131 $ 139,036 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 0 ( 15 ) effect of accounting change 0 0 0 ( 15 ) ( of accounting change 0 0 0 ( 15 ) ( 15 change 0 0 0 ( 15 ) ( 15 ) Common 0 ( 15 ) ( 15 ) Common and capital stock Common and capital stock issued 8,652 212 0 0 212 Stock-based and capital stock issued 8,652 212 0 0 212 Stock-based compensation capital stock issued 8,652 212 0 0 212 Stock-based compensation expense stock issued 8,652 212 0 0 212 Stock-based compensation expense 0 issued 8,652 212 0 0 212 Stock-based compensation expense 0 7,694 0 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax 212 Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding Stock-based compensation expense 0 7,694 0 0 7,694 Tax withholding related compensation expense 0 7,694 0 0 7,694 Tax withholding related to expense 0 7,694 0 0 7,694 Tax withholding related to vesting vesting of restricted stock unit 0 ( 4,373 ) 0 0 restricted stock unit 0 ( 4,373 ) 0 0 ( 4,373 unit 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases 0 ( 4,373 ) 0 0 ( 4,373 ) Repurchases of 4,373 ) 0 0 ( 4,373 ) Repurchases of capital stock Repurchases of capital stock ( 5,162 ) ( 315 ) 0 stock ( 5,162 ) ( 315 ) 0 ( 4,531 ) 5,162 ) ( 315 ) 0 ( 4,531 ) ( 4,846 ( 315 ) 0 ( 4,531 ) ( 4,846 ) Sale 0 ( 4,531 ) ( 4,846 ) Sale of interest in of interest in consolidated entity 0 722 0 0 722 Net interest in consolidated entity 0 722 0 0 722 Net income in consolidated entity 0 722 0 0 722 Net income 0 consolidated entity 0 722 0 0 722 Net income 0 0 entity 0 722 0 0 722 Net income 0 0 0 0 0 722 Net income 0 0 0 12,662 12,662 Other 0 722 Net income 0 0 0 12,662 12,662 Other comprehensive 722 Net income 0 0 0 12,662 12,662 Other comprehensive income Net income 0 0 0 12,662 12,662 Other comprehensive income ( income 0 0 0 12,662 12,662 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,410 0 1,410 Balance income ( loss ) 0 0 1,410 0 1,410 Balance a ( loss ) 0 0 1,410 0 1,410 Balance a of loss ) 0 0 1,410 0 1,410 Balance a of December ) 0 0 1,410 0 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 694,783 40,247 ( a of December 31 , 2017 694,783 40,247 ( 992 ) of December 31 , 2017 694,783 40,247 ( 992 ) 113,247 December 31 , 2017 694,783 40,247 ( 992 ) 113,247 152,502 , 2017 694,783 40,247 ( 992 ) 113,247 152,502 Cumulative effect 694,783 40,247 ( 992 ) 113,247 152,502 Cumulative effect of accounting 40,247 ( 992 ) 113,247 152,502 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 98 ) ( effect of accounting change 0 0 ( 98 ) ( 599 accounting change 0 0 ( 98 ) ( 599 ) ( 0 ( 98 ) ( 599 ) ( 697 ) Common ) ( 599 ) ( 697 ) Common and capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding related compensation expense 0 9,353 0 0 9,353 Tax withholding related to expense 0 9,353 0 0 9,353 Tax withholding related to vesting restricted stock unit and other 0 ( 4,782 ) 0 0 unit and other 0 ( 4,782 ) 0 0 ( 4,782 other 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases of 4,782 ) 0 0 ( 4,782 ) Repurchases of capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of interest in of interest in consolidated entity 0 659 0 0 659 Net interest in consolidated entity 0 659 0 0 659 Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive income Net income 0 0 0 30,736 30,736 Other comprehensive income ( income 0 0 0 30,736 30,736 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 1,216 ) 0 income ( loss ) 0 0 ( 1,216 ) 0 ( loss ) 0 0 ( 1,216 ) 0 ( 1,216 ) 0 0 ( 1,216 ) 0 ( 1,216 ) Balance a ( 1,216 ) 0 ( 1,216 ) Balance a of December ) Balance a of December 31 , 2018 695,556 45,049 ( a of December 31 , 2018 695,556 45,049 ( 2,306 ) of December 31 , 2018 695,556 45,049 ( 2,306 ) 134,885 December 31 , 2018 695,556 45,049 ( 2,306 ) 134,885 177,628 , 2018 695,556 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect 695,556 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect of accounting 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 4 accounting change 0 0 ( 30 ) ( 4 ) ( 0 ( 30 ) ( 4 ) ( 34 ) Common ) ( 4 ) ( 34 ) Common and capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding related compensation expense 0 10,890 0 0 10,890 Tax withholding related to expense 0 10,890 0 0 10,890 Tax withholding related to vesting restricted stock unit and other 0 ( 4,455 ) 0 0 unit and other 0 ( 4,455 ) 0 0 ( 4,455 other 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases of 4,455 ) 0 0 ( 4,455 ) Repurchases of capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1,104 0 1,104 Balance a ( loss ) 0 0 1,104 0 1,104 Balance a of loss ) 0 0 1,104 0 1,104 Balance a of December ) 0 0 1,104 0 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 688,335 $ 50,552 a of December 31 , 2019 688,335 $ 50,552 $ ( of December 31 , 2019 688,335 $ 50,552 $ ( 1,232 31 , 2019 688,335 $ 50,552 $ ( 1,232 ) $ 688,335 $ 50,552 $ ( 1,232 ) $ 152,122 $ 201,442 $ ( 1,232 ) $ 152,122 $ 201,442 See accompanying note 1,232 ) $ 152,122 $ 201,442 See accompanying note . 53 201,442 See accompanying note . 53 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2017 2018 2019 Operating Year Ended December 31 , 2017 2018 2019 Operating activity Net Ended December 31 , 2017 2018 2019 Operating activity Net income December 31 , 2017 2018 2019 Operating activity Net income $ Operating activity Net income $ 12,662 $ 30,736 $ 34,343 Adjustments Net income $ 12,662 $ 30,736 $ 34,343 Adjustments : Depreciation $ 12,662 $ 30,736 $ 34,343 Adjustments : Depreciation and impairment impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of property and equipment 6,103 8,164 10,856 Amortization and impairment of intangible and impairment of intangible asset 812 871 925 Stock-based compensation expense impairment of intangible asset 812 871 925 Stock-based compensation expense 7,679 of intangible asset 812 871 925 Stock-based compensation expense 7,679 9,353 871 925 Stock-based compensation expense 7,679 9,353 10,794 Deferred income tax 925 Stock-based compensation expense 7,679 9,353 10,794 Deferred income tax 258 Stock-based compensation expense 7,679 9,353 10,794 Deferred income tax 258 778 9,353 10,794 Deferred income tax 258 778 173 ( Gain ) 10,794 Deferred income tax 258 778 173 ( Gain ) loss Deferred income tax 258 778 173 ( Gain ) loss on and equity security , net 37 ( 6,650 ) ( 2,798 security , net 37 ( 6,650 ) ( 2,798 ) Other 37 ( 6,650 ) ( 2,798 ) Other 294 ( 189 ) ( 2,798 ) Other 294 ( 189 ) ( 592 2,798 ) Other 294 ( 189 ) ( 592 ) Changes 294 ( 189 ) ( 592 ) Changes in asset and acquisition : Accounts receivable ( 3,768 ) ( 2,169 ) ( receivable ( 3,768 ) ( 2,169 ) ( 4,340 ) Income ) ( 2,169 ) ( 4,340 ) Income tax , net ) Income tax , net 8,211 ( 2,251 ) ( 3,128 tax , net 8,211 ( 2,251 ) ( 3,128 ) Other 8,211 ( 2,251 ) ( 3,128 ) Other asset ( 2,164 3,128 ) Other asset ( 2,164 ) ( 1,207 ) ( asset ( 2,164 ) ( 1,207 ) ( 621 ) Accounts ) ( 1,207 ) ( 621 ) Accounts payable 731 1,067 ( 621 ) Accounts payable 731 1,067 428 Accrued expense and 621 ) Accounts payable 731 1,067 428 Accrued expense and other ) Accounts payable 731 1,067 428 Accrued expense and other liability Accrued expense and other liability 4,891 8,614 7,170 Accrued revenue share expense and other liability 4,891 8,614 7,170 Accrued revenue share 955 and other liability 4,891 8,614 7,170 Accrued revenue share 955 483 8,614 7,170 Accrued revenue share 955 483 1,273 Deferred revenue 390 7,170 Accrued revenue share 955 483 1,273 Deferred revenue 390 371 Accrued revenue share 955 483 1,273 Deferred revenue 390 371 37 955 483 1,273 Deferred revenue 390 371 37 Net cash provided 483 1,273 Deferred revenue 390 371 37 Net cash provided by 1,273 Deferred revenue 390 371 37 Net cash provided by operating cash provided by operating activity 37,091 47,971 54,520 Investing activity Purchases provided by operating activity 37,091 47,971 54,520 Investing activity Purchases of by operating activity 37,091 47,971 54,520 Investing activity Purchases of property of property and equipment ( 13,184 ) ( 25,139 ) ( equipment ( 13,184 ) ( 25,139 ) ( 23,548 ) Purchases ) ( 25,139 ) ( 23,548 ) Purchases of marketable security Purchases of marketable security ( 92,195 ) ( 50,158 ) ( security ( 92,195 ) ( 50,158 ) ( 100,315 ) Maturities ) ( 50,158 ) ( 100,315 ) Maturities and sale of and sale of marketable security 73,959 48,507 97,825 Purchases of non-marketable sale of marketable security 73,959 48,507 97,825 Purchases of non-marketable investment of marketable security 73,959 48,507 97,825 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 1,745 ) ( 2,073 ) ( investment ( 1,745 ) ( 2,073 ) ( 1,932 ) Maturities ) ( 2,073 ) ( 1,932 ) Maturities and sale of and sale of non-marketable investment 533 1,752 405 Acquisitions , net sale of non-marketable investment 533 1,752 405 Acquisitions , net of of non-marketable investment 533 1,752 405 Acquisitions , net of cash purchase of intangible asset ( 287 ) ( 1,491 ) ( asset ( 287 ) ( 1,491 ) ( 2,515 ) Proceeds ) ( 1,491 ) ( 2,515 ) Proceeds from collection of from collection of note receivable 1,419 0 0 Other investing activity collection of note receivable 1,419 0 0 Other investing activity 99 of note receivable 1,419 0 0 Other investing activity 99 98 0 0 Other investing activity 99 98 589 Net cash used 0 Other investing activity 99 98 589 Net cash used in Other investing activity 99 98 589 Net cash used in investing used in investing activity ( 31,401 ) ( 28,504 ) ( activity ( 31,401 ) ( 28,504 ) ( 29,491 ) Financing ) ( 28,504 ) ( 29,491 ) Financing activity Net payment to stock-based award activity ( 4,166 ) ( 4,993 ) ( activity ( 4,166 ) ( 4,993 ) ( 4,765 ) Repurchases ) ( 4,993 ) ( 4,765 ) Repurchases of capital stock Repurchases of capital stock ( 4,846 ) ( 9,075 ) ( stock ( 4,846 ) ( 9,075 ) ( 18,396 ) Proceeds ) ( 9,075 ) ( 18,396 ) Proceeds from issuance of debt , net of cost 4,291 6,766 317 Repayments of debt , net of cost 4,291 6,766 317 Repayments of debt ( net of cost 4,291 6,766 317 Repayments of debt ( 4,377 317 Repayments of debt ( 4,377 ) ( 6,827 ) ( debt ( 4,377 ) ( 6,827 ) ( 585 ) Proceeds ) ( 6,827 ) ( 585 ) Proceeds from sale of of interest in consolidated entity 800 950 220 Net cash used interest in consolidated entity 800 950 220 Net cash used in in consolidated entity 800 950 220 Net cash used in financing used in financing activity ( 8,298 ) ( 13,179 ) ( activity ( 8,298 ) ( 13,179 ) ( 23,209 ) Effect ) ( 13,179 ) ( 23,209 ) Effect of exchange rate on cash and cash equivalent 405 ( 302 ) ( 23 and cash equivalent 405 ( 302 ) ( 23 ) Net 405 ( 302 ) ( 23 ) Net increase ( decrease cash and cash equivalent ( 2,203 ) 5,986 1,797 Cash and cash equivalent ( 2,203 ) 5,986 1,797 Cash and cash equivalent equivalent ( 2,203 ) 5,986 1,797 Cash and cash equivalent at equivalent at beginning of period 12,918 10,715 16,701 Cash and cash at beginning of period 12,918 10,715 16,701 Cash and cash equivalent beginning of period 12,918 10,715 16,701 Cash and cash equivalent at at end of period $ 10,715 $ 16,701 $ 18,498 Supplemental of period $ 10,715 $ 16,701 $ 18,498 Supplemental disclosure of $ 10,715 $ 16,701 $ 18,498 Supplemental disclosure of cash flow , net of refund $ 6,191 $ 5,671 $ 8,203 See of refund $ 6,191 $ 5,671 $ 8,203 See accompanying note $ 6,191 $ 5,671 $ 8,203 See accompanying note . 54 8,203 See accompanying note . 54 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding or service . See Note 2 for further discussion on Revenues remeasured at fair value through 55 Table of Contents Alphabet Inc. affiliated customer represented more than 10 % of our revenue in % of our revenue in 2017 , 2018 , or 2019 our revenue in 2017 , 2018 , or 2019 . In 2017 , 2018 , or 2019 . In 2017 , 2018 , or 2019 . In 2017 , 2018 , and 2019 2019 . In 2017 , 2018 , and 2019 , we 2017 , 2018 , and 2019 , we generated approximately 47 2019 , we generated approximately 47 % , 46 % , generated approximately 47 % , 46 % , and 46 % , 46 % , and 46 % of our revenue , measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are and money market fund . 56 Table of Contents Alphabet Inc. liquid security with maturity beyond 12 month a current asset under Accounting Standards Update No . 2016-01 , which we adopted on which we adopted on January 1 , 2018 . Under the adopted on January 1 , 2018 . Under the measurement alternative the following criterion : ( 1 ) ha the power to the VIE ; and ( 2 ) ha the obligation to delivered to the customer . 57 Table of Contents Alphabet Inc Consolidated Balance Sheet beginning January 1 , 2019 . The current Sheet beginning January 1 , 2019 . The current portion of over period of seven to 25 year . We depreciate information based on their estimated fair 58 Table of Contents Alphabet Inc. benefit that is greater than 50 % likely to be realized For the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , advertising and , 2017 , 2018 and 2019 , advertising and promotional expense promotional expense totaled approximately $ 5.1 billion , $ 6.4 billion $ 5.1 billion , $ 6.4 billion , and $ 6.8 6.4 billion , and $ 6.8 billion , respectively . Recent not yet adopted In June 2016 , the Financial Accounting Standards Accounting Standards Update No . 2016-13 ( ASU 2016-13 ) `` No . 2016-13 ( ASU 2016-13 ) `` Financial Instruments-Credit Losses Financial Instruments-Credit Losses ( Topic 326 ) : Measurement of Credit at amortized cost . ASU 2016-13 replaces the existing incurred loss . We will adopt ASU 2016-13 effective January 1 , 2020 adopt ASU 2016-13 effective January 1 , 2020 with the cumulative 2016-13 effective January 1 , 2020 with the cumulative effect of expected to be material . 59 Table of Contents Alphabet Inc adopted accounting pronouncement In February 2016 , the FASB issued Accounting Accounting Standards Update No . 2016-02 ( Topic 842 ) `` No . 2016-02 ( Topic 842 ) `` Leases . `` `` Leases . `` Topic 842 supersedes the lease requirement in in Accounting Standards Codification Topic 840 , `` Leases . `` Leases . `` Under Topic 842 , lessee are required to operating . We adopted Topic 842 effective January 1 , 2019 adopted Topic 842 effective January 1 , 2019 . The most 842 effective January 1 , 2019 . The most significant effect most significant effect of Topic 842 were the recognition of $ were the recognition of $ 8.0 billion of operating lease asset operating lease asset and $ 8.4 billion of operating lease liability and the de-recognition of $ 1.5 billion of build-to-suit asset and adoption . We applied Topic 842 to all lease a of all lease a of January 1 , 2019 with comparative period a of January 1 , 2019 with comparative period continuing to to be reported under Topic 840 . In the adoption of In the adoption of Topic 842 , we carried forward the forward the assessment from Topic 840 of whether our contract contain cash flow . See Note 4 for further detail . Prior period presented . See Note 2 for further detail . Additionally are based . See Note 7 for further detail . Note for further detail . Note 2 . Revenues Revenue Recognition Revenues presentation . Year Ended December 31 , 2017 2018 2019 Google Year Ended December 31 , 2017 2018 2019 Google Search & Ended December 31 , 2017 2018 2019 Google Search & other December 31 , 2017 2018 2019 Google Search & other $ Google Search & other $ 69,811 $ 85,296 $ 98,115 YouTube & other $ 69,811 $ 85,296 $ 98,115 YouTube ad ( $ 69,811 $ 85,296 $ 98,115 YouTube ad ( 1 ) $ 98,115 YouTube ad ( 1 ) 8,150 11,155 15,149 Google YouTube ad ( 1 ) 8,150 11,155 15,149 Google property 77,961 ad ( 1 ) 8,150 11,155 15,149 Google property 77,961 96,451 ( 1 ) 8,150 11,155 15,149 Google property 77,961 96,451 113,264 8,150 11,155 15,149 Google property 77,961 96,451 113,264 Google Network Members 11,155 15,149 Google property 77,961 96,451 113,264 Google Network Members ' 15,149 Google property 77,961 96,451 113,264 Google Network Members ' property Google Network Members ' property 17,616 20,010 21,547 Google advertising 95,577 Network Members ' property 17,616 20,010 21,547 Google advertising 95,577 116,461 Members ' property 17,616 20,010 21,547 Google advertising 95,577 116,461 134,811 17,616 20,010 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 20,010 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 5,838 21,547 Google advertising 95,577 116,461 134,811 Google Cloud 4,056 5,838 8,918 95,577 116,461 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 116,461 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 1 134,811 Google Cloud 4,056 5,838 8,918 Google other ( 1 ) 5,838 8,918 Google other ( 1 ) 10,914 14,063 17,014 Google Google other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 other ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 ( 1 ) 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 10,914 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 14,063 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 17,014 Google revenue 110,547 136,362 160,743 Other Bets revenue 477 595 136,362 160,743 Other Bets revenue 477 595 659 Hedging gain ( 160,743 Other Bets revenue 477 595 659 Hedging gain ( loss Other Bets revenue 477 595 659 Hedging gain ( loss ) gain ( loss ) ( 169 ) ( 138 ) 455 ) ( 169 ) ( 138 ) 455 Total revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 ( Total revenue $ 110,855 $ 136,819 $ 161,857 ( 1 ) $ 110,855 $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising $ 136,819 $ 161,857 ( 1 ) YouTube non-advertising revenue are in Google other revenue . 60 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 United Year Ended December 31 , 2017 2018 2019 United States $ Ended December 31 , 2017 2018 2019 United States $ 52,449 December 31 , 2017 2018 2019 United States $ 52,449 47 2018 2019 United States $ 52,449 47 % $ 63,269 46 2019 United States $ 52,449 47 % $ 63,269 46 % $ 52,449 47 % $ 63,269 46 % $ 74,843 46 52,449 47 % $ 63,269 46 % $ 74,843 46 % $ 63,269 46 % $ 74,843 46 % EMEA ( 1 63,269 46 % $ 74,843 46 % EMEA ( 1 ) 74,843 46 % EMEA ( 1 ) 36,236 33 44,739 33 % EMEA ( 1 ) 36,236 33 44,739 33 50,645 31 EMEA ( 1 ) 36,236 33 44,739 33 50,645 31 APAC ( 1 ) 36,236 33 44,739 33 50,645 31 APAC ( 1 ) 36,236 33 44,739 33 50,645 31 APAC ( 1 ) 36,236 33 44,739 33 50,645 31 APAC ( 1 ) 36,236 33 44,739 33 50,645 31 APAC ( 1 ) 16,192 33 50,645 31 APAC ( 1 ) 16,192 15 21,341 15 31 APAC ( 1 ) 16,192 15 21,341 15 26,928 17 APAC ( 1 ) 16,192 15 21,341 15 26,928 17 Other ( 1 ) 16,192 15 21,341 15 26,928 17 Other Americas 1 ) 16,192 15 21,341 15 26,928 17 Other Americas ( ) 16,192 15 21,341 15 26,928 17 Other Americas ( 1 16,192 15 21,341 15 26,928 17 Other Americas ( 1 ) 26,928 17 Other Americas ( 1 ) 6,147 5 7,608 6 Other Americas ( 1 ) 6,147 5 7,608 6 8,986 6 Americas ( 1 ) 6,147 5 7,608 6 8,986 6 Hedging ( 1 ) 6,147 5 7,608 6 8,986 6 Hedging gain 1 ) 6,147 5 7,608 6 8,986 6 Hedging gain ( ) 6,147 5 7,608 6 8,986 6 Hedging gain ( loss 6,147 5 7,608 6 8,986 6 Hedging gain ( loss ) gain ( loss ) ( 169 ) 0 ( 138 ) loss ) ( 169 ) 0 ( 138 ) 0 455 ( 169 ) 0 ( 138 ) 0 455 0 Total ) 0 ( 138 ) 0 455 0 Total revenue $ 0 ( 138 ) 0 455 0 Total revenue $ 110,855 ( 138 ) 0 455 0 Total revenue $ 110,855 100 455 0 Total revenue $ 110,855 100 % $ 136,819 100 0 Total revenue $ 110,855 100 % $ 136,819 100 % $ 110,855 100 % $ 136,819 100 % $ 161,857 100 110,855 100 % $ 136,819 100 % $ 161,857 100 % $ 136,819 100 % $ 161,857 100 % ( 1 ) 136,819 100 % $ 161,857 100 % ( 1 ) Regions $ 161,857 100 % ( 1 ) Regions represent Europe , expected cost plus margin . 61 Table of Contents Alphabet Inc for the year ended December 31 , 2019 wa primarily driven year ended December 31 , 2019 wa primarily driven by cash obligation , offset by $ 1.7 billion of revenue recognized that revenue balance a of December 31 , 2018 . Additionally , a of December 31 , 2018 . Additionally , we have period . As of December 31 , 2019 , the amount As of December 31 , 2019 , the amount not yet from these commitment is $ 11.4 billion , which reflects our two third over the next 24 month with the remaining thereafter and marketing expense . Note 3 . Financial Instruments Debt Securities marketable debt security within Level 2 in the fair value hierarchy investment category a of December 31 , 2018 and 2019 ( a of December 31 , 2018 and 2019 ( in million December 31 , 2018 and 2019 ( in million ) : ) : As of December 31 , 2018 Adjusted Cost Gross As of December 31 , 2018 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,202 $ 0 deposit ( 1 ) $ 2,202 $ 0 $ 0 $ 1 ) $ 2,202 $ 0 $ 0 $ 2,202 $ $ 2,202 $ 0 $ 0 $ 2,202 $ 2,202 $ $ 0 $ 0 $ 2,202 $ 2,202 $ 0 Government $ 0 $ 2,202 $ 2,202 $ 0 Government bond 53,634 $ 2,202 $ 2,202 $ 0 Government bond 53,634 71 ( 2,202 $ 0 Government bond 53,634 71 ( 414 ) 53,291 $ 0 Government bond 53,634 71 ( 414 ) 53,291 3,717 Government bond 53,634 71 ( 414 ) 53,291 3,717 49,574 Corporate 53,634 71 ( 414 ) 53,291 3,717 49,574 Corporate debt security 71 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 ( 414 ) 53,291 3,717 49,574 Corporate debt security 25,383 15 3,717 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 49,574 Corporate debt security 25,383 15 ( 316 ) 25,082 44 debt security 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed 25,383 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed 15 ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed security ( 316 ) 25,082 44 25,038 Mortgage-backed and asset-backed security 16,918 25,038 Mortgage-backed and asset-backed security 16,918 11 ( 324 ) 16,605 Mortgage-backed and asset-backed security 16,918 11 ( 324 ) 16,605 0 asset-backed security 16,918 11 ( 324 ) 16,605 0 16,605 Total 16,918 11 ( 324 ) 16,605 0 16,605 Total $ 98,137 11 ( 324 ) 16,605 0 16,605 Total $ 98,137 $ ( 324 ) 16,605 0 16,605 Total $ 98,137 $ 97 16,605 0 16,605 Total $ 98,137 $ 97 $ ( 1,054 16,605 Total $ 98,137 $ 97 $ ( 1,054 ) $ 98,137 $ 97 $ ( 1,054 ) $ 97,180 $ 5,963 $ ( 1,054 ) $ 97,180 $ 5,963 $ 91,217 62 1,054 ) $ 97,180 $ 5,963 $ 91,217 62 Table of $ 97,180 $ 5,963 $ 91,217 62 Table of Contents Alphabet 97,180 $ 5,963 $ 91,217 62 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2019 Adjusted Cost Gross As of December 31 , 2019 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,294 $ 0 deposit ( 1 ) $ 2,294 $ 0 $ 0 $ 1 ) $ 2,294 $ 0 $ 0 $ 2,294 $ $ 2,294 $ 0 $ 0 $ 2,294 $ 2,294 $ $ 0 $ 0 $ 2,294 $ 2,294 $ 0 Government $ 0 $ 2,294 $ 2,294 $ 0 Government bond 55,033 $ 2,294 $ 2,294 $ 0 Government bond 55,033 434 ( 2,294 $ 0 Government bond 55,033 434 ( 30 ) 55,437 $ 0 Government bond 55,033 434 ( 30 ) 55,437 4,518 Government bond 55,033 434 ( 30 ) 55,437 4,518 50,919 Corporate 55,033 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security 19,453 27,454 Mortgage-backed and asset-backed security 19,453 96 ( 41 ) 19,508 Mortgage-backed and asset-backed security 19,453 96 ( 41 ) 19,508 0 asset-backed security 19,453 96 ( 41 ) 19,508 0 19,508 Total 19,453 96 ( 41 ) 19,508 0 19,508 Total $ 103,944 96 ( 41 ) 19,508 0 19,508 Total $ 103,944 $ ( 41 ) 19,508 0 19,508 Total $ 103,944 $ 867 19,508 0 19,508 Total $ 103,944 $ 867 $ ( 74 19,508 Total $ 103,944 $ 867 $ ( 74 ) $ 103,944 $ 867 $ ( 74 ) $ 104,737 $ 6,856 $ ( 74 ) $ 104,737 $ 6,856 $ 97,881 ( 74 ) $ 104,737 $ 6,856 $ 97,881 ( 1 ) $ 104,737 $ 6,856 $ 97,881 ( 1 ) The majority $ 6,856 $ 97,881 ( 1 ) The majority of our gross realized gain of $ 185 million , $ 1.3 billion $ 185 million , $ 1.3 billion , and $ 292 1.3 billion , and $ 292 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . We recognized gross realized loss of $ 295 million , $ 143 million $ 295 million , $ 143 million , and $ 143 143 million , and $ 143 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . We reflect ) : As of December 31 , 2019 Due in 1 As of December 31 , 2019 Due in 1 year $ 31 , 2019 Due in 1 year $ 20,392 Due in Due in 1 year $ 20,392 Due in 1 year through year $ 20,392 Due in 1 year through 5 year 63,151 Due in 1 year through 5 year 63,151 Due in 5 1 year through 5 year 63,151 Due in 5 year through 5 year 63,151 Due in 5 year through 10 year 2,671 Due in 5 year through 10 year 2,671 Due after 10 5 year through 10 year 2,671 Due after 10 year 11,667 10 year 2,671 Due after 10 year 11,667 Total $ 97,881 2,671 Due after 10 year 11,667 Total $ 97,881 The following 10 year 11,667 Total $ 97,881 The following table present gross loss position a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , aggregated by December 31 , 2018 and 2019 , aggregated by investment category ) : As of December 31 , 2018 Less than 12 As of December 31 , 2018 Less than 12 Months 12 31 , 2018 Less than 12 Months 12 Months or Greater 2018 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 12,019 $ ( 85 ) $ bond $ 12,019 $ ( 85 ) $ 23,877 $ ( $ ( 85 ) $ 23,877 $ ( 329 ) $ ) $ 23,877 $ ( 329 ) $ 35,896 $ ( $ ( 329 ) $ 35,896 $ ( 414 ) Corporate ) $ 35,896 $ ( 414 ) Corporate debt security 10,171 414 ) Corporate debt security 10,171 ( 107 ) 11,545 ( Corporate debt security 10,171 ( 107 ) 11,545 ( 209 ) security 10,171 ( 107 ) 11,545 ( 209 ) 21,716 ( ( 107 ) 11,545 ( 209 ) 21,716 ( 316 ) ) 11,545 ( 209 ) 21,716 ( 316 ) Mortgage-backed and ( 209 ) 21,716 ( 316 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 5,534 ( 75 ) 8,519 ( and asset-backed security 5,534 ( 75 ) 8,519 ( 249 ) security 5,534 ( 75 ) 8,519 ( 249 ) 14,053 ( ( 75 ) 8,519 ( 249 ) 14,053 ( 324 ) ) 8,519 ( 249 ) 14,053 ( 324 ) Total $ ( 249 ) 14,053 ( 324 ) Total $ 27,724 $ ( 324 ) Total $ 27,724 $ ( 267 ) $ Total $ 27,724 $ ( 267 ) $ 43,941 $ ( $ ( 267 ) $ 43,941 $ ( 787 ) $ ) $ 43,941 $ ( 787 ) $ 71,665 $ ( $ ( 787 ) $ 71,665 $ ( 1,054 ) As ) $ 71,665 $ ( 1,054 ) As of December 31 1,054 ) As of December 31 , 2019 Less than 12 As of December 31 , 2019 Less than 12 Months 12 31 , 2019 Less than 12 Months 12 Months or Greater 2019 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 6,752 $ ( 20 ) $ bond $ 6,752 $ ( 20 ) $ 4,590 $ ( $ ( 20 ) $ 4,590 $ ( 10 ) $ ) $ 4,590 $ ( 10 ) $ 11,342 $ ( $ ( 10 ) $ 11,342 $ ( 30 ) Corporate ) $ 11,342 $ ( 30 ) Corporate debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 ) Total $ ( 28 ) 7,371 ( 41 ) Total $ 12,953 $ ( 41 ) Total $ 12,953 $ ( 35 ) $ Total $ 12,953 $ ( 35 ) $ 8,403 $ ( $ ( 35 ) $ 8,403 $ ( 39 ) $ ) $ 8,403 $ ( 39 ) $ 21,356 $ ( $ ( 39 ) $ 21,356 $ ( 74 ) 63 ) $ 21,356 $ ( 74 ) 63 Table of Contents 21,356 $ ( 74 ) 63 Table of Contents Alphabet Inc. During the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , we did , 2017 , 2018 and 2019 , we did not recognize value and classified within Level 1 and 2 in the fair classified within Level 1 and 2 in the fair value hierarchy period are classified within Level 2 or Level 3 in the within Level 2 or Level 3 in the fair value hierarchy ) : Year Ended December 31 , 2018 2019 Net gain Year Ended December 31 , 2018 2019 Net gain ( loss Ended December 31 , 2018 2019 Net gain ( loss ) sold during the period $ 1,458 $ ( 301 ) Net period $ 1,458 $ ( 301 ) Net unrealized gain ( end of the period ( 1 ) 4,002 2,950 Total gain the period ( 1 ) 4,002 2,950 Total gain ( loss period ( 1 ) 4,002 2,950 Total gain ( loss ) expense ) , net $ 5,460 $ 2,649 ( 1 ) , net $ 5,460 $ 2,649 ( 1 ) Includes net $ 5,460 $ 2,649 ( 1 ) Includes net gain of Includes net gain of $ 4.1 billion and $ 1.8 billion $ 4.1 billion and $ 1.8 billion related to non-marketable equity for the year ended December 31 , 2018 and 2019 , year ended December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . In the During the Year Ended December 31 , 2018 2019 Total sale Year Ended December 31 , 2018 2019 Total sale price $ Ended December 31 , 2018 2019 Total sale price $ 1,965 2019 Total sale price $ 1,965 $ 3,134 Total initial cost sale price $ 1,965 $ 3,134 Total initial cost 515 858 $ 3,134 Total initial cost 515 858 Cumulative net gain $ 3,134 Total initial cost 515 858 Cumulative net gain $ 1,450 858 Cumulative net gain $ 1,450 $ 2,276 64 Table of net gain $ 1,450 $ 2,276 64 Table of Contents Alphabet gain $ 1,450 $ 2,276 64 Table of Contents Alphabet Inc ) : As of December 31 , 2018 Marketable Securities Non-Marketable As of December 31 , 2018 Marketable Securities Non-Marketable Securities Total Total Total initial cost $ 1,168 $ 8,168 $ 9,336 Cumulative initial cost $ 1,168 $ 8,168 $ 9,336 Cumulative net gain $ 1,168 $ 8,168 $ 9,336 Cumulative net gain ( 1 9,336 Cumulative net gain ( 1 ) 54 4,107 4,161 Carrying net gain ( 1 ) 54 4,107 4,161 Carrying value $ gain ( 1 ) 54 4,107 4,161 Carrying value $ 1,222 ( 1 ) 54 4,107 4,161 Carrying value $ 1,222 $ 4,107 4,161 Carrying value $ 1,222 $ 12,275 $ 13,497 ( Carrying value $ 1,222 $ 12,275 $ 13,497 ( 1 ) $ 1,222 $ 12,275 $ 13,497 ( 1 ) Non-marketable security $ 12,275 $ 13,497 ( 1 ) Non-marketable security cumulative net gain is comprised of $ 4.3 billion unrealized gain and $ billion unrealized gain and $ 178 million unrealized loss ( including ) . As of December 31 , 2019 Marketable Securities Non-Marketable As of December 31 , 2019 Marketable Securities Non-Marketable Securities Total Total Total initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative net gain $ 1,935 $ 8,297 $ 10,232 Cumulative net gain ( 1 10,232 Cumulative net gain ( 1 ) 1,361 3,056 4,417 Carrying net gain ( 1 ) 1,361 3,056 4,417 Carrying value $ gain ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 $ 3,056 4,417 Carrying value $ 3,296 $ 11,353 $ 14,649 ( Carrying value $ 3,296 $ 11,353 $ 14,649 ( 1 ) $ 3,296 $ 11,353 $ 14,649 ( 1 ) Non-marketable security $ 11,353 $ 14,649 ( 1 ) Non-marketable security cumulative net gain is comprised of $ 3.5 billion unrealized gain and $ billion unrealized gain and $ 445 million unrealized loss ( including investment category a of December 31 , 2018 and 2019 ( a of December 31 , 2018 and 2019 ( in million December 31 , 2018 and 2019 ( in million ) : ) : As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 Cash and Cash As of December 31 , 2019 Cash and Cash Equivalents Marketable Cash Equivalents Marketable Securities Level 1 : Money market fund $ : Money market fund $ 3,493 $ 0 $ 4,604 $ market fund $ 3,493 $ 0 $ 4,604 $ 0 Marketable $ 3,493 $ 0 $ 4,604 $ 0 Marketable equity security $ 0 $ 4,604 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) 0 994 0 3,046 equity security ( 1 ) 0 994 0 3,046 3,493 994 security ( 1 ) 0 994 0 3,046 3,493 994 4,604 ( 1 ) 0 994 0 3,046 3,493 994 4,604 3,046 1 ) 0 994 0 3,046 3,493 994 4,604 3,046 Level ) 0 994 0 3,046 3,493 994 4,604 3,046 Level 2 0 994 0 3,046 3,493 994 4,604 3,046 Level 2 : 994 0 3,046 3,493 994 4,604 3,046 Level 2 : Mutual 0 3,046 3,493 994 4,604 3,046 Level 2 : Mutual fund 3,493 994 4,604 3,046 Level 2 : Mutual fund 0 228 Level 2 : Mutual fund 0 228 0 250 Total $ 2 : Mutual fund 0 228 0 250 Total $ 3,493 : Mutual fund 0 228 0 250 Total $ 3,493 $ Mutual fund 0 228 0 250 Total $ 3,493 $ 1,222 228 0 250 Total $ 3,493 $ 1,222 $ 4,604 $ 250 Total $ 3,493 $ 1,222 $ 4,604 $ 3,296 ( $ 3,493 $ 1,222 $ 4,604 $ 3,296 ( 1 ) $ 1,222 $ 4,604 $ 3,296 ( 1 ) The balance $ 4,604 $ 3,296 ( 1 ) The balance a s balance a s of December 31 , 2019 includes investment that s of December 31 , 2019 includes investment that were reclassified ) : Year Ended December 31 , 2018 2019 Unrealized gain Year Ended December 31 , 2018 2019 Unrealized gain $ 4,285 Ended December 31 , 2018 2019 Unrealized gain $ 4,285 $ 2018 2019 Unrealized gain $ 4,285 $ 2,163 Unrealized loss ( Unrealized gain $ 4,285 $ 2,163 Unrealized loss ( including impairment ( including impairment ) ( 178 ) ( 372 ) Total ) ( 178 ) ( 372 ) Total unrealized gain ( for non-marketable equity security $ 4,107 $ 1,791 During the year equity security $ 4,107 $ 1,791 During the year ended December During the year ended December 31 , 2019 , included in year ended December 31 , 2019 , included in the $ , included in the $ 11.4 billion of non-marketable equity security non-marketable equity security , $ 7.6 billion were measured at fair net unrealized gain of $ 1.8 billion . 65 Table of of $ 1.8 billion . 65 Table of Contents Alphabet Inc. carrying value of approximately $ 1.3 billion a of December 31 1.3 billion a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Our share December 31 , 2018 and 2019 . Our share of gain of Income . See Note 7 for further detail on other derivative contract primarily within Level 2 in the fair value hierarchy default . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , we received December 31 , 2018 and 2019 , we received cash collateral collateral security arrangement of $ 327 million and $ 252 million $ 327 million and $ 252 million , respectively , which these contract wa approximately $ 11.8 billion and $ 13.2 billion $ 11.8 billion and $ 13.2 billion a of December 31 13.2 billion a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . These contract These contract have maturity of 24 month or le . For net . As of December 31 , 2019 , the net As of December 31 , 2019 , the net accumulated loss before tax effect wa $ 82 million , of which $ million , of which $ 82 million is expected to be into earnings within the next 12 month . Fair Value Hedges of these contract wa $ 2.0 billion and $ 455 million $ 2.0 billion and $ 455 million a of December 31 455 million a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . Gains and income ( expense ) , 66 Table of Contents Alphabet Inc. of these contract wa $ 6.7 billion and $ 9.3 billion $ 6.7 billion and $ 9.3 billion a of December 31 9.3 billion a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . Gains and foreign exchange contract wa $ 20.1 billion and $ 43.5 billion $ 20.1 billion and $ 43.5 billion a of December 31 43.5 billion a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . The fair ) : As of December 31 , 2018 Balance Sheet Location As of December 31 , 2018 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 459 $ 54 $ 513 Total non-current asset $ 459 $ 54 $ 513 Total $ 459 $ 459 $ 54 $ 513 Total $ 459 $ 54 54 $ 513 Total $ 459 $ 54 $ 513 Derivative 513 Total $ 459 $ 54 $ 513 Derivative Liabilities : $ 459 $ 54 $ 513 Derivative Liabilities : Level 2 513 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 5 $ 228 $ 233 Total and non-current $ 5 $ 228 $ 233 Total $ 5 $ 5 $ 228 $ 233 Total $ 5 $ 228 228 $ 233 Total $ 5 $ 228 $ 233 As 233 Total $ 5 $ 228 $ 233 As of December $ 5 $ 228 $ 233 As of December 31 , $ 233 As of December 31 , 2019 Balance Sheet Location As of December 31 , 2019 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 91 $ 253 $ 344 Total non-current asset $ 91 $ 253 $ 344 Total $ 91 $ 91 $ 253 $ 344 Total $ 91 $ 253 253 $ 344 Total $ 91 $ 253 $ 344 Derivative 344 Total $ 91 $ 253 $ 344 Derivative Liabilities : $ 91 $ 253 $ 344 Derivative Liabilities : Level 2 344 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 173 $ 196 $ 369 Total and non-current $ 173 $ 196 $ 369 Total $ 173 $ 173 $ 196 $ 369 Total $ 173 $ 196 196 $ 369 Total $ 173 $ 196 $ 369 67 369 Total $ 173 $ 196 $ 369 67 Table of $ 173 $ 196 $ 369 67 Table of Contents Alphabet 173 $ 196 $ 369 67 Table of Contents Alphabet Inc Tax Effect Year Ended December 31 , 2017 2018 2019 Derivatives Year Ended December 31 , 2017 2018 2019 Derivatives in Cash Ended December 31 , 2017 2018 2019 Derivatives in Cash Flow December 31 , 2017 2018 2019 Derivatives in Cash Flow Hedging assessment of effectiveness $ ( 955 ) $ 332 $ 38 $ ( 955 ) $ 332 $ 38 Amount excluded from 955 ) $ 332 $ 38 Amount excluded from the assessment from the assessment of effectiveness 0 26 ( 14 ) Derivatives the assessment of effectiveness 0 26 ( 14 ) Derivatives in of effectiveness 0 26 ( 14 ) Derivatives in Net Investment in the assessment of effectiveness 0 136 131 Total $ ( the assessment of effectiveness 0 136 131 Total $ ( 955 assessment of effectiveness 0 136 131 Total $ ( 955 ) 136 131 Total $ ( 955 ) $ 494 $ 155 $ ( 955 ) $ 494 $ 155 68 Table of 955 ) $ 494 $ 155 68 Table of Contents Alphabet ) $ 494 $ 155 68 Table of Contents Alphabet Inc in Income Year Ended December 31 , 2017 2018 2019 Revenues Year Ended December 31 , 2017 2018 2019 Revenues Other income Ended December 31 , 2017 2018 2019 Revenues Other income ( December 31 , 2017 2018 2019 Revenues Other income ( expense value hedge are recorded $ 110,855 $ 1,015 $ 136,819 $ are recorded $ 110,855 $ 1,015 $ 136,819 $ 7,389 $ $ 110,855 $ 1,015 $ 136,819 $ 7,389 $ 161,857 $ $ 1,015 $ 136,819 $ 7,389 $ 161,857 $ 5,394 Gains $ 136,819 $ 7,389 $ 161,857 $ 5,394 Gains ( Losses $ 7,389 $ 161,857 $ 5,394 Gains ( Losses ) on AOCI to income $ ( 169 ) $ 0 $ ( $ ( 169 ) $ 0 $ ( 139 ) $ ) $ 0 $ ( 139 ) $ 0 $ 367 $ ( 139 ) $ 0 $ 367 $ 0 Amount 139 ) $ 0 $ 367 $ 0 Amount excluded from $ 0 $ 367 $ 0 Amount excluded from the assessment based on an amortization approach 0 0 1 0 88 0 on an amortization approach 0 0 1 0 88 0 Amount an amortization approach 0 0 1 0 88 0 Amount excluded amortization approach 0 0 1 0 88 0 Amount excluded from approach 0 0 1 0 88 0 Amount excluded from the 0 0 1 0 88 0 Amount excluded from the assessment from the assessment of effectiveness 0 83 0 0 0 0 the assessment of effectiveness 0 83 0 0 0 0 Gains assessment of effectiveness 0 83 0 0 0 0 Gains ( of effectiveness 0 83 0 0 0 0 Gains ( Losses effectiveness 0 83 0 0 0 0 Gains ( Losses ) 0 83 0 0 0 0 Gains ( Losses ) on Foreign exchange contract Hedged item 0 197 0 ( 96 ) exchange contract Hedged item 0 197 0 ( 96 ) 0 contract Hedged item 0 197 0 ( 96 ) 0 ( item 0 197 0 ( 96 ) 0 ( 19 ) 197 0 ( 96 ) 0 ( 19 ) Derivatives designated ( 96 ) 0 ( 19 ) Derivatives designated a hedging Derivatives designated a hedging instrument 0 ( 197 ) 0 96 a hedging instrument 0 ( 197 ) 0 96 0 19 instrument 0 ( 197 ) 0 96 0 19 Amount excluded 0 ( 197 ) 0 96 0 19 Amount excluded from ( 197 ) 0 96 0 19 Amount excluded from the 197 ) 0 96 0 19 Amount excluded from the assessment from the assessment of effectiveness 0 23 0 37 0 25 the assessment of effectiveness 0 23 0 37 0 25 Gains assessment of effectiveness 0 23 0 37 0 25 Gains ( of effectiveness 0 23 0 37 0 25 Gains ( Losses effectiveness 0 23 0 37 0 25 Gains ( Losses ) 0 23 0 37 0 25 Gains ( Losses ) on from the assessment of effectiveness 0 0 0 78 0 243 the assessment of effectiveness 0 0 0 78 0 243 Gains assessment of effectiveness 0 0 0 78 0 243 Gains ( of effectiveness 0 0 0 78 0 243 Gains ( Losses effectiveness 0 0 0 78 0 243 Gains ( Losses ) 0 0 0 78 0 243 Gains ( Losses ) on not designated a hedging instrument 0 ( 230 ) 0 54 a hedging instrument 0 ( 230 ) 0 54 0 ( instrument 0 ( 230 ) 0 54 0 ( 413 ) 0 ( 230 ) 0 54 0 ( 413 ) Total ( 230 ) 0 54 0 ( 413 ) Total gain ) 0 54 0 ( 413 ) Total gain ( loss ( loss ) $ ( 169 ) $ ( 124 ) ( 169 ) $ ( 124 ) $ ( 138 ) ( 124 ) $ ( 138 ) $ 169 $ 455 $ ( 138 ) $ 169 $ 455 $ ( 145 138 ) $ 169 $ 455 $ ( 145 ) Offsetting 169 $ 455 $ ( 145 ) Offsetting of Derivatives We condition . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , information related December 31 , 2018 and 2019 , information related to these ( in million ) : 69 Table of Contents Alphabet Inc of Assets As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 569 $ ( 56 ) $ Derivatives $ 569 $ ( 56 ) $ 513 $ ( $ ( 56 ) $ 513 $ ( 90 ) ( ) $ 513 $ ( 90 ) ( 1 ) $ $ ( 90 ) ( 1 ) $ ( 307 ) ( 1 ) $ ( 307 ) $ ( 14 ) ( 307 ) $ ( 14 ) $ 102 As of $ ( 14 ) $ 102 As of December 31 , $ 102 As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 365 $ ( 21 ) $ Derivatives $ 365 $ ( 21 ) $ 344 $ ( $ ( 21 ) $ 344 $ ( 88 ) ( ) $ 344 $ ( 88 ) ( 1 ) $ $ ( 88 ) ( 1 ) $ ( 234 ) ( 1 ) $ ( 234 ) $ 0 $ 22 $ ( 234 ) $ 0 $ 22 ( 1 ) 234 ) $ 0 $ 22 ( 1 ) The balance $ 0 $ 22 ( 1 ) The balance a of The balance a of December 31 , 2018 and 2019 were a of December 31 , 2018 and 2019 were related to December 31 , 2018 and 2019 were related to derivative liability of Liabilities As of December 31 , 2018 Gross Amounts Not As of December 31 , 2018 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 289 $ ( 56 ) $ Derivatives $ 289 $ ( 56 ) $ 233 $ ( $ ( 56 ) $ 233 $ ( 90 ) ( ) $ 233 $ ( 90 ) ( 2 ) $ $ ( 90 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 143 As 2 ) $ 0 $ 0 $ 143 As of December $ 0 $ 0 $ 143 As of December 31 , $ 143 As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 390 $ ( 21 ) $ Derivatives $ 390 $ ( 21 ) $ 369 $ ( $ ( 21 ) $ 369 $ ( 88 ) ( ) $ 369 $ ( 88 ) ( 2 ) $ $ ( 88 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 281 ( 2 ) $ 0 $ 0 $ 281 ( 2 ) $ 0 $ 0 $ 281 ( 2 ) The balance $ 0 $ 281 ( 2 ) The balance a of The balance a of December 31 , 2018 and 2019 were a of December 31 , 2018 and 2019 were related to December 31 , 2018 and 2019 were related to derivative asset master netting agreement . Note 4 . Leases We have entered with lease period expiring between 2020 and 2063 . Components of period expiring between 2020 and 2063 . Components of operating lease ) : Year Ended December 31 , 2019 Operating lease cost Year Ended December 31 , 2019 Operating lease cost $ 1,820 2019 Operating lease cost $ 1,820 Variable lease cost 541 Total $ 1,820 Variable lease cost 541 Total operating lease cost $ Total operating lease cost $ 2,361 70 Table of Contents Alphabet operating lease cost $ 2,361 70 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 Cash payment for Year Ended December 31 , 2019 Cash payment for operating lease payment for operating lease $ 1,661 New operating lease asset obtained for operating lease liability $ 4,391 As of December 31 , $ 4,391 As of December 31 , 2019 , our operating As of December 31 , 2019 , our operating lease had average remaining lease term of 10 year and a weighted average weighted average discount rate of 2.8 % . Future lease payment operating lease a of December 31 , 2019 were a follows a of December 31 , 2019 were a follows ( in ( in million ) : 2020 $ 1,757 2021 1,845 2022 million ) : 2020 $ 1,757 2021 1,845 2022 1,680 2023 ) : 2020 $ 1,757 2021 1,845 2022 1,680 2023 1,508 : 2020 $ 1,757 2021 1,845 2022 1,680 2023 1,508 2024 2020 $ 1,757 2021 1,845 2022 1,680 2023 1,508 2024 1,301 $ 1,757 2021 1,845 2022 1,680 2023 1,508 2024 1,301 Thereafter 1,757 2021 1,845 2022 1,680 2023 1,508 2024 1,301 Thereafter 5,763 2021 1,845 2022 1,680 2023 1,508 2024 1,301 Thereafter 5,763 Total 1,845 2022 1,680 2023 1,508 2024 1,301 Thereafter 5,763 Total future 2022 1,680 2023 1,508 2024 1,301 Thereafter 5,763 Total future lease 2023 1,508 2024 1,301 Thereafter 5,763 Total future lease payment 13,854 5,763 Total future lease payment 13,854 Less imputed interest ( 2,441 13,854 Less imputed interest ( 2,441 ) Total lease liability balance Total lease liability balance $ 11,413 As of December 31 , $ 11,413 As of December 31 , 2019 , we have As of December 31 , 2019 , we have entered into future lease payment of $ 7.4 billion , excluding purchase option These lease will commence between 2020 and 2026 with non-cancelable lease will commence between 2020 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . Supplemental lease term of 1 to 25 year . Supplemental Information for Comparative Periods As of December 31 , 2018 , prior to As of December 31 , 2018 , prior to the adoption to the adoption of Topic 842 , future minimum payment under ) : Operating Leases ( 1 ) Sub-lease Income Net Operating Sub-lease Income Net Operating Leases 2019 $ 1,319 $ 16 $ Net Operating Leases 2019 $ 1,319 $ 16 $ 1,303 2020 Leases 2019 $ 1,319 $ 16 $ 1,303 2020 1,397 13 $ 1,319 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,319 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 $ 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 16 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 $ 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,303 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 2020 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,397 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 13 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 1,384 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 980 2021 1,337 10 1,327 2022 1,153 8 1,145 2023 980 3 1,337 10 1,327 2022 1,153 8 1,145 2023 980 3 977 10 1,327 2022 1,153 8 1,145 2023 980 3 977 Thereafter 1,327 2022 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 2022 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 5 1,153 8 1,145 2023 980 3 977 Thereafter 3,916 5 3,911 8 1,145 2023 980 3 977 Thereafter 3,916 5 3,911 Total 2023 980 3 977 Thereafter 3,916 5 3,911 Total minimum payment 980 3 977 Thereafter 3,916 5 3,911 Total minimum payment $ 3 977 Thereafter 3,916 5 3,911 Total minimum payment $ 10,102 3,911 Total minimum payment $ 10,102 $ 55 $ 10,047 ( minimum payment $ 10,102 $ 55 $ 10,047 ( 1 ) $ 10,102 $ 55 $ 10,047 ( 1 ) Includes future $ 55 $ 10,047 ( 1 ) Includes future minimum payment under operating lease wa $ 1.1 billion and $ 1.3 billion $ 1.1 billion and $ 1.3 billion for the year ended for the year ended December 31 , 2017 , and 2018 year ended December 31 , 2017 , and 2018 , respectively 31 , 2017 , and 2018 , respectively . Note 5 2018 , respectively . Note 5 . Variable Interest Entities ( u . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , asset that December 31 , 2018 and 2019 , asset that can only of these VIEs were $ 2.4 billion and $ 3.1 billion $ 2.4 billion and $ 3.1 billion , respectively , and to the VIEs were $ 909 million and $ 1.2 billion $ 909 million and $ 1.2 billion , respectively . 71 1.2 billion , respectively . 71 Table of Contents Alphabet Inc. control lifespan . In September 2014 , AbbVie Inc. ( AbbVie In the second quarter of 2018 , AbbVie and Calico amended commitment . As of December 31 , 2019 , AbbVie ha As of December 31 , 2019 , AbbVie ha contributed $ , AbbVie ha contributed $ 1,250 million to fund the collaboration agreement . As of December 31 , 2019 , Calico ha As of December 31 , 2019 , Calico ha contributed $ , Calico ha contributed $ 500 million and ha committed up up to an additional $ 750 million . Calico ha used Calico . As of December 31 , 2019 , we have As of December 31 , 2019 , we have contributed $ , we have contributed $ 480 million to Calico in exchange up to an additional $ 750 million on an as-needed basis healthier life . In December 2018 , Verily received $ 900 2018 , Verily received $ 900 million in cash from a in cash from a $ 1.0 billion investment round . The round . The remaining $ 100 million wa received in the in the first quarter of 2019 . As of December 31 2019 . As of December 31 , 2019 , Verily ha As of December 31 , 2019 , Verily ha received an an aggregate amount of $ 1.8 billion from sale of equity In the fourth quarter of 2019 , Verily obtained a controlling transaction resulted in a $ 357 million gain from the revaluation not material a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Note 6 December 31 , 2018 and 2019 . Note 6 . Debt 2018 and 2019 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . Long-Term Debt December 31 , 2018 and 2019 . Long-Term Debt Google issued Long-Term Debt Google issued $ 3.0 billion of senior unsecured note three tranche ( collectively , 2011 Notes ) in May 2011 2011 Notes ) in May 2011 , due in 2014 , May 2011 , due in 2014 , 2016 , and 2021 , due in 2014 , 2016 , and 2021 , a 2014 , 2016 , and 2021 , a well a $ , a well a $ 1.0 billion of senior unsecured note of senior unsecured note ( 2014 Notes ) in February 2014 2014 Notes ) in February 2014 due in 2024 . In in February 2014 due in 2024 . In April 2016 , in 2024 . In April 2016 , we completed an exchange holder of Google ’ s 2011 Notes due 2021 and 2014 ’ s 2011 Notes due 2021 and 2014 Notes due 2024 2011 Notes due 2021 and 2014 Notes due 2024 ( collectively 2021 and 2014 Notes due 2024 ( collectively , the Google principal amount of approximately $ 1.7 billion of the Google Notes wa exchanged for approximately $ 1.7 billion of Alphabet note with interest rate and maturity . 72 Table of Contents Alphabet Inc. loss recognized . In August 2016 , Alphabet issued $ 2.0 2016 , Alphabet issued $ 2.0 billion of senior unsecured note of senior unsecured note ( 2016 Notes ) due 2026 . ( 2016 Notes ) due 2026 . The net proceeds from from the issuance of the 2016 Notes were used for general The Alphabet note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 rank equally 2021 , 2024 , and 2026 rank equally with each other ) : As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 3.625 % Notes As of December 31 , 2019 3.625 % Notes due on of December 31 , 2019 3.625 % Notes due on May % Notes due on May 19 , 2021 $ 1,000 $ due on May 19 , 2021 $ 1,000 $ 1,000 3.375 May 19 , 2021 $ 1,000 $ 1,000 3.375 % Notes , 2021 $ 1,000 $ 1,000 3.375 % Notes due on 2021 $ 1,000 $ 1,000 3.375 % Notes due on February % Notes due on February 25 , 2024 1,000 1,000 1.998 due on February 25 , 2024 1,000 1,000 1.998 % Notes on February 25 , 2024 1,000 1,000 1.998 % Notes due February 25 , 2024 1,000 1,000 1.998 % Notes due on 25 , 2024 1,000 1,000 1.998 % Notes due on August % Notes due on August 15 , 2026 2,000 2,000 Unamortized due on August 15 , 2026 2,000 2,000 Unamortized discount for on August 15 , 2026 2,000 2,000 Unamortized discount for the August 15 , 2026 2,000 2,000 Unamortized discount for the Notes for the Notes above ( 50 ) ( 42 ) Subtotal above ( 50 ) ( 42 ) Subtotal ( 1 ) ( 42 ) Subtotal ( 1 ) 3,950 3,958 Total future ) Subtotal ( 1 ) 3,950 3,958 Total future finance lease Subtotal ( 1 ) 3,950 3,958 Total future finance lease payment Total future finance lease payment 62 685 Less : imputed interest future finance lease payment 62 685 Less : imputed interest for imputed interest for finance lease 0 ( 89 ) Total long-term for finance lease 0 ( 89 ) Total long-term debt $ ) Total long-term debt $ 4,012 $ 4,554 ( 1 ) long-term debt $ 4,012 $ 4,554 ( 1 ) Includes the $ 4,012 $ 4,554 ( 1 ) Includes the outstanding ( ) Google Notes issued in 2011 and 2014 and the Alphabet Notes issued in 2011 and 2014 and the Alphabet note exchanged the Alphabet note exchanged in 2016 . The effective interest yield the outstanding note due in 2021 , 2024 , and 2026 note due in 2021 , 2024 , and 2026 were 3.734 2021 , 2024 , and 2026 were 3.734 % , 3.377 2024 , and 2026 were 3.734 % , 3.377 % , 2026 were 3.734 % , 3.377 % , and 2.231 % , 3.377 % , and 2.231 % , respectively , with outstanding note wa approximately $ 3.9 billion and $ 4.1 billion $ 3.9 billion and $ 4.1 billion a of December 31 4.1 billion a of December 31 , 2018 and 2019 , a of December 31 , 2018 and 2019 , respectively . December 31 , 2018 and 2019 , respectively . The fair is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2019 , the aggregate As of December 31 , 2019 , the aggregate future principal ( in million ) : 2020 $ 0 2021 1,046 2022 million ) : 2020 $ 0 2021 1,046 2022 46 2023 ) : 2020 $ 0 2021 1,046 2022 46 2023 46 : 2020 $ 0 2021 1,046 2022 46 2023 46 2024 2020 $ 0 2021 1,046 2022 46 2023 46 2024 1,047 $ 0 2021 1,046 2022 46 2023 46 2024 1,047 Thereafter 0 2021 1,046 2022 46 2023 46 2024 1,047 Thereafter 2,500 2021 1,046 2022 46 2023 46 2024 1,047 Thereafter 2,500 Total 1,046 2022 46 2023 46 2024 1,047 Thereafter 2,500 Total $ 2022 46 2023 46 2024 1,047 Thereafter 2,500 Total $ 4,685 2023 46 2024 1,047 Thereafter 2,500 Total $ 4,685 Credit Facility 1,047 Thereafter 2,500 Total $ 4,685 Credit Facility As of December Credit Facility As of December 31 , 2019 , we have As of December 31 , 2019 , we have $ 4.0 2019 , we have $ 4.0 billion of revolving credit facility facility which expire in July 2023 . The interest rate for credit facility a of December 31 , 2018 and 2019 . a of December 31 , 2018 and 2019 . 73 Table December 31 , 2018 and 2019 . 73 Table of Contents , 2018 and 2019 . 73 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 7 . Supplemental Financial Statement Information ) : As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 Land and building As of December 31 , 2019 Land and building $ 30,179 2019 Land and building $ 30,179 $ 39,865 Information technology asset and building $ 30,179 $ 39,865 Information technology asset 30,119 36,840 $ 39,865 Information technology asset 30,119 36,840 Construction in progress 16,838 39,865 Information technology asset 30,119 36,840 Construction in progress 16,838 21,036 30,119 36,840 Construction in progress 16,838 21,036 Leasehold improvement 5,310 6,310 36,840 Construction in progress 16,838 21,036 Leasehold improvement 5,310 6,310 Furniture progress 16,838 21,036 Leasehold improvement 5,310 6,310 Furniture and fixture 61 16,838 21,036 Leasehold improvement 5,310 6,310 Furniture and fixture 61 156 5,310 6,310 Furniture and fixture 61 156 Property and equipment , 6,310 Furniture and fixture 61 156 Property and equipment , gross Property and equipment , gross 82,507 104,207 Less : accumulated depreciation and equipment , gross 82,507 104,207 Less : accumulated depreciation ( Less : accumulated depreciation ( 22,788 ) ( 30,561 ) Property depreciation ( 22,788 ) ( 30,561 ) Property and equipment , and equipment , net $ 59,719 $ 73,646 As of December , net $ 59,719 $ 73,646 As of December 31 , $ 73,646 As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , information technology December 31 , 2018 and 2019 , information technology asset and a cost basis of $ 648 million and $ 1.6 billion $ 648 million and $ 1.6 billion , respectively , were ) : As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 European Commission fine As of December 31 , 2019 European Commission fine ( 1 2019 European Commission fine ( 1 ) $ 7,754 $ 9,405 fine ( 1 ) $ 7,754 $ 9,405 Accrued customer liability 1 ) $ 7,754 $ 9,405 Accrued customer liability 1,810 2,245 $ 9,405 Accrued customer liability 1,810 2,245 Accrued purchase of property 9,405 Accrued customer liability 1,810 2,245 Accrued purchase of property and purchase of property and equipment 1,603 2,411 Current operating lease liability of property and equipment 1,603 2,411 Current operating lease liability 0 2,411 Current operating lease liability 0 1,199 Other accrued expense and Current operating lease liability 0 1,199 Other accrued expense and current accrued expense and current liability 5,791 7,807 Accrued expense and other expense and current liability 5,791 7,807 Accrued expense and other current and other current liability $ 16,958 $ 23,067 ( 1 ) current liability $ 16,958 $ 23,067 ( 1 ) Includes the $ 16,958 $ 23,067 ( 1 ) Includes the effect of and interest . See Note 10 for further detail . 74 10 for further detail . 74 Table of Contents Alphabet Inc Total Balance a of December 31 , 2016 $ ( 2,646 a of December 31 , 2016 $ ( 2,646 ) $ 31 , 2016 $ ( 2,646 ) $ ( 179 ) ( 2,646 ) $ ( 179 ) $ 423 $ ( $ ( 179 ) $ 423 $ ( 2,402 ) Other ) $ 423 $ ( 2,402 ) Other comprehensive income ( ( loss ) before reclassification 1,543 307 ( 638 ) 1,212 loss ) before reclassification 1,543 307 ( 638 ) 1,212 Amounts before reclassification 1,543 307 ( 638 ) 1,212 Amounts reclassified from 1,543 307 ( 638 ) 1,212 Amounts reclassified from AOCI 0 1,212 Amounts reclassified from AOCI 0 105 93 198 Other comprehensive Amounts reclassified from AOCI 0 105 93 198 Other comprehensive income reclassified from AOCI 0 105 93 198 Other comprehensive income ( from AOCI 0 105 93 198 Other comprehensive income ( loss comprehensive income ( loss ) 1,543 412 ( 545 ) 1,410 income ( loss ) 1,543 412 ( 545 ) 1,410 Balance loss ) 1,543 412 ( 545 ) 1,410 Balance a of 1,543 412 ( 545 ) 1,410 Balance a of December 31 1,410 Balance a of December 31 , 2017 ( 1,103 ) a of December 31 , 2017 ( 1,103 ) 233 ( December 31 , 2017 ( 1,103 ) 233 ( 122 ) , 2017 ( 1,103 ) 233 ( 122 ) ( 992 ( 1,103 ) 233 ( 122 ) ( 992 ) Cumulative 233 ( 122 ) ( 992 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 98 ) 0 ( of accounting change 0 ( 98 ) 0 ( 98 ) change 0 ( 98 ) 0 ( 98 ) Other comprehensive ( 98 ) 0 ( 98 ) Other comprehensive income ( loss ) before reclassification ( 781 ) 88 264 ( 429 before reclassification ( 781 ) 88 264 ( 429 ) Amounts reclassification ( 781 ) 88 264 ( 429 ) Amounts excluded 781 ) 88 264 ( 429 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified from recorded in AOCI 0 0 26 26 Amounts reclassified from AOCI in AOCI 0 0 26 26 Amounts reclassified from AOCI 0 26 Amounts reclassified from AOCI 0 ( 911 ) 98 ( reclassified from AOCI 0 ( 911 ) 98 ( 813 ) AOCI 0 ( 911 ) 98 ( 813 ) Other comprehensive ( 911 ) 98 ( 813 ) Other comprehensive income ( income ( loss ) ( 781 ) ( 823 ) 388 ) ( 781 ) ( 823 ) 388 ( 1,216 ) 781 ) ( 823 ) 388 ( 1,216 ) Balance a ( 823 ) 388 ( 1,216 ) Balance a of December ) Balance a of December 31 , 2018 ( 1,884 ) a of December 31 , 2018 ( 1,884 ) ( 688 December 31 , 2018 ( 1,884 ) ( 688 ) 266 2018 ( 1,884 ) ( 688 ) 266 ( 2,306 ) 1,884 ) ( 688 ) 266 ( 2,306 ) Cumulative effect ( 688 ) 266 ( 2,306 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 30 accounting change 0 0 ( 30 ) ( 30 ) Other 0 ( 30 ) ( 30 ) Other comprehensive income ( loss ) before reclassification ( 119 ) 1,611 36 1,528 Amounts before reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from the ( 119 ) 1,611 36 1,528 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 14 ) ( effectiveness recorded in AOCI 0 0 ( 14 ) ( 14 in AOCI 0 0 ( 14 ) ( 14 ) Amounts 0 ( 14 ) ( 14 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 111 ) ( 299 reclassified from AOCI 0 ( 111 ) ( 299 ) ( 0 ( 111 ) ( 299 ) ( 410 ) Other ) ( 299 ) ( 410 ) Other comprehensive income ( income ( loss ) ( 119 ) 1,500 ( 277 ) loss ) ( 119 ) 1,500 ( 277 ) 1,104 Balance ( 119 ) 1,500 ( 277 ) 1,104 Balance a of ) 1,500 ( 277 ) 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 $ ( 2,003 a of December 31 , 2019 $ ( 2,003 ) $ 31 , 2019 $ ( 2,003 ) $ 812 $ ( $ ( 2,003 ) $ 812 $ ( 41 ) $ ) $ 812 $ ( 41 ) $ ( 1,232 ) ( 41 ) $ ( 1,232 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2017 31 , AOCI Components Location 2017 2018 2019 Unrealized gain ( , AOCI Components Location 2017 2018 2019 Unrealized gain ( loss AOCI Components Location 2017 2018 2019 Unrealized gain ( loss ) ) , net $ ( 105 ) $ 1,190 $ 149 $ ( 105 ) $ 1,190 $ 149 Benefit ( provision 105 ) $ 1,190 $ 149 Benefit ( provision ) for provision ) for income tax 0 ( 279 ) ( 38 for income tax 0 ( 279 ) ( 38 ) Net 0 ( 279 ) ( 38 ) Net of tax ( ) Net of tax ( 105 ) 911 111 Unrealized gain of tax ( 105 ) 911 111 Unrealized gain ( loss tax ( 105 ) 911 111 Unrealized gain ( loss ) Foreign exchange contract Revenue ( 169 ) ( 139 ) 367 Revenue ( 169 ) ( 139 ) 367 Interest rate contract 169 ) ( 139 ) 367 Interest rate contract Other income ( expense ) , net 5 6 6 Benefit ( provision expense ) , net 5 6 6 Benefit ( provision ) ) , net 5 6 6 Benefit ( provision ) for provision ) for income tax 71 35 ( 74 ) Net ) for income tax 71 35 ( 74 ) Net of income tax 71 35 ( 74 ) Net of tax ( ) Net of tax ( 93 ) ( 98 ) 299 tax ( 93 ) ( 98 ) 299 Total amount reclassified 93 ) ( 98 ) 299 Total amount reclassified , net net of tax $ ( 198 ) $ 813 $ 410 $ ( 198 ) $ 813 $ 410 75 Table of 198 ) $ 813 $ 410 75 Table of Contents Alphabet ) $ 813 $ 410 75 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2017 2018 2019 Interest Year Ended December 31 , 2017 2018 2019 Interest income $ Ended December 31 , 2017 2018 2019 Interest income $ 1,312 December 31 , 2017 2018 2019 Interest income $ 1,312 $ 2018 2019 Interest income $ 1,312 $ 1,878 $ 2,427 Interest Interest income $ 1,312 $ 1,878 $ 2,427 Interest expense ( $ 1,312 $ 1,878 $ 2,427 Interest expense ( 1 ) $ 2,427 Interest expense ( 1 ) ( 109 ) ( expense ( 1 ) ( 109 ) ( 114 ) ( ) ( 109 ) ( 114 ) ( 100 ) Foreign ) ( 114 ) ( 100 ) Foreign currency exchange gain loss ) , net ( 2 ) ( 121 ) ( net ( 2 ) ( 121 ) ( 80 ) 103 ) ( 121 ) ( 80 ) 103 Gain ( loss 121 ) ( 80 ) 103 Gain ( loss ) on debt security , net ( 3 ) ( 110 ) 1,190 net ( 3 ) ( 110 ) 1,190 149 Gain ( 3 ) ( 110 ) 1,190 149 Gain ( loss ) ) ( 110 ) 1,190 149 Gain ( loss ) on on equity security , net 73 5,460 2,649 Performance fee ( equity security , net 73 5,460 2,649 Performance fee ( 4 security , net 73 5,460 2,649 Performance fee ( 4 ) 5,460 2,649 Performance fee ( 4 ) ( 32 ) ( fee ( 4 ) ( 32 ) ( 1,203 ) ( ) ( 32 ) ( 1,203 ) ( 326 ) Gain ) ( 1,203 ) ( 326 ) Gain ( loss ) method investment , net ( 156 ) ( 120 ) 390 net ( 156 ) ( 120 ) 390 Other 158 378 156 ) ( 120 ) 390 Other 158 378 102 Other ( 120 ) 390 Other 158 378 102 Other income ( 120 ) 390 Other 158 378 102 Other income ( expense ) 390 Other 158 378 102 Other income ( expense ) expense ) , net $ 1,015 $ 7,389 $ 5,394 ( , net $ 1,015 $ 7,389 $ 5,394 ( 1 ) $ 1,015 $ 7,389 $ 5,394 ( 1 ) Interest expense $ 7,389 $ 5,394 ( 1 ) Interest expense is net of interest capitalized of $ 48 million , $ 92 million $ 48 million , $ 92 million , and $ 167 92 million , and $ 167 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . ( 2 2019 , respectively . ( 2 ) Our foreign currency exchange currency transaction loss were $ 226 million , $ 195 million $ 226 million , $ 195 million , and $ 166 195 million , and $ 166 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . ( 3 2019 , respectively . ( 3 ) During the year ended During the year ended December 31 , 2018 , the term year ended December 31 , 2018 , the term of a resulting in an unrealized $ 1.3 billion gain . ( 4 1.3 billion gain . ( 4 ) Performance fee were reclassified current period presentation . Note 8 . Acquisitions 2019 Acquisitions Looker . Note 8 . Acquisitions 2019 Acquisitions Looker In December 2019 2019 Acquisitions Looker In December 2019 , we obtained all regulatory and embedded analytics for $ 2.4 billion , with integration pending measurement period . The $ 2.4 billion purchase price includes our . In aggregate , $ 91 million wa cash acquired , wa cash acquired , $ 290 million wa attributed to intangible to intangible asset , $ 1.9 billion to goodwill and $ billion to goodwill and $ 48 million to net asset acquired During the year ended December 31 , 2019 , we completed year ended December 31 , 2019 , we completed other acquisition total consideration of approximately $ 1.0 billion . In aggregate , . In aggregate , $ 28 million wa cash acquired , wa cash acquired , $ 282 million wa attributed to intangible to intangible asset , $ 904 million to goodwill and $ million to goodwill and $ 185 million to net liability assumed during the year ended December 31 , 2019 , patent and year ended December 31 , 2019 , patent and developed technology a weighted-average useful life of 3.5 year , customer relationship have a weighted-average useful life of 6.3 year , and trade name a weighted-average useful life of 4.5 year . Pending Acquisition of Acquisition of Fitbit In November 2019 , we entered into an wearable brand , for $ 7.35 per share , representing a purchase price of approximately $ 2.1 billion a of the date the agreement . The acquisition 76 Table of Contents Alphabet Inc. expected to be completed in 2020 , subject to customary closing of Google segment . Note 9 . Goodwill and Other Intangible for the year ended December 31 , 2018 and 2019 were year ended December 31 , 2018 and 2019 were a follows December 31 , 2018 and 2019 were a follows ( in Consolidated Balance a of December 31 , 2017 $ 16,295 $ a of December 31 , 2017 $ 16,295 $ 452 $ December 31 , 2017 $ 16,295 $ 452 $ 16,747 Acquisitions , 2017 $ 16,295 $ 452 $ 16,747 Acquisitions 1,227 0 $ 16,295 $ 452 $ 16,747 Acquisitions 1,227 0 1,227 Transfers $ 452 $ 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 452 $ 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 80 $ 16,747 Acquisitions 1,227 0 1,227 Transfers 80 ( 80 ) Acquisitions 1,227 0 1,227 Transfers 80 ( 80 ) 0 Foreign 0 1,227 Transfers 80 ( 80 ) 0 Foreign currency translation Transfers 80 ( 80 ) 0 Foreign currency translation and other translation and other adjustment ( 81 ) ( 5 ) ( adjustment ( 81 ) ( 5 ) ( 86 ) Balance ) ( 5 ) ( 86 ) Balance a of December ) Balance a of December 31 , 2018 17,521 367 17,888 a of December 31 , 2018 17,521 367 17,888 Acquisitions 2,353 of December 31 , 2018 17,521 367 17,888 Acquisitions 2,353 475 December 31 , 2018 17,521 367 17,888 Acquisitions 2,353 475 2,828 31 , 2018 17,521 367 17,888 Acquisitions 2,353 475 2,828 Transfers 2018 17,521 367 17,888 Acquisitions 2,353 475 2,828 Transfers 9 ( 17,521 367 17,888 Acquisitions 2,353 475 2,828 Transfers 9 ( 9 367 17,888 Acquisitions 2,353 475 2,828 Transfers 9 ( 9 ) Acquisitions 2,353 475 2,828 Transfers 9 ( 9 ) 0 Foreign 475 2,828 Transfers 9 ( 9 ) 0 Foreign currency translation Transfers 9 ( 9 ) 0 Foreign currency translation and other currency translation and other adjustment 38 ( 130 ) ( 92 and other adjustment 38 ( 130 ) ( 92 ) Balance 38 ( 130 ) ( 92 ) Balance a of December ) Balance a of December 31 , 2019 $ 19,921 $ a of December 31 , 2019 $ 19,921 $ 703 $ December 31 , 2019 $ 19,921 $ 703 $ 20,624 Other , 2019 $ 19,921 $ 703 $ 20,624 Other Intangible Assets $ 19,921 $ 703 $ 20,624 Other Intangible Assets Information regarding ) : As of December 31 , 2018 Gross Carrying Amount As of December 31 , 2018 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 5,125 $ 3,394 $ 1,731 Customer developed technology $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 $ 5,125 $ 3,394 $ 1,731 Customer relationship 349 308 41 3,394 $ 1,731 Customer relationship 349 308 41 Trade name and $ 1,731 Customer relationship 349 308 41 Trade name and other 1,731 Customer relationship 349 308 41 Trade name and other 703 41 Trade name and other 703 255 448 Total $ 6,177 Trade name and other 703 255 448 Total $ 6,177 $ name and other 703 255 448 Total $ 6,177 $ 3,957 703 255 448 Total $ 6,177 $ 3,957 $ 2,220 As 448 Total $ 6,177 $ 3,957 $ 2,220 As of December $ 6,177 $ 3,957 $ 2,220 As of December 31 , $ 2,220 As of December 31 , 2019 Gross Carrying Amount As of December 31 , 2019 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,972 $ 3,570 $ 1,402 Customer developed technology $ 4,972 $ 3,570 $ 1,402 Customer relationship 254 $ 4,972 $ 3,570 $ 1,402 Customer relationship 254 30 224 3,570 $ 1,402 Customer relationship 254 30 224 Trade name and $ 1,402 Customer relationship 254 30 224 Trade name and other 1,402 Customer relationship 254 30 224 Trade name and other 703 224 Trade name and other 703 350 353 Total $ 5,929 Trade name and other 703 350 353 Total $ 5,929 $ name and other 703 350 353 Total $ 5,929 $ 3,950 703 350 353 Total $ 5,929 $ 3,950 $ 1,979 Patents 353 Total $ 5,929 $ 3,950 $ 1,979 Patents and developed $ 5,929 $ 3,950 $ 1,979 Patents and developed technology , weighted-average remaining useful life of 2.3 year , 5.6 year , life of 2.3 year , 5.6 year , and 3.0 year , 5.6 year , and 3.0 year , respectively . Amortization purchased intangible asset wa $ 796 million , $ 865 million $ 796 million , $ 865 million , and $ 795 865 million , and $ 795 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . 77 Table and 2019 , respectively . 77 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2019 , expected amortization As of December 31 , 2019 , expected amortization expense relating ( in million ) : 2020 $ 749 2021 665 2022 million ) : 2020 $ 749 2021 665 2022 317 2023 ) : 2020 $ 749 2021 665 2022 317 2023 57 : 2020 $ 749 2021 665 2022 317 2023 57 2024 2020 $ 749 2021 665 2022 317 2023 57 2024 45 $ 749 2021 665 2022 317 2023 57 2024 45 Thereafter 749 2021 665 2022 317 2023 57 2024 45 Thereafter 146 2021 665 2022 317 2023 57 2024 45 Thereafter 146 $ 665 2022 317 2023 57 2024 45 Thereafter 146 $ 1,979 2022 317 2023 57 2024 45 Thereafter 146 $ 1,979 Note 2023 57 2024 45 Thereafter 146 $ 1,979 Note 10 . 2024 45 Thereafter 146 $ 1,979 Note 10 . Commitments and Thereafter 146 $ 1,979 Note 10 . Commitments and Contingencies Purchase Purchase Obligations As of December 31 , 2019 , we had As of December 31 , 2019 , we had $ 5.7 2019 , we had $ 5.7 billion of other non-cancelable contractual period . As of December 31 , 2019 , we did As of December 31 , 2019 , we did not have Matters Antitrust Investigations On November 30 , 2010 , the EC Investigations On November 30 , 2010 , the EC 's Directorate against u . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it EC decision imposed a € 2.4 billion ( $ 2.7 billion € 2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC EC decision and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change recognized a charge of $ 2.7 billion for the fine in in the second quarter of 2017 . On July 18 , of 2017 . On July 18 , 2018 , the EC . On July 18 , 2018 , the EC announced it EC decision imposed a € 4.3 billion ( $ 5.1 billion € 4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine and a of June 30 , 2018 ) fine and directed the at issue . On October 9 , 2018 , we appealed . On October 9 , 2018 , we appealed the EC EC decision . On October 29 , 2018 , we implemented . On October 29 , 2018 , we implemented change to recognized a charge of $ 5.1 billion for the fine in in the second quarter of 2018 . On March 20 , of 2018 . On March 20 , 2019 , the EC . On March 20 , 2019 , the EC announced it imposed a fine of € 1.5 billion ( $ 1.7 billion € 1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) and directed a of March 20 , 2019 ) and directed action related the decision . On June 4 , 2019 , we appealed . On June 4 , 2019 , we appealed the EC recognized a charge of $ 1.7 billion for the fine in in the first quarter of 2019 . 78 Table of Contents first quarter of 2019 . 78 Table of Contents Alphabet Inc For example , in August 2019 , we began receiving civil practice . Attorneys general from 51 U.S. state and territory have affect our business . In 2010 , Oracle America , Inc. favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided Oracle appealed and on March 27 , 2018 , the appeal and on March 27 , 2018 , the appeal court reversed on damage . On May 29 , 2018 , we filed . On May 29 , 2018 , we filed a petition Circuit , and on August 28 , 2018 , the Federal and on August 28 , 2018 , the Federal Circuit denied the petition . On January 24 , 2019 , we filed . On January 24 , 2019 , we filed a petition this case . On April 29 , 2019 , the Supreme . On April 29 , 2019 , the Supreme Court requested our petition . On September 27 , 2019 , the Solicitor . On September 27 , 2019 , the Solicitor General recommended provided our response on October 16 , 2019 . On November response on October 16 , 2019 . On November 15 , , 2019 . On November 15 , 2019 , the Supreme . On November 15 , 2019 , the Supreme Court granted effect on our business , 79 Table of Contents Alphabet Inc. tax contingency , see Note 14 . Note 11 . Stockholders see Note 14 . Note 11 . Stockholders ' Equity Convertible board of director ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , no share December 31 , 2018 and 2019 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In January 2018 , the board of director to repurchase up to $ 8.6 billion of it Class C . In January and July 2019 , the board of director up to an additional $ 12.5 billion and $ 25.0 billion $ 12.5 billion and $ 25.0 billion of it Class C repurchase pursuant to the January 2018 and January 2019 authorization were the January 2018 and January 2019 authorization were completed in 2019 2019 authorization were completed in 2019 . The repurchase are being transaction , including through Rule 10b5-1 plan . The repurchase program During the year ended December 31 , 2018 and 2019 , year ended December 31 , 2018 and 2019 , we repurchased December 31 , 2018 and 2019 , we repurchased and subsequently we repurchased and subsequently retired 8.2 million share of Alphabet Class an aggregate amount of $ 9.1 billion and 15.3 million share of $ 9.1 billion and 15.3 million share of Alphabet Class an aggregate amount of $ 18.4 billion , respectively . Note billion , respectively . Note 12 . Net Income Per Share the class of stock adversely 80 Table of Contents Alphabet Inc. In the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , the net , 2017 , 2018 and 2019 , the net income per ) : Year Ended December 31 , 2017 Class A Class Year Ended December 31 , 2017 Class A Class B Class Allocation of undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator undistributed earnings $ 5,438 $ 862 $ 6,362 Denominator Number of $ 5,438 $ 862 $ 6,362 Denominator Number of share used used in per share computation 297,604 47,146 348,151 Basic net income in per share computation 297,604 47,146 348,151 Basic net income per per share computation 297,604 47,146 348,151 Basic net income per share net income per share $ 18.27 $ 18.27 $ 18.27 Diluted per share $ 18.27 $ 18.27 $ 18.27 Diluted net income $ 18.27 $ 18.27 $ 18.27 Diluted net income per share earnings for basic computation $ 5,438 $ 862 $ 6,362 Reallocation basic computation $ 5,438 $ 862 $ 6,362 Reallocation of undistributed $ 5,438 $ 862 $ 6,362 Reallocation of undistributed earnings a B to Class A share 862 0 0 Reallocation of undistributed to Class A share 862 0 0 Reallocation of undistributed earnings Class A share 862 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 74 ) ( 14 ) 74 earnings ( 74 ) ( 14 ) 74 Allocation of undistributed 74 ) ( 14 ) 74 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator undistributed earnings $ 6,226 $ 848 $ 6,436 Denominator Number of $ 6,226 $ 848 $ 6,436 Denominator Number of share used share used in basic computation 297,604 47,146 348,151 Weighted-average effect of used in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive in basic computation 297,604 47,146 348,151 Weighted-average effect of dilutive security Class A common share outstanding 47,146 0 0 Restricted stock unit A common share outstanding 47,146 0 0 Restricted stock unit and common share outstanding 47,146 0 0 Restricted stock unit and other and other contingently issuable share 1,192 0 9,491 Number of share other contingently issuable share 1,192 0 9,491 Number of share used contingently issuable share 1,192 0 9,491 Number of share used in used in per share computation 345,942 47,146 357,642 Diluted net income in per share computation 345,942 47,146 357,642 Diluted net income per per share computation 345,942 47,146 357,642 Diluted net income per share net income per share $ 18.00 $ 18.00 $ 18.00 81 per share $ 18.00 $ 18.00 $ 18.00 81 Table of $ 18.00 $ 18.00 $ 18.00 81 Table of Contents Alphabet 18.00 $ 18.00 $ 18.00 81 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator Number of $ 13,200 $ 2,072 $ 15,464 Denominator Number of share used used in per share computation 298,548 46,864 349,728 Basic net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed earnings a B to Class A share 2,072 0 0 Reallocation of undistributed to Class A share 2,072 0 0 Reallocation of undistributed earnings Class A share 2,072 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 146 ) ( 24 ) 146 earnings ( 146 ) ( 24 ) 146 Allocation of undistributed 146 ) ( 24 ) 146 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator Number of $ 15,126 $ 2,048 $ 15,610 Denominator Number of share used share used in basic computation 298,548 46,864 349,728 Weighted-average effect of used in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive security Class A common share outstanding 46,864 0 0 Restricted stock unit A common share outstanding 46,864 0 0 Restricted stock unit and common share outstanding 46,864 0 0 Restricted stock unit and other and other contingently issuable share 689 0 7,456 Number of share other contingently issuable share 689 0 7,456 Number of share used contingently issuable share 689 0 7,456 Number of share used in used in per share computation 346,101 46,864 357,184 Diluted net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 Year per share $ 43.70 $ 43.70 $ 43.70 Year Ended December $ 43.70 $ 43.70 $ 43.70 Year Ended December 31 , $ 43.70 Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator Number of $ 14,846 $ 2,307 $ 17,190 Denominator Number of share used used in per share computation 299,402 46,527 346,667 Basic net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed earnings a B to Class A share 2,307 0 0 Reallocation of undistributed to Class A share 2,307 0 0 Reallocation of undistributed earnings Class A share 2,307 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 126 ) ( 20 ) 126 earnings ( 126 ) ( 20 ) 126 Allocation of undistributed 126 ) ( 20 ) 126 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator Number of $ 17,027 $ 2,287 $ 17,316 Denominator Number of share used share used in basic computation 299,402 46,527 346,667 Weighted-average effect of used in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive security Class A common share outstanding 46,527 0 0 Restricted stock unit A common share outstanding 46,527 0 0 Restricted stock unit and common share outstanding 46,527 0 0 Restricted stock unit and other and other contingently issuable share 413 0 5,547 Number of share other contingently issuable share 413 0 5,547 Number of share used contingently issuable share 413 0 5,547 Number of share used in used in per share computation 346,342 46,527 352,214 Diluted net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 82 per share $ 49.16 $ 49.16 $ 49.16 82 Table of $ 49.16 $ 49.16 $ 49.16 82 Table of Contents Alphabet 49.16 $ 49.16 $ 49.16 82 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans Plans Stock Plans Under our 2012 Stock Plan , RSUs or granted for a term of 10 year . RSUs granted to granted to participant under the 2012 Stock Plan generally vest over date . As of December 31 , 2019 , there were As of December 31 , 2019 , there were 37,982,435 share , 2019 , there were 37,982,435 share of stock reserved for For the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , total stock-based , 2017 , 2018 and 2019 , total stock-based compensation expense stock-based compensation expense wa $ 7.9 billion , $ 10.0 billion $ 7.9 billion , $ 10.0 billion and $ 11.7 billion $ 10.0 billion and $ 11.7 billion , including amount associated in Alphabet stock of $ 7.7 billion , $ 9.4 billion $ 7.7 billion , $ 9.4 billion , and $ 10.8 9.4 billion , and $ 10.8 billion , respectively . For For the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , we recognized , 2017 , 2018 and 2019 , we recognized tax benefit of Income , of $ 1.6 billion , $ 1.5 billion $ 1.6 billion , $ 1.5 billion , and $ 1.8 1.5 billion , and $ 1.8 billion , respectively . For For the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , tax benefit , 2017 , 2018 and 2019 , tax benefit realized related during the period wa $ 2.7 billion , $ 2.1 billion $ 2.7 billion , $ 2.1 billion and $ 2.2 billion $ 2.1 billion and $ 2.2 billion , respectively . These for the year ended December 31 , 2019 : Unvested Restricted year ended December 31 , 2019 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2018 18,467,678 $ 936.96 a of December 31 , 2018 18,467,678 $ 936.96 Granted 13,934,041 of December 31 , 2018 18,467,678 $ 936.96 Granted 13,934,041 $ 31 , 2018 18,467,678 $ 936.96 Granted 13,934,041 $ 1,092.36 Vested 2018 18,467,678 $ 936.96 Granted 13,934,041 $ 1,092.36 Vested ( 11,576,766 $ 936.96 Granted 13,934,041 $ 1,092.36 Vested ( 11,576,766 ) $ 13,934,041 $ 1,092.36 Vested ( 11,576,766 ) $ 919.28 Forfeited/canceled ( Vested ( 11,576,766 ) $ 919.28 Forfeited/canceled ( 1,430,717 ) $ ) $ 919.28 Forfeited/canceled ( 1,430,717 ) $ 990.56 Unvested a Forfeited/canceled ( 1,430,717 ) $ 990.56 Unvested a of December 31 990.56 Unvested a of December 31 , 2019 19,394,236 $ 1,055.22 a of December 31 , 2019 19,394,236 $ 1,055.22 The weighted-average of December 31 , 2019 19,394,236 $ 1,055.22 The weighted-average grant-date 31 , 2019 19,394,236 $ 1,055.22 The weighted-average grant-date fair value during the year ended December 31 , 2017 and 2018 , year ended December 31 , 2017 and 2018 , wa $ December 31 , 2017 and 2018 , wa $ 845.06 and and 2018 , wa $ 845.06 and $ 1,095.89 , respectively wa $ 845.06 and $ 1,095.89 , respectively . Total fair during the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 were $ 2017 , 2018 , and 2019 were $ 11.3 billion , , and 2019 were $ 11.3 billion , $ 14.1 billion $ 11.3 billion , $ 14.1 billion , and $ 15.2 14.1 billion , and $ 15.2 billion , respectively . As respectively . As of December 31 , 2019 , there wa As of December 31 , 2019 , there wa $ 19.1 2019 , there wa $ 19.1 billion of unrecognized compensation cost over a weighted-average period of 2.6 year . 401 ( k period of 2.6 year . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 448 million , $ 691 million $ 448 million , $ 691 million , and $ 724 691 million , and $ 724 million for the year ended for the year ended December 31 , 2017 , 2018 , year ended December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively . 83 Table and 2019 , respectively . 83 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2017 2018 2019 Domestic Year Ended December 31 , 2017 2018 2019 Domestic operation $ Ended December 31 , 2017 2018 2019 Domestic operation $ 10,680 December 31 , 2017 2018 2019 Domestic operation $ 10,680 $ 2018 2019 Domestic operation $ 10,680 $ 15,779 $ 16,426 Foreign Domestic operation $ 10,680 $ 15,779 $ 16,426 Foreign operation 16,513 $ 10,680 $ 15,779 $ 16,426 Foreign operation 16,513 19,134 23,199 15,779 $ 16,426 Foreign operation 16,513 19,134 23,199 Total $ 27,193 $ 16,426 Foreign operation 16,513 19,134 23,199 Total $ 27,193 $ 16,426 Foreign operation 16,513 19,134 23,199 Total $ 27,193 $ 34,913 16,513 19,134 23,199 Total $ 27,193 $ 34,913 $ 39,625 The 23,199 Total $ 27,193 $ 34,913 $ 39,625 The provision for $ 27,193 $ 34,913 $ 39,625 The provision for income tax ) : Year Ended December 31 , 2017 2018 2019 Current Year Ended December 31 , 2017 2018 2019 Current : Federal Ended December 31 , 2017 2018 2019 Current : Federal and December 31 , 2017 2018 2019 Current : Federal and state : Federal and state $ 12,608 $ 2,153 $ 2,424 Foreign and state $ 12,608 $ 2,153 $ 2,424 Foreign 1,746 1,251 $ 12,608 $ 2,153 $ 2,424 Foreign 1,746 1,251 2,713 Total $ 2,153 $ 2,424 Foreign 1,746 1,251 2,713 Total 14,354 3,404 2,153 $ 2,424 Foreign 1,746 1,251 2,713 Total 14,354 3,404 5,137 $ 2,424 Foreign 1,746 1,251 2,713 Total 14,354 3,404 5,137 Deferred Foreign 1,746 1,251 2,713 Total 14,354 3,404 5,137 Deferred : Federal 1,746 1,251 2,713 Total 14,354 3,404 5,137 Deferred : Federal and 1,251 2,713 Total 14,354 3,404 5,137 Deferred : Federal and state Deferred : Federal and state 220 907 286 Foreign ( 43 : Federal and state 220 907 286 Foreign ( 43 ) Federal and state 220 907 286 Foreign ( 43 ) ( 220 907 286 Foreign ( 43 ) ( 134 ) ( Foreign ( 43 ) ( 134 ) ( 141 ) Total ) ( 134 ) ( 141 ) Total 177 773 145 ) ( 141 ) Total 177 773 145 Provision for income ( 141 ) Total 177 773 145 Provision for income tax 141 ) Total 177 773 145 Provision for income tax $ Provision for income tax $ 14,531 $ 4,177 $ 5,282 The income tax $ 14,531 $ 4,177 $ 5,282 The Tax Act $ 14,531 $ 4,177 $ 5,282 The Tax Act enacted on Tax Act enacted on December 22 , 2017 introduced significant change enacted on December 22 , 2017 introduced significant change to U.S. income tax law . Effective 2018 , the Tax Act reduced U.S. statutory tax rate from 35 % to 21 % and rate from 35 % to 21 % and created new tax financial statement a of December 31 , 2017 . As we a of December 31 , 2017 . As we collected and , over the course of 2018 , to the provisional amount wa completed a of December 31 , 2018 . Transition tax a of December 31 , 2018 . Transition tax The Tax tax at a rate of 15.5 % to the extent of other net current asset and 8 % on the remaining earnings income tax expense of $ 10.2 billion a of December 31 10.2 billion a of December 31 , 2017 . Subsequent adjustment a of December 31 , 2017 . Subsequent adjustment in 2018 2017 . Subsequent adjustment in 2018 and 2019 were not material Subsequent adjustment in 2018 and 2019 were not material . Deferred deferred tax a of December 31 , 2017 to reflect the a of December 31 , 2017 to reflect the reduced rate deferred tax benefit of $ 376 million to reflect the reduced Tax Act a of December 31 , 2017 . 84 Table a of December 31 , 2017 . 84 Table of Contents December 31 , 2017 . 84 Table of Contents Alphabet Inc follows : Year Ended December 31 , 2017 2018 2019 U.S. Year Ended December 31 , 2017 2018 2019 U.S. federal statutory Ended December 31 , 2017 2018 2019 U.S. federal statutory tax December 31 , 2017 2018 2019 U.S. federal statutory tax rate U.S. federal statutory tax rate 35.0 % 21.0 % 21.0 % statutory tax rate 35.0 % 21.0 % 21.0 % Foreign income rate 35.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 14.2 ) ( 4.9 ) ( rate ( 14.2 ) ( 4.9 ) ( 5.6 ) Effect ) ( 4.9 ) ( 5.6 ) Effect of the Tax the Tax Act Transition tax 37.6 ( 0.1 ) ( 0.6 Act Transition tax 37.6 ( 0.1 ) ( 0.6 ) Deferred 37.6 ( 0.1 ) ( 0.6 ) Deferred tax effect ( ) Deferred tax effect ( 1.4 ) ( 1.2 ) 0.0 effect ( 1.4 ) ( 1.2 ) 0.0 Federal research credit 1.4 ) ( 1.2 ) 0.0 Federal research credit ( 1.8 0.0 Federal research credit ( 1.8 ) ( 2.4 ) ( credit ( 1.8 ) ( 2.4 ) ( 2.5 ) Stock-based ) ( 2.4 ) ( 2.5 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 4.5 ) ( 2.2 ) ( expense ( 4.5 ) ( 2.2 ) ( 0.7 ) European ) ( 2.2 ) ( 0.7 ) European Commission fine 3.5 0.7 ) European Commission fine 3.5 3.1 1.0 Deferred tax asset ) European Commission fine 3.5 3.1 1.0 Deferred tax asset valuation European Commission fine 3.5 3.1 1.0 Deferred tax asset valuation allowance Deferred tax asset valuation allowance 0.9 ( 2.0 ) 0.0 State asset valuation allowance 0.9 ( 2.0 ) 0.0 State and local allowance 0.9 ( 2.0 ) 0.0 State and local income tax State and local income tax 0.1 ( 0.4 ) 1.1 Other local income tax 0.1 ( 0.4 ) 1.1 Other adjustment ( tax 0.1 ( 0.4 ) 1.1 Other adjustment ( 1.8 ) ) 1.1 Other adjustment ( 1.8 ) 1.1 ( 0.4 ) Other adjustment ( 1.8 ) 1.1 ( 0.4 ) Effective tax ( 1.8 ) 1.1 ( 0.4 ) Effective tax rate 53.4 0.4 ) Effective tax rate 53.4 % 12.0 % 13.3 % Effective tax rate 53.4 % 12.0 % 13.3 % Our effective rate 53.4 % 12.0 % 13.3 % Our effective tax rate Irish subsidiary . Beginning in 2018 , earnings realized in foreign Tax Act . On July 27 , 2015 , the United . On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . As a decision on December 28 , 2015 . As a result of compensation cost . On June 7 , 2019 , the United . On June 7 , 2019 , the United States Court the Ninth Circuit overturned the 2015 Tax Court decision in Altera regulation issued under IRC Section 482 requiring related-party participant in a net tax benefit of $ 418 million related to previously shared in the year ended December 31 , 2019 . 85 Table year ended December 31 , 2019 . 85 Table of Contents December 31 , 2019 . 85 Table of Contents Alphabet Inc ) : As of December 31 , 2018 2019 Deferred tax As of December 31 , 2018 2019 Deferred tax asset : of December 31 , 2018 2019 Deferred tax asset : Stock-based : Stock-based compensation expense $ 291 $ 421 Accrued employee benefit compensation expense $ 291 $ 421 Accrued employee benefit 387 463 $ 421 Accrued employee benefit 387 463 Accruals and reserve not 421 Accrued employee benefit 387 463 Accruals and reserve not currently and reserve not currently deductible 902 1,047 Tax credit 1,979 3,264 reserve not currently deductible 902 1,047 Tax credit 1,979 3,264 Basis deductible 902 1,047 Tax credit 1,979 3,264 Basis difference in investment 902 1,047 Tax credit 1,979 3,264 Basis difference in investment in difference in investment in Arris 657 0 Prepaid cost sharing 597 in investment in Arris 657 0 Prepaid cost sharing 597 0 657 0 Prepaid cost sharing 597 0 Net operating loss 557 0 Prepaid cost sharing 597 0 Net operating loss 557 771 597 0 Net operating loss 557 771 Operating lease 160 1,876 0 Net operating loss 557 771 Operating lease 160 1,876 Other loss 557 771 Operating lease 160 1,876 Other 21 390 Total 557 771 Operating lease 160 1,876 Other 21 390 Total deferred Operating lease 160 1,876 Other 21 390 Total deferred tax asset lease 160 1,876 Other 21 390 Total deferred tax asset 5,551 390 Total deferred tax asset 5,551 8,232 Valuation allowance ( 2,817 Total deferred tax asset 5,551 8,232 Valuation allowance ( 2,817 ) 5,551 8,232 Valuation allowance ( 2,817 ) ( 3,502 ) Total allowance ( 2,817 ) ( 3,502 ) Total deferred tax asset asset net of valuation allowance 2,734 4,730 Deferred tax liability : net of valuation allowance 2,734 4,730 Deferred tax liability : Property and equipment , net ( 1,382 ) ( 1,798 ) Renewable net ( 1,382 ) ( 1,798 ) Renewable energy investment ( ) Renewable energy investment ( 500 ) ( 466 ) Foreign investment ( 500 ) ( 466 ) Foreign Earnings ( 111 466 ) Foreign Earnings ( 111 ) ( 373 ) Net Earnings ( 111 ) ( 373 ) Net investment gain ( ) Net investment gain ( 1,143 ) ( 1,074 ) Operating gain ( 1,143 ) ( 1,074 ) Operating lease 0 ( ( 1,074 ) Operating lease 0 ( 1,619 ) Other ( ) Operating lease 0 ( 1,619 ) Other ( 125 ) ( 1,619 ) Other ( 125 ) ( 380 ) Total Other ( 125 ) ( 380 ) Total deferred tax liability Total deferred tax liability ( 3,261 ) ( 5,710 ) Net liability ( 3,261 ) ( 5,710 ) Net deferred tax asset ( liability ) $ ( 527 ) $ ( 980 ) ( 527 ) $ ( 980 ) As of December 31 980 ) As of December 31 , 2019 , our federal As of December 31 , 2019 , our federal , state tax purpose were approximately $ 1.8 billion , $ 3.1 billion $ 1.8 billion , $ 3.1 billion , and $ 1.9 3.1 billion , and $ 1.9 billion respectively . If not will begin to expire in 2021 and the state net operating will begin to expire in 2020 . It is more likely jurisdiction . As of December 31 , 2019 , our California As of December 31 , 2019 , our California research and tax purpose were approximately $ 3.0 billion that can be carried realized . As of December 31 , 2019 , we maintained As of December 31 , 2019 , we maintained a valuation released the valuation allowance in 2018 against the deferred tax asset Home business to Arris in 2013 . We continue to reassess will be recorded accordingly . 86 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 Beginning Year Ended December 31 , 2017 2018 2019 Beginning gross unrecognized Ended December 31 , 2017 2018 2019 Beginning gross unrecognized tax December 31 , 2017 2018 2019 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 5,393 $ 4,696 $ 4,652 Increases tax benefit $ 5,393 $ 4,696 $ 4,652 Increases related to $ 5,393 $ 4,696 $ 4,652 Increases related to prior year to prior year tax position 685 321 938 Decreases related to prior year tax position 685 321 938 Decreases related to prior year tax position 685 321 938 Decreases related to prior year prior year tax position ( 257 ) ( 623 ) ( position ( 257 ) ( 623 ) ( 143 ) Decreases ) ( 623 ) ( 143 ) Decreases related to settlement settlement with tax authority ( 1,875 ) ( 191 ) ( authority ( 1,875 ) ( 191 ) ( 2,886 ) Increases ) ( 191 ) ( 2,886 ) Increases related to current to current year tax position 750 449 816 Ending gross unrecognized current year tax position 750 449 816 Ending gross unrecognized tax year tax position 750 449 816 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 4,696 $ 4,652 $ 3,377 The tax benefit $ 4,696 $ 4,652 $ 3,377 The total amount $ 4,696 $ 4,652 $ 3,377 The total amount of gross unrecognized tax benefit wa $ 4.7 billion , $ 4.7 billion $ 4.7 billion , $ 4.7 billion , and $ 3.4 4.7 billion , and $ 3.4 billion a of December 31 3.4 billion a of December 31 , 2017 , 2018 , a of December 31 , 2017 , 2018 , and 2019 December 31 , 2017 , 2018 , and 2019 , respectively 2017 , 2018 , and 2019 , respectively , of which , of which , $ 3.0 billion , $ 2.9 billion $ 3.0 billion , $ 2.9 billion , and $ 2.3 2.9 billion , and $ 2.3 billion , if recognized , gross unrecognized tax benefit in 2017 and 2019 wa primarily a tax benefit in 2017 and 2019 wa primarily a a result audit . As of December 31 , 2018 and 2019 , As of December 31 , 2018 and 2019 , we had December 31 , 2018 and 2019 , we had accrued $ , we had accrued $ 490 million and $ 130 million $ 490 million and $ 130 million in interest and penalty completed it examination through our 2015 tax year ; all issue commence it examination of our 2016 through 2018 tax return . examination of our 2016 through 2018 tax return . We have presented . The tax year 2011 through 2018 remain subject to The tax year 2011 through 2018 remain subject to examination by materially change in the next 12 month . Note 15 . next 12 month . Note 15 . Information about Segments and D service through Verily . 87 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2017 2018 2019 Revenues Year Ended December 31 , 2017 2018 2019 Revenues : Google Ended December 31 , 2017 2018 2019 Revenues : Google $ December 31 , 2017 2018 2019 Revenues : Google $ 110,547 2019 Revenues : Google $ 110,547 $ 136,362 $ 160,743 Other : Google $ 110,547 $ 136,362 $ 160,743 Other Bets 477 $ 110,547 $ 136,362 $ 160,743 Other Bets 477 595 659 136,362 $ 160,743 Other Bets 477 595 659 Hedging gain ( $ 160,743 Other Bets 477 595 659 Hedging gain ( loss 160,743 Other Bets 477 595 659 Hedging gain ( loss ) gain ( loss ) ( 169 ) ( 138 ) 455 ) ( 169 ) ( 138 ) 455 Total revenue $ 169 ) ( 138 ) 455 Total revenue $ 110,855 $ ) 455 Total revenue $ 110,855 $ 136,819 $ 161,857 Year Total revenue $ 110,855 $ 136,819 $ 161,857 Year Ended December $ 110,855 $ 136,819 $ 161,857 Year Ended December 31 , $ 161,857 Year Ended December 31 , 2017 2018 2019 Operating Year Ended December 31 , 2017 2018 2019 Operating income ( Ended December 31 , 2017 2018 2019 Operating income ( loss December 31 , 2017 2018 2019 Operating income ( loss ) loss ) : Google $ 32,456 $ 36,655 $ 41,673 Other : Google $ 32,456 $ 36,655 $ 41,673 Other Bets ( $ 32,456 $ 36,655 $ 41,673 Other Bets ( 2,734 ) $ 41,673 Other Bets ( 2,734 ) ( 3,358 ) ( Bets ( 2,734 ) ( 3,358 ) ( 4,824 ) Reconciling ) ( 3,358 ) ( 4,824 ) Reconciling item ( 1 4,824 ) Reconciling item ( 1 ) ( 3,544 ) ( item ( 1 ) ( 3,544 ) ( 5,773 ) ( ) ( 3,544 ) ( 5,773 ) ( 2,618 ) Total ) ( 5,773 ) ( 2,618 ) Total income from operation Total income from operation $ 26,178 $ 27,524 $ 34,231 ( from operation $ 26,178 $ 27,524 $ 34,231 ( 1 ) $ 26,178 $ 27,524 $ 34,231 ( 1 ) Reconciling item $ 27,524 $ 34,231 ( 1 ) Reconciling item are generally for the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 , December 31 , 2017 , 2018 and 2019 , and a , 2017 , 2018 and 2019 , and a charge from for the year ended December 31 , 2019 . Performance fee year ended December 31 , 2019 . Performance fee previously included for the year ended December 31 , 2017 and 2018 from year ended December 31 , 2017 and 2018 from general and December 31 , 2017 and 2018 from general and administrative expense the reclassification , see Note 1 . Year Ended December 31 1 . Year Ended December 31 , 2017 2018 2019 Capital Year Ended December 31 , 2017 2018 2019 Capital expenditure : Ended December 31 , 2017 2018 2019 Capital expenditure : Google December 31 , 2017 2018 2019 Capital expenditure : Google $ Capital expenditure : Google $ 12,619 $ 25,460 $ 25,251 Other : Google $ 12,619 $ 25,460 $ 25,251 Other Bets 493 $ 12,619 $ 25,460 $ 25,251 Other Bets 493 181 281 25,460 $ 25,251 Other Bets 493 181 281 Reconciling item ( $ 25,251 Other Bets 493 181 281 Reconciling item ( 2 25,251 Other Bets 493 181 281 Reconciling item ( 2 ) 181 281 Reconciling item ( 2 ) 72 ( 502 ) Reconciling item ( 2 ) 72 ( 502 ) ( 1,984 ( 2 ) 72 ( 502 ) ( 1,984 ) Total 72 ( 502 ) ( 1,984 ) Total capital expenditure a Statements of Cash Flows $ 13,184 $ 25,139 $ 23,548 ( Cash Flows $ 13,184 $ 25,139 $ 23,548 ( 2 ) $ 13,184 $ 25,139 $ 23,548 ( 2 ) Reconciling item $ 25,139 $ 23,548 ( 2 ) Reconciling item are related and other miscellaneous difference . 88 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2017 2018 2019 Stock-based Year Ended December 31 , 2017 2018 2019 Stock-based compensation : Ended December 31 , 2017 2018 2019 Stock-based compensation : Google December 31 , 2017 2018 2019 Stock-based compensation : Google $ Stock-based compensation : Google $ 7,168 $ 8,755 $ 10,185 Other : Google $ 7,168 $ 8,755 $ 10,185 Other Bets 363 $ 7,168 $ 8,755 $ 10,185 Other Bets 363 489 474 8,755 $ 10,185 Other Bets 363 489 474 Reconciling item ( $ 10,185 Other Bets 363 489 474 Reconciling item ( 3 10,185 Other Bets 363 489 474 Reconciling item ( 3 ) 489 474 Reconciling item ( 3 ) 148 109 135 Total Reconciling item ( 3 ) 148 109 135 Total stock-based compensation item ( 3 ) 148 109 135 Total stock-based compensation ( ( 3 ) 148 109 135 Total stock-based compensation ( 4 135 Total stock-based compensation ( 4 ) $ 7,679 $ 9,353 compensation ( 4 ) $ 7,679 $ 9,353 $ 10,794 Depreciation 4 ) $ 7,679 $ 9,353 $ 10,794 Depreciation , amortization $ 7,679 $ 9,353 $ 10,794 Depreciation , amortization , and and impairment : Google $ 6,608 $ 8,708 $ 11,158 Other : Google $ 6,608 $ 8,708 $ 11,158 Other Bets 307 $ 6,608 $ 8,708 $ 11,158 Other Bets 307 327 566 8,708 $ 11,158 Other Bets 307 327 566 Reconciling item ( $ 11,158 Other Bets 307 327 566 Reconciling item ( 3 11,158 Other Bets 307 327 566 Reconciling item ( 3 ) 327 566 Reconciling item ( 3 ) 0 0 57 Total Reconciling item ( 3 ) 0 0 57 Total depreciation , item ( 3 ) 0 0 57 Total depreciation , amortization ( 3 ) 0 0 57 Total depreciation , amortization , amortization , and impairment $ 6,915 $ 9,035 $ 11,781 ( and impairment $ 6,915 $ 9,035 $ 11,781 ( 3 ) $ 6,915 $ 9,035 $ 11,781 ( 3 ) Reconciling item $ 9,035 $ 11,781 ( 3 ) Reconciling item relate to to individual segment . ( 4 ) For purpose of segment ) : As of December 31 , 2018 As of December As of December 31 , 2018 As of December 31 , , 2018 As of December 31 , 2019 Long-lived asset : As of December 31 , 2019 Long-lived asset : United States asset : United States $ 74,882 $ 94,907 International 22,234 28,424 United States $ 74,882 $ 94,907 International 22,234 28,424 Total long-lived $ 74,882 $ 94,907 International 22,234 28,424 Total long-lived asset $ 74,882 $ 94,907 International 22,234 28,424 Total long-lived asset $ 97,116 28,424 Total long-lived asset $ 97,116 $ 123,331 For revenue by long-lived asset $ 97,116 $ 123,331 For revenue by geography , by geography , see Note 2 . 89 Table of Contents , see Note 2 . 89 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2019 , our disclosure a of December 31 , 2019 , our disclosure control and report operating result . In 2019 , we began a multi-year reporting to take place in 2020 . There have been no during the quarter ended December 31 , 2019 that have materially quarter ended December 31 , 2019 that have materially affected , , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2019 . Management reviewed a of December 31 , 2019 . Management reviewed the result financial reporting a of December 31 , 2019 ha been audited a of December 31 , 2019 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 90 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2020 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2019 ( 2020 Proxy year ended December 31 , 2019 ( 2020 Proxy Statement ) December 31 , 2019 ( 2020 Proxy Statement ) and is herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2020 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Plan Information ” in the 2020 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2020 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2020 Proxy Statement and is incorporated incorporated herein by reference . 91 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 47 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 50 Consolidated Statements of Income 51 50 Consolidated Statements of Income 51 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 52 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 53 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 55 2 . Financial Statement Schedules to Consolidated Financial Statements 55 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2017 , 2018 and year ended December 31 , 2017 , 2018 and 2019 ( December 31 , 2017 , 2018 and 2019 ( in million , 2017 , 2018 and 2019 ( in million ) : of Year Year ended December 31 , 2017 $ 467 $ Year ended December 31 , 2017 $ 467 $ 1,131 $ December 31 , 2017 $ 467 $ 1,131 $ ( 924 , 2017 $ 467 $ 1,131 $ ( 924 ) $ 467 $ 1,131 $ ( 924 ) $ 674 Year ended $ ( 924 ) $ 674 Year ended December 31 , $ 674 Year ended December 31 , 2018 $ 674 $ Year ended December 31 , 2018 $ 674 $ 1,115 $ December 31 , 2018 $ 674 $ 1,115 $ ( 1,060 , 2018 $ 674 $ 1,115 $ ( 1,060 ) $ 674 $ 1,115 $ ( 1,060 ) $ 729 Year ended $ ( 1,060 ) $ 729 Year ended December 31 , $ 729 Year ended December 31 , 2019 $ 729 $ Year ended December 31 , 2019 $ 729 $ 1,481 $ December 31 , 2019 $ 729 $ 1,481 $ ( 1,457 , 2019 $ 729 $ 1,481 $ ( 1,457 ) $ 729 $ 1,481 $ ( 1,457 ) $ 753 Note : $ ( 1,457 ) $ 753 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.01 Specimen Class 001-37580 ) October 2 , 2015 4.01 Specimen Class A Common ) October 2 , 2015 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 92 Table of 001-37580 ) October 2 , 2015 92 Table of Contents Alphabet ) October 2 , 2015 92 Table of Contents Alphabet Inc. by reference herein Form Date 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Transfer Restriction 001-37580 ) October 2 , 2015 4.06 Transfer Restriction Agreement , ) October 2 , 2015 4.06 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.07 Class C 001-37580 ) October 2 , 2015 4.07 Class C Undertaking , ) October 2 , 2015 4.07 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Indenture , 001-37580 ) October 2 , 2015 4.08 Indenture , dated February ) October 2 , 2015 4.08 Indenture , dated February 12 4.08 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.09 Registrant Registration 333-209510 ) February 12 , 2016 4.09 Registrant Registration Rights Agreement ) February 12 , 2016 4.09 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.10 First Supplemental 333-209518 ) February 12 , 2016 4.10 First Supplemental Indenture , ) February 12 , 2016 4.10 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.11 Form of 001-37580 ) April 27 , 2016 4.11 Form of the Registrant ) April 27 , 2016 4.11 Form of the Registrant ’ of the Registrant ’ s 3.625 % Notes due 2021 ( s 3.625 % Notes due 2021 ( included in Exhibit 4.10 2021 ( included in Exhibit 4.10 ) 4.12 Form of the included in Exhibit 4.10 ) 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.10 2024 ( included in Exhibit 4.10 ) 4.13 Form of the included in Exhibit 4.10 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 4.14 * Description 001-37580 ) August 9 , 2016 4.14 * Description of Registrant ) August 9 , 2016 4.14 * Description of Registrant ’ of Registrant ’ s Securities 10.01 u Form of Indemnification Agreement officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Letter 001-37580 ) October 2 , 2015 10.02 u Letter Agreement , ) October 2 , 2015 10.02 u Letter Agreement , dated Letter Agreement , dated April 24 , 2019 , between Robin , dated April 24 , 2019 , between Robin L. Washington Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 30 , 2019 No . 001-37580 ) April 30 , 2019 10.03 u Letter 001-37580 ) April 30 , 2019 10.03 u Letter Agreement , ) April 30 , 2019 10.03 u Letter Agreement , dated Letter Agreement , dated December 7 , 2019 , between Frances , dated December 7 , 2019 , between Frances H. Arnold Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) December 9 , 2019 No . 001-37580 ) December 9 , 2019 10.04 u Compensation 001-37580 ) December 9 , 2019 10.04 u Compensation Plan Agreement ) December 9 , 2019 10.04 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Director 001-37580 ) October 2 , 2015 10.05 u Director Arrangements Agreement ) October 2 , 2015 10.05 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.06 u Alphabet 001-37580 ) October 2 , 2015 10.06 u Alphabet Inc . ) October 2 , 2015 10.06 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.07 u Google 001-37580 ) October 2 , 2015 10.07 u Google Inc. 2004 ) October 2 , 2015 10.07 u Google Inc. 2004 Stock 2015 10.07 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.07.1 u Google 000-50726 ) June 7 , 2011 10.07.1 u Google Inc. 2004 ) June 7 , 2011 10.07.1 u Google Inc. 2004 Stock 2011 10.07.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.07.2 u Google 000-50726 ) March 30 , 2005 10.07.2 u Google Inc. 2004 ) March 30 , 2005 10.07.2 u Google Inc. 2004 Stock 2005 10.07.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.07.3 u Google 000-50726 ) March 30 , 2005 10.07.3 u Google Inc. 2004 ) March 30 , 2005 10.07.3 u Google Inc. 2004 Stock 2005 10.07.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.08 u Alphabet 333-142243 ) April 20 , 2007 10.08 u Alphabet Inc . ) April 20 , 2007 10.08 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 21 , 2019 No . 001-37580 ) June 21 , 2019 93 Table of 001-37580 ) June 21 , 2019 93 Table of Contents Alphabet ) June 21 , 2019 93 Table of Contents Alphabet Inc. by reference herein Form Date 10.08.1 * u Alphabet Inc . Inc . Amended and Restated 2012 Stock Plan - Form of Alphabet Restricted Stock Unit Agreement 10.08.2 * u Alphabet Inc . Inc . Amended and Restated 2012 Stock Plan - Performance Stock - Performance Stock Unit Agreement 10.09 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 10.10 u Apigee 333-181661 ) May 24 , 2012 10.10 u Apigee Corporation 2015 ) May 24 , 2012 10.10 u Apigee Corporation 2015 Equity 2012 10.10 u Apigee Corporation 2015 Equity Incentive Plan Registration Statement S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 10.10.1 u Apigee 333-214573 ) November 10 , 2016 10.10.1 u Apigee Corporation 2015 ) November 10 , 2016 10.10.1 u Apigee Corporation 2015 Equity 2016 10.10.1 u Apigee Corporation 2015 Equity Incentive Plan - Form S-8 ( File No . 333-214573 ) November 10 , 2016 No . 333-214573 ) November 10 , 2016 14.01 Code of 333-214573 ) November 10 , 2016 14.01 Code of Conduct of ) November 10 , 2016 14.01 Code of Conduct of the Registrant a amended on September 21 , 2017 Annual Report on amended on September 21 , 2017 Annual Report on Form 10-K 2017 Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 6 , 2018 No . 001-37580 ) February 6 , 2018 21.01 * Subsidiaries 001-37580 ) February 6 , 2018 21.01 * Subsidiaries of the ) February 6 , 2018 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.01 EC AdSense for Search the Sarbanes-Oxley Act of 2002 99.01 EC AdSense for Search Decision Decision Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) March 20 , 2019 No . 001-37580 ) March 20 , 2019 99.02 Press Release 001-37580 ) March 20 , 2019 99.02 Press Release regarding Alphabet ) March 20 , 2019 99.02 Press Release regarding Alphabet Management Change Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) December 4 , 2019 No . 001-37580 ) December 4 , 2019 101.INS * Inline 001-37580 ) December 4 , 2019 101.INS * Inline XBRL Instance ) December 4 , 2019 101.INS * Inline XBRL Instance Document the Inline XBRL document . 101.SCH * XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema Document 101.CAL * XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase Document 101.DEF * XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase Document 101.LAB * XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase Document 94 Table of Contents Alphabet Inc. by reference herein Form Date 101.PRE * XBRL Taxonomy Extension Presentation Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File XBRL and contained in Exhibit 101 ) _________________ u Indicates management ‡ Furnished herewith . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . 95 Table FORM 10-K SUMMARY None . 95 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 3 , 2020 ALPHABET INC. By Date : February 3 , 2020 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by on the date indicated . 96 Table of Contents Alphabet Inc. Principal Executive Officer ) February 3 , 2020 Sundar Pichai / Officer ) February 3 , 2020 Sundar Pichai / S / Principal Financial Officer ) February 3 , 2020 Ruth M. Porat Officer ) February 3 , 2020 Ruth M. Porat / S Principal Accounting Officer ) February 3 , 2020 Amie Thuener O'Toole Officer ) February 3 , 2020 Amie Thuener O'Toole / S H. A RNOLD Director February 3 , 2020 Frances H. Arnold RNOLD Director February 3 , 2020 Frances H. Arnold / S RIN Co-Founder and Director February 3 , 2020 Sergey Brin / and Director February 3 , 2020 Sergey Brin / S / OHN D OERR Director February 3 , 2020 L. John Doerr OERR Director February 3 , 2020 L. John Doerr / S J R . Director February 3 , 2020 Roger W. Ferguson . Director February 3 , 2020 Roger W. Ferguson , Jr. ENNESSY Director , Chair February 3 , 2020 John L. Hennessy , Chair February 3 , 2020 John L. Hennessy / S NN M ATHER Director February 3 , 2020 Ann Mather / ATHER Director February 3 , 2020 Ann Mather / S / . M ULALLY Director February 3 , 2020 Alan R. Mulally ULALLY Director February 3 , 2020 Alan R. Mulally / S AGE Co-Founder and Director February 3 , 2020 Larry Page / and Director February 3 , 2020 Larry Page / S / AM S HRIRAM Director February 3 , 2020 K. Ram Shriram HRIRAM Director February 3 , 2020 K. Ram Shriram / S Robin L. Washington Director February 3 , 2020 Robin L. Washington Washington Director February 3 , 2020 Robin L. Washington 97 , 2020 Robin L. 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___________________________________________ FORM 10-K ___________________________________________ ( , D.C. 20549 ___________________________________________ FORM 10-K ___________________________________________ ( Mark One ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2020 OR ☐ TRANSITION year ended December 31 , 2020 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive including zip code ) ( 650 ) 253-000 0 ( Registrant code ) ( 650 ) 253-000 0 ( Registrant 's telephone ) ( 650 ) 253-000 0 ( Registrant 's telephone number Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C.7262 ( b ) ) ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of June 30 , 2020 , the aggregate As of June 30 , 2020 , the aggregate market value Global Select Market on June 30 , 2020 ) wa approximately Market on June 30 , 2020 ) wa approximately $ 849.7 2020 ) wa approximately $ 849.7 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 26 , Form 10-K. As of January 26 , 2021 , there were As of January 26 , 2021 , there were 300,737,081 share , 2021 , there were 300,737,081 share of the registrant ’ A common stock outstanding , 45,843,112 share of the registrant ’ common stock outstanding , and 327,556,472 share of the registrant ’ s Proxy Statement for the 2021 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2020 . Table of year ended December 31 , 2020 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2020 TABLE OF CONTENTS Year Ended December 31 , 2020 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 3 PART I Item 1. Business Statements 3 PART I Item 1. Business 5 Item 1A . PART I Item 1. Business 5 Item 1A . Risk Factors Item 1. Business 5 Item 1A . Risk Factors 10 Item Item 1A . Risk Factors 10 Item 1B . Unresolved Staff . Risk Factors 10 Item 1B . Unresolved Staff Comments 24 1B . Unresolved Staff Comments 24 Item 2 . Properties 25 Unresolved Staff Comments 24 Item 2 . Properties 25 Item 3 24 Item 2 . Properties 25 Item 3 . Legal Proceedings 2 . Properties 25 Item 3 . Legal Proceedings 25 Item Item 3 . Legal Proceedings 25 Item 4 . Mine Safety . Legal Proceedings 25 Item 4 . Mine Safety Disclosures 25 4 . Mine Safety Disclosures 25 PART II Item 5 . Disclosures 25 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 26 Item 6 . Selected Financial of Equity Securities 26 Item 6 . Selected Financial Data 29 6 . Selected Financial Data 29 Item 7 . Management ’ Selected Financial Data 29 Item 7 . Management ’ s Discussion Condition and Results of Operations 30 Item 7A . Quantitative and Results of Operations 30 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 47 Item 8 . Financial Statements About Market Risk 47 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 50 Item 9 . Changes in and Supplementary Data 50 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 92 Item 9A . Controls and and Financial Disclosure 92 Item 9A . Controls and Procedures 92 9A . Controls and Procedures 92 Item 9B . Other Information Controls and Procedures 92 Item 9B . Other Information 92 PART Item 9B . Other Information 92 PART III Item 10 . Information 92 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 93 Item 11 . Executive Compensation and Corporate Governance 93 Item 11 . Executive Compensation 93 Item Item 11 . Executive Compensation 93 Item 12 . Security Ownership . Executive Compensation 93 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 93 Item 13 . Certain Relationships Related Stockholder Matters 93 Item 13 . Certain Relationships and Related Transactions , and Director Independence 93 Item 14 . Principal Accountant and Director Independence 93 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 93 PART IV Item 15 . Services 93 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 94 Item 16 . Form 10-K Financial Statement Schedules 94 Item 16 . Form 10-K Summary 97 94 Item 16 . Form 10-K Summary 97 Signatures 2 Table 16 . Form 10-K Summary 97 Signatures 2 Table of Contents Form 10-K Summary 97 Signatures 2 Table of Contents Alphabet Inc This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These statement include , , and other contingency ; 3 Table of Contents Alphabet Inc. a favorable effect on our 2021 operating result ; a well the following section : Item 1 `` Business , `` Item `` Business , `` Item 1A `` Risk Factors , `` Factors , `` and Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , the risk discussed in Item 1A , `` Risk Factors `` any of these company . 4 Table of Contents Alphabet Inc. Alphabet Inc. PART I ITEM 1. BUSINESS Overview As our founder a CEO of Google since 2015 and a CEO of Alphabet a CEO of Alphabet since 2019 . Alphabet is a collection when we were founded in 1998 . Since then , we AI-powered breakthrough , solving a 50-year-old protein folding challenge , which disease to environmental sustainability . 5 Table of Contents Alphabet Inc. of hardware product like Pixel 4a , Pixel 4a 5G and like Pixel 4a , Pixel 4a 5G and Pixel 5 phone Pixel 4a , Pixel 4a 5G and Pixel 5 phone , Pixel 4a 5G and Pixel 5 phone , Chromecast with Google web and app search after 18 month . How we make in many way , ranging 6 Table of Contents Alphabet Inc. a Amazon and Apple . 7 Table of Contents Alphabet Inc. ha been carbon neutral since 2007 , and in 2019 , since 2007 , and in 2019 , for the third consecutive consecutive year , we matched 100 % of our electricity consumption ( MWh ) . In 2020 , we neutralized our entire we became carbon neutral in 2007 ) , making Google the at all time , by 2030 . We 're also investing , we intend to enable 5 GW of new carbon-free energy our key manufacturing region by 2030 through investment . We anticipate will spur more than $ 5 billion in clean energy investment equal to taking more than 1 million car off the road , and create more than 8,000 clean energy job . With working to help more than 500 city and local government globally globally reduce a total of 1 gigaton of carbon emission annually of carbon emission annually by 2030 — that ’ s the that our product can help 1 billion people make more sustainable make more sustainable choice by 2022 . Climate change is one of our time . In 2017 , we developed a climate ( TCFD ) . In 2020 , we issued $ 5.75 2020 , we issued $ 5.75 billion in sustainability bond , this Annual Report on Form 10-K or in any other report file with the SEC . 8 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report employee . As of December 31 , 2020 , Alphabet had As of December 31 , 2020 , Alphabet had 135,301 employee , 2020 , Alphabet had 135,301 employee . When necessary , in Part I , Item 1A , Trends in Our Business in Part II , Item 7 , and Legal Matters in and Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 in this Annual Report on this Annual Report on Form 10-K . Intellectual Property We rely Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and our Proxy Statements provides notification of news or 9 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report textual reference only . ITEM 1A . RISK FACTORS Our operation . We generate d over 80 % o f total revenue display of ad online in 2020 . Many of our advertiser better than ours . This 10 Table of Contents Alphabet Inc. well a increased content acquisition 11 Table of Contents Alphabet Inc. , tariff , trade dispute 12 Table of Contents Alphabet Inc. could be negatively affected . 13 Table of Contents Alphabet Inc. International revenue accounted for approximately 53 % of our consolidated revenue of our consolidated revenue in 2020 . In addition to risk business operation and reputation . 14 Table of Contents Alphabet Inc rank them . Such effort 15 Table of Contents Alphabet Inc. . For example , in 2018 the United States Federal Communications complaint against Google on October 20 , 2020 , alleging that Google on October 20 , 2020 , alleging that Google violated . Separately , on December 16 , 2020 , a number , on December 16 , 2020 , a number of state , ongoing auditing and monitoring 16 Table of Contents Alphabet Inc. California Consumer Privacy Act of 2018 that came into effect in into effect in January of 2020 and the California Privacy Rights will go into effect in 2023 , both of which give ( EUCD ) of April 17 , 2019 , which EU ) of April 17 , 2019 , which EU Member States States must implement by June 7 , 2021 ; and the implement by June 7 , 2021 ; and the News Media business . For example : 17 Table of Contents Alphabet Inc. Millennium Copyright Act and Section 230 of the Communications Decency Act ( CJEU ) on May 13 , 2014 on the ‘ ) on May 13 , 2014 on the ‘ right to that we offer to EU 18 Table of Contents Alphabet Inc. administrative fine of up to 4 % of annual worldwide revenue . Fines of up to 2 % of annual worldwide revenue diminish our cash reserve . 19 Table of Contents Alphabet Inc. Class B common stock ha 10 vote per share , our right . As of December 31 , 2020 , Larry Page As of December 31 , 2020 , Larry Page and Sergey Brin beneficially owned approximate ly 85.3 % of our outstanding Class , which represented approximate ly 51.5 % o f the voting combination with any holder of 15 % or more of it an acquisition of u . 20 Table of Contents Alphabet Inc. back to the office in 2021 , we may experience increased factor listed under this Item 1A in addition to the following considerable time and resource . 21 Table of Contents Alphabet Inc. condition or operating result . 22 Table of Contents Alphabet Inc. valuation of our deferred tax 23 Table of Contents Alphabet Inc. actual operating performance . ITEM 1B . UNRESOLVED STAFF COMMENTS Not STAFF COMMENTS Not applicable . 24 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a see Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 25 Table of Contents Alphabet Inc. Alphabet Inc. PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public “ GOOG ” since April 3 , 2014 . Holders of ” since April 3 , 2014 . Holders of Record As of Record As of December 31 , 2020 , there were As of December 31 , 2020 , there were approximately 4,337 2020 , there were approximately 4,337 and 1,942 stockholder of record there were approximately 4,337 and 1,942 stockholder of record of our holder . As of December 31 , 2020 , there were As of December 31 , 2020 , there were approximately 64 2020 , there were approximately 64 stockholder of record of our during the quarter ended December 31 , 2020 : Period Total quarter ended December 31 , 2020 : Period Total Number of ( in thousand ) ( 1 ) Average Price Paid per Price Paid per Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 1,869 $ 1,540.84 million ) October 1 - 31 1,869 $ 1,540.84 1,869 $ ) October 1 - 31 1,869 $ 1,540.84 1,869 $ 22,667 1 - 31 1,869 $ 1,540.84 1,869 $ 22,667 November 1 - 31 1,869 $ 1,540.84 1,869 $ 22,667 November 1 - 1,869 $ 1,540.84 1,869 $ 22,667 November 1 - 30 1,640 1,540.84 1,869 $ 22,667 November 1 - 30 1,640 $ 1,748.65 $ 22,667 November 1 - 30 1,640 $ 1,748.65 1,640 $ 22,667 November 1 - 30 1,640 $ 1,748.65 1,640 $ 19,799 1 - 30 1,640 $ 1,748.65 1,640 $ 19,799 December 1 - 30 1,640 $ 1,748.65 1,640 $ 19,799 December 1 - 1,640 $ 1,748.65 1,640 $ 19,799 December 1 - 31 1,205 1,748.65 1,640 $ 19,799 December 1 - 31 1,205 $ 1,787.62 $ 19,799 December 1 - 31 1,205 $ 1,787.62 1,205 $ 19,799 December 1 - 31 1,205 $ 1,787.62 1,205 $ 17,645 1 - 31 1,205 $ 1,787.62 1,205 $ 17,645 Total 4,714 - 31 1,205 $ 1,787.62 1,205 $ 17,645 Total 4,714 4,714 1,205 $ 1,787.62 1,205 $ 17,645 Total 4,714 4,714 ( 1 1,787.62 1,205 $ 17,645 Total 4,714 4,714 ( 1 ) The 1,205 $ 17,645 Total 4,714 4,714 ( 1 ) The repurchase 17,645 Total 4,714 4,714 ( 1 ) The repurchase are being transaction , including through Rule 10b5-1 plan . The repurchase program . Please refer to Note 11 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 26 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-Year total shareholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2015 to December 31 ) from December 31 , 2015 to December 31 , 2020 31 , 2015 to December 31 , 2020 . The return 2015 to December 31 , 2020 . The return shown are future performance . COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN * , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2015 in stock or invested on December 31 , 2015 in stock or index , . Fiscal year ending December 31 . Copyright © 2020 S December 31 . Copyright © 2020 S & P , a Inc. All right reserved . 27 Table of Contents Alphabet Inc Inc. Class C 's cumulative 5-Year total shareholder return on capital of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our Class C all dividend ) from December 31 , 2015 to December 31 ) from December 31 , 2015 to December 31 , 2020 31 , 2015 to December 31 , 2020 . The return 2015 to December 31 , 2020 . The return shown are , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2015 in stock or invested on December 31 , 2015 in stock or in index . Fiscal year ending December 31 . Copyright © 2020 S December 31 . Copyright © 2020 S & P , a Inc. All right reserved . 28 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 6 . SELECTED FINANCIAL DATA The read in conjunction with Item 7 “ Management ’ s Discussion related note appearing in Item 8 “ Financial Statements and Supplementary this Annual Report on Form 10-K . The historical result are period . Year Ended December 31 , 2016 2017 2018 2019 Year Ended December 31 , 2016 2017 2018 2019 2020 ( Ended December 31 , 2016 2017 2018 2019 2020 ( in December 31 , 2016 2017 2018 2019 2020 ( in million 31 , 2016 2017 2018 2019 2020 ( in million , , 2016 2017 2018 2019 2020 ( in million , except Income Data : Revenues $ 90,272 $ 110,855 $ 136,819 $ : Revenues $ 90,272 $ 110,855 $ 136,819 $ 161,857 $ $ 90,272 $ 110,855 $ 136,819 $ 161,857 $ 182,527 Income $ 110,855 $ 136,819 $ 161,857 $ 182,527 Income from operation $ 136,819 $ 161,857 $ 182,527 Income from operation $ 23,737 182,527 Income from operation $ 23,737 $ 26,178 $ 27,524 $ from operation $ 23,737 $ 26,178 $ 27,524 $ 34,231 $ $ 23,737 $ 26,178 $ 27,524 $ 34,231 $ 41,224 Net $ 26,178 $ 27,524 $ 34,231 $ 41,224 Net income $ $ 27,524 $ 34,231 $ 41,224 Net income $ 19,478 $ $ 41,224 Net income $ 19,478 $ 12,662 $ 30,736 $ Net income $ 19,478 $ 12,662 $ 30,736 $ 34,343 $ $ 19,478 $ 12,662 $ 30,736 $ 34,343 $ 40,269 Basic $ 12,662 $ 30,736 $ 34,343 $ 40,269 Basic net income $ 30,736 $ 34,343 $ 40,269 Basic net income per share and B common stock $ 28.32 $ 18.27 $ 44.22 $ common stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic $ 18.27 $ 44.22 $ 49.59 $ 59.15 Basic net income $ 44.22 $ 49.59 $ 59.15 Basic net income per share Class C capital stock $ 28.32 $ 18.27 $ 44.22 $ capital stock $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ $ 28.32 $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted $ 18.27 $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share and B common stock $ 27.85 $ 18.00 $ 43.70 $ common stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted $ 18.00 $ 43.70 $ 49.16 $ 58.61 Diluted net income $ 43.70 $ 49.16 $ 58.61 Diluted net income per share Class C capital stock $ 27.85 $ 18.00 $ 43.70 $ capital stock $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ $ 27.85 $ 18.00 $ 43.70 $ 49.16 $ 58.61 As $ 18.00 $ 43.70 $ 49.16 $ 58.61 As of December $ 43.70 $ 49.16 $ 58.61 As of December 31 , $ 58.61 As of December 31 , 2016 2017 2018 2019 As of December 31 , 2016 2017 2018 2019 2020 ( of December 31 , 2016 2017 2018 2019 2020 ( in December 31 , 2016 2017 2018 2019 2020 ( in million 31 , 2016 2017 2018 2019 2020 ( in million ) , 2016 2017 2018 2019 2020 ( in million ) Consolidated , and marketable security $ 86,333 $ 101,871 $ 109,140 $ marketable security $ 86,333 $ 101,871 $ 109,140 $ 119,675 $ $ 86,333 $ 101,871 $ 109,140 $ 119,675 $ 136,694 Total $ 101,871 $ 109,140 $ 119,675 $ 136,694 Total asset $ $ 109,140 $ 119,675 $ 136,694 Total asset $ 167,497 $ $ 136,694 Total asset $ 167,497 $ 197,295 $ 232,792 $ Total asset $ 167,497 $ 197,295 $ 232,792 $ 275,909 $ $ 167,497 $ 197,295 $ 232,792 $ 275,909 $ 319,616 Total $ 197,295 $ 232,792 $ 275,909 $ 319,616 Total long-term liability $ 232,792 $ 275,909 $ 319,616 Total long-term liability $ 11,705 319,616 Total long-term liability $ 11,705 $ 20,610 $ 20,544 $ long-term liability $ 11,705 $ 20,610 $ 20,544 $ 29,246 $ $ 11,705 $ 20,610 $ 20,544 $ 29,246 $ 40,238 Total $ 20,610 $ 20,544 $ 29,246 $ 40,238 Total stockholder ’ $ 20,544 $ 29,246 $ 40,238 Total stockholder ’ equity $ Total stockholder ’ equity $ 139,036 $ 152,502 $ 177,628 $ ’ equity $ 139,036 $ 152,502 $ 177,628 $ 201,442 $ $ 139,036 $ 152,502 $ 177,628 $ 201,442 $ 222,544 29 $ 152,502 $ 177,628 $ 201,442 $ 222,544 29 Table of $ 177,628 $ 201,442 $ 222,544 29 Table of Contents Alphabet 177,628 $ 201,442 $ 222,544 29 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION under Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted discussion of We have omitted discussion of 2018 result where it would be in Part II , Item 7 of our 2019 Annual Report , Item 7 of our 2019 Annual Report on Form 10-K. 2019 Annual Report on Form 10-K. Trends in Our Business The our revenue and earnings . 30 Table of Contents Alphabet Inc. . For example , in 2020 we announced our Google for Fund to invest approximately $ 10 billion into India over the into India over the next 5-7 year through a mix of Results and Operations In late 2019 , an outbreak of COVID-19 COVID-19 emerged and by March 11 , 2020 wa declared a and by March 11 , 2020 wa declared a global pandemic our financial result in March 2020 when , despite an increase of the quarter ended June 30 , 2020 , we observed quarter ended June 30 , 2020 , we observed a gradual throughout the second half of 2020 . We continue to ass of our equity investment . 31 Table of Contents Alphabet Inc and information technology , in 2020 we slowed the pace of back to the office in 2021 , we may experience increased for the year ended December 31 , 2019 and 2020 ( year ended December 31 , 2019 and 2020 ( in million December 31 , 2019 and 2020 ( in million , except ) . Year Ended December 31 , 2019 2020 Revenues $ Year Ended December 31 , 2019 2020 Revenues $ 161,857 $ Ended December 31 , 2019 2020 Revenues $ 161,857 $ 182,527 , 2019 2020 Revenues $ 161,857 $ 182,527 Increase in revenue 2020 Revenues $ 161,857 $ 182,527 Increase in revenue year over in revenue year over year 18 % 13 % Increase in year over year 18 % 13 % Increase in constant currency currency revenue year over year 20 % 14 % Operating income year over year 20 % 14 % Operating income ( 1 14 % Operating income ( 1 ) $ 34,231 $ 41,224 income ( 1 ) $ 34,231 $ 41,224 Operating margin ( 1 ) $ 34,231 $ 41,224 Operating margin ( 1 ) $ 41,224 Operating margin ( 1 ) 21 % 23 % Operating margin ( 1 ) 21 % 23 % Other income ( 1 ) 21 % 23 % Other income ( expense expense ) , net $ 5,394 $ 6,858 Net Income ( , net $ 5,394 $ 6,858 Net Income ( 1 ) $ 6,858 Net Income ( 1 ) $ 34,343 $ 40,269 Income ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 34,343 $ 40,269 Diluted EPS ( 1 ) $ 40,269 Diluted EPS ( 1 ) $ 49.16 $ 58.61 EPS ( 1 ) $ 49.16 $ 58.61 ( 1 ) 1 ) $ 49.16 $ 58.61 ( 1 ) Results for $ 49.16 $ 58.61 ( 1 ) Results for 2019 include ( 1 ) Results for 2019 include the effect of the the effect of the $ 1.7 billion EC fine . See EC fine . See Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . • • Total revenue were $ 182.5 billion , an increase of billion , an increase of 13 % year over year , Services segment revenue of $ 16.8 billion or 11 % and of $ 16.8 billion or 11 % and an increase in Cloud segment revenue of $ 4.1 billion or 46 % . of $ 4.1 billion or 46 % . Revenues from the and Other Americas were $ 85.0 billion , $ 55.4 billion $ 85.0 billion , $ 55.4 billion , $ 32.6 billion $ 55.4 billion , $ 32.6 billion , and $ 9.4 32.6 billion , and $ 9.4 billion , respectively . • cost of revenue wa $ 84.7 billion , an increase of billion , an increase of 18 % year over year . year . TAC wa $ 32.8 billion , an increase of billion , an increase of 9 % year over year , cost of revenue were $ 51.9 billion , an increase of billion , an increase of 24 % year over year , and content acquisition cost . 32 Table of Contents Alphabet Inc. • Operating expense were $ 56.6 billion , an increase of billion , an increase of 5 % year over year primarily Operating cash flow wa $ 65.1 billion . • Capital expenditure technical infrastructure , were $ 22.3 billion . • Number of • Number of employee wa 135,301 a of December 31 , wa 135,301 a of December 31 , 2020 . The majority a of December 31 , 2020 . The majority of new in the fourth quarter of 2020 , we report our segment ) . Year Ended December 31 , 2019 2020 Google Search Year Ended December 31 , 2019 2020 Google Search & other Ended December 31 , 2019 2020 Google Search & other $ Google Search & other $ 98,115 $ 104,062 YouTube ad 15,149 & other $ 98,115 $ 104,062 YouTube ad 15,149 19,772 Google 98,115 $ 104,062 YouTube ad 15,149 19,772 Google Network Members ' $ 104,062 YouTube ad 15,149 19,772 Google Network Members ' property Google Network Members ' property 21,547 23,090 Google advertising 134,811 146,924 Network Members ' property 21,547 23,090 Google advertising 134,811 146,924 Google property 21,547 23,090 Google advertising 134,811 146,924 Google other 17,014 21,711 21,547 23,090 Google advertising 134,811 146,924 Google other 17,014 21,711 Google advertising 134,811 146,924 Google other 17,014 21,711 Google Services total 151,825 134,811 146,924 Google other 17,014 21,711 Google Services total 151,825 168,635 17,014 21,711 Google Services total 151,825 168,635 Google Cloud 8,918 13,059 21,711 Google Services total 151,825 168,635 Google Cloud 8,918 13,059 Other total 151,825 168,635 Google Cloud 8,918 13,059 Other Bets 659 657 151,825 168,635 Google Cloud 8,918 13,059 Other Bets 659 657 Hedging Cloud 8,918 13,059 Other Bets 659 657 Hedging gain ( loss 8,918 13,059 Other Bets 659 657 Hedging gain ( loss ) Hedging gain ( loss ) 455 176 Total revenue $ 161,857 gain ( loss ) 455 176 Total revenue $ 161,857 $ 455 176 Total revenue $ 161,857 $ 182,527 Google Services Google Total revenue $ 161,857 $ 182,527 Google Services Google advertising revenue , delivery or policy ; 33 Table of Contents Alphabet Inc. & other revenue increased $ 5,947 million from 2019 to 2020 increased $ 5,947 million from 2019 to 2020 . The overall 5,947 million from 2019 to 2020 . The overall growth wa YouTube ad revenue increased $ 4,623 million from 2019 to 2020 increased $ 4,623 million from 2019 to 2020 . Growth wa 4,623 million from 2019 to 2020 . Growth wa primarily driven ' property revenue increased $ 1,543 million from 2019 to 2020 increased $ 1,543 million from 2019 to 2020 . The growth 1,543 million from 2019 to 2020 . The growth wa primarily each engagement by user . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 Paid click Year Ended December 31 , 2019 2020 Paid click change 23 Ended December 31 , 2019 2020 Paid click change 23 % 2019 2020 Paid click change 23 % 19 % Cost-per-click change Paid click change 23 % 19 % Cost-per-click change ( 6 19 % Cost-per-click change ( 6 ) % ( 10 ) ( 6 ) % ( 10 ) % Paid click increased % Paid click increased from 2019 to 2020 primarily due to click increased from 2019 to 2020 primarily due to an increase . Paid click increased from 2018 to 2019 primarily due to click increased from 2018 to 2019 primarily due to an increase ) : Year Ended December 31 , 2020 Impressions change 15 Year Ended December 31 , 2020 Impressions change 15 % Cost-per-impression 31 , 2020 Impressions change 15 % Cost-per-impression change ( 8 15 % Cost-per-impression change ( 8 ) % Impressions increased from ) % Impressions increased from 2019 to 2020 primarily due to Impressions increased from 2019 to 2020 primarily due to growth in other product and service . 35 Table of Contents Alphabet Inc. Google other revenue increased $ 4,697 million from 2019 to 2020 increased $ 4,697 million from 2019 to 2020 . The growth 4,697 million from 2019 to 2020 . The growth wa primarily Google Cloud revenue increased $ 4,141 million from 2019 to 2020 increased $ 4,141 million from 2019 to 2020 . The growth 4,141 million from 2019 to 2020 . The growth wa primarily customer : Year Ended December 31 , 2019 2020 United States Year Ended December 31 , 2019 2020 United States 46 % Ended December 31 , 2019 2020 United States 46 % 47 , 2019 2020 United States 46 % 47 % EMEA 31 2020 United States 46 % 47 % EMEA 31 % 30 46 % 47 % EMEA 31 % 30 % APAC 17 47 % EMEA 31 % 30 % APAC 17 % 18 31 % 30 % APAC 17 % 18 % Other Americas 30 % APAC 17 % 18 % Other Americas 6 % % 18 % Other Americas 6 % 5 % For further % Other Americas 6 % 5 % For further detail on by geography , see Note 2 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Use of Constant Currency Revenues in accordance with GAAP . 36 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 EMEA revenue Year Ended December 31 , 2019 2020 EMEA revenue $ 50,645 Ended December 31 , 2019 2020 EMEA revenue $ 50,645 $ 2019 2020 EMEA revenue $ 50,645 $ 55,370 Exclude foreign exchange EMEA revenue $ 50,645 $ 55,370 Exclude foreign exchange effect on revenue using prior year rate 2,397 ( 111 ) EMEA constant prior year rate 2,397 ( 111 ) EMEA constant currency revenue EMEA constant currency revenue $ 53,042 $ 55,259 Prior period EMEA currency revenue $ 53,042 $ 55,259 Prior period EMEA revenue $ Prior period EMEA revenue $ 44,739 $ 50,645 EMEA revenue percentage EMEA revenue $ 44,739 $ 50,645 EMEA revenue percentage change 13 50,645 EMEA revenue percentage change 13 % 9 % EMEA constant revenue percentage change 13 % 9 % EMEA constant currency revenue constant currency revenue percentage change 19 % 9 % APAC revenue revenue percentage change 19 % 9 % APAC revenue $ 26,928 9 % APAC revenue $ 26,928 $ 32,550 Exclude foreign exchange APAC revenue $ 26,928 $ 32,550 Exclude foreign exchange effect on revenue using prior year rate 388 11 APAC constant currency revenue using prior year rate 388 11 APAC constant currency revenue $ APAC constant currency revenue $ 27,316 $ 32,561 Prior period APAC currency revenue $ 27,316 $ 32,561 Prior period APAC revenue $ Prior period APAC revenue $ 21,341 $ 26,928 APAC revenue percentage APAC revenue $ 21,341 $ 26,928 APAC revenue percentage change 26 26,928 APAC revenue percentage change 26 % 21 % APAC constant revenue percentage change 26 % 21 % APAC constant currency revenue constant currency revenue percentage change 28 % 21 % Other Americas revenue percentage change 28 % 21 % Other Americas revenue $ % Other Americas revenue $ 8,986 $ 9,417 Exclude foreign exchange Americas revenue $ 8,986 $ 9,417 Exclude foreign exchange effect on revenue using prior year rate 541 964 Other Americas constant currency using prior year rate 541 964 Other Americas constant currency revenue Americas constant currency revenue $ 9,527 $ 10,381 Prior period Other currency revenue $ 9,527 $ 10,381 Prior period Other Americas revenue period Other Americas revenue $ 7,608 $ 8,986 Other Americas revenue Americas revenue $ 7,608 $ 8,986 Other Americas revenue percentage change Other Americas revenue percentage change 18 % 5 % Other Americas revenue percentage change 18 % 5 % Other Americas constant currency constant currency revenue percentage change 25 % 16 % United States revenue percentage change 25 % 16 % United States revenue $ % United States revenue $ 74,843 $ 85,014 United States revenue States revenue $ 74,843 $ 85,014 United States revenue percentage change United States revenue percentage change 18 % 14 % Hedging gain revenue percentage change 18 % 14 % Hedging gain ( loss Hedging gain ( loss ) 455 176 Total revenue $ 161,857 gain ( loss ) 455 176 Total revenue $ 161,857 $ 455 176 Total revenue $ 161,857 $ 182,527 Total constant currency Total revenue $ 161,857 $ 182,527 Total constant currency revenue $ Total constant currency revenue $ 164,728 $ 183,215 Prior period revenue currency revenue $ 164,728 $ 183,215 Prior period revenue , excluding , excluding hedging effect ( 1 ) $ 136,957 $ 161,402 effect ( 1 ) $ 136,957 $ 161,402 Total revenue percentage 1 ) $ 136,957 $ 161,402 Total revenue percentage change 18 161,402 Total revenue percentage change 18 % 13 % Total constant revenue percentage change 18 % 13 % Total constant currency revenue constant currency revenue percentage change 20 % 14 % ( 1 revenue percentage change 20 % 14 % ( 1 ) Total 20 % 14 % ( 1 ) Total revenue and hedging for the year ended December 31 , 2018 were $ 136,819 year ended December 31 , 2018 were $ 136,819 million and 31 , 2018 were $ 136,819 million and $ ( 138 136,819 million and $ ( 138 ) million , respectively . EMEA revenue percentage change from 2019 to 2020 wa not significantly percentage change from 2019 to 2020 wa not significantly affected by APAC revenue percentage change from 2019 to 2020 wa not significantly percentage change from 2019 to 2020 wa not significantly affected by Americas revenue percentage change from 2019 to 2020 wa unfavorably affected percentage change from 2019 to 2020 wa unfavorably affected by change real and Argentine peso . 37 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 TAC $ Year Ended December 31 , 2019 2020 TAC $ 30,089 $ Ended December 31 , 2019 2020 TAC $ 30,089 $ 32,778 , 2019 2020 TAC $ 30,089 $ 32,778 Other cost of 2020 TAC $ 30,089 $ 32,778 Other cost of revenue 41,807 32,778 Other cost of revenue 41,807 51,954 Total cost of revenue Other cost of revenue 41,807 51,954 Total cost of revenue $ Total cost of revenue $ 71,896 $ 84,732 Total cost of of revenue $ 71,896 $ 84,732 Total cost of revenue a a a percentage of revenue 44.4 % 46.4 % Cost of percentage of revenue 44.4 % 46.4 % Cost of revenue increased Cost of revenue increased $ 12,836 million from 2019 to 2020 increased $ 12,836 million from 2019 to 2020 . The increase 12,836 million from 2019 to 2020 . The increase wa due revenue and TAC of $ 10,147 million and $ 2,689 million $ 10,147 million and $ 2,689 million , respectively . The other cost of revenue from 2019 to 2020 wa due to of revenue from 2019 to 2020 wa due to an increase The increase in TAC from 2019 to 2020 wa due to in TAC from 2019 to 2020 wa due to increase in . The TAC rate wa 22.3 % in both 2019 and wa 22.3 % in both 2019 and 2020 . The TAC % in both 2019 and 2020 . The TAC rate on were both substantially consistent from 2019 to 2020 . Over time substantially consistent from 2019 to 2020 . Over time , cost to our advertising revenue . 38 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 Research and Year Ended December 31 , 2019 2020 Research and development expense Ended December 31 , 2019 2020 Research and development expense $ Research and development expense $ 26,018 $ 27,573 Research and development development expense $ 26,018 $ 27,573 Research and development expense a a a percentage of revenue 16.1 % 15.1 % R & percentage of revenue 16.1 % 15.1 % R & D expense & D expense increased $ 1,555 million from 2019 to 2020 increased $ 1,555 million from 2019 to 2020 . The increase 1,555 million from 2019 to 2020 . The increase wa primarily in compensation expense of $ 1,619 million , largely resulting from , largely resulting from a 11 % increase in headcount and in certain Other Bets in 2019 . Additionally , the increase and entertainment expense of $ 383 million . Over time , ) : Year Ended December 31 , 2019 2020 Sales and Year Ended December 31 , 2019 2020 Sales and marketing expense Ended December 31 , 2019 2020 Sales and marketing expense $ Sales and marketing expense $ 18,464 $ 17,946 Sales and marketing marketing expense $ 18,464 $ 17,946 Sales and marketing expense a a a percentage of revenue 11.4 % 9.8 % Sales and percentage of revenue 11.4 % 9.8 % Sales and marketing expense and marketing expense decreased $ 518 million from 2019 to 2020 decreased $ 518 million from 2019 to 2020 . The decrease 518 million from 2019 to 2020 . The decrease wa primarily and promotional expense of $ 1,395 million , a we reduced and entertainment expense of $ 371 million . The decrease wa in compensation expense of $ 1,347 million , largely resulting from , largely resulting from an 8 % increase in headcount . ) : Year Ended December 31 , 2019 2020 General and Year Ended December 31 , 2019 2020 General and administrative expense Ended December 31 , 2019 2020 General and administrative expense $ General and administrative expense $ 9,551 $ 11,052 General and administrative administrative expense $ 9,551 $ 11,052 General and administrative expense a a a percentage of revenue 5.9 % 6.1 % General and percentage of revenue 5.9 % 6.1 % General and administrative expense organization ; • Depreciation ; 39 Table of Contents Alphabet Inc. and administrative expense increased $ 1,501 million from 2019 to 2020 increased $ 1,501 million from 2019 to 2020 . The increase 1,501 million from 2019 to 2020 . The increase wa primarily in compensation expense of $ 887 million , largely resulting from , largely resulting from a 16 % increase in headcount . wa an increase of $ 440 million related to allowance for partially offset by a $ 554 million charge recognized in 2019 554 million charge recognized in 2019 relating to a legal settlement European Commission Fines In March 2019 , the EC announced it a €1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) fine , a of March 20 , 2019 ) fine , which wa in the first quarter of 2019 . Please refer to Note . Please refer to Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Segment recast . Year Ended December 31 , 2018 2019 2020 Operating Year Ended December 31 , 2018 2019 2020 Operating income ( Ended December 31 , 2018 2019 2020 Operating income ( loss December 31 , 2018 2019 2020 Operating income ( loss ) ) : Google Services $ 43,137 $ 48,999 $ 54,606 Google Google Services $ 43,137 $ 48,999 $ 54,606 Google Cloud ( $ 43,137 $ 48,999 $ 54,606 Google Cloud ( 4,348 ) $ 54,606 Google Cloud ( 4,348 ) ( 4,645 ) ( Cloud ( 4,348 ) ( 4,645 ) ( 5,607 ) Other ) ( 4,645 ) ( 5,607 ) Other Bets ( 3,358 5,607 ) Other Bets ( 3,358 ) ( 4,824 ) ( Bets ( 3,358 ) ( 4,824 ) ( 4,476 ) Corporate ) ( 4,824 ) ( 4,476 ) Corporate cost , unallocated Corporate cost , unallocated ( 1 ) ( 7,907 ) ( unallocated ( 1 ) ( 7,907 ) ( 5,299 ) ( ) ( 7,907 ) ( 5,299 ) ( 3,299 ) Total ) ( 5,299 ) ( 3,299 ) Total income from operation Total income from operation $ 27,524 $ 34,231 $ 41,224 ( from operation $ 27,524 $ 34,231 $ 41,224 ( 1 ) $ 27,524 $ 34,231 $ 41,224 ( 1 ) Corporate cost $ 34,231 $ 41,224 ( 1 ) Corporate cost , unallocated includes a fine of $ 5.1 billion for the year ended for the year ended December 31 , 2018 and a fine year ended December 31 , 2018 and a fine and legal and legal settlement totaling $ 2.3 billion for the year ended for the year ended December 31 , 2019 . Google Services year ended December 31 , 2019 . Google Services Google service service operating income increased $ 5,607 million from 2019 to 2020 increased $ 5,607 million from 2019 to 2020 . The increase 5,607 million from 2019 to 2020 . The increase wa primarily service operating income increased $ 5,862 million from 2018 to 2019 increased $ 5,862 million from 2018 to 2019 . The increase 5,862 million from 2018 to 2019 . The increase wa primarily Cloud operating loss increased $ 962 million from 2019 to 2020 increased $ 962 million from 2019 to 2020 and increased $ 962 million from 2019 to 2020 and increased $ 297 million to 2020 and increased $ 297 million from 2018 to 2019 increased $ 297 million from 2018 to 2019 . The increase 297 million from 2018 to 2019 . The increase in operating in total expense of $ 5,103 million from 2019 to 2020 of $ 5,103 million from 2019 to 2020 and $ 3,377 5,103 million from 2019 to 2020 and $ 3,377 million from 2019 to 2020 and $ 3,377 million from 2018 to 2019 and $ 3,377 million from 2018 to 2019 . Operating expense 3,377 million from 2018 to 2019 . Operating expense increased primarily Bets operating loss decreased $ 348 million from 2019 to 2020 decreased $ 348 million from 2019 to 2020 and increased $ 348 million from 2019 to 2020 and increased $ 1,466 million to 2020 and increased $ 1,466 million from 2018 to 2019 increased $ 1,466 million from 2018 to 2019 . The fluctuation 1,466 million from 2018 to 2019 . The fluctuation were primarily ( including SBC ) . 40 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 Other income Year Ended December 31 , 2019 2020 Other income ( expense Ended December 31 , 2019 2020 Other income ( expense ) expense ) , net $ 5,394 $ 6,858 Other income ( , net $ 5,394 $ 6,858 Other income ( expense ) , net , increased $ 1,464 million from 2019 to 2020 increased $ 1,464 million from 2019 to 2020 . The change 1,464 million from 2019 to 2020 . The change wa primarily and debt security of $ 3,519 million , partially offset by partially offset by a $ 902 million loss resulting from our in interest income of $ 562 million . Over time , our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Provision for Income Taxes ) : Year Ended December 31 , 2019 2020 Provision for Year Ended December 31 , 2019 2020 Provision for income tax Ended December 31 , 2019 2020 Provision for income tax $ Provision for income tax $ 5,282 $ 7,813 Effective tax rate income tax $ 5,282 $ 7,813 Effective tax rate 13.3 % $ 7,813 Effective tax rate 13.3 % 16.2 % Our provision Effective tax rate 13.3 % 16.2 % Our provision for income effective tax rate increased from 2019 to 2020 . The increase rate increased from 2019 to 2020 . The increase in the resolution of multi-year audit in 2019 that did not recur in that did not recur in 2020 , higher earnings in country structure implemented a of December 31 , 2019 , and an a of December 31 , 2019 , and an increase in deduction benefit . See Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . We a certain discrete item . 41 Table of Contents Alphabet Inc. in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. We have prepared the unaudited the eight quarter ended December 31 , 2020 . This table quarter ended December 31 , 2020 . This table includes all rate . Quarter Ended Mar 31 , 2019 Jun 30 , Quarter Ended Mar 31 , 2019 Jun 30 , 2019 Sept Mar 31 , 2019 Jun 30 , 2019 Sept 30 , , 2019 Jun 30 , 2019 Sept 30 , 2019 Dec Jun 30 , 2019 Sept 30 , 2019 Dec 31 , , 2019 Sept 30 , 2019 Dec 31 , 2019 Mar Sept 30 , 2019 Dec 31 , 2019 Mar 31 , , 2019 Dec 31 , 2019 Mar 31 , 2020 Jun Dec 31 , 2019 Mar 31 , 2020 Jun 30 , , 2019 Mar 31 , 2020 Jun 30 , 2020 Sept Mar 31 , 2020 Jun 30 , 2020 Sept 30 , , 2020 Jun 30 , 2020 Sept 30 , 2020 Dec Jun 30 , 2020 Sept 30 , 2020 Dec 31 , , 2020 Sept 30 , 2020 Dec 31 , 2020 ( Sept 30 , 2020 Dec 31 , 2020 ( In million , 2020 Dec 31 , 2020 ( In million , except Income Data : Revenues $ 36,339 $ 38,944 $ 40,499 $ : Revenues $ 36,339 $ 38,944 $ 40,499 $ 46,075 $ $ 36,339 $ 38,944 $ 40,499 $ 46,075 $ 41,159 $ $ 38,944 $ 40,499 $ 46,075 $ 41,159 $ 38,297 $ $ 40,499 $ 46,075 $ 41,159 $ 38,297 $ 46,173 56,898 $ 46,075 $ 41,159 $ 38,297 $ 46,173 56,898 Costs and $ 41,159 $ 38,297 $ 46,173 56,898 Costs and expense : 41,159 $ 38,297 $ 46,173 56,898 Costs and expense : Cost expense : Cost of revenue 16,012 17,296 17,568 21,020 18,982 18,553 : Cost of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 Cost of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 of revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research revenue 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 6,029 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 6,029 6,213 21,117 26,080 Research and development 6,029 6,213 6,554 7,222 6,820 6,875 26,080 Research and development 6,029 6,213 6,554 7,222 6,820 6,875 6,856 Research and development 6,029 6,213 6,554 7,222 6,820 6,875 6,856 7,022 and development 6,029 6,213 6,554 7,222 6,820 6,875 6,856 7,022 Sales development 6,029 6,213 6,554 7,222 6,820 6,875 6,856 7,022 Sales and 6,029 6,213 6,554 7,222 6,820 6,875 6,856 7,022 Sales and marketing 6,213 6,554 7,222 6,820 6,875 6,856 7,022 Sales and marketing 3,905 6,554 7,222 6,820 6,875 6,856 7,022 Sales and marketing 3,905 4,212 6,856 7,022 Sales and marketing 3,905 4,212 4,609 5,738 4,500 3,901 7,022 Sales and marketing 3,905 4,212 4,609 5,738 4,500 3,901 4,231 Sales and marketing 3,905 4,212 4,609 5,738 4,500 3,901 4,231 5,314 and marketing 3,905 4,212 4,609 5,738 4,500 3,901 4,231 5,314 General marketing 3,905 4,212 4,609 5,738 4,500 3,901 4,231 5,314 General and 3,905 4,212 4,609 5,738 4,500 3,901 4,231 5,314 General and administrative 4,212 4,609 5,738 4,500 3,901 4,231 5,314 General and administrative 2,088 4,609 5,738 4,500 3,901 4,231 5,314 General and administrative 2,088 2,043 4,231 5,314 General and administrative 2,088 2,043 2,591 2,829 2,880 2,585 5,314 General and administrative 2,088 2,043 2,591 2,829 2,880 2,585 2,756 General and administrative 2,088 2,043 2,591 2,829 2,880 2,585 2,756 2,831 and administrative 2,088 2,043 2,591 2,829 2,880 2,585 2,756 2,831 European administrative 2,088 2,043 2,591 2,829 2,880 2,585 2,756 2,831 European Commission 2,088 2,043 2,591 2,829 2,880 2,585 2,756 2,831 European Commission fine 2,043 2,591 2,829 2,880 2,585 2,756 2,831 European Commission fine 1,697 2,591 2,829 2,880 2,585 2,756 2,831 European Commission fine 1,697 0 2,756 2,831 European Commission fine 1,697 0 0 0 0 0 2,831 European Commission fine 1,697 0 0 0 0 0 0 European Commission fine 1,697 0 0 0 0 0 0 0 Commission fine 1,697 0 0 0 0 0 0 0 Total fine 1,697 0 0 0 0 0 0 0 Total cost 1,697 0 0 0 0 0 0 0 Total cost and 0 0 0 0 0 0 0 Total cost and expense 0 0 0 0 0 0 Total cost and expense 29,731 0 Total cost and expense 29,731 29,764 31,322 36,809 33,182 31,914 Total cost and expense 29,731 29,764 31,322 36,809 33,182 31,914 34,960 cost and expense 29,731 29,764 31,322 36,809 33,182 31,914 34,960 41,247 and expense 29,731 29,764 31,322 36,809 33,182 31,914 34,960 41,247 Income expense 29,731 29,764 31,322 36,809 33,182 31,914 34,960 41,247 Income from 29,731 29,764 31,322 36,809 33,182 31,914 34,960 41,247 Income from operation 29,764 31,322 36,809 33,182 31,914 34,960 41,247 Income from operation 6,608 31,322 36,809 33,182 31,914 34,960 41,247 Income from operation 6,608 9,180 34,960 41,247 Income from operation 6,608 9,180 9,177 9,266 7,977 6,383 41,247 Income from operation 6,608 9,180 9,177 9,266 7,977 6,383 11,213 Income from operation 6,608 9,180 9,177 9,266 7,977 6,383 11,213 15,651 from operation 6,608 9,180 9,177 9,266 7,977 6,383 11,213 15,651 Other operation 6,608 9,180 9,177 9,266 7,977 6,383 11,213 15,651 Other income 6,608 9,180 9,177 9,266 7,977 6,383 11,213 15,651 Other income ( 9,180 9,177 9,266 7,977 6,383 11,213 15,651 Other income ( expense 9,177 9,266 7,977 6,383 11,213 15,651 Other income ( expense ) ( expense ) , net 1,538 2,967 ( 549 ) 1,438 expense ) , net 1,538 2,967 ( 549 ) 1,438 ( , net 1,538 2,967 ( 549 ) 1,438 ( 220 ) 1,538 2,967 ( 549 ) 1,438 ( 220 ) 1,894 2,146 ( 549 ) 1,438 ( 220 ) 1,894 2,146 3,038 Income ) 1,438 ( 220 ) 1,894 2,146 3,038 Income before income 1,438 ( 220 ) 1,894 2,146 3,038 Income before income tax ( 220 ) 1,894 2,146 3,038 Income before income tax 8,146 3,038 Income before income tax 8,146 12,147 8,628 10,704 7,757 8,277 Income before income tax 8,146 12,147 8,628 10,704 7,757 8,277 13,359 before income tax 8,146 12,147 8,628 10,704 7,757 8,277 13,359 18,689 income tax 8,146 12,147 8,628 10,704 7,757 8,277 13,359 18,689 Provision tax 8,146 12,147 8,628 10,704 7,757 8,277 13,359 18,689 Provision for 8,146 12,147 8,628 10,704 7,757 8,277 13,359 18,689 Provision for income 12,147 8,628 10,704 7,757 8,277 13,359 18,689 Provision for income tax 8,628 10,704 7,757 8,277 13,359 18,689 Provision for income tax 1,489 18,689 Provision for income tax 1,489 2,200 1,560 33 921 1,318 Provision for income tax 1,489 2,200 1,560 33 921 1,318 2,112 for income tax 1,489 2,200 1,560 33 921 1,318 2,112 3,462 income tax 1,489 2,200 1,560 33 921 1,318 2,112 3,462 Net tax 1,489 2,200 1,560 33 921 1,318 2,112 3,462 Net income 1,489 2,200 1,560 33 921 1,318 2,112 3,462 Net income $ 2,200 1,560 33 921 1,318 2,112 3,462 Net income $ 6,657 1,560 33 921 1,318 2,112 3,462 Net income $ 6,657 $ 2,112 3,462 Net income $ 6,657 $ 9,947 $ 7,068 $ Net income $ 6,657 $ 9,947 $ 7,068 $ 10,671 $ $ 6,657 $ 9,947 $ 7,068 $ 10,671 $ 6,836 $ $ 9,947 $ 7,068 $ 10,671 $ 6,836 $ 6,959 $ $ 7,068 $ 10,671 $ 6,836 $ 6,959 $ 11,247 15,227 $ 10,671 $ 6,836 $ 6,959 $ 11,247 15,227 Basic net $ 6,836 $ 6,959 $ 11,247 15,227 Basic net income per 6,836 $ 6,959 $ 11,247 15,227 Basic net income per share Class C capital stock $ 9.58 $ 14.33 $ 10.20 $ capital stock $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted net income $ 10.21 $ 16.55 $ 22.54 Diluted net income per share Class C capital stock $ 9.50 $ 14.21 $ 10.12 $ capital stock $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ 9.87 $ $ 14.21 $ 10.12 $ 15.35 $ 9.87 $ 10.13 $ $ 10.12 $ 15.35 $ 9.87 $ 10.13 $ 16.40 $ $ 15.35 $ 9.87 $ 10.13 $ 16.40 $ 22.30 Financial $ 9.87 $ 10.13 $ 16.40 $ 22.30 Financial Condition Cash $ 10.13 $ 16.40 $ 22.30 Financial Condition Cash , Cash Marketable Securities As of December 31 , 2020 , we had As of December 31 , 2020 , we had $ 136.7 2020 , we had $ 136.7 billion in cash , cash capital return to stockholder . 42 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 Net cash Year Ended December 31 , 2019 2020 Net cash provided by Ended December 31 , 2019 2020 Net cash provided by operating provided by operating activity $ 54,520 $ 65,124 Net cash used operating activity $ 54,520 $ 65,124 Net cash used in investing in investing activity $ ( 29,491 ) $ ( 32,773 ) ( 29,491 ) $ ( 32,773 ) Net cash used in in financing activity $ ( 23,209 ) $ ( 24,408 ) ( 23,209 ) $ ( 24,408 ) Cash Provided by Operating by operating activity increased from 2019 to 2020 primarily due to activity increased from 2019 to 2020 primarily due to the net in investing activity increased from 2019 to 2020 primarily due to activity increased from 2019 to 2020 primarily due to a net in financing activity increased from 2019 to 2020 primarily due to activity increased from 2019 to 2020 primarily due to an increase for at least the next 12 month and thereafter for the future . As of December 31 , 2020 , we had As of December 31 , 2020 , we had long-term tax long-term tax payable of $ 6.5 billion related to a one-time in annual interest-free installment through 2025 . In 2017 , 2018 installment through 2025 . In 2017 , 2018 and 2019 , 2025 . In 2017 , 2018 and 2019 , the EC In 2017 , 2018 and 2019 , the EC announced decision of €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) , €4.3 a of June 27 , 2017 ) , €4.3 billion ( , €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) , and a of June 30 , 2018 ) , and €1.5 billion and €1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) , respectively a of March 20 , 2019 ) , respectively . While the fine . In January 2021 , we closed the acquisition wearable brand , for $ 2.1 billion . We have a program of up to $ 5.0 billion through the issuance of purpose . As of December 31 , 2020 , we had As of December 31 , 2020 , we had no commercial outstanding . As of December 31 , 2020 , we have As of December 31 , 2020 , we have $ 4.0 2020 , we have $ 4.0 billion of revolving credit facility of revolving credit facility expiring 43 Table of Contents Alphabet Inc. Contents Alphabet Inc. in July 2023 with no amount outstanding . market rate . In August 2020 , we issued $ 10.0 2020 , we issued $ 10.0 billion of fixed-rate senior unsecured in six tranche : $ 1.0 billion due in 2025 , $ 1.0 billion due in 2025 , $ 1.0 billion due due in 2025 , $ 1.0 billion due in 2027 , $ 1.0 billion due in 2027 , $ 2.25 billion due due in 2027 , $ 2.25 billion due in 2030 , $ 2.25 billion due in 2030 , $ 1.25 billion due due in 2030 , $ 1.25 billion due in 2040 , $ 1.25 billion due in 2040 , $ 2.5 billion due due in 2040 , $ 2.5 billion due in 2050 and $ 2.5 billion due in 2050 and $ 2.0 billion due due in 2050 and $ 2.0 billion due in 2060 . $ 2.0 billion due in 2060 . The 2020 Notes had due in 2060 . The 2020 Notes had a weighted average a weighted average duration of 21.5 year and weighted average coupon weighted average coupon rate of 1.57 % . Of the total the total issuance , $ 5.75 billion wa designated a Sustainability purpose . As of December 31 , 2020 , we have As of December 31 , 2020 , we have senior unsecured total carrying value of $ 13.8 billion . Refer to Note billion . Refer to Note 6 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on the Directors of Alphabet , in 2020 we repurchased and subsequently retired we repurchased and subsequently retired 21.5 million share of Alphabet Class an aggregate amount of $ 31.1 billion . As of December billion . As of December 31 , 2020 , $ 17.6 As of December 31 , 2020 , $ 17.6 billion remains 31 , 2020 , $ 17.6 billion remains authorized and available transaction , including through Rule 10b5-1 plan . The repurchase program date . Refer to Note 11 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Capital Expenditures and Leases We During the year ended December 31 , 2019 and 2020 , year ended December 31 , 2019 and 2020 , we spent December 31 , 2019 and 2020 , we spent $ 23.5 2020 , we spent $ 23.5 billion and $ 22.3 billion $ 23.5 billion and $ 22.3 billion on capital expenditure and operating lease asset of $ 4.4 billion and $ 2.8 billion $ 4.4 billion and $ 2.8 billion , respectively . As respectively . As of December 31 , 2020 , the amount As of December 31 , 2020 , the amount of total average remaining lease term of 9 year , wa $ 15.1 9 year , wa $ 15.1 billion . As of December billion . As of December 31 , 2020 , we have As of December 31 , 2020 , we have entered into future lease payment of $ 8.0 billion , excluding purchase option These lease will commence between 2021 and 2026 with non-cancelable lease will commence between 2021 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . Depreciation lease term of 1 to 25 year . Depreciation of our For the year ended December 31 , 2019 and 2020 , year ended December 31 , 2019 and 2020 , our depreciation December 31 , 2019 and 2020 , our depreciation and impairment property and equipment were $ 10.9 billion and $ 12.9 billion $ 10.9 billion and $ 12.9 billion , respectively . For For the year ended December 31 , 2019 and 2020 , year ended December 31 , 2019 and 2020 , our operating December 31 , 2019 and 2020 , our operating lease expense cost ) , were $ 2.4 billion and $ 2.9 billion $ 2.4 billion and $ 2.9 billion , respectively . Finance for the year ended December 31 , 2019 and 2020 . year ended December 31 , 2019 and 2020 . Please refer December 31 , 2019 and 2020 . Please refer to Note . Please refer to Note 4 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on the information on the lease . 44 Table of Contents Alphabet Inc Contractual Obligations a of December 31 , 2020 The following summarizes a of December 31 , 2020 The following summarizes our contractual contractual obligation a of December 31 , 2020 ( in million a of December 31 , 2020 ( in million ) : By Period Total Less than 1 year 1-3 year 3-5 year Total Less than 1 year 1-3 year 3-5 year More than than 1 year 1-3 year 3-5 year More than 5 year year 3-5 year More than 5 year Operating lease obligation ( year Operating lease obligation ( 1 ) $ 15,091 $ 2,198 obligation ( 1 ) $ 15,091 $ 2,198 $ 4,165 $ 1 ) $ 15,091 $ 2,198 $ 4,165 $ 3,127 $ $ 15,091 $ 2,198 $ 4,165 $ 3,127 $ 5,601 Obligations $ 2,198 $ 4,165 $ 3,127 $ 5,601 Obligations for lease $ 4,165 $ 3,127 $ 5,601 Obligations for lease that have have not yet commenced ( 1 ) 8,049 370 1,198 1,469 yet commenced ( 1 ) 8,049 370 1,198 1,469 5,012 Purchase commenced ( 1 ) 8,049 370 1,198 1,469 5,012 Purchase obligation ( 1 ) 8,049 370 1,198 1,469 5,012 Purchase obligation ( 1 ) 8,049 370 1,198 1,469 5,012 Purchase obligation ( 2 ) 8,049 370 1,198 1,469 5,012 Purchase obligation ( 2 ) 1,469 5,012 Purchase obligation ( 2 ) 10,656 7,368 1,968 354 Purchase obligation ( 2 ) 10,656 7,368 1,968 354 966 Long-term obligation ( 2 ) 10,656 7,368 1,968 354 966 Long-term debt ( 2 ) 10,656 7,368 1,968 354 966 Long-term debt obligation 2 ) 10,656 7,368 1,968 354 966 Long-term debt obligation ( ) 10,656 7,368 1,968 354 966 Long-term debt obligation ( 3 966 Long-term debt obligation ( 3 ) 19,840 1,357 634 2,587 debt obligation ( 3 ) 19,840 1,357 634 2,587 15,262 Tax obligation ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 3 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 4 ) 19,840 1,357 634 2,587 15,262 Tax payable ( 4 ) 2,587 15,262 Tax payable ( 4 ) 7,359 834 1,916 4,609 Tax payable ( 4 ) 7,359 834 1,916 4,609 0 Other payable ( 4 ) 7,359 834 1,916 4,609 0 Other long-term ( 4 ) 7,359 834 1,916 4,609 0 Other long-term liability 4 ) 7,359 834 1,916 4,609 0 Other long-term liability reflected ) 7,359 834 1,916 4,609 0 Other long-term liability reflected on on our balance sheet ( 5 ) 1,421 532 616 185 balance sheet ( 5 ) 1,421 532 616 185 88 Total sheet ( 5 ) 1,421 532 616 185 88 Total contractual ( 5 ) 1,421 532 616 185 88 Total contractual obligation 5 ) 1,421 532 616 185 88 Total contractual obligation $ ) 1,421 532 616 185 88 Total contractual obligation $ 62,416 88 Total contractual obligation $ 62,416 $ 12,659 $ 10,497 $ contractual obligation $ 62,416 $ 12,659 $ 10,497 $ 12,331 $ $ 62,416 $ 12,659 $ 10,497 $ 12,331 $ 26,929 ( $ 12,659 $ 10,497 $ 12,331 $ 26,929 ( 1 ) $ 10,497 $ 12,331 $ 26,929 ( 1 ) For further $ 12,331 $ 26,929 ( 1 ) For further information , information , refer to Note 4 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 2 ) Represents non-cancelable Report on Form 10-K. ( 2 ) Represents non-cancelable contractual obligation and/or pricing a of December 31 , 2020 . Excluded from a of December 31 , 2020 . Excluded from the table are generally cancelable . ( 3 ) Represents our principal and debt , refer to Note 6 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. ( 4 ) Represents one-time Report on Form 10-K. ( 4 ) Represents one-time transition tax information , refer to Note 14 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Excluded from the table long-term tax payable of $ 2.3 billion a of December 31 2.3 billion a of December 31 , 2020 primarily related to a of December 31 , 2020 primarily related to uncertain tax payment in individual year beyond 12 month due to uncertainty in of tax audit . ( 5 ) Represents cash obligation recorded fine , refer to Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of Sheet Arrangements As of December 31 , 2020 , we did As of December 31 , 2020 , we did not have , a defined in Item 303 ( a ) ( 4 303 ( a ) ( 4 ) ( ii ) of to investor . See Note 10 included in Part II , in Part II , Item 8 of this annual report on this annual report on Form 10-K for more information on our in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K for a summary of significant on our financial statement . 45 Table of Contents Alphabet Inc or no market activity . 46 Table of Contents Alphabet Inc in Accounting Estimate In January 2021 , we completed an assessment be effective beginning fiscal year 2021 . For asset that are are in-service a of December 31 , 2020 , we expect a of December 31 , 2020 , we expect operating result favorably impacted by approximately $ 2.1 billion for the full fiscal for the full fiscal year 2021 . The effect of the investment during the fiscal year 2021 . ITEM 7A . QUANTITATIVE fiscal year 2021 . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced in contract . If an adverse 10 % foreign currency exchange rate income tax of approximately $ 8 million and $ 497 million $ 8 million and $ 497 million a of 47 Table $ 497 million a of 47 Table of Contents Alphabet Inc. of Contents Alphabet Inc. December 31 , 2019 and 2020 , Alphabet Inc. December 31 , 2019 and 2020 , respectively , December 31 , 2019 and 2020 , respectively , after consideration for the year ended December 31 , 2019 and 2020 . year ended December 31 , 2019 and 2020 . We use December 31 , 2019 and 2020 . We use foreign currency the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , the amount December 31 , 2019 and 2020 , the amount recorded in would have been approximately $ 1.1 billion and $ 912 million $ 1.1 billion and $ 912 million lower a of December million lower a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , respectively . December 31 , 2019 and 2020 , respectively . The change the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 936 million and $ 1 billion $ 936 million and $ 1 billion lower a of December billion lower a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , respectively . December 31 , 2019 and 2020 , respectively . The change a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2019 and 2020 are a of December 31 , 2019 and 2020 are shown below December 31 , 2019 and 2020 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2019 2020 2019 2020 As of December 31 , 2019 2020 2019 2020 Risk Category of December 31 , 2019 2020 2019 2020 Risk Category - December 31 , 2019 2020 2019 2020 Risk Category - Interest 31 , 2019 2020 2019 2020 Risk Category - Interest Rate Category - Interest Rate $ 104 $ 144 $ 90 $ Interest Rate $ 104 $ 144 $ 90 $ 145 Actual $ 104 $ 144 $ 90 $ 145 Actual future gain $ 144 $ 90 $ 145 Actual future gain and loss analysis performed a of December 31 , 2019 and 2020 due a of December 31 , 2019 and 2020 due to the December 31 , 2019 and 2020 due to the inherent limitation startup or development stage . 48 Table of Contents Alphabet Inc. volatility , and represent $ 3.3 billion and $ 5.9 billion $ 3.3 billion and $ 5.9 billion of our investment a our investment a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , respectively . December 31 , 2019 and 2020 , respectively . A hypothetical hypothetical adverse price change of 30 % on our December 31 30 % on our December 31 , 2020 balance , which on our December 31 , 2020 balance , which could be marketable equity security by $ 1.8 billion . From time to event . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , the carrying December 31 , 2019 and 2020 , the carrying value of measurement alternative , wa $ 11.4 billion and $ 18.9 billion $ 11.4 billion and $ 18.9 billion , respectively . Valuations , which totaled approximately $ 1.3 billion and $ 1.4 billion $ 1.3 billion and $ 1.4 billion a of December 31 1.4 billion a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , respectively , December 31 , 2019 and 2020 , respectively , generally do , please refer to Note 1 and Note 3 of the to Note 1 and Note 3 of the Notes to Consolidated this Annual Report on Form 10-K. 49 Table of Contents Alphabet Annual Report on Form 10-K. 49 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Independent Registered Public Accounting Firm 51 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 54 Consolidated Statements of Income 55 54 Consolidated Statements of Income 55 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 56 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 57 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 The supplementary financial information required information required by this Item 8 is included in Item 7 8 is included in Item 7 under the caption “ Quarterly Results of Operations . ” 50 Table of Contents Alphabet Inc. Company ) a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , the related December 31 , 2019 and 2020 , the related consolidated statement in the period ended December 31 , 2020 , and the period ended December 31 , 2020 , and the related note in the Index at Item 15 ( collectively referred to a of the Company at December 31 , 2019 and 2020 , Company at December 31 , 2019 and 2020 , and the December 31 , 2019 and 2020 , and the result of in the period ended December 31 , 2020 , in conformity period ended December 31 , 2020 , in conformity with U.S. financial reporting a of December 31 , 2020 , based on a of December 31 , 2020 , based on criterion established of the Treadway Commission ( 2013 framework ) and our report and our report dated February 2 , 2021 expressed an unqualified report dated February 2 , 2021 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging to which it relates . 51 Table of Contents Alphabet Inc. . As described in Note 10 to the consolidated financial statement the Company 's auditor since 1999 . San Jose , California San Jose , California February 2 , 2021 52 Table of , California February 2 , 2021 52 Table of Contents Alphabet California February 2 , 2021 52 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2020 , based on a of December 31 , 2020 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO financial reporting a of December 31 , 2020 , based on a of December 31 , 2020 , based on the COSO ( PCAOB ) , the 2020 consolidated financial statement of the and our report dated February 2 , 2021 expressed an unqualified report dated February 2 , 2021 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 2 , 2021 53 Table of , California February 2 , 2021 53 Table of Contents Alphabet California February 2 , 2021 53 Table of Contents Alphabet Inc amount ) As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Assets Current asset As of December 31 , 2020 Assets Current asset : Cash Cash and cash equivalent $ 18,498 $ 26,465 Marketable security 101,177 cash equivalent $ 18,498 $ 26,465 Marketable security 101,177 110,229 Total 18,498 $ 26,465 Marketable security 101,177 110,229 Total cash , cash $ 26,465 Marketable security 101,177 110,229 Total cash , cash equivalent equivalent , and marketable security 119,675 136,694 Accounts receivable , net , and marketable security 119,675 136,694 Accounts receivable , net 25,326 136,694 Accounts receivable , net 25,326 30,930 Income tax receivable , Accounts receivable , net 25,326 30,930 Income tax receivable , net Income tax receivable , net 2,166 454 Inventory 999 728 Other tax receivable , net 2,166 454 Inventory 999 728 Other current , net 2,166 454 Inventory 999 728 Other current asset 4,412 net 2,166 454 Inventory 999 728 Other current asset 4,412 5,490 999 728 Other current asset 4,412 5,490 Total current asset 152,578 728 Other current asset 4,412 5,490 Total current asset 152,578 174,296 4,412 5,490 Total current asset 152,578 174,296 Non-marketable investment 13,078 20,703 5,490 Total current asset 152,578 174,296 Non-marketable investment 13,078 20,703 Deferred asset 152,578 174,296 Non-marketable investment 13,078 20,703 Deferred income tax 721 152,578 174,296 Non-marketable investment 13,078 20,703 Deferred income tax 721 1,084 13,078 20,703 Deferred income tax 721 1,084 Property and equipment , 20,703 Deferred income tax 721 1,084 Property and equipment , net Property and equipment , net 73,646 84,749 Operating lease asset 10,941 and equipment , net 73,646 84,749 Operating lease asset 10,941 12,211 73,646 84,749 Operating lease asset 10,941 12,211 Intangible asset , net 84,749 Operating lease asset 10,941 12,211 Intangible asset , net 1,979 12,211 Intangible asset , net 1,979 1,445 Goodwill 20,624 21,175 Other Intangible asset , net 1,979 1,445 Goodwill 20,624 21,175 Other non-current , net 1,979 1,445 Goodwill 20,624 21,175 Other non-current asset 2,342 net 1,979 1,445 Goodwill 20,624 21,175 Other non-current asset 2,342 3,953 20,624 21,175 Other non-current asset 2,342 3,953 Total asset $ 275,909 21,175 Other non-current asset 2,342 3,953 Total asset $ 275,909 $ 2,342 3,953 Total asset $ 275,909 $ 319,616 Liabilities and Stockholders Total asset $ 275,909 $ 319,616 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 5,561 $ 5,589 Accrued compensation and Accounts payable $ 5,561 $ 5,589 Accrued compensation and benefit 8,495 5,589 Accrued compensation and benefit 8,495 11,086 Accrued expense and other Accrued compensation and benefit 8,495 11,086 Accrued expense and other current expense and other current liability 23,067 28,631 Accrued revenue share 5,916 and other current liability 23,067 28,631 Accrued revenue share 5,916 7,500 23,067 28,631 Accrued revenue share 5,916 7,500 Deferred revenue 1,908 2,543 28,631 Accrued revenue share 5,916 7,500 Deferred revenue 1,908 2,543 Income share 5,916 7,500 Deferred revenue 1,908 2,543 Income tax payable , 5,916 7,500 Deferred revenue 1,908 2,543 Income tax payable , net Income tax payable , net 274 1,485 Total current liability 45,221 tax payable , net 274 1,485 Total current liability 45,221 56,834 274 1,485 Total current liability 45,221 56,834 Long-term debt 4,554 13,932 1,485 Total current liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred liability 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 45,221 56,834 Long-term debt 4,554 13,932 Deferred revenue , non-current 358 13,932 Deferred revenue , non-current 358 481 Income tax payable , Deferred revenue , non-current 358 481 Income tax payable , non-current Income tax payable , non-current 9,885 8,849 Deferred income tax 1,701 tax payable , non-current 9,885 8,849 Deferred income tax 1,701 3,561 9,885 8,849 Deferred income tax 1,701 3,561 Operating lease liability 10,214 8,849 Deferred income tax 1,701 3,561 Operating lease liability 10,214 11,146 1,701 3,561 Operating lease liability 10,214 11,146 Other long-term liability 2,534 3,561 Operating lease liability 10,214 11,146 Other long-term liability 2,534 2,269 10,214 11,146 Other long-term liability 2,534 2,269 Total liability 74,467 97,072 11,146 Other long-term liability 2,534 2,269 Total liability 74,467 97,072 Commitments liability 2,534 2,269 Total liability 74,467 97,072 Commitments and Contingencies ( 2,534 2,269 Total liability 74,467 97,072 Commitments and Contingencies ( Note Commitments and Contingencies ( Note 10 ) Stockholders ’ equity : Convertible preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 688,335 ( Class Class C 3,000,000 ) ; 688,335 ( Class A 299,828 , ; 688,335 ( Class A 299,828 , Class B 46,441 , A 299,828 , Class B 46,441 , Class C 342,066 ) B 46,441 , Class C 342,066 ) and 675,222 ( Class Class C 342,066 ) and 675,222 ( Class A 300,730 , and 675,222 ( Class A 300,730 , Class B 45,843 , A 300,730 , Class B 45,843 , Class C 328,649 ) B 45,843 , Class C 328,649 ) share issued and outstanding ) share issued and outstanding 50,552 58,510 Accumulated other comprehensive income share issued and outstanding 50,552 58,510 Accumulated other comprehensive income ( income ( loss ) ( 1,232 ) 633 Retained earnings 152,122 loss ) ( 1,232 ) 633 Retained earnings 152,122 163,401 Total 1,232 ) 633 Retained earnings 152,122 163,401 Total stockholder ’ equity ) 633 Retained earnings 152,122 163,401 Total stockholder ’ equity 201,442 163,401 Total stockholder ’ equity 201,442 222,544 Total liability and stockholder Total stockholder ’ equity 201,442 222,544 Total liability and stockholder ’ and stockholder ’ equity $ 275,909 $ 319,616 See accompanying note ’ equity $ 275,909 $ 319,616 See accompanying note . 54 319,616 See accompanying note . 54 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2018 2019 2020 Revenues Year Ended December 31 , 2018 2019 2020 Revenues $ 136,819 Ended December 31 , 2018 2019 2020 Revenues $ 136,819 $ December 31 , 2018 2019 2020 Revenues $ 136,819 $ 161,857 2018 2019 2020 Revenues $ 136,819 $ 161,857 $ 182,527 Costs 2020 Revenues $ 136,819 $ 161,857 $ 182,527 Costs and expense $ 136,819 $ 161,857 $ 182,527 Costs and expense : Cost expense : Cost of revenue 59,549 71,896 84,732 Research and development : Cost of revenue 59,549 71,896 84,732 Research and development 21,419 Cost of revenue 59,549 71,896 84,732 Research and development 21,419 26,018 71,896 84,732 Research and development 21,419 26,018 27,573 Sales and marketing 84,732 Research and development 21,419 26,018 27,573 Sales and marketing 16,333 Research and development 21,419 26,018 27,573 Sales and marketing 16,333 18,464 26,018 27,573 Sales and marketing 16,333 18,464 17,946 General and administrative 27,573 Sales and marketing 16,333 18,464 17,946 General and administrative 6,923 Sales and marketing 16,333 18,464 17,946 General and administrative 6,923 9,551 18,464 17,946 General and administrative 6,923 9,551 11,052 European Commission fine 17,946 General and administrative 6,923 9,551 11,052 European Commission fine 5,071 General and administrative 6,923 9,551 11,052 European Commission fine 5,071 1,697 9,551 11,052 European Commission fine 5,071 1,697 0 Total cost and 11,052 European Commission fine 5,071 1,697 0 Total cost and expense European Commission fine 5,071 1,697 0 Total cost and expense 109,295 0 Total cost and expense 109,295 127,626 141,303 Income from operation Total cost and expense 109,295 127,626 141,303 Income from operation 27,524 cost and expense 109,295 127,626 141,303 Income from operation 27,524 34,231 127,626 141,303 Income from operation 27,524 34,231 41,224 Other income ( 141,303 Income from operation 27,524 34,231 41,224 Other income ( expense Income from operation 27,524 34,231 41,224 Other income ( expense ) ( expense ) , net 7,389 5,394 6,858 Income before income expense ) , net 7,389 5,394 6,858 Income before income tax ) , net 7,389 5,394 6,858 Income before income tax 34,913 6,858 Income before income tax 34,913 39,625 48,082 Provision for income Income before income tax 34,913 39,625 48,082 Provision for income tax before income tax 34,913 39,625 48,082 Provision for income tax 4,177 48,082 Provision for income tax 4,177 5,282 7,813 Net income $ Provision for income tax 4,177 5,282 7,813 Net income $ 30,736 for income tax 4,177 5,282 7,813 Net income $ 30,736 $ 5,282 7,813 Net income $ 30,736 $ 34,343 $ 40,269 Basic Net income $ 30,736 $ 34,343 $ 40,269 Basic net income $ 30,736 $ 34,343 $ 40,269 Basic net income per share Class C capital stock $ 44.22 $ 49.59 $ 59.15 Diluted capital stock $ 44.22 $ 49.59 $ 59.15 Diluted net income $ 44.22 $ 49.59 $ 59.15 Diluted net income per share Class C capital stock $ 43.70 $ 49.16 $ 58.61 See capital stock $ 43.70 $ 49.16 $ 58.61 See accompanying note $ 43.70 $ 49.16 $ 58.61 See accompanying note . 55 58.61 See accompanying note . 55 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2018 2019 2020 Net Year Ended December 31 , 2018 2019 2020 Net income $ Ended December 31 , 2018 2019 2020 Net income $ 30,736 December 31 , 2018 2019 2020 Net income $ 30,736 $ 2019 2020 Net income $ 30,736 $ 34,343 $ 40,269 Other Net income $ 30,736 $ 34,343 $ 40,269 Other comprehensive income $ 30,736 $ 34,343 $ 40,269 Other comprehensive income ( loss foreign currency translation adjustment ( 781 ) ( 119 ) 1,139 adjustment ( 781 ) ( 119 ) 1,139 Available-for-sale investment : 781 ) ( 119 ) 1,139 Available-for-sale investment : Change in unrealized gain ( loss ) 88 1,611 1,313 Less : reclassification gain ( loss ) 88 1,611 1,313 Less : reclassification adjustment ( loss ) 88 1,611 1,313 Less : reclassification adjustment for included in net income ( 911 ) ( 111 ) ( income ( 911 ) ( 111 ) ( 513 ) Net ) ( 111 ) ( 513 ) Net change , net ( expense ) of $ 156 , $ ( 221 ) $ 156 , $ ( 221 ) , and $ ( ) , and $ ( 230 ) ( 823 ) 1,500 $ ( 230 ) ( 823 ) 1,500 800 Cash flow 230 ) ( 823 ) 1,500 800 Cash flow hedge : ) ( 823 ) 1,500 800 Cash flow hedge : Change unrealized gain ( loss ) 290 22 42 Less : reclassification gain ( loss ) 290 22 42 Less : reclassification adjustment ( loss ) 290 22 42 Less : reclassification adjustment for loss included in net income 98 ( 299 ) ( 116 in net income 98 ( 299 ) ( 116 ) Net 98 ( 299 ) ( 116 ) Net change , net expense ) of $ ( 103 ) , $ 42 , ( 103 ) , $ 42 , and $ 11 388 $ 42 , and $ 11 388 ( 277 ) ( 42 , and $ 11 388 ( 277 ) ( 74 and $ 11 388 ( 277 ) ( 74 ) Other 388 ( 277 ) ( 74 ) Other comprehensive income ( income ( loss ) ( 1,216 ) 1,104 1,865 Comprehensive income loss ) ( 1,216 ) 1,104 1,865 Comprehensive income $ 29,520 ) ( 1,216 ) 1,104 1,865 Comprehensive income $ 29,520 $ 1,104 1,865 Comprehensive income $ 29,520 $ 35,447 $ 42,134 See Comprehensive income $ 29,520 $ 35,447 $ 42,134 See accompanying note $ 29,520 $ 35,447 $ 42,134 See accompanying note . 56 42,134 See accompanying note . 56 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2017 694,783 $ 40,247 a of December 31 , 2017 694,783 $ 40,247 $ ( of December 31 , 2017 694,783 $ 40,247 $ ( 992 31 , 2017 694,783 $ 40,247 $ ( 992 ) $ 694,783 $ 40,247 $ ( 992 ) $ 113,247 $ 152,502 $ ( 992 ) $ 113,247 $ 152,502 Cumulative effect of 992 ) $ 113,247 $ 152,502 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 98 ) ( effect of accounting change 0 0 ( 98 ) ( 599 accounting change 0 0 ( 98 ) ( 599 ) ( 0 ( 98 ) ( 599 ) ( 697 ) Common ) ( 599 ) ( 697 ) Common and capital stock Common and capital stock issued 8,975 148 0 0 148 Stock-based and capital stock issued 8,975 148 0 0 148 Stock-based compensation capital stock issued 8,975 148 0 0 148 Stock-based compensation expense stock issued 8,975 148 0 0 148 Stock-based compensation expense 0 issued 8,975 148 0 0 148 Stock-based compensation expense 0 9,353 0 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax 148 Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding Stock-based compensation expense 0 9,353 0 0 9,353 Tax withholding related compensation expense 0 9,353 0 0 9,353 Tax withholding related to expense 0 9,353 0 0 9,353 Tax withholding related to vesting vesting of restricted stock unit 0 ( 4,782 ) 0 0 restricted stock unit 0 ( 4,782 ) 0 0 ( 4,782 unit 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases of 4,782 ) 0 0 ( 4,782 ) Repurchases of capital stock Repurchases of capital stock ( 8,202 ) ( 576 ) 0 stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale 0 ( 8,499 ) ( 9,075 ) Sale of interest in of interest in consolidated entity 0 659 0 0 659 Net interest in consolidated entity 0 659 0 0 659 Net income in consolidated entity 0 659 0 0 659 Net income 0 consolidated entity 0 659 0 0 659 Net income 0 0 entity 0 659 0 0 659 Net income 0 0 0 0 0 659 Net income 0 0 0 30,736 30,736 Other 0 659 Net income 0 0 0 30,736 30,736 Other comprehensive 659 Net income 0 0 0 30,736 30,736 Other comprehensive income Net income 0 0 0 30,736 30,736 Other comprehensive income ( income 0 0 0 30,736 30,736 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 1,216 ) 0 income ( loss ) 0 0 ( 1,216 ) 0 ( loss ) 0 0 ( 1,216 ) 0 ( 1,216 ) 0 0 ( 1,216 ) 0 ( 1,216 ) Balance a ( 1,216 ) 0 ( 1,216 ) Balance a of December ) Balance a of December 31 , 2018 695,556 45,049 ( a of December 31 , 2018 695,556 45,049 ( 2,306 ) of December 31 , 2018 695,556 45,049 ( 2,306 ) 134,885 December 31 , 2018 695,556 45,049 ( 2,306 ) 134,885 177,628 , 2018 695,556 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect 695,556 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect of accounting 45,049 ( 2,306 ) 134,885 177,628 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 4 accounting change 0 0 ( 30 ) ( 4 ) ( 0 ( 30 ) ( 4 ) ( 34 ) Common ) ( 4 ) ( 34 ) Common and capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax 202 Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding Stock-based compensation expense 0 10,890 0 0 10,890 Tax withholding related compensation expense 0 10,890 0 0 10,890 Tax withholding related to expense 0 10,890 0 0 10,890 Tax withholding related to vesting restricted stock unit and other 0 ( 4,455 ) 0 0 unit and other 0 ( 4,455 ) 0 0 ( 4,455 other 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases of 4,455 ) 0 0 ( 4,455 ) Repurchases of capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1,104 0 1,104 Balance a ( loss ) 0 0 1,104 0 1,104 Balance a of loss ) 0 0 1,104 0 1,104 Balance a of December ) 0 0 1,104 0 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 688,335 50,552 ( a of December 31 , 2019 688,335 50,552 ( 1,232 ) of December 31 , 2019 688,335 50,552 ( 1,232 ) 152,122 December 31 , 2019 688,335 50,552 ( 1,232 ) 152,122 201,442 , 2019 688,335 50,552 ( 1,232 ) 152,122 201,442 Common and 688,335 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock issued Common and capital stock issued 8,398 168 0 0 168 Stock-based and capital stock issued 8,398 168 0 0 168 Stock-based compensation capital stock issued 8,398 168 0 0 168 Stock-based compensation expense stock issued 8,398 168 0 0 168 Stock-based compensation expense 0 issued 8,398 168 0 0 168 Stock-based compensation expense 0 13,123 0 168 Stock-based compensation expense 0 13,123 0 0 13,123 Tax 168 Stock-based compensation expense 0 13,123 0 0 13,123 Tax withholding Stock-based compensation expense 0 13,123 0 0 13,123 Tax withholding related compensation expense 0 13,123 0 0 13,123 Tax withholding related to expense 0 13,123 0 0 13,123 Tax withholding related to vesting restricted stock unit and other 0 ( 5,969 ) 0 0 unit and other 0 ( 5,969 ) 0 0 ( 5,969 other 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases of 5,969 ) 0 0 ( 5,969 ) Repurchases of capital stock Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale 0 ( 28,990 ) ( 31,149 ) Sale of interest in of interest in consolidated entity 0 2,795 0 0 2,795 Net interest in consolidated entity 0 2,795 0 0 2,795 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance income ( loss ) 0 0 1,865 0 1,865 Balance a ( loss ) 0 0 1,865 0 1,865 Balance a of loss ) 0 0 1,865 0 1,865 Balance a of December ) 0 0 1,865 0 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 675,222 $ 58,510 a of December 31 , 2020 675,222 $ 58,510 $ 633 of December 31 , 2020 675,222 $ 58,510 $ 633 $ 31 , 2020 675,222 $ 58,510 $ 633 $ 163,401 $ 2020 675,222 $ 58,510 $ 633 $ 163,401 $ 222,544 See $ 58,510 $ 633 $ 163,401 $ 222,544 See accompanying note $ 633 $ 163,401 $ 222,544 See accompanying note . 57 222,544 See accompanying note . 57 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2018 2019 2020 Operating Year Ended December 31 , 2018 2019 2020 Operating activity Net Ended December 31 , 2018 2019 2020 Operating activity Net income December 31 , 2018 2019 2020 Operating activity Net income $ Operating activity Net income $ 30,736 $ 34,343 $ 40,269 Adjustments Net income $ 30,736 $ 34,343 $ 40,269 Adjustments : Depreciation $ 30,736 $ 34,343 $ 40,269 Adjustments : Depreciation and impairment impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of property and equipment 8,164 10,856 12,905 Amortization and impairment of intangible and impairment of intangible asset 871 925 792 Stock-based compensation expense impairment of intangible asset 871 925 792 Stock-based compensation expense 9,353 of intangible asset 871 925 792 Stock-based compensation expense 9,353 10,794 925 792 Stock-based compensation expense 9,353 10,794 12,991 Deferred income tax 792 Stock-based compensation expense 9,353 10,794 12,991 Deferred income tax 778 Stock-based compensation expense 9,353 10,794 12,991 Deferred income tax 778 173 10,794 12,991 Deferred income tax 778 173 1,390 Gain on debt 12,991 Deferred income tax 778 173 1,390 Gain on debt and Deferred income tax 778 173 1,390 Gain on debt and equity equity security , net ( 6,650 ) ( 2,798 ) ( net ( 6,650 ) ( 2,798 ) ( 6,317 ) Other ) ( 2,798 ) ( 6,317 ) Other ( 189 ) ( 6,317 ) Other ( 189 ) ( 592 ) 1,267 Other ( 189 ) ( 592 ) 1,267 Changes in asset 189 ) ( 592 ) 1,267 Changes in asset and liability acquisition : Accounts receivable ( 2,169 ) ( 4,340 ) ( receivable ( 2,169 ) ( 4,340 ) ( 6,524 ) Income ) ( 4,340 ) ( 6,524 ) Income tax , net Income tax , net ( 2,251 ) ( 3,128 ) 1,209 net ( 2,251 ) ( 3,128 ) 1,209 Other asset ( 2,251 ) ( 3,128 ) 1,209 Other asset ( 1,207 ) ) 1,209 Other asset ( 1,207 ) ( 621 ) ( asset ( 1,207 ) ( 621 ) ( 1,330 ) Accounts ) ( 621 ) ( 1,330 ) Accounts payable 1,067 428 ( 1,330 ) Accounts payable 1,067 428 694 Accrued expense and 1,330 ) Accounts payable 1,067 428 694 Accrued expense and other ) Accounts payable 1,067 428 694 Accrued expense and other liability Accrued expense and other liability 8,614 7,170 5,504 Accrued revenue share expense and other liability 8,614 7,170 5,504 Accrued revenue share 483 and other liability 8,614 7,170 5,504 Accrued revenue share 483 1,273 7,170 5,504 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 5,504 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 37 Accrued revenue share 483 1,273 1,639 Deferred revenue 371 37 635 483 1,273 1,639 Deferred revenue 371 37 635 Net cash provided 1,273 1,639 Deferred revenue 371 37 635 Net cash provided by 1,639 Deferred revenue 371 37 635 Net cash provided by operating cash provided by operating activity 47,971 54,520 65,124 Investing activity Purchases provided by operating activity 47,971 54,520 65,124 Investing activity Purchases of by operating activity 47,971 54,520 65,124 Investing activity Purchases of property of property and equipment ( 25,139 ) ( 23,548 ) ( equipment ( 25,139 ) ( 23,548 ) ( 22,281 ) Purchases ) ( 23,548 ) ( 22,281 ) Purchases of marketable security Purchases of marketable security ( 50,158 ) ( 100,315 ) ( security ( 50,158 ) ( 100,315 ) ( 136,576 ) Maturities ) ( 100,315 ) ( 136,576 ) Maturities and sale of and sale of marketable security 48,507 97,825 132,906 Purchases of non-marketable sale of marketable security 48,507 97,825 132,906 Purchases of non-marketable investment of marketable security 48,507 97,825 132,906 Purchases of non-marketable investment ( Purchases of non-marketable investment ( 2,073 ) ( 1,932 ) ( investment ( 2,073 ) ( 1,932 ) ( 7,175 ) Maturities ) ( 1,932 ) ( 7,175 ) Maturities and sale of and sale of non-marketable investment 1,752 405 1,023 Acquisitions , net sale of non-marketable investment 1,752 405 1,023 Acquisitions , net of of non-marketable investment 1,752 405 1,023 Acquisitions , net of cash purchase of intangible asset ( 1,491 ) ( 2,515 ) ( asset ( 1,491 ) ( 2,515 ) ( 738 ) Other ) ( 2,515 ) ( 738 ) Other investing activity 98 738 ) Other investing activity 98 589 68 Net cash used ) Other investing activity 98 589 68 Net cash used in Other investing activity 98 589 68 Net cash used in investing used in investing activity ( 28,504 ) ( 29,491 ) ( activity ( 28,504 ) ( 29,491 ) ( 32,773 ) Financing ) ( 29,491 ) ( 32,773 ) Financing activity Net payment to stock-based award activity ( 4,993 ) ( 4,765 ) ( activity ( 4,993 ) ( 4,765 ) ( 5,720 ) Repurchases ) ( 4,765 ) ( 5,720 ) Repurchases of capital stock Repurchases of capital stock ( 9,075 ) ( 18,396 ) ( stock ( 9,075 ) ( 18,396 ) ( 31,149 ) Proceeds ) ( 18,396 ) ( 31,149 ) Proceeds from issuance of debt , net of cost 6,766 317 11,761 Repayments of debt , net of cost 6,766 317 11,761 Repayments of debt ( net of cost 6,766 317 11,761 Repayments of debt ( 6,827 11,761 Repayments of debt ( 6,827 ) ( 585 ) ( debt ( 6,827 ) ( 585 ) ( 2,100 ) Proceeds ) ( 585 ) ( 2,100 ) Proceeds from sale of in consolidated entity , net 950 220 2,800 Net cash used consolidated entity , net 950 220 2,800 Net cash used in entity , net 950 220 2,800 Net cash used in financing used in financing activity ( 13,179 ) ( 23,209 ) ( activity ( 13,179 ) ( 23,209 ) ( 24,408 ) Effect ) ( 23,209 ) ( 24,408 ) Effect of exchange rate cash and cash equivalent ( 302 ) ( 23 ) 24 equivalent ( 302 ) ( 23 ) 24 Net increase in 302 ) ( 23 ) 24 Net increase in cash and in cash and cash equivalent 5,986 1,797 7,967 Cash and cash cash and cash equivalent 5,986 1,797 7,967 Cash and cash equivalent and cash equivalent 5,986 1,797 7,967 Cash and cash equivalent at equivalent at beginning of period 10,715 16,701 18,498 Cash and cash at beginning of period 10,715 16,701 18,498 Cash and cash equivalent beginning of period 10,715 16,701 18,498 Cash and cash equivalent at at end of period $ 16,701 $ 18,498 $ 26,465 Supplemental of period $ 16,701 $ 18,498 $ 26,465 Supplemental disclosure of $ 16,701 $ 18,498 $ 26,465 Supplemental disclosure of cash flow , net of refund $ 5,671 $ 8,203 $ 4,990 See of refund $ 5,671 $ 8,203 $ 4,990 See accompanying note $ 5,671 $ 8,203 $ 4,990 See accompanying note . 58 4,990 See accompanying note . 58 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Nature of Operations and incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding liability . As of December 31 , 2020 the impact of As of December 31 , 2020 the impact of COVID-19 continues future period . In January 2021 , we completed an assessment be effective beginning fiscal year 2021 . Revenue Recognition Revenues are , we report advertising revenue 59 Table of Contents Alphabet Inc. or a flat fee ; 60 Table of Contents Alphabet Inc. For the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , advertising and , 2018 , 2019 and 2020 , advertising and promotional expense promotional expense totaled approximately $ 6.4 billion , $ 6.8 billion $ 6.4 billion , $ 6.8 billion , and $ 5.4 6.8 billion , and $ 5.4 billion , respectively . Performance affiliated customer represented more than 10 % of our revenue in % of our revenue in 2018 , 2019 , or 2020 our revenue in 2018 , 2019 , or 2020 . In 2018 , 2019 , or 2020 . In 2018 , 2019 , or 2020 . In 2018 , 2019 , and 2020 2020 . In 2018 , 2019 , and 2020 , we 2018 , 2019 , and 2020 , we generated approximately 46 2020 , we generated approximately 46 % , 46 % , generated approximately 46 % , 46 % , and 47 % , 46 % , and 47 % of our revenue , derived from revenue earned from 61 Table of Contents Alphabet Inc. measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are liquid security with maturity beyond 12 month a current asset under delivered to the customer . 62 Table of Contents Alphabet Inc. For the year ended December 31 , 2020 , our assessment year ended December 31 , 2020 , our assessment considered the on account receivable wa $ 275 million and $ 789 million $ 275 million and $ 789 million a of December 31 789 million a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , respectively . December 31 , 2019 and 2020 , respectively . Inventory Inventory are the primary beneficiary . 63 Table of Contents Alphabet Inc. over period of seven to 25 year . We depreciate information Consolidated Balance Sheet beginning January 1 , 2019 . The current Sheet beginning January 1 , 2019 . The current portion of one to twelve year . 64 Table of Contents Alphabet Inc. benefit that is greater than 50 % likely to be realized Adopted Accounting Pronouncements In June 2016 , the Financial Accounting Standards Accounting Standards Update No . 2016-13 ( `` ASU 2016-13 `` . 2016-13 ( `` ASU 2016-13 `` ) `` Financial Instruments-Credit Financial Instruments-Credit Losses ( Topic 326 ) : Measurement of Credit at amortized cost . ASU 2016-13 replaces the existing incurred loss loss . We adopted ASU 2016-13 using the modified retrospective approach retrospective approach a of January 1 , 2020 . The cumulative a of January 1 , 2020 . The cumulative effect upon above a well a Note 3 for the effect on our period presentation . See Note 15 for further detail . 65 15 for further detail . 65 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 2 . Revenues Revenue Recognition The ) . Year Ended December 31 , 2018 2019 2020 Google Year Ended December 31 , 2018 2019 2020 Google Search & Ended December 31 , 2018 2019 2020 Google Search & other December 31 , 2018 2019 2020 Google Search & other $ Google Search & other $ 85,296 $ 98,115 $ 104,062 YouTube & other $ 85,296 $ 98,115 $ 104,062 YouTube ad 11,155 $ 85,296 $ 98,115 $ 104,062 YouTube ad 11,155 15,149 19,772 98,115 $ 104,062 YouTube ad 11,155 15,149 19,772 Google Network Members $ 104,062 YouTube ad 11,155 15,149 19,772 Google Network Members ' 104,062 YouTube ad 11,155 15,149 19,772 Google Network Members ' property Google Network Members ' property 20,010 21,547 23,090 Google advertising 116,461 Network Members ' property 20,010 21,547 23,090 Google advertising 116,461 134,811 Members ' property 20,010 21,547 23,090 Google advertising 116,461 134,811 146,924 20,010 21,547 23,090 Google advertising 116,461 134,811 146,924 Google other 14,063 21,547 23,090 Google advertising 116,461 134,811 146,924 Google other 14,063 17,014 23,090 Google advertising 116,461 134,811 146,924 Google other 14,063 17,014 21,711 116,461 134,811 146,924 Google other 14,063 17,014 21,711 Google Services total 134,811 146,924 Google other 14,063 17,014 21,711 Google Services total 130,524 146,924 Google other 14,063 17,014 21,711 Google Services total 130,524 151,825 17,014 21,711 Google Services total 130,524 151,825 168,635 Google Cloud 5,838 21,711 Google Services total 130,524 151,825 168,635 Google Cloud 5,838 8,918 Google Services total 130,524 151,825 168,635 Google Cloud 5,838 8,918 13,059 130,524 151,825 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 151,825 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 659 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 659 657 5,838 8,918 13,059 Other Bets 595 659 657 Hedging gain ( 8,918 13,059 Other Bets 595 659 657 Hedging gain ( loss 13,059 Other Bets 595 659 657 Hedging gain ( loss ) gain ( loss ) ( 138 ) 455 176 Total revenue loss ) ( 138 ) 455 176 Total revenue $ 136,819 ) ( 138 ) 455 176 Total revenue $ 136,819 $ 455 176 Total revenue $ 136,819 $ 161,857 $ 182,527 The Total revenue $ 136,819 $ 161,857 $ 182,527 The following table $ 136,819 $ 161,857 $ 182,527 The following table present our ) : Year Ended December 31 , 2018 2019 2020 United Year Ended December 31 , 2018 2019 2020 United States $ Ended December 31 , 2018 2019 2020 United States $ 63,269 December 31 , 2018 2019 2020 United States $ 63,269 46 2019 2020 United States $ 63,269 46 % $ 74,843 46 2020 United States $ 63,269 46 % $ 74,843 46 % $ 63,269 46 % $ 74,843 46 % $ 85,014 47 63,269 46 % $ 74,843 46 % $ 85,014 47 % $ 74,843 46 % $ 85,014 47 % EMEA ( 1 74,843 46 % $ 85,014 47 % EMEA ( 1 ) 85,014 47 % EMEA ( 1 ) 44,739 33 50,645 31 % EMEA ( 1 ) 44,739 33 50,645 31 55,370 30 EMEA ( 1 ) 44,739 33 50,645 31 55,370 30 APAC ( 1 ) 44,739 33 50,645 31 55,370 30 APAC ( 1 ) 44,739 33 50,645 31 55,370 30 APAC ( 1 ) 44,739 33 50,645 31 55,370 30 APAC ( 1 ) 44,739 33 50,645 31 55,370 30 APAC ( 1 ) 21,341 31 55,370 30 APAC ( 1 ) 21,341 15 26,928 17 30 APAC ( 1 ) 21,341 15 26,928 17 32,550 18 APAC ( 1 ) 21,341 15 26,928 17 32,550 18 Other ( 1 ) 21,341 15 26,928 17 32,550 18 Other Americas 1 ) 21,341 15 26,928 17 32,550 18 Other Americas ( ) 21,341 15 26,928 17 32,550 18 Other Americas ( 1 21,341 15 26,928 17 32,550 18 Other Americas ( 1 ) 32,550 18 Other Americas ( 1 ) 7,608 6 8,986 6 Other Americas ( 1 ) 7,608 6 8,986 6 9,417 5 Americas ( 1 ) 7,608 6 8,986 6 9,417 5 Hedging ( 1 ) 7,608 6 8,986 6 9,417 5 Hedging gain 1 ) 7,608 6 8,986 6 9,417 5 Hedging gain ( ) 7,608 6 8,986 6 9,417 5 Hedging gain ( loss 7,608 6 8,986 6 9,417 5 Hedging gain ( loss ) gain ( loss ) ( 138 ) 0 455 0 176 loss ) ( 138 ) 0 455 0 176 0 Total ) ( 138 ) 0 455 0 176 0 Total revenue ( 138 ) 0 455 0 176 0 Total revenue $ 138 ) 0 455 0 176 0 Total revenue $ 136,819 ) 0 455 0 176 0 Total revenue $ 136,819 100 176 0 Total revenue $ 136,819 100 % $ 161,857 100 0 Total revenue $ 136,819 100 % $ 161,857 100 % $ 136,819 100 % $ 161,857 100 % $ 182,527 100 136,819 100 % $ 161,857 100 % $ 182,527 100 % $ 161,857 100 % $ 182,527 100 % ( 1 ) 161,857 100 % $ 182,527 100 % ( 1 ) Regions $ 182,527 100 % ( 1 ) Regions represent Europe , deferred revenue a of December 31 , 2019 wa $ 2.3 a of December 31 , 2019 wa $ 2.3 billion , 31 , 2019 wa $ 2.3 billion , of which $ billion , of which $ 1.8 billion wa recognized a revenue for the year ending December 31 , 2020 . Additionally , year ending December 31 , 2020 . Additionally , we have performed . As of December 31 , 2020 , the amount As of December 31 , 2020 , the amount not yet from these commitment is $ 29.8 billion . We expect to approximately half over the next 24 month with the remaining thereafter recognize such a revenue . 66 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 3 . Financial Instruments Debt Securities a available-for-sale , within Level 2 in the fair value hierarchy fair value option were $ 87 million a of December 31 87 million a of December 31 , 2020 . As of a of December 31 , 2020 . As of December 31 2020 . As of December 31 , 2020 , the fair As of December 31 , 2020 , the fair value of these debt security wa $ 2 billion . Balances a of . Balances a of December 31 , 2019 were not material a of December 31 , 2019 were not material . The investment category a of December 31 , 2019 and 2020 ( a of December 31 , 2019 and 2020 ( in million December 31 , 2019 and 2020 ( in million ) : ) : As of December 31 , 2019 Adjusted Cost Gross As of December 31 , 2019 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 2,294 $ 0 deposit ( 1 ) $ 2,294 $ 0 $ 0 $ 1 ) $ 2,294 $ 0 $ 0 $ 2,294 $ $ 2,294 $ 0 $ 0 $ 2,294 $ 2,294 $ $ 0 $ 0 $ 2,294 $ 2,294 $ 0 Government $ 0 $ 2,294 $ 2,294 $ 0 Government bond 55,033 $ 2,294 $ 2,294 $ 0 Government bond 55,033 434 ( 2,294 $ 0 Government bond 55,033 434 ( 30 ) 55,437 $ 0 Government bond 55,033 434 ( 30 ) 55,437 4,518 Government bond 55,033 434 ( 30 ) 55,437 4,518 50,919 Corporate 55,033 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 434 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 ( 30 ) 55,437 4,518 50,919 Corporate debt security 27,164 337 4,518 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 50,919 Corporate debt security 27,164 337 ( 3 ) 27,498 44 debt security 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed 27,164 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed 337 ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security ( 3 ) 27,498 44 27,454 Mortgage-backed and asset-backed security 19,453 27,454 Mortgage-backed and asset-backed security 19,453 96 ( 41 ) 19,508 Mortgage-backed and asset-backed security 19,453 96 ( 41 ) 19,508 0 asset-backed security 19,453 96 ( 41 ) 19,508 0 19,508 Total 19,453 96 ( 41 ) 19,508 0 19,508 Total $ 103,944 96 ( 41 ) 19,508 0 19,508 Total $ 103,944 $ ( 41 ) 19,508 0 19,508 Total $ 103,944 $ 867 19,508 0 19,508 Total $ 103,944 $ 867 $ ( 74 19,508 Total $ 103,944 $ 867 $ ( 74 ) $ 103,944 $ 867 $ ( 74 ) $ 104,737 $ 6,856 $ ( 74 ) $ 104,737 $ 6,856 $ 97,881 As 74 ) $ 104,737 $ 6,856 $ 97,881 As of December $ 104,737 $ 6,856 $ 97,881 As of December 31 , $ 97,881 As of December 31 , 2020 Adjusted Cost Gross As of December 31 , 2020 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 3,564 $ 0 deposit ( 1 ) $ 3,564 $ 0 $ 0 $ 1 ) $ 3,564 $ 0 $ 0 $ 3,564 $ $ 3,564 $ 0 $ 0 $ 3,564 $ 3,564 $ $ 0 $ 0 $ 3,564 $ 3,564 $ 0 Government $ 0 $ 3,564 $ 3,564 $ 0 Government bond 55,156 $ 3,564 $ 3,564 $ 0 Government bond 55,156 793 ( 3,564 $ 0 Government bond 55,156 793 ( 9 ) 55,940 $ 0 Government bond 55,156 793 ( 9 ) 55,940 2,527 Government bond 55,156 793 ( 9 ) 55,940 2,527 53,413 Corporate 55,156 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security 16,767 32,215 Mortgage-backed and asset-backed security 16,767 364 ( 7 ) 17,124 Mortgage-backed and asset-backed security 16,767 364 ( 7 ) 17,124 0 asset-backed security 16,767 364 ( 7 ) 17,124 0 17,124 Total 16,767 364 ( 7 ) 17,124 0 17,124 Total $ 107,008 364 ( 7 ) 17,124 0 17,124 Total $ 107,008 $ ( 7 ) 17,124 0 17,124 Total $ 107,008 $ 1,861 17,124 0 17,124 Total $ 107,008 $ 1,861 $ ( 18 17,124 Total $ 107,008 $ 1,861 $ ( 18 ) $ 107,008 $ 1,861 $ ( 18 ) $ 108,851 $ 6,099 $ ( 18 ) $ 108,851 $ 6,099 $ 102,752 ( 18 ) $ 108,851 $ 6,099 $ 102,752 ( 1 ) $ 108,851 $ 6,099 $ 102,752 ( 1 ) The majority $ 6,099 $ 102,752 ( 1 ) The majority of our gross realized gain of $ 1.3 billion , $ 292 million $ 1.3 billion , $ 292 million , and $ 899 292 million , and $ 899 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . We recognized gross realized loss of $ 143 million , $ 143 million $ 143 million , $ 143 million , and $ 184 143 million , and $ 184 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . We reflect ) : As of December 31 , 2020 Due in 1 As of December 31 , 2020 Due in 1 year or 31 , 2020 Due in 1 year or le $ 19,795 1 year or le $ 19,795 Due in 1 year through le $ 19,795 Due in 1 year through 5 year 69,228 Due in 1 year through 5 year 69,228 Due in 5 1 year through 5 year 69,228 Due in 5 year through 5 year 69,228 Due in 5 year through 10 year 2,739 Due in 5 year through 10 year 2,739 Due after 10 5 year through 10 year 2,739 Due after 10 year 13,038 10 year 2,739 Due after 10 year 13,038 Total $ 104,800 2,739 Due after 10 year 13,038 Total $ 104,800 67 Table 10 year 13,038 Total $ 104,800 67 Table of Contents Alphabet year 13,038 Total $ 104,800 67 Table of Contents Alphabet Inc to AOCI a of December 31 , 2019 and 2020 , a of December 31 , 2019 and 2020 , aggregated by December 31 , 2019 and 2020 , aggregated by investment category ) : As of December 31 , 2019 Less than 12 As of December 31 , 2019 Less than 12 Months 12 31 , 2019 Less than 12 Months 12 Months or Greater 2019 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 6,752 $ ( 20 ) $ bond $ 6,752 $ ( 20 ) $ 4,590 $ ( $ ( 20 ) $ 4,590 $ ( 10 ) $ ) $ 4,590 $ ( 10 ) $ 11,342 $ ( $ ( 10 ) $ 11,342 $ ( 30 ) Corporate ) $ 11,342 $ ( 30 ) Corporate debt security 1,665 30 ) Corporate debt security 1,665 ( 2 ) 978 ( Corporate debt security 1,665 ( 2 ) 978 ( 1 ) security 1,665 ( 2 ) 978 ( 1 ) 2,643 ( ( 2 ) 978 ( 1 ) 2,643 ( 3 ) ) 978 ( 1 ) 2,643 ( 3 ) Mortgage-backed and ( 1 ) 2,643 ( 3 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 4,536 ( 13 ) 2,835 ( and asset-backed security 4,536 ( 13 ) 2,835 ( 28 ) security 4,536 ( 13 ) 2,835 ( 28 ) 7,371 ( ( 13 ) 2,835 ( 28 ) 7,371 ( 41 ) ) 2,835 ( 28 ) 7,371 ( 41 ) Total $ ( 28 ) 7,371 ( 41 ) Total $ 12,953 $ ( 41 ) Total $ 12,953 $ ( 35 ) $ Total $ 12,953 $ ( 35 ) $ 8,403 $ ( $ ( 35 ) $ 8,403 $ ( 39 ) $ ) $ 8,403 $ ( 39 ) $ 21,356 $ ( $ ( 39 ) $ 21,356 $ ( 74 ) As ) $ 21,356 $ ( 74 ) As of December 31 74 ) As of December 31 , 2020 Less than 12 As of December 31 , 2020 Less than 12 Months 12 31 , 2020 Less than 12 Months 12 Months or Greater 2020 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 5,516 $ ( 9 ) $ bond $ 5,516 $ ( 9 ) $ 3 $ 0 $ ( 9 ) $ 3 $ 0 $ 5,519 $ 9 ) $ 3 $ 0 $ 5,519 $ ( 9 $ 3 $ 0 $ 5,519 $ ( 9 ) Corporate 0 $ 5,519 $ ( 9 ) Corporate debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) 1,171 ( 7 ) Total $ 8,444 $ ( 7 ) Total $ 8,444 $ ( 15 ) $ Total $ 8,444 $ ( 15 ) $ 245 $ ( $ ( 15 ) $ 245 $ ( 2 ) $ ) $ 245 $ ( 2 ) $ 8,689 $ ( $ ( 2 ) $ 8,689 $ ( 17 ) During ) $ 8,689 $ ( 17 ) During the year ended During the year ended December 31 , 2018 , and 2019 year ended December 31 , 2018 , and 2019 we did 31 , 2018 , and 2019 we did no t recognize During the year ended December 31 , 2020 , with the year ended December 31 , 2020 , with the adoption of with the adoption of ASU 2016-13 , we did not recognize wa immaterial . See Note 7 for further detail on other value and classified within Level 1 and 2 in the fair classified within Level 1 and 2 in the fair value hierarchy transaction are classified within Level 2 or Level 3 in the within Level 2 or Level 3 in the fair value hierarchy impairment are classified within Level 3 . Gains and loss on ) : Year Ended December 31 , 2019 2020 Net gain Year Ended December 31 , 2019 2020 Net gain ( loss Ended December 31 , 2019 2020 Net gain ( loss ) during the period $ ( 301 ) $ 1,339 Net unrealized $ ( 301 ) $ 1,339 Net unrealized gain ( loss the end of the period 2,950 4,253 Total gain ( loss end of the period 2,950 4,253 Total gain ( loss ) expense ) , net $ 2,649 $ 5,592 68 Table of , net $ 2,649 $ 5,592 68 Table of Contents Alphabet net $ 2,649 $ 5,592 68 Table of Contents Alphabet Inc During the Year Ended December 31 , 2019 2020 Total sale Year Ended December 31 , 2019 2020 Total sale price $ Ended December 31 , 2019 2020 Total sale price $ 3,134 2020 Total sale price $ 3,134 $ 4,767 Total initial cost sale price $ 3,134 $ 4,767 Total initial cost 858 2,674 $ 4,767 Total initial cost 858 2,674 Cumulative net gain ( 4,767 Total initial cost 858 2,674 Cumulative net gain ( loss gain ( loss ) $ 2,276 $ 2,093 Carrying value of loss ) $ 2,276 $ 2,093 Carrying value of marketable and ) : As of December 31 , 2019 Marketable Equity Securities As of December 31 , 2019 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative initial cost $ 1,935 $ 8,297 $ 10,232 Cumulative net gain $ 1,935 $ 8,297 $ 10,232 Cumulative net gain ( loss gain ( loss ) ( 1 ) 1,361 3,056 4,417 Carrying loss ) ( 1 ) 1,361 3,056 4,417 Carrying value $ ) ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 ( 1 ) 1,361 3,056 4,417 Carrying value $ 3,296 $ 3,056 4,417 Carrying value $ 3,296 $ 11,353 $ 14,649 ( Carrying value $ 3,296 $ 11,353 $ 14,649 ( 1 ) $ 3,296 $ 11,353 $ 14,649 ( 1 ) Non-marketable equity $ 11,353 $ 14,649 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 3.5 billion unrealized gain and $ billion unrealized gain and $ 445 million unrealized loss ( including ) . As of December 31 , 2020 Marketable Equity Securities As of December 31 , 2020 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative net gain $ 2,227 $ 14,616 $ 16,843 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,631 4,277 7,908 Carrying loss ) ( 1 ) 3,631 4,277 7,908 Carrying value ( ) ( 1 ) 3,631 4,277 7,908 Carrying value ( 2 ( 1 ) 3,631 4,277 7,908 Carrying value ( 2 ) 4,277 7,908 Carrying value ( 2 ) $ 5,858 $ 18,893 value ( 2 ) $ 5,858 $ 18,893 $ 24,751 ( 2 ) $ 5,858 $ 18,893 $ 24,751 ( 1 ) $ 5,858 $ 18,893 $ 24,751 ( 1 ) Non-marketable equity $ 18,893 $ 24,751 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 6.1 billion unrealized gain and $ billion unrealized gain and $ 1.9 billion unrealized loss ( including including impairment ) . ( 2 ) The long-term portion of marketable equity security of $ 429 million is included in other in other non-current asset . 69 Table of Contents Alphabet Inc investment category a of December 31 , 2019 and 2020 ( a of December 31 , 2019 and 2020 ( in million December 31 , 2019 and 2020 ( in million ) : ) : As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Cash and Cash As of December 31 , 2020 Cash and Cash Equivalents Marketable Equivalents Marketable Equity Securities Level 1 : Money market fund $ : Money market fund $ 4,604 $ 0 $ 12,210 $ market fund $ 4,604 $ 0 $ 12,210 $ 0 Marketable $ 4,604 $ 0 $ 12,210 $ 0 Marketable equity security $ 0 $ 12,210 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) ( 2 ) 0 security ( 1 ) ( 2 ) 0 3,046 0 5,470 1 ) ( 2 ) 0 3,046 0 5,470 4,604 3,046 ) ( 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 ( 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 5,470 2 ) 0 3,046 0 5,470 4,604 3,046 12,210 5,470 Level ) 0 3,046 0 5,470 4,604 3,046 12,210 5,470 Level 2 0 3,046 0 5,470 4,604 3,046 12,210 5,470 Level 2 : 3,046 0 5,470 4,604 3,046 12,210 5,470 Level 2 : Mutual 0 5,470 4,604 3,046 12,210 5,470 Level 2 : Mutual fund 4,604 3,046 12,210 5,470 Level 2 : Mutual fund 0 250 Level 2 : Mutual fund 0 250 0 388 Total $ 2 : Mutual fund 0 250 0 388 Total $ 4,604 : Mutual fund 0 250 0 388 Total $ 4,604 $ Mutual fund 0 250 0 388 Total $ 4,604 $ 3,296 250 0 388 Total $ 4,604 $ 3,296 $ 12,210 $ 388 Total $ 4,604 $ 3,296 $ 12,210 $ 5,858 ( $ 4,604 $ 3,296 $ 12,210 $ 5,858 ( 1 ) $ 3,296 $ 12,210 $ 5,858 ( 1 ) The balance $ 12,210 $ 5,858 ( 1 ) The balance a of The balance a of December 31 , 2019 and 2020 includes a of December 31 , 2019 and 2020 includes investment that December 31 , 2019 and 2020 includes investment that were reclassified entity . As of December 31 , 2020 certain investment are As of December 31 , 2020 certain investment are subject to short-term lock-up restriction . ( 2 ) As of December 31 2 ) As of December 31 , 2020 the long-term portion As of December 31 , 2020 the long-term portion of marketable marketable equity security of $ 429 million is included within other ) : Year Ended December 31 , 2019 2020 Unrealized gain Year Ended December 31 , 2019 2020 Unrealized gain $ 2,163 Ended December 31 , 2019 2020 Unrealized gain $ 2,163 $ 2019 2020 Unrealized gain $ 2,163 $ 3,020 Unrealized loss ( Unrealized gain $ 2,163 $ 3,020 Unrealized loss ( including impairment ( including impairment ) ( 372 ) ( 1,489 ) Total ) ( 372 ) ( 1,489 ) Total unrealized gain ( for non-marketable equity security $ 1,791 $ 1,531 During the year equity security $ 1,791 $ 1,531 During the year ended December During the year ended December 31 , 2020 , included in year ended December 31 , 2020 , included in the $ , included in the $ 18.9 billion of non-marketable equity security non-marketable equity security , $ 9.7 billion were measured at fair net unrealized gain of $ 1.5 billion . Equity security accounted Equity Method As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , equity security December 31 , 2019 and 2020 , equity security accounted for carrying value of approximately $ 1.3 billion and $ 1.4 billion $ 1.3 billion and $ 1.4 billion , respectively . Our of Income . See Note 7 for further detail on other the derivative primarily within Level 2 in the fair value hierarchy liability . Cash and non-cash 70 Table of Contents Alphabet Inc. These contract have maturity of 24 month or le . Cash de-designation . As of December 31 , 2020 , the net As of December 31 , 2020 , the net accumulated loss before tax effect wa $ 124 million , which is expected into earnings within the next 12 month . Fair Value Hedges ) : As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Derivatives Designated a As of December 31 , 2020 Derivatives Designated a Hedging Instruments contract Cash flow hedge $ 13,207 $ 10,187 Fair value hedge flow hedge $ 13,207 $ 10,187 Fair value hedge $ 455 10,187 Fair value hedge $ 455 $ 1,569 Net investment hedge value hedge $ 455 $ 1,569 Net investment hedge $ 9,318 1,569 Net investment hedge $ 9,318 $ 9,965 Derivatives Not Designated investment hedge $ 9,318 $ 9,965 Derivatives Not Designated a Hedging : Foreign exchange contract $ 43,497 $ 39,861 Other contract $ exchange contract $ 43,497 $ 39,861 Other contract $ 117 $ $ 39,861 Other contract $ 117 $ 2,399 71 Table of Other contract $ 117 $ 2,399 71 Table of Contents Alphabet contract $ 117 $ 2,399 71 Table of Contents Alphabet Inc ) : As of December 31 , 2019 Balance Sheet Location As of December 31 , 2019 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 91 $ 253 $ 344 Other non-current asset $ 91 $ 253 $ 344 Other contract Other $ 91 $ 253 $ 344 Other contract Other current and Other current and non-current asset 0 1 1 Total $ 91 current and non-current asset 0 1 1 Total $ 91 $ and non-current asset 0 1 1 Total $ 91 $ 254 0 1 1 Total $ 91 $ 254 $ 345 Derivative 1 Total $ 91 $ 254 $ 345 Derivative Liabilities : $ 91 $ 254 $ 345 Derivative Liabilities : Level 2 345 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 173 $ 196 $ 369 Other and non-current $ 173 $ 196 $ 369 Other contract Accrued $ 173 $ 196 $ 369 Other contract Accrued expense and liability , current and non-current 0 13 13 Total $ 173 , current and non-current 0 13 13 Total $ 173 $ current and non-current 0 13 13 Total $ 173 $ 209 0 13 13 Total $ 173 $ 209 $ 382 As 13 Total $ 173 $ 209 $ 382 As of December $ 173 $ 209 $ 382 As of December 31 , $ 382 As of December 31 , 2020 Balance Sheet Location As of December 31 , 2020 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 33 $ 316 $ 349 Other non-current asset $ 33 $ 316 $ 349 Other contract Other $ 33 $ 316 $ 349 Other contract Other current and Other current and non-current asset 0 16 16 Total $ 33 current and non-current asset 0 16 16 Total $ 33 $ and non-current asset 0 16 16 Total $ 33 $ 332 0 16 16 Total $ 33 $ 332 $ 365 Derivative 16 Total $ 33 $ 332 $ 365 Derivative Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 365 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 395 $ 185 $ 580 Other and non-current $ 395 $ 185 $ 580 Other contract Accrued $ 395 $ 185 $ 580 Other contract Accrued expense and liability , current and non-current 0 942 942 Total $ 395 , current and non-current 0 942 942 Total $ 395 $ current and non-current 0 942 942 Total $ 395 $ 1,127 0 942 942 Total $ 395 $ 1,127 $ 1,522 72 942 Total $ 395 $ 1,127 $ 1,522 72 Table of $ 395 $ 1,127 $ 1,522 72 Table of Contents Alphabet 395 $ 1,127 $ 1,522 72 Table of Contents Alphabet Inc Tax Effect Year Ended December 31 , 2018 2019 2020 Derivatives Year Ended December 31 , 2018 2019 2020 Derivatives in Cash Ended December 31 , 2018 2019 2020 Derivatives in Cash Flow December 31 , 2018 2019 2020 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 332 $ 38 $ 102 Amount of effectiveness $ 332 $ 38 $ 102 Amount excluded from $ 332 $ 38 $ 102 Amount excluded from the assessment from the assessment of effectiveness 26 ( 14 ) ( 37 assessment of effectiveness 26 ( 14 ) ( 37 ) Derivatives 26 ( 14 ) ( 37 ) Derivatives in Net Investment in the assessment of effectiveness 136 131 ( 851 ) Total the assessment of effectiveness 136 131 ( 851 ) Total $ of effectiveness 136 131 ( 851 ) Total $ 494 $ ( 851 ) Total $ 494 $ 155 $ ( 786 ) Total $ 494 $ 155 $ ( 786 ) 73 494 $ 155 $ ( 786 ) 73 Table of Contents 155 $ ( 786 ) 73 Table of Contents Alphabet Inc in Income Year Ended December 31 , 2018 2019 2020 Revenues Year Ended December 31 , 2018 2019 2020 Revenues Other income Ended December 31 , 2018 2019 2020 Revenues Other income ( December 31 , 2018 2019 2020 Revenues Other income ( expense value hedge are recorded $ 136,819 $ 7,389 $ 161,857 $ are recorded $ 136,819 $ 7,389 $ 161,857 $ 5,394 $ $ 136,819 $ 7,389 $ 161,857 $ 5,394 $ 182,527 $ $ 7,389 $ 161,857 $ 5,394 $ 182,527 $ 6,858 Gains $ 161,857 $ 5,394 $ 182,527 $ 6,858 Gains ( Losses $ 5,394 $ 182,527 $ 6,858 Gains ( Losses ) on AOCI to income $ ( 139 ) $ 0 $ 367 $ ( 139 ) $ 0 $ 367 $ 0 $ 139 ) $ 0 $ 367 $ 0 $ 144 $ $ 0 $ 367 $ 0 $ 144 $ 0 Amount $ 367 $ 0 $ 144 $ 0 Amount excluded from $ 0 $ 144 $ 0 Amount excluded from the assessment based on an amortization approach 1 0 88 0 33 0 on an amortization approach 1 0 88 0 33 0 Gains an amortization approach 1 0 88 0 33 0 Gains ( amortization approach 1 0 88 0 33 0 Gains ( Losses approach 1 0 88 0 33 0 Gains ( Losses ) 1 0 88 0 33 0 Gains ( Losses ) on Foreign exchange contract Hedged item 0 ( 96 ) 0 ( contract Hedged item 0 ( 96 ) 0 ( 19 ) item 0 ( 96 ) 0 ( 19 ) 0 18 ( 96 ) 0 ( 19 ) 0 18 Derivatives designated ) 0 ( 19 ) 0 18 Derivatives designated a hedging 0 ( 19 ) 0 18 Derivatives designated a hedging instrument Derivatives designated a hedging instrument 0 96 0 19 0 ( designated a hedging instrument 0 96 0 19 0 ( 18 a hedging instrument 0 96 0 19 0 ( 18 ) hedging instrument 0 96 0 19 0 ( 18 ) Amount instrument 0 96 0 19 0 ( 18 ) Amount excluded 96 0 19 0 ( 18 ) Amount excluded from the from the assessment of effectiveness 0 37 0 25 0 4 the assessment of effectiveness 0 37 0 25 0 4 Gains assessment of effectiveness 0 37 0 25 0 4 Gains ( of effectiveness 0 37 0 25 0 4 Gains ( Losses effectiveness 0 37 0 25 0 4 Gains ( Losses ) 0 37 0 25 0 4 Gains ( Losses ) on from the assessment of effectiveness 0 78 0 243 0 151 the assessment of effectiveness 0 78 0 243 0 151 Gains assessment of effectiveness 0 78 0 243 0 151 Gains ( of effectiveness 0 78 0 243 0 151 Gains ( Losses effectiveness 0 78 0 243 0 151 Gains ( Losses ) 0 78 0 243 0 151 Gains ( Losses ) on Instruments : Foreign exchange contract 0 54 0 ( 413 ) : Foreign exchange contract 0 54 0 ( 413 ) 0 Foreign exchange contract 0 54 0 ( 413 ) 0 718 contract 0 54 0 ( 413 ) 0 718 Other Contracts 54 0 ( 413 ) 0 718 Other Contracts 0 0 0 ( 413 ) 0 718 Other Contracts 0 0 0 ) 0 718 Other Contracts 0 0 0 0 0 ( 0 718 Other Contracts 0 0 0 0 0 ( 906 718 Other Contracts 0 0 0 0 0 ( 906 ) Other Contracts 0 0 0 0 0 ( 906 ) Total Contracts 0 0 0 0 0 ( 906 ) Total gain 0 0 0 0 ( 906 ) Total gain ( loss ( loss ) $ ( 138 ) $ 169 $ 455 $ ( 138 ) $ 169 $ 455 $ ( 145 138 ) $ 169 $ 455 $ ( 145 ) $ 169 $ 455 $ ( 145 ) $ 177 $ ( $ ( 145 ) $ 177 $ ( 33 ) Offsetting ) $ 177 $ ( 33 ) Offsetting of Derivatives The ( in million ) : 74 Table of Contents Alphabet Inc of Assets As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 366 $ ( 21 ) $ Derivatives $ 366 $ ( 21 ) $ 345 $ ( $ ( 21 ) $ 345 $ ( 88 ) ( ) $ 345 $ ( 88 ) ( 1 ) $ $ ( 88 ) ( 1 ) $ ( 234 ) ( 1 ) $ ( 234 ) $ 0 $ 23 $ ( 234 ) $ 0 $ 23 As of December 234 ) $ 0 $ 23 As of December 31 , $ 23 As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 397 $ ( 32 ) $ Derivatives $ 397 $ ( 32 ) $ 365 $ ( $ ( 32 ) $ 365 $ ( 295 ) ( ) $ 365 $ ( 295 ) ( 1 ) $ $ ( 295 ) ( 1 ) $ ( 16 ) ( 1 ) $ ( 16 ) $ 0 $ 54 $ ( 16 ) $ 0 $ 54 ( 1 ) 16 ) $ 0 $ 54 ( 1 ) The balance $ 0 $ 54 ( 1 ) The balance a of The balance a of December 31 , 2019 and 2020 were a of December 31 , 2019 and 2020 were related to December 31 , 2019 and 2020 were related to derivative liability of Liabilities As of December 31 , 2019 Gross Amounts Not As of December 31 , 2019 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 403 $ ( 21 ) $ Derivatives $ 403 $ ( 21 ) $ 382 $ ( $ ( 21 ) $ 382 $ ( 88 ) ( ) $ 382 $ ( 88 ) ( 2 ) $ $ ( 88 ) ( 2 ) $ 0 $ 0 ) ( 2 ) $ 0 $ 0 $ 294 As 2 ) $ 0 $ 0 $ 294 As of December $ 0 $ 0 $ 294 As of December 31 , $ 294 As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 1,554 $ ( 32 ) $ Derivatives $ 1,554 $ ( 32 ) $ 1,522 $ ( $ ( 32 ) $ 1,522 $ ( 295 ) ( ) $ 1,522 $ ( 295 ) ( 2 ) $ $ ( 295 ) ( 2 ) $ ( 1 ) ( 2 ) $ ( 1 ) $ ( 943 ) ( 1 ) $ ( 943 ) $ 283 ( 2 $ ( 943 ) $ 283 ( 2 ) The balance 943 ) $ 283 ( 2 ) The balance a of The balance a of December 31 , 2019 and 2020 were a of December 31 , 2019 and 2020 were related to December 31 , 2019 and 2020 were related to derivative asset master netting agreement . Note 4 . Leases We have entered with lease period expiring between 2021 and 2063 . Components of period expiring between 2021 and 2063 . Components of operating lease ) : Year Ended December 31 , 2019 2020 Operating lease Year Ended December 31 , 2019 2020 Operating lease cost $ Ended December 31 , 2019 2020 Operating lease cost $ 1,820 2020 Operating lease cost $ 1,820 $ 2,267 Variable lease cost lease cost $ 1,820 $ 2,267 Variable lease cost 541 619 $ 2,267 Variable lease cost 541 619 Total operating lease cost 2,267 Variable lease cost 541 619 Total operating lease cost $ Total operating lease cost $ 2,361 $ 2,886 75 Table of lease cost $ 2,361 $ 2,886 75 Table of Contents Alphabet cost $ 2,361 $ 2,886 75 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 Cash payment Year Ended December 31 , 2019 2020 Cash payment for operating Ended December 31 , 2019 2020 Cash payment for operating lease payment for operating lease $ 1,661 $ 2,004 New operating lease operating lease $ 1,661 $ 2,004 New operating lease asset obtained for operating lease liability $ 4,391 $ 2,765 As of December lease liability $ 4,391 $ 2,765 As of December 31 , $ 2,765 As of December 31 , 2020 , our operating As of December 31 , 2020 , our operating lease had average remaining lease term of 9 year and a weighted average weighted average discount rate of 2.6 % . Future lease payment operating lease a of December 31 , 2020 were a follows a of December 31 , 2020 were a follows ( in ( in million ) : 2021 $ 2,198 2022 2,170 2023 million ) : 2021 $ 2,198 2022 2,170 2023 1,995 2024 ) : 2021 $ 2,198 2022 2,170 2023 1,995 2024 1,738 : 2021 $ 2,198 2022 2,170 2023 1,995 2024 1,738 2025 2021 $ 2,198 2022 2,170 2023 1,995 2024 1,738 2025 1,389 $ 2,198 2022 2,170 2023 1,995 2024 1,738 2025 1,389 Thereafter 2,198 2022 2,170 2023 1,995 2024 1,738 2025 1,389 Thereafter 5,601 2022 2,170 2023 1,995 2024 1,738 2025 1,389 Thereafter 5,601 Total 2,170 2023 1,995 2024 1,738 2025 1,389 Thereafter 5,601 Total future 2023 1,995 2024 1,738 2025 1,389 Thereafter 5,601 Total future lease 2024 1,738 2025 1,389 Thereafter 5,601 Total future lease payment 15,091 5,601 Total future lease payment 15,091 Less imputed interest ( 2,251 15,091 Less imputed interest ( 2,251 ) Total lease liability balance Total lease liability balance $ 12,840 As of December 31 , $ 12,840 As of December 31 , 2020 , we have As of December 31 , 2020 , we have entered into future lease payment of $ 8.0 billion , excluding purchase option These lease will commence between 2021 and 2026 with non-cancelable lease will commence between 2021 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . Note lease term of 1 to 25 year . Note 5 . to 25 year . Note 5 . Variable Interest Entities Consolidated u . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , asset that December 31 , 2019 and 2020 , asset that can only of these VIEs were $ 3.1 billion and $ 5.7 billion $ 3.1 billion and $ 5.7 billion , respectively , and to the VIEs were $ 1.2 billion and $ 2.3 billion $ 1.2 billion and $ 2.3 billion , respectively . Total consolidated subsidiary increased from $ 1.2 billion to $ 3.9 billion $ 1.2 billion to $ 3.9 billion f rom December 31 3.9 billion f rom December 31 , 2019 to December 31 f rom December 31 , 2019 to December 31 , 2020 31 , 2019 to December 31 , 2020 , primarily due 2019 to December 31 , 2020 , primarily due to external In the first half of 2020 , Waymo completed an externally round raising in total $ 3.2 billion , which includes investment or equity method investment . 76 Table of Contents Alphabet Inc. not material a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Note 6 December 31 , 2019 and 2020 . Note 6 . Debt 2019 and 2020 . Note 6 . Debt Short-Term Debt We program of up to $ 5.0 billion through the issuance of paper outstanding a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Our short-term December 31 , 2019 and 2020 . Our short-term debt balance . Long-Term Debt In August 2020 , Alphabet issued $ 10.0 2020 , Alphabet issued $ 10.0 billion of fixed-rate senior unsecured tranche ( collectively , “ 2020 Notes ” ) : $ Notes ” ) : $ 1.0 billion due in 2025 , $ 1.0 billion due in 2025 , $ 1.0 billion due due in 2025 , $ 1.0 billion due in 2027 , $ 1.0 billion due in 2027 , $ 2.25 billion due due in 2027 , $ 2.25 billion due in 2030 , $ 2.25 billion due in 2030 , $ 1.25 billion due due in 2030 , $ 1.25 billion due in 2040 , $ 1.25 billion due in 2040 , $ 2.5 billion due due in 2040 , $ 2.5 billion due in 2050 and $ 2.5 billion due in 2050 and $ 2.0 billion due due in 2050 and $ 2.0 billion due in 2060 . $ 2.0 billion due in 2060 . The 2020 Notes had due in 2060 . The 2020 Notes had a weighted average a weighted average duration of 21.5 year and weighted average coupon weighted average coupon rate of 1.57 % . Of the total the total issuance , $ 5.75 billion wa designated a Sustainability Interest Rate As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Debt 2011-2016 Notes As of December 31 , 2020 Debt 2011-2016 Notes Issuances 2021 December 31 , 2020 Debt 2011-2016 Notes Issuances 2021 - 2026 2020 Debt 2011-2016 Notes Issuances 2021 - 2026 2.00 % - 2011-2016 Notes Issuances 2021 - 2026 2.00 % - 3.63 % Notes Issuances 2021 - 2026 2.00 % - 3.63 % 2.23 - 2026 2.00 % - 3.63 % 2.23 % - 3.73 2.00 % - 3.63 % 2.23 % - 3.73 % $ 3.63 % 2.23 % - 3.73 % $ 4,000 $ 4,000 % - 3.73 % $ 4,000 $ 4,000 2020 Notes Issuance 3.73 % $ 4,000 $ 4,000 2020 Notes Issuance 2025 - % $ 4,000 $ 4,000 2020 Notes Issuance 2025 - 2060 $ 4,000 2020 Notes Issuance 2025 - 2060 0.45 % - 2020 Notes Issuance 2025 - 2060 0.45 % - 2.25 % Notes Issuance 2025 - 2060 0.45 % - 2.25 % 0.57 - 2060 0.45 % - 2.25 % 0.57 % - 2.33 0.45 % - 2.25 % 0.57 % - 2.33 % 0 2.25 % 0.57 % - 2.33 % 0 10,000 Future finance 0.57 % - 2.33 % 0 10,000 Future finance lease payment % - 2.33 % 0 10,000 Future finance lease payment , lease payment , net ( 1 ) 711 1,201 Total debt , net ( 1 ) 711 1,201 Total debt 4,711 15,201 net ( 1 ) 711 1,201 Total debt 4,711 15,201 Unamortized ) 711 1,201 Total debt 4,711 15,201 Unamortized discount and debt 711 1,201 Total debt 4,711 15,201 Unamortized discount and debt issuance and debt issuance cost ( 42 ) ( 169 ) Less cost ( 42 ) ( 169 ) Less : Current portion Current portion of Notes ( 2 ) 0 ( 999 ) of Notes ( 2 ) 0 ( 999 ) Less : ( 2 ) 0 ( 999 ) Less : Current portion lease payment , net ( 1 ) ( 2 ) ( net ( 1 ) ( 2 ) ( 115 ) ( ) ( 2 ) ( 115 ) ( 101 ) Total ) ( 115 ) ( 101 ) Total long-term debt $ ) Total long-term debt $ 4,554 $ 13,932 ( 1 ) long-term debt $ 4,554 $ 13,932 ( 1 ) Net of $ 4,554 $ 13,932 ( 1 ) Net of imputed interest of imputed interest . ( 2 ) Total current portion of current liability . See Note 7 . The note in the portion , wa approximately $ 4.1 billion and $ 14.0 billion $ 4.1 billion and $ 14.0 billion a of December 31 14.0 billion a of December 31 , 2019 and December 31 a of December 31 , 2019 and December 31 , 2020 31 , 2019 and December 31 , 2020 , respectively . 2019 and December 31 , 2020 , respectively . The fair is categorized accordingly a Level 2 in the fair value hierarchy the fair value hierarchy . 77 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2020 , the aggregate As of December 31 , 2020 , the aggregate future principal ( in million ) : 2021 $ 1,104 2022 86 2023 million ) : 2021 $ 1,104 2022 86 2023 86 2024 ) : 2021 $ 1,104 2022 86 2023 86 2024 1,087 : 2021 $ 1,104 2022 86 2023 86 2024 1,087 2025 2021 $ 1,104 2022 86 2023 86 2024 1,087 2025 1,088 $ 1,104 2022 86 2023 86 2024 1,087 2025 1,088 Thereafter 1,104 2022 86 2023 86 2024 1,087 2025 1,088 Thereafter 11,868 2022 86 2023 86 2024 1,087 2025 1,088 Thereafter 11,868 Total 86 2023 86 2024 1,087 2025 1,088 Thereafter 11,868 Total $ 2023 86 2024 1,087 2025 1,088 Thereafter 11,868 Total $ 15,319 2024 1,087 2025 1,088 Thereafter 11,868 Total $ 15,319 Credit Facility 1,088 Thereafter 11,868 Total $ 15,319 Credit Facility As of December Credit Facility As of December 31 , 2020 , we have As of December 31 , 2020 , we have $ 4.0 2020 , we have $ 4.0 billion of revolving credit facility facility which expire in July 2023 . The interest rate for credit facility a of December 31 , 2019 and 2020 . a of December 31 , 2019 and 2020 . Note 7 December 31 , 2019 and 2020 . Note 7 . Supplemental 2019 and 2020 . Note 7 . Supplemental Financial Statement Information ) : As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Land and building As of December 31 , 2020 Land and building $ 39,865 2020 Land and building $ 39,865 $ 49,732 Information technology asset and building $ 39,865 $ 49,732 Information technology asset 36,840 45,906 $ 49,732 Information technology asset 36,840 45,906 Construction in progress 21,036 49,732 Information technology asset 36,840 45,906 Construction in progress 21,036 23,111 36,840 45,906 Construction in progress 21,036 23,111 Leasehold improvement 6,310 7,516 45,906 Construction in progress 21,036 23,111 Leasehold improvement 6,310 7,516 Furniture progress 21,036 23,111 Leasehold improvement 6,310 7,516 Furniture and fixture 156 21,036 23,111 Leasehold improvement 6,310 7,516 Furniture and fixture 156 197 6,310 7,516 Furniture and fixture 156 197 Property and equipment , 7,516 Furniture and fixture 156 197 Property and equipment , gross Property and equipment , gross 104,207 126,462 Less : accumulated depreciation and equipment , gross 104,207 126,462 Less : accumulated depreciation ( Less : accumulated depreciation ( 30,561 ) ( 41,713 ) Property depreciation ( 30,561 ) ( 41,713 ) Property and equipment , and equipment , net $ 73,646 $ 84,749 Accrued expense and , net $ 73,646 $ 84,749 Accrued expense and other current ) : As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 European Commission fine As of December 31 , 2020 European Commission fine ( 1 2020 European Commission fine ( 1 ) $ 9,405 $ 10,409 fine ( 1 ) $ 9,405 $ 10,409 Accrued customer liability 1 ) $ 9,405 $ 10,409 Accrued customer liability 2,245 3,118 $ 10,409 Accrued customer liability 2,245 3,118 Accrued purchase of property 10,409 Accrued customer liability 2,245 3,118 Accrued purchase of property and purchase of property and equipment 2,411 2,197 Current operating lease liability of property and equipment 2,411 2,197 Current operating lease liability 1,199 2,197 Current operating lease liability 1,199 1,694 Other accrued expense and Current operating lease liability 1,199 1,694 Other accrued expense and current accrued expense and current liability 7,807 11,213 Accrued expense and other expense and current liability 7,807 11,213 Accrued expense and other current and other current liability $ 23,067 $ 28,631 ( 1 ) current liability $ 23,067 $ 28,631 ( 1 ) Includes the $ 23,067 $ 28,631 ( 1 ) Includes the effect of and interest . See Note 10 for further detail . 78 10 for further detail . 78 Table of Contents Alphabet Inc Total Balance a of December 31 , 2017 $ ( 1,103 a of December 31 , 2017 $ ( 1,103 ) $ 31 , 2017 $ ( 1,103 ) $ 233 $ ( $ ( 1,103 ) $ 233 $ ( 122 ) $ ) $ 233 $ ( 122 ) $ ( 992 ) ( 122 ) $ ( 992 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 98 ) 0 ( of accounting change 0 ( 98 ) 0 ( 98 ) change 0 ( 98 ) 0 ( 98 ) Other comprehensive ( 98 ) 0 ( 98 ) Other comprehensive income ( loss ) before reclassification ( 781 ) 88 264 ( 429 before reclassification ( 781 ) 88 264 ( 429 ) Amounts reclassification ( 781 ) 88 264 ( 429 ) Amounts excluded 781 ) 88 264 ( 429 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified effectiveness recorded in AOCI 0 0 26 26 Amounts reclassified from recorded in AOCI 0 0 26 26 Amounts reclassified from AOCI in AOCI 0 0 26 26 Amounts reclassified from AOCI 0 26 Amounts reclassified from AOCI 0 ( 911 ) 98 ( reclassified from AOCI 0 ( 911 ) 98 ( 813 ) AOCI 0 ( 911 ) 98 ( 813 ) Other comprehensive ( 911 ) 98 ( 813 ) Other comprehensive income ( income ( loss ) ( 781 ) ( 823 ) 388 ) ( 781 ) ( 823 ) 388 ( 1,216 ) 781 ) ( 823 ) 388 ( 1,216 ) Balance a ( 823 ) 388 ( 1,216 ) Balance a of December ) Balance a of December 31 , 2018 ( 1,884 ) a of December 31 , 2018 ( 1,884 ) ( 688 December 31 , 2018 ( 1,884 ) ( 688 ) 266 2018 ( 1,884 ) ( 688 ) 266 ( 2,306 ) 1,884 ) ( 688 ) 266 ( 2,306 ) Cumulative effect ( 688 ) 266 ( 2,306 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 30 accounting change 0 0 ( 30 ) ( 30 ) Other 0 ( 30 ) ( 30 ) Other comprehensive income ( loss ) before reclassification ( 119 ) 1,611 36 1,528 Amounts before reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from the ( 119 ) 1,611 36 1,528 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 14 ) ( effectiveness recorded in AOCI 0 0 ( 14 ) ( 14 in AOCI 0 0 ( 14 ) ( 14 ) Amounts 0 ( 14 ) ( 14 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 111 ) ( 299 reclassified from AOCI 0 ( 111 ) ( 299 ) ( 0 ( 111 ) ( 299 ) ( 410 ) Other ) ( 299 ) ( 410 ) Other comprehensive income ( income ( loss ) ( 119 ) 1,500 ( 277 ) loss ) ( 119 ) 1,500 ( 277 ) 1,104 Balance ( 119 ) 1,500 ( 277 ) 1,104 Balance a of ) 1,500 ( 277 ) 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 ( 2,003 ) a of December 31 , 2019 ( 2,003 ) 812 ( December 31 , 2019 ( 2,003 ) 812 ( 41 ) , 2019 ( 2,003 ) 812 ( 41 ) ( 1,232 ( 2,003 ) 812 ( 41 ) ( 1,232 ) Other 812 ( 41 ) ( 1,232 ) Other comprehensive income ( ( loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from the before reclassification 1,139 1,313 79 2,531 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 37 ) ( effectiveness recorded in AOCI 0 0 ( 37 ) ( 37 in AOCI 0 0 ( 37 ) ( 37 ) Amounts 0 ( 37 ) ( 37 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 513 ) ( 116 reclassified from AOCI 0 ( 513 ) ( 116 ) ( 0 ( 513 ) ( 116 ) ( 629 ) Other ) ( 116 ) ( 629 ) Other comprehensive income ( comprehensive income ( loss ) 1,139 800 ( 74 ) 1,865 income ( loss ) 1,139 800 ( 74 ) 1,865 Balance loss ) 1,139 800 ( 74 ) 1,865 Balance a of 1,139 800 ( 74 ) 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 $ ( 864 a of December 31 , 2020 $ ( 864 ) $ 31 , 2020 $ ( 864 ) $ 1,612 $ ( $ ( 864 ) $ 1,612 $ ( 115 ) $ ) $ 1,612 $ ( 115 ) $ 633 The effect $ ( 115 ) $ 633 The effect on net income of Income Year Ended December 31 , AOCI Components Location 2018 31 , AOCI Components Location 2018 2019 2020 Unrealized gain ( , AOCI Components Location 2018 2019 2020 Unrealized gain ( loss AOCI Components Location 2018 2019 2020 Unrealized gain ( loss ) expense ) , net $ 1,190 $ 149 $ 650 Benefit , net $ 1,190 $ 149 $ 650 Benefit ( provision $ 1,190 $ 149 $ 650 Benefit ( provision ) for ) for income tax ( 279 ) ( 38 ) ( tax ( 279 ) ( 38 ) ( 137 ) Net ) ( 38 ) ( 137 ) Net of tax 911 137 ) Net of tax 911 111 513 Unrealized gain ( ) Net of tax 911 111 513 Unrealized gain ( loss Net of tax 911 111 513 Unrealized gain ( loss ) Foreign exchange contract Revenue ( 139 ) 367 144 Interest rate contract Revenue ( 139 ) 367 144 Interest rate contract Other Revenue ( 139 ) 367 144 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for provision ) for income tax 35 ( 74 ) ( 34 for income tax 35 ( 74 ) ( 34 ) Net 35 ( 74 ) ( 34 ) Net of tax ( ) Net of tax ( 98 ) 299 116 Total amount of tax ( 98 ) 299 116 Total amount reclassified , tax ( 98 ) 299 116 Total amount reclassified , net , net of tax $ 813 $ 410 $ 629 79 of tax $ 813 $ 410 $ 629 79 Table of $ 813 $ 410 $ 629 79 Table of Contents Alphabet 813 $ 410 $ 629 79 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2018 2019 2020 Interest Year Ended December 31 , 2018 2019 2020 Interest income $ Ended December 31 , 2018 2019 2020 Interest income $ 1,878 December 31 , 2018 2019 2020 Interest income $ 1,878 $ 2019 2020 Interest income $ 1,878 $ 2,427 $ 1,865 Interest Interest income $ 1,878 $ 2,427 $ 1,865 Interest expense ( $ 1,878 $ 2,427 $ 1,865 Interest expense ( 1 ) $ 1,865 Interest expense ( 1 ) ( 114 ) ( expense ( 1 ) ( 114 ) ( 100 ) ( ) ( 114 ) ( 100 ) ( 135 ) Foreign ) ( 100 ) ( 135 ) Foreign currency exchange gain loss ) , net ( 2 ) ( 80 ) 103 net ( 2 ) ( 80 ) 103 ( 344 ) 2 ) ( 80 ) 103 ( 344 ) Gain ( ( 80 ) 103 ( 344 ) Gain ( loss ) debt security , net ( 3 ) 1,190 149 725 Gain , net ( 3 ) 1,190 149 725 Gain ( loss net ( 3 ) 1,190 149 725 Gain ( loss ) ( 3 ) 1,190 149 725 Gain ( loss ) on on equity security , net 5,460 2,649 5,592 Performance fee ( equity security , net 5,460 2,649 5,592 Performance fee ( 1,203 security , net 5,460 2,649 5,592 Performance fee ( 1,203 ) 2,649 5,592 Performance fee ( 1,203 ) ( 326 ) ( fee ( 1,203 ) ( 326 ) ( 609 ) Income ) ( 326 ) ( 609 ) Income ( loss ) method investment , net ( 120 ) 390 401 Other ( , net ( 120 ) 390 401 Other ( 4 ) net ( 120 ) 390 401 Other ( 4 ) 378 ) 390 401 Other ( 4 ) 378 102 ( 637 401 Other ( 4 ) 378 102 ( 637 ) Other Other ( 4 ) 378 102 ( 637 ) Other income 4 ) 378 102 ( 637 ) Other income ( expense expense ) , net $ 7,389 $ 5,394 $ 6,858 ( , net $ 7,389 $ 5,394 $ 6,858 ( 1 ) $ 7,389 $ 5,394 $ 6,858 ( 1 ) Interest expense $ 5,394 $ 6,858 ( 1 ) Interest expense is net of interest capitalized of $ 92 million , $ 167 million $ 92 million , $ 167 million , and $ 218 167 million , and $ 218 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . ( 2 2020 , respectively . ( 2 ) Our foreign currency exchange loss and gain . ( 3 ) During the year ended During the year ended December 31 , 2018 , the term year ended December 31 , 2018 , the term of a resulting in an unrealized $ 1.3 billion gain . ( 4 1.3 billion gain . ( 4 ) During the year ended During the year ended December 31 , 2020 , we entered year ended December 31 , 2020 , we entered into derivative which resulted in a $ 902 million loss . The offsetting security , net . Note 8 . Acquisitions 2020 Acquisitions During . Note 8 . Acquisitions 2020 Acquisitions During the year ended During the year ended December 31 , 2020 , we completed year ended December 31 , 2020 , we completed acquisition and total consideration of approximately $ 744 million , net of cash . In aggregate , $ 248 million wa attributed to intangible to intangible asset , $ 446 million to goodwill and $ million to goodwill and $ 50 million to net asset acquired during the year ended December 31 , 2020 , patent and year ended December 31 , 2020 , patent and developed technology a weighted-average useful life of 4.1 year , customer relationship have a weighted-average useful life of 4.7 year , and trade name a weighted-average useful life of 4.6 year . Acquisition of Fitbit Acquisition of Fitbit In January 2021 , we closed the acquisition leading wearable brand for $ 2.1 billion . 80 Table of for $ 2.1 billion . 80 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 9 . Goodwill and Other Intangible for the year ended December 31 , 2019 and 2020 were year ended December 31 , 2019 and 2020 were a follows December 31 , 2019 and 2020 were a follows ( in Total Balance a of December 31 , 2018 $ 17,521 $ a of December 31 , 2018 $ 17,521 $ 0 $ December 31 , 2018 $ 17,521 $ 0 $ 0 $ , 2018 $ 17,521 $ 0 $ 0 $ 367 $ $ 17,521 $ 0 $ 0 $ 367 $ 17,888 Acquisitions $ 0 $ 0 $ 367 $ 17,888 Acquisitions 2,353 0 $ 0 $ 367 $ 17,888 Acquisitions 2,353 0 0 475 $ 367 $ 17,888 Acquisitions 2,353 0 0 475 2,828 Transfers 367 $ 17,888 Acquisitions 2,353 0 0 475 2,828 Transfers 9 $ 17,888 Acquisitions 2,353 0 0 475 2,828 Transfers 9 0 17,888 Acquisitions 2,353 0 0 475 2,828 Transfers 9 0 0 Acquisitions 2,353 0 0 475 2,828 Transfers 9 0 0 ( 0 0 475 2,828 Transfers 9 0 0 ( 9 ) 0 475 2,828 Transfers 9 0 0 ( 9 ) 0 475 2,828 Transfers 9 0 0 ( 9 ) 0 Foreign Transfers 9 0 0 ( 9 ) 0 Foreign currency translation 0 0 ( 9 ) 0 Foreign currency translation and other currency translation and other adjustment 38 0 0 ( 130 ) translation and other adjustment 38 0 0 ( 130 ) ( and other adjustment 38 0 0 ( 130 ) ( 92 adjustment 38 0 0 ( 130 ) ( 92 ) Balance 0 ( 130 ) ( 92 ) Balance a of December ) Balance a of December 31 , 2019 19,921 0 0 a of December 31 , 2019 19,921 0 0 703 20,624 of December 31 , 2019 19,921 0 0 703 20,624 Acquisitions December 31 , 2019 19,921 0 0 703 20,624 Acquisitions 204 31 , 2019 19,921 0 0 703 20,624 Acquisitions 204 0 , 2019 19,921 0 0 703 20,624 Acquisitions 204 0 0 2019 19,921 0 0 703 20,624 Acquisitions 204 0 0 0 0 0 703 20,624 Acquisitions 204 0 0 0 204 Foreign 0 703 20,624 Acquisitions 204 0 0 0 204 Foreign currency 703 20,624 Acquisitions 204 0 0 0 204 Foreign currency translation 20,624 Acquisitions 204 0 0 0 204 Foreign currency translation and Acquisitions 204 0 0 0 204 Foreign currency translation and other currency translation and other adjustment 46 0 0 ( 4 ) translation and other adjustment 46 0 0 ( 4 ) 42 and other adjustment 46 0 0 ( 4 ) 42 Allocation adjustment 46 0 0 ( 4 ) 42 Allocation in the 0 0 ( 4 ) 42 Allocation in the fourth quarter in the fourth quarter of 2020 ( 1 ) ( 20,171 fourth quarter of 2020 ( 1 ) ( 20,171 ) 18,408 2020 ( 1 ) ( 20,171 ) 18,408 1,763 0 0 1 ) ( 20,171 ) 18,408 1,763 0 0 Acquisitions 0 ) ( 20,171 ) 18,408 1,763 0 0 Acquisitions 0 53 ( 20,171 ) 18,408 1,763 0 0 Acquisitions 0 53 189 20,171 ) 18,408 1,763 0 0 Acquisitions 0 53 189 0 18,408 1,763 0 0 Acquisitions 0 53 189 0 242 Foreign 1,763 0 0 Acquisitions 0 53 189 0 242 Foreign currency 0 0 Acquisitions 0 53 189 0 242 Foreign currency translation 0 Acquisitions 0 53 189 0 242 Foreign currency translation and Acquisitions 0 53 189 0 242 Foreign currency translation and other currency translation and other adjustment 0 56 5 2 63 Balance translation and other adjustment 0 56 5 2 63 Balance a and other adjustment 0 56 5 2 63 Balance a of other adjustment 0 56 5 2 63 Balance a of December adjustment 0 56 5 2 63 Balance a of December 31 63 Balance a of December 31 , 2020 $ 0 $ a of December 31 , 2020 $ 0 $ 18,517 $ December 31 , 2020 $ 0 $ 18,517 $ 1,957 $ , 2020 $ 0 $ 18,517 $ 1,957 $ 701 $ $ 0 $ 18,517 $ 1,957 $ 701 $ 21,175 ( $ 18,517 $ 1,957 $ 701 $ 21,175 ( 1 ) $ 1,957 $ 701 $ 21,175 ( 1 ) Represents reallocation $ 701 $ 21,175 ( 1 ) Represents reallocation of goodwill in the fourth quarter of 2020 . See Note 15 for of 2020 . See Note 15 for further detail Other Intangible ) : As of December 31 , 2019 Gross Carrying Amount As of December 31 , 2019 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,972 $ 3,570 $ 1,402 Customer developed technology $ 4,972 $ 3,570 $ 1,402 Customer relationship 254 $ 4,972 $ 3,570 $ 1,402 Customer relationship 254 30 224 3,570 $ 1,402 Customer relationship 254 30 224 Trade name and $ 1,402 Customer relationship 254 30 224 Trade name and other 1,402 Customer relationship 254 30 224 Trade name and other 703 224 Trade name and other 703 350 353 Total $ 5,929 Trade name and other 703 350 353 Total $ 5,929 $ name and other 703 350 353 Total $ 5,929 $ 3,950 703 350 353 Total $ 5,929 $ 3,950 $ 1,979 As 353 Total $ 5,929 $ 3,950 $ 1,979 As of December $ 5,929 $ 3,950 $ 1,979 As of December 31 , $ 1,979 As of December 31 , 2020 Gross Carrying Amount As of December 31 , 2020 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,639 $ 3,649 $ 990 Customer developed technology $ 4,639 $ 3,649 $ 990 Customer relationship 266 $ 4,639 $ 3,649 $ 990 Customer relationship 266 49 217 3,649 $ 990 Customer relationship 266 49 217 Trade name and $ 990 Customer relationship 266 49 217 Trade name and other 990 Customer relationship 266 49 217 Trade name and other 699 217 Trade name and other 699 461 238 Total $ 5,604 Trade name and other 699 461 238 Total $ 5,604 $ name and other 699 461 238 Total $ 5,604 $ 4,159 699 461 238 Total $ 5,604 $ 4,159 $ 1,445 Patents 238 Total $ 5,604 $ 4,159 $ 1,445 Patents and developed $ 5,604 $ 4,159 $ 1,445 Patents and developed technology , weighted-average remaining useful life of 1.6 year , 4.9 year , life of 1.6 year , 4.9 year , and 2.1 year , 4.9 year , and 2.1 year , respectively . Amortization purchased intangible asset wa $ 865 million , $ 795 million $ 865 million , $ 795 million , and $ 774 795 million , and $ 774 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . 81 Table and 2020 , respectively . 81 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2020 , expected amortization As of December 31 , 2020 , expected amortization expense relating ( in million ) : 2021 $ 719 2022 375 2023 million ) : 2021 $ 719 2022 375 2023 104 2024 ) : 2021 $ 719 2022 375 2023 104 2024 78 : 2021 $ 719 2022 375 2023 104 2024 78 2025 2021 $ 719 2022 375 2023 104 2024 78 2025 53 $ 719 2022 375 2023 104 2024 78 2025 53 Thereafter 719 2022 375 2023 104 2024 78 2025 53 Thereafter 116 2022 375 2023 104 2024 78 2025 53 Thereafter 116 $ 375 2023 104 2024 78 2025 53 Thereafter 116 $ 1,445 2023 104 2024 78 2025 53 Thereafter 116 $ 1,445 Note 2024 78 2025 53 Thereafter 116 $ 1,445 Note 10 . 2025 53 Thereafter 116 $ 1,445 Note 10 . Commitments and Thereafter 116 $ 1,445 Note 10 . Commitments and Contingencies Purchase Purchase Obligations As of December 31 , 2020 , we had As of December 31 , 2020 , we had $ 10.7 2020 , we had $ 10.7 billion of other non-cancelable contractual period . As of December 31 , 2020 , we did As of December 31 , 2020 , we did not have Matters Antitrust Investigations On November 30 , 2010 , the EC Investigations On November 30 , 2010 , the EC 's Directorate against u . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it EC decision imposed a € 2.4 billion ( $ 2.7 billion € 2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC EC decision and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change recognized a charge of $ 2.7 billion for the fine in in the second quarter of 2017 . On July 18 , of 2017 . On July 18 , 2018 , the EC . On July 18 , 2018 , the EC announced it EC decision imposed a € 4.3 billion ( $ 5.1 billion € 4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine and a of June 30 , 2018 ) fine and directed the at issue . On October 9 , 2018 , we appealed . On October 9 , 2018 , we appealed the EC EC decision . On October 29 , 2018 , we implemented . On October 29 , 2018 , we implemented change to recognized a charge of $ 5.1 billion for the fine in in the second quarter of 2018 . On March 20 , of 2018 . On March 20 , 2019 , the EC . On March 20 , 2019 , the EC announced it imposed a fine of € 1.5 billion ( $ 1.7 billion € 1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) and directed a of March 20 , 2019 ) and directed action related the decision . On June 4 , 2019 , we appealed . On June 4 , 2019 , we appealed the EC recognized a charge of $ 1.7 billion for the fine in in the first quarter of 2019 . 82 Table of Contents first quarter of 2019 . 82 Table of Contents Alphabet Inc For example , in August 2019 , we began receiving civil filed a lawsuit on October 20 , 2020 alleging that Google lawsuit on October 20 , 2020 alleging that Google violated U.S. . Separately , on December 16 , 2020 , a number , on December 16 , 2020 , a number of state affect our business . In 2010 , Oracle America , Inc. favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided Oracle appealed and on March 27 , 2018 , the appeal and on March 27 , 2018 , the appeal court reversed on damage . On May 29 , 2018 , we filed . On May 29 , 2018 , we filed a petition Circuit , and on August 28 , 2018 , the Federal and on August 28 , 2018 , the Federal Circuit denied the petition . On January 24 , 2019 , we filed . On January 24 , 2019 , we filed a petition this case . On April 29 , 2019 , the Supreme . On April 29 , 2019 , the Supreme Court requested our petition . On September 27 , 2019 , the Solicitor . On September 27 , 2019 , the Solicitor General recommended provided our response on October 16 , 2019 . On November response on October 16 , 2019 . On November 15 , , 2019 . On November 15 , 2019 , the Supreme . On November 15 , 2019 , the Supreme Court granted in our case on October 7 , 2020 . If the case on October 7 , 2020 . If the Supreme Court can be estimated , we 83 Table of Contents Alphabet Inc. tax contingency , see Note 14 . Note 11 . Stockholders see Note 14 . Note 11 . Stockholders ' Equity Convertible Board of Directors ha authorized 100 million share of convertible preferred convertible preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , no share December 31 , 2019 and 2020 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In July 2020 , the Board of Directors up to an additional $ 28.0 billion of it Class C transaction , including through Rule 10b5-1 plan . The repurchase program During the year ended December 31 , 2019 and 2020 , year ended December 31 , 2019 and 2020 , we repurchased December 31 , 2019 and 2020 , we repurchased and subsequently we repurchased and subsequently retired 15.3 million and 21.5 million share subsequently retired 15.3 million and 21.5 million share of Alphabet Class an aggregate amount of $ 18.4 billion and $ 31.1 billion $ 18.4 billion and $ 31.1 billion , respectively . Note billion , respectively . Note 12 . Net Income Per Share there are a number of 84 Table of Contents Alphabet Inc. In the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , the net , 2018 , 2019 and 2020 , the net income per ) : Year Ended December 31 , 2018 Class A Class Year Ended December 31 , 2018 Class A Class B Class Allocation of undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator undistributed earnings $ 13,200 $ 2,072 $ 15,464 Denominator Number of $ 13,200 $ 2,072 $ 15,464 Denominator Number of share used used in per share computation 298,548 46,864 349,728 Basic net income in per share computation 298,548 46,864 349,728 Basic net income per per share computation 298,548 46,864 349,728 Basic net income per share net income per share $ 44.22 $ 44.22 $ 44.22 Diluted per share $ 44.22 $ 44.22 $ 44.22 Diluted net income $ 44.22 $ 44.22 $ 44.22 Diluted net income per share earnings for basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation basic computation $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed $ 13,200 $ 2,072 $ 15,464 Reallocation of undistributed earnings a B to Class A share 2,072 0 0 Reallocation of undistributed to Class A share 2,072 0 0 Reallocation of undistributed earnings Class A share 2,072 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 146 ) ( 24 ) 146 earnings ( 146 ) ( 24 ) 146 Allocation of undistributed 146 ) ( 24 ) 146 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator undistributed earnings $ 15,126 $ 2,048 $ 15,610 Denominator Number of $ 15,126 $ 2,048 $ 15,610 Denominator Number of share used share used in basic computation 298,548 46,864 349,728 Weighted-average effect of used in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive in basic computation 298,548 46,864 349,728 Weighted-average effect of dilutive security Class A common share outstanding 46,864 0 0 Restricted stock unit A common share outstanding 46,864 0 0 Restricted stock unit and common share outstanding 46,864 0 0 Restricted stock unit and other and other contingently issuable share 689 0 7,456 Number of share other contingently issuable share 689 0 7,456 Number of share used contingently issuable share 689 0 7,456 Number of share used in used in per share computation 346,101 46,864 357,184 Diluted net income in per share computation 346,101 46,864 357,184 Diluted net income per per share computation 346,101 46,864 357,184 Diluted net income per share net income per share $ 43.70 $ 43.70 $ 43.70 85 per share $ 43.70 $ 43.70 $ 43.70 85 Table of $ 43.70 $ 43.70 $ 43.70 85 Table of Contents Alphabet 43.70 $ 43.70 $ 43.70 85 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator Number of $ 14,846 $ 2,307 $ 17,190 Denominator Number of share used used in per share computation 299,402 46,527 346,667 Basic net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed earnings a B to Class A share 2,307 0 0 Reallocation of undistributed to Class A share 2,307 0 0 Reallocation of undistributed earnings Class A share 2,307 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 126 ) ( 20 ) 126 earnings ( 126 ) ( 20 ) 126 Allocation of undistributed 126 ) ( 20 ) 126 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator Number of $ 17,027 $ 2,287 $ 17,316 Denominator Number of share used share used in basic computation 299,402 46,527 346,667 Weighted-average effect of used in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive security Class A common share outstanding 46,527 0 0 Restricted stock unit A common share outstanding 46,527 0 0 Restricted stock unit and common share outstanding 46,527 0 0 Restricted stock unit and other and other contingently issuable share 413 0 5,547 Number of share other contingently issuable share 413 0 5,547 Number of share used contingently issuable share 413 0 5,547 Number of share used in used in per share computation 346,342 46,527 352,214 Diluted net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 Year per share $ 49.16 $ 49.16 $ 49.16 Year Ended December $ 49.16 $ 49.16 $ 49.16 Year Ended December 31 , $ 49.16 Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator Number of $ 17,733 $ 2,732 $ 19,804 Denominator Number of share used used in per share computation 299,815 46,182 334,819 Basic net income in per share computation 299,815 46,182 334,819 Basic net income per per share computation 299,815 46,182 334,819 Basic net income per share net income per share $ 59.15 $ 59.15 $ 59.15 Diluted per share $ 59.15 $ 59.15 $ 59.15 Diluted net income $ 59.15 $ 59.15 $ 59.15 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed earnings a B to Class A share 2,732 0 0 Reallocation of undistributed to Class A share 2,732 0 0 Reallocation of undistributed earnings Class A share 2,732 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 180 ) ( 25 ) 180 earnings ( 180 ) ( 25 ) 180 Allocation of undistributed 180 ) ( 25 ) 180 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator Number of $ 20,285 $ 2,707 $ 19,984 Denominator Number of share used share used in basic computation 299,815 46,182 334,819 Weighted-average effect of used in basic computation 299,815 46,182 334,819 Weighted-average effect of dilutive in basic computation 299,815 46,182 334,819 Weighted-average effect of dilutive security Class A common share outstanding 46,182 0 0 Restricted stock unit A common share outstanding 46,182 0 0 Restricted stock unit and common share outstanding 46,182 0 0 Restricted stock unit and other and other contingently issuable share 87 0 6,125 Number of share other contingently issuable share 87 0 6,125 Number of share used contingently issuable share 87 0 6,125 Number of share used in used in per share computation 346,084 46,182 340,944 Diluted net income in per share computation 346,084 46,182 340,944 Diluted net income per per share computation 346,084 46,182 340,944 Diluted net income per share net income per share $ 58.61 $ 58.61 $ 58.61 86 per share $ 58.61 $ 58.61 $ 58.61 86 Table of $ 58.61 $ 58.61 $ 58.61 86 Table of Contents Alphabet 58.61 $ 58.61 $ 58.61 86 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans stock plan include the Alphabet 2012 Stock Plan and Other Bet to participant under the Alphabet 2012 Stock Plan generally vest over date . As of December 31 , 2020 , there were As of December 31 , 2020 , there were 38,777,813 share , 2020 , there were 38,777,813 share of stock reserved for future issuance under our Alphabet 2012 Stock Plan . Stock-Based Compensation For the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , total stock-based , 2018 , 2019 and 2020 , total stock-based compensation expense stock-based compensation expense wa $ 10.0 billion , $ 11.7 billion $ 10.0 billion , $ 11.7 billion and $ 13.4 billion $ 11.7 billion and $ 13.4 billion , including amount associated in Alphabet stock of $ 9.4 billion , $ 10.8 billion $ 9.4 billion , $ 10.8 billion , and $ 12.8 10.8 billion , and $ 12.8 billion , respectively . For For the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , we recognized , 2018 , 2019 and 2020 , we recognized tax benefit of Income , of $ 1.5 billion , $ 1.8 billion $ 1.5 billion , $ 1.8 billion , and $ 2.7 1.8 billion , and $ 2.7 billion , respectively . For For the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 , December 31 , 2018 , 2019 and 2020 , tax benefit , 2018 , 2019 and 2020 , tax benefit realized related during the period wa $ 2.1 billion , $ 2.2 billion $ 2.1 billion , $ 2.2 billion and $ 3.6 billion $ 2.2 billion and $ 3.6 billion , respectively . These for the year ended December 31 , 2020 : Unvested Restricted year ended December 31 , 2020 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2019 19,394,236 $ 1,055.22 a of December 31 , 2019 19,394,236 $ 1,055.22 Granted 12,647,562 of December 31 , 2019 19,394,236 $ 1,055.22 Granted 12,647,562 1,407.97 31 , 2019 19,394,236 $ 1,055.22 Granted 12,647,562 1,407.97 Vested ( 2019 19,394,236 $ 1,055.22 Granted 12,647,562 1,407.97 Vested ( 11,643,670 ) 19,394,236 $ 1,055.22 Granted 12,647,562 1,407.97 Vested ( 11,643,670 ) 1,089.31 Granted 12,647,562 1,407.97 Vested ( 11,643,670 ) 1,089.31 Forfeited/canceled ( 1,109,335 1,407.97 Vested ( 11,643,670 ) 1,089.31 Forfeited/canceled ( 1,109,335 ) 1,160.01 11,643,670 ) 1,089.31 Forfeited/canceled ( 1,109,335 ) 1,160.01 Unvested a of 1,089.31 Forfeited/canceled ( 1,109,335 ) 1,160.01 Unvested a of December 31 1,160.01 Unvested a of December 31 , 2020 19,288,793 $ 1,262.13 a of December 31 , 2020 19,288,793 $ 1,262.13 The weighted-average of December 31 , 2020 19,288,793 $ 1,262.13 The weighted-average grant-date 31 , 2020 19,288,793 $ 1,262.13 The weighted-average grant-date fair value during the year ended December 31 , 2018 and 2019 , year ended December 31 , 2018 and 2019 , wa $ December 31 , 2018 and 2019 , wa $ 1,095.89 and and 2019 , wa $ 1,095.89 and $ 1,092.36 , respectively wa $ 1,095.89 and $ 1,092.36 , respectively . Total fair during the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 were $ 2018 , 2019 , and 2020 were $ 14.1 billion , , and 2020 were $ 14.1 billion , $ 15.2 billion $ 14.1 billion , $ 15.2 billion , and $ 17.8 15.2 billion , and $ 17.8 billion , respectively . As respectively . As of December 31 , 2020 , there wa As of December 31 , 2020 , there wa $ 22.8 2020 , there wa $ 22.8 billion of unrecognized compensation cost over a weighted-average period of 2.6 year . 401 ( k period of 2.6 year . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 691 million , $ 724 million $ 691 million , $ 724 million , and $ 855 724 million , and $ 855 million for the year ended for the year ended December 31 , 2018 , 2019 , year ended December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively . Note 14 2020 , respectively . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2018 2019 2020 Domestic Year Ended December 31 , 2018 2019 2020 Domestic operation $ Ended December 31 , 2018 2019 2020 Domestic operation $ 15,779 December 31 , 2018 2019 2020 Domestic operation $ 15,779 $ 2019 2020 Domestic operation $ 15,779 $ 16,426 $ 37,576 Foreign Domestic operation $ 15,779 $ 16,426 $ 37,576 Foreign operation 19,134 $ 15,779 $ 16,426 $ 37,576 Foreign operation 19,134 23,199 10,506 16,426 $ 37,576 Foreign operation 19,134 23,199 10,506 Total $ 34,913 $ 37,576 Foreign operation 19,134 23,199 10,506 Total $ 34,913 $ 37,576 Foreign operation 19,134 23,199 10,506 Total $ 34,913 $ 39,625 19,134 23,199 10,506 Total $ 34,913 $ 39,625 $ 48,082 87 10,506 Total $ 34,913 $ 39,625 $ 48,082 87 Table of $ 34,913 $ 39,625 $ 48,082 87 Table of Contents Alphabet 34,913 $ 39,625 $ 48,082 87 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2018 2019 2020 Current Year Ended December 31 , 2018 2019 2020 Current : Federal Ended December 31 , 2018 2019 2020 Current : Federal and December 31 , 2018 2019 2020 Current : Federal and state : Federal and state $ 2,153 $ 2,424 $ 4,789 Foreign and state $ 2,153 $ 2,424 $ 4,789 Foreign 1,251 2,713 $ 2,153 $ 2,424 $ 4,789 Foreign 1,251 2,713 1,687 Total $ 2,424 $ 4,789 Foreign 1,251 2,713 1,687 Total 3,404 5,137 2,424 $ 4,789 Foreign 1,251 2,713 1,687 Total 3,404 5,137 6,476 $ 4,789 Foreign 1,251 2,713 1,687 Total 3,404 5,137 6,476 Deferred Foreign 1,251 2,713 1,687 Total 3,404 5,137 6,476 Deferred : Federal 1,251 2,713 1,687 Total 3,404 5,137 6,476 Deferred : Federal and 2,713 1,687 Total 3,404 5,137 6,476 Deferred : Federal and state Deferred : Federal and state 907 286 1,552 Foreign ( 134 : Federal and state 907 286 1,552 Foreign ( 134 ) Federal and state 907 286 1,552 Foreign ( 134 ) ( 907 286 1,552 Foreign ( 134 ) ( 141 ) ( Foreign ( 134 ) ( 141 ) ( 215 ) Total ) ( 141 ) ( 215 ) Total 773 145 1,337 ) ( 215 ) Total 773 145 1,337 Provision for income ( 215 ) Total 773 145 1,337 Provision for income tax 215 ) Total 773 145 1,337 Provision for income tax $ Provision for income tax $ 4,177 $ 5,282 $ 7,813 The income tax $ 4,177 $ 5,282 $ 7,813 The reconciliation of $ 4,177 $ 5,282 $ 7,813 The reconciliation of federal statutory follows : Year Ended December 31 , 2018 2019 2020 U.S. Year Ended December 31 , 2018 2019 2020 U.S. federal statutory Ended December 31 , 2018 2019 2020 U.S. federal statutory tax December 31 , 2018 2019 2020 U.S. federal statutory tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 4.4 ) ( 4.9 ) ( rate ( 4.4 ) ( 4.9 ) ( 0.3 ) Foreign-derived ) ( 4.9 ) ( 0.3 ) Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 0.5 ) ( 0.7 ) ( deduction ( 0.5 ) ( 0.7 ) ( 3.0 ) Stock-based ) ( 0.7 ) ( 3.0 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 2.2 ) ( 0.7 ) ( expense ( 2.2 ) ( 0.7 ) ( 1.7 ) Federal ) ( 0.7 ) ( 1.7 ) Federal research credit ( ) Federal research credit ( 2.4 ) ( 2.5 ) ( credit ( 2.4 ) ( 2.5 ) ( 2.3 ) Impact ) ( 2.5 ) ( 2.3 ) Impact of the Tax Cuts and Jobs Act ( 1.3 ) ( 0.6 ) 0.0 Act ( 1.3 ) ( 0.6 ) 0.0 European Commission fine 1.3 ) ( 0.6 ) 0.0 European Commission fine 3.1 1.0 ) 0.0 European Commission fine 3.1 1.0 0.0 Deferred tax asset 0.0 European Commission fine 3.1 1.0 0.0 Deferred tax asset valuation European Commission fine 3.1 1.0 0.0 Deferred tax asset valuation allowance tax asset valuation allowance ( 2.0 ) 0.0 1.4 State and valuation allowance ( 2.0 ) 0.0 1.4 State and local income allowance ( 2.0 ) 0.0 1.4 State and local income tax and local income tax ( 0.4 ) 1.1 1.1 Other adjustment income tax ( 0.4 ) 1.1 1.1 Other adjustment 1.1 ( tax ( 0.4 ) 1.1 1.1 Other adjustment 1.1 ( 0.4 ) 1.1 1.1 Other adjustment 1.1 ( 0.4 ) 0.0 Effective 1.1 Other adjustment 1.1 ( 0.4 ) 0.0 Effective tax rate adjustment 1.1 ( 0.4 ) 0.0 Effective tax rate 12.0 % ) 0.0 Effective tax rate 12.0 % 13.3 % 16.2 % Effective tax rate 12.0 % 13.3 % 16.2 % Our effective rate 12.0 % 13.3 % 16.2 % Our effective tax rate Our effective tax rate for 2018 and 2019 wa affected significantly tax rate for 2018 and 2019 wa affected significantly by earnings subsidiary . As of December 31 , 2019 , we have As of December 31 , 2019 , we have simplified our in the U.S. On July 27 , 2015 , the United U.S. On July 27 , 2015 , the United States Tax regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . As a decision on December 28 , 2015 . As a result of compensation cost . On June 7 , 2019 , the United . On June 7 , 2019 , the United States Court the Ninth Circuit overturned the 2015 Tax Court decision in Altera regulation issued under IRC Section 482 requiring related-party participant in a net tax benefit of $ 418 million related to previously shared in the year ended December 31 , 2019 . In 2020 year ended December 31 , 2019 . In 2020 , there 31 , 2019 . In 2020 , there wa an increase of our Other Bets . 88 Table of Contents Alphabet Inc ) : As of December 31 , 2019 2020 Deferred tax As of December 31 , 2019 2020 Deferred tax asset : of December 31 , 2019 2020 Deferred tax asset : Stock-based : Stock-based compensation expense $ 421 $ 518 Accrued employee benefit compensation expense $ 421 $ 518 Accrued employee benefit 463 580 $ 518 Accrued employee benefit 463 580 Accruals and reserve not 518 Accrued employee benefit 463 580 Accruals and reserve not currently and reserve not currently deductible 1,047 1,049 Tax credit 3,264 3,723 reserve not currently deductible 1,047 1,049 Tax credit 3,264 3,723 Net deductible 1,047 1,049 Tax credit 3,264 3,723 Net operating loss 771 1,047 1,049 Tax credit 3,264 3,723 Net operating loss 771 1,085 3,264 3,723 Net operating loss 771 1,085 Operating lease 1,876 2,620 3,723 Net operating loss 771 1,085 Operating lease 1,876 2,620 Intangible loss 771 1,085 Operating lease 1,876 2,620 Intangible asset 164 1,525 771 1,085 Operating lease 1,876 2,620 Intangible asset 164 1,525 Other lease 1,876 2,620 Intangible asset 164 1,525 Other 226 463 Total 1,876 2,620 Intangible asset 164 1,525 Other 226 463 Total deferred Intangible asset 164 1,525 Other 226 463 Total deferred tax asset asset 164 1,525 Other 226 463 Total deferred tax asset 8,232 463 Total deferred tax asset 8,232 11,563 Valuation allowance ( 3,502 Total deferred tax asset 8,232 11,563 Valuation allowance ( 3,502 ) 8,232 11,563 Valuation allowance ( 3,502 ) ( 4,823 ) Total allowance ( 3,502 ) ( 4,823 ) Total deferred tax asset asset net of valuation allowance 4,730 6,740 Deferred tax liability : net of valuation allowance 4,730 6,740 Deferred tax liability : Property and equipment , net ( 1,798 ) ( 3,382 ) Renewable net ( 1,798 ) ( 3,382 ) Renewable energy investment ( ) Renewable energy investment ( 466 ) ( 415 ) Foreign investment ( 466 ) ( 415 ) Foreign Earnings ( 373 415 ) Foreign Earnings ( 373 ) ( 383 ) Net Earnings ( 373 ) ( 383 ) Net investment gain ( ) Net investment gain ( 1,074 ) ( 1,901 ) Operating gain ( 1,074 ) ( 1,901 ) Operating lease ( 1,619 1,901 ) Operating lease ( 1,619 ) ( 2,354 ) Other lease ( 1,619 ) ( 2,354 ) Other ( 380 ) ( 2,354 ) Other ( 380 ) ( 782 ) Total Other ( 380 ) ( 782 ) Total deferred tax liability Total deferred tax liability ( 5,710 ) ( 9,217 ) Net liability ( 5,710 ) ( 9,217 ) Net deferred tax asset ( liability ) $ ( 980 ) $ ( 2,477 ) ( 980 ) $ ( 2,477 ) As of December 31 2,477 ) As of December 31 , 2020 , our federal As of December 31 , 2020 , our federal , state tax purpose were approximately $ 3.1 billion , $ 3.1 billion $ 3.1 billion , $ 3.1 billion , and $ 1.4 3.1 billion , and $ 1.4 billion respectively . If not will begin to expire in 2023 , foreign net operating loss will begin to expire in 2024 and the state net operating will begin to expire in 2028 . It is more likely jurisdiction . As of December 31 , 2020 , our California As of December 31 , 2020 , our California research and tax purpose were approximately $ 3.7 billion that can be carried realized . As of December 31 , 2020 , we maintained As of December 31 , 2020 , we maintained a valuation will be recorded accordingly . 89 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2018 2019 2020 Beginning Year Ended December 31 , 2018 2019 2020 Beginning gross unrecognized Ended December 31 , 2018 2019 2020 Beginning gross unrecognized tax December 31 , 2018 2019 2020 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 4,696 $ 4,652 $ 3,377 Increases tax benefit $ 4,696 $ 4,652 $ 3,377 Increases related to $ 4,696 $ 4,652 $ 3,377 Increases related to prior year to prior year tax position 321 938 372 Decreases related to prior year tax position 321 938 372 Decreases related to prior year tax position 321 938 372 Decreases related to prior year prior year tax position ( 623 ) ( 143 ) ( position ( 623 ) ( 143 ) ( 557 ) Decreases ) ( 143 ) ( 557 ) Decreases related to settlement settlement with tax authority ( 191 ) ( 2,886 ) ( authority ( 191 ) ( 2,886 ) ( 45 ) Increases ) ( 2,886 ) ( 45 ) Increases related to current to current year tax position 449 816 690 Ending gross unrecognized current year tax position 449 816 690 Ending gross unrecognized tax year tax position 449 816 690 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 4,652 $ 3,377 $ 3,837 The tax benefit $ 4,652 $ 3,377 $ 3,837 The total amount $ 4,652 $ 3,377 $ 3,837 The total amount of gross unrecognized tax benefit wa $ 4.7 billion , $ 3.4 billion $ 4.7 billion , $ 3.4 billion , and $ 3.8 3.4 billion , and $ 3.8 billion a of December 31 3.8 billion a of December 31 , 2018 , 2019 , a of December 31 , 2018 , 2019 , and 2020 December 31 , 2018 , 2019 , and 2020 , respectively 2018 , 2019 , and 2020 , respectively , of which , of which , $ 2.9 billion , $ 2.3 billion $ 2.9 billion , $ 2.3 billion , and $ 2.6 2.3 billion , and $ 2.6 billion , if recognized , gross unrecognized tax benefit in 2019 wa primarily a a result audit . As of December 31 , 2019 and 2020 , As of December 31 , 2019 and 2020 , we accrued December 31 , 2019 and 2020 , we accrued $ 130 2020 , we accrued $ 130 million and $ 222 million $ 130 million and $ 222 million in interest and penalty IRS is currently examining our 2016 through 2018 tax return . currently examining our 2016 through 2018 tax return . We have presented . The tax year 2011 through 2019 remain subject to The tax year 2011 through 2019 remain subject to examination by materially change in the next 12 month . Note 15 . next 12 month . Note 15 . Information about Segments and in the fourth quarter of 2020 , we report our segment office facility , are managed 90 Table of Contents Alphabet Inc. recast : Year Ended December 31 , 2018 2019 2020 Revenues Year Ended December 31 , 2018 2019 2020 Revenues : Google Ended December 31 , 2018 2019 2020 Revenues : Google Services December 31 , 2018 2019 2020 Revenues : Google Services $ Revenues : Google Services $ 130,524 $ 151,825 $ 168,635 Google Google Services $ 130,524 $ 151,825 $ 168,635 Google Cloud 5,838 $ 130,524 $ 151,825 $ 168,635 Google Cloud 5,838 8,918 13,059 151,825 $ 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 $ 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 659 168,635 Google Cloud 5,838 8,918 13,059 Other Bets 595 659 657 5,838 8,918 13,059 Other Bets 595 659 657 Hedging gain ( 8,918 13,059 Other Bets 595 659 657 Hedging gain ( loss 13,059 Other Bets 595 659 657 Hedging gain ( loss ) gain ( loss ) ( 138 ) 455 176 Total revenue loss ) ( 138 ) 455 176 Total revenue $ 136,819 ) ( 138 ) 455 176 Total revenue $ 136,819 $ 455 176 Total revenue $ 136,819 $ 161,857 $ 182,527 Operating Total revenue $ 136,819 $ 161,857 $ 182,527 Operating income ( $ 136,819 $ 161,857 $ 182,527 Operating income ( loss ) ) : Google Services $ 43,137 $ 48,999 $ 54,606 Google Google Services $ 43,137 $ 48,999 $ 54,606 Google Cloud ( $ 43,137 $ 48,999 $ 54,606 Google Cloud ( 4,348 ) $ 54,606 Google Cloud ( 4,348 ) ( 4,645 ) ( Cloud ( 4,348 ) ( 4,645 ) ( 5,607 ) Other ) ( 4,645 ) ( 5,607 ) Other Bets ( 3,358 5,607 ) Other Bets ( 3,358 ) ( 4,824 ) ( Bets ( 3,358 ) ( 4,824 ) ( 4,476 ) Corporate ) ( 4,824 ) ( 4,476 ) Corporate cost , unallocated Corporate cost , unallocated ( 1 ) ( 7,907 ) ( unallocated ( 1 ) ( 7,907 ) ( 5,299 ) ( ) ( 7,907 ) ( 5,299 ) ( 3,299 ) Total ) ( 5,299 ) ( 3,299 ) Total income from operation Total income from operation $ 27,524 $ 34,231 $ 41,224 ( from operation $ 27,524 $ 34,231 $ 41,224 ( 1 ) $ 27,524 $ 34,231 $ 41,224 ( 1 ) Corporate cost $ 34,231 $ 41,224 ( 1 ) Corporate cost , unallocated includes a fine of $ 5.1 billion for the year ended for the year ended December 31 , 2018 and a fine year ended December 31 , 2018 and a fine and legal and legal settlement totaling $ 2.3 billion for the year ended for the year ended December 31 , 2019 . For revenue year ended December 31 , 2019 . For revenue by geography by geography , see Note 2 . The following table present ) . As of December 31 , 2019 As of December As of December 31 , 2019 As of December 31 , , 2019 As of December 31 , 2020 Long-lived asset : As of December 31 , 2020 Long-lived asset : United States asset : United States $ 63,102 $ 69,315 International 21,485 27,645 United States $ 63,102 $ 69,315 International 21,485 27,645 Total long-lived $ 63,102 $ 69,315 International 21,485 27,645 Total long-lived asset $ 63,102 $ 69,315 International 21,485 27,645 Total long-lived asset $ 84,587 27,645 Total long-lived asset $ 84,587 $ 96,960 91 Table of long-lived asset $ 84,587 $ 96,960 91 Table of Contents Alphabet asset $ 84,587 $ 96,960 91 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2020 , our disclosure a of December 31 , 2020 , our disclosure control and report operating result . In 2019 , we began a multi-year during the third quarter of 2020 . There have been no during the quarter ended December 31 , 2020 that have materially quarter ended December 31 , 2020 that have materially affected , for the quarter ended December 31 , 2020 . While pre-existing quarter ended December 31 , 2020 . While pre-existing control were , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2020 . Management reviewed a of December 31 , 2020 . Management reviewed the result financial reporting a of December 31 , 2020 ha been audited a of December 31 , 2020 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 92 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in our Proxy Statement for 2021 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2020 ( 2021 Proxy year ended December 31 , 2020 ( 2021 Proxy Statement ) December 31 , 2020 ( 2021 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be under the caption “ Section 16 ( a ) Beneficial Ownership Reporting Compliance ” in the 2021 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2021 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Plan Information ” in the 2021 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2021 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2021 Proxy Statement and is incorporated incorporated herein by reference . 93 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 51 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 54 Consolidated Statements of Income 55 54 Consolidated Statements of Income 55 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 56 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 57 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 58 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 59 2 . Financial Statement Schedules to Consolidated Financial Statements 59 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2018 , 2019 and year ended December 31 , 2018 , 2019 and 2020 ( December 31 , 2018 , 2019 and 2020 ( in million , 2018 , 2019 and 2020 ( in million ) : of Year Year ended December 31 , 2018 $ 674 $ Year ended December 31 , 2018 $ 674 $ 1,115 $ December 31 , 2018 $ 674 $ 1,115 $ ( 1,060 , 2018 $ 674 $ 1,115 $ ( 1,060 ) $ 674 $ 1,115 $ ( 1,060 ) $ 729 Year ended $ ( 1,060 ) $ 729 Year ended December 31 , $ 729 Year ended December 31 , 2019 $ 729 $ Year ended December 31 , 2019 $ 729 $ 1,481 $ December 31 , 2019 $ 729 $ 1,481 $ ( 1,457 , 2019 $ 729 $ 1,481 $ ( 1,457 ) $ 729 $ 1,481 $ ( 1,457 ) $ 753 Year ended $ ( 1,457 ) $ 753 Year ended December 31 , $ 753 Year ended December 31 , 2020 $ 753 $ Year ended December 31 , 2020 $ 753 $ 2,013 $ December 31 , 2020 $ 753 $ 2,013 $ ( 1,422 , 2020 $ 753 $ 2,013 $ ( 1,422 ) $ 753 $ 2,013 $ ( 1,422 ) $ 1,344 Note : $ ( 1,422 ) $ 1,344 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 21 , 2020 Current Report on , dated October 21 , 2020 Current Report on Form 8-K 2020 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 27 , 2020 No . 001-37580 ) October 27 , 2020 4.01 Specimen Class 001-37580 ) October 27 , 2020 4.01 Specimen Class A Common ) October 27 , 2020 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 94 Table of 001-37580 ) October 2 , 2015 94 Table of Contents Alphabet ) October 2 , 2015 94 Table of Contents Alphabet Inc. by reference herein Form Date 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Transfer Restriction 001-37580 ) October 2 , 2015 4.06 Transfer Restriction Agreement , ) October 2 , 2015 4.06 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.07 Class C 001-37580 ) October 2 , 2015 4.07 Class C Undertaking , ) October 2 , 2015 4.07 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Indenture , 001-37580 ) October 2 , 2015 4.08 Indenture , dated February ) October 2 , 2015 4.08 Indenture , dated February 12 4.08 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.09 Registrant Registration 333-209510 ) February 12 , 2016 4.09 Registrant Registration Rights Agreement ) February 12 , 2016 4.09 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.10 First Supplemental 333-209518 ) February 12 , 2016 4.10 First Supplemental Indenture , ) February 12 , 2016 4.10 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.11 Form of 001-37580 ) April 27 , 2016 4.11 Form of the Registrant ) April 27 , 2016 4.11 Form of the Registrant ’ of the Registrant ’ s 3.625 % Notes due 2021 ( s 3.625 % Notes due 2021 ( included in Exhibit 4.10 2021 ( included in Exhibit 4.10 ) 4.12 Form of the included in Exhibit 4.10 ) 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.10 2024 ( included in Exhibit 4.10 ) 4.13 Form of the included in Exhibit 4.10 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 4.14 Form of 001-37580 ) August 9 , 2016 4.14 Form of Global Note ) August 9 , 2016 4.14 Form of Global Note representing representing the Registrant ’ s 0.450 % n otes due 2025 0.450 % n otes due 2025 Current Report on Form 8-K 2025 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.15 Form of 001-37580 ) August 5 , 2020 4.15 Form of Global Note ) August 5 , 2020 4.15 Form of Global Note representing representing the Registrant ’ s 0.800 % note due 2027 Current s 0.800 % note due 2027 Current Report on Form 8-K 2027 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.16 Form of 001-37580 ) August 5 , 2020 4.16 Form of Global Note ) August 5 , 2020 4.16 Form of Global Note representing representing the Registrant ’ s 1.100 % note due 2030 Current s 1.100 % note due 2030 Current Report on Form 8-K 2030 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.17 Form of 001-37580 ) August 5 , 2020 4.17 Form of Global Note ) August 5 , 2020 4.17 Form of Global Note representing representing the Registrant ’ s 1.900 % note due 2040 Current s 1.900 % note due 2040 Current Report on Form 8-K 2040 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.18 Form of 001-37580 ) August 5 , 2020 4.18 Form of Global Note ) August 5 , 2020 4.18 Form of Global Note representing representing the Registrant ’ s 2.050 % note due 2050 Current s 2.050 % note due 2050 Current Report on Form 8-K 2050 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.19 Form of 001-37580 ) August 5 , 2020 4.19 Form of Global Note ) August 5 , 2020 4.19 Form of Global Note representing representing the Registrant ’ s 2.250 % note due 2060 Current s 2.250 % note due 2060 Current Report on Form 8-K 2060 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.20 Description of 001-37580 ) August 5 , 2020 4.20 Description of Registrant ’ ) August 5 , 2020 4.20 Description of Registrant ’ s Securities Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 4 , 2020 No . 001-37580 ) February 4 , 2020 10.01 u Form 001-37580 ) February 4 , 2020 10.01 u Form of Indemnification ) February 4 , 2020 10.01 u Form of Indemnification Agreement officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Compensation 001-37580 ) October 2 , 2015 10.02 u Compensation Plan Agreement ) October 2 , 2015 10.02 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.03 u Director 001-37580 ) October 2 , 2015 10.03 u Director Arrangements Agreement ) October 2 , 2015 10.03 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Alphabet 001-37580 ) October 2 , 2015 10.04 u Alphabet Inc . ) October 2 , 2015 10.04 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Google 001-37580 ) October 2 , 2015 10.05 u Google Inc. 2004 ) October 2 , 2015 10.05 u Google Inc. 2004 Stock 2015 10.05 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.05.1 u Google 000-50726 ) June 7 , 2011 10.05.1 u Google Inc. 2004 ) June 7 , 2011 10.05.1 u Google Inc. 2004 Stock 2011 10.05.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 95 Table of 000-50726 ) March 30 , 2005 95 Table of Contents Alphabet ) March 30 , 2005 95 Table of Contents Alphabet Inc. by reference herein Form Date 10.05.2 u Google Inc. 2004 Stock Date 10.05.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.3 u Google 000-50726 ) March 30 , 2005 10.05.3 u Google Inc. 2004 ) March 30 , 2005 10.05.3 u Google Inc. 2004 Stock 2005 10.05.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.06 u Alphabet 333-142243 ) April 20 , 2007 10.06 u Alphabet Inc . ) April 20 , 2007 10.06 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 5 , 2020 No . 001-37580 ) June 5 , 2020 10.06.1 u Alphabet 001-37580 ) June 5 , 2020 10.06.1 u Alphabet Inc . ) June 5 , 2020 10.06.1 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) February 4 , 2020 No . 000-50726 ) February 4 , 2020 10.06.2 u Alphabet 000-50726 ) February 4 , 2020 10.06.2 u Alphabet Inc . ) February 4 , 2020 10.06.2 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan - Performance Stock Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) February 4 , 2020 No . 000-50726 ) February 4 , 2020 10.07 u Motorola 000-50726 ) February 4 , 2020 10.07 u Motorola Mobility Holdings ) February 4 , 2020 10.07 u Motorola Mobility Holdings , Motorola Mobility Holdings , Inc. 2011 Incentive Compensation Plan Registration Statement S-8 ( File No . 333-181661 ) May 24 , 2012 No . 333-181661 ) May 24 , 2012 14.01 Code of 333-181661 ) May 24 , 2012 14.01 Code of Conduct of ) May 24 , 2012 14.01 Code of Conduct of the Registrant a amended on September 21 , 2017 Annual Report on amended on September 21 , 2017 Annual Report on Form 10-K 2017 Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 6 , 2018 No . 001-37580 ) February 6 , 2018 21.01 * Subsidiaries 001-37580 ) February 6 , 2018 21.01 * Subsidiaries of the ) February 6 , 2018 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Ernst & Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.01 Stipulation and Agreement of the Sarbanes-Oxley Act of 2002 99.01 Stipulation and Agreement of Settlement Settlement Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) September 5 , 2020 No . 001-37580 ) September 5 , 2020 99.02 Notice of 001-37580 ) September 5 , 2020 99.02 Notice of Pendency and ) September 5 , 2020 99.02 Notice of Pendency and Proposed Actions Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 23 , 2020 No . 001-37580 ) October 23 , 2020 101.INS * Inline 001-37580 ) October 23 , 2020 101.INS * Inline XBRL Instance ) October 23 , 2020 101.INS * Inline XBRL Instance Document the Inline XBRL document . 101.SCH * XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema Document 101.CAL * XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase Document 101.DEF * XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase Document 101.LAB * XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase Document 96 Table of Contents Alphabet Inc. by reference herein Form Date 101.PRE * XBRL Taxonomy Extension Presentation Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File XBRL and contained in Exhibit 101 ) _________________ u Indicates management ‡ Furnished herewith . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . 97 Table FORM 10-K SUMMARY None . 97 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 2 , 2021 ALPHABET INC. By Date : February 2 , 2021 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by on the date indicated . 98 Table of Contents Alphabet Inc. Principal Executive Officer ) February 2 , 2021 Sundar Pichai / Officer ) February 2 , 2021 Sundar Pichai / S / Principal Financial Officer ) February 2 , 2021 Ruth M. Porat Officer ) February 2 , 2021 Ruth M. Porat / S Principal Accounting Officer ) February 2 , 2021 Amie Thuener O'Toole Officer ) February 2 , 2021 Amie Thuener O'Toole / S H. A RNOLD Director February 2 , 2021 Frances H. Arnold RNOLD Director February 2 , 2021 Frances H. Arnold / S RIN Co-Founder and Director February 2 , 2021 Sergey Brin / and Director February 2 , 2021 Sergey Brin / S / OHN D OERR Director February 2 , 2021 L. John Doerr OERR Director February 2 , 2021 L. John Doerr / S J R . Director February 2 , 2021 Roger W. Ferguson . Director February 2 , 2021 Roger W. Ferguson , Jr. ENNESSY Director , Chair February 2 , 2021 John L. Hennessy , Chair February 2 , 2021 John L. Hennessy / S NN M ATHER Director February 2 , 2021 Ann Mather / ATHER Director February 2 , 2021 Ann Mather / S / . M ULALLY Director February 2 , 2021 Alan R. Mulally ULALLY Director February 2 , 2021 Alan R. Mulally / S AGE Co-Founder and Director February 2 , 2021 Larry Page / and Director February 2 , 2021 Larry Page / S / AM S HRIRAM Director February 2 , 2021 K. Ram Shriram HRIRAM Director February 2 , 2021 K. Ram Shriram / S Robin L. Washington Director February 2 , 2021 Robin L. Washington Washington Director February 2 , 2021 Robin L. Washington 99 , 2021 Robin L. 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PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended the fiscal year ended December 31 , 2021 OR ☐ TRANSITION year ended December 31 , 2021 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive including zip code ) ( 650 ) 253-000 0 ( Registrant code ) ( 650 ) 253-000 0 ( Registrant 's telephone ) ( 650 ) 253-000 0 ( Registrant 's telephone number Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C.7262 ( b ) ) ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of June 30 , 2021 , the aggregate As of June 30 , 2021 , the aggregate market value Global Select Market on June 30 , 2021 ) wa approximately Market on June 30 , 2021 ) wa approximately $ 1,451.1 2021 ) wa approximately $ 1,451.1 billion . For purpose of executive officer , director and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our executive officer , director and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 25 , Form 10-K. As of January 25 , 2022 , there were As of January 25 , 2022 , there were 300,754,904 share , 2022 , there were 300,754,904 share of the registrant ’ A common stock outstanding , 44,576,938 share of the registrant ’ common stock outstanding , and 315,639,479 share of the registrant ’ s Proxy Statement for the 2022 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2021 . Table of year ended December 31 , 2021 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2021 TABLE OF CONTENTS Year Ended December 31 , 2021 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 3 PART I Item 1. Business Statements 3 PART I Item 1. Business 4 Item 1A . PART I Item 1. Business 4 Item 1A . Risk Factors Item 1. Business 4 Item 1A . Risk Factors 10 Item Item 1A . Risk Factors 10 Item 1B . Unresolved Staff . Risk Factors 10 Item 1B . Unresolved Staff Comments 24 1B . Unresolved Staff Comments 24 Item 2 . Properties 24 Unresolved Staff Comments 24 Item 2 . Properties 24 Item 3 24 Item 2 . Properties 24 Item 3 . Legal Proceedings 2 . Properties 24 Item 3 . Legal Proceedings 24 Item Item 3 . Legal Proceedings 24 Item 4 . Mine Safety . Legal Proceedings 24 Item 4 . Mine Safety Disclosures 24 4 . Mine Safety Disclosures 24 PART II Item 5 . Disclosures 24 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 25 Item 6 . [ Reserved of Equity Securities 25 Item 6 . [ Reserved ] 27 6 . [ Reserved ] 27 Item 7 . Management ’ [ Reserved ] 27 Item 7 . Management ’ s Discussion Condition and Results of Operations 28 Item 7A . Quantitative and Results of Operations 28 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 42 Item 8 . Financial Statements About Market Risk 42 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 45 Item 9 . Changes in and Supplementary Data 45 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 86 Item 9A . Controls and and Financial Disclosure 86 Item 9A . Controls and Procedures 86 9A . Controls and Procedures 86 Item 9B . Other Information Controls and Procedures 86 Item 9B . Other Information 86 Item Item 9B . Other Information 86 Item 9C . Disclosure Regarding . Other Information 86 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 87 PART III Item 10 . Inspections 87 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 88 Item 11 . Executive Compensation and Corporate Governance 88 Item 11 . Executive Compensation 88 Item Item 11 . Executive Compensation 88 Item 12 . Security Ownership . Executive Compensation 88 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 88 Item 13 . Certain Relationships Related Stockholder Matters 88 Item 13 . Certain Relationships and Related Transactions , and Director Independence 88 Item 14 . Principal Accountant and Director Independence 88 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 88 PART IV Item 15 . Services 88 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 89 Item 16 . Form 10-K Financial Statement Schedules 89 Item 16 . Form 10-K Summary 92 89 Item 16 . Form 10-K Summary 92 Signatures 2 Table 16 . Form 10-K Summary 92 Signatures 2 Table of Contents Form 10-K Summary 92 Signatures 2 Table of Contents Alphabet Inc This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These include , among , and other contingency ; 3 Table of Contents Alphabet Inc. : Part I , Item 1 `` Business ; `` Part `` Part I , Item 1A `` Risk Factors ; `` and Part II , Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , in Part I , Item 1A , `` Risk Factors `` company . PART I ITEM 1. BUSINESS Overview As our founder a CEO of Google since 2015 and a CEO of Alphabet a CEO of Alphabet since 2019 . Alphabet is a collection when we were founded in 1998 . Since then , we search on Google , and 15 % of the search we have invested more than $ 100 billion in R & D , with the onset of 4 Table of Contents Alphabet Inc. example , in May of 2021 , we introduced Multitask Unified . MUM is trained across 75 different language , which mean AI-powered breakthrough , solving a 50-year-old protein folding challenge , which Chrome operating system , a 5 Table of Contents Alphabet Inc. hardware product such a Pixel 5a 5G and Pixel 6 phone product such a Pixel 5a 5G and Pixel 6 phone , Pixel 5a 5G and Pixel 6 phone , the Fitbit Charge phone , the Fitbit Charge 5 , Chromecast with Google TV web and app search after 18 month . And we continue platform and other service . 6 Table of Contents Alphabet Inc. see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K. 7 Table of Contents Alphabet Annual Report on Form 10-K. 7 Table of Contents Alphabet Inc Google ’ s founding over 20 year ago . These are two decade : • In 2007 , we became the first our operation . • In 2017 , we became the first first major company to match 100 % of our annual electricity consecutive year . • In 2020 , we issued $ 5.75 2020 , we issued $ 5.75 billion in sustainability bonds—the largest response . As of December 31 , 2020 , we have As of December 31 , 2020 , we have allocated $ , we have allocated $ 3.47 billion of the net proceeds Bond Impact Report published in 2021 . • Also in 2020 2021 . • Also in 2020 , we compensated for our a carbon-free economy , in 2020 , we launched our third of ambitious goal . By 2030 , we aim to : to run on carbon-free energy 24 hour a day , seven seven day a week , 365 day a year ; • a year ; • enable 5 gigawatts of new carbon-free energy and • help more than 500 city and local government reduce government reduce an aggregate of 1 gigaton of carbon emission annually technology by committing to help 1 billion people make more sustainable choice by the end of 2022 through our core product . water than we consume by 2030 and to support water security Report and Alphabet ’ s 2021 Sustainability Bond Impact Report , this Annual Report on Form 10-K or in any other report see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K. Culture and Workforce We are opportunity for career growth and 8 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report SEC . As of December 31 , 2021 , Alphabet had As of December 31 , 2021 , Alphabet had 156,500 employee , 2021 , Alphabet had 156,500 employee . We have work see Risk Factors in Item 1A , Trends in Our Business in Part II , Item 7 , and Legal Matters in and Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Intellectual Property We rely see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K . Available Information Our website Our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and our Proxy Statements incorporation , bylaw , governance 9 Table of Contents Alphabet Inc. this Annual Report on Form 10-K or in any other report textual reference only . ITEM 1A . RISK FACTORS Our operation . We generated more than 80 % of total revenue from display of ad online in 2021 . Many of our advertiser condition and operating result . 10 Table of Contents Alphabet Inc. in Part II , Item 7 of this Annual Report on this Annual Report on Form 10-K. Our intellectual property right are deemed invalid or unenforceable . 11 Table of Contents Alphabet Inc. may affect our supply . 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 54 % of our consolidated revenue of our consolidated revenue in 2021 . In addition to risk unable to effectively anticipate ; 13 Table of Contents Alphabet Inc. Log4j vulnerability reported in December 2021 , which could affect our to continue to experience such 14 Table of Contents Alphabet Inc. and prevent low-quality content and 15 Table of Contents Alphabet Inc. . For example , in 2018 the U.S. Federal Communications Commission complaint against Google on October 20 , 2020 , alleging that Google on October 20 , 2020 , alleging that Google violated . Similarly , on December 16 , 2020 , a number , on December 16 , 2020 , a number of state , and operating result . 16 Table of Contents Alphabet Inc. processed within that country . 17 Table of Contents Alphabet Inc. Online Privacy Protection Act of 1998 and the United Kingdom ’ Millennium Copyright Act and Section 230 of the Communications Decency Act ( CJEU ) on May 13 , 2014 on the ‘ ) on May 13 , 2014 on the ‘ right to against u , and we 18 Table of Contents Alphabet Inc. administrative fine of up to 4 % of annual worldwide revenue . Fines of up to 2 % of annual worldwide revenue California Consumer Privacy Act of 2018 ( CCPA ) , which into effect in January of 2020 ; the California Privacy Rights will go into effect in 2023 ; the Virginia Consumer Data will go into effect in 2023 ; and the Colorado Privacy will go into effect in 2023 ; all of which give certain requirement . On June 4 , 2021 , the European . On June 4 , 2021 , the European Commission published deemed sale of personal information 19 Table of Contents Alphabet Inc. Our Class B stock ha 10 vote per share , our right . As of December 31 , 2021 , Larry Page As of December 31 , 2021 , Larry Page and Sergey Sergey Brin beneficially owned approximately 85.9 % of our outstanding Class stock , which represented approximately 51.4 % of the voting power our repurchase program may also 20 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it may fall below expectation . 21 Table of Contents Alphabet Inc. of our global talent . 22 Table of Contents Alphabet Inc effect , and more permanent 23 Table of Contents Alphabet Inc. actual operating performance . ITEM 1B . UNRESOLVED STAFF COMMENTS Not COMMENTS Not applicable . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a see Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 24 Table of Contents Alphabet Inc. Alphabet Inc. PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public “ GOOG ” since April 3 , 2014 . Holders of ” since April 3 , 2014 . Holders of Record As of Record As of December 31 , 2021 , there were As of December 31 , 2021 , there were approximately 4,907 2021 , there were approximately 4,907 and 1,733 stockholder of record there were approximately 4,907 and 1,733 stockholder of record of our holder . As of December 31 , 2021 , there were As of December 31 , 2021 , there were approximately 64 2021 , there were approximately 64 stockholder of record of our during the quarter ended December 31 , 2021 : Period Total quarter ended December 31 , 2021 : Period Total Number of ( in thousand ) ( 1 ) Total Number of Class ( in thousand ) ( 1 ) Average Price Paid per per Class A Share ( 2 ) Average Price Paid per per Class C Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 126 1,445 $ million ) October 1 - 31 126 1,445 $ 2,812.76 $ ) October 1 - 31 126 1,445 $ 2,812.76 $ 2,794.72 October 1 - 31 126 1,445 $ 2,812.76 $ 2,794.72 1,571 - 31 126 1,445 $ 2,812.76 $ 2,794.72 1,571 $ 26,450 126 1,445 $ 2,812.76 $ 2,794.72 1,571 $ 26,450 November 1 1,445 $ 2,812.76 $ 2,794.72 1,571 $ 26,450 November 1 - 2,812.76 $ 2,794.72 1,571 $ 26,450 November 1 - 30 289 2,794.72 1,571 $ 26,450 November 1 - 30 289 1,393 $ $ 26,450 November 1 - 30 289 1,393 $ 2,943.97 $ 26,450 November 1 - 30 289 1,393 $ 2,943.97 $ 2,956.73 November 1 - 30 289 1,393 $ 2,943.97 $ 2,956.73 1,682 - 30 289 1,393 $ 2,943.97 $ 2,956.73 1,682 $ 21,479 289 1,393 $ 2,943.97 $ 2,956.73 1,682 $ 21,479 December 1 1,393 $ 2,943.97 $ 2,956.73 1,682 $ 21,479 December 1 - 2,943.97 $ 2,956.73 1,682 $ 21,479 December 1 - 31 250 2,956.73 1,682 $ 21,479 December 1 - 31 250 1,169 $ $ 21,479 December 1 - 31 250 1,169 $ 2,880.79 $ 21,479 December 1 - 31 250 1,169 $ 2,880.79 $ 2,898.56 December 1 - 31 250 1,169 $ 2,880.79 $ 2,898.56 1,419 - 31 250 1,169 $ 2,880.79 $ 2,898.56 1,419 $ 17,371 250 1,169 $ 2,880.79 $ 2,898.56 1,419 $ 17,371 Total 665 1,169 $ 2,880.79 $ 2,898.56 1,419 $ 17,371 Total 665 4,007 2,880.79 $ 2,898.56 1,419 $ 17,371 Total 665 4,007 4,672 ( 2,898.56 1,419 $ 17,371 Total 665 4,007 4,672 ( 1 ) 1,419 $ 17,371 Total 665 4,007 4,672 ( 1 ) The $ 17,371 Total 665 4,007 4,672 ( 1 ) The repurchase Total 665 4,007 4,672 ( 1 ) The repurchase are being transaction , including through Rule 10b5-1 plan . The repurchase program expiration date . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 25 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-year total stockholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2016 to December 31 ) from December 31 , 2016 to December 31 , 2021 31 , 2016 to December 31 , 2021 . The return 2016 to December 31 , 2021 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2016 in stock or invested on December 31 , 2016 in stock or index , . Fiscal year ending December 31 . Copyright © 2022 S December 31 . Copyright © 2022 S & P , a Inc. All right reserved . 26 Table of Contents Alphabet Inc Inc. Class C 's cumulative 5-year total stockholder return on capital of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our Class C all dividend ) from December 31 , 2016 to December 31 ) from December 31 , 2016 to December 31 , 2021 31 , 2016 to December 31 , 2021 . The return 2016 to December 31 , 2021 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2016 in stock or invested on December 31 , 2016 in stock or in index . Fiscal year ending December 31 . Copyright © 2022 S December 31 . Copyright © 2022 S & P , a All right reserved . ITEM 6 . [ Reserved ] 27 6 . [ Reserved ] 27 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION ” Part I , Item 1 `` Business , `` Part `` Part I , Item 1A `` Risk Factors , `` related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted discussion of We have omitted discussion of 2019 result where it would be discussion previously included in Item 7 of our 2020 Annual Report in Item 7 of our 2020 Annual Report on Form 10-K. 2020 Annual Report on Form 10-K. Understanding Alphabet ’ s Financial see Part I , Item 1 “ Business ” and Note “ Business ” and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business and than more mature market . 28 Table of Contents Alphabet Inc. For example , in January 2021 we closed the acquisition of Fitbit , Inc. for $ 2.1 billion , which is expected in Part I , Item 1 “ Business . ” Seasonality on YouTube property ; and 29 Table of Contents Alphabet Inc. technology and internet service . 30 Table of Contents Alphabet Inc. recognize revenue , see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Costs and Expenses Our cost , and outsourcing service . 31 Table of Contents Alphabet Inc. our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K a well a Item 7A 10-K a well a Item 7A , “ Quantitative and Qualitative tax rate , see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Executive Overview The following table for the year ended December 31 , 2020 and 2021 unless year ended December 31 , 2020 and 2021 unless otherwise specified December 31 , 2020 and 2021 unless otherwise specified ( in ) : Year Ended December 31 , 2020 2021 $ Change Year Ended December 31 , 2020 2021 $ Change % Change Ended December 31 , 2020 2021 $ Change % Change Consolidated % Change Consolidated revenue $ 182,527 $ 257,637 $ 75,110 41 Consolidated revenue $ 182,527 $ 257,637 $ 75,110 41 % Change $ 182,527 $ 257,637 $ 75,110 41 % Change in consolidated 182,527 $ 257,637 $ 75,110 41 % Change in consolidated constant in consolidated constant currency revenue 39 % Cost of revenue $ % Cost of revenue $ 84,732 $ 110,939 $ 26,207 31 of revenue $ 84,732 $ 110,939 $ 26,207 31 % Operating $ 84,732 $ 110,939 $ 26,207 31 % Operating expense $ 84,732 $ 110,939 $ 26,207 31 % Operating expense $ 56,571 31 % Operating expense $ 56,571 $ 67,984 $ 11,413 20 Operating expense $ 56,571 $ 67,984 $ 11,413 20 % Operating $ 56,571 $ 67,984 $ 11,413 20 % Operating income $ 56,571 $ 67,984 $ 11,413 20 % Operating income $ 41,224 20 % Operating income $ 41,224 $ 78,714 $ 37,490 91 Operating income $ 41,224 $ 78,714 $ 37,490 91 % Operating $ 41,224 $ 78,714 $ 37,490 91 % Operating margin 23 41,224 $ 78,714 $ 37,490 91 % Operating margin 23 % 37,490 91 % Operating margin 23 % 31 % 8 % % Operating margin 23 % 31 % 8 % Other income margin 23 % 31 % 8 % Other income ( expense expense ) , net $ 6,858 $ 12,020 $ 5,162 75 , net $ 6,858 $ 12,020 $ 5,162 75 % Net $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 40,269 75 % Net Income $ 40,269 $ 76,033 $ 35,764 89 Net Income $ 40,269 $ 76,033 $ 35,764 89 % Diluted $ 40,269 $ 76,033 $ 35,764 89 % Diluted EPS $ 40,269 $ 76,033 $ 35,764 89 % Diluted EPS $ 58.61 89 % Diluted EPS $ 58.61 $ 112.20 $ 53.59 91 Diluted EPS $ 58.61 $ 112.20 $ 53.59 91 % Number $ 58.61 $ 112.20 $ 53.59 91 % Number of Employees 58.61 $ 112.20 $ 53.59 91 % Number of Employees 135,301 91 % Number of Employees 135,301 156,500 21,199 16 % • % Number of Employees 135,301 156,500 21,199 16 % • Revenues Number of Employees 135,301 156,500 21,199 16 % • Revenues were of Employees 135,301 156,500 21,199 16 % • Revenues were $ % • Revenues were $ 257.6 billion , an increase of billion , an increase of 41 % . The increase in adverse effect of COVID-19 on 2020 advertising revenue also contributed to Cost of revenue wa $ 110.9 billion , an increase of billion , an increase of 31 % , primarily driven by • Operating expense were $ 68.0 billion , an increase of billion , an increase of 20 % , primarily driven by Operating cash flow wa $ 91.7 billion , primarily driven by • Share repurchase were $ 50.3 billion , an increase of billion , an increase of 62 % . See Note 11 62 % . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . 32 10-K for further information . 32 Table of Contents Alphabet Inc. technical infrastructure , were $ 24.6 billion . • In January billion . • In January 2021 , we updated the useful in depreciation expense of $ 2.6 billion recorded primarily in cost & D . See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . • Fitbit closed in early January 2021 , and the related revenue Google other . See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . • information . • On February 1 , 2022 , the Company • On February 1 , 2022 , the Company announced that had approved and declared a 20-for-one stock split in the form C stock . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information . The our financial result in March 2020 when , despite an increase For the quarter ended June 30 , 2020 our advertising revenue quarter ended June 30 , 2020 our advertising revenue declined due throughout the second half of 2020 . Additionally , over the , over the course of 2020 , we experienced variability in for account receivable . Throughout 2021 we remained focused on innovating The impact of COVID-19 on 2020 financial result affected year-over-year growth ) : Year Ended December 31 , 2020 2021 Google Search Year Ended December 31 , 2020 2021 Google Search & other Ended December 31 , 2020 2021 Google Search & other $ Google Search & other $ 104,062 $ 148,951 YouTube ad 19,772 & other $ 104,062 $ 148,951 YouTube ad 19,772 28,845 Google 104,062 $ 148,951 YouTube ad 19,772 28,845 Google Network 23,090 31,701 $ 148,951 YouTube ad 19,772 28,845 Google Network 23,090 31,701 Google ad 19,772 28,845 Google Network 23,090 31,701 Google advertising 146,924 209,497 19,772 28,845 Google Network 23,090 31,701 Google advertising 146,924 209,497 Google Network 23,090 31,701 Google advertising 146,924 209,497 Google other 21,711 28,032 23,090 31,701 Google advertising 146,924 209,497 Google other 21,711 28,032 Google advertising 146,924 209,497 Google other 21,711 28,032 Google Services total 168,635 146,924 209,497 Google other 21,711 28,032 Google Services total 168,635 237,529 21,711 28,032 Google Services total 168,635 237,529 Google Cloud 13,059 19,206 28,032 Google Services total 168,635 237,529 Google Cloud 13,059 19,206 Other total 168,635 237,529 Google Cloud 13,059 19,206 Other Bets 657 753 168,635 237,529 Google Cloud 13,059 19,206 Other Bets 657 753 Hedging Cloud 13,059 19,206 Other Bets 657 753 Hedging gain ( loss 13,059 19,206 Other Bets 657 753 Hedging gain ( loss ) Hedging gain ( loss ) 176 149 Total revenue $ 182,527 gain ( loss ) 176 149 Total revenue $ 182,527 $ 176 149 Total revenue $ 182,527 $ 257,637 Google Services Google Total revenue $ 182,527 $ 257,637 Google Services Google advertising revenue & other revenue increased $ 44.9 billion from 2020 to 2021 increased $ 44.9 billion from 2020 to 2021 . The overall 44.9 billion from 2020 to 2021 . The overall growth wa adoption and usage , primarily 33 Table of Contents Alphabet Inc. adverse effect of COVID-19 on 2020 revenue also contributed to the YouTube ad revenue increased $ 9.1 billion from 2020 to 2021 increased $ 9.1 billion from 2020 to 2021 . Growth wa 9.1 billion from 2020 to 2021 . Growth wa driven by adverse effect of COVID-19 on 2020 revenue . Google Network Google Google Network revenue increased $ 8.6 billion from 2020 to 2021 increased $ 8.6 billion from 2020 to 2021 . The growth 8.6 billion from 2020 to 2021 . The growth wa primarily adverse effect of COVID-19 on 2020 revenue also contributed to the a a percentage ) from 2020 to 2021 : Year Ended percentage ) from 2020 to 2021 : Year Ended December 31 2021 : Year Ended December 31 , 2021 Paid click change Year Ended December 31 , 2021 Paid click change 23 % , 2021 Paid click change 23 % Cost-per-click change 15 % change 23 % Cost-per-click change 15 % Paid click increased from % Paid click increased from 2020 to 2021 driven by a click increased from 2020 to 2021 driven by a number of adverse effect of COVID-19 on 2020 paid click also contributed to The increase in cost-per-click from 2020 to 2021 wa driven by in cost-per-click from 2020 to 2021 wa driven by a number adverse effect of COVID-19 in 2020 . Impressions and cost-per-impression The a a percentage ) from 2020 to 2021 : Year Ended percentage ) from 2020 to 2021 : Year Ended December 31 2021 : Year Ended December 31 , 2021 Impressions change 2 Year Ended December 31 , 2021 Impressions change 2 % Cost-per-impression 31 , 2021 Impressions change 2 % Cost-per-impression change 35 % change 2 % Cost-per-impression change 35 % Impressions increased from 2020 35 % Impressions increased from 2020 to 2021 primarily driven by Impressions increased from 2020 to 2021 primarily driven by growth in adverse effect of COVID-19 in 2020 a well a the effect Google other revenue increased $ 6.3 billion from 2020 to 2021 increased $ 6.3 billion from 2020 to 2021 . The growth 6.3 billion from 2020 to 2021 . The growth wa primarily the acquisition closed in January 2021 , and an increase in apps and in-app purchase . 34 Table of Contents Alphabet Inc. Google Cloud revenue increased $ 6.1 billion from 2020 to 2021 increased $ 6.1 billion from 2020 to 2021 . The growth 6.1 billion from 2020 to 2021 . The growth wa primarily customer : Year Ended December 31 , 2020 2021 United States Year Ended December 31 , 2020 2021 United States 47 % Ended December 31 , 2020 2021 United States 47 % 46 , 2020 2021 United States 47 % 46 % EMEA 30 2021 United States 47 % 46 % EMEA 30 % 31 47 % 46 % EMEA 30 % 31 % APAC 18 46 % EMEA 30 % 31 % APAC 18 % 18 30 % 31 % APAC 18 % 18 % Other Americas 31 % APAC 18 % 18 % Other Americas 5 % % 18 % Other Americas 5 % 5 % For further % Other Americas 5 % 5 % For further detail on by geography , see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Use of Constant Currency Revenues in accordance with GAAP . 35 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2020 2021 % Change Year Ended December 31 , 2020 2021 % Change from Prior Ended December 31 , 2020 2021 % Change from Prior Year Prior Year EMEA revenue $ 55,370 $ 79,107 43 % EMEA EMEA revenue $ 55,370 $ 79,107 43 % EMEA constant currency revenue $ 55,370 $ 79,107 43 % EMEA constant currency revenue % EMEA constant currency revenue 76,321 38 % APAC revenue 32,550 EMEA constant currency revenue 76,321 38 % APAC revenue 32,550 46,123 76,321 38 % APAC revenue 32,550 46,123 42 % APAC constant 38 % APAC revenue 32,550 46,123 42 % APAC constant currency % APAC revenue 32,550 46,123 42 % APAC constant currency revenue % APAC constant currency revenue 45,666 40 % Other Americas revenue APAC constant currency revenue 45,666 40 % Other Americas revenue 9,417 40 % Other Americas revenue 9,417 14,404 53 % Other Americas % Other Americas revenue 9,417 14,404 53 % Other Americas constant Other Americas revenue 9,417 14,404 53 % Other Americas constant currency Other Americas constant currency revenue 14,317 52 % United States revenue Americas constant currency revenue 14,317 52 % United States revenue 85,014 52 % United States revenue 85,014 117,854 39 % Hedging gain % United States revenue 85,014 117,854 39 % Hedging gain ( United States revenue 85,014 117,854 39 % Hedging gain ( loss Hedging gain ( loss ) 176 149 Total revenue $ 182,527 gain ( loss ) 176 149 Total revenue $ 182,527 $ 176 149 Total revenue $ 182,527 $ 257,637 41 % Revenues Total revenue $ 182,527 $ 257,637 41 % Revenues , excluding revenue $ 182,527 $ 257,637 41 % Revenues , excluding hedging , excluding hedging effect $ 182,351 $ 257,488 Exchange rate effect hedging effect $ 182,351 $ 257,488 Exchange rate effect ( 3,330 257,488 Exchange rate effect ( 3,330 ) Total constant currency revenue Total constant currency revenue $ 254,158 39 % EMEA revenue growth constant currency revenue $ 254,158 39 % EMEA revenue growth from % EMEA revenue growth from 2020 to 2021 wa favorably affected revenue growth from 2020 to 2021 wa favorably affected by foreign . APAC revenue growth from 2020 to 2021 wa favorably affected revenue growth from 2020 to 2021 wa favorably affected by foreign Other Americas growth change from 2020 to 2021 wa favorably affected growth change from 2020 to 2021 wa favorably affected by change ) : Year Ended December 31 , 2020 2021 TAC $ Year Ended December 31 , 2020 2021 TAC $ 32,778 $ Ended December 31 , 2020 2021 TAC $ 32,778 $ 45,566 , 2020 2021 TAC $ 32,778 $ 45,566 Other cost of 2021 TAC $ 32,778 $ 45,566 Other cost of revenue 51,954 45,566 Other cost of revenue 51,954 65,373 Total cost of revenue Other cost of revenue 51,954 65,373 Total cost of revenue $ Total cost of revenue $ 84,732 $ 110,939 Total cost of of revenue $ 84,732 $ 110,939 Total cost of revenue a a a percentage of revenue 46.4 % 43.1 % Cost of percentage of revenue 46.4 % 43.1 % Cost of revenue increased Cost of revenue increased $ 26.2 billion from 2020 to 2021 increased $ 26.2 billion from 2020 to 2021 . The increase 26.2 billion from 2020 to 2021 . The increase wa due revenue and TAC of $ 13.4 billion and $ 12.8 billion $ 13.4 billion and $ 12.8 billion , respectively . The The increase in TAC from 2020 to 2021 wa due to in TAC from 2020 to 2021 wa due to an increase The TAC rate decreased from 22.3 % to 21.8 % from decreased from 22.3 % to 21.8 % from 2020 to 2021 % to 21.8 % from 2020 to 2021 primarily due to 21.8 % from 2020 to 2021 primarily due to a revenue were both substantially consistent from 2020 to 2021 . The increase substantially consistent from 2020 to 2021 . The increase in other other cost of revenue from 2020 to 2021 wa driven by of revenue from 2020 to 2021 wa driven by increase in increase in data center and 36 Table of Contents Alphabet Inc. in the first quarter of 2021 . Research and Development The ) : Year Ended December 31 , 2020 2021 Research and Year Ended December 31 , 2020 2021 Research and development expense Ended December 31 , 2020 2021 Research and development expense $ Research and development expense $ 27,573 $ 31,562 Research and development development expense $ 27,573 $ 31,562 Research and development expense a a a percentage of revenue 15.1 % 12.3 % R & percentage of revenue 15.1 % 12.3 % R & D expense & D expense increased $ 4.0 billion from 2020 to 2021 increased $ 4.0 billion from 2020 to 2021 . The increase 4.0 billion from 2020 to 2021 . The increase wa primarily in compensation expense of $ 3.5 billion , largely resulting from , largely resulting from an 11 % increase in headcount , professional service fee of $ 516 million . This increase wa in depreciation expense of $ 450 million including the effect of ) : Year Ended December 31 , 2020 2021 Sales and Year Ended December 31 , 2020 2021 Sales and marketing expense Ended December 31 , 2020 2021 Sales and marketing expense $ Sales and marketing expense $ 17,946 $ 22,912 Sales and marketing marketing expense $ 17,946 $ 22,912 Sales and marketing expense a a a percentage of revenue 9.8 % 8.9 % Sales and percentage of revenue 9.8 % 8.9 % Sales and marketing expense and marketing expense increased $ 5.0 billion from 2020 to 2021 increased $ 5.0 billion from 2020 to 2021 , primarily driven 5.0 billion from 2020 to 2021 , primarily driven by an and promotional activity of $ 2.5 billion and an increase in in compensation expense of $ 2.2 billion . The increase in a reduction in spending in 2020 due to COVID-19 . The wa largely due to a 14 % increase in headcount . ) : Year Ended December 31 , 2020 2021 General and Year Ended December 31 , 2020 2021 General and administrative expense Ended December 31 , 2020 2021 General and administrative expense $ General and administrative expense $ 11,052 $ 13,510 General and administrative administrative expense $ 11,052 $ 13,510 General and administrative expense a a a percentage of revenue 6.1 % 5.2 % General and percentage of revenue 6.1 % 5.2 % General and administrative expense and administrative expense increased $ 2.5 billion from 2020 to 2021 increased $ 2.5 billion from 2020 to 2021 . The increase 2.5 billion from 2020 to 2021 . The increase wa primarily primarily driven by a $ 1.7 billion increase in charge relating legal matter and a $ 664 million increase in compensation expense , largely resulting from a 14 % increase in headcount . reduction in expense of $ 808 million related to a decline for account receivable , a 2020 reflected a higher allowance related economic effect of COVID-19 . 37 Table of Contents Alphabet Inc ) . Year Ended December 31 , 2020 2021 Operating income Year Ended December 31 , 2020 2021 Operating income ( loss Ended December 31 , 2020 2021 Operating income ( loss ) ) : Google Services $ 54,606 $ 91,855 Google Cloud ( Google Services $ 54,606 $ 91,855 Google Cloud ( 5,607 ) $ 91,855 Google Cloud ( 5,607 ) ( 3,099 ) Other Cloud ( 5,607 ) ( 3,099 ) Other Bets ( 4,476 3,099 ) Other Bets ( 4,476 ) ( 5,281 ) Corporate Bets ( 4,476 ) ( 5,281 ) Corporate cost , unallocated Corporate cost , unallocated ( 1 ) ( 3,299 ) ( unallocated ( 1 ) ( 3,299 ) ( 4,761 ) Total ) ( 3,299 ) ( 4,761 ) Total income from operation Total income from operation $ 41,224 $ 78,714 ( 1 ) from operation $ 41,224 $ 78,714 ( 1 ) Unallocated corporate $ 41,224 $ 78,714 ( 1 ) Unallocated corporate cost primarily service operating income increased $ 37.2 billion from 2020 to 2021 increased $ 37.2 billion from 2020 to 2021 . The increase 37.2 billion from 2020 to 2021 . The increase wa due The effect of COVID-19 on 2020 result affected the year-over-year increase Cloud operating loss decreased $ 2.5 billion from 2020 to 2021 decreased $ 2.5 billion from 2020 to 2021 . The decrease 2.5 billion from 2020 to 2021 . The decrease in operating Bets operating loss increased $ 805 million from 2020 to 2021 increased $ 805 million from 2020 to 2021 . The increase 805 million from 2020 to 2021 . The increase in operating during the second quarter of 2021 . Other Income ( Expense ) : Year Ended December 31 , 2020 2021 Other income Year Ended December 31 , 2020 2021 Other income ( expense Ended December 31 , 2020 2021 Other income ( expense ) expense ) , net $ 6,858 $ 12,020 Other income ( , net $ 6,858 $ 12,020 Other income ( expense ) , net , increased $ 5.2 billion from 2020 to 2021 increased $ 5.2 billion from 2020 to 2021 . The increase 5.2 billion from 2020 to 2021 . The increase wa primarily non-marketable equity security of $ 6.9 billion , partially offset by to certain investment of $ 1.3 billion . See Note 3 1.3 billion . See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Provision ) : Year Ended December 31 , 2020 2021 Provision for Year Ended December 31 , 2020 2021 Provision for income tax Ended December 31 , 2020 2021 Provision for income tax $ Provision for income tax $ 7,813 $ 14,701 Effective tax rate income tax $ 7,813 $ 14,701 Effective tax rate 16.2 % $ 14,701 Effective tax rate 16.2 % 16.2 % The provision Effective tax rate 16.2 % 16.2 % The provision for income for income tax increased from 2020 to 2021 , primarily due tax increased from 2020 to 2021 , primarily due to an . Our effective tax rate 38 Table of Contents Alphabet Inc. Inc. wa substantially consistent from 2020 to 2021 . See Note substantially consistent from 2020 to 2021 . See Note 14 of to 2021 . See Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Financial Marketable Securities As of December 31 , 2021 , we had As of December 31 , 2021 , we had $ 139.6 2021 , we had $ 139.6 billion in cash , cash ) : Year Ended December 31 , 2020 2021 Net cash Year Ended December 31 , 2020 2021 Net cash provided by Ended December 31 , 2020 2021 Net cash provided by operating provided by operating activity $ 65,124 $ 91,652 Net cash used operating activity $ 65,124 $ 91,652 Net cash used in investing in investing activity $ ( 32,773 ) $ ( 35,523 ) ( 32,773 ) $ ( 35,523 ) Net cash used in in financing activity $ ( 24,408 ) $ ( 61,362 ) ( 24,408 ) $ ( 61,362 ) Cash Provided by Operating by operating activity increased from 2020 to 2021 primarily due to activity increased from 2020 to 2021 primarily due to the net in investing activity increased from 2020 to 2021 primarily due to activity increased from 2020 to 2021 primarily due to a decrease in financing activity increased from 2020 to 2021 primarily due to activity increased from 2020 to 2021 primarily due to repayment of for at least the next 12 month and thereafter for the for the foreseeable future . 39 Table of Contents Alphabet Inc. During the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , we spent December 31 , 2020 and 2021 , we spent $ 22.3 2021 , we spent $ 22.3 billion and $ 24.6 billion $ 22.3 billion and $ 24.6 billion on capital expenditure , For the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , our depreciation December 31 , 2020 and 2021 , our depreciation and impairment property and equipment were $ 12.9 billion and $ 11.6 billion $ 12.9 billion and $ 11.6 billion , respectively . Leases For the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , we recognized December 31 , 2020 and 2021 , we recognized total operating operating lease asset of $ 2.8 billion and $ 3.0 billion $ 2.8 billion and $ 3.0 billion , respectively . As respectively . As of December 31 , 2021 , the amount As of December 31 , 2021 , the amount of total average remaining lease term of 8 year , wa $ 15.5 8 year , wa $ 15.5 billion , of which $ billion , of which $ 2.5 billion is short-term . As short-term . As of December 31 , 2021 , we have As of December 31 , 2021 , we have entered into long-term lease payment of $ 606 million and $ 5.2 billion $ 606 million and $ 5.2 billion , excluding purchase option These lease will commence between 2022 and 2026 with non-cancelable lease will commence between 2022 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . For lease term of 1 to 25 year . For the year For the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , our operating December 31 , 2020 and 2021 , our operating lease expense lease cost ) were $ 2.9 billion and $ 3.4 billion $ 2.9 billion and $ 3.4 billion , respectively . Finance for the year ended December 31 , 2020 and 2021 . year ended December 31 , 2020 and 2021 . See Note December 31 , 2020 and 2021 . See Note 4 of and 2021 . See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on lease program of up to $ 10.0 billion through the issuance of , which increased from $ 5.0 billion in September 2021 . $ 5.0 billion in September 2021 . Net proceeds from this purpose . As of December 31 , 2021 , we had As of December 31 , 2021 , we had no commercial outstanding . As of December 31 , 2021 , we had As of December 31 , 2021 , we had $ 10.0 2021 , we had $ 10.0 billion of revolving credit facility amount outstanding . In April 2021 , we terminated the existing scheduled to expire in July 2023 , and entered into two in the amount of $ 4.0 billion and $ 6.0 billion $ 4.0 billion and $ 6.0 billion , which will expire which will expire in April 2022 and April 2026 , respectively in April 2022 and April 2026 , respectively . The interest facility . As of December 31 , 2021 , we have As of December 31 , 2021 , we have senior unsecured total carrying value of $ 12.8 billion with short-term and long-term future interest payment of $ 231 million and $ 4.0 billion $ 231 million and $ 4.0 billion , respectively . See , respectively . See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on our Share Repurchase Program In April 2021 , the Board of Directors to repurchase up to $ 50.0 billion of it Class C C stock . In July 2021 , the Alphabet board approved an amendment to the April 2021 authorization , permitting the company , including the relative trading 40 Table of Contents Alphabet Inc. Directors of Alphabet , during 2021 we repurchased and subsequently retired we repurchased and subsequently retired 20.3 million aggregate share for $ million aggregate share for $ 50.3 billion . Of the aggregate repurchased and subsequently retired , 1.2 million share were Class A A stock repurchased for $ 3.4 billion . As of December billion . As of December 31 , 2021 , $ 17.4 As of December 31 , 2021 , $ 17.4 billion remains 31 , 2021 , $ 17.4 billion remains available for Class transaction , including through Rule 10b5-1 plan . The repurchase program expiration date . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. European Commission Fines In 2017 10-K. European Commission Fines In 2017 , 2018 and 2019 , Commission Fines In 2017 , 2018 and 2019 , the EC In 2017 , 2018 and 2019 , the EC announced decision and imposed fine of € 2.4 billion ( $ 2.7 billion € 2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) , € a of June 27 , 2017 ) , € 4.3 billion , 2017 ) , € 4.3 billion ( $ 5.1 billion € 4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) , and a of June 30 , 2018 ) , and € 1.5 2018 ) , and € 1.5 billion ( $ 1.7 billion € 1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) , respectively a of March 20 , 2019 ) , respectively . While . Taxes As of December 31 , 2021 , we had As of December 31 , 2021 , we had short-term and income tax payable of $ 784 million and $ 5.7 billion $ 784 million and $ 5.7 billion related to a one-time in annual interest-free installment through 2025 . We also have tax have tax payable of $ 3.5 billion primarily related to uncertain tax position a of December 31 , 2021 . Purchase Commitments a of December 31 , 2021 . Purchase Commitments We regularly arrangement . As of December 31 , 2021 , such purchase As of December 31 , 2021 , such purchase commitment , Sheets , amount to $ 13.7 billion , of which $ billion , of which $ 11.9 billion is short-term . These and/or pricing a of December 31 , 2021 . Critical Accounting a of December 31 , 2021 . Critical Accounting Estimates We of Directors . See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for a summary of significant to it fair value . 41 Table of Contents Alphabet Inc. the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We evaluate , on a in Accounting Estimate In January 2021 , we completed an assessment wa effective beginning fiscal year 2021 and is detailed further in is detailed further in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . ITEM 7A . QUANTITATIVE on Form 10-K . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES considered the historical trend in 42 Table of Contents Alphabet Inc. change in exchange rate of 10 % could be experienced in contract . If an adverse 10 % foreign currency exchange rate tax of approxima tely $ 497 million and $ 285 million $ 497 million and $ 285 million a of December 31 285 million a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively , December 31 , 2020 and 2021 , respectively , after consideration for the year ended December 31 , 2020 and 2021 . year ended December 31 , 2020 and 2021 . We use December 31 , 2020 and 2021 . We use foreign currency the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , the amount December 31 , 2020 and 2021 , the amount recorded in would have been approximately $ 912 million and $ 1.3 billion $ 912 million and $ 1.3 billion lower a of December billion lower a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively . December 31 , 2020 and 2021 , respectively . The change the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 1.0 billion lower a of both lower a of both December 31 , 2020 and 2021 . of both December 31 , 2020 and 2021 . The change December 31 , 2020 and 2021 . The change in value a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2020 and 2021 are a of December 31 , 2020 and 2021 are shown below December 31 , 2020 and 2021 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2020 2021 2020 2021 As of December 31 , 2020 2021 2020 2021 Risk Category of December 31 , 2020 2021 2020 2021 Risk Category - December 31 , 2020 2021 2020 2021 Risk Category - Interest 31 , 2020 2021 2020 2021 Risk Category - Interest Rate Category - Interest Rate $ 144 $ 139 $ 145 $ Interest Rate $ 144 $ 139 $ 145 $ 148 43 $ 144 $ 139 $ 145 $ 148 43 Table of $ 139 $ 145 $ 148 43 Table of Contents Alphabet 139 $ 145 $ 148 43 Table of Contents Alphabet Inc. analysis performed a of December 31 , 2020 and 2021 due a of December 31 , 2020 and 2021 due to the December 31 , 2020 and 2021 due to the inherent limitation volatility , and represent $ 5.9 billion and $ 7.8 billion $ 5.9 billion and $ 7.8 billion of our investment a our investment a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively . December 31 , 2020 and 2021 , respectively . A hypothetical hypothetical adverse price change of 10 % on our December 31 10 % on our December 31 , 2021 balance , which on our December 31 , 2021 balance , which could be marketable equity security by $ 780 million . From time to event . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , the carrying December 31 , 2020 and 2021 , the carrying value of measurement alternative , wa $ 18.9 billion and $ 27.6 billion $ 18.9 billion and $ 27.6 billion , respectively . Valuations , which totaled approximately $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion a of December 31 1.5 billion a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively , December 31 , 2020 and 2021 , respectively , generally do equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. 44 Table of Contents Alphabet Annual Report on Form 10-K. 44 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Firm ( PCAOB ID : 42 ) 46 Financial Statements : PCAOB ID : 42 ) 46 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 49 Consolidated Statements of Income 50 49 Consolidated Statements of Income 50 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 52 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 54 45 Table of Contents Alphabet to Consolidated Financial Statements 54 45 Table of Contents Alphabet Inc. Company ) a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , the related December 31 , 2020 and 2021 , the related consolidated statement in the period ended December 31 , 2021 , and the period ended December 31 , 2021 , and the related note in the Index at Item 15 ( collectively referred to a of the Company at December 31 , 2020 and 2021 , Company at December 31 , 2020 and 2021 , and the December 31 , 2020 and 2021 , and the result of in the period ended December 31 , 2021 , in conformity period ended December 31 , 2021 , in conformity with U.S. financial reporting a of December 31 , 2021 , based on a of December 31 , 2021 , based on criterion established of the Treadway Commission ( 2013 framework ) , and our and our report dated February 1 , 2022 expressed an unqualified report dated February 1 , 2022 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging to which it relates . 46 Table of Contents Alphabet Inc. . As described in Note 10 to the consolidated financial statement the Company 's auditor since 1999 . San Jose , California San Jose , California February 1 , 2022 47 Table of , California February 1 , 2022 47 Table of Contents Alphabet California February 1 , 2022 47 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2021 , based on a of December 31 , 2021 , based on criterion established of the Treadway Commission ( 2013 framework ) , ( the financial reporting a of December 31 , 2021 , based on a of December 31 , 2021 , based on the COSO ( PCAOB ) , the 2021 consolidated financial statement of the and our report dated February 1 , 2022 expressed an unqualified report dated February 1 , 2022 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 1 , 2022 48 Table of , California February 1 , 2022 48 Table of Contents Alphabet California February 1 , 2022 48 Table of Contents Alphabet Inc amount ) As of December 31 , 2020 2021 Assets Current As of December 31 , 2020 2021 Assets Current asset : of December 31 , 2020 2021 Assets Current asset : Cash Cash and cash equivalent $ 26,465 $ 20,945 Marketable security 110,229 cash equivalent $ 26,465 $ 20,945 Marketable security 110,229 118,704 Total 26,465 $ 20,945 Marketable security 110,229 118,704 Total cash , cash $ 20,945 Marketable security 110,229 118,704 Total cash , cash equivalent equivalent , and marketable security 136,694 139,649 Accounts receivable , net , and marketable security 136,694 139,649 Accounts receivable , net 30,930 139,649 Accounts receivable , net 30,930 39,304 Income tax receivable , Accounts receivable , net 30,930 39,304 Income tax receivable , net Income tax receivable , net 454 966 Inventory 728 1,170 Other tax receivable , net 454 966 Inventory 728 1,170 Other current , net 454 966 Inventory 728 1,170 Other current asset 5,490 net 454 966 Inventory 728 1,170 Other current asset 5,490 7,054 728 1,170 Other current asset 5,490 7,054 Total current asset 174,296 1,170 Other current asset 5,490 7,054 Total current asset 174,296 188,143 5,490 7,054 Total current asset 174,296 188,143 Non-marketable security 20,703 29,549 7,054 Total current asset 174,296 188,143 Non-marketable security 20,703 29,549 Deferred asset 174,296 188,143 Non-marketable security 20,703 29,549 Deferred income tax 1,084 174,296 188,143 Non-marketable security 20,703 29,549 Deferred income tax 1,084 1,284 20,703 29,549 Deferred income tax 1,084 1,284 Property and equipment , 29,549 Deferred income tax 1,084 1,284 Property and equipment , net Property and equipment , net 84,749 97,599 Operating lease asset 12,211 and equipment , net 84,749 97,599 Operating lease asset 12,211 12,959 84,749 97,599 Operating lease asset 12,211 12,959 Intangible asset , net 97,599 Operating lease asset 12,211 12,959 Intangible asset , net 1,445 12,959 Intangible asset , net 1,445 1,417 Goodwill 21,175 22,956 Other Intangible asset , net 1,445 1,417 Goodwill 21,175 22,956 Other non-current , net 1,445 1,417 Goodwill 21,175 22,956 Other non-current asset 3,953 net 1,445 1,417 Goodwill 21,175 22,956 Other non-current asset 3,953 5,361 21,175 22,956 Other non-current asset 3,953 5,361 Total asset $ 319,616 22,956 Other non-current asset 3,953 5,361 Total asset $ 319,616 $ 3,953 5,361 Total asset $ 319,616 $ 359,268 Liabilities and Stockholders Total asset $ 319,616 $ 359,268 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 5,589 $ 6,037 Accrued compensation and Accounts payable $ 5,589 $ 6,037 Accrued compensation and benefit 11,086 6,037 Accrued compensation and benefit 11,086 13,889 Accrued expense and other Accrued compensation and benefit 11,086 13,889 Accrued expense and other current expense and other current liability 28,631 31,236 Accrued revenue share 7,500 and other current liability 28,631 31,236 Accrued revenue share 7,500 8,996 28,631 31,236 Accrued revenue share 7,500 8,996 Deferred revenue 2,543 3,288 31,236 Accrued revenue share 7,500 8,996 Deferred revenue 2,543 3,288 Income share 7,500 8,996 Deferred revenue 2,543 3,288 Income tax payable , 7,500 8,996 Deferred revenue 2,543 3,288 Income tax payable , net Income tax payable , net 1,485 808 Total current liability 56,834 tax payable , net 1,485 808 Total current liability 56,834 64,254 1,485 808 Total current liability 56,834 64,254 Long-term debt 13,932 14,817 808 Total current liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred liability 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 56,834 64,254 Long-term debt 13,932 14,817 Deferred revenue , non-current 481 14,817 Deferred revenue , non-current 481 535 Income tax payable , Deferred revenue , non-current 481 535 Income tax payable , non-current Income tax payable , non-current 8,849 9,176 Deferred income tax 3,561 tax payable , non-current 8,849 9,176 Deferred income tax 3,561 5,257 8,849 9,176 Deferred income tax 3,561 5,257 Operating lease liability 11,146 9,176 Deferred income tax 3,561 5,257 Operating lease liability 11,146 11,389 3,561 5,257 Operating lease liability 11,146 11,389 Other long-term liability 2,269 5,257 Operating lease liability 11,146 11,389 Other long-term liability 2,269 2,205 11,146 11,389 Other long-term liability 2,269 2,205 Total liability 97,072 107,633 11,389 Other long-term liability 2,269 2,205 Total liability 97,072 107,633 Contingencies liability 2,269 2,205 Total liability 97,072 107,633 Contingencies ( Note 10 2,269 2,205 Total liability 97,072 107,633 Contingencies ( Note 10 ) 97,072 107,633 Contingencies ( Note 10 ) Stockholders ’ equity : : Preferred stock , $ 0.001 par value per share , par value per share , 100,000 share authorized ; no share no share issued and outstanding 0 0 Class A and Class share issued and outstanding 0 0 Class A and Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 15,000,000 share authorized ( Class A share authorized ( Class A 9,000,000 , Class B 3,000,000 , A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ) B 3,000,000 , Class C 3,000,000 ) ; 675,222 ( Class Class C 3,000,000 ) ; 675,222 ( Class A 300,730 , ; 675,222 ( Class A 300,730 , Class B 45,843 , A 300,730 , Class B 45,843 , Class C 328,649 ) B 45,843 , Class C 328,649 ) and 662,121 ( Class Class C 328,649 ) and 662,121 ( Class A 300,737 , and 662,121 ( Class A 300,737 , Class B 44,665 , A 300,737 , Class B 44,665 , Class C 316,719 ) B 44,665 , Class C 316,719 ) share issued and outstanding ) share issued and outstanding 58,510 61,774 Accumulated other comprehensive income share issued and outstanding 58,510 61,774 Accumulated other comprehensive income ( comprehensive income ( loss ) 633 ( 1,623 ) Retained earnings ( loss ) 633 ( 1,623 ) Retained earnings 163,401 191,484 ( 1,623 ) Retained earnings 163,401 191,484 Total stockholder ’ equity 1,623 ) Retained earnings 163,401 191,484 Total stockholder ’ equity 222,544 191,484 Total stockholder ’ equity 222,544 251,635 Total liability and stockholder Total stockholder ’ equity 222,544 251,635 Total liability and stockholder ’ and stockholder ’ equity $ 319,616 $ 359,268 See accompanying note ’ equity $ 319,616 $ 359,268 See accompanying note . 49 359,268 See accompanying note . 49 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2019 2020 2021 Revenues Year Ended December 31 , 2019 2020 2021 Revenues $ 161,857 Ended December 31 , 2019 2020 2021 Revenues $ 161,857 $ December 31 , 2019 2020 2021 Revenues $ 161,857 $ 182,527 2019 2020 2021 Revenues $ 161,857 $ 182,527 $ 257,637 Costs 2021 Revenues $ 161,857 $ 182,527 $ 257,637 Costs and expense $ 161,857 $ 182,527 $ 257,637 Costs and expense : Cost expense : Cost of revenue 71,896 84,732 110,939 Research and development : Cost of revenue 71,896 84,732 110,939 Research and development 26,018 Cost of revenue 71,896 84,732 110,939 Research and development 26,018 27,573 84,732 110,939 Research and development 26,018 27,573 31,562 Sales and marketing 110,939 Research and development 26,018 27,573 31,562 Sales and marketing 18,464 Research and development 26,018 27,573 31,562 Sales and marketing 18,464 17,946 27,573 31,562 Sales and marketing 18,464 17,946 22,912 General and administrative 31,562 Sales and marketing 18,464 17,946 22,912 General and administrative 9,551 Sales and marketing 18,464 17,946 22,912 General and administrative 9,551 11,052 17,946 22,912 General and administrative 9,551 11,052 13,510 European Commission fine 22,912 General and administrative 9,551 11,052 13,510 European Commission fine 1,697 General and administrative 9,551 11,052 13,510 European Commission fine 1,697 0 11,052 13,510 European Commission fine 1,697 0 0 Total cost and 13,510 European Commission fine 1,697 0 0 Total cost and expense European Commission fine 1,697 0 0 Total cost and expense 127,626 0 Total cost and expense 127,626 141,303 178,923 Income from operation Total cost and expense 127,626 141,303 178,923 Income from operation 34,231 cost and expense 127,626 141,303 178,923 Income from operation 34,231 41,224 141,303 178,923 Income from operation 34,231 41,224 78,714 Other income ( 178,923 Income from operation 34,231 41,224 78,714 Other income ( expense Income from operation 34,231 41,224 78,714 Other income ( expense ) ( expense ) , net 5,394 6,858 12,020 Income before income expense ) , net 5,394 6,858 12,020 Income before income tax ) , net 5,394 6,858 12,020 Income before income tax 39,625 12,020 Income before income tax 39,625 48,082 90,734 Provision for income Income before income tax 39,625 48,082 90,734 Provision for income tax before income tax 39,625 48,082 90,734 Provision for income tax 5,282 90,734 Provision for income tax 5,282 7,813 14,701 Net income $ Provision for income tax 5,282 7,813 14,701 Net income $ 34,343 for income tax 5,282 7,813 14,701 Net income $ 34,343 $ 7,813 14,701 Net income $ 34,343 $ 40,269 $ 76,033 Basic Net income $ 34,343 $ 40,269 $ 76,033 Basic net income $ 34,343 $ 40,269 $ 76,033 Basic net income per share Class C capital stock $ 49.59 $ 59.15 $ 113.88 Diluted capital stock $ 49.59 $ 59.15 $ 113.88 Diluted net income $ 49.59 $ 59.15 $ 113.88 Diluted net income per share Class C capital stock $ 49.16 $ 58.61 $ 112.20 See capital stock $ 49.16 $ 58.61 $ 112.20 See accompanying note $ 49.16 $ 58.61 $ 112.20 See accompanying note . 50 112.20 See accompanying note . 50 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2019 2020 2021 Net Year Ended December 31 , 2019 2020 2021 Net income $ Ended December 31 , 2019 2020 2021 Net income $ 34,343 December 31 , 2019 2020 2021 Net income $ 34,343 $ 2020 2021 Net income $ 34,343 $ 40,269 $ 76,033 Other Net income $ 34,343 $ 40,269 $ 76,033 Other comprehensive income $ 34,343 $ 40,269 $ 76,033 Other comprehensive income ( loss foreign currency translation adjustment ( 119 ) 1,139 ( 1,442 ) translation adjustment ( 119 ) 1,139 ( 1,442 ) Available-for-sale investment ( 119 ) 1,139 ( 1,442 ) Available-for-sale investment : Change unrealized gain ( loss ) 1,611 1,313 ( 1,312 ) Less gain ( loss ) 1,611 1,313 ( 1,312 ) Less : loss ) 1,611 1,313 ( 1,312 ) Less : reclassification adjustment included in net income ( 111 ) ( 513 ) ( income ( 111 ) ( 513 ) ( 64 ) Net ) ( 513 ) ( 64 ) Net change , net expense ) of $ ( 221 ) , $ ( 230 221 ) , $ ( 230 ) , and $ 394 230 ) , and $ 394 1,500 800 ( 1,376 ) ) , and $ 394 1,500 800 ( 1,376 ) Cash , and $ 394 1,500 800 ( 1,376 ) Cash flow $ 394 1,500 800 ( 1,376 ) Cash flow hedge : unrealized gain ( loss ) 22 42 716 Less : reclassification gain ( loss ) 22 42 716 Less : reclassification adjustment ( loss ) 22 42 716 Less : reclassification adjustment for included in net income ( 299 ) ( 116 ) ( income ( 299 ) ( 116 ) ( 154 ) Net ) ( 116 ) ( 154 ) Net change , net ( expense ) of $ 42 , $ 11 , and of $ 42 , $ 11 , and $ ( 122 11 , and $ ( 122 ) ( 277 ) ( $ ( 122 ) ( 277 ) ( 74 ) 562 ) ( 277 ) ( 74 ) 562 Other comprehensive income 277 ) ( 74 ) 562 Other comprehensive income ( loss comprehensive income ( loss ) 1,104 1,865 ( 2,256 ) Comprehensive income ( loss ) 1,104 1,865 ( 2,256 ) Comprehensive income loss ) 1,104 1,865 ( 2,256 ) Comprehensive income $ 35,447 2,256 ) Comprehensive income $ 35,447 $ 42,134 $ 73,777 See Comprehensive income $ 35,447 $ 42,134 $ 73,777 See accompanying note $ 35,447 $ 42,134 $ 73,777 See accompanying note . 51 73,777 See accompanying note . 51 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2018 695,556 $ 45,049 a of December 31 , 2018 695,556 $ 45,049 $ ( of December 31 , 2018 695,556 $ 45,049 $ ( 2,306 31 , 2018 695,556 $ 45,049 $ ( 2,306 ) $ 695,556 $ 45,049 $ ( 2,306 ) $ 134,885 $ 177,628 $ ( 2,306 ) $ 134,885 $ 177,628 Cumulative effect of 2,306 ) $ 134,885 $ 177,628 Cumulative effect of accounting change Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 4 accounting change 0 0 ( 30 ) ( 4 ) ( 0 ( 30 ) ( 4 ) ( 34 ) Common ) ( 4 ) ( 34 ) Common and capital stock Common and capital stock issued 8,120 202 0 0 202 Stock-based and capital stock issued 8,120 202 0 0 202 Stock-based compensation capital stock issued 8,120 202 0 0 202 Stock-based compensation expense stock issued 8,120 202 0 0 202 Stock-based compensation expense 0 issued 8,120 202 0 0 202 Stock-based compensation expense 0 10,890 0 202 Stock-based compensation expense 0 10,890 0 0 10,890 Income 202 Stock-based compensation expense 0 10,890 0 0 10,890 Income tax Stock-based compensation expense 0 10,890 0 0 10,890 Income tax withholding compensation expense 0 10,890 0 0 10,890 Income tax withholding related expense 0 10,890 0 0 10,890 Income tax withholding related to restricted stock unit and other 0 ( 4,455 ) 0 0 unit and other 0 ( 4,455 ) 0 0 ( 4,455 other 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases of 4,455 ) 0 0 ( 4,455 ) Repurchases of capital stock Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale 0 ( 17,102 ) ( 18,396 ) Sale of interest in of interest in consolidated entity 0 160 0 0 160 Net interest in consolidated entity 0 160 0 0 160 Net income in consolidated entity 0 160 0 0 160 Net income 0 consolidated entity 0 160 0 0 160 Net income 0 0 entity 0 160 0 0 160 Net income 0 0 0 0 0 160 Net income 0 0 0 34,343 34,343 Other 0 160 Net income 0 0 0 34,343 34,343 Other comprehensive 160 Net income 0 0 0 34,343 34,343 Other comprehensive income Net income 0 0 0 34,343 34,343 Other comprehensive income ( income 0 0 0 34,343 34,343 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,104 0 1,104 Balance income ( loss ) 0 0 1,104 0 1,104 Balance a ( loss ) 0 0 1,104 0 1,104 Balance a of loss ) 0 0 1,104 0 1,104 Balance a of December ) 0 0 1,104 0 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 688,335 50,552 ( a of December 31 , 2019 688,335 50,552 ( 1,232 ) of December 31 , 2019 688,335 50,552 ( 1,232 ) 152,122 December 31 , 2019 688,335 50,552 ( 1,232 ) 152,122 201,442 , 2019 688,335 50,552 ( 1,232 ) 152,122 201,442 Common and 688,335 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock 50,552 ( 1,232 ) 152,122 201,442 Common and capital stock issued Common and capital stock issued 8,398 168 0 0 168 Stock-based and capital stock issued 8,398 168 0 0 168 Stock-based compensation capital stock issued 8,398 168 0 0 168 Stock-based compensation expense stock issued 8,398 168 0 0 168 Stock-based compensation expense 0 issued 8,398 168 0 0 168 Stock-based compensation expense 0 13,123 0 168 Stock-based compensation expense 0 13,123 0 0 13,123 Income 168 Stock-based compensation expense 0 13,123 0 0 13,123 Income tax Stock-based compensation expense 0 13,123 0 0 13,123 Income tax withholding compensation expense 0 13,123 0 0 13,123 Income tax withholding related expense 0 13,123 0 0 13,123 Income tax withholding related to restricted stock unit and other 0 ( 5,969 ) 0 0 unit and other 0 ( 5,969 ) 0 0 ( 5,969 other 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases of 5,969 ) 0 0 ( 5,969 ) Repurchases of capital stock Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale 0 ( 28,990 ) ( 31,149 ) Sale of interest in of interest in consolidated entity 0 2,795 0 0 2,795 Net interest in consolidated entity 0 2,795 0 0 2,795 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance income ( loss ) 0 0 1,865 0 1,865 Balance a ( loss ) 0 0 1,865 0 1,865 Balance a of loss ) 0 0 1,865 0 1,865 Balance a of December ) 0 0 1,865 0 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 675,222 58,510 633 a of December 31 , 2020 675,222 58,510 633 163,401 222,544 of December 31 , 2020 675,222 58,510 633 163,401 222,544 Common December 31 , 2020 675,222 58,510 633 163,401 222,544 Common and 31 , 2020 675,222 58,510 633 163,401 222,544 Common and capital , 2020 675,222 58,510 633 163,401 222,544 Common and capital stock 2020 675,222 58,510 633 163,401 222,544 Common and capital stock issued Common and capital stock issued 7,225 12 0 0 12 Stock-based and capital stock issued 7,225 12 0 0 12 Stock-based compensation capital stock issued 7,225 12 0 0 12 Stock-based compensation expense stock issued 7,225 12 0 0 12 Stock-based compensation expense 0 issued 7,225 12 0 0 12 Stock-based compensation expense 0 15,539 0 12 Stock-based compensation expense 0 15,539 0 0 15,539 Income 12 Stock-based compensation expense 0 15,539 0 0 15,539 Income tax Stock-based compensation expense 0 15,539 0 0 15,539 Income tax withholding compensation expense 0 15,539 0 0 15,539 Income tax withholding related expense 0 15,539 0 0 15,539 Income tax withholding related to restricted stock unit and other 0 ( 10,273 ) 0 0 unit and other 0 ( 10,273 ) 0 0 ( 10,273 other 0 ( 10,273 ) 0 0 ( 10,273 ) Repurchases 0 ( 10,273 ) 0 0 ( 10,273 ) Repurchases of 10,273 ) 0 0 ( 10,273 ) Repurchases of common and common and capital stock ( 20,326 ) ( 2,324 ) 0 stock ( 20,326 ) ( 2,324 ) 0 ( 47,950 ) 20,326 ) ( 2,324 ) 0 ( 47,950 ) ( 50,274 ( 2,324 ) 0 ( 47,950 ) ( 50,274 ) Sale 0 ( 47,950 ) ( 50,274 ) Sale of interest in of interest in consolidated entity 0 310 0 0 310 Net interest in consolidated entity 0 310 0 0 310 Net income in consolidated entity 0 310 0 0 310 Net income 0 consolidated entity 0 310 0 0 310 Net income 0 0 entity 0 310 0 0 310 Net income 0 0 0 0 0 310 Net income 0 0 0 76,033 76,033 Other 0 310 Net income 0 0 0 76,033 76,033 Other comprehensive 310 Net income 0 0 0 76,033 76,033 Other comprehensive income Net income 0 0 0 76,033 76,033 Other comprehensive income ( income 0 0 0 76,033 76,033 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 2,256 ) 0 income ( loss ) 0 0 ( 2,256 ) 0 ( loss ) 0 0 ( 2,256 ) 0 ( 2,256 ) 0 0 ( 2,256 ) 0 ( 2,256 ) Balance a ( 2,256 ) 0 ( 2,256 ) Balance a of December ) Balance a of December 31 , 2021 662,121 $ 61,774 a of December 31 , 2021 662,121 $ 61,774 $ ( of December 31 , 2021 662,121 $ 61,774 $ ( 1,623 31 , 2021 662,121 $ 61,774 $ ( 1,623 ) $ 662,121 $ 61,774 $ ( 1,623 ) $ 191,484 $ 251,635 $ ( 1,623 ) $ 191,484 $ 251,635 See accompanying note 1,623 ) $ 191,484 $ 251,635 See accompanying note . 52 251,635 See accompanying note . 52 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2019 2020 2021 Operating Year Ended December 31 , 2019 2020 2021 Operating activity Net Ended December 31 , 2019 2020 2021 Operating activity Net income December 31 , 2019 2020 2021 Operating activity Net income $ Operating activity Net income $ 34,343 $ 40,269 $ 76,033 Adjustments Net income $ 34,343 $ 40,269 $ 76,033 Adjustments : Depreciation $ 34,343 $ 40,269 $ 76,033 Adjustments : Depreciation and impairment impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment of property and equipment 10,856 12,905 11,555 Amortization and impairment of intangible and impairment of intangible asset 925 792 886 Stock-based compensation expense impairment of intangible asset 925 792 886 Stock-based compensation expense 10,794 of intangible asset 925 792 886 Stock-based compensation expense 10,794 12,991 792 886 Stock-based compensation expense 10,794 12,991 15,376 Deferred income tax 886 Stock-based compensation expense 10,794 12,991 15,376 Deferred income tax 173 Stock-based compensation expense 10,794 12,991 15,376 Deferred income tax 173 1,390 12,991 15,376 Deferred income tax 173 1,390 1,808 Gain on debt 15,376 Deferred income tax 173 1,390 1,808 Gain on debt and Deferred income tax 173 1,390 1,808 Gain on debt and equity equity security , net ( 2,798 ) ( 6,317 ) ( net ( 2,798 ) ( 6,317 ) ( 12,270 ) Other ) ( 6,317 ) ( 12,270 ) Other ( 592 ) ( 12,270 ) Other ( 592 ) 1,267 ( 213 ) ) Other ( 592 ) 1,267 ( 213 ) Changes in ( 592 ) 1,267 ( 213 ) Changes in asset and acquisition : Accounts receivable ( 4,340 ) ( 6,524 ) ( receivable ( 4,340 ) ( 6,524 ) ( 9,095 ) Income ) ( 6,524 ) ( 9,095 ) Income tax , net Income tax , net ( 3,128 ) 1,209 ( 625 ) , net ( 3,128 ) 1,209 ( 625 ) Other asset ( 3,128 ) 1,209 ( 625 ) Other asset ( 621 625 ) Other asset ( 621 ) ( 1,330 ) ( asset ( 621 ) ( 1,330 ) ( 1,846 ) Accounts ) ( 1,330 ) ( 1,846 ) Accounts payable 428 694 ( 1,846 ) Accounts payable 428 694 283 Accrued expense and 1,846 ) Accounts payable 428 694 283 Accrued expense and other ) Accounts payable 428 694 283 Accrued expense and other liability Accrued expense and other liability 7,170 5,504 7,304 Accrued revenue share expense and other liability 7,170 5,504 7,304 Accrued revenue share 1,273 and other liability 7,170 5,504 7,304 Accrued revenue share 1,273 1,639 5,504 7,304 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 7,304 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 635 Accrued revenue share 1,273 1,639 1,682 Deferred revenue 37 635 774 1,273 1,639 1,682 Deferred revenue 37 635 774 Net cash provided 1,639 1,682 Deferred revenue 37 635 774 Net cash provided by 1,682 Deferred revenue 37 635 774 Net cash provided by operating cash provided by operating activity 54,520 65,124 91,652 Investing activity Purchases provided by operating activity 54,520 65,124 91,652 Investing activity Purchases of by operating activity 54,520 65,124 91,652 Investing activity Purchases of property of property and equipment ( 23,548 ) ( 22,281 ) ( equipment ( 23,548 ) ( 22,281 ) ( 24,640 ) Purchases ) ( 22,281 ) ( 24,640 ) Purchases of marketable security Purchases of marketable security ( 100,315 ) ( 136,576 ) ( security ( 100,315 ) ( 136,576 ) ( 135,196 ) Maturities ) ( 136,576 ) ( 135,196 ) Maturities and sale of and sale of marketable security 97,825 132,906 128,294 Purchases of non-marketable sale of marketable security 97,825 132,906 128,294 Purchases of non-marketable security of marketable security 97,825 132,906 128,294 Purchases of non-marketable security ( Purchases of non-marketable security ( 1,932 ) ( 7,175 ) ( security ( 1,932 ) ( 7,175 ) ( 2,838 ) Maturities ) ( 7,175 ) ( 2,838 ) Maturities and sale of and sale of non-marketable security 405 1,023 934 Acquisitions , net sale of non-marketable security 405 1,023 934 Acquisitions , net of of non-marketable security 405 1,023 934 Acquisitions , net of cash purchase of intangible asset ( 2,515 ) ( 738 ) ( asset ( 2,515 ) ( 738 ) ( 2,618 ) Other ) ( 738 ) ( 2,618 ) Other investing activity 589 2,618 ) Other investing activity 589 68 541 Net cash used ) Other investing activity 589 68 541 Net cash used in Other investing activity 589 68 541 Net cash used in investing used in investing activity ( 29,491 ) ( 32,773 ) ( activity ( 29,491 ) ( 32,773 ) ( 35,523 ) Financing ) ( 32,773 ) ( 35,523 ) Financing activity Net payment to stock-based award activity ( 4,765 ) ( 5,720 ) ( activity ( 4,765 ) ( 5,720 ) ( 10,162 ) Repurchases ) ( 5,720 ) ( 10,162 ) Repurchases of common and common and capital stock ( 18,396 ) ( 31,149 ) ( stock ( 18,396 ) ( 31,149 ) ( 50,274 ) Proceeds ) ( 31,149 ) ( 50,274 ) Proceeds from issuance of debt , net of cost 317 11,761 20,199 Repayments of debt , net of cost 317 11,761 20,199 Repayments of debt ( net of cost 317 11,761 20,199 Repayments of debt ( 585 20,199 Repayments of debt ( 585 ) ( 2,100 ) ( debt ( 585 ) ( 2,100 ) ( 21,435 ) Proceeds ) ( 2,100 ) ( 21,435 ) Proceeds from sale of in consolidated entity , net 220 2,800 310 Net cash used consolidated entity , net 220 2,800 310 Net cash used in entity , net 220 2,800 310 Net cash used in financing used in financing activity ( 23,209 ) ( 24,408 ) ( activity ( 23,209 ) ( 24,408 ) ( 61,362 ) Effect ) ( 24,408 ) ( 61,362 ) Effect of exchange rate cash and cash equivalent ( 23 ) 24 ( 287 ) cash equivalent ( 23 ) 24 ( 287 ) Net increase ( 23 ) 24 ( 287 ) Net increase ( decrease in cash and cash equivalent 1,797 7,967 ( 5,520 ) Cash cash and cash equivalent 1,797 7,967 ( 5,520 ) Cash and cash equivalent 1,797 7,967 ( 5,520 ) Cash and cash equivalent equivalent at beginning of period 16,701 18,498 26,465 Cash and cash at beginning of period 16,701 18,498 26,465 Cash and cash equivalent beginning of period 16,701 18,498 26,465 Cash and cash equivalent at at end of period $ 18,498 $ 26,465 $ 20,945 Supplemental of period $ 18,498 $ 26,465 $ 20,945 Supplemental disclosure of $ 18,498 $ 26,465 $ 20,945 Supplemental disclosure of cash flow , net of refund $ 8,203 $ 4,990 $ 13,412 See of refund $ 8,203 $ 4,990 $ 13,412 See accompanying note $ 8,203 $ 4,990 $ 13,412 See accompanying note . 53 13,412 See accompanying note . 53 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Summary of Significant Accounting incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding and liability . In January 2021 , we completed an assessment effective beginning in fiscal year 2021 . Based on the carrying network equipment a of December 31 , 2020 and those acquired a of December 31 , 2020 and those acquired during the during the year ended December 31 , 2021 , the effect year ended December 31 , 2021 , the effect of this in depreciation expense of $ 2.6 billion and an increase in in net income of $ 2.0 billion , or $ 3.02 2.0 billion , or $ 3.02 per basic share and $ per basic share and $ 2.98 per diluted share , for for the year ended December 31 , 2021 . Revenue Recognition year ended December 31 , 2021 . Revenue Recognition Revenues are discretion in establishing pricing . 54 Table of Contents Alphabet Inc. a flat fee ) . 55 Table of Contents Alphabet Inc. For the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 , December 31 , 2019 , 2020 and 2021 , advertising and , 2019 , 2020 and 2021 , advertising and promotional expense promotional expense totaled approximately $ 6.8 billion , $ 5.4 billion $ 6.8 billion , $ 5.4 billion , and $ 7.9 5.4 billion , and $ 7.9 billion , respectively . Performance measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are or no market activity . 56 Table of Contents Alphabet Inc liquid security with maturity beyond 12 month a current asset under classified a available-for-sale security . 57 Table of Contents Alphabet Inc. Derivative Financial Instruments See Note 3 for the accounting policy pertaining on account receivable wa $ 789 million and $ 550 million $ 789 million and $ 550 million a of December 31 550 million a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively . December 31 , 2020 and 2021 , respectively . Other Our are the primary beneficiary . 58 Table of Contents Alphabet Inc. over period of seven to 25 year . We depreciate information one to twelve year . 59 Table of Contents Alphabet Inc. benefit that is greater than 50 % likely to be realized current period presentation . Note 2 . Revenues Revenue Recognition The ) : Year Ended December 31 , 2019 2020 2021 Google Year Ended December 31 , 2019 2020 2021 Google Search & Ended December 31 , 2019 2020 2021 Google Search & other December 31 , 2019 2020 2021 Google Search & other $ Google Search & other $ 98,115 $ 104,062 $ 148,951 YouTube & other $ 98,115 $ 104,062 $ 148,951 YouTube ad 15,149 $ 98,115 $ 104,062 $ 148,951 YouTube ad 15,149 19,772 28,845 104,062 $ 148,951 YouTube ad 15,149 19,772 28,845 Google Network 21,547 $ 148,951 YouTube ad 15,149 19,772 28,845 Google Network 21,547 23,090 148,951 YouTube ad 15,149 19,772 28,845 Google Network 21,547 23,090 31,701 15,149 19,772 28,845 Google Network 21,547 23,090 31,701 Google advertising 134,811 19,772 28,845 Google Network 21,547 23,090 31,701 Google advertising 134,811 146,924 28,845 Google Network 21,547 23,090 31,701 Google advertising 134,811 146,924 209,497 21,547 23,090 31,701 Google advertising 134,811 146,924 209,497 Google other 17,014 23,090 31,701 Google advertising 134,811 146,924 209,497 Google other 17,014 21,711 31,701 Google advertising 134,811 146,924 209,497 Google other 17,014 21,711 28,032 134,811 146,924 209,497 Google other 17,014 21,711 28,032 Google Services total 146,924 209,497 Google other 17,014 21,711 28,032 Google Services total 151,825 209,497 Google other 17,014 21,711 28,032 Google Services total 151,825 168,635 21,711 28,032 Google Services total 151,825 168,635 237,529 Google Cloud 8,918 28,032 Google Services total 151,825 168,635 237,529 Google Cloud 8,918 13,059 Google Services total 151,825 168,635 237,529 Google Cloud 8,918 13,059 19,206 151,825 168,635 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 168,635 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 657 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 657 753 8,918 13,059 19,206 Other Bets 659 657 753 Hedging gain ( 13,059 19,206 Other Bets 659 657 753 Hedging gain ( loss 19,206 Other Bets 659 657 753 Hedging gain ( loss ) Hedging gain ( loss ) 455 176 149 Total revenue $ gain ( loss ) 455 176 149 Total revenue $ 161,857 ( loss ) 455 176 149 Total revenue $ 161,857 $ 176 149 Total revenue $ 161,857 $ 182,527 $ 257,637 No Total revenue $ 161,857 $ 182,527 $ 257,637 No individual customer $ 161,857 $ 182,527 $ 257,637 No individual customer or group affiliated customer represented more than 10 % of our revenue in % of our revenue in 2019 , 2020 , or 2021 our revenue in 2019 , 2020 , or 2021 . 60 2019 , 2020 , or 2021 . 60 Table of Contents 2020 , or 2021 . 60 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 2021 United Year Ended December 31 , 2019 2020 2021 United States $ Ended December 31 , 2019 2020 2021 United States $ 74,843 December 31 , 2019 2020 2021 United States $ 74,843 46 2020 2021 United States $ 74,843 46 % $ 85,014 47 2021 United States $ 74,843 46 % $ 85,014 47 % $ 74,843 46 % $ 85,014 47 % $ 117,854 46 74,843 46 % $ 85,014 47 % $ 117,854 46 % $ 85,014 47 % $ 117,854 46 % EMEA ( 1 85,014 47 % $ 117,854 46 % EMEA ( 1 ) 117,854 46 % EMEA ( 1 ) 50,645 31 55,370 30 % EMEA ( 1 ) 50,645 31 55,370 30 79,107 31 EMEA ( 1 ) 50,645 31 55,370 30 79,107 31 APAC ( 1 ) 50,645 31 55,370 30 79,107 31 APAC ( 1 ) 50,645 31 55,370 30 79,107 31 APAC ( 1 ) 50,645 31 55,370 30 79,107 31 APAC ( 1 ) 50,645 31 55,370 30 79,107 31 APAC ( 1 ) 26,928 30 79,107 31 APAC ( 1 ) 26,928 17 32,550 18 31 APAC ( 1 ) 26,928 17 32,550 18 46,123 18 APAC ( 1 ) 26,928 17 32,550 18 46,123 18 Other ( 1 ) 26,928 17 32,550 18 46,123 18 Other Americas 1 ) 26,928 17 32,550 18 46,123 18 Other Americas ( ) 26,928 17 32,550 18 46,123 18 Other Americas ( 1 26,928 17 32,550 18 46,123 18 Other Americas ( 1 ) 46,123 18 Other Americas ( 1 ) 8,986 6 9,417 5 Other Americas ( 1 ) 8,986 6 9,417 5 14,404 5 Americas ( 1 ) 8,986 6 9,417 5 14,404 5 Hedging ( 1 ) 8,986 6 9,417 5 14,404 5 Hedging gain 1 ) 8,986 6 9,417 5 14,404 5 Hedging gain ( ) 8,986 6 9,417 5 14,404 5 Hedging gain ( loss 8,986 6 9,417 5 14,404 5 Hedging gain ( loss ) Hedging gain ( loss ) 455 0 176 0 149 0 gain ( loss ) 455 0 176 0 149 0 Total ( loss ) 455 0 176 0 149 0 Total revenue loss ) 455 0 176 0 149 0 Total revenue $ ) 455 0 176 0 149 0 Total revenue $ 161,857 455 0 176 0 149 0 Total revenue $ 161,857 100 149 0 Total revenue $ 161,857 100 % $ 182,527 100 0 Total revenue $ 161,857 100 % $ 182,527 100 % $ 161,857 100 % $ 182,527 100 % $ 257,637 100 161,857 100 % $ 182,527 100 % $ 257,637 100 % $ 182,527 100 % $ 257,637 100 % ( 1 ) 182,527 100 % $ 257,637 100 % ( 1 ) Regions $ 257,637 100 % ( 1 ) Regions represent Europe , Deferred Revenues As of December 31 , 2021 we had $ As of December 31 , 2021 we had $ 51.0 billion , 2021 we had $ 51.0 billion of remaining performance obligation a revenue over the next 24 month with the remaining thereafter deferred revenue a of December 31 , 2020 wa $ 3.0 a of December 31 , 2020 wa $ 3.0 billion , 31 , 2020 wa $ 3.0 billion , of which $ billion , of which $ 2.3 billion wa recognized a revenue for the year ending December 31 , 2021 . Note 3 year ending December 31 , 2021 . Note 3 . Financial 31 , 2021 . Note 3 . Financial Instruments Debt Securities for a available-for-sale within Level 2 in the fair value hierarchy fair value option were $ 87 million and $ ( 35 87 million and $ ( 35 ) million a of December ) million a of December 31 , 2020 and December 31 a of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , respectively . 2020 and December 31 , 2021 , respectively . As of respectively . As of December 31 , 2020 and December 31 As of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , the fair 2020 and December 31 , 2021 , the fair value of these debt security wa $ 2.0 billion and $ 4.7 billion $ 2.0 billion and $ 4.7 billion , respectively . 61 4.7 billion , respectively . 61 Table of Contents Alphabet Inc investment category a of December 31 , 2020 and 2021 ( a of December 31 , 2020 and 2021 ( in million December 31 , 2020 and 2021 ( in million ) : ) : As of December 31 , 2020 Adjusted Cost Gross As of December 31 , 2020 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 3,564 $ 0 deposit ( 1 ) $ 3,564 $ 0 $ 0 $ 1 ) $ 3,564 $ 0 $ 0 $ 3,564 $ $ 3,564 $ 0 $ 0 $ 3,564 $ 3,564 $ $ 0 $ 0 $ 3,564 $ 3,564 $ 0 Government $ 0 $ 3,564 $ 3,564 $ 0 Government bond 55,156 $ 3,564 $ 3,564 $ 0 Government bond 55,156 793 ( 3,564 $ 0 Government bond 55,156 793 ( 9 ) 55,940 $ 0 Government bond 55,156 793 ( 9 ) 55,940 2,527 Government bond 55,156 793 ( 9 ) 55,940 2,527 53,413 Corporate 55,156 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 793 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 ( 9 ) 55,940 2,527 53,413 Corporate debt security 31,521 704 2,527 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 53,413 Corporate debt security 31,521 704 ( 2 ) 32,223 8 debt security 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed 31,521 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed 704 ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security ( 2 ) 32,223 8 32,215 Mortgage-backed and asset-backed security 16,767 32,215 Mortgage-backed and asset-backed security 16,767 364 ( 7 ) 17,124 Mortgage-backed and asset-backed security 16,767 364 ( 7 ) 17,124 0 asset-backed security 16,767 364 ( 7 ) 17,124 0 17,124 Total 16,767 364 ( 7 ) 17,124 0 17,124 Total $ 107,008 364 ( 7 ) 17,124 0 17,124 Total $ 107,008 $ ( 7 ) 17,124 0 17,124 Total $ 107,008 $ 1,861 17,124 0 17,124 Total $ 107,008 $ 1,861 $ ( 18 17,124 Total $ 107,008 $ 1,861 $ ( 18 ) $ 107,008 $ 1,861 $ ( 18 ) $ 108,851 $ 6,099 $ ( 18 ) $ 108,851 $ 6,099 $ 102,752 As 18 ) $ 108,851 $ 6,099 $ 102,752 As of December $ 108,851 $ 6,099 $ 102,752 As of December 31 , $ 102,752 As of December 31 , 2021 Adjusted Cost Gross As of December 31 , 2021 Adjusted Cost Gross Unrealized Gains Cash Equivalents Marketable Securities Level 2 : Time deposit ( 1 2 : Time deposit ( 1 ) $ 5,133 $ 0 deposit ( 1 ) $ 5,133 $ 0 $ 0 $ 1 ) $ 5,133 $ 0 $ 0 $ 5,133 $ $ 5,133 $ 0 $ 0 $ 5,133 $ 5,133 $ $ 0 $ 0 $ 5,133 $ 5,133 $ 0 Government $ 0 $ 5,133 $ 5,133 $ 0 Government bond 53,288 $ 5,133 $ 5,133 $ 0 Government bond 53,288 258 ( 5,133 $ 0 Government bond 53,288 258 ( 238 ) 53,308 $ 0 Government bond 53,288 258 ( 238 ) 53,308 5 Government bond 53,288 258 ( 238 ) 53,308 5 53,303 Corporate 53,288 258 ( 238 ) 53,308 5 53,303 Corporate debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 ( 238 ) 53,308 5 53,303 Corporate debt security 35,605 194 5 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 53,303 Corporate debt security 35,605 194 ( 223 ) 35,576 12 debt security 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security 18,829 35,564 Mortgage-backed and asset-backed security 18,829 96 ( 112 ) 18,813 Mortgage-backed and asset-backed security 18,829 96 ( 112 ) 18,813 0 asset-backed security 18,829 96 ( 112 ) 18,813 0 18,813 Total 18,829 96 ( 112 ) 18,813 0 18,813 Total $ 112,855 96 ( 112 ) 18,813 0 18,813 Total $ 112,855 $ ( 112 ) 18,813 0 18,813 Total $ 112,855 $ 548 18,813 0 18,813 Total $ 112,855 $ 548 $ ( 573 18,813 Total $ 112,855 $ 548 $ ( 573 ) $ 112,855 $ 548 $ ( 573 ) $ 112,830 $ 5,150 $ ( 573 ) $ 112,830 $ 5,150 $ 107,680 ( 573 ) $ 112,830 $ 5,150 $ 107,680 ( 1 ) $ 112,830 $ 5,150 $ 107,680 ( 1 ) The majority $ 5,150 $ 107,680 ( 1 ) The majority of our gross realized gain of $ 292 million , $ 899 million $ 292 million , $ 899 million , and $ 432 899 million , and $ 432 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . We recognized gross realized loss of $ 143 million , $ 184 million $ 143 million , $ 184 million , and $ 329 184 million , and $ 329 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . We reflect ) : As of December 31 , 2021 Due in 1 As of December 31 , 2021 Due in 1 year or 31 , 2021 Due in 1 year or le $ 16,192 1 year or le $ 16,192 Due in 1 year through le $ 16,192 Due in 1 year through 5 year 78,625 Due in 1 year through 5 year 78,625 Due in 5 1 year through 5 year 78,625 Due in 5 year through 5 year 78,625 Due in 5 year through 10 year 4,675 Due in 5 year through 10 year 4,675 Due after 10 5 year through 10 year 4,675 Due after 10 year 12,864 10 year 4,675 Due after 10 year 12,864 Total $ 112,356 4,675 Due after 10 year 12,864 Total $ 112,356 The following 10 year 12,864 Total $ 112,356 The following table present fair to AOCI a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , aggregated by December 31 , 2020 and 2021 , aggregated by investment category ) : As of December 31 , 2020 Less than 12 As of December 31 , 2020 Less than 12 Months 12 31 , 2020 Less than 12 Months 12 Months or Greater 2020 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 5,516 $ ( 9 ) $ bond $ 5,516 $ ( 9 ) $ 3 $ 0 $ ( 9 ) $ 3 $ 0 $ 5,519 $ 9 ) $ 3 $ 0 $ 5,519 $ ( 9 $ 3 $ 0 $ 5,519 $ ( 9 ) Corporate 0 $ 5,519 $ ( 9 ) Corporate debt security 1,999 9 ) Corporate debt security 1,999 ( 1 ) 0 0 Corporate debt security 1,999 ( 1 ) 0 0 1,999 ( security 1,999 ( 1 ) 0 0 1,999 ( 1 ) 1,999 ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed ( 1 ) 0 0 1,999 ( 1 ) Mortgage-backed and ) 0 0 1,999 ( 1 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 929 ( 5 ) 242 ( and asset-backed security 929 ( 5 ) 242 ( 2 ) security 929 ( 5 ) 242 ( 2 ) 1,171 ( ( 5 ) 242 ( 2 ) 1,171 ( 7 ) ) 242 ( 2 ) 1,171 ( 7 ) Total $ ( 2 ) 1,171 ( 7 ) Total $ 8,444 $ ( 7 ) Total $ 8,444 $ ( 15 ) $ Total $ 8,444 $ ( 15 ) $ 245 $ ( $ ( 15 ) $ 245 $ ( 2 ) $ ) $ 245 $ ( 2 ) $ 8,689 $ ( $ ( 2 ) $ 8,689 $ ( 17 ) 62 ) $ 8,689 $ ( 17 ) 62 Table of Contents 8,689 $ ( 17 ) 62 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2021 Less than 12 As of December 31 , 2021 Less than 12 Months 12 31 , 2021 Less than 12 Months 12 Months or Greater 2021 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 32,843 $ ( 236 ) $ bond $ 32,843 $ ( 236 ) $ 71 $ ( $ ( 236 ) $ 71 $ ( 2 ) $ ) $ 71 $ ( 2 ) $ 32,914 $ ( $ ( 2 ) $ 32,914 $ ( 238 ) Corporate ) $ 32,914 $ ( 238 ) Corporate debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248 ( 6 ) 11,750 ( 112 ) Total $ ( 6 ) 11,750 ( 112 ) Total $ 67,082 $ ( 112 ) Total $ 67,082 $ ( 494 ) $ Total $ 67,082 $ ( 494 ) $ 622 $ ( $ ( 494 ) $ 622 $ ( 13 ) $ ) $ 622 $ ( 13 ) $ 67,704 $ ( $ ( 13 ) $ 67,704 $ ( 507 ) During ) $ 67,704 $ ( 507 ) During the year ended During the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , we did December 31 , 2020 and 2021 , we did not recognize wa immaterial . See Note 7 for further detail on other value and classified within Level 1 and 2 in the fair classified within Level 1 and 2 in the fair value hierarchy transaction are classified within Level 2 or Level 3 in the within Level 2 or Level 3 in the fair value hierarchy impairment are classified within Level 3 . Gains and loss on ) : Year Ended December 31 , 2020 2021 Net gain Year Ended December 31 , 2020 2021 Net gain ( loss Ended December 31 , 2020 2021 Net gain ( loss ) sold during the period $ 1,339 $ 1,196 Unrealized gain ( the period $ 1,339 $ 1,196 Unrealized gain ( loss ) the end of the period 4,253 11,184 Total gain ( loss end of the period 4,253 11,184 Total gain ( loss ) expense ) , net $ 5,592 $ 12,380 In the table , net $ 5,592 $ 12,380 In the table above , sold during the period . 63 Table of Contents Alphabet Inc. During the Year Ended December 31 , 2020 2021 Total sale Year Ended December 31 , 2020 2021 Total sale price $ Ended December 31 , 2020 2021 Total sale price $ 4,767 2021 Total sale price $ 4,767 $ 5,604 Total initial cost sale price $ 4,767 $ 5,604 Total initial cost 2,674 1,206 $ 5,604 Total initial cost 2,674 1,206 Cumulative net gain ( 5,604 Total initial cost 2,674 1,206 Cumulative net gain ( 1 1,206 Cumulative net gain ( 1 ) $ 2,093 $ 4,398 gain ( 1 ) $ 2,093 $ 4,398 ( 1 ) 1 ) $ 2,093 $ 4,398 ( 1 ) Cumulative net $ 2,093 $ 4,398 ( 1 ) Cumulative net gain excludes excludes cumulative loss of $ 738 million resulting from our equity during the year ended December 31 , 2021 . The associated year ended December 31 , 2021 . The associated derivative liability ) : As of December 31 , 2020 Marketable Equity Securities As of December 31 , 2020 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative initial cost $ 2,227 $ 14,616 $ 16,843 Cumulative net gain $ 2,227 $ 14,616 $ 16,843 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,631 4,277 7,908 Carrying loss ) ( 1 ) 3,631 4,277 7,908 Carrying value ( ) ( 1 ) 3,631 4,277 7,908 Carrying value ( 2 ( 1 ) 3,631 4,277 7,908 Carrying value ( 2 ) 4,277 7,908 Carrying value ( 2 ) $ 5,858 $ 18,893 value ( 2 ) $ 5,858 $ 18,893 $ 24,751 ( 2 ) $ 5,858 $ 18,893 $ 24,751 ( 1 ) $ 5,858 $ 18,893 $ 24,751 ( 1 ) Non-marketable equity $ 18,893 $ 24,751 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 6.1 billion gain and $ 1.9 6.1 billion gain and $ 1.9 billion loss ( including impairment including impairment ) . ( 2 ) The long-term portion of lock-up restriction ) of $ 429 million is included within other asset . As of December 31 , 2021 Marketable Equity Securities As of December 31 , 2021 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 4,211 $ 15,135 $ 19,346 Cumulative initial cost $ 4,211 $ 15,135 $ 19,346 Cumulative net gain $ 4,211 $ 15,135 $ 19,346 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,587 12,436 16,023 Carrying loss ) ( 1 ) 3,587 12,436 16,023 Carrying value ( ) ( 1 ) 3,587 12,436 16,023 Carrying value ( 2 ( 1 ) 3,587 12,436 16,023 Carrying value ( 2 ) 12,436 16,023 Carrying value ( 2 ) $ 7,798 $ 27,571 value ( 2 ) $ 7,798 $ 27,571 $ 35,369 ( 2 ) $ 7,798 $ 27,571 $ 35,369 ( 1 ) $ 7,798 $ 27,571 $ 35,369 ( 1 ) Non-marketable equity $ 27,571 $ 35,369 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 14.1 billion gain and $ 1.7 14.1 billion gain and $ 1.7 billion loss ( including impairment including impairment ) . ( 2 ) The long-term portion of lock-up restriction ) of $ 1.4 billion is included within other investment category a of December 31 , 2020 and 2021 ( a of December 31 , 2020 and 2021 ( in million December 31 , 2020 and 2021 ( in million ) : ) : As of December 31 , 2020 As of December As of December 31 , 2020 As of December 31 , , 2020 As of December 31 , 2021 Cash and Cash As of December 31 , 2021 Cash and Cash Equivalents Marketable Equivalents Marketable Equity Securities Level 1 : Money market fund $ : Money market fund $ 12,210 $ 0 $ 7,499 $ market fund $ 12,210 $ 0 $ 7,499 $ 0 Marketable $ 12,210 $ 0 $ 7,499 $ 0 Marketable equity security $ 0 $ 7,499 $ 0 Marketable equity security ( 1 0 Marketable equity security ( 1 ) ( 2 ) 0 security ( 1 ) ( 2 ) 0 5,470 0 7,447 1 ) ( 2 ) 0 5,470 0 7,447 12,210 5,470 ) ( 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 ( 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 7,447 2 ) 0 5,470 0 7,447 12,210 5,470 7,499 7,447 Level ) 0 5,470 0 7,447 12,210 5,470 7,499 7,447 Level 2 0 5,470 0 7,447 12,210 5,470 7,499 7,447 Level 2 : 5,470 0 7,447 12,210 5,470 7,499 7,447 Level 2 : Mutual 0 7,447 12,210 5,470 7,499 7,447 Level 2 : Mutual fund 12,210 5,470 7,499 7,447 Level 2 : Mutual fund 0 388 Level 2 : Mutual fund 0 388 0 351 Total $ 2 : Mutual fund 0 388 0 351 Total $ 12,210 : Mutual fund 0 388 0 351 Total $ 12,210 $ Mutual fund 0 388 0 351 Total $ 12,210 $ 5,858 388 0 351 Total $ 12,210 $ 5,858 $ 7,499 $ 351 Total $ 12,210 $ 5,858 $ 7,499 $ 7,798 ( $ 12,210 $ 5,858 $ 7,499 $ 7,798 ( 1 ) $ 5,858 $ 7,499 $ 7,798 ( 1 ) The balance $ 7,499 $ 7,798 ( 1 ) The balance a of The balance a of December 31 , 2020 and 2021 includes a of December 31 , 2020 and 2021 includes investment that December 31 , 2020 and 2021 includes investment that were reclassified lock-up restriction ) . ( 2 ) As of December 31 2 ) As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , the long-term December 31 , 2020 and 2021 , the long-term portion of lock-up restriction ) of $ 429 million and $ 1.4 billion $ 429 million and $ 1.4 billion , respectively , is within other non-current asset . 64 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2020 2021 Unrealized gain Year Ended December 31 , 2020 2021 Unrealized gain on non-marketable Ended December 31 , 2020 2021 Unrealized gain on non-marketable equity on non-marketable equity security $ 3,020 $ 9,971 Unrealized loss on equity security $ 3,020 $ 9,971 Unrealized loss on non-marketable equity ( including impairment ) ( 1,489 ) ( 122 ) Total ) ( 1,489 ) ( 122 ) Total unrealized gain ( on non-marketable equity security $ 1,531 $ 9,849 During the year equity security $ 1,531 $ 9,849 During the year ended December During the year ended December 31 , 2021 , included in year ended December 31 , 2021 , included in the $ , included in the $ 27.6 billion of non-marketable equity security of the period , $ 18.6 billion were measured at fair net unrealized gain of $ 9.8 billion . Equity security accounted Equity Method As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , equity security December 31 , 2020 and 2021 , equity security accounted for carrying value of approximately $ 1.4 billion and $ 1.5 billion $ 1.4 billion and $ 1.5 billion , respectively . Our of Income . See Note 7 for further detail on other the derivative primarily within Level 2 in the fair value hierarchy These contract have maturity of 24 month or le . Cash de-designation . As of December 31 , 2021 , the net As of December 31 , 2021 , the net accumulated gain before tax effect wa $ 518 million , which is expected into earnings within the next 12 month . Fair Value Hedges hedge amount included in the 65 Table of Contents Alphabet Inc. , net . See Note 7 for further detail on other ) : As of December 31 , 2020 2021 Derivatives Designated As of December 31 , 2020 2021 Derivatives Designated a Hedging of December 31 , 2020 2021 Derivatives Designated a Hedging Instruments contract Cash flow hedge $ 10,187 $ 16,362 Fair value hedge flow hedge $ 10,187 $ 16,362 Fair value hedge $ 1,569 16,362 Fair value hedge $ 1,569 $ 2,556 Net investment hedge value hedge $ 1,569 $ 2,556 Net investment hedge $ 9,965 2,556 Net investment hedge $ 9,965 $ 10,159 Derivatives Not Designated investment hedge $ 9,965 $ 10,159 Derivatives Not Designated a Hedging : Foreign exchange contract $ 39,861 $ 41,031 Other contract $ exchange contract $ 39,861 $ 41,031 Other contract $ 2,399 $ $ 41,031 Other contract $ 2,399 $ 4,275 66 Table of Other contract $ 2,399 $ 4,275 66 Table of Contents Alphabet contract $ 2,399 $ 4,275 66 Table of Contents Alphabet Inc ) : As of December 31 , 2020 Balance Sheet Location As of December 31 , 2020 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 33 $ 316 $ 349 Other non-current asset $ 33 $ 316 $ 349 Other contract Other $ 33 $ 316 $ 349 Other contract Other current and Other current and non-current asset 0 16 16 Total $ 33 current and non-current asset 0 16 16 Total $ 33 $ and non-current asset 0 16 16 Total $ 33 $ 332 0 16 16 Total $ 33 $ 332 $ 365 Derivative 16 Total $ 33 $ 332 $ 365 Derivative Liabilities : $ 33 $ 332 $ 365 Derivative Liabilities : Level 2 365 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 395 $ 185 $ 580 Other and non-current $ 395 $ 185 $ 580 Other contract Accrued $ 395 $ 185 $ 580 Other contract Accrued expense and liability , current and non-current 0 942 942 Total $ 395 , current and non-current 0 942 942 Total $ 395 $ current and non-current 0 942 942 Total $ 395 $ 1,127 0 942 942 Total $ 395 $ 1,127 $ 1,522 As 942 Total $ 395 $ 1,127 $ 1,522 As of December $ 395 $ 1,127 $ 1,522 As of December 31 , $ 1,522 As of December 31 , 2021 Balance Sheet Location As of December 31 , 2021 Balance Sheet Location Fair Value Value Derivative Assets : Level 2 : Foreign exchange contract Other current and non-current asset $ 867 $ 42 $ 909 Other non-current asset $ 867 $ 42 $ 909 Other contract Other $ 867 $ 42 $ 909 Other contract Other current and Other current and non-current asset 0 52 52 Total $ 867 current and non-current asset 0 52 52 Total $ 867 $ and non-current asset 0 52 52 Total $ 867 $ 94 0 52 52 Total $ 867 $ 94 $ 961 Derivative 52 Total $ 867 $ 94 $ 961 Derivative Liabilities : $ 867 $ 94 $ 961 Derivative Liabilities : Level 2 961 Derivative Liabilities : Level 2 : Foreign exchange contract Accrued , current and non-current $ 8 $ 452 $ 460 Other and non-current $ 8 $ 452 $ 460 Other contract Accrued $ 8 $ 452 $ 460 Other contract Accrued expense and liability , current and non-current 0 121 121 Total $ 8 , current and non-current 0 121 121 Total $ 8 $ current and non-current 0 121 121 Total $ 8 $ 573 0 121 121 Total $ 8 $ 573 $ 581 67 121 Total $ 8 $ 573 $ 581 67 Table of $ 8 $ 573 $ 581 67 Table of Contents Alphabet 8 $ 573 $ 581 67 Table of Contents Alphabet Inc Tax Effect Year Ended December 31 , 2019 2020 2021 Derivatives Year Ended December 31 , 2019 2020 2021 Derivatives in Cash Ended December 31 , 2019 2020 2021 Derivatives in Cash Flow December 31 , 2019 2020 2021 Derivatives in Cash Flow Hedging the assessment of effectiveness $ 38 $ 102 $ 806 Amount of effectiveness $ 38 $ 102 $ 806 Amount excluded from $ 38 $ 102 $ 806 Amount excluded from the assessment the assessment of effectiveness ( 14 ) ( 37 ) 48 effectiveness ( 14 ) ( 37 ) 48 Derivatives in Net 14 ) ( 37 ) 48 Derivatives in Net Investment Hedging in the assessment of effectiveness 131 ( 851 ) 754 Total assessment of effectiveness 131 ( 851 ) 754 Total $ 155 effectiveness 131 ( 851 ) 754 Total $ 155 $ ( 851 ) 754 Total $ 155 $ ( 786 ) $ Total $ 155 $ ( 786 ) $ 1,608 The effect $ ( 786 ) $ 1,608 The effect of derivative instrument in Income Year Ended December 31 , 2019 2020 2021 Revenues Year Ended December 31 , 2019 2020 2021 Revenues Other income Ended December 31 , 2019 2020 2021 Revenues Other income ( December 31 , 2019 2020 2021 Revenues Other income ( expense value hedge are recorded $ 161,857 $ 5,394 $ 182,527 $ are recorded $ 161,857 $ 5,394 $ 182,527 $ 6,858 $ $ 161,857 $ 5,394 $ 182,527 $ 6,858 $ 257,637 $ $ 5,394 $ 182,527 $ 6,858 $ 257,637 $ 12,020 Gains $ 182,527 $ 6,858 $ 257,637 $ 12,020 Gains ( Losses $ 6,858 $ 257,637 $ 12,020 Gains ( Losses ) on from AOCI to income $ 367 $ 0 $ 144 $ to income $ 367 $ 0 $ 144 $ 0 $ $ 367 $ 0 $ 144 $ 0 $ 165 $ $ 0 $ 144 $ 0 $ 165 $ 0 Amount $ 144 $ 0 $ 165 $ 0 Amount excluded from $ 0 $ 165 $ 0 Amount excluded from the assessment based on an amortization approach 88 0 33 0 ( 16 on an amortization approach 88 0 33 0 ( 16 ) an amortization approach 88 0 33 0 ( 16 ) 0 amortization approach 88 0 33 0 ( 16 ) 0 Gains 88 0 33 0 ( 16 ) 0 Gains ( Losses 33 0 ( 16 ) 0 Gains ( Losses ) on Foreign exchange contract Hedged item 0 ( 19 ) 0 18 contract Hedged item 0 ( 19 ) 0 18 0 ( item 0 ( 19 ) 0 18 0 ( 95 ) 0 ( 19 ) 0 18 0 ( 95 ) Derivatives ( 19 ) 0 18 0 ( 95 ) Derivatives designated ) 0 18 0 ( 95 ) Derivatives designated a hedging Derivatives designated a hedging instrument 0 19 0 ( 18 ) designated a hedging instrument 0 19 0 ( 18 ) 0 a hedging instrument 0 19 0 ( 18 ) 0 95 instrument 0 19 0 ( 18 ) 0 95 Amount excluded 19 0 ( 18 ) 0 95 Amount excluded from the 0 ( 18 ) 0 95 Amount excluded from the assessment from the assessment of effectiveness 0 25 0 4 0 8 the assessment of effectiveness 0 25 0 4 0 8 Gains assessment of effectiveness 0 25 0 4 0 8 Gains ( of effectiveness 0 25 0 4 0 8 Gains ( Losses effectiveness 0 25 0 4 0 8 Gains ( Losses ) 0 25 0 4 0 8 Gains ( Losses ) on from the assessment of effectiveness 0 243 0 151 0 82 the assessment of effectiveness 0 243 0 151 0 82 Gains assessment of effectiveness 0 243 0 151 0 82 Gains ( of effectiveness 0 243 0 151 0 82 Gains ( Losses effectiveness 0 243 0 151 0 82 Gains ( Losses ) 0 243 0 151 0 82 Gains ( Losses ) on Instruments : Foreign exchange contract 0 ( 413 ) 0 718 Foreign exchange contract 0 ( 413 ) 0 718 0 ( contract 0 ( 413 ) 0 718 0 ( 860 ) 0 ( 413 ) 0 718 0 ( 860 ) Other ( 413 ) 0 718 0 ( 860 ) Other Contracts ) 0 718 0 ( 860 ) Other Contracts 0 0 ( 860 ) Other Contracts 0 0 0 ( 906 ) 860 ) Other Contracts 0 0 0 ( 906 ) 0 ) Other Contracts 0 0 0 ( 906 ) 0 101 Contracts 0 0 0 ( 906 ) 0 101 Total gain 0 0 ( 906 ) 0 101 Total gain ( loss 0 ( 906 ) 0 101 Total gain ( loss ) gain ( loss ) $ 455 $ ( 145 ) $ ) $ 455 $ ( 145 ) $ 177 $ ( $ ( 145 ) $ 177 $ ( 33 ) $ ) $ 177 $ ( 33 ) $ 149 $ ( $ ( 33 ) $ 149 $ ( 669 ) 68 ) $ 149 $ ( 669 ) 68 Table of Contents 149 $ ( 669 ) 68 Table of Contents Alphabet Inc of Assets As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 397 $ ( 32 ) $ Derivatives $ 397 $ ( 32 ) $ 365 $ ( $ ( 32 ) $ 365 $ ( 295 ) ( ) $ 365 $ ( 295 ) ( 1 ) $ $ ( 295 ) ( 1 ) $ ( 16 ) ( 1 ) $ ( 16 ) $ 0 $ 54 $ ( 16 ) $ 0 $ 54 As of December 16 ) $ 0 $ 54 As of December 31 , $ 54 As of December 31 , 2021 Gross Amounts Not As of December 31 , 2021 Gross Amounts Not Offset in Net Assets Exposed Derivatives $ 999 $ ( 38 ) $ Derivatives $ 999 $ ( 38 ) $ 961 $ ( $ ( 38 ) $ 961 $ ( 434 ) ( ) $ 961 $ ( 434 ) ( 1 ) $ $ ( 434 ) ( 1 ) $ ( 394 ) ( 1 ) $ ( 394 ) $ ( 12 ) ( 394 ) $ ( 12 ) $ 121 ( 1 $ ( 12 ) $ 121 ( 1 ) The balance 12 ) $ 121 ( 1 ) The balance a of The balance a of December 31 , 2020 and 2021 were a of December 31 , 2020 and 2021 were related to December 31 , 2020 and 2021 were related to derivative liability of Liabilities As of December 31 , 2020 Gross Amounts Not As of December 31 , 2020 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 1,554 $ ( 32 ) $ Derivatives $ 1,554 $ ( 32 ) $ 1,522 $ ( $ ( 32 ) $ 1,522 $ ( 295 ) ( ) $ 1,522 $ ( 295 ) ( 2 ) $ $ ( 295 ) ( 2 ) $ ( 1 ) ( 2 ) $ ( 1 ) $ ( 943 ) ( 1 ) $ ( 943 ) $ 283 As of $ ( 943 ) $ 283 As of December 31 , $ 283 As of December 31 , 2021 Gross Amounts Not As of December 31 , 2021 Gross Amounts Not Offset in Pledged Net Liabilities Derivatives $ 619 $ ( 38 ) $ Derivatives $ 619 $ ( 38 ) $ 581 $ ( $ ( 38 ) $ 581 $ ( 434 ) ( ) $ 581 $ ( 434 ) ( 2 ) $ $ ( 434 ) ( 2 ) $ ( 4 ) ( 2 ) $ ( 4 ) $ ( 110 ) ( 4 ) $ ( 110 ) $ 33 ( 2 $ ( 110 ) $ 33 ( 2 ) The balance 110 ) $ 33 ( 2 ) The balance a of The balance a of December 31 , 2020 and 2021 were a of December 31 , 2020 and 2021 were related to December 31 , 2020 and 2021 were related to derivative asset master netting agreement . Note 4 . Leases We have entered with lease period expiring between 2022 and 2063 . Components of period expiring between 2022 and 2063 . Components of operating lease ) : Year Ended December 31 , 2020 2021 Operating lease Year Ended December 31 , 2020 2021 Operating lease cost $ Ended December 31 , 2020 2021 Operating lease cost $ 2,267 2021 Operating lease cost $ 2,267 $ 2,699 Variable lease cost lease cost $ 2,267 $ 2,699 Variable lease cost 619 726 $ 2,699 Variable lease cost 619 726 Total operating lease cost 2,699 Variable lease cost 619 726 Total operating lease cost $ Total operating lease cost $ 2,886 $ 3,425 69 Table of lease cost $ 2,886 $ 3,425 69 Table of Contents Alphabet cost $ 2,886 $ 3,425 69 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2020 2021 Cash payment Year Ended December 31 , 2020 2021 Cash payment for operating Ended December 31 , 2020 2021 Cash payment for operating lease payment for operating lease $ 2,004 $ 2,489 New operating lease operating lease $ 2,004 $ 2,489 New operating lease asset obtained for operating lease liability $ 2,765 $ 2,951 As of December lease liability $ 2,765 $ 2,951 As of December 31 , $ 2,951 As of December 31 , 2021 , our operating As of December 31 , 2021 , our operating lease had average remaining lease term of 8 year and a weighted average weighted average discount rate of 2.3 % . Future lease payment operating lease a of December 31 , 2021 were a follows a of December 31 , 2021 were a follows ( in ( in million ) : 2022 $ 2,539 2023 2,527 2024 million ) : 2022 $ 2,539 2023 2,527 2024 2,226 2025 ) : 2022 $ 2,539 2023 2,527 2024 2,226 2025 1,815 : 2022 $ 2,539 2023 2,527 2024 2,226 2025 1,815 2026 2022 $ 2,539 2023 2,527 2024 2,226 2025 1,815 2026 1,401 $ 2,539 2023 2,527 2024 2,226 2025 1,815 2026 1,401 Thereafter 2,539 2023 2,527 2024 2,226 2025 1,815 2026 1,401 Thereafter 4,948 2023 2,527 2024 2,226 2025 1,815 2026 1,401 Thereafter 4,948 Total 2,527 2024 2,226 2025 1,815 2026 1,401 Thereafter 4,948 Total future 2024 2,226 2025 1,815 2026 1,401 Thereafter 4,948 Total future lease 2025 1,815 2026 1,401 Thereafter 4,948 Total future lease payment 15,456 4,948 Total future lease payment 15,456 Less imputed interest ( 1,878 15,456 Less imputed interest ( 1,878 ) Total lease liability balance Total lease liability balance $ 13,578 As of December 31 , $ 13,578 As of December 31 , 2021 , we have As of December 31 , 2021 , we have entered into future lease payment of $ 606 million and $ 5.2 billion $ 606 million and $ 5.2 billion , excluding purchase option These lease will commence between 2022 and 2026 with non-cancelable lease will commence between 2022 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . Note lease term of 1 to 25 year . Note 5 . to 25 year . Note 5 . Variable Interest Entities Consolidated u . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , asset that December 31 , 2020 and 2021 , asset that can only of these VIEs were $ 5.7 billion and $ 6.0 billion $ 5.7 billion and $ 6.0 billion , respectively , and to the VIEs were $ 2.3 billion and $ 2.5 billion $ 2.3 billion and $ 2.5 billion , respectively . Total our consolidated subsidiary wa $ 3.9 billion and $ 4.3 billion $ 3.9 billion and $ 4.3 billion a of December 31 4.3 billion a of December 31 , 2020 and 2021 , a of December 31 , 2020 and 2021 , respectively . December 31 , 2020 and 2021 , respectively . NCI and , net . See Note 7 for further detail on other net . Waymo In June 2021 , Waymo , a self-driving an investment round of $ 2.5 billion , the majority of of our exposure to these 70 Table of Contents Alphabet Inc. these unconsolidated VIEs were $ 1.7 billion and $ 1.9 billion $ 1.7 billion and $ 1.9 billion , respectively , a respectively , a of December 31 , 2020 and $ 2.7 a of December 31 , 2020 and $ 2.7 billion and 31 , 2020 and $ 2.7 billion and $ 2.9 billion $ 2.7 billion and $ 2.9 billion , respectively , a respectively , a of December 31 , 2021 . Note 6 a of December 31 , 2021 . Note 6 . Debt 31 , 2021 . Note 6 . Debt Short-Term Debt We program of up to $ 10.0 billion through the issuance of , which increased from $ 5.0 billion in September 2021 . $ 5.0 billion in September 2021 . Net proceeds from this paper outstanding a of December 31 , 2020 and 2021 . a of December 31 , 2020 and 2021 . Our short-term December 31 , 2020 and 2021 . Our short-term debt balance Interest Rate As of December 31 , Maturity Coupon Rate 2020 31 , Maturity Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuances , Maturity Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuances 2024 Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuances 2024 - 2060 2021 Debt 2011-2020 Notes Issuances 2024 - 2060 0.45 % - 2011-2020 Notes Issuances 2024 - 2060 0.45 % - 3.38 % Notes Issuances 2024 - 2060 0.45 % - 3.38 % 0.57 - 2060 0.45 % - 3.38 % 0.57 % - 3.38 0.45 % - 3.38 % 0.57 % - 3.38 % $ 3.38 % 0.57 % - 3.38 % $ 14,000 $ 13,000 % - 3.38 % $ 14,000 $ 13,000 Future finance lease 3.38 % $ 14,000 $ 13,000 Future finance lease payment , lease payment , net ( 1 ) 1,201 2,086 Total debt , net ( 1 ) 1,201 2,086 Total debt 15,201 15,086 net ( 1 ) 1,201 2,086 Total debt 15,201 15,086 Unamortized ) 1,201 2,086 Total debt 15,201 15,086 Unamortized discount and debt 1,201 2,086 Total debt 15,201 15,086 Unamortized discount and debt issuance and debt issuance cost ( 169 ) ( 156 ) Less cost ( 169 ) ( 156 ) Less : Current portion Current portion of Notes ( 2 ) ( 999 ) — Notes ( 2 ) ( 999 ) — Less : Current lease payment , net ( 1 ) ( 2 ) ( net ( 1 ) ( 2 ) ( 101 ) ( ) ( 2 ) ( 101 ) ( 113 ) Total ) ( 101 ) ( 113 ) Total long-term debt $ ) Total long-term debt $ 13,932 $ 14,817 ( 1 ) long-term debt $ 13,932 $ 14,817 ( 1 ) Net of $ 13,932 $ 14,817 ( 1 ) Net of imputed interest of imputed interest . ( 2 ) Total current portion of current liability . See Note 7 . The note in the portion , wa approximately $ 14.0 billion and $ 12.4 billion $ 14.0 billion and $ 12.4 billion a of December 31 12.4 billion a of December 31 , 2020 and December 31 a of December 31 , 2020 and December 31 , 2021 31 , 2020 and December 31 , 2021 , respectively . 2020 and December 31 , 2021 , respectively . The fair is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2021 , the aggregate As of December 31 , 2021 , the aggregate future principal ( in million ) : 2022 $ 187 2023 146 2024 million ) : 2022 $ 187 2023 146 2024 1,159 2025 ) : 2022 $ 187 2023 146 2024 1,159 2025 1,162 : 2022 $ 187 2023 146 2024 1,159 2025 1,162 2026 2022 $ 187 2023 146 2024 1,159 2025 1,162 2026 2,165 $ 187 2023 146 2024 1,159 2025 1,162 2026 2,165 Thereafter 187 2023 146 2024 1,159 2025 1,162 2026 2,165 Thereafter 10,621 2023 146 2024 1,159 2025 1,162 2026 2,165 Thereafter 10,621 Total 146 2024 1,159 2025 1,162 2026 2,165 Thereafter 10,621 Total $ 2024 1,159 2025 1,162 2026 2,165 Thereafter 10,621 Total $ 15,440 2025 1,162 2026 2,165 Thereafter 10,621 Total $ 15,440 Credit Facility 2,165 Thereafter 10,621 Total $ 15,440 Credit Facility As of December Credit Facility As of December 31 , 2021 , we have As of December 31 , 2021 , we have $ 10.0 2021 , we have $ 10.0 billion of revolving credit facility credit facility a of December 31 , 2020 and 2021 . a of December 31 , 2020 and 2021 . 71 Table December 31 , 2020 and 2021 . 71 Table of Contents , 2020 and 2021 . 71 Table of Contents Alphabet Inc Alphabet Inc . In April 2021 , we terminated the existin terminated the existin g $ 4.0 billion revolving credit facility , scheduled to expire in July 2023 , and entered into two in the amount of $ 4.0 billion and $ 6.0 billion $ 4.0 billion and $ 6.0 billion , which will expire which will expire in April 2022 and April 2026 , respectively in April 2022 and April 2026 , respectively . The interest new credit facility . Note 7 . Supplemental Financial Statement Information ) : As of December 31 , 2020 2021 Land and As of December 31 , 2020 2021 Land and building $ of December 31 , 2020 2021 Land and building $ 49,732 2021 Land and building $ 49,732 $ 58,881 Information technology asset and building $ 49,732 $ 58,881 Information technology asset 45,906 55,606 $ 58,881 Information technology asset 45,906 55,606 Construction in progress 23,111 58,881 Information technology asset 45,906 55,606 Construction in progress 23,111 23,171 45,906 55,606 Construction in progress 23,111 23,171 Leasehold improvement 7,516 9,146 55,606 Construction in progress 23,111 23,171 Leasehold improvement 7,516 9,146 Furniture progress 23,111 23,171 Leasehold improvement 7,516 9,146 Furniture and fixture 197 23,111 23,171 Leasehold improvement 7,516 9,146 Furniture and fixture 197 208 7,516 9,146 Furniture and fixture 197 208 Property and equipment , 9,146 Furniture and fixture 197 208 Property and equipment , gross Property and equipment , gross 126,462 147,012 Less : accumulated depreciation and equipment , gross 126,462 147,012 Less : accumulated depreciation ( Less : accumulated depreciation ( 41,713 ) ( 49,414 ) Property depreciation ( 41,713 ) ( 49,414 ) Property and equipment , and equipment , net $ 84,749 $ 97,599 Accrued expense and , net $ 84,749 $ 97,599 Accrued expense and other current ) : As of December 31 , 2020 2021 European Commission As of December 31 , 2020 2021 European Commission fine ( of December 31 , 2020 2021 European Commission fine ( 1 2021 European Commission fine ( 1 ) $ 10,409 $ 9,799 fine ( 1 ) $ 10,409 $ 9,799 Payables to broker 1 ) $ 10,409 $ 9,799 Payables to broker for unsettled broker for unsettled investment trade 754 397 Accrued customer liability 3,118 for unsettled investment trade 754 397 Accrued customer liability 3,118 3,505 754 397 Accrued customer liability 3,118 3,505 Accrued purchase of property 397 Accrued customer liability 3,118 3,505 Accrued purchase of property and purchase of property and equipment 2,197 2,415 Current operating lease liability of property and equipment 2,197 2,415 Current operating lease liability 1,694 2,415 Current operating lease liability 1,694 2,189 Other accrued expense and Current operating lease liability 1,694 2,189 Other accrued expense and current accrued expense and current liability 10,459 12,931 Accrued expense and other expense and current liability 10,459 12,931 Accrued expense and other current and other current liability $ 28,631 $ 31,236 ( 1 ) current liability $ 28,631 $ 31,236 ( 1 ) Includes the $ 28,631 $ 31,236 ( 1 ) Includes the effect of and interest . See Note 10 for further detail . 72 10 for further detail . 72 Table of Contents Alphabet Inc Total Balance a of December 31 , 2018 $ ( 1,884 a of December 31 , 2018 $ ( 1,884 ) $ 31 , 2018 $ ( 1,884 ) $ ( 688 ) ( 1,884 ) $ ( 688 ) $ 266 $ ( $ ( 688 ) $ 266 $ ( 2,306 ) Cumulative ) $ 266 $ ( 2,306 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 ( 30 ) ( effect of accounting change 0 0 ( 30 ) ( 30 accounting change 0 0 ( 30 ) ( 30 ) Other 0 ( 30 ) ( 30 ) Other comprehensive income ( loss ) before reclassification ( 119 ) 1,611 36 1,528 Amounts before reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from reclassification ( 119 ) 1,611 36 1,528 Amounts excluded from the ( 119 ) 1,611 36 1,528 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 14 ) ( effectiveness recorded in AOCI 0 0 ( 14 ) ( 14 in AOCI 0 0 ( 14 ) ( 14 ) Amounts 0 ( 14 ) ( 14 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 111 ) ( 299 reclassified from AOCI 0 ( 111 ) ( 299 ) ( 0 ( 111 ) ( 299 ) ( 410 ) Other ) ( 299 ) ( 410 ) Other comprehensive income ( income ( loss ) ( 119 ) 1,500 ( 277 ) loss ) ( 119 ) 1,500 ( 277 ) 1,104 Balance ( 119 ) 1,500 ( 277 ) 1,104 Balance a of ) 1,500 ( 277 ) 1,104 Balance a of December 31 1,104 Balance a of December 31 , 2019 ( 2,003 ) a of December 31 , 2019 ( 2,003 ) 812 ( December 31 , 2019 ( 2,003 ) 812 ( 41 ) , 2019 ( 2,003 ) 812 ( 41 ) ( 1,232 ( 2,003 ) 812 ( 41 ) ( 1,232 ) Other 812 ( 41 ) ( 1,232 ) Other comprehensive income ( ( loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from the before reclassification 1,139 1,313 79 2,531 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 37 ) ( effectiveness recorded in AOCI 0 0 ( 37 ) ( 37 in AOCI 0 0 ( 37 ) ( 37 ) Amounts 0 ( 37 ) ( 37 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 513 ) ( 116 reclassified from AOCI 0 ( 513 ) ( 116 ) ( 0 ( 513 ) ( 116 ) ( 629 ) Other ) ( 116 ) ( 629 ) Other comprehensive income ( comprehensive income ( loss ) 1,139 800 ( 74 ) 1,865 income ( loss ) 1,139 800 ( 74 ) 1,865 Balance loss ) 1,139 800 ( 74 ) 1,865 Balance a of 1,139 800 ( 74 ) 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 ( 864 ) a of December 31 , 2020 ( 864 ) 1,612 ( December 31 , 2020 ( 864 ) 1,612 ( 115 ) , 2020 ( 864 ) 1,612 ( 115 ) 633 Other ( 864 ) 1,612 ( 115 ) 633 Other comprehensive income ) 1,612 ( 115 ) 633 Other comprehensive income ( loss loss ) before reclassification ( 1,442 ) ( 1,312 ) 668 reclassification ( 1,442 ) ( 1,312 ) 668 ( 2,086 ) 1,442 ) ( 1,312 ) 668 ( 2,086 ) Amounts excluded ( 1,312 ) 668 ( 2,086 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 48 48 Amounts reclassified effectiveness recorded in AOCI 0 0 48 48 Amounts reclassified from recorded in AOCI 0 0 48 48 Amounts reclassified from AOCI in AOCI 0 0 48 48 Amounts reclassified from AOCI 0 48 Amounts reclassified from AOCI 0 ( 64 ) ( 154 reclassified from AOCI 0 ( 64 ) ( 154 ) ( 0 ( 64 ) ( 154 ) ( 218 ) Other ) ( 154 ) ( 218 ) Other comprehensive income ( income ( loss ) ( 1,442 ) ( 1,376 ) 562 ) ( 1,442 ) ( 1,376 ) 562 ( 2,256 ) 1,442 ) ( 1,376 ) 562 ( 2,256 ) Balance a ( 1,376 ) 562 ( 2,256 ) Balance a of December ) Balance a of December 31 , 2021 $ ( 2,306 a of December 31 , 2021 $ ( 2,306 ) $ 31 , 2021 $ ( 2,306 ) $ 236 $ 447 $ ( 2,306 ) $ 236 $ 447 $ ( 1,623 2,306 ) $ 236 $ 447 $ ( 1,623 ) The 236 $ 447 $ ( 1,623 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2019 31 , AOCI Components Location 2019 2020 2021 Unrealized gain ( , AOCI Components Location 2019 2020 2021 Unrealized gain ( loss AOCI Components Location 2019 2020 2021 Unrealized gain ( loss ) expense ) , net $ 149 $ 650 $ 82 Benefit , net $ 149 $ 650 $ 82 Benefit ( provision $ 149 $ 650 $ 82 Benefit ( provision ) for ) for income tax ( 38 ) ( 137 ) ( tax ( 38 ) ( 137 ) ( 18 ) Net ) ( 137 ) ( 18 ) Net of income tax ) Net of income tax 111 513 64 Unrealized gain ( Net of income tax 111 513 64 Unrealized gain ( loss of income tax 111 513 64 Unrealized gain ( loss ) hedge Foreign exchange contract Revenue 367 144 165 Interest rate contract Foreign exchange contract Revenue 367 144 165 Interest rate contract Other exchange contract Revenue 367 144 165 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for ) for income tax ( 74 ) ( 34 ) ( tax ( 74 ) ( 34 ) ( 17 ) Net ) ( 34 ) ( 17 ) Net of income tax ) Net of income tax 299 116 154 Total amount reclassified Net of income tax 299 116 154 Total amount reclassified , of income tax 299 116 154 Total amount reclassified , net net of income tax $ 410 $ 629 $ 218 73 income tax $ 410 $ 629 $ 218 73 Table of $ 410 $ 629 $ 218 73 Table of Contents Alphabet 410 $ 629 $ 218 73 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2019 2020 2021 Interest Year Ended December 31 , 2019 2020 2021 Interest income $ Ended December 31 , 2019 2020 2021 Interest income $ 2,427 December 31 , 2019 2020 2021 Interest income $ 2,427 $ 2020 2021 Interest income $ 2,427 $ 1,865 $ 1,499 Interest Interest income $ 2,427 $ 1,865 $ 1,499 Interest expense ( $ 2,427 $ 1,865 $ 1,499 Interest expense ( 1 ) $ 1,499 Interest expense ( 1 ) ( 100 ) ( expense ( 1 ) ( 100 ) ( 135 ) ( ) ( 100 ) ( 135 ) ( 346 ) Foreign ) ( 135 ) ( 346 ) Foreign currency exchange gain loss ) , net ( 2 ) 103 ( 344 ) , net ( 2 ) 103 ( 344 ) ( 240 ( 2 ) 103 ( 344 ) ( 240 ) Gain 103 ( 344 ) ( 240 ) Gain ( loss ) on debt security , net 149 725 ( 110 ) Gain debt security , net 149 725 ( 110 ) Gain ( , net 149 725 ( 110 ) Gain ( loss ) on equity security , net 2,649 5,592 12,380 Performance fee ( equity security , net 2,649 5,592 12,380 Performance fee ( 326 security , net 2,649 5,592 12,380 Performance fee ( 326 ) 5,592 12,380 Performance fee ( 326 ) ( 609 ) ( fee ( 326 ) ( 609 ) ( 1,908 ) Income ) ( 609 ) ( 1,908 ) Income ( loss ) equity method investment , net 390 401 334 Other ( 3 method investment , net 390 401 334 Other ( 3 ) investment , net 390 401 334 Other ( 3 ) 102 390 401 334 Other ( 3 ) 102 ( 637 ) 334 Other ( 3 ) 102 ( 637 ) 411 Other ( 3 ) 102 ( 637 ) 411 Other income ( ) 102 ( 637 ) 411 Other income ( expense ) expense ) , net $ 5,394 $ 6,858 $ 12,020 ( , net $ 5,394 $ 6,858 $ 12,020 ( 1 ) $ 5,394 $ 6,858 $ 12,020 ( 1 ) Interest expense $ 6,858 $ 12,020 ( 1 ) Interest expense is net of interest capitalized of $ 167 million , $ 218 million $ 167 million , $ 218 million , and $ 163 218 million , and $ 163 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . ( 2 2021 , respectively . ( 2 ) Our foreign currency exchange loss and gain . ( 3 ) During the year ended During the year ended December 31 , 2020 , we entered year ended December 31 , 2020 , we entered into derivative resulted in loss of $ 902 million and gain of $ million and gain of $ 92 million for the year ended for the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , respectively . December 31 , 2020 and 2021 , respectively . The offsetting security , net . Note 8 . Acquisitions Fitbit In January . Acquisitions Fitbit In January 2021 , we closed the acquisition leading wearable brand for $ 2.1 billion . The addition of price wa attributed to $ 440 million cash acquired , $ million cash acquired , $ 590 million of intangible asset , of intangible asset , $ 1.2 billion of goodwill and $ billion of goodwill and $ 92 million of net liability assumed During the year ended December 31 , 2021 , we completed year ended December 31 , 2021 , we completed other acquisition total consideration of approximately $ 885 million , net of cash tax purpose is approximately $ 118 million . Pro forma result or in the aggregate . 74 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 9 . Goodwill and Other Intangible for the year ended December 31 , 2020 and 2021 were year ended December 31 , 2020 and 2021 were a follows December 31 , 2020 and 2021 were a follows ( in Total Balance a of December 31 , 2019 $ 19,921 $ a of December 31 , 2019 $ 19,921 $ 0 $ December 31 , 2019 $ 19,921 $ 0 $ 0 $ , 2019 $ 19,921 $ 0 $ 0 $ 703 $ $ 19,921 $ 0 $ 0 $ 703 $ 20,624 Acquisitions $ 0 $ 0 $ 703 $ 20,624 Acquisitions 204 53 $ 0 $ 703 $ 20,624 Acquisitions 204 53 189 0 $ 703 $ 20,624 Acquisitions 204 53 189 0 446 Foreign 703 $ 20,624 Acquisitions 204 53 189 0 446 Foreign currency $ 20,624 Acquisitions 204 53 189 0 446 Foreign currency translation 20,624 Acquisitions 204 53 189 0 446 Foreign currency translation and Acquisitions 204 53 189 0 446 Foreign currency translation and other currency translation and other adjustment 46 56 5 ( 2 ) translation and other adjustment 46 56 5 ( 2 ) 105 and other adjustment 46 56 5 ( 2 ) 105 Allocation adjustment 46 56 5 ( 2 ) 105 Allocation in the 56 5 ( 2 ) 105 Allocation in the fourth quarter in the fourth quarter of 2020 ( 1 ) ( 20,171 fourth quarter of 2020 ( 1 ) ( 20,171 ) 18,408 2020 ( 1 ) ( 20,171 ) 18,408 1,763 0 0 1 ) ( 20,171 ) 18,408 1,763 0 0 Balance a ) ( 20,171 ) 18,408 1,763 0 0 Balance a of ( 20,171 ) 18,408 1,763 0 0 Balance a of December 20,171 ) 18,408 1,763 0 0 Balance a of December 31 0 Balance a of December 31 , 2020 0 18,517 1,957 a of December 31 , 2020 0 18,517 1,957 701 21,175 of December 31 , 2020 0 18,517 1,957 701 21,175 Acquisitions December 31 , 2020 0 18,517 1,957 701 21,175 Acquisitions 0 31 , 2020 0 18,517 1,957 701 21,175 Acquisitions 0 1,325 , 2020 0 18,517 1,957 701 21,175 Acquisitions 0 1,325 382 2020 0 18,517 1,957 701 21,175 Acquisitions 0 1,325 382 103 18,517 1,957 701 21,175 Acquisitions 0 1,325 382 103 1,810 Foreign 1,957 701 21,175 Acquisitions 0 1,325 382 103 1,810 Foreign currency 701 21,175 Acquisitions 0 1,325 382 103 1,810 Foreign currency translation 21,175 Acquisitions 0 1,325 382 103 1,810 Foreign currency translation and Acquisitions 0 1,325 382 103 1,810 Foreign currency translation and other currency translation and other adjustment 0 ( 16 ) ( 2 and other adjustment 0 ( 16 ) ( 2 ) ( 0 ( 16 ) ( 2 ) ( 11 ) ( ) ( 2 ) ( 11 ) ( 29 ) Balance ) ( 11 ) ( 29 ) Balance a of December ) Balance a of December 31 , 2021 $ 0 $ a of December 31 , 2021 $ 0 $ 19,826 $ December 31 , 2021 $ 0 $ 19,826 $ 2,337 $ , 2021 $ 0 $ 19,826 $ 2,337 $ 793 $ $ 0 $ 19,826 $ 2,337 $ 793 $ 22,956 ( $ 19,826 $ 2,337 $ 793 $ 22,956 ( 1 ) $ 2,337 $ 793 $ 22,956 ( 1 ) Represents reallocation $ 793 $ 22,956 ( 1 ) Represents reallocation of goodwill in the fourth quarter of 2020 . See Note 15 for of 2020 . See Note 15 for further detail . Other ) : As of December 31 , 2020 Gross Carrying Amount As of December 31 , 2020 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,639 $ 3,649 $ 990 Customer developed technology $ 4,639 $ 3,649 $ 990 Customer relationship 266 $ 4,639 $ 3,649 $ 990 Customer relationship 266 49 217 3,649 $ 990 Customer relationship 266 49 217 Trade name and $ 990 Customer relationship 266 49 217 Trade name and other 990 Customer relationship 266 49 217 Trade name and other 624 217 Trade name and other 624 461 163 Total definite-lived intangible Trade name and other 624 461 163 Total definite-lived intangible asset name and other 624 461 163 Total definite-lived intangible asset 5,529 163 Total definite-lived intangible asset 5,529 4,159 1,370 Indefinite-lived intangible asset Total definite-lived intangible asset 5,529 4,159 1,370 Indefinite-lived intangible asset 75 definite-lived intangible asset 5,529 4,159 1,370 Indefinite-lived intangible asset 75 0 4,159 1,370 Indefinite-lived intangible asset 75 0 75 Total intangible asset 1,370 Indefinite-lived intangible asset 75 0 75 Total intangible asset $ Indefinite-lived intangible asset 75 0 75 Total intangible asset $ 5,604 75 Total intangible asset $ 5,604 $ 4,159 $ 1,445 As intangible asset $ 5,604 $ 4,159 $ 1,445 As of December $ 5,604 $ 4,159 $ 1,445 As of December 31 , $ 1,445 As of December 31 , 2021 Gross Carrying Amount As of December 31 , 2021 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,786 $ 4,112 $ 674 Customer developed technology $ 4,786 $ 4,112 $ 674 Customer relationship 506 $ 4,786 $ 4,112 $ 674 Customer relationship 506 140 366 4,112 $ 674 Customer relationship 506 140 366 Trade name and $ 674 Customer relationship 506 140 366 Trade name and other 674 Customer relationship 506 140 366 Trade name and other 534 366 Trade name and other 534 295 239 Total definite-lived intangible Trade name and other 534 295 239 Total definite-lived intangible asset name and other 534 295 239 Total definite-lived intangible asset 5,826 239 Total definite-lived intangible asset 5,826 4,547 1,279 Indefinite-lived intangible asset Total definite-lived intangible asset 5,826 4,547 1,279 Indefinite-lived intangible asset 138 definite-lived intangible asset 5,826 4,547 1,279 Indefinite-lived intangible asset 138 0 4,547 1,279 Indefinite-lived intangible asset 138 0 138 Total intangible asset 1,279 Indefinite-lived intangible asset 138 0 138 Total intangible asset $ Indefinite-lived intangible asset 138 0 138 Total intangible asset $ 5,964 138 Total intangible asset $ 5,964 $ 4,547 $ 1,417 Patents intangible asset $ 5,964 $ 4,547 $ 1,417 Patents and developed $ 5,964 $ 4,547 $ 1,417 Patents and developed technology , weighted-average remaining useful life of 0.7 year , 3.5 year , life of 0.7 year , 3.5 year , and 4.5 year , 3.5 year , and 4.5 year , respectively . For during the year ended December 31 , 2021 , patent and year ended December 31 , 2021 , patent and developed technology a weighted-average useful life of 4.1 year , customer relationship have a weighted-average useful life of 4.3 year , and trade name a weighted-average useful life of 9.9 year . Amortization expense relating purchased intangible asset wa $ 795 million , $ 774 million $ 795 million , $ 774 million , and $ 875 774 million , and $ 875 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . 75 Table and 2021 , respectively . 75 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2021 , expected amortization As of December 31 , 2021 , expected amortization expense relating ( in million ) : 2022 $ 537 2023 255 2024 million ) : 2022 $ 537 2023 255 2024 226 2025 ) : 2022 $ 537 2023 255 2024 226 2025 98 : 2022 $ 537 2023 255 2024 226 2025 98 2026 2022 $ 537 2023 255 2024 226 2025 98 2026 61 $ 537 2023 255 2024 226 2025 98 2026 61 Thereafter 537 2023 255 2024 226 2025 98 2026 61 Thereafter 102 2023 255 2024 226 2025 98 2026 61 Thereafter 102 $ 255 2024 226 2025 98 2026 61 Thereafter 102 $ 1,279 2024 226 2025 98 2026 61 Thereafter 102 $ 1,279 Note 2025 98 2026 61 Thereafter 102 $ 1,279 Note 10 . 2026 61 Thereafter 102 $ 1,279 Note 10 . Contingencies Indemnifications Thereafter 102 $ 1,279 Note 10 . Contingencies Indemnifications In the period . As of December 31 , 2021 , we did As of December 31 , 2021 , we did not have Matters Antitrust Investigations On November 30 , 2010 , the EC Investigations On November 30 , 2010 , the EC 's Directorate against u . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it EC decision imposed a € 2.4 billion ( $ 2.7 billion € 2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC Court , and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change recognized a charge of $ 2.7 billion for the fine in in the second quarter of 2017 . On November 10 , of 2017 . On November 10 , 2021 , the General . On November 10 , 2021 , the General Court rejected Court of Justice on January 20 , 2022 . On July Justice on January 20 , 2022 . On July 18 , , 2022 . On July 18 , 2018 , the EC . On July 18 , 2018 , the EC announced it EC decision imposed a € 4.3 billion ( $ 5.1 billion € 4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine and a of June 30 , 2018 ) fine and directed the at issue . On October 9 , 2018 , we appealed . On October 9 , 2018 , we appealed the EC EC decision . On October 29 , 2018 , we implemented . On October 29 , 2018 , we implemented change to recognized a charge of $ 5.1 billion for the fine in in the second quarter of 2018 . On March 20 , of 2018 . On March 20 , 2019 , the EC . On March 20 , 2019 , the EC announced it imposed a fine of € 1.5 billion ( $ 1.7 billion € 1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) and directed a of March 20 , 2019 ) and directed action related the decision . On June 4 , 2019 , we appealed . On June 4 , 2019 , we appealed the EC recognized a charge of $ 1.7 billion for the fine in in the first quarter of 2019 . While each EC decision ) for the fine . 76 Table of Contents Alphabet Inc. other jurisdiction . In August 2019 , we began receiving civil filed a lawsuit on October 20 , 2020 alleging that Google lawsuit on October 20 , 2020 alleging that Google violated U.S. . Separately , on December 16 , 2020 , a number , on December 16 , 2020 , a number of state advertising technology . On June 22 , 2021 , the EC . On June 22 , 2021 , the EC opened a business practice . On July 7 , 2021 , a number . On July 7 , 2021 , a number of state affect our business . In 2010 , Oracle America , Inc. favor of Google on June 8 , 2016 , and the Google on June 8 , 2016 , and the court decided Oracle appealed and on March 27 , 2018 , the Federal and on March 27 , 2018 , the Federal Circuit Court on damage . On May 29 , 2018 , we filed . On May 29 , 2018 , we filed a petition Circuit , and on August 28 , 2018 , the Federal and on August 28 , 2018 , the Federal Circuit denied the petition . On January 24 , 2019 , we filed . On January 24 , 2019 , we filed a petition the case . On April 29 , 2019 , the Supreme . On April 29 , 2019 , the Supreme Court requested our petition . On September 27 , 2019 , the Solicitor . On September 27 , 2019 , the Solicitor General recommended provided our response on October 16 , 2019 . On November response on October 16 , 2019 . On November 15 , , 2019 . On November 15 , 2019 , the Supreme . On November 15 , 2019 , the Supreme Court granted in our case on October 7 , 2020 . On April case on October 7 , 2020 . On April 5 , , 2020 . On April 5 , 2021 , the Supreme . On April 5 , 2021 , the Supreme Court reversed Court opinion . On May 14 , 2021 , the Federal . On May 14 , 2021 , the Federal Circuit entered of Google . On June 21 , 2021 , the Federal . On June 21 , 2021 , the Federal Circuit issued , and operating result . 77 Table of Contents Alphabet Inc. tax contingency , see Note 14 . Note 11 . Stockholders see Note 14 . Note 11 . Stockholders ' Equity Preferred Board of Directors ha authorized 100 million share of preferred stock of preferred stock , $ 0.001 par value , issuable in series . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , no share December 31 , 2020 and 2021 , no share were issued common stock is entitled to 10 vote per share . Class . Share Repurchases In April 2021 , the Board of Directors to repurchase up to $ 50.0 billion of it Class C C stock . In July 2021 , the Alphabet board approved an amendment to the April 2021 authorization , permitting the company share . As of December 31 , 2021 , $ 17.4 As of December 31 , 2021 , $ 17.4 billion remains 31 , 2021 , $ 17.4 billion remains available for Class during the year ended December 31 , 2020 and 2021 , year ended December 31 , 2020 and 2021 , we repurchased December 31 , 2020 and 2021 , we repurchased and subsequently we repurchased and subsequently retired 21.5 million and 20.3 million aggregate subsequently retired 21.5 million and 20.3 million aggregate share for $ million aggregate share for $ 31.1 billion and $ 50.3 billion $ 31.1 billion and $ 50.3 billion , respectively . Of repurchased and subsequently retired during 2021 , 1.2 million share were subsequently retired during 2021 , 1.2 million share were Class A Class A stock for $ 3.4 billion . Stock Split Effected Split ” ) On February 1 , 2022 , the Company ) On February 1 , 2022 , the Company announced that had approved and declared a 20-for-one stock split in the form accommodate the Stock Split . 78 Table of Contents Alphabet Inc close of business on July 1 , 2022 ( the “ business on July 1 , 2022 ( the “ Record Date close of business on July 15 , 2022 , a dividend business on July 15 , 2022 , a dividend of 19 2022 , a dividend of 19 additional share of the same the Record Date . Note 12 . Net Income Per Share In the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 , December 31 , 2019 , 2020 and 2021 , the net , 2019 , 2020 and 2021 , the net income per ) : Year Ended December 31 , 2019 Class A Class Year Ended December 31 , 2019 Class A Class B Class Allocation of undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator undistributed earnings $ 14,846 $ 2,307 $ 17,190 Denominator Number of $ 14,846 $ 2,307 $ 17,190 Denominator Number of share used used in per share computation 299,402 46,527 346,667 Basic net income in per share computation 299,402 46,527 346,667 Basic net income per per share computation 299,402 46,527 346,667 Basic net income per share net income per share $ 49.59 $ 49.59 $ 49.59 Diluted per share $ 49.59 $ 49.59 $ 49.59 Diluted net income $ 49.59 $ 49.59 $ 49.59 Diluted net income per share earnings for basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation basic computation $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed $ 14,846 $ 2,307 $ 17,190 Reallocation of undistributed earnings a B to Class A share 2,307 0 0 Reallocation of undistributed to Class A share 2,307 0 0 Reallocation of undistributed earnings Class A share 2,307 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 126 ) ( 20 ) 126 earnings ( 126 ) ( 20 ) 126 Allocation of undistributed 126 ) ( 20 ) 126 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator undistributed earnings $ 17,027 $ 2,287 $ 17,316 Denominator Number of $ 17,027 $ 2,287 $ 17,316 Denominator Number of share used share used in basic computation 299,402 46,527 346,667 Weighted-average effect of used in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive in basic computation 299,402 46,527 346,667 Weighted-average effect of dilutive security to Class A share outstanding 46,527 0 0 Restricted stock unit Class A share outstanding 46,527 0 0 Restricted stock unit and A share outstanding 46,527 0 0 Restricted stock unit and other and other contingently issuable share 413 0 5,547 Number of share other contingently issuable share 413 0 5,547 Number of share used contingently issuable share 413 0 5,547 Number of share used in used in per share computation 346,342 46,527 352,214 Diluted net income in per share computation 346,342 46,527 352,214 Diluted net income per per share computation 346,342 46,527 352,214 Diluted net income per share net income per share $ 49.16 $ 49.16 $ 49.16 79 per share $ 49.16 $ 49.16 $ 49.16 79 Table of $ 49.16 $ 49.16 $ 49.16 79 Table of Contents Alphabet 49.16 $ 49.16 $ 49.16 79 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator Number of $ 17,733 $ 2,732 $ 19,804 Denominator Number of share used used in per share computation 299,815 46,182 334,819 Basic net income in per share computation 299,815 46,182 334,819 Basic net income per per share computation 299,815 46,182 334,819 Basic net income per share net income per share $ 59.15 $ 59.15 $ 59.15 Diluted per share $ 59.15 $ 59.15 $ 59.15 Diluted net income $ 59.15 $ 59.15 $ 59.15 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed earnings a B to Class A share 2,732 0 0 Reallocation of undistributed to Class A share 2,732 0 0 Reallocation of undistributed earnings Class A share 2,732 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 180 ) ( 25 ) 180 earnings ( 180 ) ( 25 ) 180 Allocation of undistributed 180 ) ( 25 ) 180 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator Number of $ 20,285 $ 2,707 $ 19,984 Denominator Number of share used share used in basic computation 299,815 46,182 334,819 Weighted-average effect of used in basic computation 299,815 46,182 334,819 Weighted-average effect of dilutive in basic computation 299,815 46,182 334,819 Weighted-average effect of dilutive security to Class A share outstanding 46,182 0 0 Restricted stock unit Class A share outstanding 46,182 0 0 Restricted stock unit and A share outstanding 46,182 0 0 Restricted stock unit and other and other contingently issuable share 87 0 6,125 Number of share other contingently issuable share 87 0 6,125 Number of share used contingently issuable share 87 0 6,125 Number of share used in used in per share computation 346,084 46,182 340,944 Diluted net income in per share computation 346,084 46,182 340,944 Diluted net income per per share computation 346,084 46,182 340,944 Diluted net income per share net income per share $ 58.61 $ 58.61 $ 58.61 Year per share $ 58.61 $ 58.61 $ 58.61 Year Ended December $ 58.61 $ 58.61 $ 58.61 Year Ended December 31 , $ 58.61 Year Ended December 31 , 2021 Class A Class Year Ended December 31 , 2021 Class A Class B Class Allocation of undistributed earnings $ 34,200 $ 5,174 $ 36,659 Denominator undistributed earnings $ 34,200 $ 5,174 $ 36,659 Denominator Number of $ 34,200 $ 5,174 $ 36,659 Denominator Number of share used used in per share computation 300,310 45,430 321,910 Basic net income in per share computation 300,310 45,430 321,910 Basic net income per per share computation 300,310 45,430 321,910 Basic net income per share net income per share $ 113.88 $ 113.88 $ 113.88 Diluted per share $ 113.88 $ 113.88 $ 113.88 Diluted net income $ 113.88 $ 113.88 $ 113.88 Diluted net income per share earnings for basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed earnings a B to Class A share 5,174 0 0 Reallocation of undistributed to Class A share 5,174 0 0 Reallocation of undistributed earnings Class A share 5,174 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 581 ) ( 77 ) 581 earnings ( 581 ) ( 77 ) 581 Allocation of undistributed 581 ) ( 77 ) 581 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 38,793 $ 5,097 $ 37,240 Denominator undistributed earnings $ 38,793 $ 5,097 $ 37,240 Denominator Number of $ 38,793 $ 5,097 $ 37,240 Denominator Number of share used share used in basic computation 300,310 45,430 321,910 Weighted-average effect of used in basic computation 300,310 45,430 321,910 Weighted-average effect of dilutive in basic computation 300,310 45,430 321,910 Weighted-average effect of dilutive security to Class A share outstanding 45,430 0 0 Restricted stock unit Class A share outstanding 45,430 0 0 Restricted stock unit and A share outstanding 45,430 0 0 Restricted stock unit and other and other contingently issuable share 15 0 10,009 Number of share other contingently issuable share 15 0 10,009 Number of share used contingently issuable share 15 0 10,009 Number of share used in used in per share computation 345,755 45,430 331,919 Diluted net income in per share computation 345,755 45,430 331,919 Diluted net income per per share computation 345,755 45,430 331,919 Diluted net income per share net income per share $ 112.20 $ 112.20 $ 112.20 80 per share $ 112.20 $ 112.20 $ 112.20 80 Table of $ 112.20 $ 112.20 $ 112.20 80 Table of Contents Alphabet 112.20 $ 112.20 $ 112.20 80 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans the Alphabet Amended and Restated 2012 Stock Plan , the Alphabet Stock Plan , the Alphabet 2021 Stock Plan and Other Bet date . As of December 31 , 2021 , there were As of December 31 , 2021 , there were 37,479,707 share , 2021 , there were 37,479,707 share of Class C stock future issuance under the Alphabet 2021 Stock Plan . Stock-Based Compensation For the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , total 2019 , 2020 , and 2021 , total stock-based compensation expense stock-based compensation expense wa $ 11.7 billion , $ 13.4 billion $ 11.7 billion , $ 13.4 billion , and $ 15.7 13.4 billion , and $ 15.7 billion , including amount associated in Alphabet stock of $ 10.8 billion , $ 12.8 billion $ 10.8 billion , $ 12.8 billion , and $ 15.0 12.8 billion , and $ 15.0 billion , respectively . For For the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , we 2019 , 2020 , and 2021 , we recognized tax benefit of Income , of $ 1.8 billion , $ 2.7 billion $ 1.8 billion , $ 2.7 billion , and $ 3.1 2.7 billion , and $ 3.1 billion , respectively . For For the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , tax 2019 , 2020 , and 2021 , tax benefit realized related during the period wa $ 2.2 billion , $ 3.6 billion $ 2.2 billion , $ 3.6 billion , and $ 5.9 3.6 billion , and $ 5.9 billion , respectively . These for the year ended December 31 , 2021 : Unvested Restricted year ended December 31 , 2021 : Unvested Restricted Stock Units Value Unvested a of December 31 , 2020 19,288,793 $ 1,262.13 a of December 31 , 2020 19,288,793 $ 1,262.13 Granted 10,582,700 of December 31 , 2020 19,288,793 $ 1,262.13 Granted 10,582,700 $ 31 , 2020 19,288,793 $ 1,262.13 Granted 10,582,700 $ 1,949.16 Vested 2020 19,288,793 $ 1,262.13 Granted 10,582,700 $ 1,949.16 Vested ( 11,209,486 $ 1,262.13 Granted 10,582,700 $ 1,949.16 Vested ( 11,209,486 ) $ 10,582,700 $ 1,949.16 Vested ( 11,209,486 ) $ 1,345.98 Forfeited/canceled ( Vested ( 11,209,486 ) $ 1,345.98 Forfeited/canceled ( 1,767,294 ) $ ) $ 1,345.98 Forfeited/canceled ( 1,767,294 ) $ 1,425.48 Unvested a Forfeited/canceled ( 1,767,294 ) $ 1,425.48 Unvested a of December 31 1,425.48 Unvested a of December 31 , 2021 16,894,713 $ 1,626.13 a of December 31 , 2021 16,894,713 $ 1,626.13 The weighted-average of December 31 , 2021 16,894,713 $ 1,626.13 The weighted-average grant-date 31 , 2021 16,894,713 $ 1,626.13 The weighted-average grant-date fair value during the year ended December 31 , 2019 and 2020 wa year ended December 31 , 2019 and 2020 wa $ 1,092.36 December 31 , 2019 and 2020 wa $ 1,092.36 and $ 2019 and 2020 wa $ 1,092.36 and $ 1,407.97 , respectively wa $ 1,092.36 and $ 1,407.97 , respectively . Total fair during the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 were $ 2019 , 2020 , and 2021 were $ 15.2 billion , , and 2021 were $ 15.2 billion , $ 17.8 billion $ 15.2 billion , $ 17.8 billion , and $ 28.8 17.8 billion , and $ 28.8 billion , respectively . As respectively . As of December 31 , 2021 , there wa As of December 31 , 2021 , there wa $ 25.8 2021 , there wa $ 25.8 billion of unrecognized compensation cost over a weighted-average period of 2.5 year . 401 ( k period of 2.5 year . 401 ( k ) Plans We ) Plans We have two 401 ( k ) Savings Plans deferred salary arrangement under Section 401 ( k ) of the Revenue Code . Under these 401 ( k ) Plans , recognized expense of approximately $ 724 million , $ 855 million $ 724 million , $ 855 million , and $ 916 855 million , and $ 916 million for the year ended for the year ended December 31 , 2019 , 2020 , year ended December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively . Note 14 2021 , respectively . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2019 2020 2021 Domestic Year Ended December 31 , 2019 2020 2021 Domestic operation $ Ended December 31 , 2019 2020 2021 Domestic operation $ 16,426 December 31 , 2019 2020 2021 Domestic operation $ 16,426 $ 2020 2021 Domestic operation $ 16,426 $ 37,576 $ 77,016 Foreign Domestic operation $ 16,426 $ 37,576 $ 77,016 Foreign operation 23,199 $ 16,426 $ 37,576 $ 77,016 Foreign operation 23,199 10,506 13,718 37,576 $ 77,016 Foreign operation 23,199 10,506 13,718 Total $ 39,625 $ 77,016 Foreign operation 23,199 10,506 13,718 Total $ 39,625 $ 77,016 Foreign operation 23,199 10,506 13,718 Total $ 39,625 $ 48,082 23,199 10,506 13,718 Total $ 39,625 $ 48,082 $ 90,734 81 13,718 Total $ 39,625 $ 48,082 $ 90,734 81 Table of $ 39,625 $ 48,082 $ 90,734 81 Table of Contents Alphabet 39,625 $ 48,082 $ 90,734 81 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 2021 Current Year Ended December 31 , 2019 2020 2021 Current : Federal Ended December 31 , 2019 2020 2021 Current : Federal and December 31 , 2019 2020 2021 Current : Federal and state : Federal and state $ 2,424 $ 4,789 $ 10,126 Foreign and state $ 2,424 $ 4,789 $ 10,126 Foreign 2,713 1,687 $ 2,424 $ 4,789 $ 10,126 Foreign 2,713 1,687 2,692 Total $ 4,789 $ 10,126 Foreign 2,713 1,687 2,692 Total 5,137 6,476 4,789 $ 10,126 Foreign 2,713 1,687 2,692 Total 5,137 6,476 12,818 $ 10,126 Foreign 2,713 1,687 2,692 Total 5,137 6,476 12,818 Deferred Foreign 2,713 1,687 2,692 Total 5,137 6,476 12,818 Deferred : Federal 2,713 1,687 2,692 Total 5,137 6,476 12,818 Deferred : Federal and 1,687 2,692 Total 5,137 6,476 12,818 Deferred : Federal and state Deferred : Federal and state 286 1,552 2,018 Foreign ( 141 : Federal and state 286 1,552 2,018 Foreign ( 141 ) Federal and state 286 1,552 2,018 Foreign ( 141 ) ( 286 1,552 2,018 Foreign ( 141 ) ( 215 ) ( Foreign ( 141 ) ( 215 ) ( 135 ) Total ) ( 215 ) ( 135 ) Total 145 1,337 1,883 ) ( 135 ) Total 145 1,337 1,883 Provision for income ( 135 ) Total 145 1,337 1,883 Provision for income tax 135 ) Total 145 1,337 1,883 Provision for income tax $ Provision for income tax $ 5,282 $ 7,813 $ 14,701 The income tax $ 5,282 $ 7,813 $ 14,701 The reconciliation of $ 5,282 $ 7,813 $ 14,701 The reconciliation of federal statutory follows : Year Ended December 31 , 2019 2020 2021 U.S. Year Ended December 31 , 2019 2020 2021 U.S. federal statutory Ended December 31 , 2019 2020 2021 U.S. federal statutory tax December 31 , 2019 2020 2021 U.S. federal statutory tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 4.9 ) ( 0.3 ) 0.2 rate ( 4.9 ) ( 0.3 ) 0.2 Foreign-derived intangible income 4.9 ) ( 0.3 ) 0.2 Foreign-derived intangible income deduction ( Foreign-derived intangible income deduction ( 0.7 ) ( 3.0 ) ( deduction ( 0.7 ) ( 3.0 ) ( 2.5 ) Stock-based ) ( 3.0 ) ( 2.5 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 0.7 ) ( 1.7 ) ( expense ( 0.7 ) ( 1.7 ) ( 2.5 ) Federal ) ( 1.7 ) ( 2.5 ) Federal research credit ( ) Federal research credit ( 2.5 ) ( 2.3 ) ( credit ( 2.5 ) ( 2.3 ) ( 1.6 ) Deferred ) ( 2.3 ) ( 1.6 ) Deferred tax asset valuation Deferred tax asset valuation allowance 0.0 1.4 0.6 State and local tax asset valuation allowance 0.0 1.4 0.6 State and local income asset valuation allowance 0.0 1.4 0.6 State and local income tax State and local income tax 1.1 1.1 1.0 Effective tax rate and local income tax 1.1 1.1 1.0 Effective tax rate 13.3 local income tax 1.1 1.1 1.0 Effective tax rate 13.3 % 1.1 1.0 Effective tax rate 13.3 % 16.2 % 16.2 % Effective tax rate 13.3 % 16.2 % 16.2 % Our effective rate 13.3 % 16.2 % 16.2 % Our effective tax rate Our effective tax rate for 2019 wa affected significantly by earnings subsidiary . As of December 31 , 2019 , we have As of December 31 , 2019 , we have simplified our in the U.S. On July 27 , 2015 , the U.S. U.S. On July 27 , 2015 , the U.S. Tax Court regulation issued under IRC Section 482 requiring related-party participant in a the final decision on December 28 , 2015 . As a decision on December 28 , 2015 . As a result of compensation cost . On June 7 , 2019 , the U.S. . On June 7 , 2019 , the U.S. Court of the Ninth Circuit overturned the 2015 Tax Court decision in Altera regulation issued under IRC Section 482 requiring related-party participant in a net tax benefit of $ 418 million related to previously shared in the year ended December 31 , 2019 . In 2020 year ended December 31 , 2019 . In 2020 , there 31 , 2019 . In 2020 , there wa an increase of our Other Bets . 82 Table of Contents Alphabet Inc ) : As of December 31 , 2020 2021 Deferred tax As of December 31 , 2020 2021 Deferred tax asset : of December 31 , 2020 2021 Deferred tax asset : Accrued : Accrued employee benefit $ 580 $ 549 Accruals and reserve employee benefit $ 580 $ 549 Accruals and reserve not currently and reserve not currently deductible 1,049 1,816 Tax credit 3,723 5,179 reserve not currently deductible 1,049 1,816 Tax credit 3,723 5,179 Net deductible 1,049 1,816 Tax credit 3,723 5,179 Net operating loss 1,085 1,049 1,816 Tax credit 3,723 5,179 Net operating loss 1,085 1,790 3,723 5,179 Net operating loss 1,085 1,790 Operating lease 2,620 2,503 5,179 Net operating loss 1,085 1,790 Operating lease 2,620 2,503 Intangible loss 1,085 1,790 Operating lease 2,620 2,503 Intangible asset 1,525 2,034 1,085 1,790 Operating lease 2,620 2,503 Intangible asset 1,525 2,034 Other lease 2,620 2,503 Intangible asset 1,525 2,034 Other 981 925 Total 2,620 2,503 Intangible asset 1,525 2,034 Other 981 925 Total deferred Intangible asset 1,525 2,034 Other 981 925 Total deferred tax asset asset 1,525 2,034 Other 981 925 Total deferred tax asset 11,563 925 Total deferred tax asset 11,563 14,796 Valuation allowance ( 4,823 Total deferred tax asset 11,563 14,796 Valuation allowance ( 4,823 ) 11,563 14,796 Valuation allowance ( 4,823 ) ( 7,129 ) Total allowance ( 4,823 ) ( 7,129 ) Total deferred tax asset asset net of valuation allowance 6,740 7,667 Deferred tax liability : net of valuation allowance 6,740 7,667 Deferred tax liability : Property and equipment , net ( 3,382 ) ( 5,237 ) Net net ( 3,382 ) ( 5,237 ) Net investment gain ( ) Net investment gain ( 1,901 ) ( 3,229 ) Operating gain ( 1,901 ) ( 3,229 ) Operating lease ( 2,354 3,229 ) Operating lease ( 2,354 ) ( 2,228 ) Other lease ( 2,354 ) ( 2,228 ) Other ( 1,580 ) ( 2,228 ) Other ( 1,580 ) ( 946 ) Total Other ( 1,580 ) ( 946 ) Total deferred tax liability Total deferred tax liability ( 9,217 ) ( 11,640 ) Net liability ( 9,217 ) ( 11,640 ) Net deferred tax asset ( liability ) $ ( 2,477 ) $ ( 3,973 ) ( 2,477 ) $ ( 3,973 ) As of December 31 3,973 ) As of December 31 , 2021 , our federal As of December 31 , 2021 , our federal , state tax purpose were approximately $ 5.6 billion , $ 4.6 billion $ 5.6 billion , $ 4.6 billion , and $ 1.7 4.6 billion , and $ 1.7 billion respectively . If not will begin to expire in 2023 , foreign net operating loss will begin to expire in 2025 and the state net operating will begin to expire in 2028 . It is more likely jurisdiction . As of December 31 , 2021 , our California As of December 31 , 2021 , our California R & tax purpose were approximately $ 5.0 billion that can be carried realized . As of December 31 , 2021 , our investment As of December 31 , 2021 , our investment tax credit tax purpose were approximately $ 700 million and will begin to will begin to expire in 2025 . We use the flow-through realized . As of December 31 , 2021 , we maintained As of December 31 , 2021 , we maintained a valuation will be recorded accordingly . 83 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2019 2020 2021 Beginning Year Ended December 31 , 2019 2020 2021 Beginning gross unrecognized Ended December 31 , 2019 2020 2021 Beginning gross unrecognized tax December 31 , 2019 2020 2021 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 4,652 $ 3,377 $ 3,837 Increases tax benefit $ 4,652 $ 3,377 $ 3,837 Increases related to $ 4,652 $ 3,377 $ 3,837 Increases related to prior year to prior year tax position 938 372 529 Decreases related to prior year tax position 938 372 529 Decreases related to prior year tax position 938 372 529 Decreases related to prior year prior year tax position ( 143 ) ( 557 ) ( position ( 143 ) ( 557 ) ( 263 ) Decreases ) ( 557 ) ( 263 ) Decreases related to settlement settlement with tax authority ( 2,886 ) ( 45 ) ( authority ( 2,886 ) ( 45 ) ( 329 ) Increases ) ( 45 ) ( 329 ) Increases related to current to current year tax position 816 690 1,384 Ending gross unrecognized current year tax position 816 690 1,384 Ending gross unrecognized tax year tax position 816 690 1,384 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 3,377 $ 3,837 $ 5,158 The tax benefit $ 3,377 $ 3,837 $ 5,158 The total amount $ 3,377 $ 3,837 $ 5,158 The total amount of gross unrecognized tax benefit wa $ 3.4 billion , $ 3.8 billion $ 3.4 billion , $ 3.8 billion , and $ 5.2 3.8 billion , and $ 5.2 billion a of December 31 5.2 billion a of December 31 , 2019 , 2020 , a of December 31 , 2019 , 2020 , and 2021 December 31 , 2019 , 2020 , and 2021 , respectively 2019 , 2020 , and 2021 , respectively , of which respectively , of which $ 2.3 billion , $ 2.6 billion $ 2.3 billion , $ 2.6 billion , and $ 3.7 2.6 billion , and $ 3.7 billion , if recognized , respectively . As of December 31 , 2020 and 2021 , As of December 31 , 2020 and 2021 , we accrued December 31 , 2020 and 2021 , we accrued $ 222 2021 , we accrued $ 222 million and $ 270 million $ 222 million and $ 270 million in interest and penalty IRS is currently examining our 2016 through 2018 tax return . currently examining our 2016 through 2018 tax return . We have presented . The tax year 2014 through 2020 remain subject to The tax year 2014 through 2020 remain subject to examination by could decrease by approximately $ 2.0 billion in the next 12 2.0 billion in the next 12 month . Positions that may and non-U.S. matter . Note 15 . Information about Segments and on usage or headcount . 84 Table of Contents Alphabet Inc. recast : Year Ended December 31 , 2019 2020 2021 Revenues Year Ended December 31 , 2019 2020 2021 Revenues : Google Ended December 31 , 2019 2020 2021 Revenues : Google Services December 31 , 2019 2020 2021 Revenues : Google Services $ Revenues : Google Services $ 151,825 $ 168,635 $ 237,529 Google Google Services $ 151,825 $ 168,635 $ 237,529 Google Cloud 8,918 $ 151,825 $ 168,635 $ 237,529 Google Cloud 8,918 13,059 19,206 168,635 $ 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 $ 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 657 237,529 Google Cloud 8,918 13,059 19,206 Other Bets 659 657 753 8,918 13,059 19,206 Other Bets 659 657 753 Hedging gain ( 13,059 19,206 Other Bets 659 657 753 Hedging gain ( loss 19,206 Other Bets 659 657 753 Hedging gain ( loss ) Hedging gain ( loss ) 455 176 149 Total revenue $ gain ( loss ) 455 176 149 Total revenue $ 161,857 ( loss ) 455 176 149 Total revenue $ 161,857 $ 176 149 Total revenue $ 161,857 $ 182,527 $ 257,637 Operating Total revenue $ 161,857 $ 182,527 $ 257,637 Operating income ( $ 161,857 $ 182,527 $ 257,637 Operating income ( loss ) ) : Google Services $ 48,999 $ 54,606 $ 91,855 Google Google Services $ 48,999 $ 54,606 $ 91,855 Google Cloud ( $ 48,999 $ 54,606 $ 91,855 Google Cloud ( 4,645 ) $ 91,855 Google Cloud ( 4,645 ) ( 5,607 ) ( Cloud ( 4,645 ) ( 5,607 ) ( 3,099 ) Other ) ( 5,607 ) ( 3,099 ) Other Bets ( 4,824 3,099 ) Other Bets ( 4,824 ) ( 4,476 ) ( Bets ( 4,824 ) ( 4,476 ) ( 5,281 ) Corporate ) ( 4,476 ) ( 5,281 ) Corporate cost , unallocated Corporate cost , unallocated ( 1 ) ( 5,299 ) ( unallocated ( 1 ) ( 5,299 ) ( 3,299 ) ( ) ( 5,299 ) ( 3,299 ) ( 4,761 ) Total ) ( 3,299 ) ( 4,761 ) Total income from operation Total income from operation $ 34,231 $ 41,224 $ 78,714 ( from operation $ 34,231 $ 41,224 $ 78,714 ( 1 ) $ 34,231 $ 41,224 $ 78,714 ( 1 ) Corporate cost $ 41,224 $ 78,714 ( 1 ) Corporate cost , unallocated and legal settlement totaling $ 2.3 billion for the year ended for the year ended December 31 , 2019 . For revenue year ended December 31 , 2019 . For revenue by geography by geography , see Note 2 . The following table present ) : As of December 31 , 2020 2021 Long-lived asset As of December 31 , 2020 2021 Long-lived asset : United of December 31 , 2020 2021 Long-lived asset : United States asset : United States $ 69,315 $ 80,207 International 27,645 30,351 United States $ 69,315 $ 80,207 International 27,645 30,351 Total long-lived $ 69,315 $ 80,207 International 27,645 30,351 Total long-lived asset $ 69,315 $ 80,207 International 27,645 30,351 Total long-lived asset $ 96,960 30,351 Total long-lived asset $ 96,960 $ 110,558 85 Table of long-lived asset $ 96,960 $ 110,558 85 Table of Contents Alphabet asset $ 96,960 $ 110,558 85 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2021 , our disclosure a of December 31 , 2021 , our disclosure control and report operating result . In 2019 , we began a multi-year during the second quarter of 2021 . There have been no during the quarter ended December 31 , 2021 that have materially quarter ended December 31 , 2021 that have materially affected , for the quarter ended December 31 , 2021 . While we quarter ended December 31 , 2021 . While we continue to , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2021 . Management reviewed a of December 31 , 2021 . Management reviewed the result financial reporting a of December 31 , 2021 ha been audited a of December 31 , 2021 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION None . . OTHER INFORMATION None . 86 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS PREVENT INSPECTIONS Not applicable . 87 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS our Proxy Statement for the 2022 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2021 ( 2022 Proxy year ended December 31 , 2021 ( 2022 Proxy Statement ) December 31 , 2021 ( 2022 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be the caption “ Delinquent Section 16 ( a ) Reports ” ) Reports ” in the 2022 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2022 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Plan Information ” in the 2022 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2022 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2022 Proxy Statement and is incorporated incorporated herein by reference . 88 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 46 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 49 Consolidated Statements of Income 50 49 Consolidated Statements of Income 50 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 52 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 54 2 . Financial Statement Schedules to Consolidated Financial Statements 54 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2019 , 2020 and year ended December 31 , 2019 , 2020 and 2021 ( December 31 , 2019 , 2020 and 2021 ( in million , 2019 , 2020 and 2021 ( in million ) : of Year Year ended December 31 , 2019 $ 729 $ Year ended December 31 , 2019 $ 729 $ 1,481 $ December 31 , 2019 $ 729 $ 1,481 $ ( 1,457 , 2019 $ 729 $ 1,481 $ ( 1,457 ) $ 729 $ 1,481 $ ( 1,457 ) $ 753 Year ended $ ( 1,457 ) $ 753 Year ended December 31 , $ 753 Year ended December 31 , 2020 $ 753 $ Year ended December 31 , 2020 $ 753 $ 2,013 $ December 31 , 2020 $ 753 $ 2,013 $ ( 1,422 , 2020 $ 753 $ 2,013 $ ( 1,422 ) $ 753 $ 2,013 $ ( 1,422 ) $ 1,344 Year ended $ ( 1,422 ) $ 1,344 Year ended December 31 , $ 1,344 Year ended December 31 , 2021 $ 1,344 $ Year ended December 31 , 2021 $ 1,344 $ 2,092 $ December 31 , 2021 $ 1,344 $ 2,092 $ ( 2,047 , 2021 $ 1,344 $ 2,092 $ ( 2,047 ) $ 1,344 $ 2,092 $ ( 2,047 ) $ 1,389 Note : $ ( 2,047 ) $ 1,389 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of the Registrant , dated October 2 , 2015 Current Report on , dated October 2 , 2015 Current Report on Form 8-K 2015 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.02 Amended and 001-37580 ) October 2 , 2015 3.02 Amended and Restated Bylaws ) October 2 , 2015 3.02 Amended and Restated Bylaws of the Registrant , dated October 21 , 2020 Current Report on , dated October 21 , 2020 Current Report on Form 8-K/A 2020 Current Report on Form 8-K/A ( File No . 001-37580 8-K/A ( File No . 001-37580 ) October 27 , 2020 No . 001-37580 ) October 27 , 2020 4.01 Specimen Class 001-37580 ) October 27 , 2020 4.01 Specimen Class A Common ) October 27 , 2020 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.05 Transfer Restriction 001-37580 ) October 2 , 2015 4.05 Transfer Restriction Agreement , ) October 2 , 2015 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 * Joinder 001-37580 ) October 2 , 2015 4.06 * Joinder Agreement , ) October 2 , 2015 4.06 * Joinder Agreement , dated Joinder Agreement , dated December 31 , 2021 , among the , dated December 31 , 2021 , among the Registrant , and certain of his affiliate 89 Table of Contents Alphabet Inc. by reference herein Form Date 4.07 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Class C 001-37580 ) October 2 , 2015 4.08 Class C Undertaking , ) October 2 , 2015 4.08 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.09 Indenture , 001-37580 ) October 2 , 2015 4.09 Indenture , dated February ) October 2 , 2015 4.09 Indenture , dated February 12 4.09 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.10 Registrant Registration 333-209510 ) February 12 , 2016 4.10 Registrant Registration Rights Agreement ) February 12 , 2016 4.10 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.11 First Supplemental 333-209518 ) February 12 , 2016 4.11 First Supplemental Indenture , ) February 12 , 2016 4.11 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.12 Form of 001-37580 ) April 27 , 2016 4.12 Form of the Registrant ) April 27 , 2016 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.1 2024 ( included in Exhibit 4.1 1 ) 4.13 Form of ( included in Exhibit 4.1 1 ) 4.13 Form of the in Exhibit 4.1 1 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 4.14 Form of 001-37580 ) August 9 , 2016 4.14 Form of Global Note ) August 9 , 2016 4.14 Form of Global Note representing representing the Registrant ’ s 0.450 % note due 2025 Current s 0.450 % note due 2025 Current Report on Form 8-K 2025 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.15 Form of 001-37580 ) August 5 , 2020 4.15 Form of Global Note ) August 5 , 2020 4.15 Form of Global Note representing representing the Registrant ’ s 0.800 % note due 2027 Current s 0.800 % note due 2027 Current Report on Form 8-K 2027 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.16 Form of 001-37580 ) August 5 , 2020 4.16 Form of Global Note ) August 5 , 2020 4.16 Form of Global Note representing representing the Registrant ’ s 1.100 % note due 2030 Current s 1.100 % note due 2030 Current Report on Form 8-K 2030 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.17 Form of 001-37580 ) August 5 , 2020 4.17 Form of Global Note ) August 5 , 2020 4.17 Form of Global Note representing representing the Registrant ’ s 1.900 % note due 2040 Current s 1.900 % note due 2040 Current Report on Form 8-K 2040 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.18 Form of 001-37580 ) August 5 , 2020 4.18 Form of Global Note ) August 5 , 2020 4.18 Form of Global Note representing representing the Registrant ’ s 2.050 % note due 2050 Current s 2.050 % note due 2050 Current Report on Form 8-K 2050 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.19 Form of 001-37580 ) August 5 , 2020 4.19 Form of Global Note ) August 5 , 2020 4.19 Form of Global Note representing representing the Registrant ’ s 2.250 % note due 2060 Current s 2.250 % note due 2060 Current Report on Form 8-K 2060 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.20 * Description 001-37580 ) August 5 , 2020 4.20 * Description of Registrant ) August 5 , 2020 4.20 * Description of Registrant ’ of Registrant ’ s Securities 10.01 u Form of Indemnification Agreement officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Compensation 001-37580 ) October 2 , 2015 10.02 u Compensation Plan Agreement ) October 2 , 2015 10.02 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.03 u Director 001-37580 ) October 2 , 2015 10.03 u Director Arrangements Agreement ) October 2 , 2015 10.03 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Alphabet 001-37580 ) October 2 , 2015 10.04 u Alphabet Inc . ) October 2 , 2015 10.04 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Google 001-37580 ) October 2 , 2015 10.05 u Google Inc. 2004 ) October 2 , 2015 10.05 u Google Inc. 2004 Stock 2015 10.05 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.05.1 u Google 000-50726 ) June 7 , 2011 10.05.1 u Google Inc. 2004 ) June 7 , 2011 10.05.1 u Google Inc. 2004 Stock 2011 10.05.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.2 u Google 000-50726 ) March 30 , 2005 10.05.2 u Google Inc. 2004 ) March 30 , 2005 10.05.2 u Google Inc. 2004 Stock 2005 10.05.2 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.05.3 u Google 000-50726 ) March 30 , 2005 10.05.3 u Google Inc. 2004 ) March 30 , 2005 10.05.3 u Google Inc. 2004 Stock 2005 10.05.3 u Google Inc. 2004 Stock Plan - Amendment to S-3 ( File No . 333-142243 ) April 20 , 2007 No . 333-142243 ) April 20 , 2007 10.06 u Alphabet 333-142243 ) April 20 , 2007 10.06 u Alphabet Inc . ) April 20 , 2007 10.06 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 5 , 2020 No . 001-37580 ) June 5 , 2020 90 Table of 001-37580 ) June 5 , 2020 90 Table of Contents Alphabet ) June 5 , 2020 90 Table of Contents Alphabet Inc. by reference herein Form Date 10.06.1 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 4 , 2020 No . 001-37580 ) February 4 , 2020 10.06.2 u Alphabet 001-37580 ) February 4 , 2020 10.06.2 u Alphabet Inc . ) February 4 , 2020 10.06.2 u Alphabet Inc . Amended Inc . 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Company Bonus Plan 14.01 Code of Conduct of the Registrant a amended on September 21 , 2017 Annual Report on amended on September 21 , 2017 Annual Report on Form 10-K 2017 Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 6 , 2018 No . 001-37580 ) February 6 , 2018 21.01 * Subsidiaries 001-37580 ) February 6 , 2018 21.01 * Subsidiaries of the ) February 6 , 2018 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Independent Registered Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 101.INS * Inline XBRL Instance the Sarbanes-Oxley Act of 2002 101.INS * Inline XBRL Instance Document within the Inline XBRL document 101.SCH * Inline XBRL Taxonomy Extension XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File document and contained in Exhibit 101 ) 91 Table of Contents contained in Exhibit 101 ) 91 Table of Contents Alphabet Inc. ‡ Furnished herewith . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . 92 Table FORM 10-K SUMMARY None . 92 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 1 , 2022 ALPHABET INC. By Date : February 1 , 2022 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by on the date indicated . 93 Table of Contents Alphabet Inc. Principal Executive Officer ) February 1 , 2022 Sundar Pichai / Officer ) February 1 , 2022 Sundar Pichai / S / Principal Financial Officer ) February 1 , 2022 Ruth M. Porat Officer ) February 1 , 2022 Ruth M. Porat / S Principal Accounting Officer ) February 1 , 2022 Amie Thuener O'Toole Officer ) February 1 , 2022 Amie Thuener O'Toole / S H. A RNOLD Director February 1 , 2022 Frances H. Arnold RNOLD Director February 1 , 2022 Frances H. Arnold / S RIN Co-Founder and Director February 1 , 2022 Sergey Brin / and Director February 1 , 2022 Sergey Brin / S / OHN D OERR Director February 1 , 2022 L. John Doerr OERR Director February 1 , 2022 L. John Doerr / S J R . Director February 1 , 2022 Roger W. Ferguson . Director February 1 , 2022 Roger W. Ferguson , Jr. ENNESSY Director , Chair February 1 , 2022 John L. Hennessy , Chair February 1 , 2022 John L. Hennessy / S NN M ATHER Director February 1 , 2022 Ann Mather / ATHER Director February 1 , 2022 Ann Mather / S / . M ULALLY Director February 1 , 2022 Alan R. Mulally ULALLY Director February 1 , 2022 Alan R. Mulally / S AGE Co-Founder and Director February 1 , 2022 Larry Page / and Director February 1 , 2022 Larry Page / S / AM S HRIRAM Director February 1 , 2022 K. Ram Shriram HRIRAM Director February 1 , 2022 K. Ram Shriram / S Robin L. Washington Director February 1 , 2022 Robin L. Washington Washington Director February 1 , 2022 Robin L. Washington 94 , 2022 Robin L. 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PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . Commission file number : 001-37580 ___________________________________________ Alphabet Inc. ( Exact it charter ) ___________________________________________ Delaware 61-1767919 ( State or other jurisdiction Employer Identification No . ) 1600 Amphitheatre Parkway Mountain View , Parkway Mountain View , CA 94043 ( Address of principal executive including zip code ) ( 650 ) 253-0000 ( Registrant 's code ) ( 650 ) 253-0000 ( Registrant 's telephone number Securities registered pursuant to Section 12 ( b ) of the A Common Stock , $ 0.001 par value GOOGL Nasdaq Stock C Capital Stock , $ 0.001 par value GOOG Nasdaq Stock Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company `` in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C.7262 ( b ) ) are registered pursuant to Section 12 ( b ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of June 30 , 2022 , the aggregate As of June 30 , 2022 , the aggregate market value Global Select Market on June 30 , 2022 ) wa approximately Market on June 30 , 2022 ) wa approximately $ 1,256.1 2022 ) wa approximately $ 1,256.1 billion . For purpose of officer , director , and 5 % or greater stockholder . . In the case of 5 % or greater stockholder , , or unless they hold 10 % or more of our officer , director , and 5 % or greater stockholder are in Part III , Item 12 of this Annual Report on this Annual Report on Form 10-K. As of January 26 , Form 10-K. As of January 26 , 2023 , there were As of January 26 , 2023 , there were 5,956 million , 2023 , there were 5,956 million share of Alphabet ’ Class A stock outstanding , 883 million share of Alphabet ’ B stock outstanding , and 5,968 million share of the Alphabet s Proxy Statement for the 2023 Annual Meeting of Stockholders are this Annual Report on Form 10-K to the extent stated herein Securities and Exchange Commission within 120 day of the registrant ’ s fiscal year ended December 31 , 2022 . Table of year ended December 31 , 2022 . Table of Contents Alphabet Inc . Alphabet Inc. Form 10-K For the Fiscal Year Ended the Fiscal Year Ended December 31 , 2022 TABLE OF CONTENTS Year Ended December 31 , 2022 TABLE OF CONTENTS Page Note Page Note About Forward-Looking Statements 3 PART I Item 1. Business Statements 3 PART I Item 1. Business 4 Item 1A . PART I Item 1. Business 4 Item 1A . Risk Factors Item 1. Business 4 Item 1A . Risk Factors 9 Item Item 1A . Risk Factors 9 Item 1B . Unresolved Staff . Risk Factors 9 Item 1B . Unresolved Staff Comments 22 1B . Unresolved Staff Comments 22 Item 2 . Properties 23 Unresolved Staff Comments 22 Item 2 . Properties 23 Item 3 22 Item 2 . Properties 23 Item 3 . Legal Proceedings 2 . Properties 23 Item 3 . Legal Proceedings 23 Item Item 3 . Legal Proceedings 23 Item 4 . Mine Safety . Legal Proceedings 23 Item 4 . Mine Safety Disclosures 23 4 . Mine Safety Disclosures 23 PART II Item 5 . Disclosures 23 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 23 Item 6 . [ Reserved of Equity Securities 23 Item 6 . [ Reserved ] 25 6 . [ Reserved ] 25 Item 7 . Management ’ [ Reserved ] 25 Item 7 . Management ’ s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures About Market Risk 40 Item 8 . Financial Statements About Market Risk 40 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 43 Item 9 . Changes in and Supplementary Data 43 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 84 Item 9A . Controls and and Financial Disclosure 84 Item 9A . Controls and Procedures 84 9A . Controls and Procedures 84 Item 9B . Other Information Controls and Procedures 84 Item 9B . Other Information 84 Item Item 9B . Other Information 84 Item 9C . Disclosure Regarding . Other Information 84 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 84 PART III Item 10 . Inspections 84 PART III Item 10 . Directors , Executive Officers Officers , and Corporate Governance 85 Item 11 . Executive Compensation and Corporate Governance 85 Item 11 . Executive Compensation 85 Item Item 11 . Executive Compensation 85 Item 12 . Security Ownership . Executive Compensation 85 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 85 Item 13 . Certain Relationships Related Stockholder Matters 85 Item 13 . Certain Relationships and Related Transactions , and Director Independence 85 Item 14 . Principal Accountant and Director Independence 85 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 85 PART IV Item 15 . Services 85 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 86 Item 16 . Form 10-K Financial Statement Schedules 86 Item 16 . Form 10-K Summary 89 86 Item 16 . Form 10-K Summary 89 Signatures 2 Table 16 . Form 10-K Summary 89 Signatures 2 Table of Contents Form 10-K Summary 89 Signatures 2 Table of Contents Alphabet Inc This Annual Report on Form 10-K contains forward-looking statement within the Securities Litigation Reform Act of 1995 . These include , among regulator and governmental entity ; 3 Table of Contents Alphabet Inc. a favorable effect on our 2023 operating result ; a well : Part I , Item 1 `` Business ; `` Part `` Part I , Item 1A `` Risk Factors ; `` and Part II , Item 7 `` Management ’ s Discussion this Annual Report on Form 10-K , and in particular , in Part I , Item 1A , `` Risk Factors `` company . PART I ITEM 1. BUSINESS Overview As our founder when we were founded in 1998 . Since then , we have invested more than $ 100 billion in research and development support of these effort . 4 Table of Contents Alphabet Inc. we see every day , 15 % are new . This music , reading book , 5 Table of Contents Alphabet Inc. such a the new Pixel 7 and Pixel 7 Pro , new Pixel 7 and Pixel 7 Pro , and the very of them have their own 6 Table of Contents Alphabet Inc. see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K . Ongoing Commitment to Sustainability ’ s founding more than 20 year ago . These are two decade : • In 2007 , we became the first our operation . • In 2017 , we became the first first major company to match 100 % of our annual electricity consecutive year . • In 2020 , we issued $ 5.75 2020 , we issued $ 5.75 billion in sustainability bonds—the largest crisis response . As of 2022 , we had fully allocated Bond Impact Report published in 2022 . Our sustainability strategy is place where we operate . 7 Table of Contents Alphabet Inc. and circular economy , in 2020 , we launched our third of ambitious goal . By 2030 , we aim to : to run on carbon-free energy 24 hour a day , seven seven day a week , 365 day a year ; • a year ; • enable 5 gigawatts of new carbon-free energy and • help more than 500 city and local government reduce government reduce an aggregate of 1 gigaton ( one billion ton water than we consume by 2030 and to support water security this Annual Report on Form 10-K or in any other report see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K. Culture and Workforce We are this Annual Report on Form 10-K or in any other report SEC . As of December 31 , 2022 , Alphabet had As of December 31 , 2022 , Alphabet had 190,234 employee , 2022 , Alphabet had 190,234 employee . We have work we need to quickly incubate 8 Table of Contents Alphabet Inc. see Risk Factors in Item 1A ; Trends in Our Business in Part II , Item 7 ; and Legal Matters in and Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K . Intellectual Property We rely see Risk Factors in Item 1A of this Annual Report on this Annual Report on Form 10-K . Available Information Our website our Annual Reports on Form 10-K , Quarterly Reports on Form , Quarterly Reports on Form 10-Q , Current Reports on Form , Current Reports on Form 8-K , and our Proxy Statements this Annual Report on Form 10-K or in any other report textual reference only . ITEM 1A . RISK FACTORS Our operation . We generated more than 80 % of total revenue from revenue from online advertising in 2022 . Many of our advertiser do not create more value 9 Table of Contents Alphabet Inc. hardware that competes effectively . 10 Table of Contents Alphabet Inc in Part II , Item 7 of this Annual Report on this Annual Report on Form 10-K. Our intellectual property right are outside of the U.S. , 11 Table of Contents Alphabet Inc. component we purchase from other 12 Table of Contents Alphabet Inc. International revenue accounted for approximately 51 % of our consolidated revenue of our consolidated revenue in 2022 . In addition to risk civil and criminal penalty ; 13 Table of Contents Alphabet Inc. privacy and data change . 14 Table of Contents Alphabet Inc. Log4j vulnerability reported in December 2021 , which could affect our our data limitation , including 15 Table of Contents Alphabet Inc. . For example , in 2018 the U.S. Federal Communications Commission rule , which could permit 16 Table of Contents Alphabet Inc. Florida ’ s Senate Bill 7072 and Texas ’ House Bill and Texas ’ House Bill 20 , and law and proposed Millennium Copyright Act and Section 230 of the Communications Decency Act a variety of claim including 17 Table of Contents Alphabet Inc. California Consumer Privacy Act of 2018 , the California Privacy Rights Online Privacy Protection Act of 1998 , the United Kingdom Age-Appropriate connection with internet-connected device . 18 Table of Contents Alphabet Inc. framework , were invalidated in 2020 , and other base for to additional tax liability . 19 Table of Contents Alphabet Inc. Our Class B stock ha 10 vote per share , our right . As of December 31 , 2022 , Larry Page As of December 31 , 2022 , Larry Page and Sergey Sergey Brin beneficially owned approximately 85.8 % of our outstanding Class stock , which represented approximately 51.2 % of the voting power a stockholder ' meeting . 20 Table of Contents Alphabet Inc. combination with any holder of 15 % or more of it at the acquired company ; 21 Table of Contents Alphabet Inc. our corporate culture . ITEM 1B . UNRESOLVED STAFF COMMENTS Not STAFF COMMENTS Not applicable . 22 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 2 . PROPERTIES Our headquarters are of our business . ITEM 3 . LEGAL PROCEEDINGS For a see Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K , which is incorporated herein herein by reference . ITEM 4 . MINE SAFETY DISCLOSURES Not applicable . PART II ITEM 5 . MARKET FOR REGISTRANT ’ EQUITY SECURITIES As of October 2 , 2015 , Alphabet Inc. As of October 2 , 2015 , Alphabet Inc. became the Google Inc. pursuant to Rule 12g-3 ( a ) under the “ GOOG ” since August 19 , 2004 and under the ” since August 19 , 2004 and under the symbol `` `` GOOGL `` since April 3 , 2014 . Prior to `` since April 3 , 2014 . Prior to August 19 2014 . Prior to August 19 , 2004 , there wa Prior to August 19 , 2004 , there wa no public “ GOOG ” since April 3 , 2014 . Holders of ” since April 3 , 2014 . Holders of Record As of Record As of December 31 , 2022 , there were As of December 31 , 2022 , there were approximately 6,670 2022 , there were approximately 6,670 and 1,657 stockholder of record there were approximately 6,670 and 1,657 stockholder of record of our holder . As of December 31 , 2022 , there were As of December 31 , 2022 , there were approximately 64 2022 , there were approximately 64 stockholder of record of our during the quarter ended December 31 , 2022 : Period Total quarter ended December 31 , 2022 : Period Total Number of ( in thousand ) ( 1 ) Total Number of Class ( in thousand ) ( 1 ) Average Price Paid per per Class A Share ( 2 ) Average Price Paid per per Class C Share ( 2 ) Total Number of Shares ( in thousand ) ( 1 ) Approximate Dollar Value of ( in million ) October 1 - 31 8,585 46,059 $ million ) October 1 - 31 8,585 46,059 $ 98.92 $ ) October 1 - 31 8,585 46,059 $ 98.92 $ 99.16 October 1 - 31 8,585 46,059 $ 98.92 $ 99.16 54,644 - 31 8,585 46,059 $ 98.92 $ 99.16 54,644 $ 38,069 8,585 46,059 $ 98.92 $ 99.16 54,644 $ 38,069 November 1 46,059 $ 98.92 $ 99.16 54,644 $ 38,069 November 1 - 98.92 $ 99.16 54,644 $ 38,069 November 1 - 30 1,968 99.16 54,644 $ 38,069 November 1 - 30 1,968 55,374 $ $ 38,069 November 1 - 30 1,968 55,374 $ 95.89 $ 38,069 November 1 - 30 1,968 55,374 $ 95.89 $ 93.51 November 1 - 30 1,968 55,374 $ 95.89 $ 93.51 57,342 - 30 1,968 55,374 $ 95.89 $ 93.51 57,342 $ 32,703 1,968 55,374 $ 95.89 $ 93.51 57,342 $ 32,703 December 1 55,374 $ 95.89 $ 93.51 57,342 $ 32,703 December 1 - 95.89 $ 93.51 57,342 $ 32,703 December 1 - 31 4,687 93.51 57,342 $ 32,703 December 1 - 31 4,687 44,649 $ $ 32,703 December 1 - 31 4,687 44,649 $ 91.93 $ 32,703 December 1 - 31 4,687 44,649 $ 91.93 $ 93.93 December 1 - 31 4,687 44,649 $ 91.93 $ 93.93 49,336 - 31 4,687 44,649 $ 91.93 $ 93.93 49,336 $ 28,079 4,687 44,649 $ 91.93 $ 93.93 49,336 $ 28,079 Total 15,240 44,649 $ 91.93 $ 93.93 49,336 $ 28,079 Total 15,240 146,082 91.93 $ 93.93 49,336 $ 28,079 Total 15,240 146,082 161,322 ( 93.93 49,336 $ 28,079 Total 15,240 146,082 161,322 ( 1 ) 49,336 $ 28,079 Total 15,240 146,082 161,322 ( 1 ) The $ 28,079 Total 15,240 146,082 161,322 ( 1 ) The repurchase Total 15,240 146,082 161,322 ( 1 ) The repurchase are being transaction , including through Rule 10b5-1 plan . The repurchase program expiration date . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information related to to share repurchase . ( 2 ) Average price paid per associated with the repurchase . 23 Table of Contents Alphabet Inc. Inc. Class A 's cumulative 5-year total stockholder return on common of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our common stock all dividend ) from December 31 , 2017 to December 31 ) from December 31 , 2017 to December 31 , 2022 31 , 2017 to December 31 , 2022 . The return 2017 to December 31 , 2022 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2017 in stock or invested on December 31 , 2017 in stock or index , of dividend . Copyright © 2023 S & P , a Inc. All right reserved . 24 Table of Contents Alphabet Inc Inc. Class C 's cumulative 5-year total stockholder return on capital of the S & P 500 index , the NASDAQ Composite the performance of a $ 100 investment in our Class C all dividend ) from December 31 , 2017 to December 31 ) from December 31 , 2017 to December 31 , 2022 31 , 2017 to December 31 , 2022 . The return 2017 to December 31 , 2022 . The return shown are performance . COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN * ALPHABET INC. , the S & P 500 Index , the NASDAQ Composite Internet Composite Index * $ 100 invested on December 31 , $ 100 invested on December 31 , 2017 in stock or invested on December 31 , 2017 in stock or in index of dividend . Copyright © 2023 S & P , a All right reserved . ITEM 6 . [ Reserved ] 25 6 . [ Reserved ] 25 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 7 . MANAGEMENT ’ S DISCUSSION ” Part I , Item 1 `` Business , `` Part `` Part I , Item 1A `` Risk Factors , `` related note included under Item 8 of this Annual Report on this Annual Report on Form 10-K. We have omitted discussion of We have omitted discussion of 2020 result where it would be discussion previously included in Item 7 of our 2021 Annual Report in Item 7 of our 2021 Annual Report on Form 10-K. 2021 Annual Report on Form 10-K. Understanding Alphabet ’ s Financial see Part I , Item 1 “ Business ” and Note “ Business ” and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Trends in Our Business and to a trend of increased 26 Table of Contents Alphabet Inc. For example , in September 2022 we closed the acquisition of For additional information see Item 1A Risk Factors and Legal Matters and Legal Matters in Note 10 of the Notes to Consolidated in Part II , Item 8 . • Our employee are in Part I , Item 1 “ Business . ” Revenues recognize revenue , see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K . In addition to the and service launch ; and 27 Table of Contents Alphabet Inc. other product and service . 28 Table of Contents Alphabet Inc and product development effort . 29 Table of Contents Alphabet Inc our investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated in Part II , Item 8 of this Annual Report on this Annual Report on Form 10-K a well a Item 7A 10-K a well a Item 7A , “ Quantitative and Qualitative tax rate , see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Executive Overview The following table ) : Year Ended December 31 , 2021 2022 $ Change Year Ended December 31 , 2021 2022 $ Change % Change Ended December 31 , 2021 2022 $ Change % Change Consolidated % Change Consolidated revenue $ 257,637 $ 282,836 $ 25,199 10 Consolidated revenue $ 257,637 $ 282,836 $ 25,199 10 % Change $ 257,637 $ 282,836 $ 25,199 10 % Change in consolidated 257,637 $ 282,836 $ 25,199 10 % Change in consolidated constant consolidated constant currency revenue ( 1 ) 14 % Cost of currency revenue ( 1 ) 14 % Cost of revenue $ % Cost of revenue $ 110,939 $ 126,203 $ 15,264 14 of revenue $ 110,939 $ 126,203 $ 15,264 14 % Operating $ 110,939 $ 126,203 $ 15,264 14 % Operating expense $ 110,939 $ 126,203 $ 15,264 14 % Operating expense $ 67,984 14 % Operating expense $ 67,984 $ 81,791 $ 13,807 20 Operating expense $ 67,984 $ 81,791 $ 13,807 20 % Operating $ 67,984 $ 81,791 $ 13,807 20 % Operating income $ 67,984 $ 81,791 $ 13,807 20 % Operating income $ 78,714 20 % Operating income $ 78,714 $ 74,842 $ ( 3,872 Operating income $ 78,714 $ 74,842 $ ( 3,872 ) ( 78,714 $ 74,842 $ ( 3,872 ) ( 5 ) % $ ( 3,872 ) ( 5 ) % Operating margin 31 5 ) % Operating margin 31 % 26 % ( 5 % Operating margin 31 % 26 % ( 5 ) % 31 % 26 % ( 5 ) % Other income ( expense ) , net $ 12,020 $ ( 3,514 ) $ net $ 12,020 $ ( 3,514 ) $ ( 15,534 ) ( 3,514 ) $ ( 15,534 ) ( 129 ) % $ ( 15,534 ) ( 129 ) % Net income $ ) % Net income $ 76,033 $ 59,972 $ ( 16,061 Net income $ 76,033 $ 59,972 $ ( 16,061 ) ( 76,033 $ 59,972 $ ( 16,061 ) ( 21 ) % $ ( 16,061 ) ( 21 ) % Diluted EPS $ ) % Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 Diluted EPS $ 5.61 $ 4.56 $ ( 1.05 ) ( 5.61 $ 4.56 $ ( 1.05 ) ( 19 ) % $ ( 1.05 ) ( 19 ) % ( 1 ) ( 19 ) % ( 1 ) See `` Use of . • Revenues were $ 282.8 billion , an increase of billion , an increase of 10 % year over year , Google Services revenue of $ 16.0 billion , or 7 % $ 16.0 billion , or 7 % , and an increase Google Cloud revenue of $ 7.1 billion , or 37 % $ 7.1 billion , or 37 % . • Total constant effect of hedging , increased 14 % year over year . % year over year . 30 Table of Contents Alphabet Inc. Cost of revenue wa $ 126.2 billion , an increase of billion , an increase of 14 % year over year , • Operating expense were $ 81.8 billion , an increase of billion , an increase of 20 % year over year , information : • On September 12 , 2022 , we closed • On September 12 , 2022 , we closed the acquisition total purchase price of $ 6.1 billion and added more than billion and added more than 2,600 employee . Mandiant 's financial acquisition date . See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information . • information . • On July 15 , 2022 , the company • On July 15 , 2022 , the company executed a , the company executed a 20-for-one stock split with a record a record date of July 1 , 2022 , effected in date of July 1 , 2022 , effected in the form Stock Split . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information . • in the first quarter of 2022 , we suspended the vast Class C share were $ 59.3 billion for the year ended for the year ended December 31 , 2022 . See Note year ended December 31 , 2022 . See Note 11 of , 2022 . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for additional information . • Operating cash flow wa $ 91.5 billion for the year ended for the year ended December 31 , 2022 . • Capital year ended December 31 , 2022 . • Capital expenditure , technical infrastructure , were $ 31.5 billion for the year ended for the year ended December 31 , 2022 . • As year ended December 31 , 2022 . • As of December . • As of December 31 , 2022 , we had As of December 31 , 2022 , we had 190,234 employee , 2022 , we had 190,234 employee . Additionally , looking looking ahead to fiscal year 2023 : • In January 2023 2023 : • In January 2023 , we announced a reduction of our workforce of approximately 12,000 role . We expect to and related charge of $ 1.9 billion to $ 2.3 billion $ 1.9 billion to $ 2.3 billion , the majority of in the first quarter of 2023 . In addition , we space reduction of approximately $ 0.5 billion in the first quarter in the first quarter of 2023 . We may incur additional need . • In January 2023 , we completed an assessment of depreciation of approximately $ 3.4 billion for the full fiscal for the full fiscal year 2023 for asset in service a in service a of December 31 , 2022 , recorded primarily a of December 31 , 2022 , recorded primarily in cost world , beginning in January 2023 , we will update our revised presentation . See Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for information relating to our relating to our segment . 31 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2021 2022 Google Search Year Ended December 31 , 2021 2022 Google Search & other Ended December 31 , 2021 2022 Google Search & other $ Google Search & other $ 148,951 $ 162,450 YouTube ad 28,845 & other $ 148,951 $ 162,450 YouTube ad 28,845 29,243 Google 148,951 $ 162,450 YouTube ad 28,845 29,243 Google Network 31,701 32,780 $ 162,450 YouTube ad 28,845 29,243 Google Network 31,701 32,780 Google ad 28,845 29,243 Google Network 31,701 32,780 Google advertising 209,497 224,473 28,845 29,243 Google Network 31,701 32,780 Google advertising 209,497 224,473 Google Network 31,701 32,780 Google advertising 209,497 224,473 Google other 28,032 29,055 31,701 32,780 Google advertising 209,497 224,473 Google other 28,032 29,055 Google advertising 209,497 224,473 Google other 28,032 29,055 Google Services total 237,529 209,497 224,473 Google other 28,032 29,055 Google Services total 237,529 253,528 28,032 29,055 Google Services total 237,529 253,528 Google Cloud 19,206 26,280 29,055 Google Services total 237,529 253,528 Google Cloud 19,206 26,280 Other total 237,529 253,528 Google Cloud 19,206 26,280 Other Bets 753 1,068 237,529 253,528 Google Cloud 19,206 26,280 Other Bets 753 1,068 Hedging Cloud 19,206 26,280 Other Bets 753 1,068 Hedging gain ( loss 19,206 26,280 Other Bets 753 1,068 Hedging gain ( loss ) Hedging gain ( loss ) 149 1,960 Total revenue $ 257,637 gain ( loss ) 149 1,960 Total revenue $ 257,637 $ 149 1,960 Total revenue $ 257,637 $ 282,836 Google Services Google Total revenue $ 257,637 $ 282,836 Google Services Google advertising revenue & other revenue increased $ 13.5 billion from 2021 to 2022 increased $ 13.5 billion from 2021 to 2022 . The growth 13.5 billion from 2021 to 2022 . The growth wa driven YouTube ad revenue increased $ 398 million from 2021 to 2022 increased $ 398 million from 2021 to 2022 . The growth 398 million from 2021 to 2022 . The growth wa driven Google Network revenue increased $ 1.1 billion from 2021 to 2022 increased $ 1.1 billion from 2021 to 2022 . The growth 1.1 billion from 2021 to 2022 . The growth wa primarily a a percentage ) from 2021 to 2022 : Paid click percentage ) from 2021 to 2022 : Paid click change 10 2022 : Paid click change 10 % Cost-per-click change ( 1 10 % Cost-per-click change ( 1 ) % Paid click increased % Paid click increased from 2021 to 2022 driven by a click increased from 2021 to 2022 driven by a number of delivery . Cost-per-click decreased from 2021 to 2022 driven by a Cost-per-click decreased from 2021 to 2022 driven by a number of foreign currency exchange rate . 32 Table of Contents Alphabet Inc. a a percentage ) from 2021 to 2022 : Impressions change percentage ) from 2021 to 2022 : Impressions change 3 % to 2022 : Impressions change 3 % Cost-per-impression change 1 % change 3 % Cost-per-impression change 1 % Impressions increased from 2021 1 % Impressions increased from 2021 to 2022 primarily driven by Impressions increased from 2021 to 2022 primarily driven by Google Ad The increase in cost-per-impression from 2021 to 2022 wa driven by in cost-per-impression from 2021 to 2022 wa driven by a number Google other revenue increased $ 1.0 billion from 2021 to 2022 increased $ 1.0 billion from 2021 to 2022 primarily driven by 1.0 billion from 2021 to 2022 primarily driven by growth in structure change we announced in 2021 a well a a decrease Google Cloud revenue increased $ 7.1 billion from 2021 to 2022 increased $ 7.1 billion from 2021 to 2022 . The growth 7.1 billion from 2021 to 2022 . The growth wa primarily customer : Year Ended December 31 , 2021 2022 United States Year Ended December 31 , 2021 2022 United States 46 % Ended December 31 , 2021 2022 United States 46 % 48 , 2021 2022 United States 46 % 48 % EMEA 31 2022 United States 46 % 48 % EMEA 31 % 29 46 % 48 % EMEA 31 % 29 % APAC 18 48 % EMEA 31 % 29 % APAC 18 % 16 31 % 29 % APAC 18 % 16 % Other Americas 29 % APAC 18 % 16 % Other Americas 5 % % 16 % Other Americas 5 % 6 % Hedging gain % Other Americas 5 % 6 % Hedging gain ( loss Hedging gain ( loss ) 0 % 1 % For further ( loss ) 0 % 1 % For further detail on by geography , see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Use of Non-GAAP Constant Currency in the current period . 33 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2022 % Change from Year Ended December 31 , 2022 % Change from Prior Period Prior Period Year Ended December 31 , Less FX Effect Constant FX Effect Constant Currency Revenues 2021 2022 United States $ 117,854 Effect Constant Currency Revenues 2021 2022 United States $ 117,854 $ 2021 2022 United States $ 117,854 $ 134,814 $ 0 $ United States $ 117,854 $ 134,814 $ 0 $ 134,814 14 $ 117,854 $ 134,814 $ 0 $ 134,814 14 % 0 $ 134,814 $ 0 $ 134,814 14 % 0 % 14 134,814 $ 0 $ 134,814 14 % 0 % 14 % 0 $ 134,814 14 % 0 % 14 % EMEA 79,107 134,814 14 % 0 % 14 % EMEA 79,107 82,062 ( 0 % 14 % EMEA 79,107 82,062 ( 8,979 ) 91,041 % 14 % EMEA 79,107 82,062 ( 8,979 ) 91,041 4 % EMEA 79,107 82,062 ( 8,979 ) 91,041 4 % ( 79,107 82,062 ( 8,979 ) 91,041 4 % ( 11 ) 82,062 ( 8,979 ) 91,041 4 % ( 11 ) % ) 91,041 4 % ( 11 ) % 15 % APAC % ( 11 ) % 15 % APAC 46,123 47,024 ( ) % 15 % APAC 46,123 47,024 ( 3,915 ) 50,939 % 15 % APAC 46,123 47,024 ( 3,915 ) 50,939 2 % APAC 46,123 47,024 ( 3,915 ) 50,939 2 % ( 46,123 47,024 ( 3,915 ) 50,939 2 % ( 8 ) 47,024 ( 3,915 ) 50,939 2 % ( 8 ) % ) 50,939 2 % ( 8 ) % 10 % Other % ( 8 ) % 10 % Other Americas 14,404 16,976 % 10 % Other Americas 14,404 16,976 ( 430 ) 17,406 10 % Other Americas 14,404 16,976 ( 430 ) 17,406 18 Other Americas 14,404 16,976 ( 430 ) 17,406 18 % ( 14,404 16,976 ( 430 ) 17,406 18 % ( 3 ) 16,976 ( 430 ) 17,406 18 % ( 3 ) % ) 17,406 18 % ( 3 ) % 21 % Revenues % ( 3 ) % 21 % Revenues , excluding hedging Revenues , excluding hedging effect 257,488 280,876 ( 13,324 ) 294,200 , excluding hedging effect 257,488 280,876 ( 13,324 ) 294,200 9 hedging effect 257,488 280,876 ( 13,324 ) 294,200 9 % ( 257,488 280,876 ( 13,324 ) 294,200 9 % ( 5 ) 280,876 ( 13,324 ) 294,200 9 % ( 5 ) % ) 294,200 9 % ( 5 ) % 14 % Hedging % ( 5 ) % 14 % Hedging gain ( loss Hedging gain ( loss ) 149 1,960 Total revenue ( 1 gain ( loss ) 149 1,960 Total revenue ( 1 ) 149 1,960 Total revenue ( 1 ) $ 257,637 $ 282,836 revenue ( 1 ) $ 257,637 $ 282,836 $ 294,200 10 1 ) $ 257,637 $ 282,836 $ 294,200 10 % 1 $ 257,637 $ 282,836 $ 294,200 10 % 1 % ( 257,637 $ 282,836 $ 294,200 10 % 1 % ( 5 282,836 $ 294,200 10 % 1 % ( 5 ) % 10 % 1 % ( 5 ) % 14 % ( % ( 5 ) % 14 % ( 1 ) Total ) % 14 % ( 1 ) Total constant currency revenue constant currency revenue of $ 294.2 billion for 2022 increased $ of $ 294.2 billion for 2022 increased $ 36.7 billion compared billion for 2022 increased $ 36.7 billion compared to $ 257.5 36.7 billion compared to $ 257.5 billion in revenue , excluding , excluding hedging effect for 2021 . EMEA revenue growth wa ) : Year Ended December 31 , 2021 2022 TAC $ Year Ended December 31 , 2021 2022 TAC $ 45,566 $ Ended December 31 , 2021 2022 TAC $ 45,566 $ 48,955 , 2021 2022 TAC $ 45,566 $ 48,955 Other cost of 2022 TAC $ 45,566 $ 48,955 Other cost of revenue 65,373 48,955 Other cost of revenue 65,373 77,248 Total cost of revenue Other cost of revenue 65,373 77,248 Total cost of revenue $ Total cost of revenue $ 110,939 $ 126,203 Total cost of of revenue $ 110,939 $ 126,203 Total cost of revenue a a a percentage of revenue 43 % 45 % Cost of percentage of revenue 43 % 45 % Cost of revenue increased Cost of revenue increased $ 15.3 billion from 2021 to 2022 increased $ 15.3 billion from 2021 to 2022 . The increase 15.3 billion from 2021 to 2022 . The increase wa due revenue and TAC of $ 11.9 billion and $ 3.4 billion $ 11.9 billion and $ 3.4 billion , respectively . The The increase in TAC from 2021 to 2022 wa due to in TAC from 2021 to 2022 wa due to an increase . The TAC rate wa 22 % in both 2021 and wa 22 % in both 2021 and 2022 . The TAC % in both 2021 and 2022 . The TAC rate on were both substantially consistent from 2021 to 2022 . The increase substantially consistent from 2021 to 2022 . The increase in other other cost of revenue from 2021 to 2022 wa primarily due of revenue from 2021 to 2022 wa primarily due to increase well a hardware cost . 34 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2021 2022 Research and Year Ended December 31 , 2021 2022 Research and development expense Ended December 31 , 2021 2022 Research and development expense $ Research and development expense $ 31,562 $ 39,500 Research and development development expense $ 31,562 $ 39,500 Research and development expense a a a percentage of revenue 12 % 14 % R & percentage of revenue 12 % 14 % R & D expense & D expense increased $ 7.9 billion from 2021 to 2022 increased $ 7.9 billion from 2021 to 2022 primarily driven by 7.9 billion from 2021 to 2022 primarily driven by an increase in compensation expense of $ 5.4 billion , largely resulting from , largely resulting from a 21 % increase in average headcount third-party service fee of $ 704 million . Sales and Marketing ) : Year Ended December 31 , 2021 2022 Sales and Year Ended December 31 , 2021 2022 Sales and marketing expense Ended December 31 , 2021 2022 Sales and marketing expense $ Sales and marketing expense $ 22,912 $ 26,567 Sales and marketing marketing expense $ 22,912 $ 26,567 Sales and marketing expense a a a percentage of revenue 9 % 9 % Sales and percentage of revenue 9 % 9 % Sales and marketing expense and marketing expense increased $ 3.7 billion from 2021 to 2022 increased $ 3.7 billion from 2021 to 2022 , primarily driven 3.7 billion from 2021 to 2022 , primarily driven by an in compensation expense of $ 1.8 billion , largely resulting from , largely resulting from a 19 % increase in average headcount and promotional activity of $ 1.3 billion . General and Administrative ) : Year Ended December 31 , 2021 2022 General and Year Ended December 31 , 2021 2022 General and administrative expense Ended December 31 , 2021 2022 General and administrative expense $ General and administrative expense $ 13,510 $ 15,724 General and administrative administrative expense $ 13,510 $ 15,724 General and administrative expense a a a percentage of revenue 5 % 6 % General and percentage of revenue 5 % 6 % General and administrative expense and administrative expense increased $ 2.2 billion from 2021 to 2022 increased $ 2.2 billion from 2021 to 2022 . The increase 2.2 billion from 2021 to 2022 . The increase wa primarily in compensation expense of $ 1.1 billion , largely resulting from , largely resulting from a 21 % increase in average headcount third-party service fee of $ 815 million . In addition , , there wa a $ 551 million increase to the allowance ) . Year Ended December 31 , 2021 2022 Operating income Year Ended December 31 , 2021 2022 Operating income ( loss Ended December 31 , 2021 2022 Operating income ( loss ) ) : Google Services $ 91,855 $ 86,572 Google Cloud ( Google Services $ 91,855 $ 86,572 Google Cloud ( 3,099 ) $ 86,572 Google Cloud ( 3,099 ) ( 2,968 ) Other Cloud ( 3,099 ) ( 2,968 ) Other Bets ( 5,281 2,968 ) Other Bets ( 5,281 ) ( 6,083 ) Corporate Bets ( 5,281 ) ( 6,083 ) Corporate cost , unallocated Corporate cost , unallocated ( 1 ) ( 4,761 ) ( unallocated ( 1 ) ( 4,761 ) ( 2,679 ) Total ) ( 4,761 ) ( 2,679 ) Total income from operation Total income from operation $ 78,714 $ 74,842 ( 1 ) from operation $ 78,714 $ 74,842 ( 1 ) Unallocated corporate $ 78,714 $ 74,842 ( 1 ) Unallocated corporate cost primarily corporate cost and totaled $ 149 million and $ 2.0 billion $ 149 million and $ 2.0 billion in 2021 and 2022 and $ 2.0 billion in 2021 and 2022 , respectively . 2.0 billion in 2021 and 2022 , respectively . Google Services Services operating income decreased $ 5.3 billion from 2021 to 2022 decreased $ 5.3 billion from 2021 to 2022 . The decrease 5.3 billion from 2021 to 2022 . The decrease in operating by growth in revenue . 35 Table of Contents Alphabet Inc. Cloud operating loss decreased $ 131 million from 2021 to 2022 decreased $ 131 million from 2021 to 2022 . The decrease 131 million from 2021 to 2022 . The decrease in operating Bets operating loss increased $ 802 million from 2021 to 2022 increased $ 802 million from 2021 to 2022 . The increase 802 million from 2021 to 2022 . The increase in operating ) : Year Ended December 31 , 2021 2022 Other income Year Ended December 31 , 2021 2022 Other income ( expense Ended December 31 , 2021 2022 Other income ( expense ) expense ) , net $ 12,020 $ ( 3,514 ) Other net $ 12,020 $ ( 3,514 ) Other income ( expense , net , decreased $ 15.5 billion from 2021 to 2022 decreased $ 15.5 billion from 2021 to 2022 primarily due to 15.5 billion from 2021 to 2022 primarily due to change in and performance fee . In 2022 , $ 3.2 billion of . In 2022 , $ 3.2 billion of net unrealized loss marketable equity security and $ 1.5 billion of net realized loss by interest income of $ 2.2 billion and reversal of previously to certain investment of $ 798 million . In 2021 , $ 798 million . In 2021 , $ 9.8 billion of . In 2021 , $ 9.8 billion of net unrealized gain non-marketable equity security and $ 1.5 billion of interest income wa , partially offset by $ 1.9 billion of accrued performance fee certain investment . See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Provision ) : Year Ended December 31 , 2021 2022 Income before Year Ended December 31 , 2021 2022 Income before provision for Ended December 31 , 2021 2022 Income before provision for income provision for income tax $ 90,734 $ 71,328 Provision for income income tax $ 90,734 $ 71,328 Provision for income tax $ Provision for income tax $ 14,701 $ 11,356 Effective tax rate income tax $ 14,701 $ 11,356 Effective tax rate 16.2 % $ 11,356 Effective tax rate 16.2 % 15.9 % The effective Effective tax rate 16.2 % 15.9 % The effective tax rate effective tax rate decreased from 2021 to 2022 , primarily driven rate decreased from 2021 to 2022 , primarily driven by the R & D expense in 2022 a required by the 2017 2022 a required by the 2017 Tax Cuts and Jobs Act tax benefit . See Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information . Financial Marketable Securities As of December 31 , 2022 , we had As of December 31 , 2022 , we had $ 113.8 2022 , we had $ 113.8 billion in cash , cash capital return to stockholder . 36 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2021 2022 Net cash Year Ended December 31 , 2021 2022 Net cash provided by Ended December 31 , 2021 2022 Net cash provided by operating provided by operating activity $ 91,652 $ 91,495 Net cash used operating activity $ 91,652 $ 91,495 Net cash used in investing in investing activity $ ( 35,523 ) $ ( 20,298 ) ( 35,523 ) $ ( 20,298 ) Net cash used in in financing activity $ ( 61,362 ) $ ( 69,757 ) ( 61,362 ) $ ( 69,757 ) Cash Provided by Operating by operating activity decreased from 2021 to 2022 primarily due to activity decreased from 2021 to 2022 primarily due to the net & D expense beginning in 2022 a required by the 2017 2022 a required by the 2017 Tax Cuts and Jobs Act in investing activity decreased from 2021 to 2022 a a result activity decreased from 2021 to 2022 a a result of a in financing activity increased from 2021 to 2022 primarily due to activity increased from 2021 to 2022 primarily due to an increase for at least the next 12 month and thereafter for the generally multi-year project with multiple 37 Table of Contents Alphabet Inc. During the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , we spent December 31 , 2021 and 2022 , we spent $ 24.6 2022 , we spent $ 24.6 billion and $ 31.5 billion $ 24.6 billion and $ 31.5 billion on capital expenditure , For the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , our depreciation December 31 , 2021 and 2022 , our depreciation and impairment property and equipment were $ 11.6 billion and $ 15.3 billion $ 11.6 billion and $ 15.3 billion , respectively . Leases For the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , we recognized December 31 , 2021 and 2022 , we recognized total operating operating lease asset of $ 3.0 billion and $ 4.4 billion $ 3.0 billion and $ 4.4 billion , respectively . As respectively . As of December 31 , 2022 , the amount As of December 31 , 2022 , the amount of total average remaining lease term of 8 year , wa $ 17.4 8 year , wa $ 17.4 billion , of which $ billion , of which $ 3.0 billion is short-term . As short-term . As of December 31 , 2022 , we have As of December 31 , 2022 , we have entered into long-term lease payment of $ 630 million and $ 3.1 billion $ 630 million and $ 3.1 billion that are not yet These lease will commence between 2023 and 2026 with non-cancelable lease will commence between 2023 and 2026 with non-cancelable lease term of with non-cancelable lease term of 1 to 25 year . For lease term of 1 to 25 year . For the year For the year ended December 31 , 2021 and 2022 , year ended December 31 , 2021 and 2022 , our operating December 31 , 2021 and 2022 , our operating lease expense lease cost ) were $ 3.4 billion and $ 3.7 billion $ 3.4 billion and $ 3.7 billion , respectively . Finance for the year ended December 31 , 2021 and 2022 . year ended December 31 , 2021 and 2022 . See Note December 31 , 2021 and 2022 . See Note 4 of and 2022 . See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on lease program of up to $ 10.0 billion through the issuance of purpose . As of December 31 , 2022 , we had As of December 31 , 2022 , we had no commercial outstanding . As of December 31 , 2022 , we had As of December 31 , 2022 , we had $ 10.0 2022 , we had $ 10.0 billion of revolving credit facility revolving credit facility , $ 4.0 billion expiring in April 2023 4.0 billion expiring in April 2023 and $ 6.0 billion expiring in April 2023 and $ 6.0 billion expiring in April 2026 6.0 billion expiring in April 2026 . The interest rate for facility . As of December 31 , 2022 , we had As of December 31 , 2022 , we had senior unsecured total carrying value of $ 12.9 billion with short-term and long-term future interest payment of $ 231 million and $ 3.8 billion $ 231 million and $ 3.8 billion , respectively . See , respectively . See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for further information on our Cash Flows included in Item 8 of this Annual Report on this Annual Report on From 10-K. Share Repurchase Program In April Share Repurchase Program In April 2022 , the Board of Directors to repurchase up to $ 70.0 billion of it Class A share . As of December 31 , 2022 , $ 28.1 As of December 31 , 2022 , $ 28.1 billion remains 31 , 2022 , $ 28.1 billion remains available for Class Directors of Alphabet , during 2022 we repurchased and subsequently retired we repurchased and subsequently retired 530 million share for $ 59.3 530 million share for $ 59.3 billion . Of the aggregate repurchased and subsequently retired , 61 million share were Class A Class A stock for $ 6.7 billion and 469 million share for $ 6.7 billion and 469 million share were Class C Class C stock for $ 52.6 billion . See Note 11 52.6 billion . See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. European Commission Fines In 2017 10-K. European Commission Fines In 2017 , 2018 and 2019 , Commission Fines In 2017 , 2018 and 2019 , the EC In 2017 , 2018 and 2019 , the EC announced decision of €2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) , €4.3 a of June 27 , 2017 ) , €4.3 billion ( , €4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) , and a of June 30 , 2018 ) , and €1.5 billion and €1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) , respectively a of March 20 , 2019 ) , respectively . On , respectively . On September 14 , 2022 , the General . On September 14 , 2022 , the General Court reduced the General Court reduced the 2018 fine from €4.3 billion to Court of Justice . In 2018 we recognized a charge of recognized a charge of $ 5.1 billion for the fine , which we reduced by $ 217 million in 2022 . While by $ 217 million in 2022 . While each EC decision for the fine . For 38 Table of Contents Alphabet Inc. further detail , see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. Taxes As of December 31 10-K. Taxes As of December 31 , 2022 , we had As of December 31 , 2022 , we had short-term and income tax payable of $ 1.6 billion and $ 4.2 billion $ 1.6 billion and $ 4.2 billion related to a one-time in annual interest-free installment through 2025 . We also have tax have tax payable of $ 5.1 billion primarily related to uncertain tax position a of December 31 , 2022 . Purchase Commitments a of December 31 , 2022 . Purchase Commitments As of Purchase Commitments As of December 31 , 2022 , we had As of December 31 , 2022 , we had material non-cancelable non-cancelable contractual obligation of $ 32.0 billion , of which $ billion , of which $ 17.3 billion wa short-term . These and/or pricing a of December 31 , 2022 . In addition a of December 31 , 2022 . In addition we regularly of Directors . See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for a summary of significant benefit from the asset . 39 Table of Contents Alphabet Inc. the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. We evaluate , on a in Accounting Estimate In January 2023 , we completed an assessment of depreciation of approximately $ 3.4 billion for the full fiscal for the full fiscal year 2023 for asset in service a in service a of December 31 , 2022 , recorded primarily a of December 31 , 2022 , recorded primarily in cost D expense . See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K for information relating to the and network equipment . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES change in exchange rate of 10 % could be experienced . forward and option contract . 40 Table of Contents Alphabet Inc Inc . If an adverse 10 % foreign currency exchange rate tax of approxima tely $ 285 million and $ 136 million $ 285 million and $ 136 million a of December 31 136 million a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , respectively , December 31 , 2021 and 2022 , respectively , after consideration for the year ended December 31 , 2021 and 2022 . year ended December 31 , 2021 and 2022 . We use December 31 , 2021 and 2022 . We use foreign currency the U.S. dollar weakened by 10 % a of December 31 10 % a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , the amount December 31 , 2021 and 2022 , the amount recorded in would have been approximately $ 1.3 billion lower for both December billion lower for both December 31 , 2021 and 2022 . for both December 31 , 2021 and 2022 . The change December 31 , 2021 and 2022 . The change in the the U.S. dollar weakened by 10 % , the amount recorded would have been approximately $ 975 million and $ 903 million $ 975 million and $ 903 million lower a of December million lower a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , respectively . December 31 , 2021 and 2022 , respectively . The change a variance/covariance VaR model with 95 % confidence interval . The debt security a of December 31 , 2021 and 2022 are a of December 31 , 2021 and 2022 are shown below December 31 , 2021 and 2022 are shown below ( in ) : As of December 31 , 12-Month Average As of As of December 31 , 12-Month Average As of December 31 12-Month Average As of December 31 , 2021 2022 2021 2022 As of December 31 , 2021 2022 2021 2022 Risk category of December 31 , 2021 2022 2021 2022 Risk category - December 31 , 2021 2022 2021 2022 Risk category - interest 31 , 2021 2022 2021 2022 Risk category - interest rate category - interest rate $ 139 $ 256 $ 148 $ interest rate $ 139 $ 256 $ 148 $ 198 Actual $ 139 $ 256 $ 148 $ 198 Actual future gain $ 256 $ 148 $ 198 Actual future gain and loss analysis performed a of December 31 , 2021 and 2022 due a of December 31 , 2021 and 2022 due to the December 31 , 2021 and 2022 due to the inherent limitation value of our holding . 41 Table of Contents Alphabet Inc. volatility , and represent $ 7.8 billion and $ 5.2 billion $ 7.8 billion and $ 5.2 billion of our investment a our investment a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , respectively . December 31 , 2021 and 2022 , respectively . A hypothetical hypothetical adverse price change of 10 % on our December 31 10 % on our December 31 , 2022 balance would decrease on our December 31 , 2022 balance would decrease the fair marketable equity security by $ 516 million . From time to security . As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , the carrying December 31 , 2021 and 2022 , the carrying value of measurement alternative , wa $ 27.6 billion and $ 28.5 billion $ 27.6 billion and $ 28.5 billion , respectively . The , which totaled approximately $ 1.5 billion a of December 31 1.5 billion a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , generally do December 31 , 2021 and 2022 , generally do not fluctuate equity investment , see Note 1 and Note 3 of the see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on this Annual Report on Form 10-K. 42 Table of Contents Alphabet Annual Report on Form 10-K. 42 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY Firm ( PCAOB ID : 42 ) 44 Financial Statements : PCAOB ID : 42 ) 44 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 47 Consolidated Statements of Income 48 47 Consolidated Statements of Income 48 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 49 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 50 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 52 43 Table of Contents Alphabet to Consolidated Financial Statements 52 43 Table of Contents Alphabet Inc. Company ) a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , the related December 31 , 2021 and 2022 , the related consolidated statement in the period ended December 31 , 2022 , and the period ended December 31 , 2022 , and the related note in the Index at Item 15 ( collectively referred to a of the Company at December 31 , 2021 and 2022 , Company at December 31 , 2021 and 2022 , and the December 31 , 2021 and 2022 , and the result of in the period ended December 31 , 2022 , in conformity period ended December 31 , 2022 , in conformity with U.S. financial reporting a of December 31 , 2022 , based on a of December 31 , 2022 , based on criterion established of the Treadway Commission ( 2013 framework ) , and our and our report dated February 2 , 2023 expressed an unqualified report dated February 2 , 2023 expressed an unqualified opinion thereon committee and that : ( 1 ) relates to account or the financial statement and ( 2 ) involved our especially challenging to which it relates . 44 Table of Contents Alphabet Inc. . As described in Note 10 to the consolidated financial statement the Company 's auditor since 1999 . San Jose , California San Jose , California February 2 , 2023 45 Table of , California February 2 , 2023 45 Table of Contents Alphabet California February 2 , 2023 45 Table of Contents Alphabet Inc. financial reporting a of December 31 , 2022 , based on a of December 31 , 2022 , based on criterion established of the Treadway Commission ( 2013 framework ) ( the COSO financial reporting a of December 31 , 2022 , based on a of December 31 , 2022 , based on the COSO ( PCAOB ) , the 2022 consolidated financial statement of the and our report dated February 2 , 2023 expressed an unqualified report dated February 2 , 2023 expressed an unqualified opinion thereon policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding San Jose , California February 2 , 2023 46 Table of , California February 2 , 2023 46 Table of Contents Alphabet California February 2 , 2023 46 Table of Contents Alphabet Inc amount ) As of December 31 , 2021 2022 Assets Current As of December 31 , 2021 2022 Assets Current asset : of December 31 , 2021 2022 Assets Current asset : Cash Cash and cash equivalent $ 20,945 $ 21,879 Marketable security 118,704 cash equivalent $ 20,945 $ 21,879 Marketable security 118,704 91,883 Total 20,945 $ 21,879 Marketable security 118,704 91,883 Total cash , cash $ 21,879 Marketable security 118,704 91,883 Total cash , cash equivalent equivalent , and marketable security 139,649 113,762 Accounts receivable , net , and marketable security 139,649 113,762 Accounts receivable , net 39,304 113,762 Accounts receivable , net 39,304 40,258 Inventory 1,170 2,670 Other Accounts receivable , net 39,304 40,258 Inventory 1,170 2,670 Other current , net 39,304 40,258 Inventory 1,170 2,670 Other current asset 8,020 net 39,304 40,258 Inventory 1,170 2,670 Other current asset 8,020 8,105 1,170 2,670 Other current asset 8,020 8,105 Total current asset 188,143 2,670 Other current asset 8,020 8,105 Total current asset 188,143 164,795 8,020 8,105 Total current asset 188,143 164,795 Non-marketable security 29,549 30,492 8,105 Total current asset 188,143 164,795 Non-marketable security 29,549 30,492 Deferred asset 188,143 164,795 Non-marketable security 29,549 30,492 Deferred income tax 1,284 188,143 164,795 Non-marketable security 29,549 30,492 Deferred income tax 1,284 5,261 29,549 30,492 Deferred income tax 1,284 5,261 Property and equipment , 30,492 Deferred income tax 1,284 5,261 Property and equipment , net Property and equipment , net 97,599 112,668 Operating lease asset 12,959 and equipment , net 97,599 112,668 Operating lease asset 12,959 14,381 97,599 112,668 Operating lease asset 12,959 14,381 Intangible asset , net 112,668 Operating lease asset 12,959 14,381 Intangible asset , net 1,417 14,381 Intangible asset , net 1,417 2,084 Goodwill 22,956 28,960 Other Intangible asset , net 1,417 2,084 Goodwill 22,956 28,960 Other non-current , net 1,417 2,084 Goodwill 22,956 28,960 Other non-current asset 5,361 net 1,417 2,084 Goodwill 22,956 28,960 Other non-current asset 5,361 6,623 22,956 28,960 Other non-current asset 5,361 6,623 Total asset $ 359,268 28,960 Other non-current asset 5,361 6,623 Total asset $ 359,268 $ 5,361 6,623 Total asset $ 359,268 $ 365,264 Liabilities and Stockholders Total asset $ 359,268 $ 365,264 Liabilities and Stockholders ’ Equity liability : Accounts payable $ 6,037 $ 5,128 Accrued compensation and Accounts payable $ 6,037 $ 5,128 Accrued compensation and benefit 13,889 5,128 Accrued compensation and benefit 13,889 14,028 Accrued expense and other Accrued compensation and benefit 13,889 14,028 Accrued expense and other current expense and other current liability 32,044 37,866 Accrued revenue share 8,996 and other current liability 32,044 37,866 Accrued revenue share 8,996 8,370 32,044 37,866 Accrued revenue share 8,996 8,370 Deferred revenue 3,288 3,908 37,866 Accrued revenue share 8,996 8,370 Deferred revenue 3,288 3,908 Total share 8,996 8,370 Deferred revenue 3,288 3,908 Total current liability 64,254 8,996 8,370 Deferred revenue 3,288 3,908 Total current liability 64,254 69,300 3,288 3,908 Total current liability 64,254 69,300 Long-term debt 14,817 14,701 3,908 Total current liability 64,254 69,300 Long-term debt 14,817 14,701 Deferred liability 64,254 69,300 Long-term debt 14,817 14,701 Deferred revenue , non-current 64,254 69,300 Long-term debt 14,817 14,701 Deferred revenue , non-current 535 14,701 Deferred revenue , non-current 535 599 Income tax payable , Deferred revenue , non-current 535 599 Income tax payable , non-current Income tax payable , non-current 9,176 9,258 Deferred income tax 5,257 tax payable , non-current 9,176 9,258 Deferred income tax 5,257 514 9,176 9,258 Deferred income tax 5,257 514 Operating lease liability 11,389 9,258 Deferred income tax 5,257 514 Operating lease liability 11,389 12,501 5,257 514 Operating lease liability 11,389 12,501 Other long-term liability 2,205 514 Operating lease liability 11,389 12,501 Other long-term liability 2,205 2,247 11,389 12,501 Other long-term liability 2,205 2,247 Total liability 107,633 109,120 12,501 Other long-term liability 2,205 2,247 Total liability 107,633 109,120 Commitments liability 2,205 2,247 Total liability 107,633 109,120 Commitments and contingency ( 2,205 2,247 Total liability 107,633 109,120 Commitments and contingency ( Note Commitments and contingency ( Note 10 ) Stockholders ’ equity : : Preferred stock , $ 0.001 par value per share , par value per share , 100 share authorized ; no share no share issued and outstanding 0 0 Class A , Class share issued and outstanding 0 0 Class A , Class B additional paid-in capital , $ 0.001 par value per share : par value per share : 300,000 share authorized ( Class A share authorized ( Class A 180,000 , Class B 60,000 , A 180,000 , Class B 60,000 , Class C 60,000 ) B 60,000 , Class C 60,000 ) ; 13,242 ( Class Class C 60,000 ) ; 13,242 ( Class A 6,015 , ; 13,242 ( Class A 6,015 , Class B 893 , A 6,015 , Class B 893 , Class C 6,334 ) B 893 , Class C 6,334 ) and 12,849 ( Class Class C 6,334 ) and 12,849 ( Class A 5,964 , and 12,849 ( Class A 5,964 , Class B 883 , A 5,964 , Class B 883 , Class C 6,002 ) B 883 , Class C 6,002 ) share issued and outstanding ) share issued and outstanding 61,774 68,184 Accumulated other comprehensive income share issued and outstanding 61,774 68,184 Accumulated other comprehensive income ( income ( loss ) ( 1,623 ) ( 7,603 ) Retained ) ( 1,623 ) ( 7,603 ) Retained earnings 191,484 195,563 ( 7,603 ) Retained earnings 191,484 195,563 Total stockholder ’ equity 7,603 ) Retained earnings 191,484 195,563 Total stockholder ’ equity 251,635 195,563 Total stockholder ’ equity 251,635 256,144 Total liability and stockholder Total stockholder ’ equity 251,635 256,144 Total liability and stockholder ’ and stockholder ’ equity $ 359,268 $ 365,264 See accompanying note ’ equity $ 359,268 $ 365,264 See accompanying note . 47 365,264 See accompanying note . 47 Table of Contents Alphabet Inc amount ) Year Ended December 31 , 2020 2021 2022 Revenues Year Ended December 31 , 2020 2021 2022 Revenues $ 182,527 Ended December 31 , 2020 2021 2022 Revenues $ 182,527 $ December 31 , 2020 2021 2022 Revenues $ 182,527 $ 257,637 2020 2021 2022 Revenues $ 182,527 $ 257,637 $ 282,836 Costs 2022 Revenues $ 182,527 $ 257,637 $ 282,836 Costs and expense $ 182,527 $ 257,637 $ 282,836 Costs and expense : Cost expense : Cost of revenue 84,732 110,939 126,203 Research and development : Cost of revenue 84,732 110,939 126,203 Research and development 27,573 Cost of revenue 84,732 110,939 126,203 Research and development 27,573 31,562 110,939 126,203 Research and development 27,573 31,562 39,500 Sales and marketing 126,203 Research and development 27,573 31,562 39,500 Sales and marketing 17,946 Research and development 27,573 31,562 39,500 Sales and marketing 17,946 22,912 31,562 39,500 Sales and marketing 17,946 22,912 26,567 General and administrative 39,500 Sales and marketing 17,946 22,912 26,567 General and administrative 11,052 Sales and marketing 17,946 22,912 26,567 General and administrative 11,052 13,510 22,912 26,567 General and administrative 11,052 13,510 15,724 Total cost and 26,567 General and administrative 11,052 13,510 15,724 Total cost and expense General and administrative 11,052 13,510 15,724 Total cost and expense 141,303 15,724 Total cost and expense 141,303 178,923 207,994 Income from operation Total cost and expense 141,303 178,923 207,994 Income from operation 41,224 cost and expense 141,303 178,923 207,994 Income from operation 41,224 78,714 178,923 207,994 Income from operation 41,224 78,714 74,842 Other income ( 207,994 Income from operation 41,224 78,714 74,842 Other income ( expense Income from operation 41,224 78,714 74,842 Other income ( expense ) ( expense ) , net 6,858 12,020 ( 3,514 ) Income expense ) , net 6,858 12,020 ( 3,514 ) Income before , net 6,858 12,020 ( 3,514 ) Income before income tax ) Income before income tax 48,082 90,734 71,328 Provision for income Income before income tax 48,082 90,734 71,328 Provision for income tax before income tax 48,082 90,734 71,328 Provision for income tax 7,813 71,328 Provision for income tax 7,813 14,701 11,356 Net income $ Provision for income tax 7,813 14,701 11,356 Net income $ 40,269 for income tax 7,813 14,701 11,356 Net income $ 40,269 $ 14,701 11,356 Net income $ 40,269 $ 76,033 $ 59,972 Basic Net income $ 40,269 $ 76,033 $ 59,972 Basic net income $ 40,269 $ 76,033 $ 59,972 Basic net income per share and Class C stock $ 2.96 $ 5.69 $ 4.59 Diluted C stock $ 2.96 $ 5.69 $ 4.59 Diluted net income $ 2.96 $ 5.69 $ 4.59 Diluted net income per share and Class C stock $ 2.93 $ 5.61 $ 4.56 See C stock $ 2.93 $ 5.61 $ 4.56 See accompanying note $ 2.93 $ 5.61 $ 4.56 See accompanying note . 48 4.56 See accompanying note . 48 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2020 2021 2022 Net Year Ended December 31 , 2020 2021 2022 Net income $ Ended December 31 , 2020 2021 2022 Net income $ 40,269 December 31 , 2020 2021 2022 Net income $ 40,269 $ 2021 2022 Net income $ 40,269 $ 76,033 $ 59,972 Other Net income $ 40,269 $ 76,033 $ 59,972 Other comprehensive income $ 40,269 $ 76,033 $ 59,972 Other comprehensive income ( loss in foreign currency translation adjustment 1,139 ( 1,442 ) ( 1,836 currency translation adjustment 1,139 ( 1,442 ) ( 1,836 ) Available-for-sale 1,139 ( 1,442 ) ( 1,836 ) Available-for-sale investment : Change unrealized gain ( loss ) 1,313 ( 1,312 ) ( 4,720 ( loss ) 1,313 ( 1,312 ) ( 4,720 ) Less 1,313 ( 1,312 ) ( 4,720 ) Less : reclassification adjustment included in net income ( 513 ) ( 64 ) 1,007 income ( 513 ) ( 64 ) 1,007 Net change , 513 ) ( 64 ) 1,007 Net change , net of expense ) of $ ( 230 ) , $ 394 , ( 230 ) , $ 394 , and $ 1,056 800 $ 394 , and $ 1,056 800 ( 1,376 ) ( 394 , and $ 1,056 800 ( 1,376 ) ( 3,713 and $ 1,056 800 ( 1,376 ) ( 3,713 ) Cash 800 ( 1,376 ) ( 3,713 ) Cash flow hedge : unrealized gain ( loss ) 42 716 1,275 Less : reclassification gain ( loss ) 42 716 1,275 Less : reclassification adjustment ( loss ) 42 716 1,275 Less : reclassification adjustment for included in net income ( 116 ) ( 154 ) ( income ( 116 ) ( 154 ) ( 1,706 ) Net ) ( 154 ) ( 1,706 ) Net change , net ( expense ) of $ 11 , $ ( 122 ) $ 11 , $ ( 122 ) , and $ 110 122 ) , and $ 110 ( 74 ) 562 ( , and $ 110 ( 74 ) 562 ( 431 ) $ 110 ( 74 ) 562 ( 431 ) Other comprehensive ( 74 ) 562 ( 431 ) Other comprehensive income ( comprehensive income ( loss ) 1,865 ( 2,256 ) ( 5,980 ( loss ) 1,865 ( 2,256 ) ( 5,980 ) Comprehensive 1,865 ( 2,256 ) ( 5,980 ) Comprehensive income $ 42,134 5,980 ) Comprehensive income $ 42,134 $ 73,777 $ 53,992 See Comprehensive income $ 42,134 $ 73,777 $ 53,992 See accompanying note $ 42,134 $ 73,777 $ 53,992 See accompanying note . 49 53,992 See accompanying note . 49 Table of Contents Alphabet Inc Amount Balance a of December 31 , 2019 13,767 $ 50,552 a of December 31 , 2019 13,767 $ 50,552 $ ( of December 31 , 2019 13,767 $ 50,552 $ ( 1,232 31 , 2019 13,767 $ 50,552 $ ( 1,232 ) $ 13,767 $ 50,552 $ ( 1,232 ) $ 152,122 $ 201,442 $ ( 1,232 ) $ 152,122 $ 201,442 Stock issued 167 1,232 ) $ 152,122 $ 201,442 Stock issued 167 168 0 152,122 $ 201,442 Stock issued 167 168 0 0 168 Stock-based $ 201,442 Stock issued 167 168 0 0 168 Stock-based compensation 201,442 Stock issued 167 168 0 0 168 Stock-based compensation expense Stock issued 167 168 0 0 168 Stock-based compensation expense 0 issued 167 168 0 0 168 Stock-based compensation expense 0 13,123 0 168 Stock-based compensation expense 0 13,123 0 0 13,123 Tax 168 Stock-based compensation expense 0 13,123 0 0 13,123 Tax withholding Stock-based compensation expense 0 13,123 0 0 13,123 Tax withholding related compensation expense 0 13,123 0 0 13,123 Tax withholding related to expense 0 13,123 0 0 13,123 Tax withholding related to vesting restricted stock unit and other 0 ( 5,969 ) 0 0 unit and other 0 ( 5,969 ) 0 0 ( 5,969 other 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases of 5,969 ) 0 0 ( 5,969 ) Repurchases of stock ( ) Repurchases of stock ( 430 ) ( 2,159 ) 0 stock ( 430 ) ( 2,159 ) 0 ( 28,990 ) 430 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale 0 ( 28,990 ) ( 31,149 ) Sale of interest in of interest in consolidated entity 0 2,795 0 0 2,795 Net interest in consolidated entity 0 2,795 0 0 2,795 Net income in consolidated entity 0 2,795 0 0 2,795 Net income 0 consolidated entity 0 2,795 0 0 2,795 Net income 0 0 entity 0 2,795 0 0 2,795 Net income 0 0 0 0 0 2,795 Net income 0 0 0 40,269 40,269 Other 0 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive 2,795 Net income 0 0 0 40,269 40,269 Other comprehensive income Net income 0 0 0 40,269 40,269 Other comprehensive income ( income 0 0 0 40,269 40,269 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 1,865 0 1,865 Balance income ( loss ) 0 0 1,865 0 1,865 Balance a ( loss ) 0 0 1,865 0 1,865 Balance a of loss ) 0 0 1,865 0 1,865 Balance a of December ) 0 0 1,865 0 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 13,504 58,510 633 a of December 31 , 2020 13,504 58,510 633 163,401 222,544 of December 31 , 2020 13,504 58,510 633 163,401 222,544 Stock December 31 , 2020 13,504 58,510 633 163,401 222,544 Stock issued 31 , 2020 13,504 58,510 633 163,401 222,544 Stock issued 145 , 2020 13,504 58,510 633 163,401 222,544 Stock issued 145 12 2020 13,504 58,510 633 163,401 222,544 Stock issued 145 12 0 633 163,401 222,544 Stock issued 145 12 0 0 12 Stock-based 163,401 222,544 Stock issued 145 12 0 0 12 Stock-based compensation 222,544 Stock issued 145 12 0 0 12 Stock-based compensation expense Stock issued 145 12 0 0 12 Stock-based compensation expense 0 issued 145 12 0 0 12 Stock-based compensation expense 0 15,539 0 12 Stock-based compensation expense 0 15,539 0 0 15,539 Tax 12 Stock-based compensation expense 0 15,539 0 0 15,539 Tax withholding Stock-based compensation expense 0 15,539 0 0 15,539 Tax withholding related compensation expense 0 15,539 0 0 15,539 Tax withholding related to expense 0 15,539 0 0 15,539 Tax withholding related to vesting restricted stock unit and other 0 ( 10,273 ) 0 0 unit and other 0 ( 10,273 ) 0 0 ( 10,273 other 0 ( 10,273 ) 0 0 ( 10,273 ) Repurchases 0 ( 10,273 ) 0 0 ( 10,273 ) Repurchases of 10,273 ) 0 0 ( 10,273 ) Repurchases of stock ( ) Repurchases of stock ( 407 ) ( 2,324 ) 0 stock ( 407 ) ( 2,324 ) 0 ( 47,950 ) 407 ) ( 2,324 ) 0 ( 47,950 ) ( 50,274 ( 2,324 ) 0 ( 47,950 ) ( 50,274 ) Sale 0 ( 47,950 ) ( 50,274 ) Sale of interest in of interest in consolidated entity 0 310 0 0 310 Net interest in consolidated entity 0 310 0 0 310 Net income in consolidated entity 0 310 0 0 310 Net income 0 consolidated entity 0 310 0 0 310 Net income 0 0 entity 0 310 0 0 310 Net income 0 0 0 0 0 310 Net income 0 0 0 76,033 76,033 Other 0 310 Net income 0 0 0 76,033 76,033 Other comprehensive 310 Net income 0 0 0 76,033 76,033 Other comprehensive income Net income 0 0 0 76,033 76,033 Other comprehensive income ( income 0 0 0 76,033 76,033 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 2,256 ) 0 income ( loss ) 0 0 ( 2,256 ) 0 ( loss ) 0 0 ( 2,256 ) 0 ( 2,256 ) 0 0 ( 2,256 ) 0 ( 2,256 ) Balance a ( 2,256 ) 0 ( 2,256 ) Balance a of December ) Balance a of December 31 , 2021 13,242 61,774 ( a of December 31 , 2021 13,242 61,774 ( 1,623 ) of December 31 , 2021 13,242 61,774 ( 1,623 ) 191,484 December 31 , 2021 13,242 61,774 ( 1,623 ) 191,484 251,635 , 2021 13,242 61,774 ( 1,623 ) 191,484 251,635 Stock issued 13,242 61,774 ( 1,623 ) 191,484 251,635 Stock issued 137 8 61,774 ( 1,623 ) 191,484 251,635 Stock issued 137 8 0 ) 191,484 251,635 Stock issued 137 8 0 0 8 Stock-based 191,484 251,635 Stock issued 137 8 0 0 8 Stock-based compensation 251,635 Stock issued 137 8 0 0 8 Stock-based compensation expense Stock issued 137 8 0 0 8 Stock-based compensation expense 0 issued 137 8 0 0 8 Stock-based compensation expense 0 19,525 0 8 Stock-based compensation expense 0 19,525 0 0 19,525 Tax 8 Stock-based compensation expense 0 19,525 0 0 19,525 Tax withholding Stock-based compensation expense 0 19,525 0 0 19,525 Tax withholding related compensation expense 0 19,525 0 0 19,525 Tax withholding related to expense 0 19,525 0 0 19,525 Tax withholding related to vesting restricted stock unit and other 0 ( 9,754 ) 0 ( unit and other 0 ( 9,754 ) 0 ( 1 ) other 0 ( 9,754 ) 0 ( 1 ) ( 9,755 ( 9,754 ) 0 ( 1 ) ( 9,755 ) Repurchases 0 ( 1 ) ( 9,755 ) Repurchases of stock ( ) Repurchases of stock ( 530 ) ( 3,404 ) 0 stock ( 530 ) ( 3,404 ) 0 ( 55,892 ) 530 ) ( 3,404 ) 0 ( 55,892 ) ( 59,296 ( 3,404 ) 0 ( 55,892 ) ( 59,296 ) Sale 0 ( 55,892 ) ( 59,296 ) Sale of interest in of interest in consolidated entity 0 35 0 0 35 Net interest in consolidated entity 0 35 0 0 35 Net income in consolidated entity 0 35 0 0 35 Net income 0 consolidated entity 0 35 0 0 35 Net income 0 0 entity 0 35 0 0 35 Net income 0 0 0 0 0 35 Net income 0 0 0 59,972 59,972 Other 0 35 Net income 0 0 0 59,972 59,972 Other comprehensive 35 Net income 0 0 0 59,972 59,972 Other comprehensive income Net income 0 0 0 59,972 59,972 Other comprehensive income ( income 0 0 0 59,972 59,972 Other comprehensive income ( loss comprehensive income ( loss ) 0 0 ( 5,980 ) 0 income ( loss ) 0 0 ( 5,980 ) 0 ( loss ) 0 0 ( 5,980 ) 0 ( 5,980 ) 0 0 ( 5,980 ) 0 ( 5,980 ) Balance a ( 5,980 ) 0 ( 5,980 ) Balance a of December ) Balance a of December 31 , 2022 12,849 $ 68,184 a of December 31 , 2022 12,849 $ 68,184 $ ( of December 31 , 2022 12,849 $ 68,184 $ ( 7,603 31 , 2022 12,849 $ 68,184 $ ( 7,603 ) $ 12,849 $ 68,184 $ ( 7,603 ) $ 195,563 $ 256,144 $ ( 7,603 ) $ 195,563 $ 256,144 See accompanying note 7,603 ) $ 195,563 $ 256,144 See accompanying note . 50 256,144 See accompanying note . 50 Table of Contents Alphabet Inc million ) Year Ended December 31 , 2020 2021 2022 Operating Year Ended December 31 , 2020 2021 2022 Operating activity Net Ended December 31 , 2020 2021 2022 Operating activity Net income December 31 , 2020 2021 2022 Operating activity Net income $ Operating activity Net income $ 40,269 $ 76,033 $ 59,972 Adjustments Net income $ 40,269 $ 76,033 $ 59,972 Adjustments : Depreciation $ 40,269 $ 76,033 $ 59,972 Adjustments : Depreciation and impairment impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment of property and equipment 12,905 11,555 15,287 Amortization and impairment of intangible and impairment of intangible asset 792 886 641 Stock-based compensation expense impairment of intangible asset 792 886 641 Stock-based compensation expense 12,991 of intangible asset 792 886 641 Stock-based compensation expense 12,991 15,376 886 641 Stock-based compensation expense 12,991 15,376 19,362 Deferred income tax 641 Stock-based compensation expense 12,991 15,376 19,362 Deferred income tax 1,390 Stock-based compensation expense 12,991 15,376 19,362 Deferred income tax 1,390 1,808 15,376 19,362 Deferred income tax 1,390 1,808 ( 8,081 ) ( 19,362 Deferred income tax 1,390 1,808 ( 8,081 ) ( Gain income tax 1,390 1,808 ( 8,081 ) ( Gain ) loss equity security , net ( 6,317 ) ( 12,270 ) 5,519 net ( 6,317 ) ( 12,270 ) 5,519 Other 1,267 ( 6,317 ) ( 12,270 ) 5,519 Other 1,267 ( 213 ) ( 12,270 ) 5,519 Other 1,267 ( 213 ) 1,030 Changes ) 5,519 Other 1,267 ( 213 ) 1,030 Changes in asset Other 1,267 ( 213 ) 1,030 Changes in asset and liability Accounts receivable , net ( 6,524 ) ( 9,095 ) ( net ( 6,524 ) ( 9,095 ) ( 2,317 ) Income ) ( 9,095 ) ( 2,317 ) Income tax , net ) Income tax , net 1,209 ( 625 ) 584 Other tax , net 1,209 ( 625 ) 584 Other asset ( net 1,209 ( 625 ) 584 Other asset ( 1,330 ) ) 584 Other asset ( 1,330 ) ( 1,846 ) ( asset ( 1,330 ) ( 1,846 ) ( 5,046 ) Accounts ) ( 1,846 ) ( 5,046 ) Accounts payable 694 283 ( 5,046 ) Accounts payable 694 283 707 Accrued expense and 5,046 ) Accounts payable 694 283 707 Accrued expense and other ) Accounts payable 694 283 707 Accrued expense and other liability Accrued expense and other liability 5,504 7,304 3,915 Accrued revenue share expense and other liability 5,504 7,304 3,915 Accrued revenue share 1,639 and other liability 5,504 7,304 3,915 Accrued revenue share 1,639 1,682 7,304 3,915 Accrued revenue share 1,639 1,682 ( 445 ) Deferred 3,915 Accrued revenue share 1,639 1,682 ( 445 ) Deferred revenue revenue share 1,639 1,682 ( 445 ) Deferred revenue 635 774 ( 445 ) Deferred revenue 635 774 367 Net cash provided 445 ) Deferred revenue 635 774 367 Net cash provided by ) Deferred revenue 635 774 367 Net cash provided by operating cash provided by operating activity 65,124 91,652 91,495 Investing activity Purchases provided by operating activity 65,124 91,652 91,495 Investing activity Purchases of by operating activity 65,124 91,652 91,495 Investing activity Purchases of property of property and equipment ( 22,281 ) ( 24,640 ) ( equipment ( 22,281 ) ( 24,640 ) ( 31,485 ) Purchases ) ( 24,640 ) ( 31,485 ) Purchases of marketable security Purchases of marketable security ( 136,576 ) ( 135,196 ) ( security ( 136,576 ) ( 135,196 ) ( 78,874 ) Maturities ) ( 135,196 ) ( 78,874 ) Maturities and sale of and sale of marketable security 132,906 128,294 97,822 Purchases of non-marketable sale of marketable security 132,906 128,294 97,822 Purchases of non-marketable security of marketable security 132,906 128,294 97,822 Purchases of non-marketable security ( Purchases of non-marketable security ( 7,175 ) ( 2,838 ) ( security ( 7,175 ) ( 2,838 ) ( 2,531 ) Maturities ) ( 2,838 ) ( 2,531 ) Maturities and sale of and sale of non-marketable security 1,023 934 150 Acquisitions , net sale of non-marketable security 1,023 934 150 Acquisitions , net of of non-marketable security 1,023 934 150 Acquisitions , net of cash purchase of intangible asset ( 738 ) ( 2,618 ) ( asset ( 738 ) ( 2,618 ) ( 6,969 ) Other ) ( 2,618 ) ( 6,969 ) Other investing activity 68 6,969 ) Other investing activity 68 541 1,589 Net cash used ) Other investing activity 68 541 1,589 Net cash used in Other investing activity 68 541 1,589 Net cash used in investing used in investing activity ( 32,773 ) ( 35,523 ) ( activity ( 32,773 ) ( 35,523 ) ( 20,298 ) Financing ) ( 35,523 ) ( 20,298 ) Financing activity Net payment to stock-based award activity ( 5,720 ) ( 10,162 ) ( activity ( 5,720 ) ( 10,162 ) ( 9,300 ) Repurchases ) ( 10,162 ) ( 9,300 ) Repurchases of stock ( ) Repurchases of stock ( 31,149 ) ( 50,274 ) ( stock ( 31,149 ) ( 50,274 ) ( 59,296 ) Proceeds ) ( 50,274 ) ( 59,296 ) Proceeds from issuance of debt , net of cost 11,761 20,199 52,872 Repayments of debt , net of cost 11,761 20,199 52,872 Repayments of debt ( net of cost 11,761 20,199 52,872 Repayments of debt ( 2,100 52,872 Repayments of debt ( 2,100 ) ( 21,435 ) ( debt ( 2,100 ) ( 21,435 ) ( 54,068 ) Proceeds ) ( 21,435 ) ( 54,068 ) Proceeds from sale of in consolidated entity , net 2,800 310 35 Net cash used consolidated entity , net 2,800 310 35 Net cash used in entity , net 2,800 310 35 Net cash used in financing used in financing activity ( 24,408 ) ( 61,362 ) ( activity ( 24,408 ) ( 61,362 ) ( 69,757 ) Effect ) ( 61,362 ) ( 69,757 ) Effect of exchange rate on cash and cash equivalent 24 ( 287 ) ( 506 and cash equivalent 24 ( 287 ) ( 506 ) Net 24 ( 287 ) ( 506 ) Net increase ( decrease in cash and cash equivalent 7,967 ( 5,520 ) 934 Cash and cash equivalent 7,967 ( 5,520 ) 934 Cash and cash equivalent 7,967 ( 5,520 ) 934 Cash and cash equivalent at equivalent at beginning of period 18,498 26,465 20,945 Cash and cash at beginning of period 18,498 26,465 20,945 Cash and cash equivalent beginning of period 18,498 26,465 20,945 Cash and cash equivalent at at end of period $ 26,465 $ 20,945 $ 21,879 Supplemental of period $ 26,465 $ 20,945 $ 21,879 Supplemental disclosure of $ 26,465 $ 20,945 $ 21,879 Supplemental disclosure of cash flow , net of refund $ 4,990 $ 13,412 $ 18,892 See of refund $ 4,990 $ 13,412 $ 18,892 See accompanying note $ 4,990 $ 13,412 $ 18,892 See accompanying note . 51 18,892 See accompanying note . 51 Table of Contents Alphabet Inc TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 . Summary of Significant Accounting incorporated in California in September 1998 and re-incorporated in the State State of Delaware in August 2003 . In 2015 , we in August 2003 . In 2015 , we implemented a holding and liability . In January 2023 , we completed an assessment effective beginning in fiscal year 2023 . Stock Split Effected in Split ” ) On February 1 , 2022 , the company ) On February 1 , 2022 , the company announced that had approved and declared a 20 -for-one stock split in the a record date of July 1 , 2022 and an effective date of July 1 , 2022 and an effective date of an effective date of July 15 , 2022 . The par date of July 15 , 2022 . The par value per stock remains unchanged at $ 0.001 per share after the Stock Platform , among others . 52 Table of Contents Alphabet Inc. . • TAC includes : 53 Table of Contents Alphabet Inc. For the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , advertising 2020 , 2021 , and 2022 , advertising and promotional expense promotional expense totaled approximately $ 5.4 billion , $ 7.9 billion $ 5.4 billion , $ 7.9 billion , and $ 9.2 7.9 billion , and $ 9.2 billion , respectively . Performance a liability . Assets and 54 Table of Contents Alphabet Inc. measure fair value : Level 1 - Observable input that reflect in active market . Level 2 - Inputs that are based and credit rating . Level 3 - Unobservable input that are liquid security with maturity beyond 12 month a current asset under our marketable equity security subject 55 Table of Contents Alphabet Inc. Derivative Financial Instruments See Note 3 for the accounting policy pertaining or an income approach . 56 Table of Contents Alphabet Inc over period of seven to 25 year . We depreciate information recoverability of these asset by 57 Table of Contents Alphabet Inc. benefit that is greater than 50 % likely to be realized with current period presentation . 58 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 2 . Revenues Disaggregated Revenues The ) : Year Ended December 31 , 2020 2021 2022 Google Year Ended December 31 , 2020 2021 2022 Google Search & Ended December 31 , 2020 2021 2022 Google Search & other December 31 , 2020 2021 2022 Google Search & other $ Google Search & other $ 104,062 $ 148,951 $ 162,450 YouTube & other $ 104,062 $ 148,951 $ 162,450 YouTube ad 19,772 $ 104,062 $ 148,951 $ 162,450 YouTube ad 19,772 28,845 29,243 148,951 $ 162,450 YouTube ad 19,772 28,845 29,243 Google Network 23,090 $ 162,450 YouTube ad 19,772 28,845 29,243 Google Network 23,090 31,701 162,450 YouTube ad 19,772 28,845 29,243 Google Network 23,090 31,701 32,780 19,772 28,845 29,243 Google Network 23,090 31,701 32,780 Google advertising 146,924 28,845 29,243 Google Network 23,090 31,701 32,780 Google advertising 146,924 209,497 29,243 Google Network 23,090 31,701 32,780 Google advertising 146,924 209,497 224,473 23,090 31,701 32,780 Google advertising 146,924 209,497 224,473 Google other 21,711 31,701 32,780 Google advertising 146,924 209,497 224,473 Google other 21,711 28,032 32,780 Google advertising 146,924 209,497 224,473 Google other 21,711 28,032 29,055 146,924 209,497 224,473 Google other 21,711 28,032 29,055 Google Services total 209,497 224,473 Google other 21,711 28,032 29,055 Google Services total 168,635 224,473 Google other 21,711 28,032 29,055 Google Services total 168,635 237,529 28,032 29,055 Google Services total 168,635 237,529 253,528 Google Cloud 13,059 29,055 Google Services total 168,635 237,529 253,528 Google Cloud 13,059 19,206 Google Services total 168,635 237,529 253,528 Google Cloud 13,059 19,206 26,280 168,635 237,529 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 237,529 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 753 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 753 1,068 13,059 19,206 26,280 Other Bets 657 753 1,068 Hedging gain ( 19,206 26,280 Other Bets 657 753 1,068 Hedging gain ( loss 26,280 Other Bets 657 753 1,068 Hedging gain ( loss ) Hedging gain ( loss ) 176 149 1,960 Total revenue $ gain ( loss ) 176 149 1,960 Total revenue $ 182,527 ( loss ) 176 149 1,960 Total revenue $ 182,527 $ 149 1,960 Total revenue $ 182,527 $ 257,637 $ 282,836 No Total revenue $ 182,527 $ 257,637 $ 282,836 No in dividual $ 182,527 $ 257,637 $ 282,836 No in dividual customer or affiliated customer represented more than 10 % of our revenue in % of our revenue in 2020 , 2021 , or 2022 our revenue in 2020 , 2021 , or 2022 . The 2020 , 2021 , or 2022 . The following table present ) : Year Ended December 31 , 2020 2021 2022 United Year Ended December 31 , 2020 2021 2022 United States $ Ended December 31 , 2020 2021 2022 United States $ 85,014 December 31 , 2020 2021 2022 United States $ 85,014 47 2021 2022 United States $ 85,014 47 % $ 117,854 46 2022 United States $ 85,014 47 % $ 117,854 46 % $ 85,014 47 % $ 117,854 46 % $ 134,814 48 85,014 47 % $ 117,854 46 % $ 134,814 48 % $ 117,854 46 % $ 134,814 48 % EMEA ( 1 117,854 46 % $ 134,814 48 % EMEA ( 1 ) 134,814 48 % EMEA ( 1 ) 55,370 30 79,107 31 % EMEA ( 1 ) 55,370 30 79,107 31 82,062 29 EMEA ( 1 ) 55,370 30 79,107 31 82,062 29 APAC ( 1 ) 55,370 30 79,107 31 82,062 29 APAC ( 1 ) 55,370 30 79,107 31 82,062 29 APAC ( 1 ) 55,370 30 79,107 31 82,062 29 APAC ( 1 ) 55,370 30 79,107 31 82,062 29 APAC ( 1 ) 32,550 31 82,062 29 APAC ( 1 ) 32,550 18 46,123 18 29 APAC ( 1 ) 32,550 18 46,123 18 47,024 16 APAC ( 1 ) 32,550 18 46,123 18 47,024 16 Other ( 1 ) 32,550 18 46,123 18 47,024 16 Other Americas 1 ) 32,550 18 46,123 18 47,024 16 Other Americas ( ) 32,550 18 46,123 18 47,024 16 Other Americas ( 1 32,550 18 46,123 18 47,024 16 Other Americas ( 1 ) 47,024 16 Other Americas ( 1 ) 9,417 5 14,404 5 Other Americas ( 1 ) 9,417 5 14,404 5 16,976 6 Americas ( 1 ) 9,417 5 14,404 5 16,976 6 Hedging ( 1 ) 9,417 5 14,404 5 16,976 6 Hedging gain 1 ) 9,417 5 14,404 5 16,976 6 Hedging gain ( ) 9,417 5 14,404 5 16,976 6 Hedging gain ( loss 9,417 5 14,404 5 16,976 6 Hedging gain ( loss ) Hedging gain ( loss ) 176 0 149 0 1,960 1 gain ( loss ) 176 0 149 0 1,960 1 Total ( loss ) 176 0 149 0 1,960 1 Total revenue loss ) 176 0 149 0 1,960 1 Total revenue $ ) 176 0 149 0 1,960 1 Total revenue $ 182,527 176 0 149 0 1,960 1 Total revenue $ 182,527 100 1,960 1 Total revenue $ 182,527 100 % $ 257,637 100 1 Total revenue $ 182,527 100 % $ 257,637 100 % $ 182,527 100 % $ 257,637 100 % $ 282,836 100 182,527 100 % $ 257,637 100 % $ 282,836 100 % $ 257,637 100 % $ 282,836 100 % ( 1 ) 257,637 100 % $ 282,836 100 % ( 1 ) Regions $ 282,836 100 % ( 1 ) Regions represent Europe , Revenue Backlog As of December 31 , 2022 , we had As of December 31 , 2022 , we had $ 64.3 2022 , we had $ 64.3 billion of remaining performance obligation a revenue over the next 24 month with the remaining to deferred revenue a of December 31 , 2021 wa $ 3.8 a of December 31 , 2021 wa $ 3.8 billion , 31 , 2021 wa $ 3.8 billion , of which $ billion , of which $ 2.5 billion wa recognized a revenue for the year ending December 31 , 2022 . 59 Table year ending December 31 , 2022 . 59 Table of Contents December 31 , 2022 . 59 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 3 . Financial Instruments Fair Value value and classified within Level 1 and Level 2 in the within Level 1 and Level 2 in the fair value hierarchy security are classified within Level 2 in the fair value hierarchy ) : As of December 31 , 2021 Fair Value Hierarchy As of December 31 , 2021 Fair Value Hierarchy Adjusted Cost comprehensive income Time deposit ( 1 ) Level 2 $ 5,133 deposit ( 1 ) Level 2 $ 5,133 $ 0 $ 1 ) Level 2 $ 5,133 $ 0 $ 0 $ Level 2 $ 5,133 $ 0 $ 0 $ 5,133 $ $ 5,133 $ 0 $ 0 $ 5,133 $ 5,133 $ $ 0 $ 0 $ 5,133 $ 5,133 $ 0 Government $ 0 $ 5,133 $ 5,133 $ 0 Government bond Level $ 5,133 $ 5,133 $ 0 Government bond Level 2 53,288 $ 0 Government bond Level 2 53,288 258 ( 238 ) 0 Government bond Level 2 53,288 258 ( 238 ) 53,308 Government bond Level 2 53,288 258 ( 238 ) 53,308 5 Level 2 53,288 258 ( 238 ) 53,308 5 53,303 Corporate 53,288 258 ( 238 ) 53,308 5 53,303 Corporate debt security 258 ( 238 ) 53,308 5 53,303 Corporate debt security Level ( 238 ) 53,308 5 53,303 Corporate debt security Level 2 53,303 Corporate debt security Level 2 35,605 194 ( 223 ) Corporate debt security Level 2 35,605 194 ( 223 ) 35,576 debt security Level 2 35,605 194 ( 223 ) 35,576 12 Level 2 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed 35,605 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed 194 ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security ( 223 ) 35,576 12 35,564 Mortgage-backed and asset-backed security Level Mortgage-backed and asset-backed security Level 2 18,829 96 ( 112 ) and asset-backed security Level 2 18,829 96 ( 112 ) 18,813 asset-backed security Level 2 18,829 96 ( 112 ) 18,813 0 Level 2 18,829 96 ( 112 ) 18,813 0 18,813 Total 18,829 96 ( 112 ) 18,813 0 18,813 Total investment with 96 ( 112 ) 18,813 0 18,813 Total investment with fair ( 112 ) 18,813 0 18,813 Total investment with fair value in Other Comprehensive Income ( 2 ) $ 112,855 $ 548 Income ( 2 ) $ 112,855 $ 548 $ ( 573 2 ) $ 112,855 $ 548 $ ( 573 ) $ 112,855 $ 548 $ ( 573 ) $ 112,830 $ 5,150 $ ( 573 ) $ 112,830 $ 5,150 $ 107,680 Fair 573 ) $ 112,830 $ 5,150 $ 107,680 Fair value adjustment $ 112,830 $ 5,150 $ 107,680 Fair value adjustment recorded in income Money market fund Level 1 $ 7,499 $ 7,499 $ market fund Level 1 $ 7,499 $ 7,499 $ 0 Current Level 1 $ 7,499 $ 7,499 $ 0 Current marketable equity $ 7,499 $ 7,499 $ 0 Current marketable equity security ( Current marketable equity security ( 3 ) Level 1 5,998 0 security ( 3 ) Level 1 5,998 0 5,998 Mutual fund ( 3 ) Level 1 5,998 0 5,998 Mutual fund Level 3 ) Level 1 5,998 0 5,998 Mutual fund Level 2 ) Level 1 5,998 0 5,998 Mutual fund Level 2 351 0 5,998 Mutual fund Level 2 351 0 351 Government bond 5,998 Mutual fund Level 2 351 0 351 Government bond Level Mutual fund Level 2 351 0 351 Government bond Level 2 fund Level 2 351 0 351 Government bond Level 2 1,165 0 351 Government bond Level 2 1,165 0 1,165 Corporate debt 351 Government bond Level 2 1,165 0 1,165 Corporate debt security Government bond Level 2 1,165 0 1,165 Corporate debt security Level bond Level 2 1,165 0 1,165 Corporate debt security Level 2 1,165 Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and Corporate debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed debt security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security security Level 2 2,503 0 2,503 Mortgage-backed and asset-backed security Level Mortgage-backed and asset-backed security Level 2 1,007 0 1,007 Total investment and asset-backed security Level 2 1,007 0 1,007 Total investment with asset-backed security Level 2 1,007 0 1,007 Total investment with fair security Level 2 1,007 0 1,007 Total investment with fair value recorded in Net Income $ 18,523 $ 7,499 $ 11,024 Cash Net Income $ 18,523 $ 7,499 $ 11,024 Cash 0 8,296 $ 18,523 $ 7,499 $ 11,024 Cash 0 8,296 0 Total $ 7,499 $ 11,024 Cash 0 8,296 0 Total $ 112,855 7,499 $ 11,024 Cash 0 8,296 0 Total $ 112,855 $ $ 11,024 Cash 0 8,296 0 Total $ 112,855 $ 548 0 8,296 0 Total $ 112,855 $ 548 $ ( 573 0 Total $ 112,855 $ 548 $ ( 573 ) $ 112,855 $ 548 $ ( 573 ) $ 131,353 $ 20,945 $ ( 573 ) $ 131,353 $ 20,945 $ 118,704 ( 573 ) $ 131,353 $ 20,945 $ 118,704 ( 1 ) $ 131,353 $ 20,945 $ 118,704 ( 1 ) The majority $ 20,945 $ 118,704 ( 1 ) The majority of our are domestic deposit . ( 2 ) Represents gross unrealized gain recorded to AOCI . ( 3 ) The long-term portion of lock-up restriction ) of $ 1.4 billion a of December 31 1.4 billion a of December 31 , 2021 is included within a of December 31 , 2021 is included within other non-current within other non-current asset . 60 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2022 Fair Value Hierarchy As of December 31 , 2022 Fair Value Hierarchy Adjusted Cost comprehensive income Time deposit ( 1 ) Level 2 $ 5,297 deposit ( 1 ) Level 2 $ 5,297 $ 0 $ 1 ) Level 2 $ 5,297 $ 0 $ 0 $ Level 2 $ 5,297 $ 0 $ 0 $ 5,297 $ $ 5,297 $ 0 $ 0 $ 5,297 $ 5,293 $ $ 0 $ 0 $ 5,297 $ 5,293 $ 4 Government $ 0 $ 5,297 $ 5,293 $ 4 Government bond Level $ 5,297 $ 5,293 $ 4 Government bond Level 2 41,036 $ 4 Government bond Level 2 41,036 64 ( 2,045 ) 4 Government bond Level 2 41,036 64 ( 2,045 ) 39,055 Government bond Level 2 41,036 64 ( 2,045 ) 39,055 283 Level 2 41,036 64 ( 2,045 ) 39,055 283 38,772 Corporate 41,036 64 ( 2,045 ) 39,055 283 38,772 Corporate debt security 64 ( 2,045 ) 39,055 283 38,772 Corporate debt security Level ( 2,045 ) 39,055 283 38,772 Corporate debt security Level 2 38,772 Corporate debt security Level 2 28,578 8 ( 1,569 ) Corporate debt security Level 2 28,578 8 ( 1,569 ) 27,017 debt security Level 2 28,578 8 ( 1,569 ) 27,017 1 Level 2 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed 28,578 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed 8 ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed security ( 1,569 ) 27,017 1 27,016 Mortgage-backed and asset-backed security Level Mortgage-backed and asset-backed security Level 2 16,176 5 ( 1,242 ) and asset-backed security Level 2 16,176 5 ( 1,242 ) 14,939 asset-backed security Level 2 16,176 5 ( 1,242 ) 14,939 0 Level 2 16,176 5 ( 1,242 ) 14,939 0 14,939 Total 16,176 5 ( 1,242 ) 14,939 0 14,939 Total investment with 5 ( 1,242 ) 14,939 0 14,939 Total investment with fair ( 1,242 ) 14,939 0 14,939 Total investment with fair value in Other Comprehensive Income ( 2 ) $ 91,087 $ 77 Income ( 2 ) $ 91,087 $ 77 $ ( 4,856 2 ) $ 91,087 $ 77 $ ( 4,856 ) $ 91,087 $ 77 $ ( 4,856 ) $ 86,308 $ 5,577 $ ( 4,856 ) $ 86,308 $ 5,577 $ 80,731 Fair 4,856 ) $ 86,308 $ 5,577 $ 80,731 Fair value adjustment $ 86,308 $ 5,577 $ 80,731 Fair value adjustment recorded in income Money market fund Level 1 $ 7,234 $ 7,234 $ market fund Level 1 $ 7,234 $ 7,234 $ 0 Current Level 1 $ 7,234 $ 7,234 $ 0 Current marketable equity $ 7,234 $ 7,234 $ 0 Current marketable equity security ( Current marketable equity security ( 3 ) Level 1 4,013 0 security ( 3 ) Level 1 4,013 0 4,013 Mutual fund ( 3 ) Level 1 4,013 0 4,013 Mutual fund Level 3 ) Level 1 4,013 0 4,013 Mutual fund Level 2 ) Level 1 4,013 0 4,013 Mutual fund Level 2 339 0 4,013 Mutual fund Level 2 339 0 339 Government bond 4,013 Mutual fund Level 2 339 0 339 Government bond Level Mutual fund Level 2 339 0 339 Government bond Level 2 fund Level 2 339 0 339 Government bond Level 2 1,877 0 339 Government bond Level 2 1,877 440 1,437 Corporate debt 339 Government bond Level 2 1,877 440 1,437 Corporate debt security Government bond Level 2 1,877 440 1,437 Corporate debt security Level bond Level 2 1,877 440 1,437 Corporate debt security Level 2 1,437 Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and Corporate debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed debt security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed security security Level 2 3,744 65 3,679 Mortgage-backed and asset-backed security Level Mortgage-backed and asset-backed security Level 2 1,686 2 1,684 Total investment and asset-backed security Level 2 1,686 2 1,684 Total investment with asset-backed security Level 2 1,686 2 1,684 Total investment with fair security Level 2 1,686 2 1,684 Total investment with fair value recorded in Net Income $ 18,893 $ 7,741 $ 11,152 Cash Net Income $ 18,893 $ 7,741 $ 11,152 Cash 0 8,561 $ 18,893 $ 7,741 $ 11,152 Cash 0 8,561 0 Total $ 7,741 $ 11,152 Cash 0 8,561 0 Total $ 91,087 7,741 $ 11,152 Cash 0 8,561 0 Total $ 91,087 $ $ 11,152 Cash 0 8,561 0 Total $ 91,087 $ 77 0 8,561 0 Total $ 91,087 $ 77 $ ( 4,856 0 Total $ 91,087 $ 77 $ ( 4,856 ) $ 91,087 $ 77 $ ( 4,856 ) $ 105,201 $ 21,879 $ ( 4,856 ) $ 105,201 $ 21,879 $ 91,883 ( 4,856 ) $ 105,201 $ 21,879 $ 91,883 ( 1 ) $ 105,201 $ 21,879 $ 91,883 ( 1 ) The majority $ 21,879 $ 91,883 ( 1 ) The majority of our are domestic deposit . ( 2 ) Represents gross unrealized gain recorded to AOCI . ( 3 ) The long-term portion of lock-up restriction ) of $ 803 million a of December 31 803 million a of December 31 , 2022 is included within a of December 31 , 2022 is included within other non-current transaction are classified within Level 2 or Level 3 in the within Level 2 or Level 3 in the fair value hierarchy impairment are classified within Level 3 . During the year ended During the year ended December 31 , 2022 , included in year ended December 31 , 2022 , included in the $ , included in the $ 28.5 billion of non-marketable equity security of the period , $ 14.1 billion were measured at fair and primarily classified a Level 2 investment . 61 Table of a Level 2 investment . 61 Table of Contents Alphabet Inc. ) : As of December 31 , 2022 Due in 1 As of December 31 , 2022 Due in 1 year or 31 , 2022 Due in 1 year or le $ 8,170 1 year or le $ 8,170 Due in 1 year through le $ 8,170 Due in 1 year through 5 year 51,698 Due in 1 year through 5 year 51,698 Due in 5 1 year through 5 year 51,698 Due in 5 year through 5 year 51,698 Due in 5 year through 10 year 16,083 Due in 5 year through 10 year 16,083 Due after 10 5 year through 10 year 16,083 Due after 10 year 11,580 10 year 16,083 Due after 10 year 11,580 Total $ 87,531 16,083 Due after 10 year 11,580 Total $ 87,531 The following 10 year 11,580 Total $ 87,531 The following table present fair ) : As of December 31 , 2021 Less than 12 As of December 31 , 2021 Less than 12 Months 12 31 , 2021 Less than 12 Months 12 Months or Greater 2021 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 32,843 $ ( 236 ) $ bond $ 32,843 $ ( 236 ) $ 71 $ ( $ ( 236 ) $ 71 $ ( 2 ) $ ) $ 71 $ ( 2 ) $ 32,914 $ ( $ ( 2 ) $ 32,914 $ ( 238 ) Corporate ) $ 32,914 $ ( 238 ) Corporate debt security 22,737 238 ) Corporate debt security 22,737 ( 152 ) 303 ( Corporate debt security 22,737 ( 152 ) 303 ( 5 ) security 22,737 ( 152 ) 303 ( 5 ) 23,040 ( ( 152 ) 303 ( 5 ) 23,040 ( 157 ) ) 303 ( 5 ) 23,040 ( 157 ) Mortgage-backed and ( 5 ) 23,040 ( 157 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 11,502 ( 106 ) 248 ( and asset-backed security 11,502 ( 106 ) 248 ( 6 ) security 11,502 ( 106 ) 248 ( 6 ) 11,750 ( ( 106 ) 248 ( 6 ) 11,750 ( 112 ) ) 248 ( 6 ) 11,750 ( 112 ) Total $ ( 6 ) 11,750 ( 112 ) Total $ 67,082 $ ( 112 ) Total $ 67,082 $ ( 494 ) $ Total $ 67,082 $ ( 494 ) $ 622 $ ( $ ( 494 ) $ 622 $ ( 13 ) $ ) $ 622 $ ( 13 ) $ 67,704 $ ( $ ( 13 ) $ 67,704 $ ( 507 ) As ) $ 67,704 $ ( 507 ) As of December 31 507 ) As of December 31 , 2022 Less than 12 As of December 31 , 2022 Less than 12 Months 12 31 , 2022 Less than 12 Months 12 Months or Greater 2022 Less than 12 Months 12 Months or Greater Total Fair Unrealized Loss Government bond $ 21,039 $ ( 1,004 ) $ bond $ 21,039 $ ( 1,004 ) $ 13,438 $ ( $ ( 1,004 ) $ 13,438 $ ( 1,041 ) $ ) $ 13,438 $ ( 1,041 ) $ 34,477 $ ( $ ( 1,041 ) $ 34,477 $ ( 2,045 ) Corporate ) $ 34,477 $ ( 2,045 ) Corporate debt security 11,228 2,045 ) Corporate debt security 11,228 ( 440 ) 15,125 ( Corporate debt security 11,228 ( 440 ) 15,125 ( 1,052 ) security 11,228 ( 440 ) 15,125 ( 1,052 ) 26,353 ( ( 440 ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) ) 15,125 ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and ( 1,052 ) 26,353 ( 1,492 ) Mortgage-backed and asset-backed security ) Mortgage-backed and asset-backed security 7,725 ( 585 ) 6,964 ( and asset-backed security 7,725 ( 585 ) 6,964 ( 657 ) security 7,725 ( 585 ) 6,964 ( 657 ) 14,689 ( ( 585 ) 6,964 ( 657 ) 14,689 ( 1,242 ) ) 6,964 ( 657 ) 14,689 ( 1,242 ) Total $ ( 657 ) 14,689 ( 1,242 ) Total $ 39,992 $ ( 1,242 ) Total $ 39,992 $ ( 2,029 ) $ Total $ 39,992 $ ( 2,029 ) $ 35,527 $ ( $ ( 2,029 ) $ 35,527 $ ( 2,750 ) $ ) $ 35,527 $ ( 2,750 ) $ 75,519 $ ( $ ( 2,750 ) $ 75,519 $ ( 4,779 ) We ) $ 75,519 $ ( 4,779 ) We determine realized gain ) : Year Ended December 31 , 2020 2021 2022 Unrealized Year Ended December 31 , 2020 2021 2022 Unrealized gain ( Ended December 31 , 2020 2021 2022 Unrealized gain ( loss December 31 , 2020 2021 2022 Unrealized gain ( loss ) value option debt security ( 1 ) $ 86 $ ( security ( 1 ) $ 86 $ ( 122 ) $ ) $ 86 $ ( 122 ) $ ( 557 ) ( 122 ) $ ( 557 ) Gross realized gain on realized gain on debt security 899 432 103 Gross realized loss gain on debt security 899 432 103 Gross realized loss on on debt security 899 432 103 Gross realized loss on debt loss on debt security ( 184 ) ( 329 ) ( security ( 184 ) ( 329 ) ( 1,588 ) ( ) ( 329 ) ( 1,588 ) ( Increase ) /decrease allowance for credit loss ( 76 ) ( 91 ) ( loss ( 76 ) ( 91 ) ( 22 ) Total ) ( 91 ) ( 22 ) Total gain ( loss expense ) , net $ 725 $ ( 110 ) $ net $ 725 $ ( 110 ) $ ( 2,064 ) ( 110 ) $ ( 2,064 ) ( 1 ) Accumulated $ ( 2,064 ) ( 1 ) Accumulated unrealized net gain fair value option were $ 87 million , $ ( 35 87 million , $ ( 35 ) million , and $ million , and $ ( 592 ) million a of December ) million a of December 31 , 2020 , 2021 , a of December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively . 62 Table and 2022 , respectively . 62 Table of Contents Alphabet Inc. of Income . See Note 7 for further detail on other ) : As of December 31 , 2021 As of December As of December 31 , 2021 As of December 31 , , 2021 As of December 31 , 2022 Marketable Equity Securities As of December 31 , 2022 Marketable Equity Securities Non-Marketable Equity Total Total initial cost $ 4,211 $ 15,135 $ 19,346 $ initial cost $ 4,211 $ 15,135 $ 19,346 $ 5,764 $ $ 4,211 $ 15,135 $ 19,346 $ 5,764 $ 16,157 $ $ 15,135 $ 19,346 $ 5,764 $ 16,157 $ 21,921 Cumulative $ 19,346 $ 5,764 $ 16,157 $ 21,921 Cumulative net gain $ 5,764 $ 16,157 $ 21,921 Cumulative net gain ( loss gain ( loss ) ( 1 ) 3,587 12,436 16,023 ( loss ) ( 1 ) 3,587 12,436 16,023 ( 608 ) ) ( 1 ) 3,587 12,436 16,023 ( 608 ) 12,372 ( 1 ) 3,587 12,436 16,023 ( 608 ) 12,372 11,764 ) 3,587 12,436 16,023 ( 608 ) 12,372 11,764 Carrying value 12,436 16,023 ( 608 ) 12,372 11,764 Carrying value $ 7,798 16,023 ( 608 ) 12,372 11,764 Carrying value $ 7,798 $ 12,372 11,764 Carrying value $ 7,798 $ 27,571 $ 35,369 $ Carrying value $ 7,798 $ 27,571 $ 35,369 $ 5,156 $ $ 7,798 $ 27,571 $ 35,369 $ 5,156 $ 28,529 $ $ 27,571 $ 35,369 $ 5,156 $ 28,529 $ 33,685 ( $ 35,369 $ 5,156 $ 28,529 $ 33,685 ( 1 ) $ 5,156 $ 28,529 $ 33,685 ( 1 ) Non-marketable equity $ 28,529 $ 33,685 ( 1 ) Non-marketable equity security cumulative ) is comprised of $ 14.1 billion gain and $ 1.7 14.1 billion gain and $ 1.7 billion loss ( including impairment impairment ) a of December 31 , 2021 and $ 16.8 a of December 31 , 2021 and $ 16.8 billion gain 31 , 2021 and $ 16.8 billion gain and $ 4.5 16.8 billion gain and $ 4.5 billion loss ( including impairment impairment ) a of December 31 , 2022 . Gains and a of December 31 , 2022 . Gains and loss on ) : Year Ended December 31 , 2020 2021 2022 Realized Year Ended December 31 , 2020 2021 2022 Realized net gain Ended December 31 , 2020 2021 2022 Realized net gain ( December 31 , 2020 2021 2022 Realized net gain ( loss sold during the period $ 1,339 $ 1,196 $ ( 442 the period $ 1,339 $ 1,196 $ ( 442 ) Unrealized 1,339 $ 1,196 $ ( 442 ) Unrealized net gain ( ) on marketable equity security 2,722 1,335 ( 3,242 ) Unrealized on marketable equity security 2,722 1,335 ( 3,242 ) Unrealized net equity security 2,722 1,335 ( 3,242 ) Unrealized net gain ( on non-marketable equity security ( 1 ) 1,531 9,849 229 Total equity security ( 1 ) 1,531 9,849 229 Total gain ( security ( 1 ) 1,531 9,849 229 Total gain ( loss ( 1 ) 1,531 9,849 229 Total gain ( loss ) expense ) , net $ 5,592 $ 12,380 $ ( 3,455 , net $ 5,592 $ 12,380 $ ( 3,455 ) ( 5,592 $ 12,380 $ ( 3,455 ) ( 1 ) Unrealized $ ( 3,455 ) ( 1 ) Unrealized gain ( loss alternative is comprised of $ 3.0 billion , $ 10.0 billion $ 3.0 billion , $ 10.0 billion , and $ 3.3 10.0 billion , and $ 3.3 billion of upward adjustment a upward adjustment a of December 31 , 2020 , 2021 , a of December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively , and $ , respectively , and $ 1.5 billion , $ 122 million $ 1.5 billion , $ 122 million , and $ 3.0 122 million , and $ 3.0 billion of downward adjustment ( impairment ) a of December 31 , 2020 , 2021 , a of December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively . In the During the Year Ended December 31 , 2021 2022 Total sale Year Ended December 31 , 2021 2022 Total sale price $ Ended December 31 , 2021 2022 Total sale price $ 5,604 2022 Total sale price $ 5,604 $ 1,784 Total initial cost sale price $ 5,604 $ 1,784 Total initial cost 1,206 937 $ 1,784 Total initial cost 1,206 937 Cumulative net gain ( 1,784 Total initial cost 1,206 937 Cumulative net gain ( loss gain ( loss ) ( 1 ) $ 4,398 $ 847 ) ( 1 ) $ 4,398 $ 847 ( 1 ) 1 ) $ 4,398 $ 847 ( 1 ) Cumulative net $ 4,398 $ 847 ( 1 ) Cumulative net gain excludes excludes cumulative loss of $ 738 million resulting from our equity during the year ended December 31 , 2021 . The associated year ended December 31 , 2021 . The associated derivative liability the underlying equity security . 63 Table of Contents Alphabet Inc. equity method As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , equity security December 31 , 2021 and 2022 , equity security accounted for carrying value of approximately $ 1.5 billion for both year . of Income . See Note 7 for further detail on other the derivative primarily within Level 2 in the fair value hierarchy These contract have maturity of 24 month or le . Cash AOCI . As of December 31 , 2022 , the net As of December 31 , 2022 , the net accumulated gain before tax effect wa $ 171 million , which is expected into revenue within the next 12 month . Fair Value Hedges , net . See Note 7 for further detail . 64 7 for further detail . 64 Table of Contents Alphabet Inc ) : As of December 31 , 2021 2022 Derivatives designated As of December 31 , 2021 2022 Derivatives designated a hedging of December 31 , 2021 2022 Derivatives designated a hedging instrument contract Cash flow hedge $ 16,362 $ 15,972 Fair value hedge flow hedge $ 16,362 $ 15,972 Fair value hedge $ 2,556 15,972 Fair value hedge $ 2,556 $ 2,117 Net investment hedge value hedge $ 2,556 $ 2,117 Net investment hedge $ 10,159 2,117 Net investment hedge $ 10,159 $ 8,751 Derivatives not designated investment hedge $ 10,159 $ 8,751 Derivatives not designated a hedging : Foreign exchange contract $ 41,031 $ 34,979 Other contract $ exchange contract $ 41,031 $ 34,979 Other contract $ 4,275 $ $ 34,979 Other contract $ 4,275 $ 7,932 The fair value Other contract $ 4,275 $ 7,932 The fair value of outstanding ) : As of December 31 , 2021 As of December As of December 31 , 2021 As of December 31 , , 2021 As of December 31 , 2022 Assets ( 1 As of December 31 , 2022 Assets ( 1 ) Liabilities 31 , 2022 Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Assets ( 1 ) ( 2 ) Assets ( 1 ) Liabilities ( 2 ) ( 1 ) Liabilities ( 2 ) Derivatives designated a hedging : Foreign exchange contract $ 867 $ 8 $ 271 $ exchange contract $ 867 $ 8 $ 271 $ 556 Derivatives $ 867 $ 8 $ 271 $ 556 Derivatives not designated $ 8 $ 271 $ 556 Derivatives not designated a hedging instrument : Foreign exchange contract 42 452 365 207 Other contract : Foreign exchange contract 42 452 365 207 Other contract 52 Foreign exchange contract 42 452 365 207 Other contract 52 121 exchange contract 42 452 365 207 Other contract 52 121 40 452 365 207 Other contract 52 121 40 47 Total derivative 365 207 Other contract 52 121 40 47 Total derivative not 207 Other contract 52 121 40 47 Total derivative not designated Other contract 52 121 40 47 Total derivative not designated a not designated a hedging instrument 94 573 405 254 Total $ designated a hedging instrument 94 573 405 254 Total $ 961 a hedging instrument 94 573 405 254 Total $ 961 $ hedging instrument 94 573 405 254 Total $ 961 $ 581 573 405 254 Total $ 961 $ 581 $ 676 $ 254 Total $ 961 $ 581 $ 676 $ 810 ( $ 961 $ 581 $ 676 $ 810 ( 1 ) $ 581 $ 676 $ 810 ( 1 ) Derivative asset $ 676 $ 810 ( 1 ) Derivative asset are recorded Consolidated Balance Sheets . ( 2 ) Derivative liability are recorded Tax Effect Year Ended December 31 , 2020 2021 2022 Derivatives Year Ended December 31 , 2020 2021 2022 Derivatives in cash Ended December 31 , 2020 2021 2022 Derivatives in cash flow December 31 , 2020 2021 2022 Derivatives in cash flow hedging the assessment of effectiveness $ 102 $ 806 $ 1,699 Amount of effectiveness $ 102 $ 806 $ 1,699 Amount excluded from $ 102 $ 806 $ 1,699 Amount excluded from the assessment the assessment of effectiveness ( 37 ) 48 ( 188 ) of effectiveness ( 37 ) 48 ( 188 ) Derivatives in ( 37 ) 48 ( 188 ) Derivatives in net investment the assessment of effectiveness ( 851 ) 754 608 Total $ of effectiveness ( 851 ) 754 608 Total $ ( 786 effectiveness ( 851 ) 754 608 Total $ ( 786 ) 754 608 Total $ ( 786 ) $ 1,608 $ 2,119 $ ( 786 ) $ 1,608 $ 2,119 65 Table of 786 ) $ 1,608 $ 2,119 65 Table of Contents Alphabet ) $ 1,608 $ 2,119 65 Table of Contents Alphabet Inc in Income Year Ended December 31 , 2020 2021 2022 Revenues Year Ended December 31 , 2020 2021 2022 Revenues Other income Ended December 31 , 2020 2021 2022 Revenues Other income ( December 31 , 2020 2021 2022 Revenues Other income ( expense Consolidated Statements of Income $ 182,527 $ 6,858 $ 257,637 $ of Income $ 182,527 $ 6,858 $ 257,637 $ 12,020 $ $ 182,527 $ 6,858 $ 257,637 $ 12,020 $ 282,836 $ $ 6,858 $ 257,637 $ 12,020 $ 282,836 $ ( 3,514 $ 257,637 $ 12,020 $ 282,836 $ ( 3,514 ) Effect 12,020 $ 282,836 $ ( 3,514 ) Effect of cash flow from AOCI to income $ 144 $ 0 $ 165 $ to income $ 144 $ 0 $ 165 $ 0 $ $ 144 $ 0 $ 165 $ 0 $ 2,046 $ $ 0 $ 165 $ 0 $ 2,046 $ 0 Amount $ 165 $ 0 $ 2,046 $ 0 Amount excluded from $ 0 $ 2,046 $ 0 Amount excluded from the assessment of effectiveness ( amortized ) 33 0 ( 16 ) 0 effectiveness ( amortized ) 33 0 ( 16 ) 0 ( amortized ) 33 0 ( 16 ) 0 ( 85 ) 33 0 ( 16 ) 0 ( 85 ) 0 Effect ( 16 ) 0 ( 85 ) 0 Effect of fair ) 0 ( 85 ) 0 Effect of fair value hedge Foreign exchange contract Hedged item 0 18 0 ( 95 ) exchange contract Hedged item 0 18 0 ( 95 ) 0 contract Hedged item 0 18 0 ( 95 ) 0 ( item 0 18 0 ( 95 ) 0 ( 162 ) 18 0 ( 95 ) 0 ( 162 ) Derivatives designated ( 95 ) 0 ( 162 ) Derivatives designated a hedging Derivatives designated a hedging instrument 0 ( 18 ) 0 95 a hedging instrument 0 ( 18 ) 0 95 0 163 instrument 0 ( 18 ) 0 95 0 163 Amount excluded 0 ( 18 ) 0 95 0 163 Amount excluded from ( 18 ) 0 95 0 163 Amount excluded from the 18 ) 0 95 0 163 Amount excluded from the assessment from the assessment of effectiveness 0 4 0 8 0 16 the assessment of effectiveness 0 4 0 8 0 16 Effect assessment of effectiveness 0 4 0 8 0 16 Effect of of effectiveness 0 4 0 8 0 16 Effect of net effectiveness 0 4 0 8 0 16 Effect of net investment 0 4 0 8 0 16 Effect of net investment hedge from the assessment of effectiveness 0 151 0 82 0 171 the assessment of effectiveness 0 151 0 82 0 171 Effect assessment of effectiveness 0 151 0 82 0 171 Effect of of effectiveness 0 151 0 82 0 171 Effect of non effectiveness 0 151 0 82 0 171 Effect of non designated 0 151 0 82 0 171 Effect of non designated hedge hedge : Foreign exchange contract 0 718 0 ( 860 ) : Foreign exchange contract 0 718 0 ( 860 ) 0 Foreign exchange contract 0 718 0 ( 860 ) 0 ( contract 0 718 0 ( 860 ) 0 ( 395 ) 718 0 ( 860 ) 0 ( 395 ) Other contract ( 860 ) 0 ( 395 ) Other contract 0 ( ( 395 ) Other contract 0 ( 906 ) 0 101 ) Other contract 0 ( 906 ) 0 101 0 144 contract 0 ( 906 ) 0 101 0 144 Total gain 0 ( 906 ) 0 101 0 144 Total gain ( ( 906 ) 0 101 0 144 Total gain ( loss 906 ) 0 101 0 144 Total gain ( loss ) gain ( loss ) $ 177 $ ( 33 ) $ ) $ 177 $ ( 33 ) $ 149 $ ( $ ( 33 ) $ 149 $ ( 669 ) $ ) $ 149 $ ( 669 ) $ 1,961 $ ( $ ( 669 ) $ 1,961 $ ( 63 ) Offsetting ) $ 1,961 $ ( 63 ) Offsetting of Derivatives We in other current asset . 66 Table of Contents Alphabet Inc ) : As of December 31 , 2021 Gross Amounts Not As of December 31 , 2021 Gross Amounts Not Offset in Balance Sheets Financial Instruments ( 1 ) Cash and Non-Cash Collateral Net Amounts Derivatives asset $ 999 $ ( 38 ) $ asset $ 999 $ ( 38 ) $ 961 $ ( $ ( 38 ) $ 961 $ ( 434 ) $ ) $ 961 $ ( 434 ) $ ( 406 ) ( 434 ) $ ( 406 ) $ 121 Derivatives liability $ ( 406 ) $ 121 Derivatives liability $ 619 $ $ 121 Derivatives liability $ 619 $ ( 38 ) $ liability $ 619 $ ( 38 ) $ 581 $ ( $ ( 38 ) $ 581 $ ( 434 ) $ ) $ 581 $ ( 434 ) $ ( 114 ) ( 434 ) $ ( 114 ) $ 33 As of $ ( 114 ) $ 33 As of December 31 , $ 33 As of December 31 , 2022 Gross Amounts Not As of December 31 , 2022 Gross Amounts Not Offset in Balance Sheets Financial Instruments ( 1 ) Cash and Non-Cash Collateral Net Amounts Derivatives asset $ 760 $ ( 84 ) $ asset $ 760 $ ( 84 ) $ 676 $ ( $ ( 84 ) $ 676 $ ( 463 ) $ ) $ 676 $ ( 463 ) $ ( 132 ) ( 463 ) $ ( 132 ) $ 81 Derivatives liability $ ( 132 ) $ 81 Derivatives liability $ 894 $ $ 81 Derivatives liability $ 894 $ ( 84 ) $ liability $ 894 $ ( 84 ) $ 810 $ ( $ ( 84 ) $ 810 $ ( 463 ) $ ) $ 810 $ ( 463 ) $ ( 28 ) ( 463 ) $ ( 28 ) $ 319 ( 1 $ ( 28 ) $ 319 ( 1 ) The balance 28 ) $ 319 ( 1 ) The balance a of The balance a of December 31 , 2021 and 2022 were a of December 31 , 2021 and 2022 were related to December 31 , 2021 and 2022 were related to derivative allowed master netting agreement . Note 4 . Leases We have entered with lease period expiring between 2023 and 2063 . Components of period expiring between 2023 and 2063 . Components of operating lease ) : Year Ended December 31 , 2020 2021 2022 Operating Year Ended December 31 , 2020 2021 2022 Operating lease cost Ended December 31 , 2020 2021 2022 Operating lease cost $ December 31 , 2020 2021 2022 Operating lease cost $ 2,267 2022 Operating lease cost $ 2,267 $ 2,699 $ 2,900 Variable lease cost $ 2,267 $ 2,699 $ 2,900 Variable lease cost $ 2,267 $ 2,699 $ 2,900 Variable lease cost 619 726 $ 2,900 Variable lease cost 619 726 838 Total operating lease 2,900 Variable lease cost 619 726 838 Total operating lease cost Variable lease cost 619 726 838 Total operating lease cost $ Total operating lease cost $ 2,886 $ 3,425 $ 3,738 Supplemental lease cost $ 2,886 $ 3,425 $ 3,738 Supplemental information related $ 2,886 $ 3,425 $ 3,738 Supplemental information related to operating ) : Year Ended December 31 , 2020 2021 2022 Cash Year Ended December 31 , 2020 2021 2022 Cash payment for Ended December 31 , 2020 2021 2022 Cash payment for operating December 31 , 2020 2021 2022 Cash payment for operating lease payment for operating lease $ 2,004 $ 2,489 $ 2,722 New operating lease $ 2,004 $ 2,489 $ 2,722 New operating lease $ 2,004 $ 2,489 $ 2,722 New operating lease asset obtained for operating lease liability $ 2,765 $ 2,951 $ 4,383 67 lease liability $ 2,765 $ 2,951 $ 4,383 67 Table of $ 2,765 $ 2,951 $ 4,383 67 Table of Contents Alphabet 2,765 $ 2,951 $ 4,383 67 Table of Contents Alphabet Inc. Alphabet Inc. As of December 31 , 2022 , our operating As of December 31 , 2022 , our operating lease had weighted average discount rate of 2.8 % . Future lease payment operating lease a of December 31 , 2022 were a follows a of December 31 , 2022 were a follows ( in ( in million ) : 2023 $ 2,955 2024 2,771 2025 million ) : 2023 $ 2,955 2024 2,771 2025 2,377 2026 ) : 2023 $ 2,955 2024 2,771 2025 2,377 2026 1,953 : 2023 $ 2,955 2024 2,771 2025 2,377 2026 1,953 2027 2023 $ 2,955 2024 2,771 2025 2,377 2026 1,953 2027 1,502 $ 2,955 2024 2,771 2025 2,377 2026 1,953 2027 1,502 Thereafter 2,955 2024 2,771 2025 2,377 2026 1,953 2027 1,502 Thereafter 5,882 2024 2,771 2025 2,377 2026 1,953 2027 1,502 Thereafter 5,882 Total 2,771 2025 2,377 2026 1,953 2027 1,502 Thereafter 5,882 Total future 2025 2,377 2026 1,953 2027 1,502 Thereafter 5,882 Total future lease 2026 1,953 2027 1,502 Thereafter 5,882 Total future lease payment 17,440 5,882 Total future lease payment 17,440 Less imputed interest ( 2,462 17,440 Less imputed interest ( 2,462 ) Total lease liability balance Total lease liability balance $ 14,978 As of December 31 , $ 14,978 As of December 31 , 2022 , we have As of December 31 , 2022 , we have entered into future lease payment of $ 630 million and $ 3.1 billion $ 630 million and $ 3.1 billion that are not yet These lease will commence between 2023 and 2026 with non-cancelable lease will commence between 2023 and 2026 with non-cancelable lease term between with non-cancelable lease term between 1 and 25 year . Note lease term between 1 and 25 year . Note 5 . and 25 year . Note 5 . Variable Interest Entities Consolidated u . As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , asset that December 31 , 2021 and 2022 , asset that can only of these VIEs were $ 6.0 billion and $ 4.1 billion $ 6.0 billion and $ 4.1 billion , respectively , and to the VIEs were $ 2.5 billion and $ 2.6 billion $ 2.5 billion and $ 2.6 billion , respectively . We our consolidated subsidiary were $ 4.3 billion and $ 3.8 billion $ 4.3 billion and $ 3.8 billion a of December 31 3.8 billion a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , respectively , December 31 , 2021 and 2022 , respectively , of which respectively , of which $ 1.1 billion is redeemable noncontrolling interest & E . See Note 7 for further detail on OI these unconsolidated VIEs were $ 2.7 billion and $ 2.9 billion $ 2.7 billion and $ 2.9 billion , respectively , a respectively , a of December 31 , 2021 and $ 2.7 a of December 31 , 2021 and $ 2.7 billion and 31 , 2021 and $ 2.7 billion and $ 2.8 billion $ 2.7 billion and $ 2.8 billion , respectively , a respectively , a of December 31 , 2022 . Note 6 a of December 31 , 2022 . Note 6 . Debt 31 , 2022 . Note 6 . Debt Short-Term Debt We program of up to $ 10.0 billion through the issuance of paper outstanding a of December 31 , 2021 and 2022 . a of December 31 , 2021 and 2022 . Our short-term December 31 , 2021 and 2022 . Our short-term debt balance of certain long-term debt . 68 Table of Contents Alphabet Inc Interest Rate As of December 31 , Maturity Coupon Rate 2021 31 , Maturity Coupon Rate 2021 2022 Debt 2014-2020 Notes issuance , Maturity Coupon Rate 2021 2022 Debt 2014-2020 Notes issuance 2024 Coupon Rate 2021 2022 Debt 2014-2020 Notes issuance 2024 - 2060 2022 Debt 2014-2020 Notes issuance 2024 - 2060 0.45 % - 2014-2020 Notes issuance 2024 - 2060 0.45 % - 3.38 % Notes issuance 2024 - 2060 0.45 % - 3.38 % 0.57 - 2060 0.45 % - 3.38 % 0.57 % - 3.38 0.45 % - 3.38 % 0.57 % - 3.38 % $ 3.38 % 0.57 % - 3.38 % $ 13,000 $ 13,000 % - 3.38 % $ 13,000 $ 13,000 Future finance lease 3.38 % $ 13,000 $ 13,000 Future finance lease payment , , net and other ( 1 ) 2,086 2,142 Total debt and other ( 1 ) 2,086 2,142 Total debt 15,086 15,142 other ( 1 ) 2,086 2,142 Total debt 15,086 15,142 Unamortized ) 2,086 2,142 Total debt 15,086 15,142 Unamortized discount and debt 2,086 2,142 Total debt 15,086 15,142 Unamortized discount and debt issuance and debt issuance cost ( 156 ) ( 143 ) Less cost ( 156 ) ( 143 ) Less : current portion and other current debt ( 1 ) ( 2 ) ( debt ( 1 ) ( 2 ) ( 113 ) ( ) ( 2 ) ( 113 ) ( 298 ) Total ) ( 113 ) ( 298 ) Total long-term debt $ ) Total long-term debt $ 14,817 $ 14,701 ( 1 ) long-term debt $ 14,817 $ 14,701 ( 1 ) Future finance $ 14,817 $ 14,701 ( 1 ) Future finance lease payment of imputed interest . ( 2 ) Total current portion of current liability . See Note 7 for further detail . The outstanding note wa approximately $ 12.4 billion and $ 9.9 billion $ 12.4 billion and $ 9.9 billion a of December 31 9.9 billion a of December 31 , 2021 and December 31 a of December 31 , 2021 and December 31 , 2022 31 , 2021 and December 31 , 2022 , respectively . 2021 and December 31 , 2022 , respectively . The fair is categorized accordingly a Level 2 in the fair value hierarchy hierarchy . As of December 31 , 2022 , the aggregate As of December 31 , 2022 , the aggregate future principal ( in million ) : 2023 $ 221 2024 1,156 2025 million ) : 2023 $ 221 2024 1,156 2025 1,159 2026 ) : 2023 $ 221 2024 1,156 2025 1,159 2026 2,163 : 2023 $ 221 2024 1,156 2025 1,159 2026 2,163 2027 2023 $ 221 2024 1,156 2025 1,159 2026 2,163 2027 1,166 $ 221 2024 1,156 2025 1,159 2026 2,163 2027 1,166 Thereafter 221 2024 1,156 2025 1,159 2026 2,163 2027 1,166 Thereafter 9,447 2024 1,156 2025 1,159 2026 2,163 2027 1,166 Thereafter 9,447 Total 1,156 2025 1,159 2026 2,163 2027 1,166 Thereafter 9,447 Total $ 2025 1,159 2026 2,163 2027 1,166 Thereafter 9,447 Total $ 15,312 2026 2,163 2027 1,166 Thereafter 9,447 Total $ 15,312 Credit Facility 1,166 Thereafter 9,447 Total $ 15,312 Credit Facility As of December Credit Facility As of December 31 , 2022 , we had As of December 31 , 2022 , we had $ 10.0 2022 , we had $ 10.0 billion of revolving credit facility revolving credit facility , $ 4.0 billion expiring in April 2023 4.0 billion expiring in April 2023 and $ 6.0 billion expiring in April 2023 and $ 6.0 billion expiring in April 2026 6.0 billion expiring in April 2026 . The interest rate for credit facility a of December 31 , 2021 and 2022 . a of December 31 , 2021 and 2022 . Note 7 December 31 , 2021 and 2022 . Note 7 . Supplemental 2021 and 2022 . Note 7 . Supplemental Financial Statement Information on account receivable wa $ 550 million and $ 754 million $ 550 million and $ 754 million a of December 31 754 million a of December 31 , 2021 and 2022 , a of December 31 , 2021 and 2022 , respectively . December 31 , 2021 and 2022 , respectively . 69 Table and 2022 , respectively . 69 Table of Contents Alphabet Inc. ) : As of December 31 , 2021 2022 Land and As of December 31 , 2021 2022 Land and building $ of December 31 , 2021 2022 Land and building $ 58,881 2022 Land and building $ 58,881 $ 66,897 Information technology asset and building $ 58,881 $ 66,897 Information technology asset 55,606 66,267 $ 66,897 Information technology asset 55,606 66,267 Construction in progress 23,172 66,897 Information technology asset 55,606 66,267 Construction in progress 23,172 27,657 55,606 66,267 Construction in progress 23,172 27,657 Leasehold improvement 9,146 10,575 66,267 Construction in progress 23,172 27,657 Leasehold improvement 9,146 10,575 Furniture progress 23,172 27,657 Leasehold improvement 9,146 10,575 Furniture and fixture 208 23,172 27,657 Leasehold improvement 9,146 10,575 Furniture and fixture 208 314 9,146 10,575 Furniture and fixture 208 314 Property and equipment , 10,575 Furniture and fixture 208 314 Property and equipment , gross Property and equipment , gross 147,013 171,710 Less : accumulated depreciation and equipment , gross 147,013 171,710 Less : accumulated depreciation ( Less : accumulated depreciation ( 49,414 ) ( 59,042 ) Property depreciation ( 49,414 ) ( 59,042 ) Property and equipment , and equipment , net $ 97,599 $ 112,668 Accrued expense and , net $ 97,599 $ 112,668 Accrued expense and other current ) : As of December 31 , 2021 2022 European Commission As of December 31 , 2021 2022 European Commission fine ( of December 31 , 2021 2022 European Commission fine ( 1 2022 European Commission fine ( 1 ) $ 9,799 $ 9,106 fine ( 1 ) $ 9,799 $ 9,106 Accrued customer liability 1 ) $ 9,799 $ 9,106 Accrued customer liability 3,505 3,619 $ 9,106 Accrued customer liability 3,505 3,619 Accrued purchase of property 9,106 Accrued customer liability 3,505 3,619 Accrued purchase of property and purchase of property and equipment 2,415 3,019 Current operating lease liability of property and equipment 2,415 3,019 Current operating lease liability 2,189 3,019 Current operating lease liability 2,189 2,477 Other accrued expense and Current operating lease liability 2,189 2,477 Other accrued expense and current accrued expense and current liability 14,136 19,645 Accrued expense and other expense and current liability 14,136 19,645 Accrued expense and other current and other current liability $ 32,044 $ 37,866 ( 1 ) current liability $ 32,044 $ 37,866 ( 1 ) While each $ 32,044 $ 37,866 ( 1 ) While each EC decision interest . Se e Note 10 for further detail . 70 10 for further detail . 70 Table of Contents Alphabet Inc Total Balance a of December 31 , 2019 $ ( 2,003 a of December 31 , 2019 $ ( 2,003 ) $ 31 , 2019 $ ( 2,003 ) $ 812 $ ( $ ( 2,003 ) $ 812 $ ( 41 ) $ ) $ 812 $ ( 41 ) $ ( 1,232 ) ( 41 ) $ ( 1,232 ) Other comprehensive income ( ( loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded loss ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from ) before reclassification 1,139 1,313 79 2,531 Amounts excluded from the before reclassification 1,139 1,313 79 2,531 Amounts excluded from the assessment hedge effectiveness recorded in AOCI 0 0 ( 37 ) ( effectiveness recorded in AOCI 0 0 ( 37 ) ( 37 in AOCI 0 0 ( 37 ) ( 37 ) Amounts 0 ( 37 ) ( 37 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 ( 513 ) ( 116 reclassified from AOCI 0 ( 513 ) ( 116 ) ( 0 ( 513 ) ( 116 ) ( 629 ) Other ) ( 116 ) ( 629 ) Other comprehensive income ( comprehensive income ( loss ) 1,139 800 ( 74 ) 1,865 income ( loss ) 1,139 800 ( 74 ) 1,865 Balance loss ) 1,139 800 ( 74 ) 1,865 Balance a of 1,139 800 ( 74 ) 1,865 Balance a of December 31 1,865 Balance a of December 31 , 2020 ( 864 ) a of December 31 , 2020 ( 864 ) 1,612 ( December 31 , 2020 ( 864 ) 1,612 ( 115 ) , 2020 ( 864 ) 1,612 ( 115 ) 633 Other ( 864 ) 1,612 ( 115 ) 633 Other comprehensive income ) 1,612 ( 115 ) 633 Other comprehensive income ( loss loss ) before reclassification ( 1,442 ) ( 1,312 ) 668 reclassification ( 1,442 ) ( 1,312 ) 668 ( 2,086 ) 1,442 ) ( 1,312 ) 668 ( 2,086 ) Amounts excluded ( 1,312 ) 668 ( 2,086 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 48 48 Amounts reclassified effectiveness recorded in AOCI 0 0 48 48 Amounts reclassified from recorded in AOCI 0 0 48 48 Amounts reclassified from AOCI in AOCI 0 0 48 48 Amounts reclassified from AOCI 0 48 Amounts reclassified from AOCI 0 ( 64 ) ( 154 reclassified from AOCI 0 ( 64 ) ( 154 ) ( 0 ( 64 ) ( 154 ) ( 218 ) Other ) ( 154 ) ( 218 ) Other comprehensive income ( income ( loss ) ( 1,442 ) ( 1,376 ) 562 ) ( 1,442 ) ( 1,376 ) 562 ( 2,256 ) 1,442 ) ( 1,376 ) 562 ( 2,256 ) Balance a ( 1,376 ) 562 ( 2,256 ) Balance a of December ) Balance a of December 31 , 2021 ( 2,306 ) a of December 31 , 2021 ( 2,306 ) 236 447 December 31 , 2021 ( 2,306 ) 236 447 ( 1,623 , 2021 ( 2,306 ) 236 447 ( 1,623 ) Other 2021 ( 2,306 ) 236 447 ( 1,623 ) Other comprehensive 2,306 ) 236 447 ( 1,623 ) Other comprehensive income ( loss ) before reclassification ( 1,836 ) ( 4,720 ) 1,463 reclassification ( 1,836 ) ( 4,720 ) 1,463 ( 5,093 ) 1,836 ) ( 4,720 ) 1,463 ( 5,093 ) Amounts excluded ( 4,720 ) 1,463 ( 5,093 ) Amounts excluded from the hedge effectiveness recorded in AOCI 0 0 ( 188 ) ( effectiveness recorded in AOCI 0 0 ( 188 ) ( 188 in AOCI 0 0 ( 188 ) ( 188 ) Amounts 0 ( 188 ) ( 188 ) Amounts reclassified from AOCI ) Amounts reclassified from AOCI 0 1,007 ( 1,706 ) ( Amounts reclassified from AOCI 0 1,007 ( 1,706 ) ( 699 from AOCI 0 1,007 ( 1,706 ) ( 699 ) Other 1,007 ( 1,706 ) ( 699 ) Other comprehensive income ( income ( loss ) ( 1,836 ) ( 3,713 ) ( ) ( 1,836 ) ( 3,713 ) ( 431 ) ( ) ( 3,713 ) ( 431 ) ( 5,980 ) Balance ) ( 431 ) ( 5,980 ) Balance a of December ) Balance a of December 31 , 2022 $ ( 4,142 a of December 31 , 2022 $ ( 4,142 ) $ 31 , 2022 $ ( 4,142 ) $ ( 3,477 ) ( 4,142 ) $ ( 3,477 ) $ 16 $ ( $ ( 3,477 ) $ 16 $ ( 7,603 ) The ) $ 16 $ ( 7,603 ) The effect on net of Income Year Ended December 31 , AOCI Components Location 2020 31 , AOCI Components Location 2020 2021 2022 Unrealized gain ( , AOCI Components Location 2020 2021 2022 Unrealized gain ( loss AOCI Components Location 2020 2021 2022 Unrealized gain ( loss ) expense ) , net $ 650 $ 82 $ ( 1,291 , net $ 650 $ 82 $ ( 1,291 ) Benefit 650 $ 82 $ ( 1,291 ) Benefit ( provision ) ) for income tax ( 137 ) ( 18 ) 284 tax ( 137 ) ( 18 ) 284 Net of income 137 ) ( 18 ) 284 Net of income tax 513 284 Net of income tax 513 64 ( 1,007 ) Unrealized Net of income tax 513 64 ( 1,007 ) Unrealized gain income tax 513 64 ( 1,007 ) Unrealized gain ( loss hedge Foreign exchange contract Revenue 144 165 2,046 Interest rate contract Foreign exchange contract Revenue 144 165 2,046 Interest rate contract Other exchange contract Revenue 144 165 2,046 Interest rate contract Other income ( expense ) , net 6 6 6 Benefit ( provision expense ) , net 6 6 6 Benefit ( provision ) ) , net 6 6 6 Benefit ( provision ) for ) for income tax ( 34 ) ( 17 ) ( tax ( 34 ) ( 17 ) ( 346 ) Net ) ( 17 ) ( 346 ) Net of income tax ) Net of income tax 116 154 1,706 Total amount reclassified Net of income tax 116 154 1,706 Total amount reclassified , of income tax 116 154 1,706 Total amount reclassified , net net of income tax $ 629 $ 218 $ 699 71 income tax $ 629 $ 218 $ 699 71 Table of $ 629 $ 218 $ 699 71 Table of Contents Alphabet 629 $ 218 $ 699 71 Table of Contents Alphabet Inc. ) : Year Ended December 31 , 2020 2021 2022 Interest Year Ended December 31 , 2020 2021 2022 Interest income $ Ended December 31 , 2020 2021 2022 Interest income $ 1,865 December 31 , 2020 2021 2022 Interest income $ 1,865 $ 2021 2022 Interest income $ 1,865 $ 1,499 $ 2,174 Interest Interest income $ 1,865 $ 1,499 $ 2,174 Interest expense ( $ 1,865 $ 1,499 $ 2,174 Interest expense ( 1 ) $ 2,174 Interest expense ( 1 ) ( 135 ) ( expense ( 1 ) ( 135 ) ( 346 ) ( ) ( 135 ) ( 346 ) ( 357 ) Foreign ) ( 346 ) ( 357 ) Foreign currency exchange gain loss ) , net ( 344 ) ( 240 ) ( net ( 344 ) ( 240 ) ( 654 ) Gain ) ( 240 ) ( 654 ) Gain ( loss ) on debt security , net 725 ( 110 ) ( 2,064 security , net 725 ( 110 ) ( 2,064 ) Gain 725 ( 110 ) ( 2,064 ) Gain ( loss ) on equity security , net 5,592 12,380 ( 3,455 ) Performance equity security , net 5,592 12,380 ( 3,455 ) Performance fee , net 5,592 12,380 ( 3,455 ) Performance fee ( 609 3,455 ) Performance fee ( 609 ) ( 1,908 ) 798 fee ( 609 ) ( 1,908 ) 798 Income ( loss 609 ) ( 1,908 ) 798 Income ( loss ) and equity method investment , net 401 334 ( 337 ) Other method investment , net 401 334 ( 337 ) Other ( , net 401 334 ( 337 ) Other ( 637 ) ( 337 ) Other ( 637 ) 411 381 Other income ) Other ( 637 ) 411 381 Other income ( expense Other ( 637 ) 411 381 Other income ( expense ) expense ) , net $ 6,858 $ 12,020 $ ( 3,514 , net $ 6,858 $ 12,020 $ ( 3,514 ) ( 6,858 $ 12,020 $ ( 3,514 ) ( 1 ) Interest $ ( 3,514 ) ( 1 ) Interest expense is net of interest capitalized of $ 218 million , $ 163 million $ 218 million , $ 163 million , and $ 128 163 million , and $ 128 million for the year ended for the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively . Note 8 2022 , respectively . Note 8 . Acquisitions Mandiant Acquisition On Acquisitions Mandiant Acquisition On September 12 , 2022 we closed the Acquisition On September 12 , 2022 we closed the acquisition of total purchase price of $ 6.1 billion , including cash and ) : Intangible asset $ 840 Goodwill ( 1 ) 4,772 asset $ 840 Goodwill ( 1 ) 4,772 Net asset acquired 840 Goodwill ( 1 ) 4,772 Net asset acquired ( 2 4,772 Net asset acquired ( 2 ) 489 Total purchase price asset acquired ( 2 ) 489 Total purchase price $ 6,101 489 Total purchase price $ 6,101 ( 1 ) Goodwill wa purchase price $ 6,101 ( 1 ) Goodwill wa recorded in for tax purpose . ( 2 ) Includes $ 706 million ( 2 ) Includes $ 706 million of acquired cash . Patents and developed technology $ 349 4.8 Customer relationship 366 8.0 and developed technology $ 349 4.8 Customer relationship 366 8.0 Trade $ 349 4.8 Customer relationship 366 8.0 Trade name and other 349 4.8 Customer relationship 366 8.0 Trade name and other 125 8.0 Trade name and other 125 5.9 Total intangible asset $ Trade name and other 125 5.9 Total intangible asset $ 840 5.9 Total intangible asset $ 840 72 Table of Contents Alphabet Total intangible asset $ 840 72 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 9 . Goodwill and Other Intangible for the year ended December 31 , 2021 and 2022 were year ended December 31 , 2021 and 2022 were a follows December 31 , 2021 and 2022 were a follows ( in Total Balance a of December 31 , 2020 $ 18,517 $ a of December 31 , 2020 $ 18,517 $ 1,957 $ December 31 , 2020 $ 18,517 $ 1,957 $ 701 $ , 2020 $ 18,517 $ 1,957 $ 701 $ 21,175 Acquisitions $ 18,517 $ 1,957 $ 701 $ 21,175 Acquisitions 1,325 382 $ 1,957 $ 701 $ 21,175 Acquisitions 1,325 382 103 1,810 $ 701 $ 21,175 Acquisitions 1,325 382 103 1,810 Foreign currency 701 $ 21,175 Acquisitions 1,325 382 103 1,810 Foreign currency translation $ 21,175 Acquisitions 1,325 382 103 1,810 Foreign currency translation and 21,175 Acquisitions 1,325 382 103 1,810 Foreign currency translation and other translation and other adjustment ( 16 ) ( 2 ) ( adjustment ( 16 ) ( 2 ) ( 11 ) ( ) ( 2 ) ( 11 ) ( 29 ) Balance ) ( 11 ) ( 29 ) Balance a of December ) Balance a of December 31 , 2021 19,826 2,337 793 a of December 31 , 2021 19,826 2,337 793 22,956 Acquisitions of December 31 , 2021 19,826 2,337 793 22,956 Acquisitions 1,176 December 31 , 2021 19,826 2,337 793 22,956 Acquisitions 1,176 4,876 31 , 2021 19,826 2,337 793 22,956 Acquisitions 1,176 4,876 119 , 2021 19,826 2,337 793 22,956 Acquisitions 1,176 4,876 119 6,171 19,826 2,337 793 22,956 Acquisitions 1,176 4,876 119 6,171 Foreign currency 2,337 793 22,956 Acquisitions 1,176 4,876 119 6,171 Foreign currency translation 793 22,956 Acquisitions 1,176 4,876 119 6,171 Foreign currency translation and 22,956 Acquisitions 1,176 4,876 119 6,171 Foreign currency translation and other translation and other adjustment ( 155 ) ( 8 ) ( adjustment ( 155 ) ( 8 ) ( 4 ) ( ) ( 8 ) ( 4 ) ( 167 ) Balance ) ( 4 ) ( 167 ) Balance a of December ) Balance a of December 31 , 2022 $ 20,847 $ a of December 31 , 2022 $ 20,847 $ 7,205 $ December 31 , 2022 $ 20,847 $ 7,205 $ 908 $ , 2022 $ 20,847 $ 7,205 $ 908 $ 28,960 Other $ 20,847 $ 7,205 $ 908 $ 28,960 Other Intangible Assets $ 7,205 $ 908 $ 28,960 Other Intangible Assets Information regarding ) : As of December 31 , 2021 As of December As of December 31 , 2021 As of December 31 , , 2021 As of December 31 , 2022 Gross Carrying Amount As of December 31 , 2022 Gross Carrying Amount Accumulated Amortization Patents and developed technology $ 4,786 $ 4,112 $ 674 $ developed technology $ 4,786 $ 4,112 $ 674 $ 1,164 $ $ 4,786 $ 4,112 $ 674 $ 1,164 $ 354 $ $ 4,112 $ 674 $ 1,164 $ 354 $ 810 3.2 $ 674 $ 1,164 $ 354 $ 810 3.2 Customer relationship $ 1,164 $ 354 $ 810 3.2 Customer relationship 506 140 1,164 $ 354 $ 810 3.2 Customer relationship 506 140 366 $ 810 3.2 Customer relationship 506 140 366 862 235 627 810 3.2 Customer relationship 506 140 366 862 235 627 5.0 3.2 Customer relationship 506 140 366 862 235 627 5.0 Trade Customer relationship 506 140 366 862 235 627 5.0 Trade name relationship 506 140 366 862 235 627 5.0 Trade name and 506 140 366 862 235 627 5.0 Trade name and other 140 366 862 235 627 5.0 Trade name and other 534 5.0 Trade name and other 534 295 239 527 120 407 Trade name and other 534 295 239 527 120 407 6.3 name and other 534 295 239 527 120 407 6.3 Total and other 534 295 239 527 120 407 6.3 Total definite-lived other 534 295 239 527 120 407 6.3 Total definite-lived intangible 534 295 239 527 120 407 6.3 Total definite-lived intangible asset 295 239 527 120 407 6.3 Total definite-lived intangible asset 5,826 6.3 Total definite-lived intangible asset 5,826 4,547 1,279 2,553 709 1,844 Total definite-lived intangible asset 5,826 4,547 1,279 2,553 709 1,844 Indefinite-lived definite-lived intangible asset 5,826 4,547 1,279 2,553 709 1,844 Indefinite-lived intangible intangible asset 5,826 4,547 1,279 2,553 709 1,844 Indefinite-lived intangible asset asset 5,826 4,547 1,279 2,553 709 1,844 Indefinite-lived intangible asset 138 5,826 4,547 1,279 2,553 709 1,844 Indefinite-lived intangible asset 138 0 709 1,844 Indefinite-lived intangible asset 138 0 138 240 0 240 1,844 Indefinite-lived intangible asset 138 0 138 240 0 240 Total Indefinite-lived intangible asset 138 0 138 240 0 240 Total intangible intangible asset 138 0 138 240 0 240 Total intangible asset asset 138 0 138 240 0 240 Total intangible asset $ 138 0 138 240 0 240 Total intangible asset $ 5,964 240 Total intangible asset $ 5,964 $ 4,547 $ 1,417 $ intangible asset $ 5,964 $ 4,547 $ 1,417 $ 2,793 $ $ 5,964 $ 4,547 $ 1,417 $ 2,793 $ 709 $ $ 4,547 $ 1,417 $ 2,793 $ 709 $ 2,084 For $ 1,417 $ 2,793 $ 709 $ 2,084 For the year $ 2,793 $ 709 $ 2,084 For the year ended December For the year ended December 31 , 2022 , $ 4.5 year ended December 31 , 2022 , $ 4.5 billion of 31 , 2022 , $ 4.5 billion of intangible asset that to intangible asset wa $ 774 million , $ 875 million $ 774 million , $ 875 million , and $ 642 875 million , and $ 642 million for the year ended for the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively . Expected amortization asset held a of December 31 , 2022 wa a follows a of December 31 , 2022 wa a follows ( in ( in million ) : 2023 $ 463 2024 444 2025 million ) : 2023 $ 463 2024 444 2025 314 2026 ) : 2023 $ 463 2024 444 2025 314 2026 235 : 2023 $ 463 2024 444 2025 314 2026 235 2027 2023 $ 463 2024 444 2025 314 2026 235 2027 152 $ 463 2024 444 2025 314 2026 235 2027 152 Thereafter 463 2024 444 2025 314 2026 235 2027 152 Thereafter 236 2024 444 2025 314 2026 235 2027 152 Thereafter 236 $ 444 2025 314 2026 235 2027 152 Thereafter 236 $ 1,844 2025 314 2026 235 2027 152 Thereafter 236 $ 1,844 Note 2026 235 2027 152 Thereafter 236 $ 1,844 Note 10 . 2027 152 Thereafter 236 $ 1,844 Note 10 . Commitments and Thereafter 236 $ 1,844 Note 10 . Commitments and contingency Commitments minimum guaranteed commitment of $ 12.3 billion a of December 31 12.3 billion a of December 31 , 2022 , of which a of December 31 , 2022 , of which the majority over seven year commencing in 2023 . 73 Table of Contents year commencing in 2023 . 73 Table of Contents Alphabet Inc. period . As of December 31 , 2022 , we did As of December 31 , 2022 , we did not have . Antitrust Investigations On November 30 , 2010 , the EC Investigations On November 30 , 2010 , the EC 's Directorate against u . On June 27 , 2017 , the EC . On June 27 , 2017 , the EC announced it EC decision imposed a € 2.4 billion ( $ 2.7 billion € 2.4 billion ( $ 2.7 billion a of June 27 2.7 billion a of June 27 , 2017 ) fine . a of June 27 , 2017 ) fine . On September ) fine . On September 11 , 2017 , we appealed . On September 11 , 2017 , we appealed the EC Court , and on September 27 , 2017 , we implemented and on September 27 , 2017 , we implemented product change recognized a charge of $ 2.7 billion for the fine in in the second quarter of 2017 . On November 10 , of 2017 . On November 10 , 2021 , the General . On November 10 , 2021 , the General Court rejected Court of Justice on January 20 , 2022 . On July Justice on January 20 , 2022 . On July 18 , , 2022 . On July 18 , 2018 , the EC . On July 18 , 2018 , the EC announced it EC decision imposed a € 4.3 billion ( $ 5.1 billion € 4.3 billion ( $ 5.1 billion a of June 30 5.1 billion a of June 30 , 2018 ) fine and a of June 30 , 2018 ) fine and directed the at issue . On October 9 , 2018 , we appealed . On October 9 , 2018 , we appealed the EC decision , and on October 29 , 2018 , we implemented and on October 29 , 2018 , we implemented change to distribution practice . On September 14 , 2022 , the General . On September 14 , 2022 , the General Court reduced reduced the fine from € 4.3 billion to € 4.1 billion € 4.3 billion to € 4.1 billion . We subsequently filed Court of Justice . In 2018 , we recognized a charge recognized a charge of $ 5.1 billion for the fine , which we reduced by $ 217 million in 2022 . On by $ 217 million in 2022 . On March 20 , in 2022 . On March 20 , 2019 , the EC . On March 20 , 2019 , the EC announced it imposed a fine of € 1.5 billion ( $ 1.7 billion € 1.5 billion ( $ 1.7 billion a of March 20 1.7 billion a of March 20 , 2019 ) and directed a of March 20 , 2019 ) and directed action related the decision . On June 4 , 2019 , we appealed . On June 4 , 2019 , we appealed the EC recognized a charge of $ 1.7 billion for the fine in in the first quarter of 2019 . From time to time globally . For example : 74 Table of Contents Alphabet Inc. Alphabet Inc. • In August 2019 , we began receiving civil filed a lawsuit on October 20 , 2020 alleging that Google lawsuit on October 20 , 2020 alleging that Google violated U.S. . Further , in June 2022 , the Australian Competition and practice . • On December 16 , 2020 , a number • On December 16 , 2020 , a number of state . Additionally , on January 24 , 2023 , the DOJ , on January 24 , 2023 , the DOJ , along technology business practice on June 22 , 2021 , May 25 practice on June 22 , 2021 , May 25 , 2022 22 , 2021 , May 25 , 2022 , and June 2021 , May 25 , 2022 , and June 29 , , 2022 , and June 29 , 2022 , respectively . , and June 29 , 2022 , respectively . • On respectively . • On July 7 , 2021 , a number • On July 7 , 2021 , a number of state protection law . In May 2022 , the EC and the a formal review in May 2022 of Google 's compliance with a material adverse effect . 75 Table of Contents Alphabet Inc. income tax contingency see Note 14 . Note 11 . Stockholders see Note 14 . Note 11 . Stockholders ' Equity Class common stock is entitled to 10 vote per share . Class . Stock Split On July 15 , 2022 , the company Split On July 15 , 2022 , the company executed a , the company executed a 20 -for-one stock split with a a record date of July 1 , 2022 , effected in date of July 1 , 2022 , effected in the form Stock Split . See Note 1 for further detail . Share . Share Repurchases In April 2022 , the Board of Directors to repurchase up to $ 70.0 billion of it Class A share . As of December 31 , 2022 , $ 28.1 As of December 31 , 2022 , $ 28.1 billion remains 31 , 2022 , $ 28.1 billion remains available for Class ) : Year Ended December 31 , 2021 Year Ended December Year Ended December 31 , 2021 Year Ended December 31 , , 2021 Year Ended December 31 , 2022 Shares Amount Shares Year Ended December 31 , 2022 Shares Amount Shares Amount Class Amount Class A share repurchase 24 $ 3,399 61 $ 6,719 A share repurchase 24 $ 3,399 61 $ 6,719 Class C share repurchase 24 $ 3,399 61 $ 6,719 Class C share 24 $ 3,399 61 $ 6,719 Class C share repurchase 383 6,719 Class C share repurchase 383 46,875 469 52,577 Total share Class C share repurchase 383 46,875 469 52,577 Total share repurchase C share repurchase 383 46,875 469 52,577 Total share repurchase 407 share repurchase 383 46,875 469 52,577 Total share repurchase 407 $ 469 52,577 Total share repurchase 407 $ 50,274 530 $ 59,296 Total share repurchase 407 $ 50,274 530 $ 59,296 Class A share repurchase 407 $ 50,274 530 $ 59,296 Class A and 407 $ 50,274 530 $ 59,296 Class A and Class C transaction , including through Rule 10b5-1 plan . The repurchase program an expiration date . Note 12 . Net Income Per Share conversion of those share . 76 Table of Contents Alphabet Inc In the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , the 2020 , 2021 , and 2022 , the net income per ) : Year Ended December 31 , 2020 Class A Class Year Ended December 31 , 2020 Class A Class B Class Allocation of undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator undistributed earnings $ 17,733 $ 2,732 $ 19,804 Denominator Number of $ 17,733 $ 2,732 $ 19,804 Denominator Number of share used used in per share computation 5,996 924 6,696 Basic net income in per share computation 5,996 924 6,696 Basic net income per per share computation 5,996 924 6,696 Basic net income per share net income per share $ 2.96 $ 2.96 $ 2.96 Diluted per share $ 2.96 $ 2.96 $ 2.96 Diluted net income $ 2.96 $ 2.96 $ 2.96 Diluted net income per share earnings for basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation basic computation $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed $ 17,733 $ 2,732 $ 19,804 Reallocation of undistributed earnings a B to Class A share 2,732 0 0 Reallocation of undistributed to Class A share 2,732 0 0 Reallocation of undistributed earnings Class A share 2,732 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 180 ) ( 25 ) 180 earnings ( 180 ) ( 25 ) 180 Allocation of undistributed 180 ) ( 25 ) 180 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator undistributed earnings $ 20,285 $ 2,707 $ 19,984 Denominator Number of $ 20,285 $ 2,707 $ 19,984 Denominator Number of share used share used in basic computation 5,996 924 6,696 Weighted-average effect of used in basic computation 5,996 924 6,696 Weighted-average effect of dilutive in basic computation 5,996 924 6,696 Weighted-average effect of dilutive security to Class A share outstanding 924 0 0 Restricted stock unit Class A share outstanding 924 0 0 Restricted stock unit and A share outstanding 924 0 0 Restricted stock unit and other and other contingently issuable share 2 0 123 Number of share other contingently issuable share 2 0 123 Number of share used contingently issuable share 2 0 123 Number of share used in used in per share computation 6,922 924 6,819 Diluted net income in per share computation 6,922 924 6,819 Diluted net income per per share computation 6,922 924 6,819 Diluted net income per share net income per share $ 2.93 $ 2.93 $ 2.93 77 per share $ 2.93 $ 2.93 $ 2.93 77 Table of $ 2.93 $ 2.93 $ 2.93 77 Table of Contents Alphabet 2.93 $ 2.93 $ 2.93 77 Table of Contents Alphabet Inc. Alphabet Inc. Year Ended December 31 , 2021 Class A Class Year Ended December 31 , 2021 Class A Class B Class Allocation of undistributed earnings $ 34,200 $ 5,174 $ 36,659 Denominator undistributed earnings $ 34,200 $ 5,174 $ 36,659 Denominator Number of $ 34,200 $ 5,174 $ 36,659 Denominator Number of share used used in per share computation 6,006 909 6,438 Basic net income in per share computation 6,006 909 6,438 Basic net income per per share computation 6,006 909 6,438 Basic net income per share net income per share $ 5.69 $ 5.69 $ 5.69 Diluted per share $ 5.69 $ 5.69 $ 5.69 Diluted net income $ 5.69 $ 5.69 $ 5.69 Diluted net income per share earnings for basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation basic computation $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed $ 34,200 $ 5,174 $ 36,659 Reallocation of undistributed earnings a B to Class A share 5,174 0 0 Reallocation of undistributed to Class A share 5,174 0 0 Reallocation of undistributed earnings Class A share 5,174 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 581 ) ( 77 ) 581 earnings ( 581 ) ( 77 ) 581 Allocation of undistributed 581 ) ( 77 ) 581 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 38,793 $ 5,097 $ 37,240 Denominator undistributed earnings $ 38,793 $ 5,097 $ 37,240 Denominator Number of $ 38,793 $ 5,097 $ 37,240 Denominator Number of share used share used in basic computation 6,006 909 6,438 Weighted-average effect of used in basic computation 6,006 909 6,438 Weighted-average effect of dilutive in basic computation 6,006 909 6,438 Weighted-average effect of dilutive security to Class A share outstanding 909 0 0 Restricted stock unit Class A share outstanding 909 0 0 Restricted stock unit and A share outstanding 909 0 0 Restricted stock unit and other and other contingently issuable share 0 0 200 Number of share other contingently issuable share 0 0 200 Number of share used contingently issuable share 0 0 200 Number of share used in used in per share computation 6,915 909 6,638 Diluted net income in per share computation 6,915 909 6,638 Diluted net income per per share computation 6,915 909 6,638 Diluted net income per share net income per share $ 5.61 $ 5.61 $ 5.61 Year per share $ 5.61 $ 5.61 $ 5.61 Year Ended December $ 5.61 $ 5.61 $ 5.61 Year Ended December 31 , $ 5.61 Year Ended December 31 , 2022 Class A Class Year Ended December 31 , 2022 Class A Class B Class Allocation of undistributed earnings $ 27,518 $ 4,072 $ 28,382 Denominator undistributed earnings $ 27,518 $ 4,072 $ 28,382 Denominator Number of $ 27,518 $ 4,072 $ 28,382 Denominator Number of share used used in per share computation 5,994 887 6,182 Basic net income in per share computation 5,994 887 6,182 Basic net income per per share computation 5,994 887 6,182 Basic net income per share net income per share $ 4.59 $ 4.59 $ 4.59 Diluted per share $ 4.59 $ 4.59 $ 4.59 Diluted net income $ 4.59 $ 4.59 $ 4.59 Diluted net income per share earnings for basic computation $ 27,518 $ 4,072 $ 28,382 Reallocation basic computation $ 27,518 $ 4,072 $ 28,382 Reallocation of undistributed $ 27,518 $ 4,072 $ 28,382 Reallocation of undistributed earnings a B to Class A share 4,072 0 0 Reallocation of undistributed to Class A share 4,072 0 0 Reallocation of undistributed earnings Class A share 4,072 0 0 Reallocation of undistributed earnings ( Reallocation of undistributed earnings ( 230 ) ( 30 ) 230 earnings ( 230 ) ( 30 ) 230 Allocation of undistributed 230 ) ( 30 ) 230 Allocation of undistributed earnings $ Allocation of undistributed earnings $ 31,360 $ 4,042 $ 28,612 Denominator undistributed earnings $ 31,360 $ 4,042 $ 28,612 Denominator Number of $ 31,360 $ 4,042 $ 28,612 Denominator Number of share used share used in basic computation 5,994 887 6,182 Weighted-average effect of used in basic computation 5,994 887 6,182 Weighted-average effect of dilutive in basic computation 5,994 887 6,182 Weighted-average effect of dilutive security to Class A share outstanding 887 0 0 Restricted stock unit Class A share outstanding 887 0 0 Restricted stock unit and A share outstanding 887 0 0 Restricted stock unit and other and other contingently issuable share 0 0 96 Number of share other contingently issuable share 0 0 96 Number of share used contingently issuable share 0 0 96 Number of share used in used in per share computation 6,881 887 6,278 Diluted net income in per share computation 6,881 887 6,278 Diluted net income per per share computation 6,881 887 6,278 Diluted net income per share net income per share $ 4.56 $ 4.56 $ 4.56 78 per share $ 4.56 $ 4.56 $ 4.56 78 Table of $ 4.56 $ 4.56 $ 4.56 78 Table of Contents Alphabet 4.56 $ 4.56 $ 4.56 78 Table of Contents Alphabet Inc Contents Alphabet Inc . Note 13 . Compensation Plans Stock Plans the Alphabet Amended and Restated 2021 Stock Plan ( `` Alphabet Stock Plan ( `` Alphabet 2021 Stock Plan `` ) and granted . Under the Alphabet 2021 Stock Plan , an RSU date . As of December 31 , 2022 , there were As of December 31 , 2022 , there were 706 million , 2022 , there were 706 million share of Class C future issuance under the Alphabet 2021 Stock Plan . Stock-Based Compensation For the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , total 2020 , 2021 , and 2022 , total stock-based compensation expense stock-based compensation expense wa $ 13.4 billion , $ 15.7 billion $ 13.4 billion , $ 15.7 billion , and $ 19.5 15.7 billion , and $ 19.5 billion , including amount associated in Alphabet stock of $ 12.8 billion , $ 15.0 billion $ 12.8 billion , $ 15.0 billion , and $ 18.8 15.0 billion , and $ 18.8 billion , respectively . For For the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , we 2020 , 2021 , and 2022 , we recognized tax benefit of Income , of $ 2.7 billion , $ 3.1 billion $ 2.7 billion , $ 3.1 billion , and $ 3.9 3.1 billion , and $ 3.9 billion , respectively . For For the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , tax 2020 , 2021 , and 2022 , tax benefit realized related during the period wa $ 3.6 billion , $ 5.9 billion $ 3.6 billion , $ 5.9 billion , and $ 4.7 5.9 billion , and $ 4.7 billion , respectively . These for the year ended December 31 , 2022 ( in million year ended December 31 , 2022 ( in million , except Value Unvested a of December 31 , 2021 338 $ 81.31 a of December 31 , 2021 338 $ 81.31 Granted 227 of December 31 , 2021 338 $ 81.31 Granted 227 $ 31 , 2021 338 $ 81.31 Granted 227 $ 127.22 Vested 2021 338 $ 81.31 Granted 227 $ 127.22 Vested ( 213 $ 81.31 Granted 227 $ 127.22 Vested ( 213 ) $ 227 $ 127.22 Vested ( 213 ) $ 87.53 Forfeited/canceled ( Vested ( 213 ) $ 87.53 Forfeited/canceled ( 28 ) $ ) $ 87.53 Forfeited/canceled ( 28 ) $ 97.10 Unvested a Forfeited/canceled ( 28 ) $ 97.10 Unvested a of December 31 97.10 Unvested a of December 31 , 2022 324 $ 107.98 a of December 31 , 2022 324 $ 107.98 The weighted-average of December 31 , 2022 324 $ 107.98 The weighted-average grant-date 31 , 2022 324 $ 107.98 The weighted-average grant-date fair value during the year ended December 31 , 2020 and 2021 wa year ended December 31 , 2020 and 2021 wa $ 70.40 December 31 , 2020 and 2021 wa $ 70.40 and $ 2020 and 2021 wa $ 70.40 and $ 97.46 , respectively wa $ 70.40 and $ 97.46 , respectively . Total fair during the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , were 2020 , 2021 , and 2022 , were $ 17.8 billion and 2022 , were $ 17.8 billion , $ 28.8 billion $ 17.8 billion , $ 28.8 billion , and $ 23.9 28.8 billion , and $ 23.9 billion , respectively . As respectively . As of December 31 , 2022 , there wa As of December 31 , 2022 , there wa $ 32.8 2022 , there wa $ 32.8 billion of unrecognized compensation cost over a weighted-average period of 2.6 year . Note 14 . of 2.6 year . Note 14 . Income Taxes Income from ) : Year Ended December 31 , 2020 2021 2022 Domestic Year Ended December 31 , 2020 2021 2022 Domestic operation $ Ended December 31 , 2020 2021 2022 Domestic operation $ 37,576 December 31 , 2020 2021 2022 Domestic operation $ 37,576 $ 2021 2022 Domestic operation $ 37,576 $ 77,016 $ 61,307 Foreign Domestic operation $ 37,576 $ 77,016 $ 61,307 Foreign operation 10,506 $ 37,576 $ 77,016 $ 61,307 Foreign operation 10,506 13,718 10,021 77,016 $ 61,307 Foreign operation 10,506 13,718 10,021 Total $ 48,082 $ 61,307 Foreign operation 10,506 13,718 10,021 Total $ 48,082 $ 61,307 Foreign operation 10,506 13,718 10,021 Total $ 48,082 $ 90,734 10,506 13,718 10,021 Total $ 48,082 $ 90,734 $ 71,328 79 10,021 Total $ 48,082 $ 90,734 $ 71,328 79 Table of $ 48,082 $ 90,734 $ 71,328 79 Table of Contents Alphabet 48,082 $ 90,734 $ 71,328 79 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2020 2021 2022 Current Year Ended December 31 , 2020 2021 2022 Current : Federal Ended December 31 , 2020 2021 2022 Current : Federal and December 31 , 2020 2021 2022 Current : Federal and state : Federal and state $ 4,789 $ 10,126 $ 17,120 Foreign and state $ 4,789 $ 10,126 $ 17,120 Foreign 1,687 2,692 $ 4,789 $ 10,126 $ 17,120 Foreign 1,687 2,692 2,434 Total $ 10,126 $ 17,120 Foreign 1,687 2,692 2,434 Total 6,476 12,818 10,126 $ 17,120 Foreign 1,687 2,692 2,434 Total 6,476 12,818 19,554 $ 17,120 Foreign 1,687 2,692 2,434 Total 6,476 12,818 19,554 Deferred Foreign 1,687 2,692 2,434 Total 6,476 12,818 19,554 Deferred : Federal 1,687 2,692 2,434 Total 6,476 12,818 19,554 Deferred : Federal and 2,692 2,434 Total 6,476 12,818 19,554 Deferred : Federal and state Deferred : Federal and state 1,552 2,018 ( 8,052 ) Foreign : Federal and state 1,552 2,018 ( 8,052 ) Foreign ( and state 1,552 2,018 ( 8,052 ) Foreign ( 215 ) ( 8,052 ) Foreign ( 215 ) ( 135 ) ( Foreign ( 215 ) ( 135 ) ( 146 ) Total ) ( 135 ) ( 146 ) Total 1,337 1,883 ( ) ( 146 ) Total 1,337 1,883 ( 8,198 ) Provision ( 146 ) Total 1,337 1,883 ( 8,198 ) Provision for ) Total 1,337 1,883 ( 8,198 ) Provision for income tax Provision for income tax $ 7,813 $ 14,701 $ 11,356 The income tax $ 7,813 $ 14,701 $ 11,356 The reconciliation of $ 7,813 $ 14,701 $ 11,356 The reconciliation of federal statutory follows : Year Ended December 31 , 2020 2021 2022 U.S. Year Ended December 31 , 2020 2021 2022 U.S. federal statutory Ended December 31 , 2020 2021 2022 U.S. federal statutory tax December 31 , 2020 2021 2022 U.S. federal statutory tax rate U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income rate 21.0 % 21.0 % 21.0 % Foreign income taxed at taxed at different rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible different rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible income deduction rate ( 0.3 ) 0.2 3.0 Foreign-derived intangible income deduction ( Foreign-derived intangible income deduction ( 3.0 ) ( 2.5 ) ( deduction ( 3.0 ) ( 2.5 ) ( 5.4 ) Stock-based ) ( 2.5 ) ( 5.4 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 1.7 ) ( 2.5 ) ( expense ( 1.7 ) ( 2.5 ) ( 1.2 ) Federal ) ( 2.5 ) ( 1.2 ) Federal research credit ( ) Federal research credit ( 2.3 ) ( 1.6 ) ( credit ( 2.3 ) ( 1.6 ) ( 2.2 ) Deferred ) ( 1.6 ) ( 2.2 ) Deferred tax asset valuation Deferred tax asset valuation allowance 1.4 0.6 0.9 State and local tax asset valuation allowance 1.4 0.6 0.9 State and local income asset valuation allowance 1.4 0.6 0.9 State and local income tax State and local income tax 1.1 1.0 0.8 Other 0.0 0.0 and local income tax 1.1 1.0 0.8 Other 0.0 0.0 ( local income tax 1.1 1.0 0.8 Other 0.0 0.0 ( 1.0 tax 1.1 1.0 0.8 Other 0.0 0.0 ( 1.0 ) Effective 1.1 1.0 0.8 Other 0.0 0.0 ( 1.0 ) Effective tax 0.8 Other 0.0 0.0 ( 1.0 ) Effective tax rate 16.2 1.0 ) Effective tax rate 16.2 % 16.2 % 15.9 % Effective tax rate 16.2 % 16.2 % 15.9 % In 2022 rate 16.2 % 16.2 % 15.9 % In 2022 , there 16.2 % 15.9 % In 2022 , there wa an increase R & D expense in 2022 a required by the 2017 2022 a required by the 2017 Tax Cuts and Jobs Act Cuts and Jobs Act . 80 Table of Contents Alphabet Inc ) : As of December 31 , 2021 2022 Deferred tax As of December 31 , 2021 2022 Deferred tax asset : of December 31 , 2021 2022 Deferred tax asset : Accruals reserve not currently deductible $ 1,816 $ 1,956 Tax credit 5,179 currently deductible $ 1,816 $ 1,956 Tax credit 5,179 6,002 Net 1,816 $ 1,956 Tax credit 5,179 6,002 Net operating loss 1,790 $ 1,956 Tax credit 5,179 6,002 Net operating loss 1,790 2,557 5,179 6,002 Net operating loss 1,790 2,557 Operating lease 2,503 2,711 6,002 Net operating loss 1,790 2,557 Operating lease 2,503 2,711 Capitalized loss 1,790 2,557 Operating lease 2,503 2,711 Capitalized research and development 1,790 2,557 Operating lease 2,503 2,711 Capitalized research and development ( Capitalized research and development ( 1 ) 1,843 10,381 Other 1,665 and development ( 1 ) 1,843 10,381 Other 1,665 3,244 Total development ( 1 ) 1,843 10,381 Other 1,665 3,244 Total deferred 1 ) 1,843 10,381 Other 1,665 3,244 Total deferred tax asset ) 1,843 10,381 Other 1,665 3,244 Total deferred tax asset 14,796 3,244 Total deferred tax asset 14,796 26,851 Valuation allowance ( 7,129 Total deferred tax asset 14,796 26,851 Valuation allowance ( 7,129 ) 14,796 26,851 Valuation allowance ( 7,129 ) ( 9,553 ) Total allowance ( 7,129 ) ( 9,553 ) Total deferred tax asset asset net of valuation allowance 7,667 17,298 Deferred tax liability : net of valuation allowance 7,667 17,298 Deferred tax liability : Property and equipment , net ( 5,237 ) ( 6,607 ) Net net ( 5,237 ) ( 6,607 ) Net investment gain ( ) Net investment gain ( 3,229 ) ( 2,361 ) Operating gain ( 3,229 ) ( 2,361 ) Operating lease ( 2,228 2,361 ) Operating lease ( 2,228 ) ( 2,491 ) Other lease ( 2,228 ) ( 2,491 ) Other ( 946 ) ( 2,491 ) Other ( 946 ) ( 1,092 ) Total Other ( 946 ) ( 1,092 ) Total deferred tax liability Total deferred tax liability ( 11,640 ) ( 12,551 ) Net liability ( 11,640 ) ( 12,551 ) Net deferred tax asset ( liability ) $ ( 3,973 ) $ 4,747 ( 1 $ ( 3,973 ) $ 4,747 ( 1 ) As required 3,973 ) $ 4,747 ( 1 ) As required by the ) As required by the 2017 Tax Cuts and Jobs Act Jobs Act , effective January 1 , 2022 , our research , effective January 1 , 2022 , our research and development substantially higher cash tax for 2022 with an equal amount of benefit . As of December 31 , 2022 , our federal As of December 31 , 2022 , our federal , state tax purpose were approximately $ 6.4 billion , $ 14.6 billion $ 6.4 billion , $ 14.6 billion , and $ 1.8 14.6 billion , and $ 1.8 billion respectively . If not will begin to expire in 2023 , foreign net operating loss will begin to expire in 2025 and the state net operating will begin to expire in 2028 . It is more likely jurisdiction . As of December 31 , 2022 , our Federal As of December 31 , 2022 , our Federal and California tax purpose were approximately $ 400 million and $ 5.8 billion $ 400 million and $ 5.8 billion , respectively . If will begin to expire in 2037 and the California R & realized . As of December 31 , 2022 , our investment As of December 31 , 2022 , our investment tax credit tax purpose were approximately $ 931 million and will begin to will begin to expire in 2025 . We use the flow-through realized . As of December 31 , 2022 , we maintained As of December 31 , 2022 , we maintained a valuation will be recorded accordingly . 81 Table of Contents Alphabet Inc ) : Year Ended December 31 , 2020 2021 2022 Beginning Year Ended December 31 , 2020 2021 2022 Beginning gross unrecognized Ended December 31 , 2020 2021 2022 Beginning gross unrecognized tax December 31 , 2020 2021 2022 Beginning gross unrecognized tax benefit gross unrecognized tax benefit $ 3,377 $ 3,837 $ 5,158 Increases tax benefit $ 3,377 $ 3,837 $ 5,158 Increases related to $ 3,377 $ 3,837 $ 5,158 Increases related to prior year to prior year tax position 372 529 253 Decreases related to prior year tax position 372 529 253 Decreases related to prior year tax position 372 529 253 Decreases related to prior year prior year tax position ( 557 ) ( 263 ) ( position ( 557 ) ( 263 ) ( 437 ) Decreases ) ( 263 ) ( 437 ) Decreases related to settlement settlement with tax authority ( 45 ) ( 329 ) ( authority ( 45 ) ( 329 ) ( 140 ) Increases ) ( 329 ) ( 140 ) Increases related to current to current year tax position 690 1,384 2,221 Ending gross unrecognized current year tax position 690 1,384 2,221 Ending gross unrecognized tax year tax position 690 1,384 2,221 Ending gross unrecognized tax benefit gross unrecognized tax benefit $ 3,837 $ 5,158 $ 7,055 We tax benefit $ 3,837 $ 5,158 $ 7,055 We are subject $ 3,837 $ 5,158 $ 7,055 We are subject to income unrecognized tax benefit wa $ 3.8 billion , $ 5.2 billion $ 3.8 billion , $ 5.2 billion , and $ 7.1 5.2 billion , and $ 7.1 billion a of December 31 7.1 billion a of December 31 , 2020 , 2021 , a of December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 , respectively 2020 , 2021 , and 2022 , respectively , of which respectively , of which $ 2.6 billion , $ 3.7 billion $ 2.6 billion , $ 3.7 billion , and $ 5.3 3.7 billion , and $ 5.3 billion , if recognized , respectively . As of December 31 , 2021 and 2022 , As of December 31 , 2021 and 2022 , we accrued December 31 , 2021 and 2022 , we accrued $ 270 2022 , we accrued $ 270 million and $ 346 million $ 270 million and $ 346 million in interest and penalty IRS is currently examining our 2016 through 2018 tax return . currently examining our 2016 through 2018 tax return . We have presented . The tax year 2015 through 2021 remain subject to The tax year 2015 through 2021 remain subject to examination by could decrease by approximately $ 1.8 billion in the next 12 1.8 billion in the next 12 month . Positions that may and non-U.S. matter . Note 15 . Information about Segments and on usage or headcount . 82 Table of Contents Alphabet Inc. world , beginning in January 2023 , we will update our ) : Year Ended December 31 , 2020 2021 2022 Revenues Year Ended December 31 , 2020 2021 2022 Revenues : Google Ended December 31 , 2020 2021 2022 Revenues : Google Services December 31 , 2020 2021 2022 Revenues : Google Services $ Revenues : Google Services $ 168,635 $ 237,529 $ 253,528 Google Google Services $ 168,635 $ 237,529 $ 253,528 Google Cloud 13,059 $ 168,635 $ 237,529 $ 253,528 Google Cloud 13,059 19,206 26,280 237,529 $ 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 $ 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 753 253,528 Google Cloud 13,059 19,206 26,280 Other Bets 657 753 1,068 13,059 19,206 26,280 Other Bets 657 753 1,068 Hedging gain ( 19,206 26,280 Other Bets 657 753 1,068 Hedging gain ( loss 26,280 Other Bets 657 753 1,068 Hedging gain ( loss ) Hedging gain ( loss ) 176 149 1,960 Total revenue $ gain ( loss ) 176 149 1,960 Total revenue $ 182,527 ( loss ) 176 149 1,960 Total revenue $ 182,527 $ 149 1,960 Total revenue $ 182,527 $ 257,637 $ 282,836 Operating Total revenue $ 182,527 $ 257,637 $ 282,836 Operating income ( $ 182,527 $ 257,637 $ 282,836 Operating income ( loss ) ) : Google Services $ 54,606 $ 91,855 $ 86,572 Google Google Services $ 54,606 $ 91,855 $ 86,572 Google Cloud ( $ 54,606 $ 91,855 $ 86,572 Google Cloud ( 5,607 ) $ 86,572 Google Cloud ( 5,607 ) ( 3,099 ) ( Cloud ( 5,607 ) ( 3,099 ) ( 2,968 ) Other ) ( 3,099 ) ( 2,968 ) Other Bets ( 4,476 2,968 ) Other Bets ( 4,476 ) ( 5,281 ) ( Bets ( 4,476 ) ( 5,281 ) ( 6,083 ) Corporate ) ( 5,281 ) ( 6,083 ) Corporate cost , unallocated Corporate cost , unallocated ( 3,299 ) ( 4,761 ) ( unallocated ( 3,299 ) ( 4,761 ) ( 2,679 ) Total ) ( 4,761 ) ( 2,679 ) Total income from operation Total income from operation $ 41,224 $ 78,714 $ 74,842 For from operation $ 41,224 $ 78,714 $ 74,842 For revenue by $ 41,224 $ 78,714 $ 74,842 For revenue by geography see revenue by geography see Note 2 . The following table present ) : As of December 31 , 2021 2022 Long-lived asset As of December 31 , 2021 2022 Long-lived asset : United of December 31 , 2021 2022 Long-lived asset : United States asset : United States $ 80,207 $ 93,565 International 30,351 33,484 United States $ 80,207 $ 93,565 International 30,351 33,484 Total long-lived $ 80,207 $ 93,565 International 30,351 33,484 Total long-lived asset $ 80,207 $ 93,565 International 30,351 33,484 Total long-lived asset $ 110,558 33,484 Total long-lived asset $ 110,558 $ 127,049 Note 16 . long-lived asset $ 110,558 $ 127,049 Note 16 . Subsequent Event $ 110,558 $ 127,049 Note 16 . Subsequent Event In January . Subsequent Event In January 2023 , we announced a reduction of our workforce of approximately 12,000 role . We expect to and related charge of $ 1.9 billion to $ 2.3 billion $ 1.9 billion to $ 2.3 billion , the majority of in the first quarter of 2023 . In addition , we space reduction of approximately $ 0.5 billion in the first quarter in the first quarter of 2023 . We may incur additional our real estate need . 83 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Evaluation and procedure pursuant to Rule 13a-15 under the Exchange Act , this Annual Report on Form 10-K. Based on this evaluation , that , a of December 31 , 2022 , our disclosure a of December 31 , 2022 , our disclosure control and during the quarter ended December 31 , 2022 that have materially quarter ended December 31 , 2022 that have materially affected , , a defined in Rule 13a-15 ( f ) of the of the Treadway Commission ( 2013 framework ) . Based on wa effective a of December 31 , 2022 . Management reviewed a of December 31 , 2022 . Management reviewed the result financial reporting a of December 31 , 2022 ha been audited a of December 31 , 2022 ha been audited by Ernst which is included in Item 8 of this Annual Report on this Annual Report on Form 10-K . Limitations on Effectiveness of to their cost . ITEM 9B . OTHER INFORMATION As previously information provided pursuant to Section 13 ( r ) of the in Part II , Item 5 of our Quarterly Report on our Quarterly Report on Form 10-Q for the quarter ended September for the quarter ended September 30 , 2022 is incorporated herein quarter ended September 30 , 2022 is incorporated herein by reference herein by reference . ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS PREVENT INSPECTIONS Not applicable . 84 Table of Contents Alphabet Inc. Alphabet Inc. PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS our Proxy Statement for the 2023 Annual Meeting of Stockholders to filed with the SEC within 120 day of the fiscal year the fiscal year ended December 31 , 2022 ( 2023 Proxy year ended December 31 , 2022 ( 2023 Proxy Statement ) December 31 , 2022 ( 2023 Proxy Statement ) and is delinquent filer pursuant to Item 405 of Regulation S-K will be the caption “ Delinquent Section 16 ( a ) Reports ” ) Reports ” in the 2023 Proxy Statement and is incorporated herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information Insider Participation ” in the 2023 Proxy Statement and is incorporated herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Plan Information ” in the 2023 Proxy Statement and is incorporated herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED Matters—Director Independence ” in the 2023 Proxy Statement and is incorporated herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND Accounting Firm ” in the 2023 Proxy Statement and is incorporated incorporated herein by reference . 85 Table of Contents Alphabet Inc. Alphabet Inc. PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT this Annual Report on Form 10-K : 1 . Consolidated Financial Report on Form 10-K : 1 . Consolidated Financial Statements Reports Independent Registered Public Accounting Firm 44 Financial Statements : Consolidated Balance Statements : Consolidated Balance Sheets 47 Consolidated Statements of Income 48 47 Consolidated Statements of Income 48 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 49 Consolidated Statements of Stockholders ’ Statements of Stockholders ’ Equity 50 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 52 2 . Financial Statement Schedules to Consolidated Financial Statements 52 2 . Financial Statement Schedules Schedule for the year ended December 31 , 2020 , 2021 , year ended December 31 , 2020 , 2021 , and 2022 December 31 , 2020 , 2021 , and 2022 ( in 2020 , 2021 , and 2022 ( in million ) : of Year Year ended December 31 , 2020 $ 753 $ Year ended December 31 , 2020 $ 753 $ 2,013 $ December 31 , 2020 $ 753 $ 2,013 $ ( 1,422 , 2020 $ 753 $ 2,013 $ ( 1,422 ) $ 753 $ 2,013 $ ( 1,422 ) $ 1,344 Year ended $ ( 1,422 ) $ 1,344 Year ended December 31 , $ 1,344 Year ended December 31 , 2021 $ 1,344 $ Year ended December 31 , 2021 $ 1,344 $ 2,092 $ December 31 , 2021 $ 1,344 $ 2,092 $ ( 2,047 , 2021 $ 1,344 $ 2,092 $ ( 2,047 ) $ 1,344 $ 2,092 $ ( 2,047 ) $ 1,389 Year ended $ ( 2,047 ) $ 1,389 Year ended December 31 , $ 1,389 Year ended December 31 , 2022 $ 1,389 $ Year ended December 31 , 2022 $ 1,389 $ 2,125 $ December 31 , 2022 $ 1,389 $ 2,125 $ ( 2,301 , 2022 $ 1,389 $ 2,125 $ ( 2,301 ) $ 1,389 $ 2,125 $ ( 2,301 ) $ 1,213 Note : $ ( 2,301 ) $ 1,213 Note : Additions to the information is otherwise included . 3 . Exhibits Exhibit Number Description by reference herein Form Date 2.01 Agreement and Plan of Merger of Merger , dated October 2 , 2015 , by and , dated October 2 , 2015 , by and among Google Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 3.01 Amended and 001-37580 ) October 2 , 2015 3.01 Amended and Restated Certificate ) October 2 , 2015 3.01 Amended and Restated Certificate of Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 3 , 2022 No . 001-37580 ) June 3 , 2022 3.02 Amended and 001-37580 ) June 3 , 2022 3.02 Amended and Restated Bylaws ) June 3 , 2022 3.02 Amended and Restated Bylaws of the Registrant , dated October 19 , 2022 Current Report on , dated October 19 , 2022 Current Report on Form 8-K 2022 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 25 , 2022 No . 001-37580 ) October 25 , 2022 4.01 Specimen Class 001-37580 ) October 25 , 2022 4.01 Specimen Class A Common ) October 25 , 2022 4.01 Specimen Class A Common Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.02 Specimen Class 001-37580 ) October 2 , 2015 4.02 Specimen Class C Capital ) October 2 , 2015 4.02 Specimen Class C Capital Stock certificate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.03 Alphabet Inc 001-37580 ) October 2 , 2015 4.03 Alphabet Inc . Deferred ) October 2 , 2015 4.03 Alphabet Inc . Deferred Compensation Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.04 Transfer Restriction 001-37580 ) October 2 , 2015 4.04 Transfer Restriction Agreement , ) October 2 , 2015 4.04 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.05 Transfer Restriction 001-37580 ) October 2 , 2015 4.05 Transfer Restriction Agreement , ) October 2 , 2015 4.05 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.06 Joinder Agreement 001-37580 ) October 2 , 2015 4.06 Joinder Agreement , dated ) October 2 , 2015 4.06 Joinder Agreement , dated December Joinder Agreement , dated December 31 , 2021 , among the , dated December 31 , 2021 , among the Registrant , affiliate Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 2 , 2022 No . 001-37580 ) February 2 , 2022 86 Table of 001-37580 ) February 2 , 2022 86 Table of Contents Alphabet ) February 2 , 2022 86 Table of Contents Alphabet Inc. by reference herein Form Date 4.07 Transfer Restriction Agreement , dated Restriction Agreement , dated October 2 , 2015 , between the , dated October 2 , 2015 , between the Registrant and affiliate Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.08 Class C 001-37580 ) October 2 , 2015 4.08 Class C Undertaking , ) October 2 , 2015 4.08 Class C Undertaking , dated C Undertaking , dated October 2 , 2015 , executed by , dated October 2 , 2015 , executed by the Registrant Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 4.09 Indenture , 001-37580 ) October 2 , 2015 4.09 Indenture , dated February ) October 2 , 2015 4.09 Indenture , dated February 12 4.09 Indenture , dated February 12 , 2016 , between the , dated February 12 , 2016 , between the Registrant and S-3 ( File No . 333-209510 ) February 12 , 2016 No . 333-209510 ) February 12 , 2016 4.10 Registrant Registration 333-209510 ) February 12 , 2016 4.10 Registrant Registration Rights Agreement ) February 12 , 2016 4.10 Registrant Registration Rights Agreement dated Registration Rights Agreement dated December 14 , 2015 Registration Statement on Agreement dated December 14 , 2015 Registration Statement on Form S-3 S-3 ( File No . 333-209518 ) February 12 , 2016 No . 333-209518 ) February 12 , 2016 4.11 First Supplemental 333-209518 ) February 12 , 2016 4.11 First Supplemental Indenture , ) February 12 , 2016 4.11 First Supplemental Indenture , dated Supplemental Indenture , dated April 27 , 2016 , between the , dated April 27 , 2016 , between the Registrant and trustee Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) April 27 , 2016 No . 001-37580 ) April 27 , 2016 4.12 Form of 001-37580 ) April 27 , 2016 4.12 Form of the Registrant ) April 27 , 2016 4.12 Form of the Registrant ’ of the Registrant ’ s 3.375 % Notes due 2024 ( s 3.375 % Notes due 2024 ( included in Exhibit 4.11 2024 ( included in Exhibit 4.11 ) 4.13 Form of the included in Exhibit 4.11 ) 4.13 Form of the Registrant ’ of the Registrant ’ s 1.998 % Note due 2026 Current s 1.998 % Note due 2026 Current Report on Form 8-K 2026 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 9 , 2016 No . 001-37580 ) August 9 , 2016 4.14 Form of 001-37580 ) August 9 , 2016 4.14 Form of Global Note ) August 9 , 2016 4.14 Form of Global Note representing representing the Registrant ’ s 0.450 % note due 2025 Current s 0.450 % note due 2025 Current Report on Form 8-K 2025 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.15 Form of 001-37580 ) August 5 , 2020 4.15 Form of Global Note ) August 5 , 2020 4.15 Form of Global Note representing representing the Registrant ’ s 0.800 % note due 2027 Current s 0.800 % note due 2027 Current Report on Form 8-K 2027 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.16 Form of 001-37580 ) August 5 , 2020 4.16 Form of Global Note ) August 5 , 2020 4.16 Form of Global Note representing representing the Registrant ’ s 1.100 % note due 2030 Current s 1.100 % note due 2030 Current Report on Form 8-K 2030 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.17 Form of 001-37580 ) August 5 , 2020 4.17 Form of Global Note ) August 5 , 2020 4.17 Form of Global Note representing representing the Registrant ’ s 1.900 % note due 2040 Current s 1.900 % note due 2040 Current Report on Form 8-K 2040 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.18 Form of 001-37580 ) August 5 , 2020 4.18 Form of Global Note ) August 5 , 2020 4.18 Form of Global Note representing representing the Registrant ’ s 2.050 % note due 2050 Current s 2.050 % note due 2050 Current Report on Form 8-K 2050 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.19 Form of 001-37580 ) August 5 , 2020 4.19 Form of Global Note ) August 5 , 2020 4.19 Form of Global Note representing representing the Registrant ’ s 2.250 % note due 2060 Current s 2.250 % note due 2060 Current Report on Form 8-K 2060 Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) August 5 , 2020 No . 001-37580 ) August 5 , 2020 4.20 * Description 001-37580 ) August 5 , 2020 4.20 * Description of Registrant ) August 5 , 2020 4.20 * Description of Registrant ’ of Registrant ’ s Securities 10.01 u Form of Indemnification Agreement officer Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.02 u Letter 001-37580 ) October 2 , 2015 10.02 u Letter Agreement dated ) October 2 , 2015 10.02 u Letter Agreement dated July u Letter Agreement dated July 11 , 2022 , between R. Agreement dated July 11 , 2022 , between R. Martin Chávez Inc. Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) July 14 , 2022 No . 001-37580 ) July 14 , 2022 10.03 u Compensation 001-37580 ) July 14 , 2022 10.03 u Compensation Plan Agreement ) July 14 , 2022 10.03 u Compensation Plan Agreement , Plan Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.04 u Director 001-37580 ) October 2 , 2015 10.04 u Director Arrangements Agreement ) October 2 , 2015 10.04 u Director Arrangements Agreement , Arrangements Agreement , dated October 2 , 2015 , between Google , dated October 2 , 2015 , between Google Inc. and Registrant Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.05 u Alphabet 001-37580 ) October 2 , 2015 10.05 u Alphabet Inc . ) October 2 , 2015 10.05 u Alphabet Inc . Deferred Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) October 2 , 2015 No . 001-37580 ) October 2 , 2015 10.06 u Google 001-37580 ) October 2 , 2015 10.06 u Google Inc. 2004 ) October 2 , 2015 10.06 u Google Inc. 2004 Stock 2015 10.06 u Google Inc. 2004 Stock Plan , a amended amended Current Report on Form 8-K ( File No . 000-50726 8-K ( File No . 000-50726 ) June 7 , 2011 No . 000-50726 ) June 7 , 2011 10.06.1 u Google 000-50726 ) June 7 , 2011 10.06.1 u Google Inc. 2004 ) June 7 , 2011 10.06.1 u Google Inc. 2004 Stock 2011 10.06.1 u Google Inc. 2004 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 000-50726 10-K ( File No . 000-50726 ) March 30 , 2005 No . 000-50726 ) March 30 , 2005 10.07 u Alphabet 000-50726 ) March 30 , 2005 10.07 u Alphabet Inc . ) March 30 , 2005 10.07 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan Current Report on Plan Current Report on Form 8-K ( File No . 001-37580 8-K ( File No . 001-37580 ) June 5 , 2020 No . 001-37580 ) June 5 , 2020 10.07.1 u Alphabet 001-37580 ) June 5 , 2020 10.07.1 u Alphabet Inc . ) June 5 , 2020 10.07.1 u Alphabet Inc . Amended Inc . Amended and Restated 2012 Stock Plan - Form of Agreement Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 4 , 2020 No . 001-37580 ) February 4 , 2020 87 Table of 001-37580 ) February 4 , 2020 87 Table of Contents Alphabet ) February 4 , 2020 87 Table of Contents Alphabet Inc. by reference herein Form Date 10.08 u Alphabet Inc . Amended Inc . Amended and Restated 2021 Stock Plan Current Report on Plan Current Report on Form 8-K ( file No . 001-37580 8-K ( file No . 001-37580 ) June 3 , 2022 No . 001-37580 ) June 3 , 2022 10.08.1 u Alphabet 001-37580 ) June 3 , 2022 10.08.1 u Alphabet Inc . ) June 3 , 2022 10.08.1 u Alphabet Inc . Amended Inc . Amended and Restated 2021 Stock Plan - Form of Agreement Quarterly Report on Form 10-Q ( file No . 001-37580 10-Q ( file No . 001-37580 ) July 28 , 2021 No . 001-37580 ) July 28 , 2021 10.08.2 u Alphabet 001-37580 ) July 28 , 2021 10.08.2 u Alphabet Inc . ) July 28 , 2021 10.08.2 u Alphabet Inc . Amended Inc . Amended and Restated 2021 Stock Plan - Form of Plan - Form of Alphabet 2022 Non-CEO Performance Stock Unit Agreement Agreement Annual Report on Form 10-K ( File No . 001-37580 10-K ( File No . 001-37580 ) February 4 , 2020 No . 001-37580 ) February 4 , 2020 10.08.3 u * 001-37580 ) February 4 , 2020 10.08.3 u * Alphabet Inc ) February 4 , 2020 10.08.3 u * Alphabet Inc . Inc . Amended and Restated 2021 Stock Plan - Form of Plan - Form of Alphabet 2022 CEO Performance Stock Unit Agreement CEO Performance Stock Unit Agreement 10.09 u * Alphabet Inc. Company Bonus Plan , a amended 21.01 * Subsidiaries of the Registrant * Subsidiaries of the Registrant 23.01 * Consent of Independent Registered Independent Registered Public Accounting Firm 24.01 * Power of Attorney ( this Annual Report on Form 10-K ) 31.01 * Certification of Report on Form 10-K ) 31.01 * Certification of Chief Executive pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief the Sarbanes-Oxley Act of 2002 31.02 * Certification of Chief Financial pursuant to Exchange Act Rules 13a-14 ( a ) and 15d-14 13a-14 ( a ) and 15d-14 ( a ) , a a adopted pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief the Sarbanes-Oxley Act of 2002 32.01 ‡ Certifications of Chief Executive Chief Financial Officer pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a adopted pursuant to a adopted pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 101.INS * Inline XBRL Instance the Sarbanes-Oxley Act of 2002 101.INS * Inline XBRL Instance Document within the Inline XBRL document 101.SCH * Inline XBRL Taxonomy Extension XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File document and contained in Exhibit 101 ) _________________ u Indicates management . ‡ Furnished herewith . 88 Table of Contents Alphabet Inc Contents Alphabet Inc . ITEM 16 . FORM 10-K SUMMARY None . ITEM 16 . FORM 10-K SUMMARY None . 89 Table FORM 10-K SUMMARY None . 89 Table of Contents Alphabet Inc. to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly this Annual Report on Form 10-K to be signed on it authorized . Date : February 2 , 2023 ALPHABET INC. By Date : February 2 , 2023 ALPHABET INC. By : / this Annual Report on Form 10-K and to file the same the Securities Exchange Act of 1934 , this Annual Report on this Annual Report on Form 10-K ha been signed below by on the date indicated . 90 Table of Contents Alphabet Inc. Principal Executive Officer ) February 2 , 2023 Sundar Pichai / Officer ) February 2 , 2023 Sundar Pichai / S / Principal Financial Officer ) February 2 , 2023 Ruth M. Porat Officer ) February 2 , 2023 Ruth M. Porat / S Principal Accounting Officer ) February 2 , 2023 Amie Thuener O'Toole Officer ) February 2 , 2023 Amie Thuener O'Toole / S H. A RNOLD Director February 2 , 2023 Frances H. Arnold RNOLD Director February 2 , 2023 Frances H. Arnold / S RIN Co-Founder and Director February 2 , 2023 Sergey Brin / and Director February 2 , 2023 Sergey Brin / S / ARTIN C HAVEZ Director February 2 , 2023 R. Martin Chávez HAVEZ Director February 2 , 2023 R. Martin Chávez / S OHN D OERR Director February 2 , 2023 L. John Doerr OERR Director February 2 , 2023 L. John Doerr / S J R . Director February 2 , 2023 Roger W. Ferguson . Director February 2 , 2023 Roger W. Ferguson Jr. / ENNESSY Director , Chair February 2 , 2023 John L. Hennessy , Chair February 2 , 2023 John L. Hennessy / S NN M ATHER Director February 2 , 2023 Ann Mather / ATHER Director February 2 , 2023 Ann Mather / S / AGE Co-Founder and Director February 2 , 2023 Larry Page / and Director February 2 , 2023 Larry Page / S / AM S HRIRAM Director February 2 , 2023 K. Ram Shriram HRIRAM Director February 2 , 2023 K. Ram Shriram / S L. W ASHINGTON Director February 2 , 2023 Robin L. Washington ASHINGTON Director February 2 , 2023 Robin L. Washington 91 , 2023 Robin L. 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PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the registered Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by are registered pursuant to Section 12 ( b ) of the ( a defined in Rule 12b-2 of the Act ) . No ☒ As of December 31 , 2022 , the aggregate As of December 31 , 2022 , the aggregate market value of the registrant wa $ 1.8 trillion based on the closing System . As of July 24 , 2023 , there were As of July 24 , 2023 , there were 7,429,763,722 share , 2023 , there were 7,429,763,722 share of common stock outstanding to be held on December 7 , 2023 are incorporated by held on December 7 , 2023 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2023 INDEX Page PART Year Ended June 30 , 2023 INDEX Page PART I Item INDEX Page PART I Item 1. Business 4 Information about our PART I Item 1. Business 4 Information about our Executive Officers Information about our Executive Officers 20 Item 1A . Risk Factors our Executive Officers 20 Item 1A . Risk Factors 23 Item Item 1A . Risk Factors 23 Item 1B . Unresolved Staff . Risk Factors 23 Item 1B . Unresolved Staff Comments 37 1B . Unresolved Staff Comments 37 Item 2 . Properties 37 Unresolved Staff Comments 37 Item 2 . Properties 37 Item 3 37 Item 2 . Properties 37 Item 3 . Legal Proceedings 2 . Properties 37 Item 3 . Legal Proceedings 37 Item Item 3 . Legal Proceedings 37 Item 4 . Mine Safety . Legal Proceedings 37 Item 4 . Mine Safety Disclosures 37 4 . Mine Safety Disclosures 37 PART II Item 5 . Disclosures 37 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 38 Item 6 . [ Reserved of Equity Securities 38 Item 6 . [ Reserved ] 39 6 . [ Reserved ] 39 Item 7 . Management ’ [ Reserved ] 39 Item 7 . Management ’ s Discussion Condition and Results of Operations 40 Item 7A . Quantitative and Results of Operations 40 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 57 Item 8 . Financial Statements about Market Risk 57 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 58 Item 9 . Changes in and Supplementary Data 58 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 99 Item 9A . Controls and and Financial Disclosure 99 Item 9A . Controls and Procedures 99 9A . Controls and Procedures 99 Report of Management on Internal Internal Control over Financial Reporting 99 Report of Independent Registered Public Independent Registered Public Accounting Firm 100 Item 9B . Other Information Public Accounting Firm 100 Item 9B . Other Information 101 Item Item 9B . Other Information 101 Item 9C . Disclosure Regarding . Other Information 101 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 101 PART III Item 10 . Inspections 101 PART III Item 10 . Directors , Executive Officers Officers , and Corporate Governance 101 Item 11 . Executive Compensation and Corporate Governance 101 Item 11 . Executive Compensation 101 Item Item 11 . Executive Compensation 101 Item 12 . Security Ownership . Executive Compensation 101 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 101 Item 13 . Certain Relationships Related Stockholder Matters 101 Item 13 . Certain Relationships and Related Transactions , and Director Independence 101 Item 14 . Principal Accountant and Director Independence 101 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 101 PART IV Item 15 . Services 101 PART IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 102 Item 16 . Form 10-K Financial Statement Schedules 102 Item 16 . Form 10-K Summary 108 102 Item 16 . Form 10-K Summary 108 Signatures 109 2 16 . Form 10-K Summary 108 Signatures 109 2 PART I Form 10-K Summary 108 Signatures 109 2 PART I Item 1 10-K Summary 108 Signatures 109 2 PART I Item 1 Note 109 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned event , or otherwise . 3 PART I Item 1 PART . 3 PART I Item 1 PART I ITEM 1 . Item 1 PART I ITEM 1 . B USINESS GENERAL Embracing What We Offer Founded in 1975 , we develop and support learns , and connects . 4 PART I Item 1 Our . 4 PART I Item 1 Our growth depends on securely and service , including Office 365 , Dynamics 365 , and including Office 365 , Dynamics 365 , and LinkedIn . Microsoft , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows , and Enterprise , and insight . Microsoft 365 Copilot combine next-generation AI with the Microsoft Graph and Microsoft 365 application . Together with the the Microsoft Cloud , Dynamics 365 , Microsoft Teams , and telecommunication , joined Microsoft in 2022 . Microsoft and Nuance enable worker and team together . 5 PART I Item 1 The . 5 PART I Item 1 The ability to convert data our cloud business with Windows 365 , a desktop operating system , user can run Windows 365 , just like a virtual and dynamic way . Windows 11 offer innovation focused on enhancing become more productive . Windows 11 security and privacy feature include safety feature . In February 2023 , we launched an all and mobile . In January 2022 , we announced plan to natural method of communication . 6 PART I Item 1 • . 6 PART I Item 1 • Tackling security from all with our service like Microsoft 365 Consumer , Microsoft Teams , our own business . In 2020 , we committed to being and zero waste company by 2030 . In May 2023 , by 2030 . In May 2023 , we released our Environmental our progress during fiscal year 2022 . We continued to make our overall emission declining by 0.5 percent . While our Scope percent . While our Scope 1 and Scope 2 emission continued our Scope 1 and Scope 2 emission continued to decline , continued to decline , Scope 3 emission increased by 0.5 percent Scope 3 emission increased by 0.5 percent . Scope 3 represented by 0.5 percent . Scope 3 represented 96 percent of our percent . Scope 3 represented 96 percent of our total emission of carbon-free energy to over 13.5 gigawatts . • Contracted for estimated to provide more than 15.6 million cubic meter in volumetric these project . • Diverted 12,159 metric ton of solid waste operational footprint . • Protected 12,270 acre of land in Belize Belize – more than the 11,206 acre of land that we , and reduce their Scope 1 , 2 , and 3 reduce their Scope 1 , 2 , and 3 emission . 1 , 2 , and 3 emission . These digital tool to make or exceed by 2025 . • Strengthening our community momentum by adding a $ 150 million investment to strengthen inclusion in the United States by 2025 . 7 PART I Item United States by 2025 . 7 PART I Item 1 In . 7 PART I Item 1 In fiscal year 2023 , Item 1 In fiscal year 2023 , we collaborated with partner including : • Working with 103 unique organization in 165 city with 103 unique organization in 165 city and county on our and digital literacy training across 14 geography , including 11 city across 14 geography , including 11 city and three state in partnership to help more than 2,000 local organization to modernize and ) program to reach nearly 400 high school in 21 community nearly 400 high school in 21 community to increase computer science student . We exceeded our 2020 goal to double the percentage African American-owned financial institution by 2023 . We are also increasing manager , which now represent 45 percent of our external manager goal of creating a $ 100 million program focused on mission-driven our goal to spend $ 500 million with double the number Growth Initiative by more than 250 percent , surpassing our initial Microsoft . As of June 2023 , we are 93 percent June 2023 , we are 93 percent of the way to of the way to our 2025 commitment to double the number director level ) , and 107 percent of the way for contributor ) . We are 28 percent of the way for below director level ) and 74 percent of the way for Digital Skills After helping over 80 million jobseekers around the world to help skill and recruit 250,000 people into the cybersecurity workforce into the cybersecurity workforce by 2025 , representing half of the scholarship and supplemental resource to 25,000 student . We have expanded the cyber skill initiative to 27 additional country that show elevated address this , in June 2023 we launched a new AI that further our mission . 8 PART I Item 1 As . 8 PART I Item 1 As of June 30 , Item 1 As of June 30 , 2023 , we employed As of June 30 , 2023 , we employed approximately 221,000 2023 , we employed approximately 221,000 people on a full-time basis on a full-time basis , 120,000 in the U.S. and 101,000 120,000 in the U.S. and 101,000 internationally . Of the total the total employed people , 89,000 were in operation , including , and consulting service ; 72,000 were in product research and product research and development ; 45,000 were in sale and marketing sale and marketing ; and 15,000 were in general and administration . As described in our 2022 Proxy Statement , annual performance environment , in fiscal year 2023 we announced that base salary would remain at fiscal year 2022 level . Pay increase continue for all eligible employee . 9 PART I Item 1 Since . 9 PART I Item 1 Since 2016 , we have PART I Item 1 Since 2016 , we have reported on and Inclusion report . In 2022 , we reported that all the U.S. combined earn $ 1.008 for every $ 1.000 earned $ 1.008 for every $ 1.000 earned by their white counterpart in the U.S. earn $ 1.007 for every $ 1.000 earned $ 1.007 for every $ 1.000 earned by their counterpart who outside the U.S. earn $ 1.002 for every $ 1.000 earned $ 1.002 for every $ 1.000 earned by their counterpart outside the U.S. to report on 61 additional country ( up from additional country ( up from 12 last year ) , representing last year ) , representing 99.8 % of our global Microsoft total pay for woman is 89.6 % of total pay for men in the U.S. and 86.2 % outside of the U.S. minority in the U.S. is 89.9 % of total pay for ongoing survey data show that 93 % of employee value the and work hour , and 78 % are satisfied with the discipline . We have over 27,000 people manager , all of of whom must complete between 20-33 hour of compulsory training on compliance , and culture . 10 PART I Item 1 OPERATING . 10 PART I Item 1 OPERATING SEGMENTS We operate our information is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , Microsoft Microsoft Viva , and Microsoft 365 Copilot . • Office Consumer Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of Office licensed on-premises to Office 365 . Office Consumer Office Consumer Office licensed on-premises to Microsoft 365 Consumer subscription . Office Consumer the sale of minute . 11 PART I Item 1 LinkedIn . 11 PART I Item 1 LinkedIn LinkedIn connects the world opportunity . LinkedIn ha over 950 million member and ha office the continued shift to Dynamics 365 , a unified set of Salesforce , and SAP . 12 PART I Item 1 Intelligent . 12 PART I Item 1 Intelligent Cloud Our Intelligent Cloud u from the competition . 13 PART I Item 1 Our . 13 PART I Item 1 Our server product face competition Windows to device shipped . 14 PART I Item 1 • . 14 PART I Item 1 • Customer mix between consumer a curated library of over 400 first- and third-party console and through first-party content creator . 15 PART I Item 1 Search . 15 PART I Item 1 Search and News Advertising Our to meet consumer demand . 16 PART I Item 1 RESEARCH . 16 PART I Item 1 RESEARCH AND DEVELOPMENT Product and and device , including Microsoft 365 , Windows , Microsoft Teams have a portfolio of over 70,000 U.S. and international patent issued international patent issued and over 19,000 pending worldwide . While we development of our product . 17 PART I Item 1 Investing . 17 PART I Item 1 Investing in the Future Our capability to subscribe to Office 365 . There are two broad and customer across industry . 18 PART I Item 1 Distributors . 18 PART I Item 1 Distributors and Resellers Organizations also that purchase perpetual license . 19 PART I Item 1 Open . 19 PART I Item 1 Open Value Open Value agreement executive officer a of July 27 , 2023 were a follows a of July 27 , 2023 were a follows : Name with the Company Satya Nadella 55 Chairman and Chief Executive Officer Executive Officer Judson B. Althoff 50 Executive Vice President and Chief Commercial Officer Christopher C. Capossela 53 Executive Vice President and Chief Marketing Officer Kathleen T. Hogan 57 Executive Vice President and Chief Resources Officer Amy E. Hood 51 Executive Vice President and Chief Financial Officer Bradford L. Smith 64 Vice Chair and President Christopher and President Christopher D. Young 51 Executive Vice President , Business of the Board in June 2021 and Chief Executive Officer in Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Commercial Officer in July 2021 . He served a Executive Worldwide Commercial Business from July 2017 until that time . Prior Althoff joined Microsoft in March 2013 a President of Microsoft North of Microsoft North America . 20 PART I Item 1 Mr. . 20 PART I Item 1 Mr. Capossela wa appointed Executive Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014.Since joining Microsoft in 1991 , March 2014.Since joining Microsoft in 1991 , Mr. Capossela ha held including Microsoft Office , Office 365 , SharePoint , Exchange , , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms. Hogan also serf Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Mr. Smith wa Chair and President in September 2021 . Prior to that , Chief Legal Officer since September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General since joining Microsoft in November 2020 . Prior to Microsoft , of McAfee , LLC from 2017 to 2020 , and served , LLC from 2017 to 2020 , and served a a of Intel Security Group from 2014 until 2017 , when he Security Group from 2014 until 2017 , when he led the of American Express Company . 21 PART I Item 1 AVAILABLE . 21 PART I Item 1 AVAILABLE INFORMATION Our Internet address Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 22 PART I Item 1A ITEM . 22 PART I Item 1A ITEM 1A . RIS K PART I Item 1A ITEM 1A . RIS K FACTORS Our and business model objective . 23 PART I Item 1A Business . 23 PART I Item 1A Business model competition Companies compete those of our competitor . 24 PART I Item 1A It . 24 PART I Item 1A It is uncertain whether our Windows operating system , Microsoft 365 , Bing , SQL Server Server , Azure , Office 365 , Xbox , LinkedIn , For example , in March 2021 we completed our acquisition of ZeniMax Media Inc. for $ 8.1 billion , and in March billion , and in March 2022 we completed our acquisition of Communications , Inc. for $ 18.8 billion . In January 2022 18.8 billion . In January 2022 we announced a definitive agreement Blizzard , Inc. for $ 68.7 billion . In January 2023 68.7 billion . In January 2023 we announced the third phase our consolidated financial statement . 25 PART I Item 1A If . 25 PART I Item 1A If our goodwill or amortizable regulation in jurisdiction worldwide . 26 PART I Item 1A Security . 26 PART I Item 1A Security of our product , occurred in early calendar year 2021 with several of our Exchange our product and service . 27 PART I Item 1A The . 27 PART I Item 1A The cost of measure to and consolidated financial statement . 28 PART I Item 1A Other . 28 PART I Item 1A Other digital safety abuse Our and consolidated financial statement . 29 PART I Item 1A OPERATIONAL . 29 PART I Item 1A OPERATIONAL RISKS We may have Microsoft Account service , Microsoft 365 , Microsoft Teams , Dynamics , Microsoft Teams , Dynamics 365 , OneDrive , SharePoint Online to scrutinize our business . 30 PART I Item 1A For . 30 PART I Item 1A For example , the European Whistleblower Directive , initiated in 2021 , which may present compliance , may result in ( 1 ) new and rapidly evolving and country , and ( 2 ) negative impact to regional , or criminal sanction . 31 PART I Item 1A Laws . 31 PART I Item 1A Laws and regulation relating to in the European market . 32 PART I Item 1A How . 32 PART I Item 1A How these law and regulation example , compliance with the 2017 United States Tax Cuts and our consolidated financial statement . 33 PART I Item 1A INTELLECTUAL . 33 PART I Item 1A INTELLECTUAL PROPERTY RISKS We face account receivable may increase . 34 PART I Item 1A We . 34 PART I Item 1A We maintain an investment portfolio and provide cloud-based service . 35 PART I Item 1A Our . 35 PART I Item 1A Our global business expose u relationship with worker representative . 36 PART I Item 1B , . 36 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2023 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PR OPERTIES Our corporate Washington . We have approximately 16 million square foot of space . These facility include approximately 11 million square foot of owned owned space situated on approximately 530 acre of land we own corporate headquarters , and approximately 5 million square foot of space ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) for further discussion of facility . In fiscal year 2023 , we made decision to and internationally a of June 30 , 2023 : ( Square a of June 30 , 2023 : ( Square foot in Location Owned Leased Total U.S. 27 20 47 International 9 22 Owned Leased Total U.S. 27 20 47 International 9 22 31 Leased Total U.S. 27 20 47 International 9 22 31 Total U.S. 27 20 47 International 9 22 31 Total 36 42 27 20 47 International 9 22 31 Total 36 42 78 20 47 International 9 22 31 Total 36 42 78 ITEM International 9 22 31 Total 36 42 78 ITEM 3 . 9 22 31 Total 36 42 78 ITEM 3 . LEGAL 22 31 Total 36 42 78 ITEM 3 . LEGAL PROCEEDINGS Total 36 42 78 ITEM 3 . LEGAL PROCEEDINGS Refer to LEGAL PROCEEDINGS Refer to Note 15 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFE TY DISCLOSURES TY DISCLOSURES Not applicable . 37 PART II Item 5 PAR . 37 PART II Item 5 PAR T II ITEM 5 5 PAR T II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 24 , 2023 , there were . On July 24 , 2023 , there were 83,883 registered , 2023 , there were 83,883 registered holder of record of fourth quarter of fiscal year 2023 : Period Total Number of ( In million ) April 1 , 2023 – April 30 million ) April 1 , 2023 – April 30 , 2023 1 , 2023 – April 30 , 2023 5,007,656 $ 287.97 2023 – April 30 , 2023 5,007,656 $ 287.97 5,007,656 $ – April 30 , 2023 5,007,656 $ 287.97 5,007,656 $ 25,467 30 , 2023 5,007,656 $ 287.97 5,007,656 $ 25,467 May 1 , 2023 5,007,656 $ 287.97 5,007,656 $ 25,467 May 1 , 5,007,656 $ 287.97 5,007,656 $ 25,467 May 1 , 2023 – 287.97 5,007,656 $ 25,467 May 1 , 2023 – May 31 $ 25,467 May 1 , 2023 – May 31 , 2023 1 , 2023 – May 31 , 2023 5,355,638 314.26 5,355,638 2023 – May 31 , 2023 5,355,638 314.26 5,355,638 23,784 June – May 31 , 2023 5,355,638 314.26 5,355,638 23,784 June 1 May 31 , 2023 5,355,638 314.26 5,355,638 23,784 June 1 , 31 , 2023 5,355,638 314.26 5,355,638 23,784 June 1 , 2023 , 2023 5,355,638 314.26 5,355,638 23,784 June 1 , 2023 – 5,355,638 314.26 5,355,638 23,784 June 1 , 2023 – June 30 5,355,638 23,784 June 1 , 2023 – June 30 , 2023 1 , 2023 – June 30 , 2023 4,413,960 334.15 4,413,960 2023 – June 30 , 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 – June 30 , 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 June 30 , 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All 30 , 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share , 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share repurchase 2023 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share repurchase were 4,413,960 334.15 4,413,960 22,309 14,777,254 14,777,254 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2023 : Declaration Date Record Date ( In million ) June 13 , 2023 August 17 , million ) June 13 , 2023 August 17 , 2023 September June 13 , 2023 August 17 , 2023 September 14 , , 2023 August 17 , 2023 September 14 , 2023 $ August 17 , 2023 September 14 , 2023 $ 0.68 $ , 2023 September 14 , 2023 $ 0.68 $ 5,054 We September 14 , 2023 $ 0.68 $ 5,054 We returned $ , 2023 $ 0.68 $ 5,054 We returned $ 9.7 billion $ 5,054 We returned $ 9.7 billion to shareholder in the fourth quarter of fiscal year 2023 . Refer to Note 16 2023 . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ R PART II Item 6 ITEM 6 . [ R ESERVED ] . [ R ESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2023 compared to the year ended June 30 , 2023 compared to the year ended to the year ended June 30 , 2022 . For a year ended June 30 , 2022 . For a discussion of of the year ended June 30 , 2022 compared to the year ended June 30 , 2022 compared to the year ended to the year ended June 30 , 2021 , please refer year ended June 30 , 2021 , please refer to Part to Part II , Item 7 , “ Management ’ s our Annual Report on Form 10-K for the year ended June for the year ended June 30 , 2022 . OVERVIEW Microsoft year ended June 30 , 2022 . OVERVIEW Microsoft is a . Highlights from fiscal year 2023 compared with fiscal year 2022 2023 compared with fiscal year 2022 included : • Microsoft Cloud • Microsoft Cloud revenue increased 22 % to $ 111.6 billion increased 22 % to $ 111.6 billion . • Office Commercial and cloud service revenue increased 10 % driven by Office 365 10 % driven by Office 365 Commercial growth of 13 % Office 365 Commercial growth of 13 % . • Office Consumer and cloud service revenue increased 2 % and Microsoft 365 Consumer increased 2 % and Microsoft 365 Consumer subscriber increased to 67.0 365 Consumer subscriber increased to 67.0 million . • LinkedIn revenue . • LinkedIn revenue increased 10 % . • Dynamics product and cloud service revenue increased 16 % driven by Dynamics 365 16 % driven by Dynamics 365 growth of 24 % . by Dynamics 365 growth of 24 % . • Server product and cloud service revenue increased 19 % driven by Azure and other cloud service growth of 29 % . • Windows original OEM ” ) revenue decreased 25 % . • Devices revenue . • Devices revenue decreased 24 % . • Windows Commercial and cloud service revenue increased 5 % . • Xbox content content and service revenue decreased 3 % . • Search and excluding traffic acquisition cost increased 11 % . Industry Trends Our , and competitive force . 40 PART II Item 7 Economic . 40 PART II Item 7 Economic Conditions , Challenges , international operation in fiscal year 2023 . On January 18 , year 2023 . On January 18 , 2023 , we announced . On January 18 , 2023 , we announced decision we , we recorded a $ 1.2 billion charge in the second second quarter of fiscal year 2023 ( “ Q2 charge ” employee severance expense of $ 800 million , impairment charge resulting our overall workforce by approximately 10,000 job through the third quarter third quarter of fiscal year 2023 related to the Q2 charge , which represents le than 5 % of our total employee the remainder of fiscal year 2023 , and we may make ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of in Accounting Estimate In July 2022 , we completed an assessment wa effective beginning fiscal year 2023 . Based on the carrying , net a of June 30 , 2022 , the effect a of June 30 , 2022 , the effect of this in estimate for fiscal year 2023 wa an increase in operating in operating income of $ 3.7 billion and net income of and net income of $ 3.0 billion , or $ 0.40 3.0 billion , or $ 0.40 per both basic and diluted basic and diluted share . 41 PART II Item 7 Reportable . 41 PART II Item 7 Reportable Segments We report our segment is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are first quarter of fiscal year 2023 , we made update to other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud for our Microsoft Cloud business 42 PART II Item 7 Productivity business 42 PART II Item 7 Productivity and Business Processes and and cloud service ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , Microsoft Microsoft Viva , and Microsoft 365 Copilot Office Consumer product and cloud service , including Microsoft 365 Consumer subscription , Office licensed and other Office service Office 365 Commercial seat growth The number growth The number of Office 365 Commercial seat at end of user covered by an Office 365 Commercial subscription Microsoft 365 Consumer Office 365 Commercial subscription Microsoft 365 Consumer subscriber The number of subscriber The number of Microsoft 365 Consumer subscriber at end of cloud service , including Dynamics 365 , comprising a set of network publisher and news partner 43 PART II Item 7 SUMMARY partner 43 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2023 2022 Percentage Change Revenue $ per share amount ) 2023 2022 Percentage Change Revenue $ 211,915 2022 Percentage Change Revenue $ 211,915 $ 198,270 7 % Gross Change Revenue $ 211,915 $ 198,270 7 % Gross margin 146,052 Revenue $ 211,915 $ 198,270 7 % Gross margin 146,052 135,620 198,270 7 % Gross margin 146,052 135,620 8 % Operating income 7 % Gross margin 146,052 135,620 8 % Operating income 88,523 % Gross margin 146,052 135,620 8 % Operating income 88,523 83,383 135,620 8 % Operating income 88,523 83,383 6 % Net income 8 % Operating income 88,523 83,383 6 % Net income 72,361 % Operating income 88,523 83,383 6 % Net income 72,361 72,738 83,383 6 % Net income 72,361 72,738 ( 1 ) % 6 % Net income 72,361 72,738 ( 1 ) % Diluted Net income 72,361 72,738 ( 1 ) % Diluted earnings per % Diluted earnings per share 9.68 9.65 0 % Adjusted gross Diluted earnings per share 9.68 9.65 0 % Adjusted gross margin earnings per share 9.68 9.65 0 % Adjusted gross margin ( gross margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating margin ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( non-GAAP ) 146,204 135,620 8 % Adjusted operating income ( operating income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( non-GAAP ) 89,694 83,383 8 % Adjusted net income ( net income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted income ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings ( non-GAAP ) 73,307 69,447 6 % Adjusted diluted earnings per per share ( non-GAAP ) 9.81 9.21 7 % Adjusted gross share ( non-GAAP ) 9.81 9.21 7 % Adjusted gross margin ( non-GAAP ) 9.81 9.21 7 % Adjusted gross margin , first quarter of fiscal year 2022 . Refer to Note 12 2022 . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . financial result . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Revenue increased $ 13.6 billion Year 2022 Revenue increased $ 13.6 billion or 7 % driven increased $ 13.6 billion or 7 % driven by growth in revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 3.2 billion or 5 % driven increased $ 3.2 billion or 5 % driven by growth in . Gross margin increased $ 10.4 billion or 8 % driven increased $ 10.4 billion or 8 % driven by growth in , gross margin percentage decreased 1 point driven by decline in Cloud gross margin percentage increased 2 point to 72 % . percentage increased 2 point to 72 % . Excluding the impact part by improvement in Office 365 Commercial . Operating expense increased . Operating expense increased $ 5.3 billion or 10 % driven increased $ 5.3 billion or 10 % driven by employee severance by employee severance expense , 2 point of growth from the . Operating income increased $ 5.1 billion or 6 % driven increased $ 5.1 billion or 6 % driven by growth in unfavorable foreign currency impact of 4 % , 4 % , impact of 4 % , 4 % , and 6 % , 4 % , and 6 % , respectively . Cost favorable foreign currency impact of 2 % . Current year gross resulted in decrease of $ 152 million , $ 1.2 billion $ 152 million , $ 1.2 billion , $ 946 million $ 1.2 billion , $ 946 million , and $ 0.13 946 million , and $ 0.13 , respectively . Prior year and diluted EPS of $ 3.3 billion and $ 0.44 , $ 3.3 billion and $ 0.44 , respectively . 44 PART $ 0.44 , respectively . 44 PART II Item 7 SEGMENT . 44 PART II Item 7 SEGMENT RESULTS OF OPERATIONS ( million , except percentage ) 2023 2022 Percentage Change Revenue Productivity , except percentage ) 2023 2022 Percentage Change Revenue Productivity and Productivity and Business Processes $ 69,274 $ 63,364 9 % Intelligent Business Processes $ 69,274 $ 63,364 9 % Intelligent Cloud 87,907 Processes $ 69,274 $ 63,364 9 % Intelligent Cloud 87,907 74,965 63,364 9 % Intelligent Cloud 87,907 74,965 17 % More Personal 9 % Intelligent Cloud 87,907 74,965 17 % More Personal Computing % Intelligent Cloud 87,907 74,965 17 % More Personal Computing 54,734 17 % More Personal Computing 54,734 59,941 ( 9 ) % % More Personal Computing 54,734 59,941 ( 9 ) % Total Personal Computing 54,734 59,941 ( 9 ) % Total $ 211,915 9 ) % Total $ 211,915 $ 198,270 7 % Operating % Total $ 211,915 $ 198,270 7 % Operating Income Productivity Total $ 211,915 $ 198,270 7 % Operating Income Productivity and Productivity and Business Processes $ 34,189 $ 29,690 15 % Intelligent Business Processes $ 34,189 $ 29,690 15 % Intelligent Cloud 37,884 Processes $ 34,189 $ 29,690 15 % Intelligent Cloud 37,884 33,203 29,690 15 % Intelligent Cloud 37,884 33,203 14 % More Personal 15 % Intelligent Cloud 37,884 33,203 14 % More Personal Computing % Intelligent Cloud 37,884 33,203 14 % More Personal Computing 16,450 14 % More Personal Computing 16,450 20,490 ( 20 ) % % More Personal Computing 16,450 20,490 ( 20 ) % Total Personal Computing 16,450 20,490 ( 20 ) % Total $ 88,523 20 ) % Total $ 88,523 $ 83,383 6 % Reportable % Total $ 88,523 $ 83,383 6 % Reportable Segments Fiscal Total $ 88,523 $ 83,383 6 % Reportable Segments Fiscal Year % Reportable Segments Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Productivity and Business Processes Revenue Business Processes Revenue increased $ 5.9 billion or 9 % . increased $ 5.9 billion or 9 % . • Office Commercial cloud service revenue increased $ 3.7 billion or 10 % . increased $ 3.7 billion or 10 % . Office 365 Commercial or 10 % . Office 365 Commercial revenue grew 13 % Office 365 Commercial revenue grew 13 % with seat growth of % with seat growth of 11 % , driven by small Office Commercial product revenue declined 21 % driven by continued customer cloud service revenue increased $ 140 million or 2 % . increased $ 140 million or 2 % . Microsoft 365 Consumer or 2 % . Microsoft 365 Consumer subscriber grew 12 % Microsoft 365 Consumer subscriber grew 12 % to 67.0 million . subscriber grew 12 % to 67.0 million . • LinkedIn revenue • LinkedIn revenue increased $ 1.3 billion or 10 % driven increased $ 1.3 billion or 10 % driven by Talent Solutions cloud service revenue increased $ 750 million or 16 % driven increased $ 750 million or 16 % driven by Dynamics 365 16 % driven by Dynamics 365 growth of 24 % . by Dynamics 365 growth of 24 % . Operating income increased . Operating income increased $ 4.5 billion or 15 % . increased $ 4.5 billion or 15 % . • Gross margin • Gross margin increased $ 5.8 billion or 12 % driven increased $ 5.8 billion or 12 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn , a driven by improvement in Office 365 Commercial , offset in part • Operating expense increased $ 1.3 billion or 7 % driven increased $ 1.3 billion or 7 % driven by investment in unfavorable foreign currency impact of 5 % , 5 % , impact of 5 % , 5 % , and 8 % , 5 % , and 8 % , respectively . Intelligent Intelligent Cloud Revenue increased $ 12.9 billion or 17 % . increased $ 12.9 billion or 17 % . • Server product cloud service revenue increased $ 12.6 billion or 19 % driven increased $ 12.6 billion or 19 % driven by Azure and other cloud service revenue grew 29 % driven by growth in . Server product revenue decreased 1 % . • Enterprise Services Enterprise Services revenue increased $ 315 million or 4 % driven increased $ 315 million or 4 % driven by growth in Microsoft Consulting Services ) . 45 PART II Item 7 Operating . 45 PART II Item 7 Operating income increased $ 4.7 7 Operating income increased $ 4.7 billion or 14 % . increased $ 4.7 billion or 14 % . • Gross margin • Gross margin increased $ 8.9 billion or 17 % driven increased $ 8.9 billion or 17 % driven by growth in , gross margin percentage decreased 3 point driven by sale mix • Operating expense increased $ 4.2 billion or 21 % driven increased $ 4.2 billion or 21 % driven by investment in by investment in Azure , 4 point of growth from the unfavorable foreign currency impact of 4 % , 4 % , impact of 4 % , 4 % , and 6 % , 4 % , and 6 % , respectively . Operating favorable foreign currency impact of 2 % . More Personal Computing Personal Computing Revenue decreased $ 5.2 billion or 9 % . decreased $ 5.2 billion or 9 % . • Windows revenue • Windows revenue decreased $ 3.2 billion or 13 % driven decreased $ 3.2 billion or 13 % driven by a decrease . Windows OEM revenue decreased 25 % a elevated channel inventory and cloud service revenue increased 5 % driven by demand for driven by demand for Microsoft 365 . • Devices revenue decreased • Devices revenue decreased $ 1.8 billion or 24 % a decreased $ 1.8 billion or 24 % a elevated channel inventory • Gaming revenue decreased $ 764 million or 5 % driven decreased $ 764 million or 5 % driven by decline in . Xbox hardware revenue decreased 11 % driven by lower volume content and service revenue decreased 3 % driven by a decline news advertising revenue increased $ 617 million or 5 % . increased $ 617 million or 5 % . Search and news excluding traffic acquisition cost increased 11 % driven by higher search . Operating income decreased $ 4.0 billion or 20 % . decreased $ 4.0 billion or 20 % . • Gross margin • Gross margin decreased $ 4.2 billion or 13 % driven decreased $ 4.2 billion or 13 % driven by decline in • Operating expense decreased $ 195 million or 2 % driven decreased $ 195 million or 2 % driven by a decline and news advertising , including 2 point of growth from the unfavorable foreign currency impact of 3 % , 4 % , impact of 3 % , 4 % , and 6 % , 4 % , and 6 % , respectively . Operating favorable foreign currency impact of 2 % . 46 PART II impact of 2 % . 46 PART II Item 7 OPERATING . 46 PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2023 2022 Percentage Change Research and , except percentage ) 2023 2022 Percentage Change Research and development Change Research and development $ 27,195 $ 24,512 11 % As and development $ 27,195 $ 24,512 11 % As a percent development $ 27,195 $ 24,512 11 % As a percent of As a percent of revenue 13 % 12 % 1ppt Research percent of revenue 13 % 12 % 1ppt Research and development revenue 13 % 12 % 1ppt Research and development expense include service content . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Research and development expense increased and development expense increased $ 2.7 billion or 11 % driven increased $ 2.7 billion or 11 % driven by investment in million , except percentage ) 2023 2022 Percentage Change Sales and , except percentage ) 2023 2022 Percentage Change Sales and marketing Change Sales and marketing $ 22,759 $ 21,825 4 % As and marketing $ 22,759 $ 21,825 4 % As a percent marketing $ 22,759 $ 21,825 4 % As a percent of As a percent of revenue 11 % 11 % 0ppt Sales percent of revenue 11 % 11 % 0ppt Sales and marketing revenue 11 % 11 % 0ppt Sales and marketing expense include other program . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Sales and marketing expense increased and marketing expense increased $ 934 million or 4 % driven increased $ 934 million or 4 % driven by 3 point or 4 % driven by 3 point of growth from the favorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2023 2022 Percentage Change General and , except percentage ) 2023 2022 Percentage Change General and administrative Change General and administrative $ 7,575 $ 5,900 28 % As and administrative $ 7,575 $ 5,900 28 % As a percent administrative $ 7,575 $ 5,900 28 % As a percent of As a percent of revenue 4 % 3 % 1ppt General percent of revenue 4 % 3 % 1ppt General and administrative revenue 4 % 3 % 1ppt General and administrative expense include administrative fee . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 General and administrative expense increased and administrative expense increased $ 1.7 billion or 28 % driven increased $ 1.7 billion or 28 % driven by employee severance favorable foreign currency impact of 2 % . 47 PART II impact of 2 % . 47 PART II Item 7 OTHER . 47 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2023 2022 Interest and Year Ended June 30 , 2023 2022 Interest and dividend income Ended June 30 , 2023 2022 Interest and dividend income $ Interest and dividend income $ 2,994 $ 2,094 Interest expense ( dividend income $ 2,994 $ 2,094 Interest expense ( 1,968 ) $ 2,094 Interest expense ( 1,968 ) ( 2,063 ) Net expense ( 1,968 ) ( 2,063 ) Net recognized gain on Net recognized gain on investment 260 461 Net loss on derivative recognized gain on investment 260 461 Net loss on derivative ( Net loss on derivative ( 456 ) ( 52 ) Net derivative ( 456 ) ( 52 ) Net gain ( loss ) on foreign currency remeasurements 181 ( 75 ) Other , foreign currency remeasurements 181 ( 75 ) Other , net ( ) Other , net ( 223 ) ( 32 ) Total net ( 223 ) ( 32 ) Total $ 788 $ ( 32 ) Total $ 788 $ 333 We use derivative ) Total $ 788 $ 333 We use derivative instrument to , net . Fiscal Year 2023 Compared with Fiscal Year 2022 2023 Compared with Fiscal Year 2022 Interest and dividend income increased tax rate for fiscal year 2023 and 2022 wa 19 % for fiscal year 2023 and 2022 wa 19 % and 13 year 2023 and 2022 wa 19 % and 13 % , 2022 wa 19 % and 13 % , respectively . The primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of service . In fiscal year 2023 , our U.S. income before before income tax wa $ 52.9 billion and our foreign income before income tax wa $ 36.4 billion . In fiscal year billion . In fiscal year 2022 , our U.S. income before before income tax wa $ 47.8 billion and our foreign income before income tax wa $ 35.9 billion . Uncertain Tax Positions ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . 48 PART for tax year 2004 to 2017 . 48 PART II Item year 2004 to 2017 . 48 PART II Item 7 As . 48 PART II Item 7 As of June 30 , Item 7 As of June 30 , 2023 , the primary As of June 30 , 2023 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2022 , some of for tax year 1996 to 2022 , some of which are first quarter of fiscal year 2022 . We believe these non-GAAP and per share amount ) 2023 2022 Percentage Change Gross margin per share amount ) 2023 2022 Percentage Change Gross margin $ Percentage Change Gross margin $ 146,052 $ 135,620 8 % Severance Gross margin $ 146,052 $ 135,620 8 % Severance , hardware-related margin $ 146,052 $ 135,620 8 % Severance , hardware-related impairment , and lease consolidation cost 152 0 * Adjusted gross margin and lease consolidation cost 152 0 * Adjusted gross margin ( margin ( non-GAAP ) $ 146,204 $ 135,620 8 % Operating non-GAAP ) $ 146,204 $ 135,620 8 % Operating income $ ) $ 146,204 $ 135,620 8 % Operating income $ 88,523 8 % Operating income $ 88,523 $ 83,383 6 % Severance Operating income $ 88,523 $ 83,383 6 % Severance , hardware-related income $ 88,523 $ 83,383 6 % Severance , hardware-related impairment , and lease consolidation cost 1,171 0 * Adjusted operating income and lease consolidation cost 1,171 0 * Adjusted operating income ( income ( non-GAAP ) $ 89,694 $ 83,383 8 % Net non-GAAP ) $ 89,694 $ 83,383 8 % Net income $ ) $ 89,694 $ 83,383 8 % Net income $ 72,361 8 % Net income $ 72,361 $ 72,738 ( 1 ) Net income $ 72,361 $ 72,738 ( 1 ) % Severance $ 72,361 $ 72,738 ( 1 ) % Severance , hardware-related , and lease consolidation cost 946 0 * Net income tax and lease consolidation cost 946 0 * Net income tax benefit to transfer of intangible property 0 ( 3,291 ) * Adjusted of intangible property 0 ( 3,291 ) * Adjusted net income income ( non-GAAP ) $ 73,307 $ 69,447 6 % Diluted non-GAAP ) $ 73,307 $ 69,447 6 % Diluted earnings per ) $ 73,307 $ 69,447 6 % Diluted earnings per share Diluted earnings per share $ 9.68 $ 9.65 0 % Severance per share $ 9.68 $ 9.65 0 % Severance , hardware-related share $ 9.68 $ 9.65 0 % Severance , hardware-related impairment , and lease consolidation cost 0.13 0 * Net income tax and lease consolidation cost 0.13 0 * Net income tax benefit to transfer of intangible property 0 ( 0.44 ) * Adjusted of intangible property 0 ( 0.44 ) * Adjusted diluted earnings share ( non-GAAP ) $ 9.81 $ 9.21 7 % * non-GAAP ) $ 9.81 $ 9.21 7 % * Not meaningful ) $ 9.81 $ 9.21 7 % * Not meaningful . % * Not meaningful . 49 PART II Item 7 LIQUIDITY . 49 PART II Item 7 LIQUIDITY AND CAPITAL RESOURCES We for at least the next 12 month and thereafter for the and short-term investment totaled $ 111.3 billion and $ 104.8 billion $ 111.3 billion and $ 104.8 billion a of June 30 104.8 billion a of June 30 , 2023 and 2022 , a of June 30 , 2023 and 2022 , respectively . June 30 , 2023 and 2022 , respectively . Equity investment . Equity investment were $ 9.9 billion and $ 6.9 billion $ 9.9 billion and $ 6.9 billion a of June 30 6.9 billion a of June 30 , 2023 and 2022 , a of June 30 , 2023 and 2022 , respectively . June 30 , 2023 and 2022 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price Cash from operation decreased $ 1.5 billion to $ 87.6 billion $ 1.5 billion to $ 87.6 billion for fiscal year 2023 87.6 billion for fiscal year 2023 , mainly due to an used in financing decreased $ 14.9 billion to $ 43.9 billion $ 14.9 billion to $ 43.9 billion for fiscal year 2023 43.9 billion for fiscal year 2023 , mainly due to a mainly due to a $ 10.5 billion decrease in common stock stock repurchase and a $ 6.3 billion decrease in repayment of in part by a $ 1.7 billion increase in dividend paid used in investing decreased $ 7.6 billion to $ 22.7 billion $ 7.6 billion to $ 22.7 billion for fiscal year 2023 22.7 billion for fiscal year 2023 , due to a $ , due to a $ 20.4 billion decrease in cash used in part by a $ 8.2 billion decrease in cash from maturity , and a $ 4.2 billion increase in addition to to property and equipment . 50 PART II Item 7 Debt . 50 PART II Item 7 Debt Proceeds We issue debt debt . Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) ) Three Months Ending September 30 , 2023 $ 19,673 December Months Ending September 30 , 2023 $ 19,673 December 31 , September 30 , 2023 $ 19,673 December 31 , 2023 15,600 , 2023 $ 19,673 December 31 , 2023 15,600 March 31 $ 19,673 December 31 , 2023 15,600 March 31 , 2024 19,673 December 31 , 2023 15,600 March 31 , 2024 10,801 31 , 2023 15,600 March 31 , 2024 10,801 June 30 2023 15,600 March 31 , 2024 10,801 June 30 , 2024 15,600 March 31 , 2024 10,801 June 30 , 2024 4,827 31 , 2024 10,801 June 30 , 2024 4,827 Thereafter 2,912 2024 10,801 June 30 , 2024 4,827 Thereafter 2,912 Total $ 10,801 June 30 , 2024 4,827 Thereafter 2,912 Total $ 53,813 30 , 2024 4,827 Thereafter 2,912 Total $ 53,813 If our 4,827 Thereafter 2,912 Total $ 53,813 If our customer choose to applicable . Refer to Note 13 – Unearned Revenue of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) : ( In million ) 2024 Thereafter Total Long-term debt : a ) Principal payment $ 5,250 $ 47,616 $ 52,866 Interest Principal payment $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 $ 5,250 $ 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 47,616 $ 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( $ 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( b 52,866 Interest payment 1,379 19,746 21,125 Construction commitment ( b ) Construction commitment ( b ) 12,237 1,218 13,455 Operating and finance commitment ( b ) 12,237 1,218 13,455 Operating and finance lease ( b ) 12,237 1,218 13,455 Operating and finance lease , imputed interest ( c ) 5,988 73,852 79,840 Purchase commitment ( interest ( c ) 5,988 73,852 79,840 Purchase commitment ( d ( c ) 5,988 73,852 79,840 Purchase commitment ( d ) Purchase commitment ( d ) 64,703 3,115 67,818 Total $ 89,557 commitment ( d ) 64,703 3,115 67,818 Total $ 89,557 $ ( d ) 64,703 3,115 67,818 Total $ 89,557 $ 145,547 64,703 3,115 67,818 Total $ 89,557 $ 145,547 $ 235,104 ( 67,818 Total $ 89,557 $ 145,547 $ 235,104 ( a ) $ 89,557 $ 145,547 $ 235,104 ( a ) Refer to a ) Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) a construction commitment above . 51 PART II Item 7 Income . 51 PART II Item 7 Income Taxes As a result over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . paid transition tax of $ 7.7 billion , which included $ billion , which included $ 1.5 billion for fiscal year 2023 1.5 billion for fiscal year 2023 . The remaining transition tax remaining transition tax of $ 10.5 billion is payable over the three year , with $ 2.7 billion payable within 12 month $ 2.7 billion payable within 12 month . In fiscal year month . In fiscal year 2023 , we paid cash tax paid cash tax of $ 4.8 billion due to the mandatory TCJA and effective on July 1 , 2022 . Share Repurchases effective on July 1 , 2022 . Share Repurchases During fiscal Share Repurchases During fiscal year 2023 and 2022 , we repurchased During fiscal year 2023 and 2022 , we repurchased 69 million and 2022 , we repurchased 69 million share and 95 million repurchased 69 million share and 95 million share of our common our common stock for $ 18.4 billion and $ 28.0 billion $ 18.4 billion and $ 28.0 billion , respectively , through resource . As of June 30 , 2023 , $ 22.3 As of June 30 , 2023 , $ 22.3 billion remained 30 , 2023 , $ 22.3 billion remained of our $ billion remained of our $ 60 billion share repurchase program . program . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2023 and 2022 , our Board During fiscal year 2023 and 2022 , our Board of Directors declared quarterly dividend of $ 0.68 per share and $ 0.62 0.68 per share and $ 0.62 per share , totaling $ per share , totaling $ 20.2 billion and $ 18.6 billion $ 20.2 billion and $ 18.6 billion , respectively . We Directors . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . Uses of Capital On January 18 , 2022 , we entered Capital On January 18 , 2022 , we entered into a Blizzard ” ) for $ 95.00 per share in an all-cash all-cash transaction valued at $ 68.7 billion , inclusive of Activision the merger agreement through October 18 , 2023 to allow for agreement through October 18 , 2023 to allow for additional time tax , and inventory . 52 PART II Item 7 Revenue . 52 PART II Item 7 Revenue Recognition Our contract with cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the expense ) , net . 53 PART II Item 7 Goodwill . 53 PART II Item 7 Goodwill We allocate goodwill to an annual basis ( May 1 ) and between annual test our consolidated financial statement . 54 PART II Item 7 Income . 54 PART II Item 7 Income Taxes The objective of that ha a greater than 50 % likelihood of being realized to cost of revenue . 55 PART II Item 7 STATEMENT . 55 PART II Item 7 STATEMENT OF MANAGEMENT ’ S President and Chief Accounting Officer 56 PART II Item 7A ITEM Officer 56 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2023 Impact Foreign currency Hypothetical Change June 30 , 2023 Impact Foreign currency – Revenue Impact Foreign currency – Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 8,122 ) Earnings Foreign currency – Earnings Foreign currency – Investments 10 % decrease in foreign exchange in foreign exchange rate ( 29 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 1,832 ) Fair Value Credit 100 1,832 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 354 ) Fair Value Equity 10 354 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 705 ) Earnings 57 PART II price ( 705 ) Earnings 57 PART II Item 8 ITEM Earnings 57 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2023 2022 2021 Revenue Year Ended June 30 , 2023 2022 2021 Revenue : Product Ended June 30 , 2023 2022 2021 Revenue : Product $ June 30 , 2023 2022 2021 Revenue : Product $ 64,699 2021 Revenue : Product $ 64,699 $ 72,732 $ 71,074 Service : Product $ 64,699 $ 72,732 $ 71,074 Service and other $ 64,699 $ 72,732 $ 71,074 Service and other 147,216 125,538 $ 71,074 Service and other 147,216 125,538 97,014 Total revenue 211,915 71,074 Service and other 147,216 125,538 97,014 Total revenue 211,915 198,270 Service and other 147,216 125,538 97,014 Total revenue 211,915 198,270 168,088 147,216 125,538 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue 125,538 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue : 97,014 Total revenue 211,915 198,270 168,088 Cost of revenue : Product Cost of revenue : Product 17,804 19,064 18,219 Service and other of revenue : Product 17,804 19,064 18,219 Service and other 48,059 revenue : Product 17,804 19,064 18,219 Service and other 48,059 43,586 19,064 18,219 Service and other 48,059 43,586 34,013 Total cost of 18,219 Service and other 48,059 43,586 34,013 Total cost of revenue Service and other 48,059 43,586 34,013 Total cost of revenue 65,863 34,013 Total cost of revenue 65,863 62,650 52,232 Gross margin 146,052 Total cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 cost of revenue 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 65,863 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 62,650 52,232 Gross margin 146,052 135,620 115,856 Research and development 27,195 52,232 Gross margin 146,052 135,620 115,856 Research and development 27,195 24,512 135,620 115,856 Research and development 27,195 24,512 20,716 Sales and marketing 115,856 Research and development 27,195 24,512 20,716 Sales and marketing 22,759 Research and development 27,195 24,512 20,716 Sales and marketing 22,759 21,825 24,512 20,716 Sales and marketing 22,759 21,825 20,117 General and administrative 20,716 Sales and marketing 22,759 21,825 20,117 General and administrative 7,575 Sales and marketing 22,759 21,825 20,117 General and administrative 7,575 5,900 21,825 20,117 General and administrative 7,575 5,900 5,107 Operating income 88,523 20,117 General and administrative 7,575 5,900 5,107 Operating income 88,523 83,383 General and administrative 7,575 5,900 5,107 Operating income 88,523 83,383 69,916 7,575 5,900 5,107 Operating income 88,523 83,383 69,916 Other income , 5,900 5,107 Operating income 88,523 83,383 69,916 Other income , net 5,107 Operating income 88,523 83,383 69,916 Other income , net 788 69,916 Other income , net 788 333 1,186 Income before income Other income , net 788 333 1,186 Income before income tax income , net 788 333 1,186 Income before income tax 89,311 1,186 Income before income tax 89,311 83,716 71,102 Provision for income Income before income tax 89,311 83,716 71,102 Provision for income tax before income tax 89,311 83,716 71,102 Provision for income tax 16,950 71,102 Provision for income tax 16,950 10,978 9,831 Net income $ Provision for income tax 16,950 10,978 9,831 Net income $ 72,361 for income tax 16,950 10,978 9,831 Net income $ 72,361 $ 10,978 9,831 Net income $ 72,361 $ 72,738 $ 61,271 Earnings Net income $ 72,361 $ 72,738 $ 61,271 Earnings per share $ 72,361 $ 72,738 $ 61,271 Earnings per share : Basic per share : Basic $ 9.72 $ 9.70 $ 8.12 Diluted : Basic $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.72 $ 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 9.70 $ 8.12 Diluted $ 9.68 $ 9.65 $ 8.05 Weighted 8.12 Diluted $ 9.68 $ 9.65 $ 8.05 Weighted average share $ 9.68 $ 9.65 $ 8.05 Weighted average share outstanding : average share outstanding : Basic 7,446 7,496 7,547 Diluted 7,472 7,540 share outstanding : Basic 7,446 7,496 7,547 Diluted 7,472 7,540 7,608 outstanding : Basic 7,446 7,496 7,547 Diluted 7,472 7,540 7,608 Refer Basic 7,446 7,496 7,547 Diluted 7,472 7,540 7,608 Refer to accompanying 7,446 7,496 7,547 Diluted 7,472 7,540 7,608 Refer to accompanying note 7,496 7,547 Diluted 7,472 7,540 7,608 Refer to accompanying note . Refer to accompanying note . 58 PART II Item 8 COMPREHENSIVE . 58 PART II Item 8 COMPREHENSIVE IN COME STATEMENTS ( million ) Year Ended June 30 , 2023 2022 2021 Net Year Ended June 30 , 2023 2022 2021 Net income $ Ended June 30 , 2023 2022 2021 Net income $ 72,361 June 30 , 2023 2022 2021 Net income $ 72,361 $ 2022 2021 Net income $ 72,361 $ 72,738 $ 61,271 Other Net income $ 72,361 $ 72,738 $ 61,271 Other comprehensive income $ 72,361 $ 72,738 $ 61,271 Other comprehensive income ( loss change related to derivative ( 14 ) 6 19 Net change to derivative ( 14 ) 6 19 Net change related to derivative ( 14 ) 6 19 Net change related to investment change related to investment ( 1,444 ) ( 5,360 ) ( investment ( 1,444 ) ( 5,360 ) ( 2,266 ) Translation ) ( 5,360 ) ( 2,266 ) Translation adjustment and other Translation adjustment and other ( 207 ) ( 1,146 ) 873 other ( 207 ) ( 1,146 ) 873 Other comprehensive loss 207 ) ( 1,146 ) 873 Other comprehensive loss ( 1,665 873 Other comprehensive loss ( 1,665 ) ( 6,500 ) ( loss ( 1,665 ) ( 6,500 ) ( 1,374 ) Comprehensive ) ( 6,500 ) ( 1,374 ) Comprehensive income $ 70,696 1,374 ) Comprehensive income $ 70,696 $ 66,238 $ 59,897 Refer Comprehensive income $ 70,696 $ 66,238 $ 59,897 Refer to accompanying $ 70,696 $ 66,238 $ 59,897 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 BALANCE . 59 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2023 2022 Assets Current million ) June 30 , 2023 2022 Assets Current asset : ) June 30 , 2023 2022 Assets Current asset : Cash Cash and cash equivalent $ 34,704 $ 13,931 Short-term investment 76,558 cash equivalent $ 34,704 $ 13,931 Short-term investment 76,558 90,826 Total 34,704 $ 13,931 Short-term investment 76,558 90,826 Total cash , cash $ 13,931 Short-term investment 76,558 90,826 Total cash , cash equivalent equivalent , and short-term investment 111,262 104,757 Accounts receivable , net , and short-term investment 111,262 104,757 Accounts receivable , net of for doubtful account of $ 650 and $ 633 48,688 44,261 of $ 650 and $ 633 48,688 44,261 Inventories 2,500 3,742 $ 650 and $ 633 48,688 44,261 Inventories 2,500 3,742 Other 650 and $ 633 48,688 44,261 Inventories 2,500 3,742 Other current $ 633 48,688 44,261 Inventories 2,500 3,742 Other current asset 21,807 633 48,688 44,261 Inventories 2,500 3,742 Other current asset 21,807 16,924 2,500 3,742 Other current asset 21,807 16,924 Total current asset 184,257 3,742 Other current asset 21,807 16,924 Total current asset 184,257 169,684 21,807 16,924 Total current asset 184,257 169,684 Property and equipment , 16,924 Total current asset 184,257 169,684 Property and equipment , net of accumulated depreciation of $ 68,251 and $ 59,660 95,641 74,398 of $ 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use $ 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use asset 68,251 and $ 59,660 95,641 74,398 Operating lease right-of-use asset 14,346 74,398 Operating lease right-of-use asset 14,346 13,148 Equity investment 9,879 6,891 Operating lease right-of-use asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill asset 14,346 13,148 Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible 14,346 13,148 Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset Equity investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset , net investment 9,879 6,891 Goodwill 67,886 67,524 Intangible asset , net 9,366 67,524 Intangible asset , net 9,366 11,298 Other long-term asset 30,601 Intangible asset , net 9,366 11,298 Other long-term asset 30,601 21,897 9,366 11,298 Other long-term asset 30,601 21,897 Total asset $ 411,976 11,298 Other long-term asset 30,601 21,897 Total asset $ 411,976 $ 30,601 21,897 Total asset $ 411,976 $ 364,840 Liabilities and stockholder Total asset $ 411,976 $ 364,840 Liabilities and stockholder ’ equity liability : Accounts payable $ 18,095 $ 19,000 Current portion of Accounts payable $ 18,095 $ 19,000 Current portion of long-term debt Current portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 portion of long-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term debt 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 5,247 2,749 Accrued compensation 11,009 10,661 Short-term income tax 4,152 4,067 11,009 10,661 Short-term income tax 4,152 4,067 Short-term unearned revenue 50,901 10,661 Short-term income tax 4,152 4,067 Short-term unearned revenue 50,901 45,538 4,152 4,067 Short-term unearned revenue 50,901 45,538 Other current liability 14,745 4,067 Short-term unearned revenue 50,901 45,538 Other current liability 14,745 13,067 50,901 45,538 Other current liability 14,745 13,067 Total current liability 104,149 45,538 Other current liability 14,745 13,067 Total current liability 104,149 95,082 14,745 13,067 Total current liability 104,149 95,082 Long-term debt 41,990 47,032 13,067 Total current liability 104,149 95,082 Long-term debt 41,990 47,032 Long-term liability 104,149 95,082 Long-term debt 41,990 47,032 Long-term income tax 25,560 104,149 95,082 Long-term debt 41,990 47,032 Long-term income tax 25,560 26,069 41,990 47,032 Long-term income tax 25,560 26,069 Long-term unearned revenue 2,912 47,032 Long-term income tax 25,560 26,069 Long-term unearned revenue 2,912 2,870 25,560 26,069 Long-term unearned revenue 2,912 2,870 Deferred income tax 433 26,069 Long-term unearned revenue 2,912 2,870 Deferred income tax 433 230 2,912 2,870 Deferred income tax 433 230 Operating lease liability 12,728 2,870 Deferred income tax 433 230 Operating lease liability 12,728 11,489 433 230 Operating lease liability 12,728 11,489 Other long-term liability 17,981 230 Operating lease liability 12,728 11,489 Other long-term liability 17,981 15,526 12,728 11,489 Other long-term liability 17,981 15,526 Total liability 205,753 198,298 11,489 Other long-term liability 17,981 15,526 Total liability 205,753 198,298 Commitments liability 17,981 15,526 Total liability 205,753 198,298 Commitments and contingency Stockholders 17,981 15,526 Total liability 205,753 198,298 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,432 and 7,464 share authorized 24,000 ; outstanding 7,432 and 7,464 93,718 86,939 Retained 24,000 ; outstanding 7,432 and 7,464 93,718 86,939 Retained earnings 118,848 ; outstanding 7,432 and 7,464 93,718 86,939 Retained earnings 118,848 84,281 outstanding 7,432 and 7,464 93,718 86,939 Retained earnings 118,848 84,281 Accumulated 7,464 93,718 86,939 Retained earnings 118,848 84,281 Accumulated other comprehensive loss 93,718 86,939 Retained earnings 118,848 84,281 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 6,343 ) ( 4,678 ) Total loss ( 6,343 ) ( 4,678 ) Total stockholder ’ equity ) Total stockholder ’ equity 206,223 166,542 Total liability and stockholder Total stockholder ’ equity 206,223 166,542 Total liability and stockholder ’ and stockholder ’ equity $ 411,976 $ 364,840 Refer to accompanying ’ equity $ 411,976 $ 364,840 Refer to accompanying note . Refer to accompanying note . 60 PART II Item 8 CASH . 60 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2023 2022 2021 Operations Year Ended June 30 , 2023 2022 2021 Operations Net income Ended June 30 , 2023 2022 2021 Operations Net income $ June 30 , 2023 2022 2021 Operations Net income $ 72,361 2021 Operations Net income $ 72,361 $ 72,738 $ 61,271 Adjustments Net income $ 72,361 $ 72,738 $ 61,271 Adjustments to reconcile $ 72,361 $ 72,738 $ 61,271 Adjustments to reconcile net income , amortization , and other 13,861 14,460 11,686 Stock-based compensation expense amortization , and other 13,861 14,460 11,686 Stock-based compensation expense 9,611 , and other 13,861 14,460 11,686 Stock-based compensation expense 9,611 7,502 14,460 11,686 Stock-based compensation expense 9,611 7,502 6,118 Net recognized loss 11,686 Stock-based compensation expense 9,611 7,502 6,118 Net recognized loss ( Stock-based compensation expense 9,611 7,502 6,118 Net recognized loss ( gain ) on investment and derivative 196 ( 409 ) ( 1,249 investment and derivative 196 ( 409 ) ( 1,249 ) Deferred 196 ( 409 ) ( 1,249 ) Deferred income tax ( ) Deferred income tax ( 6,059 ) ( 5,702 ) ( tax ( 6,059 ) ( 5,702 ) ( 150 ) Changes ) ( 5,702 ) ( 150 ) Changes in operating asset liability : Accounts receivable ( 4,087 ) ( 6,834 ) ( receivable ( 4,087 ) ( 6,834 ) ( 6,481 ) Inventories ) ( 6,834 ) ( 6,481 ) Inventories 1,242 ( 1,123 ) ( 6,481 ) Inventories 1,242 ( 1,123 ) ( 737 6,481 ) Inventories 1,242 ( 1,123 ) ( 737 ) Other 1,242 ( 1,123 ) ( 737 ) Other current asset ( ) Other current asset ( 1,991 ) ( 709 ) ( asset ( 1,991 ) ( 709 ) ( 932 ) Other ) ( 709 ) ( 932 ) Other long-term asset ( ) Other long-term asset ( 2,833 ) ( 2,805 ) ( asset ( 2,833 ) ( 2,805 ) ( 3,459 ) Accounts ) ( 2,805 ) ( 3,459 ) Accounts payable ( 2,721 3,459 ) Accounts payable ( 2,721 ) 2,943 2,798 Unearned revenue Accounts payable ( 2,721 ) 2,943 2,798 Unearned revenue 5,535 5,109 payable ( 2,721 ) 2,943 2,798 Unearned revenue 5,535 5,109 4,633 ) 2,943 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 2,943 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 358 2,798 Unearned revenue 5,535 5,109 4,633 Income tax ( 358 ) 5,109 4,633 Income tax ( 358 ) 696 ( 2,309 ) Income tax ( 358 ) 696 ( 2,309 ) Other current ( 358 ) 696 ( 2,309 ) Other current liability 2,272 2,309 ) Other current liability 2,272 2,344 4,149 Other long-term liability ) Other current liability 2,272 2,344 4,149 Other long-term liability 553 Other current liability 2,272 2,344 4,149 Other long-term liability 553 825 2,344 4,149 Other long-term liability 553 825 1,402 Net cash from 4,149 Other long-term liability 553 825 1,402 Net cash from operation Other long-term liability 553 825 1,402 Net cash from operation 87,582 1,402 Net cash from operation 87,582 89,035 76,740 Financing Cash premium Net cash from operation 87,582 89,035 76,740 Financing Cash premium on cash from operation 87,582 89,035 76,740 Financing Cash premium on debt Cash premium on debt exchange 0 0 ( 1,754 ) Repayments premium on debt exchange 0 0 ( 1,754 ) Repayments of debt exchange 0 0 ( 1,754 ) Repayments of debt ( ) Repayments of debt ( 2,750 ) ( 9,023 ) ( debt ( 2,750 ) ( 9,023 ) ( 3,750 ) Common ) ( 9,023 ) ( 3,750 ) Common stock issued 1,866 3,750 ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ) Common stock issued 1,866 1,841 1,693 Common stock repurchased ( Common stock issued 1,866 1,841 1,693 Common stock repurchased ( 22,245 1,693 Common stock repurchased ( 22,245 ) ( 32,696 ) ( repurchased ( 22,245 ) ( 32,696 ) ( 27,385 ) Common ) ( 32,696 ) ( 27,385 ) Common stock cash dividend stock cash dividend paid ( 19,800 ) ( 18,135 ) ( paid ( 19,800 ) ( 18,135 ) ( 16,521 ) Other ) ( 18,135 ) ( 16,521 ) Other , net ( ) Other , net ( 1,006 ) ( 863 ) ( net ( 1,006 ) ( 863 ) ( 769 ) Net ) ( 863 ) ( 769 ) Net cash used in cash used in financing ( 43,935 ) ( 58,876 ) ( financing ( 43,935 ) ( 58,876 ) ( 48,486 ) Investing ) ( 58,876 ) ( 48,486 ) Investing Additions to property to property and equipment ( 28,107 ) ( 23,886 ) ( equipment ( 28,107 ) ( 23,886 ) ( 20,622 ) Acquisition ) ( 23,886 ) ( 20,622 ) Acquisition of company , intangible and other asset ( 1,670 ) ( 22,038 ) ( asset ( 1,670 ) ( 22,038 ) ( 8,909 ) Purchases ) ( 22,038 ) ( 8,909 ) Purchases of investment ( ) Purchases of investment ( 37,651 ) ( 26,456 ) ( investment ( 37,651 ) ( 26,456 ) ( 62,924 ) Maturities ) ( 26,456 ) ( 62,924 ) Maturities of investment 33,510 62,924 ) Maturities of investment 33,510 16,451 51,792 Sales of investment ) Maturities of investment 33,510 16,451 51,792 Sales of investment 14,354 Maturities of investment 33,510 16,451 51,792 Sales of investment 14,354 28,443 16,451 51,792 Sales of investment 14,354 28,443 14,008 Other , net 51,792 Sales of investment 14,354 28,443 14,008 Other , net ( Sales of investment 14,354 28,443 14,008 Other , net ( 3,116 14,008 Other , net ( 3,116 ) ( 2,825 ) ( net ( 3,116 ) ( 2,825 ) ( 922 ) Net ) ( 2,825 ) ( 922 ) Net cash used in cash used in investing ( 22,680 ) ( 30,311 ) ( investing ( 22,680 ) ( 30,311 ) ( 27,577 ) Effect ) ( 30,311 ) ( 27,577 ) Effect of foreign exchange cash and cash equivalent ( 194 ) ( 141 ) ( equivalent ( 194 ) ( 141 ) ( 29 ) Net ) ( 141 ) ( 29 ) Net change in cash in cash and cash equivalent 20,773 ( 293 ) 648 Cash and cash equivalent 20,773 ( 293 ) 648 Cash and cash equivalent 20,773 ( 293 ) 648 Cash and cash equivalent , equivalent , beginning of period 13,931 14,224 13,576 Cash and cash , beginning of period 13,931 14,224 13,576 Cash and cash equivalent beginning of period 13,931 14,224 13,576 Cash and cash equivalent , , end of period $ 34,704 $ 13,931 $ 14,224 Refer of period $ 34,704 $ 13,931 $ 14,224 Refer to accompanying $ 34,704 $ 13,931 $ 14,224 Refer to accompanying note . Refer to accompanying note . 61 PART II Item 8 STOCKHOLDERS . 61 PART II Item 8 STOCKHOLDERS ’ EQ UITY STATEMENTS amount ) Year Ended June 30 , 2023 2022 2021 Common Year Ended June 30 , 2023 2022 2021 Common stock and Ended June 30 , 2023 2022 2021 Common stock and paid-in June 30 , 2023 2022 2021 Common stock and paid-in capital , beginning of period $ 86,939 $ 83,111 $ 80,552 Common of period $ 86,939 $ 83,111 $ 80,552 Common stock issued $ 86,939 $ 83,111 $ 80,552 Common stock issued 1,866 1,841 $ 80,552 Common stock issued 1,866 1,841 1,963 Common stock repurchased 80,552 Common stock issued 1,866 1,841 1,963 Common stock repurchased ( Common stock issued 1,866 1,841 1,963 Common stock repurchased ( 4,696 1,963 Common stock repurchased ( 4,696 ) ( 5,688 ) ( repurchased ( 4,696 ) ( 5,688 ) ( 5,539 ) Stock-based ) ( 5,688 ) ( 5,539 ) Stock-based compensation expense 9,611 5,539 ) Stock-based compensation expense 9,611 7,502 6,118 Other , net ) Stock-based compensation expense 9,611 7,502 6,118 Other , net ( Stock-based compensation expense 9,611 7,502 6,118 Other , net ( 2 6,118 Other , net ( 2 ) 173 17 Balance , , net ( 2 ) 173 17 Balance , end of net ( 2 ) 173 17 Balance , end of period Balance , end of period 93,718 86,939 83,111 Retained earnings Balance , end of period 93,718 86,939 83,111 Retained earnings Balance , end of period 93,718 86,939 83,111 Retained earnings Balance , beginning Balance , beginning of period 84,281 57,055 34,566 Net income 72,361 , beginning of period 84,281 57,055 34,566 Net income 72,361 72,738 beginning of period 84,281 57,055 34,566 Net income 72,361 72,738 61,271 84,281 57,055 34,566 Net income 72,361 72,738 61,271 Common stock cash 57,055 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend 34,566 Net income 72,361 72,738 61,271 Common stock cash dividend ( Common stock cash dividend ( 20,226 ) ( 18,552 ) ( dividend ( 20,226 ) ( 18,552 ) ( 16,871 ) Common ) ( 18,552 ) ( 16,871 ) Common stock repurchased ( ) Common stock repurchased ( 17,568 ) ( 26,960 ) ( repurchased ( 17,568 ) ( 26,960 ) ( 21,879 ) Cumulative ) ( 26,960 ) ( 21,879 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 ( 32 ) Balance effect of accounting change 0 0 ( 32 ) Balance , accounting change 0 0 ( 32 ) Balance , end of Balance , end of period 118,848 84,281 57,055 Accumulated other comprehensive , end of period 118,848 84,281 57,055 Accumulated other comprehensive income end of period 118,848 84,281 57,055 Accumulated other comprehensive income ( , beginning of period ( 4,678 ) 1,822 3,186 Other comprehensive of period ( 4,678 ) 1,822 3,186 Other comprehensive loss ( period ( 4,678 ) 1,822 3,186 Other comprehensive loss ( 1,665 3,186 Other comprehensive loss ( 1,665 ) ( 6,500 ) ( loss ( 1,665 ) ( 6,500 ) ( 1,374 ) Cumulative ) ( 6,500 ) ( 1,374 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 10 Balance , end effect of accounting change 0 0 10 Balance , end of of accounting change 0 0 10 Balance , end of period , end of period ( 6,343 ) ( 4,678 ) 1,822 period ( 6,343 ) ( 4,678 ) 1,822 Total stockholder ’ 6,343 ) ( 4,678 ) 1,822 Total stockholder ’ equity $ Total stockholder ’ equity $ 206,223 $ 166,542 $ 141,988 Cash ’ equity $ 206,223 $ 166,542 $ 141,988 Cash dividend declared $ 206,223 $ 166,542 $ 141,988 Cash dividend declared per common declared per common share $ 2.72 $ 2.48 $ 2.24 Refer common share $ 2.72 $ 2.48 $ 2.24 Refer to accompanying $ 2.72 $ 2.48 $ 2.24 Refer to accompanying note . Refer to accompanying note . 62 PART II Item 8 NOTES . 62 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles and uncertainty . In July 2022 , we completed an assessment wa effective beginning fiscal year 2023 . Based on the carrying , net a of June 30 , 2022 , the effect a of June 30 , 2022 , the effect of this in estimate for fiscal year 2023 wa an increase in operating in operating income of $ 3.7 billion and net income of and net income of $ 3.0 billion , or $ 0.40 3.0 billion , or $ 0.40 per both basic and diluted and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 63 PART II Item 8 Revenue . 63 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 64 PART II Item 8 Judgment . 64 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , long-term account June 30 , 2023 and 2022 , long-term account receivable , doubtful account , wa $ 4.5 billion and $ 3.8 billion $ 4.5 billion and $ 3.8 billion , respectively , and other currently available evidence . 65 PART II Item 8 Activity . 65 PART II Item 8 Activity in the allowance for million ) Year Ended June 30 , 2023 2022 2021 Balance Year Ended June 30 , 2023 2022 2021 Balance , beginning Ended June 30 , 2023 2022 2021 Balance , beginning of June 30 , 2023 2022 2021 Balance , beginning of period , beginning of period $ 710 $ 798 $ 816 Charged of period $ 710 $ 798 $ 816 Charged to cost $ 710 $ 798 $ 816 Charged to cost and other Charged to cost and other 258 157 234 Write-offs ( 252 to cost and other 258 157 234 Write-offs ( 252 ) cost and other 258 157 234 Write-offs ( 252 ) ( 258 157 234 Write-offs ( 252 ) ( 245 ) ( Write-offs ( 252 ) ( 245 ) ( 252 ) Balance ) ( 245 ) ( 252 ) Balance , end of , end of period $ 716 $ 710 $ 798 Allowance of period $ 716 $ 710 $ 798 Allowance for doubtful $ 716 $ 710 $ 798 Allowance for doubtful account included ( In million ) June 30 , 2023 2022 2021 Accounts million ) June 30 , 2023 2022 2021 Accounts receivable , ) June 30 , 2023 2022 2021 Accounts receivable , net June 30 , 2023 2022 2021 Accounts receivable , net of allowance for doubtful account $ 650 $ 633 $ 751 Other doubtful account $ 650 $ 633 $ 751 Other long-term asset $ 650 $ 633 $ 751 Other long-term asset 66 77 $ 751 Other long-term asset 66 77 47 Total $ 716 751 Other long-term asset 66 77 47 Total $ 716 $ Other long-term asset 66 77 47 Total $ 716 $ 710 66 77 47 Total $ 716 $ 710 $ 798 As 47 Total $ 716 $ 710 $ 798 As of June $ 716 $ 710 $ 798 As of June 30 , $ 798 As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , other receivables June 30 , 2023 and 2022 , other receivables related to of server component were $ 9.2 billion and $ 6.1 billion $ 9.2 billion and $ 6.1 billion , respectively , and country . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , our financing June 30 , 2023 and 2022 , our financing receivables , receivables , net were $ 5.3 billion and $ 4.1 billion $ 5.3 billion and $ 4.1 billion , respectively , for life of the product . 66 PART II Item 8 Product . 66 PART II Item 8 Product Warranty We provide for a period generally ranging from 90 day to three year . . Advertising expense wa $ 904 million , $ 1.5 billion $ 904 million , $ 1.5 billion , and $ 1.5 1.5 billion , and $ 1.5 billion in fiscal year 2023 1.5 billion in fiscal year 2023 , 2022 , and 2021 in fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . Stock-Based Compensation . Employee Severance On January 18 , 2023 , we announced Severance On January 18 , 2023 , we announced a decision our overall workforce by approximately 10,000 job through the third quarter third quarter of fiscal year 2023 . During the three month the three month ended December 31 , 2022 , we recorded month ended December 31 , 2022 , we recorded $ 800 2022 , we recorded $ 800 million of employee severance expense margin . Refer to Note 19 – Segment Information and Geographic our consolidated balance sheet . 67 PART II Item 8 Financial . 67 PART II Item 8 Financial Instruments Investments We consider expense ) , net . 68 PART II Item 8 Fair . 68 PART II Item 8 Fair Value Measurements We account level are : • Level 1 – input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability include swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 asset and liability include investment and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not our consolidated balance sheet . 69 PART II Item 8 ROU . 69 PART II Item 8 ROU asset represent our right an annual basis ( May 1 ) and between annual test , ranging from one to 20 year . We evaluate the may be impaired . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2023 2022 2021 Net Year Ended June 30 , 2023 2022 2021 Net income available Ended June 30 , 2023 2022 2021 Net income available for June 30 , 2023 2022 2021 Net income available for common shareholder ( A ) $ 72,361 $ 72,738 $ 61,271 Weighted A ) $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding $ 72,361 $ 72,738 $ 61,271 Weighted average outstanding share of common stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based ( B ) 7,446 7,496 7,547 Dilutive effect of stock-based award Dilutive effect of stock-based award 26 44 61 Common stock and effect of stock-based award 26 44 61 Common stock and common of stock-based award 26 44 61 Common stock and common stock stock equivalent ( C ) 7,472 7,540 7,608 Earnings Per Share equivalent ( C ) 7,472 7,540 7,608 Earnings Per Share Basic ( C ) 7,472 7,540 7,608 Earnings Per Share Basic ( Basic ( A/B ) $ 9.72 $ 9.70 $ 8.12 Diluted A/B ) $ 9.72 $ 9.70 $ 8.12 Diluted ( A/C $ 9.72 $ 9.70 $ 8.12 Diluted ( A/C ) $ Diluted ( A/C ) $ 9.68 $ 9.65 $ 8.05 Anti-dilutive A/C ) $ 9.68 $ 9.65 $ 8.05 Anti-dilutive stock-based award $ 9.68 $ 9.65 $ 8.05 Anti-dilutive stock-based award excluded from during the period presented . 70 PART II Item 8 NOTE . 70 PART II Item 8 NOTE 3 — OTHER INCOME PART II Item 8 NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2023 2022 2021 Interest Year Ended June 30 , 2023 2022 2021 Interest and dividend Ended June 30 , 2023 2022 2021 Interest and dividend income June 30 , 2023 2022 2021 Interest and dividend income $ Interest and dividend income $ 2,994 $ 2,094 $ 2,131 Interest dividend income $ 2,994 $ 2,094 $ 2,131 Interest expense ( $ 2,994 $ 2,094 $ 2,131 Interest expense ( 1,968 ) $ 2,131 Interest expense ( 1,968 ) ( 2,063 ) ( expense ( 1,968 ) ( 2,063 ) ( 2,346 ) Net ) ( 2,063 ) ( 2,346 ) Net recognized gain on Net recognized gain on investment 260 461 1,232 Net gain ( recognized gain on investment 260 461 1,232 Net gain ( loss gain on investment 260 461 1,232 Net gain ( loss ) loss ) on derivative ( 456 ) ( 52 ) 17 derivative ( 456 ) ( 52 ) 17 Net gain ( 456 ) ( 52 ) 17 Net gain ( loss ) ) on foreign currency remeasurements 181 ( 75 ) 54 Other foreign currency remeasurements 181 ( 75 ) 54 Other , net remeasurements 181 ( 75 ) 54 Other , net ( 223 54 Other , net ( 223 ) ( 32 ) 98 net ( 223 ) ( 32 ) 98 Total $ 788 223 ) ( 32 ) 98 Total $ 788 $ 333 32 ) 98 Total $ 788 $ 333 $ 1,186 Net 98 Total $ 788 $ 333 $ 1,186 Net Recognized Gains $ 788 $ 333 $ 1,186 Net Recognized Gains ( Losses million ) Year Ended June 30 , 2023 2022 2021 Realized Year Ended June 30 , 2023 2022 2021 Realized gain from Ended June 30 , 2023 2022 2021 Realized gain from sale June 30 , 2023 2022 2021 Realized gain from sale of sale of available-for-sale security $ 36 $ 162 $ 105 Realized available-for-sale security $ 36 $ 162 $ 105 Realized loss from $ 36 $ 162 $ 105 Realized loss from sale of sale of available-for-sale security ( 124 ) ( 138 ) ( security ( 124 ) ( 138 ) ( 40 ) Impairments ) ( 138 ) ( 40 ) Impairments and allowance for allowance for credit loss ( 10 ) ( 81 ) ( loss ( 10 ) ( 81 ) ( 2 ) Total ) ( 81 ) ( 2 ) Total $ ( 98 2 ) Total $ ( 98 ) $ ( 57 ) ( 98 ) $ ( 57 ) $ 63 Net recognized $ ( 57 ) $ 63 Net recognized gain ( loss million ) Year Ended June 30 , 2023 2022 2021 Net Year Ended June 30 , 2023 2022 2021 Net realized gain Ended June 30 , 2023 2022 2021 Net realized gain on June 30 , 2023 2022 2021 Net realized gain on investment gain on investment sold $ 75 $ 29 $ 123 Net investment sold $ 75 $ 29 $ 123 Net unrealized gain $ 75 $ 29 $ 123 Net unrealized gain on investment gain on investment still held 303 509 1,057 Impairments of investment on investment still held 303 509 1,057 Impairments of investment ( investment still held 303 509 1,057 Impairments of investment ( 20 1,057 Impairments of investment ( 20 ) ( 20 ) ( investment ( 20 ) ( 20 ) ( 11 ) Total ) ( 20 ) ( 11 ) Total $ 358 $ ( 11 ) Total $ 358 $ 518 $ 1,169 71 ) Total $ 358 $ 518 $ 1,169 71 PART II $ 358 $ 518 $ 1,169 71 PART II Item 8 358 $ 518 $ 1,169 71 PART II Item 8 NOTE 1,169 71 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Short-term Investments Equity Investments June 30 , 2023 Changes in Fair Equity Investments June 30 , 2023 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 16,589 $ 0 $ Commercial paper Level 2 $ 16,589 $ 0 $ 0 $ Level 2 $ 16,589 $ 0 $ 0 $ 16,589 $ $ 16,589 $ 0 $ 0 $ 16,589 $ 12,231 $ $ 0 $ 0 $ 16,589 $ 12,231 $ 4,358 $ $ 0 $ 16,589 $ 12,231 $ 4,358 $ 0 Certificates $ 16,589 $ 12,231 $ 4,358 $ 0 Certificates of deposit $ 12,231 $ 4,358 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,701 0 0 2,701 2,657 Certificates of deposit Level 2 2,701 0 0 2,701 2,657 44 of deposit Level 2 2,701 0 0 2,701 2,657 44 0 deposit Level 2 2,701 0 0 2,701 2,657 44 0 U.S. Level 2 2,701 0 0 2,701 2,657 44 0 U.S. government 2 2,701 0 0 2,701 2,657 44 0 U.S. government security 2,701 0 0 2,701 2,657 44 0 U.S. government security Level 0 0 2,701 2,657 44 0 U.S. government security Level 1 0 U.S. government security Level 1 65,237 2 ( 3,870 ) U.S. government security Level 1 65,237 2 ( 3,870 ) 61,369 government security Level 1 65,237 2 ( 3,870 ) 61,369 2,991 Level 1 65,237 2 ( 3,870 ) 61,369 2,991 58,378 0 65,237 2 ( 3,870 ) 61,369 2,991 58,378 0 U.S. agency 2 ( 3,870 ) 61,369 2,991 58,378 0 U.S. agency security ( 3,870 ) 61,369 2,991 58,378 0 U.S. agency security Level 3,870 ) 61,369 2,991 58,378 0 U.S. agency security Level 2 0 U.S. agency security Level 2 2,703 0 0 2,703 894 U.S. agency security Level 2 2,703 0 0 2,703 894 1,809 agency security Level 2 2,703 0 0 2,703 894 1,809 0 security Level 2 2,703 0 0 2,703 894 1,809 0 Foreign Level 2 2,703 0 0 2,703 894 1,809 0 Foreign government 2 2,703 0 0 2,703 894 1,809 0 Foreign government bond 2,703 0 0 2,703 894 1,809 0 Foreign government bond Level 0 0 2,703 894 1,809 0 Foreign government bond Level 2 0 Foreign government bond Level 2 498 1 ( 24 ) Foreign government bond Level 2 498 1 ( 24 ) 475 government bond Level 2 498 1 ( 24 ) 475 0 Level 2 498 1 ( 24 ) 475 0 475 0 498 1 ( 24 ) 475 0 475 0 Mortgage- and 1 ( 24 ) 475 0 475 0 Mortgage- and asset-backed ( 24 ) 475 0 475 0 Mortgage- and asset-backed security 24 ) 475 0 475 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 824 1 ( 39 ) and asset-backed security Level 2 824 1 ( 39 ) 786 asset-backed security Level 2 824 1 ( 39 ) 786 0 Level 2 824 1 ( 39 ) 786 0 786 0 824 1 ( 39 ) 786 0 786 0 Corporate note 1 ( 39 ) 786 0 786 0 Corporate note and ( 39 ) 786 0 786 0 Corporate note and bond 39 ) 786 0 786 0 Corporate note and bond Level Corporate note and bond Level 2 10,809 8 ( 583 ) note and bond Level 2 10,809 8 ( 583 ) 10,234 and bond Level 2 10,809 8 ( 583 ) 10,234 0 Level 2 10,809 8 ( 583 ) 10,234 0 10,234 0 10,809 8 ( 583 ) 10,234 0 10,234 0 Corporate note 8 ( 583 ) 10,234 0 10,234 0 Corporate note and ( 583 ) 10,234 0 10,234 0 Corporate note and bond 583 ) 10,234 0 10,234 0 Corporate note and bond Level Corporate note and bond Level 3 120 0 0 120 0 note and bond Level 3 120 0 0 120 0 120 and bond Level 3 120 0 0 120 0 120 0 bond Level 3 120 0 0 120 0 120 0 Municipal Level 3 120 0 0 120 0 120 0 Municipal security 3 120 0 0 120 0 120 0 Municipal security Level 120 0 0 120 0 120 0 Municipal security Level 2 0 0 120 0 120 0 Municipal security Level 2 285 120 0 Municipal security Level 2 285 1 ( 18 ) 0 Municipal security Level 2 285 1 ( 18 ) 268 Municipal security Level 2 285 1 ( 18 ) 268 7 Level 2 285 1 ( 18 ) 268 7 261 0 285 1 ( 18 ) 268 7 261 0 Municipal security 1 ( 18 ) 268 7 261 0 Municipal security Level ( 18 ) 268 7 261 0 Municipal security Level 3 18 ) 268 7 261 0 Municipal security Level 3 103 261 0 Municipal security Level 3 103 0 ( 16 ) 0 Municipal security Level 3 103 0 ( 16 ) 87 Municipal security Level 3 103 0 ( 16 ) 87 0 Level 3 103 0 ( 16 ) 87 0 87 0 103 0 ( 16 ) 87 0 87 0 Total debt 0 ( 16 ) 87 0 87 0 Total debt investment ( 16 ) 87 0 87 0 Total debt investment $ 16 ) 87 0 87 0 Total debt investment $ 99,869 0 Total debt investment $ 99,869 $ 13 $ ( 4,550 debt investment $ 99,869 $ 13 $ ( 4,550 ) $ 99,869 $ 13 $ ( 4,550 ) $ 95,332 $ 18,780 $ ( 4,550 ) $ 95,332 $ 18,780 $ 76,552 $ 4,550 ) $ 95,332 $ 18,780 $ 76,552 $ 0 Changes $ 95,332 $ 18,780 $ 76,552 $ 0 Changes in Fair $ 18,780 $ 76,552 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 10,138 $ 7,446 $ Equity investment Level 1 $ 10,138 $ 7,446 $ 0 $ Level 1 $ 10,138 $ 7,446 $ 0 $ 2,692 Equity $ 10,138 $ 7,446 $ 0 $ 2,692 Equity investment Other $ 7,446 $ 0 $ 2,692 Equity investment Other 7,187 0 $ 2,692 Equity investment Other 7,187 0 0 7,187 Total equity 2,692 Equity investment Other 7,187 0 0 7,187 Total equity investment Equity investment Other 7,187 0 0 7,187 Total equity investment $ investment Other 7,187 0 0 7,187 Total equity investment $ 17,325 7,187 Total equity investment $ 17,325 $ 7,446 $ 0 $ equity investment $ 17,325 $ 7,446 $ 0 $ 9,879 Cash $ 17,325 $ 7,446 $ 0 $ 9,879 Cash $ 8,478 $ 7,446 $ 0 $ 9,879 Cash $ 8,478 $ 8,478 0 $ 9,879 Cash $ 8,478 $ 8,478 $ 0 $ 9,879 Cash $ 8,478 $ 8,478 $ 0 $ 0 Derivatives $ 8,478 $ 8,478 $ 0 $ 0 Derivatives , net $ 8,478 $ 0 $ 0 Derivatives , net ( a , net ( a ) 6 0 6 0 Total $ net ( a ) 6 0 6 0 Total $ 121,141 ( a ) 6 0 6 0 Total $ 121,141 $ a ) 6 0 6 0 Total $ 121,141 $ 34,704 0 6 0 Total $ 121,141 $ 34,704 $ 76,558 $ 0 Total $ 121,141 $ 34,704 $ 76,558 $ 9,879 72 $ 121,141 $ 34,704 $ 76,558 $ 9,879 72 PART II $ 34,704 $ 76,558 $ 9,879 72 PART II Item 8 34,704 $ 76,558 $ 9,879 72 PART II Item 8 ( 9,879 72 PART II Item 8 ( In million ) Fair Short-term Investments Equity Investments June 30 , 2022 Changes in Fair Equity Investments June 30 , 2022 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,500 $ 0 $ Commercial paper Level 2 $ 2,500 $ 0 $ 0 $ Level 2 $ 2,500 $ 0 $ 0 $ 2,500 $ $ 2,500 $ 0 $ 0 $ 2,500 $ 2,498 $ $ 0 $ 0 $ 2,500 $ 2,498 $ 2 $ $ 0 $ 2,500 $ 2,498 $ 2 $ 0 Certificates $ 2,500 $ 2,498 $ 2 $ 0 Certificates of deposit $ 2,498 $ 2 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,071 0 0 2,071 2,032 Certificates of deposit Level 2 2,071 0 0 2,071 2,032 39 of deposit Level 2 2,071 0 0 2,071 2,032 39 0 deposit Level 2 2,071 0 0 2,071 2,032 39 0 U.S. Level 2 2,071 0 0 2,071 2,032 39 0 U.S. government 2 2,071 0 0 2,071 2,032 39 0 U.S. government security 2,071 0 0 2,071 2,032 39 0 U.S. government security Level 0 0 2,071 2,032 39 0 U.S. government security Level 1 0 U.S. government security Level 1 79,696 29 ( 2,178 ) U.S. government security Level 1 79,696 29 ( 2,178 ) 77,547 government security Level 1 79,696 29 ( 2,178 ) 77,547 9 Level 1 79,696 29 ( 2,178 ) 77,547 9 77,538 0 79,696 29 ( 2,178 ) 77,547 9 77,538 0 U.S. agency 29 ( 2,178 ) 77,547 9 77,538 0 U.S. agency security ( 2,178 ) 77,547 9 77,538 0 U.S. agency security Level 2,178 ) 77,547 9 77,538 0 U.S. agency security Level 2 0 U.S. agency security Level 2 419 0 ( 9 ) U.S. agency security Level 2 419 0 ( 9 ) 410 agency security Level 2 419 0 ( 9 ) 410 0 Level 2 419 0 ( 9 ) 410 0 410 0 419 0 ( 9 ) 410 0 410 0 Foreign government 0 ( 9 ) 410 0 410 0 Foreign government bond ( 9 ) 410 0 410 0 Foreign government bond Level 9 ) 410 0 410 0 Foreign government bond Level 2 0 Foreign government bond Level 2 506 0 ( 24 ) Foreign government bond Level 2 506 0 ( 24 ) 482 government bond Level 2 506 0 ( 24 ) 482 0 Level 2 506 0 ( 24 ) 482 0 482 0 506 0 ( 24 ) 482 0 482 0 Mortgage- and 0 ( 24 ) 482 0 482 0 Mortgage- and asset-backed ( 24 ) 482 0 482 0 Mortgage- and asset-backed security 24 ) 482 0 482 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 727 1 ( 30 ) and asset-backed security Level 2 727 1 ( 30 ) 698 asset-backed security Level 2 727 1 ( 30 ) 698 0 Level 2 727 1 ( 30 ) 698 0 698 0 727 1 ( 30 ) 698 0 698 0 Corporate note 1 ( 30 ) 698 0 698 0 Corporate note and ( 30 ) 698 0 698 0 Corporate note and bond 30 ) 698 0 698 0 Corporate note and bond Level Corporate note and bond Level 2 11,661 4 ( 554 ) note and bond Level 2 11,661 4 ( 554 ) 11,111 and bond Level 2 11,661 4 ( 554 ) 11,111 0 Level 2 11,661 4 ( 554 ) 11,111 0 11,111 0 11,661 4 ( 554 ) 11,111 0 11,111 0 Corporate note 4 ( 554 ) 11,111 0 11,111 0 Corporate note and ( 554 ) 11,111 0 11,111 0 Corporate note and bond 554 ) 11,111 0 11,111 0 Corporate note and bond Level Corporate note and bond Level 3 67 0 0 67 0 note and bond Level 3 67 0 0 67 0 67 and bond Level 3 67 0 0 67 0 67 0 bond Level 3 67 0 0 67 0 67 0 Municipal Level 3 67 0 0 67 0 67 0 Municipal security 3 67 0 0 67 0 67 0 Municipal security Level 67 0 0 67 0 67 0 Municipal security Level 2 0 0 67 0 67 0 Municipal security Level 2 368 67 0 Municipal security Level 2 368 19 ( 13 ) 0 Municipal security Level 2 368 19 ( 13 ) 374 Municipal security Level 2 368 19 ( 13 ) 374 0 Level 2 368 19 ( 13 ) 374 0 374 0 368 19 ( 13 ) 374 0 374 0 Municipal security 19 ( 13 ) 374 0 374 0 Municipal security Level ( 13 ) 374 0 374 0 Municipal security Level 3 13 ) 374 0 374 0 Municipal security Level 3 103 374 0 Municipal security Level 3 103 0 ( 6 ) 0 Municipal security Level 3 103 0 ( 6 ) 97 Municipal security Level 3 103 0 ( 6 ) 97 0 Level 3 103 0 ( 6 ) 97 0 97 0 103 0 ( 6 ) 97 0 97 0 Total debt 0 ( 6 ) 97 0 97 0 Total debt investment ( 6 ) 97 0 97 0 Total debt investment $ 6 ) 97 0 97 0 Total debt investment $ 98,118 0 Total debt investment $ 98,118 $ 53 $ ( 2,814 debt investment $ 98,118 $ 53 $ ( 2,814 ) $ 98,118 $ 53 $ ( 2,814 ) $ 95,357 $ 4,539 $ ( 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 0 Changes $ 95,357 $ 4,539 $ 90,818 $ 0 Changes in Fair $ 4,539 $ 90,818 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 Total equity investment $ 8,025 $ 1,134 $ 0 $ equity investment $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 0 Derivatives $ 8,258 $ 8,258 $ 0 $ 0 Derivatives , net $ 8,258 $ 0 $ 0 Derivatives , net ( a , net ( a ) 8 0 8 0 Total $ net ( a ) 8 0 8 0 Total $ 111,648 ( a ) 8 0 8 0 Total $ 111,648 $ a ) 8 0 8 0 Total $ 111,648 $ 13,931 0 8 0 Total $ 111,648 $ 13,931 $ 90,826 $ 0 Total $ 111,648 $ 13,931 $ 90,826 $ 6,891 ( $ 111,648 $ 13,931 $ 90,826 $ 6,891 ( a ) $ 13,931 $ 90,826 $ 6,891 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information hierarchy . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , equity investment June 30 , 2023 and 2022 , equity investment without readily price or impairment were $ 4.2 billion and $ 3.8 billion $ 4.2 billion and $ 3.8 billion , respectively . 73 3.8 billion , respectively . 73 PART II Item 8 Unrealized . 73 PART II Item 8 Unrealized Losses on Debt Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2023 U.S. government and Fair Value June 30 , 2023 U.S. government and agency security government and agency security $ 7,950 $ ( 336 ) $ security $ 7,950 $ ( 336 ) $ 45,273 $ ( $ ( 336 ) $ 45,273 $ ( 3,534 ) $ ) $ 45,273 $ ( 3,534 ) $ 53,223 $ ( $ ( 3,534 ) $ 53,223 $ ( 3,870 ) Foreign ) $ 53,223 $ ( 3,870 ) Foreign government bond 77 3,870 ) Foreign government bond 77 ( 5 ) 391 ( Foreign government bond 77 ( 5 ) 391 ( 19 ) bond 77 ( 5 ) 391 ( 19 ) 468 ( ( 5 ) 391 ( 19 ) 468 ( 24 ) ) 391 ( 19 ) 468 ( 24 ) Mortgage- and ( 19 ) 468 ( 24 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 257 ( 5 ) 412 ( and asset-backed security 257 ( 5 ) 412 ( 34 ) security 257 ( 5 ) 412 ( 34 ) 669 ( ( 5 ) 412 ( 34 ) 669 ( 39 ) ) 412 ( 34 ) 669 ( 39 ) Corporate note ( 34 ) 669 ( 39 ) Corporate note and bond ) Corporate note and bond 2,326 ( 49 ) 7,336 ( note and bond 2,326 ( 49 ) 7,336 ( 534 ) bond 2,326 ( 49 ) 7,336 ( 534 ) 9,662 ( ( 49 ) 7,336 ( 534 ) 9,662 ( 583 ) ) 7,336 ( 534 ) 9,662 ( 583 ) Municipal security ( 534 ) 9,662 ( 583 ) Municipal security 111 ( ( 583 ) Municipal security 111 ( 3 ) 186 ( ) Municipal security 111 ( 3 ) 186 ( 31 ) security 111 ( 3 ) 186 ( 31 ) 297 ( ( 3 ) 186 ( 31 ) 297 ( 34 ) ) 186 ( 31 ) 297 ( 34 ) Total $ ( 31 ) 297 ( 34 ) Total $ 10,721 $ ( 34 ) Total $ 10,721 $ ( 398 ) $ Total $ 10,721 $ ( 398 ) $ 53,598 $ ( $ ( 398 ) $ 53,598 $ ( 4,152 ) $ ) $ 53,598 $ ( 4,152 ) $ 64,319 $ ( $ ( 4,152 ) $ 64,319 $ ( 4,550 ) Less ) $ 64,319 $ ( 4,550 ) Less than 12 Months ( 4,550 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2022 U.S. government and Fair Value June 30 , 2022 U.S. government and agency security government and agency security $ 59,092 $ ( 1,835 ) $ security $ 59,092 $ ( 1,835 ) $ 2,210 $ ( $ ( 1,835 ) $ 2,210 $ ( 352 ) $ ) $ 2,210 $ ( 352 ) $ 61,302 $ ( $ ( 352 ) $ 61,302 $ ( 2,187 ) Foreign ) $ 61,302 $ ( 2,187 ) Foreign government bond 418 2,187 ) Foreign government bond 418 ( 18 ) 27 ( Foreign government bond 418 ( 18 ) 27 ( 6 ) bond 418 ( 18 ) 27 ( 6 ) 445 ( ( 18 ) 27 ( 6 ) 445 ( 24 ) ) 27 ( 6 ) 445 ( 24 ) Mortgage- and ( 6 ) 445 ( 24 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 510 ( 26 ) 41 ( and asset-backed security 510 ( 26 ) 41 ( 4 ) security 510 ( 26 ) 41 ( 4 ) 551 ( ( 26 ) 41 ( 4 ) 551 ( 30 ) ) 41 ( 4 ) 551 ( 30 ) Corporate note ( 4 ) 551 ( 30 ) Corporate note and bond ) Corporate note and bond 9,443 ( 477 ) 786 ( note and bond 9,443 ( 477 ) 786 ( 77 ) bond 9,443 ( 477 ) 786 ( 77 ) 10,229 ( ( 477 ) 786 ( 77 ) 10,229 ( 554 ) ) 786 ( 77 ) 10,229 ( 554 ) Municipal security ( 77 ) 10,229 ( 554 ) Municipal security 178 ( ( 554 ) Municipal security 178 ( 12 ) 74 ( ) Municipal security 178 ( 12 ) 74 ( 7 ) security 178 ( 12 ) 74 ( 7 ) 252 ( ( 12 ) 74 ( 7 ) 252 ( 19 ) ) 74 ( 7 ) 252 ( 19 ) Total $ ( 7 ) 252 ( 19 ) Total $ 69,641 $ ( 19 ) Total $ 69,641 $ ( 2,368 ) $ Total $ 69,641 $ ( 2,368 ) $ 3,138 $ ( $ ( 2,368 ) $ 3,138 $ ( 446 ) $ ) $ 3,138 $ ( 446 ) $ 72,779 $ ( $ ( 446 ) $ 72,779 $ ( 2,814 ) Unrealized ) $ 72,779 $ ( 2,814 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2023 Due in one Fair Value June 30 , 2023 Due in one year or one year or le $ 38,182 $ 38,048 Due after one or le $ 38,182 $ 38,048 Due after one year through one year through five year 47,127 44,490 Due after five year year through five year 47,127 44,490 Due after five year through Due after five year through 10 year 13,262 11,628 Due after five year through 10 year 13,262 11,628 Due after 10 year year through 10 year 13,262 11,628 Due after 10 year 1,298 year 13,262 11,628 Due after 10 year 1,298 1,166 Total $ 11,628 Due after 10 year 1,298 1,166 Total $ 99,869 $ Due after 10 year 1,298 1,166 Total $ 99,869 $ 95,332 year 1,298 1,166 Total $ 99,869 $ 95,332 74 PART II 1,166 Total $ 99,869 $ 95,332 74 PART II Item 8 Total $ 99,869 $ 95,332 74 PART II Item 8 NOTE 95,332 74 PART II Item 8 NOTE 5 — DERIVATIVES We PART II Item 8 NOTE 5 — DERIVATIVES We use derivative maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2023 , our long-term As of June 30 , 2023 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 75 PART II Item 8 The . 75 PART II Item 8 The following table present the ( In million ) June 30 , 2023 June 30 , million ) June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 1,492 $ 635 Interest rate contract contract purchased $ 1,492 $ 635 Interest rate contract purchased 1,078 635 Interest rate contract purchased 1,078 1,139 Not Designated a Hedging Interest rate contract purchased 1,078 1,139 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 7,874 10,322 Foreign exchange contract sold Foreign exchange contract purchased 7,874 10,322 Foreign exchange contract sold 25,159 10,322 Foreign exchange contract sold 25,159 21,606 Equity contract purchased 3,867 Foreign exchange contract sold 25,159 21,606 Equity contract purchased 3,867 1,131 25,159 21,606 Equity contract purchased 3,867 1,131 Equity contract sold 2,154 21,606 Equity contract purchased 3,867 1,131 Equity contract sold 2,154 0 3,867 1,131 Equity contract sold 2,154 0 Other contract purchased 1,224 1,131 Equity contract sold 2,154 0 Other contract purchased 1,224 1,642 2,154 0 Other contract purchased 1,224 1,642 Other contract sold 581 0 Other contract purchased 1,224 1,642 Other contract sold 581 544 1,224 1,642 Other contract sold 581 544 Fair Values of Derivative 1,642 Other contract sold 581 544 Fair Values of Derivative Instruments Derivative Assets Derivative Liabilities June 30 , 2023 June 30 , Derivative Liabilities June 30 , 2023 June 30 , 2022 Designated June 30 , 2023 June 30 , 2022 Designated a Hedging , 2023 June 30 , 2022 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 34 $ ( 67 ) $ contract $ 34 $ ( 67 ) $ 0 $ ( $ ( 67 ) $ 0 $ ( 77 ) Interest ) $ 0 $ ( 77 ) Interest rate contract 16 77 ) Interest rate contract 16 0 3 0 Not Designated ) Interest rate contract 16 0 3 0 Not Designated a Interest rate contract 16 0 3 0 Not Designated a Hedging rate contract 16 0 3 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 249 ( 332 ) 333 ( Foreign exchange contract 249 ( 332 ) 333 ( 362 ) contract 249 ( 332 ) 333 ( 362 ) Equity contract ( 332 ) 333 ( 362 ) Equity contract 165 ( ( 362 ) Equity contract 165 ( 400 ) 5 ( ) Equity contract 165 ( 400 ) 5 ( 95 ) contract 165 ( 400 ) 5 ( 95 ) Other contract ( 400 ) 5 ( 95 ) Other contract 5 ( ( 95 ) Other contract 5 ( 6 ) 15 ( ) Other contract 5 ( 6 ) 15 ( 17 ) contract 5 ( 6 ) 15 ( 17 ) Gross amount ( 6 ) 15 ( 17 ) Gross amount of derivative ) Gross amount of derivative 469 ( 805 ) 356 ( amount of derivative 469 ( 805 ) 356 ( 551 ) derivative 469 ( 805 ) 356 ( 551 ) Gross amount ( 805 ) 356 ( 551 ) Gross amount of derivative in the balance sheet ( 202 ) 206 ( 130 ) balance sheet ( 202 ) 206 ( 130 ) 133 Cash ( 202 ) 206 ( 130 ) 133 Cash collateral received ) 206 ( 130 ) 133 Cash collateral received 0 ( ) 133 Cash collateral received 0 ( 125 ) 0 ( Cash collateral received 0 ( 125 ) 0 ( 75 ) received 0 ( 125 ) 0 ( 75 ) Net amount ( 125 ) 0 ( 75 ) Net amount of derivative Net amount of derivative $ 267 $ ( 724 ) $ derivative $ 267 $ ( 724 ) $ 226 $ ( $ ( 724 ) $ 226 $ ( 493 ) Reported ) $ 226 $ ( 493 ) Reported a Short-term investment Reported a Short-term investment $ 6 $ 0 $ 8 $ Short-term investment $ 6 $ 0 $ 8 $ 0 Other $ 6 $ 0 $ 8 $ 0 Other current asset $ 0 $ 8 $ 0 Other current asset 245 0 $ 0 Other current asset 245 0 218 0 Other long-term 0 Other current asset 245 0 218 0 Other long-term asset Other current asset 245 0 218 0 Other long-term asset 16 current asset 245 0 218 0 Other long-term asset 16 0 218 0 Other long-term asset 16 0 0 0 Other current 0 Other long-term asset 16 0 0 0 Other current liability Other long-term asset 16 0 0 0 Other current liability 0 long-term asset 16 0 0 0 Other current liability 0 ( 0 0 Other current liability 0 ( 341 ) 0 ( Other current liability 0 ( 341 ) 0 ( 298 ) liability 0 ( 341 ) 0 ( 298 ) Other long-term ( 341 ) 0 ( 298 ) Other long-term liability 0 298 ) Other long-term liability 0 ( 383 ) 0 ( Other long-term liability 0 ( 383 ) 0 ( 195 ) liability 0 ( 383 ) 0 ( 195 ) Total $ ( 383 ) 0 ( 195 ) Total $ 267 $ ( 195 ) Total $ 267 $ ( 724 ) $ Total $ 267 $ ( 724 ) $ 226 $ ( $ ( 724 ) $ 226 $ ( 493 ) Gross ) $ 226 $ ( 493 ) Gross derivative asset and elected to offset were $ 442 million and $ 804 million $ 442 million and $ 804 million , respectively , a respectively , a of June 30 , 2023 , and $ a of June 30 , 2023 , and $ 343 million , 2023 , and $ 343 million and $ 550 million $ 343 million and $ 550 million , respectively , a respectively , a of June 30 , 2022 . The following a of June 30 , 2022 . The following table present ( In million ) Level 1 Level 2 Level 3 Total million ) Level 1 Level 2 Level 3 Total June 30 Level 1 Level 2 Level 3 Total June 30 , 2023 2 Level 3 Total June 30 , 2023 Derivative asset $ 3 Total June 30 , 2023 Derivative asset $ 0 $ , 2023 Derivative asset $ 0 $ 462 $ 7 $ Derivative asset $ 0 $ 462 $ 7 $ 469 Derivative $ 0 $ 462 $ 7 $ 469 Derivative liability 0 $ 462 $ 7 $ 469 Derivative liability 0 ( 805 7 $ 469 Derivative liability 0 ( 805 ) 0 ( 469 Derivative liability 0 ( 805 ) 0 ( 805 ) liability 0 ( 805 ) 0 ( 805 ) June 30 ( 805 ) 0 ( 805 ) June 30 , 2022 0 ( 805 ) June 30 , 2022 Derivative asset 1 805 ) June 30 , 2022 Derivative asset 1 349 6 30 , 2022 Derivative asset 1 349 6 356 Derivative liability , 2022 Derivative asset 1 349 6 356 Derivative liability 0 2022 Derivative asset 1 349 6 356 Derivative liability 0 ( Derivative asset 1 349 6 356 Derivative liability 0 ( 551 349 6 356 Derivative liability 0 ( 551 ) 0 ( 356 Derivative liability 0 ( 551 ) 0 ( 551 ) liability 0 ( 551 ) 0 ( 551 ) 76 PART ( 551 ) 0 ( 551 ) 76 PART II Item ) 0 ( 551 ) 76 PART II Item 8 Gains ) 76 PART II Item 8 Gains ( loss ) on million ) Year Ended June 30 , 2023 2022 2021 Designated Year Ended June 30 , 2023 2022 2021 Designated a Fair Ended June 30 , 2023 2022 2021 Designated a Fair Value June 30 , 2023 2022 2021 Designated a Fair Value Hedging Foreign exchange contract Derivatives $ 0 $ 49 $ 193 Hedged contract Derivatives $ 0 $ 49 $ 193 Hedged item 0 $ 0 $ 49 $ 193 Hedged item 0 ( 50 49 $ 193 Hedged item 0 ( 50 ) ( 188 193 Hedged item 0 ( 50 ) ( 188 ) Excluded 0 ( 50 ) ( 188 ) Excluded from effectiveness assessment ) Excluded from effectiveness assessment 0 4 30 Interest rate contract Excluded from effectiveness assessment 0 4 30 Interest rate contract Derivatives from effectiveness assessment 0 4 30 Interest rate contract Derivatives ( Interest rate contract Derivatives ( 65 ) ( 92 ) ( Derivatives ( 65 ) ( 92 ) ( 37 ) Hedged ) ( 92 ) ( 37 ) Hedged item 38 108 ( 37 ) Hedged item 38 108 53 Designated a Cash 37 ) Hedged item 38 108 53 Designated a Cash Flow ) Hedged item 38 108 53 Designated a Cash Flow Hedging from accumulated other comprehensive income 61 ( 79 ) 17 Not other comprehensive income 61 ( 79 ) 17 Not Designated a income 61 ( 79 ) 17 Not Designated a Hedging Instruments Instruments Foreign exchange contract ( 73 ) 383 27 Equity contract exchange contract ( 73 ) 383 27 Equity contract ( 420 contract ( 73 ) 383 27 Equity contract ( 420 ) 383 27 Equity contract ( 420 ) 13 ( 6 ) Equity contract ( 420 ) 13 ( 6 ) Other contract ( 420 ) 13 ( 6 ) Other contract ( 41 6 ) Other contract ( 41 ) ( 85 ) 15 contract ( 41 ) ( 85 ) 15 Gains ( loss 41 ) ( 85 ) 15 Gains ( loss ) , million ) Year Ended June 30 , 2023 2022 2021 Designated Year Ended June 30 , 2023 2022 2021 Designated a Cash Ended June 30 , 2023 2022 2021 Designated a Cash Flow June 30 , 2023 2022 2021 Designated a Cash Flow Hedging Included in effectiveness assessment $ 34 $ ( 57 ) $ assessment $ 34 $ ( 57 ) $ 34 NOTE 6 $ ( 57 ) $ 34 NOTE 6 — INVENTORIES The 57 ) $ 34 NOTE 6 — INVENTORIES The component of ( In million ) June 30 , 2023 2022 Raw material million ) June 30 , 2023 2022 Raw material $ 709 ) June 30 , 2023 2022 Raw material $ 709 $ 2023 2022 Raw material $ 709 $ 1,144 Work in process Raw material $ 709 $ 1,144 Work in process 23 82 $ 1,144 Work in process 23 82 Finished good 1,768 2,516 1,144 Work in process 23 82 Finished good 1,768 2,516 Total process 23 82 Finished good 1,768 2,516 Total $ 2,500 $ 23 82 Finished good 1,768 2,516 Total $ 2,500 $ 3,742 good 1,768 2,516 Total $ 2,500 $ 3,742 77 PART II 2,516 Total $ 2,500 $ 3,742 77 PART II Item 8 Total $ 2,500 $ 3,742 77 PART II Item 8 NOTE 3,742 77 PART II Item 8 NOTE 7 — PROPERTY AND PART II Item 8 NOTE 7 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2023 2022 Land $ million ) June 30 , 2023 2022 Land $ 5,683 $ ) June 30 , 2023 2022 Land $ 5,683 $ 4,734 , 2023 2022 Land $ 5,683 $ 4,734 Buildings and improvement 2022 Land $ 5,683 $ 4,734 Buildings and improvement 68,465 55,014 $ 4,734 Buildings and improvement 68,465 55,014 Leasehold improvement 8,537 7,819 4,734 Buildings and improvement 68,465 55,014 Leasehold improvement 8,537 7,819 Computer improvement 68,465 55,014 Leasehold improvement 8,537 7,819 Computer equipment and software 68,465 55,014 Leasehold improvement 8,537 7,819 Computer equipment and software 74,961 7,819 Computer equipment and software 74,961 60,631 Furniture and equipment 6,246 Computer equipment and software 74,961 60,631 Furniture and equipment 6,246 5,860 74,961 60,631 Furniture and equipment 6,246 5,860 Total , at cost 60,631 Furniture and equipment 6,246 5,860 Total , at cost 163,892 5,860 Total , at cost 163,892 134,058 Accumulated depreciation ( 68,251 Total , at cost 163,892 134,058 Accumulated depreciation ( 68,251 ) 163,892 134,058 Accumulated depreciation ( 68,251 ) ( 59,660 ) Total depreciation ( 68,251 ) ( 59,660 ) Total , net $ ) Total , net $ 95,641 $ 74,398 During fiscal year , net $ 95,641 $ 74,398 During fiscal year 2023 , $ 74,398 During fiscal year 2023 , 2022 , and 2021 During fiscal year 2023 , 2022 , and 2021 , depreciation 2023 , 2022 , and 2021 , depreciation expense wa $ , depreciation expense wa $ 11.0 billion , $ 12.6 billion $ 11.0 billion , $ 12.6 billion , and $ 9.3 12.6 billion , and $ 9.3 billion , respectively . Depreciation expense declined in fiscal year 2023 due to the change in equipment . As of June 30 , 2023 , we have As of June 30 , 2023 , we have committed $ , we have committed $ 13.5 billion for the construction of related to datacenters . NOTE 8 — BUSINESS COMBINATIONS Nuance Communications Communications , Inc. On March 4 , 2022 , we completed Inc. On March 4 , 2022 , we completed our acquisition total purchase price of $ 18.8 billion , consisting primarily of wa completed a of December 31 , 2022 . The major a of December 31 , 2022 . The major class of Goodwill ( a ) $ 16,326 Intangible asset 4,365 Other asset ) $ 16,326 Intangible asset 4,365 Other asset 42 Other liability Intangible asset 4,365 Other asset 42 Other liability ( b ) liability ( b ) ( 1,972 ) Total $ 18,761 ( ( 1,972 ) Total $ 18,761 ( a ) Goodwill wa ( b ) Includes $ 986 million of convertible senior note note issued by Nuance in 2015 and 2017 , substantially all by Nuance in 2015 and 2017 , substantially all of which Weighted Average Life Customer-related $ 2,610 9 year Technology-based 1,540 5 Average Life Customer-related $ 2,610 9 year Technology-based 1,540 5 year $ 2,610 9 year Technology-based 1,540 5 year Marketing-related 215 4 2,610 9 year Technology-based 1,540 5 year Marketing-related 215 4 year Technology-based 1,540 5 year Marketing-related 215 4 year Total $ 4,365 1,540 5 year Marketing-related 215 4 year Total $ 4,365 7 215 4 year Total $ 4,365 7 year 78 PART II 4 year Total $ 4,365 7 year 78 PART II Item Total $ 4,365 7 year 78 PART II Item 8 ZeniMax year 78 PART II Item 8 ZeniMax Media Inc. On March ZeniMax Media Inc. On March 9 , 2021 , we completed Inc. On March 9 , 2021 , we completed our acquisition total purchase price of $ 8.1 billion , consisting primarily of The purchase price included $ 766 million of cash and cash wa completed a of December 31 , 2021 . The major a of December 31 , 2021 . The major class of Cash and cash equivalent $ 766 Goodwill 5,510 Intangible asset 1,968 cash equivalent $ 766 Goodwill 5,510 Intangible asset 1,968 Other asset 766 Goodwill 5,510 Intangible asset 1,968 Other asset 121 Other liability Intangible asset 1,968 Other asset 121 Other liability ( 244 ) asset 121 Other liability ( 244 ) Total $ 8,121 Goodwill ( 244 ) Total $ 8,121 Goodwill wa assigned to our Weighted Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 year $ 1,341 4 year Marketing-related 627 11 year Total $ 1,968 1,341 4 year Marketing-related 627 11 year Total $ 1,968 6 627 11 year Total $ 1,968 6 year Activision Blizzard , 11 year Total $ 1,968 6 year Activision Blizzard , Inc. Blizzard , Inc. On January 18 , 2022 , we entered Inc. On January 18 , 2022 , we entered into a Blizzard ” ) for $ 95.00 per share in an all-cash all-cash transaction valued at $ 68.7 billion , inclusive of Activision the merger agreement through October 18 , 2023 to allow for agreement through October 18 , 2023 to allow for additional time remaining regulatory concern . NOTE 9 — GOODWILL Changes in the ( In million ) June 30 , 2021 Acquisitions Other June million ) June 30 , 2021 Acquisitions Other June 30 , , 2021 Acquisitions Other June 30 , 2022 Acquisitions Other June Acquisitions Other June 30 , 2022 Acquisitions Other June 30 , , 2022 Acquisitions Other June 30 , 2023 Productivity and Business Acquisitions Other June 30 , 2023 Productivity and Business Processes $ Productivity and Business Processes $ 24,317 $ 599 $ ( 105 Business Processes $ 24,317 $ 599 $ ( 105 ) $ 24,317 $ 599 $ ( 105 ) $ 24,811 $ 11 $ ( 105 ) $ 24,811 $ 11 $ ( 47 105 ) $ 24,811 $ 11 $ ( 47 ) $ 24,811 $ 11 $ ( 47 ) $ 24,775 Intelligent Cloud $ ( 47 ) $ 24,775 Intelligent Cloud 13,256 16,879 47 ) $ 24,775 Intelligent Cloud 13,256 16,879 47 30,182 223 64 $ 24,775 Intelligent Cloud 13,256 16,879 47 30,182 223 64 30,469 24,775 Intelligent Cloud 13,256 16,879 47 30,182 223 64 30,469 More Intelligent Cloud 13,256 16,879 47 30,182 223 64 30,469 More Personal Cloud 13,256 16,879 47 30,182 223 64 30,469 More Personal Computing 13,256 16,879 47 30,182 223 64 30,469 More Personal Computing 12,138 16,879 47 30,182 223 64 30,469 More Personal Computing 12,138 648 64 30,469 More Personal Computing 12,138 648 ( 255 ) 12,531 30,469 More Personal Computing 12,138 648 ( 255 ) 12,531 0 Personal Computing 12,138 648 ( 255 ) 12,531 0 111 12,642 12,138 648 ( 255 ) 12,531 0 111 12,642 Total $ 648 ( 255 ) 12,531 0 111 12,642 Total $ 49,711 ( 255 ) 12,531 0 111 12,642 Total $ 49,711 $ 255 ) 12,531 0 111 12,642 Total $ 49,711 $ 18,126 0 111 12,642 Total $ 49,711 $ 18,126 $ ( 313 12,642 Total $ 49,711 $ 18,126 $ ( 313 ) $ 49,711 $ 18,126 $ ( 313 ) $ 67,524 $ 234 $ ( 313 ) $ 67,524 $ 234 $ 128 $ 313 ) $ 67,524 $ 234 $ 128 $ 67,886 79 $ 67,524 $ 234 $ 128 $ 67,886 79 PART II $ 234 $ 128 $ 67,886 79 PART II Item 8 234 $ 128 $ 67,886 79 PART II Item 8 The 67,886 79 PART II Item 8 The measurement period for the , but do not exceed 12 month . Adjustments in purchase for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2023 , May 1 in our May 1 , 2023 , May 1 , 2022 1 , 2023 , May 1 , 2022 , or May 2023 , May 1 , 2022 , or May 1 , , 2022 , or May 1 , 2021 test . As , or May 1 , 2021 test . As of June test . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , accumulated goodwill June 30 , 2023 and 2022 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . NOTE 10 — $ 11.3 billion . NOTE 10 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2023 2022 Technology-based $ Carrying Amount June 30 , 2023 2022 Technology-based $ 11,245 $ Amount June 30 , 2023 2022 Technology-based $ 11,245 $ ( , 2023 2022 Technology-based $ 11,245 $ ( 7,589 ) $ Technology-based $ 11,245 $ ( 7,589 ) $ 3,656 $ 11,277 $ ( 7,589 ) $ 3,656 $ 11,277 $ ( 6,958 7,589 ) $ 3,656 $ 11,277 $ ( 6,958 ) $ 3,656 $ 11,277 $ ( 6,958 ) $ 4,319 Customer-related 7,281 $ ( 6,958 ) $ 4,319 Customer-related 7,281 ( 4,047 ) 6,958 ) $ 4,319 Customer-related 7,281 ( 4,047 ) 3,234 7,342 $ 4,319 Customer-related 7,281 ( 4,047 ) 3,234 7,342 ( 3,171 Customer-related 7,281 ( 4,047 ) 3,234 7,342 ( 3,171 ) 4,171 7,281 ( 4,047 ) 3,234 7,342 ( 3,171 ) 4,171 Marketing-related 4,047 ) 3,234 7,342 ( 3,171 ) 4,171 Marketing-related 4,935 ( 3,234 7,342 ( 3,171 ) 4,171 Marketing-related 4,935 ( 2,473 ) ( 3,171 ) 4,171 Marketing-related 4,935 ( 2,473 ) 2,462 4,942 ) 4,171 Marketing-related 4,935 ( 2,473 ) 2,462 4,942 ( 2,143 Marketing-related 4,935 ( 2,473 ) 2,462 4,942 ( 2,143 ) 2,799 4,935 ( 2,473 ) 2,462 4,942 ( 2,143 ) 2,799 Contract-based 2,473 ) 2,462 4,942 ( 2,143 ) 2,799 Contract-based 29 ( 2,462 4,942 ( 2,143 ) 2,799 Contract-based 29 ( 15 ) ( 2,143 ) 2,799 Contract-based 29 ( 15 ) 14 16 ) 2,799 Contract-based 29 ( 15 ) 14 16 ( 7 Contract-based 29 ( 15 ) 14 16 ( 7 ) 9 29 ( 15 ) 14 16 ( 7 ) 9 Total 15 ) 14 16 ( 7 ) 9 Total $ 23,490 14 16 ( 7 ) 9 Total $ 23,490 $ ( 7 ) 9 Total $ 23,490 $ ( 14,124 ) $ Total $ 23,490 $ ( 14,124 ) $ 9,366 $ 23,577 $ ( 14,124 ) $ 9,366 $ 23,577 $ ( 12,279 14,124 ) $ 9,366 $ 23,577 $ ( 12,279 ) $ 9,366 $ 23,577 $ ( 12,279 ) $ 11,298 No material $ ( 12,279 ) $ 11,298 No material impairment of intangible were identified during fiscal year 2023 , 2022 , or 2021 during fiscal year 2023 , 2022 , or 2021 . We 2023 , 2022 , or 2021 . We estimate that we Average Life Year Ended June 30 , 2023 2022 Technology-based $ Year Ended June 30 , 2023 2022 Technology-based $ 522 7 Ended June 30 , 2023 2022 Technology-based $ 522 7 year , 2023 2022 Technology-based $ 522 7 year $ 2,611 4 2023 2022 Technology-based $ 522 7 year $ 2,611 4 year $ 522 7 year $ 2,611 4 year Customer-related 0 0 522 7 year $ 2,611 4 year Customer-related 0 0 year $ 2,611 4 year Customer-related 0 0 year 2,837 9 year 2,611 4 year Customer-related 0 0 year 2,837 9 year Marketing-related year Customer-related 0 0 year 2,837 9 year Marketing-related 7 5 Customer-related 0 0 year 2,837 9 year Marketing-related 7 5 year year 2,837 9 year Marketing-related 7 5 year 233 4 year 2,837 9 year Marketing-related 7 5 year 233 4 year Contract-based year Marketing-related 7 5 year 233 4 year Contract-based 12 3 Marketing-related 7 5 year 233 4 year Contract-based 12 3 year year 233 4 year Contract-based 12 3 year 0 0 year 233 4 year Contract-based 12 3 year 0 0 year Total year Contract-based 12 3 year 0 0 year Total $ 541 Contract-based 12 3 year 0 0 year Total $ 541 6 0 0 year Total $ 541 6 year $ 5,681 7 0 year Total $ 541 6 year $ 5,681 7 year $ 541 6 year $ 5,681 7 year Intangible asset amortization 541 6 year $ 5,681 7 year Intangible asset amortization expense asset amortization expense wa $ 2.5 billion , $ 2.0 billion $ 2.5 billion , $ 2.0 billion , and $ 1.6 2.0 billion , and $ 1.6 billion for fiscal year 2023 1.6 billion for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . 80 PART and 2021 , respectively . 80 PART II Item 8 The . 80 PART II Item 8 The following table outline the asset held a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) million ) Year Ending June 30 , 2024 $ 2,363 2025 Year Ending June 30 , 2024 $ 2,363 2025 1,881 2026 June 30 , 2024 $ 2,363 2025 1,881 2026 1,381 2027 30 , 2024 $ 2,363 2025 1,881 2026 1,381 2027 929 , 2024 $ 2,363 2025 1,881 2026 1,381 2027 929 2028 2024 $ 2,363 2025 1,881 2026 1,381 2027 929 2028 652 $ 2,363 2025 1,881 2026 1,381 2027 929 2028 652 Thereafter 2,363 2025 1,881 2026 1,381 2027 929 2028 652 Thereafter 2,160 2025 1,881 2026 1,381 2027 929 2028 652 Thereafter 2,160 Total 1,881 2026 1,381 2027 929 2028 652 Thereafter 2,160 Total $ 2026 1,381 2027 929 2028 652 Thereafter 2,160 Total $ 9,366 2027 929 2028 652 Thereafter 2,160 Total $ 9,366 NOTE 11 652 Thereafter 2,160 Total $ 9,366 NOTE 11 — DEBT The 2,160 Total $ 9,366 NOTE 11 — DEBT The component of Rate Effective Interest Rate June 30 , 2023 June 30 , Interest Rate June 30 , 2023 June 30 , 2022 2009 June 30 , 2023 June 30 , 2022 2009 issuance of , 2023 June 30 , 2022 2009 issuance of $ 3.8 2023 June 30 , 2022 2009 issuance of $ 3.8 billion 2022 2009 issuance of $ 3.8 billion 2039 5.20 % 5.24 issuance of $ 3.8 billion 2039 5.20 % 5.24 % $ of $ 3.8 billion 2039 5.20 % 5.24 % $ 520 3.8 billion 2039 5.20 % 5.24 % $ 520 $ 520 5.20 % 5.24 % $ 520 $ 520 2010 issuance of 5.24 % $ 520 $ 520 2010 issuance of $ 4.8 % $ 520 $ 520 2010 issuance of $ 4.8 billion 520 2010 issuance of $ 4.8 billion 2040 4.50 % 4.57 issuance of $ 4.8 billion 2040 4.50 % 4.57 % 486 of $ 4.8 billion 2040 4.50 % 4.57 % 486 486 4.8 billion 2040 4.50 % 4.57 % 486 486 2011 issuance 2040 4.50 % 4.57 % 486 486 2011 issuance of $ 4.50 % 4.57 % 486 486 2011 issuance of $ 2.3 % 4.57 % 486 486 2011 issuance of $ 2.3 billion 486 2011 issuance of $ 2.3 billion 2041 5.30 % 5.36 issuance of $ 2.3 billion 2041 5.30 % 5.36 % 718 of $ 2.3 billion 2041 5.30 % 5.36 % 718 718 2.3 billion 2041 5.30 % 5.36 % 718 718 2012 issuance 2041 5.30 % 5.36 % 718 718 2012 issuance of $ 5.30 % 5.36 % 718 718 2012 issuance of $ 2.3 % 5.36 % 718 718 2012 issuance of $ 2.3 billion 718 2012 issuance of $ 2.3 billion 2042 3.50 % 3.57 issuance of $ 2.3 billion 2042 3.50 % 3.57 % 454 of $ 2.3 billion 2042 3.50 % 3.57 % 454 1,204 2.3 billion 2042 3.50 % 3.57 % 454 1,204 2013 issuance 2042 3.50 % 3.57 % 454 1,204 2013 issuance of $ 3.50 % 3.57 % 454 1,204 2013 issuance of $ 5.2 % 3.57 % 454 1,204 2013 issuance of $ 5.2 billion 1,204 2013 issuance of $ 5.2 billion 2023 – 2043 3.63 issuance of $ 5.2 billion 2023 – 2043 3.63 % – $ 5.2 billion 2023 – 2043 3.63 % – 4.88 % 5.2 billion 2023 – 2043 3.63 % – 4.88 % 3.73 – 2043 3.63 % – 4.88 % 3.73 % – 4.92 3.63 % – 4.88 % 3.73 % – 4.92 % 1,814 4.88 % 3.73 % – 4.92 % 1,814 2,814 2013 issuance 3.73 % – 4.92 % 1,814 2,814 2013 issuance of € % – 4.92 % 1,814 2,814 2013 issuance of € 4.1 – 4.92 % 1,814 2,814 2013 issuance of € 4.1 billion 2,814 2013 issuance of € 4.1 billion 2028 – 2033 2.63 issuance of € 4.1 billion 2028 – 2033 2.63 % – € 4.1 billion 2028 – 2033 2.63 % – 3.13 % 4.1 billion 2028 – 2033 2.63 % – 3.13 % 2.69 – 2033 2.63 % – 3.13 % 2.69 % – 3.22 2.63 % – 3.13 % 2.69 % – 3.22 % 2,509 3.13 % 2.69 % – 3.22 % 2,509 2,404 2015 issuance 2.69 % – 3.22 % 2,509 2,404 2015 issuance of $ % – 3.22 % 2,509 2,404 2015 issuance of $ 23.8 – 3.22 % 2,509 2,404 2015 issuance of $ 23.8 billion 2,404 2015 issuance of $ 23.8 billion 2025 – 2055 2.70 issuance of $ 23.8 billion 2025 – 2055 2.70 % – $ 23.8 billion 2025 – 2055 2.70 % – 4.75 % 23.8 billion 2025 – 2055 2.70 % – 4.75 % 2.77 – 2055 2.70 % – 4.75 % 2.77 % – 4.78 2.70 % – 4.75 % 2.77 % – 4.78 % 9,805 4.75 % 2.77 % – 4.78 % 9,805 10,805 2016 issuance 2.77 % – 4.78 % 9,805 10,805 2016 issuance of $ % – 4.78 % 9,805 10,805 2016 issuance of $ 19.8 – 4.78 % 9,805 10,805 2016 issuance of $ 19.8 billion 10,805 2016 issuance of $ 19.8 billion 2023 – 2056 2.00 issuance of $ 19.8 billion 2023 – 2056 2.00 % – $ 19.8 billion 2023 – 2056 2.00 % – 3.95 % 19.8 billion 2023 – 2056 2.00 % – 3.95 % 2.10 – 2056 2.00 % – 3.95 % 2.10 % – 4.03 2.00 % – 3.95 % 2.10 % – 4.03 % 9,430 3.95 % 2.10 % – 4.03 % 9,430 9,430 2017 issuance 2.10 % – 4.03 % 9,430 9,430 2017 issuance of $ % – 4.03 % 9,430 9,430 2017 issuance of $ 17.0 – 4.03 % 9,430 9,430 2017 issuance of $ 17.0 billion 9,430 2017 issuance of $ 17.0 billion 2024 – 2057 2.88 issuance of $ 17.0 billion 2024 – 2057 2.88 % – $ 17.0 billion 2024 – 2057 2.88 % – 4.50 % 17.0 billion 2024 – 2057 2.88 % – 4.50 % 3.04 – 2057 2.88 % – 4.50 % 3.04 % – 4.53 2.88 % – 4.50 % 3.04 % – 4.53 % 8,945 4.50 % 3.04 % – 4.53 % 8,945 8,945 2020 issuance 3.04 % – 4.53 % 8,945 8,945 2020 issuance of $ % – 4.53 % 8,945 8,945 2020 issuance of $ 10.0 – 4.53 % 8,945 8,945 2020 issuance of $ 10.0 billion 8,945 2020 issuance of $ 10.0 billion 2050 – 2060 2.53 issuance of $ 10.0 billion 2050 – 2060 2.53 % – $ 10.0 billion 2050 – 2060 2.53 % – 2.68 % 10.0 billion 2050 – 2060 2.53 % – 2.68 % 2.53 – 2060 2.53 % – 2.68 % 2.53 % – 2.68 2.53 % – 2.68 % 2.53 % – 2.68 % 10,000 2.68 % 2.53 % – 2.68 % 10,000 10,000 2021 issuance 2.53 % – 2.68 % 10,000 10,000 2021 issuance of $ % – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 billion 10,000 2021 issuance of $ 8.2 billion 2052 – 2062 2.92 issuance of $ 8.2 billion 2052 – 2062 2.92 % – $ 8.2 billion 2052 – 2062 2.92 % – 3.04 % 8.2 billion 2052 – 2062 2.92 % – 3.04 % 2.92 – 2062 2.92 % – 3.04 % 2.92 % – 3.04 2.92 % – 3.04 % 2.92 % – 3.04 % 8,185 3.04 % 2.92 % – 3.04 % 8,185 8,185 Total face 2.92 % – 3.04 % 8,185 8,185 Total face value 52,866 % – 3.04 % 8,185 8,185 Total face value 52,866 55,511 8,185 8,185 Total face value 52,866 55,511 Unamortized discount and issuance 8,185 Total face value 52,866 55,511 Unamortized discount and issuance cost discount and issuance cost ( 438 ) ( 471 ) Hedge cost ( 438 ) ( 471 ) Hedge fair value adjustment adjustment ( a ) ( 106 ) ( 68 ) Premium ) ( 106 ) ( 68 ) Premium on debt exchange Premium on debt exchange ( 5,085 ) ( 5,191 ) Total exchange ( 5,085 ) ( 5,191 ) Total debt 47,237 49,781 ( 5,191 ) Total debt 47,237 49,781 Current portion of long-term 5,191 ) Total debt 47,237 49,781 Current portion of long-term debt portion of long-term debt ( 5,247 ) ( 2,749 ) Long-term debt ( 5,247 ) ( 2,749 ) Long-term debt $ 41,990 2,749 ) Long-term debt $ 41,990 $ 47,032 ( a ) Long-term debt $ 41,990 $ 47,032 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information debt . As of June 30 , 2023 and 2022 , As of June 30 , 2023 and 2022 , the estimated June 30 , 2023 and 2022 , the estimated fair value current portion , wa $ 46.2 billion and $ 50.9 billion $ 46.2 billion and $ 50.9 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 wa $ 2023 , 2022 , and 2021 wa $ 1.7 billion , , and 2021 wa $ 1.7 billion , $ 1.9 billion $ 1.7 billion , $ 1.9 billion , and $ 2.0 1.9 billion , and $ 2.0 billion , respectively . 81 2.0 billion , respectively . 81 PART II Item 8 The . 81 PART II Item 8 The following table outline maturity portion , a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) million ) Year Ending June 30 , 2024 $ 5,250 2025 Year Ending June 30 , 2024 $ 5,250 2025 2,250 2026 June 30 , 2024 $ 5,250 2025 2,250 2026 3,000 2027 30 , 2024 $ 5,250 2025 2,250 2026 3,000 2027 8,000 , 2024 $ 5,250 2025 2,250 2026 3,000 2027 8,000 2028 2024 $ 5,250 2025 2,250 2026 3,000 2027 8,000 2028 0 $ 5,250 2025 2,250 2026 3,000 2027 8,000 2028 0 Thereafter 5,250 2025 2,250 2026 3,000 2027 8,000 2028 0 Thereafter 34,366 2025 2,250 2026 3,000 2027 8,000 2028 0 Thereafter 34,366 Total 2,250 2026 3,000 2027 8,000 2028 0 Thereafter 34,366 Total $ 2026 3,000 2027 8,000 2028 0 Thereafter 34,366 Total $ 52,866 2027 8,000 2028 0 Thereafter 34,366 Total $ 52,866 NOTE 12 0 Thereafter 34,366 Total $ 52,866 NOTE 12 — INCOME TAXES 34,366 Total $ 52,866 NOTE 12 — INCOME TAXES Provision for million ) Year Ended June 30 , 2023 2022 2021 Current Year Ended June 30 , 2023 2022 2021 Current Taxes U.S. Ended June 30 , 2023 2022 2021 Current Taxes U.S. federal June 30 , 2023 2022 2021 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 14,009 $ 8,329 $ 3,285 U.S. U.S. federal $ 14,009 $ 8,329 $ 3,285 U.S. state and $ 14,009 $ 8,329 $ 3,285 U.S. state and local 2,322 3,285 U.S. state and local 2,322 1,679 1,229 Foreign 6,678 6,672 U.S. state and local 2,322 1,679 1,229 Foreign 6,678 6,672 5,467 state and local 2,322 1,679 1,229 Foreign 6,678 6,672 5,467 Current local 2,322 1,679 1,229 Foreign 6,678 6,672 5,467 Current tax $ 2,322 1,679 1,229 Foreign 6,678 6,672 5,467 Current tax $ 23,009 1,679 1,229 Foreign 6,678 6,672 5,467 Current tax $ 23,009 $ 6,672 5,467 Current tax $ 23,009 $ 16,680 $ 9,981 Deferred Current tax $ 23,009 $ 16,680 $ 9,981 Deferred Taxes U.S. $ 23,009 $ 16,680 $ 9,981 Deferred Taxes U.S. federal $ Taxes U.S. federal $ ( 6,146 ) $ ( 4,815 ) ( 6,146 ) $ ( 4,815 ) $ 25 U.S. state $ ( 4,815 ) $ 25 U.S. state and local ( U.S. state and local ( 477 ) ( 1,062 ) ( local ( 477 ) ( 1,062 ) ( 204 ) Foreign ) ( 1,062 ) ( 204 ) Foreign 564 175 29 ) ( 204 ) Foreign 564 175 29 Deferred tax $ ( 204 ) Foreign 564 175 29 Deferred tax $ ( 204 ) Foreign 564 175 29 Deferred tax $ ( 6,059 29 Deferred tax $ ( 6,059 ) $ ( 5,702 ) ( 6,059 ) $ ( 5,702 ) $ ( 150 ) ( 5,702 ) $ ( 150 ) Provision for income tax Provision for income tax $ 16,950 $ 10,978 $ 9,831 82 income tax $ 16,950 $ 10,978 $ 9,831 82 PART II $ 16,950 $ 10,978 $ 9,831 82 PART II Item 8 16,950 $ 10,978 $ 9,831 82 PART II Item 8 U.S. 9,831 82 PART II Item 8 U.S. and foreign component of million ) Year Ended June 30 , 2023 2022 2021 U.S. Year Ended June 30 , 2023 2022 2021 U.S. $ 52,917 Ended June 30 , 2023 2022 2021 U.S. $ 52,917 $ June 30 , 2023 2022 2021 U.S. $ 52,917 $ 47,837 2023 2022 2021 U.S. $ 52,917 $ 47,837 $ 34,972 Foreign 2021 U.S. $ 52,917 $ 47,837 $ 34,972 Foreign 36,394 35,879 $ 52,917 $ 47,837 $ 34,972 Foreign 36,394 35,879 36,130 Income $ 47,837 $ 34,972 Foreign 36,394 35,879 36,130 Income before income 47,837 $ 34,972 Foreign 36,394 35,879 36,130 Income before income tax $ 34,972 Foreign 36,394 35,879 36,130 Income before income tax $ Income before income tax $ 89,311 $ 83,716 $ 71,102 Effective income tax $ 89,311 $ 83,716 $ 71,102 Effective Tax Rate $ 89,311 $ 83,716 $ 71,102 Effective Tax Rate The item follows : Year Ended June 30 , 2023 2022 2021 Federal Year Ended June 30 , 2023 2022 2021 Federal statutory rate Ended June 30 , 2023 2022 2021 Federal statutory rate 21.0 June 30 , 2023 2022 2021 Federal statutory rate 21.0 % 2022 2021 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 1.8 ) % ( 1.3 ) ( 1.8 ) % ( 1.3 ) % ( 2.7 ) ( 1.3 ) % ( 2.7 ) % Impact of intangible Impact of intangible property transfer 0 % ( 3.9 ) % property transfer 0 % ( 3.9 ) % 0 % Foreign-derived % ( 3.9 ) % 0 % Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 1.3 ) % ( 1.1 ) ( 1.3 ) % ( 1.1 ) % ( 1.3 ) ( 1.1 ) % ( 1.3 ) % State income tax , net of federal benefit 1.6 % 1.4 % 1.4 % of federal benefit 1.6 % 1.4 % 1.4 % Research and benefit 1.6 % 1.4 % 1.4 % Research and development credit Research and development credit ( 1.1 ) % ( 0.9 ) ( 1.1 ) % ( 0.9 ) % ( 0.9 ) ( 0.9 ) % ( 0.9 ) % Excess tax benefit relating to stock-based compensation ( 0.7 ) % ( 1.9 ) ( 0.7 ) % ( 1.9 ) % ( 2.4 ) ( 1.9 ) % ( 2.4 ) % Interest , net ) % Interest , net 0.8 % 0.5 % 0.5 % Interest , net 0.8 % 0.5 % 0.5 % Other reconciling net 0.8 % 0.5 % 0.5 % Other reconciling item , Other reconciling item , net 0.5 % ( 0.7 ) % , net 0.5 % ( 0.7 ) % ( 1.8 ) ( 0.7 ) % ( 1.8 ) % Effective rate 19.0 1.8 ) % Effective rate 19.0 % 13.1 % 13.8 % % Effective rate 19.0 % 13.1 % 13.8 % In the rate 19.0 % 13.1 % 13.8 % In the first quarter first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of in India . In March 2021 , the India Supreme Court Income Tax for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . The decrease from the statutory rate in fiscal year 2023 is primarily due to earnings statutory rate in fiscal year 2022 is primarily due to the statutory rate in fiscal year 2021 is primarily due to earnings tax . In fiscal year 2023 , our foreign regional operating the U.S. rate , generated 81 % of our foreign income tax . In fiscal year 2022 and 2021 , our foreign In fiscal year 2022 and 2021 , our foreign regional operating the U.S. rate , generated 71 % and 82 % of , generated 71 % and 82 % of our foreign income , and in fiscal year 2021 , includes tax benefit from tax . In fiscal year 2023 , 2022 , and 2021 In fiscal year 2023 , 2022 , and 2021 , there 2023 , 2022 , and 2021 , there were no individually significant other reconciling item . 83 PART II Item 8 The . 83 PART II Item 8 The increase in our effective tax rate for fiscal year 2023 compared to fiscal year 2022 2023 compared to fiscal year 2022 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2022 compared to fiscal year 2021 2022 compared to fiscal year 2021 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of ( In million ) June 30 , 2023 2022 Deferred Income million ) June 30 , 2023 2022 Deferred Income Tax Assets ) June 30 , 2023 2022 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 681 $ 601 Accruals , reserve compensation expense $ 681 $ 601 Accruals , reserve , and reserve , and other expense 3,131 2,874 Loss and credit carryforwards , and other expense 3,131 2,874 Loss and credit carryforwards 1,441 2,874 Loss and credit carryforwards 1,441 1,546 Amortization ( a ) Loss and credit carryforwards 1,441 1,546 Amortization ( a ) 9,440 1,546 Amortization ( a ) 9,440 10,183 Leasing liability 5,041 4,557 Amortization ( a ) 9,440 10,183 Leasing liability 5,041 4,557 Unearned ) 9,440 10,183 Leasing liability 5,041 4,557 Unearned revenue 3,296 2,876 9,440 10,183 Leasing liability 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax liability 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax basis difference in 5,041 4,557 Unearned revenue 3,296 2,876 Book/tax basis difference in investment difference in investment and debt 373 0 Capitalized research and development in investment and debt 373 0 Capitalized research and development ( and development ( a ) 6,958 473 Other 489 461 Deferred development ( a ) 6,958 473 Other 489 461 Deferred income a ) 6,958 473 Other 489 461 Deferred income tax asset ) 6,958 473 Other 489 461 Deferred income tax asset 30,850 461 Deferred income tax asset 30,850 23,571 Less valuation allowance ( Deferred income tax asset 30,850 23,571 Less valuation allowance ( 939 23,571 Less valuation allowance ( 939 ) ( 1,012 ) Deferred allowance ( 939 ) ( 1,012 ) Deferred income tax asset net of valuation allowance $ 29,911 $ 22,559 Deferred Income Tax valuation allowance $ 29,911 $ 22,559 Deferred Income Tax Liabilities Book/tax in investment and debt $ 0 $ ( 174 ) Leasing debt $ 0 $ ( 174 ) Leasing asset ( 4,680 174 ) Leasing asset ( 4,680 ) ( 4,291 ) Depreciation asset ( 4,680 ) ( 4,291 ) Depreciation ( 2,674 ) ( 4,291 ) Depreciation ( 2,674 ) ( 1,602 ) Deferred Depreciation ( 2,674 ) ( 1,602 ) Deferred tax on foreign tax on foreign earnings ( 2,738 ) ( 3,104 ) Other earnings ( 2,738 ) ( 3,104 ) Other ( 89 ) ( 3,104 ) Other ( 89 ) ( 103 ) Deferred Other ( 89 ) ( 103 ) Deferred income tax liability income tax liability $ ( 10,181 ) $ ( 9,274 ) ( 10,181 ) $ ( 9,274 ) Net deferred income tax deferred income tax asset $ 19,730 $ 13,285 Reported As Other tax asset $ 19,730 $ 13,285 Reported As Other long-term asset As Other long-term asset $ 20,163 $ 13,515 Long-term deferred income long-term asset $ 20,163 $ 13,515 Long-term deferred income tax liability deferred income tax liability ( 433 ) ( 230 ) Net liability ( 433 ) ( 230 ) Net deferred income tax deferred income tax asset $ 19,730 $ 13,285 ( a ) tax asset $ 19,730 $ 13,285 ( a ) Provisions enacted expenditure became effective on July 1 , 2022 . These provision effective on July 1 , 2022 . These provision require u recovered . As of June 30 , 2023 , we had As of June 30 , 2023 , we had federal , operating loss carryforwards of $ 509 million , $ 1.2 billion $ 509 million , $ 1.2 billion , and $ 2.3 1.2 billion , and $ 2.3 billion , respectively . The date ranging from fiscal year 2024 to 2043 or indefinite carryforward from fiscal year 2024 to 2043 or indefinite carryforward period , allowance . As of June 30 , 2023 , we had As of June 30 , 2023 , we had $ 456 2023 , we had $ 456 million federal capital loss carryforwards will expire in fiscal year 2025 . 84 PART II Item in fiscal year 2025 . 84 PART II Item 8 The . 84 PART II Item 8 The valuation allowance disclosed in of refund , were $ 23.1 billion , $ 16.0 billion $ 23.1 billion , $ 16.0 billion , and $ 13.4 16.0 billion , and $ 13.4 billion in fiscal year 2023 13.4 billion in fiscal year 2023 , 2022 , and 2021 in fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . Uncertain Tax tax position a of June 30 , 2023 , 2022 , a of June 30 , 2023 , 2022 , and 2021 June 30 , 2023 , 2022 , and 2021 , were 2023 , 2022 , and 2021 , were $ 17.1 billion and 2021 , were $ 17.1 billion , $ 15.6 billion $ 17.1 billion , $ 15.6 billion , and $ 14.6 15.6 billion , and $ 14.6 billion , respectively , which tax rate for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 by $ 2023 , 2022 , and 2021 by $ 14.4 billion , , and 2021 by $ 14.4 billion , $ 13.3 billion $ 14.4 billion , $ 13.3 billion , and $ 12.5 13.3 billion , and $ 12.5 billion , respectively . As respectively . As of June 30 , 2023 , 2022 , As of June 30 , 2023 , 2022 , and 2021 June 30 , 2023 , 2022 , and 2021 , we 2023 , 2022 , and 2021 , we had accrued interest uncertain tax position of $ 5.2 billion , $ 4.3 billion $ 5.2 billion , $ 4.3 billion , and $ 4.3 4.3 billion , and $ 4.3 billion , respectively , net income tax for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 included interest 2023 , 2022 , and 2021 included interest expense related to uncertain tax position of $ 918 million , $ 36 million $ 918 million , $ 36 million , and $ 274 36 million , and $ 274 million , respectively , net million ) Year Ended June 30 , 2023 2022 2021 Beginning Year Ended June 30 , 2023 2022 2021 Beginning unrecognized tax Ended June 30 , 2023 2022 2021 Beginning unrecognized tax benefit June 30 , 2023 2022 2021 Beginning unrecognized tax benefit $ Beginning unrecognized tax benefit $ 15,593 $ 14,550 $ 13,792 Decreases tax benefit $ 15,593 $ 14,550 $ 13,792 Decreases related to $ 15,593 $ 14,550 $ 13,792 Decreases related to settlement ( Decreases related to settlement ( 329 ) ( 317 ) ( settlement ( 329 ) ( 317 ) ( 195 ) Increases ) ( 317 ) ( 195 ) Increases for tax position related to the current year 1,051 1,145 790 Increases for tax to the current year 1,051 1,145 790 Increases for tax position the current year 1,051 1,145 790 Increases for tax position related position related to prior year 870 461 461 Decreases for tax related to prior year 870 461 461 Decreases for tax position to prior year 870 461 461 Decreases for tax position related related to prior year ( 60 ) ( 246 ) ( year ( 60 ) ( 246 ) ( 297 ) Decreases ) ( 246 ) ( 297 ) Decreases due to lapsed lapsed statute of limitation ( 5 ) 0 ( 1 ) of limitation ( 5 ) 0 ( 1 ) Ending unrecognized ( 5 ) 0 ( 1 ) Ending unrecognized tax benefit Ending unrecognized tax benefit $ 17,120 $ 15,593 $ 14,550 We tax benefit $ 17,120 $ 15,593 $ 14,550 We settled a $ 17,120 $ 15,593 $ 14,550 We settled a portion of ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . As of for tax year 2004 to 2017 . As of June 30 2017 . As of June 30 , 2023 , the primary As of June 30 , 2023 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2022 , some of for tax year 1996 to 2022 , some of which are our consolidated financial statement . 85 PART II Item 8 NOTE . 85 PART II Item 8 NOTE 13 — UNEARNED REVENUE PART II Item 8 NOTE 13 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2023 2022 Productivity and million ) June 30 , 2023 2022 Productivity and Business Processes ) June 30 , 2023 2022 Productivity and Business Processes $ Productivity and Business Processes $ 27,572 $ 24,558 Intelligent Cloud 21,563 Business Processes $ 27,572 $ 24,558 Intelligent Cloud 21,563 19,371 More 27,572 $ 24,558 Intelligent Cloud 21,563 19,371 More Personal Computing 4,678 $ 24,558 Intelligent Cloud 21,563 19,371 More Personal Computing 4,678 4,479 21,563 19,371 More Personal Computing 4,678 4,479 Total $ 53,813 $ 19,371 More Personal Computing 4,678 4,479 Total $ 53,813 $ 48,408 Computing 4,678 4,479 Total $ 53,813 $ 48,408 Changes in unearned 4,479 Total $ 53,813 $ 48,408 Changes in unearned revenue were million ) Year Ended June 30 , 2023 Balance , beginning Year Ended June 30 , 2023 Balance , beginning of period , beginning of period $ 48,408 Deferral of revenue 123,935 Recognition $ 48,408 Deferral of revenue 123,935 Recognition of unearned revenue ( Recognition of unearned revenue ( 118,530 ) Balance , end of , end of period $ 53,813 Revenue allocated to remaining performance future period , wa $ 229 billion a of June 30 229 billion a of June 30 , 2023 , of which a of June 30 , 2023 , of which $ 224 2023 , of which $ 224 billion is related to the We expect to recognize approximately 45 % of this revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 — LEASES We have operating lease term of le than 1 year to 18 year , le than 1 year to 18 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2023 2022 2021 Operating Year Ended June 30 , 2023 2022 2021 Operating lease cost Ended June 30 , 2023 2022 2021 Operating lease cost $ June 30 , 2023 2022 2021 Operating lease cost $ 2,875 2021 Operating lease cost $ 2,875 $ 2,461 $ 2,127 Finance lease cost $ 2,875 $ 2,461 $ 2,127 Finance lease cost $ 2,875 $ 2,461 $ 2,127 Finance lease cost : Amortization Amortization of right-of-use asset $ 1,352 $ 980 $ 921 Interest right-of-use asset $ 1,352 $ 980 $ 921 Interest on lease $ 1,352 $ 980 $ 921 Interest on lease liability 501 921 Interest on lease liability 501 429 386 Total finance lease Interest on lease liability 501 429 386 Total finance lease cost on lease liability 501 429 386 Total finance lease cost $ Total finance lease cost $ 1,853 $ 1,409 $ 1,307 Supplemental lease cost $ 1,853 $ 1,409 $ 1,307 Supplemental cash flow $ 1,853 $ 1,409 $ 1,307 Supplemental cash flow information related million ) Year Ended June 30 , 2023 2022 2021 Cash Year Ended June 30 , 2023 2022 2021 Cash paid for Ended June 30 , 2023 2022 2021 Cash paid for amount June 30 , 2023 2022 2021 Cash paid for amount included flow from operating lease $ 2,706 $ 2,368 $ 2,052 Operating operating lease $ 2,706 $ 2,368 $ 2,052 Operating cash flow $ 2,706 $ 2,368 $ 2,052 Operating cash flow from finance cash flow from finance lease 501 429 386 Financing cash flow flow from finance lease 501 429 386 Financing cash flow from from finance lease 501 429 386 Financing cash flow from finance cash flow from finance lease 1,056 896 648 Right-of-use asset obtained flow from finance lease 1,056 896 648 Right-of-use asset obtained in from finance lease 1,056 896 648 Right-of-use asset obtained in exchange lease obligation : Operating lease 3,514 5,268 4,380 Finance lease 3,128 obligation : Operating lease 3,514 5,268 4,380 Finance lease 3,128 4,234 : Operating lease 3,514 5,268 4,380 Finance lease 3,128 4,234 3,290 3,514 5,268 4,380 Finance lease 3,128 4,234 3,290 86 PART II 5,268 4,380 Finance lease 3,128 4,234 3,290 86 PART II Item 4,380 Finance lease 3,128 4,234 3,290 86 PART II Item 8 Finance lease 3,128 4,234 3,290 86 PART II Item 8 Supplemental 3,290 86 PART II Item 8 Supplemental balance sheet information related and discount rate ) June 30 , 2023 2022 Operating Leases rate ) June 30 , 2023 2022 Operating Leases Operating lease ) June 30 , 2023 2022 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 14,346 $ 13,148 Other current liability right-of-use asset $ 14,346 $ 13,148 Other current liability $ 2,409 13,148 Other current liability $ 2,409 $ 2,228 Operating lease liability current liability $ 2,409 $ 2,228 Operating lease liability 12,728 11,489 $ 2,228 Operating lease liability 12,728 11,489 Total operating lease liability 2,228 Operating lease liability 12,728 11,489 Total operating lease liability $ Total operating lease liability $ 15,137 $ 13,717 Finance Leases Property lease liability $ 15,137 $ 13,717 Finance Leases Property and equipment equipment , at cost $ 20,538 $ 17,388 Accumulated depreciation ( at cost $ 20,538 $ 17,388 Accumulated depreciation ( 4,647 ) $ 17,388 Accumulated depreciation ( 4,647 ) ( 3,285 ) Property depreciation ( 4,647 ) ( 3,285 ) Property and equipment , and equipment , net $ 15,891 $ 14,103 Other current liability , net $ 15,891 $ 14,103 Other current liability $ 1,197 14,103 Other current liability $ 1,197 $ 1,060 Other long-term liability current liability $ 1,197 $ 1,060 Other long-term liability 15,870 13,842 $ 1,060 Other long-term liability 15,870 13,842 Total finance lease liability 1,060 Other long-term liability 15,870 13,842 Total finance lease liability $ Total finance lease liability $ 17,067 $ 14,902 Weighted Average Remaining lease liability $ 17,067 $ 14,902 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 8 year 8 year Finance lease Term Operating lease 8 year 8 year Finance lease 11 year year 8 year Finance lease 11 year 12 year Weighted Average year Finance lease 11 year 12 year Weighted Average Discount Rate Average Discount Rate Operating lease 2.9 % 2.1 % Finance lease Rate Operating lease 2.9 % 2.1 % Finance lease 3.4 % % 2.1 % Finance lease 3.4 % 3.1 % The following % Finance lease 3.4 % 3.1 % The following table outline lease liability a of June 30 , 2023 : ( In a of June 30 , 2023 : ( In million ) million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2024 $ 2,784 $ 1,747 2025 Leases Finance Leases 2024 $ 2,784 $ 1,747 2025 2,508 2,087 Leases 2024 $ 2,784 $ 1,747 2025 2,508 2,087 2026 2,142 2024 $ 2,784 $ 1,747 2025 2,508 2,087 2026 2,142 1,771 $ 2,784 $ 1,747 2025 2,508 2,087 2026 2,142 1,771 2027 2,784 $ 1,747 2025 2,508 2,087 2026 2,142 1,771 2027 1,757 $ 1,747 2025 2,508 2,087 2026 2,142 1,771 2027 1,757 1,780 1,747 2025 2,508 2,087 2026 2,142 1,771 2027 1,757 1,780 2028 2025 2,508 2,087 2026 2,142 1,771 2027 1,757 1,780 2028 1,582 2,508 2,087 2026 2,142 1,771 2027 1,757 1,780 2028 1,582 1,787 2,087 2026 2,142 1,771 2027 1,757 1,780 2028 1,582 1,787 Thereafter 2026 2,142 1,771 2027 1,757 1,780 2028 1,582 1,787 Thereafter 6,327 2,142 1,771 2027 1,757 1,780 2028 1,582 1,787 Thereafter 6,327 11,462 1,771 2027 1,757 1,780 2028 1,582 1,787 Thereafter 6,327 11,462 Total 2027 1,757 1,780 2028 1,582 1,787 Thereafter 6,327 11,462 Total lease 1,780 2028 1,582 1,787 Thereafter 6,327 11,462 Total lease payment 17,100 2028 1,582 1,787 Thereafter 6,327 11,462 Total lease payment 17,100 20,634 6,327 11,462 Total lease payment 17,100 20,634 Less imputed interest ( 11,462 Total lease payment 17,100 20,634 Less imputed interest ( 1,963 20,634 Less imputed interest ( 1,963 ) ( 3,567 ) Total interest ( 1,963 ) ( 3,567 ) Total $ 15,137 $ ( 3,567 ) Total $ 15,137 $ 17,067 As of June ) Total $ 15,137 $ 17,067 As of June 30 , $ 17,067 As of June 30 , 2023 , we have As of June 30 , 2023 , we have additional operating not yet commenced of $ 7.7 billion and $ 34.4 billion $ 7.7 billion and $ 34.4 billion , respectively . These will commence between fiscal year 2024 and fiscal year 2030 with year 2024 and fiscal year 2030 with lease term of 1 2030 with lease term of 1 year to 18 year . term of 1 year to 18 year . 87 PART II year to 18 year . 87 PART II Item 8 NOTE . 87 PART II Item 8 NOTE 15 — CONTINGENCIES U.S PART II Item 8 NOTE 15 — CONTINGENCIES U.S . Cell , is a defendant in 46 lawsuit , including 45 lawsuit in 46 lawsuit , including 45 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted scientific evidence . In October 2016 , the Court of Appeals took place in September of 2022 . In April of 2023 2022 . In April of 2023 , the court granted defendant Data Protection Commission Matter In 2018 , the Irish Data Protection of inquiry . In April 2023 , the IDPC provided LinkedIn future . As of June 30 , 2023 , we accrued As of June 30 , 2023 , we accrued aggregate legal aggregate legal liability of $ 617 million . While we intend estimate could reach approximately $ 600 million in aggregate beyond recorded effect become reasonably estimable . 88 PART II Item 8 NOTE . 88 PART II Item 8 NOTE 16 — STOCKHOLDERS ’ PART II Item 8 NOTE 16 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2023 2022 2021 Balance Year Ended June 30 , 2023 2022 2021 Balance , beginning Ended June 30 , 2023 2022 2021 Balance , beginning of June 30 , 2023 2022 2021 Balance , beginning of year Balance , beginning of year 7,464 7,519 7,571 Issued 37 40 , beginning of year 7,464 7,519 7,571 Issued 37 40 49 beginning of year 7,464 7,519 7,571 Issued 37 40 49 Repurchased year 7,464 7,519 7,571 Issued 37 40 49 Repurchased ( 69 7,464 7,519 7,571 Issued 37 40 49 Repurchased ( 69 ) 7,519 7,571 Issued 37 40 49 Repurchased ( 69 ) ( 37 40 49 Repurchased ( 69 ) ( 95 ) ( Repurchased ( 69 ) ( 95 ) ( 101 ) Balance ) ( 95 ) ( 101 ) Balance , end of Balance , end of year 7,432 7,464 7,519 Share Repurchases On , end of year 7,432 7,464 7,519 Share Repurchases On September end of year 7,432 7,464 7,519 Share Repurchases On September 18 7,519 Share Repurchases On September 18 , 2019 , our Board Repurchases On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 and wa completed in November and wa completed in November 2021 . On September 14 , November 2021 . On September 14 , 2021 , our Board . On September 14 , 2021 , our Board of Directors program authorizing up to $ 60.0 billion in share repurchase . repurchase program commenced in November 2021 , following completion of the the program approved on September 18 , 2019 , ha no approved on September 18 , 2019 , ha no expiration date time . As of June 30 , 2023 , $ 22.3 As of June 30 , 2023 , $ 22.3 billion remained 30 , 2023 , $ 22.3 billion remained of this $ billion remained of this $ 60.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2023 2022 2021 First Year Ended June 30 , 2023 2022 2021 First Quarter 17 Ended June 30 , 2023 2022 2021 First Quarter 17 $ June 30 , 2023 2022 2021 First Quarter 17 $ 4,600 2023 2022 2021 First Quarter 17 $ 4,600 21 $ 6,200 2021 First Quarter 17 $ 4,600 21 $ 6,200 25 $ First Quarter 17 $ 4,600 21 $ 6,200 25 $ 5,270 17 $ 4,600 21 $ 6,200 25 $ 5,270 Second Quarter $ 4,600 21 $ 6,200 25 $ 5,270 Second Quarter 20 21 $ 6,200 25 $ 5,270 Second Quarter 20 4,600 20 25 $ 5,270 Second Quarter 20 4,600 20 6,233 27 5,750 $ 5,270 Second Quarter 20 4,600 20 6,233 27 5,750 Third 5,270 Second Quarter 20 4,600 20 6,233 27 5,750 Third Quarter Second Quarter 20 4,600 20 6,233 27 5,750 Third Quarter 18 Quarter 20 4,600 20 6,233 27 5,750 Third Quarter 18 4,600 20 4,600 20 6,233 27 5,750 Third Quarter 18 4,600 26 6,233 27 5,750 Third Quarter 18 4,600 26 7,800 25 5,750 27 5,750 Third Quarter 18 4,600 26 7,800 25 5,750 Fourth 5,750 Third Quarter 18 4,600 26 7,800 25 5,750 Fourth Quarter Third Quarter 18 4,600 26 7,800 25 5,750 Fourth Quarter 14 Quarter 18 4,600 26 7,800 25 5,750 Fourth Quarter 14 4,600 18 4,600 26 7,800 25 5,750 Fourth Quarter 14 4,600 28 7,800 25 5,750 Fourth Quarter 14 4,600 28 7,800 24 6,200 25 5,750 Fourth Quarter 14 4,600 28 7,800 24 6,200 Total 5,750 Fourth Quarter 14 4,600 28 7,800 24 6,200 Total 69 Fourth Quarter 14 4,600 28 7,800 24 6,200 Total 69 $ Quarter 14 4,600 28 7,800 24 6,200 Total 69 $ 18,400 14 4,600 28 7,800 24 6,200 Total 69 $ 18,400 95 28 7,800 24 6,200 Total 69 $ 18,400 95 $ 28,033 24 6,200 Total 69 $ 18,400 95 $ 28,033 101 $ 6,200 Total 69 $ 18,400 95 $ 28,033 101 $ 22,970 69 $ 18,400 95 $ 28,033 101 $ 22,970 89 PART $ 18,400 95 $ 28,033 101 $ 22,970 89 PART II 95 $ 28,033 101 $ 22,970 89 PART II Item 8 $ 28,033 101 $ 22,970 89 PART II Item 8 All 22,970 89 PART II Item 8 All repurchase were made using Shares repurchased during fiscal year 2023 and the fourth and third third quarter of fiscal year 2022 were under the share repurchase repurchase program approved on September 14 , 2021 . Shares repurchased approved on September 14 , 2021 . Shares repurchased during the second quarter of fiscal year 2022 were under the share repurchase program approved on both September 14 , 2021 and September 18 on both September 14 , 2021 and September 18 , 2019 14 , 2021 and September 18 , 2019 . All other 2021 and September 18 , 2019 . All other share repurchased repurchase program approved on September 18 , 2019 . The above approved on September 18 , 2019 . The above table excludes of stock award of $ 3.8 billion , $ 4.7 billion $ 3.8 billion , $ 4.7 billion , and $ 4.4 4.7 billion , and $ 4.4 billion for fiscal year 2023 4.4 billion for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . Dividends Our Per Share Amount Fiscal Year 2023 ( In million ) September ( In million ) September 20 , 2022 November 17 , million ) September 20 , 2022 November 17 , 2022 December September 20 , 2022 November 17 , 2022 December 8 , , 2022 November 17 , 2022 December 8 , 2022 $ November 17 , 2022 December 8 , 2022 $ 0.68 $ , 2022 December 8 , 2022 $ 0.68 $ 5,066 November December 8 , 2022 $ 0.68 $ 5,066 November 29 , , 2022 $ 0.68 $ 5,066 November 29 , 2022 February $ 0.68 $ 5,066 November 29 , 2022 February 16 , $ 5,066 November 29 , 2022 February 16 , 2023 March November 29 , 2022 February 16 , 2023 March 9 , , 2022 February 16 , 2023 March 9 , 2023 0.68 February 16 , 2023 March 9 , 2023 0.68 5,059 March , 2023 March 9 , 2023 0.68 5,059 March 14 , 2023 March 9 , 2023 0.68 5,059 March 14 , 2023 March 9 , 2023 0.68 5,059 March 14 , 2023 May , 2023 0.68 5,059 March 14 , 2023 May 18 , 0.68 5,059 March 14 , 2023 May 18 , 2023 June March 14 , 2023 May 18 , 2023 June 8 , , 2023 May 18 , 2023 June 8 , 2023 0.68 May 18 , 2023 June 8 , 2023 0.68 5,054 June , 2023 June 8 , 2023 0.68 5,054 June 13 , 2023 June 8 , 2023 0.68 5,054 June 13 , 2023 June 8 , 2023 0.68 5,054 June 13 , 2023 August , 2023 0.68 5,054 June 13 , 2023 August 17 , 0.68 5,054 June 13 , 2023 August 17 , 2023 September June 13 , 2023 August 17 , 2023 September 14 , , 2023 August 17 , 2023 September 14 , 2023 0.68 August 17 , 2023 September 14 , 2023 0.68 5,054 Total , 2023 September 14 , 2023 0.68 5,054 Total $ 2.72 2023 September 14 , 2023 0.68 5,054 Total $ 2.72 $ September 14 , 2023 0.68 5,054 Total $ 2.72 $ 20,233 2023 0.68 5,054 Total $ 2.72 $ 20,233 Fiscal Year 2022 5,054 Total $ 2.72 $ 20,233 Fiscal Year 2022 September 14 2.72 $ 20,233 Fiscal Year 2022 September 14 , 2021 November 20,233 Fiscal Year 2022 September 14 , 2021 November 18 , Year 2022 September 14 , 2021 November 18 , 2021 December September 14 , 2021 November 18 , 2021 December 9 , , 2021 November 18 , 2021 December 9 , 2021 $ November 18 , 2021 December 9 , 2021 $ 0.62 $ , 2021 December 9 , 2021 $ 0.62 $ 4,652 December December 9 , 2021 $ 0.62 $ 4,652 December 7 , , 2021 $ 0.62 $ 4,652 December 7 , 2021 February $ 0.62 $ 4,652 December 7 , 2021 February 17 , $ 4,652 December 7 , 2021 February 17 , 2022 March December 7 , 2021 February 17 , 2022 March 10 , , 2021 February 17 , 2022 March 10 , 2022 0.62 February 17 , 2022 March 10 , 2022 0.62 4,645 March , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 May , 2022 0.62 4,645 March 14 , 2022 May 19 , 0.62 4,645 March 14 , 2022 May 19 , 2022 June March 14 , 2022 May 19 , 2022 June 9 , , 2022 May 19 , 2022 June 9 , 2022 0.62 May 19 , 2022 June 9 , 2022 0.62 4,632 June , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 August , 2022 0.62 4,632 June 14 , 2022 August 18 , 0.62 4,632 June 14 , 2022 August 18 , 2022 September June 14 , 2022 August 18 , 2022 September 8 , , 2022 August 18 , 2022 September 8 , 2022 0.62 August 18 , 2022 September 8 , 2022 0.62 4,621 Total , 2022 September 8 , 2022 0.62 4,621 Total $ 2.48 2022 September 8 , 2022 0.62 4,621 Total $ 2.48 $ September 8 , 2022 0.62 4,621 Total $ 2.48 $ 18,550 2022 0.62 4,621 Total $ 2.48 $ 18,550 The dividend declared 4,621 Total $ 2.48 $ 18,550 The dividend declared on June The dividend declared on June 13 , 2023 wa included in declared on June 13 , 2023 wa included in other current current liability a of June 30 , 2023 . 90 PART a of June 30 , 2023 . 90 PART II Item June 30 , 2023 . 90 PART II Item 8 NOTE . 90 PART II Item 8 NOTE 17 — ACCUMULATED OTHER PART II Item 8 NOTE 17 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2023 2022 2021 Derivatives Year Ended June 30 , 2023 2022 2021 Derivatives Balance , Ended June 30 , 2023 2022 2021 Derivatives Balance , beginning June 30 , 2023 2022 2021 Derivatives Balance , beginning of beginning of period $ ( 13 ) $ ( 19 ) ( 13 ) $ ( 19 ) $ ( 38 ) ( 19 ) $ ( 38 ) Unrealized gain ( loss net of tax of $ 9 , $ ( 15 ) $ 9 , $ ( 15 ) , and $ 9 15 ) , and $ 9 34 ( 57 ) 34 ) , and $ 9 34 ( 57 ) 34 Reclassification and $ 9 34 ( 57 ) 34 Reclassification adjustment for 9 34 ( 57 ) 34 Reclassification adjustment for ( gain expense ) , net ( 61 ) 79 ( 17 ) , net ( 61 ) 79 ( 17 ) Tax expense ( 61 ) 79 ( 17 ) Tax expense ( benefit in provision for income tax 13 ( 16 ) 2 Amounts for income tax 13 ( 16 ) 2 Amounts reclassified from tax 13 ( 16 ) 2 Amounts reclassified from accumulated other income ( loss ) ( 48 ) 63 ( 15 ) loss ) ( 48 ) 63 ( 15 ) Net change ( 48 ) 63 ( 15 ) Net change related to of tax of $ ( 4 ) , $ 1 , ( 4 ) , $ 1 , and $ 7 ( $ 1 , and $ 7 ( 14 ) 6 19 , and $ 7 ( 14 ) 6 19 Balance , $ 7 ( 14 ) 6 19 Balance , end of 7 ( 14 ) 6 19 Balance , end of period end of period $ ( 27 ) $ ( 13 ) ( 27 ) $ ( 13 ) $ ( 19 ) ( 13 ) $ ( 19 ) Investments Balance , beginning beginning of period $ ( 2,138 ) $ 3,222 $ 5,478 $ ( 2,138 ) $ 3,222 $ 5,478 Unrealized loss , 2,138 ) $ 3,222 $ 5,478 Unrealized loss , net of of tax of $ ( 393 ) , $ ( 1,440 393 ) , $ ( 1,440 ) , and $ ( ) , and $ ( 589 ) ( 1,523 ) ( $ ( 589 ) ( 1,523 ) ( 5,405 ) ( ) ( 1,523 ) ( 5,405 ) ( 2,216 ) Reclassification ) ( 5,405 ) ( 2,216 ) Reclassification adjustment for ( ( expense ) , net 99 57 ( 63 ) Tax expense ) , net 99 57 ( 63 ) Tax expense , net 99 57 ( 63 ) Tax expense ( benefit provision for income tax ( 20 ) ( 12 ) 13 tax ( 20 ) ( 12 ) 13 Amounts reclassified from 20 ) ( 12 ) 13 Amounts reclassified from accumulated other comprehensive income ( loss ) 79 45 ( 50 ) Net income ( loss ) 79 45 ( 50 ) Net change loss ) 79 45 ( 50 ) Net change related to of tax of $ ( 373 ) , $ ( 1,428 373 ) , $ ( 1,428 ) , and $ ( ) , and $ ( 602 ) ( 1,444 ) ( $ ( 602 ) ( 1,444 ) ( 5,360 ) ( ) ( 1,444 ) ( 5,360 ) ( 2,266 ) Cumulative ) ( 5,360 ) ( 2,266 ) Cumulative effect of accounting Cumulative effect of accounting change 0 0 10 Balance , end effect of accounting change 0 0 10 Balance , end of of accounting change 0 0 10 Balance , end of period end of period $ ( 3,582 ) $ ( 2,138 ) ( 3,582 ) $ ( 2,138 ) $ 3,222 Translation Adjustments $ ( 2,138 ) $ 3,222 Translation Adjustments and Other Balance beginning of period $ ( 2,527 ) $ ( 1,381 ) ( 2,527 ) $ ( 1,381 ) $ ( 2,254 ) ( 1,381 ) $ ( 2,254 ) Translation adjustment and other net of tax of $ 0 , $ 0 , and of $ 0 , $ 0 , and $ ( 9 0 , and $ ( 9 ) ( 207 ) ( $ ( 9 ) ( 207 ) ( 1,146 ) 873 ) ( 207 ) ( 1,146 ) 873 Balance , end 207 ) ( 1,146 ) 873 Balance , end of period end of period $ ( 2,734 ) $ ( 2,527 ) ( 2,734 ) $ ( 2,527 ) $ ( 1,381 ) ( 2,527 ) $ ( 1,381 ) Accumulated other comprehensive income end of period $ ( 6,343 ) $ ( 4,678 ) ( 6,343 ) $ ( 4,678 ) $ 1,822 NOTE 18 $ ( 4,678 ) $ 1,822 NOTE 18 — EMPLOYEE STOCK 4,678 ) $ 1,822 NOTE 18 — EMPLOYEE STOCK AND SAVINGS million ) Year Ended June 30 , 2023 2022 2021 Stock-based Year Ended June 30 , 2023 2022 2021 Stock-based compensation expense Ended June 30 , 2023 2022 2021 Stock-based compensation expense $ June 30 , 2023 2022 2021 Stock-based compensation expense $ 9,611 2021 Stock-based compensation expense $ 9,611 $ 7,502 $ 6,118 Income compensation expense $ 9,611 $ 7,502 $ 6,118 Income tax benefit $ 9,611 $ 7,502 $ 6,118 Income tax benefit related to benefit related to stock-based compensation 1,651 1,293 1,065 Stock Plans Stock related to stock-based compensation 1,651 1,293 1,065 Stock Plans Stock award to stock-based compensation 1,651 1,293 1,065 Stock Plans Stock award entitle year or five year . 91 PART II Item 8 Executive . 91 PART II Item 8 Executive Incentive Plan Under the assumption : Year ended June 30 , 2023 2022 2021 Dividends Year ended June 30 , 2023 2022 2021 Dividends per share ended June 30 , 2023 2022 2021 Dividends per share ( June 30 , 2023 2022 2021 Dividends per share ( quarterly ( quarterly amount ) $ 0.62 – 0.68 $ 0.56 – amount ) $ 0.62 – 0.68 $ 0.56 – 0.62 $ $ 0.62 – 0.68 $ 0.56 – 0.62 $ 0.51 – – 0.68 $ 0.56 – 0.62 $ 0.51 – 0.56 Interest $ 0.56 – 0.62 $ 0.51 – 0.56 Interest rate 2.0 – 0.62 $ 0.51 – 0.56 Interest rate 2.0 % – 0.51 – 0.56 Interest rate 2.0 % – 5.4 % 0.03 Interest rate 2.0 % – 5.4 % 0.03 % – 3.6 2.0 % – 5.4 % 0.03 % – 3.6 % 0.01 5.4 % 0.03 % – 3.6 % 0.01 % – 1.5 0.03 % – 3.6 % 0.01 % – 1.5 % During 3.6 % 0.01 % – 1.5 % During fiscal year 2023 1.5 % During fiscal year 2023 , the following activity occurred balance , beginning of year 93 $ 227.59 Granted ( a beginning of year 93 $ 227.59 Granted ( a ) 56 227.59 Granted ( a ) 56 252.59 Vested ( 44 ) Granted ( a ) 56 252.59 Vested ( 44 ) 206.90 ) 56 252.59 Vested ( 44 ) 206.90 Forfeited ( 9 252.59 Vested ( 44 ) 206.90 Forfeited ( 9 ) 239.93 44 ) 206.90 Forfeited ( 9 ) 239.93 Nonvested balance , 206.90 Forfeited ( 9 ) 239.93 Nonvested balance , end of balance , end of year 96 $ 250.37 ( a ) end of year 96 $ 250.37 ( a ) Includes 1 250.37 ( a ) Includes 1 million , 1 million , ) Includes 1 million , 1 million , and 2 million , 1 million , and 2 million of PSUs granted at target level for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . As of respectively . As of June 30 , 2023 , total unrecognized As of June 30 , 2023 , total unrecognized compensation cost to stock award were $ 18.6 billion . These cost are stock award granted wa $ 252.59 , $ 291.22 , and wa $ 252.59 , $ 291.22 , and $ 221.13 for $ 291.22 , and $ 221.13 for fiscal year 2023 , $ 221.13 for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . The fair stock award vested wa $ 11.9 billion , $ 14.1 billion $ 11.9 billion , $ 14.1 billion , and $ 13.4 14.1 billion , and $ 13.4 billion , for fiscal year billion , for fiscal year 2023 , 2022 , and 2021 for fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . As of respectively . As of June 30 , 2023 , an aggregate As of June 30 , 2023 , an aggregate of 164 2023 , an aggregate of 164 million share were authorized for employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2023 2022 2021 Shares Year Ended June 30 , 2023 2022 2021 Shares purchased 7 Ended June 30 , 2023 2022 2021 Shares purchased 7 7 June 30 , 2023 2022 2021 Shares purchased 7 7 8 2023 2022 2021 Shares purchased 7 7 8 Average price per 2022 2021 Shares purchased 7 7 8 Average price per share 2021 Shares purchased 7 7 8 Average price per share $ Average price per share $ 245.59 $ 259.55 $ 207.88 As per share $ 245.59 $ 259.55 $ 207.88 As of June $ 245.59 $ 259.55 $ 207.88 As of June 30 , $ 207.88 As of June 30 , 2023 , 74 million As of June 30 , 2023 , 74 million share of June 30 , 2023 , 74 million share of our common issuance through the ESPP . 92 PART II Item 8 Savings . 92 PART II Item 8 Savings Plans We have saving U.S. that qualify under Section 401 ( k ) of the for all plan were $ 1.6 billion , $ 1.4 billion $ 1.6 billion , $ 1.4 billion , and $ 1.2 1.4 billion , and $ 1.2 billion in fiscal year 2023 1.2 billion in fiscal year 2023 , 2022 , and 2021 in fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively , and were expensed a contributed . NOTE 19 — SEGMENT INFORMATION AND GEOGRAPHIC • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , Microsoft Microsoft Viva , and Microsoft 365 Copilot . • Office Consumer Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of , and PC accessory . 93 PART II Item 8 • . 93 PART II Item 8 • Gaming , including Xbox million ) Year Ended June 30 , 2023 2022 2021 Revenue Year Ended June 30 , 2023 2022 2021 Revenue Productivity and Ended June 30 , 2023 2022 2021 Revenue Productivity and Business June 30 , 2023 2022 2021 Revenue Productivity and Business Processes Productivity and Business Processes $ 69,274 $ 63,364 $ 53,915 Intelligent Business Processes $ 69,274 $ 63,364 $ 53,915 Intelligent Cloud 87,907 $ 69,274 $ 63,364 $ 53,915 Intelligent Cloud 87,907 74,965 59,728 63,364 $ 53,915 Intelligent Cloud 87,907 74,965 59,728 More Personal Computing $ 53,915 Intelligent Cloud 87,907 74,965 59,728 More Personal Computing 54,734 53,915 Intelligent Cloud 87,907 74,965 59,728 More Personal Computing 54,734 59,941 74,965 59,728 More Personal Computing 54,734 59,941 54,445 Total $ 211,915 59,728 More Personal Computing 54,734 59,941 54,445 Total $ 211,915 $ More Personal Computing 54,734 59,941 54,445 Total $ 211,915 $ 198,270 54,734 59,941 54,445 Total $ 211,915 $ 198,270 $ 168,088 Operating 54,445 Total $ 211,915 $ 198,270 $ 168,088 Operating Income Productivity $ 211,915 $ 198,270 $ 168,088 Operating Income Productivity and Business Productivity and Business Processes $ 34,189 $ 29,690 $ 24,351 Intelligent Business Processes $ 34,189 $ 29,690 $ 24,351 Intelligent Cloud 37,884 $ 34,189 $ 29,690 $ 24,351 Intelligent Cloud 37,884 33,203 26,471 29,690 $ 24,351 Intelligent Cloud 37,884 33,203 26,471 More Personal Computing $ 24,351 Intelligent Cloud 37,884 33,203 26,471 More Personal Computing 16,450 24,351 Intelligent Cloud 37,884 33,203 26,471 More Personal Computing 16,450 20,490 33,203 26,471 More Personal Computing 16,450 20,490 19,094 Total $ 88,523 26,471 More Personal Computing 16,450 20,490 19,094 Total $ 88,523 $ More Personal Computing 16,450 20,490 19,094 Total $ 88,523 $ 83,383 16,450 20,490 19,094 Total $ 88,523 $ 83,383 $ 69,916 No 19,094 Total $ 88,523 $ 83,383 $ 69,916 No sale to $ 88,523 $ 83,383 $ 69,916 No sale to an individual States accounted for more than 10 % of revenue for fiscal of revenue for fiscal year 2023 , 2022 , or 2021 for fiscal year 2023 , 2022 , or 2021 . Revenue 2023 , 2022 , or 2021 . Revenue , classified by million ) Year Ended June 30 , 2023 2022 2021 United Year Ended June 30 , 2023 2022 2021 United States ( Ended June 30 , 2023 2022 2021 United States ( a June 30 , 2023 2022 2021 United States ( a ) States ( a ) $ 106,744 $ 100,218 $ 83,953 Other a ) $ 106,744 $ 100,218 $ 83,953 Other country 105,171 $ 106,744 $ 100,218 $ 83,953 Other country 105,171 98,052 84,135 100,218 $ 83,953 Other country 105,171 98,052 84,135 Total $ 211,915 $ 83,953 Other country 105,171 98,052 84,135 Total $ 211,915 $ 83,953 Other country 105,171 98,052 84,135 Total $ 211,915 $ 198,270 105,171 98,052 84,135 Total $ 211,915 $ 198,270 $ 168,088 ( 84,135 Total $ 211,915 $ 198,270 $ 168,088 ( a ) $ 211,915 $ 198,270 $ 168,088 ( a ) Includes billing source of the revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue , classified by significant million ) Year Ended June 30 , 2023 2022 2021 Server Year Ended June 30 , 2023 2022 2021 Server product and Ended June 30 , 2023 2022 2021 Server product and cloud June 30 , 2023 2022 2021 Server product and cloud service product and cloud service $ 79,970 $ 67,350 $ 52,589 Office cloud service $ 79,970 $ 67,350 $ 52,589 Office product and $ 79,970 $ 67,350 $ 52,589 Office product and cloud service Office product and cloud service 48,728 44,862 39,872 Windows 21,507 24,732 product and cloud service 48,728 44,862 39,872 Windows 21,507 24,732 22,488 and cloud service 48,728 44,862 39,872 Windows 21,507 24,732 22,488 Gaming service 48,728 44,862 39,872 Windows 21,507 24,732 22,488 Gaming 15,466 16,230 48,728 44,862 39,872 Windows 21,507 24,732 22,488 Gaming 15,466 16,230 15,370 44,862 39,872 Windows 21,507 24,732 22,488 Gaming 15,466 16,230 15,370 LinkedIn Windows 21,507 24,732 22,488 Gaming 15,466 16,230 15,370 LinkedIn 15,145 13,816 21,507 24,732 22,488 Gaming 15,466 16,230 15,370 LinkedIn 15,145 13,816 10,289 24,732 22,488 Gaming 15,466 16,230 15,370 LinkedIn 15,145 13,816 10,289 Search Gaming 15,466 16,230 15,370 LinkedIn 15,145 13,816 10,289 Search and news 15,466 16,230 15,370 LinkedIn 15,145 13,816 10,289 Search and news advertising 16,230 15,370 LinkedIn 15,145 13,816 10,289 Search and news advertising 12,208 10,289 Search and news advertising 12,208 11,591 9,267 Enterprise Services 7,722 Search and news advertising 12,208 11,591 9,267 Enterprise Services 7,722 7,407 and news advertising 12,208 11,591 9,267 Enterprise Services 7,722 7,407 6,943 12,208 11,591 9,267 Enterprise Services 7,722 7,407 6,943 Devices 5,521 7,306 11,591 9,267 Enterprise Services 7,722 7,407 6,943 Devices 5,521 7,306 7,143 9,267 Enterprise Services 7,722 7,407 6,943 Devices 5,521 7,306 7,143 Dynamics Services 7,722 7,407 6,943 Devices 5,521 7,306 7,143 Dynamics 5,437 4,687 7,722 7,407 6,943 Devices 5,521 7,306 7,143 Dynamics 5,437 4,687 3,754 7,407 6,943 Devices 5,521 7,306 7,143 Dynamics 5,437 4,687 3,754 Other Devices 5,521 7,306 7,143 Dynamics 5,437 4,687 3,754 Other 211 289 5,521 7,306 7,143 Dynamics 5,437 4,687 3,754 Other 211 289 373 7,306 7,143 Dynamics 5,437 4,687 3,754 Other 211 289 373 Total Dynamics 5,437 4,687 3,754 Other 211 289 373 Total $ 211,915 5,437 4,687 3,754 Other 211 289 373 Total $ 211,915 $ 4,687 3,754 Other 211 289 373 Total $ 211,915 $ 198,270 211 289 373 Total $ 211,915 $ 198,270 $ 168,088 Our 373 Total $ 211,915 $ 198,270 $ 168,088 Our Microsoft Cloud $ 211,915 $ 198,270 $ 168,088 Our Microsoft Cloud revenue , other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 111.6 billion , $ 91.4 billion $ 111.6 billion , $ 91.4 billion , and $ 69.1 91.4 billion , and $ 69.1 billion in fiscal year 2023 69.1 billion in fiscal year 2023 , 2022 , and 2021 in fiscal year 2023 , 2022 , and 2021 , respectively 2023 , 2022 , and 2021 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2023 2022 2021 United million ) June 30 , 2023 2022 2021 United States $ ) June 30 , 2023 2022 2021 United States $ 114,380 June 30 , 2023 2022 2021 United States $ 114,380 $ 2022 2021 United States $ 114,380 $ 106,430 $ 76,153 Ireland United States $ 114,380 $ 106,430 $ 76,153 Ireland 16,359 15,505 $ 114,380 $ 106,430 $ 76,153 Ireland 16,359 15,505 13,303 Other $ 106,430 $ 76,153 Ireland 16,359 15,505 13,303 Other country 56,500 106,430 $ 76,153 Ireland 16,359 15,505 13,303 Other country 56,500 44,433 $ 76,153 Ireland 16,359 15,505 13,303 Other country 56,500 44,433 38,858 16,359 15,505 13,303 Other country 56,500 44,433 38,858 Total $ 187,239 15,505 13,303 Other country 56,500 44,433 38,858 Total $ 187,239 $ 13,303 Other country 56,500 44,433 38,858 Total $ 187,239 $ 166,368 56,500 44,433 38,858 Total $ 187,239 $ 166,368 $ 128,314 95 38,858 Total $ 187,239 $ 166,368 $ 128,314 95 PART II $ 187,239 $ 166,368 $ 128,314 95 PART II Item 8 187,239 $ 166,368 $ 128,314 95 PART II Item 8 REPORT 128,314 95 PART II Item 8 REPORT OF INDEPENDENT REGIST ERED `` ) a of June 30 , 2023 and 2022 , a of June 30 , 2023 and 2022 , the related June 30 , 2023 and 2022 , the related consolidated statement in the period ended June 30 , 2023 , and the period ended June 30 , 2023 , and the related note the Company a of June 30 , 2023 and 2022 , a of June 30 , 2023 and 2022 , and the June 30 , 2023 and 2022 , and the result of in the period ended June 30 , 2023 , in conformity period ended June 30 , 2023 , in conformity with accounting financial reporting a of June 30 , 2023 , based on a of June 30 , 2023 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated July 27 , 2023 , expressed an report dated July 27 , 2023 , expressed an unqualified opinion audit committee and that ( 1 ) relate to account or the financial statement and ( 2 ) involved our especially challenging Recognition – Refer to Note 1 to the financial statement Critical it volume licensing program . 96 PART II Item 8 Significant . 96 PART II Item 8 Significant judgment is exercised by Positions – Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha of our tax specialist . 97 PART II Item 8 How . 97 PART II Item 8 How the Critical Audit Matter LLP Seattle , Washington July 27 , 2023 We have served , Washington July 27 , 2023 We have served a the the Company 's auditor since 1983 . 98 PART II Item 's auditor since 1983 . 98 PART II Item 9 , . 98 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2023 . There were a of June 30 , 2023 . There were no change during the quarter ended June 30 , 2023 that have materially quarter ended June 30 , 2023 that have materially affected , financial reporting a of June 30 , 2023 ; their report a of June 30 , 2023 ; their report is included report is included in Item 9A . 99 PART II Item included in Item 9A . 99 PART II Item 9A REPORT . 99 PART II Item 9A REPORT OF INDEPENDENT REGIST ERED `` ) a of June 30 , 2023 , based on a of June 30 , 2023 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2023 , based on a of June 30 , 2023 , based on criterion established Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2023 , of the year ended June 30 , 2023 , of the Company and and our report dated July 27 , 2023 , expressed an report dated July 27 , 2023 , expressed an unqualified opinion policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington July 27 , 2023 100 PART II , Washington July 27 , 2023 100 PART II , III Washington July 27 , 2023 100 PART II , III Item PART II , III Item 9B , 9C , 10 , , III Item 9B , 9C , 10 , 11 , Item 9B , 9C , 10 , 11 , 12 , , 9C , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION During the the three month ended June 30 , 2023 , none of month ended June 30 , 2023 , none of our director ( a defined in Rule 16a-1 ( f ) of the the Securities Exchange Act of 1934 ) informed u of the termination of a “ Rule 10b5-1 trading arrangement ” or “ arrangement ” or “ non-Rule 10b5-1 trading arrangement , ” a ” a defined in Item 408 of Regulation S-K . ITEM of Regulation S-K . ITEM 9C . DISCLOSURE REGARDING FOREIGN J applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFF in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 7 , 2023 ( the “ be held December 7 , 2023 ( the “ Proxy Statement in a report on Form 8-K . ITEM 11 . EXECUTI on Form 8-K . ITEM 11 . EXECUTI VE COMPENSATION The herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOU NTANT FEES ( PCAOB ID No . 34 ) , appears in the incorporated herein by reference . 101 PART IV Item 15 PART . 101 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBIT AND FINANC IAL under Part II , Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 58 Comprehensive Income Statements 59 Balance Statements 58 Comprehensive Income Statements 59 Balance Sheets 60 Cash Flows Income Statements 59 Balance Sheets 60 Cash Flows Statements 61 Stockholders Sheets 60 Cash Flows Statements 61 Stockholders ’ Equity Statements 62 61 Stockholders ’ Equity Statements 62 Notes to Financial Statements 63 62 Notes to Financial Statements 63 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/2016 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 7/3/2023 4.1 Indenture , Bylaws of Microsoft Corporation 8-K 3.2 7/3/2023 4.1 Indenture , dated of Microsoft Corporation 8-K 3.2 7/3/2023 4.1 Indenture , dated a Microsoft Corporation 8-K 3.2 7/3/2023 4.1 Indenture , dated a of , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and Base Indenture ” ) S-3ASR 4.1 10/29/2015 4.2 Form of First Indenture ” ) S-3ASR 4.1 10/29/2015 4.2 Form of First Supplemental ” ) S-3ASR 4.1 10/29/2015 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/2009 4.5 Form of to the Base Indenture 8-K 4.2 5/15/2009 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/2009 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/2009 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/2010 102 PART IV . , a Trustee 8-K 4.2 9/27/2010 102 PART IV Item , a Trustee 8-K 4.2 9/27/2010 102 PART IV Item 15 a Trustee 8-K 4.2 9/27/2010 102 PART IV Item 15 Incorporated 9/27/2010 102 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/2011 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/2011 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/2011 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/2011 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/2012 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/2012 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/2012 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/2012 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/2013 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/2013 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/2013 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/2013 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/2013 103 PART IV . , a Trustee 8-K 4.2 5/1/2013 103 PART IV Item , a Trustee 8-K 4.2 5/1/2013 103 PART IV Item 15 a Trustee 8-K 4.2 5/1/2013 103 PART IV Item 15 Incorporated 5/1/2013 103 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/2013 4.11 Eighth Supplemental . , a Trustee 8-K 4.1 12/6/2013 4.11 Eighth Supplemental Indenture , a Trustee 8-K 4.1 12/6/2013 4.11 Eighth Supplemental Indenture for a Trustee 8-K 4.1 12/6/2013 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/2013 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/2013 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/2013 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/2013 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/12/2015 4.13 Tenth Supplemental . , a trustee 8-K 4.1 2/12/2015 4.13 Tenth Supplemental Indenture , a trustee 8-K 4.1 2/12/2015 4.13 Tenth Supplemental Indenture for a trustee 8-K 4.1 2/12/2015 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 11/3/2015 104 PART IV . , a trustee 8-K 4.1 11/3/2015 104 PART IV Item , a trustee 8-K 4.1 11/3/2015 104 PART IV Item 15 a trustee 8-K 4.1 11/3/2015 104 PART IV Item 15 Incorporated 11/3/2015 104 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 8/5/2016 4.15 Twelfth Supplemental . , a trustee 8-K 4.1 8/5/2016 4.15 Twelfth Supplemental Indenture , a trustee 8-K 4.1 8/5/2016 4.15 Twelfth Supplemental Indenture for a trustee 8-K 4.1 8/5/2016 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/2017 4.16 Thirteenth Supplemental . , a trustee 8-K 4.1 2/3/2017 4.16 Thirteenth Supplemental Indenture , a trustee 8-K 4.1 2/3/2017 4.16 Thirteenth Supplemental Indenture for a trustee 8-K 4.1 2/3/2017 4.16 Thirteenth Supplemental Indenture for 2.525 4.16 Thirteenth Supplemental Indenture for 2.525 % Notes due 2050 and for 2.525 % Notes due 2050 and 2.675 % Notes due % Notes due 2050 and 2.675 % Notes due 2060 , and 2.675 % Notes due 2060 , dated a of June , dated a of June 1 , 2020 , between Microsoft a of June 1 , 2020 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 6/1/2020 4.17 Fourteenth Supplemental . , a trustee 8-K 4.1 6/1/2020 4.17 Fourteenth Supplemental Indenture , a trustee 8-K 4.1 6/1/2020 4.17 Fourteenth Supplemental Indenture for a trustee 8-K 4.1 6/1/2020 4.17 Fourteenth Supplemental Indenture for 2.921 4.17 Fourteenth Supplemental Indenture for 2.921 % Notes due 2052 and for 2.921 % Notes due 2052 and 3.041 % Notes due % Notes due 2052 and 3.041 % Notes due 2062 , and 3.041 % Notes due 2062 , dated a of March , dated a of March 17 , 2021 , between Microsoft a of March 17 , 2021 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 3/17/2021 4.18 Description of . , a trustee 8-K 4.1 3/17/2021 4.18 Description of Securities , a trustee 8-K 4.1 3/17/2021 4.18 Description of Securities 10-K a trustee 8-K 4.1 3/17/2021 4.18 Description of Securities 10-K 6/30/2019 3/17/2021 4.18 Description of Securities 10-K 6/30/2019 4.16 8/1/2019 10.1 * 4.18 Description of Securities 10-K 6/30/2019 4.16 8/1/2019 10.1 * Microsoft Description of Securities 10-K 6/30/2019 4.16 8/1/2019 10.1 * Microsoft Corporation of Securities 10-K 6/30/2019 4.16 8/1/2019 10.1 * Microsoft Corporation 2001 Securities 10-K 6/30/2019 4.16 8/1/2019 10.1 * Microsoft Corporation 2001 Stock 8/1/2019 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.1 10/20/2016 10.4 * Corporation 2001 Stock Plan 10-Q 9/30/2016 10.1 10/20/2016 10.4 * Microsoft 2001 Stock Plan 10-Q 9/30/2016 10.1 10/20/2016 10.4 * Microsoft Corporation Stock Plan 10-Q 9/30/2016 10.1 10/20/2016 10.4 * Microsoft Corporation Employee Plan 10-Q 9/30/2016 10.1 10/20/2016 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/2012 10.4 7/26/2012 105 PART Employee Stock Purchase Plan 10-K 6/30/2012 10.4 7/26/2012 105 PART IV Stock Purchase Plan 10-K 6/30/2012 10.4 7/26/2012 105 PART IV Item Purchase Plan 10-K 6/30/2012 10.4 7/26/2012 105 PART IV Item 15 Plan 10-K 6/30/2012 10.4 7/26/2012 105 PART IV Item 15 Incorporated 7/26/2012 105 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-K 6/30/2018 10.5 8/3/2018 10.6 * Corporation Deferred Compensation Plan 10-K 6/30/2018 10.5 8/3/2018 10.6 * Microsoft Deferred Compensation Plan 10-K 6/30/2018 10.5 8/3/2018 10.6 * Microsoft Corporation Compensation Plan 10-K 6/30/2018 10.5 8/3/2018 10.6 * Microsoft Corporation 2017 Plan 10-K 6/30/2018 10.5 8/3/2018 10.6 * Microsoft Corporation 2017 Stock 8/3/2018 10.6 * Microsoft Corporation 2017 Stock Plan DEF14A Annex C Stock Plan DEF14A Annex C 10/16/2017 10.7 * Form of Stock Plan DEF14A Annex C 10/16/2017 10.7 * Form of Stock Award Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/2018 10.8 * Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/2018 10.8 * Form 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/2018 10.8 * Form of Stock Plan 10-Q 3/31/2018 10.26 4/26/2018 10.8 * Form of Performance Plan 10-Q 3/31/2018 10.26 4/26/2018 10.8 * Form of Performance Stock Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/2018 10.9 Amended Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/2018 10.9 Amended and 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/2018 10.9 Amended and Restated Stock Plan 10-Q 3/31/2018 10.27 4/26/2018 10.9 Amended and Restated Officers Plan 10-Q 3/31/2018 10.27 4/26/2018 10.9 Amended and Restated Officers ’ N.A . , a trustee 10-Q 9/30/2016 10.12 10/20/2016 10.10 Assumption . , a trustee 10-Q 9/30/2016 10.12 10/20/2016 10.10 Assumption of , a trustee 10-Q 9/30/2016 10.12 10/20/2016 10.10 Assumption of Beneficiaries a trustee 10-Q 9/30/2016 10.12 10/20/2016 10.10 Assumption of Beneficiaries ’ trustee 10-Q 9/30/2016 10.12 10/20/2016 10.10 Assumption of Beneficiaries ’ Representative Officers ’ Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form ’ Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Agreement Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Agreement and N.A . , a trustee 10-K 6/30/2019 10.13 8/1/2019 10.12 Assumption . , a trustee 10-K 6/30/2019 10.13 8/1/2019 10.12 Assumption of , a trustee 10-K 6/30/2019 10.13 8/1/2019 10.12 Assumption of Beneficiaries a trustee 10-K 6/30/2019 10.13 8/1/2019 10.12 Assumption of Beneficiaries ’ trustee 10-K 6/30/2019 10.13 8/1/2019 10.12 Assumption of Beneficiaries ’ Representative Directors ’ Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * ’ Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Deferred Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Deferred Compensation Compensation Plan for Non-Employee Directors 10-Q 12/31/2017 10.14 1/31/2018 10.15 * Plan for Non-Employee Directors 10-Q 12/31/2017 10.14 1/31/2018 10.15 * Microsoft for Non-Employee Directors 10-Q 12/31/2017 10.14 1/31/2018 10.15 * Microsoft Corporation Non-Employee Directors 10-Q 12/31/2017 10.14 1/31/2018 10.15 * Microsoft Corporation Executive Directors 10-Q 12/31/2017 10.14 1/31/2018 10.15 * Microsoft Corporation Executive Incentive Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/2018 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/2018 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/2018 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/2018 10.19 * Microsoft Corporation Executive Incentive Microsoft Corporation Executive Incentive Plan 10-Q 9/30/2016 10.17 10/20/2016 10.20 * Corporation Executive Incentive Plan 10-Q 9/30/2016 10.17 10/20/2016 10.20 * Form Executive Incentive Plan 10-Q 9/30/2016 10.17 10/20/2016 10.20 * Form of Incentive Plan 10-Q 9/30/2016 10.17 10/20/2016 10.20 * Form of Executive Plan 10-Q 9/30/2016 10.17 10/20/2016 10.20 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.18 10/20/2016 10.21 * Corporation 2001 Stock Plan 10-Q 9/30/2016 10.18 10/20/2016 10.21 * Form 2001 Stock Plan 10-Q 9/30/2016 10.18 10/20/2016 10.21 * Form of Stock Plan 10-Q 9/30/2016 10.18 10/20/2016 10.21 * Form of Executive Plan 10-Q 9/30/2016 10.18 10/20/2016 10.21 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/2016 10.25 10/20/2016 10.22 * Corporation 2001 Stock Plan 10-Q 9/30/2016 10.25 10/20/2016 10.22 * Senior 2001 Stock Plan 10-Q 9/30/2016 10.25 10/20/2016 10.22 * Senior Executive Stock Plan 10-Q 9/30/2016 10.25 10/20/2016 10.22 * Senior Executive Severance Plan 10-Q 9/30/2016 10.25 10/20/2016 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 10-Q 9/30/2016 10.22 10/20/2016 10.23 * Executive Severance Benefit Plan 10-Q 9/30/2016 10.22 10/20/2016 10.23 * Offer Severance Benefit Plan 10-Q 9/30/2016 10.22 10/20/2016 10.23 * Offer Letter Benefit Plan 10-Q 9/30/2016 10.22 10/20/2016 10.23 * Offer Letter , Plan 10-Q 9/30/2016 10.22 10/20/2016 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/2014 106 PART IV Corporation and Satya Nadella 8-K 10.1 2/4/2014 106 PART IV Item and Satya Nadella 8-K 10.1 2/4/2014 106 PART IV Item 15 Satya Nadella 8-K 10.1 2/4/2014 106 PART IV Item 15 Incorporated 2/4/2014 106 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/2014 10.24 1/26/2015 10.25 * Corporation and Satya Nadella 10-Q 12/31/2014 10.24 1/26/2015 10.25 * Offer and Satya Nadella 10-Q 12/31/2014 10.24 1/26/2015 10.25 * Offer Letter Satya Nadella 10-Q 12/31/2014 10.24 1/26/2015 10.25 * Offer Letter , Nadella 10-Q 12/31/2014 10.24 1/26/2015 10.25 * Offer Letter , dated Offer Letter , dated October 25 , 2020 , between Microsoft , dated October 25 , 2020 , between Microsoft Corporation and Microsoft Corporation and Christopher Young 10-Q 9/30/2021 10.27 10/26/2021 21 Subsidiaries Corporation and Christopher Young 10-Q 9/30/2021 10.27 10/26/2021 21 Subsidiaries of and Christopher Young 10-Q 9/30/2021 10.27 10/26/2021 21 Subsidiaries of Registrant Christopher Young 10-Q 9/30/2021 10.27 10/26/2021 21 Subsidiaries of Registrant X Young 10-Q 9/30/2021 10.27 10/26/2021 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certification of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certification Sarbanes-Oxley Act of 2002 X 32.1 * * Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certification Sarbanes-Oxley Act of 2002 X 32.2 * * Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Document —the the Inline XBRL document X 101.SCH Inline XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema X 101.CAL Inline XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase X 101.DEF Inline XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase X 101.LAB Inline XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase X 101.PRE Inline XBRL Taxonomy Extension Presentation Taxonomy Extension Presentation Linkbase X 104 Cover page formatted a Inline XBRL and contained in Exhibit 101 X * Indicates a management Furnished , not filed . 107 PART IV Item 16 ITEM . 107 PART IV Item 16 ITEM 16 . FORM 10-K PART IV Item 16 ITEM 16 . FORM 10-K SUMMARY None 16 ITEM 16 . FORM 10-K SUMMARY None . 108 SIGNAT FORM 10-K SUMMARY None . 108 SIGNAT URES Pursuant to the to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 27 , 2023 . M ICROSOFT , on July 27 , 2023 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 27 , 2023 . Signature Title indicated on July 27 , 2023 . Signature Title /s/ S Officer ) Alice L. Jolla 109 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001017062-97-001764/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001017062-97-001764/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-00-001961/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-00-001961/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-01-501099/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-01-501099/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-02-001351/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-02-001351/full-submission.txt new file mode 100644 index 0000000..2020c38 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-02-001351/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2002 ¨ TRANSITION REPORT YEAR ENDED JUNE 30 , 2002 ¨ TRANSITION REPORT PURSUANT TO TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON ( STATE ( STATE OF INCORPORATION ) 91-1144442 ( I.R.S . ID ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . YES x NO delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ The aggregate market value the registrant a of July 31 , 2002 wa $ 215,553,343,213 a of July 31 , 2002 wa $ 215,553,343,213 . The 31 , 2002 wa $ 215,553,343,213 . The number of share common stock a of July 31 , 2002 wa 5,378,746,853 . a of July 31 , 2002 wa 5,378,746,853 . DOCUMENTS INCORPORATED July 31 , 2002 wa 5,378,746,853 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 5 , 2002 are incorporated by be held November 5 , 2002 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2002 INDEX Part I Year Ended June 30 , 2002 INDEX Part I Item 1. 2002 INDEX Part I Item 1. Business 1 Item 2 . Part I Item 1. Business 1 Item 2 . Properties 8 Item 1. Business 1 Item 2 . Properties 8 Item 3 1 Item 2 . Properties 8 Item 3 . Legal Proceedings 2 . Properties 8 Item 3 . Legal Proceedings 8 Item Item 3 . Legal Proceedings 8 Item 4 . Submission of . Legal Proceedings 8 Item 4 . Submission of Matters to a Vote of Security Holders 8 Executive Officers of the Registrant Executive Officers of the Registrant 9 Part II Item 5 . Registrant 9 Part II Item 5 . Market for Registrant ’ Stock and Related Stockholder Matters 11 Item 6 . Selected Financial Related Stockholder Matters 11 Item 6 . Selected Financial Data 11 6 . Selected Financial Data 11 Item 7 . Management ’ Selected Financial Data 11 Item 7 . Management ’ s Discussion of Operations and Financial Condition 12 Item 7a . Quantitative and and Financial Condition 12 Item 7a . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 18 Item 8 . Financial Statements about Market Risk 18 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 19 Item 9 . Changes in and Supplementary Data 19 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosures 39 Part III Item 10 . Disclosures 39 Part III Item 10 . Directors of the Registrant . Directors of the Registrant 40 Item 11 . Executive Compensation of the Registrant 40 Item 11 . Executive Compensation 40 Item Item 11 . Executive Compensation 40 Item 12 . Security Ownership . Executive Compensation 40 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 40 Item 13 . Certain Relationships Related Stockholder Matters 40 Item 13 . Certain Relationships and Related Certain Relationships and Related Transactions 40 Part IV Item 14 . Transactions 40 Part IV Item 14 . Exhibits , Financial Statement , and Reports on Form 8-K 41 Signatures 42 Certifications 42 and Reports on Form 8-K 41 Signatures 42 Certifications 42 Table on Form 8-K 41 Signatures 42 Certifications 42 Table of Contents 8-K 41 Signatures 42 Certifications 42 Table of Contents Part I of Contents Part I Item 1 PART I ITEM 1. BUSINESS Item 1 PART I ITEM 1. BUSINESS GENERAL Microsoft Corporation ( founded a a partnership in 1975 and incorporated in 1981 . in 1975 and incorporated in 1981 . Microsoft ’ s mission development tool . During fiscal 2002 , Microsoft launched Xbox , system . PRODUCTS During fiscal 2002 , Microsoft had four operating and Other . See Note 20 of the Notes to Financial Windows NT Server and Windows 2000 Server , Exchange , and Professional and Home ; Windows 2000 Professional ; Windows NT Workstation Windows Millennium Edition ; Windows 98 ; and other desktop operating information management and sharing . 1 / MSFT 2002 FORM 10-K sharing . 1 / MSFT 2002 FORM 10-K Table of Contents 1 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 bCentral . Microsoft ’ s launched Windows XP in October 2001 . Windows XP extends the productivity and connectivity . Windows 2000 Professional . The successor to Windows NT Workstation , Windows 2000 Professional operating system combine feature in all organization . Windows 2000 Professional contains the enhanced business enhanced business feature of Windows 98 such a Plug and Play A fully integrated , multitasking 32-bit PC operating system , Windows NT Workstation combine the Windows 98 operating system interface and usability with other consumer . Windows 98 . The successor to Windows . The successor to Windows 95 , Windows 98 is a to Windows 95 , Windows 98 is a personal computer operating diagnostics and maintenance . Windows 98 support graphic , sound , ENTERPRISE SOFTWARE AND SERVICES Windows 2000 Server , Advanced Server , and Datacenter Server . Windows 2000 Server is a multipurpose network of all size . Windows 2000 Advanced Server operating system is built on the Microsoft Windows 2000 operating system . BizTalk Server for operation management of Windows 2000 , the Microsoft Active Directory other component service in Windows 2000 , a well a other and team collaboration feature . 2 / MSFT 2002 FORM 10-K feature . 2 / MSFT 2002 FORM 10-K Table of Contents 2 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 Other Servers . Small Business help business with up to 50 computer . Systems Management Server language compiler . In February 2002 , Microsoft launched Visual Studio Xbox , released in fiscal 2002 , is Microsoft ’ s ’ s Dead or Alive 3 . Xbox Live , an the second quarter of fiscal 2003 and will allow online game of financial activity . The 3 / MSFT 2002 FORM 10-K . The 3 / MSFT 2002 FORM 10-K Table of Contents 3 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 Works Suite provides a comprehensive , is targeted at mobile 32-bit device . Microsoft Windows NT , visited by more than 7 million consumer each month . With detail on more than 10,000 car model and 100,000 used than 10,000 car model and 100,000 used vehicle , user can Networks , Inc. in February 2002 . Expedia , Inc. operates . SEGMENT REPORTING In fiscal 2003 , the Company will begin For example , Microsoft owns 50 percent of MSNBC Cable L.L.C Cable L.L.C . , a 24-hour cable news and information channel and information channel , and 50 percent of MSNBC Interactive News NBC ) owns the remaining 50 percent of these two joint these two joint venture . 4 / MSFT 2002 FORM 10-K venture . 4 / MSFT 2002 FORM 10-K Table of Contents 4 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 PRODUCT DEVELOPMENT During fiscal year PRODUCT DEVELOPMENT During fiscal year 2000 , 2001 , and 2002 During fiscal year 2000 , 2001 , and 2002 , research 2000 , 2001 , and 2002 , research and development expense and development expense wa $ 3.77 billion , $ 4.38 billion $ 3.77 billion , $ 4.38 billion , and $ 4.31 4.38 billion , and $ 4.31 billion , respectively . Those respectively . Those amount represented 16.4 % , 17.3 % , amount represented 16.4 % , 17.3 % , and 15.2 % , 17.3 % , and 15.2 % , respectively , of Accounting Standards ( SFAS ) 142 , Goodwill and Other Intangible goodwill wa discontinued in fiscal 2002 . The amount of goodwill development expense in fiscal year 2000 and 2001 wa $ 232 in fiscal year 2000 and 2001 wa $ 232 million and 2000 and 2001 wa $ 232 million and $ 272 million $ 232 million and $ 272 million , respectively . The Servers , including the Windows 2000 Server family , make up been localized into more than 30 language . MANUFACTURING Microsoft contract , and other product . 5 / MSFT 2002 FORM 10-K product . 5 / MSFT 2002 FORM 10-K Table of Contents 5 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 OPERATIONS The Company ha regional and retailer . In fiscal 2002 , Microsoft had three major Region . Beginning with fiscal 2003 , the Company ’ s , Tech Data , Level 3 Communications , SOFTBANK , Software No single customer accounted for 10 % or more of revenue or more of revenue in 2000 , 2001 , or 2002 of revenue in 2000 , 2001 , or 2002 . 6 2000 , 2001 , or 2002 . 6 / MSFT 2002 2001 , or 2002 . 6 / MSFT 2002 FORM 10-K 2002 . 6 / MSFT 2002 FORM 10-K Table of Contents 6 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 COMPETITION The software business is Lineo , and MontaVista . 7 / MSFT 2002 FORM 10-K MontaVista . 7 / MSFT 2002 FORM 10-K Table of Contents 7 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 1 , 2 , 3 , Part I Item 1 , 2 , 3 , 4 CONSUMER Item 1 , 2 , 3 , 4 CONSUMER COMMERCE INVESTMENTS , 2 , 3 , 4 CONSUMER COMMERCE INVESTMENTS Microsoft face . EMPLOYEES As of June 30 , 2002 , the Company As of June 30 , 2002 , the Company employed approximately , the Company employed approximately 50,500 people on a full-time basis on a full-time basis , 34,600 in the United States and in the United States and 15,900 internationally . Of the total . Of the total , 20,800 were in product research and product research and development , 23,500 in sale , marketing , marketing , and support , 2,200 in manufacturing and distribution , manufacturing and distribution , and 4,000 in finance and administration . employee are excellent . ITEM 2 . PROPERTIES The Company ’ corporate office consist of approximately 8.4 million square foot of office , Washington , of which 5.7 million square foot of corporate situated on slightly more than 300 acre of land is owned land is owned and approximately 2.7 million square foot is leased constructing three building with approximately 392,000 square foot of space that occupied in the Fall of 2003 . To accommodate expansion need need the Company purchased approximately 38 acre , and ha an an option to purchase approximately 112 additional acre , of land Washington , which can accommodate 2.95 million square foot of additional many site domestically totaling approximately 3.0 million square foot of office many site internationally totaling approximately 4.1 million square foot , including localization division which lease a 382,000 square-foot campus in Dublin , Dublin , Ireland , a 45,000 square-foot disk duplication facility in , Puerto Rico and a 36,000 square-foot facility in Singapore for location : Tokyo , Japan 343,000 square foot ; Unterschleissheim , foot ; Unterschleissheim , Germany 253,000 square foot ; United Kingdom foot ; United Kingdom campus 242,000 square foot ; Les Ulis ; Les Ulis , France 229,000 square foot ; and Beijing ; and Beijing , China 115,000 square foot . The Company accommodate expansion need . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 19—Contingencies of the Notes to Financial to Financial Statements ( Item 8 ) for information regarding legal regarding legal proceeding . ITEM 4 . SUBMISSION OF MATTERS TO the fourth quarter of fiscal 2002 . 8 / MSFT 2002 quarter of fiscal 2002 . 8 / MSFT 2002 FORM 10-K 2002 . 8 / MSFT 2002 FORM 10-K Table of Contents 8 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 4 EXECUTIVE OFFICERS OF THE REGISTRANT of Microsoft a of July 31 , 2002 were a follows a of July 31 , 2002 were a follows : Name William H. Gates , III 46 Chairman of the Board ; Software Architect Steven A. Ballmer 46 Chief Executive Officer James E. Executive Officer James E. Allchin 50 Group Vice President , Platforms , Platforms Group Orlando Ayala 46 Group Vice President , Worldwide . ( Robbie ) Bach 40 Senior Vice President , Games Games Division Douglas J. Burgum 46 Senior Vice President , Business Business Solutions David W. Cole 40 Senior Vice President , MSN Services Group John G. Connors 43 Senior Vice President ; Chief Chief Financial Officer Jean-Philippe Courtois 41 Senior Vice President ; President and Africa Jon Stephan DeVaan 41 Senior Vice President , TV TV Division Richard P. Emerson 40 Senior Vice President , Corporate Development and Strategy Paul Flessner 43 Senior Vice President , .NET Enterprise Servers Kevin R. Johnson 41 Senior Vice President , Microsoft Microsoft Americas Robert L. Muglia 42 Senior Vice President , Enterprise Storage Division Craig J. Mundie 53 Senior Vice President ; Chief and Policy Jeffrey S. Raikes 44 Group Vice President , Productivity Business Services Richard F. Rashid 50 Senior Vice President , Research , Research Eric D. Rudder 35 Senior Vice President , Developer Platform Evangelism Steven J. Sinofsky 36 Senior Vice President , Office , Office Bradford L. Smith 43 Senior Vice President and General and General Counsel Brian Valentine 42 Senior Vice President , Windows President , Windows David Vaskevitch 49 Senior Vice President ; Chief Business Platform Deborah N. Willingham 46 Senior Vice President , Human Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a of the Company in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Allchin wa named , Platforms Group in December 1999 . He had been Senior President , Platforms since March 1999 . He wa previously Senior and Business Systems since February 1996 . Mr. Allchin joined Microsoft Mr. Allchin joined Microsoft in 1990 . Mr. Ayala wa named and Services Group in August 2000 . He had been Senior Pacific and Americas since February 1998 , and before holding that . He joined Microsoft in 1991 a Senior Director of the , Games Division in March 2000 . He had been Vice Home and Retail since March 1999 . Before holding that position , Entertainment and Productivity since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Mr. Burgum joined the Software , Inc. in April 2001 . Mr. Burgum became Great first outside investor in March 1983 . He wa named President President of Great Plains in 1984 and subsequently named Chairman and Personal Services Group in November 2001 . Before holding that position Services Platform Division since August 2000 . He had been Senior , Consumer Services since December 1999 and Vice President , Consumer , Consumer Windows since March 1999 . Previously , he wa Mr. Cole joined Microsoft in 1986 . Mr. Connors wa named Chief Financial Officer in December 1999 . He had been Vice President , Enterprise since March 1999 . Mr. Connors had been Chief Information Officer since July 1996 . He joined Microsoft in . He joined Microsoft in 1989 . Mr. Courtois wa named , and Africa in July 2000 . He had been Vice , Customer Marketing since July 1998 . Before holding that position President of Microsoft Europe since 1997 and General Manager for Microsoft Manager for Microsoft France since 1994 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Mr. DeVaan wa named , TV Division in December 1999 . He had been Senior Consumer and Commerce since September 1999 . Mr. DeVaan had been Consumer and Commerce since March 1999 . He had been Vice President , Desktop Applications since 1995 . Mr. DeVaan joined Microsoft Mr. DeVaan joined Microsoft in 1985 . 9 / MSFT 2002 joined Microsoft in 1985 . 9 / MSFT 2002 FORM 10-K 1985 . 9 / MSFT 2002 FORM 10-K Table of Contents 9 / MSFT 2002 FORM 10-K Table of Contents Part I of Contents Part I Item 4 Mr. Emerson joined Microsoft in Emerson joined Microsoft in November 2000 a Senior Vice President , Co. LLC . He spent 12 year in San Francisco and .NET Enterprise Servers in December 1999 . He had been Vice . He joined Microsoft in 1994 . Mr. Johnson wa named , Microsoft Americas in February 2002 . He had been Senior , and Services since August 2001 , and before that , Product Support Services in July 1998 . He joined Microsoft in . He joined Microsoft in 1992 . Mr. Muglia wa named Enterprise Storage Division in November 2001 . Before holding that position Personal Services Group since August 2000 . He had been Group , Business Productivity since December 1999 . He wa named Senior , Business Productivity in March 1999 and wa named Senior Vice Applications and Tools in February 1998 . He had been Vice President , Server Applications since 1997 . He joined Microsoft in . He joined Microsoft in 1988 . Mr. Mundie wa named Strategies and Policy in August 2001 . He wa named Senior , Consumer Platforms in February 1996 . He joined Microsoft a , Advanced Consumer Technology in 1992 . Mr. Raikes wa named and Business Services in August 2000 . He had been Group Sales and Support since July 1998 . Before holding that position Sales and Marketing since July 1996 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr. Rashid wa named President , Research in May 2000 . He had been Vice President , Research since July 1994 . He joined Microsoft in . He joined Microsoft in 1991 . Mr . Rudder wa and Platform Evangelism in October 2001 . He had been Vice . Rudder joined Microsoft in 1988 and ha worked in several President , Office in December 1999 . He had been Vice President , Office since December 1998 . Mr. Sinofsky joined the joined the Office team in 1994 , increasing his responsibility with . He joined Microsoft in 1989 . Mr. Smith wa named and General Counsel in November 2001 . He had been Deputy . He joined Microsoft in 1993 . Mr. Valentine wa named President , Windows in December 1999 . He had been Vice Business and Enterprise since March 1999 . He had been Vice President , Windows since December 1998 . Before managing the Windows . He joined Microsoft in 1987 . Mr. Vaskevitch wa named , Business Platform in August 2001 . He wa named Senior , Business Applications in March 2000 . He had been Senior President , Developer since December 1999 . Before holding that position . He joined Microsoft in 1986 . Ms. Willingham wa named , Human Resources in February 2001 . She had been Vice , Human Resources since April 2000 . Ms. Willingham had been . She joined Microsoft in 1993 . 10 / MSFT 2002 joined Microsoft in 1993 . 10 / MSFT 2002 FORM 10-K 1993 . 10 / MSFT 2002 FORM 10-K Table of Contents 10 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 5 , 6 PART II ITEM Part II Item 5 , 6 PART II ITEM 5 . , 6 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On June 30 , 2002 , there were . On June 30 , 2002 , there were 117,730 registered , 2002 , there were 117,730 registered holder of record of follows : Quarter Ended Sept. 30 Dec. 31 Mar . 31 Quarter Ended Sept. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal 2001 31 Mar . 31 June 30 Year Fiscal 2001 Common stock 31 June 30 Year Fiscal 2001 Common stock price per share per share : High $ 82.00 $ 70.88 $ 64.69 $ : High $ 82.00 $ 70.88 $ 64.69 $ 73.68 $ $ 82.00 $ 70.88 $ 64.69 $ 73.68 $ 82.00 Low $ 70.88 $ 64.69 $ 73.68 $ 82.00 Low 60.31 41.50 $ 64.69 $ 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 $ 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 73.68 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 $ 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 Common 82.00 Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 Common stock Low 60.31 41.50 43.38 51.94 41.50 Fiscal 2002 Common stock price 41.50 43.38 51.94 41.50 Fiscal 2002 Common stock price per share per share : High $ 72.57 $ 69.49 $ 69.86 $ : High $ 72.57 $ 69.49 $ 69.86 $ 60.38 $ $ 72.57 $ 69.49 $ 69.86 $ 60.38 $ 72.57 Low $ 69.49 $ 69.86 $ 60.38 $ 72.57 Low 49.71 51.79 $ 69.86 $ 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 $ 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 60.38 $ 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 6 $ 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 6 . 72.57 Low 49.71 51.79 57.99 48.62 48.62 ITEM 6 . SELECTED Low 49.71 51.79 57.99 48.62 48.62 ITEM 6 . SELECTED FINANCIAL 51.79 57.99 48.62 48.62 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL per share Year Ended June 30 1998 1999 2000 2001 ( share Year Ended June 30 1998 1999 2000 2001 ( 1 Year Ended June 30 1998 1999 2000 2001 ( 1 ) Ended June 30 1998 1999 2000 2001 ( 1 ) 2002 June 30 1998 1999 2000 2001 ( 1 ) 2002 ( 1998 1999 2000 2001 ( 1 ) 2002 ( 2 ) 2000 2001 ( 1 ) 2002 ( 2 ) Revenue $ ( 1 ) 2002 ( 2 ) Revenue $ 15,262 $ ( 2 ) Revenue $ 15,262 $ 19,747 $ 22,956 $ ) Revenue $ 15,262 $ 19,747 $ 22,956 $ 25,296 $ $ 15,262 $ 19,747 $ 22,956 $ 25,296 $ 28,365 Operating $ 19,747 $ 22,956 $ 25,296 $ 28,365 Operating income 6,585 $ 22,956 $ 25,296 $ 28,365 Operating income 6,585 10,010 11,006 25,296 $ 28,365 Operating income 6,585 10,010 11,006 11,720 11,910 Income $ 28,365 Operating income 6,585 10,010 11,006 11,720 11,910 Income before 28,365 Operating income 6,585 10,010 11,006 11,720 11,910 Income before accounting Operating income 6,585 10,010 11,006 11,720 11,910 Income before accounting change income 6,585 10,010 11,006 11,720 11,910 Income before accounting change 4,490 11,910 Income before accounting change 4,490 7,785 9,421 7,721 7,829 Net Income before accounting change 4,490 7,785 9,421 7,721 7,829 Net income before accounting change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 accounting change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 7,785 change 4,490 7,785 9,421 7,721 7,829 Net income 4,490 7,785 9,421 9,421 7,721 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted 7,721 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted earnings 7,829 Net income 4,490 7,785 9,421 7,346 7,829 Diluted earnings per Net income 4,490 7,785 9,421 7,346 7,829 Diluted earnings per share income 4,490 7,785 9,421 7,346 7,829 Diluted earnings per share before per share before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted share before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings before accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per accounting change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per share change 0.84 1.42 1.70 1.38 1.41 Diluted earnings per share 0.84 1.41 Diluted earnings per share 0.84 1.42 1.70 1.32 1.41 Cash Diluted earnings per share 0.84 1.42 1.70 1.32 1.41 Cash and earnings per share 0.84 1.42 1.70 1.32 1.41 Cash and short-term per share 0.84 1.42 1.70 1.32 1.41 Cash and short-term investment share 0.84 1.42 1.70 1.32 1.41 Cash and short-term investment 13,927 1.41 Cash and short-term investment 13,927 17,236 23,798 31,600 38,652 Total Cash and short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset and short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset 22,357 short-term investment 13,927 17,236 23,798 31,600 38,652 Total asset 22,357 38,321 investment 13,927 17,236 23,798 31,600 38,652 Total asset 22,357 38,321 51,694 23,798 31,600 38,652 Total asset 22,357 38,321 51,694 58,830 67,646 Stockholders 31,600 38,652 Total asset 22,357 38,321 51,694 58,830 67,646 Stockholders ’ 38,652 Total asset 22,357 38,321 51,694 58,830 67,646 Stockholders ’ equity Total asset 22,357 38,321 51,694 58,830 67,646 Stockholders ’ equity 16,627 asset 22,357 38,321 51,694 58,830 67,646 Stockholders ’ equity 16,627 28,438 58,830 67,646 Stockholders ’ equity 16,627 28,438 41,368 47,289 52,180 ( 67,646 Stockholders ’ equity 16,627 28,438 41,368 47,289 52,180 ( 1 Stockholders ’ equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) ’ equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) Fiscal equity 16,627 28,438 41,368 47,289 52,180 ( 1 ) Fiscal year 28,438 41,368 47,289 52,180 ( 1 ) Fiscal year 2001 includes ( 1 ) Fiscal year 2001 includes an unfavorable cumulative effect of accounting change of $ 375 million or $ 0.06 per $ 375 million or $ 0.06 per diluted share , reflecting adoption of SFAS No . 133 , and $ 4.80 billion . 133 , and $ 4.80 billion ( pre-tax ) in and telecommunication investment . ( 2 ) Fiscal year 2002 includes ( 2 ) Fiscal year 2002 includes $ 4.32 billion ( Fiscal year 2002 includes $ 4.32 billion ( pre-tax ) in holding , and a $ 1.25 billion ( pre-tax ) gain sale of Expedia , Inc. 11 / MSFT 2002 FORM 10-K , Inc. 11 / MSFT 2002 FORM 10-K Table of Contents 11 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION CONDITION RESULTS OF OPERATIONS FOR 2000 , 2001 , AND 2002 OF OPERATIONS FOR 2000 , 2001 , AND 2002 Management ’ 2000 , 2001 , AND 2002 Management ’ s Discussion and s revenue growth rate wa 16 % in fiscal 2000 , wa 16 % in fiscal 2000 , 10 % in fiscal % in fiscal 2000 , 10 % in fiscal 2001 , , 10 % in fiscal 2001 , and 12 % in in fiscal 2001 , and 12 % in fiscal 2002 . and 12 % in fiscal 2002 . Revenue growth in fiscal . Revenue growth in fiscal 2002 wa led by the addition . Revenue growth in fiscal 2001 wa driven primarily by licensing by licensing of Microsoft Windows 2000 Professional , Microsoft SQL Server . Revenue growth in fiscal 2000 wa driven by strong licensing Windows NT Workstation , Windows 2000 Professional , Windows NT Server Windows NT Server , Windows 2000 Server , Microsoft Office 2000 2000 Server , Microsoft Office 2000 , and SQL Server . licensing program . On October 1 , 2001 , Microsoft launched . On October 1 , 2001 , Microsoft launched Licensing 6.0 2001 , Microsoft launched Licensing 6.0 to simplify and improve it . One feature of Licensing 6.0 is Software Assurance which give . PRODUCT REVENUE In fiscal 2002 , Microsoft had four segment Segment Information appearing in Note 20 of the Notes to Financial accounting principle . On July 1 , 2002 , Microsoft revised . On July 1 , 2002 , Microsoft revised it product the new segment in fiscal 2003 . Desktop and Enterprise Software and Services revenue wa $ 20.40 billion , $ 22.41 billion $ 20.40 billion , $ 22.41 billion , and $ 24.01 22.41 billion , and $ 24.01 billion in 2000 , 2001 and $ 24.01 billion in 2000 , 2001 , and 2002 24.01 billion in 2000 , 2001 , and 2002 . Desktop 2000 , 2001 , and 2002 . Desktop and Enterprise Software Desktop Applications revenue wa $ 9.30 billion , $ 9.54 billion $ 9.30 billion , $ 9.54 billion , and $ 9.60 9.54 billion , and $ 9.60 billion in 2000 , 2001 and $ 9.60 billion in 2000 , 2001 , and 2002 9.60 billion in 2000 , 2001 , and 2002 . Desktop 2000 , 2001 , and 2002 . Desktop Applications includes revenue Windows NT Server and Windows 2000 Server , Exchange , and and bCentral . In fiscal 2002 , Office licensing revenue declined from client access license grew 3 % in fiscal 2002 and grew 3 % in fiscal 2002 and revenue from Great Plains Desktop Applications . In fiscal 2001 , revenue from client access from client access license increased 14 % reflecting strong licensing growth Windows NT Server and Windows 2000 Server CALs . Office revenue growth wa flat during fiscal 2001 . In fiscal 2000 , fiscal 2001 . In fiscal 2000 , revenue growth from Microsoft Desktop Platforms revenue wa $ 7.02 billion , $ 8.04 billion $ 7.02 billion , $ 8.04 billion , and $ 9.30 8.04 billion , and $ 9.30 billion in 2000 , 2001 and $ 9.30 billion in 2000 , 2001 , and 2002 9.30 billion in 2000 , 2001 , and 2002 . Desktop 2000 , 2001 , and 2002 . Desktop Platforms includes revenue Professional and Home , Windows 2000 Professional , Windows NT Workstation , Windows Me , Windows 98 , and other desktop operating operating system . In fiscal 2002 , the growth in Desktop to the higher priced Windows 2000 and Windows XP Professional operating OEM unit shipment . Fiscal 2001 revenue growth reflected the strong the strong adoption of Windows 2000 Professional , partially offset by from Windows Me and Windows 98 operating system , reflecting the a higher mix of Windows 2000 Professional and Windows NT Workstation NT Workstation . In fiscal 2000 , Desktop Platforms revenue growth post mid-year availability of Windows 2000 operating system ; and , and the mix of Windows 2000 and Windows XP Professional a a a percentage of all 32-bit operating system will continue to and Services revenue wa $ 4.08 billion , $ 4.83 billion $ 4.08 billion , $ 4.83 billion , and $ 5.11 4.83 billion , and $ 5.11 billion in 2000 , 2001 and $ 5.11 billion in 2000 , 2001 , and 2002 5.11 billion in 2000 , 2001 , and 2002 . Enterprise 2000 , 2001 , and 2002 . Enterprise Software and Services Enterprise Services . In fiscal 2002 , Server Applications , including .NET Enterprise Servers , increased 10 % compared to fiscal 2001 10 % compared to fiscal 2001 . Server Platform revenue , revenue , which includes Windows 2000 Server and Windows NT Server Server operating system , increased 10 % versus fiscal 2001 driven increased 10 % versus fiscal 2001 driven by a modest overall and increased deployment of Windows 2000 Server . Enterprise Services revenue support service , wa up 17 % compared to fiscal 2001 17 % compared to fiscal 2001 , while revenue from Developer Tools and Services wa down 19 % from fiscal 2001 . down 19 % from fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , Server Applications revenue increased , Server Applications revenue increased 31 % versus the prior year year a a result of 12 / MSFT 2002 FORM 10-K result of 12 / MSFT 2002 FORM 10-K Table of Contents 12 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 the continued adoption of Microsoft Enterprise Services revenue in fiscal 2001 , wa up 34 % fiscal 2001 , wa up 34 % compared to fiscal 2000 34 % compared to fiscal 2000 and Server Platforms increased 10 2000 and Server Platforms increased 10 % while revenue from Developer wa flat . In fiscal 2000 , Server Platforms revenue growth Windows NT Server and Windows 2000 Server . Revenue from Server Applications grew strongly in fiscal 2000 , largely due to the strong success of SQL Server 7.0 , while Software Developer Tools and Devices revenue wa $ 1.63 billion , $ 1.95 billion $ 1.63 billion , $ 1.95 billion , and $ 3.59 1.95 billion , and $ 3.59 billion in 2000 , 2001 and $ 3.59 billion in 2000 , 2001 , and 2002 3.59 billion in 2000 , 2001 , and 2002 . Consumer 2000 , 2001 , and 2002 . Consumer Software , Services the revenue growth from fiscal 2001 stemmed from sale of the game system released in fiscal 2002 . MSN Internet access revenue from embedded system in fiscal 2002 grew nicely , however learning game declined compared to fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , revenue from MSN network also grew solidly from fiscal 2000 a a result of an consumer market . In fiscal 2000 , online revenue growth wa of entertainment software in fiscal 2000 produced robust revenue growth in Commerce Investments revenue wa $ 182 million , $ 299 million $ 182 million , $ 299 million , and $ 242 299 million , and $ 242 million in 2000 , 2001 and $ 242 million in 2000 , 2001 , and 2002 242 million in 2000 , 2001 , and 2002 . Consumer 2000 , 2001 , and 2002 . Consumer Commerce Investments include in revenue compared to fiscal 2001 reflects the sale of Microsoft Networks , Inc. on February 4 , 2002 . Acquisitions of Inc. on February 4 , 2002 . Acquisitions of Travelscape.com and strong revenue growth in fiscal 2001 . The increased overall reach strong revenue growth in fiscal 2000 . Other . Other revenue Microsoft Press , wa $ 754 million , $ 630 million $ 754 million , $ 630 million , and $ 530 630 million , and $ 530 million in 2000 , 2001 and $ 530 million in 2000 , 2001 , and 2002 530 million in 2000 , 2001 , and 2002 . In 2000 , 2001 , and 2002 . In fiscal 2002 , and 2002 . In fiscal 2002 , continued decline in the decline in revenue in fiscal 2001 . Continued success of the to revenue growth in fiscal 2000 . DISTRIBUTION CHANNELS Microsoft distributes . OEM revenue wa $ 7.01 billion in 2000 , $ wa $ 7.01 billion in 2000 , $ 7.86 billion in billion in 2000 , $ 7.86 billion in 2001 , and , $ 7.86 billion in 2001 , and $ 9.00 billion in 2001 , and $ 9.00 billion in 2002 . In and $ 9.00 billion in 2002 . In fiscal 2002 , in 2002 . In fiscal 2002 , reported license declined compared license declined compared to fiscal 2001 . However , a strong of the higher priced Windows 2000 and Windows XP Professional license OEM revenue growth over fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , while total license were of the higher priced Windows 2000 Professional and Windows NT Workstation low growth rate in fiscal 2000 wa due to lower business post mid-year availability of Windows 2000 Professional . Average earned revenue license also declined in fiscal 2000 compared to the prior year shift to the lower-priced Windows 98 operating system reflecting the softness Americas Region revenue wa $ 8.33 billion , $ 9.52 billion $ 8.33 billion , $ 9.52 billion , and $ 11.41 9.52 billion , and $ 11.41 billion in 2000 , 2001 and $ 11.41 billion in 2000 , 2001 , and 2002 11.41 billion in 2000 , 2001 , and 2002 . In 2000 , 2001 , and 2002 . In fiscal 2002 , and 2002 . In fiscal 2002 , the majority of the Great Plains . In fiscal 2001 , revenue growth wa led by strong licensing of Windows 2000 Professional and the family of Servers , particularly SQL Server 2000 and Exchange 2000 Server . SQL Server 2000 and Exchange 2000 Server . Revenue from Enterprise also grew strongly in fiscal 2001 . In fiscal 2000 , fiscal 2001 . In fiscal 2000 , Office 2000 integrated suite In fiscal 2000 , Office 2000 integrated suite , Windows 2000 2000 integrated suite , Windows 2000 Server , online revenue , Africa Region revenue wa $ 5.02 billion , $ 4.86 billion $ 5.02 billion , $ 4.86 billion , and $ 5.13 4.86 billion , and $ 5.13 billion in 2000 , 2001 and $ 5.13 billion in 2000 , 2001 , and 2002 5.13 billion in 2000 , 2001 , and 2002 . In 2000 , 2001 , and 2002 . In fiscal 2002 , and 2002 . In fiscal 2002 , the majority of the the year . In fiscal 2001 , weakening local currency negatively , while revenue from Windows 2000 Professional and the .NET Enterprise very healthy . In fiscal 2000 , retail sale of Windows of Windows operating system and 13 / MSFT 2002 FORM 10-K system and 13 / MSFT 2002 FORM 10-K Table of Contents 13 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 Office licensing produced moderate growth Asia Region revenue wa $ 2.60 billion in 2000 , $ wa $ 2.60 billion in 2000 , $ 3.06 billion in billion in 2000 , $ 3.06 billion in 2001 , and , $ 3.06 billion in 2001 , and $ 2.83 billion in 2001 , and $ 2.83 billion in 2002 . In and $ 2.83 billion in 2002 . In fiscal 2002 , in 2002 . In fiscal 2002 , Asia region revenue declined localized version of Microsoft Office 2000 and Microsoft Office XP , Office revenue . In fiscal 2001 , the region ’ s localized version of Microsoft Office 2000 and Microsoft Office XP , wa also attributable to Windows 2000 Professional and .NET Server application application licensing . In fiscal 2000 , the region ’ s localized version of Microsoft Office 2000 , especially the Office Personal foreign exchange rate . Approximately 30 % , 27 % , . Approximately 30 % , 27 % , and 25 % , 27 % , and 25 % of the Company ’ collected in foreign currency during 2000 , 2001 , and 2002 foreign currency during 2000 , 2001 , and 2002 . Since 2000 , 2001 , and 2002 . Since a portion of a percent of revenue wa 13.1 % in 2000 , 13.7 revenue wa 13.1 % in 2000 , 13.7 % in 2001 13.1 % in 2000 , 13.7 % in 2001 , and 2000 , 13.7 % in 2001 , and 18.3 % in % in 2001 , and 18.3 % in 2002 . Cost , and 18.3 % in 2002 . Cost of revenue in Cost of revenue in fiscal 2002 increased primarily due to cost to Xbox . In fiscal 2001 , higher support and service Cost of revenue in fiscal 2000 reflected lower cost associated with of goodwill amortization in fiscal 2002 in accordance with Statement of Accounting Standards ( SFAS ) 142 , Goodwill and Other Intangible development cost . In fiscal 2001 , the increase in R . The increase in fiscal 2000 wa driven primarily by higher a percentage of revenue wa 18.0 % in 2000 , 19.3 revenue wa 18.0 % in 2000 , 19.3 % in 2001 18.0 % in 2000 , 19.3 % in 2001 , and 2000 , 19.3 % in 2001 , and 19.1 % in % in 2001 , and 19.1 % in 2002 . In , and 19.1 % in 2002 . In fiscal 2002 , in 2002 . In fiscal 2002 , sale and marketing expense system revenue . In fiscal 2001 , sale and marketing expense sale initiative . In fiscal 2000 , sale and marketing expense and administrative expense in fiscal 2002 increased due to a charge a charge of approximately $ 660 million for estimated expense related legal fee . In fiscal 2001 , general and administrative cost , Inc. recorded in fiscal 2000 . Excluding this charge in Excluding this charge in fiscal 2000 , general and administrative expense and administrative expense in fiscal 2001 increased from the prior year legal fee . For fiscal 2000 , besides the settlement of investees and other in fiscal 2002 wa attributed to the divestiture certain equity investment in fiscal 2002 . The increase in loss investees and other in fiscal 2001 reflects an increase in the the year . In fiscal 2000 loss on equity investees and from the MSNBC entity . 14 / MSFT 2002 FORM 10-K entity . 14 / MSFT 2002 FORM 10-K Table of Contents 14 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 The Company recorded net investment In Millions Year Ended June 30 2000 2001 2002 Dividends $ Millions Year Ended June 30 2000 2001 2002 Dividends $ 363 Year Ended June 30 2000 2001 2002 Dividends $ 363 $ Ended June 30 2000 2001 2002 Dividends $ 363 $ 377 2000 2001 2002 Dividends $ 363 $ 377 $ 357 Interest 2002 Dividends $ 363 $ 377 $ 357 Interest 1,231 1,808 $ 363 $ 377 $ 357 Interest 1,231 1,808 1,762 Net $ 377 $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ 377 $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ ( $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ ( loss on the sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( the sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( 29 sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( 29 ) 3,175 2,379 Other-than-temporary impairment ( 29 ) ( 4,804 ) ( impairment ( 29 ) ( 4,804 ) ( 4,323 ) Net ) ( 4,804 ) ( 4,323 ) Net unrealized loss attributable attributable to derivative instrument ( 19 ) ( 592 ) ( instrument ( 19 ) ( 592 ) ( 480 ) Net ) ( 592 ) ( 480 ) Net recognized gains/ ( ( loss ) on investment 1,732 ( 2,221 ) ( 2,424 ) on investment 1,732 ( 2,221 ) ( 2,424 ) Investment 1,732 ( 2,221 ) ( 2,424 ) Investment income/ ( loss income/ ( loss ) $ 3,326 $ ( 36 ) $ ) $ 3,326 $ ( 36 ) $ ( 305 ) ( 36 ) $ ( 305 ) In fiscal 2002 , ( 305 ) In fiscal 2002 , other-than-temporary impairment primarily related of investment included a $ 1.25 billion gain on the sale and dividend income decreased $ 66 million from fiscal 2001 a $ 66 million from fiscal 2001 a a result of lower dividend income . In fiscal 2001 , other-than-temporary impairment primarily related sale of investment in fiscal 2001 included a gain from Microsoft and dividend income increased $ 591 million from fiscal 2000 , $ 591 million from fiscal 2000 , reflecting a larger investment portfolio . In fiscal year 2000 , investment income increased primarily of security . At June 30 , 2002 , unrealized loss . At June 30 , 2002 , unrealized loss on Equity and Other Investments of $ 623 million were deemed to be exchange it AT & T 5 % convertible preferred debt security preferred debt security for approximately 115 million share of AT & transaction will close by December 31 , 2002 . While it close by December 31 , 2002 . While it is possible exchange transaction a of June 30 , 2002 . The Company a of June 30 , 2002 . The Company ’ s effective tax rate for fiscal 2002 wa 32 % . The rate for fiscal 2002 wa 32 % . The effective tax effective tax rate for fiscal 2001 and fiscal 2000 wa 33 for fiscal 2001 and fiscal 2000 wa 33 % and 34 2001 and fiscal 2000 wa 33 % and 34 % , 2000 wa 33 % and 34 % , respectively . The . ACCOUNTING CHANGES Effective July 1 , 2001 , Microsoft adopted CHANGES Effective July 1 , 2001 , Microsoft adopted SFAS 141 2001 , Microsoft adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 , Goodwill and Other Intangible Other Intangible Assets . SFAS 141 requires business combination to be separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Goodwill amortization ( on pre-tax basis ) wa $ 234 million in fiscal 2000 and $ 234 million in fiscal 2000 and $ 311 million in in fiscal 2000 and $ 311 million in fiscal 2001 . $ 311 million in fiscal 2001 . Effective July 1 , fiscal 2001 . Effective July 1 , 2000 , Microsoft adopted . Effective July 1 , 2000 , Microsoft adopted SFAS 133 2000 , Microsoft adopted SFAS 133 , Accounting for Derivative Instruments . The adoption of SFAS 133 resulted in a cumulative pre-tax reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a ( OCI ) of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument short-term investment portfolio totaled $ 38.65 billion at June 30 , $ 38.65 billion at June 30 , 2002 . The portfolio billion at June 30 , 2002 . The portfolio consists primarily for immediate cash need . 15 / MSFT 2002 FORM 10-K need . 15 / MSFT 2002 FORM 10-K Table of Contents 15 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 Cash flow from operation wa flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion for fiscal 2002 , an increase of $ , an increase of $ 1.09 billion from fiscal 2001 . $ 1.09 billion from fiscal 2001 . The increase reflects strong used for financing wa $ 4.57 billion in fiscal 2002 , $ 4.57 billion in fiscal 2002 , a decrease of $ , a decrease of $ 1.01 billion from the prior year year . The Company repurchased 122.8 million share of common stock share repurchase program in fiscal 2002 , compared to 89.0 million fiscal 2002 , compared to 89.0 million share repurchased in the year . In addition , 5.1 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , giving it the right it the right to acquire 5.1 million of it share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from fiscal 2001 . $ 2.11 billion from fiscal 2001 . Cash flow from operation flow from operation wa $ 13.42 billion in fiscal 2001 , $ 13.42 billion in fiscal 2001 , an increase of $ , an increase of $ 2.00 billion from the prior year used for financing wa $ 5.59 billion in fiscal 2001 , $ 5.59 billion in fiscal 2001 , an increase of $ , an increase of $ 3.39 billion from the prior year of put warrant in fiscal 2001 , compared to the sale retired or exercised during fiscal 2001 . During fiscal 2001 , fiscal 2001 . During fiscal 2001 , the Company repurchased 89.0 2001 , the Company repurchased 89.0 million share . Cash used used for investing wa $ 8.73 billion in fiscal 2001 , $ 8.73 billion in fiscal 2001 , a decrease of $ , a decrease of $ 658 million from the prior year prior year . In fiscal 2000 , cash flow from operation flow from operation wa $ 11.43 billion , a decrease of , a decrease of $ 720 million from the prior year used for financing wa $ 2.19 billion in fiscal 2000 , $ 2.19 billion in fiscal 2000 , an increase of $ , an increase of $ 1.33 billion from the prior year prior year . During fiscal 2000 , the Company repurchased 55.2 2000 , the Company repurchased 55.2 million share . Cash used used for investing wa $ 9.39 billion in fiscal 2000 , $ 9.39 billion in fiscal 2000 , a decrease of $ , a decrease of $ 808 million from the prior year Stockholders ’ equity at June 30 , 2002 wa $ 52.18 equity at June 30 , 2002 wa $ 52.18 billion . 30 , 2002 wa $ 52.18 billion . Microsoft will continue constructing new building were $ 111 million on June 30 , $ 111 million on June 30 , 2002 . The Company million on June 30 , 2002 . The Company ha not capital resource . Since fiscal 1990 , Microsoft ha repurchased 982 1990 , Microsoft ha repurchased 982 million common share while 2.23 982 million common share while 2.23 billion share were issued under preferred stock matured on December 15 , 1999 . Each preferred matured on December 15 , 1999 . Each preferred share wa preferred share wa converted into 1.1273 common share . Management belief . SUBSEQUENT EVENT On July 11 , 2002 , Microsoft acquired EVENT On July 11 , 2002 , Microsoft acquired Navision a/s s share for approximately $ 1.45 billion in stock and cash of Position ( SOP ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , Accounting for the Costs , Leased , or Other- 16 / MSFT 2002 FORM 10-K or Other- 16 / MSFT 2002 FORM 10-K Table of Contents 16 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 wise Marketed . SFAS 86 7 wise Marketed . SFAS 86 specifies that cost incurred internally to significant uncertainty . SFAS 5 , Accounting for Contingencies , result of operation . SFAS 109 , Accounting for Income Taxes software industry over the last 25 year would not have occurred of the United States . 17 / MSFT 2002 FORM 10-K States . 17 / MSFT 2002 FORM 10-K Table of Contents 17 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7 Intellectual Property Rights . Microsoft Extraterritorial Income . In August 2001 , a World Trade Organization Extraterritorial Income Exclusion Act of 2000 constitute an export subsidy prohibited it appeal . On January 29 , 2002 , the WTO . On January 29 , 2002 , the WTO Dispute Settlement this issue . In July 2002 , Representative Bill Thomas , and Corporate Accountability Act of 2002 . If enacted , that the Company . On August 30 , 2002 , a WTO . On August 30 , 2002 , a WTO arbitration panel may impose up to $ 4.04 billion per year in countermeasure . As discussed in Note 19—Contingencies of the Notes to Financial and operating margin . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , simulating 10,000 market price path over 20 10,000 market price path over 20 day for equity , interest re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 th over 20 day at the 97.5 th percentile . Several risk of these security in fiscal 2002 and fiscal 2001 . Such in fiscal 2002 and fiscal 2001 . Such impairment charge have in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the of future market risk . 18 / MSFT 2002 FORM 10-K risk . 18 / MSFT 2002 FORM 10-K Table of Contents 18 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 7A , 8 The following table Part II Item 7A , 8 The following table set forth In Millions As of June 30 , Year ended June 30 30 , Year ended June 30 , 2002 Risk Categories 2002 Year ended June 30 , 2002 Risk Categories 2002 2001 Average 30 , 2002 Risk Categories 2002 2001 Average High Low Interest , 2002 Risk Categories 2002 2001 Average High Low Interest rate High Low Interest rate $ 472 $ 363 $ 435 $ Interest rate $ 472 $ 363 $ 435 $ 535 $ $ 472 $ 363 $ 435 $ 535 $ 333 Currency $ 363 $ 435 $ 535 $ 333 Currency rate 310 $ 435 $ 535 $ 333 Currency rate 310 58 162 535 $ 333 Currency rate 310 58 162 310 58 Equity $ 333 Currency rate 310 58 162 310 58 Equity price 333 Currency rate 310 58 162 310 58 Equity price 602 Currency rate 310 58 162 310 58 Equity price 602 520 rate 310 58 162 310 58 Equity price 602 520 584 162 310 58 Equity price 602 520 584 757 488 The 310 58 Equity price 602 520 584 757 488 The total 58 Equity price 602 520 584 757 488 The total VAR Equity price 602 520 584 757 488 The total VAR for price 602 520 584 757 488 The total VAR for the combined risk category is $ 908 million at June 30 , $ 908 million at June 30 , 2002 and $ 759 million at June 30 , 2002 and $ 759 million at 30 , 2002 and $ 759 million at June 30 , $ 759 million at June 30 , 2001 . The total million at June 30 , 2001 . The total VAR is . The total VAR is 34 % le at June 30 34 % le at June 30 , 2002 and 19 % le at June 30 , 2002 and 19 % le at June 30 , 2002 and 19 % le at June , % le at June , 30 2001 than the sum of le at June , 30 2001 than the sum of the asset allocation shift . ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY per share Year Ended June 30 2000 2001 2002 Revenue $ share Year Ended June 30 2000 2001 2002 Revenue $ 22,956 Year Ended June 30 2000 2001 2002 Revenue $ 22,956 $ Ended June 30 2000 2001 2002 Revenue $ 22,956 $ 25,296 2000 2001 2002 Revenue $ 22,956 $ 25,296 $ 28,365 Operating 2002 Revenue $ 22,956 $ 25,296 $ 28,365 Operating expense : $ 22,956 $ 25,296 $ 28,365 Operating expense : Cost of expense : Cost of revenue 3,002 3,455 5,191 Research and development : Cost of revenue 3,002 3,455 5,191 Research and development 3,772 Cost of revenue 3,002 3,455 5,191 Research and development 3,772 4,379 3,455 5,191 Research and development 3,772 4,379 4,307 Sales and marketing 5,191 Research and development 3,772 4,379 4,307 Sales and marketing 4,126 Research and development 3,772 4,379 4,307 Sales and marketing 4,126 4,885 4,379 4,307 Sales and marketing 4,126 4,885 5,407 General and administrative 4,307 Sales and marketing 4,126 4,885 5,407 General and administrative 1,050 Sales and marketing 4,126 4,885 5,407 General and administrative 1,050 857 4,885 5,407 General and administrative 1,050 857 1,550 Total operating expense 5,407 General and administrative 1,050 857 1,550 Total operating expense 11,950 General and administrative 1,050 857 1,550 Total operating expense 11,950 13,576 857 1,550 Total operating expense 11,950 13,576 16,455 Operating income 11,006 1,550 Total operating expense 11,950 13,576 16,455 Operating income 11,006 11,720 Total operating expense 11,950 13,576 16,455 Operating income 11,006 11,720 11,910 11,950 13,576 16,455 Operating income 11,006 11,720 11,910 Losses on equity 13,576 16,455 Operating income 11,006 11,720 11,910 Losses on equity investees 16,455 Operating income 11,006 11,720 11,910 Losses on equity investees and equity investees and other ( 57 ) ( 159 ) ( other ( 57 ) ( 159 ) ( 92 ) Investment ) ( 159 ) ( 92 ) Investment income/ ( loss Investment income/ ( loss ) 3,326 ( 36 ) ( 305 ( loss ) 3,326 ( 36 ) ( 305 ) Income 3,326 ( 36 ) ( 305 ) Income before income tax ) Income before income tax 14,275 11,525 11,513 Provision for income Income before income tax 14,275 11,525 11,513 Provision for income tax before income tax 14,275 11,525 11,513 Provision for income tax 4,854 11,513 Provision for income tax 4,854 3,804 3,684 Income before accounting Provision for income tax 4,854 3,804 3,684 Income before accounting change for income tax 4,854 3,804 3,684 Income before accounting change 9,421 3,684 Income before accounting change 9,421 7,721 7,829 Cumulative effect of Income before accounting change 9,421 7,721 7,829 Cumulative effect of accounting before accounting change 9,421 7,721 7,829 Cumulative effect of accounting change of income tax of $ 185 ) – ( 375 ) $ 185 ) – ( 375 ) – Net income $ ) – Net income $ 9,421 $ 7,346 $ 7,829 Basic Net income $ 9,421 $ 7,346 $ 7,829 Basic earnings per $ 9,421 $ 7,346 $ 7,829 Basic earnings per share : : Before accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative effect of $ 1.81 $ 1.45 $ 1.45 Cumulative effect of accounting change of accounting change – ( 0.07 ) – $ 1.81 $ ( 0.07 ) – $ 1.81 $ 1.38 $ 1.45 Diluted ) – $ 1.81 $ 1.38 $ 1.45 Diluted earnings per $ 1.81 $ 1.38 $ 1.45 Diluted earnings per share : : Before accounting change $ 1.70 $ 1.38 $ 1.41 Cumulative accounting change $ 1.70 $ 1.38 $ 1.41 Cumulative effect of $ 1.70 $ 1.38 $ 1.41 Cumulative effect of accounting change of accounting change – ( 0.06 ) – $ 1.70 $ ( 0.06 ) – $ 1.70 $ 1.32 $ 1.41 Weighted ) – $ 1.70 $ 1.32 $ 1.41 Weighted average share $ 1.70 $ 1.32 $ 1.41 Weighted average share outstanding : average share outstanding : Basic 5,189 5,341 5,406 Diluted 5,536 5,574 share outstanding : Basic 5,189 5,341 5,406 Diluted 5,536 5,574 5,553 outstanding : Basic 5,189 5,341 5,406 Diluted 5,536 5,574 5,553 See Basic 5,189 5,341 5,406 Diluted 5,536 5,574 5,553 See accompanying note 5,189 5,341 5,406 Diluted 5,536 5,574 5,553 See accompanying note . 5,341 5,406 Diluted 5,536 5,574 5,553 See accompanying note . 19 5,553 See accompanying note . 19 / MSFT 2002 FORM 10-K note . 19 / MSFT 2002 FORM 10-K Table of Contents 19 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS In million June BALANCE SHEETS In million June 30 2001 2002 Assets Current asset SHEETS In million June 30 2001 2002 Assets Current asset : In million June 30 2001 2002 Assets Current asset : Cash : Cash and equivalent $ 3,922 $ 3,016 Short-term investment 27,678 and equivalent $ 3,922 $ 3,016 Short-term investment 27,678 35,636 Total 3,922 $ 3,016 Short-term investment 27,678 35,636 Total cash and short-term $ 3,016 Short-term investment 27,678 35,636 Total cash and short-term investment Total cash and short-term investment 31,600 38,652 Accounts receivable , net cash and short-term investment 31,600 38,652 Accounts receivable , net 3,671 38,652 Accounts receivable , net 3,671 5,129 Inventories 83 673 Deferred Accounts receivable , net 3,671 5,129 Inventories 83 673 Deferred income , net 3,671 5,129 Inventories 83 673 Deferred income tax 1,522 net 3,671 5,129 Inventories 83 673 Deferred income tax 1,522 2,112 83 673 Deferred income tax 1,522 2,112 Other 2,334 2,010 Total 673 Deferred income tax 1,522 2,112 Other 2,334 2,010 Total current income tax 1,522 2,112 Other 2,334 2,010 Total current asset 39,210 tax 1,522 2,112 Other 2,334 2,010 Total current asset 39,210 48,576 2,334 2,010 Total current asset 39,210 48,576 Property and equipment , 2,010 Total current asset 39,210 48,576 Property and equipment , net Property and equipment , net 2,309 2,268 Equity and other investment and equipment , net 2,309 2,268 Equity and other investment 14,361 2,268 Equity and other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible Equity and other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset other investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset , net investment 14,361 14,191 Goodwill 1,511 1,426 Intangible asset , net 401 1,426 Intangible asset , net 401 243 Other long-term asset 1,038 Intangible asset , net 401 243 Other long-term asset 1,038 942 401 243 Other long-term asset 1,038 942 Total asset $ 58,830 243 Other long-term asset 1,038 942 Total asset $ 58,830 $ 1,038 942 Total asset $ 58,830 $ 67,646 Liabilities and stockholder Total asset $ 58,830 $ 67,646 Liabilities and stockholder ’ equity liability : Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 Accounts payable $ 1,188 $ 1,208 Accrued compensation 742 1,145 Income 1,188 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 $ 1,208 Accrued compensation 742 1,145 Income tax 1,468 2,022 Short-term compensation 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 742 1,145 Income tax 1,468 2,022 Short-term unearned revenue 4,395 5,920 1,468 2,022 Short-term unearned revenue 4,395 5,920 Other 1,461 2,449 Total 2,022 Short-term unearned revenue 4,395 5,920 Other 1,461 2,449 Total current unearned revenue 4,395 5,920 Other 1,461 2,449 Total current liability 9,254 revenue 4,395 5,920 Other 1,461 2,449 Total current liability 9,254 12,744 1,461 2,449 Total current liability 9,254 12,744 Long-term unearned revenue 1,219 2,449 Total current liability 9,254 12,744 Long-term unearned revenue 1,219 1,823 9,254 12,744 Long-term unearned revenue 1,219 1,823 Deferred income tax 409 12,744 Long-term unearned revenue 1,219 1,823 Deferred income tax 409 398 1,219 1,823 Deferred income tax 409 398 Other long-term liability 659 1,823 Deferred income tax 409 398 Other long-term liability 659 501 409 398 Other long-term liability 659 501 Commitments and contingency Stockholders 398 Other long-term liability 659 501 Commitments and contingency Stockholders ’ stock and paid-in capital—shares authorized 12,000 ; Shares issued and outstanding ; Shares issued and outstanding 5,383 and 5,359 28,390 31,647 Retained issued and outstanding 5,383 and 5,359 28,390 31,647 Retained earnings , and outstanding 5,383 and 5,359 28,390 31,647 Retained earnings , including outstanding 5,383 and 5,359 28,390 31,647 Retained earnings , including accumulated other comprehensive income of $ 587 and $ 583 18,899 20,533 of $ 587 and $ 583 18,899 20,533 Total stockholder ’ $ 587 and $ 583 18,899 20,533 Total stockholder ’ equity 587 and $ 583 18,899 20,533 Total stockholder ’ equity 47,289 20,533 Total stockholder ’ equity 47,289 52,180 Total liability and stockholder Total stockholder ’ equity 47,289 52,180 Total liability and stockholder ’ and stockholder ’ equity $ 58,830 $ 67,646 See accompanying note ’ equity $ 58,830 $ 67,646 See accompanying note . 20 67,646 See accompanying note . 20 / MSFT 2002 FORM 10-K note . 20 / MSFT 2002 FORM 10-K Table of Contents 20 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS In million In million Year Ended June 30 2000 2001 2002 Operations Net million Year Ended June 30 2000 2001 2002 Operations Net income Year Ended June 30 2000 2001 2002 Operations Net income $ Ended June 30 2000 2001 2002 Operations Net income $ 9,421 2002 Operations Net income $ 9,421 $ 7,346 $ 7,829 Cumulative Net income $ 9,421 $ 7,346 $ 7,829 Cumulative effect of $ 9,421 $ 7,346 $ 7,829 Cumulative effect of accounting change , net of tax – 375 – Depreciation , amortization , , and other noncash item 1,250 1,536 1,084 Net recognized ( and other noncash item 1,250 1,536 1,084 Net recognized ( gain other noncash item 1,250 1,536 1,084 Net recognized ( gain ) ) /losses on investment ( 1,732 ) 2,221 2,424 Stock option on investment ( 1,732 ) 2,221 2,424 Stock option income tax investment ( 1,732 ) 2,221 2,424 Stock option income tax benefit Stock option income tax benefit 5,535 2,066 1,596 Deferred income tax option income tax benefit 5,535 2,066 1,596 Deferred income tax ( income tax benefit 5,535 2,066 1,596 Deferred income tax ( 425 1,596 Deferred income tax ( 425 ) ( 420 ) ( tax ( 425 ) ( 420 ) ( 416 ) Unearned ) ( 420 ) ( 416 ) Unearned revenue 6,177 6,970 ( 416 ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned 416 ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned revenue ) Unearned revenue 6,177 6,970 11,152 Recognition of unearned revenue ( Recognition of unearned revenue ( 5,600 ) ( 6,369 ) ( revenue ( 5,600 ) ( 6,369 ) ( 8,929 ) Accounts ) ( 6,369 ) ( 8,929 ) Accounts receivable ( 944 8,929 ) Accounts receivable ( 944 ) ( 418 ) ( receivable ( 944 ) ( 418 ) ( 1,623 ) Other ) ( 418 ) ( 1,623 ) Other current asset ( ) Other current asset ( 775 ) ( 482 ) ( asset ( 775 ) ( 482 ) ( 264 ) Other ) ( 482 ) ( 264 ) Other long-term asset ( ) Other long-term asset ( 864 ) ( 330 ) ( asset ( 864 ) ( 330 ) ( 9 ) Other ) ( 330 ) ( 9 ) Other current liability ( ) Other current liability ( 992 ) 774 1,449 Other long-term current liability ( 992 ) 774 1,449 Other long-term liability 375 liability ( 992 ) 774 1,449 Other long-term liability 375 153 774 1,449 Other long-term liability 375 153 216 Net cash from 1,449 Other long-term liability 375 153 216 Net cash from operation Other long-term liability 375 153 216 Net cash from operation 11,426 216 Net cash from operation 11,426 13,422 14,509 Financing Common stock Net cash from operation 11,426 13,422 14,509 Financing Common stock issued cash from operation 11,426 13,422 14,509 Financing Common stock issued 2,245 14,509 Financing Common stock issued 2,245 1,620 1,497 Common stock repurchased Financing Common stock issued 2,245 1,620 1,497 Common stock repurchased ( Common stock issued 2,245 1,620 1,497 Common stock repurchased ( 4,896 1,497 Common stock repurchased ( 4,896 ) ( 6,074 ) ( repurchased ( 4,896 ) ( 6,074 ) ( 6,069 ) Sales/ ) ( 6,074 ) ( 6,069 ) Sales/ ( repurchase ) repurchase ) of put warrant 472 ( 1,367 ) – Preferred of put warrant 472 ( 1,367 ) – Preferred stock dividend – Preferred stock dividend ( 13 ) – – Other , – Other , net – 235 – Net cash used for cash used for financing ( 2,192 ) ( 5,586 ) ( financing ( 2,192 ) ( 5,586 ) ( 4,572 ) Investing ) ( 5,586 ) ( 4,572 ) Investing Additions to property to property and equipment ( 879 ) ( 1,103 ) ( equipment ( 879 ) ( 1,103 ) ( 770 ) Purchases ) ( 1,103 ) ( 770 ) Purchases of investment ( ) Purchases of investment ( 42,290 ) ( 66,346 ) ( investment ( 42,290 ) ( 66,346 ) ( 89,386 ) Maturities ) ( 66,346 ) ( 89,386 ) Maturities of investment 4,025 89,386 ) Maturities of investment 4,025 5,867 8.654 Sales of investment ) Maturities of investment 4,025 5,867 8.654 Sales of investment 29,752 Maturities of investment 4,025 5,867 8.654 Sales of investment 29,752 52,848 5,867 8.654 Sales of investment 29,752 52,848 70,657 Net cash used 8.654 Sales of investment 29,752 52,848 70,657 Net cash used for Sales of investment 29,752 52,848 70,657 Net cash used for investing cash used for investing ( 9,392 ) ( 8,734 ) ( investing ( 9,392 ) ( 8,734 ) ( 10,845 ) Net ) ( 8,734 ) ( 10,845 ) Net change in cash in cash and equivalent ( 158 ) ( 898 ) ( equivalent ( 158 ) ( 898 ) ( 908 ) Effect ) ( 898 ) ( 908 ) Effect of exchange rate rate on cash and equivalent 29 ( 26 ) 2 Cash cash and equivalent 29 ( 26 ) 2 Cash and equivalent equivalent 29 ( 26 ) 2 Cash and equivalent , beginning equivalent , beginning of year 4,975 4,846 3,922 Cash and equivalent , beginning of year 4,975 4,846 3,922 Cash and equivalent , beginning of year 4,975 4,846 3,922 Cash and equivalent , end , end of year $ 4,846 $ 3,922 $ 3,016 See of year $ 4,846 $ 3,922 $ 3,016 See accompanying note $ 4,846 $ 3,922 $ 3,016 See accompanying note . 21 3,016 See accompanying note . 21 / MSFT 2002 FORM 10-K note . 21 / MSFT 2002 FORM 10-K Table of Contents 21 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS In In million Year Ended June 30 2000 2001 2002 Convertible preferred million Year Ended June 30 2000 2001 2002 Convertible preferred stock Year Ended June 30 2000 2001 2002 Convertible preferred stock Balance Ended June 30 2000 2001 2002 Convertible preferred stock Balance , , beginning of year $ 980 $ – $ – Conversion preferred to common stock ( 980 ) – – Balance , Balance , beginning of year 13,844 23,195 28,390 Common stock issued , beginning of year 13,844 23,195 28,390 Common stock issued 3,554 beginning of year 13,844 23,195 28,390 Common stock issued 3,554 5,154 23,195 28,390 Common stock issued 3,554 5,154 1,801 Common stock repurchased 28,390 Common stock issued 3,554 5,154 1,801 Common stock repurchased ( Common stock issued 3,554 5,154 1,801 Common stock repurchased ( 210 1,801 Common stock repurchased ( 210 ) ( 394 ) ( repurchased ( 210 ) ( 394 ) ( 676 ) Sales/ ) ( 394 ) ( 676 ) Sales/ ( repurchase ) repurchase ) of put warrant 472 ( 1,367 ) – Stock of put warrant 472 ( 1,367 ) – Stock option income Stock option income tax benefit 5,535 2,066 1,596 Other , net option income tax benefit 5,535 2,066 1,596 Other , net – income tax benefit 5,535 2,066 1,596 Other , net – ( Other , net – ( 264 ) 536 Balance , end net – ( 264 ) 536 Balance , end of year Balance , end of year 23,195 28,390 31,647 Retained earnings Balance , end of year 23,195 28,390 31,647 Retained earnings Balance , end of year 23,195 28,390 31,647 Retained earnings Balance , beginning Balance , beginning of year 13,614 18,173 18,899 Net income 9,421 , beginning of year 13,614 18,173 18,899 Net income 9,421 7,346 beginning of year 13,614 18,173 18,899 Net income 9,421 7,346 7,829 13,614 18,173 18,899 Net income 9,421 7,346 7,829 Other comprehensive income 18,173 18,899 Net income 9,421 7,346 7,829 Other comprehensive income : 18,899 Net income 9,421 7,346 7,829 Other comprehensive income : Cumulative of accounting change – ( 75 ) – Net gains/ ( ) on derivative instrument – 634 ( 91 ) Net unrealized derivative instrument – 634 ( 91 ) Net unrealized investment gains/ gains/ ( loss ) ( 283 ) ( 1,460 ) 5 ) ( 283 ) ( 1,460 ) 5 Translation adjustment and 283 ) ( 1,460 ) 5 Translation adjustment and other 23 5 Translation adjustment and other 23 ( 39 ) 82 Comprehensive adjustment and other 23 ( 39 ) 82 Comprehensive income 9,161 other 23 ( 39 ) 82 Comprehensive income 9,161 6,406 7,825 39 ) 82 Comprehensive income 9,161 6,406 7,825 Preferred stock dividend ) 82 Comprehensive income 9,161 6,406 7,825 Preferred stock dividend ( 82 Comprehensive income 9,161 6,406 7,825 Preferred stock dividend ( 13 7,825 Preferred stock dividend ( 13 ) – – Immaterial pooling – Immaterial pooling of interest 97 – – Common stock repurchased – Common stock repurchased ( 4,686 ) ( 5,680 ) ( repurchased ( 4,686 ) ( 5,680 ) ( 6,191 ) Balance ) ( 5,680 ) ( 6,191 ) Balance , end of Balance , end of year 18,173 18,899 20,533 Total stockholder ’ , end of year 18,173 18,899 20,533 Total stockholder ’ equity end of year 18,173 18,899 20,533 Total stockholder ’ equity $ Total stockholder ’ equity $ 41,368 $ 47,289 $ 52,180 See ’ equity $ 41,368 $ 47,289 $ 52,180 See accompanying note $ 41,368 $ 47,289 $ 52,180 See accompanying note . 22 52,180 See accompanying note . 22 / MSFT 2002 FORM 10-K note . 22 / MSFT 2002 FORM 10-K Table of Contents 22 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The which Microsoft owns at least 20 % of the voting security of Position ( SOP ) 97-2 , Software Revenue Recognition . introduction of Windows XP in 2002 and revenue for certain product . Advertising expense wa $ 1.23 billion in 2000 , $ wa $ 1.23 billion in 2000 , $ 1.36 billion in billion in 2000 , $ 1.36 billion in 2001 , and , $ 1.36 billion in 2001 , and $ 1.27 billion in 2001 , and $ 1.27 billion in 2002 . 23 and $ 1.27 billion in 2002 . 23 / MSFT 2002 1.27 billion in 2002 . 23 / MSFT 2002 FORM 10-K 2002 . 23 / MSFT 2002 FORM 10-K Table of Contents 23 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 INCOME TAXES Income tax expense sell or repledge wa $ 499 million at both June 30 499 million at both June 30 , 2001 and 2002 . at both June 30 , 2001 and 2002 . Investments are June 30 , 2001 and 2002 . Investments are considered to investment is established . In 2001 , the Company recognized $ , the Company recognized $ 4.80 billion in impairment of certain and telecommunication industry . In 2002 , Microsoft recognized $ 4.32 2002 , Microsoft recognized $ 4.32 billion in impairment of certain a hedging instrument under SFAS 133 are also used to hedge In Millions Year Ended June 30 Balance at beginning of period Balance at end of period 2002 $ 174 $ 192 $ end of period 2002 $ 174 $ 192 $ 157 $ period 2002 $ 174 $ 192 $ 157 $ 209 2001 $ 174 $ 192 $ 157 $ 209 2001 186 157 $ 192 $ 157 $ 209 2001 186 157 169 174 192 $ 157 $ 209 2001 186 157 169 174 2000 $ 157 $ 209 2001 186 157 169 174 2000 204 157 $ 209 2001 186 157 169 174 2000 204 77 $ 209 2001 186 157 169 174 2000 204 77 95 209 2001 186 157 169 174 2000 204 77 95 186 2001 186 157 169 174 2000 204 77 95 186 24 186 157 169 174 2000 204 77 95 186 24 / 157 169 174 2000 204 77 95 186 24 / MSFT 169 174 2000 204 77 95 186 24 / MSFT 2002 174 2000 204 77 95 186 24 / MSFT 2002 FORM 2000 204 77 95 186 24 / MSFT 2002 FORM 10-K 95 186 24 / MSFT 2002 FORM 10-K Table of Contents 24 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 INVENTORIES Inventories are stated at , ranging from one to 15 year . Computer software developed . GOODWILL Beginning in fiscal 2002 with the adoption of SFAS with the adoption of SFAS 142 , Goodwill and Other Intangible annually . Prior to fiscal 2002 , goodwill wa amortized using for consistent presentation . NOTE 2 ACCOUNTING CHANGES Effective July 1 2 ACCOUNTING CHANGES Effective July 1 , 2000 , the Company CHANGES Effective July 1 , 2000 , the Company adopted SFAS , the Company adopted SFAS 133 , Accounting for Derivative Instruments . The adoption of SFAS 133 on July 1 , 2000 of SFAS 133 on July 1 , 2000 , resulted in 133 on July 1 , 2000 , resulted in a cumulative reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a reduction to OCI of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument in OCI a of July 1 , 2000 were reclassified into a of July 1 , 2000 were reclassified into earnings during the twelve month ended June 30 , 2001 . The change month ended June 30 , 2001 . The change in accounting from the adoption of SFAS 133 did not materially affect net materially affect net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 2001 , Microsoft adopted . Effective July 1 , 2001 , Microsoft adopted SFAS 141 2001 , Microsoft adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 , Goodwill and Other Intangible Other Intangible Assets . SFAS 141 requires business combination initiated after business combination initiated after June 30 , 2001 to be accounted initiated after June 30 , 2001 to be accounted for using separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Net income and earnings earnings per share for fiscal 2000 and fiscal 2001 adjusted to for fiscal 2000 and fiscal 2001 adjusted to exclude amortization expense Per Share Year Ended June 30 2000 2001 Net income : Share Year Ended June 30 2000 2001 Net income : Reported Year Ended June 30 2000 2001 Net income : Reported net : Reported net income $ 9,421 $ 7,346 Goodwill amortization 203 net income $ 9,421 $ 7,346 Goodwill amortization 203 252 Equity 9,421 $ 7,346 Goodwill amortization 203 252 Equity method goodwill amortization $ 7,346 Goodwill amortization 203 252 Equity method goodwill amortization 1 252 Equity method goodwill amortization 1 26 Adjusted net income $ Equity method goodwill amortization 1 26 Adjusted net income $ 9,625 26 Adjusted net income $ 9,625 $ 7,624 Basic earnings per net income $ 9,625 $ 7,624 Basic earnings per share : basic earnings per share $ 1.81 $ 1.38 Goodwill amortization 0.04 per share $ 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity 1.81 $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.38 Goodwill amortization 0.04 0.05 Equity method goodwill amortization – basic earnings per share $ 1.85 $ 1.43 Diluted earnings per per share $ 1.85 $ 1.43 Diluted earnings per share : diluted earnings per share $ 1.70 $ 1.32 Goodwill amortization 0.04 per share $ 1.70 $ 1.32 Goodwill amortization 0.04 0.05 Equity 1.70 $ 1.32 Goodwill amortization 0.04 0.05 Equity method goodwill amortization $ 1.32 Goodwill amortization 0.04 0.05 Equity method goodwill amortization – diluted earnings per share $ 1.74 $ 1.37 25 / MSFT per share $ 1.74 $ 1.37 25 / MSFT 2002 FORM share $ 1.74 $ 1.37 25 / MSFT 2002 FORM 10-K $ 1.37 25 / MSFT 2002 FORM 10-K Table of Contents 25 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 3 UNEARNED REVENUE A Part II Item 8 NOTE 3 UNEARNED REVENUE A portion of undelivered element range from approximately 20 % to 25 % for from approximately 20 % to 25 % for Windows XP Home Windows XP Home , approximately 10 % to 15 % for , approximately 10 % to 15 % for Windows XP Professional XP Professional , and approximately 10 % to 15 % for and approximately 10 % to 15 % for desktop application , for Windows operating system and 18 month for desktop application . follows : In Millions June 30 2001 2002 Volume licensing program : In Millions June 30 2001 2002 Volume licensing program $ In Millions June 30 2001 2002 Volume licensing program $ 1,922 2002 Volume licensing program $ 1,922 $ 4,158 Undelivered element 2,818 licensing program $ 1,922 $ 4,158 Undelivered element 2,818 2,830 Other 1,922 $ 4,158 Undelivered element 2,818 2,830 Other 874 755 Unearned $ 4,158 Undelivered element 2,818 2,830 Other 874 755 Unearned revenue Undelivered element 2,818 2,830 Other 874 755 Unearned revenue $ 5,614 element 2,818 2,830 Other 874 755 Unearned revenue $ 5,614 $ 874 755 Unearned revenue $ 5,614 $ 7,743 Unearned revenue by Unearned revenue $ 5,614 $ 7,743 Unearned revenue by product wa follows : In Millions June 30 2001 2002 Desktop Applications $ : In Millions June 30 2001 2002 Desktop Applications $ 2,189 In Millions June 30 2001 2002 Desktop Applications $ 2,189 $ 2001 2002 Desktop Applications $ 2,189 $ 3,489 Desktop Platforms 2,586 Desktop Applications $ 2,189 $ 3,489 Desktop Platforms 2,586 3,198 Enterprise 2,189 $ 3,489 Desktop Platforms 2,586 3,198 Enterprise Software and Services $ 3,489 Desktop Platforms 2,586 3,198 Enterprise Software and Services 391 3,198 Enterprise Software and Services 391 791 Desktop and Enterprise Software Enterprise Software and Services 391 791 Desktop and Enterprise Software and and Enterprise Software and Services 5,166 7,478 Consumer Software , Services Enterprise Software and Services 5,166 7,478 Consumer Software , Services , and Devices , and Other 448 265 Unearned revenue $ 5,614 Devices , and Other 448 265 Unearned revenue $ 5,614 $ 448 265 Unearned revenue $ 5,614 $ 7,743 Of the $ Unearned revenue $ 5,614 $ 7,743 Of the $ 7.74 billion $ 7,743 Of the $ 7.74 billion of unearned revenue at of unearned revenue at June 30 , 2002 , $ 2.28 revenue at June 30 , 2002 , $ 2.28 billion is 30 , 2002 , $ 2.28 billion is expected to be the first quarter of fiscal 2003 , $ 1.64 billion in of fiscal 2003 , $ 1.64 billion in the second quarter the second quarter of fiscal 2003 , $ 1.18 billion in of fiscal 2003 , $ 1.18 billion in the third quarter the third quarter of fiscal 2003 , $ 817 million in of fiscal 2003 , $ 817 million in the fourth quarter the fourth quarter of fiscal 2003 , and $ 1.82 billion fiscal 2003 , and $ 1.82 billion thereafter . 26 / $ 1.82 billion thereafter . 26 / MSFT 2002 FORM 10-K thereafter . 26 / MSFT 2002 FORM 10-K Table of Contents 26 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 4 CASH AND SHORT-TERM Part II Item 8 NOTE 4 CASH AND SHORT-TERM INVESTMENTS In SHORT-TERM INVESTMENTS In Millions June 30 , 2001 Cost Basis Unrealized In Millions June 30 , 2001 Cost Basis Unrealized Gains Unrealized and equivalent : Cash $ 1,145 $ – $ – $ $ – $ – $ 1,145 Commercial paper 894 – – – $ 1,145 Commercial paper 894 – – 894 Certificates of Commercial paper 894 – – 894 Certificates of deposit 286 – – 894 Certificates of deposit 286 – – 286 U.S. government of deposit 286 – – 286 U.S. government and agency security U.S. government and agency security 400 – – 400 Corporate note agency security 400 – – 400 Corporate note and bond 1,130 400 Corporate note and bond 1,130 – – 1,130 Municipal security and bond 1,130 – – 1,130 Municipal security 67 – – – – 1,130 Municipal security 67 – – 67 Cash and Municipal security 67 – – 67 Cash and equivalent 3,922 – – 67 Cash and equivalent 3,922 – – 3,922 Short-term investment and equivalent 3,922 – – 3,922 Short-term investment : Commercial paper Short-term investment : Commercial paper 635 3 – 638 U.S. government investment : Commercial paper 635 3 – 638 U.S. government and Commercial paper 635 3 – 638 U.S. government and agency security U.S. government and agency security 7,355 9 ( 42 ) 7,322 government and agency security 7,355 9 ( 42 ) 7,322 Corporate agency security 7,355 9 ( 42 ) 7,322 Corporate note and 7,355 9 ( 42 ) 7,322 Corporate note and bond 17,256 7,322 Corporate note and bond 17,256 214 ( 149 ) 17,321 Corporate note and bond 17,256 214 ( 149 ) 17,321 Municipal and bond 17,256 214 ( 149 ) 17,321 Municipal security 1,662 17,256 214 ( 149 ) 17,321 Municipal security 1,662 41 – 149 ) 17,321 Municipal security 1,662 41 – 1,703 Certificates of ) 17,321 Municipal security 1,662 41 – 1,703 Certificates of deposit Municipal security 1,662 41 – 1,703 Certificates of deposit 694 – – 1,703 Certificates of deposit 694 – – 694 Short-term investment of deposit 694 – – 694 Short-term investment 27,602 267 ( – – 694 Short-term investment 27,602 267 ( 191 ) 27,678 – 694 Short-term investment 27,602 267 ( 191 ) 27,678 Cash Short-term investment 27,602 267 ( 191 ) 27,678 Cash and short-term 27,602 267 ( 191 ) 27,678 Cash and short-term investment $ Cash and short-term investment $ 31,524 $ 267 $ ( 191 short-term investment $ 31,524 $ 267 $ ( 191 ) $ 31,524 $ 267 $ ( 191 ) $ 31,600 In Millions $ ( 191 ) $ 31,600 In Millions June 30 , $ 31,600 In Millions June 30 , 2002 Cost Basis Unrealized In Millions June 30 , 2002 Cost Basis Unrealized Gains Unrealized and equivalent : Cash $ 1,114 $ – $ – $ $ – $ – $ 1,114 Commercial paper 260 – – – $ 1,114 Commercial paper 260 – – 260 Certificates of Commercial paper 260 – – 260 Certificates of deposit 31 – – 260 Certificates of deposit 31 – – 31 Money market of deposit 31 – – 31 Money market mutual fund 714 31 Money market mutual fund 714 – – 714 Corporate note mutual fund 714 – – 714 Corporate note and bond 560 714 Corporate note and bond 560 – – 560 Municipal security and bond 560 – – 560 Municipal security 337 – – – – 560 Municipal security 337 – – 337 Cash and Municipal security 337 – – 337 Cash and equivalent 3,016 – – 337 Cash and equivalent 3,016 – – 3,016 Short-term investment and equivalent 3,016 – – 3,016 Short-term investment : Commercial paper Short-term investment : Commercial paper 552 – – 552 U.S. government Commercial paper 552 – – 552 U.S. government and agency security U.S. government and agency security 10,726 114 ( 13 ) 10,827 government and agency security 10,726 114 ( 13 ) 10,827 Corporate agency security 10,726 114 ( 13 ) 10,827 Corporate note and 10,726 114 ( 13 ) 10,827 Corporate note and bond 18,822 10,827 Corporate note and bond 18,822 255 ( 241 ) 18,836 Corporate note and bond 18,822 255 ( 241 ) 18,836 Municipal and bond 18,822 255 ( 241 ) 18,836 Municipal security 4,462 18,822 255 ( 241 ) 18,836 Municipal security 4,462 86 – 241 ) 18,836 Municipal security 4,462 86 – 4,548 Certificates of ) 18,836 Municipal security 4,462 86 – 4,548 Certificates of deposit Municipal security 4,462 86 – 4,548 Certificates of deposit 873 – – 4,548 Certificates of deposit 873 – – 873 Short-term investment of deposit 873 – – 873 Short-term investment 35,435 455 ( – – 873 Short-term investment 35,435 455 ( 254 ) 35,636 – 873 Short-term investment 35,435 455 ( 254 ) 35,636 Cash Short-term investment 35,435 455 ( 254 ) 35,636 Cash and short-term 35,435 455 ( 254 ) 35,636 Cash and short-term investment $ Cash and short-term investment $ 38,451 $ 455 $ ( 254 short-term investment $ 38,451 $ 455 $ ( 254 ) $ 38,451 $ 455 $ ( 254 ) $ 38,652 Realized gain $ ( 254 ) $ 38,652 Realized gain and ( loss and short-term investment were $ 80 million and $ ( 226 80 million and $ ( 226 ) million in 2000 , ( 226 ) million in 2000 , $ 541 million and million in 2000 , $ 541 million and $ ( 369 541 million and $ ( 369 ) million in 2001 , ( 369 ) million in 2001 , and $ 816 million in 2001 , and $ 816 million and $ ( 558 816 million and $ ( 558 ) million in 2002 . ( 558 ) million in 2002 . 27 / MSFT 2002 ) million in 2002 . 27 / MSFT 2002 FORM 10-K 2002 . 27 / MSFT 2002 FORM 10-K Table of Contents 27 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 5 INVENTORIES In Millions Part II Item 8 NOTE 5 INVENTORIES In Millions June 30 5 INVENTORIES In Millions June 30 2001 2002 Finished good $ INVENTORIES In Millions June 30 2001 2002 Finished good $ 78 In Millions June 30 2001 2002 Finished good $ 78 $ 2001 2002 Finished good $ 78 $ 505 Raw material and Finished good $ 78 $ 505 Raw material and work in material and work in process 5 168 Inventories $ 83 $ and work in process 5 168 Inventories $ 83 $ 673 process 5 168 Inventories $ 83 $ 673 NOTE 6 PROPERTY 168 Inventories $ 83 $ 673 NOTE 6 PROPERTY AND EQUIPMENT $ 83 $ 673 NOTE 6 PROPERTY AND EQUIPMENT In Millions AND EQUIPMENT In Millions June 30 2001 2002 Land $ 185 EQUIPMENT In Millions June 30 2001 2002 Land $ 185 $ In Millions June 30 2001 2002 Land $ 185 $ 197 30 2001 2002 Land $ 185 $ 197 Buildings 1,584 1,701 2002 Land $ 185 $ 197 Buildings 1,584 1,701 Computer equipment $ 185 $ 197 Buildings 1,584 1,701 Computer equipment and software 185 $ 197 Buildings 1,584 1,701 Computer equipment and software 2,292 1,701 Computer equipment and software 2,292 2,621 Other 1,214 1,372 Property Computer equipment and software 2,292 2,621 Other 1,214 1,372 Property and and software 2,292 2,621 Other 1,214 1,372 Property and equipment – software 2,292 2,621 Other 1,214 1,372 Property and equipment – at and equipment – at cost 5,275 5,891 Accumulated depreciation ( 2,966 equipment – at cost 5,275 5,891 Accumulated depreciation ( 2,966 ) 5,275 5,891 Accumulated depreciation ( 2,966 ) ( 3,623 ) Property depreciation ( 2,966 ) ( 3,623 ) Property and equipment – and equipment – net $ 2,309 $ 2,268 During 2000 , – net $ 2,309 $ 2,268 During 2000 , 2001 , $ 2,309 $ 2,268 During 2000 , 2001 , and 2002 $ 2,268 During 2000 , 2001 , and 2002 , depreciation 2000 , 2001 , and 2002 , depreciation expense , of computer equipment , wa $ 668 million , $ 764 million $ 668 million , $ 764 million , and $ 820 764 million , and $ 820 million . NOTE 7 EQUITY $ 820 million . NOTE 7 EQUITY AND OTHER INVESTMENTS In OTHER INVESTMENTS In Millions June 30 , 2001 Cost Basis Unrealized In Millions June 30 , 2001 Cost Basis Unrealized Gains Unrealized : Within one year $ 500 $ – $ – $ $ – $ – $ 500 Between 2 and 10 year $ – $ 500 Between 2 and 10 year 643 12 $ 500 Between 2 and 10 year 643 12 ( 3 Between 2 and 10 year 643 12 ( 3 ) 652 2 and 10 year 643 12 ( 3 ) 652 Between 10 year 643 12 ( 3 ) 652 Between 10 and 643 12 ( 3 ) 652 Between 10 and 15 year ( 3 ) 652 Between 10 and 15 year 513 – ) 652 Between 10 and 15 year 513 – ( 9 Between 10 and 15 year 513 – ( 9 ) 504 15 year 513 – ( 9 ) 504 Beyond 15 year 513 – ( 9 ) 504 Beyond 15 year 4,754 – ( 9 ) 504 Beyond 15 year 4,754 – ( 829 ) 504 Beyond 15 year 4,754 – ( 829 ) 3,925 15 year 4,754 – ( 829 ) 3,925 Debt security recorded 4,754 – ( 829 ) 3,925 Debt security recorded at market Debt security recorded at market 6,410 12 ( 841 ) 5,581 security recorded at market 6,410 12 ( 841 ) 5,581 Common at market 6,410 12 ( 841 ) 5,581 Common stock and 6,410 12 ( 841 ) 5,581 Common stock and warrant 5,555 5,581 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Common stock and warrant 5,555 2,030 ( 285 ) 7,300 Preferred and warrant 5,555 2,030 ( 285 ) 7,300 Preferred stock 881 5,555 2,030 ( 285 ) 7,300 Preferred stock 881 – – 285 ) 7,300 Preferred stock 881 – – 881 Other investment Preferred stock 881 – – 881 Other investment 599 – – – – 881 Other investment 599 – – 599 Equity and Other investment 599 – – 599 Equity and other investment $ Equity and other investment $ 13,445 $ 2,042 $ ( 1,126 other investment $ 13,445 $ 2,042 $ ( 1,126 ) $ 13,445 $ 2,042 $ ( 1,126 ) $ 14,361 28 / $ ( 1,126 ) $ 14,361 28 / MSFT 2002 FORM ( 1,126 ) $ 14,361 28 / MSFT 2002 FORM 10-K $ 14,361 28 / MSFT 2002 FORM 10-K Table of Contents 28 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 In Millions June 30 , Item 8 In Millions June 30 , 2002 Cost Basis Unrealized In Millions June 30 , 2002 Cost Basis Unrealized Gains Unrealized : Within one year $ 485 $ 26 $ – $ one year $ 485 $ 26 $ – $ 511 Between $ 26 $ – $ 511 Between 2 and 10 year $ – $ 511 Between 2 and 10 year 893 46 $ 511 Between 2 and 10 year 893 46 ( 4 Between 2 and 10 year 893 46 ( 4 ) 935 2 and 10 year 893 46 ( 4 ) 935 Between 10 year 893 46 ( 4 ) 935 Between 10 and 893 46 ( 4 ) 935 Between 10 and 15 year ( 4 ) 935 Between 10 and 15 year 541 19 ) 935 Between 10 and 15 year 541 19 ( 2 Between 10 and 15 year 541 19 ( 2 ) 558 10 and 15 year 541 19 ( 2 ) 558 Beyond 15 year 541 19 ( 2 ) 558 Beyond 15 year 541 19 ( 2 ) 558 Beyond 15 year 3,036 – ( 2 ) 558 Beyond 15 year 3,036 – – 3,036 ) 558 Beyond 15 year 3,036 – – 3,036 Debt security 15 year 3,036 – – 3,036 Debt security recorded at market Debt security recorded at market 4,955 91 ( 6 ) 5,040 security recorded at market 4,955 91 ( 6 ) 5,040 Common at market 4,955 91 ( 6 ) 5,040 Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,930 5,040 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Common stock and warrant 6,930 1,287 ( 617 ) 7,600 Preferred and warrant 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,382 6,930 1,287 ( 617 ) 7,600 Preferred stock 1,382 – – 617 ) 7,600 Preferred stock 1,382 – – 1,382 Other investment Preferred stock 1,382 – – 1,382 Other investment 169 – – – – 1,382 Other investment 169 – – 169 Equity and Other investment 169 – – 169 Equity and other investment $ Equity and other investment $ 13,436 $ 1,378 $ ( 623 other investment $ 13,436 $ 1,378 $ ( 623 ) $ 13,436 $ 1,378 $ ( 623 ) $ 14,191 Debt security $ ( 623 ) $ 14,191 Debt security include corporate and . Debt security maturing beyond 15 year are composed entirely of entirely of AT & T 5 % convertible preferred debt with with a contractual maturity of 30 year . The debt is stock on or after December 1 , 2000 , or may or after December 1 , 2000 , or may be redeemed condition on or after June 1 , 2002 . In connection or after June 1 , 2002 . In connection with the exchange it AT & T 5 % convertible preferred debt security preferred debt security for approximately 115 million share of AT & transaction will close by December 31 , 2002 . While it close by December 31 , 2002 . While it is possible exchange transaction a of June 30 , 2002 . Equity security a of June 30 , 2002 . Equity security that are at cost . At June 30 , 2001 the estimated fair . At June 30 , 2001 the estimated fair value of their recorded basis wa $ 161 million . At June 30 161 million . At June 30 , 2002 the recorded basis . At June 30 , 2002 the recorded basis of these estimated fair value wa $ 34 million . This excess of discussed previously ) were $ 1.94 billion and $ ( 10 1.94 billion and $ ( 10 ) million in 2000 , ( 10 ) million in 2000 , $ 3.03 billion and million in 2000 , $ 3.03 billion and $ ( 23 3.03 billion and $ ( 23 ) million in 2001 , ( 23 ) million in 2001 , and $ 2.24 billion in 2001 , and $ 2.24 billion and $ ( 121 2.24 billion and $ ( 121 ) million in 2002 . ( 121 ) million in 2002 . NOTE 8 GOODWILL During million in 2002 . NOTE 8 GOODWILL During fiscal 2002 , NOTE 8 GOODWILL During fiscal 2002 , goodwill wa reduced by goodwill wa reduced by $ 85 million , principally in connection exchange of all of it 33.7 million share and warrant of acquired or impaired during fiscal 2002 . As of June 30 2002 . As of June 30 , 2002 , Desktop and As of June 30 , 2002 , Desktop and Enterprise Software and Services goodwill wa $ 1.1 billion , Consumer Software , and Devices goodwill wa $ 258 million , and Consumer Commerce Commerce Investments goodwill wa $ 72 million . NOTE 9 INTANGIBLE $ 72 million . NOTE 9 INTANGIBLE ASSETS During fiscal 2002 9 INTANGIBLE ASSETS During fiscal 2002 , change in intangible asset ’ s acquisition of $ 25 million in patent and license patent and license and $ 27 million in existing technology , will be amortized over approximately 3 year . No significant residual asset amortization expense wa $ 202 million for fiscal 2001 and $ 202 million for fiscal 2001 and $ 194 million for for fiscal 2001 and $ 194 million for fiscal 2002 . $ 194 million for fiscal 2002 . The component of intangible follows : In Millions June 30 2001 2002 Gross Carrying Amount : In Millions June 30 2001 2002 Gross Carrying Amount Accumulated In Millions June 30 2001 2002 Gross Carrying Amount Accumulated Amortization Amortization Patents and license $ 407 $ ( 177 ) $ license $ 407 $ ( 177 ) $ 421 $ ( $ ( 177 ) $ 421 $ ( 290 ) Existing ) $ 421 $ ( 290 ) Existing technology 157 ( ( 290 ) Existing technology 157 ( 27 ) 172 ( ) Existing technology 157 ( 27 ) 172 ( 71 ) technology 157 ( 27 ) 172 ( 71 ) Trademarks , ( 27 ) 172 ( 71 ) Trademarks , tradenames and Trademarks , tradenames and other 83 ( 42 ) 15 ( tradenames and other 83 ( 42 ) 15 ( 4 ) other 83 ( 42 ) 15 ( 4 ) Intangible asset ( 42 ) 15 ( 4 ) Intangible asset $ 647 4 ) Intangible asset $ 647 $ ( 246 ) $ asset $ 647 $ ( 246 ) $ 608 $ ( $ ( 246 ) $ 608 $ ( 365 ) Amortization ) $ 608 $ ( 365 ) Amortization expense for the of intangible asset at June 30 , 2002 is estimated to asset at June 30 , 2002 is estimated to be $ is estimated to be $ 115 million in fiscal 2003 , $ 115 million in fiscal 2003 , $ 90 million in in fiscal 2003 , $ 90 million in fiscal 2004 , $ 90 million in fiscal 2004 , $ 36 million in in fiscal 2004 , $ 36 million in fiscal 2005 , $ 36 million in fiscal 2005 , and $ 2 million fiscal 2005 , and $ 2 million in fiscal 2006 . $ 2 million in fiscal 2006 . 29 / MSFT 2002 million in fiscal 2006 . 29 / MSFT 2002 FORM 10-K 2006 . 29 / MSFT 2002 FORM 10-K Table of Contents 29 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 10 DERIVATIVES For fiscal Part II Item 8 NOTE 10 DERIVATIVES For fiscal 2001 , NOTE 10 DERIVATIVES For fiscal 2001 , investment income included a net unrealized loss of $ 592 million , comprised of a , comprised of a $ 214 million gain for change in fair value hedge , $ 211 million loss for change in flow hedge , and $ 595 million loss for change in hedging instrument . For fiscal 2002 , investment income included a net unrealized loss of $ 480 million , comprised of a , comprised of a $ 30 million gain for change in fair value hedge , $ 331 million loss for change in flow hedge , and $ 179 million net loss for change is recognized . During fiscal 2001 , $ 214 million of During fiscal 2001 , $ 214 million of derivative gain were reclassified to revenue and $ 416 million of derivative loss were loss ) . During fiscal 2002 , $ 234 million of During fiscal 2002 , $ 234 million of derivative gain were reclassified to revenue and $ 10 million of derivative loss were The Company estimate that $ 63 million of net derivative gain determined in accordance with SFAS 133 , had no impact on on earnings for the fiscal 2001 and 2002 . No fair for the fiscal 2001 and 2002 . No fair value hedge derecognized or discontinued for fiscal 2001 and 2002 . NOTE 11 discontinued for fiscal 2001 and 2002 . NOTE 11 INVESTMENT INCOME/ 2001 and 2002 . NOTE 11 INVESTMENT INCOME/ ( LOSS ) In Millions Year Ended June 30 2000 2001 2002 Dividends $ Millions Year Ended June 30 2000 2001 2002 Dividends $ 363 Year Ended June 30 2000 2001 2002 Dividends $ 363 $ Ended June 30 2000 2001 2002 Dividends $ 363 $ 377 2000 2001 2002 Dividends $ 363 $ 377 $ 357 Interest 2002 Dividends $ 363 $ 377 $ 357 Interest 1,231 1,808 $ 363 $ 377 $ 357 Interest 1,231 1,808 1,762 Net $ 377 $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ 377 $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ ( $ 357 Interest 1,231 1,808 1,762 Net recognized gains/ ( loss on the sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( the sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( 29 sale of investment 1,780 3,175 2,379 Other-than-temporary impairment ( 29 ) 3,175 2,379 Other-than-temporary impairment ( 29 ) ( 4,804 ) ( impairment ( 29 ) ( 4,804 ) ( 4,323 ) Net ) ( 4,804 ) ( 4,323 ) Net unrealized loss attributable attributable to derivative instrument ( 19 ) ( 592 ) ( instrument ( 19 ) ( 592 ) ( 480 ) Net ) ( 592 ) ( 480 ) Net recognized gains/ ( ( loss ) on investment 1,732 ( 2,221 ) ( 2,424 ) on investment 1,732 ( 2,221 ) ( 2,424 ) Investment 1,732 ( 2,221 ) ( 2,424 ) Investment income/ ( loss income/ ( loss ) $ 3,326 $ ( 36 ) $ ) $ 3,326 $ ( 36 ) $ ( 305 ) ( 36 ) $ ( 305 ) NOTE 12 INCOME TAXES $ ( 305 ) NOTE 12 INCOME TAXES The provision for In Millions Year Ended June 30 2000 2001 2002 Current tax Millions Year Ended June 30 2000 2001 2002 Current tax : Year Ended June 30 2000 2001 2002 Current tax : U.S. Ended June 30 2000 2001 2002 Current tax : U.S. and : U.S. and state $ 4,744 $ 3,243 $ 3,644 International and state $ 4,744 $ 3,243 $ 3,644 International 535 514 $ 4,744 $ 3,243 $ 3,644 International 535 514 575 Current $ 3,243 $ 3,644 International 535 514 575 Current tax 5,279 3,243 $ 3,644 International 535 514 575 Current tax 5,279 3,757 $ 3,644 International 535 514 575 Current tax 5,279 3,757 4,219 535 514 575 Current tax 5,279 3,757 4,219 Deferred tax ( 514 575 Current tax 5,279 3,757 4,219 Deferred tax ( 425 575 Current tax 5,279 3,757 4,219 Deferred tax ( 425 ) 3,757 4,219 Deferred tax ( 425 ) 47 ( 535 ) Deferred tax ( 425 ) 47 ( 535 ) Provision for ( 425 ) 47 ( 535 ) Provision for income tax Provision for income tax $ 4,854 $ 3,804 $ 3,684 U.S. income tax $ 4,854 $ 3,804 $ 3,684 U.S. and international $ 4,854 $ 3,804 $ 3,684 U.S. and international component of In Millions Year Ended June 30 2000 2001 2002 U.S. $ Millions Year Ended June 30 2000 2001 2002 U.S. $ 11,860 Year Ended June 30 2000 2001 2002 U.S. $ 11,860 $ Ended June 30 2000 2001 2002 U.S. $ 11,860 $ 9,189 2000 2001 2002 U.S. $ 11,860 $ 9,189 $ 8,920 International 2002 U.S. $ 11,860 $ 9,189 $ 8,920 International 2,415 2,336 $ 11,860 $ 9,189 $ 8,920 International 2,415 2,336 2,593 Income $ 9,189 $ 8,920 International 2,415 2,336 2,593 Income before income 9,189 $ 8,920 International 2,415 2,336 2,593 Income before income tax $ 8,920 International 2,415 2,336 2,593 Income before income tax $ Income before income tax $ 14,275 $ 11,525 $ 11,513 30 income tax $ 14,275 $ 11,525 $ 11,513 30 / MSFT $ 14,275 $ 11,525 $ 11,513 30 / MSFT 2002 FORM 14,275 $ 11,525 $ 11,513 30 / MSFT 2002 FORM 10-K $ 11,513 30 / MSFT 2002 FORM 10-K Table of Contents 30 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 In 2000 , the effective Part II Item 8 In 2000 , the effective tax rate the effective tax rate wa 34.0 % , and included the included the effect of a 2.5 % reduction from the U.S. for tax credit and a 1.5 % increase for other item for other item . In 2001 , the effective tax rate the effective tax rate wa 33.0 % , and included the included the effect of a 3.1 % reduction from the U.S. for tax credit and a 1.1 % increase for other item The effective tax rate in 2002 wa 32.0 % , and tax rate in 2002 wa 32.0 % , and included the included the effect of a 2.4 % reduction from the U.S. exclusion tax benefit and a 0.6 % reduction for other item were : In Millions June 30 2001 2002 Deferred income tax : In Millions June 30 2001 2002 Deferred income tax asset In Millions June 30 2001 2002 Deferred income tax asset : asset : Revenue item $ 1,469 $ 2,261 Expense item 691 Revenue item $ 1,469 $ 2,261 Expense item 691 945 Impaired 1,469 $ 2,261 Expense item 691 945 Impaired investment 1,070 2,016 $ 2,261 Expense item 691 945 Impaired investment 1,070 2,016 Deferred item 691 945 Impaired investment 1,070 2,016 Deferred income tax asset 691 945 Impaired investment 1,070 2,016 Deferred income tax asset $ Deferred income tax asset $ 3,230 $ 5,222 Deferred income tax tax asset $ 3,230 $ 5,222 Deferred income tax liability : gain on investment $ ( 395 ) $ ( 887 ) ( 395 ) $ ( 887 ) International earnings ( 1,667 887 ) International earnings ( 1,667 ) ( 1,818 ) Other earnings ( 1,667 ) ( 1,818 ) Other ( 55 ) ( 1,818 ) Other ( 55 ) ( 803 ) Deferred Other ( 55 ) ( 803 ) Deferred income tax liability income tax liability $ ( 2,117 ) $ ( 3,508 ) ( 2,117 ) $ ( 3,508 ) Microsoft ha not provided foreign withholding tax on $ 780 million of it undistributed earnings of which relate to fiscal 2002 earnings , since these earnings reinvested indefinitely . On September 15 , 2000 , the U.S. . On September 15 , 2000 , the U.S. Tax Court ) incorrectly assessed tax for 1990 and 1991 . The Company assessed tax for 1990 and 1991 . The Company ha filed for item related to the 1990 and 1991 assessment , have related to the 1990 and 1991 assessment , have been settled IRS for all year through 1996 . The IRS is examining examining the Company ’ s 1997 through 1999 U.S. income tax Company ’ s 1997 through 1999 U.S. income tax return . Income tax paid were $ 800 million in 2000 , $ were $ 800 million in 2000 , $ 1.3 billion in million in 2000 , $ 1.3 billion in 2001 , and , $ 1.3 billion in 2001 , and $ 1.9 billion in 2001 , and $ 1.9 billion in 2002 . NOTE and $ 1.9 billion in 2002 . NOTE 13 STOCKHOLDERS ’ billion in 2002 . NOTE 13 STOCKHOLDERS ’ EQUITY Shares of In Millions Year Ended June 30 2000 2001 2002 Balance , Millions Year Ended June 30 2000 2001 2002 Balance , beginning Year Ended June 30 2000 2001 2002 Balance , beginning of Ended June 30 2000 2001 2002 Balance , beginning of year Balance , beginning of year 5,109 5,283 5,383 Issued 229 189 , beginning of year 5,109 5,283 5,383 Issued 229 189 104 beginning of year 5,109 5,283 5,383 Issued 229 189 104 Repurchased year 5,109 5,283 5,383 Issued 229 189 104 Repurchased ( 55 5,109 5,283 5,383 Issued 229 189 104 Repurchased ( 55 ) 5,283 5,383 Issued 229 189 104 Repurchased ( 55 ) ( 229 189 104 Repurchased ( 55 ) ( 89 ) ( Repurchased ( 55 ) ( 89 ) ( 128 ) Balance ) ( 89 ) ( 128 ) Balance , end of Balance , end of year 5,283 5,383 5,359 The Company repurchase , end of year 5,283 5,383 5,359 The Company repurchase it end of year 5,283 5,383 5,359 The Company repurchase it common stock purchase plan . In 2002 , the Company acquired 5.1 2002 , the Company acquired 5.1 million of it share a repurchase transaction entered into in 2001 , which gave it the up-front net payment of $ 264 million . To enhance it the third quarter of fiscal 2001 , the Company issued 2.8 2001 , the Company issued 2.8 million share to settle a put warrant . At June 30 , 2001 and 2002 , . At June 30 , 2001 and 2002 , there were June 30 , 2001 and 2002 , there were no outstanding outstanding put warrant . During 1996 , Microsoft issued 12.5 million During 1996 , Microsoft issued 12.5 million share of 2.75 % issued 12.5 million share of 2.75 % convertible exchangeable principal-protected preferred preferred stock matured on December 15 , 1999 . Each preferred matured on December 15 , 1999 . Each preferred share wa preferred share wa converted into 1.1273 common share . 31 / into 1.1273 common share . 31 / MSFT 2002 FORM 10-K share . 31 / MSFT 2002 FORM 10-K Table of Contents 31 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 14 OTHER COMPREHENSIVE INCOME Part II Item 8 NOTE 14 OTHER COMPREHENSIVE INCOME In Millions In Millions Year Ended June 30 2000 2001 2002 Cumulative effect Millions Year Ended June 30 2000 2001 2002 Cumulative effect of Year Ended June 30 2000 2001 2002 Cumulative effect of accounting Ended June 30 2000 2001 2002 Cumulative effect of accounting change tax effect of $ ( 37 ) $ – $ ( ) $ – $ ( 75 ) $ – Net gains/ of tax effect of $ 246 in 2001 and $ 30 effect of $ 246 in 2001 and $ 30 in 2002 246 in 2001 and $ 30 in 2002 – 499 55 2001 and $ 30 in 2002 – 499 55 Reclassification adjustment $ 30 in 2002 – 499 55 Reclassification adjustment for ( 30 in 2002 – 499 55 Reclassification adjustment for ( gain of tax effect of $ 67 in 2001 and $ ( effect of $ 67 in 2001 and $ ( 79 ) in 2001 and $ ( 79 ) in 2002 – 135 $ ( 79 ) in 2002 – 135 ( 146 ) 79 ) in 2002 – 135 ( 146 ) Net gains/ in 2002 – 135 ( 146 ) Net gains/ ( loss ) on derivative instrument – 634 ( 91 ) Net unrealized derivative instrument – 634 ( 91 ) Net unrealized investment gains/ of tax effect of $ 248 in 2000 , $ ( effect of $ 248 in 2000 , $ ( 351 ) in 2000 , $ ( 351 ) in 2001 , and $ ( 351 ) in 2001 , and $ ( 955 2001 , and $ ( 955 ) in 2002 531 ( $ ( 955 ) in 2002 531 ( 1,200 ) ( ( 955 ) in 2002 531 ( 1,200 ) ( 1,774 ) in 2002 531 ( 1,200 ) ( 1,774 ) Reclassification 531 ( 1,200 ) ( 1,774 ) Reclassification adjustment for ( tax effect of $ ( 420 ) in 2000 , $ $ ( 420 ) in 2000 , $ ( 128 ) in 2000 , $ ( 128 ) in 2001 , and $ ( 128 ) in 2001 , and $ 958 in in 2001 , and $ 958 in 2002 ( 814 ) , and $ 958 in 2002 ( 814 ) ( 260 $ 958 in 2002 ( 814 ) ( 260 ) 1,779 2002 ( 814 ) ( 260 ) 1,779 Net unrealized investment 814 ) ( 260 ) 1,779 Net unrealized investment gains/ ( gains/ ( loss ) ( 283 ) ( 1,460 ) 5 ) ( 283 ) ( 1,460 ) 5 Translation adjustment and 283 ) ( 1,460 ) 5 Translation adjustment and other 23 5 Translation adjustment and other 23 ( 39 ) 82 Other adjustment and other 23 ( 39 ) 82 Other comprehensive income/ other 23 ( 39 ) 82 Other comprehensive income/ ( loss ( loss ) $ ( 260 ) $ ( 940 ) ( 260 ) $ ( 940 ) $ ( 4 ) ( 940 ) $ ( 4 ) The component of accumulated were : In Millions June 30 2001 2002 Net gain on : In Millions June 30 2001 2002 Net gain on derivative In Millions June 30 2001 2002 Net gain on derivative instrument gain on derivative instrument $ 177 $ 86 Net unrealized investment derivative instrument $ 177 $ 86 Net unrealized investment gain 598 86 Net unrealized investment gain 598 603 Translation adjustment and other Net unrealized investment gain 598 603 Translation adjustment and other ( Translation adjustment and other ( 188 ) ( 106 ) Accumulated other ( 188 ) ( 106 ) Accumulated other comprehensive income Accumulated other comprehensive income $ 587 $ 583 NOTE 15 EMPLOYEE comprehensive income $ 587 $ 583 NOTE 15 EMPLOYEE STOCK AND $ 587 $ 583 NOTE 15 EMPLOYEE STOCK AND SAVINGS PLANS purchased at six-month interval at 85 % of the lower of having a value not exceeding 15 % of their gross compensation an offering period . During 2000 , 2001 , and 2002 period . During 2000 , 2001 , and 2002 , employee 2000 , 2001 , and 2002 , employee purchased 2.5 million and 2002 , employee purchased 2.5 million , 5.7 million , employee purchased 2.5 million , 5.7 million , and 5.4 million , 5.7 million , and 5.4 million share at average price at average price of $ 72.38 , $ 36.87 , and of $ 72.38 , $ 36.87 , and $ 50.52 per $ 36.87 , and $ 50.52 per share . At June per share . At June 30 , 2002 , 56.8 million . At June 30 , 2002 , 56.8 million share were June 30 , 2002 , 56.8 million share were reserved for , which qualifies under Section 401 ( k ) of the employee may contribute up to 25 % of their pretax salary with a maximum contribution of 3 % of a participant ’ . Matching contribution were $ 47 million , $ 63 million $ 47 million , $ 63 million , and $ 77 63 million , and $ 77 million in 2000 , 2001 and $ 77 million in 2000 , 2001 , and 2002 77 million in 2000 , 2001 , and 2002 . STOCK 2000 , 2001 , and 2002 . STOCK OPTION PLANS The . Options granted prior to 1995 generally vest over four and and one-half year and expire 10 year from the date of grant . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and one-half year and expire after 10 year . Options granted during year . Options granted during 2002 vest over four and one-half and one-half year and expire 10 year from the date of of grant . At June 30 , 2002 , option for . At June 30 , 2002 , option for 371 million , 2002 , option for 371 million share were vested and million share were vested and 543 million share were available for grant under the plan . 32 / MSFT 2002 FORM 10-K plan . 32 / MSFT 2002 FORM 10-K Table of Contents 32 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 Stock option outstanding were a Weighted Average Balance , June 30 , 1999 766 $ 0.56 Balance , June 30 , 1999 766 $ 0.56 – $ , June 30 , 1999 766 $ 0.56 – $ 83.28 30 , 1999 766 $ 0.56 – $ 83.28 $ 23.87 766 $ 0.56 – $ 83.28 $ 23.87 Granted 304 65.56 0.56 – $ 83.28 $ 23.87 Granted 304 65.56 – 119.13 $ 83.28 $ 23.87 Granted 304 65.56 – 119.13 79.87 Exercised 83.28 $ 23.87 Granted 304 65.56 – 119.13 79.87 Exercised ( 23.87 Granted 304 65.56 – 119.13 79.87 Exercised ( 198 ) Granted 304 65.56 – 119.13 79.87 Exercised ( 198 ) 0.56 – 119.13 79.87 Exercised ( 198 ) 0.56 – 82.94 9.54 79.87 Exercised ( 198 ) 0.56 – 82.94 9.54 Canceled ( ( 198 ) 0.56 – 82.94 9.54 Canceled ( 40 ) 198 ) 0.56 – 82.94 9.54 Canceled ( 40 ) 4.63 – 82.94 9.54 Canceled ( 40 ) 4.63 – 116.56 36.50 9.54 Canceled ( 40 ) 4.63 – 116.56 36.50 Balance , ( 40 ) 4.63 – 116.56 36.50 Balance , June 30 40 ) 4.63 – 116.56 36.50 Balance , June 30 , 116.56 36.50 Balance , June 30 , 2000 832 0.56 – Balance , June 30 , 2000 832 0.56 – 119.13 41.23 , June 30 , 2000 832 0.56 – 119.13 41.23 Granted June 30 , 2000 832 0.56 – 119.13 41.23 Granted 224 , 2000 832 0.56 – 119.13 41.23 Granted 224 41.50 – 2000 832 0.56 – 119.13 41.23 Granted 224 41.50 – 80.00 0.56 – 119.13 41.23 Granted 224 41.50 – 80.00 60.84 Exercised – 119.13 41.23 Granted 224 41.50 – 80.00 60.84 Exercised ( 41.23 Granted 224 41.50 – 80.00 60.84 Exercised ( 123 ) Granted 224 41.50 – 80.00 60.84 Exercised ( 123 ) 0.59 – 80.00 60.84 Exercised ( 123 ) 0.59 – 85.81 11.13 60.84 Exercised ( 123 ) 0.59 – 85.81 11.13 Canceled ( ( 123 ) 0.59 – 85.81 11.13 Canceled ( 35 ) 123 ) 0.59 – 85.81 11.13 Canceled ( 35 ) 13.83 – 85.81 11.13 Canceled ( 35 ) 13.83 – 119.13 63.57 11.13 Canceled ( 35 ) 13.83 – 119.13 63.57 Balance , ( 35 ) 13.83 – 119.13 63.57 Balance , June 30 35 ) 13.83 – 119.13 63.57 Balance , June 30 , 119.13 63.57 Balance , June 30 , 2001 898 0.56 – Balance , June 30 , 2001 898 0.56 – 119.13 49.54 , June 30 , 2001 898 0.56 – 119.13 49.54 Granted June 30 , 2001 898 0.56 – 119.13 49.54 Granted 41 , 2001 898 0.56 – 119.13 49.54 Granted 41 48.62 – 2001 898 0.56 – 119.13 49.54 Granted 41 48.62 – 72.57 0.56 – 119.13 49.54 Granted 41 48.62 – 72.57 62.50 Exercised – 119.13 49.54 Granted 41 48.62 – 72.57 62.50 Exercised ( 49.54 Granted 41 48.62 – 72.57 62.50 Exercised ( 99 ) Granted 41 48.62 – 72.57 62.50 Exercised ( 99 ) 1.02 – 72.57 62.50 Exercised ( 99 ) 1.02 – 69.81 12.82 62.50 Exercised ( 99 ) 1.02 – 69.81 12.82 Canceled ( ( 99 ) 1.02 – 69.81 12.82 Canceled ( 38 ) 99 ) 1.02 – 69.81 12.82 Canceled ( 38 ) 1.15 – 69.81 12.82 Canceled ( 38 ) 1.15 – 116.56 68.67 12.82 Canceled ( 38 ) 1.15 – 116.56 68.67 Balance , ( 38 ) 1.15 – 116.56 68.67 Balance , June 30 38 ) 1.15 – 116.56 68.67 Balance , June 30 , 116.56 68.67 Balance , June 30 , 2002 802 0.79 – Balance , June 30 , 2002 802 0.79 – 119.13 53.75 , June 30 , 2002 802 0.79 – 119.13 53.75 For June 30 , 2002 802 0.79 – 119.13 53.75 For various , 2002 802 0.79 – 119.13 53.75 For various price range 2002 802 0.79 – 119.13 53.75 For various price range , outstanding stock option at June 30 , 2002 were a follows option at June 30 , 2002 were a follows : In Shares Weighted Average Price $ 0.79 – $ 5.97 36 1.6 Price $ 0.79 – $ 5.97 36 1.6 $ 4.83 35 $ 0.79 – $ 5.97 36 1.6 $ 4.83 35 $ 0.79 – $ 5.97 36 1.6 $ 4.83 35 $ 4.82 $ 5.97 36 1.6 $ 4.83 35 $ 4.82 5.98 – 5.97 36 1.6 $ 4.83 35 $ 4.82 5.98 – 13.62 1.6 $ 4.83 35 $ 4.82 5.98 – 13.62 44 0.5 $ 4.83 35 $ 4.82 5.98 – 13.62 44 0.5 11.19 35 $ 4.82 5.98 – 13.62 44 0.5 11.19 42 11.18 $ 4.82 5.98 – 13.62 44 0.5 11.19 42 11.18 13.63 4.82 5.98 – 13.62 44 0.5 11.19 42 11.18 13.63 – 5.98 – 13.62 44 0.5 11.19 42 11.18 13.63 – 29.80 – 13.62 44 0.5 11.19 42 11.18 13.63 – 29.80 90 13.62 44 0.5 11.19 42 11.18 13.63 – 29.80 90 2.0 44 0.5 11.19 42 11.18 13.63 – 29.80 90 2.0 15.02 11.19 42 11.18 13.63 – 29.80 90 2.0 15.02 84 14.97 42 11.18 13.63 – 29.80 90 2.0 15.02 84 14.97 29.81 11.18 13.63 – 29.80 90 2.0 15.02 84 14.97 29.81 – 13.63 – 29.80 90 2.0 15.02 84 14.97 29.81 – 43.62 – 29.80 90 2.0 15.02 84 14.97 29.81 – 43.62 73 29.80 90 2.0 15.02 84 14.97 29.81 – 43.62 73 2.7 90 2.0 15.02 84 14.97 29.81 – 43.62 73 2.7 32.19 15.02 84 14.97 29.81 – 43.62 73 2.7 32.19 66 32.09 84 14.97 29.81 – 43.62 73 2.7 32.19 66 32.09 43.63 14.97 29.81 – 43.62 73 2.7 32.19 66 32.09 43.63 – 29.81 – 43.62 73 2.7 32.19 66 32.09 43.63 – 60.00 – 43.62 73 2.7 32.19 66 32.09 43.63 – 60.00 191 43.62 73 2.7 32.19 66 32.09 43.63 – 60.00 191 6.9 73 2.7 32.19 66 32.09 43.63 – 60.00 191 6.9 55.81 32.19 66 32.09 43.63 – 60.00 191 6.9 55.81 41 54.03 66 32.09 43.63 – 60.00 191 6.9 55.81 41 54.03 60.01 32.09 43.63 – 60.00 191 6.9 55.81 41 54.03 60.01 – 43.63 – 60.00 191 6.9 55.81 41 54.03 60.01 – 69.50 – 60.00 191 6.9 55.81 41 54.03 60.01 – 69.50 146 60.00 191 6.9 55.81 41 54.03 60.01 – 69.50 146 6.4 191 6.9 55.81 41 54.03 60.01 – 69.50 146 6.4 66.24 55.81 41 54.03 60.01 – 69.50 146 6.4 66.24 35 66.53 41 54.03 60.01 – 69.50 146 6.4 66.24 35 66.53 69.51 54.03 60.01 – 69.50 146 6.4 66.24 35 66.53 69.51 – 60.01 – 69.50 146 6.4 66.24 35 66.53 69.51 – 83.28 – 69.50 146 6.4 66.24 35 66.53 69.51 – 83.28 80 69.50 146 6.4 66.24 35 66.53 69.51 – 83.28 80 5.1 146 6.4 66.24 35 66.53 69.51 – 83.28 80 5.1 71.17 66.24 35 66.53 69.51 – 83.28 80 5.1 71.17 21 71.84 35 66.53 69.51 – 83.28 80 5.1 71.17 21 71.84 83.29 66.53 69.51 – 83.28 80 5.1 71.17 21 71.84 83.29 – 69.51 – 83.28 80 5.1 71.17 21 71.84 83.29 – 119.13 – 83.28 80 5.1 71.17 21 71.84 83.29 – 119.13 142 83.28 80 5.1 71.17 21 71.84 83.29 – 119.13 142 4.2 80 5.1 71.17 21 71.84 83.29 – 119.13 142 4.2 89.87 71.17 21 71.84 83.29 – 119.13 142 4.2 89.87 47 89.29 21 71.84 83.29 – 119.13 142 4.2 89.87 47 89.29 The 71.84 83.29 – 119.13 142 4.2 89.87 47 89.29 The Company 83.29 – 119.13 142 4.2 89.87 47 89.29 The Company follows – 119.13 142 4.2 89.87 47 89.29 The Company follows Accounting 119.13 142 4.2 89.87 47 89.29 The Company follows Accounting Principles follows Accounting Principles Board Opinion 25 , Accounting for Stock Issued for stock option is SFAS 123 , Accounting for Stock-Based Compensation over the vesting period . 33 / MSFT 2002 FORM 10-K period . 33 / MSFT 2002 FORM 10-K Table of Contents 33 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 Had compensation cost for the determined a prescribed by SFAS 123 , pro forma income statement pro forma income statement for 2000 , 2001 , and 2002 income statement for 2000 , 2001 , and 2002 would have 2000 , 2001 , and 2002 would have been a follows Share Amounts Year Ended June 30 2000 2001 2002 Reported Pro Amounts Year Ended June 30 2000 2001 2002 Reported Pro Forma Year Ended June 30 2000 2001 2002 Reported Pro Forma Reported Ended June 30 2000 2001 2002 Reported Pro Forma Reported Pro Reported Pro Forma Revenue $ 22,956 $ 22,956 $ 25,296 $ Forma Revenue $ 22,956 $ 22,956 $ 25,296 $ 25,296 $ $ 22,956 $ 22,956 $ 25,296 $ 25,296 $ 28,365 $ $ 22,956 $ 25,296 $ 25,296 $ 28,365 $ 28,365 Operating $ 25,296 $ 25,296 $ 28,365 $ 28,365 Operating expense : $ 25,296 $ 28,365 $ 28,365 Operating expense : Cost of expense : Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 : Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research Cost of revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research and of revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research and development revenue 3,002 3,277 3,455 3,775 5,191 5,699 Research and development 3,772 3,002 3,277 3,455 3,775 5,191 5,699 Research and development 3,772 4,814 5,191 5,699 Research and development 3,772 4,814 4,379 6,106 4,307 6,299 5,699 Research and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales Research and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and and development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and marketing development 3,772 4,814 4,379 6,106 4,307 6,299 Sales and marketing 4,126 3,772 4,814 4,379 6,106 4,307 6,299 Sales and marketing 4,126 4,468 4,307 6,299 Sales and marketing 4,126 4,468 4,885 5,888 5,407 6,252 6,299 Sales and marketing 4,126 4,468 4,885 5,888 5,407 6,252 General Sales and marketing 4,126 4,468 4,885 5,888 5,407 6,252 General and and marketing 4,126 4,468 4,885 5,888 5,407 6,252 General and administrative marketing 4,126 4,468 4,885 5,888 5,407 6,252 General and administrative 1,050 4,126 4,468 4,885 5,888 5,407 6,252 General and administrative 1,050 1,284 5,407 6,252 General and administrative 1,050 1,284 857 1,184 1,550 1,843 6,252 General and administrative 1,050 1,284 857 1,184 1,550 1,843 Total General and administrative 1,050 1,284 857 1,184 1,550 1,843 Total operating and administrative 1,050 1,284 857 1,184 1,550 1,843 Total operating expense administrative 1,050 1,284 857 1,184 1,550 1,843 Total operating expense 11,950 1,050 1,284 857 1,184 1,550 1,843 Total operating expense 11,950 13,843 1,550 1,843 Total operating expense 11,950 13,843 13,576 16,953 16,455 20,093 1,843 Total operating expense 11,950 13,843 13,576 16,953 16,455 20,093 Operating Total operating expense 11,950 13,843 13,576 16,953 16,455 20,093 Operating income operating expense 11,950 13,843 13,576 16,953 16,455 20,093 Operating income 11,006 expense 11,950 13,843 13,576 16,953 16,455 20,093 Operating income 11,006 9,113 11,950 13,843 13,576 16,953 16,455 20,093 Operating income 11,006 9,113 11,720 16,953 16,455 20,093 Operating income 11,006 9,113 11,720 8,343 11,910 8,272 16,455 20,093 Operating income 11,006 9,113 11,720 8,343 11,910 8,272 Losses 20,093 Operating income 11,006 9,113 11,720 8,343 11,910 8,272 Losses on Operating income 11,006 9,113 11,720 8,343 11,910 8,272 Losses on equity income 11,006 9,113 11,720 8,343 11,910 8,272 Losses on equity investees 11,006 9,113 11,720 8,343 11,910 8,272 Losses on equity investees and equity investees and other ( 57 ) ( 57 ) ( other ( 57 ) ( 57 ) ( 159 ) ( ) ( 57 ) ( 159 ) ( 159 ) ( ) ( 159 ) ( 159 ) ( 92 ) ( ) ( 159 ) ( 92 ) ( 92 ) Investment ) ( 92 ) ( 92 ) Investment income/ ( loss Investment income/ ( loss ) 3,326 3,326 ( 36 ) ( income/ ( loss ) 3,326 3,326 ( 36 ) ( 36 loss ) 3,326 3,326 ( 36 ) ( 36 ) ( 3,326 ( 36 ) ( 36 ) ( 305 ) ( ) ( 36 ) ( 305 ) ( 305 ) Income ) ( 305 ) ( 305 ) Income before income tax ) Income before income tax 14,275 12,382 11,525 8,148 11,513 7,875 Income before income tax 14,275 12,382 11,525 8,148 11,513 7,875 Provision before income tax 14,275 12,382 11,525 8,148 11,513 7,875 Provision for income tax 14,275 12,382 11,525 8,148 11,513 7,875 Provision for income tax 14,275 12,382 11,525 8,148 11,513 7,875 Provision for income tax 14,275 12,382 11,525 8,148 11,513 7,875 Provision for income tax 4,854 7,875 Provision for income tax 4,854 4,210 3,804 2,689 3,684 2,520 Provision for income tax 4,854 4,210 3,804 2,689 3,684 2,520 Income for income tax 4,854 4,210 3,804 2,689 3,684 2,520 Income before income tax 4,854 4,210 3,804 2,689 3,684 2,520 Income before accounting tax 4,854 4,210 3,804 2,689 3,684 2,520 Income before accounting change 4,854 4,210 3,804 2,689 3,684 2,520 Income before accounting change 9,421 2,520 Income before accounting change 9,421 8,172 7,721 5,459 7,829 5,355 Income before accounting change 9,421 8,172 7,721 5,459 7,829 5,355 Cumulative before accounting change 9,421 8,172 7,721 5,459 7,829 5,355 Cumulative effect accounting change 9,421 8,172 7,721 5,459 7,829 5,355 Cumulative effect of change 9,421 8,172 7,721 5,459 7,829 5,355 Cumulative effect of accounting 9,421 8,172 7,721 5,459 7,829 5,355 Cumulative effect of accounting change accounting change – – ( 375 ) ( 375 ) – – ( 375 ) ( 375 ) – – Net income – – Net income $ 9,421 $ 8,172 $ 7,346 $ Net income $ 9,421 $ 8,172 $ 7,346 $ 5,084 $ $ 9,421 $ 8,172 $ 7,346 $ 5,084 $ 7,829 $ $ 8,172 $ 7,346 $ 5,084 $ 7,829 $ 5,355 Basic $ 7,346 $ 5,084 $ 7,829 $ 5,355 Basic earnings per $ 5,084 $ 7,829 $ 5,355 Basic earnings per share $ Basic earnings per share $ 1.81 $ 1.57 $ 1.38 $ per share $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ $ 1.81 $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ $ 1.57 $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted $ 1.38 $ 0.95 $ 1.45 $ 0.99 Diluted earnings per $ 0.95 $ 1.45 $ 0.99 Diluted earnings per share $ Diluted earnings per share $ 1.70 $ 1.48 $ 1.32 $ per share $ 1.70 $ 1.48 $ 1.32 $ 0.91 $ $ 1.70 $ 1.48 $ 1.32 $ 0.91 $ 1.41 $ $ 1.48 $ 1.32 $ 0.91 $ 1.41 $ 0.98 The $ 1.32 $ 0.91 $ 1.41 $ 0.98 The weighted average $ 0.91 $ 1.41 $ 0.98 The weighted average Black-Scholes value the stock option plan during 2000 , 2001 , and 2002 option plan during 2000 , 2001 , and 2002 wa $ 2000 , 2001 , and 2002 wa $ 36.67 , $ , and 2002 wa $ 36.67 , $ 29.31 , and wa $ 36.67 , $ 29.31 , and $ 31.57 . $ 29.31 , and $ 31.57 . Value wa estimated using weighted average expected life of 6.2 year in 2000 , 6.4 life of 6.2 year in 2000 , 6.4 year in 2001 6.2 year in 2000 , 6.4 year in 2001 , and 2000 , 6.4 year in 2001 , and 7.0 year in year in 2001 , and 7.0 year in 2002 , no , and 7.0 year in 2002 , no dividend , volatility , volatility of .33 in 2000 , .39 in 2001 , in 2000 , .39 in 2001 , and .39 in 2002 2001 , and .39 in 2002 , and risk-free interest rate and risk-free interest rate of 6.2 % , 5.3 % , rate of 6.2 % , 5.3 % , and 5.4 % , 5.3 % , and 5.4 % in 2000 , 2001 , and 5.4 % in 2000 , 2001 , and 2002 5.4 % in 2000 , 2001 , and 2002 . 34 2000 , 2001 , and 2002 . 34 / MSFT 2002 2001 , and 2002 . 34 / MSFT 2002 FORM 10-K 2002 . 34 / MSFT 2002 FORM 10-K Table of Contents 34 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 16 EARNINGS PER SHARE Part II Item 8 NOTE 16 EARNINGS PER SHARE Basic earnings Share Amounts Year Ended June 30 2000 2001 2002 Income before Amounts Year Ended June 30 2000 2001 2002 Income before accounting Year Ended June 30 2000 2001 2002 Income before accounting change Ended June 30 2000 2001 2002 Income before accounting change $ Income before accounting change $ 9,421 $ 7,721 $ 7,829 Preferred accounting change $ 9,421 $ 7,721 $ 7,829 Preferred stock dividend $ 9,421 $ 7,721 $ 7,829 Preferred stock dividend 13 – $ 7,829 Preferred stock dividend 13 – – Net income available available for common shareholder $ 9,408 $ 7,721 $ 7,829 Weighted common shareholder $ 9,408 $ 7,721 $ 7,829 Weighted average outstanding $ 9,408 $ 7,721 $ 7,829 Weighted average outstanding share of outstanding share of common stock 5,189 5,341 5,406 Dilutive effect of share of common stock 5,189 5,341 5,406 Dilutive effect of : of common stock 5,189 5,341 5,406 Dilutive effect of : Put effect of : Put warrant 2 21 – Preferred stock 7 of : Put warrant 2 21 – Preferred stock 7 – 2 21 – Preferred stock 7 – – Employee stock option – – Employee stock option 338 212 147 Common stock and – Employee stock option 338 212 147 Common stock and common Employee stock option 338 212 147 Common stock and common stock stock and common stock equivalent 5,536 5,574 5,553 Earnings per share and common stock equivalent 5,536 5,574 5,553 Earnings per share before common stock equivalent 5,536 5,574 5,553 Earnings per share before accounting accounting change : Basic $ 1.81 $ 1.45 $ 1.45 Diluted : Basic $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.81 $ 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 1.45 $ 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For 1.45 Diluted $ 1.70 $ 1.38 $ 1.41 For the year $ 1.70 $ 1.38 $ 1.41 For the year ended June For the year ended June 30 , 2000 , 2001 and year ended June 30 , 2000 , 2001 and 2002 , June 30 , 2000 , 2001 and 2002 , 45 million , 2000 , 2001 and 2002 , 45 million , 351 , 2001 and 2002 , 45 million , 351 million , 2002 , 45 million , 351 million , and 373 million , 351 million , and 373 million share attributable to outstanding effect wa antidilutive . NOTE 17 OPERATIONAL TRANSACTIONS In January 2000 17 OPERATIONAL TRANSACTIONS In January 2000 , the Company acquired Visio of interest . Microsoft issued 14 million share valued at approximately share valued at approximately $ 1.5 billion in the exchange for been restated . In April 2001 , the Company acquired Great , Inc. for approximately $ 1.1 billion in stock . Great wa not material . NOTE 18 COMMITMENTS The Company ha operating for operating lease wa $ 201 million , $ 281 million $ 201 million , $ 281 million , and $ 318 281 million , and $ 318 million in 2000 , 2001 and $ 318 million in 2000 , 2001 , and 2002 318 million in 2000 , 2001 , and 2002 . Future 2000 , 2001 , and 2002 . Future minimum rental commitment of dollar , are : 2003 , $ 260 ; 2004 are : 2003 , $ 260 ; 2004 , $ 219 2003 , $ 260 ; 2004 , $ 219 ; 2005 260 ; 2004 , $ 219 ; 2005 , $ 197 2004 , $ 219 ; 2005 , $ 197 ; 2006 219 ; 2005 , $ 197 ; 2006 , $ 170 2005 , $ 197 ; 2006 , $ 170 ; 2007 197 ; 2006 , $ 170 ; 2007 , $ 135 2006 , $ 170 ; 2007 , $ 135 ; and 170 ; 2007 , $ 135 ; and thereafter , $ ; and thereafter , $ 302 . Microsoft ha committed $ . Microsoft ha committed $ 111 million for constructing new building the Company ha guaranteed $ 536 million in debt of it it equity investees . NOTE 19 CONTINGENCIES The Company is a that Microsoft had violated Sections 1 and 2 of the Sherman had violated Sections 1 and 2 of the Sherman Act and Judgment wa entered on June 7 , 2000 ordering , among entered on June 7 , 2000 ordering , among other thing Microsoft into two company . 35 / MSFT 2002 FORM 10-K company . 35 / MSFT 2002 FORM 10-K Table of Contents 35 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 The Judgment wa stayed pending an appeal . On June 28 , 2001 , the U.S. . On June 28 , 2001 , the U.S. Court of new trial on one Section 1 claim and for entry of that Microsoft had violated Section 2 . On October 12 , Section 2 . On October 12 , 2001 , the trial . On October 12 , 2001 , the trial court held in settlement discussion until November 2 , 2001 . Microsoft entered discussion until November 2 , 2001 . Microsoft entered into a the United States on November 2 , 2001 . Nine state States on November 2 , 2001 . Nine state ( New the same term on November 6 , 2001 . A hearing term on November 6 , 2001 . A hearing on the by the Court on March 6 , 2002 . The Court Court on March 6 , 2002 . The Court will now ’ proposed remedy from March 18 to June 19 , 2002 from March 18 to June 19 , 2002 . A decision 18 to June 19 , 2002 . A decision is anticipated is anticipated later in calendar 2002 . In other ongoing investigation to interoperate fully with Windows 2000 client and server and ha under Federal law and in 17 separate state court proceeding , that state . In fiscal 2002 , the Company recorded a contingent liability of approximately $ 660 million representing management ’ s suit against Microsoft on January 22 , 2002 in Federal court Microsoft on January 22 , 2002 in Federal court in the by Palm Incorporated in August 2001 , filed suit against Microsoft suit against Microsoft on February 18 , 2002 in Federal court Microsoft on February 18 , 2002 in Federal court in San described above . On March 8 , 2002 , Sun Microsystems . On March 8 , 2002 , Sun Microsystems , Inc. described above . On June 3 , 2002 , Microsoft and . On June 3 , 2002 , Microsoft and the Securities keeping practice during fiscal year 1995 through 1998 ( SEC File during fiscal year 1995 through 1998 ( SEC File No . ( SEC File No . 3-10789 ) . The settlement provides it result of operation . 36 / MSFT 2002 FORM 10-K operation . 36 / MSFT 2002 FORM 10-K Table of Contents 36 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 NOTE 20 SEGMENT INFORMATION In Part II Item 8 NOTE 20 SEGMENT INFORMATION In Millions Year In Millions Year Ended June 30 Desktop and Enterprise Software and Investments Other Reconciling Amounts Consolidated 2000 Revenue $ 20,410 $ 1,654 Amounts Consolidated 2000 Revenue $ 20,410 $ 1,654 $ 182 $ 2000 Revenue $ 20,410 $ 1,654 $ 182 $ 691 $ $ 20,410 $ 1,654 $ 182 $ 691 $ 19 $ $ 1,654 $ 182 $ 691 $ 19 $ 22,956 Operating $ 182 $ 691 $ 19 $ 22,956 Operating income/ ( $ 691 $ 19 $ 22,956 Operating income/ ( loss ) Operating income/ ( loss ) 13,210 ( 1,090 ) ( 60 ( loss ) 13,210 ( 1,090 ) ( 60 ) 86 13,210 ( 1,090 ) ( 60 ) 86 ( 1,140 ) 1,090 ) ( 60 ) 86 ( 1,140 ) 11,006 2001 ( 60 ) 86 ( 1,140 ) 11,006 2001 Revenue $ ) 86 ( 1,140 ) 11,006 2001 Revenue $ 22,720 $ 86 ( 1,140 ) 11,006 2001 Revenue $ 22,720 $ 1,961 ) 11,006 2001 Revenue $ 22,720 $ 1,961 $ 522 $ 2001 Revenue $ 22,720 $ 1,961 $ 522 $ 652 $ $ 22,720 $ 1,961 $ 522 $ 652 $ ( 559 $ 1,961 $ 522 $ 652 $ ( 559 ) $ 522 $ 652 $ ( 559 ) $ 25,296 Operating income/ $ ( 559 ) $ 25,296 Operating income/ ( loss ) Operating income/ ( loss ) 14,261 ( 1,666 ) ( 222 ( loss ) 14,261 ( 1,666 ) ( 222 ) 97 14,261 ( 1,666 ) ( 222 ) 97 ( 750 ) 1,666 ) ( 222 ) 97 ( 750 ) 11,720 2002 ( 222 ) 97 ( 750 ) 11,720 2002 Revenue $ ) 97 ( 750 ) 11,720 2002 Revenue $ 23,786 $ 97 ( 750 ) 11,720 2002 Revenue $ 23,786 $ 3,531 ) 11,720 2002 Revenue $ 23,786 $ 3,531 $ 245 $ 2002 Revenue $ 23,786 $ 3,531 $ 245 $ 537 $ $ 23,786 $ 3,531 $ 245 $ 537 $ 266 $ $ 3,531 $ 245 $ 537 $ 266 $ 28,365 Operating $ 245 $ 537 $ 266 $ 28,365 Operating income/ ( $ 537 $ 266 $ 28,365 Operating income/ ( loss ) Operating income/ ( loss ) 14,671 ( 1,778 ) 23 59 ( loss ) 14,671 ( 1,778 ) 23 59 ( 1,065 ) 14,671 ( 1,778 ) 23 59 ( 1,065 ) 11,910 14,671 ( 1,778 ) 23 59 ( 1,065 ) 11,910 Desktop 1,778 ) 23 59 ( 1,065 ) 11,910 Desktop and Enterprise 23 59 ( 1,065 ) 11,910 Desktop and Enterprise Software and In Millions Year Ended June 30 2000 2001 2002 Desktop Applications Millions Year Ended June 30 2000 2001 2002 Desktop Applications $ Year Ended June 30 2000 2001 2002 Desktop Applications $ 9,013 Ended June 30 2000 2001 2002 Desktop Applications $ 9,013 $ 2001 2002 Desktop Applications $ 9,013 $ 9,580 $ 9,327 Desktop Desktop Applications $ 9,013 $ 9,580 $ 9,327 Desktop Platforms 7,383 $ 9,013 $ 9,580 $ 9,327 Desktop Platforms 7,383 8,265 9,276 9,580 $ 9,327 Desktop Platforms 7,383 8,265 9,276 Desktop Software 16,396 $ 9,327 Desktop Platforms 7,383 8,265 9,276 Desktop Software 16,396 17,845 9,327 Desktop Platforms 7,383 8,265 9,276 Desktop Software 16,396 17,845 18,603 7,383 8,265 9,276 Desktop Software 16,396 17,845 18,603 Enterprise Software and 8,265 9,276 Desktop Software 16,396 17,845 18,603 Enterprise Software and Services 9,276 Desktop Software 16,396 17,845 18,603 Enterprise Software and Services 4,014 18,603 Enterprise Software and Services 4,014 4,875 5,183 Total Desktop and Enterprise Software and Services 4,014 4,875 5,183 Total Desktop and Enterprise Software and Services 4,014 4,875 5,183 Total Desktop and Enterprise Software Enterprise Software and Services $ 20,410 $ 22,720 $ 23,786 In and Services $ 20,410 $ 22,720 $ 23,786 In fiscal 2002 $ 20,410 $ 22,720 $ 23,786 In fiscal 2002 , Microsoft 22,720 $ 23,786 In fiscal 2002 , Microsoft had four segment Windows NT Server and Windows 2000 Server , Exchange , and Professional and Home , Windows 2000 Professional , Windows NT Workstation Windows Me ) , Windows 98 , and other desktop operating presented in accordance with SFAS 131 , Disclosures about Segments of and administrative expense ( $ 1.05 billion in 2000 , $ ( $ 1.05 billion in 2000 , $ 857 million in billion in 2000 , $ 857 million in 2001 , and , $ 857 million in 2001 , and $ 1.55 billion in 2001 , and $ 1.55 billion in 2002 ) , and $ 1.55 billion in 2002 ) , certain research expense certain research expense ( $ 141 million in 2000 , $ ( $ 141 million in 2000 , $ 154 million in million in 2000 , $ 154 million in 2001 , and , $ 154 million in 2001 , and $ 166 million in 2001 , and $ 166 million in 2002 ) , and $ 166 million in 2002 ) , and other corporate for internal reporting presentation . 37 / MSFT 2002 FORM 10-K presentation . 37 / MSFT 2002 FORM 10-K Table of Contents 37 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 Revenue attributable to U.S. operation from U.S. operation totaled $ 15.7 billion , $ 17.8 billion $ 15.7 billion , $ 17.8 billion , and $ 20.9 17.8 billion , and $ 20.9 billion in 2000 , 2001 and $ 20.9 billion in 2000 , 2001 , and 2002 20.9 billion in 2000 , 2001 , and 2002 . Revenue 2000 , 2001 , and 2002 . Revenue from outside the U.S. export , totaled $ 7.3 billion , $ 7.5 billion $ 7.3 billion , $ 7.5 billion , and $ 7.5 7.5 billion , and $ 7.5 billion in 2000 , 2001 and $ 7.5 billion in 2000 , 2001 , and 2002 7.5 billion in 2000 , 2001 , and 2002 . No 2000 , 2001 , and 2002 . No single customer accounted No single customer accounted for 10 % or more of revenue or more of revenue in 2000 , 2001 , or 2002 of revenue in 2000 , 2001 , or 2002 . Long-lived 2000 , 2001 , or 2002 . Long-lived asset ( principally and equipment ) totaled $ 2.2 billion and $ 2.0 billion $ 2.2 billion and $ 2.0 billion in the United States in the United States in 2001 and 2002 and $ 154 United States in 2001 and 2002 and $ 154 million and 2001 and 2002 and $ 154 million and $ 220 million $ 154 million and $ 220 million in other country in million in other country in 2001 and 2002 . NOTE 21 other country in 2001 and 2002 . NOTE 21 SUBSEQUENT EVENT 2001 and 2002 . NOTE 21 SUBSEQUENT EVENT On July 11 21 SUBSEQUENT EVENT On July 11 , 2002 , Microsoft acquired EVENT On July 11 , 2002 , Microsoft acquired Navision a/s s share for approximately $ 1.45 billion in stock and cash Unaudited ) Quarter Ended Sept. 30 Dec. 31 Mar . 31 Quarter Ended Sept. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal 2000 31 Mar . 31 June 30 Year Fiscal 2000 Revenue $ 31 June 30 Year Fiscal 2000 Revenue $ 5,384 $ 6,112 Year Fiscal 2000 Revenue $ 5,384 $ 6,112 $ 5,656 $ 2000 Revenue $ 5,384 $ 6,112 $ 5,656 $ 5,804 $ $ 5,384 $ 6,112 $ 5,656 $ 5,804 $ 22,956 Gross $ 6,112 $ 5,656 $ 5,804 $ 22,956 Gross profit 4,672 $ 5,656 $ 5,804 $ 22,956 Gross profit 4,672 5,356 4,904 5,804 $ 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net $ 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 22,956 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 Gross profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 2,436 profit 4,672 5,356 4,904 5,022 19,954 Net income 2,191 2,436 2,385 4,904 5,022 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic 5,022 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings 19,954 Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings per Net income 2,191 2,436 2,385 2,409 9,421 Basic earnings per share income 2,191 2,436 2,385 2,409 9,421 Basic earnings per share 0.43 9,421 Basic earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted Basic earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings earnings per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per per share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per share share 0.43 0.47 0.46 0.46 1.81 Diluted earnings per share 0.40 1.81 Diluted earnings per share 0.40 0.44 0.43 0.44 1.70 Fiscal Diluted earnings per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 earnings per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue per share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ share 0.40 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 0.44 0.43 0.44 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 1.70 Fiscal 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( 1 5,504 5,710 21,841 Net income 2,206 ( 1 ) 2,624 2,451 21,841 Net income 2,206 ( 1 ) 2,624 2,451 65 ( income 2,206 ( 1 ) 2,624 2,451 65 ( 2 ) 2,206 ( 1 ) 2,624 2,451 65 ( 2 ) 7,346 ( 1 ) 2,624 2,451 65 ( 2 ) 7,346 Basic ) 2,624 2,451 65 ( 2 ) 7,346 Basic earnings per 2,451 65 ( 2 ) 7,346 Basic earnings per share 0.42 7,346 Basic earnings per share 0.42 ( 1 ) 0.49 0.46 earnings per share 0.42 ( 1 ) 0.49 0.46 0.01 1.38 share 0.42 ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings 0.42 ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per ( 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per share 1 ) 0.49 0.46 0.01 1.38 Diluted earnings per share 0.40 1.38 Diluted earnings per share 0.40 ( 1 ) 0.47 0.44 earnings per share 0.40 ( 1 ) 0.47 0.44 0.01 1.32 share 0.40 ( 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 0.40 ( 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue ( 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 1 ) 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 6,126 0.47 0.44 0.01 1.32 Fiscal 2002 Revenue $ 6,126 $ 7,741 1.32 Fiscal 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( 3 5,850 5,885 23,174 Net income 1,283 ( 3 ) 2,283 2,738 23,174 Net income 1,283 ( 3 ) 2,283 2,738 ( 4 income 1,283 ( 3 ) 2,283 2,738 ( 4 ) 1,525 1,283 ( 3 ) 2,283 2,738 ( 4 ) 1,525 ( 3 ) 2,283 2,738 ( 4 ) 1,525 ( 5 ) 2,283 2,738 ( 4 ) 1,525 ( 5 ) 7,829 Basic ( 4 ) 1,525 ( 5 ) 7,829 Basic earnings per ) 1,525 ( 5 ) 7,829 Basic earnings per share 0.24 7,829 Basic earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted Basic earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings earnings per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per per share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per share share 0.24 0.42 0.51 0.28 1.45 Diluted earnings per share 0.23 1.45 Diluted earnings per share 0.23 0.41 0.49 0.28 1.41 ( Diluted earnings per share 0.23 0.41 0.49 0.28 1.41 ( 1 earnings per share 0.23 0.41 0.49 0.28 1.41 ( 1 ) per share 0.23 0.41 0.49 0.28 1.41 ( 1 ) Includes share 0.23 0.41 0.49 0.28 1.41 ( 1 ) Includes an 0.41 0.49 0.28 1.41 ( 1 ) Includes an unfavorable cumulative of accounting change of $ 375 million or $ 0.07 per $ 375 million or $ 0.07 per basic share and $ per basic share and $ 0.06 per diluted share , reflecting adoption of SFAS No . 133 . ( 2 ) Includes No . 133 . ( 2 ) Includes $ 3.92 billion ( 2 ) Includes $ 3.92 billion ( pre-tax ) in of certain investment . ( 3 ) Includes $ 1.82 billion ( 3 ) Includes $ 1.82 billion ( pre-tax ) in of certain investment . ( 4 ) Includes $ 1.25 billion ( 4 ) Includes $ 1.25 billion ( pre-tax ) gain Expedia , Inc. and $ 1.19 billion ( pre-tax ) in of certain investment . ( 5 ) Includes $ 1.19 billion ( 5 ) Includes $ 1.19 billion ( pre-tax ) in impairment of certain investment . 38 / MSFT 2002 FORM 10-K investment . 38 / MSFT 2002 FORM 10-K Table of Contents 38 / MSFT 2002 FORM 10-K Table of Contents Part II of Contents Part II Item 8 , 9 INDEPENDENT AUDITORS ’ Part II Item 8 , 9 INDEPENDENT AUDITORS ’ REPORT To Company ) a of June 30 , 2001 and 2002 , a of June 30 , 2001 and 2002 , and the June 30 , 2001 and 2002 , and the related consolidated in the period ended June 30 , 2002 . These financial period ended June 30 , 2002 . These financial statement are and subsidiary a of June 30 , 2001 and 2002 , a of June 30 , 2001 and 2002 , and the June 30 , 2001 and 2002 , and the result of in the period ended June 30 , 2002 in conformity with period ended June 30 , 2002 in conformity with accounting principle . As described in Note 2 to the financial statement , Financial Accounting Standards No . 133 , Accounting for Derivative Instruments Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . / S , effective July 1 , 2001 . / S / D LLP Seattle , Washington July 18 , 2002 ITEM 9 . , Washington July 18 , 2002 ITEM 9 . CHANGES IN July 18 , 2002 ITEM 9 . CHANGES IN AND DISAGREEMENTS AND FINANCIAL DISCLOSURES None . 39 / MSFT 2002 FORM 10-K None . 39 / MSFT 2002 FORM 10-K Table of Contents 39 / MSFT 2002 FORM 10-K Table of Contents Part III of Contents Part III Item 10 , 11 , 12 , Part III Item 10 , 11 , 12 , 13 PART Item 10 , 11 , 12 , 13 PART III ITEM , 11 , 12 , 13 PART III ITEM 10 . , 13 PART III ITEM 10 . DIRECTORS OF THE REGISTRANT Shareholders to be held November 5 , 2002 ( the “ be held November 5 , 2002 ( the “ Proxy Statement herein by reference . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN Except Per Share Amounts June 30 , 2002 ( a ) Share Amounts June 30 , 2002 ( a ) ( b plan approved by security holder 802 $ 53.75 600 Equity compensation by security holder 802 $ 53.75 600 Equity compensation plan not security holder 802 $ 53.75 600 Equity compensation plan not approved holder – – – Total 802 $ 53.75 600 The information – – Total 802 $ 53.75 600 The information set forth – Total 802 $ 53.75 600 The information set forth under herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED incorporated herein by reference . 40 / MSFT 2002 FORM 10-K reference . 40 / MSFT 2002 FORM 10-K Table of Contents 40 / MSFT 2002 FORM 10-K Table of Contents Part IV of Contents Part IV Item 14 PART IV ITEM 14 . Item 14 PART IV ITEM 14 . EXHIBITS , FINANCIAL STATEMENT , AND REPORTS ON FORM 8-K ( a ) Financial Statements are set forth under Item 8 of this report on Form of this report on Form 10-K. Financial statement schedule have been b ) Reports on Form 8-K The Company filed no report filed no report on Form 8-K during the quarter ended June during the quarter ended June 30 , 2002 . ( c quarter ended June 30 , 2002 . ( c ) Exhibit Exhibit Listing Exhibit Number Description 3.1 Restated Articles of Incorporation of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation 10.1 3.2 Bylaws of Microsoft Corporation 10.1 Microsoft Corporation 2001 Stock Plan Microsoft Corporation 10.1 Microsoft Corporation 2001 Stock Plan ( 2 ) Corporation 2001 Stock Plan ( 2 ) 10.2 Microsoft Corporation 1991 Stock Plan ( 2 ) 10.2 Microsoft Corporation 1991 Stock Option 2 ) 10.2 Microsoft Corporation 1991 Stock Option Plan ( 3 1991 Stock Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Stock Option 3 ) 10.3 Microsoft Corporation 1981 Stock Option Plan ( 4 1981 Stock Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Stock Option 4 ) 10.4 Microsoft Corporation 1999 Stock Option Plan for Non-Employee Plan for Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Option Plan Plan for Consultants and Advisors 10.6 Microsoft Corporation 1997 Employee Stock and Advisors 10.6 Microsoft Corporation 1997 Employee Stock Purchase Plan ( Employee Stock Purchase Plan ( 6 ) 10.7 Microsoft Corporation Savings Purchase Plan ( 6 ) 10.7 Microsoft Corporation Savings Plus Plan Corporation Savings Plus Plan ( 7 ) 10.8 Trust Agreement dated Plus Plan ( 7 ) 10.8 Trust Agreement dated June 1 10.8 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and First First Interstate Bank of Washington 10.9 Form of Indemnification Agreement 10.10 10.9 Form of Indemnification Agreement 10.10 Resignation Agreement between Richard Belluzzo Richard Belluzzo and Microsoft Corporation 21 . Subsidiaries of Registrant 23 21 . Subsidiaries of Registrant 23 . Independent Auditors ’ Consent . Independent Auditors ’ Consent 99.1 Certification Pursuant to 18 U.S.C Consent 99.1 Certification Pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a Adopted Pursuant to a Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 U.S.C 2002 99.2 Certification Pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a Adopted Pursuant to a Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 1999 . ( 2 Year Ended June 30 , 1999 . ( 2 ) Incorporated 30 , 1999 . ( 2 ) Incorporated by reference to by reference to Registration Statement 333-52-852 on Form S-8 . ( on Form S-8 . ( 3 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 1997 . ( 4 Year Ended June 30 , 1997 . ( 4 ) Incorporated 30 , 1997 . ( 4 ) Incorporated by reference to by reference to Registration Statement 33-37623 on Form S-8 . ( on Form S-8 . ( 5 ) Incorporated by reference to by reference to Registration Statement 333-91755 on Form S-8 . ( on Form S-8 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2001 . ( 7 Year Ended June 30 , 2001 . ( 7 ) Incorporated 30 , 2001 . ( 7 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2000 . 41 / Year Ended June 30 , 2000 . 41 / MSFT 2002 June 30 , 2000 . 41 / MSFT 2002 FORM 10-K 2000 . 41 / MSFT 2002 FORM 10-K Table of Contents 41 / MSFT 2002 FORM 10-K Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on September 5 , 2002 . MICROSOFT CORPORATION , on September 5 , 2002 . MICROSOFT CORPORATION By / the Securities Exchange Act of 1934 , this report ha been the capacity indicated on September 5 , 2002 . Signature Title indicated on September 5 , 2002 . Signature Title / S Ballmer , certify that : 1 . I have reviewed this this annual report on Form 10-K of Microsoft Corporation ; 2 10-K of Microsoft Corporation ; 2 . Based on my knowledge this annual report ; and 3 . Based on my knowledge report . Date : September 5 , 2002 / S / Date : September 5 , 2002 / S / S TEVEN Connors , certify that : 1 . I have reviewed this this annual report on Form 10-K of Microsoft Corporation ; 2 10-K of Microsoft Corporation ; 2 . Based on my knowledge this annual report ; and 3 . Based on my knowledge report . Date : September 5 , 2002 / S / Date : September 5 , 2002 / S / J OHN G. Connors Chief Financial Officer 42 / MSFT 2002 FORM 10-K Financial Officer 42 / MSFT 2002 FORM 10-K Table of Contents 42 / MSFT 2002 FORM 10-K Table of Contents INDEX TO TO EXHIBITS Exhibit Number Description 3.1 Restated Articles of Incorporation of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation 10.1 3.2 Bylaws of Microsoft Corporation 10.1 Microsoft Corporation 2001 Stock Plan Microsoft Corporation 10.1 Microsoft Corporation 2001 Stock Plan ( 2 ) Corporation 2001 Stock Plan ( 2 ) 10.2 Microsoft Corporation 1991 Stock Plan ( 2 ) 10.2 Microsoft Corporation 1991 Stock Option 2 ) 10.2 Microsoft Corporation 1991 Stock Option Plan ( 3 1991 Stock Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Stock Option 3 ) 10.3 Microsoft Corporation 1981 Stock Option Plan ( 4 1981 Stock Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Stock Option 4 ) 10.4 Microsoft Corporation 1999 Stock Option Plan for Non-Employee Plan for Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Option Plan Plan for Consultants and Advisors 10.6 Microsoft Corporation 1997 Employee Stock and Advisors 10.6 Microsoft Corporation 1997 Employee Stock Purchase Plan ( Employee Stock Purchase Plan ( 6 ) 10.7 Microsoft Corporation Savings Purchase Plan ( 6 ) 10.7 Microsoft Corporation Savings Plus Plan Corporation Savings Plus Plan ( 7 ) 10.8 Trust Agreement dated Plus Plan ( 7 ) 10.8 Trust Agreement dated June 1 10.8 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and First First Interstate Bank of Washington 10.9 Form of Indemnification Agreement 10.10 10.9 Form of Indemnification Agreement 10.10 Resignation Agreement between Richard Belluzzo Richard Belluzzo and Microsoft Corporation 21 . Subsidiaries of Registrant 23 21 . Subsidiaries of Registrant 23 . Independent Auditors ’ Consent . Independent Auditors ’ Consent 99.1 Certification Pursuant to 18 U.S.C Consent 99.1 Certification Pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a Adopted Pursuant to a Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 U.S.C 2002 99.2 Certification Pursuant to 18 U.S.C . Section 1350 , to 18 U.S.C . Section 1350 , a Adopted Pursuant to a Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 1999 . ( 2 Year Ended June 30 , 1999 . ( 2 ) Incorporated 30 , 1999 . ( 2 ) Incorporated by reference to by reference to Registration Statement 333-52-852 on Form S-8 . ( on Form S-8 . ( 3 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 1997 . ( 4 Year Ended June 30 , 1997 . ( 4 ) Incorporated 30 , 1997 . ( 4 ) Incorporated by reference to by reference to Registration Statement 33-37623 on Form S-8 . ( on Form S-8 . ( 5 ) Incorporated by reference to by reference to Registration Statement 333-91755 on Form S-8 . ( on Form S-8 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2001 . ( 7 Year Ended June 30 , 2001 . ( 7 ) Incorporated 30 , 2001 . ( 7 ) Incorporated by reference to to Annual Report on Form 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2000 . 2002 FORM Year Ended June 30 , 2000 . 2002 FORM 10-K June 30 , 2000 . 2002 FORM 10-K , 2000 . 2002 FORM 10-K \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-98-001067/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-98-001067/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-99-001375/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001032210-99-001375/full-submission.txt new file mode 100644 index 0000000..e69de29 diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-03-045632/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-03-045632/full-submission.txt new file mode 100644 index 0000000..cae6fd7 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-03-045632/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2003 ¨ TRANSITION REPORT YEAR ENDED JUNE 30 , 2003 ¨ TRANSITION REPORT PURSUANT TO TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark ( a defined in Rule 12b-2 of the Exchange Act ) the registrant a of August 15 , 2003 wa $ 235,404,995,887 a of August 15 , 2003 wa $ 235,404,995,887 . The 15 , 2003 wa $ 235,404,995,887 . The number of share common stock a of August 15 , 2003 wa 10,813,984,831 . a of August 15 , 2003 wa 10,813,984,831 . DOCUMENTS INCORPORATED August 15 , 2003 wa 10,813,984,831 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 11 , 2003 are incorporated by be held November 11 , 2003 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2003 INDEX PART I Year Ended June 30 , 2003 INDEX PART I Item 1. 2003 INDEX PART I Item 1. Business 1 Item 2 . PART I Item 1. Business 1 Item 2 . Properties 7 Item 1. Business 1 Item 2 . Properties 7 Item 3 1 Item 2 . Properties 7 Item 3 . Legal Proceedings 2 . Properties 7 Item 3 . Legal Proceedings 7 Item Item 3 . Legal Proceedings 7 Item 4 . Submission of . Legal Proceedings 7 Item 4 . Submission of Matters to a Vote of Security Holders 7 Executive Officers of the Registrant Executive Officers of the Registrant 8 PART II Item 5 . Registrant 8 PART II Item 5 . Market for Registrant ’ Stock and Related Stockholder Matters 9 Item 6 . Selected Financial Related Stockholder Matters 9 Item 6 . Selected Financial Data 9 6 . Selected Financial Data 9 Item 7 . Management ’ Selected Financial Data 9 Item 7 . Management ’ s Discussion Condition and Results of Operations 9 Item 7A . Quantitative and Results of Operations 9 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 18 Item 8 . Financial Statements about Market Risk 18 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 19 Item 9 . Changes in and Supplementary Data 19 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosures 41 Item 9A . Control and and Financial Disclosures 41 Item 9A . Control and Procedures 41 9A . Control and Procedures 41 PART III Item 10 . Procedures 41 PART III Item 10 . Directors and Executive Officers Executive Officers of the Registrant 41 Item 11 . Executive Compensation of the Registrant 41 Item 11 . Executive Compensation 41 Item Item 11 . Executive Compensation 41 Item 12 . Security Ownership . Executive Compensation 41 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 41 Item 13 . Certain Relationships Related Stockholder Matters 41 Item 13 . Certain Relationships and Related Certain Relationships and Related Transactions 41 Item 14 . Principal Accounting and Related Transactions 41 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 41 PART IV Item 15 . Services 41 PART IV Item 15 . Exhibits , Financial Statement , and Reports on Form 8-K 42 Signatures 43 Table of and Reports on Form 8-K 42 Signatures 43 Table of Contents on Form 8-K 42 Signatures 43 Table of Contents Part I Contents Part I , Item 1 PART I ITEM 1. Business Item 1 PART I ITEM 1. Business GENERAL Microsoft Corporation wa founded a a partnership in 1975 and incorporated in 1981 . in 1975 and incorporated in 1981 . Our mission is to product segment for fiscal year 2003 . Our seven product segment detailed planning . See Note 21 of the Notes to Financial includes Windows XP , Windows 2000 , and other standard Windows wa the successor to Windows 2000 . Client ha overall responsibility information access . Windows Server 2003 is a multipurpose operating system , and manageable infrastructure with 24×7 messaging and collaboration . Systems solution that includes the Windows 2003 Server network operating system and is responsible for enterprise sale 1 / MSFT 2003 FORM 10-K enterprise sale 1 / MSFT 2003 FORM 10-K Table of Contents 1 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 strategy , enterprise sale learning the first half of fiscal 2004 . The Microsoft Office System System includes the Microsoft Office 2003 Editions , which include ( ) : Microsoft Office Outlook 2003 , Microsoft Office Excel 2003 2003 , Microsoft Office Excel 2003 , Microsoft Office PowerPoint 2003 2003 , Microsoft Office PowerPoint 2003 , Microsoft Office Word 2003 2003 , Microsoft Office Word 2003 , and Microsoft Office Access , and Microsoft Office Access 2003 . Other product in the System include Microsoft Office Visio 2003 , Microsoft Office Project 2003 2003 , Microsoft Office Project 2003 , Microsoft Office Project Server , Microsoft Office Project Server 2003 , Microsoft Office InfoPath 2003 2003 , Microsoft Office InfoPath 2003 , Microsoft Office OneNote 2003 2003 , Microsoft Office OneNote 2003 , Microsoft Office Publisher 2003 2003 , Microsoft Office Publisher 2003 , Microsoft Office FrontPage 2003 2003 , Microsoft Office FrontPage 2003 , and Microsoft Office SharePoint Microsoft Office SharePoint Portal Server 2003 . Microsoft Office ha evolved Microsoft Office Live Communications Server 2003 , and an allocation for business . In fiscal year 2004 , SMS & P group consist of business with $ 1 million to $ 800 million $ 1 million to $ 800 million in annual revenue . network consisting of more than 4,500 value added resellers , system and network equipment provider . 2 / MSFT 2003 FORM 10-K provider . 2 / MSFT 2003 FORM 10-K Table of Contents 2 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 Home and Entertainment Home and Xbox , released in fiscal 2002 , is our next-generation video For example , we own 50 percent of MSNBC Cable L.L.C Cable L.L.C . , a 24-hour cable news and information channel and information channel , and 50 percent of MSNBC Interactive News NBC ) owns the remaining 50 percent of each of these PRODUCT DEVELOPMENT During fiscal year 2001 , 2002 , and 2003 During fiscal year 2001 , 2002 , and 2003 , research 2001 , 2002 , and 2003 , research and development expense and development expense wa $ 4.38 billion , $ 4.31 billion $ 4.38 billion , $ 4.31 billion , and $ 4.66 4.31 billion , and $ 4.66 billion , respectively . Those respectively . Those amount represented 17.3 % , 15.2 % , amount represented 17.3 % , 15.2 % , and 14.5 % , 15.2 % , and 14.5 % , respectively , of year . During fiscal year 2001 , $ 272 million of fiscal year 2001 , $ 272 million of goodwill amortization wa is included in fiscal year 2002 and 2003 , in accordance in fiscal year 2002 and 2003 , in accordance with Statement Accounting Standards ( SFAS ) 142 , Goodwill and Other Intangible Server System and Windows Server 2003 ) , development tool to ( Microsoft Visual Studio .NET 2003 and the .NET Framework ) worldwide network of more than 35,000 Microsoft Certified Partner organization – . A reliable system or 3 / MSFT 2003 FORM 10-K system or 3 / MSFT 2003 FORM 10-K Table of Contents 3 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 service is one the customer a three year period . 4 / MSFT 2003 FORM 10-K period . 4 / MSFT 2003 FORM 10-K Table of Contents 4 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 Enterprise Subscription Agreement . The No single customer accounted for 10 % or more of revenue or more of revenue in 2001 , 2002 , or 2003 of revenue in 2001 , 2002 , or 2003 . Our 2001 , 2002 , or 2003 . Our practice is to company focused on the Java 2 Platform Enterprise Edition ( J2EE server application for the PC-based 5 / MSFT 2003 FORM 10-K the PC-based 5 / MSFT 2003 FORM 10-K Table of Contents 5 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 distributed client/server environment include Oracle of distribution and marketing . 6 / MSFT 2003 FORM 10-K marketing . 6 / MSFT 2003 FORM 10-K Table of Contents 6 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 1 , 2 , 3 , I , Item 1 , 2 , 3 , 4 Our Item 1 , 2 , 3 , 4 Our Xbox hardware , 2 , 3 , 4 Our Xbox hardware business competes . EMPLOYEES As of June 30 , 2003 , we employed As of June 30 , 2003 , we employed approximately 55,000 2003 , we employed approximately 55,000 people on a full-time basis on a full-time basis , 36,500 in the United States and in the United States and 18,500 internationally . Of the total . Of the total , 23,200 were in product research and product research and development , 25,100 in sale , marketing , marketing , and support , 2,400 in manufacturing and distribution , manufacturing and distribution , and 4,300 in finance and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K and any amendment to those to the SEC . ITEM 2 . Properties Our corporate office corporate office consist of approximately 9.0 million square foot of office , Washington , of which 6.1 million square foot is corporate situated on slightly more than 300 acre of land which is which is owned and approximately 2.9 million square foot which is constructing one building with approximately 302,000 square foot of space that second quarter of fiscal year 2004 . To accommodate future expansion expansion need we purchased approximately 38 acre , and have an an option to purchase approximately 112 additional acre , of land Washington , which can accommodate 2.9 million square foot of additional space . We own approximately 594,000 square foot of office building many site domestically totaling approximately 3.4 million square foot of office many site internationally totaling approximately 5.4 million square foot , including localization division that lease a 411,000 square-foot campus in Dublin , Dublin , Ireland , a 54,000 square-foot disk duplication facility in Puerto Rico , and a 36,000 square-foot facility in Singapore for location : Tokyo , Japan 343,000 square foot ; Unterschleissheim , foot ; Unterschleissheim , Germany 381,000 square foot ; United Kingdom foot ; United Kingdom campus 242,000 square foot ; Les Ulis ; Les Ulis , France 229,000 square foot ; Vedbaek , foot ; Vedbaek , Denmark 186,000 square foot ; Mississauga , foot ; Mississauga , Canada 160,000 square foot ; Taipei , foot ; Taipei , Taiwan 116,000 square foot ; Sydney , foot ; Sydney , Australia 116,000 square foot ; and Beijing ; and Beijing , China 115,000 square foot . Our facility accommodate expansion need . ITEM 3 . Legal Proceedings See Note . Legal Proceedings See Note 20—Contingencies of the Notes to Financial to Financial Statements ( Item 8 ) for information regarding legal regarding legal proceeding . ITEM 4 . Submission of Matters to the fourth quarter of fiscal 2003 . 7 / MSFT 2003 quarter of fiscal 2003 . 7 / MSFT 2003 FORM 10-K 2003 . 7 / MSFT 2003 FORM 10-K Table of Contents 7 / MSFT 2003 FORM 10-K Table of Contents Part I Contents Part I , Item 4 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of September 4 , 2003 were a follows a of September 4 , 2003 were a follows : Name Company William H. Gates III 47 Chairman , Chief Software Architect Software Architect Steven A. Ballmer 47 Chief Executive Officer James E. Executive Officer James E. Allchin 51 Group Vice President , Platforms . ( Robbie ) Bach 41 Senior Vice President , Home and Entertainment Douglas J. Burgum 47 Senior Vice President , Microsoft Business Solutions David W. Cole 41 Senior Vice President , MSN Services Group John G. Connors 44 Senior Vice President , Chief Chief Financial Officer Jean-Philippe Courtois 43 Senior Vice President , Chief and Africa Kenneth A. DiPietro 44 Corporate Vice President , Human Human Resources Kevin R. Johnson 42 Group Vice President , Worldwide Michelle ( Mich ) Mathews 36 Corporate Vice President , Marketing , Marketing Craig J. Mundie 54 Senior Vice President , Chief and Policy Jeffrey S. Raikes 45 Group Vice President , Productivity Business Services Eric D. Rudder 36 Senior Vice President , Server and Tools Bradford L. Smith 44 Senior Vice President , General Counsel and Secretary David Vaskevitch 51 Senior Vice President , Chief Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a of the Company in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Allchin wa named , Platforms Group in December 1999 . He had been Senior President , Platforms since March 1999 . He wa previously Senior and Business Systems since February 1996 . Mr. Allchin joined Microsoft Mr. Allchin joined Microsoft in 1990 . Mr. Bach wa named Home and Entertainment in March 2000 . He had been Vice Home and Retail since March 1999 . Before holding that position , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Mr. Burgum joined the Software , Inc. in April 2001 . Mr. Burgum became Great first outside investor in March 1983 . He wa named President President of Great Plains in 1984 and subsequently named Chairman and Personal Services Group in November 2001 . Before holding that position Services Platform Division since August 2000 . He had been Senior , Consumer Services since December 1999 and Vice President , Consumer , Consumer Windows since March 1999 . Previously , he wa Mr. Cole joined Microsoft in 1986 . Mr. Connors wa named Chief Financial Officer in December 1999 . He had been Vice Worldwide Enterprise Group since March 1999 . Mr. Connors had been Chief Information Officer since July 1996 . He joined Microsoft in . He joined Microsoft in 1989 . Mr. Courtois wa named , and Africa in March 2003 . He had been Senior , and Africa since July 2000 . Before holding that position Worldwide Customer Marketing since July 1998 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Mr. DiPietro joined Microsoft DiPietro joined Microsoft in January 2003 a Corporate Vice President , Marketing and Services in March 2003 . He had been Senior , Microsoft Americas since February 2002 . Mr. Johnson had been , and Services since August 2001 , and before that , . He joined Microsoft in 1992 . Ms. Mathews wa named President , Marketing in August 2001 . Before holding her current President Corporate Public Relations since 1999 . Ms. Mathews joined Microsoft Ms. Mathews joined Microsoft in 1993 . Mr. Mundie wa named Strategies and Policy in August 2001 . He wa named Senior , Consumer Platforms in February 1996 . He joined Microsoft in . He joined Microsoft in 1992 . Mr. Raikes wa named and Business Services in August 2000 . He had been Group Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr . Rudder wa and Platform Evangelism in October 2001 . He had been Vice . Rudder joined Microsoft in 1988 . Mr. Smith wa named Counsel and Secretary in November 2001 . He had been Deputy . He joined Microsoft in 1993 . Mr. Vaskevitch wa named , Business Platform in August 2001 . He had been Senior , Business Applications since March 2000 . Mr. Vaskevitch had been President , Developer since December 1999 . Before holding that position . He joined Microsoft in 1986 . 8 / MSFT 2003 joined Microsoft in 1986 . 8 / MSFT 2003 FORM 10-K 1986 . 8 / MSFT 2003 FORM 10-K Table of Contents 8 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 5 , 6 , 7 PART II , Item 5 , 6 , 7 PART II ITEM Item 5 , 6 , 7 PART II ITEM 5 . , 7 PART II ITEM 5 . Market for Registrant ’ symbol MSFT . On August 15 , 2003 , there were . On August 15 , 2003 , there were 131,580 registered , 2003 , there were 131,580 registered holder of record of follows : Quarter Ended Sept. 30 Dec. 31 Mar . 31 Quarter Ended Sept. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal 2002 31 Mar . 31 June 30 Year Fiscal 2002 Common stock 31 June 30 Year Fiscal 2002 Common stock price per share stock price per share ( 1 ) : High $ 36.29 1 ) : High $ 36.29 $ 34.75 $ 34.93 $ : High $ 36.29 $ 34.75 $ 34.93 $ 30.19 $ $ 36.29 $ 34.75 $ 34.93 $ 30.19 $ 36.29 Low $ 34.75 $ 34.93 $ 30.19 $ 36.29 Low 24.86 25.90 $ 34.93 $ 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 $ 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 30.19 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 $ 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 Common 36.29 Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 Common stock Low 24.86 25.90 29.00 24.31 24.31 Fiscal 2003 Common stock price 25.90 29.00 24.31 24.31 Fiscal 2003 Common stock price per share stock price per share ( 1 ) : High $ 27.43 1 ) : High $ 27.43 $ 29.12 $ 28.49 $ : High $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 1 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 1 ) 29.12 Low 21.42 21.89 22.80 23.67 21.42 ( 1 ) Amounts Low 21.42 21.89 22.80 23.67 21.42 ( 1 ) Amounts have 21.89 22.80 23.67 21.42 ( 1 ) Amounts have been restated two-for-one stock split in February 2003 . In January 2003 , February 2003 . In January 2003 , our Board of Directors stock dividend , of $ 0.08 per share , which wa which wa paid in March 2003 . Our dividend policy is ordinary share , Microsoft issued 29.1 million share of it common to Navision shareholder on July 12 , 2002 , in exchange shareholder on July 12 , 2002 , in exchange for 19.4 2002 , in exchange for 19.4 million Navision ordinary share , share , nominal value DKK 1 per share . The price with the offer wa DKK 300 per each Navision share , of an exchange ratio of 1.49982 share of Microsoft common stock under the Securities Act of 1933 on the basis of the the exemption provided by Rule 802 thereunder . Rule 802 exempts Rule 802 thereunder . Rule 802 exempts offer and sale in acquisition , we have issued 23,009 share of our common stock of our common stock to 16 employee in exchange for 10,136 16 employee in exchange for 10,136 ordinary share of Navision that the Securities Act . ITEM 6 . Selected Financial Data Financial share ) Year Ended June 30 1999 2000 2001 ( 2 ) Year Ended June 30 1999 2000 2001 ( 2 ) Year Ended June 30 1999 2000 2001 ( 2 ) 2002 Ended June 30 1999 2000 2001 ( 2 ) 2002 ( 30 1999 2000 2001 ( 2 ) 2002 ( 3 ) 2000 2001 ( 2 ) 2002 ( 3 ) 2003 ( ( 2 ) 2002 ( 3 ) 2003 ( 4 ) ) 2002 ( 3 ) 2003 ( 4 ) Revenue $ ( 3 ) 2003 ( 4 ) Revenue $ 19,747 $ ( 4 ) Revenue $ 19,747 $ 22,956 $ 25,296 $ ) Revenue $ 19,747 $ 22,956 $ 25,296 $ 28,365 $ $ 19,747 $ 22,956 $ 25,296 $ 28,365 $ 32,187 Operating $ 22,956 $ 25,296 $ 28,365 $ 32,187 Operating income 10,010 $ 25,296 $ 28,365 $ 32,187 Operating income 10,010 11,006 11,720 28,365 $ 32,187 Operating income 10,010 11,006 11,720 11,910 13,217 Income $ 32,187 Operating income 10,010 11,006 11,720 11,910 13,217 Income before 32,187 Operating income 10,010 11,006 11,720 11,910 13,217 Income before accounting Operating income 10,010 11,006 11,720 11,910 13,217 Income before accounting change income 10,010 11,006 11,720 11,910 13,217 Income before accounting change 7,785 13,217 Income before accounting change 7,785 9,421 7,721 7,829 9,993 Net Income before accounting change 7,785 9,421 7,721 7,829 9,993 Net income before accounting change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 accounting change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 9,421 change 7,785 9,421 7,721 7,829 9,993 Net income 7,785 9,421 7,346 7,721 7,829 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted 7,829 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted earnings 9,993 Net income 7,785 9,421 7,346 7,829 9,993 Diluted earnings per Net income 7,785 9,421 7,346 7,829 9,993 Diluted earnings per share income 7,785 9,421 7,346 7,829 9,993 Diluted earnings per share before share before accounting change ( 1 ) 0.71 0.85 0.69 0.70 accounting change ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted change ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings ( 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per 1 ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per share ) 0.71 0.85 0.69 0.70 0.92 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.71 0.85 0.66 0.70 per share ( 1 ) 0.71 0.85 0.66 0.70 0.92 Cash share ( 1 ) 0.71 0.85 0.66 0.70 0.92 Cash dividend ( 1 ) 0.71 0.85 0.66 0.70 0.92 Cash dividend per 1 ) 0.71 0.85 0.66 0.70 0.92 Cash dividend per share ) 0.71 0.85 0.66 0.70 0.92 Cash dividend per share – share – – – – 0.08 Cash and short-term investment 17,236 0.08 Cash and short-term investment 17,236 23,798 31,600 38,652 49,048 Total Cash and short-term investment 17,236 23,798 31,600 38,652 49,048 Total asset and short-term investment 17,236 23,798 31,600 38,652 49,048 Total asset 38,321 short-term investment 17,236 23,798 31,600 38,652 49,048 Total asset 38,321 51,694 investment 17,236 23,798 31,600 38,652 49,048 Total asset 38,321 51,694 58,830 31,600 38,652 49,048 Total asset 38,321 51,694 58,830 67,646 79,571 Stockholders 38,652 49,048 Total asset 38,321 51,694 58,830 67,646 79,571 Stockholders ’ 49,048 Total asset 38,321 51,694 58,830 67,646 79,571 Stockholders ’ equity Total asset 38,321 51,694 58,830 67,646 79,571 Stockholders ’ equity 28,438 asset 38,321 51,694 58,830 67,646 79,571 Stockholders ’ equity 28,438 41,368 67,646 79,571 Stockholders ’ equity 28,438 41,368 47,289 52,180 61,020 ( 79,571 Stockholders ’ equity 28,438 41,368 47,289 52,180 61,020 ( 1 Stockholders ’ equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) ’ equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) Earnings equity 28,438 41,368 47,289 52,180 61,020 ( 1 ) Earnings per 41,368 47,289 52,180 61,020 ( 1 ) Earnings per share have two-for-one stock split in February 2003 . ( 2 ) Fiscal in February 2003 . ( 2 ) Fiscal year 2001 includes ( 2 ) Fiscal year 2001 includes an unfavorable cumulative effect of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per diluted share , reflecting adoption of SFAS No . 133 , and $ 4.80 billion . 133 , and $ 4.80 billion ( pre-tax ) in and telecommunication investment . ( 3 ) Fiscal year 2002 includes ( 3 ) Fiscal year 2002 includes $ 4.32 billion ( Fiscal year 2002 includes $ 4.32 billion ( pre-tax ) in holding , and a $ 1.25 billion ( pre-tax ) gain of Expedia , Inc. ( 4 ) Fiscal year 2003 includes ( 4 ) Fiscal year 2003 includes $ 1.15 billion ( Fiscal year 2003 includes $ 1.15 billion ( pre-tax ) in of certain investment . ITEM 7 . Management ’ s Discussion Operations Results of Operations for 2001 , 2002 , and 2003 of Operations for 2001 , 2002 , and 2003 Management ’ 2001 , 2002 , and 2003 Management ’ s Discussion and elsewhere in this report . 9 / MSFT 2003 FORM 10-K report . 9 / MSFT 2003 FORM 10-K Table of Contents 9 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 REVENUE Our revenue growth rate Our revenue growth rate wa 10 % in fiscal 2001 , wa 10 % in fiscal 2001 , 12 % in fiscal % in fiscal 2001 , 12 % in fiscal 2002 , , 12 % in fiscal 2002 , and 13 % in in fiscal 2002 , and 13 % in fiscal 2003 . and 13 % in fiscal 2003 . Revenue growth in fiscal . Revenue growth in fiscal 2003 wa driven primarily by multi-year new licensing program ( Licensing 6.0 ) in the first quarter the first quarter of fiscal 2003 . Prior to the July . Prior to the July 31 , 2002 transition date to to the July 31 , 2002 transition date to Licensing 6.0 2002 transition date to Licensing 6.0 , we experienced significant growth growth also reflected a $ 933 million or 13 % increase a $ 933 million or 13 % increase associated with OEM operating system and a $ 309 million or 23 % increase a $ 309 million or 23 % increase in revenue from . Revenue growth in fiscal 2002 wa led by the addition by the addition of $ 1.35 billion of Xbox video game game system revenue and $ 1.20 billion of revenue growth from . Revenue growth in fiscal 2001 wa driven primarily by licensing by licensing of Microsoft Windows 2000 Professional with $ 1.01 billion Windows 2000 Professional with $ 1.01 billion growth in revenue from Tools revenue growth of $ 852 million . During the second the second quarter of fiscal 2002 , we launched a new new licensing program , Licensing 6.0 , for volume licensing customer volume licensing customer . Licensing 6.0 simplifies and improves our volume OPERATING INCOME Operating income grew 6 % in fiscal 2001 , grew 6 % in fiscal 2001 , 2 % in fiscal % in fiscal 2001 , 2 % in fiscal 2002 , , 2 % in fiscal 2002 , and 11 % in in fiscal 2002 , and 11 % in fiscal 2003 . and 11 % in fiscal 2003 . In fiscal 2003 , fiscal 2003 . In fiscal 2003 , the growth in operating reflected an increase of $ 3.82 billion in revenue , partially by an increase of $ 2.52 billion in operating expense , settlement expense . In fiscal 2002 , the growth in operating reflected an increase of $ 3.07 billion in revenue , substantially by an increase of $ 2.88 billion in operating expense , game system . In fiscal 2001 , the growth in operating reflected an increase of $ 2.34 billion in revenue , partially by an increase of $ 1.63 billion in operating expense . our segment for fiscal year 2003 . Our seven segment are Segment Information appearing in Note 21 of the Notes to Financial presented in accordance with SFAS 131 , Disclosures about Segments of Loss ) Year Ended June 30 2002 2003 2002 2003 Client ) Year Ended June 30 2002 2003 2002 2003 Client $ Year Ended June 30 2002 2003 2002 2003 Client $ 9,360 Ended June 30 2002 2003 2002 2003 Client $ 9,360 $ June 30 2002 2003 2002 2003 Client $ 9,360 $ 10,394 2003 2002 2003 Client $ 9,360 $ 10,394 $ 7,576 $ 2003 Client $ 9,360 $ 10,394 $ 7,576 $ 8,400 Server $ 9,360 $ 10,394 $ 7,576 $ 8,400 Server and Tools $ 10,394 $ 7,576 $ 8,400 Server and Tools 6,157 7,140 $ 8,400 Server and Tools 6,157 7,140 2,048 2,457 Information Worker 8,400 Server and Tools 6,157 7,140 2,048 2,457 Information Worker 8,212 Server and Tools 6,157 7,140 2,048 2,457 Information Worker 8,212 9,229 and Tools 6,157 7,140 2,048 2,457 Information Worker 8,212 9,229 6,448 7,140 2,048 2,457 Information Worker 8,212 9,229 6,448 7,037 Microsoft Business 2,048 2,457 Information Worker 8,212 9,229 6,448 7,037 Microsoft Business Solutions 2,457 Information Worker 8,212 9,229 6,448 7,037 Microsoft Business Solutions 308 Information Worker 8,212 9,229 6,448 7,037 Microsoft Business Solutions 308 567 6,448 7,037 Microsoft Business Solutions 308 567 ( 176 ) ( 7,037 Microsoft Business Solutions 308 567 ( 176 ) ( 254 Business Solutions 308 567 ( 176 ) ( 254 ) MSN 567 ( 176 ) ( 254 ) MSN 1,571 1,953 ( ) ( 254 ) MSN 1,571 1,953 ( 641 ) ( ( 254 ) MSN 1,571 1,953 ( 641 ) ( 299 ) MSN 1,571 1,953 ( 641 ) ( 299 ) Mobile 1,953 ( 641 ) ( 299 ) Mobile and Embedded Devices ) Mobile and Embedded Devices 112 156 ( 157 ) ( Mobile and Embedded Devices 112 156 ( 157 ) ( 157 Embedded Devices 112 156 ( 157 ) ( 157 ) Home 156 ( 157 ) ( 157 ) Home and Entertainment 2,453 157 ) Home and Entertainment 2,453 2,748 ( 874 ) ( ) Home and Entertainment 2,453 2,748 ( 874 ) ( 924 and Entertainment 2,453 2,748 ( 874 ) ( 924 ) Other 2,748 ( 874 ) ( 924 ) Other 192 — ( ) ( 924 ) Other 192 — ( 2,314 ) ( ) Other 192 — ( 2,314 ) ( 3,043 ) Consolidated — ( 2,314 ) ( 3,043 ) Consolidated $ 28,365 $ ( 3,043 ) Consolidated $ 28,365 $ 32,187 $ 11,910 $ ) Consolidated $ 28,365 $ 32,187 $ 11,910 $ 13,217 Client $ 28,365 $ 32,187 $ 11,910 $ 13,217 Client Client revenue $ 32,187 $ 11,910 $ 13,217 Client Client revenue wa $ Client Client revenue wa $ 8.17 billion , $ 9.36 billion $ 8.17 billion , $ 9.36 billion , and $ 10.39 9.36 billion , and $ 10.39 billion in 2001 , 2002 and $ 10.39 billion in 2001 , 2002 , and 2003 10.39 billion in 2001 , 2002 , and 2003 . Client 2001 , 2002 , and 2003 . Client includes revenue from Professional and Home , Windows 2000 Professional , and other standard Windows operating system . In 2003 , Client revenue growth wa licensing revenue growth of $ 933 million and a 9 percentage $ 933 million and a 9 percentage point increase of the Professional revenue growth for fiscal 2003 wa $ 1.59 billion or for fiscal 2003 wa $ 1.59 billion or 31 % compared wa $ 1.59 billion or 31 % compared to fiscal 2002 31 % compared to fiscal 2002 , partially offset by a partially offset by a $ 573 million decline in revenue of million decline in revenue of 10 / MSFT 2003 FORM 10-K revenue of 10 / MSFT 2003 FORM 10-K Table of Contents 10 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 earlier version of Windows operating Client operating profit for fiscal 2003 increased 11 % primarily a profit for fiscal 2003 increased 11 % primarily a a result a a result of the 11 % growth in revenue , related cost . In fiscal 2002 , the growth in Client to the higher priced Windows 2000 and Windows XP Professional operating . OEM revenue grew $ 939 million , despite a 5 939 million , despite a 5 % decline in reported OEM OEM unit shipment . Fiscal 2001 revenue growth reflected the strong the strong adoption of Windows 2000 Professional with professional operating system system revenue growth of $ 1.01 billion and a 7 percentage $ 1.01 billion and a 7 percentage point mix increase to to the higher priced Windows 2000 Professional and Windows NT Workstation system , and a $ 91 million increase in revenue from from Windows Me and Windows 98 operating system . We do at previous level into fiscal 2004 . Additionally , variability between the beginning of fiscal year 2003 , under which OEMs are and Tools revenue wa $ 5.84 billion , $ 6.16 billion $ 5.84 billion , $ 6.16 billion , and $ 7.14 6.16 billion , and $ 7.14 billion in 2001 , 2002 and $ 7.14 billion in 2001 , 2002 , and 2003 7.14 billion in 2001 , 2002 , and 2003 . Server 2001 , 2002 , and 2003 . Server and Tools consists and Tools revenue grew $ 983 million or 16 % in grew $ 983 million or 16 % in fiscal 2003 , or 16 % in fiscal 2003 , driven by an increase including CALs , grew $ 787 million or 18 % from grew $ 787 million or 18 % from fiscal 2002 a or 18 % from fiscal 2002 a a result of increased product support service increased $ 91 million or 10 % compared increased $ 91 million or 10 % compared to fiscal 2002 10 % compared to fiscal 2002 . Revenue from developer tool and other service increased $ 105 million or 13 % . increased $ 105 million or 13 % . Server operating profit Server operating profit for fiscal 2003 grew 20 % , primarily profit for fiscal 2003 grew 20 % , primarily a a a a result of the 16 % increase in revenue . in revenue . In fiscal 2002 , Server and Tools revenue Server and Tools revenue increased 5 % compared to fiscal 2001 5 % compared to fiscal 2001 . Server revenue , including , including CALs , increased 9 % versus fiscal 2001 , increased 9 % versus fiscal 2001 , driven by a 5 2001 , driven by a 5 % overall increase in Windows-based and increased deployment of Windows 2000 Server . Consulting and Premier service revenue wa up $ 137 million or 17 % compared up $ 137 million or 17 % compared to fiscal 2001 17 % compared to fiscal 2001 , while revenue from developer other service wa down $ 183 million or 18 % from down $ 183 million or 18 % from fiscal 2001 . or 18 % from fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , Server and Tools revenue and Tools revenue increased $ 852 million or 17 % versus increased $ 852 million or 17 % versus the prior year Information Worker revenue wa $ 8.42 billion , $ 8.21 billion $ 8.42 billion , $ 8.21 billion , and $ 9.23 8.21 billion , and $ 9.23 billion in 2001 , 2002 and $ 9.23 billion in 2001 , 2002 , and 2003 9.23 billion in 2001 , 2002 , and 2003 . Information 2001 , 2002 , and 2003 . Information Worker includes revenue support service . The $ 1.02 billion or 12 % increase The $ 1.02 billion or 12 % increase in Information Worker Worker revenue in fiscal year 2003 compared to fiscal 2002 , year 2003 compared to fiscal 2002 , wa primarily due to licensing agreement and a $ 264 million or 28 % increase a $ 264 million or 28 % increase in revenue from operating profit for fiscal year 2003 grew 9 % compared to for fiscal year 2003 grew 9 % compared to fiscal year % compared to fiscal year 2002 led by the 12 % year 2002 led by the 12 % increase in revenue , , partially offset by a 24 % growth in operating expense marketing expense . In fiscal 2002 , Information Worker licensing revenue Worker licensing revenue declined $ 228 million or 3 % during declined $ 228 million or 3 % during the year due year , and a $ 294 million or 14 % decrease a $ 294 million or 14 % decrease in consumer purchase partially offset by a $ 189 million or 22 % growth a $ 189 million or 22 % growth in OEM licensing licensing revenue . In fiscal 2001 , Information Worker revenue growth revenue growth wa le than 1 % or $ 30 million than 1 % or $ 30 million . Microsoft Business Solutions Business Solutions revenue wa $ 106 million , $ 308 million $ 106 million , $ 308 million , and $ 567 308 million , and $ 567 million in 2001 , 2002 and $ 567 million in 2001 , 2002 , and 2003 567 million in 2001 , 2002 , and 2003 . Microsoft 2001 , 2002 , and 2003 . Microsoft Business Solutions includes Business Solutions revenue for fiscal 2003 grew $ 259 million from for fiscal 2003 grew $ 259 million from fiscal 2002 , $ 259 million from fiscal 2002 , of which $ 246 2002 , of which $ 246 million wa attributable to the Solutions operating loss for fiscal 2003 increased 44 % , primarily loss for fiscal 2003 increased 44 % , primarily due to MSN MSN revenue wa $ 1.32 billion , $ 1.57 billion $ 1.32 billion , $ 1.57 billion , and $ 1.95 1.57 billion , and $ 1.95 billion in 2001 , 2002 and $ 1.95 billion in 2001 , 2002 , and 2003 1.95 billion in 2001 , 2002 , and 2003 . MSN 2001 , 2002 , and 2003 . MSN includes MSN Subscriptions at the end of fiscal 2003 were flat compared to the to the end of fiscal 2002 , MSN Subscriptions revenue grew MSN Subscriptions revenue grew $ 112 million or 11 % in grew $ 112 million or 11 % in fiscal year 2003 11 % in fiscal year 2003 reflecting an increase in the Network service revenue grew $ 270 million or 48 % in grew $ 270 million or 48 % in fiscal 2003 a or 48 % in fiscal 2003 a a result of growth MSN operating loss for fiscal 2003 decreased 53 % , primarily loss for fiscal 2003 decreased 53 % , primarily a a support cost . In fiscal 2002 , MSN Subscriptions revenue increased MSN Subscriptions revenue increased $ 229 million or 29 % a increased $ 229 million or 29 % a a result of MSN Network service increased $ 27 million or 5 % led increased $ 27 million or 5 % led by online advertising online advertising . In fiscal 2001 , revenue from MSN Network MSN Network service grew $ 197 million or 58 % led grew $ 197 million or 58 % led by online advertising Subscriptions revenue also grew $ 141 million or 22 % from grew $ 141 million or 22 % from fiscal 2000 a or 22 % from fiscal 2000 a a result of an contracted under rebate program . 11 / MSFT 2003 FORM 10-K program . 11 / MSFT 2003 FORM 10-K Table of Contents 11 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 Mobile and Embedded Devices Mobile Embedded Devices revenue wa $ 86 million , $ 112 million $ 86 million , $ 112 million , and $ 156 112 million , and $ 156 million in 2001 , 2002 and $ 156 million in 2001 , 2002 , and 2003 156 million in 2001 , 2002 , and 2003 . Mobile 2001 , 2002 , and 2003 . Mobile and Embedded Devices Automotive . Revenue for fiscal 2003 grew $ 44 million driven for fiscal 2003 grew $ 44 million driven by increased Pocket . Operating loss for fiscal 2003 wa flat with the prior and Entertainment revenue wa $ 1.14 billion , $ 2.45 billion $ 1.14 billion , $ 2.45 billion , and $ 2.75 2.45 billion , and $ 2.75 billion in 2001 , 2002 and $ 2.75 billion in 2001 , 2002 , and 2003 2.75 billion in 2001 , 2002 , and 2003 . Home 2001 , 2002 , and 2003 . Home & Entertainment includes and Entertainment revenue increased $ 295 million , a a result available for all of fiscal 2003 . Xbox revenue grew $ . Xbox revenue grew $ 309 million or 23 % in grew $ 309 million or 23 % in fiscal 2003 reflecting or 23 % in fiscal 2003 reflecting a $ 779 million fiscal 2003 reflecting a $ 779 million increase from higher volume partially offset by a $ 470 million decrease due to price and PC game declined $ 14 million or 1 % in declined $ 14 million or 1 % in fiscal 2003 . or 1 % in fiscal 2003 . Operating loss for fiscal . Operating loss for fiscal 2003 increased 6 % from the loss for fiscal 2003 increased 6 % from the prior year expense more than offset the 12 % increase in revenue . in revenue . In fiscal 2002 , Home and Entertainment revenue Entertainment revenue growth from fiscal 2001 stemmed from $ 1.35 billion fiscal 2001 stemmed from $ 1.35 billion of sale of the game system released in fiscal 2002 . Learning and productivity software and online game declined $ 39 million or 3 % in declined $ 39 million or 3 % in fiscal 2002 compared or 3 % in fiscal 2002 compared to fiscal 2001 . fiscal 2002 compared to fiscal 2001 . In fiscal 2001 , fiscal 2001 . In fiscal 2001 , Home and Entertainment revenue and Entertainment revenue declined $ 214 million or 16 % from declined $ 214 million or 16 % from fiscal 2002 . or 16 % from fiscal 2002 . Other Revenue in the which wa sold in February 2002 , resulting in a decline decline in revenue from fiscal 2001 . Acquisitions of Travelscape.com and Expedia , Inc. in fiscal 2001 and increased product offering from strong revenue growth in fiscal 2001 . Operating loss includes Expedia and administrative expense ( $ 1.55 billion in 2002 and $ ( $ 1.55 billion in 2002 and $ 2.10 billion in billion in 2002 and $ 2.10 billion in 2003 ) , and $ 2.10 billion in 2003 ) , broad-based research and and development expense ( $ 202 million in 2002 and $ ( $ 202 million in 2002 and $ 210 million in million in 2002 and $ 210 million in 2003 ) , and $ 210 million in 2003 ) , and certain corporate and marketing cost ( $ 526 million in 2002 and $ ( $ 526 million in 2002 and $ 688 million in million in 2002 and $ 688 million in 2003 ) . and $ 688 million in 2003 ) . Foreign Currencies Impact foreign exchange rate . Approximately 27 % , 25 % , . Approximately 27 % , 25 % , and 28 % , 25 % , and 28 % of our revenue wa collected in foreign currency during 2001 , 2002 , and 2003 foreign currency during 2001 , 2002 , and 2003 . Had 2001 , 2002 , and 2003 . Had the rate from Had the rate from fiscal 2002 been in effect in fiscal been in effect in fiscal 2003 , translated international revenue billed would have been approximately $ 700 million lower . Certain manufacturing a percent of revenue wa 13.7 % in 2001 , 18.3 revenue wa 13.7 % in 2001 , 18.3 % in 2002 13.7 % in 2001 , 18.3 % in 2002 , and 2001 , 18.3 % in 2002 , and 17.7 % in % in 2002 , and 17.7 % in 2003 . For , and 17.7 % in 2003 . For fiscal 2003 , in 2003 . For fiscal 2003 , cost of revenue wa cost of revenue wa $ 5.69 billion compared to $ 5.19 5.69 billion compared to $ 5.19 billion in fiscal 2002 . $ 5.19 billion in fiscal 2002 . The primary driver of percentage of revenue in fiscal 2003 wa a 0.2 percentage point in fiscal 2003 wa a 0.2 percentage point decrease from Home video game console and a 0.4 percentage point decrease from MSN and service cost in fiscal 2003 compared to fiscal 2002 . fiscal 2003 compared to fiscal 2002 . Cost of revenue in Cost of revenue in fiscal 2002 wa $ 5.19 billion compared in fiscal 2002 wa $ 5.19 billion compared to $ 3.46 5.19 billion compared to $ 3.46 billion in fiscal 2001 . $ 3.46 billion in fiscal 2001 . The increase a a percentage of revenue in fiscal 2002 wa due to an increase due to an increase of 5.3 percentage point from Home and , partially offset by a 0.7 percentage point decrease due to licensing business . In fiscal 2001 , cost of revenue wa cost of revenue wa $ 3.46 billion , an increase of , an increase of $ 453 million compared to fiscal 2000 453 million compared to fiscal 2000 . The higher sale associated support and service cost drove 0.4 of the 0.6 percentage point cost drove 0.4 of the 0.6 percentage point increase in total and development expense for fiscal 2003 were $ 4.66 billion , for fiscal 2003 were $ 4.66 billion , an increase of billion , an increase of 8 % compared to fiscal 2002 8 % compared to fiscal 2002 . The increase reflects a . The increase reflects a 7 % increase in headcount-related cost in headcount-related cost , a 25 % increase in third-party product development cost , and a 29 % increase in testing laboratory and expense . In fiscal 2002 , research and development expense and development expense were $ 4.31 billion compared to $ 4.38 4.31 billion compared to $ 4.38 billion in fiscal 2001 . $ 4.38 billion in fiscal 2001 . The decrease from fiscal . The decrease from fiscal 2001 wa due to the discontinuation goodwill in accordance with SFAS 142 , Goodwill and Other Intangible Other Intangible Assets , $ 272 million which offset the 15 272 million which offset the 15 % growth in headcount-related cost headcount-related cost . In fiscal 2001 , research and development expense and development expense were $ 4.38 billion , an increase of billion , an increase of 16 % compared to fiscal 2000 16 % compared to fiscal 2000 . The increase in research development expense resulted from a 11 % increase in headcount-related cost in headcount-related cost and a 23 % increase in investment in in new product development . 12 / MSFT 2003 FORM 10-K development . 12 / MSFT 2003 FORM 10-K Table of Contents 12 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 Sales and Marketing Sales and a percentage of revenue wa 19.3 % in 2001 , 19.1 revenue wa 19.3 % in 2001 , 19.1 % in 2002 19.3 % in 2001 , 19.1 % in 2002 , and 2001 , 19.1 % in 2002 , and 20.3 % in % in 2002 , and 20.3 % in 2003 . Sales , and 20.3 % in 2003 . Sales and marketing expense and marketing expense were $ 6.52 billion in 2003 , compared were $ 6.52 billion in 2003 , compared to $ 5.41 2003 , compared to $ 5.41 billion in fiscal 2002 . $ 5.41 billion in fiscal 2002 . The increase in absolute dollar wa due to a 20 % increase in sale expense sale force , and a 21 % increase in marketing expense marketing expense . In fiscal 2002 , sale and marketing expense and marketing expense were $ 5.41 billion , an increase of billion , an increase of 11 % from fiscal 2001 . of 11 % from fiscal 2001 . The sale and marketing dollar increased due to a 20 % increase in headcount-related cost cost partially offset by a 25 % decline in MSN customer acquisition marketing cost and a 4 % decline in all other marketing cost . In fiscal 2001 , sale and marketing expense and marketing expense were $ 4.89 billion compared to $ 4.13 4.89 billion compared to $ 4.13 billion in fiscal 2000 . $ 4.13 billion in fiscal 2000 . The 18 % increase in fiscal 2000 . The 18 % increase in sale and sale and marketing from fiscal 2000 wa primarily due to a wa primarily due to a 21 % growth in headcount-related cost a lesser extent , a 3 % growth in higher marketing and administrative cost in fiscal 2003 increased $ 554 million due in fiscal 2003 increased $ 554 million due to a charge to a charge of $ 750 million related to a settlement in the fourth quarter of 2003 and also due to a also due to a $ 256 million charge reflecting an increase and administrative expense in fiscal 2002 increased due to a charge a charge of approximately $ 660 million for estimated expense related class action lawsuit and a 10 % increase in headcount-related cost headcount-related cost . In fiscal 2001 , general and administrative cost settlement charge recorded in fiscal 2000 , partially offset by a , partially offset by a 3 % growth in headcount-related cost investees and other in fiscal 2003 and 2002 wa due to other in fiscal 2003 and 2002 wa due to the divestiture certain equity investment in fiscal 2002 in conjunction with the underlying investees and other in fiscal 2001 reflected an increase in the million ) Year Ended June 30 2001 2002 2003 Dividends $ ) Year Ended June 30 2001 2002 2003 Dividends $ 377 Year Ended June 30 2001 2002 2003 Dividends $ 377 $ Ended June 30 2001 2002 2003 Dividends $ 377 $ 357 2001 2002 2003 Dividends $ 377 $ 357 $ 260 Interest 2003 Dividends $ 377 $ 357 $ 260 Interest 1,808 1,762 $ 377 $ 357 $ 260 Interest 1,808 1,762 1,697 Net $ 357 $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ 357 $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ ( $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ ( loss on the sale of investment 3,175 2,379 909 Other-than-temporary impairment ( the sale of investment 3,175 2,379 909 Other-than-temporary impairment ( 4,804 sale of investment 3,175 2,379 909 Other-than-temporary impairment ( 4,804 ) 2,379 909 Other-than-temporary impairment ( 4,804 ) ( 4,323 ) ( impairment ( 4,804 ) ( 4,323 ) ( 1,148 ) Net ) ( 4,323 ) ( 1,148 ) Net unrealized loss attributable attributable to derivative instrument ( 592 ) ( 480 ) ( instrument ( 592 ) ( 480 ) ( 141 ) Net ) ( 480 ) ( 141 ) Net recognized gains/ ( loss ) on investment ( 2,221 ) ( 2,424 ) ( investment ( 2,221 ) ( 2,424 ) ( 380 ) Investment ) ( 2,424 ) ( 380 ) Investment income/ ( loss ( loss ) $ ( 36 ) $ ( 305 ) ( 36 ) $ ( 305 ) $ 1,577 Investments are $ ( 305 ) $ 1,577 Investments are considered to be is established . In fiscal 2003 , other-than-temporary impairment decreased mainly . Interest income decreased $ 65 million due to declining interest . Dividend income decreased $ 97 million primarily related to the exchange of AT & T 5 % convertible preferred debt for the year . In fiscal 2002 , other-than-temporary impairment primarily related of investment included a $ 1.25 billion gain on sale of and dividend income decreased $ 66 million from fiscal 2001 a $ 66 million from fiscal 2001 a a result of lower dividend income . In fiscal 2001 , other-than-temporary impairment primarily related sale of investment in fiscal 2001 included a gain from our and dividend income increased $ 591 million from fiscal 2000 , $ 591 million from fiscal 2000 , reflecting a larger investment a larger investment portfolio . 13 / MSFT 2003 FORM 10-K portfolio . 13 / MSFT 2003 FORM 10-K Table of Contents 13 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 Income Taxes Our effective tax effective tax rate for fiscal 2003 wa 32 % , reflecting rate for fiscal 2003 wa 32 % , reflecting a one-time the second quarter of $ 126 million from the reversal of tax reversal stem from a 9th Circuit Court of Appeals ruling of Appeals ruling in December 2002 overturning a previous Tax Court tax rate would have been 33 % . The effective tax effective tax rate for fiscal 2001 and fiscal 2002 wa 33 for fiscal 2001 and fiscal 2002 wa 33 % and 32 2001 and fiscal 2002 wa 33 % and 32 % , 2002 wa 33 % and 32 % , respectively . ACCOUNTING . ACCOUNTING CHANGES Effective July 1 , 2001 , we adopted CHANGES Effective July 1 , 2001 , we adopted SFAS 141 2001 , we adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 , Goodwill and Other Intangible Other Intangible Assets . SFAS 141 requires business combination to be separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Goodwill amortization ( on pre-tax basis ) wa $ 311 million in fiscal 2001 . $ 311 million in fiscal 2001 . Effective July 1 , fiscal 2001 . Effective July 1 , 2000 , we adopted . Effective July 1 , 2000 , we adopted SFAS 133 2000 , we adopted SFAS 133 , Accounting for Derivative Instruments . The adoption of SFAS 133 resulted in a cumulative pre-tax reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a ( OCI ) of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument . STOCK-BASED COMPENSATION On July 8 , 2003 , we announced COMPENSATION On July 8 , 2003 , we announced change in stock-based compensation for more than 600 of our senior leader will plan by the end of 2003 . In addition to announcing value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , effective July 1 , 2003 , and will , effective July 1 , 2003 , and will report that restatement method described in SFAS 148 , Accounting for Stock-Based Compensation—Transition Compensation—Transition and Disclosure . Note 16 of the Notes to the pro forma income statement for 2001 , 2002 , and 2003 income statement for 2001 , 2002 , and 2003 a if 2001 , 2002 , and 2003 a if compensation cost for determined a prescribed by SFAS 123 . FINANCIAL CONDITION Our cash short-term investment portfolio totaled $ 49.05 billion at June 30 , $ 49.05 billion at June 30 , 2003 , an increase billion at June 30 , 2003 , an increase of $ , an increase of $ 10.40 billion from fiscal year 2002 10.40 billion from fiscal year 2002 . The portfolio consists primarily Unearned revenue a of June 30 , 2003 wa $ 9.02 a of June 30 , 2003 wa $ 9.02 billion , 30 , 2003 wa $ 9.02 billion , increasing $ 1.27 9.02 billion , increasing $ 1.27 billion from June 30 , $ 1.27 billion from June 30 , 2002 , reflecting the billion from June 30 , 2002 , reflecting the addition of flow from operation wa $ 15.80 billion for fiscal 2003 , $ 15.80 billion for fiscal 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal 2002 . $ 1.29 billion from fiscal 2002 . The increase reflects a The increase reflects a $ 2.16 billion increase in net income net income from fiscal year 2002 and an increase of $ and an increase of $ 1.37 billion in unearned revenue , by an increase of $ 2.36 billion in recognition of unearned used for financing wa $ 5.22 billion in fiscal 2003 , $ 5.22 billion in fiscal 2003 , an increase of $ , an increase of $ 651 million from the prior year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and an increase of $ and an increase of $ 417 million in common stock repurchase stock repurchase , offsetting $ 623 million received for common stock stock issued . We repurchased 238.2 million share of common stock share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion for fiscal 2002 , an increase of $ , an increase of $ 1.09 billion from fiscal 2001 . $ 1.09 billion from fiscal 2001 . The increase reflected strong Upgrade Advantage during the Licensing 6.0 transition period . This resulted used for financing wa $ 4.57 billion in fiscal 2002 , $ 4.57 billion in fiscal 2002 , a decrease of $ , a decrease of $ 1.01 billion from the prior year prior year . We repurchased 245.6 million share of common stock share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from fiscal 2001 . $ 2.11 billion from fiscal 2001 . 14 / MSFT 2003 billion from fiscal 2001 . 14 / MSFT 2003 FORM 10-K 2001 . 14 / MSFT 2003 FORM 10-K Table of Contents 14 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 Cash flow from operation wa flow from operation wa $ 13.42 billion in fiscal 2001 , $ 13.42 billion in fiscal 2001 , an increase of $ , an increase of $ 2.00 billion from the prior year used for financing wa $ 5.59 billion in fiscal 2001 , $ 5.59 billion in fiscal 2001 , an increase of $ , an increase of $ 3.39 billion from the prior year of put warrant in fiscal 2001 , compared to the sale retired or exercised during fiscal 2001 . During fiscal 2001 , fiscal 2001 . During fiscal 2001 , we repurchased 178.1 million fiscal 2001 , we repurchased 178.1 million share . Cash used used for investing wa $ 8.73 billion in fiscal 2001 , $ 8.73 billion in fiscal 2001 , a decrease of $ , a decrease of $ 658 million from the prior year Stockholders ’ equity at June 30 , 2003 wa $ 61.02 equity at June 30 , 2003 wa $ 61.02 billion . 30 , 2003 wa $ 61.02 billion . We will continue constructing new building were $ 117 million on June 30 , $ 117 million on June 30 , 2003 . We have million on June 30 , 2003 . We have not engaged for operating lease wa $ 281 million , $ 318 million $ 281 million , $ 318 million , and $ 290 318 million , and $ 290 million in 2001 , 2002 and $ 290 million in 2001 , 2002 , and 2003 290 million in 2001 , 2002 , and 2003 , respectively 2001 , 2002 , and 2003 , respectively . Future minimum of dollar , are : 2004 , $ 218 ; 2005 are : 2004 , $ 218 ; 2005 , $ 202 2004 , $ 218 ; 2005 , $ 202 ; 2006 218 ; 2005 , $ 202 ; 2006 , $ 172 2005 , $ 202 ; 2006 , $ 172 ; 2007 202 ; 2006 , $ 172 ; 2007 , $ 134 2006 , $ 172 ; 2007 , $ 134 ; 2008 172 ; 2007 , $ 134 ; 2008 , $ 116 2007 , $ 134 ; 2008 , $ 116 ; and 134 ; 2008 , $ 116 ; and thereafter , $ ; and thereafter , $ 429 . We have unconditionally guaranteed These guarantee arose on February 1 , 2003 in conjunction with arose on February 1 , 2003 in conjunction with the expiration the loan of approximately $ 51 million . The estimated fair of the guarantee wa $ 10.5 million and did not result and fee , or February 1 , 2009 . The maximum , or February 1 , 2009 . The maximum amount of value . As of June 30 , 2003 , the maximum As of June 30 , 2003 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that for such indemnification under SFAS 5 , Accounting for Contingencies , , a interpreted by FIN 45 . We consider such factor ISSUED ACCOUNTING STANDARDS In January 2003 , the FASB issued Interpretation , the FASB issued Interpretation 46 , Consolidation of Variable Interest support it activity . Interpretation 46 requires a variable interest entity The consolidation requirement of Interpretation 46 apply immediately to variable interest interest entity created after January 31 , 2003 . The consolidation created after January 31 , 2003 . The consolidation requirement apply entered into prior to February 1 , 2003 in the first prior to February 1 , 2003 in the first fiscal year interim period beginning after June 15 , 2003 . Certain of beginning after June 15 , 2003 . Certain of the disclosure financial statement issued after January 31 , 2003 , regardless of issued after January 31 , 2003 , regardless of when the of the Interpretation on July 1 , 2003 did not have Interpretation on July 1 , 2003 did not have a material financial statement . In April 2003 , the FASB issued SFAS , the FASB issued SFAS 149 , Amendment of Statement 133 149 , Amendment of Statement 133 on Derivative Instruments and Hedging for hedging activity under SFAS 133 . The Statement is effective into or modified after June 30 , 2003 . We do modified after June 30 , 2003 . We do not believe financial statement . In May 2003 , the FASB issued SFAS , the FASB issued SFAS 150 , Accounting for Certain Financial measure certain financial instrument with 15 / MSFT 2003 FORM 10-K instrument with 15 / MSFT 2003 FORM 10-K Table of Contents 15 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 characteristic of both liability and into or modified after May 31 , 2003 , and otherwise modified after May 31 , 2003 , and otherwise is effective interim period beginning after June 15 , 2003 . While we beginning after June 15 , 2003 . While we do not of Position ( SOP ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable hold the investment . SFAS 142 , Goodwill and Other Intangible an annual basis ( July 1 st for Microsoft ) and accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , Accounting for the Costs or Otherwise Marketed . SFAS 86 specifies that cost incurred internally to significant uncertainty . SFAS 5 , Accounting for Contingencies , result of operation . SFAS 109 , Accounting for Income Taxes This Annual Report on Form 10-K contains statement that are forward-looking have powerful incentive to develop 16 / MSFT 2003 FORM 10-K to develop 16 / MSFT 2003 FORM 10-K Table of Contents 16 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 innovative software that is useful Litigation As discussed in Note 20 – Contingencies of the Notes to the transition to Licensing 6.0 in July 2002 . These to Licensing 6.0 in July 2002 . These agreement will expire These agreement will expire in 2004 and 2005 and the rate will expire in 2004 and 2005 and the rate at which of Extraterritorial Income In August 2001 , a World Trade Organization Extraterritorial Income Exclusion Act of 2000 ( “ ETI ” ) the WTO Agreement on Subsidies 17 / MSFT 2003 FORM 10-K on Subsidies 17 / MSFT 2003 FORM 10-K Table of Contents 17 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7 , 7A and Countervailing Measures II , Item 7 , 7A and Countervailing Measures . The market . As of June 30 , 2003 , potential coverage As of June 30 , 2003 , potential coverage available under captive insurance arrangement wa $ 1.0 billion , subject to deductible in Part I , Item 1 of this report ; and including impairment charge . ITEM 7A . Quantitative and Qualitative Disclosures by , first , simulating 10,000 market price path over 20 10,000 market price path over 20 day for equity , interest re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 th over 20 day at the 97.5 th percentile confidence level . in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the of future market risk . 18 / MSFT 2003 FORM 10-K risk . 18 / MSFT 2003 FORM 10-K Table of Contents 18 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 7A , 8 The following table II , Item 7A , 8 The following table set forth million ) As of June 30 Year ended June 30 , June 30 Year ended June 30 , 2003 Risk Categories 2002 Year ended June 30 , 2003 Risk Categories 2002 2003 Average 30 , 2003 Risk Categories 2002 2003 Average High Low Interest , 2003 Risk Categories 2002 2003 Average High Low Interest rate High Low Interest rate $ 472 $ 448 $ 609 $ Interest rate $ 472 $ 448 $ 609 $ 762 $ $ 472 $ 448 $ 609 $ 762 $ 448 Currency $ 448 $ 609 $ 762 $ 448 Currency rate $ $ 609 $ 762 $ 448 Currency rate $ 310 $ $ 448 Currency rate $ 310 $ 141 $ 156 $ Currency rate $ 310 $ 141 $ 156 $ 333 $ $ 310 $ 141 $ 156 $ 333 $ 41 Equity $ 141 $ 156 $ 333 $ 41 Equity price $ $ 156 $ 333 $ 41 Equity price $ 602 $ $ 41 Equity price $ 602 $ 869 $ 838 $ Equity price $ 602 $ 869 $ 838 $ 1,083 $ $ 602 $ 869 $ 838 $ 1,083 $ 523 The $ 869 $ 838 $ 1,083 $ 523 The total VAR $ 838 $ 1,083 $ 523 The total VAR for the combined risk category is $ 987 million at June 30 , $ 987 million at June 30 , 2003 and $ 908 million at June 30 , 2003 and $ 908 million at 30 , 2003 and $ 908 million at June 30 , $ 908 million at June 30 , 2002 . The total million at June 30 , 2002 . The total VAR is . The total VAR is 32 % le at June 30 32 % le at June 30 , 2003 and 34 % le at June 30 , 2003 and 34 % le at June 30 , 2003 and 34 % le at June , % le at June , 30 2002 than the sum of le at June , 30 2002 than the sum of the the U.S. dollar . ITEM 8 . Financial Statements and Supplementary share ) Year Ended June 30 2001 2002 2003 Revenue $ ) Year Ended June 30 2001 2002 2003 Revenue $ 25,296 Year Ended June 30 2001 2002 2003 Revenue $ 25,296 $ Ended June 30 2001 2002 2003 Revenue $ 25,296 $ 28,365 2001 2002 2003 Revenue $ 25,296 $ 28,365 $ 32,187 Operating 2003 Revenue $ 25,296 $ 28,365 $ 32,187 Operating expense : $ 25,296 $ 28,365 $ 32,187 Operating expense : Cost of expense : Cost of revenue 3,455 5,191 5,686 Research and development : Cost of revenue 3,455 5,191 5,686 Research and development 4,379 Cost of revenue 3,455 5,191 5,686 Research and development 4,379 4,307 5,191 5,686 Research and development 4,379 4,307 4,659 Sales and marketing 5,686 Research and development 4,379 4,307 4,659 Sales and marketing 4,885 Research and development 4,379 4,307 4,659 Sales and marketing 4,885 5,407 4,307 4,659 Sales and marketing 4,885 5,407 6,521 General and administrative 4,659 Sales and marketing 4,885 5,407 6,521 General and administrative 857 Sales and marketing 4,885 5,407 6,521 General and administrative 857 1,550 5,407 6,521 General and administrative 857 1,550 2,104 Total operating expense 6,521 General and administrative 857 1,550 2,104 Total operating expense 13,576 General and administrative 857 1,550 2,104 Total operating expense 13,576 16,455 1,550 2,104 Total operating expense 13,576 16,455 18,970 Operating income 11,720 2,104 Total operating expense 13,576 16,455 18,970 Operating income 11,720 11,910 Total operating expense 13,576 16,455 18,970 Operating income 11,720 11,910 13,217 13,576 16,455 18,970 Operating income 11,720 11,910 13,217 Losses on equity 16,455 18,970 Operating income 11,720 11,910 13,217 Losses on equity investees 18,970 Operating income 11,720 11,910 13,217 Losses on equity investees and equity investees and other ( 159 ) ( 92 ) ( other ( 159 ) ( 92 ) ( 68 ) Investment ) ( 92 ) ( 68 ) Investment income/ ( loss income/ ( loss ) ( 36 ) ( 305 ) 1,577 ) ( 36 ) ( 305 ) 1,577 Income before income 36 ) ( 305 ) 1,577 Income before income tax 11,525 1,577 Income before income tax 11,525 11,513 14,726 Provision for income Income before income tax 11,525 11,513 14,726 Provision for income tax before income tax 11,525 11,513 14,726 Provision for income tax 3,804 14,726 Provision for income tax 3,804 3,684 4,733 Income before accounting Provision for income tax 3,804 3,684 4,733 Income before accounting change for income tax 3,804 3,684 4,733 Income before accounting change 7,721 4,733 Income before accounting change 7,721 7,829 9,993 Cumulative effect of Income before accounting change 7,721 7,829 9,993 Cumulative effect of accounting before accounting change 7,721 7,829 9,993 Cumulative effect of accounting change of income tax of $ 185 ) ( 375 ) – of $ 185 ) ( 375 ) – – Net income – – Net income $ 7,346 $ 7,829 $ 9,993 Basic Net income $ 7,346 $ 7,829 $ 9,993 Basic earnings per $ 7,346 $ 7,829 $ 9,993 Basic earnings per share ( Basic earnings per share ( 1 ) : Before accounting change : Before accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative accounting change $ 0.72 $ 0.72 $ 0.93 Cumulative effect of $ 0.72 $ 0.72 $ 0.93 Cumulative effect of accounting change effect of accounting change ( 0.03 ) – – $ 0.69 0.03 ) – – $ 0.69 $ 0.72 $ 0.93 Diluted – – $ 0.69 $ 0.72 $ 0.93 Diluted earnings per $ 0.69 $ 0.72 $ 0.93 Diluted earnings per share ( Diluted earnings per share ( 1 ) : Before accounting change : Before accounting change $ 0.69 $ 0.70 $ 0.92 Cumulative accounting change $ 0.69 $ 0.70 $ 0.92 Cumulative effect of $ 0.69 $ 0.70 $ 0.92 Cumulative effect of accounting change effect of accounting change ( 0.03 ) – – $ 0.66 0.03 ) – – $ 0.66 $ 0.70 $ 0.92 Weighted – – $ 0.66 $ 0.70 $ 0.92 Weighted average share $ 0.66 $ 0.70 $ 0.92 Weighted average share outstanding ( Weighted average share outstanding ( 1 ) : Basic 10,683 10,811 ( 1 ) : Basic 10,683 10,811 10,723 Diluted 11,148 11,106 1 ) : Basic 10,683 10,811 10,723 Diluted 11,148 11,106 10,882 ) : Basic 10,683 10,811 10,723 Diluted 11,148 11,106 10,882 ( Basic 10,683 10,811 10,723 Diluted 11,148 11,106 10,882 ( 1 ) 10,683 10,811 10,723 Diluted 11,148 11,106 10,882 ( 1 ) Earnings 10,811 10,723 Diluted 11,148 11,106 10,882 ( 1 ) Earnings per Diluted 11,148 11,106 10,882 ( 1 ) Earnings per share and two-for-one stock split in February 2003 . See accompanying note . . See accompanying note . 19 / MSFT 2003 FORM 10-K note . 19 / MSFT 2003 FORM 10-K Table of Contents 19 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2002 2003 Assets Current asset In million ) June 30 2002 2003 Assets Current asset : million ) June 30 2002 2003 Assets Current asset : Cash : Cash and equivalent $ 3,016 $ 6,438 Short-term investment 35,636 and equivalent $ 3,016 $ 6,438 Short-term investment 35,636 42,610 Total 3,016 $ 6,438 Short-term investment 35,636 42,610 Total cash and short-term $ 6,438 Short-term investment 35,636 42,610 Total cash and short-term investment Total cash and short-term investment 38,652 49,048 Accounts receivable , net cash and short-term investment 38,652 49,048 Accounts receivable , net 5,129 49,048 Accounts receivable , net 5,129 5,196 Inventories 673 640 Deferred Accounts receivable , net 5,129 5,196 Inventories 673 640 Deferred income , net 5,129 5,196 Inventories 673 640 Deferred income tax 2,112 net 5,129 5,196 Inventories 673 640 Deferred income tax 2,112 2,506 673 640 Deferred income tax 2,112 2,506 Other 2,010 1,583 Total 640 Deferred income tax 2,112 2,506 Other 2,010 1,583 Total current income tax 2,112 2,506 Other 2,010 1,583 Total current asset 48,576 tax 2,112 2,506 Other 2,010 1,583 Total current asset 48,576 58,973 2,010 1,583 Total current asset 48,576 58,973 Property and equipment , 1,583 Total current asset 48,576 58,973 Property and equipment , net Property and equipment , net 2,268 2,223 Equity and other investment and equipment , net 2,268 2,223 Equity and other investment 14,191 2,223 Equity and other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible Equity and other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset other investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset , net investment 14,191 13,692 Goodwill 1,426 3,128 Intangible asset , net 243 3,128 Intangible asset , net 243 384 Other long-term asset 942 Intangible asset , net 243 384 Other long-term asset 942 1,171 243 384 Other long-term asset 942 1,171 Total asset $ 67,646 384 Other long-term asset 942 1,171 Total asset $ 67,646 $ 942 1,171 Total asset $ 67,646 $ 79,571 Liabilities and stockholder Total asset $ 67,646 $ 79,571 Liabilities and stockholder ’ equity liability : Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 Accounts payable $ 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income 1,208 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 $ 1,573 Accrued compensation 1,145 1,416 Income tax 2,022 2,044 Short-term compensation 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 1,145 1,416 Income tax 2,022 2,044 Short-term unearned revenue 5,920 7,225 2,022 2,044 Short-term unearned revenue 5,920 7,225 Other 2,449 1,716 Total 2,044 Short-term unearned revenue 5,920 7,225 Other 2,449 1,716 Total current unearned revenue 5,920 7,225 Other 2,449 1,716 Total current liability 12,744 revenue 5,920 7,225 Other 2,449 1,716 Total current liability 12,744 13,974 2,449 1,716 Total current liability 12,744 13,974 Long-term unearned revenue 1,823 1,716 Total current liability 12,744 13,974 Long-term unearned revenue 1,823 1,790 12,744 13,974 Long-term unearned revenue 1,823 1,790 Deferred income tax 398 13,974 Long-term unearned revenue 1,823 1,790 Deferred income tax 398 1,731 1,823 1,790 Deferred income tax 398 1,731 Other long-term liability 501 1,790 Deferred income tax 398 1,731 Other long-term liability 501 1,056 398 1,731 Other long-term liability 501 1,056 Commitments and contingency Stockholders 1,731 Other long-term liability 501 1,056 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; Shares issued and outstanding ; Shares issued and outstanding 10,718 and 10,771 31,647 35,344 Retained issued and outstanding 10,718 and 10,771 31,647 35,344 Retained earnings , and outstanding 10,718 and 10,771 31,647 35,344 Retained earnings , including outstanding 10,718 and 10,771 31,647 35,344 Retained earnings , including accumulated other comprehensive income of $ 583 and $ 1,840 20,533 25,676 of $ 583 and $ 1,840 20,533 25,676 Total stockholder ’ $ 583 and $ 1,840 20,533 25,676 Total stockholder ’ equity 583 and $ 1,840 20,533 25,676 Total stockholder ’ equity 52,180 25,676 Total stockholder ’ equity 52,180 61,020 Total liability and stockholder Total stockholder ’ equity 52,180 61,020 Total liability and stockholder ’ and stockholder ’ equity $ 67,646 $ 79,571 See accompanying note ’ equity $ 67,646 $ 79,571 See accompanying note . 20 79,571 See accompanying note . 20 / MSFT 2003 FORM 10-K note . 20 / MSFT 2003 FORM 10-K Table of Contents 20 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2001 2002 2003 Operations Net ) Year Ended June 30 2001 2002 2003 Operations Net income Year Ended June 30 2001 2002 2003 Operations Net income $ Ended June 30 2001 2002 2003 Operations Net income $ 7,346 2003 Operations Net income $ 7,346 $ 7,829 $ 9,993 Cumulative Net income $ 7,346 $ 7,829 $ 9,993 Cumulative effect of $ 7,346 $ 7,829 $ 9,993 Cumulative effect of accounting change change , net of tax 375 – – Depreciation , amortization , and other noncash item 1,536 1,084 1,439 Net recognized loss and other noncash item 1,536 1,084 1,439 Net recognized loss on other noncash item 1,536 1,084 1,439 Net recognized loss on investment Net recognized loss on investment 2,221 2,424 380 Stock option income recognized loss on investment 2,221 2,424 380 Stock option income tax loss on investment 2,221 2,424 380 Stock option income tax benefit Stock option income tax benefit 2,066 1,596 1,376 Deferred income tax option income tax benefit 2,066 1,596 1,376 Deferred income tax ( income tax benefit 2,066 1,596 1,376 Deferred income tax ( 420 1,376 Deferred income tax ( 420 ) ( 416 ) 336 tax ( 420 ) ( 416 ) 336 Unearned revenue 6,970 420 ) ( 416 ) 336 Unearned revenue 6,970 11,152 12,519 416 ) 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned ) 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned revenue 336 Unearned revenue 6,970 11,152 12,519 Recognition of unearned revenue ( Recognition of unearned revenue ( 6,369 ) ( 8,929 ) ( revenue ( 6,369 ) ( 8,929 ) ( 11,292 ) Accounts ) ( 8,929 ) ( 11,292 ) Accounts receivable ( 418 11,292 ) Accounts receivable ( 418 ) ( 1,623 ) 187 receivable ( 418 ) ( 1,623 ) 187 Other current asset 418 ) ( 1,623 ) 187 Other current asset ( 482 187 Other current asset ( 482 ) ( 264 ) 412 asset ( 482 ) ( 264 ) 412 Other long-term asset 482 ) ( 264 ) 412 Other long-term asset ( 330 412 Other long-term asset ( 330 ) ( 9 ) ( asset ( 330 ) ( 9 ) ( 28 ) Other ) ( 9 ) ( 28 ) Other current liability 774 28 ) Other current liability 774 1,449 35 Other long-term liability ) Other current liability 774 1,449 35 Other long-term liability 153 Other current liability 774 1,449 35 Other long-term liability 153 216 1,449 35 Other long-term liability 153 216 440 Net cash from 35 Other long-term liability 153 216 440 Net cash from operation Other long-term liability 153 216 440 Net cash from operation 13,422 440 Net cash from operation 13,422 14,509 15,797 Financing Common stock Net cash from operation 13,422 14,509 15,797 Financing Common stock issued cash from operation 13,422 14,509 15,797 Financing Common stock issued 1,620 15,797 Financing Common stock issued 1,620 1,497 2,120 Common stock repurchased Financing Common stock issued 1,620 1,497 2,120 Common stock repurchased ( Common stock issued 1,620 1,497 2,120 Common stock repurchased ( 6,074 2,120 Common stock repurchased ( 6,074 ) ( 6,069 ) ( repurchased ( 6,074 ) ( 6,069 ) ( 6,486 ) Repurchases ) ( 6,069 ) ( 6,486 ) Repurchases of put warrant Repurchases of put warrant ( 1,367 ) – – Common stock stock dividend – – ( 857 ) Other , net 235 857 ) Other , net 235 – – Net cash used cash used for financing ( 5,586 ) ( 4,572 ) ( financing ( 5,586 ) ( 4,572 ) ( 5,223 ) Investing ) ( 4,572 ) ( 5,223 ) Investing Additions to property to property and equipment ( 1,103 ) ( 770 ) ( equipment ( 1,103 ) ( 770 ) ( 891 ) Acquisitions ) ( 770 ) ( 891 ) Acquisitions of company , cash acquired – – ( 1,063 ) Purchases of investment ( ) Purchases of investment ( 66,346 ) ( 89,386 ) ( investment ( 66,346 ) ( 89,386 ) ( 89,621 ) Maturities ) ( 89,386 ) ( 89,621 ) Maturities of investment 5,867 89,621 ) Maturities of investment 5,867 8,654 9,205 Sales of investment ) Maturities of investment 5,867 8,654 9,205 Sales of investment 52,848 Maturities of investment 5,867 8,654 9,205 Sales of investment 52,848 70,657 8,654 9,205 Sales of investment 52,848 70,657 75,157 Net cash used 9,205 Sales of investment 52,848 70,657 75,157 Net cash used for Sales of investment 52,848 70,657 75,157 Net cash used for investing cash used for investing ( 8,734 ) ( 10,845 ) ( investing ( 8,734 ) ( 10,845 ) ( 7,213 ) Net ) ( 10,845 ) ( 7,213 ) Net change in cash in cash and equivalent ( 898 ) ( 908 ) 3,361 equivalent ( 898 ) ( 908 ) 3,361 Effect of exchange 898 ) ( 908 ) 3,361 Effect of exchange rate on on cash and equivalent ( 26 ) 2 61 Cash and and equivalent ( 26 ) 2 61 Cash and equivalent , equivalent ( 26 ) 2 61 Cash and equivalent , beginning equivalent , beginning of year 4,846 3,922 3,016 Cash and equivalent , beginning of year 4,846 3,922 3,016 Cash and equivalent , beginning of year 4,846 3,922 3,016 Cash and equivalent , end , end of year $ 3,922 $ 3,016 $ 6,438 See of year $ 3,922 $ 3,016 $ 6,438 See accompanying note $ 3,922 $ 3,016 $ 6,438 See accompanying note . 21 6,438 See accompanying note . 21 / MSFT 2003 FORM 10-K note . 21 / MSFT 2003 FORM 10-K Table of Contents 21 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 2001 2002 2003 Common stock ) Year Ended June 30 2001 2002 2003 Common stock and Year Ended June 30 2001 2002 2003 Common stock and paid-in Ended June 30 2001 2002 2003 Common stock and paid-in capital , beginning of year $ 23,195 $ 28,390 $ 31,647 Common of year $ 23,195 $ 28,390 $ 31,647 Common stock issued $ 23,195 $ 28,390 $ 31,647 Common stock issued 5,154 1,801 $ 31,647 Common stock issued 5,154 1,801 3,012 Common stock repurchased 31,647 Common stock issued 5,154 1,801 3,012 Common stock repurchased ( Common stock issued 5,154 1,801 3,012 Common stock repurchased ( 394 3,012 Common stock repurchased ( 394 ) ( 676 ) ( repurchased ( 394 ) ( 676 ) ( 691 ) Repurchases ) ( 676 ) ( 691 ) Repurchases of put warrant Repurchases of put warrant ( 1,367 ) – – Stock option Stock option income tax benefit 2,066 1,596 1,376 Other , net option income tax benefit 2,066 1,596 1,376 Other , net ( income tax benefit 2,066 1,596 1,376 Other , net ( 264 1,376 Other , net ( 264 ) 536 – Balance , , net ( 264 ) 536 – Balance , end of Balance , end of year 28,390 31,647 35,344 Retained earnings Balance , end of year 28,390 31,647 35,344 Retained earnings Balance , end of year 28,390 31,647 35,344 Retained earnings Balance , beginning Balance , beginning of year 18,173 18,899 20,533 Net income 7,346 , beginning of year 18,173 18,899 20,533 Net income 7,346 7,829 beginning of year 18,173 18,899 20,533 Net income 7,346 7,829 9,993 18,173 18,899 20,533 Net income 7,346 7,829 9,993 Other comprehensive income 18,899 20,533 Net income 7,346 7,829 9,993 Other comprehensive income : 20,533 Net income 7,346 7,829 9,993 Other comprehensive income : Cumulative effect of accounting change ( 75 ) – – Net gains/ loss ) on derivative instrument 634 ( 91 ) ( 102 on derivative instrument 634 ( 91 ) ( 102 ) Net 634 ( 91 ) ( 102 ) Net unrealized investment gains/ gains/ ( loss ) ( 1,460 ) 5 1,243 Translation adjustment loss ) ( 1,460 ) 5 1,243 Translation adjustment and other ) ( 1,460 ) 5 1,243 Translation adjustment and other ( Translation adjustment and other ( 39 ) 82 116 Comprehensive income and other ( 39 ) 82 116 Comprehensive income 6,406 7,825 other ( 39 ) 82 116 Comprehensive income 6,406 7,825 11,250 ) 82 116 Comprehensive income 6,406 7,825 11,250 Common stock repurchased 82 116 Comprehensive income 6,406 7,825 11,250 Common stock repurchased ( 116 Comprehensive income 6,406 7,825 11,250 Common stock repurchased ( 5,680 11,250 Common stock repurchased ( 5,680 ) ( 6,191 ) ( repurchased ( 5,680 ) ( 6,191 ) ( 5,250 ) Common ) ( 6,191 ) ( 5,250 ) Common stock dividend – stock dividend – – ( 857 ) Balance , end of Balance , end of year 18,899 20,533 25,676 Total stockholder ’ , end of year 18,899 20,533 25,676 Total stockholder ’ equity end of year 18,899 20,533 25,676 Total stockholder ’ equity $ Total stockholder ’ equity $ 47,289 $ 52,180 $ 61,020 See ’ equity $ 47,289 $ 52,180 $ 61,020 See accompanying note $ 47,289 $ 52,180 $ 61,020 See accompanying note . 22 61,020 See accompanying note . 22 / MSFT 2003 FORM 10-K note . 22 / MSFT 2003 FORM 10-K Table of Contents 22 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 NOTES TO FINANCIAL STATEMENTS Note NOTES TO FINANCIAL STATEMENTS Note 1—Accounting Policies Accounting Principles The financial which we own at least 20 % of the voting security . Advertising expense wa $ 1.02 billion in 2001 , $ wa $ 1.02 billion in 2001 , $ 1.13 billion in billion in 2001 , $ 1.13 billion in 2002 , and , $ 1.13 billion in 2002 , and $ 1.06 billion in 2002 , and $ 1.06 billion in 2003 . 23 and $ 1.06 billion in 2003 . 23 / MSFT 2003 1.06 billion in 2003 . 23 / MSFT 2003 FORM 10-K 2003 . 23 / MSFT 2003 FORM 10-K Table of Contents 23 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Income Taxes Income tax expense sell or repledge wa $ 499 million at both June 30 499 million at both June 30 , 2002 and 2003 . at both June 30 , 2002 and 2003 . Investments are June 30 , 2002 and 2003 . Investments are considered to value hedging instrument under SFAS 133 . Options used to hedge a hedging instrument under SFAS 133 are also used to hedge a hedging instrument under SFAS 133 , to hedge interest rate a hedging instrument under SFAS 133 , to hedge our exposure a hedging instrument under SFAS 133 , are used to manage assessment of hedge effectiveness . 24 / MSFT 2003 FORM 10-K effectiveness . 24 / MSFT 2003 FORM 10-K Table of Contents 24 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Allowance for Doubtful Accounts The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2001 $ 186 $ 157 $ end of period 2001 $ 186 $ 157 $ 169 $ period 2001 $ 186 $ 157 $ 169 $ 174 2002 $ 186 $ 157 $ 169 $ 174 2002 174 192 $ 157 $ 169 $ 174 2002 174 192 157 209 157 $ 169 $ 174 2002 174 192 157 209 2003 $ 169 $ 174 2002 174 192 157 209 2003 209 169 $ 174 2002 174 192 157 209 2003 209 118 $ 174 2002 174 192 157 209 2003 209 118 85 174 2002 174 192 157 209 2003 209 118 85 242 2002 174 192 157 209 2003 209 118 85 242 Inventories 174 192 157 209 2003 209 118 85 242 Inventories Inventories 192 157 209 2003 209 118 85 242 Inventories Inventories are 157 209 2003 209 118 85 242 Inventories Inventories are stated 209 2003 209 118 85 242 Inventories Inventories are stated at , ranging from one to 15 year . Computer software developed . Goodwill Beginning in fiscal 2002 with the adoption of SFAS with the adoption of SFAS 142 , Goodwill and Other Intangible annually . Prior to fiscal 2002 , goodwill wa amortized using follow Accounting Principles Board Opinion 25 , Accounting for Stock Issued employee compensation arrangement in July 2003 , we also indicated that value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , effective July 1 , 2003 and will report , effective July 1 , 2003 and will report that change restatement method described in SFAS 148 , Accounting for Stock-Based Compensation value recognition provision of SFAS 123 : ( In million , share ) Year Ended June 30 2001 2002 2003 Net income ) Year Ended June 30 2001 2002 2003 Net income , Year Ended June 30 2001 2002 2003 Net income , a Ended June 30 2001 2002 2003 Net income , a reported income , a reported $ 7,346 $ 7,829 $ 9,993 Add a reported $ 7,346 $ 7,829 $ 9,993 Add : Stock-based $ 7,346 $ 7,829 $ 9,993 Add : Stock-based employee compensation income , net of tax 144 99 52 Deduct : Total , net of tax 144 99 52 Deduct : Total stock-based net of tax 144 99 52 Deduct : Total stock-based employee , net of tax ( 2,406 ) ( 2,573 ) ( tax ( 2,406 ) ( 2,573 ) ( 2,514 ) Pro ) ( 2,573 ) ( 2,514 ) Pro forma net income Pro forma net income $ 5,084 $ 5,355 $ 7,531 Earnings net income $ 5,084 $ 5,355 $ 7,531 Earnings per share $ 5,084 $ 5,355 $ 7,531 Earnings per share : Basic Basic – a reported $ 0.69 $ 0.72 $ 0.93 Basic a reported $ 0.69 $ 0.72 $ 0.93 Basic – pro $ 0.69 $ 0.72 $ 0.93 Basic – pro forma $ Basic – pro forma $ 0.48 $ 0.50 $ 0.70 Diluted pro forma $ 0.48 $ 0.50 $ 0.70 Diluted – a $ 0.48 $ 0.50 $ 0.70 Diluted – a reported $ Diluted – a reported $ 0.66 $ 0.70 $ 0.92 Diluted a reported $ 0.66 $ 0.70 $ 0.92 Diluted – pro $ 0.66 $ 0.70 $ 0.92 Diluted – pro forma $ Diluted – pro forma $ 0.46 $ 0.48 $ 0.69 Note pro forma $ 0.46 $ 0.48 $ 0.69 Note 2—Stock Split $ 0.46 $ 0.48 $ 0.69 Note 2—Stock Split In February $ 0.48 $ 0.69 Note 2—Stock Split In February 2003 , Note 2—Stock Split In February 2003 , outstanding share of our the stock split . Note 3—Accounting Changes Effective July 1 , Note 3—Accounting Changes Effective July 1 , 2000 , we adopted Changes Effective July 1 , 2000 , we adopted SFAS 133 2000 , we adopted SFAS 133 which establishes accounting and reporting . The adoption of SFAS 133 on July 1 , 2000 of SFAS 133 on July 1 , 2000 , resulted in 133 on July 1 , 2000 , resulted in a cumulative reduction to income of $ 560 million ( $ 375 million $ 560 million ( $ 375 million after-tax ) and a ) and a cumulative pre-tax 25 / MSFT 2003 FORM 10-K cumulative pre-tax 25 / MSFT 2003 FORM 10-K Table of Contents 25 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 reduction to OCI of $ reduction to OCI of $ 112 million ( $ 75 million $ 112 million ( $ 75 million after-tax ) . The a loss of approximately $ 300 million reclassified from OCI for a loss of approximately $ 250 million reclassified from OCI for to loss of approximately $ 670 million on cash flow hedge OCI of the approximately $ 300 million loss for the time option and the approximately $ 250 million loss for derivative instrument in OCI a of July 1 , 2000 were reclassified into a of July 1 , 2000 were reclassified into earnings during the twelve month ended June 30 , 2001 . The change month ended June 30 , 2001 . The change in accounting from the adoption of SFAS 133 did not materially affect net materially affect net income in 2001 . Effective July 1 , in 2001 . Effective July 1 , 2001 , we adopted . Effective July 1 , 2001 , we adopted SFAS 141 2001 , we adopted SFAS 141 , Business Combinations , and Business Combinations , and SFAS 142 . SFAS 141 requires business and SFAS 142 . SFAS 141 requires business combination initiated after business combination initiated after June 30 , 2001 to be accounted initiated after June 30 , 2001 to be accounted for using separate from goodwill . SFAS 142 requires that goodwill and certain goodwill upon adoption of SFAS 142 . Net income and earnings earnings per share for fiscal 2001 adjusted to exclude amortization expense share ) Year Ended June 30 2001 Net income : Reported ) Year Ended June 30 2001 Net income : Reported net : Reported net income $ 7,346 Goodwill amortization 252 Equity method income $ 7,346 Goodwill amortization 252 Equity method goodwill amortization 26 252 Equity method goodwill amortization 26 Adjusted net income $ 7,624 26 Adjusted net income $ 7,624 Basic earnings per share : basic earnings per share $ 0.69 Goodwill amortization 0.02 Equity method share $ 0.69 Goodwill amortization 0.02 Equity method goodwill amortization – basic earnings per share $ 0.71 Diluted earnings per share : diluted earnings per share $ 0.66 Goodwill amortization 0.02 Equity method share $ 0.66 Goodwill amortization 0.02 Equity method goodwill amortization – diluted earnings per share $ 0.68 Note 4—Unearned Revenue Unearned revenue per share $ 0.68 Note 4—Unearned Revenue Unearned revenue from volume undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price ( In million ) June 30 2002 2003 Volume licensing program In million ) June 30 2002 2003 Volume licensing program $ million ) June 30 2002 2003 Volume licensing program $ 4,158 2003 Volume licensing program $ 4,158 $ 5,472 Undelivered element 2,830 licensing program $ 4,158 $ 5,472 Undelivered element 2,830 2,847 Other 4,158 $ 5,472 Undelivered element 2,830 2,847 Other 755 696 Unearned $ 5,472 Undelivered element 2,830 2,847 Other 755 696 Unearned revenue Undelivered element 2,830 2,847 Other 755 696 Unearned revenue $ 7,743 element 2,830 2,847 Other 755 696 Unearned revenue $ 7,743 $ 755 696 Unearned revenue $ 7,743 $ 9,015 Unearned revenue by Unearned revenue $ 7,743 $ 9,015 Unearned revenue by segment wa ( In million ) June 30 2002 2003 Client $ 3,023 In million ) June 30 2002 2003 Client $ 3,023 $ million ) June 30 2002 2003 Client $ 3,023 $ 3,165 30 2002 2003 Client $ 3,023 $ 3,165 Server and Tools 2003 Client $ 3,023 $ 3,165 Server and Tools 1,595 2,185 $ 3,165 Server and Tools 1,595 2,185 Information Worker 2,757 3,305 3,165 Server and Tools 1,595 2,185 Information Worker 2,757 3,305 Other Tools 1,595 2,185 Information Worker 2,757 3,305 Other segment 368 360 1,595 2,185 Information Worker 2,757 3,305 Other segment 368 360 Unearned Worker 2,757 3,305 Other segment 368 360 Unearned revenue $ 7,743 2,757 3,305 Other segment 368 360 Unearned revenue $ 7,743 $ 368 360 Unearned revenue $ 7,743 $ 9,015 26 / MSFT Unearned revenue $ 7,743 $ 9,015 26 / MSFT 2003 FORM revenue $ 7,743 $ 9,015 26 / MSFT 2003 FORM 10-K $ 9,015 26 / MSFT 2003 FORM 10-K Table of Contents 26 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Of the $ 9.02 billion Item 8 Of the $ 9.02 billion of unearned revenue at of unearned revenue at June 30 , 2003 , $ 2.65 revenue at June 30 , 2003 , $ 2.65 billion is 30 , 2003 , $ 2.65 billion is expected to be the first quarter of fiscal 2004 , $ 2.05 billion in of fiscal 2004 , $ 2.05 billion in the second quarter the second quarter of fiscal 2004 , $ 1.53 billion in of fiscal 2004 , $ 1.53 billion in the third quarter the third quarter of fiscal 2004 , $ 1.00 billion in of fiscal 2004 , $ 1.00 billion in the fourth quarter the fourth quarter of fiscal 2004 , and $ 1.79 billion fiscal 2004 , and $ 1.79 billion thereafter . Note 5—Cash 1.79 billion thereafter . Note 5—Cash and Short-Term Investments ( In Unrealized Losses Recorded Basis June 30 , 2002 Cash and equivalent Recorded Basis June 30 , 2002 Cash and equivalent : Cash and equivalent : Cash $ 1,114 $ – $ – $ $ – $ – $ 1,114 Commercial paper 260 – – – $ 1,114 Commercial paper 260 – – 260 Certificates of Commercial paper 260 – – 260 Certificates of deposit 31 – – 260 Certificates of deposit 31 – – 31 Money market of deposit 31 – – 31 Money market mutual fund 714 31 Money market mutual fund 714 – – 714 Corporate note mutual fund 714 – – 714 Corporate note and bond 560 714 Corporate note and bond 560 – – 560 Municipal security and bond 560 – – 560 Municipal security 337 – – – – 560 Municipal security 337 – – 337 Cash and Municipal security 337 – – 337 Cash and equivalent 3,016 – – 337 Cash and equivalent 3,016 – – 3,016 Short-term investment and equivalent 3,016 – – 3,016 Short-term investment : Commercial paper Short-term investment : Commercial paper 552 – — 552 U.S. government Commercial paper 552 – — 552 U.S. government and agency security U.S. government and agency security 8,745 91 ( 12 ) 8,824 government and agency security 8,745 91 ( 12 ) 8,824 Corporate agency security 8,745 91 ( 12 ) 8,824 Corporate note and 8,745 91 ( 12 ) 8,824 Corporate note and bond 14,577 8,824 Corporate note and bond 14,577 255 ( 241 ) 14,591 Corporate note and bond 14,577 255 ( 241 ) 14,591 Mortgage-backed and bond 14,577 255 ( 241 ) 14,591 Mortgage-backed security 6,226 14,577 255 ( 241 ) 14,591 Mortgage-backed security 6,226 23 ( 241 ) 14,591 Mortgage-backed security 6,226 23 ( 1 ) 6,248 ) 14,591 Mortgage-backed security 6,226 23 ( 1 ) 6,248 Municipal Mortgage-backed security 6,226 23 ( 1 ) 6,248 Municipal security 4,462 6,226 23 ( 1 ) 6,248 Municipal security 4,462 86 – 1 ) 6,248 Municipal security 4,462 86 – 4,548 Certificates of ) 6,248 Municipal security 4,462 86 – 4,548 Certificates of deposit Municipal security 4,462 86 – 4,548 Certificates of deposit 873 – – 4,548 Certificates of deposit 873 – – 873 Short-term investment of deposit 873 – – 873 Short-term investment 35,435 455 ( – – 873 Short-term investment 35,435 455 ( 254 ) 35,636 – 873 Short-term investment 35,435 455 ( 254 ) 35,636 Cash Short-term investment 35,435 455 ( 254 ) 35,636 Cash and short-term 35,435 455 ( 254 ) 35,636 Cash and short-term investment $ Cash and short-term investment $ 38,451 $ 455 $ ( 254 short-term investment $ 38,451 $ 455 $ ( 254 ) $ 38,451 $ 455 $ ( 254 ) $ 38,652 ( In $ ( 254 ) $ 38,652 ( In million ) Cost Unrealized Losses Recorded Basis June 30 , 2003 Cash and equivalent Recorded Basis June 30 , 2003 Cash and equivalent : Cash and equivalent : Cash $ 1,308 $ – $ – $ $ – $ – $ 1,308 Commercial paper 774 – – – $ 1,308 Commercial paper 774 – – 774 U.S. government Commercial paper 774 – – 774 U.S. government and agency security U.S. government and agency security 1,889 – – 1,889 Certificates of agency security 1,889 – – 1,889 Certificates of deposit 28 – – 1,889 Certificates of deposit 28 – – 28 Money market of deposit 28 – – 28 Money market mutual fund 1,263 28 Money market mutual fund 1,263 – – 1,263 Corporate note mutual fund 1,263 – – 1,263 Corporate note and bond 744 1,263 Corporate note and bond 744 95 ( 11 ) 828 Corporate note and bond 744 95 ( 11 ) 828 Municipal and bond 744 95 ( 11 ) 828 Municipal security 348 744 95 ( 11 ) 828 Municipal security 348 – – 11 ) 828 Municipal security 348 – – 348 Cash and Municipal security 348 – – 348 Cash and equivalent 6,354 95 – 348 Cash and equivalent 6,354 95 ( 11 ) 6,438 348 Cash and equivalent 6,354 95 ( 11 ) 6,438 Short-term and equivalent 6,354 95 ( 11 ) 6,438 Short-term investment : 6,354 95 ( 11 ) 6,438 Short-term investment : Commercial paper Short-term investment : Commercial paper 100 – – 100 U.S. government Commercial paper 100 – – 100 U.S. government and agency security U.S. government and agency security 5,316 126 ( 28 ) 5,414 government and agency security 5,316 126 ( 28 ) 5,414 Foreign agency security 5,316 126 ( 28 ) 5,414 Foreign government bond 5,316 126 ( 28 ) 5,414 Foreign government bond 5,364 79 ) 5,414 Foreign government bond 5,364 79 ( 16 ) 5,427 5,414 Foreign government bond 5,364 79 ( 16 ) 5,427 Corporate government bond 5,364 79 ( 16 ) 5,427 Corporate note and 5,364 79 ( 16 ) 5,427 Corporate note and bond 15,440 5,427 Corporate note and bond 15,440 735 ( 86 ) 16,089 Corporate note and bond 15,440 735 ( 86 ) 16,089 Mortgage-backed and bond 15,440 735 ( 86 ) 16,089 Mortgage-backed security 6,257 15,440 735 ( 86 ) 16,089 Mortgage-backed security 6,257 65 ( 86 ) 16,089 Mortgage-backed security 6,257 65 ( 3 ) 6,319 ) 16,089 Mortgage-backed security 6,257 65 ( 3 ) 6,319 Municipal Mortgage-backed security 6,257 65 ( 3 ) 6,319 Municipal security 8,733 6,257 65 ( 3 ) 6,319 Municipal security 8,733 265 ( 3 ) 6,319 Municipal security 8,733 265 ( 6 ) 8,992 ) 6,319 Municipal security 8,733 265 ( 6 ) 8,992 Certificates Municipal security 8,733 265 ( 6 ) 8,992 Certificates of deposit 8,733 265 ( 6 ) 8,992 Certificates of deposit 269 – ) 8,992 Certificates of deposit 269 – – 269 Short-term investment of deposit 269 – – 269 Short-term investment 41,479 1,270 ( – – 269 Short-term investment 41,479 1,270 ( 139 ) 42,610 – 269 Short-term investment 41,479 1,270 ( 139 ) 42,610 Cash Short-term investment 41,479 1,270 ( 139 ) 42,610 Cash and short-term 41,479 1,270 ( 139 ) 42,610 Cash and short-term investment $ Cash and short-term investment $ 47,833 $ 1,365 $ ( 150 short-term investment $ 47,833 $ 1,365 $ ( 150 ) $ 47,833 $ 1,365 $ ( 150 ) $ 49,048 Realized gain $ ( 150 ) $ 49,048 Realized gain and ( loss excluding impairment ) were $ 541 million and $ ( 369 541 million and $ ( 369 ) million in 2001 , ( 369 ) million in 2001 , $ 816 million and million in 2001 , $ 816 million and $ ( 558 816 million and $ ( 558 ) million in 2002 and ( 558 ) million in 2002 and $ 1.42 billion and million in 2002 and $ 1.42 billion and $ ( 957 1.42 billion and $ ( 957 ) million in 2003 . ( 957 ) million in 2003 . Note 6—Inventories ( In million in 2003 . Note 6—Inventories ( In million ) June ( In million ) June 30 2002 2003 Finished good $ In million ) June 30 2002 2003 Finished good $ 505 million ) June 30 2002 2003 Finished good $ 505 $ 2002 2003 Finished good $ 505 $ 393 Raw material and Finished good $ 505 $ 393 Raw material and work in material and work in process 168 247 Inventories $ 673 $ and work in process 168 247 Inventories $ 673 $ 640 process 168 247 Inventories $ 673 $ 640 27 / MSFT 247 Inventories $ 673 $ 640 27 / MSFT 2003 FORM Inventories $ 673 $ 640 27 / MSFT 2003 FORM 10-K $ 640 27 / MSFT 2003 FORM 10-K Table of Contents 27 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Note 7—Property and Equipment ( II , Item 8 Note 7—Property and Equipment ( In million ( In million ) June 30 2002 2003 Land $ 197 In million ) June 30 2002 2003 Land $ 197 $ million ) June 30 2002 2003 Land $ 197 $ 248 30 2002 2003 Land $ 197 $ 248 Buildings 1,701 1,854 2003 Land $ 197 $ 248 Buildings 1,701 1,854 Computer equipment $ 197 $ 248 Buildings 1,701 1,854 Computer equipment and software 197 $ 248 Buildings 1,701 1,854 Computer equipment and software 2,621 1,854 Computer equipment and software 2,621 2,464 Other 1,372 1,512 Property Computer equipment and software 2,621 2,464 Other 1,372 1,512 Property and and software 2,621 2,464 Other 1,372 1,512 Property and equipment – software 2,621 2,464 Other 1,372 1,512 Property and equipment – at and equipment – at cost 5,891 6,078 Accumulated depreciation ( 3,623 equipment – at cost 5,891 6,078 Accumulated depreciation ( 3,623 ) 5,891 6,078 Accumulated depreciation ( 3,623 ) ( 3,855 ) Property depreciation ( 3,623 ) ( 3,855 ) Property and equipment – and equipment – net $ 2,268 $ 2,223 During 2001 , – net $ 2,268 $ 2,223 During 2001 , 2002 , $ 2,268 $ 2,223 During 2001 , 2002 , and 2003 $ 2,223 During 2001 , 2002 , and 2003 , depreciation 2001 , 2002 , and 2003 , depreciation expense , the computer equipment , wa $ 764 million , $ 820 million $ 764 million , $ 820 million , and $ 929 820 million , and $ 929 million . Note 8—Equity and $ 929 million . Note 8—Equity and Other Investments ( In Unrealized Losses Recorded Basis June 30 , 2002 Debt security recorded Recorded Basis June 30 , 2002 Debt security recorded at market : Within one year $ 485 $ 26 $ – $ one year $ 485 $ 26 $ – $ 511 Between $ 26 $ – $ 511 Between 2 and 10 year $ – $ 511 Between 2 and 10 year 893 46 $ 511 Between 2 and 10 year 893 46 ( 4 Between 2 and 10 year 893 46 ( 4 ) 935 2 and 10 year 893 46 ( 4 ) 935 Between 10 year 893 46 ( 4 ) 935 Between 10 and 893 46 ( 4 ) 935 Between 10 and 15 year ( 4 ) 935 Between 10 and 15 year 541 19 ) 935 Between 10 and 15 year 541 19 ( 2 Between 10 and 15 year 541 19 ( 2 ) 558 10 and 15 year 541 19 ( 2 ) 558 Beyond 15 year 541 19 ( 2 ) 558 Beyond 15 year 541 19 ( 2 ) 558 Beyond 15 year 3,036 – ( 2 ) 558 Beyond 15 year 3,036 – – 3,036 ) 558 Beyond 15 year 3,036 – – 3,036 Debt security 15 year 3,036 – – 3,036 Debt security recorded at market Debt security recorded at market 4,955 91 ( 6 ) 5,040 security recorded at market 4,955 91 ( 6 ) 5,040 Common at market 4,955 91 ( 6 ) 5,040 Common stock and 4,955 91 ( 6 ) 5,040 Common stock and warrant 6,580 5,040 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Common stock and warrant 6,580 1,287 ( 617 ) 7,250 Preferred and warrant 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,382 6,580 1,287 ( 617 ) 7,250 Preferred stock 1,382 – – 617 ) 7,250 Preferred stock 1,382 – – 1,382 Other investment Preferred stock 1,382 – – 1,382 Other investment 519 – – – – 1,382 Other investment 519 – – 519 Equity and Other investment 519 – – 519 Equity and other investment $ Equity and other investment $ 13,436 $ 1,378 $ ( 623 other investment $ 13,436 $ 1,378 $ ( 623 ) $ 13,436 $ 1,378 $ ( 623 ) $ 14,191 ( In $ ( 623 ) $ 14,191 ( In million ) Cost Unrealized Losses Recorded Basis June 30 , 2003 Debt security recorded Recorded Basis June 30 , 2003 Debt security recorded at market : Within one year $ 293 $ 9 $ – $ one year $ 293 $ 9 $ – $ 302 Between $ 9 $ – $ 302 Between 2 and 10 year $ – $ 302 Between 2 and 10 year 1,436 194 $ 302 Between 2 and 10 year 1,436 194 ( 73 Between 2 and 10 year 1,436 194 ( 73 ) 1,557 2 and 10 year 1,436 194 ( 73 ) 1,557 Debt 10 year 1,436 194 ( 73 ) 1,557 Debt security recorded 1,436 194 ( 73 ) 1,557 Debt security recorded at market Debt security recorded at market 1,729 203 ( 73 ) 1,859 security recorded at market 1,729 203 ( 73 ) 1,859 Common at market 1,729 203 ( 73 ) 1,859 Common stock and 1,729 203 ( 73 ) 1,859 Common stock and warrant 8,395 1,859 Common stock and warrant 8,395 1,686 ( 3 ) 10,078 Common stock and warrant 8,395 1,686 ( 3 ) 10,078 Preferred and warrant 8,395 1,686 ( 3 ) 10,078 Preferred stock 1,262 8,395 1,686 ( 3 ) 10,078 Preferred stock 1,262 – – 3 ) 10,078 Preferred stock 1,262 – – 1,262 Other investment Preferred stock 1,262 – – 1,262 Other investment 493 – – – – 1,262 Other investment 493 – – 493 Equity and Other investment 493 – – 493 Equity and other investment $ Equity and other investment $ 11,879 $ 1,889 $ ( 76 other investment $ 11,879 $ 1,889 $ ( 76 ) $ 11,879 $ 1,889 $ ( 76 ) $ 13,692 Debt security $ ( 76 ) $ 13,692 Debt security include corporate and exchanged it AT & T 5 % convertible preferred debt for % convertible preferred debt for 115 million share of Comcast Corporation of Comcast Corporation on November 18 , 2002 , resulting in Corporation on November 18 , 2002 , resulting in a $ , resulting in a $ 20 million net recognized loss . at cost . At June 30 , 2002 the recorded basis . At June 30 , 2002 the recorded basis of these of these investment wa $ 2.31 billion , and their estimated estimated fair value wa $ 2.28 billion . At June 30 2.28 billion . At June 30 , 2003 , the recorded . At June 30 , 2003 , the recorded basis of of these investment wa $ 2.15 billion , and their estimated estimated fair value wa $ 2.56 billion . The estimate of excluding impairment ) were $ 3.03 billion and $ ( 23 3.03 billion and $ ( 23 ) million in 2001 , ( 23 ) million in 2001 , $ 2.24 billion and million in 2001 , $ 2.24 billion and $ ( 121 2.24 billion and $ ( 121 ) million in 2002 , ( 121 ) million in 2002 , and $ 540 million in 2002 , and $ 540 million and $ ( 88 540 million and $ ( 88 ) million in 2003 . ( 88 ) million in 2003 . Note 9—Goodwill During fiscal million in 2003 . Note 9—Goodwill During fiscal 2003 , goodwill . Note 9—Goodwill During fiscal 2003 , goodwill increased by approximately goodwill increased by approximately $ 1.7 billion . The increase related : Navision a/s with $ 1.2 billion allocated to Microsoft Business Microsoft Business Solutions , $ 281 million for the Rare , Placeware , Inc. with $ 180 million allocated to Information Worker No impairment wa charged to 28 / MSFT 2003 FORM 10-K charged to 28 / MSFT 2003 FORM 10-K Table of Contents 28 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 goodwill during fiscal 2003 . Item 8 goodwill during fiscal 2003 . During fiscal 2002 , fiscal 2003 . During fiscal 2002 , goodwill wa reduced by goodwill wa reduced by $ 85 million , principally in connection exchange of all of the 33.7 million share and warrant we acquired or impaired during fiscal 2002 . Goodwill by segment wa ( In million ) June 30 2002 2003 Client $ 26 In million ) June 30 2002 2003 Client $ 26 $ million ) June 30 2002 2003 Client $ 26 $ 37 30 2002 2003 Client $ 26 $ 37 Server and Tools 2003 Client $ 26 $ 37 Server and Tools 97 106 $ 37 Server and Tools 97 106 Information Worker – 180 37 Server and Tools 97 106 Information Worker – 180 Microsoft 97 106 Information Worker – 180 Microsoft Business Solutions 1,021 2,219 – 180 Microsoft Business Solutions 1,021 2,219 MSN 160 154 Mobile 180 Microsoft Business Solutions 1,021 2,219 MSN 160 154 Mobile and Business Solutions 1,021 2,219 MSN 160 154 Mobile and Embedded Devices Solutions 1,021 2,219 MSN 160 154 Mobile and Embedded Devices 5 154 Mobile and Embedded Devices 5 28 Home and Entertainment 117 Mobile and Embedded Devices 5 28 Home and Entertainment 117 404 5 28 Home and Entertainment 117 404 Goodwill $ 1,426 $ 28 Home and Entertainment 117 404 Goodwill $ 1,426 $ 3,128 Entertainment 117 404 Goodwill $ 1,426 $ 3,128 Note 10—Intangible Assets 404 Goodwill $ 1,426 $ 3,128 Note 10—Intangible Assets During fiscal $ 1,426 $ 3,128 Note 10—Intangible Assets During fiscal 2003 , Note 10—Intangible Assets During fiscal 2003 , we recorded addition of we recorded addition of $ 306 million in intangible asset , , Ltd. , with $ 19 million allocated to marketing related marketing related asset , $ 97 million to technology-based asset , to technology-based asset , $ 162 million to contract based asset based asset , and $ 28 million to customer-related asset . . Through the fiscal year 2003 acquisition , $ 17 million year 2003 acquisition , $ 17 million wa assigned to research with FASB Interpretation No . 4 ( FIN 4 ) , No . 4 ( FIN 4 ) , Applicability of FASB of FASB Statement No . 2 to Business Combinations Accounted for Development expense . During fiscal 2002 , change in intangible asset to our acquisition of $ 25 million in contract and $ million in contract and $ 27 million in technology , which asset amortization expense wa $ 194 million for fiscal 2002 and $ 194 million for fiscal 2002 and $ 161 million for for fiscal 2002 and $ 161 million for fiscal 2003 . $ 161 million for fiscal 2003 . The component of intangible Carrying Amount Accumulated Amortization June 30 2002 2003 Contract-based $ 421 Amount Accumulated Amortization June 30 2002 2003 Contract-based $ 421 $ Accumulated Amortization June 30 2002 2003 Contract-based $ 421 $ ( 30 2002 2003 Contract-based $ 421 $ ( 290 ) $ Contract-based $ 421 $ ( 290 ) $ 584 $ ( $ ( 290 ) $ 584 $ ( 376 ) Technology-based ) $ 584 $ ( 376 ) Technology-based 172 ( 71 $ ( 376 ) Technology-based 172 ( 71 ) 261 ( 376 ) Technology-based 172 ( 71 ) 261 ( 137 ) Technology-based 172 ( 71 ) 261 ( 137 ) Marketing-related 15 ( 71 ) 261 ( 137 ) Marketing-related 15 ( 4 261 ( 137 ) Marketing-related 15 ( 4 ) 34 ( 137 ) Marketing-related 15 ( 4 ) 34 ( 9 ) Marketing-related 15 ( 4 ) 34 ( 9 ) Customer-related – ( 4 ) 34 ( 9 ) Customer-related – – 28 9 ) Customer-related – – 28 ( 1 ) Total Intangible Customer-related – – 28 ( 1 ) Total Intangible Assets $ ) Total Intangible Assets $ 608 $ ( 365 ) $ Assets $ 608 $ ( 365 ) $ 907 $ ( $ ( 365 ) $ 907 $ ( 523 ) Amortization ) $ 907 $ ( 523 ) Amortization expense is estimated is estimated to be $ 151 million for fiscal 2004 , $ 151 million for fiscal 2004 , $ 103 million for for fiscal 2004 , $ 103 million for fiscal 2005 , $ 103 million for fiscal 2005 , $ 56 million for for fiscal 2005 , $ 56 million for fiscal 2006 , $ 56 million for fiscal 2006 , $ 39 million for for fiscal 2006 , $ 39 million for fiscal 2007 , $ 39 million for fiscal 2007 , and $ 23 million fiscal 2007 , and $ 23 million for fiscal 2008 . $ 23 million for fiscal 2008 . Note 11—Derivatives For fiscal for fiscal 2008 . Note 11—Derivatives For fiscal 2001 , investment . Note 11—Derivatives For fiscal 2001 , investment income included a net unrealized loss of $ 592 million , comprised of a , comprised of a $ 214 million gain for change in fair value hedge , $ 211 million loss for change in flow hedge , and $ 595 million loss for change in hedging instrument . For fiscal 2002 , investment income included a net unrealized loss of $ 480 million , comprised of a , comprised of a $ 30 million gain for change in value hedge , a $ 331 million loss for change in hedge , and a $ 179 million net loss for change hedging instrument . For fiscal 2003 , investment income included a net unrealized loss of $ 141 million , comprised of a , comprised of a $ 74 million loss for change in value hedge , a $ 229 million loss for change in hedge , and a $ 162 million gain for change in is recognized . During fiscal 2001 , $ 214 million of During fiscal 2001 , $ 214 million of derivative gain were reclassified to revenue and $ 416 million of derivative loss were loss ) . During fiscal 2002 , $ 234 million of During fiscal 2002 , $ 234 million of derivative gain were reclassified to revenue and $ 10 million of derivative loss were loss ) . During fiscal 2003 , $ 40 million of During fiscal 2003 , $ 40 million of derivative gain were reclassified to revenue and $ 2 million of derivative gain were . We estimate that $ 22 million of net derivative gain determined in accordance with SFAS 133 , had no significant impact earnings for the fiscal year 2001 , 2002 , and 2003 the fiscal year 2001 , 2002 , and 2003 . No 2001 , 2002 , and 2003 . No significant fair value or discontinued for fiscal year 2001 , 2002 , and 2003 for fiscal year 2001 , 2002 , and 2003 . 29 2001 , 2002 , and 2003 . 29 / MSFT 2003 2002 , and 2003 . 29 / MSFT 2003 FORM 10-K 2003 . 29 / MSFT 2003 FORM 10-K Table of Contents 29 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Note 12—Investment Income/ ( Loss II , Item 8 Note 12—Investment Income/ ( Loss ) The million ) Year Ended June 30 2001 2002 2003 Dividends $ ) Year Ended June 30 2001 2002 2003 Dividends $ 377 Year Ended June 30 2001 2002 2003 Dividends $ 377 $ Ended June 30 2001 2002 2003 Dividends $ 377 $ 357 2001 2002 2003 Dividends $ 377 $ 357 $ 260 Interest 2003 Dividends $ 377 $ 357 $ 260 Interest 1,808 1,762 $ 377 $ 357 $ 260 Interest 1,808 1,762 1,697 Net $ 357 $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ 357 $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ ( $ 260 Interest 1,808 1,762 1,697 Net recognized gains/ ( loss on the sale of investment 3,175 2,379 909 Other-than-temporary impairment ( the sale of investment 3,175 2,379 909 Other-than-temporary impairment ( 4,804 sale of investment 3,175 2,379 909 Other-than-temporary impairment ( 4,804 ) 2,379 909 Other-than-temporary impairment ( 4,804 ) ( 4,323 ) ( impairment ( 4,804 ) ( 4,323 ) ( 1,148 ) Net ) ( 4,323 ) ( 1,148 ) Net unrealized loss attributable attributable to derivative instrument ( 592 ) ( 480 ) ( instrument ( 592 ) ( 480 ) ( 141 ) Net ) ( 480 ) ( 141 ) Net recognized gains/ ( loss ) on investment ( 2,221 ) ( 2,424 ) ( investment ( 2,221 ) ( 2,424 ) ( 380 ) Investment ) ( 2,424 ) ( 380 ) Investment income/ ( loss ( loss ) $ ( 36 ) $ ( 305 ) ( 36 ) $ ( 305 ) $ 1,577 Other than $ ( 305 ) $ 1,577 Other than temporary impairment were million ) Year Ended June 30 2001 2002 2003 Due to ) Year Ended June 30 2001 2002 2003 Due to general Year Ended June 30 2001 2002 2003 Due to general market Ended June 30 2001 2002 2003 Due to general market condition to general market condition $ 1,692 $ 2,793 $ 943 Due market condition $ 1,692 $ 2,793 $ 943 Due to specific $ 1,692 $ 2,793 $ 943 Due to specific adverse condition Due to specific adverse condition 3,112 1,530 205 Total Impairments $ to specific adverse condition 3,112 1,530 205 Total Impairments $ 4,804 specific adverse condition 3,112 1,530 205 Total Impairments $ 4,804 $ 1,530 205 Total Impairments $ 4,804 $ 4,323 $ 1,148 Note Total Impairments $ 4,804 $ 4,323 $ 1,148 Note 13—Income Taxes $ 4,804 $ 4,323 $ 1,148 Note 13—Income Taxes The provision $ 4,323 $ 1,148 Note 13—Income Taxes The provision for income million ) Year Ended June 30 2001 2002 2003 Current tax ) Year Ended June 30 2001 2002 2003 Current tax : Year Ended June 30 2001 2002 2003 Current tax : U.S. Ended June 30 2001 2002 2003 Current tax : U.S. and : U.S. and state $ 3,243 $ 3,644 $ 3,861 International and state $ 3,243 $ 3,644 $ 3,861 International 514 575 $ 3,243 $ 3,644 $ 3,861 International 514 575 808 Current $ 3,644 $ 3,861 International 514 575 808 Current tax 3,757 3,644 $ 3,861 International 514 575 808 Current tax 3,757 4,219 $ 3,861 International 514 575 808 Current tax 3,757 4,219 4,669 514 575 808 Current tax 3,757 4,219 4,669 Deferred tax 47 575 808 Current tax 3,757 4,219 4,669 Deferred tax 47 ( 808 Current tax 3,757 4,219 4,669 Deferred tax 47 ( 535 3,757 4,219 4,669 Deferred tax 47 ( 535 ) 64 Provision 4,669 Deferred tax 47 ( 535 ) 64 Provision for income tax 47 ( 535 ) 64 Provision for income tax $ Provision for income tax $ 3,804 $ 3,684 $ 4,733 U.S. income tax $ 3,804 $ 3,684 $ 4,733 U.S. and international $ 3,804 $ 3,684 $ 4,733 U.S. and international component of million ) Year Ended June 30 2001 2002 2003 U.S. $ ) Year Ended June 30 2001 2002 2003 U.S. $ 9,189 Year Ended June 30 2001 2002 2003 U.S. $ 9,189 $ Ended June 30 2001 2002 2003 U.S. $ 9,189 $ 8,920 2001 2002 2003 U.S. $ 9,189 $ 8,920 $ 11,346 International 2003 U.S. $ 9,189 $ 8,920 $ 11,346 International 2,336 2,593 $ 9,189 $ 8,920 $ 11,346 International 2,336 2,593 3,380 Income $ 8,920 $ 11,346 International 2,336 2,593 3,380 Income before income 8,920 $ 11,346 International 2,336 2,593 3,380 Income before income tax $ 11,346 International 2,336 2,593 3,380 Income before income tax $ Income before income tax $ 11,525 $ 11,513 $ 14,726 In income tax $ 11,525 $ 11,513 $ 14,726 In 2001 , $ 11,525 $ 11,513 $ 14,726 In 2001 , the effective $ 11,513 $ 14,726 In 2001 , the effective tax rate the effective tax rate wa 33.0 % and included the effect included the effect of a 3.1 % reduction from the U.S. for tax credit and a 1.1 % increase for other item The effective tax rate in 2002 wa 32.0 % and included tax rate in 2002 wa 32.0 % and included the effect included the effect of a 2.4 % reduction from the U.S. exclusion tax benefit and a 0.6 % reduction for other item The effective tax rate in 2003 wa 32.1 % and included tax rate in 2003 wa 32.1 % and included the effect a one-time benefit of $ 126 million from the reversal of tax court ruling and a 2.0 % reduction from the U.S. the effective tax rate in 2003 would have been 33.0 % in 2003 would have been 33.0 % . 30 / MSFT have been 33.0 % . 30 / MSFT 2003 FORM 10-K % . 30 / MSFT 2003 FORM 10-K Table of Contents 30 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Deferred income tax were : ( In million ) June 30 2002 2003 Deferred income tax In million ) June 30 2002 2003 Deferred income tax asset million ) June 30 2002 2003 Deferred income tax asset : asset : Revenue item $ 2,261 $ 2,556 Expense item 945 Revenue item $ 2,261 $ 2,556 Expense item 945 1,048 Impaired 2,261 $ 2,556 Expense item 945 1,048 Impaired investment 2,016 1,525 $ 2,556 Expense item 945 1,048 Impaired investment 2,016 1,525 Deferred item 945 1,048 Impaired investment 2,016 1,525 Deferred income tax asset 945 1,048 Impaired investment 2,016 1,525 Deferred income tax asset $ Deferred income tax asset $ 5,222 $ 5,129 Deferred income tax tax asset $ 5,222 $ 5,129 Deferred income tax liability : gain on investment $ ( 887 ) $ ( 1,584 ) ( 887 ) $ ( 1,584 ) International earnings ( 1,818 1,584 ) International earnings ( 1,818 ) ( 1,809 ) Other earnings ( 1,818 ) ( 1,809 ) Other ( 803 ) ( 1,809 ) Other ( 803 ) ( 961 ) Deferred Other ( 803 ) ( 961 ) Deferred income tax liability income tax liability $ ( 3,508 ) $ ( 4,354 ) ( 3,508 ) $ ( 4,354 ) We have not provided foreign withholding tax on $ 1.64 billion of our undistributed earnings of which relate to fiscal 2002 and 2003 earnings , because relate to fiscal 2002 and 2003 earnings , because these earnings reinvested indefinitely . On September 15 , 2000 , the U.S. . On September 15 , 2000 , the U.S. Tax Court ) incorrectly assessed tax for 1990 and 1991 . On December assessed tax for 1990 and 1991 . On December 3 , and 1991 . On December 3 , 2002 , the Ninth . On December 3 , 2002 , the Ninth Circuit Court IRS for all year through 1996 . The IRS is examining The IRS is examining our 1997 through 1999 U.S. income tax is examining our 1997 through 1999 U.S. income tax return . Income tax paid were $ 1.3 billion in 2001 , $ were $ 1.3 billion in 2001 , $ 1.9 billion in billion in 2001 , $ 1.9 billion in 2002 , and , $ 1.9 billion in 2002 , and $ 2.8 billion in 2002 , and $ 2.8 billion in 2003 . Note and $ 2.8 billion in 2003 . Note 14—Stockholders ’ Equity billion in 2003 . Note 14—Stockholders ’ Equity Shares of common million ) Year Ended June 30 2001 2002 2003 Balance , ) Year Ended June 30 2001 2002 2003 Balance , beginning Year Ended June 30 2001 2002 2003 Balance , beginning of Ended June 30 2001 2002 2003 Balance , beginning of year Balance , beginning of year 10,566 10,766 10,718 Issued 378 208 , beginning of year 10,566 10,766 10,718 Issued 378 208 291 beginning of year 10,566 10,766 10,718 Issued 378 208 291 Repurchased year 10,566 10,766 10,718 Issued 378 208 291 Repurchased ( 178 10,566 10,766 10,718 Issued 378 208 291 Repurchased ( 178 ) 10,766 10,718 Issued 378 208 291 Repurchased ( 178 ) ( 378 208 291 Repurchased ( 178 ) ( 256 ) ( Repurchased ( 178 ) ( 256 ) ( 238 ) Balance ) ( 256 ) ( 238 ) Balance , end of Balance , end of year 10,766 10,718 10,771 We repurchase our , end of year 10,766 10,718 10,771 We repurchase our common end of year 10,766 10,718 10,771 We repurchase our common share of common share . In 2002 , we acquired 10.2 million In 2002 , we acquired 10.2 million of our share a repurchase transaction entered into in 2001 , which gave u the up-front net payment of $ 264 million . To enhance our the third quarter of fiscal 2001 , we issued 5.6 million fiscal 2001 , we issued 5.6 million share to settle a put warrant . At June 30 , 2001 , 2002 , . At June 30 , 2001 , 2002 , and 2003 June 30 , 2001 , 2002 , and 2003 no put 2001 , 2002 , and 2003 no put warrant were outstanding for cash . On January 16 , 2003 , our Board . On January 16 , 2003 , our Board of Directors our common stock of $ 0.08 per share , payable March per share , payable March 7 , 2003 to shareholder of , payable March 7 , 2003 to shareholder of record at close of business on February 21 , 2003 . 31 / business on February 21 , 2003 . 31 / MSFT 2003 February 21 , 2003 . 31 / MSFT 2003 FORM 10-K 2003 . 31 / MSFT 2003 FORM 10-K Table of Contents 31 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Note 15—Other Comprehensive Income ( II , Item 8 Note 15—Other Comprehensive Income ( In million million ) Year Ended June 30 2001 2002 2003 Cumulative effect ) Year Ended June 30 2001 2002 2003 Cumulative effect of Year Ended June 30 2001 2002 2003 Cumulative effect of accounting Ended June 30 2001 2002 2003 Cumulative effect of accounting change tax effect of $ ( 37 ) $ ( 75 ) ( 37 ) $ ( 75 ) $ – $ – of tax effect of $ 246 in 2001 , $ 30 effect of $ 246 in 2001 , $ 30 in 2002 246 in 2001 , $ 30 in 2002 , and $ 2001 , $ 30 in 2002 , and $ ( 69 2002 , and $ ( 69 ) in 2003 499 55 $ ( 69 ) in 2003 499 55 ( 129 ) ( 69 ) in 2003 499 55 ( 129 ) Reclassification 69 ) in 2003 499 55 ( 129 ) Reclassification adjustment in 2003 499 55 ( 129 ) Reclassification adjustment for ( of tax effect of $ 67 in 2001 , $ ( effect of $ 67 in 2001 , $ ( 79 ) in 2001 , $ ( 79 ) in 2002 , and $ ( 79 ) in 2002 , and $ 15 in in 2002 , and $ 15 in 2003 135 ( 146 , and $ 15 in 2003 135 ( 146 ) 27 and $ 15 in 2003 135 ( 146 ) 27 Net 15 in 2003 135 ( 146 ) 27 Net gains/ ( 2003 135 ( 146 ) 27 Net gains/ ( loss ) loss ) on derivative instrument 634 ( 91 ) ( 102 on derivative instrument 634 ( 91 ) ( 102 ) Net 634 ( 91 ) ( 102 ) Net unrealized investment gains/ tax effect of $ ( 351 ) in 2001 , $ $ ( 351 ) in 2001 , $ ( 955 ) in 2001 , $ ( 955 ) in 2002 , and $ ( 955 ) in 2002 , and $ 610 in in 2002 , and $ 610 in 2003 ( 1,200 ) , and $ 610 in 2003 ( 1,200 ) ( 1,774 $ 610 in 2003 ( 1,200 ) ( 1,774 ) 1,132 2003 ( 1,200 ) ( 1,774 ) 1,132 Reclassification adjustment for 1,200 ) ( 1,774 ) 1,132 Reclassification adjustment for ( gain tax effect of $ ( 128 ) in 2001 , $ $ ( 128 ) in 2001 , $ 958 in 2002 ) in 2001 , $ 958 in 2002 , and $ 2001 , $ 958 in 2002 , and $ 60 in in 2002 , and $ 60 in 2003 ( 260 ) , and $ 60 in 2003 ( 260 ) 1,779 111 $ 60 in 2003 ( 260 ) 1,779 111 Net unrealized in 2003 ( 260 ) 1,779 111 Net unrealized investment gains/ 2003 ( 260 ) 1,779 111 Net unrealized investment gains/ ( gains/ ( loss ) ( 1,460 ) 5 1,243 Translation adjustment loss ) ( 1,460 ) 5 1,243 Translation adjustment and other ) ( 1,460 ) 5 1,243 Translation adjustment and other ( Translation adjustment and other ( 39 ) 82 116 Other comprehensive and other ( 39 ) 82 116 Other comprehensive income/ ( other ( 39 ) 82 116 Other comprehensive income/ ( loss ( loss ) $ ( 940 ) $ ( 4 ) ( 940 ) $ ( 4 ) $ 1,257 The component $ ( 4 ) $ 1,257 The component of accumulated other ( In million ) June 30 2002 2003 Net gains/ ( In million ) June 30 2002 2003 Net gains/ ( loss million ) June 30 2002 2003 Net gains/ ( loss ) ) on derivative instrument $ 86 $ ( 16 ) Net instrument $ 86 $ ( 16 ) Net unrealized investment gain ) Net unrealized investment gain 603 1,846 Translation adjustment and other Net unrealized investment gain 603 1,846 Translation adjustment and other ( Translation adjustment and other ( 106 ) 10 Accumulated other comprehensive and other ( 106 ) 10 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 583 $ 1,840 Note 16—Employee Stock comprehensive income $ 583 $ 1,840 Note 16—Employee Stock and Savings $ 583 $ 1,840 Note 16—Employee Stock and Savings Plans Employee purchased at six-month interval at 85 % of the lower of having a value not exceeding 15 % of their gross compensation an offering period . During 2001 , 2002 , and 2003 period . During 2001 , 2002 , and 2003 employee purchased 2001 , 2002 , and 2003 employee purchased 11.4 million , , and 2003 employee purchased 11.4 million , 10.8 million share employee purchased 11.4 million , 10.8 million share and 15.2 million , 10.8 million share and 15.2 million share at average price at average price of $ 18.43 , $ 25.26 , and of $ 18.43 , $ 25.26 , and $ 22.56 per $ 25.26 , and $ 22.56 per share . At June per share . At June 30 , 2003 , 192.2 million . At June 30 , 2003 , 192.2 million share were June 30 , 2003 , 192.2 million share were reserved for , which qualifies under Section 401 ( k ) of the employee may contribute up to 25 % of their pretax salary with a maximum contribution of 3 % of a participant ’ . Matching contribution were $ 63 million , $ 77 million $ 63 million , $ 77 million , and $ 88 77 million , and $ 88 million in 2001 , 2002 and $ 88 million in 2001 , 2002 , and 2003 88 million in 2001 , 2002 , and 2003 . Stock 2001 , 2002 , and 2003 . Stock Option and Stock . Options granted prior to 1995 generally vest over four and grant . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and Options granted during and after 2002 vest over four and one-half of stock . In fiscal 2003 , the company granted 4 2003 , the company granted 4 million stock award , which five year . At June 30 , 2003 , stock option . At June 30 , 2003 , stock option for 774 2003 , stock option for 774 million share were vested and million share were vested and 866 million share were available for grant under the plan . 32 / MSFT 2003 FORM 10-K plan . 32 / MSFT 2003 FORM 10-K Table of Contents 32 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 Stock option outstanding were a Weighted Average Balance , June 30 , 2000 1,664 $ 0.28 Balance , June 30 , 2000 1,664 $ 0.28 – $ , June 30 , 2000 1,664 $ 0.28 – $ 59.57 30 , 2000 1,664 $ 0.28 – $ 59.57 $ 20.62 1,664 $ 0.28 – $ 59.57 $ 20.62 Granted 448 20.75 0.28 – $ 59.57 $ 20.62 Granted 448 20.75 – 40.00 $ 59.57 $ 20.62 Granted 448 20.75 – 40.00 30.42 Exercised 59.57 $ 20.62 Granted 448 20.75 – 40.00 30.42 Exercised ( 20.62 Granted 448 20.75 – 40.00 30.42 Exercised ( 246 ) Granted 448 20.75 – 40.00 30.42 Exercised ( 246 ) 0.30 – 40.00 30.42 Exercised ( 246 ) 0.30 – 42.91 5.57 30.42 Exercised ( 246 ) 0.30 – 42.91 5.57 Canceled ( ( 246 ) 0.30 – 42.91 5.57 Canceled ( 70 ) 246 ) 0.30 – 42.91 5.57 Canceled ( 70 ) 6.92 – 42.91 5.57 Canceled ( 70 ) 6.92 – 59.57 31.79 5.57 Canceled ( 70 ) 6.92 – 59.57 31.79 Balance , ( 70 ) 6.92 – 59.57 31.79 Balance , June 30 70 ) 6.92 – 59.57 31.79 Balance , June 30 , 59.57 31.79 Balance , June 30 , 2001 1,796 0.28 – Balance , June 30 , 2001 1,796 0.28 – 59.57 24.77 , June 30 , 2001 1,796 0.28 – 59.57 24.77 Granted June 30 , 2001 1,796 0.28 – 59.57 24.77 Granted 82 , 2001 1,796 0.28 – 59.57 24.77 Granted 82 24.31 – 2001 1,796 0.28 – 59.57 24.77 Granted 82 24.31 – 36.29 0.28 – 59.57 24.77 Granted 82 24.31 – 36.29 31.25 Exercised – 59.57 24.77 Granted 82 24.31 – 36.29 31.25 Exercised ( 24.77 Granted 82 24.31 – 36.29 31.25 Exercised ( 198 ) Granted 82 24.31 – 36.29 31.25 Exercised ( 198 ) 0.51 – 36.29 31.25 Exercised ( 198 ) 0.51 – 34.91 6.41 31.25 Exercised ( 198 ) 0.51 – 34.91 6.41 Canceled ( ( 198 ) 0.51 – 34.91 6.41 Canceled ( 76 ) 198 ) 0.51 – 34.91 6.41 Canceled ( 76 ) 0.58 – 34.91 6.41 Canceled ( 76 ) 0.58 – 58.28 34.34 6.41 Canceled ( 76 ) 0.58 – 58.28 34.34 Balance , ( 76 ) 0.58 – 58.28 34.34 Balance , June 30 76 ) 0.58 – 58.28 34.34 Balance , June 30 , 58.28 34.34 Balance , June 30 , 2002 1,604 0.40 – Balance , June 30 , 2002 1,604 0.40 – 59.57 26.88 , June 30 , 2002 1,604 0.40 – 59.57 26.88 Granted June 30 , 2002 1,604 0.40 – 59.57 26.88 Granted 254 , 2002 1,604 0.40 – 59.57 26.88 Granted 254 21.42 – 2002 1,604 0.40 – 59.57 26.88 Granted 254 21.42 – 29.12 0.40 – 59.57 26.88 Granted 254 21.42 – 29.12 24.27 Exercised – 59.57 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) 0.51 – 29.12 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 Canceled ( ( 234 ) 0.51 – 28.22 6.89 Canceled ( 75 ) 234 ) 0.51 – 28.22 6.89 Canceled ( 75 ) 2.13 – 28.22 6.89 Canceled ( 75 ) 2.13 – 59.56 34.33 6.89 Canceled ( 75 ) 2.13 – 59.56 34.33 Balance , ( 75 ) 2.13 – 59.56 34.33 Balance , June 30 75 ) 2.13 – 59.56 34.33 Balance , June 30 , 59.56 34.33 Balance , June 30 , 2003 1,549 0.40 – Balance , June 30 , 2003 1,549 0.40 – 59.56 29.30 , June 30 , 2003 1,549 0.40 – 59.56 29.30 For June 30 , 2003 1,549 0.40 – 59.56 29.30 For various , 2003 1,549 0.40 – 59.56 29.30 For various price range 2003 1,549 0.40 – 59.56 29.30 For various price range , outstanding stock option at June 30 , 2003 were a follows option at June 30 , 2003 were a follows : ( Shares Weighted Average Price $ 0.39 – $ 15.00 124 3.7 Price $ 0.39 – $ 15.00 124 3.7 $ 6.29 117 $ 0.39 – $ 15.00 124 3.7 $ 6.29 117 $ 0.39 – $ 15.00 124 3.7 $ 6.29 117 $ 6.23 $ 15.00 124 3.7 $ 6.29 117 $ 6.23 15.01 – 15.00 124 3.7 $ 6.29 117 $ 6.23 15.01 – 25.00 3.7 $ 6.29 117 $ 6.23 15.01 – 25.00 359 5.6 $ 6.29 117 $ 6.23 15.01 – 25.00 359 5.6 21.30 117 $ 6.23 15.01 – 25.00 359 5.6 21.30 131 16.54 $ 6.23 15.01 – 25.00 359 5.6 21.30 131 16.54 25.01 6.23 15.01 – 25.00 359 5.6 21.30 131 16.54 25.01 – 15.01 – 25.00 359 5.6 21.30 131 16.54 25.01 – 33.00 – 25.00 359 5.6 21.30 131 16.54 25.01 – 33.00 415 25.00 359 5.6 21.30 131 16.54 25.01 – 33.00 415 5.8 359 5.6 21.30 131 16.54 25.01 – 33.00 415 5.8 28.24 21.30 131 16.54 25.01 – 33.00 415 5.8 28.24 177 27.92 131 16.54 25.01 – 33.00 415 5.8 28.24 177 27.92 33.01 16.54 25.01 – 33.00 415 5.8 28.24 177 27.92 33.01 – 25.01 – 33.00 415 5.8 28.24 177 27.92 33.01 – 41.00 – 33.00 415 5.8 28.24 177 27.92 33.01 – 41.00 387 33.00 415 5.8 28.24 177 27.92 33.01 – 41.00 387 3.2 415 5.8 28.24 177 27.92 33.01 – 41.00 387 3.2 34.26 28.24 177 27.92 33.01 – 41.00 387 3.2 34.26 196 34.34 177 27.92 33.01 – 41.00 387 3.2 34.26 196 34.34 41.01 27.92 33.01 – 41.00 387 3.2 34.26 196 34.34 41.01 – 33.01 – 41.00 387 3.2 34.26 196 34.34 41.01 – 59.56 – 41.00 387 3.2 34.26 196 34.34 41.01 – 59.56 264 41.00 387 3.2 34.26 196 34.34 41.01 – 59.56 264 2.4 387 3.2 34.26 196 34.34 41.01 – 59.56 264 2.4 44.90 34.26 196 34.34 41.01 – 59.56 264 2.4 44.90 153 44.73 196 34.34 41.01 – 59.56 264 2.4 44.90 153 44.73 We 34.34 41.01 – 59.56 264 2.4 44.90 153 44.73 We follow 41.01 – 59.56 264 2.4 44.90 153 44.73 We follow Accounting – 59.56 264 2.4 44.90 153 44.73 We follow Accounting Principles 59.56 264 2.4 44.90 153 44.73 We follow Accounting Principles Board follow Accounting Principles Board Opinion 25 to account for stock option for stock option is SFAS 123 . Under SFAS 123 , SFAS 123 . Under SFAS 123 , employee stock option are employee compensation arrangement in July 2003 , we also indicated that value recognition provision of SFAS 123 effective July 1 , 2003 of SFAS 123 effective July 1 , 2003 and will report 123 effective July 1 , 2003 and will report that change restatement method described in SFAS 148 . Had compensation cost for determined a prescribed by SFAS 123 , pro forma income statement pro forma income statement for 2001 , 2002 , and 2003 income statement for 2001 , 2002 , and 2003 would have 2001 , 2002 , and 2003 would have been a follows share ) Year Ended June 30 2001 2002 2003 Reported Pro ) Year Ended June 30 2001 2002 2003 Reported Pro Forma Year Ended June 30 2001 2002 2003 Reported Pro Forma Reported Ended June 30 2001 2002 2003 Reported Pro Forma Reported Pro Reported Pro Forma Revenue $ 25,296 $ 25,296 $ 28,365 $ Forma Revenue $ 25,296 $ 25,296 $ 28,365 $ 28,365 $ $ 25,296 $ 25,296 $ 28,365 $ 28,365 $ 32,187 $ $ 25,296 $ 28,365 $ 28,365 $ 32,187 $ 32,187 Operating $ 28,365 $ 28,365 $ 32,187 $ 32,187 Operating expense : $ 28,365 $ 32,187 $ 32,187 Operating expense : Cost of expense : Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 : Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research Cost of revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research and of revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research and development revenue 3,455 3,775 5,191 5,699 5,686 6,059 Research and development 4,379 3,455 3,775 5,191 5,699 5,686 6,059 Research and development 4,379 6,106 5,686 6,059 Research and development 4,379 6,106 4,307 6,299 4,659 6,595 6,059 Research and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales Research and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and and development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and marketing development 4,379 6,106 4,307 6,299 4,659 6,595 Sales and marketing 4,885 4,379 6,106 4,307 6,299 4,659 6,595 Sales and marketing 4,885 5,888 4,659 6,595 Sales and marketing 4,885 5,888 5,407 6,252 6,521 7,562 6,595 Sales and marketing 4,885 5,888 5,407 6,252 6,521 7,562 General Sales and marketing 4,885 5,888 5,407 6,252 6,521 7,562 General and and marketing 4,885 5,888 5,407 6,252 6,521 7,562 General and administrative marketing 4,885 5,888 5,407 6,252 6,521 7,562 General and administrative 857 4,885 5,888 5,407 6,252 6,521 7,562 General and administrative 857 1,184 6,521 7,562 General and administrative 857 1,184 1,550 1,843 2,104 2,426 7,562 General and administrative 857 1,184 1,550 1,843 2,104 2,426 Total General and administrative 857 1,184 1,550 1,843 2,104 2,426 Total operating and administrative 857 1,184 1,550 1,843 2,104 2,426 Total operating expense administrative 857 1,184 1,550 1,843 2,104 2,426 Total operating expense 13,576 857 1,184 1,550 1,843 2,104 2,426 Total operating expense 13,576 16,953 2,104 2,426 Total operating expense 13,576 16,953 16,455 20,093 18,970 22,642 2,426 Total operating expense 13,576 16,953 16,455 20,093 18,970 22,642 Operating Total operating expense 13,576 16,953 16,455 20,093 18,970 22,642 Operating income operating expense 13,576 16,953 16,455 20,093 18,970 22,642 Operating income 11,720 expense 13,576 16,953 16,455 20,093 18,970 22,642 Operating income 11,720 8,343 13,576 16,953 16,455 20,093 18,970 22,642 Operating income 11,720 8,343 11,910 20,093 18,970 22,642 Operating income 11,720 8,343 11,910 8,272 13,217 9,545 18,970 22,642 Operating income 11,720 8,343 11,910 8,272 13,217 9,545 Losses 22,642 Operating income 11,720 8,343 11,910 8,272 13,217 9,545 Losses on Operating income 11,720 8,343 11,910 8,272 13,217 9,545 Losses on equity income 11,720 8,343 11,910 8,272 13,217 9,545 Losses on equity investees 11,720 8,343 11,910 8,272 13,217 9,545 Losses on equity investees and equity investees and other ( 159 ) ( 159 ) ( other ( 159 ) ( 159 ) ( 92 ) ( ) ( 159 ) ( 92 ) ( 92 ) ( ) ( 92 ) ( 92 ) ( 68 ) ( ) ( 92 ) ( 68 ) ( 68 ) Investment ) ( 68 ) ( 68 ) Investment income/ ( loss income/ ( loss ) ( 36 ) ( 36 ) ( ) ( 36 ) ( 36 ) ( 305 ) ( ) ( 36 ) ( 305 ) ( 305 ) 1,577 ) ( 305 ) ( 305 ) 1,577 1,577 Income before 305 ) ( 305 ) 1,577 1,577 Income before income tax ) ( 305 ) 1,577 1,577 Income before income tax 11,525 1,577 Income before income tax 11,525 8,148 11,513 7,875 14,726 11,054 Income before income tax 11,525 8,148 11,513 7,875 14,726 11,054 Provision before income tax 11,525 8,148 11,513 7,875 14,726 11,054 Provision for income tax 11,525 8,148 11,513 7,875 14,726 11,054 Provision for income tax 11,525 8,148 11,513 7,875 14,726 11,054 Provision for income tax 11,525 8,148 11,513 7,875 14,726 11,054 Provision for income tax 3,804 11,054 Provision for income tax 3,804 2,689 3,684 2,520 4,733 3,523 Provision for income tax 3,804 2,689 3,684 2,520 4,733 3,523 Income for income tax 3,804 2,689 3,684 2,520 4,733 3,523 Income before income tax 3,804 2,689 3,684 2,520 4,733 3,523 Income before accounting tax 3,804 2,689 3,684 2,520 4,733 3,523 Income before accounting change 3,804 2,689 3,684 2,520 4,733 3,523 Income before accounting change 7,721 3,523 Income before accounting change 7,721 5,459 7,829 5,355 9,993 7,531 Income before accounting change 7,721 5,459 7,829 5,355 9,993 7,531 Cumulative before accounting change 7,721 5,459 7,829 5,355 9,993 7,531 Cumulative effect accounting change 7,721 5,459 7,829 5,355 9,993 7,531 Cumulative effect of change 7,721 5,459 7,829 5,355 9,993 7,531 Cumulative effect of accounting 7,721 5,459 7,829 5,355 9,993 7,531 Cumulative effect of accounting change effect of accounting change ( 375 ) ( 375 ) – change ( 375 ) ( 375 ) – – – – – – Net income $ 7,346 $ 5,084 $ 7,829 $ Net income $ 7,346 $ 5,084 $ 7,829 $ 5,355 $ $ 7,346 $ 5,084 $ 7,829 $ 5,355 $ 9,993 $ $ 5,084 $ 7,829 $ 5,355 $ 9,993 $ 7,531 Basic $ 7,829 $ 5,355 $ 9,993 $ 7,531 Basic earnings per $ 5,355 $ 9,993 $ 7,531 Basic earnings per share $ Basic earnings per share $ 0.69 $ 0.48 $ 0.72 $ per share $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ $ 0.69 $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ $ 0.48 $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted $ 0.72 $ 0.50 $ 0.93 $ 0.70 Diluted earnings per $ 0.50 $ 0.93 $ 0.70 Diluted earnings per share $ Diluted earnings per share $ 0.66 $ 0.46 $ 0.70 $ per share $ 0.66 $ 0.46 $ 0.70 $ 0.48 $ $ 0.66 $ 0.46 $ 0.70 $ 0.48 $ 0.92 $ $ 0.46 $ 0.70 $ 0.48 $ 0.92 $ 0.69 33 $ 0.70 $ 0.48 $ 0.92 $ 0.69 33 / MSFT $ 0.48 $ 0.92 $ 0.69 33 / MSFT 2003 FORM 0.48 $ 0.92 $ 0.69 33 / MSFT 2003 FORM 10-K $ 0.69 33 / MSFT 2003 FORM 10-K Table of Contents 33 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 The weighted average Black-Scholes value the stock option plan during 2001 , 2002 , and 2003 option plan during 2001 , 2002 , and 2003 wa $ 2001 , 2002 , and 2003 wa $ 14.66 , $ , and 2003 wa $ 14.66 , $ 15.79 , and wa $ 14.66 , $ 15.79 , and $ 12.08 . $ 15.79 , and $ 12.08 . Value wa estimated using weighted average expected life of 6.4 year in 2001 and 7.0 life of 6.4 year in 2001 and 7.0 year in 2002 6.4 year in 2001 and 7.0 year in 2002 and 2003 2001 and 7.0 year in 2002 and 2003 , no dividend 7.0 year in 2002 and 2003 , no dividend in 2001 2003 , no dividend in 2001 and 2002 , a $ no dividend in 2001 and 2002 , a $ 0.08 per and 2002 , a $ 0.08 per share dividend in 2003 0.08 per share dividend in 2003 , volatility of .39 in , volatility of .39 in 2001 , .39 in 2002 , in 2001 , .39 in 2002 , and .42 in 2003 2002 , and .42 in 2003 , and risk-free interest rate and risk-free interest rate of 5.3 % , 5.4 % , rate of 5.3 % , 5.4 % , and 3.9 % , 5.4 % , and 3.9 % in 2001 , 2002 , and 3.9 % in 2001 , 2002 , and 2003 3.9 % in 2001 , 2002 , and 2003 . Note 2001 , 2002 , and 2003 . Note 17—Earnings Per Share , and 2003 . Note 17—Earnings Per Share Basic earnings per share ) Year Ended June 30 2001 2002 2003 Income before ) Year Ended June 30 2001 2002 2003 Income before accounting Year Ended June 30 2001 2002 2003 Income before accounting change Ended June 30 2001 2002 2003 Income before accounting change $ Income before accounting change $ 7,721 $ 7,829 $ 9,993 Weighted accounting change $ 7,721 $ 7,829 $ 9,993 Weighted average outstanding $ 7,721 $ 7,829 $ 9,993 Weighted average outstanding share of outstanding share of common stock 10,683 10,811 10,723 Dilutive effect of share of common stock 10,683 10,811 10,723 Dilutive effect of : of common stock 10,683 10,811 10,723 Dilutive effect of : Put effect of : Put warrant 42 – – Employee stock option – – Employee stock option 423 295 159 Common stock and – Employee stock option 423 295 159 Common stock and common Employee stock option 423 295 159 Common stock and common stock stock and common stock equivalent 11,148 11,106 10,882 Earnings per share and common stock equivalent 11,148 11,106 10,882 Earnings per share before common stock equivalent 11,148 11,106 10,882 Earnings per share before accounting accounting change : Basic $ 0.72 $ 0.72 $ 0.93 Diluted : Basic $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.72 $ 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 0.72 $ 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For 0.93 Diluted $ 0.69 $ 0.70 $ 0.92 For the year $ 0.69 $ 0.70 $ 0.92 For the year ended June For the year ended June 30 , 2001 , 2002 and year ended June 30 , 2001 , 2002 and 2003 ; June 30 , 2001 , 2002 and 2003 ; 702 million , 2001 , 2002 and 2003 ; 702 million , 746 , 2002 and 2003 ; 702 million , 746 million , 2003 ; 702 million , 746 million , and 1.09 billion , 746 million , and 1.09 billion share attributable to outstanding effect wa antidilutive . Note 18—Acquisitions In fiscal year ended June In fiscal year ended June 30 , 2003 , we acquired year ended June 30 , 2003 , we acquired all of We acquired Navision on July 12 , 2002 for $ 1.465 Navision on July 12 , 2002 for $ 1.465 billion consisting 12 , 2002 for $ 1.465 billion consisting primarily of $ billion consisting primarily of $ 662 million in cash and the cash and the issuance of 29.1 million common share of Microsoft Microsoft stock valued at $ 773 million . The value of our common share over the 2-day period before and after term Rare wa acquired on September 24 , 2002 for $ 377 acquired on September 24 , 2002 for $ 377 million consisting 24 , 2002 for $ 377 million consisting primarily of $ million consisting primarily of $ 375 million in cash . Placeware Placeware wa acquired on April 30 , 2003 for $ 202 acquired on April 30 , 2003 for $ 202 million , 30 , 2003 for $ 202 million , consisting primarily of , consisting primarily of $ 189 million in cash . Navision : Navision a/s At July 12 , 2002 Rare , Ltd. a/s At July 12 , 2002 Rare , Ltd. At September Rare , Ltd. At September 24 , 2002 Placeware , Inc. Ltd. At September 24 , 2002 Placeware , Inc. At April Placeware , Inc. At April 30 , 2003 Current asset $ Inc. At April 30 , 2003 Current asset $ 240 $ , 2003 Current asset $ 240 $ 25 $ 30 Property Current asset $ 240 $ 25 $ 30 Property , plant $ 240 $ 25 $ 30 Property , plant , and , plant , and equipment 8 8 7 Intangible asset 169 plant , and equipment 8 8 7 Intangible asset 169 75 , and equipment 8 8 7 Intangible asset 169 75 30 8 8 7 Intangible asset 169 75 30 Goodwill 1,197 281 8 7 Intangible asset 169 75 30 Goodwill 1,197 281 180 7 Intangible asset 169 75 30 Goodwill 1,197 281 180 Total asset 169 75 30 Goodwill 1,197 281 180 Total asset acquired 169 75 30 Goodwill 1,197 281 180 Total asset acquired 1,614 75 30 Goodwill 1,197 281 180 Total asset acquired 1,614 389 281 180 Total asset acquired 1,614 389 247 Current Liabilities ( 180 Total asset acquired 1,614 389 247 Current Liabilities ( 148 Total asset acquired 1,614 389 247 Current Liabilities ( 148 ) 389 247 Current Liabilities ( 148 ) ( 12 ) ( Liabilities ( 148 ) ( 12 ) ( 32 ) Long-term ) ( 12 ) ( 32 ) Long-term liability ( 1 32 ) Long-term liability ( 1 ) – ( 13 ) ( 1 ) – ( 13 ) Total liability assumed ( ) Total liability assumed ( 149 ) ( 12 ) ( assumed ( 149 ) ( 12 ) ( 45 ) Net ) ( 12 ) ( 45 ) Net Assets Acquired $ ) Net Assets Acquired $ 1,465 $ 377 $ 202 Of Assets Acquired $ 1,465 $ 377 $ 202 Of the $ $ 1,465 $ 377 $ 202 Of the $ 169 million $ 202 Of the $ 169 million of acquired intangible asset the Navision acquisition , $ 2 million wa assigned to research off in accordance with FIN 4 . Those write-off are included expense . The remaining $ 167 million of acquired intangible asset amount include technology of $ 48 million ( four-year weighted-average useful ) , contract of $ 115 million ( six-year weighted-average useful , and marketing of $ 4 million ( three-year weighted-average useful million ( three-year weighted-average useful 34 / MSFT 2003 FORM 10-K weighted-average useful 34 / MSFT 2003 FORM 10-K Table of Contents 34 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 life ) . The $ life ) . The $ 1,197 million of goodwill wa assigned total amount , approximately $ 900 million is expected to be purpose . Of the $ 75 million of acquired intangible asset the Rare acquisition , $ 13 million wa assigned to research off in accordance with FIN 4 . Those write-off are included expense . The remaining $ 62 million of acquired intangible asset amount include technology of $ 36 million ( five-year weighted average ) , contract of $ 16 million ( five-year weighted average , and marketing of $ 10 million ( five-year weighted average life ) . The $ 281 million of goodwill wa assigned total amount , approximately $ 270 million is expected to be tax purpose . The $ 30 million of acquired intangible asset amount include technology of $ 4 million ( four-year weighted-average useful ) , customer of $ 23 million ( ten-year weighted-average useful ) , contract of $ 1 million ( six-year weighted-average useful , and marketing of $ 2 million ( one-year weighted average life ) . The $ 180 million of goodwill wa assigned for tax purpose . Note 19—Commitments and Guarantees We have operating for operating lease wa $ 281 million , $ 318 million $ 281 million , $ 318 million , and $ 290 318 million , and $ 290 million in 2001 , 2002 and $ 290 million in 2001 , 2002 , and 2003 290 million in 2001 , 2002 , and 2003 . Future 2001 , 2002 , and 2003 . Future minimum rental commitment of dollar , are : 2004 , $ 218 ; 2005 are : 2004 , $ 218 ; 2005 , $ 202 2004 , $ 218 ; 2005 , $ 202 ; 2006 218 ; 2005 , $ 202 ; 2006 , $ 172 2005 , $ 202 ; 2006 , $ 172 ; 2007 202 ; 2006 , $ 172 ; 2007 , $ 134 2006 , $ 172 ; 2007 , $ 134 ; 2008 172 ; 2007 , $ 134 ; 2008 , $ 116 2007 , $ 134 ; 2008 , $ 116 ; and 134 ; 2008 , $ 116 ; and thereafter , $ ; and thereafter , $ 429 . We have committed $ . We have committed $ 117 million for constructing new building new building . In November 2002 , the FASB issued Interpretation , the FASB issued Interpretation 45 , Guarantor ’ s Accounting Indebtedness of Others ( FIN 45 ) . FIN 45 elaborates FIN 45 ) . FIN 45 elaborates on previously existing disclosure issued or modified after December 31 , 2002 . We have modified after December 31 , 2002 . We have unconditionally guaranteed These guarantee arose on February 1 , 2003 in conjunction with arose on February 1 , 2003 in conjunction with the expiration the loan of approximately $ 51 million . The estimated fair of the guarantee wa $ 10.5 million and did not result and fee , or February 1 , 2009 . The maximum , or February 1 , 2009 . The maximum amount of value . As of June 30 , 2003 , the maximum As of June 30 , 2003 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that for such indemnification under SFAS 5 , Accounting for Contingencies , , a interpreted by FIN 45 . We consider such factor the fiscal year ended June 30 , 2003 were a follows year ended June 30 , 2003 were a follows ( in , beginning of period $ 8 Payments made – Change in warranty issued during the period 29 Change in liability for preexisting liability for preexisting warranty ( 25 ) Balance , end of , end of period $ 12 Note 20—Contingencies We are a of period $ 12 Note 20—Contingencies We are a defendant in that we had violated Sections 1 and 2 of the Sherman had violated Sections 1 and 2 of the Sherman Act and Judgment wa entered on June 7 , 2000 ordering , among entered on June 7 , 2000 ordering , among 35 / , 2000 ordering , among 35 / MSFT 2003 FORM 10-K , among 35 / MSFT 2003 FORM 10-K Table of Contents 35 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 other thing , our breakup an appeal . On June 28 , 2001 , the U.S. . On June 28 , 2001 , the U.S. Court of new trial on one Section 1 claim and for entry of that we had violated Section 2 . We entered into a the United States on November 2 , 2001 . Nine state States on November 2 , 2001 . Nine state ( New the same term on November 6 , 2001 . On November term on November 6 , 2001 . On November 1 , , 2001 . On November 1 , 2002 , the Court . On November 1 , 2002 , the Court approved the other state . On November 1 , 2002 , the Court . On November 1 , 2002 , the Court entered a to interoperate fully with Windows 2000 client and server and that could be a large a 10 % of our worldwide annual under Federal law and in 16 different state . Nine of certified class licensed fewer than 550,000 copy of operating system software software from Microsoft . In 2003 , we reached an agreement to settle all claim in 27 consolidated case in that state value of up to $ 1.1 billion that may be redeemed by the court . In 2003 , we also reached similar the Montana settlement is $ 12.3 million , the Florida settlement the Florida settlement , $ 202 million , the West Virginia West Virginia settlement , $ 21 million , and the North North Carolina settlement , $ 89.2 million . These proposed settlement case will range between $ 916 million and $ 1.1 billion $ 916 million and $ 1.1 billion with the actual cost . In accordance with SFAS 5 and FIN 14 , Reasonable with SFAS 5 and FIN 14 , Reasonable Estimation of the a contingent liability of $ 916 million . Netscape Communications Inc. suit against u on January 22 , 2002 in U.S. District u on January 22 , 2002 in U.S. District Court for described above . On May 29 , 2003 , we and . On May 29 , 2003 , we and AOL Time settlement , we paid $ 750 million to AOL Time Warner to use our Windows Media 9 Series and future software for Palm , Inc. in August 2001 , filed suit against u suit against u on February 18 , 2002 in the U.S. u on February 18 , 2002 in the U.S. District Court with computer manufacturer , pricing 36 / MSFT 2003 FORM 10-K , pricing 36 / MSFT 2003 FORM 10-K Table of Contents 36 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 policy , and business practice of operation . On March 8 , 2002 , Sun Microsystems . On March 8 , 2002 , Sun Microsystems , Inc. described above . On January 21 , 2003 , the Court . On January 21 , 2003 , the Court granted Sun injunction order . On June 26 , 2003 , a three . On June 26 , 2003 , a three judge panel the defendant in more than 30 patent infringement case . Several District of Illinois on February 2 , 1999 , the plaintiff Illinois on February 2 , 1999 , the plaintiff accused the of infringement . On August 11 , 2003 , the jury . On August 11 , 2003 , the jury awarded the awarded the plaintiff approximately $ 520 million in damage for infringement ’ patent issued through September 2001 . The plaintiff are seeking accounting for damage from September 2001 to the present . We for Northern California on April 26 , 2001 , is anticipated California on April 26 , 2001 , is anticipated in 2005 2001 , is anticipated in 2005 . The plaintiff in this becomes reasonably estimable . Note 21—Segment Information ( In million ) million ) Year Ended June 30 2002 2003 Revenue Client $ ) Year Ended June 30 2002 2003 Revenue Client $ 9,350 Year Ended June 30 2002 2003 Revenue Client $ 9,350 $ 2002 2003 Revenue Client $ 9,350 $ 10,286 Server and Tools Revenue Client $ 9,350 $ 10,286 Server and Tools 5,632 6,519 $ 10,286 Server and Tools 5,632 6,519 Information Worker 8,328 9,718 10,286 Server and Tools 5,632 6,519 Information Worker 8,328 9,718 Microsoft Tools 5,632 6,519 Information Worker 8,328 9,718 Microsoft Business Solutions 308 5,632 6,519 Information Worker 8,328 9,718 Microsoft Business Solutions 308 577 8,328 9,718 Microsoft Business Solutions 308 577 MSN 1,924 2,363 Mobile 9,718 Microsoft Business Solutions 308 577 MSN 1,924 2,363 Mobile and Business Solutions 308 577 MSN 1,924 2,363 Mobile and Embedded Devices Solutions 308 577 MSN 1,924 2,363 Mobile and Embedded Devices 124 2,363 Mobile and Embedded Devices 124 153 Home and Entertainment 2,411 Mobile and Embedded Devices 124 153 Home and Entertainment 2,411 2,779 124 153 Home and Entertainment 2,411 2,779 Reconciling Amounts 288 ( 153 Home and Entertainment 2,411 2,779 Reconciling Amounts 288 ( 208 Entertainment 2,411 2,779 Reconciling Amounts 288 ( 208 ) Consolidated Revenue 2,779 Reconciling Amounts 288 ( 208 ) Consolidated Revenue $ 28,365 208 ) Consolidated Revenue $ 28,365 $ 32,187 Operating Income/ ( Consolidated Revenue $ 28,365 $ 32,187 Operating Income/ ( Loss ) ( Loss ) Client $ 7,529 $ 8,281 Server and Tools ) Client $ 7,529 $ 8,281 Server and Tools 1,409 1,848 $ 8,281 Server and Tools 1,409 1,848 Information Worker 6,440 7,393 8,281 Server and Tools 1,409 1,848 Information Worker 6,440 7,393 Microsoft Tools 1,409 1,848 Information Worker 6,440 7,393 Microsoft Business Solutions ( 1,409 1,848 Information Worker 6,440 7,393 Microsoft Business Solutions ( 196 7,393 Microsoft Business Solutions ( 196 ) ( 308 ) MSN Solutions ( 196 ) ( 308 ) MSN ( 746 ) ( 308 ) MSN ( 746 ) ( 394 ) Mobile MSN ( 746 ) ( 394 ) Mobile and Embedded Devices Mobile and Embedded Devices ( 240 ) ( 175 ) Home Devices ( 240 ) ( 175 ) Home and Entertainment ( ) Home and Entertainment ( 866 ) ( 940 ) Reconciling Entertainment ( 866 ) ( 940 ) Reconciling Amounts ( 1,420 940 ) Reconciling Amounts ( 1,420 ) ( 2,488 ) Consolidated Amounts ( 1,420 ) ( 2,488 ) Consolidated Operating Income/ ( Income/ ( Loss ) $ 11,910 $ 13,217 Segment information is Loss ) $ 11,910 $ 13,217 Segment information is presented in presented in accordance with SFAS 131 , Disclosures about Segments of each segment and it is 37 / MSFT 2003 FORM 10-K it is 37 / MSFT 2003 FORM 10-K Table of Contents 37 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 impracticable for the Company to or loss . On July 1 , 2002 , we revised . On July 1 , 2002 , we revised our segment to discern operating income for 2001 for the current segment or segment or operating income for 2003 for the previous segment due with Windows XP , Windows 2000 , and other standard Windows and administrative expense ( $ 1.55 billion in 2002 and $ ( $ 1.55 billion in 2002 and $ 2.10 billion in billion in 2002 and $ 2.10 billion in 2003 ) , and $ 2.10 billion in 2003 ) , broad-based research and and development expense ( $ 202 million in 2002 and $ ( $ 202 million in 2002 and $ 210 million in million in 2002 and $ 210 million in 2003 ) , and $ 210 million in 2003 ) , and certain corporate and marketing cost ( $ 526 million in 2002 and $ ( $ 526 million in 2002 and $ 688 million in million in 2002 and $ 688 million in 2003 ) . and $ 688 million in 2003 ) . The internal segment from U.S. operation totaled $ 17.8 billion , $ 20.9 billion $ 17.8 billion , $ 20.9 billion , and $ 22.1 20.9 billion , and $ 22.1 billion in 2001 , 2002 and $ 22.1 billion in 2001 , 2002 , and 2003 22.1 billion in 2001 , 2002 , and 2003 . Revenue 2001 , 2002 , and 2003 . Revenue from outside the U.S. export , totaled $ 7.5 billion , $ 7.5 billion $ 7.5 billion , $ 7.5 billion , and $ 10.1 7.5 billion , and $ 10.1 billion in 2001 , 2002 and $ 10.1 billion in 2001 , 2002 , and 2003 10.1 billion in 2001 , 2002 , and 2003 . No 2001 , 2002 , and 2003 . No single customer accounted No single customer accounted for 10 % or more of revenue or more of revenue in 2001 , 2002 , or 2003 of revenue in 2001 , 2002 , or 2003 . Long-lived 2001 , 2002 , or 2003 . Long-lived asset ( principally and equipment ) totaled $ 2.0 billion and $ 1.9 billion $ 2.0 billion and $ 1.9 billion in the United States in the United States in 2002 and 2003 and $ 220 United States in 2002 and 2003 and $ 220 million , 2002 and 2003 and $ 220 million , and $ 294 220 million , and $ 294 million in other country in million in other country in 2002 and 2003 . 38 / other country in 2002 and 2003 . 38 / MSFT 2003 in 2002 and 2003 . 38 / MSFT 2003 FORM 10-K 2003 . 38 / MSFT 2003 FORM 10-K Table of Contents 38 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sept. 30 Dec. 31 Mar . 31 Quarter Ended Sept. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal 2001 31 Mar . 31 June 30 Year Fiscal 2001 Revenue $ 31 June 30 Year Fiscal 2001 Revenue $ 5,766 $ 6,550 Year Fiscal 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 2001 Revenue $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ $ 5,766 $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross $ 6,550 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 $ 6,403 $ 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 6,577 $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net $ 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 25,296 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 Gross profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( profit 4,941 5,686 5,504 5,710 21,841 Net income 2,206 ( 2 5,504 5,710 21,841 Net income 2,206 ( 2 ) 2,624 2,451 21,841 Net income 2,206 ( 2 ) 2,624 2,451 65 ( income 2,206 ( 2 ) 2,624 2,451 65 ( 3 ) 2,206 ( 2 ) 2,624 2,451 65 ( 3 ) 7,346 ( 2 ) 2,624 2,451 65 ( 3 ) 7,346 Basic ) 2,624 2,451 65 ( 3 ) 7,346 Basic earnings per 2,451 65 ( 3 ) 7,346 Basic earnings per share ( Basic earnings per share ( 1 ) 0.21 ( 2 ) per share ( 1 ) 0.21 ( 2 ) 0.25 0.23 ( 1 ) 0.21 ( 2 ) 0.25 0.23 0.01 0.69 ) 0.21 ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings 0.21 ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per ( 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per share 2 ) 0.25 0.23 0.01 0.69 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.20 ( 2 ) per share ( 1 ) 0.20 ( 2 ) 0.24 0.22 ( 1 ) 0.20 ( 2 ) 0.24 0.22 0.01 0.66 ) 0.20 ( 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 0.20 ( 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue ( 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 2 ) 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 6,126 0.24 0.22 0.01 0.66 Fiscal 2002 Revenue $ 6,126 $ 7,741 0.66 Fiscal 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 2002 Revenue $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ $ 6,126 $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross $ 7,741 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 $ 7,245 $ 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 7,253 $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net $ 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 28,365 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 Gross profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( profit 5,242 6,197 5,850 5,885 23,174 Net income 1,283 ( 4 5,850 5,885 23,174 Net income 1,283 ( 4 ) 2,283 2,738 23,174 Net income 1,283 ( 4 ) 2,283 2,738 ( 5 income 1,283 ( 4 ) 2,283 2,738 ( 5 ) 1,525 1,283 ( 4 ) 2,283 2,738 ( 5 ) 1,525 ( 4 ) 2,283 2,738 ( 5 ) 1,525 ( 6 ) 2,283 2,738 ( 5 ) 1,525 ( 6 ) 7,829 Basic ( 5 ) 1,525 ( 6 ) 7,829 Basic earnings per ) 1,525 ( 6 ) 7,829 Basic earnings per share ( Basic earnings per share ( 1 ) 0.12 0.21 0.25 0.14 per share ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted share ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings ( 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per 1 ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per share ) 0.12 0.21 0.25 0.14 0.72 Diluted earnings per share ( Diluted earnings per share ( 1 ) 0.12 0.21 0.25 0.14 per share ( 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal share ( 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 ( 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue 1 ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ ) 0.12 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ 7,746 0.21 0.25 0.14 0.70 Fiscal 2003 Revenue $ 7,746 $ 8,541 0.70 Fiscal 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,547 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,547 6,507 6,620 8,065 $ 32,187 Gross profit 6,547 6,507 6,620 6,827 26,501 Net $ 32,187 Gross profit 6,547 6,507 6,620 6,827 26,501 Net income 32,187 Gross profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 Gross profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 2,552 profit 6,547 6,507 6,620 6,827 26,501 Net income 2,726 2,552 2,794 6,620 6,827 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic 6,827 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings 26,501 Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings per Net income 2,726 2,552 2,794 1,921 9,993 Basic earnings per share income 2,726 2,552 2,794 1,921 9,993 Basic earnings per share 0.25 9,993 Basic earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted Basic earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings earnings per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per per share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per share share 0.25 0.24 0.26 0.18 0.93 Diluted earnings per share 0.25 0.93 Diluted earnings per share 0.25 0.23 0.26 0.18 0.92 ( Diluted earnings per share 0.25 0.23 0.26 0.18 0.92 ( 1 earnings per share 0.25 0.23 0.26 0.18 0.92 ( 1 ) per share 0.25 0.23 0.26 0.18 0.92 ( 1 ) Earnings share 0.25 0.23 0.26 0.18 0.92 ( 1 ) Earnings per 0.23 0.26 0.18 0.92 ( 1 ) Earnings per share have two-for-one stock split in February 2003 . ( 2 ) Includes in February 2003 . ( 2 ) Includes an unfavorable cumulative of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per basic share and diluted adoption of SFAS No . 133 . ( 3 ) Includes No . 133 . ( 3 ) Includes $ 3.92 billion ( 3 ) Includes $ 3.92 billion ( pre-tax ) in of certain investment . ( 4 ) Includes $ 1.82 billion ( 4 ) Includes $ 1.82 billion ( pre-tax ) in of certain investment . ( 5 ) Includes $ 1.25 billion ( 5 ) Includes $ 1.25 billion ( pre-tax ) gain Expedia , Inc. and $ 1.19 billion ( pre-tax ) in of certain investment . ( 6 ) Includes $ 1.19 billion ( 6 ) Includes $ 1.19 billion ( pre-tax ) in impairment of certain investment . 39 / MSFT 2003 FORM 10-K investment . 39 / MSFT 2003 FORM 10-K Table of Contents 39 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 8 INDEPENDENT AUDITORS ’ REPORT To and subsidiary a of June 30 , 2002 and 2003 , a of June 30 , 2002 and 2003 , and the June 30 , 2002 and 2003 , and the related consolidated in the period ended June 30 , 2003 . These financial period ended June 30 , 2003 . These financial statement are and subsidiary a of June 30 , 2002 and 2003 , a of June 30 , 2002 and 2003 , and the June 30 , 2002 and 2003 , and the result of in the period ended June 30 , 2003 in conformity with period ended June 30 , 2003 in conformity with accounting principle . As described in Note 3 to the financial statement , Financial Accounting Standards No . 133 , Accounting for Derivative Instruments Hedging Activities , effective July 1 , 2000 , and Statement , effective July 1 , 2000 , and Statement of Financial Financial Accounting Standards No . 142 , Goodwill and Other Intangible Intangible Assets , effective July 1 , 2001 . /s/ D , effective July 1 , 2001 . /s/ D ELOITTE & LLP Seattle , Washington July 17 , 2003 ( September 3 , Washington July 17 , 2003 ( September 3 , 2003 17 , 2003 ( September 3 , 2003 a to certain 2003 ( September 3 , 2003 a to certain information in to certain information in Note 20 ) 40 / MSFT 2003 information in Note 20 ) 40 / MSFT 2003 FORM 10-K 20 ) 40 / MSFT 2003 FORM 10-K Table of Contents 40 / MSFT 2003 FORM 10-K Table of Contents Part II Contents Part II , Item 9 , 9A , Part III II , Item 9 , 9A , Part III , Item , Part III , Item 10 , 11 , 12 , III , Item 10 , 11 , 12 , 13 , Item 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9 . , 12 , 13 , 14 ITEM 9 . Changes in , 13 , 14 ITEM 9 . Changes in and Disagreements Financial Disclosures None . ITEM 9A . Controls and Procedures Under pursuant to Exchange Act Rule 13a-14 ( c ) a of during the quarter ended June 30 , 2003 that have materially quarter ended June 30 , 2003 that have materially affected , reporting . PART III ITEM 10 . Directors and Executive Officers Shareholders to be held November 11 , 2003 ( the “ be held November 11 , 2003 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . Executive on Form 8-K . ITEM 11 . Executive Compensation The information herein by reference . ITEM 12 . Security Ownership of Certain herein by reference . ITEM 13 . Certain Relationships and Related herein by reference . ITEM 14 . Principal Accounting Fees and incorporated herein by reference . 41 / MSFT 2003 FORM 10-K reference . 41 / MSFT 2003 FORM 10-K Table of Contents 41 / MSFT 2003 FORM 10-K Table of Contents Part IV Contents Part IV , Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . Exhibits , Financial Statement , and Reports on Form 8-K ( a ) Financial Statements are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been b ) Reports on Form 8-K We did not file any file any report on Form 8-K during the quarter ended June during the quarter ended June 30 , 2003 . We furnished quarter ended June 30 , 2003 . We furnished to the the SEC report on Form 8-K on April 15 , 2003 on Form 8-K on April 15 , 2003 and May 12 8-K on April 15 , 2003 and May 12 , 2003 15 , 2003 and May 12 , 2003 . The April 2003 and May 12 , 2003 . The April 15 , , 2003 . The April 15 , 2003 Form 8-K wa . The April 15 , 2003 Form 8-K wa for the April 15 , 2003 Form 8-K wa for the purpose of the fiscal quarter ended March 31 , 2003 . The May quarter ended March 31 , 2003 . The May 12 , , 2003 . The May 12 , 2003 Form 8-K wa . The May 12 , 2003 Form 8-K wa for the May 12 , 2003 Form 8-K wa for the purpose of balance sheet a of June 30 , 2002 and March 31 a of June 30 , 2002 and March 31 , 2003 30 , 2002 and March 31 , 2003 , and the 2002 and March 31 , 2003 , and the related consolidated and nine month ended March 31 , 2002 and 2003 formatted month ended March 31 , 2002 and 2003 formatted in XBRL March 31 , 2002 and 2003 formatted in XBRL ( Extensible Exhibit Listing Exhibit Number Description 3.1 Amended and Restated Articles of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation ( Bylaws of Microsoft Corporation ( 2 ) 10.1 Microsoft Corporation 2001 Microsoft Corporation ( 2 ) 10.1 Microsoft Corporation 2001 Stock Plan 2 ) 10.1 Microsoft Corporation 2001 Stock Plan , a amended , a amended and restated 10.2 Microsoft Corporation 1991 Stock Option and restated 10.2 Microsoft Corporation 1991 Stock Option Plan ( 3 1991 Stock Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Option Plan ( 3 ) 10.3 Microsoft Corporation 1981 Stock Option 3 ) 10.3 Microsoft Corporation 1981 Stock Option Plan ( 4 1981 Stock Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Option Plan ( 4 ) 10.4 Microsoft Corporation 1999 Stock Option 4 ) 10.4 Microsoft Corporation 1999 Stock Option Plan for Non-Employee Plan for Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Option Plan for Consultants and Advisors ( 6 ) 10.6 Microsoft Corporation 2003 and Advisors ( 6 ) 10.6 Microsoft Corporation 2003 Employee Stock 6 ) 10.6 Microsoft Corporation 2003 Employee Stock Purchase Plan ( Employee Stock Purchase Plan ( 7 ) 10.7 Trust Agreement dated Purchase Plan ( 7 ) 10.7 Trust Agreement dated June 1 10.7 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY Washington a trustee ) ( 6 ) 10.8 Trust Agreement dated trustee ) ( 6 ) 10.8 Trust Agreement dated a of Agreement dated a of June 30 , 2003 between Microsoft Corporation a of June 30 , 2003 between Microsoft Corporation and BNY Western Trust Company a trustee 10.9 Form of Indemnification Agreement ( Form of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Registrant 23 21 . Subsidiaries of Registrant 23 . Independent Auditors ’ Consent . Independent Auditors ’ Consent 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief Executive Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2002 . ( 2 Period Ended December 31 , 2002 . ( 2 ) Incorporated 31 , 2002 . ( 2 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended March 31 , 2003 . ( 3 Period Ended March 31 , 2003 . ( 3 ) Incorporated 31 , 2003 . ( 3 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 1997 . ( 4 Year Ended June 30 , 1997 . ( 4 ) Incorporated 30 , 1997 . ( 4 ) Incorporated by reference to by reference to Registration Statement 33-37623 on Form S-8 . ( on Form S-8 . ( 5 ) Incorporated by reference to by reference to Registration Statement 333-91755 on Form S-8 . ( on Form S-8 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2002 . ( 7 Year Ended June 30 , 2002 . ( 7 ) Incorporated 30 , 2002 . ( 7 ) Incorporated by reference to by reference to Registration Statement 333-102240 on Form S-8 . 42 333-102240 on Form S-8 . 42 / MSFT 2003 FORM 10-K S-8 . 42 / MSFT 2003 FORM 10-K Table of Contents 42 / MSFT 2003 FORM 10-K Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on September 4 , 2003 . M ICROSOFT , on September 4 , 2003 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on September 4 , 2003 . Signature Title indicated on September 4 , 2003 . Signature Title /s/ W Financial and Accounting Officer ) 43 / MSFT 2003 FORM 10-K Officer ) 43 / MSFT 2003 FORM 10-K 43 / MSFT 2003 FORM 10-K \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-04-150689/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-04-150689/full-submission.txt new file mode 100644 index 0000000..5825d8e --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-04-150689/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2004 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2004 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark ( a defined in Rule 12b-2 of the Exchange Act ) the registrant a of December 31 , 2003 wa $ 252,132,492,030 a of December 31 , 2003 wa $ 252,132,492,030 . The 31 , 2003 wa $ 252,132,492,030 . The number of share common stock a of August 15 , 2004 wa 10,872,704,667 . a of August 15 , 2004 wa 10,872,704,667 . DOCUMENTS INCORPORATED August 15 , 2004 wa 10,872,704,667 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 9 , 2004 are incorporated by be held November 9 , 2004 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2004 INDEX PART I Year Ended June 30 , 2004 INDEX PART I Item 1. 2004 INDEX PART I Item 1. Business 1 Item 2 . PART I Item 1. Business 1 Item 2 . Properties 10 Item 1. Business 1 Item 2 . Properties 10 Item 3 1 Item 2 . Properties 10 Item 3 . Legal Proceedings 2 . Properties 10 Item 3 . Legal Proceedings 11 Item Item 3 . Legal Proceedings 11 Item 4 . Submission of . Legal Proceedings 11 Item 4 . Submission of Matters to a Vote of Security Holders 11 Executive Officers of the Registrant Executive Officers of the Registrant 11 PART II Item 5 . Registrant 11 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 13 Item 6 . Selected Financial of Equity Securities 13 Item 6 . Selected Financial Data 14 6 . Selected Financial Data 14 Item 7 . Management ’ Selected Financial Data 14 Item 7 . Management ’ s Discussion Condition and Results of Operations 15 Item 7A . Quantitative and Results of Operations 15 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 33 Item 8 . Financial Statements about Market Risk 33 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 35 Item 9 . Changes in and Supplementary Data 35 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 65 Item 9A . Controls and and Financial Disclosure 65 Item 9A . Controls and Procedures 65 9A . Controls and Procedures 65 Item 9B . Other Information Controls and Procedures 65 Item 9B . Other Information 65 PART Item 9B . Other Information 65 PART III Item 10 . Information 65 PART III Item 10 . Directors and Executive Officers Executive Officers of the Registrant 66 Item 11 . Executive Compensation of the Registrant 66 Item 11 . Executive Compensation 66 Item Item 11 . Executive Compensation 66 Item 12 . Security Ownership . Executive Compensation 66 Item 12 . Security Ownership of Certain Certain Beneficial Owners and Management 66 Item 13 . Certain Relationships Owners and Management 66 Item 13 . Certain Relationships and Related Certain Relationships and Related Transactions 66 Item 14 . Principal Accountant and Related Transactions 66 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 66 PART IV Item 15 . Services 66 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 66 Signatures 68 Table of Contents Financial Statement Schedules 66 Signatures 68 Table of Contents Part I of Contents Part I Item 1 PART I ITEM 1. BUSINESS Item 1 PART I ITEM 1. BUSINESS GENERAL Over the last . Since our founding in 1975 , we have been a and Entertainment . See Note 18 – Segment Information of the and connectivity . Windows XP 64-Bit Edition meet the demand of operating system in calendar year 2006 . We are also developing operating system introduction . PAGE 1 Table of Contents Part I of Contents Part I Item 1 Server and Tools . The built on the Windows Server 2003 operating system . In addition solution . Microsoft Office System 2003 , the successor to Microsoft the first half of fiscal 2004 and ha evolved from a System includes the Microsoft Office 2003 Editions , which include ( ) : Microsoft Office Outlook 2003 ; Microsoft Office Excel 2003 2003 ; Microsoft Office Excel 2003 ; Microsoft Office PowerPoint 2003 2003 ; Microsoft Office PowerPoint 2003 ; Microsoft Office Word 2003 2003 ; Microsoft Office Word 2003 ; and Microsoft Office Access ; and Microsoft Office Access 2003 . Other product in the include : Microsoft Office Visio 2003 ; Microsoft Office Project 2003 2003 ; Microsoft Office Project 2003 ; Microsoft Office Project Server ; Microsoft Office Project Server 2003 ; Microsoft Office InfoPath 2003 2003 ; Microsoft Office InfoPath 2003 ; Microsoft Office OneNote 2003 2003 ; Microsoft Office OneNote 2003 ; Microsoft Office Publisher 2003 2003 ; Microsoft Office Publisher 2003 ; Microsoft Office FrontPage 2003 2003 ; Microsoft Office FrontPage 2003 ; and Microsoft Office SharePoint Microsoft Office SharePoint Portal Server 2003 . In addition , the support . Historically , approximately 40 percent of Information Worker billed a given enterprise . PAGE 2 Table of Contents Part I of Contents Part I Item 1 Consequently , general employment level Information Worker revenue . Approximately 40 percent of Information Worker revenue condition . The remaining approximately 20 percent of Information Worker revenue PC shipment . For fiscal 2004 , the segment includes the mid-market business . During fiscal 2004 , we combined the existing the fourth quarter of fiscal 2004 a reorganization which , effective reorganization which , effective July 1 , 2004 , will include , effective July 1 , 2004 , will include the SMS the first quarter of fiscal 2005 , the SMS & P , visited by more than 350 million unique user every month e-mail service with more than 187 million account , and MSN instant-messaging service with more than 135 million account . Mobile and and ISV partner to PAGE 3 Table of Contents Part I of Contents Part I Item 1 accelerate the development and availability Xbox , released in fiscal 2002 , is our video game Cable L.L.C . , a 24-hour cable news and information channel both of which are owned 50 % by u and 50 50 % by u and 50 % by National Broadcasting Company in Singapore support the PAGE 4 Table of Contents Part I of Contents Part I Item 1 Japan , Greater China and . PRODUCT DEVELOPMENT During fiscal 2002 , 2003 , and 2004 DEVELOPMENT During fiscal 2002 , 2003 , and 2004 , research 2002 , 2003 , and 2004 , research and development expense and development expense wa $ 6.30 billion , $ 6.60 billion $ 6.30 billion , $ 6.60 billion , and $ 7.78 6.60 billion , and $ 7.78 billion respectively . Those amount respectively . Those amount represented 22.2 % , 20.5 % , amount represented 22.2 % , 20.5 % , and 21.1 % , 20.5 % , and 21.1 % , respectively , of of those year . Fiscal 2002 and 2003 have been restated year . Fiscal 2002 and 2003 have been restated to reflect the retroactive adoption of SFAS 123 , Accounting for Stock-Based Compensation is innovation . In fiscal 2004 , we filed for more we filed for more than 2,000 patent for new technology , : It took more than 20 year to grow the worldwide base of PC user to 600+ million . By 2010 , to 600+ million . By 2010 , we expect this base this base to grow to 1 billion , due to opportunity OneNote and InfoPath . PAGE 5 Table of Contents Part I of Contents Part I Item 1 • Enhanced Server Position : : We believe Windows Server 2003 and our other server offering product such a Windows Server 2003 , Visual Studio .NET , Visual Studio .NET , SMS 2003 , the Dynamic Systems Initiative , and Microsoft Operations Manager 2005 . • IT Services for business today is a $ 1 billion-plus business . We believe is significant . In fiscal 2005 , we will invest in virtually all of the PAGE 6 Table of Contents Part I of Contents Part I Item 1 major PC OEMs , including primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , this program medium-to-large organization ( greater than 250 license ) , this program product and solution . PAGE 7 Table of Contents Part I of Contents Part I Item 1 CUSTOMERS Our customer include individual the aggregate accounted for approximately 10 % of fiscal 2004 revenue approximately 10 % of fiscal 2004 revenue . These sale were customer accounted for more than 10 % of revenue in 2002 10 % of revenue in 2002 or 2003 . Our practice of revenue in 2002 or 2003 . Our practice is to company focused on the Java 2 Platform Enterprise Edition ( J2EE server application available . PAGE 8 Table of Contents Part I of Contents Part I Item 1 Numerous commercial software vendor offer building on various real-time PAGE 9 Table of Contents Part I of Contents Part I Item 1 , 2 operating system platform Part I Item 1 , 2 operating system platform from commercial . EMPLOYEES As of June 30 , 2004 , we employed As of June 30 , 2004 , we employed approximately 57,000 2004 , we employed approximately 57,000 people on a full-time basis on a full-time basis , 37,000 in the United States and in the United States and 20,000 internationally . Of the total . Of the total , 24,000 were in product research and product research and development , 16,000 in sale and marketing , in sale and marketing , 11,000 in product support and consulting support and consulting service , 2,000 in manufacturing and distribution , manufacturing and distribution , and 4,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 8.9 million square foot of office King County , Washington : 7.5 million square foot of that situated on slightly more than 300 acre of owned land and of owned land and approximately 1.4 million square foot is leased renovating two building with approximately 392,000 square foot that we plan plan to occupy in fiscal 2005 . To accommodate future expansion expansion need we purchased approximately 63 acre , and have an an option to purchase approximately 45 additional acre in Issaquah , Washington , which can accommodate 2.1 million square foot of additional space . We own approximately 576,000 square foot of office building many site domestically totaling approximately 2.8 million square foot of office office building space . PAGE 10 Table of Contents Part I of Contents Part I Item 2 , 3 , 4 We Part I Item 2 , 3 , 4 We occupy many Item 2 , 3 , 4 We occupy many site internationally site internationally , totaling approximately 6.1 million square foot that is that is leased and approximately 223,000 square foot that is owned Operations Center that lease a 187,000 square-foot campus in Dublin , Dublin , Ireland , a 56,000 square-foot disk duplication facility in Puerto Rico , and a 96,000 square-foot facility in Singapore for location : Tokyo , Japan 459,000 square foot ; Unterschleissheim , foot ; Unterschleissheim , Germany 381,000 square foot ; Les Ulis ; Les Ulis , France 261,000 square foot ; Reading , foot ; Reading , England 241,000 square foot ; and Mississauga ; and Mississauga , Canada 235,000 square foot . In addition accommodate expansion need . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes to Financial Statements ( Item 8 ) for information regarding legal regarding legal proceeding . ITEM 4 . SUBMISSION OF MATTERS TO the fourth quarter of fiscal 2004 . EXECUTIVE OFFICERS OF THE executive officer a of August 25 , 2004 were a follows a of August 25 , 2004 were a follows : Name Company William H. Gates III 48 Chairman of the Board ; Software Architect Steven A. Ballmer 48 Chief Executive Officer James E. Executive Officer James E. Allchin 52 Group Vice President , Platforms . ( Robbie ) Bach 42 Senior Vice President , Home and Entertainment Douglas J. Burgum 48 Senior Vice President , Microsoft Business Solutions David W. Cole 42 Senior Vice President , MSN Services Group John G. Connors 45 Senior Vice President ; Chief Chief Financial Officer Jean-Philippe Courtois 44 Senior Vice President ; CEO and Africa Kenneth A. DiPietro 45 Corporate Vice President , Human Human Resources Kevin R. Johnson 43 Group Vice President , Worldwide Michelle ( Mich ) Mathews 37 Corporate Vice President , Marketing , Marketing Craig J. Mundie 55 Senior Vice President ; Chief and Policy Jeffrey S. Raikes 46 Group Vice President , Information Worker Business Eric D. Rudder 37 Senior Vice President , Server Tools Business Bradford L. Smith 45 Senior Vice President , General Counsel and Secretary David Vaskevitch 51 Senior Vice President ; Chief Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a of the Company in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Allchin wa named , Platforms Group in December 1999 . He had been Senior President , Platforms since March 1999 . He wa previously Senior and Business Systems since February 1996 . Mr. Allchin joined Microsoft Mr. Allchin joined Microsoft in 1990 . Mr. Bach wa named Home and Entertainment in March 2000 . He had been Vice Home and Retail since March 1999 . Before holding that position , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . PAGE 11 Table of Microsoft in 1988 . PAGE 11 Table of Contents Part I of Contents Part I Item 4 Mr. Burgum joined the Company Software , Inc. in April 2001 . Prior to the acquisition He joined Great Plains in 1983 . Mr. Cole wa named Personal Services Group in November 2001 . Before holding that position Services Platform Division since August 2000 . He had been Senior , Consumer Services since December 1999 and Vice President , Consumer , Consumer Windows since March 1999 . Previously , he wa Mr. Cole joined Microsoft in 1986 . Mr. Connors wa named Chief Financial Officer in December 1999 . He had been Vice Worldwide Enterprise Group since March 1999 . Mr. Connors had been Chief Information Officer since July 1996 . He joined Microsoft in . He joined Microsoft in 1989 . Mr. Courtois wa named , and Africa in March 2003 . He had been Senior , and Africa since July 2000 . Before holding that position Worldwide Customer Marketing since July 1998 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Mr. DiPietro joined Microsoft DiPietro joined Microsoft in January 2003 a Corporate Vice President , Marketing and Services in March 2003 . He had been Senior , Microsoft Americas since February 2002 . Mr. Johnson had been , and Services since August 2001 , and before that Vice . He joined Microsoft in 1992 . Ms. Mathews wa named President , Marketing in August 2001 . Before holding her current President Corporate Public Relations since 1999 . Ms. Mathews joined Microsoft Ms. Mathews joined Microsoft in 1993 . Mr. Mundie wa named Strategies and Policy in August 2001 . He wa named Senior , Consumer Platforms in February 1996 . He joined Microsoft in . He joined Microsoft in 1992 . Mr. Raikes wa named Information Worker Business in June 2004 . He had been Group and Business Services since August 2000 . Mr. Raikes had been Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr . Rudder wa and Tools Business in June 2003 . Prior to assuming that . Rudder joined Microsoft in 1988 . Mr. Smith wa named Counsel and Secretary in November 2001 . He had been Deputy . He joined Microsoft in 1993 . Mr. Vaskevitch wa named , Business Platforms in August 2001 . He had been Senior , Business Applications since March 2000 . Mr. Vaskevitch had been President , Developer since December 1999 . Before holding that position . He joined Microsoft in 1986 . PAGE 12 Table of Microsoft in 1986 . PAGE 12 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On August 10 , 2004 , there were . On August 10 , 2004 , there were 141,975 registered , 2004 , there were 141,975 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal 2003 31 Mar . 31 June 30 Year Fiscal 2003 Common stock 31 June 30 Year Fiscal 2003 Common stock price per share per share : High $ 27.43 $ 29.12 $ 28.49 $ : High $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ $ 27.43 $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low $ 29.12 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 $ 28.49 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 $ 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 26.37 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 $ 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 Common 29.12 Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 Common stock Low 21.42 21.89 22.80 23.67 21.42 Fiscal 2004 Common stock price 21.89 22.80 23.67 21.42 Fiscal 2004 Common stock price per share per share : High $ 29.96 $ 29.35 $ 28.80 $ : High $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 In 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 In September $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 In September 2003 29.96 Low 25.54 25.10 24.15 25.08 24.15 In September 2003 , Low 25.54 25.10 24.15 25.08 24.15 In September 2003 , our 24.15 25.08 24.15 In September 2003 , our board of director common stock dividend of $ 0.16 per share , which wa which wa paid in November 2003 . That wa the only declared or paid in fiscal 2004 . Our dividend policy is business model . On July 20 , 2004 , our board . On July 20 , 2004 , our board of director a quarterly dividend of $ 0.08 per share payable on September per share payable on September 14 , 2004 , to shareholder payable on September 14 , 2004 , to shareholder of record shareholder of record on August 25 , 2004 . In addition record on August 25 , 2004 . In addition , the buy back up to $ 30 billion in Microsoft common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . We did be held November 9 , 2004 . We did not repurchase the fourth quarter of fiscal 2004 . PAGE 13 Table of of fiscal 2004 . PAGE 13 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 2000 ( 1 ) 2001 ) Year Ended June 30 2000 ( 1 ) 2001 ( Ended June 30 2000 ( 1 ) 2001 ( 1,2 ) 30 2000 ( 1 ) 2001 ( 1,2 ) 2002 ( ( 1 ) 2001 ( 1,2 ) 2002 ( 1,3 ) ) 2001 ( 1,2 ) 2002 ( 1,3 ) 2003 ( ( 1,2 ) 2002 ( 1,3 ) 2003 ( 1,4 ) ) 2002 ( 1,3 ) 2003 ( 1,4 ) 2004 Revenue ( 1,3 ) 2003 ( 1,4 ) 2004 Revenue $ 22,956 ) 2003 ( 1,4 ) 2004 Revenue $ 22,956 $ 25,296 1,4 ) 2004 Revenue $ 22,956 $ 25,296 $ 28,365 $ 2004 Revenue $ 22,956 $ 25,296 $ 28,365 $ 32,187 $ $ 22,956 $ 25,296 $ 28,365 $ 32,187 $ 36,835 Operating $ 25,296 $ 28,365 $ 32,187 $ 36,835 Operating income 11,006 $ 28,365 $ 32,187 $ 36,835 Operating income 11,006 11,720 8,272 32,187 $ 36,835 Operating income 11,006 11,720 8,272 9,545 9,034 Income $ 36,835 Operating income 11,006 11,720 8,272 9,545 9,034 Income before 36,835 Operating income 11,006 11,720 8,272 9,545 9,034 Income before accounting Operating income 11,006 11,720 8,272 9,545 9,034 Income before accounting change income 11,006 11,720 8,272 9,545 9,034 Income before accounting change 9,421 9,034 Income before accounting change 9,421 7,721 5,355 7,531 8,168 Net Income before accounting change 9,421 7,721 5,355 7,531 8,168 Net income before accounting change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 accounting change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 7,346 change 9,421 7,721 5,355 7,531 8,168 Net income 9,421 7,346 5,355 5,355 7,531 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted 7,531 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted earnings 8,168 Net income 9,421 7,346 5,355 7,531 8,168 Diluted earnings per Net income 9,421 7,346 5,355 7,531 8,168 Diluted earnings per share income 9,421 7,346 5,355 7,531 8,168 Diluted earnings per share before share before accounting change $ 0.85 $ 0.69 $ 0.48 $ accounting change $ 0.85 $ 0.69 $ 0.48 $ 0.69 $ $ 0.85 $ 0.69 $ 0.48 $ 0.69 $ 0.75 Diluted $ 0.69 $ 0.48 $ 0.69 $ 0.75 Diluted earnings per $ 0.48 $ 0.69 $ 0.75 Diluted earnings per share $ Diluted earnings per share $ 0.85 $ 0.66 $ 0.48 $ per share $ 0.85 $ 0.66 $ 0.48 $ 0.69 $ $ 0.85 $ 0.66 $ 0.48 $ 0.69 $ 0.75 Cash $ 0.66 $ 0.48 $ 0.69 $ 0.75 Cash dividend per $ 0.48 $ 0.69 $ 0.75 Cash dividend per share $ $ – $ – $ 0.08 $ 0.16 Cash and short-term $ – $ 0.08 $ 0.16 Cash and short-term investment 23,798 0.16 Cash and short-term investment 23,798 31,600 38,652 49,048 60,592 Total Cash and short-term investment 23,798 31,600 38,652 49,048 60,592 Total asset and short-term investment 23,798 31,600 38,652 49,048 60,592 Total asset 51,694 short-term investment 23,798 31,600 38,652 49,048 60,592 Total asset 51,694 58,830 investment 23,798 31,600 38,652 49,048 60,592 Total asset 51,694 58,830 69,910 38,652 49,048 60,592 Total asset 51,694 58,830 69,910 81,732 92,389 Stockholders 49,048 60,592 Total asset 51,694 58,830 69,910 81,732 92,389 Stockholders ’ 60,592 Total asset 51,694 58,830 69,910 81,732 92,389 Stockholders ’ equity Total asset 51,694 58,830 69,910 81,732 92,389 Stockholders ’ equity 41,368 asset 51,694 58,830 69,910 81,732 92,389 Stockholders ’ equity 41,368 47,289 81,732 92,389 Stockholders ’ equity 41,368 47,289 54,842 64,912 74,825 ( 92,389 Stockholders ’ equity 41,368 47,289 54,842 64,912 74,825 ( 1 Stockholders ’ equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) ’ equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) The equity 41,368 47,289 54,842 64,912 74,825 ( 1 ) The financial 47,289 54,842 64,912 74,825 ( 1 ) The financial data presented financial data presented for fiscal 2002 and 2003 ha been restated presented for fiscal 2002 and 2003 ha been restated a prescribed restated a prescribed by SFAS 148 , Accounting for Stock-Based Compensation of FASB Statement No . 123 , to reflect the retroactive value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Compensation a discussed in Note 13 . The information presented for . The information presented for 2000 and 2001 ha not been information presented for 2000 and 2001 ha not been restated . been restated . If fiscal 2000 had been restated , the income would have been $ 9,113 million and $ 8,172 million $ 9,113 million and $ 8,172 million . If fiscal 2001 8,172 million . If fiscal 2001 had been restated , the income would have been $ 8,343 million and $ 5,084 million $ 8,343 million and $ 5,084 million . ( 2 ) $ 5,084 million . ( 2 ) Fiscal 2001 includes an . ( 2 ) Fiscal 2001 includes an unfavorable cumulative effect of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per diluted share , reflecting adoption of SFAS No . 133 . Fiscal 2001 also includes No . 133 . Fiscal 2001 also includes the acquisition of , Inc. for approximately $ 1.1 billion in stock . ( billion in stock . ( 3 ) Fiscal 2002 includes a . ( 3 ) Fiscal 2002 includes a $ 1.25 billion Fiscal 2002 includes a $ 1.25 billion ( pre-tax ) gain of Expedia , Inc. ( 4 ) Fiscal 2003 includes the Inc. ( 4 ) Fiscal 2003 includes the acquisition of Navision for a total of $ 1.23 billion in cash and $ billion in cash and $ 788 million in stock and other and other consideration . PAGE 14 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OPERATIONS RESULTS OF OPERATIONS FOR 2002 , 2003 , AND 2004 OF OPERATIONS FOR 2002 , 2003 , AND 2004 Management ’ 2002 , 2003 , AND 2004 Management ’ s Discussion and . Our focus in fiscal 2005 is building on this foundation which we project will top 1 billion by 2010 ; • will top 1 billion by 2010 ; • Delivering new scenario information worker . For fiscal 2005 , we believe industry-wide factor wa very strong in fiscal 2004 , increasing approximately 13 % fiscal 2004 , increasing approximately 13 % from fiscal 2003 . approximately 13 % from fiscal 2003 . We do not expect growth to occur in fiscal 2005 . PAGE 15 Table of in fiscal 2005 . PAGE 15 Table of Contents Part II of Contents Part II Item 7 We believe that PC unit PC unit shipment will grow 7 % to 9 % , will grow 7 % to 9 % , resulting in a resulting in a forecasted fiscal 2005 Client revenue growth rate that we believe will be between 5 % and 7 % . be between 5 % and 7 % . We continue to unit grew modestly in fiscal 2004 , while Linux distribution rose to decrease significantly in fiscal 2005 . We have approximately $ . We have approximately $ 1.1 billion in original Upgrade Advantage the first quarter of fiscal 2005 . This revenue wa recognized the first quarter of fiscal 2005 the contract period expires . million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 28,365 $ 32,187 13 % $ ) Revenue $ 28,365 $ 32,187 13 % $ 36,835 14 Revenue $ 28,365 $ 32,187 13 % $ 36,835 14 % $ 32,187 13 % $ 36,835 14 % Operating income $ 32,187 13 % $ 36,835 14 % Operating income $ 8,272 14 % Operating income $ 8,272 $ 9,545 15 % $ Operating income $ 8,272 $ 9,545 15 % $ 9,034 ( income $ 8,272 $ 9,545 15 % $ 9,034 ( 5 $ 9,545 15 % $ 9,034 ( 5 ) % Our 15 % $ 9,034 ( 5 ) % Our revenue growth Our revenue growth for fiscal 2004 wa driven by licensing of the transition to our Licensing 6.0 program in the first quarter the first quarter of fiscal 2003 . We estimate growth in growth in PC shipment wa 13 % during fiscal 2004 , wa 13 % during fiscal 2004 , reflecting global economic improvement the first half of fiscal 2004 and to replacement PC and the second half of fiscal 2004 . We estimate that total total server hardware shipment grew 16 % , with Windows Server than the overall sector at 18 % in fiscal 2004 . at 18 % in fiscal 2004 . The net impact of revenue wa positive in fiscal 2004 , primarily due to a been in effect in fiscal 2004 , translated international revenue earned would have been approximately $ 1.10 billion lower . We hedge . Prior to the July 31 , 2002 Licensing 6.0 transition to the July 31 , 2002 Licensing 6.0 transition date , July 31 , 2002 Licensing 6.0 transition date , we experienced . Revenue growth in fiscal 2003 wa driven primarily by multi-year that occurred before the Licensing 6.0 transition date in the first the first quarter of fiscal 2003 . The revenue growth also growth also reflected a $ 933 million or 13 % increase a $ 933 million or 13 % increase associated with OEM operating system and a $ 309 million or 23 % increase a $ 309 million or 23 % increase in revenue from . Revenue growth in fiscal 2002 wa led by the addition by the addition of $ 1.35 billion of Xbox video game game system revenue and $ 1.20 billion of revenue growth from operating system . For fiscal 2004 , the operating income decline operating income decline of $ 511 million wa primarily caused by primarily caused by the $ 2.53 billion of charge related to the third quarter of fiscal 2004 and $ 2.21 billion of of fiscal 2004 and $ 2.21 billion of stock-based compensation expense the second quarter of fiscal 2004 . Operating income wa positively MSN business . In fiscal 2003 , the growth in operating reflected an increase of $ 3.82 billion in revenue , partially by an increase of $ 2.55 billion in operating expense , Warner settlement charge of $ 750 million . In fiscal 2002 750 million . In fiscal 2002 , the growth in operating reflected an increase of $ 3.07 billion in revenue , substantially by an increase of $ 3.14 billion in operating expense , value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , on July 1 , 2003 and restated prior , on July 1 , 2003 and restated prior period to the recognition provision of SFAS 123 for PAGE 16 Table of of SFAS 123 for PAGE 16 Table of Contents Part II of Contents Part II Item 7 all award granted to employee granted to employee after July 1 , 1995 . Stock-based compensation employee after July 1 , 1995 . Stock-based compensation expense are in operating expense were $ 5.73 billion in fiscal 2004 , $ 5.73 billion in fiscal 2004 , $ 3.75 billion in in fiscal 2004 , $ 3.75 billion in fiscal 2003 , $ 3.75 billion in fiscal 2003 , and $ 3.78 billion fiscal 2003 , and $ 3.78 billion in fiscal 2002 . $ 3.78 billion in fiscal 2002 . In fiscal 2005 , fiscal 2002 . In fiscal 2005 , we do not expect similarly high rate a fiscal 2004 , even if information technology the second half of fiscal 2004 , we expect PC and rate to decline in fiscal 2005 from the high growth rate high growth rate in fiscal 2004 . We estimate PC shipment PC shipment will grow from 7 % to 9 % and grow from 7 % to 9 % and Server unit shipment unit shipment will grow from 13 % to 15 % in grow from 13 % to 15 % in fiscal 2005 compared to 15 % in fiscal 2005 compared to fiscal 2004 . fiscal 2005 compared to fiscal 2004 . These lower growth rate slower revenue growth in fiscal 2005 . We are anticipating little exchange rate benefit in fiscal 2005 . We anticipate that we that we will renew between 10 % and 30 % of renew between 10 % and 30 % of the expiring Upgrade Upgrade Advantage revenue is $ 56 million . MSN had a a strong year in fiscal 2004 with revenue growth of 13 2004 with revenue growth of 13 % driven by over 40 13 % driven by over 40 % growth in advertising revenue advertising revenue . In fiscal 2005 , we expect MSN to growth for MSN in fiscal 2005 . Home and Entertainment revenue revenue grew moderately in fiscal 2004 . We do not expect Home and Entertainment in fiscal 2005 a price reduction in the the second half of fiscal 2004 related to the late stage operating income growth in fiscal 2005 to exceed our revenue growth settlement which occurred in fiscal 2004 , lower stock-based compensation cost that our segment in fiscal 2004 that reported a segment operating toward segment profitability in fiscal 2005 with improved operation . SEGMENT . Corporate expense were $ 3.08 billion , $ 3.74 billion $ 3.08 billion , $ 3.74 billion and $ 4.66 billion $ 3.74 billion and $ 4.66 billion in fiscal 2002 , $ 4.66 billion in fiscal 2002 , 2003 and 2004 respectively billion in fiscal 2002 , 2003 and 2004 respectively . Segment fiscal 2002 , 2003 and 2004 respectively . Segment information appearing Segment information appearing in Note 18 – Segment Information of the presented in accordance with SFAS 131 , Disclosures about Segments of million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 9,360 $ 10,394 11 % $ ) Revenue $ 9,360 $ 10,394 11 % $ 11,546 11 Revenue $ 9,360 $ 10,394 11 % $ 11,546 11 % $ 10,394 11 % $ 11,546 11 % Operating income $ 10,394 11 % $ 11,546 11 % Operating income $ 7,105 11 % Operating income $ 7,105 $ 8,017 13 % $ Operating income $ 7,105 $ 8,017 13 % $ 8,015 nm income $ 7,105 $ 8,017 13 % $ 8,015 nm PAGE $ 8,017 13 % $ 8,015 nm PAGE 17 Table of % $ 8,015 nm PAGE 17 Table of Contents Part II of Contents Part II Item 7 Client includes revenue from Windows Professional and Home , Windows 2000 Professional , and other standard increase wa driven by a 14 % growth in OEM license growth in OEM license and 16 % growth in OEM revenue the second half of fiscal 2004 . Revenue from commercial and commercial and retail licensing declined 4 % due to lower revenue product sale . In fiscal 2003 , Client revenue growth wa licensing revenue growth of $ 933 million and a 9 percentage $ 933 million and a 9 percentage point increase in the Professional revenue growth for fiscal 2003 wa $ 1.59 billion , for fiscal 2003 wa $ 1.59 billion , or 31 % $ 1.59 billion , or 31 % , compared to fiscal % , compared to fiscal 2002 . The Windows Professional growth Windows Professional growth in fiscal 2003 wa partially offset by a partially offset by a $ 573 million decline in revenue from income wa flat for fiscal 2004 compared to fiscal 2003 due fiscal 2004 compared to fiscal 2003 due to increased operating expense Sun Microsystems settlement of $ 700 million in the third quarter the third quarter of fiscal 2004 and $ 307 million of of fiscal 2004 and $ 307 million of stock-based compensation expense the second quarter of fiscal 2004 , offset by growth in . Operating income for fiscal 2003 increased primarily a a result a a result of the 11 % growth in revenue , market growth will be from 7 % to 9 % in be from 7 % to 9 % in fiscal 2005 . to 9 % in fiscal 2005 . We expect emerging market only modest improvement in fiscal 2005 . The Client commercial and revenue to improve in fiscal 2005 , due to the legal option transfer program in fiscal 2004 . Major investment in fiscal . Major investment in fiscal 2005 include development of the Windows to Windows XP Service Pack 2 and other new product . million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 6,157 $ 7,140 16 % $ ) Revenue $ 6,157 $ 7,140 16 % $ 8,483 19 Revenue $ 6,157 $ 7,140 16 % $ 8,483 19 % $ 7,140 16 % $ 8,483 19 % Operating income $ 7,140 16 % $ 8,483 19 % Operating income $ 747 19 % Operating income $ 747 $ 1,121 50 % $ Operating income $ 747 $ 1,121 50 % $ 96 ( income $ 747 $ 1,121 50 % $ 96 ( 91 $ 1,121 50 % $ 96 ( 91 ) % Server 50 % $ 96 ( 91 ) % Server and Tools overall server hardware shipment grew 16 % in fiscal 2004 compared grew 16 % in fiscal 2004 compared to the prior year CAL revenue , grew $ 1.28 billion or 25 % driven grew $ 1.28 billion or 25 % driven primarily by an driven primarily by an estimated 18 % increase in Windows-based server Windows-based server shipment resulting in 15 % growth in new Windows support service revenue increased $ 189 million or 19 % compared increased $ 189 million or 19 % compared to fiscal 2003 19 % compared to fiscal 2003 due to increased customer penetration and other service declined $ 128 million or 14 % compared declined $ 128 million or 14 % compared to fiscal 2003 14 % compared to fiscal 2003 due to recognition of revenue exchange rate contributed approximately $ 350 million or 5 % of approximately $ 350 million or 5 % of Server and Tools Tools revenue growth . PAGE 18 Table of Contents Part II of Contents Part II Item 7 Total Server and Tools revenue and Tools revenue grew $ 983 million or 16 % in grew $ 983 million or 16 % in fiscal 2003 , or 16 % in fiscal 2003 , driven by an increase and CALs revenue grew $ 787 million or 18 % from grew $ 787 million or 18 % from fiscal 2002 a or 18 % from fiscal 2002 a a result of increased product support service increased $ 91 million or 10 % compared increased $ 91 million or 10 % compared to fiscal 2002 10 % compared to fiscal 2002 . Revenue from developer tool and other service increased $ 105 million or 13 % from increased $ 105 million or 13 % from fiscal 2002 . or 13 % from fiscal 2002 . Server and Tools operating Tools operating income for fiscal 2004 declined primarily due to the Sun Microsystems settlement of $ 1.22 billion in the third quarter the third quarter of fiscal 2004 and $ 651 million of of fiscal 2004 and $ 651 million of stock-based compensation cost the second quarter of fiscal 2004 . Server and Tools operating Tools operating income for fiscal 2003 grew 50 % , primarily income for fiscal 2003 grew 50 % , primarily a a a a result of the 16 % increase in revenue . hardware shipment will grow from 13 % to 15 % in grow from 13 % to 15 % in fiscal 2005 and to 15 % in fiscal 2005 and new license of Windows We believe that Windows Server 2003 shipment will create opportunity for Tools net revenue for fiscal 2005 will be unfavorably affected by million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 8,212 $ 9,229 12 % $ ) Revenue $ 8,212 $ 9,229 12 % $ 10,800 17 Revenue $ 8,212 $ 9,229 12 % $ 10,800 17 % $ 9,229 12 % $ 10,800 17 % Operating income $ 9,229 12 % $ 10,800 17 % Operating income $ 5,932 17 % Operating income $ 5,932 $ 6,486 9 % $ Operating income $ 5,932 $ 6,486 9 % $ 7,151 10 income $ 5,932 $ 6,486 9 % $ 7,151 10 % $ 6,486 9 % $ 7,151 10 % Information Worker consists 6,486 9 % $ 7,151 10 % Information Worker consists of . Revenue growth for fiscal 2004 from volume licensing , retail of Office in Japan wa 15 % in aggregate . This the transition to our Licensing 6.0 program and approximately $ 110 6.0 program and approximately $ 110 million related to the launch to the launch of Office 2003 . OEM licensing revenue grew . OEM licensing revenue grew 29 % or $ 325 million grew 29 % or $ 325 million . Foreign exchange rate exchange rate provided approximately $ 485 million or 5 % of approximately $ 485 million or 5 % of total Information Worker revenue growth . The $ 1.02 billion or 12 % increase The $ 1.02 billion or 12 % increase in revenue in increase in revenue in fiscal 2003 compared to fiscal 2002 wa fiscal 2003 compared to fiscal 2002 wa primarily due to growth licensing agreement and a $ 264 million or 28 % increase a $ 264 million or 28 % increase in revenue from Worker operating income in fiscal 2004 increased from the prior year , primarily related to $ 351 million of stock-based compensation expense the second quarter of fiscal 2004 and higher sale and marketing Worker operating profit for fiscal 2003 grew 9 % compared to profit for fiscal 2003 grew 9 % compared to fiscal 2002 9 % compared to fiscal 2002 , led by the 12 2002 , led by the 12 % increase in revenue and and partially offset by a 20 % growth in operating expense and marketing expense . Fiscal 2005 Information Worker revenue is expected to be similar to fiscal 2004 . We are expecting a increased purchasing of Office System 2003 a enterprise complete their product their product evaluation . PAGE 19 Table of Contents Part II of Contents Part II Item 7 Microsoft Business Solutions ( In million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 308 $ 567 84 % $ ) Revenue $ 308 $ 567 84 % $ 667 18 Revenue $ 308 $ 567 84 % $ 667 18 % $ 567 84 % $ 667 18 % Operating loss $ 567 84 % $ 667 18 % Operating loss $ ( % Operating loss $ ( 301 ) $ ( 309 ) ( 301 ) $ ( 309 ) 3 % $ ( ) $ ( 309 ) 3 % $ ( 255 ) ) 3 % $ ( 255 ) ( 17 ) % $ ( 255 ) ( 17 ) % Microsoft Business Solutions The revenue increase in fiscal 2004 wa primarily attributable to continued Business Solutions revenue for fiscal 2003 grew $ 259 million from for fiscal 2003 grew $ 259 million from fiscal 2002 , $ 259 million from fiscal 2002 , of which $ 246 2002 , of which $ 246 million wa attributable to the The operating loss for fiscal 2004 declined from fiscal 2003 due fiscal 2004 declined from fiscal 2003 due to the increase in lower operating expense including $ 42 million of lower amortization cost , partially offset by $ 27 million in stock-based compensation expense the second quarter of fiscal 2004 . Microsoft Business Solutions operating Solutions operating loss for fiscal 2003 increased from fiscal 2002 primarily fiscal 2003 increased from fiscal 2002 primarily due to operating loss the fourth quarter of fiscal 2004 a plan to align and the reorganization of approximately $ 100 million in revenue and cost Business Solutions . In fiscal 2005 , we expect continued growth million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 1,571 $ 1,953 24 % $ ) Revenue $ 1,571 $ 1,953 24 % $ 2,216 13 Revenue $ 1,571 $ 1,953 24 % $ 2,216 13 % $ 1,953 24 % $ 2,216 13 % Operating income/ ( 1,953 24 % $ 2,216 13 % Operating income/ ( loss ( loss ) $ ( 909 ) $ ( 567 ) ( 909 ) $ ( 567 ) ( 38 ) % $ ( 567 ) ( 38 ) % $ 121 nm ( 38 ) % $ 121 nm The MSN segment includes Internet Access . In fiscal 2004 , MSN advertising revenue increased MSN advertising revenue increased $ 360 million or 43 % a increased $ 360 million or 43 % a a result of by a decline of $ 168 million or 15 % in of $ 168 million or 15 % in Internet access revenue than Internet access increased $ 71 million in fiscal 2004 to $ 71 million in fiscal 2004 to $ 95 million . in fiscal 2004 to $ 95 million . At the end fiscal year , MSN had 4.3 million internet access subscriber compared internet access subscriber compared to 6.5 million at the end of the prior fiscal year and 8.8 million total subscriber compared to million total subscriber compared to 8.6 million at the end of addition , MSN ha over 350 million unique user PAGE 20 350 million unique user PAGE 20 Table of Contents Part II of Contents Part II Item 7 monthly , 187 million active II Item 7 monthly , 187 million active Hotmail account , active Hotmail account , and 135 million active Messenger account . account . Compared to fiscal 2002 , MSN advertising revenue grew MSN advertising revenue grew $ 270 million or 48 % in grew $ 270 million or 48 % in fiscal 2003 a or 48 % in fiscal 2003 a a result of growth MSN subscription revenue grew $ 112 million or 11 % in grew $ 112 million or 11 % in fiscal 2003 reflecting or 11 % in fiscal 2003 reflecting an increase in the the first quarter of fiscal 2004 and wa profitable for the business , and a $ 48 million refund of prior year , partially offset by $ 144 million of stock-based compensation expense the second quarter of fiscal 2004 . MSN operating loss for MSN operating loss for fiscal 2003 decreased from fiscal 2002 , fiscal 2003 decreased from fiscal 2002 , primarily a a result service to increase in fiscal 2005 . Advertising revenue should benefit access to decline in fiscal 2005 a narrowband subscriber continue to the fourth quarter of fiscal 2004 an increase to the amount increase it profitability in fiscal 2005 , led by continued operational million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 112 $ 156 39 % $ ) Revenue $ 112 $ 156 39 % $ 247 58 Revenue $ 112 $ 156 39 % $ 247 58 % $ 156 39 % $ 247 58 % Operating loss $ 156 39 % $ 247 58 % Operating loss $ ( % Operating loss $ ( 275 ) $ ( 277 ) ( 275 ) $ ( 277 ) 1 % $ ( ) $ ( 277 ) 1 % $ ( 224 ) ) 1 % $ ( 224 ) ( 19 ) % $ ( 224 ) ( 19 ) % Mobile and Embedded drove revenue growth for fiscal 2004 over fiscal 2003 in all for fiscal 2004 over fiscal 2003 in all product line . Service . Revenue for fiscal 2003 grew $ 44 million driven for fiscal 2003 grew $ 44 million driven by increased Pocket ’ operating loss for fiscal 2004 decreased compared to fiscal 2003 2004 decreased compared to fiscal 2003 primarily due to growth in , partially offset by $ 58 million of stock-based compensation expense the second quarter of fiscal 2004 . Operating loss for fiscal . Operating loss for fiscal 2003 grew 1 % from the loss for fiscal 2003 grew 1 % from the prior year offering Windows-based device . PAGE 21 Table of Contents Part II of Contents Part II Item 7 Home and Entertainment ( In million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ( dec. ) Revenue $ 2,453 $ 2,748 12 % $ ) Revenue $ 2,453 $ 2,748 12 % $ 2,876 5 Revenue $ 2,453 $ 2,748 12 % $ 2,876 5 % $ 2,748 12 % $ 2,876 5 % Operating loss $ 2,748 12 % $ 2,876 5 % Operating loss $ ( % Operating loss $ ( 1,135 ) $ ( 1,191 ) ( 1,135 ) $ ( 1,191 ) 5 % $ ( ) $ ( 1,191 ) 5 % $ ( 1,215 ) ) 5 % $ ( 1,215 ) 2 % Home and % $ ( 1,215 ) 2 % Home and Entertainment includes our first release in fiscal 2002 , and have established ourselves volume have grown quickly since 2002 , but revenue growth moderated revenue growth moderated in fiscal 2004 due to price reduction typical console sold . In fiscal 2004 , Xbox revenue increased $ , Xbox revenue increased $ 144 million or 9 % with increased $ 144 million or 9 % with $ 269 million or 9 % with $ 269 million related to higher Xbox Xbox software volume and $ 117 million due to higher Xbox partially offset by a $ 242 million decline related to price , Xbox console volume increased 11 % in fiscal 2004 compared increased 11 % in fiscal 2004 compared to fiscal 2003 . fiscal 2004 compared to fiscal 2003 . The Xbox life-to-date U.S. game attach rate increased to 6.9 game per console according to analyst NPD a of June 30 , 2004 . Revenue from a of June 30 , 2004 . Revenue from consumer hardware and TV platform declined $ 16 million or 1 % compared declined $ 16 million or 1 % compared to fiscal 2003 1 % compared to fiscal 2003 due to lower PC game and Entertainment revenue in fiscal 2003 from fiscal 2002 wa the in fiscal 2003 from fiscal 2002 wa the result of sale available for all of fiscal 2003 . Xbox revenue grew $ . Xbox revenue grew $ 309 million or 23 % in grew $ 309 million or 23 % in fiscal 2003 reflecting or 23 % in fiscal 2003 reflecting a $ 779 million fiscal 2003 reflecting a $ 779 million increase from higher volume partially offset by a $ 470 million decrease due to price and PC game declined $ 14 million or 1 % in declined $ 14 million or 1 % in fiscal 2003 , or 1 % in fiscal 2003 , driving the decrease in in operating loss in fiscal 2004 wa primarily due to $ wa primarily due to $ 141 million of stock-based compensation expense the second quarter of fiscal 2004 , increased sale of negative operating loss increase from fiscal 2003 also included a lower of market adjustment of approximately $ 90 million , reflecting the current console . Operating loss in 2003 increased by $ 56 million in 2003 increased by $ 56 million or 5 % from by $ 56 million or 5 % from the prior year expense more than offset the 12 % increase in revenue . in revenue . In fiscal 2005 , we expect Xbox console revenue to decrease from fiscal 2004 consistent with this stage of a Halo2 . In fiscal 2005 we expect PC game revenue revenue to decrease from fiscal 2004 driven by fewer new game the fourth quarter of fiscal 2004 . In fiscal 2005 , fiscal 2004 . In fiscal 2005 , we expect operating margin margin to improve from fiscal 2004 driven by lower unit volume to be higher in fiscal 2005 driven by investment in the million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ) Cost of revenue $ 5,699 $ 6,059 6 % $ of revenue $ 5,699 $ 6,059 6 % $ 6,716 11 revenue $ 5,699 $ 6,059 6 % $ 6,716 11 % $ 6,059 6 % $ 6,716 11 % As a percent 6,059 6 % $ 6,716 11 % As a percent of As a percent of revenue 20.1 % 18.8 % ( 1.3 percent of revenue 20.1 % 18.8 % ( 1.3 ) pp 20.1 % 18.8 % ( 1.3 ) pp 18.2 % ( % ( 1.3 ) pp 18.2 % ( 0.6 ) pp ) pp 18.2 % ( 0.6 ) pp PAGE 22 Table ( 0.6 ) pp PAGE 22 Table of Contents Part II of Contents Part II Item 7 Cost of revenue includes manufacturing . The increase in fiscal 2004 wa primarily due to increased consulting service cost of $ 508 million , $ 214 million $ 508 million , $ 214 million of stock-based compensation expense the fourth quarter of fiscal 2004 by approximately $ 90 million fiscal 2004 by approximately $ 90 million , reflecting the current , partially offset by $ 365 million decrease in MSN service service cost . In fiscal 2003 , the primary driver of of the increase wa a 4.4 percentage point increase from Home and Entertainment product and a 1.6 percentage point decrease from MSN and service cost in fiscal 2003 compared to fiscal 2002 . fiscal 2003 compared to fiscal 2002 . Research and development ( million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ) Research and development $ 6,299 $ 6,595 5 % $ and development $ 6,299 $ 6,595 5 % $ 7,779 18 development $ 6,299 $ 6,595 5 % $ 7,779 18 % $ 6,595 5 % $ 7,779 18 % As a percent 6,595 5 % $ 7,779 18 % As a percent of As a percent of revenue 22.2 % 20.5 % ( 1.7 percent of revenue 22.2 % 20.5 % ( 1.7 ) pp 22.2 % 20.5 % ( 1.7 ) pp 21.1 % 0.6 % ( 1.7 ) pp 21.1 % 0.6 pp Research and 1.7 ) pp 21.1 % 0.6 pp Research and development expense . The increase in fiscal 2004 wa primarily due to $ wa primarily due to $ 1.31 billion of stock-based compensation expense the second quarter of fiscal 2004 a well a other headcount-related employee cost related to a 3 % growth in research and and development headcount from fiscal 2003 . In fiscal 2003 , fiscal 2003 . In fiscal 2003 , the increase reflects an in headcount-related cost , a 25 % increase in third-party product development cost , and a 29 % increase in testing laboratory million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ) Sales and marketing $ 6,252 $ 7,562 21 % $ and marketing $ 6,252 $ 7,562 21 % $ 8,309 10 marketing $ 6,252 $ 7,562 21 % $ 8,309 10 % $ 7,562 21 % $ 8,309 10 % As a percent 7,562 21 % $ 8,309 10 % As a percent of As a percent of revenue 22.0 % 23.5 % 1.5 pp percent of revenue 22.0 % 23.5 % 1.5 pp 22.6 % revenue 22.0 % 23.5 % 1.5 pp 22.6 % ( 0.9 % 23.5 % 1.5 pp 22.6 % ( 0.9 ) pp 1.5 pp 22.6 % ( 0.9 ) pp Sales and marketing marketing cost increased in fiscal 2004 due to $ 400 million fiscal 2004 due to $ 400 million of stock-based compensation expense the second quarter of fiscal 2004 and other headcount-related cost related headcount-related cost related to a 9 % growth in sale and marketing headcount . In fiscal 2003 , the sale and marketing marketing expense increase of $ 1.31 billion dollar wa due to sale force , and a 21 % increase in marketing expense million , except percentage ) 2002 2003 Percentage inc./ ( dec. , except percentage ) 2002 2003 Percentage inc./ ( dec. ) Percentage inc./ ( dec. ) 2004 Percentage inc./ ( dec. ) ) General and administrative $ 1,843 $ 2,426 32 % $ and administrative $ 1,843 $ 2,426 32 % $ 4,997 106 administrative $ 1,843 $ 2,426 32 % $ 4,997 106 % $ 2,426 32 % $ 4,997 106 % As a percent 2,426 32 % $ 4,997 106 % As a percent of As a percent of revenue 6.5 % 7.5 % 1.0 pp percent of revenue 6.5 % 7.5 % 1.0 pp 13.6 % revenue 6.5 % 7.5 % 1.0 pp 13.6 % 6.1 pp % 7.5 % 1.0 pp 13.6 % 6.1 pp PAGE 23 % 1.0 pp 13.6 % 6.1 pp PAGE 23 Table of 13.6 % 6.1 pp PAGE 23 Table of Contents Part II of Contents Part II Item 7 General and administrative cost include administrative cost increased in fiscal 2004 primarily due to legal expense to legal expense including $ 1.92 billion of charge related to Microsystems settlement , a $ 605 million fine imposed by the the third quarter of fiscal 2004 , $ 280 million of of fiscal 2004 , $ 280 million of stock-based compensation expense the second quarter of fiscal 2004 , other legal cost of legal cost of approximately $ 104 million , and other headcount and administrative cost in fiscal 2003 increased $ 583 million from in fiscal 2003 increased $ 583 million from fiscal 2002 due $ 583 million from fiscal 2002 due to a charge of to a charge of $ 750 million related to a settlement in the fourth quarter of 2003 and a $ 256 million of 2003 and a $ 256 million charge reflecting an increase ) / Year Ended June 30 2002 2003 2004 Dividends and / Year Ended June 30 2002 2003 2004 Dividends and interest Year Ended June 30 2002 2003 2004 Dividends and interest $ Ended June 30 2002 2003 2004 Dividends and interest $ 2,119 2004 Dividends and interest $ 2,119 $ 1,957 $ 1,892 Net and interest $ 2,119 $ 1,957 $ 1,892 Net recognized gain $ 2,119 $ 1,957 $ 1,892 Net recognized gain ( loss loss ) on investment ( 1,807 ) 44 1,563 Net loss on investment ( 1,807 ) 44 1,563 Net loss on derivative investment ( 1,807 ) 44 1,563 Net loss on derivative ( Net loss on derivative ( 617 ) ( 424 ) ( derivative ( 617 ) ( 424 ) ( 268 ) Investment ) ( 424 ) ( 268 ) Investment income / ( ( loss ) $ ( 305 ) $ 1,577 $ 3,187 $ ( 305 ) $ 1,577 $ 3,187 Dividends and interest 305 ) $ 1,577 $ 3,187 Dividends and interest income decreased and interest income decreased $ 65 million in fiscal 2004 mainly $ 65 million in fiscal 2004 mainly due to lower dividend exchange of AT & T 5 % convertible preferred debt for share of Comcast during fiscal 2003 and declining interest rate , include other-than-temporary impairment of $ 82 million in fiscal 2004 compared $ 82 million in fiscal 2004 compared to $ 1.15 billion fiscal 2004 compared to $ 1.15 billion in the prior year gain on sale in fiscal 2004 a we moved to more gain on sale were $ 1.65 billion in fiscal 2004 and $ 1.65 billion in fiscal 2004 and $ 1.19 billion in in fiscal 2004 and $ 1.19 billion in fiscal 2003 . $ 1.19 billion in fiscal 2003 . The decline in impairment . Derivative loss decreased $ 156 million to $ 268 million $ 156 million to $ 268 million in fiscal 2004 compared $ 268 million in fiscal 2004 compared to fiscal 2003 primarily fiscal 2004 compared to fiscal 2003 primarily due to the combined equity security . In fiscal 2003 , dividend and interest income and interest income decreased $ 162 million driven primarily by a in dividend income of $ 97 million resulting from the exchange exchange of AT & T 5 % convertible preferred debt for the second quarter of fiscal 2003 , and declining interest rate includes other-than-temporary impairment of $ 1.15 billion in fiscal 2003 compared $ 1.15 billion in fiscal 2003 compared to $ 4.32 billion fiscal 2003 compared to $ 4.32 billion in fiscal 2002 and $ 4.32 billion in fiscal 2002 and net realized gain on gain on investment of $ 1.19 billion in fiscal 2003 compared $ 1.19 billion in fiscal 2003 compared to $ 2.52 billion fiscal 2003 compared to $ 2.52 billion in fiscal 2002 . $ 2.52 billion in fiscal 2002 . The decrease in other-than-temporary decrease in other-than-temporary impairment in 2003 wa also due to the of investment resulting from significant 2002 impairment of investment in the telecommunication sector . In fiscal 2002 , other-than-temporary impairment of $ , other-than-temporary impairment of $ 4.32 billion primarily related to our sale of investment of $ 2.52 billion included a $ 1.25 2.52 billion included a $ 1.25 billion gain on sale of investment is established . PAGE 24 Table of Contents Part II of Contents Part II Item 7 Income Taxes Our effective tax effective tax rate for fiscal 2004 wa 33 % . A rate for fiscal 2004 wa 33 % . A benefit of . A benefit of $ 208 million wa recorded during the open issue remanded by the 9th Circuit Court of Appeals ruling of Appeals ruling in December 2002 . The effective tax rate the fourth quarter of fiscal 2004 wa approximately 27 % . of fiscal 2004 wa approximately 27 % . During the third effective tax rate for fiscal 2003 and fiscal 2002 wa 32 for fiscal 2003 and fiscal 2002 wa 32 % each year 2003 and fiscal 2002 wa 32 % each year . The each year . The fiscal 2003 rate reflected a benefit in the second quarter of $ 126 million from the reversal of the initial item from the 9th Circuit Court of Appeals ruling tax rate would have been 33 % . Stock-based Compensation . We implemented change in fiscal 2004 in employee compensation designed to the second quarter of fiscal 2004 whereby employee could elect to a strike price of $ 33 or higher ( “ eligible during the period from November 14 , 2003 to December 8 period from November 14 , 2003 to December 8 , 2003 14 , 2003 to December 8 , 2003 , which wa 2003 to December 8 , 2003 , which wa $ 25.5720 2003 , which wa $ 25.5720 . Note 13 – Employee wa $ 25.5720 . Note 13 – Employee Stock and Savings In addition , effective July 1 , 2003 , we adopted , effective July 1 , 2003 , we adopted the fair value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation restatement method described in SFAS 148 , Accounting for Stock-Based Compensation value recognition provision of SFAS 123 , stock-based compensation cost is vesting period . The June 30 , 2003 balance sheet ha . The June 30 , 2003 balance sheet ha been restated value recognition provision of SFAS 123 , which resulted in a which resulted in a $ 13.89 billion increase in common stock paid-in capital , a $ 10.00 billion decrease in retained earnings earnings , and a $ 3.89 billion increase in deferred income stock-based compensation expense for fiscal 2002 through 2004 by segment . expense for fiscal 2002 through 2004 by segment . ( In expense per share ) ( 1 ) 2002 2003 2004 Client share ) ( 1 ) 2002 2003 2004 Client $ 471 ) ( 1 ) 2002 2003 2004 Client $ 471 $ ( 1 ) 2002 2003 2004 Client $ 471 $ 450 2002 2003 2004 Client $ 471 $ 450 $ 738 Server 2004 Client $ 471 $ 450 $ 738 Server and Tools $ 471 $ 450 $ 738 Server and Tools 1,301 1,274 $ 738 Server and Tools 1,301 1,274 1,862 Information Worker 516 738 Server and Tools 1,301 1,274 1,862 Information Worker 516 510 Server and Tools 1,301 1,274 1,862 Information Worker 516 510 848 1,301 1,274 1,862 Information Worker 516 510 848 Microsoft Business Solutions 1,274 1,862 Information Worker 516 510 848 Microsoft Business Solutions 125 1,862 Information Worker 516 510 848 Microsoft Business Solutions 125 129 510 848 Microsoft Business Solutions 125 129 147 MSN 268 262 848 Microsoft Business Solutions 125 129 147 MSN 268 262 392 Microsoft Business Solutions 125 129 147 MSN 268 262 392 Mobile Solutions 125 129 147 MSN 268 262 392 Mobile and Embedded 125 129 147 MSN 268 262 392 Mobile and Embedded Devices 129 147 MSN 268 262 392 Mobile and Embedded Devices 118 392 Mobile and Embedded Devices 118 129 170 Home and Entertainment Mobile and Embedded Devices 118 129 170 Home and Entertainment 261 and Embedded Devices 118 129 170 Home and Entertainment 261 257 129 170 Home and Entertainment 261 257 381 Corporate 724 738 170 Home and Entertainment 261 257 381 Corporate 724 738 1,196 Home and Entertainment 261 257 381 Corporate 724 738 1,196 Stock-based Entertainment 261 257 381 Corporate 724 738 1,196 Stock-based employee compensation 261 257 381 Corporate 724 738 1,196 Stock-based employee compensation expense 257 381 Corporate 724 738 1,196 Stock-based employee compensation expense $ Stock-based employee compensation expense $ 3,784 $ 3,749 $ 5,734 After-tax compensation expense $ 3,784 $ 3,749 $ 5,734 After-tax stock-based employee $ 3,784 $ 3,749 $ 5,734 After-tax stock-based employee compensation expense stock-based employee compensation expense $ 2,573 $ 2,512 $ 3,842 After-tax compensation expense $ 2,573 $ 2,512 $ 3,842 After-tax stock-based employee $ 2,573 $ 2,512 $ 3,842 After-tax stock-based employee compensation expense expense per diluted share $ 0.23 $ 0.23 $ 0.35 ( diluted share $ 0.23 $ 0.23 $ 0.35 ( 1 ) $ 0.23 $ 0.23 $ 0.35 ( 1 ) The amount $ 0.23 $ 0.35 ( 1 ) The amount for fiscal ) The amount for fiscal 2004 include $ 2.21 billion ( for fiscal 2004 include $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) due option transfer program . PAGE 25 Table of Contents Part II of Contents Part II Item 7 FINANCIAL CONDITION Our cash and short-term investment portfolio totaled $ 60.59 billion a of June 30 60.59 billion a of June 30 , 2004 . Equity and a of June 30 , 2004 . Equity and other investment and other investment were $ 12.21 billion a of June 30 12.21 billion a of June 30 , 2004 . The portfolio a of June 30 , 2004 . The portfolio consists primarily undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price Unearned revenue a of June 30 , 2004 decreased $ 838 a of June 30 , 2004 decreased $ 838 million from 30 , 2004 decreased $ 838 million from June 30 , $ 838 million from June 30 , 2003 , reflecting recognition million from June 30 , 2003 , reflecting recognition of unearned ha outpaced addition by $ 397 million , primarily due to licensing agreement and a $ 489 million decline in revenue deferred undelivered element . Starting April 1 , 2003 revenue deferred for . Starting April 1 , 2003 revenue deferred for undelivered element . We earned approximately $ 1.8 billion and $ 1.1 billion $ 1.8 billion and $ 1.1 billion from the Upgrade Advantage Upgrade Advantage program for fiscal 2003 and 2004 , respectively and program for fiscal 2003 and 2004 , respectively and expect to expect to earn approximately $ 56 million in fiscal 2005 from $ 56 million in fiscal 2005 from those program . Cash flow from operation for fiscal 2004 decreased $ 1.17 billion to for fiscal 2004 decreased $ 1.17 billion to $ 14.63 billion $ 1.17 billion to $ 14.63 billion . The decrease primarily combined cash outflow of $ 2.56 billion related to the Sun used for financing wa $ 2.36 billion in fiscal 2004 , $ 2.36 billion in fiscal 2004 , a decrease of $ , a decrease of $ 2.86 billion from the prior year the fourth quarter of fiscal 2004 combined with a $ 628 2004 combined with a $ 628 million increase primarily from stock partially offset by an $ 872 million increase in cash dividend dividend paid . We repurchased 123.7 million share of common stock share repurchase program in fiscal 2004 . Cash used for investing used for investing wa $ 2.75 billion in fiscal 2004 , $ 2.75 billion in fiscal 2004 , a decrease of $ , a decrease of $ 4.47 billion from fiscal 2003 , $ 4.47 billion from fiscal 2003 , due to a $ , due to a $ 3.63 billion decrease in net investment investment purchase and a $ 1.06 billion decrease in acquisition spending flow from operation wa $ 15.80 billion for fiscal 2003 , $ 15.80 billion for fiscal 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal 2002 . $ 1.29 billion from fiscal 2002 . The increase primarily reflects used for financing wa $ 5.22 billion in fiscal 2003 , $ 5.22 billion in fiscal 2003 , an increase of $ , an increase of $ 651 million from the prior year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and an increase of $ and an increase of $ 417 million in common stock repurchase stock repurchase , offsetting $ 623 million received for common stock stock issued . We repurchased 238.2 million share of common stock share repurchase program in fiscal 2003 . Cash used for investing used for investing wa $ 7.21 billion in fiscal 2003 , $ 7.21 billion in fiscal 2003 , a decrease of $ , a decrease of $ 3.63 billion from fiscal 2002 , $ 3.63 billion from fiscal 2002 , due to stronger portfolio flow from operation wa $ 14.51 billion for fiscal 2002 , $ 14.51 billion for fiscal 2002 , an increase of $ , an increase of $ 1.09 billion from fiscal 2001 . $ 1.09 billion from fiscal 2001 . The increase reflected strong Upgrade Advantage during the Licensing 6.0 transition period . This resulted used for financing wa $ 4.57 billion in fiscal 2002 , $ 4.57 billion in fiscal 2002 , a decrease of $ , a decrease of $ 1.01 billion from the prior year the prior year . PAGE 26 Table of Contents Part II of Contents Part II Item 7 We repurchased 245.6 million share II Item 7 We repurchased 245.6 million share of common stock share repurchase program in fiscal 2002 . In addition , 10.2 2002 . In addition , 10.2 million share of common stock stock were acquired in fiscal 2002 under a structured stock repurchase stock repurchase transaction in fiscal 2001 , which gave u the u the right to acquire 10.2 million of our share in up-front net payment of $ 264 million . Cash used for used for investing wa $ 10.85 billion in fiscal 2002 , $ 10.85 billion in fiscal 2002 , an increase of $ , an increase of $ 2.11 billion from fiscal 2001 . $ 2.11 billion from fiscal 2001 . We have no material Stockholders ’ equity at June 30 , 2004 wa $ 74.8 equity at June 30 , 2004 wa $ 74.8 billion . 30 , 2004 wa $ 74.8 billion . We will continue constructing new building were $ 129 million on June 30 , $ 129 million on June 30 , 2004 . We have million on June 30 , 2004 . We have operating lease incurred rental expense totaling $ 318 million , $ 290 million $ 318 million , $ 290 million , and $ 331 290 million , and $ 331 million in fiscal 2002 , $ 331 million in fiscal 2002 , 2003 , and 2004 million in fiscal 2002 , 2003 , and 2004 , respectively 2002 , 2003 , and 2004 , respectively . We have value . As of June 30 , 2004 , the maximum As of June 30 , 2004 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that capital resource . On July 20 , 2004 , our board . On July 20 , 2004 , our board of director a quarterly dividend of $ 0.08 per share payable on September per share payable on September 14 , 2004 , to shareholder payable on September 14 , 2004 , to shareholder of record shareholder of record on August 25 , 2004 . In addition record on August 25 , 2004 . In addition , the buy back up to $ 30 billion in Microsoft Common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . We believe be held November 9 , 2004 . We believe existing cash These guarantee arose on February 1 , 2003 in conjunction with arose on February 1 , 2003 in conjunction with the expiration the loan of approximately $ 51 million . The estimated fair of the guarantee wa $ 11 million and did not result and fee , or February 1 , 2009 . The maximum , or February 1 , 2009 . The maximum amount of of the proceeds . PAGE 27 Table of Contents Part II of Contents Part II Item 7 We provide indemnification of varying for such indemnification under SFAS 5 , Accounting for Contingencies , , a interpreted by FIN 45 . We consider factor such contractual obligation a of June 30 , 2004 : ( In a of June 30 , 2004 : ( In million ) ( In million ) ( 1 ) Payments due by period ) Payments due by period 2005 2006-2008 2009-2011 2012 and thereafter Payments due by period 2005 2006-2008 2009-2011 2012 and thereafter Total due by period 2005 2006-2008 2009-2011 2012 and thereafter Total Long-term by period 2005 2006-2008 2009-2011 2012 and thereafter Total Long-term debt $ – Construction commitment ( 2 ) 127 2 – – Construction commitment ( 2 ) 127 2 – – 129 Lease commitment ( 2 ) 127 2 – – 129 Lease obligation ) 127 2 – – 129 Lease obligation : Capital lease Lease obligation : Capital lease 7 17 10 – 34 Operating obligation : Capital lease 7 17 10 – 34 Operating lease : Capital lease 7 17 10 – 34 Operating lease ( lease 7 17 10 – 34 Operating lease ( 3 ) – 34 Operating lease ( 3 ) 141 250 86 24 Operating lease ( 3 ) 141 250 86 24 501 Purchase lease ( 3 ) 141 250 86 24 501 Purchase commitment ( 3 ) 141 250 86 24 501 Purchase commitment ( 3 ) 141 250 86 24 501 Purchase commitment ( 4 ) 141 250 86 24 501 Purchase commitment ( 4 ) 24 501 Purchase commitment ( 4 ) 1,340 130 90 – Purchase commitment ( 4 ) 1,340 130 90 – 1,560 Other commitment ( 4 ) 1,340 130 90 – 1,560 Other long-term ( 4 ) 1,340 130 90 – 1,560 Other long-term liability ) 1,340 130 90 – 1,560 Other long-term liability ( 5 1,560 Other long-term liability ( 5 ) – 204 14 4 liability ( 5 ) – 204 14 4 222 Total contractual ( 5 ) – 204 14 4 222 Total contractual obligation 5 ) – 204 14 4 222 Total contractual obligation $ ) – 204 14 4 222 Total contractual obligation $ 1,615 222 Total contractual obligation $ 1,615 $ 603 $ 200 $ contractual obligation $ 1,615 $ 603 $ 200 $ 28 $ $ 1,615 $ 603 $ 200 $ 28 $ 2,446 ( $ 603 $ 200 $ 28 $ 2,446 ( 1 ) $ 200 $ 28 $ 2,446 ( 1 ) We have $ 28 $ 2,446 ( 1 ) We have excluded the have excluded the recorded $ 1.04 billion contingent liability related to the third paragraph of Note 17 – Contingencies of the Notes subject to uncertainty . ( 2 ) We have certain commitment flow from operation . ( 3 ) Our future minimum rental flow from operation . ( 4 ) Purchase commitment represent obligation all known contract exceeding $ 5 million in the aggregate a flow from operation . ( 5 ) We have excluded unearned excluded unearned revenue of $ 1.66 billion from other long-term liability the Jupiter guarantee of $ 11 million . RECENTLY ISSUED ACCOUNTING ISSUED ACCOUNTING STANDARDS In December 2003 , the Financial Accounting Standards ( FASB ) issued Interpretation 46R ( FIN 46R ) , issued Interpretation 46R ( FIN 46R ) , a revision to , a revision to Interpretation 46 ( FIN 46 ) , to Interpretation 46 ( FIN 46 ) , Consolidation of Variable Variable Interest Entities . FIN 46R clarifies some of the provision of the provision of FIN 46 and exempts certain entity from from it requirement . FIN 46R is effective at the end interim period ending after March 15 , 2004 . Entities that ending after March 15 , 2004 . Entities that have adopted Entities that have adopted FIN 46 prior to this effective date apply the provision of FIN 46 until the effective date of the effective date of FIN 46R or elect early adoption of elect early adoption of FIN 46R . The adoption of FIN . The adoption of FIN 46 and FIN 46R did not of FIN 46 and FIN 46R did not have a material financial statement . In March 2004 , the FASB ratified the EITF ) Issue No . 03-1 , The Meaning of Other-Than-Temporary measurement guidance will be PAGE 28 Table of Contents Part II of Contents Part II Item 7 applied to other-than-temporary impairment evaluation with our first fiscal quarter 2005 . We do not believe in EITF Issue No . 03-1 will have a material impact financial statement . In July 2004 , the FASB ratified Emerging consensus on Issue No . 02-14 , Whether an Investor Should . EITF Issue No . 02-14 will be effective beginning with our second quarter of fiscal 2005 . We do not believe of EITF Issue No . 02-14 will have a material impact of Position ( SOP ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether to existing product . SFAS 115 , Accounting for Certain Investments Accounting Bulletin ( SAB ) 59 , Accounting for Noncurrent Marketable portfolio a discussed in Note 4 – Investment Income/ ( Loss incur future impairment . SFAS 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between accounting pronouncement , including SFAS 2 , Accounting for Research and Development Costs , and SFAS 86 , Accounting for the Costs the Costs of Computer PAGE 29 Table of Contents Part II of Contents Part II Item 7 Software to be Sold , or Otherwise Marketed . SFAS 86 specifies that cost incurred internally to significant uncertainty . SFAS 5 , Accounting for Contingencies , result of operation . SFAS 109 , Accounting for Income Taxes This Annual Report on Form 10-K contains statement that are forward-looking about the benefit of PAGE 30 Table of Contents Part II of Contents Part II Item 7 licensing genuine product and educate . As discussed in Note 17 – Contingencies of the Notes affect our revenue . PAGE 31 Table of Contents Part II of Contents Part II Item 7 Declines in Demand for Software to the transition to Licensing 6.0 in July 2002 . These to Licensing 6.0 in July 2002 . These agreement generally expired agreement generally expired throughout fiscal 2004 and will largely be expired the first fiscal quarter in 2005 . The rate at which Extraterritorial Income . In August 2001 , a World Trade Organization Extraterritorial Income Exclusion Act of 2000 ( “ ETI ” ) it appeal . On March 1 , 2004 , the European . On March 1 , 2004 , the European Union began replace ETI with a phased-in 9 % domestic production activity deduction not be fully effective until 2012 . The U.S. House of would repeal ETI effective December 31 , 2004 , provide a ETI effective December 31 , 2004 , provide a two-year phase-out and replace ETI with a 3 % tax rate reduction for be full phased in by 2006 . Neither bill will fully market . As of June 30 , 2004 , the face As of June 30 , 2004 , the face value of captive insurance arrangement wa $ 2.0 PAGE 32 Table of Contents arrangement wa $ 2.0 PAGE 32 Table of Contents Part II of Contents Part II Item 7 , 7A billion . Actual Part II Item 7 , 7A billion . Actual value at in Part I , Item 1 of this report ; and including impairment charge . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , simulating 10,000 market price path over 20 10,000 market price path over 20 day for equity , interest and price . Each PAGE 33 Table of Contents Part II of Contents Part II Item 7A resulting unique set of equity re-price each holding . The 250 th worst performance ( out worst performance ( out of 10,000 ) represents the value-at-risk over ) represents the value-at-risk over 20 day at the 97.5 percentile over 20 day at the 97.5 percentile confidence level . Several in fair value over a 20-day holding period can exceed the longer time horizon than the 20-day holding period used in the million ) Year ended June 30 , 2004 Risk Categories 2003 Year ended June 30 , 2004 Risk Categories 2003 2004 Average 30 , 2004 Risk Categories 2003 2004 Average High Low Interest , 2004 Risk Categories 2003 2004 Average High Low Interest rate High Low Interest rate $ 448 $ 298 $ 625 $ Interest rate $ 448 $ 298 $ 625 $ 817 $ $ 448 $ 298 $ 625 $ 817 $ 298 Currency $ 298 $ 625 $ 817 $ 298 Currency rate $ $ 625 $ 817 $ 298 Currency rate $ 141 $ $ 298 Currency rate $ 141 $ 207 $ 217 $ Currency rate $ 141 $ 207 $ 217 $ 326 $ $ 141 $ 207 $ 217 $ 326 $ 117 Equity $ 207 $ 217 $ 326 $ 117 Equity price $ $ 217 $ 326 $ 117 Equity price $ 869 $ $ 117 Equity price $ 869 $ 773 $ 969 $ Equity price $ 869 $ 773 $ 969 $ 1,174 $ $ 869 $ 773 $ 969 $ 1,174 $ 770 The $ 773 $ 969 $ 1,174 $ 770 The total VAR $ 969 $ 1,174 $ 770 The total VAR for the combined risk category is $ 835 million at June 30 , $ 835 million at June 30 , 2004 and $ 987 million at June 30 , 2004 and $ 987 million at 30 , 2004 and $ 987 million at June 30 , $ 987 million at June 30 , 2003 . The total million at June 30 , 2003 . The total VAR is . The total VAR is 35 % le at June 30 35 % le at June 30 , 2004 and 32 % le at June 30 , 2004 and 32 % le at June 30 , 2004 and 32 % le at June , % le at June , 30 2003 than the sum of le at June , 30 2003 than the sum of the and portfolio growth . PAGE 34 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY share ) Year Ended June 30 2002 ( 1 ) 2003 ) Year Ended June 30 2002 ( 1 ) 2003 ( Ended June 30 2002 ( 1 ) 2003 ( 1 ) 30 2002 ( 1 ) 2003 ( 1 ) 2004 Revenue ( 1 ) 2003 ( 1 ) 2004 Revenue $ 28,365 ) 2003 ( 1 ) 2004 Revenue $ 28,365 $ 32,187 1 ) 2004 Revenue $ 28,365 $ 32,187 $ 36,835 Operating 2004 Revenue $ 28,365 $ 32,187 $ 36,835 Operating expense : $ 28,365 $ 32,187 $ 36,835 Operating expense : Cost of expense : Cost of revenue 5,699 6,059 6,716 Research and development : Cost of revenue 5,699 6,059 6,716 Research and development 6,299 Cost of revenue 5,699 6,059 6,716 Research and development 6,299 6,595 6,059 6,716 Research and development 6,299 6,595 7,779 Sales and marketing 6,716 Research and development 6,299 6,595 7,779 Sales and marketing 6,252 Research and development 6,299 6,595 7,779 Sales and marketing 6,252 7,562 6,595 7,779 Sales and marketing 6,252 7,562 8,309 General and administrative 7,779 Sales and marketing 6,252 7,562 8,309 General and administrative 1,843 Sales and marketing 6,252 7,562 8,309 General and administrative 1,843 2,426 7,562 8,309 General and administrative 1,843 2,426 4,997 Total operating expense 8,309 General and administrative 1,843 2,426 4,997 Total operating expense 20,093 General and administrative 1,843 2,426 4,997 Total operating expense 20,093 22,642 2,426 4,997 Total operating expense 20,093 22,642 27,801 Operating income 8,272 4,997 Total operating expense 20,093 22,642 27,801 Operating income 8,272 9,545 Total operating expense 20,093 22,642 27,801 Operating income 8,272 9,545 9,034 20,093 22,642 27,801 Operating income 8,272 9,545 9,034 Losses on equity 22,642 27,801 Operating income 8,272 9,545 9,034 Losses on equity investees 27,801 Operating income 8,272 9,545 9,034 Losses on equity investees and equity investees and other ( 92 ) ( 68 ) ( other ( 92 ) ( 68 ) ( 25 ) Investment ) ( 68 ) ( 25 ) Investment income/ ( loss income/ ( loss ) ( 305 ) 1,577 3,187 Income before loss ) ( 305 ) 1,577 3,187 Income before income tax ) ( 305 ) 1,577 3,187 Income before income tax 7,875 3,187 Income before income tax 7,875 11,054 12,196 Provision for income Income before income tax 7,875 11,054 12,196 Provision for income tax before income tax 7,875 11,054 12,196 Provision for income tax 2,520 12,196 Provision for income tax 2,520 3,523 4,028 Net income $ Provision for income tax 2,520 3,523 4,028 Net income $ 5,355 for income tax 2,520 3,523 4,028 Net income $ 5,355 $ 3,523 4,028 Net income $ 5,355 $ 7,531 $ 8,168 Earnings Net income $ 5,355 $ 7,531 $ 8,168 Earnings per share $ 5,355 $ 7,531 $ 8,168 Earnings per share : Basic per share : Basic $ 0.50 $ 0.70 $ 0.76 Diluted : Basic $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.50 $ 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 0.70 $ 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 Weighted 0.76 Diluted $ 0.48 $ 0.69 $ 0.75 Weighted average share $ 0.48 $ 0.69 $ 0.75 Weighted average share outstanding : average share outstanding : Basic 10,811 10,723 10,803 Diluted 11,106 10,882 share outstanding : Basic 10,811 10,723 10,803 Diluted 11,106 10,882 10,894 outstanding : Basic 10,811 10,723 10,803 Diluted 11,106 10,882 10,894 ( Basic 10,811 10,723 10,803 Diluted 11,106 10,882 10,894 ( 1 ) 10,811 10,723 10,803 Diluted 11,106 10,882 10,894 ( 1 ) Income 10,723 10,803 Diluted 11,106 10,882 10,894 ( 1 ) Income Statements Diluted 11,106 10,882 10,894 ( 1 ) Income Statements for the for the year ended June 30 , 2002 and 2003 have year ended June 30 , 2002 and 2003 have been restated June 30 , 2002 and 2003 have been restated to reflect value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . See accompanying note . See accompanying note . PAGE 35 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2003 ( 1 ) 2004 In million ) June 30 2003 ( 1 ) 2004 Assets ) June 30 2003 ( 1 ) 2004 Assets Current asset 30 2003 ( 1 ) 2004 Assets Current asset : Cash : Cash and equivalent $ 6,438 $ 15,982 Short-term investment 42,610 and equivalent $ 6,438 $ 15,982 Short-term investment 42,610 44,610 Total 6,438 $ 15,982 Short-term investment 42,610 44,610 Total cash and short-term $ 15,982 Short-term investment 42,610 44,610 Total cash and short-term investment Total cash and short-term investment 49,048 60,592 Accounts receivable , net cash and short-term investment 49,048 60,592 Accounts receivable , net 5,196 60,592 Accounts receivable , net 5,196 5,890 Inventories 640 421 Deferred Accounts receivable , net 5,196 5,890 Inventories 640 421 Deferred income , net 5,196 5,890 Inventories 640 421 Deferred income tax 2,506 net 5,196 5,890 Inventories 640 421 Deferred income tax 2,506 2,097 640 421 Deferred income tax 2,506 2,097 Other 1,583 1,566 Total 421 Deferred income tax 2,506 2,097 Other 1,583 1,566 Total current income tax 2,506 2,097 Other 1,583 1,566 Total current asset 58,973 tax 2,506 2,097 Other 1,583 1,566 Total current asset 58,973 70,566 1,583 1,566 Total current asset 58,973 70,566 Property and equipment , 1,566 Total current asset 58,973 70,566 Property and equipment , net Property and equipment , net 2,223 2,326 Equity and other investment and equipment , net 2,223 2,326 Equity and other investment 13,692 2,326 Equity and other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible Equity and other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset other investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset , net investment 13,692 12,210 Goodwill 3,128 3,115 Intangible asset , net 384 3,115 Intangible asset , net 384 569 Deferred income tax 2,161 Intangible asset , net 384 569 Deferred income tax 2,161 1,829 384 569 Deferred income tax 2,161 1,829 Other long-term asset 1,171 569 Deferred income tax 2,161 1,829 Other long-term asset 1,171 1,774 2,161 1,829 Other long-term asset 1,171 1,774 Total asset $ 81,732 1,829 Other long-term asset 1,171 1,774 Total asset $ 81,732 $ 1,171 1,774 Total asset $ 81,732 $ 92,389 Liabilities and stockholder Total asset $ 81,732 $ 92,389 Liabilities and stockholder ’ equity liability : Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 Accounts payable $ 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income 1,573 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 $ 1,717 Accrued compensation 1,416 1,339 Income tax 2,044 3,478 Short-term compensation 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 1,416 1,339 Income tax 2,044 3,478 Short-term unearned revenue 7,225 6,514 2,044 3,478 Short-term unearned revenue 7,225 6,514 Other 1,716 1,921 Total 3,478 Short-term unearned revenue 7,225 6,514 Other 1,716 1,921 Total current unearned revenue 7,225 6,514 Other 1,716 1,921 Total current liability 13,974 revenue 7,225 6,514 Other 1,716 1,921 Total current liability 13,974 14,969 1,716 1,921 Total current liability 13,974 14,969 Long-term unearned revenue 1,790 1,921 Total current liability 13,974 14,969 Long-term unearned revenue 1,790 1,663 13,974 14,969 Long-term unearned revenue 1,790 1,663 Other long-term liability 1,056 14,969 Long-term unearned revenue 1,790 1,663 Other long-term liability 1,056 932 1,790 1,663 Other long-term liability 1,056 932 Commitments and contingency Stockholders 1,663 Other long-term liability 1,056 932 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 10,771 and 10,862 share authorized 24,000 ; outstanding 10,771 and 10,862 49,234 56,396 Retained 24,000 ; outstanding 10,771 and 10,862 49,234 56,396 Retained earnings , ; outstanding 10,771 and 10,862 49,234 56,396 Retained earnings , including outstanding 10,771 and 10,862 49,234 56,396 Retained earnings , including accumulated other comprehensive income of $ 1,840 and $ 1,119 15,678 18,429 of $ 1,840 and $ 1,119 15,678 18,429 Total stockholder ’ $ 1,840 and $ 1,119 15,678 18,429 Total stockholder ’ equity 1,840 and $ 1,119 15,678 18,429 Total stockholder ’ equity 64,912 18,429 Total stockholder ’ equity 64,912 74,825 Total liability and stockholder Total stockholder ’ equity 64,912 74,825 Total liability and stockholder ’ and stockholder ’ equity $ 81,732 $ 92,389 ( 1 ) ’ equity $ 81,732 $ 92,389 ( 1 ) June 30 $ 81,732 $ 92,389 ( 1 ) June 30 , 2003 92,389 ( 1 ) June 30 , 2003 balance sheet ha 1 ) June 30 , 2003 balance sheet ha been restated value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . See accompanying note . See accompanying note . PAGE 36 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2002 ( 1 ) 2003 ) Year Ended June 30 2002 ( 1 ) 2003 ( Ended June 30 2002 ( 1 ) 2003 ( 1 ) 30 2002 ( 1 ) 2003 ( 1 ) 2004 Operations ( 1 ) 2003 ( 1 ) 2004 Operations Net income ) 2003 ( 1 ) 2004 Operations Net income $ 5,355 2004 Operations Net income $ 5,355 $ 7,531 $ 8,168 Depreciation Net income $ 5,355 $ 7,531 $ 8,168 Depreciation , amortization $ 5,355 $ 7,531 $ 8,168 Depreciation , amortization , and , and other noncash item 938 1,393 1,186 Stock-based compensation 3,784 and other noncash item 938 1,393 1,186 Stock-based compensation 3,784 3,749 other noncash item 938 1,393 1,186 Stock-based compensation 3,784 3,749 5,734 938 1,393 1,186 Stock-based compensation 3,784 3,749 5,734 Net recognized ( 1,393 1,186 Stock-based compensation 3,784 3,749 5,734 Net recognized ( gain 1,186 Stock-based compensation 3,784 3,749 5,734 Net recognized ( gain ) gain ) /losses on investment 2,424 380 ( 1,296 ) Stock ) /losses on investment 2,424 380 ( 1,296 ) Stock option on investment 2,424 380 ( 1,296 ) Stock option income tax Stock option income tax benefit 1,596 1,365 1,100 Deferred income tax option income tax benefit 1,596 1,365 1,100 Deferred income tax ( income tax benefit 1,596 1,365 1,100 Deferred income tax ( 1,580 1,100 Deferred income tax ( 1,580 ) ( 894 ) ( tax ( 1,580 ) ( 894 ) ( 1,479 ) Unearned ) ( 894 ) ( 1,479 ) Unearned revenue 11,152 12,519 ( 1,479 ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned 1,479 ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned revenue ) Unearned revenue 11,152 12,519 11,777 Recognition of unearned revenue ( Recognition of unearned revenue ( 8,929 ) ( 11,292 ) ( revenue ( 8,929 ) ( 11,292 ) ( 12,527 ) Accounts ) ( 11,292 ) ( 12,527 ) Accounts receivable ( 1,623 12,527 ) Accounts receivable ( 1,623 ) 187 ( 687 ) Accounts receivable ( 1,623 ) 187 ( 687 ) Other current ( 1,623 ) 187 ( 687 ) Other current asset ( ) Other current asset ( 264 ) 412 478 Other long-term current asset ( 264 ) 412 478 Other long-term asset ( asset ( 264 ) 412 478 Other long-term asset ( 9 478 Other long-term asset ( 9 ) ( 28 ) 34 asset ( 9 ) ( 28 ) 34 Other current liability 9 ) ( 28 ) 34 Other current liability 1,449 35 ) 34 Other current liability 1,449 35 2,063 Other long-term liability 34 Other current liability 1,449 35 2,063 Other long-term liability 216 Other current liability 1,449 35 2,063 Other long-term liability 216 440 35 2,063 Other long-term liability 216 440 75 Net cash from 2,063 Other long-term liability 216 440 75 Net cash from operation Other long-term liability 216 440 75 Net cash from operation 14,509 75 Net cash from operation 14,509 15,797 14,626 Financing Common stock Net cash from operation 14,509 15,797 14,626 Financing Common stock issued cash from operation 14,509 15,797 14,626 Financing Common stock issued 1,497 14,626 Financing Common stock issued 1,497 2,120 2,748 Common stock repurchased Financing Common stock issued 1,497 2,120 2,748 Common stock repurchased ( Common stock issued 1,497 2,120 2,748 Common stock repurchased ( 6,069 2,748 Common stock repurchased ( 6,069 ) ( 6,486 ) ( repurchased ( 6,069 ) ( 6,486 ) ( 3,383 ) Common ) ( 6,486 ) ( 3,383 ) Common stock dividend – Common stock dividend – ( 857 ) ( 1,729 ) Net – ( 857 ) ( 1,729 ) Net cash used for cash used for financing ( 4,572 ) ( 5,223 ) ( financing ( 4,572 ) ( 5,223 ) ( 2,364 ) Investing ) ( 5,223 ) ( 2,364 ) Investing Additions to property to property and equipment ( 770 ) ( 891 ) ( equipment ( 770 ) ( 891 ) ( 1,109 ) Acquisition ) ( 891 ) ( 1,109 ) Acquisition of company , of cash acquired – ( 1,063 ) ( 4 ) Purchases – ( 1,063 ) ( 4 ) Purchases of investment ( ) Purchases of investment ( 89,386 ) ( 89,621 ) ( investment ( 89,386 ) ( 89,621 ) ( 92,495 ) Maturities ) ( 89,621 ) ( 92,495 ) Maturities of investment 8,654 92,495 ) Maturities of investment 8,654 9,205 5,561 Sales of investment ) Maturities of investment 8,654 9,205 5,561 Sales of investment 70,657 Maturities of investment 8,654 9,205 5,561 Sales of investment 70,657 75,157 9,205 5,561 Sales of investment 70,657 75,157 85,302 Net cash used 5,561 Sales of investment 70,657 75,157 85,302 Net cash used for Sales of investment 70,657 75,157 85,302 Net cash used for investing cash used for investing ( 10,845 ) ( 7,213 ) ( investing ( 10,845 ) ( 7,213 ) ( 2,745 ) Net ) ( 7,213 ) ( 2,745 ) Net change in cash in cash and equivalent ( 908 ) 3,361 9,517 Effect of and equivalent ( 908 ) 3,361 9,517 Effect of exchange rate equivalent ( 908 ) 3,361 9,517 Effect of exchange rate on rate on cash and equivalent 2 61 27 Cash and equivalent on cash and equivalent 2 61 27 Cash and equivalent , cash and equivalent 2 61 27 Cash and equivalent , beginning equivalent , beginning of period 3,922 3,016 6,438 Cash and equivalent , beginning of period 3,922 3,016 6,438 Cash and equivalent , beginning of period 3,922 3,016 6,438 Cash and equivalent , end , end of period $ 3,016 $ 6,438 $ 15,982 ( of period $ 3,016 $ 6,438 $ 15,982 ( 1 ) $ 3,016 $ 6,438 $ 15,982 ( 1 ) June 30 $ 6,438 $ 15,982 ( 1 ) June 30 , 2002 15,982 ( 1 ) June 30 , 2002 and 2003 cash 1 ) June 30 , 2002 and 2003 cash flow statement June 30 , 2002 and 2003 cash flow statement have been value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . See accompanying note . See accompanying note . PAGE 37 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 2002 ( 1 ) 2003 ) Year Ended June 30 2002 ( 1 ) 2003 ( Ended June 30 2002 ( 1 ) 2003 ( 1 ) 30 2002 ( 1 ) 2003 ( 1 ) 2004 Common ( 1 ) 2003 ( 1 ) 2004 Common stock and ) 2003 ( 1 ) 2004 Common stock and paid-in capital , beginning of period $ 28,390 $ 41,845 $ 49,234 Cumulative of period $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 $ 28,390 $ 41,845 $ 49,234 Cumulative SFAS 123 retroactive adjustment 41,845 $ 49,234 Cumulative SFAS 123 retroactive adjustment 6,560 – – Cumulative SFAS 123 retroactive adjustment 6,560 – – Common stock issued – – Common stock issued 1,655 2,966 2,815 Common stock repurchased – Common stock issued 1,655 2,966 2,815 Common stock repurchased ( Common stock issued 1,655 2,966 2,815 Common stock repurchased ( 676 2,815 Common stock repurchased ( 676 ) ( 691 ) ( repurchased ( 676 ) ( 691 ) ( 416 ) Stock-based ) ( 691 ) ( 416 ) Stock-based compensation expense 3,784 416 ) Stock-based compensation expense 3,784 3,749 5,734 Stock option income ) Stock-based compensation expense 3,784 3,749 5,734 Stock option income tax Stock-based compensation expense 3,784 3,749 5,734 Stock option income tax benefits/ tax benefits/ ( deficiency ) 1,596 1,365 ( 989 ) Other benefits/ ( deficiency ) 1,596 1,365 ( 989 ) Other , deficiency ) 1,596 1,365 ( 989 ) Other , net 536 989 ) Other , net 536 – 18 Balance , end Other , net 536 – 18 Balance , end of period Balance , end of period 41,845 49,234 56,396 Retained earnings Balance , end of period 41,845 49,234 56,396 Retained earnings Balance , end of period 41,845 49,234 56,396 Retained earnings Balance , beginning Balance , beginning of period 18,899 12,997 15,678 Cumulative SFAS 123 , beginning of period 18,899 12,997 15,678 Cumulative SFAS 123 retroactive beginning of period 18,899 12,997 15,678 Cumulative SFAS 123 retroactive adjustment 18,899 12,997 15,678 Cumulative SFAS 123 retroactive adjustment ( 5,062 ) SFAS 123 retroactive adjustment ( 5,062 ) – – Net income ) – – Net income 5,355 7,531 8,168 Other comprehensive income – – Net income 5,355 7,531 8,168 Other comprehensive income : – Net income 5,355 7,531 8,168 Other comprehensive income : Net ) on derivative instrument ( 91 ) ( 102 ) 101 instrument ( 91 ) ( 102 ) 101 Net unrealized investment 91 ) ( 102 ) 101 Net unrealized investment gains/ ( investment gains/ ( loss ) 5 1,243 ( 873 ) Translation gains/ ( loss ) 5 1,243 ( 873 ) Translation adjustment loss ) 5 1,243 ( 873 ) Translation adjustment and other ) Translation adjustment and other 82 116 51 Comprehensive income 5,351 Translation adjustment and other 82 116 51 Comprehensive income 5,351 8,788 adjustment and other 82 116 51 Comprehensive income 5,351 8,788 7,447 82 116 51 Comprehensive income 5,351 8,788 7,447 Common stock dividend 116 51 Comprehensive income 5,351 8,788 7,447 Common stock dividend – 51 Comprehensive income 5,351 8,788 7,447 Common stock dividend – ( Common stock dividend – ( 857 ) ( 1,729 ) Common – ( 857 ) ( 1,729 ) Common stock repurchased ( ) Common stock repurchased ( 6,191 ) ( 5,250 ) ( repurchased ( 6,191 ) ( 5,250 ) ( 2,967 ) Balance ) ( 5,250 ) ( 2,967 ) Balance , end of Balance , end of period 12,997 15,678 18,429 Total stockholder ’ , end of period 12,997 15,678 18,429 Total stockholder ’ equity end of period 12,997 15,678 18,429 Total stockholder ’ equity $ Total stockholder ’ equity $ 54,842 $ 64,912 $ 74,825 ( ’ equity $ 54,842 $ 64,912 $ 74,825 ( 1 ) $ 54,842 $ 64,912 $ 74,825 ( 1 ) June 30 $ 64,912 $ 74,825 ( 1 ) June 30 , 2002 74,825 ( 1 ) June 30 , 2002 and 2003 stockholder 1 ) June 30 , 2002 and 2003 stockholder ’ equity June 30 , 2002 and 2003 stockholder ’ equity statement have value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . See accompanying note . See accompanying note . PAGE 38 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The for a subscription . PAGE 39 Table of Contents Part II of Contents Part II Item 8 Revenue related to our Xbox . Advertising expense wa $ 1.13 billion in fiscal 2002 , $ 1.13 billion in fiscal 2002 , $ 1.06 billion in in fiscal 2002 , $ 1.06 billion in fiscal 2003 , $ 1.06 billion in fiscal 2003 , and $ 904 million fiscal 2003 , and $ 904 million in fiscal 2004 . $ 904 million in fiscal 2004 . INCOME TAXES Income tax sell or repledge wa $ 499 million at both June 30 499 million at both June 30 , 2003 and 2004 . at both June 30 , 2003 and 2004 . Investments are June 30 , 2003 and 2004 . Investments are considered to investment is established . PAGE 40 Table of Contents Part II of Contents Part II Item 8 We use derivative instrument to Accounting Standards ( SFAS ) 133 , Accounting for Derivative Instruments fair-value hedging instrument under SFAS 133 . Certain option and forward a hedging instrument under SFAS 133 are also used to hedge a hedging instrument under SFAS 133 , are also used to a hedging instrument under SFAS 133 , to hedge interest rate a hedging instrument under SFAS 133 , are used to manage period of change . PAGE 41 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2002 $ 174 $ 192 $ end of period 2002 $ 174 $ 192 $ ( 157 period 2002 $ 174 $ 192 $ ( 157 ) $ 174 $ 192 $ ( 157 ) $ 209 2003 209 $ ( 157 ) $ 209 2003 209 118 ( 85 ( 157 ) $ 209 2003 209 118 ( 85 ) 157 ) $ 209 2003 209 118 ( 85 ) 242 ) $ 209 2003 209 118 ( 85 ) 242 2004 209 2003 209 118 ( 85 ) 242 2004 242 44 209 118 ( 85 ) 242 2004 242 44 ( 120 118 ( 85 ) 242 2004 242 44 ( 120 ) ( 85 ) 242 2004 242 44 ( 120 ) 166 85 ) 242 2004 242 44 ( 120 ) 166 INVENTORIES 242 2004 242 44 ( 120 ) 166 INVENTORIES Inventories are 242 44 ( 120 ) 166 INVENTORIES Inventories are stated at , ranging from one to 15 year . Computer software developed annual basis a of July 1 , and between annual test the period presented . NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price sale price for desktop PAGE 42 Table of Contents Part II of Contents Part II Item 8 application , depending on the ( In million ) June 30 2003 2004 Volume licensing program In million ) June 30 2003 2004 Volume licensing program $ million ) June 30 2003 2004 Volume licensing program $ 5,472 2004 Volume licensing program $ 5,472 $ 5,075 Undelivered element 2,847 licensing program $ 5,472 $ 5,075 Undelivered element 2,847 2,358 Other 5,472 $ 5,075 Undelivered element 2,847 2,358 Other 696 744 Unearned $ 5,075 Undelivered element 2,847 2,358 Other 696 744 Unearned revenue Undelivered element 2,847 2,358 Other 696 744 Unearned revenue $ 9,015 element 2,847 2,358 Other 696 744 Unearned revenue $ 9,015 $ 696 744 Unearned revenue $ 9,015 $ 8,177 Unearned revenue by Unearned revenue $ 9,015 $ 8,177 Unearned revenue by segment is ( In million ) June 30 2003 2004 Client $ 3,165 In million ) June 30 2003 2004 Client $ 3,165 $ million ) June 30 2003 2004 Client $ 3,165 $ 2,822 30 2003 2004 Client $ 3,165 $ 2,822 Server and Tools 2004 Client $ 3,165 $ 2,822 Server and Tools 2,185 2,370 $ 2,822 Server and Tools 2,185 2,370 Information Worker 3,305 2,586 2,822 Server and Tools 2,185 2,370 Information Worker 3,305 2,586 Other Tools 2,185 2,370 Information Worker 3,305 2,586 Other segment 360 399 2,185 2,370 Information Worker 3,305 2,586 Other segment 360 399 Unearned Worker 3,305 2,586 Other segment 360 399 Unearned revenue $ 9,015 3,305 2,586 Other segment 360 399 Unearned revenue $ 9,015 $ 360 399 Unearned revenue $ 9,015 $ 8,177 PAGE 43 Table Unearned revenue $ 9,015 $ 8,177 PAGE 43 Table of Contents $ 9,015 $ 8,177 PAGE 43 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2003 Fixed maturity security other investment June 30 , 2003 Fixed maturity security Cash $ Fixed maturity security Cash $ 1,308 $ – $ – $ $ – $ – $ 1,308 $ 1,308 $ – $ $ – $ 1,308 $ 1,308 $ – $ – Money – Money market mutual fund 1,263 – – 1,263 1,263 – mutual fund 1,263 – – 1,263 1,263 – – Commercial paper fund 1,263 – – 1,263 1,263 – – Commercial paper 874 1,263 – – Commercial paper 874 – – 874 774 100 Commercial paper 874 – – 874 774 100 – Certificates of paper 874 – – 874 774 100 – Certificates of deposit 874 – – 874 774 100 – Certificates of deposit 297 100 – Certificates of deposit 297 – – 297 28 269 of deposit 297 – – 297 28 269 – U. S. deposit 297 – – 297 28 269 – U. S. Government 297 – – 297 28 269 – U. S. Government and S. Government and Agency security 7,205 126 ( 28 ) 7,303 Government and Agency security 7,205 126 ( 28 ) 7,303 1,889 Agency security 7,205 126 ( 28 ) 7,303 1,889 5,414 – 7,205 126 ( 28 ) 7,303 1,889 5,414 – Foreign government 126 ( 28 ) 7,303 1,889 5,414 – Foreign government bond ( 28 ) 7,303 1,889 5,414 – Foreign government bond 5,364 5,414 – Foreign government bond 5,364 79 ( 16 ) 5,427 – Foreign government bond 5,364 79 ( 16 ) 5,427 – government bond 5,364 79 ( 16 ) 5,427 – 5,427 – 5,364 79 ( 16 ) 5,427 – 5,427 – Mortgage backed ( 16 ) 5,427 – 5,427 – Mortgage backed security 6,257 5,427 – Mortgage backed security 6,257 65 ( 3 ) 6,319 – Mortgage backed security 6,257 65 ( 3 ) 6,319 – backed security 6,257 65 ( 3 ) 6,319 – 6,319 – 6,257 65 ( 3 ) 6,319 – 6,319 – Corporate note ( 3 ) 6,319 – 6,319 – Corporate note and bond – Corporate note and bond 17,913 1,033 ( 170 ) 18,776 Corporate note and bond 17,913 1,033 ( 170 ) 18,776 828 and bond 17,913 1,033 ( 170 ) 18,776 828 16,089 1,859 17,913 1,033 ( 170 ) 18,776 828 16,089 1,859 Municipal security 1,033 ( 170 ) 18,776 828 16,089 1,859 Municipal security 9,081 ( 170 ) 18,776 828 16,089 1,859 Municipal security 9,081 265 170 ) 18,776 828 16,089 1,859 Municipal security 9,081 265 ( 828 16,089 1,859 Municipal security 9,081 265 ( 6 ) 9,340 16,089 1,859 Municipal security 9,081 265 ( 6 ) 9,340 348 Municipal security 9,081 265 ( 6 ) 9,340 348 8,992 – 9,081 265 ( 6 ) 9,340 348 8,992 – Fixed maturity 265 ( 6 ) 9,340 348 8,992 – Fixed maturity security ( 6 ) 9,340 348 8,992 – Fixed maturity security 49,562 8,992 – Fixed maturity security 49,562 1,568 ( 223 ) 50,907 – Fixed maturity security 49,562 1,568 ( 223 ) 50,907 6,438 maturity security 49,562 1,568 ( 223 ) 50,907 6,438 42,610 1,859 49,562 1,568 ( 223 ) 50,907 6,438 42,610 1,859 Equity security 1,568 ( 223 ) 50,907 6,438 42,610 1,859 Equity security Common ( 223 ) 50,907 6,438 42,610 1,859 Equity security Common stock 223 ) 50,907 6,438 42,610 1,859 Equity security Common stock and security Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 Common stock and equivalent 8,395 1,686 ( 3 ) 10,078 – and equivalent 8,395 1,686 ( 3 ) 10,078 – – 10,078 8,395 1,686 ( 3 ) 10,078 – – 10,078 Preferred stock 3 ) 10,078 – – 10,078 Preferred stock 1,262 – – – – 10,078 Preferred stock 1,262 – – 1,262 – – Preferred stock 1,262 – – 1,262 – – 1,262 Other investment – – 1,262 – – 1,262 Other investment 493 – – – – 1,262 Other investment 493 – – 493 – – Other investment 493 – – 493 – – 493 Equity security – – 493 – – 493 Equity security 10,150 1,686 ( – – 493 Equity security 10,150 1,686 ( 3 ) 11,833 – 493 Equity security 10,150 1,686 ( 3 ) 11,833 – Equity security 10,150 1,686 ( 3 ) 11,833 – – 11,833 10,150 1,686 ( 3 ) 11,833 – – 11,833 Total $ 3 ) 11,833 – – 11,833 Total $ 59,712 $ 3,254 – – 11,833 Total $ 59,712 $ 3,254 $ ( 226 11,833 Total $ 59,712 $ 3,254 $ ( 226 ) $ 59,712 $ 3,254 $ ( 226 ) $ 62,740 $ 6,438 $ ( 226 ) $ 62,740 $ 6,438 $ 42,610 $ 226 ) $ 62,740 $ 6,438 $ 42,610 $ 13,692 ( $ 62,740 $ 6,438 $ 42,610 $ 13,692 ( In million $ 6,438 $ 42,610 $ 13,692 ( In million ) Cost Equity and other investment June 30 , 2004 Fixed maturity security other investment June 30 , 2004 Fixed maturity security Cash $ Fixed maturity security Cash $ 1,812 $ – $ – $ $ – $ – $ 1,812 $ 1,812 $ – $ $ – $ 1,812 $ 1,812 $ – $ – Money – Money market mutual fund 3,595 – – 3,595 3,595 – mutual fund 3,595 – – 3,595 3,595 – – Commercial paper fund 3,595 – – 3,595 3,595 – – Commercial paper 7,286 3,595 – – Commercial paper 7,286 – – 7,286 4,109 3,177 Commercial paper 7,286 – – 7,286 4,109 3,177 – Certificates of paper 7,286 – – 7,286 4,109 3,177 – Certificates of deposit 7,286 – – 7,286 4,109 3,177 – Certificates of deposit 415 3,177 – Certificates of deposit 415 – – 415 330 85 of deposit 415 – – 415 330 85 – U. S. deposit 415 – – 415 330 85 – U. S. Government 415 – – 415 330 85 – U. S. Government and S. Government and Agency security 20,565 26 ( 54 ) 20,537 Government and Agency security 20,565 26 ( 54 ) 20,537 4,083 Agency security 20,565 26 ( 54 ) 20,537 4,083 16,454 – 20,565 26 ( 54 ) 20,537 4,083 16,454 – Foreign government 26 ( 54 ) 20,537 4,083 16,454 – Foreign government bond ( 54 ) 20,537 4,083 16,454 – Foreign government bond 4,524 16,454 – Foreign government bond 4,524 41 ( 60 ) 4,505 – Foreign government bond 4,524 41 ( 60 ) 4,505 – government bond 4,524 41 ( 60 ) 4,505 – 4,505 – 4,524 41 ( 60 ) 4,505 – 4,505 – Mortgage backed ( 60 ) 4,505 – 4,505 – Mortgage backed security 3,656 4,505 – Mortgage backed security 3,656 21 ( 42 ) 3,635 – Mortgage backed security 3,656 21 ( 42 ) 3,635 – backed security 3,656 21 ( 42 ) 3,635 – 3,635 – 3,656 21 ( 42 ) 3,635 – 3,635 – Corporate note ( 42 ) 3,635 – 3,635 – Corporate note and bond – Corporate note and bond 15,048 122 ( 50 ) 15,120 Corporate note and bond 15,048 122 ( 50 ) 15,120 1,010 and bond 15,048 122 ( 50 ) 15,120 1,010 12,629 1,481 15,048 122 ( 50 ) 15,120 1,010 12,629 1,481 Municipal security 122 ( 50 ) 15,120 1,010 12,629 1,481 Municipal security 5,154 ( 50 ) 15,120 1,010 12,629 1,481 Municipal security 5,154 39 50 ) 15,120 1,010 12,629 1,481 Municipal security 5,154 39 ( 1,010 12,629 1,481 Municipal security 5,154 39 ( 25 ) 5,168 12,629 1,481 Municipal security 5,154 39 ( 25 ) 5,168 1,043 Municipal security 5,154 39 ( 25 ) 5,168 1,043 4,125 – 5,154 39 ( 25 ) 5,168 1,043 4,125 – Fixed maturity 39 ( 25 ) 5,168 1,043 4,125 – Fixed maturity security ( 25 ) 5,168 1,043 4,125 – Fixed maturity security 62,055 4,125 – Fixed maturity security 62,055 249 ( 231 ) 62,073 – Fixed maturity security 62,055 249 ( 231 ) 62,073 15,982 maturity security 62,055 249 ( 231 ) 62,073 15,982 44,610 1,481 62,055 249 ( 231 ) 62,073 15,982 44,610 1,481 Equity security 249 ( 231 ) 62,073 15,982 44,610 1,481 Equity security Common ( 231 ) 62,073 15,982 44,610 1,481 Equity security Common stock 231 ) 62,073 15,982 44,610 1,481 Equity security Common stock and security Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 – and equivalent 7,722 1,571 ( 62 ) 9,231 – – 9,231 7,722 1,571 ( 62 ) 9,231 – – 9,231 Preferred stock 62 ) 9,231 – – 9,231 Preferred stock 1,290 – – – – 9,231 Preferred stock 1,290 – – 1,290 – – Preferred stock 1,290 – – 1,290 – – 1,290 Other investment – – 1,290 – – 1,290 Other investment 208 – – – – 1,290 Other investment 208 – – 208 – – Other investment 208 – – 208 – – 208 Equity security – – 208 – – 208 Equity security 9,220 1,571 ( – – 208 Equity security 9,220 1,571 ( 62 ) 10,729 – 208 Equity security 9,220 1,571 ( 62 ) 10,729 – Equity security 9,220 1,571 ( 62 ) 10,729 – – 10,729 9,220 1,571 ( 62 ) 10,729 – – 10,729 Total $ 62 ) 10,729 – – 10,729 Total $ 71,275 $ 1,820 – – 10,729 Total $ 71,275 $ 1,820 $ ( 293 10,729 Total $ 71,275 $ 1,820 $ ( 293 ) $ 71,275 $ 1,820 $ ( 293 ) $ 72,802 $ 15,982 $ ( 293 ) $ 72,802 $ 15,982 $ 44,610 $ 293 ) $ 72,802 $ 15,982 $ 44,610 $ 12,210 PAGE $ 72,802 $ 15,982 $ 44,610 $ 12,210 PAGE 44 Table $ 15,982 $ 44,610 $ 12,210 PAGE 44 Table of Contents $ 44,610 $ 12,210 PAGE 44 Table of Contents Part II of Contents Part II Item 8 At June 30 , 2004 II Item 8 At June 30 , 2004 unrealized loss of 8 At June 30 , 2004 unrealized loss of $ 293 2004 unrealized loss of $ 293 million consisted of : $ million consisted of : $ 188 million related to investment grade fixed income security , $ 43 million related to investment in fixed income security , $ 49 million related to domestic equity domestic equity security and $ 13 million related to international equity the unrealized loss of $ 293 million at June 30 , $ 293 million at June 30 , 2004 , $ 51 million at June 30 , 2004 , $ 51 million exceeded 30 , 2004 , $ 51 million exceeded twelve month . available evidence a of June 30 , 2004 . Common and a of June 30 , 2004 . Common and preferred stock at cost . At June 30 , 2003 , the recorded . At June 30 , 2003 , the recorded basis of of these investment wa $ 2.15 billion , and their estimated estimated fair value wa $ 2.56 billion . At June 30 2.56 billion . At June 30 , 2004 the recorded basis . At June 30 , 2004 the recorded basis of these of these investment wa $ 1.65 billion , and their estimated estimated fair value wa $ 2.12 billion . The estimate of of debt security at June 30 , 2004 were a follows security at June 30 , 2004 were a follows : ( one year or le $ 37,348 $ 37,388 Due after one or le $ 37,348 $ 37,388 Due after one year through one year through five year 14,077 14,064 Due after five year year through five year 14,077 14,064 Due after five year through five year through ten year 5,636 5,665 Due after ten year year through ten year 5,636 5,665 Due after ten year 4,994 5,665 Due after ten year 4,994 4,956 Total $ 62,055 $ Due after ten year 4,994 4,956 Total $ 62,055 $ 62,073 year 4,994 4,956 Total $ 62,055 $ 62,073 Debt security include 4,956 Total $ 62,055 $ 62,073 Debt security include fixed maturity fixed maturity security . NOTE 4 INVESTMENT INCOME/ ( LOSS ) million ) Year Ended June 30 2002 2003 2004 Dividends and ) Year Ended June 30 2002 2003 2004 Dividends and interest Year Ended June 30 2002 2003 2004 Dividends and interest $ Ended June 30 2002 2003 2004 Dividends and interest $ 2,119 2004 Dividends and interest $ 2,119 $ 1,957 $ 1,892 Net and interest $ 2,119 $ 1,957 $ 1,892 Net recognized gains/ $ 2,119 $ 1,957 $ 1,892 Net recognized gains/ ( loss loss ) on investment ( 1,807 ) 44 1,563 Net loss on investment ( 1,807 ) 44 1,563 Net loss on derivative investment ( 1,807 ) 44 1,563 Net loss on derivative ( Net loss on derivative ( 617 ) ( 424 ) ( derivative ( 617 ) ( 424 ) ( 268 ) Investment ) ( 424 ) ( 268 ) Investment income/ ( loss ( loss ) $ ( 305 ) $ 1,577 $ 3,187 $ ( 305 ) $ 1,577 $ 3,187 Net recognized gains/ 305 ) $ 1,577 $ 3,187 Net recognized gains/ ( loss include other-than-temporary impairment of $ 4.32 billion in fiscal 2002 , $ 4.32 billion in fiscal 2002 , $ 1.15 billion in in fiscal 2002 , $ 1.15 billion in fiscal 2003 , $ 1.15 billion in fiscal 2003 , and $ 82 million fiscal 2003 , and $ 82 million in fiscal 2004 . $ 82 million in fiscal 2004 . Realized gain and ( other-than-temporary impairment ) were $ 3.02 billion and $ ( 504 3.02 billion and $ ( 504 ) million in fiscal 2002 504 ) million in fiscal 2002 , $ 1.44 billion and in fiscal 2002 , $ 1.44 billion and $ ( 245 1.44 billion and $ ( 245 ) million in fiscal 2003 245 ) million in fiscal 2003 , and $ 2.16 billion fiscal 2003 , and $ 2.16 billion and $ ( 518 2.16 billion and $ ( 518 ) million in fiscal 2004 518 ) million in fiscal 2004 . NOTE 5 DERIVATIVES For in fiscal 2004 . NOTE 5 DERIVATIVES For derivative instrument designated determined in accordance with SFAS 133 , did not have a impact on earnings for fiscal 2002 , 2003 , and 2004 earnings for fiscal 2002 , 2003 , and 2004 . During 2002 , 2003 , and 2004 . During fiscal 2002 , and 2004 . During fiscal 2002 , $ 30 million in During fiscal 2002 , $ 30 million in gain on fair in time value and $ 331 million in loss on cash loss ) . During fiscal 2003 , $ 74 million in During fiscal 2003 , $ 74 million in loss on fair in time value and $ 229 million in loss on cash loss ) . During fiscal 2004 , $ 31 million in During fiscal 2004 , $ 31 million in gain on fair in time value and $ 325 million in loss on cash ( loss ) . PAGE 45 Table of Contents Part II of Contents Part II Item 8 Derivative gain and loss included is recognized . During fiscal 2002 , $ 234 million of During fiscal 2002 , $ 234 million of derivative gain were reclassified to revenue and $ 10 million in derivative loss were loss ) . During fiscal 2003 , $ 40 million of During fiscal 2003 , $ 40 million of derivative gain were reclassified to revenue and $ 2 million in derivative gain were loss ) . During fiscal 2004 , $ 14 million of During fiscal 2004 , $ 14 million of derivative gain were . We estimate that $ 119 million of net derivative gain derecognized or discontinued for fiscal 2002 , 2003 , and 2004 discontinued for fiscal 2002 , 2003 , and 2004 . NOTE 2002 , 2003 , and 2004 . NOTE 6 INVENTORIES ( , and 2004 . NOTE 6 INVENTORIES ( In million ) million ) Year Ended June 30 2003 2004 Finished good $ ) Year Ended June 30 2003 2004 Finished good $ 393 Year Ended June 30 2003 2004 Finished good $ 393 $ 2003 2004 Finished good $ 393 $ 271 Raw material and Finished good $ 393 $ 271 Raw material and work in material and work in process 247 150 Inventories $ 640 $ and work in process 247 150 Inventories $ 640 $ 421 process 247 150 Inventories $ 640 $ 421 We recorded lower 150 Inventories $ 640 $ 421 We recorded lower of cost market adjustment totaling approximately $ 90 million in fiscal 2004 . $ 90 million in fiscal 2004 . NOTE 7 PROPERTY AND in fiscal 2004 . NOTE 7 PROPERTY AND EQUIPMENT ( In million ) Year Ended June 30 2003 2004 Land $ 248 ) Year Ended June 30 2003 2004 Land $ 248 $ Year Ended June 30 2003 2004 Land $ 248 $ 274 30 2003 2004 Land $ 248 $ 274 Buildings and improvement 2004 Land $ 248 $ 274 Buildings and improvement 1,854 1,981 $ 274 Buildings and improvement 1,854 1,981 Leasehold improvement 768 805 274 Buildings and improvement 1,854 1,981 Leasehold improvement 768 805 Computer improvement 1,854 1,981 Leasehold improvement 768 805 Computer equipment and software 1,854 1,981 Leasehold improvement 768 805 Computer equipment and software 2,464 805 Computer equipment and software 2,464 2,637 Furniture and equipment 744 Computer equipment and software 2,464 2,637 Furniture and equipment 744 792 2,464 2,637 Furniture and equipment 744 792 Property and equipment , 2,637 Furniture and equipment 744 792 Property and equipment , at and equipment , at cost 6,078 6,489 Accumulated depreciation ( 3,855 equipment , at cost 6,078 6,489 Accumulated depreciation ( 3,855 ) 6,078 6,489 Accumulated depreciation ( 3,855 ) ( 4,163 ) Property depreciation ( 3,855 ) ( 4,163 ) Property and equipment , and equipment , net $ 2,223 $ 2,326 Property and equipment , net $ 2,223 $ 2,326 Property and equipment are stated not depreciated . During fiscal 2002 , 2003 , and 2004 . During fiscal 2002 , 2003 , and 2004 , depreciation 2002 , 2003 , and 2004 , depreciation expense wa $ , depreciation expense wa $ 820 million , $ 929 million $ 820 million , $ 929 million , and $ 647 929 million , and $ 647 million , the majority of to computer equipment . PAGE 46 Table of Contents Part II of Contents Part II Item 8 NOTE 8 GOODWILL Changes in Part II Item 8 NOTE 8 GOODWILL Changes in the carrying amount of goodwill for fiscal 2003 and 2004 by segment , goodwill for fiscal 2003 and 2004 by segment , are a ) Balance a of June 30 , 2002 Acquisitions / purchase a of June 30 , 2002 Acquisitions / purchase accounting adjustment adjustment Balance a of June 30 , 2003 Acquisitions / purchase a of June 30 , 2003 Acquisitions / purchase accounting adjustment Divestitures Balance a of June 30 , 2004 Client $ 26 a of June 30 , 2004 Client $ 26 $ 11 30 , 2004 Client $ 26 $ 11 $ 37 $ 2004 Client $ 26 $ 11 $ 37 $ – $ $ 26 $ 11 $ 37 $ – $ – $ $ – $ – $ 37 Server and Tools 97 9 $ 37 Server and Tools 97 9 106 – – 106 37 Server and Tools 97 9 106 – – 106 Information Server and Tools 97 9 106 – – 106 Information Worker 97 9 106 – – 106 Information Worker – 180 180 – 106 Information Worker – 180 180 ( 2 ) – 106 Information Worker – 180 180 ( 2 ) – 178 Worker – 180 180 ( 2 ) – 178 Microsoft Business 180 ( 2 ) – 178 Microsoft Business Solutions 1,021 1,198 – 178 Microsoft Business Solutions 1,021 1,198 2,219 7 ( 19 178 Microsoft Business Solutions 1,021 1,198 2,219 7 ( 19 ) Microsoft Business Solutions 1,021 1,198 2,219 7 ( 19 ) 2,207 Business Solutions 1,021 1,198 2,219 7 ( 19 ) 2,207 MSN 1,021 1,198 2,219 7 ( 19 ) 2,207 MSN 160 ( 2,219 7 ( 19 ) 2,207 MSN 160 ( 6 ) ( 19 ) 2,207 MSN 160 ( 6 ) 154 – ) 2,207 MSN 160 ( 6 ) 154 – – 154 MSN 160 ( 6 ) 154 – – 154 Mobile and 6 ) 154 – – 154 Mobile and Embedded Devices 5 154 Mobile and Embedded Devices 5 23 28 2 – 30 Mobile and Embedded Devices 5 23 28 2 – 30 Home and Embedded Devices 5 23 28 2 – 30 Home and Embedded Devices 5 23 28 2 – 30 Home and Entertainment 5 23 28 2 – 30 Home and Entertainment 117 287 – 30 Home and Entertainment 117 287 404 ( 1 ) 30 Home and Entertainment 117 287 404 ( 1 ) – Home and Entertainment 117 287 404 ( 1 ) – 403 Entertainment 117 287 404 ( 1 ) – 403 Total $ 404 ( 1 ) – 403 Total $ 1,426 $ 1,702 ) – 403 Total $ 1,426 $ 1,702 $ 3,128 $ 403 Total $ 1,426 $ 1,702 $ 3,128 $ 6 $ $ 1,426 $ 1,702 $ 3,128 $ 6 $ ( 19 $ 1,702 $ 3,128 $ 6 $ ( 19 ) $ 3,128 $ 6 $ ( 19 ) $ 3,115 We test $ ( 19 ) $ 3,115 We test goodwill for impairment with the provision of SFAS 142 . Our annual testing resulted charge to goodwill in fiscal 2003 and 2004 . If an goodwill in fiscal 2003 and 2004 . If an event occurs annual test . During fiscal 2004 , we had no material acquisition . Goodwill decreased $ 13 million primarily a a result current year . The $ 1.7 billion increase in goodwill during increase in goodwill during fiscal 2003 related principally to the following : Navision a/s with $ 1.2 billion allocated to Microsoft Business Microsoft Business Solutions ; $ 281 million for the Rare Ltd. Placeware , Inc. with $ 180 million allocated to Information Worker to Information Worker . NOTE 9 INTANGIBLE ASSETS The component of million ) Year Ended June 30 2003 2004 Gross carrying amount ) Year Ended June 30 2003 2004 Gross carrying amount Accumulated Year Ended June 30 2003 2004 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 584 $ ( 376 ) $ Contract-based $ 584 $ ( 376 ) $ 208 $ 908 $ ( 376 ) $ 208 $ 908 $ ( 476 376 ) $ 208 $ 908 $ ( 476 ) $ 208 $ 908 $ ( 476 ) $ 432 Technology-based 261 $ ( 476 ) $ 432 Technology-based 261 ( 137 ) 476 ) $ 432 Technology-based 261 ( 137 ) 124 278 $ 432 Technology-based 261 ( 137 ) 124 278 ( 183 Technology-based 261 ( 137 ) 124 278 ( 183 ) 95 261 ( 137 ) 124 278 ( 183 ) 95 Marketing-related 137 ) 124 278 ( 183 ) 95 Marketing-related 34 ( 124 278 ( 183 ) 95 Marketing-related 34 ( 9 ) ( 183 ) 95 Marketing-related 34 ( 9 ) 25 35 ) 95 Marketing-related 34 ( 9 ) 25 35 ( 19 Marketing-related 34 ( 9 ) 25 35 ( 19 ) 16 34 ( 9 ) 25 35 ( 19 ) 16 Customer-related 9 ) 25 35 ( 19 ) 16 Customer-related 28 ( 25 35 ( 19 ) 16 Customer-related 28 ( 1 ) ( 19 ) 16 Customer-related 28 ( 1 ) 27 30 ) 16 Customer-related 28 ( 1 ) 27 30 ( 4 Customer-related 28 ( 1 ) 27 30 ( 4 ) 26 28 ( 1 ) 27 30 ( 4 ) 26 Total 1 ) 27 30 ( 4 ) 26 Total $ 907 27 30 ( 4 ) 26 Total $ 907 $ ( 4 ) 26 Total $ 907 $ ( 523 ) $ Total $ 907 $ ( 523 ) $ 384 $ 1,251 $ ( 523 ) $ 384 $ 1,251 $ ( 682 523 ) $ 384 $ 1,251 $ ( 682 ) $ 384 $ 1,251 $ ( 682 ) $ 569 PAGE 47 $ ( 682 ) $ 569 PAGE 47 Table of Contents 682 ) $ 569 PAGE 47 Table of Contents Part II of Contents Part II Item 8 During fiscal 2004 , we II Item 8 During fiscal 2004 , we recorded addition to to intangible asset of $ 355 million , of which $ million , of which $ 266 million wa related to a intangible were acquired in fiscal 2004 . During fiscal 2003 , fiscal 2004 . During fiscal 2003 , we recorded addition to to intangible asset of $ 306 million , primarily related to , a described at Note 15 – Acquisitions . The component intangible asset acquired during fiscal 2003 and 2004 are a follows acquired during fiscal 2003 and 2004 are a follows – no million ) Year Ended June 30 2003 2004 Amount Weighted average ) Year Ended June 30 2003 2004 Amount Weighted average life Year Ended June 30 2003 2004 Amount Weighted average life Amount Weighted average life Contract-based $ 162 5 year $ 324 9 average life Contract-based $ 162 5 year $ 324 9 year $ 162 5 year $ 324 9 year Technology-based 97 4 162 5 year $ 324 9 year Technology-based 97 4 year $ 324 9 year Technology-based 97 4 year 28 4 year 324 9 year Technology-based 97 4 year 28 4 year Marketing-related year Technology-based 97 4 year 28 4 year Marketing-related 19 4 Technology-based 97 4 year 28 4 year Marketing-related 19 4 year year 28 4 year Marketing-related 19 4 year – – Customer-related 28 4 year Marketing-related 19 4 year – – Customer-related 28 4 year – – Customer-related 28 9 year 3 3 year year – – Customer-related 28 9 year 3 3 year Total – Customer-related 28 9 year 3 3 year Total $ 306 Customer-related 28 9 year 3 3 year Total $ 306 5 3 3 year Total $ 306 5 year $ 355 9 3 year Total $ 306 5 year $ 355 9 year $ 306 5 year $ 355 9 year During 2003 , 306 5 year $ 355 9 year During 2003 , research $ 355 9 year During 2003 , research and development asset and development asset of $ 17 million were acquired and written with FASB Interpretation No . 4 ( FIN 4 ) , No . 4 ( FIN 4 ) , Applicability of FASB of FASB Statement No . 2 to Business Combinations Accounted for asset amortization expense wa $ 161 million for fiscal 2003 and $ 161 million for fiscal 2003 and $ 170 million for for fiscal 2003 and $ 170 million for fiscal 2004 . $ 170 million for fiscal 2004 . The estimated future amortization intangible asset a of June 30 , 2004 is a follows a of June 30 , 2004 is a follows : ( ( In million ) June 30 Amount 2005 $ 154 2006 million ) June 30 Amount 2005 $ 154 2006 104 2007 June 30 Amount 2005 $ 154 2006 104 2007 81 2008 30 Amount 2005 $ 154 2006 104 2007 81 2008 62 Amount 2005 $ 154 2006 104 2007 81 2008 62 2009 2005 $ 154 2006 104 2007 81 2008 62 2009 38 $ 154 2006 104 2007 81 2008 62 2009 38 Total 154 2006 104 2007 81 2008 62 2009 38 Total $ 2006 104 2007 81 2008 62 2009 38 Total $ 439 104 2007 81 2008 62 2009 38 Total $ 439 NOTE 2007 81 2008 62 2009 38 Total $ 439 NOTE 10 62 2009 38 Total $ 439 NOTE 10 INCOME TAXES The 38 Total $ 439 NOTE 10 INCOME TAXES The component of million ) Year Ended June 30 2002 2003 2004 Current tax ) Year Ended June 30 2002 2003 2004 Current tax : Year Ended June 30 2002 2003 2004 Current tax : U.S. Ended June 30 2002 2003 2004 Current tax : U.S. and : U.S. and state $ 3,644 $ 3,861 $ 3,940 International and state $ 3,644 $ 3,861 $ 3,940 International 575 808 $ 3,644 $ 3,861 $ 3,940 International 575 808 1,056 Current $ 3,861 $ 3,940 International 575 808 1,056 Current tax 4,219 3,861 $ 3,940 International 575 808 1,056 Current tax 4,219 4,669 $ 3,940 International 575 808 1,056 Current tax 4,219 4,669 4,996 575 808 1,056 Current tax 4,219 4,669 4,996 Deferred tax ( 808 1,056 Current tax 4,219 4,669 4,996 Deferred tax ( 1,699 1,056 Current tax 4,219 4,669 4,996 Deferred tax ( 1,699 ) 4,669 4,996 Deferred tax ( 1,699 ) ( 1,146 ) ( tax ( 1,699 ) ( 1,146 ) ( 968 ) Provision ) ( 1,146 ) ( 968 ) Provision for income tax Provision for income tax $ 2,520 $ 3,523 $ 4,028 PAGE income tax $ 2,520 $ 3,523 $ 4,028 PAGE 48 Table $ 2,520 $ 3,523 $ 4,028 PAGE 48 Table of Contents $ 3,523 $ 4,028 PAGE 48 Table of Contents Part II of Contents Part II Item 8 U.S. and international component of million ) Year Ended June 30 2002 2003 2004 U.S. $ ) Year Ended June 30 2002 2003 2004 U.S. $ 5,282 Year Ended June 30 2002 2003 2004 U.S. $ 5,282 $ Ended June 30 2002 2003 2004 U.S. $ 5,282 $ 7,674 2002 2003 2004 U.S. $ 5,282 $ 7,674 $ 8,088 International 2004 U.S. $ 5,282 $ 7,674 $ 8,088 International 2,593 3,380 $ 5,282 $ 7,674 $ 8,088 International 2,593 3,380 4,108 Income $ 7,674 $ 8,088 International 2,593 3,380 4,108 Income before income 7,674 $ 8,088 International 2,593 3,380 4,108 Income before income tax $ 8,088 International 2,593 3,380 4,108 Income before income tax $ Income before income tax $ 7,875 $ 11,054 $ 12,196 The income tax $ 7,875 $ 11,054 $ 12,196 The item accounting $ 7,875 $ 11,054 $ 12,196 The item accounting for the million ) Year Ended June 30 2002 2003 2004 Federal statutory ) Year Ended June 30 2002 2003 2004 Federal statutory rate Year Ended June 30 2002 2003 2004 Federal statutory rate 35.0 Ended June 30 2002 2003 2004 Federal statutory rate 35.0 % 2003 2004 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Extraterritorial income exclusion tax benefit ( 3.1 ) % ( 1.6 ) ( 3.1 ) % ( 1.6 ) % ( 0.9 ) ( 1.6 ) % ( 0.9 ) % Permanent reinvestment of reinvestment of foreign earnings ( 1.8 ) % ( 1.3 ) ( 1.8 ) % ( 1.3 ) % ( 1.7 ) ( 1.3 ) % ( 1.7 ) % Other reconciling item ) % Other reconciling item 1.9 % – 0.6 % Total reconciling item 1.9 % – 0.6 % Total 32.0 % 32.1 % – 0.6 % Total 32.0 % 32.1 % 33.0 % 0.6 % Total 32.0 % 32.1 % 33.0 % The 2004 Total 32.0 % 32.1 % 33.0 % The 2004 other reconciling 32.1 % 33.0 % The 2004 other reconciling item include the reconciling item include the $ 208 million benefit from the resolution the issue remanded by the 9 th Circuit Court of Appeals ( In million ) June 30 2003 2004 Deferred income tax In million ) June 30 2003 2004 Deferred income tax asset million ) June 30 2003 2004 Deferred income tax asset : asset : Revenue item $ 2,556 $ 2,032 Expense item 1,048 Revenue item $ 2,556 $ 2,032 Expense item 1,048 1,308 Impaired 2,556 $ 2,032 Expense item 1,048 1,308 Impaired investment 1,525 1,246 $ 2,032 Expense item 1,048 1,308 Impaired investment 1,525 1,246 Stock-based item 1,048 1,308 Impaired investment 1,525 1,246 Stock-based compensation expense 3,892 1,048 1,308 Impaired investment 1,525 1,246 Stock-based compensation expense 3,892 3,749 1,525 1,246 Stock-based compensation expense 3,892 3,749 Deferred income tax asset 1,246 Stock-based compensation expense 3,892 3,749 Deferred income tax asset $ Deferred income tax asset $ 9,021 $ 8,335 Deferred income tax tax asset $ 9,021 $ 8,335 Deferred income tax liability : gain on investment $ ( 1,584 ) $ ( 1,087 ) ( 1,584 ) $ ( 1,087 ) International earnings ( 1,809 1,087 ) International earnings ( 1,809 ) ( 2,227 ) Other earnings ( 1,809 ) ( 2,227 ) Other ( 961 ) ( 2,227 ) Other ( 961 ) ( 1,095 ) Deferred Other ( 961 ) ( 1,095 ) Deferred income tax liability Deferred income tax liability ( 4,354 ) ( 4,409 ) Net liability ( 4,354 ) ( 4,409 ) Net deferred income tax Net deferred income tax $ 4,667 $ 3,926 Reported a : income tax $ 4,667 $ 3,926 Reported a : Current deferred Current deferred tax asset $ 2,506 $ 2,097 Long-term deferred tax tax asset $ 2,506 $ 2,097 Long-term deferred tax asset 2,161 2,097 Long-term deferred tax asset 2,161 1,829 Net deferred income tax Long-term deferred tax asset 2,161 1,829 Net deferred income tax $ Net deferred income tax $ 4,667 $ 3,926 Deferred income tax income tax $ 4,667 $ 3,926 Deferred income tax balance reflect foreign withholding tax on $ 2.30 billion of our undistributed earnings of which relate to fiscal 2002 , 2003 , and 2004 relate to fiscal 2002 , 2003 , and 2004 earnings , 2002 , 2003 , and 2004 earnings , because these earnings the United States . PAGE 49 Table of Contents Part II of Contents Part II Item 8 On December 3 , 2002 II Item 8 On December 3 , 2002 , the Ninth 8 On December 3 , 2002 , the Ninth Circuit Court Tax Court decision . In 2004 , the remaining issue remanded year with the IRS through 1996 . The IRS is currently The IRS is currently auditing 1997 through 2003 . Management belief is currently auditing 1997 through 2003 . Management belief any adjustment Income tax paid were $ 1.9 billion in fiscal 2002 , $ 1.9 billion in fiscal 2002 , $ 2.8 billion in in fiscal 2002 , $ 2.8 billion in fiscal 2003 , $ 2.8 billion in fiscal 2003 , and $ 2.5 billion fiscal 2003 , and $ 2.5 billion in fiscal 2004 . $ 2.5 billion in fiscal 2004 . NOTE 11 STOCKHOLDERS ’ in fiscal 2004 . NOTE 11 STOCKHOLDERS ’ EQUITY Shares of million ) Year Ended June 30 2002 2003 2004 Beginning balance ) Year Ended June 30 2002 2003 2004 Beginning balance 10,766 Year Ended June 30 2002 2003 2004 Beginning balance 10,766 10,718 Ended June 30 2002 2003 2004 Beginning balance 10,766 10,718 10,771 2002 2003 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 2003 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 215 2004 Beginning balance 10,766 10,718 10,771 Issued 208 291 215 Repurchased balance 10,766 10,718 10,771 Issued 208 291 215 Repurchased ( 256 10,766 10,718 10,771 Issued 208 291 215 Repurchased ( 256 ) 10,718 10,771 Issued 208 291 215 Repurchased ( 256 ) ( 208 291 215 Repurchased ( 256 ) ( 238 ) ( Repurchased ( 256 ) ( 238 ) ( 124 ) Balance ) ( 238 ) ( 124 ) Balance , end of Balance , end of year 10,718 10,771 10,862 As discussed in , end of year 10,718 10,771 10,862 As discussed in Note end of year 10,718 10,771 10,862 As discussed in Note 13 10,862 As discussed in Note 13 – Employee Stock and Savings Stock and Savings Plans , 344.6 million option were transferred to derivative . As of June 30 , 2004 , the option As of June 30 , 2004 , the option have strike strike price ranging from $ 33.03 to $ 101.25 per share from $ 33.03 to $ 101.25 per share and have expiration have expiration date between December 2005 and December 2006 . Our between December 2005 and December 2006 . Our board of director plan . A total of 618 million share have been repurchased fiscal year for approximately $ 16.2 billion . We repurchased 256 16.2 billion . We repurchased 256 million share for $ 6.9 256 million share for $ 6.9 billion , 238 million share for $ 6.9 billion , 238 million share for $ 5.9 238 million share for $ 5.9 billion , and 124 million $ 5.9 billion , and 124 million share for $ 3.4 124 million share for $ 3.4 billion in fiscal 2002 , $ 3.4 billion in fiscal 2002 , 2003 , and 2004 billion in fiscal 2002 , 2003 , and 2004 , respectively 2002 , 2003 , and 2004 , respectively . Additionally , respectively . Additionally , in 2002 , we acquired 10.2 million in 2002 , we acquired 10.2 million of our share a repurchase transaction entered into in 2001 , which gave u the up-front net payment of $ 264 million . In any period for cash . On January 16 and September 12 , 2003 On January 16 and September 12 , 2003 , our board 16 and September 12 , 2003 , our board of director our common stock of $ 0.08 and $ 0.16 per share of $ 0.08 and $ 0.16 per share , respectively . dividend were paid on March 7 and November 7 , 2003 on March 7 and November 7 , 2003 , respectively , 7 and November 7 , 2003 , respectively , to shareholder close of business on February 21 , and October 17 , February 21 , and October 17 , 2003 . PAGE 50 , and October 17 , 2003 . PAGE 50 Table of 17 , 2003 . PAGE 50 Table of Contents Part II of Contents Part II Item 8 NOTE 12 OTHER COMPREHENSIVE INCOME Part II Item 8 NOTE 12 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 2002 2003 2004 Net gains/ ) Year Ended June 30 2002 2003 2004 Net gains/ ( Year Ended June 30 2002 2003 2004 Net gains/ ( loss Ended June 30 2002 2003 2004 Net gains/ ( loss ) of tax effect of $ 30 in 2002 , $ ( effect of $ 30 in 2002 , $ ( 69 ) in 2002 , $ ( 69 ) in 2003 and $ $ ( 69 ) in 2003 and $ 49 in 2004 ) in 2003 and $ 49 in 2004 $ 55 $ 2003 and $ 49 in 2004 $ 55 $ ( 129 $ 49 in 2004 $ 55 $ ( 129 ) $ 2004 $ 55 $ ( 129 ) $ 92 Reclassification adjustment $ ( 129 ) $ 92 Reclassification adjustment for ( gain tax effect of $ ( 79 ) in 2002 , $ $ ( 79 ) in 2002 , $ 15 in 2003 ) in 2002 , $ 15 in 2003 and $ 5 2002 , $ 15 in 2003 and $ 5 in 2004 15 in 2003 and $ 5 in 2004 ( 146 ) 2003 and $ 5 in 2004 ( 146 ) 27 9 $ 5 in 2004 ( 146 ) 27 9 Net gains/ in 2004 ( 146 ) 27 9 Net gains/ ( loss 2004 ( 146 ) 27 9 Net gains/ ( loss ) ) on derivative instrument ( 91 ) ( 102 ) 101 instrument ( 91 ) ( 102 ) 101 Net unrealized investment 91 ) ( 102 ) 101 Net unrealized investment gains/ ( tax effect of $ ( 955 ) in 2002 , $ $ ( 955 ) in 2002 , $ 610 in 2003 ) in 2002 , $ 610 in 2003 and $ ( 2002 , $ 610 in 2003 and $ ( 994 ) in 2003 and $ ( 994 ) in 2004 ( 1,774 $ ( 994 ) in 2004 ( 1,774 ) 1,132 ( 994 ) in 2004 ( 1,774 ) 1,132 ( 1,846 ) in 2004 ( 1,774 ) 1,132 ( 1,846 ) Reclassification adjustment ( 1,774 ) 1,132 ( 1,846 ) Reclassification adjustment for ( of tax effect of $ 958 in 2002 , $ 60 effect of $ 958 in 2002 , $ 60 in 2003 958 in 2002 , $ 60 in 2003 and $ 524 2002 , $ 60 in 2003 and $ 524 in 2004 60 in 2003 and $ 524 in 2004 1,779 111 973 2003 and $ 524 in 2004 1,779 111 973 Net unrealized and $ 524 in 2004 1,779 111 973 Net unrealized investment $ 524 in 2004 1,779 111 973 Net unrealized investment gains/ 524 in 2004 1,779 111 973 Net unrealized investment gains/ ( investment gains/ ( loss ) 5 1,243 ( 873 ) Translation gains/ ( loss ) 5 1,243 ( 873 ) Translation adjustment loss ) 5 1,243 ( 873 ) Translation adjustment and other ) Translation adjustment and other 82 116 51 Other comprehensive income Translation adjustment and other 82 116 51 Other comprehensive income / adjustment and other 82 116 51 Other comprehensive income / ( ( loss ) $ ( 4 ) $ 1,257 $ ( $ ( 4 ) $ 1,257 $ ( 721 ) The ) $ 1,257 $ ( 721 ) The component of accumulated : ( In million ) 2003 2004 Year Ended June 30 ( In million ) 2003 2004 Year Ended June 30 Net 2003 2004 Year Ended June 30 Net gains/ ( loss ) on derivative instrument $ ( 16 ) $ 85 Net unrealized $ ( 16 ) $ 85 Net unrealized investment gain 1,846 85 Net unrealized investment gain 1,846 973 Translation adjustment and other Net unrealized investment gain 1,846 973 Translation adjustment and other 10 973 Translation adjustment and other 10 61 Accumulated other comprehensive income Translation adjustment and other 10 61 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,840 $ 1,119 NOTE 13 EMPLOYEE comprehensive income $ 1,840 $ 1,119 NOTE 13 EMPLOYEE STOCK AND $ 1,840 $ 1,119 NOTE 13 EMPLOYEE STOCK AND SAVINGS PLANS AND SAVINGS PLANS Effective July 1 , 2003 , we adopted PLANS Effective July 1 , 2003 , we adopted the fair value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation restatement method described in SFAS 148 , Accounting for Stock-Based Compensation value recognition provision of SFAS 123 , stock-based compensation cost is have been restated for fiscal 2002 and 2003 to reflect result restated for fiscal 2002 and 2003 to reflect result a if the fair-value method of SFAS 123 had been applied from it employee compensation award wa $ 3.78 billion in fiscal 2002 , $ 3.78 billion in fiscal 2002 , $ 3.75 billion in in fiscal 2002 , $ 3.75 billion in fiscal 2003 , $ 3.75 billion in fiscal 2003 , and $ 5.73 billion fiscal 2003 , and $ 5.73 billion in fiscal 2004 . $ 5.73 billion in fiscal 2004 . The amount for fiscal . The amount for fiscal 2004 include $ 2.21 billion ( for fiscal 2004 include $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) due at six month interval at 85 % of the lower of having a value not exceeding 15 % of their gross compensation offering period . During fiscal 2002 , 2003 , and 2004 . During fiscal 2002 , 2003 , and 2004 employee purchased 2002 , 2003 , and 2004 employee purchased 10.8 million share , and 2004 employee purchased 10.8 million share , 15.2 million purchased 10.8 million share , 15.2 million share , and 16.7 15.2 million share , and 16.7 million share at average price at average price of $ 25.26 , $ 22.56 , and of $ 25.26 , $ 22.56 , and $ 22.74 per $ 22.56 , and $ 22.74 per share . At June per share . At June 30 , 2004 , 175.5 million . At June 30 , 2004 , 175.5 million share were June 30 , 2004 , 175.5 million share were reserved for for future issuance . PAGE 51 Table of Contents Part II of Contents Part II Item 8 During the fourth quarter of the fourth quarter of fiscal 2004 , the administrative committee under , effective beginning in fiscal 2005 , share of our common at three month interval at 90 % of the fair market , that qualifies under Section 401 ( k ) of the employee may contribute up to 25 % of their pretax salary with a maximum contribution of 3 % of a participant ’ for all plan were $ 101 million , $ 118 million $ 101 million , $ 118 million , and $ 141 118 million , and $ 141 million in fiscal 2002 , $ 141 million in fiscal 2002 , 2003 , and 2004 million in fiscal 2002 , 2003 , and 2004 . Matching 2002 , 2003 , and 2004 . Matching contribution are invested Stock Plans . In fiscal 2004 we implemented change in employee our shareholder . In fiscal 2004 , we began granting employee the second quarter of fiscal 2004 whereby employee could elect to a strike price of $ 33 or higher ( “ eligible during the period from November 14 , 2003 to December 8 period from November 14 , 2003 to December 8 , 2003 14 , 2003 to December 8 , 2003 , which wa 2003 to December 8 , 2003 , which wa $ 25.57 2003 , which wa $ 25.57 . A total of 18,503 25.57 . A total of 18,503 ( 51 % ) of A total of 18,503 ( 51 % ) of the 36,539 51 % ) of the 36,539 eligible employee elected to participate stock option transfer program and 344.6 million ( 55 % ) program and 344.6 million ( 55 % ) of the 621.4 55 % ) of the 621.4 million eligible option were tendered , JPMorgan paid u $ 382 million for the transferred option an initial payment of $ 219 million to participating employee for stock-based compensation expense of $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) which in the result of fiscal 2004 . This expense consists of tax return . For fiscal 2004 , deferred tax asset were were reduced by approximately $ 2.01 billion with an offsetting reduction stock award . At June 30 , 2004 , an aggregate . At June 30 , 2004 , an aggregate of 807 2004 , an aggregate of 807 million share were available for of stock award ; all 807 million share remaining available for available for grant at June 30 , 2004 could be awarded grant at June 30 , 2004 could be awarded a stock award vest . During fiscal 2004 , 32.6 million stock award . During fiscal 2004 , 32.6 million stock award with a weighted-average fair value of $ 26.12 per share were granted and a five-year period . Approximately 787,000 stock award vested and 1.1 787,000 stock award vested and 1.1 million stock award were cancelled award were cancelled during fiscal 2004 . PAGE 52 Table of during fiscal 2004 . PAGE 52 Table of Contents Part II of Contents Part II Item 8 Shared Performance Stock Awards are The performance period is July 1 , 2003 through June 30 period is July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for certain executive officer ) target in a range between 33 % and 150 % ( range between 33 % and 150 % ( 0 % to % and 150 % ( 0 % to 150 % for % ( 0 % to 150 % for certain executive officer two year . In fiscal 2004 , Shared Performance Stock Awards the performance period ending June 30 , 2006 were granted in period ending June 30 , 2006 were granted in the aggregate in the aggregate amount of 31.7 million share with a weighted average fair value of $ 26.08 per share . Because these only be awarded in fiscal 2005 and 2006 to newly hired awarded in fiscal 2005 and 2006 to newly hired and promoted performance stock award vested and 1.2 million shared performance stock award award were cancelled during fiscal 2004 . Stock Awards and Shared Stock Awards are amortized over 5 year using the straight line plan . Options granted before 1995 generally vest over four and grant . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and grant . Options granted after 2001 vest over four and one-half of grant . At June 30 , 2004 , stock option . At June 30 , 2004 , stock option for 569 2004 , stock option for 569 million share were vested . the stock plan during fiscal 2002 , 2003 , and 2004 plan during fiscal 2002 , 2003 , and 2004 wa $ 2002 , 2003 , and 2004 wa $ 15.79 , $ , and 2004 wa $ 15.79 , $ 12.08 , and wa $ 15.79 , $ 12.08 , and $ 10.13 , $ 12.08 , and $ 10.13 , respectively . The fair grant : Year Ended June 30 2002 2003 2004 Weighted average : Year Ended June 30 2002 2003 2004 Weighted average expected Year Ended June 30 2002 2003 2004 Weighted average expected life Ended June 30 2002 2003 2004 Weighted average expected life in average expected life in year 7 7 7 Dividend per share expected life in year 7 7 7 Dividend per share $ life in year 7 7 7 Dividend per share $ – per share $ – $ 0.08 $ 0.16 Volatility 39.0 % $ – $ 0.08 $ 0.16 Volatility 39.0 % 42.0 % $ 0.08 $ 0.16 Volatility 39.0 % 42.0 % 29.5 % $ 0.16 Volatility 39.0 % 42.0 % 29.5 % Risk-free interest Volatility 39.0 % 42.0 % 29.5 % Risk-free interest rate 5.4 29.5 % Risk-free interest rate 5.4 % 3.9 % 4.1 % Risk-free interest rate 5.4 % 3.9 % 4.1 % Employee stock rate 5.4 % 3.9 % 4.1 % Employee stock option outstanding Weighted average Balance , June 30 , 2001 1,796 $ 0.28 Balance , June 30 , 2001 1,796 $ 0.28 – $ , June 30 , 2001 1,796 $ 0.28 – $ 59.57 30 , 2001 1,796 $ 0.28 – $ 59.57 $ 24.77 1,796 $ 0.28 – $ 59.57 $ 24.77 Granted 82 24.31 0.28 – $ 59.57 $ 24.77 Granted 82 24.31 – 36.29 $ 59.57 $ 24.77 Granted 82 24.31 – 36.29 31.25 Exercised 59.57 $ 24.77 Granted 82 24.31 – 36.29 31.25 Exercised ( 24.77 Granted 82 24.31 – 36.29 31.25 Exercised ( 198 ) Granted 82 24.31 – 36.29 31.25 Exercised ( 198 ) 0.51 – 36.29 31.25 Exercised ( 198 ) 0.51 – 34.91 6.41 31.25 Exercised ( 198 ) 0.51 – 34.91 6.41 Canceled ( ( 198 ) 0.51 – 34.91 6.41 Canceled ( 76 ) 198 ) 0.51 – 34.91 6.41 Canceled ( 76 ) 0.58 – 34.91 6.41 Canceled ( 76 ) 0.58 – 58.28 34.34 6.41 Canceled ( 76 ) 0.58 – 58.28 34.34 Balance , ( 76 ) 0.58 – 58.28 34.34 Balance , June 30 76 ) 0.58 – 58.28 34.34 Balance , June 30 , 58.28 34.34 Balance , June 30 , 2002 1,604 0.40 – Balance , June 30 , 2002 1,604 0.40 – 59.57 26.88 , June 30 , 2002 1,604 0.40 – 59.57 26.88 Granted June 30 , 2002 1,604 0.40 – 59.57 26.88 Granted 254 , 2002 1,604 0.40 – 59.57 26.88 Granted 254 21.42 – 2002 1,604 0.40 – 59.57 26.88 Granted 254 21.42 – 29.12 0.40 – 59.57 26.88 Granted 254 21.42 – 29.12 24.27 Exercised – 59.57 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) 0.51 – 29.12 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 Canceled ( ( 234 ) 0.51 – 28.22 6.89 Canceled ( 75 ) 234 ) 0.51 – 28.22 6.89 Canceled ( 75 ) 2.13 – 28.22 6.89 Canceled ( 75 ) 2.13 – 59.56 34.33 6.89 Canceled ( 75 ) 2.13 – 59.56 34.33 Balance , ( 75 ) 2.13 – 59.56 34.33 Balance , June 30 75 ) 2.13 – 59.56 34.33 Balance , June 30 , 59.56 34.33 Balance , June 30 , 2003 1,549 0.40 – Balance , June 30 , 2003 1,549 0.40 – 59.56 29.30 , June 30 , 2003 1,549 0.40 – 59.56 29.30 Granted June 30 , 2003 1,549 0.40 – 59.56 29.30 Granted 2 , 2003 1,549 0.40 – 59.56 29.30 Granted 2 25.46 – 2003 1,549 0.40 – 59.56 29.30 Granted 2 25.46 – 29.96 0.40 – 59.56 29.30 Granted 2 25.46 – 29.96 26.76 Exercised – 59.56 29.30 Granted 2 25.46 – 29.96 26.76 Exercised ( 29.30 Granted 2 25.46 – 29.96 26.76 Exercised ( 198 ) Granted 2 25.46 – 29.96 26.76 Exercised ( 198 ) 0.51 – 29.96 26.76 Exercised ( 198 ) 0.51 – 29.38 12.21 26.76 Exercised ( 198 ) 0.51 – 29.38 12.21 Stock Option ( 198 ) 0.51 – 29.38 12.21 Stock Option Transfer Program 198 ) 0.51 – 29.38 12.21 Stock Option Transfer Program ( Stock Option Transfer Program ( 345 ) 33.03 – 59.56 38.70 Transfer Program ( 345 ) 33.03 – 59.56 38.70 Canceled ( ( 345 ) 33.03 – 59.56 38.70 Canceled ( 59 ) 345 ) 33.03 – 59.56 38.70 Canceled ( 59 ) 2.31 – 59.56 38.70 Canceled ( 59 ) 2.31 – 58.28 31.29 38.70 Canceled ( 59 ) 2.31 – 58.28 31.29 Balance , ( 59 ) 2.31 – 58.28 31.29 Balance , June 30 59 ) 2.31 – 58.28 31.29 Balance , June 30 , 58.28 31.29 Balance , June 30 , 2004 949 0.40 – Balance , June 30 , 2004 949 0.40 – 59.56 29.26 , June 30 , 2004 949 0.40 – 59.56 29.26 PAGE June 30 , 2004 949 0.40 – 59.56 29.26 PAGE 53 , 2004 949 0.40 – 59.56 29.26 PAGE 53 Table of 2004 949 0.40 – 59.56 29.26 PAGE 53 Table of Contents 0.40 – 59.56 29.26 PAGE 53 Table of Contents Part II of Contents Part II Item 8 For various price range , employee stock option at June 30 , 2004 are a follows option at June 30 , 2004 are a follows : ( Shares Weighted average price $ 0.00 – $ 15.00 37 1.82 price $ 0.00 – $ 15.00 37 1.82 $ 6.60 36 $ 0.00 – $ 15.00 37 1.82 $ 6.60 36 $ 0.00 – $ 15.00 37 1.82 $ 6.60 36 $ 6.53 $ 15.00 37 1.82 $ 6.60 36 $ 6.53 15.01 – 15.00 37 1.82 $ 6.60 36 $ 6.53 15.01 – 25.00 1.82 $ 6.60 36 $ 6.53 15.01 – 25.00 244 7.24 $ 6.60 36 $ 6.53 15.01 – 25.00 244 7.24 $ 36 $ 6.53 15.01 – 25.00 244 7.24 $ 23.33 75 $ 6.53 15.01 – 25.00 244 7.24 $ 23.33 75 $ 6.53 15.01 – 25.00 244 7.24 $ 23.33 75 $ 21.78 – 25.00 244 7.24 $ 23.33 75 $ 21.78 25.01 – 25.00 244 7.24 $ 23.33 75 $ 21.78 25.01 – 33.00 7.24 $ 23.33 75 $ 21.78 25.01 – 33.00 387 5.62 $ 23.33 75 $ 21.78 25.01 – 33.00 387 5.62 $ 75 $ 21.78 25.01 – 33.00 387 5.62 $ 28.24 237 $ 21.78 25.01 – 33.00 387 5.62 $ 28.24 237 $ 21.78 25.01 – 33.00 387 5.62 $ 28.24 237 $ 28.17 – 33.00 387 5.62 $ 28.24 237 $ 28.17 33.01 – 33.00 387 5.62 $ 28.24 237 $ 28.17 33.01 – 41.00 5.62 $ 28.24 237 $ 28.17 33.01 – 41.00 169 4.17 $ 28.24 237 $ 28.17 33.01 – 41.00 169 4.17 $ 237 $ 28.17 33.01 – 41.00 169 4.17 $ 34.22 127 $ 28.17 33.01 – 41.00 169 4.17 $ 34.22 127 $ 28.17 33.01 – 41.00 169 4.17 $ 34.22 127 $ 34.25 – 41.00 169 4.17 $ 34.22 127 $ 34.25 41.01 – 41.00 169 4.17 $ 34.22 127 $ 34.25 41.01 – 59.56 4.17 $ 34.22 127 $ 34.25 41.01 – 59.56 112 4.40 $ 34.22 127 $ 34.25 41.01 – 59.56 112 4.40 $ 127 $ 34.25 41.01 – 59.56 112 4.40 $ 44.80 94 $ 34.25 41.01 – 59.56 112 4.40 $ 44.80 94 $ 34.25 41.01 – 59.56 112 4.40 $ 44.80 94 $ 44.66 – 59.56 112 4.40 $ 44.80 94 $ 44.66 949 569 59.56 112 4.40 $ 44.80 94 $ 44.66 949 569 As 4.40 $ 44.80 94 $ 44.66 949 569 As of June $ 44.80 94 $ 44.66 949 569 As of June 30 44.80 94 $ 44.66 949 569 As of June 30 , 949 569 As of June 30 , 2004 , 345 million As of June 30 , 2004 , 345 million transferred option June 30 , 2004 , 345 million transferred option to JP table above . See Note 11 . In addition , the in the total option outstanding 6.8 million option outstanding that were exercise price range of $ 0.00 to $ 204.09 and a of $ 0.00 to $ 204.09 and a weighted average exercise average exercise price of $ 14.13 . NOTE 14 EARNINGS PER of $ 14.13 . NOTE 14 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2002 2003 2004 Net income ) Year Ended June 30 2002 2003 2004 Net income available Year Ended June 30 2002 2003 2004 Net income available for Ended June 30 2002 2003 2004 Net income available for common shareholder ( A ) $ 5,355 $ 7,531 $ 8,168 Weighted A ) $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding $ 5,355 $ 7,531 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,811 10,723 10,803 Dilutive effect of stock ( B ) 10,811 10,723 10,803 Dilutive effect of employee ( B ) 10,811 10,723 10,803 Dilutive effect of employee stock employee stock option and award 295 159 91 Common stock and stock option and award 295 159 91 Common stock and common option and award 295 159 91 Common stock and common stock stock equivalent ( C ) 11,106 10,882 10,894 Earnings per share equivalent ( C ) 11,106 10,882 10,894 Earnings per share : ( C ) 11,106 10,882 10,894 Earnings per share : Basic Basic ( A/B ) $ 0.50 $ 0.70 $ 0.76 Diluted A/B ) $ 0.50 $ 0.70 $ 0.76 Diluted ( A/C $ 0.50 $ 0.70 $ 0.76 Diluted ( A/C ) $ Diluted ( A/C ) $ 0.48 $ 0.69 $ 0.75 For A/C ) $ 0.48 $ 0.69 $ 0.75 For the year $ 0.48 $ 0.69 $ 0.75 For the year ended June For the year ended June 30 , 2002 , 2003 and year ended June 30 , 2002 , 2003 and 2004 , June 30 , 2002 , 2003 and 2004 , 746 million , 2002 , 2003 and 2004 , 746 million , 1.09 , 2003 and 2004 , 746 million , 1.09 billion and 2004 , 746 million , 1.09 billion and 1.2 billion share million , 1.09 billion and 1.2 billion share attributable to outstanding For the year ended June 30 , 2004 , 21.9 million year ended June 30 , 2004 , 21.9 million shared performance June 30 , 2004 , 21.9 million shared performance stock award stock award , out of 31.7 million targeted amount granted , , a discussed in Note 13 – Employee Stock and Savings and Savings Plans . PAGE 54 Table of Contents Part II of Contents Part II Item 8 NOTE 15 ACQUISITIONS In fiscal Part II Item 8 NOTE 15 ACQUISITIONS In fiscal 2004 , NOTE 15 ACQUISITIONS In fiscal 2004 , we had no material material acquisition . In fiscal 2003 , we acquired all of We acquired Navision on July 12 , 2002 for $ 1.465 Navision on July 12 , 2002 for $ 1.465 billion consisting 12 , 2002 for $ 1.465 billion consisting primarily of $ billion consisting primarily of $ 662 million in cash and the cash and the issuance of 29.1 million common share of our common stock valued at $ 773 million . The value of Rare wa acquired on September 24 , 2002 for $ 377 acquired on September 24 , 2002 for $ 377 million consisting 24 , 2002 for $ 377 million consisting primarily of $ million consisting primarily of $ 375 million in cash and is Placeware wa acquired on April 30 , 2003 for $ 202 acquired on April 30 , 2003 for $ 202 million , 30 , 2003 for $ 202 million , consisting primarily of , consisting primarily of $ 189 million in cash . Navision of the acquisition for fiscal 2003 are a follows : ( ) Navision a/s at July 12 , 2002 Rare Ltd. at a/s at July 12 , 2002 Rare Ltd. at September 24 2002 Rare Ltd. at September 24 , 2002 Placeware , Inc. Ltd. at September 24 , 2002 Placeware , Inc. at April Placeware , Inc. at April 30 , 2003 Current asset $ Inc. at April 30 , 2003 Current asset $ 240 $ , 2003 Current asset $ 240 $ 25 $ 30 Property Current asset $ 240 $ 25 $ 30 Property , plant $ 240 $ 25 $ 30 Property , plant and equipment Property , plant and equipment 8 8 7 Intangible asset 169 , plant and equipment 8 8 7 Intangible asset 169 75 plant and equipment 8 8 7 Intangible asset 169 75 30 8 8 7 Intangible asset 169 75 30 Goodwill 1,197 281 8 7 Intangible asset 169 75 30 Goodwill 1,197 281 180 7 Intangible asset 169 75 30 Goodwill 1,197 281 180 Total asset 169 75 30 Goodwill 1,197 281 180 Total asset acquired 169 75 30 Goodwill 1,197 281 180 Total asset acquired 1,614 75 30 Goodwill 1,197 281 180 Total asset acquired 1,614 389 281 180 Total asset acquired 1,614 389 247 Current liability ( 180 Total asset acquired 1,614 389 247 Current liability ( 148 Total asset acquired 1,614 389 247 Current liability ( 148 ) 389 247 Current liability ( 148 ) ( 12 ) ( liability ( 148 ) ( 12 ) ( 32 ) Long-term ) ( 12 ) ( 32 ) Long-term liability ( 1 32 ) Long-term liability ( 1 ) – ( 13 ) ( 1 ) – ( 13 ) Total liability assumed ( ) Total liability assumed ( 149 ) ( 12 ) ( assumed ( 149 ) ( 12 ) ( 45 ) Net ) ( 12 ) ( 45 ) Net asset acquired $ ) Net asset acquired $ 1,465 $ 377 $ 202 The asset acquired $ 1,465 $ 377 $ 202 The $ 1.20 $ 1,465 $ 377 $ 202 The $ 1.20 billion of 377 $ 202 The $ 1.20 billion of goodwill resulting from total amount , approximately $ 900 million is expected to be tax purpose . The $ 281 million of goodwill in the total amount , approximately $ 270 million is expected to be tax purpose . The $ 180 million of goodwill in the Weighted average life Contract-based $ 115 6 year $ 16 5 average life Contract-based $ 115 6 year $ 16 5 year $ 115 6 year $ 16 5 year $ 1 6 115 6 year $ 16 5 year $ 1 6 year $ 16 5 year $ 1 6 year Technology-based 48 4 16 5 year $ 1 6 year Technology-based 48 4 year $ 1 6 year Technology-based 48 4 year 36 5 year 1 6 year Technology-based 48 4 year 36 5 year 4 year Technology-based 48 4 year 36 5 year 4 4 year Technology-based 48 4 year 36 5 year 4 4 year Marketing-related 4 year 36 5 year 4 4 year Marketing-related 4 3 year 36 5 year 4 4 year Marketing-related 4 3 year year 4 4 year Marketing-related 4 3 year 10 5 year 4 4 year Marketing-related 4 3 year 10 5 year 2 year Marketing-related 4 3 year 10 5 year 2 1 year Marketing-related 4 3 year 10 5 year 2 1 year Customer-related 3 year 10 5 year 2 1 year Customer-related – – year 10 5 year 2 1 year Customer-related – – – Customer-related – – – – 23 10 year Research and Development – – – – 23 10 year Research and Development 2 10 year Research and Development 2 ( 1 ) – 13 Research and Development 2 ( 1 ) – 13 ( 1 2 ( 1 ) – 13 ( 1 ) – – 1 ) – 13 ( 1 ) – – – Total – – – Total $ 169 5 year $ 75 5 – – Total $ 169 5 year $ 75 5 year $ 169 5 year $ 75 5 year $ 30 8 169 5 year $ 75 5 year $ 30 8 year $ 75 5 year $ 30 8 year ( 1 ) 75 5 year $ 30 8 year ( 1 ) Amounts $ 30 8 year ( 1 ) Amounts assigned to research off in accordance with FIN 4 . Those write-off were included and Development expense . PAGE 55 Table of Contents Part II of Contents Part II Item 8 NOTE 16 COMMITMENTS AND GUARANTEES Part II Item 8 NOTE 16 COMMITMENTS AND GUARANTEES We have for operating lease wa $ 318 million , $ 290 million $ 318 million , $ 290 million , and $ 331 290 million , and $ 331 million in fiscal 2002 , $ 331 million in fiscal 2002 , 2003 , and 2004 million in fiscal 2002 , 2003 , and 2004 , respectively 2002 , 2003 , and 2004 , respectively . Future minimum million ) Year Ended June 30 Amount 2005 $ 148 2006 Year Ended June 30 Amount 2005 $ 148 2006 124 2007 June 30 Amount 2005 $ 148 2006 124 2007 81 2008 30 Amount 2005 $ 148 2006 124 2007 81 2008 62 Amount 2005 $ 148 2006 124 2007 81 2008 62 2009 2005 $ 148 2006 124 2007 81 2008 62 2009 and $ 148 2006 124 2007 81 2008 62 2009 and thereafter 148 2006 124 2007 81 2008 62 2009 and thereafter 120 2006 124 2007 81 2008 62 2009 and thereafter 120 $ 124 2007 81 2008 62 2009 and thereafter 120 $ 535 2008 62 2009 and thereafter 120 $ 535 We have committed 2009 and thereafter 120 $ 535 We have committed $ 129 535 We have committed $ 129 million for constructing new building These guarantee arose on February 1 , 2003 in conjunction with arose on February 1 , 2003 in conjunction with the expiration the loan of approximately $ 51 million . The estimated fair of the guarantee wa $ 11 million which wa added to and fee , or February 1 , 2009 . The maximum , or February 1 , 2009 . The maximum amount of value . As of June 30 , 2004 , the maximum As of June 30 , 2004 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that for such indemnification under SFAS 5 , Accounting for Contingencies , , a interpreted by FIN 45 . We consider such factor Our warranty accrual total $ 19 million . There ha been any period presented . PAGE 56 Table of Contents Part II of Contents Part II Item 8 NOTE 17 CONTINGENCIES Government antitrust Part II Item 8 NOTE 17 CONTINGENCIES Government antitrust case . that we had violated Sections 1 and 2 of the Sherman had violated Sections 1 and 2 of the Sherman Act and Judgment wa entered on June 7 , 2000 ordering , among entered on June 7 , 2000 ordering , among other thing two company . On June 28 , 2001 , the U.S. . On June 28 , 2001 , the U.S. Court of new trial on one Section 1 claim and for entry of that we had violated Section 2 . We entered into a the United States on November 2 , 2001 . Nine state States on November 2 , 2001 . Nine state ( New the same term on November 6 , 2001 . On November term on November 6 , 2001 . On November 1 , , 2001 . On November 1 , 2002 , the Court . On November 1 , 2002 , the Court approved the v. Microsoft . On November 1 , 2002 , the Court . On November 1 , 2002 , the Court entered a other case . On June 30 , 2004 , the U.S. . On June 30 , 2004 , the U.S. Court of law matter . On March 25 , 2004 the European Commission . On March 25 , 2004 the European Commission announced a imposed a fine of € 497 million , which resulted in in a charge of € 497 million ( $ 605 million € 497 million ( $ 605 million ) . We filed of First Instance on June 6 , 2004 and will seek Instance on June 6 , 2004 and will seek interim measure will be held on September 30 – October 1 , 2004 on September 30 – October 1 , 2004 . In other 30 – October 1 , 2004 . In other ongoing investigation under federal law and in 14 state . Nine of those certified class licensed fewer than 550,000 copy of at-issue operating system from u . In September 2003 , we reached an agreement received final approval in April 2004 . In 2003 , we in April 2004 . In 2003 , we reached an agreement to settle all claim in 27 consolidated case in that state obtain voucher on a PAGE 57 Table of Contents Part II of Contents Part II Item 8 claim made basis that entitle . Since the beginning of 2003 , we also reached similar California settlement , is $ 1.55 billion . The actual cost case will range between $ 1.1 billion and $ 1.2 billion $ 1.1 billion and $ 1.2 billion with the actual cost . In accordance with SFAS 5 , Accounting for Contingencies , for Contingencies , and FIN 14 , Reasonable Estimation of the a contingent liability of $ 1.04 billion , net of administrative RealNetworks litigation . On December 18 , 2003 , RealNetworks , . On December 18 , 2003 , RealNetworks , Inc. filed the defendant in more than 30 patent infringement case that we District of Illinois on February 2 , 1999 , the plaintiff Illinois on February 2 , 1999 , the plaintiff accused the of infringement . On August 11 , 2003 , the jury . On August 11 , 2003 , the jury awarded the awarded the plaintiff approximately $ 520 million in damage for infringement ’ patent issued through September 2001 . The plaintiff are seeking accounting for damage from September 2001 to the present . On the present . On January 14 , 2004 , the trial . On January 14 , 2004 , the trial court entered entered final judgment of $ 565 million , including post-trial interest including post-trial interest of $ 45 million , and entered an notice of appeal on February 12 , 2004 . On October appeal on February 12 , 2004 . On October 30 , , 2004 . On October 30 , 2003 , the U.S. . On October 30 , 2003 , the U.S. Patent Office Eolas patent . On February 26 , 2004 , pursuant to . On February 26 , 2004 , pursuant to this re-examination back a Windows and Office 2000 . The case is scheduled for trial in April of 2005 . In TVI v. Microsoft scheduled for trial in September 2004 . In Arendi USA , Microsoft Office XP and Office 2003 of infringing one patent . is scheduled for September , 2004 . Adverse outcome in some in material settlement . PAGE 58 Table of Contents Part II of Contents Part II Item 8 Sun Microsystems agreement . On Microsystems agreement . On April 1 , 2004 , we entered . On April 1 , 2004 , we entered into a we made payment totaling $ 1.95 billion to Sun . In under MDL Docket No . 1332 . Sun released Microsoft from . v Microsoft Corp. , 84 F. Supp . 2d 9 , 84 F. Supp . 2d 9 ( D.D.C . 2002 84 F. Supp . 2d 9 ( D.D.C . 2002 ) 2d 9 ( D.D.C . 2002 ) . Pursuant to the , Microsoft paid Sun $ 700 million , which wa recorded to sue each year until 2014 in exchange for an annual agreement provides that on April 1 , 2014 , provided that that on April 1 , 2014 , provided that certain condition , Microsoft paid Sun $ 900 million , which wa recorded be credited against the $ 350 million already paid pursuant to a fair value of $ 29 million for the right to the remaining amount of $ 321 million wa recorded a litigation Intertrust settlement . On April 3 , 2004 , the previously . On April 3 , 2004 , the previously reported case payment to InterTrust of $ 440 million . The agreement involved an intangible asset of $ 266 million and a payment of and a payment of $ 174 million for settlement of legal the total payment , $ 174 million wa recovered through insurance of these matter may PAGE 59 Table of Contents Part II of Contents Part II Item 8 change in the future . becomes reasonably estimable . NOTE 18 SEGMENT INFORMATION Segment revenue and is a follows : ( 1 ) ( In million ) million ) Year Ended June 30 2002 2003 2004 Revenue Client ) Year Ended June 30 2002 2003 2004 Revenue Client $ Year Ended June 30 2002 2003 2004 Revenue Client $ 9,350 Ended June 30 2002 2003 2004 Revenue Client $ 9,350 $ 2003 2004 Revenue Client $ 9,350 $ 10,287 $ 11,241 Server Revenue Client $ 9,350 $ 10,287 $ 11,241 Server and Tools $ 9,350 $ 10,287 $ 11,241 Server and Tools 5,632 6,692 $ 11,241 Server and Tools 5,632 6,692 7,881 Information Worker 8,328 11,241 Server and Tools 5,632 6,692 7,881 Information Worker 8,328 9,695 Server and Tools 5,632 6,692 7,881 Information Worker 8,328 9,695 10,924 5,632 6,692 7,881 Information Worker 8,328 9,695 10,924 Microsoft Business Solutions 6,692 7,881 Information Worker 8,328 9,695 10,924 Microsoft Business Solutions 308 7,881 Information Worker 8,328 9,695 10,924 Microsoft Business Solutions 308 577 9,695 10,924 Microsoft Business Solutions 308 577 660 MSN 1,924 2,396 10,924 Microsoft Business Solutions 308 577 660 MSN 1,924 2,396 2,444 Microsoft Business Solutions 308 577 660 MSN 1,924 2,396 2,444 Mobile Solutions 308 577 660 MSN 1,924 2,396 2,444 Mobile and Embedded 308 577 660 MSN 1,924 2,396 2,444 Mobile and Embedded Devices 577 660 MSN 1,924 2,396 2,444 Mobile and Embedded Devices 124 2,444 Mobile and Embedded Devices 124 153 239 Home and Entertainment Mobile and Embedded Devices 124 153 239 Home and Entertainment 2,411 and Embedded Devices 124 153 239 Home and Entertainment 2,411 2,779 153 239 Home and Entertainment 2,411 2,779 2,870 Reconciling amount 288 239 Home and Entertainment 2,411 2,779 2,870 Reconciling amount 288 ( Home and Entertainment 2,411 2,779 2,870 Reconciling amount 288 ( 392 2,411 2,779 2,870 Reconciling amount 288 ( 392 ) 576 Consolidated 2,870 Reconciling amount 288 ( 392 ) 576 Consolidated $ 28,365 amount 288 ( 392 ) 576 Consolidated $ 28,365 $ 32,187 392 ) 576 Consolidated $ 28,365 $ 32,187 $ 36,835 Operating 576 Consolidated $ 28,365 $ 32,187 $ 36,835 Operating Income/ ( $ 28,365 $ 32,187 $ 36,835 Operating Income/ ( Loss ) ( Loss ) Client $ 7,529 $ 8,362 $ 9,005 Server ) Client $ 7,529 $ 8,362 $ 9,005 Server and Tools $ 7,529 $ 8,362 $ 9,005 Server and Tools 1,409 1,841 $ 9,005 Server and Tools 1,409 1,841 2,173 Information Worker 6,440 9,005 Server and Tools 1,409 1,841 2,173 Information Worker 6,440 7,495 Server and Tools 1,409 1,841 2,173 Information Worker 6,440 7,495 8,067 1,409 1,841 2,173 Information Worker 6,440 7,495 8,067 Microsoft Business Solutions 1,841 2,173 Information Worker 6,440 7,495 8,067 Microsoft Business Solutions ( 2,173 Information Worker 6,440 7,495 8,067 Microsoft Business Solutions ( 196 8,067 Microsoft Business Solutions ( 196 ) ( 202 ) ( Solutions ( 196 ) ( 202 ) ( 180 ) MSN ) ( 202 ) ( 180 ) MSN ( 746 ) ( 180 ) MSN ( 746 ) ( 378 ) 397 MSN ( 746 ) ( 378 ) 397 Mobile and Embedded 746 ) ( 378 ) 397 Mobile and Embedded Devices ( Mobile and Embedded Devices ( 240 ) ( 162 ) ( Devices ( 240 ) ( 162 ) ( 102 ) Home ) ( 162 ) ( 102 ) Home and Entertainment ( ) Home and Entertainment ( 866 ) ( 938 ) ( Entertainment ( 866 ) ( 938 ) ( 894 ) Reconciling ) ( 938 ) ( 894 ) Reconciling amount ( 5,058 894 ) Reconciling amount ( 5,058 ) ( 6,473 ) ( amount ( 5,058 ) ( 6,473 ) ( 9,432 ) Consolidated ) ( 6,473 ) ( 9,432 ) Consolidated $ 8,272 $ ( 9,432 ) Consolidated $ 8,272 $ 9,545 $ 9,034 ( ) Consolidated $ 8,272 $ 9,545 $ 9,034 ( 1 ) $ 8,272 $ 9,545 $ 9,034 ( 1 ) Fiscal 2002 $ 9,545 $ 9,034 ( 1 ) Fiscal 2002 and 2003 9,034 ( 1 ) Fiscal 2002 and 2003 information ha been 1 ) Fiscal 2002 and 2003 information ha been restated to value recognition provision of SFAS 123 , Accounting for Stock-Based Compensation , a discussed in Note 13 . In addition , fiscal . In addition , fiscal 2003 information ha been restated for not practicable to restate fiscal 2002 information for these change , a basis consistent with fiscal 2002 . SFAS 131 , Disclosures with fiscal 2002 . SFAS 131 , Disclosures about Segments of Professional and Home , Windows 2000 Professional , and other standard Windows operating system . PAGE 60 Table of Contents Part II of Contents Part II Item 8 Server and Tools – Server million ) Year Ended June 30 2002 2003 2004 Operating income ) Year Ended June 30 2002 2003 2004 Operating income reconciling Year Ended June 30 2002 2003 2004 Operating income reconciling amount Ended June 30 2002 2003 2004 Operating income reconciling amount : settlement and contingent liability ( 673 ) ( 1,079 ) ( liability ( 673 ) ( 1,079 ) ( 2,778 ) Stock-based ) ( 1,079 ) ( 2,778 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 3,784 ) ( 3,749 ) ( expense ( 3,784 ) ( 3,749 ) ( 4,773 ) Revenue ) ( 3,749 ) ( 4,773 ) Revenue reconciling amount 288 4,773 ) Revenue reconciling amount 288 ( 392 ) 576 Other Revenue reconciling amount 288 ( 392 ) 576 Other ( 889 amount 288 ( 392 ) 576 Other ( 889 ) ( 392 ) 576 Other ( 889 ) ( 1,253 ) ( Other ( 889 ) ( 1,253 ) ( 2,457 ) Total ) ( 1,253 ) ( 2,457 ) Total $ ( 5,058 2,457 ) Total $ ( 5,058 ) $ ( 6,473 ) ( 5,058 ) $ ( 6,473 ) $ ( 9,432 ) ( 6,473 ) $ ( 9,432 ) Other primarily includes corporate with U.S. GAAP . PAGE 61 Table of Contents Part II of Contents Part II Item 8 Sales to Dell and it the aggregate accounted for approximately 10 % of total fiscal 2004 10 % of total fiscal 2004 revenue . These sale were customer accounted for more than 10 % of revenue in 2002 10 % of revenue in 2002 or 2003 . Revenue , of revenue in 2002 or 2003 . Revenue , classified by million ) Year Ended June 30 2002 2003 2004 United States ) Year Ended June 30 2002 2003 2004 United States ( Year Ended June 30 2002 2003 2004 United States ( 1 Ended June 30 2002 2003 2004 United States ( 1 ) 2003 2004 United States ( 1 ) $ 20,066 $ 22,077 States ( 1 ) $ 20,066 $ 22,077 $ 25,046 Other 1 ) $ 20,066 $ 22,077 $ 25,046 Other country 8,299 $ 20,066 $ 22,077 $ 25,046 Other country 8,299 10,110 11,789 22,077 $ 25,046 Other country 8,299 10,110 11,789 Total $ 28,365 $ 25,046 Other country 8,299 10,110 11,789 Total $ 28,365 $ 25,046 Other country 8,299 10,110 11,789 Total $ 28,365 $ 32,187 8,299 10,110 11,789 Total $ 28,365 $ 32,187 $ 36,835 ( 11,789 Total $ 28,365 $ 32,187 $ 36,835 ( 1 ) $ 28,365 $ 32,187 $ 36,835 ( 1 ) Includes shipment $ 32,187 $ 36,835 ( 1 ) Includes shipment to customer million ) Year Ended June 30 2003 2004 United States $ ) Year Ended June 30 2003 2004 United States $ 3,773 Year Ended June 30 2003 2004 United States $ 3,773 $ 2003 2004 United States $ 3,773 $ 5,365 Other country 1,962 United States $ 3,773 $ 5,365 Other country 1,962 645 Total 3,773 $ 5,365 Other country 1,962 645 Total $ 5,735 $ $ 5,365 Other country 1,962 645 Total $ 5,735 $ 6,010 country 1,962 645 Total $ 5,735 $ 6,010 NOTE 19 SUBSEQUENT 645 Total $ 5,735 $ 6,010 NOTE 19 SUBSEQUENT EVENT On $ 5,735 $ 6,010 NOTE 19 SUBSEQUENT EVENT On July 20 19 SUBSEQUENT EVENT On July 20 , 2004 , our board EVENT On July 20 , 2004 , our board of director a quarterly dividend of $ 0.08 per share payable on September per share payable on September 14 , 2004 , to shareholder payable on September 14 , 2004 , to shareholder of record shareholder of record on August 25 , 2004 . In addition record on August 25 , 2004 . In addition , the buy back up to $ 30 billion in Microsoft common stock one-time special dividend of $ 3.00 per share , or approximately share , or approximately $ 32 billion , subject to shareholder will be payable on December 2 , 2004 , to shareholder payable on December 2 , 2004 , to shareholder of record shareholder of record on November 17 , 2004 , conditioned upon record on November 17 , 2004 , conditioned upon shareholder approval scheduled to be held November 9 , 2004 . PAGE 62 be held November 9 , 2004 . PAGE 62 Table of 9 , 2004 . PAGE 62 Table of Contents Part II of Contents Part II Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal 2003 31 Mar . 31 June 30 Total Fiscal 2003 Revenue $ 31 June 30 Total Fiscal 2003 Revenue $ 7,746 $ 8,541 Total Fiscal 2003 Revenue $ 7,746 $ 8,541 $ ` 7,835 2003 Revenue $ 7,746 $ 8,541 $ ` 7,835 $ 8,065 7,746 $ 8,541 $ ` 7,835 $ 8,065 $ 32,187 Gross 8,541 $ ` 7,835 $ 8,065 $ 32,187 Gross profit 6,402 ` 7,835 $ 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 2,142 6,561 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic earnings per 2,142 1,483 ( 1 ) 7,531 Basic earnings per share 0.19 7,531 Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share 0.19 0.70 Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue per share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ share 0.19 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ 8,215 0.17 0.20 0.14 0.69 Fiscal 2004 Revenue $ 8,215 $ 10,153 0.69 Fiscal 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 ( Net income 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,690 8,168 ( 2 ) 1,315 ( 3 ) 2,690 8,168 Basic earnings ) 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 ) per share 0.24 0.14 0.12 0.25 0.75 ( 1 ) Includes share 0.24 0.14 0.12 0.25 0.75 ( 1 ) Includes charge 0.14 0.12 0.25 0.75 ( 1 ) Includes charge of $ ) Includes charge of $ 750 million ( pre-tax ) related Time Warner settlement and $ 1.15 billion in impairment of investment impairment of investment . ( 2 ) Includes stock-based compensation charge stock-based compensation charge of $ 2.2 billion for the employee stock option transfer program . ( 3 ) Includes charge of $ ) Includes charge of $ 2.53 billion ( pre-tax ) related the European Commission . PAGE 63 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC and subsidiary a of June 30 , 2003 and 2004 , a of June 30 , 2003 and 2004 , and the June 30 , 2003 and 2004 , and the related consolidated in the period ended June 30 , 2004 . These financial period ended June 30 , 2004 . These financial statement are and subsidiary a of June 30 , 2003 and 2004 , a of June 30 , 2003 and 2004 , and the June 30 , 2003 and 2004 , and the result of in the period ended June 30 , 2004 in conformity with period ended June 30 , 2004 in conformity with accounting principle . As described in Note 13 to the financial statement , Financial Accounting Standards No . 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , effective July 1 , 2003 . /s/ D , effective July 1 , 2003 . /s/ D ELOITTE & LLP Seattle , Washington August 24 , 2004 PAGE 64 Table , Washington August 24 , 2004 PAGE 64 Table of Contents August 24 , 2004 PAGE 64 Table of Contents Part II of Contents Part II Item 9 , 9A , 9B ITEM Part II Item 9 , 9A , 9B ITEM 9 . Item 9 , 9A , 9B ITEM 9 . CHANGES IN , 9A , 9B ITEM 9 . CHANGES IN AND DISAGREEMENTS FINANCIAL DISCLOSURE None . ITEM 9A . CONTROLS AND PROCEDURES Under pursuant to Exchange Act Rule 13a-15 ( b ) a of during the quarter ended June 30 , 2004 that have materially quarter ended June 30 , 2004 that have materially affected , over financial reporting . ITEM 9B . OTHER INFORMATION None . OTHER INFORMATION None . PAGE 65 Table of Contents Part III of Contents Part III Item 10 , 11 , 12 , Part III Item 10 , 11 , 12 , 13 , Item 10 , 11 , 12 , 13 , 14 , , 11 , 12 , 13 , 14 , 15 PART , 12 , 13 , 14 , 15 PART III ITEM , 13 , 14 , 15 PART III ITEM 10 . , 15 PART III ITEM 10 . DIRECTORS AND EXECUTIVE OFFICERS Shareholders to be held November 9 , 2004 ( the “ be held November 9 , 2004 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND reference . PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been is otherwise included . PAGE 66 Table of Contents Part IV of Contents Part IV Item 15 ( b ) Exhibit Listing Exhibit Listing Exhibit Number Description 3.1 Amended and Restated Articles of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation ( Bylaws of Microsoft Corporation ( 2 ) 4 . Call Option Microsoft Corporation ( 2 ) 4 . Call Option Transaction Confirmation Option Transaction Confirmation dated December 11 , 2003 between Microsoft Corporation Confirmation dated December 11 , 2003 between Microsoft Corporation and JPMorgan and JPMorgan Chase Bank ( 3 ) 10.1 * Microsoft Corporation Chase Bank ( 3 ) 10.1 * Microsoft Corporation 2001 Stock ) 10.1 * Microsoft Corporation 2001 Stock Plan 10.2 * Microsoft Microsoft Corporation 2001 Stock Plan 10.2 * Microsoft Corporation 1991 Stock Plan 10.2 * Microsoft Corporation 1991 Stock Option Plan ( 4 1991 Stock Option Plan ( 4 ) 10.3 * Microsoft Corporation Option Plan ( 4 ) 10.3 * Microsoft Corporation 1999 Stock ) 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10.4 * Microsoft Corporation Stock Option Plan for Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Option Plan for Consultants and Advisors ( 6 ) 10.6 * Microsoft Corporation and Advisors ( 6 ) 10.6 * Microsoft Corporation 2003 Employee ) 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10.7 2003 Employee Stock Purchase Plan 10.7 * Microsoft Corporation 1998 Stock Plan 10.7 * Microsoft Corporation 1998 Stock Option Gain and Bonus Gain and Bonus Deferral Program 10.8 * Form of Stock Award Form of Stock Award Agreement 10.9 * Form of Stock Award Award Agreement for Non-Employee Directors 10.10 * Form of Shared Performance Award Agreement for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10.11 2004 to June 30 , 2006 performance period 10.11 * Form 30 , 2006 performance period 10.11 * Form of Shared Performance Award Agreement for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10.12 2003 to June 30 , 2006 performance period 10.12 * Form 30 , 2006 performance period 10.12 * Form of Stock Option Form of Stock Option Agreement 10.13 * Form of Stock Option Option Agreement for Non-Employee Directors 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY Washington a trustee ) ( 6 ) 10.15 Trust Agreement dated trustee ) ( 6 ) 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Trust Company a trustee ( 7 ) 10.16 Form of Indemnification a trustee ( 7 ) 10.16 Form of Indemnification Agreement ( Form of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Registrant 23 21 . Subsidiaries of Registrant 23 . Consent of Independent Registered Independent Registered Public Accounting Firm 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief Executive Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2002 . ( 2 Period Ended December 31 , 2002 . ( 2 ) Incorporated 31 , 2002 . ( 2 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended March 31 , 2003 . ( 3 Period Ended March 31 , 2003 . ( 3 ) Incorporated 31 , 2003 . ( 3 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2003 . ( 4 Period Ended December 31 , 2003 . ( 4 ) Incorporated 31 , 2003 . ( 4 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 1997 . ( 5 Year Ended June 30 , 1997 . ( 5 ) Incorporated 30 , 1997 . ( 5 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 1994 . ( 6 Year Ended June 30 , 1994 . ( 6 ) Incorporated 30 , 1994 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2002 . ( 7 Year Ended June 30 , 2002 . ( 7 ) Incorporated 30 , 2002 . ( 7 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2003 . * Indicates Year Ended June 30 , 2003 . * Indicates a management plan or arrangement . PAGE 67 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on September 1 , 2004 . M ICROSOFT , on September 1 , 2004 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on September 1 , 2004 . Signature Title indicated on September 1 , 2004 . Signature Title /s/ W and Accounting Officer ) PAGE 68 Table of Contents EXHIBIT INDEX EXHIBIT INDEX Exhibit Number Description 3.1 Amended and Restated Articles of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation ( Bylaws of Microsoft Corporation ( 2 ) 4 . Call Option Microsoft Corporation ( 2 ) 4 . Call Option Transaction Confirmation Option Transaction Confirmation dated December 11 , 2003 between Microsoft Corporation Confirmation dated December 11 , 2003 between Microsoft Corporation and JPMorgan and JPMorgan Chase Bank ( 3 ) 10.1 * Microsoft Corporation Chase Bank ( 3 ) 10.1 * Microsoft Corporation 2001 Stock ) 10.1 * Microsoft Corporation 2001 Stock Plan 10.2 * Microsoft Microsoft Corporation 2001 Stock Plan 10.2 * Microsoft Corporation 1991 Stock Plan 10.2 * Microsoft Corporation 1991 Stock Option Plan ( 4 1991 Stock Option Plan ( 4 ) 10.3 * Microsoft Corporation Option Plan ( 4 ) 10.3 * Microsoft Corporation 1999 Stock ) 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10.4 * Microsoft Corporation Stock Option Plan for Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 5 ) 10.5 Microsoft Corporation Stock Option Plan for Consultants and Advisors ( 6 ) 10.6 * Microsoft Corporation and Advisors ( 6 ) 10.6 * Microsoft Corporation 2003 Employee ) 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10.7 2003 Employee Stock Purchase Plan 10.7 * Microsoft Corporation 1998 Stock Plan 10.7 * Microsoft Corporation 1998 Stock Option Gain and Bonus Gain and Bonus Deferral Program 10.8 * Form of Stock Award Form of Stock Award Agreement 10.9 * Form of Stock Award Award Agreement for Non-Employee Directors 10.10 * Form of Shared Performance Award Agreement for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10.11 2004 to June 30 , 2006 performance period 10.11 * Form 30 , 2006 performance period 10.11 * Form of Shared Performance Award Agreement for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10.12 2003 to June 30 , 2006 performance period 10.12 * Form 30 , 2006 performance period 10.12 * Form of Stock Option Form of Stock Option Agreement 10.13 * Form of Stock Option Option Agreement for Non-Employee Directors 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY Washington a trustee ) ( 6 ) 10.15 Trust Agreement dated trustee ) ( 6 ) 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Trust Company a trustee ( 7 ) 10.16 Form of Indemnification a trustee ( 7 ) 10.16 Form of Indemnification Agreement ( Form of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Registrant 23 21 . Subsidiaries of Registrant 23 . Consent of Independent Registered Independent Registered Public Accounting Firm 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief the Sarbanes-Oxley Act of 2002 32 . Certifications of Chief Executive Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2002 . ( 2 Period Ended December 31 , 2002 . ( 2 ) Incorporated 31 , 2002 . ( 2 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended March 31 , 2003 . ( 3 Period Ended March 31 , 2003 . ( 3 ) Incorporated 31 , 2003 . ( 3 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2003 . ( 4 Period Ended December 31 , 2003 . ( 4 ) Incorporated 31 , 2003 . ( 4 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 1997 . ( 5 Year Ended June 30 , 1997 . ( 5 ) Incorporated 30 , 1997 . ( 5 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 1994 . ( 6 Year Ended June 30 , 1994 . ( 6 ) Incorporated 30 , 1994 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2002 . ( 7 Year Ended June 30 , 2002 . ( 7 ) Incorporated 30 , 2002 . ( 7 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2003 . * Indicates Year Ended June 30 , 2003 . * Indicates a management \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-05-174825/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-05-174825/full-submission.txt new file mode 100644 index 0000000..9a64b7d --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-05-174825/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2005 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2005 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark ( a defined in Rule 12b-2 of the Exchange Act ) ( a defined in Rule 12b-2 of the Exchange Act ) the registrant a of December 31 , 2004 wa $ 256,094,088,589.78 a of December 31 , 2004 wa $ 256,094,088,589.78 . The 31 , 2004 wa $ 256,094,088,589.78 . The number of share common stock a of August 15 , 2005 wa 10,712,706,028 . a of August 15 , 2005 wa 10,712,706,028 . DOCUMENTS INCORPORATED August 15 , 2005 wa 10,712,706,028 . DOCUMENTS INCORPORATED BY REFERENCE Shareholders to be held November 9 , 2005 are incorporated by be held November 9 , 2005 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2005 INDEX PART I Year Ended June 30 , 2005 INDEX PART I Item 1. 2005 INDEX PART I Item 1. Business 3 Risk Factors 13 PART I Item 1. Business 3 Risk Factors 13 Executive Officers 1. Business 3 Risk Factors 13 Executive Officers of the Registrant Executive Officers of the Registrant 17 Item 2 . Properties 19 of the Registrant 17 Item 2 . Properties 19 Item 3 17 Item 2 . Properties 19 Item 3 . Legal Proceedings 2 . Properties 19 Item 3 . Legal Proceedings 19 Item Item 3 . Legal Proceedings 19 Item 4 . Submission of . Legal Proceedings 19 Item 4 . Submission of Matters to a Vote of Security Holders 19 PART II Item 5 . Holders 19 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 20 Item 6 . Selected Financial of Equity Securities 20 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 39 Item 8 . Financial Statements about Market Risk 39 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 41 Item 9 . Changes in and Supplementary Data 41 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 71 Item 9A . Controls and and Financial Disclosure 71 Item 9A . Controls and Procedures 71 9A . Controls and Procedures 71 Report of Management on Internal Internal Control over Financial Reporting 71 Report of Independent Registered Public Independent Registered Public Accounting Firm 72 Item 9B . Other Information Public Accounting Firm 72 Item 9B . Other Information 73 PART Item 9B . Other Information 73 PART III Item 10 . Information 73 PART III Item 10 . Directors and Executive Officers Executive Officers of the Registrant 73 Item 11 . Executive Compensation of the Registrant 73 Item 11 . Executive Compensation 73 Item Item 11 . Executive Compensation 73 Item 12 . Security Ownership . Executive Compensation 73 Item 12 . Security Ownership of Certain Certain Beneficial Owners and Management 73 Item 13 . Certain Relationships Owners and Management 73 Item 13 . Certain Relationships and Related Certain Relationships and Related Transactions 73 Item 14 . Principal Accountant and Related Transactions 73 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 73 PART IV Item 15 . Services 73 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 74 Signatures 75 PAGE 2 Table Financial Statement Schedules 74 Signatures 75 PAGE 2 Table of Contents Schedules 74 Signatures 75 PAGE 2 Table of Contents Part I of Contents Part I Item 1 Special Note About Forward-Looking Statements Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . These forward-looking statement generally Factors ” beginning on page 13 of this report . We otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is . Since our founding in 1975 , we have been a and Entertainment . See Note 18 – Segment Information of the OEM channel account for over 80 % of total Client revenue in more place . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Windows XP Home Edition is and connectivity . Windows XP 64-Bit Edition meet the demand of first half of fiscal year 2007 . Server and Tools . built on the Windows Server 2003 operating system . In addition service . During fiscal year 2006 , Server and Tools plan different customer segment . Approximately 50 % of Server revenue come from multi-year licensing agreement , 40 % is purchased through fully volume licensing program , and 10 % come from license sold sold to OEMs . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Information Worker . The Information first half of fiscal year 2004 , represents an evolution from system includes the Microsoft Office 2003 Editions , which include ( ) : Microsoft Office Outlook 2003 ; Microsoft Office Excel 2003 2003 ; Microsoft Office Excel 2003 ; Microsoft Office PowerPoint 2003 2003 ; Microsoft Office PowerPoint 2003 ; Microsoft Office Word 2003 2003 ; Microsoft Office Word 2003 ; Microsoft Office Access 2003 2003 ; Microsoft Office Access 2003 ; Microsoft Office InfoPath 2003 2003 ; Microsoft Office InfoPath 2003 ; and Microsoft Office Publisher ; and Microsoft Office Publisher 2003 . Other product in the include : Microsoft Office Visio 2003 ; Microsoft Office Project 2003 2003 ; Microsoft Office Project 2003 ; Microsoft Office Project Server ; Microsoft Office Project Server 2003 ; Microsoft Office OneNote 2003 2003 ; Microsoft Office OneNote 2003 ; Microsoft Office FrontPage 2003 2003 ; Microsoft Office FrontPage 2003 ; Microsoft Office Live Communications Microsoft Office Live Communications Server 2005 ; Microsoft Office Live Meeting ; Microsoft Office Live Meeting 2005 ; Microsoft Office Communicator 2005 2005 ; Microsoft Office Communicator 2005 ; and Microsoft Office SharePoint Microsoft Office SharePoint Portal Server 2003 . The Information Worker business solution . Historically , approximately 40 % of Information Worker billed Information Worker revenue . Approximately 40 % of Information Worker revenue condition . The remaining approximately 20 % of Information Worker revenue with a major release every 24-36 month . New product and cycle . In fiscal year 2006 , the Information Worker segment product , code named Office 12 , due for release during first half of fiscal year 2007 . Microsoft Business Solutions . small and midsized retailer PAGE 5 Table of Contents Part I of Contents Part I Item 1 ( Microsoft Point of Sale Worker . In fiscal year 2006 , Microsoft Business Solutions will , visited by more than 420 million unique user every month e-mail service with more than 205 million account , and MSN instant-messaging service with more than 175 million account . MSN also vehicle . In fiscal year 2006 , Mobile and Embedded Devices functionality to the Windows Mobile 5.0 platform through the Microsoft Enterprise and the Exchange Service Pack 2 . Effective July 1 , Pack 2 . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function related to MapPoint MSN reported result . PAGE 6 Table of Contents Part I of Contents Part I Item 1 Home and Entertainment . The , released in fiscal year 2002 , is a video game and audio experience . Xbox 360 , unveiled in May 2005 360 , unveiled in May 2005 , is our next-generation video first half of fiscal year 2006 in Europe , Japan and Similarly , our upcoming Xbox 360 console will also include certain initially source these key Xbox 360 component from a single supplier PRODUCT DEVELOPMENT During fiscal year 2003 , 2004 , and 2005 During fiscal year 2003 , 2004 , and 2005 , research 2003 , 2004 , and 2005 , research and development expense and development expense wa $ 6.60 billion , $ 7.78 billion $ 6.60 billion , $ 7.78 billion , and $ 6.18 7.78 billion , and $ 6.18 billion respectively . Those amount respectively . Those amount represented 20.5 % , 21.1 % , amount represented 20.5 % , 21.1 % , and 15.5 % , 21.1 % , and 15.5 % , respectively , of , and testing . PAGE 7 Table of Contents Part I of Contents Part I Item 1 Business and Product Development Strategy innovation . In fiscal year 2005 , we filed for more we filed for more than 3,000 U.S. patent for new technology operating system , the Office 12 upgrade of the Microsoft Office in local market . PAGE 8 Table of Contents Part I of Contents Part I Item 1 Distributors and Resellers . We primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , this program medium-to-large organization ( greater than 250 license ) , this program product and solution . PAGE 9 Table of Contents Part I of Contents Part I Item 1 CUSTOMERS Our customer include individual the aggregate accounted for approximately 10 % of fiscal year 2004 10 % of fiscal year 2004 and 2005 revenue . These of fiscal year 2004 and 2005 revenue . These sale were customer accounted for more than 10 % of revenue in 2003 10 % of revenue in 2003 . Our practice is to and Red Hat . PAGE 10 Table of Contents Part I of Contents Part I Item 1 We compete in the business company focused on the Java 2 Platform Enterprise Edition ( J2EE especially in display and PAGE 11 Table of Contents Part I of Contents Part I Item 1 in search-based advertising . As game console have on average 5 to 7 year lifecycles . have on average 5 to 7 year lifecycles . We have first half of fiscal year 2006 of a new console , new console , the Xbox 360 . Sony and Nintendo have . We believe the Xbox 360 is positioned well against competitive strong exclusive content from our 1 st party game franchise such , and Siemens/Myrio . PAGE 12 Table of Contents Part I of Contents Part I Item 1 RISK FACTORS Challenges to our range in size from Fortune 100 company to small , single-product See Part I , Item 1 of this report for additional made and expect to PAGE 13 Table of Contents Part I of Contents Part I Item 1 continue making significant expenditure to U.S. Department of Justice , 18 state , and the District that took effect in November 2001 and a Final Judgment entered Final Judgment entered in November 2002 . These proceeding imposed regulatory the past . In March 2004 , the European Commission determined the Commission . The PAGE 14 Table of Contents Part I of Contents Part I Item 1 availability of these license may including Windows Vista , Office 12 , MSN Search , SQL , Windows Server and Xbox 360 . Investments in new technology Microsoft Office System ( Office 12 ) . If these product tax . In the PAGE 15 Table of Contents Part I of Contents Part I Item 1 ordinary course of our business insufficient supply of certain Xbox 360 component or console inventory . component of the upcoming Xbox 360 are obtained from a single component shortage for the Xbox 360 . Similarly , if our the excess inventory . Xbox 360 console will be assembled in from operation . See Note 1 in “ Item 8 . Note 1 in “ Item 8 . Financial Statements and Supplementary Data ” and “ Item 7 . Management ’ s Discussion . We operate in over 100 country and a significant part which are near major PAGE 16 Table of Contents Part I of Contents Part I Item 1 earthquake fault . A catastrophic market . As of June 30 , 2005 , the face As of June 30 , 2005 , the face value of captive insurance arrangement wa $ 2.0 billion . Actual value at executive officer a of August 25 , 2005 were a follows a of August 25 , 2005 were a follows : Name Company William H. Gates III 49 Chairman of the Board and Software Architect Steven A. Ballmer 49 Chief Executive Officer James E. Executive Officer James E. Allchin 53 Group Vice President , Platforms . ( Robbie ) Bach 43 Senior Vice President , Home Home and Entertainment Lisa Brummel 45 Corporate Vice President , Human Human Resources Douglas J. Burgum 49 Senior Vice President , Microsoft Business Solutions David W. Cole 43 Senior Vice President , MSN Personal Services Group Jean-Philippe Courtois 45 Senior Vice President ; President International J. Scott Di Valerio 42 Corporate Vice President , Finance Accounting Officer Kevin R. Johnson 44 Group Vice President , Worldwide and Services Christopher P. Liddell 47 Senior Vice President , Finance Michelle ( Mich ) Mathews 38 Senior Vice President , Marketing , Marketing Craig J. Mundie 56 Senior Vice President ; Chief and Policy Jeffrey S. Raikes 47 Group Vice President , Information Worker Business Eric D. Rudder 38 Senior Vice President , Server Tools Business Bradford L. Smith 46 Senior Vice President , Legal Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a since our incorporation . PAGE 17 Table of Contents Part I of Contents Part I Item 1 Mr. Ballmer wa named Chief of the Company in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Allchin wa named President , Platforms in December 1999 . He had been Senior President , Platforms since March 1999 . He wa previously Senior and Business Systems since February 1996 . Mr. Allchin joined Microsoft Mr. Allchin joined Microsoft in 1990 . Mr. Bach wa named Home and Entertainment in March 2000 . He had been Vice Home and Retail since March 1999 . Before holding that position , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Ms. Brummel wa named , Human Resources in April 2005 . Previous to this position . She joined Microsoft in 1989 . Mr. Burgum joined the Software , Inc. in April 2001 . Previous to the acquisition He joined Great Plains in 1983 . Mr. Cole wa named and Personal Services in November 2001 . Before holding that position Services Platform Division since August 2000 . He had been Senior , Consumer Services since December 1999 and Vice President , Consumer , Consumer Windows since March 1999 . Previously , he wa Mr. Cole joined Microsoft in 1986 . Mr. Courtois wa named of Microsoft International in June 2005 . He had been Chief , and Africa since March 2003 . Previous to that , , and Africa since July 2000 . Before holding that position Worldwide Customer Marketing since July 1998 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Mr. Di Valerio wa Chief Accounting Officer in May 2005 . He ha served a and Corporate Controller since April 2003 . Before joining Microsoft , Walt Disney Company from January 2001 to April 2003 . Before from January 2001 to April 2003 . Before joining Disney , Mindwave Software Inc. from May 2000 to October 2000 . Prior from May 2000 to October 2000 . Prior to going to , Mr. Di Valerio spent 15 year with PricewaterhouseCoopers . Mr. Marketing and Services in March 2003 . He had been Senior , Microsoft Americas since February 2002 . Mr. Johnson had been , and Services since August 2001 , and before that Vice . He joined Microsoft in 1992 . Mr. Liddell wa named Chief Financial Officer in May 2005 . Mr. Liddell served a International Paper Company since March 2003 , and prior to becoming Carter Holt Harvey Limited from 1999 to 2002 and Chief Financial Harvey Limited from 1999 to 2002 and Chief Financial Officer from and Chief Financial Officer from 1995 to 1998 . Ms. Mathews Financial Officer from 1995 to 1998 . Ms. Mathews wa named President , Marketing in May 2005 . Before holding her current President , Marketing since August 2001 and Vice President Corporate Public President Corporate Public Relations since 1999 . Ms. Mathews joined Microsoft Ms. Mathews joined Microsoft in 1993 . Mr. Mundie wa named Strategies and Policy in August 2001 . He wa named Senior , Consumer Platforms in February 1996 . He joined Microsoft in . He joined Microsoft in 1992 . Mr. Raikes wa named Information Worker Business in June 2004 . He had been Group and Business Services since August 2000 . Mr. Raikes had been Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr . Rudder wa and Tools Business in June 2003 . Previous to assuming that . Rudder joined Microsoft in 1988 . Mr. Smith wa named Counsel and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy . He joined Microsoft in 1993 . PAGE 18 Table of Microsoft in 1993 . PAGE 18 Table of Contents Part I of Contents Part I Item 1 , 2 , 3 , Part I Item 1 , 2 , 3 , 4 EMPLOYEES Item 1 , 2 , 3 , 4 EMPLOYEES As of , 2 , 3 , 4 EMPLOYEES As of June 30 4 EMPLOYEES As of June 30 , 2005 , we employed As of June 30 , 2005 , we employed approximately 61,000 2005 , we employed approximately 61,000 people on a full-time basis on a full-time basis , 39,000 in the United States and in the United States and 22,000 internationally . Of the total . Of the total , 24,000 were in product research and product research and development , 18,000 in sale and marketing , in sale and marketing , 12,000 in product support and consulting support and consulting service , 2,000 in manufacturing and distribution , manufacturing and distribution , and 5,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 9.3 million square foot of office King County , Washington : 7.5 million square foot of owned situated on slightly more than 395 acre of owned land in our corporate campus and approximately 1.8 million square foot is leased leased . We own approximately 576,000 square foot of office building many site domestically totaling approximately 2.4 million square foot of office site internationally , totaling approximately 6.3 million square foot that is that is leased and approximately 536,000 square foot that is owned Operations Center that lease a 187,000 square-foot campus in Dublin , Dublin , Ireland , a 56,000 square-foot disk duplication facility in Puerto Rico , and a 155,100 square-foot facility in Singapore for location : Tokyo , Japan 511,000 square foot ; Unterschleissheim , foot ; Unterschleissheim , Germany 381,000 square foot ; Les Ulis ; Les Ulis , France 262,000 square foot ; Reading , foot ; Reading , England 241,000 square foot ; and Mississauga ; and Mississauga , Canada 235,000 square foot . In addition ” above . In May 2005 , the Redmond , Washington we can develop an additional 2.2 million square foot of facility campus . We also own 63 acre of land in Issaquah Washington , which can accommodate 1.2 million square foot of office accommodate expansion need . ITEM 3 . LEGAL PROCEEDINGS On July . LEGAL PROCEEDINGS On July 1 , 2005 , we announced PROCEEDINGS On July 1 , 2005 , we announced a settlement , we paid IBM $ 775 million and extended a $ million and extended a $ 75 million credit for IBM ’ two year . See Note 17 – Contingencies of the Notes to Financial Statements ( Item 8 ) for information regarding other we are involved . ITEM 4 . SUBMISSION OF MATTERS TO fourth quarter of fiscal year 2005 . PAGE 19 Table of fiscal year 2005 . PAGE 19 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On August 15 , 2005 , there were . On August 15 , 2005 , there were 149,668 registered , 2005 , there were 149,668 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal year 31 Mar . 31 June 30 Year Fiscal year 2004 Common June 30 Year Fiscal year 2004 Common stock price per share per share : High $ 29.96 $ 29.35 $ 28.80 $ : High $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ $ 29.96 $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low $ 29.35 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 $ 28.80 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 $ 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal 28.57 $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year $ 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year 2005 29.96 Low 25.54 25.10 24.15 25.08 24.15 Fiscal year 2005 Common Low 25.54 25.10 24.15 25.08 24.15 Fiscal year 2005 Common stock 24.15 25.08 24.15 Fiscal year 2005 Common stock price per share per share : High $ 29.00 $ 29.98 $ 26.84 $ : High $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In September $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 In September 2003 29.98 Low 26.88 26.53 23.92 24.12 23.92 In September 2003 , Low 26.88 26.53 23.92 24.12 23.92 In September 2003 , our 23.92 24.12 23.92 In September 2003 , our Board of Directors common stock dividend of $ 0.16 per share , which wa which wa paid in November 2003 . That wa the only or paid in fiscal year 2004 . See Note 12 – year 2004 . See Note 12 – Stockholders ’ Equity of to Financial Statements ( Item 8 ) for information regarding dividend of Directors in fiscal year 2005 . On July 20 , year 2005 . On July 20 , 2004 , our Board . On July 20 , 2004 , our Board of Directors buy back up to $ 30 billion in Microsoft common stock each quarter of fiscal year 2005 a follows : Period Total price paid per share July 1 , 2004 – September 30 per share July 1 , 2004 – September 30 , 2004 1 , 2004 – September 30 , 2004 22,826,608 $ 27.38 2004 – September 30 , 2004 22,826,608 $ 27.38 October 1 – September 30 , 2004 22,826,608 $ 27.38 October 1 , 30 , 2004 22,826,608 $ 27.38 October 1 , 2004 – 2004 22,826,608 $ 27.38 October 1 , 2004 – December 31 $ 27.38 October 1 , 2004 – December 31 , 2004 1 , 2004 – December 31 , 2004 23,595,280 $ 27.75 2004 – December 31 , 2004 23,595,280 $ 27.75 January 1 – December 31 , 2004 23,595,280 $ 27.75 January 1 , 31 , 2004 23,595,280 $ 27.75 January 1 , 2005 – 2004 23,595,280 $ 27.75 January 1 , 2005 – March 31 $ 27.75 January 1 , 2005 – March 31 , 2005 1 , 2005 – March 31 , 2005 95,122,446 $ 25.44 2005 – March 31 , 2005 95,122,446 $ 25.44 April 1 – March 31 , 2005 95,122,446 $ 25.44 April 1 , 31 , 2005 95,122,446 $ 25.44 April 1 , 2005 – 2005 95,122,446 $ 25.44 April 1 , 2005 – June 30 $ 25.44 April 1 , 2005 – June 30 , 2005 1 , 2005 – June 30 , 2005 170,656,770 $ 25.21 2005 – June 30 , 2005 170,656,770 $ 25.21 Common stock – June 30 , 2005 170,656,770 $ 25.21 Common stock repurchase 30 , 2005 170,656,770 $ 25.21 Common stock repurchase in the fourth quarter of fiscal year 2005 were a follows : Period ( in million ) April 1 , 2005 – April 30 million ) April 1 , 2005 – April 30 , 2005 1 , 2005 – April 30 , 2005 55,331,155 $ 24.77 2005 – April 30 , 2005 55,331,155 $ 24.77 55,331,155 $ – April 30 , 2005 55,331,155 $ 24.77 55,331,155 $ 24,930 30 , 2005 55,331,155 $ 24.77 55,331,155 $ 24,930 May 1 , 2005 55,331,155 $ 24.77 55,331,155 $ 24,930 May 1 , 55,331,155 $ 24.77 55,331,155 $ 24,930 May 1 , 2005 – 24.77 55,331,155 $ 24,930 May 1 , 2005 – May 31 $ 24,930 May 1 , 2005 – May 31 , 2005 1 , 2005 – May 31 , 2005 60,679,509 $ 25.49 2005 – May 31 , 2005 60,679,509 $ 25.49 60,679,509 $ – May 31 , 2005 60,679,509 $ 25.49 60,679,509 $ 23,384 31 , 2005 60,679,509 $ 25.49 60,679,509 $ 23,384 June 1 , 2005 60,679,509 $ 25.49 60,679,509 $ 23,384 June 1 , 60,679,509 $ 25.49 60,679,509 $ 23,384 June 1 , 2005 – 25.49 60,679,509 $ 23,384 June 1 , 2005 – June 30 $ 23,384 June 1 , 2005 – June 30 , 2005 1 , 2005 – June 30 , 2005 54,646,106 $ 25.35 2005 – June 30 , 2005 54,646,106 $ 25.35 54,646,106 $ – June 30 , 2005 54,646,106 $ 25.35 54,646,106 $ 21,998 30 , 2005 54,646,106 $ 25.35 54,646,106 $ 21,998 170,656,770 170,656,770 , 2005 54,646,106 $ 25.35 54,646,106 $ 21,998 170,656,770 170,656,770 PAGE 54,646,106 $ 25.35 54,646,106 $ 21,998 170,656,770 170,656,770 PAGE 20 Table $ 25.35 54,646,106 $ 21,998 170,656,770 170,656,770 PAGE 20 Table of 25.35 54,646,106 $ 21,998 170,656,770 170,656,770 PAGE 20 Table of Contents $ 21,998 170,656,770 170,656,770 PAGE 20 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 2001 ( 1,2 ) 2002 Fiscal Year Ended June 30 2001 ( 1,2 ) 2002 ( Ended June 30 2001 ( 1,2 ) 2002 ( 1,3 ) 30 2001 ( 1,2 ) 2002 ( 1,3 ) 2003 ( ( 1,2 ) 2002 ( 1,3 ) 2003 ( 1,4 ) ) 2002 ( 1,3 ) 2003 ( 1,4 ) 2004 2005 ( 1,3 ) 2003 ( 1,4 ) 2004 2005 Revenue $ ) 2003 ( 1,4 ) 2004 2005 Revenue $ 25,296 $ 2003 ( 1,4 ) 2004 2005 Revenue $ 25,296 $ 28,365 ) 2004 2005 Revenue $ 25,296 $ 28,365 $ 32,187 $ 2005 Revenue $ 25,296 $ 28,365 $ 32,187 $ 36,835 $ $ 25,296 $ 28,365 $ 32,187 $ 36,835 $ 39,788 Operating $ 28,365 $ 32,187 $ 36,835 $ 39,788 Operating income 11,720 $ 32,187 $ 36,835 $ 39,788 Operating income 11,720 8,272 9,545 36,835 $ 39,788 Operating income 11,720 8,272 9,545 9,034 14,561 Income $ 39,788 Operating income 11,720 8,272 9,545 9,034 14,561 Income before 39,788 Operating income 11,720 8,272 9,545 9,034 14,561 Income before accounting Operating income 11,720 8,272 9,545 9,034 14,561 Income before accounting change income 11,720 8,272 9,545 9,034 14,561 Income before accounting change 7,721 14,561 Income before accounting change 7,721 5,355 7,531 8,168 12,254 Net Income before accounting change 7,721 5,355 7,531 8,168 12,254 Net income before accounting change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 accounting change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 5,355 change 7,721 5,355 7,531 8,168 12,254 Net income 7,346 5,355 7,531 7,531 8,168 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted 8,168 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted earnings 12,254 Net income 7,346 5,355 7,531 8,168 12,254 Diluted earnings per Net income 7,346 5,355 7,531 8,168 12,254 Diluted earnings per share income 7,346 5,355 7,531 8,168 12,254 Diluted earnings per share before share before accounting change $ 0.69 $ 0.48 $ 0.69 $ accounting change $ 0.69 $ 0.48 $ 0.69 $ 0.75 $ $ 0.69 $ 0.48 $ 0.69 $ 0.75 $ 1.12 Diluted $ 0.48 $ 0.69 $ 0.75 $ 1.12 Diluted earnings per $ 0.69 $ 0.75 $ 1.12 Diluted earnings per share $ Diluted earnings per share $ 0.66 $ 0.48 $ 0.69 $ per share $ 0.66 $ 0.48 $ 0.69 $ 0.75 $ $ 0.66 $ 0.48 $ 0.69 $ 0.75 $ 1.12 Cash $ 0.48 $ 0.69 $ 0.75 $ 1.12 Cash dividend declared $ 0.69 $ 0.75 $ 1.12 Cash dividend declared per share $ – $ – $ 0.08 $ 0.16 $ 3.40 Cash $ – $ 0.08 $ 0.16 $ 3.40 Cash and short-term $ 0.08 $ 0.16 $ 3.40 Cash and short-term investment 31,600 3.40 Cash and short-term investment 31,600 38,652 49,048 60,592 37,751 Total Cash and short-term investment 31,600 38,652 49,048 60,592 37,751 Total asset and short-term investment 31,600 38,652 49,048 60,592 37,751 Total asset 58,830 short-term investment 31,600 38,652 49,048 60,592 37,751 Total asset 58,830 69,910 investment 31,600 38,652 49,048 60,592 37,751 Total asset 58,830 69,910 81,732 49,048 60,592 37,751 Total asset 58,830 69,910 81,732 94,368 70,815 Long-term 60,592 37,751 Total asset 58,830 69,910 81,732 94,368 70,815 Long-term obligation 37,751 Total asset 58,830 69,910 81,732 94,368 70,815 Long-term obligation 2,287 Total asset 58,830 69,910 81,732 94,368 70,815 Long-term obligation 2,287 2,722 asset 58,830 69,910 81,732 94,368 70,815 Long-term obligation 2,287 2,722 2,846 81,732 94,368 70,815 Long-term obligation 2,287 2,722 2,846 4,574 5,823 Stockholders 94,368 70,815 Long-term obligation 2,287 2,722 2,846 4,574 5,823 Stockholders ’ 70,815 Long-term obligation 2,287 2,722 2,846 4,574 5,823 Stockholders ’ equity Long-term obligation 2,287 2,722 2,846 4,574 5,823 Stockholders ’ equity 47,289 obligation 2,287 2,722 2,846 4,574 5,823 Stockholders ’ equity 47,289 54,842 4,574 5,823 Stockholders ’ equity 47,289 54,842 64,912 74,825 48,115 ( 5,823 Stockholders ’ equity 47,289 54,842 64,912 74,825 48,115 ( 1 Stockholders ’ equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) ’ equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) The equity 47,289 54,842 64,912 74,825 48,115 ( 1 ) The financial 54,842 64,912 74,825 48,115 ( 1 ) The financial data presented compensation expense except fiscal year 2001 , a prescribed by Statement ( SFAS ) No . 148 , Accounting for Stock-Based Compensation of FASB Statement No . 123 , to reflect the retroactive provision of SFAS No . 123 , Accounting for Stock-Based Compensation Compensation a discussed in Note 14 . If fiscal year 2001 14 . If fiscal year 2001 had been restated , the income would have been $ 8,343 million and $ 5,084 million $ 8,343 million and $ 5,084 million . ( 2 ) $ 5,084 million . ( 2 ) Fiscal year 2001 includes ( 2 ) Fiscal year 2001 includes an unfavorable cumulative effect of accounting change of $ 375 million or $ 0.03 per $ 375 million or $ 0.03 per diluted share , reflecting adoption of SFAS No . 133 , Accounting for Derivative Instruments Hedging Activities . Fiscal year 2001 also includes the acquisition of , Inc. for approximately $ 1.1 billion in stock . ( billion in stock . ( 3 ) Fiscal year 2002 includes ( 3 ) Fiscal year 2002 includes a $ 1.25 billion year 2002 includes a $ 1.25 billion ( pre-tax ) gain of Expedia , Inc. ( 4 ) Fiscal year 2003 includes ( 4 ) Fiscal year 2003 includes the acquisition of Navision for a total of $ 1.23 billion in cash and $ billion in cash and $ 788 million in stock and other and other consideration . PAGE 21 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2003 , 2004 , AND 2005 FOR FISCAL YEARS 2003 , 2004 , AND 2005 OVERVIEW The 2003 , 2004 , AND 2005 OVERVIEW The following Management ’ season . Historically , approximately 40 % to 50 % of , approximately 40 % to 50 % of Home and Entertainment Our focus in fiscal year 2006 is building on this foundation to collaborate interactively . PAGE 22 Table of Contents Part II of Contents Part II Item 7 Worldwide macroeconomic factor have a slight improvement in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 . Our optimism is balanced held steady in fiscal year 2005 , while Linux distribution rose million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 32,187 2005 Percent Change Revenue $ 32,187 $ 36,835 14 % $ Change Revenue $ 32,187 $ 36,835 14 % $ 39,788 8 Revenue $ 32,187 $ 36,835 14 % $ 39,788 8 % $ 36,835 14 % $ 39,788 8 % Operating income $ 36,835 14 % $ 39,788 8 % Operating income $ 9,545 8 % Operating income $ 9,545 $ 9,034 ( 5 ) Operating income $ 9,545 $ 9,034 ( 5 ) % $ $ 9,545 $ 9,034 ( 5 ) % $ 14,561 61 ( 5 ) % $ 14,561 61 % Our revenue growth 5 ) % $ 14,561 61 % Our revenue growth for revenue growth for fiscal year 2005 wa driven by growth in IT spending . The November 2004 launch of the “ Halo launch of the “ Halo 2 ® ” Xbox game also from all source grew about 11 % to 13 % and grew about 11 % to 13 % and total server hardware server hardware shipment grew approximately 13 % to 14 % during grew approximately 13 % to 14 % during fiscal year 2005 14 % during fiscal year 2005 a compared to fiscal year a compared to fiscal year 2004 . The net impact of on revenue wa positive in 2005 , primarily due to relative in effect in fiscal year 2005 , translated international revenue growth would have been approximately $ 873 million or two percentage point point lower for fiscal year 2005 . We hedge a portion growth rate wa a $ 1.1 billion decline in earned revenue Upgrade Advantage in fiscal year 2005 . The Upgrade Advantage contract first quarter of fiscal year 2005 . This revenue wa recognized wa recognized over fiscal year 2003 and fiscal year 2004 and year 2003 and fiscal year 2004 and in the first quarter first quarter of fiscal year 2005 when the contract period expired Revenue growth in fiscal year 2004 wa primarily driven by the all source wa estimated at 13 % and the Windows server server shipment wa estimated at 18 % in fiscal year 2004 18 % in fiscal year 2004 a compared to fiscal year a compared to fiscal year 2003 . The net impact of wa positive in fiscal year 2004 due to a relative strengthening This resulted in approximately $ 1.10 billion growth in total revenue Revenue growth in fiscal year 2003 wa driven primarily by multi-year that occurred before the Licensing 6.0 transition date in the first first quarter of fiscal year 2003 . The fiscal year 2003 2003 . The fiscal year 2003 revenue growth also reflected a growth also reflected a $ 933 million or 13 % increase a $ 933 million or 13 % increase associated with OEM operating system and a $ 309 million or 23 % increase a $ 309 million or 23 % increase in revenue from console . For fiscal year 2005 , the operating income increase , strong sale of Halo 2 reduced the overall operating loss Entertainment segment for fiscal year 2005 . The $ 3.29 billion year 2005 . The $ 3.29 billion decrease in stock-based compensation increased operating expense of $ 562 million related to increased salary litigation declined in fiscal year 2005 due to the $ 2.53 2005 due to the $ 2.53 billion of charge related to charge related to the PAGE 23 Table of Contents Part II of Contents Part II Item 7 settlement of Sun Microsystems litigation European Commission in fiscal year 2004 . This effect wa partially by legal expense of $ 2.08 billion related to settlement with matter . In fiscal year 2004 , the operating income decline wa caused primarily by $ 2.53 billion of legal charge and of legal charge and $ 2.21 billion of stock-based compensation expense revenue . In fiscal year 2003 , the growth in operating Warner settlement charge of $ 750 million . In fiscal year million . In fiscal year 2004 , we implemented change in second quarter of fiscal year 2004 in which employee could elect a strike price of $ 33 or higher to JPMorgan . transfer . A total of 345 million of the 621 million of 345 million of the 621 million eligible option were transferred stock-based compensation expense of $ 2.21 billion in the second quarter second quarter of fiscal year 2004 . As a result of statement classification for fiscal year 2003 , 2004 and 2005 . for fiscal year 2003 , 2004 and 2005 . ( In year 2003 , 2004 and 2005 . ( In million ) . ( In million ) 2003 2004 Increase/ ( Decrease ) ( In million ) 2003 2004 Increase/ ( Decrease ) 2005 2004 Increase/ ( Decrease ) 2005 Increase/ ( Decrease ) Client ( Decrease ) Client $ 454 $ 754 $ 300 $ ) Client $ 454 $ 754 $ 300 $ 310 $ $ 454 $ 754 $ 300 $ 310 $ ( 444 $ 754 $ 300 $ 310 $ ( 444 ) Server 300 $ 310 $ ( 444 ) Server and Tools 1,281 444 ) Server and Tools 1,281 1,898 617 826 ( 1,072 ) Server and Tools 1,281 1,898 617 826 ( 1,072 ) Server and Tools 1,281 1,898 617 826 ( 1,072 ) Information and Tools 1,281 1,898 617 826 ( 1,072 ) Information Worker 1,281 1,898 617 826 ( 1,072 ) Information Worker 407 573 ( 1,072 ) Information Worker 407 573 166 269 ( 304 1,072 ) Information Worker 407 573 166 269 ( 304 ) ) Information Worker 407 573 166 269 ( 304 ) Microsoft Information Worker 407 573 166 269 ( 304 ) Microsoft Business 407 573 166 269 ( 304 ) Microsoft Business Solutions 237 304 ) Microsoft Business Solutions 237 324 87 149 ( 175 ) Microsoft Business Solutions 237 324 87 149 ( 175 ) Microsoft Business Solutions 237 324 87 149 ( 175 ) MSN Business Solutions 237 324 87 149 ( 175 ) MSN 263 237 324 87 149 ( 175 ) MSN 263 415 152 149 ( 175 ) MSN 263 415 152 174 ( 241 ( 175 ) MSN 263 415 152 174 ( 241 ) 175 ) MSN 263 415 152 174 ( 241 ) Mobile ) MSN 263 415 152 174 ( 241 ) Mobile and 263 415 152 174 ( 241 ) Mobile and Embedded Devices ) Mobile and Embedded Devices 130 170 40 75 ( 95 Mobile and Embedded Devices 130 170 40 75 ( 95 ) and Embedded Devices 130 170 40 75 ( 95 ) Home Embedded Devices 130 170 40 75 ( 95 ) Home and 130 170 40 75 ( 95 ) Home and Entertainment 261 95 ) Home and Entertainment 261 387 126 168 ( 219 ) Home and Entertainment 261 387 126 168 ( 219 ) Home and Entertainment 261 387 126 168 ( 219 ) Corporate and Entertainment 261 387 126 168 ( 219 ) Corporate 716 261 387 126 168 ( 219 ) Corporate 716 1,213 497 168 ( 219 ) Corporate 716 1,213 497 477 ( 736 ( 219 ) Corporate 716 1,213 497 477 ( 736 ) 219 ) Corporate 716 1,213 497 477 ( 736 ) Consolidated ) Corporate 716 1,213 497 477 ( 736 ) Consolidated $ 716 1,213 497 477 ( 736 ) Consolidated $ 3,749 $ ( 736 ) Consolidated $ 3,749 $ 5,734 $ 1,985 $ ) Consolidated $ 3,749 $ 5,734 $ 1,985 $ 2,448 $ $ 3,749 $ 5,734 $ 1,985 $ 2,448 $ ( 3,286 $ 5,734 $ 1,985 $ 2,448 $ ( 3,286 ) Cost 1,985 $ 2,448 $ ( 3,286 ) Cost of revenue 380 3,286 ) Cost of revenue 380 681 301 318 ( 363 ) Cost of revenue 380 681 301 318 ( 363 ) Cost of revenue 380 681 301 318 ( 363 ) Research of revenue 380 681 301 318 ( 363 ) Research and 380 681 301 318 ( 363 ) Research and development 1,964 363 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Research and development 1,964 3,117 1,153 1,241 ( 1,876 ) Sales and development 1,964 3,117 1,153 1,241 ( 1,876 ) Sales and 1,964 3,117 1,153 1,241 ( 1,876 ) Sales and marketing 1,050 1,876 ) Sales and marketing 1,050 1,272 222 612 ( 660 ) Sales and marketing 1,050 1,272 222 612 ( 660 ) Sales and marketing 1,050 1,272 222 612 ( 660 ) General and marketing 1,050 1,272 222 612 ( 660 ) General and 1,050 1,272 222 612 ( 660 ) General and administrative 355 660 ) General and administrative 355 664 309 277 ( 387 ) General and administrative 355 664 309 277 ( 387 ) General and administrative 355 664 309 277 ( 387 ) Consolidated and administrative 355 664 309 277 ( 387 ) Consolidated $ 355 664 309 277 ( 387 ) Consolidated $ 3,749 $ ( 387 ) Consolidated $ 3,749 $ 5,734 $ 1,985 $ ) Consolidated $ 3,749 $ 5,734 $ 1,985 $ 2,448 $ $ 3,749 $ 5,734 $ 1,985 $ 2,448 $ ( 3,286 $ 5,734 $ 1,985 $ 2,448 $ ( 3,286 ) In 1,985 $ 2,448 $ ( 3,286 ) In fiscal year 2006 3,286 ) In fiscal year 2006 , we expect revenue to higher rate than fiscal year 2005 , mainly due to the revenue growth in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 in Home and Entertainment primarily by the launch of Xbox 360 . We estimate worldwide PC PC shipment will grow between 7 % to 9 % and grow between 7 % to 9 % and worldwide server unit unit shipment will grow between 11 % to 13 % in grow between 11 % to 13 % in fiscal year 2006 13 % in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 . We do not expect exchange rate in fiscal year 2006 . We expect our operating growth rate in fiscal year 2006 to exceed our revenue growth than incurred in fiscal year 2005 and a reduction in stock-based to increase in fiscal year 2006 driven by the launch of of and investment in Xbox 360 . SEGMENT PRODUCT REVENUE/OPERATING INCOME to each of the PAGE 24 Table of Contents Part II of Contents Part II Item 7 segment . The segment information segment information appearing in Note 18 – Segment Information of the accordance with SFAS No . 131 , Disclosures about Segments of analyzed separately . Fiscal year 2003 and 2004 amount have been . Fiscal year 2003 and 2004 amount have been restated for million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 10,394 2005 Percent Change Revenue $ 10,394 $ 11,546 11 % $ Change Revenue $ 10,394 $ 11,546 11 % $ 12,234 6 Revenue $ 10,394 $ 11,546 11 % $ 12,234 6 % $ 11,546 11 % $ 12,234 6 % Operating income $ 11,546 11 % $ 12,234 6 % Operating income $ 7,960 6 % Operating income $ 7,960 $ 8,654 9 % $ Operating income $ 7,960 $ 8,654 9 % $ 9,442 9 income $ 7,960 $ 8,654 9 % $ 9,442 9 % $ 8,654 9 % $ 9,442 9 % Client includes revenue 8,654 9 % $ 9,442 9 % Client includes revenue from OEM channel account for over 80 % of total Client revenue revenue increased in fiscal year 2005 driven by 12 % growth fiscal year 2005 driven by 12 % growth in OEM license OEM license unit and $ 886 million or 10 % growth and $ 886 million or 10 % growth in OEM revenue partially offset by a $ 198 million or 9 % decrease a $ 198 million or 9 % decrease in revenue from the year remained flat at 50 % of total OEM Windows Upgrade Advantage declined by $ 99 million in fiscal year 2005 99 million in fiscal year 2005 contributing to the decrease in revenue increase in fiscal year 2004 wa driven by 14 % year 2004 wa driven by 14 % growth in OEM license growth in OEM license and 16 % growth in OEM revenue second half of fiscal year 2004 . Client operating income increased income increased in fiscal year 2005 primarily due to an increase operating income for fiscal year 2004 ha been restated for a legal settlement charge totaling $ 700 million from Client to corporate income increased for fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 mainly due to growth in second quarter of fiscal year 2004 . We anticipate that worldwide shipment will grow at approximately 7 % to 9 % in at approximately 7 % to 9 % in fiscal year 2006 9 % in fiscal year 2006 , continuing to influence our these channel in fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 . We anticipate a modest product mix in fiscal year 2006 , although we PAGE 25 2006 , although we PAGE 25 Table of Contents Part II of Contents Part II Item 7 anticipate shipment of the premium-priced Major investment in fiscal year 2006 will focus on development of million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 7,192 2005 Percent Change Revenue $ 7,192 $ 8,538 19 % $ Change Revenue $ 7,192 $ 8,538 19 % $ 9,885 16 Revenue $ 7,192 $ 8,538 19 % $ 9,885 16 % $ 8,538 19 % $ 9,885 16 % Operating income $ 8,538 19 % $ 9,885 16 % Operating income $ 1,160 16 % Operating income $ 1,160 $ 1,418 22 % $ Operating income $ 1,160 $ 1,418 22 % $ 3,259 130 income $ 1,160 $ 1,418 22 % $ 3,259 130 % $ 1,418 22 % $ 3,259 130 % Server and Tools 1,418 22 % $ 3,259 130 % Server and Tools consists revenue growth in fiscal year 2005 wa mainly driven by growth revenue , which grew $ 1.1 billion or 17 % in grew $ 1.1 billion or 17 % in fiscal year 2005 17 % in fiscal year 2005 reflecting broad adoption of Windows overall server hardware shipment grew 13 % to 14 % during shipment grew 13 % to 14 % during fiscal year 2005 14 % during fiscal year 2005 and that Windows-based server shipment support service revenue increased $ 241 million or 19 % compared increased $ 241 million or 19 % compared to the previous change accounted for approximately $ 284 million or three percentage point wa offset by a $ 314 million decline in Upgrade Advantage earned . In fiscal year 2004 , Server and Server application CAL revenue , grew $ 1.28 billion or 25 % . grew $ 1.28 billion or 25 % . Foreign currency exchange exchange rate contributed approximately $ 350 million or five percentage point revenue growth in fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 . Consulting and Premier product support service revenue increased $ 192 million or 18 % compared increased $ 192 million or 18 % compared to fiscal year % compared to fiscal year 2003 due to increased customer penetration income growth for fiscal year 2005 wa primarily due to an for a reclassification of $ 1.22 billion of legal settlement from operating income for fiscal year 2004 increased slightly due to the compensation charge , including $ 651 million related to the employee second quarter of fiscal year 2004 . We expect worldwide server server hardware shipment to grow 11 % to 13 % in to grow 11 % to 13 % in fiscal year 2006 13 % in fiscal year 2006 . However , we face rate impact in fiscal year 2006 . We also expect Server to increase during fiscal year 2006 due to expected investment in release , including SQL Server 2005 and Visual Studio 2005 . Server 2005 and Visual Studio 2005 . PAGE 26 Table of Visual Studio 2005 . PAGE 26 Table of Contents Part II of Contents Part II Item 7 Information Worker ( In million million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 9,113 2005 Percent Change Revenue $ 9,113 $ 10,653 17 % $ Change Revenue $ 9,113 $ 10,653 17 % $ 11,013 3 Revenue $ 9,113 $ 10,653 17 % $ 11,013 3 % $ 10,653 17 % $ 11,013 3 % Operating income $ 10,653 17 % $ 11,013 3 % Operating income $ 6,389 3 % Operating income $ 6,389 $ 7,410 16 % $ Operating income $ 6,389 $ 7,410 16 % $ 7,915 7 income $ 6,389 $ 7,410 16 % $ 7,915 7 % $ 7,410 16 % $ 7,915 7 % Information Worker consists 7,410 16 % $ 7,915 7 % Information Worker consists of . Beginning in fiscal year 2005 , the Small and Mid-Market revenue increased in fiscal year 2005 primarily due to a 3 2005 primarily due to a 3 % or $ 269 million a 3 % or $ 269 million increase in volume licensing Office in Japan , a 6 % or $ 91 million a 6 % or $ 91 million increase in OEM revenue rate accounted for approximately $ 367 million or three percentage point revenue growth for fiscal year 2005 a compared to the previous , offset by a $ 663 million decline in Upgrade Advantage Revenue growth for fiscal year 2004 from volume licensing , retail of Office in Japan wa 15 % in aggregate . This the transition to our Licensing 6.0 program and approximately $ 110 6.0 program and approximately $ 110 million related to the launch to the launch of Office 2003 . OEM licensing revenue grew . OEM licensing revenue grew 29 % or $ 325 million grew 29 % or $ 325 million . Foreign currency exchange exchange rate provided approximately $ 485 million or 5 % of approximately $ 485 million or 5 % of total Information Worker income growth for fiscal year 2005 wa primarily due to the with the launch of Office 2003 . This decline wa offset operating income in fiscal year 2004 increased from the previous year , primarily related to $ 351 million of stock-based compensation expense second quarter of fiscal year 2004 and higher sale and marketing be higher in fiscal year 2006 than fiscal year 2005 . year 2006 than fiscal year 2005 . We expect sustained momentum increased purchasing of Office System 2003 a enterprise complete their product rate benefit in fiscal year 2006 . Microsoft Business Solutions ( million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 631 2005 Percent Change Revenue $ 631 $ 759 20 % $ Change Revenue $ 631 $ 759 20 % $ 803 6 Revenue $ 631 $ 759 20 % $ 803 6 % $ 759 20 % $ 803 6 % Operating loss $ 759 20 % $ 803 6 % Operating loss $ ( % Operating loss $ ( 148 ) $ ( 315 ) ( 148 ) $ ( 315 ) ( 113 ) % $ ( 315 ) ( 113 ) % $ ( 201 113 ) % $ ( 201 ) 36 % Microsoft Business % $ ( 201 ) 36 % Microsoft Business Solutions provides an adaptable software platform PAGE 27 Table of Contents Part II of Contents Part II Item 7 that work like and with Solutions revenue in fiscal year 2005 wa mainly due to a wa mainly due to a 10 % revenue growth in software software partially offset by a 25 % decline in service revenue increase wa driven by a 9 % growth in license revenue growth in license revenue and 16 % growth in enhancement revenue revenue increase in fiscal year 2004 wa primarily attributable to continued loss declined in fiscal year 2005 primarily due to a decline operating loss for fiscal year 2004 increased from fiscal year 2003 2004 increased from fiscal year 2003 due to an increase in second quarter of fiscal year 2004 , partially offset by an lower operating expense including $ 42 million of lower intangible amortization Business Solutions in fiscal year 2006 . MSN ( In million million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 1,953 2005 Percent Change Revenue $ 1,953 $ 2,216 13 % $ Change Revenue $ 1,953 $ 2,216 13 % $ 2,274 3 Revenue $ 1,953 $ 2,216 13 % $ 2,274 3 % $ 2,216 13 % $ 2,274 3 % Operating income ( 2,216 13 % $ 2,274 3 % Operating income ( loss ( loss ) $ ( 573 ) $ 87 115 % $ ( 573 ) $ 87 115 % $ 405 366 ( 573 ) $ 87 115 % $ 405 366 % $ 87 115 % $ 405 366 % MSN includes personal 87 115 % $ 405 366 % MSN includes personal communication Access . In fiscal year 2005 , we launched a new product enhancement in fiscal year 2005 , including a new version advertising program in fiscal year 2005 , which removed paid advertising result . In fiscal year 2005 , MSN advertising revenue increased MSN advertising revenue increased $ 193 million or 16 % primarily increased $ 193 million or 16 % primarily a a result the search clarity in PAGE 28 Table of Contents Part II of Contents Part II Item 7 advertising program and the impact than Internet Access increased $ 84 million or 88 % in increased $ 84 million or 88 % in fiscal year 2005 88 % in fiscal year 2005 a a result of growth wa a decline of $ 219 million or 24 % in of $ 219 million or 24 % in Internet Access revenue fiscal year , MSN had 2.7 million internet access subscriber and million internet access subscriber and 9.1 million total subscriber compared to million total subscriber compared to 4.3 million and 8.8 million at compared to 4.3 million and 8.8 million at the end of addition , MSN ha over 420 million unique user monthly , unique user monthly , over 205 million active Hotmail account , Hotmail account , and over 175 million active Messenger account . account . In fiscal year 2004 , MSN advertising revenue increased MSN advertising revenue increased $ 360 million or 43 % a increased $ 360 million or 43 % a a result of by a decline of $ 168 million or 15 % in of $ 168 million or 15 % in Internet Access revenue than Internet Access increased $ 71 million . In fiscal year million . In fiscal year 2005 , MSN operating income increased benefit , and a $ 48 million tax benefit recorded in first quarter of fiscal year 2004 . MSN reached profitability in first quarter of fiscal year 2004 and wa profitable for fiscal wa profitable for fiscal year 2004 . The improvement in profitability in profitability in fiscal year 2004 wa primarily driven by an business , and a $ 48 million refund of previous year to decline in fiscal year 2006 . Profitability may decline in may decline in fiscal year 2006 a investment are made in user base . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function related to MapPoint million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 156 2005 Percent Change Revenue $ 156 $ 247 58 % $ Change Revenue $ 156 $ 247 58 % $ 337 36 Revenue $ 156 $ 247 58 % $ 337 36 % $ 247 58 % $ 337 36 % Operating loss $ 247 58 % $ 337 36 % Operating loss $ ( % Operating loss $ ( 277 ) $ ( 219 ) ( 277 ) $ ( 219 ) 21 % $ ( ) $ ( 219 ) 21 % $ ( 46 ) ) 21 % $ ( 46 ) 79 % Mobile and % $ ( 46 ) 79 % Mobile and Embedded Devices revenue growth for fiscal year 2005 wa primarily due to unit in volume shipment for PAGE 29 Table of Contents Part II of Contents Part II Item 7 standalone PDAs . The increase category . In fiscal year 2005 , revenue for Windows Mobile Windows Mobile software increased $ 46 million or 45 % , increased $ 46 million or 45 % , revenue for Windows Embedded operating system increased $ 19 million or 21 % and increased $ 19 million or 21 % and revenue for MapPoint and Windows Automotive increased $ 25 million or 45 % . increased $ 25 million or 45 % . Mobile and Embedded community . In fiscal year 2005 , Mobile and Embedded Devices Embedded Devices released Windows Mobile 5.0 which is the latest version revenue growth for fiscal year 2004 over fiscal year 2003 in year 2004 over fiscal year 2003 in all major product line operating loss for fiscal year 2005 decreased compared to fiscal year decreased compared to fiscal year 2004 primarily due to a decrease operating loss for fiscal year 2004 decreased compared to fiscal year decreased compared to fiscal year 2003 primarily due to growth in , partially offset by $ 58 million of stock-based compensation expense second quarter of fiscal year 2004 . Mobile and Embedded Devices solution . In fiscal year 2006 we expect to bring added functionality to the Windows Mobile 5.0 platform through the Windows Mobile platform through the Windows Mobile 5.0 Messaging and Security Feature Pack Pack and the Exchange Server 2003 Service Pack 2 . This Exchange Server 2003 Service Pack 2 . This solution enables business to grow in fiscal year 2006 . The growth is anticipated communication device . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function related to MapPoint million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Revenue $ 2,748 2005 Percent Change Revenue $ 2,748 $ 2,876 5 % $ Change Revenue $ 2,748 $ 2,876 5 % $ 3,242 13 Revenue $ 2,748 $ 2,876 5 % $ 3,242 13 % $ 2,876 5 % $ 3,242 13 % Operating loss $ 2,876 5 % $ 3,242 13 % Operating loss $ ( % Operating loss $ ( 1,191 ) $ ( 1,220 ) ( 1,191 ) $ ( 1,220 ) ( 2 ) % $ ( 1,220 ) ( 2 ) % $ ( 391 2 ) % $ ( 391 ) 68 % Home and % $ ( 391 ) 68 % Home and Entertainment includes we entered the market in 2002 and we have established ourselves revenue increased in fiscal year 2005 primarily due to significant new which resulted in a $ 416 million or 23 % increase a $ 416 million or 23 % increase in Xbox revenue second quarter of fiscal year 2005 , we PAGE 30 Table year 2005 , we PAGE 30 Table of Contents Part II of Contents Part II Item 7 introduced Halo 2 , which II Item 7 introduced Halo 2 , which generated over $ , which generated over $ 300 million in revenue in the and TV platform declined $ 50 million or 5 % compared declined $ 50 million or 5 % compared to fiscal year % compared to fiscal year 2004 due to lower PC game sale . In fiscal year 2004 , Xbox revenue increased $ , Xbox revenue increased $ 144 million or 9 % with increased $ 144 million or 9 % with $ 269 million or 9 % with $ 269 million related to higher Xbox Xbox software volume and $ 117 million due to higher Xbox partially offset by a $ 242 million decline related to price Xbox console volume sale increased 11 % in fiscal year 2004 11 % in fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 . Revenue from consumer hardware and TV platform declined $ 16 million or 1 % compared declined $ 16 million or 1 % compared to fiscal year % compared to fiscal year 2003 due to lower PC game operating loss in fiscal year 2005 decreased primarily due to an adjustment recorded in fiscal year 2004 , and a decrease in in cost associated with Xbox 360 console development and launch effort operating loss in fiscal year 2004 wa primarily due to $ wa primarily due to $ 141 million of stock-based compensation expense second quarter of fiscal year 2004 , increased sale of negative and cost associated with Xbox 360 console development effort , partially loss increase from fiscal year 2003 also included a lower-of-cost-or-market adjustment lower-of-cost-or-market adjustment of approximately $ 90 million related to Xbox console near the launch of Xbox 360 . As a result of to increase in fiscal year 2006 . In fiscal year 2006 2006 . In fiscal year 2006 , we expect Xbox console to increase from fiscal year 2005 due to launch of the to launch of the Xbox 360 . In fiscal year 2006 360 . In fiscal year 2006 we expect PC game revenue to increase from fiscal year 2005 driven by more new game million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Corporate-level Expenses $ Percent Change Corporate-level Expenses $ 3,775 $ 6,781 80 % $ Corporate-level Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( Expenses $ 3,775 $ 6,781 80 % $ 5,822 ( 14 $ 6,781 80 % $ 5,822 ( 14 ) % Certain 80 % $ 5,822 ( 14 ) % Certain corporate-level expense contingency . In fiscal year 2005 , corporate-level expense decreased primarily legal cost . Fiscal year 2005 legal cost were $ 2.08 2005 legal cost were $ 2.08 billion a compared to $ billion a compared to $ 2.53 billion in fiscal year 2004 2.53 billion in fiscal year 2004 . The legal cost in States . In fiscal year 2004 , corporate-level expense increased primarily legal cost including a $ 1.92 billion charge for a settlement and the fine of € 497 million ( $ 605 million € 497 million ( $ 605 million ) imposed by the stock-based compensation increased by $ 497 million a compared to fiscal a compared to fiscal year 2003 . Cost of Revenue ( million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Cost of revenue Change Cost of revenue $ 6,059 $ 6,716 11 % $ of revenue $ 6,059 $ 6,716 11 % $ 6,200 ( revenue $ 6,059 $ 6,716 11 % $ 6,200 ( 8 $ 6,716 11 % $ 6,200 ( 8 ) % As 11 % $ 6,200 ( 8 ) % As a percent As a percent of revenue 19 % 18 % ( 1 percent of revenue 19 % 18 % ( 1 ) ppt 19 % 18 % ( 1 ) ppt 16 % ( % ( 1 ) ppt 16 % ( 2 ) ppt ) ppt 16 % ( 2 ) ppt Cost of revenue consulting service . In PAGE 31 Table of Contents Part II of Contents Part II Item 7 addition to a decrease in of revenue in fiscal year 2005 due to lower stock-based compensation decreased due to a $ 140 million reduction in cost primarily subscription declined and a $ 169 million reduction in other product The increase in fiscal year 2004 wa primarily due to increased consulting service cost of $ 508 million , $ 214 million $ 508 million , $ 214 million of stock-based compensation expense fourth quarter of fiscal year 2004 of approximately $ 90 million year 2004 of approximately $ 90 million related to the Xbox partially offset by a $ 365 million decrease in MSN online million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Research and development Change Research and development $ 6,595 $ 7,779 18 % $ and development $ 6,595 $ 7,779 18 % $ 6,184 ( development $ 6,595 $ 7,779 18 % $ 6,184 ( 21 $ 7,779 18 % $ 6,184 ( 21 ) % As 18 % $ 6,184 ( 21 ) % As a percent As a percent of revenue 21 % 21 % 0 ppt percent of revenue 21 % 21 % 0 ppt 16 % revenue 21 % 21 % 0 ppt 16 % ( 5 % 21 % 0 ppt 16 % ( 5 ) ppt 0 ppt 16 % ( 5 ) ppt Research and development expense decreased in fiscal year 2005 due to lower stock-based compensation product , primarily the Xbox 360 console and related game , related game , SQL Server 2005 , Windows Vista , and The increase in fiscal year 2004 wa primarily due to $ wa primarily due to $ 1.31 billion of stock-based compensation expense employee cost associated with a 3 % increase in research and development headcount from fiscal year 2003 . Sales and Marketing ( million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change Sales and marketing Change Sales and marketing $ 7,562 $ 8,309 10 % $ and marketing $ 7,562 $ 8,309 10 % $ 8,677 4 marketing $ 7,562 $ 8,309 10 % $ 8,677 4 % $ 8,309 10 % $ 8,677 4 % As a percent 8,309 10 % $ 8,677 4 % As a percent of As a percent of revenue 24 % 23 % ( 1 percent of revenue 24 % 23 % ( 1 ) ppt 24 % 23 % ( 1 ) ppt 22 % ( % ( 1 ) ppt 22 % ( 1 ) ppt ) ppt 22 % ( 1 ) ppt Sales and marketing program . For fiscal year 2005 , sale and marketing expense increased slightly due to $ 470 million higher headcount-related cost from campaign ; launch of Halo 2 ; and launch arrangement for and launch arrangement for Xbox 360 . The increase wa offset cost increased in fiscal year 2004 due to $ 400 million year 2004 due to $ 400 million of stock-based compensation expense headcount-related cost related to a 9 % increase in sale and million , except percentage ) 2003 2004 Percent Change 2005 Percent , except percentage ) 2003 2004 Percent Change 2005 Percent Change ) 2003 2004 Percent Change 2005 Percent Change General and administrative Change General and administrative $ 2,426 $ 4,997 106 % $ and administrative $ 2,426 $ 4,997 106 % $ 4,166 ( administrative $ 2,426 $ 4,997 106 % $ 4,166 ( 17 $ 4,997 106 % $ 4,166 ( 17 ) % As 106 % $ 4,166 ( 17 ) % As a percent As a percent of revenue 8 % 14 % 6 ppt percent of revenue 8 % 14 % 6 ppt 10 % revenue 8 % 14 % 6 ppt 10 % ( 4 % 14 % 6 ppt 10 % ( 4 ) ppt 6 ppt 10 % ( 4 ) ppt PAGE 32 Table ( 4 ) ppt PAGE 32 Table of Contents Part II of Contents Part II Item 7 General and administrative cost include expense decreased in fiscal year 2005 due to lower legal cost and existing employee of $ 25 million . In fiscal year million . In fiscal year 2005 , our legal expense were driven by charge of $ 2.08 billion , nearly all of cost increased in fiscal year 2004 primarily due to legal expense to legal expense including $ 1.92 billion of charge related to Microsystems settlement , a $ 605 million fine imposed by the legal cost of approximately $ 104 million ; $ 280 million $ 104 million ; $ 280 million of stock-based compensation expense second quarter of fiscal year 2004 ; and other headcount-related cost : ( In million ) 2003 2004 2005 Dividends and interest ( In million ) 2003 2004 2005 Dividends and interest $ In million ) 2003 2004 2005 Dividends and interest $ 1,957 2005 Dividends and interest $ 1,957 $ 1,892 $ 1,460 Net and interest $ 1,957 $ 1,892 $ 1,460 Net gain on $ 1,957 $ 1,892 $ 1,460 Net gain on investment 44 1,460 Net gain on investment 44 1,563 856 Net loss on Net gain on investment 44 1,563 856 Net loss on derivative gain on investment 44 1,563 856 Net loss on derivative ( Net loss on derivative ( 424 ) ( 268 ) ( derivative ( 424 ) ( 268 ) ( 262 ) Income/ ) ( 268 ) ( 262 ) Income/ ( loss ) equity investees and other ( 68 ) ( 25 ) 13 other ( 68 ) ( 25 ) 13 Investment income and 68 ) ( 25 ) 13 Investment income and other $ Investment income and other $ 1,509 $ 3,162 $ 2,067 Dividends and other $ 1,509 $ 3,162 $ 2,067 Dividends and interest $ 1,509 $ 3,162 $ 2,067 Dividends and interest income declined and interest income declined $ 432 million in fiscal year 2005 432 million in fiscal year 2005 due to the combination of in preparation for the $ 32.64 billion special dividend paid on special dividend paid on December 2 , 2004 and a lower paid on December 2 , 2004 and a lower portfolio balance gain on investment declined $ 707 million in fiscal year 2005 707 million in fiscal year 2005 due primarily to greater sale special dividend paid on December 2 , 2004 . Net gain paid on December 2 , 2004 . Net gain on investment include other-than-temporary impairment of $ 152 million in fiscal year 2005 152 million in fiscal year 2005 compared to $ 82 million year 2005 compared to $ 82 million fiscal year 2004 . $ 82 million fiscal year 2004 . Investments are considered to derivative loss in fiscal year 2005 were primarily related to loss contract . During fiscal year 2005 , loss related to equity in equity price were $ 202 million and loss related to interest rate derivative were $ 53 million . These loss were foreign currency contract were $ 53 million , related in part on commodity position were $ 46 million during fiscal year 2005 46 million during fiscal year 2005 . In fiscal year 2004 2005 . In fiscal year 2004 , dividend and interest income interest income decreased by $ 65 million mainly due to lower exchange of AT & T 5 % convertible preferred debt for of Comcast during fiscal year 2003 and declining interest rate , gain on investment include PAGE 33 Table of Contents Part II of Contents Part II Item 7 other-than-temporary impairment of $ 82 7 other-than-temporary impairment of $ 82 million in fiscal year 2004 82 million in fiscal year 2004 compared to $ 1.15 billion year 2004 compared to $ 1.15 billion in fiscal year 2003 1.15 billion in fiscal year 2003 and higher net realized gain on sale in fiscal year 2004 a we moved to more gain on sale were $ 1.65 billion in fiscal year 2004 1.65 billion in fiscal year 2004 and $ 1.19 billion in fiscal year 2004 and $ 1.19 billion in fiscal year 2003 1.19 billion in fiscal year 2003 . The decline in impairment . Derivative loss decreased $ 156 million to $ 268 million $ 156 million to $ 268 million in fiscal year 2004 268 million in fiscal year 2004 compared to fiscal year 2003 2004 compared to fiscal year 2003 primarily due to the combined for the full fiscal year 2005 wa 26 % compared with full fiscal year 2005 wa 26 % compared with 33 % wa 26 % compared with 33 % for fiscal year 2004 33 % for fiscal year 2004 . The decreased rate for from the reversal of $ 776 million of previously accrued tax Service examination for fiscal year 1997 to 1999 and recording a for fiscal year 1997 to 1999 and recording a tax benefit a tax benefit of $ 179 million generated by the decision American Jobs Creation Act of 2004 . The effective tax rate tax rate for fiscal year 2003 wa 32 % . The for fiscal year 2003 wa 32 % . The fiscal year % . The fiscal year 2003 rate reflected a benefit in the second quarter of $ 126 million which resulted from the of which were reversed in 2003 by the Ninth Circuit Court and short-term investment totaled $ 37.75 billion a of June 30 37.75 billion a of June 30 , 2005 compared to $ a of June 30 , 2005 compared to $ 60.59 billion , 2005 compared to $ 60.59 billion a of June 30 60.59 billion a of June 30 , 2004 . The decline a of June 30 , 2004 . The decline is primarily the special dividend of $ 3.00 per share , or $ per share , or $ 32.64 billion , paid on December billion , paid on December 2 , 2004 , and to paid on December 2 , 2004 , and to common stock to common stock repurchase of 312 million share for $ 8.0 312 million share for $ 8.0 billion during 2005 . Equity for $ 8.0 billion during 2005 . Equity and other investment and other investment were $ 11.00 billion a of June 30 11.00 billion a of June 30 , 2005 compared to $ a of June 30 , 2005 compared to $ 12.21 billion , 2005 compared to $ 12.21 billion a of June 30 12.21 billion a of June 30 , 2004 . The investment a of June 30 , 2004 . The investment portfolio consists comprehensive income , wa $ 12.30 billion at June 30 , $ 12.30 billion at June 30 , 2005 . Our retained billion at June 30 , 2005 . Our retained deficit is Unearned revenue a of June 30 , 2005 increased $ 990 a of June 30 , 2005 increased $ 990 million from 30 , 2005 increased $ 990 million from June 30 , $ 990 million from June 30 , 2004 reflecting current period million from June 30 , 2004 reflecting current period billing outpacing multi-year licensing arrangement by $ 925 million and a $ 304 925 million and a $ 304 million increase primarily in unearned partially offset by a $ 239 million decline in revenue deferred for undelivered element . PAGE 34 Table of Contents Part II of Contents Part II Item 7 The following table outline the of unearned revenue at June 30 , 2005 : ( In revenue at June 30 , 2005 : ( In million ) Three month ended : September 30 , 2005 $ 2,724 December ended : September 30 , 2005 $ 2,724 December 31 , September 30 , 2005 $ 2,724 December 31 , 2005 2,208 , 2005 $ 2,724 December 31 , 2005 2,208 March 31 $ 2,724 December 31 , 2005 2,208 March 31 , 2006 2,724 December 31 , 2005 2,208 March 31 , 2006 1,612 31 , 2005 2,208 March 31 , 2006 1,612 June 30 2005 2,208 March 31 , 2006 1,612 June 30 , 2006 2,208 March 31 , 2006 1,612 June 30 , 2006 958 31 , 2006 1,612 June 30 , 2006 958 Thereafter 1,665 2006 1,612 June 30 , 2006 958 Thereafter 1,665 Unearned revenue 1,612 June 30 , 2006 958 Thereafter 1,665 Unearned revenue $ 30 , 2006 958 Thereafter 1,665 Unearned revenue $ 9,167 Cash Thereafter 1,665 Unearned revenue $ 9,167 Cash Flows Cash flow from from operation for fiscal year 2005 increased 14 % to $ for fiscal year 2005 increased 14 % to $ 16.61 billion increased 14 % to $ 16.61 billion due primarily to an from customer driven by our 8 % revenue growth combined with revenue growth combined with a 12 % increase in unearned revenue Cash payment in fiscal year 2005 resulting from significant legal settlement legal settlement were approximately $ 1.8 billion lower than in the to employee resulting from a 7 % increase in full-time employee used for financing wa $ 41.08 billion in fiscal year 2005 41.08 billion in fiscal year 2005 , driven by $ 36.11 2005 , driven by $ 36.11 billion of cash dividend paid dividend paid in fiscal year 2005 compared to $ 1.73 billion year 2005 compared to $ 1.73 billion paid in fiscal year billion paid in fiscal year 2004 . The increase wa also also partially driven by $ 8.0 billion in cash used for , an increase of $ 4.67 billion in cash used for the previous year , reflecting 312 million share repurchased in fiscal share repurchased in fiscal year 2005 , an increase of 188.5 2005 , an increase of 188.5 million share compared to the cash from investing wa $ 15.03 billion in fiscal year 2005 15.03 billion in fiscal year 2005 , an increase of $ , an increase of $ 18.37 billion from fiscal year 2004 18.37 billion from fiscal year 2004 , primarily due to a primarily due to a $ 23.59 billion increase in investment maturity dividend paid in fiscal year 2005 , partially offset by a partially offset by a $ 5.32 billion decrease in cash from from operation for fiscal year 2004 decreased $ 1.17 billion to fiscal year 2004 decreased $ 1.17 billion to $ 14.63 billion $ 1.17 billion to $ 14.63 billion . The decrease primarily combined cash outflow of $ 2.56 billion related to the Sun used for financing wa $ 2.36 billion in fiscal year 2004 2.36 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 2.86 billion from the previous year fourth quarter of fiscal year 2004 combined with a $ 628 2004 combined with a $ 628 million increase primarily from stock partially offset by an $ 872 million increase in cash dividend dividend paid . We repurchased 123.7 million share of common stock repurchase program in fiscal year 2004 . Cash used for investing used for investing wa $ 3.34 billion in fiscal year 2004 3.34 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 3.88 billion from fiscal year 2003 3.88 billion from fiscal year 2003 . Cash flow from operation flow from operation wa $ 15.80 billion for fiscal year 2003 15.80 billion for fiscal year 2003 , an increase of $ , an increase of $ 1.29 billion from fiscal year 2002 1.29 billion from fiscal year 2002 . The increase primarily reflects used for financing wa $ 5.22 billion in fiscal year 2003 5.22 billion in fiscal year 2003 , an increase of $ , an increase of $ 651 million from the previous year cash dividend payment of $ 857 million in 2003 and an of $ 857 million in 2003 and an increase of $ and an increase of $ 417 million in common stock repurchased stock repurchased , offsetting $ 623 million received from common stock stock issued . We repurchased 238.2 million share of common stock repurchase program in fiscal year 2003 . Cash used for investing used for investing wa $ 7.50 billion in fiscal year 2003 7.50 billion in fiscal year 2003 , a decrease of $ , a decrease of $ 3.37 billion from fiscal year 2002 3.37 billion from fiscal year 2002 , due to stronger portfolio Stockholders ’ equity at June 30 , 2005 wa $ 48.12 equity at June 30 , 2005 wa $ 48.12 billion . 30 , 2005 wa $ 48.12 billion . We will continue constructing new building were $ 152 million on June 30 , $ 152 million on June 30 , 2005 . We have million on June 30 , 2005 . We have operating lease rental expense totaling , $ 290 million , $ 331 million $ 290 million , $ 331 million and $ 299 million $ 331 million and $ 299 million in fiscal year 2003 299 million in fiscal year 2003 , 2004 and 2005 , in fiscal year 2003 , 2004 and 2005 , respectively . year 2003 , 2004 and 2005 , respectively . We have leased property from the PAGE 35 Table of Contents Part II of Contents Part II Item 7 lessor at the end of value . As of June 30 , 2005 , the maximum As of June 30 , 2005 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that resource . In fiscal year 2005 , our Board of Directors Board of Directors approved $ 3.40 per share cash dividend , cash dividend , with $ 3.32 paid a of June 30 3.32 paid a of June 30 , 2005 . A quarterly a of June 30 , 2005 . A quarterly dividend of A quarterly dividend of $ 0.08 per share ( or approximately share ( or approximately $ 857 million ) wa approved by Board of Directors on June 15 , 2005 to be paid Directors on June 15 , 2005 to be paid to shareholder of record a of August 17 , 2005 on September 8 a of August 17 , 2005 on September 8 , 2005 17 , 2005 on September 8 , 2005 . On July 2005 on September 8 , 2005 . On July 20 , , 2005 . On July 20 , 2004 , our Board . On July 20 , 2004 , our Board of Directors buy back up to $ 30 billion in Microsoft common stock cash . During fiscal year 2005 , we repurchased 312 million year 2005 , we repurchased 312 million share , or $ million share , or $ 8.0 billion of our common stock Sheet Arrangements As of June 30 , 2004 , we had As of June 30 , 2004 , we had guaranteed the these guarantee wa approximately $ 51 million . Effective December 21 51 million . Effective December 21 , 2004 , the guarantee . Effective December 21 , 2004 , the guarantee were terminated indemnification under SFAS No . 5 , Accounting for Contingencies , No . ( FIN ) 45 . We consider factor such contractual obligation a of June 30 , 2005 : ( In a of June 30 , 2005 : ( In million ) ( In million ) ( 1 ) Payments due by period due by period Fiscal Years 2006 2007-2009 2010-2012 2013 and thereafter by period Fiscal Years 2006 2007-2009 2010-2012 2013 and thereafter Total period Fiscal Years 2006 2007-2009 2010-2012 2013 and thereafter Total Long-term Fiscal Years 2006 2007-2009 2010-2012 2013 and thereafter Total Long-term debt $ – Construction commitment ( 2 ) 122 28 2 – Construction commitment ( 2 ) 122 28 2 – 152 Lease commitment ( 2 ) 122 28 2 – 152 Lease obligation ( 2 ) 122 28 2 – 152 Lease obligation : ) 122 28 2 – 152 Lease obligation : Capital lease Lease obligation : Capital lease 6 17 11 – 34 Operating obligation : Capital lease 6 17 11 – 34 Operating lease : Capital lease 6 17 11 – 34 Operating lease ( lease 6 17 11 – 34 Operating lease ( 3 ) – 34 Operating lease ( 3 ) 230 493 214 96 Operating lease ( 3 ) 230 493 214 96 1,033 Purchase lease ( 3 ) 230 493 214 96 1,033 Purchase commitment ( 3 ) 230 493 214 96 1,033 Purchase commitment ( 3 ) 230 493 214 96 1,033 Purchase commitment ( 4 ) 230 493 214 96 1,033 Purchase commitment ( 4 ) 96 1,033 Purchase commitment ( 4 ) 1,072 1 – – Purchase commitment ( 4 ) 1,072 1 – – 1,073 Other commitment ( 4 ) 1,072 1 – – 1,073 Other long-term ) 1,072 1 – – 1,073 Other long-term liability ( 5 1,073 Other long-term liability ( 5 ) – 95 17 12 liability ( 5 ) – 95 17 12 124 Total contractual ( 5 ) – 95 17 12 124 Total contractual obligation 5 ) – 95 17 12 124 Total contractual obligation $ ) – 95 17 12 124 Total contractual obligation $ 1,430 124 Total contractual obligation $ 1,430 $ 634 $ 244 $ contractual obligation $ 1,430 $ 634 $ 244 $ 108 $ $ 1,430 $ 634 $ 244 $ 108 $ 2,416 PAGE $ 634 $ 244 $ 108 $ 2,416 PAGE 36 Table $ 244 $ 108 $ 2,416 PAGE 36 Table of Contents $ 108 $ 2,416 PAGE 36 Table of Contents Part II of Contents Part II Item 7 ( 1 ) We have Part II Item 7 ( 1 ) We have excluded the We have excluded the $ 1.1 billion contingent liability related to the third paragraph of Note 17 – Contingencies of the Notes subject to uncertainty . ( 2 ) We have certain commitment flow from operation . ( 3 ) Our future minimum rental flow from operation . ( 4 ) Purchase commitment represent obligation all known contract exceeding $ 5 million in the aggregate and flow from operation . ( 5 ) We have excluded unearned excluded unearned revenue of $ 1.67 billion from other long-term liability ISSUED ACCOUNTING STANDARDS In November 2004 , the Financial Accounting Standards ) issued SFAS No . 151 , Inventory Costs , which material . SFAS No . 151 will be effective for inventory fiscal year beginning after June 15 , 2005 . We do beginning after June 15 , 2005 . We do not believe adoption of SFAS No . 151 will have a material impact financial statement . In December 2004 , the FASB issued SFAS FASB issued SFAS No . 153 , Exchanges of Nonmonetary Assets substance . SFAS No . 153 will be effective for nonmonetary fiscal period beginning after June 15 , 2005 . We do beginning after June 15 , 2005 . We do not believe adoption of SFAS No . 153 will have a material impact financial statement . In December 2004 , the FASB issued SFAS FASB issued SFAS No . 123 ( R ) , Share-Based APB ) Opinion No . 25 . In March 2005 , . 25 . In March 2005 , the SEC released Staff Accounting Bulletin ( SAB ) 107 , Share-Based Payment , which application of SFAS No . 123 ( R ) . In R ) . In April 2005 the SEC issued a rule rule that SFAS No . 123 ( R ) will be beginning on or after June 15 , 2005 . We previously or after June 15 , 2005 . We previously adopted the provision of SFAS No . 123 , Accounting for Stock-Based Compensation Stock-Based Compensation , on July 1 , 2003 and restated previous , on July 1 , 2003 and restated previous period at granted to employee after July 1 , 1995 . Accordingly we employee after July 1 , 1995 . Accordingly we believe SFAS we believe SFAS No . 123 ( R ) will not adoption of SFAS No . 123 ( R ) will have of Position ( SOP ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether software arrangement , the PAGE 37 Table of Contents Part II of Contents Part II Item 7 ability to identify VSOE for product . SFAS No . 115 , Accounting for Certain Investments Securities , and SEC SAB 59 , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Accounting for the Costs Marketed . SFAS No . 86 specifies that cost incurred internally uncertainty . SFAS No . 5 , Accounting for Contingencies , operation . SFAS No . 109 , Accounting for Income Taxes or cash flow . PAGE 38 Table of Contents Part II of Contents Part II Item 7 , 7A We account for Part II Item 7 , 7A We account for stock-based compensation provision of SFAS No . 123 , Accounting for Stock-Based Compensation provision of SFAS No . 123 , stock-based compensation cost is be materially impacted . ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES by , first , simulating 10,000 market price path over a re-price each holding . The 250th worst performance ( out of worst performance ( out of 10,000 ) represents the VAR over period of time at the 97.5 percentile confidence level . Several future market risk . PAGE 39 Table of Contents Part II of Contents Part II Item 7A Management began using a 1-day 7A Management began using a 1-day VAR for internal risk measurement effective for the quarter-ended March 31 , 2005 . The effect the quarter-ended March 31 , 2005 . The effect of changing The effect of changing from 20-day VAR to 1-day VAR wa changing from 20-day VAR to 1-day VAR wa not material and following table set forth the 1-day VAR for substantially all of million ) Year ended June 30 , 2005 Risk Categories 2004 Year ended June 30 , 2005 Risk Categories 2004 2005 Average 30 , 2005 Risk Categories 2004 2005 Average High Low Interest , 2005 Risk Categories 2004 2005 Average High Low Interest rate High Low Interest rate $ 67 $ 88 $ 68 $ Interest rate $ 67 $ 88 $ 68 $ 94 $ $ 67 $ 88 $ 68 $ 94 $ 37 Currency $ 88 $ 68 $ 94 $ 37 Currency rate 46 $ 68 $ 94 $ 37 Currency rate 46 52 36 94 $ 37 Currency rate 46 52 36 55 12 Equity $ 37 Currency rate 46 52 36 55 12 Equity price 37 Currency rate 46 52 36 55 12 Equity price 173 Currency rate 46 52 36 55 12 Equity price 173 164 rate 46 52 36 55 12 Equity price 173 164 166 36 55 12 Equity price 173 164 166 187 141 Commodity 55 12 Equity price 173 164 166 187 141 Commodity price 12 Equity price 173 164 166 187 141 Commodity price – Equity price 173 164 166 187 141 Commodity price – 14 price 173 164 166 187 141 Commodity price – 14 6 187 141 Commodity price – 14 6 14 – The total 141 Commodity price – 14 6 14 – The total 1-day Commodity price – 14 6 14 – The total 1-day VAR 6 14 – The total 1-day VAR for the combined risk combined risk category wa $ 195 million at June 30 , $ 195 million at June 30 , 2005 and $ 187 million at June 30 , 2005 and $ 187 million at 30 , 2005 and $ 187 million at June 30 , $ 187 million at June 30 , 2004 . The total million at June 30 , 2004 . The total VAR is . The total VAR is 39 % le at June 30 39 % le at June 30 , 2005 and 35 % le at June 30 , 2005 and 35 % le at June 30 , 2005 and 35 % le at June , % le at June , 30 2004 than the sum of le at June , 30 2004 than the sum of the combination of risk . PAGE 40 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 2003 2004 2005 Revenue $ ) Year Ended June 30 2003 2004 2005 Revenue $ 32,187 Year Ended June 30 2003 2004 2005 Revenue $ 32,187 $ Ended June 30 2003 2004 2005 Revenue $ 32,187 $ 36,835 2003 2004 2005 Revenue $ 32,187 $ 36,835 $ 39,788 Operating 2005 Revenue $ 32,187 $ 36,835 $ 39,788 Operating expense : $ 32,187 $ 36,835 $ 39,788 Operating expense : Cost of expense : Cost of revenue 6,059 6,716 6,200 Research and development : Cost of revenue 6,059 6,716 6,200 Research and development 6,595 Cost of revenue 6,059 6,716 6,200 Research and development 6,595 7,779 6,716 6,200 Research and development 6,595 7,779 6,184 Sales and marketing 6,200 Research and development 6,595 7,779 6,184 Sales and marketing 7,562 Research and development 6,595 7,779 6,184 Sales and marketing 7,562 8,309 7,779 6,184 Sales and marketing 7,562 8,309 8,677 General and administrative 6,184 Sales and marketing 7,562 8,309 8,677 General and administrative 2,426 Sales and marketing 7,562 8,309 8,677 General and administrative 2,426 4,997 8,309 8,677 General and administrative 2,426 4,997 4,166 Total operating expense 8,677 General and administrative 2,426 4,997 4,166 Total operating expense 22,642 General and administrative 2,426 4,997 4,166 Total operating expense 22,642 27,801 4,997 4,166 Total operating expense 22,642 27,801 25,227 Operating income 9,545 4,166 Total operating expense 22,642 27,801 25,227 Operating income 9,545 9,034 Total operating expense 22,642 27,801 25,227 Operating income 9,545 9,034 14,561 22,642 27,801 25,227 Operating income 9,545 9,034 14,561 Investment income and 27,801 25,227 Operating income 9,545 9,034 14,561 Investment income and other 25,227 Operating income 9,545 9,034 14,561 Investment income and other 1,509 14,561 Investment income and other 1,509 3,162 2,067 Income before income Investment income and other 1,509 3,162 2,067 Income before income tax income and other 1,509 3,162 2,067 Income before income tax 11,054 2,067 Income before income tax 11,054 12,196 16,628 Provision for income Income before income tax 11,054 12,196 16,628 Provision for income tax before income tax 11,054 12,196 16,628 Provision for income tax 3,523 16,628 Provision for income tax 3,523 4,028 4,374 Net income $ Provision for income tax 3,523 4,028 4,374 Net income $ 7,531 for income tax 3,523 4,028 4,374 Net income $ 7,531 $ 4,028 4,374 Net income $ 7,531 $ 8,168 $ 12,254 Earnings Net income $ 7,531 $ 8,168 $ 12,254 Earnings per share $ 7,531 $ 8,168 $ 12,254 Earnings per share : Basic per share : Basic $ 0.70 $ 0.76 $ 1.13 Diluted : Basic $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.70 $ 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 0.76 $ 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Weighted 1.13 Diluted $ 0.69 $ 0.75 $ 1.12 Weighted average share $ 0.69 $ 0.75 $ 1.12 Weighted average share outstanding : average share outstanding : Basic 10,723 10,803 10,839 Diluted 10,882 10,894 share outstanding : Basic 10,723 10,803 10,839 Diluted 10,882 10,894 10,906 outstanding : Basic 10,723 10,803 10,839 Diluted 10,882 10,894 10,906 Cash Basic 10,723 10,803 10,839 Diluted 10,882 10,894 10,906 Cash dividend declared 10,723 10,803 10,839 Diluted 10,882 10,894 10,906 Cash dividend declared per 10,803 10,839 Diluted 10,882 10,894 10,906 Cash dividend declared per share dividend declared per share $ 0.08 $ 0.16 $ 3.40 See per share $ 0.08 $ 0.16 $ 3.40 See accompanying note $ 0.08 $ 0.16 $ 3.40 See accompanying note . PAGE See accompanying note . PAGE 41 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2004 2005 Assets Current asset In million ) June 30 2004 2005 Assets Current asset : million ) June 30 2004 2005 Assets Current asset : Cash : Cash and equivalent $ 14,304 $ 4,851 Short-term investment 46,288 and equivalent $ 14,304 $ 4,851 Short-term investment 46,288 32,900 Total 14,304 $ 4,851 Short-term investment 46,288 32,900 Total cash and short-term $ 4,851 Short-term investment 46,288 32,900 Total cash and short-term investment Total cash and short-term investment 60,592 37,751 Accounts receivable , net cash and short-term investment 60,592 37,751 Accounts receivable , net 5,890 37,751 Accounts receivable , net 5,890 7,180 Inventories 421 491 Deferred Accounts receivable , net 5,890 7,180 Inventories 421 491 Deferred income , net 5,890 7,180 Inventories 421 491 Deferred income tax 2,097 net 5,890 7,180 Inventories 421 491 Deferred income tax 2,097 1,701 421 491 Deferred income tax 2,097 1,701 Other 1,566 1,614 Total 491 Deferred income tax 2,097 1,701 Other 1,566 1,614 Total current income tax 2,097 1,701 Other 1,566 1,614 Total current asset 70,566 tax 2,097 1,701 Other 1,566 1,614 Total current asset 70,566 48,737 1,566 1,614 Total current asset 70,566 48,737 Property and equipment , 1,614 Total current asset 70,566 48,737 Property and equipment , net Property and equipment , net 2,326 2,346 Equity and other investment and equipment , net 2,326 2,346 Equity and other investment 12,210 2,346 Equity and other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible Equity and other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset other investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset , net investment 12,210 11,004 Goodwill 3,115 3,309 Intangible asset , net 569 3,309 Intangible asset , net 569 499 Deferred income tax 3,808 Intangible asset , net 569 499 Deferred income tax 3,808 3,621 569 499 Deferred income tax 3,808 3,621 Other long-term asset 1,774 499 Deferred income tax 3,808 3,621 Other long-term asset 1,774 1,299 3,808 3,621 Other long-term asset 1,774 1,299 Total asset $ 94,368 3,621 Other long-term asset 1,774 1,299 Total asset $ 94,368 $ 1,774 1,299 Total asset $ 94,368 $ 70,815 Liabilities and stockholder Total asset $ 94,368 $ 70,815 Liabilities and stockholder ’ equity liability : Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 Accounts payable $ 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income 1,717 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 $ 2,086 Accrued compensation 1,339 1,662 Income tax 3,478 2,020 Short-term compensation 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 1,339 1,662 Income tax 3,478 2,020 Short-term unearned revenue 6,514 7,502 3,478 2,020 Short-term unearned revenue 6,514 7,502 Other 1,921 3,607 Total 2,020 Short-term unearned revenue 6,514 7,502 Other 1,921 3,607 Total current unearned revenue 6,514 7,502 Other 1,921 3,607 Total current liability 14,969 revenue 6,514 7,502 Other 1,921 3,607 Total current liability 14,969 16,877 1,921 3,607 Total current liability 14,969 16,877 Long-term unearned revenue 1,663 3,607 Total current liability 14,969 16,877 Long-term unearned revenue 1,663 1,665 14,969 16,877 Long-term unearned revenue 1,663 1,665 Other long-term liability 2,911 16,877 Long-term unearned revenue 1,663 1,665 Other long-term liability 2,911 4,158 1,663 1,665 Other long-term liability 2,911 4,158 Commitments and contingency Stockholders 1,665 Other long-term liability 2,911 4,158 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 10,862 and 10,710 share authorized 24,000 ; outstanding 10,862 and 10,710 56,396 60,413 Retained 24,000 ; outstanding 10,862 and 10,710 56,396 60,413 Retained earnings ( ; outstanding 10,862 and 10,710 56,396 60,413 Retained earnings ( deficit outstanding 10,862 and 10,710 56,396 60,413 Retained earnings ( deficit ) other comprehensive income of $ 1,119 and $ 1,426 18,429 ( of $ 1,119 and $ 1,426 18,429 ( 12,298 ) Total $ 1,119 and $ 1,426 18,429 ( 12,298 ) Total stockholder and $ 1,426 18,429 ( 12,298 ) Total stockholder ’ equity ) Total stockholder ’ equity 74,825 48,115 Total liability and stockholder Total stockholder ’ equity 74,825 48,115 Total liability and stockholder ’ and stockholder ’ equity $ 94,368 $ 70,815 See accompanying note ’ equity $ 94,368 $ 70,815 See accompanying note . PAGE See accompanying note . PAGE 42 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2003 2004 2005 Operations Net ) Year Ended June 30 2003 2004 2005 Operations Net income Year Ended June 30 2003 2004 2005 Operations Net income $ Ended June 30 2003 2004 2005 Operations Net income $ 7,531 2005 Operations Net income $ 7,531 $ 8,168 $ 12,254 Depreciation Net income $ 7,531 $ 8,168 $ 12,254 Depreciation , amortization $ 7,531 $ 8,168 $ 12,254 Depreciation , amortization , and , and other noncash item 1,393 1,186 855 Stock-based compensation 3,749 and other noncash item 1,393 1,186 855 Stock-based compensation 3,749 5,734 other noncash item 1,393 1,186 855 Stock-based compensation 3,749 5,734 2,448 1,393 1,186 855 Stock-based compensation 3,749 5,734 2,448 Net recognized ( 1,186 855 Stock-based compensation 3,749 5,734 2,448 Net recognized ( gain 855 Stock-based compensation 3,749 5,734 2,448 Net recognized ( gain ) gain ) /losses on investment 380 ( 1,296 ) ( 527 /losses on investment 380 ( 1,296 ) ( 527 ) Stock 380 ( 1,296 ) ( 527 ) Stock option income tax Stock option income tax benefit 1,365 1,100 668 Deferred income tax option income tax benefit 1,365 1,100 668 Deferred income tax ( income tax benefit 1,365 1,100 668 Deferred income tax ( 1,348 668 Deferred income tax ( 1,348 ) ( 1,479 ) ( tax ( 1,348 ) ( 1,479 ) ( 179 ) Unearned ) ( 1,479 ) ( 179 ) Unearned revenue 12,519 11,777 ( 179 ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned 179 ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned revenue ) Unearned revenue 12,519 11,777 13,831 Recognition of unearned revenue ( Recognition of unearned revenue ( 11,292 ) ( 12,527 ) ( revenue ( 11,292 ) ( 12,527 ) ( 12,919 ) Accounts ) ( 12,527 ) ( 12,919 ) Accounts receivable 187 ( ( 12,919 ) Accounts receivable 187 ( 687 ) ( 1,243 ) Accounts receivable 187 ( 687 ) ( 1,243 ) Other 187 ( 687 ) ( 1,243 ) Other current asset 412 1,243 ) Other current asset 412 478 ( 245 ) Other ) Other current asset 412 478 ( 245 ) Other long-term current asset 412 478 ( 245 ) Other long-term asset ( ) Other long-term asset ( 28 ) 34 21 Other current long-term asset ( 28 ) 34 21 Other current liability 35 asset ( 28 ) 34 21 Other current liability 35 1,529 34 21 Other current liability 35 1,529 396 Other long-term liability 21 Other current liability 35 1,529 396 Other long-term liability 894 Other current liability 35 1,529 396 Other long-term liability 894 609 1,529 396 Other long-term liability 894 609 1,245 Net cash from 396 Other long-term liability 894 609 1,245 Net cash from operation Other long-term liability 894 609 1,245 Net cash from operation 15,797 1,245 Net cash from operation 15,797 14,626 16,605 Financing Common stock Net cash from operation 15,797 14,626 16,605 Financing Common stock issued cash from operation 15,797 14,626 16,605 Financing Common stock issued 2,120 16,605 Financing Common stock issued 2,120 2,748 3,109 Common stock repurchased Financing Common stock issued 2,120 2,748 3,109 Common stock repurchased ( Common stock issued 2,120 2,748 3,109 Common stock repurchased ( 6,486 3,109 Common stock repurchased ( 6,486 ) ( 3,383 ) ( repurchased ( 6,486 ) ( 3,383 ) ( 8,057 ) Common ) ( 3,383 ) ( 8,057 ) Common stock cash dividend Common stock cash dividend ( 857 ) ( 1,729 ) ( dividend ( 857 ) ( 1,729 ) ( 36,112 ) Other ) ( 1,729 ) ( 36,112 ) Other – – ( ) Other – – ( 18 ) Net cash used for cash used for financing ( 5,223 ) ( 2,364 ) ( financing ( 5,223 ) ( 2,364 ) ( 41,078 ) Investing ) ( 2,364 ) ( 41,078 ) Investing Additions to property to property and equipment ( 891 ) ( 1,109 ) ( equipment ( 891 ) ( 1,109 ) ( 812 ) Acquisition ) ( 1,109 ) ( 812 ) Acquisition of company , net of cash acquired ( 1,063 ) ( 4 ) ( acquired ( 1,063 ) ( 4 ) ( 207 ) Purchases ) ( 4 ) ( 207 ) Purchases of investment ( ) Purchases of investment ( 91,869 ) ( 95,005 ) ( investment ( 91,869 ) ( 95,005 ) ( 68,045 ) Maturities ) ( 95,005 ) ( 68,045 ) Maturities of investment 9,205 68,045 ) Maturities of investment 9,205 5,561 29,153 Sales of investment ) Maturities of investment 9,205 5,561 29,153 Sales of investment 77,123 Maturities of investment 9,205 5,561 29,153 Sales of investment 77,123 87,215 5,561 29,153 Sales of investment 77,123 87,215 54,938 Net cash from 29,153 Sales of investment 77,123 87,215 54,938 Net cash from investing Sales of investment 77,123 87,215 54,938 Net cash from investing ( Net cash from investing ( 7,495 ) ( 3,342 ) 15,027 investing ( 7,495 ) ( 3,342 ) 15,027 Net change in 7,495 ) ( 3,342 ) 15,027 Net change in cash and change in cash and equivalent 3,079 8,920 ( 9,446 ) Effect in cash and equivalent 3,079 8,920 ( 9,446 ) Effect of and equivalent 3,079 8,920 ( 9,446 ) Effect of exchange rate rate on cash and equivalent 61 27 ( 7 ) Cash on cash and equivalent 61 27 ( 7 ) Cash and and equivalent 61 27 ( 7 ) Cash and equivalent , equivalent , beginning of period 2,217 5,357 14,304 Cash and equivalent , beginning of period 2,217 5,357 14,304 Cash and equivalent , beginning of period 2,217 5,357 14,304 Cash and equivalent , end , end of period $ 5,357 $ 14,304 $ 4,851 See of period $ 5,357 $ 14,304 $ 4,851 See accompanying note $ 5,357 $ 14,304 $ 4,851 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 2003 2004 2005 Common stock ) Year Ended June 30 2003 2004 2005 Common stock and Year Ended June 30 2003 2004 2005 Common stock and paid-in Ended June 30 2003 2004 2005 Common stock and paid-in capital , beginning of period $ 41,845 $ 49,234 $ 56,396 Common of period $ 41,845 $ 49,234 $ 56,396 Common stock issued $ 41,845 $ 49,234 $ 56,396 Common stock issued 2,966 2,815 $ 56,396 Common stock issued 2,966 2,815 3,223 Common stock repurchased 56,396 Common stock issued 2,966 2,815 3,223 Common stock repurchased ( Common stock issued 2,966 2,815 3,223 Common stock repurchased ( 691 3,223 Common stock repurchased ( 691 ) ( 416 ) ( repurchased ( 691 ) ( 416 ) ( 1,737 ) Stock-based ) ( 416 ) ( 1,737 ) Stock-based compensation expense 3,749 1,737 ) Stock-based compensation expense 3,749 5,734 2,448 Stock option income ) Stock-based compensation expense 3,749 5,734 2,448 Stock option income tax Stock-based compensation expense 3,749 5,734 2,448 Stock option income tax benefits/ tax benefits/ ( deficiency ) 1,365 ( 989 ) 89 Other ( deficiency ) 1,365 ( 989 ) 89 Other , net ) 1,365 ( 989 ) 89 Other , net – 18 89 Other , net – 18 ( 6 ) Balance , , net – 18 ( 6 ) Balance , end of Balance , end of period 49,234 56,396 60,413 Retained earnings ( , end of period 49,234 56,396 60,413 Retained earnings ( deficit end of period 49,234 56,396 60,413 Retained earnings ( deficit ) Balance , beginning of period 12,997 15,678 18,429 Net income 7,531 , beginning of period 12,997 15,678 18,429 Net income 7,531 8,168 beginning of period 12,997 15,678 18,429 Net income 7,531 8,168 12,254 12,997 15,678 18,429 Net income 7,531 8,168 12,254 Other comprehensive income 15,678 18,429 Net income 7,531 8,168 12,254 Other comprehensive income : 18,429 Net income 7,531 8,168 12,254 Other comprehensive income : Net ) on derivative instrument ( 102 ) 101 ( 58 ) derivative instrument ( 102 ) 101 ( 58 ) Net unrealized ( 102 ) 101 ( 58 ) Net unrealized investment gains/ investment gains/ ( loss ) 1,243 ( 873 ) 371 Translation ( loss ) 1,243 ( 873 ) 371 Translation adjustment and ) 1,243 ( 873 ) 371 Translation adjustment and other 116 371 Translation adjustment and other 116 51 ( 6 ) Comprehensive Translation adjustment and other 116 51 ( 6 ) Comprehensive income and other 116 51 ( 6 ) Comprehensive income 8,788 7,447 ( 6 ) Comprehensive income 8,788 7,447 12,561 Common stock cash 6 ) Comprehensive income 8,788 7,447 12,561 Common stock cash dividend ) Comprehensive income 8,788 7,447 12,561 Common stock cash dividend ( Common stock cash dividend ( 857 ) ( 1,729 ) ( dividend ( 857 ) ( 1,729 ) ( 36,968 ) Common ) ( 1,729 ) ( 36,968 ) Common stock repurchased ( ) Common stock repurchased ( 5,250 ) ( 2,967 ) ( repurchased ( 5,250 ) ( 2,967 ) ( 6,320 ) Balance ) ( 2,967 ) ( 6,320 ) Balance , end of Balance , end of period 15,678 18,429 ( 12,298 ) Total , end of period 15,678 18,429 ( 12,298 ) Total stockholder of period 15,678 18,429 ( 12,298 ) Total stockholder ’ equity Total stockholder ’ equity $ 64,912 $ 74,825 $ 48,115 See ’ equity $ 64,912 $ 74,825 $ 48,115 See accompanying note $ 64,912 $ 74,825 $ 48,115 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The for a subscription . PAGE 45 Table of Contents Part II of Contents Part II Item 8 Revenue related to our Xbox . Advertising expense wa $ 1.06 billion in fiscal year 2003 1.06 billion in fiscal year 2003 , $ 904 million in fiscal year 2003 , $ 904 million in fiscal year 2004 904 million in fiscal year 2004 , and $ 995 million year 2004 , and $ 995 million in fiscal year 2005 995 million in fiscal year 2005 . INCOME TAXES Income tax sell or re-pledge wa $ 499 million at both June 30 499 million at both June 30 , 2004 and 2005 . at both June 30 , 2004 and 2005 . Investments are June 30 , 2004 and 2005 . Investments are considered to investment is established . PAGE 46 Table of Contents Part II of Contents Part II Item 8 We use derivative instrument to ( SFAS ) No . 133 , Accounting for Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage period of change . PAGE 47 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2003 $ 209 $ 118 $ end of period 2003 $ 209 $ 118 $ ( 85 period 2003 $ 209 $ 118 $ ( 85 ) $ 209 $ 118 $ ( 85 ) $ 242 2004 242 $ ( 85 ) $ 242 2004 242 44 ( 120 ( 85 ) $ 242 2004 242 44 ( 120 ) 85 ) $ 242 2004 242 44 ( 120 ) 166 ) $ 242 2004 242 44 ( 120 ) 166 2005 242 2004 242 44 ( 120 ) 166 2005 166 48 242 44 ( 120 ) 166 2005 166 48 ( 43 44 ( 120 ) 166 2005 166 48 ( 43 ) ( 120 ) 166 2005 166 48 ( 43 ) 171 120 ) 166 2005 166 48 ( 43 ) 171 INVENTORIES 166 2005 166 48 ( 43 ) 171 INVENTORIES Inventories are 166 48 ( 43 ) 171 INVENTORIES Inventories are stated at , ranging from one to 15 year . Computer software developed annual basis a of July 1 , and between annual test liability . We reclassified $ 1.1 billion and $ 1.7 billion $ 1.1 billion and $ 1.7 billion of investment in ARS in ARS a of June 30 , 2003 and 2004 , a of June 30 , 2003 and 2004 , respectively , June 30 , 2003 and 2004 , respectively , that were we have also reclassified $ 2.0 billion in our fiscal year billion in our fiscal year 2004 balance sheet from net long-term current period presentation . PAGE 48 Table of Contents Part II of Contents Part II Item 8 NOTE 2 UNEARNED REVENUE Unearned Part II Item 8 NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price ( In million ) June 30 2004 2005 Volume licensing program In million ) June 30 2004 2005 Volume licensing program $ million ) June 30 2004 2005 Volume licensing program $ 5,075 2005 Volume licensing program $ 5,075 $ 6,000 Undelivered element 2,358 licensing program $ 5,075 $ 6,000 Undelivered element 2,358 2,119 Other 5,075 $ 6,000 Undelivered element 2,358 2,119 Other 744 1,048 Unearned $ 6,000 Undelivered element 2,358 2,119 Other 744 1,048 Unearned revenue Undelivered element 2,358 2,119 Other 744 1,048 Unearned revenue $ 8,177 element 2,358 2,119 Other 744 1,048 Unearned revenue $ 8,177 $ 744 1,048 Unearned revenue $ 8,177 $ 9,167 Unearned revenue by Unearned revenue $ 8,177 $ 9,167 Unearned revenue by segment is ( In million ) June 30 2004 2005 Client $ 2,822 In million ) June 30 2004 2005 Client $ 2,822 $ million ) June 30 2004 2005 Client $ 2,822 $ 2,687 30 2004 2005 Client $ 2,822 $ 2,687 Server and Tools 2005 Client $ 2,822 $ 2,687 Server and Tools 2,370 3,048 $ 2,687 Server and Tools 2,370 3,048 Information Worker 2,586 2,814 2,687 Server and Tools 2,370 3,048 Information Worker 2,586 2,814 Other Tools 2,370 3,048 Information Worker 2,586 2,814 Other segment 399 618 2,370 3,048 Information Worker 2,586 2,814 Other segment 399 618 Unearned Worker 2,586 2,814 Other segment 399 618 Unearned revenue $ 8,177 2,586 2,814 Other segment 399 618 Unearned revenue $ 8,177 $ 399 618 Unearned revenue $ 8,177 $ 9,167 PAGE 49 Table Unearned revenue $ 8,177 $ 9,167 PAGE 49 Table of Contents $ 8,177 $ 9,167 PAGE 49 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2004 Cash and security other investment June 30 , 2004 Cash and security Cash $ Cash and security Cash $ 1,812 $ – $ – $ $ – $ – $ 1,812 $ 1,812 $ – $ $ – $ 1,812 $ 1,812 $ – $ – Mutual – $ – Mutual fund 3,595 – – 3,595 3,595 – Mutual fund 3,595 – – 3,595 3,595 – – Commercial paper fund 3,595 – – 3,595 3,595 – – Commercial paper 7,286 3,595 – – Commercial paper 7,286 – – 7,286 4,109 3,177 Commercial paper 7,286 – – 7,286 4,109 3,177 – Certificates of paper 7,286 – – 7,286 4,109 3,177 – Certificates of deposit 7,286 – – 7,286 4,109 3,177 – Certificates of deposit 415 3,177 – Certificates of deposit 415 – – 415 330 85 of deposit 415 – – 415 330 85 – U. S. deposit 415 – – 415 330 85 – U. S. Government 415 – – 415 330 85 – U. S. Government and S. Government and Agency security 20,565 26 ( 54 ) 20,537 Government and Agency security 20,565 26 ( 54 ) 20,537 4,083 Agency security 20,565 26 ( 54 ) 20,537 4,083 16,454 – 20,565 26 ( 54 ) 20,537 4,083 16,454 – Foreign government 26 ( 54 ) 20,537 4,083 16,454 – Foreign government bond ( 54 ) 20,537 4,083 16,454 – Foreign government bond 4,524 16,454 – Foreign government bond 4,524 41 ( 60 ) 4,505 – Foreign government bond 4,524 41 ( 60 ) 4,505 – government bond 4,524 41 ( 60 ) 4,505 – 4,505 – 4,524 41 ( 60 ) 4,505 – 4,505 – Mortgage backed ( 60 ) 4,505 – 4,505 – Mortgage backed security 3,656 4,505 – Mortgage backed security 3,656 21 ( 42 ) 3,635 – Mortgage backed security 3,656 21 ( 42 ) 3,635 – backed security 3,656 21 ( 42 ) 3,635 – 3,635 – 3,656 21 ( 42 ) 3,635 – 3,635 – Corporate note ( 42 ) 3,635 – 3,635 – Corporate note and bond – Corporate note and bond 15,048 122 ( 50 ) 15,120 Corporate note and bond 15,048 122 ( 50 ) 15,120 98 and bond 15,048 122 ( 50 ) 15,120 98 13,541 1,481 15,048 122 ( 50 ) 15,120 98 13,541 1,481 Municipal security 122 ( 50 ) 15,120 98 13,541 1,481 Municipal security 5,154 ( 50 ) 15,120 98 13,541 1,481 Municipal security 5,154 39 50 ) 15,120 98 13,541 1,481 Municipal security 5,154 39 ( 98 13,541 1,481 Municipal security 5,154 39 ( 25 ) 5,168 13,541 1,481 Municipal security 5,154 39 ( 25 ) 5,168 277 Municipal security 5,154 39 ( 25 ) 5,168 277 4,891 – 5,154 39 ( 25 ) 5,168 277 4,891 – Common stock 39 ( 25 ) 5,168 277 4,891 – Common stock and ( 25 ) 5,168 277 4,891 – Common stock and equivalent – Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 Common stock and equivalent 7,722 1,571 ( 62 ) 9,231 – and equivalent 7,722 1,571 ( 62 ) 9,231 – – 9,231 7,722 1,571 ( 62 ) 9,231 – – 9,231 Preferred stock 62 ) 9,231 – – 9,231 Preferred stock 1,290 – – – – 9,231 Preferred stock 1,290 – – 1,290 – – Preferred stock 1,290 – – 1,290 – – 1,290 Other investment – – 1,290 – – 1,290 Other investment 208 – – – – 1,290 Other investment 208 – – 208 – – Other investment 208 – – 208 – – 208 Total $ – – 208 – – 208 Total $ 71,275 $ 1,820 – – 208 Total $ 71,275 $ 1,820 $ ( 293 208 Total $ 71,275 $ 1,820 $ ( 293 ) $ 71,275 $ 1,820 $ ( 293 ) $ 72,802 $ 14,304 $ ( 293 ) $ 72,802 $ 14,304 $ 46,288 $ 293 ) $ 72,802 $ 14,304 $ 46,288 $ 12,210 ( $ 72,802 $ 14,304 $ 46,288 $ 12,210 ( In million $ 14,304 $ 46,288 $ 12,210 ( In million ) Cost Equity and other investment June 30 , 2005 Cash and security other investment June 30 , 2005 Cash and security Cash $ Cash and security Cash $ 1,911 $ – $ – $ $ – $ – $ 1,911 $ 1,911 $ – $ $ – $ 1,911 $ 1,911 $ – $ – Mutual – $ – Mutual fund 1,636 38 – 1,674 817 857 $ – Mutual fund 1,636 38 – 1,674 817 857 – Mutual fund 1,636 38 – 1,674 817 857 – Commercial paper fund 1,636 38 – 1,674 817 857 – Commercial paper 1,566 1,636 38 – 1,674 817 857 – Commercial paper 1,566 4 817 857 – Commercial paper 1,566 4 – 1,570 1,570 – 857 – Commercial paper 1,566 4 – 1,570 1,570 – – Commercial paper 1,566 4 – 1,570 1,570 – – Certificates of paper 1,566 4 – 1,570 1,570 – – Certificates of deposit – – Certificates of deposit 614 – – 614 453 161 of deposit 614 – – 614 453 161 – U. S. deposit 614 – – 614 453 161 – U. S. Government 614 – – 614 453 161 – U. S. Government and S. Government and Agency security 9,943 29 ( 59 ) 9,913 Government and Agency security 9,943 29 ( 59 ) 9,913 – Agency security 9,943 29 ( 59 ) 9,913 – 9,913 – 9,943 29 ( 59 ) 9,913 – 9,913 – Foreign government ( 59 ) 9,913 – 9,913 – Foreign government bond 5,486 9,913 – Foreign government bond 5,486 194 ( 2 ) 5,678 – Foreign government bond 5,486 194 ( 2 ) 5,678 – government bond 5,486 194 ( 2 ) 5,678 – 5,678 – 5,486 194 ( 2 ) 5,678 – 5,678 – Mortgage backed ( 2 ) 5,678 – 5,678 – Mortgage backed security 123 5,678 – Mortgage backed security 123 – – 123 – 123 backed security 123 – – 123 – 123 – Corporate note 123 – – 123 – 123 – Corporate note and bond – Corporate note and bond 8,053 50 ( 31 ) 8,072 Corporate note and bond 8,053 50 ( 31 ) 8,072 80 and bond 8,053 50 ( 31 ) 8,072 80 7,473 519 8,053 50 ( 31 ) 8,072 80 7,473 519 Municipal security 50 ( 31 ) 8,072 80 7,473 519 Municipal security 8,579 ( 31 ) 8,072 80 7,473 519 Municipal security 8,579 70 31 ) 8,072 80 7,473 519 Municipal security 8,579 70 ( 80 7,473 519 Municipal security 8,579 70 ( 33 ) 8,616 7,473 519 Municipal security 8,579 70 ( 33 ) 8,616 20 Municipal security 8,579 70 ( 33 ) 8,616 20 8,596 – 8,579 70 ( 33 ) 8,616 20 8,596 – Other 99 70 ( 33 ) 8,616 20 8,596 – Other 99 – ( 33 ) 8,616 20 8,596 – Other 99 – – 8,616 20 8,596 – Other 99 – – 99 – 99 – Other 99 – – 99 – 99 – Common stock 99 – – 99 – 99 – Common stock and equivalent – Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 – and equivalent 7,273 1,970 ( 133 ) 9,110 – – 9,110 7,273 1,970 ( 133 ) 9,110 – – 9,110 Preferred stock 133 ) 9,110 – – 9,110 Preferred stock 1,067 4 – – – 9,110 Preferred stock 1,067 4 – 1,071 – – – 9,110 Preferred stock 1,067 4 – 1,071 – – 1,071 Preferred stock 1,067 4 – 1,071 – – 1,071 Other investment 4 – 1,071 – – 1,071 Other investment 304 – – – – 1,071 Other investment 304 – – 304 – – Other investment 304 – – 304 – – 304 Total $ – – 304 – – 304 Total $ 46,654 $ 2,359 – – 304 Total $ 46,654 $ 2,359 $ ( 258 304 Total $ 46,654 $ 2,359 $ ( 258 ) $ 46,654 $ 2,359 $ ( 258 ) $ 48,755 $ 4,851 $ ( 258 ) $ 48,755 $ 4,851 $ 32,900 $ 258 ) $ 48,755 $ 4,851 $ 32,900 $ 11,004 At $ 48,755 $ 4,851 $ 32,900 $ 11,004 At June 30 $ 4,851 $ 32,900 $ 11,004 At June 30 , 2004 32,900 $ 11,004 At June 30 , 2004 unrealized loss of 11,004 At June 30 , 2004 unrealized loss of $ 293 2004 unrealized loss of $ 293 million consisted of : $ million consisted of : $ 188 million related to investment grade fixed income security , $ 43 million related to investment in fixed income security , $ 49 million related to domestic equity domestic equity security and $ 13 million related to international equity the unrealized loss of $ 293 million at PAGE 50 Table $ 293 million at PAGE 50 Table of Contents Part II of Contents Part II Item 8 June 30 , 2004 , Part II Item 8 June 30 , 2004 , $ 51 Item 8 June 30 , 2004 , $ 51 million exceeded 30 , 2004 , $ 51 million exceeded twelve month . twelve month . At June 30 , 2005 unrealized loss of . At June 30 , 2005 unrealized loss of $ 258 2005 unrealized loss of $ 258 million consisted of : $ million consisted of : $ 112 million related to investment grade fixed income security , $ 13 million related to investment in fixed income security , $ 90 million related to domestic equity domestic equity security and $ 43 million related to international equity the unrealized loss of $ 258 million at June 30 , $ 258 million at June 30 , 2005 , $ 25 million at June 30 , 2005 , $ 25 million exceeded 30 , 2005 , $ 25 million exceeded twelve month . available evidence a of June 30 , 2005 . Common and a of June 30 , 2005 . Common and preferred stock at cost . At June 30 , 2004 the recorded basis . At June 30 , 2004 the recorded basis of these of these investment wa $ 1.65 billion , and their estimated estimated fair value wa $ 2.12 billion . At June 30 2.12 billion . At June 30 , 2005 the recorded basis . At June 30 , 2005 the recorded basis of these of these investment wa $ 1.05 billion , and their estimated estimated fair value wa $ 1.27 billion . The estimate of of debt security at June 30 , 2005 were a follows security at June 30 , 2005 were a follows : ( one year or le $ 6,648 $ 6,647 Due after one or le $ 6,648 $ 6,647 Due after one year through one year through five year 16,972 16,960 Due after five year year through five year 16,972 16,960 Due after five year through five year through ten year 7,584 7,771 Due after ten year year through ten year 7,584 7,771 Due after ten year 3,259 7,771 Due after ten year 3,259 3,307 Total $ 34,463 $ Due after ten year 3,259 3,307 Total $ 34,463 $ 34,685 year 3,259 3,307 Total $ 34,463 $ 34,685 Debt security include 3,307 Total $ 34,463 $ 34,685 Debt security include fixed maturity fixed maturity security . NOTE 4 INVESTMENT INCOME AND OTHER The million ) Year Ended June 30 2003 2004 2005 Dividends and ) Year Ended June 30 2003 2004 2005 Dividends and interest Year Ended June 30 2003 2004 2005 Dividends and interest $ Ended June 30 2003 2004 2005 Dividends and interest $ 1,957 2005 Dividends and interest $ 1,957 $ 1,892 $ 1,460 Net and interest $ 1,957 $ 1,892 $ 1,460 Net gain on $ 1,957 $ 1,892 $ 1,460 Net gain on investment 44 1,460 Net gain on investment 44 1,563 856 Net loss on Net gain on investment 44 1,563 856 Net loss on derivative gain on investment 44 1,563 856 Net loss on derivative ( Net loss on derivative ( 424 ) ( 268 ) ( derivative ( 424 ) ( 268 ) ( 262 ) Income/ ) ( 268 ) ( 262 ) Income/ ( loss ) equity investees and other ( 68 ) ( 25 ) 13 other ( 68 ) ( 25 ) 13 Investment income and 68 ) ( 25 ) 13 Investment income and other $ Investment income and other $ 1,509 $ 3,162 $ 2,067 Net and other $ 1,509 $ 3,162 $ 2,067 Net gain on $ 1,509 $ 3,162 $ 2,067 Net gain on investment include include other-than-temporary impairment of $ 1.15 billion in fiscal year 2003 1.15 billion in fiscal year 2003 , $ 82 million in fiscal year 2003 , $ 82 million in fiscal year 2004 82 million in fiscal year 2004 , and $ 152 million year 2004 , and $ 152 million in fiscal year 2005 152 million in fiscal year 2005 . Realized gain and ( other-than-temporary impairment ) were $ 1.44 billion and $ ( 245 1.44 billion and $ ( 245 ) million in fiscal year ) million in fiscal year 2003 , $ 2.16 billion and fiscal year 2003 , $ 2.16 billion and $ ( 518 2.16 billion and $ ( 518 ) million in fiscal year ) million in fiscal year 2004 , and $ 1.38 billion year 2004 , and $ 1.38 billion and $ ( 376 1.38 billion and $ ( 376 ) million in fiscal year ) million in fiscal year 2005 . NOTE 5 DERIVATIVES For fiscal year 2005 . NOTE 5 DERIVATIVES For derivative instrument designated accordance with SFAS No . 133 , did not have a on earnings for fiscal year 2003 , 2004 , and 2005 for fiscal year 2003 , 2004 , and 2005 . During 2003 , 2004 , and 2005 . During fiscal year 2003 2005 . During fiscal year 2003 , $ 74 million in fiscal year 2003 , $ 74 million in loss on fair in time value and $ 229 million in loss on cash other . During fiscal year 2004 , $ 31 million in fiscal year 2004 , $ 31 million in gain on fair in time value and $ 325 million in loss on cash were excluded from the PAGE 51 Table of Contents Part II of Contents Part II Item 8 assessment of hedge effectiveness and other . During fiscal year 2005 , $ 79 million in fiscal year 2005 , $ 79 million in gain on fair in time value and $ 116 million in loss on cash recognized . During fiscal year 2003 , $ 40 million of fiscal year 2003 , $ 40 million of derivative gain were reclassified to revenue and $ 2 million in derivative gain were other . During fiscal year 2004 , $ 14 million of fiscal year 2004 , $ 14 million of derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were . We estimate that $ 42 million of net derivative gain or discontinued for fiscal year 2003 , 2004 , and 2005 for fiscal year 2003 , 2004 , and 2005 . NOTE 2003 , 2004 , and 2005 . NOTE 6 INVENTORIES ( , and 2005 . NOTE 6 INVENTORIES ( In million ) ( In million ) June 30 2004 2005 Finished good $ In million ) June 30 2004 2005 Finished good $ 271 million ) June 30 2004 2005 Finished good $ 271 $ 2004 2005 Finished good $ 271 $ 422 Raw material and Finished good $ 271 $ 422 Raw material and work in material and work in process 150 69 Inventories $ 421 $ and work in process 150 69 Inventories $ 421 $ 491 process 150 69 Inventories $ 421 $ 491 We recorded lower 69 Inventories $ 421 $ 491 We recorded lower of cost market adjustment totaling approximately $ 90 million in fiscal year 2004 90 million in fiscal year 2004 . NOTE 7 PROPERTY AND fiscal year 2004 . NOTE 7 PROPERTY AND EQUIPMENT ( In ( In million ) June 30 2004 2005 Land $ 274 In million ) June 30 2004 2005 Land $ 274 $ million ) June 30 2004 2005 Land $ 274 $ 313 30 2004 2005 Land $ 274 $ 313 Buildings and improvement 2005 Land $ 274 $ 313 Buildings and improvement 1,981 2,014 $ 313 Buildings and improvement 1,981 2,014 Leasehold improvement 805 851 313 Buildings and improvement 1,981 2,014 Leasehold improvement 805 851 Computer improvement 1,981 2,014 Leasehold improvement 805 851 Computer equipment and software 1,981 2,014 Leasehold improvement 805 851 Computer equipment and software 2,637 851 Computer equipment and software 2,637 2,318 Furniture and equipment 792 Computer equipment and software 2,637 2,318 Furniture and equipment 792 879 2,637 2,318 Furniture and equipment 792 879 Property and equipment , 2,318 Furniture and equipment 792 879 Property and equipment , at and equipment , at cost 6,489 6,375 Accumulated depreciation ( 4,163 equipment , at cost 6,489 6,375 Accumulated depreciation ( 4,163 ) 6,489 6,375 Accumulated depreciation ( 4,163 ) ( 4,029 ) Property depreciation ( 4,163 ) ( 4,029 ) Property and equipment , and equipment , net $ 2,326 $ 2,346 Property and equipment , net $ 2,326 $ 2,346 Property and equipment are stated depreciated . During fiscal year 2003 , 2004 , and 2005 During fiscal year 2003 , 2004 , and 2005 , depreciation 2003 , 2004 , and 2005 , depreciation expense wa $ , depreciation expense wa $ 929 million , $ 647 million $ 929 million , $ 647 million , and $ 723 647 million , and $ 723 million , the majority of to computer equipment . PAGE 52 Table of Contents Part II of Contents Part II Item 8 NOTE 8 GOODWILL Changes in Part II Item 8 NOTE 8 GOODWILL Changes in the carrying of goodwill for fiscal year 2004 and 2005 by segment , for fiscal year 2004 and 2005 by segment , are a ) Balance a of June 30 , 2003 Acquisitions / purchase a of June 30 , 2003 Acquisitions / purchase accounting adjustment Divestitures Balance a of June 30 , 2004 Acquisitions / purchase a of June 30 , 2004 Acquisitions / purchase accounting adjustment Divestitures Balance a of June 30 , 2005 Client $ 37 a of June 30 , 2005 Client $ 37 $ – 30 , 2005 Client $ 37 $ – $ – $ $ – $ – $ 37 $ 6 $ – $ $ – $ 37 $ 6 $ – $ 43 Server $ 6 $ – $ 43 Server and Tools 106 – $ 43 Server and Tools 106 – – 106 135 – and Tools 106 – – 106 135 – 241 Information Worker Tools 106 – – 106 135 – 241 Information Worker 180 – – 106 135 – 241 Information Worker 180 ( 2 135 – 241 Information Worker 180 ( 2 ) – 178 241 Information Worker 180 ( 2 ) – 178 47 – 180 ( 2 ) – 178 47 – 225 Microsoft Business ( 2 ) – 178 47 – 225 Microsoft Business Solutions ) – 178 47 – 225 Microsoft Business Solutions 2,219 7 – 225 Microsoft Business Solutions 2,219 7 ( 19 ) 2,207 225 Microsoft Business Solutions 2,219 7 ( 19 ) 2,207 3 Business Solutions 2,219 7 ( 19 ) 2,207 3 – 2,210 2,219 7 ( 19 ) 2,207 3 – 2,210 MSN 154 7 ( 19 ) 2,207 3 – 2,210 MSN 154 – 19 ) 2,207 3 – 2,210 MSN 154 – – 154 2,207 3 – 2,210 MSN 154 – – 154 17 – 2,210 MSN 154 – – 154 17 – 171 Mobile and MSN 154 – – 154 17 – 171 Mobile and Embedded – – 154 17 – 171 Mobile and Embedded Devices 28 171 Mobile and Embedded Devices 28 2 – 30 – – Mobile and Embedded Devices 28 2 – 30 – – 30 Embedded Devices 28 2 – 30 – – 30 Home and 2 – 30 – – 30 Home and Entertainment 404 ( – 30 Home and Entertainment 404 ( 1 ) – 403 Home and Entertainment 404 ( 1 ) – 403 – ( 404 ( 1 ) – 403 – ( 14 ) 389 ) – 403 – ( 14 ) 389 Total $ 3,128 403 – ( 14 ) 389 Total $ 3,128 $ 6 14 ) 389 Total $ 3,128 $ 6 $ ( 19 389 Total $ 3,128 $ 6 $ ( 19 ) $ 3,128 $ 6 $ ( 19 ) $ 3,115 $ 208 $ ( 19 ) $ 3,115 $ 208 $ ( 14 19 ) $ 3,115 $ 208 $ ( 14 ) $ 3,115 $ 208 $ ( 14 ) $ 3,309 We test $ ( 14 ) $ 3,309 We test goodwill for impairment provision of SFAS No . 142 , Goodwill and Other Intangible to goodwill in fiscal year 2004 and 2005 . If an in fiscal year 2004 and 2005 . If an event occurs test . During fiscal year 2004 and 2005 , we had During fiscal year 2004 and 2005 , we had no material no material acquisition . NOTE 9 INTANGIBLE ASSETS The component of ( In million ) June 30 2004 2005 Gross carrying amount In million ) June 30 2004 2005 Gross carrying amount Accumulated million ) June 30 2004 2005 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 908 $ ( 476 ) $ Contract-based $ 908 $ ( 476 ) $ 432 $ 957 $ ( 476 ) $ 432 $ 957 $ ( 606 476 ) $ 432 $ 957 $ ( 606 ) $ 432 $ 957 $ ( 606 ) $ 351 Technology-based 278 $ ( 606 ) $ 351 Technology-based 278 ( 183 ) 606 ) $ 351 Technology-based 278 ( 183 ) 95 309 $ 351 Technology-based 278 ( 183 ) 95 309 ( 200 Technology-based 278 ( 183 ) 95 309 ( 200 ) 109 278 ( 183 ) 95 309 ( 200 ) 109 Marketing-related 183 ) 95 309 ( 200 ) 109 Marketing-related 35 ( 95 309 ( 200 ) 109 Marketing-related 35 ( 19 ) ( 200 ) 109 Marketing-related 35 ( 19 ) 16 35 ) 109 Marketing-related 35 ( 19 ) 16 35 ( 25 Marketing-related 35 ( 19 ) 16 35 ( 25 ) 10 35 ( 19 ) 16 35 ( 25 ) 10 Customer-related 19 ) 16 35 ( 25 ) 10 Customer-related 30 ( 16 35 ( 25 ) 10 Customer-related 30 ( 4 ) ( 25 ) 10 Customer-related 30 ( 4 ) 26 40 ) 10 Customer-related 30 ( 4 ) 26 40 ( 11 Customer-related 30 ( 4 ) 26 40 ( 11 ) 29 30 ( 4 ) 26 40 ( 11 ) 29 Total 4 ) 26 40 ( 11 ) 29 Total $ 1,251 26 40 ( 11 ) 29 Total $ 1,251 $ ( 11 ) 29 Total $ 1,251 $ ( 682 ) $ Total $ 1,251 $ ( 682 ) $ 569 $ 1,341 $ ( 682 ) $ 569 $ 1,341 $ ( 842 682 ) $ 569 $ 1,341 $ ( 842 ) $ 569 $ 1,341 $ ( 842 ) $ 499 PAGE 53 $ ( 842 ) $ 499 PAGE 53 Table of Contents 842 ) $ 499 PAGE 53 Table of Contents Part II of Contents Part II Item 8 During fiscal year 2004 , Item 8 During fiscal year 2004 , we recorded addition to to intangible asset of $ 355 million , of which $ million , of which $ 266 million wa related to a Microsoft . During fiscal year 2005 , we recorded addition to intangible asset of approximately $ 90 million . No other material were acquired in fiscal year 2004 . We estimate that we asset acquired during fiscal year 2004 and 2005 are a follows during fiscal year 2004 and 2005 are a follows : ( million ) Year Ended June 30 2004 2005 Amount Weighted average ) Year Ended June 30 2004 2005 Amount Weighted average life Year Ended June 30 2004 2005 Amount Weighted average life Amount Weighted average life Contract-based $ 324 9 year $ 16 6 average life Contract-based $ 324 9 year $ 16 6 year $ 324 9 year $ 16 6 year Technology-based 28 4 324 9 year $ 16 6 year Technology-based 28 4 year $ 16 6 year Technology-based 28 4 year 64 5 year 16 6 year Technology-based 28 4 year 64 5 year Customer-related year Technology-based 28 4 year 64 5 year Customer-related 3 3 Technology-based 28 4 year 64 5 year Customer-related 3 3 year year 64 5 year Customer-related 3 3 year 10 5 year 64 5 year Customer-related 3 3 year 10 5 year Marketing-related year Customer-related 3 3 year 10 5 year Marketing-related – – Customer-related 3 3 year 10 5 year Marketing-related – – – – – – Total $ 355 $ 90 Acquired finite-lived intangible – Total $ 355 $ 90 Acquired finite-lived intangible are generally asset amortization expense wa $ 170 million for fiscal year 2004 170 million for fiscal year 2004 and $ 161 million for fiscal year 2004 and $ 161 million for fiscal year 2005 161 million for fiscal year 2005 . The estimated future amortization intangible asset a of June 30 , 2005 is a follows a of June 30 , 2005 is a follows : ( million ) Year Ended June 30 Amount 2006 $ 123 2007 Year Ended June 30 Amount 2006 $ 123 2007 99 2008 June 30 Amount 2006 $ 123 2007 99 2008 81 2009 30 Amount 2006 $ 123 2007 99 2008 81 2009 50 Amount 2006 $ 123 2007 99 2008 81 2009 50 2010 2006 $ 123 2007 99 2008 81 2009 50 2010 39 $ 123 2007 99 2008 81 2009 50 2010 39 Total 123 2007 99 2008 81 2009 50 2010 39 Total $ 2007 99 2008 81 2009 50 2010 39 Total $ 392 99 2008 81 2009 50 2010 39 Total $ 392 NOTE 2008 81 2009 50 2010 39 Total $ 392 NOTE 10 50 2010 39 Total $ 392 NOTE 10 INCOME TAXES The 39 Total $ 392 NOTE 10 INCOME TAXES The component of million ) Year Ended June 30 2003 2004 2005 Current tax ) Year Ended June 30 2003 2004 2005 Current tax : Year Ended June 30 2003 2004 2005 Current tax : U.S. Ended June 30 2003 2004 2005 Current tax : U.S. Federal tax : U.S. Federal $ 3,708 $ 3,766 $ 3,401 U.S. U.S. Federal $ 3,708 $ 3,766 $ 3,401 U.S. State and $ 3,708 $ 3,766 $ 3,401 U.S. State and Local 153 3,401 U.S. State and Local 153 174 152 International 808 1,056 U.S. State and Local 153 174 152 International 808 1,056 911 State and Local 153 174 152 International 808 1,056 911 Current Local 153 174 152 International 808 1,056 911 Current tax 4,669 153 174 152 International 808 1,056 911 Current tax 4,669 4,996 174 152 International 808 1,056 911 Current tax 4,669 4,996 4,464 808 1,056 911 Current tax 4,669 4,996 4,464 Deferred tax ( 1,056 911 Current tax 4,669 4,996 4,464 Deferred tax ( 1,146 911 Current tax 4,669 4,996 4,464 Deferred tax ( 1,146 ) 4,996 4,464 Deferred tax ( 1,146 ) ( 968 ) ( tax ( 1,146 ) ( 968 ) ( 90 ) Provision ) ( 968 ) ( 90 ) Provision for income tax Provision for income tax $ 3,523 $ 4,028 $ 4,374 PAGE income tax $ 3,523 $ 4,028 $ 4,374 PAGE 54 Table $ 3,523 $ 4,028 $ 4,374 PAGE 54 Table of Contents $ 4,028 $ 4,374 PAGE 54 Table of Contents Part II of Contents Part II Item 8 U.S. and international component of million ) Year Ended June 30 2003 2004 2005 U.S. $ ) Year Ended June 30 2003 2004 2005 U.S. $ 7,674 Year Ended June 30 2003 2004 2005 U.S. $ 7,674 $ Ended June 30 2003 2004 2005 U.S. $ 7,674 $ 8,088 2003 2004 2005 U.S. $ 7,674 $ 8,088 $ 9,806 International 2005 U.S. $ 7,674 $ 8,088 $ 9,806 International 3,380 4,108 $ 7,674 $ 8,088 $ 9,806 International 3,380 4,108 6,822 Income $ 8,088 $ 9,806 International 3,380 4,108 6,822 Income before income 8,088 $ 9,806 International 3,380 4,108 6,822 Income before income tax $ 9,806 International 3,380 4,108 6,822 Income before income tax $ Income before income tax $ 11,054 $ 12,196 $ 16,628 The income tax $ 11,054 $ 12,196 $ 16,628 The item accounting $ 11,054 $ 12,196 $ 16,628 The item accounting for the follows : Year Ended June 30 2003 2004 2005 Federal statutory : Year Ended June 30 2003 2004 2005 Federal statutory rate Year Ended June 30 2003 2004 2005 Federal statutory rate 35.0 Ended June 30 2003 2004 2005 Federal statutory rate 35.0 % 2004 2005 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : IRS examination settlement – – ( 4.7 ) % Foreign earnings taxed taxed at lower rate ( 1.3 ) % ( 1.7 ) ( 1.3 ) % ( 1.7 ) % ( 3.1 ) ( 1.7 ) % ( 3.1 ) % Extraterritorial income exclusion % Extraterritorial income exclusion ( 1.6 ) % ( 0.9 ) ( 1.6 ) % ( 0.9 ) % ( 1.3 ) ( 0.9 ) % ( 1.3 ) % Other reconciling item % Other reconciling item – 0.6 % 0.4 % Effective rate reconciling item – 0.6 % 0.4 % Effective rate 32.1 % % 0.4 % Effective rate 32.1 % 33.0 % 26.3 % % Effective rate 32.1 % 33.0 % 26.3 % The 2005 rate 32.1 % 33.0 % 26.3 % The 2005 other reconciling 33.0 % 26.3 % The 2005 other reconciling item include a reconciling item include a $ 179 million repatriation tax benefit . repatriation tax benefit . The 2004 other reconciling item include the reconciling item include the $ 208 million benefit from the resolution the impact of the $ 605 million non-deductible European Commission fine ( In million ) June 30 2004 2005 Deferred income tax In million ) June 30 2004 2005 Deferred income tax asset million ) June 30 2004 2005 Deferred income tax asset : asset : Unearned revenue $ 1,746 $ 915 Impaired investment 1,246 Unearned revenue $ 1,746 $ 915 Impaired investment 1,246 861 Stock-based 1,746 $ 915 Impaired investment 1,246 861 Stock-based compensation expense 3,749 $ 915 Impaired investment 1,246 861 Stock-based compensation expense 3,749 3,994 1,246 861 Stock-based compensation expense 3,749 3,994 Other revenue item 286 861 Stock-based compensation expense 3,749 3,994 Other revenue item 286 213 3,749 3,994 Other revenue item 286 213 Other expense item 1,308 3,994 Other revenue item 286 213 Other expense item 1,308 1,751 286 213 Other expense item 1,308 1,751 Other – 173 Deferred 213 Other expense item 1,308 1,751 Other – 173 Deferred income item 1,308 1,751 Other – 173 Deferred income tax asset $ Deferred income tax asset $ 8,335 $ 7,907 Deferred income tax tax asset $ 8,335 $ 7,907 Deferred income tax liability : gain on investment $ ( 1,087 ) $ ( 1,169 ) ( 1,087 ) $ ( 1,169 ) International earnings ( 1,327 1,169 ) International earnings ( 1,327 ) ( 1,393 ) Other earnings ( 1,327 ) ( 1,393 ) Other ( 16 ) ( 1,393 ) Other ( 16 ) ( 23 ) Deferred Other ( 16 ) ( 23 ) Deferred income tax liability Deferred income tax liability ( 2,430 ) ( 2,585 ) Net liability ( 2,430 ) ( 2,585 ) Net deferred income tax deferred income tax asset $ 5,905 $ 5,322 Reported a : tax asset $ 5,905 $ 5,322 Reported a : Current deferred Current deferred tax asset $ 2,097 $ 1,701 Long-term deferred tax tax asset $ 2,097 $ 1,701 Long-term deferred tax asset 3,808 1,701 Long-term deferred tax asset 3,808 3,621 Net deferred income tax Long-term deferred tax asset 3,808 3,621 Net deferred income tax asset deferred income tax asset $ 5,905 $ 5,322 PAGE 55 Table tax asset $ 5,905 $ 5,322 PAGE 55 Table of Contents $ 5,905 $ 5,322 PAGE 55 Table of Contents Part II of Contents Part II Item 8 Deferred income tax balance reflect foreign withholding tax on $ 4.1 billion of our undistributed earnings of which relate to fiscal 2002 through 2005 earnings , because relate to fiscal 2002 through 2005 earnings , because these earnings American Jobs Creation Act of 2004 ( the “ Act ” ) wa enacted in October 2004 . The Act creates a earnings by providing an elective 85 % dividend received deduction for intend to repatriate approximately $ 780 million in dividend subject to dividend subject to the elective 85 % dividend received deduction . tax provision benefit of $ 179 million from the reversal of this dividend in fiscal year 2006 . Income tax paid were Income tax paid were $ 2.8 billion in fiscal year 2003 2.8 billion in fiscal year 2003 , $ 2.5 billion in fiscal year 2003 , $ 2.5 billion in fiscal year 2004 2.5 billion in fiscal year 2004 , and $ 4.3 billion year 2004 , and $ 4.3 billion in fiscal year 2005 4.3 billion in fiscal year 2005 . Tax Contingencies . We requirement of SFAS No . 5 , Accounting for Contingencies . federal income tax return through 1996 . We recently entered into the IRS for tax year 1997 through 1999 resulting in certain for tax year 1997 through 1999 resulting in certain adjustment to Accordingly , our fiscal year 2005 tax provision ha been reduced ha been reduced by $ 776 million a a result of by the IRS for the 1997-1999 tax year . The IRS tax return for tax year 2000 through 2003 . Although we for tax year 2000 through 2003 . Although we believe we of amount recorded . NOTE 11 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 2004 2005 Tax contingency $ In million ) June 30 2004 2005 Tax contingency $ 1,979 million ) June 30 2004 2005 Tax contingency $ 1,979 $ 2004 2005 Tax contingency $ 1,979 $ 3,066 Legal contingency 699 Tax contingency $ 1,979 $ 3,066 Legal contingency 699 961 Employee 1,979 $ 3,066 Legal contingency 699 961 Employee stock option transfer $ 3,066 Legal contingency 699 961 Employee stock option transfer program Employee stock option transfer program 146 48 Other 87 83 Other stock option transfer program 146 48 Other 87 83 Other long-term transfer program 146 48 Other 87 83 Other long-term liability $ program 146 48 Other 87 83 Other long-term liability $ 2,911 83 Other long-term liability $ 2,911 $ 4,158 PAGE 56 Table long-term liability $ 2,911 $ 4,158 PAGE 56 Table of Contents $ 2,911 $ 4,158 PAGE 56 Table of Contents Part II of Contents Part II Item 8 NOTE 12 STOCKHOLDERS ’ EQUITY Part II Item 8 NOTE 12 STOCKHOLDERS ’ EQUITY Shares of million ) Year Ended June 30 2003 2004 2005 Balance , ) Year Ended June 30 2003 2004 2005 Balance , beginning Year Ended June 30 2003 2004 2005 Balance , beginning of Ended June 30 2003 2004 2005 Balance , beginning of year Balance , beginning of year 10,718 10,771 10,862 Issued 291 215 , beginning of year 10,718 10,771 10,862 Issued 291 215 160 beginning of year 10,718 10,771 10,862 Issued 291 215 160 Repurchased year 10,718 10,771 10,862 Issued 291 215 160 Repurchased ( 238 10,718 10,771 10,862 Issued 291 215 160 Repurchased ( 238 ) 10,771 10,862 Issued 291 215 160 Repurchased ( 238 ) ( 291 215 160 Repurchased ( 238 ) ( 124 ) ( Repurchased ( 238 ) ( 124 ) ( 312 ) Balance ) ( 124 ) ( 312 ) Balance , end of Balance , end of year 10,771 10,862 10,710 As discussed in , end of year 10,771 10,862 10,710 As discussed in Note end of year 10,771 10,862 10,710 As discussed in Note 14 10,710 As discussed in Note 14 – Employee Stock and Savings Stock and Savings Plans , 345 million option were transferred to derivative . As of June 30 , 2005 , the option As of June 30 , 2005 , the option have strike strike price ranging from $ 28.83 to $ 89.58 per share from $ 28.83 to $ 89.58 per share and have expiration have expiration date between December 2005 and December 2006 . On between December 2005 and December 2006 . On July 20 , December 2006 . On July 20 , 2004 , our Board . On July 20 , 2004 , our Board of Directors buy back up to $ 30 billion of Microsoft common stock dollar in billion ) ( 1 ) Fiscal year 2003 2004 ( 1 ) Fiscal year 2003 2004 2005 ( 1 ) 1 ) Fiscal year 2003 2004 2005 ( 1 ) Shares ) Fiscal year 2003 2004 2005 ( 1 ) Shares Amount year 2003 2004 2005 ( 1 ) Shares Amount Shares Amount Amount Shares Amount First quarter 120.6 $ 3.0 43.3 $ 1.2 Amount First quarter 120.6 $ 3.0 43.3 $ 1.2 22.8 $ First quarter 120.6 $ 3.0 43.3 $ 1.2 22.8 $ 0.6 120.6 $ 3.0 43.3 $ 1.2 22.8 $ 0.6 Second quarter $ 3.0 43.3 $ 1.2 22.8 $ 0.6 Second quarter 38.8 43.3 $ 1.2 22.8 $ 0.6 Second quarter 38.8 1.0 30.5 22.8 $ 0.6 Second quarter 38.8 1.0 30.5 0.8 23.6 0.7 $ 0.6 Second quarter 38.8 1.0 30.5 0.8 23.6 0.7 Third 0.6 Second quarter 38.8 1.0 30.5 0.8 23.6 0.7 Third quarter Second quarter 38.8 1.0 30.5 0.8 23.6 0.7 Third quarter 30.7 quarter 38.8 1.0 30.5 0.8 23.6 0.7 Third quarter 30.7 0.7 38.8 1.0 30.5 0.8 23.6 0.7 Third quarter 30.7 0.7 49.9 0.8 23.6 0.7 Third quarter 30.7 0.7 49.9 1.4 95.1 2.4 23.6 0.7 Third quarter 30.7 0.7 49.9 1.4 95.1 2.4 Fourth 0.7 Third quarter 30.7 0.7 49.9 1.4 95.1 2.4 Fourth quarter Third quarter 30.7 0.7 49.9 1.4 95.1 2.4 Fourth quarter 48.1 quarter 30.7 0.7 49.9 1.4 95.1 2.4 Fourth quarter 48.1 1.2 30.7 0.7 49.9 1.4 95.1 2.4 Fourth quarter 48.1 1.2 – 1.4 95.1 2.4 Fourth quarter 48.1 1.2 – – 170.7 4.3 95.1 2.4 Fourth quarter 48.1 1.2 – – 170.7 4.3 Total quarter 48.1 1.2 – – 170.7 4.3 Total 238.2 $ 5.9 48.1 1.2 – – 170.7 4.3 Total 238.2 $ 5.9 123.7 – – 170.7 4.3 Total 238.2 $ 5.9 123.7 $ 3.4 170.7 4.3 Total 238.2 $ 5.9 123.7 $ 3.4 312.2 $ 4.3 Total 238.2 $ 5.9 123.7 $ 3.4 312.2 $ 8.0 238.2 $ 5.9 123.7 $ 3.4 312.2 $ 8.0 ( 1 $ 5.9 123.7 $ 3.4 312.2 $ 8.0 ( 1 ) 123.7 $ 3.4 312.2 $ 8.0 ( 1 ) All amount 3.4 312.2 $ 8.0 ( 1 ) All amount repurchased in amount repurchased in fiscal year 2005 were repurchased under the repurchase Board of Directors on July 20 , 2004 . In addition Directors on July 20 , 2004 . In addition , a have purchased call option on 25 million share of our common strike price ranging from $ 27.00 – $ 27.50 . The from $ 27.00 – $ 27.50 . The call option have have maturity ranging from July 15 , 2005 to January 20 ranging from July 15 , 2005 to January 20 , 2006 15 , 2005 to January 20 , 2006 and are reflected 2005 to January 20 , 2006 and are reflected in stockholder equity . In fiscal year 2005 , our Board of Directors million ) Payment Date July 20 , 2004 $ 0.08 August Payment Date July 20 , 2004 $ 0.08 August 25 , July 20 , 2004 $ 0.08 August 25 , 2004 $ , 2004 $ 0.08 August 25 , 2004 $ 870 September $ 0.08 August 25 , 2004 $ 870 September 14 , August 25 , 2004 $ 870 September 14 , 2004 July , 2004 $ 870 September 14 , 2004 July 20 , $ 870 September 14 , 2004 July 20 , 2004 $ September 14 , 2004 July 20 , 2004 $ 3.00 November , 2004 July 20 , 2004 $ 3.00 November 17 , July 20 , 2004 $ 3.00 November 17 , 2004 $ , 2004 $ 3.00 November 17 , 2004 $ 32,640 December $ 3.00 November 17 , 2004 $ 32,640 December 2 , November 17 , 2004 $ 32,640 December 2 , 2004 September , 2004 $ 32,640 December 2 , 2004 September 15 , $ 32,640 December 2 , 2004 September 15 , 2004 $ December 2 , 2004 September 15 , 2004 $ 0.08 November , 2004 September 15 , 2004 $ 0.08 November 17 , September 15 , 2004 $ 0.08 November 17 , 2004 $ , 2004 $ 0.08 November 17 , 2004 $ 871 December $ 0.08 November 17 , 2004 $ 871 December 2 , November 17 , 2004 $ 871 December 2 , 2004 December , 2004 $ 871 December 2 , 2004 December 8 , $ 871 December 2 , 2004 December 8 , 2004 $ December 2 , 2004 December 8 , 2004 $ 0.08 February , 2004 December 8 , 2004 $ 0.08 February 17 , December 8 , 2004 $ 0.08 February 17 , 2005 $ , 2004 $ 0.08 February 17 , 2005 $ 868 March $ 0.08 February 17 , 2005 $ 868 March 10 , February 17 , 2005 $ 868 March 10 , 2005 March , 2005 $ 868 March 10 , 2005 March 23 , $ 868 March 10 , 2005 March 23 , 2005 $ March 10 , 2005 March 23 , 2005 $ 0.08 May , 2005 March 23 , 2005 $ 0.08 May 18 , March 23 , 2005 $ 0.08 May 18 , 2005 $ , 2005 $ 0.08 May 18 , 2005 $ 860 June $ 0.08 May 18 , 2005 $ 860 June 9 , May 18 , 2005 $ 860 June 9 , 2005 June , 2005 $ 860 June 9 , 2005 June 15 , $ 860 June 9 , 2005 June 15 , 2005 $ June 9 , 2005 June 15 , 2005 $ 0.08 August , 2005 June 15 , 2005 $ 0.08 August 17,2005 ( June 15 , 2005 $ 0.08 August 17,2005 ( 1 ) , 2005 $ 0.08 August 17,2005 ( 1 ) September 8 $ 0.08 August 17,2005 ( 1 ) September 8 , 2005 17,2005 ( 1 ) September 8 , 2005 ( 1 ) 1 ) September 8 , 2005 ( 1 ) The dividend September 8 , 2005 ( 1 ) The dividend approved on The dividend approved on June 15 , 2005 will be paid approved on June 15 , 2005 will be paid after the of this report on Form 10-K . The accrued liability for the dividend approved on June 15 , 2005 of $ 857 approved on June 15 , 2005 of $ 857 million is 15 , 2005 of $ 857 million is included in other other current liability . PAGE 57 Table of Contents Part II of Contents Part II Item 8 On January 16 and September II Item 8 On January 16 and September 12 , 2003 On January 16 and September 12 , 2003 , our Board 16 and September 12 , 2003 , our Board of Directors our common stock of $ 0.08 and $ 0.16 per share of $ 0.08 and $ 0.16 per share , respectively . dividend were paid on March 7 and November 7 , 2003 on March 7 and November 7 , 2003 , respectively , 7 and November 7 , 2003 , respectively , to shareholder close of business on February 21 , and October 17 , February 21 , and October 17 , 2003 . NOTE 13 , and October 17 , 2003 . NOTE 13 OTHER COMPREHENSIVE 17 , 2003 . NOTE 13 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 2003 2004 2005 Net gains/ ) Year Ended June 30 2003 2004 2005 Net gains/ ( Year Ended June 30 2003 2004 2005 Net gains/ ( loss Ended June 30 2003 2004 2005 Net gains/ ( loss ) tax effect of $ ( 69 ) in 2003 , $ $ ( 69 ) in 2003 , $ 49 in 2004 ) in 2003 , $ 49 in 2004 and $ ( 2003 , $ 49 in 2004 and $ ( 63 ) in 2004 and $ ( 63 ) in 2005 $ ( $ ( 63 ) in 2005 $ ( 129 ) $ ) in 2005 $ ( 129 ) $ 92 $ ( $ ( 129 ) $ 92 $ ( 116 ) Reclassification ) $ 92 $ ( 116 ) Reclassification adjustment for loss of tax effect of $ 15 in 2003 , $ 5 effect of $ 15 in 2003 , $ 5 in 2004 15 in 2003 , $ 5 in 2004 and $ 31 2003 , $ 5 in 2004 and $ 31 in 2005 5 in 2004 and $ 31 in 2005 27 9 58 2004 and $ 31 in 2005 27 9 58 Net gains/ and $ 31 in 2005 27 9 58 Net gains/ ( $ 31 in 2005 27 9 58 Net gains/ ( loss 31 in 2005 27 9 58 Net gains/ ( loss ) ) on derivative instrument ( 102 ) 101 ( 58 ) derivative instrument ( 102 ) 101 ( 58 ) Net unrealized ( 102 ) 101 ( 58 ) Net unrealized investment gains/ of tax effect of $ 610 in 2003 , $ ( effect of $ 610 in 2003 , $ ( 994 ) in 2003 , $ ( 994 ) in 2004 and $ $ ( 994 ) in 2004 and $ ( 69 ) in 2004 and $ ( 69 ) in 2005 1,132 ( $ ( 69 ) in 2005 1,132 ( 1,846 ) ( ( 69 ) in 2005 1,132 ( 1,846 ) ( 128 ) in 2005 1,132 ( 1,846 ) ( 128 ) Reclassification 1,132 ( 1,846 ) ( 128 ) Reclassification adjustment for loss of tax effect of $ 60 in 2003 , $ 524 effect of $ 60 in 2003 , $ 524 in 2004 60 in 2003 , $ 524 in 2004 and $ 269 2003 , $ 524 in 2004 and $ 269 in 2005 524 in 2004 and $ 269 in 2005 111 973 499 2004 and $ 269 in 2005 111 973 499 Net unrealized and $ 269 in 2005 111 973 499 Net unrealized investment $ 269 in 2005 111 973 499 Net unrealized investment gains/ 269 in 2005 111 973 499 Net unrealized investment gains/ ( investment gains/ ( loss ) 1,243 ( 873 ) 371 Translation ( loss ) 1,243 ( 873 ) 371 Translation adjustment and ) 1,243 ( 873 ) 371 Translation adjustment and other 116 371 Translation adjustment and other 116 51 ( 6 ) Other Translation adjustment and other 116 51 ( 6 ) Other comprehensive and other 116 51 ( 6 ) Other comprehensive income / / ( loss ) $ 1,257 $ ( 721 ) $ ) $ 1,257 $ ( 721 ) $ 307 The component $ ( 721 ) $ 307 The component of accumulated other : ( In million ) 2004 2005 Year Ended June 30 ( In million ) 2004 2005 Year Ended June 30 Net 2004 2005 Year Ended June 30 Net gain on derivative instrument gain on derivative instrument $ 85 $ 27 Net unrealized investment derivative instrument $ 85 $ 27 Net unrealized investment gain 973 27 Net unrealized investment gain 973 1,344 Translation adjustment and other Net unrealized investment gain 973 1,344 Translation adjustment and other 61 1,344 Translation adjustment and other 61 55 Accumulated other comprehensive income Translation adjustment and other 61 55 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,119 $ 1,426 NOTE 14 EMPLOYEE comprehensive income $ 1,119 $ 1,426 NOTE 14 EMPLOYEE STOCK AND $ 1,119 $ 1,426 NOTE 14 EMPLOYEE STOCK AND SAVINGS PLANS AND SAVINGS PLANS Effective July 1 , 2003 , we adopted PLANS Effective July 1 , 2003 , we adopted the fair provision of SFAS No . 123 , Accounting for Stock-Based Compensation described in SFAS No . 148 , Accounting for Stock-Based Compensation provision of SFAS No . 123 , stock-based compensation cost is were restated for fiscal year 2003 to reflect result a if method of SFAS No . 123 had been applied from it employee compensation award wa $ 3.75 billion in fiscal year 2003 3.75 billion in fiscal year 2003 , $ 5.73 billion in fiscal year 2003 , $ 5.73 billion in fiscal year 2004 5.73 billion in fiscal year 2004 , and $ 2.45 billion year 2004 , and $ 2.45 billion in fiscal year 2005 2.45 billion in fiscal year 2005 . The amount for fiscal The amount for fiscal year 2004 include $ 2.21 billion ( fiscal year 2004 include $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) due purchase discount and approved PAGE 58 Table of Contents Part II of Contents Part II Item 8 the elimination of the related period that became effective July 1 , 2005 . As a became effective July 1 , 2005 . As a result , , beginning in fiscal year 2005 , share of our common at three month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation period . During fiscal year 2005 employee purchased 16.4 million share fiscal year 2005 employee purchased 16.4 million share at an average an average price of $ 23.33 per share . At June per share . At June 30 , 2005 , 159.1 million . At June 30 , 2005 , 159.1 million share were June 30 , 2005 , 159.1 million share were reserved for effect previous to fiscal year 2005 , share of our common at six month interval at 85 % of the lower of having a value not exceeding 15 % of their gross compensation period . During fiscal year 2003 and 2004 employee purchased 15.2 During fiscal year 2003 and 2004 employee purchased 15.2 million and 2003 and 2004 employee purchased 15.2 million and 16.7 million share employee purchased 15.2 million and 16.7 million share at average price at average price of $ 22.56 , and $ 22.74 per $ 22.56 , and $ 22.74 per share . Savings Plan , that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their pretax salary with a maximum contribution of 3 % of a participant ’ for all plan were $ 118 million , $ 141 million $ 118 million , $ 141 million , and $ 154 141 million , and $ 154 million in fiscal year 2003 154 million in fiscal year 2003 , 2004 , and 2005 in fiscal year 2003 , 2004 , and 2005 . Matching 2003 , 2004 , and 2005 . Matching contribution are invested Plans . In fiscal year 2004 , we began granting employee second quarter of fiscal year 2004 whereby employee could elect to a strike price of $ 33 or higher ( “ eligible , JPMorgan paid u $ 382 million for the 345 million $ 382 million for the 345 million option transferred . We an initial payment of $ 219 million to participating employee for stock-based compensation expense of $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) which second quarter of fiscal year 2004 . The contingent payment applicable return . For fiscal year 2004 , deferred tax asset were were reduced by approximately $ 2.01 billion with an offsetting reduction stock award . At June 30 , 2005 , an aggregate . At June 30 , 2005 , an aggregate of 816 2005 , an aggregate of 816 million share were available for of stock award ; all 816 million share remaining available for available for grant at June 30 , 2005 could be awarded grant at June 30 , 2005 could be awarded a stock our plan . On November 9 , 2004 , our shareholder . On November 9 , 2004 , our shareholder approved amendment pre-dividend value after the $ 3.00 special dividend . Additional award the ex-dividend date . PAGE 59 Table of Contents Part II of Contents Part II Item 8 Strike price for option were and payment of the $ 3.00 special dividend on December 2 3.00 special dividend on December 2 , 2004 , an adjustment dividend on December 2 , 2004 , an adjustment to the resulting in a total of 96 million option and 6.7 million of 96 million option and 6.7 million stock award being issued stock award were increased by 3.5 million share . Stock Awards The performance period is July 1 , 2003 through June 30 period is July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for certain executive officer ) target in a range between 33 % and 150 % ( range between 33 % and 150 % ( 0 % to % and 150 % ( 0 % to 150 % for % ( 0 % to 150 % for certain executive officer be awarded in fiscal year 2005 and 2006 to newly hired in fiscal year 2005 and 2006 to newly hired and promoted the vesting period ( generally 5 year ) using the straight million ) Year Ended June 30 2004 2005 Stock award Beginning ) Year Ended June 30 2004 2005 Stock award Beginning balance Year Ended June 30 2004 2005 Stock award Beginning balance 3.9 2005 Stock award Beginning balance 3.9 34.4 Granted 32.6 41.0 Special Stock award Beginning balance 3.9 34.4 Granted 32.6 41.0 Special dividend Beginning balance 3.9 34.4 Granted 32.6 41.0 Special dividend adjustment – balance 3.9 34.4 Granted 32.6 41.0 Special dividend adjustment – 6.7 41.0 Special dividend adjustment – 6.7 Vested ( .8 ) ( Vested ( .8 ) ( 7.3 ) Cancelled ( 1.3 ) ( 7.3 ) Cancelled ( 1.3 ) ( 3.5 ) Ending Cancelled ( 1.3 ) ( 3.5 ) Ending balance 34.4 71.3 ( 3.5 ) Ending balance 34.4 71.3 Weighted-average fair value per 3.5 ) Ending balance 34.4 71.3 Weighted-average fair value per share during the year * $ 24.09 $ 24.03 Shared performance stock year * $ 24.09 $ 24.03 Shared performance stock award Beginning stock award Beginning balance – 30.5 Granted 31.7 3.7 Special dividend Beginning balance – 30.5 Granted 31.7 3.7 Special dividend adjustment – balance – 30.5 Granted 31.7 3.7 Special dividend adjustment – 3.5 3.7 Special dividend adjustment – 3.5 Vested – – Cancelled ( Vested – – Cancelled ( 1.2 ) ( 2.4 ) Ending Cancelled ( 1.2 ) ( 2.4 ) Ending balance 30.5 35.3 ( 2.4 ) Ending balance 30.5 35.3 Weighted-average fair value per 2.4 ) Ending balance 30.5 35.3 Weighted-average fair value per share during the year * $ 23.62 $ 24.35 * Adjusted for year * $ 23.62 $ 24.35 * Adjusted for additional award award granted for the $ 3.00 special dividend . Stock Options plan . Options granted before 1995 generally vest over four and grant . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and grant . Options granted after 2001 vest over four and one-half of grant . At June 30 , 2005 , stock option . At June 30 , 2005 , stock option for 662 2005 , stock option for 662 million share were vested . share were vested . PAGE 60 Table of Contents Part II of Contents Part II Item 8 The weighted average Black-Scholes value stock plan during fiscal year 2003 and 2004 wa $ 12.08 during fiscal year 2003 and 2004 wa $ 12.08 and $ 2003 and 2004 wa $ 12.08 and $ 10.13 , respectively wa $ 12.08 and $ 10.13 , respectively . No stock option were granted in fiscal 2005 . The fair value of grant : Year Ended June 30 2003 2004 Weighted average expected : Year Ended June 30 2003 2004 Weighted average expected life Year Ended June 30 2003 2004 Weighted average expected life in average expected life in year 7 7 Dividend per share $ expected life in year 7 7 Dividend per share $ 0.08 7 Dividend per share $ 0.08 $ 0.16 Volatility 42.0 % per share $ 0.08 $ 0.16 Volatility 42.0 % 29.5 % $ 0.08 $ 0.16 Volatility 42.0 % 29.5 % Risk-free interest $ 0.16 Volatility 42.0 % 29.5 % Risk-free interest rate 3.9 29.5 % Risk-free interest rate 3.9 % 4.1 % Employee stock Risk-free interest rate 3.9 % 4.1 % Employee stock option outstanding Weighted average Balance , June 30 , 2002 1,604 $ 0.40 Balance , June 30 , 2002 1,604 $ 0.40 – $ , June 30 , 2002 1,604 $ 0.40 – $ 59.57 30 , 2002 1,604 $ 0.40 – $ 59.57 $ 26.88 1,604 $ 0.40 – $ 59.57 $ 26.88 Granted 254 21.42 0.40 – $ 59.57 $ 26.88 Granted 254 21.42 – 29.12 $ 59.57 $ 26.88 Granted 254 21.42 – 29.12 24.27 Exercised 59.57 $ 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 26.88 Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) Granted 254 21.42 – 29.12 24.27 Exercised ( 234 ) 0.51 – 29.12 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 24.27 Exercised ( 234 ) 0.51 – 28.22 6.89 Canceled/Forfeited ( ( 234 ) 0.51 – 28.22 6.89 Canceled/Forfeited ( 75 ) 234 ) 0.51 – 28.22 6.89 Canceled/Forfeited ( 75 ) 2.13 – 28.22 6.89 Canceled/Forfeited ( 75 ) 2.13 – 59.56 34.33 6.89 Canceled/Forfeited ( 75 ) 2.13 – 59.56 34.33 Balance , ( 75 ) 2.13 – 59.56 34.33 Balance , June 30 75 ) 2.13 – 59.56 34.33 Balance , June 30 , 59.56 34.33 Balance , June 30 , 2003 1,549 $ 0.40 Balance , June 30 , 2003 1,549 $ 0.40 – $ , June 30 , 2003 1,549 $ 0.40 – $ 59.56 30 , 2003 1,549 $ 0.40 – $ 59.56 $ 29.30 1,549 $ 0.40 – $ 59.56 $ 29.30 Granted 2 25.46 0.40 – $ 59.56 $ 29.30 Granted 2 25.46 – 29.96 $ 59.56 $ 29.30 Granted 2 25.46 – 29.96 26.76 Exercised 59.56 $ 29.30 Granted 2 25.46 – 29.96 26.76 Exercised ( 29.30 Granted 2 25.46 – 29.96 26.76 Exercised ( 198 ) Granted 2 25.46 – 29.96 26.76 Exercised ( 198 ) 0.51 – 29.96 26.76 Exercised ( 198 ) 0.51 – 29.38 12.21 26.76 Exercised ( 198 ) 0.51 – 29.38 12.21 Stock Option ( 198 ) 0.51 – 29.38 12.21 Stock Option Transfer Program 198 ) 0.51 – 29.38 12.21 Stock Option Transfer Program ( Stock Option Transfer Program ( 345 ) 33.03 – 59.56 38.70 Transfer Program ( 345 ) 33.03 – 59.56 38.70 Canceled/Forfeited ( ( 345 ) 33.03 – 59.56 38.70 Canceled/Forfeited ( 59 ) 345 ) 33.03 – 59.56 38.70 Canceled/Forfeited ( 59 ) 2.31 – 59.56 38.70 Canceled/Forfeited ( 59 ) 2.31 – 58.28 31.29 38.70 Canceled/Forfeited ( 59 ) 2.31 – 58.28 31.29 Balance , ( 59 ) 2.31 – 58.28 31.29 Balance , June 30 59 ) 2.31 – 58.28 31.29 Balance , June 30 , 58.28 31.29 Balance , June 30 , 2004 949 $ 0.40 Balance , June 30 , 2004 949 $ 0.40 – $ , June 30 , 2004 949 $ 0.40 – $ 59.56 30 , 2004 949 $ 0.40 – $ 59.56 $ 29.26 949 $ 0.40 – $ 59.56 $ 29.26 Special Dividend Adjustment 0.40 – $ 59.56 $ 29.26 Special Dividend Adjustment 96 0.36 $ 29.26 Special Dividend Adjustment 96 0.36 – 53.61 26.68 Granted 29.26 Special Dividend Adjustment 96 0.36 – 53.61 26.68 Granted – Dividend Adjustment 96 0.36 – 53.61 26.68 Granted – – – Adjustment 96 0.36 – 53.61 26.68 Granted – – – Exercised – – – Exercised ( 138 ) 3.39 – 29.56 20.42 – Exercised ( 138 ) 3.39 – 29.56 20.42 Canceled/Forfeited ( ( 138 ) 3.39 – 29.56 20.42 Canceled/Forfeited ( 43 ) 138 ) 3.39 – 29.56 20.42 Canceled/Forfeited ( 43 ) 14.29 – 29.56 20.42 Canceled/Forfeited ( 43 ) 14.29 – 58.28 28.89 20.42 Canceled/Forfeited ( 43 ) 14.29 – 58.28 28.89 Balance , ( 43 ) 14.29 – 58.28 28.89 Balance , June 30 43 ) 14.29 – 58.28 28.89 Balance , June 30 , 58.28 28.89 Balance , June 30 , 2005 864 $ 0.36 Balance , June 30 , 2005 864 $ 0.36 – $ , June 30 , 2005 864 $ 0.36 – $ 59.56 30 , 2005 864 $ 0.36 – $ 59.56 $ 27.41 864 $ 0.36 – $ 59.56 $ 27.41 For various price 0.36 – $ 59.56 $ 27.41 For various price range , employee stock option at June 30 , 2005 are a follows option at June 30 , 2005 are a follows : ( Shares Weighted average price $ 0.36 – $ 15.00 24 1.5 price $ 0.36 – $ 15.00 24 1.5 $ 8.81 24 $ 0.36 – $ 15.00 24 1.5 $ 8.81 24 $ 0.36 – $ 15.00 24 1.5 $ 8.81 24 $ 8.81 $ 15.00 24 1.5 $ 8.81 24 $ 8.81 15.01 – 15.00 24 1.5 $ 8.81 24 $ 8.81 15.01 – 25.00 1.5 $ 8.81 24 $ 8.81 15.01 – 25.00 276 6.56 $ 8.81 24 $ 8.81 15.01 – 25.00 276 6.56 $ 24 $ 8.81 15.01 – 25.00 276 6.56 $ 22.15 136 $ 8.81 15.01 – 25.00 276 6.56 $ 22.15 136 $ 8.81 15.01 – 25.00 276 6.56 $ 22.15 136 $ 22.31 – 25.00 276 6.56 $ 22.15 136 $ 22.31 25.01 – 25.00 276 6.56 $ 22.15 136 $ 22.31 25.01 – 33.00 6.56 $ 22.15 136 $ 22.31 25.01 – 33.00 430 4.64 $ 22.15 136 $ 22.31 25.01 – 33.00 430 4.64 $ 136 $ 22.31 25.01 – 33.00 430 4.64 $ 27.88 369 $ 22.31 25.01 – 33.00 430 4.64 $ 27.88 369 $ 22.31 25.01 – 33.00 430 4.64 $ 27.88 369 $ 28.10 – 33.00 430 4.64 $ 27.88 369 $ 28.10 33.01 – 33.00 430 4.64 $ 27.88 369 $ 28.10 33.01 – 41.00 4.64 $ 27.88 369 $ 28.10 33.01 – 41.00 125 3.22 $ 27.88 369 $ 28.10 33.01 – 41.00 125 3.22 $ 369 $ 28.10 33.01 – 41.00 125 3.22 $ 39.42 124 $ 28.10 33.01 – 41.00 125 3.22 $ 39.42 124 $ 28.10 33.01 – 41.00 125 3.22 $ 39.42 124 $ 39.43 – 41.00 125 3.22 $ 39.42 124 $ 39.43 41.01 – 41.00 125 3.22 $ 39.42 124 $ 39.43 41.01 – 59.56 3.22 $ 39.42 124 $ 39.43 41.01 – 59.56 9 2.58 $ 39.42 124 $ 39.43 41.01 – 59.56 9 2.58 $ 124 $ 39.43 41.01 – 59.56 9 2.58 $ 44.78 9 $ 39.43 41.01 – 59.56 9 2.58 $ 44.78 9 $ 39.43 41.01 – 59.56 9 2.58 $ 44.78 9 $ 44.78 – 59.56 9 2.58 $ 44.78 9 $ 44.78 864 662 59.56 9 2.58 $ 44.78 9 $ 44.78 864 662 As 2.58 $ 44.78 9 $ 44.78 864 662 As of June $ 44.78 9 $ 44.78 864 662 As of June 30 44.78 9 $ 44.78 864 662 As of June 30 , 864 662 As of June 30 , 2005 , 345 million As of June 30 , 2005 , 345 million transferred option June 30 , 2005 , 345 million transferred option to JP table above . See Note 12 . In addition , the in the total option outstanding 4.3 million option outstanding that were granted in conjunction with PAGE 61 Table of Contents Part II of Contents Part II Item 8 corporate acquisition . These option exercise price range of $ 0.00 to $ 170.87 and a of $ 0.00 to $ 170.87 and a weighted average exercise average exercise price of $ 13.68 . NOTE 15 EARNINGS PER of $ 13.68 . NOTE 15 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2003 2004 2005 Net income ) Year Ended June 30 2003 2004 2005 Net income available Year Ended June 30 2003 2004 2005 Net income available for Ended June 30 2003 2004 2005 Net income available for common shareholder ( A ) $ 7,531 $ 8,168 $ 12,254 Weighted A ) $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding $ 7,531 $ 8,168 $ 12,254 Weighted average outstanding share of common stock ( B ) 10,723 10,803 10,839 Dilutive effect of stock ( B ) 10,723 10,803 10,839 Dilutive effect of employee ( B ) 10,723 10,803 10,839 Dilutive effect of employee stock employee stock option and award 159 91 67 Common stock and stock option and award 159 91 67 Common stock and common option and award 159 91 67 Common stock and common stock stock equivalent ( C ) 10,882 10,894 10,906 Earnings per share equivalent ( C ) 10,882 10,894 10,906 Earnings per share : ( C ) 10,882 10,894 10,906 Earnings per share : Basic Basic ( A/B ) $ 0.70 $ 0.76 $ 1.13 Diluted A/B ) $ 0.70 $ 0.76 $ 1.13 Diluted ( A/C $ 0.70 $ 0.76 $ 1.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 0.69 $ 0.75 $ 1.12 For A/C ) $ 0.69 $ 0.75 $ 1.12 For the year $ 0.69 $ 0.75 $ 1.12 For the year ended June For the year ended June 30 , 2003 , 2004 , year ended June 30 , 2003 , 2004 , and 2005 June 30 , 2003 , 2004 , and 2005 , 1.09 2003 , 2004 , and 2005 , 1.09 billion , 1.2 2004 , and 2005 , 1.09 billion , 1.2 billion and 2005 , 1.09 billion , 1.2 billion and 854 million share billion , 1.2 billion and 854 million share attributable to outstanding For the year ended June 30 , 2005 , 25.24 million year ended June 30 , 2005 , 25.24 million shared performance June 30 , 2005 , 25.24 million shared performance stock award award , out of the 35.3 million targeted amount outstanding , , a discussed in Note 14 – Employee Stock and Savings and Savings Plans . NOTE 16 COMMITMENTS AND GUARANTEES We have for operating lease wa $ 290 million , $ 331 million $ 290 million , $ 331 million , and $ 299 331 million , and $ 299 million in fiscal year 2003 299 million in fiscal year 2003 , 2004 , and 2005 in fiscal year 2003 , 2004 , and 2005 , respectively 2003 , 2004 , and 2005 , respectively . Future minimum million ) Year Ended June 30 Amount 2006 $ 230 2007 Year Ended June 30 Amount 2006 $ 230 2007 204 2008 June 30 Amount 2006 $ 230 2007 204 2008 167 2009 30 Amount 2006 $ 230 2007 204 2008 167 2009 122 Amount 2006 $ 230 2007 204 2008 167 2009 122 2010 2006 $ 230 2007 204 2008 167 2009 122 2010 and $ 230 2007 204 2008 167 2009 122 2010 and thereafter 230 2007 204 2008 167 2009 122 2010 and thereafter 310 2007 204 2008 167 2009 122 2010 and thereafter 310 $ 204 2008 167 2009 122 2010 and thereafter 310 $ 1,033 2009 122 2010 and thereafter 310 $ 1,033 We have committed 2010 and thereafter 310 $ 1,033 We have committed $ 152 1,033 We have committed $ 152 million for constructing new building building . As of June 30 , 2004 , we had As of June 30 , 2004 , we had guaranteed the these guarantee wa approximately $ 51 million . Effective December 21 51 million . Effective December 21 , 2004 , the unconditional . Effective December 21 , 2004 , the unconditional guarantee were guarantee were terminated . PAGE 62 Table of Contents Part II of Contents Part II Item 8 In connection with various operating value . As of June 30 , 2005 , the maximum As of June 30 , 2005 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that indemnification under SFAS No . 5 , Accounting for Contingencies , , a interpreted by FIN 45 . We consider such factor Our warranty accrual total $ 14 million a of June 30 14 million a of June 30 , 2005 . There ha a of June 30 , 2005 . There ha been no any period presented . NOTE 17 CONTINGENCIES Government competition law matter law matter . On March 25 , 2004 , the European . On March 25 , 2004 , the European Commission announced imposed a fine of € 497 million , which resulted in third quarter of fiscal year 2004 of € 497 million ( fiscal year 2004 of € 497 million ( $ 605 million € 497 million ( $ 605 million ) . We filed of First Instance on June 6 , 2004 . On December Instance on June 6 , 2004 . On December 22 , , 2004 . On December 22 , 2004 , the Court . On December 22 , 2004 , the Court ordered that determined later in calendar year 2005 . We continue to contest the KFTC began on July 13 , 2005 , continued on began on July 13 , 2005 , continued on August 23 2005 , continued on August 23 , 2005 , and may continued on August 23 , 2005 , and may be extended extended into the fall of 2005 . In other ongoing investigation under federal law and in 17 state . Nine of those have ruled that indirect PAGE 63 Table of Contents Part II of Contents Part II Item 8 purchaser case may proceed a denied class certification . In 2003 , we reached an agreement to settle all claim in 27 consolidated case in that state . Since the beginning of 2003 , we also reached similar settlement , is approximately $ 1.9 billion . The actual cost case will range between $ 1.2 billion and $ 1.5 billion $ 1.2 billion and $ 1.5 billion , with the actual accordance with SFAS No . 5 , Accounting for Contingencie s FASB Interpretation ( FIN ) 14 , Reasonable Estimation of the a Loss , at June 30 , 2005 , we have , at June 30 , 2005 , we have recorded a these claim of approximately $ 1.1 billion , net of payment and claim . On August 27 , 2004 , the City . On August 27 , 2004 , the City and County during the period from February 18 , 1995 to the date period from February 18 , 1995 to the date of trial with the complaint on August 30 , 2004 and we removed complaint on August 30 , 2004 and we removed the case in it entirety on April 18 , 2005 with leave to entirety on April 18 , 2005 with leave to file an s decision . On December 18 , 2003 , RealNetworks , . On December 18 , 2003 , RealNetworks , Inc. filed for Maryland . On November 12 , 2004 , Novell , . On November 12 , 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . On between June 1994 and March 1996 . On June 10 , March 1996 . On June 10 , 2005 , the trial . On June 10 , 2005 , the trial court granted our product . On July 1 , 2005 , we announced . On July 1 , 2005 , we announced a settlement , we paid IBM $ 775 million and extended a $ million and extended a $ 75 million credit for IBM ’ past conduct except for PAGE 64 Table of Contents Part II of Contents Part II Item 8 claim related to it server current liability a of June 30 , 2005 . In addition a of June 30 , 2005 . In addition to the matter , a of June 30 , 2005 , we have a of June 30 , 2005 , we have recorded a recorded a liability of $ 455 million for the foregoing other could be up to $ 400 million in aggregate beyond recorded a defendant in more than 35 patent infringement case that we District of Illinois on February 2 , 1999 , the plaintiff Illinois on February 2 , 1999 , the plaintiff alleged infringement of Windows . On August 11 , 2003 , the jury . On August 11 , 2003 , the jury awarded the awarded the plaintiff approximately $ 520 million in damage for infringement patent wa issued through September 2001 . The plaintiff are seeking accounting for damage from September 2001 to the present . On the present . On January 14 , 2004 , the trial . On January 14 , 2004 , the trial court entered entered final judgment of $ 565 million , including post-trial interest including post-trial interest of $ 45 million , and entered an We appealed and on March 2 , 2005 the Court of and on March 2 , 2005 the Court of Appeals for the patent . In October 2003 , the U.S. Patent Office Eolas patent . On February 26 , 2004 , the Patent . On February 26 , 2004 , the Patent Office issued District of Arizona on December 21 , 2001 , the plaintiff Arizona on December 21 , 2001 , the plaintiff ha asserted conduct wa tried on August 11 and 12 , 2005 . tried on August 11 and 12 , 2005 . The remaining August 11 and 12 , 2005 . The remaining issue in second half of calendar year 2005 . In TVI v. Microsoft District of California on May 16 , 2002 , the plaintiff California on May 16 , 2002 , the plaintiff alleges infringement in the second half of 2005 . In Microsoft v. Lucent in San Diego on April 8 , 2003 , we are Diego on April 8 , 2003 , we are seeking a of Rhode Island on July 31 , 2002 , the plaintiff Island on July 31 , 2002 , the plaintiff alleged infringement Microsoft Office XP and Office 2003 . Following trial in September . Following trial in September 2004 the jury returned a verdict District of California on March 7 , 2003 , the plaintiff California on March 7 , 2003 , the plaintiff ha accused in the amount of $ 8.9 million . The judge later the damage award to $ 5.9 million . The court also District of California on July 2 , 2004 , the plaintiff California on July 2 , 2004 , the plaintiff ha accused computer game publisher on August 23 , 2004 . The case publisher on August 23 , 2004 . The case concern graphic scheduled for trial in January 2006 . Adverse outcome in some matter are subject to PAGE 65 Table of Contents Part II of Contents Part II Item 8 inherent uncertainty and management ’ estimable . As of June 30 , 2005 , we had As of June 30 , 2005 , we had accrued liability had accrued liability totaling $ 1.7 billion in other current liability other current liability and $ 961 million in other long-term liability the above matter . NOTE 18 SEGMENT INFORMATION Segment revenue and million ) Year Ended June 30 2003 2004 2005 Revenue Client ) Year Ended June 30 2003 2004 2005 Revenue Client $ Year Ended June 30 2003 2004 2005 Revenue Client $ 10,304 Ended June 30 2003 2004 2005 Revenue Client $ 10,304 $ 2004 2005 Revenue Client $ 10,304 $ 11,283 $ 12,048 Server Revenue Client $ 10,304 $ 11,283 $ 12,048 Server and Tools $ 10,304 $ 11,283 $ 12,048 Server and Tools 6,786 8,007 $ 12,048 Server and Tools 6,786 8,007 9,143 Information Worker 9,636 12,048 Server and Tools 6,786 8,007 9,143 Information Worker 9,636 10,895 Server and Tools 6,786 8,007 9,143 Information Worker 9,636 10,895 11,523 6,786 8,007 9,143 Information Worker 9,636 10,895 11,523 Microsoft Business Solutions 8,007 9,143 Information Worker 9,636 10,895 11,523 Microsoft Business Solutions 641 9,143 Information Worker 9,636 10,895 11,523 Microsoft Business Solutions 641 753 10,895 11,523 Microsoft Business Solutions 641 753 793 MSN 2,396 2,444 11,523 Microsoft Business Solutions 641 753 793 MSN 2,396 2,444 2,411 Microsoft Business Solutions 641 753 793 MSN 2,396 2,444 2,411 Mobile Solutions 641 753 793 MSN 2,396 2,444 2,411 Mobile and Embedded 641 753 793 MSN 2,396 2,444 2,411 Mobile and Embedded Devices 753 793 MSN 2,396 2,444 2,411 Mobile and Embedded Devices 153 2,411 Mobile and Embedded Devices 153 239 334 Home and Entertainment Mobile and Embedded Devices 153 239 334 Home and Entertainment 2,779 and Embedded Devices 153 239 334 Home and Entertainment 2,779 2,870 239 334 Home and Entertainment 2,779 2,870 3,211 Reconciling amount ( 334 Home and Entertainment 2,779 2,870 3,211 Reconciling amount ( 508 Home and Entertainment 2,779 2,870 3,211 Reconciling amount ( 508 ) 2,870 3,211 Reconciling amount ( 508 ) 344 325 Consolidated $ Reconciling amount ( 508 ) 344 325 Consolidated $ 32,187 $ amount ( 508 ) 344 325 Consolidated $ 32,187 $ 36,835 ) 344 325 Consolidated $ 32,187 $ 36,835 $ 39,788 Operating 325 Consolidated $ 32,187 $ 36,835 $ 39,788 Operating Income/ ( $ 32,187 $ 36,835 $ 39,788 Operating Income/ ( Loss ) ( Loss ) Client $ 8,306 $ 8,975 $ 9,396 Server ) Client $ 8,306 $ 8,975 $ 9,396 Server and Tools $ 8,306 $ 8,975 $ 9,396 Server and Tools 1,879 2,302 $ 9,396 Server and Tools 1,879 2,302 2,888 Information Worker 7,500 9,396 Server and Tools 1,879 2,302 2,888 Information Worker 7,500 8,112 Server and Tools 1,879 2,302 2,888 Information Worker 7,500 8,112 8,616 1,879 2,302 2,888 Information Worker 7,500 8,112 8,616 Microsoft Business Solutions 2,302 2,888 Information Worker 7,500 8,112 8,616 Microsoft Business Solutions ( 2,888 Information Worker 7,500 8,112 8,616 Microsoft Business Solutions ( 143 8,616 Microsoft Business Solutions ( 143 ) ( 115 ) ( Solutions ( 143 ) ( 115 ) ( 163 ) MSN ) ( 115 ) ( 163 ) MSN ( 384 ) ( 163 ) MSN ( 384 ) 383 469 Mobile and ) MSN ( 384 ) 383 469 Mobile and Embedded Devices MSN ( 384 ) 383 469 Mobile and Embedded Devices ( Mobile and Embedded Devices ( 162 ) ( 98 ) ( Devices ( 162 ) ( 98 ) ( 19 ) Home ) ( 98 ) ( 19 ) Home and Entertainment ( ) Home and Entertainment ( 938 ) ( 894 ) ( Entertainment ( 938 ) ( 894 ) ( 359 ) Reconciling ) ( 894 ) ( 359 ) Reconciling amount ( 6,513 359 ) Reconciling amount ( 6,513 ) ( 9,631 ) ( amount ( 6,513 ) ( 9,631 ) ( 6,267 ) Consolidated ) ( 9,631 ) ( 6,267 ) Consolidated $ 9,545 $ ( 6,267 ) Consolidated $ 9,545 $ 9,034 $ 14,561 SFAS ) Consolidated $ 9,545 $ 9,034 $ 14,561 SFAS No . $ 9,545 $ 9,034 $ 14,561 SFAS No . 131 , $ 14,561 SFAS No . 131 , Disclosures about Segments of Microsoft Consulting Services . PAGE 66 Table of Contents Part II of Contents Part II Item 8 Information Worker – Microsoft Office million ) Year Ended June 30 2003 2004 2005 Operating income ) Year Ended June 30 2003 2004 2005 Operating income reconciling Year Ended June 30 2003 2004 2005 Operating income reconciling amount Ended June 30 2003 2004 2005 Operating income reconciling amount : and contingent liability $ ( 1,079 ) $ ( 2,832 ) ( 1,079 ) $ ( 2,832 ) $ ( 2,312 ) ( 2,832 ) $ ( 2,312 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 3,749 ) ( 4,516 ) ( expense ( 3,749 ) ( 4,516 ) ( 1,042 ) Revenue ) ( 4,516 ) ( 1,042 ) Revenue reconciling amount ( ) Revenue reconciling amount ( 508 ) 344 325 Corporate-level expense reconciling amount ( 508 ) 344 325 Corporate-level expense ( 1 amount ( 508 ) 344 325 Corporate-level expense ( 1 ) 344 325 Corporate-level expense ( 1 ) ( 1,980 ) ( expense ( 1 ) ( 1,980 ) ( 3,037 ) ( ) ( 1,980 ) ( 3,037 ) ( 3,405 ) Other ) ( 3,037 ) ( 3,405 ) Other 803 410 167 ) ( 3,405 ) Other 803 410 167 Total $ ( ( 3,405 ) Other 803 410 167 Total $ ( 6,513 3,405 ) Other 803 410 167 Total $ ( 6,513 ) 410 167 Total $ ( 6,513 ) $ ( 9,631 ) ( 6,513 ) $ ( 9,631 ) $ ( 6,267 ) ( 9,631 ) $ ( 6,267 ) ( 1 ) Corporate-level $ ( 6,267 ) ( 1 ) Corporate-level expense exclude legal the aggregate accounted for approximately 10 % of total fiscal year % of total fiscal year 2004 and 2005 revenue . These total fiscal year 2004 and 2005 revenue . These sale were customer accounted for more than 10 % of revenue in 2003 10 % of revenue in 2003 . PAGE 67 Table of revenue in 2003 . PAGE 67 Table of Contents Part II of Contents Part II Item 8 Revenue , classified by the million ) Year Ended June 30 2003 2004 2005 United States ) Year Ended June 30 2003 2004 2005 United States ( Year Ended June 30 2003 2004 2005 United States ( 1 Ended June 30 2003 2004 2005 United States ( 1 ) 2004 2005 United States ( 1 ) $ 22,077 $ 25,046 States ( 1 ) $ 22,077 $ 25,046 $ 26,949 Other 1 ) $ 22,077 $ 25,046 $ 26,949 Other country 10,110 $ 22,077 $ 25,046 $ 26,949 Other country 10,110 11,789 12,839 25,046 $ 26,949 Other country 10,110 11,789 12,839 Total $ 32,187 $ 26,949 Other country 10,110 11,789 12,839 Total $ 32,187 $ 26,949 Other country 10,110 11,789 12,839 Total $ 32,187 $ 36,835 10,110 11,789 12,839 Total $ 32,187 $ 36,835 $ 39,788 ( 12,839 Total $ 32,187 $ 36,835 $ 39,788 ( 1 ) $ 32,187 $ 36,835 $ 39,788 ( 1 ) Includes shipment $ 36,835 $ 39,788 ( 1 ) Includes shipment to customer million ) Year Ended June 30 2004 2005 United States $ ) Year Ended June 30 2004 2005 United States $ 5,365 Year Ended June 30 2004 2005 United States $ 5,365 $ 2004 2005 United States $ 5,365 $ 5,506 Other country 645 United States $ 5,365 $ 5,506 Other country 645 648 Total 5,365 $ 5,506 Other country 645 648 Total $ 6,010 $ $ 5,506 Other country 645 648 Total $ 6,010 $ 6,154 country 645 648 Total $ 6,010 $ 6,154 PAGE 68 Table 648 Total $ 6,010 $ 6,154 PAGE 68 Table of Contents $ 6,010 $ 6,154 PAGE 68 Table of Contents Part II of Contents Part II Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal year 31 Mar . 31 June 30 Total Fiscal year 2003 Revenue June 30 Total Fiscal year 2003 Revenue $ 7,746 $ 8,541 Fiscal year 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 2003 Revenue $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ $ 7,746 $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross $ 8,541 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,402 $ 7,835 $ 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 8,065 $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net $ 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 32,187 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 Gross profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 profit 6,402 6,404 6,561 6,761 26,128 Net income 2,041 1,865 2,142 6,561 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 6,761 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 26,128 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Net income 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic 2,041 1,865 2,142 1,483 ( 1 ) 7,531 Basic earnings per 2,142 1,483 ( 1 ) 7,531 Basic earnings per share 0.19 7,531 Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted Basic earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings earnings per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per per share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share share 0.19 0.17 0.20 0.14 0.70 Diluted earnings per share 0.19 0.70 Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal Diluted earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal year earnings per share 0.19 0.17 0.20 0.14 0.69 Fiscal year 2004 per share 0.19 0.17 0.20 0.14 0.69 Fiscal year 2004 Revenue share 0.19 0.17 0.20 0.14 0.69 Fiscal year 2004 Revenue $ 0.20 0.14 0.69 Fiscal year 2004 Revenue $ 8,215 $ 10,153 Fiscal year 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 2 ) 1,315 ( Net income 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,614 1,549 ( 2 ) 1,315 ( 3 ) 2,690 8,168 ( 2 ) 1,315 ( 3 ) 2,690 8,168 Basic earnings ) 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 1,315 ( 3 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal year earnings per share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 per share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 Revenue share 0.24 0.14 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 0.12 0.25 0.75 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,720 8,896 8,221 10,161 $ 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net $ 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net income 39,788 Gross profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 Gross profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 ( profit 7,720 8,896 8,221 8,751 33,588 Net income 2,528 ( 4 8,221 8,751 33,588 Net income 2,528 ( 4 ) 3,463 2,563 33,588 Net income 2,528 ( 4 ) 3,463 2,563 ( 5 income 2,528 ( 4 ) 3,463 2,563 ( 5 ) 3,700 2,528 ( 4 ) 3,463 2,563 ( 5 ) 3,700 ( 4 ) 3,463 2,563 ( 5 ) 3,700 ( 6 ) 3,463 2,563 ( 5 ) 3,700 ( 6 ) 12,254 Basic ( 5 ) 3,700 ( 6 ) 12,254 Basic earnings per ) 3,700 ( 6 ) 12,254 Basic earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) Includes share 0.23 0.32 0.23 0.34 1.12 ( 1 ) Includes charge 0.32 0.23 0.34 1.12 ( 1 ) Includes charge totaling $ ) Includes charge totaling $ 750 million ( pre-tax ) related Time Warner settlement and $ 1.15 billion in impairment of investment impairment of investment . ( 2 ) Includes stock-based compensation charge stock-based compensation charge totaling $ 2.2 billion for the employee stock option transfer program . ( 3 ) Includes charge totaling $ ) Includes charge totaling $ 2.53 billion ( pre-tax ) related the European Commission . ( 4 ) Includes charge totaling $ ) Includes charge totaling $ 536 million ( pre-tax ) related with Novell , Inc. ( 5 ) Includes charge totaling $ ) Includes charge totaling $ 768 million ( pre-tax ) related certain other matter . ( 6 ) Includes charge totaling $ ) Includes charge totaling $ 756 million ( pre-tax ) related and other matter . PAGE 69 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2005 and 2004 , a of June 30 , 2005 and 2004 , and the June 30 , 2005 and 2004 , and the related consolidated in the period ended June 30 , 2005 . These financial period ended June 30 , 2005 . These financial statement are and subsidiary a of June 30 , 2005 and 2004 , a of June 30 , 2005 and 2004 , and the June 30 , 2005 and 2004 , and the result of in the period ended June 30 , 2005 , in conformity period ended June 30 , 2005 , in conformity with accounting financial reporting a of June 30 , 2005 , based on a of June 30 , 2005 , based on the criterion and our report dated August 23 , 2005 expressed an unqualified report dated August 23 , 2005 expressed an unqualified opinion on LLP Seattle , Washington August 23 , 2005 PAGE 70 Table , Washington August 23 , 2005 PAGE 70 Table of Contents August 23 , 2005 PAGE 70 Table of Contents Part II of Contents Part II Item 9 , 9A ITEM 9 . Part II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under pursuant to Exchange Act Rule 13a-15 ( b ) a of during the quarter ended June 30 , 2005 that have materially quarter ended June 30 , 2005 that have materially affected , wa effective a of June 30 , 2005 . Deloitte & a of June 30 , 2005 . Deloitte & Touche LLP report is included in Item 9A . PAGE 71 Table of in Item 9A . PAGE 71 Table of Contents Part II of Contents Part II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of June 30 , 2005 , based on a of June 30 , 2005 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2005 , is fairly a of June 30 , 2005 , is fairly stated , financial reporting a of June 30 , 2005 , based on a of June 30 , 2005 , based on the criterion for the year ended June 30 , 2005 of the Company year ended June 30 , 2005 of the Company and our and our report dated August 23 , 2005 expressed an unqualified report dated August 23 , 2005 expressed an unqualified opinion on LLP Seattle , Washington August 23 , 2005 PAGE 72 Table , Washington August 23 , 2005 PAGE 72 Table of Contents August 23 , 2005 PAGE 72 Table of Contents Part II Part II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS AND EXECUTIVE OFFICERS in Part I , Item 1 of this report . Information Shareholders to be held November 9 , 2005 ( the “ be held November 9 , 2005 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND herein by reference . PAGE 73 Table of Contents Part IV of Contents Part IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been Exhibit Listing Exhibit Number Description 3.1 Amended and Restated Articles of Incorporation of Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Microsoft Corporation ( 1 ) 3.2 Bylaws of Microsoft Corporation ( Bylaws of Microsoft Corporation ( 2 ) 4 . Call Option Microsoft Corporation ( 2 ) 4 . Call Option Transaction Confirmation Option Transaction Confirmation dated December 11 , 2003 between Microsoft Corporation Confirmation dated December 11 , 2003 between Microsoft Corporation and JPMorgan and JPMorgan Chase Bank ( 3 ) 10.1 * Microsoft Corporation Chase Bank ( 3 ) 10.1 * Microsoft Corporation 2001 Stock ) 10.1 * Microsoft Corporation 2001 Stock Plan ( 4 ) Corporation 2001 Stock Plan ( 4 ) 10.2 * Microsoft Corporation Stock Plan ( 4 ) 10.2 * Microsoft Corporation 1991 Stock ) 10.2 * Microsoft Corporation 1991 Stock Option Plan ( 4 1991 Stock Option Plan ( 4 ) 10.3 * Microsoft Corporation Option Plan ( 4 ) 10.3 * Microsoft Corporation 1999 Stock ) 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Plan for Non-Employee Directors ( 4 ) 10.4 * Microsoft Corporation Non-Employee Directors ( 4 ) 10.4 * Microsoft Corporation Stock Option Plan for Non-Employee Directors ( 4 ) 10.5 Microsoft Corporation Stock Non-Employee Directors ( 4 ) 10.5 Microsoft Corporation Stock Option Plan for Consultants and Advisors ( 4 ) 10.6 * Microsoft Corporation and Advisors ( 4 ) 10.6 * Microsoft Corporation 2003 Employee ) 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan ( Employee Stock Purchase Plan ( 5 ) 10.7 * Microsoft Corporation Purchase Plan ( 5 ) 10.7 * Microsoft Corporation 1998 Stock ) 10.7 * Microsoft Corporation 1998 Stock Option Gain and Bonus and Bonus Deferral Program ( 5 ) 10.8 * Form of Deferral Program ( 5 ) 10.8 * Form of Stock Award of Stock Award Agreement ( 5 ) 10.9 * Form of Award Agreement ( 5 ) 10.9 * Form of Stock Award Agreement for Non-Employee Directors ( 5 ) 10.10 * Form of Non-Employee Directors ( 5 ) 10.10 * Form of Shared Performance Award Agreement for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period ( 2004 to June 30 , 2006 performance period ( 5 ) , 2006 performance period ( 5 ) 10.11 * Form of performance period ( 5 ) 10.11 * Form of Shared Performance Award Agreement for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period ( 2003 to June 30 , 2006 performance period ( 5 ) , 2006 performance period ( 5 ) 10.12 * Form of performance period ( 5 ) 10.12 * Form of Stock Option of Stock Option Agreement ( 5 ) 10.13 * Form of Option Agreement ( 5 ) 10.13 * Form of Stock Option Agreement for Non-Employee Directors ( 5 ) 10.14 Trust Agreement dated Non-Employee Directors ( 5 ) 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY Washington a trustee ) ( 6 ) 10.15 Trust Agreement dated trustee ) ( 6 ) 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Trust Company a trustee ( 7 ) 10.16 Form of Indemnification a trustee ( 7 ) 10.16 Form of Indemnification Agreement ( Form of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Indemnification Agreement ( 6 ) 21 . Subsidiaries of Registrant 23.1 21 . Subsidiaries of Registrant 23.1 Consent of Independent Registered Public Independent Registered Public Accounting Firm 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial the Sarbanes-Oxley Act of 2002 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.1 Certifications of Chief Executive the Sarbanes-Oxley Act of 2002 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 32.2 Certifications of Chief Financial the Sarbanes-Oxley Act of 2002 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by Sarbanes-Oxley Act of 2002 ( 1 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2002 . ( 2 Period Ended December 31 , 2002 . ( 2 ) Incorporated 31 , 2002 . ( 2 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended March 31 , 2003 . ( 3 Period Ended March 31 , 2003 . ( 3 ) Incorporated 31 , 2003 . ( 3 ) Incorporated by reference to to Quarterly Report on Form 10-Q for the Quarterly Period Ended the Quarterly Period Ended December 31 , 2003 . ( 4 Period Ended December 31 , 2003 . ( 4 ) Incorporated 31 , 2003 . ( 4 ) Incorporated by reference to to Current Report on Form 8-K dated November 15 , 2004 on Form 8-K dated November 15 , 2004 . ( 5 8-K dated November 15 , 2004 . ( 5 ) Incorporated 15 , 2004 . ( 5 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2004 . ( 6 Year Ended June 30 , 2004 . ( 6 ) Incorporated 30 , 2004 . ( 6 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2002 . ( 7 Year Ended June 30 , 2002 . ( 7 ) Incorporated 30 , 2002 . ( 7 ) Incorporated by reference to to Annual Report on Form 10-K for the Fiscal Year Ended the Fiscal Year Ended June 30 , 2003 . * Indicates Year Ended June 30 , 2003 . * Indicates a management plan or arrangement . PAGE 74 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 25 , 2005 . M ICROSOFT , on August 25 , 2005 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 25 , 2005 Signature Title /s/ indicated on August 25 , 2005 Signature Title /s/ W ILLIAM Principal Accounting Officer ) PAGE 75 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-06-180008/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-06-180008/full-submission.txt new file mode 100644 index 0000000..42a5d79 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-06-180008/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2006 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2006 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark accelerated filer ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2005 , the aggregate As of December 31 , 2005 , the aggregate market value of the registrant wa $ 233,926,876,964 based on the closing sale System . As of August 18 , 2006 , there were As of August 18 , 2006 , there were 9,969,991,800 share , 2006 , there were 9,969,991,800 share of common stock outstanding to be held on November 14 , 2006 are incorporated by held on November 14 , 2006 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2006 INDEX PART I Year Ended June 30 , 2006 INDEX PART I Item 1. 2006 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Item 1A . Risk Factors 12 Item Item 1A . Risk Factors 12 Item 1B . Unresolved Staff . Risk Factors 12 Item 1B . Unresolved Staff Comments 18 1B . Unresolved Staff Comments 18 Item 2 . Properties 18 Unresolved Staff Comments 18 Item 2 . Properties 18 Item 3 18 Item 2 . Properties 18 Item 3 . Legal Proceedings 2 . Properties 18 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Submission of . Legal Proceedings 18 Item 4 . Submission of Matters to a Vote of Security Holders 18 PART II Item 5 . Holders 18 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management ’ Selected Financial Data 20 Item 7 . Management ’ s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 41 Item 8 . Financial Statements about Market Risk 41 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 43 Item 9 . Changes in and Supplementary Data 43 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 74 Item 9A . Controls and and Financial Disclosure 74 Item 9A . Controls and Procedures 74 9A . Controls and Procedures 74 Report of Management on Internal Internal Control over Financial Reporting 74 Report of Independent Registered Public Independent Registered Public Accounting Firm 75 Item 9B . Other Information Public Accounting Firm 75 Item 9B . Other Information 76 PART Item 9B . Other Information 76 PART III Item 10 . Information 76 PART III Item 10 . Directors and Executive Officers Executive Officers of the Registrant 76 Item 11 . Executive Compensation of the Registrant 76 Item 11 . Executive Compensation 76 Item Item 11 . Executive Compensation 76 Item 12 . Security Ownership . Executive Compensation 76 Item 12 . Security Ownership of Certain Certain Beneficial Owners and Management 76 Item 13 . Certain Relationships Owners and Management 76 Item 13 . Certain Relationships and Related Certain Relationships and Related Transactions 76 Item 14 . Principal Accountant and Related Transactions 76 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 76 PART IV Item 15 . Services 76 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 77 Signatures 79 PAGE 2 Table Financial Statement Schedules 77 Signatures 79 PAGE 2 Table of Contents Schedules 77 Signatures 79 PAGE 2 Table of Contents Part I of Contents Part I Item 1 Special Note About Forward-Looking Statements Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . These forward-looking statement generally ” ( refer to Item 1A ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is . Since our founding in 1975 , we have been a have office in more than 100 country . We generate revenue . We sell the Xbox 360 video game console and game across our business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business and Entertainment . See Note 18 – Segment Information of the segment reporting . On July 17 , 2006 , we announced . On July 17 , 2006 , we announced a change business realignment announced in September 2005 . These change will be be effective for fiscal year 2007 ; the seven segment discussed group level in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 . Client 2006 , 2005 , and 2004 . Client Client ha overall OEM channel account for over 80 % of total Client revenue built on the Windows Server 2003 operating system . Windows Server and marketing organization . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Approximately half of Server revenue licensing program , and approximately 10 % come from license sold sold to OEMs . Approximately 15 % of revenue come from company focused on the Java 2 Platform Enterprise Edition ( J2EE Office system offering generate over 85 % of Information Worker revenue and business intelligence . Approximately 40 % of Information Worker revenue Information Worker revenue . Approximately 40 % of Information Worker revenue condition . The remaining approximately 20 % of Information Worker revenue our flagship product , the 2007 Microsoft Office system , is Office Communication Server . PAGE 5 Table of Contents Part I of Contents Part I Item 1 Competition Competitors to the Microsoft subscriber . In fiscal year 2006 , we launched MSN adCenter U.S. where it now serf 100 percent of paid search traffic third party for delivering PAGE 6 Table of Contents Part I of Contents Part I Item 1 ad . In fiscal year ad . In fiscal year 2006 , we announced Windows Live™ Live Messenger to consumer in 58 country . Products : MSN management and control . PAGE 7 Table of Contents Part I of Contents Part I Item 1 Home and Entertainment Home and product . Products : Xbox 360 ; Xbox ; Xbox Live for video game console average 5 to 7 year . We game console average 5 to 7 year . We released Xbox year . We released Xbox 360 , our next generation console next generation console in November 2005 . Nintendo and Sony have . We believe the Xbox 360 is positioned well against competitive limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from PAGE 8 Table Xbox 360 component from PAGE 8 Table of Contents Part I of Contents Part I Item 1 a single supplier , we PRODUCT DEVELOPMENT During fiscal year 2006 , 2005 , and 2004 During fiscal year 2006 , 2005 , and 2004 , research 2006 , 2005 , and 2004 , research and development expense and development expense wa $ 6.58 billion , $ 6.10 billion $ 6.58 billion , $ 6.10 billion , and $ 7.74 6.10 billion , and $ 7.74 billion , respectively . Those respectively . Those amount represented 14.9 % , 15.3 % , amount represented 14.9 % , 15.3 % , and 21.0 % , 15.3 % , and 21.0 % , respectively , of growth . In fiscal year 2006 , we received our 5,000 2006 , we received our 5,000 th patent . We continue Vista operating system , the 2007 Microsoft Office system , and system , and Exchange Server 2007 . We also expect these protection . In fiscal year 2006 , nearly 60 million PCs fiscal year 2006 , nearly 60 million PCs were sold with business . In fiscal year 2007 , we will deliver new our development effort . PAGE 9 Table of Contents Part I of Contents Part I Item 1 In fiscal year 2006 , Item 1 In fiscal year 2006 , we introduced Windows Live which we announced in July 2006 . We will also continue primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , this program medium-to-large organization ( greater than 250 license ) , this program volume licensing agreement . PAGE 10 Table of Contents Part I of Contents Part I Item 1 Enterprise Agreement . The Enterprise the aggregate accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 and 10 % in each of fiscal year 2006 and 10 % in each of fiscal in each of fiscal year 2005 and 2004 revenue . These of fiscal year 2005 and 2004 revenue . These sale were executive officer a of August 25 , 2006 were a follows a of August 25 , 2006 were a follows : Name Company William H. Gates III 50 Chairman of the Board Steven the Board Steven A. Ballmer 50 Chief Executive Officer Robert J . ( Robbie ) Bach 44 President , Microsoft Entertainment and Devices Division Lisa E. Brummel 46 Senior Vice President , Human Human Resources Kevin R. Johnson 45 Co-President , Microsoft Platforms and Services Division Christopher P. Liddell 48 Senior Vice President and Chief Financial Officer Jeffrey S. Raikes 48 President , Microsoft Business Division Business Division Bradford L. Smith 47 Senior Vice President , Legal and Secretary Brian Kevin Turner 41 Chief Operating Officer Mr. Gates Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a Software Architect . In June 2006 , Mr. Gates stepped down Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Bach wa named and Devices Division in September 2005 . He had been Senior Home and Entertainment since March 2000 . Before holding that position Home and Retail since March 1999 , and Vice President , , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . PAGE 11 Table of Microsoft in 1988 . PAGE 11 Table of Contents Part I of Contents Part I Item 1 , 1A Ms. Brummel wa Part I Item 1 , 1A Ms. Brummel wa named Senior , Human Resources in December 2005 . She had been Corporate , Human Resources since April 2005 . From 1995 to April since April 2005 . From 1995 to April 2005 , she . From 1995 to April 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held and Services Division in September 2005 . He had been Group Marketing and Services since March 2003 . Before that position , , Microsoft Americas since February 2002 and Senior Vice President , , and Services since August 2001 , and prior to assuming . He joined Microsoft in 1992 . Mr. Liddell wa named of the Company in May 2005 . Mr. Liddell served a International Paper Company since March 2003 , and prior to becoming of International Paper , from 1999 to 2002 and Chief Financial Paper , from 1999 to 2002 and Chief Financial Officer from and Chief Financial Officer from 1995 to 1998 . Mr. Raikes Financial Officer from 1995 to 1998 . Mr. Raikes wa named Microsoft Business Division in September 2005 . He had been Group Information Worker Business since June 2004 . Before that position , and Business Services since August 2000 and Group Vice President , Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr. Smith wa appointed Counsel and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy . He joined Microsoft in 1993 . Mr. Turner wa appointed Chief Operating Officer in September 2005 . Before joining Microsoft , Stores , Inc. From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it . EMPLOYEES As of June 30 , 2006 , we employed As of June 30 , 2006 , we employed approximately 71,000 2006 , we employed approximately 71,000 people on a full-time basis on a full-time basis , 44,000 in the United States and in the United States and 27,000 internationally . Of the total . Of the total , 28,000 were in product research and product research and development , 21,000 in sale and marketing , in sale and marketing , 13,000 in product support and consulting support and consulting service , 2,000 in manufacturing and distribution , manufacturing and distribution , and 7,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 1A . RISK FACTORS Challenges to . In recent year PAGE 12 Table of Contents Part I of Contents Part I Item 1A certain “ open source ” range in size from Fortune 100 company to small , specialized manage this risk . PAGE 13 Table of Contents Part I of Contents Part I Item 1A We may not be able U.S. Department of Justice , 18 state , and the District that took effect in November 2001 and a Final Judgment entered Final Judgment entered in November 2002 . These proceeding imposed regulatory our business . In March 2004 , the European Commission determined legal principle that govern PAGE 14 Table of Contents Part I of Contents Part I Item 1A product design issue for future other product . In December 2005 , the Korean Fair Trade including Windows Vista , the 2007 Microsoft Office system , Xbox Microsoft Office system , Xbox 360 , MSN Search , Windows have experienced historically . PAGE 15 Table of Contents Part I of Contents Part I Item 1A Declines in demand for software in Windows Vista and the 2007 Microsoft Office system . If insufficient supply of certain Xbox 360 component or console inventory . Some component of the Xbox 360 are obtained from a single component shortage for the Xbox 360 or , alternatively , excess cost of revenue . Xbox 360 console will be assembled in from operation . See Note 1 in “ Item 8 . Note 1 in “ Item 8 . Financial Statements and Supplementary Data ” and “ Item 7 . Management ’ s Discussion . We operate in over 100 country and a significant part pricing structure uniform might PAGE 16 Table of Contents Part I of Contents Part I Item 1A require that we reduce the market . As of June 30 , 2006 , the face As of June 30 , 2006 , the face value of captive insurance arrangement wa $ 2.0 billion . Actual value at of weather-related event . PAGE 17 Table of Contents Part I of Contents Part I Item 1B , 2 , 3 , Part I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2006 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 11.0 million square foot of office King County , Washington : 8.5 million square foot of owned that is situated on approximately 500 acre of land we own our corporate campus and approximately 2.5 million square foot of space lease . We own approximately 533,000 square foot of office building many site domestically totaling approximately 2.7 million square foot of office site internationally , totaling approximately 6.9 million square foot that is that is leased and approximately 883,000 square foot that is owned Operations Center that lease a 187,000 square foot campus in Dublin Dublin , Ireland , a 56,000 square foot disk duplication facility Puerto Rico , and a 159,000 square foot facility in Singapore location : Tokyo , Japan 408,000 square foot ; Unterschleissheim , foot ; Unterschleissheim , Germany 381,000 square foot ; Les Ulis ; Les Ulis , France 262,000 square foot ; Reading , foot ; Reading , England 241,000 square foot ; and Mississauga ; and Mississauga , Canada 161,000 square foot . In addition expansion need . We own 63 acre of land in Issaquah Washington , which can accommodate 1.2 million square foot of office we may develop an additional 2.2 million square foot of facility Redmond , Washington . ITEM 3 . LEGAL PROCEEDINGS On May . LEGAL PROCEEDINGS On May 22 , 2006 , the Korean PROCEEDINGS On May 22 , 2006 , the Korean Fair Trade for which we have a 50 % or greater market share order wa denied on July 31 , 2006 . Our appeal denied on July 31 , 2006 . Our appeal of the still pending . On July 12 , 2006 , the European . On July 12 , 2006 , the European Commission announced technical documentation requirement in it 2004 Decision against u , and levied a fine of € 281 million ( $ 351 million € 281 million ( $ 351 million ) . We intend Commission ’ s underlying March 2004 decision finding Microsoft in violation competition law and accompanying € 497 million ( $ 605 million € 497 million ( $ 605 million ) fine and are First Instance . See Note 17 – Contingencies in “ Item – Contingencies in “ Item 8 . Financial Statements and Supplementary we are involved . ITEM 4 . SUBMISSION OF MATTERS TO fourth quarter of fiscal year 2006 . PAGE 18 Table of fiscal year 2006 . PAGE 18 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On August 18 , 2006 , there were . On August 18 , 2006 , there were 148,993 registered , 2006 , there were 148,993 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal year 31 Mar . 31 June 30 Year Fiscal year 2005 Common June 30 Year Fiscal year 2005 Common stock price per share per share : High $ 29.00 $ 29.98 $ 26.84 $ : High $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ $ 29.00 $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low $ 29.98 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 $ 26.84 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 $ 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal 26.07 $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year $ 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year 2006 29.98 Low 26.88 26.53 23.92 24.12 23.92 Fiscal year 2006 Common Low 26.88 26.53 23.92 24.12 23.92 Fiscal year 2006 Common stock 23.92 24.12 23.92 Fiscal year 2006 Common stock price per share per share : High $ 27.76 $ 28.16 $ 28.15 $ : High $ 27.76 $ 28.16 $ 28.15 $ 27.74 $ $ 27.76 $ 28.16 $ 28.15 $ 27.74 $ 28.16 Low $ 28.16 $ 28.15 $ 27.74 $ 28.16 Low 24.65 24.30 $ 28.15 $ 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 $ 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See 27.74 $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See Note $ 28.16 Low 24.65 24.30 26.28 21.51 21.51 See Note 12 28.16 Low 24.65 24.30 26.28 21.51 21.51 See Note 12 – Low 24.65 24.30 26.28 21.51 21.51 See Note 12 – Stockholders 26.28 21.51 21.51 See Note 12 – Stockholders ’ Equity of to Financial Statements ( Item 8 ) for information regarding dividend of Directors in fiscal year 2006 and 2005 . On July in fiscal year 2006 and 2005 . On July 20 , and 2005 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 , to buy Directors on July 20 , 2004 , to buy back up buy back up to $ 30 billion in Microsoft common stock each quarter of fiscal year 2006 a follows : Period Total price paid per share July 1 , 2005 – September 30 per share July 1 , 2005 – September 30 , 2005 1 , 2005 – September 30 , 2005 114,134,218 $ 26.54 2005 – September 30 , 2005 114,134,218 $ 26.54 October 1 – September 30 , 2005 114,134,218 $ 26.54 October 1 , 30 , 2005 114,134,218 $ 26.54 October 1 , 2005 – 2005 114,134,218 $ 26.54 October 1 , 2005 – December 31 $ 26.54 October 1 , 2005 – December 31 , 2005 1 , 2005 – December 31 , 2005 283,112,246 $ 27.08 2005 – December 31 , 2005 283,112,246 $ 27.08 January 1 – December 31 , 2005 283,112,246 $ 27.08 January 1 , 31 , 2005 283,112,246 $ 27.08 January 1 , 2006 – 2005 283,112,246 $ 27.08 January 1 , 2006 – March 31 $ 27.08 January 1 , 2006 – March 31 , 2006 1 , 2006 – March 31 , 2006 180,720,830 $ 27.00 2006 – March 31 , 2006 180,720,830 $ 27.00 April 1 – March 31 , 2006 180,720,830 $ 27.00 April 1 , 31 , 2006 180,720,830 $ 27.00 April 1 , 2006 – 2006 180,720,830 $ 27.00 April 1 , 2006 – June 30 $ 27.00 April 1 , 2006 – June 30 , 2006 1 , 2006 – June 30 , 2006 175,609,060 $ 23.78 2006 – June 30 , 2006 175,609,060 $ 23.78 Common stock – June 30 , 2006 175,609,060 $ 23.78 Common stock repurchase 30 , 2006 175,609,060 $ 23.78 Common stock repurchase in the fourth quarter of fiscal year 2006 were a follows : Period ( in million ) April 1 , 2006 – April 30 million ) April 1 , 2006 – April 30 , 2006 1 , 2006 – April 30 , 2006 38,041,415 $ 27.08 2006 – April 30 , 2006 38,041,415 $ 27.08 38,041,415 $ – April 30 , 2006 38,041,415 $ 27.08 38,041,415 $ 5,394 30 , 2006 38,041,415 $ 27.08 38,041,415 $ 5,394 May 1 , 2006 38,041,415 $ 27.08 38,041,415 $ 5,394 May 1 , 38,041,415 $ 27.08 38,041,415 $ 5,394 May 1 , 2006 – 27.08 38,041,415 $ 5,394 May 1 , 2006 – May 31 $ 5,394 May 1 , 2006 – May 31 , 2006 1 , 2006 – May 31 , 2006 8,618,036 $ 24.37 2006 – May 31 , 2006 8,618,036 $ 24.37 8,618,036 $ – May 31 , 2006 8,618,036 $ 24.37 8,618,036 $ 5,184 31 , 2006 8,618,036 $ 24.37 8,618,036 $ 5,184 June 1 , 2006 8,618,036 $ 24.37 8,618,036 $ 5,184 June 1 , 8,618,036 $ 24.37 8,618,036 $ 5,184 June 1 , 2006 – 24.37 8,618,036 $ 5,184 June 1 , 2006 – June 30 $ 5,184 June 1 , 2006 – June 30 , 2006 1 , 2006 – June 30 , 2006 128,949,609 $ 22.76 2006 – June 30 , 2006 128,949,609 $ 22.76 128,949,609 $ – June 30 , 2006 128,949,609 $ 22.76 128,949,609 $ 2,249 30 , 2006 128,949,609 $ 22.76 128,949,609 $ 2,249 175,609,060 175,609,060 , 2006 128,949,609 $ 22.76 128,949,609 $ 2,249 175,609,060 175,609,060 On 128,949,609 $ 22.76 128,949,609 $ 2,249 175,609,060 175,609,060 On July 20 $ 22.76 128,949,609 $ 2,249 175,609,060 175,609,060 On July 20 , 22.76 128,949,609 $ 2,249 175,609,060 175,609,060 On July 20 , 2006 2,249 175,609,060 175,609,060 On July 20 , 2006 , we announced 175,609,060 On July 20 , 2006 , we announced that our repurchase program : a $ 20 billion tender offer which wa which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . PAGE 19 Table of of $ 24.75 . PAGE 19 Table of Contents Part II of Contents Part II Item 5 , 6 On August 18 Part II Item 5 , 6 On August 18 , 2006 5 , 6 On August 18 , 2006 , we announced 6 On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . ITEM 6 billion through June 30 , 2011 . ITEM 6 . SELECTED 30 , 2011 . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 2006 2005 2004 2003 2002 Fiscal Year Ended June 30 2006 2005 2004 2003 2002 Revenue Year Ended June 30 2006 2005 2004 2003 2002 Revenue $ Ended June 30 2006 2005 2004 2003 2002 Revenue $ 44,282 June 30 2006 2005 2004 2003 2002 Revenue $ 44,282 $ 30 2006 2005 2004 2003 2002 Revenue $ 44,282 $ 39,788 2004 2003 2002 Revenue $ 44,282 $ 39,788 $ 36,835 $ 2002 Revenue $ 44,282 $ 39,788 $ 36,835 $ 32,187 $ $ 44,282 $ 39,788 $ 36,835 $ 32,187 $ 28,365 Operating $ 39,788 $ 36,835 $ 32,187 $ 28,365 Operating income 16,472 $ 36,835 $ 32,187 $ 28,365 Operating income 16,472 14,561 9,034 32,187 $ 28,365 Operating income 16,472 14,561 9,034 9,545 8,272 Net $ 28,365 Operating income 16,472 14,561 9,034 9,545 8,272 Net income 28,365 Operating income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 Operating income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 12,254 income 16,472 14,561 9,034 9,545 8,272 Net income 12,599 12,254 8,168 9,034 9,545 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted 9,545 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings 8,272 Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per Net income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per share income 12,599 12,254 8,168 7,531 5,355 Diluted earnings per share $ Diluted earnings per share $ 1.20 $ 1.12 $ 0.75 $ per share $ 1.20 $ 1.12 $ 0.75 $ 0.69 $ $ 1.20 $ 1.12 $ 0.75 $ 0.69 $ 0.48 Cash $ 1.12 $ 0.75 $ 0.69 $ 0.48 Cash dividend declared $ 0.75 $ 0.69 $ 0.48 Cash dividend declared per share dividend declared per share $ 0.35 $ 3.40 $ 0.16 $ per share $ 0.35 $ 3.40 $ 0.16 $ 0.08 $ $ 0.35 $ 3.40 $ 0.16 $ 0.08 $ – Cash $ 3.40 $ 0.16 $ 0.08 $ – Cash and short-term – Cash and short-term investment 34,161 37,751 60,592 49,048 38,652 Total Cash and short-term investment 34,161 37,751 60,592 49,048 38,652 Total asset and short-term investment 34,161 37,751 60,592 49,048 38,652 Total asset 69,597 short-term investment 34,161 37,751 60,592 49,048 38,652 Total asset 69,597 70,815 investment 34,161 37,751 60,592 49,048 38,652 Total asset 69,597 70,815 94,368 60,592 49,048 38,652 Total asset 69,597 70,815 94,368 81,732 69,910 Long-term 49,048 38,652 Total asset 69,597 70,815 94,368 81,732 69,910 Long-term obligation 38,652 Total asset 69,597 70,815 94,368 81,732 69,910 Long-term obligation 7,051 Total asset 69,597 70,815 94,368 81,732 69,910 Long-term obligation 7,051 5,823 asset 69,597 70,815 94,368 81,732 69,910 Long-term obligation 7,051 5,823 4,574 94,368 81,732 69,910 Long-term obligation 7,051 5,823 4,574 2,846 2,722 Stockholders 81,732 69,910 Long-term obligation 7,051 5,823 4,574 2,846 2,722 Stockholders ’ 69,910 Long-term obligation 7,051 5,823 4,574 2,846 2,722 Stockholders ’ equity Long-term obligation 7,051 5,823 4,574 2,846 2,722 Stockholders ’ equity 40,104 obligation 7,051 5,823 4,574 2,846 2,722 Stockholders ’ equity 40,104 48,115 2,846 2,722 Stockholders ’ equity 40,104 48,115 74,825 64,912 54,842 PAGE 2,722 Stockholders ’ equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Stockholders ’ equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table ’ equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table of equity 40,104 48,115 74,825 64,912 54,842 PAGE 20 Table of Contents 48,115 74,825 64,912 54,842 PAGE 20 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2006 , 2005 , AND 2004 FOR FISCAL YEARS 2006 , 2005 , AND 2004 OVERVIEW The 2006 , 2005 , AND 2004 OVERVIEW The following Management ’ and Entertainment ha generated over 40 % of it yearly segment Our focus in fiscal year 2007 is building on this foundation to collaborate interactively . PAGE 21 Table of Contents Part II of Contents Part II Item 7 Worldwide macroeconomic factor have a and demand in fiscal year 2007 a compared to fiscal year a compared to fiscal year 2006 . As open source software system increased in fiscal year 2006 . Summary of Results for of Results for Fiscal Years 2006 , 2005 , and 2004 for Fiscal Years 2006 , 2005 , and 2004 ( In 2006 , 2005 , and 2004 ( In million , except million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 44,282 2005 Percent Change 2005 versus 2004 Revenue $ 44,282 $ 39,788 2005 versus 2004 Revenue $ 44,282 $ 39,788 $ 36,835 11 2004 Revenue $ 44,282 $ 39,788 $ 36,835 11 % 8 $ 44,282 $ 39,788 $ 36,835 11 % 8 % Operating 44,282 $ 39,788 $ 36,835 11 % 8 % Operating income 39,788 $ 36,835 11 % 8 % Operating income $ 16,472 8 % Operating income $ 16,472 $ 14,561 $ 9,034 13 Operating income $ 16,472 $ 14,561 $ 9,034 13 % 61 $ 16,472 $ 14,561 $ 9,034 13 % 61 % Our 16,472 $ 14,561 $ 9,034 13 % 61 % Our revenue 14,561 $ 9,034 13 % 61 % Our revenue growth for revenue growth for fiscal year 2006 wa driven primarily by growth the launch of SQL Server 2005 in the second quarter , revenue resulting from the Xbox 360 launch in the second quarter from all source grew approximately 12 % to 14 % and grew approximately 12 % to 14 % and total server hardware server hardware shipment grew approximately 11 % to 13 % during grew approximately 11 % to 13 % during fiscal year 2006 13 % during fiscal year 2006 . Foreign currency exchange rate Revenue growth for fiscal year 2005 wa driven by growth in Worker product . The November 2004 launch of the “ Halo launch of the “ Halo 2 ” Xbox game also contributed from all source grew approximately 11 % to 13 % and grew approximately 11 % to 13 % and total server hardware server hardware shipment grew approximately 13 % to 14 % during grew approximately 13 % to 14 % during fiscal year 2005 14 % during fiscal year 2005 a compared to fiscal year a compared to fiscal year 2004 . The net impact of on revenue wa positive in 2005 , primarily due to relative growth rate wa a $ 1.08 billion decline in earned revenue Upgrade Advantage in fiscal year 2005 . This revenue wa recognized wa recognized over fiscal year 2003 and fiscal year 2004 and year 2003 and fiscal year 2004 and in the first quarter first quarter of fiscal year 2005 when the contract period expired period expired . Fiscal year 2004 revenue growth wa primarily driven all source wa estimated at 13 % and the Windows server server shipment wa estimated at 18 % in fiscal year 2004 18 % in fiscal year 2004 a compared to fiscal year a compared to fiscal year 2003 . The net impact of wa positive in fiscal year 2004 due to a relative strengthening This resulted in approximately $ 1.10 billion growth in total revenue Operating income for fiscal year 2006 increased primarily reflecting the revenue revenue increase and a $ 991 million decrease in cost for partially offset by a $ 1.62 billion increase in cost of revenue primarily related to Xbox 360 and a $ 1.26 billion Xbox 360 and a $ 1.26 billion increase in sale and compensation expense , increased $ 682 million or 7 % resulting increased $ 682 million or 7 % resulting from both an for existing headcount and a 16 % growth in headcount over Stock-based compensation expense decreased $ 733 million or 30 % reflecting decreased $ 733 million or 30 % reflecting a continuing decline income increased in fiscal year 2005 due to a decline in , strong sale of Halo 2 reduced the overall operating loss Entertainment segment for fiscal year 2005 . The $ 3.29 billion year 2005 . The $ 3.29 billion decrease in stock-based compensation increased operating expense of $ 562 million related to increased salary litigation declined in fiscal year 2005 due to the $ 2.53 2005 due to the $ 2.53 billion of charge related to the settlement of Sun PAGE 22 Table of Contents Part II of Contents Part II Item 7 Microsystems litigation and the fine European Commission in fiscal year 2004 . This effect wa partially by legal expense of $ 2.08 billion related to settlement with matter . In fiscal year 2004 , the operating income decline wa caused primarily by $ 2.53 billion of legal charge and of legal charge and $ 2.21 billion of stock-based compensation expense employee compensation in fiscal year 2004 whereby employee are granted stock second quarter of fiscal year 2004 in which employee could elect a strike price of $ 33.00 or higher to JPMorgan Chase transfer . A total of 345 million of the 621 million of 345 million of the 621 million eligible option were transferred stock-based compensation expense of $ 2.21 billion in the second quarter second quarter of fiscal year 2004 . As a result of expense decreased in fiscal year 2006 and 2005 , and we in fiscal year 2006 and 2005 , and we expect stock-based to decrease in fiscal year 2007 . Fiscal Year 2007 Outlook year 2007 . Fiscal Year 2007 Outlook In fiscal year 2007 2007 Outlook In fiscal year 2007 , we expect continued double of Windows Vista and the 2007 Microsoft Office system . We PC shipment will grow between 8 % and 10 % . grow between 8 % and 10 % . We expect that unit shipment will grow between 10 % and 12 % in grow between 10 % and 12 % in fiscal year 2007 12 % in fiscal year 2007 a compared to fiscal year a compared to fiscal year 2006 . We do not expect exchange rate in fiscal year 2007 . We expect our operating first half of fiscal year 2007 due to an increasing mix an increasing mix of Xbox 360 console revenue and related cost and Entertainment . On July 17 , 2006 , we announced . On July 17 , 2006 , we announced a change our realignment announced in September 2005 . These change will be be effective for fiscal year 2007 ; the seven segment discussed group level in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 . The 2006 , 2005 , and 2004 . The revenue and operating segment information appearing in Note 18 – Segment Information of the SFAS ” ) No . 131 , Disclosures about Segments of analyzed separately . Fiscal year 2005 and 2004 amount have been . Fiscal year 2005 and 2004 amount have been restated for conform to the fiscal year 2006 presentation . Client ( In million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 13,209 2005 Percent Change 2005 versus 2004 Revenue $ 13,209 $ 12,151 2005 versus 2004 Revenue $ 13,209 $ 12,151 $ 11,556 9 2004 Revenue $ 13,209 $ 12,151 $ 11,556 9 % 5 $ 13,209 $ 12,151 $ 11,556 9 % 5 % Operating 13,209 $ 12,151 $ 11,556 9 % 5 % Operating income 12,151 $ 11,556 9 % 5 % Operating income $ 10,203 5 % Operating income $ 10,203 $ 9,464 $ 8,740 8 Operating income $ 10,203 $ 9,464 $ 8,740 8 % 8 $ 10,203 $ 9,464 $ 8,740 8 % 8 % PAGE 10,203 $ 9,464 $ 8,740 8 % 8 % PAGE 23 9,464 $ 8,740 8 % 8 % PAGE 23 Table of 8 % 8 % PAGE 23 Table of Contents Part II of Contents Part II Item 7 Client consists of premium edition OEM channel account for over 80 % of total Client revenue revenue increased in fiscal year 2006 reflecting $ 1.18 billion or fiscal year 2006 reflecting $ 1.18 billion or 12 % growth reflecting $ 1.18 billion or 12 % growth in OEM revenue in OEM revenue driven by 17 % growth in OEM license partially offset by a $ 118 million or 6 % decrease a $ 118 million or 6 % decrease in revenue from increased two percentage point to 52 % . OEM revenue growth increase to revenue of $ 89 million resulting from the alignment revenue increased in fiscal year 2005 driven by 12 % growth fiscal year 2005 driven by 12 % growth in OEM license OEM license unit and $ 886 million or 10 % growth and $ 886 million or 10 % growth in OEM revenue partially offset by a $ 198 million or 9 % decrease a $ 198 million or 9 % decrease in revenue from Premium Mix remained flat at 50 % of total OEM Windows Upgrade Advantage declined by $ 99 million in fiscal year 2005 99 million in fiscal year 2005 contributing to the decrease in income increased in fiscal year 2006 reflecting the increase in OEM partially offset by a $ 224 million increase in sale and program . Headcount-related cost increased 6 % in fiscal year 2006 6 % in fiscal year 2006 reflecting both a 13 % year 2006 reflecting both a 13 % increase in headcount primarily income increased in fiscal year 2005 primarily due to an increase OEM revenue and a $ 444 million decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 11,467 2005 Percent Change 2005 versus 2004 Revenue $ 11,467 $ 9,938 2005 versus 2004 Revenue $ 11,467 $ 9,938 $ 8,590 15 2004 Revenue $ 11,467 $ 9,938 $ 8,590 15 % 16 $ 11,467 $ 9,938 $ 8,590 15 % 16 % Operating 11,467 $ 9,938 $ 8,590 15 % 16 % Operating income 9,938 $ 8,590 15 % 16 % Operating income $ 4,323 16 % Operating income $ 4,323 $ 3,291 $ 1,474 31 Operating income $ 4,323 $ 3,291 $ 1,474 31 % 123 $ 4,323 $ 3,291 $ 1,474 31 % 123 % Server 4,323 $ 3,291 $ 1,474 31 % 123 % Server and 3,291 $ 1,474 31 % 123 % Server and Tools consists revenue increased during fiscal year 2006 mainly driven by growth in Core CAL . SQL Server 2005 and Visual Studio 2005 were Server 2005 and Visual Studio 2005 were launched in the second second quarter of fiscal year 2006 and produced revenue growth in shipment which we estimate grew 11 % to 13 % in estimate grew 11 % to 13 % in fiscal year 2006 13 % in fiscal year 2006 . Server and Server application and certification revenue grew $ 1.31 billion or 16 % during grew $ 1.31 billion or 16 % during fiscal year 2006 16 % during fiscal year 2006 . The result reflect broad Server , which grew over 30 % for PAGE 24 Table over 30 % for PAGE 24 Table of Contents Part II of Contents Part II Item 7 the year . Consulting , support service revenue increased $ 218 million or 15 % primarily increased $ 218 million or 15 % primarily due to higher service . In fiscal year 2005 , Server and Server application CAL revenue , grew $ 1.10 billion or 17 % . grew $ 1.10 billion or 17 % . Consulting , Premier support service revenue increased $ 241 million or 19 % compared increased $ 241 million or 19 % compared to the previous rate change accounted for $ 284 million or three percentage point wa offset by a $ 314 million decline in Upgrade Advantage income increased during fiscal year 2006 primarily reflecting increased revenue , and marketing expense increased $ 274 million due to additional spending the launch of SQL Server 2005 and Visual Studio 2005 . Server 2005 and Visual Studio 2005 . Total Server and Tools and Tools headcount-related cost increased 5 % related to both an % related to both an 11 % increase in headcount and expense . In fiscal year 2005 , Server and Tools operating increased revenue and a $ 1.07 billion decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 11,756 2005 Percent Change 2005 versus 2004 Revenue $ 11,756 $ 11,169 2005 versus 2004 Revenue $ 11,756 $ 11,169 $ 10,748 5 2004 Revenue $ 11,756 $ 11,169 $ 10,748 5 % 4 $ 11,756 $ 11,169 $ 10,748 5 % 4 % Operating 11,756 $ 11,169 $ 10,748 5 % 4 % Operating income 11,169 $ 10,748 5 % 4 % Operating income $ 8,285 4 % Operating income $ 8,285 $ 8,025 $ 7,458 3 Operating income $ 8,285 $ 8,025 $ 7,458 3 % 8 $ 8,285 $ 8,025 $ 7,458 3 % 8 % Information 8,285 $ 8,025 $ 7,458 3 % 8 % Information Worker 8,025 $ 7,458 3 % 8 % Information Worker primarily consists revenue increased in fiscal year 2006 primarily reflecting a $ 521 2006 primarily reflecting a $ 521 million or 5 % increase a $ 521 million or 5 % increase in volume licensing while OEM revenue increased $ 66 million or 4 % . increased $ 66 million or 4 % . Information Worker revenue revenue increased in fiscal year 2005 primarily reflecting a $ 269 2005 primarily reflecting a $ 269 million or 3 % increase a $ 269 million or 3 % increase in volume licensing in Japan , a $ 91 million or 6 % increase a $ 91 million or 6 % increase in OEM revenue rate accounted for approximately $ 367 million or three percentage point revenue growth for fiscal year 2005 , offset by a $ , offset by a $ 663 million decline in Upgrade Advantage income increased in fiscal year 2006 primarily due to the revenue partially offset by a $ 283 million or 15 % increase a $ 283 million or 15 % increase in sale and sale effort and a $ 71 million or 10 % increase a $ 71 million or 10 % increase in research and expense . Headcount-related cost increased 14 % during fiscal year 2006 14 % during fiscal year 2006 reflecting both an 18 % year 2006 reflecting both an 18 % increase in headcount related income growth for fiscal year 2005 wa primarily due to the revenue growth and a $ 304 million decrease in stock-based compensation with the launch of Office 2003 . This decline wa offset for existing headcount . PAGE 25 Table of Contents Part II of Contents Part II Item 7 Microsoft Business Solutions ( In million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 919 2005 Percent Change 2005 versus 2004 Revenue $ 919 $ 784 2005 versus 2004 Revenue $ 919 $ 784 $ 742 17 2004 Revenue $ 919 $ 784 $ 742 17 % 6 $ 919 $ 784 $ 742 17 % 6 % Operating 919 $ 784 $ 742 17 % 6 % Operating income 784 $ 742 17 % 6 % Operating income ( loss income ( loss ) $ 24 $ ( 171 ) $ ) $ 24 $ ( 171 ) $ ( 291 ) ( 171 ) $ ( 291 ) * 41 % * $ ( 291 ) * 41 % * Not meaningful Microsoft revenue increased in fiscal year 2006 driven by new user for Solutions revenue in fiscal year 2005 wa mainly due to 10 2005 wa mainly due to 10 % revenue growth in software in software partially offset by 25 % decline in service revenue revenue increase wa driven by 9 % growth in license revenue growth in license revenue and 16 % growth in enhancement revenue income increased in fiscal year 2006 reflecting the increase in revenue revenue accompanied by a $ 56 million decrease in sale and spending . Headcount-related cost increased 3 % reflecting both a 10 3 % reflecting both a 10 % increase in headcount and loss declined in fiscal year 2005 primarily due to a $ primarily due to a $ 175 million decline in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 2,298 2005 Percent Change 2005 versus 2004 Revenue $ 2,298 $ 2,344 2005 versus 2004 Revenue $ 2,298 $ 2,344 $ 2,270 ( 2004 Revenue $ 2,298 $ 2,344 $ 2,270 ( 2 ) $ 2,298 $ 2,344 $ 2,270 ( 2 ) % 3 $ 2,344 $ 2,270 ( 2 ) % 3 % Operating 2,270 ( 2 ) % 3 % Operating income ( loss ( loss ) $ ( 77 ) $ 412 $ 98 $ ( 77 ) $ 412 $ 98 * 320 % 77 ) $ 412 $ 98 * 320 % * Not $ 412 $ 98 * 320 % * Not meaningful MSN subscriber . In fiscal year 2006 , we launched MSN adCenter U.S. where it now serf 100 percent of paid search traffic delivering ad . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function related to MapPoint in Mobile and Embedded PAGE 26 Table of Contents Part II of Contents Part II Item 7 Devices were moved to MSN We announced in fiscal year 2006 , Windows Live™ , a revenue decreased in fiscal year 2006 primarily reflecting a $ 195 2006 primarily reflecting a $ 195 million or 28 % decline a $ 195 million or 28 % decline in access revenue partially offset by a $ 126 million or 9 % increase a $ 126 million or 9 % increase in advertising revenue advertising revenue and a $ 23 million or 9 % increase a $ 23 million or 9 % increase in revenue from access . As of June 30 , 2006 , MSN had As of June 30 , 2006 , MSN had 2.1 million , 2006 , MSN had 2.1 million access subscriber compared with million access subscriber compared with 2.7 million at June 30 , with 2.7 million at June 30 , 2005 . In addition million at June 30 , 2005 . In addition , MSN addition , MSN had over 261 million active Hotmail account and active Hotmail account and over 243 million active Messenger account a Messenger account a of June 30 , 2006 . The increase a of June 30 , 2006 . The increase in advertising adCenter . In fiscal year 2005 , MSN revenue increased reflecting MSN revenue increased reflecting $ 193 million or 16 % growth reflecting $ 193 million or 16 % growth in advertising revenue display advertising revenue and $ 84 million or 88 % growth and $ 84 million or 88 % growth in subscription and and a decline of $ 219 million or 24 % in of $ 219 million or 24 % in access revenue , income decreased in fiscal year 2006 due to a $ 230 2006 due to a $ 230 million or 39 % increase a $ 230 million or 39 % increase in research and development cost , a $ 126 million or 22 % increase a $ 126 million or 22 % increase in sale and expense , and a $ 67 million or 9 % increase a $ 67 million or 9 % increase in cost of platform . Headcount-related cost increased 25 % reflecting a 44 % increased 25 % reflecting a 44 % increase in headcount and compensation . In fiscal year 2005 , MSN operating income increased mainly due to a $ 241 million decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 377 2005 Percent Change 2005 versus 2004 Revenue $ 377 $ 262 2005 versus 2004 Revenue $ 377 $ 262 $ 193 44 2004 Revenue $ 377 $ 262 $ 193 44 % 36 $ 377 $ 262 $ 193 44 % 36 % Operating 377 $ 262 $ 193 44 % 36 % Operating income 262 $ 193 44 % 36 % Operating income ( loss income ( loss ) $ 2 $ ( 65 ) $ ) $ 2 $ ( 65 ) $ ( 237 ) ( 65 ) $ ( 237 ) * 73 % * $ ( 237 ) * 73 % * Not meaningful Mobile mobile operator . Effective July 1 , 2005 , function related . Effective July 1 , 2005 , function related to MapPoint revenue increased in fiscal year 2006 primarily due to unit volume PDAs . In fiscal year 2006 , revenue for Windows Mobile Windows Mobile software increased $ 55 million or 37 % while increased $ 55 million or 37 % while revenue for Windows Embedded operating system increased $ 49 million or 47 % , increased $ 49 million or 47 % , which wa primarily revenue growth for fiscal year 2005 over fiscal PAGE 27 Table year 2005 over fiscal PAGE 27 Table of Contents Part II of Contents Part II Item 7 year 2004 , primarily driven Part II Item 7 year 2004 , primarily driven by increased PDAs . In fiscal year 2005 , revenue for Windows Mobile Windows Mobile software increased $ 46 million or 45 % and increased $ 46 million or 45 % and revenue for Windows Embedded operating system increased $ 19 million or 21 % . increased $ 19 million or 21 % . Unit volume increase revenue growth for fiscal year 2005 over fiscal year 2004 , year 2005 over fiscal year 2004 , primarily driven by increased operating income for fiscal year 2006 a opposed to the operating operating loss in fiscal year 2005 primarily due to increased revenue partially offset by a $ 42 million or 21 % increase a $ 42 million or 21 % increase in both research expense . Headcount-related cost increased 15 % reflecting both a 24 15 % reflecting both a 24 % increase in headcount and operating loss for fiscal year 2005 decreased compared to fiscal year decreased compared to fiscal year 2004 primarily due to a $ primarily due to a $ 95 million decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Revenue $ 4,256 2005 Percent Change 2005 versus 2004 Revenue $ 4,256 $ 3,140 2005 versus 2004 Revenue $ 4,256 $ 3,140 $ 2,737 36 2004 Revenue $ 4,256 $ 3,140 $ 2,737 36 % 15 $ 4,256 $ 3,140 $ 2,737 36 % 15 % Operating 4,256 $ 3,140 $ 2,737 36 % 15 % Operating loss 3,140 $ 2,737 36 % 15 % Operating loss $ ( % Operating loss $ ( 1,262 ) $ ( 485 ) ( 1,262 ) $ ( 485 ) $ ( 1,337 ) ( 485 ) $ ( 1,337 ) ( 160 ) % $ ( 1,337 ) ( 160 ) % 64 % Home ) ( 160 ) % 64 % Home and Entertainment includes new console , the Xbox 360 , which launched in the second quarter of fiscal year 2006 . We believe that the the long-term success of Xbox 360 . Revenue from the first of the introduction of Xbox 360 . Home and Entertainment revenue revenue increased in fiscal year 2006 primarily due to the launch the launch of the Xbox 360 console partially offset by a the significant impact of Halo 2 in fiscal year 2005 . Halo 2 in fiscal year 2005 . We sold approximately 5 2005 . We sold approximately 5 million Xbox 360 console during sold approximately 5 million Xbox 360 console during fiscal year 2006 360 console during fiscal year 2006 . The revenue growth wa wa also attributable to $ 140 million or 15 % growth to $ 140 million or 15 % growth from our other to deployment in fiscal year 2006 . Revenue increased in fiscal Revenue increased in fiscal year 2005 primarily due to significant new which resulted in a $ 416 million or 23 % increase a $ 416 million or 23 % increase in Xbox revenue in Xbox revenue . Halo 2 wa introduced in the second second quarter of fiscal year 2005 and generated over $ 300 2005 and generated over $ 300 million in revenue in fiscal in revenue in fiscal year 2005 . Revenue from consumer hardware and TV platform declined $ 50 million or 5 % compared declined $ 50 million or 5 % compared to fiscal year % compared to fiscal year 2004 due to lower PC game loss increased in fiscal year 2006 primarily a a result of a result of a $ 1.64 billion increase in cost of from the number of Xbox 360 console sold and higher Xbox console sold and higher Xbox 360 unit cost , partially offset growth . Our fiscal year 2006 operating loss increased due to the significant impact of Halo 2 in fiscal year 2005 . Halo 2 in fiscal year 2005 . Headcount-related cost increased 5 2005 . Headcount-related cost increased 5 % reflecting both a 19 5 % reflecting both a 19 % increase in headcount and expense . The fiscal year 2005 operating loss decreased primarily due unit cost , a $ 90 million lower-of-cost-or-market inventory adjustment recorded adjustment recorded in fiscal year 2004 , and a $ 219 2004 , and a $ 219 million decrease in stock-based compensation in cost associated with Xbox 360 console development and related launch related launch effort . PAGE 28 Table of Contents Part II of Contents Part II Item 7 Corporate-Level Activity ( In million million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Corporate-level expense $ 2005 Percent Change 2005 versus 2004 Corporate-level expense $ 5,026 $ versus 2004 Corporate-level expense $ 5,026 $ 5,910 $ 6,871 ( Corporate-level expense $ 5,026 $ 5,910 $ 6,871 ( 15 ) $ 5,026 $ 5,910 $ 6,871 ( 15 ) % ( $ 5,910 $ 6,871 ( 15 ) % ( 14 ) ( 15 ) % ( 14 ) % Certain corporate-level expense expense decreased in fiscal year 2006 , primarily reflecting a $ , primarily reflecting a $ 991 million decrease in cost for partially offset by an $ 84 million increase in headcount-related cost cost . We incurred $ 1.32 billion in legal charge during legal charge during fiscal year 2006 including settlement expense of $ including settlement expense of $ 361 million related to our settlement matter , and the € 281 million ( $ 351 million € 281 million ( $ 351 million ) fine imposed by the European Commission in July 2006 related to it 2004 decision July 2006 related to it 2004 decision in it competition law , a compared to $ 2.31 billion in legal charge incurred matter . Headcount-related cost increased 5 % during the twelve month the twelve month ended June 30 , 2006 reflecting both a month ended June 30 , 2006 reflecting both a 23 % , 2006 reflecting both a 23 % increase in headcount and expense decreased in fiscal year 2005 , primarily a a result a result of a $ 736 million reduction in stock-based compensation contingency . In fiscal year 2005 , we recognized $ 2.31 2005 , we recognized $ 2.31 billion in legal charge a charge a compared to $ 2.53 billion in fiscal year 2004 2.53 billion in fiscal year 2004 which included a $ 1.92 2004 which included a $ 1.92 billion charge for a settlement and the fine of € 497 million ( $ 605 million € 497 million ( $ 605 million ) imposed by the Financial Reporting Structure On July 17 , 2006 , we announced Structure On July 17 , 2006 , we announced that effective first quarter of fiscal year 2007 , we will report our business beginning in fiscal year 2007 . Each of the five announced earlier in fiscal year 2006 : • Platforms and Services Dynamics AX , Microsoft PAGE 29 Table of Contents Part II of Contents Part II Item 7 Dynamics CRM , Microsoft Dynamics . Products will include Xbox 360 , Xbox , Xbox Live four quarter in fiscal year 2006 and 2005 were a follows in fiscal year 2006 and 2005 were a follows : Revenue ( In million ) September 30 , 2005 December 31 , million ) September 30 , 2005 December 31 , 2005 March September 30 , 2005 December 31 , 2005 March 31 , , 2005 December 31 , 2005 March 31 , 2006 June December 31 , 2005 March 31 , 2006 June 30 , , 2005 March 31 , 2006 June 30 , 2006 Fiscal March 31 , 2006 June 30 , 2006 Fiscal Year 2006 , 2006 June 30 , 2006 Fiscal Year 2006 September 30 30 , 2006 Fiscal Year 2006 September 30 , 2004 December 2006 Fiscal Year 2006 September 30 , 2004 December 31 , Year 2006 September 30 , 2004 December 31 , 2004 March September 30 , 2004 December 31 , 2004 March 31 , , 2004 December 31 , 2004 March 31 , 2005 June December 31 , 2004 March 31 , 2005 June 30 , , 2004 March 31 , 2005 June 30 , 2005 Fiscal March 31 , 2005 June 30 , 2005 Fiscal Year 2005 , 2005 June 30 , 2005 Fiscal Year 2005 Segments Client 30 , 2005 Fiscal Year 2005 Segments Client $ 3,187 $ Year 2005 Segments Client $ 3,187 $ 3,459 $ 3,187 $ Segments Client $ 3,187 $ 3,459 $ 3,187 $ 3,376 $ $ 3,187 $ 3,459 $ 3,187 $ 3,376 $ 13,209 $ $ 3,459 $ 3,187 $ 3,376 $ 13,209 $ 2,980 $ $ 3,187 $ 3,376 $ 13,209 $ 2,980 $ 3,193 $ $ 3,376 $ 13,209 $ 2,980 $ 3,193 $ 2,964 $ $ 13,209 $ 2,980 $ 3,193 $ 2,964 $ 3,014 $ $ 2,980 $ 3,193 $ 2,964 $ 3,014 $ 12,151 Server $ 3,193 $ 2,964 $ 3,014 $ 12,151 Server and Tools $ 2,964 $ 3,014 $ 12,151 Server and Tools 2,127 2,438 $ 12,151 Server and Tools 2,127 2,438 2,398 2,690 9,653 1,906 12,151 Server and Tools 2,127 2,438 2,398 2,690 9,653 1,906 2,161 Server and Tools 2,127 2,438 2,398 2,690 9,653 1,906 2,161 2,058 and Tools 2,127 2,438 2,398 2,690 9,653 1,906 2,161 2,058 2,245 Tools 2,127 2,438 2,398 2,690 9,653 1,906 2,161 2,058 2,245 8,370 2,127 2,438 2,398 2,690 9,653 1,906 2,161 2,058 2,245 8,370 Online 2,438 2,398 2,690 9,653 1,906 2,161 2,058 2,245 8,370 Online Services 2,398 2,690 9,653 1,906 2,161 2,058 2,245 8,370 Online Services Business 2,690 9,653 1,906 2,161 2,058 2,245 8,370 Online Services Business 564 9,653 1,906 2,161 2,058 2,245 8,370 Online Services Business 564 594 2,245 8,370 Online Services Business 564 594 561 580 2,299 559 8,370 Online Services Business 564 594 561 580 2,299 559 606 Online Services Business 564 594 561 580 2,299 559 606 581 Services Business 564 594 561 580 2,299 559 606 581 598 Business 564 594 561 580 2,299 559 606 581 598 2,344 564 594 561 580 2,299 559 606 581 598 2,344 Microsoft 594 561 580 2,299 559 606 581 598 2,344 Microsoft Business 561 580 2,299 559 606 581 598 2,344 Microsoft Business Division 580 2,299 559 606 581 598 2,344 Microsoft Business Division 3,283 2,299 559 606 581 598 2,344 Microsoft Business Division 3,283 3,689 598 2,344 Microsoft Business Division 3,283 3,689 3,608 3,908 14,488 3,086 2,344 Microsoft Business Division 3,283 3,689 3,608 3,908 14,488 3,086 3,413 Microsoft Business Division 3,283 3,689 3,608 3,908 14,488 3,086 3,413 3,384 Business Division 3,283 3,689 3,608 3,908 14,488 3,086 3,413 3,384 3,637 Division 3,283 3,689 3,608 3,908 14,488 3,086 3,413 3,384 3,637 13,520 3,283 3,689 3,608 3,908 14,488 3,086 3,413 3,384 3,637 13,520 Entertainment 3,689 3,608 3,908 14,488 3,086 3,413 3,384 3,637 13,520 Entertainment and 3,608 3,908 14,488 3,086 3,413 3,384 3,637 13,520 Entertainment and Devices 3,908 14,488 3,086 3,413 3,384 3,637 13,520 Entertainment and Devices 580 14,488 3,086 3,413 3,384 3,637 13,520 Entertainment and Devices 580 1,657 3,637 13,520 Entertainment and Devices 580 1,657 1,146 1,250 4,633 658 13,520 Entertainment and Devices 580 1,657 1,146 1,250 4,633 658 1,445 Entertainment and Devices 580 1,657 1,146 1,250 4,633 658 1,445 633 and Devices 580 1,657 1,146 1,250 4,633 658 1,445 633 667 Devices 580 1,657 1,146 1,250 4,633 658 1,445 633 667 3,403 580 1,657 1,146 1,250 4,633 658 1,445 633 667 3,403 Total 1,657 1,146 1,250 4,633 658 1,445 633 667 3,403 Total revenue 1,146 1,250 4,633 658 1,445 633 667 3,403 Total revenue $ 1,250 4,633 658 1,445 633 667 3,403 Total revenue $ 9,741 4,633 658 1,445 633 667 3,403 Total revenue $ 9,741 $ 667 3,403 Total revenue $ 9,741 $ 11,837 $ 10,900 $ Total revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 $ $ 11,837 $ 10,900 $ 11,804 $ 44,282 $ 9,189 $ $ 10,900 $ 11,804 $ 44,282 $ 9,189 $ 10,818 $ $ 11,804 $ 44,282 $ 9,189 $ 10,818 $ 9,620 $ $ 44,282 $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Operating $ 10,818 $ 9,620 $ 10,161 $ 39,788 Operating Income / $ 9,620 $ 10,161 $ 39,788 Operating Income / ( Loss ( In million ) September 30 , 2005 December 31 , million ) September 30 , 2005 December 31 , 2005 March September 30 , 2005 December 31 , 2005 March 31 , , 2005 December 31 , 2005 March 31 , 2006 June December 31 , 2005 March 31 , 2006 June 30 , , 2005 March 31 , 2006 June 30 , 2006 Fiscal March 31 , 2006 June 30 , 2006 Fiscal Year 2006 , 2006 June 30 , 2006 Fiscal Year 2006 September 30 30 , 2006 Fiscal Year 2006 September 30 , 2004 December 2006 Fiscal Year 2006 September 30 , 2004 December 31 , Year 2006 September 30 , 2004 December 31 , 2004 March September 30 , 2004 December 31 , 2004 March 31 , , 2004 December 31 , 2004 March 31 , 2005 June December 31 , 2004 March 31 , 2005 June 30 , , 2004 March 31 , 2005 June 30 , 2005 Fiscal March 31 , 2005 June 30 , 2005 Fiscal Year 2005 , 2005 June 30 , 2005 Fiscal Year 2005 Segments Client 30 , 2005 Fiscal Year 2005 Segments Client $ 2,569 $ Year 2005 Segments Client $ 2,569 $ 2,638 $ 2,471 $ Segments Client $ 2,569 $ 2,638 $ 2,471 $ 2,504 $ $ 2,569 $ 2,638 $ 2,471 $ 2,504 $ 10,182 $ $ 2,638 $ 2,471 $ 2,504 $ 10,182 $ 2,387 $ $ 2,471 $ 2,504 $ 10,182 $ 2,387 $ 2,513 $ $ 2,504 $ 10,182 $ 2,387 $ 2,513 $ 2,331 $ $ 10,182 $ 2,387 $ 2,513 $ 2,331 $ 2,172 $ $ 2,387 $ 2,513 $ 2,331 $ 2,172 $ 9,403 Server $ 2,513 $ 2,331 $ 2,172 $ 9,403 Server and Tools $ 2,331 $ 2,172 $ 9,403 Server and Tools 606 762 $ 9,403 Server and Tools 606 762 746 903 3,017 455 9,403 Server and Tools 606 762 746 903 3,017 455 660 Server and Tools 606 762 746 903 3,017 455 660 515 and Tools 606 762 746 903 3,017 455 660 515 479 Tools 606 762 746 903 3,017 455 660 515 479 2,109 606 762 746 903 3,017 455 660 515 479 2,109 Online 762 746 903 3,017 455 660 515 479 2,109 Online Services 746 903 3,017 455 660 515 479 2,109 Online Services Business 903 3,017 455 660 515 479 2,109 Online Services Business 81 3,017 455 660 515 479 2,109 Online Services Business 81 58 479 2,109 Online Services Business 81 58 ( 26 ) ( 2,109 Online Services Business 81 58 ( 26 ) ( 190 Services Business 81 58 ( 26 ) ( 190 ) ( 58 ( 26 ) ( 190 ) ( 77 ) 79 ) ( 190 ) ( 77 ) 79 130 101 101 190 ) ( 77 ) 79 130 101 101 411 Microsoft ) ( 77 ) 79 130 101 101 411 Microsoft Business ( 77 ) 79 130 101 101 411 Microsoft Business Division 77 ) 79 130 101 101 411 Microsoft Business Division 2,251 ) 79 130 101 101 411 Microsoft Business Division 2,251 2,466 101 411 Microsoft Business Division 2,251 2,466 2,414 2,544 9,675 2,160 411 Microsoft Business Division 2,251 2,466 2,414 2,544 9,675 2,160 2,355 Microsoft Business Division 2,251 2,466 2,414 2,544 9,675 2,160 2,355 2,316 Business Division 2,251 2,466 2,414 2,544 9,675 2,160 2,355 2,316 2,285 Division 2,251 2,466 2,414 2,544 9,675 2,160 2,355 2,316 2,285 9,116 2,251 2,466 2,414 2,544 9,675 2,160 2,355 2,316 2,285 9,116 Entertainment 2,466 2,414 2,544 9,675 2,160 2,355 2,316 2,285 9,116 Entertainment and 2,414 2,544 9,675 2,160 2,355 2,316 2,285 9,116 Entertainment and Devices 2,544 9,675 2,160 2,355 2,316 2,285 9,116 Entertainment and Devices ( 9,675 2,160 2,355 2,316 2,285 9,116 Entertainment and Devices ( 182 9,116 Entertainment and Devices ( 182 ) ( 296 ) ( Devices ( 182 ) ( 296 ) ( 422 ) ( ) ( 296 ) ( 422 ) ( 437 ) ( ) ( 422 ) ( 437 ) ( 1,337 ) ( ) ( 437 ) ( 1,337 ) ( 202 ) 28 ) ( 1,337 ) ( 202 ) 28 ( 198 ) 1,337 ) ( 202 ) 28 ( 198 ) ( 235 ( 202 ) 28 ( 198 ) ( 235 ) ( 28 ( 198 ) ( 235 ) ( 607 ) Corporate-Level ) ( 235 ) ( 607 ) Corporate-Level Activity ( 1,279 607 ) Corporate-Level Activity ( 1,279 ) ( 971 ) ( Activity ( 1,279 ) ( 971 ) ( 1,295 ) ( ) ( 971 ) ( 1,295 ) ( 1,443 ) ( ) ( 1,295 ) ( 1,443 ) ( 4,988 ) ( ) ( 1,443 ) ( 4,988 ) ( 1,385 ) ( ) ( 4,988 ) ( 1,385 ) ( 937 ) ( ) ( 1,385 ) ( 937 ) ( 1,736 ) ( ) ( 937 ) ( 1,736 ) ( 1,813 ) ( ) ( 1,736 ) ( 1,813 ) ( 5,871 ) Total ) ( 1,813 ) ( 5,871 ) Total operating income $ ) Total operating income $ 4,046 $ 4,657 $ 3,888 $ operating income $ 4,046 $ 4,657 $ 3,888 $ 3,881 $ $ 4,046 $ 4,657 $ 3,888 $ 3,881 $ 16,472 $ $ 4,657 $ 3,888 $ 3,881 $ 16,472 $ 3,494 $ $ 3,888 $ 3,881 $ 16,472 $ 3,494 $ 4,749 $ $ 3,881 $ 16,472 $ 3,494 $ 4,749 $ 3,329 $ $ 16,472 $ 3,494 $ 4,749 $ 3,329 $ 2,989 $ $ 3,494 $ 4,749 $ 3,329 $ 2,989 $ 14,561 Our $ 4,749 $ 3,329 $ 2,989 $ 14,561 Our outlook for $ 3,329 $ 2,989 $ 14,561 Our outlook for fiscal year Our outlook for fiscal year 2007 based on the five operating expect PC shipment to grow 8 % to 10 % for to grow 8 % to 10 % for fiscal year 2007 10 % for fiscal year 2007 . We believe that PC revenue growth in fiscal year 2007 . We estimate overall server hardware unit shipment will grow 10 % to 12 % in will grow 10 % to 12 % in fiscal year 2007 12 % in fiscal year 2007 . However , we face in server application . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Online Services Business We expect to grow in fiscal year 2007 a a result of continued to decline in fiscal year 2007 . Microsoft Business Division We to grow in fiscal year 2007 . We feel that our contract indicates enthusiasm for the 2007 Microsoft Office system . We , building on the fiscal 2006 momentum . Entertainment and Devices to increase from fiscal year 2006 due to the increased availability increased availability of the Xbox 360 console unit during the entire the launch in fiscal year 2006 . In fiscal year 2007 2006 . In fiscal year 2007 , we expect to introduce continuing revenue stream . Xbox 360 console unit cost are expected key area in fiscal year 2007 : increased product cost associated operating expense in fiscal year 2007 , we believe they will million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Cost of revenue 2005 Percent Change 2005 versus 2004 Cost of revenue $ 7,650 2004 Cost of revenue $ 7,650 $ 6,031 $ 6,596 27 of revenue $ 7,650 $ 6,031 $ 6,596 27 % ( $ 7,650 $ 6,031 $ 6,596 27 % ( 9 ) 7,650 $ 6,031 $ 6,596 27 % ( 9 ) % $ 6,596 27 % ( 9 ) % As a percent As a percent of revenue 17 % 15 % 18 % percent of revenue 17 % 15 % 18 % 2ppt ( revenue 17 % 15 % 18 % 2ppt ( 3 ) % 15 % 18 % 2ppt ( 3 ) ppt Cost % 18 % 2ppt ( 3 ) ppt Cost of revenue of revenue in fiscal year 2006 increased mainly due to a mainly due to a $ 1.64 billion increase in Home and console sold and higher Xbox 360 unit cost . Cost of of revenue in fiscal year 2005 decreased due to a $ decreased due to a $ 363 million decrease in stock-based compensation compensation expense , a $ 140 million reduction in cost associated base , and a $ 169 million reduction in other product million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Research and development 2005 Percent Change 2005 versus 2004 Research and development $ 6,584 2004 Research and development $ 6,584 $ 6,097 $ 7,735 8 and development $ 6,584 $ 6,097 $ 7,735 8 % ( $ 6,584 $ 6,097 $ 7,735 8 % ( 21 ) 6,584 $ 6,097 $ 7,735 8 % ( 21 ) % $ 7,735 8 % ( 21 ) % As a percent As a percent of revenue 15 % 15 % 21 % percent of revenue 15 % 15 % 21 % –ppt ( revenue 15 % 15 % 21 % –ppt ( 6 ) % 21 % –ppt ( 6 ) ppt Research and development and development expense also PAGE 31 Table of Contents Part II of Contents Part II Item 7 include third-party development and programming cost increased during fiscal year 2006 primarily due to increased development a MSN adCenter , the 2007 Microsoft Office system , Windows , Windows Vista , Xbox 360 , and corporate research activity activity . Headcount-related cost increased 3 % during fiscal year 2006 3 % during fiscal year 2006 reflecting both a 17 % year 2006 reflecting both a 17 % increase in headcount and expense decreased in fiscal year 2005 due to a $ 1.88 2005 due to a $ 1.88 billion decrease in stock-based compensation cost associated with the Xbox 360 console and related game , related game , SQL Server 2005 , Windows Vista , and million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 Sales and marketing 2005 Percent Change 2005 versus 2004 Sales and marketing $ 9,818 2004 Sales and marketing $ 9,818 $ 8,563 $ 8,195 15 and marketing $ 9,818 $ 8,563 $ 8,195 15 % 4 $ 9,818 $ 8,563 $ 8,195 15 % 4 % As 9,818 $ 8,563 $ 8,195 15 % 4 % As a 8,563 $ 8,195 15 % 4 % As a percent of As a percent of revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % –ppt –ppt revenue 22 % 22 % 22 % –ppt –ppt Sales and expense increased during fiscal year 2006 primarily due to increased headcount-related spending . Headcount-related cost increased 13 % during fiscal year 2006 13 % during fiscal year 2006 reflecting both a 20 % year 2006 reflecting both a 20 % increase in headcount and expense . For fiscal year 2005 , sale and marketing expense increased slightly due to $ 470 million higher headcount-related cost from ; launch of “ Halo 2 ” ; and launch arrangement and launch arrangement for Xbox 360 . The increase wa offset offset mainly by a $ 660 million decrease in stock-based compensation million , except percentage ) 2006 2005 2004 Percent Change 2006 , except percentage ) 2006 2005 2004 Percent Change 2006 versus except percentage ) 2006 2005 2004 Percent Change 2006 versus 2005 2006 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 2004 Percent Change 2006 versus 2005 Percent Change 2005 versus 2004 2006 versus 2005 Percent Change 2005 versus 2004 General and administrative 2005 Percent Change 2005 versus 2004 General and administrative $ 3,758 2004 General and administrative $ 3,758 $ 4,536 $ 5,275 17 and administrative $ 3,758 $ 4,536 $ 5,275 17 % 14 $ 3,758 $ 4,536 $ 5,275 17 % 14 % As 3,758 $ 4,536 $ 5,275 17 % 14 % As a 4,536 $ 5,275 17 % 14 % As a percent of As a percent of revenue 8 % 11 % 14 % percent of revenue 8 % 11 % 14 % ( 3 revenue 8 % 11 % 14 % ( 3 ) ppt 11 % 14 % ( 3 ) ppt ( 3 ) ( 3 ) ppt ( 3 ) ppt General and administrative cost decreased in fiscal year 2006 primarily reflecting decreased cost for contingency . We incurred $ 1.32 billion in legal charge during legal charge during fiscal year 2006 a compared to $ 2.31 2006 a compared to $ 2.31 billion in legal charge incurred charge incurred during fiscal year 2005 . Headcount-related cost increased 7 2005 . Headcount-related cost increased 7 % during the twelve month the twelve month ended June 30 , 2006 reflecting both an month ended June 30 , 2006 reflecting both an 18 % , 2006 reflecting both an 18 % increase in headcount and cost decreased in fiscal year 2005 primarily reflecting decreased stock-based compensation contingency . In fiscal year 2005 , we recognized $ 277 2005 , we recognized $ 277 million of stock-based compensation expense expense a compared to $ 664 million in fiscal year 2004 664 million in fiscal year 2004 . In fiscal year 2005 2004 . In fiscal year 2005 , we recognized $ 2.31 2005 , we recognized $ 2.31 billion in legal charge a charge a compared to $ 2.83 billion in fiscal year 2004 2.83 billion in fiscal year 2004 . PAGE 32 Table of fiscal year 2004 . PAGE 32 Table of Contents Part II of Contents Part II Item 7 Investment Income and Other The : ( In million ) 2006 2005 2004 Dividends and interest ( In million ) 2006 2005 2004 Dividends and interest $ In million ) 2006 2005 2004 Dividends and interest $ 1,510 2004 Dividends and interest $ 1,510 $ 1,460 $ 1,892 Net and interest $ 1,510 $ 1,460 $ 1,892 Net gain on $ 1,510 $ 1,460 $ 1,892 Net gain on investment 161 1,892 Net gain on investment 161 856 1,563 Net loss on Net gain on investment 161 856 1,563 Net loss on derivative gain on investment 161 856 1,563 Net loss on derivative ( Net loss on derivative ( 99 ) ( 262 ) ( derivative ( 99 ) ( 262 ) ( 268 ) Income/ ) ( 262 ) ( 268 ) Income/ ( loss ) from equity investees and other 218 13 ( 25 ) Investment equity investees and other 218 13 ( 25 ) Investment income and other 218 13 ( 25 ) Investment income and other Investment income and other $ 1,790 $ 2,067 $ 3,162 For and other $ 1,790 $ 2,067 $ 3,162 For fiscal year $ 1,790 $ 2,067 $ 3,162 For fiscal year 2006 , $ 3,162 For fiscal year 2006 , dividend and interest income a result of the $ 32.64 billion special dividend paid on special dividend paid on December 2 , 2004 , and stock paid on December 2 , 2004 , and stock repurchase made repurchase made throughout fiscal year 2006 . Dividends and interest income and interest income declined $ 432 million in fiscal year 2005 432 million in fiscal year 2005 due to the combination of in preparation for the $ 32.64 billion special dividend paid on special dividend paid on December 2 , 2004 , and a paid on December 2 , 2004 , and a lower portfolio dividend . For fiscal year 2006 , net recognized gain on gain decreased in fiscal year 2006 primarily due to increased net a compared to fiscal year 2005 . For fiscal year 2006 2005 . For fiscal year 2006 , other-than-temporary impairment were $ , other-than-temporary impairment were $ 408 million , a compared to , a compared to $ 152 million in fiscal year 2005 152 million in fiscal year 2005 . The increase in other-than-temporary other-than-temporary impairment in fiscal year 2006 wa driven by planned sale raise fund for the $ 20 billion tender offer announced on tender offer announced on July 20 , 2006 . Net gain announced on July 20 , 2006 . Net gain on investment gain on investment declined $ 707 million in fiscal year 2005 707 million in fiscal year 2005 primarily due to greater sale special dividend paid on December 2 , 2004 . Net gain paid on December 2 , 2004 . Net gain on investment include other-than-temporary impairment of $ 152 million in fiscal year 2005 152 million in fiscal year 2005 compared to $ 82 million year 2005 compared to $ 82 million in fiscal year 2004 82 million in fiscal year 2004 . Net realized gain on gain on sale were $ 1.65 billion in fiscal year 2004 1.65 billion in fiscal year 2004 a we moved to more : ( In million ) 2006 2005 2004 Net gain/ ( ( In million ) 2006 2005 2004 Net gain/ ( loss In million ) 2006 2005 2004 Net gain/ ( loss ) ) on equity derivative $ 192 $ ( 202 ) $ derivative $ 192 $ ( 202 ) $ 118 Net gain $ ( 202 ) $ 118 Net gain on commodity derivative Net gain on commodity derivative 101 46 – Net loss on gain on commodity derivative 101 46 – Net loss on interest on interest rate derivative ( 79 ) ( 53 ) ( derivative ( 79 ) ( 53 ) ( 102 ) Net ) ( 53 ) ( 102 ) Net loss on foreign on foreign currency contract ( 313 ) ( 53 ) ( contract ( 313 ) ( 53 ) ( 284 ) Net ) ( 53 ) ( 284 ) Net loss on derivative loss on derivative $ ( 99 ) $ ( 262 ) ( 99 ) $ ( 262 ) $ ( 268 ) ( 262 ) $ ( 268 ) During fiscal year 2006 268 ) During fiscal year 2006 , we experienced lower net a compared to fiscal year 2005 primarily due to net gain loss in the prior PAGE 33 Table of Contents Part II of Contents Part II Item 7 fiscal year and higher net equity derivative during fiscal year 2006 are primarily due to change derivative loss in fiscal year 2005 were primarily related to loss contract . During fiscal year 2005 , loss related to equity in equity price were $ 202 million and loss related to interest rate derivative were $ 53 million . These loss were foreign currency contract were $ 53 million , related to change on commodity position were $ 46 million during fiscal year 2005 46 million during fiscal year 2005 . Derivative loss were $ . Derivative loss were $ 268 million in fiscal year 2004 268 million in fiscal year 2004 primarily due to net loss second quarter of fiscal year 2006 , we entered into an a result , we divested 32 % of CJV for $ % of CJV for $ 331 million and NBC acquired the , to buy the remaining 18 % interest . In addition , we paid a $ 200 million fee to effectively terminate also prepaid the remaining $ 14 million license fee to NBC fourth quarter of fiscal year 2006 , NBC exercised it option option to buy our remaining 18 % interest in CJV . CJV . For fiscal year 2006 , we recognized a net a net gain of $ 195 million related to the above tax rate for fiscal year 2006 wa 31 % a compared for fiscal year 2006 wa 31 % a compared to 26 31 % a compared to 26 % for fiscal year 2005 26 % for fiscal year 2005 . During fiscal year 2006 2005 . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from the resolution of increased rate in fiscal year 2006 resulted primarily from the European European Commission fine of € 281 million ( $ 351 million € 281 million ( $ 351 million ) which is not lower rate in fiscal year 2005 a a result of reversal result of reversal of $ 776 million of previously accrued tax Service examination for fiscal year 1997 – 1999 and a tax for fiscal year 1997 – 1999 and a tax benefit of a tax benefit of $ 179 million generated by the decision American Jobs Creation Act of 2004 . Our effective tax rate tax rate for fiscal year 2004 wa 33 % . Financial for fiscal year 2004 wa 33 % . Financial Condition Cash and short-term investment totaled $ 34.16 billion and $ 37.75 billion $ 34.16 billion and $ 37.75 billion a of June 30 37.75 billion a of June 30 , 2006 , and 2005 a of June 30 , 2006 , and 2005 , respectively 30 , 2006 , and 2005 , respectively . This investment and other investment were $ 9.23 billion and $ 11.00 billion $ 9.23 billion and $ 11.00 billion a of June 30 11.00 billion a of June 30 , 2006 , and 2005 a of June 30 , 2006 , and 2005 , respectively 30 , 2006 , and 2005 , respectively . As a second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 18.90 billion at June 30 , $ 18.90 billion at June 30 , 2006 . Our retained billion at June 30 , 2006 . Our retained deficit is and financial position . PAGE 34 Table of Contents Part II of Contents Part II Item 7 Unearned Revenue Unearned revenue from Unearned revenue a of June 30 , 2006 , increased $ a of June 30 , 2006 , increased $ 1.74 billion , 2006 , increased $ 1.74 billion from June 30 , $ 1.74 billion from June 30 , 2005 , reflecting addition billion from June 30 , 2005 , reflecting addition to unearned that outpaced recognition by $ 1.66 billion , a $ 53 1.66 billion , a $ 53 million decrease in revenue deferred element , and a $ 127 million increase primarily in unearned the expected recognition of $ 10.9 billion of unearned revenue a unearned revenue a of June 30 , 2006 : ( In a of June 30 , 2006 : ( In million ) Three month ended : September 30 , 2006 $ 3,483 December ended : September 30 , 2006 $ 3,483 December 31 , September 30 , 2006 $ 3,483 December 31 , 2006 2,687 , 2006 $ 3,483 December 31 , 2006 2,687 March 31 $ 3,483 December 31 , 2006 2,687 March 31 , 2007 3,483 December 31 , 2006 2,687 March 31 , 2007 1,899 31 , 2006 2,687 March 31 , 2007 1,899 June 30 2006 2,687 March 31 , 2007 1,899 June 30 , 2007 2,687 March 31 , 2007 1,899 June 30 , 2007 1,069 31 , 2007 1,899 June 30 , 2007 1,069 Thereafter 1,764 2007 1,899 June 30 , 2007 1,069 Thereafter 1,764 Unearned revenue 1,899 June 30 , 2007 1,069 Thereafter 1,764 Unearned revenue $ 30 , 2007 1,069 Thereafter 1,764 Unearned revenue $ 10,902 Cash Thereafter 1,764 Unearned revenue $ 10,902 Cash Flows Cash flow from from operation for fiscal year 2006 decreased 13 % to $ for fiscal year 2006 decreased 13 % to $ 14.40 billion decreased 13 % to $ 14.40 billion primarily due to increased payment to fund a $ 987 million increase in inventory and product cost related to Xbox 360 and increased payment to employee to employee resulting from a 16 % growth in headcount . from customer driven by our 11 % revenue growth and $ % revenue growth and $ 1.74 billion increase in unearned revenue used in financing wa $ 20.56 billion in fiscal year 2006 20.56 billion in fiscal year 2006 , a decrease of $ , a decrease of $ 20.52 billion from the previous year year driven by a $ 32.57 billion reduction in cash dividend partially offset by an $ 11.15 billion increase in common stock cash from investing wa $ 8.00 billion in fiscal year 2006 8.00 billion in fiscal year 2006 , a decrease of $ , a decrease of $ 7.02 billion from fiscal year 2005 7.02 billion from fiscal year 2005 driven primarily by an $ driven primarily by an $ 8.93 billion decrease in cash from of investment and a $ 766 million increase in addition to were partially offset by $ 3.12 billion of cash proceeds from from operation for fiscal year 2005 increased 14 % to $ for fiscal year 2005 increased 14 % to $ 16.61 billion increased 14 % to $ 16.61 billion primarily due to an from customer driven by our 8 % revenue growth combined with revenue growth combined with a 12 % increase in unearned revenue Cash payment in fiscal year 2005 resulting from significant legal settlement legal settlement were approximately $ 1.8 billion lower than in the to employee resulting from a 7 % increase in full-time employee used for financing wa $ 41.08 billion in fiscal year 2005 41.08 billion in fiscal year 2005 , driven by $ 36.11 2005 , driven by $ 36.11 billion of cash dividend paid dividend paid in fiscal year 2005 compared to $ 1.73 billion year 2005 compared to $ 1.73 billion paid in fiscal year billion paid in fiscal year 2004 . The increase wa also also partially driven by $ 8.06 billion in cash used for , an increase of $ 4.67 billion in cash used for the previous year , reflecting 312 million share repurchased in fiscal share repurchased in fiscal year 2005 , an increase of 188.5 2005 , an increase of 188.5 million share compared to the cash from investing wa $ 15.03 billion in fiscal year 2005 15.03 billion in fiscal year 2005 , an increase of $ , an increase of $ 18.37 billion from fiscal year 2004 18.37 billion from fiscal year 2004 , primarily due to a primarily due to a $ 23.59 billion increase in investment maturity dividend paid in fiscal year 2005 , partially offset by a partially offset by a $ 5.32 billion decrease in cash from and sale activity . PAGE 35 Table of Contents Part II of Contents Part II Item 7 Cash flow from operation for from operation for fiscal year 2004 decreased $ 1.17 billion to fiscal year 2004 decreased $ 1.17 billion to $ 14.63 billion $ 1.17 billion to $ 14.63 billion . The decrease primarily combined cash outflow of $ 2.56 billion related to the Sun used for financing wa $ 2.36 billion in fiscal year 2004 2.36 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 2.86 billion from the previous year fourth quarter of fiscal year 2004 combined with a $ 628 2004 combined with a $ 628 million increase primarily from stock partially offset by an $ 872 million increase in cash dividend dividend paid . We repurchased 123.7 million share of common stock repurchase program in fiscal year 2004 . Cash used for investing used for investing wa $ 3.34 billion in fiscal year 2004 3.34 billion in fiscal year 2004 , a decrease of $ , a decrease of $ 3.88 billion from fiscal year 2003 3.88 billion from fiscal year 2003 . We have no material Stockholders ’ equity at June 30 , 2006 , wa $ equity at June 30 , 2006 , wa $ 40.10 billion , 2006 , wa $ 40.10 billion . We will continue constructing new building were $ 234 million on June 30 , $ 234 million on June 30 , 2006 . We have million on June 30 , 2006 . We have operating lease incurred rental expense totaling $ 276 million , $ 299 million $ 276 million , $ 299 million , and $ 331 299 million , and $ 331 million fiscal year 2006 , $ 331 million fiscal year 2006 , 2005 and 2004 , million fiscal year 2006 , 2005 and 2004 , respectively . year 2006 , 2005 and 2004 , respectively . We have value . As of June 30 , 2006 , the maximum As of June 30 , 2006 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that resource . In fiscal year 2006 , our Board of Directors Board of Directors declared $ 0.35 per share cash dividend , cash dividend , with $ 2.69 billion paid a of June billion paid a of June 30 , 2006 . A quarterly a of June 30 , 2006 . A quarterly dividend of A quarterly dividend of $ 0.09 per share ( or $ per share ( or $ 906 million ) wa declared by Board of Directors on June 21 , 2006 to be paid Directors on June 21 , 2006 to be paid to shareholder of record a of August 17 , 2006 , on September a of August 17 , 2006 , on September 14 , , 2006 , on September 14 , 2006 . On July , on September 14 , 2006 . On July 20 , , 2006 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30 billion in Microsoft common stock resource . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.75 billion , of our common this plan . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that , comprised of a $ 20 billion tender offer which wa which wa completed on August 17 , 2006 , and an completed on August 17 , 2006 , and an additional $ , and an additional $ 20 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of our common common stock , or approximately 1.5 % of the common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . We believe billion through June 30 , 2011 . We believe existing cash indemnification under SFAS No . 5 , Accounting for Contingencies , ( “ FIN ” ) 45 , Guarantor ’ s Accounting unfavorable outcome and the PAGE 36 Table of Contents Part II of Contents Part II Item 7 ability to make a reasonable contractual obligation a of June 30 , 2006 : ( In a of June 30 , 2006 : ( In million ) ( In million ) ( 1 ) Payments due by period due by period Fiscal Years 2007 2008-2010 2011-2013 2014 and thereafter by period Fiscal Years 2007 2008-2010 2011-2013 2014 and thereafter Total period Fiscal Years 2007 2008-2010 2011-2013 2014 and thereafter Total Long-term Fiscal Years 2007 2008-2010 2011-2013 2014 and thereafter Total Long-term debt $ – Construction commitment ( 2 ) ( 4 ) 234 commitment ( 2 ) ( 4 ) 234 – – – 2 ) ( 4 ) 234 – – – 234 Lease ) 234 – – – 234 Lease obligation : Capital lease – – Operating lease ( 3 ) 250 436 158 41 Operating lease ( 3 ) 250 436 158 41 885 Purchase lease ( 3 ) 250 436 158 41 885 Purchase commitment ( 3 ) 250 436 158 41 885 Purchase commitment ( 3 ) 250 436 158 41 885 Purchase commitment ( 4 ) 250 436 158 41 885 Purchase commitment ( 4 ) 41 885 Purchase commitment ( 4 ) 2,219 9 – – Purchase commitment ( 4 ) 2,219 9 – – 2,228 Other commitment ( 4 ) 2,219 9 – – 2,228 Other long-term ) 2,219 9 – – 2,228 Other long-term liability ( 5 2,228 Other long-term liability ( 5 ) 4 66 1 – long-term liability ( 5 ) 4 66 1 – 71 Total liability ( 5 ) 4 66 1 – 71 Total contractual ( 5 ) 4 66 1 – 71 Total contractual obligation ) 4 66 1 – 71 Total contractual obligation $ 2,707 71 Total contractual obligation $ 2,707 $ 511 $ 159 $ contractual obligation $ 2,707 $ 511 $ 159 $ 41 $ $ 2,707 $ 511 $ 159 $ 41 $ 3,418 ( $ 511 $ 159 $ 41 $ 3,418 ( 1 ) $ 159 $ 41 $ 3,418 ( 1 ) We have $ 41 $ 3,418 ( 1 ) We have excluded the We have excluded the $ 970 million long-term contingent liability related lawsuit referred to in Note 17 – Contingencies of the Notes subject to uncertainty . ( 2 ) We have certain commitment flow from operation . ( 3 ) Our future minimum rental flow from operation . ( 4 ) The amount presented above flow from operation . ( 5 ) We have excluded other excluded other obligation of $ 5.22 billion from other long-term liability excluded unearned revenue of $ 1.76 billion . RECENTLY ISSUED ACCOUNTING ISSUED ACCOUNTING STANDARDS In November 2005 , the FASB issued Staff prescribed in SFAS No . 123 ( R ) , Share-Based that adopts SFAS No . 123 ( R ) using the adoption of SFAS No . 123 ( R ) or the the FSP a of July 1 , 2005 . This method a of July 1 , 2005 . This method change did financial statement . In June 2006 , the FASB issued FIN FASB issued FIN No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 , which clarifies the accounting with FASB Statement No . 109 , Accounting for Income Taxes return . FIN No . 48 requires recognition of tax benefit that satisfy a greater than 50 % probability threshold . FIN threshold . FIN No . 48 also provides guidance on derecognition transition . FIN No . 48 is effective for u beginning effective for u beginning July 1 , 2007 . We are u beginning July 1 , 2007 . We are assessing the adoption of FIN No . 48 will have on our financial our financial statement . PAGE 37 Table of Contents Part II of Contents Part II Item 7 In June 2006 , the II Item 7 In June 2006 , the FASB ratified the on EITF Issue No . 06-2 , “ Accounting for Sabbatical to FASB Statement No . 43 ” . EITF Issue No . EITF Issue No . 06-2 requires company to accrue the . EITF Issue No . 06-2 is effective for u beginning effective for u beginning July 1 , 2007 . The cumulative u beginning July 1 , 2007 . The cumulative effect of ( “ SOP ” ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether product . SFAS No . 115 , Accounting for Certain Investments Securities , and SEC SAB 59 , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between value allocation approach . PAGE 38 Table of Contents Part II of Contents Part II Item 7 We account for research and , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Accounting for the Costs Marketed . SFAS No . 86 specifies that cost incurred internally uncertainty . SFAS No . 5 , Accounting for Contingencies , operation . SFAS No . 109 , Accounting for Income Taxes requirement of SFAS No . 5 . We account for stock-based accordance with SFAS No . 123 ( R ) , Share-Based be materially impacted . PAGE 39 Table of Contents Part II of Contents Part II Item 7 Statement of Management ’ s ; Chief Accounting Officer PAGE 40 Table of Contents Part II of Contents Part II Item 7A ITEM 7A . QUANTITATIVE AND Part II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES to a range of over 1,000 equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor fiscal quarter of fiscal year 2006 , we changed the methodology second quarter of fiscal year 2006 , we adopted a factor-based future market risk . PAGE 41 Table of Contents Part II of Contents Part II Item 7A The following table set forth our position a of June 30 , 2006 and 2005 , a of June 30 , 2006 and 2005 , and for June 30 , 2006 and 2005 , and for the fiscal the fiscal year ended June 30 , 2006 : ( In year ended June 30 , 2006 : ( In million ) million ) Year ended June 30 , 2006 Risk Categories 2006 Year ended June 30 , 2006 Risk Categories 2006 2005 Average 30 , 2006 Risk Categories 2006 2005 Average High Low Interest , 2006 Risk Categories 2006 2005 Average High Low Interest rate High Low Interest rate $ 66 $ 88 $ 82 $ Interest rate $ 66 $ 88 $ 82 $ 127 $ $ 66 $ 88 $ 82 $ 127 $ 62 Currency $ 88 $ 82 $ 127 $ 62 Currency rate 91 $ 82 $ 127 $ 62 Currency rate 91 52 33 127 $ 62 Currency rate 91 52 33 91 11 Equity $ 62 Currency rate 91 52 33 91 11 Equity price 62 Currency rate 91 52 33 91 11 Equity price 88 Currency rate 91 52 33 91 11 Equity price 88 164 rate 91 52 33 91 11 Equity price 88 164 116 33 91 11 Equity price 88 164 116 168 84 Commodity 91 11 Equity price 88 164 116 168 84 Commodity price 11 Equity price 88 164 116 168 84 Commodity price 12 Equity price 88 164 116 168 84 Commodity price 12 14 price 88 164 116 168 84 Commodity price 12 14 15 116 168 84 Commodity price 12 14 15 18 12 Total 168 84 Commodity price 12 14 15 18 12 Total one-day 84 Commodity price 12 14 15 18 12 Total one-day VaR Commodity price 12 14 15 18 12 Total one-day VaR for price 12 14 15 18 12 Total one-day VaR for the combined risk category wa $ 158 million at June 30 , $ 158 million at June 30 , 2006 and $ 195 million at June 30 , 2006 and $ 195 million at 30 , 2006 and $ 195 million at June 30 , $ 195 million at June 30 , 2005 . The total million at June 30 , 2005 . The total VaR is . The total VaR is 38 % le at June 30 38 % le at June 30 , 2006 and 39 % le at June 30 , 2006 and 39 % le at June 30 , 2006 and 39 % le at June , % le at June , 30 2005 than the sum of le at June , 30 2005 than the sum of the combination of risk . PAGE 42 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 2006 2005 2004 Revenue $ ) Year Ended June 30 2006 2005 2004 Revenue $ 44,282 Year Ended June 30 2006 2005 2004 Revenue $ 44,282 $ Ended June 30 2006 2005 2004 Revenue $ 44,282 $ 39,788 2006 2005 2004 Revenue $ 44,282 $ 39,788 $ 36,835 Operating 2004 Revenue $ 44,282 $ 39,788 $ 36,835 Operating expense : $ 44,282 $ 39,788 $ 36,835 Operating expense : Cost of expense : Cost of revenue 7,650 6,031 6,596 Research and development : Cost of revenue 7,650 6,031 6,596 Research and development 6,584 Cost of revenue 7,650 6,031 6,596 Research and development 6,584 6,097 6,031 6,596 Research and development 6,584 6,097 7,735 Sales and marketing 6,596 Research and development 6,584 6,097 7,735 Sales and marketing 9,818 Research and development 6,584 6,097 7,735 Sales and marketing 9,818 8,563 6,097 7,735 Sales and marketing 9,818 8,563 8,195 General and administrative 7,735 Sales and marketing 9,818 8,563 8,195 General and administrative 3,758 Sales and marketing 9,818 8,563 8,195 General and administrative 3,758 4,536 8,563 8,195 General and administrative 3,758 4,536 5,275 Total operating expense 8,195 General and administrative 3,758 4,536 5,275 Total operating expense 27,810 General and administrative 3,758 4,536 5,275 Total operating expense 27,810 25,227 4,536 5,275 Total operating expense 27,810 25,227 27,801 Operating income 16,472 5,275 Total operating expense 27,810 25,227 27,801 Operating income 16,472 14,561 Total operating expense 27,810 25,227 27,801 Operating income 16,472 14,561 9,034 27,810 25,227 27,801 Operating income 16,472 14,561 9,034 Investment income and 25,227 27,801 Operating income 16,472 14,561 9,034 Investment income and other 27,801 Operating income 16,472 14,561 9,034 Investment income and other 1,790 9,034 Investment income and other 1,790 2,067 3,162 Income before income Investment income and other 1,790 2,067 3,162 Income before income tax income and other 1,790 2,067 3,162 Income before income tax 18,262 3,162 Income before income tax 18,262 16,628 12,196 Provision for income Income before income tax 18,262 16,628 12,196 Provision for income tax before income tax 18,262 16,628 12,196 Provision for income tax 5,663 12,196 Provision for income tax 5,663 4,374 4,028 Net income $ Provision for income tax 5,663 4,374 4,028 Net income $ 12,599 for income tax 5,663 4,374 4,028 Net income $ 12,599 $ 4,374 4,028 Net income $ 12,599 $ 12,254 $ 8,168 Earnings Net income $ 12,599 $ 12,254 $ 8,168 Earnings per share $ 12,599 $ 12,254 $ 8,168 Earnings per share : Basic per share : Basic $ 1.21 $ 1.13 $ 0.76 Diluted : Basic $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.21 $ 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 1.13 $ 0.76 Diluted $ 1.20 $ 1.12 $ 0.75 Weighted 0.76 Diluted $ 1.20 $ 1.12 $ 0.75 Weighted average share $ 1.20 $ 1.12 $ 0.75 Weighted average share outstanding : average share outstanding : Basic 10,438 10,839 10,803 Diluted 10,531 10,906 share outstanding : Basic 10,438 10,839 10,803 Diluted 10,531 10,906 10,894 outstanding : Basic 10,438 10,839 10,803 Diluted 10,531 10,906 10,894 Cash Basic 10,438 10,839 10,803 Diluted 10,531 10,906 10,894 Cash dividend declared 10,438 10,839 10,803 Diluted 10,531 10,906 10,894 Cash dividend declared per 10,839 10,803 Diluted 10,531 10,906 10,894 Cash dividend declared per common declared per common share $ 0.35 $ 3.40 $ 0.16 See common share $ 0.35 $ 3.40 $ 0.16 See accompanying note $ 0.35 $ 3.40 $ 0.16 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2006 2005 Assets Current asset In million ) June 30 2006 2005 Assets Current asset : million ) June 30 2006 2005 Assets Current asset : Cash : Cash and equivalent $ 6,714 $ 4,851 Short-term investment ( and equivalent $ 6,714 $ 4,851 Short-term investment ( including security pledged a collateral of $ 3,065 and $ - ) 27,447 3,065 and $ - ) 27,447 32,900 Total cash and short-term and $ - ) 27,447 32,900 Total cash and short-term investment Total cash and short-term investment 34,161 37,751 Accounts receivable , net cash and short-term investment 34,161 37,751 Accounts receivable , net of for doubtful account of $ 142 and $ 171 9,316 7,180 of $ 142 and $ 171 9,316 7,180 Inventories , net $ 142 and $ 171 9,316 7,180 Inventories , net 1,478 142 and $ 171 9,316 7,180 Inventories , net 1,478 491 9,316 7,180 Inventories , net 1,478 491 Deferred income tax 1,940 7,180 Inventories , net 1,478 491 Deferred income tax 1,940 1,701 1,478 491 Deferred income tax 1,940 1,701 Other 2,115 1,614 Total 491 Deferred income tax 1,940 1,701 Other 2,115 1,614 Total current income tax 1,940 1,701 Other 2,115 1,614 Total current asset 49,010 tax 1,940 1,701 Other 2,115 1,614 Total current asset 49,010 48,737 2,115 1,614 Total current asset 49,010 48,737 Property and equipment , 1,614 Total current asset 49,010 48,737 Property and equipment , net Property and equipment , net 3,044 2,346 Equity and other investment and equipment , net 3,044 2,346 Equity and other investment 9,232 2,346 Equity and other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible Equity and other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset other investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset , net investment 9,232 11,004 Goodwill 3,866 3,309 Intangible asset , net 539 3,309 Intangible asset , net 539 499 Deferred income tax 2,611 Intangible asset , net 539 499 Deferred income tax 2,611 3,621 539 499 Deferred income tax 2,611 3,621 Other long-term asset 1,295 499 Deferred income tax 2,611 3,621 Other long-term asset 1,295 1,299 2,611 3,621 Other long-term asset 1,295 1,299 Total asset $ 69,597 3,621 Other long-term asset 1,295 1,299 Total asset $ 69,597 $ 1,295 1,299 Total asset $ 69,597 $ 70,815 Liabilities and stockholder Total asset $ 69,597 $ 70,815 Liabilities and stockholder ’ equity liability : Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 Accounts payable $ 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income 2,909 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 $ 2,086 Accrued compensation 1,938 1,662 Income tax 1,557 2,020 Short-term compensation 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 1,938 1,662 Income tax 1,557 2,020 Short-term unearned revenue 9,138 7,502 1,557 2,020 Short-term unearned revenue 9,138 7,502 Securities lending payable 3,117 2,020 Short-term unearned revenue 9,138 7,502 Securities lending payable 3,117 — 9,138 7,502 Securities lending payable 3,117 — Other 3,783 3,607 Total lending payable 3,117 — Other 3,783 3,607 Total current liability 22,442 payable 3,117 — Other 3,783 3,607 Total current liability 22,442 16,877 3,783 3,607 Total current liability 22,442 16,877 Long-term unearned revenue 1,764 3,607 Total current liability 22,442 16,877 Long-term unearned revenue 1,764 1,665 22,442 16,877 Long-term unearned revenue 1,764 1,665 Other long-term liability 5,287 16,877 Long-term unearned revenue 1,764 1,665 Other long-term liability 5,287 4,158 1,764 1,665 Other long-term liability 5,287 4,158 Commitments and contingency Stockholders 1,665 Other long-term liability 5,287 4,158 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 10,062 and 10,710 share authorized 24,000 ; outstanding 10,062 and 10,710 59,005 60,413 Retained 24,000 ; outstanding 10,062 and 10,710 59,005 60,413 Retained earnings ( ; outstanding 10,062 and 10,710 59,005 60,413 Retained earnings ( deficit outstanding 10,062 and 10,710 59,005 60,413 Retained earnings ( deficit ) other comprehensive income of $ 1,229 and $ 1,426 ( 18,901 of $ 1,229 and $ 1,426 ( 18,901 ) ( 12,298 1,229 and $ 1,426 ( 18,901 ) ( 12,298 ) Total 1,426 ( 18,901 ) ( 12,298 ) Total stockholder ’ equity ) Total stockholder ’ equity 40,104 48,115 Total liability and stockholder Total stockholder ’ equity 40,104 48,115 Total liability and stockholder ’ and stockholder ’ equity $ 69,597 $ 70,815 See accompanying note ’ equity $ 69,597 $ 70,815 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2006 2005 2004 Operations Net ) Year Ended June 30 2006 2005 2004 Operations Net income Year Ended June 30 2006 2005 2004 Operations Net income $ Ended June 30 2006 2005 2004 Operations Net income $ 12,599 2004 Operations Net income $ 12,599 $ 12,254 $ 8,168 Depreciation Net income $ 12,599 $ 12,254 $ 8,168 Depreciation , amortization $ 12,599 $ 12,254 $ 8,168 Depreciation , amortization , and , and other noncash item 903 855 1,186 Stock-based compensation 1,715 and other noncash item 903 855 1,186 Stock-based compensation 1,715 2,448 other noncash item 903 855 1,186 Stock-based compensation 1,715 2,448 5,734 903 855 1,186 Stock-based compensation 1,715 2,448 5,734 Net recognized gain 855 1,186 Stock-based compensation 1,715 2,448 5,734 Net recognized gain on 1,186 Stock-based compensation 1,715 2,448 5,734 Net recognized gain on investment recognized gain on investment ( 270 ) ( 527 ) ( investment ( 270 ) ( 527 ) ( 1,296 ) Stock ) ( 527 ) ( 1,296 ) Stock option income tax option income tax benefit – 668 1,100 Excess tax benefit from income tax benefit – 668 1,100 Excess tax benefit from stock-based from stock-based payment arrangement ( 89 ) – – Deferred income – – Deferred income tax 219 ( 179 ) ( 1,479 Deferred income tax 219 ( 179 ) ( 1,479 ) Unearned 219 ( 179 ) ( 1,479 ) Unearned revenue 16,453 13,831 ( 1,479 ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned 1,479 ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned revenue ) Unearned revenue 16,453 13,831 11,777 Recognition of unearned revenue ( Recognition of unearned revenue ( 14,729 ) ( 12,919 ) ( revenue ( 14,729 ) ( 12,919 ) ( 12,527 ) Accounts ) ( 12,919 ) ( 12,527 ) Accounts receivable ( 2,071 12,527 ) Accounts receivable ( 2,071 ) ( 1,243 ) ( receivable ( 2,071 ) ( 1,243 ) ( 687 ) Other ) ( 1,243 ) ( 687 ) Other current asset ( ) Other current asset ( 1,405 ) ( 245 ) 478 asset ( 1,405 ) ( 245 ) 478 Other long-term asset 1,405 ) ( 245 ) 478 Other long-term asset ( 49 478 Other long-term asset ( 49 ) 21 34 Other current long-term asset ( 49 ) 21 34 Other current liability ( asset ( 49 ) 21 34 Other current liability ( 145 34 Other current liability ( 145 ) 396 1,529 Other long-term current liability ( 145 ) 396 1,529 Other long-term liability 1,273 liability ( 145 ) 396 1,529 Other long-term liability 1,273 1,245 396 1,529 Other long-term liability 1,273 1,245 609 Net cash from 1,529 Other long-term liability 1,273 1,245 609 Net cash from operation Other long-term liability 1,273 1,245 609 Net cash from operation 14,404 609 Net cash from operation 14,404 16,605 14,626 Financing Common stock Net cash from operation 14,404 16,605 14,626 Financing Common stock issued cash from operation 14,404 16,605 14,626 Financing Common stock issued 2,101 14,626 Financing Common stock issued 2,101 3,109 2,748 Common stock repurchased Financing Common stock issued 2,101 3,109 2,748 Common stock repurchased ( Common stock issued 2,101 3,109 2,748 Common stock repurchased ( 19,207 2,748 Common stock repurchased ( 19,207 ) ( 8,057 ) ( repurchased ( 19,207 ) ( 8,057 ) ( 3,383 ) Common ) ( 8,057 ) ( 3,383 ) Common stock cash dividend Common stock cash dividend ( 3,545 ) ( 36,112 ) ( dividend ( 3,545 ) ( 36,112 ) ( 1,729 ) Excess ) ( 36,112 ) ( 1,729 ) Excess tax benefit from benefit from stock-based payment arrangement 89 – – Other – ( – – Other – ( 18 ) – Net cash used cash used in financing ( 20,562 ) ( 41,078 ) ( financing ( 20,562 ) ( 41,078 ) ( 2,364 ) Investing ) ( 41,078 ) ( 2,364 ) Investing Additions to property to property and equipment ( 1,578 ) ( 812 ) ( equipment ( 1,578 ) ( 812 ) ( 1,109 ) Acquisition ) ( 812 ) ( 1,109 ) Acquisition of company , net of cash acquired ( 649 ) ( 207 ) ( acquired ( 649 ) ( 207 ) ( 4 ) Purchases ) ( 207 ) ( 4 ) Purchases of investment ( ) Purchases of investment ( 51,117 ) ( 68,045 ) ( investment ( 51,117 ) ( 68,045 ) ( 95,005 ) Maturities ) ( 68,045 ) ( 95,005 ) Maturities of investment 3,877 95,005 ) Maturities of investment 3,877 29,153 5,561 Sales of investment ) Maturities of investment 3,877 29,153 5,561 Sales of investment 54,353 Maturities of investment 3,877 29,153 5,561 Sales of investment 54,353 54,938 29,153 5,561 Sales of investment 54,353 54,938 87,215 Net proceeds from 5,561 Sales of investment 54,353 54,938 87,215 Net proceeds from security Sales of investment 54,353 54,938 87,215 Net proceeds from security lending Net proceeds from security lending 3,117 – – Net cash from ( used in ) investing 8,003 15,027 ( 3,342 ) Net used in ) investing 8,003 15,027 ( 3,342 ) Net change ) investing 8,003 15,027 ( 3,342 ) Net change in cash change in cash and equivalent 1,845 ( 9,446 ) 8,920 Effect cash and equivalent 1,845 ( 9,446 ) 8,920 Effect of exchange equivalent 1,845 ( 9,446 ) 8,920 Effect of exchange rate on rate on cash and equivalent 18 ( 7 ) 27 Cash cash and equivalent 18 ( 7 ) 27 Cash and equivalent equivalent 18 ( 7 ) 27 Cash and equivalent , beginning equivalent , beginning of period 4,851 14,304 5,357 Cash and equivalent , beginning of period 4,851 14,304 5,357 Cash and equivalent , beginning of period 4,851 14,304 5,357 Cash and equivalent , end , end of period $ 6,714 $ 4,851 $ 14,304 See of period $ 6,714 $ 4,851 $ 14,304 See accompanying note $ 6,714 $ 4,851 $ 14,304 See accompanying note . PAGE See accompanying note . PAGE 45 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 2006 2005 2004 Common stock ) Year Ended June 30 2006 2005 2004 Common stock and Year Ended June 30 2006 2005 2004 Common stock and paid-in Ended June 30 2006 2005 2004 Common stock and paid-in capital , beginning of period $ 60,413 $ 56,396 $ 49,234 Common of period $ 60,413 $ 56,396 $ 49,234 Common stock issued $ 60,413 $ 56,396 $ 49,234 Common stock issued 1,939 3,223 $ 49,234 Common stock issued 1,939 3,223 2,815 Common stock repurchased 49,234 Common stock issued 1,939 3,223 2,815 Common stock repurchased ( Common stock issued 1,939 3,223 2,815 Common stock repurchased ( 4,447 2,815 Common stock repurchased ( 4,447 ) ( 1,737 ) ( repurchased ( 4,447 ) ( 1,737 ) ( 416 ) Stock-based ) ( 1,737 ) ( 416 ) Stock-based compensation expense 1,715 416 ) Stock-based compensation expense 1,715 2,448 5,734 Stock option income ) Stock-based compensation expense 1,715 2,448 5,734 Stock option income tax Stock-based compensation expense 1,715 2,448 5,734 Stock option income tax benefits/ benefits/ ( deficiency ) ( 617 ) 89 ( 989 ) deficiency ) ( 617 ) 89 ( 989 ) Other , ( 617 ) 89 ( 989 ) Other , net 2 989 ) Other , net 2 ( 6 ) 18 Balance Other , net 2 ( 6 ) 18 Balance , end net 2 ( 6 ) 18 Balance , end of period Balance , end of period 59,005 60,413 56,396 Retained earnings ( , end of period 59,005 60,413 56,396 Retained earnings ( deficit end of period 59,005 60,413 56,396 Retained earnings ( deficit ) , beginning of period ( 12,298 ) 18,429 15,678 Net income of period ( 12,298 ) 18,429 15,678 Net income 12,599 12,254 period ( 12,298 ) 18,429 15,678 Net income 12,599 12,254 8,168 ) 18,429 15,678 Net income 12,599 12,254 8,168 Other comprehensive income 18,429 15,678 Net income 12,599 12,254 8,168 Other comprehensive income : 15,678 Net income 12,599 12,254 8,168 Other comprehensive income : Net loss ) on derivative instrument 76 ( 58 ) 101 Net on derivative instrument 76 ( 58 ) 101 Net unrealized investment instrument 76 ( 58 ) 101 Net unrealized investment gains/ ( gains/ ( loss ) ( 282 ) 371 ( 873 ) loss ) ( 282 ) 371 ( 873 ) Translation adjustment ( 282 ) 371 ( 873 ) Translation adjustment and other ) Translation adjustment and other 9 ( 6 ) 51 Comprehensive adjustment and other 9 ( 6 ) 51 Comprehensive income 12,402 other 9 ( 6 ) 51 Comprehensive income 12,402 12,561 7,447 6 ) 51 Comprehensive income 12,402 12,561 7,447 Common stock cash ) 51 Comprehensive income 12,402 12,561 7,447 Common stock cash dividend 51 Comprehensive income 12,402 12,561 7,447 Common stock cash dividend ( Common stock cash dividend ( 3,594 ) ( 36,968 ) ( dividend ( 3,594 ) ( 36,968 ) ( 1,729 ) Common ) ( 36,968 ) ( 1,729 ) Common stock repurchased ( ) Common stock repurchased ( 15,411 ) ( 6,320 ) ( repurchased ( 15,411 ) ( 6,320 ) ( 2,967 ) Balance ) ( 6,320 ) ( 2,967 ) Balance , end of , end of period ( 18,901 ) ( 12,298 ) 18,429 period ( 18,901 ) ( 12,298 ) 18,429 Total stockholder ’ 18,901 ) ( 12,298 ) 18,429 Total stockholder ’ equity $ Total stockholder ’ equity $ 40,104 $ 48,115 $ 74,825 See ’ equity $ 40,104 $ 48,115 $ 74,825 See accompanying note $ 40,104 $ 48,115 $ 74,825 See accompanying note . PAGE See accompanying note . PAGE 46 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The classification policy during fiscal year 2006 which resulted in reclassification of . Certain multi-year licensing PAGE 47 Table of Contents Part II of Contents Part II Item 8 arrangement include right to receive . Advertising expense wa $ 1.23 billion in fiscal year 2006 1.23 billion in fiscal year 2006 , $ 995 million in fiscal year 2006 , $ 995 million in fiscal year 2005 995 million in fiscal year 2005 , and $ 904 million year 2005 , and $ 904 million in fiscal year 2004 904 million in fiscal year 2004 . INCOME TAXES Income tax a corresponding liability . PAGE 48 Table of Contents Part II of Contents Part II Item 8 Investments are considered to be SFAS ” ) No . 133 , Accounting for Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage period of change . PAGE 49 Table of Contents Part II of Contents Part II Item 8 ALLOWANCE FOR DOUBTFUL ACCOUNTS The million ) Year Ended June 30 Balance at beginning of period Balance at end of period 2004 $ 242 $ 44 $ end of period 2004 $ 242 $ 44 $ ( 120 period 2004 $ 242 $ 44 $ ( 120 ) $ 242 $ 44 $ ( 120 ) $ 166 2005 166 $ ( 120 ) $ 166 2005 166 48 ( 43 ( 120 ) $ 166 2005 166 48 ( 43 ) 120 ) $ 166 2005 166 48 ( 43 ) 171 ) $ 166 2005 166 48 ( 43 ) 171 2006 166 2005 166 48 ( 43 ) 171 2006 171 40 166 48 ( 43 ) 171 2006 171 40 ( 69 48 ( 43 ) 171 2006 171 40 ( 69 ) ( 43 ) 171 2006 171 40 ( 69 ) $ 43 ) 171 2006 171 40 ( 69 ) $ 142 171 2006 171 40 ( 69 ) $ 142 INVENTORIES Inventories 40 ( 69 ) $ 142 INVENTORIES Inventories are stated at , ranging from one to 15 year . Computer software developed annual basis a of July 1 , and between annual test the period presented . NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home , approximately 5 % to 15 % of , approximately 5 % to 15 % of the sale price XP Professional , and approximately 1 % to 15 % of and approximately 1 % to 15 % of the sale price for desktop application . PAGE 50 Table of Contents Part II of Contents Part II Item 8 Other – Represents payment for ( In million ) June 30 2006 2005 Volume licensing program In million ) June 30 2006 2005 Volume licensing program $ million ) June 30 2006 2005 Volume licensing program $ 7,661 2005 Volume licensing program $ 7,661 $ 6,000 Undelivered element 2,066 licensing program $ 7,661 $ 6,000 Undelivered element 2,066 2,119 Other 7,661 $ 6,000 Undelivered element 2,066 2,119 Other 1,175 1,048 Unearned $ 6,000 Undelivered element 2,066 2,119 Other 1,175 1,048 Unearned revenue Undelivered element 2,066 2,119 Other 1,175 1,048 Unearned revenue $ 10,902 element 2,066 2,119 Other 1,175 1,048 Unearned revenue $ 10,902 $ 1,175 1,048 Unearned revenue $ 10,902 $ 9,167 Unearned revenue by Unearned revenue $ 10,902 $ 9,167 Unearned revenue by segment wa ( In million ) June 30 2006 2005 Client $ 2,850 In million ) June 30 2006 2005 Client $ 2,850 $ million ) June 30 2006 2005 Client $ 2,850 $ 2,687 30 2006 2005 Client $ 2,850 $ 2,687 Server and Tools 2005 Client $ 2,850 $ 2,687 Server and Tools 3,792 3,048 $ 2,687 Server and Tools 3,792 3,048 Information Worker 3,609 2,814 2,687 Server and Tools 3,792 3,048 Information Worker 3,609 2,814 Other Tools 3,792 3,048 Information Worker 3,609 2,814 Other segment 651 618 3,792 3,048 Information Worker 3,609 2,814 Other segment 651 618 Unearned Worker 3,609 2,814 Other segment 651 618 Unearned revenue $ 10,902 3,609 2,814 Other segment 651 618 Unearned revenue $ 10,902 $ 651 618 Unearned revenue $ 10,902 $ 9,167 NOTE 3 INVESTMENTS Unearned revenue $ 10,902 $ 9,167 NOTE 3 INVESTMENTS The component $ 10,902 $ 9,167 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2006 Cash $ 3,248 other investment June 30 , 2006 Cash $ 3,248 $ – 30 , 2006 Cash $ 3,248 $ – $ – $ $ – $ – $ 3,248 $ 3,248 $ – $ $ – $ 3,248 $ 3,248 $ – $ – Mutual – $ – Mutual fund 723 11 ( 1 ) 733 $ – Mutual fund 723 11 ( 1 ) 733 288 Mutual fund 723 11 ( 1 ) 733 288 445 – 723 11 ( 1 ) 733 288 445 – Commercial paper 11 ( 1 ) 733 288 445 – Commercial paper 3,242 ( 1 ) 733 288 445 – Commercial paper 3,242 – 288 445 – Commercial paper 3,242 – – 3,242 3,150 92 Commercial paper 3,242 – – 3,242 3,150 92 – Certificates of paper 3,242 – – 3,242 3,150 92 – Certificates of deposit 3,242 – – 3,242 3,150 92 – Certificates of deposit 364 92 – Certificates of deposit 364 – – 364 – 364 of deposit 364 – – 364 – 364 – U. S. 364 – – 364 – 364 – U. S. Government and S. Government and Agency security 4,904 4 ( 30 ) 4,878 Government and Agency security 4,904 4 ( 30 ) 4,878 14 Agency security 4,904 4 ( 30 ) 4,878 14 4,790 74 4,904 4 ( 30 ) 4,878 14 4,790 74 Foreign government 4 ( 30 ) 4,878 14 4,790 74 Foreign government bond ( 30 ) 4,878 14 4,790 74 Foreign government bond 6,034 30 ) 4,878 14 4,790 74 Foreign government bond 6,034 21 4,790 74 Foreign government bond 6,034 21 ( 73 ) 5,982 74 Foreign government bond 6,034 21 ( 73 ) 5,982 – government bond 6,034 21 ( 73 ) 5,982 – 5,982 – 6,034 21 ( 73 ) 5,982 – 5,982 – Mortgage backed ( 73 ) 5,982 – 5,982 – Mortgage backed security 4,285 5,982 – Mortgage backed security 4,285 – ( 42 ) 4,243 backed security 4,285 – ( 42 ) 4,243 – 4,243 – 4,285 – ( 42 ) 4,243 – 4,243 – Corporate note ( 42 ) 4,243 – 4,243 – Corporate note and bond – Corporate note and bond 7,605 15 ( 18 ) 7,602 Corporate note and bond 7,605 15 ( 18 ) 7,602 – and bond 7,605 15 ( 18 ) 7,602 – 7,475 127 7,605 15 ( 18 ) 7,602 – 7,475 127 Municipal security ( 18 ) 7,602 – 7,475 127 Municipal security 4,008 5 18 ) 7,602 – 7,475 127 Municipal security 4,008 5 ( – 7,475 127 Municipal security 4,008 5 ( 45 ) 3,968 7,475 127 Municipal security 4,008 5 ( 45 ) 3,968 14 Municipal security 4,008 5 ( 45 ) 3,968 14 3,954 – 4,008 5 ( 45 ) 3,968 14 3,954 – Common stock 5 ( 45 ) 3,968 14 3,954 – Common stock and ( 45 ) 3,968 14 3,954 – Common stock and equivalent – Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 – and equivalent 6,933 1,846 ( 34 ) 8,745 – – 8,745 6,933 1,846 ( 34 ) 8,745 – – 8,745 Preferred stock 34 ) 8,745 – – 8,745 Preferred stock 41 5 – – – 8,745 Preferred stock 41 5 – 46 – – – 8,745 Preferred stock 41 5 – 46 – – 46 Preferred stock 41 5 – 46 – – 46 Other investment 5 – 46 – – 46 Other investment 342 – – – – 46 Other investment 342 – – 342 – 102 Other investment 342 – – 342 – 102 240 Total $ 342 – – 342 – 102 240 Total $ 41,729 $ – – 342 – 102 240 Total $ 41,729 $ 1,907 – 102 240 Total $ 41,729 $ 1,907 $ ( 243 240 Total $ 41,729 $ 1,907 $ ( 243 ) $ 41,729 $ 1,907 $ ( 243 ) $ 43,393 $ 6,714 $ ( 243 ) $ 43,393 $ 6,714 $ 27,447 $ 243 ) $ 43,393 $ 6,714 $ 27,447 $ 9,232 PAGE $ 43,393 $ 6,714 $ 27,447 $ 9,232 PAGE 51 Table $ 6,714 $ 27,447 $ 9,232 PAGE 51 Table of Contents $ 27,447 $ 9,232 PAGE 51 Table of Contents Part II of Contents Part II Item 8 ( In million ) Cost Equity and other investment June 30 , 2005 Cash $ 1,911 other investment June 30 , 2005 Cash $ 1,911 $ – 30 , 2005 Cash $ 1,911 $ – $ – $ $ – $ – $ 1,911 $ 1,911 $ – $ $ – $ 1,911 $ 1,911 $ – $ – Mutual – $ – Mutual fund 1,636 38 – 1,674 817 857 $ – Mutual fund 1,636 38 – 1,674 817 857 – Mutual fund 1,636 38 – 1,674 817 857 – Commercial paper fund 1,636 38 – 1,674 817 857 – Commercial paper 1,566 1,636 38 – 1,674 817 857 – Commercial paper 1,566 4 817 857 – Commercial paper 1,566 4 – 1,570 1,570 – 857 – Commercial paper 1,566 4 – 1,570 1,570 – – Commercial paper 1,566 4 – 1,570 1,570 – – Certificates of paper 1,566 4 – 1,570 1,570 – – Certificates of deposit – – Certificates of deposit 614 – – 614 453 161 of deposit 614 – – 614 453 161 – U. S. deposit 614 – – 614 453 161 – U. S. Government 614 – – 614 453 161 – U. S. Government and S. Government and Agency security 9,943 29 ( 59 ) 9,913 Government and Agency security 9,943 29 ( 59 ) 9,913 – Agency security 9,943 29 ( 59 ) 9,913 – 9,913 – 9,943 29 ( 59 ) 9,913 – 9,913 – Foreign government ( 59 ) 9,913 – 9,913 – Foreign government bond 5,486 9,913 – Foreign government bond 5,486 194 ( 2 ) 5,678 – Foreign government bond 5,486 194 ( 2 ) 5,678 – government bond 5,486 194 ( 2 ) 5,678 – 5,678 – 5,486 194 ( 2 ) 5,678 – 5,678 – Mortgage backed ( 2 ) 5,678 – 5,678 – Mortgage backed security 123 5,678 – Mortgage backed security 123 – – 123 – 123 backed security 123 – – 123 – 123 – Corporate note 123 – – 123 – 123 – Corporate note and bond – Corporate note and bond 8,053 50 ( 31 ) 8,072 Corporate note and bond 8,053 50 ( 31 ) 8,072 80 and bond 8,053 50 ( 31 ) 8,072 80 7,473 519 8,053 50 ( 31 ) 8,072 80 7,473 519 Municipal security 50 ( 31 ) 8,072 80 7,473 519 Municipal security 8,579 ( 31 ) 8,072 80 7,473 519 Municipal security 8,579 70 31 ) 8,072 80 7,473 519 Municipal security 8,579 70 ( 80 7,473 519 Municipal security 8,579 70 ( 33 ) 8,616 7,473 519 Municipal security 8,579 70 ( 33 ) 8,616 20 Municipal security 8,579 70 ( 33 ) 8,616 20 8,596 – 8,579 70 ( 33 ) 8,616 20 8,596 – Common stock 70 ( 33 ) 8,616 20 8,596 – Common stock and ( 33 ) 8,616 20 8,596 – Common stock and equivalent – Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 Common stock and equivalent 7,273 1,970 ( 133 ) 9,110 – and equivalent 7,273 1,970 ( 133 ) 9,110 – – 9,110 7,273 1,970 ( 133 ) 9,110 – – 9,110 Preferred stock 133 ) 9,110 – – 9,110 Preferred stock 1,067 4 – – – 9,110 Preferred stock 1,067 4 – 1,071 – – – 9,110 Preferred stock 1,067 4 – 1,071 – – 1,071 Preferred stock 1,067 4 – 1,071 – – 1,071 Other investment 4 – 1,071 – – 1,071 Other investment 403 – – – – 1,071 Other investment 403 – – 403 – 99 Other investment 403 – – 403 – 99 304 Total $ 403 – – 403 – 99 304 Total $ 46,654 $ – – 403 – 99 304 Total $ 46,654 $ 2,359 – 99 304 Total $ 46,654 $ 2,359 $ ( 258 304 Total $ 46,654 $ 2,359 $ ( 258 ) $ 46,654 $ 2,359 $ ( 258 ) $ 48,755 $ 4,851 $ ( 258 ) $ 48,755 $ 4,851 $ 32,900 $ 258 ) $ 48,755 $ 4,851 $ 32,900 $ 11,004 Investments $ 48,755 $ 4,851 $ 32,900 $ 11,004 Investments with continuous $ 4,851 $ 32,900 $ 11,004 Investments with continuous unrealized loss le than and greater than 12 month and their related fair a follows : Less than 12 month 12 month or greater : Less than 12 month 12 month or greater Total ( Fair value Unrealized loss June 30 , 2006 Mutual fund $ Unrealized loss June 30 , 2006 Mutual fund $ 14 $ , 2006 Mutual fund $ 14 $ ( 1 ) $ fund $ 14 $ ( 1 ) $ 4 $ – $ ( 1 ) $ 4 $ – $ 18 $ $ 4 $ – $ 18 $ ( 1 ) U. – $ 18 $ ( 1 ) U. S. Government and S. Government and Agency security 2,303 ( 24 ) 172 ( and Agency security 2,303 ( 24 ) 172 ( 6 ) security 2,303 ( 24 ) 172 ( 6 ) 2,475 ( ( 24 ) 172 ( 6 ) 2,475 ( 30 ) ) 172 ( 6 ) 2,475 ( 30 ) Foreign government ( 6 ) 2,475 ( 30 ) Foreign government bond 2,523 30 ) Foreign government bond 2,523 ( 56 ) 1,749 ( Foreign government bond 2,523 ( 56 ) 1,749 ( 17 ) bond 2,523 ( 56 ) 1,749 ( 17 ) 4,272 ( ( 56 ) 1,749 ( 17 ) 4,272 ( 73 ) ) 1,749 ( 17 ) 4,272 ( 73 ) Mortgage backed ( 17 ) 4,272 ( 73 ) Mortgage backed security 2,692 73 ) Mortgage backed security 2,692 ( 40 ) 102 ( Mortgage backed security 2,692 ( 40 ) 102 ( 2 ) security 2,692 ( 40 ) 102 ( 2 ) 2,794 ( ( 40 ) 102 ( 2 ) 2,794 ( 42 ) ) 102 ( 2 ) 2,794 ( 42 ) Corporate note ( 2 ) 2,794 ( 42 ) Corporate note and bond ) Corporate note and bond 4,721 ( 13 ) 359 ( note and bond 4,721 ( 13 ) 359 ( 5 ) bond 4,721 ( 13 ) 359 ( 5 ) 5,080 ( ( 13 ) 359 ( 5 ) 5,080 ( 18 ) ) 359 ( 5 ) 5,080 ( 18 ) Municipal security ( 5 ) 5,080 ( 18 ) Municipal security 1,323 ( ( 18 ) Municipal security 1,323 ( 13 ) 1,192 ( ) Municipal security 1,323 ( 13 ) 1,192 ( 32 ) security 1,323 ( 13 ) 1,192 ( 32 ) 2,515 ( ( 13 ) 1,192 ( 32 ) 2,515 ( 45 ) ) 1,192 ( 32 ) 2,515 ( 45 ) Common stock ( 32 ) 2,515 ( 45 ) Common stock and equivalent ) Common stock and equivalent 266 ( 33 ) 29 ( stock and equivalent 266 ( 33 ) 29 ( 1 ) equivalent 266 ( 33 ) 29 ( 1 ) 295 ( ( 33 ) 29 ( 1 ) 295 ( 34 ) ) 29 ( 1 ) 295 ( 34 ) Total $ ( 1 ) 295 ( 34 ) Total $ 13,842 $ ( 34 ) Total $ 13,842 $ ( 180 ) $ Total $ 13,842 $ ( 180 ) $ 3,607 $ ( $ ( 180 ) $ 3,607 $ ( 63 ) $ ) $ 3,607 $ ( 63 ) $ 17,449 $ ( $ ( 63 ) $ 17,449 $ ( 243 ) Less ) $ 17,449 $ ( 243 ) Less than 12 month ( 243 ) Less than 12 month 12 month or greater ) Less than 12 month 12 month or greater Total ( Fair value Unrealized loss June 30 , 2005 U. S. Government Unrealized loss June 30 , 2005 U. S. Government and Agency Government and Agency security $ 7,490 $ ( 59 ) $ security $ 7,490 $ ( 59 ) $ – $ – ) $ – $ – 7,490 $ ( 59 ) Foreign $ – 7,490 $ ( 59 ) Foreign government bond 32 59 ) Foreign government bond 32 ( 2 ) – – Foreign government bond 32 ( 2 ) – – 32 ( ( 2 ) – – 32 ( 2 ) Corporate note ) – – 32 ( 2 ) Corporate note and bond ) Corporate note and bond 4,536 ( 31 ) – – note and bond 4,536 ( 31 ) – – 4,536 ( ( 31 ) – – 4,536 ( 31 ) Municipal security ) – – 4,536 ( 31 ) Municipal security 4,339 ( ( 31 ) Municipal security 4,339 ( 30 ) 239 ( ) Municipal security 4,339 ( 30 ) 239 ( 3 ) security 4,339 ( 30 ) 239 ( 3 ) 4,578 ( ( 30 ) 239 ( 3 ) 4,578 ( 33 ) ) 239 ( 3 ) 4,578 ( 33 ) Common stock ( 3 ) 4,578 ( 33 ) Common stock and equivalent ) Common stock and equivalent 1,168 ( 111 ) 89 ( stock and equivalent 1,168 ( 111 ) 89 ( 22 ) equivalent 1,168 ( 111 ) 89 ( 22 ) 1,257 ( ( 111 ) 89 ( 22 ) 1,257 ( 133 ) ) 89 ( 22 ) 1,257 ( 133 ) Total $ ( 22 ) 1,257 ( 133 ) Total $ 17,565 $ ( 133 ) Total $ 17,565 $ ( 233 ) $ Total $ 17,565 $ ( 233 ) $ 328 $ ( $ ( 233 ) $ 328 $ ( 25 ) $ ) $ 328 $ ( 25 ) $ 17,893 $ ( $ ( 25 ) $ 17,893 $ ( 258 ) PAGE ) $ 17,893 $ ( 258 ) PAGE 52 Table of $ ( 258 ) PAGE 52 Table of Contents Part II of Contents Part II Item 8 At June 30 , 2006 II Item 8 At June 30 , 2006 unrealized loss of 8 At June 30 , 2006 unrealized loss of $ 243 2006 unrealized loss of $ 243 million consisted of : $ million consisted of : $ 196 million related to investment grade grade fixed-income security , $ 12 million related to investment in market fixed-income security , $ 2 million related to domestic equity domestic equity security and $ 33 million related to international equity price movement . At June 30 , 2005 unrealized loss of . At June 30 , 2005 unrealized loss of $ 258 2005 unrealized loss of $ 258 million consisted of : $ million consisted of : $ 112 million related to investment grade grade fixed-income security , $ 13 million related to investment in fixed income security , $ 90 million related to domestic equity domestic equity security and $ 43 million related to international equity available evidence a of June 30 , 2006 . Common and a of June 30 , 2006 . Common and preferred stock at cost . At June 30 , 2006 the recorded basis . At June 30 , 2006 the recorded basis of these of these investment wa $ 41 million , and their estimated estimated fair value wa $ 41 million . At June 30 41 million . At June 30 , 2005 the recorded basis . At June 30 , 2005 the recorded basis of these of these investment wa $ 1.05 billion , and their estimated estimated fair value wa $ 1.27 billion . The estimate of maturity security , at June 30 , 2006 were a follows , at June 30 , 2006 were a follows : ( one year or le $ 5,680 $ 5,686 Due after one or le $ 5,680 $ 5,686 Due after one year through one year through five year 12,011 11,971 Due after five year year through five year 12,011 11,971 Due after five year through five year through ten year 6,111 6,041 Due after ten year year through ten year 6,111 6,041 Due after ten year 6,741 6,041 Due after ten year 6,741 6,683 Total $ 30,543 $ Due after ten year 6,741 6,683 Total $ 30,543 $ 30,381 year 6,741 6,683 Total $ 30,543 $ 30,381 NOTE 4 INVESTMENT 6,683 Total $ 30,543 $ 30,381 NOTE 4 INVESTMENT INCOME AND $ 30,543 $ 30,381 NOTE 4 INVESTMENT INCOME AND OTHER The million ) Year Ended June 30 2006 2005 2004 Dividends and ) Year Ended June 30 2006 2005 2004 Dividends and interest Year Ended June 30 2006 2005 2004 Dividends and interest $ Ended June 30 2006 2005 2004 Dividends and interest $ 1,510 2004 Dividends and interest $ 1,510 $ 1,460 $ 1,892 Net and interest $ 1,510 $ 1,460 $ 1,892 Net gain on $ 1,510 $ 1,460 $ 1,892 Net gain on investment 161 1,892 Net gain on investment 161 856 1,563 Net loss on Net gain on investment 161 856 1,563 Net loss on derivative gain on investment 161 856 1,563 Net loss on derivative ( Net loss on derivative ( 99 ) ( 262 ) ( derivative ( 99 ) ( 262 ) ( 268 ) Income/ ) ( 262 ) ( 268 ) Income/ ( loss ) from equity investees and other 218 13 ( 25 ) Investment equity investees and other 218 13 ( 25 ) Investment income and other 218 13 ( 25 ) Investment income and other Investment income and other $ 1,790 $ 2,067 $ 3,162 Net and other $ 1,790 $ 2,067 $ 3,162 Net gain on $ 1,790 $ 2,067 $ 3,162 Net gain on investment include include other-than-temporary impairment of $ 408 million in fiscal year 2006 408 million in fiscal year 2006 , $ 152 million in fiscal year 2006 , $ 152 million in fiscal year 2005 152 million in fiscal year 2005 , and $ 82 million year 2005 , and $ 82 million in fiscal year 2004 82 million in fiscal year 2004 . The increase in other-than-temporary other-than-temporary impairment in fiscal year 2006 wa driven by planned sale raise fund for the $ 20 billion tender offer announced on tender offer announced on July 20 , 2006 . Realized gain announced on July 20 , 2006 . Realized gain and ( other-than-temporary impairment ) were $ 1.11 billion and $ ( 531 1.11 billion and $ ( 531 ) million in fiscal year ) million in fiscal year 2006 , $ 1.38 billion and fiscal year 2006 , $ 1.38 billion and $ ( 376 1.38 billion and $ ( 376 ) million in fiscal year ) million in fiscal year 2005 , and $ 2.16 billion year 2005 , and $ 2.16 billion and $ ( 518 2.16 billion and $ ( 518 ) million in fiscal year ) million in fiscal year 2004 . NOTE 5 DERIVATIVES For fiscal year 2004 . NOTE 5 DERIVATIVES For derivative instrument designated accordance with SFAS No . 133 , Accounting for Derivative Instruments significant impact on earnings PAGE 53 Table of Contents Part II of Contents Part II Item 8 for fiscal year 2006 , Item 8 for fiscal year 2006 , 2005 , or 2004 for fiscal year 2006 , 2005 , or 2004 . During 2006 , 2005 , or 2004 . During fiscal year 2006 2004 . During fiscal year 2006 , $ 217 million in fiscal year 2006 , $ 217 million in gain on fair in time value and $ 399 million in loss on cash other . During fiscal year 2005 , $ 79 million in fiscal year 2005 , $ 79 million in gain on fair in time value and $ 116 million in loss on cash other . During fiscal year 2004 , $ 31 million in fiscal year 2004 , $ 31 million in gain on fair in time value and $ 325 million in loss on cash recognized . During fiscal year 2006 , $ 166 million of fiscal year 2006 , $ 166 million of derivative gain were reclassified to revenue and $ 23 million in derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were other . During fiscal year 2004 , $ 14 million of fiscal year 2004 , $ 14 million of derivative gain were . We estimate that $ 133 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2006 , 2005 , and 2004 for fiscal year 2006 , 2005 , and 2004 . NOTE 2006 , 2005 , and 2004 . NOTE 6 INVENTORIES ( , and 2004 . NOTE 6 INVENTORIES ( In million ) ( In million ) June 30 2006 2005 Finished good $ In million ) June 30 2006 2005 Finished good $ 1,013 million ) June 30 2006 2005 Finished good $ 1,013 $ 2006 2005 Finished good $ 1,013 $ 422 Raw material and Finished good $ 1,013 $ 422 Raw material and work in material and work in process 465 69 Inventories $ 1,478 $ and work in process 465 69 Inventories $ 1,478 $ 491 process 465 69 Inventories $ 1,478 $ 491 NOTE 7 PROPERTY 69 Inventories $ 1,478 $ 491 NOTE 7 PROPERTY AND EQUIPMENT $ 1,478 $ 491 NOTE 7 PROPERTY AND EQUIPMENT ( In ( In million ) June 30 2006 2005 Land $ 362 In million ) June 30 2006 2005 Land $ 362 $ million ) June 30 2006 2005 Land $ 362 $ 313 30 2006 2005 Land $ 362 $ 313 Buildings and improvement 2005 Land $ 362 $ 313 Buildings and improvement 2,228 2,014 $ 313 Buildings and improvement 2,228 2,014 Leasehold improvement 918 851 313 Buildings and improvement 2,228 2,014 Leasehold improvement 918 851 Computer improvement 2,228 2,014 Leasehold improvement 918 851 Computer equipment and software 2,228 2,014 Leasehold improvement 918 851 Computer equipment and software 2,682 851 Computer equipment and software 2,682 2,318 Furniture and equipment 1,033 Computer equipment and software 2,682 2,318 Furniture and equipment 1,033 879 2,682 2,318 Furniture and equipment 1,033 879 Property and equipment , 2,318 Furniture and equipment 1,033 879 Property and equipment , at and equipment , at cost 7,223 6,375 Accumulated depreciation ( 4,179 equipment , at cost 7,223 6,375 Accumulated depreciation ( 4,179 ) 7,223 6,375 Accumulated depreciation ( 4,179 ) ( 4,029 ) Property depreciation ( 4,179 ) ( 4,029 ) Property and equipment , and equipment , net $ 3,044 $ 2,346 Property and equipment , net $ 3,044 $ 2,346 Property and equipment are stated building range from five to 15 year , leasehold improvement range depreciated . During fiscal year 2006 , 2005 , and 2004 During fiscal year 2006 , 2005 , and 2004 , depreciation 2006 , 2005 , and 2004 , depreciation expense wa $ , depreciation expense wa $ 863 million , $ 723 million $ 863 million , $ 723 million , and $ 647 723 million , and $ 647 million , respectively . The to computer equipment . PAGE 54 Table of Contents Part II of Contents Part II Item 8 NOTE 8 GOODWILL Changes in Part II Item 8 NOTE 8 GOODWILL Changes in the carrying of goodwill for fiscal year 2006 and 2005 by segment were for fiscal year 2006 and 2005 by segment were a follows ) Balance a of June 30 , 2004 Acquisitions / purchase a of June 30 , 2004 Acquisitions / purchase accounting adjustment Divestitures Balance a of June 30 , 2005 Acquisitions Other Balance a of June 30 , 2005 Acquisitions Other Balance a of Other Balance a of June 30 , 2006 Client $ 37 a of June 30 , 2006 Client $ 37 $ 6 30 , 2006 Client $ 37 $ 6 $ – $ 2006 Client $ 37 $ 6 $ – $ 43 $ $ 6 $ – $ 43 $ 31 $ – $ $ – $ 43 $ 31 $ – $ 74 Server $ 31 $ – $ 74 Server and Tools 106 135 $ 74 Server and Tools 106 135 – 241 29 ( 74 Server and Tools 106 135 – 241 29 ( 14 and Tools 106 135 – 241 29 ( 14 ) 256 Tools 106 135 – 241 29 ( 14 ) 256 Information 135 – 241 29 ( 14 ) 256 Information Worker 178 241 29 ( 14 ) 256 Information Worker 178 47 – 14 ) 256 Information Worker 178 47 – 225 246 – ) 256 Information Worker 178 47 – 225 246 – 471 Information Worker 178 47 – 225 246 – 471 Microsoft Business Worker 178 47 – 225 246 – 471 Microsoft Business Solutions 47 – 225 246 – 471 Microsoft Business Solutions 2,207 3 – 471 Microsoft Business Solutions 2,207 3 – 2,210 – – 471 Microsoft Business Solutions 2,207 3 – 2,210 – – 2,210 Business Solutions 2,207 3 – 2,210 – – 2,210 MSN 154 3 – 2,210 – – 2,210 MSN 154 17 – 171 2,210 – – 2,210 MSN 154 17 – 171 263 21 – – 2,210 MSN 154 17 – 171 263 21 455 2,210 MSN 154 17 – 171 263 21 455 Mobile and MSN 154 17 – 171 263 21 455 Mobile and Embedded 154 17 – 171 263 21 455 Mobile and Embedded Devices 17 – 171 263 21 455 Mobile and Embedded Devices 30 455 Mobile and Embedded Devices 30 – – 30 – ( Embedded Devices 30 – – 30 – ( 24 ) 6 – – 30 – ( 24 ) 6 Home and Entertainment 30 – ( 24 ) 6 Home and Entertainment 403 – ) 6 Home and Entertainment 403 – ( 14 ) 389 and Entertainment 403 – ( 14 ) 389 23 ( 18 403 – ( 14 ) 389 23 ( 18 ) 393 – ( 14 ) 389 23 ( 18 ) 393 Total 14 ) 389 23 ( 18 ) 393 Total $ 3,115 389 23 ( 18 ) 393 Total $ 3,115 $ 208 18 ) 393 Total $ 3,115 $ 208 $ ( 14 393 Total $ 3,115 $ 208 $ ( 14 ) $ 3,115 $ 208 $ ( 14 ) $ 3,309 $ 592 $ ( 14 ) $ 3,309 $ 592 $ ( 35 14 ) $ 3,309 $ 592 $ ( 35 ) $ 3,309 $ 592 $ ( 35 ) $ 3,866 We test $ ( 35 ) $ 3,866 We test goodwill for impairment provision of SFAS No . 142 , Goodwill and Other Intangible of goodwill in fiscal year 2006 and 2005 . If an in fiscal year 2006 and 2005 . If an event occurs test . During fiscal year 2005 , we had no material . During the fiscal year 2006 , we acquired the following a total consideration of $ 689 million , which wa primarily business platform ; and • 14 various other entity specializing in acquisition , we recorded $ 592 million of goodwill . None segment a follows : $ 29 million to Server & Tools Server & Tools , $ 263 million to MSN , $ million to MSN , $ 31 million to Client , $ million to Client , $ 246 million to Information Worker , Information Worker , and $ 23 million to Home and Entertainment . We also recorded $ 125 million of technology-based intangible asset a weighted-average amortization period of 3.25 year , and $ 26 3.25 year , and $ 26 million of other intangible asset a weighted-average amortization period of 4.5 year . All of the not been included . PAGE 55 Table of Contents Part II of Contents Part II Item 8 NOTE 9 INTANGIBLE ASSETS The Part II Item 8 NOTE 9 INTANGIBLE ASSETS The component of ( In million ) June 30 2006 2005 Gross carrying amount In million ) June 30 2006 2005 Gross carrying amount Accumulated million ) June 30 2006 2005 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 954 $ ( 661 ) $ Contract-based $ 954 $ ( 661 ) $ 292 $ 957 $ ( 661 ) $ 292 $ 957 $ ( 606 661 ) $ 292 $ 957 $ ( 606 ) $ 292 $ 957 $ ( 606 ) $ 351 Technology-based 458 $ ( 606 ) $ 351 Technology-based 458 ( 255 ) 606 ) $ 351 Technology-based 458 ( 255 ) 203 309 $ 351 Technology-based 458 ( 255 ) 203 309 ( 200 Technology-based 458 ( 255 ) 203 309 ( 200 ) 109 458 ( 255 ) 203 309 ( 200 ) 109 Marketing-related 255 ) 203 309 ( 200 ) 109 Marketing-related 42 ( 203 309 ( 200 ) 109 Marketing-related 42 ( 32 ) ( 200 ) 109 Marketing-related 42 ( 32 ) 10 35 ) 109 Marketing-related 42 ( 32 ) 10 35 ( 25 Marketing-related 42 ( 32 ) 10 35 ( 25 ) 10 42 ( 32 ) 10 35 ( 25 ) 10 Customer-related 32 ) 10 35 ( 25 ) 10 Customer-related 54 ( 10 35 ( 25 ) 10 Customer-related 54 ( 21 ) ( 25 ) 10 Customer-related 54 ( 21 ) 33 40 ) 10 Customer-related 54 ( 21 ) 33 40 ( 11 Customer-related 54 ( 21 ) 33 40 ( 11 ) 29 54 ( 21 ) 33 40 ( 11 ) 29 Total 21 ) 33 40 ( 11 ) 29 Total $ 1,508 33 40 ( 11 ) 29 Total $ 1,508 $ ( 11 ) 29 Total $ 1,508 $ ( 969 ) $ Total $ 1,508 $ ( 969 ) $ 539 $ 1,341 $ ( 969 ) $ 539 $ 1,341 $ ( 842 969 ) $ 539 $ 1,341 $ ( 842 ) $ 539 $ 1,341 $ ( 842 ) $ 499 During fiscal $ ( 842 ) $ 499 During fiscal year 2006 and $ 499 During fiscal year 2006 and 2005 , we recorded During fiscal year 2006 and 2005 , we recorded addition to to intangible asset of $ 189 million and $ 90 million $ 189 million and $ 90 million , respectively . We asset acquired during fiscal year 2006 and 2005 were a follows during fiscal year 2006 and 2005 were a follows : ( million ) Year Ended June 30 2006 2005 Amount Weighted average ) Year Ended June 30 2006 2005 Amount Weighted average life Year Ended June 30 2006 2005 Amount Weighted average life Amount Weighted average life Contract-based $ 36 4 year $ 16 6 average life Contract-based $ 36 4 year $ 16 6 year $ 36 4 year $ 16 6 year Technology-based 140 4 36 4 year $ 16 6 year Technology-based 140 4 year $ 16 6 year Technology-based 140 4 year 64 5 year 16 6 year Technology-based 140 4 year 64 5 year Marketing-related year Technology-based 140 4 year 64 5 year Marketing-related 5 3 Technology-based 140 4 year 64 5 year Marketing-related 5 3 year year 64 5 year Marketing-related 5 3 year – – Customer-related 64 5 year Marketing-related 5 3 year – – Customer-related 8 3 year – – Customer-related 8 4 year 10 5 year year – – Customer-related 8 4 year 10 5 year Total – Customer-related 8 4 year 10 5 year Total $ 189 Customer-related 8 4 year 10 5 year Total $ 189 $ 10 5 year Total $ 189 $ 90 Acquired intangible are year Total $ 189 $ 90 Acquired intangible are generally amortized asset amortization expense wa $ 127 million for fiscal year 2006 127 million for fiscal year 2006 , $ 161 million for fiscal year 2006 , $ 161 million for fiscal year 2005 161 million for fiscal year 2005 , and $ 170 million year 2005 , and $ 170 million for fiscal year 2004 170 million for fiscal year 2004 . The estimated future amortization intangible asset a of June 30 , 2006 is a follows a of June 30 , 2006 is a follows : ( million ) Year Ended June 30 Amount 2007 $ 150 2008 Year Ended June 30 Amount 2007 $ 150 2008 126 2009 June 30 Amount 2007 $ 150 2008 126 2009 83 2010 30 Amount 2007 $ 150 2008 126 2009 83 2010 60 Amount 2007 $ 150 2008 126 2009 83 2010 60 2011 2007 $ 150 2008 126 2009 83 2010 60 2011 46 $ 150 2008 126 2009 83 2010 60 2011 46 Total 150 2008 126 2009 83 2010 60 2011 46 Total $ 2008 126 2009 83 2010 60 2011 46 Total $ 465 126 2009 83 2010 60 2011 46 Total $ 465 PAGE 2009 83 2010 60 2011 46 Total $ 465 PAGE 56 60 2011 46 Total $ 465 PAGE 56 Table of Contents 46 Total $ 465 PAGE 56 Table of Contents Part II of Contents Part II Item 8 NOTE 10 INCOME TAXES The Part II Item 8 NOTE 10 INCOME TAXES The component of million ) Year Ended June 30 2006 2005 2004 Current tax ) Year Ended June 30 2006 2005 2004 Current tax : Year Ended June 30 2006 2005 2004 Current tax : U.S. Ended June 30 2006 2005 2004 Current tax : U.S. Federal tax : U.S. Federal $ 4,471 $ 3,401 $ 3,766 U.S. U.S. Federal $ 4,471 $ 3,401 $ 3,766 U.S. State and $ 4,471 $ 3,401 $ 3,766 U.S. State and Local 101 3,766 U.S. State and Local 101 152 174 International 882 911 U.S. State and Local 101 152 174 International 882 911 1,056 State and Local 101 152 174 International 882 911 1,056 Current Local 101 152 174 International 882 911 1,056 Current tax 5,454 101 152 174 International 882 911 1,056 Current tax 5,454 4,464 152 174 International 882 911 1,056 Current tax 5,454 4,464 4,996 882 911 1,056 Current tax 5,454 4,464 4,996 Deferred tax ( 911 1,056 Current tax 5,454 4,464 4,996 Deferred tax ( benefit 1,056 Current tax 5,454 4,464 4,996 Deferred tax ( benefit ) Deferred tax ( benefit ) 209 ( 90 ) ( 968 ( benefit ) 209 ( 90 ) ( 968 ) Provision 209 ( 90 ) ( 968 ) Provision for income tax Provision for income tax $ 5,663 $ 4,374 $ 4,028 U.S. income tax $ 5,663 $ 4,374 $ 4,028 U.S. and international $ 5,663 $ 4,374 $ 4,028 U.S. and international component of million ) Year Ended June 30 2006 2005 2004 U.S. $ ) Year Ended June 30 2006 2005 2004 U.S. $ 11,404 Year Ended June 30 2006 2005 2004 U.S. $ 11,404 $ Ended June 30 2006 2005 2004 U.S. $ 11,404 $ 9,806 2006 2005 2004 U.S. $ 11,404 $ 9,806 $ 8,088 International 2004 U.S. $ 11,404 $ 9,806 $ 8,088 International 6,858 6,822 $ 11,404 $ 9,806 $ 8,088 International 6,858 6,822 4,108 Income $ 9,806 $ 8,088 International 6,858 6,822 4,108 Income before income 9,806 $ 8,088 International 6,858 6,822 4,108 Income before income tax $ 8,088 International 6,858 6,822 4,108 Income before income tax $ Income before income tax $ 18,262 $ 16,628 $ 12,196 The income tax $ 18,262 $ 16,628 $ 12,196 The item accounting $ 18,262 $ 16,628 $ 12,196 The item accounting for the follows : Year Ended June 30 2006 2005 2004 Federal statutory : Year Ended June 30 2006 2005 2004 Federal statutory rate Year Ended June 30 2006 2005 2004 Federal statutory rate 35.0 Ended June 30 2006 2005 2004 Federal statutory rate 35.0 % 2005 2004 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 4.6 ) % ( 3.1 ) ( 4.6 ) % ( 3.1 ) % ( 1.7 ) ( 3.1 ) % ( 1.7 ) % Examination settlement ( ) % Examination settlement ( 0.6 ) % ( 4.7 ) ( 0.6 ) % ( 4.7 ) % – Other reconciling % – Other reconciling item 1.2 % ( 0.9 ) % reconciling item 1.2 % ( 0.9 ) % ( 0.3 ) ( 0.9 ) % ( 0.3 ) % Effective rate 31.0 0.3 ) % Effective rate 31.0 % 26.3 % 33.0 % % Effective rate 31.0 % 26.3 % 33.0 % The 2006 rate 31.0 % 26.3 % 33.0 % The 2006 other reconciling 26.3 % 33.0 % The 2006 other reconciling item includes the the impact of the $ 351 million non-deductible European Commission fine European Commission fine . The 2005 other reconciling item include a reconciling item include a $ 179 million repatriation tax benefit under American Jobs Creation Act of 2004 . The 2004 other reconciling Act of 2004 . The 2004 other reconciling item include the reconciling item include the $ 208 million benefit from the resolution the impact of the $ 605 million non-deductible European Commission fine European Commission fine . PAGE 57 Table of Contents Part II of Contents Part II Item 8 The component of the deferred ( In million ) June 30 2006 2005 Deferred income tax In million ) June 30 2006 2005 Deferred income tax asset million ) June 30 2006 2005 Deferred income tax asset : : Stock-based compensation expense $ 3,630 $ 3,994 Other expense item compensation expense $ 3,630 $ 3,994 Other expense item 1,451 1,751 $ 3,994 Other expense item 1,451 1,751 Unearned revenue 1,028 915 3,994 Other expense item 1,451 1,751 Unearned revenue 1,028 915 Impaired item 1,451 1,751 Unearned revenue 1,028 915 Impaired investment 989 861 1,451 1,751 Unearned revenue 1,028 915 Impaired investment 989 861 Other revenue 1,028 915 Impaired investment 989 861 Other revenue item 102 1,028 915 Impaired investment 989 861 Other revenue item 102 213 989 861 Other revenue item 102 213 Other – 173 Deferred 861 Other revenue item 102 213 Other – 173 Deferred income item 102 213 Other – 173 Deferred income tax asset $ Deferred income tax asset $ 7,200 $ 7,907 Deferred income tax tax asset $ 7,200 $ 7,907 Deferred income tax liability : : International earnings $ ( 1,715 ) $ ( 1,393 ) ( 1,715 ) $ ( 1,393 ) Unrealized gain on investment Unrealized gain on investment ( 801 ) $ ( 1,169 ) ( 801 ) $ ( 1,169 ) Other ( 133 ) ( 1,169 ) Other ( 133 ) ( 23 ) Deferred Other ( 133 ) ( 23 ) Deferred income tax liability Deferred income tax liability ( 2,649 ) ( 2,585 ) Net liability ( 2,649 ) ( 2,585 ) Net deferred income tax deferred income tax asset $ 4,551 $ 5,322 Reported a : tax asset $ 4,551 $ 5,322 Reported a : Current deferred Current deferred tax asset $ 1,940 $ 1,701 Long-term deferred tax tax asset $ 1,940 $ 1,701 Long-term deferred tax asset 2,611 1,701 Long-term deferred tax asset 2,611 3,621 Net deferred income tax Long-term deferred tax asset 2,611 3,621 Net deferred income tax asset deferred income tax asset $ 4,551 $ 5,322 Deferred income tax tax asset $ 4,551 $ 5,322 Deferred income tax balance reflect temporary difference of approximately $ 505 million resulting from earnings for temporary difference is approximately $ 151 million . The American Jobs American Jobs Creation Act of 2004 ( the “ Act ” ) wa enacted in October 2004 . The Act creates a earnings by providing an elective 85 % dividend received deduction for , we repatriated approximately $ 780 million in dividend subject to dividend subject to the elective 85 % dividend received deduction and tax provision benefit of $ 179 million from the reversal of unremitted foreign subsidiary earnings in 2005 . The dividend wa paid dividend wa paid in June 2006 . Income tax paid were Income tax paid were $ 4.8 billion in fiscal year 2006 4.8 billion in fiscal year 2006 , $ 4.3 billion in fiscal year 2006 , $ 4.3 billion in fiscal year 2005 4.3 billion in fiscal year 2005 , and $ 2.5 billion year 2005 , and $ 2.5 billion in fiscal year 2004 2.5 billion in fiscal year 2004 . Tax Contingencies . We requirement of SFAS No . 5 , Accounting for Contingencies . , restructuring of foreign PAGE 58 Table of Contents Part II of Contents Part II Item 8 operation , tax benefit from federal income tax return through 1999 . The IRS is currently tax return for tax year 2000 through 2003 . NOTE 11 for tax year 2000 through 2003 . NOTE 11 OTHER LONG-TERM 2000 through 2003 . NOTE 11 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 2006 2005 Tax contingency $ In million ) June 30 2006 2005 Tax contingency $ 4,194 million ) June 30 2006 2005 Tax contingency $ 4,194 $ 2006 2005 Tax contingency $ 4,194 $ 3,066 Legal contingency 1,022 Tax contingency $ 4,194 $ 3,066 Legal contingency 1,022 961 Employee 4,194 $ 3,066 Legal contingency 1,022 961 Employee stock option transfer $ 3,066 Legal contingency 1,022 961 Employee stock option transfer program stock option transfer program – 48 Other 71 83 Other long-term transfer program – 48 Other 71 83 Other long-term liability $ program – 48 Other 71 83 Other long-term liability $ 5,287 83 Other long-term liability $ 5,287 $ 4,158 NOTE 12 STOCKHOLDERS long-term liability $ 5,287 $ 4,158 NOTE 12 STOCKHOLDERS ’ EQUITY $ 5,287 $ 4,158 NOTE 12 STOCKHOLDERS ’ EQUITY Shares of million ) Year Ended June 30 2006 2005 2004 Balance , ) Year Ended June 30 2006 2005 2004 Balance , beginning Year Ended June 30 2006 2005 2004 Balance , beginning of Ended June 30 2006 2005 2004 Balance , beginning of year Balance , beginning of year 10,710 10,862 10,771 Issued 106 160 , beginning of year 10,710 10,862 10,771 Issued 106 160 215 beginning of year 10,710 10,862 10,771 Issued 106 160 215 Repurchased year 10,710 10,862 10,771 Issued 106 160 215 Repurchased ( 754 10,710 10,862 10,771 Issued 106 160 215 Repurchased ( 754 ) 10,862 10,771 Issued 106 160 215 Repurchased ( 754 ) ( 106 160 215 Repurchased ( 754 ) ( 312 ) ( Repurchased ( 754 ) ( 312 ) ( 124 ) Balance ) ( 312 ) ( 124 ) Balance , end of Balance , end of year 10,062 10,710 10,862 On July 20 , end of year 10,062 10,710 10,862 On July 20 , end of year 10,062 10,710 10,862 On July 20 , 2006 10,062 10,710 10,862 On July 20 , 2006 , we announced 10,862 On July 20 , 2006 , we announced the completion the completion of the $ 30 billion Microsoft common stock repurchase Board of Directors on July 20 , 2004 . The repurchase Directors on July 20 , 2004 . The repurchase were made in billion ) Fiscal year 2006 ( 1 ) 2005 ( ) Fiscal year 2006 ( 1 ) 2005 ( 1 ) year 2006 ( 1 ) 2005 ( 1 ) 2004 Shares ( 1 ) 2005 ( 1 ) 2004 Shares Amount Shares ) 2005 ( 1 ) 2004 Shares Amount Shares Amount Shares Amount Shares Amount First quarter 114.1 $ 3.0 22.8 $ 0.6 Amount First quarter 114.1 $ 3.0 22.8 $ 0.6 43.3 $ First quarter 114.1 $ 3.0 22.8 $ 0.6 43.3 $ 1.2 114.1 $ 3.0 22.8 $ 0.6 43.3 $ 1.2 Second quarter $ 3.0 22.8 $ 0.6 43.3 $ 1.2 Second quarter 283.1 22.8 $ 0.6 43.3 $ 1.2 Second quarter 283.1 7.7 23.6 43.3 $ 1.2 Second quarter 283.1 7.7 23.6 0.7 30.5 0.8 $ 1.2 Second quarter 283.1 7.7 23.6 0.7 30.5 0.8 Third 1.2 Second quarter 283.1 7.7 23.6 0.7 30.5 0.8 Third quarter Second quarter 283.1 7.7 23.6 0.7 30.5 0.8 Third quarter 180.7 quarter 283.1 7.7 23.6 0.7 30.5 0.8 Third quarter 180.7 4.9 283.1 7.7 23.6 0.7 30.5 0.8 Third quarter 180.7 4.9 95.1 0.7 30.5 0.8 Third quarter 180.7 4.9 95.1 2.4 49.9 1.4 30.5 0.8 Third quarter 180.7 4.9 95.1 2.4 49.9 1.4 Fourth 0.8 Third quarter 180.7 4.9 95.1 2.4 49.9 1.4 Fourth quarter Third quarter 180.7 4.9 95.1 2.4 49.9 1.4 Fourth quarter 175.6 quarter 180.7 4.9 95.1 2.4 49.9 1.4 Fourth quarter 175.6 4.1 180.7 4.9 95.1 2.4 49.9 1.4 Fourth quarter 175.6 4.1 170.7 2.4 49.9 1.4 Fourth quarter 175.6 4.1 170.7 4.3 – – 49.9 1.4 Fourth quarter 175.6 4.1 170.7 4.3 – – Total 1.4 Fourth quarter 175.6 4.1 170.7 4.3 – – Total 753.5 Fourth quarter 175.6 4.1 170.7 4.3 – – Total 753.5 $ 170.7 4.3 – – Total 753.5 $ 19.7 312.2 $ 8.0 – – Total 753.5 $ 19.7 312.2 $ 8.0 123.7 $ – Total 753.5 $ 19.7 312.2 $ 8.0 123.7 $ 3.4 753.5 $ 19.7 312.2 $ 8.0 123.7 $ 3.4 ( 1 $ 19.7 312.2 $ 8.0 123.7 $ 3.4 ( 1 ) 312.2 $ 8.0 123.7 $ 3.4 ( 1 ) All amount 8.0 123.7 $ 3.4 ( 1 ) All amount repurchased in amount repurchased in fiscal year 2005 and in fiscal year 2006 2005 and in fiscal year 2006 were repurchased under the repurchase Board of Directors on July 20 , 2004 . PAGE 59 Directors on July 20 , 2004 . PAGE 59 Table of 20 , 2004 . PAGE 59 Table of Contents Part II of Contents Part II Item 8 In fiscal year 2006 , Item 8 In fiscal year 2006 , our Board of Directors million ) Payment Date September 23 , 2005 $ 0.08 November Payment Date September 23 , 2005 $ 0.08 November 17 , September 23 , 2005 $ 0.08 November 17 , 2005 $ , 2005 $ 0.08 November 17 , 2005 $ 846 December $ 0.08 November 17 , 2005 $ 846 December 8 , November 17 , 2005 $ 846 December 8 , 2005 December , 2005 $ 846 December 8 , 2005 December 14 , $ 846 December 8 , 2005 December 14 , 2005 $ December 8 , 2005 December 14 , 2005 $ 0.09 February , 2005 December 14 , 2005 $ 0.09 February 17 , December 14 , 2005 $ 0.09 February 17 , 2006 $ , 2005 $ 0.09 February 17 , 2006 $ 926 March $ 0.09 February 17 , 2006 $ 926 March 9 , February 17 , 2006 $ 926 March 9 , 2006 March , 2006 $ 926 March 9 , 2006 March 27 , $ 926 March 9 , 2006 March 27 , 2006 $ March 9 , 2006 March 27 , 2006 $ 0.09 May , 2006 March 27 , 2006 $ 0.09 May 17 , March 27 , 2006 $ 0.09 May 17 , 2006 $ , 2006 $ 0.09 May 17 , 2006 $ 916 June $ 0.09 May 17 , 2006 $ 916 June 8 , May 17 , 2006 $ 916 June 8 , 2006 June , 2006 $ 916 June 8 , 2006 June 21 , $ 916 June 8 , 2006 June 21 , 2006 $ June 8 , 2006 June 21 , 2006 $ 0.09 August , 2006 June 21 , 2006 $ 0.09 August 17,2006 $ June 21 , 2006 $ 0.09 August 17,2006 $ 906 ( , 2006 $ 0.09 August 17,2006 $ 906 ( 1 ) $ 0.09 August 17,2006 $ 906 ( 1 ) September 14 August 17,2006 $ 906 ( 1 ) September 14 , 2006 906 ( 1 ) September 14 , 2006 ( 1 ) 1 ) September 14 , 2006 ( 1 ) The dividend September 14 , 2006 ( 1 ) The dividend declared on The dividend declared on June 21 , 2006 will be paid declared on June 21 , 2006 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2006 . In fiscal a of June 30 , 2006 . In fiscal year 2005 2006 . In fiscal year 2005 , our Board of Directors million ) Payment Date July 20 , 2004 $ 0.08 August Payment Date July 20 , 2004 $ 0.08 August 25 , July 20 , 2004 $ 0.08 August 25 , 2004 $ , 2004 $ 0.08 August 25 , 2004 $ 870 September $ 0.08 August 25 , 2004 $ 870 September 14 , August 25 , 2004 $ 870 September 14 , 2004 July , 2004 $ 870 September 14 , 2004 July 20 , $ 870 September 14 , 2004 July 20 , 2004 $ September 14 , 2004 July 20 , 2004 $ 3.00 November , 2004 July 20 , 2004 $ 3.00 November 17 , July 20 , 2004 $ 3.00 November 17 , 2004 $ , 2004 $ 3.00 November 17 , 2004 $ 32,640 December $ 3.00 November 17 , 2004 $ 32,640 December 2 , November 17 , 2004 $ 32,640 December 2 , 2004 September , 2004 $ 32,640 December 2 , 2004 September 15 , $ 32,640 December 2 , 2004 September 15 , 2004 $ December 2 , 2004 September 15 , 2004 $ 0.08 November , 2004 September 15 , 2004 $ 0.08 November 17 , September 15 , 2004 $ 0.08 November 17 , 2004 $ , 2004 $ 0.08 November 17 , 2004 $ 871 December $ 0.08 November 17 , 2004 $ 871 December 2 , November 17 , 2004 $ 871 December 2 , 2004 December , 2004 $ 871 December 2 , 2004 December 8 , $ 871 December 2 , 2004 December 8 , 2004 $ December 2 , 2004 December 8 , 2004 $ 0.08 February , 2004 December 8 , 2004 $ 0.08 February 17 , December 8 , 2004 $ 0.08 February 17 , 2005 $ , 2004 $ 0.08 February 17 , 2005 $ 868 March $ 0.08 February 17 , 2005 $ 868 March 10 , February 17 , 2005 $ 868 March 10 , 2005 March , 2005 $ 868 March 10 , 2005 March 23 , $ 868 March 10 , 2005 March 23 , 2005 $ March 10 , 2005 March 23 , 2005 $ 0.08 May , 2005 March 23 , 2005 $ 0.08 May 18 , March 23 , 2005 $ 0.08 May 18 , 2005 $ , 2005 $ 0.08 May 18 , 2005 $ 860 June $ 0.08 May 18 , 2005 $ 860 June 9 , May 18 , 2005 $ 860 June 9 , 2005 June , 2005 $ 860 June 9 , 2005 June 15 , $ 860 June 9 , 2005 June 15 , 2005 $ June 9 , 2005 June 15 , 2005 $ 0.08 August , 2005 June 15 , 2005 $ 0.08 August 17 , June 15 , 2005 $ 0.08 August 17 , 2005 $ , 2005 $ 0.08 August 17 , 2005 $ 857 ( $ 0.08 August 17 , 2005 $ 857 ( 1 ) August 17 , 2005 $ 857 ( 1 ) September 8 , 2005 $ 857 ( 1 ) September 8 , 2005 857 ( 1 ) September 8 , 2005 ( 1 ) 1 ) September 8 , 2005 ( 1 ) The dividend September 8 , 2005 ( 1 ) The dividend declared on The dividend declared on June 15 , 2005 wa included in declared on June 15 , 2005 wa included in other current current liability a of June 30 , 2005 . NOTE 13 a of June 30 , 2005 . NOTE 13 OTHER COMPREHENSIVE 30 , 2005 . NOTE 13 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 2006 2005 2004 Net gains/ ) Year Ended June 30 2006 2005 2004 Net gains/ ( Year Ended June 30 2006 2005 2004 Net gains/ ( loss Ended June 30 2006 2005 2004 Net gains/ ( loss ) tax effect of $ ( 25 ) in 2006 , $ $ ( 25 ) in 2006 , $ ( 63 ) in 2006 , $ ( 63 ) in 2005 , and $ ( 63 ) in 2005 , and $ 49 in in 2005 , and $ 49 in 2004 $ ( 47 , and $ 49 in 2004 $ ( 47 ) $ 49 in 2004 $ ( 47 ) $ ( 116 ) ( 47 ) $ ( 116 ) $ 92 Reclassification adjustment $ ( 116 ) $ 92 Reclassification adjustment for loss included of tax effect of $ 66 in 2006 , $ 31 effect of $ 66 in 2006 , $ 31 in 2005 66 in 2006 , $ 31 in 2005 , and $ 2006 , $ 31 in 2005 , and $ 5 in in 2005 , and $ 5 in 2004 123 58 9 , and $ 5 in 2004 123 58 9 Net gains/ and $ 5 in 2004 123 58 9 Net gains/ ( $ 5 in 2004 123 58 9 Net gains/ ( loss 5 in 2004 123 58 9 Net gains/ ( loss ) loss ) on derivative instrument 76 ( 58 ) 101 Net on derivative instrument 76 ( 58 ) 101 Net unrealized investment instrument 76 ( 58 ) 101 Net unrealized investment gains/ ( tax effect of $ ( 199 ) in 2006 , $ $ ( 199 ) in 2006 , $ ( 69 ) in 2006 , $ ( 69 ) in 2005 , and $ ( 69 ) in 2005 , and $ ( 994 2005 , and $ ( 994 ) in 2004 ( 369 $ ( 994 ) in 2004 ( 369 ) ( 128 994 ) in 2004 ( 369 ) ( 128 ) ( 2004 ( 369 ) ( 128 ) ( 1,846 ) Reclassification ) ( 128 ) ( 1,846 ) Reclassification adjustment for loss of tax effect of $ 47 in 2006 , $ 269 effect of $ 47 in 2006 , $ 269 in 2005 47 in 2006 , $ 269 in 2005 , and $ 2006 , $ 269 in 2005 , and $ 524 in in 2005 , and $ 524 in 2004 87 499 973 , and $ 524 in 2004 87 499 973 Net unrealized and $ 524 in 2004 87 499 973 Net unrealized investment $ 524 in 2004 87 499 973 Net unrealized investment gains/ 524 in 2004 87 499 973 Net unrealized investment gains/ ( gains/ ( loss ) ( 282 ) 371 ( 873 ) loss ) ( 282 ) 371 ( 873 ) Translation adjustment ( 282 ) 371 ( 873 ) Translation adjustment and other ) Translation adjustment and other 9 ( 6 ) 51 Other adjustment and other 9 ( 6 ) 51 Other comprehensive income other 9 ( 6 ) 51 Other comprehensive income / ( ( loss ) $ ( 197 ) $ 307 $ ( $ ( 197 ) $ 307 $ ( 721 ) PAGE ) $ 307 $ ( 721 ) PAGE 60 Table of $ ( 721 ) PAGE 60 Table of Contents Part II of Contents Part II Item 8 The component of accumulated other million ) Year Ended June 30 2006 2005 2004 Net gain ) Year Ended June 30 2006 2005 2004 Net gain on Year Ended June 30 2006 2005 2004 Net gain on derivative Ended June 30 2006 2005 2004 Net gain on derivative instrument gain on derivative instrument $ 103 $ 27 $ 85 Net derivative instrument $ 103 $ 27 $ 85 Net unrealized investment $ 103 $ 27 $ 85 Net unrealized investment gain 1,062 85 Net unrealized investment gain 1,062 1,344 973 Translation adjustment and Net unrealized investment gain 1,062 1,344 973 Translation adjustment and other unrealized investment gain 1,062 1,344 973 Translation adjustment and other 64 973 Translation adjustment and other 64 55 61 Accumulated other comprehensive Translation adjustment and other 64 55 61 Accumulated other comprehensive income adjustment and other 64 55 61 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,229 $ 1,426 $ 1,119 NOTE comprehensive income $ 1,229 $ 1,426 $ 1,119 NOTE 14 EMPLOYEE $ 1,229 $ 1,426 $ 1,119 NOTE 14 EMPLOYEE STOCK AND $ 1,426 $ 1,119 NOTE 14 EMPLOYEE STOCK AND SAVINGS PLANS AND SAVINGS PLANS Effective July 1 , 2005 , we adopted PLANS Effective July 1 , 2005 , we adopted SFAS No we adopted SFAS No . 123 ( R ) , Share-Based provision of SFAS No . 123 , Stock-Based Compensation , and , and SFAS No . 123 ( R ) were materially adoption of SFAS No . 123 ( R ) did not adoption of SFAS No . 123 ( R ) , benefit flow . SFAS No . 123 ( R ) requires excess : ( In million ) 2006 2005 2004 Total stock-based compensation ( In million ) 2006 2005 2004 Total stock-based compensation $ In million ) 2006 2005 2004 Total stock-based compensation $ 1,715 2004 Total stock-based compensation $ 1,715 $ 2,448 $ 5,734 Income stock-based compensation $ 1,715 $ 2,448 $ 5,734 Income tax benefit $ 1,715 $ 2,448 $ 5,734 Income tax benefit related to related to stock-based compensation $ 600 $ 857 $ 2,007 Employee stock-based compensation $ 600 $ 857 $ 2,007 Employee Stock Purchase $ 600 $ 857 $ 2,007 Employee Stock Purchase Plan . accordance with SFAS No . 123 ( R ) . The period that became effective July 1 , 2004 . As a became effective July 1 , 2004 . As a result , , beginning in fiscal year 2005 , share of our common employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation period . During fiscal year 2006 employee purchased 17.2 million share fiscal year 2006 employee purchased 17.2 million share at an average an average price of $ 23.02 per share . At June per share . At June 30 , 2006 , 141.9 million . At June 30 , 2006 , 141.9 million share were June 30 , 2006 , 141.9 million share were reserved for issuance . During fiscal year 2005 employee purchased 16.4 million share fiscal year 2005 employee purchased 16.4 million share at average price at average price of $ 23.33 per share . Under the effect previous to fiscal year 2005 , share of our common at six month interval at 85 % of the lower of having a value not exceeding 15 % of their gross compensation period . During fiscal year 2004 employee purchased 16.7 million share fiscal year 2004 employee purchased 16.7 million share at average price at average price of $ 22.74 per share . Savings Plan States that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their pretax salary with a maximum contribution of 3 % of a participant ’ for all plan were $ 178 million , $ 154 million $ 178 million , $ 154 million , and $ 141 154 million , and $ 141 million in fiscal year 2006 141 million in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Matching contribution Microsoft common stock . PAGE 61 Table of Contents Part II of Contents Part II Item 8 Stock Plans . We have and advisor . At June 30 , 2006 , an aggregate . At June 30 , 2006 , an aggregate of 812 2006 , an aggregate of 812 million share were authorized for below ) in fiscal year 2004 have been removed from our our plan . On November 9 , 2004 , our shareholder . On November 9 , 2004 , our shareholder approved amendment pre-dividend value after the $ 3.00 special dividend . Additional award and payment of the $ 3.00 special dividend on December 2 3.00 special dividend on December 2 , 2004 , an adjustment dividend on December 2 , 2004 , an adjustment to the resulting in a total of 96 million option and 6.7 million of 96 million option and 6.7 million stock award being issued stock award were increased by 3.5 million share . We issue option exercise . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30 billion in Microsoft common stock SPSAs issued in fiscal year 2004 , 2005 , and 2006 in fiscal year 2004 , 2005 , and 2006 wa July 2004 , 2005 , and 2006 wa July 1 , 2003 , and 2006 wa July 1 , 2003 through June 30 2006 wa July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for certain executive officer ) award to be issued wa 37.0 million , based on the first quarter of fiscal year 2007 . An additional one-third of SPSAs issued in fiscal year 2005 and 2006 were given only in fiscal year 2005 and 2006 were given only to newly grant SPSAs for fiscal year 2007 with a performance period of a performance period of July 1 , 2006 through June 30 period of July 1 , 2006 through June 30 , 2007 1 , 2006 through June 30 , 2007 . At the 2006 through June 30 , 2007 . At the end of by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage will sole discretion . An additional 15 % of the total stock : ( In million ) 2006 2005 2004 Dividend per share ( In million ) 2006 2005 2004 Dividend per share $ In million ) 2006 2005 2004 Dividend per share $ 0.08 2004 Dividend per share $ 0.08 - $ 0.09 $ 0.08 share $ 0.08 - $ 0.09 $ 0.08 $ 0.16 Interest 0.08 - $ 0.09 $ 0.08 $ 0.16 Interest rate range $ 0.09 $ 0.08 $ 0.16 Interest rate range 3.2 % $ 0.16 Interest rate range 3.2 % - 5.3 % 1.3 rate range 3.2 % - 5.3 % 1.3 % - 4.3 3.2 % - 5.3 % 1.3 % - 4.3 % 0.9 5.3 % 1.3 % - 4.3 % 0.9 % - 4.2 1.3 % - 4.3 % 0.9 % - 4.2 % The 4.3 % 0.9 % - 4.2 % The dividend per share share amount for fiscal year 2006 and fiscal year 2005 are year 2006 and fiscal year 2005 are quarterly dividend amount . The dividend amount of $ 0.16 wa the total dividend per per share for fiscal year 2004 . PAGE 62 Table of fiscal year 2004 . PAGE 62 Table of Contents Part II of Contents Part II Item 8 During fiscal year 2006 , Item 8 During fiscal year 2006 , the following activity occurred : Nonvested balance at July 1 , 2005 71.3 $ 23.92 balance at July 1 , 2005 71.3 $ 23.92 Granted 47.3 at July 1 , 2005 71.3 $ 23.92 Granted 47.3 24.70 1 , 2005 71.3 $ 23.92 Granted 47.3 24.70 Vested ( 2005 71.3 $ 23.92 Granted 47.3 24.70 Vested ( 15.7 ) 71.3 $ 23.92 Granted 47.3 24.70 Vested ( 15.7 ) 23.85 Granted 47.3 24.70 Vested ( 15.7 ) 23.85 Forfeited ( 4.8 24.70 Vested ( 15.7 ) 23.85 Forfeited ( 4.8 ) 23.60 15.7 ) 23.85 Forfeited ( 4.8 ) 23.60 Nonvested balance at 23.85 Forfeited ( 4.8 ) 23.60 Nonvested balance at June 30 23.60 Nonvested balance at June 30 , 2006 98.1 $ 24.25 balance at June 30 , 2006 98.1 $ 24.25 Shared performance at June 30 , 2006 98.1 $ 24.25 Shared performance stock 30 , 2006 98.1 $ 24.25 Shared performance stock award : : Nonvested balance at July 1 , 2005 35.3 $ 23.54 balance at July 1 , 2005 35.3 $ 23.54 Granted 3.1 at July 1 , 2005 35.3 $ 23.54 Granted 3.1 24.80 1 , 2005 35.3 $ 23.54 Granted 3.1 24.80 Vested – 2005 35.3 $ 23.54 Granted 3.1 24.80 Vested – – Forfeited 35.3 $ 23.54 Granted 3.1 24.80 Vested – – Forfeited ( Vested – – Forfeited ( 1.8 ) 24.92 Nonvested balance at – Forfeited ( 1.8 ) 24.92 Nonvested balance at June 30 24.92 Nonvested balance at June 30 , 2006 36.6 $ 23.57 balance at June 30 , 2006 36.6 $ 23.57 As of at June 30 , 2006 36.6 $ 23.57 As of June 30 , 2006 36.6 $ 23.57 As of June 30 , $ 23.57 As of June 30 , 2006 , there were As of June 30 , 2006 , there were $ 1.69 2006 , there were $ 1.69 billion and $ 383 million $ 1.69 billion and $ 383 million of total unrecognized compensation a weighted average period of 3.1 year and 2.2 year , period of 3.1 year and 2.2 year , respectively . During , respectively . During the 12 month ended June 30 , the 12 month ended June 30 , 2005 and June 30 month ended June 30 , 2005 and June 30 , 2004 30 , 2005 and June 30 , 2004 , the following 2005 and June 30 , 2004 , the following activity occurred fair value ) Fiscal Year 2005 Fiscal Year 2004 Stock award Fiscal Year 2005 Fiscal Year 2004 Stock award granted 41.0 32.6 Year 2004 Stock award granted 41.0 32.6 Weighted average grant-date fair 2004 Stock award granted 41.0 32.6 Weighted average grant-date fair value average grant-date fair value $ 24.03 $ 24.09 Shared performance stock fair value $ 24.03 $ 24.09 Shared performance stock award granted Shared performance stock award granted 3.7 31.7 Weighted average grant-date fair performance stock award granted 3.7 31.7 Weighted average grant-date fair value average grant-date fair value $ 24.35 $ 23.62 Stock Options . fair value $ 24.35 $ 23.62 Stock Options . In fiscal Options . In fiscal year 2004 , we began granting employee plan . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and grant . Options granted after 2001 vest over four and one-half date of grant . Approximately 2.9 million stock option were granted business acquisition during fiscal year 2006 . No stock option were during the year ended June 30 , 2005 . In fiscal year ended June 30 , 2005 . In fiscal year 2004 2005 . In fiscal year 2004 , approximately two million stock acquisition . During fiscal year 2004 , we completed an employee a strike price of $ 33.00 or higher to JPMorgan . stock-based compensation expense of $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) which second quarter of fiscal year 2004 . As of June 30 2004 . As of June 30 , 2006 , 237 million As of June 30 , 2006 , 237 million option transferred June 30 , 2006 , 237 million option transferred to JPMorgan strike price ranging from $ 28.60 to $ 89.58 per share from $ 28.60 to $ 89.58 per share and have expiration expiration date extending through December 2006 . PAGE 63 Table of through December 2006 . PAGE 63 Table of Contents Part II of Contents Part II Item 8 Employee stock option outstanding were million ) Balance , July 1 , 2005 864 $ 27.41 Balance , July 1 , 2005 864 $ 27.41 Granted 3 , July 1 , 2005 864 $ 27.41 Granted 3 23.54 1 , 2005 864 $ 27.41 Granted 3 23.54 Exercised ( 2005 864 $ 27.41 Granted 3 23.54 Exercised ( 76 ) 864 $ 27.41 Granted 3 23.54 Exercised ( 76 ) 20.59 Granted 3 23.54 Exercised ( 76 ) 20.59 Canceled ( 33 23.54 Exercised ( 76 ) 20.59 Canceled ( 33 ) 32.13 76 ) 20.59 Canceled ( 33 ) 32.13 Forfeited ( 8 20.59 Canceled ( 33 ) 32.13 Forfeited ( 8 ) 23.01 33 ) 32.13 Forfeited ( 8 ) 23.01 Balance , June 32.13 Forfeited ( 8 ) 23.01 Balance , June 30 , ) 23.01 Balance , June 30 , 2006 750 $ 27.92 Balance , June 30 , 2006 750 $ 27.92 4.16 $ , June 30 , 2006 750 $ 27.92 4.16 $ 452 30 , 2006 750 $ 27.92 4.16 $ 452 Exercisable , , 2006 750 $ 27.92 4.16 $ 452 Exercisable , June 750 $ 27.92 4.16 $ 452 Exercisable , June 30 , $ 452 Exercisable , June 30 , 2006 673 $ 28.55 Exercisable , June 30 , 2006 673 $ 28.55 3.93 $ , June 30 , 2006 673 $ 28.55 3.93 $ 343 30 , 2006 673 $ 28.55 3.93 $ 343 Included in , 2006 673 $ 28.55 3.93 $ 343 Included in the 673 $ 28.55 3.93 $ 343 Included in the option outstanding exercise price range of $ 0 to $ 150.93 and a of $ 0 to $ 150.93 and a weighted average exercise average exercise price of $ 11.26 . As of June 30 11.26 . As of June 30 , 2006 , there were As of June 30 , 2006 , there were $ 402 2006 , there were $ 402 million of total unrecognized compensation year . During fiscal year 2006 , 2005 , and 2004 During fiscal year 2006 , 2005 , and 2004 the following 2006 , 2005 , and 2004 the following activity occurred under : ( In million ) 2006 2005 2004 Total intrinsic value ( In million ) 2006 2005 2004 Total intrinsic value of In million ) 2006 2005 2004 Total intrinsic value of stock of stock option exercised $ 491 $ 940 $ 2,971 Total option exercised $ 491 $ 940 $ 2,971 Total fair value $ 491 $ 940 $ 2,971 Total fair value of stock value of stock award vested 377 198 20 Cash received and of stock award vested 377 198 20 Cash received and income stock award vested 377 198 20 Cash received and income tax option exercise for fiscal year 2006 were $ 1.71 billion and fiscal year 2006 were $ 1.71 billion and $ 183 million $ 1.71 billion and $ 183 million , respectively . NOTE million , respectively . NOTE 15 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 2006 2005 2004 Net income ) Year Ended June 30 2006 2005 2004 Net income available Year Ended June 30 2006 2005 2004 Net income available for Ended June 30 2006 2005 2004 Net income available for common shareholder ( A ) $ 12,599 $ 12,254 $ 8,168 Weighted A ) $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding $ 12,599 $ 12,254 $ 8,168 Weighted average outstanding share of common stock ( B ) 10,438 10,839 10,803 Dilutive effect of stock ( B ) 10,438 10,839 10,803 Dilutive effect of employee ( B ) 10,438 10,839 10,803 Dilutive effect of employee stock employee stock option and award 93 67 91 Common stock and stock option and award 93 67 91 Common stock and common option and award 93 67 91 Common stock and common stock stock equivalent ( C ) 10,531 10,906 10,894 Earnings per share equivalent ( C ) 10,531 10,906 10,894 Earnings per share : ( C ) 10,531 10,906 10,894 Earnings per share : Basic Basic ( A/B ) $ 1.21 $ 1.13 $ 0.76 Diluted A/B ) $ 1.21 $ 1.13 $ 0.76 Diluted ( A/C $ 1.21 $ 1.13 $ 0.76 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.20 $ 1.12 $ 0.75 PAGE A/C ) $ 1.20 $ 1.12 $ 0.75 PAGE 64 Table $ 1.20 $ 1.12 $ 0.75 PAGE 64 Table of Contents $ 1.12 $ 0.75 PAGE 64 Table of Contents Part II of Contents Part II Item 8 For the year ended June For the year ended June 30 , 2006 , 2005 , year ended June 30 , 2006 , 2005 , and 2004 June 30 , 2006 , 2005 , and 2004 , 649 2006 , 2005 , and 2004 , 649 million , 854 2005 , and 2004 , 649 million , 854 million , 2004 , 649 million , 854 million , and 1.2 billion , 854 million , and 1.2 billion share , respectively , For the year ended June 30 , 2006 , 1.2 million year ended June 30 , 2006 , 1.2 million shared performance June 30 , 2006 , 1.2 million shared performance stock award award , out of the 36.6 million targeted amount outstanding , , a discussed in Note 14 – Employee Stock and Savings and Savings Plans . NOTE 16 COMMITMENTS AND GUARANTEES We have for operating lease wa $ 276 million , $ 299 million $ 276 million , $ 299 million , and $ 331 299 million , and $ 331 million , in fiscal year million , in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 , respectively 2006 , 2005 , and 2004 , respectively . Future minimum million ) Year Ended June 30 Amount 2007 $ 250 2008 Year Ended June 30 Amount 2007 $ 250 2008 193 2009 June 30 Amount 2007 $ 250 2008 193 2009 138 2010 30 Amount 2007 $ 250 2008 193 2009 138 2010 105 Amount 2007 $ 250 2008 193 2009 138 2010 105 2011 2007 $ 250 2008 193 2009 138 2010 105 2011 and $ 250 2008 193 2009 138 2010 105 2011 and thereafter 250 2008 193 2009 138 2010 105 2011 and thereafter 199 2008 193 2009 138 2010 105 2011 and thereafter 199 $ 193 2009 138 2010 105 2011 and thereafter 199 $ 885 2010 105 2011 and thereafter 199 $ 885 We have committed 2011 and thereafter 199 $ 885 We have committed $ 234 885 We have committed $ 234 million for constructing new building value . As of June 30 , 2006 , the maximum As of June 30 , 2006 , the maximum amount of value guarantee wa approximately $ 271 million . We believe that indemnification under SFAS No . 5 , Accounting for Contingencies , interpreted by FIN No . 45 , Guarantor ’ s Accounting Our warranty accrual total $ 10 million a of June 30 10 million a of June 30 , 2006 . There ha a of June 30 , 2006 . There ha been no any period presented . NOTE 17 CONTINGENCIES Government competition law matter law matter . On March 25 , 2004 , the European . On March 25 , 2004 , the European Commission issued competitor and to develop PAGE 65 Table of Contents Part II of Contents Part II Item 8 and make available a version imposed a fine of € 497 million , which resulted in third quarter of fiscal year 2004 of € 497 million ( fiscal year 2004 of € 497 million ( $ 605 million € 497 million ( $ 605 million ) . We filed of First Instance on June 6 , 2004 . On December Instance on June 6 , 2004 . On December 22 , , 2004 . On December 22 , 2004 , the Court . On December 22 , 2004 , the Court ordered that the appeal occurred in April 2006 . We continue to contest position vigorously . In December 2005 , the Commission issued a in full compliance with the 2004 decree . In March 2006 2004 decree . In March 2006 , the Commission conducted an the Statement . On July 12 , 2006 , the European . On July 12 , 2006 , the European Commission announced technical documentation requirement of the 2004 Decision , and levied a levied a fine of € 281 million ( $ 351 million € 281 million ( $ 351 million ) . We will First Instance . On December 7 , 2005 , the Korean . On December 7 , 2005 , the Korean Fair Trade a fine of approximately $ 34 million . The KFTC issued and corrective order on February 23 , 2006 . The KFTC order on February 23 , 2006 . The KFTC held that , which became effective August 24 , 2006 , we can became effective August 24 , 2006 , we can no longer High Court . On May 22 , 2006 , the KFTC . On May 22 , 2006 , the KFTC denied our for which we have a 50 % or greater market share market share . On August 23 , 2006 , we announced . On August 23 , 2006 , we announced the release under federal law and in 18 state . Ten of those direct purchaser . On April 18 , 2006 , the Court . On April 18 , 2006 , the Court of Appeals purchaser claim . Courts in 18 state have ruled that indirect a class action . In 2003 , we reached an agreement to settle all claim in 27 consolidated case in that state made available to certain PAGE 66 Table of Contents Part II of Contents Part II Item 8 school in California in the settlement , is approximately $ 2.5 billion . The actual cost case will range between $ 1.5 billion and $ 1.7 billion $ 1.5 billion and $ 1.7 billion , with the actual accordance with SFAS No . 5 , Accounting for Contingencies , , and FIN No . 14 , Reasonable Estimation of the a Loss , at June 30 , 2006 , we have , at June 30 , 2006 , we have recorded a these claim of approximately $ 1.2 billion , which reflects our our estimated exposure of $ 1.5 billion le payment made to to date of approximately $ 300 million , primarily for administrative and claim . On August 27 , 2004 , the City . On August 27 , 2004 , the City and County during the period from February 18 , 1995 to the date period from February 18 , 1995 to the date of trial complaint wa granted on April 18 , 2005 with leave to granted on April 18 , 2005 with leave to file an the lawsuit . On November 12 , 2004 , Novell , . On November 12 , 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . On between June 1994 and March 1996 . On June 10 , March 1996 . On June 10 , 2005 , the trial . On June 10 , 2005 , the trial court granted a defendant in more than 35 patent infringement case that we District of Illinois on February 2 , 1999 , the plaintiff Illinois on February 2 , 1999 , the plaintiff alleged infringement of Windows . On August 11 , 2003 , the jury . On August 11 , 2003 , the jury awarded the awarded the plaintiff approximately $ 520 million in damage for infringement patent wa issued through September 2001 . The plaintiff are seeking accounting for damage from September 2001 to the present . On the present . On January 14 , 2004 , the trial . On January 14 , 2004 , the trial court entered entered final judgment of $ 565 million , including post-trial interest including post-trial interest of $ 45 million , and entered an We appealed and on March 2 , 2005 the Court of and on March 2 , 2005 the Court of Appeals for in San Diego on April 8 , 2003 , we are Diego on April 8 , 2003 , we are seeking a set to begin on November 20 , 2006 . On March begin on November 20 , 2006 . On March 28 , , 2006 . On March 28 , 2006 , Lucent filed . On March 28 , 2006 , Lucent filed a new Diego , claiming that Xbox 360 violates one of the patent the patent that earlier PAGE 67 Table of Contents Part II of Contents Part II Item 8 had been dismissed from the District of California on March 7 , 2003 , the plaintiff California on March 7 , 2003 , the plaintiff ha accused patent and damage of $ 8.9 million were awarded . The the damage award to $ 5.9 million . The court also patent right . In April 2006 , the jury rendered a the jury rendered a $ 115 million verdict against u . against u . In August 2006 , the trial court increased court increased damage by $ 25 million pursuant to the jury District of Washington on May 18 , 2006 , a subsidiary Washington on May 18 , 2006 , a subsidiary of Symantec future . As of June 30 , 2006 , we had As of June 30 , 2006 , we had accrued aggregate accrued aggregate liability totaling $ 1.0 billion in other current liability other current liability and $ 1.0 billion in other long-term liability could be up to $ 1.0 billion in aggregate beyond recorded becomes reasonably estimable . NOTE 18 SEGMENT INFORMATION Segment revenue and million ) Year Ended June 30 2006 2005 2004 Revenue Client ) Year Ended June 30 2006 2005 2004 Revenue Client $ Year Ended June 30 2006 2005 2004 Revenue Client $ 13,001 Ended June 30 2006 2005 2004 Revenue Client $ 13,001 $ 2005 2004 Revenue Client $ 13,001 $ 11,972 $ 11,293 Server Revenue Client $ 13,001 $ 11,972 $ 11,293 Server and Tools $ 13,001 $ 11,972 $ 11,293 Server and Tools 10,542 9,197 $ 11,293 Server and Tools 10,542 9,197 8,031 Information Worker 12,380 11,293 Server and Tools 10,542 9,197 8,031 Information Worker 12,380 11,702 Server and Tools 10,542 9,197 8,031 Information Worker 12,380 11,702 10,990 10,542 9,197 8,031 Information Worker 12,380 11,702 10,990 Microsoft Business Solutions 9,197 8,031 Information Worker 12,380 11,702 10,990 Microsoft Business Solutions 906 8,031 Information Worker 12,380 11,702 10,990 Microsoft Business Solutions 906 776 11,702 10,990 Microsoft Business Solutions 906 776 735 MSN 2,488 2,486 10,990 Microsoft Business Solutions 906 776 735 MSN 2,488 2,486 2,498 Microsoft Business Solutions 906 776 735 MSN 2,488 2,486 2,498 Mobile Solutions 906 776 735 MSN 2,488 2,486 2,498 Mobile and Embedded 906 776 735 MSN 2,488 2,486 2,498 Mobile and Embedded Devices 776 735 MSN 2,488 2,486 2,498 Mobile and Embedded Devices 365 2,498 Mobile and Embedded Devices 365 259 185 Home and Entertainment Mobile and Embedded Devices 365 259 185 Home and Entertainment 4,292 and Embedded Devices 365 259 185 Home and Entertainment 4,292 3,110 259 185 Home and Entertainment 4,292 3,110 2,731 Reconciling amount 308 185 Home and Entertainment 4,292 3,110 2,731 Reconciling amount 308 286 Home and Entertainment 4,292 3,110 2,731 Reconciling amount 308 286 372 4,292 3,110 2,731 Reconciling amount 308 286 372 Consolidated $ 44,282 3,110 2,731 Reconciling amount 308 286 372 Consolidated $ 44,282 $ 2,731 Reconciling amount 308 286 372 Consolidated $ 44,282 $ 39,788 308 286 372 Consolidated $ 44,282 $ 39,788 $ 36,835 PAGE 372 Consolidated $ 44,282 $ 39,788 $ 36,835 PAGE 68 Table $ 44,282 $ 39,788 $ 36,835 PAGE 68 Table of Contents $ 39,788 $ 36,835 PAGE 68 Table of Contents Part II of Contents Part II Item 8 ( In million ) Year million ) Year Ended June 30 2006 2005 2004 Operating Income/ ) Year Ended June 30 2006 2005 2004 Operating Income/ ( Year Ended June 30 2006 2005 2004 Operating Income/ ( Loss Ended June 30 2006 2005 2004 Operating Income/ ( Loss ) ( Loss ) Client $ 10,043 $ 9,418 $ 9,061 Server ) Client $ 10,043 $ 9,418 $ 9,061 Server and Tools $ 10,043 $ 9,418 $ 9,061 Server and Tools 3,525 2,922 $ 9,061 Server and Tools 3,525 2,922 2,357 Information Worker 8,982 9,061 Server and Tools 3,525 2,922 2,357 Information Worker 8,982 8,726 Server and Tools 3,525 2,922 2,357 Information Worker 8,982 8,726 8,160 3,525 2,922 2,357 Information Worker 8,982 8,726 8,160 Microsoft Business Solutions 2,922 2,357 Information Worker 8,982 8,726 8,160 Microsoft Business Solutions 14 2,357 Information Worker 8,982 8,726 8,160 Microsoft Business Solutions 14 ( 8,726 8,160 Microsoft Business Solutions 14 ( 134 ) ( 91 Microsoft Business Solutions 14 ( 134 ) ( 91 ) MSN 14 ( 134 ) ( 91 ) MSN 111 477 393 ) ( 91 ) MSN 111 477 393 Mobile and Embedded ( 91 ) MSN 111 477 393 Mobile and Embedded Devices 91 ) MSN 111 477 393 Mobile and Embedded Devices ( Mobile and Embedded Devices ( 11 ) ( 37 ) ( Devices ( 11 ) ( 37 ) ( 116 ) Home ) ( 37 ) ( 116 ) Home and Entertainment ( ) Home and Entertainment ( 1,283 ) ( 451 ) ( Entertainment ( 1,283 ) ( 451 ) ( 1,011 ) Reconciling ) ( 451 ) ( 1,011 ) Reconciling amount ( 4,909 1,011 ) Reconciling amount ( 4,909 ) ( 6,360 ) ( amount ( 4,909 ) ( 6,360 ) ( 9,719 ) Consolidated ) ( 6,360 ) ( 9,719 ) Consolidated $ 16,472 $ ( 9,719 ) Consolidated $ 16,472 $ 14,561 $ 9,034 SFAS ) Consolidated $ 16,472 $ 14,561 $ 9,034 SFAS No . $ 16,472 $ 14,561 $ 9,034 SFAS No . 131 , $ 9,034 SFAS No . 131 , Disclosures about Segments of U.S. GAAP . Fiscal year 2005 and 2004 amount have been . Fiscal year 2005 and 2004 amount have been restated for and Entertainment . On July 17 , 2006 we announced a . On July 17 , 2006 we announced a change in our realignment announced in September 2005 . These change will be be effective for fiscal year 2007 ; the seven segment discussed group level in fiscal year 2006 , 2005 , and 2004 in fiscal year 2006 , 2005 , and 2004 . The 2006 , 2005 , and 2004 . The type of product Home and Entertainment – Xbox 360 ; Xbox ; Xbox Live . Management will continually PAGE 69 Table of Contents Part II of Contents Part II Item 8 evaluate the alignment of product million ) Year Ended June 30 2006 2005 2004 Operating income ) Year Ended June 30 2006 2005 2004 Operating income reconciling Year Ended June 30 2006 2005 2004 Operating income reconciling amount Ended June 30 2006 2005 2004 Operating income reconciling amount : and contingent liability $ ( 1,321 ) $ ( 2,312 ) ( 1,321 ) $ ( 2,312 ) $ ( 2,832 ) ( 2,312 ) $ ( 2,832 ) Stock-based compensation expense ( ) Stock-based compensation expense ( 127 ) ( 1,042 ) ( expense ( 127 ) ( 1,042 ) ( 4,516 ) Revenue ) ( 1,042 ) ( 4,516 ) Revenue reconciling amount 308 4,516 ) Revenue reconciling amount 308 286 372 Corporate-level expense ( ) Revenue reconciling amount 308 286 372 Corporate-level expense ( 1 Revenue reconciling amount 308 286 372 Corporate-level expense ( 1 ) 286 372 Corporate-level expense ( 1 ) ( 3,742 ) ( expense ( 1 ) ( 3,742 ) ( 3,493 ) ( ) ( 3,742 ) ( 3,493 ) ( 3,128 ) Other ) ( 3,493 ) ( 3,128 ) Other ( 27 ) ( 3,128 ) Other ( 27 ) 201 385 Total $ ) Other ( 27 ) 201 385 Total $ ( 4,909 Other ( 27 ) 201 385 Total $ ( 4,909 ) 201 385 Total $ ( 4,909 ) $ ( 6,360 ) ( 4,909 ) $ ( 6,360 ) $ ( 9,719 ) ( 6,360 ) $ ( 9,719 ) ( 1 ) Corporate-level $ ( 9,719 ) ( 1 ) Corporate-level expense exclude legal the aggregate accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 and 10 % of total of fiscal year 2006 and 10 % of total fiscal year % of total fiscal year 2005 and 2004 revenue . These total fiscal year 2005 and 2004 revenue . These sale were million ) Year Ended June 30 2006 2005 2004 United States ) Year Ended June 30 2006 2005 2004 United States ( Year Ended June 30 2006 2005 2004 United States ( 1 Ended June 30 2006 2005 2004 United States ( 1 ) 2005 2004 United States ( 1 ) $ 29,730 $ 26,949 States ( 1 ) $ 29,730 $ 26,949 $ 25,046 Other 1 ) $ 29,730 $ 26,949 $ 25,046 Other country 14,552 $ 29,730 $ 26,949 $ 25,046 Other country 14,552 12,839 11,789 26,949 $ 25,046 Other country 14,552 12,839 11,789 Total $ 44,282 $ 25,046 Other country 14,552 12,839 11,789 Total $ 44,282 $ 25,046 Other country 14,552 12,839 11,789 Total $ 44,282 $ 39,788 14,552 12,839 11,789 Total $ 44,282 $ 39,788 $ 36,835 ( 11,789 Total $ 44,282 $ 39,788 $ 36,835 ( 1 ) $ 44,282 $ 39,788 $ 36,835 ( 1 ) Includes shipment $ 39,788 $ 36,835 ( 1 ) Includes shipment to customer million ) Year Ended June 30 2006 2005 United States $ ) Year Ended June 30 2006 2005 United States $ 6,661 Year Ended June 30 2006 2005 United States $ 6,661 $ 2006 2005 United States $ 6,661 $ 5,506 Other country 788 United States $ 6,661 $ 5,506 Other country 788 648 Total 6,661 $ 5,506 Other country 788 648 Total $ 7,449 $ $ 5,506 Other country 788 648 Total $ 7,449 $ 6,154 country 788 648 Total $ 7,449 $ 6,154 PAGE 70 Table 648 Total $ 7,449 $ 6,154 PAGE 70 Table of Contents $ 7,449 $ 6,154 PAGE 70 Table of Contents Part II of Contents Part II Item 8 NOTE 19 SUBSEQUENT EVENTS On Part II Item 8 NOTE 19 SUBSEQUENT EVENTS On July 12 19 SUBSEQUENT EVENTS On July 12 , 2006 , the European EVENTS On July 12 , 2006 , the European Commission imposed imposed a fine of € 281 million ( $ 351 million € 281 million ( $ 351 million ) on Microsoft related the Commission ’ s March 2004 decision in it competition law investigation . As of June 30 , 2006 , the total As of June 30 , 2006 , the total amount of current liability . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our , comprised of a $ 20 billion tender offer which wa which wa completed on August 17 , 2006 , and an completed on August 17 , 2006 , and an additional $ , and an additional $ 20 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of our common common stock , or approximately 1.5 % of our common stock outstanding , for approximately $ 3.8 billion at a per share per share price of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the , previously announced on July 20 , 2006 , had been announced on July 20 , 2006 , had been increased by been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . PAGE 71 billion through June 30 , 2011 . PAGE 71 Table of 30 , 2011 . PAGE 71 Table of Contents Part II of Contents Part II Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal year 31 Mar . 31 June 30 Total Fiscal year 2006 Revenue June 30 Total Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 6 8,872 9,674 36,632 Net income 3,141 ( 6 ) 3,653 2,977 36,632 Net income 3,141 ( 6 ) 3,653 2,977 ( 7 income 3,141 ( 6 ) 3,653 2,977 ( 7 ) 2,828 3,141 ( 6 ) 3,653 2,977 ( 7 ) 2,828 ( 6 ) 3,653 2,977 ( 7 ) 2,828 ( 8 ) 3,653 2,977 ( 7 ) 2,828 ( 8 ) 12,599 Basic ( 7 ) 2,828 ( 8 ) 12,599 Basic earnings per ) 2,828 ( 8 ) 12,599 Basic earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 per share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( 3 8,257 8,773 33,757 Net income 2,528 ( 3 ) 3,463 2,563 33,757 Net income 2,528 ( 3 ) 3,463 2,563 ( 4 income 2,528 ( 3 ) 3,463 2,563 ( 4 ) 3,700 2,528 ( 3 ) 3,463 2,563 ( 4 ) 3,700 ( 3 ) 3,463 2,563 ( 4 ) 3,700 ( 5 ) 3,463 2,563 ( 4 ) 3,700 ( 5 ) 12,254 Basic ( 4 ) 3,700 ( 5 ) 12,254 Basic earnings per ) 3,700 ( 5 ) 12,254 Basic earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 Fiscal Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 Fiscal year earnings per share 0.23 0.32 0.23 0.34 1.12 Fiscal year 2004 per share 0.23 0.32 0.23 0.34 1.12 Fiscal year 2004 Revenue share 0.23 0.32 0.23 0.34 1.12 Fiscal year 2004 Revenue $ 0.23 0.34 1.12 Fiscal year 2004 Revenue $ 8,215 $ 10,153 Fiscal year 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 2004 Revenue $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ $ 8,215 $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross $ 10,153 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 $ 9,175 $ 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 9,292 $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net $ 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 36,835 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 Gross profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 profit 6,735 7,809 7,764 7,811 30,119 Net income 2,614 1,549 ( 7,764 7,811 30,119 Net income 2,614 1,549 ( 1 ) 1,315 7,811 30,119 Net income 2,614 1,549 ( 1 ) 1,315 ( Net income 2,614 1,549 ( 1 ) 1,315 ( 2 ) 2,614 1,549 ( 1 ) 1,315 ( 2 ) 2,690 8,168 ( 1 ) 1,315 ( 2 ) 2,690 8,168 Basic earnings ) 1,315 ( 2 ) 2,690 8,168 Basic earnings per share 1,315 ( 2 ) 2,690 8,168 Basic earnings per share 0.24 8,168 Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted Basic earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings earnings per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per per share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share share 0.24 0.14 0.12 0.25 0.76 Diluted earnings per share 0.24 0.76 Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( Diluted earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 earnings per share 0.24 0.14 0.12 0.25 0.75 ( 1 ) per share 0.24 0.14 0.12 0.25 0.75 ( 1 ) Includes share 0.24 0.14 0.12 0.25 0.75 ( 1 ) Includes stock-based 0.14 0.12 0.25 0.75 ( 1 ) Includes stock-based compensation charge stock-based compensation charge totaling $ 2.2 billion for the employee stock option transfer program . ( 2 ) Includes charge totaling $ ) Includes charge totaling $ 2.53 billion ( pre-tax ) related the European Commission . ( 3 ) Includes charge totaling $ ) Includes charge totaling $ 536 million ( pre-tax ) related with Novell , Inc. ( 4 ) Includes charge totaling $ ) Includes charge totaling $ 768 million ( pre-tax ) related certain other matter . ( 5 ) Includes charge totaling $ ) Includes charge totaling $ 756 million ( pre-tax ) related and other matter . ( 6 ) Includes charge of $ ) Includes charge of $ 361 million ( pre-tax ) related with RealNetworks , Inc. ( 7 ) Includes charge of $ ) Includes charge of $ 397 million ( pre-tax ) related various legal charge . ( 8 ) Includes charge of € ) Includes charge of € 281 million ( $ 351 million € 281 million ( $ 351 million ) ( pre-tax ) the European Commission in July 2006 . PAGE 72 Table of in July 2006 . PAGE 72 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2006 and 2005 , a of June 30 , 2006 and 2005 , and the June 30 , 2006 and 2005 , and the related consolidated in the period ended June 30 , 2006 . These financial period ended June 30 , 2006 . These financial statement are and subsidiary a of June 30 , 2006 and 2005 , a of June 30 , 2006 and 2005 , and the June 30 , 2006 and 2005 , and the result of in the period ended June 30 , 2006 , in conformity period ended June 30 , 2006 , in conformity with accounting financial reporting a of June 30 , 2006 , based on a of June 30 , 2006 , based on the criterion and our report dated August 22 , 2006 , expressed an report dated August 22 , 2006 , expressed an unqualified opinion LLP Seattle , Washington August 22 , 2006 PAGE 73 Table , Washington August 22 , 2006 PAGE 73 Table of Contents August 22 , 2006 PAGE 73 Table of Contents Part II of Contents Part II Item 9 , 9A ITEM 9 . Part II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under pursuant to Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2006 . There were a of June 30 , 2006 . There were no change during the quarter ended June 30 , 2006 that have materially quarter ended June 30 , 2006 that have materially affected , report is included in Item 9A . PAGE 74 Table of in Item 9A . PAGE 74 Table of Contents Part II of Contents Part II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of June 30 , 2006 , based on a of June 30 , 2006 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2006 , is fairly a of June 30 , 2006 , is fairly stated , financial reporting a of June 30 , 2006 , based on a of June 30 , 2006 , based on the criterion for the year ended June 30 , 2006 of the Company year ended June 30 , 2006 of the Company and our and our report dated August 22 , 2006 expressed an unqualified report dated August 22 , 2006 expressed an unqualified opinion on LLP Seattle , Washington August 22 , 2006 PAGE 75 Table , Washington August 22 , 2006 PAGE 75 Table of Contents August 22 , 2006 PAGE 75 Table of Contents Part II Part II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Effective August . OTHER INFORMATION Effective August 23 , 2006 , the Board INFORMATION Effective August 23 , 2006 , the Board of Directors Board added a new Section 1.13 concerning the right of shareholder a new paragraph to Section 2.2 to incorporate the Board ’ election . PART III ITEM 10 . DIRECTORS AND EXECUTIVE OFFICERS in Part I , Item 1 of this report . Information Shareholders to be held November 14 , 2006 ( the “ be held November 14 , 2006 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND herein by reference . PAGE 76 Table of Contents Part IV of Contents Part IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been Period ending Exhibit Filing date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation X Bylaws of Microsoft Corporation X 4 Call Option Transaction Confirmation dated Option Transaction Confirmation dated December 11 , 2003 between Microsoft Corporation Confirmation dated December 11 , 2003 between Microsoft Corporation and JPMorgan Corporation and JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * and JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation 2001 Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation 2001 Stock 2/6/04 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock 7/21/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Stock 7/21/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Option Option Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Option Plan for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 Employee 11/15/04 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan X 10.9 * Corporation 2001 Stock Plan X 10.9 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of Contents 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of Contents Part IV of Contents Part IV Item 15 Incorporated by reference Exhibit number Period ending Exhibit Filing date 10.11 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY of Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Western Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 21 Subsidiaries of Registrant for Non-Employee Directors S-8 99.2 2/28/06 21 Subsidiaries of Registrant X Non-Employee Directors S-8 99.2 2/28/06 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X * Indicates a management compensatory plan or arrangement PAGE 78 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 25 , 2006 . M ICROSOFT , on August 25 , 2006 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 25 , 2006 . Signature Title indicated on August 25 , 2006 . Signature Title William H. Principal Accounting Officer ) PAGE 79 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-07-170817/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-07-170817/full-submission.txt new file mode 100644 index 0000000..8879db7 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-07-170817/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2007 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2007 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark accelerated filer ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2006 , the aggregate As of December 31 , 2006 , the aggregate market value of the registrant wa $ 251,464,010,491 based on the closing sale System . As of August 1 , 2007 , there were As of August 1 , 2007 , there were 9,375,492,496 share , 2007 , there were 9,375,492,496 share of common stock outstanding to be held on November 13 , 2007 are incorporated by held on November 13 , 2007 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2007 INDEX PART I Year Ended June 30 , 2007 INDEX PART I Item 1. 2007 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Item 1A . Risk Factors 12 Item Item 1A . Risk Factors 12 Item 1B . Unresolved Staff . Risk Factors 12 Item 1B . Unresolved Staff Comments 16 1B . Unresolved Staff Comments 16 Item 2 . Properties 17 Unresolved Staff Comments 16 Item 2 . Properties 17 Item 3 16 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 17 Item Item 3 . Legal Proceedings 17 Item 4 . Submission of . Legal Proceedings 17 Item 4 . Submission of Matters to a Vote of Security Holders 17 PART II Item 5 . Holders 17 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 18 Item 6 . Selected Financial of Equity Securities 18 Item 6 . Selected Financial Data 19 6 . Selected Financial Data 19 Item 7 . Management ’ Selected Financial Data 19 Item 7 . Management ’ s Discussion Condition and Results of Operations 20 Item 7A . Quantitative and Results of Operations 20 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 39 Item 8 . Financial Statements about Market Risk 39 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 40 Item 9 . Changes in and Supplementary Data 40 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 72 Item 9A . Controls and and Financial Disclosure 72 Item 9A . Controls and Procedures 72 9A . Controls and Procedures 72 Report of Management on Internal Internal Control over Financial Reporting 72 Report of Independent Registered Public Independent Registered Public Accounting Firm 73 Item 9B . Other Information Public Accounting Firm 73 Item 9B . Other Information 74 PART Item 9B . Other Information 74 PART III Item 10 . Information 74 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 74 Item 11 . Executive Compensation and Corporate Governance 74 Item 11 . Executive Compensation 74 Item Item 11 . Executive Compensation 74 Item 12 . Security Ownership . Executive Compensation 74 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 74 Item 13 . Certain Relationships Related Stockholder Matters 74 Item 13 . Certain Relationships and Related Transactions , and Director Independence 74 Item 14 . Principal Accounting and Director Independence 74 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 74 PART IV Item 15 . Services 74 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 75 Signatures 77 PAGE 2 Table Financial Statement Schedules 75 Signatures 77 PAGE 2 Table of Contents Schedules 75 Signatures 77 PAGE 2 Table of Contents Part I of Contents Part I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . These forward-looking statement generally to Part I , Item 1A ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is . Since our founding in 1975 , we have worked to have office in more than 100 country . We generate revenue . We sell the Xbox 360 video game console and game easily separable business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 In July 2006 , we I Item 1 In July 2006 , we announced a change group level in fiscal year 2007 . See Note 18 – year 2007 . See Note 18 – Segment Information of the ( Part II , Item 8 ) for financial information regarding OEM channel account for over 80 % of total Client revenue system , in fiscal year 2007 . This release concluded a and marketing organization . Approximately 45 % of Server revenue come multi-year licensing agreement , approximately 30 % is purchased through fully licensing program , and approximately 10 % come from license sold product support service . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Products and Services : Windows company focused on the Java 2 Platform Enterprise Edition ( J2EE subscription . In fiscal year 2006 , OSB launched adCenter , adCenter . In fiscal year 2007 , we launched new online Live Search™ and Live.com in 54 international market , Live Local experience ) , Virtual Earth™ 3D , Windows Live Hotmail , to decline a we PAGE 5 Table of Contents Part I of Contents Part I Item 1 de-emphasize this portion of our offering , which generate over 90 % of MBD revenue , Office in Japan . Approximately 75 % of MBD revenue is a given year . Approximately 25 % of MBD revenue is and Workplace offering . PAGE 6 Table of Contents Part I of Contents Part I Item 1 Our Microsoft Dynamics product compete company . Products : Xbox 360 console and game ; Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We think the Xbox 360 is positioned well against competitive and MontaVista Software . PAGE 7 Table of Contents Part I of Contents Part I Item 1 OPERATIONS To serve the need party who produce the Xbox 360 , Zune , various retail limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from a single supplier PRODUCT DEVELOPMENT During fiscal year 2007 , 2006 , and 2005 During fiscal year 2007 , 2006 , and 2005 , research 2007 , 2006 , and 2005 , research and development expense and development expense wa $ 7.12 billion , $ 6.58 billion $ 7.12 billion , $ 6.58 billion , and $ 6.10 6.58 billion , and $ 6.10 billion , respectively . These respectively . These amount represented 14 % , 15 % , amount represented 14 % , 15 % , and 15 % , 15 % , and 15 % , respectively , of with Windows Vista , the 2007 Microsoft Office System , Xbox Microsoft Office System , Xbox 360 , Microsoft Windows Live , deliver end-to-end experience . PAGE 8 Table of Contents Part I of Contents Part I Item 1 Software plus service . Underlying enjoyed success in fiscal year 2007 with the launch of Windows of Windows Vista and the 2007 Microsoft Office System , we planned release in fiscal year 2008 of Windows Server 2008 , year 2008 of Windows Server 2008 , SQL Server 2008 , Server 2008 , SQL Server 2008 , and Visual Studio 2008 2008 , and Visual Studio 2008 , and the possibility to u . In fiscal year 2007 , we announced the expansion primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , this program volume licensing agreement . PAGE 9 Table of Contents Part I of Contents Part I Item 1 Select . Designed primarily for medium-to-large organization ( greater than 250 license ) , this program customer accounted for more than 10 % of fiscal year 2007 10 % of fiscal year 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % and 10 % of for approximately 11 % and 10 % of fiscal year 2006 10 % of fiscal year 2006 and 2005 revenue , respectively of fiscal year 2006 and 2005 revenue , respectively . These is not significant . PAGE 10 Table of Contents Part I of Contents Part I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 3 , 2007 were a follows a of August 3 , 2007 were a follows : Name Company William H. Gates III 51 Chairman of the Board Steven the Board Steven A. Ballmer 51 Chief Executive Officer Robert J . ( Robbie ) Bach 45 President , Entertainment and Devices Devices Division Lisa E. Brummel 47 Senior Vice President , Human Human Resources Kevin R. Johnson 46 President , Platforms and Services Services Division Christopher P. Liddell 49 Senior Vice President and Chief Financial Officer Jeffrey S. Raikes 49 President , Microsoft Business Division Business Division Bradford L. Smith 48 Senior Vice President ; General and Secretary Brian Kevin Turner 42 Chief Operating Officer Mr. Gates Mr. Gates co-founded Microsoft in 1975 and served a it Chief original partnership wa incorporated in 1981 until January 2000 , when incorporated in 1981 until January 2000 , when he resigned a Software Architect . In June 2006 , Mr. Gates stepped down Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Bach wa named and Devices Division in September 2005 . He had been Senior Home and Entertainment since March 2000 . Before holding that position Home and Retail since March 1999 , Vice President , Learning , Entertainment and Productivity since 1997 , and Vice President , , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Ms. Brummel wa named , Human Resources in December 2005 . She had been Corporate , Human Resources since April 2005 . From 1995 to April since April 2005 . From 1995 to April 2005 , she . From 1995 to April 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held and Services Division in January 2007 . He had been Co-President and Services Division since September 2005 . He held the position Marketing and Services since March 2003 . Before that position , , Microsoft Americas since February 2002 and Senior Vice President , , and Services since August 2001 , and prior to assuming . He joined Microsoft in 1992 . Mr. Liddell wa named of the Company in May 2005 . Mr. Liddell served a International Paper Company from March 2003 through April 2005 , and from March 2003 through April 2005 , and prior to becoming of International Paper , from 1999 to 2002 and Chief Financial Paper , from 1999 to 2002 and Chief Financial Officer from and Chief Financial Officer from 1995 to 1998 . Mr. Raikes Financial Officer from 1995 to 1998 . Mr. Raikes wa named Microsoft Business Division in September 2005 . He had been Group Information Worker Business since June 2004 . Before that position , and Business Services since August 2000 and Group Vice President , Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . Mr. Smith wa named , and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy . He joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Stores , Inc. From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it Information Systems Division . PAGE 11 Table of Contents Part I of Contents Part I Item 1 , 1A EMPLOYEES As of Part I Item 1 , 1A EMPLOYEES As of June 30 1A EMPLOYEES As of June 30 , 2007 , we employed As of June 30 , 2007 , we employed approximately 79,000 2007 , we employed approximately 79,000 people on a full-time basis on a full-time basis , 48,000 in the United States and in the United States and 31,000 internationally . Of the total . Of the total , 31,000 were in product research and product research and development , 24,000 in sale and marketing , in sale and marketing , 13,000 in product support and consulting support and consulting service , 3,000 in manufacturing and distribution , manufacturing and distribution , and 8,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 1A . RISK FACTORS Our operation range in size from Fortune 100 company to small , specialized version . These competitive PAGE 12 Table of Contents Part I of Contents Part I Item 1A pressure may result in decreased and judicial decision . PAGE 13 Table of Contents Part I of Contents Part I Item 1A We are subject to government U.S. Department of Justice , 18 state , and the District that took effect in November 2001 and a Final Judgment entered Final Judgment entered in November 2002 . These proceeding imposed various rule will expire in November 2007 ; others will stay in stay in force until November 2009 or later . Although we our business . In March 2004 , the European Commission ordered in Europe . In February 2006 , the Korean Fair Trade and leader in our PAGE 14 Table of Contents Part I of Contents Part I Item 1A industry is extremely competitive . including Windows Vista , the 2007 Microsoft Office system , Xbox Microsoft Office system , Xbox 360 , Live Search , Windows a Windows Vista and the 2007 Microsoft Office system are not product such a the Xbox 360 console are highly complex and cost of revenue . Xbox 360 console are assembled in Asia and operating margin . PAGE 15 Table of Contents Part I of Contents Part I Item 1A , 1B If our goodwill Part I Item 1A , 1B If our goodwill or amortizable . We operate in over 100 country and a significant part with revenue growth . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2007 that remain unresolved . PAGE that remain unresolved . PAGE 16 Table of Contents Part I of Contents Part I Item 2 , 3 , 4 ITEM Part I Item 2 , 3 , 4 ITEM 2 . Item 2 , 3 , 4 ITEM 2 . PROPERTIES Our , 3 , 4 ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 11 million square foot of office King County , Washington : 8 million square foot of owned that is situated on approximately 500 acre of land we own our corporate campus and approximately 3 million square foot of space lease . We own approximately 1 million square foot of office many site domestically totaling approximately 3 million square foot of office site internationally , totaling approximately 8 million square foot that is that is leased and approximately 1 million square foot that is expansion need . We own 63 acre of land in Issaquah Washington , which can accommodate 1 million square foot of office we may develop an additional 1 million square foot of facility Redmond , Washington . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 ) for information about legal we are involved . ITEM 4 . SUBMISSION OF MATTERS TO fourth quarter of fiscal year 2007 . PAGE 17 Table of fiscal year 2007 . PAGE 17 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On August 1 , 2007 , there were . On August 1 , 2007 , there were 148,344 registered , 2007 , there were 148,344 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal year 31 Mar . 31 June 30 Year Fiscal year 2007 Common June 30 Year Fiscal year 2007 Common stock price per share per share : High $ 27.52 $ 30.26 $ 31.48 $ : High $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year 2006 31.48 Low 22.23 27.15 26.60 27.56 22.23 Fiscal year 2006 Common Low 22.23 27.15 26.60 27.56 22.23 Fiscal year 2006 Common stock 26.60 27.56 22.23 Fiscal year 2006 Common stock price per share per share : High $ 27.94 $ 28.25 $ 28.38 $ : High $ 27.94 $ 28.25 $ 28.38 $ 27.94 $ $ 27.94 $ 28.25 $ 28.38 $ 27.94 $ 28.38 Low $ 28.25 $ 28.38 $ 27.94 $ 28.38 Low 24.50 24.25 $ 28.38 $ 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 $ 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See 27.94 $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See Note $ 28.38 Low 24.50 24.25 26.10 21.46 21.46 See Note 12 28.38 Low 24.50 24.25 26.10 21.46 21.46 See Note 12 – Low 24.50 24.25 26.10 21.46 21.46 See Note 12 – Stockholders 26.10 21.46 21.46 See Note 12 – Stockholders ’ Equity of ( Part II , Item 8 ) for information regarding dividend of Directors in fiscal year 2007 and 2006 . On July in fiscal year 2007 and 2006 . On July 20 , and 2006 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.00 billion tender offer which wa which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program program that expires on June 30 , 2011 . Under the expires on June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately $ 16.16 billion . As a result an amount up to $ 36.16 billion through June 30 , $ 36.16 billion through June 30 , 2011 . The repurchase billion through June 30 , 2011 . The repurchase program may a trading plan under Rule 10b5-1 . We repurchased common stock each quarter of fiscal year 2007 using available cash resource a price paid per share July 1 , 2006 – September 30 per share July 1 , 2006 – September 30 , 2006 1 , 2006 – September 30 , 2006 285,126,354 $ 24.43 2006 – September 30 , 2006 285,126,354 $ 24.43 October 1 – September 30 , 2006 285,126,354 $ 24.43 October 1 , 30 , 2006 285,126,354 $ 24.43 October 1 , 2006 – 2006 285,126,354 $ 24.43 October 1 , 2006 – December 31 $ 24.43 October 1 , 2006 – December 31 , 2006 1 , 2006 – December 31 , 2006 205,416,571 $ 29.39 2006 – December 31 , 2006 205,416,571 $ 29.39 January 1 – December 31 , 2006 205,416,571 $ 29.39 January 1 , 31 , 2006 205,416,571 $ 29.39 January 1 , 2007 – 2006 205,416,571 $ 29.39 January 1 , 2007 – March 31 $ 29.39 January 1 , 2007 – March 31 , 2007 1 , 2007 – March 31 , 2007 237,497,727 $ 28.40 2007 – March 31 , 2007 237,497,727 $ 28.40 April 1 – March 31 , 2007 237,497,727 $ 28.40 April 1 , 31 , 2007 237,497,727 $ 28.40 April 1 , 2007 – 2007 237,497,727 $ 28.40 April 1 , 2007 – June 30 $ 28.40 April 1 , 2007 – June 30 , 2007 1 , 2007 – June 30 , 2007 242,715,913 $ 30.35 2007 – June 30 , 2007 242,715,913 $ 30.35 Common stock – June 30 , 2007 242,715,913 $ 30.35 Common stock repurchase 30 , 2007 242,715,913 $ 30.35 Common stock repurchase in the fourth quarter of fiscal year 2007 were a follows : Period ( in million ) April 1 , 2007 – April 30 million ) April 1 , 2007 – April 30 , 2007 1 , 2007 – April 30 , 2007 10,816,647 $ 28.17 2007 – April 30 , 2007 10,816,647 $ 28.17 10,816,647 $ – April 30 , 2007 10,816,647 $ 28.17 10,816,647 $ 22,200 30 , 2007 10,816,647 $ 28.17 10,816,647 $ 22,200 May 1 , 2007 10,816,647 $ 28.17 10,816,647 $ 22,200 May 1 , 10,816,647 $ 28.17 10,816,647 $ 22,200 May 1 , 2007 – 28.17 10,816,647 $ 22,200 May 1 , 2007 – May 31 $ 22,200 May 1 , 2007 – May 31 , 2007 1 , 2007 – May 31 , 2007 133,980,027 $ 30.71 2007 – May 31 , 2007 133,980,027 $ 30.71 133,980,027 $ – May 31 , 2007 133,980,027 $ 30.71 133,980,027 $ 18,086 31 , 2007 133,980,027 $ 30.71 133,980,027 $ 18,086 June 1 , 2007 133,980,027 $ 30.71 133,980,027 $ 18,086 June 1 , 133,980,027 $ 30.71 133,980,027 $ 18,086 June 1 , 2007 – 30.71 133,980,027 $ 18,086 June 1 , 2007 – June 30 $ 18,086 June 1 , 2007 – June 30 , 2007 1 , 2007 – June 30 , 2007 97,919,239 $ 30.11 2007 – June 30 , 2007 97,919,239 $ 30.11 97,919,239 $ – June 30 , 2007 97,919,239 $ 30.11 97,919,239 $ 15,138 30 , 2007 97,919,239 $ 30.11 97,919,239 $ 15,138 242,715,913 242,715,913 , 2007 97,919,239 $ 30.11 97,919,239 $ 15,138 242,715,913 242,715,913 PAGE 97,919,239 $ 30.11 97,919,239 $ 15,138 242,715,913 242,715,913 PAGE 18 Table $ 30.11 97,919,239 $ 15,138 242,715,913 242,715,913 PAGE 18 Table of 30.11 97,919,239 $ 15,138 242,715,913 242,715,913 PAGE 18 Table of Contents $ 15,138 242,715,913 242,715,913 PAGE 18 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 2007 2006 2005 2004 2003 Fiscal Year Ended June 30 2007 2006 2005 2004 2003 Revenue Year Ended June 30 2007 2006 2005 2004 2003 Revenue $ Ended June 30 2007 2006 2005 2004 2003 Revenue $ 51,122 June 30 2007 2006 2005 2004 2003 Revenue $ 51,122 $ 30 2007 2006 2005 2004 2003 Revenue $ 51,122 $ 44,282 2005 2004 2003 Revenue $ 51,122 $ 44,282 $ 39,788 $ 2003 Revenue $ 51,122 $ 44,282 $ 39,788 $ 36,835 $ $ 51,122 $ 44,282 $ 39,788 $ 36,835 $ 32,187 Operating $ 44,282 $ 39,788 $ 36,835 $ 32,187 Operating income 18,524 $ 39,788 $ 36,835 $ 32,187 Operating income 18,524 16,472 14,561 36,835 $ 32,187 Operating income 18,524 16,472 14,561 9,034 9,545 Net $ 32,187 Operating income 18,524 16,472 14,561 9,034 9,545 Net income 32,187 Operating income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 Operating income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 12,599 income 18,524 16,472 14,561 9,034 9,545 Net income 14,065 12,599 12,254 14,561 9,034 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted 9,034 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings 9,545 Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings per Net income 14,065 12,599 12,254 8,168 7,531 Diluted earnings per share income 14,065 12,599 12,254 8,168 7,531 Diluted earnings per share $ Diluted earnings per share $ 1.42 $ 1.20 $ 1.12 $ per share $ 1.42 $ 1.20 $ 1.12 $ 0.75 $ $ 1.42 $ 1.20 $ 1.12 $ 0.75 $ 0.69 Cash $ 1.20 $ 1.12 $ 0.75 $ 0.69 Cash dividend declared $ 1.12 $ 0.75 $ 0.69 Cash dividend declared per share dividend declared per share $ 0.40 $ 0.35 $ 3.40 $ per share $ 0.40 $ 0.35 $ 3.40 $ 0.16 $ $ 0.40 $ 0.35 $ 3.40 $ 0.16 $ 0.08 Cash $ 0.35 $ 3.40 $ 0.16 $ 0.08 Cash and short-term $ 3.40 $ 0.16 $ 0.08 Cash and short-term investment 23,411 0.08 Cash and short-term investment 23,411 34,161 37,751 60,592 49,048 Total Cash and short-term investment 23,411 34,161 37,751 60,592 49,048 Total asset and short-term investment 23,411 34,161 37,751 60,592 49,048 Total asset 63,171 short-term investment 23,411 34,161 37,751 60,592 49,048 Total asset 63,171 69,597 investment 23,411 34,161 37,751 60,592 49,048 Total asset 63,171 69,597 70,815 37,751 60,592 49,048 Total asset 63,171 69,597 70,815 94,368 81,732 Long-term 60,592 49,048 Total asset 63,171 69,597 70,815 94,368 81,732 Long-term obligation 49,048 Total asset 63,171 69,597 70,815 94,368 81,732 Long-term obligation 8,320 Total asset 63,171 69,597 70,815 94,368 81,732 Long-term obligation 8,320 7,051 asset 63,171 69,597 70,815 94,368 81,732 Long-term obligation 8,320 7,051 5,823 70,815 94,368 81,732 Long-term obligation 8,320 7,051 5,823 4,574 2,846 Stockholders 94,368 81,732 Long-term obligation 8,320 7,051 5,823 4,574 2,846 Stockholders ’ 81,732 Long-term obligation 8,320 7,051 5,823 4,574 2,846 Stockholders ’ equity Long-term obligation 8,320 7,051 5,823 4,574 2,846 Stockholders ’ equity 31,097 obligation 8,320 7,051 5,823 4,574 2,846 Stockholders ’ equity 31,097 40,104 4,574 2,846 Stockholders ’ equity 31,097 40,104 48,115 74,825 64,912 PAGE 2,846 Stockholders ’ equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Stockholders ’ equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table ’ equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table of equity 31,097 40,104 48,115 74,825 64,912 PAGE 19 Table of Contents 40,104 48,115 74,825 64,912 PAGE 19 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2007 , 2006 , AND 2005 FOR FISCAL YEARS 2007 , 2006 , AND 2005 OVERVIEW The 2007 , 2006 , AND 2005 OVERVIEW The following Management ’ consumer . In fiscal year 2007 , our revenue wa highest to the recognition of $ 1.67 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those Devices Division ha generated over 40 % of it yearly segment the exception of fiscal year 2007 , we believe the seasonality Our focus in fiscal year 2008 is building on this foundation s consumer device . PAGE 20 Table of Contents Part II of Contents Part II Item 7 Software plus service . The of Results for Fiscal Years 2007 , 2006 , and 2005 for Fiscal Years 2007 , 2006 , and 2005 ( In 2007 , 2006 , and 2005 ( In million , except million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 51,122 2006 Percent Change 2006 versus 2005 Revenue $ 51,122 $ 44,282 2006 versus 2005 Revenue $ 51,122 $ 44,282 $ 39,788 15 2005 Revenue $ 51,122 $ 44,282 $ 39,788 15 % 11 $ 51,122 $ 44,282 $ 39,788 15 % 11 % Operating 51,122 $ 44,282 $ 39,788 15 % 11 % Operating income 44,282 $ 39,788 15 % 11 % Operating income $ 18,524 11 % Operating income $ 18,524 $ 16,472 $ 14,561 12 Operating income $ 18,524 $ 16,472 $ 14,561 12 % 13 $ 18,524 $ 16,472 $ 14,561 12 % 13 % Fiscal 18,524 $ 16,472 $ 14,561 12 % 13 % Fiscal year 16,472 $ 14,561 12 % 13 % Fiscal year 2007 compared % 13 % Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Revenue growth wa driven primarily primarily by licensing of the 2007 Microsoft Office system and Windows Studio , and increased Xbox 360 console sale . Foreign currency of revenue associated with Xbox 360 and Windows Vista , increased marketing expense . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year , we recorded a $ 1.06 billion charge for anticipated cost launch . Headcount-related cost increased 15 % , driven by a % , driven by a 10 % increase in headcount over existing headcount . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 Revenue growth wa driven primarily the launch of SQL Server 2005 in the second quarter of second quarter of fiscal year 2006 , Windows Server and other revenue resulting from the Xbox 360 launch in November 2005 , Xbox 360 launch in November 2005 , growth in licensing of revenue primarily related to Xbox 360 and an increase in sale spending . Headcount-related cost increased 7 % , driven by an for existing headcount and a 16 % growth in headcount . in headcount . Fiscal Year 2008 Outlook Worldwide macroeconomic factor have and demand in fiscal year 2008 . We also expect continued second half of fiscal year 2007 , we expect revenue growth first half of fiscal year 2008 than in the second half PC shipment will grow between 9 % and 11 % . grow between 9 % and 11 % . We do not not expect a significant PAGE 21 Table of Contents Part II of Contents Part II Item 7 impact from change in year-over-year exchange rate in fiscal year 2008 . We expect our operating ( LOSS ) In July 2006 , we announced a change group level in fiscal year 2007 . The revenue and operating segment information appearing in Note 18 – Segment Information of the ( Part II , Item 8 ) is presented on a SFAS ” ) No . 131 , Disclosures about Segments of million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 14,972 2006 Percent Change 2006 versus 2005 Revenue $ 14,972 $ 13,089 2006 versus 2005 Revenue $ 14,972 $ 13,089 $ 12,042 14 2005 Revenue $ 14,972 $ 13,089 $ 12,042 14 % 9 $ 14,972 $ 13,089 $ 12,042 14 % 9 % Operating 14,972 $ 13,089 $ 12,042 14 % 9 % Operating income 13,089 $ 12,042 14 % 9 % Operating income $ 11,603 9 % Operating income $ 11,603 $ 10,297 $ 9,442 13 Operating income $ 11,603 $ 10,297 $ 9,442 13 % 9 $ 11,603 $ 10,297 $ 9,442 13 % 9 % Client 11,603 $ 10,297 $ 9,442 13 % 9 % Client offering 10,297 $ 9,442 13 % 9 % Client offering consist of OEM channel account for approximately 80 % of total Client revenue system builder . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Client revenue increased primarily reflecting . OEM revenue increased $ 1.46 billion or 13 % driven increased $ 1.46 billion or 13 % driven by 13 % or 13 % driven by 13 % growth in OEM license Windows operating system increased $ 422 million or 21 % . increased $ 422 million or 21 % . During the year the OEM Premium Mix increased 16 percentage point to 68 % increased 16 percentage point to 68 % . Based on our shipment from all source grew 10 % to 12 % driven source grew 10 % to 12 % driven by demand in Vista . Headcount-related cost decreased 3 % , driven by a % , driven by a 1 % decrease in headcount and compensation expense . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 Client revenue increased reflecting $ Client revenue increased reflecting $ 1.18 billion or 12 % growth reflecting $ 1.18 billion or 12 % growth in OEM revenue in OEM revenue driven by 17 % growth in OEM license partially offset by a $ 118 million or 6 % decrease a $ 118 million or 6 % decrease in revenue from increased two percentage point to 52 % . OEM revenue growth increase to revenue of $ 89 million resulting from the alignment from the alignment of PAGE 22 Table of Contents Part II of Contents Part II Item 7 our billing associated with OEM partially offset by a $ 224 million increase in sale and program . Headcount-related cost increased 6 % , driven by a % , driven by a 13 % increase in headcount primarily million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 11,175 2006 Percent Change 2006 versus 2005 Revenue $ 11,175 $ 9,652 2006 versus 2005 Revenue $ 11,175 $ 9,652 $ 8,367 16 2005 Revenue $ 11,175 $ 9,652 $ 8,367 16 % 15 $ 11,175 $ 9,652 $ 8,367 16 % 15 % Operating 11,175 $ 9,652 $ 8,367 16 % 15 % Operating income 9,652 $ 8,367 16 % 15 % Operating income $ 3,900 15 % Operating income $ 3,900 $ 3,035 $ 2,072 29 Operating income $ 3,900 $ 3,035 $ 2,072 29 % 46 $ 3,900 $ 3,035 $ 2,072 29 % 46 % Server 3,900 $ 3,035 $ 2,072 29 % 46 % Server and 3,035 $ 2,072 29 % 46 % Server and Tools offering volume license . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Server and server application revenue and certification revenue increased $ 1.12 billion or 14 % . increased $ 1.12 billion or 14 % . This increase wa SQL Server which grew over 20 % . Consulting , Premier support service revenue increased $ 404 million or 24 % primarily increased $ 404 million or 24 % primarily due to higher rate accounted for a $ 165 million or a two percentage service . Headcount-related cost increased 12 % , driven by an % , driven by an 11 % increase in headcount and Cost of revenue increased $ 243 million or 13 % reflecting increased $ 243 million or 13 % reflecting growth in service service provided . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 Server and Tools revenue increased Visual Studio . SQL Server 2005 and Visual Studio 2005 were Server 2005 and Visual Studio 2005 were launched in the second second quarter of fiscal year 2006 and produced revenue growth in and certification revenue increased $ 1.07 billion or 16 % during increased $ 1.07 billion or 16 % during fiscal year 2006 16 % during fiscal year 2006 . The result reflect broad Server , which grew over 30 % for the year . support service revenue increased $ 217 million or 15 % primarily increased $ 217 million or 15 % primarily due to higher the launch of SQL Server 2005 and Visual Studio 2005 . Server 2005 and Visual Studio 2005 . Headcount-related cost increased 5 2005 . Headcount-related cost increased 5 % , driven by an % , driven by an 11 % increase in headcount and stock-based compensation expense . PAGE 23 Table of Contents Part II of Contents Part II Item 7 Online Services Business ( In million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 2,474 2006 Percent Change 2006 versus 2005 Revenue $ 2,474 $ 2,299 2006 versus 2005 Revenue $ 2,474 $ 2,299 $ 2,344 8 2005 Revenue $ 2,474 $ 2,299 $ 2,344 8 % ( $ 2,474 $ 2,299 $ 2,344 8 % ( 2 ) 2,474 $ 2,299 $ 2,344 8 % ( 2 ) % $ 2,344 8 % ( 2 ) % Operating income ( ( loss ) $ ( 732 ) $ ( 74 ) ( 732 ) $ ( 74 ) $ 402 * * $ ( 74 ) $ 402 * * * Not meaningful future . In fiscal year 2007 , we launched Windows Live Live Search and Live.com in 54 international market , Live Local experience ) , Virtual Earth™ 3D , Windows Live Hotmail , other offering . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 OSB revenue increased driven primarily advertising revenue which grew $ 314 million or 21 % to grew $ 314 million or 21 % to $ 1.84 billion or 21 % to $ 1.84 billion . This increase wa partially offset by a $ 156 million or 31 % decrease a $ 156 million or 31 % decrease in access revenue access revenue . At June 30 , 2007 , we estimate . At June 30 , 2007 , we estimate that OSB estimate that OSB had over 310 million active Hotmail account and active Hotmail account and over 280 million Messenger account . OSB of revenue which grew $ 352 million or 45 % and grew $ 352 million or 45 % and increased headcount-related cost royalty . Headcount-related cost increased 30 % , driven by a % , driven by a 12 % increase in headcount and existing headcount . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 OSB revenue decreased primarily reflecting decreased primarily reflecting a $ 195 million or 28 % decline a $ 195 million or 28 % decline in access revenue partially offset by a $ 126 million or 9 % increase a $ 126 million or 9 % increase in advertising revenue advertising revenue and a $ 23 million or 9 % increase a $ 23 million or 9 % increase in revenue from Advertising revenue for fiscal year 2006 wa $ 1.52 billion . fiscal year 2006 wa $ 1.52 billion . The increase in adCenter . As of June 30 , 2006 , OSB had As of June 30 , 2006 , OSB had 2.1 million , 2006 , OSB had 2.1 million access subscriber compared with million access subscriber compared with 2.7 million at June 30 , with 2.7 million at June 30 , 2005 . In addition million at June 30 , 2005 . In addition , OSB addition , OSB had over 261 million active Hotmail account and active Hotmail account and over 243 million active Messenger account a Messenger account a of June 30 , 2006 . OSB operating a of June 30 , 2006 . OSB operating income decreased decreased due to a $ 230 million or 39 % increase a $ 230 million or 39 % increase in research and development cost , a $ 126 million or 22 % increase a $ 126 million or 22 % increase in sale and expense , and a $ 67 million or 9 % increase a $ 67 million or 9 % increase in cost of platform . Headcount-related cost increased 25 % , reflecting a 44 25 % , reflecting a 44 % increase in headcount and in stock-based compensation . PAGE 24 Table of Contents Part II of Contents Part II Item 7 Microsoft Business Division ( In million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 16,396 2006 Percent Change 2006 versus 2005 Revenue $ 16,396 $ 14,486 2006 versus 2005 Revenue $ 16,396 $ 14,486 $ 13,520 13 2005 Revenue $ 16,396 $ 14,486 $ 13,520 13 % 7 $ 16,396 $ 14,486 $ 13,520 13 % 7 % Operating 16,396 $ 14,486 $ 13,520 13 % 7 % Operating income 14,486 $ 13,520 13 % 7 % Operating income $ 10,838 7 % Operating income $ 10,838 $ 9,620 $ 9,116 13 Operating income $ 10,838 $ 9,620 $ 9,116 13 % 6 $ 10,838 $ 9,620 $ 9,116 13 % 6 % MBD 10,838 $ 9,620 $ 9,116 13 % 6 % MBD offering 9,620 $ 9,116 13 % 6 % MBD offering consist of offering , which generate over 90 % of MBD revenue , in Japan . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 MBD revenue increased primarily reflecting primarily reflecting licensing of the 2007 Microsoft Office system . Revenue from consumer sale increased $ 371 million or 11 % while increased $ 371 million or 11 % while revenue from business from business sale increased $ 1.54 billion or 14 % . increased $ 1.54 billion or 14 % . The increase in in business revenue includes a 21 % increase in Microsoft Dynamics rate accounted for a $ 248 million or a two percentage revenue primarily associated with the 2007 Microsoft Office system . The expense . Headcount-related cost increased 10 % , driven by a % , driven by a 6 % increase in headcount and compensation expense . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 MBD revenue increased reflecting an in business sale of $ 1.01 billion or 10 % , of $ 1.01 billion or 10 % , partially offset by in consumer sale of $ 44 million or 1 % . of $ 44 million or 1 % . The increase in in business sale reflects a 16 % increase in Microsoft Dynamics expense . Headcount-related cost increased 8 % , driven by a % , driven by a 14 % increase in headcount and stock-based compensation expense . PAGE 25 Table of Contents Part II of Contents Part II Item 7 Entertainment and Devices Division ( million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Revenue $ 6,083 2006 Percent Change 2006 versus 2005 Revenue $ 6,083 $ 4,756 2006 versus 2005 Revenue $ 6,083 $ 4,756 $ 3,515 28 2005 Revenue $ 6,083 $ 4,756 $ 3,515 28 % 35 $ 6,083 $ 4,756 $ 3,515 28 % 35 % Operating 6,083 $ 4,756 $ 3,515 28 % 35 % Operating loss 4,756 $ 3,515 28 % 35 % Operating loss $ ( % Operating loss $ ( 1,892 ) $ ( 1,284 ) ( 1,892 ) $ ( 1,284 ) $ ( 539 ) ( 1,284 ) $ ( 539 ) ( 47 ) % $ ( 539 ) ( 47 ) % ( 138 ) ( 47 ) % ( 138 ) % The Entertainment and the functionality of the Xbox 360 console , game portfolio , competitive console . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 EDD revenue increased primarily due primarily due to increased Xbox 360 console sale , Zune sale game sale . We shipped 6.6 million Xbox 360 console during We shipped 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 a compared to 5.0 million year 2007 a compared to 5.0 million console during fiscal year million console during fiscal year 2006 . Xbox and PC game PC game revenue increased $ 650 million or 19 % a increased $ 650 million or 19 % a a result of a result of increased Xbox 360 platform sale , partially offset which wa launched in November 2006 , consumer hardware and software TV platform revenue increased $ 539 million or 65 % . increased $ 539 million or 65 % . Mobile and Embedded Embedded Devices revenue increased $ 138 million or 28 % driven increased $ 138 million or 28 % driven by sale growth primarily due to the $ 1.06 billion Xbox 360 charge recognized the $ 1.06 billion Xbox 360 charge recognized in the fourth fourth quarter of fiscal year 2007 and Zune launch-related expense . partially offset by increased Xbox 360 platform sale and decreased Xbox platform sale and decreased Xbox 360 console manufacturing cost . Headcount-related cost . Headcount-related cost increased 15 % , driven by a % , driven by a 9 % increase in headcount and compensation expense . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 EDD revenue increased primarily due the launch of the Xbox 360 console in November 2005 , Xbox 360 console in November 2005 , partially offset by a the significant impact of Halo 2 in fiscal year 2005 . Halo 2 in fiscal year 2005 . The revenue growth wa wa also attributable to $ 140 million or 15 % growth to $ 140 million or 15 % growth from our other to deployment in fiscal year 2006 . Mobile and Embedded Devices Embedded Devices revenue increased $ 115 million or 44 % driven increased $ 115 million or 44 % driven by unit volume a result of a $ 1.64 billion increase in cost of from the number of Xbox 360 console sold and higher Xbox console sold and higher Xbox 360 unit cost , partially offset The significant impact of Halo 2 in fiscal year 2005 also Halo 2 in fiscal year 2005 also contributed to the increase the increase in fiscal year 2006 operating loss . Headcount-related cost loss . Headcount-related cost increased 8 % , driven by a % , driven by a 21 % increase in headcount and stock-based compensation expense . PAGE 26 Table of Contents Part II of Contents Part II Item 7 Corporate-Level Activity ( In million million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Corporate-level activity $ 2006 Percent Change 2006 versus 2005 Corporate-level activity $ ( 5,193 2005 Corporate-level activity $ ( 5,193 ) $ ( 5,122 ) ( 5,193 ) $ ( 5,122 ) $ ( 5,932 ) ( 5,122 ) $ ( 5,932 ) ( 1 ) % $ ( 5,932 ) ( 1 ) % 14 % Certain ) ( 1 ) % 14 % Certain corporate-level result are and contingency . Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Corporate-level expense increased primarily driven contingency . Headcount-related cost increased 25 % , driven by a % , driven by a 19 % increase in headcount and headcount . We incurred $ 511 million in legal charge during the twelve month ended June 30 , 2007 , primarily related month ended June 30 , 2007 , primarily related to antitrust Agreement . We incurred $ 1.32 billion in legal charge during legal charge during fiscal year 2006 which included settlement expense of included settlement expense of $ 361 million related to our settlement antitrust matter , a € 281 million ( $ 351 million € 281 million ( $ 351 million ) fine imposed by the European Commission in July 2006 related to it 2004 decision July 2006 related to it 2004 decision in it competition law Microsystems , Inc. Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 Corporate-level expense decreased primarily reflecting cost . We incurred $ 1.32 billion in legal charge during legal charge during fiscal year 2006 a compared to $ 2.31 2006 a compared to $ 2.31 billion in legal charge incurred charge incurred during fiscal year 2005 primarily related to settlement with matter . Headcount-related cost increased 5 % , driven by a % , driven by a 23 % increase in headcount and Our outlook for fiscal year 2008 is a follows : Client expect PC shipment to grow 9 % to 11 % for to grow 9 % to 11 % for fiscal year 2008 11 % for fiscal year 2008 . We believe that PC second half of fiscal year 2008 . Online Services Business We to expand . In May 2007 , we agreed to acquire company , for approximately $ 6 billion in cash . We complete this transaction in August 2007 . This acquisition will enable to increase in fiscal year 2008 due to increased customer acceptance increased customer acceptance of the 2007 Microsoft Office system . We Microsoft Dynamics product . PAGE 27 Table of Contents Part II of Contents Part II Item 7 Entertainment and Devices Division We installed base of the Xbox 360 console and from the release from the release of Halo 3 , a new Xbox 360 3 , a new Xbox 360 game . Revenue from existing million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Cost of revenue 2006 Percent Change 2006 versus 2005 Cost of revenue $ 10,693 2005 Cost of revenue $ 10,693 $ 7,650 $ 6,031 40 of revenue $ 10,693 $ 7,650 $ 6,031 40 % 27 $ 10,693 $ 7,650 $ 6,031 40 % 27 % As 10,693 $ 7,650 $ 6,031 40 % 27 % As a 7,650 $ 6,031 40 % 27 % As a percent of As a percent of revenue 21 % 17 % 15 % percent of revenue 21 % 17 % 15 % 4ppt 2ppt revenue 21 % 17 % 15 % 4ppt 2ppt Cost of % 17 % 15 % 4ppt 2ppt Cost of revenue includes 17 % 15 % 4ppt 2ppt Cost of revenue includes manufacturing revenue increased in fiscal year 2007 primarily driven by the Xbox primarily driven by the Xbox 360 charge , increased Windows Vista revenue increased in fiscal year 2006 mainly due to a $ mainly due to a $ 1.64 billion increase in EDD a console sold and higher Xbox 360 unit cost . Research and million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Research and development 2006 Percent Change 2006 versus 2005 Research and development $ 7,121 2005 Research and development $ 7,121 $ 6,584 $ 6,097 8 and development $ 7,121 $ 6,584 $ 6,097 8 % 8 $ 7,121 $ 6,584 $ 6,097 8 % 8 % As 7,121 $ 6,584 $ 6,097 8 % 8 % As a 6,584 $ 6,097 8 % 8 % As a percent of As a percent of revenue 14 % 15 % 15 % percent of revenue 14 % 15 % 15 % ( 1 revenue 14 % 15 % 15 % ( 1 ) ppt 15 % 15 % ( 1 ) ppt – Research and cost increased during fiscal year 2007 primarily due to increased headcount-related increased headcount-related cost which grew 8 % , reflecting a 9 8 % , reflecting a 9 % growth in headcount and cost increased during fiscal year 2006 primarily due to increased development activity . Headcount-related cost increased 3 % during fiscal year 2006 3 % during fiscal year 2006 , driven by a 17 2006 , driven by a 17 % increase in headcount and stock-based compensation expense . PAGE 28 Table of Contents Part II of Contents Part II Item 7 Sales and Marketing ( In million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 Sales and marketing 2006 Percent Change 2006 versus 2005 Sales and marketing $ 11,455 2005 Sales and marketing $ 11,455 $ 9,818 $ 8,563 17 and marketing $ 11,455 $ 9,818 $ 8,563 17 % 15 $ 11,455 $ 9,818 $ 8,563 17 % 15 % As 11,455 $ 9,818 $ 8,563 17 % 15 % As a 9,818 $ 8,563 17 % 15 % As a percent of As a percent of revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % – – revenue 22 % 22 % 22 % – – Sales and expense increased during fiscal year 2007 primarily because of increased headcount-related launch . Headcount-related cost increased 22 % during fiscal year 2007 22 % during fiscal year 2007 , driven by an 11 2007 , driven by an 11 % increase in headcount and expense increased during fiscal year 2006 primarily because of increased headcount-related spending . Headcount-related cost increased 13 % during fiscal year 2006 13 % during fiscal year 2006 , driven by a 20 2006 , driven by a 20 % increase in headcount and million , except percentage ) 2007 2006 2005 Percent Change 2007 , except percentage ) 2007 2006 2005 Percent Change 2007 versus except percentage ) 2007 2006 2005 Percent Change 2007 versus 2006 2007 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 2005 Percent Change 2007 versus 2006 Percent Change 2006 versus 2005 2007 versus 2006 Percent Change 2006 versus 2005 General and administrative 2006 Percent Change 2006 versus 2005 General and administrative $ 3,329 2005 General and administrative $ 3,329 $ 3,758 $ 4,536 ( and administrative $ 3,329 $ 3,758 $ 4,536 ( 11 ) $ 3,329 $ 3,758 $ 4,536 ( 11 ) % ( $ 3,758 $ 4,536 ( 11 ) % ( 17 ) ( 11 ) % ( 17 ) % As a percent As a percent of revenue 7 % 8 % 11 % percent of revenue 7 % 8 % 11 % ( 1 revenue 7 % 8 % 11 % ( 1 ) ppt 8 % 11 % ( 1 ) ppt ( 3 ) ( 1 ) ppt ( 3 ) ppt General and administrative cost decreased during fiscal year 2007 primarily reflecting decreased cost for cost . During fiscal year 2007 , we incurred $ 511 2007 , we incurred $ 511 million of legal charge primarily Inc. a compared to $ 1.32 billion of legal charge in legal charge in fiscal year 2006 . Headcount-related cost increased 15 2006 . Headcount-related cost increased 15 % during fiscal year 2007 15 % during fiscal year 2007 , driven by a 12 2007 , driven by a 12 % increase in headcount and cost decreased in fiscal year 2006 primarily reflecting decreased cost for contingency . During fiscal year 2006 , we incurred $ 1.32 2006 , we incurred $ 1.32 billion of legal charge primarily Legal charge in fiscal year 2006 also included settlement expense of included settlement expense of $ 361 million related to our settlement , Inc. and the € 281 million ( $ 351 million € 281 million ( $ 351 million ) European Commission fine fine . Headcount-related cost increased 7 % during fiscal year 2006 7 % during fiscal year 2006 , driven by an 18 2006 , driven by an 18 % increase in headcount and headcount . We incurred $ 2.31 billion in legal charge during legal charge during fiscal year 2005 . PAGE 29 Table of fiscal year 2005 . PAGE 29 Table of Contents Part II of Contents Part II Item 7 Investment Income and Other The : ( In million ) 2007 2006 2005 Dividends and interest ( In million ) 2007 2006 2005 Dividends and interest $ In million ) 2007 2006 2005 Dividends and interest $ 1,319 2005 Dividends and interest $ 1,319 $ 1,510 $ 1,460 Net and interest $ 1,319 $ 1,510 $ 1,460 Net gain on $ 1,319 $ 1,510 $ 1,460 Net gain on investment 650 1,460 Net gain on investment 650 161 856 Net loss on Net gain on investment 650 161 856 Net loss on derivative gain on investment 650 161 856 Net loss on derivative ( Net loss on derivative ( 358 ) ( 99 ) ( derivative ( 358 ) ( 99 ) ( 262 ) Other ) ( 99 ) ( 262 ) Other , net ( ) Other , net ( 34 ) 218 13 Investment income , net ( 34 ) 218 13 Investment income and other net ( 34 ) 218 13 Investment income and other $ Investment income and other $ 1,577 $ 1,790 $ 2,067 For and other $ 1,577 $ 1,790 $ 2,067 For fiscal year $ 1,577 $ 1,790 $ 2,067 For fiscal year 2007 , $ 2,067 For fiscal year 2007 , dividend and interest income investment . For fiscal year 2006 , dividend and interest income a result of the $ 32.64 billion special dividend paid on special dividend paid on December 2 , 2004 , and stock paid on December 2 , 2004 , and stock repurchase made repurchase made throughout fiscal year 2006 . For fiscal year 2007 2006 . For fiscal year 2007 , net gain on investment to loss in fiscal year 2006 , partly offset by fewer Other-than-temporary impairment in fiscal year 2007 were not material and were not material and were $ 408 million in fiscal year 2006 408 million in fiscal year 2006 . Net gain on investment investment decreased in fiscal year 2006 primarily due to increased net equity investment in fiscal year 2006 a compared to fiscal year a compared to fiscal year 2005 . For fiscal year 2006 2005 . For fiscal year 2006 , other-than-temporary impairment were $ , other-than-temporary impairment were $ 408 million , a compared to , a compared to $ 152 million in fiscal year 2005 152 million in fiscal year 2005 . The increase in other-than-temporary other-than-temporary impairment in fiscal year 2006 wa driven by planned sale raise fund for the $ 20 billion tender offer announced on tender offer announced on July 20 , 2006 . Investments are announced on July 20 , 2006 . Investments are considered to . Derivative loss during fiscal 2007 were primarily driven by net revenue . During fiscal year 2006 , we experienced lower net a compared to fiscal year 2005 primarily due to net gain non-designated equity derivative in fiscal 2006 a compared to net loss to net loss in fiscal 2005 and higher net gain on on commodity position in fiscal 2006 driven by increase in the rate derivative contract in fiscal 2006 . Net derivative loss in derivative loss in fiscal year 2005 were primarily related to loss of portfolio diversification . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Other , net in fiscal , net in fiscal year 2006 includes $ 195 million of fiscal year 2006 includes $ 195 million of gain that resulted tax rate for fiscal year 2007 , 2006 , and 2005 for fiscal year 2007 , 2006 , and 2005 wa 30 2007 , 2006 , and 2005 wa 30 % , 31 2006 , and 2005 wa 30 % , 31 % , 2005 wa 30 % , 31 % , and 26 % , 31 % , and 26 % , respectively . The respectively . The fiscal year 2007 rate reflects a recurring effective recurring effective tax rate of 31 % offset by a $ % offset by a $ 195 million reduction resulting from various assessment . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from the resolution of recorded a charge of € 281 million ( $ 351 million € 281 million ( $ 351 million ) from the European not tax deductible . The 2005 tax rate wa lower from and short-term investment totaled $ 23.41 billion and $ 34.16 billion $ 23.41 billion and $ 34.16 billion a of June 30 34.16 billion a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , respectively . June 30 , 2007 and 2006 , respectively . Equity and and other investment were $ 10.12 billion and $ 9.23 billion $ 10.12 billion and $ 9.23 billion a of June 30 9.23 billion a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , respectively . June 30 , 2007 and 2006 , respectively . Our investment second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 29.46 billion at June 30 , $ 29.46 billion at June 30 , 2007 . Our retained billion at June 30 , 2007 . Our retained deficit is unearned revenue a of June 30 , 2007 : ( In a of June 30 , 2007 : ( In million ) Three month ended : September 30 , 2007 $ 4,021 December ended : September 30 , 2007 $ 4,021 December 31 , September 30 , 2007 $ 4,021 December 31 , 2007 3,245 , 2007 $ 4,021 December 31 , 2007 3,245 March 31 $ 4,021 December 31 , 2007 3,245 March 31 , 2008 4,021 December 31 , 2007 3,245 March 31 , 2008 2,264 31 , 2007 3,245 March 31 , 2008 2,264 June 30 2007 3,245 March 31 , 2008 2,264 June 30 , 2008 3,245 March 31 , 2008 2,264 June 30 , 2008 1,249 31 , 2008 2,264 June 30 , 2008 1,249 Thereafter 1,867 2008 2,264 June 30 , 2008 1,249 Thereafter 1,867 Unearned revenue 2,264 June 30 , 2008 1,249 Thereafter 1,867 Unearned revenue $ 30 , 2008 1,249 Thereafter 1,867 Unearned revenue $ 12,646 PAGE Thereafter 1,867 Unearned revenue $ 12,646 PAGE 31 Table of Contents Unearned revenue $ 12,646 PAGE 31 Table of Contents Part II of Contents Part II Item 7 Cash Flows Fiscal year 2007 7 Cash Flows Fiscal year 2007 compared to fiscal year 2006 2007 compared to fiscal year 2006 Cash flow from operation increased flow from operation increased $ 3.39 billion due to an increase received from customer driven by 15 % revenue growth , along , along with a $ 1.64 billion decrease in cash outflow used for financing increased $ 3.98 billion . Several event occurred event occurred during fiscal year 2007 that affected cash used for financing . We issued $ 6.78 billion of common stock , common stock , including $ 3.25 billion related to 113 million $ 3.25 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa offer on August 17 , 2006 , which wa included in wa included in the $ 27.58 billion of common stock repurchase Cash from investing decreased $ 1.91 billion due to a $ billion due to a $ 3.49 billion decline in security lending the counterparty along with $ 1.19 billion spent on acquisition of partially offset by a $ 2.77 billion increase in net cash and maturity . Fiscal year 2006 compared to fiscal year 2005 2006 compared to fiscal year 2005 Cash flow from operation decreased flow from operation decreased $ 2.20 billion primarily due to increased payment to fund a $ 987 million increase in Xbox 360 987 million increase in Xbox 360 inventory and product cost and to employee resulting from a 16 % growth in headcount . from customer driven by our 11 % revenue growth and a revenue growth and a $ 1.74 billion increase in unearned revenue used in financing decreased $ 20.52 billion driven by a $ billion driven by a $ 32.57 billion reduction in cash dividend partially offset by an $ 11.15 billion increase in common stock cash from investing decreased $ 7.02 billion driven primarily by an driven primarily by an $ 8.93 billion decrease in cash from of investment and a $ 766 million increase in addition to were partially offset by $ 3.12 billion of net cash proceeds Stockholders ’ equity at June 30 , 2007 , wa $ equity at June 30 , 2007 , wa $ 31.10 billion , 2007 , wa $ 31.10 billion . We will continue constructing new building were $ 821 million on June 30 , $ 821 million on June 30 , 2007 . We have million on June 30 , 2007 . We have operating lease incurred rental expense totaling $ 326 million , $ 276 million $ 326 million , $ 276 million , and $ 299 276 million , and $ 299 million in fiscal year 2007 299 million in fiscal year 2007 , 2006 , and 2005 in fiscal year 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . We have capital resource . In May 2007 , we announced that we , Inc. for approximately $ 6 billion in cash . We complete this transaction in August 2007 . During fiscal year 2007 2007 . During fiscal year 2007 and 2006 , our Board During fiscal year 2007 and 2006 , our Board of Directors million ) ( Fiscal year 2007 ) September 13 , 2006 Fiscal year 2007 ) September 13 , 2006 $ 0.10 November 2007 ) September 13 , 2006 $ 0.10 November 16 , September 13 , 2006 $ 0.10 November 16 , 2006 $ , 2006 $ 0.10 November 16 , 2006 $ 980 December $ 0.10 November 16 , 2006 $ 980 December 14 , November 16 , 2006 $ 980 December 14 , 2006 December , 2006 $ 980 December 14 , 2006 December 20 , $ 980 December 14 , 2006 December 20 , 2006 $ December 14 , 2006 December 20 , 2006 $ 0.10 February , 2006 December 20 , 2006 $ 0.10 February 15 , December 20 , 2006 $ 0.10 February 15 , 2007 $ , 2006 $ 0.10 February 15 , 2007 $ 978 March $ 0.10 February 15 , 2007 $ 978 March 8 , February 15 , 2007 $ 978 March 8 , 2007 March , 2007 $ 978 March 8 , 2007 March 26 , $ 978 March 8 , 2007 March 26 , 2007 $ March 8 , 2007 March 26 , 2007 $ 0.10 May , 2007 March 26 , 2007 $ 0.10 May 17 , March 26 , 2007 $ 0.10 May 17 , 2007 $ , 2007 $ 0.10 May 17 , 2007 $ 952 June $ 0.10 May 17 , 2007 $ 952 June 14 , May 17 , 2007 $ 952 June 14 , 2007 June , 2007 $ 952 June 14 , 2007 June 27 , $ 952 June 14 , 2007 June 27 , 2007 $ June 14 , 2007 June 27 , 2007 $ 0.10 August , 2007 June 27 , 2007 $ 0.10 August 16 , June 27 , 2007 $ 0.10 August 16 , 2007 $ , 2007 $ 0.10 August 16 , 2007 $ 938 September $ 0.10 August 16 , 2007 $ 938 September 13 , August 16 , 2007 $ 938 September 13 , 2007 ( , 2007 $ 938 September 13 , 2007 ( Fiscal year $ 938 September 13 , 2007 ( Fiscal year 2006 ) , 2007 ( Fiscal year 2006 ) September 23 , 2005 Fiscal year 2006 ) September 23 , 2005 $ 0.08 November 2006 ) September 23 , 2005 $ 0.08 November 17 , September 23 , 2005 $ 0.08 November 17 , 2005 $ , 2005 $ 0.08 November 17 , 2005 $ 846 December $ 0.08 November 17 , 2005 $ 846 December 8 , November 17 , 2005 $ 846 December 8 , 2005 December , 2005 $ 846 December 8 , 2005 December 14 , $ 846 December 8 , 2005 December 14 , 2005 $ December 8 , 2005 December 14 , 2005 $ 0.09 February , 2005 December 14 , 2005 $ 0.09 February 17 , December 14 , 2005 $ 0.09 February 17 , 2006 $ , 2005 $ 0.09 February 17 , 2006 $ 926 March $ 0.09 February 17 , 2006 $ 926 March 9 , February 17 , 2006 $ 926 March 9 , 2006 March , 2006 $ 926 March 9 , 2006 March 27 , $ 926 March 9 , 2006 March 27 , 2006 $ March 9 , 2006 March 27 , 2006 $ 0.09 May , 2006 March 27 , 2006 $ 0.09 May 17 , March 27 , 2006 $ 0.09 May 17 , 2006 $ , 2006 $ 0.09 May 17 , 2006 $ 916 June $ 0.09 May 17 , 2006 $ 916 June 8 , May 17 , 2006 $ 916 June 8 , 2006 June , 2006 $ 916 June 8 , 2006 June 21 , $ 916 June 8 , 2006 June 21 , 2006 $ June 8 , 2006 June 21 , 2006 $ 0.09 August , 2006 June 21 , 2006 $ 0.09 August 17,2006 $ June 21 , 2006 $ 0.09 August 17,2006 $ 897 September , 2006 $ 0.09 August 17,2006 $ 897 September 14 , $ 0.09 August 17,2006 $ 897 September 14 , 2006 PAGE August 17,2006 $ 897 September 14 , 2006 PAGE 32 Table $ 897 September 14 , 2006 PAGE 32 Table of Contents September 14 , 2006 PAGE 32 Table of Contents Part II of Contents Part II Item 7 On July 20 , 2006 II Item 7 On July 20 , 2006 , we announced 7 On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30.00 billion in Microsoft common stock stock . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.75 billion , of our common this plan . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.00 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately $ 16.16 billion . As a result an amount up to $ 36.16 billion through June 30 , $ 36.16 billion through June 30 , 2011 . As of billion through June 30 , 2011 . As of June 30 2011 . As of June 30 , 2007 , approximately $ As of June 30 , 2007 , approximately $ 15.14 billion , 2007 , approximately $ 15.14 billion remained of the $ billion remained of the $ 36.16 billion approved repurchase amount . indemnification under SFAS No . 5 , Accounting for Contingencies , ” ) Interpretation No . 45 , Guarantor ’ s Accounting our financial statement . PAGE 33 Table of Contents Part II of Contents Part II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2007 : ( In a of June 30 , 2007 : ( In million ) ( In million ) ( 1 ) Payments due by period due by period Fiscal Years 2008 2009-2011 2012-2014 2015 and thereafter by period Fiscal Years 2008 2009-2011 2012-2014 2015 and thereafter Total period Fiscal Years 2008 2009-2011 2012-2014 2015 and thereafter Total Long-term Fiscal Years 2008 2009-2011 2012-2014 2015 and thereafter Total Long-term debt $ – Construction commitment ( 2 ) ( 4 ) 821 commitment ( 2 ) ( 4 ) 821 – – – 2 ) ( 4 ) 821 – – – 821 Lease ) 821 – – – 821 Lease obligation : Capital lease – – Operating lease ( 3 ) 349 618 258 116 Operating lease ( 3 ) 349 618 258 116 1,341 Purchase lease ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 3 ) 349 618 258 116 1,341 Purchase commitment ( 4 ) 349 618 258 116 1,341 Purchase commitment ( 4 ) 116 1,341 Purchase commitment ( 4 ) 1,824 19 – – Purchase commitment ( 4 ) 1,824 19 – – 1,843 Other commitment ( 4 ) 1,824 19 – – 1,843 Other long-term ) 1,824 19 – – 1,843 Other long-term liability ( 5 1,843 Other long-term liability ( 5 ) 1 519 — – long-term liability ( 5 ) 1 519 — – 520 Total liability ( 5 ) 1 519 — – 520 Total contractual ) 1 519 — – 520 Total contractual obligation $ 2,995 520 Total contractual obligation $ 2,995 $ 1,156 $ 258 $ contractual obligation $ 2,995 $ 1,156 $ 258 $ 116 $ $ 2,995 $ 1,156 $ 258 $ 116 $ 4,525 ( $ 1,156 $ 258 $ 116 $ 4,525 ( 1 ) $ 258 $ 116 $ 4,525 ( 1 ) We have $ 116 $ 4,525 ( 1 ) We have excluded the We have excluded the $ 768 million long-term contingent liability related lawsuit referred to in Note 17 – Contingencies of the Notes ( Part II , Item 8 ) a the timing and subject to uncertainty . ( 2 ) We have certain commitment flow from operation . ( 3 ) Our future minimum rental flow from operation . ( 4 ) The amount presented above flow from operation . ( 5 ) We have excluded other excluded other obligation of $ 5.86 billion from other long-term liability excluded non-cash item of $ 71 million and unearned revenue of and unearned revenue of $ 1.87 billion . In May 2007 1.87 billion . In May 2007 , we entered into an the company for approximately $ 6 billion in cash . As are required to pay $ 500 million if certain event occur to be completed in August 2007 . RECENTLY ISSUED ACCOUNTING STANDARDS ISSUED ACCOUNTING STANDARDS In June 2006 , the FASB issued Interpretation FASB issued Interpretation No . 48 ( “ FIN No . ( “ FIN No . 48 ” ) , Accounting for of FASB Statement No . 109 , which clarifies the accounting with FASB Statement No . 109 , Accounting for Income Taxes . Under FIN No . 48 , the Company may recognize that ha a greater than 50 % likelihood of being realized settlement . FIN No . 48 also provides guidance on derecognition transition . FIN No . 48 is effective for u beginning effective for u beginning July 1 , 2007 . Based on u beginning July 1 , 2007 . Based on our current adoption of FIN No . 48 is expected to decrease beginning beginning retained earnings by $ 200 million to $ 400 million $ 200 million to $ 400 million upon adoption . In upon adoption . In June 2006 , the FASB ratified the on EITF Issue No . 06-2 , “ Accounting for Sabbatical to FASB Statement No . 43 . ” EITF Issue No ” EITF Issue No . 06-2 requires company to accrue the sabbatical or similar benefit PAGE 34 Table of Contents Part II of Contents Part II Item 7 arrangement over the requisite service . EITF Issue No . 06-2 is effective for u beginning effective for u beginning July 1 , 2007 . The cumulative u beginning July 1 , 2007 . The cumulative effect of statement . In fiscal year 2007 , we adopted Staff Accounting SAB ” ) No . 108 , Considering the Effects of Misstatements . SAB No . 108 requires company to quantify misstatement adoption of SAB No . 108 did not have an impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , measurement . SFAS No . 157 doe not require any new effective for u beginning July 1 , 2008 . We currently u beginning July 1 , 2008 . We currently are assessing adoption of SFAS No . 157 would have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early u beginning July 1 , 2008 , although early adoption is adoption of SFAS No . 159 will have on our financial ( “ SOP ” ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether product . SFAS No . 115 , Accounting for Certain Investments Securities , and SAB Topic 5M , Accounting for Noncurrent Marketable an impairment charge is PAGE 35 Table of Contents Part II of Contents Part II Item 7 recorded and a new cost impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Accounting for the Costs Marketed . SFAS No . 86 specifies that cost incurred internally with Windows Vista and the 2007 Microsoft Office system during the second quarter of fiscal year 2007 and accordingly , we capitalized , we capitalized approximately $ 120 million of software development cost uncertainty . SFAS No . 5 , Accounting for Contingencies , flow . SFAS No . 109 , Accounting for Income Taxes requirement of SFAS No . 5 . We account for stock-based accordance with SFAS No . 123 ( R ) , Share-Based to be forfeited . PAGE 36 Table of Contents Part II of Contents Part II Item 7 If actual result differ significantly accordance with SFAS No . 5 , Accounting for Contingencies . a period generally ranging from 90 day to three year . amount a necessary . PAGE 37 Table of Contents Part II of Contents Part II Item 7 Statement of Management ’ s ; Chief Accounting Officer PAGE 38 Table of Contents Part II of Contents Part II Item 7A ITEM 7A . QUANTITATIVE AND Part II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES to a range of over 1,000 equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor for the year ended June 30 , 2007 and 2006 : year ended June 30 , 2007 and 2006 : ( In June 30 , 2007 and 2006 : ( In million ) million ) Year ended June 30 , 2007 Risk Categories June Year ended June 30 , 2007 Risk Categories June 30 , , 2007 Risk Categories June 30 , 2007 June 30 , Risk Categories June 30 , 2007 June 30 , 2006 Average June 30 , 2007 June 30 , 2006 Average High Low , 2007 June 30 , 2006 Average High Low Interest rate High Low Interest rate $ 34 $ 66 $ 43 $ Interest rate $ 34 $ 66 $ 43 $ 67 $ $ 34 $ 66 $ 43 $ 67 $ 32 Currency $ 66 $ 43 $ 67 $ 32 Currency rate 55 $ 43 $ 67 $ 32 Currency rate 55 91 52 67 $ 32 Currency rate 55 91 52 101 15 Equity $ 32 Currency rate 55 91 52 101 15 Equity price 32 Currency rate 55 91 52 101 15 Equity price 60 Currency rate 55 91 52 101 15 Equity price 60 88 rate 55 91 52 101 15 Equity price 60 88 59 52 101 15 Equity price 60 88 59 89 49 Commodity 101 15 Equity price 60 88 59 89 49 Commodity price 15 Equity price 60 88 59 89 49 Commodity price 7 Equity price 60 88 59 89 49 Commodity price 7 12 price 60 88 59 89 49 Commodity price 7 12 7 59 89 49 Commodity price 7 12 7 12 4 Total 89 49 Commodity price 7 12 7 12 4 Total one-day 49 Commodity price 7 12 7 12 4 Total one-day VaR Commodity price 7 12 7 12 4 Total one-day VaR for price 7 12 7 12 4 Total one-day VaR for the combined risk category wa $ 95 million at June 30 , $ 95 million at June 30 , 2007 and $ 158 million at June 30 , 2007 and $ 158 million at 30 , 2007 and $ 158 million at June 30 , $ 158 million at June 30 , 2006 . The total million at June 30 , 2006 . The total VaR is . The total VaR is 39 % le at June 30 39 % le at June 30 , 2007 , and 38 le at June 30 , 2007 , and 38 % le 30 , 2007 , and 38 % le at June 30 38 % le at June 30 , 2006 , than the le at June 30 , 2006 , than the sum of the overall portfolio . PAGE 39 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 2007 2006 2005 Revenue $ ) Year Ended June 30 2007 2006 2005 Revenue $ 51,122 Year Ended June 30 2007 2006 2005 Revenue $ 51,122 $ Ended June 30 2007 2006 2005 Revenue $ 51,122 $ 44,282 2007 2006 2005 Revenue $ 51,122 $ 44,282 $ 39,788 Operating 2005 Revenue $ 51,122 $ 44,282 $ 39,788 Operating expense : $ 51,122 $ 44,282 $ 39,788 Operating expense : Cost of expense : Cost of revenue 10,693 7,650 6,031 Research and development : Cost of revenue 10,693 7,650 6,031 Research and development 7,121 Cost of revenue 10,693 7,650 6,031 Research and development 7,121 6,584 7,650 6,031 Research and development 7,121 6,584 6,097 Sales and marketing 6,031 Research and development 7,121 6,584 6,097 Sales and marketing 11,455 Research and development 7,121 6,584 6,097 Sales and marketing 11,455 9,818 6,584 6,097 Sales and marketing 11,455 9,818 8,563 General and administrative 6,097 Sales and marketing 11,455 9,818 8,563 General and administrative 3,329 Sales and marketing 11,455 9,818 8,563 General and administrative 3,329 3,758 9,818 8,563 General and administrative 3,329 3,758 4,536 Total operating expense 8,563 General and administrative 3,329 3,758 4,536 Total operating expense 32,598 General and administrative 3,329 3,758 4,536 Total operating expense 32,598 27,810 3,758 4,536 Total operating expense 32,598 27,810 25,227 Operating income 18,524 4,536 Total operating expense 32,598 27,810 25,227 Operating income 18,524 16,472 Total operating expense 32,598 27,810 25,227 Operating income 18,524 16,472 14,561 32,598 27,810 25,227 Operating income 18,524 16,472 14,561 Investment income and 27,810 25,227 Operating income 18,524 16,472 14,561 Investment income and other 25,227 Operating income 18,524 16,472 14,561 Investment income and other 1,577 14,561 Investment income and other 1,577 1,790 2,067 Income before income Investment income and other 1,577 1,790 2,067 Income before income tax income and other 1,577 1,790 2,067 Income before income tax 20,101 2,067 Income before income tax 20,101 18,262 16,628 Provision for income Income before income tax 20,101 18,262 16,628 Provision for income tax before income tax 20,101 18,262 16,628 Provision for income tax 6,036 16,628 Provision for income tax 6,036 5,663 4,374 Net income $ Provision for income tax 6,036 5,663 4,374 Net income $ 14,065 for income tax 6,036 5,663 4,374 Net income $ 14,065 $ 5,663 4,374 Net income $ 14,065 $ 12,599 $ 12,254 Earnings Net income $ 14,065 $ 12,599 $ 12,254 Earnings per share $ 14,065 $ 12,599 $ 12,254 Earnings per share : Basic per share : Basic $ 1.44 $ 1.21 $ 1.13 Diluted : Basic $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.44 $ 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 1.21 $ 1.13 Diluted $ 1.42 $ 1.20 $ 1.12 Weighted 1.13 Diluted $ 1.42 $ 1.20 $ 1.12 Weighted average share $ 1.42 $ 1.20 $ 1.12 Weighted average share outstanding : average share outstanding : Basic 9,742 10,438 10,839 Diluted 9,886 10,531 share outstanding : Basic 9,742 10,438 10,839 Diluted 9,886 10,531 10,906 outstanding : Basic 9,742 10,438 10,839 Diluted 9,886 10,531 10,906 Cash Basic 9,742 10,438 10,839 Diluted 9,886 10,531 10,906 Cash dividend declared 9,742 10,438 10,839 Diluted 9,886 10,531 10,906 Cash dividend declared per 10,438 10,839 Diluted 9,886 10,531 10,906 Cash dividend declared per common declared per common share $ 0.40 $ 0.35 $ 3.40 See common share $ 0.40 $ 0.35 $ 3.40 See accompanying note $ 0.40 $ 0.35 $ 3.40 See accompanying note . PAGE See accompanying note . PAGE 40 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 2007 2006 Assets Current asset In million ) June 30 2007 2006 Assets Current asset : million ) June 30 2007 2006 Assets Current asset : Cash : Cash and equivalent $ 6,111 $ 6,714 Short-term investment ( and equivalent $ 6,111 $ 6,714 Short-term investment ( including security pledged a collateral of $ 2,356 and $ 3,065 ) 17,300 of $ 2,356 and $ 3,065 ) 17,300 27,447 Total cash 2,356 and $ 3,065 ) 17,300 27,447 Total cash and short-term and $ 3,065 ) 17,300 27,447 Total cash and short-term investment Total cash and short-term investment 23,411 34,161 Accounts receivable , net cash and short-term investment 23,411 34,161 Accounts receivable , net of for doubtful account of $ 117 and $ 142 11,338 9,316 of $ 117 and $ 142 11,338 9,316 Inventories 1,127 1,478 $ 117 and $ 142 11,338 9,316 Inventories 1,127 1,478 Deferred 117 and $ 142 11,338 9,316 Inventories 1,127 1,478 Deferred income $ 142 11,338 9,316 Inventories 1,127 1,478 Deferred income tax 1,899 142 11,338 9,316 Inventories 1,127 1,478 Deferred income tax 1,899 1,940 1,127 1,478 Deferred income tax 1,899 1,940 Other 2,393 2,115 Total 1,478 Deferred income tax 1,899 1,940 Other 2,393 2,115 Total current income tax 1,899 1,940 Other 2,393 2,115 Total current asset 40,168 tax 1,899 1,940 Other 2,393 2,115 Total current asset 40,168 49,010 2,393 2,115 Total current asset 40,168 49,010 Property and equipment , 2,115 Total current asset 40,168 49,010 Property and equipment , net Property and equipment , net 4,350 3,044 Equity and other investment and equipment , net 4,350 3,044 Equity and other investment 10,117 3,044 Equity and other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible Equity and other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset other investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset , net investment 10,117 9,232 Goodwill 4,760 3,866 Intangible asset , net 878 3,866 Intangible asset , net 878 539 Deferred income tax 1,389 Intangible asset , net 878 539 Deferred income tax 1,389 2,611 878 539 Deferred income tax 1,389 2,611 Other long-term asset 1,509 539 Deferred income tax 1,389 2,611 Other long-term asset 1,509 1,295 1,389 2,611 Other long-term asset 1,509 1,295 Total asset $ 63,171 2,611 Other long-term asset 1,509 1,295 Total asset $ 63,171 $ 1,509 1,295 Total asset $ 63,171 $ 69,597 Liabilities and stockholder Total asset $ 63,171 $ 69,597 Liabilities and stockholder ’ equity liability : Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 Accounts payable $ 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income 3,247 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 $ 2,909 Accrued compensation 2,325 1,938 Income tax 1,040 1,557 Short-term compensation 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 2,325 1,938 Income tax 1,040 1,557 Short-term unearned revenue 10,779 9,138 1,040 1,557 Short-term unearned revenue 10,779 9,138 Securities lending payable 2,741 1,557 Short-term unearned revenue 10,779 9,138 Securities lending payable 2,741 3,117 10,779 9,138 Securities lending payable 2,741 3,117 Other 3,622 3,783 Total 9,138 Securities lending payable 2,741 3,117 Other 3,622 3,783 Total current lending payable 2,741 3,117 Other 3,622 3,783 Total current liability 23,754 payable 2,741 3,117 Other 3,622 3,783 Total current liability 23,754 22,442 3,622 3,783 Total current liability 23,754 22,442 Long-term unearned revenue 1,867 3,783 Total current liability 23,754 22,442 Long-term unearned revenue 1,867 1,764 23,754 22,442 Long-term unearned revenue 1,867 1,764 Other long-term liability 6,453 22,442 Long-term unearned revenue 1,867 1,764 Other long-term liability 6,453 5,287 1,867 1,764 Other long-term liability 6,453 5,287 Commitments and contingency Stockholders 1,764 Other long-term liability 6,453 5,287 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 9,380 and 10,062 share authorized 24,000 ; outstanding 9,380 and 10,062 60,557 59,005 Retained 24,000 ; outstanding 9,380 and 10,062 60,557 59,005 Retained deficit , ; outstanding 9,380 and 10,062 60,557 59,005 Retained deficit , including outstanding 9,380 and 10,062 60,557 59,005 Retained deficit , including accumulated other comprehensive income of $ 1,654 and $ 1,229 ( 29,460 of $ 1,654 and $ 1,229 ( 29,460 ) ( 18,901 1,654 and $ 1,229 ( 29,460 ) ( 18,901 ) Total 1,229 ( 29,460 ) ( 18,901 ) Total stockholder ’ equity ) Total stockholder ’ equity 31,097 40,104 Total liability and stockholder Total stockholder ’ equity 31,097 40,104 Total liability and stockholder ’ and stockholder ’ equity $ 63,171 $ 69,597 See accompanying note ’ equity $ 63,171 $ 69,597 See accompanying note . PAGE See accompanying note . PAGE 41 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 2007 2006 2005 Operations Net ) Year Ended June 30 2007 2006 2005 Operations Net income Year Ended June 30 2007 2006 2005 Operations Net income $ Ended June 30 2007 2006 2005 Operations Net income $ 14,065 2005 Operations Net income $ 14,065 $ 12,599 $ 12,254 Depreciation Net income $ 14,065 $ 12,599 $ 12,254 Depreciation , amortization $ 14,065 $ 12,599 $ 12,254 Depreciation , amortization , and , and other noncash item 1,440 903 855 Stock-based compensation 1,550 and other noncash item 1,440 903 855 Stock-based compensation 1,550 1,715 other noncash item 1,440 903 855 Stock-based compensation 1,550 1,715 2,448 1,440 903 855 Stock-based compensation 1,550 1,715 2,448 Net recognized gain 903 855 Stock-based compensation 1,550 1,715 2,448 Net recognized gain on 855 Stock-based compensation 1,550 1,715 2,448 Net recognized gain on investment recognized gain on investment ( 292 ) ( 270 ) ( investment ( 292 ) ( 270 ) ( 527 ) Stock ) ( 270 ) ( 527 ) Stock option income tax income tax benefit – – 668 Excess tax benefit from stock-based from stock-based payment arrangement ( 77 ) ( 89 ) – arrangement ( 77 ) ( 89 ) – Deferred income tax ) – Deferred income tax 421 219 ( 179 ) Unearned – Deferred income tax 421 219 ( 179 ) Unearned revenue income tax 421 219 ( 179 ) Unearned revenue 21,032 16,453 ( 179 ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned 179 ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned revenue ) Unearned revenue 21,032 16,453 13,831 Recognition of unearned revenue ( Recognition of unearned revenue ( 19,382 ) ( 14,729 ) ( revenue ( 19,382 ) ( 14,729 ) ( 12,919 ) Accounts ) ( 14,729 ) ( 12,919 ) Accounts receivable ( 1,764 12,919 ) Accounts receivable ( 1,764 ) ( 2,071 ) ( receivable ( 1,764 ) ( 2,071 ) ( 1,243 ) Other ) ( 2,071 ) ( 1,243 ) Other current asset 232 1,243 ) Other current asset 232 ( 1,405 ) ( 245 Other current asset 232 ( 1,405 ) ( 245 ) Other 232 ( 1,405 ) ( 245 ) Other long-term asset ( ) Other long-term asset ( 435 ) ( 49 ) 21 asset ( 435 ) ( 49 ) 21 Other current liability 435 ) ( 49 ) 21 Other current liability ( 552 21 Other current liability ( 552 ) ( 145 ) 396 liability ( 552 ) ( 145 ) 396 Other long-term liability 552 ) ( 145 ) 396 Other long-term liability 1,558 1,273 ) 396 Other long-term liability 1,558 1,273 1,245 Net cash from 396 Other long-term liability 1,558 1,273 1,245 Net cash from operation Other long-term liability 1,558 1,273 1,245 Net cash from operation 17,796 1,245 Net cash from operation 17,796 14,404 16,605 Financing Common stock Net cash from operation 17,796 14,404 16,605 Financing Common stock issued cash from operation 17,796 14,404 16,605 Financing Common stock issued 6,782 16,605 Financing Common stock issued 6,782 2,101 3,109 Common stock repurchased Financing Common stock issued 6,782 2,101 3,109 Common stock repurchased ( Common stock issued 6,782 2,101 3,109 Common stock repurchased ( 27,575 3,109 Common stock repurchased ( 27,575 ) ( 19,207 ) ( repurchased ( 27,575 ) ( 19,207 ) ( 8,057 ) Common ) ( 19,207 ) ( 8,057 ) Common stock cash dividend Common stock cash dividend ( 3,805 ) ( 3,545 ) ( dividend ( 3,805 ) ( 3,545 ) ( 36,112 ) Excess ) ( 3,545 ) ( 36,112 ) Excess tax benefit from benefit from stock-based payment arrangement 77 89 – Other ( 23 from stock-based payment arrangement 77 89 – Other ( 23 ) 77 89 – Other ( 23 ) – ( 18 ) ( 23 ) – ( 18 ) Net cash used in cash used in financing ( 24,544 ) ( 20,562 ) ( financing ( 24,544 ) ( 20,562 ) ( 41,078 ) Investing ) ( 20,562 ) ( 41,078 ) Investing Additions to property to property and equipment ( 2,264 ) ( 1,578 ) ( equipment ( 2,264 ) ( 1,578 ) ( 812 ) Acquisition ) ( 1,578 ) ( 812 ) Acquisition of company , net of cash acquired ( 1,150 ) ( 649 ) ( acquired ( 1,150 ) ( 649 ) ( 207 ) Purchases ) ( 649 ) ( 207 ) Purchases of investment ( ) Purchases of investment ( 36,308 ) ( 51,117 ) ( investment ( 36,308 ) ( 51,117 ) ( 68,045 ) Maturities ) ( 51,117 ) ( 68,045 ) Maturities of investment 4,736 68,045 ) Maturities of investment 4,736 3,877 29,153 Sales of investment ) Maturities of investment 4,736 3,877 29,153 Sales of investment 41,451 Maturities of investment 4,736 3,877 29,153 Sales of investment 41,451 54,353 3,877 29,153 Sales of investment 41,451 54,353 54,938 Securities lending payable 29,153 Sales of investment 41,451 54,353 54,938 Securities lending payable ( Sales of investment 41,451 54,353 54,938 Securities lending payable ( 376 54,938 Securities lending payable ( 376 ) 3,117 – Net cash lending payable ( 376 ) 3,117 – Net cash from investing – Net cash from investing 6,089 8,003 15,027 Net change in Net cash from investing 6,089 8,003 15,027 Net change in cash cash from investing 6,089 8,003 15,027 Net change in cash and in cash and equivalent ( 659 ) 1,845 ( 9,446 ) and equivalent ( 659 ) 1,845 ( 9,446 ) Effect of ( 659 ) 1,845 ( 9,446 ) Effect of exchange rate rate on cash and equivalent 56 18 ( 7 ) Cash on cash and equivalent 56 18 ( 7 ) Cash and and equivalent 56 18 ( 7 ) Cash and equivalent , equivalent , beginning of period 6,714 4,851 14,304 Cash and equivalent , beginning of period 6,714 4,851 14,304 Cash and equivalent , beginning of period 6,714 4,851 14,304 Cash and equivalent , end , end of period $ 6,111 $ 6,714 $ 4,851 See of period $ 6,111 $ 6,714 $ 4,851 See accompanying note $ 6,111 $ 6,714 $ 4,851 See accompanying note . PAGE See accompanying note . PAGE 42 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 2007 2006 2005 Common stock ) Year Ended June 30 2007 2006 2005 Common stock and Year Ended June 30 2007 2006 2005 Common stock and paid-in Ended June 30 2007 2006 2005 Common stock and paid-in capital , beginning of period $ 59,005 $ 60,413 $ 56,396 Common of period $ 59,005 $ 60,413 $ 56,396 Common stock issued $ 59,005 $ 60,413 $ 56,396 Common stock issued 6,783 1,939 $ 56,396 Common stock issued 6,783 1,939 3,223 Common stock repurchased 56,396 Common stock issued 6,783 1,939 3,223 Common stock repurchased ( Common stock issued 6,783 1,939 3,223 Common stock repurchased ( 6,162 3,223 Common stock repurchased ( 6,162 ) ( 4,447 ) ( repurchased ( 6,162 ) ( 4,447 ) ( 1,737 ) Stock-based ) ( 4,447 ) ( 1,737 ) Stock-based compensation expense 1,550 1,737 ) Stock-based compensation expense 1,550 1,715 2,448 Stock option income ) Stock-based compensation expense 1,550 1,715 2,448 Stock option income tax Stock-based compensation expense 1,550 1,715 2,448 Stock option income tax benefits/ benefits/ ( deficiency ) ( 661 ) ( 617 ) 89 ) ( 661 ) ( 617 ) 89 Other , net 661 ) ( 617 ) 89 Other , net 42 2 ) 89 Other , net 42 2 ( 6 ) Balance 89 Other , net 42 2 ( 6 ) Balance , , net 42 2 ( 6 ) Balance , end of Balance , end of period 60,557 59,005 60,413 Retained earnings ( , end of period 60,557 59,005 60,413 Retained earnings ( deficit end of period 60,557 59,005 60,413 Retained earnings ( deficit ) , beginning of period ( 18,901 ) ( 12,298 ) 18,429 period ( 18,901 ) ( 12,298 ) 18,429 Net income 14,065 18,901 ) ( 12,298 ) 18,429 Net income 14,065 12,599 12,254 12,298 ) 18,429 Net income 14,065 12,599 12,254 Other comprehensive income ) 18,429 Net income 14,065 12,599 12,254 Other comprehensive income : 18,429 Net income 14,065 12,599 12,254 Other comprehensive income : Net loss ) on derivative instrument 14 76 ( 58 ) Net ) on derivative instrument 14 76 ( 58 ) Net unrealized derivative instrument 14 76 ( 58 ) Net unrealized gains/ ( ( loss ) on investment 326 ( 282 ) 371 Translation ) on investment 326 ( 282 ) 371 Translation adjustment and investment 326 ( 282 ) 371 Translation adjustment and other 85 371 Translation adjustment and other 85 9 ( 6 ) Comprehensive Translation adjustment and other 85 9 ( 6 ) Comprehensive income and other 85 9 ( 6 ) Comprehensive income 14,490 12,402 ( 6 ) Comprehensive income 14,490 12,402 12,561 Common stock cash 6 ) Comprehensive income 14,490 12,402 12,561 Common stock cash dividend ) Comprehensive income 14,490 12,402 12,561 Common stock cash dividend ( Common stock cash dividend ( 3,837 ) ( 3,594 ) ( dividend ( 3,837 ) ( 3,594 ) ( 36,968 ) Common ) ( 3,594 ) ( 36,968 ) Common stock repurchased ( ) Common stock repurchased ( 21,212 ) ( 15,411 ) ( repurchased ( 21,212 ) ( 15,411 ) ( 6,320 ) Balance ) ( 15,411 ) ( 6,320 ) Balance , end of , end of period ( 29,460 ) ( 18,901 ) ( period ( 29,460 ) ( 18,901 ) ( 12,298 ) Total ) ( 18,901 ) ( 12,298 ) Total stockholder ’ equity Total stockholder ’ equity $ 31,097 $ 40,104 $ 48,115 See ’ equity $ 31,097 $ 40,104 $ 48,115 See accompanying note $ 31,097 $ 40,104 $ 48,115 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The , other multi-year licensing PAGE 44 Table of Contents Part II of Contents Part II Item 8 arrangement include a perpetual license with Windows Vista and the 2007 Microsoft Office system during the second quarter of fiscal year 2007 and accordingly , we capitalized , we capitalized approximately $ 120 million of software development cost . Advertising expense wa $ 1.33 billion , $ 1.23 billion $ 1.33 billion , $ 1.23 billion , and $ 995 1.23 billion , and $ 995 million in fiscal year 2007 995 million in fiscal year 2007 , 2006 , and 2005 in fiscal year 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . INCOME TAXES other-than-temporary impairment ) . PAGE 45 Table of Contents Part II of Contents Part II Item 8 Equity and other investment may SFAS ” ) No . 133 , Accounting for Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage . “ To Be PAGE 46 Table of Contents Part II of Contents Part II Item 8 Announced ” forward purchase commitment million ) Year Ended June 30 Balance at beginning of year Balance at end of year 2005 166 48 ( 43 ) at end of year 2005 166 48 ( 43 ) $ end of year 2005 166 48 ( 43 ) $ 171 year 2005 166 48 ( 43 ) $ 171 2006 171 48 ( 43 ) $ 171 2006 171 40 ( 69 ( 43 ) $ 171 2006 171 40 ( 69 ) 43 ) $ 171 2006 171 40 ( 69 ) 142 ) $ 171 2006 171 40 ( 69 ) 142 2007 171 2006 171 40 ( 69 ) 142 2007 142 64 171 40 ( 69 ) 142 2007 142 64 ( 89 40 ( 69 ) 142 2007 142 64 ( 89 ) ( 69 ) 142 2007 142 64 ( 89 ) $ 69 ) 142 2007 142 64 ( 89 ) $ 117 142 2007 142 64 ( 89 ) $ 117 INVENTORIES Inventories 64 ( 89 ) $ 117 INVENTORIES Inventories are stated at , ranging from one to 15 year . Computer software developed annual basis a of July 1 , and between annual test a period generally ranging from 90 day to three year . amount a necessary . PAGE 47 Table of Contents Part II of Contents Part II Item 8 RECENTLY ISSUED ACCOUNTING STANDARDS In ISSUED ACCOUNTING STANDARDS In June 2006 , the FASB issued Interpretation FASB issued Interpretation No . 48 ( “ FIN No . ( “ FIN No . 48 ” ) , Accounting for of FASB Statement No . 109 , which clarifies the accounting accordance with SFAS No . 109 , Accounting for Income Taxes . Under FIN No . 48 , the Company may recognize that ha a greater than 50 % likelihood of being realized settlement . FIN No . 48 also provides guidance on derecognition transition . FIN No . 48 is effective for u beginning effective for u beginning July 1 , 2007 . Based on u beginning July 1 , 2007 . Based on our current adoption of FIN No . 48 is expected to decrease beginning beginning retained earnings by $ 200 million to $ 400 million $ 200 million to $ 400 million upon adoption . In upon adoption . In June 2006 , the FASB ratified the on EITF Issue No . 06-2 , “ Accounting for Sabbatical to FASB Statement No . 43 . ” EITF Issue No ” EITF Issue No . 06-2 requires company to accrue the . EITF Issue No . 06-2 is effective for u beginning effective for u beginning July 1 , 2007 . The cumulative u beginning July 1 , 2007 . The cumulative effect of statement . In fiscal year 2007 , we adopted Staff Accounting SAB ” ) No . 108 , Considering the Effects of Misstatements . SAB No . 108 requires company to quantify misstatement adoption of SAB No . 108 did not have an impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , measurement . SFAS No . 157 doe not require any new effective for u beginning July 1 , 2008 . We currently u beginning July 1 , 2008 . We currently are assessing adoption of SFAS No . 157 would have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 , although early u beginning July 1 , 2008 , although early adoption is adoption of SFAS No . 159 will have on our financial our financial statement . NOTE 2 UNEARNED REVENUE Unearned revenue is undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price price for Windows XP PAGE 48 Table of Contents Part II of Contents Part II Item 8 Professional , depending on the ( In million ) June 30 2007 2006 Volume licensing program In million ) June 30 2007 2006 Volume licensing program $ million ) June 30 2007 2006 Volume licensing program $ 9,334 2006 Volume licensing program $ 9,334 $ 7,661 Undelivered element 1,839 licensing program $ 9,334 $ 7,661 Undelivered element 1,839 2,066 Other 9,334 $ 7,661 Undelivered element 1,839 2,066 Other 1,473 1,175 Unearned $ 7,661 Undelivered element 1,839 2,066 Other 1,473 1,175 Unearned revenue Undelivered element 1,839 2,066 Other 1,473 1,175 Unearned revenue $ 12,646 element 1,839 2,066 Other 1,473 1,175 Unearned revenue $ 12,646 $ 1,473 1,175 Unearned revenue $ 12,646 $ 10,902 Unearned revenue by Unearned revenue $ 12,646 $ 10,902 Unearned revenue by segment wa ( In million ) June 30 2007 2006 Client $ 2,875 In million ) June 30 2007 2006 Client $ 2,875 $ million ) June 30 2007 2006 Client $ 2,875 $ 2,850 30 2007 2006 Client $ 2,875 $ 2,850 Server and Tools 2006 Client $ 2,875 $ 2,850 Server and Tools 3,652 3,792 $ 2,850 Server and Tools 3,652 3,792 Microsoft Business Division 5,771 2,850 Server and Tools 3,652 3,792 Microsoft Business Division 5,771 3,609 3,652 3,792 Microsoft Business Division 5,771 3,609 Other segment 348 651 3,792 Microsoft Business Division 5,771 3,609 Other segment 348 651 Unearned Division 5,771 3,609 Other segment 348 651 Unearned revenue $ 12,646 5,771 3,609 Other segment 348 651 Unearned revenue $ 12,646 $ 348 651 Unearned revenue $ 12,646 $ 10,902 PAGE 49 Table Unearned revenue $ 12,646 $ 10,902 PAGE 49 Table of Contents $ 12,646 $ 10,902 PAGE 49 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENTS The component Part II Item 8 NOTE 3 INVESTMENTS The component of investment Equity and other investment June 30 , 2007 Cash $ 3,040 other investment June 30 , 2007 Cash $ 3,040 $ – 30 , 2007 Cash $ 3,040 $ – $ – $ $ – $ – $ 3,040 $ 3,040 $ – $ $ – $ 3,040 $ 3,040 $ – $ – Mutual – $ – Mutual fund 398 4 ( 1 ) 401 $ – Mutual fund 398 4 ( 1 ) 401 132 Mutual fund 398 4 ( 1 ) 401 132 205 64 398 4 ( 1 ) 401 132 205 64 Commercial paper 4 ( 1 ) 401 132 205 64 Commercial paper 227 ( 1 ) 401 132 205 64 Commercial paper 227 – 1 ) 401 132 205 64 Commercial paper 227 – – 132 205 64 Commercial paper 227 – – 227 179 48 Commercial paper 227 – – 227 179 48 – Certificates of paper 227 – – 227 179 48 – Certificates of deposit 227 – – 227 179 48 – Certificates of deposit 98 48 – Certificates of deposit 98 – – 98 – 98 of deposit 98 – – 98 – 98 – U. S. 98 – – 98 – 98 – U. S. Government and S. Government and Agency security 3,085 4 ( 12 ) 3,077 Government and Agency security 3,085 4 ( 12 ) 3,077 1 Agency security 3,085 4 ( 12 ) 3,077 1 3,002 74 3,085 4 ( 12 ) 3,077 1 3,002 74 Foreign government 4 ( 12 ) 3,077 1 3,002 74 Foreign government bond ( 12 ) 3,077 1 3,002 74 Foreign government bond 3,845 12 ) 3,077 1 3,002 74 Foreign government bond 3,845 2 3,002 74 Foreign government bond 3,845 2 ( 63 ) 3,784 74 Foreign government bond 3,845 2 ( 63 ) 3,784 – government bond 3,845 2 ( 63 ) 3,784 – 3,784 – 3,845 2 ( 63 ) 3,784 – 3,784 – Mortgage backed ( 63 ) 3,784 – 3,784 – Mortgage backed security 3,236 3,784 – Mortgage backed security 3,236 4 ( 49 ) 3,191 – Mortgage backed security 3,236 4 ( 49 ) 3,191 – backed security 3,236 4 ( 49 ) 3,191 – 3,191 – 3,236 4 ( 49 ) 3,191 – 3,191 – Corporate note ( 49 ) 3,191 – 3,191 – Corporate note and bond – Corporate note and bond 7,184 14 ( 18 ) 7,180 Corporate note and bond 7,184 14 ( 18 ) 7,180 2,425 and bond 7,184 14 ( 18 ) 7,180 2,425 4,753 2 7,184 14 ( 18 ) 7,180 2,425 4,753 2 Municipal security 14 ( 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 ( 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 3 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 3 ( 2,425 4,753 2 Municipal security 2,639 3 ( 25 ) 2,617 4,753 2 Municipal security 2,639 3 ( 25 ) 2,617 334 Municipal security 2,639 3 ( 25 ) 2,617 334 2,283 – 2,639 3 ( 25 ) 2,617 334 2,283 – Common stock 3 ( 25 ) 2,617 334 2,283 – Common stock and ( 25 ) 2,617 334 2,283 – Common stock and equivalent – Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 – and equivalent 7,290 2,309 ( 18 ) 9,581 – – 9,581 7,290 2,309 ( 18 ) 9,581 – – 9,581 Preferred stock 18 ) 9,581 – – 9,581 Preferred stock 62 12 – – – 9,581 Preferred stock 62 12 – 74 – – – 9,581 Preferred stock 62 12 – 74 – – 74 Preferred stock 62 12 – 74 – – 74 Other investment 12 – 74 – – 74 Other investment 258 – – – – 74 Other investment 258 – – 258 – ( Other investment 258 – – 258 – ( 64 ) 322 – – 258 – ( 64 ) 322 Total $ 31,362 258 – ( 64 ) 322 Total $ 31,362 $ 2,352 64 ) 322 Total $ 31,362 $ 2,352 $ ( 186 322 Total $ 31,362 $ 2,352 $ ( 186 ) $ 31,362 $ 2,352 $ ( 186 ) $ 33,528 $ 6,111 $ ( 186 ) $ 33,528 $ 6,111 $ 17,300 $ 186 ) $ 33,528 $ 6,111 $ 17,300 $ 10,117 ( $ 33,528 $ 6,111 $ 17,300 $ 10,117 ( In million $ 6,111 $ 17,300 $ 10,117 ( In million ) Cost Equity and other investment June 30 , 2006 Cash $ 3,248 other investment June 30 , 2006 Cash $ 3,248 $ – 30 , 2006 Cash $ 3,248 $ – $ – $ $ – $ – $ 3,248 $ 3,248 $ – $ $ – $ 3,248 $ 3,248 $ – $ – Mutual – $ – Mutual fund 723 11 ( 1 ) 733 $ – Mutual fund 723 11 ( 1 ) 733 288 Mutual fund 723 11 ( 1 ) 733 288 445 – 723 11 ( 1 ) 733 288 445 – Commercial paper 11 ( 1 ) 733 288 445 – Commercial paper 3,242 ( 1 ) 733 288 445 – Commercial paper 3,242 – 288 445 – Commercial paper 3,242 – – 3,242 3,150 92 Commercial paper 3,242 – – 3,242 3,150 92 – Certificates of paper 3,242 – – 3,242 3,150 92 – Certificates of deposit 3,242 – – 3,242 3,150 92 – Certificates of deposit 364 92 – Certificates of deposit 364 – – 364 – 364 of deposit 364 – – 364 – 364 – U. S. 364 – – 364 – 364 – U. S. Government and S. Government and Agency security 4,904 4 ( 30 ) 4,878 Government and Agency security 4,904 4 ( 30 ) 4,878 14 Agency security 4,904 4 ( 30 ) 4,878 14 4,790 74 4,904 4 ( 30 ) 4,878 14 4,790 74 Foreign government 4 ( 30 ) 4,878 14 4,790 74 Foreign government bond ( 30 ) 4,878 14 4,790 74 Foreign government bond 6,034 30 ) 4,878 14 4,790 74 Foreign government bond 6,034 21 4,790 74 Foreign government bond 6,034 21 ( 73 ) 5,982 74 Foreign government bond 6,034 21 ( 73 ) 5,982 – government bond 6,034 21 ( 73 ) 5,982 – 5,982 – 6,034 21 ( 73 ) 5,982 – 5,982 – Mortgage backed ( 73 ) 5,982 – 5,982 – Mortgage backed security 4,285 5,982 – Mortgage backed security 4,285 – ( 42 ) 4,243 backed security 4,285 – ( 42 ) 4,243 – 4,243 – 4,285 – ( 42 ) 4,243 – 4,243 – Corporate note ( 42 ) 4,243 – 4,243 – Corporate note and bond – Corporate note and bond 7,605 15 ( 18 ) 7,602 Corporate note and bond 7,605 15 ( 18 ) 7,602 – and bond 7,605 15 ( 18 ) 7,602 – 7,475 127 7,605 15 ( 18 ) 7,602 – 7,475 127 Municipal security ( 18 ) 7,602 – 7,475 127 Municipal security 4,008 5 18 ) 7,602 – 7,475 127 Municipal security 4,008 5 ( – 7,475 127 Municipal security 4,008 5 ( 45 ) 3,968 7,475 127 Municipal security 4,008 5 ( 45 ) 3,968 14 Municipal security 4,008 5 ( 45 ) 3,968 14 3,954 – 4,008 5 ( 45 ) 3,968 14 3,954 – Common stock 5 ( 45 ) 3,968 14 3,954 – Common stock and ( 45 ) 3,968 14 3,954 – Common stock and equivalent – Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 Common stock and equivalent 6,933 1,846 ( 34 ) 8,745 – and equivalent 6,933 1,846 ( 34 ) 8,745 – – 8,745 6,933 1,846 ( 34 ) 8,745 – – 8,745 Preferred stock 34 ) 8,745 – – 8,745 Preferred stock 41 5 – – – 8,745 Preferred stock 41 5 – 46 – – – 8,745 Preferred stock 41 5 – 46 – – 46 Preferred stock 41 5 – 46 – – 46 Other investment 5 – 46 – – 46 Other investment 342 – – – – 46 Other investment 342 – – 342 – 102 Other investment 342 – – 342 – 102 240 Total $ 342 – – 342 – 102 240 Total $ 41,729 $ – – 342 – 102 240 Total $ 41,729 $ 1,907 – 102 240 Total $ 41,729 $ 1,907 $ ( 243 240 Total $ 41,729 $ 1,907 $ ( 243 ) $ 41,729 $ 1,907 $ ( 243 ) $ 43,393 $ 6,714 $ ( 243 ) $ 43,393 $ 6,714 $ 27,447 $ 243 ) $ 43,393 $ 6,714 $ 27,447 $ 9,232 PAGE $ 43,393 $ 6,714 $ 27,447 $ 9,232 PAGE 50 Table $ 6,714 $ 27,447 $ 9,232 PAGE 50 Table of Contents $ 27,447 $ 9,232 PAGE 50 Table of Contents Part II of Contents Part II Item 8 Investments with continuous unrealized loss le than and greater than 12 month and their related fair a follows : Less than 12 month 12 month or greater : Less than 12 month 12 month or greater Total ( Fair value unrealized loss June 30 , 2007 Mutual fund $ unrealized loss June 30 , 2007 Mutual fund $ 76 $ , 2007 Mutual fund $ 76 $ ( 1 ) $ fund $ 76 $ ( 1 ) $ 3 $ – $ ( 1 ) $ 3 $ – $ 79 $ $ 3 $ – $ 79 $ ( 1 ) U. – $ 79 $ ( 1 ) U. S. Government and S. Government and Agency security 1,219 ( 8 ) 238 ( and Agency security 1,219 ( 8 ) 238 ( 4 ) security 1,219 ( 8 ) 238 ( 4 ) 1,457 ( ( 8 ) 238 ( 4 ) 1,457 ( 12 ) ) 238 ( 4 ) 1,457 ( 12 ) Foreign government ( 4 ) 1,457 ( 12 ) Foreign government bond 3,554 12 ) Foreign government bond 3,554 ( 63 ) 2 – Foreign government bond 3,554 ( 63 ) 2 – 3,556 ( bond 3,554 ( 63 ) 2 – 3,556 ( 63 ) ( 63 ) 2 – 3,556 ( 63 ) Mortgage backed ) 2 – 3,556 ( 63 ) Mortgage backed security 2,520 63 ) Mortgage backed security 2,520 ( 43 ) 214 ( Mortgage backed security 2,520 ( 43 ) 214 ( 6 ) security 2,520 ( 43 ) 214 ( 6 ) 2,734 ( ( 43 ) 214 ( 6 ) 2,734 ( 49 ) ) 214 ( 6 ) 2,734 ( 49 ) Corporate note ( 6 ) 2,734 ( 49 ) Corporate note and bond ) Corporate note and bond 526 ( 14 ) 74 ( note and bond 526 ( 14 ) 74 ( 4 ) bond 526 ( 14 ) 74 ( 4 ) 600 ( ( 14 ) 74 ( 4 ) 600 ( 18 ) ) 74 ( 4 ) 600 ( 18 ) Municipal security ( 4 ) 600 ( 18 ) Municipal security 575 ( ( 18 ) Municipal security 575 ( 9 ) 420 ( ) Municipal security 575 ( 9 ) 420 ( 16 ) security 575 ( 9 ) 420 ( 16 ) 995 ( ( 9 ) 420 ( 16 ) 995 ( 25 ) ) 420 ( 16 ) 995 ( 25 ) Common stock ( 16 ) 995 ( 25 ) Common stock and equivalent ) Common stock and equivalent 237 ( 17 ) 9 ( stock and equivalent 237 ( 17 ) 9 ( 1 ) equivalent 237 ( 17 ) 9 ( 1 ) 246 ( ( 17 ) 9 ( 1 ) 246 ( 18 ) ) 9 ( 1 ) 246 ( 18 ) Total $ ( 1 ) 246 ( 18 ) Total $ 8,707 $ ( 18 ) Total $ 8,707 $ ( 155 ) $ Total $ 8,707 $ ( 155 ) $ 960 $ ( $ ( 155 ) $ 960 $ ( 31 ) $ ) $ 960 $ ( 31 ) $ 9,667 $ ( $ ( 31 ) $ 9,667 $ ( 186 ) Less ) $ 9,667 $ ( 186 ) Less than 12 month ( 186 ) Less than 12 month 12 month or greater ) Less than 12 month 12 month or greater Total ( Fair value unrealized loss June 30 , 2006 Mutual fund $ unrealized loss June 30 , 2006 Mutual fund $ 14 $ , 2006 Mutual fund $ 14 $ ( 1 ) $ fund $ 14 $ ( 1 ) $ 4 $ – $ ( 1 ) $ 4 $ – $ 18 $ $ 4 $ – $ 18 $ ( 1 ) U. – $ 18 $ ( 1 ) U. S. Government and S. Government and Agency security 2,303 ( 24 ) 172 ( and Agency security 2,303 ( 24 ) 172 ( 6 ) security 2,303 ( 24 ) 172 ( 6 ) 2,475 ( ( 24 ) 172 ( 6 ) 2,475 ( 30 ) ) 172 ( 6 ) 2,475 ( 30 ) Foreign government ( 6 ) 2,475 ( 30 ) Foreign government bond 2,523 30 ) Foreign government bond 2,523 ( 56 ) 1,749 ( Foreign government bond 2,523 ( 56 ) 1,749 ( 17 ) bond 2,523 ( 56 ) 1,749 ( 17 ) 4,272 ( ( 56 ) 1,749 ( 17 ) 4,272 ( 73 ) ) 1,749 ( 17 ) 4,272 ( 73 ) Mortgage backed ( 17 ) 4,272 ( 73 ) Mortgage backed security 2,692 73 ) Mortgage backed security 2,692 ( 40 ) 102 ( Mortgage backed security 2,692 ( 40 ) 102 ( 2 ) security 2,692 ( 40 ) 102 ( 2 ) 2,794 ( ( 40 ) 102 ( 2 ) 2,794 ( 42 ) ) 102 ( 2 ) 2,794 ( 42 ) Corporate note ( 2 ) 2,794 ( 42 ) Corporate note and bond ) Corporate note and bond 4,721 ( 13 ) 359 ( note and bond 4,721 ( 13 ) 359 ( 5 ) bond 4,721 ( 13 ) 359 ( 5 ) 5,080 ( ( 13 ) 359 ( 5 ) 5,080 ( 18 ) ) 359 ( 5 ) 5,080 ( 18 ) Municipal security ( 5 ) 5,080 ( 18 ) Municipal security 1,323 ( ( 18 ) Municipal security 1,323 ( 13 ) 1,192 ( ) Municipal security 1,323 ( 13 ) 1,192 ( 32 ) security 1,323 ( 13 ) 1,192 ( 32 ) 2,515 ( ( 13 ) 1,192 ( 32 ) 2,515 ( 45 ) ) 1,192 ( 32 ) 2,515 ( 45 ) Common stock ( 32 ) 2,515 ( 45 ) Common stock and equivalent ) Common stock and equivalent 266 ( 33 ) 29 ( stock and equivalent 266 ( 33 ) 29 ( 1 ) equivalent 266 ( 33 ) 29 ( 1 ) 295 ( ( 33 ) 29 ( 1 ) 295 ( 34 ) ) 29 ( 1 ) 295 ( 34 ) Total $ ( 1 ) 295 ( 34 ) Total $ 13,842 $ ( 34 ) Total $ 13,842 $ ( 180 ) $ Total $ 13,842 $ ( 180 ) $ 3,607 $ ( $ ( 180 ) $ 3,607 $ ( 63 ) $ ) $ 3,607 $ ( 63 ) $ 17,449 $ ( $ ( 63 ) $ 17,449 $ ( 243 ) At ) $ 17,449 $ ( 243 ) At June 30 , ( 243 ) At June 30 , 2007 , unrealized loss ) At June 30 , 2007 , unrealized loss of $ , unrealized loss of $ 186 million consisted of : $ million consisted of : $ 161 million related to investment grade grade fixed-income security , $ 7 million related to investment in market fixed-income security , $ 7 million related to domestic equity equity security , and $ 11 million related to international equity equity security . At June 30 , 2006 , unrealized loss . At June 30 , 2006 , unrealized loss of $ , unrealized loss of $ 243 million consisted of : $ million consisted of : $ 196 million related to investment grade grade fixed-income security , $ 12 million related to investment in market fixed-income security , $ 2 million related to domestic equity equity security , and $ 33 million related to international equity available evidence a of June 30 , 2007 . Common and a of June 30 , 2007 . Common and preferred stock at cost . At June 30 , 2007 , the recorded . At June 30 , 2007 , the recorded basis and of these investment wa $ 38 million . At June 30 38 million . At June 30 , 2006 , the recorded . At June 30 , 2006 , the recorded basis and of these investment wa $ 41 million . The estimate of determined by management . PAGE 51 Table of Contents Part II of Contents Part II Item 8 The maturity of debt security fixed-maturity security , at June 30 , 2007 were a follows , at June 30 , 2007 were a follows : ( one year or le $ 5,519 $ 5,518 Due after one or le $ 5,519 $ 5,518 Due after one year through one year through five year 6,886 6,849 Due after five year year through five year 6,886 6,849 Due after five year through five year through ten year 2,935 2,890 Due after ten year year through ten year 2,935 2,890 Due after ten year 4,910 2,890 Due after ten year 4,910 4,853 Total $ 20,250 $ Due after ten year 4,910 4,853 Total $ 20,250 $ 20,110 year 4,910 4,853 Total $ 20,250 $ 20,110 NOTE 4 INVESTMENT 4,853 Total $ 20,250 $ 20,110 NOTE 4 INVESTMENT INCOME AND $ 20,250 $ 20,110 NOTE 4 INVESTMENT INCOME AND OTHER The million ) Year Ended June 30 2007 2006 2005 Dividends and ) Year Ended June 30 2007 2006 2005 Dividends and interest Year Ended June 30 2007 2006 2005 Dividends and interest $ Ended June 30 2007 2006 2005 Dividends and interest $ 1,319 2005 Dividends and interest $ 1,319 $ 1,510 $ 1,460 Net and interest $ 1,319 $ 1,510 $ 1,460 Net gain on $ 1,319 $ 1,510 $ 1,460 Net gain on investment 650 1,460 Net gain on investment 650 161 856 Net loss on Net gain on investment 650 161 856 Net loss on derivative gain on investment 650 161 856 Net loss on derivative ( Net loss on derivative ( 358 ) ( 99 ) ( derivative ( 358 ) ( 99 ) ( 262 ) Income/ ) ( 99 ) ( 262 ) Income/ ( loss ) equity investees and other ( 34 ) 218 13 Investment income and other ( 34 ) 218 13 Investment income and other other ( 34 ) 218 13 Investment income and other $ Investment income and other $ 1,577 $ 1,790 $ 2,067 Net and other $ 1,577 $ 1,790 $ 2,067 Net gain on $ 1,577 $ 1,790 $ 2,067 Net gain on investment include not material in fiscal year 2007 , were $ 408 million year 2007 , were $ 408 million in fiscal year 2006 408 million in fiscal year 2006 , and were $ 152 2006 , and were $ 152 million in fiscal year 2005 152 million in fiscal year 2005 . The decrease in other-than-temporary other-than-temporary impairment in fiscal year 2007 and the increase in fiscal the increase in fiscal year 2006 were driven by planned sale raise fund for the $ 20 billion tender offer announced on tender offer announced on July 20 , 2006 . Realized gain announced on July 20 , 2006 . Realized gain and loss other-than-temporary impairment ) were $ 851 million and $ 176 million $ 851 million and $ 176 million , respectively , in respectively , in fiscal year 2007 , $ 1.11 billion and fiscal year 2007 , $ 1.11 billion and $ 531 million $ 1.11 billion and $ 531 million , respectively , in respectively , in fiscal year 2006 , and $ 1.38 billion year 2006 , and $ 1.38 billion and $ 376 million $ 1.38 billion and $ 376 million , respectively , in respectively , in fiscal year 2005 . NOTE 5 DERIVATIVES For fiscal year 2005 . NOTE 5 DERIVATIVES For derivative instrument designated accordance with SFAS No . 133 , Accounting for Derivative Instruments on earnings for fiscal year 2007 , 2006 , or 2005 for fiscal year 2007 , 2006 , or 2005 . During 2007 , 2006 , or 2005 . During fiscal year 2007 2005 . During fiscal year 2007 , $ 219 million in fiscal year 2007 , $ 219 million in gain on fair in time value and $ 361 million in loss on cash other . During fiscal year 2006 , $ 217 million in fiscal year 2006 , $ 217 million in gain on fair in time value and $ 399 million in loss on cash other . During fiscal year 2005 , $ 79 million in fiscal year 2005 , $ 79 million in gain on fair in time value and $ 116 million in loss on cash recognized . During fiscal year 2007 , $ 168 million of fiscal year 2007 , $ 168 million of derivative gain were revenue . During fiscal year 2006 , $ 166 million of fiscal year 2006 , $ 166 million of derivative gain were reclassified to revenue and $ 23 million in derivative gain were other . During fiscal year 2005 , $ 57 million of fiscal year 2005 , $ 57 million of derivative gain were reclassified to revenue and $ 33 million in derivative gain were . We estimate that $ 124 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2007 , 2006 , and 2005 for fiscal year 2007 , 2006 , and 2005 . PAGE 2007 , 2006 , and 2005 . PAGE 52 Table of , and 2005 . PAGE 52 Table of Contents Part II of Contents Part II Item 8 NOTE 6 INVENTORIES ( In Part II Item 8 NOTE 6 INVENTORIES ( In million ) ( In million ) June 30 2007 2006 Raw material $ In million ) June 30 2007 2006 Raw material $ 435 million ) June 30 2007 2006 Raw material $ 435 $ 2007 2006 Raw material $ 435 $ 465 Work in process Raw material $ 435 $ 465 Work in process 148 – $ 465 Work in process 148 – Finished good 544 1,013 process 148 – Finished good 544 1,013 Inventories $ 1,127 $ 148 – Finished good 544 1,013 Inventories $ 1,127 $ 1,478 good 544 1,013 Inventories $ 1,127 $ 1,478 NOTE 7 PROPERTY 1,013 Inventories $ 1,127 $ 1,478 NOTE 7 PROPERTY AND EQUIPMENT $ 1,127 $ 1,478 NOTE 7 PROPERTY AND EQUIPMENT ( In ( In million ) June 30 2007 2006 Land $ 428 In million ) June 30 2007 2006 Land $ 428 $ million ) June 30 2007 2006 Land $ 428 $ 362 30 2007 2006 Land $ 428 $ 362 Buildings and improvement 2006 Land $ 428 $ 362 Buildings and improvement 3,170 2,228 $ 362 Buildings and improvement 3,170 2,228 Leasehold improvement 1,077 918 362 Buildings and improvement 3,170 2,228 Leasehold improvement 1,077 918 Computer improvement 3,170 2,228 Leasehold improvement 1,077 918 Computer equipment and software 3,170 2,228 Leasehold improvement 1,077 918 Computer equipment and software 3,458 918 Computer equipment and software 3,458 2,682 Furniture and equipment 1,233 Computer equipment and software 3,458 2,682 Furniture and equipment 1,233 1,033 3,458 2,682 Furniture and equipment 1,233 1,033 Property and equipment , 2,682 Furniture and equipment 1,233 1,033 Property and equipment , at and equipment , at cost 9,366 7,223 Accumulated depreciation ( 5,016 equipment , at cost 9,366 7,223 Accumulated depreciation ( 5,016 ) 9,366 7,223 Accumulated depreciation ( 5,016 ) ( 4,179 ) Property depreciation ( 5,016 ) ( 4,179 ) Property and equipment , and equipment , net $ 4,350 $ 3,044 Property and equipment , net $ 4,350 $ 3,044 Property and equipment are stated building range from five to 15 year , leasehold improvement generally depreciated . During fiscal year 2007 , 2006 , and 2005 During fiscal year 2007 , 2006 , and 2005 , depreciation 2007 , 2006 , and 2005 , depreciation expense wa $ , depreciation expense wa $ 1.17 billion , $ 863 million $ 1.17 billion , $ 863 million , and $ 723 863 million , and $ 723 million , respectively . The to computer equipment . NOTE 8 GOODWILL Changes in the carrying of goodwill for fiscal year 2007 and 2006 by segment were for fiscal year 2007 and 2006 by segment were a follows ) Balance a of June 30 , 2005 Acquisitions Other Balance a of June 30 , 2005 Acquisitions Other Balance a of Other Balance a of June 30 , 2006 Acquisitions Other Balance a of June 30 , 2006 Acquisitions Other Balance a of Other Balance a of June 30 , 2007 Client $ 43 a of June 30 , 2007 Client $ 43 $ 31 30 , 2007 Client $ 43 $ 31 $ – $ 2007 Client $ 43 $ 31 $ – $ 74 $ $ 31 $ – $ 74 $ 6 $ ( 3 $ – $ 74 $ 6 $ ( 3 ) $ 74 $ 6 $ ( 3 ) $ 77 Server and $ ( 3 ) $ 77 Server and Tools 241 29 $ 77 Server and Tools 241 29 ( 14 ) 256 77 Server and Tools 241 29 ( 14 ) 256 325 and Tools 241 29 ( 14 ) 256 325 ( 1 241 29 ( 14 ) 256 325 ( 1 ) 580 29 ( 14 ) 256 325 ( 1 ) 580 Microsoft 14 ) 256 325 ( 1 ) 580 Microsoft Business Division 256 325 ( 1 ) 580 Microsoft Business Division 2,435 246 ) 580 Microsoft Business Division 2,435 246 – 2,681 508 ( 580 Microsoft Business Division 2,435 246 – 2,681 508 ( 57 Business Division 2,435 246 – 2,681 508 ( 57 ) 3,132 Division 2,435 246 – 2,681 508 ( 57 ) 3,132 Online 246 – 2,681 508 ( 57 ) 3,132 Online Services Business 2,681 508 ( 57 ) 3,132 Online Services Business 171 263 ) 3,132 Online Services Business 171 263 21 455 123 ( 3,132 Online Services Business 171 263 21 455 123 ( 26 Online Services Business 171 263 21 455 123 ( 26 ) Services Business 171 263 21 455 123 ( 26 ) 552 Business 171 263 21 455 123 ( 26 ) 552 Entertainment 263 21 455 123 ( 26 ) 552 Entertainment and Devices 455 123 ( 26 ) 552 Entertainment and Devices Division 419 552 Entertainment and Devices Division 419 23 ( 42 ) 400 Entertainment and Devices Division 419 23 ( 42 ) 400 21 Devices Division 419 23 ( 42 ) 400 21 ( 2 419 23 ( 42 ) 400 21 ( 2 ) 419 23 ( 42 ) 400 21 ( 2 ) 419 Total 42 ) 400 21 ( 2 ) 419 Total $ 3,309 400 21 ( 2 ) 419 Total $ 3,309 $ 592 2 ) 419 Total $ 3,309 $ 592 $ ( 35 419 Total $ 3,309 $ 592 $ ( 35 ) $ 3,309 $ 592 $ ( 35 ) $ 3,866 $ 983 $ ( 35 ) $ 3,866 $ 983 $ ( 89 35 ) $ 3,866 $ 983 $ ( 89 ) $ 3,866 $ 983 $ ( 89 ) $ 4,760 We test $ ( 89 ) $ 4,760 We test goodwill for impairment for impairment annually on July 1 at the reporting unit level provision of SFAS No . 142 , Goodwill and Other Intangible of goodwill in fiscal year 2007 and 2006 . If an in fiscal year 2007 and 2006 . If an event occurs circumstance change that would PAGE 53 Table of Contents Part II of Contents Part II Item 8 more likely than not reduce test . During fiscal year 2007 , we acquired the following for total consideration of $ 1.34 billion , which wa primarily application platform ; and • 11 other entity specializing in area acquisition , we recorded $ 983 million of goodwill , none were not material . NOTE 9 INTANGIBLE ASSETS The component of ( In million ) June 30 2007 2006 Gross carrying amount In million ) June 30 2007 2006 Gross carrying amount Accumulated million ) June 30 2007 2006 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 988 $ ( 727 ) $ Contract-based $ 988 $ ( 727 ) $ 261 $ 954 $ ( 727 ) $ 261 $ 954 $ ( 661 727 ) $ 261 $ 954 $ ( 661 ) $ 261 $ 954 $ ( 661 ) $ 293 Technology-based 916 $ ( 661 ) $ 293 Technology-based 916 ( 407 ) 661 ) $ 293 Technology-based 916 ( 407 ) 509 458 $ 293 Technology-based 916 ( 407 ) 509 458 ( 255 Technology-based 916 ( 407 ) 509 458 ( 255 ) 203 916 ( 407 ) 509 458 ( 255 ) 203 Marketing-related 407 ) 509 458 ( 255 ) 203 Marketing-related 57 ( 509 458 ( 255 ) 203 Marketing-related 57 ( 39 ) ( 255 ) 203 Marketing-related 57 ( 39 ) 18 42 ) 203 Marketing-related 57 ( 39 ) 18 42 ( 32 Marketing-related 57 ( 39 ) 18 42 ( 32 ) 10 57 ( 39 ) 18 42 ( 32 ) 10 Customer-related 39 ) 18 42 ( 32 ) 10 Customer-related 122 ( 18 42 ( 32 ) 10 Customer-related 122 ( 32 ) ( 32 ) 10 Customer-related 122 ( 32 ) 90 54 ) 10 Customer-related 122 ( 32 ) 90 54 ( 21 Customer-related 122 ( 32 ) 90 54 ( 21 ) 33 122 ( 32 ) 90 54 ( 21 ) 33 Total 32 ) 90 54 ( 21 ) 33 Total $ 2,083 90 54 ( 21 ) 33 Total $ 2,083 $ ( 21 ) 33 Total $ 2,083 $ ( 1,205 ) $ Total $ 2,083 $ ( 1,205 ) $ 878 $ 1,508 $ ( 1,205 ) $ 878 $ 1,508 $ ( 969 1,205 ) $ 878 $ 1,508 $ ( 969 ) $ 878 $ 1,508 $ ( 969 ) $ 539 During fiscal $ ( 969 ) $ 539 During fiscal year 2007 and $ 539 During fiscal year 2007 and 2006 , we recorded During fiscal year 2007 and 2006 , we recorded addition to to intangible asset of $ 473 million and $ 189 million $ 473 million and $ 189 million , respectively . We asset acquired during fiscal year 2007 and 2006 were a follows during fiscal year 2007 and 2006 were a follows : ( million ) Year Ended June 30 2007 2006 Amount Weighted average ) Year Ended June 30 2007 2006 Amount Weighted average life Year Ended June 30 2007 2006 Amount Weighted average life Amount Weighted average life Contract-based $ 57 5 year $ 36 4 average life Contract-based $ 57 5 year $ 36 4 year $ 57 5 year $ 36 4 year Technology-based 333 4 57 5 year $ 36 4 year Technology-based 333 4 year $ 36 4 year Technology-based 333 4 year 140 4 year 36 4 year Technology-based 333 4 year 140 4 year Marketing-related year Technology-based 333 4 year 140 4 year Marketing-related 14 4 Technology-based 333 4 year 140 4 year Marketing-related 14 4 year year 140 4 year Marketing-related 14 4 year 5 3 year 140 4 year Marketing-related 14 4 year 5 3 year Customer-related year Marketing-related 14 4 year 5 3 year Customer-related 69 5 Marketing-related 14 4 year 5 3 year Customer-related 69 5 year year 5 3 year Customer-related 69 5 year 8 4 year 5 3 year Customer-related 69 5 year 8 4 year Total year Customer-related 69 5 year 8 4 year Total $ 473 Customer-related 69 5 year 8 4 year Total $ 473 $ 8 4 year Total $ 473 $ 189 Intangible asset addition year Total $ 473 $ 189 Intangible asset addition include $ Intangible asset addition include $ 170 million of technology-based intangible asset with a weighted-average life of 4 year , and $ 84 4 year , and $ 84 million of other intangible asset with a weighted-average life of 4.9 year , related to the Inc. , and the remaining 11 entity acquired . PAGE 54 11 entity acquired . PAGE 54 Table of Contents Part II of Contents Part II Item 8 Acquired intangible are generally amortized asset amortization expense wa $ 236 million for fiscal year 2007 236 million for fiscal year 2007 , $ 127 million for fiscal year 2007 , $ 127 million for fiscal year 2006 127 million for fiscal year 2006 , and $ 161 million year 2006 , and $ 161 million for fiscal year 2005 161 million for fiscal year 2005 . The estimated future amortization intangible asset a of June 30 , 2007 is a follows a of June 30 , 2007 is a follows : ( million ) Year Ended June 30 Amount 2008 $ 263 2009 Year Ended June 30 Amount 2008 $ 263 2009 229 2010 June 30 Amount 2008 $ 263 2009 229 2010 184 2011 30 Amount 2008 $ 263 2009 229 2010 184 2011 111 Amount 2008 $ 263 2009 229 2010 184 2011 111 2012 2008 $ 263 2009 229 2010 184 2011 111 2012 and $ 263 2009 229 2010 184 2011 111 2012 and thereafter 263 2009 229 2010 184 2011 111 2012 and thereafter 91 2009 229 2010 184 2011 111 2012 and thereafter 91 Total 229 2010 184 2011 111 2012 and thereafter 91 Total $ 2011 111 2012 and thereafter 91 Total $ 878 NOTE 10 and thereafter 91 Total $ 878 NOTE 10 INCOME TAXES The 91 Total $ 878 NOTE 10 INCOME TAXES The component of million ) Year Ended June 30 2007 2006 2005 Current tax ) Year Ended June 30 2007 2006 2005 Current tax : Year Ended June 30 2007 2006 2005 Current tax : U.S. Ended June 30 2007 2006 2005 Current tax : U.S. Federal tax : U.S. Federal $ 4,593 $ 4,471 $ 3,401 U.S. U.S. Federal $ 4,593 $ 4,471 $ 3,401 U.S. State and $ 4,593 $ 4,471 $ 3,401 U.S. State and Local 154 3,401 U.S. State and Local 154 101 152 International 957 882 U.S. State and Local 154 101 152 International 957 882 911 State and Local 154 101 152 International 957 882 911 Current Local 154 101 152 International 957 882 911 Current tax 5,704 154 101 152 International 957 882 911 Current tax 5,704 5,454 101 152 International 957 882 911 Current tax 5,704 5,454 4,464 957 882 911 Current tax 5,704 5,454 4,464 Deferred tax ( 882 911 Current tax 5,704 5,454 4,464 Deferred tax ( benefit 911 Current tax 5,704 5,454 4,464 Deferred tax ( benefit ) Deferred tax ( benefit ) 332 209 ( 90 ) Provision tax ( benefit ) 332 209 ( 90 ) Provision for benefit ) 332 209 ( 90 ) Provision for income tax Provision for income tax $ 6,036 $ 5,663 $ 4,374 U.S. income tax $ 6,036 $ 5,663 $ 4,374 U.S. and international $ 6,036 $ 5,663 $ 4,374 U.S. and international component of million ) Year Ended June 30 2007 2006 2005 U.S. $ ) Year Ended June 30 2007 2006 2005 U.S. $ 12,902 Year Ended June 30 2007 2006 2005 U.S. $ 12,902 $ Ended June 30 2007 2006 2005 U.S. $ 12,902 $ 11,404 2007 2006 2005 U.S. $ 12,902 $ 11,404 $ 9,806 International 2005 U.S. $ 12,902 $ 11,404 $ 9,806 International 7,199 6,858 $ 12,902 $ 11,404 $ 9,806 International 7,199 6,858 6,822 Income $ 11,404 $ 9,806 International 7,199 6,858 6,822 Income before income 11,404 $ 9,806 International 7,199 6,858 6,822 Income before income tax $ 9,806 International 7,199 6,858 6,822 Income before income tax $ Income before income tax $ 20,101 $ 18,262 $ 16,628 The income tax $ 20,101 $ 18,262 $ 16,628 The item accounting $ 20,101 $ 18,262 $ 16,628 The item accounting for the follows : Year Ended June 30 2007 2006 2005 Federal statutory : Year Ended June 30 2007 2006 2005 Federal statutory rate Year Ended June 30 2007 2006 2005 Federal statutory rate 35.0 Ended June 30 2007 2006 2005 Federal statutory rate 35.0 % 2006 2005 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 5.1 ) % ( 4.6 ) ( 5.1 ) % ( 4.6 ) % ( 3.1 ) ( 4.6 ) % ( 3.1 ) % Examination settlement – % Examination settlement – ( 0.6 ) % ( 4.7 ) ( 0.6 ) % ( 4.7 ) % Other reconciling item ) % Other reconciling item 0.1 % 1.2 % ( 0.9 Other reconciling item 0.1 % 1.2 % ( 0.9 ) % 0.1 % 1.2 % ( 0.9 ) % Effective rate 30.0 0.9 ) % Effective rate 30.0 % 31.0 % 26.3 % % Effective rate 30.0 % 31.0 % 26.3 % PAGE 55 rate 30.0 % 31.0 % 26.3 % PAGE 55 Table of 31.0 % 26.3 % PAGE 55 Table of Contents Part II of Contents Part II Item 8 The 2007 other reconciling item Part II Item 8 The 2007 other reconciling item includes the the impact of a $ 195 million reduction resulting from various foreign audit assessment . The 2006 other reconciling item includes the the impact of the $ 351 million non-deductible European Commission fine European Commission fine . The 2005 other reconciling item include a reconciling item include a $ 179 million repatriation tax benefit under American Jobs Creation Act of 2004 . The component of the ( In million ) June 30 2007 2006 Deferred income tax In million ) June 30 2007 2006 Deferred income tax asset million ) June 30 2007 2006 Deferred income tax asset : : Stock-based compensation expense $ 2,859 $ 3,630 Other expense item compensation expense $ 2,859 $ 3,630 Other expense item 1,735 1,451 $ 3,630 Other expense item 1,735 1,451 Unearned revenue 842 1,028 3,630 Other expense item 1,735 1,451 Unearned revenue 842 1,028 Impaired item 1,735 1,451 Unearned revenue 842 1,028 Impaired investment 710 989 1,735 1,451 Unearned revenue 842 1,028 Impaired investment 710 989 Other revenue 842 1,028 Impaired investment 710 989 Other revenue item 58 842 1,028 Impaired investment 710 989 Other revenue item 58 102 710 989 Other revenue item 58 102 Deferred income tax asset 989 Other revenue item 58 102 Deferred income tax asset $ Deferred income tax asset $ 6,204 $ 7,200 Deferred income tax tax asset $ 6,204 $ 7,200 Deferred income tax liability : : International earnings $ ( 1,763 ) $ ( 1,715 ) ( 1,763 ) $ ( 1,715 ) Unrealized gain on investment Unrealized gain on investment ( 926 ) ( 801 ) Other investment ( 926 ) ( 801 ) Other ( 227 ) ( 801 ) Other ( 227 ) ( 133 ) Deferred Other ( 227 ) ( 133 ) Deferred income tax liability Deferred income tax liability ( 2,916 ) ( 2,649 ) Net liability ( 2,916 ) ( 2,649 ) Net deferred income tax deferred income tax asset $ 3,288 $ 4,551 Reported a : tax asset $ 3,288 $ 4,551 Reported a : Current deferred Current deferred tax asset $ 1,899 $ 1,940 Long-term deferred tax tax asset $ 1,899 $ 1,940 Long-term deferred tax asset 1,389 1,940 Long-term deferred tax asset 1,389 2,611 Net deferred income tax Long-term deferred tax asset 1,389 2,611 Net deferred income tax asset deferred income tax asset $ 3,288 $ 4,551 Deferred income tax tax asset $ 3,288 $ 4,551 Deferred income tax balance reflect temporary difference of approximately $ 6.10 billion resulting from earnings for temporary difference is approximately $ 1.77 million . The American Jobs American Jobs Creation Act of 2004 ( the “ Act ” ) wa enacted in October 2004 . The Act creates a earnings by providing an elective 85 % dividend received deduction for , we repatriated approximately $ 780 million in dividend subject to dividend subject to the elective 85 % dividend received deduction and tax provision benefit of $ 179 million from the reversal of unremitted foreign subsidiary earnings in 2005 . The dividend wa paid dividend wa paid in June 2006 . Income tax paid were Income tax paid were $ 5.24 billion in fiscal year 2007 5.24 billion in fiscal year 2007 , $ 4.78 billion in fiscal year 2007 , $ 4.78 billion in fiscal year 2006 4.78 billion in fiscal year 2006 , and $ 4.33 billion year 2006 , and $ 4.33 billion in fiscal year 2005 4.33 billion in fiscal year 2005 . Tax Contingencies . We requirement of SFAS No . 5 , Accounting for Contingencies . Accounting for Contingencies . PAGE 56 Table of Contents Part II of Contents Part II Item 8 Although we believe we have federal income tax return through 1999 . The IRS is currently tax return for tax year 2000 through 2006 . NOTE 11 for tax year 2000 through 2006 . NOTE 11 OTHER LONG-TERM 2000 through 2006 . NOTE 11 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 2007 2006 Tax contingency $ In million ) June 30 2007 2006 Tax contingency $ 5,071 million ) June 30 2007 2006 Tax contingency $ 5,071 $ 2007 2006 Tax contingency $ 5,071 $ 4,194 Legal contingency 778 Tax contingency $ 5,071 $ 4,194 Legal contingency 778 1,022 Product 5,071 $ 4,194 Legal contingency 778 1,022 Product warranty 487 – $ 4,194 Legal contingency 778 1,022 Product warranty 487 – Other contingency 778 1,022 Product warranty 487 – Other 117 71 Other Product warranty 487 – Other 117 71 Other long-term liability $ warranty 487 – Other 117 71 Other long-term liability $ 6,453 71 Other long-term liability $ 6,453 $ 5,287 NOTE 12 STOCKHOLDERS long-term liability $ 6,453 $ 5,287 NOTE 12 STOCKHOLDERS ’ EQUITY $ 6,453 $ 5,287 NOTE 12 STOCKHOLDERS ’ EQUITY Shares of million ) Year Ended June 30 2007 2006 2005 Balance , ) Year Ended June 30 2007 2006 2005 Balance , beginning Year Ended June 30 2007 2006 2005 Balance , beginning of Ended June 30 2007 2006 2005 Balance , beginning of year Balance , beginning of year 10,062 10,710 10,862 Issued 289 106 , beginning of year 10,062 10,710 10,862 Issued 289 106 160 beginning of year 10,062 10,710 10,862 Issued 289 106 160 Repurchased year 10,062 10,710 10,862 Issued 289 106 160 Repurchased ( 971 10,062 10,710 10,862 Issued 289 106 160 Repurchased ( 971 ) 10,710 10,862 Issued 289 106 160 Repurchased ( 971 ) ( 289 106 160 Repurchased ( 971 ) ( 754 ) ( Repurchased ( 971 ) ( 754 ) ( 312 ) Balance ) ( 754 ) ( 312 ) Balance , end of Balance , end of year 9,380 10,062 10,710 On July 20 , end of year 9,380 10,062 10,710 On July 20 , end of year 9,380 10,062 10,710 On July 20 , 2006 9,380 10,062 10,710 On July 20 , 2006 , we announced 10,710 On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30.00 billion in Microsoft common stock common stock . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that repurchase program : a $ 20.00 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.00 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.84 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.00 billion ongoing share repurchase program been increased by approximately PAGE 57 Table of Contents Part II of Contents Part II Item 8 $ 16.16 billion . As Part II Item 8 $ 16.16 billion . As a result an amount up to $ 36.16 billion through June 30 , $ 36.16 billion through June 30 , 2011 . As of billion through June 30 , 2011 . As of June 30 2011 . As of June 30 , 2007 , approximately $ As of June 30 , 2007 , approximately $ 15.14 billion , 2007 , approximately $ 15.14 billion remained of the $ billion remained of the $ 36.16 billion approved repurchase amount . amount . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.75 billion , of our common In million ) Fiscal year 2007 ( 1 ) 2006 ( ) Fiscal year 2007 ( 1 ) 2006 ( 2 ) year 2007 ( 1 ) 2006 ( 2 ) 2005 ( ( 1 ) 2006 ( 2 ) 2005 ( 2 ) ) 2006 ( 2 ) 2005 ( 2 ) Shares Amount ( 2 ) 2005 ( 2 ) Shares Amount Shares Amount Amount Shares Amount First quarter 285 $ 6,965 114 $ 3,029 Amount First quarter 285 $ 6,965 114 $ 3,029 23 $ First quarter 285 $ 6,965 114 $ 3,029 23 $ 625 285 $ 6,965 114 $ 3,029 23 $ 625 Second quarter $ 6,965 114 $ 3,029 23 $ 625 Second quarter 205 114 $ 3,029 23 $ 625 Second quarter 205 6,037 283 23 $ 625 Second quarter 205 6,037 283 7,666 23 655 $ 625 Second quarter 205 6,037 283 7,666 23 655 Third 625 Second quarter 205 6,037 283 7,666 23 655 Third quarter Second quarter 205 6,037 283 7,666 23 655 Third quarter 238 quarter 205 6,037 283 7,666 23 655 Third quarter 238 6,744 205 6,037 283 7,666 23 655 Third quarter 238 6,744 181 7,666 23 655 Third quarter 238 6,744 181 4,879 95 2,420 23 655 Third quarter 238 6,744 181 4,879 95 2,420 Fourth 655 Third quarter 238 6,744 181 4,879 95 2,420 Fourth quarter Third quarter 238 6,744 181 4,879 95 2,420 Fourth quarter 243 quarter 238 6,744 181 4,879 95 2,420 Fourth quarter 243 7,367 238 6,744 181 4,879 95 2,420 Fourth quarter 243 7,367 176 4,879 95 2,420 Fourth quarter 243 7,367 176 4,175 171 4,302 95 2,420 Fourth quarter 243 7,367 176 4,175 171 4,302 Total 2,420 Fourth quarter 243 7,367 176 4,175 171 4,302 Total 971 Fourth quarter 243 7,367 176 4,175 171 4,302 Total 971 $ quarter 243 7,367 176 4,175 171 4,302 Total 971 $ 27,113 243 7,367 176 4,175 171 4,302 Total 971 $ 27,113 754 176 4,175 171 4,302 Total 971 $ 27,113 754 $ 19,749 171 4,302 Total 971 $ 27,113 754 $ 19,749 312 $ 4,302 Total 971 $ 27,113 754 $ 19,749 312 $ 8,002 971 $ 27,113 754 $ 19,749 312 $ 8,002 ( 1 $ 27,113 754 $ 19,749 312 $ 8,002 ( 1 ) 754 $ 19,749 312 $ 8,002 ( 1 ) Approximately 155 19,749 312 $ 8,002 ( 1 ) Approximately 155 million share 8,002 ( 1 ) Approximately 155 million share of common stock common stock for approximately $ 3.84 billion were repurchased under our first quarter of fiscal year 2007 . All other amount repurchased Board of Directors on July 20 , 2006 . ( 2 Directors on July 20 , 2006 . ( 2 ) All 20 , 2006 . ( 2 ) All amount repurchased in amount repurchased in fiscal year 2006 and 2005 were repurchased under in fiscal year 2006 and 2005 were repurchased under the repurchase Board of Directors on July 20 , 2004 . In fiscal Directors on July 20 , 2004 . In fiscal year 2007 2004 . In fiscal year 2007 , our Board of Directors million ) Payment Date September 13 , 2006 $ 0.10 November Payment Date September 13 , 2006 $ 0.10 November 16 , September 13 , 2006 $ 0.10 November 16 , 2006 $ , 2006 $ 0.10 November 16 , 2006 $ 980 December $ 0.10 November 16 , 2006 $ 980 December 14 , November 16 , 2006 $ 980 December 14 , 2006 December , 2006 $ 980 December 14 , 2006 December 20 , $ 980 December 14 , 2006 December 20 , 2006 $ December 14 , 2006 December 20 , 2006 $ 0.10 February , 2006 December 20 , 2006 $ 0.10 February 15 , December 20 , 2006 $ 0.10 February 15 , 2007 $ , 2006 $ 0.10 February 15 , 2007 $ 978 March $ 0.10 February 15 , 2007 $ 978 March 8 , February 15 , 2007 $ 978 March 8 , 2007 March , 2007 $ 978 March 8 , 2007 March 26 , $ 978 March 8 , 2007 March 26 , 2007 $ March 8 , 2007 March 26 , 2007 $ 0.10 May , 2007 March 26 , 2007 $ 0.10 May 17 , March 26 , 2007 $ 0.10 May 17 , 2007 $ , 2007 $ 0.10 May 17 , 2007 $ 952 June $ 0.10 May 17 , 2007 $ 952 June 14 , May 17 , 2007 $ 952 June 14 , 2007 June , 2007 $ 952 June 14 , 2007 June 27 , $ 952 June 14 , 2007 June 27 , 2007 $ June 14 , 2007 June 27 , 2007 $ 0.10 August , 2007 June 27 , 2007 $ 0.10 August 16 , June 27 , 2007 $ 0.10 August 16 , 2007 $ , 2007 $ 0.10 August 16 , 2007 $ 938 ( $ 0.10 August 16 , 2007 $ 938 ( 1 ) August 16 , 2007 $ 938 ( 1 ) September 13 , 2007 $ 938 ( 1 ) September 13 , 2007 938 ( 1 ) September 13 , 2007 ( 1 ) 1 ) September 13 , 2007 ( 1 ) The dividend September 13 , 2007 ( 1 ) The dividend declared on The dividend declared on June 27 , 2007 will be paid declared on June 27 , 2007 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2007 . In fiscal a of June 30 , 2007 . In fiscal year 2006 2007 . In fiscal year 2006 , our Board of Directors million ) Payment Date September 23 , 2005 $ 0.08 November Payment Date September 23 , 2005 $ 0.08 November 17 , September 23 , 2005 $ 0.08 November 17 , 2005 $ , 2005 $ 0.08 November 17 , 2005 $ 846 December $ 0.08 November 17 , 2005 $ 846 December 8 , November 17 , 2005 $ 846 December 8 , 2005 December , 2005 $ 846 December 8 , 2005 December 14 , $ 846 December 8 , 2005 December 14 , 2005 $ December 8 , 2005 December 14 , 2005 $ 0.09 February , 2005 December 14 , 2005 $ 0.09 February 17 , December 14 , 2005 $ 0.09 February 17 , 2006 $ , 2005 $ 0.09 February 17 , 2006 $ 926 March $ 0.09 February 17 , 2006 $ 926 March 9 , February 17 , 2006 $ 926 March 9 , 2006 March , 2006 $ 926 March 9 , 2006 March 27 , $ 926 March 9 , 2006 March 27 , 2006 $ March 9 , 2006 March 27 , 2006 $ 0.09 May , 2006 March 27 , 2006 $ 0.09 May 17 , March 27 , 2006 $ 0.09 May 17 , 2006 $ , 2006 $ 0.09 May 17 , 2006 $ 916 June $ 0.09 May 17 , 2006 $ 916 June 8 , May 17 , 2006 $ 916 June 8 , 2006 June , 2006 $ 916 June 8 , 2006 June 21 , $ 916 June 8 , 2006 June 21 , 2006 $ June 8 , 2006 June 21 , 2006 $ 0.09 August , 2006 June 21 , 2006 $ 0.09 August 17 , June 21 , 2006 $ 0.09 August 17 , 2006 $ , 2006 $ 0.09 August 17 , 2006 $ 897 ( $ 0.09 August 17 , 2006 $ 897 ( 1 ) August 17 , 2006 $ 897 ( 1 ) September 14 , 2006 $ 897 ( 1 ) September 14 , 2006 897 ( 1 ) September 14 , 2006 ( 1 ) 1 ) September 14 , 2006 ( 1 ) The dividend September 14 , 2006 ( 1 ) The dividend declared on The dividend declared on June 21 , 2006 wa included in declared on June 21 , 2006 wa included in other current current liability a of June 30 , 2006 . PAGE 58 a of June 30 , 2006 . PAGE 58 Table of 30 , 2006 . PAGE 58 Table of Contents Part II of Contents Part II Item 8 NOTE 13 OTHER COMPREHENSIVE INCOME Part II Item 8 NOTE 13 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 2007 2006 2005 Net unrealized ) Year Ended June 30 2007 2006 2005 Net unrealized gains/ Year Ended June 30 2007 2006 2005 Net unrealized gains/ ( Ended June 30 2007 2006 2005 Net unrealized gains/ ( loss of tax effect of $ 66 in 2007 , $ 107 effect of $ 66 in 2007 , $ 107 in 2006 66 in 2007 , $ 107 in 2006 , and $ 2007 , $ 107 in 2006 , and $ 0 in in 2006 , and $ 0 in 2005 $ 123 $ , and $ 0 in 2005 $ 123 $ 199 $ $ 0 in 2005 $ 123 $ 199 $ — Reclassification in 2005 $ 123 $ 199 $ — Reclassification adjustment for tax effect of $ ( 59 ) in 2007 , $ $ ( 59 ) in 2007 , $ ( 66 ) in 2007 , $ ( 66 ) in 2006 , and $ ( 66 ) in 2006 , and $ ( 31 2006 , and $ ( 31 ) in 2005 ( 109 $ ( 31 ) in 2005 ( 109 ) ( 123 31 ) in 2005 ( 109 ) ( 123 ) ( 2005 ( 109 ) ( 123 ) ( 58 ) Net ) ( 123 ) ( 58 ) Net unrealized gains/ ( loss ) on derivative instrument 14 76 ( 58 ) Net ) on derivative instrument 14 76 ( 58 ) Net unrealized derivative instrument 14 76 ( 58 ) Net unrealized gains/ ( of tax effect of $ 393 in 2007 , $ ( effect of $ 393 in 2007 , $ ( 105 ) in 2007 , $ ( 105 ) in 2006 , and $ ( 105 ) in 2006 , and $ 469 in in 2006 , and $ 469 in 2005 730 ( 195 , and $ 469 in 2005 730 ( 195 ) 870 and $ 469 in 2005 730 ( 195 ) 870 Reclassification 469 in 2005 730 ( 195 ) 870 Reclassification adjustment for 2005 730 ( 195 ) 870 Reclassification adjustment for gain included tax effect of $ ( 217 ) in 2007 , $ $ ( 217 ) in 2007 , $ ( 47 ) in 2007 , $ ( 47 ) in 2006 , and $ ( 47 ) in 2006 , and $ ( 269 2006 , and $ ( 269 ) in 2005 ( 404 $ ( 269 ) in 2005 ( 404 ) ( 87 269 ) in 2005 ( 404 ) ( 87 ) ( 2005 ( 404 ) ( 87 ) ( 499 ) Net ) ( 87 ) ( 499 ) Net unrealized gains/ ( ( loss ) on investment 326 ( 282 ) 371 Translation ) on investment 326 ( 282 ) 371 Translation adjustment and investment 326 ( 282 ) 371 Translation adjustment and other 85 371 Translation adjustment and other 85 9 ( 6 ) Other Translation adjustment and other 85 9 ( 6 ) Other comprehensive and other 85 9 ( 6 ) Other comprehensive income/ ( income/ ( loss ) $ 425 $ ( 197 ) $ ) $ 425 $ ( 197 ) $ 307 Certain activity $ ( 197 ) $ 307 Certain activity within the unrealized reclassification adjustment line item in 2006 and 2005 ha been revised line item in 2006 and 2005 ha been revised to correct million ) Year Ended June 30 2007 2006 2005 Net unrealized ) Year Ended June 30 2007 2006 2005 Net unrealized gain Year Ended June 30 2007 2006 2005 Net unrealized gain on Ended June 30 2007 2006 2005 Net unrealized gain on derivative gain on derivative instrument $ 117 $ 103 $ 27 Net derivative instrument $ 117 $ 103 $ 27 Net unrealized gain $ 117 $ 103 $ 27 Net unrealized gain on investment Net unrealized gain on investment 1,388 1,062 1,344 Translation adjustment and unrealized gain on investment 1,388 1,062 1,344 Translation adjustment and other gain on investment 1,388 1,062 1,344 Translation adjustment and other 149 1,344 Translation adjustment and other 149 64 55 Accumulated other comprehensive Translation adjustment and other 149 64 55 Accumulated other comprehensive income adjustment and other 149 64 55 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,654 $ 1,229 $ 1,426 NOTE comprehensive income $ 1,654 $ 1,229 $ 1,426 NOTE 14 EMPLOYEE $ 1,654 $ 1,229 $ 1,426 NOTE 14 EMPLOYEE STOCK AND $ 1,229 $ 1,426 NOTE 14 EMPLOYEE STOCK AND SAVINGS PLANS AND SAVINGS PLANS Effective July 1 , 2005 , we adopted PLANS Effective July 1 , 2005 , we adopted SFAS No we adopted SFAS No . 123 ( R ) , Share-Based provision of SFAS No . 123 , Stock-Based Compensation , and , and SFAS No . 123 ( R ) were materially adoption of SFAS No . 123 ( R ) did not adoption of SFAS No . 123 ( R ) , benefit flow . SFAS No . 123 ( R ) requires excess : ( In million ) 2007 2006 2005 Total stock-based compensation ( In million ) 2007 2006 2005 Total stock-based compensation $ In million ) 2007 2006 2005 Total stock-based compensation $ 1,550 2005 Total stock-based compensation $ 1,550 $ 1,715 $ 2,448 Income stock-based compensation $ 1,550 $ 1,715 $ 2,448 Income tax benefit $ 1,550 $ 1,715 $ 2,448 Income tax benefit related to related to stock-based compensation $ 542 $ 600 $ 857 PAGE stock-based compensation $ 542 $ 600 $ 857 PAGE 59 Table $ 542 $ 600 $ 857 PAGE 59 Table of Contents $ 600 $ 857 PAGE 59 Table of Contents Part II of Contents Part II Item 8 Employee Stock Purchase Plan . accordance with SFAS No . 123 ( R ) . Shares employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation ( Shares In million ) 2007 2006 2005 Shares purchased 17 Shares In million ) 2007 2006 2005 Shares purchased 17 17 In million ) 2007 2006 2005 Shares purchased 17 17 16 2007 2006 2005 Shares purchased 17 17 16 Average price per 2006 2005 Shares purchased 17 17 16 Average price per share 2005 Shares purchased 17 17 16 Average price per share $ Average price per share $ 25.36 $ 23.02 $ 23.33 At per share $ 25.36 $ 23.02 $ 23.33 At June 30 $ 25.36 $ 23.02 $ 23.33 At June 30 , 2007 23.02 $ 23.33 At June 30 , 2007 , 125 million 23.33 At June 30 , 2007 , 125 million share were June 30 , 2007 , 125 million share were reserved for States that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their pretax salary with a maximum contribution of 3 % of a participant ’ for all plan were $ 218 million , $ 178 million $ 218 million , $ 178 million , and $ 154 178 million , and $ 154 million in fiscal year 2007 154 million in fiscal year 2007 , 2006 , and 2005 in fiscal year 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Matching contribution and advisor . At June 30 , 2007 , an aggregate . At June 30 , 2007 , an aggregate of 819 2007 , an aggregate of 819 million share were authorized for below ) in fiscal year 2004 have been removed from our option exercise . On November 9 , 2004 , our shareholder . On November 9 , 2004 , our shareholder approved amendment pre-dividend value after the $ 3.00 special dividend . Additional award and payment of the $ 3.00 special dividend on December 2 3.00 special dividend on December 2 , 2004 , an adjustment dividend on December 2 , 2004 , an adjustment to the resulting in a total of 96 million option and 7 million of 96 million option and 7 million stock award being issued stock award were increased by 4 million share . Stock Awards SPSAs issued in fiscal year 2004 , 2005 , and 2006 in fiscal year 2004 , 2005 , and 2006 wa July 2004 , 2005 , and 2006 wa July 1 , 2003 , and 2006 wa July 1 , 2003 through June 30 2006 wa July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for certain executive officer ) award to be issued wa 37.0 million , based on the award vested in fiscal year 2007 . An additional one-third of SPSAs issued in fiscal year 2005 and 2006 were given only in fiscal year 2005 and 2006 were given only to newly granted SPSAs for fiscal year 2007 with a performance period of a performance period of July 1 , 2006 through June 30 period of July 1 , 2006 through June 30 , 2007 1 , 2006 through June 30 , 2007 . At the 2006 through June 30 , 2007 . At the end of by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is sole discretion . An additional 15 % of the total stock will be available a PAGE 60 Table of Contents Part II of Contents Part II Item 8 additional award to participant based : ( In million ) 2007 2006 2005 Dividend per share ( In million ) 2007 2006 2005 Dividend per share ( In million ) 2007 2006 2005 Dividend per share ( quarterly ( quarterly amount ) $ 0.09 - $ 0.10 $ 0.08 ) $ 0.09 - $ 0.10 $ 0.08 - $ 0.09 0.09 - $ 0.10 $ 0.08 - $ 0.09 $ 0.08 0.10 $ 0.08 - $ 0.09 $ 0.08 Interest rate range 0.08 - $ 0.09 $ 0.08 Interest rate range 4.3 % $ 0.08 Interest rate range 4.3 % - 5.3 % 3.2 rate range 4.3 % - 5.3 % 3.2 % - 5.3 4.3 % - 5.3 % 3.2 % - 5.3 % 1.3 5.3 % 3.2 % - 5.3 % 1.3 % - 4.3 3.2 % - 5.3 % 1.3 % - 4.3 % During 5.3 % 1.3 % - 4.3 % During fiscal year 2007 4.3 % During fiscal year 2007 , the following activity occurred : Nonvested balance at June 30 , 2006 98 $ 24.25 balance at June 30 , 2006 98 $ 24.25 Granted 57 at June 30 , 2006 98 $ 24.25 Granted 57 25.15 30 , 2006 98 $ 24.25 Granted 57 25.15 Vested ( 2006 98 $ 24.25 Granted 57 25.15 Vested ( 24 ) 98 $ 24.25 Granted 57 25.15 Vested ( 24 ) 24.15 Granted 57 25.15 Vested ( 24 ) 24.15 Forfeited ( 7 25.15 Vested ( 24 ) 24.15 Forfeited ( 7 ) 24.44 24 ) 24.15 Forfeited ( 7 ) 24.44 Nonvested balance at 24.15 Forfeited ( 7 ) 24.44 Nonvested balance at June 30 24.44 Nonvested balance at June 30 , 2007 124 $ 24.67 balance at June 30 , 2007 124 $ 24.67 Shared performance at June 30 , 2007 124 $ 24.67 Shared performance stock 30 , 2007 124 $ 24.67 Shared performance stock award : : Nonvested balance at June 30 , 2006 37 $ 23.57 balance at June 30 , 2006 37 $ 23.57 Granted 11 at June 30 , 2006 37 $ 23.57 Granted 11 25.18 30 , 2006 37 $ 23.57 Granted 11 25.18 Vested ( 2006 37 $ 23.57 Granted 11 25.18 Vested ( 13 ) 37 $ 23.57 Granted 11 25.18 Vested ( 13 ) 23.74 Granted 11 25.18 Vested ( 13 ) 23.74 Forfeited ( 2 25.18 Vested ( 13 ) 23.74 Forfeited ( 2 ) 23.92 13 ) 23.74 Forfeited ( 2 ) 23.92 Nonvested balance at 23.74 Forfeited ( 2 ) 23.92 Nonvested balance at June 30 23.92 Nonvested balance at June 30 , 2007 33 $ 24.11 balance at June 30 , 2007 33 $ 24.11 As of at June 30 , 2007 33 $ 24.11 As of June 30 , 2007 33 $ 24.11 As of June 30 , $ 24.11 As of June 30 , 2007 , there were As of June 30 , 2007 , there were $ 2.22 2007 , there were $ 2.22 billion and $ 392 million $ 2.22 billion and $ 392 million of total unrecognized compensation a weighted average period of 3.4 year and 2.1 year , period of 3.4 year and 2.1 year , respectively . SPSAs SPSAs granted in fiscal year 2007 include adjustment for estimated performance performance target . During the 12 month ended June 30 , the 12 month ended June 30 , 2006 and June 30 month ended June 30 , 2006 and June 30 , 2005 30 , 2006 and June 30 , 2005 , the following 2006 and June 30 , 2005 , the following activity occurred fair value ) Fiscal Year 2006 Fiscal Year 2005 Stock award Fiscal Year 2006 Fiscal Year 2005 Stock award granted 47 41 Year 2005 Stock award granted 47 41 Weighted average grant-date fair 2005 Stock award granted 47 41 Weighted average grant-date fair value average grant-date fair value $ 24.70 $ 24.03 Shared performance stock fair value $ 24.70 $ 24.03 Shared performance stock award granted Shared performance stock award granted 3 4 Weighted average grant-date fair performance stock award granted 3 4 Weighted average grant-date fair value average grant-date fair value $ 24.80 $ 24.35 Stock Options . fair value $ 24.80 $ 24.35 Stock Options . In fiscal Options . In fiscal year 2004 , we began granting employee plan . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and vest over four and PAGE 61 Table of Contents Part II of Contents Part II Item 8 one-half year and expire seven grant . Options granted after 2001 vest over four and one-half date of grant . Approximately 3 million stock option were granted business acquisition during fiscal year 2007 and 2006 , respectively . during fiscal year 2007 and 2006 , respectively . No stock during the year ended June 30 , 2005 . During fiscal year ended June 30 , 2005 . During fiscal year 2004 2005 . During fiscal year 2004 , we completed an employee a strike price of $ 33.00 or higher to JPMorgan . stock-based compensation expense of $ 2.21 billion ( $ 1.48 billion $ 2.21 billion ( $ 1.48 billion after-tax or $ 0.14 1.48 billion after-tax or $ 0.14 per diluted share ) which second quarter of fiscal year 2004 . In December 2006 , year 2004 . In December 2006 , JP Morgan Chase Bank JPMorgan ” ) exercised approximately 113 million call option for $ million call option for $ 3.25 billion at an average price price per share of $ 28.80 . The call option were The call option were among 345 million option acquired by JPMorgan by JPMorgan in fiscal year 2004 through our employee stock option program . The other approximately 232 million option expired unexercised . million ) Balance , June 30 , 2006 750 $ 27.92 Balance , June 30 , 2006 750 $ 27.92 Granted 3 , June 30 , 2006 750 $ 27.92 Granted 3 27.28 30 , 2006 750 $ 27.92 Granted 3 27.28 Exercised ( 2006 750 $ 27.92 Granted 3 27.28 Exercised ( 134 ) 750 $ 27.92 Granted 3 27.28 Exercised ( 134 ) 23.66 Granted 3 27.28 Exercised ( 134 ) 23.66 Canceled ( 92 27.28 Exercised ( 134 ) 23.66 Canceled ( 92 ) 34.46 134 ) 23.66 Canceled ( 92 ) 34.46 Forfeited ( 3 23.66 Canceled ( 92 ) 34.46 Forfeited ( 3 ) 21.51 92 ) 34.46 Forfeited ( 3 ) 21.51 Balance , June 34.46 Forfeited ( 3 ) 21.51 Balance , June 30 , ) 21.51 Balance , June 30 , 2007 524 $ 27.86 Balance , June 30 , 2007 524 $ 27.86 3.60 $ , June 30 , 2007 524 $ 27.86 3.60 $ 1,877 30 , 2007 524 $ 27.86 3.60 $ 1,877 Exercisable , , 2007 524 $ 27.86 3.60 $ 1,877 Exercisable , June 524 $ 27.86 3.60 $ 1,877 Exercisable , June 30 , $ 1,877 Exercisable , June 30 , 2007 511 $ 27.98 Exercisable , June 30 , 2007 511 $ 27.98 3.55 $ , June 30 , 2007 511 $ 27.98 3.55 $ 1,773 30 , 2007 511 $ 27.98 3.55 $ 1,773 Included in , 2007 511 $ 27.98 3.55 $ 1,773 Included in the 511 $ 27.98 3.55 $ 1,773 Included in the option outstanding option outstanding balance are approximately 5 million option that were granted exercise price range of $ 0 to $ 150.93 and a of $ 0 to $ 150.93 and a weighted average exercise average exercise price of $ 10.35 . During fiscal year 2007 10.35 . During fiscal year 2007 , 2006 , and 2005 During fiscal year 2007 , 2006 , and 2005 the following 2007 , 2006 , and 2005 the following activity occurred under : ( In million ) 2007 2006 2005 Total intrinsic value ( In million ) 2007 2006 2005 Total intrinsic value of In million ) 2007 2006 2005 Total intrinsic value of stock of stock option exercised $ 818 $ 491 $ 940 Total option exercised $ 818 $ 491 $ 940 Total fair value $ 818 $ 491 $ 940 Total fair value of stock value of stock award vested 618 377 198 Total fair value of stock award vested 618 377 198 Total fair value of stock award vested 618 377 198 Total fair value of shared shared performance stock award vested 316 – – Cash received and stock option exercise were $ 6.35 billion and $ 286 million $ 6.35 billion and $ 286 million , respectively , for respectively , for fiscal year 2007 . NOTE 15 EARNINGS PER fiscal year 2007 . NOTE 15 EARNINGS PER SHARE Basic earnings during the period using PAGE 62 Table of Contents Part II of Contents Part II Item 8 the treasury stock method . share ) Year Ended June 30 2007 2006 2005 Net income ) Year Ended June 30 2007 2006 2005 Net income available Year Ended June 30 2007 2006 2005 Net income available for Ended June 30 2007 2006 2005 Net income available for common shareholder ( A ) $ 14,065 $ 12,599 $ 12,254 Weighted A ) $ 14,065 $ 12,599 $ 12,254 Weighted average outstanding $ 14,065 $ 12,599 $ 12,254 Weighted average outstanding share of common stock ( B ) 9,742 10,438 10,839 Dilutive effect of stock ( B ) 9,742 10,438 10,839 Dilutive effect of employee ( B ) 9,742 10,438 10,839 Dilutive effect of employee stock employee stock option and award 144 93 67 Common stock and stock option and award 144 93 67 Common stock and common option and award 144 93 67 Common stock and common stock stock equivalent ( C ) 9,886 10,531 10,906 Earnings per share equivalent ( C ) 9,886 10,531 10,906 Earnings per share : ( C ) 9,886 10,531 10,906 Earnings per share : Basic Basic ( A/B ) $ 1.44 $ 1.21 $ 1.13 Diluted A/B ) $ 1.44 $ 1.21 $ 1.13 Diluted ( A/C $ 1.44 $ 1.21 $ 1.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.42 $ 1.20 $ 1.12 For A/C ) $ 1.42 $ 1.20 $ 1.12 For the year $ 1.42 $ 1.20 $ 1.12 For the year ended June For the year ended June 30 , 2007 , 2006 , year ended June 30 , 2007 , 2006 , and 2005 June 30 , 2007 , 2006 , and 2005 , 199 2007 , 2006 , and 2005 , 199 million , 649 2006 , and 2005 , 199 million , 649 million , 2005 , 199 million , 649 million , and 854 million , 649 million , and 854 million share , respectively , For the year ended June 30 , 2007 , 4 million year ended June 30 , 2007 , 4 million shared performance June 30 , 2007 , 4 million shared performance stock award award , out of the 14 million targeted amount outstanding , , a discussed in Note 14 – Employee Stock and Savings and Savings Plans . NOTE 16 COMMITMENTS AND GUARANTEES We have GUARANTEES We have committed $ 821 million for constructing new building for operating lease wa $ 326 million , $ 276 million $ 326 million , $ 276 million , and $ 299 276 million , and $ 299 million , in fiscal year million , in fiscal year 2007 , 2006 , and 2005 in fiscal year 2007 , 2006 , and 2005 , respectively 2007 , 2006 , and 2005 , respectively . Future minimum million ) Year Ended June 30 Amount 2008 $ 349 2009 Year Ended June 30 Amount 2008 $ 349 2009 242 2010 June 30 Amount 2008 $ 349 2009 242 2010 202 2011 30 Amount 2008 $ 349 2009 242 2010 202 2011 174 Amount 2008 $ 349 2009 242 2010 202 2011 174 2012 2008 $ 349 2009 242 2010 202 2011 174 2012 and $ 349 2009 242 2010 202 2011 174 2012 and thereafter 349 2009 242 2010 202 2011 174 2012 and thereafter 374 2009 242 2010 202 2011 174 2012 and thereafter 374 $ 242 2010 202 2011 174 2012 and thereafter 374 $ 1,341 2011 174 2012 and thereafter 374 $ 1,341 In connection with 2012 and thereafter 374 $ 1,341 In connection with various operating value . As of June 30 , 2006 , the maximum As of June 30 , 2006 , the maximum amount of value guarantee wa approximately $ 271 million . During 2007 , $ 271 million . During 2007 , we exercised a provision operating lease for approximately $ 41 million and are no longer we also provide indemnification PAGE 63 Table of Contents Part II of Contents Part II Item 8 against credit risk in several indemnification under SFAS No . 5 , Accounting for Contingencies , interpreted by FIN No . 45 , Guarantor ’ s Accounting a period generally ranging from 90 day to three year . a necessary . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year light . The basic Xbox 360 console warranty remains in place ) Amount Balance at July 1 , 2005 $ 14 Accruals Balance at July 1 , 2005 $ 14 Accruals for warranty July 1 , 2005 $ 14 Accruals for warranty issued 45 14 Accruals for warranty issued 45 Adjustments to pre-existing warranty ( Adjustments to pre-existing warranty ( 7 ) Settlements of warranty claim Settlements of warranty claim ( 42 ) Balance at June 30 42 ) Balance at June 30 , 2006 10 Accruals for Balance at June 30 , 2006 10 Accruals for warranty issued at June 30 , 2006 10 Accruals for warranty issued ( Accruals for warranty issued ( 1 ) 974 Adjustments to pre-existing warranty issued ( 1 ) 974 Adjustments to pre-existing warranty 92 974 Adjustments to pre-existing warranty 92 Settlements of warranty claim ( Settlements of warranty claim ( 226 ) Balance at June 30 226 ) Balance at June 30 , 2007 $ 850 ( Balance at June 30 , 2007 $ 850 ( 1 ) June 30 , 2007 $ 850 ( 1 ) Includes warranty , 2007 $ 850 ( 1 ) Includes warranty expense incurred the expansion of our Xbox 360 warranty coverage a discussed above a discussed above . NOTE 17 CONTINGENCIES Government competition law matter law matter . In March 2004 , the European Commission issued Commission also fined u € 497 million ( $ 605 million € 497 million ( $ 605 million ) . We appealed First Instance . In July 2006 , the European Commission determined technical documentation requirement of the 2004 Decision , and fined u , and fined u € 281 million ( $ 351 million € 281 million ( $ 351 million ) . We have the appeal . In March 2007 , the European Commission announced a required by the March 2004 decision are “ not PAGE decision are “ not PAGE 64 Table of Contents Part II of Contents Part II Item 8 reasonable . ” The statement fine of up to € 500,000 ( $ 675,000 ) per to € 500,000 ( $ 675,000 ) per day from December ) per day from December 2005 to June 2006 , up from December 2005 to June 2006 , up to € 2 2006 , up to € 2 million ( $ 3 million € 2 million ( $ 3 million ) per day from day from June to July 2006 , and up to € , and up to € 3 million ( $ 4 million € 3 million ( $ 4 million ) per day beginning ) per day beginning August 2006 . The maximum amount of potential fine a of June 30 , 2007 is $ 1.58 a of June 30 , 2007 is $ 1.58 billion . 30 , 2007 is $ 1.58 billion . We have submitted the Commission . In December 2005 , the Korean Fair Trade a fine of approximately $ 34 million which we have expensed s order issued in February 2006 held that our integration of High Court . In May 2006 , the KFTC denied our for which we have a 50 % or greater market share under federal law and in 15 state . Courts refused to to settle all claim in 20 state . Under the settlement be issued is approximately $ 2.7 billion . The actual cost final court approval in March 2007 . The Iowa case settled Iowa case settled in February 2007 and the court gave it of the settlement in April 2007 . The case in Mississippi case will range between $ 1.7 billion and $ 1.9 billion $ 1.7 billion and $ 1.9 billion . The actual cost the claim . At June 30 , 2007 , we have . At June 30 , 2007 , we have recorded a these claim of approximately $ 1.2 billion , which reflects our our estimated exposure of $ 1.7 billion le payment made to to date of approximately $ 500 million , mostly for administrative and claim . In November 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted are vigorously defending more than 45 patent infringement case . In District Court in Illinois in 1999 , the plaintiff alleged infringement of Windows . In January 2004 , the trial court entered entered final judgment of $ 565 million , and entered an We appealed and in March 2005 the PAGE 65 Table of in March 2005 the PAGE 65 Table of Contents Part II of Contents Part II Item 8 U.S. Court of Appeals for of Alcatel and Lucent in 2006 . For simplicity , we following discussion . • In 2003 , we filed an action software pre-installed . In February 2007 , the jury returned a trial , and awarded $ 1.5 billion in damage . The scheduled to begin in February 2008 . • In March 2006 2008 . • In March 2006 , Alcatel-Lucent filed a lawsuit California , claiming the Xbox 360 violates one of it patent asserted counterclaim that Alcatel-Lucent infringes 10 Microsoft patent by it sale set for trial in April 2008 . • In November 2006 2008 . • In November 2006 , Alcatel-Lucent filed two patent it patent . In April 2007 , we asserted infringement counterclaim patent is set for January 2009 . • In February 2007 2009 . • In February 2007 , we filed a complaint set for trial in October 2007 . • In April 2007 2007 . • In April 2007 , the Multimedia Patent Trust will be heard in September 2007 . The actual cost to Court in Texas in September 2004 , the plaintiff alleged that patent right . In April 2006 , the jury rendered a the jury rendered a $ 115 million verdict against u . against u . In August 2006 , the trial court increased court increased damage by $ 25 million pursuant to the jury infringement and awarded Z4 $ 2 million in attorney ’ fee Court in Washington in May 2006 , a subsidiary of Symantec in the future . PAGE 66 Table of Contents Part II of Contents Part II Item 8 As of June 30 , Item 8 As of June 30 , 2007 , we had As of June 30 , 2007 , we had accrued aggregate aggregate liability of approximately $ 800 million in other current liability current liability and approximately $ 800 million in other long-term liability could be up to $ 4.15 billion in aggregate beyond recorded effect becomes reasonably estimable NOTE 18 SEGMENT INFORMATION Segment revenue and million ) Year Ended June 30 2007 2006 2005 Revenue : ) Year Ended June 30 2007 2006 2005 Revenue : Client Year Ended June 30 2007 2006 2005 Revenue : Client $ Ended June 30 2007 2006 2005 Revenue : Client $ 14,812 2005 Revenue : Client $ 14,812 $ 13,040 $ 11,901 Server : Client $ 14,812 $ 13,040 $ 11,901 Server and Tools $ 14,812 $ 13,040 $ 11,901 Server and Tools 11,182 9,680 $ 11,901 Server and Tools 11,182 9,680 8,314 Online Services Business 11,901 Server and Tools 11,182 9,680 8,314 Online Services Business 2,474 Server and Tools 11,182 9,680 8,314 Online Services Business 2,474 2,306 9,680 8,314 Online Services Business 2,474 2,306 2,353 Microsoft Business Division 8,314 Online Services Business 2,474 2,306 2,353 Microsoft Business Division 16,381 Online Services Business 2,474 2,306 2,353 Microsoft Business Division 16,381 14,516 2,306 2,353 Microsoft Business Division 16,381 14,516 13,298 Entertainment and Devices 2,353 Microsoft Business Division 16,381 14,516 13,298 Entertainment and Devices Division Microsoft Business Division 16,381 14,516 13,298 Entertainment and Devices Division 6,132 13,298 Entertainment and Devices Division 6,132 4,808 3,485 Unallocated and other Entertainment and Devices Division 6,132 4,808 3,485 Unallocated and other 141 and Devices Division 6,132 4,808 3,485 Unallocated and other 141 ( 4,808 3,485 Unallocated and other 141 ( 68 ) 437 Consolidated Unallocated and other 141 ( 68 ) 437 Consolidated $ 51,122 other 141 ( 68 ) 437 Consolidated $ 51,122 $ 44,282 68 ) 437 Consolidated $ 51,122 $ 44,282 $ 39,788 ( 437 Consolidated $ 51,122 $ 44,282 $ 39,788 ( In million $ 51,122 $ 44,282 $ 39,788 ( In million ) Year million ) Year Ended June 30 2007 2006 2005 Operating Income/ ) Year Ended June 30 2007 2006 2005 Operating Income/ ( Year Ended June 30 2007 2006 2005 Operating Income/ ( Loss Ended June 30 2007 2006 2005 Operating Income/ ( Loss ) Loss ) : Client $ 11,544 $ 10,245 $ 9,435 Server : Client $ 11,544 $ 10,245 $ 9,435 Server and Tools $ 11,544 $ 10,245 $ 9,435 Server and Tools 3,837 3,171 $ 9,435 Server and Tools 3,837 3,171 2,381 Online Services Business 9,435 Server and Tools 3,837 3,171 2,381 Online Services Business ( Server and Tools 3,837 3,171 2,381 Online Services Business ( 745 2,381 Online Services Business ( 745 ) 115 470 Microsoft Business Services Business ( 745 ) 115 470 Microsoft Business Division 10,724 Business ( 745 ) 115 470 Microsoft Business Division 10,724 9,687 115 470 Microsoft Business Division 10,724 9,687 9,146 Entertainment and Devices 470 Microsoft Business Division 10,724 9,687 9,146 Entertainment and Devices Division Microsoft Business Division 10,724 9,687 9,146 Entertainment and Devices Division ( Entertainment and Devices Division ( 2,066 ) ( 1,284 ) ( Division ( 2,066 ) ( 1,284 ) ( 464 ) Reconciling ) ( 1,284 ) ( 464 ) Reconciling amount ( 4,770 464 ) Reconciling amount ( 4,770 ) ( 5,462 ) ( amount ( 4,770 ) ( 5,462 ) ( 6,407 ) Consolidated ) ( 5,462 ) ( 6,407 ) Consolidated $ 18,524 $ ( 6,407 ) Consolidated $ 18,524 $ 16,472 $ 14,561 SFAS ) Consolidated $ 18,524 $ 16,472 $ 14,561 SFAS No . $ 18,524 $ 16,472 $ 14,561 SFAS No . 131 , $ 14,561 SFAS No . 131 , Disclosures about Segments of U.S. GAAP . In July 2006 we announced a change in . Amounts for fiscal year 2006 and 2005 have been recast for fiscal year 2006 and 2005 have been recast to conform and Devices Division . PAGE 67 Table of Contents Part II of Contents Part II Item 8 The type of product and and Devices Division – Xbox 360 console and game ; Xbox for legal contingency . PAGE 68 Table of Contents Part II of Contents Part II Item 8 Significant reconciling item were a million ) Year Ended June 30 2007 2006 2005 Summary of ) Year Ended June 30 2007 2006 2005 Summary of reconciling Year Ended June 30 2007 2006 2005 Summary of reconciling amount Ended June 30 2007 2006 2005 Summary of reconciling amount : amount : Corporate-level activity ( 1 ) $ ( 5,193 ) ( 1 ) $ ( 5,193 ) $ ( 5,122 ) ( 5,193 ) $ ( 5,122 ) $ ( 5,932 ) ( 5,122 ) $ ( 5,932 ) Stock-based compensation expense 124 5,932 ) Stock-based compensation expense 124 ( 174 ) ( 1,042 Stock-based compensation expense 124 ( 174 ) ( 1,042 ) Revenue 124 ( 174 ) ( 1,042 ) Revenue reconciling amount 119 1,042 ) Revenue reconciling amount 119 ( 68 ) 437 Other Revenue reconciling amount 119 ( 68 ) 437 Other 180 ( amount 119 ( 68 ) 437 Other 180 ( 98 ) ( 68 ) 437 Other 180 ( 98 ) 130 Total ) 437 Other 180 ( 98 ) 130 Total $ ( Other 180 ( 98 ) 130 Total $ ( 4,770 ) ) 130 Total $ ( 4,770 ) $ ( 5,462 ) ( 4,770 ) $ ( 5,462 ) $ ( 6,407 ) ( 5,462 ) $ ( 6,407 ) ( 1 ) Corporate-level $ ( 6,407 ) ( 1 ) Corporate-level activity excludes stock-based customer accounted for more than 10 % of fiscal year 2007 10 % of fiscal year 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % and 10 % of for approximately 11 % and 10 % of fiscal year 2006 10 % of fiscal year 2006 and 2005 revenue , respectively of fiscal year 2006 and 2005 revenue , respectively . These million ) Year Ended June 30 2007 2006 2005 United States ) Year Ended June 30 2007 2006 2005 United States ( Year Ended June 30 2007 2006 2005 United States ( 1 Ended June 30 2007 2006 2005 United States ( 1 ) 2006 2005 United States ( 1 ) $ 31,346 $ 27,957 States ( 1 ) $ 31,346 $ 27,957 $ 25,427 Other 1 ) $ 31,346 $ 27,957 $ 25,427 Other country 19,776 $ 31,346 $ 27,957 $ 25,427 Other country 19,776 16,325 14,361 27,957 $ 25,427 Other country 19,776 16,325 14,361 Total $ 51,122 $ 25,427 Other country 19,776 16,325 14,361 Total $ 51,122 $ 25,427 Other country 19,776 16,325 14,361 Total $ 51,122 $ 44,282 19,776 16,325 14,361 Total $ 51,122 $ 44,282 $ 39,788 ( 14,361 Total $ 51,122 $ 44,282 $ 39,788 ( 1 ) $ 51,122 $ 44,282 $ 39,788 ( 1 ) Includes shipment $ 44,282 $ 39,788 ( 1 ) Includes shipment to customer organization . In fiscal year 2007 , the Company refined it million ) Year Ended June 30 2007 2006 United States $ ) Year Ended June 30 2007 2006 United States $ 9,121 Year Ended June 30 2007 2006 United States $ 9,121 $ 2007 2006 United States $ 9,121 $ 6,661 Other country 866 United States $ 9,121 $ 6,661 Other country 866 788 Total 9,121 $ 6,661 Other country 866 788 Total $ 9,987 $ $ 6,661 Other country 866 788 Total $ 9,987 $ 7,449 country 866 788 Total $ 9,987 $ 7,449 PAGE 69 Table 788 Total $ 9,987 $ 7,449 PAGE 69 Table of Contents $ 9,987 $ 7,449 PAGE 69 Table of Contents Part II of Contents Part II Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal year 31 Mar . 31 June 30 Total Fiscal year 2007 Revenue June 30 Total Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( 1 ) 2007 Revenue $ 10,811 $ 12,542 ( 1 ) $ 14,398 $ 10,811 $ 12,542 ( 1 ) $ 14,398 ( 2 12,542 ( 1 ) $ 14,398 ( 2 ) $ 13,371 1 ) $ 14,398 ( 2 ) $ 13,371 $ 51,122 14,398 ( 2 ) $ 13,371 $ 51,122 Gross profit 9,115 2 ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net $ 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income 51,122 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 Gross profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 2,626 profit 9,115 8,922 12,258 10,134 40,429 Net income 3,478 2,626 4,926 12,258 10,134 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 10,134 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 ) 40,429 Net income 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Net income 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Basic 3,478 2,626 4,926 3,035 ( 3 ) 14,065 Basic earnings per 4,926 3,035 ( 3 ) 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 4 8,872 9,674 36,632 Net income 3,141 ( 4 ) 3,653 2,977 36,632 Net income 3,141 ( 4 ) 3,653 2,977 ( 5 income 3,141 ( 4 ) 3,653 2,977 ( 5 ) 2,828 3,141 ( 4 ) 3,653 2,977 ( 5 ) 2,828 ( 4 ) 3,653 2,977 ( 5 ) 2,828 ( 6 ) 3,653 2,977 ( 5 ) 2,828 ( 6 ) 12,599 Basic ( 5 ) 2,828 ( 6 ) 12,599 Basic earnings per ) 2,828 ( 6 ) 12,599 Basic earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year earnings per share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 per share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue share 0.29 0.34 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 0.29 0.28 1.20 Fiscal year 2005 Revenue $ 9,189 $ 10,818 Fiscal year 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 2005 Revenue $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ $ 9,189 $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross $ 10,818 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 $ 9,620 $ 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 10,161 $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net $ 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 39,788 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 Gross profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( profit 7,784 8,943 8,257 8,773 33,757 Net income 2,528 ( 7 8,257 8,773 33,757 Net income 2,528 ( 7 ) 3,463 2,563 33,757 Net income 2,528 ( 7 ) 3,463 2,563 ( 8 income 2,528 ( 7 ) 3,463 2,563 ( 8 ) 3,700 2,528 ( 7 ) 3,463 2,563 ( 8 ) 3,700 ( 7 ) 3,463 2,563 ( 8 ) 3,700 ( 9 ) 3,463 2,563 ( 8 ) 3,700 ( 9 ) 12,254 Basic ( 8 ) 3,700 ( 9 ) 12,254 Basic earnings per ) 3,700 ( 9 ) 12,254 Basic earnings per share 0.23 12,254 Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted Basic earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings earnings per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per per share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share share 0.23 0.32 0.24 0.34 1.13 Diluted earnings per share 0.23 1.13 Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( Diluted earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 earnings per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) per share 0.23 0.32 0.23 0.34 1.12 ( 1 ) Reflects share 0.23 0.32 0.23 0.34 1.12 ( 1 ) Reflects $ 0.32 0.23 0.34 1.12 ( 1 ) Reflects $ 1.64 billion ( 1 ) Reflects $ 1.64 billion of revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( Microsoft Office system . ( 2 ) Includes $ 1.64 billion ( 2 ) Includes $ 1.64 billion of revenue discussed above above and charge totaling $ 296 million ( pre-tax ) related various legal matter . ( 3 ) Includes $ 1.06 billion ( 3 ) Includes $ 1.06 billion charge related to the charge related to the Xbox 360 warranty policy , inventory write-down and product return . ( 4 ) Includes charge of $ ) Includes charge of $ 361 million ( pre-tax ) related with RealNetworks , Inc. ( 5 ) Includes charge of $ ) Includes charge of $ 397 million ( pre-tax ) related various legal matter . ( 6 ) Includes charge of € ) Includes charge of € 281 million ( $ 351 million € 281 million ( $ 351 million ) a a result the European Commission in July 2006 . ( 7 ) Includes in July 2006 . ( 7 ) Includes charge totaling $ ) Includes charge totaling $ 536 million ( pre-tax ) related with Novell , Inc. ( 8 ) Includes charge totaling $ ) Includes charge totaling $ 768 million ( pre-tax ) related certain other matter . ( 9 ) Includes charge totaling $ ) Includes charge totaling $ 756 million ( pre-tax ) related and other matter . PAGE 70 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , and the June 30 , 2007 and 2006 , and the related consolidated in the period ended June 30 , 2007 . These financial period ended June 30 , 2007 . These financial statement are and subsidiary a of June 30 , 2007 and 2006 , a of June 30 , 2007 and 2006 , and the June 30 , 2007 and 2006 , and the result of in the period ended June 30 , 2007 , in conformity period ended June 30 , 2007 , in conformity with accounting financial reporting a of June 30 , 2007 , based on a of June 30 , 2007 , based on the criterion and our report dated August 3 , 2007 , expressed an report dated August 3 , 2007 , expressed an unqualified opinion LLP Seattle , Washington August 3 , 2007 PAGE 71 Table , Washington August 3 , 2007 PAGE 71 Table of Contents August 3 , 2007 PAGE 71 Table of Contents Part II of Contents Part II Item 9 , 9A ITEM 9 . Part II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2007 . There were a of June 30 , 2007 . There were no change during the quarter ended June 30 , 2007 that have materially quarter ended June 30 , 2007 that have materially affected , report is included in Item 9A . PAGE 72 Table of in Item 9A . PAGE 72 Table of Contents Part II of Contents Part II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC financial reporting a of June 30 , 2007 , based on a of June 30 , 2007 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2007 , is fairly a of June 30 , 2007 , is fairly stated , financial reporting a of June 30 , 2007 , based on a of June 30 , 2007 , based on the criterion for the year ended June 30 , 2007 of the Company year ended June 30 , 2007 of the Company and our and our report dated August 3 , 2007 expressed an unqualified report dated August 3 , 2007 expressed an unqualified opinion on LLP Seattle , Washington August 3 , 2007 PAGE 73 Table , Washington August 3 , 2007 PAGE 73 Table of Contents August 3 , 2007 PAGE 73 Table of Contents Part II Part II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this report . Information Shareholders to be held November 13 , 2007 ( the “ be held November 13 , 2007 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND herein by reference . PAGE 74 Table of Contents Part IV of Contents Part IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been Period ending Exhibit Filing date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation X Bylaws of Microsoft Corporation X 4 Call Option Transaction Confirmation dated Option Transaction Confirmation dated December 11 , 2003 between Microsoft Corporation Confirmation dated December 11 , 2003 between Microsoft Corporation and JPMorgan Corporation and JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * and JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft JPMorgan Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation Chase Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation 2001 Bank 10-K 12/31/03 4 2/6/04 10.1 * Microsoft Corporation 2001 Stock 2/6/04 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock 7/21/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Stock 7/21/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Option Option Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Option Plan for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 Employee 11/15/04 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.9 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 75 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 75 Table 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 75 Table of performance period 10-K 6/30/04 10.10 9/1/04 PAGE 75 Table of Contents 10-K 6/30/04 10.10 9/1/04 PAGE 75 Table of Contents Part IV of Contents Part IV Item 15 Filed herewith Incorporated by reference Period ending Exhibit Filing date 10.11 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY of Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Western Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of Shared Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2007 performance period X 21 Subsidiaries year 2007 performance period X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X * Indicates a management compensatory plan or arrangement PAGE 76 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 3 , 2007 . M ICROSOFT , on August 3 , 2007 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 3 , 2007 . Signature Title indicated on August 3 , 2007 . Signature Title /s/ W Principal Accounting Officer ) PAGE 77 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-08-162768/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-08-162768/full-submission.txt new file mode 100644 index 0000000..44b1ab2 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-08-162768/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2008 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2008 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant WASHINGTON 98052-6399 ( 425 ) 882-8080 Securities registered pursuant to Section Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No delinquent filer pursuant to Item 405 of Regulation S-K is not Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2007 , the aggregate As of December 31 , 2007 , the aggregate market value of the registrant wa $ 287,616,660,928 based on the closing sale System . As of July 28 , 2008 , there were As of July 28 , 2008 , there were 9,130,293,074 share , 2008 , there were 9,130,293,074 share of common stock outstanding to be held on November 19 , 2008 are incorporated by held on November 19 , 2008 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2008 INDEX PART I Year Ended June 30 , 2008 INDEX PART I Item 1. 2008 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Item 1A . Risk Factors 12 Item Item 1A . Risk Factors 12 Item 1B . Unresolved Staff . Risk Factors 12 Item 1B . Unresolved Staff Comments 17 1B . Unresolved Staff Comments 17 Item 2 . Properties 17 Unresolved Staff Comments 17 Item 2 . Properties 17 Item 3 17 Item 2 . Properties 17 Item 3 . Legal Proceedings 2 . Properties 17 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Submission of . Legal Proceedings 18 Item 4 . Submission of Matters to a Vote of Security Holders 18 PART II Item 5 . Holders 18 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management ’ Selected Financial Data 20 Item 7 . Management ’ s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 40 Item 8 . Financial Statements about Market Risk 40 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 41 Item 9 . Changes in and Supplementary Data 41 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 74 Item 9A . Controls and and Financial Disclosure 74 Item 9A . Controls and Procedures 74 9A . Controls and Procedures 74 Report of Management on Internal Internal Control over Financial Reporting 74 Report of Independent Registered Public Independent Registered Public Accounting Firm 75 Item 9B . Other Information Public Accounting Firm 75 Item 9B . Other Information 76 PART Item 9B . Other Information 76 PART III Item 10 . Information 76 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 76 Item 11 . Executive Compensation and Corporate Governance 76 Item 11 . Executive Compensation 76 Item Item 11 . Executive Compensation 76 Item 12 . Security Ownership . Executive Compensation 76 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 76 Item 13 . Certain Relationships Related Stockholder Matters 76 Item 13 . Certain Relationships and Related Transactions , and Director Independence 76 Item 14 . Principal Accounting and Director Independence 76 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 76 PART IV Item 15 . Services 76 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 77 Signatures 79 PAGE 2 Table Financial Statement Schedules 77 Signatures 79 PAGE 2 Table of Contents Schedules 77 Signatures 79 PAGE 2 Table of Contents Part I of Contents Part I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . These forward-looking statement generally to Part I , Item 1A ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is the company wa founded in 1975 , we have worked to have office in more than 100 country . We generate revenue sell hardware including the Xbox 360 video game console , the across our business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business OEM channel account for over 80 % of total Client revenue system , in fiscal year 2007 . This release concluded a Client platform product . PAGE 4 Table of Contents Part I of Contents Part I Item 1 Approximately 45 % of Server Part I Item 1 Approximately 45 % of Server and Tools multi-year licensing agreement , approximately 25 % is purchased through fully licensing program , and approximately 10 % come from license sold and Tools in fiscal year 2008 included Windows Server 2008 and year 2008 included Windows Server 2008 and Visual Studio 2008 . Server 2008 and Visual Studio 2008 . Windows Server 2008 provides Studio 2008 . Windows Server 2008 provides virtualization technology , security management utility while Visual Studio 2008 provides rapid application development , application . In fiscal year 2009 , we plan to release to release Microsoft SQL Server 2008 which will deliver advance in company focused on the Java 2 Platform Enterprise Edition ( J2EE future . During fiscal year 2008 , we launched new release launched new release of PAGE 5 Table of Contents Part I of Contents Part I Item 1 Windows Live Search , the offering , which generate over 90 % of MBD revenue , and OEM revenue . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Microsoft Office Communicator ; PAGE 6 Table of Contents Part I of Contents Part I Item 1 Microsoft Tellme Service , Microsoft system . Products : Xbox 360 console and game ; Xbox distribution and marketing . PAGE 7 Table of Contents Part I of Contents Part I Item 1 Our Xbox hardware business competes year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We think the Xbox 360 is positioned well against competitive our manufacturing activity for Xbox 360 and related game , Zune limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from a single supplier PRODUCT DEVELOPMENT During fiscal year 2008 , 2007 , and 2006 During fiscal year 2008 , 2007 , and 2006 , research 2008 , 2007 , and 2006 , research and development expense and development expense wa $ 8.2 billion , $ 7.1 billion $ 8.2 billion , $ 7.1 billion , and $ 6.6 7.1 billion , and $ 6.6 billion , respectively . These respectively . These amount represented 14 % , 14 % , amount represented 14 % , 14 % , and 15 % , 14 % , and 15 % , respectively , of information a early a PAGE 8 Table of Contents Part I of Contents Part I Item 1 possible about changing usage pattern with Windows Vista , the 2007 Microsoft Office System , Xbox Microsoft Office System , Xbox 360 , Microsoft Windows Live , with developer . Fiscal year 2008 saw widespread adoption of Windows of Windows Vista and the 2007 Microsoft Office system and the the launch of Windows Server 2008 , SQL Server 2008 , Server 2008 , SQL Server 2008 , and Visual Studio 2008 2008 , and Visual Studio 2008 . We will continue to these product in fiscal year 2009 , and in providing additional of all size , PAGE 9 Table of Contents Part I of Contents Part I Item 1 LARs are primarily engaged with primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , this program medium-to-large organization ( greater than 250 license ) , this program customer accounted for more than 10 % of fiscal year 2008 10 % of fiscal year 2008 or 2007 revenue . Sales of fiscal year 2008 or 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 revenue . These sale were is not significant . PAGE 10 Table of Contents Part I of Contents Part I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 31 , 2008 were a follows a of July 31 , 2008 were a follows : Name the Company Steven A. Ballmer 52 Chief Executive Officer Robert J . ( Robbie ) Bach 46 President , Entertainment and Devices Devices Division Lisa E. Brummel 48 Senior Vice President , Human Human Resources Stephen A. Elop 44 President , Microsoft Business Division Business Division Kevin R. Johnson 47 President , Platforms and Services Services Division Christopher P. Liddell 50 Senior Vice President and Chief Financial Officer Robert L. Muglia 48 Senior Vice President , Server and Tools Craig J. Mundie 59 Chief Research and Strategy Officer Strategy Officer Raymond E. Ozzie 52 Chief Software Architect Jeffrey S. Software Architect Jeffrey S. Raikes 50 President , Microsoft Business Division Business Division Bradford L. Smith 49 Senior Vice President ; General and Secretary Brian Kevin Turner 43 Chief Operating Officer Mr. Ballmer Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . He joined Microsoft in . He joined Microsoft in 1980 . Mr. Bach wa named and Devices Division in September 2005 . He had been Senior Home and Entertainment since March 2000 . Before holding that position Home and Retail since March 1999 , Vice President , Learning , Entertainment and Productivity since 1997 , and Vice President , , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Ms. Brummel wa named , Human Resources in December 2005 . She had been Corporate , Human Resources since April 2005 . From 1995 to April since April 2005 . From 1995 to April 2005 , she . From 1995 to April 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Microsoft Business Division in January 2008 . Prior to joining the Networks , Inc. from January 2007 to January 2008 . From from January 2007 to January 2008 . From December 2005 to January 2008 . From December 2005 to December 2006 , he From December 2005 to December 2006 , he served a President Elop joined Adobe following the 2005 acquisition of Macromedia Inc. , Chief Executive Officer from January 2005 to December 2005 . During from January 2005 to December 2005 . During his almost eight-year and Services Division in January 2007 . He had been Co-President and Services Division since September 2005 . He held the position Marketing and Services since March 2003 . Before that position , , Microsoft Americas since February 2002 and Senior Vice President , , and Services since August 2001 . Prior to assuming that . He joined Microsoft in 1992 . In July 2008 , in 1992 . In July 2008 , Mr. Johnson announced his of the Company in May 2005 . Mr. Liddell served a International Paper Company from March 2003 through April 2005 , and from March 2003 through April 2005 , and prior to becoming of International Paper , from 1999 to 2002 and Chief Financial Paper , from 1999 to 2002 and Chief Financial Officer from and Chief Financial Officer from 1995 to 1998 . Mr. Muglia Financial Officer from 1995 to 1998 . Mr. Muglia wa named and Tools Business in October 2005 . Before holding that position Enterprise Storage Division since November 2001 , Group Vice President , Personal Services Group since August 2000 , Group Vice President , , Business Productivity since December 1999 , Senior Vice President , , Business Productivity since March 1999 , Senior Vice President , Applications and Tools since February 1998 , and Corporate Vice President President , Server Applications since 1997 . He joined Microsoft in . He joined Microsoft in 1988 . PAGE 11 Table of Microsoft in 1988 . PAGE 11 Table of Contents Part I of Contents Part I Item 1 , 1A Mr. Mundie wa Part I Item 1 , 1A Mr. Mundie wa named Chief and Strategy Officer in June 2006 . He had been Senior Strategies and Policy since August 2001 . He wa named Senior , Consumer Platforms in February 1996 . Mr. Mundie joined Microsoft Mr. Mundie joined Microsoft in 1992 . Mr. Ozzie wa named Chief Software Architect in June 2006 . He had been Chief Chief Technical Officer from April 2005 to June 2006 . He from April 2005 to June 2006 . He assumed that role assumed that role in April 2005 after Microsoft acquired Groove Networks software company he formed in 1997 . Mr. Raikes wa named Microsoft Business Division in September 2005 . He had been Group Information Worker Business since June 2004 . Before that position , and Business Services since August 2000 and Group Vice President , Sales and Support since July 1998 . Mr. Raikes joined Microsoft Mr. Raikes joined Microsoft in 1981 . In January 2008 , in 1981 . In January 2008 , he announced his plan at the end of August 2008 . Mr. Smith wa named , and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy . He joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Club division . From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it . EMPLOYEES As of June 30 , 2008 , we employed As of June 30 , 2008 , we employed approximately 91,000 2008 , we employed approximately 91,000 people on a full-time basis on a full-time basis , 55,000 in the United States and in the United States and 36,000 internationally . Of the total . Of the total , 35,000 were in product research and product research and development , 26,000 in sale and marketing , in sale and marketing , 17,000 in product support and consulting support and consulting service , 4,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 1A . RISK FACTORS Our operation margin may decline . PAGE 12 Table of Contents Part I of Contents Part I Item 1A Another development is the business range in size from Fortune 100 company to small , specialized the next paragraph . PAGE 13 Table of Contents Part I of Contents Part I Item 1A Security vulnerability in our product U.S. Department of Justice , 18 state , and the District Decree that took effect in 2001 and a Final Judgment entered a Final Judgment entered in 2002 . These proceeding imposed various to other company . In 2004 , the Commission ordered u which developer rely . PAGE 14 Table of Contents Part I of Contents Part I Item 1A • We may be required including Windows Vista , the 2007 Microsoft Office system , Xbox Microsoft Office system , Xbox 360 , Live Search , Windows a Windows Vista and the 2007 Microsoft Office system are not ultimate tax determination is PAGE 15 Table of Contents Part I of Contents Part I Item 1A uncertain . We regularly are product such a the Xbox 360 console are highly complex and cost of revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part or financial condition . PAGE 16 Table of Contents Part I of Contents Part I Item 1A , 1B , 2 Improper Part I Item 1A , 1B , 2 Improper disclosure of Item 1A , 1B , 2 Improper disclosure of personal data with revenue growth . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2008 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 13 million square foot of office owned space situated on approximately 500 acre of land we own we may currently develop approximately 850,000 square foot of additional facility In addition , we own 63 acre of undeveloped land in of office space . PAGE 17 Table of Contents Part I of Contents Part I Item 3 , 4 ITEM 3 . Part I Item 3 , 4 ITEM 3 . LEGAL PROCEEDINGS Item 3 , 4 ITEM 3 . LEGAL PROCEEDINGS In March . LEGAL PROCEEDINGS In March 2004 , the European Commission issued our competitor . In March 2007 , the European Commission issued a required by the March 2004 decision were “ not reasonable the Commission announced on October 22 , 2007 that we were announced on October 22 , 2007 that we were in compliance in compliance with the March 2004 decision and that no further that date . In February 2008 , the Commission issued a issued a fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the period prior to October 22 , 2007 . In May prior to October 22 , 2007 . In May 2008 , , 2007 . In May 2008 , we filed an application the fine . See Note 15 – Contingencies of the Notes ( Part II , Item 8 ) for information about legal we are involved . ITEM 4 . SUBMISSION OF MATTERS TO fourth quarter of fiscal year 2008 . PAGE 18 Table of fiscal year 2008 . PAGE 18 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 28 , 2008 , there were . On July 28 , 2008 , there were 145,903 registered , 2008 , there were 145,903 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal year 31 Mar . 31 June 30 Year Fiscal year 2008 Common June 30 Year Fiscal year 2008 Common stock price per share per share : High $ 31.84 $ 37.50 $ 35.96 $ : High $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low 27.51 29.29 $ 35.96 $ 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 $ 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal 32.10 $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year $ 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year 2007 37.50 Low 27.51 29.29 26.87 27.11 26.87 Fiscal year 2007 Common Low 27.51 29.29 26.87 27.11 26.87 Fiscal year 2007 Common stock 26.87 27.11 26.87 Fiscal year 2007 Common stock price per share per share : High $ 27.52 $ 30.26 $ 31.48 $ : High $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ $ 27.52 $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low $ 30.26 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 $ 31.48 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 $ 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See 31.16 $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See Note $ 31.48 Low 22.23 27.15 26.60 27.56 22.23 See Note 16 31.48 Low 22.23 27.15 26.60 27.56 22.23 See Note 16 – Low 22.23 27.15 26.60 27.56 22.23 See Note 16 – Stockholders 26.60 27.56 22.23 See Note 16 – Stockholders ’ Equity of ( Part II , Item 8 ) for information regarding dividend of Directors in fiscal year 2008 and 2007 . On July in fiscal year 2008 and 2007 . On July 20 , and 2007 . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.0 billion tender offer which wa which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program program that expires on June 30 , 2011 . Under the expires on June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . The repurchase billion through June 30 , 2011 . The repurchase program may a trading plan under Rule 10b5-1 . We repurchased common stock each quarter of fiscal year 2008 using available cash resource a price paid per share July 1 , 2007 – September 30 per share July 1 , 2007 – September 30 , 2007 1 , 2007 – September 30 , 2007 80,597,986 $ 29.14 2007 – September 30 , 2007 80,597,986 $ 29.14 October 1 – September 30 , 2007 80,597,986 $ 29.14 October 1 , 30 , 2007 80,597,986 $ 29.14 October 1 , 2007 – 2007 80,597,986 $ 29.14 October 1 , 2007 – December 31 $ 29.14 October 1 , 2007 – December 31 , 2007 1 , 2007 – December 31 , 2007 119,614,762 $ 34.12 2007 – December 31 , 2007 119,614,762 $ 34.12 January 1 – December 31 , 2007 119,614,762 $ 34.12 January 1 , 31 , 2007 119,614,762 $ 34.12 January 1 , 2008 – 2007 119,614,762 $ 34.12 January 1 , 2008 – March 31 $ 34.12 January 1 , 2008 – March 31 , 2008 1 , 2008 – March 31 , 2008 30,160,464 $ 33.82 2008 – March 31 , 2008 30,160,464 $ 33.82 April 1 – March 31 , 2008 30,160,464 $ 33.82 April 1 , 31 , 2008 30,160,464 $ 33.82 April 1 , 2008 – 2008 30,160,464 $ 33.82 April 1 , 2008 – June 30 $ 33.82 April 1 , 2008 – June 30 , 2008 1 , 2008 – June 30 , 2008 171,474,350 $ 29.01 2008 – June 30 , 2008 171,474,350 $ 29.01 Total share – June 30 , 2008 171,474,350 $ 29.01 Total share repurchase 30 , 2008 171,474,350 $ 29.01 Total share repurchase in fiscal share repurchase in fiscal year 2008 401,847,562 Common stock repurchase in repurchase in fiscal year 2008 401,847,562 Common stock repurchase in the fourth quarter of fiscal year 2008 were a follows : Period ( in million ) April 1 , 2008 – April 30 million ) April 1 , 2008 – April 30 , 2008 1 , 2008 – April 30 , 2008 – $ – 2008 – April 30 , 2008 – $ – – $ – $ – – $ 7,688 May 1 , 2008 – – – $ 7,688 May 1 , 2008 – May 31 $ 7,688 May 1 , 2008 – May 31 , 2008 1 , 2008 – May 31 , 2008 82,151,000 $ 29.77 2008 – May 31 , 2008 82,151,000 $ 29.77 82,151,000 $ – May 31 , 2008 82,151,000 $ 29.77 82,151,000 $ 5,243 31 , 2008 82,151,000 $ 29.77 82,151,000 $ 5,243 June 1 , 2008 82,151,000 $ 29.77 82,151,000 $ 5,243 June 1 , 82,151,000 $ 29.77 82,151,000 $ 5,243 June 1 , 2008 – 29.77 82,151,000 $ 5,243 June 1 , 2008 – June 30 $ 5,243 June 1 , 2008 – June 30 , 2008 1 , 2008 – June 30 , 2008 89,323,350 $ 28.31 2008 – June 30 , 2008 89,323,350 $ 28.31 89,323,350 $ – June 30 , 2008 89,323,350 $ 28.31 89,323,350 $ 2,714 30 , 2008 89,323,350 $ 28.31 89,323,350 $ 2,714 171,474,350 171,474,350 , 2008 89,323,350 $ 28.31 89,323,350 $ 2,714 171,474,350 171,474,350 PAGE 89,323,350 $ 28.31 89,323,350 $ 2,714 171,474,350 171,474,350 PAGE 19 Table $ 28.31 89,323,350 $ 2,714 171,474,350 171,474,350 PAGE 19 Table of 28.31 89,323,350 $ 2,714 171,474,350 171,474,350 PAGE 19 Table of Contents $ 2,714 171,474,350 171,474,350 PAGE 19 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 , 2008 2007 2006 2005 Year Ended June 30 , 2008 2007 2006 2005 2004 Revenue Ended June 30 , 2008 2007 2006 2005 2004 Revenue $ June 30 , 2008 2007 2006 2005 2004 Revenue $ 60,420 30 , 2008 2007 2006 2005 2004 Revenue $ 60,420 $ , 2008 2007 2006 2005 2004 Revenue $ 60,420 $ 51,122 2006 2005 2004 Revenue $ 60,420 $ 51,122 $ 44,282 $ 2004 Revenue $ 60,420 $ 51,122 $ 44,282 $ 39,788 $ $ 60,420 $ 51,122 $ 44,282 $ 39,788 $ 36,835 Operating $ 51,122 $ 44,282 $ 39,788 $ 36,835 Operating income $ $ 44,282 $ 39,788 $ 36,835 Operating income $ 22,492 $ $ 36,835 Operating income $ 22,492 $ 18,524 $ 16,472 $ Operating income $ 22,492 $ 18,524 $ 16,472 $ 14,561 $ $ 22,492 $ 18,524 $ 16,472 $ 14,561 $ 9,034 Net $ 18,524 $ 16,472 $ 14,561 $ 9,034 Net income $ $ 16,472 $ 14,561 $ 9,034 Net income $ 17,681 $ $ 9,034 Net income $ 17,681 $ 14,065 $ 12,599 $ Net income $ 17,681 $ 14,065 $ 12,599 $ 12,254 $ $ 17,681 $ 14,065 $ 12,599 $ 12,254 $ 8,168 Diluted $ 14,065 $ 12,599 $ 12,254 $ 8,168 Diluted earnings per $ 12,599 $ 12,254 $ 8,168 Diluted earnings per share $ Diluted earnings per share $ 1.87 $ 1.42 $ 1.20 $ per share $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ $ 1.87 $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash $ 1.42 $ 1.20 $ 1.12 $ 0.75 Cash dividend declared $ 1.20 $ 1.12 $ 0.75 Cash dividend declared per share dividend declared per share $ 0.44 $ 0.40 $ 0.35 $ per share $ 0.44 $ 0.40 $ 0.35 $ 3.40 $ $ 0.44 $ 0.40 $ 0.35 $ 3.40 $ 0.16 Cash $ 0.40 $ 0.35 $ 3.40 $ 0.16 Cash , cash $ 0.35 $ 3.40 $ 0.16 Cash , cash equivalent , , and short-term investment $ 23,662 $ 23,411 $ 34,161 $ short-term investment $ 23,662 $ 23,411 $ 34,161 $ 37,751 $ $ 23,662 $ 23,411 $ 34,161 $ 37,751 $ 60,592 Total $ 23,411 $ 34,161 $ 37,751 $ 60,592 Total asset $ $ 34,161 $ 37,751 $ 60,592 Total asset $ 72,793 $ $ 60,592 Total asset $ 72,793 $ 63,171 $ 69,597 $ Total asset $ 72,793 $ 63,171 $ 69,597 $ 70,815 $ $ 72,793 $ 63,171 $ 69,597 $ 70,815 $ 94,368 Long-term $ 63,171 $ 69,597 $ 70,815 $ 94,368 Long-term obligation $ $ 69,597 $ 70,815 $ 94,368 Long-term obligation $ 6,621 $ $ 94,368 Long-term obligation $ 6,621 $ 8,320 $ 7,051 $ Long-term obligation $ 6,621 $ 8,320 $ 7,051 $ 5,823 $ $ 6,621 $ 8,320 $ 7,051 $ 5,823 $ 4,574 Stockholders $ 8,320 $ 7,051 $ 5,823 $ 4,574 Stockholders ’ equity $ 7,051 $ 5,823 $ 4,574 Stockholders ’ equity $ 36,286 4,574 Stockholders ’ equity $ 36,286 $ 31,097 $ 40,104 $ ’ equity $ 36,286 $ 31,097 $ 40,104 $ 48,115 $ $ 36,286 $ 31,097 $ 40,104 $ 48,115 $ 74,825 PAGE $ 31,097 $ 40,104 $ 48,115 $ 74,825 PAGE 20 Table $ 40,104 $ 48,115 $ 74,825 PAGE 20 Table of Contents $ 48,115 $ 74,825 PAGE 20 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2008 , 2007 , AND 2006 FOR FISCAL YEARS 2008 , 2007 , AND 2006 OVERVIEW The 2008 , 2007 , AND 2006 OVERVIEW The following Management ’ sell hardware including the Xbox 360 video game console , the Devices Division ha generated over 40 % of it yearly segment quarter . In fiscal year 2007 , our revenue wa highest to the recognition of $ 1.7 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those Our focus in fiscal year 2009 is to continue to build across the company . PAGE 21 Table of Contents Part II of Contents Part II Item 7 Key market opportunity include : with developer . Fiscal year 2008 saw widespread adoption of Windows of Windows Vista and the 2007 Microsoft Office system and the the launch of Windows Server 2008 , SQL Server 2008 , Server 2008 , SQL Server 2008 , and Visual Studio 2008 2008 , and Visual Studio 2008 . Summary of Results for of Results for Fiscal Years 2008 , 2007 , and 2006 for Fiscal Years 2008 , 2007 , and 2006 ( In 2008 , 2007 , and 2006 ( In million , except million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 60,420 2007 Percentage Change 2007 versus 2006 Revenue $ 60,420 $ 51,122 2007 versus 2006 Revenue $ 60,420 $ 51,122 $ 44,282 18 2006 Revenue $ 60,420 $ 51,122 $ 44,282 18 % 15 $ 60,420 $ 51,122 $ 44,282 18 % 15 % Operating 60,420 $ 51,122 $ 44,282 18 % 15 % Operating income 51,122 $ 44,282 18 % 15 % Operating income $ 22,492 15 % Operating income $ 22,492 $ 18,524 $ 16,472 21 Operating income $ 22,492 $ 18,524 $ 16,472 21 % 12 $ 22,492 $ 18,524 $ 16,472 21 % 12 % Diluted 22,492 $ 18,524 $ 16,472 21 % 12 % Diluted earnings 18,524 $ 16,472 21 % 12 % Diluted earnings per share Diluted earnings per share $ 1.87 $ 1.42 $ 1.20 32 per share $ 1.87 $ 1.42 $ 1.20 32 % 18 $ 1.87 $ 1.42 $ 1.20 32 % 18 % Fiscal 1.87 $ 1.42 $ 1.20 32 % 18 % Fiscal year 1.42 $ 1.20 32 % 18 % Fiscal year 2008 compared % 18 % Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted for a $ 1.6 billion or three percentage point revenue . Headcount-related expense increased 12 % , reflecting an increase year . We incurred $ 1.8 billion of legal charge during European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) a compared with ) a compared with $ 511 million of legal charge during Cost of revenue increased $ 905 million or 8 % , increased $ 905 million or 8 % , reflecting increased data partially offset by decreased Xbox 360 cost . The decreased Xbox cost . The decreased Xbox 360 cost reflect the $ 1.1 360 cost reflect the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 related to the expansion of the expansion of our Xbox 360 warranty coverage a discussed below partially offset by increased Xbox 360 product cost reflecting growth in wa impacted by the $ 1.1 billion Xbox 360 charge in the $ 1.1 billion Xbox 360 charge in fiscal year 2007 360 charge in fiscal year 2007 and current year share repurchase share repurchase . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Revenue growth wa driven primarily primarily by licensing of the 2007 Microsoft Office system and Windows Studio , and increased Xbox 360 platform sale . Foreign currency of revenue associated with Xbox 360 and Windows Vista , increased marketing expense . In July 2007 , we expanded our global we expanded our global Xbox 360 warranty coverage to three year , we recorded a $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 for anticipated cost under the sale and marketing expense PAGE 22 Table of Contents Part II of Contents Part II Item 7 wa primarily driven by increased launch . Headcount-related expense increased 18 % , driven by an the year . Fiscal Year 2009 Outlook Global macroeconomic factor have offering . In fiscal year 2009 , we expect a broad latter part of fiscal year 2008 . In fiscal year 2009 2008 . In fiscal year 2009 , we expect double digit PC shipment will grow between 12 % and 14 % . grow between 12 % and 14 % . Within the overall segment information appearing in Note 19 – Segment Information of the ( Part II , Item 8 ) is presented on a SFAS ” ) No . 131 , Disclosures about Segments of million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 16,865 2007 Percentage Change 2007 versus 2006 Revenue $ 16,865 $ 14,976 2007 versus 2006 Revenue $ 16,865 $ 14,976 $ 13,107 13 2006 Revenue $ 16,865 $ 14,976 $ 13,107 13 % 14 $ 16,865 $ 14,976 $ 13,107 13 % 14 % Operating 16,865 $ 14,976 $ 13,107 13 % 14 % Operating income 14,976 $ 13,107 13 % 14 % Operating income $ 13,052 14 % Operating income $ 13,052 $ 11,467 $ 10,208 14 Operating income $ 13,052 $ 11,467 $ 10,208 14 % 12 $ 13,052 $ 11,467 $ 10,208 14 % 12 % Client 13,052 $ 11,467 $ 10,208 14 % 12 % Client offering 11,467 $ 10,208 14 % 12 % Client offering consist of OEM channel account for over 80 % of total Client revenue system builder . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Client revenue increased reflecting growth the end of fiscal year 2008 , more than 180 million year 2008 , more than 180 million Windows Vista license had had been sold ( approximately 130 million were sold during fiscal were sold during fiscal year 2008 ) and million of enterprise . OEM revenue increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , driven by 16 13 % , driven by 16 % growth in OEM license Windows operating system increased $ 209 million or 8 % , increased $ 209 million or 8 % , primarily from Enterprise increased seven percentage point to 74 % , reflecting strong demand from all source grew approximately 12 % to 14 % , grew approximately 12 % to 14 % , driven by demand and mature market . PAGE 23 Table of Contents Part II of Contents Part II Item 7 Client operating income increased reflecting and marketing expense increased $ 149 million or 10 % , increased $ 149 million or 10 % , primarily reflecting increased Cost of revenue increased $ 115 million or 13 % , increased $ 115 million or 13 % , primarily driven by product cost . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Client revenue increased primarily reflecting . OEM revenue increased $ 1.4 billion or 13 % driven increased $ 1.4 billion or 13 % driven by 13 % or 13 % driven by 13 % growth in OEM license Windows operating system increased $ 447 million or 22 % . increased $ 447 million or 22 % . During the year the OEM premium mix increased 15 percentage point to 67 % increased 15 percentage point to 67 % . We estimate total shipment from all source grew 10 % to 12 % driven source grew 10 % to 12 % driven by demand in Vista . Headcount-related expense decreased 7 % , primarily driven by the year . Fiscal Year 2009 Outlook We expect PC market million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 13,170 2007 Percentage Change 2007 versus 2006 Revenue $ 13,170 $ 11,171 2007 versus 2006 Revenue $ 13,170 $ 11,171 $ 9,665 18 2006 Revenue $ 13,170 $ 11,171 $ 9,665 18 % 16 $ 13,170 $ 11,171 $ 9,665 18 % 16 % Operating 13,170 $ 11,171 $ 9,665 18 % 16 % Operating income 11,171 $ 9,665 18 % 16 % Operating income $ 4,593 16 % Operating income $ 4,593 $ 3,643 $ 2,868 26 Operating income $ 4,593 $ 3,643 $ 2,868 26 % 27 $ 4,593 $ 3,643 $ 2,868 26 % 27 % Server 4,593 $ 3,643 $ 2,868 26 % 27 % Server and 3,643 $ 2,868 26 % 27 % Server and Tools concentrate volume license . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Server and Tools revenue increased currency exchange rate of $ 464 million or four percentage point developer tool revenue increased $ 1.4 billion or 15 % , increased $ 1.4 billion or 15 % , primarily driven by the release of Windows Server 2008 and Visual Studio 2008 during Server 2008 and Visual Studio 2008 during the fiscal year . support service revenue increased $ 593 million or 29 % , increased $ 593 million or 29 % , primarily due to and marketing expense increased $ 475 million or 14 % , increased $ 475 million or 14 % , due to higher Cost of revenue increased $ 394 million or 18 % , increased $ 394 million or 18 % , reflecting the growth Consulting and Premier and PAGE 24 Table of Contents Part II of Contents Part II Item 7 Professional product support service . and development expense increased $ 183 million or 11 % , increased $ 183 million or 11 % , primarily driven by expense . Headcount-related expense increased 8 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Server and server application revenue and certification revenue increased $ 1.1 billion or 13 % , increased $ 1.1 billion or 13 % , and included a currency exchange rate of $ 168 million or two percentage point SQL Server which grew over 20 % . Consulting and Premier support service revenue increased $ 428 million or 26 % , increased $ 428 million or 26 % , primarily due to service . Headcount-related expense increased 14 % , driven by an Cost of revenue increased $ 260 million or 14 % , increased $ 260 million or 14 % , reflecting growth in support service . Fiscal Year 2009 Outlook We expect continued growth the recently released Windows Server 2008 and Visual Studio 2008 and Server 2008 and Visual Studio 2008 and upcoming release of SQL upcoming release of SQL Server 2008 . Online Services Business ( million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 3,214 2007 Percentage Change 2007 versus 2006 Revenue $ 3,214 $ 2,441 2007 versus 2006 Revenue $ 3,214 $ 2,441 $ 2,296 32 2006 Revenue $ 3,214 $ 2,441 $ 2,296 32 % 6 $ 3,214 $ 2,441 $ 2,296 32 % 6 % Operating 3,214 $ 2,441 $ 2,296 32 % 6 % Operating income 2,441 $ 2,296 32 % 6 % Operating income ( loss ( loss ) $ ( 1,233 ) $ ( 617 ) ( 1,233 ) $ ( 617 ) $ 5 ( 100 $ ( 617 ) $ 5 ( 100 ) % * 617 ) $ 5 ( 100 ) % * * Not future . During fiscal year 2008 , we launched new release first quarter of fiscal year 2008 , we completed our acquisition result of operation starting August 10 , 2007 , the acquisition operation starting August 10 , 2007 , the acquisition date . strategy , during fiscal year 2008 we submitted a proposal to proposal to acquire the PAGE 25 Table of Contents Part II of Contents Part II Item 7 company . Subsequently , we strategic acquisition . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 OSB revenue increased driven by Online advertising revenue increased $ 553 million or 31 % , increased $ 553 million or 31 % , to $ 2.3 31 % , to $ 2.3 billion . This increase reflects online advertising revenue of $ 161 million . Agency revenue , from aQuantive , wa $ 345 million during the year . . Access revenue decreased $ 98 million or 28 % , decreased $ 98 million or 28 % , to $ 256 28 % , to $ 256 million , reflecting migration of provider . As of June 30 , 2008 , we estimate As of June 30 , 2008 , we estimate we had we estimate we had approximately 460 million Windows Live IDs compared Windows Live IDs compared with 382 million a of the same Cost of revenue increased $ 796 million or 71 % , increased $ 796 million or 71 % , primarily driven by and marketing expense increased $ 300 million or 35 % , increased $ 300 million or 35 % , primarily due to customer-related intangible asset of $ 94 million , increased headcount-related expense and development expense increased $ 177 million or 18 % , increased $ 177 million or 18 % , and general and and administrative expense increased $ 117 million or 175 % , increased $ 117 million or 175 % , primarily reflecting increased expense . Headcount-related expense increased 24 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 OSB revenue increased driven primarily advertising revenue which grew $ 283 million or 19 % , grew $ 283 million or 19 % , to $ 1.8 19 % , to $ 1.8 billion . This increase wa partially offset by a $ 156 million or 31 % decrease a $ 156 million or 31 % decrease in access revenue of revenue which grew $ 336 million or 42 % , grew $ 336 million or 42 % , and increased headcount-related royalty . Headcount-related expense increased 31 % , driven by an the year . Fiscal Year 2009 Outlook We expect revenue , to increase in fiscal year 2009 a we begin to see million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 18,932 2007 Percentage Change 2007 versus 2006 Revenue $ 18,932 $ 16,402 2007 versus 2006 Revenue $ 18,932 $ 16,402 $ 14,465 15 2006 Revenue $ 18,932 $ 16,402 $ 14,465 15 % 13 $ 18,932 $ 16,402 $ 14,465 15 % 13 % Operating 18,932 $ 16,402 $ 14,465 15 % 13 % Operating income 16,402 $ 14,465 15 % 13 % Operating income $ 12,358 13 % Operating income $ 12,358 $ 10,777 $ 9,534 15 Operating income $ 12,358 $ 10,777 $ 9,534 15 % 13 $ 12,358 $ 10,777 $ 9,534 15 % 13 % Microsoft 12,358 $ 10,777 $ 9,534 15 % 13 % Microsoft Business 10,777 $ 9,534 15 % 13 % Microsoft Business Division ( offering , which generate over 90 % of MBD revenue , business intelligence . Microsoft PAGE 26 Table of Contents Part II of Contents Part II Item 7 Dynamics product provide business solution OEM revenue . In April 2008 , we completed our acquisition content management . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 MBD revenue increased reflecting growth growth in licensing of the 2007 Microsoft Office system and included currency exchange rate of $ 724 million or four percentage point . Business revenue increased $ 2.6 billion or 21 % , increased $ 2.6 billion or 21 % , primarily a a business revenue also included a 21 % increase in Microsoft Dynamics . Consumer revenue decreased $ 80 million or 2 % , decreased $ 80 million or 2 % , reflecting the consumer the consumer launch of the 2007 Microsoft Office system in the and marketing expense increased $ 462 million or 13 % , increased $ 462 million or 13 % , reflecting increased expense and development expense increased $ 228 million or 18 % , increased $ 228 million or 18 % , primarily driven by headcount-related expense and a $ 35 million in-process research and development Cost of revenue increased $ 225 million or 29 % , increased $ 225 million or 29 % , primarily driven by sale . Headcount-related expense increased 10 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 MBD revenue increased primarily reflecting primarily reflecting licensing of the 2007 Microsoft Office system and included currency exchange rate of $ 247 million or two percentage point from consumer sale increased $ 339 million or 10 % while increased $ 339 million or 10 % while revenue from business from business sale increased $ 1.6 billion or 15 % . increased $ 1.6 billion or 15 % . The increase in in business revenue included a 21 % increase in Microsoft Dynamics revenue primarily associated with the 2007 Microsoft Office system . The expense . Headcount-related expense increased 8 % , driven by an the year . Fiscal Year 2009 Outlook We expect revenue to the strong performance of the 2007 Microsoft Office system and business other application . Fiscal year 2009 represents an important year in million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Revenue $ 8,140 2007 Percentage Change 2007 versus 2006 Revenue $ 8,140 $ 6,069 2007 versus 2006 Revenue $ 8,140 $ 6,069 $ 4,732 34 2006 Revenue $ 8,140 $ 6,069 $ 4,732 34 % 28 $ 8,140 $ 6,069 $ 4,732 34 % 28 % Operating 8,140 $ 6,069 $ 4,732 34 % 28 % Operating income 6,069 $ 4,732 34 % 28 % Operating income ( loss income ( loss ) $ 426 $ ( 1,969 ) $ ) $ 426 $ ( 1,969 ) $ ( 1,339 ) ( 1,969 ) $ ( 1,339 ) * ( 47 ) ( 1,339 ) * ( 47 ) % * Not meaningful % * Not meaningful PAGE 27 Table of Contents Part II of Contents Part II Item 7 Entertainment and Devices Division ( ) offering include the Xbox 360 platform ( which includes the game console system , Xbox 360 video game , Xbox Live Xbox Live , and Xbox 360 accessory ) , the Zune operating system . In April 2008 , we acquired Danger , their subscriber . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 EDD revenue increased primarily due primarily due to increased Xbox 360 platform sale . Xbox 360 360 platform sale . Xbox 360 platform and PC game revenue PC game revenue increased $ 1.7 billion or 41 % a increased $ 1.7 billion or 41 % a a result of a result of increased Xbox 360 console sale , video game game sale led by Halo 3 , Xbox Live revenue , Live revenue , and Xbox 360 accessory sale . We shipped accessory sale . We shipped 8.7 million Xbox 360 console during We shipped 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 , compared with 6.6 million year 2008 , compared with 6.6 million Xbox 360 console during compared with 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 . EDD operating income increased Cost of revenue decreased $ 683 million or 13 % , decreased $ 683 million or 13 % , reflecting the impact the impact of the $ 1.1 billion Xbox 360 charge in the $ 1.1 billion Xbox 360 charge in fiscal year 2007 360 charge in fiscal year 2007 ( which primarily related to partially offset by increased Xbox 360 product cost related to increased and development expense increased $ 242 million or 18 % , increased $ 242 million or 18 % , primarily reflecting increased Danger , including a $ 24 million in-process research and development and marketing expense increased $ 93 million or 8 % , increased $ 93 million or 8 % , primarily reflecting increased expense . Headcount-related expense increased 21 % , driven by an the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 EDD revenue increased primarily due primarily due to increased Xbox 360 platform and Zune sale . Zune sale . We shipped 6.6 million Xbox 360 console during We shipped 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 a compared to 5.0 million year 2007 a compared to 5.0 million console during fiscal year million console during fiscal year 2006 . Xbox and PC game PC game revenue increased $ 650 million or 19 % a increased $ 650 million or 19 % a a result of a result of increased Xbox 360 platform sale , partially offset and Mediaroom revenue increased $ 539 million or 65 % primarily increased $ 539 million or 65 % primarily driven by the the Zune launch in November 2006 . EDD operating loss increased primarily due to the $ 1.1 billion Xbox 360 charge recognized the $ 1.1 billion Xbox 360 charge recognized in the fourth fourth quarter of fiscal year 2007 and Zune launch-related expense . partially offset by increased Xbox 360 platform sale and decreased Xbox platform sale and decreased Xbox 360 console manufacturing cost . Headcount-related cost . Headcount-related expense increased 14 % , driven by an the year . Fiscal Year 2009 Outlook We expect revenue to sustained profitability for fiscal year 2009 . Corporate-Level Activity ( In million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Corporate-level activity $ 2007 Percentage Change 2007 versus 2006 Corporate-level activity $ ( 6,704 2006 Corporate-level activity $ ( 6,704 ) $ ( 4,777 ) ( 6,704 ) $ ( 4,777 ) $ ( 4,804 ) ( 4,777 ) $ ( 4,804 ) ( 40 ) % $ ( 4,804 ) ( 40 ) % 1 % Certain ) ( 40 ) % 1 % Certain corporate-level activity , to our segment . PAGE 28 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2008 compared with II Item 7 Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Corporate-level expense increased during fiscal expense increased during fiscal year 2008 , reflecting increased cost for and legal contingency and a 12 % increase in headcount-related expense expense . We incurred $ 1.8 billion of legal charge during European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) a compared with ) a compared with $ 511 million of legal charge during the year . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Corporate-level expense increased primarily driven contingency . Headcount-related expense increased 25 % , driven by an headcount . We incurred $ 511 million in legal charge during legal charge during fiscal year 2007 , primarily related to antitrust Agreement . We incurred $ 1.3 billion in legal charge during legal charge during fiscal year 2006 which included settlement expense of included settlement expense of $ 361 million related to our settlement antitrust matter , a $ 351 million ( € 281 million $ 351 million ( € 281 million ) fine imposed by the European Commission in July 2006 related to it 2004 decision July 2006 related to it 2004 decision in it competition law million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Cost of revenue 2007 Percentage Change 2007 versus 2006 Cost of revenue $ 11,598 2006 Cost of revenue $ 11,598 $ 10,693 $ 7,650 8 of revenue $ 11,598 $ 10,693 $ 7,650 8 % 40 $ 11,598 $ 10,693 $ 7,650 8 % 40 % As 11,598 $ 10,693 $ 7,650 8 % 40 % As a 10,693 $ 7,650 8 % 40 % As a percent of As a percent of revenue 19 % 21 % 17 % percent of revenue 19 % 21 % 17 % ( 2 revenue 19 % 21 % 17 % ( 2 ) ppt 21 % 17 % ( 2 ) ppt 4 ppt Cost % ( 2 ) ppt 4 ppt Cost of revenue includes revenue increased in fiscal year 2008 , reflecting increased data center partially offset by decreased Xbox 360 cost . Xbox 360 cost Xbox 360 cost . Xbox 360 cost decreased because of the decreased because of the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 ( which primarily related to the expansion of our Xbox 360 warranty coverage ) , partially partially offset by increased Xbox 360 product cost , reflecting growth revenue increased in fiscal year 2007 , primarily driven by the primarily driven by the Xbox 360 warranty charge , increased Windows million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Research and development 2007 Percentage Change 2007 versus 2006 Research and development $ 8,164 2006 Research and development $ 8,164 $ 7,121 $ 6,584 15 and development $ 8,164 $ 7,121 $ 6,584 15 % 8 $ 8,164 $ 7,121 $ 6,584 15 % 8 % As 8,164 $ 7,121 $ 6,584 15 % 8 % As a 7,121 $ 6,584 15 % 8 % As a percent of As a percent of revenue 14 % 14 % 15 % percent of revenue 14 % 14 % 15 % – ppt revenue 14 % 14 % 15 % – ppt ( 1 15 % – ppt ( 1 ) ppt PAGE 29 Table ( 1 ) ppt PAGE 29 Table of Contents Part II of Contents Part II Item 7 Research and development expense include expense increased during fiscal year 2008 reflecting increased headcount-related expense , year . Headcount-related expense increased 12 % during fiscal year 2008 12 % during fiscal year 2008 , reflecting an increase in cost increased during fiscal year 2007 , primarily due to increased increased headcount-related expense which grew 8 % , reflecting growth in million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Sales and marketing 2007 Percentage Change 2007 versus 2006 Sales and marketing $ 13,039 2006 Sales and marketing $ 13,039 $ 11,455 $ 9,818 14 and marketing $ 13,039 $ 11,455 $ 9,818 14 % 17 $ 13,039 $ 11,455 $ 9,818 14 % 17 % As 13,039 $ 11,455 $ 9,818 14 % 17 % As a 11,455 $ 9,818 14 % 17 % As a percent of As a percent of revenue 22 % 22 % 22 % percent of revenue 22 % 22 % 22 % – ppt revenue 22 % 22 % 22 % – ppt – ppt expense increased during fiscal year 2008 , primarily reflecting increased headcount-related campaign . Headcount-related expense increased 14 % during fiscal year 2008 14 % during fiscal year 2008 , reflecting an increase in expense increased during fiscal year 2007 primarily because of increased headcount-related launch . Headcount-related expense increased 22 % during fiscal year 2007 22 % during fiscal year 2007 , driven by an increase million , except percentage ) 2008 2007 2006 Percentage Change 2008 , except percentage ) 2008 2007 2006 Percentage Change 2008 versus except percentage ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 General and administrative 2007 Percentage Change 2007 versus 2006 General and administrative $ 5,127 2006 General and administrative $ 5,127 $ 3,329 $ 3,758 54 and administrative $ 5,127 $ 3,329 $ 3,758 54 % ( $ 5,127 $ 3,329 $ 3,758 54 % ( 11 ) 5,127 $ 3,329 $ 3,758 54 % ( 11 ) % $ 3,758 54 % ( 11 ) % As a percent As a percent of revenue 8 % 7 % 8 % percent of revenue 8 % 7 % 8 % 1 ppt revenue 8 % 7 % 8 % 1 ppt ( 1 % 7 % 8 % 1 ppt ( 1 ) ppt 8 % 1 ppt ( 1 ) ppt General and administrative expense increased during fiscal year 2008 , reflecting increased cost for expense . We incurred $ 1.8 billion of legal charge during legal charge during fiscal year 2008 , primarily related to the European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) a compared with ) a compared with $ 511 million of legal charge during legal charge during fiscal year 2007 . Headcount-related expense increased 7 2007 . Headcount-related expense increased 7 % during fiscal year 2008 7 % during fiscal year 2008 , reflecting an increase in year . During fiscal year 2007 , we incurred $ 511 2007 , we incurred $ 511 million of legal charge primarily Inc. a compared with $ 1.3 billion of legal charge in legal charge in fiscal year 2006 . Headcount-related expense increased 15 2006 . Headcount-related expense increased 15 % during fiscal year 2007 15 % during fiscal year 2007 , driven by an increase during the year . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Investment Income and Other The : ( In million ) 2008 2007 2006 Percentage Change 2008 ( In million ) 2008 2007 2006 Percentage Change 2008 versus In million ) 2008 2007 2006 Percentage Change 2008 versus 2007 2008 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 2006 Percentage Change 2008 versus 2007 Percentage Change 2007 versus 2006 2008 versus 2007 Percentage Change 2007 versus 2006 Dividends and interest 2007 Percentage Change 2007 versus 2006 Dividends and interest $ 888 2006 Dividends and interest $ 888 $ 1,319 $ 1,510 ( and interest $ 888 $ 1,319 $ 1,510 ( 33 ) $ 888 $ 1,319 $ 1,510 ( 33 ) % ( $ 1,319 $ 1,510 ( 33 ) % ( 13 ) ( 33 ) % ( 13 ) % Net recognized gain Net recognized gain on investment 346 650 161 ( 47 ) recognized gain on investment 346 650 161 ( 47 ) % gain on investment 346 650 161 ( 47 ) % 304 investment 346 650 161 ( 47 ) % 304 % Net 161 ( 47 ) % 304 % Net gain ( loss ( loss ) on derivative 226 ( 358 ) ( 99 ) on derivative 226 ( 358 ) ( 99 ) * 226 ( 358 ) ( 99 ) * 262 % Other ) ( 99 ) * 262 % Other ( 138 ) * 262 % Other ( 138 ) ( 34 ) 218 Other ( 138 ) ( 34 ) 218 306 % * 138 ) ( 34 ) 218 306 % * Investment income ) ( 34 ) 218 306 % * Investment income and Investment income and other $ 1,322 $ 1,577 $ 1,790 ( and other $ 1,322 $ 1,577 $ 1,790 ( 16 ) $ 1,322 $ 1,577 $ 1,790 ( 16 ) % ( $ 1,577 $ 1,790 ( 16 ) % ( 12 ) ( 16 ) % ( 12 ) % * Not meaningful * Not meaningful Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Dividends and interest income decreased include other-than-temporary impairment of $ 312 million during fiscal year 2008 312 million during fiscal year 2008 and $ 25 million during fiscal year 2008 and $ 25 million during fiscal year 2007 25 million during fiscal year 2007 , decreased primarily due to derivative . Other of $ 138 million includes the correction of prior period . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Dividends and interest income declined include other-than-temporary impairment of $ 25 million during fiscal year 2007 25 million during fiscal year 2007 and $ 408 million in fiscal year 2007 and $ 408 million in fiscal year 2006 408 million in fiscal year 2006 , increased primarily due to to loss in fiscal year 2006 , partly offset by fewer . Other in fiscal year 2006 includes $ 195 million of fiscal year 2006 includes $ 195 million of gain that resulted other comprehensive income . PAGE 31 Table of Contents Part II of Contents Part II Item 7 Income Taxes Our effective tax tax rate for fiscal year 2008 , 2007 , and 2006 for fiscal year 2008 , 2007 , and 2006 were 26 2008 , 2007 , and 2006 were 26 % , 30 2007 , and 2006 were 26 % , 30 % , 2006 were 26 % , 30 % , and 31 % , 30 % , and 31 % , respectively . Our decreased rate in fiscal year 2008 resulted from resolution of tax IRS ” ) for it 2000-2003 examination . This decline wa European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) , which wa deductible . The fiscal year 2007 rate reflects a recurring effective recurring effective tax rate of 31 % , offset by a , offset by a $ 195 million reduction resulting from various assessment . During fiscal year 2006 , we recorded a tax a tax benefit of $ 108 million from the resolution of recorded a charge of $ 351 million ( € 281 million $ 351 million ( € 281 million ) from the European tax deductible . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted the provision ” ) Interpretation No . 48 ( “ FIN 48 ” . 48 ( “ FIN 48 ” ) Accounting for Uncertainty of FASB Statement No . 109 , which provides a financial tax return . Adopting FIN 48 had the following impact on increased current asset by $ 228 million , long-term asset by , long-term asset by $ 1.1 billion , long-term liability by , long-term liability by $ 2.1 billion , and our retained our retained deficit by $ 395 million ; and decreased our income tax payable by $ 394 million . As of June million . As of June 30 , 2008 , we had As of June 30 , 2008 , we had $ 3.2 2008 , we had $ 3.2 billion of unrecognized tax benefit tax benefit of which $ 2.3 billion , if recognized , rate . As of July 1 , 2007 , we had As of July 1 , 2007 , we had $ 7.1 2007 , we had $ 7.1 billion of unrecognized tax benefit tax benefit of which $ 5.3 billion , if recognized , expense . Interest totaled $ 121 million in fiscal year 2008 121 million in fiscal year 2008 . As of June 30 2008 . As of June 30 , 2008 and July 1 As of June 30 , 2008 and July 1 , 2007 30 , 2008 and July 1 , 2007 , we had 2008 and July 1 , 2007 , we had accrued interest uncertain tax position of $ 324 million and $ 863 million $ 324 million and $ 863 million , respectively , net and short-term investment totaled $ 23.7 billion and $ 23.4 billion $ 23.7 billion and $ 23.4 billion a of June 30 23.4 billion a of June 30 , 2008 and 2007 , a of June 30 , 2008 and 2007 , respectively . June 30 , 2008 and 2007 , respectively . Equity and and other investment were $ 6.6 billion and $ 10.1 billion $ 6.6 billion and $ 10.1 billion a of June 30 10.1 billion a of June 30 , 2008 and 2007 , a of June 30 , 2008 and 2007 , respectively . June 30 , 2008 and 2007 , respectively . Our investment second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 26.6 billion at June 30 , $ 26.6 billion at June 30 , 2008 . Our retained billion at June 30 , 2008 . Our retained deficit is our portfolio a of June 30 , 2008 doe not contain a of June 30 , 2008 doe not contain direct exposure residential mortgage and carry a 100 % principal and interest guarantee billing coverage period . PAGE 32 Table of Contents Part II of Contents Part II Item 7 Undelivered element – Represents free undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price unearned revenue a of June 30 , 2008 : ( In a of June 30 , 2008 : ( In million ) Three month ended : September 30 , 2008 $ 5,120 December ended : September 30 , 2008 $ 5,120 December 31 , September 30 , 2008 $ 5,120 December 31 , 2008 4,033 , 2008 $ 5,120 December 31 , 2008 4,033 March 31 $ 5,120 December 31 , 2008 4,033 March 31 , 2009 5,120 December 31 , 2008 4,033 March 31 , 2009 2,775 31 , 2008 4,033 March 31 , 2009 2,775 June 30 2008 4,033 March 31 , 2009 2,775 June 30 , 2009 4,033 March 31 , 2009 2,775 June 30 , 2009 1,469 31 , 2009 2,775 June 30 , 2009 1,469 Thereafter 1,900 2009 2,775 June 30 , 2009 1,469 Thereafter 1,900 Unearned revenue 2,775 June 30 , 2009 1,469 Thereafter 1,900 Unearned revenue $ 30 , 2009 1,469 Thereafter 1,900 Unearned revenue $ 15,297 Cash Thereafter 1,900 Unearned revenue $ 15,297 Cash Flows Fiscal year 2008 15,297 Cash Flows Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cash flow from operation increased flow from operation increased $ 3.8 billion due to an increase received from customer driven by 18 % revenue growth , partially partially offset by the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) payment of the used for financing decreased $ 11.6 billion primarily due to a primarily due to a $ 15.0 billion decrease in common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 billion for fiscal year 2008 a compared with cash provided with cash provided of $ 6.1 billion for fiscal year 2007 6.1 billion for fiscal year 2007 . This decrease wa primarily primarily due to a $ 6.9 billion increase in cash paid first quarter of fiscal year 2008 , a $ 918 million year 2008 , a $ 918 million increase in purchase of equipment , and a $ 3.1 billion decrease in cash from our settlement related to the 2000-2003 examination , we paid the paid the IRS approximately $ 3.1 billion during the first quarter first quarter of fiscal year 2009 . Fiscal year 2007 compared year 2009 . Fiscal year 2007 compared with fiscal year 2006 2007 compared with fiscal year 2006 Cash flow from operation increased flow from operation increased $ 3.4 billion due to an increase received from customer driven by 15 % revenue growth , along , along with a $ 1.6 billion decrease in cash outflow used for financing increased $ 4.0 billion . Several event occurred event occurred during fiscal year 2007 affecting cash used for financing financing . We issued $ 6.8 billion of common stock , common stock , including $ 3.3 billion related to 113 million $ 3.3 billion related to 113 million call option exercised by exercised by JPMorgan in December 2006 . We also completed our our tender offer on August 17 , 2006 , which wa offer on August 17 , 2006 , which wa included in wa included in the $ 27.6 billion of common stock repurchase Cash from investing decreased $ 1.9 billion due to a $ billion due to a $ 3.5 billion decline in security lending the counterparty along with $ 1.2 billion spent on acquisition of partially offset by a $ 2.8 billion increase in net cash , and maturity . PAGE 33 Table of Contents Part II of Contents Part II Item 7 We have no material long-term Stockholders ’ equity at June 30 , 2008 , wa $ equity at June 30 , 2008 , wa $ 36.3 billion , 2008 , wa $ 36.3 billion . We will continue constructing new building were $ 1.2 billion on June 30 , $ 1.2 billion on June 30 , 2008 . We have billion on June 30 , 2008 . We have operating lease incurred rental expense totaling $ 398 million , $ 325 million $ 398 million , $ 325 million , and $ 271 325 million , and $ 271 million in fiscal year 2008 271 million in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . We have resource . During fiscal year 2008 and 2007 , our Board During fiscal year 2008 and 2007 , our Board of Directors million ) ( Fiscal year 2008 ) September 12 , 2007 Fiscal year 2008 ) September 12 , 2007 $ 0.11 November 2008 ) September 12 , 2007 $ 0.11 November 15 , September 12 , 2007 $ 0.11 November 15 , 2007 $ , 2007 $ 0.11 November 15 , 2007 $ 1,034 December $ 0.11 November 15 , 2007 $ 1,034 December 13 , November 15 , 2007 $ 1,034 December 13 , 2007 December , 2007 $ 1,034 December 13 , 2007 December 19 , $ 1,034 December 13 , 2007 December 19 , 2007 $ December 13 , 2007 December 19 , 2007 $ 0.11 February , 2007 December 19 , 2007 $ 0.11 February 21 , December 19 , 2007 $ 0.11 February 21 , 2008 $ , 2007 $ 0.11 February 21 , 2008 $ 1,023 March $ 0.11 February 21 , 2008 $ 1,023 March 13 , February 21 , 2008 $ 1,023 March 13 , 2008 March , 2008 $ 1,023 March 13 , 2008 March 17 , $ 1,023 March 13 , 2008 March 17 , 2008 $ March 13 , 2008 March 17 , 2008 $ 0.11 May , 2008 March 17 , 2008 $ 0.11 May 15 , March 17 , 2008 $ 0.11 May 15 , 2008 $ , 2008 $ 0.11 May 15 , 2008 $ 1,020 June $ 0.11 May 15 , 2008 $ 1,020 June 12 , May 15 , 2008 $ 1,020 June 12 , 2008 June , 2008 $ 1,020 June 12 , 2008 June 11 , $ 1,020 June 12 , 2008 June 11 , 2008 $ June 12 , 2008 June 11 , 2008 $ 0.11 August , 2008 June 11 , 2008 $ 0.11 August 21 , June 11 , 2008 $ 0.11 August 21 , 2008 $ , 2008 $ 0.11 August 21 , 2008 $ 1,007 September $ 0.11 August 21 , 2008 $ 1,007 September 11 , August 21 , 2008 $ 1,007 September 11 , 2008 ( , 2008 $ 1,007 September 11 , 2008 ( Fiscal year $ 1,007 September 11 , 2008 ( Fiscal year 2007 ) , 2008 ( Fiscal year 2007 ) September 13 , 2006 Fiscal year 2007 ) September 13 , 2006 $ 0.10 November 2007 ) September 13 , 2006 $ 0.10 November 16 , September 13 , 2006 $ 0.10 November 16 , 2006 $ , 2006 $ 0.10 November 16 , 2006 $ 980 December $ 0.10 November 16 , 2006 $ 980 December 14 , November 16 , 2006 $ 980 December 14 , 2006 December , 2006 $ 980 December 14 , 2006 December 20 , $ 980 December 14 , 2006 December 20 , 2006 $ December 14 , 2006 December 20 , 2006 $ 0.10 February , 2006 December 20 , 2006 $ 0.10 February 15 , December 20 , 2006 $ 0.10 February 15 , 2007 $ , 2006 $ 0.10 February 15 , 2007 $ 978 March $ 0.10 February 15 , 2007 $ 978 March 8 , February 15 , 2007 $ 978 March 8 , 2007 March , 2007 $ 978 March 8 , 2007 March 26 , $ 978 March 8 , 2007 March 26 , 2007 $ March 8 , 2007 March 26 , 2007 $ 0.10 May , 2007 March 26 , 2007 $ 0.10 May 17 , March 26 , 2007 $ 0.10 May 17 , 2007 $ , 2007 $ 0.10 May 17 , 2007 $ 952 June $ 0.10 May 17 , 2007 $ 952 June 14 , May 17 , 2007 $ 952 June 14 , 2007 June , 2007 $ 952 June 14 , 2007 June 27 , $ 952 June 14 , 2007 June 27 , 2007 $ June 14 , 2007 June 27 , 2007 $ 0.10 August , 2007 June 27 , 2007 $ 0.10 August 16 , June 27 , 2007 $ 0.10 August 16 , 2007 $ , 2007 $ 0.10 August 16 , 2007 $ 938 September $ 0.10 August 16 , 2007 $ 938 September 13 , August 16 , 2007 $ 938 September 13 , 2007 On , 2007 $ 938 September 13 , 2007 On July 20 $ 938 September 13 , 2007 On July 20 , 2006 13 , 2007 On July 20 , 2006 , we announced 2007 On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30.0 billion in Microsoft common stock stock . During fiscal year 2006 , we repurchased 754 million year 2006 , we repurchased 754 million share , or $ million share , or $ 19.8 billion , of our common this plan . On July 20 , 2006 , we announced . On July 20 , 2006 , we announced that our repurchase program : a $ 20.0 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . As of billion through June 30 , 2011 . As of June 30 2011 . As of June 30 , 2008 , approximately $ As of June 30 , 2008 , approximately $ 2.7 billion , 2008 , approximately $ 2.7 billion remained of the $ billion remained of the $ 36.2 billion approved repurchase amount . indemnification under SFAS No . 5 , Accounting for Contingencies , by FASB Interpretation No . 45 , Guarantor ’ s Accounting our financial statement . PAGE 34 Table of Contents Part II of Contents Part II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2008 : ( In a of June 30 , 2008 : ( In million ) due by period Fiscal Years 2009 2010-2012 2013-2015 2016 and thereafter by period Fiscal Years 2009 2010-2012 2013-2015 2016 and thereafter Total period Fiscal Years 2009 2010-2012 2013-2015 2016 and thereafter Total Long-term Fiscal Years 2009 2010-2012 2013-2015 2016 and thereafter Total Long-term debt $ – Construction commitment ( 1 ) ( 2 ) 1,226 commitment ( 1 ) ( 2 ) 1,226 – – – 1 ) ( 2 ) 1,226 – – – 1,226 Lease ) 1,226 – – – 1,226 Lease obligation : Capital lease obligation : Capital lease – 1 – – 1 Operating lease lease – 1 – – 1 Operating lease ( 3 ) – 1 Operating lease ( 3 ) 440 831 522 415 Operating lease ( 3 ) 440 831 522 415 2,208 Purchase lease ( 3 ) 440 831 522 415 2,208 Purchase commitment ( 3 ) 440 831 522 415 2,208 Purchase commitment ( 3 ) 440 831 522 415 2,208 Purchase commitment ( 2 ) 440 831 522 415 2,208 Purchase commitment ( 2 ) 415 2,208 Purchase commitment ( 2 ) 2,520 5 – – Purchase commitment ( 2 ) 2,520 5 – – 2,525 Other commitment ( 2 ) 2,520 5 – – 2,525 Other long-term ) 2,520 5 – – 2,525 Other long-term liability ( 4 2,525 Other long-term liability ( 4 ) 196 105 – – long-term liability ( 4 ) 196 105 – – 301 Total liability ( 4 ) 196 105 – – 301 Total contractual ) 196 105 – – 301 Total contractual obligation ( 5 301 Total contractual obligation ( 5 ) $ 4,382 $ 942 obligation ( 5 ) $ 4,382 $ 942 $ 522 $ 5 ) $ 4,382 $ 942 $ 522 $ 415 $ $ 4,382 $ 942 $ 522 $ 415 $ 6,261 ( $ 942 $ 522 $ 415 $ 6,261 ( 1 ) $ 522 $ 415 $ 6,261 ( 1 ) We have $ 415 $ 6,261 ( 1 ) We have certain commitment flow from operation . ( 2 ) The amount presented a flow from operation . ( 3 ) Our future minimum rental flow from operation . ( 4 ) We have excluded long-term other tax liability of $ 3.8 billion and other long-term contingent contingent liability of approximately $ 500 million ( related to the excluded non-cash item of $ 77 million and unearned revenue of and unearned revenue of $ 1.9 billion . ( 5 ) $ 1.9 billion . ( 5 ) We have excluded $ ) We have excluded $ 3.1 billion of current tax payable first quarter of fiscal year 2009 a a result of our our settlement related to the 2000-2003 examination . RECENTLY ISSUED ACCOUNTING Adopted Accounting Pronouncements On July 1 , 2007 , we adopted Pronouncements On July 1 , 2007 , we adopted FIN 48 2007 , we adopted FIN 48 which provides a financial statement tax return . Under FIN 48 , we may recognize the that ha a greater than 50 % likelihood of being realized upon ultimate settlement . FIN 48 also provides guidance on derecognition , we recognized a $ 395 million charge to our beginning accounting principle . See Note 11 – Income Taxes of the ( Part II , Item 8 ) . On July 1 8 ) . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted Emerging Issues Task Force Issue No . 06-2 ( “ EITF 06-2 ” . 06-2 ( “ EITF 06-2 ” ) , Accounting for to FASB Statement No . 43 . EITF 06-2 requires company No . 43 . EITF 06-2 requires company to accrue the , we recognized a $ 17 million charge to our beginning in accounting principle . PAGE 35 Table of Contents Part II of Contents Part II Item 7 Recent Accounting Pronouncements Not Yet Not Yet Adopted In March 2008 , the FASB issued SFAS FASB issued SFAS No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 , which requires additional disclosure instrument under SFAS No . 133 and it related interpretation , flow . SFAS No . 161 is effective for u beginning effective for u beginning January 1 , 2009 . We are u beginning January 1 , 2009 . We are currently assessing adoption of SFAS No . 161 may have on our financial financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141R , Business Combinations , which which replaces SFAS No . 141 . The statement retains the incurred . SFAS No . 141R is effective for u beginning effective for u beginning July 1 , 2009 and will apply u beginning July 1 , 2009 and will apply prospectively to that date . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 160 , Noncontrolling Interests in Consolidated amendment of ARB No . 51 , which change the accounting earnings . SFAS No . 160 is effective for u beginning effective for u beginning July 1 , 2009 and will apply u beginning July 1 , 2009 and will apply prospectively , adoption of SFAS No . 160 may have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 . We do u beginning July 1 , 2008 . We do not believe not believe SFAS No . 159 will have a material impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( “ FSP ” ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for all nonfinancial asset and ) . SFAS No . 157 is effective for u beginning effective for u beginning July 1 , 2008 ; FSP 157-2 u beginning July 1 , 2008 ; FSP 157-2 delay the 1 , 2008 ; FSP 157-2 delay the effective date for for certain item to July 1 , 2009 . We do item to July 1 , 2009 . We do not believe not believe SFAS No . 157 will have a material impact ( “ SOP ” ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether , customer receive certain PAGE 36 Table of Contents Part II of Contents Part II Item 7 element of our product over product . SFAS No . 115 , Accounting for Certain Investments and Staff Accounting Bulletin Topic 5M , Accounting for Noncurrent Marketable impairment . SFAS No . 142 , Goodwill and Other Intangible an annual basis ( July 1 for u ) and between , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Accounting for the Costs Marketed . SFAS No . 86 specifies that cost incurred internally uncertainty . SFAS No . 5 , Accounting for Contingencies , our cash flow . PAGE 37 Table of Contents Part II of Contents Part II Item 7 SFAS No . 109 , Item 7 SFAS No . 109 , Accounting for Income Taxes with the requirement of FIN 48 . Under FIN 48 , FIN 48 . Under FIN 48 , we may recognize the that ha a greater than 50 % likelihood of being realized upon ultimate settlement . FIN 48 also provides guidance on derecognition accordance with SFAS No . 123 ( R ) , Share-Based accordance with SFAS No . 5 , Accounting for Contingencies . a period generally ranging from 90 day to three year . amount a necessary . PAGE 38 Table of Contents Part II of Contents Part II Item 7 Statement of Management ’ s ; Chief Accounting Officer PAGE 39 Table of Contents Part II of Contents Part II Item 7A ITEM 7A . QUANTITATIVE AND Part II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES to a range of over 1,000 equity , fixed-income , foreign not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor for the year ended June 30 , 2008 and 2007 : year ended June 30 , 2008 and 2007 : ( In June 30 , 2008 and 2007 : ( In million ) million ) Year ended June 30 , 2008 Risk Categories June Year ended June 30 , 2008 Risk Categories June 30 , , 2008 Risk Categories June 30 , 2008 June 30 , Risk Categories June 30 , 2008 June 30 , 2007 Average June 30 , 2008 June 30 , 2007 Average High Low , 2008 June 30 , 2007 Average High Low Interest rate High Low Interest rate $ 34 $ 34 $ 32 $ Interest rate $ 34 $ 34 $ 32 $ 37 $ $ 34 $ 34 $ 32 $ 37 $ 25 Currency $ 34 $ 32 $ 37 $ 25 Currency rate 100 $ 32 $ 37 $ 25 Currency rate 100 55 93 37 $ 25 Currency rate 100 55 93 145 60 Equity $ 25 Currency rate 100 55 93 145 60 Equity price 25 Currency rate 100 55 93 145 60 Equity price 45 Currency rate 100 55 93 145 60 Equity price 45 60 rate 100 55 93 145 60 Equity price 45 60 54 93 145 60 Equity price 45 60 54 60 44 Commodity 145 60 Equity price 45 60 54 60 44 Commodity price 60 Equity price 45 60 54 60 44 Commodity price 7 Equity price 45 60 54 60 44 Commodity price 7 7 price 45 60 54 60 44 Commodity price 7 7 6 54 60 44 Commodity price 7 7 6 7 4 Total 60 44 Commodity price 7 7 6 7 4 Total one-day 44 Commodity price 7 7 6 7 4 Total one-day VaR Commodity price 7 7 6 7 4 Total one-day VaR for price 7 7 6 7 4 Total one-day VaR for the combined risk category wa $ 123 million at June 30 , $ 123 million at June 30 , 2008 and $ 95 million at June 30 , 2008 and $ 95 million at 30 , 2008 and $ 95 million at June 30 , $ 95 million at June 30 , 2007 . The total million at June 30 , 2007 . The total VaR is . The total VaR is 34 % le at June 30 34 % le at June 30 , 2008 , and 39 le at June 30 , 2008 , and 39 % le 30 , 2008 , and 39 % le at June 30 39 % le at June 30 , 2007 , than the le at June 30 , 2007 , than the sum of the overall portfolio . PAGE 40 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2008 2007 2006 Revenue Year Ended June 30 , 2008 2007 2006 Revenue $ 60,420 Ended June 30 , 2008 2007 2006 Revenue $ 60,420 $ June 30 , 2008 2007 2006 Revenue $ 60,420 $ 51,122 2008 2007 2006 Revenue $ 60,420 $ 51,122 $ 44,282 Operating 2006 Revenue $ 60,420 $ 51,122 $ 44,282 Operating expense : $ 60,420 $ 51,122 $ 44,282 Operating expense : Cost of expense : Cost of revenue 11,598 10,693 7,650 Research and development : Cost of revenue 11,598 10,693 7,650 Research and development 8,164 Cost of revenue 11,598 10,693 7,650 Research and development 8,164 7,121 10,693 7,650 Research and development 8,164 7,121 6,584 Sales and marketing 7,650 Research and development 8,164 7,121 6,584 Sales and marketing 13,039 Research and development 8,164 7,121 6,584 Sales and marketing 13,039 11,455 7,121 6,584 Sales and marketing 13,039 11,455 9,818 General and administrative 6,584 Sales and marketing 13,039 11,455 9,818 General and administrative 5,127 Sales and marketing 13,039 11,455 9,818 General and administrative 5,127 3,329 11,455 9,818 General and administrative 5,127 3,329 3,758 Total operating expense 9,818 General and administrative 5,127 3,329 3,758 Total operating expense 37,928 General and administrative 5,127 3,329 3,758 Total operating expense 37,928 32,598 3,329 3,758 Total operating expense 37,928 32,598 27,810 Operating income 22,492 3,758 Total operating expense 37,928 32,598 27,810 Operating income 22,492 18,524 Total operating expense 37,928 32,598 27,810 Operating income 22,492 18,524 16,472 37,928 32,598 27,810 Operating income 22,492 18,524 16,472 Investment income and 32,598 27,810 Operating income 22,492 18,524 16,472 Investment income and other 27,810 Operating income 22,492 18,524 16,472 Investment income and other 1,322 16,472 Investment income and other 1,322 1,577 1,790 Income before income Investment income and other 1,322 1,577 1,790 Income before income tax income and other 1,322 1,577 1,790 Income before income tax 23,814 1,790 Income before income tax 23,814 20,101 18,262 Provision for income Income before income tax 23,814 20,101 18,262 Provision for income tax before income tax 23,814 20,101 18,262 Provision for income tax 6,133 18,262 Provision for income tax 6,133 6,036 5,663 Net income $ Provision for income tax 6,133 6,036 5,663 Net income $ 17,681 for income tax 6,133 6,036 5,663 Net income $ 17,681 $ 6,036 5,663 Net income $ 17,681 $ 14,065 $ 12,599 Earnings Net income $ 17,681 $ 14,065 $ 12,599 Earnings per share $ 17,681 $ 14,065 $ 12,599 Earnings per share : Basic per share : Basic $ 1.90 $ 1.44 $ 1.21 Diluted : Basic $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.90 $ 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 1.44 $ 1.21 Diluted $ 1.87 $ 1.42 $ 1.20 Weighted 1.21 Diluted $ 1.87 $ 1.42 $ 1.20 Weighted average share $ 1.87 $ 1.42 $ 1.20 Weighted average share outstanding : average share outstanding : Basic 9,328 9,742 10,438 Diluted 9,470 9,886 share outstanding : Basic 9,328 9,742 10,438 Diluted 9,470 9,886 10,531 outstanding : Basic 9,328 9,742 10,438 Diluted 9,470 9,886 10,531 Cash Basic 9,328 9,742 10,438 Diluted 9,470 9,886 10,531 Cash dividend declared 9,328 9,742 10,438 Diluted 9,470 9,886 10,531 Cash dividend declared per 9,742 10,438 Diluted 9,470 9,886 10,531 Cash dividend declared per common declared per common share $ 0.44 $ 0.40 $ 0.35 See common share $ 0.44 $ 0.40 $ 0.35 See accompanying note $ 0.44 $ 0.40 $ 0.35 See accompanying note . PAGE See accompanying note . PAGE 41 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2008 2007 Assets Current million ) June 30 , 2008 2007 Assets Current asset : ) June 30 , 2008 2007 Assets Current asset : Cash Cash and cash equivalent $ 10,339 $ 6,111 Short-term investment ( cash equivalent $ 10,339 $ 6,111 Short-term investment ( including security pledged a collateral of $ 2,491 and $ 2,356 ) 13,323 of $ 2,491 and $ 2,356 ) 13,323 17,300 Total cash 2,491 and $ 2,356 ) 13,323 17,300 Total cash , cash and $ 2,356 ) 13,323 17,300 Total cash , cash equivalent equivalent , and short-term investment 23,662 23,411 Accounts receivable , net , and short-term investment 23,662 23,411 Accounts receivable , net of for doubtful account of $ 153 and $ 117 13,589 11,338 of $ 153 and $ 117 13,589 11,338 Inventories 985 1,127 $ 153 and $ 117 13,589 11,338 Inventories 985 1,127 Deferred 153 and $ 117 13,589 11,338 Inventories 985 1,127 Deferred income $ 117 13,589 11,338 Inventories 985 1,127 Deferred income tax 2,017 117 13,589 11,338 Inventories 985 1,127 Deferred income tax 2,017 1,899 985 1,127 Deferred income tax 2,017 1,899 Other 2,989 2,393 Total 1,127 Deferred income tax 2,017 1,899 Other 2,989 2,393 Total current income tax 2,017 1,899 Other 2,989 2,393 Total current asset 43,242 tax 2,017 1,899 Other 2,989 2,393 Total current asset 43,242 40,168 2,989 2,393 Total current asset 43,242 40,168 Property and equipment , 2,393 Total current asset 43,242 40,168 Property and equipment , net of accumulated depreciation of $ 6,302 and $ 5,016 6,242 4,350 of $ 6,302 and $ 5,016 6,242 4,350 Equity and other $ 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,302 and $ 5,016 6,242 4,350 Equity and other investment 6,588 4,350 Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible Equity and other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset other investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset , net investment 6,588 10,117 Goodwill 12,108 4,760 Intangible asset , net 1,973 4,760 Intangible asset , net 1,973 878 Deferred income tax 949 Intangible asset , net 1,973 878 Deferred income tax 949 1,389 1,973 878 Deferred income tax 949 1,389 Other long-term asset 1,691 878 Deferred income tax 949 1,389 Other long-term asset 1,691 1,509 949 1,389 Other long-term asset 1,691 1,509 Total asset $ 72,793 1,389 Other long-term asset 1,691 1,509 Total asset $ 72,793 $ 1,691 1,509 Total asset $ 72,793 $ 63,171 Liabilities and stockholder Total asset $ 72,793 $ 63,171 Liabilities and stockholder ’ equity liability : Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 Accounts payable $ 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income 4,034 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 $ 3,247 Accrued compensation 2,934 2,325 Income tax 3,248 1,040 Short-term compensation 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 2,934 2,325 Income tax 3,248 1,040 Short-term unearned revenue 13,397 10,779 3,248 1,040 Short-term unearned revenue 13,397 10,779 Securities lending payable 2,614 1,040 Short-term unearned revenue 13,397 10,779 Securities lending payable 2,614 2,741 13,397 10,779 Securities lending payable 2,614 2,741 Other 3,659 3,622 Total 10,779 Securities lending payable 2,614 2,741 Other 3,659 3,622 Total current lending payable 2,614 2,741 Other 3,659 3,622 Total current liability 29,886 payable 2,614 2,741 Other 3,659 3,622 Total current liability 29,886 23,754 3,659 3,622 Total current liability 29,886 23,754 Long-term unearned revenue 1,900 3,622 Total current liability 29,886 23,754 Long-term unearned revenue 1,900 1,867 29,886 23,754 Long-term unearned revenue 1,900 1,867 Other long-term liability 4,721 23,754 Long-term unearned revenue 1,900 1,867 Other long-term liability 4,721 6,453 1,900 1,867 Other long-term liability 4,721 6,453 Commitments and contingency Stockholders 1,867 Other long-term liability 4,721 6,453 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 9,151 and 9,380 share authorized 24,000 ; outstanding 9,151 and 9,380 62,849 60,557 Retained 24,000 ; outstanding 9,151 and 9,380 62,849 60,557 Retained deficit , ; outstanding 9,151 and 9,380 62,849 60,557 Retained deficit , including outstanding 9,151 and 9,380 62,849 60,557 Retained deficit , including accumulated other comprehensive income of $ 1,140 and $ 1,654 ( 26,563 of $ 1,140 and $ 1,654 ( 26,563 ) ( 29,460 1,140 and $ 1,654 ( 26,563 ) ( 29,460 ) Total 1,654 ( 26,563 ) ( 29,460 ) Total stockholder ’ equity ) Total stockholder ’ equity 36,286 31,097 Total liability and stockholder Total stockholder ’ equity 36,286 31,097 Total liability and stockholder ’ and stockholder ’ equity $ 72,793 $ 63,171 See accompanying note ’ equity $ 72,793 $ 63,171 See accompanying note . PAGE See accompanying note . PAGE 42 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2008 2007 2006 Operations Year Ended June 30 , 2008 2007 2006 Operations Net income Ended June 30 , 2008 2007 2006 Operations Net income $ June 30 , 2008 2007 2006 Operations Net income $ 17,681 2006 Operations Net income $ 17,681 $ 14,065 $ 12,599 Depreciation Net income $ 17,681 $ 14,065 $ 12,599 Depreciation , amortization $ 17,681 $ 14,065 $ 12,599 Depreciation , amortization , and , and other noncash item 2,056 1,440 903 Stock-based compensation 1,479 and other noncash item 2,056 1,440 903 Stock-based compensation 1,479 1,550 other noncash item 2,056 1,440 903 Stock-based compensation 1,479 1,550 1,715 2,056 1,440 903 Stock-based compensation 1,479 1,550 1,715 Net recognized gain 1,440 903 Stock-based compensation 1,479 1,550 1,715 Net recognized gain on 903 Stock-based compensation 1,479 1,550 1,715 Net recognized gain on investment recognized gain on investment ( 572 ) ( 292 ) ( investment ( 572 ) ( 292 ) ( 270 ) Excess ) ( 292 ) ( 270 ) Excess tax benefit from from stock-based payment arrangement ( 120 ) ( 77 ) ( arrangement ( 120 ) ( 77 ) ( 89 ) Deferred ) ( 77 ) ( 89 ) Deferred income tax 935 89 ) Deferred income tax 935 421 219 Unearned revenue 24,532 ) Deferred income tax 935 421 219 Unearned revenue 24,532 21,032 Deferred income tax 935 421 219 Unearned revenue 24,532 21,032 16,453 935 421 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned 421 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned revenue 219 Unearned revenue 24,532 21,032 16,453 Recognition of unearned revenue ( Recognition of unearned revenue ( 21,944 ) ( 19,382 ) ( revenue ( 21,944 ) ( 19,382 ) ( 14,729 ) Accounts ) ( 19,382 ) ( 14,729 ) Accounts receivable ( 1,569 14,729 ) Accounts receivable ( 1,569 ) ( 1,764 ) ( receivable ( 1,569 ) ( 1,764 ) ( 2,071 ) Other ) ( 1,764 ) ( 2,071 ) Other current asset 153 2,071 ) Other current asset 153 232 ( 1,405 ) Other ) Other current asset 153 232 ( 1,405 ) Other long-term current asset 153 232 ( 1,405 ) Other long-term asset ( ) Other long-term asset ( 98 ) ( 435 ) ( asset ( 98 ) ( 435 ) ( 49 ) Other ) ( 435 ) ( 49 ) Other current liability ( ) Other current liability ( 748 ) ( 552 ) ( liability ( 748 ) ( 552 ) ( 145 ) Other ) ( 552 ) ( 145 ) Other long-term liability ( ) Other long-term liability ( 173 ) 1,558 1,273 Net cash long-term liability ( 173 ) 1,558 1,273 Net cash from operation liability ( 173 ) 1,558 1,273 Net cash from operation 21,612 1,273 Net cash from operation 21,612 17,796 14,404 Financing Common stock Net cash from operation 21,612 17,796 14,404 Financing Common stock issued cash from operation 21,612 17,796 14,404 Financing Common stock issued 3,494 14,404 Financing Common stock issued 3,494 6,782 2,101 Common stock repurchased Financing Common stock issued 3,494 6,782 2,101 Common stock repurchased ( Common stock issued 3,494 6,782 2,101 Common stock repurchased ( 12,533 2,101 Common stock repurchased ( 12,533 ) ( 27,575 ) ( repurchased ( 12,533 ) ( 27,575 ) ( 19,207 ) Common ) ( 27,575 ) ( 19,207 ) Common stock cash dividend Common stock cash dividend ( 4,015 ) ( 3,805 ) ( dividend ( 4,015 ) ( 3,805 ) ( 3,545 ) Excess ) ( 3,805 ) ( 3,545 ) Excess tax benefit from benefit from stock-based payment arrangement 120 77 89 Other – ( from stock-based payment arrangement 120 77 89 Other – ( 23 stock-based payment arrangement 120 77 89 Other – ( 23 ) 77 89 Other – ( 23 ) – Net cash used cash used in financing ( 12,934 ) ( 24,544 ) ( financing ( 12,934 ) ( 24,544 ) ( 20,562 ) Investing ) ( 24,544 ) ( 20,562 ) Investing Additions to property to property and equipment ( 3,182 ) ( 2,264 ) ( equipment ( 3,182 ) ( 2,264 ) ( 1,578 ) Acquisition ) ( 2,264 ) ( 1,578 ) Acquisition of company , net of cash acquired ( 8,053 ) ( 1,150 ) ( acquired ( 8,053 ) ( 1,150 ) ( 649 ) Purchases ) ( 1,150 ) ( 649 ) Purchases of investment ( ) Purchases of investment ( 20,954 ) ( 36,308 ) ( investment ( 20,954 ) ( 36,308 ) ( 51,117 ) Maturities ) ( 36,308 ) ( 51,117 ) Maturities of investment 2,597 51,117 ) Maturities of investment 2,597 4,736 3,877 Sales of investment ) Maturities of investment 2,597 4,736 3,877 Sales of investment 25,132 Maturities of investment 2,597 4,736 3,877 Sales of investment 25,132 41,451 4,736 3,877 Sales of investment 25,132 41,451 54,353 Securities lending payable 3,877 Sales of investment 25,132 41,451 54,353 Securities lending payable ( Sales of investment 25,132 41,451 54,353 Securities lending payable ( 127 54,353 Securities lending payable ( 127 ) ( 376 ) 3,117 payable ( 127 ) ( 376 ) 3,117 Net cash from 127 ) ( 376 ) 3,117 Net cash from ( used used in ) investing ( 4,587 ) 6,089 8,003 Effect of ) investing ( 4,587 ) 6,089 8,003 Effect of exchange rate investing ( 4,587 ) 6,089 8,003 Effect of exchange rate on on cash and cash equivalent 137 56 18 Net change in cash and cash equivalent 137 56 18 Net change in cash and cash equivalent 137 56 18 Net change in cash and in cash and cash equivalent 4,228 ( 603 ) 1,863 Cash and cash equivalent 4,228 ( 603 ) 1,863 Cash and cash equivalent 4,228 ( 603 ) 1,863 Cash and cash equivalent , equivalent , beginning of period 6,111 6,714 4,851 Cash and cash , beginning of period 6,111 6,714 4,851 Cash and cash equivalent beginning of period 6,111 6,714 4,851 Cash and cash equivalent , , end of period $ 10,339 $ 6,111 $ 6,714 See of period $ 10,339 $ 6,111 $ 6,714 See accompanying note $ 10,339 $ 6,111 $ 6,714 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2008 2007 2006 Common Year Ended June 30 , 2008 2007 2006 Common stock and Ended June 30 , 2008 2007 2006 Common stock and paid-in June 30 , 2008 2007 2006 Common stock and paid-in capital , beginning of period $ 60,557 $ 59,005 $ 60,413 Common of period $ 60,557 $ 59,005 $ 60,413 Common stock issued $ 60,557 $ 59,005 $ 60,413 Common stock issued 3,504 6,783 $ 60,413 Common stock issued 3,504 6,783 1,939 Common stock repurchased 60,413 Common stock issued 3,504 6,783 1,939 Common stock repurchased ( Common stock issued 3,504 6,783 1,939 Common stock repurchased ( 3,022 1,939 Common stock repurchased ( 3,022 ) ( 6,162 ) ( repurchased ( 3,022 ) ( 6,162 ) ( 4,447 ) Stock-based ) ( 6,162 ) ( 4,447 ) Stock-based compensation expense 1,479 4,447 ) Stock-based compensation expense 1,479 1,550 1,715 Stock option income ) Stock-based compensation expense 1,479 1,550 1,715 Stock option income tax Stock-based compensation expense 1,479 1,550 1,715 Stock option income tax benefit tax benefit ( deficiency ) 253 ( 661 ) ( 617 ( deficiency ) 253 ( 661 ) ( 617 ) Other 253 ( 661 ) ( 617 ) Other , net 78 617 ) Other , net 78 42 2 Balance , end ) Other , net 78 42 2 Balance , end of Other , net 78 42 2 Balance , end of period Balance , end of period 62,849 60,557 59,005 Retained earnings ( , end of period 62,849 60,557 59,005 Retained earnings ( deficit end of period 62,849 60,557 59,005 Retained earnings ( deficit ) , beginning of period ( 29,460 ) ( 18,901 ) ( period ( 29,460 ) ( 18,901 ) ( 12,298 ) Cumulative ) ( 18,901 ) ( 12,298 ) Cumulative effect of a principle – adoption of FIN 48 ( 1 ) ( 395 adoption of FIN 48 ( 1 ) ( 395 ) – 48 ( 1 ) ( 395 ) – – Cumulative effect principle – adoption of EITF 06-2 ( 1 ) ( 17 adoption of EITF 06-2 ( 1 ) ( 17 ) – 06-2 ( 1 ) ( 17 ) – – Net income ) – – Net income 17,681 14,065 12,599 Other comprehensive income – – Net income 17,681 14,065 12,599 Other comprehensive income : – Net income 17,681 14,065 12,599 Other comprehensive income : Net unrealized gain on derivative instrument 18 14 76 Net unrealized gain gain on derivative instrument 18 14 76 Net unrealized gain ( on derivative instrument 18 14 76 Net unrealized gain ( loss loss ) on investment ( 653 ) 326 ( 282 ) on investment ( 653 ) 326 ( 282 ) Translation adjustment ( 653 ) 326 ( 282 ) Translation adjustment and other ) Translation adjustment and other 121 85 9 Comprehensive income 17,167 Translation adjustment and other 121 85 9 Comprehensive income 17,167 14,490 adjustment and other 121 85 9 Comprehensive income 17,167 14,490 12,402 121 85 9 Comprehensive income 17,167 14,490 12,402 Common stock cash 85 9 Comprehensive income 17,167 14,490 12,402 Common stock cash dividend 9 Comprehensive income 17,167 14,490 12,402 Common stock cash dividend ( Common stock cash dividend ( 4,084 ) ( 3,837 ) ( dividend ( 4,084 ) ( 3,837 ) ( 3,594 ) Common ) ( 3,837 ) ( 3,594 ) Common stock repurchased ( ) Common stock repurchased ( 9,774 ) ( 21,212 ) ( repurchased ( 9,774 ) ( 21,212 ) ( 15,411 ) Balance ) ( 21,212 ) ( 15,411 ) Balance , end of , end of period ( 26,563 ) ( 29,460 ) ( period ( 26,563 ) ( 29,460 ) ( 18,901 ) Total ) ( 29,460 ) ( 18,901 ) Total stockholder ’ equity Total stockholder ’ equity $ 36,286 $ 31,097 $ 40,104 ( ’ equity $ 36,286 $ 31,097 $ 40,104 ( 1 ) $ 36,286 $ 31,097 $ 40,104 ( 1 ) See Note $ 31,097 $ 40,104 ( 1 ) See Note 1 of ( 1 ) See Note 1 of Notes to Financial Statements See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The , other multi-year licensing PAGE 45 Table of Contents Part II of Contents Part II Item 8 arrangement include a perpetual license . Advertising expense wa $ 1.2 billion , $ 1.3 billion $ 1.2 billion , $ 1.3 billion , and $ 1.2 1.3 billion , and $ 1.2 billion in fiscal year 2008 1.2 billion in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . PRODUCT WARRANTY a period generally ranging from 90 day to three year . amount a necessary . PAGE 46 Table of Contents Part II of Contents Part II Item 8 STOCK-BASED COMPENSATION We account for accordance with SFAS No . 123 ( R ) , Share-Based recognized in earnings . PAGE 47 Table of Contents Part II of Contents Part II Item 8 Foreign Currency Risk . Certain SFAS ” ) No . 133 , Accounting for Derivative Instruments instrument under SFAS No . 133 . Certain option and forward instrument under SFAS No . 133 are also used to hedge instrument under SFAS No . 133 , are also used to instrument under SFAS No . 133 , to hedge interest rate instrument under SFAS No . 133 , are used to manage : ( In million ) 2008 2007 2006 Year Ended June ( In million ) 2008 2007 2006 Year Ended June 30 In million ) 2008 2007 2006 Year Ended June 30 , 2007 2006 Year Ended June 30 , Balance , beginning of , beginning of period $ 117 $ 142 $ 171 Charged of period $ 117 $ 142 $ 171 Charged to cost $ 117 $ 142 $ 171 Charged to cost and expense Charged to cost and expense 88 64 40 Write-offs and other to cost and expense 88 64 40 Write-offs and other ( cost and expense 88 64 40 Write-offs and other ( 52 40 Write-offs and other ( 52 ) ( 89 ) ( other ( 52 ) ( 89 ) ( 69 ) Balance ) ( 89 ) ( 69 ) Balance , end of , end of period $ 153 $ 117 $ 142 INVENTORIES of period $ 153 $ 117 $ 142 INVENTORIES Inventories are $ 153 $ 117 $ 142 INVENTORIES Inventories are stated at new cost basis . PAGE 48 Table of Contents Part II of Contents Part II Item 8 PROPERTY AND EQUIPMENT Property and , ranging from one to 15 year . Computer software developed annual basis a of July 1 , and between annual test Adopted Accounting Pronouncements On July 1 , 2007 , we adopted Pronouncements On July 1 , 2007 , we adopted the provision ” ) Interpretation No . 48 ( “ FIN 48 ” . 48 ( “ FIN 48 ” ) , Accounting for of FASB Statement No . 109 , which provides a financial tax return . Under FIN 48 , we may recognize the that ha a greater than 50 % likelihood of being realized upon ultimate settlement . FIN 48 also provides guidance on derecognition , we recognized a $ 395 million charge to our beginning accounting principle . See Note 11 – Income Taxes . On Income Taxes . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted Emerging Issues Task Force Issue No . 06-2 ( “ EITF 06-2 ” . 06-2 ( “ EITF 06-2 ” ) , Accounting for to FASB Statement No . 43 . EITF 06-2 requires company No . 43 . EITF 06-2 requires company to accrue the , we recognized a $ 17 million charge to our beginning Not Yet Adopted In March 2008 , the FASB issued SFAS FASB issued SFAS No . 161 , Disclosures about Derivative Instruments , an amendment of FAS 133 , which requires additional disclosure instrument under SFAS No . 133 and it related interpretation , flow . SFAS No . 161 is effective for u beginning effective for u beginning January 1 , 2009 . We are u beginning January 1 , 2009 . We are currently assessing adoption of SFAS No . 161 may have on our financial financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141R , Business Combinations , which , which replaces SFAS No 141 . The statement retains the incurred . SFAS No . 141R is effective for u beginning effective for u beginning July 1 , 2009 and will apply u beginning July 1 , 2009 and will apply prospectively to after that date . PAGE 49 Table of Contents Part II of Contents Part II Item 8 In December 2007 , the II Item 8 In December 2007 , the FASB issued SFAS FASB issued SFAS No . 160 , Noncontrolling Interests in Consolidated , an amendment of ARB 51 , which change the accounting earnings . SFAS No . 160 is effective for u beginning effective for u beginning July 1 , 2009 and will apply u beginning July 1 , 2009 and will apply prospectively , adoption of SFAS No . 160 may have on our financial financial statement . In February 2007 , the FASB issued SFAS FASB issued SFAS No . 159 , The Fair Value Option Liabilities . SFAS No . 159 give u the irrevocable option earnings . SFAS No . 159 is effective for u beginning effective for u beginning July 1 , 2008 . We do u beginning July 1 , 2008 . We do not believe not believe SFAS No . 159 will have a material impact financial statement . In September 2006 , the FASB issued SFAS FASB issued SFAS No . 157 , Fair Value Measurements , the information . In February 2008 , the FASB issued FASB ( “ FSP ” ) 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for all nonfinancial asset and ) . SFAS No . 157 is effective for u beginning effective for u beginning July 1 , 2008 ; FSP 157-2 u beginning July 1 , 2008 ; FSP 157-2 delay the 1 , 2008 ; FSP 157-2 delay the effective date for for certain item to July 1 , 2009 . We do item to July 1 , 2009 . We do not believe not believe SFAS No . 157 will have a material impact our financial statement . NOTE 2 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 , 2008 2007 2006 Net Year Ended June 30 , 2008 2007 2006 Net income available Ended June 30 , 2008 2007 2006 Net income available for June 30 , 2008 2007 2006 Net income available for common shareholder ( A ) $ 17,681 $ 14,065 $ 12,599 Weighted A ) $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding $ 17,681 $ 14,065 $ 12,599 Weighted average outstanding share of common stock ( B ) 9,328 9,742 10,438 Dilutive effect of stock ( B ) 9,328 9,742 10,438 Dilutive effect of employee ( B ) 9,328 9,742 10,438 Dilutive effect of employee stock employee stock option and award 142 144 93 Common stock and stock option and award 142 144 93 Common stock and common option and award 142 144 93 Common stock and common stock stock equivalent ( C ) 9,470 9,886 10,531 Earnings per share equivalent ( C ) 9,470 9,886 10,531 Earnings per share : ( C ) 9,470 9,886 10,531 Earnings per share : Basic Basic ( A/B ) $ 1.90 $ 1.44 $ 1.21 Diluted A/B ) $ 1.90 $ 1.44 $ 1.21 Diluted ( A/C $ 1.90 $ 1.44 $ 1.21 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.87 $ 1.42 $ 1.20 For A/C ) $ 1.87 $ 1.42 $ 1.20 For the year $ 1.87 $ 1.42 $ 1.20 For the year ended June For the year ended June 30 , 2008 , 2007 and year ended June 30 , 2008 , 2007 and 2006 , June 30 , 2008 , 2007 and 2006 , 91 million , 2008 , 2007 and 2006 , 91 million , 199 , 2007 and 2006 , 91 million , 199 million , 2006 , 91 million , 199 million , and 649 million , 199 million , and 649 million share , respectively , For the year ended June 30 , 2007 , four million year ended June 30 , 2007 , four million shared performance award , out of the 14 million targeted amount outstanding , , a discussed in Note 18 – Employee Stock and Savings and Savings Plans . PAGE 50 Table of Contents Part II of Contents Part II Item 8 NOTE 3 INVESTMENT INCOME AND Part II Item 8 NOTE 3 INVESTMENT INCOME AND OTHER The million ) Year Ended June 30 , 2008 2007 2006 Dividends Year Ended June 30 , 2008 2007 2006 Dividends and interest Ended June 30 , 2008 2007 2006 Dividends and interest $ June 30 , 2008 2007 2006 Dividends and interest $ 888 2006 Dividends and interest $ 888 $ 1,319 $ 1,510 Net and interest $ 888 $ 1,319 $ 1,510 Net recognized gain $ 888 $ 1,319 $ 1,510 Net recognized gain on investment Net recognized gain on investment 346 650 161 Net gain ( recognized gain on investment 346 650 161 Net gain ( loss gain on investment 346 650 161 Net gain ( loss ) ( loss ) on derivative 226 ( 358 ) ( 99 ) on derivative 226 ( 358 ) ( 99 ) Other 226 ( 358 ) ( 99 ) Other ( 138 ) ( 99 ) Other ( 138 ) ( 34 ) 218 Other ( 138 ) ( 34 ) 218 Investment income and 138 ) ( 34 ) 218 Investment income and other $ Investment income and other $ 1,322 $ 1,577 $ 1,790 Net and other $ 1,322 $ 1,577 $ 1,790 Net gain on $ 1,322 $ 1,577 $ 1,790 Net gain on investment included included other-than-temporary impairment of $ 312 million , $ 25 million $ 312 million , $ 25 million , and $ 408 25 million , and $ 408 million in fiscal year 2008 408 million in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Realized gain other-than-temporary impairment ) were $ 751 million and $ 93 million $ 751 million and $ 93 million , respectively , in respectively , in fiscal year 2008 , $ 851 million and fiscal year 2008 , $ 851 million and $ 176 million $ 851 million and $ 176 million , respectively , in respectively , in fiscal year 2007 , and $ 1.1 billion year 2007 , and $ 1.1 billion and $ 531 million $ 1.1 billion and $ 531 million , respectively , in respectively , in fiscal year 2006 . PAGE 51 Table of fiscal year 2006 . PAGE 51 Table of Contents Part II of Contents Part II Item 8 NOTE 4 INVESTMENTS The component Part II Item 8 NOTE 4 INVESTMENTS The component of investment Equity and other investment June 30 , 2008 Cash $ 3,274 other investment June 30 , 2008 Cash $ 3,274 $ – 30 , 2008 Cash $ 3,274 $ – $ – $ $ – $ – $ 3,274 $ 3,274 $ – $ $ – $ 3,274 $ 3,274 $ – $ – Mutual – $ – Mutual fund 1,044 15 ( 8 ) 1,051 $ – Mutual fund 1,044 15 ( 8 ) 1,051 835 Mutual fund 1,044 15 ( 8 ) 1,051 835 136 80 1,044 15 ( 8 ) 1,051 835 136 80 Commercial paper 15 ( 8 ) 1,051 835 136 80 Commercial paper 787 ( 8 ) 1,051 835 136 80 Commercial paper 787 – 8 ) 1,051 835 136 80 Commercial paper 787 – – 835 136 80 Commercial paper 787 – – 787 787 – Commercial paper 787 – – 787 787 – – Certificates of paper 787 – – 787 787 – – Certificates of deposit – – Certificates of deposit 1,580 – – 1,580 1,373 207 of deposit 1,580 – – 1,580 1,373 207 – U.S. Government deposit 1,580 – – 1,580 1,373 207 – U.S. Government and 1,580 – – 1,580 1,373 207 – U.S. Government and Agency U.S. Government and Agency security 4,200 37 ( 4 ) 4,233 Government and Agency security 4,200 37 ( 4 ) 4,233 1,839 Agency security 4,200 37 ( 4 ) 4,233 1,839 2,318 76 4,200 37 ( 4 ) 4,233 1,839 2,318 76 Foreign government 37 ( 4 ) 4,233 1,839 2,318 76 Foreign government bond ( 4 ) 4,233 1,839 2,318 76 Foreign government bond 3,466 4 ) 4,233 1,839 2,318 76 Foreign government bond 3,466 15 2,318 76 Foreign government bond 3,466 15 ( 62 ) 3,419 76 Foreign government bond 3,466 15 ( 62 ) 3,419 – government bond 3,466 15 ( 62 ) 3,419 – 3,419 – 3,466 15 ( 62 ) 3,419 – 3,419 – Mortgage-backed security ( 62 ) 3,419 – 3,419 – Mortgage-backed security 3,628 31 – 3,419 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 3,419 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 – 3,634 – 3,628 31 ( 25 ) 3,634 – 3,634 – Corporate note ( 25 ) 3,634 – 3,634 – Corporate note and bond – Corporate note and bond 5,013 91 ( 39 ) 5,065 Corporate note and bond 5,013 91 ( 39 ) 5,065 2,122 and bond 5,013 91 ( 39 ) 5,065 2,122 2,943 – 5,013 91 ( 39 ) 5,065 2,122 2,943 – Municipal security 91 ( 39 ) 5,065 2,122 2,943 – Municipal security 761 ( 39 ) 5,065 2,122 2,943 – Municipal security 761 4 2,122 2,943 – Municipal security 761 4 ( 4 ) 761 2,943 – Municipal security 761 4 ( 4 ) 761 109 Municipal security 761 4 ( 4 ) 761 109 652 – 761 4 ( 4 ) 761 109 652 – Common stock 4 ( 4 ) 761 109 652 – Common stock and ( 4 ) 761 109 652 – Common stock and equivalent – Common stock and equivalent 4,508 1,215 ( 113 ) 5,610 Common stock and equivalent 4,508 1,215 ( 113 ) 5,610 – and equivalent 4,508 1,215 ( 113 ) 5,610 – – 5,610 4,508 1,215 ( 113 ) 5,610 – – 5,610 Preferred stock 113 ) 5,610 – – 5,610 Preferred stock 307 9 – – – 5,610 Preferred stock 307 9 – 316 – – – 5,610 Preferred stock 307 9 – 316 – – 316 Preferred stock 307 9 – 316 – – 316 Other investment 9 – 316 – – 316 Other investment 520 – – – – 316 Other investment 520 – – 520 – 14 Other investment 520 – – 520 – 14 506 Total $ 520 – – 520 – 14 506 Total $ 29,088 $ – – 520 – 14 506 Total $ 29,088 $ 1,417 – 14 506 Total $ 29,088 $ 1,417 $ ( 255 506 Total $ 29,088 $ 1,417 $ ( 255 ) $ 29,088 $ 1,417 $ ( 255 ) $ 30,250 $ 10,339 $ ( 255 ) $ 30,250 $ 10,339 $ 13,323 $ 255 ) $ 30,250 $ 10,339 $ 13,323 $ 6,588 ( $ 30,250 $ 10,339 $ 13,323 $ 6,588 ( In million $ 10,339 $ 13,323 $ 6,588 ( In million ) Cost Equity and other investment June 30 , 2007 Cash $ 3,040 other investment June 30 , 2007 Cash $ 3,040 $ – 30 , 2007 Cash $ 3,040 $ – $ – $ $ – $ – $ 3,040 $ 3,040 $ – $ $ – $ 3,040 $ 3,040 $ – $ – Mutual – $ – Mutual fund 398 4 ( 1 ) 401 $ – Mutual fund 398 4 ( 1 ) 401 132 Mutual fund 398 4 ( 1 ) 401 132 205 64 398 4 ( 1 ) 401 132 205 64 Commercial paper 4 ( 1 ) 401 132 205 64 Commercial paper 227 ( 1 ) 401 132 205 64 Commercial paper 227 – 1 ) 401 132 205 64 Commercial paper 227 – – 132 205 64 Commercial paper 227 – – 227 179 48 Commercial paper 227 – – 227 179 48 – Certificates of paper 227 – – 227 179 48 – Certificates of deposit 227 – – 227 179 48 – Certificates of deposit 98 48 – Certificates of deposit 98 – – 98 – 98 of deposit 98 – – 98 – 98 – U.S. Government 98 – – 98 – 98 – U.S. Government and Agency U.S. Government and Agency security 3,085 4 ( 12 ) 3,077 Government and Agency security 3,085 4 ( 12 ) 3,077 1 Agency security 3,085 4 ( 12 ) 3,077 1 3,002 74 3,085 4 ( 12 ) 3,077 1 3,002 74 Foreign government 4 ( 12 ) 3,077 1 3,002 74 Foreign government bond ( 12 ) 3,077 1 3,002 74 Foreign government bond 3,845 12 ) 3,077 1 3,002 74 Foreign government bond 3,845 2 3,002 74 Foreign government bond 3,845 2 ( 63 ) 3,784 74 Foreign government bond 3,845 2 ( 63 ) 3,784 – government bond 3,845 2 ( 63 ) 3,784 – 3,784 – 3,845 2 ( 63 ) 3,784 – 3,784 – Mortgage-backed security ( 63 ) 3,784 – 3,784 – Mortgage-backed security 3,236 4 – 3,784 – Mortgage-backed security 3,236 4 ( 49 ) 3,191 3,784 – Mortgage-backed security 3,236 4 ( 49 ) 3,191 – Mortgage-backed security 3,236 4 ( 49 ) 3,191 – 3,191 – 3,236 4 ( 49 ) 3,191 – 3,191 – Corporate note ( 49 ) 3,191 – 3,191 – Corporate note and bond – Corporate note and bond 7,184 14 ( 18 ) 7,180 Corporate note and bond 7,184 14 ( 18 ) 7,180 2,425 and bond 7,184 14 ( 18 ) 7,180 2,425 4,753 2 7,184 14 ( 18 ) 7,180 2,425 4,753 2 Municipal security 14 ( 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 ( 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 3 18 ) 7,180 2,425 4,753 2 Municipal security 2,639 3 ( 2,425 4,753 2 Municipal security 2,639 3 ( 25 ) 2,617 4,753 2 Municipal security 2,639 3 ( 25 ) 2,617 334 Municipal security 2,639 3 ( 25 ) 2,617 334 2,283 – 2,639 3 ( 25 ) 2,617 334 2,283 – Common stock 3 ( 25 ) 2,617 334 2,283 – Common stock and ( 25 ) 2,617 334 2,283 – Common stock and equivalent – Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 Common stock and equivalent 7,290 2,309 ( 18 ) 9,581 – and equivalent 7,290 2,309 ( 18 ) 9,581 – – 9,581 7,290 2,309 ( 18 ) 9,581 – – 9,581 Preferred stock 18 ) 9,581 – – 9,581 Preferred stock 62 12 – – – 9,581 Preferred stock 62 12 – 74 – – – 9,581 Preferred stock 62 12 – 74 – – 74 Preferred stock 62 12 – 74 – – 74 Other investment 12 – 74 – – 74 Other investment 258 – – – – 74 Other investment 258 – – 258 – ( Other investment 258 – – 258 – ( 64 ) 322 – – 258 – ( 64 ) 322 Total $ 31,362 258 – ( 64 ) 322 Total $ 31,362 $ 2,352 64 ) 322 Total $ 31,362 $ 2,352 $ ( 186 322 Total $ 31,362 $ 2,352 $ ( 186 ) $ 31,362 $ 2,352 $ ( 186 ) $ 33,528 $ 6,111 $ ( 186 ) $ 33,528 $ 6,111 $ 17,300 $ 186 ) $ 33,528 $ 6,111 $ 17,300 $ 10,117 PAGE $ 33,528 $ 6,111 $ 17,300 $ 10,117 PAGE 52 Table $ 6,111 $ 17,300 $ 10,117 PAGE 52 Table of Contents $ 17,300 $ 10,117 PAGE 52 Table of Contents Part II of Contents Part II Item 8 Investments with continuous unrealized loss unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 month 12 month or greater : Less than 12 month 12 month or greater Total ( fair value unrealized loss June 30 , 2008 Mutual fund $ unrealized loss June 30 , 2008 Mutual fund $ 123 $ , 2008 Mutual fund $ 123 $ ( 7 ) $ fund $ 123 $ ( 7 ) $ 12 $ ( $ ( 7 ) $ 12 $ ( 1 ) $ ) $ 12 $ ( 1 ) $ 135 $ ( $ ( 1 ) $ 135 $ ( 8 ) U.S. ) $ 135 $ ( 8 ) U.S. Government and Agency U.S. Government and Agency security 342 ( 4 ) – – and Agency security 342 ( 4 ) – – 342 ( ( 4 ) – – 342 ( 4 ) Foreign government ) – – 342 ( 4 ) Foreign government bond 2,241 4 ) Foreign government bond 2,241 ( 62 ) – – Foreign government bond 2,241 ( 62 ) – – 2,241 ( ( 62 ) – – 2,241 ( 62 ) Mortgage-backed security ) – – 2,241 ( 62 ) Mortgage-backed security 1,078 ( ( 62 ) Mortgage-backed security 1,078 ( 25 ) – – ) Mortgage-backed security 1,078 ( 25 ) – – 1,078 ( ( 25 ) – – 1,078 ( 25 ) Corporate note ) – – 1,078 ( 25 ) Corporate note and bond ) Corporate note and bond 807 ( 26 ) 925 ( note and bond 807 ( 26 ) 925 ( 13 ) bond 807 ( 26 ) 925 ( 13 ) 1,732 ( ( 26 ) 925 ( 13 ) 1,732 ( 39 ) ) 925 ( 13 ) 1,732 ( 39 ) Municipal security ( 13 ) 1,732 ( 39 ) Municipal security 176 ( ( 39 ) Municipal security 176 ( 3 ) 193 ( ) Municipal security 176 ( 3 ) 193 ( 1 ) security 176 ( 3 ) 193 ( 1 ) 369 ( ( 3 ) 193 ( 1 ) 369 ( 4 ) ) 193 ( 1 ) 369 ( 4 ) Common stock ( 1 ) 369 ( 4 ) Common stock and equivalent ) Common stock and equivalent 598 ( 106 ) 28 ( stock and equivalent 598 ( 106 ) 28 ( 7 ) equivalent 598 ( 106 ) 28 ( 7 ) 626 ( ( 106 ) 28 ( 7 ) 626 ( 113 ) ) 28 ( 7 ) 626 ( 113 ) Total $ ( 7 ) 626 ( 113 ) Total $ 5,365 $ ( 113 ) Total $ 5,365 $ ( 233 ) $ Total $ 5,365 $ ( 233 ) $ 1,158 $ ( $ ( 233 ) $ 1,158 $ ( 22 ) $ ) $ 1,158 $ ( 22 ) $ 6,523 $ ( $ ( 22 ) $ 6,523 $ ( 255 ) Less ) $ 6,523 $ ( 255 ) Less than 12 month ( 255 ) Less than 12 month 12 month or greater ) Less than 12 month 12 month or greater Total ( fair value unrealized loss June 30 , 2007 Mutual fund $ unrealized loss June 30 , 2007 Mutual fund $ 76 $ , 2007 Mutual fund $ 76 $ ( 1 ) $ fund $ 76 $ ( 1 ) $ 3 $ – $ ( 1 ) $ 3 $ – $ 79 $ $ 3 $ – $ 79 $ ( 1 ) U.S. – $ 79 $ ( 1 ) U.S. Government and Agency U.S. Government and Agency security 1,219 ( 8 ) 238 ( and Agency security 1,219 ( 8 ) 238 ( 4 ) security 1,219 ( 8 ) 238 ( 4 ) 1,457 ( ( 8 ) 238 ( 4 ) 1,457 ( 12 ) ) 238 ( 4 ) 1,457 ( 12 ) Foreign government ( 4 ) 1,457 ( 12 ) Foreign government bond 3,554 12 ) Foreign government bond 3,554 ( 63 ) 2 – Foreign government bond 3,554 ( 63 ) 2 – 3,556 ( bond 3,554 ( 63 ) 2 – 3,556 ( 63 ) ( 63 ) 2 – 3,556 ( 63 ) Mortgage-backed security ) 2 – 3,556 ( 63 ) Mortgage-backed security 2,520 ( ( 63 ) Mortgage-backed security 2,520 ( 43 ) 214 ( ) Mortgage-backed security 2,520 ( 43 ) 214 ( 6 ) security 2,520 ( 43 ) 214 ( 6 ) 2,734 ( ( 43 ) 214 ( 6 ) 2,734 ( 49 ) ) 214 ( 6 ) 2,734 ( 49 ) Corporate note ( 6 ) 2,734 ( 49 ) Corporate note and bond ) Corporate note and bond 526 ( 14 ) 74 ( note and bond 526 ( 14 ) 74 ( 4 ) bond 526 ( 14 ) 74 ( 4 ) 600 ( ( 14 ) 74 ( 4 ) 600 ( 18 ) ) 74 ( 4 ) 600 ( 18 ) Municipal security ( 4 ) 600 ( 18 ) Municipal security 575 ( ( 18 ) Municipal security 575 ( 9 ) 420 ( ) Municipal security 575 ( 9 ) 420 ( 16 ) security 575 ( 9 ) 420 ( 16 ) 995 ( ( 9 ) 420 ( 16 ) 995 ( 25 ) ) 420 ( 16 ) 995 ( 25 ) Common stock ( 16 ) 995 ( 25 ) Common stock and equivalent ) Common stock and equivalent 237 ( 17 ) 9 ( stock and equivalent 237 ( 17 ) 9 ( 1 ) equivalent 237 ( 17 ) 9 ( 1 ) 246 ( ( 17 ) 9 ( 1 ) 246 ( 18 ) ) 9 ( 1 ) 246 ( 18 ) Total $ ( 1 ) 246 ( 18 ) Total $ 8,707 $ ( 18 ) Total $ 8,707 $ ( 155 ) $ Total $ 8,707 $ ( 155 ) $ 960 $ ( $ ( 155 ) $ 960 $ ( 31 ) $ ) $ 960 $ ( 31 ) $ 9,667 $ ( $ ( 31 ) $ 9,667 $ ( 186 ) At ) $ 9,667 $ ( 186 ) At June 30 , ( 186 ) At June 30 , 2008 , unrealized loss ) At June 30 , 2008 , unrealized loss of $ , unrealized loss of $ 255 million consisted of : $ million consisted of : $ 121 million related to investment grade grade fixed-income security , $ 21 million related to investment in market fixed-income security , $ 99 million related to domestic equity equity security , and $ 14 million related to international equity equity security . At June 30 , 2007 , unrealized loss . At June 30 , 2007 , unrealized loss of $ , unrealized loss of $ 186 million consisted of : $ million consisted of : $ 161 million related to investment grade grade fixed-income security , $ 7 million related to investment in market fixed-income security , $ 7 million related to domestic equity equity security , and $ 11 million related to international equity available evidence a of June 30 , 2008 . Common and a of June 30 , 2008 . Common and preferred stock at cost . At June 30 , 2008 , the recorded . At June 30 , 2008 , the recorded basis and of these investment wa $ 289 million . At June 30 289 million . At June 30 , 2007 , the recorded . At June 30 , 2007 , the recorded basis and of these investment wa $ 38 million . The estimate of determined by management . PAGE 53 Table of Contents Part II of Contents Part II Item 8 The maturity of debt security fixed-maturity security , at June 30 , 2008 , were a , at June 30 , 2008 , were a follows : one year or le $ 3,618 $ 3,618 Due after one or le $ 3,618 $ 3,618 Due after one year through one year through five year 3,805 3,858 Due after five year year through five year 3,805 3,858 Due after five year through five year through ten year 1,582 1,559 Due after ten year year through ten year 1,582 1,559 Due after ten year 7,831 1,559 Due after ten year 7,831 7,846 Total $ 16,836 $ Due after ten year 7,831 7,846 Total $ 16,836 $ 16,881 year 7,831 7,846 Total $ 16,836 $ 16,881 NOTE 5 DERIVATIVES 7,846 Total $ 16,836 $ 16,881 NOTE 5 DERIVATIVES For derivative $ 16,836 $ 16,881 NOTE 5 DERIVATIVES For derivative instrument designated accordance with SFAS No . 133 , Accounting for Derivative Instruments on earnings for fiscal year 2008 , 2007 , or 2006 for fiscal year 2008 , 2007 , or 2006 . During 2008 , 2007 , or 2006 . During fiscal year 2008 2006 . During fiscal year 2008 , $ 274 million in fiscal year 2008 , $ 274 million in gain on fair-value in time value and $ 324 million in loss on cash-flow other . During fiscal year 2007 , $ 219 million in fiscal year 2007 , $ 219 million in gain on fair-value in time value and $ 361 million in loss on cash-flow other . During fiscal year 2006 , $ 217 million in fiscal year 2006 , $ 217 million in gain on fair-value in time value and $ 399 million in loss on cash-flow recognized . During fiscal year 2008 , $ 104 million of fiscal year 2008 , $ 104 million of derivative gain were revenue . During fiscal year 2007 , $ 168 million of fiscal year 2007 , $ 168 million of derivative gain were revenue . During fiscal year 2006 , $ 166 million of fiscal year 2006 , $ 166 million of derivative gain were reclassified to revenue and $ 23 million in derivative gain were . We estimate that $ 111 million of net derivative gain into earnings within the next 12 month . No significant amount to occur for fiscal year 2008 , 2007 , and 2006 for fiscal year 2008 , 2007 , and 2006 . Derivative 2008 , 2007 , and 2006 . Derivative fair value are million ) Short-term investment ( 1 ) Other current asset Equity Equity and other investment ( 1 ) Other current liability Other Other long-term liability Total June 30 , 2008 Cash-flow hedge $ liability Total June 30 , 2008 Cash-flow hedge $ – $ Cash-flow hedge $ – $ 488 $ – $ – $ $ – $ – $ 488 Fair-value hedge ( 41 ) $ 488 Fair-value hedge ( 41 ) – 767 ( 11 hedge ( 41 ) – 767 ( 11 ) – 715 41 ) – 767 ( 11 ) – 715 Other derivative 767 ( 11 ) – 715 Other derivative 69 ( 34 ) – 715 Other derivative 69 ( 34 ) 4 ( 715 Other derivative 69 ( 34 ) 4 ( 20 ) derivative 69 ( 34 ) 4 ( 20 ) – 19 ( 34 ) 4 ( 20 ) – 19 Total $ 4 ( 20 ) – 19 Total $ 28 $ 454 ) – 19 Total $ 28 $ 454 $ 771 $ 19 Total $ 28 $ 454 $ 771 $ ( 31 $ 28 $ 454 $ 771 $ ( 31 ) $ 454 $ 771 $ ( 31 ) $ – $ 1,222 31 ) $ – $ 1,222 June 30 , 2007 Cash-flow $ – $ 1,222 June 30 , 2007 Cash-flow hedge $ $ 1,222 June 30 , 2007 Cash-flow hedge $ – $ Cash-flow hedge $ – $ 258 $ – $ – $ $ – $ – $ 258 Fair-value hedge ( 11 ) $ 258 Fair-value hedge ( 11 ) – ( 29 ) ( 11 ) – ( 29 ) ( 340 ) ( – ( 29 ) ( 340 ) ( 22 ) ( ) ( 340 ) ( 22 ) ( 402 ) Other ) ( 22 ) ( 402 ) Other derivative 9 ( ( 402 ) Other derivative 9 ( 20 ) ( 6 ) Other derivative 9 ( 20 ) ( 6 ) ( 9 ( 20 ) ( 6 ) ( 114 ) – ) ( 6 ) ( 114 ) – ( 131 ) ( 114 ) – ( 131 ) Total $ ( 2 131 ) Total $ ( 2 ) $ 238 $ ( $ ( 2 ) $ 238 $ ( 35 ) $ ) $ 238 $ ( 35 ) $ ( 454 ) ( 35 ) $ ( 454 ) $ ( 22 ) ( 454 ) $ ( 22 ) $ ( 275 ) ( 22 ) $ ( 275 ) ( 1 ) The $ ( 275 ) ( 1 ) The amount presented a the amount presented in Note 4 – Investments . PAGE 54 4 – Investments . PAGE 54 Table of Contents Part II of Contents Part II Item 8 NOTE 6 INVENTORIES ( In Part II Item 8 NOTE 6 INVENTORIES ( In million ) ( In million ) June 30 , 2008 2007 Raw material million ) June 30 , 2008 2007 Raw material $ 417 ) June 30 , 2008 2007 Raw material $ 417 $ 2008 2007 Raw material $ 417 $ 435 Work in process Raw material $ 417 $ 435 Work in process 31 148 $ 435 Work in process 31 148 Finished good 537 544 435 Work in process 31 148 Finished good 537 544 Inventories process 31 148 Finished good 537 544 Inventories $ 985 $ 31 148 Finished good 537 544 Inventories $ 985 $ 1,127 good 537 544 Inventories $ 985 $ 1,127 NOTE 7 PROPERTY 544 Inventories $ 985 $ 1,127 NOTE 7 PROPERTY AND EQUIPMENT $ 985 $ 1,127 NOTE 7 PROPERTY AND EQUIPMENT ( In ( In million ) June 30 , 2008 2007 Land $ million ) June 30 , 2008 2007 Land $ 518 $ ) June 30 , 2008 2007 Land $ 518 $ 428 , 2008 2007 Land $ 518 $ 428 Buildings and improvement 2007 Land $ 518 $ 428 Buildings and improvement 4,302 3,170 $ 428 Buildings and improvement 4,302 3,170 Leasehold improvement 1,728 1,077 428 Buildings and improvement 4,302 3,170 Leasehold improvement 1,728 1,077 Computer improvement 4,302 3,170 Leasehold improvement 1,728 1,077 Computer equipment and software 4,302 3,170 Leasehold improvement 1,728 1,077 Computer equipment and software 4,475 1,077 Computer equipment and software 4,475 3,458 Furniture and equipment 1,521 Computer equipment and software 4,475 3,458 Furniture and equipment 1,521 1,233 4,475 3,458 Furniture and equipment 1,521 1,233 Property and equipment , 3,458 Furniture and equipment 1,521 1,233 Property and equipment , at and equipment , at cost 12,544 9,366 Accumulated depreciation ( 6,302 equipment , at cost 12,544 9,366 Accumulated depreciation ( 6,302 ) 12,544 9,366 Accumulated depreciation ( 6,302 ) ( 5,016 ) Property depreciation ( 6,302 ) ( 5,016 ) Property and equipment , and equipment , net $ 6,242 $ 4,350 Property and equipment , net $ 6,242 $ 4,350 Property and equipment are stated building range from five to 15 year , leasehold improvement generally depreciated . During fiscal year 2008 , 2007 , and 2006 During fiscal year 2008 , 2007 , and 2006 , depreciation 2008 , 2007 , and 2006 , depreciation expense wa $ , depreciation expense wa $ 1.4 billion , $ 1.2 billion $ 1.4 billion , $ 1.2 billion , and $ 863 1.2 billion , and $ 863 million , respectively . The to computer equipment . NOTE 8 ACQUISITIONS On August 10 , NOTE 8 ACQUISITIONS On August 10 , 2007 , we acquired ACQUISITIONS On August 10 , 2007 , we acquired all the aQuantive ” ) for $ 5.9 billion , which wa paid result of operation starting August 10 , 2007 , the acquisition operation starting August 10 , 2007 , the acquisition date . acquisition , we recorded $ 5.2 billion of goodwill in our Business . Of the $ 939 million of acquired intangible asset acquired intangible asset , $ 24 million wa assigned to in-process acquired intangible asset include $ 476 million of customer relationship with of six year , $ 327 million of technology-based intangible asset four year , and $ 112 million of other intangible asset five year . On April 24 , 2008 , we acquired . On April 24 , 2008 , we acquired all the FAST ” ) for $ 1.3 billion , which wa paid result of operation starting April 24 , 2008 , the acquisition operation starting April 24 , 2008 , the acquisition date . the acquisition date . PAGE 55 Table of Contents Part II of Contents Part II Item 8 As a result of the acquisition , we recorded $ 981 million of goodwill in our Division . Of the $ 266 million of acquired intangible asset acquired intangible asset , $ 35 million wa assigned to in-process acquired intangible asset include $ 27 million of customer relationship with of seven year , $ 134 million of technology-based intangible asset five year , and $ 70 million of other intangible asset ) aQuantive a of August 10 , 2007 FAST a of a of August 10 , 2007 FAST a of April 24 2007 FAST a of April 24 , 2008 Cash and cash a of April 24 , 2008 Cash and cash equivalent $ Cash and cash equivalent $ 342 $ 91 Accounts receivable , cash equivalent $ 342 $ 91 Accounts receivable , net 273 91 Accounts receivable , net 273 46 Other current asset 6 Accounts receivable , net 273 46 Other current asset 6 7 273 46 Other current asset 6 7 Property , plant and 46 Other current asset 6 7 Property , plant and equipment Property , plant and equipment 50 30 Intangible asset 939 266 , plant and equipment 50 30 Intangible asset 939 266 Goodwill equipment 50 30 Intangible asset 939 266 Goodwill 5,189 981 Deferred 50 30 Intangible asset 939 266 Goodwill 5,189 981 Deferred income Intangible asset 939 266 Goodwill 5,189 981 Deferred income tax 179 asset 939 266 Goodwill 5,189 981 Deferred income tax 179 – 5,189 981 Deferred income tax 179 – Other long-term asset 7 179 – Other long-term asset 7 5 Total asset acquired $ – Other long-term asset 7 5 Total asset acquired $ 6,985 5 Total asset acquired $ 6,985 $ 1,426 Accrued compensation 37 asset acquired $ 6,985 $ 1,426 Accrued compensation 37 39 Other 6,985 $ 1,426 Accrued compensation 37 39 Other current liability 683 $ 1,426 Accrued compensation 37 39 Other current liability 683 38 37 39 Other current liability 683 38 Deferred income tax 338 39 Other current liability 683 38 Deferred income tax 338 65 683 38 Deferred income tax 338 65 Other long-term liability 70 38 Deferred income tax 338 65 Other long-term liability 70 10 338 65 Other long-term liability 70 10 Total liability assumed $ 65 Other long-term liability 70 10 Total liability assumed $ 1,128 10 Total liability assumed $ 1,128 $ 152 Net asset acquired liability assumed $ 1,128 $ 152 Net asset acquired $ 5,857 152 Net asset acquired $ 5,857 $ 1,274 In addition to asset acquired $ 5,857 $ 1,274 In addition to aQuantive and and FAST , we acquired 19 other entity during fiscal year other entity during fiscal year 2008 for total consideration of $ for total consideration of $ 1.6 billion which wa paid primarily acquired Danger for approximately $ 500 million in cash ; and in cash ; and • 18 other entity specializing in area acquisition of Danger and the 18 other entity , we recorded entity , we recorded $ 1.2 billion of goodwill . In . In addition , $ 37 million wa assigned to in-process effect of Danger and the 18 other acquisition , individually and were not material . PAGE 56 Table of Contents Part II of Contents Part II Item 8 NOTE 9 GOODWILL Changes in Part II Item 8 NOTE 9 GOODWILL Changes in the carrying of goodwill for fiscal year 2008 and 2007 by segment were for fiscal year 2008 and 2007 by segment were a follows ) Balance a of June 30 , 2008 Acquisitions Other Balance a of June 30 , 2008 Acquisitions Other Balance a of Other Balance a of June 30 , 2007 Acquisitions Other Balance a of June 30 , 2007 Acquisitions Other Balance a of Other Balance a of June 30 , 2006 Client $ 153 a of June 30 , 2006 Client $ 153 $ 77 30 , 2006 Client $ 153 $ 77 $ ( 1 2006 Client $ 153 $ 77 $ ( 1 ) $ 153 $ 77 $ ( 1 ) $ 77 $ 6 $ ( 1 ) $ 77 $ 6 $ ( 3 1 ) $ 77 $ 6 $ ( 3 ) $ 77 $ 6 $ ( 3 ) $ 74 Server and $ ( 3 ) $ 74 Server and Tools 738 90 $ 74 Server and Tools 738 90 68 580 325 ( 74 Server and Tools 738 90 68 580 325 ( 1 Server and Tools 738 90 68 580 325 ( 1 ) and Tools 738 90 68 580 325 ( 1 ) 256 Tools 738 90 68 580 325 ( 1 ) 256 Online 90 68 580 325 ( 1 ) 256 Online Services Business 580 325 ( 1 ) 256 Online Services Business 6,274 5,775 ) 256 Online Services Business 6,274 5,775 ( 53 ) 552 256 Online Services Business 6,274 5,775 ( 53 ) 552 123 Services Business 6,274 5,775 ( 53 ) 552 123 ( 26 6,274 5,775 ( 53 ) 552 123 ( 26 ) 455 5,775 ( 53 ) 552 123 ( 26 ) 455 Microsoft 53 ) 552 123 ( 26 ) 455 Microsoft Business Division 552 123 ( 26 ) 455 Microsoft Business Division 4,191 1,073 ) 455 Microsoft Business Division 4,191 1,073 ( 14 ) 3,132 455 Microsoft Business Division 4,191 1,073 ( 14 ) 3,132 508 Business Division 4,191 1,073 ( 14 ) 3,132 508 ( 57 4,191 1,073 ( 14 ) 3,132 508 ( 57 ) 2,681 1,073 ( 14 ) 3,132 508 ( 57 ) 2,681 Entertainment 14 ) 3,132 508 ( 57 ) 2,681 Entertainment and Devices 3,132 508 ( 57 ) 2,681 Entertainment and Devices Division 752 2,681 Entertainment and Devices Division 752 354 ( 21 ) 419 Entertainment and Devices Division 752 354 ( 21 ) 419 21 Devices Division 752 354 ( 21 ) 419 21 ( 2 752 354 ( 21 ) 419 21 ( 2 ) 400 354 ( 21 ) 419 21 ( 2 ) 400 Total 21 ) 419 21 ( 2 ) 400 Total $ 12,108 419 21 ( 2 ) 400 Total $ 12,108 $ 7,369 2 ) 400 Total $ 12,108 $ 7,369 $ ( 21 400 Total $ 12,108 $ 7,369 $ ( 21 ) $ 12,108 $ 7,369 $ ( 21 ) $ 4,760 $ 983 $ ( 21 ) $ 4,760 $ 983 $ ( 89 21 ) $ 4,760 $ 983 $ ( 89 ) $ 4,760 $ 983 $ ( 89 ) $ 3,866 We test $ ( 89 ) $ 3,866 We test goodwill for impairment for impairment annually on July 1 at the reporting unit level provision of SFAS No . 142 , Goodwill and Other Intangible of goodwill in fiscal year 2008 and 2007 . If an in fiscal year 2008 and 2007 . If an event occurs a goodwill during fiscal year 2008 is expected to be deductible is preliminary for up to 12 month after the acquisition date the above table . NOTE 10 INTANGIBLE ASSETS The component of ( In million ) June 30 , 2008 2007 Gross carrying million ) June 30 , 2008 2007 Gross carrying amount Accumulated ) June 30 , 2008 2007 Gross carrying amount Accumulated amortization Net carrying amount Contract-based $ 1,074 $ ( 796 ) $ Contract-based $ 1,074 $ ( 796 ) $ 278 $ 988 $ ( 796 ) $ 278 $ 988 $ ( 727 796 ) $ 278 $ 988 $ ( 727 ) $ 278 $ 988 $ ( 727 ) $ 261 Technology-based 1,677 $ ( 727 ) $ 261 Technology-based 1,677 ( 672 ) 727 ) $ 261 Technology-based 1,677 ( 672 ) 1,005 916 $ 261 Technology-based 1,677 ( 672 ) 1,005 916 ( 407 Technology-based 1,677 ( 672 ) 1,005 916 ( 407 ) 509 1,677 ( 672 ) 1,005 916 ( 407 ) 509 Marketing-related 672 ) 1,005 916 ( 407 ) 509 Marketing-related 171 ( 1,005 916 ( 407 ) 509 Marketing-related 171 ( 65 ) ( 407 ) 509 Marketing-related 171 ( 65 ) 106 57 ) 509 Marketing-related 171 ( 65 ) 106 57 ( 39 Marketing-related 171 ( 65 ) 106 57 ( 39 ) 18 171 ( 65 ) 106 57 ( 39 ) 18 Customer-related 65 ) 106 57 ( 39 ) 18 Customer-related 708 ( 106 57 ( 39 ) 18 Customer-related 708 ( 124 ) ( 39 ) 18 Customer-related 708 ( 124 ) 584 122 ) 18 Customer-related 708 ( 124 ) 584 122 ( 32 Customer-related 708 ( 124 ) 584 122 ( 32 ) 90 708 ( 124 ) 584 122 ( 32 ) 90 Total 124 ) 584 122 ( 32 ) 90 Total $ 3,630 584 122 ( 32 ) 90 Total $ 3,630 $ ( 32 ) 90 Total $ 3,630 $ ( 1,657 ) $ Total $ 3,630 $ ( 1,657 ) $ 1,973 $ 2,083 $ ( 1,657 ) $ 1,973 $ 2,083 $ ( 1,205 1,657 ) $ 1,973 $ 2,083 $ ( 1,205 ) $ 1,973 $ 2,083 $ ( 1,205 ) $ 878 PAGE 57 $ ( 1,205 ) $ 878 PAGE 57 Table of Contents 1,205 ) $ 878 PAGE 57 Table of Contents Part II of Contents Part II Item 8 During fiscal year 2008 and Item 8 During fiscal year 2008 and 2007 , we recorded During fiscal year 2008 and 2007 , we recorded addition to to intangible asset of $ 1.6 billion and $ 473 million $ 1.6 billion and $ 473 million , respectively . We asset acquired during fiscal year 2008 and 2007 were a follows during fiscal year 2008 and 2007 were a follows : ( million ) Year Ended June 30 , 2008 2007 Amount Weighted Year Ended June 30 , 2008 2007 Amount Weighted average life Ended June 30 , 2008 2007 Amount Weighted average life Amount Weighted average life Contract-based $ 91 6 year $ 57 5 average life Contract-based $ 91 6 year $ 57 5 year $ 91 6 year $ 57 5 year Technology-based 787 4 91 6 year $ 57 5 year Technology-based 787 4 year $ 57 5 year Technology-based 787 4 year 333 4 year 57 5 year Technology-based 787 4 year 333 4 year Marketing-related year Technology-based 787 4 year 333 4 year Marketing-related 116 5 Technology-based 787 4 year 333 4 year Marketing-related 116 5 year year 333 4 year Marketing-related 116 5 year 14 4 year 333 4 year Marketing-related 116 5 year 14 4 year Customer-related year Marketing-related 116 5 year 14 4 year Customer-related 589 6 Marketing-related 116 5 year 14 4 year Customer-related 589 6 year year 14 4 year Customer-related 589 6 year 69 5 year 14 4 year Customer-related 589 6 year 69 5 year Total year Customer-related 589 6 year 69 5 year Total $ 1,583 Customer-related 589 6 year 69 5 year Total $ 1,583 $ 69 5 year Total $ 1,583 $ 473 Intangible asset addition year Total $ 1,583 $ 473 Intangible asset addition included $ Intangible asset addition included $ 694 million of technology-based intangible asset four year , and $ 782 million of other intangible asset FAST , Danger , and 18 other entity acquired . See entity acquired . See Note 8 – Acquisitions . Acquired intangible asset amortization expense wa $ 472 million for fiscal year 2008 472 million for fiscal year 2008 , $ 236 million for fiscal year 2008 , $ 236 million for fiscal year 2007 236 million for fiscal year 2007 , and $ 127 million year 2007 , and $ 127 million for fiscal year 2006 127 million for fiscal year 2006 . The following table outline intangible asset a of June 30 , 2008 : ( In a of June 30 , 2008 : ( In million ) million ) Year Ended June 30 , Amount 2009 $ 543 Ended June 30 , Amount 2009 $ 543 2010 495 2011 30 , Amount 2009 $ 543 2010 495 2011 408 2012 , Amount 2009 $ 543 2010 495 2011 408 2012 279 Amount 2009 $ 543 2010 495 2011 408 2012 279 2013 2009 $ 543 2010 495 2011 408 2012 279 2013 and $ 543 2010 495 2011 408 2012 279 2013 and thereafter 543 2010 495 2011 408 2012 279 2013 and thereafter 248 2010 495 2011 408 2012 279 2013 and thereafter 248 Total 495 2011 408 2012 279 2013 and thereafter 248 Total $ 2012 279 2013 and thereafter 248 Total $ 1,973 NOTE 11 and thereafter 248 Total $ 1,973 NOTE 11 INCOME TAXES The 248 Total $ 1,973 NOTE 11 INCOME TAXES The component of million ) Year Ended June 30 , 2008 2007 2006 Current Year Ended June 30 , 2008 2007 2006 Current tax : Ended June 30 , 2008 2007 2006 Current tax : U.S. June 30 , 2008 2007 2006 Current tax : U.S. Federal tax : U.S. Federal $ 4,357 $ 4,593 $ 4,471 U.S. U.S. Federal $ 4,357 $ 4,593 $ 4,471 U.S. State and $ 4,357 $ 4,593 $ 4,471 U.S. State and Local 256 4,471 U.S. State and Local 256 154 101 International 1,007 957 U.S. State and Local 256 154 101 International 1,007 957 882 State and Local 256 154 101 International 1,007 957 882 Current Local 256 154 101 International 1,007 957 882 Current tax 5,620 256 154 101 International 1,007 957 882 Current tax 5,620 5,704 154 101 International 1,007 957 882 Current tax 5,620 5,704 5,454 1,007 957 882 Current tax 5,620 5,704 5,454 Deferred tax 513 957 882 Current tax 5,620 5,704 5,454 Deferred tax 513 332 882 Current tax 5,620 5,704 5,454 Deferred tax 513 332 209 5,620 5,704 5,454 Deferred tax 513 332 209 Provision for income 5,704 5,454 Deferred tax 513 332 209 Provision for income tax 5,454 Deferred tax 513 332 209 Provision for income tax $ Provision for income tax $ 6,133 $ 6,036 $ 5,663 PAGE income tax $ 6,133 $ 6,036 $ 5,663 PAGE 58 Table $ 6,133 $ 6,036 $ 5,663 PAGE 58 Table of Contents $ 6,036 $ 5,663 PAGE 58 Table of Contents Part II of Contents Part II Item 8 U.S. and international component of million ) Year Ended June 30 , 2008 2007 2006 U.S. Year Ended June 30 , 2008 2007 2006 U.S. $ 12,682 Ended June 30 , 2008 2007 2006 U.S. $ 12,682 $ June 30 , 2008 2007 2006 U.S. $ 12,682 $ 12,902 2008 2007 2006 U.S. $ 12,682 $ 12,902 $ 11,404 International 2006 U.S. $ 12,682 $ 12,902 $ 11,404 International 11,132 7,199 $ 12,682 $ 12,902 $ 11,404 International 11,132 7,199 6,858 Income $ 12,902 $ 11,404 International 11,132 7,199 6,858 Income before income 12,902 $ 11,404 International 11,132 7,199 6,858 Income before income tax $ 11,404 International 11,132 7,199 6,858 Income before income tax $ Income before income tax $ 23,814 $ 20,101 $ 18,262 The income tax $ 23,814 $ 20,101 $ 18,262 The item accounting $ 23,814 $ 20,101 $ 18,262 The item accounting for the follows : Year Ended June 30 , 2008 2007 2006 Federal Year Ended June 30 , 2008 2007 2006 Federal statutory rate Ended June 30 , 2008 2007 2006 Federal statutory rate 35.0 June 30 , 2008 2007 2006 Federal statutory rate 35.0 % 2007 2006 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 7.0 ) % ( 5.1 ) ( 7.0 ) % ( 5.1 ) % ( 4.6 ) ( 5.1 ) % ( 4.6 ) % Examination settlement ( ) % Examination settlement ( 5.8 ) % – ( 0.6 5.8 ) % – ( 0.6 ) % European Commission fine ) % European Commission fine 2.1 % – 0.7 % Other Commission fine 2.1 % – 0.7 % Other reconciling item 1.5 0.7 % Other reconciling item 1.5 % 0.1 % 0.5 % Other reconciling item 1.5 % 0.1 % 0.5 % Effective rate item 1.5 % 0.1 % 0.5 % Effective rate 25.8 % % 0.5 % Effective rate 25.8 % 30.0 % 31.0 % % Effective rate 25.8 % 30.0 % 31.0 % In general rate 25.8 % 30.0 % 31.0 % In general , other credit . In fiscal year 2008 and 2006 , there were In fiscal year 2008 and 2006 , there were no individually reconciling item in fiscal year 2007 included the impact of a the impact of a $ 195 million reduction resulting from various ( In million ) June 30 , 2008 2007 Deferred income million ) June 30 , 2008 2007 Deferred income tax asset ) June 30 , 2008 2007 Deferred income tax asset : : Stock-based compensation expense $ 2,225 $ 2,859 Other expense item compensation expense $ 2,225 $ 2,859 Other expense item 1,933 1,735 $ 2,859 Other expense item 1,933 1,735 Unearned revenue 928 842 2,859 Other expense item 1,933 1,735 Unearned revenue 928 842 Impaired item 1,933 1,735 Unearned revenue 928 842 Impaired investment 331 710 1,933 1,735 Unearned revenue 928 842 Impaired investment 331 710 Other revenue 928 842 Impaired investment 331 710 Other revenue item 91 928 842 Impaired investment 331 710 Other revenue item 91 58 331 710 Other revenue item 91 58 Deferred income tax asset 710 Other revenue item 91 58 Deferred income tax asset $ Deferred income tax asset $ 5,508 $ 6,204 Deferred income tax tax asset $ 5,508 $ 6,204 Deferred income tax liability : : International earnings $ ( 1,300 ) $ ( 1,763 ) ( 1,300 ) $ ( 1,763 ) Unrealized gain on investment Unrealized gain on investment ( 513 ) ( 926 ) Other investment ( 513 ) ( 926 ) Other ( 729 ) ( 926 ) Other ( 729 ) ( 227 ) Deferred Other ( 729 ) ( 227 ) Deferred income tax liability Deferred income tax liability ( 2,542 ) ( 2,916 ) Net liability ( 2,542 ) ( 2,916 ) Net deferred income tax deferred income tax asset $ 2,966 $ 3,288 Reported a : tax asset $ 2,966 $ 3,288 Reported a : Current deferred deferred income tax asset $ 2,017 $ 1,899 Long-term deferred income tax asset $ 2,017 $ 1,899 Long-term deferred income tax asset Long-term deferred income tax asset 949 1,389 Net deferred income tax deferred income tax asset 949 1,389 Net deferred income tax asset deferred income tax asset $ 2,966 $ 3,288 PAGE 59 Table tax asset $ 2,966 $ 3,288 PAGE 59 Table of Contents $ 2,966 $ 3,288 PAGE 59 Table of Contents Part II of Contents Part II Item 8 Deferred income tax balance reflect temporary difference of approximately $ 7.5 billion resulting from earnings for temporary difference is approximately $ 2.2 billion . Income tax paid Income tax paid were $ 5.4 billion in fiscal year 2008 5.4 billion in fiscal year 2008 , $ 5.2 billion in fiscal year 2008 , $ 5.2 billion in fiscal year 2007 5.2 billion in fiscal year 2007 , and $ 4.8 billion year 2007 , and $ 4.8 billion in fiscal year 2006 4.8 billion in fiscal year 2006 . FIN 48 On July fiscal year 2006 . FIN 48 On July 1 , 2007 . FIN 48 On July 1 , 2007 , we adopted 48 On July 1 , 2007 , we adopted the provision adopted the provision of FIN 48 which had the following impact increased current asset by $ 228 million , long-term asset by , long-term asset by $ 1.1 billion , long-term liability by , long-term liability by $ 2.1 billion , and retained deficit and retained deficit by $ 395 million ; and decreased income income tax payable by $ 394 million . As of June million . As of June 30 , 2008 , we had As of June 30 , 2008 , we had $ 3.2 2008 , we had $ 3.2 billion of unrecognized tax benefit tax benefit of which $ 2.3 billion , if recognized , rate . As of July 1 , 2007 , we had As of July 1 , 2007 , we had $ 7.1 2007 , we had $ 7.1 billion of unrecognized tax benefit tax benefit of which $ 5.3 billion , if recognized , expense . Interest totaled $ 121 million in fiscal year 2008 121 million in fiscal year 2008 . As of June 30 2008 . As of June 30 , 2008 and July 1 As of June 30 , 2008 and July 1 , 2007 30 , 2008 and July 1 , 2007 , we had 2008 and July 1 , 2007 , we had accrued interest uncertain tax position of $ 324 million and $ 863 million $ 324 million and $ 863 million , respectively , net million ) Year Ended June 30 , 2008 Balance , beginning Year Ended June 30 , 2008 Balance , beginning of year , beginning of year $ 7,076 Decreases related to settlement ( Decreases related to settlement ( 4,787 ) Increases for tax position related to the current year 934 Increases for tax position related position related to prior year 66 Decreases for tax position related related to prior year ( 80 ) Reductions due to lapsed lapsed statute of limitation ( 14 ) Balance , end of , end of year $ 3,195 During fiscal year 2008 , $ 3,195 During fiscal year 2008 , we reached a settlement IRS ” ) on it 2000-2003 examination . As a result unrecognized tax benefit by $ 4.8 billion and recognized a tax tax provision reduction of $ 1.2 billion . We are under IRS for the tax year 2004-2006 . We do not believe or decrease within the next 12 month a we do not be concluded within the next 12 month . As a result our settlement related to the 2000-2003 examination , we paid the paid the IRS approximately $ 3.1 billion during the first quarter first quarter of fiscal year 2009 . We are subject to result of operation . NOTE 12 UNEARNED REVENUE Unearned revenue is billing coverage period . PAGE 60 Table of Contents Part II of Contents Part II Item 8 Undelivered element – Represents free undelivered element range from approximately 15 % to 25 % of from approximately 15 % to 25 % of the sale price Windows XP Home and approximately 5 % to 15 % of and approximately 5 % to 15 % of the sale price ( In million ) June 30 , 2008 2007 Volume licensing million ) June 30 , 2008 2007 Volume licensing program $ ) June 30 , 2008 2007 Volume licensing program $ 12,232 2007 Volume licensing program $ 12,232 $ 9,334 Undelivered element 1,396 licensing program $ 12,232 $ 9,334 Undelivered element 1,396 1,839 Other 12,232 $ 9,334 Undelivered element 1,396 1,839 Other 1,669 1,473 Unearned $ 9,334 Undelivered element 1,396 1,839 Other 1,669 1,473 Unearned revenue Undelivered element 1,396 1,839 Other 1,669 1,473 Unearned revenue $ 15,297 element 1,396 1,839 Other 1,669 1,473 Unearned revenue $ 15,297 $ 1,669 1,473 Unearned revenue $ 15,297 $ 12,646 Unearned revenue by Unearned revenue $ 15,297 $ 12,646 Unearned revenue by segment wa ( In million ) June 30 , 2008 2007 Client $ million ) June 30 , 2008 2007 Client $ 2,738 $ ) June 30 , 2008 2007 Client $ 2,738 $ 2,875 , 2008 2007 Client $ 2,738 $ 2,875 Server and Tools 2007 Client $ 2,738 $ 2,875 Server and Tools 5,007 3,652 $ 2,875 Server and Tools 5,007 3,652 Microsoft Business Division 7,101 2,875 Server and Tools 5,007 3,652 Microsoft Business Division 7,101 5,771 5,007 3,652 Microsoft Business Division 7,101 5,771 Other segment 451 348 3,652 Microsoft Business Division 7,101 5,771 Other segment 451 348 Unearned Division 7,101 5,771 Other segment 451 348 Unearned revenue $ 15,297 7,101 5,771 Other segment 451 348 Unearned revenue $ 15,297 $ 451 348 Unearned revenue $ 15,297 $ 12,646 NOTE 13 OTHER Unearned revenue $ 15,297 $ 12,646 NOTE 13 OTHER LONG-TERM LIABILITIES $ 15,297 $ 12,646 NOTE 13 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 , 2008 2007 Tax contingency million ) June 30 , 2008 2007 Tax contingency and other ) June 30 , 2008 2007 Tax contingency and other tax and other tax liability $ 3,812 $ 5,071 Legal contingency 530 tax liability $ 3,812 $ 5,071 Legal contingency 530 778 Product 3,812 $ 5,071 Legal contingency 530 778 Product warranty 278 487 $ 5,071 Legal contingency 530 778 Product warranty 278 487 Other contingency 530 778 Product warranty 278 487 Other 101 117 Other 530 778 Product warranty 278 487 Other 101 117 Other long-term Product warranty 278 487 Other 101 117 Other long-term liability $ warranty 278 487 Other 101 117 Other long-term liability $ 4,721 117 Other long-term liability $ 4,721 $ 6,453 PAGE 61 Table long-term liability $ 4,721 $ 6,453 PAGE 61 Table of Contents $ 4,721 $ 6,453 PAGE 61 Table of Contents Part II of Contents Part II Item 8 NOTE 14 COMMITMENTS AND GUARANTEES Part II Item 8 NOTE 14 COMMITMENTS AND GUARANTEES We have GUARANTEES We have committed $ 1.2 billion for constructing new building new building a of June 30 , 2008 . We have a of June 30 , 2008 . We have operating lease for operating lease wa $ 398 million , $ 325 million $ 398 million , $ 325 million , and $ 271 325 million , and $ 271 million , in fiscal year million , in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Future minimum million ) Year Ended June 30 , Amount 2009 $ 440 Ended June 30 , Amount 2009 $ 440 2010 323 2011 30 , Amount 2009 $ 440 2010 323 2011 272 2012 , Amount 2009 $ 440 2010 323 2011 272 2012 236 Amount 2009 $ 440 2010 323 2011 272 2012 236 2013 2009 $ 440 2010 323 2011 272 2012 236 2013 and $ 440 2010 323 2011 272 2012 236 2013 and thereafter 440 2010 323 2011 272 2012 236 2013 and thereafter 937 2010 323 2011 272 2012 236 2013 and thereafter 937 $ 323 2011 272 2012 236 2013 and thereafter 937 $ 2,208 2012 236 2013 and thereafter 937 $ 2,208 We provide indemnification 2013 and thereafter 937 $ 2,208 We provide indemnification of varying indemnification under SFAS No . 5 , Accounting for Contingencies , interpreted by FIN No . 45 , Guarantor ’ s Accounting . Product Warranty In July 2007 , we announced the expansion expansion of our global Xbox 360 warranty coverage to three year light . The basic Xbox 360 console warranty remains in place million ) Year Ended June 30 , 2008 2007 Balance , Year Ended June 30 , 2008 2007 Balance , beginning of Ended June 30 , 2008 2007 Balance , beginning of year , beginning of year $ 850 $ 10 Accruals for warranty of year $ 850 $ 10 Accruals for warranty issued 365 10 Accruals for warranty issued 365 974 Adjustments to pre-existing warranty Accruals for warranty issued 365 974 Adjustments to pre-existing warranty 36 974 Adjustments to pre-existing warranty 36 92 Settlements of warranty claim Adjustments to pre-existing warranty 36 92 Settlements of warranty claim ( Settlements of warranty claim ( 559 ) ( 226 ) Balance claim ( 559 ) ( 226 ) Balance , end of , end of year $ 692 $ 850 Accruals for warranty of year $ 692 $ 850 Accruals for warranty issued during warranty issued during fiscal year 2007 included charge incurred a a the expansion of our Xbox 360 warranty coverage a discussed above a discussed above . PAGE 62 Table of Contents Part II of Contents Part II Item 8 NOTE 15 CONTINGENCIES Government competition Part II Item 8 NOTE 15 CONTINGENCIES Government competition law matter law matter . In March 2004 , the European Commission issued our competitor . In March 2007 , the European Commission issued a required by the March 2004 decision were “ not reasonable the Commission announced on October 22 , 2007 that we were announced on October 22 , 2007 that we were in compliance in compliance with the March 2004 decision and that no further that date . On February 27 , 2008 , the Commission . On February 27 , 2008 , the Commission issued a issued a fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) relating to the the period prior to October 22 , 2007 . In January prior to October 22 , 2007 . In January 2008 , , 2007 . In January 2008 , the Commission announced that browsing software . In May 2008 , we filed an application Instance to annul the February 2008 fine . We paid the . We paid the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) fine in June million ) fine in June 2008 . We are subject to U.S. Department of Justice , 18 state , and the District scheduled to expire on January 31 , 2008 ; we voluntarily expire on January 31 , 2008 ; we voluntarily agreed to the Consent Decree to November 2009 . In October 2007 , November 2009 . In October 2007 , some state filed a are party . In January 2008 , the court issued a the consent decree until November 2009 . In other ongoing investigation under federal law and in 15 state . Courts refused to been made to date in 19 state and the District of be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.7 billion and $ 1.9 billion $ 1.7 billion and $ 1.9 billion . The actual cost the claim . At June 30 , 2008 , we have . At June 30 , 2008 , we have recorded a these claim of approximately $ 900 million , which reflects our our estimated exposure of $ 1.7 billion le payment made to to date of approximately $ 800 million , mostly for administrative and claim . In November 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted appealed , and in October 2007 , the court of appeal for further proceeding . PAGE 63 Table of Contents Part II of Contents Part II Item 8 Patent and intellectual property claim are vigorously defending more than 45 patent infringement case . Microsoft of Alcatel and Lucent in 2006 . For simplicity , we this discussion . • In 2003 , we filed an action software pre-installed . In February 2007 , the jury returned a trial , and awarded $ 1.5 billion in damage . In in damage . In August 2007 , on our motion for third grouping . In April 2008 , a jury returned a two patent and awarded $ 367 million in damage . On in damage . On June 19 , 2008 , the trial . On June 19 , 2008 , the trial judge increased amount of damage to $ 512 million , which includes the , which includes the $ 367 million of damage and $ million of damage and $ 145 million of interest . Microsoft verdict . • In March 2006 , Alcatel-Lucent filed a lawsuit Player , and the Xbox 360 infringe one of it patent asserted counterclaim that Alcatel-Lucent infringes 10 Microsoft patent by it sale went to trial in April 2008 on Alcatel-Lucent ’ s video ’ s favor on June 4 , 2008 , finding no favor on June 4 , 2008 , finding no infringement of patent . • In November 2006 , Alcatel-Lucent filed two patent it patent . In April 2007 , we asserted infringement counterclaim patent is set for January 2009 . • In February 2007 2009 . • In February 2007 , we filed a complaint matter took place in October 2007 . The administrative law judge reversed that decision in May 2008 . We are appealing that Circuit . • In April 2007 , the Multimedia Patent Trust the trust . In June 2008 , the plaintiff dismissed one future . As of June 30 , 2008 , we had As of June 30 , 2008 , we had accrued aggregate aggregate liability of approximately $ 600 million in other current liability current liability and approximately $ 500 million in other long-term liability adverse outcome that we PAGE 64 Table of Contents Part II of Contents Part II Item 8 estimate could be up to could be up to $ 2.2 billion in aggregate beyond recorded become reasonably estimable . NOTE 16 STOCKHOLDERS ’ EQUITY Shares of million ) Year Ended June 30 , 2008 2007 2006 Balance Year Ended June 30 , 2008 2007 2006 Balance , beginning Ended June 30 , 2008 2007 2006 Balance , beginning of June 30 , 2008 2007 2006 Balance , beginning of year Balance , beginning of year 9,380 10,062 10,710 Issued 173 289 , beginning of year 9,380 10,062 10,710 Issued 173 289 106 beginning of year 9,380 10,062 10,710 Issued 173 289 106 Repurchased year 9,380 10,062 10,710 Issued 173 289 106 Repurchased ( 402 9,380 10,062 10,710 Issued 173 289 106 Repurchased ( 402 ) 10,062 10,710 Issued 173 289 106 Repurchased ( 402 ) ( 173 289 106 Repurchased ( 402 ) ( 971 ) ( Repurchased ( 402 ) ( 971 ) ( 754 ) Balance ) ( 971 ) ( 754 ) Balance , end of Balance , end of year 9,151 9,380 10,062 On July 20 , end of year 9,151 9,380 10,062 On July 20 , end of year 9,151 9,380 10,062 On July 20 , 2006 9,151 9,380 10,062 On July 20 , 2006 , we announced 10,062 On July 20 , 2006 , we announced the completion Board of Directors on July 20 , 2004 to buy back Directors on July 20 , 2004 to buy back up to buy back up to $ 30.0 billion in Microsoft common stock common stock . On July 20 , 2006 , we also . On July 20 , 2006 , we also announced that repurchase program : a $ 20.0 billion tender offer , which which wa completed on August 17 , 2006 ; and authorization completed on August 17 , 2006 ; and authorization for up up to an additional $ 20.0 billion ongoing share repurchase program with an expiration of June 30 , 2011 . Under the expiration of June 30 , 2011 . Under the tender offer offer , we repurchased approximately 155 million share of common stock of common stock , or 1.5 % of our common share outstanding , for approximately $ 3.8 billion at a price per price per share of $ 24.75 . On August 18 , $ 24.75 . On August 18 , 2006 , we announced . On August 18 , 2006 , we announced that the the authorization for the $ 20.0 billion ongoing share repurchase program been increased by approximately $ 16.2 billion . As a result an amount up to $ 36.2 billion through June 30 , $ 36.2 billion through June 30 , 2011 . As of billion through June 30 , 2011 . As of June 30 2011 . As of June 30 , 2008 , approximately $ As of June 30 , 2008 , approximately $ 2.7 billion , 2008 , approximately $ 2.7 billion remained of the $ billion remained of the $ 36.2 billion approved repurchase amount . million ) Year Ended June 30 , 2008 ( 1 ) Year Ended June 30 , 2008 ( 1 ) 2007 ( June 30 , 2008 ( 1 ) 2007 ( 2 ) , 2008 ( 1 ) 2007 ( 2 ) 2006 ( ( 1 ) 2007 ( 2 ) 2006 ( 3 ) ) 2007 ( 2 ) 2006 ( 3 ) Shares Amount ( 2 ) 2006 ( 3 ) Shares Amount Shares Amount Amount Shares Amount First quarter 81 $ 2,348 285 $ 6,965 Amount First quarter 81 $ 2,348 285 $ 6,965 114 $ First quarter 81 $ 2,348 285 $ 6,965 114 $ 3,029 81 $ 2,348 285 $ 6,965 114 $ 3,029 Second quarter $ 2,348 285 $ 6,965 114 $ 3,029 Second quarter 120 285 $ 6,965 114 $ 3,029 Second quarter 120 4,081 205 114 $ 3,029 Second quarter 120 4,081 205 6,037 283 7,666 $ 3,029 Second quarter 120 4,081 205 6,037 283 7,666 Third 3,029 Second quarter 120 4,081 205 6,037 283 7,666 Third quarter Second quarter 120 4,081 205 6,037 283 7,666 Third quarter 30 quarter 120 4,081 205 6,037 283 7,666 Third quarter 30 1,020 120 4,081 205 6,037 283 7,666 Third quarter 30 1,020 238 6,037 283 7,666 Third quarter 30 1,020 238 6,744 181 4,879 283 7,666 Third quarter 30 1,020 238 6,744 181 4,879 Fourth 7,666 Third quarter 30 1,020 238 6,744 181 4,879 Fourth quarter Third quarter 30 1,020 238 6,744 181 4,879 Fourth quarter 171 quarter 30 1,020 238 6,744 181 4,879 Fourth quarter 171 4,975 30 1,020 238 6,744 181 4,879 Fourth quarter 171 4,975 243 6,744 181 4,879 Fourth quarter 171 4,975 243 7,367 176 4,175 181 4,879 Fourth quarter 171 4,975 243 7,367 176 4,175 Total 4,879 Fourth quarter 171 4,975 243 7,367 176 4,175 Total 402 Fourth quarter 171 4,975 243 7,367 176 4,175 Total 402 $ quarter 171 4,975 243 7,367 176 4,175 Total 402 $ 12,424 171 4,975 243 7,367 176 4,175 Total 402 $ 12,424 971 243 7,367 176 4,175 Total 402 $ 12,424 971 $ 27,113 176 4,175 Total 402 $ 12,424 971 $ 27,113 754 $ 4,175 Total 402 $ 12,424 971 $ 27,113 754 $ 19,749 402 $ 12,424 971 $ 27,113 754 $ 19,749 ( 1 $ 12,424 971 $ 27,113 754 $ 19,749 ( 1 ) 971 $ 27,113 754 $ 19,749 ( 1 ) All amount 27,113 754 $ 19,749 ( 1 ) All amount repurchased in amount repurchased in fiscal year 2008 were repurchased under the repurchase Board of Directors on July 20 , 2006 . ( 2 Directors on July 20 , 2006 . ( 2 ) Approximately 20 , 2006 . ( 2 ) Approximately 155 million share . ( 2 ) Approximately 155 million share of common stock common stock for approximately $ 3.8 billion were repurchased under our first quarter of fiscal year 2007 . All other amount repurchased Board of Directors on July 20 , 2006 . ( 3 Directors on July 20 , 2006 . ( 3 ) All 20 , 2006 . ( 3 ) All amount repurchased in amount repurchased in fiscal year 2006 were repurchased under the repurchase Board of Directors on July 20 , 2004 . PAGE 65 Directors on July 20 , 2004 . PAGE 65 Table of 20 , 2004 . PAGE 65 Table of Contents Part II of Contents Part II Item 8 In fiscal year 2008 , Item 8 In fiscal year 2008 , our Board of Directors million ) Payment Date September 12 , 2007 $ 0.11 November Payment Date September 12 , 2007 $ 0.11 November 15 , September 12 , 2007 $ 0.11 November 15 , 2007 $ , 2007 $ 0.11 November 15 , 2007 $ 1,034 December $ 0.11 November 15 , 2007 $ 1,034 December 13 , November 15 , 2007 $ 1,034 December 13 , 2007 December , 2007 $ 1,034 December 13 , 2007 December 19 , $ 1,034 December 13 , 2007 December 19 , 2007 $ December 13 , 2007 December 19 , 2007 $ 0.11 February , 2007 December 19 , 2007 $ 0.11 February 21 , December 19 , 2007 $ 0.11 February 21 , 2008 $ , 2007 $ 0.11 February 21 , 2008 $ 1,023 March $ 0.11 February 21 , 2008 $ 1,023 March 13 , February 21 , 2008 $ 1,023 March 13 , 2008 March , 2008 $ 1,023 March 13 , 2008 March 17 , $ 1,023 March 13 , 2008 March 17 , 2008 $ March 13 , 2008 March 17 , 2008 $ 0.11 May , 2008 March 17 , 2008 $ 0.11 May 15 , March 17 , 2008 $ 0.11 May 15 , 2008 $ , 2008 $ 0.11 May 15 , 2008 $ 1,020 June $ 0.11 May 15 , 2008 $ 1,020 June 12 , May 15 , 2008 $ 1,020 June 12 , 2008 June , 2008 $ 1,020 June 12 , 2008 June 11 , $ 1,020 June 12 , 2008 June 11 , 2008 $ June 12 , 2008 June 11 , 2008 $ 0.11 August , 2008 June 11 , 2008 $ 0.11 August 21 , June 11 , 2008 $ 0.11 August 21 , 2008 $ , 2008 $ 0.11 August 21 , 2008 $ 1,007 ( $ 0.11 August 21 , 2008 $ 1,007 ( 1 ) August 21 , 2008 $ 1,007 ( 1 ) September 11 , 2008 $ 1,007 ( 1 ) September 11 , 2008 1,007 ( 1 ) September 11 , 2008 ( 1 ) 1 ) September 11 , 2008 ( 1 ) The dividend September 11 , 2008 ( 1 ) The dividend declared on The dividend declared on June 11 , 2008 will be paid declared on June 11 , 2008 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2008 . In fiscal a of June 30 , 2008 . In fiscal year 2007 2008 . In fiscal year 2007 , our Board of Directors million ) Payment Date September 13 , 2006 $ 0.10 November Payment Date September 13 , 2006 $ 0.10 November 16 , September 13 , 2006 $ 0.10 November 16 , 2006 $ , 2006 $ 0.10 November 16 , 2006 $ 980 December $ 0.10 November 16 , 2006 $ 980 December 14 , November 16 , 2006 $ 980 December 14 , 2006 December , 2006 $ 980 December 14 , 2006 December 20 , $ 980 December 14 , 2006 December 20 , 2006 $ December 14 , 2006 December 20 , 2006 $ 0.10 February , 2006 December 20 , 2006 $ 0.10 February 15 , December 20 , 2006 $ 0.10 February 15 , 2007 $ , 2006 $ 0.10 February 15 , 2007 $ 978 March $ 0.10 February 15 , 2007 $ 978 March 8 , February 15 , 2007 $ 978 March 8 , 2007 March , 2007 $ 978 March 8 , 2007 March 26 , $ 978 March 8 , 2007 March 26 , 2007 $ March 8 , 2007 March 26 , 2007 $ 0.10 May , 2007 March 26 , 2007 $ 0.10 May 17 , March 26 , 2007 $ 0.10 May 17 , 2007 $ , 2007 $ 0.10 May 17 , 2007 $ 952 June $ 0.10 May 17 , 2007 $ 952 June 14 , May 17 , 2007 $ 952 June 14 , 2007 June , 2007 $ 952 June 14 , 2007 June 27 , $ 952 June 14 , 2007 June 27 , 2007 $ June 14 , 2007 June 27 , 2007 $ 0.10 August , 2007 June 27 , 2007 $ 0.10 August 16 , June 27 , 2007 $ 0.10 August 16 , 2007 $ , 2007 $ 0.10 August 16 , 2007 $ 938 ( $ 0.10 August 16 , 2007 $ 938 ( 1 ) August 16 , 2007 $ 938 ( 1 ) September 13 , 2007 $ 938 ( 1 ) September 13 , 2007 938 ( 1 ) September 13 , 2007 ( 1 ) 1 ) September 13 , 2007 ( 1 ) The dividend September 13 , 2007 ( 1 ) The dividend declared on The dividend declared on June 27 , 2007 wa included in declared on June 27 , 2007 wa included in other current current liability a of June 30 , 2007 . NOTE 17 a of June 30 , 2007 . NOTE 17 OTHER COMPREHENSIVE 30 , 2007 . NOTE 17 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 , 2008 2007 2006 Net Year Ended June 30 , 2008 2007 2006 Net unrealized gain Ended June 30 , 2008 2007 2006 Net unrealized gain on June 30 , 2008 2007 2006 Net unrealized gain on derivative of tax effect of $ 46 in 2008 , $ 66 effect of $ 46 in 2008 , $ 66 in 2007 46 in 2008 , $ 66 in 2007 , and $ 2008 , $ 66 in 2007 , and $ 107 in in 2007 , and $ 107 in 2006 $ 86 $ , and $ 107 in 2006 $ 86 $ 123 $ $ 107 in 2006 $ 86 $ 123 $ 199 Reclassification in 2006 $ 86 $ 123 $ 199 Reclassification adjustment for $ 86 $ 123 $ 199 Reclassification adjustment for gain included tax effect of $ ( 36 ) in 2008 , $ $ ( 36 ) in 2008 , $ ( 59 ) in 2008 , $ ( 59 ) in 2007 , and $ ( 59 ) in 2007 , and $ ( 66 2007 , and $ ( 66 ) in 2006 ( 68 $ ( 66 ) in 2006 ( 68 ) ( 109 66 ) in 2006 ( 68 ) ( 109 ) ( 2006 ( 68 ) ( 109 ) ( 123 ) Net ) ( 109 ) ( 123 ) Net unrealized gain on unrealized gain on derivative instrument 18 14 76 Net unrealized gain gain on derivative instrument 18 14 76 Net unrealized gain ( on derivative instrument 18 14 76 Net unrealized gain ( loss tax effect of $ ( 234 ) in 2008 , $ $ ( 234 ) in 2008 , $ 393 in 2007 ) in 2008 , $ 393 in 2007 , and $ 2008 , $ 393 in 2007 , and $ ( 105 2007 , and $ ( 105 ) in 2006 ( 435 $ ( 105 ) in 2006 ( 435 ) 730 ( 105 ) in 2006 ( 435 ) 730 ( 195 ) in 2006 ( 435 ) 730 ( 195 ) Reclassification adjustment ( 435 ) 730 ( 195 ) Reclassification adjustment for gain tax effect of $ ( 117 ) in 2008 , $ $ ( 117 ) in 2008 , $ ( 217 ) in 2008 , $ ( 217 ) in 2007 , and $ ( 217 ) in 2007 , and $ ( 47 2007 , and $ ( 47 ) in 2006 ( 218 $ ( 47 ) in 2006 ( 218 ) ( 404 47 ) in 2006 ( 218 ) ( 404 ) ( 2006 ( 218 ) ( 404 ) ( 87 ) Net ) ( 404 ) ( 87 ) Net unrealized gain ( loss ) on investment ( 653 ) 326 ( 282 ) on investment ( 653 ) 326 ( 282 ) Translation adjustment ( 653 ) 326 ( 282 ) Translation adjustment and other ) Translation adjustment and other 121 85 9 Other comprehensive income Translation adjustment and other 121 85 9 Other comprehensive income ( adjustment and other 121 85 9 Other comprehensive income ( loss ( loss ) $ ( 514 ) $ 425 $ ( $ ( 514 ) $ 425 $ ( 197 ) The ) $ 425 $ ( 197 ) The component of accumulated million ) Year Ended June 30 , 2008 2007 2006 Net Year Ended June 30 , 2008 2007 2006 Net unrealized gain Ended June 30 , 2008 2007 2006 Net unrealized gain on June 30 , 2008 2007 2006 Net unrealized gain on derivative gain on derivative instrument $ 135 $ 117 $ 103 Net derivative instrument $ 135 $ 117 $ 103 Net unrealized gain $ 135 $ 117 $ 103 Net unrealized gain on investment Net unrealized gain on investment 735 1,388 1,062 Translation adjustment and unrealized gain on investment 735 1,388 1,062 Translation adjustment and other gain on investment 735 1,388 1,062 Translation adjustment and other 270 1,062 Translation adjustment and other 270 149 64 Accumulated other comprehensive Translation adjustment and other 270 149 64 Accumulated other comprehensive income adjustment and other 270 149 64 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,140 $ 1,654 $ 1,229 PAGE comprehensive income $ 1,140 $ 1,654 $ 1,229 PAGE 66 Table $ 1,140 $ 1,654 $ 1,229 PAGE 66 Table of Contents $ 1,654 $ 1,229 PAGE 66 Table of Contents Part II of Contents Part II Item 8 NOTE 18 EMPLOYEE STOCK AND Part II Item 8 NOTE 18 EMPLOYEE STOCK AND SAVINGS PLANS : ( In million ) 2008 2007 2006 Total stock-based compensation ( In million ) 2008 2007 2006 Total stock-based compensation $ In million ) 2008 2007 2006 Total stock-based compensation $ 1,479 2006 Total stock-based compensation $ 1,479 $ 1,550 $ 1,715 Income stock-based compensation $ 1,479 $ 1,550 $ 1,715 Income tax benefit $ 1,479 $ 1,550 $ 1,715 Income tax benefit related to related to stock-based compensation $ 518 $ 542 $ 600 Employee stock-based compensation $ 518 $ 542 $ 600 Employee Stock Purchase $ 518 $ 542 $ 600 Employee Stock Purchase Plan . accordance with SFAS No . 123 ( R ) . Shares employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation ( Shares In million ) 2008 2007 2006 Shares purchased 18 Shares In million ) 2008 2007 2006 Shares purchased 18 17 In million ) 2008 2007 2006 Shares purchased 18 17 17 2008 2007 2006 Shares purchased 18 17 17 Average price per 2007 2006 Shares purchased 18 17 17 Average price per share 2006 Shares purchased 18 17 17 Average price per share $ Average price per share $ 26.78 $ 25.36 $ 23.02 At per share $ 26.78 $ 25.36 $ 23.02 At June 30 $ 26.78 $ 25.36 $ 23.02 At June 30 , 2008 25.36 $ 23.02 At June 30 , 2008 , 107 million 23.02 At June 30 , 2008 , 107 million share were June 30 , 2008 , 107 million share were reserved for States that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 238 million , $ 218 million $ 238 million , $ 218 million , and $ 178 218 million , and $ 178 million in fiscal year 2008 178 million in fiscal year 2008 , 2007 , and 2006 in fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Matching contribution and advisor . At June 30 , 2008 , an aggregate . At June 30 , 2008 , an aggregate of 786 2008 , an aggregate of 786 million share were authorized for SPSAs issued in fiscal year 2004 , 2005 , and 2006 in fiscal year 2004 , 2005 , and 2006 wa July 2004 , 2005 , and 2006 wa July 1 , 2003 , and 2006 wa July 1 , 2003 through June 30 2006 wa July 1 , 2003 through June 30 , 2006 1 , 2003 through June 30 , 2006 ( January 1 2003 through June 30 , 2006 ( January 1 , 2004 30 , 2006 ( January 1 , 2004 through June 30 2006 ( January 1 , 2004 through June 30 , 2006 1 , 2004 through June 30 , 2006 for certain executive 2004 through June 30 , 2006 for certain executive officer ) SAs to be issued wa 37 million , based on the each of the fiscal year 2007 and 2008 . An additional the fiscal year 2007 and 2008 . An additional one-third of will vest in fiscal year 2009 . Because the SPSAs covered SPSAs issued in fiscal year 2006 were given only to newly granted SPSAs for fiscal year 2007 and 2008 with performance period for fiscal year 2007 and 2008 with performance period of July with performance period of July 1 , 2006 through June 30 period of July 1 , 2006 through June 30 , 2007 1 , 2006 through June 30 , 2007 and July 1 2006 through June 30 , 2007 and July 1 , 2007 30 , 2007 and July 1 , 2007 through June 30 2007 and July 1 , 2007 through June 30 , 2008 1 , 2007 through June 30 , 2008 , respectively . 2007 through June 30 , 2008 , respectively . At the by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is number of share , approximately 15 % of the total target the end of the PAGE 67 Table of Contents Part II of Contents Part II Item 8 performance period , and an end of the fiscal year 2007 performance period , the Compensation SAs to be issued wa 11 million , based on the issued for the fiscal year 2008 performance period will be determined first quarter of fiscal year 2009 . We measure the fair : ( In million ) 2008 2007 2006 Dividend per share ( In million ) 2008 2007 2006 Dividend per share ( In million ) 2008 2007 2006 Dividend per share ( quarterly ( quarterly amount ) $ 0.10 - $ 0.11 $ 0.09 ) $ 0.10 - $ 0.11 $ 0.09 - $ 0.10 0.10 - $ 0.11 $ 0.09 - $ 0.10 $ 0.08 0.11 $ 0.09 - $ 0.10 $ 0.08 - $ 0.09 0.09 - $ 0.10 $ 0.08 - $ 0.09 Interest rate 0.10 $ 0.08 - $ 0.09 Interest rate range 2.5 % $ 0.09 Interest rate range 2.5 % - 4.9 % 4.3 rate range 2.5 % - 4.9 % 4.3 % - 5.3 2.5 % - 4.9 % 4.3 % - 5.3 % 3.2 4.9 % 4.3 % - 5.3 % 3.2 % - 5.3 4.3 % - 5.3 % 3.2 % - 5.3 % During 5.3 % 3.2 % - 5.3 % During fiscal year 2008 5.3 % During fiscal year 2008 , the following activity occurred Fair Value Year Ended June 30 , 2008 Stock award : Year Ended June 30 , 2008 Stock award : Nonvested balance balance , beginning of year 124 $ 24.67 Granted 71 27.83 beginning of year 124 $ 24.67 Granted 71 27.83 Vested ( year 124 $ 24.67 Granted 71 27.83 Vested ( 33 ) 124 $ 24.67 Granted 71 27.83 Vested ( 33 ) 24.49 Granted 71 27.83 Vested ( 33 ) 24.49 Forfeited ( 9 27.83 Vested ( 33 ) 24.49 Forfeited ( 9 ) 25.61 33 ) 24.49 Forfeited ( 9 ) 25.61 Nonvested balance , 24.49 Forfeited ( 9 ) 25.61 Nonvested balance , end of balance , end of year 153 $ 26.12 Shared performance stock end of year 153 $ 26.12 Shared performance stock award : balance , beginning of year 33 $ 24.11 Granted 19 27.82 beginning of year 33 $ 24.11 Granted 19 27.82 Vested ( year 33 $ 24.11 Granted 19 27.82 Vested ( 14 ) 33 $ 24.11 Granted 19 27.82 Vested ( 14 ) 24.07 Granted 19 27.82 Vested ( 14 ) 24.07 Forfeited ( 2 27.82 Vested ( 14 ) 24.07 Forfeited ( 2 ) 24.44 14 ) 24.07 Forfeited ( 2 ) 24.44 Nonvested balance , 24.07 Forfeited ( 2 ) 24.44 Nonvested balance , end of balance , end of year 36 $ 26.14 As of June end of year 36 $ 26.14 As of June 30 , $ 26.14 As of June 30 , 2008 , there wa As of June 30 , 2008 , there wa $ 3.2 2008 , there wa $ 3.2 billion and $ 586 million $ 3.2 billion and $ 586 million of total unrecognized compensation a weighted average period of 3.4 year and 2.8 year , period of 3.4 year and 2.8 year , respectively . SPSAs SPSAs granted in fiscal year 2008 include adjustment for estimated performance target . During fiscal year 2007 and 2006 , the following During fiscal year 2007 and 2006 , the following activity occurred , except fair value ) 2007 2006 Stock award granted 57 except fair value ) 2007 2006 Stock award granted 57 47 2007 2006 Stock award granted 57 47 Weighted average grant-date fair 2006 Stock award granted 57 47 Weighted average grant-date fair value average grant-date fair value $ 25.15 $ 24.70 Shared performance stock fair value $ 25.15 $ 24.70 Shared performance stock award granted Shared performance stock award granted 11 3 Weighted average grant-date fair performance stock award granted 11 3 Weighted average grant-date fair value average grant-date fair value $ 25.18 $ 24.80 Stock Options . fair value $ 25.18 $ 24.80 Stock Options . In fiscal Options . In fiscal year 2004 , we began granting employee under our non-employee director PAGE 68 Table of Contents Part II of Contents Part II Item 8 stock plan . Nonqualified and plan . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and grant . Options granted after 2001 vest over four and one-half business acquisition during fiscal year 2008 , 2007 , and 2006 during fiscal year 2008 , 2007 , and 2006 , respectively 2008 , 2007 , and 2006 , respectively . Employee stock million ) Balance , June 30 , 2007 524 $ 27.86 Balance , June 30 , 2007 524 $ 27.86 Granted 10 , June 30 , 2007 524 $ 27.86 Granted 10 8.63 30 , 2007 524 $ 27.86 Granted 10 8.63 Exercised ( 2007 524 $ 27.86 Granted 10 8.63 Exercised ( 121 ) 524 $ 27.86 Granted 10 8.63 Exercised ( 121 ) 25.06 Granted 10 8.63 Exercised ( 121 ) 25.06 Canceled ( 48 8.63 Exercised ( 121 ) 25.06 Canceled ( 48 ) 32.05 121 ) 25.06 Canceled ( 48 ) 32.05 Forfeited ( 1 25.06 Canceled ( 48 ) 32.05 Forfeited ( 1 ) 15.58 48 ) 32.05 Forfeited ( 1 ) 15.58 Balance , June 32.05 Forfeited ( 1 ) 15.58 Balance , June 30 , ) 15.58 Balance , June 30 , 2008 364 $ 28.12 Balance , June 30 , 2008 364 $ 28.12 3.01 $ , June 30 , 2008 364 $ 28.12 3.01 $ 1,029 30 , 2008 364 $ 28.12 3.01 $ 1,029 Exercisable , , 2008 364 $ 28.12 3.01 $ 1,029 Exercisable , June 364 $ 28.12 3.01 $ 1,029 Exercisable , June 30 , $ 1,029 Exercisable , June 30 , 2008 357 $ 28.12 Exercisable , June 30 , 2008 357 $ 28.12 2.95 $ , June 30 , 2008 357 $ 28.12 2.95 $ 899 30 , 2008 357 $ 28.12 2.95 $ 899 Options outstanding , 2008 357 $ 28.12 2.95 $ 899 Options outstanding a 357 $ 28.12 2.95 $ 899 Options outstanding a of June Options outstanding a of June 30 , 2008 include approximately 12 a of June 30 , 2008 include approximately 12 million option 30 , 2008 include approximately 12 million option that were granted average exercise price of $ 28.12 presented . These option have exercise price range of $ 0 to $ 150.93 and a of $ 0 to $ 150.93 and a weighted average exercise average exercise price of $ 9.03 . During fiscal year 2008 9.03 . During fiscal year 2008 , 2007 , and 2006 During fiscal year 2008 , 2007 , and 2006 the following 2008 , 2007 , and 2006 the following activity occurred under : ( In million ) 2008 2007 2006 Total intrinsic value ( In million ) 2008 2007 2006 Total intrinsic value of In million ) 2008 2007 2006 Total intrinsic value of stock of stock option exercised $ 1,042 $ 818 $ 491 Total option exercised $ 1,042 $ 818 $ 491 Total fair value $ 1,042 $ 818 $ 491 Total fair value of stock of stock award vested $ 804 $ 566 $ 377 Total award vested $ 804 $ 566 $ 377 Total fair value $ 804 $ 566 $ 377 Total fair value of shared performance stock award vested $ 336 $ 292 $ – Cash award vested $ 336 $ 292 $ – Cash received and stock option exercise were $ 3.0 billion and $ 365 million $ 3.0 billion and $ 365 million , respectively , for respectively , for fiscal year 2008 . NOTE 19 SEGMENT INFORMATION fiscal year 2008 . NOTE 19 SEGMENT INFORMATION Segment revenue and million ) Year Ended June 30 , 2008 2007 2006 Revenue Year Ended June 30 , 2008 2007 2006 Revenue : Client Ended June 30 , 2008 2007 2006 Revenue : Client $ June 30 , 2008 2007 2006 Revenue : Client $ 16,472 2006 Revenue : Client $ 16,472 $ 14,844 $ 13,077 Server : Client $ 16,472 $ 14,844 $ 13,077 Server and Tools $ 16,472 $ 14,844 $ 13,077 Server and Tools 13,189 11,184 $ 13,077 Server and Tools 13,189 11,184 9,670 Online Services Business 13,077 Server and Tools 13,189 11,184 9,670 Online Services Business 3,214 Server and Tools 13,189 11,184 9,670 Online Services Business 3,214 2,441 11,184 9,670 Online Services Business 3,214 2,441 2,303 Microsoft Business Division 9,670 Online Services Business 3,214 2,441 2,303 Microsoft Business Division 18,937 Online Services Business 3,214 2,441 2,303 Microsoft Business Division 18,937 16,404 2,441 2,303 Microsoft Business Division 18,937 16,404 14,461 Entertainment and Devices 2,303 Microsoft Business Division 18,937 16,404 14,461 Entertainment and Devices Division Microsoft Business Division 18,937 16,404 14,461 Entertainment and Devices Division 8,139 14,461 Entertainment and Devices Division 8,139 6,066 4,761 Unallocated and other Entertainment and Devices Division 8,139 6,066 4,761 Unallocated and other 469 and Devices Division 8,139 6,066 4,761 Unallocated and other 469 183 6,066 4,761 Unallocated and other 469 183 10 Consolidated $ 60,420 4,761 Unallocated and other 469 183 10 Consolidated $ 60,420 $ Unallocated and other 469 183 10 Consolidated $ 60,420 $ 51,122 469 183 10 Consolidated $ 60,420 $ 51,122 $ 44,282 PAGE 10 Consolidated $ 60,420 $ 51,122 $ 44,282 PAGE 69 Table $ 60,420 $ 51,122 $ 44,282 PAGE 69 Table of Contents $ 51,122 $ 44,282 PAGE 69 Table of Contents Part II of Contents Part II Item 8 ( In million ) Year million ) Year Ended June 30 , 2008 2007 2006 Operating Year Ended June 30 , 2008 2007 2006 Operating Income ( Ended June 30 , 2008 2007 2006 Operating Income ( Loss June 30 , 2008 2007 2006 Operating Income ( Loss ) Loss ) : Client $ 12,537 $ 11,338 $ 10,176 Server : Client $ 12,537 $ 11,338 $ 10,176 Server and Tools $ 12,537 $ 11,338 $ 10,176 Server and Tools 4,261 3,593 $ 10,176 Server and Tools 4,261 3,593 2,980 Online Services Business 10,176 Server and Tools 4,261 3,593 2,980 Online Services Business ( Server and Tools 4,261 3,593 2,980 Online Services Business ( 1,309 2,980 Online Services Business ( 1,309 ) ( 630 ) 194 Business ( 1,309 ) ( 630 ) 194 Microsoft Business Division 1,309 ) ( 630 ) 194 Microsoft Business Division 12,182 10,696 ) 194 Microsoft Business Division 12,182 10,696 9,567 Entertainment and Devices 194 Microsoft Business Division 12,182 10,696 9,567 Entertainment and Devices Division Microsoft Business Division 12,182 10,696 9,567 Entertainment and Devices Division 267 9,567 Entertainment and Devices Division 267 ( 2,016 ) ( 1,329 and Devices Division 267 ( 2,016 ) ( 1,329 ) Reconciling 267 ( 2,016 ) ( 1,329 ) Reconciling amount ( 5,446 1,329 ) Reconciling amount ( 5,446 ) ( 4,457 ) ( amount ( 5,446 ) ( 4,457 ) ( 5,116 ) Consolidated ) ( 4,457 ) ( 5,116 ) Consolidated $ 22,492 $ ( 5,116 ) Consolidated $ 22,492 $ 18,524 $ 16,472 SFAS ) Consolidated $ 22,492 $ 18,524 $ 16,472 SFAS No . $ 22,492 $ 18,524 $ 16,472 SFAS No . 131 , $ 16,472 SFAS No . 131 , Disclosures about Segments of and Devices Division – Xbox 360 console and game ; Xbox . Management will continually PAGE 70 Table of Contents Part II of Contents Part II Item 8 evaluate the alignment of product million ) Year Ended June 30 , 2008 2007 2006 Summary Year Ended June 30 , 2008 2007 2006 Summary of reconciling Ended June 30 , 2008 2007 2006 Summary of reconciling amount June 30 , 2008 2007 2006 Summary of reconciling amount : amount : Corporate-level activity ( 1 ) $ ( 6,704 ) ( 1 ) $ ( 6,704 ) $ ( 4,777 ) ( 6,704 ) $ ( 4,777 ) $ ( 4,804 ) ( 4,777 ) $ ( 4,804 ) Stock-based compensation expense 844 4,804 ) Stock-based compensation expense 844 123 ( 173 ) Revenue ) Stock-based compensation expense 844 123 ( 173 ) Revenue reconciling compensation expense 844 123 ( 173 ) Revenue reconciling amount 368 173 ) Revenue reconciling amount 368 120 ( 7 ) Other ) Revenue reconciling amount 368 120 ( 7 ) Other 46 reconciling amount 368 120 ( 7 ) Other 46 77 ( 120 ( 7 ) Other 46 77 ( 132 ) Total ( 7 ) Other 46 77 ( 132 ) Total $ ) Other 46 77 ( 132 ) Total $ ( 5,446 132 ) Total $ ( 5,446 ) $ ( 4,457 ) ( 5,446 ) $ ( 4,457 ) $ ( 5,116 ) ( 4,457 ) $ ( 5,116 ) ( 1 ) Corporate-level $ ( 5,116 ) ( 1 ) Corporate-level activity excludes stock-based customer accounted for more than 10 % of fiscal year 2008 10 % of fiscal year 2008 or fiscal year 2007 revenue year 2008 or fiscal year 2007 revenue . Sales to Dell it subsidiary accounted for approximately 11 % of fiscal year 2006 11 % of fiscal year 2006 revenue . These sale were million ) Year Ended June 30 , 2008 2007 2006 United Year Ended June 30 , 2008 2007 2006 United States ( Ended June 30 , 2008 2007 2006 United States ( 1 June 30 , 2008 2007 2006 United States ( 1 ) 2007 2006 United States ( 1 ) $ 35,928 $ 31,346 States ( 1 ) $ 35,928 $ 31,346 $ 27,957 Other 1 ) $ 35,928 $ 31,346 $ 27,957 Other country 24,492 $ 35,928 $ 31,346 $ 27,957 Other country 24,492 19,776 16,325 31,346 $ 27,957 Other country 24,492 19,776 16,325 Total $ 60,420 $ 27,957 Other country 24,492 19,776 16,325 Total $ 60,420 $ 27,957 Other country 24,492 19,776 16,325 Total $ 60,420 $ 51,122 24,492 19,776 16,325 Total $ 60,420 $ 51,122 $ 44,282 ( 16,325 Total $ 60,420 $ 51,122 $ 44,282 ( 1 ) $ 60,420 $ 51,122 $ 44,282 ( 1 ) Includes shipment $ 51,122 $ 44,282 ( 1 ) Includes shipment to customer million ) Year Ended June 30 , 2008 2007 United States Year Ended June 30 , 2008 2007 United States $ 19,129 Ended June 30 , 2008 2007 United States $ 19,129 $ 2008 2007 United States $ 19,129 $ 9,132 Other country 1,194 United States $ 19,129 $ 9,132 Other country 1,194 856 Total 19,129 $ 9,132 Other country 1,194 856 Total $ 20,323 $ $ 9,132 Other country 1,194 856 Total $ 20,323 $ 9,988 country 1,194 856 Total $ 20,323 $ 9,988 PAGE 71 Table 856 Total $ 20,323 $ 9,988 PAGE 71 Table of Contents $ 20,323 $ 9,988 PAGE 71 Table of Contents Part II of Contents Part II Item 8 QUARTERLY INFORMATION ( In million Unaudited ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal year 31 Mar . 31 June 30 Total Fiscal year 2008 Revenue June 30 Total Fiscal year 2008 Revenue $ 13,762 $ 16,367 Fiscal year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 ( 11,940 12,971 48,822 Net income 4,289 4,707 ( 1 ) 4,388 12,971 48,822 Net income 4,289 4,707 ( 1 ) 4,388 ( Net income 4,289 4,707 ( 1 ) 4,388 ( 2 ) 4,289 4,707 ( 1 ) 4,388 ( 2 ) 4,297 17,681 ( 1 ) 4,388 ( 2 ) 4,297 17,681 Basic earnings ) 4,388 ( 2 ) 4,297 17,681 Basic earnings per share 4,388 ( 2 ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( 3 ) 2007 Revenue $ 10,811 $ 12,542 ( 3 ) $ 14,398 $ 10,811 $ 12,542 ( 3 ) $ 14,398 ( 4 12,542 ( 3 ) $ 14,398 ( 4 ) $ 13,371 3 ) $ 14,398 ( 4 ) $ 13,371 $ 51,122 14,398 ( 4 ) $ 13,371 $ 51,122 Gross profit 9,115 4 ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( 6 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( 6 ) 51,122 Gross profit 9,115 8,922 12,258 10,134 ( 6 ) 40,429 Gross profit 9,115 8,922 12,258 10,134 ( 6 ) 40,429 Net 9,115 8,922 12,258 10,134 ( 6 ) 40,429 Net income 3,478 12,258 10,134 ( 6 ) 40,429 Net income 3,478 2,626 4,926 6 ) 40,429 Net income 3,478 2,626 4,926 ( 5 ) ) 40,429 Net income 3,478 2,626 4,926 ( 5 ) 3,035 40,429 Net income 3,478 2,626 4,926 ( 5 ) 3,035 14,065 income 3,478 2,626 4,926 ( 5 ) 3,035 14,065 Basic earnings 2,626 4,926 ( 5 ) 3,035 14,065 Basic earnings per share 4,926 ( 5 ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year earnings per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 per share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue share 0.35 0.26 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 0.50 0.31 1.42 Fiscal year 2006 Revenue $ 9,741 $ 11,837 Fiscal year 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 2006 Revenue $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ $ 9,741 $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross $ 11,837 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 $ 10,900 $ 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 11,804 $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net $ 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 44,282 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 Gross profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( profit 8,488 9,598 8,872 9,674 36,632 Net income 3,141 ( 7 8,872 9,674 36,632 Net income 3,141 ( 7 ) 3,653 2,977 36,632 Net income 3,141 ( 7 ) 3,653 2,977 ( 8 income 3,141 ( 7 ) 3,653 2,977 ( 8 ) 2,828 3,141 ( 7 ) 3,653 2,977 ( 8 ) 2,828 ( 7 ) 3,653 2,977 ( 8 ) 2,828 ( 9 ) 3,653 2,977 ( 8 ) 2,828 ( 9 ) 12,599 Basic ( 8 ) 2,828 ( 9 ) 12,599 Basic earnings per ) 2,828 ( 9 ) 12,599 Basic earnings per share 0.29 12,599 Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted Basic earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings earnings per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per per share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share share 0.29 0.35 0.29 0.28 1.21 Diluted earnings per share 0.29 1.21 Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 ( Diluted earnings per share 0.29 0.34 0.29 0.28 1.20 ( 1 earnings per share 0.29 0.34 0.29 0.28 1.20 ( 1 ) per share 0.29 0.34 0.29 0.28 1.20 ( 1 ) Includes share 0.29 0.34 0.29 0.28 1.20 ( 1 ) Includes charge 0.34 0.29 0.28 1.20 ( 1 ) Includes charge of $ ) Includes charge of $ 237 million ( pre-tax ) related various legal matter . ( 2 ) Includes charge of $ ) Includes charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . ( 3 ) Reflects in February 2008 . ( 3 ) Reflects $ 1.6 billion ( 3 ) Reflects $ 1.6 billion of revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( Microsoft Office system . ( 4 ) Includes $ 1.6 billion ( 4 ) Includes $ 1.6 billion of revenue discussed above revenue discussed above . ( 5 ) Includes charge of $ ) Includes charge of $ 296 million ( pre-tax ) related various legal matter . ( 6 ) Includes $ 1.1 billion ( 6 ) Includes $ 1.1 billion ( pre-tax ) charge charge related to the Xbox 360 warranty policy , inventory write-down and product return . ( 7 ) Includes charge of $ ) Includes charge of $ 361 million ( pre-tax ) related with RealNetworks , Inc. ( 8 ) Includes charge of $ ) Includes charge of $ 397 million ( pre-tax ) related various legal matter . ( 9 ) Includes charge of $ ) Includes charge of $ 351 million ( € 281 million $ 351 million ( € 281 million ) a a result the European Commission in July 2006 . PAGE 72 Table of in July 2006 . PAGE 72 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2008 and 2007 , a of June 30 , 2008 and 2007 , and the June 30 , 2008 and 2007 , and the related consolidated in the period ended June 30 , 2008 . These financial period ended June 30 , 2008 . These financial statement are and subsidiary a of June 30 , 2008 and 2007 , a of June 30 , 2008 and 2007 , and the June 30 , 2008 and 2007 , and the result of in the period ended June 30 , 2008 , in conformity period ended June 30 , 2008 , in conformity with accounting . As discussed in Note 1 to the financial statement , financial statement , on July 1 , 2007 the Company adopted , on July 1 , 2007 the Company adopted the provision Standards Board Interpretation No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 and Emerging Issues Task Force Task Force Issue No . 06-2 , Accounting for Sabbatical Leave to FASB Statement No . 43 . We have also audited financial reporting a of June 30 , 2008 , based on a of June 30 , 2008 , based on the criterion and our report dated July 31 , 2008 expressed an unqualified report dated July 31 , 2008 expressed an unqualified opinion on LLP Seattle , Washington July 31 , 2008 PAGE 73 Table , Washington July 31 , 2008 PAGE 73 Table of Contents July 31 , 2008 PAGE 73 Table of Contents Part II of Contents Part II Item 9 , 9A ITEM 9 . Part II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2008 . There were a of June 30 , 2008 . There were no change during the quarter ended June 30 , 2008 that have materially quarter ended June 30 , 2008 that have materially affected , financial reporting a of June 30 , 2008 ; their report a of June 30 , 2008 ; their report is included report is included in Item 9A . PAGE 74 Table of in Item 9A . PAGE 74 Table of Contents Part II of Contents Part II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2008 , based on a of June 30 , 2008 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2008 , based on a of June 30 , 2008 , based on the criterion for the year ended June 30 , 2008 of the Company year ended June 30 , 2008 of the Company and our and our report dated July 31 , 2008 expressed an unqualified report dated July 31 , 2008 expressed an unqualified opinion on Standards Board Interpretation No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 and Emerging Issues Task Force Task Force Issue No . 06-2 , Accounting for Sabbatical Leave to FASB Statement No . 43 . /s/ D ELOITTE & LLP Seattle , Washington July 31 , 2008 PAGE 75 Table , Washington July 31 , 2008 PAGE 75 Table of Contents July 31 , 2008 PAGE 75 Table of Contents Part II Part II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this report . Information Shareholders to be held November 19 , 2008 ( the “ be held November 19 , 2008 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND herein by reference . PAGE 76 Table of Contents Part IV of Contents Part IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K. Financial statement schedule have been Period ending Exhibit Filing date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation 10-K 3.2 Bylaws of Microsoft Corporation 10-K 6/30/07 3.2 8/3/07 10.1 * Bylaws of Microsoft Corporation 10-K 6/30/07 3.2 8/3/07 10.1 * Microsoft of Microsoft Corporation 10-K 6/30/07 3.2 8/3/07 10.1 * Microsoft Corporation Microsoft Corporation 10-K 6/30/07 3.2 8/3/07 10.1 * Microsoft Corporation 2001 Corporation 10-K 6/30/07 3.2 8/3/07 10.1 * Microsoft Corporation 2001 Stock 8/3/07 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/21/06 10.2 * Microsoft Corporation 1991 Stock 7/21/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/21/06 10.3 * Microsoft Corporation 1999 Stock 7/21/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Stock Option Option Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Plan for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation for Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Non-Employee Directors 8-K 10.4 11/15/04 10.5 * Microsoft Corporation Stock Option Plan for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft for Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation Consultants and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 and Advisors 8-K 10.5 11/15/04 10.6 * Microsoft Corporation 2003 Employee 11/15/04 10.6 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Plan 10-K 6/30/04 10.6 9/1/04 10.7 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Deferred Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Compensation Plan S-8 99.1 2/28/06 10.8 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.9 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.9 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table 2006 performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of performance period 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of Contents 10-K 6/30/04 10.10 9/1/04 PAGE 77 Table of Contents Part IV of Contents Part IV Item 15 Filed herewith Incorporated by reference Period ending Exhibit Filing date 10.11 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.12 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.13 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June Directors 10-K 6/30/04 10.13 9/1/04 10.14 Trust Agreement dated June 1 10.14 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY of Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement a trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated trustee ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June ) 10-K 6/30/02 10.8 9/6/02 10.15 Trust Agreement dated June 30 10.15 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Western Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Company a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation a trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred trustee 10-K 6/30/03 10.8 9/5/03 10.16 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of Shared Non-Employee Directors S-8 99.2 2/28/06 10.17 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2007 performance period 10-K 6/30/07 10.17 fiscal year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.18 * year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.18 * Form 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.18 * Form of performance period 10-K 6/30/07 10.17 8/3/07 10.18 * Form of Shared period 10-K 6/30/07 10.17 8/3/07 10.18 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2008 performance period 10-Q 12/31/07 10.18 fiscal year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 21 Subsidiaries year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 21 Subsidiaries of 2008 performance period 10-Q 12/31/07 10.18 1/24/08 21 Subsidiaries of Registrant performance period 10-Q 12/31/07 10.18 1/24/08 21 Subsidiaries of Registrant X period 10-Q 12/31/07 10.18 1/24/08 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X * Indicates a management compensatory plan or arrangement PAGE 78 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 31 , 2008 . M ICROSOFT , on July 31 , 2008 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 31 , 2008 . Signature Title indicated on July 31 , 2008 . Signature Title /s/ W Principal Accounting Officer ) PAGE 79 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-09-158735/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-09-158735/full-submission.txt new file mode 100644 index 0000000..a74d046 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-09-158735/full-submission.txt @@ -0,0 +1 @@ +Exchange Commission Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED JUNE 30 , 2009 OR ¨ TRANSITION YEAR ENDED JUNE 30 , 2009 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM FROM TO COMMISSION FILE NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( NUMBER 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/msft REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/msft Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/msft Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No submitted and posted to Rule 405 of Regulation S-T ( §229.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2008 , the aggregate As of December 31 , 2008 , the aggregate market value of the registrant wa $ 149,769,380,603 based on the closing sale System . As of July 27 , 2009 , there were As of July 27 , 2009 , there were 8,910,673,817 share , 2009 , there were 8,910,673,817 share of common stock outstanding to be held on November 19 , 2009 are incorporated by held on November 19 , 2009 are incorporated by reference into of Contents Microsoft Corporation FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2009 INDEX PART I Year Ended June 30 , 2009 INDEX PART I Item 1. 2009 INDEX PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 11 Item 1A . Risk Factors of the Registrant 11 Item 1A . Risk Factors 13 Item Item 1A . Risk Factors 13 Item 1B . Unresolved Staff . Risk Factors 13 Item 1B . Unresolved Staff Comments 18 1B . Unresolved Staff Comments 18 Item 2 . Properties 18 Unresolved Staff Comments 18 Item 2 . Properties 18 Item 3 18 Item 2 . Properties 18 Item 3 . Legal Proceedings 2 . Properties 18 Item 3 . Legal Proceedings 18 Item Item 3 . Legal Proceedings 18 Item 4 . Submission of . Legal Proceedings 18 Item 4 . Submission of Matters to a Vote of Security Holders 18 PART II Item 5 . Holders 18 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 19 Item 6 . Selected Financial of Equity Securities 19 Item 6 . Selected Financial Data 20 6 . Selected Financial Data 20 Item 7 . Management ’ Selected Financial Data 20 Item 7 . Management ’ s Discussion Condition and Results of Operations 21 Item 7A . Quantitative and Results of Operations 21 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 42 Item 8 . Financial Statements about Market Risk 42 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 43 Item 9 . Changes in and Supplementary Data 43 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 82 Item 9A . Controls and and Financial Disclosure 82 Item 9A . Controls and Procedures 82 9A . Controls and Procedures 82 Report of Management on Internal Internal Control over Financial Reporting 82 Report of Independent Registered Public Independent Registered Public Accounting Firm 83 Item 9B . Other Information Public Accounting Firm 83 Item 9B . Other Information 84 PART Item 9B . Other Information 84 PART III Item 10 . Information 84 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 84 Item 11 . Executive Compensation and Corporate Governance 84 Item 11 . Executive Compensation 84 Item Item 11 . Executive Compensation 84 Item 12 . Security Ownership . Executive Compensation 84 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 84 Item 13 . Certain Relationships Related Stockholder Matters 84 Item 13 . Certain Relationships and Related Transactions , and Director Independence 84 Item 14 . Principal Accounting and Director Independence 84 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 84 PART IV Item 15 . Services 84 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 85 Signatures 88 PAGE 2 Table Financial Statement Schedules 85 Signatures 88 PAGE 2 Table of Contents Schedules 85 Signatures 88 PAGE 2 Table of Contents Part I of Contents Part I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear to Part I , Item 1A ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is the company wa founded in 1975 , we have worked to have office in more than 100 country . We generate revenue sell hardware including the Xbox 360 video game console , the resource within business . PAGE 3 Table of Contents Part I of Contents Part I Item 1 Due to our integrated business OEM channel account for over 80 % of total Client revenue of revenue in fiscal year 2009 came from sale of Windows wa released in fiscal year 2007 . Windows XP operating system in China ) . Windows 7 , the latest version of released to manufacturing in July 2009 and is expected to be be generally available on October 22 , 2009 . Client offering available on October 22 , 2009 . Client offering consist of and operation , service-oriented PAGE 4 Table of Contents Part I of Contents Part I Item 1 architecture platform , and security Client platform product . Approximately 50 % of Server and Tools multi-year licensing agreement , approximately 20 % is purchased through fully licensing program , and approximately 10 % come from license sold support service . Windows Server 2008 R2 , the latest version released to manufacturing in July 2009 and is expected to be be generally available in September 2009 . Products and Services : company focused on the Java 2 Platform Enterprise Edition ( J2EE future . During fiscal year 2009 , we launched new release advertising platform , adCenter PAGE 5 Table of Contents Part I of Contents Part I Item 1 and adExpert , and launched offering , which generate over 90 % of MBD revenue , and OEM revenue . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Dynamics CRM Online . PAGE 6 Table of Contents Part I of Contents Part I Item 1 Competition Competitors to the Microsoft . Web-based offering such a 37Signals , Adobe , AjaxWrite , system . Products : Xbox 360 console and game ; Xbox game console average five to 10 year . We released Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success and peripheral . We PAGE 7 Table of Contents Part I of Contents Part I Item 1 think the Xbox 360 is Item 1 think the Xbox 360 is positioned well against competitive our manufacturing activity for Xbox 360 and related game , Zune limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from a single supplier AND DEVELOPMENT During fiscal year 2009 , 2008 , and 2007 During fiscal year 2009 , 2008 , and 2007 , research 2009 , 2008 , and 2007 , research and development expense and development expense wa $ 9.0 billion , $ 8.2 billion $ 9.0 billion , $ 8.2 billion , and $ 7.1 8.2 billion , and $ 7.1 billion , respectively . These respectively . These amount represented 15 % , 14 % , amount represented 15 % , 14 % , and 14 % , 14 % , and 14 % , respectively , of , and testing . PAGE 8 Table of Contents Part I of Contents Part I Item 1 Investing in Business and Product and consumer product including Xbox 360 and Zune . Natural user seen in product like Windows 7 , the Microsoft Auto software research and discovery . PAGE 9 Table of Contents Part I of Contents Part I Item 1 Intelligent computing As computing power primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , these program volume licensing agreement . PAGE 10 Table of Contents Part I of Contents Part I Item 1 Select licensing Designed primarily for medium-to-large organization ( greater than 250 license ) , this program large organization ( greater than 250 license ) that want to customer accounted for more than 10 % of fiscal year 2009 10 % of fiscal year 2009 , 2008 , or 2007 of fiscal year 2009 , 2008 , or 2007 revenue . 2009 , 2008 , or 2007 revenue . Our practice is executive officer a of July 29 , 2009 were a follows a of July 29 , 2009 were a follows : Name the Company Steven A. Ballmer 53 Chief Executive Officer Robert J . ( Robbie ) Bach 47 President , Entertainment and Devices Devices Division Lisa E. Brummel 49 Senior Vice President , Human Human Resources Stephen A. Elop 45 President , Microsoft Business Division Business Division Christopher P. Liddell 51 Senior Vice President and Chief Officer Qi Lu , Ph.D. 47 President , Online Services Division Services Division Robert L. Muglia 49 President , Server and Tools Tools Business Craig J. Mundie 60 Chief Research and Strategy Officer Strategy Officer Raymond E. Ozzie 53 Chief Software Architect Steven Sinofsky Chief Software Architect Steven Sinofsky 43 President , Windows Division Bradford Windows Division Bradford L. Smith 50 Senior Vice President ; General ; Secretary B. Kevin Turner 44 Chief Operating Officer PAGE 11 44 Chief Operating Officer PAGE 11 Table of Contents Part I of Contents Part I Item 1 Mr. Ballmer wa appointed Chief Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . Mr. Ballmer joined Microsoft Mr. Ballmer joined Microsoft in 1980 . Mr. Bach wa named and Devices Division in September 2005 . He had been Senior Home and Entertainment since March 2000 . Before holding that position Home and Retail since March 1999 , Vice President , Learning , Entertainment and Productivity since 1997 , and Vice President , , Desktop Applications Marketing since 1996 . Mr. Bach joined Microsoft Mr. Bach joined Microsoft in 1988 . Ms. Brummel wa named , Human Resources in December 2005 . She had been Corporate , Human Resources since May 2005 . From May 2000 to May 2005 . From May 2000 to May 2005 , she From May 2000 to May 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Microsoft Business Division in January 2008 . Prior to joining the Networks , Inc. from January 2007 to January 2008 . From from January 2007 to January 2008 . From December 2005 to January 2008 . From December 2005 to December 2006 , he From December 2005 to December 2006 , he served a President Elop joined Adobe following the 2005 acquisition of Macromedia Inc. , Chief Executive Officer from January 2005 to December 2005 . During from January 2005 to December 2005 . During his almost eight-year of the Company in May 2005 . Mr. Liddell served a International Paper Company from March 2003 through April 2005 , and from March 2003 through April 2005 , and prior to becoming of International Paper , from 1999 to 2002 and Chief Financial Paper , from 1999 to 2002 and Chief Financial Officer from and Chief Financial Officer from 1995 to 1998 . Dr. Lu Financial Officer from 1995 to 1998 . Dr. Lu joined Microsoft Lu joined Microsoft in January 2009 a President , Online Services Yahoo ! , Inc. for 10 year . His role included and Tools Business in January 2009 . He had been Senior and Tools Business since October 2005 . Before holding that position Enterprise Storage Division since November 2001 , Group Vice President , Personal Services Group since August 2000 , Group Vice President , , Business Productivity since December 1999 , Senior Vice President , , Business Productivity since March 1999 , Senior Vice President , Applications and Tools since February 1998 , and Corporate Vice President President , Server Applications since 1997 . Mr. Muglia joined Microsoft Mr. Muglia joined Microsoft in 1988 . Mr. Mundie wa named and Strategy Officer in June 2006 . He had been Senior Strategies and Policy since August 2001 . He wa named Senior , Consumer Platforms in February 1996 . Mr. Mundie joined Microsoft Mr. Mundie joined Microsoft in 1992 . Mr. Ozzie wa named Chief Software Architect in June 2006 . He had been Chief Chief Technical Officer from April 2005 to June 2006 . He from April 2005 to June 2006 . He assumed that role assumed that role in April 2005 after Microsoft acquired Groove Networks software company he formed in 1997 . Mr. Sinofsky wa named , Windows Division in July 2009 . He served a Senior Live Engineering Group since December 2006 and Senior Vice President , President , Office from December 1999 to December 2006 . He from December 1999 to December 2006 . He had been Vice President , Office since December 1998 . Mr. Sinofsky joined the joined the Office team in 1994 , increasing his responsibility with Mr. Sinofsky joined Microsoft in 1989 . Mr. Smith wa named , and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Club division . From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it Information Systems Division . PAGE 12 Table of Contents Part I of Contents Part I Item 1 , 1A EMPLOYEES As of Part I Item 1 , 1A EMPLOYEES As of June 30 1A EMPLOYEES As of June 30 , 2009 , we employed As of June 30 , 2009 , we employed approximately 93,000 2009 , we employed approximately 93,000 people on a full-time basis on a full-time basis , 56,000 in the United States and in the United States and 37,000 internationally . Of the total . Of the total , 36,000 were in product research and product research and development , 26,000 in sale and marketing , in sale and marketing , 17,000 in product support and consulting support and consulting service , 5,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to the SEC . ITEM 1A . RISK FACTORS Our operation where providing a robust PAGE 13 Table of Contents Part I of Contents Part I Item 1A alternative is particularly important and range in size from Fortune 100 company to small , specialized particular because hacker tend PAGE 14 Table of Contents Part I of Contents Part I Item 1A to focus their effort on U.S. Department of Justice , 18 state , and the District Decree that took effect in 2001 and a Final Judgment entered a Final Judgment entered in 2002 . These proceeding imposed various to other company . In 2004 , the Commission ordered u competition law proceeding . PAGE 15 Table of Contents Part I of Contents Part I Item 1A Our software and service online Microsoft Office system , Xbox 360 , Live Search , Windows and reasonably estimable . PAGE 16 Table of Contents Part I of Contents Part I Item 1A We may have additional tax product such a the Xbox 360 console are highly complex and cost of revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part by our customer . PAGE 17 Table of Contents Part I of Contents Part I Item 1A , 1B , 2 , Part I Item 1A , 1B , 2 , 3 , Item 1A , 1B , 2 , 3 , 4 Acquisitions , 1B , 2 , 3 , 4 Acquisitions and joint , 2 , 3 , 4 Acquisitions and joint venture may and financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2009 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office owned space situated on approximately 500 acre of land we own we may currently develop approximately 1.6 million square foot of additional In addition , we own 63 acre of undeveloped land in of office space . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 ) for information regarding legal we are involved . ITEM 4 . SUBMISSION OF MATTERS TO fourth quarter of fiscal year 2009 . PAGE 18 Table of fiscal year 2009 . PAGE 18 Table of Contents Part II of Contents Part II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 27 , 2009 , there were . On July 27 , 2009 , there were 142,468 registered , 2009 , there were 142,468 registered holder of record of follows : Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Year Fiscal year 31 Mar . 31 June 30 Year Fiscal year 2009 Common June 30 Year Fiscal year 2009 Common stock price per share per share : High $ 28.50 $ 27.47 $ 21.00 $ : High $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 17.50 24.34 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ 14.87 Fiscal $ 17.50 $ 14.87 $ 18.18 $ 14.87 Fiscal year 2008 $ 14.87 $ 18.18 $ 14.87 Fiscal year 2008 Common stock 18.18 $ 14.87 Fiscal year 2008 Common stock price per share per share : High $ 31.84 $ 37.50 $ 35.96 $ : High $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ $ 31.84 $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 37.50 $ 35.96 $ 32.10 $ 37.50 Low $ 27.51 $ 35.96 $ 32.10 $ 37.50 Low $ 27.51 $ 29.29 32.10 $ 37.50 Low $ 27.51 $ 29.29 $ 26.87 $ 37.50 Low $ 27.51 $ 29.29 $ 26.87 $ 27.11 $ $ 27.51 $ 29.29 $ 26.87 $ 27.11 $ 26.87 DIVIDENDS $ 29.29 $ 26.87 $ 27.11 $ 26.87 DIVIDENDS AND SHARE $ 26.87 $ 27.11 $ 26.87 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 ) for information regarding dividend and share repurchase . PAGE 19 Table of Contents Part II of Contents Part II Item 6 ITEM 6 . SELECTED FINANCIAL Part II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL ) Fiscal Year Ended June 30 , 2009 2008 2007 2006 Year Ended June 30 , 2009 2008 2007 2006 2005 Revenue Ended June 30 , 2009 2008 2007 2006 2005 Revenue $ June 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 30 , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ , 2009 2008 2007 2006 2005 Revenue $ 58,437 $ 60,420 2007 2006 2005 Revenue $ 58,437 $ 60,420 $ 51,122 $ 2005 Revenue $ 58,437 $ 60,420 $ 51,122 $ 44,282 $ $ 58,437 $ 60,420 $ 51,122 $ 44,282 $ 39,788 Operating $ 60,420 $ 51,122 $ 44,282 $ 39,788 Operating income $ $ 51,122 $ 44,282 $ 39,788 Operating income $ 20,363 $ $ 39,788 Operating income $ 20,363 $ 22,271 $ 18,438 $ Operating income $ 20,363 $ 22,271 $ 18,438 $ 16,380 $ $ 20,363 $ 22,271 $ 18,438 $ 16,380 $ 14,576 Net $ 22,271 $ 18,438 $ 16,380 $ 14,576 Net income $ $ 18,438 $ 16,380 $ 14,576 Net income $ 14,569 $ $ 14,576 Net income $ 14,569 $ 17,681 $ 14,065 $ Net income $ 14,569 $ 17,681 $ 14,065 $ 12,599 $ $ 14,569 $ 17,681 $ 14,065 $ 12,599 $ 12,254 Diluted $ 17,681 $ 14,065 $ 12,599 $ 12,254 Diluted earnings per $ 14,065 $ 12,599 $ 12,254 Diluted earnings per share $ Diluted earnings per share $ 1.62 $ 1.87 $ 1.42 $ per share $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ $ 1.62 $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash $ 1.87 $ 1.42 $ 1.20 $ 1.12 Cash dividend declared $ 1.42 $ 1.20 $ 1.12 Cash dividend declared per share dividend declared per share $ 0.52 $ 0.44 $ 0.40 $ per share $ 0.52 $ 0.44 $ 0.40 $ 0.35 $ $ 0.52 $ 0.44 $ 0.40 $ 0.35 $ 3.40 Cash $ 0.44 $ 0.40 $ 0.35 $ 3.40 Cash and cash $ 0.40 $ 0.35 $ 3.40 Cash and cash equivalent and equivalent and short-term investment $ 31,447 $ 23,662 $ 23,411 $ short-term investment $ 31,447 $ 23,662 $ 23,411 $ 34,161 $ $ 31,447 $ 23,662 $ 23,411 $ 34,161 $ 37,751 Total $ 23,662 $ 23,411 $ 34,161 $ 37,751 Total asset $ $ 23,411 $ 34,161 $ 37,751 Total asset $ 77,888 $ $ 37,751 Total asset $ 77,888 $ 72,793 $ 63,171 $ Total asset $ 77,888 $ 72,793 $ 63,171 $ 69,597 $ $ 77,888 $ 72,793 $ 63,171 $ 69,597 $ 70,815 Long-term $ 72,793 $ 63,171 $ 69,597 $ 70,815 Long-term obligation $ $ 63,171 $ 69,597 $ 70,815 Long-term obligation $ 11,296 ( $ 70,815 Long-term obligation $ 11,296 ( a ) $ 6,621 11,296 ( a ) $ 6,621 $ 8,320 $ 7,051 $ a ) $ 6,621 $ 8,320 $ 7,051 $ 5,823 Stockholders $ 6,621 $ 8,320 $ 7,051 $ 5,823 Stockholders ’ equity $ 8,320 $ 7,051 $ 5,823 Stockholders ’ equity $ 39,558 5,823 Stockholders ’ equity $ 39,558 $ 36,286 $ 31,097 $ ’ equity $ 39,558 $ 36,286 $ 31,097 $ 40,104 $ $ 39,558 $ 36,286 $ 31,097 $ 40,104 $ 48,115 ( $ 36,286 $ 31,097 $ 40,104 $ 48,115 ( a ) $ 31,097 $ 40,104 $ 48,115 ( a ) Includes $ ( a ) Includes $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 – May 2009 . See Note 12 – Debt of the Notes ( Part II , Item 8 ) . PAGE 20 Table Item 8 ) . PAGE 20 Table of Contents Part II of Contents Part II Item 7 ITEM 7 . MANAGEMENT ’ Part II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION OF OPERATIONS FOR FISCAL YEARS 2009 , 2008 , AND 2007 FOR FISCAL YEARS 2009 , 2008 , AND 2007 Overview The 2009 , 2008 , AND 2007 Overview The following Management ’ hardware , including the Xbox 360 video game console , the Devices Division ha generated approximately 40 % of it annual segment quarter . In fiscal year 2007 , our revenue wa highest to the recognition of $ 1.7 billion of revenue previously deferred of Windows Vista and the 2007 Microsoft Office system . The to Windows Vista and the 2007 Microsoft Office system when those our business in fiscal year 2009 a consumer and business cut for release in fiscal year 2010 , we believe that Microsoft downturn , in fiscal year 2009 we made important adjustment to communication , entertainment , PAGE 21 Table of Contents Part II of Contents Part II Item 7 and other area that we Our focus in fiscal year 2010 is to build on this of Results for Fiscal Years 2009 , 2008 , and 2007 for Fiscal Years 2009 , 2008 , and 2007 ( In 2009 , 2008 , and 2007 ( In million , except and per share amount ) 2009 2008 2007 Percentage Change 2009 per share amount ) 2009 2008 2007 Percentage Change 2009 Versus share amount ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 58,437 2008 Percentage Change 2008 Versus 2007 Revenue $ 58,437 $ 60,420 2008 Versus 2007 Revenue $ 58,437 $ 60,420 $ 51,122 ( 2007 Revenue $ 58,437 $ 60,420 $ 51,122 ( 3 ) $ 58,437 $ 60,420 $ 51,122 ( 3 ) % 18 $ 60,420 $ 51,122 ( 3 ) % 18 % Operating 51,122 ( 3 ) % 18 % Operating income $ 20,363 18 % Operating income $ 20,363 $ 22,271 $ 18,438 ( Operating income $ 20,363 $ 22,271 $ 18,438 ( 9 ) $ 20,363 $ 22,271 $ 18,438 ( 9 ) % 21 $ 22,271 $ 18,438 ( 9 ) % 21 % Diluted 18,438 ( 9 ) % 21 % Diluted earnings per share Diluted earnings per share $ 1.62 $ 1.87 $ 1.42 ( per share $ 1.62 $ 1.87 $ 1.42 ( 13 ) $ 1.62 $ 1.87 $ 1.42 ( 13 ) % 32 $ 1.87 $ 1.42 ( 13 ) % 32 % Fiscal 1.42 ( 13 ) % 32 % Fiscal year 2009 compared % 32 % Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Revenue declined across most segment rate accounted for a $ 486 million or one percentage point line of business including Xbox 360 platform and PC game revenue price reduction during the past 12 month , partially offset by and administrative expense decreased $ 1.4 billion or 28 % , decreased $ 1.4 billion or 28 % , primarily due to contingency . We incurred $ 283 million of legal charge during the twelve month ended June 30 , 2009 a compared to month ended June 30 , 2009 a compared to $ 1.8 2009 a compared to $ 1.8 billion during the twelve month the twelve month ended June 30 , 2008 . The prior month ended June 30 , 2008 . The prior year cost European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . • Sales and marketing expense decreased $ 381 million or 3 % , decreased $ 381 million or 3 % , primarily driven by Headcount-related expense , excluding $ 330 million of employee severance charge employee severance charge , increased 7 % , driven by a % , driven by a 2 % increase in headcount during in headcount during the past 12 month and an increase in Cost of revenue increased $ 557 million or 5 % , increased $ 557 million or 5 % , primarily reflecting increased partially offset by decreased Xbox 360 platform cost . In January platform cost . In January 2009 , we announced and implemented , we announced the PAGE 22 Table of Contents Part II of Contents Part II Item 7 elimination of up to 5,000 7 elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During the technology by June 30 , 2010 . During the twelve month the twelve month ended June 30 , 2009 , we recorded month ended June 30 , 2009 , we recorded employee severance employee severance charge of $ 330 million for the expected reduction share repurchase during the past 12 month . We repurchased 318 12 month . We repurchased 318 million share during the twelve the twelve month ended June 30 , 2009 . Fiscal year month ended June 30 , 2009 . Fiscal year 2008 compared , 2009 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Revenue growth wa driven primarily by increased licensing of the 2007 Microsoft Office system , increased Office system , increased Xbox 360 platform sale , increased revenue rate accounted for a $ 1.6 billion or three percentage point in revenue during fiscal year 2008 . Operating income increased primarily revenue . Headcount-related expense increased 12 % , reflecting an increase in headcount during fiscal year 2008 . We incurred $ 1.8 2008 . We incurred $ 1.8 billion of legal charge during legal charge during fiscal year 2008 primarily related to the European European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) a compared with ) a compared with $ 511 million of legal charge during legal charge during fiscal year 2007 . Cost of revenue increased Cost of revenue increased $ 905 million or 8 % , increased $ 905 million or 8 % , reflecting increased data partially offset by decreased Xbox 360 cost . The decreased Xbox cost . The decreased Xbox 360 cost reflect the $ 1.1 360 cost reflect the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 related to the expansion of the expansion of our Xbox 360 warranty , partially offset by partially offset by increased Xbox 360 product cost reflecting growth in wa impacted by the $ 1.1 billion Xbox 360 charge in the $ 1.1 billion Xbox 360 charge in fiscal year 2007 360 charge in fiscal year 2007 and share repurchase during fiscal share repurchase during fiscal year 2008 . Fiscal Year 2010 Outlook year 2008 . Fiscal Year 2010 Outlook Global macroeconomic factor have for improvement in calendar year 2010 , we are unable to Segment information appearing in Note 22 – Segment Information and Geographic ( Part II , Item 8 ) is presented on a SFAS ” ) No . 131 , Disclosures about Segments of million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,712 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,712 $ 16,865 2008 Versus 2007 Revenue $ 14,712 $ 16,865 $ 14,911 ( 2007 Revenue $ 14,712 $ 16,865 $ 14,911 ( 13 ) $ 14,712 $ 16,865 $ 14,911 ( 13 ) % 13 $ 16,865 $ 14,911 ( 13 ) % 13 % Operating 14,911 ( 13 ) % 13 % Operating income $ 10,856 13 % Operating income $ 10,856 $ 13,105 $ 11,424 ( Operating income $ 10,856 $ 13,105 $ 11,424 ( 17 ) $ 10,856 $ 13,105 $ 11,424 ( 17 ) % 15 $ 13,105 $ 11,424 ( 17 ) % 15 % Client 11,424 ( 17 ) % 15 % Client offering consist of Windows Vista Enterprise , PAGE 23 Table of Contents Part II of Contents Part II Item 7 Windows XP Professional , Windows OEM channel account for over 80 % of total Client revenue system builder . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Client revenue decreased primarily a . OEM revenue decreased $ 2.3 billion or 16 % while decreased $ 2.3 billion or 16 % while OEM license unit while OEM license unit declined 2 % . The decline in in OEM revenue reflects a 10 percentage point decline in the the OEM premium mix to 64 % . Based on our experienced a decline of approximately 1 % to growth of approximately % to growth of approximately 2 % , driven by change and marketing expense increased $ 122 million or 7 % , increased $ 122 million or 7 % , primarily reflecting increased and marketing . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Client revenue increased reflecting growth the end of fiscal year 2008 , more than 180 million year 2008 , more than 180 million Windows Vista license had had been sold ( approximately 130 million were sold during fiscal were sold during fiscal year 2008 ) and million of enterprise . OEM revenue increased $ 1.8 billion or 14 % , increased $ 1.8 billion or 14 % , driven by 16 14 % , driven by 16 % growth in OEM license Windows operating system increased $ 202 million or 9 % , increased $ 202 million or 9 % , primarily from Enterprise market . During fiscal year 2008 , the OEM premium mix increased seven percentage point to 74 % , reflecting strong demand from all source grew approximately 12 % to 14 % , grew approximately 12 % to 14 % , driven by demand and marketing expense increased $ 106 million or 7 % , increased $ 106 million or 7 % , primarily reflecting increased Cost of revenue increased $ 116 million or 14 % , increased $ 116 million or 14 % , primarily driven by group level in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 . Effective 2009 , 2008 , and 2007 . Effective July 1 , and 2007 . Effective July 1 , 2009 , we reorganized . Effective July 1 , 2009 , we reorganized the Windows million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,126 2008 Percentage Change 2008 Versus 2007 Revenue $ 14,126 $ 13,102 2008 Versus 2007 Revenue $ 14,126 $ 13,102 $ 11,104 8 2007 Revenue $ 14,126 $ 13,102 $ 11,104 8 % 18 $ 14,126 $ 13,102 $ 11,104 8 % 18 % Operating 14,126 $ 13,102 $ 11,104 8 % 18 % Operating income 13,102 $ 11,104 8 % 18 % Operating income $ 5,327 18 % Operating income $ 5,327 $ 4,539 $ 3,571 17 Operating income $ 5,327 $ 4,539 $ 3,571 17 % 27 $ 5,327 $ 4,539 $ 3,571 17 % 27 % Server 5,327 $ 4,539 $ 3,571 17 % 27 % Server and 4,539 $ 3,571 17 % 27 % Server and Tools license or in a Microsoft- PAGE 24 Table of Contents Part II of Contents Part II Item 7 hosted environment . We use volume license . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Server and Tools revenue increased developer tool revenue increased $ 809 million or 8 % , increased $ 809 million or 8 % , primarily driven by support service revenue increased $ 215 million or 8 % , increased $ 215 million or 8 % , primarily due to rate accounted for a $ 140 million or one percentage point and development expense increased $ 168 million or 9 % , increased $ 168 million or 9 % , primarily driven by Cost of revenue increased $ 84 million or 3 % , increased $ 84 million or 3 % , reflecting the growth consulting service . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Server and Tools revenue increased currency exchange rate of $ 464 million or four percentage point developer tool revenue increased $ 1.4 billion or 16 % , increased $ 1.4 billion or 16 % , primarily driven by the release of Windows Server 2008 and Visual Studio 2008 during Server 2008 and Visual Studio 2008 during fiscal year 2008 . Studio 2008 during fiscal year 2008 . Consulting and Premier product support service revenue increased $ 593 million or 29 % , increased $ 593 million or 29 % , primarily due to and marketing expense increased $ 458 million or 13 % , increased $ 458 million or 13 % , due to higher Cost of revenue increased $ 404 million or 19 % , increased $ 404 million or 19 % , reflecting the growth and development expense increased $ 177 million or 10 % , increased $ 177 million or 10 % , primarily driven by expense . Headcount-related expense increased 6 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 3,088 2008 Percentage Change 2008 Versus 2007 Revenue $ 3,088 $ 3,214 2008 Versus 2007 Revenue $ 3,088 $ 3,214 $ 2,434 ( 2007 Revenue $ 3,088 $ 3,214 $ 2,434 ( 4 ) $ 3,088 $ 3,214 $ 2,434 ( 4 ) % 32 $ 3,214 $ 2,434 ( 4 ) % 32 % Operating 2,434 ( 4 ) % 32 % Operating loss $ ( % Operating loss $ ( 2,253 ) $ ( 1,222 ) ( 2,253 ) $ ( 1,222 ) $ ( 604 ) ( 1,222 ) $ ( 604 ) ( 84 ) % $ ( 604 ) ( 84 ) % ( 102 ) ( 84 ) % ( 102 ) % Online Services Business first quarter of fiscal year 2008 , we completed our acquisition result of operation starting August 10 , 2007 , the acquisition operation starting August 10 , 2007 , the acquisition date . the acquisition date . PAGE 25 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 OSB revenue decreased primarily a Online advertising revenue decreased $ 73 million or 3 % , decreased $ 73 million or 3 % , to $ 2.3 3 % , to $ 2.3 billion , reflecting a decrease . Access revenue decreased $ 72 million or 28 % , decreased $ 72 million or 28 % , reflecting continued migration rate accounted for a $ 28 million or one percentage point Cost of revenue increased $ 692 million or 36 % , increased $ 692 million or 36 % , primarily driven by and development expense increased $ 149 million or 13 % , increased $ 149 million or 13 % , primarily due to headcount-related expense . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 OSB revenue increased driven by Online advertising revenue increased $ 550 million or 31 % , increased $ 550 million or 31 % , to $ 2.3 31 % , to $ 2.3 billion . This increase reflects online advertising revenue of $ 161 million . Agency revenue , from aQuantive , wa $ 345 million during fiscal year 2008 345 million during fiscal year 2008 . Access revenue decreased $ . Access revenue decreased $ 98 million or 28 % , decreased $ 98 million or 28 % , to $ 256 28 % , to $ 256 million , reflecting migration of Cost of revenue increased $ 796 million or 71 % , increased $ 796 million or 71 % , primarily driven by and marketing expense increased $ 311 million or 37 % , increased $ 311 million or 37 % , primarily due to customer-related intangible asset of $ 94 million , increased headcount-related expense and development expense increased $ 177 million or 17 % , increased $ 177 million or 17 % , and general and and administrative expense increased $ 114 million or 178 % , increased $ 114 million or 178 % , primarily reflecting increased expense . Headcount-related expense increased 24 % , driven by an group level in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 . Effective 2009 , 2008 , and 2007 . Effective July 1 , and 2007 . Effective July 1 , 2009 , we reorganized . Effective July 1 , 2009 , we reorganized the Windows those area . On July 29 , 2009 , we announced . On July 29 , 2009 , we announced that we that we entered into a 10-year agreement with Yahoo ! Inc. is expected in calendar year 2010 . See Note 24 – year 2010 . See Note 24 – Subsequent Event of the ( Part II , Item 8 ) . Microsoft Business Division million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 18,894 2008 Percentage Change 2008 Versus 2007 Revenue $ 18,894 $ 18,929 2008 Versus 2007 Revenue $ 18,894 $ 18,929 $ 16,476 – 2007 Revenue $ 18,894 $ 18,929 $ 16,476 – % 15 $ 18,894 $ 18,929 $ 16,476 – % 15 % Operating 18,929 $ 16,476 – % 15 % Operating income $ 12,141 15 % Operating income $ 12,141 $ 12,369 $ 10,838 ( Operating income $ 12,141 $ 12,369 $ 10,838 ( 2 ) $ 12,141 $ 12,369 $ 10,838 ( 2 ) % 14 $ 12,369 $ 10,838 ( 2 ) % 14 % Microsoft 10,838 ( 2 ) % 14 % Microsoft Business Division ( the Microsoft Office system PAGE 26 Table of Contents Part II of Contents Part II Item 7 offering , which generate over offering , which generate over 90 % of MBD revenue , OEM revenue . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 MBD revenue wa flat reflecting currency exchange rate of $ 378 million or two percentage point . Consumer revenue decreased $ 525 million or 14 % , decreased $ 525 million or 14 % , primarily a a and pricing promotion on the 2007 Microsoft Office system . Business . Business revenue increased $ 490 million or 3 % , increased $ 490 million or 3 % , primarily reflecting growth agreement revenue and included a 7 % decrease in Microsoft Dynamics Cost of revenue increased $ 135 million or 14 % primarily increased $ 135 million or 14 % primarily driven by expense which we acquired in April 2008 , a well a online and development expense increased $ 119 million or 8 % , increased $ 119 million or 8 % , primarily driven by and marketing expense decreased $ 90 million or 2 % , decreased $ 90 million or 2 % , primarily driven by sale force . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 MBD revenue increased reflecting growth growth in licensing of the 2007 Microsoft Office system and included currency exchange rate of $ 724 million or four percentage point . Business revenue increased $ 2.6 billion or 21 % , increased $ 2.6 billion or 21 % , primarily a a business revenue also included a 21 % increase in Microsoft Dynamics . Consumer revenue decreased $ 131 million or 3 % , decreased $ 131 million or 3 % , reflecting the consumer the consumer launch of the 2007 Microsoft Office system in fiscal Office system in fiscal year 2007 . MBD operating income increased and marketing expense increased $ 446 million or 13 % , increased $ 446 million or 13 % , reflecting increased expense and development expense increased $ 229 million or 18 % , increased $ 229 million or 18 % , primarily driven by headcount-related expense and a $ 35 million in-process research and development Cost of revenue increased $ 214 million or 27 % , increased $ 214 million or 27 % , primarily driven by sale . Headcount-related expense increased 10 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Revenue $ 7,753 2008 Percentage Change 2008 Versus 2007 Revenue $ 7,753 $ 8,206 2008 Versus 2007 Revenue $ 7,753 $ 8,206 $ 6,139 ( 2007 Revenue $ 7,753 $ 8,206 $ 6,139 ( 6 ) $ 7,753 $ 8,206 $ 6,139 ( 6 ) % 34 $ 8,206 $ 6,139 ( 6 ) % 34 % Operating 6,139 ( 6 ) % 34 % Operating income ( loss income ( loss ) $ 169 $ 497 $ ( 1,898 loss ) $ 169 $ 497 $ ( 1,898 ) ( 169 $ 497 $ ( 1,898 ) ( 66 ) % $ ( 1,898 ) ( 66 ) % * * Not ) offering include the Xbox 360 platform ( which includes the which includes the Microsoft Xbox 360 video game console system , game console system , Xbox 360 video game , Xbox Live Xbox Live , and Xbox 360 accessory ) , the Zune ) , the Zune PAGE 27 Table of Contents Part II of Contents Part II Item 7 digital music and entertainment platform operating system . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 EDD revenue decreased across most our non-gaming business decreased $ 292 million or 12 % , decreased $ 292 million or 12 % , primarily reflecting decreased hardware product revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 161 million or 3 % , decreased $ 161 million or 3 % , primarily a a of decreased revenue per Xbox 360 console due to price reduction price reduction during the past 12 month , partially offset by partially offset by increased Xbox 360 console sale and increased Xbox Live revenue . We shipped 11.2 million Xbox 360 console during We shipped 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 , compared with 8.7 million year 2009 , compared with 8.7 million Xbox 360 console during compared with 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 . Foreign currency exchange rate rate accounted for a $ 74 million or one percentage point and development expense increased $ 252 million or 16 % , increased $ 252 million or 16 % , primarily reflecting increased Cost of revenue decreased $ 326 million or 7 % , decreased $ 326 million or 7 % , primarily due to primarily due to decreased Xbox 360 platform cost . Fiscal year platform cost . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 EDD revenue increased primarily due primarily due to increased Xbox 360 platform sale . Xbox 360 360 platform sale . Xbox 360 platform and PC game revenue PC game revenue increased $ 1.7 billion or 41 % a increased $ 1.7 billion or 41 % a a result of a result of increased Xbox 360 console sale , video game game sale led by Halo 3 , Xbox Live revenue , Live revenue , and Xbox 360 accessory sale . We shipped accessory sale . We shipped 8.7 million Xbox 360 console during We shipped 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 , compared with 6.6 million year 2008 , compared with 6.6 million Xbox 360 console during compared with 6.6 million Xbox 360 console during fiscal year 2007 360 console during fiscal year 2007 . EDD operating income increased Cost of revenue decreased $ 684 million or 13 % , decreased $ 684 million or 13 % , reflecting the impact the impact of the $ 1.1 billion Xbox 360 charge in the $ 1.1 billion Xbox 360 charge in fiscal year 2007 360 charge in fiscal year 2007 ( which primarily related to partially offset by increased Xbox 360 product cost related to increased and development expense increased $ 242 million or 18 % , increased $ 242 million or 18 % , primarily reflecting increased Danger , including a $ 24 million in-process research and development and marketing expense increased $ 89 million or 7 % , increased $ 89 million or 7 % , primarily reflecting increased expense . Headcount-related expense increased 22 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Corporate-level activity $ 2008 Percentage Change 2008 Versus 2007 Corporate-level activity $ ( 5,877 2007 Corporate-level activity $ ( 5,877 ) $ ( 7,017 ) ( 5,877 ) $ ( 7,017 ) $ ( 4,893 ) ( 7,017 ) $ ( 4,893 ) 16 % ( 43 ) $ ( 4,893 ) 16 % ( 43 ) % 4,893 ) 16 % ( 43 ) % Certain corporate-level activity employee severance . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Corporate-level expense decreased during the the twelve month ended June 30 , 2009 , primarily reflecting month ended June 30 , 2009 , primarily reflecting decreased general employee severance charge of $ 330 million . General and administrative and administrative expense decreased $ 1.4 billion or 28 % , decreased $ 1.4 billion or 28 % , primarily due to contingency . We incurred $ 283 million of legal charge during the twelve month ended PAGE 28 Table of Contents Part II of Contents Part II Item 7 June 30 , 2009 a Part II Item 7 June 30 , 2009 a compared to Item 7 June 30 , 2009 a compared to $ 1.8 2009 a compared to $ 1.8 billion during the twelve month the twelve month ended June 30 , 2008 . The prior month ended June 30 , 2008 . The prior year cost European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . Sales and and marketing expense decreased $ 412 million or 30 % , decreased $ 412 million or 30 % , reflecting the resource management program implemented in January 2009 . Fiscal year 2008 compared January 2009 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Corporate-level expense increased , reflecting and legal contingency and a 13 % increase in headcount-related expense expense . We incurred $ 1.8 billion of legal charge during legal charge during fiscal year 2008 primarily related to the European European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) a compared with ) a compared with $ 511 million of legal charge during legal charge during fiscal year 2007 . The increase in headcount-related million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Cost of revenue 2008 Percentage Change 2008 Versus 2007 Cost of revenue $ 12,155 2007 Cost of revenue $ 12,155 $ 11,598 $ 10,693 5 of revenue $ 12,155 $ 11,598 $ 10,693 5 % 8 $ 12,155 $ 11,598 $ 10,693 5 % 8 % As 12,155 $ 11,598 $ 10,693 5 % 8 % As a 11,598 $ 10,693 5 % 8 % As a percent of As a percent of revenue 21 % 19 % 21 % percent of revenue 21 % 19 % 21 % 2ppt ( revenue 21 % 19 % 21 % 2ppt ( 2 ) % 19 % 21 % 2ppt ( 2 ) ppt Cost % 21 % 2ppt ( 2 ) ppt Cost of revenue technological feasibility . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Cost of revenue increased during the twelve month ended June 30 , 2009 , primarily reflecting month ended June 30 , 2009 , primarily reflecting increased online partially offset by decreased Xbox 360 platform cost . Fiscal year platform cost . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cost of revenue increased reflecting partially offset by decreased Xbox 360 cost . Xbox 360 cost Xbox 360 cost . Xbox 360 cost decreased because of the decreased because of the $ 1.1 billion charge in fiscal year billion charge in fiscal year 2007 ( which primarily related to the expansion of our Xbox 360 warranty coverage ) , partially partially offset by increased Xbox 360 product cost , reflecting growth million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Research and development 2008 Percentage Change 2008 Versus 2007 Research and development $ 9,010 2007 Research and development $ 9,010 $ 8,164 $ 7,121 10 and development $ 9,010 $ 8,164 $ 7,121 10 % 15 $ 9,010 $ 8,164 $ 7,121 10 % 15 % As 9,010 $ 8,164 $ 7,121 10 % 15 % As a 8,164 $ 7,121 10 % 15 % As a percent of As a percent of revenue 15 % 14 % 14 % percent of revenue 15 % 14 % 14 % 1ppt –ppt revenue 15 % 14 % 14 % 1ppt –ppt Research and % 14 % 14 % 1ppt –ppt Research and development expense research and development . PAGE 29 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Research and development expense increased the twelve month ended June 30 , 2009 , primarily reflecting month ended June 30 , 2009 , primarily reflecting a 13 2009 , primarily reflecting a 13 % increase in headcount-related cost headcount-related cost . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Research and development expense increased to acquisition during fiscal year 2008 . Headcount-related expense increased 12 2008 . Headcount-related expense increased 12 % , reflecting an increase million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Sales and marketing 2008 Percentage Change 2008 Versus 2007 Sales and marketing $ 12,879 2007 Sales and marketing $ 12,879 $ 13,260 $ 11,541 ( and marketing $ 12,879 $ 13,260 $ 11,541 ( 3 ) $ 12,879 $ 13,260 $ 11,541 ( 3 ) % 15 $ 13,260 $ 11,541 ( 3 ) % 15 % As 11,541 ( 3 ) % 15 % As a percent of As a percent of revenue 22 % 22 % 23 % percent of revenue 22 % 22 % 23 % –ppt ( revenue 22 % 22 % 23 % –ppt ( 1 ) % 23 % –ppt ( 1 ) ppt Sales and marketing other program . Effective July 1 , 2008 , we began . Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , we included Prior to July 1 , 2008 , we included gain and the twelve month ended June 30 , 2009 , $ 509 month ended June 30 , 2009 , $ 509 million of 30 , 2009 , $ 509 million of loss were reported the twelve month ended June 30 , 2008 and 2007 , month ended June 30 , 2008 and 2007 , $ 221 June 30 , 2008 and 2007 , $ 221 million and 2008 and 2007 , $ 221 million and $ 86 million $ 221 million and $ 86 million of gain , respectively expense ) . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Sales and marketing expense decreased management program implemented in January 2009 . Fiscal year 2008 compared January 2009 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Sales and marketing expense increased campaign . Headcount-related expense increased 14 % , driven by an million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 General and administrative 2008 Percentage Change 2008 Versus 2007 General and administrative $ 3,700 2007 General and administrative $ 3,700 $ 5,127 $ 3,329 ( and administrative $ 3,700 $ 5,127 $ 3,329 ( 28 ) $ 3,700 $ 5,127 $ 3,329 ( 28 ) % 54 $ 5,127 $ 3,329 ( 28 ) % 54 % As 3,329 ( 28 ) % 54 % As a percent of As a percent of revenue 6 % 8 % 7 % percent of revenue 6 % 8 % 7 % ( 2 revenue 6 % 8 % 7 % ( 2 ) ppt 8 % 7 % ( 2 ) ppt 1ppt General and % ( 2 ) ppt 1ppt General and administrative cost include other administrative fee . PAGE 30 Table of Contents Part II of Contents Part II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 General and administrative expense decreased incurred legal charge of $ 283 million in current year , , a compared with $ 1.8 billion during fiscal year 2008 1.8 billion during fiscal year 2008 . The fiscal year 2008 2008 . The fiscal year 2008 legal cost were primarily related European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . Fiscal year million ) . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 General and administrative expense increased expense . We incurred $ 1.8 billion of legal charge during legal charge during fiscal year 2008 , primarily related to the , a compared with $ 511 million of legal charge during legal charge during fiscal year 2007 . Headcount-related expense increased 7 2007 . Headcount-related expense increased 7 % , reflecting an increase . Employee Severance In January 2009 , we announced and implemented the elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During the technology by June 30 , 2010 . During the current year employee severance charge of $ 330 million for the expected reduction million , except percentage ) 2009 2008 2007 Percentage Change 2009 , except percentage ) 2009 2008 2007 Percentage Change 2009 Versus except percentage ) 2009 2008 2007 Percentage Change 2009 Versus 2008 2009 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 2007 Percentage Change 2009 Versus 2008 Percentage Change 2008 Versus 2007 2009 Versus 2008 Percentage Change 2008 Versus 2007 Dividends and interest 2008 Percentage Change 2008 Versus 2007 Dividends and interest $ 706 2007 Dividends and interest $ 706 $ 888 $ 1,319 Net and interest $ 706 $ 888 $ 1,319 Net recognized gain $ 706 $ 888 $ 1,319 Net recognized gain ( loss loss ) on investment ( 125 ) 346 650 Net gain on investment ( 125 ) 346 650 Net gain ( loss investment ( 125 ) 346 650 Net gain ( loss ) loss ) on derivative ( 558 ) 226 ( 358 ) on derivative ( 558 ) 226 ( 358 ) Net gain ( 558 ) 226 ( 358 ) Net gain ( loss on foreign currency remeasurements ( 509 ) 226 56 Other ( currency remeasurements ( 509 ) 226 56 Other ( 56 ) remeasurements ( 509 ) 226 56 Other ( 56 ) ( ) 226 56 Other ( 56 ) ( 143 ) ( Other ( 56 ) ( 143 ) ( 4 ) Total ) ( 143 ) ( 4 ) Total $ ( 542 4 ) Total $ ( 542 ) $ 1,543 $ 1,663 $ ( 542 ) $ 1,543 $ 1,663 ( 135 ) 542 ) $ 1,543 $ 1,663 ( 135 ) % ( $ 1,543 $ 1,663 ( 135 ) % ( 7 ) ( 135 ) % ( 7 ) % Effective July 1 7 ) % Effective July 1 , 2008 , we began % Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , we included Prior to July 1 , 2008 , we included gain and the twelve month ended June 30 , 2009 , $ 509 month ended June 30 , 2009 , $ 509 million of 30 , 2009 , $ 509 million of loss were reported the twelve month ended June 30 , 2008 and 2007 , month ended June 30 , 2008 and 2007 , $ 221 June 30 , 2008 and 2007 , $ 221 million and 2008 and 2007 , $ 221 million and $ 86 million $ 221 million and $ 86 million of gain , respectively , including industry and PAGE 31 Table of Contents Part II of Contents Part II Item 7 sector performance , change in comprehensive income . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Dividends and interest income decreased . Other-than-temporary impairment were $ 862 million during the twelve month the twelve month ended June 30 , 2009 , a compared month ended June 30 , 2009 , a compared with $ , a compared with $ 312 million during the twelve month the twelve month ended June 30 , 2008 and increased primarily month ended June 30 , 2008 and increased primarily due to fiscal year . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Dividends and interest income decreased include other-than-temporary impairment of $ 312 million during fiscal year 2008 312 million during fiscal year 2008 and $ 25 million during fiscal year 2008 and $ 25 million during fiscal year 2007 25 million during fiscal year 2007 , decreased primarily due to . Income Taxes Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Our effective tax rate in tax rate in fiscal year 2009 and 2008 were 27 % in fiscal year 2009 and 2008 were 27 % and 26 year 2009 and 2008 were 27 % and 26 % , 2008 were 27 % and 26 % , respectively . While . While the fiscal year 2009 rate reflects a higher mix year because the fiscal year 2008 rate reflects the resolution of IRS ” ) settling the 2000-2003 examination , partially offset by paid the IRS approximately $ 4.1 billion during fiscal year 2009 4.1 billion during fiscal year 2009 . Fiscal year 2008 compared year 2009 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Our effective tax rate in tax rate in fiscal year 2008 and 2007 were 26 % in fiscal year 2008 and 2007 were 26 % and 30 year 2008 and 2007 were 26 % and 30 % , 2007 were 26 % and 30 % , respectively . The respectively . The fiscal year 2008 rate wa lower due to and short-term investment totaled $ 31.4 billion a of June 30 31.4 billion a of June 30 , 2009 , compared with a of June 30 , 2009 , compared with $ 23.7 2009 , compared with $ 23.7 billion a of June 30 23.7 billion a of June 30 , 2008 . Equity and a of June 30 , 2008 . Equity and other investment and other investment were $ 4.9 billion a of June 30 4.9 billion a of June 30 , 2009 , compared with a of June 30 , 2009 , compared with $ 6.6 2009 , compared with $ 6.6 billion a of June 30 6.6 billion a of June 30 , 2008 . Our investment a of June 30 , 2008 . Our investment consist primarily second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 22.8 billion at June 30 , $ 22.8 billion at June 30 , 2009 . Our retained billion at June 30 , 2009 . Our retained deficit is and financial position . PAGE 32 Table of Contents Part II of Contents Part II Item 7 In general , and where methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note certain agency security . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally labeled a Level 2 investment because the broker price our portfolio a of June 30 , 2009 doe not contain a of June 30 , 2009 doe not contain direct exposure residential mortgage and carry a 100 % principal and interest guarantee Debt Short-term Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . Pursuant to the sale of up to $ 2.0 billion in short-term commercial paper paper . As of June 30 , 2009 , $ 2.0 As of June 30 , 2009 , $ 2.0 billion of 30 , 2009 , $ 2.0 billion of the commercial paper including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 119 day . In and maturity of 22 to 119 day . In September 2008 119 day . In September 2008 , we also entered into also entered into a $ 2.0 billion six-month senior unsecured credit paper program . In November 2008 , we replaced the six-month credit facility with a $ 2.0 billion 364-day credit facility . with a $ 2.0 billion 364-day credit facility . This credit credit facility expires on November 6 , 2009 . In March expires on November 6 , 2009 . In March 2009 , , 2009 . In March 2009 , we entered into an credit facility . This $ 1.0 billion 364-day credit facility expires . This $ 1.0 billion 364-day credit facility expires on March credit facility expires on March 12 , 2010 . As of expires on March 12 , 2010 . As of June 30 2010 . As of June 30 , 2009 , we were As of June 30 , 2009 , we were in compliance during the year ended June 30 , 2009 . Long-term Debt year ended June 30 , 2009 . Long-term Debt In November . Long-term Debt In November 2008 , we filed a shelf time pursuant to the September 2008 authorization for debt financing of financing of up to $ 6.0 billion . In May 2009 6.0 billion . In May 2009 , we issued $ 3.75 2009 , we issued $ 3.75 billion of debt security under statement a follows : $ 2.0 billion aggregate principal amount of billion aggregate principal amount of 2.95 % note due 2014 , of 2.95 % note due 2014 , $ 1.0 billion aggregate note due 2014 , $ 1.0 billion aggregate principal amount of billion aggregate principal amount of 4.20 % note due 2019 , of 4.20 % note due 2019 , and $ 750 million due 2019 , and $ 750 million aggregate principal amount of million aggregate principal amount of 5.20 % note due 2039 ( of 5.20 % note due 2039 ( collectively “ the Notes be payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year , commencing year , commencing on December 1 , 2009 , to holder commencing on December 1 , 2009 , to holder of record record on the preceding May 15 and November 15 . The preceding May 15 and November 15 . The Notes are senior , and acquisition . PAGE 33 Table of Contents Part II of Contents Part II Item 7 Unearned Revenue Unearned revenue is . Undelivered element include $ 276 million of deferred revenue related revenue related to the Windows 7 Upgrade Option program . The program , which started June 26 , 2009 , allows customer which started June 26 , 2009 , allows customer who purchase the corresponding version of Windows 7 at minimal or no cost upgrade to the equivalent Windows 7 product with participating retailer in unearned revenue a of June 30 , 2009 : ( In a of June 30 , 2009 : ( In million ) Three month ended : September 30 , 2009 $ 4,740 December ended : September 30 , 2009 $ 4,740 December 31 , September 30 , 2009 $ 4,740 December 31 , 2009 4,120 , 2009 $ 4,740 December 31 , 2009 4,120 March 31 $ 4,740 December 31 , 2009 4,120 March 31 , 2010 4,740 December 31 , 2009 4,120 March 31 , 2010 2,743 31 , 2009 4,120 March 31 , 2010 2,743 June 30 2009 4,120 March 31 , 2010 2,743 June 30 , 2010 4,120 March 31 , 2010 2,743 June 30 , 2010 1,400 31 , 2010 2,743 June 30 , 2010 1,400 Thereafter 1,281 2010 2,743 June 30 , 2010 1,400 Thereafter 1,281 Total $ 2,743 June 30 , 2010 1,400 Thereafter 1,281 Total $ 14,284 30 , 2010 1,400 Thereafter 1,281 Total $ 14,284 Cash Flows 1,400 Thereafter 1,281 Total $ 14,284 Cash Flows Fiscal year 2009 14,284 Cash Flows Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Cash flow from operation decreased flow from operation decreased $ 2.6 billion due to payment of to payment of approximately $ 4.1 billion to the IRS in with our settlement of the 2000-2003 audit examination . This impact offset by the fiscal year 2008 payment of the $ 1.4 2008 payment of the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) European Commission fine used for financing decreased $ 5.5 billion primarily due to $ billion primarily due to $ 5.7 billion of net cash proceeds long-term debt in fiscal PAGE 34 Table of Contents Part II of Contents Part II Item 7 year 2009. Financing activity also Part II Item 7 year 2009. Financing activity also included a activity also included a $ 3.2 billion decrease in common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in cash paid of aQuantive in fiscal year 2008 . Fiscal year 2008 compared year 2008 . Fiscal year 2008 compared with fiscal year 2007 2008 compared with fiscal year 2007 Cash flow from operation increased flow from operation increased $ 3.8 billion due to an increase received from customer driven by 18 % revenue growth , partially partially offset by the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) payment of the used for financing decreased $ 11.6 billion primarily due to a primarily due to a $ 15.0 billion decrease in common stock partially offset by a $ 3.3 billion decrease in cash proceeds used for investing wa $ 4.6 billion for fiscal year 2008 4.6 billion for fiscal year 2008 a compared with cash provided with cash provided of $ 6.1 billion for fiscal year 2007 6.1 billion for fiscal year 2007 . This decrease wa primarily primarily due to a $ 6.9 billion increase in cash paid first quarter of fiscal year 2008 , a $ 918 million year 2008 , a $ 918 million increase in purchase of equipment , and a $ 3.1 billion decrease in cash from Stockholders ’ equity at June 30 , 2009 , wa $ equity at June 30 , 2009 , wa $ 39.6 billion , 2009 , wa $ 39.6 billion . We will continue constructing new building were $ 621 million on June 30 , $ 621 million on June 30 , 2009 . We have million on June 30 , 2009 . We have operating lease incurred rental expense totaling $ 475 million , $ 398 million $ 475 million , $ 398 million , and $ 325 398 million , and $ 325 million , in fiscal year million , in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 , respectively 2009 , 2008 , and 2007 , respectively . We have . Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 to buy back up to buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . We repurchased date of September 30 , 2013 . We repurchased 318 million , 2013 . We repurchased 318 million share for $ 8.2 318 million share for $ 8.2 billion during the fiscal year the fiscal year ended June 30 , 2009 ; 101 million year ended June 30 , 2009 ; 101 million share were June 30 , 2009 ; 101 million share were repurchased for share were repurchased for $ 2.7 billion under the repurchase program first quarter of fiscal year 2007 and 217 million share were of fiscal year 2007 and 217 million share were repurchased for share were repurchased for $ 5.5 billion under the repurchase program first quarter of fiscal year 2009 . As of June 30 2009 . As of June 30 , 2009 , approximately $ As of June 30 , 2009 , approximately $ 34.5 billion , 2009 , approximately $ 34.5 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . . Dividends During fiscal year 2009 and 2008 , our Board During fiscal year 2009 and 2008 , our Board of Directors million ) ( Fiscal year 2009 ) September 19 , 2008 Fiscal year 2009 ) September 19 , 2008 $ 0.13 November 2009 ) September 19 , 2008 $ 0.13 November 20 , September 19 , 2008 $ 0.13 November 20 , 2008 $ , 2008 $ 0.13 November 20 , 2008 $ 1,157 December $ 0.13 November 20 , 2008 $ 1,157 December 11 , November 20 , 2008 $ 1,157 December 11 , 2008 December , 2008 $ 1,157 December 11 , 2008 December 10 , $ 1,157 December 11 , 2008 December 10 , 2008 $ December 11 , 2008 December 10 , 2008 $ 0.13 February , 2008 December 10 , 2008 $ 0.13 February 19 , December 10 , 2008 $ 0.13 February 19 , 2009 $ , 2008 $ 0.13 February 19 , 2009 $ 1,155 March $ 0.13 February 19 , 2009 $ 1,155 March 12 , February 19 , 2009 $ 1,155 March 12 , 2009 March , 2009 $ 1,155 March 12 , 2009 March 9 , $ 1,155 March 12 , 2009 March 9 , 2009 $ March 12 , 2009 March 9 , 2009 $ 0.13 May , 2009 March 9 , 2009 $ 0.13 May 21 , March 9 , 2009 $ 0.13 May 21 , 2009 $ , 2009 $ 0.13 May 21 , 2009 $ 1,158 June $ 0.13 May 21 , 2009 $ 1,158 June 18 , May 21 , 2009 $ 1,158 June 18 , 2009 June , 2009 $ 1,158 June 18 , 2009 June 10 , $ 1,158 June 18 , 2009 June 10 , 2009 $ June 18 , 2009 June 10 , 2009 $ 0.13 August , 2009 June 10 , 2009 $ 0.13 August 20 , June 10 , 2009 $ 0.13 August 20 , 2009 $ , 2009 $ 0.13 August 20 , 2009 $ 1,158 September $ 0.13 August 20 , 2009 $ 1,158 September 10 , August 20 , 2009 $ 1,158 September 10 , 2009 ( , 2009 $ 1,158 September 10 , 2009 ( Fiscal year $ 1,158 September 10 , 2009 ( Fiscal year 2008 ) , 2009 ( Fiscal year 2008 ) September 12 , 2007 Fiscal year 2008 ) September 12 , 2007 $ 0.11 November 2008 ) September 12 , 2007 $ 0.11 November 15 , September 12 , 2007 $ 0.11 November 15 , 2007 $ , 2007 $ 0.11 November 15 , 2007 $ 1,034 December $ 0.11 November 15 , 2007 $ 1,034 December 13 , November 15 , 2007 $ 1,034 December 13 , 2007 December , 2007 $ 1,034 December 13 , 2007 December 19 , $ 1,034 December 13 , 2007 December 19 , 2007 $ December 13 , 2007 December 19 , 2007 $ 0.11 February , 2007 December 19 , 2007 $ 0.11 February 21 , December 19 , 2007 $ 0.11 February 21 , 2008 $ , 2007 $ 0.11 February 21 , 2008 $ 1,023 March $ 0.11 February 21 , 2008 $ 1,023 March 13 , February 21 , 2008 $ 1,023 March 13 , 2008 March , 2008 $ 1,023 March 13 , 2008 March 17 , $ 1,023 March 13 , 2008 March 17 , 2008 $ March 13 , 2008 March 17 , 2008 $ 0.11 May , 2008 March 17 , 2008 $ 0.11 May 15 , March 17 , 2008 $ 0.11 May 15 , 2008 $ , 2008 $ 0.11 May 15 , 2008 $ 1,020 June $ 0.11 May 15 , 2008 $ 1,020 June 12 , May 15 , 2008 $ 1,020 June 12 , 2008 June , 2008 $ 1,020 June 12 , 2008 June 11 , $ 1,020 June 12 , 2008 June 11 , 2008 $ June 12 , 2008 June 11 , 2008 $ 0.11 August , 2008 June 11 , 2008 $ 0.11 August 21 , June 11 , 2008 $ 0.11 August 21 , 2008 $ , 2008 $ 0.11 August 21 , 2008 $ 998 September $ 0.11 August 21 , 2008 $ 998 September 11 , August 21 , 2008 $ 998 September 11 , 2008 PAGE , 2008 $ 998 September 11 , 2008 PAGE 35 Table $ 998 September 11 , 2008 PAGE 35 Table of Contents September 11 , 2008 PAGE 35 Table of Contents Part II of Contents Part II Item 7 We believe existing cash , indemnification under SFAS No . 5 , Accounting for Contingencies , FIN ” ) No . 45 , Guarantor ’ s Accounting contractual obligation a of June 30 , 2009 . We expect a of June 30 , 2009 . We expect to fund Due by Period Fiscal Years 2010 2011-2013 2014-2016 2017 and Thereafter by Period Fiscal Years 2010 2011-2013 2014-2016 2017 and Thereafter Total Period Fiscal Years 2010 2011-2013 2014-2016 2017 and Thereafter Total Long-term Fiscal Years 2010 2011-2013 2014-2016 2017 and Thereafter Total Long-term debt $ – $ – $ 2,000 $ 1,750 $ 3,750 Interest $ – $ 2,000 $ 1,750 $ 3,750 Interest payment 145 $ 2,000 $ 1,750 $ 3,750 Interest payment 145 420 302 1,750 $ 3,750 Interest payment 145 420 302 1,023 1,890 Construction $ 3,750 Interest payment 145 420 302 1,023 1,890 Construction commitment 3,750 Interest payment 145 420 302 1,023 1,890 Construction commitment ( Interest payment 145 420 302 1,023 1,890 Construction commitment ( b payment 145 420 302 1,023 1,890 Construction commitment ( b ) Construction commitment ( b ) 621 – – – 621 Lease ) 621 – – – 621 Lease obligation : Capital lease Lease obligation : Capital lease 3 9 1 – 13 Operating obligation : Capital lease 3 9 1 – 13 Operating lease : Capital lease 3 9 1 – 13 Operating lease ( lease 3 9 1 – 13 Operating lease ( c ) Operating lease ( c ) 457 931 520 477 2,385 Purchase lease ( c ) 457 931 520 477 2,385 Purchase commitment ( c ) 457 931 520 477 2,385 Purchase commitment ( c ) 457 931 520 477 2,385 Purchase commitment ( d ) 457 931 520 477 2,385 Purchase commitment ( d ) Purchase commitment ( d ) 3,289 382 1 – 3,672 Other commitment ( d ) 3,289 382 1 – 3,672 Other long-term ( d ) 3,289 382 1 – 3,672 Other long-term liability ) 3,289 382 1 – 3,672 Other long-term liability ( e liability ( e ) – 110 4 2 116 Total contractual ( e ) – 110 4 2 116 Total contractual obligation e ) – 110 4 2 116 Total contractual obligation $ ) – 110 4 2 116 Total contractual obligation $ 4,515 116 Total contractual obligation $ 4,515 $ 1,852 $ 2,828 $ contractual obligation $ 4,515 $ 1,852 $ 2,828 $ 3,252 $ $ 4,515 $ 1,852 $ 2,828 $ 3,252 $ 12,447 ( $ 1,852 $ 2,828 $ 3,252 $ 12,447 ( a ) $ 2,828 $ 3,252 $ 12,447 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 ) ( b ) These other tax liability of $ 5.5 billion and other long-term contingent long-term contingent liability of $ 407 million ( related to the excluded unearned revenue of $ 1.3 billion and non-cash item of and non-cash item of $ 226 million . PAGE 36 Table $ 226 million . PAGE 36 Table of Contents Part II of Contents Part II Item 7 RECENTLY ISSUED ACCOUNTING STANDARDS Recently Adopted Accounting Pronouncements On April 1 , 2009 , we adopted Pronouncements On April 1 , 2009 , we adopted the Financial “ FSP ” ) FAS 157-4 , FSP FAS 115-2 and FAS 157-4 , FSP FAS 115-2 and FAS 124-2 , and FSP FAS 115-2 and FAS 124-2 , and FSP FAS 107-1 124-2 , and FSP FAS 107-1 and APB 28-1 . These FSP FAS 107-1 and APB 28-1 . These FSPs are intended of security . FSP FAS 157-4 clarifies the objective and method being measured . FSP FAS 115-2 and FAS 124-2 establishes a FSP FAS 115-2 and FAS 124-2 establishes a new model for comprehensive income . FSP FAS 107-1 and APB 28-1 expands the FSP FAS 107-1 and APB 28-1 expands the fair value disclosure scope of SFAS No . 107 , Disclosures about Fair Value associated disclosure . On January 1 , 2009 , we adopted . On January 1 , 2009 , we adopted SFAS No we adopted SFAS No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 . SFAS No . 161 133 . SFAS No . 161 requires additional disclosure about the instrument under SFAS No . 133 , Accounting for Derivative Instruments cash flow . See Note 5 – Derivatives of the Notes ( Part II , Item 8 ) . On July 1 8 ) . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 – Investments of the Notes ( Part II , Item 8 ) . SFAS No . ) . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . SFAS No . 159 2008 . SFAS No . 159 give u the irrevocable option deficit . As of June 30 , 2009 , we had As of June 30 , 2009 , we had not elected Not Yet Adopted In June 2009 , the FASB issued SFAS FASB issued SFAS No . 167 , Amendments to FASB Interpretation to FASB Interpretation No . 46 ( R ) , which effective for u beginning July 1 , 2010 . This Statement u beginning July 1 , 2010 . This Statement amends FIN . This Statement amends FIN 46 ( R ) , Consolidation interpretation of ARB No . 51 , to require revised evaluation financial statement . In February 2008 , the FASB issued FSP the FASB issued FSP FAS 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for u to July 1 157 for u to July 1 , 2009 , for all u to July 1 , 2009 , for all nonfinancial asset item of SFAS No . 157 will not have a material financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141 ( R ) , Business which replaces SFAS No . 141 . The statement retains the requirement in SFAS No . 141 that the acquisition method of a incurred . In April 2009 , the FASB issued FSP the FASB issued FSP FAS 141 ( R ) -1 which which amends SFAS No . 141 ( R ) by establishing the FSP , an PAGE 37 Table of Contents Part II of Contents Part II Item 7 acquirer is required to recognize criterion in SFAS No . 5 , Accounting for Contingencies , and FASB Interpretation No . 14 , Reasonable Estimation of the of FASB Statement No . 5 . SFAS No . 141 5 . SFAS No . 141 ( R ) and FSP R ) and FSP FAS 141 ( R ) -1 are effective for u beginning July 1 , 2009 , and will u beginning July 1 , 2009 , and will apply prospectively adoption of SFAS No . 141 ( R ) and FSP R ) and FSP FAS 141 ( R ) -1 will of adoption . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 160 , Noncontrolling Interests in Consolidated amendment of ARB No . 51 , which change the accounting income . SFAS No . 160 is effective for u beginning effective for u beginning July 1 , 2009 , and will u beginning July 1 , 2009 , and will apply prospectively adoption of SFAS No . 160 will not have a material ( “ SOP ” ) 97-2 , Software Revenue Recognition . . The application of SOP 97-2 requires judgment , including whether a result of the Windows 7 Upgrade Option program which started Option program which started June 26 , 2009 . The program which started June 26 , 2009 . The program allows customer the corresponding version of Windows 7 at minimal or no cost upgrade to the equivalent Windows 7 product with participating retailer in related to the undelivered Windows 7 product is deferred until the Investment Securities SFAS No . 115 , Accounting for Certain Investments Staff Accounting Bulletin No . 111 , and FSP FAS 115-2 111 , and FSP FAS 115-2 and FAS 124-2 , Recognition FSP FAS 115-2 and FAS 124-2 , Recognition and Presentation of Impairments , provide guidance PAGE 38 Table of Contents Part II of Contents Part II Item 7 on determining when an investment . Goodwill SFAS No . 142 , Goodwill and Other Intangible second quarter of fiscal year 2009 , we changed the date annual impairment test from July 1 to May 1 . The from July 1 to May 1 . The change wa made retrospectively . During fiscal year 2009 , the annual impairment test wa performed a of July 1 , 2008 and wa performed a of July 1 , 2008 and wa performed again a performed again a of May 1 , 2009 . Research and a of May 1 , 2009 . Research and Development Costs , including SFAS No . 2 , Accounting for Research and , and SFAS No . 86 , Accounting for the Costs Marketed . SFAS No . 86 specifies that cost incurred internally of the product . PAGE 39 Table of Contents Part II of Contents Part II Item 7 Legal and Other Contingencies The uncertainty . SFAS No . 5 , Accounting for Contingencies , Income Taxes SFAS No . 109 , Accounting for Income Taxes requirement of FIN No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 . Under FIN No . . Under FIN No . 48 , we may recognize the that ha a greater than 50 % likelihood of being realized settlement . FIN No . 48 also provides guidance on derecognition accordance with SFAS No . 123 ( R ) , Share-Based accordance with SFAS No . 5 , Accounting for Contingencies . a period generally ranging from 90 day to three year . amount a necessary . PAGE 40 Table of Contents Part II of Contents Part II Item 7 Statement of Management ’ s ; Chief Accounting Officer PAGE 41 Table of Contents Part II of Contents Part II Item 7A ITEM 7A . QUANTATIVE AND Part II Item 7A ITEM 7A . QUANTATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor our position a of June 30 , 2009 and 2008 and a of June 30 , 2009 and 2008 and for the June 30 , 2009 and 2008 and for the year ended for the year ended June 30 , 2009 : ( In year ended June 30 , 2009 : ( In million ) million ) Year Ended June 30 , 2009 Risk Categories June Year Ended June 30 , 2009 Risk Categories June 30 , , 2009 Risk Categories June 30 , 2009 June 30 , Risk Categories June 30 , 2009 June 30 , 2008 Average June 30 , 2009 June 30 , 2008 Average High Low , 2009 June 30 , 2008 Average High Low Foreign currency High Low Foreign currency $ 68 $ 100 $ 53 $ Foreign currency $ 68 $ 100 $ 53 $ 99 $ $ 68 $ 100 $ 53 $ 99 $ 20 Interest $ 100 $ 53 $ 99 $ 20 Interest rate 42 $ 53 $ 99 $ 20 Interest rate 42 34 28 99 $ 20 Interest rate 42 34 28 43 17 Equity $ 20 Interest rate 42 34 28 43 17 Equity 157 20 Interest rate 42 34 28 43 17 Equity 157 45 Interest rate 42 34 28 43 17 Equity 157 45 98 rate 42 34 28 43 17 Equity 157 45 98 158 34 28 43 17 Equity 157 45 98 158 45 Commodity 28 43 17 Equity 157 45 98 158 45 Commodity 16 43 17 Equity 157 45 98 158 45 Commodity 16 7 17 Equity 157 45 98 158 45 Commodity 16 7 10 Equity 157 45 98 158 45 Commodity 16 7 10 16 45 98 158 45 Commodity 16 7 10 16 6 Total 98 158 45 Commodity 16 7 10 16 6 Total one-day 158 45 Commodity 16 7 10 16 6 Total one-day VaR 45 Commodity 16 7 10 16 6 Total one-day VaR for Commodity 16 7 10 16 6 Total one-day VaR for the combined risk category wa $ 211 million at June 30 , $ 211 million at June 30 , 2009 and $ 123 million at June 30 , 2009 and $ 123 million at 30 , 2009 and $ 123 million at June 30 , $ 123 million at June 30 , 2008 . The total million at June 30 , 2008 . The total VaR is . The total VaR is 25 % le at June 30 25 % le at June 30 , 2009 , and 34 le at June 30 , 2009 , and 34 % le 30 , 2009 , and 34 % le at June 30 34 % le at June 30 , 2008 , than the le at June 30 , 2008 , than the sum of the overall portfolio . PAGE 42 Table of Contents Part II of Contents Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS Part II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2009 2008 2007 Revenue Year Ended June 30 , 2009 2008 2007 Revenue $ 58,437 Ended June 30 , 2009 2008 2007 Revenue $ 58,437 $ June 30 , 2009 2008 2007 Revenue $ 58,437 $ 60,420 2009 2008 2007 Revenue $ 58,437 $ 60,420 $ 51,122 Operating 2007 Revenue $ 58,437 $ 60,420 $ 51,122 Operating expense : $ 58,437 $ 60,420 $ 51,122 Operating expense : Cost of expense : Cost of revenue 12,155 11,598 10,693 Research and development : Cost of revenue 12,155 11,598 10,693 Research and development 9,010 Cost of revenue 12,155 11,598 10,693 Research and development 9,010 8,164 11,598 10,693 Research and development 9,010 8,164 7,121 Sales and marketing 10,693 Research and development 9,010 8,164 7,121 Sales and marketing 12,879 Research and development 9,010 8,164 7,121 Sales and marketing 12,879 13,260 8,164 7,121 Sales and marketing 12,879 13,260 11,541 General and administrative 7,121 Sales and marketing 12,879 13,260 11,541 General and administrative 3,700 Sales and marketing 12,879 13,260 11,541 General and administrative 3,700 5,127 13,260 11,541 General and administrative 3,700 5,127 3,329 Employee severance 330 11,541 General and administrative 3,700 5,127 3,329 Employee severance 330 – General and administrative 3,700 5,127 3,329 Employee severance 330 – – 3,700 5,127 3,329 Employee severance 330 – – Total operating expense – – Total operating expense 38,074 38,149 32,684 Operating income 20,363 – Total operating expense 38,074 38,149 32,684 Operating income 20,363 22,271 Total operating expense 38,074 38,149 32,684 Operating income 20,363 22,271 18,438 38,074 38,149 32,684 Operating income 20,363 22,271 18,438 Other income ( 38,149 32,684 Operating income 20,363 22,271 18,438 Other income ( expense 32,684 Operating income 20,363 22,271 18,438 Other income ( expense ) income ( expense ) ( 542 ) 1,543 1,663 Income before expense ) ( 542 ) 1,543 1,663 Income before income tax ) ( 542 ) 1,543 1,663 Income before income tax 19,821 1,663 Income before income tax 19,821 23,814 20,101 Provision for income Income before income tax 19,821 23,814 20,101 Provision for income tax before income tax 19,821 23,814 20,101 Provision for income tax 5,252 20,101 Provision for income tax 5,252 6,133 6,036 Net income $ Provision for income tax 5,252 6,133 6,036 Net income $ 14,569 for income tax 5,252 6,133 6,036 Net income $ 14,569 $ 6,133 6,036 Net income $ 14,569 $ 17,681 $ 14,065 Earnings Net income $ 14,569 $ 17,681 $ 14,065 Earnings per share $ 14,569 $ 17,681 $ 14,065 Earnings per share : Basic per share : Basic $ 1.63 $ 1.90 $ 1.44 Diluted : Basic $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.63 $ 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 1.90 $ 1.44 Diluted $ 1.62 $ 1.87 $ 1.42 Weighted 1.44 Diluted $ 1.62 $ 1.87 $ 1.42 Weighted average share $ 1.62 $ 1.87 $ 1.42 Weighted average share outstanding : average share outstanding : Basic 8,945 9,328 9,742 Diluted 8,996 9,470 share outstanding : Basic 8,945 9,328 9,742 Diluted 8,996 9,470 9,886 outstanding : Basic 8,945 9,328 9,742 Diluted 8,996 9,470 9,886 Cash Basic 8,945 9,328 9,742 Diluted 8,996 9,470 9,886 Cash dividend declared 8,945 9,328 9,742 Diluted 8,996 9,470 9,886 Cash dividend declared per 9,328 9,742 Diluted 8,996 9,470 9,886 Cash dividend declared per common declared per common share $ 0.52 $ 0.44 $ 0.40 See common share $ 0.52 $ 0.44 $ 0.40 See accompanying note $ 0.52 $ 0.44 $ 0.40 See accompanying note . PAGE See accompanying note . PAGE 43 Table of Contents Part II of Contents Part II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2009 2008 Assets Current million ) June 30 , 2009 2008 Assets Current asset : ) June 30 , 2009 2008 Assets Current asset : Cash Cash and cash equivalent $ 6,076 $ 10,339 Short-term investment ( cash equivalent $ 6,076 $ 10,339 Short-term investment ( including security pledged a collateral of $ 1,540 and $ 2,491 ) 25,371 of $ 1,540 and $ 2,491 ) 25,371 13,323 Total cash 1,540 and $ 2,491 ) 25,371 13,323 Total cash , cash and $ 2,491 ) 25,371 13,323 Total cash , cash equivalent equivalent , and short-term investment 31,447 23,662 Accounts receivable , net , and short-term investment 31,447 23,662 Accounts receivable , net of for doubtful account of $ 451 and $ 153 11,192 13,589 of $ 451 and $ 153 11,192 13,589 Inventories 717 985 $ 451 and $ 153 11,192 13,589 Inventories 717 985 Deferred 451 and $ 153 11,192 13,589 Inventories 717 985 Deferred income $ 153 11,192 13,589 Inventories 717 985 Deferred income tax 2,213 153 11,192 13,589 Inventories 717 985 Deferred income tax 2,213 2,017 717 985 Deferred income tax 2,213 2,017 Other 3,711 2,989 Total 985 Deferred income tax 2,213 2,017 Other 3,711 2,989 Total current income tax 2,213 2,017 Other 3,711 2,989 Total current asset 49,280 tax 2,213 2,017 Other 3,711 2,989 Total current asset 49,280 43,242 3,711 2,989 Total current asset 49,280 43,242 Property and equipment , 2,989 Total current asset 49,280 43,242 Property and equipment , net of accumulated depreciation of $ 7,547 and $ 6,302 7,535 6,242 of $ 7,547 and $ 6,302 7,535 6,242 Equity and other $ 7,547 and $ 6,302 7,535 6,242 Equity and other investment 7,547 and $ 6,302 7,535 6,242 Equity and other investment 4,933 6,242 Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible Equity and other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset other investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset , net investment 4,933 6,588 Goodwill 12,503 12,108 Intangible asset , net 1,759 12,108 Intangible asset , net 1,759 1,973 Deferred income tax 279 Intangible asset , net 1,759 1,973 Deferred income tax 279 949 1,759 1,973 Deferred income tax 279 949 Other long-term asset 1,599 1,973 Deferred income tax 279 949 Other long-term asset 1,599 1,691 279 949 Other long-term asset 1,599 1,691 Total asset $ 77,888 949 Other long-term asset 1,599 1,691 Total asset $ 77,888 $ 1,599 1,691 Total asset $ 77,888 $ 72,793 Liabilities and stockholder Total asset $ 77,888 $ 72,793 Liabilities and stockholder ’ equity liability : Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 Accounts payable $ 3,324 $ 4,034 Short-term debt 2,000 – Accrued 3,324 $ 4,034 Short-term debt 2,000 – Accrued compensation 3,156 2,934 debt 2,000 – Accrued compensation 3,156 2,934 Income tax 725 3,248 2,000 – Accrued compensation 3,156 2,934 Income tax 725 3,248 Short-term compensation 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 3,156 2,934 Income tax 725 3,248 Short-term unearned revenue 13,003 13,397 725 3,248 Short-term unearned revenue 13,003 13,397 Securities lending payable 1,684 3,248 Short-term unearned revenue 13,003 13,397 Securities lending payable 1,684 2,614 13,003 13,397 Securities lending payable 1,684 2,614 Other 3,142 3,659 Total 13,397 Securities lending payable 1,684 2,614 Other 3,142 3,659 Total current lending payable 1,684 2,614 Other 3,142 3,659 Total current liability 27,034 payable 1,684 2,614 Other 3,142 3,659 Total current liability 27,034 29,886 3,142 3,659 Total current liability 27,034 29,886 Long-term debt 3,746 – 3,659 Total current liability 27,034 29,886 Long-term debt 3,746 – Long-term liability 27,034 29,886 Long-term debt 3,746 – Long-term unearned revenue 1,281 3,746 – Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 – Long-term unearned revenue 1,281 1,900 Other long-term liability 6,269 4,721 1,281 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders 1,900 Other long-term liability 6,269 4,721 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,908 and 9,151 share authorized 24,000 ; outstanding 8,908 and 9,151 62,382 62,849 Retained 24,000 ; outstanding 8,908 and 9,151 62,382 62,849 Retained deficit , ; outstanding 8,908 and 9,151 62,382 62,849 Retained deficit , including outstanding 8,908 and 9,151 62,382 62,849 Retained deficit , including accumulated other comprehensive income of $ 969 and $ 1,140 ( 22,824 of $ 969 and $ 1,140 ( 22,824 ) ( 26,563 969 and $ 1,140 ( 22,824 ) ( 26,563 ) Total 1,140 ( 22,824 ) ( 26,563 ) Total stockholder ’ equity ) Total stockholder ’ equity 39,558 36,286 Total liability and stockholder Total stockholder ’ equity 39,558 36,286 Total liability and stockholder ’ and stockholder ’ equity $ 77,888 $ 72,793 See accompanying note ’ equity $ 77,888 $ 72,793 See accompanying note . PAGE See accompanying note . PAGE 44 Table of Contents Part II of Contents Part II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2009 2008 2007 Operations Year Ended June 30 , 2009 2008 2007 Operations Net income Ended June 30 , 2009 2008 2007 Operations Net income $ June 30 , 2009 2008 2007 Operations Net income $ 14,569 2007 Operations Net income $ 14,569 $ 17,681 $ 14,065 Adjustments Net income $ 14,569 $ 17,681 $ 14,065 Adjustments to reconcile $ 14,569 $ 17,681 $ 14,065 Adjustments to reconcile net income , and other noncash item 2,562 2,056 1,440 Stock-based compensation 1,708 and other noncash item 2,562 2,056 1,440 Stock-based compensation 1,708 1,479 other noncash item 2,562 2,056 1,440 Stock-based compensation 1,708 1,479 1,550 2,562 2,056 1,440 Stock-based compensation 1,708 1,479 1,550 Net recognized loss 2,056 1,440 Stock-based compensation 1,708 1,479 1,550 Net recognized loss ( 1,440 Stock-based compensation 1,708 1,479 1,550 Net recognized loss ( gain ) on investment and derivative 683 ( 572 ) ( 292 investment and derivative 683 ( 572 ) ( 292 ) Excess 683 ( 572 ) ( 292 ) Excess tax benefit from benefit from stock-based compensation ( 52 ) ( 120 ) ( compensation ( 52 ) ( 120 ) ( 77 ) Deferred ) ( 120 ) ( 77 ) Deferred income tax 762 77 ) Deferred income tax 762 935 421 Deferral of unearned ) Deferred income tax 762 935 421 Deferral of unearned revenue Deferred income tax 762 935 421 Deferral of unearned revenue 24,409 421 Deferral of unearned revenue 24,409 24,532 21,032 Recognition of unearned Deferral of unearned revenue 24,409 24,532 21,032 Recognition of unearned revenue of unearned revenue 24,409 24,532 21,032 Recognition of unearned revenue ( Recognition of unearned revenue ( 25,426 ) ( 21,944 ) ( revenue ( 25,426 ) ( 21,944 ) ( 19,382 ) Changes ) ( 21,944 ) ( 19,382 ) Changes in operating asset and liability : Accounts receivable 2,215 ( 1,569 ) ( 1,764 : Accounts receivable 2,215 ( 1,569 ) ( 1,764 ) Other 2,215 ( 1,569 ) ( 1,764 ) Other current asset ( ) Other current asset ( 422 ) 153 232 Other long-term current asset ( 422 ) 153 232 Other long-term asset ( asset ( 422 ) 153 232 Other long-term asset ( 273 232 Other long-term asset ( 273 ) ( 98 ) ( asset ( 273 ) ( 98 ) ( 435 ) Other ) ( 98 ) ( 435 ) Other current liability ( ) Other current liability ( 3,371 ) ( 748 ) ( liability ( 3,371 ) ( 748 ) ( 552 ) Other ) ( 748 ) ( 552 ) Other long-term liability 1,673 552 ) Other long-term liability 1,673 ( 173 ) 1,558 Net Other long-term liability 1,673 ( 173 ) 1,558 Net cash from liability 1,673 ( 173 ) 1,558 Net cash from operation 19,037 1,558 Net cash from operation 19,037 21,612 17,796 Financing Short-term borrowing Net cash from operation 19,037 21,612 17,796 Financing Short-term borrowing , cash from operation 19,037 21,612 17,796 Financing Short-term borrowing , maturity Short-term borrowing , maturity of 90 day or le , net day or le , net 1,178 – – Proceeds from issuance debt , maturity longer than 90 day 4,796 – – Repayments maturity longer than 90 day 4,796 – – Repayments of debt debt , maturity longer than 90 day ( 228 ) – longer than 90 day ( 228 ) – – Common stock – – Common stock issued 579 3,494 6,782 Common stock repurchased – Common stock issued 579 3,494 6,782 Common stock repurchased ( Common stock issued 579 3,494 6,782 Common stock repurchased ( 9,353 6,782 Common stock repurchased ( 9,353 ) ( 12,533 ) ( repurchased ( 9,353 ) ( 12,533 ) ( 27,575 ) Common ) ( 12,533 ) ( 27,575 ) Common stock cash dividend Common stock cash dividend ( 4,468 ) ( 4,015 ) ( dividend ( 4,468 ) ( 4,015 ) ( 3,805 ) Excess ) ( 4,015 ) ( 3,805 ) Excess tax benefit from tax benefit from stock-based compensation 52 120 77 Other ( 19 benefit from stock-based compensation 52 120 77 Other ( 19 ) from stock-based compensation 52 120 77 Other ( 19 ) – 52 120 77 Other ( 19 ) – ( 23 ) ( 19 ) – ( 23 ) Net cash used in cash used in financing ( 7,463 ) ( 12,934 ) ( financing ( 7,463 ) ( 12,934 ) ( 24,544 ) Investing ) ( 12,934 ) ( 24,544 ) Investing Additions to property to property and equipment ( 3,119 ) ( 3,182 ) ( equipment ( 3,119 ) ( 3,182 ) ( 2,264 ) Acquisition ) ( 3,182 ) ( 2,264 ) Acquisition of company , net of cash acquired ( 868 ) ( 8,053 ) ( acquired ( 868 ) ( 8,053 ) ( 1,150 ) Purchases ) ( 8,053 ) ( 1,150 ) Purchases of investment ( ) Purchases of investment ( 36,850 ) ( 20,954 ) ( investment ( 36,850 ) ( 20,954 ) ( 36,308 ) Maturities ) ( 20,954 ) ( 36,308 ) Maturities of investment 6,191 36,308 ) Maturities of investment 6,191 2,597 4,736 Sales of investment ) Maturities of investment 6,191 2,597 4,736 Sales of investment 19,806 Maturities of investment 6,191 2,597 4,736 Sales of investment 19,806 25,132 2,597 4,736 Sales of investment 19,806 25,132 41,451 Securities lending payable 4,736 Sales of investment 19,806 25,132 41,451 Securities lending payable ( Sales of investment 19,806 25,132 41,451 Securities lending payable ( 930 41,451 Securities lending payable ( 930 ) ( 127 ) ( payable ( 930 ) ( 127 ) ( 376 ) Net ) ( 127 ) ( 376 ) Net cash from ( used in ) investing ( 15,770 ) ( 4,587 ) 6,089 investing ( 15,770 ) ( 4,587 ) 6,089 Effect of exchange 15,770 ) ( 4,587 ) 6,089 Effect of exchange rate on cash and cash equivalent ( 67 ) 137 56 Net change cash equivalent ( 67 ) 137 56 Net change in cash equivalent ( 67 ) 137 56 Net change in cash and cash and cash equivalent ( 4,263 ) 4,228 ( 603 ) cash equivalent ( 4,263 ) 4,228 ( 603 ) Cash and ( 4,263 ) 4,228 ( 603 ) Cash and cash equivalent equivalent , beginning of period 10,339 6,111 6,714 Cash and cash , beginning of period 10,339 6,111 6,714 Cash and cash equivalent beginning of period 10,339 6,111 6,714 Cash and cash equivalent , , end of period $ 6,076 $ 10,339 $ 6,111 See of period $ 6,076 $ 10,339 $ 6,111 See accompanying note $ 6,076 $ 10,339 $ 6,111 See accompanying note . PAGE See accompanying note . PAGE 45 Table of Contents Part II of Contents Part II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2009 2008 2007 Common Year Ended June 30 , 2009 2008 2007 Common stock and Ended June 30 , 2009 2008 2007 Common stock and paid-in June 30 , 2009 2008 2007 Common stock and paid-in capital , beginning of period $ 62,849 $ 60,557 $ 59,005 Common of period $ 62,849 $ 60,557 $ 59,005 Common stock issued $ 62,849 $ 60,557 $ 59,005 Common stock issued 567 3,504 $ 59,005 Common stock issued 567 3,504 6,783 Common stock repurchased 59,005 Common stock issued 567 3,504 6,783 Common stock repurchased ( Common stock issued 567 3,504 6,783 Common stock repurchased ( 2,611 6,783 Common stock repurchased ( 2,611 ) ( 3,022 ) ( repurchased ( 2,611 ) ( 3,022 ) ( 6,162 ) Stock-based ) ( 3,022 ) ( 6,162 ) Stock-based compensation expense 1,708 6,162 ) Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income ) Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income tax Stock-based compensation expense 1,708 1,479 1,550 Stock-based compensation income tax benefit benefit ( deficiency ) ( 128 ) 253 ( 661 ) deficiency ) ( 128 ) 253 ( 661 ) Other , ( 128 ) 253 ( 661 ) Other , net ( ) Other , net ( 3 ) 78 42 Balance , , net ( 3 ) 78 42 Balance , end of net ( 3 ) 78 42 Balance , end of period Balance , end of period 62,382 62,849 60,557 Retained deficit Balance , end of period 62,382 62,849 60,557 Retained deficit Balance , end of period 62,382 62,849 60,557 Retained deficit Balance , beginning , beginning of period ( 26,563 ) ( 29,460 ) ( period ( 26,563 ) ( 29,460 ) ( 18,901 ) Cumulative ) ( 29,460 ) ( 18,901 ) Cumulative effect of a principle – adoption of FIN 48 – ( 395 ) – of FIN 48 – ( 395 ) – Cumulative effect of principle – adoption of EITF 06-2 – ( 17 ) – of EITF 06-2 – ( 17 ) – Net income 14,569 17 ) – Net income 14,569 17,681 14,065 Other comprehensive income ) – Net income 14,569 17,681 14,065 Other comprehensive income : – Net income 14,569 17,681 14,065 Other comprehensive income : Net Net unrealized gain on derivative 302 18 14 Net unrealized gain unrealized gain on derivative 302 18 14 Net unrealized gain ( gain on derivative 302 18 14 Net unrealized gain ( loss loss ) on investment ( 233 ) ( 653 ) 326 investment ( 233 ) ( 653 ) 326 Translation adjustment and 233 ) ( 653 ) 326 Translation adjustment and other ( Translation adjustment and other ( 240 ) 121 85 Comprehensive income and other ( 240 ) 121 85 Comprehensive income 14,398 17,167 other ( 240 ) 121 85 Comprehensive income 14,398 17,167 14,490 ) 121 85 Comprehensive income 14,398 17,167 14,490 Common stock cash 121 85 Comprehensive income 14,398 17,167 14,490 Common stock cash dividend 85 Comprehensive income 14,398 17,167 14,490 Common stock cash dividend ( Common stock cash dividend ( 4,620 ) ( 4,084 ) ( dividend ( 4,620 ) ( 4,084 ) ( 3,837 ) Common ) ( 4,084 ) ( 3,837 ) Common stock repurchased ( ) Common stock repurchased ( 6,039 ) ( 9,774 ) ( repurchased ( 6,039 ) ( 9,774 ) ( 21,212 ) Balance ) ( 9,774 ) ( 21,212 ) Balance , end of , end of period ( 22,824 ) ( 26,563 ) ( period ( 22,824 ) ( 26,563 ) ( 29,460 ) Total ) ( 26,563 ) ( 29,460 ) Total stockholder ’ equity Total stockholder ’ equity $ 39,558 $ 36,286 $ 31,097 See ’ equity $ 39,558 $ 36,286 $ 31,097 See accompanying note $ 39,558 $ 36,286 $ 31,097 See accompanying note . PAGE See accompanying note . PAGE 46 Table of Contents Part II of Contents Part II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES Accounting Principles The ” ) . Effective July 1 , 2008 , we began . Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , we included Prior to July 1 , 2008 , we included gain and period presentation . See Note 3 – Other Income ( Expense undelivered element is recognized PAGE 47 Table of Contents Part II of Contents Part II Item 8 ratably on a straight-line basis a result of the Windows 7 Upgrade Option program which started Option program which started June 26 , 2009 . The program which started June 26 , 2009 . The program allows customer the corresponding version of Windows 7 at minimal or no cost upgrade to the equivalent Windows 7 product with participating retailer in related to the undelivered Windows 7 product is deferred until the Revenue related to our Xbox 360 game console , game published for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . and development expense until PAGE 48 Table of Contents Part II of Contents Part II Item 8 the point that technological feasibility . Advertising expense wa $ 1.4 billion , $ 1.2 billion $ 1.4 billion , $ 1.2 billion , and $ 1.3 1.2 billion , and $ 1.3 billion in fiscal year 2009 1.3 billion in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 , respectively 2009 , 2008 , and 2007 , respectively . Employee Severance accordance with SFAS No . 123 ( R ) , Share-Based , or plan to PAGE 49 Table of Contents Part II of Contents Part II Item 8 sell , the investment . resulting designation . See Note 5 – Derivatives . Our current : ( In million ) 2009 2008 2007 Year Ended June ( In million ) 2009 2008 2007 Year Ended June 30 In million ) 2009 2008 2007 Year Ended June 30 , 2008 2007 Year Ended June 30 , Balance , beginning of , beginning of period $ 153 $ 117 $ 142 Charged of period $ 153 $ 117 $ 142 Charged to cost $ 153 $ 117 $ 142 Charged to cost and other Charged to cost and other 360 88 64 Write-offs ( 62 to cost and other 360 88 64 Write-offs ( 62 ) cost and other 360 88 64 Write-offs ( 62 ) ( 360 88 64 Write-offs ( 62 ) ( 52 ) ( Write-offs ( 62 ) ( 52 ) ( 89 ) Balance ) ( 52 ) ( 89 ) Balance , end of , end of period $ 451 $ 153 $ 117 Inventories of period $ 451 $ 153 $ 117 Inventories Inventories are $ 451 $ 153 $ 117 Inventories Inventories are stated at , ranging from one to 15 year . Computer software developed second quarter of fiscal year 2009 , we changed the date annual impairment test from July 1 to May 1 . The from July 1 to May 1 . The change wa made applied retrospectively . See Note 10 – Goodwill . PAGE 50 10 – Goodwill . PAGE 50 Table of Contents Part II of Contents Part II Item 8 Intangible Assets Intangible asset are , ranging from one to 10 year . We evaluate the recent fiscal year and July 29 , 2009 , the date year and July 29 , 2009 , the date the financial Adopted Accounting Pronouncements On April 1 , 2009 , we adopted Pronouncements On April 1 , 2009 , we adopted the Financial “ FSP ” ) FAS 157-4 , FSP FAS 115-2 and FAS 157-4 , FSP FAS 115-2 and FAS 124-2 , and FSP FAS 115-2 and FAS 124-2 , and FSP FAS 107-1 124-2 , and FSP FAS 107-1 and APB 28-1 . These FSP FAS 107-1 and APB 28-1 . These FSPs are intended of security . FSP FAS 157-4 clarifies the objective and method being measured . FSP FAS 115-2 and FAS 124-2 establishes a FSP FAS 115-2 and FAS 124-2 establishes a new model for comprehensive income . FSP FAS 107-1 and APB 28-1 expands the FSP FAS 107-1 and APB 28-1 expands the fair value disclosure scope of SFAS No . 107 , Disclosures about Fair Value associated disclosure . On January 1 , 2009 , we adopted . On January 1 , 2009 , we adopted Statement of SFAS ” ) No . 161 , Disclosures about Derivative Instruments of FASB Statement No . 133 . SFAS No . 161 133 . SFAS No . 161 requires additional disclosure about the instrument under SFAS No . 133 , Accounting for Derivative Instruments cash flow . See Note 5 – Derivatives . On July – Derivatives . On July 1 , 2008 , we adopted . On July 1 , 2008 , we adopted SFAS No we adopted SFAS No . 157 , Fair Value Measurements , ) . SFAS No . 157 defines fair value , establishes the information . See Note 4 – Investments . SFAS No Investments . SFAS No . 159 , The Fair Value Option of FASB Statement No . 115 , became effective for u effective for u on July 1 , 2008 . SFAS No u on July 1 , 2008 . SFAS No . 159 2008 . SFAS No . 159 give u the irrevocable option deficit . As of June 30 , 2009 , we had As of June 30 , 2009 , we had not elected Not Yet Adopted In June 2009 , the FASB issued SFAS FASB issued SFAS No . 167 , Amendments to FASB Interpretation to FASB Interpretation No . 46 ( R ) , which effective for u beginning July 1 , 2010 . This Statement u beginning July 1 , 2010 . This Statement amends Financial FIN ” ) No . 46 ( R ) , Consolidation interpretation of ARB No . 51 , to require revised evaluation financial statement . In February 2008 , the FASB issued FSP the FASB issued FSP FAS 157-2 , Effective Date of FASB of FASB Statement No . 157 , which delay the effective date of SFAS No . 157 for u to July 1 157 for u to July 1 , 2009 , for all u to July 1 , 2009 , for all nonfinancial asset nonfinancial liability , except PAGE 51 Table of Contents Part II of Contents Part II Item 8 for item that are recognized item of SFAS No . 157 will not have a material financial statement . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 141 ( R ) , Business which replaces SFAS No . 141 . The statement retains the requirement in SFAS No . 141 that the acquisition method of a incurred . In April 2009 , the FASB issued FSP the FASB issued FSP FAS 141 ( R ) -1 which which amends SFAS No . 141 ( R ) by establishing criterion in SFAS No . 5 , Accounting for Contingencies , and FASB Interpretation No . 14 , Reasonable Estimation of the of FASB Statement No . 5 . SFAS No . 141 5 . SFAS No . 141 ( R ) and FSP R ) and FSP FAS 141 ( R ) -1 are effective for u beginning July 1 , 2009 , and will u beginning July 1 , 2009 , and will apply prospectively adoption of SFAS No . 141 ( R ) and FSP R ) and FSP FAS 141 ( R ) -1 will of adoption . In December 2007 , the FASB issued SFAS FASB issued SFAS No . 160 , Noncontrolling Interests in Consolidated amendment of ARB No . 51 , which change the accounting income . SFAS No . 160 is effective for u beginning effective for u beginning July 1 , 2009 , and will u beginning July 1 , 2009 , and will apply prospectively adoption of SFAS No . 160 will not have a material our financial statement . NOTE 2 EARNINGS PER SHARE Basic earnings share ) Year Ended June 30 , 2009 2008 2007 Net Year Ended June 30 , 2009 2008 2007 Net income available Ended June 30 , 2009 2008 2007 Net income available for June 30 , 2009 2008 2007 Net income available for common shareholder ( A ) $ 14,569 $ 17,681 $ 14,065 Weighted A ) $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding $ 14,569 $ 17,681 $ 14,065 Weighted average outstanding share of common stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based ( B ) 8,945 9,328 9,742 Dilutive effect of stock-based award Dilutive effect of stock-based award 51 142 144 Common stock and effect of stock-based award 51 142 144 Common stock and common of stock-based award 51 142 144 Common stock and common stock stock equivalent ( C ) 8,996 9,470 9,886 Earnings per share equivalent ( C ) 8,996 9,470 9,886 Earnings per share : ( C ) 8,996 9,470 9,886 Earnings per share : Basic Basic ( A/B ) $ 1.63 $ 1.90 $ 1.44 Diluted A/B ) $ 1.63 $ 1.90 $ 1.44 Diluted ( A/C $ 1.63 $ 1.90 $ 1.44 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.62 $ 1.87 $ 1.42 For A/C ) $ 1.62 $ 1.87 $ 1.42 For the year $ 1.62 $ 1.87 $ 1.42 For the year ended June For the year ended June 30 , 2009 , 2008 , year ended June 30 , 2009 , 2008 , and 2007 June 30 , 2009 , 2008 , and 2007 , 342 2009 , 2008 , and 2007 , 342 million , 91 2008 , and 2007 , 342 million , 91 million , 2007 , 342 million , 91 million , and 199 million , 91 million , and 199 million share , respectively , have been anti-dilutive . PAGE 52 Table of Contents Part II of Contents Part II Item 8 NOTE 3 OTHER INCOME ( Part II Item 8 NOTE 3 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2009 2008 2007 Dividends Year Ended June 30 , 2009 2008 2007 Dividends and interest Ended June 30 , 2009 2008 2007 Dividends and interest $ June 30 , 2009 2008 2007 Dividends and interest $ 706 2007 Dividends and interest $ 706 $ 888 $ 1,319 Net and interest $ 706 $ 888 $ 1,319 Net recognized gain $ 706 $ 888 $ 1,319 Net recognized gain ( loss loss ) on investment ( 125 ) 346 650 Net gain on investment ( 125 ) 346 650 Net gain ( loss investment ( 125 ) 346 650 Net gain ( loss ) loss ) on derivative ( 558 ) 226 ( 358 ) on derivative ( 558 ) 226 ( 358 ) Net gain ( 558 ) 226 ( 358 ) Net gain ( loss on foreign currency remeasurements ( 509 ) 226 56 Other ( currency remeasurements ( 509 ) 226 56 Other ( 56 ) remeasurements ( 509 ) 226 56 Other ( 56 ) ( ) 226 56 Other ( 56 ) ( 143 ) ( Other ( 56 ) ( 143 ) ( 4 ) Total ) ( 143 ) ( 4 ) Total $ ( 542 4 ) Total $ ( 542 ) $ 1,543 $ 1,663 $ ( 542 ) $ 1,543 $ 1,663 Effective July 1 542 ) $ 1,543 $ 1,663 Effective July 1 , 2008 1,543 $ 1,663 Effective July 1 , 2008 , we began 1,663 Effective July 1 , 2008 , we began presenting gain ) . Prior to July 1 , 2008 , we included Prior to July 1 , 2008 , we included gain and operation . For fiscal year 2009 , $ 509 million of fiscal year 2009 , $ 509 million of loss were reported ) . For fiscal year 2008 and 2007 , $ 221 For fiscal year 2008 and 2007 , $ 221 million and 2008 and 2007 , $ 221 million and $ 86 million $ 221 million and $ 86 million of gain , respectively included other-than-temporary impairment of $ 862 million , $ 312 million $ 862 million , $ 312 million , and $ 25 312 million , and $ 25 million in fiscal year 2009 25 million in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 , respectively 2009 , 2008 , and 2007 , respectively . Realized gain other-than-temporary impairment ) were $ 1.6 billion and $ 897 million $ 1.6 billion and $ 897 million , respectively , in respectively , in fiscal year 2009 , $ 751 million and fiscal year 2009 , $ 751 million and $ 93 million $ 751 million and $ 93 million , respectively , in respectively , in fiscal year 2008 , and $ 851 million year 2008 , and $ 851 million and $ 176 million $ 851 million and $ 176 million , respectively , in respectively , in fiscal year 2007 . NOTE 4 INVESTMENTS Investment fiscal year 2007 . NOTE 4 INVESTMENTS Investment Components , Including Equity and Other Investments June 30 , 2009 Cash $ 2,064 Other Investments June 30 , 2009 Cash $ 2,064 $ – 30 , 2009 Cash $ 2,064 $ – $ – $ $ – $ – $ 2,064 $ 2,064 $ – $ $ – $ 2,064 $ 2,064 $ – $ – Mutual – $ – Mutual fund 1,007 – ( 25 ) 982 Mutual fund 1,007 – ( 25 ) 982 900 82 – 1,007 – ( 25 ) 982 900 82 – Commercial paper – ( 25 ) 982 900 82 – Commercial paper 2,601 ( 25 ) 982 900 82 – Commercial paper 2,601 – 900 82 – Commercial paper 2,601 – – 2,601 400 2,201 Commercial paper 2,601 – – 2,601 400 2,201 – Certificates of paper 2,601 – – 2,601 400 2,201 – Certificates of deposit 2,601 – – 2,601 400 2,201 – Certificates of deposit 555 2,201 – Certificates of deposit 555 – – 555 275 280 of deposit 555 – – 555 275 280 – U.S. Government deposit 555 – – 555 275 280 – U.S. Government and 555 – – 555 275 280 – U.S. Government and Agency U.S. Government and Agency security 13,450 21 ( 5 ) 13,466 Government and Agency security 13,450 21 ( 5 ) 13,466 2,369 Agency security 13,450 21 ( 5 ) 13,466 2,369 11,097 – 13,450 21 ( 5 ) 13,466 2,369 11,097 – Foreign government 21 ( 5 ) 13,466 2,369 11,097 – Foreign government bond ( 5 ) 13,466 2,369 11,097 – Foreign government bond 3,450 11,097 – Foreign government bond 3,450 71 ( 4 ) 3,517 – Foreign government bond 3,450 71 ( 4 ) 3,517 – government bond 3,450 71 ( 4 ) 3,517 – 3,517 – 3,450 71 ( 4 ) 3,517 – 3,517 – Mortgage-backed security ( 4 ) 3,517 – 3,517 – Mortgage-backed security 3,353 81 – 3,517 – Mortgage-backed security 3,353 81 ( 16 ) 3,418 3,517 – Mortgage-backed security 3,353 81 ( 16 ) 3,418 – Mortgage-backed security 3,353 81 ( 16 ) 3,418 – 3,418 – 3,353 81 ( 16 ) 3,418 – 3,418 – Corporate note ( 16 ) 3,418 – 3,418 – Corporate note and bond – Corporate note and bond 4,361 287 ( 52 ) 4,596 Corporate note and bond 4,361 287 ( 52 ) 4,596 – and bond 4,361 287 ( 52 ) 4,596 – 4,596 – 4,361 287 ( 52 ) 4,596 – 4,596 – Municipal security ( 52 ) 4,596 – 4,596 – Municipal security 255 2 – 4,596 – Municipal security 255 2 ( 1 ) 256 4,596 – Municipal security 255 2 ( 1 ) 256 68 Municipal security 255 2 ( 1 ) 256 68 188 – 255 2 ( 1 ) 256 68 188 – Common and 2 ( 1 ) 256 68 188 – Common and preferred ( 1 ) 256 68 188 – Common and preferred stock – Common and preferred stock 4,015 627 ( 182 ) 4,460 Common and preferred stock 4,015 627 ( 182 ) 4,460 – preferred stock 4,015 627 ( 182 ) 4,460 – – 4,460 4,015 627 ( 182 ) 4,460 – – 4,460 Other investment 182 ) 4,460 – – 4,460 Other investment 465 – – – – 4,460 Other investment 465 – – 465 – ( Other investment 465 – – 465 – ( 8 ) 473 – – 465 – ( 8 ) 473 Total $ 35,576 465 – ( 8 ) 473 Total $ 35,576 $ 1,089 8 ) 473 Total $ 35,576 $ 1,089 $ ( 285 473 Total $ 35,576 $ 1,089 $ ( 285 ) $ 35,576 $ 1,089 $ ( 285 ) $ 36,380 $ 6,076 $ ( 285 ) $ 36,380 $ 6,076 $ 25,371 $ 285 ) $ 36,380 $ 6,076 $ 25,371 $ 4,933 PAGE $ 36,380 $ 6,076 $ 25,371 $ 4,933 PAGE 53 Table $ 6,076 $ 25,371 $ 4,933 PAGE 53 Table of Contents $ 25,371 $ 4,933 PAGE 53 Table of Contents Part II of Contents Part II Item 8 ( In million ) Cost Equity and Other Investments June 30 , 2008 Cash $ 3,274 Other Investments June 30 , 2008 Cash $ 3,274 $ – 30 , 2008 Cash $ 3,274 $ – $ – $ $ – $ – $ 3,274 $ 3,274 $ – $ $ – $ 3,274 $ 3,274 $ – $ – Mutual – $ – Mutual fund 1,044 15 ( 8 ) 1,051 $ – Mutual fund 1,044 15 ( 8 ) 1,051 835 Mutual fund 1,044 15 ( 8 ) 1,051 835 136 80 1,044 15 ( 8 ) 1,051 835 136 80 Commercial paper 15 ( 8 ) 1,051 835 136 80 Commercial paper 787 ( 8 ) 1,051 835 136 80 Commercial paper 787 – 8 ) 1,051 835 136 80 Commercial paper 787 – – 835 136 80 Commercial paper 787 – – 787 787 – Commercial paper 787 – – 787 787 – – Certificates of paper 787 – – 787 787 – – Certificates of deposit – – Certificates of deposit 1,580 – – 1,580 1,373 207 of deposit 1,580 – – 1,580 1,373 207 – U.S. Government deposit 1,580 – – 1,580 1,373 207 – U.S. Government and 1,580 – – 1,580 1,373 207 – U.S. Government and Agency U.S. Government and Agency security 4,200 37 ( 4 ) 4,233 Government and Agency security 4,200 37 ( 4 ) 4,233 1,839 Agency security 4,200 37 ( 4 ) 4,233 1,839 2,318 76 4,200 37 ( 4 ) 4,233 1,839 2,318 76 Foreign government 37 ( 4 ) 4,233 1,839 2,318 76 Foreign government bond ( 4 ) 4,233 1,839 2,318 76 Foreign government bond 3,466 4 ) 4,233 1,839 2,318 76 Foreign government bond 3,466 15 2,318 76 Foreign government bond 3,466 15 ( 62 ) 3,419 76 Foreign government bond 3,466 15 ( 62 ) 3,419 – government bond 3,466 15 ( 62 ) 3,419 – 3,419 – 3,466 15 ( 62 ) 3,419 – 3,419 – Mortgage-backed security ( 62 ) 3,419 – 3,419 – Mortgage-backed security 3,628 31 – 3,419 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 3,419 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 – Mortgage-backed security 3,628 31 ( 25 ) 3,634 – 3,634 – 3,628 31 ( 25 ) 3,634 – 3,634 – Corporate note ( 25 ) 3,634 – 3,634 – Corporate note and bond – Corporate note and bond 5,013 91 ( 39 ) 5,065 Corporate note and bond 5,013 91 ( 39 ) 5,065 2,122 and bond 5,013 91 ( 39 ) 5,065 2,122 2,943 – 5,013 91 ( 39 ) 5,065 2,122 2,943 – Municipal security 91 ( 39 ) 5,065 2,122 2,943 – Municipal security 761 ( 39 ) 5,065 2,122 2,943 – Municipal security 761 4 2,122 2,943 – Municipal security 761 4 ( 4 ) 761 2,943 – Municipal security 761 4 ( 4 ) 761 109 Municipal security 761 4 ( 4 ) 761 109 652 – 761 4 ( 4 ) 761 109 652 – Common and 4 ( 4 ) 761 109 652 – Common and preferred ( 4 ) 761 109 652 – Common and preferred stock – Common and preferred stock 4,815 1,224 ( 113 ) 5,926 Common and preferred stock 4,815 1,224 ( 113 ) 5,926 – preferred stock 4,815 1,224 ( 113 ) 5,926 – – 5,926 4,815 1,224 ( 113 ) 5,926 – – 5,926 Other investment 113 ) 5,926 – – 5,926 Other investment 520 – – – – 5,926 Other investment 520 – – 520 – 14 Other investment 520 – – 520 – 14 506 Total $ 520 – – 520 – 14 506 Total $ 29,088 $ – – 520 – 14 506 Total $ 29,088 $ 1,417 – 14 506 Total $ 29,088 $ 1,417 $ ( 255 506 Total $ 29,088 $ 1,417 $ ( 255 ) $ 29,088 $ 1,417 $ ( 255 ) $ 30,250 $ 10,339 $ ( 255 ) $ 30,250 $ 10,339 $ 13,323 $ 255 ) $ 30,250 $ 10,339 $ 13,323 $ 6,588 Unrealized $ 30,250 $ 10,339 $ 13,323 $ 6,588 Unrealized Losses on $ 10,339 $ 13,323 $ 6,588 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total ( Fair Value Unrealized Losses June 30 , 2009 Mutual fund $ Unrealized Losses June 30 , 2009 Mutual fund $ 3 $ , 2009 Mutual fund $ 3 $ ( 1 ) $ fund $ 3 $ ( 1 ) $ 77 $ ( $ ( 1 ) $ 77 $ ( 24 ) $ ) $ 77 $ ( 24 ) $ 80 $ ( $ ( 24 ) $ 80 $ ( 25 ) U.S. ) $ 80 $ ( 25 ) U.S. Government and Agency U.S. Government and Agency security 4,033 ( 5 ) – – and Agency security 4,033 ( 5 ) – – 4,033 ( ( 5 ) – – 4,033 ( 5 ) Foreign government ) – – 4,033 ( 5 ) Foreign government bond 1,444 5 ) Foreign government bond 1,444 ( 3 ) 669 ( Foreign government bond 1,444 ( 3 ) 669 ( 1 ) bond 1,444 ( 3 ) 669 ( 1 ) 2,113 ( ( 3 ) 669 ( 1 ) 2,113 ( 4 ) ) 669 ( 1 ) 2,113 ( 4 ) Mortgage-backed security ( 1 ) 2,113 ( 4 ) Mortgage-backed security 503 ( ( 4 ) Mortgage-backed security 503 ( 16 ) – – ) Mortgage-backed security 503 ( 16 ) – – 503 ( ( 16 ) – – 503 ( 16 ) Corporate note ) – – 503 ( 16 ) Corporate note and bond ) Corporate note and bond 713 ( 10 ) 504 ( note and bond 713 ( 10 ) 504 ( 42 ) bond 713 ( 10 ) 504 ( 42 ) 1,217 ( ( 10 ) 504 ( 42 ) 1,217 ( 52 ) ) 504 ( 42 ) 1,217 ( 52 ) Municipal security ( 42 ) 1,217 ( 52 ) Municipal security 16 ( ( 52 ) Municipal security 16 ( 1 ) – – ) Municipal security 16 ( 1 ) – – 16 ( ( 1 ) – – 16 ( 1 ) Common and ) – – 16 ( 1 ) Common and preferred stock ) Common and preferred stock 1,154 ( 135 ) 120 ( and preferred stock 1,154 ( 135 ) 120 ( 47 ) stock 1,154 ( 135 ) 120 ( 47 ) 1,274 ( ( 135 ) 120 ( 47 ) 1,274 ( 182 ) ) 120 ( 47 ) 1,274 ( 182 ) Total $ ( 47 ) 1,274 ( 182 ) Total $ 7,866 $ ( 182 ) Total $ 7,866 $ ( 171 ) $ Total $ 7,866 $ ( 171 ) $ 1,370 $ ( $ ( 171 ) $ 1,370 $ ( 114 ) $ ) $ 1,370 $ ( 114 ) $ 9,236 $ ( $ ( 114 ) $ 9,236 $ ( 285 ) Less ) $ 9,236 $ ( 285 ) Less than 12 Months ( 285 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total ( Fair Value Unrealized Losses June 30 , 2008 Mutual fund $ Unrealized Losses June 30 , 2008 Mutual fund $ 123 $ , 2008 Mutual fund $ 123 $ ( 7 ) $ fund $ 123 $ ( 7 ) $ 12 $ ( $ ( 7 ) $ 12 $ ( 1 ) $ ) $ 12 $ ( 1 ) $ 135 $ ( $ ( 1 ) $ 135 $ ( 8 ) U.S. ) $ 135 $ ( 8 ) U.S. Government and Agency U.S. Government and Agency security 342 ( 4 ) – – and Agency security 342 ( 4 ) – – 342 ( ( 4 ) – – 342 ( 4 ) Foreign government ) – – 342 ( 4 ) Foreign government bond 2,241 4 ) Foreign government bond 2,241 ( 62 ) – – Foreign government bond 2,241 ( 62 ) – – 2,241 ( ( 62 ) – – 2,241 ( 62 ) Mortgage-backed security ) – – 2,241 ( 62 ) Mortgage-backed security 1,078 ( ( 62 ) Mortgage-backed security 1,078 ( 25 ) – – ) Mortgage-backed security 1,078 ( 25 ) – – 1,078 ( ( 25 ) – – 1,078 ( 25 ) Corporate note ) – – 1,078 ( 25 ) Corporate note and bond ) Corporate note and bond 807 ( 26 ) 925 ( note and bond 807 ( 26 ) 925 ( 13 ) bond 807 ( 26 ) 925 ( 13 ) 1,732 ( ( 26 ) 925 ( 13 ) 1,732 ( 39 ) ) 925 ( 13 ) 1,732 ( 39 ) Municipal security ( 13 ) 1,732 ( 39 ) Municipal security 176 ( ( 39 ) Municipal security 176 ( 3 ) 193 ( ) Municipal security 176 ( 3 ) 193 ( 1 ) security 176 ( 3 ) 193 ( 1 ) 369 ( ( 3 ) 193 ( 1 ) 369 ( 4 ) ) 193 ( 1 ) 369 ( 4 ) Common and ( 1 ) 369 ( 4 ) Common and preferred stock ) Common and preferred stock 598 ( 106 ) 28 ( and preferred stock 598 ( 106 ) 28 ( 7 ) stock 598 ( 106 ) 28 ( 7 ) 626 ( ( 106 ) 28 ( 7 ) 626 ( 113 ) ) 28 ( 7 ) 626 ( 113 ) Total $ ( 7 ) 626 ( 113 ) Total $ 5,365 $ ( 113 ) Total $ 5,365 $ ( 233 ) $ Total $ 5,365 $ ( 233 ) $ 1,158 $ ( $ ( 233 ) $ 1,158 $ ( 22 ) $ ) $ 1,158 $ ( 22 ) $ 6,523 $ ( $ ( 22 ) $ 6,523 $ ( 255 ) PAGE ) $ 6,523 $ ( 255 ) PAGE 54 Table of $ ( 255 ) PAGE 54 Table of Contents Part II of Contents Part II Item 8 At June 30 , 2009 II Item 8 At June 30 , 2009 , unrealized loss 8 At June 30 , 2009 , unrealized loss of $ , unrealized loss of $ 285 million consisted of : $ million consisted of : $ 79 million related to investment grade grade fixed-income security , $ 24 million related to investment in market fixed-income security , $ 110 million related to domestic equity equity security , and $ 72 million related to international equity equity security . At June 30 , 2008 , unrealized loss . At June 30 , 2008 , unrealized loss of $ , unrealized loss of $ 255 million consisted of : $ million consisted of : $ 121 million related to investment grade grade fixed-income security , $ 21 million related to investment in market fixed-income security , $ 99 million related to domestic equity equity security , and $ 14 million related to international equity available evidence a of June 30 , 2009 . At June a of June 30 , 2009 . At June 30 , , 2009 . At June 30 , 2009 , the recorded . At June 30 , 2009 , the recorded basis and not publicly traded wa $ 204 million . At June 30 204 million . At June 30 , 2008 , the recorded . At June 30 , 2008 , the recorded basis and of these investment wa $ 289 million . The estimate of one year or le $ 8,487 $ 6,750 Due after one or le $ 8,487 $ 6,750 Due after one year through one year through five year 9,796 10,071 Due after five year year through five year 9,796 10,071 Due after five year through five year through ten year 1,212 1,248 Due after ten year year through ten year 1,212 1,248 Due after ten year 2,759 1,248 Due after ten year 2,759 2,819 Total $ 22,254 $ Due after ten year 2,759 2,819 Total $ 22,254 $ 20,888 year 2,759 2,819 Total $ 22,254 $ 20,888 NOTE 5 DERIVATIVES 2,819 Total $ 22,254 $ 20,888 NOTE 5 DERIVATIVES We use $ 22,254 $ 20,888 NOTE 5 DERIVATIVES We use derivative instrument treatment under SFAS No . 133 , Accounting for Derivative Instruments dollar . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount foreign exchange contract wa $ 7.2 billion . Foreign currency risk instrument . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount exchange contract sold wa $ 3.5 billion . Certain option and exposure . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 3.2 billion and $ 3.6 billion $ 3.2 billion and $ 3.6 billion , respectively . Equity to hedge our price PAGE 55 Table of Contents Part II of Contents Part II Item 8 risk , we may use forward . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount instrument . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 2.7 billion and $ 456 million $ 2.7 billion and $ 456 million , respectively . In instrument under SFAS No . 133 in case where physical delivery date . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional derivative mortgage contract purchased wa $ 1.3 billion . Credit Our fixed-income liquidity . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount grain . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 543 million and $ 33 million $ 543 million and $ 33 million , respectively . Credit-Risk-Related a minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2009 , our long-term As of June 30 , 2009 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result to be posted . PAGE 56 Table of Contents Part II of Contents Part II Item 8 Gross Fair Values of Derivative ( Excluding FIN No . 39 ( a ) Netting ) a ) Netting ) June 30 , 2009 ( In million Netting ) June 30 , 2009 ( In million ) Foreign hedging instrument Short-term investment $ 9 $ 78 $ 44 $ Short-term investment $ 9 $ 78 $ 44 $ 21 $ $ 9 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 154 Other $ 44 $ 21 $ 2 $ 154 Other current asset $ 21 $ 2 $ 154 Other current asset 48 – $ 154 Other current asset 48 – – – – 48 48 – – – – 48 Total $ 57 $ 78 – – 48 Total $ 57 $ 78 $ 44 $ 48 Total $ 57 $ 78 $ 44 $ 21 $ $ 57 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 202 Derivatives $ 44 $ 21 $ 2 $ 202 Derivatives designated a $ 21 $ 2 $ 202 Derivatives designated a hedging instrument hedging instrument Short-term investment $ 12 $ – $ – $ $ – $ – $ 12 Other current asset 417 – $ 12 Other current asset 417 – – – – 417 417 – – – – 417 Equity and other investment – Equity and other investment – 2 – – – 2 Total – 2 – – – 2 Total $ 429 $ 2 – – 2 Total $ 429 $ 2 $ – $ 2 Total $ 429 $ 2 $ – $ – $ $ – $ – $ 431 Total asset ( b ) asset ( b ) $ 486 $ 80 $ 44 $ b ) $ 486 $ 80 $ 44 $ 21 $ $ 486 $ 80 $ 44 $ 21 $ 2 $ $ 80 $ 44 $ 21 $ 2 $ 633 Liabilities $ 44 $ 21 $ 2 $ 633 Liabilities Derivatives not $ 21 $ 2 $ 633 Liabilities Derivatives not designated a Other current liability $ ( 183 ) $ ( 3 ) ( 183 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 274 ) ( 6 ) $ ( 274 ) Derivatives designated a hedging Other current liability $ ( 75 ) $ – $ – – $ – $ ( 75 ) Total liability ( b ( b ) $ ( 258 ) $ ( 3 ) ( 258 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 349 ) ( 6 ) $ ( 349 ) ( a ) FIN a ) FIN No . 39 , Offsetting of Amounts Related interpretation of APB No . 10 and FASB Statement No . and FASB Statement No . 105 , permit the netting of ( b ) See Note 6 – Fair Value Measurements . earnings . During fiscal year 2009 , we recognized in other Contracts Equity Contracts Derivatives $ 121 $ 191 Hedged item ( Contracts Derivatives $ 121 $ 191 Hedged item ( 120 ) $ 191 Hedged item ( 120 ) ( 211 ) Total item ( 120 ) ( 211 ) Total $ 1 $ ( 211 ) Total $ 1 $ ( 20 ) PAGE Total $ 1 $ ( 20 ) PAGE 57 Table of $ ( 20 ) PAGE 57 Table of Contents Part II of Contents Part II Item 8 Cash-Flow Hedges For a derivative earnings . During fiscal year 2009 , we recognized the following of tax effect of $ 472 $ 876 Gain reclassified from effect of $ 472 $ 876 Gain reclassified from accumulated OCI accumulated OCI into revenue $ 884 Amount excluded from effectiveness assessment ( expense ) $ ( 314 ) We estimate that $ ) We estimate that $ 528 million of net derivative gain into earnings within the next 12 month . No significant amount to occur during fiscal year 2009 . Non-Designated Derivatives Gains ( amount recognized during fiscal year 2009 were a follows : ( Foreign exchange contract $ ( 234 ) Equity contract ( 131 234 ) Equity contract ( 131 ) Interest-rate contract 5 Credit ( 131 ) Interest-rate contract 5 Credit contract ( 18 ) contract 5 Credit contract ( 18 ) Commodity contract ( 126 18 ) Commodity contract ( 126 ) Total $ ( 504 126 ) Total $ ( 504 ) Gains ( loss ) were immaterial for fiscal year 2009 and have been excluded from the table above . NOTE 6 FAIR VALUE MEASUREMENTS SFAS No VALUE MEASUREMENTS SFAS No . 157 defines fair value a the value , SFAS No . 157 expands the disclosure requirement around fair value measurement is PAGE 58 Table of Contents Part II of Contents Part II Item 8 reported in one of the level are : • Level 1 – input are based upon active market . • Level 2 – input are based upon or liability . • Level 3 – input are generally unobservable methodology applies to our Level 1 investment , such a domestic investment are included in Level 2 and consist primarily of corporate agency security . Our Level 3 asset primarily include investment in . We value the Level 3 corporate bond using internally developed liability are included in Level 1 . The fair value for and liability included in Level 2 are estimated using industry standard currency and commodity . Level 2 derivative asset and liability primarily liability are included in Level 3 and primarily represent derivative for for foreign equity . PAGE 59 Table of Contents Part II of Contents Part II Item 8 Assets and Liabilities Measured at asset and liability at June 30 , 2009 , which are liability at June 30 , 2009 , which are measured at ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value FIN No Fair Value FIN No . 39 Netting ( a ) Net Value Assets Mutual fund $ 982 $ – $ – $ $ – $ – $ 982 $ – $ 982 Commercial $ 982 $ – $ 982 Commercial paper – 2,601 – $ 982 Commercial paper – 2,601 – 2,601 – 2,601 Certificates Commercial paper – 2,601 – 2,601 – 2,601 Certificates of deposit – 2,601 – 2,601 – 2,601 Certificates of deposit – 555 2,601 Certificates of deposit – 555 – 555 – 555 U.S. of deposit – 555 – 555 – 555 U.S. Government and – 555 – 555 – 555 U.S. Government and Agency security U.S. Government and Agency security 7,134 6,105 – 13,239 – 13,239 Government and Agency security 7,134 6,105 – 13,239 – 13,239 Foreign Agency security 7,134 6,105 – 13,239 – 13,239 Foreign government bond 7,134 6,105 – 13,239 – 13,239 Foreign government bond 501 3,022 – 13,239 Foreign government bond 501 3,022 – 3,523 – 3,523 13,239 Foreign government bond 501 3,022 – 3,523 – 3,523 Mortgage-backed government bond 501 3,022 – 3,523 – 3,523 Mortgage-backed security – 501 3,022 – 3,523 – 3,523 Mortgage-backed security – 3,593 – – 3,523 Mortgage-backed security – 3,593 – 3,593 – 3,593 Corporate Mortgage-backed security – 3,593 – 3,593 – 3,593 Corporate note and – 3,593 – 3,593 – 3,593 Corporate note and bond – Corporate note and bond – 4,073 253 4,326 – 4,326 Municipal note and bond – 4,073 253 4,326 – 4,326 Municipal security and bond – 4,073 253 4,326 – 4,326 Municipal security – – 4,073 253 4,326 – 4,326 Municipal security – 256 – – 4,326 Municipal security – 256 – 256 – 256 Common Municipal security – 256 – 256 – 256 Common and preferred – 256 – 256 – 256 Common and preferred stock 4,218 256 Common and preferred stock 4,218 28 5 4,251 – 4,251 Common and preferred stock 4,218 28 5 4,251 – 4,251 Derivatives and preferred stock 4,218 28 5 4,251 – 4,251 Derivatives 5 preferred stock 4,218 28 5 4,251 – 4,251 Derivatives 5 623 4,218 28 5 4,251 – 4,251 Derivatives 5 623 5 633 5 4,251 – 4,251 Derivatives 5 623 5 633 ( 235 4,251 – 4,251 Derivatives 5 623 5 633 ( 235 ) – 4,251 Derivatives 5 623 5 633 ( 235 ) 398 4,251 Derivatives 5 623 5 633 ( 235 ) 398 Total 5 623 5 633 ( 235 ) 398 Total $ 12,840 5 633 ( 235 ) 398 Total $ 12,840 $ 20,856 235 ) 398 Total $ 12,840 $ 20,856 $ 263 $ 398 Total $ 12,840 $ 20,856 $ 263 $ 33,959 $ $ 12,840 $ 20,856 $ 263 $ 33,959 $ ( 235 $ 20,856 $ 263 $ 33,959 $ ( 235 ) $ 263 $ 33,959 $ ( 235 ) $ 33,724 Liabilities Derivatives $ ( 235 ) $ 33,724 Liabilities Derivatives $ 5 $ $ 33,724 Liabilities Derivatives $ 5 $ 344 $ – $ Liabilities Derivatives $ 5 $ 344 $ – $ 349 $ $ 344 $ – $ 349 $ ( 231 ) $ – $ 349 $ ( 231 ) $ 118 ( a $ ( 231 ) $ 118 ( a ) FIN No a ) FIN No . 39 , Offsetting of Amounts Related interpretation of APB No . 10 and FASB Statement No . and FASB Statement No . 105 , permit the netting of risk . Changes in Level 3 Instruments Measured at Fair Value The majority of our Level 3 instrument consist of investment security present the change in Level 3 instrument measured on a recurring for the year ended June 30 , 2009 : ( In year ended June 30 , 2009 : ( In million ) , beginning of period $ 138 $ 8 $ 71 $ of period $ 138 $ 8 $ 71 $ 217 Total $ 138 $ 8 $ 71 $ 217 Total realized and $ 8 $ 71 $ 217 Total realized and unrealized gain income ( expense ) ( 6 ) ( 6 ) 51 ) ( 6 ) ( 6 ) 51 39 Included in 6 ) ( 6 ) 51 39 Included in other comprehensive ) ( 6 ) 51 39 Included in other comprehensive income Included in other comprehensive income 111 – – 111 Purchases , comprehensive income 111 – – 111 Purchases , issuance , and issuance , and settlement – 5 ( 119 ) ( 114 and settlement – 5 ( 119 ) ( 114 ) Transfers 5 ( 119 ) ( 114 ) Transfers in ( out Transfers in ( out ) 10 ( 2 ) 2 10 ( out ) 10 ( 2 ) 2 10 Balance , ) 10 ( 2 ) 2 10 Balance , end of 10 ( 2 ) 2 10 Balance , end of period , end of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Change $ 253 $ 5 $ 5 $ 263 Change in unrealized $ 5 $ 5 $ 263 Change in unrealized gain ( asset held a of June 30 , 2009 $ ( 7 a of June 30 , 2009 $ ( 7 ) $ 30 , 2009 $ ( 7 ) $ ( 5 ) ( 7 ) $ ( 5 ) $ 4 $ ( $ ( 5 ) $ 4 $ ( 8 ) PAGE ) $ 4 $ ( 8 ) PAGE 60 Table of $ ( 8 ) PAGE 60 Table of Contents Part II of Contents Part II Item 8 Assets and Liabilities Measured at other-than-temporarily impaired . At June 30 , 2009 , the fair . At June 30 , 2009 , the fair value of a non-recurring basis wa $ 164 million . This fair value Principles Board Opinion No . 18 , The Equity Method of the fiscal year ended June 30 , 2009 , impairment charge year ended June 30 , 2009 , impairment charge of $ , impairment charge of $ 86 million were recognized for certain in all instance . NOTE 7 INVENTORIES The component of inventory ( In million ) June 30 , 2009 2008 Raw material million ) June 30 , 2009 2008 Raw material $ 170 ) June 30 , 2009 2008 Raw material $ 170 $ 2009 2008 Raw material $ 170 $ 417 Work in process Raw material $ 170 $ 417 Work in process 45 31 $ 417 Work in process 45 31 Finished good 502 537 417 Work in process 45 31 Finished good 502 537 Total process 45 31 Finished good 502 537 Total $ 717 $ 45 31 Finished good 502 537 Total $ 717 $ 985 good 502 537 Total $ 717 $ 985 NOTE 8 PROPERTY 537 Total $ 717 $ 985 NOTE 8 PROPERTY AND EQUIPMENT $ 717 $ 985 NOTE 8 PROPERTY AND EQUIPMENT The component ( In million ) June 30 , 2009 2008 Land $ million ) June 30 , 2009 2008 Land $ 526 $ ) June 30 , 2009 2008 Land $ 526 $ 518 , 2009 2008 Land $ 526 $ 518 Buildings and improvement 2008 Land $ 526 $ 518 Buildings and improvement 5,886 4,302 $ 518 Buildings and improvement 5,886 4,302 Leasehold improvement 1,938 1,728 518 Buildings and improvement 5,886 4,302 Leasehold improvement 1,938 1,728 Computer improvement 5,886 4,302 Leasehold improvement 1,938 1,728 Computer equipment and software 5,886 4,302 Leasehold improvement 1,938 1,728 Computer equipment and software 4,989 1,728 Computer equipment and software 4,989 4,475 Furniture and equipment 1,743 Computer equipment and software 4,989 4,475 Furniture and equipment 1,743 1,521 4,989 4,475 Furniture and equipment 1,743 1,521 Total , at cost 4,475 Furniture and equipment 1,743 1,521 Total , at cost 15,082 1,521 Total , at cost 15,082 12,544 Accumulated depreciation ( 7,547 Total , at cost 15,082 12,544 Accumulated depreciation ( 7,547 ) 15,082 12,544 Accumulated depreciation ( 7,547 ) ( 6,302 ) Total depreciation ( 7,547 ) ( 6,302 ) Total , net $ ) Total , net $ 7,535 $ 6,242 Property and equipment , net $ 7,535 $ 6,242 Property and equipment are stated building range from five to 15 year , leasehold improvement generally generally range from two to 10 year ( representing the applicable is not depreciated . PAGE 61 Table of Contents Part II of Contents Part II Item 8 During fiscal year 2009 , Item 8 During fiscal year 2009 , 2008 , and 2007 During fiscal year 2009 , 2008 , and 2007 , depreciation 2009 , 2008 , and 2007 , depreciation expense wa $ , depreciation expense wa $ 1.7 billion , $ 1.4 billion $ 1.7 billion , $ 1.4 billion , and $ 1.2 1.4 billion , and $ 1.2 billion , respectively . The to computer equipment . NOTE 9 ACQUISITIONS We acquired nine entity nine entity during fiscal year 2009 for total consideration of $ for total consideration of $ 925 million , substantially all of are preliminary for up to 12 month after the acquisition date result of operation . NOTE 10 GOODWILL Changes in the carrying of goodwill for fiscal year 2009 and 2008 by segment were for fiscal year 2009 and 2008 by segment were a follows ) Balance a of June 30 , 2007 Acquisitions Purchase Accounting a of June 30 , 2007 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2008 Acquisitions Purchase Accounting a of June 30 , 2008 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2009 Client $ 77 a of June 30 , 2009 Client $ 77 $ 77 30 , 2009 Client $ 77 $ 77 $ ( 1 2009 Client $ 77 $ 77 $ ( 1 ) $ 77 $ 77 $ ( 1 ) $ 153 $ 1 $ ( 1 ) $ 153 $ 1 $ ( 77 1 ) $ 153 $ 1 $ ( 77 ) $ 153 $ 1 $ ( 77 ) $ 77 Server and $ ( 77 ) $ 77 Server and Tools 580 90 $ 77 Server and Tools 580 90 68 738 233 67 77 Server and Tools 580 90 68 738 233 67 1,038 Server and Tools 580 90 68 738 233 67 1,038 Online and Tools 580 90 68 738 233 67 1,038 Online Services Tools 580 90 68 738 233 67 1,038 Online Services Business 580 90 68 738 233 67 1,038 Online Services Business 552 90 68 738 233 67 1,038 Online Services Business 552 5,775 67 1,038 Online Services Business 552 5,775 ( 53 ) 6,274 1,038 Online Services Business 552 5,775 ( 53 ) 6,274 447 Services Business 552 5,775 ( 53 ) 6,274 447 ( 64 552 5,775 ( 53 ) 6,274 447 ( 64 ) 6,657 5,775 ( 53 ) 6,274 447 ( 64 ) 6,657 Microsoft 53 ) 6,274 447 ( 64 ) 6,657 Microsoft Business Division 6,274 447 ( 64 ) 6,657 Microsoft Business Division 3,132 1,073 ) 6,657 Microsoft Business Division 3,132 1,073 ( 14 ) 4,191 6,657 Microsoft Business Division 3,132 1,073 ( 14 ) 4,191 _ Business Division 3,132 1,073 ( 14 ) 4,191 _ ( 264 3,132 1,073 ( 14 ) 4,191 _ ( 264 ) 3,927 14 ) 4,191 _ ( 264 ) 3,927 Entertainment and Devices 4,191 _ ( 264 ) 3,927 Entertainment and Devices Division 419 3,927 Entertainment and Devices Division 419 354 ( 21 ) 752 Entertainment and Devices Division 419 354 ( 21 ) 752 58 Devices Division 419 354 ( 21 ) 752 58 ( 6 419 354 ( 21 ) 752 58 ( 6 ) 804 354 ( 21 ) 752 58 ( 6 ) 804 Total 21 ) 752 58 ( 6 ) 804 Total $ 4,760 752 58 ( 6 ) 804 Total $ 4,760 $ 7,369 6 ) 804 Total $ 4,760 $ 7,369 $ ( 21 804 Total $ 4,760 $ 7,369 $ ( 21 ) $ 4,760 $ 7,369 $ ( 21 ) $ 12,108 $ 739 $ ( 21 ) $ 12,108 $ 739 $ ( 344 21 ) $ 12,108 $ 739 $ ( 344 ) $ 12,108 $ 739 $ ( 344 ) $ 12,503 None of $ ( 344 ) $ 12,503 None of the amount recorded are preliminary for up to 12 month after the acquisition date provision of SFAS No . 142 , Goodwill and Other Intangible second quarter of fiscal year 2009 , we changed the date annual impairment test from July 1 to May 1 . The from July 1 to May 1 . The change wa made retrospectively . During fiscal year 2009 , the annual impairment test wa performed a of July 1 , 2008 and wa performed a of July 1 , 2008 and wa performed again a performed again a of May 1 , 2009 . PAGE 62 a of May 1 , 2009 . PAGE 62 Table of 1 , 2009 . PAGE 62 Table of Contents Part II of Contents Part II Item 8 NOTE 11 INTANGIBLE ASSETS The Part II Item 8 NOTE 11 INTANGIBLE ASSETS The component of ( In million ) June 30 , 2009 2008 Gross Carrying million ) June 30 , 2009 2008 Gross Carrying Amount Accumulated ) June 30 , 2009 2008 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Contract-based $ 1,087 $ ( 855 ) $ Contract-based $ 1,087 $ ( 855 ) $ 232 $ 1,074 $ ( 855 ) $ 232 $ 1,074 $ ( 796 855 ) $ 232 $ 1,074 $ ( 796 ) $ 232 $ 1,074 $ ( 796 ) $ 278 Technology-based 2,033 $ ( 796 ) $ 278 Technology-based 2,033 ( 1,090 ) 796 ) $ 278 Technology-based 2,033 ( 1,090 ) 943 1,677 $ 278 Technology-based 2,033 ( 1,090 ) 943 1,677 ( 672 Technology-based 2,033 ( 1,090 ) 943 1,677 ( 672 ) 1,005 2,033 ( 1,090 ) 943 1,677 ( 672 ) 1,005 Marketing-related 1,090 ) 943 1,677 ( 672 ) 1,005 Marketing-related 188 ( 943 1,677 ( 672 ) 1,005 Marketing-related 188 ( 97 ) ( 672 ) 1,005 Marketing-related 188 ( 97 ) 91 171 ) 1,005 Marketing-related 188 ( 97 ) 91 171 ( 65 Marketing-related 188 ( 97 ) 91 171 ( 65 ) 106 188 ( 97 ) 91 171 ( 65 ) 106 Customer-related 97 ) 91 171 ( 65 ) 106 Customer-related 732 ( 91 171 ( 65 ) 106 Customer-related 732 ( 239 ) ( 65 ) 106 Customer-related 732 ( 239 ) 493 708 ) 106 Customer-related 732 ( 239 ) 493 708 ( 124 Customer-related 732 ( 239 ) 493 708 ( 124 ) 584 732 ( 239 ) 493 708 ( 124 ) 584 Total 239 ) 493 708 ( 124 ) 584 Total $ 4,040 493 708 ( 124 ) 584 Total $ 4,040 $ ( 124 ) 584 Total $ 4,040 $ ( 2,281 ) $ Total $ 4,040 $ ( 2,281 ) $ 1,759 $ 3,630 $ ( 2,281 ) $ 1,759 $ 3,630 $ ( 1,657 2,281 ) $ 1,759 $ 3,630 $ ( 1,657 ) $ 1,759 $ 3,630 $ ( 1,657 ) $ 1,973 During fiscal $ ( 1,657 ) $ 1,973 During fiscal year 2009 and $ 1,973 During fiscal year 2009 and 2008 , we recorded During fiscal year 2009 and 2008 , we recorded addition to to intangible asset of $ 354 million and $ 1.6 billion $ 354 million and $ 1.6 billion , respectively . We asset acquired during fiscal year 2009 and 2008 were a follows during fiscal year 2009 and 2008 were a follows : ( million ) Year Ended June 30 , 2009 2008 Amount Weighted Year Ended June 30 , 2009 2008 Amount Weighted Average Life Ended June 30 , 2009 2008 Amount Weighted Average Life Amount Weighted Average Life Contract-based $ 26 4 year $ 91 6 Average Life Contract-based $ 26 4 year $ 91 6 year $ 26 4 year $ 91 6 year Technology-based 293 4 26 4 year $ 91 6 year Technology-based 293 4 year $ 91 6 year Technology-based 293 4 year 787 4 year 91 6 year Technology-based 293 4 year 787 4 year Marketing-related year Technology-based 293 4 year 787 4 year Marketing-related 7 5 Technology-based 293 4 year 787 4 year Marketing-related 7 5 year year 787 4 year Marketing-related 7 5 year 116 5 year 787 4 year Marketing-related 7 5 year 116 5 year Customer-related year Marketing-related 7 5 year 116 5 year Customer-related 28 2 Marketing-related 7 5 year 116 5 year Customer-related 28 2 year year 116 5 year Customer-related 28 2 year 589 6 year 116 5 year Customer-related 28 2 year 589 6 year Total year Customer-related 28 2 year 589 6 year Total $ 354 Customer-related 28 2 year 589 6 year Total $ 354 $ 589 6 year Total $ 354 $ 1,583 Acquired intangible generally year Total $ 354 $ 1,583 Acquired intangible generally are amortized asset amortization expense wa $ 591 million for fiscal year 2009 591 million for fiscal year 2009 , $ 472 million for fiscal year 2009 , $ 472 million for fiscal year 2008 472 million for fiscal year 2008 , and $ 236 million year 2008 , and $ 236 million for fiscal year 2007 236 million for fiscal year 2007 . The following table outline intangible asset a of June 30 , 2009 : ( In a of June 30 , 2009 : ( In million ) million ) Year Ended June 30 , Amount 2010 $ 562 Ended June 30 , Amount 2010 $ 562 2011 511 2012 30 , Amount 2010 $ 562 2011 511 2012 455 2013 , Amount 2010 $ 562 2011 511 2012 455 2013 191 Amount 2010 $ 562 2011 511 2012 455 2013 191 2014 2010 $ 562 2011 511 2012 455 2013 191 2014 and $ 562 2011 511 2012 455 2013 191 2014 and thereafter 562 2011 511 2012 455 2013 191 2014 and thereafter 40 2011 511 2012 455 2013 191 2014 and thereafter 40 Total 511 2012 455 2013 191 2014 and thereafter 40 Total $ 2013 191 2014 and thereafter 40 Total $ 1,759 PAGE 63 and thereafter 40 Total $ 1,759 PAGE 63 Table of Contents 40 Total $ 1,759 PAGE 63 Table of Contents Part II of Contents Part II Item 8 NOTE 12 DEBT Short-term Debt Part II Item 8 NOTE 12 DEBT Short-term Debt In September DEBT Short-term Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . Pursuant to the sale of up to $ 2.0 billion in short-term commercial paper paper . As of June 30 , 2009 , $ 2.0 As of June 30 , 2009 , $ 2.0 billion of 30 , 2009 , $ 2.0 billion of the commercial paper including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 119 day . The and maturity of 22 to 119 day . The estimated fair carrying value . In September 2008 , we also entered into also entered into a $ 2.0 billion six-month senior unsecured credit paper program . In November 2008 , we replaced the six-month credit facility with a $ 2.0 billion 364-day credit facility . with a $ 2.0 billion 364-day credit facility . This credit credit facility expires on November 6 , 2009 . In March expires on November 6 , 2009 . In March 2009 , , 2009 . In March 2009 , we entered into an credit facility . This $ 1.0 billion 364-day credit facility expires . This $ 1.0 billion 364-day credit facility expires on March credit facility expires on March 12 , 2010 . As of expires on March 12 , 2010 . As of June 30 2010 . As of June 30 , 2009 , we were As of June 30 , 2009 , we were in compliance during the year ended June 30 , 2009 . Long-term Debt year ended June 30 , 2009 . Long-term Debt In November . Long-term Debt In November 2008 , we filed a shelf time pursuant to the September 2008 authorization for debt financing of financing of up to $ 6.0 billion . In May 2009 6.0 billion . In May 2009 , we issued $ 3.75 2009 , we issued $ 3.75 billion of debt security under be payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year , commencing year , commencing on December 1 , 2009 , to holder commencing on December 1 , 2009 , to holder of record record on the preceding May 15 and November 15 . The preceding May 15 and November 15 . The Notes are senior long-term debt a of June 30 , 2009 were a follows a of June 30 , 2009 were a follows : ( : ( In million ) 2.95 % Notes due on June % Notes due on June 1 , 2014 $ 2,000 4.20 due on June 1 , 2014 $ 2,000 4.20 % Notes June 1 , 2014 $ 2,000 4.20 % Notes due on 1 , 2014 $ 2,000 4.20 % Notes due on June % Notes due on June 1 , 2019 1,000 5.20 % due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June % Notes due on June 1 , 2039 750 Unamortized debt due on June 1 , 2039 750 Unamortized debt discount ( on June 1 , 2039 750 Unamortized debt discount ( 4 750 Unamortized debt discount ( 4 ) Total $ 3,746 Maturities ( 4 ) Total $ 3,746 Maturities of long-term debt for million ) Year Ended June 30 , Amount 2010 $ – Ended June 30 , Amount 2010 $ – 2011 – 2012 , Amount 2010 $ – 2011 – 2012 – 2013 – 2010 $ – 2011 – 2012 – 2013 – 2014 2,000 – 2011 – 2012 – 2013 – 2014 2,000 Thereafter 1,750 – 2012 – 2013 – 2014 2,000 Thereafter 1,750 Total $ 2012 – 2013 – 2014 2,000 Thereafter 1,750 Total $ 3,750 2013 – 2014 2,000 Thereafter 1,750 Total $ 3,750 As of 2,000 Thereafter 1,750 Total $ 3,750 As of June 30 , $ 3,750 As of June 30 , 2009 , the total As of June 30 , 2009 , the total carrying value our long-term debt were $ 3.75 billion and $ 3.74 billion $ 3.75 billion and $ 3.74 billion , respectively . The publicly-traded debt a of June 30 , 2009 . The effective a of June 30 , 2009 . The effective interest yield of the Notes due in 2014 , 2019 , and 2039 Notes due in 2014 , 2019 , and 2039 were 3.00 2014 , 2019 , and 2039 were 3.00 % , 4.29 2019 , and 2039 were 3.00 % , 4.29 % , 2039 were 3.00 % , 4.29 % , and 5.22 % , 4.29 % , and 5.22 % , respectively , at , respectively , at June 30 , 2009 . PAGE 64 , at June 30 , 2009 . PAGE 64 Table of 30 , 2009 . PAGE 64 Table of Contents Part II of Contents Part II Item 8 NOTE 13 INCOME TAXES The Part II Item 8 NOTE 13 INCOME TAXES The component of million ) Year Ended June 30 , 2009 2008 2007 Current Year Ended June 30 , 2009 2008 2007 Current tax : Ended June 30 , 2009 2008 2007 Current tax : U.S. June 30 , 2009 2008 2007 Current tax : U.S. Federal tax : U.S. Federal $ 3,159 $ 4,357 $ 4,593 U.S. U.S. Federal $ 3,159 $ 4,357 $ 4,593 U.S. State and $ 3,159 $ 4,357 $ 4,593 U.S. State and Local 192 4,593 U.S. State and Local 192 256 154 International 1,139 1,007 U.S. State and Local 192 256 154 International 1,139 1,007 957 State and Local 192 256 154 International 1,139 1,007 957 Current Local 192 256 154 International 1,139 1,007 957 Current tax 4,490 192 256 154 International 1,139 1,007 957 Current tax 4,490 5,620 256 154 International 1,139 1,007 957 Current tax 4,490 5,620 5,704 1,139 1,007 957 Current tax 4,490 5,620 5,704 Deferred tax 762 1,007 957 Current tax 4,490 5,620 5,704 Deferred tax 762 513 957 Current tax 4,490 5,620 5,704 Deferred tax 762 513 332 4,490 5,620 5,704 Deferred tax 762 513 332 Provision for income 5,620 5,704 Deferred tax 762 513 332 Provision for income tax 5,704 Deferred tax 762 513 332 Provision for income tax $ Provision for income tax $ 5,252 $ 6,133 $ 6,036 U.S. income tax $ 5,252 $ 6,133 $ 6,036 U.S. and international $ 5,252 $ 6,133 $ 6,036 U.S. and international component of million ) Year Ended June 30 , 2009 2008 2007 U.S. Year Ended June 30 , 2009 2008 2007 U.S. $ 5,529 Ended June 30 , 2009 2008 2007 U.S. $ 5,529 $ June 30 , 2009 2008 2007 U.S. $ 5,529 $ 12,682 2009 2008 2007 U.S. $ 5,529 $ 12,682 $ 12,902 International 2007 U.S. $ 5,529 $ 12,682 $ 12,902 International 14,292 11,132 $ 5,529 $ 12,682 $ 12,902 International 14,292 11,132 7,199 Income $ 12,682 $ 12,902 International 14,292 11,132 7,199 Income before income 12,682 $ 12,902 International 14,292 11,132 7,199 Income before income tax $ 12,902 International 14,292 11,132 7,199 Income before income tax $ Income before income tax $ 19,821 $ 23,814 $ 20,101 The income tax $ 19,821 $ 23,814 $ 20,101 The item accounting $ 19,821 $ 23,814 $ 20,101 The item accounting for the follows : Year Ended June 30 , 2009 2008 2007 Federal Year Ended June 30 , 2009 2008 2007 Federal statutory rate Ended June 30 , 2009 2008 2007 Federal statutory rate 35.0 June 30 , 2009 2008 2007 Federal statutory rate 35.0 % 2008 2007 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 9.3 ) % ( 7.0 ) ( 9.3 ) % ( 7.0 ) % ( 5.1 ) ( 7.0 ) % ( 5.1 ) % Internal Revenue Service Service settlement – % ( 5.8 ) % – % European European Commission fine – % 2.1 % – % Other reconciling Other reconciling item , net 0.8 % 1.5 % 0.1 % item , net 0.8 % 1.5 % 0.1 % Effective rate net 0.8 % 1.5 % 0.1 % Effective rate 26.5 % % 0.1 % Effective rate 26.5 % 25.8 % 30.0 % % Effective rate 26.5 % 25.8 % 30.0 % In general rate 26.5 % 25.8 % 30.0 % In general , other credit . In fiscal year 2009 and 2008 , there were In fiscal year 2009 and 2008 , there were no individually reconciling item in fiscal year 2007 included the impact of a the impact of a $ 195 million reduction resulting from various foreign audit assessment . PAGE 65 Table of Contents Part II of Contents Part II Item 8 The component of the deferred ( In million ) June 30 , 2009 2008 Deferred income million ) June 30 , 2009 2008 Deferred income tax asset ) June 30 , 2009 2008 Deferred income tax asset : : Stock-based compensation expense $ 2,004 $ 2,225 Other expense item compensation expense $ 2,004 $ 2,225 Other expense item 1,595 1,933 $ 2,225 Other expense item 1,595 1,933 Unearned revenue 743 928 2,225 Other expense item 1,595 1,933 Unearned revenue 743 928 Impaired item 1,595 1,933 Unearned revenue 743 928 Impaired investment 236 331 1,595 1,933 Unearned revenue 743 928 Impaired investment 236 331 Other revenue 743 928 Impaired investment 236 331 Other revenue item 120 743 928 Impaired investment 236 331 Other revenue item 120 91 236 331 Other revenue item 120 91 Deferred income tax asset 331 Other revenue item 120 91 Deferred income tax asset $ Deferred income tax asset $ 4,698 $ 5,508 Deferred income tax tax asset $ 4,698 $ 5,508 Deferred income tax liability : : International earnings $ ( 1,191 ) $ ( 1,300 ) ( 1,191 ) $ ( 1,300 ) Unrealized gain on investment Unrealized gain on investment ( 516 ) ( 513 ) Other investment ( 516 ) ( 513 ) Other ( 499 ) ( 513 ) Other ( 499 ) ( 729 ) Deferred Other ( 499 ) ( 729 ) Deferred income tax liability Deferred income tax liability ( 2,206 ) ( 2,542 ) Net liability ( 2,206 ) ( 2,542 ) Net deferred income tax deferred income tax asset $ 2,492 $ 2,966 Reported a : tax asset $ 2,492 $ 2,966 Reported a : Current deferred deferred income tax asset $ 2,213 $ 2,017 Long-term deferred income tax asset $ 2,213 $ 2,017 Long-term deferred income tax asset Long-term deferred income tax asset 279 949 Net deferred income tax deferred income tax asset 279 949 Net deferred income tax asset deferred income tax asset $ 2,492 $ 2,966 Deferred income tax tax asset $ 2,492 $ 2,966 Deferred income tax balance reflect temporary difference of approximately $ 18.0 billion resulting from earnings for temporary difference is approximately $ 5.4 billion . Income tax paid Income tax paid were $ 6.6 billion in fiscal year 2009 6.6 billion in fiscal year 2009 , $ 5.4 billion in fiscal year 2009 , $ 5.4 billion in fiscal year 2008 5.4 billion in fiscal year 2008 , and $ 5.2 billion year 2008 , and $ 5.2 billion in fiscal year 2007 5.2 billion in fiscal year 2007 . Uncertain Tax Positions As Tax Positions As of June 30 , 2009 , we had As of June 30 , 2009 , we had $ 5.4 2009 , we had $ 5.4 billion of unrecognized tax benefit tax benefit of which $ 4.4 billion , if recognized , rate . As of June 30 , 2008 , we had As of June 30 , 2008 , we had $ 3.2 2008 , we had $ 3.2 billion of unrecognized tax benefit tax benefit of which $ 2.3 billion , if recognized , . Such interest totaled $ 230 million in fiscal year 2009 230 million in fiscal year 2009 and $ 121 million in fiscal year 2009 and $ 121 million in fiscal year 2008 121 million in fiscal year 2008 . As of June 30 2008 . As of June 30 , 2009 and 2008 , As of June 30 , 2009 and 2008 , we had June 30 , 2009 and 2008 , we had accrued interest uncertain tax position of $ 554 million and $ 324 million $ 554 million and $ 324 million , respectively , net our balance sheet . PAGE 66 Table of Contents Part II of Contents Part II Item 8 The aggregate change in the million ) Year Ended June 30 , 2009 2008 Balance , Year Ended June 30 , 2009 2008 Balance , beginning of Ended June 30 , 2009 2008 Balance , beginning of year , beginning of year $ 3,195 $ 7,076 Decreases related to of year $ 3,195 $ 7,076 Decreases related to settlement ( Decreases related to settlement ( 82 ) ( 4,787 ) Increases settlement ( 82 ) ( 4,787 ) Increases for tax position related to the current year 2,203 934 Increases for tax position to the current year 2,203 934 Increases for tax position related position related to prior year 239 66 Decreases for tax position related to prior year 239 66 Decreases for tax position related related to prior year ( 132 ) ( 80 ) Reductions year ( 132 ) ( 80 ) Reductions due to lapsed lapsed statute of limitation ( 20 ) ( 14 ) Balance limitation ( 20 ) ( 14 ) Balance , end of , end of year $ 5,403 $ 3,195 During fiscal year of year $ 5,403 $ 3,195 During fiscal year 2008 , $ 3,195 During fiscal year 2008 , we reached a settlement IRS ” ) on it 2000-2003 examination . As a result unrecognized tax benefit by $ 4.8 billion and recognized a tax tax provision reduction of $ 1.2 billion . As a result As a result of the 2000-2003 settlement and the related impact paid the IRS approximately $ 4.1 billion during fiscal year 2009 4.1 billion during fiscal year 2009 . We are under audit IRS for the tax year 2004-2006 . We do not believe or decrease within the next 12 month a we do not be concluded within the next 12 month . We are subject result of operation . NOTE 14 UNEARNED REVENUE Unearned revenue is . Undelivered element include $ 276 million of deferred revenue related revenue related to the Windows 7 Upgrade Option program . Other revenue recognition criterion . PAGE 67 Table of Contents Part II of Contents Part II Item 8 The component of unearned revenue ( In million ) June 30 , 2009 2008 Volume licensing million ) June 30 , 2009 2008 Volume licensing program $ ) June 30 , 2009 2008 Volume licensing program $ 11,350 2008 Volume licensing program $ 11,350 $ 12,232 Undelivered element 1,083 licensing program $ 11,350 $ 12,232 Undelivered element 1,083 1,396 Other 11,350 $ 12,232 Undelivered element 1,083 1,396 Other 1,851 1,669 Total $ 12,232 Undelivered element 1,083 1,396 Other 1,851 1,669 Total $ Undelivered element 1,083 1,396 Other 1,851 1,669 Total $ 14,284 $ element 1,083 1,396 Other 1,851 1,669 Total $ 14,284 $ 15,297 Other 1,851 1,669 Total $ 14,284 $ 15,297 Unearned revenue by 1,669 Total $ 14,284 $ 15,297 Unearned revenue by segment wa ( In million ) June 30 , 2009 2008 Client $ million ) June 30 , 2009 2008 Client $ 2,345 $ ) June 30 , 2009 2008 Client $ 2,345 $ 2,738 , 2009 2008 Client $ 2,345 $ 2,738 Server and Tools 2008 Client $ 2,345 $ 2,738 Server and Tools 4,732 5,007 $ 2,738 Server and Tools 4,732 5,007 Microsoft Business Division 6,508 2,738 Server and Tools 4,732 5,007 Microsoft Business Division 6,508 7,101 4,732 5,007 Microsoft Business Division 6,508 7,101 Other segment 699 451 5,007 Microsoft Business Division 6,508 7,101 Other segment 699 451 Total Division 6,508 7,101 Other segment 699 451 Total $ 14,284 $ 6,508 7,101 Other segment 699 451 Total $ 14,284 $ 15,297 segment 699 451 Total $ 14,284 $ 15,297 NOTE 15 OTHER 451 Total $ 14,284 $ 15,297 NOTE 15 OTHER LONG-TERM LIABILITIES $ 14,284 $ 15,297 NOTE 15 OTHER LONG-TERM LIABILITIES ( In ( In million ) June 30 , 2009 2008 Tax contingency million ) June 30 , 2009 2008 Tax contingency and other ) June 30 , 2009 2008 Tax contingency and other tax and other tax liability $ 5,515 $ 3,812 Legal contingency 407 tax liability $ 5,515 $ 3,812 Legal contingency 407 530 Product 5,515 $ 3,812 Legal contingency 407 530 Product warranty 132 278 $ 3,812 Legal contingency 407 530 Product warranty 132 278 Other contingency 407 530 Product warranty 132 278 Other 215 101 Total 407 530 Product warranty 132 278 Other 215 101 Total $ Product warranty 132 278 Other 215 101 Total $ 6,269 $ warranty 132 278 Other 215 101 Total $ 6,269 $ 4,721 Other 215 101 Total $ 6,269 $ 4,721 NOTE 16 COMMITMENTS 101 Total $ 6,269 $ 4,721 NOTE 16 COMMITMENTS AND GUARANTEES $ 6,269 $ 4,721 NOTE 16 COMMITMENTS AND GUARANTEES We have GUARANTEES We have committed $ 621 million for constructing new building new building a of June 30 , 2009 . We have a of June 30 , 2009 . We have operating lease for operating lease wa $ 475 million , $ 398 million $ 475 million , $ 398 million , and $ 325 398 million , and $ 325 million , in fiscal year million , in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 , respectively 2009 , 2008 , and 2007 , respectively . Future minimum in place a of June 30 , 2009 are a follows a of June 30 , 2009 are a follows : ( million ) Year Ended June 30 , Amount 2010 $ 457 Ended June 30 , Amount 2010 $ 457 2011 370 2012 30 , Amount 2010 $ 457 2011 370 2012 309 2013 , Amount 2010 $ 457 2011 370 2012 309 2013 252 Amount 2010 $ 457 2011 370 2012 309 2013 252 2014 2010 $ 457 2011 370 2012 309 2013 252 2014 and $ 457 2011 370 2012 309 2013 252 2014 and thereafter 457 2011 370 2012 309 2013 252 2014 and thereafter 997 2011 370 2012 309 2013 252 2014 and thereafter 997 $ 370 2012 309 2013 252 2014 and thereafter 997 $ 2,385 2013 252 2014 and thereafter 997 $ 2,385 PAGE 68 Table 2014 and thereafter 997 $ 2,385 PAGE 68 Table of Contents thereafter 997 $ 2,385 PAGE 68 Table of Contents Part II of Contents Part II Item 8 We provide indemnification of varying indemnification under SFAS No . 5 , Accounting for Contingencies , interpreted by FIN No . 45 , Guarantor ’ s Accounting million ) Year Ended June 30 , 2009 2008 Balance , Year Ended June 30 , 2009 2008 Balance , beginning of Ended June 30 , 2009 2008 Balance , beginning of year , beginning of year $ 692 $ 850 Accruals for warranty of year $ 692 $ 850 Accruals for warranty issued 161 850 Accruals for warranty issued 161 365 Adjustments to pre-existing warranty Accruals for warranty issued 161 365 Adjustments to pre-existing warranty – Adjustments to pre-existing warranty – 36 Settlements of warranty claim ( Settlements of warranty claim ( 511 ) ( 559 ) Balance claim ( 511 ) ( 559 ) Balance , end of , end of year $ 342 $ 692 NOTE 17 CONTINGENCIES of year $ 342 $ 692 NOTE 17 CONTINGENCIES Government Competition $ 342 $ 692 NOTE 17 CONTINGENCIES Government Competition Law Matters Competition Law Matters In March 2004 , the European Commission issued our competitor . In March 2007 , the European Commission issued a required by the March 2004 decision were “ not reasonable the Commission announced on October 22 , 2007 that we were announced on October 22 , 2007 that we were in compliance in compliance with the March 2004 decision and that no further that date . On February 27 , 2008 , the Commission . On February 27 , 2008 , the Commission issued a issued a fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) relating to the the period prior to October 22 , 2007 . In May prior to October 22 , 2007 . In May 2008 , , 2007 . In May 2008 , we filed an application Instance to annul the February 2008 fine . We paid the . We paid the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) fine in June million ) fine in June 2008 . In January 2008 , June 2008 . In January 2008 , the Commission opened a browsing software . On January 15 , 2009 , the European . On January 15 , 2009 , the European Commission issued Internet Explorer in Windows since 1996 ha violated European competition law of objection in late April 2009 . The European Commission will operating system . In January 2008 , the Commission opened an s competitor . On July 24 , 2009 we submitted a . On July 24 , 2009 we submitted a proposal to a proposal regarding mean PAGE 69 Table of Contents Part II of Contents Part II Item 8 of promoting greater interoperability between a statement issued on July 24 , 2009 , the Commission issued on July 24 , 2009 , the Commission stated it U.S. Department of Justice , 18 state , and the District scheduled to expire in November 2007 . In 2006 , we in November 2007 . In 2006 , we voluntarily agreed to the Final Judgments to November 2009 . The U.S. Department of are party . In January 2008 , the court issued a the Final Judgments until November 2009 . On April 16 , November 2009 . On April 16 , 2009 , we agreed . On April 16 , 2009 , we agreed with the the Final Judgments to May 2011 , and submitted to the this extension . In April 2009 , the Court entered an under federal law and in 15 state . Courts refused to been made to date in 19 state and the District of be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.8 billion and $ 2.0 billion $ 1.8 billion and $ 2.0 billion . The actual cost the claim . At June 30 , 2009 , we have . At June 30 , 2009 , we have recorded a these claim of approximately $ 800 million , which reflects our our estimated exposure of $ 1.8 billion le payment made to to date of approximately $ 1.0 billion mostly for voucher , Litigation and Claims In November 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . This between June 1994 and March 1996 . This case wa transferred to Maryland . In June 2005 , the trial court granted appealed , and in October 2007 , the court of appeal and Intellectual Property Claims In 2003 we filed an action in of Alcatel and Lucent in 2006 , for simplicity we refer Alcatel-Lucent ) . In April 2008 , a jury returned a interface patent and awarded $ 367 million in damage . In in damage . In June 2008 , the trial judge increased amount of damage to $ 512 million to include $ 145 512 million to include $ 145 million of interest . We Federal Circuit . In December 2008 , we entered into a resolving all other litigation PAGE 70 Table of Contents Part II of Contents Part II Item 8 pending between Microsoft and Alcatel-Lucent Alcatel-Lucent , leaving approximately $ 500 million remaining in dispute . in dispute . In April 2009 , the U.S. Patent and that ruling . In October 2003 , Uniloc USA Inc. , for trial . In April 2009 , the jury returned a the jury returned a $ 388 million verdict against u , pre-judgment interest , approximately $ 500 million is in dispute . in dispute . In March 2007 , i4i Limited Partnership , custom XML technology in Word 2003 and 2007 infringed i4i ’ technology in Word 2003 and 2007 infringed i4i ’ s patent s patent . In May 2009 , a jury returned a , finding damage of $ 200 million and that we willfully pre-judgment interest , approximately $ 240 million is in dispute . dispute . There are over 50 other patent infringement case pending case pending against Microsoft , 10 of which are set for for trial in fiscal year 2010 . Other We also are future . As of June 30 , 2009 , we had As of June 30 , 2009 , we had accrued aggregate aggregate liability of approximately $ 800 million in other current liability current liability and approximately $ 400 million in other long-term liability could be up to $ 2.2 billion in aggregate beyond recorded doe not include the January 15 , 2009 European Commission statement include the January 15 , 2009 European Commission statement of objection become reasonably estimable . NOTE 18 STOCKHOLDERS ’ EQUITY Shares Outstanding million ) Year Ended June 30 , 2009 2008 2007 Balance Year Ended June 30 , 2009 2008 2007 Balance , beginning Ended June 30 , 2009 2008 2007 Balance , beginning of June 30 , 2009 2008 2007 Balance , beginning of year Balance , beginning of year 9,151 9,380 10,062 Issued 75 173 , beginning of year 9,151 9,380 10,062 Issued 75 173 289 beginning of year 9,151 9,380 10,062 Issued 75 173 289 Repurchased year 9,151 9,380 10,062 Issued 75 173 289 Repurchased ( 318 9,151 9,380 10,062 Issued 75 173 289 Repurchased ( 318 ) 9,380 10,062 Issued 75 173 289 Repurchased ( 318 ) ( 75 173 289 Repurchased ( 318 ) ( 402 ) ( Repurchased ( 318 ) ( 402 ) ( 971 ) Balance ) ( 402 ) ( 971 ) Balance , end of Balance , end of year 8,908 9,151 9,380 Share Repurchases On , end of year 8,908 9,151 9,380 Share Repurchases On September end of year 8,908 9,151 9,380 Share Repurchases On September 22 9,380 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 to buy back up to buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that new share repurchase program PAGE 71 Table of Contents Part II of Contents Part II Item 8 authorizing up to $ 40.0 8 authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2009 , approximately $ As of June 30 , 2009 , approximately $ 34.5 billion , 2009 , approximately $ 34.5 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . million ) Year Ended June 30 , 2009 ( a ) Year Ended June 30 , 2009 ( a ) 2008 ( , 2009 ( a ) 2008 ( b ) 2007 ( ) 2008 ( b ) 2007 ( c ) Shares Amount Amount Shares Amount First quarter 223 $ 5,966 81 $ 2,348 Amount First quarter 223 $ 5,966 81 $ 2,348 285 $ First quarter 223 $ 5,966 81 $ 2,348 285 $ 6,965 223 $ 5,966 81 $ 2,348 285 $ 6,965 Second quarter $ 5,966 81 $ 2,348 285 $ 6,965 Second quarter 95 81 $ 2,348 285 $ 6,965 Second quarter 95 2,234 120 285 $ 6,965 Second quarter 95 2,234 120 4,081 205 6,037 $ 6,965 Second quarter 95 2,234 120 4,081 205 6,037 Third 6,965 Second quarter 95 2,234 120 4,081 205 6,037 Third quarter Second quarter 95 2,234 120 4,081 205 6,037 Third quarter – quarter 95 2,234 120 4,081 205 6,037 Third quarter – – 95 2,234 120 4,081 205 6,037 Third quarter – – 30 6,037 Third quarter – – 30 1,020 238 6,744 Fourth quarter Third quarter – – 30 1,020 238 6,744 Fourth quarter – quarter – – 30 1,020 238 6,744 Fourth quarter – – – – 30 1,020 238 6,744 Fourth quarter – – 171 6,744 Fourth quarter – – 171 4,975 243 7,367 Total 318 Fourth quarter – – 171 4,975 243 7,367 Total 318 $ quarter – – 171 4,975 243 7,367 Total 318 $ 8,200 – – 171 4,975 243 7,367 Total 318 $ 8,200 402 171 4,975 243 7,367 Total 318 $ 8,200 402 $ 12,424 243 7,367 Total 318 $ 8,200 402 $ 12,424 971 $ 7,367 Total 318 $ 8,200 402 $ 12,424 971 $ 27,113 318 $ 8,200 402 $ 12,424 971 $ 27,113 ( a $ 8,200 402 $ 12,424 971 $ 27,113 ( a ) 402 $ 12,424 971 $ 27,113 ( a ) Of the ( a ) Of the 318 million share of common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the repurchase plan first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . ( b Directors on September 22 , 2008 . ( b ) All share repurchased in fiscal year 2008 were repurchased under the repurchase Board of Directors on July 20 , 2006 . ( c Directors on July 20 , 2006 . ( c ) Of ( c ) Of the 971 million share of common stock stock repurchased in fiscal year 2007 , 155 million share were in fiscal year 2007 , 155 million share were repurchased for share were repurchased for $ 3.8 billion under our tender offer first quarter of fiscal year 2007 . The remaining share were Board of Directors on July 20 , 2006 . Dividends In Directors on July 20 , 2006 . Dividends In fiscal year . Dividends In fiscal year 2009 , our Board of Directors million ) Payment Date September 19 , 2008 $ 0.13 November Payment Date September 19 , 2008 $ 0.13 November 20 , September 19 , 2008 $ 0.13 November 20 , 2008 $ , 2008 $ 0.13 November 20 , 2008 $ 1,157 December $ 0.13 November 20 , 2008 $ 1,157 December 11 , November 20 , 2008 $ 1,157 December 11 , 2008 December , 2008 $ 1,157 December 11 , 2008 December 10 , $ 1,157 December 11 , 2008 December 10 , 2008 $ December 11 , 2008 December 10 , 2008 $ 0.13 February , 2008 December 10 , 2008 $ 0.13 February 19 , December 10 , 2008 $ 0.13 February 19 , 2009 $ , 2008 $ 0.13 February 19 , 2009 $ 1,155 March $ 0.13 February 19 , 2009 $ 1,155 March 12 , February 19 , 2009 $ 1,155 March 12 , 2009 March , 2009 $ 1,155 March 12 , 2009 March 9 , $ 1,155 March 12 , 2009 March 9 , 2009 $ March 12 , 2009 March 9 , 2009 $ 0.13 May , 2009 March 9 , 2009 $ 0.13 May 21 , March 9 , 2009 $ 0.13 May 21 , 2009 $ , 2009 $ 0.13 May 21 , 2009 $ 1,158 June $ 0.13 May 21 , 2009 $ 1,158 June 18 , May 21 , 2009 $ 1,158 June 18 , 2009 June , 2009 $ 1,158 June 18 , 2009 June 10 , $ 1,158 June 18 , 2009 June 10 , 2009 $ June 18 , 2009 June 10 , 2009 $ 0.13 August , 2009 June 10 , 2009 $ 0.13 August 20 , June 10 , 2009 $ 0.13 August 20 , 2009 $ , 2009 $ 0.13 August 20 , 2009 $ 1,158 ( $ 0.13 August 20 , 2009 $ 1,158 ( a ) August 20 , 2009 $ 1,158 ( a ) September 10 1,158 ( a ) September 10 , 2009 ( a ) a ) September 10 , 2009 ( a ) The dividend The dividend declared on June 10 , 2009 will be paid declared on June 10 , 2009 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2009 . In fiscal a of June 30 , 2009 . In fiscal year 2008 2009 . In fiscal year 2008 , our Board of Directors million ) Payment Date September 12 , 2007 $ 0.11 November Payment Date September 12 , 2007 $ 0.11 November 15 , September 12 , 2007 $ 0.11 November 15 , 2007 $ , 2007 $ 0.11 November 15 , 2007 $ 1,034 December $ 0.11 November 15 , 2007 $ 1,034 December 13 , November 15 , 2007 $ 1,034 December 13 , 2007 December , 2007 $ 1,034 December 13 , 2007 December 19 , $ 1,034 December 13 , 2007 December 19 , 2007 $ December 13 , 2007 December 19 , 2007 $ 0.11 February , 2007 December 19 , 2007 $ 0.11 February 21 , December 19 , 2007 $ 0.11 February 21 , 2008 $ , 2007 $ 0.11 February 21 , 2008 $ 1,023 March $ 0.11 February 21 , 2008 $ 1,023 March 13 , February 21 , 2008 $ 1,023 March 13 , 2008 March , 2008 $ 1,023 March 13 , 2008 March 17 , $ 1,023 March 13 , 2008 March 17 , 2008 $ March 13 , 2008 March 17 , 2008 $ 0.11 May , 2008 March 17 , 2008 $ 0.11 May 15 , March 17 , 2008 $ 0.11 May 15 , 2008 $ , 2008 $ 0.11 May 15 , 2008 $ 1,020 June $ 0.11 May 15 , 2008 $ 1,020 June 12 , May 15 , 2008 $ 1,020 June 12 , 2008 June , 2008 $ 1,020 June 12 , 2008 June 11 , $ 1,020 June 12 , 2008 June 11 , 2008 $ June 12 , 2008 June 11 , 2008 $ 0.11 August , 2008 June 11 , 2008 $ 0.11 August 21 , June 11 , 2008 $ 0.11 August 21 , 2008 $ , 2008 $ 0.11 August 21 , 2008 $ 998 ( $ 0.11 August 21 , 2008 $ 998 ( a ) August 21 , 2008 $ 998 ( a ) September 11 998 ( a ) September 11 , 2008 ( a ) a ) September 11 , 2008 ( a ) The dividend The dividend declared on June 11 , 2008 wa included in declared on June 11 , 2008 wa included in other current current liability a of June 30 , 2008 . Other On a of June 30 , 2008 . Other On July 1 2008 . Other On July 1 , 2007 , we adopted Other On July 1 , 2007 , we adopted the provision provision of FIN No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 , which provides a financial statement recognition threshold and PAGE 72 Table of Contents Part II of Contents Part II Item 8 measurement attribute for a tax , we recognized a $ 395 million charge to our beginning accounting principle . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted Emerging Issues Task Force Issue No . 06-2 ( “ EITF 06-2 ” . 06-2 ( “ EITF 06-2 ” ) , Accounting for to FASB Statement No . 43 . EITF 06-2 requires company No . 43 . EITF 06-2 requires company to accrue the , we recognized a $ 17 million charge to our beginning in accounting principle . NOTE 19 OTHER COMPREHENSIVE INCOME The activity million ) Year Ended June 30 , 2009 2008 2007 Net Year Ended June 30 , 2009 2008 2007 Net unrealized gain Ended June 30 , 2009 2008 2007 Net unrealized gain on June 30 , 2009 2008 2007 Net unrealized gain on derivative of tax effect of $ 472 , $ 46 , and of $ 472 , $ 46 , and $ 66 $ $ 46 , and $ 66 $ 876 $ 86 $ , and $ 66 $ 876 $ 86 $ 123 Reclassification $ 66 $ 876 $ 86 $ 123 Reclassification adjustment for $ 876 $ 86 $ 123 Reclassification adjustment for gain included tax effect of $ ( 309 ) , $ ( 36 309 ) , $ ( 36 ) , and $ ( ) , and $ ( 59 ) ( 574 ) ( $ ( 59 ) ( 574 ) ( 68 ) ( ) ( 574 ) ( 68 ) ( 109 ) Net ) ( 68 ) ( 109 ) Net unrealized gain on Net unrealized gain on derivative 302 18 14 Net unrealized gain unrealized gain on derivative 302 18 14 Net unrealized gain ( gain on derivative 302 18 14 Net unrealized gain ( loss tax effect of $ ( 142 ) , $ ( 234 142 ) , $ ( 234 ) , and $ 393 234 ) , and $ 393 ( 263 ) ( 435 , and $ 393 ( 263 ) ( 435 ) 730 393 ( 263 ) ( 435 ) 730 Reclassification adjustment for 263 ) ( 435 ) 730 Reclassification adjustment for loss ( of tax effect of $ 16 , $ ( 117 ) $ 16 , $ ( 117 ) , and $ ( ) , and $ ( 217 ) 30 ( 218 ) and $ ( 217 ) 30 ( 218 ) ( 404 ( 217 ) 30 ( 218 ) ( 404 ) Net 30 ( 218 ) ( 404 ) Net unrealized gain ( loss ) on investment ( 233 ) ( 653 ) 326 investment ( 233 ) ( 653 ) 326 Translation adjustment and 233 ) ( 653 ) 326 Translation adjustment and other ( Translation adjustment and other ( 240 ) 121 85 Other comprehensive and other ( 240 ) 121 85 Other comprehensive income ( other ( 240 ) 121 85 Other comprehensive income ( loss ( loss ) $ ( 171 ) $ ( 514 ) ( 171 ) $ ( 514 ) $ 425 The component $ ( 514 ) $ 425 The component of accumulated other million ) Year Ended June 30 , 2009 2008 2007 Net Year Ended June 30 , 2009 2008 2007 Net unrealized gain Ended June 30 , 2009 2008 2007 Net unrealized gain on June 30 , 2009 2008 2007 Net unrealized gain on derivative unrealized gain on derivative $ 437 $ 135 $ 117 Net on derivative $ 437 $ 135 $ 117 Net unrealized gain $ 437 $ 135 $ 117 Net unrealized gain on investment Net unrealized gain on investment 502 735 1,388 Translation adjustment and unrealized gain on investment 502 735 1,388 Translation adjustment and other gain on investment 502 735 1,388 Translation adjustment and other 30 1,388 Translation adjustment and other 30 270 149 Accumulated other comprehensive Translation adjustment and other 30 270 149 Accumulated other comprehensive income adjustment and other 30 270 149 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 969 $ 1,140 $ 1,654 NOTE comprehensive income $ 969 $ 1,140 $ 1,654 NOTE 20 EMPLOYEE $ 969 $ 1,140 $ 1,654 NOTE 20 EMPLOYEE STOCK AND $ 1,140 $ 1,654 NOTE 20 EMPLOYEE STOCK AND SAVINGS PLANS : ( In million ) 2009 2008 2007 Year Ended June ( In million ) 2009 2008 2007 Year Ended June 30 In million ) 2009 2008 2007 Year Ended June 30 , 2008 2007 Year Ended June 30 , Total stock-based compensation expense Total stock-based compensation expense $ 1,708 $ 1,479 $ 1,550 Income compensation expense $ 1,708 $ 1,479 $ 1,550 Income tax benefit $ 1,708 $ 1,479 $ 1,550 Income tax benefit related to related to stock-based compensation $ 598 $ 518 $ 542 PAGE stock-based compensation $ 598 $ 518 $ 542 PAGE 73 Table $ 598 $ 518 $ 542 PAGE 73 Table of Contents $ 518 $ 542 PAGE 73 Table of Contents Part II of Contents Part II Item 8 Employee Stock Purchase Plan We accordance with SFAS No . 123 ( R ) . Shares employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation ( Shares in million ) 2009 2008 2007 Year Ended June Shares in million ) 2009 2008 2007 Year Ended June 30 in million ) 2009 2008 2007 Year Ended June 30 , 2008 2007 Year Ended June 30 , Shares purchased 24 18 June 30 , Shares purchased 24 18 17 Average price per 30 , Shares purchased 24 18 17 Average price per share , Shares purchased 24 18 17 Average price per share $ Average price per share $ 20.13 $ 26.78 $ 25.36 At per share $ 20.13 $ 26.78 $ 25.36 At June 30 $ 20.13 $ 26.78 $ 25.36 At June 30 , 2009 26.78 $ 25.36 At June 30 , 2009 , 83 million 25.36 At June 30 , 2009 , 83 million share were June 30 , 2009 , 83 million share were reserved for States that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 262 million , $ 238 million $ 262 million , $ 238 million , and $ 218 238 million , and $ 218 million in fiscal year 2009 218 million in fiscal year 2009 , 2008 , and 2007 in fiscal year 2009 , 2008 , and 2007 , respectively 2009 , 2008 , and 2007 , respectively , and were and advisor . At June 30 , 2009 , an aggregate . At June 30 , 2009 , an aggregate of 714 2009 , an aggregate of 714 million share were authorized for granted SPSAs for fiscal year 2009 , 2008 , and 2007 for fiscal year 2009 , 2008 , and 2007 with performance 2009 , 2008 , and 2007 with performance period of July with performance period of July 1 , 2008 through June 30 period of July 1 , 2008 through June 30 , 2009 1 , 2008 through June 30 , 2009 , July 1 2008 through June 30 , 2009 , July 1 , 2007 30 , 2009 , July 1 , 2007 through June 30 2009 , July 1 , 2007 through June 30 , 2008 1 , 2007 through June 30 , 2008 , and July 2007 through June 30 , 2008 , and July 1 , , 2008 , and July 1 , 2006 through June 30 , and July 1 , 2006 through June 30 , 2007 1 , 2006 through June 30 , 2007 , respectively . 2006 through June 30 , 2007 , respectively . At the by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is number of share , approximately 12.2 % of the total target end of the fiscal year 2008 and 2007 performance period , the fiscal year 2008 and 2007 performance period , the Compensation SPSAs to be issued were 18 million and 11 million respectively issued were 18 million and 11 million respectively , based on issued for the fiscal year 2009 performance period will be determined first quarter of fiscal year 2010 . PAGE 74 Table of fiscal year 2010 . PAGE 74 Table of Contents Part II of Contents Part II Item 8 Executive Officer Incentive Plan In Incentive Plan In fiscal year 2009 , the Compensation Committee approved period . For fiscal year 2009 , executive officer were eligible the award for fiscal year 2009 , 20 % of the for fiscal year 2009 , 20 % of the award will cash , and the remaining 80 % will be converted into is approved following fiscal year 2009 , and one-quarter on August , and one-quarter on August 31 of each of the following the executive officer in September 2009 based on the performance period the performance period of July 1 , 2008 through June 30 period of July 1 , 2008 through June 30 , 2009 1 , 2008 through June 30 , 2009 , from an 2008 through June 30 , 2009 , from an incentive pool an incentive pool equal to 0.35 % of the Company ’ Company ’ s fiscal year 2009 operating income . Each executive of the pool ranging between 0 and 150 % of a pool ranging between 0 and 150 % of a target based s performance during fiscal year 2009 . The number of share Microsoft common stock on August 31 , 2009 . Activity for stock on August 31 , 2009 . Activity for All Stock using the following assumption : 2009 2008 2007 Year Ended June the following assumption : 2009 2008 2007 Year Ended June 30 following assumption : 2009 2008 2007 Year Ended June 30 , 2008 2007 Year Ended June 30 , Dividends per share ( ( quarterly amount ) $ 0.11 - $ 0.13 $ 0.10 ) $ 0.11 - $ 0.13 $ 0.10 - $ 0.11 0.11 - $ 0.13 $ 0.10 - $ 0.11 $ 0.09 0.13 $ 0.10 - $ 0.11 $ 0.09 - $ 0.10 0.10 - $ 0.11 $ 0.09 - $ 0.10 Interest rate 0.11 $ 0.09 - $ 0.10 Interest rate range 1.4 % $ 0.10 Interest rate range 1.4 % - 3.6 % 2.5 rate range 1.4 % - 3.6 % 2.5 % - 4.9 1.4 % - 3.6 % 2.5 % - 4.9 % 4.3 3.6 % 2.5 % - 4.9 % 4.3 % -5.3 % 2.5 % - 4.9 % 4.3 % -5.3 % During fiscal -5.3 % During fiscal year 2009 , the following activity occurred balance , beginning of year 153 $ 26.12 Granted 91 $ beginning of year 153 $ 26.12 Granted 91 $ 24.95 Vested year 153 $ 26.12 Granted 91 $ 24.95 Vested ( 43 $ 26.12 Granted 91 $ 24.95 Vested ( 43 ) $ 91 $ 24.95 Vested ( 43 ) $ 25.56 Forfeited ( Vested ( 43 ) $ 25.56 Forfeited ( 10 ) $ ) $ 25.56 Forfeited ( 10 ) $ 26.08 Nonvested balance Forfeited ( 10 ) $ 26.08 Nonvested balance , end of balance , end of year 191 $ 25.69 Shared performance stock end of year 191 $ 25.69 Shared performance stock award : balance , beginning of year 36 $ 26.14 Granted 10 $ beginning of year 36 $ 26.14 Granted 10 $ 25.93 Vested year 36 $ 26.14 Granted 10 $ 25.93 Vested ( 18 $ 26.14 Granted 10 $ 25.93 Vested ( 18 ) $ 10 $ 25.93 Vested ( 18 ) $ 25.07 Forfeited – Vested ( 18 ) $ 25.07 Forfeited – – Nonvested balance balance , end of year 28 $ 26.79 As of June end of year 28 $ 26.79 As of June 30 , $ 26.79 As of June 30 , 2009 , there wa As of June 30 , 2009 , there wa $ 3.8 2009 , there wa $ 3.8 billion and $ 551 million $ 3.8 billion and $ 551 million of total unrecognized compensation a weighted average period of 3.5 year and 2.5 year , period of 3.5 year and 2.5 year , respectively . PAGE year , respectively . PAGE 75 Table of Contents Part II of Contents Part II Item 8 During fiscal year 2008 and Item 8 During fiscal year 2008 and 2007 , the following During fiscal year 2008 and 2007 , the following activity occurred , except fair value ) 2008 2007 Stock award granted 71 except fair value ) 2008 2007 Stock award granted 71 57 2008 2007 Stock award granted 71 57 Weighted average grant-date fair 2007 Stock award granted 71 57 Weighted average grant-date fair value average grant-date fair value $ 27.83 $ 25.15 Shared performance stock fair value $ 27.83 $ 25.15 Shared performance stock award granted Shared performance stock award granted 19 11 Weighted average grant-date fair performance stock award granted 19 11 Weighted average grant-date fair value average grant-date fair value $ 27.82 $ 25.18 Stock Options In fair value $ 27.82 $ 25.18 Stock Options In fiscal year Stock Options In fiscal year 2004 , we began granting employee non-employee director stock plan until 2004 when we began granting director plan . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and and one-half year and expire 10 year from the date of grant . Options granted after 2001 vest over four and one-half and one-half year and expire 10 year from the date of We granted one million , 10 million , and two million business acquisition during fiscal year 2009 , 2008 , and 2007 during fiscal year 2009 , 2008 , and 2007 . Employee 2009 , 2008 , and 2007 . Employee stock option outstanding million ) Balance , July 1 , 2008 364 $ 28.12 Balance , July 1 , 2008 364 $ 28.12 Granted 1 , July 1 , 2008 364 $ 28.12 Granted 1 $ 1 , 2008 364 $ 28.12 Granted 1 $ 2.14 Exercised 2008 364 $ 28.12 Granted 1 $ 2.14 Exercised ( 6 $ 28.12 Granted 1 $ 2.14 Exercised ( 6 ) $ 1 $ 2.14 Exercised ( 6 ) $ 22.44 Canceled ( Exercised ( 6 ) $ 22.44 Canceled ( 28 ) $ ) $ 22.44 Canceled ( 28 ) $ 30.31 Forfeited ( Canceled ( 28 ) $ 30.31 Forfeited ( 1 ) $ ) $ 30.31 Forfeited ( 1 ) $ 10.50 Balance , Forfeited ( 1 ) $ 10.50 Balance , June 30 , $ 10.50 Balance , June 30 , 2009 330 $ 27.99 Balance , June 30 , 2009 330 $ 27.99 1.99 $ , June 30 , 2009 330 $ 27.99 1.99 $ 318 30 , 2009 330 $ 27.99 1.99 $ 318 Exercisable , , 2009 330 $ 27.99 1.99 $ 318 Exercisable , June 330 $ 27.99 1.99 $ 318 Exercisable , June 30 , $ 318 Exercisable , June 30 , 2009 327 $ 27.99 Exercisable , June 30 , 2009 327 $ 27.99 1.98 $ , June 30 , 2009 327 $ 27.99 1.98 $ 271 30 , 2009 327 $ 27.99 1.98 $ 271 Options outstanding , 2009 327 $ 27.99 1.98 $ 271 Options outstanding a 327 $ 27.99 1.98 $ 271 Options outstanding a of June Options outstanding a of June 30 , 2009 include approximately eight a of June 30 , 2009 include approximately eight million option exercise price range of $ 0.01 to $ 150.93 and a of $ 0.01 to $ 150.93 and a weighted average exercise average exercise price of $ 9.50 . During fiscal year 2009 9.50 . During fiscal year 2009 , 2008 , and 2007 During fiscal year 2009 , 2008 , and 2007 , the 2009 , 2008 , and 2007 , the following activity occurred : ( In million ) 2009 2008 2007 Total intrinsic value ( In million ) 2009 2008 2007 Total intrinsic value of In million ) 2009 2008 2007 Total intrinsic value of stock of stock option exercised $ 48 $ 1,042 $ 818 Total option exercised $ 48 $ 1,042 $ 818 Total fair value $ 48 $ 1,042 $ 818 Total fair value of stock of stock award vested $ 1,126 $ 804 $ 566 Total award vested $ 1,126 $ 804 $ 566 Total fair value $ 1,126 $ 804 $ 566 Total fair value of shared performance stock award vested $ 450 $ 336 $ 292 Cash award vested $ 450 $ 336 $ 292 Cash received and $ 450 $ 336 $ 292 Cash received and income tax stock option exercise were $ 88 million and $ 12 million $ 88 million and $ 12 million , respectively , for respectively , for fiscal year 2009 . PAGE 76 Table of fiscal year 2009 . PAGE 76 Table of Contents Part II of Contents Part II Item 8 NOTE 21 EMPLOYEE SEVERANCE In Part II Item 8 NOTE 21 EMPLOYEE SEVERANCE In January 2009 21 EMPLOYEE SEVERANCE In January 2009 , we announced and implemented the elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During the technology by June 30 , 2010 . During the fiscal year the fiscal year ended June 30 , 2009 , we recorded year ended June 30 , 2009 , we recorded charge of we recorded charge of $ 330 million for the expected reduction a net reduction of approximately 4,400 position under the resource management million ) Year Ended June 30 , 2009 Balance , beginning Year Ended June 30 , 2009 Balance , beginning of period $ – Employee severance charge 330 Cash payment ( 203 ) charge 330 Cash payment ( 203 ) Balance , end of , end of period $ 127 NOTE 22 SEGMENT INFORMATION AND of period $ 127 NOTE 22 SEGMENT INFORMATION AND GEOGRAPHIC DATA million ) Year Ended June 30 , 2009 2008 2007 Revenue Year Ended June 30 , 2009 2008 2007 Revenue : Client Ended June 30 , 2009 2008 2007 Revenue : Client $ June 30 , 2009 2008 2007 Revenue : Client $ 14,414 2007 Revenue : Client $ 14,414 $ 16,472 $ 14,779 Server : Client $ 14,414 $ 16,472 $ 14,779 Server and Tools $ 14,414 $ 16,472 $ 14,779 Server and Tools 14,135 13,121 $ 14,779 Server and Tools 14,135 13,121 11,117 Online Services Business 14,779 Server and Tools 14,135 13,121 11,117 Online Services Business 3,088 Server and Tools 14,135 13,121 11,117 Online Services Business 3,088 3,190 13,121 11,117 Online Services Business 3,088 3,190 2,434 Microsoft Business Division 11,117 Online Services Business 3,088 3,190 2,434 Microsoft Business Division 18,902 Online Services Business 3,088 3,190 2,434 Microsoft Business Division 18,902 18,935 3,190 2,434 Microsoft Business Division 18,902 18,935 16,478 Entertainment and Devices 2,434 Microsoft Business Division 18,902 18,935 16,478 Entertainment and Devices Division Microsoft Business Division 18,902 18,935 16,478 Entertainment and Devices Division 7,753 16,478 Entertainment and Devices Division 7,753 8,213 6,136 Unallocated and other Entertainment and Devices Division 7,753 8,213 6,136 Unallocated and other 145 and Devices Division 7,753 8,213 6,136 Unallocated and other 145 489 8,213 6,136 Unallocated and other 145 489 178 Consolidated $ 58,437 6,136 Unallocated and other 145 489 178 Consolidated $ 58,437 $ Unallocated and other 145 489 178 Consolidated $ 58,437 $ 60,420 145 489 178 Consolidated $ 58,437 $ 60,420 $ 51,122 ( 178 Consolidated $ 58,437 $ 60,420 $ 51,122 ( In million $ 58,437 $ 60,420 $ 51,122 ( In million ) Year million ) Year Ended June 30 , 2009 2008 2007 Operating Year Ended June 30 , 2009 2008 2007 Operating Income ( Ended June 30 , 2009 2008 2007 Operating Income ( Loss June 30 , 2009 2008 2007 Operating Income ( Loss ) Loss ) : Client $ 10,435 $ 12,566 $ 11,295 Server : Client $ 10,435 $ 12,566 $ 11,295 Server and Tools $ 10,435 $ 12,566 $ 11,295 Server and Tools 5,047 4,170 $ 11,295 Server and Tools 5,047 4,170 3,520 Online Services Business 11,295 Server and Tools 5,047 4,170 3,520 Online Services Business ( Server and Tools 5,047 4,170 3,520 Online Services Business ( 2,391 3,520 Online Services Business ( 2,391 ) ( 1,304 ) ( Business ( 2,391 ) ( 1,304 ) ( 617 ) Microsoft ) ( 1,304 ) ( 617 ) Microsoft Business Division 11,940 617 ) Microsoft Business Division 11,940 12,169 10,757 Entertainment and Devices ) Microsoft Business Division 11,940 12,169 10,757 Entertainment and Devices Division Microsoft Business Division 11,940 12,169 10,757 Entertainment and Devices Division 5 10,757 Entertainment and Devices Division 5 325 ( 1,945 ) Reconciling Entertainment and Devices Division 5 325 ( 1,945 ) Reconciling amount Devices Division 5 325 ( 1,945 ) Reconciling amount ( 4,673 1,945 ) Reconciling amount ( 4,673 ) ( 5,655 ) ( amount ( 4,673 ) ( 5,655 ) ( 4,572 ) Consolidated ) ( 5,655 ) ( 4,572 ) Consolidated $ 20,363 $ ( 4,572 ) Consolidated $ 20,363 $ 22,271 $ 18,438 PAGE ) Consolidated $ 20,363 $ 22,271 $ 18,438 PAGE 77 Table $ 20,363 $ 22,271 $ 18,438 PAGE 77 Table of Contents $ 22,271 $ 18,438 PAGE 77 Table of Contents Part II of Contents Part II Item 8 SFAS No . 131 , Item 8 SFAS No . 131 , Disclosures about Segments of and Devices Division – Xbox 360 console and game ; Xbox for legal contingency . PAGE 78 Table of Contents Part II of Contents Part II Item 8 Significant reconciling item were a million ) Year Ended June 30 , 2009 2008 2007 Summary Year Ended June 30 , 2009 2008 2007 Summary of reconciling Ended June 30 , 2009 2008 2007 Summary of reconciling amount June 30 , 2009 2008 2007 Summary of reconciling amount : ( a ) $ ( 5,877 ) $ ( 7,017 ) ( 5,877 ) $ ( 7,017 ) $ ( 4,893 ) ( 7,017 ) $ ( 4,893 ) Stock-based compensation expense 936 4,893 ) Stock-based compensation expense 936 950 123 Revenue reconciling amount ) Stock-based compensation expense 936 950 123 Revenue reconciling amount 280 Stock-based compensation expense 936 950 123 Revenue reconciling amount 280 385 950 123 Revenue reconciling amount 280 385 120 Other ( 12 123 Revenue reconciling amount 280 385 120 Other ( 12 ) Revenue reconciling amount 280 385 120 Other ( 12 ) 27 280 385 120 Other ( 12 ) 27 78 Total $ 120 Other ( 12 ) 27 78 Total $ ( 4,673 Other ( 12 ) 27 78 Total $ ( 4,673 ) 27 78 Total $ ( 4,673 ) $ ( 5,655 ) ( 4,673 ) $ ( 5,655 ) $ ( 4,572 ) ( 5,655 ) $ ( 4,572 ) ( a ) Corporate-level customer accounted for more than 10 % of fiscal year 2009 10 % of fiscal year 2009 , 2008 , or 2007 of fiscal year 2009 , 2008 , or 2007 revenue . 2009 , 2008 , or 2007 revenue . Revenue , classified million ) Year Ended June 30 , 2009 2008 2007 United Year Ended June 30 , 2009 2008 2007 United States ( Ended June 30 , 2009 2008 2007 United States ( a June 30 , 2009 2008 2007 United States ( a ) States ( a ) $ 33,052 $ 35,928 $ 31,346 Other a ) $ 33,052 $ 35,928 $ 31,346 Other country 25,385 $ 33,052 $ 35,928 $ 31,346 Other country 25,385 24,492 19,776 35,928 $ 31,346 Other country 25,385 24,492 19,776 Total $ 58,437 $ 31,346 Other country 25,385 24,492 19,776 Total $ 58,437 $ 31,346 Other country 25,385 24,492 19,776 Total $ 58,437 $ 60,420 25,385 24,492 19,776 Total $ 58,437 $ 60,420 $ 51,122 ( 19,776 Total $ 58,437 $ 60,420 $ 51,122 ( a ) $ 58,437 $ 60,420 $ 51,122 ( a ) Includes shipment million ) Year Ended June 30 , 2009 2008 United States Year Ended June 30 , 2009 2008 United States $ 19,362 Ended June 30 , 2009 2008 United States $ 19,362 $ 2009 2008 United States $ 19,362 $ 19,129 Other country 2,435 United States $ 19,362 $ 19,129 Other country 2,435 1,194 Total 19,362 $ 19,129 Other country 2,435 1,194 Total $ 21,797 $ $ 19,129 Other country 2,435 1,194 Total $ 21,797 $ 20,323 country 2,435 1,194 Total $ 21,797 $ 20,323 PAGE 79 Table 1,194 Total $ 21,797 $ 20,323 PAGE 79 Table of Contents $ 21,797 $ 20,323 PAGE 79 Table of Contents Part II of Contents Part II Item 8 NOTE 23 QUARTERLY INFORMATION ( Part II Item 8 NOTE 23 QUARTERLY INFORMATION ( Unaudited ) amount ) Quarter Ended Sep. 30 Dec. 31 Mar . 31 Quarter Ended Sep. 30 Dec. 31 Mar . 31 June 30 30 Dec. 31 Mar . 31 June 30 Total Fiscal year 31 Mar . 31 June 30 Total Fiscal year 2009 Revenue June 30 Total Fiscal year 2009 Revenue $ 15,061 $ 16,629 Fiscal year 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( a ) $ 16,629 $ 13,648 $ 13,099 ( a ) $ 58,437 13,099 ( a ) $ 58,437 Gross profit 12,213 12,722 10,834 ) $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 2,977 10,834 10,513 46,282 Net income 4,373 4,174 2,977 ( b ) 10,513 46,282 Net income 4,373 4,174 2,977 ( b ) 3,045 46,282 Net income 4,373 4,174 2,977 ( b ) 3,045 ( 4,174 2,977 ( b ) 3,045 ( b ) 14,569 Basic ) 3,045 ( b ) 14,569 Basic earnings per share 0.48 14,569 Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share 0.48 1.63 Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal year earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal year 2008 per share 0.48 0.47 0.33 0.34 1.62 Fiscal year 2008 Revenue share 0.48 0.47 0.33 0.34 1.62 Fiscal year 2008 Revenue $ 0.33 0.34 1.62 Fiscal year 2008 Revenue $ 13,762 $ 16,367 Fiscal year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 ( 11,940 12,971 48,822 Net income 4,289 4,707 ( c ) 4,388 12,971 48,822 Net income 4,289 4,707 ( c ) 4,388 ( 4,289 4,707 ( c ) 4,388 ( d ) 4,297 17,681 ) 4,388 ( d ) 4,297 17,681 Basic earnings per share 4,388 ( d ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year earnings per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 per share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue share 0.45 0.50 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 0.47 0.46 1.87 Fiscal year 2007 Revenue $ 10,811 $ 12,542 Fiscal year 2007 Revenue $ 10,811 $ 12,542 ( e ) 2007 Revenue $ 10,811 $ 12,542 ( e ) $ 14,398 12,542 ( e ) $ 14,398 ( f ) $ 13,371 14,398 ( f ) $ 13,371 $ 51,122 Gross profit 9,115 f ) $ 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 13,371 $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( h $ 51,122 Gross profit 9,115 8,922 12,258 10,134 ( h ) 51,122 Gross profit 9,115 8,922 12,258 10,134 ( h ) 40,429 Gross profit 9,115 8,922 12,258 10,134 ( h ) 40,429 Net 12,258 10,134 ( h ) 40,429 Net income 3,478 2,626 4,926 h ) 40,429 Net income 3,478 2,626 4,926 ( g ) ) 40,429 Net income 3,478 2,626 4,926 ( g ) 3,035 40,429 Net income 3,478 2,626 4,926 ( g ) 3,035 14,065 2,626 4,926 ( g ) 3,035 14,065 Basic earnings per share 4,926 ( g ) 3,035 14,065 Basic earnings per share 0.35 14,065 Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted Basic earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings earnings per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per per share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share share 0.35 0.27 0.51 0.32 1.44 Diluted earnings per share 0.35 1.44 Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 ( Diluted earnings per share 0.35 0.26 0.50 0.31 1.42 ( a earnings per share 0.35 0.26 0.50 0.31 1.42 ( a ) per share 0.35 0.26 0.50 0.31 1.42 ( a ) Reflects share 0.35 0.26 0.50 0.31 1.42 ( a ) Reflects $ ( a ) Reflects $ 276 million of revenue deferred to period relating to the Windows 7 Upgrade Option program . ( Includes employee severance of $ 290 million and $ 40 million $ 290 million and $ 40 million ( pre-tax ) in of the year ended June 30 , 2009 , respectively . year ended June 30 , 2009 , respectively . ( c ) Includes charge of $ 237 million ( pre-tax ) related ) Includes charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . ( e ) Reflects ( e ) Reflects $ 1.6 billion of revenue deferred to third quarter of fiscal year 2007 for the Express Upgrade to of Windows Vista and the 2007 Microsoft Office system . ( ( f ) Includes $ 1.6 billion of revenue discussed above ) Includes charge of $ 296 million ( pre-tax ) related ( h ) Includes $ 1.1 billion ( pre-tax ) charge charge related to the Xbox 360 warranty policy , inventory write-down and product return . NOTE 24 SUBSEQUENT EVENT On July 29 24 SUBSEQUENT EVENT On July 29 , 2009 , Microsoft and EVENT On July 29 , 2009 , Microsoft and Yahoo ! and Yahoo ! announced a 10-year agreement under which Microsoft will will also acquire an exclusive 10-year license to Yahoo ! ’ agreement entered into on July 29 anticipates that the party will occur in early calendar year 2010 . PAGE 80 Table of calendar year 2010 . PAGE 80 Table of Contents Part II of Contents Part II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2009 and 2008 , a of June 30 , 2009 and 2008 , and the June 30 , 2009 and 2008 , and the related consolidated in the period ended June 30 , 2009 . These financial period ended June 30 , 2009 . These financial statement are and subsidiary a of June 30 , 2009 and 2008 , a of June 30 , 2009 and 2008 , and the June 30 , 2009 and 2008 , and the result of in the period ended June 30 , 2009 , in conformity period ended June 30 , 2009 , in conformity with accounting . As discussed in Note 18 to the financial statement , financial statement , on July 1 , 2007 the Company adopted , on July 1 , 2007 the Company adopted the provision Standards Board Interpretation No . 48 , Accounting for Uncertainty in of FASB Statement No . 109 , and Emerging Issues Task Task Force Issue No . 06-2 , Accounting for Sabbatical Leave to FASB Statement No . 43 . We have also audited financial reporting a of June 30 , 2009 , based on a of June 30 , 2009 , based on the criterion and our report dated July 29 , 2009 , expressed an report dated July 29 , 2009 , expressed an unqualified opinion LLP Seattle , Washington July 29 , 2009 PAGE 81 Table , Washington July 29 , 2009 PAGE 81 Table of Contents July 29 , 2009 PAGE 81 Table of Contents Part II of Contents Part II Item 9 , 9A ITEM 9 . Part II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2009 . There were a of June 30 , 2009 . There were no change during the quarter ended June 30 , 2009 that have materially quarter ended June 30 , 2009 that have materially affected , financial reporting a of June 30 , 2009 ; their report a of June 30 , 2009 ; their report is included report is included in Item 9A . PAGE 82 Table of in Item 9A . PAGE 82 Table of Contents Part II of Contents Part II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2009 , based on a of June 30 , 2009 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2009 , based on a of June 30 , 2009 , based on the criterion for the year ended June 30 , 2009 , of the year ended June 30 , 2009 , of the Company and and our report dated July 29 , 2009 , expressed an report dated July 29 , 2009 , expressed an unqualified opinion LLP Seattle , Washington July 29 , 2009 PAGE 83 Table , Washington July 29 , 2009 PAGE 83 Table of Contents July 29 , 2009 PAGE 83 Table of Contents Part II Part II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this report . Information Shareholders to be held November 19 , 2009 ( the “ be held November 19 , 2009 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND herein by reference . PAGE 84 Table of Contents Part IV of Contents Part IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Annual Report on this Annual Report on Form 10-K , a indexed below . Financial Statements Page Income Statements 43 Balance Sheets 44 Cash Flows Income Statements 43 Balance Sheets 44 Cash Flows Statements 45 Stockholders Sheets 44 Cash Flows Statements 45 Stockholders ’ Equity Statements 46 45 Stockholders ’ Equity Statements 46 Notes to Financial Statements 47 46 Notes to Financial Statements 47 Report of Independent Registered Public Independent Registered Public Accounting Firm 81 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/02 3.1 1/31/03 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 9/25/08 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 9/25/08 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 9/25/08 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 9/25/08 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 10.1 * Microsoft to the Base Indenture 8-K 4.2 5/15/09 10.1 * Microsoft Corporation the Base Indenture 8-K 4.2 5/15/09 10.1 * Microsoft Corporation 2001 Base Indenture 8-K 4.2 5/15/09 10.1 * Microsoft Corporation 2001 Stock 5/15/09 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock 7/20/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Stock 7/20/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Employee 11/15/04 10.4 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 PAGE 85 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 PAGE 85 Table Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 PAGE 85 Table of Purchase Plan 10-K 6/30/04 10.6 9/1/04 PAGE 85 Table of Contents 10-K 6/30/04 10.6 9/1/04 PAGE 85 Table of Contents Part IV of Contents Part IV Item 15 Filed Herewith Incorporated by Reference Period Ending Exhibit Filing Date 10.5 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan S-8 99.1 2/28/06 10.6 * Form of Deferred Compensation Plan S-8 99.1 2/28/06 10.6 * Form of Stock Compensation Plan S-8 99.1 2/28/06 10.6 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Trust Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Trust Agreement for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Trust Agreement dated Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Trust Agreement dated June Directors 10-K 6/30/04 10.13 9/1/04 10.12 Trust Agreement dated June 1 10.12 Trust Agreement dated June 1 , 1993 between Microsoft Corporation Agreement dated June 1 , 1993 between Microsoft Corporation and BNY of Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.13 Trust Washington a trustee ) 10-K 6/30/02 10.8 9/6/02 10.13 Trust Agreement a trustee ) 10-K 6/30/02 10.8 9/6/02 10.13 Trust Agreement dated trustee ) 10-K 6/30/02 10.8 9/6/02 10.13 Trust Agreement dated June ) 10-K 6/30/02 10.8 9/6/02 10.13 Trust Agreement dated June 30 10.13 Trust Agreement dated June 30 , 2003 between Microsoft Corporation Agreement dated June 30 , 2003 between Microsoft Corporation and BNY Western Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.14 * Trust Company a trustee 10-K 6/30/03 10.8 9/5/03 10.14 * Microsoft Company a trustee 10-K 6/30/03 10.8 9/5/03 10.14 * Microsoft Corporation a trustee 10-K 6/30/03 10.8 9/5/03 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/03 10.8 9/5/03 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2007 performance period 10-K 6/30/07 10.17 fiscal year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of Shared period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2008 performance period 10-Q 12/31/07 10.18 fiscal year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 PAGE 86 year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 PAGE 86 Table 2008 performance period 10-Q 12/31/07 10.18 1/24/08 PAGE 86 Table of performance period 10-Q 12/31/07 10.18 1/24/08 PAGE 86 Table of Contents 10-Q 12/31/07 10.18 1/24/08 PAGE 86 Table of Contents Part IV of Contents Part IV Item 15 Filed Herewith Incorporated by Reference Period Ending Exhibit Filing Date 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Bonus Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Bonus Plan Bonus Plan for Executive Officers 10-Q 12/31/08 10.19 1/22/09 12 Computation Plan for Executive Officers 10-Q 12/31/08 10.19 1/22/09 12 Computation of for Executive Officers 10-Q 12/31/08 10.19 1/22/09 12 Computation of Ratio Executive Officers 10-Q 12/31/08 10.19 1/22/09 12 Computation of Ratio of Officers 10-Q 12/31/08 10.19 1/22/09 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X * Indicates a management compensatory plan or arrangement PAGE 87 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 29 , 2009 . M ICROSOFT , on July 29 , 2009 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 29 , 2009 . Signature Title indicated on July 29 , 2009 . Signature Title /s/ W Principal Accounting Officer ) PAGE 88 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-10-171791/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-10-171791/full-submission.txt new file mode 100644 index 0000000..c0d691d --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-10-171791/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2010 OR ¨ TRANSITION Year Ended June 30 , 2010 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2009 , the aggregate As of December 31 , 2009 , the aggregate market value of the registrant wa $ 235,244,858,633 based on the closing sale System . As of July 20 , 2010 , there were As of July 20 , 2010 , there were 8,653,567,331 share , 2010 , there were 8,653,567,331 share of common stock outstanding to be held on November 16 , 2010 are incorporated by held on November 16 , 2010 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2010 INDEX Page PART Year Ended June 30 , 2010 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 13 Item 1A . Risk Factors of the Registrant 13 Item 1A . Risk Factors 15 Item Item 1A . Risk Factors 15 Item 1B . Unresolved Staff . Risk Factors 15 Item 1B . Unresolved Staff Comments 20 1B . Unresolved Staff Comments 20 Item 2 . Properties 20 Unresolved Staff Comments 20 Item 2 . Properties 20 Item 3 20 Item 2 . Properties 20 Item 3 . Legal Proceedings 2 . Properties 20 Item 3 . Legal Proceedings 21 PART Item 3 . Legal Proceedings 21 PART II Item 5 . Proceedings 21 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 21 6 . Selected Financial Data 21 Item 7 . Management ’ Selected Financial Data 21 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 43 Item 8 . Financial Statements about Market Risk 43 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 44 Item 9 . Changes in and Supplementary Data 44 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 85 Item 9A . Controls and and Financial Disclosure 85 Item 9A . Controls and Procedures 85 9A . Controls and Procedures 85 Report of Management on Internal Internal Control over Financial Reporting 85 Report of Independent Registered Public Independent Registered Public Accounting Firm 86 Item 9B . Other Information Public Accounting Firm 86 Item 9B . Other Information 87 PART Item 9B . Other Information 87 PART III Item 10 . Information 87 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 87 Item 11 . Executive Compensation and Corporate Governance 87 Item 11 . Executive Compensation 87 Item Item 11 . Executive Compensation 87 Item 12 . Security Ownership . Executive Compensation 87 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 87 Item 13 . Certain Relationships Related Stockholder Matters 87 Item 13 . Certain Relationships and Related Transactions , and Director Independence 87 Item 14 . Principal Accounting and Director Independence 87 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 87 PART IV Item 15 . Services 87 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 88 Signatures 91 2 Table of Financial Statement Schedules 88 Signatures 91 2 Table of Contents PART Statement Schedules 88 Signatures 91 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear to Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our mission is the company wa founded in 1975 , we have worked to have office in more than 100 country . We generate revenue sell hardware including the Xbox 360 gaming and entertainment console and , and content access . 3 Table of Contents PART I of Contents PART I Item 1 Our current cloud-based service for distribution channel account for approximately 80 % of total Windows Division Windows operating system : Windows 7 , including Home Basic , application and web service . 4 Table of Contents PART I of Contents PART I Item 1 Competition The Windows operating system product and service . Approximately 50 % of Server and Tools volume licensing agreement , approximately 30 % is purchased through transactional Novell and Red Hat . 5 Table of Contents PART I of Contents PART I Item 1 We have entered into business future . During fiscal year 2010 , we launched new release In addition , on December 4 , 2009 , we entered , on December 4 , 2009 , we entered into a believe that we can compete 6 Table of Contents PART I of Contents PART I Item 1 effectively by attracting new user offering , which generate over 90 % of MBD revenue , of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is . Web-based offering such a 37Signals , Adobe , AjaxWrite , our customer already have . 7 Table of Contents PART I of Contents PART I Item 1 Entertainment and Devices Division The and marketing : the Xbox 360 platform , including the Xbox platform , including the Xbox 360 gaming and entertainment console and Products and Services : Xbox 360 console and game ; Xbox entertainment console average five to 10 year . We released Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We think the Xbox 360 is positioned well against competitive information is contained in Note 22 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 8 Table of this Form 10-K ) . 8 Table of Contents PART I of Contents PART I Item 1 OPERATIONS To serve the need our manufacturing activity for Xbox 360 and related game , Zune limited source . Our Xbox 360 console includes certain key component initially source these key Xbox 360 component from a single supplier AND DEVELOPMENT During fiscal year 2010 , 2009 , and 2008 During fiscal year 2010 , 2009 , and 2008 , research 2010 , 2009 , and 2008 , research and development expense and development expense wa $ 8.7 billion , $ 9.0 billion $ 8.7 billion , $ 9.0 billion , and $ 8.2 9.0 billion , and $ 8.2 billion , respectively . These respectively . These amount represented 14 % , 15 % , amount represented 14 % , 15 % , and 14 % , 15 % , and 14 % , respectively , of advertising ; and device . 9 Table of Contents PART I of Contents PART I Item 1 Increasingly , we are taking product and service including Xbox 360 , Xbox LIVE , Windows seen in product like Windows 7 , the Microsoft Auto software platform and Kinect for Xbox 360 . We believe sensory input scientific research and discovery . 10 Table of Contents PART I of Contents PART I Item 1 Intelligent computing As computing power primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , these program to future version of software 11 Table of Contents PART I of Contents PART I Item 1 product over a specified time medium-to-large organization ( greater than 250 license ) , this program large organization ( greater than 250 license ) that want to customer accounted for more than 10 % of fiscal year 2010 10 % of fiscal year 2010 , 2009 , or 2008 of fiscal year 2010 , 2009 , or 2008 revenue . 2010 , 2009 , or 2008 revenue . Our practice is backlog is not significant . 12 Table of Contents PART I of Contents PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 30 , 2010 were a follows a of July 30 , 2010 were a follows : Name the Company Steven A. Ballmer 54 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 50 Senior Vice President , Human Human Resources Stephen A. Elop 46 President , Microsoft Business Division Business Division Peter S. Klein 47 Chief Financial Officer Robert L. Financial Officer Robert L. Muglia 50 President , Server and Tools and Tools Craig J. Mundie 61 Chief Research and Strategy Officer and Strategy Officer Steven Sinofsky 44 President , Windows & Windows Live Division Bradford L. Smith 51 Senior Vice President ; General ; Secretary B. Kevin Turner 45 Chief Operating Officer Mr. Ballmer Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . Mr. Ballmer joined Microsoft Mr. Ballmer joined Microsoft in 1980 . Ms. Brummel wa named , Human Resources in December 2005 . She had been Corporate , Human Resources since May 2005 . From May 2000 to May 2005 . From May 2000 to May 2005 , she From May 2000 to May 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Microsoft Business Division in January 2008 . Prior to joining the Networks , Inc. from January 2007 to January 2008 . From from January 2007 to January 2008 . From December 2005 to January 2008 . From December 2005 to December 2006 , he From December 2005 to December 2006 , he served a President Elop joined Adobe following the 2005 acquisition of Macromedia Inc. , Chief Executive Officer from January 2005 to December 2005 . During from January 2005 to December 2005 . During his almost eight-year Chief Financial Officer in November 2009 . He served a Corporate Microsoft Business Division since February 2006 and Chief Financial Officer of Tools Business Group from July 2003 to February 2006 . Mr. from July 2003 to February 2006 . Mr. Klein joined Microsoft Mr. Klein joined Microsoft in 2002 . Mr. Muglia wa named Server and Tools in January 2009 . He had been Senior Server and Tools since October 2005 . Before holding that position Enterprise Storage Division since November 2001 , Group Vice President , Personal Services Group since August 2000 , Group Vice President , , Business Productivity since December 1999 , Senior Vice President , , Business Productivity since March 1999 , Senior Vice President , Applications and Tools since February 1998 , and Corporate Vice President President , Server Applications since 1997 . Mr. Muglia joined Microsoft Mr. Muglia joined Microsoft in 1988 . Mr. Mundie wa named and Strategy Officer in June 2006 . He had been Senior Strategies and Policy since August 2001 . He wa named Senior , Consumer Platforms in February 1996 . Mr. Mundie joined Microsoft Mr. Mundie joined Microsoft in 1992 . Mr. Sinofsky wa named Windows Live Division in July 2009 . He served a Senior Live Engineering Group since December 2006 and Senior Vice President , President , Office from December 1999 to December 2006 . He from December 1999 to December 2006 . He had been Vice President , Office since December 1998 . Mr. Sinofsky joined the joined the Office team in 1994 , increasing his responsibility with Mr. Sinofsky joined Microsoft in 1989 . 13 Table of Contents joined Microsoft in 1989 . 13 Table of Contents PART I of Contents PART I Item 1 Mr. Smith wa named Senior , and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Club division . From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it . EMPLOYEES As of June 30 , 2010 , we employed As of June 30 , 2010 , we employed approximately 89,000 2010 , we employed approximately 89,000 people on a full-time basis on a full-time basis , 54,000 in the United States and in the United States and 35,000 internationally . Of the total . Of the total , 35,000 were in product research and product research and development , 25,000 in sale and marketing , in sale and marketing , 15,000 in product support and consulting support and consulting service , 5,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to furnish to the SEC . 14 Table of Contents PART I of Contents PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation range in size from Fortune 100 company to small , specialized little or no cost in 15 Table of Contents PART I of Contents PART I Item 1A connection with our interoperability initiative to reduce or delay future 16 Table of Contents PART I of Contents PART I Item 1A purchase , or to use U.S. Department of Justice , 18 state , and the District Decree that took effect in 2001 and a Final Judgment entered a Final Judgment entered in 2002 . These proceeding imposed various to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a sale of our product . 17 Table of Contents PART I of Contents PART I Item 1A Government regulatory action and court Microsoft Office system , Xbox 360 , Bing , Windows Server affected . Our product distribution 18 Table of Contents PART I of Contents PART I Item 1A system also relies on an product such a the Xbox 360 console are highly complex and cost of revenue . Xbox 360 console are assembled in Asia . We operate in over 100 country and a significant part other country . Operations outside 19 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 the PART I Item 1A , 1B , 2 the United States Item 1A , 1B , 2 the United States may be or financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2010 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office owned space situated on approximately 500 acre of land we own Development ” section of Item 1 of this Form 10-K. 20 Item 1 of this Form 10-K. 20 Table of Contents PART 1 of this Form 10-K. 20 Table of Contents PART I PART I , II Item 2 , 3 , 5 , , II Item 2 , 3 , 5 , 6 Our Item 2 , 3 , 5 , 6 Our facility are , 3 , 5 , 6 Our facility are fully used we may currently develop approximately 1.6 million square foot of additional In addition , we own 63 acre of undeveloped land in of office space . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal involved . PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 20 , 2010 , there were . On July 20 , 2010 , there were 138,568 registered , 2010 , there were 138,568 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2010 30 Fiscal Year Fiscal Year 2010 High $ 26.25 $ 31.50 Fiscal Year 2010 High $ 26.25 $ 31.50 $ 31.24 $ 2010 High $ 26.25 $ 31.50 $ 31.24 $ 31.58 $ $ 26.25 $ 31.50 $ 31.24 $ 31.58 $ 31.58 Low $ 31.50 $ 31.24 $ 31.58 $ 31.58 Low $ 22.00 $ 31.24 $ 31.58 $ 31.58 Low $ 22.00 $ 24.43 31.58 $ 31.58 Low $ 22.00 $ 24.43 $ 27.57 $ 31.58 Low $ 22.00 $ 24.43 $ 27.57 $ 22.95 $ $ 22.00 $ 24.43 $ 27.57 $ 22.95 $ 22.00 Fiscal $ 24.43 $ 27.57 $ 22.95 $ 22.00 Fiscal Year 2009 $ 27.57 $ 22.95 $ 22.00 Fiscal Year 2009 High $ 22.95 $ 22.00 Fiscal Year 2009 High $ 28.50 $ 27.47 Fiscal Year 2009 High $ 28.50 $ 27.47 $ 21.00 $ 2009 High $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ $ 28.50 $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 27.47 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 21.00 $ 24.34 $ 28.50 Low $ 23.50 $ 17.50 24.34 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 28.50 Low $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ $ 23.50 $ 17.50 $ 14.87 $ 18.18 $ 14.87 DIVIDENDS $ 17.50 $ 14.87 $ 18.18 $ 14.87 DIVIDENDS AND SHARE $ 14.87 $ 18.18 $ 14.87 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend and share repurchase . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2010 2009 2008 2007 Year Ended June 30 , 2010 2009 2008 2007 2006 Revenue Ended June 30 , 2010 2009 2008 2007 2006 Revenue $ June 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 30 , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ , 2010 2009 2008 2007 2006 Revenue $ 62,484 $ 58,437 2008 2007 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 2006 Revenue $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ $ 62,484 $ 58,437 $ 60,420 $ 51,122 $ 44,282 Operating $ 58,437 $ 60,420 $ 51,122 $ 44,282 Operating income $ $ 60,420 $ 51,122 $ 44,282 Operating income $ 24,098 $ $ 44,282 Operating income $ 24,098 $ 20,363 $ 22,271 ( Operating income $ 24,098 $ 20,363 $ 22,271 ( c ) $ 24,098 $ 20,363 $ 22,271 ( c ) $ 18,438 22,271 ( c ) $ 18,438 $ 16,380 Net income $ c ) $ 18,438 $ 16,380 Net income $ 18,760 $ $ 16,380 Net income $ 18,760 $ 14,569 $ 17,681 ( Net income $ 18,760 $ 14,569 $ 17,681 ( c ) $ 18,760 $ 14,569 $ 17,681 ( c ) $ 14,065 17,681 ( c ) $ 14,065 $ 12,599 Diluted earnings per c ) $ 14,065 $ 12,599 Diluted earnings per share $ Diluted earnings per share $ 2.10 $ 1.62 $ 1.87 $ per share $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ $ 2.10 $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash $ 1.62 $ 1.87 $ 1.42 $ 1.20 Cash dividend declared $ 1.87 $ 1.42 $ 1.20 Cash dividend declared per share dividend declared per share $ 0.52 $ 0.52 $ 0.44 $ per share $ 0.52 $ 0.52 $ 0.44 $ 0.40 $ $ 0.52 $ 0.52 $ 0.44 $ 0.40 $ 0.35 Cash $ 0.52 $ 0.44 $ 0.40 $ 0.35 Cash and cash $ 0.44 $ 0.40 $ 0.35 Cash and cash equivalent and equivalent and short-term investment $ 36,788 $ 31,447 $ 23,662 $ short-term investment $ 36,788 $ 31,447 $ 23,662 $ 23,411 $ $ 36,788 $ 31,447 $ 23,662 $ 23,411 $ 34,161 Total $ 31,447 $ 23,662 $ 23,411 $ 34,161 Total asset $ $ 23,662 $ 23,411 $ 34,161 Total asset $ 86,113 $ $ 34,161 Total asset $ 86,113 $ 77,888 $ 72,793 $ Total asset $ 86,113 $ 77,888 $ 72,793 $ 63,171 $ $ 86,113 $ 77,888 $ 72,793 $ 63,171 $ 69,597 Long-term $ 77,888 $ 72,793 $ 63,171 $ 69,597 Long-term obligation $ $ 72,793 $ 63,171 $ 69,597 Long-term obligation $ 13,791 ( $ 69,597 Long-term obligation $ 13,791 ( a ) $ 11,296 13,791 ( a ) $ 11,296 ( b ) $ 6,621 11,296 ( b ) $ 6,621 $ 8,320 $ 7,051 Stockholders b ) $ 6,621 $ 8,320 $ 7,051 Stockholders ’ equity $ 6,621 $ 8,320 $ 7,051 Stockholders ’ equity $ 46,175 7,051 Stockholders ’ equity $ 46,175 $ 39,558 $ 36,286 $ ’ equity $ 46,175 $ 39,558 $ 36,286 $ 31,097 $ $ 46,175 $ 39,558 $ 36,286 $ 31,097 $ 40,104 ( $ 39,558 $ 36,286 $ 31,097 $ 40,104 ( a ) $ 36,286 $ 31,097 $ 40,104 ( a ) Includes $ ( a ) Includes $ 1.25 billion of convertible debt security debt security issued in June 2010 and $ 3.75 billion of in June 2010 and $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 – May 2009 . See Note 12 – Debt in the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) ( b ) Includes $ 3.75 billion of debt security issued debt security issued in May 2009 . See Note 12 – May 2009 . See Note 12 – Debt in the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) ) Includes charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . 21 Table of Contents Commission in February 2008 . 21 Table of Contents PART II of Contents PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION hardware , including the Xbox 360 gaming and entertainment console and Devices Division ha generated approximately 40 % of it annual segment to eligible sale of the 2007 Microsoft Office system with a to be upgraded to the 2010 Microsoft Office system at minimal cost ( the “ Office 2010 Deferral ” ) and sale to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the “ Windows 7 Deferral ” ) . Global our business in fiscal year 2009 a consumer and business cut investment . During fiscal year 2010 , the environment began to likely to remain so into 2011 . Irrespective of global economic total cost of ownership . 22 Table of Contents PART II of Contents PART II Item 7 In addition , we continue Our focus in fiscal year 2011 is to build on this of Results for Fiscal Years 2010 , 2009 , and 2008 for Fiscal Years 2010 , 2009 , and 2008 ( In 2010 , 2009 , and 2008 ( In million , except and per share amount ) 2010 2009 2008 Percentage Change 2010 per share amount ) 2010 2009 2008 Percentage Change 2010 Versus share amount ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 62,484 2009 Percentage Change 2009 Versus 2008 Revenue $ 62,484 $ 58,437 2009 Versus 2008 Revenue $ 62,484 $ 58,437 $ 60,420 7 2008 Revenue $ 62,484 $ 58,437 $ 60,420 7 % ( $ 62,484 $ 58,437 $ 60,420 7 % ( 3 ) 62,484 $ 58,437 $ 60,420 7 % ( 3 ) % $ 60,420 7 % ( 3 ) % Operating income $ ) % Operating income $ 24,098 $ 20,363 $ 22,271 18 Operating income $ 24,098 $ 20,363 $ 22,271 18 % ( $ 24,098 $ 20,363 $ 22,271 18 % ( 9 ) 24,098 $ 20,363 $ 22,271 18 % ( 9 ) % $ 22,271 18 % ( 9 ) % Diluted earnings per Diluted earnings per share $ 2.10 $ 1.62 $ 1.87 30 per share $ 2.10 $ 1.62 $ 1.87 30 % ( $ 2.10 $ 1.62 $ 1.87 30 % ( 13 ) 2.10 $ 1.62 $ 1.87 30 % ( 13 ) % $ 1.87 30 % ( 13 ) % Fiscal year 2010 13 ) % Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Revenue increased mainly due to to strong sale of Windows 7 , which wa released during wa released during fiscal year 2010 , and PC market improvement and marketing expense increased $ 335 million or 3 % , increased $ 335 million or 3 % , primarily reflecting increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . • General and administrative and administrative expense increased $ 304 million or 8 % due increased $ 304 million or 8 % due mainly to increased Cost of revenue increased $ 240 million or 2 % , increased $ 240 million or 2 % , primarily reflecting increased in part by decreased Xbox 360 console cost and reduction in and development expense decreased $ 296 million or 3 % , decreased $ 296 million or 3 % , primarily reflecting a income and the repurchase of 380 million share during fiscal year million share during fiscal year 2010 . Fiscal year 2009 compared year 2010 . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Revenue declined across most segment line of business including Xbox 360 platform and PC game revenue price reduction during the prior 12 month , partially offset by and Xbox LIVE revenue . 23 Table of Contents PART II of Contents PART II Item 7 The above decline were partially a favorable impact of $ 486 million on revenue . Operating and administrative expense decreased $ 1.4 billion or 28 % , decreased $ 1.4 billion or 28 % , primarily due to contingency . We incurred $ 283 million of legal charge during the twelve month ended June 30 , 2009 a compared to month ended June 30 , 2009 a compared to $ 1.8 2009 a compared to $ 1.8 billion during the twelve month the twelve month ended June 30 , 2008 . The prior month ended June 30 , 2008 . The prior year cost European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . • Sales and marketing expense decreased $ 381 million or 3 % , decreased $ 381 million or 3 % , primarily driven by Headcount-related expense , excluding $ 330 million of employee severance charge employee severance charge , increased 7 % , driven by a % , driven by a 2 % increase in headcount during in headcount during the past 12 month and an increase in Cost of revenue increased $ 557 million or 5 % , increased $ 557 million or 5 % , primarily reflecting increased partially offset by decreased Xbox 360 platform cost . In January platform cost . In January 2009 , we announced and implemented the elimination of up to 5,000 position in research and development and information technology by June 30 , 2010 . During fiscal technology by June 30 , 2010 . During fiscal year 2009 2010 . During fiscal year 2009 , we recorded employee severance employee severance charge of $ 330 million for the expected reduction share repurchase during the prior 12 month . We repurchased 318 12 month . We repurchased 318 million share during fiscal year million share during fiscal year 2009 . SEGMENT PRODUCT REVENUE/OPERATING INCOME Segment information appearing in Note 22 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a second quarter of fiscal year 2010 . Windows & Windows Live million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,491 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,491 $ 14,974 2009 Versus 2008 Revenue $ 18,491 $ 14,974 $ 17,211 23 2008 Revenue $ 18,491 $ 14,974 $ 17,211 23 % ( $ 18,491 $ 14,974 $ 17,211 23 % ( 13 ) 18,491 $ 14,974 $ 17,211 23 % ( 13 ) % $ 17,211 23 % ( 13 ) % Operating income $ ) % Operating income $ 12,977 $ 9,982 $ 12,422 30 Operating income $ 12,977 $ 9,982 $ 12,422 30 % ( $ 12,977 $ 9,982 $ 12,422 30 % ( 20 ) 12,977 $ 9,982 $ 12,422 30 % ( 20 ) % $ 12,422 30 % ( 20 ) % 24 Table of % ( 20 ) % 24 Table of Contents PART II of Contents PART II Item 7 Windows & Windows Live Division . Premium edition include Windows 7 Home Premium , Windows 7 7 Home Premium , Windows 7 Professional , Windows 7 Ultimate Windows 7 Professional , Windows 7 Ultimate , Windows 7 Enterprise Windows 7 Ultimate , Windows 7 Enterprise , Windows Vista Business . Standard edition include Windows 7 Starter , Windows 7 Home Windows 7 Starter , Windows 7 Home Basic , Windows Vista OEM channel account for approximately 80 % of total Windows Division revenue . The remaining approximately 20 % of Windows Division revenue Windows Live . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Windows Division revenue increased primarily of strong sale of Windows 7 and PC market improvement . from all source grew approximately 16 % to 18 % . grew approximately 16 % to 18 % . OEM revenue increased . OEM revenue increased $ 2.6 billion or 22 % , increased $ 2.6 billion or 22 % , while OEM license while OEM license unit increased 21 % . The OEM revenue business PCs . Fiscal year 2009 OEM revenue reflects a $ OEM revenue reflects a $ 273 million Windows 7 Deferral , a $ 273 million Windows 7 Deferral , a discussed under subsequently recognized in fiscal year 2010 . Other revenue increased $ . Other revenue increased $ 912 million or 29 % driven increased $ 912 million or 29 % driven primarily by Windows % driven primarily by Windows 7 retail sale . Windows Division Cost of revenue increased $ 296 million or 22 % , increased $ 296 million or 22 % , primarily driven by and marketing expense increased $ 256 million or 11 % reflecting increased $ 256 million or 11 % reflecting increased advertising and advertising and marketing of Windows 7 . Fiscal year 2009 compared Windows 7 . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Windows Division revenue decreased primarily . OEM revenue decreased $ 2.3 billion or 16 % while decreased $ 2.3 billion or 16 % while OEM license unit while OEM license unit declined 2 % . Based on our experienced a decline of approximately 1 % to growth of approximately % to growth of approximately 2 % , driven by change and marketing expense increased $ 100 million or 5 % , increased $ 100 million or 5 % , primarily reflecting increased million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 14,866 2009 Percentage Change 2009 Versus 2008 Revenue $ 14,866 $ 14,191 2009 Versus 2008 Revenue $ 14,866 $ 14,191 $ 13,195 5 2008 Revenue $ 14,866 $ 14,191 $ 13,195 5 % 8 $ 14,866 $ 14,191 $ 13,195 5 % 8 % Operating 14,866 $ 14,191 $ 13,195 5 % 8 % Operating income 14,191 $ 13,195 5 % 8 % Operating income $ 5,491 8 % Operating income $ 5,491 $ 4,803 $ 4,149 14 Operating income $ 5,491 $ 4,803 $ 4,149 14 % 16 $ 5,491 $ 4,803 $ 4,149 14 % 16 % Server 5,491 $ 4,803 $ 4,149 14 % 16 % Server and 4,803 $ 4,149 14 % 16 % Server and Tools license SQL Server , Windows Azure 25 Table of Contents PART II of Contents PART II Item 7 and other cloud and server to end customer . Approximately 50 % of Server and Tools volume licensing agreement , approximately 30 % is purchased through transactional Enterprise Services . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Server and Tools revenue increased . Product revenue increased $ 652 million or 6 % , increased $ 652 million or 6 % , driven primarily by and development expense decreased $ 38 million or 2 % , decreased $ 38 million or 2 % , primarily driven by Cost of revenue increased $ 25 million . Fiscal year 2009 25 million . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Server and Tools revenue increased . Product revenue increased $ 741 million or 7 % , increased $ 741 million or 7 % , primarily driven by Enterprise Services revenue increased $ 255 million or 10 % , increased $ 255 million or 10 % , primarily due to currency exchange impact of $ 140 million . Server and Tools and development expense increased $ 242 million or 12 % , increased $ 242 million or 12 % , primarily driven by Cost of revenue increased $ 82 million or 3 % , increased $ 82 million or 3 % , reflecting the growth million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 2,199 2009 Percentage Change 2009 Versus 2008 Revenue $ 2,199 $ 2,121 2009 Versus 2008 Revenue $ 2,199 $ 2,121 $ 2,198 4 2008 Revenue $ 2,199 $ 2,121 $ 2,198 4 % ( $ 2,199 $ 2,121 $ 2,198 4 % ( 4 ) 2,199 $ 2,121 $ 2,198 4 % ( 4 ) % $ 2,198 4 % ( 4 ) % Operating loss $ % Operating loss $ ( 2,355 ) $ ( 1,652 ) ( 2,355 ) $ ( 1,652 ) $ ( 578 ) ( 1,652 ) $ ( 578 ) ( 43 ) % $ ( 578 ) ( 43 ) % ( 186 ) ( 43 ) % ( 186 ) % Online Services Division ! Commercial Agreement On December 4 , 2009 , we entered Agreement On December 4 , 2009 , we entered into a through greater scale in search 26 Table of Contents PART II of Contents PART II Item 7 query and an expanded and advertising marketplace . See Note 16 – Commitments and Guarantees in ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for additional information about the agreement . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 OSD revenue increased reflecting increased Online advertising revenue increased $ 146 million or 8 % to increased $ 146 million or 8 % to $ 1.9 billion or 8 % to $ 1.9 billion , reflecting higher search . Access revenue decreased $ 57 million or 31 % , decreased $ 57 million or 31 % , reflecting continued migration Cost of revenue increased $ 565 million , primarily driven by and administrative expense increased $ 136 million . Sales and marketing and marketing expense increased $ 56 million or 5 % due increased $ 56 million or 5 % due mainly to increased headcount-related expense . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 OSD revenue decreased primarily a . Access revenue decreased $ 72 million or 28 % , decreased $ 72 million or 28 % , reflecting continued migration Online advertising revenue increased $ 6 million to $ 1.8 billion $ 6 million to $ 1.8 billion , reflecting an increase currency exchange impact of $ 28 million . OSD operating loss Cost of revenue increased $ 700 million or 82 % , increased $ 700 million or 82 % , primarily driven by and development expense increased $ 153 million or 17 % , increased $ 153 million or 17 % , primarily due to million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,642 2009 Percentage Change 2009 Versus 2008 Revenue $ 18,642 $ 18,910 2009 Versus 2008 Revenue $ 18,642 $ 18,910 $ 18,899 ( 2008 Revenue $ 18,642 $ 18,910 $ 18,899 ( 1 ) $ 18,642 $ 18,910 $ 18,899 ( 1 ) % 0 $ 18,910 $ 18,899 ( 1 ) % 0 % Operating 18,899 ( 1 ) % 0 % Operating income $ 11,776 0 % Operating income $ 11,776 $ 11,664 $ 11,859 1 Operating income $ 11,776 $ 11,664 $ 11,859 1 % ( $ 11,776 $ 11,664 $ 11,859 1 % ( 2 ) 11,776 $ 11,664 $ 11,859 1 % ( 2 ) % $ 11,859 1 % ( 2 ) % Microsoft Business Division Office system offering generate over 90 % of MBD revenue . sale and OEM revenue . 27 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 MBD revenue decreased primarily a the net deferral of $ 254 million of revenue related to to eligible sale of the 2007 Microsoft Office system with a to be upgraded to the 2010 Microsoft Office system at minimal cost ( the “ Office 2010 Deferral ” ) . Consumer . Consumer revenue decreased $ 166 million or 5 % , decreased $ 166 million or 5 % , primarily due to primarily due to the Office 2010 Deferral , offset in part market and sale of the 2010 Microsoft Office system , which . Business revenue decreased $ 102 million or 1 % , decreased $ 102 million or 1 % , primarily reflecting a decline in licensing of the 2007 Microsoft Office system to transactional revenue and licensing of the 2010 Microsoft Office system to transactional and marketing expense decreased $ 266 million or 6 % , decreased $ 266 million or 6 % , primarily driven by and development expense decreased $ 187 million or 11 % , decreased $ 187 million or 11 % , primarily a a and administrative expense decreased $ 53 million or 18 % primarily decreased $ 53 million or 18 % primarily due to expense in part by a $ 126 million or 11 % increase a $ 126 million or 11 % increase in cost of providing service . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 MBD revenue wa flat reflecting . Business revenue increased $ 458 million or 3 % , increased $ 458 million or 3 % , primarily reflecting growth agreement revenue and included a 7 % decrease in Microsoft Dynamics . Consumer revenue decreased $ 447 million or 12 % , decreased $ 447 million or 12 % , primarily a a and pricing promotion on the 2007 Microsoft Office system . MBD currency exchange impact of $ 378 million . MBD operating income Cost of revenue increased $ 134 million or 14 % primarily increased $ 134 million or 14 % primarily driven by expense which we acquired in April 2008 , a well a online and development expense increased $ 118 million or 8 % , increased $ 118 million or 8 % , primarily driven by and marketing expense decreased $ 79 million or 2 % , decreased $ 79 million or 2 % , primarily driven by million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Revenue $ 8,058 2009 Percentage Change 2009 Versus 2008 Revenue $ 8,058 $ 8,035 2009 Versus 2008 Revenue $ 8,058 $ 8,035 $ 8,495 0 2008 Revenue $ 8,058 $ 8,035 $ 8,495 0 % ( $ 8,058 $ 8,035 $ 8,495 0 % ( 5 ) 8,058 $ 8,035 $ 8,495 0 % ( 5 ) % $ 8,495 0 % ( 5 ) % Operating income $ ) % Operating income $ 679 $ 108 $ 445 529 Operating income $ 679 $ 108 $ 445 529 % ( $ 679 $ 108 $ 445 529 % ( 76 ) 679 $ 108 $ 445 529 % ( 76 ) % $ 445 529 % ( 76 ) % Entertainment and Devices ) offering include the Xbox 360 platform ( which includes the ( which includes the Xbox 360 gaming and entertainment console , and entertainment console , Xbox 360 video game , Xbox LIVE Xbox LIVE , and Xbox 360 accessory ) , the Zune and Windows operating system . 28 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 EDD revenue wa nearly flat by decreased revenue from Xbox 360 platform and PC game . . Non-gaming revenue increased $ 35 million or 1 % primarily increased $ 35 million or 1 % primarily reflecting increased sale Windows Phone revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 12 million , primarily reflecting a reflecting a reduction in Xbox 360 console sold and revenue per LIVE revenue . We shipped 10.3 million Xbox 360 console during We shipped 10.3 million Xbox 360 console during the fiscal year console during the fiscal year 2010 , compared with 11.2 million year 2010 , compared with 11.2 million Xbox 360 console during compared with 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 . EDD operating income increased Cost of revenue decreased $ 528 million or 11 % , decreased $ 528 million or 11 % , primarily due to primarily due to lower Xbox 360 console cost , offset in and development expense decreased $ 34 million or 2 % , decreased $ 34 million or 2 % , primarily reflecting decreased programming cost . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 EDD revenue decreased across most our non-gaming business decreased $ 300 million or 11 % , decreased $ 300 million or 11 % , primarily reflecting decreased hardware product revenue . Xbox 360 platform and PC game revenue PC game revenue decreased $ 160 million or 3 % , decreased $ 160 million or 3 % , primarily a a of decreased revenue per Xbox 360 console due to price reduction price reduction during the past 12 month , partially offset by partially offset by increased Xbox 360 console sale and increased Xbox LIVE revenue . We shipped 11.2 million Xbox 360 console during We shipped 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 , compared with 8.7 million year 2009 , compared with 8.7 million Xbox 360 console during compared with 8.7 million Xbox 360 console during fiscal year 2008 360 console during fiscal year 2008 . EDD revenue included an currency exchange impact of $ 74 million . EDD operating income and development expense increased $ 275 million or 17 % , increased $ 275 million or 17 % , primarily reflecting increased Cost of revenue decreased $ 344 million or 7 % , decreased $ 344 million or 7 % , primarily due to primarily due to decreased Xbox 360 platform cost . Corporate-Level Activity million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Corporate-level activity $ 2009 Percentage Change 2009 Versus 2008 Corporate-level activity $ ( 4,470 2008 Corporate-level activity $ ( 4,470 ) $ ( 4,542 ) ( 4,470 ) $ ( 4,542 ) $ ( 6,026 ) ( 4,542 ) $ ( 6,026 ) 2 % 25 % ) $ ( 6,026 ) 2 % 25 % Certain corporate-level ( 6,026 ) 2 % 25 % Certain corporate-level activity is employee severance . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Corporate-level expense decreased due mainly employee severance charge of $ 330 million incurred in the prior Legal charge were approximately $ 533 million compared to $ 283 533 million compared to $ 283 million in the prior year in the prior year . 29 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Corporate-level expense decreased during fiscal expense decreased during fiscal year 2009 , primarily reflecting decreased general employee severance charge of $ 330 million . General and administrative and administrative expense decreased $ 1.4 billion or 36 % , decreased $ 1.4 billion or 36 % , primarily due to contingency . We incurred $ 283 million of legal charge during legal charge during fiscal year 2009 a compared to $ 1.8 2009 a compared to $ 1.8 billion during fiscal year 2008 1.8 billion during fiscal year 2008 . The prior year cost European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . Sales and and marketing expense decreased $ 513 million or 82 % , decreased $ 513 million or 82 % , reflecting the resource management program implemented in January 2009 . OPERATING EXPENSES Cost of million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Cost of revenue 2009 Percentage Change 2009 Versus 2008 Cost of revenue $ 12,395 2008 Cost of revenue $ 12,395 $ 12,155 $ 11,598 2 of revenue $ 12,395 $ 12,155 $ 11,598 2 % 5 $ 12,395 $ 12,155 $ 11,598 2 % 5 % As 12,395 $ 12,155 $ 11,598 2 % 5 % As a 12,155 $ 11,598 2 % 5 % As a percent of As a percent of revenue 20 % 21 % 19 % percent of revenue 20 % 21 % 19 % ( 1 revenue 20 % 21 % 19 % ( 1 ) ppt 21 % 19 % ( 1 ) ppt 2ppt Cost of % ( 1 ) ppt 2ppt Cost of revenue includes : development cost . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Cost of revenue increased reflecting in part by lower Xbox 360 console cost and reduction in management effort . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Cost of revenue increased during revenue increased during fiscal year 2009 , primarily reflecting increased online partially offset by decreased Xbox 360 platform cost . Research and million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Research and development 2009 Percentage Change 2009 Versus 2008 Research and development $ 8,714 2008 Research and development $ 8,714 $ 9,010 $ 8,164 ( and development $ 8,714 $ 9,010 $ 8,164 ( 3 ) $ 8,714 $ 9,010 $ 8,164 ( 3 ) % 10 $ 9,010 $ 8,164 ( 3 ) % 10 % As 8,164 ( 3 ) % 10 % As a percent of As a percent of revenue 14 % 15 % 14 % percent of revenue 14 % 15 % 14 % ( 1 revenue 14 % 15 % 14 % ( 1 ) ppt 15 % 14 % ( 1 ) ppt 1ppt Research and % ( 1 ) ppt 1ppt Research and development expense include code and service content . 30 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Research and development expense decreased development cost related to Windows 7 product development in the prior prior year . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Research and development expense increased expense increased during fiscal year 2009 , primarily reflecting a 13 2009 , primarily reflecting a 13 % increase in headcount-related cost million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Sales and marketing 2009 Percentage Change 2009 Versus 2008 Sales and marketing $ 13,214 2008 Sales and marketing $ 13,214 $ 12,879 $ 13,260 3 and marketing $ 13,214 $ 12,879 $ 13,260 3 % ( $ 13,214 $ 12,879 $ 13,260 3 % ( 3 ) 13,214 $ 12,879 $ 13,260 3 % ( 3 ) % $ 13,260 3 % ( 3 ) % As a percent As a percent of revenue 21 % 22 % 22 % percent of revenue 21 % 22 % 22 % ( 1 revenue 21 % 22 % 22 % ( 1 ) ppt 22 % 22 % ( 1 ) ppt 0ppt Sales and % ( 1 ) ppt 0ppt Sales and marketing expense include other program . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Sales and marketing expense increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . Fiscal year 2009 compared Windows 7 . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Sales and marketing expense decreased management program implemented in January 2009 . General and Administrative ( million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 General and administrative 2009 Percentage Change 2009 Versus 2008 General and administrative $ 4,004 2008 General and administrative $ 4,004 $ 3,700 $ 5,127 8 and administrative $ 4,004 $ 3,700 $ 5,127 8 % ( $ 4,004 $ 3,700 $ 5,127 8 % ( 28 ) 4,004 $ 3,700 $ 5,127 8 % ( 28 ) % $ 5,127 8 % ( 28 ) % As a percent As a percent of revenue 6 % 6 % 8 % percent of revenue 6 % 6 % 8 % 0ppt ( revenue 6 % 6 % 8 % 0ppt ( 2 ) % 6 % 8 % 0ppt ( 2 ) ppt General % 8 % 0ppt ( 2 ) ppt General and administrative administrative fee . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 General and administrative expense increased offset in part by a 6 % reduction in headcount-related expense reduction in headcount-related expense . 31 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 General and administrative expense decreased incurred legal charge of $ 283 million in fiscal year 2009 283 million in fiscal year 2009 , a compared with $ , a compared with $ 1.8 billion during fiscal year 2008 1.8 billion during fiscal year 2008 . The fiscal year 2008 2008 . The fiscal year 2008 legal cost were primarily related European Commission fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) . Employee Severance . Employee Severance In January 2009 , we announced and implemented this program in fiscal year 2010 , reducing our overall headcount our overall headcount by approximately 5,300 in various function , including technology . During fiscal year 2010 and 2009 , we recorded During fiscal year 2010 and 2009 , we recorded employee severance employee severance expense of $ 59 million and $ 330 million $ 59 million and $ 330 million , respectively . OTHER million , except percentage ) 2010 2009 2008 Percentage Change 2010 , except percentage ) 2010 2009 2008 Percentage Change 2010 Versus except percentage ) 2010 2009 2008 Percentage Change 2010 Versus 2009 2010 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 2008 Percentage Change 2010 Versus 2009 Percentage Change 2009 Versus 2008 2010 Versus 2009 Percentage Change 2009 Versus 2008 Dividends and interest 2009 Percentage Change 2009 Versus 2008 Dividends and interest income $ Dividends and interest income $ 843 $ 744 $ 994 13 interest income $ 843 $ 744 $ 994 13 % ( $ 843 $ 744 $ 994 13 % ( 25 ) 843 $ 744 $ 994 13 % ( 25 ) % $ 994 13 % ( 25 ) % Interest expense ( ) % Interest expense ( 151 ) ( 38 ) ( expense ( 151 ) ( 38 ) ( 106 ) ( ) ( 38 ) ( 106 ) ( 297 ) % ) ( 106 ) ( 297 ) % 64 % Net ) ( 297 ) % 64 % Net recognized gain ( ( loss ) on investment 348 ( 125 ) 346 * ) on investment 348 ( 125 ) 346 * * Net investment 348 ( 125 ) 346 * * Net gain ( loss ) on derivative ( 140 ) ( 558 ) 226 derivative ( 140 ) ( 558 ) 226 75 % * 140 ) ( 558 ) 226 75 % * Net gain ) ( 558 ) 226 75 % * Net gain ( ) on foreign currency remeasurements 1 ( 509 ) 226 * foreign currency remeasurements 1 ( 509 ) 226 * * Other remeasurements 1 ( 509 ) 226 * * Other 14 ( ) 226 * * Other 14 ( 56 ) ( 143 * * Other 14 ( 56 ) ( 143 ) * 14 ( 56 ) ( 143 ) * 61 % Total ) ( 143 ) * 61 % Total $ 915 $ * 61 % Total $ 915 $ ( 542 ) $ Total $ 915 $ ( 542 ) $ 1,543 * * $ ( 542 ) $ 1,543 * * * Not meaningful comprehensive income . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Dividends and interest income increased long term debt in May 2009 . Net recognized gain on . Other-than-temporary impairment were $ 69 million during fiscal year 2010 69 million during fiscal year 2010 , a compared with $ , a compared with $ 862 million during fiscal year 2009 862 million during fiscal year 2009 and decreased primarily due to were insignificant in fiscal year 2010 compared to net loss of to net loss of $ 509 million in the prior year year . For fiscal year 2010 , other includes a gain the divestiture of Razorfish . 32 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2009 compared with II Item 7 Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Dividends and interest income decreased Other-than- temporary impairment were $ 862 million during fiscal year 2009 862 million during fiscal year 2009 , a compared with $ , a compared with $ 312 million during fiscal year 2008 312 million during fiscal year 2008 and increased primarily due to rate derivative in fiscal year 2009 a compared with gain in half of the fiscal year 2009 . Income Taxes Fiscal year . Income Taxes Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Our effective tax rate in tax rate in fiscal year 2010 and 2009 were 25 % in fiscal year 2010 and 2009 were 25 % and 27 year 2010 and 2009 were 25 % and 27 % , 2009 were 25 % and 27 % , respectively . The respectively . The fiscal year 2010 rate reflects a higher mix lower rate . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Our effective tax rate in tax rate in fiscal year 2009 and 2008 were 27 % in fiscal year 2009 and 2008 were 27 % and 26 year 2009 and 2008 were 27 % and 26 % , 2008 were 27 % and 26 % , respectively . While . While the fiscal year 2009 rate reflects a higher mix year because the fiscal year 2008 rate reflects the resolution of IRS ” ) settling the 2000-2003 examination , partially offset by paid the IRS approximately $ 4.1 billion during fiscal year 2009 4.1 billion during fiscal year 2009 . FINANCIAL CONDITION Cash , and short-term investment totaled $ 36.8 billion a of June 30 36.8 billion a of June 30 , 2010 , compared with a of June 30 , 2010 , compared with $ 31.4 2010 , compared with $ 31.4 billion a of June 30 31.4 billion a of June 30 , 2009 . Equity and a of June 30 , 2009 . Equity and other investment and other investment were $ 7.8 billion a of June 30 7.8 billion a of June 30 , 2010 , compared with a of June 30 , 2010 , compared with $ 4.9 2010 , compared with $ 4.9 billion a of June 30 4.9 billion a of June 30 , 2009 . Our short-term a of June 30 , 2009 . Our short-term investment are methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note and agency security . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally labeled a Level 2 investment because the broker price . In addition , all 33 Table of Contents PART II of Contents PART II Item 7 of our broker-priced investment have our portfolio a of June 30 , 2010 doe not contain a of June 30 , 2010 doe not contain direct exposure residential mortgage and carry a 100 % principal and interest guarantee liability . Debt In September 2008 , our Board of Directors financing of up to $ 6.0 billion . As of June billion . As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.0 2010 , we had $ 6.0 billion of issued and outstanding outstanding debt comprised of $ 1.0 billion of commercial paper and of commercial paper and $ 5.0 billion of long-term debt including of long-term debt including $ 1.25 billion of convertible debt . Short-term Debt As of June 30 , 2010 , our $ As of June 30 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion of commercial paper issued including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 216 day . In and maturity of 22 to 216 day . In November 2009 216 day . In November 2009 , we replaced our $ , we replaced our $ 2.0 billion and $ 1.0 billion $ 2.0 billion and $ 1.0 billion credit facility with a credit facility with a $ 2.25 billion 364-day credit facility , with a $ 2.25 billion 364-day credit facility , which expires , which expires on November 5 , 2010 . This facility expires on November 5 , 2010 . This facility serf a paper program . In June 2010 , we reduced the size our credit facility from $ 2.25 billion to $ 1.0 billion $ 2.25 billion to $ 1.0 billion due to the reduction outstanding . As of June 30 , 2010 , we were As of June 30 , 2010 , we were in compliance Debt Notes As of June 30 , 2010 , we had As of June 30 , 2010 , we had issued and had issued and outstanding $ 3.75 billion of debt security a security a follows : $ 2.0 billion aggregate principal amount of billion aggregate principal amount of 2.95 % note due 2014 , of 2.95 % note due 2014 , $ 1.0 billion aggregate note due 2014 , $ 1.0 billion aggregate principal amount of billion aggregate principal amount of 4.20 % note due 2019 , of 4.20 % note due 2019 , and $ 750 million due 2019 , and $ 750 million aggregate principal amount of million aggregate principal amount of 5.20 % note due 2039 ( of 5.20 % note due 2039 ( collectively “ the Notes is payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year to holder record on the preceding May 15 and November 15 . The preceding May 15 and November 15 . The Notes are senior . Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee commercial paper , leaving $ 1.0 billion of commercial paper outstanding paper outstanding a of June 30 , 2010 . Each $ a of June 30 , 2010 . Each $ 1,000 principal , 2010 . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . 34 Table $ 33.40 per share . 34 Table of Contents PART II of Contents PART II Item 7 Prior to March 15 , Item 7 Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million , with the portion price initially equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and were charged to Revenue Unearned revenue at June 30 , 2010 comprised mainly unearned revenue at June 30 , 2010 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2010 also included payment revenue at June 30 , 2010 also included payment for : guarantee program , including the 2010 Microsoft Office technology guarantee program unearned revenue a of June 30 , 2010 : ( In a of June 30 , 2010 : ( In million ) Three Months Ending , September 30 , 2010 $ 5,150 December Ending , September 30 , 2010 $ 5,150 December 31 , September 30 , 2010 $ 5,150 December 31 , 2010 4,239 , 2010 $ 5,150 December 31 , 2010 4,239 March 31 $ 5,150 December 31 , 2010 4,239 March 31 , 2011 5,150 December 31 , 2010 4,239 March 31 , 2011 2,815 31 , 2010 4,239 March 31 , 2011 2,815 June 30 2010 4,239 March 31 , 2011 2,815 June 30 , 2011 4,239 March 31 , 2011 2,815 June 30 , 2011 1,448 31 , 2011 2,815 June 30 , 2011 1,448 Thereafter 1,178 2011 2,815 June 30 , 2011 1,448 Thereafter 1,178 Total $ 2,815 June 30 , 2011 1,448 Thereafter 1,178 Total $ 14,830 30 , 2011 1,448 Thereafter 1,178 Total $ 14,830 Cash Flows 1,448 Thereafter 1,178 Total $ 14,830 Cash Flows Fiscal year 2010 14,830 Cash Flows Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Cash flow from operation increased flow from operation increased $ 5.0 billion , primarily due to due to payment of $ 4.1 billion to the Internal Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used which wa offset in part 35 Table of Contents PART II of Contents PART II Item 7 by a $ 1.7 billion Item 7 by a $ 1.7 billion increase in cash received used for investing decreased $ 4.5 billion due to a $ billion due to a $ 3.3 billion decrease in cash used maturity along with a $ 1.1 billion decrease in addition to and equipment . Fiscal year 2009 compared with fiscal year 2008 2009 compared with fiscal year 2008 Cash flow from operation decreased flow from operation decreased $ 2.6 billion due to payment of to payment of approximately $ 4.1 billion to the IRS in with our settlement of the 2000-2003 audit examination . This impact offset by the fiscal year 2008 payment of the $ 1.4 2008 payment of the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) European Commission fine used for financing decreased $ 5.5 billion primarily due to $ billion primarily due to $ 5.7 billion of net cash proceeds long-term debt in fiscal year 2009. Financing activity also included a activity also included a $ 3.2 billion decrease in common stock wa offset by a $ 2.9 billion decline in common stock used for investing increased $ 11.2 billion due to a $ billion due to a $ 15.9 billion rise in purchase of investment along with a $ 1.7 billion decrease in cash from partially offset by a $ 7.2 billion decrease in cash paid of aQuantive in fiscal year 2008 . Share Repurchases On September . Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 ( the “ 2007 Programs year 2007 ( the “ 2007 Programs ” ) to buy buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 ( the “ date of September 30 , 2013 ( the “ 2008 Program , 2013 ( the “ 2008 Program ” ) . As ) . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 380 million share for $ 10.8 380 million share for $ 10.8 billion during fiscal year 2010 10.8 billion during fiscal year 2010 ; 318 million share for during fiscal year 2010 ; 318 million share for $ 8.2 318 million share for $ 8.2 billion during fiscal year 2009 8.2 billion during fiscal year 2009 ; and 402 million share fiscal year 2009 ; and 402 million share for $ 12.4 402 million share for $ 12.4 billion during fiscal year 2008 12.4 billion during fiscal year 2008 . All share repurchased in share repurchased in fiscal year 2010 were repurchased under the 2008 2010 were repurchased under the 2008 Program , while all share share repurchased in fiscal year 2008 were repurchased under the 2007 2008 were repurchased under the 2007 Programs . Of the share share repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the 2007 Programs $ 2.7 billion under the 2007 Programs , while the remainder remainder were repurchased under the 2008 Program . Dividends During fiscal . Dividends During fiscal year 2010 and 2009 , our Board During fiscal year 2010 and 2009 , our Board of Directors In million ) Fiscal Year 2010 September 18 , 2009 $ ) Fiscal Year 2010 September 18 , 2009 $ 0.13 November Year 2010 September 18 , 2009 $ 0.13 November 19 , September 18 , 2009 $ 0.13 November 19 , 2009 $ , 2009 $ 0.13 November 19 , 2009 $ 1,152 December $ 0.13 November 19 , 2009 $ 1,152 December 10 , November 19 , 2009 $ 1,152 December 10 , 2009 December , 2009 $ 1,152 December 10 , 2009 December 9 , $ 1,152 December 10 , 2009 December 9 , 2009 $ December 10 , 2009 December 9 , 2009 $ 0.13 February , 2009 December 9 , 2009 $ 0.13 February 18 , December 9 , 2009 $ 0.13 February 18 , 2010 $ , 2009 $ 0.13 February 18 , 2010 $ 1,139 March $ 0.13 February 18 , 2010 $ 1,139 March 11 , February 18 , 2010 $ 1,139 March 11 , 2010 March , 2010 $ 1,139 March 11 , 2010 March 8 , $ 1,139 March 11 , 2010 March 8 , 2010 $ March 11 , 2010 March 8 , 2010 $ 0.13 May , 2010 March 8 , 2010 $ 0.13 May 20 , March 8 , 2010 $ 0.13 May 20 , 2010 $ , 2010 $ 0.13 May 20 , 2010 $ 1,130 June $ 0.13 May 20 , 2010 $ 1,130 June 10 , May 20 , 2010 $ 1,130 June 10 , 2010 June , 2010 $ 1,130 June 10 , 2010 June 16 , $ 1,130 June 10 , 2010 June 16 , 2010 $ June 10 , 2010 June 16 , 2010 $ 0.13 August , 2010 June 16 , 2010 $ 0.13 August 19 , June 16 , 2010 $ 0.13 August 19 , 2010 $ , 2010 $ 0.13 August 19 , 2010 $ 1,127 September $ 0.13 August 19 , 2010 $ 1,127 September 9 , August 19 , 2010 $ 1,127 September 9 , 2010 Fiscal , 2010 $ 1,127 September 9 , 2010 Fiscal Year 2009 $ 1,127 September 9 , 2010 Fiscal Year 2009 September 19 9 , 2010 Fiscal Year 2009 September 19 , 2008 $ 2010 Fiscal Year 2009 September 19 , 2008 $ 0.13 November Year 2009 September 19 , 2008 $ 0.13 November 20 , September 19 , 2008 $ 0.13 November 20 , 2008 $ , 2008 $ 0.13 November 20 , 2008 $ 1,157 December $ 0.13 November 20 , 2008 $ 1,157 December 11 , November 20 , 2008 $ 1,157 December 11 , 2008 December , 2008 $ 1,157 December 11 , 2008 December 10 , $ 1,157 December 11 , 2008 December 10 , 2008 $ December 11 , 2008 December 10 , 2008 $ 0.13 February , 2008 December 10 , 2008 $ 0.13 February 19 , December 10 , 2008 $ 0.13 February 19 , 2009 $ , 2008 $ 0.13 February 19 , 2009 $ 1,155 March $ 0.13 February 19 , 2009 $ 1,155 March 12 , February 19 , 2009 $ 1,155 March 12 , 2009 March , 2009 $ 1,155 March 12 , 2009 March 9 , $ 1,155 March 12 , 2009 March 9 , 2009 $ March 12 , 2009 March 9 , 2009 $ 0.13 May , 2009 March 9 , 2009 $ 0.13 May 21 , March 9 , 2009 $ 0.13 May 21 , 2009 $ , 2009 $ 0.13 May 21 , 2009 $ 1,158 June $ 0.13 May 21 , 2009 $ 1,158 June 18 , May 21 , 2009 $ 1,158 June 18 , 2009 June , 2009 $ 1,158 June 18 , 2009 June 10 , $ 1,158 June 18 , 2009 June 10 , 2009 $ June 18 , 2009 June 10 , 2009 $ 0.13 August , 2009 June 10 , 2009 $ 0.13 August 20 , June 10 , 2009 $ 0.13 August 20 , 2009 $ , 2009 $ 0.13 August 20 , 2009 $ 1,157 September $ 0.13 August 20 , 2009 $ 1,157 September 10 , August 20 , 2009 $ 1,157 September 10 , 2009 Off-Balance , 2009 $ 1,157 September 10 , 2009 Off-Balance Sheet Arrangements $ 1,157 September 10 , 2009 Off-Balance Sheet Arrangements We provide other matter . In evaluating 36 Table of Contents PART II of Contents PART II Item 7 estimated loss on these indemnification contractual obligation a of June 30 , 2010 . We expect a of June 30 , 2010 . We expect to fund . ( In million ) 2011 2012-2014 2015-2017 2018 and Thereafter ( In million ) 2011 2012-2014 2015-2017 2018 and Thereafter Total In million ) 2011 2012-2014 2015-2017 2018 and Thereafter Total Long-term million ) 2011 2012-2014 2015-2017 2018 and Thereafter Total Long-term debt a ) Principal payment $ 0 $ 3,250 $ 0 $ Principal payment $ 0 $ 3,250 $ 0 $ 1,750 $ $ 0 $ 3,250 $ 0 $ 1,750 $ 5,000 Interest $ 3,250 $ 0 $ 1,750 $ 5,000 Interest payment 140 $ 0 $ 1,750 $ 5,000 Interest payment 140 420 243 1,750 $ 5,000 Interest payment 140 420 243 942 1,745 Construction $ 5,000 Interest payment 140 420 243 942 1,745 Construction commitment 5,000 Interest payment 140 420 243 942 1,745 Construction commitment ( Interest payment 140 420 243 942 1,745 Construction commitment ( b payment 140 420 243 942 1,745 Construction commitment ( b ) Construction commitment ( b ) 347 0 0 0 347 Operating commitment ( b ) 347 0 0 0 347 Operating lease ( b ) 347 0 0 0 347 Operating lease ( b ) 347 0 0 0 347 Operating lease ( c ) 347 0 0 0 347 Operating lease ( c ) Operating lease ( c ) 437 784 407 270 1,898 Purchase lease ( c ) 437 784 407 270 1,898 Purchase commitment ( c ) 437 784 407 270 1,898 Purchase commitment ( c ) 437 784 407 270 1,898 Purchase commitment ( d ) 437 784 407 270 1,898 Purchase commitment ( d ) Purchase commitment ( d ) 3,994 184 0 0 4,178 Other commitment ( d ) 3,994 184 0 0 4,178 Other long-term ( d ) 3,994 184 0 0 4,178 Other long-term liability d ) 3,994 184 0 0 4,178 Other long-term liability ( ) 3,994 184 0 0 4,178 Other long-term liability ( e long-term liability ( e ) 0 72 9 1 82 Total liability ( e ) 0 72 9 1 82 Total contractual ( e ) 0 72 9 1 82 Total contractual obligation e ) 0 72 9 1 82 Total contractual obligation $ ) 0 72 9 1 82 Total contractual obligation $ 4,918 82 Total contractual obligation $ 4,918 $ 4,710 $ 659 $ contractual obligation $ 4,918 $ 4,710 $ 659 $ 2,963 $ $ 4,918 $ 4,710 $ 659 $ 2,963 $ 13,250 ( $ 4,710 $ 659 $ 2,963 $ 13,250 ( a ) $ 659 $ 2,963 $ 13,250 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) ( b ) These other tax liability of $ 7.1 billion and other long-term contingent long-term contingent liability of $ 236 million ( related to the excluded unearned revenue of $ 1.2 billion and non-cash item of and non-cash item of $ 240 million . Other Planned Uses and potential future need . 37 Table of Contents PART II of Contents PART II Item 7 As a result of the second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 16.7 billion at June 30 , $ 16.7 billion at June 30 , 2010 . Our retained billion at June 30 , 2010 . Our retained deficit is . RECENT LEGISLATION In March 2010 , the Patient Protection and and Education Reconciliation Act of 2010 were signed into law in Adopted Accounting Pronouncements In January 2010 , the Financial Accounting Standards asset and liability between Level 1 ( quoted price in active or liability ) and Level 2 ( significant other observable input significant unobservable input ( Level 3 fair value measurement ) . the reporting period beginning January 1 , 2010 , except for period beginning January 1 , 2010 , except for the disclosure roll forward activity for Level 3 fair value measurement , which the reporting period beginning July 1 , 2011 . Other than period beginning July 1 , 2011 . Other than requiring additional financial statement . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued business combination completed since July 1 , 2009 . On July completed since July 1 , 2009 . On July 1 , , 2009 . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued financial statement . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance on Not Yet Adopted In October 2009 , the FASB issued guidance effective for u beginning July 1 , 2010 . Under the u beginning July 1 , 2010 . Under the new guidance longer be within the scope 38 Table of Contents PART II of Contents PART II Item 7 of the software revenue recognition financial statement . In June 2009 , the FASB issued guidance effective for u beginning July 1 , 2010 . The new u beginning July 1 , 2010 . The new guidance requires to Windows Vista and Windows 7 is not subject to a no significant undelivered element . 2007 Microsoft Office system revenue is a a result of the 2010 Microsoft Office system technology guarantee program , which started March 5 , 2010 . This program which started March 5 , 2010 . This program allows customer purchased certain version of the 2007 Microsoft Office system to receive the corresponding version of the 2010 Microsoft Office system at minimal revenue related to the undelivered 2010 Microsoft Office system is deferred the security before recovery . 39 Table of Contents PART II of Contents PART II Item 7 We also consider specific adverse an annual basis ( May 1 for u ) and between impairment test performed on May 1 , 2010 , we performed performed on May 1 , 2010 , we performed an interim first quarter of fiscal year 2010 in connection with the disposal benefit from an uncertain tax 40 Table of Contents PART II of Contents PART II Item 7 position only if it is that ha a greater than 50 % likelihood of being realized a period generally ranging from 90 day to three year . the amount a necessary . 41 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 42 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTATIVE AND PART II Item 7A ITEM 7A . QUANTATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor our position a of June 30 , 2010 and 2009 and a of June 30 , 2010 and 2009 and for the June 30 , 2010 and 2009 and for the year ended for the year ended June 30 , 2010 : ( In year ended June 30 , 2010 : ( In million ) ( In million ) June 30 , 2010 June 30 , million ) June 30 , 2010 June 30 , 2009 Year June 30 , 2010 June 30 , 2009 Year Ended June , 2010 June 30 , 2009 Year Ended June 30 , , 2009 Year Ended June 30 , 2010 Risk Categories Average Year Ended June 30 , 2010 Risk Categories Average High Low High Low Foreign currency $ 57 $ 68 $ 53 $ Foreign currency $ 57 $ 68 $ 53 $ 86 $ $ 57 $ 68 $ 53 $ 86 $ 20 Interest $ 68 $ 53 $ 86 $ 20 Interest rate $ $ 53 $ 86 $ 20 Interest rate $ 58 $ $ 20 Interest rate $ 58 $ 42 $ 54 $ Interest rate $ 58 $ 42 $ 54 $ 69 $ $ 58 $ 42 $ 54 $ 69 $ 43 Equity $ 42 $ 54 $ 69 $ 43 Equity $ 183 $ 54 $ 69 $ 43 Equity $ 183 $ 157 69 $ 43 Equity $ 183 $ 157 $ 184 $ 43 Equity $ 183 $ 157 $ 184 $ 206 $ $ 183 $ 157 $ 184 $ 206 $ 142 Commodity $ 157 $ 184 $ 206 $ 142 Commodity $ 19 $ 184 $ 206 $ 142 Commodity $ 19 $ 16 206 $ 142 Commodity $ 19 $ 16 $ 17 $ 142 Commodity $ 19 $ 16 $ 17 $ 20 $ $ 19 $ 16 $ 17 $ 20 $ 14 Total $ 16 $ 17 $ 20 $ 14 Total one-day VaR $ 17 $ 20 $ 14 Total one-day VaR for the combined risk category wa $ 235 million at June 30 , $ 235 million at June 30 , 2010 and $ 211 million at June 30 , 2010 and $ 211 million at 30 , 2010 and $ 211 million at June 30 , $ 211 million at June 30 , 2009 . The total million at June 30 , 2009 . The total VaR is . The total VaR is 26 % le at June 30 26 % le at June 30 , 2010 , and 25 le at June 30 , 2010 , and 25 % le 30 , 2010 , and 25 % le at June 30 25 % le at June 30 , 2009 , than the le at June 30 , 2009 , than the sum of the combination of risk . 43 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2010 2009 2008 Revenue Year Ended June 30 , 2010 2009 2008 Revenue $ 62,484 Ended June 30 , 2010 2009 2008 Revenue $ 62,484 $ June 30 , 2010 2009 2008 Revenue $ 62,484 $ 58,437 2010 2009 2008 Revenue $ 62,484 $ 58,437 $ 60,420 Operating 2008 Revenue $ 62,484 $ 58,437 $ 60,420 Operating expense : $ 62,484 $ 58,437 $ 60,420 Operating expense : Cost of expense : Cost of revenue 12,395 12,155 11,598 Research and development : Cost of revenue 12,395 12,155 11,598 Research and development 8,714 Cost of revenue 12,395 12,155 11,598 Research and development 8,714 9,010 12,155 11,598 Research and development 8,714 9,010 8,164 Sales and marketing 11,598 Research and development 8,714 9,010 8,164 Sales and marketing 13,214 Research and development 8,714 9,010 8,164 Sales and marketing 13,214 12,879 9,010 8,164 Sales and marketing 13,214 12,879 13,260 General and administrative 8,164 Sales and marketing 13,214 12,879 13,260 General and administrative 4,004 Sales and marketing 13,214 12,879 13,260 General and administrative 4,004 3,700 12,879 13,260 General and administrative 4,004 3,700 5,127 Employee severance 59 13,260 General and administrative 4,004 3,700 5,127 Employee severance 59 330 General and administrative 4,004 3,700 5,127 Employee severance 59 330 0 4,004 3,700 5,127 Employee severance 59 330 0 Total operating expense 3,700 5,127 Employee severance 59 330 0 Total operating expense 38,386 5,127 Employee severance 59 330 0 Total operating expense 38,386 38,074 330 0 Total operating expense 38,386 38,074 38,149 Operating income 24,098 0 Total operating expense 38,386 38,074 38,149 Operating income 24,098 20,363 Total operating expense 38,386 38,074 38,149 Operating income 24,098 20,363 22,271 38,386 38,074 38,149 Operating income 24,098 20,363 22,271 Other income ( 38,074 38,149 Operating income 24,098 20,363 22,271 Other income ( expense 38,149 Operating income 24,098 20,363 22,271 Other income ( expense ) Other income ( expense ) 915 ( 542 ) 1,543 Income ( expense ) 915 ( 542 ) 1,543 Income before income ) 915 ( 542 ) 1,543 Income before income tax 25,013 1,543 Income before income tax 25,013 19,821 23,814 Provision for income Income before income tax 25,013 19,821 23,814 Provision for income tax before income tax 25,013 19,821 23,814 Provision for income tax 6,253 23,814 Provision for income tax 6,253 5,252 6,133 Net income $ Provision for income tax 6,253 5,252 6,133 Net income $ 18,760 for income tax 6,253 5,252 6,133 Net income $ 18,760 $ 5,252 6,133 Net income $ 18,760 $ 14,569 $ 17,681 Earnings Net income $ 18,760 $ 14,569 $ 17,681 Earnings per share $ 18,760 $ 14,569 $ 17,681 Earnings per share : Basic per share : Basic $ 2.13 $ 1.63 $ 1.90 Diluted : Basic $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 2.13 $ 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 1.63 $ 1.90 Diluted $ 2.10 $ 1.62 $ 1.87 Weighted 1.90 Diluted $ 2.10 $ 1.62 $ 1.87 Weighted average share $ 2.10 $ 1.62 $ 1.87 Weighted average share outstanding : average share outstanding : Basic 8,813 8,945 9,328 Diluted 8,927 8,996 share outstanding : Basic 8,813 8,945 9,328 Diluted 8,927 8,996 9,470 outstanding : Basic 8,813 8,945 9,328 Diluted 8,927 8,996 9,470 Cash Basic 8,813 8,945 9,328 Diluted 8,927 8,996 9,470 Cash dividend declared 8,813 8,945 9,328 Diluted 8,927 8,996 9,470 Cash dividend declared per 8,945 9,328 Diluted 8,927 8,996 9,470 Cash dividend declared per common declared per common share $ 0.52 $ 0.52 $ 0.44 See common share $ 0.52 $ 0.52 $ 0.44 See accompanying note $ 0.52 $ 0.52 $ 0.44 See accompanying note . 44 0.44 See accompanying note . 44 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2010 2009 Assets Current million ) June 30 , 2010 2009 Assets Current asset : ) June 30 , 2010 2009 Assets Current asset : Cash Cash and cash equivalent $ 5,505 $ 6,076 Short-term investment ( cash equivalent $ 5,505 $ 6,076 Short-term investment ( including security including security loaned of $ 62 and $ 1,540 ) 31,283 of $ 62 and $ 1,540 ) 31,283 25,371 Total cash 62 and $ 1,540 ) 31,283 25,371 Total cash , cash and $ 1,540 ) 31,283 25,371 Total cash , cash equivalent equivalent , and short-term investment 36,788 31,447 Accounts receivable , net , and short-term investment 36,788 31,447 Accounts receivable , net of for doubtful account of $ 375 and $ 451 13,014 11,192 of $ 375 and $ 451 13,014 11,192 Inventories 740 717 $ 375 and $ 451 13,014 11,192 Inventories 740 717 Deferred 375 and $ 451 13,014 11,192 Inventories 740 717 Deferred income $ 451 13,014 11,192 Inventories 740 717 Deferred income tax 2,184 451 13,014 11,192 Inventories 740 717 Deferred income tax 2,184 2,213 740 717 Deferred income tax 2,184 2,213 Other 2,950 3,711 Total 717 Deferred income tax 2,184 2,213 Other 2,950 3,711 Total current income tax 2,184 2,213 Other 2,950 3,711 Total current asset 55,676 tax 2,184 2,213 Other 2,950 3,711 Total current asset 55,676 49,280 2,950 3,711 Total current asset 55,676 49,280 Property and equipment , 3,711 Total current asset 55,676 49,280 Property and equipment , net of accumulated depreciation of $ 8,629 and $ 7,547 7,630 7,535 of $ 8,629 and $ 7,547 7,630 7,535 Equity and other $ 8,629 and $ 7,547 7,630 7,535 Equity and other investment 8,629 and $ 7,547 7,630 7,535 Equity and other investment 7,754 7,535 Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible Equity and other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset other investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset , net investment 7,754 4,933 Goodwill 12,394 12,503 Intangible asset , net 1,158 12,503 Intangible asset , net 1,158 1,759 Deferred income tax 0 Intangible asset , net 1,158 1,759 Deferred income tax 0 279 1,158 1,759 Deferred income tax 0 279 Other long-term asset 1,501 1,759 Deferred income tax 0 279 Other long-term asset 1,501 1,599 0 279 Other long-term asset 1,501 1,599 Total asset $ 86,113 279 Other long-term asset 1,501 1,599 Total asset $ 86,113 $ 1,501 1,599 Total asset $ 86,113 $ 77,888 Liabilities and stockholder Total asset $ 86,113 $ 77,888 Liabilities and stockholder ’ equity liability : Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 Accounts payable $ 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued 4,025 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 $ 3,324 Short-term debt 1,000 2,000 Accrued compensation 3,283 3,156 Income debt 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 1,000 2,000 Accrued compensation 3,283 3,156 Income tax 1,074 725 Short-term compensation 3,283 3,156 Income tax 1,074 725 Short-term unearned revenue 13,652 3,283 3,156 Income tax 1,074 725 Short-term unearned revenue 13,652 13,003 1,074 725 Short-term unearned revenue 13,652 13,003 Securities lending payable 182 725 Short-term unearned revenue 13,652 13,003 Securities lending payable 182 1,684 13,652 13,003 Securities lending payable 182 1,684 Other 2,931 3,142 Total 13,003 Securities lending payable 182 1,684 Other 2,931 3,142 Total current lending payable 182 1,684 Other 2,931 3,142 Total current liability 26,147 payable 182 1,684 Other 2,931 3,142 Total current liability 26,147 27,034 2,931 3,142 Total current liability 26,147 27,034 Long-term debt 4,939 3,746 3,142 Total current liability 26,147 27,034 Long-term debt 4,939 3,746 Long-term liability 26,147 27,034 Long-term debt 4,939 3,746 Long-term unearned revenue 1,178 26,147 27,034 Long-term debt 4,939 3,746 Long-term unearned revenue 1,178 1,281 4,939 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 3,746 Long-term unearned revenue 1,178 1,281 Deferred income tax 229 0 1,178 1,281 Deferred income tax 229 0 Other long-term liability 7,445 1,281 Deferred income tax 229 0 Other long-term liability 7,445 6,269 229 0 Other long-term liability 7,445 6,269 Commitments and contingency Stockholders 0 Other long-term liability 7,445 6,269 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,668 and 8,908 share authorized 24,000 ; outstanding 8,668 and 8,908 62,856 62,382 Retained 24,000 ; outstanding 8,668 and 8,908 62,856 62,382 Retained deficit , ; outstanding 8,668 and 8,908 62,856 62,382 Retained deficit , including outstanding 8,668 and 8,908 62,856 62,382 Retained deficit , including accumulated other comprehensive income of $ 1,055 and $ 969 ( 16,681 of $ 1,055 and $ 969 ( 16,681 ) ( 22,824 1,055 and $ 969 ( 16,681 ) ( 22,824 ) Total 969 ( 16,681 ) ( 22,824 ) Total stockholder ’ equity ) Total stockholder ’ equity 46,175 39,558 Total liability and stockholder Total stockholder ’ equity 46,175 39,558 Total liability and stockholder ’ and stockholder ’ equity $ 86,113 $ 77,888 See accompanying note ’ equity $ 86,113 $ 77,888 See accompanying note . 45 77,888 See accompanying note . 45 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2010 2009 2008 Operations Year Ended June 30 , 2010 2009 2008 Operations Net income Ended June 30 , 2010 2009 2008 Operations Net income $ June 30 , 2010 2009 2008 Operations Net income $ 18,760 2008 Operations Net income $ 18,760 $ 14,569 $ 17,681 Adjustments Net income $ 18,760 $ 14,569 $ 17,681 Adjustments to reconcile $ 18,760 $ 14,569 $ 17,681 Adjustments to reconcile net income , and other noncash item 2,673 2,562 2,056 Stock-based compensation 1,891 and other noncash item 2,673 2,562 2,056 Stock-based compensation 1,891 1,708 other noncash item 2,673 2,562 2,056 Stock-based compensation 1,891 1,708 1,479 2,673 2,562 2,056 Stock-based compensation 1,891 1,708 1,479 Net recognized loss 2,562 2,056 Stock-based compensation 1,891 1,708 1,479 Net recognized loss ( 2,056 Stock-based compensation 1,891 1,708 1,479 Net recognized loss ( gain on investment and derivative ( 208 ) 683 ( 572 ) and derivative ( 208 ) 683 ( 572 ) Excess tax ( 208 ) 683 ( 572 ) Excess tax benefit from benefit from stock-based compensation ( 45 ) ( 52 ) ( compensation ( 45 ) ( 52 ) ( 120 ) Deferred ) ( 52 ) ( 120 ) Deferred income tax ( ) Deferred income tax ( 220 ) 762 935 Deferral of income tax ( 220 ) 762 935 Deferral of unearned revenue tax ( 220 ) 762 935 Deferral of unearned revenue 29,374 935 Deferral of unearned revenue 29,374 24,409 24,532 Recognition of unearned Deferral of unearned revenue 29,374 24,409 24,532 Recognition of unearned revenue of unearned revenue 29,374 24,409 24,532 Recognition of unearned revenue ( Recognition of unearned revenue ( 28,813 ) ( 25,426 ) ( revenue ( 28,813 ) ( 25,426 ) ( 21,944 ) Changes ) ( 25,426 ) ( 21,944 ) Changes in operating asset liability : Accounts receivable ( 2,238 ) 2,215 ( 1,569 ) Accounts receivable ( 2,238 ) 2,215 ( 1,569 ) Other current ( 2,238 ) 2,215 ( 1,569 ) Other current asset 420 1,569 ) Other current asset 420 ( 422 ) 153 Other Other current asset 420 ( 422 ) 153 Other long-term asset asset 420 ( 422 ) 153 Other long-term asset ( 223 153 Other long-term asset ( 223 ) ( 273 ) ( asset ( 223 ) ( 273 ) ( 98 ) Other ) ( 273 ) ( 98 ) Other current liability 1,295 98 ) Other current liability 1,295 ( 3,371 ) ( 748 Other current liability 1,295 ( 3,371 ) ( 748 ) Other 1,295 ( 3,371 ) ( 748 ) Other long-term liability 1,407 748 ) Other long-term liability 1,407 1,673 ( 173 ) Net ) Other long-term liability 1,407 1,673 ( 173 ) Net cash long-term liability 1,407 1,673 ( 173 ) Net cash from operation ) Net cash from operation 24,073 19,037 21,612 Financing Short-term borrowing Net cash from operation 24,073 19,037 21,612 Financing Short-term borrowing ( cash from operation 24,073 19,037 21,612 Financing Short-term borrowing ( repayment repayment ) , maturity of 90 day or le , net or le , net ( 991 ) 1,178 0 Proceeds from , net ( 991 ) 1,178 0 Proceeds from issuance of net ( 991 ) 1,178 0 Proceeds from issuance of debt debt , maturity longer than 90 day 4,167 4,796 0 Repayments maturity longer than 90 day 4,167 4,796 0 Repayments of debt longer than 90 day 4,167 4,796 0 Repayments of debt , than 90 day 4,167 4,796 0 Repayments of debt , maturity debt , maturity longer than 90 day ( 2,986 ) ( longer than 90 day ( 2,986 ) ( 228 ) 0 day ( 2,986 ) ( 228 ) 0 Common stock issued 2,986 ) ( 228 ) 0 Common stock issued 2,311 579 ) 0 Common stock issued 2,311 579 3,494 Common stock repurchased 0 Common stock issued 2,311 579 3,494 Common stock repurchased ( Common stock issued 2,311 579 3,494 Common stock repurchased ( 11,269 3,494 Common stock repurchased ( 11,269 ) ( 9,353 ) ( repurchased ( 11,269 ) ( 9,353 ) ( 12,533 ) Common ) ( 9,353 ) ( 12,533 ) Common stock cash dividend stock cash dividend paid ( 4,578 ) ( 4,468 ) ( paid ( 4,578 ) ( 4,468 ) ( 4,015 ) Excess ) ( 4,468 ) ( 4,015 ) Excess tax benefit from tax benefit from stock-based compensation 45 52 120 Other 10 ( benefit from stock-based compensation 45 52 120 Other 10 ( 19 from stock-based compensation 45 52 120 Other 10 ( 19 ) compensation 45 52 120 Other 10 ( 19 ) 0 Net 52 120 Other 10 ( 19 ) 0 Net cash used Other 10 ( 19 ) 0 Net cash used in financing cash used in financing ( 13,291 ) ( 7,463 ) ( financing ( 13,291 ) ( 7,463 ) ( 12,934 ) Investing ) ( 7,463 ) ( 12,934 ) Investing Additions to property to property and equipment ( 1,977 ) ( 3,119 ) ( equipment ( 1,977 ) ( 3,119 ) ( 3,182 ) Acquisition ) ( 3,119 ) ( 3,182 ) Acquisition of company , net of cash acquired ( 245 ) ( 868 ) ( acquired ( 245 ) ( 868 ) ( 8,053 ) Purchases ) ( 868 ) ( 8,053 ) Purchases of investment ( ) Purchases of investment ( 30,168 ) ( 36,850 ) ( investment ( 30,168 ) ( 36,850 ) ( 20,954 ) Maturities ) ( 36,850 ) ( 20,954 ) Maturities of investment 7,453 20,954 ) Maturities of investment 7,453 6,191 2,597 Sales of investment ) Maturities of investment 7,453 6,191 2,597 Sales of investment 15,125 Maturities of investment 7,453 6,191 2,597 Sales of investment 15,125 19,806 6,191 2,597 Sales of investment 15,125 19,806 25,132 Securities lending payable 2,597 Sales of investment 15,125 19,806 25,132 Securities lending payable ( Sales of investment 15,125 19,806 25,132 Securities lending payable ( 1,502 25,132 Securities lending payable ( 1,502 ) ( 930 ) ( payable ( 1,502 ) ( 930 ) ( 127 ) Net ) ( 930 ) ( 127 ) Net cash used in cash used in investing ( 11,314 ) ( 15,770 ) ( investing ( 11,314 ) ( 15,770 ) ( 4,587 ) Effect ) ( 15,770 ) ( 4,587 ) Effect of exchange rate cash and cash equivalent ( 39 ) ( 67 ) 137 equivalent ( 39 ) ( 67 ) 137 Net change in 39 ) ( 67 ) 137 Net change in cash and cash and cash equivalent ( 571 ) ( 4,263 ) 4,228 equivalent ( 571 ) ( 4,263 ) 4,228 Cash and cash 571 ) ( 4,263 ) 4,228 Cash and cash equivalent , equivalent , beginning of period 6,076 10,339 6,111 Cash and cash , beginning of period 6,076 10,339 6,111 Cash and cash equivalent beginning of period 6,076 10,339 6,111 Cash and cash equivalent , , end of period $ 5,505 $ 6,076 $ 10,339 See of period $ 5,505 $ 6,076 $ 10,339 See accompanying note $ 5,505 $ 6,076 $ 10,339 See accompanying note . 46 10,339 See accompanying note . 46 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2010 2009 2008 Common Year Ended June 30 , 2010 2009 2008 Common stock and Ended June 30 , 2010 2009 2008 Common stock and paid-in June 30 , 2010 2009 2008 Common stock and paid-in capital , beginning of period $ 62,382 $ 62,849 $ 60,557 Common of period $ 62,382 $ 62,849 $ 60,557 Common stock issued $ 62,382 $ 62,849 $ 60,557 Common stock issued 2,311 567 $ 60,557 Common stock issued 2,311 567 3,504 Common stock repurchased 60,557 Common stock issued 2,311 567 3,504 Common stock repurchased ( Common stock issued 2,311 567 3,504 Common stock repurchased ( 3,113 3,504 Common stock repurchased ( 3,113 ) ( 2,611 ) ( repurchased ( 3,113 ) ( 2,611 ) ( 3,022 ) Stock-based ) ( 2,611 ) ( 3,022 ) Stock-based compensation expense 1,891 3,022 ) Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income ) Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income tax Stock-based compensation expense 1,891 1,708 1,479 Stock-based compensation income tax benefit benefit ( deficiency ) ( 647 ) ( 128 ) 253 ) ( 647 ) ( 128 ) 253 Other , net 647 ) ( 128 ) 253 Other , net 32 ( ) 253 Other , net 32 ( 3 ) 78 Balance Other , net 32 ( 3 ) 78 Balance , end net 32 ( 3 ) 78 Balance , end of period Balance , end of period 62,856 62,382 62,849 Retained deficit Balance , end of period 62,856 62,382 62,849 Retained deficit Balance , end of period 62,856 62,382 62,849 Retained deficit Balance , beginning , beginning of period ( 22,824 ) ( 26,563 ) ( period ( 22,824 ) ( 26,563 ) ( 29,460 ) Cumulative ) ( 26,563 ) ( 29,460 ) Cumulative effect of a relating to uncertain tax position 0 0 ( 395 ) Cumulative to uncertain tax position 0 0 ( 395 ) Cumulative effect tax position 0 0 ( 395 ) Cumulative effect of a cost of certain compensated absence 0 0 ( 17 ) Net of certain compensated absence 0 0 ( 17 ) Net income compensated absence 0 0 ( 17 ) Net income 18,760 14,569 ( 17 ) Net income 18,760 14,569 17,681 Other comprehensive income 17 ) Net income 18,760 14,569 17,681 Other comprehensive income : ) Net income 18,760 14,569 17,681 Other comprehensive income : Net Net unrealized gain on derivative 27 302 18 Net unrealized gain unrealized gain on derivative 27 302 18 Net unrealized gain ( gain on derivative 27 302 18 Net unrealized gain ( loss ( loss ) on investment 265 ( 233 ) ( 653 ) on investment 265 ( 233 ) ( 653 ) Translation 265 ( 233 ) ( 653 ) Translation adjustment and other Translation adjustment and other ( 206 ) ( 240 ) 121 other ( 206 ) ( 240 ) 121 Comprehensive income 18,846 206 ) ( 240 ) 121 Comprehensive income 18,846 14,398 17,167 240 ) 121 Comprehensive income 18,846 14,398 17,167 Common stock cash ) 121 Comprehensive income 18,846 14,398 17,167 Common stock cash dividend 121 Comprehensive income 18,846 14,398 17,167 Common stock cash dividend ( Common stock cash dividend ( 4,547 ) ( 4,620 ) ( dividend ( 4,547 ) ( 4,620 ) ( 4,084 ) Common ) ( 4,620 ) ( 4,084 ) Common stock repurchased ( ) Common stock repurchased ( 8,156 ) ( 6,039 ) ( repurchased ( 8,156 ) ( 6,039 ) ( 9,774 ) Balance ) ( 6,039 ) ( 9,774 ) Balance , end of , end of period ( 16,681 ) ( 22,824 ) ( period ( 16,681 ) ( 22,824 ) ( 26,563 ) Total ) ( 22,824 ) ( 26,563 ) Total stockholder ’ equity Total stockholder ’ equity $ 46,175 $ 39,558 $ 36,286 See ’ equity $ 46,175 $ 39,558 $ 36,286 See accompanying note $ 46,175 $ 39,558 $ 36,286 See accompanying note . 47 36,286 See accompanying note . 47 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles to Windows Vista and Windows 7 is not subject to a value of both product . 48 Table of Contents PART II of Contents PART II Item 8 Certain multi-year licensing arrangement include Revenue related to our Xbox 360 gaming and entertainment console , for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . life of the product . 49 Table of Contents PART II of Contents PART II Item 8 Sales and Marketing Sales and . Advertising expense wa $ 1.6 billion , $ 1.4 billion $ 1.6 billion , $ 1.4 billion , and $ 1.2 1.4 billion , and $ 1.2 billion in fiscal year 2010 1.2 billion in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Employee Severance employee at three-month interval at 90 % of the fair market level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon asset or liability . Where 50 Table of Contents PART II of Contents PART II Item 8 applicable , these model project and commodity . Our Level 2 non-derivative investment consist primarily of commercial paper . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment the investment . Our Level 3 derivative asset and liability primarily or plan to sell , 51 Table of Contents PART II of Contents PART II Item 8 the investment . For fixed million ) Year Ended June 30 , 2010 2009 2008 Balance Year Ended June 30 , 2010 2009 2008 Balance , beginning Ended June 30 , 2010 2009 2008 Balance , beginning of June 30 , 2010 2009 2008 Balance , beginning of period , beginning of period $ 451 $ 153 $ 117 Charged of period $ 451 $ 153 $ 117 Charged to cost $ 451 $ 153 $ 117 Charged to cost and other Charged to cost and other 45 360 88 Write-offs ( 121 to cost and other 45 360 88 Write-offs ( 121 ) cost and other 45 360 88 Write-offs ( 121 ) ( 45 360 88 Write-offs ( 121 ) ( 62 ) ( Write-offs ( 121 ) ( 62 ) ( 52 ) Balance ) ( 62 ) ( 52 ) Balance , end of , end of period $ 375 $ 451 $ 153 Inventories of period $ 375 $ 451 $ 153 Inventories Inventories are $ 375 $ 451 $ 153 Inventories Inventories are stated at to cost of revenue . 52 Table of Contents PART II of Contents PART II Item 8 Property and Equipment Property and and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 10 year ; and furniture and an annual basis ( May 1 for u ) and between , ranging from one to 10 year . We evaluate the Adopted Accounting Pronouncements In January 2010 , the Financial Accounting Standards asset and liability between Level 1 ( quoted price in active or liability ) and Level 2 ( significant other observable input significant unobservable input ( Level 3 fair value measurement ) . the reporting period beginning January 1 , 2010 , except for period beginning January 1 , 2010 , except for the disclosure roll forward activity for Level 3 fair value measurement , which the reporting period beginning July 1 , 2011 . Other than period beginning July 1 , 2011 . Other than requiring additional financial statement . See Note 6 – Fair Value Measurements . Value Measurements . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued business combination completed since July 1 , 2009 . On July completed since July 1 , 2009 . On July 1 , , 2009 . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance issued financial statement . On July 1 , 2009 , we adopted . On July 1 , 2009 , we adopted guidance on on our financial statement . 53 Table of Contents PART II of Contents PART II Item 8 Recent Accounting Pronouncements Not Yet Not Yet Adopted In October 2009 , the FASB issued guidance effective for u beginning July 1 , 2010 . Under the u beginning July 1 , 2010 . Under the new guidance financial statement . In June 2009 , the FASB issued guidance effective for u beginning July 1 , 2010 . The new u beginning July 1 , 2010 . The new guidance requires our financial statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2010 2009 2008 Net Year Ended June 30 , 2010 2009 2008 Net income available Ended June 30 , 2010 2009 2008 Net income available for June 30 , 2010 2009 2008 Net income available for common shareholder ( A ) $ 18,760 $ 14,569 $ 17,681 Weighted A ) $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding $ 18,760 $ 14,569 $ 17,681 Weighted average outstanding share of common stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based ( B ) 8,813 8,945 9,328 Dilutive effect of stock-based award Dilutive effect of stock-based award 114 51 142 Common stock and effect of stock-based award 114 51 142 Common stock and common of stock-based award 114 51 142 Common stock and common stock stock equivalent ( C ) 8,927 8,996 9,470 Earnings Per Share equivalent ( C ) 8,927 8,996 9,470 Earnings Per Share Basic ( C ) 8,927 8,996 9,470 Earnings Per Share Basic ( Basic ( A/B ) $ 2.13 $ 1.63 $ 1.90 Diluted A/B ) $ 2.13 $ 1.63 $ 1.90 Diluted ( A/C $ 2.13 $ 1.63 $ 1.90 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.10 $ 1.62 $ 1.87 For A/C ) $ 2.10 $ 1.62 $ 1.87 For fiscal year $ 2.10 $ 1.62 $ 1.87 For fiscal year 2010 , $ 1.87 For fiscal year 2010 , 2009 , and 2008 For fiscal year 2010 , 2009 , and 2008 , 28 2010 , 2009 , and 2008 , 28 million , 342 2009 , and 2008 , 28 million , 342 million , 2008 , 28 million , 342 million , and 91 million , 342 million , and 91 million share , respectively , been anti-dilutive . In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero-coupon debt security anti-dilutive . See also Note 12 – Debt . 54 Table Note 12 – Debt . 54 Table of Contents PART II of Contents PART II Item 8 NOTE 3 — OTHER INCOME PART II Item 8 NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2010 2009 2008 Dividends Year Ended June 30 , 2010 2009 2008 Dividends and interest Ended June 30 , 2010 2009 2008 Dividends and interest income June 30 , 2010 2009 2008 Dividends and interest income $ Dividends and interest income $ 843 $ 744 $ 994 Interest interest income $ 843 $ 744 $ 994 Interest expense ( $ 843 $ 744 $ 994 Interest expense ( 151 ) $ 994 Interest expense ( 151 ) ( 38 ) ( expense ( 151 ) ( 38 ) ( 106 ) Net ) ( 38 ) ( 106 ) Net recognized gain ( ( loss ) on investment 348 ( 125 ) 346 Net ) on investment 348 ( 125 ) 346 Net gain ( investment 348 ( 125 ) 346 Net gain ( loss ) loss ) on derivative ( 140 ) ( 558 ) 226 derivative ( 140 ) ( 558 ) 226 Net gain ( 140 ) ( 558 ) 226 Net gain ( loss ) ) on foreign currency remeasurements 1 ( 509 ) 226 Other foreign currency remeasurements 1 ( 509 ) 226 Other 14 ( remeasurements 1 ( 509 ) 226 Other 14 ( 56 ) ( 509 ) 226 Other 14 ( 56 ) ( 143 ) 226 Other 14 ( 56 ) ( 143 ) Total 14 ( 56 ) ( 143 ) Total $ 915 $ ( 143 ) Total $ 915 $ ( 542 ) $ Total $ 915 $ ( 542 ) $ 1,543 Other-than-temporary impairment $ ( 542 ) $ 1,543 Other-than-temporary impairment , which are table above , were $ 69 million , $ 862 million $ 69 million , $ 862 million , and $ 312 862 million , and $ 312 million in fiscal year 2010 312 million in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Realized gain other-than-temporary impairment ) were $ 605 million and $ 188 million $ 605 million and $ 188 million , respectively , in respectively , in fiscal year 2010 , $ 1.6 billion and fiscal year 2010 , $ 1.6 billion and $ 897 million $ 1.6 billion and $ 897 million , respectively , in respectively , in fiscal year 2009 , and $ 751 million year 2009 , and $ 751 million and $ 93 million $ 751 million and $ 93 million , respectively , in respectively , in fiscal year 2008 . NOTE 4 — INVESTMENTS fiscal year 2008 . NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2010 Cash $ 1,661 Other Investments June 30 , 2010 Cash $ 1,661 $ 0 30 , 2010 Cash $ 1,661 $ 0 $ 0 $ 2010 Cash $ 1,661 $ 0 $ 0 $ 1,661 $ $ 1,661 $ 0 $ 0 $ 1,661 $ 1,661 $ $ 0 $ 0 $ 1,661 $ 1,661 $ 0 $ $ 0 $ 1,661 $ 1,661 $ 0 $ 0 Mutual $ 1,661 $ 1,661 $ 0 $ 0 Mutual fund 1,120 $ 1,661 $ 0 $ 0 Mutual fund 1,120 0 0 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial paper fund 1,120 0 0 1,120 1,120 0 0 Commercial paper 188 1,120 0 0 1,120 1,120 0 0 Commercial paper 188 0 0 0 1,120 1,120 0 0 Commercial paper 188 0 0 1,120 0 0 Commercial paper 188 0 0 188 13 175 0 0 Commercial paper 188 0 0 188 13 175 0 0 Commercial paper 188 0 0 188 13 175 0 Certificates Commercial paper 188 0 0 188 13 175 0 Certificates of paper 188 0 0 188 13 175 0 Certificates of deposit 188 0 0 188 13 175 0 Certificates of deposit 348 0 0 188 13 175 0 Certificates of deposit 348 0 175 0 Certificates of deposit 348 0 0 348 68 280 0 Certificates of deposit 348 0 0 348 68 280 0 Certificates of deposit 348 0 0 348 68 280 0 U.S. of deposit 348 0 0 348 68 280 0 U.S. Government deposit 348 0 0 348 68 280 0 U.S. Government and 348 0 0 348 68 280 0 U.S. Government and Agency 0 0 348 68 280 0 U.S. Government and Agency security U.S. Government and Agency security 21,036 167 ( 1 ) 21,202 Government and Agency security 21,036 167 ( 1 ) 21,202 1,822 Agency security 21,036 167 ( 1 ) 21,202 1,822 19,380 0 21,036 167 ( 1 ) 21,202 1,822 19,380 0 Foreign government 167 ( 1 ) 21,202 1,822 19,380 0 Foreign government bond ( 1 ) 21,202 1,822 19,380 0 Foreign government bond 518 1 ) 21,202 1,822 19,380 0 Foreign government bond 518 13 19,380 0 Foreign government bond 518 13 0 531 0 531 0 Foreign government bond 518 13 0 531 0 531 0 Foreign government bond 518 13 0 531 0 531 0 Mortgage-backed government bond 518 13 0 531 0 531 0 Mortgage-backed security bond 518 13 0 531 0 531 0 Mortgage-backed security 3,137 518 13 0 531 0 531 0 Mortgage-backed security 3,137 135 13 0 531 0 531 0 Mortgage-backed security 3,137 135 ( 0 531 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 531 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 0 3,265 0 3,137 135 ( 7 ) 3,265 0 3,265 0 Corporate note 135 ( 7 ) 3,265 0 3,265 0 Corporate note and ( 7 ) 3,265 0 3,265 0 Corporate note and bond 7 ) 3,265 0 3,265 0 Corporate note and bond 7,450 0 Corporate note and bond 7,450 289 ( 18 ) 7,721 Corporate note and bond 7,450 289 ( 18 ) 7,721 701 and bond 7,450 289 ( 18 ) 7,721 701 7,020 0 7,450 289 ( 18 ) 7,721 701 7,020 0 Municipal security 289 ( 18 ) 7,721 701 7,020 0 Municipal security 726 ( 18 ) 7,721 701 7,020 0 Municipal security 726 22 18 ) 7,721 701 7,020 0 Municipal security 726 22 ( 701 7,020 0 Municipal security 726 22 ( 1 ) 747 7,020 0 Municipal security 726 22 ( 1 ) 747 120 Municipal security 726 22 ( 1 ) 747 120 627 0 726 22 ( 1 ) 747 120 627 0 Common and 22 ( 1 ) 747 120 627 0 Common and preferred ( 1 ) 747 120 627 0 Common and preferred stock 1 ) 747 120 627 0 Common and preferred stock 6,640 0 Common and preferred stock 6,640 1,030 ( 418 ) 7,252 Common and preferred stock 6,640 1,030 ( 418 ) 7,252 0 preferred stock 6,640 1,030 ( 418 ) 7,252 0 0 7,252 6,640 1,030 ( 418 ) 7,252 0 0 7,252 Other investment 1,030 ( 418 ) 7,252 0 0 7,252 Other investment 507 ( 418 ) 7,252 0 0 7,252 Other investment 507 0 418 ) 7,252 0 0 7,252 Other investment 507 0 0 0 0 7,252 Other investment 507 0 0 507 0 5 0 7,252 Other investment 507 0 0 507 0 5 502 7,252 Other investment 507 0 0 507 0 5 502 Total Other investment 507 0 0 507 0 5 502 Total $ investment 507 0 0 507 0 5 502 Total $ 43,331 507 0 0 507 0 5 502 Total $ 43,331 $ 0 0 507 0 5 502 Total $ 43,331 $ 1,656 0 5 502 Total $ 43,331 $ 1,656 $ ( 445 502 Total $ 43,331 $ 1,656 $ ( 445 ) $ 43,331 $ 1,656 $ ( 445 ) $ 44,542 $ 5,505 $ ( 445 ) $ 44,542 $ 5,505 $ 31,283 $ 445 ) $ 44,542 $ 5,505 $ 31,283 $ 7,754 55 $ 44,542 $ 5,505 $ 31,283 $ 7,754 55 Table of $ 5,505 $ 31,283 $ 7,754 55 Table of Contents PART 5,505 $ 31,283 $ 7,754 55 Table of Contents PART II of Contents PART II Item 8 ( In million ) Cost Equity and Other Investments June 30 , 2009 Cash $ 2,064 Other Investments June 30 , 2009 Cash $ 2,064 $ 0 30 , 2009 Cash $ 2,064 $ 0 $ 0 $ 2009 Cash $ 2,064 $ 0 $ 0 $ 2,064 $ $ 2,064 $ 0 $ 0 $ 2,064 $ 2,064 $ $ 0 $ 0 $ 2,064 $ 2,064 $ 0 $ $ 0 $ 2,064 $ 2,064 $ 0 $ 0 Mutual $ 2,064 $ 2,064 $ 0 $ 0 Mutual fund 1,007 $ 2,064 $ 0 $ 0 Mutual fund 1,007 0 ( 0 $ 0 Mutual fund 1,007 0 ( 25 ) 982 $ 0 Mutual fund 1,007 0 ( 25 ) 982 900 Mutual fund 1,007 0 ( 25 ) 982 900 82 0 1,007 0 ( 25 ) 982 900 82 0 Commercial paper 0 ( 25 ) 982 900 82 0 Commercial paper 2,601 ( 25 ) 982 900 82 0 Commercial paper 2,601 0 25 ) 982 900 82 0 Commercial paper 2,601 0 0 900 82 0 Commercial paper 2,601 0 0 2,601 400 2,201 82 0 Commercial paper 2,601 0 0 2,601 400 2,201 0 0 Commercial paper 2,601 0 0 2,601 400 2,201 0 Certificates Commercial paper 2,601 0 0 2,601 400 2,201 0 Certificates of paper 2,601 0 0 2,601 400 2,201 0 Certificates of deposit 2,601 0 0 2,601 400 2,201 0 Certificates of deposit 555 0 0 2,601 400 2,201 0 Certificates of deposit 555 0 2,201 0 Certificates of deposit 555 0 0 555 275 280 0 Certificates of deposit 555 0 0 555 275 280 0 Certificates of deposit 555 0 0 555 275 280 0 U.S. of deposit 555 0 0 555 275 280 0 U.S. Government deposit 555 0 0 555 275 280 0 U.S. Government and 555 0 0 555 275 280 0 U.S. Government and Agency 0 0 555 275 280 0 U.S. Government and Agency security U.S. Government and Agency security 13,450 21 ( 5 ) 13,466 Government and Agency security 13,450 21 ( 5 ) 13,466 2,369 Agency security 13,450 21 ( 5 ) 13,466 2,369 11,097 0 13,450 21 ( 5 ) 13,466 2,369 11,097 0 Foreign government 21 ( 5 ) 13,466 2,369 11,097 0 Foreign government bond ( 5 ) 13,466 2,369 11,097 0 Foreign government bond 3,450 5 ) 13,466 2,369 11,097 0 Foreign government bond 3,450 71 11,097 0 Foreign government bond 3,450 71 ( 4 ) 3,517 0 Foreign government bond 3,450 71 ( 4 ) 3,517 0 government bond 3,450 71 ( 4 ) 3,517 0 3,517 0 3,450 71 ( 4 ) 3,517 0 3,517 0 Mortgage-backed security 71 ( 4 ) 3,517 0 3,517 0 Mortgage-backed security 3,353 ( 4 ) 3,517 0 3,517 0 Mortgage-backed security 3,353 81 4 ) 3,517 0 3,517 0 Mortgage-backed security 3,353 81 ( 0 3,517 0 Mortgage-backed security 3,353 81 ( 16 ) 3,418 3,517 0 Mortgage-backed security 3,353 81 ( 16 ) 3,418 0 Mortgage-backed security 3,353 81 ( 16 ) 3,418 0 3,418 0 3,353 81 ( 16 ) 3,418 0 3,418 0 Corporate note 81 ( 16 ) 3,418 0 3,418 0 Corporate note and ( 16 ) 3,418 0 3,418 0 Corporate note and bond 16 ) 3,418 0 3,418 0 Corporate note and bond 4,361 0 Corporate note and bond 4,361 287 ( 52 ) 4,596 Corporate note and bond 4,361 287 ( 52 ) 4,596 0 and bond 4,361 287 ( 52 ) 4,596 0 4,596 0 4,361 287 ( 52 ) 4,596 0 4,596 0 Municipal security 287 ( 52 ) 4,596 0 4,596 0 Municipal security 255 ( 52 ) 4,596 0 4,596 0 Municipal security 255 2 52 ) 4,596 0 4,596 0 Municipal security 255 2 ( 0 4,596 0 Municipal security 255 2 ( 1 ) 256 4,596 0 Municipal security 255 2 ( 1 ) 256 68 Municipal security 255 2 ( 1 ) 256 68 188 0 255 2 ( 1 ) 256 68 188 0 Common and 2 ( 1 ) 256 68 188 0 Common and preferred ( 1 ) 256 68 188 0 Common and preferred stock 1 ) 256 68 188 0 Common and preferred stock 4,015 0 Common and preferred stock 4,015 627 ( 182 ) 4,460 Common and preferred stock 4,015 627 ( 182 ) 4,460 0 preferred stock 4,015 627 ( 182 ) 4,460 0 0 4,460 4,015 627 ( 182 ) 4,460 0 0 4,460 Other investment 627 ( 182 ) 4,460 0 0 4,460 Other investment 465 ( 182 ) 4,460 0 0 4,460 Other investment 465 0 182 ) 4,460 0 0 4,460 Other investment 465 0 0 0 0 4,460 Other investment 465 0 0 465 0 ( 0 4,460 Other investment 465 0 0 465 0 ( 8 4,460 Other investment 465 0 0 465 0 ( 8 ) Other investment 465 0 0 465 0 ( 8 ) 473 investment 465 0 0 465 0 ( 8 ) 473 Total 0 0 465 0 ( 8 ) 473 Total $ 35,576 465 0 ( 8 ) 473 Total $ 35,576 $ 1,089 8 ) 473 Total $ 35,576 $ 1,089 $ ( 285 473 Total $ 35,576 $ 1,089 $ ( 285 ) $ 35,576 $ 1,089 $ ( 285 ) $ 36,380 $ 6,076 $ ( 285 ) $ 36,380 $ 6,076 $ 25,371 $ 285 ) $ 36,380 $ 6,076 $ 25,371 $ 4,933 Unrealized $ 36,380 $ 6,076 $ 25,371 $ 4,933 Unrealized Losses on $ 6,076 $ 25,371 $ 4,933 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2010 U.S. Government and Fair Value June 30 , 2010 U.S. Government and Agency security Government and Agency security $ 216 $ ( 1 ) $ security $ 216 $ ( 1 ) $ 0 $ 0 $ ( 1 ) $ 0 $ 0 $ 216 $ 1 ) $ 0 $ 0 $ 216 $ ( 1 $ 0 $ 0 $ 216 $ ( 1 ) Mortgage-backed 0 $ 216 $ ( 1 ) Mortgage-backed security 105 ( ( 1 ) Mortgage-backed security 105 ( 6 ) 18 ( ) Mortgage-backed security 105 ( 6 ) 18 ( 1 ) security 105 ( 6 ) 18 ( 1 ) 123 ( ( 6 ) 18 ( 1 ) 123 ( 7 ) ) 18 ( 1 ) 123 ( 7 ) Corporate note ( 1 ) 123 ( 7 ) Corporate note and bond ) Corporate note and bond 1,124 ( 13 ) 89 ( note and bond 1,124 ( 13 ) 89 ( 5 ) bond 1,124 ( 13 ) 89 ( 5 ) 1,213 ( ( 13 ) 89 ( 5 ) 1,213 ( 18 ) ) 89 ( 5 ) 1,213 ( 18 ) Municipal security ( 5 ) 1,213 ( 18 ) Municipal security 66 ( ( 18 ) Municipal security 66 ( 1 ) 0 0 ) Municipal security 66 ( 1 ) 0 0 66 ( security 66 ( 1 ) 0 0 66 ( 1 ) 66 ( 1 ) 0 0 66 ( 1 ) Common ( 1 ) 0 0 66 ( 1 ) Common and ) 0 0 66 ( 1 ) Common and preferred stock ) Common and preferred stock 2,102 ( 339 ) 190 ( and preferred stock 2,102 ( 339 ) 190 ( 79 ) stock 2,102 ( 339 ) 190 ( 79 ) 2,292 ( ( 339 ) 190 ( 79 ) 2,292 ( 418 ) ) 190 ( 79 ) 2,292 ( 418 ) Total $ ( 79 ) 2,292 ( 418 ) Total $ 3,613 $ ( 418 ) Total $ 3,613 $ ( 360 ) $ Total $ 3,613 $ ( 360 ) $ 297 $ ( $ ( 360 ) $ 297 $ ( 85 ) $ ) $ 297 $ ( 85 ) $ 3,910 $ ( $ ( 85 ) $ 3,910 $ ( 445 ) Less ) $ 3,910 $ ( 445 ) Less than 12 Months ( 445 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2009 Mutual fund $ Fair Value June 30 , 2009 Mutual fund $ 3 $ , 2009 Mutual fund $ 3 $ ( 1 ) $ fund $ 3 $ ( 1 ) $ 77 $ ( $ ( 1 ) $ 77 $ ( 24 ) $ ) $ 77 $ ( 24 ) $ 80 $ ( $ ( 24 ) $ 80 $ ( 25 ) U.S. ) $ 80 $ ( 25 ) U.S. Government and Agency U.S. Government and Agency security 4,033 ( 5 ) 0 0 and Agency security 4,033 ( 5 ) 0 0 4,033 ( security 4,033 ( 5 ) 0 0 4,033 ( 5 ) 4,033 ( 5 ) 0 0 4,033 ( 5 ) Foreign ( 5 ) 0 0 4,033 ( 5 ) Foreign government ) 0 0 4,033 ( 5 ) Foreign government bond 1,444 5 ) Foreign government bond 1,444 ( 3 ) 669 ( Foreign government bond 1,444 ( 3 ) 669 ( 1 ) bond 1,444 ( 3 ) 669 ( 1 ) 2,113 ( ( 3 ) 669 ( 1 ) 2,113 ( 4 ) ) 669 ( 1 ) 2,113 ( 4 ) Mortgage-backed security ( 1 ) 2,113 ( 4 ) Mortgage-backed security 503 ( ( 4 ) Mortgage-backed security 503 ( 16 ) 0 0 ) Mortgage-backed security 503 ( 16 ) 0 0 503 ( security 503 ( 16 ) 0 0 503 ( 16 ) 503 ( 16 ) 0 0 503 ( 16 ) Corporate ( 16 ) 0 0 503 ( 16 ) Corporate note ) 0 0 503 ( 16 ) Corporate note and bond ) Corporate note and bond 713 ( 10 ) 504 ( note and bond 713 ( 10 ) 504 ( 42 ) bond 713 ( 10 ) 504 ( 42 ) 1,217 ( ( 10 ) 504 ( 42 ) 1,217 ( 52 ) ) 504 ( 42 ) 1,217 ( 52 ) Municipal security ( 42 ) 1,217 ( 52 ) Municipal security 16 ( ( 52 ) Municipal security 16 ( 1 ) 0 0 ) Municipal security 16 ( 1 ) 0 0 16 ( security 16 ( 1 ) 0 0 16 ( 1 ) 16 ( 1 ) 0 0 16 ( 1 ) Common ( 1 ) 0 0 16 ( 1 ) Common and ) 0 0 16 ( 1 ) Common and preferred stock ) Common and preferred stock 1,154 ( 135 ) 120 ( and preferred stock 1,154 ( 135 ) 120 ( 47 ) stock 1,154 ( 135 ) 120 ( 47 ) 1,274 ( ( 135 ) 120 ( 47 ) 1,274 ( 182 ) ) 120 ( 47 ) 1,274 ( 182 ) Total $ ( 47 ) 1,274 ( 182 ) Total $ 7,866 $ ( 182 ) Total $ 7,866 $ ( 171 ) $ Total $ 7,866 $ ( 171 ) $ 1,370 $ ( $ ( 171 ) $ 1,370 $ ( 114 ) $ ) $ 1,370 $ ( 114 ) $ 9,236 $ ( $ ( 114 ) $ 9,236 $ ( 285 ) 56 ) $ 9,236 $ ( 285 ) 56 Table of Contents 9,236 $ ( 285 ) 56 Table of Contents PART II of Contents PART II Item 8 Unrealized loss from fixed-income security available evidence a of June 30 , 2010 . At June a of June 30 , 2010 . At June 30 , , 2010 . At June 30 , 2010 and 2009 , . At June 30 , 2010 and 2009 , the recorded June 30 , 2010 and 2009 , the recorded base and not publicly traded were $ 216 million and $ 204 million $ 216 million and $ 204 million , respectively . Debt Basis Estimated Fair Value June 30 , 2010 Due in one Fair Value June 30 , 2010 Due in one year or one year or le $ 12,489 $ 12,526 Due after one or le $ 12,489 $ 12,526 Due after one year through one year through five year 14,987 15,283 Due after five year year through five year 14,987 15,283 Due after five year through Due after five year through 10 year 2,137 2,242 Due after five year through 10 year 2,137 2,242 Due after 10 year year through 10 year 2,137 2,242 Due after 10 year 3,791 year 2,137 2,242 Due after 10 year 3,791 3,952 Total $ 2,242 Due after 10 year 3,791 3,952 Total $ 33,404 $ Due after 10 year 3,791 3,952 Total $ 33,404 $ 34,003 year 3,791 3,952 Total $ 33,404 $ 34,003 NOTE 5 — 3,952 Total $ 33,404 $ 34,003 NOTE 5 — DERIVATIVES We $ 33,404 $ 34,003 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2010 and 2009 , As of June 30 , 2010 and 2009 , the total June 30 , 2010 and 2009 , the total notional amount exchange contract sold were $ 9.3 billion and $ 7.2 billion $ 9.3 billion and $ 7.2 billion , respectively . Foreign instrument . As of June 30 , 2010 and 2009 , As of June 30 , 2010 and 2009 , the total June 30 , 2010 and 2009 , the total notional amount exchange contract sold were $ 523 million and $ 3.5 billion $ 523 million and $ 3.5 billion , respectively . Certain exposure . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 7.8 billion and $ 5.3 billion $ 7.8 billion and $ 5.3 billion , respectively . As respectively . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 3.2 billion and $ 3.6 billion $ 3.2 billion and $ 3.6 billion , respectively . Equity forward . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 918 million and $ 472 million $ 918 million and $ 472 million , respectively . As respectively . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount and sold were immaterial . 57 Table of Contents PART II of Contents PART II Item 8 Interest Rate Securities held in instrument . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 3.1 billion and $ 1.8 billion $ 3.1 billion and $ 1.8 billion , respectively . As respectively . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 2.7 billion and $ 456 million $ 2.7 billion and $ 456 million , respectively . In date . As of June 30 , 2010 and 2009 , As of June 30 , 2010 and 2009 , the total June 30 , 2010 and 2009 , the total notional derivative purchased were immaterial and $ 1.3 billion , respectively . Credit risk . As of June 30 , 2010 and 2009 , As of June 30 , 2010 and 2009 , the total June 30 , 2010 and 2009 , the total notional amount grain . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 1.1 billion and $ 376 million $ 1.1 billion and $ 376 million , respectively . As respectively . As of June 30 , 2009 , the total As of June 30 , 2009 , the total notional amount purchased and sold were $ 543 million and $ 33 million $ 543 million and $ 33 million , respectively . Credit-Risk-Related a minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2010 , our long-term As of June 30 , 2010 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 58 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments derivative instrument held at June 30 , 2010 and 2009 , held at June 30 , 2010 and 2009 , excluding the June 30 , 2010 and 2009 , excluding the impact of Commodity Contracts Total Derivatives June 30 , 2010 Assets Derivatives not Total Derivatives June 30 , 2010 Assets Derivatives not designated a instrument : Short-term investment $ 15 $ 134 $ 12 $ Short-term investment $ 15 $ 134 $ 12 $ 7 $ $ 15 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 176 Other $ 12 $ 7 $ 8 $ 176 Other current asset $ 7 $ 8 $ 176 Other current asset 34 0 $ 176 Other current asset 34 0 0 0 0 34 176 Other current asset 34 0 0 0 0 34 Total Other current asset 34 0 0 0 0 34 Total $ current asset 34 0 0 0 0 34 Total $ 49 asset 34 0 0 0 0 34 Total $ 49 $ 34 0 0 0 0 34 Total $ 49 $ 134 0 0 34 Total $ 49 $ 134 $ 12 $ 34 Total $ 49 $ 134 $ 12 $ 7 $ $ 49 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 210 Derivatives $ 12 $ 7 $ 8 $ 210 Derivatives designated a $ 7 $ 8 $ 210 Derivatives designated a hedging instrument instrument : Short-term investment $ 3 $ 0 $ 0 $ Short-term investment $ 3 $ 0 $ 0 $ 0 $ $ 3 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 3 Other $ 0 $ 0 $ 0 $ 3 Other current asset $ 0 $ 0 $ 3 Other current asset 563 0 $ 3 Other current asset 563 0 0 0 0 563 3 Other current asset 563 0 0 0 0 563 Total Other current asset 563 0 0 0 0 563 Total $ current asset 563 0 0 0 0 563 Total $ 566 asset 563 0 0 0 0 563 Total $ 566 $ 563 0 0 0 0 563 Total $ 566 $ 0 0 0 563 Total $ 566 $ 0 $ 0 $ 563 Total $ 566 $ 0 $ 0 $ 0 $ $ 566 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 566 Total $ 0 $ 0 $ 0 $ 566 Total asset $ $ 0 $ 0 $ 566 Total asset $ 615 $ $ 566 Total asset $ 615 $ 134 $ 12 $ Total asset $ 615 $ 134 $ 12 $ 7 $ $ 615 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 776 Liabilities $ 12 $ 7 $ 8 $ 776 Liabilities Derivatives not $ 7 $ 8 $ 776 Liabilities Derivatives not designated a Other current liability $ ( 60 ) $ ( 17 ) ( 60 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 156 ) ( 5 ) $ ( 156 ) Derivatives designated a hedging Other current liability $ ( 9 ) $ 0 $ 0 $ ( 9 ) $ 0 $ 0 $ 0 $ 9 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 9 $ 0 $ 0 $ 0 $ ( 9 ) Total 0 $ 0 $ ( 9 ) Total liability $ ( ) Total liability $ ( 69 ) $ ( 17 ) ( 69 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 165 ) ( 5 ) $ ( 165 ) 59 Table of Contents ) $ ( 165 ) 59 Table of Contents PART II of Contents PART II Item 8 ( In million ) Foreign Commodity Contracts Total Derivatives June 30 , 2009 Assets Derivatives not Total Derivatives June 30 , 2009 Assets Derivatives not designated a instrument : Short-term investment $ 9 $ 78 $ 44 $ Short-term investment $ 9 $ 78 $ 44 $ 21 $ $ 9 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 154 Other $ 44 $ 21 $ 2 $ 154 Other current asset $ 21 $ 2 $ 154 Other current asset 48 0 $ 154 Other current asset 48 0 0 0 0 48 154 Other current asset 48 0 0 0 0 48 Total Other current asset 48 0 0 0 0 48 Total $ current asset 48 0 0 0 0 48 Total $ 57 asset 48 0 0 0 0 48 Total $ 57 $ 48 0 0 0 0 48 Total $ 57 $ 78 0 0 48 Total $ 57 $ 78 $ 44 $ 48 Total $ 57 $ 78 $ 44 $ 21 $ $ 57 $ 78 $ 44 $ 21 $ 2 $ $ 78 $ 44 $ 21 $ 2 $ 202 Derivatives $ 44 $ 21 $ 2 $ 202 Derivatives designated a $ 21 $ 2 $ 202 Derivatives designated a hedging instrument instrument : Short-term investment $ 12 $ 0 $ 0 $ Short-term investment $ 12 $ 0 $ 0 $ 0 $ $ 12 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 12 Other $ 0 $ 0 $ 0 $ 12 Other current asset $ 0 $ 0 $ 12 Other current asset 417 0 $ 12 Other current asset 417 0 0 0 0 417 12 Other current asset 417 0 0 0 0 417 Equity Other current asset 417 0 0 0 0 417 Equity and current asset 417 0 0 0 0 417 Equity and other asset 417 0 0 0 0 417 Equity and other investment 417 0 0 0 0 417 Equity and other investment 0 417 Equity and other investment 0 2 0 0 0 2 Equity and other investment 0 2 0 0 0 2 Total and other investment 0 2 0 0 0 2 Total $ other investment 0 2 0 0 0 2 Total $ 429 investment 0 2 0 0 0 2 Total $ 429 $ 0 2 0 0 0 2 Total $ 429 $ 2 0 0 2 Total $ 429 $ 2 $ 0 $ 2 Total $ 429 $ 2 $ 0 $ 0 $ $ 429 $ 2 $ 0 $ 0 $ 0 $ $ 2 $ 0 $ 0 $ 0 $ 431 Total $ 0 $ 0 $ 0 $ 431 Total asset $ $ 0 $ 0 $ 431 Total asset $ 486 $ $ 431 Total asset $ 486 $ 80 $ 44 $ Total asset $ 486 $ 80 $ 44 $ 21 $ $ 486 $ 80 $ 44 $ 21 $ 2 $ $ 80 $ 44 $ 21 $ 2 $ 633 Liabilities $ 44 $ 21 $ 2 $ 633 Liabilities Derivatives not $ 21 $ 2 $ 633 Liabilities Derivatives not designated a Other current liability $ ( 183 ) $ ( 3 ) ( 183 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 274 ) ( 6 ) $ ( 274 ) Derivatives designated a hedging Other current liability $ ( 75 ) $ 0 $ 0 $ ( 75 ) $ 0 $ 0 $ 0 $ 75 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 75 $ 0 $ 0 $ 0 $ ( 75 ) Total 0 $ 0 $ ( 75 ) Total liability $ ( ) Total liability $ ( 258 ) $ ( 3 ) ( 258 ) $ ( 3 ) $ ( 20 ) ( 3 ) $ ( 20 ) $ ( 62 ) ( 20 ) $ ( 62 ) $ ( 6 ) ( 62 ) $ ( 6 ) $ ( 349 ) ( 6 ) $ ( 349 ) See also Note 4 349 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . million ) Year Ended June 30 , 2010 2009 Foreign Exchange Year Ended June 30 , 2010 2009 Foreign Exchange Contracts Derivatives Ended June 30 , 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 60 ( 120 ) $ 121 Hedged item 60 ( 120 ) Total $ 121 Hedged item 60 ( 120 ) Total $ 3 $ ( 120 ) Total $ 3 $ 1 Equity Contracts Derivatives ) Total $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives $ 0 $ 191 Hedged item 0 Contracts Derivatives $ 0 $ 191 Hedged item 0 ( 211 0 $ 191 Hedged item 0 ( 211 ) Total $ 191 Hedged item 0 ( 211 ) Total $ 0 $ ( 211 ) Total $ 0 $ ( 20 ) 60 Total $ 0 $ ( 20 ) 60 Table of Contents 0 $ ( 20 ) 60 Table of Contents PART II of Contents PART II Item 8 Cash-Flow Hedges We recognized the million ) Year Ended June 30 , 2010 2009 Effective Portion Year Ended June 30 , 2010 2009 Effective Portion Gain recognized Ended June 30 , 2010 2009 Effective Portion Gain recognized in of tax effect of $ 188 and $ 472 $ 349 of $ 188 and $ 472 $ 349 $ 876 Gain 188 and $ 472 $ 349 $ 876 Gain reclassified from $ 472 $ 349 $ 876 Gain reclassified from OCI into from OCI into revenue $ 495 $ 884 Amount Excluded from into revenue $ 495 $ 884 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 174 ) $ ( 314 ) ( 174 ) $ ( 314 ) We estimate that $ ) We estimate that $ 496 million of net derivative gain into earnings within the next 12 month . No significant amount to occur during fiscal year 2010 . Non-Designated Derivatives Gains ( immaterial for the fiscal year 2010 and 2009 . Other than the fiscal year 2010 and 2009 . Other than those derivative million ) Year Ended June 30 , 2010 2009 Foreign exchange Year Ended June 30 , 2010 2009 Foreign exchange contract $ Ended June 30 , 2010 2009 Foreign exchange contract $ 106 2009 Foreign exchange contract $ 106 $ ( 234 ) Equity contract $ 106 $ ( 234 ) Equity contract 12 ( ( 234 ) Equity contract 12 ( 131 ) Interest-rate contract ) Equity contract 12 ( 131 ) Interest-rate contract ( 4 131 ) Interest-rate contract ( 4 ) 5 Credit contract 22 Interest-rate contract ( 4 ) 5 Credit contract 22 ( 18 4 ) 5 Credit contract 22 ( 18 ) Commodity contract 5 Credit contract 22 ( 18 ) Commodity contract ( 1 18 ) Commodity contract ( 1 ) ( 126 ) Total contract ( 1 ) ( 126 ) Total $ 135 $ ( 126 ) Total $ 135 $ ( 504 ) 61 Total $ 135 $ ( 504 ) 61 Table of Contents 135 $ ( 504 ) 61 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2010 Assets Mutual fund Fair Value June 30 , 2010 Assets Mutual fund $ 1,120 2010 Assets Mutual fund $ 1,120 $ 0 $ 0 $ Mutual fund $ 1,120 $ 0 $ 0 $ 1,120 $ $ 1,120 $ 0 $ 0 $ 1,120 $ 0 $ $ 0 $ 0 $ 1,120 $ 0 $ 1,120 Commercial $ 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 172 0 0 $ 1,120 Commercial paper 0 172 0 172 0 172 $ 1,120 Commercial paper 0 172 0 172 0 172 Certificates 1,120 Commercial paper 0 172 0 172 0 172 Certificates of Commercial paper 0 172 0 172 0 172 Certificates of deposit paper 0 172 0 172 0 172 Certificates of deposit 0 0 172 0 172 0 172 Certificates of deposit 0 348 0 172 Certificates of deposit 0 348 0 348 0 348 172 Certificates of deposit 0 348 0 348 0 348 U.S. Certificates of deposit 0 348 0 348 0 348 U.S. Government of deposit 0 348 0 348 0 348 U.S. Government and deposit 0 348 0 348 0 348 U.S. Government and Agency 0 348 0 348 0 348 U.S. Government and Agency security U.S. Government and Agency security 16,473 4,756 0 21,229 0 21,229 Government and Agency security 16,473 4,756 0 21,229 0 21,229 Foreign and Agency security 16,473 4,756 0 21,229 0 21,229 Foreign government Agency security 16,473 4,756 0 21,229 0 21,229 Foreign government bond security 16,473 4,756 0 21,229 0 21,229 Foreign government bond 239 16,473 4,756 0 21,229 0 21,229 Foreign government bond 239 294 0 21,229 Foreign government bond 239 294 0 533 0 533 21,229 Foreign government bond 239 294 0 533 0 533 Mortgage-backed Foreign government bond 239 294 0 533 0 533 Mortgage-backed security government bond 239 294 0 533 0 533 Mortgage-backed security 0 bond 239 294 0 533 0 533 Mortgage-backed security 0 3,264 239 294 0 533 0 533 Mortgage-backed security 0 3,264 0 533 0 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 0 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate note Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate note and security 0 3,264 0 3,264 0 3,264 Corporate note and bond 0 3,264 0 3,264 0 3,264 Corporate note and bond 0 3,264 Corporate note and bond 0 7,460 167 7,627 0 7,627 Corporate note and bond 0 7,460 167 7,627 0 7,627 Municipal note and bond 0 7,460 167 7,627 0 7,627 Municipal security and bond 0 7,460 167 7,627 0 7,627 Municipal security 0 bond 0 7,460 167 7,627 0 7,627 Municipal security 0 747 0 7,460 167 7,627 0 7,627 Municipal security 0 747 0 7,627 0 7,627 Municipal security 0 747 0 747 0 747 0 7,627 Municipal security 0 747 0 747 0 747 Common 7,627 Municipal security 0 747 0 747 0 747 Common and Municipal security 0 747 0 747 0 747 Common and preferred security 0 747 0 747 0 747 Common and preferred stock 0 747 0 747 0 747 Common and preferred stock 6,988 747 Common and preferred stock 6,988 43 5 7,036 0 7,036 Common and preferred stock 6,988 43 5 7,036 0 7,036 Derivatives and preferred stock 6,988 43 5 7,036 0 7,036 Derivatives 22 preferred stock 6,988 43 5 7,036 0 7,036 Derivatives 22 745 stock 6,988 43 5 7,036 0 7,036 Derivatives 22 745 9 6,988 43 5 7,036 0 7,036 Derivatives 22 745 9 776 5 7,036 0 7,036 Derivatives 22 745 9 776 ( 207 7,036 0 7,036 Derivatives 22 745 9 776 ( 207 ) 0 7,036 Derivatives 22 745 9 776 ( 207 ) 569 7,036 Derivatives 22 745 9 776 ( 207 ) 569 Total 22 745 9 776 ( 207 ) 569 Total $ 24,842 9 776 ( 207 ) 569 Total $ 24,842 $ 17,829 207 ) 569 Total $ 24,842 $ 17,829 $ 181 $ 569 Total $ 24,842 $ 17,829 $ 181 $ 42,852 $ $ 24,842 $ 17,829 $ 181 $ 42,852 $ ( 207 $ 17,829 $ 181 $ 42,852 $ ( 207 ) $ 181 $ 42,852 $ ( 207 ) $ 42,645 Liabilities Derivatives $ ( 207 ) $ 42,645 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 85 $ 137 $ 0 $ and other $ 85 $ 137 $ 0 $ 222 $ $ 85 $ 137 $ 0 $ 222 $ ( 205 $ 137 $ 0 $ 222 $ ( 205 ) $ 0 $ 222 $ ( 205 ) $ 17 ( In $ ( 205 ) $ 17 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2009 Assets Mutual fund Fair Value June 30 , 2009 Assets Mutual fund $ 982 2009 Assets Mutual fund $ 982 $ 0 $ 0 $ Mutual fund $ 982 $ 0 $ 0 $ 982 $ $ 982 $ 0 $ 0 $ 982 $ 0 $ $ 0 $ 0 $ 982 $ 0 $ 982 Commercial $ 0 $ 982 $ 0 $ 982 Commercial paper 0 $ 982 $ 0 $ 982 Commercial paper 0 2,601 0 0 $ 982 Commercial paper 0 2,601 0 2,601 0 2,601 $ 982 Commercial paper 0 2,601 0 2,601 0 2,601 Certificates 982 Commercial paper 0 2,601 0 2,601 0 2,601 Certificates of Commercial paper 0 2,601 0 2,601 0 2,601 Certificates of deposit paper 0 2,601 0 2,601 0 2,601 Certificates of deposit 0 0 2,601 0 2,601 0 2,601 Certificates of deposit 0 555 0 2,601 Certificates of deposit 0 555 0 555 0 555 2,601 Certificates of deposit 0 555 0 555 0 555 U.S. Certificates of deposit 0 555 0 555 0 555 U.S. Government of deposit 0 555 0 555 0 555 U.S. Government and deposit 0 555 0 555 0 555 U.S. Government and Agency 0 555 0 555 0 555 U.S. Government and Agency security U.S. Government and Agency security 7,134 6,105 0 13,239 0 13,239 Government and Agency security 7,134 6,105 0 13,239 0 13,239 Foreign and Agency security 7,134 6,105 0 13,239 0 13,239 Foreign government Agency security 7,134 6,105 0 13,239 0 13,239 Foreign government bond security 7,134 6,105 0 13,239 0 13,239 Foreign government bond 501 7,134 6,105 0 13,239 0 13,239 Foreign government bond 501 3,022 0 13,239 Foreign government bond 501 3,022 0 3,523 0 3,523 13,239 Foreign government bond 501 3,022 0 3,523 0 3,523 Mortgage-backed Foreign government bond 501 3,022 0 3,523 0 3,523 Mortgage-backed security government bond 501 3,022 0 3,523 0 3,523 Mortgage-backed security 0 bond 501 3,022 0 3,523 0 3,523 Mortgage-backed security 0 3,593 501 3,022 0 3,523 0 3,523 Mortgage-backed security 0 3,593 0 3,523 0 3,523 Mortgage-backed security 0 3,593 0 3,593 0 3,593 0 3,523 Mortgage-backed security 0 3,593 0 3,593 0 3,593 Corporate 3,523 Mortgage-backed security 0 3,593 0 3,593 0 3,593 Corporate note Mortgage-backed security 0 3,593 0 3,593 0 3,593 Corporate note and security 0 3,593 0 3,593 0 3,593 Corporate note and bond 0 3,593 0 3,593 0 3,593 Corporate note and bond 0 3,593 Corporate note and bond 0 4,073 253 4,326 0 4,326 Corporate note and bond 0 4,073 253 4,326 0 4,326 Municipal note and bond 0 4,073 253 4,326 0 4,326 Municipal security and bond 0 4,073 253 4,326 0 4,326 Municipal security 0 bond 0 4,073 253 4,326 0 4,326 Municipal security 0 256 0 4,073 253 4,326 0 4,326 Municipal security 0 256 0 4,326 0 4,326 Municipal security 0 256 0 256 0 256 0 4,326 Municipal security 0 256 0 256 0 256 Common 4,326 Municipal security 0 256 0 256 0 256 Common and Municipal security 0 256 0 256 0 256 Common and preferred security 0 256 0 256 0 256 Common and preferred stock 0 256 0 256 0 256 Common and preferred stock 4,218 256 Common and preferred stock 4,218 28 5 4,251 0 4,251 Common and preferred stock 4,218 28 5 4,251 0 4,251 Derivatives and preferred stock 4,218 28 5 4,251 0 4,251 Derivatives 5 preferred stock 4,218 28 5 4,251 0 4,251 Derivatives 5 623 stock 4,218 28 5 4,251 0 4,251 Derivatives 5 623 5 4,218 28 5 4,251 0 4,251 Derivatives 5 623 5 633 5 4,251 0 4,251 Derivatives 5 623 5 633 ( 235 4,251 0 4,251 Derivatives 5 623 5 633 ( 235 ) 0 4,251 Derivatives 5 623 5 633 ( 235 ) 398 4,251 Derivatives 5 623 5 633 ( 235 ) 398 Total 5 623 5 633 ( 235 ) 398 Total $ 12,840 5 633 ( 235 ) 398 Total $ 12,840 $ 20,856 235 ) 398 Total $ 12,840 $ 20,856 $ 263 $ 398 Total $ 12,840 $ 20,856 $ 263 $ 33,959 $ $ 12,840 $ 20,856 $ 263 $ 33,959 $ ( 235 $ 20,856 $ 263 $ 33,959 $ ( 235 ) $ 263 $ 33,959 $ ( 235 ) $ 33,724 Liabilities Derivatives $ ( 235 ) $ 33,724 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 344 $ 0 $ and other $ 5 $ 344 $ 0 $ 349 $ $ 5 $ 344 $ 0 $ 349 $ ( 231 $ 344 $ 0 $ 349 $ ( 231 ) $ 0 $ 349 $ ( 231 ) $ 118 ( a $ ( 231 ) $ 118 ( a ) These amount and counterparty credit risk . 62 Table of Contents PART II of Contents PART II Item 8 The table below reconciles the these same asset in Note 4 – Investments for June 30 4 – Investments for June 30 , 2010 and 2009 . Investments for June 30 , 2010 and 2009 . ( In June 30 , 2010 and 2009 . ( In million ) ( In million ) June 30 , 2010 2009 Net fair million ) June 30 , 2010 2009 Net fair value of ) June 30 , 2010 2009 Net fair value of asset on a recurring basis $ 42,645 $ 33,724 Cash 1,661 2,064 recurring basis $ 42,645 $ 33,724 Cash 1,661 2,064 Common and $ 42,645 $ 33,724 Cash 1,661 2,064 Common and preferred stock 42,645 $ 33,724 Cash 1,661 2,064 Common and preferred stock measured value on a nonrecurring basis 216 204 Other investment measured at on a nonrecurring basis 216 204 Other investment measured at fair value on a nonrecurring basis 502 465 Derivative asset classified a on a nonrecurring basis 502 465 Derivative asset classified a other a other current asset ( 597 ) ( 465 ) Derivative asset ( 597 ) ( 465 ) Derivative liability under master classified a other current asset 53 231 Other 62 157 Recorded a other current asset 53 231 Other 62 157 Recorded basis current asset 53 231 Other 62 157 Recorded basis of investment asset 53 231 Other 62 157 Recorded basis of investment component basis of investment component $ 44,542 $ 36,380 Changes in Financial investment component $ 44,542 $ 36,380 Changes in Financial Instruments Measured Financial Instruments Measured at Level 3 Fair Value on a Recurring change during the fiscal year 2010 and 2009 in our Level the fiscal year 2010 and 2009 in our Level 3 financial and 2009 in our Level 3 financial instrument that are measured Assets Total Year Ended June 30 , 2010 Balance , beginning Year Ended June 30 , 2010 Balance , beginning of period , beginning of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Total $ 253 $ 5 $ 5 $ 263 Total realized and $ 5 $ 5 $ 263 Total realized and unrealized gain other income ( expense ) 6 0 4 10 Included in income ( expense ) 6 0 4 10 Included in other ( expense ) 6 0 4 10 Included in other comprehensive expense ) 6 0 4 10 Included in other comprehensive income in other comprehensive income ( 92 ) 0 0 ( 92 comprehensive income ( 92 ) 0 0 ( 92 ) Balance income ( 92 ) 0 0 ( 92 ) Balance , 92 ) 0 0 ( 92 ) Balance , end of , end of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Change $ 167 $ 5 $ 9 $ 181 Change in unrealized $ 5 $ 9 $ 181 Change in unrealized gain ( asset held a of June 30 , 2010 $ 6 $ a of June 30 , 2010 $ 6 $ 0 $ June 30 , 2010 $ 6 $ 0 $ 4 $ , 2010 $ 6 $ 0 $ 4 $ 10 ( $ 6 $ 0 $ 4 $ 10 ( In million $ 0 $ 4 $ 10 ( In million ) Corporate Assets Total Year Ended June 30 , 2009 Balance , beginning Year Ended June 30 , 2009 Balance , beginning of period , beginning of period $ 138 $ 8 $ 71 $ of period $ 138 $ 8 $ 71 $ 217 Total $ 138 $ 8 $ 71 $ 217 Total realized and $ 8 $ 71 $ 217 Total realized and unrealized gain income ( expense ) ( 6 ) ( 6 ) 51 ) ( 6 ) ( 6 ) 51 39 Included in 6 ) ( 6 ) 51 39 Included in other comprehensive ) ( 6 ) 51 39 Included in other comprehensive income Included in other comprehensive income 111 0 0 111 Purchases , in other comprehensive income 111 0 0 111 Purchases , issuance other comprehensive income 111 0 0 111 Purchases , issuance , comprehensive income 111 0 0 111 Purchases , issuance , and , issuance , and settlement 0 5 ( 119 ) ( issuance , and settlement 0 5 ( 119 ) ( 114 and settlement 0 5 ( 119 ) ( 114 ) Transfers 5 ( 119 ) ( 114 ) Transfers in ( out Transfers in ( out ) 10 ( 2 ) 2 10 ( out ) 10 ( 2 ) 2 10 Balance , ) 10 ( 2 ) 2 10 Balance , end of 10 ( 2 ) 2 10 Balance , end of period , end of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Change $ 253 $ 5 $ 5 $ 263 Change in unrealized $ 5 $ 5 $ 263 Change in unrealized gain ( asset held a of June 30 , 2009 $ ( 7 a of June 30 , 2009 $ ( 7 ) $ 30 , 2009 $ ( 7 ) $ ( 5 ) ( 7 ) $ ( 5 ) $ 4 $ ( $ ( 5 ) $ 4 $ ( 8 ) 63 ) $ 4 $ ( 8 ) 63 Table of Contents 4 $ ( 8 ) 63 Table of Contents PART II of Contents PART II Item 8 Assets and Liabilities Measured at Nonrecurring Basis During fiscal year 2010 and 2009 , impairment charge During fiscal year 2010 and 2009 , impairment charge of $ , impairment charge of $ 5 million and $ 86 million $ 5 million and $ 86 million , respectively , were all instance . At June 30 , 2010 and 2009 , . At June 30 , 2010 and 2009 , the fair June 30 , 2010 and 2009 , the fair value of a non-recurring basis were $ 0 and $ 164 million , were $ 0 and $ 164 million , respectively . NOTE million , respectively . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2010 2009 Raw material million ) June 30 , 2010 2009 Raw material $ 172 ) June 30 , 2010 2009 Raw material $ 172 $ 2010 2009 Raw material $ 172 $ 170 Work in process Raw material $ 172 $ 170 Work in process 16 45 $ 170 Work in process 16 45 Finished good 552 502 170 Work in process 16 45 Finished good 552 502 Total process 16 45 Finished good 552 502 Total $ 740 $ 16 45 Finished good 552 502 Total $ 740 $ 717 good 552 502 Total $ 740 $ 717 NOTE 8 — 502 Total $ 740 $ 717 NOTE 8 — PROPERTY AND $ 740 $ 717 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2010 2009 Land $ million ) June 30 , 2010 2009 Land $ 526 $ ) June 30 , 2010 2009 Land $ 526 $ 526 , 2010 2009 Land $ 526 $ 526 Buildings and improvement 2009 Land $ 526 $ 526 Buildings and improvement 6,087 5,886 $ 526 Buildings and improvement 6,087 5,886 Leasehold improvement 2,100 1,938 526 Buildings and improvement 6,087 5,886 Leasehold improvement 2,100 1,938 Computer improvement 6,087 5,886 Leasehold improvement 2,100 1,938 Computer equipment and software 6,087 5,886 Leasehold improvement 2,100 1,938 Computer equipment and software 5,673 1,938 Computer equipment and software 5,673 4,989 Furniture and equipment 1,873 Computer equipment and software 5,673 4,989 Furniture and equipment 1,873 1,743 5,673 4,989 Furniture and equipment 1,873 1,743 Total , at cost 4,989 Furniture and equipment 1,873 1,743 Total , at cost 16,259 1,743 Total , at cost 16,259 15,082 Accumulated depreciation ( 8,629 Total , at cost 16,259 15,082 Accumulated depreciation ( 8,629 ) 16,259 15,082 Accumulated depreciation ( 8,629 ) ( 7,547 ) Total depreciation ( 8,629 ) ( 7,547 ) Total , net $ ) Total , net $ 7,630 $ 7,535 During fiscal year , net $ 7,630 $ 7,535 During fiscal year 2010 , $ 7,535 During fiscal year 2010 , 2009 , and 2008 During fiscal year 2010 , 2009 , and 2008 , depreciation 2010 , 2009 , and 2008 , depreciation expense wa $ , depreciation expense wa $ 1.8 billion , $ 1.7 billion $ 1.8 billion , $ 1.7 billion , and $ 1.4 1.7 billion , and $ 1.4 billion , respectively . NOTE billion , respectively . NOTE 9 — BUSINESS COMBINATIONS During fiscal BUSINESS COMBINATIONS During fiscal year 2010 , we acquired five entity for total consideration of $ 267 million , substantially all of for total consideration of $ 600 million , including Razorfish in second quarter of fiscal year 2010 . These entity have been consolidated result of operation . 64 Table of Contents PART II of Contents PART II Item 8 NOTE 10 — GOODWILL Changes PART II Item 8 NOTE 10 — GOODWILL Changes in the of goodwill for fiscal year 2010 and 2009 by segment were for fiscal year 2010 and 2009 by segment were a follows : Balance a of June 30 , 2008 Acquisitions Purchase Accounting a of June 30 , 2008 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2009 Acquisitions Purchase Accounting a of June 30 , 2009 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2010 ( In million a of June 30 , 2010 ( In million ) Windows & Windows Live Division $ 153 $ 1 $ ( 77 Live Division $ 153 $ 1 $ ( 77 ) $ 153 $ 1 $ ( 77 ) $ 77 $ 0 $ ( 77 ) $ 77 $ 0 $ 0 $ 77 ) $ 77 $ 0 $ 0 $ 77 Server $ 77 $ 0 $ 0 $ 77 Server and Tools $ 0 $ 0 $ 77 Server and Tools 738 233 $ 77 Server and Tools 738 233 67 1,038 82 ( 77 Server and Tools 738 233 67 1,038 82 ( 2 Server and Tools 738 233 67 1,038 82 ( 2 ) and Tools 738 233 67 1,038 82 ( 2 ) 1,118 Tools 738 233 67 1,038 82 ( 2 ) 1,118 Online 233 67 1,038 82 ( 2 ) 1,118 Online Services Division 1,038 82 ( 2 ) 1,118 Online Services Division 6,274 447 ) 1,118 Online Services Division 6,274 447 ( 64 ) 6,657 1,118 Online Services Division 6,274 447 ( 64 ) 6,657 0 Services Division 6,274 447 ( 64 ) 6,657 0 ( 284 6,274 447 ( 64 ) 6,657 0 ( 284 ) 6,373 447 ( 64 ) 6,657 0 ( 284 ) 6,373 Microsoft 64 ) 6,657 0 ( 284 ) 6,373 Microsoft Business Division 6,657 0 ( 284 ) 6,373 Microsoft Business Division 4,191 0 ) 6,373 Microsoft Business Division 4,191 0 ( 264 ) 3,927 6,373 Microsoft Business Division 4,191 0 ( 264 ) 3,927 116 Business Division 4,191 0 ( 264 ) 3,927 116 ( 19 4,191 0 ( 264 ) 3,927 116 ( 19 ) 4,024 0 ( 264 ) 3,927 116 ( 19 ) 4,024 Entertainment 264 ) 3,927 116 ( 19 ) 4,024 Entertainment and Devices 3,927 116 ( 19 ) 4,024 Entertainment and Devices Division 752 4,024 Entertainment and Devices Division 752 58 ( 6 ) 804 Entertainment and Devices Division 752 58 ( 6 ) 804 0 Devices Division 752 58 ( 6 ) 804 0 ( 2 752 58 ( 6 ) 804 0 ( 2 ) 802 58 ( 6 ) 804 0 ( 2 ) 802 Total 6 ) 804 0 ( 2 ) 802 Total $ 12,108 804 0 ( 2 ) 802 Total $ 12,108 $ 739 2 ) 802 Total $ 12,108 $ 739 $ ( 344 802 Total $ 12,108 $ 739 $ ( 344 ) $ 12,108 $ 739 $ ( 344 ) $ 12,503 $ 198 $ ( 344 ) $ 12,503 $ 198 $ ( 307 344 ) $ 12,503 $ 198 $ ( 307 ) $ 12,503 $ 198 $ ( 307 ) $ 12,394 None of $ ( 307 ) $ 12,394 None of the amount recorded , but will not exceed 12 month . Adjustments in the other ” for fiscal year 2010 is $ 285 million of fiscal year 2010 is $ 285 million of goodwill associated with disposition . See also Note 9 – Business Combinations . We for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2010 . In connection a of May 1 , 2010 . In connection with the first quarter of fiscal year 2010 . No impairment of goodwill goodwill wa identified . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2010 2009 Contract-based $ Year Ended June 30 , 2010 2009 Contract-based $ 1,075 $ Ended June 30 , 2010 2009 Contract-based $ 1,075 $ ( , 2010 2009 Contract-based $ 1,075 $ ( 914 ) $ Contract-based $ 1,075 $ ( 914 ) $ 161 $ 1,087 $ ( 914 ) $ 161 $ 1,087 $ ( 855 914 ) $ 161 $ 1,087 $ ( 855 ) $ 161 $ 1,087 $ ( 855 ) $ 232 Technology-based 2,308 $ ( 855 ) $ 232 Technology-based 2,308 ( 1,521 ) 855 ) $ 232 Technology-based 2,308 ( 1,521 ) 787 2,033 $ 232 Technology-based 2,308 ( 1,521 ) 787 2,033 ( 1,090 Technology-based 2,308 ( 1,521 ) 787 2,033 ( 1,090 ) 943 2,308 ( 1,521 ) 787 2,033 ( 1,090 ) 943 Marketing-related 1,521 ) 787 2,033 ( 1,090 ) 943 Marketing-related 114 ( 787 2,033 ( 1,090 ) 943 Marketing-related 114 ( 86 ) ( 1,090 ) 943 Marketing-related 114 ( 86 ) 28 188 ) 943 Marketing-related 114 ( 86 ) 28 188 ( 97 Marketing-related 114 ( 86 ) 28 188 ( 97 ) 91 114 ( 86 ) 28 188 ( 97 ) 91 Customer-related 86 ) 28 188 ( 97 ) 91 Customer-related 390 ( 28 188 ( 97 ) 91 Customer-related 390 ( 208 ) ( 97 ) 91 Customer-related 390 ( 208 ) 182 732 ) 91 Customer-related 390 ( 208 ) 182 732 ( 239 Customer-related 390 ( 208 ) 182 732 ( 239 ) 493 390 ( 208 ) 182 732 ( 239 ) 493 Total 208 ) 182 732 ( 239 ) 493 Total $ 3,887 182 732 ( 239 ) 493 Total $ 3,887 $ ( 239 ) 493 Total $ 3,887 $ ( 2,729 ) $ Total $ 3,887 $ ( 2,729 ) $ 1,158 $ 4,040 $ ( 2,729 ) $ 1,158 $ 4,040 $ ( 2,281 2,729 ) $ 1,158 $ 4,040 $ ( 2,281 ) $ 1,158 $ 4,040 $ ( 2,281 ) $ 1,759 We estimate $ ( 2,281 ) $ 1,759 We estimate that we have of the period presented . 65 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset asset acquired during fiscal year 2010 and 2009 were a follows during fiscal year 2010 and 2009 were a follows : ( Average Life Year Ended June 30 , 2010 2009 Contract-based $ Year Ended June 30 , 2010 2009 Contract-based $ 3 2 Ended June 30 , 2010 2009 Contract-based $ 3 2 year , 2010 2009 Contract-based $ 3 2 year $ 26 4 2010 2009 Contract-based $ 3 2 year $ 26 4 year $ 3 2 year $ 26 4 year Technology-based 322 4 3 2 year $ 26 4 year Technology-based 322 4 year $ 26 4 year Technology-based 322 4 year 293 4 year 26 4 year Technology-based 322 4 year 293 4 year Marketing-related year Technology-based 322 4 year 293 4 year Marketing-related 0 7 Technology-based 322 4 year 293 4 year Marketing-related 0 7 5 year 293 4 year Marketing-related 0 7 5 year Customer-related 18 293 4 year Marketing-related 0 7 5 year Customer-related 18 5 4 year Marketing-related 0 7 5 year Customer-related 18 5 year 0 7 5 year Customer-related 18 5 year 28 2 year 7 5 year Customer-related 18 5 year 28 2 year Total year Customer-related 18 5 year 28 2 year Total $ 343 Customer-related 18 5 year 28 2 year Total $ 343 $ 28 2 year Total $ 343 $ 354 Intangible asset amortization year Total $ 343 $ 354 Intangible asset amortization expense wa asset amortization expense wa $ 707 million , $ 591 million $ 707 million , $ 591 million , and $ 472 591 million , and $ 472 million for fiscal year 2010 472 million for fiscal year 2010 , 2009 , and 2008 for fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . The following intangible asset held at June 30 , 2010 : ( In held at June 30 , 2010 : ( In million ) million ) Year Ending June 30 , 2011 $ 486 2012 Year Ending June 30 , 2011 $ 486 2012 365 2013 June 30 , 2011 $ 486 2012 365 2013 235 2014 30 , 2011 $ 486 2012 365 2013 235 2014 36 , 2011 $ 486 2012 365 2013 235 2014 36 2015 2011 $ 486 2012 365 2013 235 2014 36 2015 and $ 486 2012 365 2013 235 2014 36 2015 and thereafter 486 2012 365 2013 235 2014 36 2015 and thereafter 36 2012 365 2013 235 2014 36 2015 and thereafter 36 Total 365 2013 235 2014 36 2015 and thereafter 36 Total $ 2014 36 2015 and thereafter 36 Total $ 1,158 NOTE 12 and thereafter 36 Total $ 1,158 NOTE 12 — DEBT In 36 Total $ 1,158 NOTE 12 — DEBT In September 2008 12 — DEBT In September 2008 , our Board of Directors financing of up to $ 6.0 billion . As of June billion . As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.0 2010 , we had $ 6.0 billion of issued and outstanding outstanding debt comprised of $ 1.0 billion of commercial paper and of commercial paper and $ 5.0 billion of long-term debt , long-term debt , including $ 1.25 billion of convertible debt . our debt for fiscal year 2010 wa $ 145 million . fiscal year 2010 wa $ 145 million . No cash wa our debt for fiscal year 2009 and 2008 . Short-term Debt for fiscal year 2009 and 2008 . Short-term Debt As of Short-term Debt As of June 30 , 2010 , our $ As of June 30 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion of commercial paper issued including issuance cost , of 0.20 % and maturity of 22 0.20 % and maturity of 22 to 216 day . The and maturity of 22 to 216 day . The estimated fair carrying value . In November 2009 , we replaced our $ , we replaced our $ 2.0 billion and $ 1.0 billion $ 2.0 billion and $ 1.0 billion credit facility with a credit facility with a $ 2.25 billion 364-day credit facility , with a $ 2.25 billion 364-day credit facility , which expires , which expires on November 5 , 2010 . This facility expires on November 5 , 2010 . This facility serf a paper program . In June 2010 , we reduced the size our credit facility from $ 2.25 billion to $ 1.0 billion $ 2.25 billion to $ 1.0 billion due to the reduction outstanding . As of June 30 , 2010 , we were As of June 30 , 2010 , we were in compliance Debt Notes As of June 30 , 2010 , we had As of June 30 , 2010 , we had issued and had issued and outstanding $ 3.75 billion of debt security a is payable semi-annually on June 1 and December 1 of each on June 1 and December 1 of each year , to record on the preceding May 15 and November 15 . The preceding May 15 and November 15 . The Notes are senior and unsubordinated debt outstanding . 66 Table of Contents PART II of Contents PART II Item 8 Convertible Debt In June 2010 8 Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee commercial paper , leaving $ 1.0 billion of commercial paper outstanding paper outstanding a of June 30 , 2010 . Each $ a of June 30 , 2010 . Each $ 1,000 principal , 2010 . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . Prior to share . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder equity . As of June 30 , 2010 , the total As of June 30 , 2010 , the total carrying value convertible debt , were $ 4.94 billion and $ 5.21 billion $ 4.94 billion and $ 5.21 billion , respectively . The publicly-traded debt a of June 30 , 2010 , a applicable a of June 30 , 2010 , a applicable . The of the Notes due in 2014 , 2019 , and 2039 Notes due in 2014 , 2019 , and 2039 were 3.00 2014 , 2019 , and 2039 were 3.00 % , 4.29 2019 , and 2039 were 3.00 % , 4.29 % , 2039 were 3.00 % , 4.29 % , and 5.22 % , 4.29 % , and 5.22 % , respectively , at , respectively , at June 30 , 2010 . The effective , at June 30 , 2010 . The effective interest yield the convertible debt due in 2013 is 1.85 % at June debt due in 2013 is 1.85 % at June 30 , is 1.85 % at June 30 , 2010 and the coupon % at June 30 , 2010 and the coupon interest rate long-term debt a of June 30 , 2010 were a follows a of June 30 , 2010 were a follows : ( convertible note due on June 15 , 2013 $ 1,250 2.95 due on June 15 , 2013 $ 1,250 2.95 % Notes June 15 , 2013 $ 1,250 2.95 % Notes due on 15 , 2013 $ 1,250 2.95 % Notes due on June % Notes due on June 1 , 2014 2,000 4.20 % due on June 1 , 2014 2,000 4.20 % Notes due on June 1 , 2014 2,000 4.20 % Notes due on June 1 , 2014 2,000 4.20 % Notes due on June % Notes due on June 1 , 2019 1,000 5.20 % due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June 1 , 2019 1,000 5.20 % Notes due on June % Notes due on June 1 , 2039 750 Unamortized discount due on June 1 , 2039 750 Unamortized discount for Notes on June 1 , 2039 750 Unamortized discount for Notes above discount for Notes above ( 61 ) Total $ 4,939 Maturities ( 61 ) Total $ 4,939 Maturities of long-term debt for million ) Year Ending June 30 , 2011 $ 0 2012 Year Ending June 30 , 2011 $ 0 2012 0 2013 June 30 , 2011 $ 0 2012 0 2013 1,250 2014 30 , 2011 $ 0 2012 0 2013 1,250 2014 2,000 , 2011 $ 0 2012 0 2013 1,250 2014 2,000 2015 2011 $ 0 2012 0 2013 1,250 2014 2,000 2015 0 $ 0 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 0 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 2012 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 Total 0 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 Total $ 2013 1,250 2014 2,000 2015 0 Thereafter 1,750 Total $ 5,000 2014 2,000 2015 0 Thereafter 1,750 Total $ 5,000 67 Table 0 Thereafter 1,750 Total $ 5,000 67 Table of Contents PART Thereafter 1,750 Total $ 5,000 67 Table of Contents PART II of Contents PART II Item 8 NOTE 13 — INCOME TAXES PART II Item 8 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2010 2009 2008 Current Year Ended June 30 , 2010 2009 2008 Current Taxes U.S. Ended June 30 , 2010 2009 2008 Current Taxes U.S. federal June 30 , 2010 2009 2008 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 4,415 $ 3,159 $ 4,357 U.S. U.S. federal $ 4,415 $ 3,159 $ 4,357 U.S. state and $ 4,415 $ 3,159 $ 4,357 U.S. state and local 357 4,357 U.S. state and local 357 192 256 International 1,701 1,139 U.S. state and local 357 192 256 International 1,701 1,139 1,007 state and local 357 192 256 International 1,701 1,139 1,007 Current local 357 192 256 International 1,701 1,139 1,007 Current tax 6,473 357 192 256 International 1,701 1,139 1,007 Current tax 6,473 4,490 192 256 International 1,701 1,139 1,007 Current tax 6,473 4,490 5,620 1,701 1,139 1,007 Current tax 6,473 4,490 5,620 Deferred Taxes Deferred 1,139 1,007 Current tax 6,473 4,490 5,620 Deferred Taxes Deferred tax 1,007 Current tax 6,473 4,490 5,620 Deferred Taxes Deferred tax ( Deferred Taxes Deferred tax ( 220 ) 762 513 Provision for Deferred tax ( 220 ) 762 513 Provision for income tax tax ( 220 ) 762 513 Provision for income tax $ Provision for income tax $ 6,253 $ 5,252 $ 6,133 U.S. income tax $ 6,253 $ 5,252 $ 6,133 U.S. and international $ 6,253 $ 5,252 $ 6,133 U.S. and international component of million ) Year Ended June 30 , 2010 2009 2008 U.S. Year Ended June 30 , 2010 2009 2008 U.S. $ 9,575 Ended June 30 , 2010 2009 2008 U.S. $ 9,575 $ June 30 , 2010 2009 2008 U.S. $ 9,575 $ 5,529 2010 2009 2008 U.S. $ 9,575 $ 5,529 $ 12,682 International 2008 U.S. $ 9,575 $ 5,529 $ 12,682 International 15,438 14,292 $ 9,575 $ 5,529 $ 12,682 International 15,438 14,292 11,132 Income $ 5,529 $ 12,682 International 15,438 14,292 11,132 Income before income 5,529 $ 12,682 International 15,438 14,292 11,132 Income before income tax $ 12,682 International 15,438 14,292 11,132 Income before income tax $ Income before income tax $ 25,013 $ 19,821 $ 23,814 The income tax $ 25,013 $ 19,821 $ 23,814 The item accounting $ 25,013 $ 19,821 $ 23,814 The item accounting for the follows : Year Ended June 30 , 2010 2009 2008 Federal Year Ended June 30 , 2010 2009 2008 Federal statutory rate Ended June 30 , 2010 2009 2008 Federal statutory rate 35.0 June 30 , 2010 2009 2008 Federal statutory rate 35.0 % 2009 2008 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 12.1 ) % ( 9.3 ) ( 12.1 ) % ( 9.3 ) % ( 7.0 ) ( 9.3 ) % ( 7.0 ) % Internal Revenue Service % Internal Revenue Service settlement 0 % 0 % ( 5.8 Revenue Service settlement 0 % 0 % ( 5.8 ) % 0 % 0 % ( 5.8 ) % European Commission fine ) % European Commission fine 0 % 0 % 2.1 % European Commission fine 0 % 0 % 2.1 % Other reconciling fine 0 % 0 % 2.1 % Other reconciling item , Other reconciling item , net 2.1 % 0.8 % 1.5 % item , net 2.1 % 0.8 % 1.5 % Effective rate net 2.1 % 0.8 % 1.5 % Effective rate 25.0 % % 1.5 % Effective rate 25.0 % 26.5 % 25.8 % % Effective rate 25.0 % 26.5 % 25.8 % In general rate 25.0 % 26.5 % 25.8 % In general , other credit . In fiscal year 2010 , 2009 and 2008 , In fiscal year 2010 , 2009 and 2008 , there were year 2010 , 2009 and 2008 , there were no individually significant other reconciling item . 68 Table of Contents PART II of Contents PART II Item 8 The component of the deferred ( In million ) June 30 , 2010 2009 Deferred Income million ) June 30 , 2010 2009 Deferred Income Tax Assets ) June 30 , 2010 2009 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 1,329 $ 2,004 Other expense item compensation expense $ 1,329 $ 2,004 Other expense item 1,696 1,595 $ 2,004 Other expense item 1,696 1,595 Unearned revenue 556 743 2,004 Other expense item 1,696 1,595 Unearned revenue 556 743 Impaired item 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 1,696 1,595 Unearned revenue 556 743 Impaired investment 289 236 Other revenue 556 743 Impaired investment 289 236 Other revenue item 80 556 743 Impaired investment 289 236 Other revenue item 80 120 289 236 Other revenue item 80 120 Deferred income tax asset 236 Other revenue item 80 120 Deferred income tax asset $ Deferred income tax asset $ 3,950 $ 4,698 Deferred Income Tax tax asset $ 3,950 $ 4,698 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,056 ) $ ( 1,191 ) ( 1,056 ) $ ( 1,191 ) Unrealized gain on investment Unrealized gain on investment ( 674 ) ( 516 ) Other investment ( 674 ) ( 516 ) Other ( 265 ) ( 516 ) Other ( 265 ) ( 499 ) Deferred Other ( 265 ) ( 499 ) Deferred income tax liability Deferred income tax liability ( 1,995 ) ( 2,206 ) Net liability ( 1,995 ) ( 2,206 ) Net deferred income tax deferred income tax asset $ 1,955 $ 2,492 Reported As Current tax asset $ 1,955 $ 2,492 Reported As Current deferred income deferred income tax asset $ 2,184 $ 2,213 Long-term deferred income tax asset $ 2,184 $ 2,213 Long-term deferred income tax asset asset ( liability ) ( 229 ) 279 Net deferred income liability ) ( 229 ) 279 Net deferred income tax asset deferred income tax asset $ 1,955 $ 2,492 Deferred income tax tax asset $ 1,955 $ 2,492 Deferred income tax balance reflect temporary difference of approximately $ 29.5 billion resulting from earnings for temporary difference is approximately $ 9.2 billion . Income tax paid Income tax paid were $ 4.1 billion , $ 6.6 billion $ 4.1 billion , $ 6.6 billion , and $ 5.4 6.6 billion , and $ 5.4 billion in fiscal year 2010 5.4 billion in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Uncertain Tax Tax Positions As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.5 2010 , we had $ 6.5 billion of unrecognized tax benefit tax benefit of which $ 5.6 billion , if recognized , rate . As of June 30 , 2009 , we had As of June 30 , 2009 , we had $ 5.4 2009 , we had $ 5.4 billion of unrecognized tax benefit tax benefit of which $ 4.4 billion , if recognized , unrecognized tax benefit wa $ 193 million , $ 230 million $ 193 million , $ 230 million , and $ 121 230 million , and $ 121 million in fiscal year 2010 121 million in fiscal year 2010 , 2009 and 2008 , in fiscal year 2010 , 2009 and 2008 , respectively . year 2010 , 2009 and 2008 , respectively . As of respectively . As of June 30 , 2010 , 2009 and As of June 30 , 2010 , 2009 and 2008 , June 30 , 2010 , 2009 and 2008 , we had , 2010 , 2009 and 2008 , we had accrued interest uncertain tax position of $ 747 million , $ 554 million $ 747 million , $ 554 million , and $ 324 554 million , and $ 324 million , respectively , net federal income tax benefit . 69 Table of Contents PART II of Contents PART II Item 8 The aggregate change in the million ) Year Ended June 30 , 2010 2009 2008 Balance Year Ended June 30 , 2010 2009 2008 Balance , beginning Ended June 30 , 2010 2009 2008 Balance , beginning of June 30 , 2010 2009 2008 Balance , beginning of year , beginning of year $ 5,403 $ 3,195 $ 7,076 Decreases of year $ 5,403 $ 3,195 $ 7,076 Decreases related to $ 5,403 $ 3,195 $ 7,076 Decreases related to settlement ( Decreases related to settlement ( 57 ) ( 82 ) ( settlement ( 57 ) ( 82 ) ( 4,787 ) Increases ) ( 82 ) ( 4,787 ) Increases for tax position related to the current year 1,012 2,203 934 Increases for tax to the current year 1,012 2,203 934 Increases for tax position the current year 1,012 2,203 934 Increases for tax position related position related to prior year 364 239 66 Decreases for tax related to prior year 364 239 66 Decreases for tax position to prior year 364 239 66 Decreases for tax position related related to prior year ( 166 ) ( 132 ) ( year ( 166 ) ( 132 ) ( 80 ) Reductions ) ( 132 ) ( 80 ) Reductions due to lapsed lapsed statute of limitation ( 14 ) ( 20 ) ( limitation ( 14 ) ( 20 ) ( 14 ) Balance ) ( 20 ) ( 14 ) Balance , end of , end of year $ 6,542 $ 5,403 $ 3,195 We of year $ 6,542 $ 5,403 $ 3,195 We are under $ 6,542 $ 5,403 $ 3,195 We are under audit by IRS for the tax year 2004-2006 . We do not believe or decrease within the next 12 month a we do not be concluded within the next 12 month . We are subject our financial statement . NOTE 14 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2010 2009 Volume licensing million ) June 30 , 2010 2009 Volume licensing program $ ) June 30 , 2010 2009 Volume licensing program $ 12,180 2009 Volume licensing program $ 12,180 $ 11,350 Undelivered element 624 licensing program $ 12,180 $ 11,350 Undelivered element 624 1,083 Other 12,180 $ 11,350 Undelivered element 624 1,083 Other 2,026 1,851 Total $ 11,350 Undelivered element 624 1,083 Other 2,026 1,851 Total $ Undelivered element 624 1,083 Other 2,026 1,851 Total $ 14,830 $ element 624 1,083 Other 2,026 1,851 Total $ 14,830 $ 14,284 Other 2,026 1,851 Total $ 14,830 $ 14,284 70 Table of 1,851 Total $ 14,830 $ 14,284 70 Table of Contents PART Total $ 14,830 $ 14,284 70 Table of Contents PART II of Contents PART II Item 8 Unearned revenue by segment wa ( In million ) June 30 , 2010 2009 Windows & million ) June 30 , 2010 2009 Windows & Windows Live ) June 30 , 2010 2009 Windows & Windows Live Division & Windows Live Division $ 1,701 $ 2,345 Server and Tools Live Division $ 1,701 $ 2,345 Server and Tools 5,282 4,732 $ 2,345 Server and Tools 5,282 4,732 Microsoft Business Division 7,004 2,345 Server and Tools 5,282 4,732 Microsoft Business Division 7,004 6,508 5,282 4,732 Microsoft Business Division 7,004 6,508 Other segment 843 699 4,732 Microsoft Business Division 7,004 6,508 Other segment 843 699 Total Division 7,004 6,508 Other segment 843 699 Total $ 14,830 $ 7,004 6,508 Other segment 843 699 Total $ 14,830 $ 14,284 segment 843 699 Total $ 14,830 $ 14,284 NOTE 15 — 699 Total $ 14,830 $ 14,284 NOTE 15 — OTHER LONG-TERM $ 14,830 $ 14,284 NOTE 15 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2010 2009 Tax contingency million ) June 30 , 2010 2009 Tax contingency and other ) June 30 , 2010 2009 Tax contingency and other tax and other tax liability $ 6,887 $ 5,515 Legal contingency 236 tax liability $ 6,887 $ 5,515 Legal contingency 236 407 Product 6,887 $ 5,515 Legal contingency 236 407 Product warranty 69 132 $ 5,515 Legal contingency 236 407 Product warranty 69 132 Other contingency 236 407 Product warranty 69 132 Other 253 215 Total 236 407 Product warranty 69 132 Other 253 215 Total $ Product warranty 69 132 Other 253 215 Total $ 7,445 $ warranty 69 132 Other 253 215 Total $ 7,445 $ 6,269 Other 253 215 Total $ 7,445 $ 6,269 NOTE 16 — 215 Total $ 7,445 $ 6,269 NOTE 16 — COMMITMENTS AND $ 7,445 $ 6,269 NOTE 16 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 347 million for constructing new building leasehold improvement a of June 30 , 2010 . We have a of June 30 , 2010 . We have operating lease facility operating lease wa $ 530 million , $ 475 million $ 530 million , $ 475 million , and $ 398 475 million , and $ 398 million , in fiscal year million , in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Future minimum in place a of June 30 , 2010 are a follows a of June 30 , 2010 are a follows : ( million ) Year Ending June 30 , 2011 $ 437 2012 Year Ending June 30 , 2011 $ 437 2012 322 2013 June 30 , 2011 $ 437 2012 322 2013 256 2014 30 , 2011 $ 437 2012 322 2013 256 2014 206 , 2011 $ 437 2012 322 2013 256 2014 206 2015 2011 $ 437 2012 322 2013 256 2014 206 2015 and $ 437 2012 322 2013 256 2014 206 2015 and thereafter 437 2012 322 2013 256 2014 206 2015 and thereafter 677 2012 322 2013 256 2014 206 2015 and thereafter 677 Total 322 2013 256 2014 206 2015 and thereafter 677 Total $ 2014 206 2015 and thereafter 677 Total $ 1,898 Indemnifications We and thereafter 677 Total $ 1,898 Indemnifications We provide indemnification of in our financial statement . 71 Table of Contents PART II of Contents PART II Item 8 Yahoo ! Commercial Agreement On ! Commercial Agreement On December 4 , 2009 , we entered Agreement On December 4 , 2009 , we entered into a the third fiscal quarter of 2010 . The term of the term of the agreement is 10 year subject to termination provision guarantee for a period of 18 month after implementation of the range between zero and $ 150 million ; however , no million ) Year Ended June 30 , 2010 2009 Balance , Year Ended June 30 , 2010 2009 Balance , beginning of Ended June 30 , 2010 2009 Balance , beginning of year , beginning of year $ 342 $ 692 Accruals for warranty of year $ 342 $ 692 Accruals for warranty issued 144 692 Accruals for warranty issued 144 161 Adjustments to pre-existing warranty Accruals for warranty issued 144 161 Adjustments to pre-existing warranty ( Adjustments to pre-existing warranty ( 2 ) 0 Settlements of warranty pre-existing warranty ( 2 ) 0 Settlements of warranty claim ( Settlements of warranty claim ( 244 ) ( 511 ) Balance claim ( 244 ) ( 511 ) Balance , end of , end of year $ 240 $ 342 NOTE 17 — of year $ 240 $ 342 NOTE 17 — CONTINGENCIES Government $ 240 $ 342 NOTE 17 — CONTINGENCIES Government Competition Law Competition Law Matters In March 2004 , the European Commission issued our competitor . In March 2007 , the European Commission issued a required by the March 2004 decision were “ not reasonable the Commission announced on October 22 , 2007 that we were announced on October 22 , 2007 that we were in compliance in compliance with the March 2004 decision and that no further that date . On February 27 , 2008 , the Commission . On February 27 , 2008 , the Commission issued a issued a fine of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) relating to the the period prior to October 22 , 2007 . In May prior to October 22 , 2007 . In May 2008 , , 2007 . In May 2008 , we filed an application Instance to annul the February 2008 fine . We paid the . We paid the $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) fine in June million ) fine in June 2008 , pending the outcome of the appeal . In January 2008 , the Commission opened a The Commission announced on December 16 , 2009 that it welcomed announced on December 16 , 2009 that it welcomed these proposal fourth quarter of fiscal year 2010 , the trade association withdrew basis of the investigation . 72 Table of Contents PART II of Contents PART II Item 8 We are also subject to U.S. Department of Justice , 18 state , and the District scheduled to expire in May 2011 . In other ongoing investigation under federal law and in 15 state . Courts refused to been made to date in 19 state and the District of be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.9 billion and $ 2.0 billion $ 1.9 billion and $ 2.0 billion . At June 30 2.0 billion . At June 30 , 2010 , we have . At June 30 , 2010 , we have recorded a these claim of approximately $ 651 million , which reflects our our estimated exposure of $ 1.9 billion le payment made to to date of approximately $ 1.2 billion mostly for voucher , been settled . In March 2010 , the court in the Litigation and Claims In November 2004 , Novell , Inc. filed during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted the complaint . On March 30 , 2010 , the trial . On March 30 , 2010 , the trial court granted and Intellectual Property Claims In 2003 , we filed an action of Alcatel and Lucent in 2006 , for simplicity we refer Alcatel-Lucent ) . In April 2008 , a jury returned a interface patent and awarded $ 367 million in damage . In in damage . In June 2008 , the trial judge increased amount of damage to $ 512 million to include $ 145 512 million to include $ 145 million of interest . We Federal Circuit . In December 2008 , we entered into a Alcatel-Lucent , leaving approximately $ 500 million remaining in dispute . in dispute . In September 2009 , the United States Court the first week of December 2010 . 73 Table of Contents week of December 2010 . 73 Table of Contents PART II of Contents PART II Item 8 In October 2003 , Uniloc II Item 8 In October 2003 , Uniloc USA Inc. , for trial . In April 2009 , the jury returned a the jury returned a $ 388 million verdict against u , willful infringement . In September 2009 , the district court judge ha appealed . In March 2007 , i4i Limited Partnership sued custom XML technology in Word 2003 and 2007 infringed i4i ’ technology in Word 2003 and 2007 infringed i4i ’ s patent s patent . In May 2009 , a jury returned a , finding damage of $ 200 million and that we willfully the patent . In August 2009 , the court denied our awarded enhanced damage of $ 40 million and prejudgment interest of and prejudgment interest of $ 37 million . The court also our appeal . On December 22 , 2009 , the court . On December 22 , 2009 , the court of appeal of the injunction to January 11 , 2010 . On April injunction to January 11 , 2010 . On April 1 , , 2010 . On April 1 , 2010 , the court . On April 1 , 2010 , the court of appeal U.S. Supreme Court . In 2007 , VirnetX Inc. brought suit by a jury in March 2010 . The jury returned a found damage of approximately $ 106 million . In March 2010 106 million . In March 2010 , VirnetX filed a new product and service including Windows 7 and Windows Server 2008 R2 Windows 7 and Windows Server 2008 R2 infringe the same two lawsuit . There are over 50 other patent infringement case pending case pending against Microsoft , 10 of which are set for for trial in fiscal year 2010 . Other We also are future . As of June 30 , 2010 , we had As of June 30 , 2010 , we had accrued aggregate aggregate liability of approximately $ 1.0 billion in other current liability current liability and approximately $ 236 million in other long-term liability estimate could reach approximately $ 800 million in aggregate beyond recorded become reasonably estimable . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2010 2009 2008 Balance Year Ended June 30 , 2010 2009 2008 Balance , beginning Ended June 30 , 2010 2009 2008 Balance , beginning of June 30 , 2010 2009 2008 Balance , beginning of year Balance , beginning of year 8,908 9,151 9,380 Issued 140 75 , beginning of year 8,908 9,151 9,380 Issued 140 75 173 beginning of year 8,908 9,151 9,380 Issued 140 75 173 Repurchased year 8,908 9,151 9,380 Issued 140 75 173 Repurchased ( 380 8,908 9,151 9,380 Issued 140 75 173 Repurchased ( 380 ) 9,151 9,380 Issued 140 75 173 Repurchased ( 380 ) ( 140 75 173 Repurchased ( 380 ) ( 318 ) ( Repurchased ( 380 ) ( 318 ) ( 402 ) Balance ) ( 318 ) ( 402 ) Balance , end of Balance , end of year 8,668 8,908 9,151 74 Table of , end of year 8,668 8,908 9,151 74 Table of Contents end of year 8,668 8,908 9,151 74 Table of Contents PART of year 8,668 8,908 9,151 74 Table of Contents PART II of Contents PART II Item 8 Share Repurchases On September 22 8 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 to buy back up to buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2010 , approximately $ As of June 30 , 2010 , approximately $ 23.7 billion , 2010 , approximately $ 23.7 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year Ended June 30 , 2010 ( a ) Year Ended June 30 , 2010 ( a ) 2009 ( , 2010 ( a ) 2009 ( b ) 2008 ( ) 2009 ( b ) 2008 ( c ) First quarter ( c ) First quarter 58 $ 1,445 223 $ 5,966 ) First quarter 58 $ 1,445 223 $ 5,966 81 $ First quarter 58 $ 1,445 223 $ 5,966 81 $ 2,348 58 $ 1,445 223 $ 5,966 81 $ 2,348 Second quarter $ 1,445 223 $ 5,966 81 $ 2,348 Second quarter 125 223 $ 5,966 81 $ 2,348 Second quarter 125 3,583 95 81 $ 2,348 Second quarter 125 3,583 95 2,234 120 4,081 $ 2,348 Second quarter 125 3,583 95 2,234 120 4,081 Third 2,348 Second quarter 125 3,583 95 2,234 120 4,081 Third quarter Second quarter 125 3,583 95 2,234 120 4,081 Third quarter 67 quarter 125 3,583 95 2,234 120 4,081 Third quarter 67 2,000 125 3,583 95 2,234 120 4,081 Third quarter 67 2,000 0 2,234 120 4,081 Third quarter 67 2,000 0 0 30 1,020 120 4,081 Third quarter 67 2,000 0 0 30 1,020 Fourth 4,081 Third quarter 67 2,000 0 0 30 1,020 Fourth quarter Third quarter 67 2,000 0 0 30 1,020 Fourth quarter 130 quarter 67 2,000 0 0 30 1,020 Fourth quarter 130 3,808 67 2,000 0 0 30 1,020 Fourth quarter 130 3,808 0 0 30 1,020 Fourth quarter 130 3,808 0 0 171 4,975 30 1,020 Fourth quarter 130 3,808 0 0 171 4,975 Total 1,020 Fourth quarter 130 3,808 0 0 171 4,975 Total 380 Fourth quarter 130 3,808 0 0 171 4,975 Total 380 $ quarter 130 3,808 0 0 171 4,975 Total 380 $ 10,836 130 3,808 0 0 171 4,975 Total 380 $ 10,836 318 0 0 171 4,975 Total 380 $ 10,836 318 $ 8,200 171 4,975 Total 380 $ 10,836 318 $ 8,200 402 $ 4,975 Total 380 $ 10,836 318 $ 8,200 402 $ 12,424 380 $ 10,836 318 $ 8,200 402 $ 12,424 ( a $ 10,836 318 $ 8,200 402 $ 12,424 ( a ) 318 $ 8,200 402 $ 12,424 ( a ) All share share repurchased in fiscal year 2010 were repurchased under the plan Board of Directors on September 22 , 2008 . ( b Directors on September 22 , 2008 . ( b ) Of ( b ) Of the 318 million share of common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the plan approved first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . ( c Directors on September 22 , 2008 . ( c ) All share repurchased in fiscal year 2008 were repurchased under the plan first quarter of fiscal year 2007 . Dividends In fiscal year . Dividends In fiscal year 2010 , our Board of Directors ( In million ) September 18 , 2009 $ 0.13 November million ) September 18 , 2009 $ 0.13 November 19 , September 18 , 2009 $ 0.13 November 19 , 2009 $ , 2009 $ 0.13 November 19 , 2009 $ 1,152 December $ 0.13 November 19 , 2009 $ 1,152 December 10 , November 19 , 2009 $ 1,152 December 10 , 2009 December , 2009 $ 1,152 December 10 , 2009 December 9 , $ 1,152 December 10 , 2009 December 9 , 2009 $ December 10 , 2009 December 9 , 2009 $ 0.13 February , 2009 December 9 , 2009 $ 0.13 February 18 , December 9 , 2009 $ 0.13 February 18 , 2010 $ , 2009 $ 0.13 February 18 , 2010 $ 1,139 March $ 0.13 February 18 , 2010 $ 1,139 March 11 , February 18 , 2010 $ 1,139 March 11 , 2010 March , 2010 $ 1,139 March 11 , 2010 March 8 , $ 1,139 March 11 , 2010 March 8 , 2010 $ March 11 , 2010 March 8 , 2010 $ 0.13 May , 2010 March 8 , 2010 $ 0.13 May 20 , March 8 , 2010 $ 0.13 May 20 , 2010 $ , 2010 $ 0.13 May 20 , 2010 $ 1,130 June $ 0.13 May 20 , 2010 $ 1,130 June 10 , May 20 , 2010 $ 1,130 June 10 , 2010 June , 2010 $ 1,130 June 10 , 2010 June 16 , $ 1,130 June 10 , 2010 June 16 , 2010 $ June 10 , 2010 June 16 , 2010 $ 0.13 August , 2010 June 16 , 2010 $ 0.13 August 19 , June 16 , 2010 $ 0.13 August 19 , 2010 $ , 2010 $ 0.13 August 19 , 2010 $ 1,127 September $ 0.13 August 19 , 2010 $ 1,127 September 9 , August 19 , 2010 $ 1,127 September 9 , 2010 The , 2010 $ 1,127 September 9 , 2010 The dividend declared $ 1,127 September 9 , 2010 The dividend declared on June The dividend declared on June 16 , 2010 will be paid declared on June 16 , 2010 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2010 . In fiscal a of June 30 , 2010 . In fiscal year 2009 2010 . In fiscal year 2009 , our Board of Directors ( In million ) September 19 , 2008 $ 0.13 November million ) September 19 , 2008 $ 0.13 November 20 , September 19 , 2008 $ 0.13 November 20 , 2008 $ , 2008 $ 0.13 November 20 , 2008 $ 1,157 December $ 0.13 November 20 , 2008 $ 1,157 December 11 , November 20 , 2008 $ 1,157 December 11 , 2008 December , 2008 $ 1,157 December 11 , 2008 December 10 , $ 1,157 December 11 , 2008 December 10 , 2008 $ December 11 , 2008 December 10 , 2008 $ 0.13 February , 2008 December 10 , 2008 $ 0.13 February 19 , December 10 , 2008 $ 0.13 February 19 , 2009 $ , 2008 $ 0.13 February 19 , 2009 $ 1,155 March $ 0.13 February 19 , 2009 $ 1,155 March 12 , February 19 , 2009 $ 1,155 March 12 , 2009 March , 2009 $ 1,155 March 12 , 2009 March 9 , $ 1,155 March 12 , 2009 March 9 , 2009 $ March 12 , 2009 March 9 , 2009 $ 0.13 May , 2009 March 9 , 2009 $ 0.13 May 21 , March 9 , 2009 $ 0.13 May 21 , 2009 $ , 2009 $ 0.13 May 21 , 2009 $ 1,158 June $ 0.13 May 21 , 2009 $ 1,158 June 18 , May 21 , 2009 $ 1,158 June 18 , 2009 June , 2009 $ 1,158 June 18 , 2009 June 10 , $ 1,158 June 18 , 2009 June 10 , 2009 $ June 18 , 2009 June 10 , 2009 $ 0.13 August , 2009 June 10 , 2009 $ 0.13 August 20 , June 10 , 2009 $ 0.13 August 20 , 2009 $ , 2009 $ 0.13 August 20 , 2009 $ 1,157 September $ 0.13 August 20 , 2009 $ 1,157 September 10 , August 20 , 2009 $ 1,157 September 10 , 2009 The , 2009 $ 1,157 September 10 , 2009 The dividend declared $ 1,157 September 10 , 2009 The dividend declared on June The dividend declared on June 10 , 2009 wa included in declared on June 10 , 2009 wa included in other current current liability a of June 30 , 2009 . 75 Table a of June 30 , 2009 . 75 Table of Contents June 30 , 2009 . 75 Table of Contents PART II of Contents PART II Item 8 Cumulative Effects of Changes in in Accounting Principle On July 1 , 2007 , we adopted Principle On July 1 , 2007 , we adopted guidance on , we recognized a $ 395 million charge to our beginning accounting principle . On July 1 , 2007 , we adopted . On July 1 , 2007 , we adopted accounting guidance , we recognized a $ 17 million charge to our beginning in accounting principle . NOTE 19 — OTHER COMPREHENSIVE INCOME The million ) Year Ended June 30 , 2010 2009 2008 Net Year Ended June 30 , 2010 2009 2008 Net Unrealized Gains Ended June 30 , 2010 2009 2008 Net Unrealized Gains on June 30 , 2010 2009 2008 Net Unrealized Gains on Derivatives of tax effect of $ 188 , $ 472 , and of $ 188 , $ 472 , and $ 46 $ $ 472 , and $ 46 $ 349 $ 876 $ , and $ 46 $ 349 $ 876 $ 86 Reclassification $ 46 $ 349 $ 876 $ 86 Reclassification adjustment for $ 349 $ 876 $ 86 Reclassification adjustment for gain included tax effect of $ ( 173 ) , $ ( 309 173 ) , $ ( 309 ) , and $ ( ) , and $ ( 36 ) ( 322 ) ( $ ( 36 ) ( 322 ) ( 574 ) ( ) ( 322 ) ( 574 ) ( 68 ) Net ) ( 574 ) ( 68 ) Net unrealized gain on unrealized gain on derivative $ 27 $ 302 $ 18 Net on derivative $ 27 $ 302 $ 18 Net Unrealized Gains $ 27 $ 302 $ 18 Net Unrealized Gains ( Losses of tax effect of $ 263 , $ ( 142 ) $ 263 , $ ( 142 ) , and $ ( ) , and $ ( 234 ) $ 488 $ ( $ ( 234 ) $ 488 $ ( 263 ) $ ) $ 488 $ ( 263 ) $ ( 435 ) ( 263 ) $ ( 435 ) Reclassification adjustment for loss tax effect of $ ( 120 ) , $ 16 , ( 120 ) , $ 16 , and $ ( 117 16 , and $ ( 117 ) ( 223 ) 30 $ ( 117 ) ( 223 ) 30 ( 218 ) 117 ) ( 223 ) 30 ( 218 ) Net unrealized ( 223 ) 30 ( 218 ) Net unrealized gain ( ( loss ) on investment 265 ( 233 ) ( 653 ) on investment 265 ( 233 ) ( 653 ) Translation 265 ( 233 ) ( 653 ) Translation adjustment and other tax effect of $ ( 103 ) , $ ( 133 103 ) , $ ( 133 ) , and $ 69 133 ) , and $ 69 ( 206 ) ( 240 , and $ 69 ( 206 ) ( 240 ) 121 69 ( 206 ) ( 240 ) 121 Other comprehensive income 206 ) ( 240 ) 121 Other comprehensive income ( loss income ( loss ) $ 86 $ ( 171 ) $ ) $ 86 $ ( 171 ) $ ( 514 ) ( 171 ) $ ( 514 ) The component of accumulated million ) Year Ended June 30 , 2010 2009 2008 Net Year Ended June 30 , 2010 2009 2008 Net unrealized gain Ended June 30 , 2010 2009 2008 Net unrealized gain on June 30 , 2010 2009 2008 Net unrealized gain on derivative unrealized gain on derivative $ 464 $ 437 $ 135 Net on derivative $ 464 $ 437 $ 135 Net unrealized gain $ 464 $ 437 $ 135 Net unrealized gain on investment Net unrealized gain on investment 767 502 735 Translation adjustment and unrealized gain on investment 767 502 735 Translation adjustment and other gain on investment 767 502 735 Translation adjustment and other ( Translation adjustment and other ( 176 ) 30 270 Accumulated other and other ( 176 ) 30 270 Accumulated other comprehensive income other ( 176 ) 30 270 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,055 $ 969 $ 1,140 NOTE comprehensive income $ 1,055 $ 969 $ 1,140 NOTE 20 — $ 1,055 $ 969 $ 1,140 NOTE 20 — EMPLOYEE STOCK $ 969 $ 1,140 NOTE 20 — EMPLOYEE STOCK AND SAVINGS million ) Year Ended June 30 , 2010 2009 2008 Total Year Ended June 30 , 2010 2009 2008 Total stock-based compensation Ended June 30 , 2010 2009 2008 Total stock-based compensation expense June 30 , 2010 2009 2008 Total stock-based compensation expense $ Total stock-based compensation expense $ 1,891 $ 1,708 $ 1,479 Income compensation expense $ 1,891 $ 1,708 $ 1,479 Income tax benefit $ 1,891 $ 1,708 $ 1,479 Income tax benefit related to related to stock-based compensation $ 662 $ 598 $ 518 76 stock-based compensation $ 662 $ 598 $ 518 76 Table of $ 662 $ 598 $ 518 76 Table of Contents PART 662 $ 598 $ 518 76 Table of Contents PART II of Contents PART II Item 8 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2010 2009 2008 Shares Year Ended June 30 , 2010 2009 2008 Shares purchased 20 Ended June 30 , 2010 2009 2008 Shares purchased 20 24 June 30 , 2010 2009 2008 Shares purchased 20 24 18 2010 2009 2008 Shares purchased 20 24 18 Average price per 2009 2008 Shares purchased 20 24 18 Average price per share 2008 Shares purchased 20 24 18 Average price per share $ Average price per share $ 23.73 $ 20.13 $ 26.78 At per share $ 23.73 $ 20.13 $ 26.78 At June 30 $ 23.73 $ 20.13 $ 26.78 At June 30 , 2010 20.13 $ 26.78 At June 30 , 2010 , 64 million 26.78 At June 30 , 2010 , 64 million share of June 30 , 2010 , 64 million share of our common and advisor . At June 30 , 2010 , an aggregate . At June 30 , 2010 , an aggregate of 690 2010 , an aggregate of 690 million share were authorized for granted SPSAs for fiscal year 2010 , 2009 , and 2008 for fiscal year 2010 , 2009 , and 2008 with performance 2010 , 2009 , and 2008 with performance period of July with performance period of July 1 , 2009 through June 30 period of July 1 , 2009 through June 30 , 2010 1 , 2009 through June 30 , 2010 , July 1 2009 through June 30 , 2010 , July 1 , 2008 30 , 2010 , July 1 , 2008 through June 30 2010 , July 1 , 2008 through June 30 , 2009 1 , 2008 through June 30 , 2009 , and July 2008 through June 30 , 2009 , and July 1 , , 2009 , and July 1 , 2007 through June 30 , and July 1 , 2007 through June 30 , 2008 1 , 2007 through June 30 , 2008 , respectively . 2007 through June 30 , 2008 , respectively . In September by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is number of share , approximately 12 % of the total target Incentive Plan In fiscal year 2009 , the Compensation Committee approved period . For fiscal year 2010 and 2009 , executive officer For fiscal year 2010 and 2009 , executive officer were eligible income . For fiscal year 2010 it wa 0.45 % of fiscal year 2010 it wa 0.45 % of operating income , , and for fiscal year 2009 it wa 0.35 % of fiscal year 2009 it wa 0.35 % of operating income . approval of the award , 20 % of the award is cash , and the remaining 80 % is converted into an , and one-quarter on August 31 of each of the following the following three year . 77 Table of Contents PART II of Contents PART II Item 8 We grant award from the of the pool ranging between 0 % and 150 % of ranging between 0 % and 150 % of a target based Microsoft common stock on August 31 of each year . Activity assumption : Year Ended June 30 , 2010 2009 2008 Dividends Year Ended June 30 , 2010 2009 2008 Dividends per share Ended June 30 , 2010 2009 2008 Dividends per share ( June 30 , 2010 2009 2008 Dividends per share ( quarterly ( quarterly amount ) $ 0.13 $ 0.11 - $ 0.13 amount ) $ 0.13 $ 0.11 - $ 0.13 $ 0.10 0.13 $ 0.11 - $ 0.13 $ 0.10 - $ 0.11 0.11 - $ 0.13 $ 0.10 - $ 0.11 Interest rate 0.13 $ 0.10 - $ 0.11 Interest rate range 2.1 % $ 0.11 Interest rate range 2.1 % - 2.9 % 1.4 rate range 2.1 % - 2.9 % 1.4 % - 3.6 2.1 % - 2.9 % 1.4 % - 3.6 % 2.5 2.9 % 1.4 % - 3.6 % 2.5 % - 4.9 1.4 % - 3.6 % 2.5 % - 4.9 % During 3.6 % 2.5 % - 4.9 % During fiscal year 2010 4.9 % During fiscal year 2010 , the following activity occurred balance , beginning of year 191 $ 25.69 Granted 100 $ beginning of year 191 $ 25.69 Granted 100 $ 23.43 Vested year 191 $ 25.69 Granted 100 $ 23.43 Vested ( 52 $ 25.69 Granted 100 $ 23.43 Vested ( 52 ) $ 100 $ 23.43 Vested ( 52 ) $ 25.50 Forfeited ( Vested ( 52 ) $ 25.50 Forfeited ( 16 ) $ ) $ 25.50 Forfeited ( 16 ) $ 25.19 Nonvested balance Forfeited ( 16 ) $ 25.19 Nonvested balance , end of balance , end of year 223 $ 24.76 Shared Performance Stock end of year 223 $ 24.76 Shared Performance Stock Awards Nonvested balance , beginning of year 28 $ 26.79 Granted 12 $ beginning of year 28 $ 26.79 Granted 12 $ 24.57 Vested year 28 $ 26.79 Granted 12 $ 24.57 Vested ( 7 $ 26.79 Granted 12 $ 24.57 Vested ( 7 ) $ 12 $ 24.57 Vested ( 7 ) $ 26.65 Forfeited ( Vested ( 7 ) $ 26.65 Forfeited ( 3 ) $ ) $ 26.65 Forfeited ( 3 ) $ 25.74 Nonvested balance Forfeited ( 3 ) $ 25.74 Nonvested balance , end of balance , end of year 30 $ 25.32 As of June end of year 30 $ 25.32 As of June 30 , $ 25.32 As of June 30 , 2010 , there wa As of June 30 , 2010 , there wa $ 4.2 2010 , there wa $ 4.2 billion and $ 482 million $ 4.2 billion and $ 482 million of total unrecognized compensation a weighted average period of 3.4 year and 2.4 year , period of 3.4 year and 2.4 year , respectively . During respectively . During fiscal year 2009 and 2008 , the following During fiscal year 2009 and 2008 , the following activity occurred , except fair value ) 2009 2008 Stock Awards Awards granted except fair value ) 2009 2008 Stock Awards Awards granted 91 2008 Stock Awards Awards granted 91 71 Weighted average grant-date fair Stock Awards Awards granted 91 71 Weighted average grant-date fair value average grant-date fair value $ 24.95 $ 27.83 Shared Performance Stock fair value $ 24.95 $ 27.83 Shared Performance Stock Awards Awards Performance Stock Awards Awards granted 10 19 Weighted average grant-date fair Stock Awards Awards granted 10 19 Weighted average grant-date fair value average grant-date fair value $ 25.93 $ 27.82 78 Table of fair value $ 25.93 $ 27.82 78 Table of Contents PART value $ 25.93 $ 27.82 78 Table of Contents PART II of Contents PART II Item 8 Stock Options In fiscal year Stock Options In fiscal year 2004 , we began granting employee acquisition . Options granted between 1995 and 2001 generally vest over Options granted between 1995 and 2001 generally vest over four and and one-half year and expire 10 year from the date of grant . Options granted after 2001 vest over four and one-half and one-half year and expire 10 year from the date of , one million , and 10 million stock option in conjunction business acquisition during fiscal year 2010 , 2009 , and 2008 during fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Employee stock million ) Balance , July 1 , 2009 330 $ 27.99 Balance , July 1 , 2009 330 $ 27.99 Granted 1 , July 1 , 2009 330 $ 27.99 Granted 1 $ 1 , 2009 330 $ 27.99 Granted 1 $ 3.20 Exercised 2009 330 $ 27.99 Granted 1 $ 3.20 Exercised ( 74 $ 27.99 Granted 1 $ 3.20 Exercised ( 74 ) $ 1 $ 3.20 Exercised ( 74 ) $ 25.86 Canceled ( Exercised ( 74 ) $ 25.86 Canceled ( 69 ) $ ) $ 25.86 Canceled ( 69 ) $ 39.00 Forfeited ( Canceled ( 69 ) $ 39.00 Forfeited ( 1 ) $ ) $ 39.00 Forfeited ( 1 ) $ 12.94 Balance , Forfeited ( 1 ) $ 12.94 Balance , June 30 , $ 12.94 Balance , June 30 , 2010 187 $ 24.68 Balance , June 30 , 2010 187 $ 24.68 1.46 $ , June 30 , 2010 187 $ 24.68 1.46 $ 143 30 , 2010 187 $ 24.68 1.46 $ 143 Exercisable , , 2010 187 $ 24.68 1.46 $ 143 Exercisable , June 187 $ 24.68 1.46 $ 143 Exercisable , June 30 , $ 143 Exercisable , June 30 , 2010 186 $ 24.68 Exercisable , June 30 , 2010 186 $ 24.68 1.43 $ , June 30 , 2010 186 $ 24.68 1.43 $ 130 30 , 2010 186 $ 24.68 1.43 $ 130 Options outstanding , 2010 186 $ 24.68 1.43 $ 130 Options outstanding a 186 $ 24.68 1.43 $ 130 Options outstanding a of June Options outstanding a of June 30 , 2010 include approximately three a of June 30 , 2010 include approximately three million option exercise price range of $ 0.01 to $ 150.93 and a of $ 0.01 to $ 150.93 and a weighted average exercise average exercise price of $ 7.49 . During fiscal year 2010 7.49 . During fiscal year 2010 , 2009 , and 2008 During fiscal year 2010 , 2009 , and 2008 , the 2010 , 2009 , and 2008 , the following activity occurred : ( In million ) 2010 2009 2008 Total intrinsic value ( In million ) 2010 2009 2008 Total intrinsic value of In million ) 2010 2009 2008 Total intrinsic value of stock of stock option exercised $ 365 $ 48 $ 1,042 Total option exercised $ 365 $ 48 $ 1,042 Total vest-date fair $ 365 $ 48 $ 1,042 Total vest-date fair value of of stock award vested $ 1,358 $ 1,137 $ 955 Total award vested $ 1,358 $ 1,137 $ 955 Total vest-date fair $ 1,358 $ 1,137 $ 955 Total vest-date fair value of performance stock award vested $ 227 $ 485 $ 401 Cash award vested $ 227 $ 485 $ 401 Cash received from $ 227 $ 485 $ 401 Cash received from option exercise option exercise for fiscal year 2010 , 2009 , and 2008 for fiscal year 2010 , 2009 , and 2008 , wa 2010 , 2009 , and 2008 , wa $ 1.8 billion and 2008 , wa $ 1.8 billion , $ 88 million $ 1.8 billion , $ 88 million , and $ 3.0 88 million , and $ 3.0 billion , respectively . The from option exercise totaled $ 126 million , $ 12 million $ 126 million , $ 12 million , and $ 365 12 million , and $ 365 million for fiscal year 2010 365 million for fiscal year 2010 , 2009 , and 2008 for fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively . Savings Plan States that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 275 million , $ 262 million $ 275 million , $ 262 million , and $ 238 262 million , and $ 238 million in fiscal year 2010 238 million in fiscal year 2010 , 2009 , and 2008 in fiscal year 2010 , 2009 , and 2008 , respectively 2010 , 2009 , and 2008 , respectively , and were in Microsoft common stock . 79 Table of Contents PART II of Contents PART II Item 8 NOTE 21 — EMPLOYEE SEVERANCE PART II Item 8 NOTE 21 — EMPLOYEE SEVERANCE In January — EMPLOYEE SEVERANCE In January 2009 , we announced and implemented we announced the elimination of 5,000 position in research and development technology . As of September 30 , 2009 , we had As of September 30 , 2009 , we had reduced our number of position by approximately 5,000 and headcount by approximately 4,600 5,000 and headcount by approximately 4,600 . In November 2009 , approximately 4,600 . In November 2009 , we identified an additional , we identified an additional 800 position for elimination based on Severance expense of approximately $ 52 million associated with these additional our overall headcount by approximately 5,300 . The change in our million ) Year Ended June 30 , 2010 2009 Balance , Year Ended June 30 , 2010 2009 Balance , beginning of Ended June 30 , 2010 2009 Balance , beginning of period , beginning of period $ 127 $ 0 Employee severance charge of period $ 127 $ 0 Employee severance charge 52 330 $ 0 Employee severance charge 52 330 Adjustments 7 0 Cash 0 Employee severance charge 52 330 Adjustments 7 0 Cash payment severance charge 52 330 Adjustments 7 0 Cash payment ( 186 charge 52 330 Adjustments 7 0 Cash payment ( 186 ) 7 0 Cash payment ( 186 ) ( 203 ) Balance payment ( 186 ) ( 203 ) Balance , end of , end of period $ 0 $ 127 NOTE 22 — of period $ 0 $ 127 NOTE 22 — SEGMENT INFORMATION $ 0 $ 127 NOTE 22 — SEGMENT INFORMATION AND GEOGRAPHIC second quarter of fiscal year 2010 . Segment revenue and operating million ) Year Ended June 30 , 2010 2009 2008 Revenue Year Ended June 30 , 2010 2009 2008 Revenue Windows & Ended June 30 , 2010 2009 2008 Revenue Windows & Windows June 30 , 2010 2009 2008 Revenue Windows & Windows Live & Windows Live Division $ 17,788 $ 14,690 $ 16,815 Server Live Division $ 17,788 $ 14,690 $ 16,815 Server and Tools $ 17,788 $ 14,690 $ 16,815 Server and Tools 14,878 14,276 $ 16,815 Server and Tools 14,878 14,276 13,217 Online Services Division 16,815 Server and Tools 14,878 14,276 13,217 Online Services Division 2,198 Server and Tools 14,878 14,276 13,217 Online Services Division 2,198 2,110 14,276 13,217 Online Services Division 2,198 2,110 2,164 Microsoft Business Division 13,217 Online Services Division 2,198 2,110 2,164 Microsoft Business Division 18,909 Online Services Division 2,198 2,110 2,164 Microsoft Business Division 18,909 18,864 2,110 2,164 Microsoft Business Division 18,909 18,864 18,904 Entertainment and Devices 2,164 Microsoft Business Division 18,909 18,864 18,904 Entertainment and Devices Division Microsoft Business Division 18,909 18,864 18,904 Entertainment and Devices Division 8,114 18,904 Entertainment and Devices Division 8,114 8,035 8,502 Unallocated and other Entertainment and Devices Division 8,114 8,035 8,502 Unallocated and other 597 and Devices Division 8,114 8,035 8,502 Unallocated and other 597 462 8,035 8,502 Unallocated and other 597 462 818 Consolidated $ 62,484 8,502 Unallocated and other 597 462 818 Consolidated $ 62,484 $ Unallocated and other 597 462 818 Consolidated $ 62,484 $ 58,437 597 462 818 Consolidated $ 62,484 $ 58,437 $ 60,420 80 818 Consolidated $ 62,484 $ 58,437 $ 60,420 80 Table of $ 62,484 $ 58,437 $ 60,420 80 Table of Contents PART 62,484 $ 58,437 $ 60,420 80 Table of Contents PART II of Contents PART II Item 8 ( In million ) Year million ) Year Ended June 30 , 2010 2009 2008 Operating Year Ended June 30 , 2010 2009 2008 Operating Income ( Ended June 30 , 2010 2009 2008 Operating Income ( Loss June 30 , 2010 2009 2008 Operating Income ( Loss ) & Windows Live Division $ 12,089 $ 9,569 $ 11,876 Server Live Division $ 12,089 $ 9,569 $ 11,876 Server and Tools $ 12,089 $ 9,569 $ 11,876 Server and Tools 4,990 4,638 $ 11,876 Server and Tools 4,990 4,638 3,845 Online Services Division 11,876 Server and Tools 4,990 4,638 3,845 Online Services Division ( Server and Tools 4,990 4,638 3,845 Online Services Division ( 2,436 3,845 Online Services Division ( 2,436 ) ( 1,760 ) ( Division ( 2,436 ) ( 1,760 ) ( 619 ) Microsoft ) ( 1,760 ) ( 619 ) Microsoft Business Division 11,664 619 ) Microsoft Business Division 11,664 11,454 11,681 Entertainment and Devices ) Microsoft Business Division 11,664 11,454 11,681 Entertainment and Devices Division Microsoft Business Division 11,664 11,454 11,681 Entertainment and Devices Division 589 11,681 Entertainment and Devices Division 589 ( 3 ) 314 Reconciling and Devices Division 589 ( 3 ) 314 Reconciling amount ( Division 589 ( 3 ) 314 Reconciling amount ( 2,798 ) ) 314 Reconciling amount ( 2,798 ) ( 3,535 ) ( amount ( 2,798 ) ( 3,535 ) ( 4,826 ) Consolidated ) ( 3,535 ) ( 4,826 ) Consolidated $ 24,098 $ ( 4,826 ) Consolidated $ 24,098 $ 20,363 $ 22,271 The ) Consolidated $ 24,098 $ 20,363 $ 22,271 The type of $ 24,098 $ 20,363 $ 22,271 The type of product and operating system , including Windows 7 , and online software and Division offering include the Xbox 360 platform , the Zune digital in any period presented . 81 Table of Contents PART II of Contents PART II Item 8 In addition , certain cost million ) Year Ended June 30 , 2010 2009 2008 Corporate-level Year Ended June 30 , 2010 2009 2008 Corporate-level activity ( Ended June 30 , 2010 2009 2008 Corporate-level activity ( a June 30 , 2010 2009 2008 Corporate-level activity ( a ) ( a ) $ ( 4,470 ) $ ( 4,542 ) ( 4,470 ) $ ( 4,542 ) $ ( 6,026 ) ( 4,542 ) $ ( 6,026 ) Stock-based compensation expense 571 6,026 ) Stock-based compensation expense 571 770 790 Revenue reconciling amount ) Stock-based compensation expense 571 770 790 Revenue reconciling amount 369 Stock-based compensation expense 571 770 790 Revenue reconciling amount 369 256 770 790 Revenue reconciling amount 369 256 396 Other 732 ( 790 Revenue reconciling amount 369 256 396 Other 732 ( 19 Revenue reconciling amount 369 256 396 Other 732 ( 19 ) amount 369 256 396 Other 732 ( 19 ) 14 Total 256 396 Other 732 ( 19 ) 14 Total $ ( Other 732 ( 19 ) 14 Total $ ( 2,798 ) ) 14 Total $ ( 2,798 ) $ ( 3,535 ) ( 2,798 ) $ ( 3,535 ) $ ( 4,826 ) ( 3,535 ) $ ( 4,826 ) ( a ) Corporate-level customer accounted for more than 10 % of fiscal year 2010 10 % of fiscal year 2010 , 2009 , or 2008 of fiscal year 2010 , 2009 , or 2008 revenue . 2010 , 2009 , or 2008 revenue . Revenue , classified million ) Year Ended June 30 , 2010 2009 2008 United Year Ended June 30 , 2010 2009 2008 United States ( Ended June 30 , 2010 2009 2008 United States ( a June 30 , 2010 2009 2008 United States ( a ) States ( a ) $ 36,173 $ 33,052 $ 35,928 Other a ) $ 36,173 $ 33,052 $ 35,928 Other country 26,311 $ 36,173 $ 33,052 $ 35,928 Other country 26,311 25,385 24,492 33,052 $ 35,928 Other country 26,311 25,385 24,492 Total $ 62,484 $ 35,928 Other country 26,311 25,385 24,492 Total $ 62,484 $ 35,928 Other country 26,311 25,385 24,492 Total $ 62,484 $ 58,437 26,311 25,385 24,492 Total $ 62,484 $ 58,437 $ 60,420 ( 24,492 Total $ 62,484 $ 58,437 $ 60,420 ( a ) $ 62,484 $ 58,437 $ 60,420 ( a ) Includes shipment million ) Year Ended June 30 , 2010 2009 2008 Microsoft Year Ended June 30 , 2010 2009 2008 Microsoft Office system Ended June 30 , 2010 2009 2008 Microsoft Office system $ June 30 , 2010 2009 2008 Microsoft Office system $ 17,754 2008 Microsoft Office system $ 17,754 $ 17,998 $ 18,083 Windows Office system $ 17,754 $ 17,998 $ 18,083 Windows PC operating $ 17,754 $ 17,998 $ 18,083 Windows PC operating system 18,225 18,083 Windows PC operating system 18,225 14,653 16,838 Server product and Windows PC operating system 18,225 14,653 16,838 Server product and tool PC operating system 18,225 14,653 16,838 Server product and tool 12,007 16,838 Server product and tool 12,007 11,344 10,611 Xbox 360 platform Server product and tool 12,007 11,344 10,611 Xbox 360 platform 5,456 product and tool 12,007 11,344 10,611 Xbox 360 platform 5,456 5,475 tool 12,007 11,344 10,611 Xbox 360 platform 5,456 5,475 5,598 Consulting 11,344 10,611 Xbox 360 platform 5,456 5,475 5,598 Consulting and product 10,611 Xbox 360 platform 5,456 5,475 5,598 Consulting and product support Xbox 360 platform 5,456 5,475 5,598 Consulting and product support service Consulting and product support service 3,036 3,024 2,743 Advertising 2,528 2,345 and product support service 3,036 3,024 2,743 Advertising 2,528 2,345 2,425 product support service 3,036 3,024 2,743 Advertising 2,528 2,345 2,425 Other service 3,036 3,024 2,743 Advertising 2,528 2,345 2,425 Other 3,478 3,598 3,036 3,024 2,743 Advertising 2,528 2,345 2,425 Other 3,478 3,598 4,122 3,024 2,743 Advertising 2,528 2,345 2,425 Other 3,478 3,598 4,122 Total Advertising 2,528 2,345 2,425 Other 3,478 3,598 4,122 Total $ 62,484 2,528 2,345 2,425 Other 3,478 3,598 4,122 Total $ 62,484 $ 2,345 2,425 Other 3,478 3,598 4,122 Total $ 62,484 $ 58,437 3,478 3,598 4,122 Total $ 62,484 $ 58,437 $ 60,420 82 4,122 Total $ 62,484 $ 58,437 $ 60,420 82 Table of $ 62,484 $ 58,437 $ 60,420 82 Table of Contents PART 62,484 $ 58,437 $ 60,420 82 Table of Contents PART II of Contents PART II Item 8 Long-lived asset , excluding financial ( In million ) June 30 , 2010 2009 2008 United million ) June 30 , 2010 2009 2008 United States $ ) June 30 , 2010 2009 2008 United States $ 18,716 June 30 , 2010 2009 2008 United States $ 18,716 $ 2009 2008 United States $ 18,716 $ 19,362 $ 19,129 Other United States $ 18,716 $ 19,362 $ 19,129 Other country 2,466 $ 18,716 $ 19,362 $ 19,129 Other country 2,466 2,435 1,194 19,362 $ 19,129 Other country 2,466 2,435 1,194 Total $ 21,182 $ 19,129 Other country 2,466 2,435 1,194 Total $ 21,182 $ 19,129 Other country 2,466 2,435 1,194 Total $ 21,182 $ 21,797 2,466 2,435 1,194 Total $ 21,182 $ 21,797 $ 20,323 NOTE 1,194 Total $ 21,182 $ 21,797 $ 20,323 NOTE 23 — $ 21,182 $ 21,797 $ 20,323 NOTE 23 — QUARTERLY INFORMATION $ 21,797 $ 20,323 NOTE 23 — QUARTERLY INFORMATION ( Unaudited amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2010 Revenue June 30 Total Fiscal Year 2010 Revenue $ 12,920 ( b Fiscal Year 2010 Revenue $ 12,920 ( b ) $ 19,022 12,920 ( b ) $ 19,022 ( a ) $ 14,503 19,022 ( a ) $ 14,503 $ 16,039 $ 62,484 Gross a ) $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 4,006 11,748 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share 0.40 18,760 Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share 0.40 2.13 Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 Fiscal Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 Fiscal Year earnings per share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 per share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 Revenue share 0.40 0.74 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 0.45 0.51 2.10 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 Fiscal Year 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 2009 Revenue $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( $ 15,061 $ 16,629 $ 13,648 $ 13,099 ( c ) $ 16,629 $ 13,648 $ 13,099 ( c ) $ 58,437 13,099 ( c ) $ 58,437 Gross profit 12,213 12,722 10,834 ) $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net $ 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 58,437 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 Gross profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 profit 12,213 12,722 10,834 10,513 46,282 Net income 4,373 4,174 2,977 10,834 10,513 46,282 Net income 4,373 4,174 2,977 ( d ) 10,513 46,282 Net income 4,373 4,174 2,977 ( d ) 3,045 46,282 Net income 4,373 4,174 2,977 ( d ) 3,045 ( 4,174 2,977 ( d ) 3,045 ( d ) 14,569 Basic ) 3,045 ( d ) 14,569 Basic earnings per share 0.48 14,569 Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted Basic earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings earnings per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per per share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share share 0.48 0.47 0.33 0.34 1.63 Diluted earnings per share 0.48 1.63 Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Diluted earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Year earnings per share 0.48 0.47 0.33 0.34 1.62 Fiscal Year 2008 per share 0.48 0.47 0.33 0.34 1.62 Fiscal Year 2008 Revenue share 0.48 0.47 0.33 0.34 1.62 Fiscal Year 2008 Revenue $ 0.33 0.34 1.62 Fiscal Year 2008 Revenue $ 13,762 $ 16,367 Fiscal Year 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 2008 Revenue $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ $ 13,762 $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross $ 16,367 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 $ 14,454 $ 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 15,837 $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net $ 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 60,420 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 Gross profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 profit 11,087 12,824 11,940 12,971 48,822 Net income 4,289 4,707 4,388 11,940 12,971 48,822 Net income 4,289 4,707 4,388 ( e ) 12,971 48,822 Net income 4,289 4,707 4,388 ( e ) 4,297 48,822 Net income 4,289 4,707 4,388 ( e ) 4,297 17,681 4,707 4,388 ( e ) 4,297 17,681 Basic earnings per share 4,388 ( e ) 4,297 17,681 Basic earnings per share 0.46 17,681 Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted Basic earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings earnings per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per per share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share share 0.46 0.50 0.47 0.46 1.90 Diluted earnings per share 0.45 1.90 Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 ( Diluted earnings per share 0.45 0.50 0.47 0.46 1.87 ( a earnings per share 0.45 0.50 0.47 0.46 1.87 ( a ) per share 0.45 0.50 0.47 0.46 1.87 ( a ) Reflects share 0.45 0.50 0.47 0.46 1.87 ( a ) Reflects $ ( a ) Reflects $ 1.7 billion of revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the “ Windows 7 Deferral ” ) . ( ( b ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . ( c ) ( c ) Reflects $ 276 million of revenue deferred to period relating to the Windows 7 Deferral . ( d ) Includes employee severance of $ 290 million and $ 40 million $ 290 million and $ 40 million ( pre-tax ) in of the year ended June 30 , 2009 , respectively . year ended June 30 , 2009 , respectively . ( e ) Includes charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . 83 Table of Contents Commission in February 2008 . 83 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2010 and 2009 , a of June 30 , 2010 and 2009 , and the June 30 , 2010 and 2009 , and the related consolidated in the period ended June 30 , 2010 . These financial period ended June 30 , 2010 . These financial statement are and subsidiary a of June 30 , 2010 and 2009 , a of June 30 , 2010 and 2009 , and the June 30 , 2010 and 2009 , and the result of in the period ended June 30 , 2010 , in conformity period ended June 30 , 2010 , in conformity with accounting financial reporting a of June 30 , 2010 , based on a of June 30 , 2010 , based on the criterion and our report dated July 30 , 2010 , expressed an report dated July 30 , 2010 , expressed an unqualified opinion LLP Seattle , Washington July 30 , 2010 84 Table of , Washington July 30 , 2010 84 Table of Contents PART Washington July 30 , 2010 84 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2010 . There were a of June 30 , 2010 . There were no change during the quarter ended June 30 , 2010 that have materially quarter ended June 30 , 2010 that have materially affected , financial reporting a of June 30 , 2010 ; their report a of June 30 , 2010 ; their report is included report is included in Item 9A . 85 Table of Contents included in Item 9A . 85 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2010 , based on a of June 30 , 2010 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2010 , based on a of June 30 , 2010 , based on the criterion for the year ended June 30 , 2010 , of the year ended June 30 , 2010 , of the Company and and our report dated July 30 , 2010 , expressed an report dated July 30 , 2010 , expressed an unqualified opinion LLP Seattle , Washington July 30 , 2010 86 Table of , Washington July 30 , 2010 86 Table of Contents PART Washington July 30 , 2010 86 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 16 , 2010 ( the “ be held November 16 , 2010 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 87 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 44 Balance Sheets 45 Cash Flows Income Statements 44 Balance Sheets 45 Cash Flows Statements 46 Stockholders Sheets 45 Cash Flows Statements 46 Stockholders ’ Equity Statements 47 46 Stockholders ’ Equity Statements 47 Notes to Financial Statements 48 47 Notes to Financial Statements 48 Report of Independent Registered Public Independent Registered Public Accounting Firm 84 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation 10-Q 3.2 Bylaws of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form Bylaws of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture between Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a of , dated a of June 14 , 2010 , between Microsoft a of June 14 , 2010 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 6/18/10 4.4 Form of . , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note representing Coupon Convertible Senior Notes due 2013 8-K 4.2 6/18/10 10.1 * Convertible Senior Notes due 2013 8-K 4.2 6/18/10 10.1 * Microsoft Senior Notes due 2013 8-K 4.2 6/18/10 10.1 * Microsoft Corporation Notes due 2013 8-K 4.2 6/18/10 10.1 * Microsoft Corporation 2001 due 2013 8-K 4.2 6/18/10 10.1 * Microsoft Corporation 2001 Stock 6/18/10 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock 7/20/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Stock 7/20/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Employee 11/15/04 10.4 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan S-8 99.1 2/28/06 88 Table of Contents Deferred Compensation Plan S-8 99.1 2/28/06 88 Table of Contents PART Compensation Plan S-8 99.1 2/28/06 88 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.6 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Company , a trustee X 10.13 Amended and Restated 2003 Indemnification X 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Company , a trustee X 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2007 performance period 10-K 6/30/07 10.17 fiscal year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * year 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form 2007 performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of performance period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of Shared period 10-K 6/30/07 10.17 8/3/07 10.16 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2008 performance period 10-Q 12/31/07 10.18 fiscal year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer Incentive period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual 2001 Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Stock Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Bonus Plan 10-Q 9/30/08 10.18 10/23/08 10.19 * Annual Performance Bonus Plan Bonus Plan for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Plan for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio of Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 89 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Instance Document * XBRL Instance Document X 101.SCH * * XBRL Taxonomy Extension XBRL Taxonomy Extension Schema X 101.CAL * * XBRL Taxonomy Extension Taxonomy Extension Calculation Linkbase X 101.DEF * * XBRL Taxonomy Extension Taxonomy Extension Definition Linkbase X 101.LAB * * XBRL Taxonomy Extension Taxonomy Extension Label Linkbase X 101.PRE * * XBRL Taxonomy Extension * * Pursuant to Rule 406T of Regulation S-T , these prospectus for purpose of Sections 11 or 12 of the Securities purpose of Sections 11 or 12 of the Securities Act of of the Securities Act of 1933 or Section 18 of the Act of 1933 or Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 and otherwise are not subject not subject to liability . 90 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 30 , 2010 . M ICROSOFT , on July 30 , 2010 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 30 , 2010 . Signature Title indicated on July 30 , 2010 . Signature Title / S ( Principal Accounting Officer ) 91 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-11-200680/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-11-200680/full-submission.txt new file mode 100644 index 0000000..a6cf6aa --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-11-200680/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2011 OR ¨ TRANSITION Year Ended June 30 , 2011 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2010 , the aggregate As of December 31 , 2010 , the aggregate market value of the registrant wa $ 208,370,414,170 based on the closing sale System . As of July 20 , 2011 , there were As of July 20 , 2011 , there were 8,378,265,782 share , 2011 , there were 8,378,265,782 share of common stock outstanding to be held on November 15 , 2011 are incorporated by held on November 15 , 2011 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2011 INDEX Page PART Year Ended June 30 , 2011 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registrant 12 Item 1A . Risk Factors 14 Item Item 1A . Risk Factors 14 Item 1B . Unresolved Staff . Risk Factors 14 Item 1B . Unresolved Staff Comments 20 1B . Unresolved Staff Comments 20 Item 2 . Properties 20 Unresolved Staff Comments 20 Item 2 . Properties 20 Item 3 20 Item 2 . Properties 20 Item 3 . Legal Proceedings 2 . Properties 20 Item 3 . Legal Proceedings 21 PART Item 3 . Legal Proceedings 21 PART II Item 5 . Proceedings 21 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 21 Item 6 . Selected Financial of Equity Securities 21 Item 6 . Selected Financial Data 22 6 . Selected Financial Data 22 Item 7 . Management ’ Selected Financial Data 22 Item 7 . Management ’ s Discussion Condition and Results of Operations 22 Item 7A . Quantitative and Results of Operations 22 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 44 Item 8 . Financial Statements about Market Risk 44 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 46 Item 9 . Changes in and Supplementary Data 46 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 86 Item 9A . Controls and and Financial Disclosure 86 Item 9A . Controls and Procedures 86 9A . Controls and Procedures 86 Report of Management on Internal Internal Control over Financial Reporting 86 Report of Independent Registered Public Independent Registered Public Accounting Firm 87 Item 9B . Other Information Public Accounting Firm 87 Item 9B . Other Information 88 PART Item 9B . Other Information 88 PART III Item 10 . Information 88 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 88 Item 11 . Executive Compensation and Corporate Governance 88 Item 11 . Executive Compensation 88 Item Item 11 . Executive Compensation 88 Item 12 . Security Ownership . Executive Compensation 88 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 88 Item 13 . Certain Relationships Related Stockholder Matters 88 Item 13 . Certain Relationships and Related Transactions , and Director Independence 88 Item 14 . Principal Accounting and Director Independence 88 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 88 PART IV Item 15 . Services 88 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 89 Signatures 92 2 Table of Financial Statement Schedules 89 Signatures 92 2 Table of Contents PART Statement Schedules 89 Signatures 92 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Microsoft wa founded GENERAL Microsoft wa founded in 1975 . Our mission is to have office in more than 100 country . We generate revenue sell hardware including the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC content ; • Microsoft Office 365 , an online suite that SharePoint , and Lync ; 3 Table of Contents PART I of Contents PART I Item 1 • Microsoft Dynamics CRM Online information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & Windows market worldwide , a approximately 75 % of total Windows Division Products and Services : Windows 7 and prior version of the for any operating system . 4 Table of Contents PART I of Contents PART I Item 1 Windows Live software and service product and service . Approximately 50 % of Server and Tools volume licensing agreement , approximately 30 % is purchased through transactional IBM , and VMWare in 5 Table of Contents PART I of Contents PART I Item 1 the management of information technology frequent basis . In December 2009 , we entered into a U.S. and Canada in July 2010 and the paid search transition paid search transition in October 2010 and have begun transitioning algorithmic program , service , and 6 Table of Contents PART I of Contents PART I Item 1 software solution , which may offering , which generate over 90 % of MBD revenue , of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is and OneNote . In June 2011 , MBD launched Office 365 2011 , MBD launched Office 365 , which is an online connect people . The Xbox 360 entertainment platform , including Kinect and Xbox LIVE functionality . 7 Table of Contents PART I of Contents PART I Item 1 Nokia strategic alliance On April Nokia strategic alliance On April 21 , 2011 , Microsoft and alliance On April 21 , 2011 , Microsoft and Nokia entered Products and Services : Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox 360 360 video game , Xbox 360 accessory ; Xbox LIVE ; entertainment console average five to 10 year . We released Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We believe the Xbox 360 entertainment platform is positioned well for the network operator . 8 Table of Contents PART I of Contents PART I Item 1 OPERATIONS We have operation center our manufacturing activity for Xbox 360 and related game , Kinect game , Kinect for Xbox 360 , various retail software packaged limited source . Our Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 include key component that are AND DEVELOPMENT During fiscal year 2011 , 2010 , and 2009 During fiscal year 2011 , 2010 , and 2009 , research 2011 , 2010 , and 2009 , research and development expense and development expense wa $ 9.0 billion , $ 8.7 billion $ 9.0 billion , $ 8.7 billion , and $ 9.0 8.7 billion , and $ 9.0 billion , respectively . These respectively . These amount represented 13 % , 14 % , amount represented 13 % , 14 % , and 15 % , 14 % , and 15 % , respectively , of have a portfolio of over 26,000 U.S. and international patent issued international patent issued and over 36,000 pending . While we employ development of our product . 9 Table of Contents PART I of Contents PART I Item 1 Investing in Innovation Innovation is local or regional level . 10 Table of Contents PART I of Contents PART I Item 1 Distributors and Resellers Many organization Microsoft Lync , Microsoft Office 365 , Microsoft Office Communications Online primarily for small-to-medium organization ( 5 to over 250 license ) organization ( 5 to over 250 license ) , Open licensing existing volume licensing agreement . 11 Table of Contents PART I of Contents PART I Item 1 Select Licensing Designed primarily for medium-to-large organization ( greater than 250 license ) , the Select large organization ( greater than 250 license ) that want to customer accounted for more than 10 % of fiscal year 2011 10 % of fiscal year 2011 , 2010 , or 2009 of fiscal year 2011 , 2010 , or 2009 revenue . 2011 , 2010 , or 2009 revenue . Our practice is executive officer a of July 28 , 2011 were a follows a of July 28 , 2011 were a follows : Name the Company Steven A. Ballmer 55 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 51 Senior Vice President , Human Human Resources Kurt D. DelBene 51 President , Microsoft Office Division Office Division Peter S. Klein 48 Chief Financial Officer Craig J. Financial Officer Craig J. Mundie 62 Chief Research and Strategy Officer and Strategy Officer Satya Nadella 43 President , Server and Tools Server and Tools Steven Sinofsky 45 President , Windows & Windows Live Division Bradford L. Smith 52 Senior Vice President ; General ; Secretary B. Kevin Turner 46 Chief Operating Officer Mr. Ballmer Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . Mr. Ballmer joined Microsoft Mr. Ballmer joined Microsoft in 1980 . 12 Table of Contents joined Microsoft in 1980 . 12 Table of Contents PART I of Contents PART I Item 1 Ms. Brummel wa named Senior , Human Resources in December 2005 . She had been Corporate , Human Resources since May 2005 . From May 2000 to May 2005 . From May 2000 to May 2005 , she From May 2000 to May 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Microsoft Office Division in September 2010 . He served a Senior the Microsoft Business Division since 2006 . Since joining Microsoft in . Since joining Microsoft in 1992 , Mr. DelBene ha served Chief Financial Officer in November 2009 . He served a Corporate Microsoft Business Division from February 2006 to November 2009 and Chief from February 2006 to November 2009 and Chief Financial Officer of Server and Tools from July 2003 to February 2006 . Mr. from July 2003 to February 2006 . Mr. Klein joined Microsoft Mr. Klein joined Microsoft in 2002 . Mr. Mundie wa named and Strategy Officer in June 2006 . He had been Senior Strategies and Policy since August 2001 . He wa named Senior , Consumer Platforms in February 1996 . Mr. Mundie joined Microsoft Mr. Mundie joined Microsoft in 1992 . Mr. Nadella wa named Server and Tools in February 2011 . Before holding that position the Online Services Division since 2008 and Corporate Vice President , for the Advertising Platform since 2007 . From 2000 to 2007 Platform since 2007 . From 2000 to 2007 , Mr. Nadella 2007 . From 2000 to 2007 , Mr. Nadella led Microsoft Mr. Nadella joined Microsoft in 1992 . Mr. Sinofsky wa named Windows Live Division in July 2009 . He served a Senior Live Engineering Group since December 2006 and Senior Vice President , President , Office from December 1999 to December 2006 . He from December 1999 to December 2006 . He had been Vice President , Office since December 1998 . Mr. Sinofsky joined the joined the Office team in 1994 , increasing his responsibility with Mr. Sinofsky joined Microsoft in 1989 . Mr. Smith wa named , and Secretary in November 2001 . Mr. Smith wa also Chief Compliance Officer effective July 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Club division . From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it . EMPLOYEES As of June 30 , 2011 , we employed As of June 30 , 2011 , we employed approximately 90,000 2011 , we employed approximately 90,000 people on a full-time basis on a full-time basis , 54,000 in the U.S. and 36,000 54,000 in the U.S. and 36,000 internationally . Of the total . Of the total , 35,000 were in product research and product research and development , 25,000 in sale and marketing , in sale and marketing , 16,000 in product support and consulting support and consulting service , 5,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . to collective bargaining agreement . 13 Table of Contents PART I of Contents PART I Item 1 , 1A AVAILABLE INFORMATION Our PART I Item 1 , 1A AVAILABLE INFORMATION Our Internet address our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to , the SEC . ITEM 1A . RISK FACTORS Our operation security of their data . 14 Table of Contents PART I of Contents PART I Item 1A Challenges to our business model range in size from Fortune 100 company to small , specialized constant technological change in the 15 Table of Contents PART I of Contents PART I Item 1A segment in which we compete harm our competitive position . 16 Table of Contents PART I of Contents PART I Item 1A Improper disclosure of personal data , Exchange Online , Office 365 , SharePoint Online , Xbox U.S. Department of Justice , 18 state , and the District Decree that took effect in 2001 and a Final Judgment entered a Final Judgment entered in 2002 . These proceeding imposed various Final Judgment expired in May 2011 , we expect that federal to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a sale of our product . 17 Table of Contents PART I of Contents PART I Item 1A Government regulatory action and court offering , and the Xbox 360 entertainment platform . Investments in decline , or consumer or 18 Table of Contents PART I of Contents PART I Item 1A business spending for those product product such a the Xbox 360 console are highly complex and cost of revenue . Xbox 360 console are assembled in Asia our result of operation . 19 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 We PART I Item 1A , 1B , 2 We operate a Item 1A , 1B , 2 We operate a global business . We operate in over 100 country and a significant part or financial condition . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2011 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office King County , Washington : 10 million square foot of owned owned space situated on approximately 500 acre of land we own and data center space . 20 Table of Contents PART I PART I , II Item 2 , 3 , 5 We , II Item 2 , 3 , 5 We occupy many Item 2 , 3 , 5 We occupy many site internationally Development ” section of Item 1 of this Form 10-K. Our Item 1 of this Form 10-K. Our facility are fully used we may currently develop approximately 1.6 million square foot of additional In addition , we own 63 acre of undeveloped land in of office space . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal involved . PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 20 , 2011 , there were . On July 20 , 2011 , there were 134,854 registered , 2011 , there were 134,854 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2011 30 Fiscal Year Fiscal Year 2011 High $ 26.41 $ 28.87 Fiscal Year 2011 High $ 26.41 $ 28.87 $ 29.46 $ 2011 High $ 26.41 $ 28.87 $ 29.46 $ 26.87 $ $ 26.41 $ 28.87 $ 29.46 $ 26.87 $ 29.46 Low $ 28.87 $ 29.46 $ 26.87 $ 29.46 Low $ 22.73 $ 29.46 $ 26.87 $ 29.46 Low $ 22.73 $ 23.78 26.87 $ 29.46 Low $ 22.73 $ 23.78 $ 24.68 $ 29.46 Low $ 22.73 $ 23.78 $ 24.68 $ 23.65 $ $ 22.73 $ 23.78 $ 24.68 $ 23.65 $ 22.73 Fiscal $ 23.78 $ 24.68 $ 23.65 $ 22.73 Fiscal Year 2010 $ 24.68 $ 23.65 $ 22.73 Fiscal Year 2010 High $ 23.65 $ 22.73 Fiscal Year 2010 High $ 26.25 $ 31.50 Fiscal Year 2010 High $ 26.25 $ 31.50 $ 31.24 $ 2010 High $ 26.25 $ 31.50 $ 31.24 $ 31.58 $ $ 26.25 $ 31.50 $ 31.24 $ 31.58 $ 31.58 Low $ 31.50 $ 31.24 $ 31.58 $ 31.58 Low $ 22.00 $ 31.24 $ 31.58 $ 31.58 Low $ 22.00 $ 24.43 31.58 $ 31.58 Low $ 22.00 $ 24.43 $ 27.57 $ 31.58 Low $ 22.00 $ 24.43 $ 27.57 $ 22.95 $ $ 22.00 $ 24.43 $ 27.57 $ 22.95 $ 22.00 21 $ 24.43 $ 27.57 $ 22.95 $ 22.00 21 Table of $ 27.57 $ 22.95 $ 22.00 21 Table of Contents PART 27.57 $ 22.95 $ 22.00 21 Table of Contents PART II of Contents PART II Item 5 , 6 , 7 DIVIDENDS PART II Item 5 , 6 , 7 DIVIDENDS AND SHARE Item 5 , 6 , 7 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2011 : Period Total Number of ( in million ) April 1 , 2011 – April 30 million ) April 1 , 2011 – April 30 , 2011 1 , 2011 – April 30 , 2011 0 $ 0 2011 – April 30 , 2011 0 $ 0 0 $ – April 30 , 2011 0 $ 0 0 $ 13,851 30 , 2011 0 $ 0 0 $ 13,851 May 1 , 2011 0 $ 0 0 $ 13,851 May 1 , 0 $ 0 0 $ 13,851 May 1 , 2011 – 0 0 $ 13,851 May 1 , 2011 – May 31 $ 13,851 May 1 , 2011 – May 31 , 2011 1 , 2011 – May 31 , 2011 0 $ 0 2011 – May 31 , 2011 0 $ 0 0 $ – May 31 , 2011 0 $ 0 0 $ 13,851 31 , 2011 0 $ 0 0 $ 13,851 June 1 , 2011 0 $ 0 0 $ 13,851 June 1 , 0 $ 0 0 $ 13,851 June 1 , 2011 – 0 0 $ 13,851 June 1 , 2011 – June 30 $ 13,851 June 1 , 2011 – June 30 , 2011 1 , 2011 – June 30 , 2011 65,839,984 $ 24.77 2011 – June 30 , 2011 65,839,984 $ 24.77 65,839,984 $ – June 30 , 2011 65,839,984 $ 24.77 65,839,984 $ 12,221 30 , 2011 65,839,984 $ 24.77 65,839,984 $ 12,221 65,839,984 65,839,984 , 2011 65,839,984 $ 24.77 65,839,984 $ 12,221 65,839,984 65,839,984 The 65,839,984 $ 24.77 65,839,984 $ 12,221 65,839,984 65,839,984 The repurchase were $ 24.77 65,839,984 $ 12,221 65,839,984 65,839,984 The repurchase were made 24.77 65,839,984 $ 12,221 65,839,984 65,839,984 The repurchase were made using a trading plan under Rule 10b5-1 of the Securities Exchange Act the Securities Exchange Act of 1934 . ITEM 6 . SELECTED Act of 1934 . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2011 2010 2009 2008 Year Ended June 30 , 2011 2010 2009 2008 2007 Revenue Ended June 30 , 2011 2010 2009 2008 2007 Revenue $ June 30 , 2011 2010 2009 2008 2007 Revenue $ 69,943 30 , 2011 2010 2009 2008 2007 Revenue $ 69,943 $ , 2011 2010 2009 2008 2007 Revenue $ 69,943 $ 62,484 2009 2008 2007 Revenue $ 69,943 $ 62,484 $ 58,437 $ 2007 Revenue $ 69,943 $ 62,484 $ 58,437 $ 60,420 $ $ 69,943 $ 62,484 $ 58,437 $ 60,420 $ 51,122 Operating $ 62,484 $ 58,437 $ 60,420 $ 51,122 Operating income $ $ 58,437 $ 60,420 $ 51,122 Operating income $ 27,161 $ $ 51,122 Operating income $ 27,161 $ 24,098 $ 20,363 $ Operating income $ 27,161 $ 24,098 $ 20,363 $ 22,271 ( $ 27,161 $ 24,098 $ 20,363 $ 22,271 ( a ) $ 24,098 $ 20,363 $ 22,271 ( a ) $ 18,438 22,271 ( a ) $ 18,438 Net income $ 23,150 $ $ 18,438 Net income $ 23,150 $ 18,760 $ 14,569 $ Net income $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( a ) $ 18,760 $ 14,569 $ 17,681 ( a ) $ 14,065 17,681 ( a ) $ 14,065 Diluted earnings per share $ Diluted earnings per share $ 2.69 $ 2.10 $ 1.62 $ per share $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ $ 2.69 $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash $ 2.10 $ 1.62 $ 1.87 $ 1.42 Cash dividend declared $ 1.62 $ 1.87 $ 1.42 Cash dividend declared per share dividend declared per share $ 0.64 $ 0.52 $ 0.52 $ per share $ 0.64 $ 0.52 $ 0.52 $ 0.44 $ $ 0.64 $ 0.52 $ 0.52 $ 0.44 $ 0.40 Cash $ 0.52 $ 0.52 $ 0.44 $ 0.40 Cash and cash $ 0.52 $ 0.44 $ 0.40 Cash and cash equivalent and equivalent and short-term investment $ 52,772 $ 36,788 $ 31,447 $ short-term investment $ 52,772 $ 36,788 $ 31,447 $ 23,662 $ $ 52,772 $ 36,788 $ 31,447 $ 23,662 $ 23,411 Total $ 36,788 $ 31,447 $ 23,662 $ 23,411 Total asset $ $ 31,447 $ 23,662 $ 23,411 Total asset $ 108,704 $ $ 23,411 Total asset $ 108,704 $ 86,113 $ 77,888 $ Total asset $ 108,704 $ 86,113 $ 77,888 $ 72,793 $ $ 108,704 $ 86,113 $ 77,888 $ 72,793 $ 63,171 Long-term $ 86,113 $ 77,888 $ 72,793 $ 63,171 Long-term obligation $ $ 77,888 $ 72,793 $ 63,171 Long-term obligation $ 22,847 $ $ 63,171 Long-term obligation $ 22,847 $ 13,791 $ 11,296 $ Long-term obligation $ 22,847 $ 13,791 $ 11,296 $ 6,621 $ $ 22,847 $ 13,791 $ 11,296 $ 6,621 $ 8,320 Stockholders $ 13,791 $ 11,296 $ 6,621 $ 8,320 Stockholders ’ equity $ 11,296 $ 6,621 $ 8,320 Stockholders ’ equity $ 57,083 8,320 Stockholders ’ equity $ 57,083 $ 46,175 $ 39,558 $ ’ equity $ 57,083 $ 46,175 $ 39,558 $ 36,286 $ $ 57,083 $ 46,175 $ 39,558 $ 36,286 $ 31,097 ( $ 46,175 $ 39,558 $ 36,286 $ 31,097 ( a ) $ 39,558 $ 36,286 $ 31,097 ( a ) Includes a Includes a charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . ITEM 7 . MANAGEMENT in February 2008 . ITEM 7 . MANAGEMENT ’ S DISCUSSION , and income tax . 22 Table of Contents PART II of Contents PART II Item 7 Industry Trends Our industry is Microsoft SQL Azure , Office 365 , Windows Azure , Windows user make better decision and 23 Table of Contents PART II of Contents PART II Item 7 complete task more simply when Lync , Office , Office 365 , SharePoint , and Windows under Risk Factors ( Part 1 , Item 1a . of ( Part 1 , Item 1a . of this Form 10-K 1a . of this Form 10-K ) . Seasonality Our revenue Devices Division ha generated approximately 40 % of it yearly segment to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to retailer before general availability availability ( the “ Windows 7 Deferral ” ) . 24 7 Deferral ” ) . 24 Table of Contents PART II of Contents PART II Item 7 RESULTS OF OPERATIONS Summary of of Results for Fiscal Years 2011 , 2010 , and 2009 for Fiscal Years 2011 , 2010 , and 2009 ( In 2011 , 2010 , and 2009 ( In million , except and per share amount ) 2011 2010 2009 Percentage Change 2011 per share amount ) 2011 2010 2009 Percentage Change 2011 Versus share amount ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 69,943 2010 Percentage Change 2010 Versus 2009 Revenue $ 69,943 $ 62,484 2010 Versus 2009 Revenue $ 69,943 $ 62,484 $ 58,437 12 2009 Revenue $ 69,943 $ 62,484 $ 58,437 12 % 7 $ 69,943 $ 62,484 $ 58,437 12 % 7 % Operating 69,943 $ 62,484 $ 58,437 12 % 7 % Operating income 62,484 $ 58,437 12 % 7 % Operating income $ 27,161 7 % Operating income $ 27,161 $ 24,098 $ 20,363 13 Operating income $ 27,161 $ 24,098 $ 20,363 13 % 18 $ 27,161 $ 24,098 $ 20,363 13 % 18 % Diluted 27,161 $ 24,098 $ 20,363 13 % 18 % Diluted earnings 24,098 $ 20,363 13 % 18 % Diluted earnings per share Diluted earnings per share $ 2.69 $ 2.10 $ 1.62 28 per share $ 2.69 $ 2.10 $ 1.62 28 % 30 $ 2.69 $ 2.10 $ 1.62 28 % 30 % Fiscal 2.69 $ 2.10 $ 1.62 28 % 30 % Fiscal year 2.10 $ 1.62 28 % 30 % Fiscal year 2011 compared % 30 % Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and increased due to the $ 254 million Office Deferral in fiscal Office Deferral in fiscal year 2010 and the subsequent recognition of Office Deferral during fiscal year 2011 . Changes in foreign currency Cost of revenue increased $ 3.2 billion or 26 % , increased $ 3.2 billion or 26 % , due to higher and increased volume of Xbox 360 console and Kinect sensor sold and marketing expense increased $ 726 million or 5 % , increased $ 726 million or 5 % , primarily reflecting increased and marketing of the Xbox 360 platform , Windows Phone , and development expense increased $ 329 million or 4 % , increased $ 329 million or 4 % , due mainly to and administrative expense increased $ 159 million or 4 % , increased $ 159 million or 4 % , due mainly to operating expense . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Revenue increased mainly due to to strong sale of Windows 7 , which wa released during wa released during fiscal year 2010 , and PC market improvement and marketing expense increased $ 335 million or 3 % , increased $ 335 million or 3 % , primarily reflecting increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . • General and administrative and administrative expense increased $ 33 million or 1 % due increased $ 33 million or 1 % due mainly to increased Cost of revenue increased $ 240 million or 2 % , increased $ 240 million or 2 % , primarily reflecting increased in part by decreased Xbox 360 console cost and reduction in and development expense decreased $ 296 million or 3 % , decreased $ 296 million or 3 % , primarily reflecting a certain software development cost . 25 Table of Contents PART II of Contents PART II Item 7 Diluted earnings per share increased income and the repurchase of 380 million share during fiscal year million share during fiscal year 2010 . SEGMENT PRODUCT REVENUE/OPERATING INCOME Segment information appearing in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 19,024 2010 Percentage Change 2010 Versus 2009 Revenue $ 19,024 $ 19,494 2010 Versus 2009 Revenue $ 19,024 $ 19,494 $ 15,847 ( 2009 Revenue $ 19,024 $ 19,494 $ 15,847 ( 2 ) $ 19,024 $ 19,494 $ 15,847 ( 2 ) % 23 $ 19,494 $ 15,847 ( 2 ) % 23 % Operating 15,847 ( 2 ) % 23 % Operating income $ 12,281 23 % Operating income $ 12,281 $ 13,034 $ 9,790 ( Operating income $ 12,281 $ 13,034 $ 9,790 ( 6 ) $ 12,281 $ 13,034 $ 9,790 ( 6 ) % 33 $ 13,034 $ 9,790 ( 6 ) % 33 % Windows 9,790 ( 6 ) % 33 % Windows & Windows Live market worldwide , a approximately 75 % of total Windows Division sell . The remaining approximately 25 % of Windows Division revenue Windows Live . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Windows Division revenue reflected relative PCs to business grew approximately 11 % this year and sale PCs to consumer declined approximately 1 % . The decline in PC sale included an approximately 32 % decline in the sale PC market increased an estimated 2 % to 4 % . an estimated 2 % to 4 % . Revenue wa negatively Considering the impact of Windows 7 launch in the prior year prior year , including $ 273 million of revenue recognized related recognized related to the Windows 7 Deferral , we estimate that and marketing expense increased $ 224 million or 8 % reflecting increased $ 224 million or 8 % reflecting increased advertising of Windows and Windows Live . 26 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Windows Division revenue increased primarily of strong sale of Windows 7 and PC market improvement . from all source grew approximately 16 % to 18 % . grew approximately 16 % to 18 % . OEM revenue increased . OEM revenue increased $ 2.6 billion or 22 % , increased $ 2.6 billion or 22 % , while OEM license while OEM license unit increased 21 % . The OEM revenue business PCs . Fiscal year 2009 OEM revenue reflects a $ OEM revenue reflects a $ 273 million Windows 7 Deferral . a $ 273 million Windows 7 Deferral . This amount wa subsequently recognized in fiscal year 2010 . Other revenue increased $ . Other revenue increased $ 970 million or 26 % driven increased $ 970 million or 26 % driven primarily by Windows % driven primarily by Windows 7 retail sale . Windows Division and marketing expense increased $ 258 million or 11 % reflecting increased $ 258 million or 11 % reflecting increased advertising and advertising and marketing of Windows 7 . Cost of revenue increased Cost of revenue increased $ 251 million or 14 % , increased $ 251 million or 14 % , primarily driven by million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 17,096 2010 Percentage Change 2010 Versus 2009 Revenue $ 17,096 $ 15,378 2010 Versus 2009 Revenue $ 17,096 $ 15,378 $ 14,601 11 2009 Revenue $ 17,096 $ 15,378 $ 14,601 11 % 5 $ 17,096 $ 15,378 $ 14,601 11 % 5 % Operating 17,096 $ 15,378 $ 14,601 11 % 5 % Operating income 15,378 $ 14,601 11 % 5 % Operating income $ 6,608 5 % Operating income $ 6,608 $ 5,539 $ 4,816 19 Operating income $ 6,608 $ 5,539 $ 4,816 19 % 15 $ 6,608 $ 5,539 $ 4,816 19 % 15 % Server 6,608 $ 5,539 $ 4,816 19 % 15 % Server and 5,539 $ 4,816 19 % 15 % Server and Tools develops training and certification . Approximately 50 % of Server and Tools volume licensing agreement , approximately 30 % is purchased through transactional Enterprise Services . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Server and Tools revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 337 million or 11 % , grew $ 337 million or 11 % , due to growth Cost of revenue increased $ 366 million or 13 % , increased $ 366 million or 13 % , primarily reflecting a , primarily reflecting a $ 323 million increase in expense from and marketing expense increased $ 264 million or 6 % reflecting increased $ 264 million or 6 % reflecting increased fee paid marketing activity . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Server and Tools revenue increased . Product revenue increased $ 784 million or 7 % , increased $ 784 million or 7 % , driven primarily by by decreased consulting service . 27 Table of Contents PART II of Contents PART II Item 7 Server and Tools operating income Cost of revenue increased $ 65 million or 2 % , increased $ 65 million or 2 % , reflecting increased headcount-related million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 2,528 2010 Percentage Change 2010 Versus 2009 Revenue $ 2,528 $ 2,201 2010 Versus 2009 Revenue $ 2,528 $ 2,201 $ 2,121 15 2009 Revenue $ 2,528 $ 2,201 $ 2,121 15 % 4 $ 2,528 $ 2,201 $ 2,121 15 % 4 % Operating 2,528 $ 2,201 $ 2,121 15 % 4 % Operating loss 2,201 $ 2,121 15 % 4 % Operating loss $ ( % Operating loss $ ( 2,557 ) $ ( 2,337 ) ( 2,557 ) $ ( 2,337 ) $ ( 1,641 ) ( 2,337 ) $ ( 1,641 ) ( 9 ) % $ ( 1,641 ) ( 9 ) % ( 42 ) ( 9 ) % ( 42 ) % Online Services Division annual revenue . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 OSD revenue increased primarily a Online advertising revenue grew $ 358 million or 19 % to grew $ 358 million or 19 % to $ 2.3 billion or 19 % to $ 2.3 billion , reflecting continued growth property . As of June 30 , 2011 , according to As of June 30 , 2011 , according to third-party source U.S. market share grew over 31 % to approximately 14 % over 31 % to approximately 14 % , while Bing-powered U.S. ! property , wa approximately 27 % . OSD operating loss Cost of revenue grew $ 641 million driven by cost associated and administrative expense decreased $ 157 million or 60 % due decreased $ 157 million or 60 % due mainly to transition Research and development increased $ 117 million or 11 % due increased $ 117 million or 11 % due to increased headcount-related headcount-related cost . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 OSD revenue increased reflecting increased Online advertising revenue increased $ 146 million or 8 % to increased $ 146 million or 8 % to $ 1.9 billion or 8 % to $ 1.9 billion , reflecting higher search . Access revenue decreased $ 57 million or 31 % , decreased $ 57 million or 31 % , reflecting continued migration Cost of revenue increased $ 567 million , primarily driven by and administrative expense increased $ 135 million . Sales and marketing and marketing expense increased $ 51 million or 5 % due increased $ 51 million or 5 % due mainly to increased million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 22,186 2010 Percentage Change 2010 Versus 2009 Revenue $ 22,186 $ 19,076 2010 Versus 2009 Revenue $ 22,186 $ 19,076 $ 19,257 16 2009 Revenue $ 22,186 $ 19,076 $ 19,257 16 % ( $ 22,186 $ 19,076 $ 19,257 16 % ( 1 ) 22,186 $ 19,076 $ 19,257 16 % ( 1 ) % $ 19,257 16 % ( 1 ) % Operating income $ ) % Operating income $ 14,124 $ 11,504 $ 11,365 23 Operating income $ 14,124 $ 11,504 $ 11,365 23 % 1 $ 14,124 $ 11,504 $ 11,365 23 % 1 % 28 14,124 $ 11,504 $ 11,365 23 % 1 % 28 Table 11,504 $ 11,365 23 % 1 % 28 Table of Contents 11,365 23 % 1 % 28 Table of Contents PART II of Contents PART II Item 7 Microsoft Business Division ( “ ) , which generates over 90 % of MBD revenue , OEM revenue . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 MBD revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system , the Office system , the $ 254 million Office Deferral during fiscal Office Deferral during fiscal year 2010 , and the subsequent recognition Office Deferral during fiscal year 2011. Business revenue increased $ 2.0 2011. Business revenue increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , reflecting licensing of , reflecting licensing of the 2010 Microsoft Office system to transactional licensing revenue , and a 10 % increase in Microsoft Dynamics . Consumer revenue increased $ 1.1 billion or 33 % , increased $ 1.1 billion or 33 % , approximately half of to the launch of Office 2010 and half of which wa Office Deferral during fiscal year 2010 and subsequent recognition of the Office Deferral during fiscal year 2011 . Excluding the impact associated , consumer revenue increased $ 620 million or 17 % due increased $ 620 million or 17 % due to sale of due to sale of the 2010 Microsoft Office system . MBD Cost of revenue increased $ 335 million or 26 % , increased $ 335 million or 26 % , primarily driven by and marketing expense increased $ 97 million or 2 % , increased $ 97 million or 2 % , primarily driven by and development cost increased $ 79 million or 4 % , increased $ 79 million or 4 % , primarily a a prior year . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 MBD revenue decreased primarily a the net deferral of $ 254 million of revenue related to revenue related to the Office 2010 Deferral . Consumer revenue decreased . Consumer revenue decreased $ 142 million or 4 % , decreased $ 142 million or 4 % , primarily due to primarily due to the Office 2010 Deferral , offset in part market and sale of the 2010 Microsoft Office system , which fourth quarter of fiscal year 2010. Business revenue decreased $ 39 2010. Business revenue decreased $ 39 million , primarily reflecting a decline in licensing of the 2007 Microsoft Office system to transactional revenue and licensing of the 2010 Microsoft Office system to transactional and marketing expense decreased $ 203 million or 5 % , decreased $ 203 million or 5 % , primarily driven by and development expense decreased $ 202 million or 9 % , decreased $ 202 million or 9 % , primarily a a and administrative expense decreased $ 50 million or 17 % primarily decreased $ 50 million or 17 % primarily due to expense in part by a $ 135 million or 12 % increase a $ 135 million or 12 % increase in cost of million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Revenue $ 8,913 2010 Percentage Change 2010 Versus 2009 Revenue $ 8,913 $ 6,168 2010 Versus 2009 Revenue $ 8,913 $ 6,168 $ 6,416 45 2009 Revenue $ 8,913 $ 6,168 $ 6,416 45 % ( $ 8,913 $ 6,168 $ 6,416 45 % ( 4 ) 8,913 $ 6,168 $ 6,416 45 % ( 4 ) % $ 6,416 45 % ( 4 ) % Operating income $ ) % Operating income $ 1,324 $ 618 $ 351 114 Operating income $ 1,324 $ 618 $ 351 114 % 76 $ 1,324 $ 618 $ 351 114 % 76 % 29 1,324 $ 618 $ 351 114 % 76 % 29 Table 618 $ 351 114 % 76 % 29 Table of Contents 351 114 % 76 % 29 Table of Contents PART II of Contents PART II Item 7 Entertainment and Devices Division ( EDD offering include the Xbox 360 entertainment platform ( which includes ( which includes the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox LIVE Xbox LIVE , and Xbox 360 accessory ) , Mediaroom ( Windows Phone . In November 2010 , we released Kinect for we released Kinect for Xbox 360 and the latest version of Windows Phone . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 EDD revenue increased primarily reflecting increased primarily reflecting higher Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue grew $ 2.7 360 platform revenue grew $ 2.7 billion or 48 % , grew $ 2.7 billion or 48 % , led by increased by increased volume of Xbox 360 console , sale of Kinect LIVE revenue . We shipped 13.7 million Xbox 360 console during We shipped 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 , compared with 10.3 million year 2011 , compared with 10.3 million Xbox 360 console during compared with 10.3 million Xbox 360 console during fiscal year 2010 360 console during fiscal year 2010 . EDD operating income increased Cost of revenue increased $ 1.8 billion or 49 % primarily increased $ 1.8 billion or 49 % primarily reflecting higher volume reflecting higher volume of Xbox 360 console and Kinect sensor sold and development expense increased $ 119 million or 12 % , increased $ 119 million or 12 % , primarily reflecting higher and marketing expense grew $ 90 million or 12 % primarily grew $ 90 million or 12 % primarily reflecting increased Xbox % primarily reflecting increased Xbox 360 platform marketing activity . Fiscal marketing activity . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 EDD revenue decreased reflecting decreased reflecting decreased revenue from Xbox 360 platform and PC game . and PC game . Xbox 360 platform and PC game revenue PC game revenue decreased $ 12 million , primarily reflecting a reflecting a reduction in Xbox 360 console sold and revenue per LIVE revenue . We shipped 10.3 million Xbox 360 console during We shipped 10.3 million Xbox 360 console during fiscal year 2010 360 console during fiscal year 2010 , compared with 11.2 million year 2010 , compared with 11.2 million Xbox 360 console during compared with 11.2 million Xbox 360 console during fiscal year 2009 360 console during fiscal year 2009 . Non-gaming revenue decreased $ . Non-gaming revenue decreased $ 197 million or 25 % primarily decreased $ 197 million or 25 % primarily reflecting decreased Zune Cost of revenue decreased $ 496 million or 12 % , decreased $ 496 million or 12 % , primarily due to primarily due to lower Xbox 360 console cost , offset in and marketing cost decreased $ 75 million or 9 % , decreased $ 75 million or 9 % , primarily due to primarily due to decreased Xbox 360 platform marketing activity . Research and development expense increased $ 54 million or 6 % , increased $ 54 million or 6 % , primarily reflecting increased million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Corporate-level activity $ 2010 Percentage Change 2010 Versus 2009 Corporate-level activity $ ( 4,619 2009 Corporate-level activity $ ( 4,619 ) $ ( 4,260 ) ( 4,619 ) $ ( 4,260 ) $ ( 4,318 ) ( 4,260 ) $ ( 4,318 ) ( 8 ) % $ ( 4,318 ) ( 8 ) % 1 % Certain ) ( 8 ) % 1 % Certain corporate-level activity is and contingency . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Corporate-level expense increased due mainly charge , which were $ 332 million in fiscal year 2011 332 million in fiscal year 2011 compared to $ 533 million year 2011 compared to $ 533 million in fiscal year 2010 533 million in fiscal year 2010 . 30 Table of Contents in fiscal year 2010 . 30 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Corporate-level expense decreased due mainly employee severance charge of $ 330 million incurred in the prior Legal charge were approximately $ 533 million compared to $ 283 533 million compared to $ 283 million in the prior year million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Cost of revenue 2010 Percentage Change 2010 Versus 2009 Cost of revenue $ 15,577 2009 Cost of revenue $ 15,577 $ 12,395 $ 12,155 26 of revenue $ 15,577 $ 12,395 $ 12,155 26 % 2 $ 15,577 $ 12,395 $ 12,155 26 % 2 % As 15,577 $ 12,395 $ 12,155 26 % 2 % As a 12,395 $ 12,155 26 % 2 % As a percent of As a percent of revenue 22 % 20 % 21 % percent of revenue 22 % 20 % 21 % 2ppt ( revenue 22 % 20 % 21 % 2ppt ( 1 ) % 20 % 21 % 2ppt ( 1 ) ppt Cost % 21 % 2ppt ( 1 ) ppt Cost of revenue development cost . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cost of revenue increased primarily to increased volume of Xbox 360 console and Kinect sensor sold content sold . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Cost of revenue increased reflecting in part by lower Xbox 360 console cost and reduction in million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Research and development 2010 Percentage Change 2010 Versus 2009 Research and development $ 9,043 2009 Research and development $ 9,043 $ 8,714 $ 9,010 4 and development $ 9,043 $ 8,714 $ 9,010 4 % ( $ 9,043 $ 8,714 $ 9,010 4 % ( 3 ) 9,043 $ 8,714 $ 9,010 4 % ( 3 ) % $ 9,010 4 % ( 3 ) % As a percent As a percent of revenue 13 % 14 % 15 % percent of revenue 13 % 14 % 15 % ( 1 revenue 13 % 14 % 15 % ( 1 ) ppt 14 % 15 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Research and development service content . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Research and development expense increased increased primarily due to a 5 % increase in headcount-related expense in the prior year . 31 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2010 compared with II Item 7 Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Research and development expense decreased development cost related to Windows 7 product development in the prior million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 Sales and marketing 2010 Percentage Change 2010 Versus 2009 Sales and marketing $ 13,940 2009 Sales and marketing $ 13,940 $ 13,214 $ 12,879 5 and marketing $ 13,940 $ 13,214 $ 12,879 5 % 3 $ 13,940 $ 13,214 $ 12,879 5 % 3 % As 13,940 $ 13,214 $ 12,879 5 % 3 % As a 13,214 $ 12,879 5 % 3 % As a percent of As a percent of revenue 20 % 21 % 22 % percent of revenue 20 % 21 % 22 % ( 1 revenue 20 % 21 % 22 % ( 1 ) ppt 21 % 22 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Sales and marketing expense increased and marketing of the Xbox 360 platform , Windows Phone , and Windows Live , a 5 % increase in headcount-related expense software advisor . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Sales and marketing expense increased advertising and marketing of Windows 7 and Bing and increased sale force expense related to Windows 7 . General and Administrative ( million , except percentage ) 2011 2010 2009 Percentage Change 2011 , except percentage ) 2011 2010 2009 Percentage Change 2011 Versus except percentage ) 2011 2010 2009 Percentage Change 2011 Versus 2010 2011 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 2009 Percentage Change 2011 Versus 2010 Percentage Change 2010 Versus 2009 2011 Versus 2010 Percentage Change 2010 Versus 2009 General and administrative 2010 Percentage Change 2010 Versus 2009 General and administrative $ 4,222 2009 General and administrative $ 4,222 $ 4,063 $ 4,030 4 and administrative $ 4,222 $ 4,063 $ 4,030 4 % 1 $ 4,222 $ 4,063 $ 4,030 4 % 1 % As 4,222 $ 4,063 $ 4,030 4 % 1 % As a 4,063 $ 4,030 4 % 1 % As a percent of As a percent of revenue 6 % 7 % 7 % percent of revenue 6 % 7 % 7 % ( 1 revenue 6 % 7 % 7 % ( 1 ) ppt 7 % 7 % ( 1 ) ppt 0ppt General and % ( 1 ) ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 General and administrative expense increased increased primarily due to a 12 % increase in headcount-related expense Commercial Agreement . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 General and administrative expense increased offset in part by a 6 % reduction in headcount-related expense cost . During fiscal year 2010 and 2009 , general and During fiscal year 2010 and 2009 , general and administrative expense employee severance expense of $ 59 million and $ 330 million $ 59 million and $ 330 million , respectively , associated that wa announced in January 2009 and completed in fiscal year and completed in fiscal year 2010 . 32 Table of Contents in fiscal year 2010 . 32 Table of Contents PART II of Contents PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2011 2010 2009 Dividends Year Ended June 30 , 2011 2010 2009 Dividends and interest Ended June 30 , 2011 2010 2009 Dividends and interest income June 30 , 2011 2010 2009 Dividends and interest income $ Dividends and interest income $ 900 $ 843 $ 744 Interest interest income $ 900 $ 843 $ 744 Interest expense ( $ 900 $ 843 $ 744 Interest expense ( 295 ) $ 744 Interest expense ( 295 ) ( 151 ) ( expense ( 295 ) ( 151 ) ( 38 ) Net ) ( 151 ) ( 38 ) Net recognized gain ( ( loss ) on investment 439 348 ( 125 ) Net loss ) on investment 439 348 ( 125 ) Net loss on investment 439 348 ( 125 ) Net loss on derivative Net loss on derivative ( 77 ) ( 140 ) ( derivative ( 77 ) ( 140 ) ( 558 ) Net ) ( 140 ) ( 558 ) Net gain ( loss on foreign currency remeasurements ( 26 ) 1 ( 509 ) currency remeasurements ( 26 ) 1 ( 509 ) Other ( ( 26 ) 1 ( 509 ) Other ( 31 ) ( 509 ) Other ( 31 ) 14 ( 56 ) ) Other ( 31 ) 14 ( 56 ) Total $ ( 31 ) 14 ( 56 ) Total $ 910 $ ( 56 ) Total $ 910 $ 915 $ ( 542 ) Total $ 910 $ 915 $ ( 542 ) We 910 $ 915 $ ( 542 ) We use derivative instrument comprehensive income . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Dividends and interest income increased currency revenue . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Dividends and interest income increased long term debt in May 2009 . Net recognized gain on . Other-than-temporary impairment were $ 69 million during fiscal year 2010 69 million during fiscal year 2010 , a compared with $ , a compared with $ 862 million during fiscal year 2009 862 million during fiscal year 2009 and decreased primarily due to were insignificant in fiscal year 2010 compared to net loss of to net loss of $ 509 million in the prior year year . For fiscal year 2010 , other includes a gain . Income Taxes Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Our effective tax rate for tax rate for fiscal year 2011 and 2010 were approximately 18 for fiscal year 2011 and 2010 were approximately 18 % and 2011 and 2010 were approximately 18 % and 25 % , were approximately 18 % and 25 % , respectively . Our , which are subject to 33 Table of Contents PART II of Contents PART II Item 7 lower income tax rate . rate . In fiscal year 2011 and 2010 , our U.S. In fiscal year 2011 and 2010 , our U.S. income before before income tax wa $ 8.9 billion and $ 9.6 billion $ 8.9 billion and $ 9.6 billion , respectively , and , respectively , and comprised 32 % and 38 % , and comprised 32 % and 38 % , respectively , of tax . In fiscal year 2011 and 2010 , the foreign In fiscal year 2011 and 2010 , the foreign income before before income tax wa $ 19.2 billion and $ 15.4 billion $ 19.2 billion and $ 15.4 billion , respectively , and , respectively , and comprised 68 % and 62 % , and comprised 68 % and 62 % , respectively , of tax . In fiscal year 2011 and 2010 , the reduction In fiscal year 2011 and 2010 , the reduction of the taxed at lower rate wa 16 % and 12 % , rate wa 16 % and 12 % , respectively . In third quarter of fiscal year 2011 relating to the audit of the audit of tax year 2004 to 2006 . This partial of tax year 2004 to 2006 . This partial settlement reduced tax expense for fiscal year 2011 by $ 461 million . fiscal year 2011 by $ 461 million . Tax contingency and other tax liability were $ 7.4 billion and $ 6.9 billion $ 7.4 billion and $ 6.9 billion a of June 30 6.9 billion a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , respectively , June 30 , 2011 and 2010 , respectively , and are temporary difference of approximately $ 44.8 billion resulting from earnings for temporary difference wa approximately $ 14.2 billion a of June 30 14.2 billion a of June 30 , 2011 . While we a of June 30 , 2011 . While we settled a . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit fourth quarter of fiscal year 2011 , the I.R.S . completed or decrease within the next 12 month , a we do be concluded within the next 12 month . We also continue I.R.S . for tax year 2007 to 2010 . Fiscal year for tax year 2007 to 2010 . Fiscal year 2010 compared to 2010 . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Our effective tax rate in tax rate in fiscal year 2010 and 2009 were approximately 25 in fiscal year 2010 and 2009 were approximately 25 % and 2010 and 2009 were approximately 25 % and 27 % , were approximately 25 % and 27 % , respectively . In respectively . In fiscal year 2010 and 2009 , the reduction In fiscal year 2010 and 2009 , the reduction to the taxed at lower rate wa 12 % and 9 % , rate wa 12 % and 9 % , respectively , reflecting income . In fiscal year 2010 and 2009 , foreign income In fiscal year 2010 and 2009 , foreign income before income before income tax wa $ 15.4 billion and $ 14.3 billion $ 15.4 billion and $ 14.3 billion , respectively . FINANCIAL and short-term investment totaled $ 52.8 billion a of June 30 52.8 billion a of June 30 , 2011 , compared with a of June 30 , 2011 , compared with $ 36.8 2011 , compared with $ 36.8 billion a of June 30 36.8 billion a of June 30 , 2010 . Equity and a of June 30 , 2010 . Equity and other investment and other investment were $ 10.9 billion a of June 30 10.9 billion a of June 30 , 2011 , compared with a of June 30 , 2011 , compared with $ 7.8 2011 , compared with $ 7.8 billion a of June 30 7.8 billion a of June 30 , 2010 . Our short-term a of June 30 , 2010 . Our short-term investment are our portfolio a of June 30 , 2011 doe not contain a of June 30 , 2011 doe not contain direct exposure residential mortgage and carry a 100 % principal and interest guarantee Government National Mortgage Association . 34 Table of Contents PART II of Contents PART II Item 7 Of the cash , cash and short-term investment at June 30 , 2011 , approximately $ investment at June 30 , 2011 , approximately $ 45 billion , 2011 , approximately $ 45 billion wa held by our regulatory ) wa approximately $ 379 million . As of June million . As of June 30 , 2011 , approximately 68 As of June 30 , 2011 , approximately 68 % of 30 , 2011 , approximately 68 % of the short-term investment and agency security , approximately 12 % were invested in corporate of U.S. company , and 5 % were invested in U.S. lending payable balance wa $ 1.2 billion a of June 30 1.2 billion a of June 30 , 2011 . Our average a of June 30 , 2011 . Our average and maximum the fiscal year were $ 1.6 billion and $ 3.3 billion $ 1.6 billion and $ 3.3 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note and agency security . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally labeled a Level 2 investment because the broker price . Cash Flows Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cash flow from operation increased flow from operation increased $ 2.9 billion during the current fiscal current fiscal year to $ 27.0 billion due mainly to increased used in financing decreased $ 4.9 billion to $ 8.4 billion $ 4.9 billion to $ 8.4 billion due mainly to a due mainly to a $ 5.8 billion increase in proceeds from in part by a $ 602 million increase in cash paid used in investing increased $ 3.3 billion to $ 14.6 billion $ 3.3 billion to $ 14.6 billion due to a $ billion due to a $ 5.8 billion increase in purchase of in part by a $ 2.5 billion increase in cash from security lending . Fiscal year 2010 compared with fiscal year 2009 2010 compared with fiscal year 2009 Cash flow from operation increased flow from operation increased $ 5.0 billion , primarily due to due to payment of $ 4.1 billion to the Internal Revenue of our settlement of the 2000-2003 audit examination along with increased used for financing increased $ 5.8 billion , primarily due to primarily due to a $ 5.6 35 Table of Contents PART due to a $ 5.6 35 Table of Contents PART II of Contents PART II Item 7 billion decrease in net cash activity also included a $ 1.9 billion increase in cash used in part by a $ 1.7 billion increase in cash received used for investing decreased $ 4.5 billion due to a $ billion due to a $ 3.3 billion decrease in cash used maturity along with a $ 1.1 billion decrease in addition to Short-term debt During fiscal year 2011 , we repaid $ 1.0 2011 , we repaid $ 1.0 billion of commercial paper , zero outstanding . On November 5 , 2010 , our $ . On November 5 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion 364-day credit facility expired , our $ 1.0 billion 364-day credit facility expired . This repurchase . As of June 30 , 2011 , the total As of June 30 , 2011 , the total carrying value convertible debt , were $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respectively . This estimated fair value of $ 4.9 billion and $ 5.2 billion $ 4.9 billion and $ 5.2 billion , respectively , a respectively , a of June 30 , 2010 . The estimated a of June 30 , 2010 . The estimated fair value publicly-traded debt a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , a applicable June 30 , 2011 and 2010 , a applicable . The a follows a of June 30 , 2011 : Due Date a of June 30 , 2011 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 2013 $ 1,000 0.875 % 1.000 % March 15 2013 $ 1,000 0.875 % 1.000 % March 15 March 27 0.875 % 1.000 % March 15 March 27 September 15 September 1.000 % March 15 March 27 September 15 September 27 June March 15 March 27 September 15 September 27 June 1 , March 27 September 15 September 27 June 1 , 2014 2,000 September 15 September 27 June 1 , 2014 2,000 2.950 % September 27 June 1 , 2014 2,000 2.950 % 3.049 % 27 June 1 , 2014 2,000 2.950 % 3.049 % May June 1 , 2014 2,000 2.950 % 3.049 % May 15 , 2014 2,000 2.950 % 3.049 % May 15 June 1 2.950 % 3.049 % May 15 June 1 November 15 December 3.049 % May 15 June 1 November 15 December 1 September May 15 June 1 November 15 December 1 September 25 , June 1 November 15 December 1 September 25 , 2015 1,750 November 15 December 1 September 25 , 2015 1,750 1.625 % December 1 September 25 , 2015 1,750 1.625 % 1.795 % 1 September 25 , 2015 1,750 1.625 % 1.795 % March September 25 , 2015 1,750 1.625 % 1.795 % March 15 , 2015 1,750 1.625 % 1.795 % March 15 March 25 1.625 % 1.795 % March 15 March 25 September 15 September 1.795 % March 15 March 25 September 15 September 25 February March 15 March 25 September 15 September 25 February 8 , March 25 September 15 September 25 February 8 , 2016 750 September 15 September 25 February 8 , 2016 750 2.500 % September 25 February 8 , 2016 750 2.500 % 2.642 % 25 February 8 , 2016 750 2.500 % 2.642 % February February 8 , 2016 750 2.500 % 2.642 % February 1 , 2016 750 2.500 % 2.642 % February 1 February 8 2.500 % 2.642 % February 1 February 8 August 1 August 2.642 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2019 1,000 August 1 August 8 June 1 , 2019 1,000 4.200 % August 8 June 1 , 2019 1,000 4.200 % 4.379 % 8 June 1 , 2019 1,000 4.200 % 4.379 % May June 1 , 2019 1,000 4.200 % 4.379 % May 15 , 2019 1,000 4.200 % 4.379 % May 15 June 1 4.200 % 4.379 % May 15 June 1 November 15 December 4.379 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2020 1,000 November 15 December 1 October 1 , 2020 1,000 3.000 % December 1 October 1 , 2020 1,000 3.000 % 3.137 % 1 October 1 , 2020 1,000 3.000 % 3.137 % March October 1 , 2020 1,000 3.000 % 3.137 % March 15 , 2020 1,000 3.000 % 3.137 % March 15 April 1 3.000 % 3.137 % March 15 April 1 September 15 October 3.137 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2021 500 September 15 October 1 February 8 , 2021 500 4.000 % October 1 February 8 , 2021 500 4.000 % 4.082 % 1 February 8 , 2021 500 4.000 % 4.082 % February February 8 , 2021 500 4.000 % 4.082 % February 1 , 2021 500 4.000 % 4.082 % February 1 February 8 4.000 % 4.082 % February 1 February 8 August 1 August 4.082 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2039 750 August 1 August 8 June 1 , 2039 750 5.200 % August 8 June 1 , 2039 750 5.200 % 5.240 % 8 June 1 , 2039 750 5.200 % 5.240 % May June 1 , 2039 750 5.200 % 5.240 % May 15 , 2039 750 5.200 % 5.240 % May 15 June 1 5.200 % 5.240 % May 15 June 1 November 15 December 5.240 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2040 1,000 November 15 December 1 October 1 , 2040 1,000 4.500 % December 1 October 1 , 2040 1,000 4.500 % 4.567 % 1 October 1 , 2040 1,000 4.500 % 4.567 % March October 1 , 2040 1,000 4.500 % 4.567 % March 15 , 2040 1,000 4.500 % 4.567 % March 15 April 1 4.500 % 4.567 % March 15 April 1 September 15 October 4.567 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2041 1,000 September 15 October 1 February 8 , 2041 1,000 5.300 % October 1 February 8 , 2041 1,000 5.300 % 5.361 % 1 February 8 , 2041 1,000 5.300 % 5.361 % February February 8 , 2041 1,000 5.300 % 5.361 % February 1 , 2041 1,000 5.300 % 5.361 % February 1 February 8 5.300 % 5.361 % February 1 February 8 August 1 August 5.361 % February 1 February 8 August 1 August 8 Total February 1 February 8 August 1 August 8 Total 10,750 Convertible February 8 August 1 August 8 Total 10,750 Convertible Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 79 ) Total $ 11,921 Notes ( 79 ) Total $ 11,921 Notes The Notes are senior and unsubordinated debt outstanding . 36 Table of Contents PART II of Contents PART II Item 7 Convertible Debt In June 2010 7 Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee were capitalized . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of June 30 , 2011 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder Revenue Unearned revenue at June 30 , 2011 comprised mainly unearned revenue at June 30 , 2011 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2011 also included payment revenue at June 30 , 2011 also included payment for : unearned revenue a of June 30 , 2011 : ( In a of June 30 , 2011 : ( In million ) Three Months Ending , September 30 , 2011 $ 5,979 December Ending , September 30 , 2011 $ 5,979 December 31 , September 30 , 2011 $ 5,979 December 31 , 2011 4,914 , 2011 $ 5,979 December 31 , 2011 4,914 March 31 $ 5,979 December 31 , 2011 4,914 March 31 , 2012 5,979 December 31 , 2011 4,914 March 31 , 2012 3,207 31 , 2011 4,914 March 31 , 2012 3,207 June 30 2011 4,914 March 31 , 2012 3,207 June 30 , 2012 4,914 March 31 , 2012 3,207 June 30 , 2012 1,622 31 , 2012 3,207 June 30 , 2012 1,622 Thereafter 1,398 2012 3,207 June 30 , 2012 1,622 Thereafter 1,398 Total $ 3,207 June 30 , 2012 1,622 Thereafter 1,398 Total $ 17,120 30 , 2012 1,622 Thereafter 1,398 Total $ 17,120 37 Table 1,622 Thereafter 1,398 Total $ 17,120 37 Table of Contents PART Thereafter 1,398 Total $ 17,120 37 Table of Contents PART II of Contents PART II Item 7 Share Repurchases On September 22 7 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 ( the “ 2007 Programs year 2007 ( the “ 2007 Programs ” ) to buy buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 ( the “ date of September 30 , 2013 ( the “ 2008 Program , 2013 ( the “ 2008 Program ” ) . As ) . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 447 million share for $ 11.5 447 million share for $ 11.5 billion during fiscal year 2011 11.5 billion during fiscal year 2011 ; 380 million share for during fiscal year 2011 ; 380 million share for $ 10.8 380 million share for $ 10.8 billion during fiscal year 2010 10.8 billion during fiscal year 2010 ; and 318 million share fiscal year 2010 ; and 318 million share for $ 8.2 318 million share for $ 8.2 billion during fiscal year 2009 8.2 billion during fiscal year 2009 . All share repurchased in share repurchased in fiscal year 2011 and 2010 were repurchased under in fiscal year 2011 and 2010 were repurchased under the 2008 2010 were repurchased under the 2008 Program . Of the share share repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the 2007 Programs $ 2.7 billion under the 2007 Programs , while the remainder remainder wa repurchased under the 2008 Program . Dividends During fiscal . Dividends During fiscal year 2011 and 2010 , our Board During fiscal year 2011 and 2010 , our Board of Directors In million ) Fiscal Year 2011 September 21 , 2010 $ ) Fiscal Year 2011 September 21 , 2010 $ 0.16 November Year 2011 September 21 , 2010 $ 0.16 November 18 , September 21 , 2010 $ 0.16 November 18 , 2010 $ , 2010 $ 0.16 November 18 , 2010 $ 1,363 December $ 0.16 November 18 , 2010 $ 1,363 December 9 , November 18 , 2010 $ 1,363 December 9 , 2010 December , 2010 $ 1,363 December 9 , 2010 December 15 , $ 1,363 December 9 , 2010 December 15 , 2010 $ December 9 , 2010 December 15 , 2010 $ 0.16 February , 2010 December 15 , 2010 $ 0.16 February 17 , December 15 , 2010 $ 0.16 February 17 , 2011 $ , 2010 $ 0.16 February 17 , 2011 $ 1,349 March $ 0.16 February 17 , 2011 $ 1,349 March 10 , February 17 , 2011 $ 1,349 March 10 , 2011 March , 2011 $ 1,349 March 10 , 2011 March 14 , $ 1,349 March 10 , 2011 March 14 , 2011 $ March 10 , 2011 March 14 , 2011 $ 0.16 May , 2011 March 14 , 2011 $ 0.16 May 19 , March 14 , 2011 $ 0.16 May 19 , 2011 $ , 2011 $ 0.16 May 19 , 2011 $ 1,350 June $ 0.16 May 19 , 2011 $ 1,350 June 9 , May 19 , 2011 $ 1,350 June 9 , 2011 June , 2011 $ 1,350 June 9 , 2011 June 15 , $ 1,350 June 9 , 2011 June 15 , 2011 $ June 9 , 2011 June 15 , 2011 $ 0.16 August , 2011 June 15 , 2011 $ 0.16 August 18 , June 15 , 2011 $ 0.16 August 18 , 2011 $ , 2011 $ 0.16 August 18 , 2011 $ 1,340 September $ 0.16 August 18 , 2011 $ 1,340 September 8 , August 18 , 2011 $ 1,340 September 8 , 2011 Fiscal , 2011 $ 1,340 September 8 , 2011 Fiscal Year 2010 $ 1,340 September 8 , 2011 Fiscal Year 2010 September 18 8 , 2011 Fiscal Year 2010 September 18 , 2009 $ 2011 Fiscal Year 2010 September 18 , 2009 $ 0.13 November Year 2010 September 18 , 2009 $ 0.13 November 19 , September 18 , 2009 $ 0.13 November 19 , 2009 $ , 2009 $ 0.13 November 19 , 2009 $ 1,152 December $ 0.13 November 19 , 2009 $ 1,152 December 10 , November 19 , 2009 $ 1,152 December 10 , 2009 December , 2009 $ 1,152 December 10 , 2009 December 9 , $ 1,152 December 10 , 2009 December 9 , 2009 $ December 10 , 2009 December 9 , 2009 $ 0.13 February , 2009 December 9 , 2009 $ 0.13 February 18 , December 9 , 2009 $ 0.13 February 18 , 2010 $ , 2009 $ 0.13 February 18 , 2010 $ 1,139 March $ 0.13 February 18 , 2010 $ 1,139 March 11 , February 18 , 2010 $ 1,139 March 11 , 2010 March , 2010 $ 1,139 March 11 , 2010 March 8 , $ 1,139 March 11 , 2010 March 8 , 2010 $ March 11 , 2010 March 8 , 2010 $ 0.13 May , 2010 March 8 , 2010 $ 0.13 May 20 , March 8 , 2010 $ 0.13 May 20 , 2010 $ , 2010 $ 0.13 May 20 , 2010 $ 1,130 June $ 0.13 May 20 , 2010 $ 1,130 June 10 , May 20 , 2010 $ 1,130 June 10 , 2010 June , 2010 $ 1,130 June 10 , 2010 June 16 , $ 1,130 June 10 , 2010 June 16 , 2010 $ June 10 , 2010 June 16 , 2010 $ 0.13 August , 2010 June 16 , 2010 $ 0.13 August 19 , June 16 , 2010 $ 0.13 August 19 , 2010 $ , 2010 $ 0.13 August 19 , 2010 $ 1,118 September $ 0.13 August 19 , 2010 $ 1,118 September 9 , August 19 , 2010 $ 1,118 September 9 , 2010 Off-Balance , 2010 $ 1,118 September 9 , 2010 Off-Balance Sheet Arrangements $ 1,118 September 9 , 2010 Off-Balance Sheet Arrangements We provide related to these indemnification . 38 Table of Contents PART II of Contents PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2011 . ( In a of June 30 , 2011 . ( In million ) . ( In million ) 2012 2013-2015 2016-2018 2019 and Thereafter ( In million ) 2012 2013-2015 2016-2018 2019 and Thereafter Total In million ) 2012 2013-2015 2016-2018 2019 and Thereafter Total Long-term million ) 2012 2013-2015 2016-2018 2019 and Thereafter Total Long-term debt a ) Principal payment $ 0 $ 4,250 $ 2,500 $ Principal payment $ 0 $ 4,250 $ 2,500 $ 5,250 $ $ 0 $ 4,250 $ 2,500 $ 5,250 $ 12,000 Interest $ 4,250 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 959 720 5,250 $ 12,000 Interest payment 344 959 720 3,228 5,251 Construction $ 12,000 Interest payment 344 959 720 3,228 5,251 Construction commitment 12,000 Interest payment 344 959 720 3,228 5,251 Construction commitment ( Interest payment 344 959 720 3,228 5,251 Construction commitment ( b payment 344 959 720 3,228 5,251 Construction commitment ( b ) Construction commitment ( b ) 263 0 0 0 263 Operating commitment ( b ) 263 0 0 0 263 Operating lease ( b ) 263 0 0 0 263 Operating lease ( b ) 263 0 0 0 263 Operating lease ( c ) 263 0 0 0 263 Operating lease ( c ) Operating lease ( c ) 481 964 380 127 1,952 Purchase lease ( c ) 481 964 380 127 1,952 Purchase commitment ( c ) 481 964 380 127 1,952 Purchase commitment ( c ) 481 964 380 127 1,952 Purchase commitment ( d ) 481 964 380 127 1,952 Purchase commitment ( d ) Purchase commitment ( d ) 5,580 355 0 0 5,935 Other commitment ( d ) 5,580 355 0 0 5,935 Other long-term ( d ) 5,580 355 0 0 5,935 Other long-term liability d ) 5,580 355 0 0 5,935 Other long-term liability ( ) 5,580 355 0 0 5,935 Other long-term liability ( e long-term liability ( e ) 0 92 22 22 136 Total liability ( e ) 0 92 22 22 136 Total contractual ( e ) 0 92 22 22 136 Total contractual obligation e ) 0 92 22 22 136 Total contractual obligation $ ) 0 92 22 22 136 Total contractual obligation $ 6,668 136 Total contractual obligation $ 6,668 $ 6,620 $ 3,622 $ contractual obligation $ 6,668 $ 6,620 $ 3,622 $ 8,627 $ $ 6,668 $ 6,620 $ 3,622 $ 8,627 $ 25,537 ( $ 6,620 $ 3,622 $ 8,627 $ 25,537 ( a ) $ 3,622 $ 8,627 $ 25,537 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) ( b ) These deferred income tax of $ 8.8 billion and other long-term contingent long-term contingent liability of $ 276 million ( related to the excluded unearned revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 279 million . Other Planned Uses Agreement with Skype On May 10 , 2011 , we announced Skype On May 10 , 2011 , we announced that we communication company , for $ 8.5 billion in cash . We regulatory approval during calendar year 2011 . Liquidity We earn a cash , cash equivalent , 39 Table of Contents PART II of Contents PART II Item 7 short-term investment , and cash for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the second quarter of fiscal year 2005 and share repurchased , our comprehensive income , wa $ 6.3 billion at June 30 , $ 6.3 billion at June 30 , 2011 . Our retained billion at June 30 , 2011 . Our retained deficit is Adopted Accounting Pronouncements On July 1 , 2010 , we adopted Pronouncements On July 1 , 2010 , we adopted guidance issued financial statement . On July 1 , 2010 , we adopted . On July 1 , 2010 , we adopted new guidance Not Yet Adopted In June 2011 , the FASB issued guidance effective for u beginning July 1 , 2012 and will have u beginning July 1 , 2012 and will have presentation change change only . In May 2011 , the FASB issued guidance Additionally , the new guidance 40 Table of Contents PART II of Contents PART II Item 7 expands the disclosure on Level expands the disclosure on Level 3 input by requiring quantitative disclosure effective for u beginning January 1 , 2012 . Other than u beginning January 1 , 2012 . Other than requiring additional upon adoption . In January 2010 , the FASB issued guidance significant unobservable input ( Level 3 fair value measurement ) . the reporting period beginning July 1 , 2011 . Other than period beginning July 1 , 2011 . Other than requiring additional an annual basis ( May 1 for u ) and between of a reporting unit . 41 Table of Contents PART II of Contents PART II Item 7 Application of the goodwill impairment ’ s goodwill wa $ 6.4 billion a of June 30 6.4 billion a of June 30 , 2011 . The estimate a of June 30 , 2011 . The estimate used to that ha a greater than 50 % likelihood of being realized operation could be impacted . 42 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 43 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 44 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2011 and 2010 and a of June 30 , 2011 and 2010 and for the June 30 , 2011 and 2010 and for the year ended for the year ended June 30 , 2011 : ( In year ended June 30 , 2011 : ( In million ) ( In million ) June 30 , 2011 June 30 , million ) June 30 , 2011 June 30 , 2010 Year June 30 , 2011 June 30 , 2010 Year Ended June , 2011 June 30 , 2010 Year Ended June 30 , , 2010 Year Ended June 30 , 2011 Risk Categories Average Year Ended June 30 , 2011 Risk Categories Average High Low High Low Foreign currency $ 86 $ 57 $ 67 $ Foreign currency $ 86 $ 57 $ 67 $ 121 $ $ 86 $ 57 $ 67 $ 121 $ 40 Interest $ 57 $ 67 $ 121 $ 40 Interest rate $ $ 67 $ 121 $ 40 Interest rate $ 58 $ $ 40 Interest rate $ 58 $ 58 $ 56 $ Interest rate $ 58 $ 58 $ 56 $ 65 $ $ 58 $ 58 $ 56 $ 65 $ 50 Equity $ 58 $ 56 $ 65 $ 50 Equity $ 212 $ 56 $ 65 $ 50 Equity $ 212 $ 183 65 $ 50 Equity $ 212 $ 183 $ 211 $ 50 Equity $ 212 $ 183 $ 211 $ 230 $ $ 212 $ 183 $ 211 $ 230 $ 184 Commodity $ 183 $ 211 $ 230 $ 184 Commodity $ 28 $ 211 $ 230 $ 184 Commodity $ 28 $ 19 230 $ 184 Commodity $ 28 $ 19 $ 22 $ 184 Commodity $ 28 $ 19 $ 22 $ 30 $ $ 28 $ 19 $ 22 $ 30 $ 18 Total $ 19 $ 22 $ 30 $ 18 Total one-day VaR $ 22 $ 30 $ 18 Total one-day VaR for the combined risk category wa $ 290 million at June 30 , $ 290 million at June 30 , 2011 and $ 235 million at June 30 , 2011 and $ 235 million at 30 , 2011 and $ 235 million at June 30 , $ 235 million at June 30 , 2010 . The total million at June 30 , 2010 . The total VaR is . The total VaR is 25 % le at June 30 25 % le at June 30 , 2011 , and 26 le at June 30 , 2011 , and 26 % le 30 , 2011 , and 26 % le at June 30 26 % le at June 30 , 2010 , than the le at June 30 , 2010 , than the sum of the combination of risk . 45 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenue $ 69,943 Ended June 30 , 2011 2010 2009 Revenue $ 69,943 $ June 30 , 2011 2010 2009 Revenue $ 69,943 $ 62,484 2011 2010 2009 Revenue $ 69,943 $ 62,484 $ 58,437 Operating 2009 Revenue $ 69,943 $ 62,484 $ 58,437 Operating expense : $ 69,943 $ 62,484 $ 58,437 Operating expense : Cost of expense : Cost of revenue 15,577 12,395 12,155 Research and development : Cost of revenue 15,577 12,395 12,155 Research and development 9,043 Cost of revenue 15,577 12,395 12,155 Research and development 9,043 8,714 12,395 12,155 Research and development 9,043 8,714 9,010 Sales and marketing 12,155 Research and development 9,043 8,714 9,010 Sales and marketing 13,940 Research and development 9,043 8,714 9,010 Sales and marketing 13,940 13,214 8,714 9,010 Sales and marketing 13,940 13,214 12,879 General and administrative 9,010 Sales and marketing 13,940 13,214 12,879 General and administrative 4,222 Sales and marketing 13,940 13,214 12,879 General and administrative 4,222 4,063 13,214 12,879 General and administrative 4,222 4,063 4,030 Total operating expense 12,879 General and administrative 4,222 4,063 4,030 Total operating expense 42,782 General and administrative 4,222 4,063 4,030 Total operating expense 42,782 38,386 4,063 4,030 Total operating expense 42,782 38,386 38,074 Operating income 27,161 4,030 Total operating expense 42,782 38,386 38,074 Operating income 27,161 24,098 Total operating expense 42,782 38,386 38,074 Operating income 27,161 24,098 20,363 42,782 38,386 38,074 Operating income 27,161 24,098 20,363 Other income ( 38,386 38,074 Operating income 27,161 24,098 20,363 Other income ( expense 38,074 Operating income 27,161 24,098 20,363 Other income ( expense ) Other income ( expense ) 910 915 ( 542 ) Income income ( expense ) 910 915 ( 542 ) Income before expense ) 910 915 ( 542 ) Income before income tax ) Income before income tax 28,071 25,013 19,821 Provision for income Income before income tax 28,071 25,013 19,821 Provision for income tax before income tax 28,071 25,013 19,821 Provision for income tax 4,921 19,821 Provision for income tax 4,921 6,253 5,252 Net income $ Provision for income tax 4,921 6,253 5,252 Net income $ 23,150 for income tax 4,921 6,253 5,252 Net income $ 23,150 $ 6,253 5,252 Net income $ 23,150 $ 18,760 $ 14,569 Earnings Net income $ 23,150 $ 18,760 $ 14,569 Earnings per share $ 23,150 $ 18,760 $ 14,569 Earnings per share : Basic per share : Basic $ 2.73 $ 2.13 $ 1.63 Diluted : Basic $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.73 $ 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 2.13 $ 1.63 Diluted $ 2.69 $ 2.10 $ 1.62 Weighted 1.63 Diluted $ 2.69 $ 2.10 $ 1.62 Weighted average share $ 2.69 $ 2.10 $ 1.62 Weighted average share outstanding : average share outstanding : Basic 8,490 8,813 8,945 Diluted 8,593 8,927 share outstanding : Basic 8,490 8,813 8,945 Diluted 8,593 8,927 8,996 outstanding : Basic 8,490 8,813 8,945 Diluted 8,593 8,927 8,996 Cash Basic 8,490 8,813 8,945 Diluted 8,593 8,927 8,996 Cash dividend declared 8,490 8,813 8,945 Diluted 8,593 8,927 8,996 Cash dividend declared per 8,813 8,945 Diluted 8,593 8,927 8,996 Cash dividend declared per common declared per common share $ 0.64 $ 0.52 $ 0.52 See common share $ 0.64 $ 0.52 $ 0.52 See accompanying note $ 0.64 $ 0.52 $ 0.52 See accompanying note . 46 0.52 See accompanying note . 46 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2011 2010 Assets Current million ) June 30 , 2011 2010 Assets Current asset : ) June 30 , 2011 2010 Assets Current asset : Cash Cash and cash equivalent $ 9,610 $ 5,505 Short-term investment ( cash equivalent $ 9,610 $ 5,505 Short-term investment ( including security including security loaned of $ 1,181 and $ 62 ) 43,162 of $ 1,181 and $ 62 ) 43,162 31,283 Total cash 1,181 and $ 62 ) 43,162 31,283 Total cash , cash and $ 62 ) 43,162 31,283 Total cash , cash equivalent equivalent , and short-term investment 52,772 36,788 Accounts receivable , net , and short-term investment 52,772 36,788 Accounts receivable , net of for doubtful account of $ 333 and $ 375 14,987 13,014 of $ 333 and $ 375 14,987 13,014 Inventories 1,372 740 $ 333 and $ 375 14,987 13,014 Inventories 1,372 740 Deferred 333 and $ 375 14,987 13,014 Inventories 1,372 740 Deferred income $ 375 14,987 13,014 Inventories 1,372 740 Deferred income tax 2,467 375 14,987 13,014 Inventories 1,372 740 Deferred income tax 2,467 2,184 1,372 740 Deferred income tax 2,467 2,184 Other 3,320 2,950 Total 740 Deferred income tax 2,467 2,184 Other 3,320 2,950 Total current income tax 2,467 2,184 Other 3,320 2,950 Total current asset 74,918 tax 2,467 2,184 Other 3,320 2,950 Total current asset 74,918 55,676 3,320 2,950 Total current asset 74,918 55,676 Property and equipment , 2,950 Total current asset 74,918 55,676 Property and equipment , net of accumulated depreciation of $ 9,829 and $ 8,629 8,162 7,630 of $ 9,829 and $ 8,629 8,162 7,630 Equity and other $ 9,829 and $ 8,629 8,162 7,630 Equity and other investment 9,829 and $ 8,629 8,162 7,630 Equity and other investment 10,865 7,630 Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible Equity and other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset other investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset , net investment 10,865 7,754 Goodwill 12,581 12,394 Intangible asset , net 744 12,394 Intangible asset , net 744 1,158 Other long-term asset 1,434 Intangible asset , net 744 1,158 Other long-term asset 1,434 1,501 744 1,158 Other long-term asset 1,434 1,501 Total asset $ 108,704 1,158 Other long-term asset 1,434 1,501 Total asset $ 108,704 $ 1,434 1,501 Total asset $ 108,704 $ 86,113 Liabilities and stockholder Total asset $ 108,704 $ 86,113 Liabilities and stockholder ’ equity liability : Accounts payable $ 4,197 $ 4,025 Short-term debt 0 Accounts payable $ 4,197 $ 4,025 Short-term debt 0 1,000 Accrued 4,197 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 $ 4,025 Short-term debt 0 1,000 Accrued compensation 3,575 3,283 Income debt 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 0 1,000 Accrued compensation 3,575 3,283 Income tax 580 1,074 Short-term compensation 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 3,575 3,283 Income tax 580 1,074 Short-term unearned revenue 15,722 13,652 580 1,074 Short-term unearned revenue 15,722 13,652 Securities lending payable 1,208 1,074 Short-term unearned revenue 15,722 13,652 Securities lending payable 1,208 182 15,722 13,652 Securities lending payable 1,208 182 Other 3,492 2,931 Total 13,652 Securities lending payable 1,208 182 Other 3,492 2,931 Total current lending payable 1,208 182 Other 3,492 2,931 Total current liability 28,774 payable 1,208 182 Other 3,492 2,931 Total current liability 28,774 26,147 3,492 2,931 Total current liability 28,774 26,147 Long-term debt 11,921 4,939 2,931 Total current liability 28,774 26,147 Long-term debt 11,921 4,939 Long-term liability 28,774 26,147 Long-term debt 11,921 4,939 Long-term unearned revenue 1,398 28,774 26,147 Long-term debt 11,921 4,939 Long-term unearned revenue 1,398 1,178 11,921 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 4,939 Long-term unearned revenue 1,398 1,178 Deferred income tax 1,456 229 1,398 1,178 Deferred income tax 1,456 229 Other long-term liability 8,072 1,178 Deferred income tax 1,456 229 Other long-term liability 8,072 7,445 1,456 229 Other long-term liability 8,072 7,445 Total liability 51,621 39,938 229 Other long-term liability 8,072 7,445 Total liability 51,621 39,938 Commitments liability 8,072 7,445 Total liability 51,621 39,938 Commitments and contingency Stockholders 8,072 7,445 Total liability 51,621 39,938 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,376 and 8,668 share authorized 24,000 ; outstanding 8,376 and 8,668 63,415 62,856 Retained 24,000 ; outstanding 8,376 and 8,668 63,415 62,856 Retained deficit , ; outstanding 8,376 and 8,668 63,415 62,856 Retained deficit , including outstanding 8,376 and 8,668 63,415 62,856 Retained deficit , including accumulated other comprehensive income of $ 1,863 and $ 1,055 ( 6,332 of $ 1,863 and $ 1,055 ( 6,332 ) ( 16,681 1,863 and $ 1,055 ( 6,332 ) ( 16,681 ) Total 1,055 ( 6,332 ) ( 16,681 ) Total stockholder ’ equity ) Total stockholder ’ equity 57,083 46,175 Total liability and stockholder Total stockholder ’ equity 57,083 46,175 Total liability and stockholder ’ and stockholder ’ equity $ 108,704 $ 86,113 See accompanying note ’ equity $ 108,704 $ 86,113 See accompanying note . 47 86,113 See accompanying note . 47 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2011 2010 2009 Operations Year Ended June 30 , 2011 2010 2009 Operations Net income Ended June 30 , 2011 2010 2009 Operations Net income $ June 30 , 2011 2010 2009 Operations Net income $ 23,150 2009 Operations Net income $ 23,150 $ 18,760 $ 14,569 Adjustments Net income $ 23,150 $ 18,760 $ 14,569 Adjustments to reconcile $ 23,150 $ 18,760 $ 14,569 Adjustments to reconcile net income , amortization , and other 2,766 2,673 2,562 Stock-based compensation expense amortization , and other 2,766 2,673 2,562 Stock-based compensation expense 2,166 , and other 2,766 2,673 2,562 Stock-based compensation expense 2,166 1,891 2,673 2,562 Stock-based compensation expense 2,166 1,891 1,708 Net recognized loss 2,562 Stock-based compensation expense 2,166 1,891 1,708 Net recognized loss ( Stock-based compensation expense 2,166 1,891 1,708 Net recognized loss ( gain on investment and derivative ( 362 ) ( 208 ) 683 derivative ( 362 ) ( 208 ) 683 Excess tax benefit 362 ) ( 208 ) 683 Excess tax benefit from stock-based benefit from stock-based compensation ( 17 ) ( 45 ) ( compensation ( 17 ) ( 45 ) ( 52 ) Deferred ) ( 45 ) ( 52 ) Deferred income tax 2 52 ) Deferred income tax 2 ( 220 ) 762 Deferral Deferred income tax 2 ( 220 ) 762 Deferral of unearned tax 2 ( 220 ) 762 Deferral of unearned revenue 31,227 762 Deferral of unearned revenue 31,227 29,374 24,409 Recognition of unearned Deferral of unearned revenue 31,227 29,374 24,409 Recognition of unearned revenue of unearned revenue 31,227 29,374 24,409 Recognition of unearned revenue ( Recognition of unearned revenue ( 28,935 ) ( 28,813 ) ( revenue ( 28,935 ) ( 28,813 ) ( 25,426 ) Changes ) ( 28,813 ) ( 25,426 ) Changes in operating asset liability : Accounts receivable ( 1,451 ) ( 2,238 ) 2,215 receivable ( 1,451 ) ( 2,238 ) 2,215 Inventories ( 561 1,451 ) ( 2,238 ) 2,215 Inventories ( 561 ) ( 2,238 ) 2,215 Inventories ( 561 ) ( 44 ) 255 Inventories ( 561 ) ( 44 ) 255 Other current asset 561 ) ( 44 ) 255 Other current asset ( 1,259 255 Other current asset ( 1,259 ) 464 ( 677 ) current asset ( 1,259 ) 464 ( 677 ) Other long-term ( 1,259 ) 464 ( 677 ) Other long-term asset 62 677 ) Other long-term asset 62 ( 223 ) ( 273 Other long-term asset 62 ( 223 ) ( 273 ) Accounts 62 ( 223 ) ( 273 ) Accounts payable 58 844 ( 273 ) Accounts payable 58 844 ( 671 ) Other 273 ) Accounts payable 58 844 ( 671 ) Other current Accounts payable 58 844 ( 671 ) Other current liability ( ) Other current liability ( 1,146 ) 451 ( 2,700 ) current liability ( 1,146 ) 451 ( 2,700 ) Other long-term ( 1,146 ) 451 ( 2,700 ) Other long-term liability 1,294 2,700 ) Other long-term liability 1,294 1,407 1,673 Net cash from ) Other long-term liability 1,294 1,407 1,673 Net cash from operation Other long-term liability 1,294 1,407 1,673 Net cash from operation 26,994 1,673 Net cash from operation 26,994 24,073 19,037 Financing Short-term debt Net cash from operation 26,994 24,073 19,037 Financing Short-term debt borrowing cash from operation 26,994 24,073 19,037 Financing Short-term debt borrowing ( repayment ) , maturity of 90 day or le , net or le , net ( 186 ) ( 991 ) 1,178 net ( 186 ) ( 991 ) 1,178 Proceeds from issuance 186 ) ( 991 ) 1,178 Proceeds from issuance of debt debt , maturity longer than 90 day 6,960 4,167 4,796 Repayments maturity longer than 90 day 6,960 4,167 4,796 Repayments of debt longer than 90 day 6,960 4,167 4,796 Repayments of debt , than 90 day 6,960 4,167 4,796 Repayments of debt , maturity debt , maturity longer than 90 day ( 814 ) ( longer than 90 day ( 814 ) ( 2,986 ) ( day ( 814 ) ( 2,986 ) ( 228 ) Common ) ( 2,986 ) ( 228 ) Common stock issued 2,422 228 ) Common stock issued 2,422 2,311 579 Common stock repurchased ) Common stock issued 2,422 2,311 579 Common stock repurchased ( Common stock issued 2,422 2,311 579 Common stock repurchased ( 11,555 579 Common stock repurchased ( 11,555 ) ( 11,269 ) ( repurchased ( 11,555 ) ( 11,269 ) ( 9,353 ) Common ) ( 11,269 ) ( 9,353 ) Common stock cash dividend stock cash dividend paid ( 5,180 ) ( 4,578 ) ( paid ( 5,180 ) ( 4,578 ) ( 4,468 ) Excess ) ( 4,578 ) ( 4,468 ) Excess tax benefit from tax benefit from stock-based compensation 17 45 52 Other ( 40 benefit from stock-based compensation 17 45 52 Other ( 40 ) from stock-based compensation 17 45 52 Other ( 40 ) 10 17 45 52 Other ( 40 ) 10 ( 19 ) 52 Other ( 40 ) 10 ( 19 ) Net cash ( 40 ) 10 ( 19 ) Net cash used in cash used in financing ( 8,376 ) ( 13,291 ) ( financing ( 8,376 ) ( 13,291 ) ( 7,463 ) Investing ) ( 13,291 ) ( 7,463 ) Investing Additions to property to property and equipment ( 2,355 ) ( 1,977 ) ( equipment ( 2,355 ) ( 1,977 ) ( 3,119 ) Acquisition ) ( 1,977 ) ( 3,119 ) Acquisition of company , net of cash acquired ( 71 ) ( 245 ) ( acquired ( 71 ) ( 245 ) ( 868 ) Purchases ) ( 245 ) ( 868 ) Purchases of investment ( ) Purchases of investment ( 35,993 ) ( 30,168 ) ( investment ( 35,993 ) ( 30,168 ) ( 36,850 ) Maturities ) ( 30,168 ) ( 36,850 ) Maturities of investment 6,897 36,850 ) Maturities of investment 6,897 7,453 6,191 Sales of investment ) Maturities of investment 6,897 7,453 6,191 Sales of investment 15,880 Maturities of investment 6,897 7,453 6,191 Sales of investment 15,880 15,125 7,453 6,191 Sales of investment 15,880 15,125 19,806 Securities lending payable 6,191 Sales of investment 15,880 15,125 19,806 Securities lending payable 1,026 Sales of investment 15,880 15,125 19,806 Securities lending payable 1,026 ( 15,125 19,806 Securities lending payable 1,026 ( 1,502 ) ( 930 Securities lending payable 1,026 ( 1,502 ) ( 930 ) Net 1,026 ( 1,502 ) ( 930 ) Net cash used in cash used in investing ( 14,616 ) ( 11,314 ) ( investing ( 14,616 ) ( 11,314 ) ( 15,770 ) Effect ) ( 11,314 ) ( 15,770 ) Effect of exchange rate on cash and cash equivalent 103 ( 39 ) ( 67 and cash equivalent 103 ( 39 ) ( 67 ) Net 103 ( 39 ) ( 67 ) Net change in cash in cash and cash equivalent 4,105 ( 571 ) ( 4,263 and cash equivalent 4,105 ( 571 ) ( 4,263 ) Cash 4,105 ( 571 ) ( 4,263 ) Cash and cash equivalent equivalent , beginning of period 5,505 6,076 10,339 Cash and cash , beginning of period 5,505 6,076 10,339 Cash and cash equivalent beginning of period 5,505 6,076 10,339 Cash and cash equivalent , , end of period $ 9,610 $ 5,505 $ 6,076 See of period $ 9,610 $ 5,505 $ 6,076 See accompanying note $ 9,610 $ 5,505 $ 6,076 See accompanying note . 48 6,076 See accompanying note . 48 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2011 2010 2009 Common Year Ended June 30 , 2011 2010 2009 Common stock and Ended June 30 , 2011 2010 2009 Common stock and paid-in June 30 , 2011 2010 2009 Common stock and paid-in capital , beginning of period $ 62,856 $ 62,382 $ 62,849 Common of period $ 62,856 $ 62,382 $ 62,849 Common stock issued $ 62,856 $ 62,382 $ 62,849 Common stock issued 2,422 2,311 $ 62,849 Common stock issued 2,422 2,311 567 Common stock repurchased 62,849 Common stock issued 2,422 2,311 567 Common stock repurchased ( Common stock issued 2,422 2,311 567 Common stock repurchased ( 3,738 567 Common stock repurchased ( 3,738 ) ( 3,113 ) ( repurchased ( 3,738 ) ( 3,113 ) ( 2,611 ) Stock-based ) ( 3,113 ) ( 2,611 ) Stock-based compensation expense 2,166 2,611 ) Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income ) Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income tax Stock-based compensation expense 2,166 1,891 1,708 Stock-based compensation income tax deficiency compensation income tax deficiency ( 292 ) ( 647 ) ( deficiency ( 292 ) ( 647 ) ( 128 ) Other ) ( 647 ) ( 128 ) Other , net 1 128 ) Other , net 1 32 ( 3 ) Balance ) Other , net 1 32 ( 3 ) Balance , , net 1 32 ( 3 ) Balance , end of Balance , end of period 63,415 62,856 62,382 Retained deficit Balance , end of period 63,415 62,856 62,382 Retained deficit Balance , end of period 63,415 62,856 62,382 Retained deficit Balance , beginning , beginning of period ( 16,681 ) ( 22,824 ) ( period ( 16,681 ) ( 22,824 ) ( 26,563 ) Net ) ( 22,824 ) ( 26,563 ) Net income 23,150 18,760 ( 26,563 ) Net income 23,150 18,760 14,569 Other comprehensive income 26,563 ) Net income 23,150 18,760 14,569 Other comprehensive income : ) Net income 23,150 18,760 14,569 Other comprehensive income : Net loss ) on derivative ( 627 ) 27 302 Net unrealized on derivative ( 627 ) 27 302 Net unrealized gain ( derivative ( 627 ) 27 302 Net unrealized gain ( loss ( loss ) on investment 1,054 265 ( 233 ) Translation loss ) on investment 1,054 265 ( 233 ) Translation adjustment on investment 1,054 265 ( 233 ) Translation adjustment and other ) Translation adjustment and other 381 ( 206 ) ( 240 adjustment and other 381 ( 206 ) ( 240 ) Comprehensive 381 ( 206 ) ( 240 ) Comprehensive income 23,958 18,846 ( 240 ) Comprehensive income 23,958 18,846 14,398 Common stock cash 240 ) Comprehensive income 23,958 18,846 14,398 Common stock cash dividend ) Comprehensive income 23,958 18,846 14,398 Common stock cash dividend ( Common stock cash dividend ( 5,394 ) ( 4,547 ) ( dividend ( 5,394 ) ( 4,547 ) ( 4,620 ) Common ) ( 4,547 ) ( 4,620 ) Common stock repurchased ( ) Common stock repurchased ( 8,215 ) ( 8,156 ) ( repurchased ( 8,215 ) ( 8,156 ) ( 6,039 ) Balance ) ( 8,156 ) ( 6,039 ) Balance , end of , end of period ( 6,332 ) ( 16,681 ) ( period ( 6,332 ) ( 16,681 ) ( 22,824 ) Total ) ( 16,681 ) ( 22,824 ) Total stockholder ’ equity Total stockholder ’ equity $ 57,083 $ 46,175 $ 39,558 See ’ equity $ 57,083 $ 46,175 $ 39,558 See accompanying note $ 57,083 $ 46,175 $ 39,558 See accompanying note . 49 39,558 See accompanying note . 49 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles product or service over a 50 Table of Contents PART II of Contents PART II Item 8 period of time without taking Revenue related to our Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , game published by u for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.9 billion , $ 1.6 billion $ 1.9 billion , $ 1.6 billion , and $ 1.4 1.6 billion , and $ 1.4 billion in fiscal year 2011 1.4 billion in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . 51 Table and 2009 , respectively . 51 Table of Contents PART II of Contents PART II Item 8 Employee Severance We record employee the plan . In January 2009 , we announced and implemented with this program were $ 59 million and $ 330 million $ 59 million and $ 330 million in fiscal year 2010 330 million in fiscal year 2010 and 2009 , respectively , in fiscal year 2010 and 2009 , respectively , and are employee at three-month interval at 90 % of the fair market level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of commercial paper . Our Level 2 derivative asset and liability primarily option and swap contract . 52 Table of Contents PART II of Contents PART II Item 8 • Level 3 – input II Item 8 • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment the investment . Our Level 3 derivative asset and liability primarily the investment is established . 53 Table of Contents PART II of Contents PART II Item 8 Derivative instrument are recognized a million ) Year Ended June 30 , 2011 2010 2009 Balance Year Ended June 30 , 2011 2010 2009 Balance , beginning Ended June 30 , 2011 2010 2009 Balance , beginning of June 30 , 2011 2010 2009 Balance , beginning of period , beginning of period $ 375 $ 451 $ 153 Charged of period $ 375 $ 451 $ 153 Charged to cost $ 375 $ 451 $ 153 Charged to cost and other Charged to cost and other 14 45 360 Write-offs ( 56 to cost and other 14 45 360 Write-offs ( 56 ) cost and other 14 45 360 Write-offs ( 56 ) ( 14 45 360 Write-offs ( 56 ) ( 121 ) ( Write-offs ( 56 ) ( 121 ) ( 62 ) Balance ) ( 121 ) ( 62 ) Balance , end of , end of period $ 333 $ 375 $ 451 Inventories of period $ 333 $ 375 $ 451 Inventories Inventories are $ 333 $ 375 $ 451 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 10 year ; and furniture and Land is not depreciated . 54 Table of Contents PART II of Contents PART II Item 8 Goodwill Goodwill is tested for an annual basis ( May 1 for u ) and between , ranging from one to 10 year . We evaluate the adopted accounting pronouncement On July 1 , 2010 , we adopted pronouncement On July 1 , 2010 , we adopted guidance issued financial statement . On July 1 , 2010 , we adopted . On July 1 , 2010 , we adopted new guidance not yet adopted In June 2011 , the FASB issued guidance effective for u beginning July 1 , 2012 and will have u beginning July 1 , 2012 and will have presentation change change only . In May 2011 , the FASB issued guidance expands the disclosure on Level 3 input by requiring quantitative disclosure effective for u beginning January 1 , 2012 . Other than u beginning January 1 , 2012 . Other than requiring additional financial statement upon adoption . 55 Table of Contents PART II of Contents PART II Item 8 In January 2010 , the II Item 8 In January 2010 , the FASB issued guidance significant unobservable input ( Level 3 fair value measurement ) . the reporting period beginning July 1 , 2011 . Other than period beginning July 1 , 2011 . Other than requiring additional our financial statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2011 2010 2009 Net Year Ended June 30 , 2011 2010 2009 Net income available Ended June 30 , 2011 2010 2009 Net income available for June 30 , 2011 2010 2009 Net income available for common shareholder ( A ) $ 23,150 $ 18,760 $ 14,569 Weighted A ) $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding $ 23,150 $ 18,760 $ 14,569 Weighted average outstanding share of common stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based ( B ) 8,490 8,813 8,945 Dilutive effect of stock-based award Dilutive effect of stock-based award 103 114 51 Common stock and effect of stock-based award 103 114 51 Common stock and common of stock-based award 103 114 51 Common stock and common stock stock equivalent ( C ) 8,593 8,927 8,996 Earnings Per Share equivalent ( C ) 8,593 8,927 8,996 Earnings Per Share Basic ( C ) 8,593 8,927 8,996 Earnings Per Share Basic ( Basic ( A/B ) $ 2.73 $ 2.13 $ 1.63 Diluted A/B ) $ 2.73 $ 2.13 $ 1.63 Diluted ( A/C $ 2.73 $ 2.13 $ 1.63 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.69 $ 2.10 $ 1.62 We A/C ) $ 2.69 $ 2.10 $ 1.62 We excluded the $ 2.69 $ 2.10 $ 1.62 We excluded the following share million ) Year Ended June 30 , 2011 2010 2009 Shares Year Ended June 30 , 2011 2010 2009 Shares excluded from Ended June 30 , 2011 2010 2009 Shares excluded from calculation June 30 , 2011 2010 2009 Shares excluded from calculation of from calculation of diluted EPS 21 28 342 The decrease in calculation of diluted EPS 21 28 342 The decrease in anti-dilutive of diluted EPS 21 28 342 The decrease in anti-dilutive share anti-dilutive share from fiscal year 2009 to 2010 wa due mainly from fiscal year 2009 to 2010 wa due mainly to the option outstanding . In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero-coupon debt security met . As of June 30 , 2011 , none of As of June 30 , 2011 , none of these security diluted EPS . See Note 12 – Debt for additional information for additional information . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2011 2010 2009 Dividends Year Ended June 30 , 2011 2010 2009 Dividends and interest Ended June 30 , 2011 2010 2009 Dividends and interest income June 30 , 2011 2010 2009 Dividends and interest income $ Dividends and interest income $ 900 $ 843 $ 744 Interest interest income $ 900 $ 843 $ 744 Interest expense ( $ 900 $ 843 $ 744 Interest expense ( 295 ) $ 744 Interest expense ( 295 ) ( 151 ) ( expense ( 295 ) ( 151 ) ( 38 ) Net ) ( 151 ) ( 38 ) Net recognized gain ( ( loss ) on investment 439 348 ( 125 ) Net loss ) on investment 439 348 ( 125 ) Net loss on investment 439 348 ( 125 ) Net loss on derivative Net loss on derivative ( 77 ) ( 140 ) ( derivative ( 77 ) ( 140 ) ( 558 ) Net ) ( 140 ) ( 558 ) Net gain ( loss on foreign currency remeasurements ( 26 ) 1 ( 509 ) currency remeasurements ( 26 ) 1 ( 509 ) Other ( ( 26 ) 1 ( 509 ) Other ( 31 ) ( 509 ) Other ( 31 ) 14 ( 56 ) ) Other ( 31 ) 14 ( 56 ) Total $ ( 31 ) 14 ( 56 ) Total $ 910 $ ( 56 ) Total $ 910 $ 915 $ ( 542 ) Total $ 910 $ 915 $ ( 542 ) 56 910 $ 915 $ ( 542 ) 56 Table of Contents 915 $ ( 542 ) 56 Table of Contents PART II of Contents PART II Item 8 Following are detail of net million ) Year Ended June 30 , 2011 2010 2009 Other-than-temporary Year Ended June 30 , 2011 2010 2009 Other-than-temporary impairment of Ended June 30 , 2011 2010 2009 Other-than-temporary impairment of investment June 30 , 2011 2010 2009 Other-than-temporary impairment of investment $ impairment of investment $ ( 80 ) $ ( 69 ) ( 80 ) $ ( 69 ) $ ( 862 ) ( 69 ) $ ( 862 ) Realized gain from sale from sale of available-for-sale security 734 605 1,634 Realized loss from sale of available-for-sale security 734 605 1,634 Realized loss from sale of available-for-sale security 734 605 1,634 Realized loss from sale of sale of available-for-sale security ( 215 ) ( 188 ) ( security ( 215 ) ( 188 ) ( 897 ) Total ) ( 188 ) ( 897 ) Total $ 439 $ ( 897 ) Total $ 439 $ 348 $ ( 125 ) Total $ 439 $ 348 $ ( 125 ) NOTE 439 $ 348 $ ( 125 ) NOTE 4 — INVESTMENTS $ ( 125 ) NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2011 Cash $ 1,648 Other Investments June 30 , 2011 Cash $ 1,648 $ 0 30 , 2011 Cash $ 1,648 $ 0 $ 0 $ 2011 Cash $ 1,648 $ 0 $ 0 $ 1,648 $ $ 1,648 $ 0 $ 0 $ 1,648 $ 1,648 $ $ 0 $ 0 $ 1,648 $ 1,648 $ 0 $ $ 0 $ 1,648 $ 1,648 $ 0 $ 0 Mutual $ 1,648 $ 1,648 $ 0 $ 0 Mutual fund 1,752 $ 1,648 $ 0 $ 0 Mutual fund 1,752 0 0 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial paper fund 1,752 0 0 1,752 1,752 0 0 Commercial paper 639 1,752 0 0 1,752 1,752 0 0 Commercial paper 639 0 0 0 1,752 1,752 0 0 Commercial paper 639 0 0 1,752 0 0 Commercial paper 639 0 0 639 414 225 0 0 Commercial paper 639 0 0 639 414 225 0 0 Commercial paper 639 0 0 639 414 225 0 Certificates Commercial paper 639 0 0 639 414 225 0 Certificates of paper 639 0 0 639 414 225 0 Certificates of deposit 639 0 0 639 414 225 0 Certificates of deposit 598 0 0 639 414 225 0 Certificates of deposit 598 0 225 0 Certificates of deposit 598 0 0 598 372 226 0 Certificates of deposit 598 0 0 598 372 226 0 Certificates of deposit 598 0 0 598 372 226 0 U.S. of deposit 598 0 0 598 372 226 0 U.S. government deposit 598 0 0 598 372 226 0 U.S. government and 598 0 0 598 372 226 0 U.S. government and agency 0 0 598 372 226 0 U.S. government and agency security U.S. government and agency security 33,607 162 ( 7 ) 33,762 government and agency security 33,607 162 ( 7 ) 33,762 2,049 agency security 33,607 162 ( 7 ) 33,762 2,049 31,713 0 33,607 162 ( 7 ) 33,762 2,049 31,713 0 Foreign government 162 ( 7 ) 33,762 2,049 31,713 0 Foreign government bond ( 7 ) 33,762 2,049 31,713 0 Foreign government bond 658 7 ) 33,762 2,049 31,713 0 Foreign government bond 658 11 31,713 0 Foreign government bond 658 11 ( 2 ) 667 0 Foreign government bond 658 11 ( 2 ) 667 0 government bond 658 11 ( 2 ) 667 0 667 0 658 11 ( 2 ) 667 0 667 0 Mortgage-backed security 11 ( 2 ) 667 0 667 0 Mortgage-backed security 2,307 ( 2 ) 667 0 667 0 Mortgage-backed security 2,307 121 2 ) 667 0 667 0 Mortgage-backed security 2,307 121 ( 0 667 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 667 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 0 2,424 0 2,307 121 ( 4 ) 2,424 0 2,424 0 Corporate note 121 ( 4 ) 2,424 0 2,424 0 Corporate note and ( 4 ) 2,424 0 2,424 0 Corporate note and bond 4 ) 2,424 0 2,424 0 Corporate note and bond 10,575 0 Corporate note and bond 10,575 260 ( 11 ) 10,824 Corporate note and bond 10,575 260 ( 11 ) 10,824 3,375 and bond 10,575 260 ( 11 ) 10,824 3,375 7,449 0 10,575 260 ( 11 ) 10,824 3,375 7,449 0 Municipal security 260 ( 11 ) 10,824 3,375 7,449 0 Municipal security 441 ( 11 ) 10,824 3,375 7,449 0 Municipal security 441 15 11 ) 10,824 3,375 7,449 0 Municipal security 441 15 ( 3,375 7,449 0 Municipal security 441 15 ( 2 ) 454 7,449 0 Municipal security 441 15 ( 2 ) 454 0 Municipal security 441 15 ( 2 ) 454 0 454 0 441 15 ( 2 ) 454 0 454 0 Common and 15 ( 2 ) 454 0 454 0 Common and preferred ( 2 ) 454 0 454 0 Common and preferred stock 2 ) 454 0 454 0 Common and preferred stock 7,925 0 Common and preferred stock 7,925 2,483 ( 193 ) 10,215 Common and preferred stock 7,925 2,483 ( 193 ) 10,215 0 preferred stock 7,925 2,483 ( 193 ) 10,215 0 0 10,215 7,925 2,483 ( 193 ) 10,215 0 0 10,215 Other investment 2,483 ( 193 ) 10,215 0 0 10,215 Other investment 654 ( 193 ) 10,215 0 0 10,215 Other investment 654 0 193 ) 10,215 0 0 10,215 Other investment 654 0 0 0 0 10,215 Other investment 654 0 0 654 0 4 0 10,215 Other investment 654 0 0 654 0 4 650 10,215 Other investment 654 0 0 654 0 4 650 Total Other investment 654 0 0 654 0 4 650 Total $ investment 654 0 0 654 0 4 650 Total $ 60,804 654 0 0 654 0 4 650 Total $ 60,804 $ 0 0 654 0 4 650 Total $ 60,804 $ 3,052 0 4 650 Total $ 60,804 $ 3,052 $ ( 219 650 Total $ 60,804 $ 3,052 $ ( 219 ) $ 60,804 $ 3,052 $ ( 219 ) $ 63,637 $ 9,610 $ ( 219 ) $ 63,637 $ 9,610 $ 43,162 $ 219 ) $ 63,637 $ 9,610 $ 43,162 $ 10,865 ( $ 63,637 $ 9,610 $ 43,162 $ 10,865 ( In million $ 9,610 $ 43,162 $ 10,865 ( In million ) Cost Equity and Other Investments June 30 , 2010 Cash $ 1,661 Other Investments June 30 , 2010 Cash $ 1,661 $ 0 30 , 2010 Cash $ 1,661 $ 0 $ 0 $ 2010 Cash $ 1,661 $ 0 $ 0 $ 1,661 $ $ 1,661 $ 0 $ 0 $ 1,661 $ 1,661 $ $ 0 $ 0 $ 1,661 $ 1,661 $ 0 $ $ 0 $ 1,661 $ 1,661 $ 0 $ 0 Mutual $ 1,661 $ 1,661 $ 0 $ 0 Mutual fund 1,120 $ 1,661 $ 0 $ 0 Mutual fund 1,120 0 0 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 $ 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 0 Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial Mutual fund 1,120 0 0 1,120 1,120 0 0 Commercial paper fund 1,120 0 0 1,120 1,120 0 0 Commercial paper 188 1,120 0 0 1,120 1,120 0 0 Commercial paper 188 0 0 0 1,120 1,120 0 0 Commercial paper 188 0 0 1,120 0 0 Commercial paper 188 0 0 188 13 175 0 0 Commercial paper 188 0 0 188 13 175 0 0 Commercial paper 188 0 0 188 13 175 0 Certificates Commercial paper 188 0 0 188 13 175 0 Certificates of paper 188 0 0 188 13 175 0 Certificates of deposit 188 0 0 188 13 175 0 Certificates of deposit 348 0 0 188 13 175 0 Certificates of deposit 348 0 175 0 Certificates of deposit 348 0 0 348 68 280 0 Certificates of deposit 348 0 0 348 68 280 0 Certificates of deposit 348 0 0 348 68 280 0 U.S. of deposit 348 0 0 348 68 280 0 U.S. government deposit 348 0 0 348 68 280 0 U.S. government and 348 0 0 348 68 280 0 U.S. government and agency 0 0 348 68 280 0 U.S. government and agency security U.S. government and agency security 21,036 167 ( 1 ) 21,202 government and agency security 21,036 167 ( 1 ) 21,202 1,822 agency security 21,036 167 ( 1 ) 21,202 1,822 19,380 0 21,036 167 ( 1 ) 21,202 1,822 19,380 0 Foreign government 167 ( 1 ) 21,202 1,822 19,380 0 Foreign government bond ( 1 ) 21,202 1,822 19,380 0 Foreign government bond 518 1 ) 21,202 1,822 19,380 0 Foreign government bond 518 13 19,380 0 Foreign government bond 518 13 0 531 0 531 0 Foreign government bond 518 13 0 531 0 531 0 Foreign government bond 518 13 0 531 0 531 0 Mortgage-backed government bond 518 13 0 531 0 531 0 Mortgage-backed security bond 518 13 0 531 0 531 0 Mortgage-backed security 3,137 518 13 0 531 0 531 0 Mortgage-backed security 3,137 135 13 0 531 0 531 0 Mortgage-backed security 3,137 135 ( 0 531 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 531 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 0 Mortgage-backed security 3,137 135 ( 7 ) 3,265 0 3,265 0 3,137 135 ( 7 ) 3,265 0 3,265 0 Corporate note 135 ( 7 ) 3,265 0 3,265 0 Corporate note and ( 7 ) 3,265 0 3,265 0 Corporate note and bond 7 ) 3,265 0 3,265 0 Corporate note and bond 7,450 0 Corporate note and bond 7,450 289 ( 18 ) 7,721 Corporate note and bond 7,450 289 ( 18 ) 7,721 701 and bond 7,450 289 ( 18 ) 7,721 701 7,020 0 7,450 289 ( 18 ) 7,721 701 7,020 0 Municipal security 289 ( 18 ) 7,721 701 7,020 0 Municipal security 726 ( 18 ) 7,721 701 7,020 0 Municipal security 726 22 18 ) 7,721 701 7,020 0 Municipal security 726 22 ( 701 7,020 0 Municipal security 726 22 ( 1 ) 747 7,020 0 Municipal security 726 22 ( 1 ) 747 120 Municipal security 726 22 ( 1 ) 747 120 627 0 726 22 ( 1 ) 747 120 627 0 Common and 22 ( 1 ) 747 120 627 0 Common and preferred ( 1 ) 747 120 627 0 Common and preferred stock 1 ) 747 120 627 0 Common and preferred stock 6,640 0 Common and preferred stock 6,640 1,030 ( 418 ) 7,252 Common and preferred stock 6,640 1,030 ( 418 ) 7,252 0 preferred stock 6,640 1,030 ( 418 ) 7,252 0 0 7,252 6,640 1,030 ( 418 ) 7,252 0 0 7,252 Other investment 1,030 ( 418 ) 7,252 0 0 7,252 Other investment 507 ( 418 ) 7,252 0 0 7,252 Other investment 507 0 418 ) 7,252 0 0 7,252 Other investment 507 0 0 0 0 7,252 Other investment 507 0 0 507 0 5 0 7,252 Other investment 507 0 0 507 0 5 502 7,252 Other investment 507 0 0 507 0 5 502 Total Other investment 507 0 0 507 0 5 502 Total $ investment 507 0 0 507 0 5 502 Total $ 43,331 507 0 0 507 0 5 502 Total $ 43,331 $ 0 0 507 0 5 502 Total $ 43,331 $ 1,656 0 5 502 Total $ 43,331 $ 1,656 $ ( 445 502 Total $ 43,331 $ 1,656 $ ( 445 ) $ 43,331 $ 1,656 $ ( 445 ) $ 44,542 $ 5,505 $ ( 445 ) $ 44,542 $ 5,505 $ 31,283 $ 445 ) $ 44,542 $ 5,505 $ 31,283 $ 7,754 57 $ 44,542 $ 5,505 $ 31,283 $ 7,754 57 Table of $ 5,505 $ 31,283 $ 7,754 57 Table of Contents PART 5,505 $ 31,283 $ 7,754 57 Table of Contents PART II of Contents PART II Item 8 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Fair Fair Value Unrealized Losses June 30 , 2011 U.S. government and Unrealized Losses June 30 , 2011 U.S. government and agency security government and agency security $ 484 $ ( 7 ) $ security $ 484 $ ( 7 ) $ 0 $ 0 $ ( 7 ) $ 0 $ 0 $ 484 $ 7 ) $ 0 $ 0 $ 484 $ ( 7 $ 0 $ 0 $ 484 $ ( 7 ) Foreign 0 $ 484 $ ( 7 ) Foreign government bond 365 7 ) Foreign government bond 365 ( 2 ) 0 0 Foreign government bond 365 ( 2 ) 0 0 365 ( bond 365 ( 2 ) 0 0 365 ( 2 ) 365 ( 2 ) 0 0 365 ( 2 ) Mortgage-backed ( 2 ) 0 0 365 ( 2 ) Mortgage-backed security ) 0 0 365 ( 2 ) Mortgage-backed security 63 ( ( 2 ) Mortgage-backed security 63 ( 3 ) 14 ( ) Mortgage-backed security 63 ( 3 ) 14 ( 1 ) security 63 ( 3 ) 14 ( 1 ) 77 ( ( 3 ) 14 ( 1 ) 77 ( 4 ) ) 14 ( 1 ) 77 ( 4 ) Corporate note ( 1 ) 77 ( 4 ) Corporate note and bond ) Corporate note and bond 750 ( 10 ) 25 ( note and bond 750 ( 10 ) 25 ( 1 ) bond 750 ( 10 ) 25 ( 1 ) 775 ( ( 10 ) 25 ( 1 ) 775 ( 11 ) ) 25 ( 1 ) 775 ( 11 ) Municipal security ( 1 ) 775 ( 11 ) Municipal security 79 ( ( 11 ) Municipal security 79 ( 2 ) 0 0 ) Municipal security 79 ( 2 ) 0 0 79 ( security 79 ( 2 ) 0 0 79 ( 2 ) 79 ( 2 ) 0 0 79 ( 2 ) Common ( 2 ) 0 0 79 ( 2 ) Common and ) 0 0 79 ( 2 ) Common and preferred stock ) Common and preferred stock 1,377 ( 146 ) 206 ( and preferred stock 1,377 ( 146 ) 206 ( 47 ) stock 1,377 ( 146 ) 206 ( 47 ) 1,583 ( ( 146 ) 206 ( 47 ) 1,583 ( 193 ) ) 206 ( 47 ) 1,583 ( 193 ) Total $ ( 47 ) 1,583 ( 193 ) Total $ 3,118 $ ( 193 ) Total $ 3,118 $ ( 170 ) $ Total $ 3,118 $ ( 170 ) $ 245 $ ( $ ( 170 ) $ 245 $ ( 49 ) $ ) $ 245 $ ( 49 ) $ 3,363 $ ( $ ( 49 ) $ 3,363 $ ( 219 ) Less ) $ 3,363 $ ( 219 ) Less than 12 Months ( 219 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Fair Fair Value Unrealized Losses June 30 , 2010 U.S. government and Unrealized Losses June 30 , 2010 U.S. government and agency security government and agency security $ 216 $ ( 1 ) $ security $ 216 $ ( 1 ) $ 0 $ 0 $ ( 1 ) $ 0 $ 0 $ 216 $ 1 ) $ 0 $ 0 $ 216 $ ( 1 $ 0 $ 0 $ 216 $ ( 1 ) Mortgage-backed 0 $ 216 $ ( 1 ) Mortgage-backed security 105 ( ( 1 ) Mortgage-backed security 105 ( 6 ) 18 ( ) Mortgage-backed security 105 ( 6 ) 18 ( 1 ) security 105 ( 6 ) 18 ( 1 ) 123 ( ( 6 ) 18 ( 1 ) 123 ( 7 ) ) 18 ( 1 ) 123 ( 7 ) Corporate note ( 1 ) 123 ( 7 ) Corporate note and bond ) Corporate note and bond 1,124 ( 13 ) 89 ( note and bond 1,124 ( 13 ) 89 ( 5 ) bond 1,124 ( 13 ) 89 ( 5 ) 1,213 ( ( 13 ) 89 ( 5 ) 1,213 ( 18 ) ) 89 ( 5 ) 1,213 ( 18 ) Municipal security ( 5 ) 1,213 ( 18 ) Municipal security 66 ( ( 18 ) Municipal security 66 ( 1 ) 0 0 ) Municipal security 66 ( 1 ) 0 0 66 ( security 66 ( 1 ) 0 0 66 ( 1 ) 66 ( 1 ) 0 0 66 ( 1 ) Common ( 1 ) 0 0 66 ( 1 ) Common and ) 0 0 66 ( 1 ) Common and preferred stock ) Common and preferred stock 2,102 ( 339 ) 190 ( and preferred stock 2,102 ( 339 ) 190 ( 79 ) stock 2,102 ( 339 ) 190 ( 79 ) 2,292 ( ( 339 ) 190 ( 79 ) 2,292 ( 418 ) ) 190 ( 79 ) 2,292 ( 418 ) Total $ ( 79 ) 2,292 ( 418 ) Total $ 3,613 $ ( 418 ) Total $ 3,613 $ ( 360 ) $ Total $ 3,613 $ ( 360 ) $ 297 $ ( $ ( 360 ) $ 297 $ ( 85 ) $ ) $ 297 $ ( 85 ) $ 3,910 $ ( $ ( 85 ) $ 3,910 $ ( 445 ) Unrealized ) $ 3,910 $ ( 445 ) Unrealized loss from fixed-income available evidence a of June 30 , 2011 . At June a of June 30 , 2011 . At June 30 , , 2011 . At June 30 , 2011 and 2010 , . At June 30 , 2011 and 2010 , the recorded June 30 , 2011 and 2010 , the recorded base and not publicly traded were $ 334 million and $ 216 million $ 334 million and $ 216 million , respectively . Debt Basis Estimated Fair Value June 30 , 2011 Due in one Fair Value June 30 , 2011 Due in one year or one year or le $ 23,982 $ 24,053 Due after one or le $ 23,982 $ 24,053 Due after one year through one year through five year 19,516 19,733 Due after five year year through five year 19,516 19,733 Due after five year through Due after five year through 10 year 2,516 2,637 Due after five year through 10 year 2,516 2,637 Due after 10 year year through 10 year 2,516 2,637 Due after 10 year 2,811 year 2,516 2,637 Due after 10 year 2,811 2,945 Total $ 2,637 Due after 10 year 2,811 2,945 Total $ 48,825 $ Due after 10 year 2,811 2,945 Total $ 48,825 $ 49,368 year 2,811 2,945 Total $ 48,825 $ 49,368 58 Table of 2,945 Total $ 48,825 $ 49,368 58 Table of Contents PART Total $ 48,825 $ 49,368 58 Table of Contents PART II of Contents PART II Item 8 NOTE 5 — DERIVATIVES We PART II Item 8 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2011 and 2010 , As of June 30 , 2011 and 2010 , the total June 30 , 2011 and 2010 , the total notional amount exchange contract sold were $ 10.6 billion and $ 9.3 billion $ 10.6 billion and $ 9.3 billion , respectively . Foreign instrument . As of June 30 , 2011 and 2010 , As of June 30 , 2011 and 2010 , the total June 30 , 2011 and 2010 , the total notional amount exchange contract sold were $ 572 million and $ 523 million $ 572 million and $ 523 million , respectively . Certain exposure . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 3.9 billion and $ 7.3 billion $ 3.9 billion and $ 7.3 billion , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 7.8 billion and $ 5.3 billion $ 7.8 billion and $ 5.3 billion , respectively . Equity forward . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.4 billion and $ 935 million $ 1.4 billion and $ 935 million , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 918 million and $ 472 million $ 918 million and $ 472 million , respectively . Interest instrument . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 2.3 billion and $ 2.2 billion $ 2.3 billion and $ 2.2 billion , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 3.1 billion and $ 1.8 billion $ 3.1 billion and $ 1.8 billion , respectively . In date . As of June 30 , 2011 and 2010 , As of June 30 , 2011 and 2010 , the total June 30 , 2011 and 2010 , the total notional derivative mortgage contract purchased were $ 868 million and $ 305 million $ 868 million and $ 305 million , respectively . Credit low cost method of managing 59 Table of Contents PART II of Contents PART II Item 8 exposure to individual credit risk risk . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 532 million and $ 277 million $ 532 million and $ 277 million , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 371 million and $ 199 million $ 371 million and $ 199 million , respectively . Commodity grain . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.9 billion and $ 502 million $ 1.9 billion and $ 502 million , respectively . As respectively . As of June 30 , 2010 , the total As of June 30 , 2010 , the total notional amount purchased and sold were $ 1.1 billion and $ 376 million $ 1.1 billion and $ 376 million , respectively . Credit a minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2011 , our long-term As of June 30 , 2011 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result that were held at June 30 , 2011 and 2010 . held at June 30 , 2011 and 2010 . The fair June 30 , 2011 and 2010 . The fair value exclude Commodity Contracts Total Derivatives June 30 , 2011 Assets Non-designated hedge Total Derivatives June 30 , 2011 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 179 $ 0 $ Short-term investment $ 14 $ 179 $ 0 $ 17 $ $ 14 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 214 Other $ 0 $ 17 $ 4 $ 214 Other current asset $ 17 $ 4 $ 214 Other current asset 73 0 $ 214 Other current asset 73 0 0 0 0 73 214 Other current asset 73 0 0 0 0 73 Total Other current asset 73 0 0 0 0 73 Total $ current asset 73 0 0 0 0 73 Total $ 87 asset 73 0 0 0 0 73 Total $ 87 $ 73 0 0 0 0 73 Total $ 87 $ 179 0 0 73 Total $ 87 $ 179 $ 0 $ 73 Total $ 87 $ 179 $ 0 $ 17 $ $ 87 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 287 Designated $ 0 $ 17 $ 4 $ 287 Designated hedge derivative $ 17 $ 4 $ 287 Designated hedge derivative : Short-term derivative : Short-term investment $ 6 $ 0 $ 0 $ Short-term investment $ 6 $ 0 $ 0 $ 0 $ $ 6 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 6 Other $ 0 $ 0 $ 0 $ 6 Other current asset $ 0 $ 0 $ 6 Other current asset 123 0 $ 6 Other current asset 123 0 0 0 0 123 6 Other current asset 123 0 0 0 0 123 Total Other current asset 123 0 0 0 0 123 Total $ current asset 123 0 0 0 0 123 Total $ 129 asset 123 0 0 0 0 123 Total $ 129 $ 123 0 0 0 0 123 Total $ 129 $ 0 0 0 123 Total $ 129 $ 0 $ 0 $ 123 Total $ 129 $ 0 $ 0 $ 0 $ $ 129 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 129 Total $ 0 $ 0 $ 0 $ 129 Total asset $ $ 0 $ 0 $ 129 Total asset $ 216 $ $ 129 Total asset $ 216 $ 179 $ 0 $ Total asset $ 216 $ 179 $ 0 $ 17 $ $ 216 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 416 Liabilities $ 0 $ 17 $ 4 $ 416 Liabilities Non-designated hedge $ 17 $ 4 $ 416 Liabilities Non-designated hedge derivative : Other current liability $ ( 91 ) $ ( 12 ) ( 91 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 135 ) ( 4 ) $ ( 135 ) Designated hedge derivative : Other current liability $ ( 128 ) $ 0 $ 0 $ ( 128 ) $ 0 $ 0 $ 0 $ 128 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 128 $ 0 $ 0 $ 0 $ ( 128 ) Total 0 $ 0 $ ( 128 ) Total liability $ ( ) Total liability $ ( 219 ) $ ( 12 ) ( 219 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 263 ) ( 4 ) $ ( 263 ) 60 Table of Contents ) $ ( 263 ) 60 Table of Contents PART II of Contents PART II Item 8 ( In million ) Foreign Commodity Contracts Total Derivatives June 30 , 2010 Assets Non-designated hedge Total Derivatives June 30 , 2010 Assets Non-designated hedge derivative : derivative : Short-term investment $ 15 $ 134 $ 12 $ Short-term investment $ 15 $ 134 $ 12 $ 7 $ $ 15 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 176 Other $ 12 $ 7 $ 8 $ 176 Other current asset $ 7 $ 8 $ 176 Other current asset 34 0 $ 176 Other current asset 34 0 0 0 0 34 176 Other current asset 34 0 0 0 0 34 Total Other current asset 34 0 0 0 0 34 Total $ current asset 34 0 0 0 0 34 Total $ 49 asset 34 0 0 0 0 34 Total $ 49 $ 34 0 0 0 0 34 Total $ 49 $ 134 0 0 34 Total $ 49 $ 134 $ 12 $ 34 Total $ 49 $ 134 $ 12 $ 7 $ $ 49 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 210 Designated $ 12 $ 7 $ 8 $ 210 Designated hedge derivative $ 7 $ 8 $ 210 Designated hedge derivative : Short-term derivative : Short-term investment $ 3 $ 0 $ 0 $ Short-term investment $ 3 $ 0 $ 0 $ 0 $ $ 3 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 3 Other $ 0 $ 0 $ 0 $ 3 Other current asset $ 0 $ 0 $ 3 Other current asset 563 0 $ 3 Other current asset 563 0 0 0 0 563 3 Other current asset 563 0 0 0 0 563 Total Other current asset 563 0 0 0 0 563 Total $ current asset 563 0 0 0 0 563 Total $ 566 asset 563 0 0 0 0 563 Total $ 566 $ 563 0 0 0 0 563 Total $ 566 $ 0 0 0 563 Total $ 566 $ 0 $ 0 $ 563 Total $ 566 $ 0 $ 0 $ 0 $ $ 566 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 566 Total $ 0 $ 0 $ 0 $ 566 Total asset $ $ 0 $ 0 $ 566 Total asset $ 615 $ $ 566 Total asset $ 615 $ 134 $ 12 $ Total asset $ 615 $ 134 $ 12 $ 7 $ $ 615 $ 134 $ 12 $ 7 $ 8 $ $ 134 $ 12 $ 7 $ 8 $ 776 Liabilities $ 12 $ 7 $ 8 $ 776 Liabilities Non-designated hedge $ 7 $ 8 $ 776 Liabilities Non-designated hedge derivative : Other current liability $ ( 60 ) $ ( 17 ) ( 60 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 156 ) ( 5 ) $ ( 156 ) Designated hedge derivative : Other current liability $ ( 9 ) $ 0 $ 0 $ ( 9 ) $ 0 $ 0 $ 0 $ 9 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 9 $ 0 $ 0 $ 0 $ ( 9 ) Total 0 $ 0 $ ( 9 ) Total liability $ ( ) Total liability $ ( 69 ) $ ( 17 ) ( 69 ) $ ( 17 ) $ ( 33 ) ( 17 ) $ ( 33 ) $ ( 41 ) ( 33 ) $ ( 41 ) $ ( 5 ) ( 41 ) $ ( 5 ) $ ( 165 ) ( 5 ) $ ( 165 ) See also Note 4 165 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . million ) Year Ended June 30 , 2011 2010 2009 Foreign Year Ended June 30 , 2011 2010 2009 Foreign Exchange Contracts Ended June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives June 30 , 2011 2010 2009 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) $ 121 Hedged item $ ( 57 ) $ 121 Hedged item 85 60 ( ) $ 121 Hedged item 85 60 ( 120 ) Total $ 121 Hedged item 85 60 ( 120 ) Total $ Hedged item 85 60 ( 120 ) Total $ ( 7 120 ) Total $ ( 7 ) $ 3 $ 1 $ ( 7 ) $ 3 $ 1 Equity Contracts Derivatives 7 ) $ 3 $ 1 Equity Contracts Derivatives $ 0 1 Equity Contracts Derivatives $ 0 $ 0 $ 191 Hedged Contracts Derivatives $ 0 $ 0 $ 191 Hedged item 0 $ 0 $ 0 $ 191 Hedged item 0 0 ( 0 $ 191 Hedged item 0 0 ( 211 ) Total $ 191 Hedged item 0 0 ( 211 ) Total $ Hedged item 0 0 ( 211 ) Total $ 0 $ ( 211 ) Total $ 0 $ 0 $ ( 20 ) Total $ 0 $ 0 $ ( 20 ) 61 0 $ 0 $ ( 20 ) 61 Table of Contents 0 $ ( 20 ) 61 Table of Contents PART II of Contents PART II Item 8 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2011 2010 2009 Effective Year Ended June 30 , 2011 2010 2009 Effective Portion Gain Ended June 30 , 2011 2010 2009 Effective Portion Gain ( June 30 , 2011 2010 2009 Effective Portion Gain ( loss tax effect of $ ( 340 ) , $ 188 and ( 340 ) , $ 188 and $ 472 $ ( , $ 188 and $ 472 $ ( 632 ) $ and $ 472 $ ( 632 ) $ 349 $ 876 $ ( 632 ) $ 349 $ 876 Gain ( loss 632 ) $ 349 $ 876 Gain ( loss ) reclassified OCI into revenue $ ( 7 ) $ 495 $ 884 $ ( 7 ) $ 495 $ 884 Amount Excluded from 7 ) $ 495 $ 884 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 276 ) $ ( 174 ) ( 276 ) $ ( 174 ) $ ( 314 ) ( 174 ) $ ( 314 ) We estimate that $ ) We estimate that $ 186 million of net derivative loss included in OCI at June 30 , 2011 will be reclassified OCI at June 30 , 2011 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2011 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2011 2010 2009 Foreign Year Ended June 30 , 2011 2010 2009 Foreign exchange contract Ended June 30 , 2011 2010 2009 Foreign exchange contract $ June 30 , 2011 2010 2009 Foreign exchange contract $ ( Foreign exchange contract $ ( 27 ) $ 106 $ ( $ ( 27 ) $ 106 $ ( 234 ) Equity ) $ 106 $ ( 234 ) Equity contract 35 12 ( 234 ) Equity contract 35 12 ( 131 ) Interest-rate 234 ) Equity contract 35 12 ( 131 ) Interest-rate contract Equity contract 35 12 ( 131 ) Interest-rate contract 19 ( ( 131 ) Interest-rate contract 19 ( 4 ) 5 Credit ) Interest-rate contract 19 ( 4 ) 5 Credit contract 24 contract 19 ( 4 ) 5 Credit contract 24 22 ( 4 ) 5 Credit contract 24 22 ( 18 ) Commodity ) 5 Credit contract 24 22 ( 18 ) Commodity contract Credit contract 24 22 ( 18 ) Commodity contract 148 ( ( 18 ) Commodity contract 148 ( 1 ) ( 126 ) Commodity contract 148 ( 1 ) ( 126 ) Total 148 ( 1 ) ( 126 ) Total $ 199 $ ( 126 ) Total $ 199 $ 135 $ ( 504 ) Total $ 199 $ 135 $ ( 504 ) 62 199 $ 135 $ ( 504 ) 62 Table of Contents 135 $ ( 504 ) 62 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2011 Assets Mutual fund Fair Value June 30 , 2011 Assets Mutual fund $ 1,752 2011 Assets Mutual fund $ 1,752 $ 0 $ 0 $ Mutual fund $ 1,752 $ 0 $ 0 $ 1,752 $ $ 1,752 $ 0 $ 0 $ 1,752 $ 0 $ $ 0 $ 0 $ 1,752 $ 0 $ 1,752 Commercial $ 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 639 0 0 $ 1,752 Commercial paper 0 639 0 639 0 639 $ 1,752 Commercial paper 0 639 0 639 0 639 Certificates 1,752 Commercial paper 0 639 0 639 0 639 Certificates of Commercial paper 0 639 0 639 0 639 Certificates of deposit paper 0 639 0 639 0 639 Certificates of deposit 0 0 639 0 639 0 639 Certificates of deposit 0 598 0 639 Certificates of deposit 0 598 0 598 0 598 639 Certificates of deposit 0 598 0 598 0 598 U.S. Certificates of deposit 0 598 0 598 0 598 U.S. government of deposit 0 598 0 598 0 598 U.S. government and deposit 0 598 0 598 0 598 U.S. government and agency 0 598 0 598 0 598 U.S. government and agency security U.S. government and agency security 23,591 10,175 0 33,766 0 33,766 government and agency security 23,591 10,175 0 33,766 0 33,766 Foreign and agency security 23,591 10,175 0 33,766 0 33,766 Foreign government agency security 23,591 10,175 0 33,766 0 33,766 Foreign government bond security 23,591 10,175 0 33,766 0 33,766 Foreign government bond 303 23,591 10,175 0 33,766 0 33,766 Foreign government bond 303 367 0 33,766 Foreign government bond 303 367 0 670 0 670 33,766 Foreign government bond 303 367 0 670 0 670 Mortgage-backed Foreign government bond 303 367 0 670 0 670 Mortgage-backed security government bond 303 367 0 670 0 670 Mortgage-backed security 0 bond 303 367 0 670 0 670 Mortgage-backed security 0 2,428 303 367 0 670 0 670 Mortgage-backed security 0 2,428 0 670 0 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 0 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate note Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate note and security 0 2,428 0 2,428 0 2,428 Corporate note and bond 0 2,428 0 2,428 0 2,428 Corporate note and bond 0 2,428 Corporate note and bond 0 10,600 58 10,658 0 10,658 Corporate note and bond 0 10,600 58 10,658 0 10,658 Municipal note and bond 0 10,600 58 10,658 0 10,658 Municipal security and bond 0 10,600 58 10,658 0 10,658 Municipal security 0 bond 0 10,600 58 10,658 0 10,658 Municipal security 0 454 0 10,600 58 10,658 0 10,658 Municipal security 0 454 0 10,658 0 10,658 Municipal security 0 454 0 454 0 454 0 10,658 Municipal security 0 454 0 454 0 454 Common 10,658 Municipal security 0 454 0 454 0 454 Common and Municipal security 0 454 0 454 0 454 Common and preferred security 0 454 0 454 0 454 Common and preferred stock 0 454 0 454 0 454 Common and preferred stock 9,821 454 Common and preferred stock 9,821 55 5 9,881 0 9,881 Common and preferred stock 9,821 55 5 9,881 0 9,881 Derivatives and preferred stock 9,821 55 5 9,881 0 9,881 Derivatives 8 preferred stock 9,821 55 5 9,881 0 9,881 Derivatives 8 388 stock 9,821 55 5 9,881 0 9,881 Derivatives 8 388 20 9,821 55 5 9,881 0 9,881 Derivatives 8 388 20 416 5 9,881 0 9,881 Derivatives 8 388 20 416 ( 204 9,881 0 9,881 Derivatives 8 388 20 416 ( 204 ) 0 9,881 Derivatives 8 388 20 416 ( 204 ) 212 9,881 Derivatives 8 388 20 416 ( 204 ) 212 Total 8 388 20 416 ( 204 ) 212 Total $ 35,475 20 416 ( 204 ) 212 Total $ 35,475 $ 25,704 204 ) 212 Total $ 35,475 $ 25,704 $ 83 $ 212 Total $ 35,475 $ 25,704 $ 83 $ 61,262 $ $ 35,475 $ 25,704 $ 83 $ 61,262 $ ( 204 $ 25,704 $ 83 $ 61,262 $ ( 204 ) $ 83 $ 61,262 $ ( 204 ) $ 61,058 Liabilities Derivatives $ ( 204 ) $ 61,058 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 109 $ 257 $ 0 $ and other $ 109 $ 257 $ 0 $ 366 $ $ 109 $ 257 $ 0 $ 366 $ ( 203 $ 257 $ 0 $ 366 $ ( 203 ) $ 0 $ 366 $ ( 203 ) $ 163 ( In $ ( 203 ) $ 163 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2010 Assets Mutual fund Fair Value June 30 , 2010 Assets Mutual fund $ 1,120 2010 Assets Mutual fund $ 1,120 $ 0 $ 0 $ Mutual fund $ 1,120 $ 0 $ 0 $ 1,120 $ $ 1,120 $ 0 $ 0 $ 1,120 $ 0 $ $ 0 $ 0 $ 1,120 $ 0 $ 1,120 Commercial $ 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 $ 1,120 $ 0 $ 1,120 Commercial paper 0 172 0 0 $ 1,120 Commercial paper 0 172 0 172 0 172 $ 1,120 Commercial paper 0 172 0 172 0 172 Certificates 1,120 Commercial paper 0 172 0 172 0 172 Certificates of Commercial paper 0 172 0 172 0 172 Certificates of deposit paper 0 172 0 172 0 172 Certificates of deposit 0 0 172 0 172 0 172 Certificates of deposit 0 348 0 172 Certificates of deposit 0 348 0 348 0 348 172 Certificates of deposit 0 348 0 348 0 348 U.S. Certificates of deposit 0 348 0 348 0 348 U.S. government of deposit 0 348 0 348 0 348 U.S. government and deposit 0 348 0 348 0 348 U.S. government and agency 0 348 0 348 0 348 U.S. government and agency security U.S. government and agency security 16,473 4,756 0 21,229 0 21,229 government and agency security 16,473 4,756 0 21,229 0 21,229 Foreign and agency security 16,473 4,756 0 21,229 0 21,229 Foreign government agency security 16,473 4,756 0 21,229 0 21,229 Foreign government bond security 16,473 4,756 0 21,229 0 21,229 Foreign government bond 239 16,473 4,756 0 21,229 0 21,229 Foreign government bond 239 294 0 21,229 Foreign government bond 239 294 0 533 0 533 21,229 Foreign government bond 239 294 0 533 0 533 Mortgage-backed Foreign government bond 239 294 0 533 0 533 Mortgage-backed security government bond 239 294 0 533 0 533 Mortgage-backed security 0 bond 239 294 0 533 0 533 Mortgage-backed security 0 3,264 239 294 0 533 0 533 Mortgage-backed security 0 3,264 0 533 0 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 0 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate 533 Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate note Mortgage-backed security 0 3,264 0 3,264 0 3,264 Corporate note and security 0 3,264 0 3,264 0 3,264 Corporate note and bond 0 3,264 0 3,264 0 3,264 Corporate note and bond 0 3,264 Corporate note and bond 0 7,460 167 7,627 0 7,627 Corporate note and bond 0 7,460 167 7,627 0 7,627 Municipal note and bond 0 7,460 167 7,627 0 7,627 Municipal security and bond 0 7,460 167 7,627 0 7,627 Municipal security 0 bond 0 7,460 167 7,627 0 7,627 Municipal security 0 747 0 7,460 167 7,627 0 7,627 Municipal security 0 747 0 7,627 0 7,627 Municipal security 0 747 0 747 0 747 0 7,627 Municipal security 0 747 0 747 0 747 Common 7,627 Municipal security 0 747 0 747 0 747 Common and Municipal security 0 747 0 747 0 747 Common and preferred security 0 747 0 747 0 747 Common and preferred stock 0 747 0 747 0 747 Common and preferred stock 6,988 747 Common and preferred stock 6,988 43 5 7,036 0 7,036 Common and preferred stock 6,988 43 5 7,036 0 7,036 Derivatives and preferred stock 6,988 43 5 7,036 0 7,036 Derivatives 22 preferred stock 6,988 43 5 7,036 0 7,036 Derivatives 22 745 stock 6,988 43 5 7,036 0 7,036 Derivatives 22 745 9 6,988 43 5 7,036 0 7,036 Derivatives 22 745 9 776 5 7,036 0 7,036 Derivatives 22 745 9 776 ( 207 7,036 0 7,036 Derivatives 22 745 9 776 ( 207 ) 0 7,036 Derivatives 22 745 9 776 ( 207 ) 569 7,036 Derivatives 22 745 9 776 ( 207 ) 569 Total 22 745 9 776 ( 207 ) 569 Total $ 24,842 9 776 ( 207 ) 569 Total $ 24,842 $ 17,829 207 ) 569 Total $ 24,842 $ 17,829 $ 181 $ 569 Total $ 24,842 $ 17,829 $ 181 $ 42,852 $ $ 24,842 $ 17,829 $ 181 $ 42,852 $ ( 207 $ 17,829 $ 181 $ 42,852 $ ( 207 ) $ 181 $ 42,852 $ ( 207 ) $ 42,645 Liabilities Derivatives $ ( 207 ) $ 42,645 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 85 $ 137 $ 0 $ and other $ 85 $ 137 $ 0 $ 222 $ $ 85 $ 137 $ 0 $ 222 $ ( 205 $ 137 $ 0 $ 222 $ ( 205 ) $ 0 $ 222 $ ( 205 ) $ 17 ( a $ ( 205 ) $ 17 ( a ) These amount and counterparty credit risk . 63 Table of Contents PART II of Contents PART II Item 8 The table below reconciles the these same asset in Note 4 – Investments for June 30 4 – Investments for June 30 , 2011 and 2010 . Investments for June 30 , 2011 and 2010 . ( In June 30 , 2011 and 2010 . ( In million ) ( In million ) June 30 , 2011 2010 Net fair million ) June 30 , 2011 2010 Net fair value of ) June 30 , 2011 2010 Net fair value of asset on a recurring basis $ 61,058 $ 42,645 Cash 1,648 1,661 recurring basis $ 61,058 $ 42,645 Cash 1,648 1,661 Common and $ 61,058 $ 42,645 Cash 1,648 1,661 Common and preferred stock 61,058 $ 42,645 Cash 1,648 1,661 Common and preferred stock measured value on a nonrecurring basis 334 216 Other investment measured at on a nonrecurring basis 334 216 Other investment measured at fair value on a nonrecurring basis 650 502 Less derivative asset classified on a nonrecurring basis 650 502 Less derivative asset classified a a other current asset ( 54 ) ( 544 ) Other asset ( 54 ) ( 544 ) Other 1 62 Recorded ) ( 544 ) Other 1 62 Recorded basis of investment ( 544 ) Other 1 62 Recorded basis of investment component basis of investment component $ 63,637 $ 44,542 Changes in Financial investment component $ 63,637 $ 44,542 Changes in Financial Instruments Measured Financial Instruments Measured at Level 3 Fair Value on a Recurring change during the fiscal year 2011 and 2010 in our Level the fiscal year 2011 and 2010 in our Level 3 financial and 2010 in our Level 3 financial instrument that are measured Assets Total Year Ended June 30 , 2011 Balance , beginning Year Ended June 30 , 2011 Balance , beginning of period , beginning of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Total $ 167 $ 5 $ 9 $ 181 Total realized and $ 5 $ 9 $ 181 Total realized and unrealized gain other income ( expense ) 39 0 11 50 Included in income ( expense ) 39 0 11 50 Included in other ( expense ) 39 0 11 50 Included in other comprehensive expense ) 39 0 11 50 Included in other comprehensive income in other comprehensive income ( 63 ) 0 0 ( 63 comprehensive income ( 63 ) 0 0 ( 63 ) Purchases income ( 63 ) 0 0 ( 63 ) Purchases , 63 ) 0 0 ( 63 ) Purchases , issuance and , issuance and settlement ( 85 ) 0 0 ( 85 and settlement ( 85 ) 0 0 ( 85 ) Balance settlement ( 85 ) 0 0 ( 85 ) Balance , 85 ) 0 0 ( 85 ) Balance , end of , end of period $ 58 $ 5 $ 20 $ of period $ 58 $ 5 $ 20 $ 83 Change $ 58 $ 5 $ 20 $ 83 Change in unrealized $ 5 $ 20 $ 83 Change in unrealized gain ( asset held a of June 30 , 2011 $ 6 $ a of June 30 , 2011 $ 6 $ 0 $ June 30 , 2011 $ 6 $ 0 $ 11 $ , 2011 $ 6 $ 0 $ 11 $ 17 ( $ 6 $ 0 $ 11 $ 17 ( In million $ 0 $ 11 $ 17 ( In million ) Corporate Assets Total Year Ended June 30 , 2010 Balance , beginning Year Ended June 30 , 2010 Balance , beginning of period , beginning of period $ 253 $ 5 $ 5 $ of period $ 253 $ 5 $ 5 $ 263 Total $ 253 $ 5 $ 5 $ 263 Total realized and $ 5 $ 5 $ 263 Total realized and unrealized gain other income ( expense ) 6 0 4 10 Included in income ( expense ) 6 0 4 10 Included in other ( expense ) 6 0 4 10 Included in other comprehensive expense ) 6 0 4 10 Included in other comprehensive income in other comprehensive income ( 92 ) 0 0 ( 92 comprehensive income ( 92 ) 0 0 ( 92 ) Balance income ( 92 ) 0 0 ( 92 ) Balance , 92 ) 0 0 ( 92 ) Balance , end of , end of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Change $ 167 $ 5 $ 9 $ 181 Change in unrealized $ 5 $ 9 $ 181 Change in unrealized gain ( asset held a of June 30 , 2010 $ 6 $ a of June 30 , 2010 $ 6 $ 0 $ June 30 , 2010 $ 6 $ 0 $ 4 $ , 2010 $ 6 $ 0 $ 4 $ 10 Assets $ 6 $ 0 $ 4 $ 10 Assets and Liabilities $ 0 $ 4 $ 10 Assets and Liabilities Measured at Nonrecurring Basis During fiscal year 2011 and 2010 , impairment charge During fiscal year 2011 and 2010 , impairment charge of $ , impairment charge of $ 2 million and $ 5 million $ 2 million and $ 5 million , respectively , were all instance . At June 30 , 2011 and 2010 , . At June 30 , 2011 and 2010 , we held June 30 , 2011 and 2010 , we held no common on a nonrecurring basis . 64 Table of Contents PART II of Contents PART II Item 8 NOTE 7 — INVENTORIES The PART II Item 8 NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2011 2010 Raw material million ) June 30 , 2011 2010 Raw material $ 232 ) June 30 , 2011 2010 Raw material $ 232 $ 2011 2010 Raw material $ 232 $ 172 Work in process Raw material $ 232 $ 172 Work in process 56 16 $ 172 Work in process 56 16 Finished good 1,084 552 172 Work in process 56 16 Finished good 1,084 552 Total process 56 16 Finished good 1,084 552 Total $ 1,372 $ 56 16 Finished good 1,084 552 Total $ 1,372 $ 740 good 1,084 552 Total $ 1,372 $ 740 NOTE 8 — 552 Total $ 1,372 $ 740 NOTE 8 — PROPERTY AND $ 1,372 $ 740 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2011 2010 Land $ million ) June 30 , 2011 2010 Land $ 533 $ ) June 30 , 2011 2010 Land $ 533 $ 526 , 2011 2010 Land $ 533 $ 526 Buildings and improvement 2010 Land $ 533 $ 526 Buildings and improvement 6,521 6,087 $ 526 Buildings and improvement 6,521 6,087 Leasehold improvement 2,345 2,100 526 Buildings and improvement 6,521 6,087 Leasehold improvement 2,345 2,100 Computer improvement 6,521 6,087 Leasehold improvement 2,345 2,100 Computer equipment and software 6,521 6,087 Leasehold improvement 2,345 2,100 Computer equipment and software 6,601 2,100 Computer equipment and software 6,601 5,673 Furniture and equipment 1,991 Computer equipment and software 6,601 5,673 Furniture and equipment 1,991 1,873 6,601 5,673 Furniture and equipment 1,991 1,873 Total , at cost 5,673 Furniture and equipment 1,991 1,873 Total , at cost 17,991 1,873 Total , at cost 17,991 16,259 Accumulated depreciation ( 9,829 Total , at cost 17,991 16,259 Accumulated depreciation ( 9,829 ) 17,991 16,259 Accumulated depreciation ( 9,829 ) ( 8,629 ) Total depreciation ( 9,829 ) ( 8,629 ) Total , net $ ) Total , net $ 8,162 $ 7,630 During fiscal year , net $ 8,162 $ 7,630 During fiscal year 2011 , $ 7,630 During fiscal year 2011 , 2010 , and 2009 During fiscal year 2011 , 2010 , and 2009 , depreciation 2011 , 2010 , and 2009 , depreciation expense wa $ , depreciation expense wa $ 2.0 billion , $ 1.8 billion $ 2.0 billion , $ 1.8 billion , and $ 1.7 1.8 billion , and $ 1.7 billion , respectively . NOTE billion , respectively . NOTE 9 — BUSINESS COMBINATIONS During fiscal BUSINESS COMBINATIONS During fiscal year 2011 , we acquired three entity for total consideration of $ 75 million , substantially all of cash . During fiscal year 2010 , we acquired five entity for total consideration of $ 267 million , substantially all of cash . During fiscal year 2010 , we also sold three for total consideration of $ 600 million , including Razorfish in second quarter of fiscal year 2010 . During fiscal year 2009 2010 . During fiscal year 2009 , we acquired nine entity for total consideration of $ 925 million , substantially all of Agreement with Skype On May 10 , 2011 , we announced Skype On May 10 , 2011 , we announced that we communication company , for $ 8.5 billion in cash . The regulatory approval during calendar year 2011 . 65 Table of Contents during calendar year 2011 . 65 Table of Contents PART II of Contents PART II Item 8 NOTE 10 — GOODWILL Changes PART II Item 8 NOTE 10 — GOODWILL Changes in the of goodwill for fiscal year 2011 and 2010 by segment were for fiscal year 2011 and 2010 by segment were a follows : Balance a of June 30 , 2009 Acquisitions Purchase Accounting a of June 30 , 2009 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2010 Acquisitions Purchase Accounting a of June 30 , 2010 Acquisitions Purchase Accounting Adjustments and Other Balance a of June 30 , 2011 ( In million a of June 30 , 2011 ( In million ) Windows & Windows Live Division $ 77 $ 0 $ 0 $ Live Division $ 77 $ 0 $ 0 $ 77 $ $ 77 $ 0 $ 0 $ 77 $ 0 $ $ 0 $ 0 $ 77 $ 0 $ 12 $ $ 0 $ 77 $ 0 $ 12 $ 89 Server $ 77 $ 0 $ 12 $ 89 Server and Tools $ 0 $ 12 $ 89 Server and Tools 1,038 82 $ 89 Server and Tools 1,038 82 ( 2 ) 1,118 89 Server and Tools 1,038 82 ( 2 ) 1,118 13 and Tools 1,038 82 ( 2 ) 1,118 13 8 1,139 1,038 82 ( 2 ) 1,118 13 8 1,139 Online Services 82 ( 2 ) 1,118 13 8 1,139 Online Services Division ( 2 ) 1,118 13 8 1,139 Online Services Division 6,657 2 ) 1,118 13 8 1,139 Online Services Division 6,657 0 8 1,139 Online Services Division 6,657 0 ( 284 ) 6,373 1,139 Online Services Division 6,657 0 ( 284 ) 6,373 0 Services Division 6,657 0 ( 284 ) 6,373 0 0 6,373 6,657 0 ( 284 ) 6,373 0 0 6,373 Microsoft Business 0 ( 284 ) 6,373 0 0 6,373 Microsoft Business Division ( 284 ) 6,373 0 0 6,373 Microsoft Business Division 3,927 284 ) 6,373 0 0 6,373 Microsoft Business Division 3,927 116 0 6,373 Microsoft Business Division 3,927 116 ( 19 ) 4,024 6,373 Microsoft Business Division 3,927 116 ( 19 ) 4,024 4 Business Division 3,927 116 ( 19 ) 4,024 4 139 4,167 3,927 116 ( 19 ) 4,024 4 139 4,167 Entertainment and 116 ( 19 ) 4,024 4 139 4,167 Entertainment and Devices ( 19 ) 4,024 4 139 4,167 Entertainment and Devices Division 19 ) 4,024 4 139 4,167 Entertainment and Devices Division 804 4,167 Entertainment and Devices Division 804 0 ( 2 ) 802 Entertainment and Devices Division 804 0 ( 2 ) 802 30 Devices Division 804 0 ( 2 ) 802 30 ( 19 804 0 ( 2 ) 802 30 ( 19 ) 813 0 ( 2 ) 802 30 ( 19 ) 813 Total 2 ) 802 30 ( 19 ) 813 Total $ 12,503 802 30 ( 19 ) 813 Total $ 12,503 $ 198 19 ) 813 Total $ 12,503 $ 198 $ ( 307 813 Total $ 12,503 $ 198 $ ( 307 ) $ 12,503 $ 198 $ ( 307 ) $ 12,394 $ 47 $ ( 307 ) $ 12,394 $ 47 $ 140 $ 307 ) $ 12,394 $ 47 $ 140 $ 12,581 None $ 12,394 $ 47 $ 140 $ 12,581 None of the $ 47 $ 140 $ 12,581 None of the amount recorded , but will not exceed 12 month . Adjustments in the other ” for fiscal year 2010 is $ 285 million of fiscal year 2010 is $ 285 million of goodwill associated with disposition . See also Note 9 – Business Combinations . We for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2011 . NOTE 11 a of May 1 , 2011 . NOTE 11 — INTANGIBLE 1 , 2011 . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2011 2010 Contract-based $ Year Ended June 30 , 2011 2010 Contract-based $ 1,068 $ Ended June 30 , 2011 2010 Contract-based $ 1,068 $ ( , 2011 2010 Contract-based $ 1,068 $ ( 966 ) $ Contract-based $ 1,068 $ ( 966 ) $ 102 $ 1,075 $ ( 966 ) $ 102 $ 1,075 $ ( 914 966 ) $ 102 $ 1,075 $ ( 914 ) $ 102 $ 1,075 $ ( 914 ) $ 161 Technology-based ( $ ( 914 ) $ 161 Technology-based ( a ) 2,356 161 Technology-based ( a ) 2,356 ( 1,831 ) 525 2,308 ( a ) 2,356 ( 1,831 ) 525 2,308 ( 1,521 ) 2,356 ( 1,831 ) 525 2,308 ( 1,521 ) 787 2,356 ( 1,831 ) 525 2,308 ( 1,521 ) 787 Marketing-related 1,831 ) 525 2,308 ( 1,521 ) 787 Marketing-related 113 ( 525 2,308 ( 1,521 ) 787 Marketing-related 113 ( 98 ) ( 1,521 ) 787 Marketing-related 113 ( 98 ) 15 114 ) 787 Marketing-related 113 ( 98 ) 15 114 ( 86 Marketing-related 113 ( 98 ) 15 114 ( 86 ) 28 113 ( 98 ) 15 114 ( 86 ) 28 Customer-related 98 ) 15 114 ( 86 ) 28 Customer-related 326 ( 15 114 ( 86 ) 28 Customer-related 326 ( 224 ) ( 86 ) 28 Customer-related 326 ( 224 ) 102 390 ) 28 Customer-related 326 ( 224 ) 102 390 ( 208 Customer-related 326 ( 224 ) 102 390 ( 208 ) 182 326 ( 224 ) 102 390 ( 208 ) 182 Total 224 ) 102 390 ( 208 ) 182 Total $ 3,863 102 390 ( 208 ) 182 Total $ 3,863 $ ( 208 ) 182 Total $ 3,863 $ ( 3,119 ) $ Total $ 3,863 $ ( 3,119 ) $ 744 $ 3,887 $ ( 3,119 ) $ 744 $ 3,887 $ ( 2,729 3,119 ) $ 744 $ 3,887 $ ( 2,729 ) $ 744 $ 3,887 $ ( 2,729 ) $ 1,158 ( a $ ( 2,729 ) $ 1,158 ( a ) Technology-based intangible Technology-based intangible asset included $ 179 million and $ 249 million $ 179 million and $ 249 million a of June 30 249 million a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , respectively , June 30 , 2011 and 2010 , respectively , of net of the period presented . 66 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset asset acquired during fiscal year 2011 and 2010 were a follows during fiscal year 2011 and 2010 were a follows : ( Average Life Year Ended June 30 , 2011 2010 Contract-based $ Year Ended June 30 , 2011 2010 Contract-based $ 0 $ Ended June 30 , 2011 2010 Contract-based $ 0 $ 3 , 2011 2010 Contract-based $ 0 $ 3 2 year Technology-based 2010 Contract-based $ 0 $ 3 2 year Technology-based 119 3 Contract-based $ 0 $ 3 2 year Technology-based 119 3 year $ 3 2 year Technology-based 119 3 year 322 4 year 3 2 year Technology-based 119 3 year 322 4 year Marketing-related year Technology-based 119 3 year 322 4 year Marketing-related 1 7 Technology-based 119 3 year 322 4 year Marketing-related 1 7 year year 322 4 year Marketing-related 1 7 year 0 Customer-related 2 322 4 year Marketing-related 1 7 year 0 Customer-related 2 4 year Marketing-related 1 7 year 0 Customer-related 2 4 year 18 1 7 year 0 Customer-related 2 4 year 18 5 year 7 year 0 Customer-related 2 4 year 18 5 year Total 0 Customer-related 2 4 year 18 5 year Total $ 122 Customer-related 2 4 year 18 5 year Total $ 122 3 18 5 year Total $ 122 3 year $ 343 4 5 year Total $ 122 3 year $ 343 4 year $ 122 3 year $ 343 4 year Intangible asset amortization 122 3 year $ 343 4 year Intangible asset amortization expense asset amortization expense wa $ 537 million , $ 707 million $ 537 million , $ 707 million , and $ 591 707 million , and $ 591 million for fiscal year 2011 591 million for fiscal year 2011 , 2010 , and 2009 for fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . Amortization of of capitalized software wa $ 114 million , $ 97 million $ 114 million , $ 97 million , and $ 65 97 million , and $ 65 million for fiscal year 2011 65 million for fiscal year 2011 , 2010 , and 2009 for fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . The following intangible asset held at June 30 , 2011 : ( In held at June 30 , 2011 : ( In million ) million ) Year Ending June 30 , 2012 $ 390 2013 Year Ending June 30 , 2012 $ 390 2013 242 2014 June 30 , 2012 $ 390 2013 242 2014 68 2015 30 , 2012 $ 390 2013 242 2014 68 2015 27 , 2012 $ 390 2013 242 2014 68 2015 27 2016 2012 $ 390 2013 242 2014 68 2015 27 2016 10 $ 390 2013 242 2014 68 2015 27 2016 10 2017 390 2013 242 2014 68 2015 27 2016 10 2017 and 2013 242 2014 68 2015 27 2016 10 2017 and thereafter 242 2014 68 2015 27 2016 10 2017 and thereafter 7 2014 68 2015 27 2016 10 2017 and thereafter 7 Total 68 2015 27 2016 10 2017 and thereafter 7 Total $ 2016 10 2017 and thereafter 7 Total $ 744 NOTE 12 and thereafter 7 Total $ 744 NOTE 12 — DEBT Short-term 7 Total $ 744 NOTE 12 — DEBT Short-term Debt During Short-term Debt During fiscal year 2011 , we repaid $ 1.0 2011 , we repaid $ 1.0 billion of commercial paper , zero outstanding . On November 5 , 2010 , our $ . On November 5 , 2010 , our $ 1.0 billion , 2010 , our $ 1.0 billion 364-day credit facility expired , our $ 1.0 billion 364-day credit facility expired . This Long-term Debt As of June 30 , 2011 , the total As of June 30 , 2011 , the total carrying value convertible debt , were $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respectively . This estimated fair value of $ 4.9 billion and $ 5.2 billion $ 4.9 billion and $ 5.2 billion , respectively , a respectively , a of June 30 , 2010 . The estimated a of June 30 , 2010 . The estimated fair value publicly-traded debt a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , a applicable June 30 , 2011 and 2010 , a applicable . Maturities million ) Year Ending June 30 , 2012 $ 0 2013 Year Ending June 30 , 2012 $ 0 2013 1,250 2014 June 30 , 2012 $ 0 2013 1,250 2014 3,000 2015 30 , 2012 $ 0 2013 1,250 2014 3,000 2015 0 , 2012 $ 0 2013 1,250 2014 3,000 2015 0 2016 2012 $ 0 2013 1,250 2014 3,000 2015 0 2016 2,500 $ 0 2013 1,250 2014 3,000 2015 0 2016 2,500 Thereafter 0 2013 1,250 2014 3,000 2015 0 2016 2,500 Thereafter 5,250 2013 1,250 2014 3,000 2015 0 2016 2,500 Thereafter 5,250 Total 1,250 2014 3,000 2015 0 2016 2,500 Thereafter 5,250 Total $ 2014 3,000 2015 0 2016 2,500 Thereafter 5,250 Total $ 12,000 2015 0 2016 2,500 Thereafter 5,250 Total $ 12,000 67 Table 2,500 Thereafter 5,250 Total $ 12,000 67 Table of Contents PART Thereafter 5,250 Total $ 12,000 67 Table of Contents PART II of Contents PART II Item 8 Cash paid for interest on our debt for fiscal year 2011 and 2010 wa $ 197 for fiscal year 2011 and 2010 wa $ 197 million and 2011 and 2010 wa $ 197 million and $ 145 million $ 197 million and $ 145 million , respectively . No debt interest for fiscal year 2009 . The component of long-term a follows a of June 30 , 2011 : Due Date a of June 30 , 2011 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 2013 $ 1,000 0.875 % 1.000 % March 15 2013 $ 1,000 0.875 % 1.000 % March 15 March 27 0.875 % 1.000 % March 15 March 27 September 15 September 1.000 % March 15 March 27 September 15 September 27 June March 15 March 27 September 15 September 27 June 1 , March 27 September 15 September 27 June 1 , 2014 2,000 September 15 September 27 June 1 , 2014 2,000 2.950 % September 27 June 1 , 2014 2,000 2.950 % 3.049 % 27 June 1 , 2014 2,000 2.950 % 3.049 % May June 1 , 2014 2,000 2.950 % 3.049 % May 15 , 2014 2,000 2.950 % 3.049 % May 15 June 1 2.950 % 3.049 % May 15 June 1 November 15 December 3.049 % May 15 June 1 November 15 December 1 September May 15 June 1 November 15 December 1 September 25 , June 1 November 15 December 1 September 25 , 2015 1,750 November 15 December 1 September 25 , 2015 1,750 1.625 % December 1 September 25 , 2015 1,750 1.625 % 1.795 % 1 September 25 , 2015 1,750 1.625 % 1.795 % March September 25 , 2015 1,750 1.625 % 1.795 % March 15 , 2015 1,750 1.625 % 1.795 % March 15 March 25 1.625 % 1.795 % March 15 March 25 September 15 September 1.795 % March 15 March 25 September 15 September 25 February March 15 March 25 September 15 September 25 February 8 , March 25 September 15 September 25 February 8 , 2016 750 September 15 September 25 February 8 , 2016 750 2.500 % September 25 February 8 , 2016 750 2.500 % 2.642 % 25 February 8 , 2016 750 2.500 % 2.642 % February February 8 , 2016 750 2.500 % 2.642 % February 1 , 2016 750 2.500 % 2.642 % February 1 February 8 2.500 % 2.642 % February 1 February 8 August 1 August 2.642 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2019 1,000 August 1 August 8 June 1 , 2019 1,000 4.200 % August 8 June 1 , 2019 1,000 4.200 % 4.379 % 8 June 1 , 2019 1,000 4.200 % 4.379 % May June 1 , 2019 1,000 4.200 % 4.379 % May 15 , 2019 1,000 4.200 % 4.379 % May 15 June 1 4.200 % 4.379 % May 15 June 1 November 15 December 4.379 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2020 1,000 November 15 December 1 October 1 , 2020 1,000 3.000 % December 1 October 1 , 2020 1,000 3.000 % 3.137 % 1 October 1 , 2020 1,000 3.000 % 3.137 % March October 1 , 2020 1,000 3.000 % 3.137 % March 15 , 2020 1,000 3.000 % 3.137 % March 15 April 1 3.000 % 3.137 % March 15 April 1 September 15 October 3.137 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2021 500 September 15 October 1 February 8 , 2021 500 4.000 % October 1 February 8 , 2021 500 4.000 % 4.082 % 1 February 8 , 2021 500 4.000 % 4.082 % February February 8 , 2021 500 4.000 % 4.082 % February 1 , 2021 500 4.000 % 4.082 % February 1 February 8 4.000 % 4.082 % February 1 February 8 August 1 August 4.082 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2039 750 August 1 August 8 June 1 , 2039 750 5.200 % August 8 June 1 , 2039 750 5.200 % 5.240 % 8 June 1 , 2039 750 5.200 % 5.240 % May June 1 , 2039 750 5.200 % 5.240 % May 15 , 2039 750 5.200 % 5.240 % May 15 June 1 5.200 % 5.240 % May 15 June 1 November 15 December 5.240 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2040 1,000 November 15 December 1 October 1 , 2040 1,000 4.500 % December 1 October 1 , 2040 1,000 4.500 % 4.567 % 1 October 1 , 2040 1,000 4.500 % 4.567 % March October 1 , 2040 1,000 4.500 % 4.567 % March 15 , 2040 1,000 4.500 % 4.567 % March 15 April 1 4.500 % 4.567 % March 15 April 1 September 15 October 4.567 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2041 1,000 September 15 October 1 February 8 , 2041 1,000 5.300 % October 1 February 8 , 2041 1,000 5.300 % 5.361 % 1 February 8 , 2041 1,000 5.300 % 5.361 % February February 8 , 2041 1,000 5.300 % 5.361 % February 1 , 2041 1,000 5.300 % 5.361 % February 1 February 8 5.300 % 5.361 % February 1 February 8 August 1 August 5.361 % February 1 February 8 August 1 August 8 Total February 1 February 8 August 1 August 8 Total 10,750 Convertible February 8 August 1 August 8 Total 10,750 Convertible Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 79 ) Total $ 11,921 The ( 79 ) Total $ 11,921 The component of long-term debt a follows a of June 30 , 2010 : Due Date a of June 30 , 2010 : Due Date Face Value In million ) Notes June 1 , 2014 $ 2,000 2.950 ) Notes June 1 , 2014 $ 2,000 2.950 % 3.049 June 1 , 2014 $ 2,000 2.950 % 3.049 % May 1 , 2014 $ 2,000 2.950 % 3.049 % May 15 2014 $ 2,000 2.950 % 3.049 % May 15 June 1 2.950 % 3.049 % May 15 June 1 November 15 December 3.049 % May 15 June 1 November 15 December 1 June May 15 June 1 November 15 December 1 June 1 , June 1 November 15 December 1 June 1 , 2019 1,000 November 15 December 1 June 1 , 2019 1,000 4.200 % December 1 June 1 , 2019 1,000 4.200 % 4.379 % 1 June 1 , 2019 1,000 4.200 % 4.379 % May June 1 , 2019 1,000 4.200 % 4.379 % May 15 , 2019 1,000 4.200 % 4.379 % May 15 June 1 4.200 % 4.379 % May 15 June 1 November 15 December 4.379 % May 15 June 1 November 15 December 1 June May 15 June 1 November 15 December 1 June 1 , June 1 November 15 December 1 June 1 , 2039 750 November 15 December 1 June 1 , 2039 750 5.200 % December 1 June 1 , 2039 750 5.200 % 5.240 % 1 June 1 , 2039 750 5.200 % 5.240 % May June 1 , 2039 750 5.200 % 5.240 % May 15 , 2039 750 5.200 % 5.240 % May 15 June 1 5.200 % 5.240 % May 15 June 1 November 15 December 5.240 % May 15 June 1 November 15 December 1 Total May 15 June 1 November 15 December 1 Total 3,750 Convertible June 1 November 15 December 1 Total 3,750 Convertible Debt June November 15 December 1 Total 3,750 Convertible Debt June 15 , Total 3,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total unamortized , 2013 1,250 0.000 % 1.849 % Total unamortized discount ( % Total unamortized discount ( 61 ) Total $ 4,939 Notes ( 61 ) Total $ 4,939 Notes The Notes are senior and unsubordinated debt outstanding . 68 Table of Contents PART II of Contents PART II Item 8 Convertible debt In June 2010 8 Convertible debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee were capitalized . Each $ 1,000 principal amount of note is of note is convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . As of share . As of June 30 , 2011 , the net As of June 30 , 2011 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 38 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million with the portion in cap price equal to $ 37.16 . The purchased capped call call were valued at $ 40 million and recorded to stockholder stockholder ’ equity . NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2011 2010 2009 Current Year Ended June 30 , 2011 2010 2009 Current Taxes U.S. Ended June 30 , 2011 2010 2009 Current Taxes U.S. federal June 30 , 2011 2010 2009 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,108 $ 4,415 $ 3,159 U.S. U.S. federal $ 3,108 $ 4,415 $ 3,159 U.S. state and $ 3,108 $ 4,415 $ 3,159 U.S. state and local 209 3,159 U.S. state and local 209 357 192 International 1,602 1,701 U.S. state and local 209 357 192 International 1,602 1,701 1,139 state and local 209 357 192 International 1,602 1,701 1,139 Current local 209 357 192 International 1,602 1,701 1,139 Current tax 4,919 209 357 192 International 1,602 1,701 1,139 Current tax 4,919 6,473 357 192 International 1,602 1,701 1,139 Current tax 4,919 6,473 4,490 1,602 1,701 1,139 Current tax 4,919 6,473 4,490 Deferred Taxes Deferred 1,701 1,139 Current tax 4,919 6,473 4,490 Deferred Taxes Deferred tax 1,139 Current tax 4,919 6,473 4,490 Deferred Taxes Deferred tax 2 4,490 Deferred Taxes Deferred tax 2 ( 220 ) 762 Provision Taxes Deferred tax 2 ( 220 ) 762 Provision for income tax 2 ( 220 ) 762 Provision for income tax $ Provision for income tax $ 4,921 $ 6,253 $ 5,252 U.S. income tax $ 4,921 $ 6,253 $ 5,252 U.S. and international $ 4,921 $ 6,253 $ 5,252 U.S. and international component of million ) Year Ended June 30 , 2011 2010 2009 U.S. Year Ended June 30 , 2011 2010 2009 U.S. $ 8,862 Ended June 30 , 2011 2010 2009 U.S. $ 8,862 $ June 30 , 2011 2010 2009 U.S. $ 8,862 $ 9,575 2011 2010 2009 U.S. $ 8,862 $ 9,575 $ 5,529 International 2009 U.S. $ 8,862 $ 9,575 $ 5,529 International 19,209 15,438 $ 8,862 $ 9,575 $ 5,529 International 19,209 15,438 14,292 Income $ 9,575 $ 5,529 International 19,209 15,438 14,292 Income before income 9,575 $ 5,529 International 19,209 15,438 14,292 Income before income tax $ 5,529 International 19,209 15,438 14,292 Income before income tax $ Income before income tax $ 28,071 $ 25,013 $ 19,821 69 income tax $ 28,071 $ 25,013 $ 19,821 69 Table of $ 28,071 $ 25,013 $ 19,821 69 Table of Contents PART 28,071 $ 25,013 $ 19,821 69 Table of Contents PART II of Contents PART II Item 8 The item accounting for the follows : Year Ended June 30 , 2011 2010 2009 Federal Year Ended June 30 , 2011 2010 2009 Federal statutory rate Ended June 30 , 2011 2010 2009 Federal statutory rate 35.0 June 30 , 2011 2010 2009 Federal statutory rate 35.0 % 2010 2009 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 15.6 ) % ( 12.1 ) ( 15.6 ) % ( 12.1 ) % ( 9.3 ) ( 12.1 ) % ( 9.3 ) % Internal Revenue Service Internal Revenue Service settlement ( 1.7 ) % 0 % 0 settlement ( 1.7 ) % 0 % 0 % Other reconciling 1.7 ) % 0 % 0 % Other reconciling item , reconciling item , net ( 0.2 ) % 2.1 % 0.8 net ( 0.2 ) % 2.1 % 0.8 % Effective rate 0.2 ) % 2.1 % 0.8 % Effective rate 17.5 % % 0.8 % Effective rate 17.5 % 25.0 % 26.5 % % Effective rate 17.5 % 25.0 % 26.5 % The reduction rate 17.5 % 25.0 % 26.5 % The reduction from the credit . In fiscal year 2011 , 2010 , and 2009 In fiscal year 2011 , 2010 , and 2009 , there 2011 , 2010 , and 2009 , there were no individually ( In million ) June 30 , 2011 2010 Deferred Income million ) June 30 , 2011 2010 Deferred Income Tax Assets ) June 30 , 2011 2010 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 1,079 $ 1,329 Other expense item compensation expense $ 1,079 $ 1,329 Other expense item 1,411 1,696 $ 1,329 Other expense item 1,411 1,696 Unearned revenue 463 556 1,329 Other expense item 1,411 1,696 Unearned revenue 463 556 Impaired item 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 1,411 1,696 Unearned revenue 463 556 Impaired investment 424 289 Other revenue 463 556 Impaired investment 424 289 Other revenue item 69 463 556 Impaired investment 424 289 Other revenue item 69 80 424 289 Other revenue item 69 80 Deferred income tax asset 289 Other revenue item 69 80 Deferred income tax asset $ Deferred income tax asset $ 3,446 $ 3,950 Deferred Income Tax tax asset $ 3,446 $ 3,950 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,266 ) $ ( 1,056 ) ( 1,266 ) $ ( 1,056 ) Unrealized gain on investment Unrealized gain on investment ( 904 ) ( 674 ) Other investment ( 904 ) ( 674 ) Other ( 265 ) ( 674 ) Other ( 265 ) ( 265 ) Deferred Other ( 265 ) ( 265 ) Deferred income tax liability Deferred income tax liability ( 2,435 ) ( 1,995 ) Net liability ( 2,435 ) ( 1,995 ) Net deferred income tax deferred income tax asset $ 1,011 $ 1,955 Reported As Current tax asset $ 1,011 $ 1,955 Reported As Current deferred income deferred income tax asset $ 2,467 $ 2,184 Long-term deferred income tax asset $ 2,467 $ 2,184 Long-term deferred income tax liability deferred income tax liability ( 1,456 ) ( 229 ) Net liability ( 1,456 ) ( 229 ) Net deferred income tax deferred income tax asset $ 1,011 $ 1,955 Deferred income tax tax asset $ 1,011 $ 1,955 Deferred income tax balance reflect temporary difference of approximately $ 44.8 billion resulting from earnings for temporary difference is approximately $ 14.2 billion . Income tax paid Income tax paid were $ 5.3 billion , $ 4.1 billion $ 5.3 billion , $ 4.1 billion , and $ 6.6 4.1 billion , and $ 6.6 billion in fiscal year 2011 6.6 billion in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . 70 Table and 2009 , respectively . 70 Table of Contents PART II of Contents PART II Item 8 Uncertain Tax Positions As of Tax Positions As of June 30 , 2011 , we had As of June 30 , 2011 , we had $ 6.9 2011 , we had $ 6.9 billion of unrecognized tax benefit tax benefit of which $ 5.9 billion , if recognized , rate . As of June 30 , 2010 , we had As of June 30 , 2010 , we had $ 6.5 2010 , we had $ 6.5 billion of unrecognized tax benefit tax benefit of which $ 5.6 billion , if recognized , unrecognized tax benefit wa $ 38 million , $ 193 million $ 38 million , $ 193 million , and $ 230 193 million , and $ 230 million in fiscal year 2011 230 million in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . As of respectively . As of June 30 , 2011 , 2010 , As of June 30 , 2011 , 2010 , and 2009 June 30 , 2011 , 2010 , and 2009 , we 2011 , 2010 , and 2009 , we had accrued interest uncertain tax position of $ 785 million , $ 747 million $ 785 million , $ 747 million , and $ 554 747 million , and $ 554 million , respectively , net million ) Year Ended June 30 , 2011 2010 2009 Balance Year Ended June 30 , 2011 2010 2009 Balance , beginning Ended June 30 , 2011 2010 2009 Balance , beginning of June 30 , 2011 2010 2009 Balance , beginning of year , beginning of year $ 6,542 $ 5,403 $ 3,195 Decreases of year $ 6,542 $ 5,403 $ 3,195 Decreases related to $ 6,542 $ 5,403 $ 3,195 Decreases related to settlement ( Decreases related to settlement ( 632 ) ( 57 ) ( settlement ( 632 ) ( 57 ) ( 82 ) Increases ) ( 57 ) ( 82 ) Increases for tax position related to the current year 739 1,012 2,203 Increases for tax to the current year 739 1,012 2,203 Increases for tax position the current year 739 1,012 2,203 Increases for tax position related position related to prior year 405 364 239 Decreases for tax related to prior year 405 364 239 Decreases for tax position to prior year 405 364 239 Decreases for tax position related related to prior year ( 119 ) ( 166 ) ( year ( 119 ) ( 166 ) ( 132 ) Decreases ) ( 166 ) ( 132 ) Decreases due to lapsed to lapsed statute of limitation 0 ( 14 ) ( 20 statute of limitation 0 ( 14 ) ( 20 ) Balance 0 ( 14 ) ( 20 ) Balance , end of , end of year $ 6,935 $ 6,542 $ 5,403 During of year $ 6,935 $ 6,542 $ 5,403 During the third $ 6,935 $ 6,542 $ 5,403 During the third quarter of third quarter of fiscal year 2011 , we reached a partial I.R.S . on tax year 2004 to 2006 and recorded a on tax year 2004 to 2006 and recorded a $ 461 2006 and recorded a $ 461 million income tax provision benefit fourth quarter of fiscal year 2011 , the I.R.S . completed or decrease within the next 12 month , a we do be concluded within the next 12 month . We also continue I.R.S . for tax year 2007 to 2010 . We are for tax year 2007 to 2010 . We are subject to our financial statement . NOTE 14 — UNEARNED REVENUE Unearned revenue the revenue recognition criterion . 71 Table of Contents PART II of Contents PART II Item 8 The component of unearned revenue ( In million ) June 30 , 2011 2010 Volume licensing million ) June 30 , 2011 2010 Volume licensing program $ ) June 30 , 2011 2010 Volume licensing program $ 14,625 2010 Volume licensing program $ 14,625 $ 12,180 Other 2,495 2,650 licensing program $ 14,625 $ 12,180 Other 2,495 2,650 Total $ $ 14,625 $ 12,180 Other 2,495 2,650 Total $ 17,120 $ 14,625 $ 12,180 Other 2,495 2,650 Total $ 17,120 $ 14,830 Other 2,495 2,650 Total $ 17,120 $ 14,830 Unearned revenue by 2,650 Total $ 17,120 $ 14,830 Unearned revenue by segment wa ( In million ) June 30 , 2011 2010 Windows & million ) June 30 , 2011 2010 Windows & Windows Live ) June 30 , 2011 2010 Windows & Windows Live Division & Windows Live Division $ 1,782 $ 1,701 Server and Tools Live Division $ 1,782 $ 1,701 Server and Tools 6,552 5,282 $ 1,701 Server and Tools 6,552 5,282 Microsoft Business Division 7,950 1,701 Server and Tools 6,552 5,282 Microsoft Business Division 7,950 7,004 6,552 5,282 Microsoft Business Division 7,950 7,004 Other segment 836 843 5,282 Microsoft Business Division 7,950 7,004 Other segment 836 843 Total Division 7,950 7,004 Other segment 836 843 Total $ 17,120 $ 7,950 7,004 Other segment 836 843 Total $ 17,120 $ 14,830 segment 836 843 Total $ 17,120 $ 14,830 NOTE 15 — 843 Total $ 17,120 $ 14,830 NOTE 15 — OTHER LONG-TERM $ 17,120 $ 14,830 NOTE 15 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2011 2010 Tax contingency million ) June 30 , 2011 2010 Tax contingency and other ) June 30 , 2011 2010 Tax contingency and other tax and other tax liability $ 7,381 $ 6,887 Legal contingency 276 tax liability $ 7,381 $ 6,887 Legal contingency 276 236 Other 7,381 $ 6,887 Legal contingency 276 236 Other 415 322 Total $ 6,887 Legal contingency 276 236 Other 415 322 Total $ Legal contingency 276 236 Other 415 322 Total $ 8,072 $ contingency 276 236 Other 415 322 Total $ 8,072 $ 7,445 Other 415 322 Total $ 8,072 $ 7,445 NOTE 16 — 322 Total $ 8,072 $ 7,445 NOTE 16 — COMMITMENTS AND $ 8,072 $ 7,445 NOTE 16 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 263 million for constructing new building leasehold improvement a of June 30 , 2011 . We have a of June 30 , 2011 . We have operating lease facility operating lease wa $ 525 million , $ 530 million $ 525 million , $ 530 million , and $ 475 530 million , and $ 475 million , in fiscal year million , in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . Future minimum in place a of June 30 , 2011 are a follows a of June 30 , 2011 are a follows : ( million ) Year Ending June 30 , 2012 $ 481 2013 Year Ending June 30 , 2012 $ 481 2013 396 2014 June 30 , 2012 $ 481 2013 396 2014 319 2015 30 , 2012 $ 481 2013 396 2014 319 2015 249 , 2012 $ 481 2013 396 2014 319 2015 249 2016 2012 $ 481 2013 396 2014 319 2015 249 2016 163 $ 481 2013 396 2014 319 2015 249 2016 163 2017 481 2013 396 2014 319 2015 249 2016 163 2017 and 2013 396 2014 319 2015 249 2016 163 2017 and thereafter 396 2014 319 2015 249 2016 163 2017 and thereafter 344 2014 319 2015 249 2016 163 2017 and thereafter 344 Total 319 2015 249 2016 163 2017 and thereafter 344 Total $ 2016 163 2017 and thereafter 344 Total $ 1,952 72 Table and thereafter 344 Total $ 1,952 72 Table of Contents PART thereafter 344 Total $ 1,952 72 Table of Contents PART II of Contents PART II Item 8 Indemnifications We provide indemnification of ! Commercial Agreement On December 4 , 2009 , we entered Agreement On December 4 , 2009 , we entered into a term of the agreement is 10 year subject to termination provision guarantee for a period of 18 month after implementation of the if any , during the 18-month period from pre-implementation level , could range up to $ 150 million . Microsoft also agreed million ) Year Ended June 30 , 2011 2010 Balance , Year Ended June 30 , 2011 2010 Balance , beginning of Ended June 30 , 2011 2010 Balance , beginning of year , beginning of year $ 240 $ 342 Accruals for warranty of year $ 240 $ 342 Accruals for warranty issued 55 342 Accruals for warranty issued 55 144 Adjustments to pre-existing warranty Accruals for warranty issued 55 144 Adjustments to pre-existing warranty 0 144 Adjustments to pre-existing warranty 0 ( 2 ) Settlements of to pre-existing warranty 0 ( 2 ) Settlements of warranty claim Settlements of warranty claim ( 123 ) ( 244 ) Balance claim ( 123 ) ( 244 ) Balance , end of , end of year $ 172 $ 240 NOTE 17 — of year $ 172 $ 240 NOTE 17 — CONTINGENCIES Government $ 172 $ 240 NOTE 17 — CONTINGENCIES Government Competition Law Government Competition Law Matters Since 2001 , we have been subject U.S. Department of Justice , 18 state , and the District Final Judgments expired in May 2011 . In other ongoing investigation , and security issue . 73 Table of Contents PART II of Contents PART II Item 8 Antitrust , Unfair Competition , under federal law and in 15 state . Courts refused to been made to date in 19 state and the District of be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.9 billion and $ 2.0 billion $ 1.9 billion and $ 2.0 billion . At June 30 2.0 billion . At June 30 , 2011 , we have . At June 30 , 2011 , we have recorded a these claim of approximately $ 568 million , which reflects our our estimated exposure of $ 1.9 billion le payment made to to date of approximately $ 1.3 billion mostly for voucher , been settled . In March 2010 , the court in the class action . On April 15 , 2011 , the British . On April 15 , 2011 , the British Columbia Court Litigation and Claims In November 2004 , Novell , Inc. ( during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted the complaint . In March 2010 the trial court granted summary trial in Utah in October 2011 . Patent and Intellectual Property and Intellectual Property Claims In 2003 , we filed an action of Alcatel and Lucent in 2006 , for simplicity we refer Alcatel-Lucent ) . In April 2008 , a jury returned a interface patent and awarded $ 367 million in damage . In in damage . In June 2008 , the trial judge increased amount of damage to $ 512 million to include $ 145 512 million to include $ 145 million of interest . We that award . In December 2008 , we entered into a Alcatel-Lucent , leaving approximately $ 500 million remaining in dispute . in dispute . In September 2009 , the court of appeal claim wa held in July 2011 . In October 2003 , July 2011 . In October 2003 , Uniloc USA Inc. ( trial court decision and remanded 74 Table of Contents PART II of Contents PART II Item 8 the case for trial . for trial . In April 2009 , the jury returned a the jury returned a $ 388 million verdict against u , willful infringement . In September 2009 , the district court judge appealed , and in January 2011 the court of appeal reversed ha been set for January 2012 . In March 2007 , January 2012 . In March 2007 , i4i Limited Partnership ( custom XML technology in Word 2003 and 2007 infringed i4i ’ technology in Word 2003 and 2007 infringed i4i ’ s patent s patent . In May 2009 , a jury returned a , finding damage of $ 200 million and that we willfully the patent . In August 2009 , the court denied our awarded enhanced damage of $ 40 million and prejudgment interest of and prejudgment interest of $ 37 million . The court also our appeal . In December 2009 , the court of appeal of the injunction to January 11 , 2010 . We appealed injunction to January 11 , 2010 . We appealed to the Court , and in June 2011 the court affirmed the judgment of appeal . In October 2010 , we filed suit against ’ s Android-based device violate 23 of it patent , and including Windows , Windows Phone 7 , Windows Mobile 6.5 , Phone 7 , Windows Mobile 6.5 , Xbox , Bing Maps and Exchange Server ) violate 21 Motorola patent . Microsoft also case is set for August 2011 , trial in Motorola ’ case is set for October 2011 , and trial of both also is set for October 2011 . In addition to these case , there are approximately 55 other patent infringement case pending future . As of June 30 , 2011 , we had As of June 30 , 2011 , we had accrued aggregate accrued aggregate liability of $ 693 million in other current liability other current liability and $ 276 million in other long-term liability estimate could reach approximately $ 800 million in aggregate beyond recorded effect become reasonably estimable . 75 Table of Contents PART II of Contents PART II Item 8 NOTE 18 — STOCKHOLDERS ’ PART II Item 8 NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2011 2010 2009 Balance Year Ended June 30 , 2011 2010 2009 Balance , beginning Ended June 30 , 2011 2010 2009 Balance , beginning of June 30 , 2011 2010 2009 Balance , beginning of year Balance , beginning of year 8,668 8,908 9,151 Issued 155 140 , beginning of year 8,668 8,908 9,151 Issued 155 140 75 beginning of year 8,668 8,908 9,151 Issued 155 140 75 Repurchased year 8,668 8,908 9,151 Issued 155 140 75 Repurchased ( 447 8,668 8,908 9,151 Issued 155 140 75 Repurchased ( 447 ) 8,908 9,151 Issued 155 140 75 Repurchased ( 447 ) ( 155 140 75 Repurchased ( 447 ) ( 380 ) ( Repurchased ( 447 ) ( 380 ) ( 318 ) Balance ) ( 380 ) ( 318 ) Balance , end of Balance , end of year 8,376 8,668 8,908 Share Repurchases On , end of year 8,376 8,668 8,908 Share Repurchases On September end of year 8,376 8,668 8,908 Share Repurchases On September 22 8,908 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced the completion first quarter of fiscal year 2007 to buy back up to buy back up to $ 40.0 billion of Microsoft common stock common stock . On September 22 , 2008 , we also . On September 22 , 2008 , we also announced that program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2011 , approximately $ As of June 30 , 2011 , approximately $ 12.2 billion , 2011 , approximately $ 12.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . Shares Amount Year Ended June 30 , 2011 ( a ) Year Ended June 30 , 2011 ( a ) 2010 ( , 2011 ( a ) 2010 ( a ) 2009 ( ) 2010 ( a ) 2009 ( b ) First quarter ( b ) First quarter 163 $ 4,000 58 $ 1,445 ) First quarter 163 $ 4,000 58 $ 1,445 223 $ First quarter 163 $ 4,000 58 $ 1,445 223 $ 5,966 163 $ 4,000 58 $ 1,445 223 $ 5,966 Second quarter $ 4,000 58 $ 1,445 223 $ 5,966 Second quarter 188 58 $ 1,445 223 $ 5,966 Second quarter 188 5,000 125 223 $ 5,966 Second quarter 188 5,000 125 3,583 95 2,234 $ 5,966 Second quarter 188 5,000 125 3,583 95 2,234 Third 5,966 Second quarter 188 5,000 125 3,583 95 2,234 Third quarter Second quarter 188 5,000 125 3,583 95 2,234 Third quarter 30 quarter 188 5,000 125 3,583 95 2,234 Third quarter 30 827 188 5,000 125 3,583 95 2,234 Third quarter 30 827 67 3,583 95 2,234 Third quarter 30 827 67 2,000 0 0 95 2,234 Third quarter 30 827 67 2,000 0 0 Fourth 2,234 Third quarter 30 827 67 2,000 0 0 Fourth quarter Third quarter 30 827 67 2,000 0 0 Fourth quarter 66 quarter 30 827 67 2,000 0 0 Fourth quarter 66 1,631 30 827 67 2,000 0 0 Fourth quarter 66 1,631 130 2,000 0 0 Fourth quarter 66 1,631 130 3,808 0 0 0 0 Fourth quarter 66 1,631 130 3,808 0 0 Total 0 Fourth quarter 66 1,631 130 3,808 0 0 Total 447 Fourth quarter 66 1,631 130 3,808 0 0 Total 447 $ quarter 66 1,631 130 3,808 0 0 Total 447 $ 11,458 66 1,631 130 3,808 0 0 Total 447 $ 11,458 380 130 3,808 0 0 Total 447 $ 11,458 380 $ 10,836 0 0 Total 447 $ 11,458 380 $ 10,836 318 $ 0 Total 447 $ 11,458 380 $ 10,836 318 $ 8,200 447 $ 11,458 380 $ 10,836 318 $ 8,200 ( a $ 11,458 380 $ 10,836 318 $ 8,200 ( a ) 380 $ 10,836 318 $ 8,200 ( a ) All share share repurchased in fiscal year 2011 and 2010 were repurchased under in fiscal year 2011 and 2010 were repurchased under the plan Board of Directors on September 22 , 2008 . ( b Directors on September 22 , 2008 . ( b ) Of ( b ) Of the 318 million share of common stock stock repurchased in fiscal year 2009 , 101 million share were in fiscal year 2009 , 101 million share were repurchased for share were repurchased for $ 2.7 billion under the plan approved first quarter of fiscal year 2007 . The remaining share were Board of Directors on September 22 , 2008 . Dividends In Directors on September 22 , 2008 . Dividends In fiscal year . Dividends In fiscal year 2011 , our Board of Directors ( In million ) September 21 , 2010 $ 0.16 November million ) September 21 , 2010 $ 0.16 November 18 , September 21 , 2010 $ 0.16 November 18 , 2010 $ , 2010 $ 0.16 November 18 , 2010 $ 1,363 December $ 0.16 November 18 , 2010 $ 1,363 December 9 , November 18 , 2010 $ 1,363 December 9 , 2010 December , 2010 $ 1,363 December 9 , 2010 December 15 , $ 1,363 December 9 , 2010 December 15 , 2010 $ December 9 , 2010 December 15 , 2010 $ 0.16 February , 2010 December 15 , 2010 $ 0.16 February 17 , December 15 , 2010 $ 0.16 February 17 , 2011 $ , 2010 $ 0.16 February 17 , 2011 $ 1,349 March $ 0.16 February 17 , 2011 $ 1,349 March 10 , February 17 , 2011 $ 1,349 March 10 , 2011 March , 2011 $ 1,349 March 10 , 2011 March 14 , $ 1,349 March 10 , 2011 March 14 , 2011 $ March 10 , 2011 March 14 , 2011 $ 0.16 May , 2011 March 14 , 2011 $ 0.16 May 19 , March 14 , 2011 $ 0.16 May 19 , 2011 $ , 2011 $ 0.16 May 19 , 2011 $ 1,350 June $ 0.16 May 19 , 2011 $ 1,350 June 9 , May 19 , 2011 $ 1,350 June 9 , 2011 June , 2011 $ 1,350 June 9 , 2011 June 15 , $ 1,350 June 9 , 2011 June 15 , 2011 $ June 9 , 2011 June 15 , 2011 $ 0.16 August , 2011 June 15 , 2011 $ 0.16 August 18 , June 15 , 2011 $ 0.16 August 18 , 2011 $ , 2011 $ 0.16 August 18 , 2011 $ 1,340 September $ 0.16 August 18 , 2011 $ 1,340 September 8 , August 18 , 2011 $ 1,340 September 8 , 2011 76 , 2011 $ 1,340 September 8 , 2011 76 Table of $ 1,340 September 8 , 2011 76 Table of Contents PART 1,340 September 8 , 2011 76 Table of Contents PART II of Contents PART II Item 8 The dividend declared on June The dividend declared on June 15 , 2011 will be paid declared on June 15 , 2011 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2011 . In fiscal a of June 30 , 2011 . In fiscal year 2010 2011 . In fiscal year 2010 , our Board of Directors ( In million ) September 18 , 2009 $ 0.13 November million ) September 18 , 2009 $ 0.13 November 19 , September 18 , 2009 $ 0.13 November 19 , 2009 $ , 2009 $ 0.13 November 19 , 2009 $ 1,152 December $ 0.13 November 19 , 2009 $ 1,152 December 10 , November 19 , 2009 $ 1,152 December 10 , 2009 December , 2009 $ 1,152 December 10 , 2009 December 9 , $ 1,152 December 10 , 2009 December 9 , 2009 $ December 10 , 2009 December 9 , 2009 $ 0.13 February , 2009 December 9 , 2009 $ 0.13 February 18 , December 9 , 2009 $ 0.13 February 18 , 2010 $ , 2009 $ 0.13 February 18 , 2010 $ 1,139 March $ 0.13 February 18 , 2010 $ 1,139 March 11 , February 18 , 2010 $ 1,139 March 11 , 2010 March , 2010 $ 1,139 March 11 , 2010 March 8 , $ 1,139 March 11 , 2010 March 8 , 2010 $ March 11 , 2010 March 8 , 2010 $ 0.13 May , 2010 March 8 , 2010 $ 0.13 May 20 , March 8 , 2010 $ 0.13 May 20 , 2010 $ , 2010 $ 0.13 May 20 , 2010 $ 1,130 June $ 0.13 May 20 , 2010 $ 1,130 June 10 , May 20 , 2010 $ 1,130 June 10 , 2010 June , 2010 $ 1,130 June 10 , 2010 June 16 , $ 1,130 June 10 , 2010 June 16 , 2010 $ June 10 , 2010 June 16 , 2010 $ 0.13 August , 2010 June 16 , 2010 $ 0.13 August 19 , June 16 , 2010 $ 0.13 August 19 , 2010 $ , 2010 $ 0.13 August 19 , 2010 $ 1,118 September $ 0.13 August 19 , 2010 $ 1,118 September 9 , August 19 , 2010 $ 1,118 September 9 , 2010 The , 2010 $ 1,118 September 9 , 2010 The dividend declared $ 1,118 September 9 , 2010 The dividend declared on June The dividend declared on June 16 , 2010 wa included in declared on June 16 , 2010 wa included in other current current liability a of June 30 , 2010 . NOTE 19 a of June 30 , 2010 . NOTE 19 — OTHER 30 , 2010 . NOTE 19 — OTHER COMPREHENSIVE INCOME The million ) Year Ended June 30 , 2011 2010 2009 Net Year Ended June 30 , 2011 2010 2009 Net Unrealized Gains Ended June 30 , 2011 2010 2009 Net Unrealized Gains on June 30 , 2011 2010 2009 Net Unrealized Gains on Derivatives tax effect of $ ( 340 ) , $ 188 , ( 340 ) , $ 188 , and $ 472 $ $ 188 , and $ 472 $ ( 632 ) $ and $ 472 $ ( 632 ) $ 349 $ 876 $ ( 632 ) $ 349 $ 876 Reclassification adjustment for 632 ) $ 349 $ 876 Reclassification adjustment for gain included of tax effect of $ 2 , $ ( 173 ) $ 2 , $ ( 173 ) , and $ ( ) , and $ ( 309 ) 5 ( 322 ) and $ ( 309 ) 5 ( 322 ) ( 574 ( 309 ) 5 ( 322 ) ( 574 ) Net 5 ( 322 ) ( 574 ) Net unrealized gain on gain on derivative $ ( 627 ) $ 27 $ 302 $ ( 627 ) $ 27 $ 302 Net Unrealized Gains 627 ) $ 27 $ 302 Net Unrealized Gains ( Losses of tax effect of $ 726 , $ 263 , and of $ 726 , $ 263 , and $ ( 142 263 , and $ ( 142 ) $ 1,349 $ 488 $ ( 142 ) $ 1,349 $ 488 $ ( 263 142 ) $ 1,349 $ 488 $ ( 263 ) Reclassification 1,349 $ 488 $ ( 263 ) Reclassification adjustment for loss tax effect of $ ( 159 ) , $ ( 120 159 ) , $ ( 120 ) , and $ 16 120 ) , and $ 16 ( 295 ) ( 223 , and $ 16 ( 295 ) ( 223 ) 30 16 ( 295 ) ( 223 ) 30 Net unrealized gain 295 ) ( 223 ) 30 Net unrealized gain ( loss ( loss ) on investment 1,054 265 ( 233 ) Translation loss ) on investment 1,054 265 ( 233 ) Translation adjustment on investment 1,054 265 ( 233 ) Translation adjustment and other of tax effect of $ 205 , $ ( 103 ) $ 205 , $ ( 103 ) and $ ( 133 103 ) and $ ( 133 ) 381 ( 206 ) and $ ( 133 ) 381 ( 206 ) ( 240 ( 133 ) 381 ( 206 ) ( 240 ) Other 381 ( 206 ) ( 240 ) Other comprehensive income ( income ( loss ) $ 808 $ 86 $ ( 171 loss ) $ 808 $ 86 $ ( 171 ) The 808 $ 86 $ ( 171 ) The component of accumulated million ) Year Ended June 30 , 2011 2010 2009 Net Year Ended June 30 , 2011 2010 2009 Net unrealized gain Ended June 30 , 2011 2010 2009 Net unrealized gain ( June 30 , 2011 2010 2009 Net unrealized gain ( loss ) on derivative $ ( 163 ) $ 464 $ 437 $ ( 163 ) $ 464 $ 437 Net unrealized gain 163 ) $ 464 $ 437 Net unrealized gain on investment Net unrealized gain on investment 1,821 767 502 Translation adjustment and unrealized gain on investment 1,821 767 502 Translation adjustment and other gain on investment 1,821 767 502 Translation adjustment and other 205 502 Translation adjustment and other 205 ( 176 ) 30 Accumulated adjustment and other 205 ( 176 ) 30 Accumulated other comprehensive other 205 ( 176 ) 30 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,863 $ 1,055 $ 969 NOTE comprehensive income $ 1,863 $ 1,055 $ 969 NOTE 20 — $ 1,863 $ 1,055 $ 969 NOTE 20 — EMPLOYEE STOCK $ 1,055 $ 969 NOTE 20 — EMPLOYEE STOCK AND SAVINGS and employee . At June 30 , 2011 , an aggregate . At June 30 , 2011 , an aggregate of 583 2011 , an aggregate of 583 million share were authorized for of our stock plan . 77 Table of Contents PART II of Contents PART II Item 8 Stock-based compensation expense and related million ) Year Ended June 30 , 2011 2010 2009 Stock-based Year Ended June 30 , 2011 2010 2009 Stock-based compensation expense Ended June 30 , 2011 2010 2009 Stock-based compensation expense $ June 30 , 2011 2010 2009 Stock-based compensation expense $ 2,166 2009 Stock-based compensation expense $ 2,166 $ 1,891 $ 1,708 Income compensation expense $ 2,166 $ 1,891 $ 1,708 Income tax benefit $ 2,166 $ 1,891 $ 1,708 Income tax benefit related to related to stock-based compensation $ 758 $ 662 $ 598 Stock stock-based compensation $ 758 $ 662 $ 598 Stock Plans ( $ 758 $ 662 $ 598 Stock Plans ( Excluding Stock granted SPSAs for fiscal year 2011 , 2010 , and 2009 for fiscal year 2011 , 2010 , and 2009 with performance 2011 , 2010 , and 2009 with performance period of July with performance period of July 1 , 2010 through June 30 period of July 1 , 2010 through June 30 , 2011 1 , 2010 through June 30 , 2011 , July 1 2010 through June 30 , 2011 , July 1 , 2009 30 , 2011 , July 1 , 2009 through June 30 2011 , July 1 , 2009 through June 30 , 2010 1 , 2009 through June 30 , 2010 , and July 2009 through June 30 , 2010 , and July 1 , , 2010 , and July 1 , 2008 through June 30 , and July 1 , 2008 through June 30 , 2009 1 , 2008 through June 30 , 2009 , respectively . 2008 through June 30 , 2009 , respectively . In August by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is number of share , approximately 12 % of the total target income . For fiscal year 2011 , 2010 , and 2009 For fiscal year 2011 , 2010 , and 2009 , the 2011 , 2010 , and 2009 , the pool wa 0.25 2009 , the pool wa 0.25 % , 0.45 % , pool wa 0.25 % , 0.45 % , and 0.35 % , 0.45 % , and 0.35 % of operating income , The fixed percentage range between 0 % and 150 % of range between 0 % and 150 % of a target based approval of the award , 20 % of the award is cash , and the remaining 80 % is converted into an by dividing the value of 80 % of the total award year-end and one-quarter on August 31 of each of the following assumption : Year Ended June 30 , 2011 2010 2009 Dividends Year Ended June 30 , 2011 2010 2009 Dividends per share Ended June 30 , 2011 2010 2009 Dividends per share ( June 30 , 2011 2010 2009 Dividends per share ( quarterly ( quarterly amount ) $ 0.13 – $ 0.16 $ 0.13 ) $ 0.13 – $ 0.16 $ 0.13 $ 0.11 - 0.13 – $ 0.16 $ 0.13 $ 0.11 - $ 0.13 $ 0.16 $ 0.13 $ 0.11 - $ 0.13 Interest rate 0.13 $ 0.11 - $ 0.13 Interest rate range 1.1 % $ 0.13 Interest rate range 1.1 % - 2.4 % 2.1 rate range 1.1 % - 2.4 % 2.1 % - 2.9 1.1 % - 2.4 % 2.1 % - 2.9 % 1.4 2.4 % 2.1 % - 2.9 % 1.4 % - 3.6 2.1 % - 2.9 % 1.4 % - 3.6 % 78 2.9 % 1.4 % - 3.6 % 78 Table of Contents 1.4 % - 3.6 % 78 Table of Contents PART II of Contents PART II Item 8 During fiscal year 2011 , Item 8 During fiscal year 2011 , the following activity occurred balance , beginning of year 223 $ 24.76 Granted 114 $ beginning of year 223 $ 24.76 Granted 114 $ 22.17 Vested year 223 $ 24.76 Granted 114 $ 22.17 Vested ( 63 $ 24.76 Granted 114 $ 22.17 Vested ( 63 ) $ 114 $ 22.17 Vested ( 63 ) $ 25.00 Forfeited ( Vested ( 63 ) $ 25.00 Forfeited ( 19 ) $ ) $ 25.00 Forfeited ( 19 ) $ 23.97 Nonvested balance Forfeited ( 19 ) $ 23.97 Nonvested balance , end of balance , end of year 255 $ 23.59 Shared Performance Stock end of year 255 $ 23.59 Shared Performance Stock Awards Nonvested balance , beginning of year 30 $ 25.32 Granted 18 $ beginning of year 30 $ 25.32 Granted 18 $ 22.56 Vested year 30 $ 25.32 Granted 18 $ 22.56 Vested ( 13 $ 25.32 Granted 18 $ 22.56 Vested ( 13 ) $ 18 $ 22.56 Vested ( 13 ) $ 25.63 Forfeited ( Vested ( 13 ) $ 25.63 Forfeited ( 3 ) $ ) $ 25.63 Forfeited ( 3 ) $ 24.05 Nonvested balance Forfeited ( 3 ) $ 24.05 Nonvested balance , end of balance , end of year 32 $ 23.76 As of June end of year 32 $ 23.76 As of June 30 , $ 23.76 As of June 30 , 2011 , there wa As of June 30 , 2011 , there wa $ 4.5 2011 , there wa $ 4.5 billion and $ 467 million $ 4.5 billion and $ 467 million of total unrecognized compensation a weighted average period of 3.3 year and 2.5 year , period of 3.3 year and 2.5 year , respectively . During respectively . During fiscal year 2010 and 2009 , the following During fiscal year 2010 and 2009 , the following activity occurred , except fair value ) 2010 2009 Stock Awards Awards granted except fair value ) 2010 2009 Stock Awards Awards granted 100 2009 Stock Awards Awards granted 100 91 Weighted average grant-date fair Stock Awards Awards granted 100 91 Weighted average grant-date fair value average grant-date fair value $ 23.43 $ 24.95 Shared Performance Stock fair value $ 23.43 $ 24.95 Shared Performance Stock Awards Awards Performance Stock Awards Awards granted 12 10 Weighted average grant-date fair Stock Awards Awards granted 12 10 Weighted average grant-date fair value average grant-date fair value $ 24.57 $ 25.93 Following are the fair value $ 24.57 $ 25.93 Following are the fair value : ( In million ) 2011 2010 2009 Total vest-date fair ( In million ) 2011 2010 2009 Total vest-date fair value In million ) 2011 2010 2009 Total vest-date fair value of of stock award vested $ 1,521 $ 1,358 $ 1,137 Total award vested $ 1,521 $ 1,358 $ 1,137 Total vest-date fair $ 1,521 $ 1,358 $ 1,137 Total vest-date fair value of performance stock award vested $ 289 $ 227 $ 485 Stock award vested $ 289 $ 227 $ 485 Stock Options We $ 289 $ 227 $ 485 Stock Options We grant stock business acquisition during fiscal year 2011 , 2010 , and 2009 during fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively . Options generally and one-half year and expire 10 year from the date of the date of grant . 79 Table of Contents PART II of Contents PART II Item 8 Employee stock option activity during Employee stock option activity during 2011 wa a follows : Shares million ) Balance , July 1 , 2010 187 $ 24.68 Balance , July 1 , 2010 187 $ 24.68 Exercised ( , July 1 , 2010 187 $ 24.68 Exercised ( 79 1 , 2010 187 $ 24.68 Exercised ( 79 ) $ 187 $ 24.68 Exercised ( 79 ) $ 24.91 Canceled ( Exercised ( 79 ) $ 24.91 Canceled ( 15 ) $ ) $ 24.91 Canceled ( 15 ) $ 28.84 Balance , Canceled ( 15 ) $ 28.84 Balance , June 30 , $ 28.84 Balance , June 30 , 2011 93 $ 23.21 Balance , June 30 , 2011 93 $ 23.21 1.04 $ , June 30 , 2011 93 $ 23.21 1.04 $ 312 30 , 2011 93 $ 23.21 1.04 $ 312 Exercisable , , 2011 93 $ 23.21 1.04 $ 312 Exercisable , June 93 $ 23.21 1.04 $ 312 Exercisable , June 30 , $ 312 Exercisable , June 30 , 2011 92 $ 23.16 Exercisable , June 30 , 2011 92 $ 23.16 1.04 $ , June 30 , 2011 92 $ 23.16 1.04 $ 309 30 , 2011 92 $ 23.16 1.04 $ 309 Options outstanding , 2011 92 $ 23.16 1.04 $ 309 Options outstanding a 92 $ 23.16 1.04 $ 309 Options outstanding a of June Options outstanding a of June 30 , 2011 include approximately two a of June 30 , 2011 include approximately two million option exercise price range of $ 0.01 to $ 29.24 and a of $ 0.01 to $ 29.24 and a weighted average exercise average exercise price of $ 7.69 . During the period reported : ( In million ) 2011 2010 2009 Total intrinsic value ( In million ) 2011 2010 2009 Total intrinsic value of In million ) 2011 2010 2009 Total intrinsic value of stock of stock option exercised $ 222 $ 365 $ 48 Cash option exercised $ 222 $ 365 $ 48 Cash received from $ 222 $ 365 $ 48 Cash received from stock option from stock option exercise $ 1,954 $ 1,839 $ 88 Tax option exercise $ 1,954 $ 1,839 $ 88 Tax benefit realized $ 1,954 $ 1,839 $ 88 Tax benefit realized from stock from stock option exercise $ 77 $ 126 $ 12 Employee option exercise $ 77 $ 126 $ 12 Employee Stock Purchase $ 77 $ 126 $ 12 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2011 2010 2009 Shares Year Ended June 30 , 2011 2010 2009 Shares purchased 20 Ended June 30 , 2011 2010 2009 Shares purchased 20 20 June 30 , 2011 2010 2009 Shares purchased 20 20 24 2011 2010 2009 Shares purchased 20 20 24 Average price per 2010 2009 Shares purchased 20 20 24 Average price per share 2009 Shares purchased 20 20 24 Average price per share $ Average price per share $ 22.98 $ 23.73 $ 20.13 At per share $ 22.98 $ 23.73 $ 20.13 At June 30 $ 22.98 $ 23.73 $ 20.13 At June 30 , 2011 23.73 $ 20.13 At June 30 , 2011 , 43 million 20.13 At June 30 , 2011 , 43 million share of June 30 , 2011 , 43 million share of our common U.S. that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 282 million , $ 275 million $ 282 million , $ 275 million , and $ 262 275 million , and $ 262 million in fiscal year 2011 262 million in fiscal year 2011 , 2010 , and 2009 in fiscal year 2011 , 2010 , and 2009 , respectively 2011 , 2010 , and 2009 , respectively , and were in Microsoft common stock . 80 Table of Contents PART II of Contents PART II Item 8 NOTE 21 — SEGMENT INFORMATION PART II Item 8 NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Mediaroom ( our Internet , and Windows Phone . 81 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2011 2010 2009 Revenue Year Ended June 30 , 2011 2010 2009 Revenue Windows & Ended June 30 , 2011 2010 2009 Revenue Windows & Windows June 30 , 2011 2010 2009 Revenue Windows & Windows Live & Windows Live Division $ 18,778 $ 18,792 $ 15,563 Server Live Division $ 18,778 $ 18,792 $ 15,563 Server and Tools $ 18,778 $ 18,792 $ 15,563 Server and Tools 17,107 15,390 $ 15,563 Server and Tools 17,107 15,390 14,686 Online Services Division 15,563 Server and Tools 17,107 15,390 14,686 Online Services Division 2,528 Server and Tools 17,107 15,390 14,686 Online Services Division 2,528 2,200 15,390 14,686 Online Services Division 2,528 2,200 2,110 Microsoft Business Division 14,686 Online Services Division 2,528 2,200 2,110 Microsoft Business Division 21,986 Online Services Division 2,528 2,200 2,110 Microsoft Business Division 21,986 19,345 2,200 2,110 Microsoft Business Division 21,986 19,345 19,211 Entertainment and Devices 2,110 Microsoft Business Division 21,986 19,345 19,211 Entertainment and Devices Division Microsoft Business Division 21,986 19,345 19,211 Entertainment and Devices Division 8,716 19,211 Entertainment and Devices Division 8,716 6,224 6,416 Unallocated and other Entertainment and Devices Division 8,716 6,224 6,416 Unallocated and other 828 and Devices Division 8,716 6,224 6,416 Unallocated and other 828 533 6,224 6,416 Unallocated and other 828 533 451 Consolidated $ 69,943 6,416 Unallocated and other 828 533 451 Consolidated $ 69,943 $ Unallocated and other 828 533 451 Consolidated $ 69,943 $ 62,484 828 533 451 Consolidated $ 69,943 $ 62,484 $ 58,437 ( 451 Consolidated $ 69,943 $ 62,484 $ 58,437 ( In million $ 69,943 $ 62,484 $ 58,437 ( In million ) Year million ) Year Ended June 30 , 2011 2010 2009 Operating Year Ended June 30 , 2011 2010 2009 Operating Income ( Ended June 30 , 2011 2010 2009 Operating Income ( Loss June 30 , 2011 2010 2009 Operating Income ( Loss ) & Windows Live Division $ 11,968 $ 12,253 $ 9,372 Server Live Division $ 11,968 $ 12,253 $ 9,372 Server and Tools $ 11,968 $ 12,253 $ 9,372 Server and Tools 6,453 5,320 $ 9,372 Server and Tools 6,453 5,320 4,627 Online Services Division 9,372 Server and Tools 6,453 5,320 4,627 Online Services Division ( Server and Tools 6,453 5,320 4,627 Online Services Division ( 2,638 4,627 Online Services Division ( 2,638 ) ( 2,410 ) ( Division ( 2,638 ) ( 2,410 ) ( 1,749 ) Microsoft ) ( 2,410 ) ( 1,749 ) Microsoft Business Division 13,827 1,749 ) Microsoft Business Division 13,827 11,642 11,153 Entertainment and Devices ) Microsoft Business Division 13,827 11,642 11,153 Entertainment and Devices Division Microsoft Business Division 13,827 11,642 11,153 Entertainment and Devices Division 1,135 11,153 Entertainment and Devices Division 1,135 573 288 Reconciling amount ( Entertainment and Devices Division 1,135 573 288 Reconciling amount ( 3,584 and Devices Division 1,135 573 288 Reconciling amount ( 3,584 ) 573 288 Reconciling amount ( 3,584 ) ( 3,280 ) ( amount ( 3,584 ) ( 3,280 ) ( 3,328 ) Consolidated ) ( 3,280 ) ( 3,328 ) Consolidated $ 27,161 $ ( 3,328 ) Consolidated $ 27,161 $ 24,098 $ 20,363 Reconciling ) Consolidated $ 27,161 $ 24,098 $ 20,363 Reconciling amount in $ 27,161 $ 24,098 $ 20,363 Reconciling amount in the table million ) Year Ended June 30 , 2011 2010 2009 Corporate-level Year Ended June 30 , 2011 2010 2009 Corporate-level activity ( Ended June 30 , 2011 2010 2009 Corporate-level activity ( a June 30 , 2011 2010 2009 Corporate-level activity ( a ) ( a ) $ ( 4,619 ) $ ( 4,260 ) ( 4,619 ) $ ( 4,260 ) $ ( 4,318 ) ( 4,260 ) $ ( 4,318 ) Stock-based compensation expense 544 4,318 ) Stock-based compensation expense 544 556 753 Revenue reconciling amount ) Stock-based compensation expense 544 556 753 Revenue reconciling amount 632 Stock-based compensation expense 544 556 753 Revenue reconciling amount 632 366 556 753 Revenue reconciling amount 632 366 256 Other ( 141 753 Revenue reconciling amount 632 366 256 Other ( 141 ) Revenue reconciling amount 632 366 256 Other ( 141 ) 58 632 366 256 Other ( 141 ) 58 ( 19 ) 256 Other ( 141 ) 58 ( 19 ) Total $ ( 141 ) 58 ( 19 ) Total $ ( 3,584 19 ) Total $ ( 3,584 ) $ ( 3,280 ) ( 3,584 ) $ ( 3,280 ) $ ( 3,328 ) ( 3,280 ) $ ( 3,328 ) ( a ) Corporate-level customer accounted for more than 10 % of fiscal year 2011 10 % of fiscal year 2011 , 2010 , or 2009 of fiscal year 2011 , 2010 , or 2009 revenue . 2011 , 2010 , or 2009 revenue . Revenue , classified million ) Year Ended June 30 , 2011 2010 2009 United Year Ended June 30 , 2011 2010 2009 United States ( Ended June 30 , 2011 2010 2009 United States ( a June 30 , 2011 2010 2009 United States ( a ) States ( a ) $ 38,008 $ 36,173 $ 33,052 Other a ) $ 38,008 $ 36,173 $ 33,052 Other country 31,935 $ 38,008 $ 36,173 $ 33,052 Other country 31,935 26,311 25,385 36,173 $ 33,052 Other country 31,935 26,311 25,385 Total $ 69,943 $ 33,052 Other country 31,935 26,311 25,385 Total $ 69,943 $ 33,052 Other country 31,935 26,311 25,385 Total $ 69,943 $ 62,484 31,935 26,311 25,385 Total $ 69,943 $ 62,484 $ 58,437 ( 25,385 Total $ 69,943 $ 62,484 $ 58,437 ( a ) $ 69,943 $ 62,484 $ 58,437 ( a ) Includes shipment OEMs and multinational organization . 82 Table of Contents PART II of Contents PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2011 2010 2009 Microsoft Year Ended June 30 , 2011 2010 2009 Microsoft Office system Ended June 30 , 2011 2010 2009 Microsoft Office system $ June 30 , 2011 2010 2009 Microsoft Office system $ 20,730 2009 Microsoft Office system $ 20,730 $ 17,754 $ 17,998 Windows Office system $ 20,730 $ 17,754 $ 17,998 Windows PC operating $ 20,730 $ 17,754 $ 17,998 Windows PC operating system 17,825 17,998 Windows PC operating system 17,825 18,225 14,653 Server product and Windows PC operating system 17,825 18,225 14,653 Server product and tool PC operating system 17,825 18,225 14,653 Server product and tool 13,251 14,653 Server product and tool 13,251 12,007 11,344 Xbox 360 platform Server product and tool 13,251 12,007 11,344 Xbox 360 platform 8,103 product and tool 13,251 12,007 11,344 Xbox 360 platform 8,103 5,456 tool 13,251 12,007 11,344 Xbox 360 platform 8,103 5,456 5,475 Consulting 12,007 11,344 Xbox 360 platform 8,103 5,456 5,475 Consulting and product 11,344 Xbox 360 platform 8,103 5,456 5,475 Consulting and product support Xbox 360 platform 8,103 5,456 5,475 Consulting and product support service Consulting and product support service 3,372 3,036 3,024 Advertising 2,913 2,528 and product support service 3,372 3,036 3,024 Advertising 2,913 2,528 2,345 product support service 3,372 3,036 3,024 Advertising 2,913 2,528 2,345 Other service 3,372 3,036 3,024 Advertising 2,913 2,528 2,345 Other 3,749 3,478 3,372 3,036 3,024 Advertising 2,913 2,528 2,345 Other 3,749 3,478 3,598 3,036 3,024 Advertising 2,913 2,528 2,345 Other 3,749 3,478 3,598 Total Advertising 2,913 2,528 2,345 Other 3,749 3,478 3,598 Total $ 69,943 2,913 2,528 2,345 Other 3,749 3,478 3,598 Total $ 69,943 $ 2,528 2,345 Other 3,749 3,478 3,598 Total $ 69,943 $ 62,484 3,749 3,478 3,598 Total $ 69,943 $ 62,484 $ 58,437 Assets 3,598 Total $ 69,943 $ 62,484 $ 58,437 Assets are not $ 69,943 $ 62,484 $ 58,437 Assets are not allocated to ( In million ) June 30 , 2011 2010 2009 United million ) June 30 , 2011 2010 2009 United States $ ) June 30 , 2011 2010 2009 United States $ 18,498 June 30 , 2011 2010 2009 United States $ 18,498 $ 2010 2009 United States $ 18,498 $ 18,716 $ 19,362 Other United States $ 18,498 $ 18,716 $ 19,362 Other country 2,989 $ 18,498 $ 18,716 $ 19,362 Other country 2,989 2,466 2,435 18,716 $ 19,362 Other country 2,989 2,466 2,435 Total $ 21,487 $ 19,362 Other country 2,989 2,466 2,435 Total $ 21,487 $ 19,362 Other country 2,989 2,466 2,435 Total $ 21,487 $ 21,182 2,989 2,466 2,435 Total $ 21,487 $ 21,182 $ 21,797 83 2,435 Total $ 21,487 $ 21,182 $ 21,797 83 Table of $ 21,487 $ 21,182 $ 21,797 83 Table of Contents PART 21,487 $ 21,182 $ 21,797 83 Table of Contents PART II of Contents PART II Item 8 NOTE 22 — QUARTERLY INFORMATION PART II Item 8 NOTE 22 — QUARTERLY INFORMATION ( Unaudited amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2011 Revenue June 30 Total Fiscal Year 2011 Revenue $ 16,195 $ 19,953 Fiscal Year 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 5,232 12,531 13,659 54,366 Net income 5,410 6,634 5,232 ( a ) 13,659 54,366 Net income 5,410 6,634 5,232 ( a ) 5,874 54,366 Net income 5,410 6,634 5,232 ( a ) 5,874 ( 6,634 5,232 ( a ) 5,874 ( b ) 23,150 Basic ) 5,874 ( b ) 23,150 Basic earnings per share 0.63 23,150 Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share 0.62 2.73 Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 Fiscal Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 Fiscal Year earnings per share 0.62 0.77 0.61 0.69 2.69 Fiscal Year 2010 per share 0.62 0.77 0.61 0.69 2.69 Fiscal Year 2010 Revenue share 0.62 0.77 0.61 0.69 2.69 Fiscal Year 2010 Revenue $ 0.61 0.69 2.69 Fiscal Year 2010 Revenue $ 12,920 ( d Fiscal Year 2010 Revenue $ 12,920 ( d ) $ 19,022 12,920 ( d ) $ 19,022 ( c ) $ 14,503 19,022 ( c ) $ 14,503 $ 16,039 $ 62,484 Gross c ) $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 $ 14,503 $ 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 16,039 $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net $ 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 62,484 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 Gross profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 profit 10,078 15,394 11,748 12,869 50,089 Net income 3,574 6,662 4,006 11,748 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic 12,869 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings 50,089 Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per Net income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share income 3,574 6,662 4,006 4,518 18,760 Basic earnings per share 0.40 18,760 Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted Basic earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings earnings per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per per share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share share 0.40 0.75 0.46 0.52 2.13 Diluted earnings per share 0.40 2.13 Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 ( Diluted earnings per share 0.40 0.74 0.45 0.51 2.10 ( a earnings per share 0.40 0.74 0.45 0.51 2.10 ( a ) per share 0.40 0.74 0.45 0.51 2.10 ( a ) Includes share 0.40 0.74 0.45 0.51 2.10 ( a ) Includes a . audit of tax year 2004 to 2006 , which increased of tax year 2004 to 2006 , which increased net income increased net income by $ 461 million . ( b ) an effective tax rate of 7 % due mainly to the ( c ) Reflects $ 1.7 billion of revenue recognized for to be upgraded to Windows 7 at minimal or no cost no cost and of Windows 7 to original equipment manufacturer and availability ( the “ Windows 7 Deferral ” ) . ( ( d ) Reflects $ 1.5 billion of revenue deferred to period relating to the Windows 7 Deferral . 84 Table of the Windows 7 Deferral . 84 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , and the June 30 , 2011 and 2010 , and the related consolidated in the period ended June 30 , 2011 . These financial period ended June 30 , 2011 . These financial statement are and subsidiary a of June 30 , 2011 and 2010 , a of June 30 , 2011 and 2010 , and the June 30 , 2011 and 2010 , and the result of in the period ended June 30 , 2011 , in conformity period ended June 30 , 2011 , in conformity with accounting financial reporting a of June 30 , 2011 , based on a of June 30 , 2011 , based on the criterion and our report dated July 28 , 2011 , expressed an report dated July 28 , 2011 , expressed an unqualified opinion LLP Seattle , Washington July 28 , 2011 85 Table of , Washington July 28 , 2011 85 Table of Contents PART Washington July 28 , 2011 85 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2011 . There were a of June 30 , 2011 . There were no change during the quarter ended June 30 , 2011 that have materially quarter ended June 30 , 2011 that have materially affected , financial reporting a of June 30 , 2011 ; their report a of June 30 , 2011 ; their report is included report is included in Item 9A . 86 Table of Contents included in Item 9A . 86 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2011 , based on a of June 30 , 2011 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2011 , based on a of June 30 , 2011 , based on the criterion for the year ended June 30 , 2011 , of the year ended June 30 , 2011 , of the Company and and our report dated July 28 , 2011 , expressed an report dated July 28 , 2011 , expressed an unqualified opinion LLP Seattle , Washington July 28 , 2011 87 Table of , Washington July 28 , 2011 87 Table of Contents PART Washington July 28 , 2011 87 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 15 , 2011 ( the “ be held November 15 , 2011 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 88 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 46 Balance Sheets 47 Cash Flows Income Statements 46 Balance Sheets 47 Cash Flows Statements 48 Stockholders Sheets 47 Cash Flows Statements 48 Stockholders ’ Equity Statements 49 48 Stockholders ’ Equity Statements 49 Notes to Financial Statements 50 49 Notes to Financial Statements 50 Report of Independent Registered Public Independent Registered Public Accounting Firm 85 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation 10-Q 3.2 Bylaws of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form Bylaws of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of of Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture Microsoft Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture between Corporation 10-Q 12/31/09 3.2 1/28/10 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a of , dated a of June 14 , 2010 , between Microsoft a of June 14 , 2010 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 6/18/10 4.4 Form of . , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note representing Coupon Convertible Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form Convertible Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Second Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Second Supplemental due 2013 8-K 4.2 6/18/10 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 89 Table of . , a Trustee 8-K 4.5 9/27/10 89 Table of Contents , a Trustee 8-K 4.5 9/27/10 89 Table of Contents PART a Trustee 8-K 4.5 9/27/10 89 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft . , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation 2001 Stock 2/8/11 10.1 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 2001 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock Plan 8-K 99.2 7/20/06 10.2 * Microsoft Corporation 1991 Stock 7/20/06 10.2 * Microsoft Corporation 1991 Stock Option Plan 8-K 99.1 Corporation 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft 1991 Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation Stock Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Option Plan 8-K 99.1 7/20/06 10.3 * Microsoft Corporation 1999 Stock 7/20/06 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation 2003 Employee 11/15/04 10.4 * Microsoft Corporation 2003 Employee Stock Purchase Plan 10-K 2003 Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Employee Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/04 10.6 9/1/04 10.5 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan X 10.6 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Directors 10-K 6/30/04 10.9 9/1/04 10.8 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the January Stock Plan for the January 1 , 2004 to June 30 for the January 1 , 2004 to June 30 , 2006 1 , 2004 to June 30 , 2006 performance period 10-K 2004 to June 30 , 2006 performance period 10-K 6/30/04 10.10 30 , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * , 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form 2006 performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of performance period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared period 10-K 6/30/04 10.10 9/1/04 10.9 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the July Stock Plan for the July 1 , 2003 to June 30 for the July 1 , 2003 to June 30 , 2006 1 , 2003 to June 30 , 2006 performance period 10-K 2003 to June 30 , 2006 performance period 10-K 6/30/04 10.11 30 , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * , 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form 2006 performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of performance period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock period 10-K 6/30/04 10.11 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of for Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Non-Employee Directors S-8 99.2 2/28/06 10.15 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2007 performance period 10-K 6/30/07 10.17 fiscal year 2007 performance period 10-K 6/30/07 10.17 8/3/07 90 Table year 2007 performance period 10-K 6/30/07 10.17 8/3/07 90 Table of 2007 performance period 10-K 6/30/07 10.17 8/3/07 90 Table of Contents performance period 10-K 6/30/07 10.17 8/3/07 90 Table of Contents PART period 10-K 6/30/07 10.17 8/3/07 90 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.16 * Form of Shared Performance Agreement under the Microsoft Corporation 2001 Stock Plan for the fiscal Plan for the fiscal year 2008 performance period 10-Q 12/31/07 10.18 fiscal year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * year 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive 2008 performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer performance period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer Incentive period 10-Q 12/31/07 10.18 1/24/08 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/10 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/10 10.18 10/28/10 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/10 10.18 10/28/10 10.19 * Annual 2001 Stock Plan 10-Q 9/30/10 10.18 10/28/10 10.19 * Annual Performance Stock Plan 10-Q 9/30/10 10.18 10/28/10 10.19 * Annual Performance Bonus Plan 10-Q 9/30/10 10.18 10/28/10 10.19 * Annual Performance Bonus Plan Bonus Plan for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Plan for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio for Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio of Executive Officers 10-Q 10.19 1/22/09 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Instance Document * XBRL Instance Document X 101.SCH * * XBRL Taxonomy Extension XBRL Taxonomy Extension Schema X 101.CAL * * XBRL Taxonomy Extension Taxonomy Extension Calculation Linkbase X 101.DEF * * XBRL Taxonomy Extension Taxonomy Extension Definition Linkbase X 101.LAB * * XBRL Taxonomy Extension Taxonomy Extension Label Linkbase X 101.PRE * * XBRL Taxonomy Extension * * Pursuant to Rule 406T of Regulation S-T , these prospectus for purpose of Sections 11 or 12 of the Securities purpose of Sections 11 or 12 of the Securities Act of of the Securities Act of 1933 or Section 18 of the Act of 1933 or Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 and otherwise are not subject not subject to liability . 91 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 28 , 2011 . M ICROSOFT , on July 28 , 2011 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 28 , 2011 . Signature Title indicated on July 28 , 2011 . Signature Title / S ( Principal Accounting Officer ) 92 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-12-316848/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-12-316848/full-submission.txt new file mode 100644 index 0000000..3786d8c --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-12-316848/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2012 OR ¨ TRANSITION Year Ended June 30 , 2012 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2011 , the aggregate As of December 31 , 2011 , the aggregate market value of the registrant wa $ 195,333,665,376 based on the closing sale System . As of July 18 , 2012 , there were As of July 18 , 2012 , there were 8,383,396,575 share , 2012 , there were 8,383,396,575 share of common stock outstanding to be held on November 28 , 2012 are incorporated by held on November 28 , 2012 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2012 INDEX Page PART Year Ended June 30 , 2012 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registrant 12 Item 1A . Risk Factors 14 Item Item 1A . Risk Factors 14 Item 1B . Unresolved Staff . Risk Factors 14 Item 1B . Unresolved Staff Comments 22 1B . Unresolved Staff Comments 22 Item 2 . Properties 22 Unresolved Staff Comments 22 Item 2 . Properties 22 Item 3 22 Item 2 . Properties 22 Item 3 . Legal Proceedings 2 . Properties 22 Item 3 . Legal Proceedings 22 Item Item 3 . Legal Proceedings 22 Item 4 . Mine Safety . Legal Proceedings 22 Item 4 . Mine Safety Disclosures 22 4 . Mine Safety Disclosures 22 PART II Item 5 . Disclosures 22 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 23 Item 6 . Selected Financial of Equity Securities 23 Item 6 . Selected Financial Data 23 6 . Selected Financial Data 23 Item 7 . Management ’ Selected Financial Data 23 Item 7 . Management ’ s Discussion Condition and Results of Operations 24 Item 7A . Quantitative and Results of Operations 24 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 45 Item 8 . Financial Statements about Market Risk 45 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 47 Item 9 . Changes in and Supplementary Data 47 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 89 Item 9A . Controls and and Financial Disclosure 89 Item 9A . Controls and Procedures 89 9A . Controls and Procedures 89 Report of Management on Internal Internal Control over Financial Reporting 89 Report of Independent Registered Public Independent Registered Public Accounting Firm 90 Item 9B . Other Information Public Accounting Firm 90 Item 9B . Other Information 91 PART Item 9B . Other Information 91 PART III Item 10 . Information 91 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 91 Item 11 . Executive Compensation and Corporate Governance 91 Item 11 . Executive Compensation 91 Item Item 11 . Executive Compensation 91 Item 12 . Security Ownership . Executive Compensation 91 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 91 Item 13 . Certain Relationships Related Stockholder Matters 91 Item 13 . Certain Relationships and Related Transactions , and Director Independence 91 Item 14 . Principal Accounting and Director Independence 91 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 91 PART IV Item 15 . Services 91 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 92 Signatures 95 2 Table of Financial Statement Schedules 92 Signatures 95 2 Table of Contents PART Statement Schedules 92 Signatures 95 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Microsoft wa founded GENERAL Microsoft wa founded in 1975 . Our mission is to have office in more than 100 country . We generate revenue sell hardware including the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC include : • Microsoft Office 365 , an online suite that familiar Microsoft Outlook interface ; 3 Table of Contents PART I of Contents PART I Item 1 • Bing , our Internet information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Windows & Windows market worldwide , a approximately 75 % of total Windows Division Products and Services : Windows 7 operating system ; Windows Live our operating system , Windows 8 , will be generally available be generally available on October 26 , 2012 . At that available on October 26 , 2012 . At that time , and manufactured hardware device . 4 Table of Contents PART I of Contents PART I Item 1 Competition The Windows operating system system . Additionally , Windows 8 will run on both x86 run Windows . The Windows 8 operating system will include the product and service . Approximately 55 % of Server and Tools volume licensing agreement , approximately 25 % is purchased through transactional Premier product support service . 5 Table of Contents PART I of Contents PART I Item 1 Competition Our server operating system Microsoft product , including Xbox 360 and Windows Phone , to those offering . In December 2009 , we entered into an online tool for advertiser . 6 Table of Contents PART I of Contents PART I Item 1 Competition OSD competes with Google comprising mainly Office , Office 365 , SharePoint , Exchange , software solution and generates over 90 % of MBD revenue . of global enterprise . Approximately 80 % of MBD revenue is a given year . Approximately 20 % of MBD revenue is Dynamics CRM ; Microsoft Office 365 , which is an online ’ s on-premise offering . 7 Table of Contents PART I of Contents PART I Item 1 Entertainment and Devices Division Entertainment connect people . The Xbox 360 entertainment platform , including Kinect Products and Services : Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox 360 360 video game , Xbox 360 accessory ; Xbox LIVE ; entertainment console average five to 10 year . We released Xbox year . We released Xbox 360 , our second generation console generation console , in November 2005 . Nintendo and Sony released their game console in late 2006 . We believe the success . We believe the Xbox 360 entertainment platform is positioned well our manufacturing activity for Xbox 360 and related game , Kinect game , Kinect for Xbox 360 , various retail software packaged limited source . Our Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 8 Table of Contents PART I of Contents PART I Item 1 360 include key component that Contents PART I Item 1 360 include key component that are AND DEVELOPMENT During fiscal year 2012 , 2011 , and 2010 During fiscal year 2012 , 2011 , and 2010 , research 2012 , 2011 , and 2010 , research and development expense and development expense wa $ 9.8 billion , $ 9.0 billion $ 9.8 billion , $ 9.0 billion , and $ 8.7 9.0 billion , and $ 8.7 billion , respectively . These respectively . These amount represented 13 % , 13 % , amount represented 13 % , 13 % , and 14 % , 13 % , and 14 % , respectively , of have a portfolio of over 31,000 U.S. and international patent issued international patent issued and over 38,000 pending . While we employ We generally fund research at 9 Table of Contents PART I of Contents PART I Item 1 the corporate level to ensure training and sale support . 10 Table of Contents PART I of Contents PART I Item 1 Online Although client-based software will Microsoft Lync , Microsoft Office 365 , Microsoft Office Communications Online monthly based upon consumption . 11 Table of Contents PART I of Contents PART I Item 1 Enterprise Agreement Licensing Enterprise agreement customer accounted for more than 10 % of fiscal year 2012 10 % of fiscal year 2012 , 2011 , or 2010 of fiscal year 2012 , 2011 , or 2010 revenue . 2012 , 2011 , or 2010 revenue . Our practice is executive officer a of July 26 , 2012 were a follows a of July 26 , 2012 were a follows : Name the Company Steven A. Ballmer 56 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 52 Chief People Officer Kurt D. People Officer Kurt D. DelBene 52 President , Microsoft Office Division Office Division Peter S. Klein 49 Chief Financial Officer Craig J. Financial Officer Craig J. Mundie 63 Chief Research and Strategy Officer and Strategy Officer Satya Nadella 44 President , Server and Tools and Tools Business Steven Sinofsky 46 President , Windows & Windows Live Division Bradford L. Smith 53 Executive Vice President ; General ; Secretary B. Kevin Turner 47 Chief Operating Officer Mr. Ballmer Chief Executive Officer in January 2000 . He served a President served a President from July 1998 to February 2001 . Previously from July 1998 to February 2001 . Previously , he had Sales and Support since February 1992 . Mr. Ballmer joined Microsoft Mr. Ballmer joined Microsoft in 1980 . Ms. Brummel wa named , Human Resources in December 2005 and in 2011 her title in December 2005 and in 2011 her title changed to Chief , Human Resources since May 2005 . From May 2000 to May 2005 . From May 2000 to May 2005 , she From May 2000 to May 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Microsoft Office Division in September 2010 . He served a Senior the Microsoft Business Division since 2006 . Since joining Microsoft in . Since joining Microsoft in 1992 , Mr. DelBene ha served Chief Financial Officer in November 2009 . He served a Corporate Microsoft Business Division from February 2006 to November 2009 and Chief from February 2006 to November 2009 and Chief Financial Officer of Server and Tools from July 2003 to February 2006 . Mr. from July 2003 to February 2006 . Mr. Klein joined Microsoft Mr. Klein joined Microsoft in 2002 . 12 Table of Contents joined Microsoft in 2002 . 12 Table of Contents PART I of Contents PART I Item 1 Mr. Mundie wa named Chief and Strategy Officer in June 2006 . He had been Senior Strategies and Policy since August 2001 . He wa named Senior , Consumer Platforms in February 1996 . Mr. Mundie joined Microsoft Mr. Mundie joined Microsoft in 1992 . Mr. Nadella wa named Server and Tools in February 2011 . He previously held other the Online Services Division since 2008 and Corporate Vice President , for the Advertising Platform since 2007 . From 2000 to 2007 Platform since 2007 . From 2000 to 2007 , Mr. Nadella 2007 . From 2000 to 2007 , Mr. Nadella led Microsoft Mr. Nadella joined Microsoft in 1992 . Mr. Sinofsky wa named Windows Live Division in July 2009 . He served a Senior Live Engineering Group since December 2006 and Senior Vice President , President , Office from December 1999 to December 2006 . He from December 1999 to December 2006 . He had been Vice President , Office since December 1998 . Mr. Sinofsky joined the joined the Office team in 1994 , increasing his responsibility with Mr. Sinofsky joined Microsoft in 1989 . Mr. Smith wa named , and Secretary in November 2001 and in 2011 his title in November 2001 and in 2011 his title changed to Executive Chief Compliance Officer effective July 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , Club division . From September 2001 to August 2002 , he From September 2001 to August 2002 , he served a Executive Systems Division . From March 2000 to September 2001 , he From March 2000 to September 2001 , he served a it . EMPLOYEES As of June 30 , 2012 , we employed As of June 30 , 2012 , we employed approximately 94,000 2012 , we employed approximately 94,000 people on a full-time basis on a full-time basis , 55,000 in the U.S. and 39,000 55,000 in the U.S. and 39,000 internationally . Of the total . Of the total , 36,000 were in product research and product research and development , 25,000 in sale and marketing , in sale and marketing , 18,000 in product support and consulting support and consulting service , 6,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to and other governance-related policy ; 13 Table of Contents PART I of Contents PART I Item 1 , 1A • other news PART I Item 1 , 1A • other news and announcement , the SEC . ITEM 1A . RISK FACTORS Our operation a we launch the Windows 8 operating system , Surface device lower our operating margin . 14 Table of Contents PART I of Contents PART I Item 1A Business model competition . Companies Azure Services platform , Office 365 , other cloud-based service offering offering , and the Xbox 360 entertainment platform . We will manufactured device announced in June 2012 . Investments in new technology we have experienced historically . 15 Table of Contents PART I of Contents PART I Item 1A In fall 2012 , we I Item 1A In fall 2012 , we are launching Windows , we are launching Windows 8 , a major new release marketing cost in launching Window 8 and associated service and device impact on our business . 16 Table of Contents PART I of Contents PART I Item 1A In addition , our internal do not adequately protect the 17 Table of Contents PART I of Contents PART I Item 1A privacy of personal information could , Exchange Online , Office 365 , SharePoint Online , Skype U.S. Department of Justice , 18 state , and the District Decree that took effect in 2001 and a Final Judgment entered a Final Judgment entered in 2002 . These proceeding imposed various Final Judgment expired in May 2011 , we expect that federal to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a other competition law proceeding . 18 Table of Contents PART I of Contents PART I Item 1A • We are subject to For example , in July 2012 we announced that , for not in compliance with our 2009 agreement to display a “ Azure Services platform , Office 365 , other cloud-based service offering offering , and the Xbox 360 entertainment platform . In June entertainment platform . In June 2012 , we announced the Surface to pay for product and 19 Table of Contents PART I of Contents PART I Item 1A service they have purchased . product such a the Xbox 360 console , Surface device , cost of revenue . Xbox 360 console are assembled in Asia intangible asset for impairment when 20 Table of Contents PART I of Contents PART I Item 1A event or change in circumstance For example , in July 2012 , we announced a $ , we announced a $ 6.2 billion charge for the impairment . We operate in over 100 country and a significant part result or financial condition . 21 Table of Contents PART I of Contents PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2012 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office King County , Washington : 10 million square foot of owned owned space situated on approximately 500 acre of land we own Development ” section of Item 1 of this Form 10-K. Our Item 1 of this Form 10-K. Our facility are fully used we may currently develop approximately 1.6 million square foot of additional In addition , we own 63 acre of undeveloped land in of office space . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 22 Table of Contents PART II of Contents PART II Item 5 , 6 PART II ITEM PART II Item 5 , 6 PART II ITEM 5 . , 6 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 18 , 2012 , there were . On July 18 , 2012 , there were 128,992 registered , 2012 , there were 128,992 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2012 30 Fiscal Year Fiscal Year 2012 High $ 28.15 $ 27.50 Fiscal Year 2012 High $ 28.15 $ 27.50 $ 32.95 $ 2012 High $ 28.15 $ 27.50 $ 32.95 $ 32.89 $ $ 28.15 $ 27.50 $ 32.95 $ 32.89 $ 32.95 Low $ 27.50 $ 32.95 $ 32.89 $ 32.95 Low $ 23.79 $ 32.95 $ 32.89 $ 32.95 Low $ 23.79 $ 24.26 32.89 $ 32.95 Low $ 23.79 $ 24.26 $ 26.39 $ 32.95 Low $ 23.79 $ 24.26 $ 26.39 $ 28.32 $ $ 23.79 $ 24.26 $ 26.39 $ 28.32 $ 23.79 Fiscal $ 24.26 $ 26.39 $ 28.32 $ 23.79 Fiscal Year 2011 $ 26.39 $ 28.32 $ 23.79 Fiscal Year 2011 High $ 28.32 $ 23.79 Fiscal Year 2011 High $ 26.41 $ 28.87 Fiscal Year 2011 High $ 26.41 $ 28.87 $ 29.46 $ 2011 High $ 26.41 $ 28.87 $ 29.46 $ 26.87 $ $ 26.41 $ 28.87 $ 29.46 $ 26.87 $ 29.46 Low $ 28.87 $ 29.46 $ 26.87 $ 29.46 Low $ 22.73 $ 29.46 $ 26.87 $ 29.46 Low $ 22.73 $ 23.78 26.87 $ 29.46 Low $ 22.73 $ 23.78 $ 24.68 $ 29.46 Low $ 22.73 $ 23.78 $ 24.68 $ 23.65 $ $ 22.73 $ 23.78 $ 24.68 $ 23.65 $ 22.73 DIVIDENDS $ 23.78 $ 24.68 $ 23.65 $ 22.73 DIVIDENDS AND SHARE $ 24.68 $ 23.65 $ 22.73 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2012 , all of which were ( in million ) April 1 , 2012 – April 30 million ) April 1 , 2012 – April 30 , 2012 1 , 2012 – April 30 , 2012 404,577 $ 31.98 2012 – April 30 , 2012 404,577 $ 31.98 404,577 $ – April 30 , 2012 404,577 $ 31.98 404,577 $ 9,208 30 , 2012 404,577 $ 31.98 404,577 $ 9,208 May 1 , 2012 404,577 $ 31.98 404,577 $ 9,208 May 1 , 404,577 $ 31.98 404,577 $ 9,208 May 1 , 2012 – 31.98 404,577 $ 9,208 May 1 , 2012 – May 31 $ 9,208 May 1 , 2012 – May 31 , 2012 1 , 2012 – May 31 , 2012 27,154,632 $ 30.50 2012 – May 31 , 2012 27,154,632 $ 30.50 27,154,632 $ – May 31 , 2012 27,154,632 $ 30.50 27,154,632 $ 8,379 31 , 2012 27,154,632 $ 30.50 27,154,632 $ 8,379 June 1 , 2012 27,154,632 $ 30.50 27,154,632 $ 8,379 June 1 , 27,154,632 $ 30.50 27,154,632 $ 8,379 June 1 , 2012 – 30.50 27,154,632 $ 8,379 June 1 , 2012 – June 30 $ 8,379 June 1 , 2012 – June 30 , 2012 1 , 2012 – June 30 , 2012 5,485,035 $ 28.97 2012 – June 30 , 2012 5,485,035 $ 28.97 5,485,035 $ – June 30 , 2012 5,485,035 $ 28.97 5,485,035 $ 8,221 30 , 2012 5,485,035 $ 28.97 5,485,035 $ 8,221 33,044,244 33,044,244 , 2012 5,485,035 $ 28.97 5,485,035 $ 8,221 33,044,244 33,044,244 The 5,485,035 $ 28.97 5,485,035 $ 8,221 33,044,244 33,044,244 The repurchase were $ 28.97 5,485,035 $ 8,221 33,044,244 33,044,244 The repurchase were made 28.97 5,485,035 $ 8,221 33,044,244 33,044,244 The repurchase were made using the open market . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2012 2011 2010 2009 Year Ended June 30 , 2012 2011 2010 2009 2008 Revenue Ended June 30 , 2012 2011 2010 2009 2008 Revenue $ June 30 , 2012 2011 2010 2009 2008 Revenue $ 73,723 30 , 2012 2011 2010 2009 2008 Revenue $ 73,723 $ , 2012 2011 2010 2009 2008 Revenue $ 73,723 $ 69,943 2010 2009 2008 Revenue $ 73,723 $ 69,943 $ 62,484 $ 2008 Revenue $ 73,723 $ 69,943 $ 62,484 $ 58,437 $ $ 73,723 $ 69,943 $ 62,484 $ 58,437 $ 60,420 Operating $ 69,943 $ 62,484 $ 58,437 $ 60,420 Operating income $ $ 62,484 $ 58,437 $ 60,420 Operating income $ 21,763 ( $ 60,420 Operating income $ 21,763 ( a ) $ 27,161 21,763 ( a ) $ 27,161 $ 24,098 $ 20,363 $ a ) $ 27,161 $ 24,098 $ 20,363 $ 22,271 ( $ 27,161 $ 24,098 $ 20,363 $ 22,271 ( b ) $ 24,098 $ 20,363 $ 22,271 ( b ) Net income b ) Net income $ 16,978 ( a ) $ 23,150 16,978 ( a ) $ 23,150 $ 18,760 $ 14,569 $ a ) $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( $ 23,150 $ 18,760 $ 14,569 $ 17,681 ( b ) $ 18,760 $ 14,569 $ 17,681 ( b ) Diluted earnings Diluted earnings per share $ 2.00 ( a ) $ 2.69 2.00 ( a ) $ 2.69 $ 2.10 $ 1.62 $ a ) $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash $ 2.69 $ 2.10 $ 1.62 $ 1.87 Cash dividend declared $ 2.10 $ 1.62 $ 1.87 Cash dividend declared per share dividend declared per share $ 0.80 $ 0.64 $ 0.52 $ per share $ 0.80 $ 0.64 $ 0.52 $ 0.52 $ $ 0.80 $ 0.64 $ 0.52 $ 0.52 $ 0.44 Cash $ 0.64 $ 0.52 $ 0.52 $ 0.44 Cash , cash $ 0.52 $ 0.52 $ 0.44 Cash , cash equivalent , , and short-term investment $ 63,040 $ 52,772 $ 36,788 $ short-term investment $ 63,040 $ 52,772 $ 36,788 $ 31,447 $ $ 63,040 $ 52,772 $ 36,788 $ 31,447 $ 23,662 Total $ 52,772 $ 36,788 $ 31,447 $ 23,662 Total asset $ $ 36,788 $ 31,447 $ 23,662 Total asset $ 121,271 $ $ 23,662 Total asset $ 121,271 $ 108,704 $ 86,113 $ Total asset $ 121,271 $ 108,704 $ 86,113 $ 77,888 $ $ 121,271 $ 108,704 $ 86,113 $ 77,888 $ 72,793 Long-term $ 108,704 $ 86,113 $ 77,888 $ 72,793 Long-term obligation $ $ 86,113 $ 77,888 $ 72,793 Long-term obligation $ 22,220 $ $ 72,793 Long-term obligation $ 22,220 $ 22,847 $ 13,791 $ Long-term obligation $ 22,220 $ 22,847 $ 13,791 $ 11,296 $ $ 22,220 $ 22,847 $ 13,791 $ 11,296 $ 6,621 Stockholders $ 22,847 $ 13,791 $ 11,296 $ 6,621 Stockholders ’ equity $ 13,791 $ 11,296 $ 6,621 Stockholders ’ equity $ 66,363 6,621 Stockholders ’ equity $ 66,363 $ 57,083 $ 46,175 $ ’ equity $ 66,363 $ 57,083 $ 46,175 $ 39,558 $ $ 66,363 $ 57,083 $ 46,175 $ 39,558 $ 36,286 ( $ 57,083 $ 46,175 $ 39,558 $ 36,286 ( a ) $ 46,175 $ 39,558 $ 36,286 ( a ) Includes a and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ( b ) Includes Includes a charge of $ 1.4 billion ( € 899 million $ 1.4 billion ( € 899 million ) related to the the European Commission in February 2008 . 23 Table of Contents Commission in February 2008 . 23 Table of Contents PART II of Contents PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION , Windows Phone , Xbox 360 , or the newly announced or the newly announced Surface 24 Table of Contents PART II of Contents PART II Item 7 device , our goal is Skype , Office , Office 365 , SharePoint , Windows Live Microsoft SQL Azure , Office 365 , Windows Azure , Windows ( Part II , Item 1A . of this Form 10-K 1A . of this Form 10-K ) . Seasonality Our revenue market and holiday season spending 25 Table of Contents PART II of Contents PART II Item 7 by consumer . Our Entertainment Devices Division ha generated approximately 40 % of it yearly segment to be upgraded to Windows 7 at minimal or no cost cost ( the “ Windows 7 Deferral ” ) , and , and sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price and per share amount ) 2012 2011 2010 Percentage Change 2012 per share amount ) 2012 2011 2010 Percentage Change 2012 Versus share amount ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 73,723 2011 Percentage Change 2011 Versus 2010 Revenue $ 73,723 $ 69,943 2011 Versus 2010 Revenue $ 73,723 $ 69,943 $ 62,484 5 2010 Revenue $ 73,723 $ 69,943 $ 62,484 5 % 12 $ 73,723 $ 69,943 $ 62,484 5 % 12 % Operating 73,723 $ 69,943 $ 62,484 5 % 12 % Operating income 69,943 $ 62,484 5 % 12 % Operating income $ 21,763 12 % Operating income $ 21,763 $ 27,161 $ 24,098 ( Operating income $ 21,763 $ 27,161 $ 24,098 ( 20 ) $ 21,763 $ 27,161 $ 24,098 ( 20 ) % 13 $ 27,161 $ 24,098 ( 20 ) % 13 % Diluted 24,098 ( 20 ) % 13 % Diluted earnings per share Diluted earnings per share $ 2.00 $ 2.69 $ 2.10 ( per share $ 2.00 $ 2.69 $ 2.10 ( 26 ) $ 2.00 $ 2.69 $ 2.10 ( 26 ) % 28 $ 2.69 $ 2.10 ( 26 ) % 28 % Fiscal 2.10 ( 26 ) % 28 % Fiscal year 2012 compared % 28 % Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Revenue increased primarily due to product and service and the 2010 Microsoft Office system , offset to the deferral of $ 540 million of revenue relating to . Revenue in fiscal year 2012 also included Skype revenue from goodwill impairment charge of $ 6.2 billion related to our OSD Cost of revenue increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , reflecting higher cost strategic initiative , higher Xbox 360 royalty cost , and other and development expense increased $ 768 million or 8 % , increased $ 768 million or 8 % , due mainly to and administrative expense increased $ 347 million or 8 % , increased $ 347 million or 8 % , due mainly to across the company reflecting a 4 % increase in headcount from increase in headcount from June 30 , 2011 and change in headcount from June 30 , 2011 and change in our employee earnings per share by $ 0.73 . Prior year net income the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share prior year . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Revenue increased primarily due to strong sale of the Xbox 360 entertainment platform , the 2010 360 entertainment platform , the 2010 Microsoft Office system , and Revenue also increased due to 26 Table of Contents PART II of Contents PART II Item 7 the $ 254 million Office II Item 7 the $ 254 million Office Deferral in fiscal Office Deferral in fiscal year 2010 and the subsequent recognition of Office Deferral during fiscal year 2011 . Changes in foreign currency Cost of revenue increased $ 3.2 billion or 26 % , increased $ 3.2 billion or 26 % , due to higher and increased volume of Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 sold . • Sales and and marketing expense increased $ 726 million or 5 % , increased $ 726 million or 5 % , primarily reflecting increased and marketing of the Xbox 360 platform , Windows Phone , and development expense increased $ 329 million or 4 % , increased $ 329 million or 4 % , due mainly to and administrative expense increased $ 159 million or 4 % , increased $ 159 million or 4 % , due mainly to Segment information appearing in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,373 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,373 $ 19,033 2011 Versus 2010 Revenue $ 18,373 $ 19,033 $ 19,491 ( 2010 Revenue $ 18,373 $ 19,033 $ 19,491 ( 3 ) $ 18,373 $ 19,033 $ 19,491 ( 3 ) % ( $ 19,033 $ 19,491 ( 3 ) % ( 2 ) ( 3 ) % ( 2 ) % Operating income $ ) % Operating income $ 11,460 $ 12,211 $ 12,895 ( Operating income $ 11,460 $ 12,211 $ 12,895 ( 6 ) $ 11,460 $ 12,211 $ 12,895 ( 6 ) % ( $ 12,211 $ 12,895 ( 6 ) % ( 5 ) ( 6 ) % ( 5 ) % Windows & Windows market worldwide , a approximately 75 % of total Windows Division sell . The remaining approximately 25 % of Windows Division revenue advertising from Windows Live . 27 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2012 compared with II Item 7 Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Windows Division revenue reflected relative PCs to business grew approximately 4 % and sale of PCs of PCs to consumer decreased 1 % . Excluding a decline PCs to consumer grew approximately 5 % . Taken together , PC market increased an estimated 0 % to 2 % . an estimated 0 % to 2 % . Relative to PC and the deferral of $ 540 million of revenue relating to lower revenue and a $ 163 million or 10 % increase a $ 163 million or 10 % increase in research and primarily associated with the Windows 8 operating system . Fiscal year operating system . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Windows Division revenue reflected relative PCs to business grew approximately 11 % this year and sale PCs to consumer declined approximately 1 % . The decline in PC sale included an approximately 32 % decline in the sale PC market increased an estimated 2 % to 4 % . an estimated 2 % to 4 % . Revenue wa negatively the impact of the Windows 7 launch in the prior year prior year , including $ 273 million of revenue recognized related recognized related to the Windows 7 Deferral , we estimate that and marketing expense increased $ 182 million or 6 % , increased $ 182 million or 6 % , reflecting increased advertising million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,686 2011 Percentage Change 2011 Versus 2010 Revenue $ 18,686 $ 16,680 2011 Versus 2010 Revenue $ 18,686 $ 16,680 $ 15,109 12 2010 Revenue $ 18,686 $ 16,680 $ 15,109 12 % 10 $ 18,686 $ 16,680 $ 15,109 12 % 10 % Operating 18,686 $ 16,680 $ 15,109 12 % 10 % Operating income 16,680 $ 15,109 12 % 10 % Operating income $ 7,431 10 % Operating income $ 7,431 $ 6,290 $ 5,381 18 Operating income $ 7,431 $ 6,290 $ 5,381 18 % 17 $ 7,431 $ 6,290 $ 5,381 18 % 17 % Server 7,431 $ 6,290 $ 5,381 18 % 17 % Server and 6,290 $ 5,381 18 % 17 % Server and Tools develops , and certification . Approximately 55 % of Server and Tools volume licensing agreement , approximately 25 % is purchased through transactional Enterprise Services . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Server and Tools revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 595 million or 18 % , grew $ 595 million or 18 % , due to growth Cost of revenue increased $ 682 million or 22 % , increased $ 682 million or 22 % , primarily reflecting higher and marketing expense grew $ 155 million or 4 % , grew $ 155 million or 4 % , reflecting increased corporate increased corporate marketing activity . 28 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2011 compared with II Item 7 Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Server and Tools revenue increased . Product revenue increased $ 1.2 billion or 10 % , increased $ 1.2 billion or 10 % , driven primarily by Enterprise Services revenue grew $ 353 million or 12 % , grew $ 353 million or 12 % , due to growth Cost of revenue increased $ 377 million or 13 % , increased $ 377 million or 13 % , primarily reflecting a , primarily reflecting a $ 323 million increase in expense from and marketing expense increased $ 270 million or 7 % , increased $ 270 million or 7 % , reflecting increased fee million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 2,867 2011 Percentage Change 2011 Versus 2010 Revenue $ 2,867 $ 2,607 2011 Versus 2010 Revenue $ 2,867 $ 2,607 $ 2,294 10 2010 Revenue $ 2,867 $ 2,607 $ 2,294 10 % 14 $ 2,867 $ 2,607 $ 2,294 10 % 14 % Operating 2,867 $ 2,607 $ 2,294 10 % 14 % Operating loss 2,607 $ 2,294 10 % 14 % Operating loss $ ( % Operating loss $ ( 8,121 ) $ ( 2,657 ) ( 8,121 ) $ ( 2,657 ) $ ( 2,408 ) ( 2,657 ) $ ( 2,408 ) * ( 10 ) ( 2,408 ) * ( 10 ) % * Not meaningful annual revenue . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Online advertising revenue grew $ Online advertising revenue grew $ 306 million or 13 % to grew $ 306 million or 13 % to $ 2.6 billion or 13 % to $ 2.6 billion , reflecting continued growth for the month of June 2012 wa approximately 16 % , of June 2012 wa approximately 16 % , and grew 120 16 % , and grew 120 basis point year over year ! property , wa approximately 26 % for the month of for the month of June 2012 , down 100 basis point of June 2012 , down 100 basis point year over year OSD ’ s fiscal year 2012 operating loss reflects a goodwill goodwill impairment charge of $ 6.2 billion , which we recorded to goodwill acquired through our 2007 acquisition of aQuantive , Inc performance . Excluding the $ 6.2 billion goodwill impairment charge , and marketing expense decreased $ 321 million or 29 % , decreased $ 321 million or 29 % , due mainly to Cost of revenue decreased $ 213 million , driven by lower operating cost . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 OSD revenue increased primarily a Online advertising revenue grew $ 351 million or 18 % to grew $ 351 million or 18 % to $ 2.3 billion or 18 % to $ 2.3 billion , reflecting continued growth the new mix and volume 29 Table of Contents PART II of Contents PART II Item 7 of traffic from the combined for the month of June 2011 wa approximately 14 % , of June 2011 wa approximately 14 % , and grew 170 14 % , and grew 170 basis point year over year ! property , wa approximately 27 % for the month of for the month of June 2011 . OSD operating loss increased Cost of revenue grew $ 647 million driven by cost associated and administrative expense decreased $ 156 million or 58 % , decreased $ 156 million or 58 % , due mainly to Research and development increased $ 123 million or 11 % due increased $ 123 million or 11 % due to increased headcount-related million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 23,991 2011 Percentage Change 2011 Versus 2010 Revenue $ 23,991 $ 22,514 2011 Versus 2010 Revenue $ 23,991 $ 22,514 $ 19,256 7 2010 Revenue $ 23,991 $ 22,514 $ 19,256 7 % 17 $ 23,991 $ 22,514 $ 19,256 7 % 17 % Operating 23,991 $ 22,514 $ 19,256 7 % 17 % Operating income 22,514 $ 19,256 7 % 17 % Operating income $ 15,719 17 % Operating income $ 15,719 $ 14,657 $ 11,849 7 Operating income $ 15,719 $ 14,657 $ 11,849 7 % 24 $ 15,719 $ 14,657 $ 11,849 7 % 24 % Microsoft 15,719 $ 14,657 $ 11,849 7 % 24 % Microsoft Business 14,657 $ 11,849 7 % 24 % Microsoft Business Division ( , Lync , and Office 365 ) , which generates over ) , which generates over 90 % of MBD revenue , OEM revenue . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 MBD revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system . Business . Business revenue increased $ 1.7 billion or 9 % , increased $ 1.7 billion or 9 % , primarily reflecting growth revenue , licensing of the 2010 Microsoft Office system to transactional business customer , and an 11 % increase in Microsoft Dynamics . Consumer revenue decreased $ 195 million or 4 % due decreased $ 195 million or 4 % due to the recognition to the recognition of $ 254 million of revenue in the . Excluding the fiscal year 2011 impact associated with the Office , consumer revenue increased $ 59 million , driven by increased by increased sale of the 2010 Microsoft Office system . MBD for the year ended June 30 , 2012 included a favorable year ended June 30 , 2012 included a favorable foreign currency foreign currency impact of $ 506 million . MBD operating income Cost of revenue increased $ 258 million or 16 % , increased $ 258 million or 16 % , primarily due to headcount-related cost . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 MBD revenue increased primarily reflecting primarily reflecting sale of the 2010 Microsoft Office system , the Office system , the $ 254 million Office Deferral during fiscal Office Deferral during fiscal year 2010 , and the subsequent recognition Office Deferral during fiscal year 2011. Business revenue increased $ 2.1 2011. Business revenue increased $ 2.1 billion or 14 % , increased $ 2.1 billion or 14 % , reflecting licensing of , reflecting licensing of the 2010 Microsoft Office system to transactional licensing revenue , and a 10 % increase in Microsoft Dynamics . Consumer revenue increased $ 1.1 billion or 33 % , increased $ 1.1 billion or 33 % , approximately half of to the launch of Office 2010 and half of which wa Office Deferral during fiscal year 2010 and subsequent recognition of the Office Deferral during fiscal year 2011 . Excluding the impact associated , consumer revenue increased $ 617 million or 17 % due increased $ 617 million or 17 % due to sale of due to sale of the 2010 Microsoft Office system . MBD Cost of revenue increased $ 328 million or 25 % , increased $ 328 million or 25 % , primarily driven by support cost . Sales and 30 Table of Contents PART II of Contents PART II Item 7 marketing expense increased , primarily million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Revenue $ 9,593 2011 Percentage Change 2011 Versus 2010 Revenue $ 9,593 $ 8,915 2011 Versus 2010 Revenue $ 9,593 $ 8,915 $ 6,079 8 2010 Revenue $ 9,593 $ 8,915 $ 6,079 8 % 47 $ 9,593 $ 8,915 $ 6,079 8 % 47 % Operating 9,593 $ 8,915 $ 6,079 8 % 47 % Operating income 8,915 $ 6,079 8 % 47 % Operating income $ 364 47 % Operating income $ 364 $ 1,257 $ 517 ( Operating income $ 364 $ 1,257 $ 517 ( 71 ) $ 364 $ 1,257 $ 517 ( 71 ) % 143 $ 1,257 $ 517 ( 71 ) % 143 % Entertainment 517 ( 71 ) % 143 % Entertainment and Devices Division EDD offering include the Xbox 360 entertainment platform ( which includes ( which includes the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox LIVE Xbox LIVE , and Xbox 360 accessory ) , Mediaroom ( licensing revenue . In November 2010 , we released Kinect for we released Kinect for Xbox 360 . We acquired Skype on We acquired Skype on October 13 , 2011 , and it Skype on October 13 , 2011 , and it result of discussed below . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 EDD revenue increased primarily reflecting in part by lower Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue decreased $ 113 360 platform revenue decreased $ 113 million , due mainly to volume of Kinect for Xbox 360 sold and lower video game LIVE revenue . We shipped 13.0 million Xbox 360 console during We shipped 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 , compared with 13.7 million year 2012 , compared with 13.7 million Xbox 360 console during compared with 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 . Video game revenue decreased Cost of revenue grew $ 900 million or 16 % , grew $ 900 million or 16 % , primarily due to and development expense increased $ 356 million or 30 % , increased $ 356 million or 30 % , primarily reflecting higher and marketing expense increased $ 244 million or 28 % , increased $ 244 million or 28 % , primarily reflecting the Skype expense . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 EDD revenue increased primarily reflecting increased primarily reflecting higher Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue grew $ 2.7 360 platform revenue grew $ 2.7 billion or 48 % , grew $ 2.7 billion or 48 % , led by increased by increased volume of Xbox 360 console , sale of Kinect sale of Kinect for Xbox 360 , and higher Xbox LIVE LIVE revenue . We shipped 13.7 million Xbox 360 console during We shipped 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 , compared with 10.3 million year 2011 , compared with 10.3 million Xbox 360 console during compared with 10.3 million Xbox 360 console during fiscal year 2010 360 console during fiscal year 2010 . EDD operating income increased Cost of revenue increased $ 1.8 billion or 49 % , increased $ 1.8 billion or 49 % , primarily reflecting higher reflecting higher volume of Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 sold , and increased royalty and development expense increased $ 160 million or 15 % , increased $ 160 million or 15 % , primarily reflecting higher and marketing expense grew $ 112 million or 15 % , grew $ 112 million or 15 % , primarily reflecting increased , primarily reflecting increased Xbox 360 platform marketing activity . Corporate-Level million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Corporate-level activity $ 2011 Percentage Change 2011 Versus 2010 Corporate-level activity $ ( 5,090 2010 Corporate-level activity $ ( 5,090 ) $ ( 4,597 ) ( 5,090 ) $ ( 4,597 ) $ ( 4,136 ) ( 4,597 ) $ ( 4,136 ) ( 11 ) % $ ( 4,136 ) ( 11 ) % ( 11 ) ( 11 ) % ( 11 ) % 31 Table of % ( 11 ) % 31 Table of Contents PART II of Contents PART II Item 7 Certain corporate-level activity is not and contingency . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Corporate-level expense increased due mainly charge , which were $ 56 million in fiscal year 2012 56 million in fiscal year 2012 compared with $ 332 million year 2012 compared with $ 332 million in fiscal year 2011 332 million in fiscal year 2011 . Fiscal year 2011 compared year 2011 . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Corporate-level expense increased due mainly charge , which were $ 332 million in fiscal year 2011 332 million in fiscal year 2011 compared with $ 533 million year 2011 compared with $ 533 million in fiscal year 2010 533 million in fiscal year 2010 . OPERATING EXPENSES Cost of million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Cost of revenue 2011 Percentage Change 2011 Versus 2010 Cost of revenue $ 17,530 2010 Cost of revenue $ 17,530 $ 15,577 $ 12,395 13 of revenue $ 17,530 $ 15,577 $ 12,395 13 % 26 $ 17,530 $ 15,577 $ 12,395 13 % 26 % As 17,530 $ 15,577 $ 12,395 13 % 26 % As a 15,577 $ 12,395 13 % 26 % As a percent of As a percent of revenue 24 % 22 % 20 % percent of revenue 24 % 22 % 20 % 2ppt 2ppt revenue 24 % 22 % 20 % 2ppt 2ppt Cost of % 22 % 20 % 2ppt 2ppt Cost of revenue includes 22 % 20 % 2ppt 2ppt Cost of revenue includes : development cost . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Cost of revenue increased reflecting sold . Headcount-related expense increased 20 % , primarily related to Services headcount . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cost of revenue increased primarily to increased volume of Xbox 360 console and Kinect for Xbox console and Kinect for Xbox 360 sold , higher cost associated million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Research and development 2011 Percentage Change 2011 Versus 2010 Research and development $ 9,811 2010 Research and development $ 9,811 $ 9,043 $ 8,714 8 and development $ 9,811 $ 9,043 $ 8,714 8 % 4 $ 9,811 $ 9,043 $ 8,714 8 % 4 % As 9,811 $ 9,043 $ 8,714 8 % 4 % As a 9,043 $ 8,714 8 % 4 % As a percent of As a percent of revenue 13 % 13 % 14 % percent of revenue 13 % 13 % 14 % 0ppt ( revenue 13 % 13 % 14 % 0ppt ( 1 ) % 13 % 14 % 0ppt ( 1 ) ppt 32 % 14 % 0ppt ( 1 ) ppt 32 Table of 0ppt ( 1 ) ppt 32 Table of Contents PART II of Contents PART II Item 7 Research and development expense include service content . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Research and development expense increased increased , primarily reflecting a 10 % increase in headcount-related expense headcount-related expense . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Research and development expense increased increased primarily due to a 5 % increase in headcount-related expense million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 Sales and marketing 2011 Percentage Change 2011 Versus 2010 Sales and marketing $ 13,857 2010 Sales and marketing $ 13,857 $ 13,940 $ 13,214 ( and marketing $ 13,857 $ 13,940 $ 13,214 ( 1 ) $ 13,857 $ 13,940 $ 13,214 ( 1 ) % 5 $ 13,940 $ 13,214 ( 1 ) % 5 % As 13,214 ( 1 ) % 5 % As a percent of As a percent of revenue 19 % 20 % 21 % percent of revenue 19 % 20 % 21 % ( 1 revenue 19 % 20 % 21 % ( 1 ) ppt 20 % 21 % ( 1 ) ppt ( 1 ) ( 1 ) ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Sales and marketing expense decreased and marketing of the Xbox 360 platform , Windows Phone , offset in part by a 5 % increase in headcount-related expense headcount-related expense . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Sales and marketing expense increased and marketing of the Xbox 360 platform , Windows Phone , and Windows Live , a 5 % increase in headcount-related expense million , except percentage ) 2012 2011 2010 Percentage Change 2012 , except percentage ) 2012 2011 2010 Percentage Change 2012 Versus except percentage ) 2012 2011 2010 Percentage Change 2012 Versus 2011 2012 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 2010 Percentage Change 2012 Versus 2011 Percentage Change 2011 Versus 2010 2012 Versus 2011 Percentage Change 2011 Versus 2010 General and administrative 2011 Percentage Change 2011 Versus 2010 General and administrative $ 4,569 2010 General and administrative $ 4,569 $ 4,222 $ 4,063 8 and administrative $ 4,569 $ 4,222 $ 4,063 8 % 4 $ 4,569 $ 4,222 $ 4,063 8 % 4 % As 4,569 $ 4,222 $ 4,063 8 % 4 % As a 4,222 $ 4,063 8 % 4 % As a percent of As a percent of revenue 6 % 6 % 7 % percent of revenue 6 % 6 % 7 % 0ppt ( revenue 6 % 6 % 7 % 0ppt ( 1 ) % 6 % 7 % 0ppt ( 1 ) ppt General % 7 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 General and administrative expense increased , primarily due to a 10 % increase in headcount-related expense decrease in legal charge . 33 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2011 compared with II Item 7 Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 General and administrative expense increased , primarily due to a 12 % increase in headcount-related expense impairment test a of May 1 , 2012 for all reporting a of May 1 , 2012 for all reporting unit . goodwill impairment charge of $ 6.2 billion during the three month the three month ended June 30 , 2012 , reducing OSD month ended June 30 , 2012 , reducing OSD ’ s ’ s goodwill from $ 6.4 billion to $ 223 million $ 6.4 billion to $ 223 million . OTHER INCOME ( million ) Year Ended June 30 , 2012 2011 2010 Dividends Year Ended June 30 , 2012 2011 2010 Dividends and interest Ended June 30 , 2012 2011 2010 Dividends and interest income June 30 , 2012 2011 2010 Dividends and interest income $ Dividends and interest income $ 800 $ 900 $ 843 Interest interest income $ 800 $ 900 $ 843 Interest expense ( $ 800 $ 900 $ 843 Interest expense ( 380 ) $ 843 Interest expense ( 380 ) ( 295 ) ( expense ( 380 ) ( 295 ) ( 151 ) Net ) ( 295 ) ( 151 ) Net recognized gain on Net recognized gain on investment 564 439 348 Net loss on recognized gain on investment 564 439 348 Net loss on derivative gain on investment 564 439 348 Net loss on derivative ( Net loss on derivative ( 364 ) ( 77 ) ( derivative ( 364 ) ( 77 ) ( 140 ) Net ) ( 77 ) ( 140 ) Net gain ( loss on foreign currency remeasurements ( 117 ) ( 26 ) 1 remeasurements ( 117 ) ( 26 ) 1 Other 1 ( 117 ) ( 26 ) 1 Other 1 ( 31 ) ( 26 ) 1 Other 1 ( 31 ) 14 Total ) 1 Other 1 ( 31 ) 14 Total $ 504 Other 1 ( 31 ) 14 Total $ 504 $ 910 31 ) 14 Total $ 504 $ 910 $ 915 We 14 Total $ 504 $ 910 $ 915 We use derivative $ 504 $ 910 $ 915 We use derivative instrument to comprehensive income . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Dividends and interest income decreased initial public offering on May 18 , 2012 , offset in offering on May 18 , 2012 , offset in part by . Other-than-temporary impairment were $ 298 million in fiscal year 2012 298 million in fiscal year 2012 , compared with $ 80 2012 , compared with $ 80 million in fiscal year 2011 80 million in fiscal year 2011 . Net loss on derivative hedging activity . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Dividends and interest income increased issuance of debt . Net 34 Table of Contents PART II of Contents PART II Item 7 recognized gain on investment increased . Income Taxes Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Our effective tax rate for tax rate for fiscal year 2012 and 2011 were approximately 24 for fiscal year 2012 and 2011 were approximately 24 % and 2012 and 2011 were approximately 24 % and 18 % , were approximately 24 % and 18 % , respectively . Our rate . Our fiscal year 2012 effective rate increased by 6 2012 effective rate increased by 6 % from fiscal year 2011 6 % from fiscal year 2011 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment in the fourth quarter of 2012 . The goodwill impairment charge our effective tax rate by 10 % . In addition , addition , in fiscal year 2012 and 2011 , we recognized in fiscal year 2012 and 2011 , we recognized a reduction we recognized a reduction of 21 % and 16 % , reduction of 21 % and 16 % , respectively , to rate . In fiscal year 2011 , we settled a portion . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income tax expense for fiscal year 2011 by $ 461 million and fiscal year 2011 by $ 461 million and reduced the effective the effective tax rate by 2 % . Changes in the Division operating income declined $ 751 million in fiscal year 2012 751 million in fiscal year 2012 , while MBD and Server Tools operating income increased $ 1.1 billion and $ 1.1 billion $ 1.1 billion and $ 1.1 billion , respectively , during center . In fiscal year 2012 and 2011 , our U.S. In fiscal year 2012 and 2011 , our U.S. income before before income tax wa $ 1.6 billion and $ 8.9 billion $ 1.6 billion and $ 8.9 billion , respectively , and , respectively , and comprised 7 % and 32 % , and comprised 7 % and 32 % , respectively , of tax . In fiscal year 2012 and 2011 , the foreign In fiscal year 2012 and 2011 , the foreign income before before income tax wa $ 20.7 billion and $ 19.2 billion $ 20.7 billion and $ 19.2 billion , respectively , and , respectively , and comprised 93 % and 68 % , and comprised 93 % and 68 % , respectively , of income tax in fiscal year 2012 wa the goodwill impairment charge other tax liability were $ 7.6 billion and $ 7.4 billion $ 7.6 billion and $ 7.4 billion a of June 30 7.4 billion a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , respectively , June 30 , 2012 and 2011 , respectively , and are . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit these year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2012 , the primary As of June 30 , 2012 , the primary unresolved issue or decrease within the next 12 month , a we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2011 . Fiscal year for tax year 2007 to 2011 . Fiscal year 2011 compared to 2011 . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Our effective tax rate for tax rate for fiscal year 2011 and 2010 were approximately 18 for fiscal year 2011 and 2010 were approximately 18 % and 2011 and 2010 were approximately 18 % and 25 % , were approximately 18 % and 25 % , respectively . Our rate . In fiscal year 2011 and 2010 , our U.S. In fiscal year 2011 and 2010 , our U.S. income before before income tax wa $ 8.9 billion and $ 9.6 billion $ 8.9 billion and $ 9.6 billion , respectively , and , respectively , and comprised 32 % and 38 % , and comprised 32 % and 38 % , respectively , of tax . In fiscal year 2011 and 2010 , the foreign In fiscal year 2011 and 2010 , the foreign income before before income tax wa $ 19.2 billion and $ 15.4 billion $ 19.2 billion and $ 15.4 billion , respectively , and , respectively , and comprised 68 % and 62 % , and comprised 68 % and 62 % , respectively , of tax . In fiscal year 2011 and 2010 , the reduction In fiscal year 2011 and 2010 , the reduction of the taxed at lower rate wa 16 % and 12 % , rate wa 16 % and 12 % , respectively . 35 12 % , respectively . 35 Table of Contents PART II of Contents PART II Item 7 In addition , our effective third quarter of fiscal year 2011 relating to the audit of the audit of tax year 2004 to 2006 . This partial of tax year 2004 to 2006 . This partial settlement reduced tax expense for fiscal year 2011 by $ 461 million . fiscal year 2011 by $ 461 million . FINANCIAL CONDITION Cash and short-term investment totaled $ 63.0 billion a of June 30 63.0 billion a of June 30 , 2012 , compared with a of June 30 , 2012 , compared with $ 52.8 2012 , compared with $ 52.8 billion a of June 30 52.8 billion a of June 30 , 2011 . Equity and a of June 30 , 2011 . Equity and other investment and other investment were $ 9.8 billion a of June 30 9.8 billion a of June 30 , 2012 , compared with a of June 30 , 2012 , compared with $ 10.9 2012 , compared with $ 10.9 billion a of June 30 10.9 billion a of June 30 , 2011 . Our short-term a of June 30 , 2011 . Our short-term investment are our portfolio a of June 30 , 2012 doe not contain a of June 30 , 2012 doe not contain direct exposure residential mortgage and carry a 100 % principal and interest guarantee and short-term investment at June 30 , 2012 , approximately $ investment at June 30 , 2012 , approximately $ 54 billion , 2012 , approximately $ 54 billion wa held by our regulatory ) wa approximately $ 660 million . As of June million . As of June 30 , 2012 , approximately 77 As of June 30 , 2012 , approximately 77 % of 30 , 2012 , approximately 77 % of the short-term investment and agency security , approximately 10 % were invested in corporate of U.S. company , and 3 % were invested in U.S. lending payable balance wa $ 814 million a of June 30 814 million a of June 30 , 2012 . Our average a of June 30 , 2012 . Our average and maximum the fiscal year were $ 1.2 billion and $ 1.4 billion $ 1.2 billion and $ 1.4 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note and bond , foreign government 36 Table of Contents PART II of Contents PART II Item 7 bond , mortgage-backed security , and agency security . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally labeled a Level 2 investment because the broker price . Cash Flows Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Cash flow from operation increased flow from operation increased $ 4.6 billion during the current fiscal current fiscal year to $ 31.6 billion due mainly to increased used for financing increased $ 1.0 billion to $ 9.4 billion $ 1.0 billion to $ 9.4 billion due mainly to a due mainly to a $ 6.0 billion net decrease in proceeds of debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 billion to $ 24.8 billion $ 10.2 billion to $ 24.8 billion due mainly to a due mainly to a $ 10.0 billion increase in acquisition of intangible asset and a $ 1.4 billion decrease in cash from partially offset by a $ 1.2 billion decrease in cash used of investment . Fiscal year 2011 compared with fiscal year 2010 2011 compared with fiscal year 2010 Cash flow from operation increased flow from operation increased $ 2.9 billion during the current fiscal current fiscal year to $ 27.0 billion due mainly to increased used in financing decreased $ 4.9 billion to $ 8.4 billion $ 4.9 billion to $ 8.4 billion due mainly to a due mainly to a $ 5.8 billion increase in proceeds from in part by a $ 602 million increase in cash paid used in investing increased $ 3.3 billion to $ 14.6 billion $ 3.3 billion to $ 14.6 billion due to a $ billion due to a $ 5.8 billion increase in purchase of in part by a $ 2.5 billion increase in cash from repurchase . As of June 30 , 2012 , the total As of June 30 , 2012 , the total carrying value current portion , were $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively . This estimated fair value of $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respectively , a respectively , a of June 30 , 2011 . These estimated a of June 30 , 2011 . These estimated fair value value are based on Level 2 input . 37 Table of on Level 2 input . 37 Table of Contents PART II of Contents PART II Item 7 The component of our long-term a follows a of June 30 , 2012 : Due Date a of June 30 , 2012 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 2013 $ 1,000 0.875 % 1.000 % March 15 2013 $ 1,000 0.875 % 1.000 % March 15 March 27 0.875 % 1.000 % March 15 March 27 September 15 September 1.000 % March 15 March 27 September 15 September 27 June March 15 March 27 September 15 September 27 June 1 , March 27 September 15 September 27 June 1 , 2014 2,000 September 15 September 27 June 1 , 2014 2,000 2.950 % September 27 June 1 , 2014 2,000 2.950 % 3.049 % 27 June 1 , 2014 2,000 2.950 % 3.049 % May June 1 , 2014 2,000 2.950 % 3.049 % May 15 , 2014 2,000 2.950 % 3.049 % May 15 June 1 2.950 % 3.049 % May 15 June 1 November 15 December 3.049 % May 15 June 1 November 15 December 1 September May 15 June 1 November 15 December 1 September 25 , June 1 November 15 December 1 September 25 , 2015 1,750 November 15 December 1 September 25 , 2015 1,750 1.625 % December 1 September 25 , 2015 1,750 1.625 % 1.795 % 1 September 25 , 2015 1,750 1.625 % 1.795 % March September 25 , 2015 1,750 1.625 % 1.795 % March 15 , 2015 1,750 1.625 % 1.795 % March 15 March 25 1.625 % 1.795 % March 15 March 25 September 15 September 1.795 % March 15 March 25 September 15 September 25 February March 15 March 25 September 15 September 25 February 8 , March 25 September 15 September 25 February 8 , 2016 750 September 15 September 25 February 8 , 2016 750 2.500 % September 25 February 8 , 2016 750 2.500 % 2.642 % 25 February 8 , 2016 750 2.500 % 2.642 % February February 8 , 2016 750 2.500 % 2.642 % February 1 , 2016 750 2.500 % 2.642 % February 1 February 8 2.500 % 2.642 % February 1 February 8 August 1 August 2.642 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2019 1,000 August 1 August 8 June 1 , 2019 1,000 4.200 % August 8 June 1 , 2019 1,000 4.200 % 4.379 % 8 June 1 , 2019 1,000 4.200 % 4.379 % May June 1 , 2019 1,000 4.200 % 4.379 % May 15 , 2019 1,000 4.200 % 4.379 % May 15 June 1 4.200 % 4.379 % May 15 June 1 November 15 December 4.379 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2020 1,000 November 15 December 1 October 1 , 2020 1,000 3.000 % December 1 October 1 , 2020 1,000 3.000 % 3.137 % 1 October 1 , 2020 1,000 3.000 % 3.137 % March October 1 , 2020 1,000 3.000 % 3.137 % March 15 , 2020 1,000 3.000 % 3.137 % March 15 April 1 3.000 % 3.137 % March 15 April 1 September 15 October 3.137 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2021 500 September 15 October 1 February 8 , 2021 500 4.000 % October 1 February 8 , 2021 500 4.000 % 4.082 % 1 February 8 , 2021 500 4.000 % 4.082 % February February 8 , 2021 500 4.000 % 4.082 % February 1 , 2021 500 4.000 % 4.082 % February 1 February 8 4.000 % 4.082 % February 1 February 8 August 1 August 4.082 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2039 750 August 1 August 8 June 1 , 2039 750 5.200 % August 8 June 1 , 2039 750 5.200 % 5.240 % 8 June 1 , 2039 750 5.200 % 5.240 % May June 1 , 2039 750 5.200 % 5.240 % May 15 , 2039 750 5.200 % 5.240 % May 15 June 1 5.200 % 5.240 % May 15 June 1 November 15 December 5.240 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2040 1,000 November 15 December 1 October 1 , 2040 1,000 4.500 % December 1 October 1 , 2040 1,000 4.500 % 4.567 % 1 October 1 , 2040 1,000 4.500 % 4.567 % March October 1 , 2040 1,000 4.500 % 4.567 % March 15 , 2040 1,000 4.500 % 4.567 % March 15 April 1 4.500 % 4.567 % March 15 April 1 September 15 October 4.567 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2041 1,000 September 15 October 1 February 8 , 2041 1,000 5.300 % October 1 February 8 , 2041 1,000 5.300 % 5.361 % 1 February 8 , 2041 1,000 5.300 % 5.361 % February February 8 , 2041 1,000 5.300 % 5.361 % February 1 , 2041 1,000 5.300 % 5.361 % February 1 February 8 5.300 % 5.361 % February 1 February 8 August 1 August 5.361 % February 1 February 8 August 1 August 8 Total February 1 February 8 August 1 August 8 Total 10,750 Convertible February 8 August 1 August 8 Total 10,750 Convertible Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total face , 2013 1,250 0.000 % 1.849 % Total face value $ % Total face value $ 12,000 As of June 30 , $ 12,000 As of June 30 , 2012 , the aggregate As of June 30 , 2012 , the aggregate unamortized discount current portion , wa $ 56 million . Notes The Notes . Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee . Initially , each $ 1,000 principal amount of note wa of note wa convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . The conversion agreement . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million with the portion in call transaction are expected to 38 Table of Contents PART II of Contents PART II Item 7 reduce potential dilution of earnings cap price equal to $ 37.16 , which is adjusted periodically call were valued at $ 40 million and recorded to stockholder Revenue Unearned revenue at June 30 , 2012 comprised mainly unearned revenue at June 30 , 2012 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2012 also included payment revenue at June 30 , 2012 also included payment for : unearned revenue a of June 30 , 2012 : ( In a of June 30 , 2012 : ( In million ) Three Months Ending , September 30 , 2012 $ 6,874 December Ending , September 30 , 2012 $ 6,874 December 31 , September 30 , 2012 $ 6,874 December 31 , 2012 5,635 , 2012 $ 6,874 December 31 , 2012 5,635 March 31 $ 6,874 December 31 , 2012 5,635 March 31 , 2013 6,874 December 31 , 2012 5,635 March 31 , 2013 4,323 31 , 2012 5,635 March 31 , 2013 4,323 June 30 2012 5,635 March 31 , 2013 4,323 June 30 , 2013 5,635 March 31 , 2013 4,323 June 30 , 2013 1,821 31 , 2013 4,323 June 30 , 2013 1,821 Thereafter 1,406 2013 4,323 June 30 , 2013 1,821 Thereafter 1,406 Total $ 4,323 June 30 , 2013 1,821 Thereafter 1,406 Total $ 20,059 30 , 2013 1,821 Thereafter 1,406 Total $ 20,059 Share Repurchases 1,821 Thereafter 1,406 Total $ 20,059 Share Repurchases On September 22 20,059 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced that our program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2012 , approximately $ As of June 30 , 2012 , approximately $ 8.2 billion , 2012 , approximately $ 8.2 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . repurchased with cash resource : 142 million share for $ 4.0 142 million share for $ 4.0 billion during fiscal year 2012 4.0 billion during fiscal year 2012 ; 447 million share for during fiscal year 2012 ; 447 million share for $ 11.5 447 million share for $ 11.5 billion during fiscal year 2011 11.5 billion during fiscal year 2011 ; and 380 million share fiscal year 2011 ; and 380 million share for $ 10.8 380 million share for $ 10.8 billion during fiscal year 2010 10.8 billion during fiscal year 2010 . Dividends During fiscal year . Dividends During fiscal year 2012 and 2011 , our Board During fiscal year 2012 and 2011 , our Board of Directors In million ) Fiscal Year 2012 September 20 , 2011 $ ) Fiscal Year 2012 September 20 , 2011 $ 0.20 November Year 2012 September 20 , 2011 $ 0.20 November 17 , September 20 , 2011 $ 0.20 November 17 , 2011 $ , 2011 $ 0.20 November 17 , 2011 $ 1,683 December $ 0.20 November 17 , 2011 $ 1,683 December 8 , November 17 , 2011 $ 1,683 December 8 , 2011 December , 2011 $ 1,683 December 8 , 2011 December 14 , $ 1,683 December 8 , 2011 December 14 , 2011 $ December 8 , 2011 December 14 , 2011 $ 0.20 February , 2011 December 14 , 2011 $ 0.20 February 16 , December 14 , 2011 $ 0.20 February 16 , 2012 $ , 2011 $ 0.20 February 16 , 2012 $ 1,683 March $ 0.20 February 16 , 2012 $ 1,683 March 8 , February 16 , 2012 $ 1,683 March 8 , 2012 March , 2012 $ 1,683 March 8 , 2012 March 13 , $ 1,683 March 8 , 2012 March 13 , 2012 $ March 8 , 2012 March 13 , 2012 $ 0.20 May , 2012 March 13 , 2012 $ 0.20 May 17 , March 13 , 2012 $ 0.20 May 17 , 2012 $ , 2012 $ 0.20 May 17 , 2012 $ 1,678 June $ 0.20 May 17 , 2012 $ 1,678 June 14 , May 17 , 2012 $ 1,678 June 14 , 2012 June , 2012 $ 1,678 June 14 , 2012 June 13 , $ 1,678 June 14 , 2012 June 13 , 2012 $ June 14 , 2012 June 13 , 2012 $ 0.20 August , 2012 June 13 , 2012 $ 0.20 August 16 , June 13 , 2012 $ 0.20 August 16 , 2012 $ , 2012 $ 0.20 August 16 , 2012 $ 1,676 September $ 0.20 August 16 , 2012 $ 1,676 September 13 , August 16 , 2012 $ 1,676 September 13 , 2012 Fiscal , 2012 $ 1,676 September 13 , 2012 Fiscal Year 2011 $ 1,676 September 13 , 2012 Fiscal Year 2011 September 21 13 , 2012 Fiscal Year 2011 September 21 , 2010 $ 2012 Fiscal Year 2011 September 21 , 2010 $ 0.16 November Year 2011 September 21 , 2010 $ 0.16 November 18 , September 21 , 2010 $ 0.16 November 18 , 2010 $ , 2010 $ 0.16 November 18 , 2010 $ 1,363 December $ 0.16 November 18 , 2010 $ 1,363 December 9 , November 18 , 2010 $ 1,363 December 9 , 2010 December , 2010 $ 1,363 December 9 , 2010 December 15 , $ 1,363 December 9 , 2010 December 15 , 2010 $ December 9 , 2010 December 15 , 2010 $ 0.16 February , 2010 December 15 , 2010 $ 0.16 February 17 , December 15 , 2010 $ 0.16 February 17 , 2011 $ , 2010 $ 0.16 February 17 , 2011 $ 1,349 March $ 0.16 February 17 , 2011 $ 1,349 March 10 , February 17 , 2011 $ 1,349 March 10 , 2011 March , 2011 $ 1,349 March 10 , 2011 March 14 , $ 1,349 March 10 , 2011 March 14 , 2011 $ March 10 , 2011 March 14 , 2011 $ 0.16 May , 2011 March 14 , 2011 $ 0.16 May 19 , March 14 , 2011 $ 0.16 May 19 , 2011 $ , 2011 $ 0.16 May 19 , 2011 $ 1,350 June $ 0.16 May 19 , 2011 $ 1,350 June 9 , May 19 , 2011 $ 1,350 June 9 , 2011 June , 2011 $ 1,350 June 9 , 2011 June 15 , $ 1,350 June 9 , 2011 June 15 , 2011 $ June 9 , 2011 June 15 , 2011 $ 0.16 August , 2011 June 15 , 2011 $ 0.16 August 18 , June 15 , 2011 $ 0.16 August 18 , 2011 $ , 2011 $ 0.16 August 18 , 2011 $ 1,341 September $ 0.16 August 18 , 2011 $ 1,341 September 8 , August 18 , 2011 $ 1,341 September 8 , 2011 39 , 2011 $ 1,341 September 8 , 2011 39 Table of $ 1,341 September 8 , 2011 39 Table of Contents PART 1,341 September 8 , 2011 39 Table of Contents PART II of Contents PART II Item 7 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2012 : ( In a of June 30 , 2012 : ( In million ) : ( In million ) 2013 2014-2015 2016-2017 Thereafter Total Long-term ( In million ) 2013 2014-2015 2016-2017 Thereafter Total Long-term debt In million ) 2013 2014-2015 2016-2017 Thereafter Total Long-term debt : a ) Principal payment $ 1,250 $ 3,000 $ 2,500 $ Principal payment $ 1,250 $ 3,000 $ 2,500 $ 5,250 $ $ 1,250 $ 3,000 $ 2,500 $ 5,250 $ 12,000 Interest $ 3,000 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 $ 2,500 $ 5,250 $ 12,000 Interest payment 344 616 491 5,250 $ 12,000 Interest payment 344 616 491 3,457 4,908 Construction $ 12,000 Interest payment 344 616 491 3,457 4,908 Construction commitment 12,000 Interest payment 344 616 491 3,457 4,908 Construction commitment ( Interest payment 344 616 491 3,457 4,908 Construction commitment ( b payment 344 616 491 3,457 4,908 Construction commitment ( b ) Construction commitment ( b ) 353 0 0 0 353 Operating commitment ( b ) 353 0 0 0 353 Operating lease ( b ) 353 0 0 0 353 Operating lease ( b ) 353 0 0 0 353 Operating lease ( c ) 353 0 0 0 353 Operating lease ( c ) Operating lease ( c ) 527 748 387 315 1,977 Purchase lease ( c ) 527 748 387 315 1,977 Purchase commitment ( c ) 527 748 387 315 1,977 Purchase commitment ( c ) 527 748 387 315 1,977 Purchase commitment ( d ) 527 748 387 315 1,977 Purchase commitment ( d ) Purchase commitment ( d ) 6,556 884 236 146 7,822 Other commitment ( d ) 6,556 884 236 146 7,822 Other long-term ( d ) 6,556 884 236 146 7,822 Other long-term liability d ) 6,556 884 236 146 7,822 Other long-term liability ( ) 6,556 884 236 146 7,822 Other long-term liability ( e long-term liability ( e ) 0 106 16 30 152 Total liability ( e ) 0 106 16 30 152 Total contractual ( e ) 0 106 16 30 152 Total contractual obligation e ) 0 106 16 30 152 Total contractual obligation $ ) 0 106 16 30 152 Total contractual obligation $ 9,030 152 Total contractual obligation $ 9,030 $ 5,354 $ 3,630 $ contractual obligation $ 9,030 $ 5,354 $ 3,630 $ 9,198 $ $ 9,030 $ 5,354 $ 3,630 $ 9,198 $ 27,212 ( $ 5,354 $ 3,630 $ 9,198 $ 27,212 ( a ) $ 3,630 $ 9,198 $ 27,212 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) deferred income tax of $ 9.5 billion and other long-term contingent long-term contingent liability of $ 220 million ( related to the excluded unearned revenue of $ 1.4 billion and non-cash item of and non-cash item of $ 202 million . Other Planned Uses Uses of Capital On July 18 , 2012 , we acquired Capital On July 18 , 2012 , we acquired Yammer , social network , for $ 1.2 billion in cash . Yammer Equivalents , and Investments , 40 Table of Contents PART II of Contents PART II Item 7 the majority of our cash for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the Adopted Accounting Guidance On July 1 , 2011 , we adopted Guidance On July 1 , 2011 , we adopted guidance issued significant unobservable input ( Level 3 fair value measurement ) . financial statement . On January 1 , 2012 , we adopted . On January 1 , 2012 , we adopted guidance issued expands the disclosure on Level 3 input by requiring quantitative disclosure Not Yet Adopted In December 2011 , the FASB issued guidance effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In September 2011 , the FASB issued guidance effective for u beginning July 1 , 2012 . In June u beginning July 1 , 2012 . In June 2011 , , 2012 . In June 2011 , the FASB issued guidance statement of net income and 41 Table of Contents PART II of Contents PART II Item 7 other comprehensive income or in effective for u beginning July 1 , 2012 and will require u beginning July 1 , 2012 and will require financial statement . However , in December 2011 , the FASB issued guidance to existing product . Windows 7 revenue is subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provides significantly discounted right to purchase Windows 8 Pro to qualifying end user end user that purchase Windows 7 PCs during the eligibility period is responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 is deferred until it is an annual basis ( May 1 for u ) and between of a reporting unit . 42 Table of Contents PART II of Contents PART II Item 7 Application of the goodwill impairment that ha a greater than 50 % likelihood of being realized operation could be impacted . 43 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 44 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 45 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2012 and June 30 a of June 30 , 2012 and June 30 , 2011 30 , 2012 and June 30 , 2011 and for the 2012 and June 30 , 2011 and for the year ended for the year ended June 30 , 2012 : ( In year ended June 30 , 2012 : ( In million ) ( In million ) June 30 , 2012 June 30 , million ) June 30 , 2012 June 30 , 2011 Year June 30 , 2012 June 30 , 2011 Year Ended June , 2012 June 30 , 2011 Year Ended June 30 , , 2011 Year Ended June 30 , 2012 Risk Categories Average Year Ended June 30 , 2012 Risk Categories Average High Low High Low Foreign currency $ 98 $ 86 $ 173 $ Foreign currency $ 98 $ 86 $ 173 $ 229 $ $ 98 $ 86 $ 173 $ 229 $ 84 Interest $ 86 $ 173 $ 229 $ 84 Interest rate $ $ 173 $ 229 $ 84 Interest rate $ 71 $ $ 84 Interest rate $ 71 $ 58 $ 64 $ Interest rate $ 71 $ 58 $ 64 $ 73 $ $ 71 $ 58 $ 64 $ 73 $ 57 Equity $ 58 $ 64 $ 73 $ 57 Equity $ 205 $ 64 $ 73 $ 57 Equity $ 205 $ 212 73 $ 57 Equity $ 205 $ 212 $ 194 $ 57 Equity $ 205 $ 212 $ 194 $ 248 $ $ 205 $ 212 $ 194 $ 248 $ 165 Commodity $ 212 $ 194 $ 248 $ 165 Commodity $ 18 $ 194 $ 248 $ 165 Commodity $ 18 $ 28 248 $ 165 Commodity $ 18 $ 28 $ 20 $ 165 Commodity $ 18 $ 28 $ 20 $ 29 $ $ 18 $ 28 $ 20 $ 29 $ 15 Total $ 28 $ 20 $ 29 $ 15 Total one-day VaR $ 20 $ 29 $ 15 Total one-day VaR for the combined risk category wa $ 292 million at June 30 , $ 292 million at June 30 , 2012 and $ 290 million at June 30 , 2012 and $ 290 million at 30 , 2012 and $ 290 million at June 30 , $ 290 million at June 30 , 2011 . The total million at June 30 , 2011 . The total VaR is . The total VaR is 26 % le at June 30 26 % le at June 30 , 2012 , and 25 le at June 30 , 2012 , and 25 % le 30 , 2012 , and 25 % le at June 30 25 % le at June 30 , 2011 , than the le at June 30 , 2011 , than the sum of the combination of risk . 46 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2012 2011 2010 Revenue Year Ended June 30 , 2012 2011 2010 Revenue $ 73,723 Ended June 30 , 2012 2011 2010 Revenue $ 73,723 $ June 30 , 2012 2011 2010 Revenue $ 73,723 $ 69,943 2012 2011 2010 Revenue $ 73,723 $ 69,943 $ 62,484 Operating 2010 Revenue $ 73,723 $ 69,943 $ 62,484 Operating expense : $ 73,723 $ 69,943 $ 62,484 Operating expense : Cost of expense : Cost of revenue 17,530 15,577 12,395 Research and development : Cost of revenue 17,530 15,577 12,395 Research and development 9,811 Cost of revenue 17,530 15,577 12,395 Research and development 9,811 9,043 15,577 12,395 Research and development 9,811 9,043 8,714 Sales and marketing 12,395 Research and development 9,811 9,043 8,714 Sales and marketing 13,857 Research and development 9,811 9,043 8,714 Sales and marketing 13,857 13,940 9,043 8,714 Sales and marketing 13,857 13,940 13,214 General and administrative 8,714 Sales and marketing 13,857 13,940 13,214 General and administrative 4,569 Sales and marketing 13,857 13,940 13,214 General and administrative 4,569 4,222 13,940 13,214 General and administrative 4,569 4,222 4,063 Goodwill impairment 6,193 13,214 General and administrative 4,569 4,222 4,063 Goodwill impairment 6,193 0 General and administrative 4,569 4,222 4,063 Goodwill impairment 6,193 0 0 4,569 4,222 4,063 Goodwill impairment 6,193 0 0 Total operating expense 4,222 4,063 Goodwill impairment 6,193 0 0 Total operating expense 51,960 4,063 Goodwill impairment 6,193 0 0 Total operating expense 51,960 42,782 0 0 Total operating expense 51,960 42,782 38,386 Operating income 21,763 0 Total operating expense 51,960 42,782 38,386 Operating income 21,763 27,161 Total operating expense 51,960 42,782 38,386 Operating income 21,763 27,161 24,098 51,960 42,782 38,386 Operating income 21,763 27,161 24,098 Other income 504 42,782 38,386 Operating income 21,763 27,161 24,098 Other income 504 910 38,386 Operating income 21,763 27,161 24,098 Other income 504 910 915 21,763 27,161 24,098 Other income 504 910 915 Income before income 27,161 24,098 Other income 504 910 915 Income before income tax 24,098 Other income 504 910 915 Income before income tax 22,267 915 Income before income tax 22,267 28,071 25,013 Provision for income Income before income tax 22,267 28,071 25,013 Provision for income tax before income tax 22,267 28,071 25,013 Provision for income tax 5,289 25,013 Provision for income tax 5,289 4,921 6,253 Net income $ Provision for income tax 5,289 4,921 6,253 Net income $ 16,978 for income tax 5,289 4,921 6,253 Net income $ 16,978 $ 4,921 6,253 Net income $ 16,978 $ 23,150 $ 18,760 Earnings Net income $ 16,978 $ 23,150 $ 18,760 Earnings per share $ 16,978 $ 23,150 $ 18,760 Earnings per share : Basic per share : Basic $ 2.02 $ 2.73 $ 2.13 Diluted : Basic $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.02 $ 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 2.73 $ 2.13 Diluted $ 2.00 $ 2.69 $ 2.10 Weighted 2.13 Diluted $ 2.00 $ 2.69 $ 2.10 Weighted average share $ 2.00 $ 2.69 $ 2.10 Weighted average share outstanding : average share outstanding : Basic 8,396 8,490 8,813 Diluted 8,506 8,593 share outstanding : Basic 8,396 8,490 8,813 Diluted 8,506 8,593 8,927 outstanding : Basic 8,396 8,490 8,813 Diluted 8,506 8,593 8,927 Cash Basic 8,396 8,490 8,813 Diluted 8,506 8,593 8,927 Cash dividend declared 8,396 8,490 8,813 Diluted 8,506 8,593 8,927 Cash dividend declared per 8,490 8,813 Diluted 8,506 8,593 8,927 Cash dividend declared per common declared per common share $ 0.80 $ 0.64 $ 0.52 See common share $ 0.80 $ 0.64 $ 0.52 See accompanying note $ 0.80 $ 0.64 $ 0.52 See accompanying note . 47 0.52 See accompanying note . 47 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2012 2011 Assets Current million ) June 30 , 2012 2011 Assets Current asset : ) June 30 , 2012 2011 Assets Current asset : Cash Cash and cash equivalent $ 6,938 $ 9,610 Short-term investment ( cash equivalent $ 6,938 $ 9,610 Short-term investment ( including security including security loaned of $ 785 and $ 1,181 ) 56,102 of $ 785 and $ 1,181 ) 56,102 43,162 Total cash 785 and $ 1,181 ) 56,102 43,162 Total cash , cash and $ 1,181 ) 56,102 43,162 Total cash , cash equivalent equivalent , and short-term investment 63,040 52,772 Accounts receivable , net , and short-term investment 63,040 52,772 Accounts receivable , net of for doubtful account of $ 389 and $ 333 15,780 14,987 of $ 389 and $ 333 15,780 14,987 Inventories 1,137 1,372 $ 389 and $ 333 15,780 14,987 Inventories 1,137 1,372 Deferred 389 and $ 333 15,780 14,987 Inventories 1,137 1,372 Deferred income $ 333 15,780 14,987 Inventories 1,137 1,372 Deferred income tax 2,035 333 15,780 14,987 Inventories 1,137 1,372 Deferred income tax 2,035 2,467 1,137 1,372 Deferred income tax 2,035 2,467 Other 3,092 3,320 Total 1,372 Deferred income tax 2,035 2,467 Other 3,092 3,320 Total current income tax 2,035 2,467 Other 3,092 3,320 Total current asset 85,084 tax 2,035 2,467 Other 3,092 3,320 Total current asset 85,084 74,918 3,092 3,320 Total current asset 85,084 74,918 Property and equipment , 3,320 Total current asset 85,084 74,918 Property and equipment , net of accumulated depreciation of $ 10,962 and $ 9,829 8,269 8,162 of $ 10,962 and $ 9,829 8,269 8,162 Equity and other $ 10,962 and $ 9,829 8,269 8,162 Equity and other investment 10,962 and $ 9,829 8,269 8,162 Equity and other investment 9,776 8,162 Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible Equity and other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset other investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset , net investment 9,776 10,865 Goodwill 13,452 12,581 Intangible asset , net 3,170 12,581 Intangible asset , net 3,170 744 Other long-term asset 1,520 Intangible asset , net 3,170 744 Other long-term asset 1,520 1,434 3,170 744 Other long-term asset 1,520 1,434 Total asset $ 121,271 744 Other long-term asset 1,520 1,434 Total asset $ 121,271 $ 1,520 1,434 Total asset $ 121,271 $ 108,704 Liabilities and stockholder Total asset $ 121,271 $ 108,704 Liabilities and stockholder ’ equity liability : Accounts payable $ 4,175 $ 4,197 Current portion of Accounts payable $ 4,175 $ 4,197 Current portion of long-term debt Current portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 portion of long-term debt 1,231 0 Accrued compensation 3,875 3,575 Income debt 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 1,231 0 Accrued compensation 3,875 3,575 Income tax 789 580 Short-term compensation 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 3,875 3,575 Income tax 789 580 Short-term unearned revenue 18,653 15,722 789 580 Short-term unearned revenue 18,653 15,722 Securities lending payable 814 580 Short-term unearned revenue 18,653 15,722 Securities lending payable 814 1,208 18,653 15,722 Securities lending payable 814 1,208 Other 3,151 3,492 Total 15,722 Securities lending payable 814 1,208 Other 3,151 3,492 Total current lending payable 814 1,208 Other 3,151 3,492 Total current liability 32,688 payable 814 1,208 Other 3,151 3,492 Total current liability 32,688 28,774 3,151 3,492 Total current liability 32,688 28,774 Long-term debt 10,713 11,921 3,492 Total current liability 32,688 28,774 Long-term debt 10,713 11,921 Long-term liability 32,688 28,774 Long-term debt 10,713 11,921 Long-term unearned revenue 1,406 32,688 28,774 Long-term debt 10,713 11,921 Long-term unearned revenue 1,406 1,398 10,713 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 11,921 Long-term unearned revenue 1,406 1,398 Deferred income tax 1,893 1,456 1,406 1,398 Deferred income tax 1,893 1,456 Other long-term liability 8,208 1,398 Deferred income tax 1,893 1,456 Other long-term liability 8,208 8,072 1,893 1,456 Other long-term liability 8,208 8,072 Total liability 54,908 51,621 1,456 Other long-term liability 8,208 8,072 Total liability 54,908 51,621 Commitments liability 8,208 8,072 Total liability 54,908 51,621 Commitments and contingency Stockholders 8,208 8,072 Total liability 54,908 51,621 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,381 and 8,376 share authorized 24,000 ; outstanding 8,381 and 8,376 65,797 63,415 Retained 24,000 ; outstanding 8,381 and 8,376 65,797 63,415 Retained earnings ( ; outstanding 8,381 and 8,376 65,797 63,415 Retained earnings ( deficit outstanding 8,381 and 8,376 65,797 63,415 Retained earnings ( deficit ) other comprehensive income of $ 1,422 and $ 1,863 566 ( of $ 1,422 and $ 1,863 566 ( 6,332 ) Total $ 1,422 and $ 1,863 566 ( 6,332 ) Total stockholder and $ 1,863 566 ( 6,332 ) Total stockholder ’ equity ) Total stockholder ’ equity 66,363 57,083 Total liability and stockholder Total stockholder ’ equity 66,363 57,083 Total liability and stockholder ’ and stockholder ’ equity $ 121,271 $ 108,704 See accompanying note ’ equity $ 121,271 $ 108,704 See accompanying note . 48 108,704 See accompanying note . 48 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2012 2011 2010 Operations Year Ended June 30 , 2012 2011 2010 Operations Net income Ended June 30 , 2012 2011 2010 Operations Net income $ June 30 , 2012 2011 2010 Operations Net income $ 16,978 2010 Operations Net income $ 16,978 $ 23,150 $ 18,760 Adjustments Net income $ 16,978 $ 23,150 $ 18,760 Adjustments to reconcile $ 16,978 $ 23,150 $ 18,760 Adjustments to reconcile net income from operation : Goodwill impairment 6,193 0 0 Depreciation , amortization operation : Goodwill impairment 6,193 0 0 Depreciation , amortization , : Goodwill impairment 6,193 0 0 Depreciation , amortization , and , amortization , and other 2,967 2,766 2,673 Stock-based compensation expense amortization , and other 2,967 2,766 2,673 Stock-based compensation expense 2,244 , and other 2,967 2,766 2,673 Stock-based compensation expense 2,244 2,166 2,766 2,673 Stock-based compensation expense 2,244 2,166 1,891 Net recognized gain 2,673 Stock-based compensation expense 2,244 2,166 1,891 Net recognized gain on Stock-based compensation expense 2,244 2,166 1,891 Net recognized gain on investment on investment and derivative ( 200 ) ( 362 ) ( derivative ( 200 ) ( 362 ) ( 208 ) Excess ) ( 362 ) ( 208 ) Excess tax benefit from benefit from stock-based compensation ( 93 ) ( 17 ) ( compensation ( 93 ) ( 17 ) ( 45 ) Deferred ) ( 17 ) ( 45 ) Deferred income tax 954 45 ) Deferred income tax 954 2 ( 220 ) Deferral ) Deferred income tax 954 2 ( 220 ) Deferral of income tax 954 2 ( 220 ) Deferral of unearned revenue ) Deferral of unearned revenue 36,104 31,227 29,374 Recognition of unearned Deferral of unearned revenue 36,104 31,227 29,374 Recognition of unearned revenue of unearned revenue 36,104 31,227 29,374 Recognition of unearned revenue ( Recognition of unearned revenue ( 33,347 ) ( 28,935 ) ( revenue ( 33,347 ) ( 28,935 ) ( 28,813 ) Changes ) ( 28,935 ) ( 28,813 ) Changes in operating asset liability : Accounts receivable ( 1,156 ) ( 1,451 ) ( receivable ( 1,156 ) ( 1,451 ) ( 2,238 ) Inventories ) ( 1,451 ) ( 2,238 ) Inventories 184 ( 561 ) ( 2,238 ) Inventories 184 ( 561 ) ( 44 2,238 ) Inventories 184 ( 561 ) ( 44 ) Other 184 ( 561 ) ( 44 ) Other current asset 493 44 ) Other current asset 493 ( 1,259 ) 464 Other Other current asset 493 ( 1,259 ) 464 Other long-term asset asset 493 ( 1,259 ) 464 Other long-term asset ( 248 464 Other long-term asset ( 248 ) 62 ( 223 ) long-term asset ( 248 ) 62 ( 223 ) Accounts payable ( 248 ) 62 ( 223 ) Accounts payable ( 31 223 ) Accounts payable ( 31 ) 58 844 Other current Accounts payable ( 31 ) 58 844 Other current liability 410 payable ( 31 ) 58 844 Other current liability 410 ( 58 844 Other current liability 410 ( 1,146 ) 451 Other Other current liability 410 ( 1,146 ) 451 Other long-term liability liability 410 ( 1,146 ) 451 Other long-term liability 174 1,294 ) 451 Other long-term liability 174 1,294 1,407 Net cash from 451 Other long-term liability 174 1,294 1,407 Net cash from operation Other long-term liability 174 1,294 1,407 Net cash from operation 31,626 1,407 Net cash from operation 31,626 26,994 24,073 Financing Short-term debt Net cash from operation 31,626 26,994 24,073 Financing Short-term debt repayment cash from operation 31,626 26,994 24,073 Financing Short-term debt repayment , debt repayment , maturity of 90 day or le , net day or le , net 0 ( 186 ) ( 991 le , net 0 ( 186 ) ( 991 ) Proceeds 0 ( 186 ) ( 991 ) Proceeds from issuance of debt , maturity longer than 90 day 0 6,960 4,167 Repayments maturity longer than 90 day 0 6,960 4,167 Repayments of debt longer than 90 day 0 6,960 4,167 Repayments of debt , than 90 day 0 6,960 4,167 Repayments of debt , maturity debt , maturity longer than 90 day 0 ( 814 ) maturity longer than 90 day 0 ( 814 ) ( 2,986 than 90 day 0 ( 814 ) ( 2,986 ) Common 0 ( 814 ) ( 2,986 ) Common stock issued 1,913 2,986 ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ) Common stock issued 1,913 2,422 2,311 Common stock repurchased ( Common stock issued 1,913 2,422 2,311 Common stock repurchased ( 5,029 2,311 Common stock repurchased ( 5,029 ) ( 11,555 ) ( repurchased ( 5,029 ) ( 11,555 ) ( 11,269 ) Common ) ( 11,555 ) ( 11,269 ) Common stock cash dividend stock cash dividend paid ( 6,385 ) ( 5,180 ) ( paid ( 6,385 ) ( 5,180 ) ( 4,578 ) Excess ) ( 5,180 ) ( 4,578 ) Excess tax benefit from tax benefit from stock-based compensation 93 17 45 Other 0 ( benefit from stock-based compensation 93 17 45 Other 0 ( 40 from stock-based compensation 93 17 45 Other 0 ( 40 ) compensation 93 17 45 Other 0 ( 40 ) 10 Net 17 45 Other 0 ( 40 ) 10 Net cash used Other 0 ( 40 ) 10 Net cash used in financing cash used in financing ( 9,408 ) ( 8,376 ) ( financing ( 9,408 ) ( 8,376 ) ( 13,291 ) Investing ) ( 8,376 ) ( 13,291 ) Investing Additions to property to property and equipment ( 2,305 ) ( 2,355 ) ( equipment ( 2,305 ) ( 2,355 ) ( 1,977 ) Acquisition ) ( 2,355 ) ( 1,977 ) Acquisition of company , intangible and other asset ( 10,112 ) ( 71 ) ( asset ( 10,112 ) ( 71 ) ( 245 ) Purchases ) ( 71 ) ( 245 ) Purchases of investment ( ) Purchases of investment ( 57,250 ) ( 35,993 ) ( investment ( 57,250 ) ( 35,993 ) ( 30,168 ) Maturities ) ( 35,993 ) ( 30,168 ) Maturities of investment 15,575 30,168 ) Maturities of investment 15,575 6,897 7,453 Sales of investment ) Maturities of investment 15,575 6,897 7,453 Sales of investment 29,700 Maturities of investment 15,575 6,897 7,453 Sales of investment 29,700 15,880 6,897 7,453 Sales of investment 29,700 15,880 15,125 Securities lending payable 7,453 Sales of investment 29,700 15,880 15,125 Securities lending payable ( Sales of investment 29,700 15,880 15,125 Securities lending payable ( 394 15,125 Securities lending payable ( 394 ) 1,026 ( 1,502 ) lending payable ( 394 ) 1,026 ( 1,502 ) Net cash ( 394 ) 1,026 ( 1,502 ) Net cash used in cash used in investing ( 24,786 ) ( 14,616 ) ( investing ( 24,786 ) ( 14,616 ) ( 11,314 ) Effect ) ( 14,616 ) ( 11,314 ) Effect of exchange rate cash and cash equivalent ( 104 ) 103 ( 39 ) cash equivalent ( 104 ) 103 ( 39 ) Net change ( 104 ) 103 ( 39 ) Net change in cash cash and cash equivalent ( 2,672 ) 4,105 ( 571 ) cash equivalent ( 2,672 ) 4,105 ( 571 ) Cash and ( 2,672 ) 4,105 ( 571 ) Cash and cash equivalent equivalent , beginning of period 9,610 5,505 6,076 Cash and cash , beginning of period 9,610 5,505 6,076 Cash and cash equivalent beginning of period 9,610 5,505 6,076 Cash and cash equivalent , , end of period $ 6,938 $ 9,610 $ 5,505 See of period $ 6,938 $ 9,610 $ 5,505 See accompanying note $ 6,938 $ 9,610 $ 5,505 See accompanying note . 49 5,505 See accompanying note . 49 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2012 2011 2010 Common Year Ended June 30 , 2012 2011 2010 Common stock and Ended June 30 , 2012 2011 2010 Common stock and paid-in June 30 , 2012 2011 2010 Common stock and paid-in capital , beginning of period $ 63,415 $ 62,856 $ 62,382 Common of period $ 63,415 $ 62,856 $ 62,382 Common stock issued $ 63,415 $ 62,856 $ 62,382 Common stock issued 1,924 2,422 $ 62,382 Common stock issued 1,924 2,422 2,311 Common stock repurchased 62,382 Common stock issued 1,924 2,422 2,311 Common stock repurchased ( Common stock issued 1,924 2,422 2,311 Common stock repurchased ( 1,714 2,311 Common stock repurchased ( 1,714 ) ( 3,738 ) ( repurchased ( 1,714 ) ( 3,738 ) ( 3,113 ) Stock-based ) ( 3,738 ) ( 3,113 ) Stock-based compensation expense 2,244 3,113 ) Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income ) Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income tax Stock-based compensation expense 2,244 2,166 1,891 Stock-based compensation income tax deficiency compensation income tax deficiency ( 75 ) ( 292 ) ( deficiency ( 75 ) ( 292 ) ( 647 ) Other ) ( 292 ) ( 647 ) Other , net 3 647 ) Other , net 3 1 32 Balance , end ) Other , net 3 1 32 Balance , end of Other , net 3 1 32 Balance , end of period Balance , end of period 65,797 63,415 62,856 Retained earnings ( , end of period 65,797 63,415 62,856 Retained earnings ( deficit end of period 65,797 63,415 62,856 Retained earnings ( deficit ) , beginning of period ( 6,332 ) ( 16,681 ) ( period ( 6,332 ) ( 16,681 ) ( 22,824 ) Net ) ( 16,681 ) ( 22,824 ) Net income 16,978 23,150 ( 22,824 ) Net income 16,978 23,150 18,760 Other comprehensive income 22,824 ) Net income 16,978 23,150 18,760 Other comprehensive income : ) Net income 16,978 23,150 18,760 Other comprehensive income : Net ( loss ) on derivative 255 ( 627 ) 27 Net ) on derivative 255 ( 627 ) 27 Net unrealized gain derivative 255 ( 627 ) 27 Net unrealized gain ( loss loss ) on investment ( 390 ) 1,054 265 Translation adjustment on investment ( 390 ) 1,054 265 Translation adjustment and other investment ( 390 ) 1,054 265 Translation adjustment and other ( Translation adjustment and other ( 306 ) 381 ( 206 ) and other ( 306 ) 381 ( 206 ) Comprehensive income ( 306 ) 381 ( 206 ) Comprehensive income 16,537 23,958 ( 206 ) Comprehensive income 16,537 23,958 18,846 Common stock cash 206 ) Comprehensive income 16,537 23,958 18,846 Common stock cash dividend ) Comprehensive income 16,537 23,958 18,846 Common stock cash dividend ( Common stock cash dividend ( 6,721 ) ( 5,394 ) ( dividend ( 6,721 ) ( 5,394 ) ( 4,547 ) Common ) ( 5,394 ) ( 4,547 ) Common stock repurchased ( ) Common stock repurchased ( 2,918 ) ( 8,215 ) ( repurchased ( 2,918 ) ( 8,215 ) ( 8,156 ) Balance ) ( 8,215 ) ( 8,156 ) Balance , end of Balance , end of period 566 ( 6,332 ) ( 16,681 end of period 566 ( 6,332 ) ( 16,681 ) Total 566 ( 6,332 ) ( 16,681 ) Total stockholder ’ equity Total stockholder ’ equity $ 66,363 $ 57,083 $ 46,175 See ’ equity $ 66,363 $ 57,083 $ 46,175 See accompanying note $ 66,363 $ 57,083 $ 46,175 See accompanying note . 50 46,175 See accompanying note . 50 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles subscription . Revenue for software 51 Table of Contents PART II of Contents PART II Item 8 product where customer have the Revenue related to our Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , game published by u for use on the Xbox 360 platform is recognized when game a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.6 billion , $ 1.9 billion $ 1.6 billion , $ 1.9 billion , and $ 1.6 1.9 billion , and $ 1.6 billion in fiscal year 2012 1.6 billion in fiscal year 2012 , 2011 , and 2010 in fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . 52 Table and 2010 , respectively . 52 Table of Contents PART II of Contents PART II Item 8 Stock-Based Compensation We measure stock-based employee at three-month interval at 90 % of the fair market level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of commercial paper . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment . We value the Level 3 corporate bond using internally developed and volatility . Our Level 3 derivative asset and liability primarily the asset and liability . 53 Table of Contents PART II of Contents PART II Item 8 We measure certain asset , are recognized in earnings . 54 Table of Contents PART II of Contents PART II Item 8 For derivative instrument designated a million ) Year Ended June 30 , 2012 2011 2010 Balance Year Ended June 30 , 2012 2011 2010 Balance , beginning Ended June 30 , 2012 2011 2010 Balance , beginning of June 30 , 2012 2011 2010 Balance , beginning of period , beginning of period $ 333 $ 375 $ 451 Charged of period $ 333 $ 375 $ 451 Charged to cost $ 333 $ 375 $ 451 Charged to cost and other Charged to cost and other 115 14 45 Write-offs ( 59 to cost and other 115 14 45 Write-offs ( 59 ) cost and other 115 14 45 Write-offs ( 59 ) ( 115 14 45 Write-offs ( 59 ) ( 56 ) ( Write-offs ( 59 ) ( 56 ) ( 121 ) Balance ) ( 56 ) ( 121 ) Balance , end of , end of period $ 389 $ 333 $ 375 Inventories of period $ 389 $ 333 $ 375 Inventories Inventories are $ 389 $ 333 $ 375 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 10 year ; and furniture and an annual basis ( May 1 for u ) and between below it carrying value . 55 Table of Contents PART II of Contents PART II Item 8 Intangible Assets All of our , ranging from one to 15 year . We evaluate the adopted accounting guidance On July 1 , 2011 , we adopted guidance On July 1 , 2011 , we adopted guidance issued significant unobservable input ( Level 3 fair value measurement ) . financial statement . On January 1 , 2012 , we adopted . On January 1 , 2012 , we adopted guidance issued expands the disclosure on Level 3 input by requiring quantitative disclosure not yet adopted In December 2011 , the FASB issued guidance effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In September 2011 , the FASB issued guidance effective for u beginning July 1 , 2012 . In June u beginning July 1 , 2012 . In June 2011 , , 2012 . In June 2011 , the FASB issued guidance effective for u beginning July 1 , 2012 and will require u beginning July 1 , 2012 and will require financial statement . However , in December 2011 , the FASB issued guidance presentation of reclassification adjustment . 56 Table of Contents PART II of Contents PART II Item 8 NOTE 2 — EARNINGS PER PART II Item 8 NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2012 2011 2010 Net Year Ended June 30 , 2012 2011 2010 Net income available Ended June 30 , 2012 2011 2010 Net income available for June 30 , 2012 2011 2010 Net income available for common shareholder ( A ) $ 16,978 $ 23,150 $ 18,760 Weighted A ) $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding $ 16,978 $ 23,150 $ 18,760 Weighted average outstanding share of common stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based ( B ) 8,396 8,490 8,813 Dilutive effect of stock-based award Dilutive effect of stock-based award 110 103 114 Common stock and effect of stock-based award 110 103 114 Common stock and common of stock-based award 110 103 114 Common stock and common stock stock equivalent ( C ) 8,506 8,593 8,927 Earnings Per Share equivalent ( C ) 8,506 8,593 8,927 Earnings Per Share Basic ( C ) 8,506 8,593 8,927 Earnings Per Share Basic ( Basic ( A/B ) $ 2.02 $ 2.73 $ 2.13 Diluted A/B ) $ 2.02 $ 2.73 $ 2.13 Diluted ( A/C $ 2.02 $ 2.73 $ 2.13 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.00 $ 2.69 $ 2.10 We A/C ) $ 2.00 $ 2.69 $ 2.10 We excluded the $ 2.00 $ 2.69 $ 2.10 We excluded the following share million ) Year Ended June 30 , 2012 2011 2010 Shares Year Ended June 30 , 2012 2011 2010 Shares excluded from Ended June 30 , 2012 2011 2010 Shares excluded from calculation June 30 , 2012 2011 2010 Shares excluded from calculation of from calculation of diluted EPS 1 21 28 In June 2010 calculation of diluted EPS 1 21 28 In June 2010 , of diluted EPS 1 21 28 In June 2010 , we 1 21 28 In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero-coupon debt security met . As of June 30 , 2012 , none of As of June 30 , 2012 , none of these security diluted EPS . See Note 12 – Debt for additional information for additional information . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2012 2011 2010 Dividends Year Ended June 30 , 2012 2011 2010 Dividends and interest Ended June 30 , 2012 2011 2010 Dividends and interest income June 30 , 2012 2011 2010 Dividends and interest income $ Dividends and interest income $ 800 $ 900 $ 843 Interest interest income $ 800 $ 900 $ 843 Interest expense ( $ 800 $ 900 $ 843 Interest expense ( 380 ) $ 843 Interest expense ( 380 ) ( 295 ) ( expense ( 380 ) ( 295 ) ( 151 ) Net ) ( 295 ) ( 151 ) Net recognized gain on Net recognized gain on investment 564 439 348 Net loss on recognized gain on investment 564 439 348 Net loss on derivative gain on investment 564 439 348 Net loss on derivative ( Net loss on derivative ( 364 ) ( 77 ) ( derivative ( 364 ) ( 77 ) ( 140 ) Net ) ( 77 ) ( 140 ) Net gain ( loss on foreign currency remeasurements ( 117 ) ( 26 ) 1 remeasurements ( 117 ) ( 26 ) 1 Other 1 ( 117 ) ( 26 ) 1 Other 1 ( 31 ) ( 26 ) 1 Other 1 ( 31 ) 14 Total ) 1 Other 1 ( 31 ) 14 Total $ 504 Other 1 ( 31 ) 14 Total $ 504 $ 910 31 ) 14 Total $ 504 $ 910 $ 915 57 14 Total $ 504 $ 910 $ 915 57 Table of $ 504 $ 910 $ 915 57 Table of Contents PART 504 $ 910 $ 915 57 Table of Contents PART II of Contents PART II Item 8 Following are detail of net million ) Year Ended June 30 , 2012 2011 2010 Other-than-temporary Year Ended June 30 , 2012 2011 2010 Other-than-temporary impairment of Ended June 30 , 2012 2011 2010 Other-than-temporary impairment of investment June 30 , 2012 2011 2010 Other-than-temporary impairment of investment $ impairment of investment $ ( 298 ) $ ( 80 ) ( 298 ) $ ( 80 ) $ ( 69 ) ( 80 ) $ ( 69 ) Realized gain from sale from sale of available-for-sale security 1,418 734 605 Realized loss from sale of available-for-sale security 1,418 734 605 Realized loss from sale of available-for-sale security 1,418 734 605 Realized loss from sale of sale of available-for-sale security ( 556 ) ( 215 ) ( security ( 556 ) ( 215 ) ( 188 ) Total ) ( 215 ) ( 188 ) Total $ 564 $ ( 188 ) Total $ 564 $ 439 $ 348 NOTE ) Total $ 564 $ 439 $ 348 NOTE 4 — $ 564 $ 439 $ 348 NOTE 4 — INVESTMENTS Investment $ 439 $ 348 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2012 Cash $ 2,019 Other Investments June 30 , 2012 Cash $ 2,019 $ 0 30 , 2012 Cash $ 2,019 $ 0 $ 0 $ 2012 Cash $ 2,019 $ 0 $ 0 $ 2,019 $ $ 2,019 $ 0 $ 0 $ 2,019 $ 2,019 $ $ 0 $ 0 $ 2,019 $ 2,019 $ 0 $ $ 0 $ 2,019 $ 2,019 $ 0 $ 0 Mutual $ 2,019 $ 2,019 $ 0 $ 0 Mutual fund 820 $ 2,019 $ 0 $ 0 Mutual fund 820 0 0 0 $ 0 Mutual fund 820 0 0 820 820 0 $ 0 Mutual fund 820 0 0 820 820 0 0 0 Mutual fund 820 0 0 820 820 0 0 Commercial Mutual fund 820 0 0 820 820 0 0 Commercial paper fund 820 0 0 820 820 0 0 Commercial paper 96 820 0 0 820 820 0 0 Commercial paper 96 0 0 0 820 820 0 0 Commercial paper 96 0 0 820 0 0 Commercial paper 96 0 0 96 96 0 0 0 Commercial paper 96 0 0 96 96 0 0 0 Commercial paper 96 0 0 96 96 0 0 Certificates Commercial paper 96 0 0 96 96 0 0 Certificates of paper 96 0 0 96 96 0 0 Certificates of deposit 96 0 0 96 96 0 0 Certificates of deposit 744 0 0 96 96 0 0 Certificates of deposit 744 0 0 0 Certificates of deposit 744 0 0 744 342 402 0 Certificates of deposit 744 0 0 744 342 402 0 Certificates of deposit 744 0 0 744 342 402 0 U.S. of deposit 744 0 0 744 342 402 0 U.S. government deposit 744 0 0 744 342 402 0 U.S. government and 744 0 0 744 342 402 0 U.S. government and agency 0 0 744 342 402 0 U.S. government and agency security U.S. government and agency security 47,178 130 ( 2 ) 47,306 government and agency security 47,178 130 ( 2 ) 47,306 561 agency security 47,178 130 ( 2 ) 47,306 561 46,745 0 47,178 130 ( 2 ) 47,306 561 46,745 0 Foreign government 130 ( 2 ) 47,306 561 46,745 0 Foreign government bond ( 2 ) 47,306 561 46,745 0 Foreign government bond 1,741 2 ) 47,306 561 46,745 0 Foreign government bond 1,741 18 46,745 0 Foreign government bond 1,741 18 ( 29 ) 1,730 0 Foreign government bond 1,741 18 ( 29 ) 1,730 575 government bond 1,741 18 ( 29 ) 1,730 575 1,155 0 1,741 18 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 18 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 82 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 82 ( 575 1,155 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 1,155 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 0 1,896 0 1,816 82 ( 2 ) 1,896 0 1,896 0 Corporate note 82 ( 2 ) 1,896 0 1,896 0 Corporate note and ( 2 ) 1,896 0 1,896 0 Corporate note and bond 2 ) 1,896 0 1,896 0 Corporate note and bond 7,799 0 Corporate note and bond 7,799 224 ( 15 ) 8,008 Corporate note and bond 7,799 224 ( 15 ) 8,008 2,525 and bond 7,799 224 ( 15 ) 8,008 2,525 5,483 0 7,799 224 ( 15 ) 8,008 2,525 5,483 0 Municipal security 224 ( 15 ) 8,008 2,525 5,483 0 Municipal security 358 ( 15 ) 8,008 2,525 5,483 0 Municipal security 358 58 15 ) 8,008 2,525 5,483 0 Municipal security 358 58 0 2,525 5,483 0 Municipal security 358 58 0 416 0 416 5,483 0 Municipal security 358 58 0 416 0 416 0 0 Municipal security 358 58 0 416 0 416 0 Common Municipal security 358 58 0 416 0 416 0 Common and security 358 58 0 416 0 416 0 Common and preferred 358 58 0 416 0 416 0 Common and preferred stock 58 0 416 0 416 0 Common and preferred stock 6,965 0 Common and preferred stock 6,965 2,204 ( 436 ) 8,733 Common and preferred stock 6,965 2,204 ( 436 ) 8,733 0 preferred stock 6,965 2,204 ( 436 ) 8,733 0 0 8,733 6,965 2,204 ( 436 ) 8,733 0 0 8,733 Other investment 2,204 ( 436 ) 8,733 0 0 8,733 Other investment 1,048 ( 436 ) 8,733 0 0 8,733 Other investment 1,048 0 436 ) 8,733 0 0 8,733 Other investment 1,048 0 0 0 0 8,733 Other investment 1,048 0 0 1,048 0 5 0 8,733 Other investment 1,048 0 0 1,048 0 5 1,043 8,733 Other investment 1,048 0 0 1,048 0 5 1,043 Total Other investment 1,048 0 0 1,048 0 5 1,043 Total $ investment 1,048 0 0 1,048 0 5 1,043 Total $ 70,584 1,048 0 0 1,048 0 5 1,043 Total $ 70,584 $ 0 0 1,048 0 5 1,043 Total $ 70,584 $ 2,716 0 5 1,043 Total $ 70,584 $ 2,716 $ ( 484 1,043 Total $ 70,584 $ 2,716 $ ( 484 ) $ 70,584 $ 2,716 $ ( 484 ) $ 72,816 $ 6,938 $ ( 484 ) $ 72,816 $ 6,938 $ 56,102 $ 484 ) $ 72,816 $ 6,938 $ 56,102 $ 9,776 ( $ 72,816 $ 6,938 $ 56,102 $ 9,776 ( In million $ 6,938 $ 56,102 $ 9,776 ( In million ) Cost Equity and Other Investments June 30 , 2011 Cash $ 1,648 Other Investments June 30 , 2011 Cash $ 1,648 $ 0 30 , 2011 Cash $ 1,648 $ 0 $ 0 $ 2011 Cash $ 1,648 $ 0 $ 0 $ 1,648 $ $ 1,648 $ 0 $ 0 $ 1,648 $ 1,648 $ $ 0 $ 0 $ 1,648 $ 1,648 $ 0 $ $ 0 $ 1,648 $ 1,648 $ 0 $ 0 Mutual $ 1,648 $ 1,648 $ 0 $ 0 Mutual fund 1,752 $ 1,648 $ 0 $ 0 Mutual fund 1,752 0 0 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 $ 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 0 Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial Mutual fund 1,752 0 0 1,752 1,752 0 0 Commercial paper fund 1,752 0 0 1,752 1,752 0 0 Commercial paper 639 1,752 0 0 1,752 1,752 0 0 Commercial paper 639 0 0 0 1,752 1,752 0 0 Commercial paper 639 0 0 1,752 0 0 Commercial paper 639 0 0 639 414 225 0 0 Commercial paper 639 0 0 639 414 225 0 0 Commercial paper 639 0 0 639 414 225 0 Certificates Commercial paper 639 0 0 639 414 225 0 Certificates of paper 639 0 0 639 414 225 0 Certificates of deposit 639 0 0 639 414 225 0 Certificates of deposit 598 0 0 639 414 225 0 Certificates of deposit 598 0 225 0 Certificates of deposit 598 0 0 598 372 226 0 Certificates of deposit 598 0 0 598 372 226 0 Certificates of deposit 598 0 0 598 372 226 0 U.S. of deposit 598 0 0 598 372 226 0 U.S. government deposit 598 0 0 598 372 226 0 U.S. government and 598 0 0 598 372 226 0 U.S. government and agency 0 0 598 372 226 0 U.S. government and agency security U.S. government and agency security 33,607 162 ( 7 ) 33,762 government and agency security 33,607 162 ( 7 ) 33,762 2,049 agency security 33,607 162 ( 7 ) 33,762 2,049 31,713 0 33,607 162 ( 7 ) 33,762 2,049 31,713 0 Foreign government 162 ( 7 ) 33,762 2,049 31,713 0 Foreign government bond ( 7 ) 33,762 2,049 31,713 0 Foreign government bond 658 7 ) 33,762 2,049 31,713 0 Foreign government bond 658 11 31,713 0 Foreign government bond 658 11 ( 2 ) 667 0 Foreign government bond 658 11 ( 2 ) 667 0 government bond 658 11 ( 2 ) 667 0 667 0 658 11 ( 2 ) 667 0 667 0 Mortgage-backed security 11 ( 2 ) 667 0 667 0 Mortgage-backed security 2,307 ( 2 ) 667 0 667 0 Mortgage-backed security 2,307 121 2 ) 667 0 667 0 Mortgage-backed security 2,307 121 ( 0 667 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 667 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 0 Mortgage-backed security 2,307 121 ( 4 ) 2,424 0 2,424 0 2,307 121 ( 4 ) 2,424 0 2,424 0 Corporate note 121 ( 4 ) 2,424 0 2,424 0 Corporate note and ( 4 ) 2,424 0 2,424 0 Corporate note and bond 4 ) 2,424 0 2,424 0 Corporate note and bond 10,575 0 Corporate note and bond 10,575 260 ( 11 ) 10,824 Corporate note and bond 10,575 260 ( 11 ) 10,824 3,375 and bond 10,575 260 ( 11 ) 10,824 3,375 7,449 0 10,575 260 ( 11 ) 10,824 3,375 7,449 0 Municipal security 260 ( 11 ) 10,824 3,375 7,449 0 Municipal security 441 ( 11 ) 10,824 3,375 7,449 0 Municipal security 441 15 11 ) 10,824 3,375 7,449 0 Municipal security 441 15 ( 3,375 7,449 0 Municipal security 441 15 ( 2 ) 454 7,449 0 Municipal security 441 15 ( 2 ) 454 0 Municipal security 441 15 ( 2 ) 454 0 454 0 441 15 ( 2 ) 454 0 454 0 Common and 15 ( 2 ) 454 0 454 0 Common and preferred ( 2 ) 454 0 454 0 Common and preferred stock 2 ) 454 0 454 0 Common and preferred stock 7,925 0 Common and preferred stock 7,925 2,483 ( 193 ) 10,215 Common and preferred stock 7,925 2,483 ( 193 ) 10,215 0 preferred stock 7,925 2,483 ( 193 ) 10,215 0 0 10,215 7,925 2,483 ( 193 ) 10,215 0 0 10,215 Other investment 2,483 ( 193 ) 10,215 0 0 10,215 Other investment 654 ( 193 ) 10,215 0 0 10,215 Other investment 654 0 193 ) 10,215 0 0 10,215 Other investment 654 0 0 0 0 10,215 Other investment 654 0 0 654 0 4 0 10,215 Other investment 654 0 0 654 0 4 650 10,215 Other investment 654 0 0 654 0 4 650 Total Other investment 654 0 0 654 0 4 650 Total $ investment 654 0 0 654 0 4 650 Total $ 60,804 654 0 0 654 0 4 650 Total $ 60,804 $ 0 0 654 0 4 650 Total $ 60,804 $ 3,052 0 4 650 Total $ 60,804 $ 3,052 $ ( 219 650 Total $ 60,804 $ 3,052 $ ( 219 ) $ 60,804 $ 3,052 $ ( 219 ) $ 63,637 $ 9,610 $ ( 219 ) $ 63,637 $ 9,610 $ 43,162 $ 219 ) $ 63,637 $ 9,610 $ 43,162 $ 10,865 58 $ 63,637 $ 9,610 $ 43,162 $ 10,865 58 Table of $ 9,610 $ 43,162 $ 10,865 58 Table of Contents PART 9,610 $ 43,162 $ 10,865 58 Table of Contents PART II of Contents PART II Item 8 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2012 U.S. government and Fair Value June 30 , 2012 U.S. government and agency security government and agency security $ 44 $ ( 2 ) $ security $ 44 $ ( 2 ) $ 0 $ 0 $ ( 2 ) $ 0 $ 0 $ 44 $ 2 ) $ 0 $ 0 $ 44 $ ( 2 $ 0 $ 0 $ 44 $ ( 2 ) Foreign 0 $ 44 $ ( 2 ) Foreign government bond 657 2 ) Foreign government bond 657 ( 27 ) 12 ( Foreign government bond 657 ( 27 ) 12 ( 2 ) bond 657 ( 27 ) 12 ( 2 ) 669 ( ( 27 ) 12 ( 2 ) 669 ( 29 ) ) 12 ( 2 ) 669 ( 29 ) Mortgage-backed security ( 2 ) 669 ( 29 ) Mortgage-backed security 53 0 ( 29 ) Mortgage-backed security 53 0 48 ( 2 ) 29 ) Mortgage-backed security 53 0 48 ( 2 ) 101 ) Mortgage-backed security 53 0 48 ( 2 ) 101 ( security 53 0 48 ( 2 ) 101 ( 2 ) 0 48 ( 2 ) 101 ( 2 ) Corporate note ( 2 ) 101 ( 2 ) Corporate note and bond ) Corporate note and bond 640 ( 11 ) 70 ( note and bond 640 ( 11 ) 70 ( 4 ) bond 640 ( 11 ) 70 ( 4 ) 710 ( ( 11 ) 70 ( 4 ) 710 ( 15 ) ) 70 ( 4 ) 710 ( 15 ) Common and ( 4 ) 710 ( 15 ) Common and preferred stock ) Common and preferred stock 2,135 ( 329 ) 305 ( and preferred stock 2,135 ( 329 ) 305 ( 107 ) stock 2,135 ( 329 ) 305 ( 107 ) 2,440 ( ( 329 ) 305 ( 107 ) 2,440 ( 436 ) ) 305 ( 107 ) 2,440 ( 436 ) Total $ ( 107 ) 2,440 ( 436 ) Total $ 3,529 $ ( 436 ) Total $ 3,529 $ ( 369 ) $ Total $ 3,529 $ ( 369 ) $ 435 $ ( $ ( 369 ) $ 435 $ ( 115 ) $ ) $ 435 $ ( 115 ) $ 3,964 $ ( $ ( 115 ) $ 3,964 $ ( 484 ) Less ) $ 3,964 $ ( 484 ) Less than 12 Months ( 484 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2011 U.S. government and Fair Value June 30 , 2011 U.S. government and agency security government and agency security $ 484 $ ( 7 ) $ security $ 484 $ ( 7 ) $ 0 $ 0 $ ( 7 ) $ 0 $ 0 $ 484 $ 7 ) $ 0 $ 0 $ 484 $ ( 7 $ 0 $ 0 $ 484 $ ( 7 ) Foreign 0 $ 484 $ ( 7 ) Foreign government bond 365 7 ) Foreign government bond 365 ( 2 ) 0 0 Foreign government bond 365 ( 2 ) 0 0 365 ( bond 365 ( 2 ) 0 0 365 ( 2 ) 365 ( 2 ) 0 0 365 ( 2 ) Mortgage-backed ( 2 ) 0 0 365 ( 2 ) Mortgage-backed security ) 0 0 365 ( 2 ) Mortgage-backed security 63 ( ( 2 ) Mortgage-backed security 63 ( 3 ) 14 ( ) Mortgage-backed security 63 ( 3 ) 14 ( 1 ) security 63 ( 3 ) 14 ( 1 ) 77 ( ( 3 ) 14 ( 1 ) 77 ( 4 ) ) 14 ( 1 ) 77 ( 4 ) Corporate note ( 1 ) 77 ( 4 ) Corporate note and bond ) Corporate note and bond 750 ( 10 ) 25 ( note and bond 750 ( 10 ) 25 ( 1 ) bond 750 ( 10 ) 25 ( 1 ) 775 ( ( 10 ) 25 ( 1 ) 775 ( 11 ) ) 25 ( 1 ) 775 ( 11 ) Municipal security ( 1 ) 775 ( 11 ) Municipal security 79 ( ( 11 ) Municipal security 79 ( 2 ) 0 0 ) Municipal security 79 ( 2 ) 0 0 79 ( security 79 ( 2 ) 0 0 79 ( 2 ) 79 ( 2 ) 0 0 79 ( 2 ) Common ( 2 ) 0 0 79 ( 2 ) Common and ) 0 0 79 ( 2 ) Common and preferred stock ) Common and preferred stock 1,377 ( 146 ) 206 ( and preferred stock 1,377 ( 146 ) 206 ( 47 ) stock 1,377 ( 146 ) 206 ( 47 ) 1,583 ( ( 146 ) 206 ( 47 ) 1,583 ( 193 ) ) 206 ( 47 ) 1,583 ( 193 ) Total $ ( 47 ) 1,583 ( 193 ) Total $ 3,118 $ ( 193 ) Total $ 3,118 $ ( 170 ) $ Total $ 3,118 $ ( 170 ) $ 245 $ ( $ ( 170 ) $ 245 $ ( 49 ) $ ) $ 245 $ ( 49 ) $ 3,363 $ ( $ ( 49 ) $ 3,363 $ ( 219 ) Unrealized ) $ 3,363 $ ( 219 ) Unrealized loss from fixed-income available evidence a of June 30 , 2012 . At June a of June 30 , 2012 . At June 30 , , 2012 . At June 30 , 2012 and 2011 , . At June 30 , 2012 and 2011 , the recorded June 30 , 2012 and 2011 , the recorded base of not publicly traded were $ 313 million and $ 334 million $ 313 million and $ 334 million , respectively . These Basis Estimated Fair Value June 30 , 2012 Due in one Fair Value June 30 , 2012 Due in one year or one year or le $ 23,097 $ 23,125 Due after one or le $ 23,097 $ 23,125 Due after one year through one year through five year 31,029 31,124 Due after five year year through five year 31,029 31,124 Due after five year through Due after five year through 10 year 3,173 3,371 Due after five year through 10 year 3,173 3,371 Due after 10 year year through 10 year 3,173 3,371 Due after 10 year 2,433 year 3,173 3,371 Due after 10 year 2,433 2,576 Total $ 3,371 Due after 10 year 2,433 2,576 Total $ 59,732 $ Due after 10 year 2,433 2,576 Total $ 59,732 $ 60,196 year 2,433 2,576 Total $ 59,732 $ 60,196 59 Table of 2,576 Total $ 59,732 $ 60,196 59 Table of Contents PART Total $ 59,732 $ 60,196 59 Table of Contents PART II of Contents PART II Item 8 NOTE 5 — DERIVATIVES We PART II Item 8 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2012 and June 30 As of June 30 , 2012 and June 30 , 2011 30 , 2012 and June 30 , 2011 , the total 2012 and June 30 , 2011 , the total notional amount exchange contract sold were $ 6.7 billion and $ 10.6 billion $ 6.7 billion and $ 10.6 billion , respectively . Foreign instrument . As of June 30 , 2012 and June 30 As of June 30 , 2012 and June 30 , 2011 30 , 2012 and June 30 , 2011 , the total 2012 and June 30 , 2011 , the total notional amount exchange contract sold were $ 1.3 billion and $ 572 million $ 1.3 billion and $ 572 million , respectively . Certain exposure . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 3.6 billion and $ 7.3 billion $ 3.6 billion and $ 7.3 billion , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 4.3 billion and $ 7.1 billion $ 4.3 billion and $ 7.1 billion , respectively . Equity forward . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.4 billion and $ 982 million $ 1.4 billion and $ 982 million , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.1 billion and $ 860 million $ 1.1 billion and $ 860 million , respectively . Interest instrument . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 3.2 billion and $ 1.9 billion $ 3.2 billion and $ 1.9 billion , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 2.3 billion and $ 697 million $ 2.3 billion and $ 697 million , respectively . In date . As of June 30 , 2012 and 2011 , As of June 30 , 2012 and 2011 , the total June 30 , 2012 and 2011 , the total notional derivative mortgage contract purchased were $ 1.1 billion and $ 868 million $ 1.1 billion and $ 868 million , respectively . 60 868 million , respectively . 60 Table of Contents PART II of Contents PART II Item 8 Credit Our fixed-income portfolio is risk . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 318 million and $ 456 million $ 318 million and $ 456 million , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 532 million and $ 281 million $ 532 million and $ 281 million , respectively . Commodity grain . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.5 billion and $ 445 million $ 1.5 billion and $ 445 million , respectively . As respectively . As of June 30 , 2011 , the total As of June 30 , 2011 , the total notional amount purchased and sold were $ 1.9 billion and $ 502 million $ 1.9 billion and $ 502 million , respectively . Credit-Risk-Related a minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2012 , our long-term As of June 30 , 2012 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 61 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2012 Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Other current asset $ 26 $ 3 $ 215 Other current asset 85 0 $ 215 Other current asset 85 0 0 0 0 85 215 Other current asset 85 0 0 0 0 85 Total Other current asset 85 0 0 0 0 85 Total $ current asset 85 0 0 0 0 85 Total $ 99 asset 85 0 0 0 0 85 Total $ 99 $ 85 0 0 0 0 85 Total $ 99 $ 162 0 0 85 Total $ 99 $ 162 $ 10 $ 85 Total $ 99 $ 162 $ 10 $ 26 $ $ 99 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 300 Designated $ 10 $ 26 $ 3 $ 300 Designated hedge derivative $ 26 $ 3 $ 300 Designated hedge derivative : Short-term derivative : Short-term investment $ 6 $ 0 $ 0 $ Short-term investment $ 6 $ 0 $ 0 $ 0 $ $ 6 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 6 Other $ 0 $ 0 $ 0 $ 6 Other current asset $ 0 $ 0 $ 6 Other current asset 177 0 $ 6 Other current asset 177 0 0 0 0 177 6 Other current asset 177 0 0 0 0 177 Total Other current asset 177 0 0 0 0 177 Total $ current asset 177 0 0 0 0 177 Total $ 183 asset 177 0 0 0 0 177 Total $ 183 $ 177 0 0 0 0 177 Total $ 183 $ 0 0 0 177 Total $ 183 $ 0 $ 0 $ 177 Total $ 183 $ 0 $ 0 $ 0 $ $ 183 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 183 Total $ 0 $ 0 $ 0 $ 183 Total asset $ $ 0 $ 0 $ 183 Total asset $ 282 $ $ 183 Total asset $ 282 $ 162 $ 10 $ Total asset $ 282 $ 162 $ 10 $ 26 $ $ 282 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 483 Liabilities $ 10 $ 26 $ 3 $ 483 Liabilities Non-designated hedge $ 26 $ 3 $ 483 Liabilities Non-designated hedge derivative : Other current liability $ ( 84 ) $ ( 19 ) ( 84 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 141 ) Designated ) $ 0 $ ( 141 ) Designated hedge derivative : Other current liability $ ( 14 ) $ 0 $ 0 $ ( 14 ) $ 0 $ 0 $ 0 $ 14 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 14 $ 0 $ 0 $ 0 $ ( 14 ) Total 0 $ 0 $ ( 14 ) Total liability $ ( ) Total liability $ ( 98 ) $ ( 19 ) ( 98 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 155 ) ( ) $ 0 $ ( 155 ) ( In million ) Commodity Contracts Total Derivatives June 30 , 2011 Assets Non-designated hedge Total Derivatives June 30 , 2011 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 179 $ 0 $ Short-term investment $ 14 $ 179 $ 0 $ 17 $ $ 14 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 214 Other $ 0 $ 17 $ 4 $ 214 Other current asset $ 17 $ 4 $ 214 Other current asset 73 0 $ 214 Other current asset 73 0 0 0 0 73 214 Other current asset 73 0 0 0 0 73 Total Other current asset 73 0 0 0 0 73 Total $ current asset 73 0 0 0 0 73 Total $ 87 asset 73 0 0 0 0 73 Total $ 87 $ 73 0 0 0 0 73 Total $ 87 $ 179 0 0 73 Total $ 87 $ 179 $ 0 $ 73 Total $ 87 $ 179 $ 0 $ 17 $ $ 87 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 287 Designated $ 0 $ 17 $ 4 $ 287 Designated hedge derivative $ 17 $ 4 $ 287 Designated hedge derivative : Short-term derivative : Short-term investment $ 6 $ 0 $ 0 $ Short-term investment $ 6 $ 0 $ 0 $ 0 $ $ 6 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 6 Other $ 0 $ 0 $ 0 $ 6 Other current asset $ 0 $ 0 $ 6 Other current asset 123 0 $ 6 Other current asset 123 0 0 0 0 123 6 Other current asset 123 0 0 0 0 123 Total Other current asset 123 0 0 0 0 123 Total $ current asset 123 0 0 0 0 123 Total $ 129 asset 123 0 0 0 0 123 Total $ 129 $ 123 0 0 0 0 123 Total $ 129 $ 0 0 0 123 Total $ 129 $ 0 $ 0 $ 123 Total $ 129 $ 0 $ 0 $ 0 $ $ 129 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 129 Total $ 0 $ 0 $ 0 $ 129 Total asset $ $ 0 $ 0 $ 129 Total asset $ 216 $ $ 129 Total asset $ 216 $ 179 $ 0 $ Total asset $ 216 $ 179 $ 0 $ 17 $ $ 216 $ 179 $ 0 $ 17 $ 4 $ $ 179 $ 0 $ 17 $ 4 $ 416 Liabilities $ 0 $ 17 $ 4 $ 416 Liabilities Non-designated hedge $ 17 $ 4 $ 416 Liabilities Non-designated hedge derivative : Other current liability $ ( 91 ) $ ( 12 ) ( 91 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 135 ) ( 4 ) $ ( 135 ) Designated hedge derivative : Other current liability $ ( 128 ) $ 0 $ 0 $ ( 128 ) $ 0 $ 0 $ 0 $ 128 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 128 $ 0 $ 0 $ 0 $ ( 128 ) Total 0 $ 0 $ ( 128 ) Total liability $ ( ) Total liability $ ( 219 ) $ ( 12 ) ( 219 ) $ ( 12 ) $ ( 9 ) ( 12 ) $ ( 9 ) $ ( 19 ) ( 9 ) $ ( 19 ) $ ( 4 ) ( 19 ) $ ( 4 ) $ ( 263 ) ( 4 ) $ ( 263 ) See also Note 4 263 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 62 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2012 2011 2010 Foreign Year Ended June 30 , 2012 2011 2010 Foreign Exchange Contracts Ended June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives June 30 , 2012 2011 2010 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 52 $ ( 92 ) $ Derivatives $ 52 $ ( 92 ) $ ( 57 ) ( 92 ) $ ( 57 ) Hedged item ( 50 57 ) Hedged item ( 50 ) 85 60 Total $ Hedged item ( 50 ) 85 60 Total $ 2 $ item ( 50 ) 85 60 Total $ 2 $ ( ) 85 60 Total $ 2 $ ( 7 ) $ Total $ 2 $ ( 7 ) $ 3 Cash Flow $ ( 7 ) $ 3 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2012 2011 2010 Effective Year Ended June 30 , 2012 2011 2010 Effective Portion Gain Ended June 30 , 2012 2011 2010 Effective Portion Gain ( June 30 , 2012 2011 2010 Effective Portion Gain ( loss of tax effect of $ 127 , $ ( 340 ) $ 127 , $ ( 340 ) and $ 188 $ ( 340 ) and $ 188 $ 236 $ ( 632 ) and $ 188 $ 236 $ ( 632 ) $ 188 $ 236 $ ( 632 ) $ 349 Gain ( $ ( 632 ) $ 349 Gain ( loss ) reclassified OCI into revenue $ ( 27 ) $ ( 7 ) ( 27 ) $ ( 7 ) $ 495 Amount Excluded $ ( 7 ) $ 495 Amount Excluded from Effectiveness Assessment ( expense ) $ ( 231 ) $ ( 276 ) ( 231 ) $ ( 276 ) $ ( 174 ) ( 276 ) $ ( 174 ) We estimate that $ ) We estimate that $ 137 million of net derivative gain included in OCI at June 30 , 2012 will be reclassified OCI at June 30 , 2012 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2012 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2012 2011 2010 Foreign Year Ended June 30 , 2012 2011 2010 Foreign exchange contract Ended June 30 , 2012 2011 2010 Foreign exchange contract $ June 30 , 2012 2011 2010 Foreign exchange contract $ ( Foreign exchange contract $ ( 119 ) $ ( 27 ) ( 119 ) $ ( 27 ) $ 106 Equity contract $ ( 27 ) $ 106 Equity contract ( 85 ) $ 106 Equity contract ( 85 ) 35 12 Interest-rate contract Equity contract ( 85 ) 35 12 Interest-rate contract 93 19 contract ( 85 ) 35 12 Interest-rate contract 93 19 ( ) 35 12 Interest-rate contract 93 19 ( 4 ) Credit 35 12 Interest-rate contract 93 19 ( 4 ) Credit contract Interest-rate contract 93 19 ( 4 ) Credit contract ( 7 4 ) Credit contract ( 7 ) 24 22 Commodity contract Credit contract ( 7 ) 24 22 Commodity contract ( 121 contract ( 7 ) 24 22 Commodity contract ( 121 ) 24 22 Commodity contract ( 121 ) 148 ( 1 ) Commodity contract ( 121 ) 148 ( 1 ) Total $ ( 121 ) 148 ( 1 ) Total $ ( 239 1 ) Total $ ( 239 ) $ 199 $ 135 $ ( 239 ) $ 199 $ 135 63 Table of 239 ) $ 199 $ 135 63 Table of Contents PART ) $ 199 $ 135 63 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2012 Assets Mutual fund Fair Value June 30 , 2012 Assets Mutual fund $ 820 2012 Assets Mutual fund $ 820 $ 0 $ 0 $ Mutual fund $ 820 $ 0 $ 0 $ 820 $ $ 820 $ 0 $ 0 $ 820 $ 0 $ $ 0 $ 0 $ 820 $ 0 $ 820 Commercial $ 0 $ 820 $ 0 $ 820 Commercial paper 0 $ 820 $ 0 $ 820 Commercial paper 0 96 0 0 $ 820 Commercial paper 0 96 0 96 0 96 $ 820 Commercial paper 0 96 0 96 0 96 Certificates 820 Commercial paper 0 96 0 96 0 96 Certificates of Commercial paper 0 96 0 96 0 96 Certificates of deposit paper 0 96 0 96 0 96 Certificates of deposit 0 0 96 0 96 0 96 Certificates of deposit 0 744 0 96 Certificates of deposit 0 744 0 744 0 744 96 Certificates of deposit 0 744 0 744 0 744 U.S. Certificates of deposit 0 744 0 744 0 744 U.S. government of deposit 0 744 0 744 0 744 U.S. government and deposit 0 744 0 744 0 744 U.S. government and agency 0 744 0 744 0 744 U.S. government and agency security U.S. government and agency security 42,291 5,019 0 47,310 0 47,310 government and agency security 42,291 5,019 0 47,310 0 47,310 Foreign and agency security 42,291 5,019 0 47,310 0 47,310 Foreign government agency security 42,291 5,019 0 47,310 0 47,310 Foreign government bond security 42,291 5,019 0 47,310 0 47,310 Foreign government bond 31 42,291 5,019 0 47,310 0 47,310 Foreign government bond 31 1,703 0 47,310 Foreign government bond 31 1,703 0 1,734 0 1,734 47,310 Foreign government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed Foreign government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 1,892 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 1,892 0 1,734 0 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 0 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate note Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate note and security 0 1,892 0 1,892 0 1,892 Corporate note and bond 0 1,892 0 1,892 0 1,892 Corporate note and bond 0 1,892 Corporate note and bond 0 7,839 9 7,848 0 7,848 Corporate note and bond 0 7,839 9 7,848 0 7,848 Municipal note and bond 0 7,839 9 7,848 0 7,848 Municipal security and bond 0 7,839 9 7,848 0 7,848 Municipal security 0 bond 0 7,839 9 7,848 0 7,848 Municipal security 0 416 0 7,839 9 7,848 0 7,848 Municipal security 0 416 0 7,848 0 7,848 Municipal security 0 416 0 416 0 416 0 7,848 Municipal security 0 416 0 416 0 416 Common 7,848 Municipal security 0 416 0 416 0 416 Common and Municipal security 0 416 0 416 0 416 Common and preferred security 0 416 0 416 0 416 Common and preferred stock 0 416 0 416 0 416 Common and preferred stock 7,539 416 Common and preferred stock 7,539 877 5 8,421 0 8,421 Common and preferred stock 7,539 877 5 8,421 0 8,421 Derivatives and preferred stock 7,539 877 5 8,421 0 8,421 Derivatives 16 preferred stock 7,539 877 5 8,421 0 8,421 Derivatives 16 467 stock 7,539 877 5 8,421 0 8,421 Derivatives 16 467 0 7,539 877 5 8,421 0 8,421 Derivatives 16 467 0 483 5 8,421 0 8,421 Derivatives 16 467 0 483 ( 141 8,421 0 8,421 Derivatives 16 467 0 483 ( 141 ) 0 8,421 Derivatives 16 467 0 483 ( 141 ) 342 8,421 Derivatives 16 467 0 483 ( 141 ) 342 Total 16 467 0 483 ( 141 ) 342 Total $ 50,697 0 483 ( 141 ) 342 Total $ 50,697 $ 19,053 141 ) 342 Total $ 50,697 $ 19,053 $ 14 $ 342 Total $ 50,697 $ 19,053 $ 14 $ 69,764 $ $ 50,697 $ 19,053 $ 14 $ 69,764 $ ( 141 $ 19,053 $ 14 $ 69,764 $ ( 141 ) $ 14 $ 69,764 $ ( 141 ) $ 69,623 Liabilities Derivatives $ ( 141 ) $ 69,623 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 10 $ 145 $ 0 $ and other $ 10 $ 145 $ 0 $ 155 $ $ 10 $ 145 $ 0 $ 155 $ ( 139 $ 145 $ 0 $ 155 $ ( 139 ) $ 0 $ 155 $ ( 139 ) $ 16 ( In $ ( 139 ) $ 16 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2011 Assets Mutual fund Fair Value June 30 , 2011 Assets Mutual fund $ 1,752 2011 Assets Mutual fund $ 1,752 $ 0 $ 0 $ Mutual fund $ 1,752 $ 0 $ 0 $ 1,752 $ $ 1,752 $ 0 $ 0 $ 1,752 $ 0 $ $ 0 $ 0 $ 1,752 $ 0 $ 1,752 Commercial $ 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 $ 1,752 $ 0 $ 1,752 Commercial paper 0 639 0 0 $ 1,752 Commercial paper 0 639 0 639 0 639 $ 1,752 Commercial paper 0 639 0 639 0 639 Certificates 1,752 Commercial paper 0 639 0 639 0 639 Certificates of Commercial paper 0 639 0 639 0 639 Certificates of deposit paper 0 639 0 639 0 639 Certificates of deposit 0 0 639 0 639 0 639 Certificates of deposit 0 598 0 639 Certificates of deposit 0 598 0 598 0 598 639 Certificates of deposit 0 598 0 598 0 598 U.S. Certificates of deposit 0 598 0 598 0 598 U.S. government of deposit 0 598 0 598 0 598 U.S. government and deposit 0 598 0 598 0 598 U.S. government and agency 0 598 0 598 0 598 U.S. government and agency security U.S. government and agency security 23,591 10,175 0 33,766 0 33,766 government and agency security 23,591 10,175 0 33,766 0 33,766 Foreign and agency security 23,591 10,175 0 33,766 0 33,766 Foreign government agency security 23,591 10,175 0 33,766 0 33,766 Foreign government bond security 23,591 10,175 0 33,766 0 33,766 Foreign government bond 303 23,591 10,175 0 33,766 0 33,766 Foreign government bond 303 367 0 33,766 Foreign government bond 303 367 0 670 0 670 33,766 Foreign government bond 303 367 0 670 0 670 Mortgage-backed Foreign government bond 303 367 0 670 0 670 Mortgage-backed security government bond 303 367 0 670 0 670 Mortgage-backed security 0 bond 303 367 0 670 0 670 Mortgage-backed security 0 2,428 303 367 0 670 0 670 Mortgage-backed security 0 2,428 0 670 0 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 0 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate 670 Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate note Mortgage-backed security 0 2,428 0 2,428 0 2,428 Corporate note and security 0 2,428 0 2,428 0 2,428 Corporate note and bond 0 2,428 0 2,428 0 2,428 Corporate note and bond 0 2,428 Corporate note and bond 0 10,600 58 10,658 0 10,658 Corporate note and bond 0 10,600 58 10,658 0 10,658 Municipal note and bond 0 10,600 58 10,658 0 10,658 Municipal security and bond 0 10,600 58 10,658 0 10,658 Municipal security 0 bond 0 10,600 58 10,658 0 10,658 Municipal security 0 454 0 10,600 58 10,658 0 10,658 Municipal security 0 454 0 10,658 0 10,658 Municipal security 0 454 0 454 0 454 0 10,658 Municipal security 0 454 0 454 0 454 Common 10,658 Municipal security 0 454 0 454 0 454 Common and Municipal security 0 454 0 454 0 454 Common and preferred security 0 454 0 454 0 454 Common and preferred stock 0 454 0 454 0 454 Common and preferred stock 9,821 454 Common and preferred stock 9,821 55 5 9,881 0 9,881 Common and preferred stock 9,821 55 5 9,881 0 9,881 Derivatives and preferred stock 9,821 55 5 9,881 0 9,881 Derivatives 8 preferred stock 9,821 55 5 9,881 0 9,881 Derivatives 8 388 stock 9,821 55 5 9,881 0 9,881 Derivatives 8 388 20 9,821 55 5 9,881 0 9,881 Derivatives 8 388 20 416 5 9,881 0 9,881 Derivatives 8 388 20 416 ( 204 9,881 0 9,881 Derivatives 8 388 20 416 ( 204 ) 0 9,881 Derivatives 8 388 20 416 ( 204 ) 212 9,881 Derivatives 8 388 20 416 ( 204 ) 212 Total 8 388 20 416 ( 204 ) 212 Total $ 35,475 20 416 ( 204 ) 212 Total $ 35,475 $ 25,704 204 ) 212 Total $ 35,475 $ 25,704 $ 83 $ 212 Total $ 35,475 $ 25,704 $ 83 $ 61,262 $ $ 35,475 $ 25,704 $ 83 $ 61,262 $ ( 204 $ 25,704 $ 83 $ 61,262 $ ( 204 ) $ 83 $ 61,262 $ ( 204 ) $ 61,058 Liabilities Derivatives $ ( 204 ) $ 61,058 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 109 $ 257 $ 0 $ and other $ 109 $ 257 $ 0 $ 366 $ $ 109 $ 257 $ 0 $ 366 $ ( 203 $ 257 $ 0 $ 366 $ ( 203 ) $ 0 $ 366 $ ( 203 ) $ 163 ( a $ ( 203 ) $ 163 ( a ) These amount and counterparty credit risk . 64 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2012 2011 Net fair million ) June 30 , 2012 2011 Net fair value of ) June 30 , 2012 2011 Net fair value of asset on a recurring basis $ 69,623 $ 61,058 Cash 2,019 1,648 recurring basis $ 69,623 $ 61,058 Cash 2,019 1,648 Common and $ 69,623 $ 61,058 Cash 2,019 1,648 Common and preferred stock 69,623 $ 61,058 Cash 2,019 1,648 Common and preferred stock measured value on a nonrecurring basis 313 334 Other investment measured at on a nonrecurring basis 313 334 Other investment measured at fair value on a nonrecurring basis 1,043 650 Less derivative asset classified on a nonrecurring basis 1,043 650 Less derivative asset classified a a other current asset ( 185 ) ( 54 ) Other asset ( 185 ) ( 54 ) Other 3 1 Recorded ) ( 54 ) Other 3 1 Recorded basis of investment ( 54 ) Other 3 1 Recorded basis of investment component basis of investment component $ 72,816 $ 63,637 Changes in Financial investment component $ 72,816 $ 63,637 Changes in Financial Instruments Measured Financial Instruments Measured at Level 3 Fair Value on a Recurring period presented in our Level 3 financial instrument that are measured Assets Total Year Ended June 30 , 2012 Balance , beginning Year Ended June 30 , 2012 Balance , beginning of period , beginning of period $ 58 $ 5 $ 20 $ of period $ 58 $ 5 $ 20 $ 83 Total $ 58 $ 5 $ 20 $ 83 Total realized and $ 5 $ 20 $ 83 Total realized and unrealized loss other income ( expense ) 0 0 ( 5 ) ( income ( expense ) 0 0 ( 5 ) ( 5 expense ) 0 0 ( 5 ) ( 5 ) Included 0 ( 5 ) ( 5 ) Included in other comprehensive in other comprehensive income ( 21 ) 0 0 ( 21 comprehensive income ( 21 ) 0 0 ( 21 ) Conversions income ( 21 ) 0 0 ( 21 ) Conversions of 21 ) 0 0 ( 21 ) Conversions of Level 3 21 ) Conversions of Level 3 instrument to Level 1 instrument Level 3 instrument to Level 1 instrument ( 28 ) 0 to Level 1 instrument ( 28 ) 0 ( 15 ) 1 instrument ( 28 ) 0 ( 15 ) ( 43 ( 28 ) 0 ( 15 ) ( 43 ) Balance 0 ( 15 ) ( 43 ) Balance , end of , end of period $ 9 $ 5 $ 0 $ of period $ 9 $ 5 $ 0 $ 14 Change $ 9 $ 5 $ 0 $ 14 Change in unrealized $ 5 $ 0 $ 14 Change in unrealized gain included asset held a of June 30 , 2012 $ 0 $ a of June 30 , 2012 $ 0 $ 0 $ June 30 , 2012 $ 0 $ 0 $ 0 $ , 2012 $ 0 $ 0 $ 0 $ 0 ( $ 0 $ 0 $ 0 $ 0 ( In million $ 0 $ 0 $ 0 ( In million ) Corporate Assets Total Year Ended June 30 , 2011 Balance , beginning Year Ended June 30 , 2011 Balance , beginning of period , beginning of period $ 167 $ 5 $ 9 $ of period $ 167 $ 5 $ 9 $ 181 Total $ 167 $ 5 $ 9 $ 181 Total realized and $ 5 $ 9 $ 181 Total realized and unrealized gain other income ( expense ) 39 0 11 50 Included in income ( expense ) 39 0 11 50 Included in other ( expense ) 39 0 11 50 Included in other comprehensive expense ) 39 0 11 50 Included in other comprehensive income in other comprehensive income ( 63 ) 0 0 ( 63 comprehensive income ( 63 ) 0 0 ( 63 ) Purchases income ( 63 ) 0 0 ( 63 ) Purchases , 63 ) 0 0 ( 63 ) Purchases , issuance and , issuance and settlement ( 85 ) 0 0 ( 85 and settlement ( 85 ) 0 0 ( 85 ) Balance settlement ( 85 ) 0 0 ( 85 ) Balance , 85 ) 0 0 ( 85 ) Balance , end of , end of period $ 58 $ 5 $ 20 $ of period $ 58 $ 5 $ 20 $ 83 Change $ 58 $ 5 $ 20 $ 83 Change in unrealized $ 5 $ 20 $ 83 Change in unrealized gain included asset held a of June 30 , 2011 $ 6 $ a of June 30 , 2011 $ 6 $ 0 $ June 30 , 2011 $ 6 $ 0 $ 11 $ , 2011 $ 6 $ 0 $ 11 $ 17 Financial $ 6 $ 0 $ 11 $ 17 Financial Assets and $ 0 $ 11 $ 17 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2012 and 2011 , we did During fiscal year 2012 and 2011 , we did not record on a nonrecurring basis . 65 Table of Contents PART II of Contents PART II Item 8 NOTE 7 — INVENTORIES The PART II Item 8 NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2012 2011 Raw material million ) June 30 , 2012 2011 Raw material $ 210 ) June 30 , 2012 2011 Raw material $ 210 $ 2012 2011 Raw material $ 210 $ 232 Work in process Raw material $ 210 $ 232 Work in process 96 56 $ 232 Work in process 96 56 Finished good 831 1,084 232 Work in process 96 56 Finished good 831 1,084 Total process 96 56 Finished good 831 1,084 Total $ 1,137 $ 96 56 Finished good 831 1,084 Total $ 1,137 $ 1,372 good 831 1,084 Total $ 1,137 $ 1,372 NOTE 8 — 1,084 Total $ 1,137 $ 1,372 NOTE 8 — PROPERTY AND $ 1,137 $ 1,372 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2012 2011 Land $ million ) June 30 , 2012 2011 Land $ 528 $ ) June 30 , 2012 2011 Land $ 528 $ 533 , 2012 2011 Land $ 528 $ 533 Buildings and improvement 2011 Land $ 528 $ 533 Buildings and improvement 6,768 6,521 $ 533 Buildings and improvement 6,768 6,521 Leasehold improvement 2,550 2,345 533 Buildings and improvement 6,768 6,521 Leasehold improvement 2,550 2,345 Computer improvement 6,768 6,521 Leasehold improvement 2,550 2,345 Computer equipment and software 6,768 6,521 Leasehold improvement 2,550 2,345 Computer equipment and software 7,298 2,345 Computer equipment and software 7,298 6,601 Furniture and equipment 2,087 Computer equipment and software 7,298 6,601 Furniture and equipment 2,087 1,991 7,298 6,601 Furniture and equipment 2,087 1,991 Total , at cost 6,601 Furniture and equipment 2,087 1,991 Total , at cost 19,231 1,991 Total , at cost 19,231 17,991 Accumulated depreciation ( 10,962 Total , at cost 19,231 17,991 Accumulated depreciation ( 10,962 ) 19,231 17,991 Accumulated depreciation ( 10,962 ) ( 9,829 ) Total depreciation ( 10,962 ) ( 9,829 ) Total , net $ ) Total , net $ 8,269 $ 8,162 During fiscal year , net $ 8,269 $ 8,162 During fiscal year 2012 , $ 8,162 During fiscal year 2012 , 2011 , and 2010 During fiscal year 2012 , 2011 , and 2010 , depreciation 2012 , 2011 , and 2010 , depreciation expense wa $ , depreciation expense wa $ 2.2 billion , $ 2.0 billion $ 2.2 billion , $ 2.0 billion , and $ 1.8 2.0 billion , and $ 1.8 billion , respectively . NOTE billion , respectively . NOTE 9 — BUSINESS COMBINATIONS Skype On BUSINESS COMBINATIONS Skype On October 13 , 2011 , we acquired Skype On October 13 , 2011 , we acquired all of in Luxembourg , for $ 8.6 billion , primarily in cash price were goodwill of $ 7.1 billion , identifiable intangible asset identifiable intangible asset of $ 1.6 billion , and unearned revenue and unearned revenue of $ 222 million . The goodwill recognized the following segment : $ 4.2 billion to Entertainment and Devices and Devices Division , $ 2.8 billion to Microsoft Business Division Business Division , and $ 54 million to Online Services Division result of operation starting October 13 , 2011 , the acquisition operation starting October 13 , 2011 , the acquisition date . ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 year $ 1,249 15 year Technology-based 275 5 year Customer-related 114 5 1,249 15 year Technology-based 275 5 year Customer-related 114 5 year Technology-based 275 5 year Customer-related 114 5 year Contract-based 10 4 275 5 year Customer-related 114 5 year Contract-based 10 4 year Customer-related 114 5 year Contract-based 10 4 year Total $ 1,648 114 5 year Contract-based 10 4 year Total $ 1,648 13 10 4 year Total $ 1,648 13 year 66 Table of 4 year Total $ 1,648 13 year 66 Table of Contents Total $ 1,648 13 year 66 Table of Contents PART II of Contents PART II Item 8 Other During fiscal year 2012 8 Other During fiscal year 2012 , we completed an additional for total consideration of $ 87 million , substantially all of cash . During fiscal year 2011 , we acquired three entity for total consideration of $ 75 million , substantially all of cash . During fiscal year 2010 , we acquired five entity for total consideration of $ 267 million , substantially all of cash . During fiscal year 2010 , we also sold three for total consideration of $ 600 million , including Razorfish in second quarter of fiscal year 2010 . These entity have been result of operation . NOTE 10 — GOODWILL Changes in the : Balance a of June 30 , 2010 Acquisitions Other Balance a of June 30 , 2010 Acquisitions Other Balance a of Other Balance a of June 30 , 2011 Acquisitions Other Balance a of June 30 , 2011 Acquisitions Other Balance a of Other Balance a of June 30 , 2012 ( In million a of June 30 , 2012 ( In million ) Windows & Windows Live Division $ 77 $ 0 $ 12 $ Live Division $ 77 $ 0 $ 12 $ 89 $ $ 77 $ 0 $ 12 $ 89 $ 0 $ $ 0 $ 12 $ 89 $ 0 $ 0 $ $ 12 $ 89 $ 0 $ 0 $ 89 Server $ 89 $ 0 $ 0 $ 89 Server and Tools $ 0 $ 0 $ 89 Server and Tools 1,118 13 $ 89 Server and Tools 1,118 13 8 1,139 7 ( 89 Server and Tools 1,118 13 8 1,139 7 ( 2 Server and Tools 1,118 13 8 1,139 7 ( 2 ) and Tools 1,118 13 8 1,139 7 ( 2 ) 1,144 Tools 1,118 13 8 1,139 7 ( 2 ) 1,144 Online 13 8 1,139 7 ( 2 ) 1,144 Online Services Division 1,139 7 ( 2 ) 1,144 Online Services Division 6,373 0 ) 1,144 Online Services Division 6,373 0 0 6,373 54 ( 1,144 Online Services Division 6,373 0 0 6,373 54 ( 6,204 Online Services Division 6,373 0 0 6,373 54 ( 6,204 ) Services Division 6,373 0 0 6,373 54 ( 6,204 ) 223 Division 6,373 0 0 6,373 54 ( 6,204 ) 223 Microsoft 0 0 6,373 54 ( 6,204 ) 223 Microsoft Business Division 6,373 54 ( 6,204 ) 223 Microsoft Business Division 4,024 4 ) 223 Microsoft Business Division 4,024 4 139 4,167 2,843 ( 223 Microsoft Business Division 4,024 4 139 4,167 2,843 ( 117 Microsoft Business Division 4,024 4 139 4,167 2,843 ( 117 ) Business Division 4,024 4 139 4,167 2,843 ( 117 ) 6,893 Division 4,024 4 139 4,167 2,843 ( 117 ) 6,893 Entertainment 4 139 4,167 2,843 ( 117 ) 6,893 Entertainment and Devices 4,167 2,843 ( 117 ) 6,893 Entertainment and Devices Division 802 6,893 Entertainment and Devices Division 802 30 ( 19 ) 813 Entertainment and Devices Division 802 30 ( 19 ) 813 4,294 Devices Division 802 30 ( 19 ) 813 4,294 ( 4 802 30 ( 19 ) 813 4,294 ( 4 ) 5,103 30 ( 19 ) 813 4,294 ( 4 ) 5,103 Total 19 ) 813 4,294 ( 4 ) 5,103 Total $ 12,394 813 4,294 ( 4 ) 5,103 Total $ 12,394 $ 47 4 ) 5,103 Total $ 12,394 $ 47 $ 140 $ 5,103 Total $ 12,394 $ 47 $ 140 $ 12,581 $ $ 12,394 $ 47 $ 140 $ 12,581 $ 7,198 $ $ 47 $ 140 $ 12,581 $ 7,198 $ ( 6,327 $ 140 $ 12,581 $ 7,198 $ ( 6,327 ) $ 12,581 $ 7,198 $ ( 6,327 ) $ 13,452 The measurement $ ( 6,327 ) $ 13,452 The measurement period for purchase , but do not exceed 12 month . Adjustments in purchase applicable . For fiscal year 2012 , a $ 6.2 billion year 2012 , a $ 6.2 billion goodwill impairment charge is goodwill impairment a of June 30 , 2012 . Goodwill Impairment a of June 30 , 2012 . Goodwill Impairment We tested for impairment a of May 1 , 2012 at the reporting a of May 1 , 2012 at the reporting unit level future performance of OSD . 67 Table of Contents PART II of Contents PART II Item 8 Because our annual test indicated impairment test ( “ Step 2 ” ) wa performed specific to OSD . Under Step 2 , the fair value of were identified in our May 1 , 2012 test . NOTE in our May 1 , 2012 test . NOTE 11 — , 2012 test . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2012 2011 Technology-based ( Year Ended June 30 , 2012 2011 Technology-based ( a ) Ended June 30 , 2012 2011 Technology-based ( a ) $ Technology-based ( a ) $ 3,550 $ ( 1,899 ) $ ) $ 3,550 $ ( 1,899 ) $ 1,651 $ 2,356 $ ( 1,899 ) $ 1,651 $ 2,356 $ ( 1,831 1,899 ) $ 1,651 $ 2,356 $ ( 1,831 ) $ 1,651 $ 2,356 $ ( 1,831 ) $ 525 Marketing-related 1,325 $ ( 1,831 ) $ 525 Marketing-related 1,325 ( 136 ) 1,831 ) $ 525 Marketing-related 1,325 ( 136 ) 1,189 113 $ 525 Marketing-related 1,325 ( 136 ) 1,189 113 ( 98 Marketing-related 1,325 ( 136 ) 1,189 113 ( 98 ) 15 1,325 ( 136 ) 1,189 113 ( 98 ) 15 Contract-based 136 ) 1,189 113 ( 98 ) 15 Contract-based 824 ( 1,189 113 ( 98 ) 15 Contract-based 824 ( 644 ) ( 98 ) 15 Contract-based 824 ( 644 ) 180 1,068 ) 15 Contract-based 824 ( 644 ) 180 1,068 ( 966 Contract-based 824 ( 644 ) 180 1,068 ( 966 ) 102 824 ( 644 ) 180 1,068 ( 966 ) 102 Customer-related 644 ) 180 1,068 ( 966 ) 102 Customer-related 408 ( 180 1,068 ( 966 ) 102 Customer-related 408 ( 258 ) ( 966 ) 102 Customer-related 408 ( 258 ) 150 326 ) 102 Customer-related 408 ( 258 ) 150 326 ( 224 Customer-related 408 ( 258 ) 150 326 ( 224 ) 102 408 ( 258 ) 150 326 ( 224 ) 102 Total 258 ) 150 326 ( 224 ) 102 Total $ 6,107 150 326 ( 224 ) 102 Total $ 6,107 $ ( 224 ) 102 Total $ 6,107 $ ( 2,937 ) $ Total $ 6,107 $ ( 2,937 ) $ 3,170 $ 3,863 $ ( 2,937 ) $ 3,170 $ 3,863 $ ( 3,119 2,937 ) $ 3,170 $ 3,863 $ ( 3,119 ) $ 3,170 $ 3,863 $ ( 3,119 ) $ 744 ( a $ ( 3,119 ) $ 744 ( a ) Technology-based intangible Technology-based intangible asset included $ 177 million and $ 179 million $ 177 million and $ 179 million a of June 30 179 million a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , respectively , June 30 , 2012 and 2011 , respectively , of net Average Life Year Ended June 30 , 2012 2011 Technology-based $ Year Ended June 30 , 2012 2011 Technology-based $ 1,548 7 Ended June 30 , 2012 2011 Technology-based $ 1,548 7 year , 2012 2011 Technology-based $ 1,548 7 year $ 119 3 2012 2011 Technology-based $ 1,548 7 year $ 119 3 year $ 1,548 7 year $ 119 3 year Marketing-related 1,249 15 1,548 7 year $ 119 3 year Marketing-related 1,249 15 year $ 119 3 year Marketing-related 1,249 15 year 1 7 year 119 3 year Marketing-related 1,249 15 year 1 7 year Contract-based year Marketing-related 1,249 15 year 1 7 year Contract-based 115 7 Marketing-related 1,249 15 year 1 7 year Contract-based 115 7 year year 1 7 year Contract-based 115 7 year 0 Customer-related 114 1 7 year Contract-based 115 7 year 0 Customer-related 114 5 year Contract-based 115 7 year 0 Customer-related 114 5 year 2 115 7 year 0 Customer-related 114 5 year 2 4 year 7 year 0 Customer-related 114 5 year 2 4 year Total 0 Customer-related 114 5 year 2 4 year Total $ 3,026 Customer-related 114 5 year 2 4 year Total $ 3,026 10 2 4 year Total $ 3,026 10 year $ 122 3 4 year Total $ 3,026 10 year $ 122 3 year $ 3,026 10 year $ 122 3 year Intangible asset amortization 3,026 10 year $ 122 3 year Intangible asset amortization expense asset amortization expense wa $ 558 million , $ 537 million $ 558 million , $ 537 million , and $ 707 537 million , and $ 707 million for fiscal year 2012 707 million for fiscal year 2012 , 2011 , and 2010 for fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . Amortization of of capitalized software wa $ 117 million , $ 114 million $ 117 million , $ 114 million , and $ 97 114 million , and $ 97 million for fiscal year 2012 97 million for fiscal year 2012 , 2011 , and 2010 for fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . 68 Table and 2010 , respectively . 68 Table of Contents PART II of Contents PART II Item 8 The following table outline the intangible asset held at June 30 , 2012 : ( In held at June 30 , 2012 : ( In million ) million ) Year Ending June 30 , 2013 $ 597 2014 Year Ending June 30 , 2013 $ 597 2014 432 2015 June 30 , 2013 $ 597 2014 432 2015 367 2016 30 , 2013 $ 597 2014 432 2015 367 2016 304 , 2013 $ 597 2014 432 2015 367 2016 304 2017 2013 $ 597 2014 432 2015 367 2016 304 2017 234 $ 597 2014 432 2015 367 2016 304 2017 234 Thereafter 597 2014 432 2015 367 2016 304 2017 234 Thereafter 1,236 2014 432 2015 367 2016 304 2017 234 Thereafter 1,236 Total 432 2015 367 2016 304 2017 234 Thereafter 1,236 Total $ 2015 367 2016 304 2017 234 Thereafter 1,236 Total $ 3,170 2016 304 2017 234 Thereafter 1,236 Total $ 3,170 NOTE 12 234 Thereafter 1,236 Total $ 3,170 NOTE 12 — DEBT As 1,236 Total $ 3,170 NOTE 12 — DEBT As of June — DEBT As of June 30 , 2012 , the total As of June 30 , 2012 , the total carrying value current portion , were $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively . This estimated fair value of $ 11.9 billion and $ 12.1 billion $ 11.9 billion and $ 12.1 billion , respectively , a respectively , a of June 30 , 2011 . These estimated a of June 30 , 2011 . These estimated fair value value are based on Level 2 input . The component of a follows a of June 30 , 2012 and 2011 : a of June 30 , 2012 and 2011 : Due Date June 30 , 2012 and 2011 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % March 27 , 2013 $ 1,000 0.875 % 1.000 % March 15 2013 $ 1,000 0.875 % 1.000 % March 15 March 27 0.875 % 1.000 % March 15 March 27 September 15 September 1.000 % March 15 March 27 September 15 September 27 June March 15 March 27 September 15 September 27 June 1 , March 27 September 15 September 27 June 1 , 2014 2,000 September 15 September 27 June 1 , 2014 2,000 2.950 % September 27 June 1 , 2014 2,000 2.950 % 3.049 % 27 June 1 , 2014 2,000 2.950 % 3.049 % May June 1 , 2014 2,000 2.950 % 3.049 % May 15 , 2014 2,000 2.950 % 3.049 % May 15 June 1 2.950 % 3.049 % May 15 June 1 November 15 December 3.049 % May 15 June 1 November 15 December 1 September May 15 June 1 November 15 December 1 September 25 , June 1 November 15 December 1 September 25 , 2015 1,750 November 15 December 1 September 25 , 2015 1,750 1.625 % December 1 September 25 , 2015 1,750 1.625 % 1.795 % 1 September 25 , 2015 1,750 1.625 % 1.795 % March September 25 , 2015 1,750 1.625 % 1.795 % March 15 , 2015 1,750 1.625 % 1.795 % March 15 March 25 1.625 % 1.795 % March 15 March 25 September 15 September 1.795 % March 15 March 25 September 15 September 25 February March 15 March 25 September 15 September 25 February 8 , March 25 September 15 September 25 February 8 , 2016 750 September 15 September 25 February 8 , 2016 750 2.500 % September 25 February 8 , 2016 750 2.500 % 2.642 % 25 February 8 , 2016 750 2.500 % 2.642 % February February 8 , 2016 750 2.500 % 2.642 % February 1 , 2016 750 2.500 % 2.642 % February 1 February 8 2.500 % 2.642 % February 1 February 8 August 1 August 2.642 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2019 1,000 August 1 August 8 June 1 , 2019 1,000 4.200 % August 8 June 1 , 2019 1,000 4.200 % 4.379 % 8 June 1 , 2019 1,000 4.200 % 4.379 % May June 1 , 2019 1,000 4.200 % 4.379 % May 15 , 2019 1,000 4.200 % 4.379 % May 15 June 1 4.200 % 4.379 % May 15 June 1 November 15 December 4.379 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2020 1,000 November 15 December 1 October 1 , 2020 1,000 3.000 % December 1 October 1 , 2020 1,000 3.000 % 3.137 % 1 October 1 , 2020 1,000 3.000 % 3.137 % March October 1 , 2020 1,000 3.000 % 3.137 % March 15 , 2020 1,000 3.000 % 3.137 % March 15 April 1 3.000 % 3.137 % March 15 April 1 September 15 October 3.137 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2021 500 September 15 October 1 February 8 , 2021 500 4.000 % October 1 February 8 , 2021 500 4.000 % 4.082 % 1 February 8 , 2021 500 4.000 % 4.082 % February February 8 , 2021 500 4.000 % 4.082 % February 1 , 2021 500 4.000 % 4.082 % February 1 February 8 4.000 % 4.082 % February 1 February 8 August 1 August 4.082 % February 1 February 8 August 1 August 8 June February 1 February 8 August 1 August 8 June 1 , February 8 August 1 August 8 June 1 , 2039 750 August 1 August 8 June 1 , 2039 750 5.200 % August 8 June 1 , 2039 750 5.200 % 5.240 % 8 June 1 , 2039 750 5.200 % 5.240 % May June 1 , 2039 750 5.200 % 5.240 % May 15 , 2039 750 5.200 % 5.240 % May 15 June 1 5.200 % 5.240 % May 15 June 1 November 15 December 5.240 % May 15 June 1 November 15 December 1 October May 15 June 1 November 15 December 1 October 1 , June 1 November 15 December 1 October 1 , 2040 1,000 November 15 December 1 October 1 , 2040 1,000 4.500 % December 1 October 1 , 2040 1,000 4.500 % 4.567 % 1 October 1 , 2040 1,000 4.500 % 4.567 % March October 1 , 2040 1,000 4.500 % 4.567 % March 15 , 2040 1,000 4.500 % 4.567 % March 15 April 1 4.500 % 4.567 % March 15 April 1 September 15 October 4.567 % March 15 April 1 September 15 October 1 February March 15 April 1 September 15 October 1 February 8 , April 1 September 15 October 1 February 8 , 2041 1,000 September 15 October 1 February 8 , 2041 1,000 5.300 % October 1 February 8 , 2041 1,000 5.300 % 5.361 % 1 February 8 , 2041 1,000 5.300 % 5.361 % February February 8 , 2041 1,000 5.300 % 5.361 % February 1 , 2041 1,000 5.300 % 5.361 % February 1 February 8 5.300 % 5.361 % February 1 February 8 August 1 August 5.361 % February 1 February 8 August 1 August 8 Total February 1 February 8 August 1 August 8 Total 10,750 Convertible February 8 August 1 August 8 Total 10,750 Convertible Debt June August 1 August 8 Total 10,750 Convertible Debt June 15 , Total 10,750 Convertible Debt June 15 , 2013 1,250 0.000 % Convertible Debt June 15 , 2013 1,250 0.000 % 1.849 % Debt June 15 , 2013 1,250 0.000 % 1.849 % Total June 15 , 2013 1,250 0.000 % 1.849 % Total face , 2013 1,250 0.000 % 1.849 % Total face value $ % Total face value $ 12,000 As of June 30 , $ 12,000 As of June 30 , 2012 and 2011 , As of June 30 , 2012 and 2011 , the aggregate June 30 , 2012 and 2011 , the aggregate unamortized discount current portion , wa $ 56 million and $ 79 million $ 56 million and $ 79 million , respectively . Notes and unsubordinated debt outstanding . 69 Table of Contents PART II of Contents PART II Item 8 Convertible Debt In June 2010 8 Convertible Debt In June 2010 , we issued $ 1.25 2010 , we issued $ 1.25 billion of zero coupon convertible unsecured debt due on June 15 , 2013 in a private due on June 15 , 2013 in a private placement offering from the offering were $ 1.24 billion , net of fee . Initially , each $ 1,000 principal amount of note wa of note wa convertible into 29.94 share of Microsoft common stock a conversion price of $ 33.40 per share . The conversion agreement . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount our convertible debt wa $ 1.2 billion and the unamortized discount the unamortized discount wa $ 19 million . Prior to March million . Prior to March 15 , 2013 , the note Prior to March 15 , 2013 , the note will be . On or after March 15 , 2013 , the note or after March 15 , 2013 , the note will be The net proceeds of $ 1.24 billion were allocated between debt allocated between debt for $ 1.18 billion and stockholder ’ equity stockholder ’ equity for $ 58 million with the portion in cap price equal to $ 37.16 , which is adjusted periodically call were valued at $ 40 million and recorded to stockholder million ) Year Ending June 30 , 2013 $ 1,250 2014 Year Ending June 30 , 2013 $ 1,250 2014 3,000 2015 June 30 , 2013 $ 1,250 2014 3,000 2015 0 2016 30 , 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 , 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 2017 2013 $ 1,250 2014 3,000 2015 0 2016 2,500 2017 0 $ 1,250 2014 3,000 2015 0 2016 2,500 2017 0 Thereafter 1,250 2014 3,000 2015 0 2016 2,500 2017 0 Thereafter 5,250 2014 3,000 2015 0 2016 2,500 2017 0 Thereafter 5,250 Total 3,000 2015 0 2016 2,500 2017 0 Thereafter 5,250 Total $ 2015 0 2016 2,500 2017 0 Thereafter 5,250 Total $ 12,000 2016 2,500 2017 0 Thereafter 5,250 Total $ 12,000 Cash paid 0 Thereafter 5,250 Total $ 12,000 Cash paid for interest on our debt for fiscal year 2012 , 2011 , and 2010 for fiscal year 2012 , 2011 , and 2010 wa $ 2012 , 2011 , and 2010 wa $ 344 million , , and 2010 wa $ 344 million , $ 197 million $ 344 million , $ 197 million , and $ 145 197 million , and $ 145 million , respectively . 70 145 million , respectively . 70 Table of Contents PART II of Contents PART II Item 8 NOTE 13 — INCOME TAXES PART II Item 8 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2012 2011 2010 Current Year Ended June 30 , 2012 2011 2010 Current Taxes U.S. Ended June 30 , 2012 2011 2010 Current Taxes U.S. federal June 30 , 2012 2011 2010 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 2,235 $ 3,108 $ 4,415 U.S. U.S. federal $ 2,235 $ 3,108 $ 4,415 U.S. state and $ 2,235 $ 3,108 $ 4,415 U.S. state and local 153 4,415 U.S. state and local 153 209 357 International 1,947 1,602 U.S. state and local 153 209 357 International 1,947 1,602 1,701 state and local 153 209 357 International 1,947 1,602 1,701 Current local 153 209 357 International 1,947 1,602 1,701 Current tax 4,335 153 209 357 International 1,947 1,602 1,701 Current tax 4,335 4,919 209 357 International 1,947 1,602 1,701 Current tax 4,335 4,919 6,473 1,947 1,602 1,701 Current tax 4,335 4,919 6,473 Deferred Taxes Deferred 1,602 1,701 Current tax 4,335 4,919 6,473 Deferred Taxes Deferred tax 1,701 Current tax 4,335 4,919 6,473 Deferred Taxes Deferred tax 954 6,473 Deferred Taxes Deferred tax 954 2 ( 220 ) Provision Deferred Taxes Deferred tax 954 2 ( 220 ) Provision for Deferred tax 954 2 ( 220 ) Provision for income tax Provision for income tax $ 5,289 $ 4,921 $ 6,253 U.S. income tax $ 5,289 $ 4,921 $ 6,253 U.S. and international $ 5,289 $ 4,921 $ 6,253 U.S. and international component of million ) Year Ended June 30 , 2012 2011 2010 U.S. Year Ended June 30 , 2012 2011 2010 U.S. $ 1,600 Ended June 30 , 2012 2011 2010 U.S. $ 1,600 $ June 30 , 2012 2011 2010 U.S. $ 1,600 $ 8,862 2012 2011 2010 U.S. $ 1,600 $ 8,862 $ 9,575 International 2010 U.S. $ 1,600 $ 8,862 $ 9,575 International 20,667 19,209 $ 1,600 $ 8,862 $ 9,575 International 20,667 19,209 15,438 Income $ 8,862 $ 9,575 International 20,667 19,209 15,438 Income before income 8,862 $ 9,575 International 20,667 19,209 15,438 Income before income tax $ 9,575 International 20,667 19,209 15,438 Income before income tax $ Income before income tax $ 22,267 $ 28,071 $ 25,013 The income tax $ 22,267 $ 28,071 $ 25,013 The item accounting $ 22,267 $ 28,071 $ 25,013 The item accounting for the follows : Year Ended June 30 , 2012 2011 2010 Federal Year Ended June 30 , 2012 2011 2010 Federal statutory rate Ended June 30 , 2012 2011 2010 Federal statutory rate 35.0 June 30 , 2012 2011 2010 Federal statutory rate 35.0 % 2011 2010 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 21.1 ) % ( 15.6 ) ( 21.1 ) % ( 15.6 ) % ( 12.1 ) ( 15.6 ) % ( 12.1 ) % Goodwill impairment 9.7 12.1 ) % Goodwill impairment 9.7 % 0 % 0 % % Goodwill impairment 9.7 % 0 % 0 % I.R.S . impairment 9.7 % 0 % 0 % I.R.S . settlement 0 0 % I.R.S . settlement 0 % ( 1.7 ) % . settlement 0 % ( 1.7 ) % 0 % Other % ( 1.7 ) % 0 % Other reconciling item , Other reconciling item , net 0.2 % ( 0.2 ) % , net 0.2 % ( 0.2 ) % 2.1 % Effective % ( 0.2 ) % 2.1 % Effective rate 23.8 % % 2.1 % Effective rate 23.8 % 17.5 % 25.0 % % Effective rate 23.8 % 17.5 % 25.0 % The reduction rate 23.8 % 17.5 % 25.0 % The reduction from the credit . In fiscal year 2012 , 2011 , and 2010 In fiscal year 2012 , 2011 , and 2010 , there 2012 , 2011 , and 2010 , there were no individually settlement is discussed below . 71 Table of Contents PART II of Contents PART II Item 8 The component of the deferred ( In million ) June 30 , 2012 2011 Deferred Income million ) June 30 , 2012 2011 Deferred Income Tax Assets ) June 30 , 2012 2011 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 882 $ 1,079 Other expense item compensation expense $ 882 $ 1,079 Other expense item 965 1,321 $ 1,079 Other expense item 965 1,321 Unearned revenue 571 463 1,079 Other expense item 965 1,321 Unearned revenue 571 463 Impaired item 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 965 1,321 Unearned revenue 571 463 Impaired investment 152 424 Loss revenue 571 463 Impaired investment 152 424 Loss carryforwards 532 90 571 463 Impaired investment 152 424 Loss carryforwards 532 90 Other investment 152 424 Loss carryforwards 532 90 Other revenue item 79 152 424 Loss carryforwards 532 90 Other revenue item 79 69 532 90 Other revenue item 79 69 Deferred income tax asset 90 Other revenue item 79 69 Deferred income tax asset $ Deferred income tax asset $ 3,181 $ 3,446 Less valuation allowance tax asset $ 3,181 $ 3,446 Less valuation allowance ( 453 3,446 Less valuation allowance ( 453 ) 0 Deferred income tax valuation allowance ( 453 ) 0 Deferred income tax asset , net of valuation allowance $ 2,728 $ 3,446 Deferred Income Tax valuation allowance $ 2,728 $ 3,446 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,072 ) $ ( 1,266 ) ( 1,072 ) $ ( 1,266 ) Unrealized gain on investment Unrealized gain on investment ( 830 ) ( 904 ) Depreciation investment ( 830 ) ( 904 ) Depreciation and amortization ( ) Depreciation and amortization ( 670 ) ( 265 ) Other amortization ( 670 ) ( 265 ) Other ( 14 ) ( 265 ) Other ( 14 ) 0 Deferred income tax ) Other ( 14 ) 0 Deferred income tax liability ( Deferred income tax liability ( 2,586 ) ( 2,435 ) Net liability ( 2,586 ) ( 2,435 ) Net deferred income tax deferred income tax asset $ 142 $ 1,011 Reported As Current tax asset $ 142 $ 1,011 Reported As Current deferred income deferred income tax asset $ 2,035 $ 2,467 Long-term deferred income tax asset $ 2,035 $ 2,467 Long-term deferred income tax liability deferred income tax liability ( 1,893 ) ( 1,456 ) Net liability ( 1,893 ) ( 1,456 ) Net deferred income tax deferred income tax asset $ 142 $ 1,011 The valuation allowance tax asset $ 142 $ 1,011 The valuation allowance disclosed in a portion of a $ 2.0 billion net operating loss carryforward recovered . As of June 30 , 2012 , we have As of June 30 , 2012 , we have not provided temporary difference of approximately $ 60.8 billion resulting from earnings for temporary difference wa approximately $ 19.4 billion at June 30 , $ 19.4 billion at June 30 , 2012 . Income tax billion at June 30 , 2012 . Income tax paid were Income tax paid were $ 3.5 billion , $ 5.3 billion $ 3.5 billion , $ 5.3 billion , and $ 4.1 5.3 billion , and $ 4.1 billion in fiscal year 2012 4.1 billion in fiscal year 2012 , 2011 , and 2010 in fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . Uncertain Tax Tax Positions As of June 30 , 2012 , we had As of June 30 , 2012 , we had $ 7.2 2012 , we had $ 7.2 billion of unrecognized tax benefit tax benefit of which $ 6.2 billion , if recognized , rate . As of June 30 , 2011 , we had As of June 30 , 2011 , we had $ 6.9 2011 , we had $ 6.9 billion of unrecognized tax benefit tax benefit of which $ 5.9 billion , if recognized , unrecognized tax benefit wa $ 154 million , $ 38 million $ 154 million , $ 38 million , and $ 193 38 million , and $ 193 million in fiscal year 2012 193 million in fiscal year 2012 , 2011 , and 2010 in fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . As of respectively . As of June 30 , 2012 , 2011 , As of June 30 , 2012 , 2011 , and 2010 June 30 , 2012 , 2011 , and 2010 , we 2012 , 2011 , and 2010 , we had accrued interest uncertain tax position of $ 939 million , $ 785 million $ 939 million , $ 785 million , and $ 747 785 million , and $ 747 million , respectively , net federal income tax benefit . 72 Table of Contents PART II of Contents PART II Item 8 The aggregate change in the million ) Year Ended June 30 , 2012 2011 2010 Balance Year Ended June 30 , 2012 2011 2010 Balance , beginning Ended June 30 , 2012 2011 2010 Balance , beginning of June 30 , 2012 2011 2010 Balance , beginning of year , beginning of year $ 6,935 $ 6,542 $ 5,403 Decreases of year $ 6,935 $ 6,542 $ 5,403 Decreases related to $ 6,935 $ 6,542 $ 5,403 Decreases related to settlement ( Decreases related to settlement ( 16 ) ( 632 ) ( settlement ( 16 ) ( 632 ) ( 57 ) Increases ) ( 632 ) ( 57 ) Increases for tax position related to the current year 481 739 1,012 Increases for tax to the current year 481 739 1,012 Increases for tax position the current year 481 739 1,012 Increases for tax position related position related to prior year 118 405 364 Decreases for tax related to prior year 118 405 364 Decreases for tax position to prior year 118 405 364 Decreases for tax position related related to prior year ( 292 ) ( 119 ) ( year ( 292 ) ( 119 ) ( 166 ) Decreases ) ( 119 ) ( 166 ) Decreases due to lapsed lapsed statute of limitation ( 24 ) 0 ( 14 ) of limitation ( 24 ) 0 ( 14 ) Balance , ( 24 ) 0 ( 14 ) Balance , end of , end of year $ 7,202 $ 6,935 $ 6,542 During of year $ 7,202 $ 6,935 $ 6,542 During the third $ 7,202 $ 6,935 $ 6,542 During the third quarter of third quarter of fiscal year 2011 , we reached a settlement . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income income tax expense by $ 461 million . While we settled these year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2012 , the primary As of June 30 , 2012 , the primary unresolved issue or decrease within the next 12 month , a we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2011 . We are for tax year 2007 to 2011 . We are subject to to examination for tax year 1996 to 2011 , some of for tax year 1996 to 2011 , some of which are our financial statement . NOTE 14 — UNEARNED REVENUE Unearned revenue point ; sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 at a discounted price ( the revenue recognition criterion . 73 Table of Contents PART II of Contents PART II Item 8 The component of unearned revenue ( In million ) June 30 , 2012 2011 Volume licensing million ) June 30 , 2012 2011 Volume licensing program $ ) June 30 , 2012 2011 Volume licensing program $ 16,717 2011 Volume licensing program $ 16,717 $ 14,625 Other ( a licensing program $ 16,717 $ 14,625 Other ( a ) 3,342 14,625 Other ( a ) 3,342 2,495 Total $ 20,059 $ Other ( a ) 3,342 2,495 Total $ 20,059 $ 17,120 ) 3,342 2,495 Total $ 20,059 $ 17,120 ( a ) 2,495 Total $ 20,059 $ 17,120 ( a ) Other a ) Other a of June 30 , 2012 includes $ 540 a of June 30 , 2012 includes $ 540 million of 30 , 2012 includes $ 540 million of unearned revenue associated ( In million ) June 30 , 2012 2011 Windows & million ) June 30 , 2012 2011 Windows & Windows Live ) June 30 , 2012 2011 Windows & Windows Live Division & Windows Live Division $ 2,444 $ 1,782 Server and Tools Live Division $ 2,444 $ 1,782 Server and Tools 7,445 6,315 $ 1,782 Server and Tools 7,445 6,315 Microsoft Business Division 9,015 1,782 Server and Tools 7,445 6,315 Microsoft Business Division 9,015 8,187 7,445 6,315 Microsoft Business Division 9,015 8,187 Other segment 1,155 836 6,315 Microsoft Business Division 9,015 8,187 Other segment 1,155 836 Total Division 9,015 8,187 Other segment 1,155 836 Total $ 20,059 $ 9,015 8,187 Other segment 1,155 836 Total $ 20,059 $ 17,120 segment 1,155 836 Total $ 20,059 $ 17,120 Fiscal year 2011 836 Total $ 20,059 $ 17,120 Fiscal year 2011 amount have 20,059 $ 17,120 Fiscal year 2011 amount have been recast for recast for the fiscal year 2012 movement of Forefront Protection for Microsoft Business Division . NOTE 15 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2012 2011 Tax contingency million ) June 30 , 2012 2011 Tax contingency and other ) June 30 , 2012 2011 Tax contingency and other tax and other tax liability $ 7,634 $ 7,381 Legal contingency 220 tax liability $ 7,634 $ 7,381 Legal contingency 220 276 Other 7,634 $ 7,381 Legal contingency 220 276 Other 354 415 Total $ 7,381 Legal contingency 220 276 Other 354 415 Total $ Legal contingency 220 276 Other 354 415 Total $ 8,208 $ contingency 220 276 Other 354 415 Total $ 8,208 $ 8,072 Other 354 415 Total $ 8,208 $ 8,072 NOTE 16 — 415 Total $ 8,208 $ 8,072 NOTE 16 — COMMITMENTS AND $ 8,208 $ 8,072 NOTE 16 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 353 million for constructing new building leasehold improvement a of June 30 , 2012 . 74 Table a of June 30 , 2012 . 74 Table of Contents June 30 , 2012 . 74 Table of Contents PART II of Contents PART II Item 8 We have operating lease for facility operating lease wa $ 639 million , $ 525 million $ 639 million , $ 525 million , and $ 530 525 million , and $ 530 million , in fiscal year million , in fiscal year 2012 , 2011 , and 2010 in fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . Future minimum in place a of June 30 , 2012 are a follows a of June 30 , 2012 are a follows : ( million ) Year Ending June 30 , 2013 $ 527 2014 Year Ending June 30 , 2013 $ 527 2014 421 2015 June 30 , 2013 $ 527 2014 421 2015 327 2016 30 , 2013 $ 527 2014 421 2015 327 2016 223 , 2013 $ 527 2014 421 2015 327 2016 223 2017 2013 $ 527 2014 421 2015 327 2016 223 2017 164 $ 527 2014 421 2015 327 2016 223 2017 164 Thereafter 527 2014 421 2015 327 2016 223 2017 164 Thereafter 315 2014 421 2015 327 2016 223 2017 164 Thereafter 315 Total 421 2015 327 2016 223 2017 164 Thereafter 315 Total $ 2015 327 2016 223 2017 164 Thereafter 315 Total $ 1,977 2016 223 2017 164 Thereafter 315 Total $ 1,977 Indemnifications We 164 Thereafter 315 Total $ 1,977 Indemnifications We provide indemnification of ! Commercial Agreement On December 4 , 2009 , we entered Agreement On December 4 , 2009 , we entered into a , we entered into a 10-year agreement with Yahoo ! Inc. guarantee for a period of 18 month after implementation of the , extended by an additional 12 month for the U.S. and could range up to $ 120 million . NOTE 17 — $ 120 million . NOTE 17 — CONTINGENCIES Antitrust , Unfair certain other software product between 1999 and 2005 . We obtained software product between 1999 and 2005 . We obtained dismissal or be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.9 billion and $ 2.0 billion $ 1.9 billion and $ 2.0 billion . At June 30 2.0 billion . At June 30 , 2012 , we have . At June 30 , 2012 , we have recorded a these claim of approximately $ 500 million , which reflects our our estimated exposure of $ 1.9 billion le payment made to to date of approximately $ 1.4 billion mostly for voucher , , and administrative expense . 75 Table of Contents PART II of Contents PART II Item 8 The three case pending in been settled . In March 2010 , the court in the class action . In April 2011 , the British Columbia Court heard in the fall of 2012 . The other two action Litigation and Claims In November 2004 , Novell , Inc. ( during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted the complaint . In March 2010 , the trial court granted place from October to December 2011 and resulted in a mistrial a verdict . In July 2012 , the trial court granted Competition Law Matters In December 2009 , the European Commission adopted with a version of Windows 7 called Windows 7 Service Pack of Windows 7 called Windows 7 Service Pack 1 . We called Windows 7 Service Pack 1 . We did deliver the the original version of Windows 7 and earlier edition of Windows that come preinstalled with Windows 7 Service Pack are now receiving a intended . On July 17 , 2012 , the Commission . On July 17 , 2012 , the Commission announced that may be fined up to 10 % of it worldwide annual Claims Motorola Litigation In October 2010 , Microsoft filed patent infringement United Kingdom . In April 2012 , following complaint by Microsoft antitrust rule . In June 2012 , we received a request Motorola took place in August 2011 on seven of the nine the complaint . In December 2011 , the administrative law judge ITC issue a limited exclusion 76 Table of Contents PART II of Contents PART II Item 8 order against Motorola prohibiting importation Android device . In May 2012 , the ITC issued the which became effective on July 18 , 2012 . Microsoft ha effective on July 18 , 2012 . Microsoft ha appealed certain exclusion order . In November 2010 , Motorola filed an action the U.S . In April 2012 , the ALJ found that s finding . In June 2012 , Microsoft filed a motion matter to the ALJ ( 1 ) to apply certain ITC ITC case precedent , ( 2 ) to rule on Microsoft on Microsoft ’ s June 2012 motion to terminate , and to terminate , and ( 3 ) set a new target Presidential review for up to 60 day , during which it Court case filed in October 2010 by Microsoft a a companion ITC case . In November 2010 , Microsoft sued Motorola for H.264 video standard and the 802.11 Wi-Fi standard . In suit in Germany . In February 2012 , the Seattle District Court of Microsoft ruling that ( 1 ) Motorola entered into binding and condition ; and ( 2 ) Microsoft is a third-party RAND royalty . In April 2012 , the court issued a video patent . In May 2012 , the court converted that royalty to begin in November 2012 . Cases filed by Motorola transferred case , Motorola asserts 15 patent are infringed by many Microsoft product including Windows Mobile 6.5 and Windows Phone 7 , Mobile 6.5 and Windows Phone 7 , Windows Marketplace , Silverlight Silverlight , Windows Vista and 7 , Exchange Server 2003 and and 7 , Exchange Server 2003 and later , Exchange ActiveSync Live Messenger , Lync Server 2010 , Outlook 2010 , Office Lync Server 2010 , Outlook 2010 , Office 365 , SQL , Outlook 2010 , Office 365 , SQL Server , Internet SQL Server , Internet Explorer 9 , Xbox , and Kinect by Motorola , Microsoft asserts 14 patent are infringed by Motorola Motorola digital video recorder . 77 Table of Contents PART II of Contents PART II Item 8 Germany In July 2011 , Item 8 Germany In July 2011 , Motorola filed patent infringement H.264 capable product including Xbox 360 , Windows 7 , Media including Xbox 360 , Windows 7 , Media Player , and an injunction . In May 2012 , the court issued an protocol employed by Windows Phone 7 , Outlook Mobile , Hotmail an injunction . In May 2012 , the Court invited further issue a ruling in August 2012 . Damages would be determined , October , and December 2011 and in April 2012 , December 2011 and in April 2012 , Microsoft asserts Motorola Android an injunction . In May 2012 , the court issued an . United Kingdom In December 2011 , Microsoft filed an action ActiveSync protocol . In February 2012 , Motorola counterclaimed alleging infringement trial is expected in December 2012 . Other Patent and Intellectual case , there are approximately 60 other patent infringement case pending future . As of June 30 , 2012 , we had As of June 30 , 2012 , we had accrued aggregate accrued aggregate liability of $ 384 million in other current liability other current liability and $ 220 million in other long-term liability estimate could reach approximately $ 550 million in aggregate beyond recorded effect become reasonably estimable . 78 Table of Contents PART II of Contents PART II Item 8 NOTE 18 — STOCKHOLDERS ’ PART II Item 8 NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2012 2011 2010 Balance Year Ended June 30 , 2012 2011 2010 Balance , beginning Ended June 30 , 2012 2011 2010 Balance , beginning of June 30 , 2012 2011 2010 Balance , beginning of year Balance , beginning of year 8,376 8,668 8,908 Issued 147 155 , beginning of year 8,376 8,668 8,908 Issued 147 155 140 beginning of year 8,376 8,668 8,908 Issued 147 155 140 Repurchased year 8,376 8,668 8,908 Issued 147 155 140 Repurchased ( 142 8,376 8,668 8,908 Issued 147 155 140 Repurchased ( 142 ) 8,668 8,908 Issued 147 155 140 Repurchased ( 142 ) ( 147 155 140 Repurchased ( 142 ) ( 447 ) ( Repurchased ( 142 ) ( 447 ) ( 380 ) Balance ) ( 447 ) ( 380 ) Balance , end of Balance , end of year 8,381 8,376 8,668 Share Repurchases On , end of year 8,381 8,376 8,668 Share Repurchases On September end of year 8,381 8,376 8,668 Share Repurchases On September 22 8,668 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced that our program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2012 , approximately $ As of June 30 , 2012 , approximately $ 8.2 billion , 2012 , approximately $ 8.2 billion of the approved repurchase Shares Amount Year Ended June 30 , 2012 2011 2010 First Year Ended June 30 , 2012 2011 2010 First quarter 38 Ended June 30 , 2012 2011 2010 First quarter 38 $ June 30 , 2012 2011 2010 First quarter 38 $ 1,000 2012 2011 2010 First quarter 38 $ 1,000 163 $ 4,000 2010 First quarter 38 $ 1,000 163 $ 4,000 58 $ First quarter 38 $ 1,000 163 $ 4,000 58 $ 1,445 38 $ 1,000 163 $ 4,000 58 $ 1,445 Second quarter $ 1,000 163 $ 4,000 58 $ 1,445 Second quarter 39 163 $ 4,000 58 $ 1,445 Second quarter 39 1,000 188 58 $ 1,445 Second quarter 39 1,000 188 5,000 125 3,583 $ 1,445 Second quarter 39 1,000 188 5,000 125 3,583 Third 1,445 Second quarter 39 1,000 188 5,000 125 3,583 Third quarter Second quarter 39 1,000 188 5,000 125 3,583 Third quarter 31 quarter 39 1,000 188 5,000 125 3,583 Third quarter 31 1,000 39 1,000 188 5,000 125 3,583 Third quarter 31 1,000 30 5,000 125 3,583 Third quarter 31 1,000 30 827 67 2,000 125 3,583 Third quarter 31 1,000 30 827 67 2,000 Fourth 3,583 Third quarter 31 1,000 30 827 67 2,000 Fourth quarter Third quarter 31 1,000 30 827 67 2,000 Fourth quarter 34 quarter 31 1,000 30 827 67 2,000 Fourth quarter 34 1,000 31 1,000 30 827 67 2,000 Fourth quarter 34 1,000 66 827 67 2,000 Fourth quarter 34 1,000 66 1,631 130 3,808 67 2,000 Fourth quarter 34 1,000 66 1,631 130 3,808 Total 2,000 Fourth quarter 34 1,000 66 1,631 130 3,808 Total 142 Fourth quarter 34 1,000 66 1,631 130 3,808 Total 142 $ quarter 34 1,000 66 1,631 130 3,808 Total 142 $ 4,000 34 1,000 66 1,631 130 3,808 Total 142 $ 4,000 447 66 1,631 130 3,808 Total 142 $ 4,000 447 $ 11,458 130 3,808 Total 142 $ 4,000 447 $ 11,458 380 $ 3,808 Total 142 $ 4,000 447 $ 11,458 380 $ 10,836 142 $ 4,000 447 $ 11,458 380 $ 10,836 Dividends In $ 4,000 447 $ 11,458 380 $ 10,836 Dividends In fiscal 447 $ 11,458 380 $ 10,836 Dividends In fiscal year 2012 10,836 Dividends In fiscal year 2012 , our Board of Directors ( In million ) September 20 , 2011 $ 0.20 November million ) September 20 , 2011 $ 0.20 November 17 , September 20 , 2011 $ 0.20 November 17 , 2011 $ , 2011 $ 0.20 November 17 , 2011 $ 1,683 December $ 0.20 November 17 , 2011 $ 1,683 December 8 , November 17 , 2011 $ 1,683 December 8 , 2011 December , 2011 $ 1,683 December 8 , 2011 December 14 , $ 1,683 December 8 , 2011 December 14 , 2011 $ December 8 , 2011 December 14 , 2011 $ 0.20 February , 2011 December 14 , 2011 $ 0.20 February 16 , December 14 , 2011 $ 0.20 February 16 , 2012 $ , 2011 $ 0.20 February 16 , 2012 $ 1,683 March $ 0.20 February 16 , 2012 $ 1,683 March 8 , February 16 , 2012 $ 1,683 March 8 , 2012 March , 2012 $ 1,683 March 8 , 2012 March 13 , $ 1,683 March 8 , 2012 March 13 , 2012 $ March 8 , 2012 March 13 , 2012 $ 0.20 May , 2012 March 13 , 2012 $ 0.20 May 17 , March 13 , 2012 $ 0.20 May 17 , 2012 $ , 2012 $ 0.20 May 17 , 2012 $ 1,678 June $ 0.20 May 17 , 2012 $ 1,678 June 14 , May 17 , 2012 $ 1,678 June 14 , 2012 June , 2012 $ 1,678 June 14 , 2012 June 13 , $ 1,678 June 14 , 2012 June 13 , 2012 $ June 14 , 2012 June 13 , 2012 $ 0.20 August , 2012 June 13 , 2012 $ 0.20 August 16 , June 13 , 2012 $ 0.20 August 16 , 2012 $ , 2012 $ 0.20 August 16 , 2012 $ 1,676 September $ 0.20 August 16 , 2012 $ 1,676 September 13 , August 16 , 2012 $ 1,676 September 13 , 2012 The , 2012 $ 1,676 September 13 , 2012 The dividend declared $ 1,676 September 13 , 2012 The dividend declared on June The dividend declared on June 13 , 2012 will be paid declared on June 13 , 2012 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2012 . In fiscal a of June 30 , 2012 . In fiscal year 2011 2012 . In fiscal year 2011 , our Board of Directors ( In million ) September 21 , 2010 $ 0.16 November million ) September 21 , 2010 $ 0.16 November 18 , September 21 , 2010 $ 0.16 November 18 , 2010 $ , 2010 $ 0.16 November 18 , 2010 $ 1,363 December $ 0.16 November 18 , 2010 $ 1,363 December 9 , November 18 , 2010 $ 1,363 December 9 , 2010 December , 2010 $ 1,363 December 9 , 2010 December 15 , $ 1,363 December 9 , 2010 December 15 , 2010 $ December 9 , 2010 December 15 , 2010 $ 0.16 February , 2010 December 15 , 2010 $ 0.16 February 17 , December 15 , 2010 $ 0.16 February 17 , 2011 $ , 2010 $ 0.16 February 17 , 2011 $ 1,349 March $ 0.16 February 17 , 2011 $ 1,349 March 10 , February 17 , 2011 $ 1,349 March 10 , 2011 March , 2011 $ 1,349 March 10 , 2011 March 14 , $ 1,349 March 10 , 2011 March 14 , 2011 $ March 10 , 2011 March 14 , 2011 $ 0.16 May , 2011 March 14 , 2011 $ 0.16 May 19 , March 14 , 2011 $ 0.16 May 19 , 2011 $ , 2011 $ 0.16 May 19 , 2011 $ 1,350 June $ 0.16 May 19 , 2011 $ 1,350 June 9 , May 19 , 2011 $ 1,350 June 9 , 2011 June , 2011 $ 1,350 June 9 , 2011 June 15 , $ 1,350 June 9 , 2011 June 15 , 2011 $ June 9 , 2011 June 15 , 2011 $ 0.16 August , 2011 June 15 , 2011 $ 0.16 August 18 , June 15 , 2011 $ 0.16 August 18 , 2011 $ , 2011 $ 0.16 August 18 , 2011 $ 1,341 September $ 0.16 August 18 , 2011 $ 1,341 September 8 , August 18 , 2011 $ 1,341 September 8 , 2011 79 , 2011 $ 1,341 September 8 , 2011 79 Table of $ 1,341 September 8 , 2011 79 Table of Contents PART 1,341 September 8 , 2011 79 Table of Contents PART II of Contents PART II Item 8 The dividend declared on June The dividend declared on June 15 , 2011 wa included in declared on June 15 , 2011 wa included in other current current liability a of June 30 , 2011 . NOTE 19 a of June 30 , 2011 . NOTE 19 — OTHER 30 , 2011 . NOTE 19 — OTHER COMPREHENSIVE INCOME ( million ) Year Ended June 30 , 2012 2011 2010 Net Year Ended June 30 , 2012 2011 2010 Net Unrealized Gains Ended June 30 , 2012 2011 2010 Net Unrealized Gains ( June 30 , 2012 2011 2010 Net Unrealized Gains ( Losses of tax effect of $ 127 , $ ( 340 ) $ 127 , $ ( 340 ) , and $ 188 340 ) , and $ 188 $ 236 $ ( 632 , and $ 188 $ 236 $ ( 632 ) $ 188 $ 236 $ ( 632 ) $ 349 Reclassification adjustment $ ( 632 ) $ 349 Reclassification adjustment for loss ( of tax effect of $ 10 , $ 2 , and of $ 10 , $ 2 , and $ ( 173 2 , and $ ( 173 ) 19 5 ( 322 and $ ( 173 ) 19 5 ( 322 ) Net $ ( 173 ) 19 5 ( 322 ) Net unrealized 173 ) 19 5 ( 322 ) Net unrealized gain ( loss ) on derivative $ 255 $ ( 627 ) $ derivative $ 255 $ ( 627 ) $ 27 Net Unrealized $ ( 627 ) $ 27 Net Unrealized Gains ( Losses tax effect of $ ( 93 ) , $ 726 , ( 93 ) , $ 726 , and $ 263 $ $ 726 , and $ 263 $ ( 172 ) $ and $ 263 $ ( 172 ) $ 1,349 $ 488 $ ( 172 ) $ 1,349 $ 488 Reclassification adjustment for 172 ) $ 1,349 $ 488 Reclassification adjustment for gain included tax effect of $ ( 117 ) , $ ( 159 117 ) , $ ( 159 ) , and $ ( ) , and $ ( 120 ) ( 218 ) ( $ ( 120 ) ( 218 ) ( 295 ) ( ) ( 218 ) ( 295 ) ( 223 ) Net ) ( 295 ) ( 223 ) Net unrealized gain ( loss ) on investment ( 390 ) 1,054 265 Translation adjustment on investment ( 390 ) 1,054 265 Translation adjustment and other investment ( 390 ) 1,054 265 Translation adjustment and other , tax effect of $ ( 165 ) , $ 205 and ( 165 ) , $ 205 and $ ( 103 ) $ 205 and $ ( 103 ) ( 306 ) 381 $ ( 103 ) ( 306 ) 381 ( 206 ) 103 ) ( 306 ) 381 ( 206 ) Other comprehensive ( 306 ) 381 ( 206 ) Other comprehensive income ( ( loss ) $ ( 441 ) $ 808 $ 86 $ ( 441 ) $ 808 $ 86 The component of 441 ) $ 808 $ 86 The component of accumulated other ( In million ) June 30 , 2012 2011 2010 Net million ) June 30 , 2012 2011 2010 Net unrealized gain ) June 30 , 2012 2011 2010 Net unrealized gain ( June 30 , 2012 2011 2010 Net unrealized gain ( loss loss ) on derivative $ 92 $ ( 163 ) $ derivative $ 92 $ ( 163 ) $ 464 Net unrealized $ ( 163 ) $ 464 Net unrealized gain on investment Net unrealized gain on investment 1,431 1,821 767 Translation adjustment and unrealized gain on investment 1,431 1,821 767 Translation adjustment and other gain on investment 1,431 1,821 767 Translation adjustment and other ( Translation adjustment and other ( 101 ) 205 ( 176 ) and other ( 101 ) 205 ( 176 ) Accumulated other ( 101 ) 205 ( 176 ) Accumulated other comprehensive income Accumulated other comprehensive income $ 1,422 $ 1,863 $ 1,055 NOTE comprehensive income $ 1,422 $ 1,863 $ 1,055 NOTE 20 — $ 1,422 $ 1,863 $ 1,055 NOTE 20 — EMPLOYEE STOCK $ 1,863 $ 1,055 NOTE 20 — EMPLOYEE STOCK AND SAVINGS and employee . At June 30 , 2012 , an aggregate . At June 30 , 2012 , an aggregate of 507 2012 , an aggregate of 507 million share were authorized for million ) Year Ended June 30 , 2012 2011 2010 Stock-based Year Ended June 30 , 2012 2011 2010 Stock-based compensation expense Ended June 30 , 2012 2011 2010 Stock-based compensation expense $ June 30 , 2012 2011 2010 Stock-based compensation expense $ 2,244 2010 Stock-based compensation expense $ 2,244 $ 2,166 $ 1,891 Income compensation expense $ 2,244 $ 2,166 $ 1,891 Income tax benefit $ 2,244 $ 2,166 $ 1,891 Income tax benefit related to related to stock-based compensation $ 785 $ 758 $ 662 80 stock-based compensation $ 785 $ 758 $ 662 80 Table of $ 785 $ 758 $ 662 80 Table of Contents PART 785 $ 758 $ 662 80 Table of Contents PART II of Contents PART II Item 8 Stock Plans ( Excluding Stock granted SPSAs for fiscal year 2012 , 2011 , and 2010 for fiscal year 2012 , 2011 , and 2010 with performance 2012 , 2011 , and 2010 with performance period of July with performance period of July 1 , 2011 through June 30 period of July 1 , 2011 through June 30 , 2012 1 , 2011 through June 30 , 2012 , July 1 2011 through June 30 , 2012 , July 1 , 2010 30 , 2012 , July 1 , 2010 through June 30 2012 , July 1 , 2010 through June 30 , 2011 1 , 2010 through June 30 , 2011 , and July 2010 through June 30 , 2011 , and July 1 , , 2011 , and July 1 , 2009 through June 30 , and July 1 , 2009 through June 30 , 2010 1 , 2009 through June 30 , 2010 , respectively . 2009 through June 30 , 2010 , respectively . In August by a percentage ranging from 0 % to 150 % . ranging from 0 % to 150 % . The percentage is number of share , approximately 12 % of the total target income . For fiscal year 2012 , 2011 , and 2010 For fiscal year 2012 , 2011 , and 2010 , the 2012 , 2011 , and 2010 , the pool wa 0.3 2010 , the pool wa 0.3 % , 0.25 % , pool wa 0.3 % , 0.25 % , and 0.45 % , 0.25 % , and 0.45 % of operating income , The fixed percentage range between 0 % and 150 % of range between 0 % and 150 % of a target based approval of the award , 20 % of the award is cash , and the remaining 80 % is converted into an by dividing the value of 80 % of the total award year-end and one-quarter on August 31 of each of the following assumption : Year Ended June 30 , 2012 2011 2010 Dividends Year Ended June 30 , 2012 2011 2010 Dividends per share Ended June 30 , 2012 2011 2010 Dividends per share ( June 30 , 2012 2011 2010 Dividends per share ( quarterly ( quarterly amount ) $ 0.16 - $ 0.20 $ 0.13 ) $ 0.16 - $ 0.20 $ 0.13 - $ 0.16 0.16 - $ 0.20 $ 0.13 - $ 0.16 $ 0.13 0.20 $ 0.13 - $ 0.16 $ 0.13 Interest rate range 0.13 - $ 0.16 $ 0.13 Interest rate range 0.7 % $ 0.13 Interest rate range 0.7 % - 1.7 % 1.1 rate range 0.7 % - 1.7 % 1.1 % - 2.4 0.7 % - 1.7 % 1.1 % - 2.4 % 2.1 1.7 % 1.1 % - 2.4 % 2.1 % - 2.9 1.1 % - 2.4 % 2.1 % - 2.9 % 81 2.4 % 2.1 % - 2.9 % 81 Table of Contents 2.1 % - 2.9 % 81 Table of Contents PART II of Contents PART II Item 8 During fiscal year 2012 , Item 8 During fiscal year 2012 , the following activity occurred balance , beginning of year 255 $ 23.59 Granted 90 $ beginning of year 255 $ 23.59 Granted 90 $ 24.96 Vested year 255 $ 23.59 Granted 90 $ 24.96 Vested ( 73 $ 23.59 Granted 90 $ 24.96 Vested ( 73 ) $ 90 $ 24.96 Vested ( 73 ) $ 24.20 Forfeited ( Vested ( 73 ) $ 24.20 Forfeited ( 24 ) $ ) $ 24.20 Forfeited ( 24 ) $ 23.74 Nonvested balance Forfeited ( 24 ) $ 23.74 Nonvested balance , end of balance , end of year 248 $ 23.90 Shared Performance Stock end of year 248 $ 23.90 Shared Performance Stock Awards Nonvested balance , beginning of year 32 $ 23.76 Granted 20 $ beginning of year 32 $ 23.76 Granted 20 $ 22.88 Vested year 32 $ 23.76 Granted 20 $ 22.88 Vested ( 15 $ 23.76 Granted 20 $ 22.88 Vested ( 15 ) $ 20 $ 22.88 Vested ( 15 ) $ 24.69 Forfeited ( Vested ( 15 ) $ 24.69 Forfeited ( 4 ) $ ) $ 24.69 Forfeited ( 4 ) $ 23.82 Nonvested balance Forfeited ( 4 ) $ 23.82 Nonvested balance , end of balance , end of year 33 $ 23.93 As of June end of year 33 $ 23.93 As of June 30 , $ 23.93 As of June 30 , 2012 , there wa As of June 30 , 2012 , there wa $ 4.4 2012 , there wa $ 4.4 billion and $ 495 million $ 4.4 billion and $ 495 million of total unrecognized compensation a weighted average period of 2.9 year and 2.5 year , period of 2.9 year and 2.5 year , respectively . During respectively . During fiscal year 2011 and 2010 , the following During fiscal year 2011 and 2010 , the following activity occurred , except fair value ) 2011 2010 Stock Awards Awards granted except fair value ) 2011 2010 Stock Awards Awards granted 114 2010 Stock Awards Awards granted 114 100 Weighted average grant-date fair Stock Awards Awards granted 114 100 Weighted average grant-date fair value average grant-date fair value $ 22.17 $ 23.43 Shared Performance Stock fair value $ 22.17 $ 23.43 Shared Performance Stock Awards Awards Performance Stock Awards Awards granted 18 12 Weighted average grant-date fair Stock Awards Awards granted 18 12 Weighted average grant-date fair value average grant-date fair value $ 22.56 $ 24.57 Following are the fair value $ 22.56 $ 24.57 Following are the fair value : ( In million ) 2012 2011 2010 Total vest-date fair ( In million ) 2012 2011 2010 Total vest-date fair value In million ) 2012 2011 2010 Total vest-date fair value of of stock award vested $ 1,971 $ 1,521 $ 1,358 Total award vested $ 1,971 $ 1,521 $ 1,358 Total vest-date fair $ 1,971 $ 1,521 $ 1,358 Total vest-date fair value of performance stock award vested $ 388 $ 289 $ 227 Stock award vested $ 388 $ 289 $ 227 Stock Options Currently $ 388 $ 289 $ 227 Stock Options Currently , we business acquisition during fiscal year 2012 , 2011 , and 2010 during fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively . 82 Table and 2010 , respectively . 82 Table of Contents PART II of Contents PART II Item 8 Employee stock option activity during Employee stock option activity during 2012 wa a follows : Shares million ) Balance , July 1 , 2011 93 $ 23.21 Balance , July 1 , 2011 93 $ 23.21 Granted 6 , July 1 , 2011 93 $ 23.21 Granted 6 $ 1 , 2011 93 $ 23.21 Granted 6 $ 9.41 Exercised 2011 93 $ 23.21 Granted 6 $ 9.41 Exercised ( 64 $ 23.21 Granted 6 $ 9.41 Exercised ( 64 ) $ 6 $ 9.41 Exercised ( 64 ) $ 22.20 Canceled ( Exercised ( 64 ) $ 22.20 Canceled ( 13 ) $ ) $ 22.20 Canceled ( 13 ) $ 29.44 Balance , Canceled ( 13 ) $ 29.44 Balance , June 30 , $ 29.44 Balance , June 30 , 2012 22 $ 18.69 Balance , June 30 , 2012 22 $ 18.69 2.15 $ , June 30 , 2012 22 $ 18.69 2.15 $ 264 30 , 2012 22 $ 18.69 2.15 $ 264 Exercisable , , 2012 22 $ 18.69 2.15 $ 264 Exercisable , June 22 $ 18.69 2.15 $ 264 Exercisable , June 30 , $ 264 Exercisable , June 30 , 2012 18 $ 20.77 Exercisable , June 30 , 2012 18 $ 20.77 0.83 $ , June 30 , 2012 18 $ 20.77 0.83 $ 178 30 , 2012 18 $ 20.77 0.83 $ 178 As of , 2012 18 $ 20.77 0.83 $ 178 As of June 18 $ 20.77 0.83 $ 178 As of June 30 , $ 178 As of June 30 , 2012 approximately six million As of June 30 , 2012 approximately six million option that exercise price range of $ 0.01 to $ 29.24 and a of $ 0.01 to $ 29.24 and a weighted average exercise average exercise price of $ 9.33 . During the period reported : ( In million ) 2012 2011 2010 Total intrinsic value ( In million ) 2012 2011 2010 Total intrinsic value of In million ) 2012 2011 2010 Total intrinsic value of stock of stock option exercised $ 456 $ 222 $ 365 Cash option exercised $ 456 $ 222 $ 365 Cash received from $ 456 $ 222 $ 365 Cash received from stock option from stock option exercise $ 1,410 $ 1,954 $ 1,839 Tax option exercise $ 1,410 $ 1,954 $ 1,839 Tax benefit realized $ 1,410 $ 1,954 $ 1,839 Tax benefit realized from stock from stock option exercise $ 160 $ 77 $ 126 Employee option exercise $ 160 $ 77 $ 126 Employee Stock Purchase $ 160 $ 77 $ 126 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation Plan that were approved in 2002 , the Plan will terminate Plan will terminate on December 31 , 2012 . Microsoft intends terminate on December 31 , 2012 . Microsoft intends to request under the Plan before December 31 , 2012 . Employees purchased Plan before December 31 , 2012 . Employees purchased the following million ) Year Ended June 30 , 2012 2011 2010 Shares Year Ended June 30 , 2012 2011 2010 Shares purchased 20 Ended June 30 , 2012 2011 2010 Shares purchased 20 20 June 30 , 2012 2011 2010 Shares purchased 20 20 20 2012 2011 2010 Shares purchased 20 20 20 Average price per 2011 2010 Shares purchased 20 20 20 Average price per share 2010 Shares purchased 20 20 20 Average price per share $ Average price per share $ 25.03 $ 22.98 $ 23.73 At per share $ 25.03 $ 22.98 $ 23.73 At June 30 $ 25.03 $ 22.98 $ 23.73 At June 30 , 2012 22.98 $ 23.73 At June 30 , 2012 , 23 million 23.73 At June 30 , 2012 , 23 million share of June 30 , 2012 , 23 million share of our common U.S. that qualifies under Section 401 ( k ) of the employee may contribute up to 50 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 373 million , $ 282 million $ 373 million , $ 282 million , and $ 275 282 million , and $ 275 million in fiscal year 2012 275 million in fiscal year 2012 , 2011 , and 2010 in fiscal year 2012 , 2011 , and 2010 , respectively 2012 , 2011 , and 2010 , respectively , and were in Microsoft common stock . 83 Table of Contents PART II of Contents PART II Item 8 NOTE 21 — SEGMENT INFORMATION PART II Item 8 NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC offering consist of the Windows 7 operating system , software and Division offering include the Xbox 360 entertainment platform , including Kinect , including Kinect for Xbox 360 , Skype , and Windows , and Windows Phone . 84 Table of Contents PART II of Contents PART II Item 8 Segment revenue and operating income million ) Year Ended June 30 , 2012 2011 2010 Revenue Year Ended June 30 , 2012 2011 2010 Revenue Windows & Ended June 30 , 2012 2011 2010 Revenue Windows & Windows June 30 , 2012 2011 2010 Revenue Windows & Windows Live & Windows Live Division $ 18,818 $ 18,787 $ 18,789 Server Live Division $ 18,818 $ 18,787 $ 18,789 Server and Tools $ 18,818 $ 18,787 $ 18,789 Server and Tools 18,696 16,691 $ 18,789 Server and Tools 18,696 16,691 15,121 Online Services Division 18,789 Server and Tools 18,696 16,691 15,121 Online Services Division 2,934 Server and Tools 18,696 16,691 15,121 Online Services Division 2,934 2,680 16,691 15,121 Online Services Division 2,934 2,680 2,345 Microsoft Business Division 15,121 Online Services Division 2,934 2,680 2,345 Microsoft Business Division 23,963 Online Services Division 2,934 2,680 2,345 Microsoft Business Division 23,963 22,314 2,680 2,345 Microsoft Business Division 23,963 22,314 19,525 Entertainment and Devices 2,345 Microsoft Business Division 23,963 22,314 19,525 Entertainment and Devices Division Microsoft Business Division 23,963 22,314 19,525 Entertainment and Devices Division 9,585 19,525 Entertainment and Devices Division 9,585 8,896 6,135 Unallocated and other Entertainment and Devices Division 9,585 8,896 6,135 Unallocated and other ( and Devices Division 9,585 8,896 6,135 Unallocated and other ( 273 6,135 Unallocated and other ( 273 ) 575 569 Consolidated $ and other ( 273 ) 575 569 Consolidated $ 73,723 $ other ( 273 ) 575 569 Consolidated $ 73,723 $ 69,943 ) 575 569 Consolidated $ 73,723 $ 69,943 $ 62,484 ( 569 Consolidated $ 73,723 $ 69,943 $ 62,484 ( In million $ 73,723 $ 69,943 $ 62,484 ( In million ) Year million ) Year Ended June 30 , 2012 2011 2010 Operating Year Ended June 30 , 2012 2011 2010 Operating Income ( Ended June 30 , 2012 2011 2010 Operating Income ( Loss June 30 , 2012 2011 2010 Operating Income ( Loss ) & Windows Live Division $ 11,908 $ 11,971 $ 12,193 Server Live Division $ 11,908 $ 11,971 $ 12,193 Server and Tools $ 11,908 $ 11,971 $ 12,193 Server and Tools 7,459 6,332 $ 12,193 Server and Tools 7,459 6,332 5,378 Online Services Division 12,193 Server and Tools 7,459 6,332 5,378 Online Services Division ( Server and Tools 7,459 6,332 5,378 Online Services Division ( 8,122 5,378 Online Services Division ( 8,122 ) ( 2,649 ) ( Division ( 8,122 ) ( 2,649 ) ( 2,395 ) Microsoft ) ( 2,649 ) ( 2,395 ) Microsoft Business Division 15,688 2,395 ) Microsoft Business Division 15,688 14,453 12,109 Entertainment and Devices ) Microsoft Business Division 15,688 14,453 12,109 Entertainment and Devices Division Microsoft Business Division 15,688 14,453 12,109 Entertainment and Devices Division 365 12,109 Entertainment and Devices Division 365 1,294 525 Reconciling amount ( Entertainment and Devices Division 365 1,294 525 Reconciling amount ( 5,535 and Devices Division 365 1,294 525 Reconciling amount ( 5,535 ) 1,294 525 Reconciling amount ( 5,535 ) ( 4,240 ) ( amount ( 5,535 ) ( 4,240 ) ( 3,712 ) Consolidated ) ( 4,240 ) ( 3,712 ) Consolidated $ 21,763 $ ( 3,712 ) Consolidated $ 21,763 $ 27,161 $ 24,098 Reconciling ) Consolidated $ 21,763 $ 27,161 $ 24,098 Reconciling amount in $ 21,763 $ 27,161 $ 24,098 Reconciling amount in the table million ) Year Ended June 30 , 2012 2011 2010 Corporate-level Year Ended June 30 , 2012 2011 2010 Corporate-level activity ( Ended June 30 , 2012 2011 2010 Corporate-level activity ( a June 30 , 2012 2011 2010 Corporate-level activity ( a ) ( a ) $ ( 5,090 ) $ ( 4,597 ) ( 5,090 ) $ ( 4,597 ) $ ( 4,136 ) ( 4,597 ) $ ( 4,136 ) Revenue reconciling amount ( ) Revenue reconciling amount ( 486 ) 381 314 Other 41 reconciling amount ( 486 ) 381 314 Other 41 ( 24 amount ( 486 ) 381 314 Other 41 ( 24 ) 486 ) 381 314 Other 41 ( 24 ) 110 Total 381 314 Other 41 ( 24 ) 110 Total $ ( Other 41 ( 24 ) 110 Total $ ( 5,535 ) ) 110 Total $ ( 5,535 ) $ ( 4,240 ) ( 5,535 ) $ ( 4,240 ) $ ( 3,712 ) ( 4,240 ) $ ( 3,712 ) ( a ) Corporate-level in that line item . 85 Table of Contents PART II of Contents PART II Item 8 No sale to an individual States accounted for more than 10 % of fiscal year 2012 10 % of fiscal year 2012 , 2011 , or 2010 of fiscal year 2012 , 2011 , or 2010 revenue . 2012 , 2011 , or 2010 revenue . Revenue , classified million ) Year Ended June 30 , 2012 2011 2010 United Year Ended June 30 , 2012 2011 2010 United States ( Ended June 30 , 2012 2011 2010 United States ( a June 30 , 2012 2011 2010 United States ( a ) States ( a ) $ 38,846 $ 38,008 $ 36,173 Other a ) $ 38,846 $ 38,008 $ 36,173 Other country 34,877 $ 38,846 $ 38,008 $ 36,173 Other country 34,877 31,935 26,311 38,008 $ 36,173 Other country 34,877 31,935 26,311 Total $ 73,723 $ 36,173 Other country 34,877 31,935 26,311 Total $ 73,723 $ 36,173 Other country 34,877 31,935 26,311 Total $ 73,723 $ 69,943 34,877 31,935 26,311 Total $ 73,723 $ 69,943 $ 62,484 ( 26,311 Total $ 73,723 $ 69,943 $ 62,484 ( a ) $ 73,723 $ 69,943 $ 62,484 ( a ) Includes billing million ) Year Ended June 30 , 2012 2011 2010 Microsoft Year Ended June 30 , 2012 2011 2010 Microsoft Office system Ended June 30 , 2012 2011 2010 Microsoft Office system $ June 30 , 2012 2011 2010 Microsoft Office system $ 22,299 2010 Microsoft Office system $ 22,299 $ 20,730 $ 17,754 Windows Office system $ 22,299 $ 20,730 $ 17,754 Windows PC operating $ 22,299 $ 20,730 $ 17,754 Windows PC operating system 17,320 17,754 Windows PC operating system 17,320 17,825 18,225 Server product and Windows PC operating system 17,320 17,825 18,225 Server product and tool PC operating system 17,320 17,825 18,225 Server product and tool 14,232 18,225 Server product and tool 14,232 13,251 12,007 Xbox 360 platform Server product and tool 14,232 13,251 12,007 Xbox 360 platform 8,045 product and tool 14,232 13,251 12,007 Xbox 360 platform 8,045 8,103 tool 14,232 13,251 12,007 Xbox 360 platform 8,045 8,103 5,456 Consulting 13,251 12,007 Xbox 360 platform 8,045 8,103 5,456 Consulting and product 12,007 Xbox 360 platform 8,045 8,103 5,456 Consulting and product support Xbox 360 platform 8,045 8,103 5,456 Consulting and product support service Consulting and product support service 3,976 3,372 3,036 Advertising 3,181 2,913 and product support service 3,976 3,372 3,036 Advertising 3,181 2,913 2,528 product support service 3,976 3,372 3,036 Advertising 3,181 2,913 2,528 Other service 3,976 3,372 3,036 Advertising 3,181 2,913 2,528 Other 4,670 3,749 3,976 3,372 3,036 Advertising 3,181 2,913 2,528 Other 4,670 3,749 3,478 3,372 3,036 Advertising 3,181 2,913 2,528 Other 4,670 3,749 3,478 Total Advertising 3,181 2,913 2,528 Other 4,670 3,749 3,478 Total $ 73,723 3,181 2,913 2,528 Other 4,670 3,749 3,478 Total $ 73,723 $ 2,913 2,528 Other 4,670 3,749 3,478 Total $ 73,723 $ 69,943 4,670 3,749 3,478 Total $ 73,723 $ 69,943 $ 62,484 Assets 3,478 Total $ 73,723 $ 69,943 $ 62,484 Assets are not $ 73,723 $ 69,943 $ 62,484 Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2012 2011 2010 United million ) June 30 , 2012 2011 2010 United States $ ) June 30 , 2012 2011 2010 United States $ 14,081 June 30 , 2012 2011 2010 United States $ 14,081 $ 2011 2010 United States $ 14,081 $ 18,498 $ 18,716 Luxembourg United States $ 14,081 $ 18,498 $ 18,716 Luxembourg 6,975 0 $ 14,081 $ 18,498 $ 18,716 Luxembourg 6,975 0 0 Other $ 18,498 $ 18,716 Luxembourg 6,975 0 0 Other country 3,835 18,498 $ 18,716 Luxembourg 6,975 0 0 Other country 3,835 2,989 $ 18,716 Luxembourg 6,975 0 0 Other country 3,835 2,989 2,466 6,975 0 0 Other country 3,835 2,989 2,466 Total $ 24,891 0 0 Other country 3,835 2,989 2,466 Total $ 24,891 $ 0 Other country 3,835 2,989 2,466 Total $ 24,891 $ 21,487 3,835 2,989 2,466 Total $ 24,891 $ 21,487 $ 21,182 NOTE 2,466 Total $ 24,891 $ 21,487 $ 21,182 NOTE 22 — $ 24,891 $ 21,487 $ 21,182 NOTE 22 — SUBSEQUENT EVENT $ 21,487 $ 21,182 NOTE 22 — SUBSEQUENT EVENT Acquisition of Acquisition of Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.2 billion in cash . Yammer of complementary cloud-based service . 86 Table of Contents PART II of Contents PART II Item 8 NOTE 23 — QUARTERLY INFORMATION PART II Item 8 NOTE 23 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2012 Revenue June 30 Total Fiscal Year 2012 Revenue $ 17,372 $ 20,885 Fiscal Year 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 5,108 13,455 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( a income 5,738 6,624 5,108 ( 492 ) ( a ) 16,978 492 ) ( a ) 16,978 ( a ) Basic earnings ( loss ) per share 0.68 0.79 0.61 ( 0.06 ) loss ) per share 0.68 0.79 0.61 ( 0.06 ) 2.02 ) per share 0.68 0.79 0.61 ( 0.06 ) 2.02 Diluted share 0.68 0.79 0.61 ( 0.06 ) 2.02 Diluted earnings ( 0.79 0.61 ( 0.06 ) 2.02 Diluted earnings ( loss ) ( loss ) per share 0.68 0.78 0.60 ( 0.06 ) loss ) per share 0.68 0.78 0.60 ( 0.06 ) ( ) per share 0.68 0.78 0.60 ( 0.06 ) ( a share 0.68 0.78 0.60 ( 0.06 ) ( a ) 2.00 0.06 ) ( a ) 2.00 ( a ) Fiscal Year ( a ) Fiscal Year 2011 Revenue $ 16,195 $ 19,953 Fiscal Year 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 2011 Revenue $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ $ 16,195 $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross $ 19,953 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 $ 16,428 $ 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 17,367 $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net $ 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 69,943 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 Gross profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 profit 13,056 15,120 12,531 13,659 54,366 Net income 5,410 6,634 5,232 12,531 13,659 54,366 Net income 5,410 6,634 5,232 ( b ) 13,659 54,366 Net income 5,410 6,634 5,232 ( b ) 5,874 54,366 Net income 5,410 6,634 5,232 ( b ) 5,874 ( 6,634 5,232 ( b ) 5,874 ( c ) 23,150 Basic ) 5,874 ( c ) 23,150 Basic earnings per share 0.63 23,150 Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted Basic earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings earnings per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per per share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share share 0.63 0.78 0.62 0.70 2.73 Diluted earnings per share 0.62 2.73 Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 ( Diluted earnings per share 0.62 0.77 0.61 0.69 2.69 ( a earnings per share 0.62 0.77 0.61 0.69 2.69 ( a ) per share 0.62 0.77 0.61 0.69 2.69 ( a ) Includes share 0.62 0.77 0.61 0.69 2.69 ( a ) Includes a decreased net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ( b ) Includes . audit of tax year 2004 to 2006 , which increased of tax year 2004 to 2006 , which increased net income increased net income by $ 461 million . ( c ) an effective tax rate of 7 % due mainly to the our effective tax rate . 87 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and 2011 , and the related consolidated in the period ended June 30 , 2012 . These financial period ended June 30 , 2012 . These financial statement are and subsidiary a of June 30 , 2012 and 2011 , a of June 30 , 2012 and 2011 , and the June 30 , 2012 and 2011 , and the result of in the period ended June 30 , 2012 , in conformity period ended June 30 , 2012 , in conformity with accounting financial reporting a of June 30 , 2012 , based on a of June 30 , 2012 , based on the criterion and our report dated July 26 , 2012 , expressed an report dated July 26 , 2012 , expressed an unqualified opinion LLP Seattle , Washington July 26 , 2012 88 Table of , Washington July 26 , 2012 88 Table of Contents PART Washington July 26 , 2012 88 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of wa effective a of June 30 , 2012 . There were a of June 30 , 2012 . There were no change during the quarter ended June 30 , 2012 that have materially quarter ended June 30 , 2012 that have materially affected , financial reporting a of June 30 , 2012 ; their report a of June 30 , 2012 ; their report is included report is included in Item 9A . 89 Table of Contents included in Item 9A . 89 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2012 , based on a of June 30 , 2012 , based on criterion established policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2012 , based on a of June 30 , 2012 , based on the criterion for the year ended June 30 , 2012 , of the year ended June 30 , 2012 , of the Company and and our report dated July 26 , 2012 , expressed an report dated July 26 , 2012 , expressed an unqualified opinion LLP Seattle , Washington July 26 , 2012 90 Table of , Washington July 26 , 2012 90 Table of Contents PART Washington July 26 , 2012 90 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 28 , 2012 ( the “ be held November 28 , 2012 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 91 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 47 Balance Sheets 48 Cash Flows Income Statements 47 Balance Sheets 48 Cash Flows Statements 49 Stockholders Sheets 48 Cash Flows Statements 49 Stockholders ’ Equity Statements 50 49 Stockholders ’ Equity Statements 50 Notes to Financial Statements 51 50 Notes to Financial Statements 51 Report of Independent Registered Public Independent Registered Public Accounting Firm 88 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , to the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated the Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a Base Indenture 8-K 4.2 5/15/09 4.3 Indenture , dated a of , dated a of June 14 , 2010 , between Microsoft a of June 14 , 2010 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 6/18/10 4.4 Form of . , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global , a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note a Trustee 8-K 4.1 6/18/10 4.4 Form of Global Note representing Coupon Convertible Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form Convertible Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Senior Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Second Notes due 2013 8-K 4.2 6/18/10 4.5 Form of Second Supplemental due 2013 8-K 4.2 6/18/10 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 92 Table of . , a Trustee 8-K 4.5 9/27/10 92 Table of Contents , a Trustee 8-K 4.5 9/27/10 92 Table of Contents PART a Trustee 8-K 4.5 9/27/10 92 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft . , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation , a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.6 2/8/11 10.1 * Microsoft Corporation 2001 Stock 2/8/11 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Stock 1/19/12 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Stock Employee Stock Purchase Plan X 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer Incentive Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/11 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/11 10.18 10/20/11 12 Computation Corporation 2001 Stock Plan 10-Q 9/30/11 10.18 10/20/11 12 Computation of 2001 Stock Plan 10-Q 9/30/11 10.18 10/20/11 12 Computation of Ratio Stock Plan 10-Q 9/30/11 10.18 10/20/11 12 Computation of Ratio of Plan 10-Q 9/30/11 10.18 10/20/11 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 93 Table of Contents Sarbanes-Oxley Act of 2002 X 93 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 32.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Sarbanes-Oxley Act of 2002 X 101.INS * * XBRL Instance Document * XBRL Instance Document X 101.SCH * * XBRL Taxonomy Extension XBRL Taxonomy Extension Schema X 101.CAL * * XBRL Taxonomy Extension Taxonomy Extension Calculation Linkbase X 101.DEF * * XBRL Taxonomy Extension Taxonomy Extension Definition Linkbase X 101.LAB * * XBRL Taxonomy Extension Taxonomy Extension Label Linkbase X 101.PRE * * XBRL Taxonomy Extension * * Pursuant to Rule 406T of Regulation S-T , these prospectus for purpose of Sections 11 or 12 of the Securities purpose of Sections 11 or 12 of the Securities Act of of the Securities Act of 1933 or Section 18 of the Act of 1933 or Section 18 of the Securities Exchange Act the Securities Exchange Act of 1934 and otherwise are not subject not subject to liability . 94 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 26 , 2012 . M ICROSOFT , on July 26 , 2012 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 26 , 2012 . Signature Title indicated on July 26 , 2012 . Signature Title / S ( Principal Accounting Officer ) 95 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-13-310206/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-13-310206/full-submission.txt new file mode 100644 index 0000000..d8da4a2 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-13-310206/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2013 OR ¨ TRANSITION Year Ended June 30 , 2013 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2012 , the aggregate As of December 31 , 2012 , the aggregate market value of the registrant wa $ 202,945,146,270 based on the closing sale System . As of July 18 , 2013 , there were As of July 18 , 2013 , there were 8,329,956,402 share , 2013 , there were 8,329,956,402 share of common stock outstanding to be held on November 19 , 2013 are incorporated by held on November 19 , 2013 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2013 INDEX Page PART Year Ended June 30 , 2013 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 12 Item 1A . Risk Factors of the Registrant 12 Item 1A . Risk Factors 14 Item Item 1A . Risk Factors 14 Item 1B . Unresolved Staff . Risk Factors 14 Item 1B . Unresolved Staff Comments 21 1B . Unresolved Staff Comments 21 Item 2 . Properties 22 Unresolved Staff Comments 21 Item 2 . Properties 22 Item 3 21 Item 2 . Properties 22 Item 3 . Legal Proceedings 2 . Properties 22 Item 3 . Legal Proceedings 22 Item Item 3 . Legal Proceedings 22 Item 4 . Mine Safety . Legal Proceedings 22 Item 4 . Mine Safety Disclosures 22 4 . Mine Safety Disclosures 22 PART II Item 5 . Disclosures 22 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 22 Item 6 . Selected Financial of Equity Securities 22 Item 6 . Selected Financial Data 23 6 . Selected Financial Data 23 Item 7 . Management ’ Selected Financial Data 23 Item 7 . Management ’ s Discussion Condition and Results of Operations 23 Item 7A . Quantitative and Results of Operations 23 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 47 Item 8 . Financial Statements about Market Risk 47 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 49 Item 9 . Changes in and Supplementary Data 49 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 90 Item 9A . Controls and and Financial Disclosure 90 Item 9A . Controls and Procedures 90 9A . Controls and Procedures 90 Report of Management on Internal Internal Control over Financial Reporting 90 Report of Independent Registered Public Independent Registered Public Accounting Firm 91 Item 9B . Other Information Public Accounting Firm 91 Item 9B . Other Information 92 PART Item 9B . Other Information 92 PART III Item 10 . Information 92 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 92 Item 11 . Executive Compensation and Corporate Governance 92 Item 11 . Executive Compensation 92 Item Item 11 . Executive Compensation 92 Item 12 . Security Ownership . Executive Compensation 92 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 92 Item 13 . Certain Relationships Related Stockholder Matters 92 Item 13 . Certain Relationships and Related Transactions , and Director Independence 92 Item 14 . Principal Accounting and Director Independence 92 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 92 PART IV Item 15 . Services 92 PART IV Item 15 . Exhibits and Financial Statement Exhibits and Financial Statement Schedules 93 Signatures 96 2 Table of Financial Statement Schedules 93 Signatures 96 2 Table of Contents PART Statement Schedules 93 Signatures 96 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements Certain Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Microsoft wa founded GENERAL Microsoft wa founded in 1975 . Our mission is to have office in more than 100 country . We generate revenue Surface Pro , the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 accessory , for Xbox 360 , Xbox 360 accessory , and Microsoft PC we offer include Microsoft Office 365 , Microsoft Dynamics CRM Online Devices Division . Our segment 3 Table of Contents PART I of Contents PART I Item 1 provide management with a comprehensive information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . In July 2013 10-K ) . In July 2013 , we announced a change hardware and software . Windows 8 is the first version of worldwide . Currently , approximately 65 % of total Windows Division of Surface RT and Windows 8 started on October 26 , Windows 8 started on October 26 , 2012 . The general started on October 26 , 2012 . The general availability of Surface Pro started on February 9 , 2013 . A preview started on February 9 , 2013 . A preview of Windows . A preview of Windows 8.1 wa released on June 26 8.1 wa released on June 26 , 2013 . Competition The released on June 26 , 2013 . Competition The Windows operating operating system . The Windows 8 operating system includes the Windows access to certified application . 4 Table of Contents PART I of Contents PART I Item 1 Windows Services software and application product and service . Approximately 80 % of Server and Tools application for connectivity ( both 5 Table of Contents PART I of Contents PART I Item 1 Internet and intranet ) , Microsoft product , including Windows 8 , the new Office , the new Office , Xbox 360 , and Windows Phone , Office product set , Office 365 , SharePoint , Exchange , designed to increase personal , 6 Table of Contents PART I of Contents PART I Item 1 team , and organization productivity software solution and generates over 90 % of MBD revenue . of global enterprise . Approximately 85 % of MBD revenue is a given year . Approximately 15 % of MBD revenue is Dynamics CRM ; Microsoft Office 365 , which is an online new Office started on January 29 , 2013 . Competition Competitors started on January 29 , 2013 . Competition Competitors to Office Products and Services : Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox 360 360 video game , Xbox 360 accessory ; Xbox LIVE ; ; and Windows Phone . 7 Table of Contents PART I of Contents PART I Item 1 Competition Our Xbox gaming and entertainment console average five to 10 year . We released Xbox year . We released Xbox 360 in November 2005 . Nintendo released Xbox 360 in November 2005 . Nintendo and Sony released their game console in November 2006 . In June 2013 , November 2006 . In June 2013 , we announced that we second quarter of fiscal year 2014 . Sony also announced their available for purchase in late 2013 . Nintendo released their latest latest generation console in November 2012 . We believe the success our manufacturing activity for Xbox 360 and related game , Kinect game , Kinect for Xbox 360 , various retail software packaged limited source . Our Xbox 360 console , Kinect for Xbox console , Kinect for Xbox 360 , Surface device , and processing unit for the Xbox 360 console is purchased from IBM AND DEVELOPMENT During fiscal year 2013 , 2012 , and 2011 During fiscal year 2013 , 2012 , and 2011 , research 2013 , 2012 , and 2011 , research and development expense and development expense wa $ 10.4 billion , $ 9.8 billion $ 10.4 billion , $ 9.8 billion , and $ 9.0 9.8 billion , and $ 9.0 billion , respectively . These respectively . These amount represented 13 % of revenue in each research and development effort . 8 Table of Contents PART I of Contents PART I Item 1 Product and Service Development and have a portfolio of over 35,000 U.S. and international patent issued international patent issued and over 38,000 pending . While we employ device and service strategy . 9 Table of Contents PART I of Contents PART I Item 1 DISTRIBUTION , SALES , AND Office Web Apps , Office 365 , Windows Phone Marketplace , Windows Intune , and Office 365 consisting of online version of Yammer . Other service delivered 10 Table of Contents PART I of Contents PART I Item 1 online include our online advertising part of their enterprise . 11 Table of Contents PART I of Contents PART I Item 1 Enterprises can elect to either customer accounted for more than 10 % of fiscal year 2013 10 % of fiscal year 2013 , 2012 , or 2011 of fiscal year 2013 , 2012 , or 2011 revenue . 2013 , 2012 , or 2011 revenue . Our practice is executive officer a of July 30 , 2013 were a follows a of July 30 , 2013 were a follows : Name the Company Steven A. Ballmer 57 Chief Executive Officer Anthony J. Executive Officer Anthony J. Bates 46 Executive Vice President , Business and Evangelism Lisa E. Brummel 53 Executive Vice President , Human Human Resources Amy E. Hood 41 Executive Vice President , Chief Chief Financial Officer Tami Reller 49 Executive Vice President , Marketing , Marketing Eric D. Rudder 46 Executive Vice President , Advanced and Research Bradford L. Smith 54 Executive Vice President , General ; Secretary B. Kevin Turner 48 Chief Operating Officer Mr. Ballmer Chief Executive Officer in January 2000 . He served a President He served a President from 1998 to 2001 . Previously , a President from 1998 to 2001 . Previously , he had , Sales and Support since 1992 . Mr. Ballmer joined Microsoft Mr. Ballmer joined Microsoft in 1980 . Mr. Bates wa named Development and Evangelism in July 2013 . He had been President it acquisition by Microsoft in 2011 . Mr. Bates had been Executive Officer of Skype since 2010 . Before joining Skype , , Mr. Bates spent nearly 15 year at Cisco Systems , senior human resource executive since 2005 . From 2000 to 2005 executive since 2005 . From 2000 to 2005 , she had 2005 . From 2000 to 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Chief Financial Officer in May 2013 . Beginning in 2010 , May 2013 . Beginning in 2010 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha President , Marketing in July 2013 . From 2011 to 2013 in July 2013 . From 2011 to 2013 Ms. Reller wa 2013 . From 2011 to 2013 Ms. Reller wa Chief Marketing Division Marketing and Finance from 2009 to 2011 and a Corporate and Finance from 2009 to 2011 and a Corporate Vice President , Business Solutions beginning in 2002 . Ms. Reller joined Microsoft Chief Financial Officer , in 2001 . 12 Table of Contents Officer , in 2001 . 12 Table of Contents PART I of Contents PART I Item 1 Mr . Rudder wa named Strategy and Research in July 2013 . Mr . Rudder had Chief Technical Strategy Officer since 2005 . Since joining Microsoft in . Since joining Microsoft in 1988 , Mr . Rudder held , Server and Tools from 2003 to 2005 and Senior Vice and Tools from 2003 to 2005 and Senior Vice President , Developer and Platform Evangelism from 2001 to 2003 . Mr. Smith Platform Evangelism from 2001 to 2003 . Mr. Smith , Executive in that role since November 2001 . Mr. Smith wa also named Chief Compliance Officer in 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa named Chief Operating Officer in September 2005 . Before joining Microsoft , s Club division . From 2001 to 2002 , he served division . From 2001 to 2002 , he served a Executive Information Systems Division . From 2000 to 2001 , he served Division . From 2000 to 2001 , he served a it Inc. EMPLOYEES As of June 30 , 2013 , we employed As of June 30 , 2013 , we employed approximately 99,000 2013 , we employed approximately 99,000 people on a full-time basis on a full-time basis , 58,000 in the U.S. and 41,000 58,000 in the U.S. and 41,000 internationally . Of the total . Of the total , 37,000 were in product research and product research and development , 26,000 in sale and marketing , in sale and marketing , 21,000 in product support and consulting support and consulting service , 6,000 in manufacturing and distribution , manufacturing and distribution , and 9,000 in general and administration . our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to to , the SEC . 13 Table of Contents PART I of Contents PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation the launch of the Windows 8 operating system , Surface , lower our operating margin . 14 Table of Contents PART I of Contents PART I Item 1A Business model competition Companies compete their data . In July 2013 , we announced a change service , such a Office 365 , rather than licensing transaction-based period of the subscription . 15 Table of Contents PART I of Contents PART I Item 1A We make significant investment in Azure Services platform , Office 365 , other cloud-based service offering offering , and the Xbox 360 entertainment platform . We will manufactured Surface launched in October 2012 . Investments in new technology experienced historically . In October 2012 , we launched Windows 8 2012 , we launched Windows 8 , a major new release new feature , pricing Windows 8-based device competitively , and attracting are incurring to promote Windows 8 and associated service and device In some country , such 16 Table of Contents PART I of Contents PART I Item 1A a Germany , an injunction update are not deployed ; 17 Table of Contents PART I of Contents PART I Item 1A • protecting the digital security , Exchange Online , Office 365 , SharePoint Online , SkyDrive U.S. Department of Justice , 18 state , and the District of Columbia in the late 1990s . The resolution of the these constraint expired in May 2011 , we expect that federal closely scrutinize our business . 18 Table of Contents PART I of Contents PART I Item 1A The European Commission closely scrutinizes to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a For example , in July 2012 , we announced that , not in compliance with our 2009 agreement to display a “ imposed a fine of € 561 million ( approximately $ 733 561 million ( approximately $ 733 million ) . Our product adversely affect our revenue . 19 Table of Contents PART I of Contents PART I Item 1A Adverse economic or market condition product such a the Xbox 360 console , Surface , and cost of revenue . Xbox 360 console and Surface are assembled revenue , damage to our 20 Table of Contents PART I of Contents PART I Item 1A , 1B reputation , repair PART I Item 1A , 1B reputation , repair or remediation fourth quarter of fiscal year 2012 , we recorded a $ , we recorded a $ 6.2 billion charge for the impairment . We operate in over 100 country and a significant part provide cloud-based service . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2013 that remain unresolved . 21 2013 that remain unresolved . 21 Table of Contents PART I PART I , II Item 2 , 3 , 4 , , II Item 2 , 3 , 4 , 5 ITEM Item 2 , 3 , 4 , 5 ITEM 2 . , 3 , 4 , 5 ITEM 2 . PROPERTIES Our , 4 , 5 ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office King County , Washington : 10 million square foot of owned owned space situated on approximately 500 acre of land we own Development ” section of Item 1 of this Form 10-K. Our Item 1 of this Form 10-K. Our facility are fully used we may currently develop approximately 1.6 million square foot of additional Redmond , Washington . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not applicable . PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 18 , 2013 , there were . On July 18 , 2013 , there were 119,862 registered , 2013 , there were 119,862 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2013 30 Fiscal Year Fiscal Year 2013 High $ 31.61 $ 30.25 Fiscal Year 2013 High $ 31.61 $ 30.25 $ 28.66 $ 2013 High $ 31.61 $ 30.25 $ 28.66 $ 35.78 $ $ 31.61 $ 30.25 $ 28.66 $ 35.78 $ 35.78 Low $ 30.25 $ 28.66 $ 35.78 $ 35.78 Low $ 28.54 $ 28.66 $ 35.78 $ 35.78 Low $ 28.54 $ 26.26 35.78 $ 35.78 Low $ 28.54 $ 26.26 $ 26.28 $ 35.78 Low $ 28.54 $ 26.26 $ 26.28 $ 28.11 $ $ 28.54 $ 26.26 $ 26.28 $ 28.11 $ 26.26 Fiscal $ 26.26 $ 26.28 $ 28.11 $ 26.26 Fiscal Year 2012 $ 26.28 $ 28.11 $ 26.26 Fiscal Year 2012 High $ 28.11 $ 26.26 Fiscal Year 2012 High $ 28.15 $ 27.50 Fiscal Year 2012 High $ 28.15 $ 27.50 $ 32.95 $ 2012 High $ 28.15 $ 27.50 $ 32.95 $ 32.89 $ $ 28.15 $ 27.50 $ 32.95 $ 32.89 $ 32.95 Low $ 27.50 $ 32.95 $ 32.89 $ 32.95 Low $ 23.79 $ 32.95 $ 32.89 $ 32.95 Low $ 23.79 $ 24.26 32.89 $ 32.95 Low $ 23.79 $ 24.26 $ 26.39 $ 32.95 Low $ 23.79 $ 24.26 $ 26.39 $ 28.32 $ $ 23.79 $ 24.26 $ 26.39 $ 28.32 $ 23.79 22 $ 24.26 $ 26.39 $ 28.32 $ 23.79 22 Table of $ 26.39 $ 28.32 $ 23.79 22 Table of Contents PART 26.39 $ 28.32 $ 23.79 22 Table of Contents PART II of Contents PART II Item 5 , 6 , 7 DIVIDENDS PART II Item 5 , 6 , 7 DIVIDENDS AND SHARE Item 5 , 6 , 7 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2013 , all of which were ( in million ) April 1 , 2013 – April 30 million ) April 1 , 2013 – April 30 , 2013 1 , 2013 – April 30 , 2013 0 $ 0.00 2013 – April 30 , 2013 0 $ 0.00 0 $ – April 30 , 2013 0 $ 0.00 0 $ 4,614 30 , 2013 0 $ 0.00 0 $ 4,614 May 1 , 2013 0 $ 0.00 0 $ 4,614 May 1 , 0 $ 0.00 0 $ 4,614 May 1 , 2013 – 0.00 0 $ 4,614 May 1 , 2013 – May 31 $ 4,614 May 1 , 2013 – May 31 , 2013 1 , 2013 – May 31 , 2013 7,002,462 $ 32.61 2013 – May 31 , 2013 7,002,462 $ 32.61 7,002,462 $ – May 31 , 2013 7,002,462 $ 32.61 7,002,462 $ 4,386 31 , 2013 7,002,462 $ 32.61 7,002,462 $ 4,386 June 1 , 2013 7,002,462 $ 32.61 7,002,462 $ 4,386 June 1 , 7,002,462 $ 32.61 7,002,462 $ 4,386 June 1 , 2013 – 32.61 7,002,462 $ 4,386 June 1 , 2013 – June 30 $ 4,386 June 1 , 2013 – June 30 , 2013 1 , 2013 – June 30 , 2013 23,632,259 $ 32.65 2013 – June 30 , 2013 23,632,259 $ 32.65 23,632,259 $ – June 30 , 2013 23,632,259 $ 32.65 23,632,259 $ 3,614 30 , 2013 23,632,259 $ 32.65 23,632,259 $ 3,614 30,634,721 30,634,721 , 2013 23,632,259 $ 32.65 23,632,259 $ 3,614 30,634,721 30,634,721 The 23,632,259 $ 32.65 23,632,259 $ 3,614 30,634,721 30,634,721 The repurchase were $ 32.65 23,632,259 $ 3,614 30,634,721 30,634,721 The repurchase were made 32.65 23,632,259 $ 3,614 30,634,721 30,634,721 The repurchase were made using a certain counterparty . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2013 2012 2011 2010 Year Ended June 30 , 2013 2012 2011 2010 2009 Revenue Ended June 30 , 2013 2012 2011 2010 2009 Revenue $ June 30 , 2013 2012 2011 2010 2009 Revenue $ 77,849 30 , 2013 2012 2011 2010 2009 Revenue $ 77,849 $ , 2013 2012 2011 2010 2009 Revenue $ 77,849 $ 73,723 2011 2010 2009 Revenue $ 77,849 $ 73,723 $ 69,943 $ 2009 Revenue $ 77,849 $ 73,723 $ 69,943 $ 62,484 $ $ 77,849 $ 73,723 $ 69,943 $ 62,484 $ 58,437 Operating $ 73,723 $ 69,943 $ 62,484 $ 58,437 Operating income $ $ 69,943 $ 62,484 $ 58,437 Operating income $ 26,764 ( $ 58,437 Operating income $ 26,764 ( a ) $ 21,763 26,764 ( a ) $ 21,763 ( b ) $ 27,161 21,763 ( b ) $ 27,161 $ 24,098 $ 20,363 Net b ) $ 27,161 $ 24,098 $ 20,363 Net income $ $ 27,161 $ 24,098 $ 20,363 Net income $ 21,863 ( $ 20,363 Net income $ 21,863 ( a ) $ 16,978 21,863 ( a ) $ 16,978 ( b ) $ 23,150 16,978 ( b ) $ 23,150 $ 18,760 $ 14,569 Diluted b ) $ 23,150 $ 18,760 $ 14,569 Diluted earnings per $ 23,150 $ 18,760 $ 14,569 Diluted earnings per share $ Diluted earnings per share $ 2.58 ( a ) $ 2.00 2.58 ( a ) $ 2.00 ( b ) $ 2.69 2.00 ( b ) $ 2.69 $ 2.10 $ 1.62 Cash b ) $ 2.69 $ 2.10 $ 1.62 Cash dividend declared $ 2.69 $ 2.10 $ 1.62 Cash dividend declared per share dividend declared per share $ 0.92 $ 0.80 $ 0.64 $ per share $ 0.92 $ 0.80 $ 0.64 $ 0.52 $ $ 0.92 $ 0.80 $ 0.64 $ 0.52 $ 0.52 Cash $ 0.80 $ 0.64 $ 0.52 $ 0.52 Cash , cash $ 0.64 $ 0.52 $ 0.52 Cash , cash equivalent , , and short-term investment $ 77,022 $ 63,040 $ 52,772 $ short-term investment $ 77,022 $ 63,040 $ 52,772 $ 36,788 $ $ 77,022 $ 63,040 $ 52,772 $ 36,788 $ 31,447 Total $ 63,040 $ 52,772 $ 36,788 $ 31,447 Total asset $ $ 52,772 $ 36,788 $ 31,447 Total asset $ 142,431 $ $ 31,447 Total asset $ 142,431 $ 121,271 $ 108,704 $ Total asset $ 142,431 $ 121,271 $ 108,704 $ 86,113 $ $ 142,431 $ 121,271 $ 108,704 $ 86,113 $ 77,888 Long-term $ 121,271 $ 108,704 $ 86,113 $ 77,888 Long-term obligation $ $ 108,704 $ 86,113 $ 77,888 Long-term obligation $ 26,070 $ $ 77,888 Long-term obligation $ 26,070 $ 22,220 $ 22,847 $ Long-term obligation $ 26,070 $ 22,220 $ 22,847 $ 13,791 $ $ 26,070 $ 22,220 $ 22,847 $ 13,791 $ 11,296 Stockholders $ 22,220 $ 22,847 $ 13,791 $ 11,296 Stockholders ’ equity $ 22,847 $ 13,791 $ 11,296 Stockholders ’ equity $ 78,944 11,296 Stockholders ’ equity $ 78,944 $ 66,363 $ 57,083 $ ’ equity $ 78,944 $ 66,363 $ 57,083 $ 46,175 $ $ 78,944 $ 66,363 $ 57,083 $ 46,175 $ 39,558 ( $ 66,363 $ 57,083 $ 46,175 $ 39,558 ( a ) $ 57,083 $ 46,175 $ 39,558 ( a ) Includes a the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( € 561 million $ 733 million ( € 561 million ) and diluted earnings earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( b ) Includes and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT ’ S DISCUSSION range of computing device . 23 Table of Contents PART II of Contents PART II Item 7 We generate revenue by developing around the world . Windows 8 reflects this shift . Launched shift . Launched in October 2012 , Windows 8 wa designed in October 2012 , Windows 8 wa designed to unite the a PC . The Windows 8 operating system includes the Windows personal and corporate device . 24 Table of Contents PART II of Contents PART II Item 7 To address these opportunity , both . With Windows Server 2012 , Windows Azure , and support our strategy of offering 25 Table of Contents PART II of Contents PART II Item 7 a family of device and a functional realignment in July 2013 . Through this realignment our ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue Devices Division ha generated approximately 40 % of it yearly revenue deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Office , and “ the 2010 Office Upgrade Offer ” for prior offer relating to Office 2010 ) . If our customer and per share amount ) 2013 2012 2011 Percentage Change 2013 per share amount ) 2013 2012 2011 Percentage Change 2013 Versus share amount ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 77,849 2012 Percentage Change 2012 Versus 2011 Revenue $ 77,849 $ 73,723 2012 Versus 2011 Revenue $ 77,849 $ 73,723 $ 69,943 6 2011 Revenue $ 77,849 $ 73,723 $ 69,943 6 % 5 $ 77,849 $ 73,723 $ 69,943 6 % 5 % Operating 77,849 $ 73,723 $ 69,943 6 % 5 % Operating income 73,723 $ 69,943 6 % 5 % Operating income $ 26,764 5 % Operating income $ 26,764 $ 21,763 $ 27,161 23 Operating income $ 26,764 $ 21,763 $ 27,161 23 % ( $ 26,764 $ 21,763 $ 27,161 23 % ( 20 ) 26,764 $ 21,763 $ 27,161 23 % ( 20 ) % $ 27,161 23 % ( 20 ) % Diluted earnings per Diluted earnings per share $ 2.58 $ 2.00 $ 2.69 29 per share $ 2.58 $ 2.00 $ 2.69 29 % ( $ 2.58 $ 2.00 $ 2.69 29 % ( 26 ) 2.58 $ 2.00 $ 2.69 29 % ( 26 ) % $ 2.69 29 % ( 26 ) % Fiscal year 2013 26 ) % Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Revenue increased , primarily due and service , including Windows 8 , Surface , and the the x86 PC market . 26 Table of Contents PART II of Contents PART II Item 7 Operating income grew , primarily primarily due to the $ 6.2 billion goodwill impairment charge related Cost of revenue increased $ 2.7 billion or 16 % , increased $ 2.7 billion or 16 % , reflecting increased product associated with Surface and Windows 8 , including an approximately $ , including an approximately $ 900 million charge for Surface RT with lower sale of Xbox 360 console and decreased traffic acquisition and marketing expense increased $ 1.4 billion or 10 % , increased $ 1.4 billion or 10 % , reflecting advertising of , reflecting advertising of Windows 8 and Surface . • Research and development expense increased $ 600 million or 6 % , increased $ 600 million or 6 % , due mainly to and administrative expense increased $ 580 million or 13 % , increased $ 580 million or 13 % , due to higher the EU fine of $ 733 million . Fiscal year 2012 733 million . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Revenue increased primarily due to product and service and the 2010 Microsoft Office system , offset to the deferral of $ 540 million of revenue relating to . Revenue in fiscal year 2012 also included Skype revenue from goodwill impairment charge of $ 6.2 billion related to our OSD Cost of revenue increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , reflecting higher cost strategic initiative , higher Xbox 360 royalty cost , and other and development expense increased $ 768 million or 8 % , increased $ 768 million or 8 % , due mainly to and administrative expense increased $ 347 million or 8 % , increased $ 347 million or 8 % , due mainly to across the company reflecting a 4 % increase in headcount from increase in headcount from June 30 , 2011 and change in headcount from June 30 , 2011 and change in our employee compensation program . Fiscal year 2012 diluted earnings per share were earnings per share by $ 0.73 . Fiscal year 2011 net $ 0.73 . Fiscal year 2011 net income and diluted earnings the I.R.S . added $ 461 million to net income and to net income and $ 0.05 to diluted earnings per share per share in fiscal year 2011 . SEGMENT REVENUE/OPERATING INCOME ( Segment information appearing in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is presented on a segment performance during fiscal year 2013 , reflecting immaterial movement of , reflecting immaterial movement of 27 Table of Contents PART II of Contents PART II Item 7 business activity between segment and cost allocation . In July 2013 , we announced a change million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 19,239 2012 Percentage Change 2012 Versus 2011 Revenue $ 19,239 $ 18,400 2012 Versus 2011 Revenue $ 19,239 $ 18,400 $ 19,061 5 2011 Revenue $ 19,239 $ 18,400 $ 19,061 5 % ( $ 19,239 $ 18,400 $ 19,061 5 % ( 3 ) 19,239 $ 18,400 $ 19,061 5 % ( 3 ) % $ 19,061 5 % ( 3 ) % Operating income $ ) % Operating income $ 9,504 $ 11,555 $ 12,280 ( Operating income $ 9,504 $ 11,555 $ 12,280 ( 18 ) $ 9,504 $ 11,555 $ 12,280 ( 18 ) % ( $ 11,555 $ 12,280 ( 18 ) % ( 6 ) ( 18 ) % ( 6 ) % Windows Division develops of Surface RT and Windows 8 started October 26 , 2012 and Windows 8 started October 26 , 2012 . The general 8 started October 26 , 2012 . The general availability of of Surface Pro started February 9 , 2013 . Currently , Pro started February 9 , 2013 . Currently , approximately 65 2013 . Currently , approximately 65 % of total Windows Division online advertising . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Windows Division revenue increased $ Windows Division revenue increased $ 839 million . Surface revenue wa . Surface revenue wa $ 853 million . Revenue from commercial licensing of Windows increased $ 487 million , while unearned revenue addition , we recognized $ 540 million of previously deferred revenue revenue . OEM revenue decreased 3 % . Excluding the impact Offer , OEM revenue decreased 10 % . This decrease primarily which we estimate declined approximately 9 % . In May 2013 9 % . In May 2013 , we announced that we announced that we had surpassed 100 million license sold for Windows million license sold for Windows 8 . Windows Division operating income Cost of revenue increased $ 1.8 billion , reflecting a $ billion , reflecting a $ 1.6 billion increase in product cost associated with Surface and Windows 8 , including a charge for inventory adjustment of approximately $ 900 million . Sales and marketing and marketing expense increased $ 1.0 billion or 34 % , increased $ 1.0 billion or 34 % , reflecting an $ % , reflecting an $ 898 million increase in advertising cost cost associated primarily with Windows 8 and Surface . Fiscal year and Surface . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Windows Division revenue reflected relative PCs to business grew approximately 4 % and sale of PCs of PCs to consumer decreased 1 % . Excluding a decline PCs to consumer grew approximately 5 % . Taken together , PC market increased an estimated 0 % to 2 % . an estimated 0 % to 2 % . Relative to PC and the deferral of $ 540 million of revenue relating to lower revenue and a $ 172 million or 11 % increase a $ 172 million or 11 % increase in research and primarily associated with the Windows 8 operating system . 28 Table Windows 8 operating system . 28 Table of Contents PART II of Contents PART II Item 7 Server and Tools ( In million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 20,281 2012 Percentage Change 2012 Versus 2011 Revenue $ 20,281 $ 18,534 2012 Versus 2011 Revenue $ 20,281 $ 18,534 $ 16,559 9 2011 Revenue $ 20,281 $ 18,534 $ 16,559 9 % 12 $ 20,281 $ 18,534 $ 16,559 9 % 12 % Operating 20,281 $ 18,534 $ 16,559 9 % 12 % Operating income 18,534 $ 16,559 9 % 12 % Operating income $ 8,164 12 % Operating income $ 8,164 $ 7,235 $ 6,105 13 Operating income $ 8,164 $ 7,235 $ 6,105 13 % 19 $ 8,164 $ 7,235 $ 6,105 13 % 19 % Server 8,164 $ 7,235 $ 6,105 13 % 19 % Server and 7,235 $ 6,105 13 % 19 % Server and Tools develops , and certification . Approximately 80 % of Server and Tools Enterprise Services . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Server and Tools revenue increased . Product revenue increased $ 1.3 billion or 9 % , increased $ 1.3 billion or 9 % , driven primarily by Enterprise Services revenue grew $ 434 million or 11 % , grew $ 434 million or 11 % , due to growth Cost of revenue grew $ 589 million or 15 % , grew $ 589 million or 15 % , reflecting a $ % , reflecting a $ 269 million increase in headcount-related expense headcount-related expense and a $ 169 million increase in datacenter expense and marketing expense grew $ 160 million or 3 % , grew $ 160 million or 3 % , reflecting increased fee marketing activity . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Server and Tools revenue increased . Product revenue increased $ 1.4 billion or 11 % , increased $ 1.4 billion or 11 % , driven primarily by Enterprise Services revenue grew $ 585 million or 17 % , grew $ 585 million or 17 % , due to growth Cost of revenue increased $ 678 million or 22 % , increased $ 678 million or 22 % , primarily reflecting higher and marketing expense grew $ 154 million or 3 % , grew $ 154 million or 3 % , reflecting increased corporate million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 3,201 2012 Percentage Change 2012 Versus 2011 Revenue $ 3,201 $ 2,867 2012 Versus 2011 Revenue $ 3,201 $ 2,867 $ 2,607 12 2011 Revenue $ 3,201 $ 2,867 $ 2,607 12 % 10 $ 3,201 $ 2,867 $ 2,607 12 % 10 % Operating 3,201 $ 2,867 $ 2,607 12 % 10 % Operating loss 2,867 $ 2,607 12 % 10 % Operating loss $ ( % Operating loss $ ( 1,281 ) $ ( 8,125 ) ( 1,281 ) $ ( 8,125 ) $ ( 2,657 ) ( 8,125 ) $ ( 2,657 ) * * * Not OSD ’ s revenue . 29 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2013 compared with II Item 7 Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Online advertising revenue grew $ Online advertising revenue grew $ 409 million or 16 % to grew $ 409 million or 16 % to $ 3.0 billion or 16 % to $ 3.0 billion , reflecting an increase goodwill impairment charge of $ 6.2 billion . Operating loss wa Cost of revenue decreased $ 302 million or 12 % , decreased $ 302 million or 12 % , driven by a , driven by a $ 271 million decrease in traffic acquisition and marketing expense were $ 120 million or 15 % lower were $ 120 million or 15 % lower , due mainly and development cost increased $ 94 million or 7 % , increased $ 94 million or 7 % , due primarily to increased headcount . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Online advertising revenue grew $ Online advertising revenue grew $ 317 million or 14 % to grew $ 317 million or 14 % to $ 2.6 billion or 14 % to $ 2.6 billion , reflecting continued growth for the month of June 2012 wa approximately 16 % , of June 2012 wa approximately 16 % , and grew 120 16 % , and grew 120 basis point year over year ! property , wa approximately 26 % for the month of for the month of June 2012 , down 100 basis point of June 2012 , down 100 basis point year over year OSD ’ s fiscal year 2012 operating loss reflects a goodwill goodwill impairment charge of $ 6.2 billion , which we recorded to goodwill acquired through our 2007 acquisition of aQuantive , Inc Inc . Excluding the $ 6.2 billion goodwill impairment charge , and marketing expense decreased $ 321 million or 29 % , decreased $ 321 million or 29 % , due mainly to Cost of revenue decreased $ 208 million , driven by lower million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 24,724 2012 Percentage Change 2012 Versus 2011 Revenue $ 24,724 $ 24,111 2012 Versus 2011 Revenue $ 24,724 $ 24,111 $ 22,607 3 2011 Revenue $ 24,724 $ 24,111 $ 22,607 3 % 7 $ 24,724 $ 24,111 $ 22,607 3 % 7 % Operating 24,724 $ 24,111 $ 22,607 3 % 7 % Operating income 24,111 $ 22,607 3 % 7 % Operating income $ 16,194 7 % Operating income $ 16,194 $ 15,832 $ 14,678 2 Operating income $ 16,194 $ 15,832 $ 14,678 2 % 8 $ 16,194 $ 15,832 $ 14,678 2 % 8 % Microsoft 16,194 $ 15,832 $ 14,678 2 % 8 % Microsoft Business 15,832 $ 14,678 2 % 8 % Microsoft Business Division ( Office product set , Office 365 , SharePoint , Exchange , ) , which generates over 90 % of MBD revenue , new Office started on January 29 , 2013 . We evaluate started on January 29 , 2013 . We evaluate MBD result OEM revenue . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 MBD revenue increased reflecting growth . Business revenue increased $ 1.2 billion or 6 % , increased $ 1.2 billion or 6 % , which reflects 11 6 % , which reflects 11 % growth in Office revenue Office revenue from subscription and 30 Table of Contents PART II of Contents PART II Item 7 volume licensing agreement with software software assurance , and a 12 % increase in Microsoft Dynamics offset in part by a 9 % decrease in Office license-only . Consumer revenue decreased $ 582 million or 13 % , decreased $ 582 million or 13 % , primarily driven by for the year ended June 30 , 2013 included an unfavorable year ended June 30 , 2013 included an unfavorable foreign currency foreign currency impact of $ 475 million . MBD operating income and marketing expense grew $ 185 million or 5 % , grew $ 185 million or 5 % , primarily due to Cost of revenue grew $ 108 million or 6 % , grew $ 108 million or 6 % , primarily due to support cost . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 MBD revenue increased primarily reflecting . Business revenue increased $ 1.7 billion or 9 % , increased $ 1.7 billion or 9 % , primarily reflecting growth business customer , and a 9 % increase in Microsoft Dynamics . Consumer revenue decreased $ 193 million or 4 % due decreased $ 193 million or 4 % due to the recognition to the recognition of $ 254 million of revenue in the prior year associated with the 2010 Office Upgrade Offer . Excluding . Excluding the fiscal year 2011 impact associated with the 2010 2011 impact associated with the 2010 Office Upgrade Offer , consumer , consumer revenue increased $ 61 million , driven by increased for the year ended June 30 , 2012 included a favorable year ended June 30 , 2012 included a favorable foreign currency foreign currency impact of $ 506 million . MBD operating income Cost of revenue increased $ 278 million or 17 % , increased $ 278 million or 17 % , primarily due to million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Revenue $ 10,165 2012 Percentage Change 2012 Versus 2011 Revenue $ 10,165 $ 9,599 2012 Versus 2011 Revenue $ 10,165 $ 9,599 $ 8,915 6 2011 Revenue $ 10,165 $ 9,599 $ 8,915 6 % 8 $ 10,165 $ 9,599 $ 8,915 6 % 8 % Operating 10,165 $ 9,599 $ 8,915 6 % 8 % Operating income 9,599 $ 8,915 6 % 8 % Operating income $ 848 8 % Operating income $ 848 $ 380 $ 1,261 123 Operating income $ 848 $ 380 $ 1,261 123 % ( $ 848 $ 380 $ 1,261 123 % ( 70 ) 848 $ 380 $ 1,261 123 % ( 70 ) % $ 1,261 123 % ( 70 ) % Entertainment and Devices ( which includes the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox LIVE Xbox LIVE , and Xbox 360 accessory ) , Skype , We acquired Skype on October 13 , 2011 , and it Skype on October 13 , 2011 , and it result of discussed below . In June 2013 , we announced that we second quarter of fiscal year 2014 . Fiscal year 2013 compared year 2014 . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 EDD revenue increased , due in part by lower Xbox 360 platform revenue . Windows Phone Windows Phone revenue increased $ 1.2 billion , including an increase of result in fiscal year 2013 . Xbox 360 platform revenue fiscal year 2013 . Xbox 360 platform revenue decreased $ 950 360 platform revenue decreased $ 950 million or 12 % , decreased $ 950 million or 12 % , due mainly to LIVE revenue . We shipped 9.8 million Xbox 360 console during We shipped 9.8 million Xbox 360 console during fiscal year 2013 360 console during fiscal year 2013 , compared with 13.0 million year 2013 , compared with 13.0 million Xbox 360 console during compared with 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 . EDD operating income increased and marketing expense decreased $ 176 million or 16 % , decreased $ 176 million or 16 % , reflecting a $ % , reflecting a $ 248 million 31 Table of Contents reflecting a $ 248 million 31 Table of Contents PART II of Contents PART II Item 7 decrease in Xbox 360 platform Item 7 decrease in Xbox 360 platform marketing . Cost of Cost of revenue decreased $ 143 million or 2 % , decreased $ 143 million or 2 % , due mainly to due mainly to a $ 1.0 billion decrease in manufacturing and with lower volume of Xbox 360 console sold , offset in in part by a $ 375 million increase in expense for strategic initiative and a $ 273 million increase in royalty on and development expense increased $ 432 million or 28 % , increased $ 432 million or 28 % , reflecting $ 246 28 % , reflecting $ 246 million higher headcount-related expense , and Skype . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 EDD revenue increased primarily reflecting in part by lower Xbox 360 platform revenue . Xbox 360 360 platform revenue . Xbox 360 platform revenue decreased $ 107 360 platform revenue decreased $ 107 million , due mainly to volume of Kinect for Xbox 360 sold and lower video game LIVE revenue . We shipped 13.0 million Xbox 360 console during We shipped 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 , compared with 13.7 million year 2012 , compared with 13.7 million Xbox 360 console during compared with 13.7 million Xbox 360 console during fiscal year 2011 360 console during fiscal year 2011 . Video game revenue decreased Cost of revenue grew $ 896 million or 16 % , grew $ 896 million or 16 % , primarily due to and development expense increased $ 366 million or 31 % , increased $ 366 million or 31 % , primarily reflecting higher and marketing expense increased $ 242 million or 27 % , increased $ 242 million or 27 % , primarily reflecting the million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Corporate-level activity $ 2012 Percentage Change 2012 Versus 2011 Corporate-level activity $ ( 6,665 2011 Corporate-level activity $ ( 6,665 ) $ ( 5,114 ) ( 6,665 ) $ ( 5,114 ) $ ( 4,506 ) ( 5,114 ) $ ( 4,506 ) ( 30 ) % $ ( 4,506 ) ( 30 ) % ( 13 ) ( 30 ) % ( 13 ) % Certain corporate-level activity and contingency . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Corporate-level expense increased , primarily European Commission fine of € 561 million ( approximately $ 733 561 million ( approximately $ 733 million ) for failure to failure to comply with our 2009 agreement to display a “ grew due to a $ 350 million increase in retail store retail store expense and $ 287 million higher intellectual property licensing licensing cost . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Corporate-level expense increased due mainly charge , which were $ 56 million in fiscal year 2012 56 million in fiscal year 2012 compared with $ 332 million year 2012 compared with $ 332 million in fiscal year 2011 332 million in fiscal year 2011 . COST OF REVENUE Cost million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Cost of revenue 2012 Percentage Change 2012 Versus 2011 Cost of revenue $ 20,249 2011 Cost of revenue $ 20,249 $ 17,530 $ 15,577 16 of revenue $ 20,249 $ 17,530 $ 15,577 16 % 13 $ 20,249 $ 17,530 $ 15,577 16 % 13 % As 20,249 $ 17,530 $ 15,577 16 % 13 % As a 17,530 $ 15,577 16 % 13 % As a percent of As a percent of revenue 26 % 24 % 22 % percent of revenue 26 % 24 % 22 % 2ppt 2ppt revenue 26 % 24 % 22 % 2ppt 2ppt 32 Table % 24 % 22 % 2ppt 2ppt 32 Table of Contents 24 % 22 % 2ppt 2ppt 32 Table of Contents PART % 22 % 2ppt 2ppt 32 Table of Contents PART II of Contents PART II Item 7 Cost of revenue includes : development cost . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Cost of revenue increased , revenue increased , reflecting $ 1.6 billion in product cost associated associated with Surface and Windows 8 , including a charge for inventory adjustment of approximately $ 900 million , $ 578 million $ 900 million , $ 578 million higher headcount-related expense , headcount-related expense , a $ 375 million increase in expense for joint strategic initiative , $ 287 million higher intellectual property licensing licensing cost , a $ 273 million increase in royalty on content , and a $ 152 million increase in retail store in part by a $ 1.0 billion decrease in manufacturing and with lower volume of Xbox 360 console sold and a $ console sold and a $ 431 million decrease in traffic acquisition acquisition cost . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Cost of revenue increased reflecting sold . Headcount-related expense increased 20 % , primarily related to million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Research and development 2012 Percentage Change 2012 Versus 2011 Research and development $ 10,411 2011 Research and development $ 10,411 $ 9,811 $ 9,043 6 and development $ 10,411 $ 9,811 $ 9,043 6 % 8 $ 10,411 $ 9,811 $ 9,043 6 % 8 % As 10,411 $ 9,811 $ 9,043 6 % 8 % As a 9,811 $ 9,043 6 % 8 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Research and development expense increased increased , reflecting a $ 460 million or 6 % increase a $ 460 million or 6 % increase in headcount-related expense Devices Division . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Research and development expense increased increased , primarily reflecting a 10 % increase in headcount-related expense million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 Sales and marketing 2012 Percentage Change 2012 Versus 2011 Sales and marketing $ 15,276 2011 Sales and marketing $ 15,276 $ 13,857 $ 13,940 10 and marketing $ 15,276 $ 13,857 $ 13,940 10 % ( $ 15,276 $ 13,857 $ 13,940 10 % ( 1 ) 15,276 $ 13,857 $ 13,940 10 % ( 1 ) % $ 13,940 10 % ( 1 ) % As a percent As a percent of revenue 20 % 19 % 20 % percent of revenue 20 % 19 % 20 % 1ppt ( revenue 20 % 19 % 20 % 1ppt ( 1 ) % 19 % 20 % 1ppt ( 1 ) ppt 33 % 20 % 1ppt ( 1 ) ppt 33 Table of 1ppt ( 1 ) ppt 33 Table of Contents PART II of Contents PART II Item 7 Sales and marketing expense include other program . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Sales and marketing expense grew grew , reflecting an $ 898 million increase in advertising cost cost associated primarily with Windows 8 and Surface , $ 181 8 and Surface , $ 181 million higher fee paid to advisor , and a $ 145 million or 2 % increase a $ 145 million or 2 % increase in headcount-related expense headcount-related expense . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Sales and marketing expense decreased and marketing of the Xbox 360 platform , Windows Phone , offset in part by a 5 % increase in headcount-related expense million , except percentage ) 2013 2012 2011 Percentage Change 2013 , except percentage ) 2013 2012 2011 Percentage Change 2013 Versus except percentage ) 2013 2012 2011 Percentage Change 2013 Versus 2012 2013 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 2011 Percentage Change 2013 Versus 2012 Percentage Change 2012 Versus 2011 2013 Versus 2012 Percentage Change 2012 Versus 2011 General and administrative 2012 Percentage Change 2012 Versus 2011 General and administrative $ 5,149 2011 General and administrative $ 5,149 $ 4,569 $ 4,222 13 and administrative $ 5,149 $ 4,569 $ 4,222 13 % 8 $ 5,149 $ 4,569 $ 4,222 13 % 8 % As 5,149 $ 4,569 $ 4,222 13 % 8 % As a 4,569 $ 4,222 13 % 8 % As a percent of As a percent of revenue 7 % 6 % 6 % percent of revenue 7 % 6 % 6 % 1ppt 0ppt revenue 7 % 6 % 6 % 1ppt 0ppt General and % 6 % 6 % 1ppt 0ppt General and administrative expense 6 % 6 % 1ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 General and administrative expense increased EU fine . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 General and administrative expense increased , primarily due to a 10 % increase in headcount-related expense for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2013 . Our goodwill a of May 1 , 2013 . Our goodwill impairment test impairment test a of May 1 , 2012 , indicated that a of May 1 , 2012 , indicated that OSD ’ goodwill impairment charge of $ 6.2 billion during the three month the three month ended June 30 , 2012 , reducing OSD month ended June 30 , 2012 , reducing OSD ’ s ’ s goodwill from $ 6.4 billion to $ 223 million $ 6.4 billion to $ 223 million . 34 Table of to $ 223 million . 34 Table of Contents PART II of Contents PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2013 2012 2011 Dividends Year Ended June 30 , 2013 2012 2011 Dividends and interest Ended June 30 , 2013 2012 2011 Dividends and interest income June 30 , 2013 2012 2011 Dividends and interest income $ Dividends and interest income $ 677 $ 800 $ 900 Interest interest income $ 677 $ 800 $ 900 Interest expense ( $ 677 $ 800 $ 900 Interest expense ( 429 ) $ 900 Interest expense ( 429 ) ( 380 ) ( expense ( 429 ) ( 380 ) ( 295 ) Net ) ( 380 ) ( 295 ) Net recognized gain on Net recognized gain on investment 116 564 439 Net loss on recognized gain on investment 116 564 439 Net loss on derivative gain on investment 116 564 439 Net loss on derivative ( Net loss on derivative ( 196 ) ( 364 ) ( derivative ( 196 ) ( 364 ) ( 77 ) Net ) ( 364 ) ( 77 ) Net loss on foreign on foreign currency remeasurements ( 74 ) ( 117 ) ( remeasurements ( 74 ) ( 117 ) ( 26 ) Other ) ( 117 ) ( 26 ) Other 194 1 ( ) ( 26 ) Other 194 1 ( 31 ) Total ( 26 ) Other 194 1 ( 31 ) Total $ ) Other 194 1 ( 31 ) Total $ 288 $ ( 31 ) Total $ 288 $ 504 $ 910 We ) Total $ 288 $ 504 $ 910 We use derivative $ 288 $ 504 $ 910 We use derivative instrument to expense ) . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Dividends and interest income decreased . Other-than-temporary impairment were $ 208 million in fiscal year 2013 208 million in fiscal year 2013 , compared with $ 298 2013 , compared with $ 298 million in fiscal year 2012 298 million in fiscal year 2012 . Net loss on derivative upon the divestiture of our 50 % share in the MSNBC joint venture . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Dividends and interest income decreased initial public offering on May 18 , 2012 , offset in offering on May 18 , 2012 , offset in part by . Other-than-temporary impairment were $ 298 million in fiscal year 2012 298 million in fiscal year 2012 , compared with $ 80 2012 , compared with $ 80 million in fiscal year 2011 80 million in fiscal year 2011 . Net loss on derivative of our hedging activity . 35 Table of Contents PART II of Contents PART II Item 7 Income Taxes Fiscal year 2013 7 Income Taxes Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Our effective tax rate for tax rate for fiscal year 2013 and 2012 wa approximately 19 for fiscal year 2013 and 2012 wa approximately 19 % and 2013 and 2012 wa approximately 19 % and 24 % , wa approximately 19 % and 24 % , respectively . Our Rico . Our fiscal year 2013 effective rate decreased by 5 2013 effective rate decreased by 5 % from fiscal year 2012 5 % from fiscal year 2012 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment wa recorded in fiscal year 2012 . The goodwill impairment charge our effective tax rate by 10 % in fiscal year 2012 10 % in fiscal year 2012 . In addition , in addition , in fiscal year 2013 and 2012 , we recognized in fiscal year 2013 and 2012 , we recognized a reduction we recognized a reduction of 18 % and 21 % , reduction of 18 % and 21 % , respectively , to tax rate for fiscal year 2013 wa primarily offset by a wa primarily offset by a 1 % increase related to the Division operating income declined $ 2.1 billion in fiscal year 2013 2.1 billion in fiscal year 2013 , while MBD and Server Tools operating income increased $ 362 million and $ 929 million $ 362 million and $ 929 million , respectively , during center . In fiscal year 2013 and 2012 , our U.S. In fiscal year 2013 and 2012 , our U.S. income before before income tax wa $ 6.7 billion and $ 1.6 billion $ 6.7 billion and $ 1.6 billion , respectively , and , respectively , and comprised 25 % and 7 % , and comprised 25 % and 7 % , respectively , of tax . In fiscal year 2013 and 2012 , the foreign In fiscal year 2013 and 2012 , the foreign income before before income tax wa $ 20.4 billion and $ 20.7 billion $ 20.4 billion and $ 20.7 billion , respectively , and , respectively , and comprised 75 % and 93 % , and comprised 75 % and 93 % , respectively , of income tax in fiscal year 2013 wa the goodwill impairment charge other tax liability were $ 9.4 billion and $ 7.6 billion $ 9.4 billion and $ 7.6 billion a of June 30 7.6 billion a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , respectively , June 30 , 2013 and 2012 , respectively , and are . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit those year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month because we do not be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are financial statement . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Our effective tax rate for tax rate for fiscal year 2012 and 2011 were approximately 24 for fiscal year 2012 and 2011 were approximately 24 % and 2012 and 2011 were approximately 24 % and 18 % , were approximately 24 % and 18 % , respectively . Our Rico . Our fiscal year 2012 effective rate increased by 6 2012 effective rate increased by 6 % from fiscal year 2011 6 % from fiscal year 2011 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment in the fourth quarter of 2012 . The goodwill impairment charge our effective tax rate by 10 % . In addition , addition , in fiscal year 2012 and 2011 , we recognized in fiscal year 2012 and 2011 , we recognized 36 Table and 2011 , we recognized 36 Table of Contents PART II of Contents PART II Item 7 a reduction of 21 % Item 7 a reduction of 21 % and 16 % , reduction of 21 % and 16 % , respectively , to rate . In fiscal year 2011 , we settled a portion . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income tax expense for fiscal year 2011 by $ 461 million and fiscal year 2011 by $ 461 million and reduced the effective the effective tax rate by 2 % . Changes in the Division operating income declined $ 751 million in fiscal year 2012 751 million in fiscal year 2012 , while MBD and Server Tools operating income increased $ 1.1 billion and $ 1.1 billion $ 1.1 billion and $ 1.1 billion , respectively , during center . In fiscal year 2012 and 2011 , our U.S. In fiscal year 2012 and 2011 , our U.S. income before before income tax wa $ 1.6 billion and $ 8.9 billion $ 1.6 billion and $ 8.9 billion , respectively , and , respectively , and comprised 7 % and 32 % , and comprised 7 % and 32 % , respectively , of tax . In fiscal year 2012 and 2011 , the foreign In fiscal year 2012 and 2011 , the foreign income before before income tax wa $ 20.7 billion and $ 19.2 billion $ 20.7 billion and $ 19.2 billion , respectively , and , respectively , and comprised 93 % and 68 % , and comprised 93 % and 68 % , respectively , of income tax in fiscal year 2012 wa the goodwill impairment charge and short-term investment totaled $ 77.0 billion a of June 30 77.0 billion a of June 30 , 2013 , compared with a of June 30 , 2013 , compared with $ 63.0 2013 , compared with $ 63.0 billion a of June 30 63.0 billion a of June 30 , 2012 . Equity and a of June 30 , 2012 . Equity and other investment and other investment were $ 10.8 billion a of June 30 10.8 billion a of June 30 , 2013 , compared with a of June 30 , 2013 , compared with $ 9.8 2013 , compared with $ 9.8 billion a of June 30 9.8 billion a of June 30 , 2012 . Our short-term a of June 30 , 2012 . Our short-term investment are our portfolio a of June 30 , 2013 doe not contain a of June 30 , 2013 doe not contain material direct residential mortgage and carry a 100 % principal and interest guarantee and short-term investment at June 30 , 2013 , approximately $ investment at June 30 , 2013 , approximately $ 69.6 billion , 2013 , approximately $ 69.6 billion wa held by our regulatory ) wa approximately $ 880 million . As of June million . As of June 30 , 2013 , approximately 87 As of June 30 , 2013 , approximately 87 % of 30 , 2013 , approximately 87 % of the cash equivalent and agency security , approximately 4 % were invested in corporate of U.S. company , and 2 % were invested in U.S. lent and the creditworthiness of 37 Table of Contents PART II of Contents PART II Item 7 the borrower . Cash received lending payable balance wa $ 645 million a of June 30 645 million a of June 30 , 2013 . Our average a of June 30 , 2013 . Our average and maximum the fiscal year were $ 494 million and $ 1.4 billion $ 494 million and $ 1.4 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note U.S. agency security . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price . Cash Flows Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ 28.8 billion , due mainly to used for financing decreased $ 1.3 billion to $ 8.1 billion $ 1.3 billion to $ 8.1 billion , due mainly to due mainly to a $ 3.5 billion increase in proceeds from in part by a $ 1.1 billion increase in dividend paid dividend paid and a $ 982 million decrease in proceeds from used in investing decreased $ 975 million to $ 23.8 billion $ 975 million to $ 23.8 billion , due mainly to due mainly to an $ 8.5 billion decrease in cash used in part by a $ 5.8 billion increase in cash used and sale and a $ 2.0 billion increase in cash used and equipment . Fiscal year 2012 compared with fiscal year 2011 2012 compared with fiscal year 2011 Cash flow from operation increased flow from operation increased $ 4.6 billion during fiscal year 2012 4.6 billion during fiscal year 2012 to $ 31.6 billion , fiscal year 2012 to $ 31.6 billion , due mainly to used for financing increased $ 1.0 billion to $ 9.4 billion $ 1.0 billion to $ 9.4 billion , due mainly to due mainly to a $ 6.0 billion net decrease in proceeds of debt and a $ 1.2 billion increase in dividend paid in part by a $ 6.5 billion decrease in cash used used in investing increased $ 10.2 billion to $ 24.8 billion $ 10.2 billion to $ 24.8 billion , due mainly to due mainly to a $ 10.0 billion increase in acquisition of intangible asset and a $ 1.4 billion decrease in cash from partially offset by a $ 1.2 billion decrease in cash used and sale of investment . 38 Table of Contents PART II of Contents PART II Item 7 Debt We issued debt to debt . As of June 30 , 2013 , the total As of June 30 , 2013 , the total carrying value current portion , were $ 15.6 billion and $ 15.8 billion $ 15.6 billion and $ 15.8 billion , respectively . This estimated fair value of $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively , a respectively , a of June 30 , 2012 . These estimated a of June 30 , 2012 . These estimated fair value value are based on Level 2 input . The component of a follows a of June 30 , 2013 : Due Date a of June 30 , 2013 : Due Date Face Value In million ) Notes September 27 , 2013 $ 1,000 0.875 ) Notes September 27 , 2013 $ 1,000 0.875 % 1.000 September 27 , 2013 $ 1,000 0.875 % 1.000 % June 27 , 2013 $ 1,000 0.875 % 1.000 % June 1 2013 $ 1,000 0.875 % 1.000 % June 1 , 2014 0.875 % 1.000 % June 1 , 2014 2,000 2.950 % 1.000 % June 1 , 2014 2,000 2.950 % 3.049 % % June 1 , 2014 2,000 2.950 % 3.049 % September June 1 , 2014 2,000 2.950 % 3.049 % September 25 , 2014 2,000 2.950 % 3.049 % September 25 , 2015 2.950 % 3.049 % September 25 , 2015 1,750 1.625 % 3.049 % September 25 , 2015 1,750 1.625 % 1.795 % % September 25 , 2015 1,750 1.625 % 1.795 % February September 25 , 2015 1,750 1.625 % 1.795 % February 8 , 2015 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 750 2.500 % 1.795 % February 8 , 2016 750 2.500 % 2.642 % % February 8 , 2016 750 2.500 % 2.642 % November February 8 , 2016 750 2.500 % 2.642 % November 15 , 2016 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 ( a ) 2.642 % November 15 , 2017 ( a ) 600 0.875 , 2017 ( a ) 600 0.875 % 1.084 % May 2017 ( a ) 600 0.875 % 1.084 % May 1 a ) 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 ( b ) 1.084 % May 1 , 2018 ( b ) 450 1.000 , 2018 ( b ) 450 1.000 % 1.106 % June 2018 ( b ) 450 1.000 % 1.106 % June 1 b ) 450 1.000 % 1.106 % June 1 , 2019 1.000 % 1.106 % June 1 , 2019 1,000 4.200 % 1.106 % June 1 , 2019 1,000 4.200 % 4.379 % % June 1 , 2019 1,000 4.200 % 4.379 % October June 1 , 2019 1,000 4.200 % 4.379 % October 1 , 2019 1,000 4.200 % 4.379 % October 1 , 2020 4.200 % 4.379 % October 1 , 2020 1,000 3.000 % 4.379 % October 1 , 2020 1,000 3.000 % 3.137 % % October 1 , 2020 1,000 3.000 % 3.137 % February October 1 , 2020 1,000 3.000 % 3.137 % February 8 , 2020 1,000 3.000 % 3.137 % February 8 , 2021 3.000 % 3.137 % February 8 , 2021 500 4.000 % 3.137 % February 8 , 2021 500 4.000 % 4.082 % % February 8 , 2021 500 4.000 % 4.082 % November February 8 , 2021 500 4.000 % 4.082 % November 15 , 2021 500 4.000 % 4.082 % November 15 , 2022 4.000 % 4.082 % November 15 , 2022 ( a ) 4.082 % November 15 , 2022 ( a ) 750 2.125 , 2022 ( a ) 750 2.125 % 2.239 % May 2022 ( a ) 750 2.125 % 2.239 % May 1 a ) 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 ( b ) 2.239 % May 1 , 2023 ( b ) 1,000 2.375 , 2023 ( b ) 1,000 2.375 % 2.465 % May 2023 ( b ) 1,000 2.375 % 2.465 % May 2 b ) 1,000 2.375 % 2.465 % May 2 , 2033 2.375 % 2.465 % May 2 , 2033 ( c ) 2.465 % May 2 , 2033 ( c ) 715 2.625 , 2033 ( c ) 715 2.625 % 2.690 % June 2033 ( c ) 715 2.625 % 2.690 % June 1 c ) 715 2.625 % 2.690 % June 1 , 2039 2.625 % 2.690 % June 1 , 2039 750 5.200 % 2.690 % June 1 , 2039 750 5.200 % 5.240 % % June 1 , 2039 750 5.200 % 5.240 % October June 1 , 2039 750 5.200 % 5.240 % October 1 , 2039 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 4.500 % 5.240 % October 1 , 2040 1,000 4.500 % 4.567 % % October 1 , 2040 1,000 4.500 % 4.567 % February October 1 , 2040 1,000 4.500 % 4.567 % February 8 , 2040 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 5.300 % 4.567 % February 8 , 2041 1,000 5.300 % 5.361 % % February 8 , 2041 1,000 5.300 % 5.361 % November February 8 , 2041 1,000 5.300 % 5.361 % November 15 , 2041 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 ( a ) 5.361 % November 15 , 2042 ( a ) 900 3.500 , 2042 ( a ) 900 3.500 % 3.571 % May 2042 ( a ) 900 3.500 % 3.571 % May 1 a ) 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 ( b ) 3.571 % May 1 , 2043 ( b ) 500 3.750 , 2043 ( b ) 500 3.750 % 3.829 % Total 2043 ( b ) 500 3.750 % 3.829 % Total $ b ) 500 3.750 % 3.829 % Total $ 15,665 ( % 3.829 % Total $ 15,665 ( a ) In November ( a ) In November 2012 , we issued $ 2.25 2012 , we issued $ 2.25 billion of debt security . ( b ) In April 2013 , we issued $ 1.95 2013 , we issued $ 1.95 billion of debt security . ( c ) In April 2013 , we issued € 550 2013 , we issued € 550 million of debt security . annually . As of June 30 , 2013 , the aggregate As of June 30 , 2013 , the aggregate unamortized discount current portion , wa $ 65 million . Notes The Notes and unsubordinated debt outstanding . 39 Table of Contents PART II of Contents PART II Item 7 Convertible Debt In June 2013 7 Convertible Debt In June 2013 , we paid cash of we paid cash of $ 1.25 billion for the principal amount deliver cash for the $ 96 million excess obligation resulting from the note . Each $ 1,000 principal amount of note wa of note wa convertible into 30.68 share of Microsoft common stock a conversion price of $ 32.59 per share . As of share . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount the unamortized discount were $ 1.2 billion and $ 19 million $ 1.2 billion and $ 19 million , respectively . In issuance of the note in 2010 , we entered into capped of the note in June 2013 , we exercised the capped were physically settled by acquiring 29 million share of our own own common stock for $ 938 million . The remaining capped net cash settled for $ 24 million . Credit Facility In . Credit Facility In June 2013 , we established a commercial sale of up to $ 1.3 billion in commercial paper . paper . As of June 30 , 2013 , we have As of June 30 , 2013 , we have not issued this program . In June 2013 , we entered into a we entered into a $ 1.3 billion credit facility , which program . As of June 30 , 2013 , we were As of June 30 , 2013 , we were in compliance credit facility expires on June 24 , 2018 . No amount expires on June 24 , 2018 . No amount were drawn Revenue Unearned revenue at June 30 , 2013 comprised mainly unearned revenue at June 30 , 2013 comprised mainly unearned revenue from . Unearned revenue at June 30 , 2013 also included payment revenue at June 30 , 2013 also included payment for : unearned revenue a of June 30 , 2013 : ( In a of June 30 , 2013 : ( In million ) Three Months Ending , September 30 , 2013 $ 7,790 December Ending , September 30 , 2013 $ 7,790 December 31 , September 30 , 2013 $ 7,790 December 31 , 2013 6,571 , 2013 $ 7,790 December 31 , 2013 6,571 March 31 $ 7,790 December 31 , 2013 6,571 March 31 , 2014 7,790 December 31 , 2013 6,571 March 31 , 2014 4,252 31 , 2013 6,571 March 31 , 2014 4,252 June 30 2013 6,571 March 31 , 2014 4,252 June 30 , 2014 6,571 March 31 , 2014 4,252 June 30 , 2014 2,026 31 , 2014 4,252 June 30 , 2014 2,026 Thereafter 1,760 2014 4,252 June 30 , 2014 2,026 Thereafter 1,760 Total $ 4,252 June 30 , 2014 2,026 Thereafter 1,760 Total $ 22,399 30 , 2014 2,026 Thereafter 1,760 Total $ 22,399 Share Repurchases 2,026 Thereafter 1,760 Total $ 22,399 Share Repurchases On September 22 22,399 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced that our program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2013 , approximately $ As of June 30 , 2013 , approximately $ 3.6 billion , 2013 , approximately $ 3.6 billion remained of the $ billion remained of the $ 40.0 billion approved repurchase amount . any time without notice . 40 Table of Contents PART II of Contents PART II Item 7 During the period reported , repurchased with cash resource : 158 million share for $ 4.6 158 million share for $ 4.6 billion during fiscal year 2013 4.6 billion during fiscal year 2013 ; 142 million share for during fiscal year 2013 ; 142 million share for $ 4.0 142 million share for $ 4.0 billion during fiscal year 2012 4.0 billion during fiscal year 2012 ; and 447 million share fiscal year 2012 ; and 447 million share for $ 11.5 447 million share for $ 11.5 billion during fiscal year 2011 11.5 billion during fiscal year 2011 . Dividends During fiscal year . Dividends During fiscal year 2013 and 2012 , our Board During fiscal year 2013 and 2012 , our Board of Directors In million ) Fiscal Year 2013 September 18 , 2012 $ ) Fiscal Year 2013 September 18 , 2012 $ 0.23 November Year 2013 September 18 , 2012 $ 0.23 November 15 , September 18 , 2012 $ 0.23 November 15 , 2012 $ , 2012 $ 0.23 November 15 , 2012 $ 1,933 December $ 0.23 November 15 , 2012 $ 1,933 December 13 , November 15 , 2012 $ 1,933 December 13 , 2012 November , 2012 $ 1,933 December 13 , 2012 November 28 , $ 1,933 December 13 , 2012 November 28 , 2012 $ December 13 , 2012 November 28 , 2012 $ 0.23 February , 2012 November 28 , 2012 $ 0.23 February 21 , November 28 , 2012 $ 0.23 February 21 , 2013 $ , 2012 $ 0.23 February 21 , 2013 $ 1,925 March $ 0.23 February 21 , 2013 $ 1,925 March 14 , February 21 , 2013 $ 1,925 March 14 , 2013 March , 2013 $ 1,925 March 14 , 2013 March 11 , $ 1,925 March 14 , 2013 March 11 , 2013 $ March 14 , 2013 March 11 , 2013 $ 0.23 May , 2013 March 11 , 2013 $ 0.23 May 16 , March 11 , 2013 $ 0.23 May 16 , 2013 $ , 2013 $ 0.23 May 16 , 2013 $ 1,921 June $ 0.23 May 16 , 2013 $ 1,921 June 13 , May 16 , 2013 $ 1,921 June 13 , 2013 June , 2013 $ 1,921 June 13 , 2013 June 12 , $ 1,921 June 13 , 2013 June 12 , 2013 $ June 13 , 2013 June 12 , 2013 $ 0.23 August , 2013 June 12 , 2013 $ 0.23 August 15 , June 12 , 2013 $ 0.23 August 15 , 2013 $ , 2013 $ 0.23 August 15 , 2013 $ 1,916 September $ 0.23 August 15 , 2013 $ 1,916 September 12 , August 15 , 2013 $ 1,916 September 12 , 2013 Fiscal , 2013 $ 1,916 September 12 , 2013 Fiscal Year 2012 $ 1,916 September 12 , 2013 Fiscal Year 2012 September 20 12 , 2013 Fiscal Year 2012 September 20 , 2011 $ 2013 Fiscal Year 2012 September 20 , 2011 $ 0.20 November Year 2012 September 20 , 2011 $ 0.20 November 17 , September 20 , 2011 $ 0.20 November 17 , 2011 $ , 2011 $ 0.20 November 17 , 2011 $ 1,683 December $ 0.20 November 17 , 2011 $ 1,683 December 8 , November 17 , 2011 $ 1,683 December 8 , 2011 December , 2011 $ 1,683 December 8 , 2011 December 14 , $ 1,683 December 8 , 2011 December 14 , 2011 $ December 8 , 2011 December 14 , 2011 $ 0.20 February , 2011 December 14 , 2011 $ 0.20 February 16 , December 14 , 2011 $ 0.20 February 16 , 2012 $ , 2011 $ 0.20 February 16 , 2012 $ 1,683 March $ 0.20 February 16 , 2012 $ 1,683 March 8 , February 16 , 2012 $ 1,683 March 8 , 2012 March , 2012 $ 1,683 March 8 , 2012 March 13 , $ 1,683 March 8 , 2012 March 13 , 2012 $ March 8 , 2012 March 13 , 2012 $ 0.20 May , 2012 March 13 , 2012 $ 0.20 May 17 , March 13 , 2012 $ 0.20 May 17 , 2012 $ , 2012 $ 0.20 May 17 , 2012 $ 1,678 June $ 0.20 May 17 , 2012 $ 1,678 June 14 , May 17 , 2012 $ 1,678 June 14 , 2012 June , 2012 $ 1,678 June 14 , 2012 June 13 , $ 1,678 June 14 , 2012 June 13 , 2012 $ June 14 , 2012 June 13 , 2012 $ 0.20 August , 2012 June 13 , 2012 $ 0.20 August 16 , June 13 , 2012 $ 0.20 August 16 , 2012 $ , 2012 $ 0.20 August 16 , 2012 $ 1,676 September $ 0.20 August 16 , 2012 $ 1,676 September 13 , August 16 , 2012 $ 1,676 September 13 , 2012 Off-Balance , 2012 $ 1,676 September 13 , 2012 Off-Balance Sheet Arrangements $ 1,676 September 13 , 2012 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2013 : ( In a of June 30 , 2013 : ( In million ) : ( In million ) 2014 2015-2016 2017-2018 Thereafter Total Long-term ( In million ) 2014 2015-2016 2017-2018 Thereafter Total Long-term debt In million ) 2014 2015-2016 2017-2018 Thereafter Total Long-term debt : a ) Principal payment $ 3,000 $ 2,500 $ 1,050 $ Principal payment $ 3,000 $ 2,500 $ 1,050 $ 9,115 $ $ 3,000 $ 2,500 $ 1,050 $ 9,115 $ 15,665 Interest $ 2,500 $ 1,050 $ 9,115 $ 15,665 Interest payment 459 $ 1,050 $ 9,115 $ 15,665 Interest payment 459 776 693 9,115 $ 15,665 Interest payment 459 776 693 4,940 6,868 Construction $ 15,665 Interest payment 459 776 693 4,940 6,868 Construction commitment 15,665 Interest payment 459 776 693 4,940 6,868 Construction commitment ( Interest payment 459 776 693 4,940 6,868 Construction commitment ( b payment 459 776 693 4,940 6,868 Construction commitment ( b ) Construction commitment ( b ) 694 0 0 0 694 Operating commitment ( b ) 694 0 0 0 694 Operating lease ( b ) 694 0 0 0 694 Operating lease ( b ) 694 0 0 0 694 Operating lease ( c ) 694 0 0 0 694 Operating lease ( c ) Operating lease ( c ) 572 800 485 605 2,462 Purchase lease ( c ) 572 800 485 605 2,462 Purchase commitment ( c ) 572 800 485 605 2,462 Purchase commitment ( c ) 572 800 485 605 2,462 Purchase commitment ( d ) 572 800 485 605 2,462 Purchase commitment ( d ) Purchase commitment ( d ) 13,752 934 258 83 15,027 Other commitment ( d ) 13,752 934 258 83 15,027 Other long-term ( d ) 13,752 934 258 83 15,027 Other long-term liability d ) 13,752 934 258 83 15,027 Other long-term liability ( ) 13,752 934 258 83 15,027 Other long-term liability ( e long-term liability ( e ) 0 67 20 23 110 Total liability ( e ) 0 67 20 23 110 Total contractual ( e ) 0 67 20 23 110 Total contractual obligation e ) 0 67 20 23 110 Total contractual obligation $ ) 0 67 20 23 110 Total contractual obligation $ 18,477 110 Total contractual obligation $ 18,477 $ 5,077 $ 2,506 $ contractual obligation $ 18,477 $ 5,077 $ 2,506 $ 14,766 $ $ 18,477 $ 5,077 $ 2,506 $ 14,766 $ 40,826 ( $ 5,077 $ 2,506 $ 14,766 $ 40,826 ( a ) $ 2,506 $ 14,766 $ 40,826 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) a construction commitment above . 41 Table of Contents PART II of Contents PART II Item 7 ( e ) We have deferred income tax of $ 11.3 billion and other long-term contingent long-term contingent liability of $ 162 million ( related to the for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the Adopted Accounting Guidance In September 2011 , the Financial Accounting Standards this new guidance beginning July 1 , 2012 . Adoption of guidance beginning July 1 , 2012 . Adoption of this new financial statement . In June 2011 , the FASB issued guidance this new guidance beginning July 1 , 2012 . Adoption of guidance beginning July 1 , 2012 . Adoption of this new of our financial statement . 42 Table of Contents PART II of Contents PART II Item 7 Recent Accounting Guidance Not Yet Not Yet Adopted In December 2011 , the FASB issued guidance net exposure . In January 2013 , the FASB clarified that effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In February 2013 , the FASB issued guidance effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In March 2013 , the FASB issued guidance effective for u beginning July 1 , 2014 . We do u beginning July 1 , 2014 . We do not anticipate or made available . Windows 8.1 will enable new hardware , address customer issue with Windows 8 , and will be provided will be provided to Windows 8 customer when available at no charge . We evaluated Windows 8.1 and determined that it did to this planned release . 43 Table of Contents PART II of Contents PART II Item 7 Windows 7 revenue wa subject PART II Item 7 Windows 7 revenue wa subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provided significantly discounted right to purchase Windows 8 Pro to qualifying end-users that qualifying end-users that purchased Windows 7 PCs during the eligibility period wa responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 wa deferred until it wa Offer , which started October 19 , 2012 . The Office which started October 19 , 2012 . The Office Upgrade Offer allowed customer who purchased qualifying 2010 Microsoft Office system or Office system or Office for Mac 2011 product to receive , at a one-year subscription to Office 365 Home Premium or the equivalent or the equivalent version of 2013 Microsoft Office system upon general a three-month trial of Office 365 Small Business Premium . Accordingly revenue related to the undelivered 2013 Microsoft Office system and subscription an annual basis ( May 1 for u ) and between feasibility is established , all 44 Table of Contents PART II of Contents PART II Item 7 software cost are capitalized until that ha a greater than 50 % likelihood of being realized analysis require significant judgment . 45 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 46 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 47 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2013 and 2012 and a of June 30 , 2013 and 2012 and for the June 30 , 2013 and 2012 and for the year ended for the year ended June 30 , 2013 : ( In year ended June 30 , 2013 : ( In million ) ( In million ) June 30 , 2013 June 30 , million ) June 30 , 2013 June 30 , 2012 Year June 30 , 2013 June 30 , 2012 Year Ended June , 2013 June 30 , 2012 Year Ended June 30 , , 2012 Year Ended June 30 , 2013 Risk Categories Average Year Ended June 30 , 2013 Risk Categories Average High Low High Low Foreign currency $ 199 $ 98 $ 215 $ Foreign currency $ 199 $ 98 $ 215 $ 256 $ $ 199 $ 98 $ 215 $ 256 $ 90 Interest $ 98 $ 215 $ 256 $ 90 Interest rate $ $ 215 $ 256 $ 90 Interest rate $ 85 $ $ 90 Interest rate $ 85 $ 71 $ 73 $ Interest rate $ 85 $ 71 $ 73 $ 86 $ $ 85 $ 71 $ 73 $ 86 $ 63 Equity $ 71 $ 73 $ 86 $ 63 Equity $ 181 $ 73 $ 86 $ 63 Equity $ 181 $ 205 86 $ 63 Equity $ 181 $ 205 $ 198 $ 63 Equity $ 181 $ 205 $ 198 $ 211 $ $ 181 $ 205 $ 198 $ 211 $ 178 Commodity $ 205 $ 198 $ 211 $ 178 Commodity $ 19 $ 198 $ 211 $ 178 Commodity $ 19 $ 18 211 $ 178 Commodity $ 19 $ 18 $ 20 $ 178 Commodity $ 19 $ 18 $ 20 $ 24 $ $ 19 $ 18 $ 20 $ 24 $ 18 Total $ 18 $ 20 $ 24 $ 18 Total one-day VaR $ 20 $ 24 $ 18 Total one-day VaR for the combined risk category wa $ 350 million at June 30 , $ 350 million at June 30 , 2013 and $ 292 million at June 30 , 2013 and $ 292 million at 30 , 2013 and $ 292 million at June 30 , $ 292 million at June 30 , 2012 . The total million at June 30 , 2012 . The total VaR is . The total VaR is 28 % le at June 30 28 % le at June 30 , 2013 , and 26 le at June 30 , 2013 , and 26 % le 30 , 2013 , and 26 % le at June 30 26 % le at June 30 , 2012 , than the le at June 30 , 2012 , than the sum of the combination of risk . 48 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2013 2012 2011 Revenue Year Ended June 30 , 2013 2012 2011 Revenue $ 77,849 Ended June 30 , 2013 2012 2011 Revenue $ 77,849 $ June 30 , 2013 2012 2011 Revenue $ 77,849 $ 73,723 2013 2012 2011 Revenue $ 77,849 $ 73,723 $ 69,943 Cost 2011 Revenue $ 77,849 $ 73,723 $ 69,943 Cost of revenue $ 77,849 $ 73,723 $ 69,943 Cost of revenue 20,249 17,530 $ 69,943 Cost of revenue 20,249 17,530 15,577 Gross profit 57,600 69,943 Cost of revenue 20,249 17,530 15,577 Gross profit 57,600 56,193 Cost of revenue 20,249 17,530 15,577 Gross profit 57,600 56,193 54,366 20,249 17,530 15,577 Gross profit 57,600 56,193 54,366 Operating expense : 17,530 15,577 Gross profit 57,600 56,193 54,366 Operating expense : Research 15,577 Gross profit 57,600 56,193 54,366 Operating expense : Research and expense : Research and development 10,411 9,811 9,043 Sales and marketing : Research and development 10,411 9,811 9,043 Sales and marketing 15,276 Research and development 10,411 9,811 9,043 Sales and marketing 15,276 13,857 9,811 9,043 Sales and marketing 15,276 13,857 13,940 General and administrative 9,043 Sales and marketing 15,276 13,857 13,940 General and administrative 5,149 Sales and marketing 15,276 13,857 13,940 General and administrative 5,149 4,569 13,857 13,940 General and administrative 5,149 4,569 4,222 Goodwill impairment 0 13,940 General and administrative 5,149 4,569 4,222 Goodwill impairment 0 6,193 General and administrative 5,149 4,569 4,222 Goodwill impairment 0 6,193 0 5,149 4,569 4,222 Goodwill impairment 0 6,193 0 Total operating expense 4,569 4,222 Goodwill impairment 0 6,193 0 Total operating expense 30,836 4,222 Goodwill impairment 0 6,193 0 Total operating expense 30,836 34,430 6,193 0 Total operating expense 30,836 34,430 27,205 Operating income 26,764 0 Total operating expense 30,836 34,430 27,205 Operating income 26,764 21,763 Total operating expense 30,836 34,430 27,205 Operating income 26,764 21,763 27,161 30,836 34,430 27,205 Operating income 26,764 21,763 27,161 Other income 288 34,430 27,205 Operating income 26,764 21,763 27,161 Other income 288 504 27,205 Operating income 26,764 21,763 27,161 Other income 288 504 910 26,764 21,763 27,161 Other income 288 504 910 Income before income 21,763 27,161 Other income 288 504 910 Income before income tax 27,161 Other income 288 504 910 Income before income tax 27,052 910 Income before income tax 27,052 22,267 28,071 Provision for income Income before income tax 27,052 22,267 28,071 Provision for income tax before income tax 27,052 22,267 28,071 Provision for income tax 5,189 28,071 Provision for income tax 5,189 5,289 4,921 Net income $ Provision for income tax 5,189 5,289 4,921 Net income $ 21,863 for income tax 5,189 5,289 4,921 Net income $ 21,863 $ 5,289 4,921 Net income $ 21,863 $ 16,978 $ 23,150 Earnings Net income $ 21,863 $ 16,978 $ 23,150 Earnings per share $ 21,863 $ 16,978 $ 23,150 Earnings per share : Basic per share : Basic $ 2.61 $ 2.02 $ 2.73 Diluted : Basic $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.61 $ 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 2.02 $ 2.73 Diluted $ 2.58 $ 2.00 $ 2.69 Weighted 2.73 Diluted $ 2.58 $ 2.00 $ 2.69 Weighted average share $ 2.58 $ 2.00 $ 2.69 Weighted average share outstanding : average share outstanding : Basic 8,375 8,396 8,490 Diluted 8,470 8,506 share outstanding : Basic 8,375 8,396 8,490 Diluted 8,470 8,506 8,593 outstanding : Basic 8,375 8,396 8,490 Diluted 8,470 8,506 8,593 Cash Basic 8,375 8,396 8,490 Diluted 8,470 8,506 8,593 Cash dividend declared 8,375 8,396 8,490 Diluted 8,470 8,506 8,593 Cash dividend declared per 8,396 8,490 Diluted 8,470 8,506 8,593 Cash dividend declared per common declared per common share $ 0.92 $ 0.80 $ 0.64 See common share $ 0.92 $ 0.80 $ 0.64 See accompanying note $ 0.92 $ 0.80 $ 0.64 See accompanying note . 49 0.64 See accompanying note . 49 Table of Contents PART II of Contents PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2013 2012 2011 Net Year Ended June 30 , 2013 2012 2011 Net income $ Ended June 30 , 2013 2012 2011 Net income $ 21,863 June 30 , 2013 2012 2011 Net income $ 21,863 $ 2012 2011 Net income $ 21,863 $ 16,978 $ 23,150 Other Net income $ 21,863 $ 16,978 $ 23,150 Other comprehensive income $ 21,863 $ 16,978 $ 23,150 Other comprehensive income ( loss tax effect of $ ( 14 ) , $ 137 , ( 14 ) , $ 137 , and $ ( 338 137 , and $ ( 338 ) ) ( 26 ) ( 338 ) ) ( 26 ) 255 ( 627 ) ) ) ( 26 ) 255 ( 627 ) Net unrealized ( 26 ) 255 ( 627 ) Net unrealized gain ( of tax effect of $ 195 , $ ( 210 ) $ 195 , $ ( 210 ) , and $ 567 210 ) , and $ 567 ) 363 ( 390 ) , and $ 567 ) 363 ( 390 ) 1,054 Translation $ 567 ) 363 ( 390 ) 1,054 Translation adjustment and ) 363 ( 390 ) 1,054 Translation adjustment and other ( tax effect of $ ( 8 ) , $ ( 165 8 ) , $ ( 165 ) , and $ 205 165 ) , and $ 205 ) ( 16 ) ( and $ 205 ) ( 16 ) ( 306 ) 381 ) ( 16 ) ( 306 ) 381 Other comprehensive income 16 ) ( 306 ) 381 Other comprehensive income ( loss comprehensive income ( loss ) 321 ( 441 ) 808 Comprehensive ( loss ) 321 ( 441 ) 808 Comprehensive income $ ) 321 ( 441 ) 808 Comprehensive income $ 22,184 $ ) 808 Comprehensive income $ 22,184 $ 16,537 $ 23,958 See Comprehensive income $ 22,184 $ 16,537 $ 23,958 See accompanying note $ 22,184 $ 16,537 $ 23,958 See accompanying note . 50 23,958 See accompanying note . 50 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2013 2012 Assets Current million ) June 30 , 2013 2012 Assets Current asset : ) June 30 , 2013 2012 Assets Current asset : Cash Cash and cash equivalent $ 3,804 $ 6,938 Short-term investment ( cash equivalent $ 3,804 $ 6,938 Short-term investment ( including security including security loaned of $ 579 and $ 785 ) 73,218 of $ 579 and $ 785 ) 73,218 56,102 Total cash 579 and $ 785 ) 73,218 56,102 Total cash , cash and $ 785 ) 73,218 56,102 Total cash , cash equivalent equivalent , and short-term investment 77,022 63,040 Accounts receivable , net , and short-term investment 77,022 63,040 Accounts receivable , net of for doubtful account of $ 336 and $ 389 17,486 15,780 of $ 336 and $ 389 17,486 15,780 Inventories 1,938 1,137 $ 336 and $ 389 17,486 15,780 Inventories 1,938 1,137 Deferred 336 and $ 389 17,486 15,780 Inventories 1,938 1,137 Deferred income $ 389 17,486 15,780 Inventories 1,938 1,137 Deferred income tax 1,632 389 17,486 15,780 Inventories 1,938 1,137 Deferred income tax 1,632 2,035 1,938 1,137 Deferred income tax 1,632 2,035 Other 3,388 3,092 Total 1,137 Deferred income tax 1,632 2,035 Other 3,388 3,092 Total current income tax 1,632 2,035 Other 3,388 3,092 Total current asset 101,466 tax 1,632 2,035 Other 3,388 3,092 Total current asset 101,466 85,084 3,388 3,092 Total current asset 101,466 85,084 Property and equipment , 3,092 Total current asset 101,466 85,084 Property and equipment , net of accumulated depreciation of $ 12,513 and $ 10,962 9,991 8,269 of $ 12,513 and $ 10,962 9,991 8,269 Equity and other $ 12,513 and $ 10,962 9,991 8,269 Equity and other investment 12,513 and $ 10,962 9,991 8,269 Equity and other investment 10,844 8,269 Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible Equity and other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset other investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset , net investment 10,844 9,776 Goodwill 14,655 13,452 Intangible asset , net 3,083 13,452 Intangible asset , net 3,083 3,170 Other long-term asset 2,392 Intangible asset , net 3,083 3,170 Other long-term asset 2,392 1,520 3,083 3,170 Other long-term asset 2,392 1,520 Total asset $ 142,431 3,170 Other long-term asset 2,392 1,520 Total asset $ 142,431 $ 2,392 1,520 Total asset $ 142,431 $ 121,271 Liabilities and stockholder Total asset $ 142,431 $ 121,271 Liabilities and stockholder ’ equity liability : Accounts payable $ 4,828 $ 4,175 Current portion of Accounts payable $ 4,828 $ 4,175 Current portion of long-term debt Current portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 portion of long-term debt 2,999 1,231 Accrued compensation 4,117 3,875 Income debt 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 2,999 1,231 Accrued compensation 4,117 3,875 Income tax 592 789 Short-term compensation 4,117 3,875 Income tax 592 789 Short-term unearned revenue 20,639 4,117 3,875 Income tax 592 789 Short-term unearned revenue 20,639 18,653 592 789 Short-term unearned revenue 20,639 18,653 Securities lending payable 645 789 Short-term unearned revenue 20,639 18,653 Securities lending payable 645 814 20,639 18,653 Securities lending payable 645 814 Other 3,597 3,151 Total 18,653 Securities lending payable 645 814 Other 3,597 3,151 Total current lending payable 645 814 Other 3,597 3,151 Total current liability 37,417 payable 645 814 Other 3,597 3,151 Total current liability 37,417 32,688 3,597 3,151 Total current liability 37,417 32,688 Long-term debt 12,601 10,713 3,151 Total current liability 37,417 32,688 Long-term debt 12,601 10,713 Long-term liability 37,417 32,688 Long-term debt 12,601 10,713 Long-term unearned revenue 1,760 37,417 32,688 Long-term debt 12,601 10,713 Long-term unearned revenue 1,760 1,406 12,601 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 10,713 Long-term unearned revenue 1,760 1,406 Deferred income tax 1,709 1,893 1,760 1,406 Deferred income tax 1,709 1,893 Other long-term liability 10,000 1,406 Deferred income tax 1,709 1,893 Other long-term liability 10,000 8,208 1,709 1,893 Other long-term liability 10,000 8,208 Total liability 63,487 54,908 1,893 Other long-term liability 10,000 8,208 Total liability 63,487 54,908 Commitments liability 10,000 8,208 Total liability 63,487 54,908 Commitments and contingency Stockholders 10,000 8,208 Total liability 63,487 54,908 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,328 and 8,381 share authorized 24,000 ; outstanding 8,328 and 8,381 67,306 65,797 Retained 24,000 ; outstanding 8,328 and 8,381 67,306 65,797 Retained earnings ( ; outstanding 8,328 and 8,381 67,306 65,797 Retained earnings ( deficit outstanding 8,328 and 8,381 67,306 65,797 Retained earnings ( deficit ) Retained earnings ( deficit ) 9,895 ( 856 ) Accumulated other ( deficit ) 9,895 ( 856 ) Accumulated other comprehensive income ) Accumulated other comprehensive income 1,743 1,422 Total stockholder ’ equity Accumulated other comprehensive income 1,743 1,422 Total stockholder ’ equity 78,944 1,422 Total stockholder ’ equity 78,944 66,363 Total liability and stockholder Total stockholder ’ equity 78,944 66,363 Total liability and stockholder ’ and stockholder ’ equity $ 142,431 $ 121,271 See accompanying note ’ equity $ 142,431 $ 121,271 See accompanying note . 51 121,271 See accompanying note . 51 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2013 2012 2011 Operations Year Ended June 30 , 2013 2012 2011 Operations Net income Ended June 30 , 2013 2012 2011 Operations Net income $ June 30 , 2013 2012 2011 Operations Net income $ 21,863 2011 Operations Net income $ 21,863 $ 16,978 $ 23,150 Adjustments Net income $ 21,863 $ 16,978 $ 23,150 Adjustments to reconcile $ 21,863 $ 16,978 $ 23,150 Adjustments to reconcile net income from operation : Goodwill impairment 0 6,193 0 Depreciation , amortization operation : Goodwill impairment 0 6,193 0 Depreciation , amortization , : Goodwill impairment 0 6,193 0 Depreciation , amortization , and , amortization , and other 3,755 2,967 2,766 Stock-based compensation expense amortization , and other 3,755 2,967 2,766 Stock-based compensation expense 2,406 , and other 3,755 2,967 2,766 Stock-based compensation expense 2,406 2,244 2,967 2,766 Stock-based compensation expense 2,406 2,244 2,166 Net recognized loss 2,766 Stock-based compensation expense 2,406 2,244 2,166 Net recognized loss ( Stock-based compensation expense 2,406 2,244 2,166 Net recognized loss ( gain ) on investment and derivative 80 ( 200 ) ( 362 investment and derivative 80 ( 200 ) ( 362 ) Excess 80 ( 200 ) ( 362 ) Excess tax benefit from benefit from stock-based compensation ( 209 ) ( 93 ) ( compensation ( 209 ) ( 93 ) ( 17 ) Deferred ) ( 93 ) ( 17 ) Deferred income tax ( ) Deferred income tax ( 19 ) 954 2 Deferral of income tax ( 19 ) 954 2 Deferral of unearned revenue tax ( 19 ) 954 2 Deferral of unearned revenue 44,253 2 Deferral of unearned revenue 44,253 36,104 31,227 Recognition of unearned Deferral of unearned revenue 44,253 36,104 31,227 Recognition of unearned revenue of unearned revenue 44,253 36,104 31,227 Recognition of unearned revenue ( Recognition of unearned revenue ( 41,921 ) ( 33,347 ) ( revenue ( 41,921 ) ( 33,347 ) ( 28,935 ) Changes ) ( 33,347 ) ( 28,935 ) Changes in operating asset liability : Accounts receivable ( 1,807 ) ( 1,156 ) ( receivable ( 1,807 ) ( 1,156 ) ( 1,451 ) Inventories ) ( 1,156 ) ( 1,451 ) Inventories ( 802 ) ( 1,451 ) Inventories ( 802 ) 184 ( 561 ) ) Inventories ( 802 ) 184 ( 561 ) Other current ( 802 ) 184 ( 561 ) Other current asset ( ) Other current asset ( 129 ) 493 ( 1,259 ) current asset ( 129 ) 493 ( 1,259 ) Other long-term ( 129 ) 493 ( 1,259 ) Other long-term asset ( ) Other long-term asset ( 478 ) ( 248 ) 62 asset ( 478 ) ( 248 ) 62 Accounts payable 537 478 ) ( 248 ) 62 Accounts payable 537 ( 31 248 ) 62 Accounts payable 537 ( 31 ) 58 Other 62 Accounts payable 537 ( 31 ) 58 Other current liability payable 537 ( 31 ) 58 Other current liability 146 410 ) 58 Other current liability 146 410 ( 1,146 ) Other 58 Other current liability 146 410 ( 1,146 ) Other long-term current liability 146 410 ( 1,146 ) Other long-term liability 1,158 1,146 ) Other long-term liability 1,158 174 1,294 Net cash from ) Other long-term liability 1,158 174 1,294 Net cash from operation Other long-term liability 1,158 174 1,294 Net cash from operation 28,833 1,294 Net cash from operation 28,833 31,626 26,994 Financing Short-term debt Net cash from operation 28,833 31,626 26,994 Financing Short-term debt repayment cash from operation 28,833 31,626 26,994 Financing Short-term debt repayment , debt repayment , maturity of 90 day or le , net day or le , net 0 0 ( 186 ) Proceeds or le , net 0 0 ( 186 ) Proceeds from , net 0 0 ( 186 ) Proceeds from issuance of Proceeds from issuance of debt 4,883 0 6,960 Repayments of debt from issuance of debt 4,883 0 6,960 Repayments of debt ( issuance of debt 4,883 0 6,960 Repayments of debt ( 1,346 6,960 Repayments of debt ( 1,346 ) 0 ( 814 ) of debt ( 1,346 ) 0 ( 814 ) Common stock ( 1,346 ) 0 ( 814 ) Common stock issued 931 814 ) Common stock issued 931 1,913 2,422 Common stock repurchased ) Common stock issued 931 1,913 2,422 Common stock repurchased ( Common stock issued 931 1,913 2,422 Common stock repurchased ( 5,360 2,422 Common stock repurchased ( 5,360 ) ( 5,029 ) ( repurchased ( 5,360 ) ( 5,029 ) ( 11,555 ) Common ) ( 5,029 ) ( 11,555 ) Common stock cash dividend stock cash dividend paid ( 7,455 ) ( 6,385 ) ( paid ( 7,455 ) ( 6,385 ) ( 5,180 ) Excess ) ( 6,385 ) ( 5,180 ) Excess tax benefit from tax benefit from stock-based compensation 209 93 17 Other ( 10 benefit from stock-based compensation 209 93 17 Other ( 10 ) from stock-based compensation 209 93 17 Other ( 10 ) 0 209 93 17 Other ( 10 ) 0 ( 40 ) 17 Other ( 10 ) 0 ( 40 ) Net cash ( 10 ) 0 ( 40 ) Net cash used in cash used in financing ( 8,148 ) ( 9,408 ) ( financing ( 8,148 ) ( 9,408 ) ( 8,376 ) Investing ) ( 9,408 ) ( 8,376 ) Investing Additions to property to property and equipment ( 4,257 ) ( 2,305 ) ( equipment ( 4,257 ) ( 2,305 ) ( 2,355 ) Acquisition ) ( 2,305 ) ( 2,355 ) Acquisition of company , intangible and other asset ( 1,584 ) ( 10,112 ) ( asset ( 1,584 ) ( 10,112 ) ( 71 ) Purchases ) ( 10,112 ) ( 71 ) Purchases of investment ( ) Purchases of investment ( 75,396 ) ( 57,250 ) ( investment ( 75,396 ) ( 57,250 ) ( 35,993 ) Maturities ) ( 57,250 ) ( 35,993 ) Maturities of investment 5,130 35,993 ) Maturities of investment 5,130 15,575 6,897 Sales of investment ) Maturities of investment 5,130 15,575 6,897 Sales of investment 52,464 Maturities of investment 5,130 15,575 6,897 Sales of investment 52,464 29,700 15,575 6,897 Sales of investment 52,464 29,700 15,880 Securities lending payable 6,897 Sales of investment 52,464 29,700 15,880 Securities lending payable ( Sales of investment 52,464 29,700 15,880 Securities lending payable ( 168 15,880 Securities lending payable ( 168 ) ( 394 ) 1,026 payable ( 168 ) ( 394 ) 1,026 Net cash used 168 ) ( 394 ) 1,026 Net cash used in investing cash used in investing ( 23,811 ) ( 24,786 ) ( investing ( 23,811 ) ( 24,786 ) ( 14,616 ) Effect ) ( 24,786 ) ( 14,616 ) Effect of exchange rate cash and cash equivalent ( 8 ) ( 104 ) 103 equivalent ( 8 ) ( 104 ) 103 Net change in 8 ) ( 104 ) 103 Net change in cash and cash and cash equivalent ( 3,134 ) ( 2,672 ) 4,105 equivalent ( 3,134 ) ( 2,672 ) 4,105 Cash and cash 3,134 ) ( 2,672 ) 4,105 Cash and cash equivalent , equivalent , beginning of period 6,938 9,610 5,505 Cash and cash , beginning of period 6,938 9,610 5,505 Cash and cash equivalent beginning of period 6,938 9,610 5,505 Cash and cash equivalent , , end of period $ 3,804 $ 6,938 $ 9,610 See of period $ 3,804 $ 6,938 $ 9,610 See accompanying note $ 3,804 $ 6,938 $ 9,610 See accompanying note . 52 9,610 See accompanying note . 52 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2013 2012 2011 Common Year Ended June 30 , 2013 2012 2011 Common stock and Ended June 30 , 2013 2012 2011 Common stock and paid-in June 30 , 2013 2012 2011 Common stock and paid-in capital , beginning of period $ 65,797 $ 63,415 $ 62,856 Common of period $ 65,797 $ 63,415 $ 62,856 Common stock issued $ 65,797 $ 63,415 $ 62,856 Common stock issued 920 1,924 $ 62,856 Common stock issued 920 1,924 2,422 Common stock repurchased 62,856 Common stock issued 920 1,924 2,422 Common stock repurchased ( Common stock issued 920 1,924 2,422 Common stock repurchased ( 2,014 2,422 Common stock repurchased ( 2,014 ) ( 1,714 ) ( repurchased ( 2,014 ) ( 1,714 ) ( 3,738 ) Stock-based ) ( 1,714 ) ( 3,738 ) Stock-based compensation expense 2,406 3,738 ) Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income ) Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income tax Stock-based compensation expense 2,406 2,244 2,166 Stock-based compensation income tax benefit tax benefit ( deficiency ) 190 ( 75 ) ( 292 ( deficiency ) 190 ( 75 ) ( 292 ) Other 190 ( 75 ) ( 292 ) Other , net 7 292 ) Other , net 7 3 1 Balance , end ) Other , net 7 3 1 Balance , end of Other , net 7 3 1 Balance , end of period Balance , end of period 67,306 65,797 63,415 Retained earnings ( , end of period 67,306 65,797 63,415 Retained earnings ( deficit end of period 67,306 65,797 63,415 Retained earnings ( deficit ) , beginning of period ( 856 ) ( 8,195 ) ( period ( 856 ) ( 8,195 ) ( 17,736 ) Net ) ( 8,195 ) ( 17,736 ) Net income 21,863 16,978 ( 17,736 ) Net income 21,863 16,978 23,150 Common stock cash 17,736 ) Net income 21,863 16,978 23,150 Common stock cash dividend ) Net income 21,863 16,978 23,150 Common stock cash dividend ( Common stock cash dividend ( 7,694 ) ( 6,721 ) ( dividend ( 7,694 ) ( 6,721 ) ( 5,394 ) Common ) ( 6,721 ) ( 5,394 ) Common stock repurchased ( ) Common stock repurchased ( 3,418 ) ( 2,918 ) ( repurchased ( 3,418 ) ( 2,918 ) ( 8,215 ) Balance ) ( 2,918 ) ( 8,215 ) Balance , end of Balance , end of period 9,895 ( 856 ) ( 8,195 end of period 9,895 ( 856 ) ( 8,195 ) Accumulated 9,895 ( 856 ) ( 8,195 ) Accumulated other comprehensive income Balance , beginning of period 1,422 1,863 1,055 Other comprehensive income , beginning of period 1,422 1,863 1,055 Other comprehensive income ( beginning of period 1,422 1,863 1,055 Other comprehensive income ( loss comprehensive income ( loss ) 321 ( 441 ) 808 Balance ( loss ) 321 ( 441 ) 808 Balance , end ) 321 ( 441 ) 808 Balance , end of period Balance , end of period 1,743 1,422 1,863 Total stockholder ’ , end of period 1,743 1,422 1,863 Total stockholder ’ equity end of period 1,743 1,422 1,863 Total stockholder ’ equity $ Total stockholder ’ equity $ 78,944 $ 66,363 $ 57,083 See ’ equity $ 78,944 $ 66,363 $ 57,083 See accompanying note $ 78,944 $ 66,363 $ 57,083 See accompanying note . 53 57,083 See accompanying note . 53 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles price set by management . 54 Table of Contents PART II of Contents PART II Item 8 Software update that will be or made available . Windows 8.1 will enable new hardware , the customer issue with Windows 8 , and will be provided will be provided to Windows 8 customer when available at no charge . We evaluated Windows 8.1 and determined that it did to Surface , our Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , game published by u for use on the Xbox 360 platform is recognized when game life of the product . 55 Table of Contents PART II of Contents PART II Item 8 Product Warranty We provide for a period generally ranging from 90 day to three year . . Advertising expense wa $ 2.6 billion , $ 1.6 billion $ 2.6 billion , $ 1.6 billion , and $ 1.9 1.6 billion , and $ 1.9 billion in fiscal year 2013 1.9 billion in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Stock-Based Compensation employee at three-month interval at 90 % of the fair market related asset or liability . 56 Table of Contents PART II of Contents PART II Item 8 Fair Value Measurements We account level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of government bond . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 asset primarily comprise investment in . We value the Level 3 corporate bond using internally developed loss are recorded using the 57 Table of Contents PART II of Contents PART II Item 8 specific identification method . Changes income ( expense ) . 58 Table of Contents PART II of Contents PART II Item 8 Allowance for Doubtful Accounts The million ) Year Ended June 30 , 2013 2012 2011 Balance Year Ended June 30 , 2013 2012 2011 Balance , beginning Ended June 30 , 2013 2012 2011 Balance , beginning of June 30 , 2013 2012 2011 Balance , beginning of period , beginning of period $ 389 $ 333 $ 375 Charged of period $ 389 $ 333 $ 375 Charged to cost $ 389 $ 333 $ 375 Charged to cost and other Charged to cost and other 4 115 14 Write-offs ( 57 to cost and other 4 115 14 Write-offs ( 57 ) cost and other 4 115 14 Write-offs ( 57 ) ( 4 115 14 Write-offs ( 57 ) ( 59 ) ( Write-offs ( 57 ) ( 59 ) ( 56 ) Balance ) ( 59 ) ( 56 ) Balance , end of , end of period $ 336 $ 389 $ 333 Inventories of period $ 336 $ 389 $ 333 Inventories Inventories are $ 336 $ 389 $ 333 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 10 year ; and furniture and an annual basis ( May 1 for u ) and between , ranging from one to 15 year . We evaluate the adopted accounting guidance In September 2011 , the Financial Accounting Standards this new guidance beginning July 1 , 2012 . Adoption of guidance beginning July 1 , 2012 . Adoption of this new on our financial statement . 59 Table of Contents PART II of Contents PART II Item 8 In June 2011 , the II Item 8 In June 2011 , the FASB issued guidance this new guidance beginning July 1 , 2012 . Adoption of guidance beginning July 1 , 2012 . Adoption of this new not yet adopted In December 2011 , the FASB issued guidance net exposure . In January 2013 , the FASB clarified that effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In February 2013 , the FASB issued guidance effective for u beginning July 1 , 2013 . Other than u beginning July 1 , 2013 . Other than requiring additional upon adoption . In March 2013 , the FASB issued guidance effective for u beginning July 1 , 2014 . We do u beginning July 1 , 2014 . We do not anticipate statement upon adoption . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2013 2012 2011 Net Year Ended June 30 , 2013 2012 2011 Net income available Ended June 30 , 2013 2012 2011 Net income available for June 30 , 2013 2012 2011 Net income available for common shareholder ( A ) $ 21,863 $ 16,978 $ 23,150 Weighted A ) $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding $ 21,863 $ 16,978 $ 23,150 Weighted average outstanding share of common stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based ( B ) 8,375 8,396 8,490 Dilutive effect of stock-based award Dilutive effect of stock-based award 95 110 103 Common stock and effect of stock-based award 95 110 103 Common stock and common of stock-based award 95 110 103 Common stock and common stock stock equivalent ( C ) 8,470 8,506 8,593 Earnings Per Share equivalent ( C ) 8,470 8,506 8,593 Earnings Per Share Basic ( C ) 8,470 8,506 8,593 Earnings Per Share Basic ( Basic ( A/B ) $ 2.61 $ 2.02 $ 2.73 Diluted A/B ) $ 2.61 $ 2.02 $ 2.73 Diluted ( A/C $ 2.61 $ 2.02 $ 2.73 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.58 $ 2.00 $ 2.69 Anti-dilutive A/C ) $ 2.58 $ 2.00 $ 2.69 Anti-dilutive stock-based award $ 2.58 $ 2.00 $ 2.69 Anti-dilutive stock-based award excluded from during the period presented . 60 Table of Contents PART II of Contents PART II Item 8 NOTE 3 — OTHER INCOME PART II Item 8 NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2013 2012 2011 Dividends Year Ended June 30 , 2013 2012 2011 Dividends and interest Ended June 30 , 2013 2012 2011 Dividends and interest income June 30 , 2013 2012 2011 Dividends and interest income $ Dividends and interest income $ 677 $ 800 $ 900 Interest interest income $ 677 $ 800 $ 900 Interest expense ( $ 677 $ 800 $ 900 Interest expense ( 429 ) $ 900 Interest expense ( 429 ) ( 380 ) ( expense ( 429 ) ( 380 ) ( 295 ) Net ) ( 380 ) ( 295 ) Net recognized gain on Net recognized gain on investment 116 564 439 Net loss on recognized gain on investment 116 564 439 Net loss on derivative gain on investment 116 564 439 Net loss on derivative ( Net loss on derivative ( 196 ) ( 364 ) ( derivative ( 196 ) ( 364 ) ( 77 ) Net ) ( 364 ) ( 77 ) Net loss on foreign on foreign currency remeasurements ( 74 ) ( 117 ) ( remeasurements ( 74 ) ( 117 ) ( 26 ) Other ) ( 117 ) ( 26 ) Other 194 1 ( ) ( 26 ) Other 194 1 ( 31 ) Total ( 26 ) Other 194 1 ( 31 ) Total $ ) Other 194 1 ( 31 ) Total $ 288 $ ( 31 ) Total $ 288 $ 504 $ 910 Following ) Total $ 288 $ 504 $ 910 Following are detail $ 288 $ 504 $ 910 Following are detail of net million ) Year Ended June 30 , 2013 2012 2011 Other-than-temporary Year Ended June 30 , 2013 2012 2011 Other-than-temporary impairment of Ended June 30 , 2013 2012 2011 Other-than-temporary impairment of investment June 30 , 2013 2012 2011 Other-than-temporary impairment of investment $ impairment of investment $ ( 208 ) $ ( 298 ) ( 208 ) $ ( 298 ) $ ( 80 ) ( 298 ) $ ( 80 ) Realized gain from sale from sale of available-for-sale security 489 1,418 734 Realized loss from sale of available-for-sale security 489 1,418 734 Realized loss from sale of available-for-sale security 489 1,418 734 Realized loss from sale of sale of available-for-sale security ( 165 ) ( 556 ) ( security ( 165 ) ( 556 ) ( 215 ) Total ) ( 556 ) ( 215 ) Total $ 116 $ ( 215 ) Total $ 116 $ 564 $ 439 NOTE ) Total $ 116 $ 564 $ 439 NOTE 4 — $ 116 $ 564 $ 439 NOTE 4 — INVESTMENTS Investment $ 564 $ 439 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2013 Cash $ 1,967 Other Investments June 30 , 2013 Cash $ 1,967 $ 0 30 , 2013 Cash $ 1,967 $ 0 $ 0 $ 2013 Cash $ 1,967 $ 0 $ 0 $ 1,967 $ $ 1,967 $ 0 $ 0 $ 1,967 $ 1,967 $ $ 0 $ 0 $ 1,967 $ 1,967 $ 0 $ $ 0 $ 1,967 $ 1,967 $ 0 $ 0 Mutual $ 1,967 $ 1,967 $ 0 $ 0 Mutual fund 868 $ 1,967 $ 0 $ 0 Mutual fund 868 0 0 0 $ 0 Mutual fund 868 0 0 868 868 0 $ 0 Mutual fund 868 0 0 868 868 0 0 0 Mutual fund 868 0 0 868 868 0 0 Commercial Mutual fund 868 0 0 868 868 0 0 Commercial paper fund 868 0 0 868 868 0 0 Commercial paper 603 868 0 0 868 868 0 0 Commercial paper 603 0 0 0 868 868 0 0 Commercial paper 603 0 0 868 0 0 Commercial paper 603 0 0 603 214 389 0 0 Commercial paper 603 0 0 603 214 389 0 0 Commercial paper 603 0 0 603 214 389 0 Certificates Commercial paper 603 0 0 603 214 389 0 Certificates of paper 603 0 0 603 214 389 0 Certificates of deposit 603 0 0 603 214 389 0 Certificates of deposit 994 0 0 603 214 389 0 Certificates of deposit 994 0 389 0 Certificates of deposit 994 0 0 994 609 385 0 Certificates of deposit 994 0 0 994 609 385 0 Certificates of deposit 994 0 0 994 609 385 0 U.S. of deposit 994 0 0 994 609 385 0 U.S. government deposit 994 0 0 994 609 385 0 U.S. government and 994 0 0 994 609 385 0 U.S. government and agency 0 0 994 609 385 0 U.S. government and agency security U.S. government and agency security 64,934 47 ( 84 ) 64,897 government and agency security 64,934 47 ( 84 ) 64,897 146 agency security 64,934 47 ( 84 ) 64,897 146 64,751 0 64,934 47 ( 84 ) 64,897 146 64,751 0 Foreign government 47 ( 84 ) 64,897 146 64,751 0 Foreign government bond ( 84 ) 64,897 146 64,751 0 Foreign government bond 900 84 ) 64,897 146 64,751 0 Foreign government bond 900 16 64,751 0 Foreign government bond 900 16 ( 41 ) 875 0 Foreign government bond 900 16 ( 41 ) 875 0 government bond 900 16 ( 41 ) 875 0 875 0 900 16 ( 41 ) 875 0 875 0 Mortgage-backed security 16 ( 41 ) 875 0 875 0 Mortgage-backed security 1,258 ( 41 ) 875 0 875 0 Mortgage-backed security 1,258 43 41 ) 875 0 875 0 Mortgage-backed security 1,258 43 ( 0 875 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 875 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 0 1,288 0 1,258 43 ( 13 ) 1,288 0 1,288 0 Corporate note 43 ( 13 ) 1,288 0 1,288 0 Corporate note and ( 13 ) 1,288 0 1,288 0 Corporate note and bond 13 ) 1,288 0 1,288 0 Corporate note and bond 4,993 0 Corporate note and bond 4,993 169 ( 40 ) 5,122 Corporate note and bond 4,993 169 ( 40 ) 5,122 0 and bond 4,993 169 ( 40 ) 5,122 0 5,122 0 4,993 169 ( 40 ) 5,122 0 5,122 0 Municipal security 169 ( 40 ) 5,122 0 5,122 0 Municipal security 350 ( 40 ) 5,122 0 5,122 0 Municipal security 350 36 40 ) 5,122 0 5,122 0 Municipal security 350 36 ( 0 5,122 0 Municipal security 350 36 ( 1 ) 385 5,122 0 Municipal security 350 36 ( 1 ) 385 0 Municipal security 350 36 ( 1 ) 385 0 385 0 350 36 ( 1 ) 385 0 385 0 Common and 36 ( 1 ) 385 0 385 0 Common and preferred ( 1 ) 385 0 385 0 Common and preferred stock 1 ) 385 0 385 0 Common and preferred stock 6,931 0 Common and preferred stock 6,931 2,938 ( 281 ) 9,588 Common and preferred stock 6,931 2,938 ( 281 ) 9,588 0 preferred stock 6,931 2,938 ( 281 ) 9,588 0 0 9,588 6,931 2,938 ( 281 ) 9,588 0 0 9,588 Other investment 2,938 ( 281 ) 9,588 0 0 9,588 Other investment 1,279 ( 281 ) 9,588 0 0 9,588 Other investment 1,279 0 281 ) 9,588 0 0 9,588 Other investment 1,279 0 0 0 0 9,588 Other investment 1,279 0 0 1,279 0 23 0 9,588 Other investment 1,279 0 0 1,279 0 23 1,256 9,588 Other investment 1,279 0 0 1,279 0 23 1,256 Total Other investment 1,279 0 0 1,279 0 23 1,256 Total $ investment 1,279 0 0 1,279 0 23 1,256 Total $ 85,077 1,279 0 0 1,279 0 23 1,256 Total $ 85,077 $ 0 0 1,279 0 23 1,256 Total $ 85,077 $ 3,249 0 23 1,256 Total $ 85,077 $ 3,249 $ ( 460 1,256 Total $ 85,077 $ 3,249 $ ( 460 ) $ 85,077 $ 3,249 $ ( 460 ) $ 87,866 $ 3,804 $ ( 460 ) $ 87,866 $ 3,804 $ 73,218 $ 460 ) $ 87,866 $ 3,804 $ 73,218 $ 10,844 61 $ 87,866 $ 3,804 $ 73,218 $ 10,844 61 Table of $ 3,804 $ 73,218 $ 10,844 61 Table of Contents PART 3,804 $ 73,218 $ 10,844 61 Table of Contents PART II of Contents PART II Item 8 ( In million ) Cost Equity and Other Investments June 30 , 2012 Cash $ 2,019 Other Investments June 30 , 2012 Cash $ 2,019 $ 0 30 , 2012 Cash $ 2,019 $ 0 $ 0 $ 2012 Cash $ 2,019 $ 0 $ 0 $ 2,019 $ $ 2,019 $ 0 $ 0 $ 2,019 $ 2,019 $ $ 0 $ 0 $ 2,019 $ 2,019 $ 0 $ $ 0 $ 2,019 $ 2,019 $ 0 $ 0 Mutual $ 2,019 $ 2,019 $ 0 $ 0 Mutual fund 820 $ 2,019 $ 0 $ 0 Mutual fund 820 0 0 0 $ 0 Mutual fund 820 0 0 820 820 0 $ 0 Mutual fund 820 0 0 820 820 0 0 0 Mutual fund 820 0 0 820 820 0 0 Commercial Mutual fund 820 0 0 820 820 0 0 Commercial paper fund 820 0 0 820 820 0 0 Commercial paper 96 820 0 0 820 820 0 0 Commercial paper 96 0 0 0 820 820 0 0 Commercial paper 96 0 0 820 0 0 Commercial paper 96 0 0 96 96 0 0 0 Commercial paper 96 0 0 96 96 0 0 0 Commercial paper 96 0 0 96 96 0 0 Certificates Commercial paper 96 0 0 96 96 0 0 Certificates of paper 96 0 0 96 96 0 0 Certificates of deposit 96 0 0 96 96 0 0 Certificates of deposit 744 0 0 96 96 0 0 Certificates of deposit 744 0 0 0 Certificates of deposit 744 0 0 744 342 402 0 Certificates of deposit 744 0 0 744 342 402 0 Certificates of deposit 744 0 0 744 342 402 0 U.S. of deposit 744 0 0 744 342 402 0 U.S. government deposit 744 0 0 744 342 402 0 U.S. government and 744 0 0 744 342 402 0 U.S. government and agency 0 0 744 342 402 0 U.S. government and agency security U.S. government and agency security 47,178 130 ( 2 ) 47,306 government and agency security 47,178 130 ( 2 ) 47,306 561 agency security 47,178 130 ( 2 ) 47,306 561 46,745 0 47,178 130 ( 2 ) 47,306 561 46,745 0 Foreign government 130 ( 2 ) 47,306 561 46,745 0 Foreign government bond ( 2 ) 47,306 561 46,745 0 Foreign government bond 1,741 2 ) 47,306 561 46,745 0 Foreign government bond 1,741 18 46,745 0 Foreign government bond 1,741 18 ( 29 ) 1,730 0 Foreign government bond 1,741 18 ( 29 ) 1,730 575 government bond 1,741 18 ( 29 ) 1,730 575 1,155 0 1,741 18 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 18 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 ( 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 82 29 ) 1,730 575 1,155 0 Mortgage-backed security 1,816 82 ( 575 1,155 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 1,155 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 0 Mortgage-backed security 1,816 82 ( 2 ) 1,896 0 1,896 0 1,816 82 ( 2 ) 1,896 0 1,896 0 Corporate note 82 ( 2 ) 1,896 0 1,896 0 Corporate note and ( 2 ) 1,896 0 1,896 0 Corporate note and bond 2 ) 1,896 0 1,896 0 Corporate note and bond 7,799 0 Corporate note and bond 7,799 224 ( 15 ) 8,008 Corporate note and bond 7,799 224 ( 15 ) 8,008 2,525 and bond 7,799 224 ( 15 ) 8,008 2,525 5,483 0 7,799 224 ( 15 ) 8,008 2,525 5,483 0 Municipal security 224 ( 15 ) 8,008 2,525 5,483 0 Municipal security 358 ( 15 ) 8,008 2,525 5,483 0 Municipal security 358 58 15 ) 8,008 2,525 5,483 0 Municipal security 358 58 ( 2,525 5,483 0 Municipal security 358 58 ( 0 ) 416 5,483 0 Municipal security 358 58 ( 0 ) 416 0 Municipal security 358 58 ( 0 ) 416 0 416 0 358 58 ( 0 ) 416 0 416 0 Common and 58 ( 0 ) 416 0 416 0 Common and preferred ( 0 ) 416 0 416 0 Common and preferred stock 0 ) 416 0 416 0 Common and preferred stock 6,965 0 Common and preferred stock 6,965 2,204 ( 436 ) 8,733 Common and preferred stock 6,965 2,204 ( 436 ) 8,733 0 preferred stock 6,965 2,204 ( 436 ) 8,733 0 0 8,733 6,965 2,204 ( 436 ) 8,733 0 0 8,733 Other investment 2,204 ( 436 ) 8,733 0 0 8,733 Other investment 1,048 ( 436 ) 8,733 0 0 8,733 Other investment 1,048 0 436 ) 8,733 0 0 8,733 Other investment 1,048 0 0 0 0 8,733 Other investment 1,048 0 0 1,048 0 5 0 8,733 Other investment 1,048 0 0 1,048 0 5 1,043 8,733 Other investment 1,048 0 0 1,048 0 5 1,043 Total Other investment 1,048 0 0 1,048 0 5 1,043 Total $ investment 1,048 0 0 1,048 0 5 1,043 Total $ 70,584 1,048 0 0 1,048 0 5 1,043 Total $ 70,584 $ 0 0 1,048 0 5 1,043 Total $ 70,584 $ 2,716 0 5 1,043 Total $ 70,584 $ 2,716 $ ( 484 1,043 Total $ 70,584 $ 2,716 $ ( 484 ) $ 70,584 $ 2,716 $ ( 484 ) $ 72,816 $ 6,938 $ ( 484 ) $ 72,816 $ 6,938 $ 56,102 $ 484 ) $ 72,816 $ 6,938 $ 56,102 $ 9,776 Unrealized $ 72,816 $ 6,938 $ 56,102 $ 9,776 Unrealized Losses on $ 6,938 $ 56,102 $ 9,776 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2013 U.S. government and Fair Value June 30 , 2013 U.S. government and agency security government and agency security $ 2,208 $ ( 84 ) $ security $ 2,208 $ ( 84 ) $ 0 $ 0 $ ( 84 ) $ 0 $ 0 $ 2,208 $ 84 ) $ 0 $ 0 $ 2,208 $ ( 84 $ 0 $ 0 $ 2,208 $ ( 84 ) Foreign 0 $ 2,208 $ ( 84 ) Foreign government bond 589 84 ) Foreign government bond 589 ( 18 ) 69 ( Foreign government bond 589 ( 18 ) 69 ( 23 ) bond 589 ( 18 ) 69 ( 23 ) 658 ( ( 18 ) 69 ( 23 ) 658 ( 41 ) ) 69 ( 23 ) 658 ( 41 ) Mortgage-backed security ( 23 ) 658 ( 41 ) Mortgage-backed security 357 ( ( 41 ) Mortgage-backed security 357 ( 12 ) 39 ( ) Mortgage-backed security 357 ( 12 ) 39 ( 1 ) security 357 ( 12 ) 39 ( 1 ) 396 ( ( 12 ) 39 ( 1 ) 396 ( 13 ) ) 39 ( 1 ) 396 ( 13 ) Corporate note ( 1 ) 396 ( 13 ) Corporate note and bond ) Corporate note and bond 1,142 ( 38 ) 27 ( note and bond 1,142 ( 38 ) 27 ( 2 ) bond 1,142 ( 38 ) 27 ( 2 ) 1,169 ( ( 38 ) 27 ( 2 ) 1,169 ( 40 ) ) 27 ( 2 ) 1,169 ( 40 ) Municipal security ( 2 ) 1,169 ( 40 ) Municipal security 44 ( ( 40 ) Municipal security 44 ( 1 ) 0 0 ) Municipal security 44 ( 1 ) 0 0 44 ( security 44 ( 1 ) 0 0 44 ( 1 ) 44 ( 1 ) 0 0 44 ( 1 ) Common ( 1 ) 0 0 44 ( 1 ) Common and ) 0 0 44 ( 1 ) Common and preferred stock ) Common and preferred stock 1,166 ( 168 ) 409 ( and preferred stock 1,166 ( 168 ) 409 ( 113 ) stock 1,166 ( 168 ) 409 ( 113 ) 1,575 ( ( 168 ) 409 ( 113 ) 1,575 ( 281 ) ) 409 ( 113 ) 1,575 ( 281 ) Total $ ( 113 ) 1,575 ( 281 ) Total $ 5,506 $ ( 281 ) Total $ 5,506 $ ( 321 ) $ Total $ 5,506 $ ( 321 ) $ 544 $ ( $ ( 321 ) $ 544 $ ( 139 ) $ ) $ 544 $ ( 139 ) $ 6,050 $ ( $ ( 139 ) $ 6,050 $ ( 460 ) Less ) $ 6,050 $ ( 460 ) Less than 12 Months ( 460 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2012 U.S. government and Fair Value June 30 , 2012 U.S. government and agency security government and agency security $ 44 $ ( 2 ) $ security $ 44 $ ( 2 ) $ 0 $ 0 $ ( 2 ) $ 0 $ 0 $ 44 $ 2 ) $ 0 $ 0 $ 44 $ ( 2 $ 0 $ 0 $ 44 $ ( 2 ) Foreign 0 $ 44 $ ( 2 ) Foreign government bond 657 2 ) Foreign government bond 657 ( 27 ) 12 ( Foreign government bond 657 ( 27 ) 12 ( 2 ) bond 657 ( 27 ) 12 ( 2 ) 669 ( ( 27 ) 12 ( 2 ) 669 ( 29 ) ) 12 ( 2 ) 669 ( 29 ) Mortgage-backed security ( 2 ) 669 ( 29 ) Mortgage-backed security 53 0 ( 29 ) Mortgage-backed security 53 0 48 ( 2 ) 29 ) Mortgage-backed security 53 0 48 ( 2 ) 101 ) Mortgage-backed security 53 0 48 ( 2 ) 101 ( security 53 0 48 ( 2 ) 101 ( 2 ) 0 48 ( 2 ) 101 ( 2 ) Corporate note ( 2 ) 101 ( 2 ) Corporate note and bond ) Corporate note and bond 640 ( 11 ) 70 ( note and bond 640 ( 11 ) 70 ( 4 ) bond 640 ( 11 ) 70 ( 4 ) 710 ( ( 11 ) 70 ( 4 ) 710 ( 15 ) ) 70 ( 4 ) 710 ( 15 ) Common and ( 4 ) 710 ( 15 ) Common and preferred stock ) Common and preferred stock 2,135 ( 329 ) 305 ( and preferred stock 2,135 ( 329 ) 305 ( 107 ) stock 2,135 ( 329 ) 305 ( 107 ) 2,440 ( ( 329 ) 305 ( 107 ) 2,440 ( 436 ) ) 305 ( 107 ) 2,440 ( 436 ) Total $ ( 107 ) 2,440 ( 436 ) Total $ 3,529 $ ( 436 ) Total $ 3,529 $ ( 369 ) $ Total $ 3,529 $ ( 369 ) $ 435 $ ( $ ( 369 ) $ 435 $ ( 115 ) $ ) $ 435 $ ( 115 ) $ 3,964 $ ( $ ( 115 ) $ 3,964 $ ( 484 ) Unrealized ) $ 3,964 $ ( 484 ) Unrealized loss from fixed-income available evidence a of June 30 , 2013 . 62 Table a of June 30 , 2013 . 62 Table of Contents June 30 , 2013 . 62 Table of Contents PART II of Contents PART II Item 8 At June 30 , 2013 II Item 8 At June 30 , 2013 and 2012 , 8 At June 30 , 2013 and 2012 , the recorded June 30 , 2013 and 2012 , the recorded base of not publicly traded were $ 395 million and $ 313 million $ 395 million and $ 313 million , respectively . These Basis Estimated Fair Value June 30 , 2013 Due in one Fair Value June 30 , 2013 Due in one year or one year or le $ 26,386 $ 26,412 Due after one or le $ 26,386 $ 26,412 Due after one year through one year through five year 42,343 42,400 Due after five year year through five year 42,343 42,400 Due after five year through Due after five year through 10 year 3,293 3,303 Due after five year through 10 year 3,293 3,303 Due after 10 year year through 10 year 3,293 3,303 Due after 10 year 2,010 year 3,293 3,303 Due after 10 year 2,010 2,049 Total $ 3,303 Due after 10 year 2,010 2,049 Total $ 74,032 $ Due after 10 year 2,010 2,049 Total $ 74,032 $ 74,164 year 2,010 2,049 Total $ 74,032 $ 74,164 NOTE 5 — 2,049 Total $ 74,032 $ 74,164 NOTE 5 — DERIVATIVES We $ 74,032 $ 74,164 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2013 and June 30 As of June 30 , 2013 and June 30 , 2012 30 , 2013 and June 30 , 2012 , the total 2013 and June 30 , 2012 , the total notional amount exchange contract sold were $ 5.1 billion and $ 6.7 billion $ 5.1 billion and $ 6.7 billion , respectively . Foreign instrument . As of June 30 , 2013 and June 30 As of June 30 , 2013 and June 30 , 2012 30 , 2013 and June 30 , 2012 , the total 2013 and June 30 , 2012 , the total notional amount exchange contract sold were $ 407 million and $ 1.3 billion $ 407 million and $ 1.3 billion , respectively . Certain exposure . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 5.0 billion and $ 7.9 billion $ 5.0 billion and $ 7.9 billion , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 3.6 billion and $ 7.3 billion $ 3.6 billion and $ 7.3 billion , respectively . Equity forward . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount designated and non-designated equity contract 63 Table of Contents PART II of Contents PART II Item 8 purchased and sold were $ purchased and sold were $ 898 million and $ 1.0 billion $ 898 million and $ 1.0 billion , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.4 billion and $ 982 million $ 1.4 billion and $ 982 million , respectively . Interest instrument . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 1.1 billion and $ 809 million $ 1.1 billion and $ 809 million , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 3.2 billion and $ 1.9 billion $ 3.2 billion and $ 1.9 billion , respectively . In date . As of June 30 , 2013 and 2012 , As of June 30 , 2013 and 2012 , the total June 30 , 2013 and 2012 , the total notional derivative mortgage contract purchased were $ 1.2 billion and $ 1.1 billion $ 1.2 billion and $ 1.1 billion , respectively . Credit risk . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 377 million and $ 501 million $ 377 million and $ 501 million , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 318 million and $ 456 million $ 318 million and $ 456 million , respectively . Commodity grain . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 1.2 billion and $ 249 million $ 1.2 billion and $ 249 million , respectively . As respectively . As of June 30 , 2012 , the total As of June 30 , 2012 , the total notional amount purchased and sold were $ 1.5 billion and $ 445 million $ 1.5 billion and $ 445 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2013 , our long-term As of June 30 , 2013 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 64 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments Commodity Contracts Total Derivatives June 30 , 2013 Assets Non-designated hedge Total Derivatives June 30 , 2013 Assets Non-designated hedge derivative : derivative : Short-term investment $ 41 $ 157 $ 18 $ Short-term investment $ 41 $ 157 $ 18 $ 19 $ $ 41 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 238 Other $ 18 $ 19 $ 3 $ 238 Other current asset $ 19 $ 3 $ 238 Other current asset 87 0 $ 238 Other current asset 87 0 0 0 0 87 238 Other current asset 87 0 0 0 0 87 Total Other current asset 87 0 0 0 0 87 Total $ current asset 87 0 0 0 0 87 Total $ 128 asset 87 0 0 0 0 87 Total $ 128 $ 87 0 0 0 0 87 Total $ 128 $ 157 0 0 87 Total $ 128 $ 157 $ 18 $ 87 Total $ 128 $ 157 $ 18 $ 19 $ $ 128 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 325 Designated $ 18 $ 19 $ 3 $ 325 Designated hedge derivative $ 19 $ 3 $ 325 Designated hedge derivative : Short-term derivative : Short-term investment $ 9 $ 0 $ 0 $ Short-term investment $ 9 $ 0 $ 0 $ 0 $ $ 9 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 9 Other $ 0 $ 0 $ 0 $ 9 Other current asset $ 0 $ 0 $ 9 Other current asset 167 0 $ 9 Other current asset 167 0 0 0 0 167 9 Other current asset 167 0 0 0 0 167 Total Other current asset 167 0 0 0 0 167 Total $ current asset 167 0 0 0 0 167 Total $ 176 asset 167 0 0 0 0 167 Total $ 176 $ 167 0 0 0 0 167 Total $ 176 $ 0 0 0 167 Total $ 176 $ 0 $ 0 $ 167 Total $ 176 $ 0 $ 0 $ 0 $ $ 176 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 176 Total $ 0 $ 0 $ 0 $ 176 Total asset $ $ 0 $ 0 $ 176 Total asset $ 304 $ $ 176 Total asset $ 304 $ 157 $ 18 $ Total asset $ 304 $ 157 $ 18 $ 19 $ $ 304 $ 157 $ 18 $ 19 $ 3 $ $ 157 $ 18 $ 19 $ 3 $ 501 Liabilities $ 18 $ 19 $ 3 $ 501 Liabilities Non-designated hedge $ 19 $ 3 $ 501 Liabilities Non-designated hedge derivative : Other current liability $ ( 63 ) $ ( 9 ) ( 63 ) $ ( 9 ) $ ( 45 ) ( 9 ) $ ( 45 ) $ ( 17 ) ( 45 ) $ ( 17 ) $ ( 1 ) ( 17 ) $ ( 1 ) $ ( 135 ) ( 1 ) $ ( 135 ) Designated hedge derivative : : Other current liability $ 0 $ 0 $ 0 $ current liability $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 0 Total $ 0 $ 0 $ 0 $ 0 Total liability $ $ 0 $ 0 $ 0 Total liability $ ( 63 0 Total liability $ ( 63 ) $ ( 9 ) ( 63 ) $ ( 9 ) $ ( 45 ) ( 9 ) $ ( 45 ) $ ( 17 ) ( 45 ) $ ( 17 ) $ ( 1 ) ( 17 ) $ ( 1 ) $ ( 135 ) ( 1 ) $ ( 135 ) ( In million ) Commodity Contracts Total Derivatives June 30 , 2012 Assets Non-designated hedge Total Derivatives June 30 , 2012 Assets Non-designated hedge derivative : derivative : Short-term investment $ 14 $ 162 $ 10 $ Short-term investment $ 14 $ 162 $ 10 $ 26 $ $ 14 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 215 Other $ 10 $ 26 $ 3 $ 215 Other current asset $ 26 $ 3 $ 215 Other current asset 85 0 $ 215 Other current asset 85 0 0 0 0 85 215 Other current asset 85 0 0 0 0 85 Total Other current asset 85 0 0 0 0 85 Total $ current asset 85 0 0 0 0 85 Total $ 99 asset 85 0 0 0 0 85 Total $ 99 $ 85 0 0 0 0 85 Total $ 99 $ 162 0 0 85 Total $ 99 $ 162 $ 10 $ 85 Total $ 99 $ 162 $ 10 $ 26 $ $ 99 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 300 Designated $ 10 $ 26 $ 3 $ 300 Designated hedge derivative $ 26 $ 3 $ 300 Designated hedge derivative : Short-term derivative : Short-term investment $ 6 $ 0 $ 0 $ Short-term investment $ 6 $ 0 $ 0 $ 0 $ $ 6 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 6 Other $ 0 $ 0 $ 0 $ 6 Other current asset $ 0 $ 0 $ 6 Other current asset 177 0 $ 6 Other current asset 177 0 0 0 0 177 6 Other current asset 177 0 0 0 0 177 Total Other current asset 177 0 0 0 0 177 Total $ current asset 177 0 0 0 0 177 Total $ 183 asset 177 0 0 0 0 177 Total $ 183 $ 177 0 0 0 0 177 Total $ 183 $ 0 0 0 177 Total $ 183 $ 0 $ 0 $ 177 Total $ 183 $ 0 $ 0 $ 0 $ $ 183 $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ 183 Total $ 0 $ 0 $ 0 $ 183 Total asset $ $ 0 $ 0 $ 183 Total asset $ 282 $ $ 183 Total asset $ 282 $ 162 $ 10 $ Total asset $ 282 $ 162 $ 10 $ 26 $ $ 282 $ 162 $ 10 $ 26 $ 3 $ $ 162 $ 10 $ 26 $ 3 $ 483 Liabilities $ 10 $ 26 $ 3 $ 483 Liabilities Non-designated hedge $ 26 $ 3 $ 483 Liabilities Non-designated hedge derivative : Other current liability $ ( 84 ) $ ( 19 ) ( 84 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 141 ) Designated ) $ 0 $ ( 141 ) Designated hedge derivative : Other current liability $ ( 14 ) $ 0 $ 0 $ ( 14 ) $ 0 $ 0 $ 0 $ 14 ) $ 0 $ 0 $ 0 $ 0 $ $ 0 $ 0 $ 0 $ 0 $ ( 14 $ 0 $ 0 $ 0 $ ( 14 ) Total 0 $ 0 $ ( 14 ) Total liability $ ( ) Total liability $ ( 98 ) $ ( 19 ) ( 98 ) $ ( 19 ) $ ( 17 ) ( 19 ) $ ( 17 ) $ ( 21 ) ( 17 ) $ ( 21 ) $ 0 $ ( $ ( 21 ) $ 0 $ ( 155 ) See ) $ 0 $ ( 155 ) See also Note 4 155 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 65 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2013 2012 2011 Foreign Year Ended June 30 , 2013 2012 2011 Foreign Exchange Contracts Ended June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives June 30 , 2013 2012 2011 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 70 $ 52 $ ( 92 Contracts Derivatives $ 70 $ 52 $ ( 92 ) Hedged 70 $ 52 $ ( 92 ) Hedged item ( 69 92 ) Hedged item ( 69 ) ( 50 ) 85 item ( 69 ) ( 50 ) 85 Total $ 1 69 ) ( 50 ) 85 Total $ 1 $ 2 50 ) 85 Total $ 1 $ 2 $ ( 7 85 Total $ 1 $ 2 $ ( 7 ) Cash 1 $ 2 $ ( 7 ) Cash Flow Hedge Gains million ) Year Ended June 30 , 2013 2012 2011 Effective Year Ended June 30 , 2013 2012 2011 Effective Portion Gains Ended June 30 , 2013 2012 2011 Effective Portion Gains ( June 30 , 2013 2012 2011 Effective Portion Gains ( loss of tax effect of $ 54 , $ 127 and $ of $ 54 , $ 127 and $ ( 340 ) $ 127 and $ ( 340 ) $ 101 $ 236 $ ( 340 ) $ 101 $ 236 $ ( 632 340 ) $ 101 $ 236 $ ( 632 ) Gains 101 $ 236 $ ( 632 ) Gains ( loss ) from AOCI into revenue $ 195 $ ( 27 ) $ revenue $ 195 $ ( 27 ) $ ( 7 ) ( 27 ) $ ( 7 ) Amount Excluded from Effectiveness ( expense ) $ ( 168 ) $ ( 231 ) ( 168 ) $ ( 231 ) $ ( 276 ) ( 231 ) $ ( 276 ) We estimate that $ ) We estimate that $ 95 million of net derivative gain included in AOCI at June 30 , 2013 will be reclassified AOCI at June 30 , 2013 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2013 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2013 2012 2011 Foreign Year Ended June 30 , 2013 2012 2011 Foreign exchange contract Ended June 30 , 2013 2012 2011 Foreign exchange contract $ June 30 , 2013 2012 2011 Foreign exchange contract $ 18 2011 Foreign exchange contract $ 18 $ ( 119 ) $ contract $ 18 $ ( 119 ) $ ( 27 ) ( 119 ) $ ( 27 ) Equity contract 16 ( ( 27 ) Equity contract 16 ( 85 ) 35 Interest-rate ) Equity contract 16 ( 85 ) 35 Interest-rate contract ( contract 16 ( 85 ) 35 Interest-rate contract ( 11 ) ) 35 Interest-rate contract ( 11 ) 93 19 Credit contract Interest-rate contract ( 11 ) 93 19 Credit contract ( 3 contract ( 11 ) 93 19 Credit contract ( 3 ) 93 19 Credit contract ( 3 ) ( 7 ) 24 contract ( 3 ) ( 7 ) 24 Commodity contract ( 3 ) ( 7 ) 24 Commodity contract ( 42 ) ) 24 Commodity contract ( 42 ) ( 121 ) 148 contract ( 42 ) ( 121 ) 148 Total $ ( 42 ) ( 121 ) 148 Total $ ( 22 ) ) 148 Total $ ( 22 ) $ ( 239 ) ( 22 ) $ ( 239 ) $ 199 66 Table $ ( 239 ) $ 199 66 Table of Contents PART ( 239 ) $ 199 66 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2013 Assets Mutual fund Fair Value June 30 , 2013 Assets Mutual fund $ 868 2013 Assets Mutual fund $ 868 $ 0 $ 0 $ Mutual fund $ 868 $ 0 $ 0 $ 868 $ $ 868 $ 0 $ 0 $ 868 $ 0 $ $ 0 $ 0 $ 868 $ 0 $ 868 Commercial $ 0 $ 868 $ 0 $ 868 Commercial paper 0 $ 868 $ 0 $ 868 Commercial paper 0 603 0 0 $ 868 Commercial paper 0 603 0 603 0 603 $ 868 Commercial paper 0 603 0 603 0 603 Certificates 868 Commercial paper 0 603 0 603 0 603 Certificates of Commercial paper 0 603 0 603 0 603 Certificates of deposit paper 0 603 0 603 0 603 Certificates of deposit 0 0 603 0 603 0 603 Certificates of deposit 0 994 0 603 Certificates of deposit 0 994 0 994 0 994 603 Certificates of deposit 0 994 0 994 0 994 U.S. Certificates of deposit 0 994 0 994 0 994 U.S. government of deposit 0 994 0 994 0 994 U.S. government and deposit 0 994 0 994 0 994 U.S. government and agency 0 994 0 994 0 994 U.S. government and agency security U.S. government and agency security 62,237 2,664 0 64,901 0 64,901 government and agency security 62,237 2,664 0 64,901 0 64,901 Foreign and agency security 62,237 2,664 0 64,901 0 64,901 Foreign government agency security 62,237 2,664 0 64,901 0 64,901 Foreign government bond security 62,237 2,664 0 64,901 0 64,901 Foreign government bond 9 62,237 2,664 0 64,901 0 64,901 Foreign government bond 9 851 0 64,901 Foreign government bond 9 851 0 860 0 860 64,901 Foreign government bond 9 851 0 860 0 860 Mortgage-backed Foreign government bond 9 851 0 860 0 860 Mortgage-backed security government bond 9 851 0 860 0 860 Mortgage-backed security 0 bond 9 851 0 860 0 860 Mortgage-backed security 0 1,311 9 851 0 860 0 860 Mortgage-backed security 0 1,311 0 860 0 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 0 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate note Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate note and security 0 1,311 0 1,311 0 1,311 Corporate note and bond 0 1,311 0 1,311 0 1,311 Corporate note and bond 0 1,311 Corporate note and bond 0 4,915 19 4,934 0 4,934 Corporate note and bond 0 4,915 19 4,934 0 4,934 Municipal note and bond 0 4,915 19 4,934 0 4,934 Municipal security and bond 0 4,915 19 4,934 0 4,934 Municipal security 0 bond 0 4,915 19 4,934 0 4,934 Municipal security 0 385 0 4,915 19 4,934 0 4,934 Municipal security 0 385 0 4,934 0 4,934 Municipal security 0 385 0 385 0 385 0 4,934 Municipal security 0 385 0 385 0 385 Common 4,934 Municipal security 0 385 0 385 0 385 Common and Municipal security 0 385 0 385 0 385 Common and preferred security 0 385 0 385 0 385 Common and preferred stock 0 385 0 385 0 385 Common and preferred stock 8,470 385 Common and preferred stock 8,470 717 5 9,192 0 9,192 Common and preferred stock 8,470 717 5 9,192 0 9,192 Derivatives and preferred stock 8,470 717 5 9,192 0 9,192 Derivatives 12 preferred stock 8,470 717 5 9,192 0 9,192 Derivatives 12 489 stock 8,470 717 5 9,192 0 9,192 Derivatives 12 489 0 8,470 717 5 9,192 0 9,192 Derivatives 12 489 0 501 5 9,192 0 9,192 Derivatives 12 489 0 501 ( 81 9,192 0 9,192 Derivatives 12 489 0 501 ( 81 ) 0 9,192 Derivatives 12 489 0 501 ( 81 ) 420 9,192 Derivatives 12 489 0 501 ( 81 ) 420 Total 12 489 0 501 ( 81 ) 420 Total $ 71,596 0 501 ( 81 ) 420 Total $ 71,596 $ 12,929 81 ) 420 Total $ 71,596 $ 12,929 $ 24 $ 420 Total $ 71,596 $ 12,929 $ 24 $ 84,549 $ $ 71,596 $ 12,929 $ 24 $ 84,549 $ ( 81 $ 12,929 $ 24 $ 84,549 $ ( 81 ) $ 24 $ 84,549 $ ( 81 ) $ 84,468 Liabilities Derivatives $ ( 81 ) $ 84,468 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 14 $ 121 $ 0 $ and other $ 14 $ 121 $ 0 $ 135 $ $ 14 $ 121 $ 0 $ 135 $ ( 80 $ 121 $ 0 $ 135 $ ( 80 ) $ 0 $ 135 $ ( 80 ) $ 55 ( In $ ( 80 ) $ 55 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2012 Assets Mutual fund Fair Value June 30 , 2012 Assets Mutual fund $ 820 2012 Assets Mutual fund $ 820 $ 0 $ 0 $ Mutual fund $ 820 $ 0 $ 0 $ 820 $ $ 820 $ 0 $ 0 $ 820 $ 0 $ $ 0 $ 0 $ 820 $ 0 $ 820 Commercial $ 0 $ 820 $ 0 $ 820 Commercial paper 0 $ 820 $ 0 $ 820 Commercial paper 0 96 0 0 $ 820 Commercial paper 0 96 0 96 0 96 $ 820 Commercial paper 0 96 0 96 0 96 Certificates 820 Commercial paper 0 96 0 96 0 96 Certificates of Commercial paper 0 96 0 96 0 96 Certificates of deposit paper 0 96 0 96 0 96 Certificates of deposit 0 0 96 0 96 0 96 Certificates of deposit 0 744 0 96 Certificates of deposit 0 744 0 744 0 744 96 Certificates of deposit 0 744 0 744 0 744 U.S. Certificates of deposit 0 744 0 744 0 744 U.S. government of deposit 0 744 0 744 0 744 U.S. government and deposit 0 744 0 744 0 744 U.S. government and agency 0 744 0 744 0 744 U.S. government and agency security U.S. government and agency security 42,291 5,019 0 47,310 0 47,310 government and agency security 42,291 5,019 0 47,310 0 47,310 Foreign and agency security 42,291 5,019 0 47,310 0 47,310 Foreign government agency security 42,291 5,019 0 47,310 0 47,310 Foreign government bond security 42,291 5,019 0 47,310 0 47,310 Foreign government bond 31 42,291 5,019 0 47,310 0 47,310 Foreign government bond 31 1,703 0 47,310 Foreign government bond 31 1,703 0 1,734 0 1,734 47,310 Foreign government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed Foreign government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security government bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 bond 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 1,892 31 1,703 0 1,734 0 1,734 Mortgage-backed security 0 1,892 0 1,734 0 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 0 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate 1,734 Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate note Mortgage-backed security 0 1,892 0 1,892 0 1,892 Corporate note and security 0 1,892 0 1,892 0 1,892 Corporate note and bond 0 1,892 0 1,892 0 1,892 Corporate note and bond 0 1,892 Corporate note and bond 0 7,839 9 7,848 0 7,848 Corporate note and bond 0 7,839 9 7,848 0 7,848 Municipal note and bond 0 7,839 9 7,848 0 7,848 Municipal security and bond 0 7,839 9 7,848 0 7,848 Municipal security 0 bond 0 7,839 9 7,848 0 7,848 Municipal security 0 416 0 7,839 9 7,848 0 7,848 Municipal security 0 416 0 7,848 0 7,848 Municipal security 0 416 0 416 0 416 0 7,848 Municipal security 0 416 0 416 0 416 Common 7,848 Municipal security 0 416 0 416 0 416 Common and Municipal security 0 416 0 416 0 416 Common and preferred security 0 416 0 416 0 416 Common and preferred stock 0 416 0 416 0 416 Common and preferred stock 7,539 416 Common and preferred stock 7,539 877 5 8,421 0 8,421 Common and preferred stock 7,539 877 5 8,421 0 8,421 Derivatives and preferred stock 7,539 877 5 8,421 0 8,421 Derivatives 16 preferred stock 7,539 877 5 8,421 0 8,421 Derivatives 16 467 stock 7,539 877 5 8,421 0 8,421 Derivatives 16 467 0 7,539 877 5 8,421 0 8,421 Derivatives 16 467 0 483 5 8,421 0 8,421 Derivatives 16 467 0 483 ( 141 8,421 0 8,421 Derivatives 16 467 0 483 ( 141 ) 0 8,421 Derivatives 16 467 0 483 ( 141 ) 342 8,421 Derivatives 16 467 0 483 ( 141 ) 342 Total 16 467 0 483 ( 141 ) 342 Total $ 50,697 0 483 ( 141 ) 342 Total $ 50,697 $ 19,053 141 ) 342 Total $ 50,697 $ 19,053 $ 14 $ 342 Total $ 50,697 $ 19,053 $ 14 $ 69,764 $ $ 50,697 $ 19,053 $ 14 $ 69,764 $ ( 141 $ 19,053 $ 14 $ 69,764 $ ( 141 ) $ 14 $ 69,764 $ ( 141 ) $ 69,623 Liabilities Derivatives $ ( 141 ) $ 69,623 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 10 $ 145 $ 0 $ and other $ 10 $ 145 $ 0 $ 155 $ $ 10 $ 145 $ 0 $ 155 $ ( 139 $ 145 $ 0 $ 155 $ ( 139 ) $ 0 $ 155 $ ( 139 ) $ 16 ( a $ ( 139 ) $ 16 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 67 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2013 2012 Net fair million ) June 30 , 2013 2012 Net fair value of ) June 30 , 2013 2012 Net fair value of asset on a recurring basis $ 84,468 $ 69,623 Cash 1,967 2,019 recurring basis $ 84,468 $ 69,623 Cash 1,967 2,019 Common and $ 84,468 $ 69,623 Cash 1,967 2,019 Common and preferred stock 84,468 $ 69,623 Cash 1,967 2,019 Common and preferred stock measured value on a nonrecurring basis 395 313 Other investment measured at on a nonrecurring basis 395 313 Other investment measured at fair value on a nonrecurring basis 1,256 1,043 Less derivative net asset on a nonrecurring basis 1,256 1,043 Less derivative net asset classified a other current asset ( 213 ) ( 185 ) Other asset ( 213 ) ( 185 ) Other ( 7 ) ( 185 ) Other ( 7 ) 3 Recorded basis of ) Other ( 7 ) 3 Recorded basis of investment component basis of investment component $ 87,866 $ 72,816 Financial Assets and investment component $ 87,866 $ 72,816 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2013 and 2012 , we did During fiscal year 2013 and 2012 , we did not record a nonrecurring basis . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2013 2012 Raw material million ) June 30 , 2013 2012 Raw material $ 328 ) June 30 , 2013 2012 Raw material $ 328 $ 2013 2012 Raw material $ 328 $ 210 Work in process Raw material $ 328 $ 210 Work in process 201 96 $ 210 Work in process 201 96 Finished good 1,409 831 210 Work in process 201 96 Finished good 1,409 831 Total process 201 96 Finished good 1,409 831 Total $ 1,938 $ 201 96 Finished good 1,409 831 Total $ 1,938 $ 1,137 good 1,409 831 Total $ 1,938 $ 1,137 NOTE 8 — 831 Total $ 1,938 $ 1,137 NOTE 8 — PROPERTY AND $ 1,938 $ 1,137 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2013 2012 Land $ million ) June 30 , 2013 2012 Land $ 525 $ ) June 30 , 2013 2012 Land $ 525 $ 528 , 2013 2012 Land $ 525 $ 528 Buildings and improvement 2012 Land $ 525 $ 528 Buildings and improvement 7,326 6,768 $ 528 Buildings and improvement 7,326 6,768 Leasehold improvement 2,946 2,550 528 Buildings and improvement 7,326 6,768 Leasehold improvement 2,946 2,550 Computer improvement 7,326 6,768 Leasehold improvement 2,946 2,550 Computer equipment and software 7,326 6,768 Leasehold improvement 2,946 2,550 Computer equipment and software 9,242 2,550 Computer equipment and software 9,242 7,298 Furniture and equipment 2,465 Computer equipment and software 9,242 7,298 Furniture and equipment 2,465 2,087 9,242 7,298 Furniture and equipment 2,465 2,087 Total , at cost 7,298 Furniture and equipment 2,465 2,087 Total , at cost 22,504 2,087 Total , at cost 22,504 19,231 Accumulated depreciation ( 12,513 Total , at cost 22,504 19,231 Accumulated depreciation ( 12,513 ) 22,504 19,231 Accumulated depreciation ( 12,513 ) ( 10,962 ) Total depreciation ( 12,513 ) ( 10,962 ) Total , net $ ) Total , net $ 9,991 $ 8,269 During fiscal year , net $ 9,991 $ 8,269 During fiscal year 2013 , $ 8,269 During fiscal year 2013 , 2012 , and 2011 During fiscal year 2013 , 2012 , and 2011 , depreciation 2013 , 2012 , and 2011 , depreciation expense wa $ , depreciation expense wa $ 2.6 billion , $ 2.2 billion $ 2.6 billion , $ 2.2 billion , and $ 2.0 2.2 billion , and $ 2.0 billion , respectively . 68 2.0 billion , respectively . 68 Table of Contents PART II of Contents PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS Yammer On BUSINESS COMBINATIONS Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.1 billion in cash . Yammer price were goodwill of $ 937 million and identifiable intangible asset identifiable intangible asset of $ 178 million . We assigned the date . Skype On October 13 , 2011 , we acquired Skype On October 13 , 2011 , we acquired all of in Luxembourg , for $ 8.6 billion , primarily in cash price were goodwill of $ 7.1 billion , identifiable intangible asset identifiable intangible asset of $ 1.6 billion , and unearned revenue and unearned revenue of $ 222 million . The goodwill recognized the following segment : $ 4.2 billion to Entertainment and Devices and Devices Division , $ 2.8 billion to Microsoft Business Division Business Division , and $ 54 million to Online Services Division ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 year $ 1,249 15 year Technology-based 275 5 year Customer-related 114 5 1,249 15 year Technology-based 275 5 year Customer-related 114 5 year Technology-based 275 5 year Customer-related 114 5 year Contract-based 10 4 275 5 year Customer-related 114 5 year Contract-based 10 4 year Customer-related 114 5 year Contract-based 10 4 year Total $ 1,648 114 5 year Contract-based 10 4 year Total $ 1,648 13 10 4 year Total $ 1,648 13 year Other During fiscal 4 year Total $ 1,648 13 year Other During fiscal year year Other During fiscal year 2013 , we completed 11 additional year 2013 , we completed 11 additional acquisition for total consideration for total consideration of $ 437 million , all of which result of operation . NOTE 10 — GOODWILL Changes in the ) Balance a of June 30 , 2011 Acquisitions Other Balance a of June 30 , 2011 Acquisitions Other Balance a of Other Balance a of June 30 , 2012 Acquisitions Other Balance a of June 30 , 2012 Acquisitions Other Balance a of Other Balance a of June 30 , 2013 Windows Division $ a of June 30 , 2013 Windows Division $ 89 $ , 2013 Windows Division $ 89 $ 0 $ 0 $ Windows Division $ 89 $ 0 $ 0 $ 89 $ $ 89 $ 0 $ 0 $ 89 $ 12 $ $ 0 $ 0 $ 89 $ 12 $ 0 $ $ 0 $ 89 $ 12 $ 0 $ 101 Server $ 89 $ 12 $ 0 $ 101 Server and Tools $ 12 $ 0 $ 101 Server and Tools 1,139 7 $ 101 Server and Tools 1,139 7 ( 2 ) 1,144 101 Server and Tools 1,139 7 ( 2 ) 1,144 217 and Tools 1,139 7 ( 2 ) 1,144 217 ( 3 1,139 7 ( 2 ) 1,144 217 ( 3 ) 1,358 7 ( 2 ) 1,144 217 ( 3 ) 1,358 Online 2 ) 1,144 217 ( 3 ) 1,358 Online Services Division 1,144 217 ( 3 ) 1,358 Online Services Division 6,373 54 ) 1,358 Online Services Division 6,373 54 ( 6,204 ) 223 1,358 Online Services Division 6,373 54 ( 6,204 ) 223 0 Services Division 6,373 54 ( 6,204 ) 223 0 ( 5 6,373 54 ( 6,204 ) 223 0 ( 5 ) 218 54 ( 6,204 ) 223 0 ( 5 ) 218 Microsoft 6,204 ) 223 0 ( 5 ) 218 Microsoft Business Division 223 0 ( 5 ) 218 Microsoft Business Division 4,167 2,843 ) 218 Microsoft Business Division 4,167 2,843 ( 117 ) 6,893 218 Microsoft Business Division 4,167 2,843 ( 117 ) 6,893 987 Business Division 4,167 2,843 ( 117 ) 6,893 987 ( 11 4,167 2,843 ( 117 ) 6,893 987 ( 11 ) 7,869 2,843 ( 117 ) 6,893 987 ( 11 ) 7,869 Entertainment 117 ) 6,893 987 ( 11 ) 7,869 Entertainment and Devices 6,893 987 ( 11 ) 7,869 Entertainment and Devices Division 813 7,869 Entertainment and Devices Division 813 4,294 ( 4 ) 5,103 Entertainment and Devices Division 813 4,294 ( 4 ) 5,103 27 Devices Division 813 4,294 ( 4 ) 5,103 27 ( 21 813 4,294 ( 4 ) 5,103 27 ( 21 ) 5,109 4,294 ( 4 ) 5,103 27 ( 21 ) 5,109 Total 4 ) 5,103 27 ( 21 ) 5,109 Total $ 12,581 5,103 27 ( 21 ) 5,109 Total $ 12,581 $ 7,198 21 ) 5,109 Total $ 12,581 $ 7,198 $ ( 6,327 5,109 Total $ 12,581 $ 7,198 $ ( 6,327 ) $ 12,581 $ 7,198 $ ( 6,327 ) $ 13,452 $ 1,243 $ ( 6,327 ) $ 13,452 $ 1,243 $ ( 40 6,327 ) $ 13,452 $ 1,243 $ ( 40 ) $ 13,452 $ 1,243 $ ( 40 ) $ 14,655 69 Table $ ( 40 ) $ 14,655 69 Table of Contents PART ( 40 ) $ 14,655 69 Table of Contents PART II of Contents PART II Item 8 The measurement period for purchase , but do not exceed 12 month . Adjustments in purchase applicable . For fiscal year 2012 , a $ 6.2 billion year 2012 , a $ 6.2 billion goodwill impairment charge wa goodwill impairment a of June 30 , 2013 and 2012 . a of June 30 , 2013 and 2012 . Goodwill Impairment June 30 , 2013 and 2012 . Goodwill Impairment We test for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2013 . Upon completion a of May 1 , 2013 . Upon completion of the completion of the fiscal year 2012 test , OSD goodwill wa . Because our fiscal year 2012 annual test indicated that OSD impairment test ( “ Step 2 ” ) wa performed specific to OSD . Under Step 2 , the fair value of were identified in our May 1 , 2012 test . NOTE in our May 1 , 2012 test . NOTE 11 — , 2012 test . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2013 2012 Technology-based ( Year Ended June 30 , 2013 2012 Technology-based ( a ) Ended June 30 , 2013 2012 Technology-based ( a ) $ Technology-based ( a ) $ 3,760 $ ( 2,110 ) $ ) $ 3,760 $ ( 2,110 ) $ 1,650 $ 3,550 $ ( 2,110 ) $ 1,650 $ 3,550 $ ( 1,899 2,110 ) $ 1,650 $ 3,550 $ ( 1,899 ) $ 1,650 $ 3,550 $ ( 1,899 ) $ 1,651 Marketing-related 1,348 $ ( 1,899 ) $ 1,651 Marketing-related 1,348 ( 211 ) 1,899 ) $ 1,651 Marketing-related 1,348 ( 211 ) 1,137 1,325 $ 1,651 Marketing-related 1,348 ( 211 ) 1,137 1,325 ( 136 Marketing-related 1,348 ( 211 ) 1,137 1,325 ( 136 ) 1,189 1,348 ( 211 ) 1,137 1,325 ( 136 ) 1,189 Contract-based 211 ) 1,137 1,325 ( 136 ) 1,189 Contract-based 823 ( 1,137 1,325 ( 136 ) 1,189 Contract-based 823 ( 688 ) ( 136 ) 1,189 Contract-based 823 ( 688 ) 135 824 ) 1,189 Contract-based 823 ( 688 ) 135 824 ( 644 Contract-based 823 ( 688 ) 135 824 ( 644 ) 180 823 ( 688 ) 135 824 ( 644 ) 180 Customer-related 688 ) 135 824 ( 644 ) 180 Customer-related 380 ( 135 824 ( 644 ) 180 Customer-related 380 ( 219 ) ( 644 ) 180 Customer-related 380 ( 219 ) 161 408 ) 180 Customer-related 380 ( 219 ) 161 408 ( 258 Customer-related 380 ( 219 ) 161 408 ( 258 ) 150 380 ( 219 ) 161 408 ( 258 ) 150 Total 219 ) 161 408 ( 258 ) 150 Total $ 6,311 161 408 ( 258 ) 150 Total $ 6,311 $ ( 258 ) 150 Total $ 6,311 $ ( 3,228 ) $ Total $ 6,311 $ ( 3,228 ) $ 3,083 $ 6,107 $ ( 3,228 ) $ 3,083 $ 6,107 $ ( 2,937 3,228 ) $ 3,083 $ 6,107 $ ( 2,937 ) $ 3,083 $ 6,107 $ ( 2,937 ) $ 3,170 ( a $ ( 2,937 ) $ 3,170 ( a ) Technology-based intangible Technology-based intangible asset included $ 218 million and $ 177 million $ 218 million and $ 177 million a of June 30 177 million a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , respectively , June 30 , 2013 and 2012 , respectively , of net of the period presented . 70 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2013 2012 Technology-based $ Year Ended June 30 , 2013 2012 Technology-based $ 539 4 Ended June 30 , 2013 2012 Technology-based $ 539 4 year , 2013 2012 Technology-based $ 539 4 year $ 1,548 7 2013 2012 Technology-based $ 539 4 year $ 1,548 7 year $ 539 4 year $ 1,548 7 year Marketing-related 39 7 539 4 year $ 1,548 7 year Marketing-related 39 7 year $ 1,548 7 year Marketing-related 39 7 year 1,249 15 year 1,548 7 year Marketing-related 39 7 year 1,249 15 year Contract-based year Marketing-related 39 7 year 1,249 15 year Contract-based 0 115 Marketing-related 39 7 year 1,249 15 year Contract-based 0 115 7 year 1,249 15 year Contract-based 0 115 7 year Customer-related 89 1,249 15 year Contract-based 0 115 7 year Customer-related 89 6 15 year Contract-based 0 115 7 year Customer-related 89 6 year 0 115 7 year Customer-related 89 6 year 114 5 year 115 7 year Customer-related 89 6 year 114 5 year Total year Customer-related 89 6 year 114 5 year Total $ 667 Customer-related 89 6 year 114 5 year Total $ 667 5 114 5 year Total $ 667 5 year $ 3,026 10 5 year Total $ 667 5 year $ 3,026 10 year $ 667 5 year $ 3,026 10 year Intangible asset amortization 667 5 year $ 3,026 10 year Intangible asset amortization expense asset amortization expense wa $ 739 million , $ 558 million $ 739 million , $ 558 million , and $ 537 558 million , and $ 537 million for fiscal year 2013 537 million for fiscal year 2013 , 2012 , and 2011 for fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Amortization of of capitalized software wa $ 210 million , $ 117 million $ 210 million , $ 117 million , and $ 114 117 million , and $ 114 million for fiscal year 2013 114 million for fiscal year 2013 , 2012 , and 2011 for fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . The following intangible asset held at June 30 , 2013 : ( In held at June 30 , 2013 : ( In million ) million ) Year Ending June 30 , 2014 $ 645 2015 Year Ending June 30 , 2014 $ 645 2015 454 2016 June 30 , 2014 $ 645 2015 454 2016 382 2017 30 , 2014 $ 645 2015 454 2016 382 2017 281 , 2014 $ 645 2015 454 2016 382 2017 281 2018 2014 $ 645 2015 454 2016 382 2017 281 2018 242 $ 645 2015 454 2016 382 2017 281 2018 242 Thereafter 645 2015 454 2016 382 2017 281 2018 242 Thereafter 1,079 2015 454 2016 382 2017 281 2018 242 Thereafter 1,079 Total 454 2016 382 2017 281 2018 242 Thereafter 1,079 Total $ 2016 382 2017 281 2018 242 Thereafter 1,079 Total $ 3,083 2017 281 2018 242 Thereafter 1,079 Total $ 3,083 NOTE 12 242 Thereafter 1,079 Total $ 3,083 NOTE 12 — DEBT As 1,079 Total $ 3,083 NOTE 12 — DEBT As of June — DEBT As of June 30 , 2013 , the total As of June 30 , 2013 , the total carrying value current portion , were $ 15.6 billion and $ 15.8 billion $ 15.6 billion and $ 15.8 billion , respectively . This estimated fair value of $ 11.9 billion and $ 13.2 billion $ 11.9 billion and $ 13.2 billion , respectively , a respectively , a of June 30 , 2012 . These estimated a of June 30 , 2012 . These estimated fair value value are based on Level 2 input . 71 Table of on Level 2 input . 71 Table of Contents PART II of Contents PART II Item 8 The component of our long-term a follows a of June 30 , 2013 and 2012 : a of June 30 , 2013 and 2012 : Due Date June 30 , 2013 and 2012 : Due Date Face Value Due Date Face Value June 30 , 2013 Face Value June Face Value June 30 , 2013 Face Value June 30 , , 2013 Face Value June 30 , 2012 Stated Interest Rate Face Value June 30 , 2012 Stated Interest Rate Effective Interest In million ) Notes September 27 , 2013 $ 1,000 $ ) Notes September 27 , 2013 $ 1,000 $ 1,000 0.875 September 27 , 2013 $ 1,000 $ 1,000 0.875 % 1.000 , 2013 $ 1,000 $ 1,000 0.875 % 1.000 % June 2013 $ 1,000 $ 1,000 0.875 % 1.000 % June 1 1,000 $ 1,000 0.875 % 1.000 % June 1 , 2014 0.875 % 1.000 % June 1 , 2014 2,000 2,000 2.950 1.000 % June 1 , 2014 2,000 2,000 2.950 % 3.049 % June 1 , 2014 2,000 2,000 2.950 % 3.049 % June 1 , 2014 2,000 2,000 2.950 % 3.049 % September 1 , 2014 2,000 2,000 2.950 % 3.049 % September 25 2014 2,000 2,000 2.950 % 3.049 % September 25 , 2015 2.950 % 3.049 % September 25 , 2015 1,750 1,750 1.625 3.049 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % February 25 , 2015 1,750 1,750 1.625 % 1.795 % February 8 2015 1,750 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 750 750 2.500 1.795 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % November 8 , 2016 750 750 2.500 % 2.642 % November 15 2016 750 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 ( a ) 2.642 % November 15 , 2017 ( a ) 600 * , 2017 ( a ) 600 * 0.875 % 1.084 % ( a ) 600 * 0.875 % 1.084 % May 1 ) 600 * 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 ( b ) 1.084 % May 1 , 2018 ( b ) 450 * , 2018 ( b ) 450 * 1.000 % 1.106 % ( b ) 450 * 1.000 % 1.106 % June 1 ) 450 * 1.000 % 1.106 % June 1 , 2019 1.000 % 1.106 % June 1 , 2019 1,000 1,000 4.200 1.106 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % October 1 , 2019 1,000 1,000 4.200 % 4.379 % October 1 2019 1,000 1,000 4.200 % 4.379 % October 1 , 2020 4.200 % 4.379 % October 1 , 2020 1,000 1,000 3.000 4.379 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % February 1 , 2020 1,000 1,000 3.000 % 3.137 % February 8 2020 1,000 1,000 3.000 % 3.137 % February 8 , 2021 3.000 % 3.137 % February 8 , 2021 500 500 4.000 3.137 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % November 8 , 2021 500 500 4.000 % 4.082 % November 15 2021 500 500 4.000 % 4.082 % November 15 , 2022 4.000 % 4.082 % November 15 , 2022 ( a ) 4.082 % November 15 , 2022 ( a ) 750 * , 2022 ( a ) 750 * 2.125 % 2.239 % ( a ) 750 * 2.125 % 2.239 % May 1 ) 750 * 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 ( b ) 2.239 % May 1 , 2023 ( b ) 1,000 * , 2023 ( b ) 1,000 * 2.375 % 2.465 % ( b ) 1,000 * 2.375 % 2.465 % May 2 ) 1,000 * 2.375 % 2.465 % May 2 , 2033 2.375 % 2.465 % May 2 , 2033 ( c ) 2.465 % May 2 , 2033 ( c ) 715 * , 2033 ( c ) 715 * 2.625 % 2.690 % ( c ) 715 * 2.625 % 2.690 % June 1 ) 715 * 2.625 % 2.690 % June 1 , 2039 2.625 % 2.690 % June 1 , 2039 750 750 5.200 2.690 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 ( a ) 5.361 % November 15 , 2042 ( a ) 900 * , 2042 ( a ) 900 * 3.500 % 3.571 % ( a ) 900 * 3.500 % 3.571 % May 1 ) 900 * 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 ( b ) 3.571 % May 1 , 2043 ( b ) 500 * , 2043 ( b ) 500 * 3.750 % 3.829 % ( b ) 500 * 3.750 % 3.829 % Total 15,665 ) 500 * 3.750 % 3.829 % Total 15,665 10,750 Convertible 3.750 % 3.829 % Total 15,665 10,750 Convertible Debt June 15 % 3.829 % Total 15,665 10,750 Convertible Debt June 15 , 15,665 10,750 Convertible Debt June 15 , 2013 0 1,250 0.000 Convertible Debt June 15 , 2013 0 1,250 0.000 % 1.849 Debt June 15 , 2013 0 1,250 0.000 % 1.849 % June 15 , 2013 0 1,250 0.000 % 1.849 % Total 15 , 2013 0 1,250 0.000 % 1.849 % Total $ 2013 0 1,250 0.000 % 1.849 % Total $ 15,665 $ % 1.849 % Total $ 15,665 $ 12,000 ( a ) % Total $ 15,665 $ 12,000 ( a ) In November ( a ) In November 2012 , we issued $ 2.25 2012 , we issued $ 2.25 billion of debt security . ( b ) In April 2013 , we issued $ 1.95 2013 , we issued $ 1.95 billion of debt security . ( c ) In April 2013 , we issued € 550 2013 , we issued € 550 million of debt security . applicable . As of June 30 , 2013 and 2012 , As of June 30 , 2013 and 2012 , the aggregate June 30 , 2013 and 2012 , the aggregate unamortized discount current portion , wa $ 65 million and $ 56 million $ 65 million and $ 56 million , respectively . Notes . Convertible Debt In June 2013 , we paid cash of we paid cash of $ 1.25 billion for the principal amount deliver cash for the $ 96 million excess obligation resulting from the note . Each $ 1,000 principal amount of note wa of note wa convertible into 30.68 share of Microsoft common stock a conversion price of $ 32.59 per share . As of share . As of June 30 , 2012 , the net As of June 30 , 2012 , the net carrying amount the unamortized discount were $ 1.2 billion and $ 19 million $ 1.2 billion and $ 19 million , respectively . In issuance of the note in 2010 , we entered into capped of the note in June 72 Table of Contents PART II of Contents PART II Item 8 2013 , we exercised the Contents PART II Item 8 2013 , we exercised the capped were physically settled by acquiring 29 million share of our own own common stock for $ 938 million . The remaining capped net cash settled for $ 24 million . Debt Service Maturities million ) Year Ending June 30 , 2014 $ 3,000 2015 Year Ending June 30 , 2014 $ 3,000 2015 0 2016 June 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 30 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 , 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 2014 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 $ 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 3,000 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 2015 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 Total 0 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 Total $ 2016 2,500 2017 0 2018 1,050 Thereafter 9,115 Total $ 15,665 2017 0 2018 1,050 Thereafter 9,115 Total $ 15,665 Interest on 1,050 Thereafter 9,115 Total $ 15,665 Interest on the note is our debt for fiscal year 2013 , 2012 , and 2011 for fiscal year 2013 , 2012 , and 2011 wa $ 2013 , 2012 , and 2011 wa $ 371 million , , and 2011 wa $ 371 million , $ 344 million $ 371 million , $ 344 million , and $ 197 344 million , and $ 197 million , respectively . Credit . Credit Facility In June 2013 , we established a commercial sale of up to $ 1.3 billion in commercial paper . paper . As of June 30 , 2013 , we have As of June 30 , 2013 , we have not issued this program . In June 2013 , we entered into a we entered into a $ 1.3 billion credit facility , which program . As of June 30 , 2013 , we were As of June 30 , 2013 , we were in compliance credit facility expires on June 24 , 2018 . No amount expires on June 24 , 2018 . No amount were drawn since it inception . NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2013 2012 2011 Current Year Ended June 30 , 2013 2012 2011 Current Taxes U.S. Ended June 30 , 2013 2012 2011 Current Taxes U.S. federal June 30 , 2013 2012 2011 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,131 $ 2,235 $ 3,108 U.S. U.S. federal $ 3,131 $ 2,235 $ 3,108 U.S. state and $ 3,131 $ 2,235 $ 3,108 U.S. state and local 332 3,108 U.S. state and local 332 153 209 International 1,745 1,947 U.S. state and local 332 153 209 International 1,745 1,947 1,602 state and local 332 153 209 International 1,745 1,947 1,602 Current local 332 153 209 International 1,745 1,947 1,602 Current tax 5,208 332 153 209 International 1,745 1,947 1,602 Current tax 5,208 4,335 153 209 International 1,745 1,947 1,602 Current tax 5,208 4,335 4,919 1,745 1,947 1,602 Current tax 5,208 4,335 4,919 Deferred Taxes Deferred 1,947 1,602 Current tax 5,208 4,335 4,919 Deferred Taxes Deferred tax 1,602 Current tax 5,208 4,335 4,919 Deferred Taxes Deferred tax ( Deferred Taxes Deferred tax ( 19 ) 954 2 Provision for Deferred tax ( 19 ) 954 2 Provision for income tax tax ( 19 ) 954 2 Provision for income tax $ Provision for income tax $ 5,189 $ 5,289 $ 4,921 73 income tax $ 5,189 $ 5,289 $ 4,921 73 Table of $ 5,189 $ 5,289 $ 4,921 73 Table of Contents PART 5,189 $ 5,289 $ 4,921 73 Table of Contents PART II of Contents PART II Item 8 U.S. and international component of million ) Year Ended June 30 , 2013 2012 2011 U.S. Year Ended June 30 , 2013 2012 2011 U.S. $ 6,674 Ended June 30 , 2013 2012 2011 U.S. $ 6,674 $ June 30 , 2013 2012 2011 U.S. $ 6,674 $ 1,600 2013 2012 2011 U.S. $ 6,674 $ 1,600 $ 8,862 International 2011 U.S. $ 6,674 $ 1,600 $ 8,862 International 20,378 20,667 $ 6,674 $ 1,600 $ 8,862 International 20,378 20,667 19,209 Income $ 1,600 $ 8,862 International 20,378 20,667 19,209 Income before income 1,600 $ 8,862 International 20,378 20,667 19,209 Income before income tax $ 8,862 International 20,378 20,667 19,209 Income before income tax $ Income before income tax $ 27,052 $ 22,267 $ 28,071 The income tax $ 27,052 $ 22,267 $ 28,071 The item accounting $ 27,052 $ 22,267 $ 28,071 The item accounting for the follows : Year Ended June 30 , 2013 2012 2011 Federal Year Ended June 30 , 2013 2012 2011 Federal statutory rate Ended June 30 , 2013 2012 2011 Federal statutory rate 35.0 June 30 , 2013 2012 2011 Federal statutory rate 35.0 % 2012 2011 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 17.5 ) % ( 21.1 ) ( 17.5 ) % ( 21.1 ) % ( 15.6 ) ( 21.1 ) % ( 15.6 ) % Goodwill impairment 0 15.6 ) % Goodwill impairment 0 % 9.7 % 0 % % Goodwill impairment 0 % 9.7 % 0 % I.R.S . impairment 0 % 9.7 % 0 % I.R.S . settlement 0 0 % I.R.S . settlement 0 % 0 % ( 1.7 I.R.S . settlement 0 % 0 % ( 1.7 ) % 0 % 0 % ( 1.7 ) % Other reconciling item Other reconciling item , net 1.7 % 0.2 % ( 0.2 item , net 1.7 % 0.2 % ( 0.2 ) % 1.7 % 0.2 % ( 0.2 ) % Effective rate 19.2 0.2 ) % Effective rate 19.2 % 23.8 % 17.5 % % Effective rate 19.2 % 23.8 % 17.5 % The reduction rate 19.2 % 23.8 % 17.5 % The reduction from the regional operating center , were 79 % , 79 % , , were 79 % , 79 % , and 78 % , 79 % , and 78 % of our international income before tax in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . In general credit . In fiscal year 2013 , 2012 , and 2011 In fiscal year 2013 , 2012 , and 2011 , there 2013 , 2012 , and 2011 , there were no individually settlement is discussed below . 74 Table of Contents PART II of Contents PART II Item 8 The component of the deferred ( In million ) June 30 , 2013 2012 Deferred Income million ) June 30 , 2013 2012 Deferred Income Tax Assets ) June 30 , 2013 2012 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 888 $ 882 Other expense item compensation expense $ 888 $ 882 Other expense item 917 965 $ 882 Other expense item 917 965 Unearned revenue 445 571 882 Other expense item 917 965 Unearned revenue 445 571 Impaired item 917 965 Unearned revenue 445 571 Impaired investment 246 152 917 965 Unearned revenue 445 571 Impaired investment 246 152 Loss revenue 445 571 Impaired investment 246 152 Loss carryforwards 715 532 445 571 Impaired investment 246 152 Loss carryforwards 715 532 Other investment 246 152 Loss carryforwards 715 532 Other revenue item 55 246 152 Loss carryforwards 715 532 Other revenue item 55 79 715 532 Other revenue item 55 79 Deferred income tax asset 532 Other revenue item 55 79 Deferred income tax asset $ Deferred income tax asset $ 3,266 $ 3,181 Less valuation allowance tax asset $ 3,266 $ 3,181 Less valuation allowance ( 579 3,181 Less valuation allowance ( 579 ) ( 453 ) Deferred allowance ( 579 ) ( 453 ) Deferred income tax asset net of valuation allowance $ 2,687 $ 2,728 Deferred Income Tax valuation allowance $ 2,687 $ 2,728 Deferred Income Tax Liabilities International Liabilities International earnings $ ( 1,146 ) $ ( 1,072 ) ( 1,146 ) $ ( 1,072 ) Unrealized gain on investment Unrealized gain on investment ( 1,012 ) ( 830 ) Depreciation investment ( 1,012 ) ( 830 ) Depreciation and amortization ( ) Depreciation and amortization ( 604 ) ( 670 ) Other amortization ( 604 ) ( 670 ) Other ( 2 ) ( 670 ) Other ( 2 ) ( 14 ) Deferred Other ( 2 ) ( 14 ) Deferred income tax liability income tax liability $ ( 2,764 ) $ ( 2,586 ) ( 2,764 ) $ ( 2,586 ) Net deferred income tax ( liability ) $ ( 77 ) $ 142 Reported As $ ( 77 ) $ 142 Reported As Current deferred income deferred income tax asset $ 1,632 $ 2,035 Long-term deferred income tax asset $ 1,632 $ 2,035 Long-term deferred income tax liability deferred income tax liability ( 1,709 ) ( 1,893 ) Net liability ( 1,709 ) ( 1,893 ) Net deferred income tax ( liability ) $ ( 77 ) $ 142 As of $ ( 77 ) $ 142 As of June 30 , $ 142 As of June 30 , 2013 , we had As of June 30 , 2013 , we had net operating operating loss carryforwards of $ 2.7 billion , including $ 2.2 2.7 billion , including $ 2.2 billion of foreign net operating recovered . As of June 30 , 2013 , we have As of June 30 , 2013 , we have not provided temporary difference of approximately $ 76.4 billion resulting from earnings for temporary difference wa approximately $ 24.4 billion at June 30 , $ 24.4 billion at June 30 , 2013 . Income tax billion at June 30 , 2013 . Income tax paid were Income tax paid were $ 3.9 billion , $ 3.5 billion $ 3.9 billion , $ 3.5 billion , and $ 5.3 3.5 billion , and $ 5.3 billion in fiscal year 2013 5.3 billion in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Uncertain Tax Tax Positions As of June 30 , 2013 , we had As of June 30 , 2013 , we had $ 8.6 2013 , we had $ 8.6 billion of unrecognized tax benefit tax benefit of which $ 6.5 billion , if recognized , rate . As of June 30 , 2012 , we had As of June 30 , 2012 , we had $ 7.2 2012 , we had $ 7.2 billion of unrecognized tax benefit tax benefit of which $ 6.2 billion , if recognized , unrecognized tax benefit wa $ 400 million , $ 154 million $ 400 million , $ 154 million , and $ 38 154 million , and $ 38 million in fiscal year 2013 38 million in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . As of respectively . As of June 30 , 2013 , 2012 , As of June 30 , 2013 , 2012 , and 2011 June 30 , 2013 , 2012 , and 2011 , we 2013 , 2012 , and 2011 , we had accrued interest uncertain tax position of $ 1.3 billion , $ 939 million $ 1.3 billion , $ 939 million , and $ 785 939 million , and $ 785 million , respectively , net federal income tax benefit . 75 Table of Contents PART II of Contents PART II Item 8 The aggregate change in the million ) Year Ended June 30 , 2013 2012 2011 Balance Year Ended June 30 , 2013 2012 2011 Balance , beginning Ended June 30 , 2013 2012 2011 Balance , beginning of June 30 , 2013 2012 2011 Balance , beginning of year , beginning of year $ 7,202 $ 6,935 $ 6,542 Decreases of year $ 7,202 $ 6,935 $ 6,542 Decreases related to $ 7,202 $ 6,935 $ 6,542 Decreases related to settlement ( Decreases related to settlement ( 30 ) ( 16 ) ( settlement ( 30 ) ( 16 ) ( 632 ) Increases ) ( 16 ) ( 632 ) Increases for tax position related to the current year 612 481 739 Increases for tax to the current year 612 481 739 Increases for tax position the current year 612 481 739 Increases for tax position related position related to prior year 931 118 405 Decreases for tax related to prior year 931 118 405 Decreases for tax position to prior year 931 118 405 Decreases for tax position related related to prior year ( 65 ) ( 292 ) ( year ( 65 ) ( 292 ) ( 119 ) Decreases ) ( 292 ) ( 119 ) Decreases due to lapsed lapsed statute of limitation ( 2 ) ( 24 ) 0 limitation ( 2 ) ( 24 ) 0 Balance , end 2 ) ( 24 ) 0 Balance , end of year , end of year $ 8,648 $ 7,202 $ 6,935 During of year $ 8,648 $ 7,202 $ 6,935 During the third $ 8,648 $ 7,202 $ 6,935 During the third quarter of third quarter of fiscal year 2011 , we reached a settlement . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income income tax expense by $ 461 million . While we settled these year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month , because we do be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are our financial statement . NOTE 14 — UNEARNED REVENUE Unearned revenue the revenue recognition criterion . 76 Table of Contents PART II of Contents PART II Item 8 The component of unearned revenue ( In million ) June 30 , 2013 2012 Volume licensing million ) June 30 , 2013 2012 Volume licensing program $ ) June 30 , 2013 2012 Volume licensing program $ 18,871 2012 Volume licensing program $ 18,871 $ 16,717 Other ( a licensing program $ 18,871 $ 16,717 Other ( a ) 3,528 16,717 Other ( a ) 3,528 3,342 Total $ 22,399 $ Other ( a ) 3,528 3,342 Total $ 22,399 $ 20,059 ) 3,528 3,342 Total $ 22,399 $ 20,059 ( a ) 3,342 Total $ 22,399 $ 20,059 ( a ) Other a ) Other a of June 30 , 2012 included $ 540 a of June 30 , 2012 included $ 540 million of 30 , 2012 included $ 540 million of unearned revenue associated associated with sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price ( In million ) June 30 , 2013 2012 Windows Division million ) June 30 , 2013 2012 Windows Division $ 2,086 ) June 30 , 2013 2012 Windows Division $ 2,086 $ 2013 2012 Windows Division $ 2,086 $ 2,444 Server and Tools Windows Division $ 2,086 $ 2,444 Server and Tools 8,639 7,445 $ 2,444 Server and Tools 8,639 7,445 Microsoft Business Division 10,142 2,444 Server and Tools 8,639 7,445 Microsoft Business Division 10,142 9,015 8,639 7,445 Microsoft Business Division 10,142 9,015 Other segment 1,532 1,155 7,445 Microsoft Business Division 10,142 9,015 Other segment 1,532 1,155 Total Division 10,142 9,015 Other segment 1,532 1,155 Total $ 22,399 $ 10,142 9,015 Other segment 1,532 1,155 Total $ 22,399 $ 20,059 segment 1,532 1,155 Total $ 22,399 $ 20,059 NOTE 15 — 1,155 Total $ 22,399 $ 20,059 NOTE 15 — OTHER LONG-TERM $ 22,399 $ 20,059 NOTE 15 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2013 2012 Tax contingency million ) June 30 , 2013 2012 Tax contingency and other ) June 30 , 2013 2012 Tax contingency and other tax and other tax liability $ 9,548 $ 7,634 Legal contingency 162 tax liability $ 9,548 $ 7,634 Legal contingency 162 220 Other 9,548 $ 7,634 Legal contingency 162 220 Other 290 354 Total $ 7,634 Legal contingency 162 220 Other 290 354 Total $ Legal contingency 162 220 Other 290 354 Total $ 10,000 $ contingency 162 220 Other 290 354 Total $ 10,000 $ 8,208 Other 290 354 Total $ 10,000 $ 8,208 NOTE 16 — 354 Total $ 10,000 $ 8,208 NOTE 16 — COMMITMENTS AND $ 10,000 $ 8,208 NOTE 16 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 694 million for constructing new building leasehold improvement a of June 30 , 2013 . We have a of June 30 , 2013 . We have operating lease facility operating lease wa $ 711 million , $ 639 million $ 711 million , $ 639 million , and $ 525 639 million , and $ 525 million , in fiscal year million , in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Future minimum in place a of June 30 , 2013 are a follows a of June 30 , 2013 are a follows : ( million ) Year Ending June 30 , 2014 $ 572 2015 Year Ending June 30 , 2014 $ 572 2015 451 2016 June 30 , 2014 $ 572 2015 451 2016 349 2017 30 , 2014 $ 572 2015 451 2016 349 2017 281 , 2014 $ 572 2015 451 2016 349 2017 281 2018 2014 $ 572 2015 451 2016 349 2017 281 2018 204 $ 572 2015 451 2016 349 2017 281 2018 204 Thereafter 572 2015 451 2016 349 2017 281 2018 204 Thereafter 605 2015 451 2016 349 2017 281 2018 204 Thereafter 605 Total 451 2016 349 2017 281 2018 204 Thereafter 605 Total $ 2016 349 2017 281 2018 204 Thereafter 605 Total $ 2,462 2017 281 2018 204 Thereafter 605 Total $ 2,462 77 Table 204 Thereafter 605 Total $ 2,462 77 Table of Contents PART Thereafter 605 Total $ 2,462 77 Table of Contents PART II of Contents PART II Item 8 Indemnifications We provide indemnification of our financial statement . NOTE 17 — CONTINGENCIES Antitrust , Unfair certain other software product between 1999 and 2005 . We obtained software product between 1999 and 2005 . We obtained dismissal or be issued is approximately $ 2.7 billion . The actual cost case will range between $ 1.9 billion and $ 2.0 billion $ 1.9 billion and $ 2.0 billion . At June 30 2.0 billion . At June 30 , 2013 , we have . At June 30 , 2013 , we have recorded a these claim of approximately $ 500 million , which reflects our our estimated exposure of $ 1.9 billion le payment made to to date of approximately $ 1.4 billion mostly for voucher , been settled . In March 2010 , the court in the class action . In April 2011 , the British Columbia Court heard in the fall of 2012 . The other two action Litigation and Claims In November 2004 , Novell , Inc. ( during the period between June 1994 and March 1996 . In between June 1994 and March 1996 . In June 2005 , March 1996 . In June 2005 , the trial court granted six claim . In March 2010 , the trial court granted place from October to December 2011 and resulted in a mistrial a verdict . In July 2012 , the trial court granted heard oral argument in May 2013 . Patent and Intellectual Property Claims Motorola Litigation In October 2010 , Microsoft filed patent infringement infringement of nine Microsoft patent 78 Table of Contents PART II of Contents PART II Item 8 by Motorola ’ s Android United Kingdom . In April 2012 , following complaint by Microsoft antitrust rule . In June 2012 , we received a request Motorola took place in August 2011 on seven of the nine the complaint . In December 2011 , the administrative law judge Android device . In May 2012 , the ITC issued the which became effective on July 18 , 2012 . Microsoft ha effective on July 18 , 2012 . Microsoft ha appealed certain In addition , in July 2013 , Microsoft filed an action the ITC ’ s May 2012 import ban against infringing Motorola the order . In November 2010 , Motorola filed an action the U.S . In April 2012 , the ALJ found that s finding . In June 2012 , Microsoft filed a motion matter to the ALJ ( 1 ) to apply certain ITC ITC case precedent , ( 2 ) to rule on Microsoft on Microsoft ’ s June 2012 motion to terminate , and to terminate , and ( 3 ) set a new target held a hearing in December 2012 and set a target date final ITC ruling in July 2013 . At Motorola ’ s the ITC . In March 2013 , the ALJ ruled that the ITC denied in May 2013 . U.S. District Court The Court case filed in October 2010 by Microsoft a a companion ITC case . In November 2010 , Microsoft sued Motorola for H.264 video standard and the 802.11 Wi-Fi standard . In suit in Germany . In February 2012 , the Seattle District Court of Microsoft ruling that ( 1 ) Motorola entered into binding and condition ; and ( 2 ) Microsoft is a third-party RAND royalty . In April 2012 , the court issued a video patent . In May 2012 , the court converted that the court ’ s injunction 79 Table of Contents PART II of Contents PART II Item 8 order to the Court of affirmed the order in September 2012 . The Seattle District Court held a trial in November 2012 to determine the RAND royalty Motorola ’ s H.264 and 802.11 patent . In December 2012 802.11 patent . In December 2012 , the Seattle District Court infringement of it H.264 and 802.11 patent . In April 2013 802.11 patent . In April 2013 , the court set per Motorola ’ s H.264 and 802.11 patent , which resulted in claim is set for August 26 , 2013 . Cases filed set for August 26 , 2013 . Cases filed by Motorola transferred case , Motorola asserts 15 patent are infringed by many Microsoft product including Windows Mobile 6.5 and Windows Phone 7 , Mobile 6.5 and Windows Phone 7 , Windows Marketplace , Silverlight , Windows Vista and Windows 7 , Exchange Server 2003 and Windows 7 , Exchange Server 2003 and later , Exchange ActiveSync Live Messenger , Lync Server 2010 , Outlook 2010 , Office Lync Server 2010 , Outlook 2010 , Office 365 , SQL , Outlook 2010 , Office 365 , SQL Server , Internet SQL Server , Internet Explorer 9 , Xbox , and Kinect by Motorola , Microsoft asserts 14 patent are infringed by Motorola recorder . Germany In July 2011 , Motorola filed patent infringement H.264 capable product including Xbox 360 , Windows 7 , Media including Xbox 360 , Windows 7 , Media Player , and an injunction . In May 2012 , the court issued an protocol employed by Windows Phone 7 , Outlook Mobile , Hotmail an injunction . In April 2013 , the court stayed the , October , and December 2011 and in April 2012 , December 2011 and in April 2012 , Microsoft asserts Motorola Android , July , and September 2012 , court in Germany issued . United Kingdom In December 2011 , Microsoft filed an action ActiveSync protocol . In February 2012 , Motorola counterclaimed alleging infringement counterclaimed alleging infringement of the 80 Table of Contents PART II of Contents PART II Item 8 patent and seeking damage and trial took place in December 2012 , and the court ruled case , there are approximately 65 other patent infringement case pending future . As of June 30 , 2013 , we had As of June 30 , 2013 , we had accrued aggregate accrued aggregate liability of $ 412 million in other current liability other current liability and $ 162 million in other long-term liability estimate could reach approximately $ 400 million in aggregate beyond recorded become reasonably estimable . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2013 2012 2011 Balance Year Ended June 30 , 2013 2012 2011 Balance , beginning Ended June 30 , 2013 2012 2011 Balance , beginning of June 30 , 2013 2012 2011 Balance , beginning of year Balance , beginning of year 8,381 8,376 8,668 Issued 105 147 , beginning of year 8,381 8,376 8,668 Issued 105 147 155 beginning of year 8,381 8,376 8,668 Issued 105 147 155 Repurchased year 8,381 8,376 8,668 Issued 105 147 155 Repurchased ( 158 8,381 8,376 8,668 Issued 105 147 155 Repurchased ( 158 ) 8,376 8,668 Issued 105 147 155 Repurchased ( 158 ) ( 105 147 155 Repurchased ( 158 ) ( 142 ) ( Repurchased ( 158 ) ( 142 ) ( 447 ) Balance ) ( 142 ) ( 447 ) Balance , end of Balance , end of year 8,328 8,381 8,376 Share Repurchases On , end of year 8,328 8,381 8,376 Share Repurchases On September end of year 8,328 8,381 8,376 Share Repurchases On September 22 8,376 Share Repurchases On September 22 , 2008 , we announced Repurchases On September 22 , 2008 , we announced that our program authorizing up to $ 40.0 billion in share repurchase with an expiration date of September 30 , 2013 . As of date of September 30 , 2013 . As of June 30 2013 . As of June 30 , 2013 , approximately $ As of June 30 , 2013 , approximately $ 3.6 billion , 2013 , approximately $ 3.6 billion of the approved repurchase Shares Amount Year Ended June 30 , 2013 2012 2011 First Year Ended June 30 , 2013 2012 2011 First quarter 33 Ended June 30 , 2013 2012 2011 First quarter 33 $ June 30 , 2013 2012 2011 First quarter 33 $ 1,000 2013 2012 2011 First quarter 33 $ 1,000 38 $ 1,000 2011 First quarter 33 $ 1,000 38 $ 1,000 163 $ First quarter 33 $ 1,000 38 $ 1,000 163 $ 4,000 33 $ 1,000 38 $ 1,000 163 $ 4,000 Second quarter $ 1,000 38 $ 1,000 163 $ 4,000 Second quarter 58 38 $ 1,000 163 $ 4,000 Second quarter 58 1,607 39 163 $ 4,000 Second quarter 58 1,607 39 1,000 188 5,000 $ 4,000 Second quarter 58 1,607 39 1,000 188 5,000 Third 4,000 Second quarter 58 1,607 39 1,000 188 5,000 Third quarter Second quarter 58 1,607 39 1,000 188 5,000 Third quarter 36 quarter 58 1,607 39 1,000 188 5,000 Third quarter 36 1,000 58 1,607 39 1,000 188 5,000 Third quarter 36 1,000 31 1,000 188 5,000 Third quarter 36 1,000 31 1,000 30 827 188 5,000 Third quarter 36 1,000 31 1,000 30 827 Fourth 5,000 Third quarter 36 1,000 31 1,000 30 827 Fourth quarter Third quarter 36 1,000 31 1,000 30 827 Fourth quarter 31 quarter 36 1,000 31 1,000 30 827 Fourth quarter 31 1,000 36 1,000 31 1,000 30 827 Fourth quarter 31 1,000 34 1,000 30 827 Fourth quarter 31 1,000 34 1,000 66 1,631 30 827 Fourth quarter 31 1,000 34 1,000 66 1,631 Total 827 Fourth quarter 31 1,000 34 1,000 66 1,631 Total 158 Fourth quarter 31 1,000 34 1,000 66 1,631 Total 158 $ quarter 31 1,000 34 1,000 66 1,631 Total 158 $ 4,607 31 1,000 34 1,000 66 1,631 Total 158 $ 4,607 142 34 1,000 66 1,631 Total 158 $ 4,607 142 $ 4,000 66 1,631 Total 158 $ 4,607 142 $ 4,000 447 $ 1,631 Total 158 $ 4,607 142 $ 4,000 447 $ 11,458 158 $ 4,607 142 $ 4,000 447 $ 11,458 81 Table $ 4,607 142 $ 4,000 447 $ 11,458 81 Table of 142 $ 4,000 447 $ 11,458 81 Table of Contents PART $ 4,000 447 $ 11,458 81 Table of Contents PART II of Contents PART II Item 8 Dividends In fiscal year 2013 8 Dividends In fiscal year 2013 , our Board of Directors ( In million ) September 18 , 2012 $ 0.23 November million ) September 18 , 2012 $ 0.23 November 15 , September 18 , 2012 $ 0.23 November 15 , 2012 $ , 2012 $ 0.23 November 15 , 2012 $ 1,933 December $ 0.23 November 15 , 2012 $ 1,933 December 13 , November 15 , 2012 $ 1,933 December 13 , 2012 November , 2012 $ 1,933 December 13 , 2012 November 28 , $ 1,933 December 13 , 2012 November 28 , 2012 $ December 13 , 2012 November 28 , 2012 $ 0.23 February , 2012 November 28 , 2012 $ 0.23 February 21 , November 28 , 2012 $ 0.23 February 21 , 2013 $ , 2012 $ 0.23 February 21 , 2013 $ 1,925 March $ 0.23 February 21 , 2013 $ 1,925 March 14 , February 21 , 2013 $ 1,925 March 14 , 2013 March , 2013 $ 1,925 March 14 , 2013 March 11 , $ 1,925 March 14 , 2013 March 11 , 2013 $ March 14 , 2013 March 11 , 2013 $ 0.23 May , 2013 March 11 , 2013 $ 0.23 May 16 , March 11 , 2013 $ 0.23 May 16 , 2013 $ , 2013 $ 0.23 May 16 , 2013 $ 1,921 June $ 0.23 May 16 , 2013 $ 1,921 June 13 , May 16 , 2013 $ 1,921 June 13 , 2013 June , 2013 $ 1,921 June 13 , 2013 June 12 , $ 1,921 June 13 , 2013 June 12 , 2013 $ June 13 , 2013 June 12 , 2013 $ 0.23 August , 2013 June 12 , 2013 $ 0.23 August 15 , June 12 , 2013 $ 0.23 August 15 , 2013 $ , 2013 $ 0.23 August 15 , 2013 $ 1,916 September $ 0.23 August 15 , 2013 $ 1,916 September 12 , August 15 , 2013 $ 1,916 September 12 , 2013 The , 2013 $ 1,916 September 12 , 2013 The dividend declared $ 1,916 September 12 , 2013 The dividend declared on June The dividend declared on June 12 , 2013 will be paid declared on June 12 , 2013 will be paid after the of this report on Form 10-K and wa included in other current liability a of June 30 , 2013 . In fiscal a of June 30 , 2013 . In fiscal year 2012 2013 . In fiscal year 2012 , our Board of Directors ( In million ) September 20 , 2011 $ 0.20 November million ) September 20 , 2011 $ 0.20 November 17 , September 20 , 2011 $ 0.20 November 17 , 2011 $ , 2011 $ 0.20 November 17 , 2011 $ 1,683 December $ 0.20 November 17 , 2011 $ 1,683 December 8 , November 17 , 2011 $ 1,683 December 8 , 2011 December , 2011 $ 1,683 December 8 , 2011 December 14 , $ 1,683 December 8 , 2011 December 14 , 2011 $ December 8 , 2011 December 14 , 2011 $ 0.20 February , 2011 December 14 , 2011 $ 0.20 February 16 , December 14 , 2011 $ 0.20 February 16 , 2012 $ , 2011 $ 0.20 February 16 , 2012 $ 1,683 March $ 0.20 February 16 , 2012 $ 1,683 March 8 , February 16 , 2012 $ 1,683 March 8 , 2012 March , 2012 $ 1,683 March 8 , 2012 March 13 , $ 1,683 March 8 , 2012 March 13 , 2012 $ March 8 , 2012 March 13 , 2012 $ 0.20 May , 2012 March 13 , 2012 $ 0.20 May 17 , March 13 , 2012 $ 0.20 May 17 , 2012 $ , 2012 $ 0.20 May 17 , 2012 $ 1,678 June $ 0.20 May 17 , 2012 $ 1,678 June 14 , May 17 , 2012 $ 1,678 June 14 , 2012 June , 2012 $ 1,678 June 14 , 2012 June 13 , $ 1,678 June 14 , 2012 June 13 , 2012 $ June 14 , 2012 June 13 , 2012 $ 0.20 August , 2012 June 13 , 2012 $ 0.20 August 16 , June 13 , 2012 $ 0.20 August 16 , 2012 $ , 2012 $ 0.20 August 16 , 2012 $ 1,676 September $ 0.20 August 16 , 2012 $ 1,676 September 13 , August 16 , 2012 $ 1,676 September 13 , 2012 The , 2012 $ 1,676 September 13 , 2012 The dividend declared $ 1,676 September 13 , 2012 The dividend declared on June The dividend declared on June 13 , 2012 wa included in declared on June 13 , 2012 wa included in other current current liability a of June 30 , 2012 . NOTE 19 a of June 30 , 2012 . NOTE 19 — OTHER 30 , 2012 . NOTE 19 — OTHER COMPREHENSIVE INCOME ( million ) Year Ended June 30 , 2013 2012 2011 Net Year Ended June 30 , 2013 2012 2011 Net Unrealized Gains Ended June 30 , 2013 2012 2011 Net Unrealized Gains ( June 30 , 2013 2012 2011 Net Unrealized Gains ( Losses of tax effect of $ 54 , $ 127 , and of $ 54 , $ 127 , and $ ( 340 127 , and $ ( 340 ) $ 101 $ 236 $ ( 340 ) $ 101 $ 236 $ ( 632 340 ) $ 101 $ 236 $ ( 632 ) Reclassification 101 $ 236 $ ( 632 ) Reclassification adjustment for loss tax effect of $ ( 68 ) , $ 10 , ( 68 ) , $ 10 , and $ 2 ( $ 10 , and $ 2 ( 127 ) 19 5 , and $ 2 ( 127 ) 19 5 Net unrealized $ 2 ( 127 ) 19 5 Net unrealized gain ( 2 ( 127 ) 19 5 Net unrealized gain ( loss ) on derivative $ ( 26 ) $ 255 $ ( $ ( 26 ) $ 255 $ ( 627 ) Net ) $ 255 $ ( 627 ) Net Unrealized Gains ( of tax effect of $ 244 , $ ( 93 ) $ 244 , $ ( 93 ) , and $ 726 93 ) , and $ 726 $ 453 $ ( 172 , and $ 726 $ 453 $ ( 172 ) $ 726 $ 453 $ ( 172 ) $ 1,349 Reclassification adjustment $ ( 172 ) $ 1,349 Reclassification adjustment for gain included tax effect of $ ( 49 ) , $ ( 117 49 ) , $ ( 117 ) , and $ ( ) , and $ ( 159 ) ( 90 ) ( $ ( 159 ) ( 90 ) ( 218 ) ( ) ( 90 ) ( 218 ) ( 295 ) Net ) ( 218 ) ( 295 ) Net unrealized gain ( ( loss ) on investment 363 ( 390 ) 1,054 Translation ) on investment 363 ( 390 ) 1,054 Translation adjustment and investment 363 ( 390 ) 1,054 Translation adjustment and other , tax effect of $ ( 8 ) , $ ( 165 8 ) , $ ( 165 ) and $ 205 ( ( 165 ) and $ 205 ( 16 ) ( 306 ) and $ 205 ( 16 ) ( 306 ) 381 205 ( 16 ) ( 306 ) 381 Other comprehensive income 16 ) ( 306 ) 381 Other comprehensive income ( loss income ( loss ) $ 321 $ ( 441 ) $ ) $ 321 $ ( 441 ) $ 808 82 Table $ ( 441 ) $ 808 82 Table of Contents PART ( 441 ) $ 808 82 Table of Contents PART II of Contents PART II Item 8 The component of accumulated other ( In million ) June 30 , 2013 2012 2011 Net million ) June 30 , 2013 2012 2011 Net unrealized gain ) June 30 , 2013 2012 2011 Net unrealized gain ( June 30 , 2013 2012 2011 Net unrealized gain ( loss loss ) on derivative $ 66 $ 92 $ ( 163 on derivative $ 66 $ 92 $ ( 163 ) Net 66 $ 92 $ ( 163 ) Net unrealized gain on Net unrealized gain on investment 1,794 1,431 1,821 Translation adjustment and unrealized gain on investment 1,794 1,431 1,821 Translation adjustment and other gain on investment 1,794 1,431 1,821 Translation adjustment and other ( Translation adjustment and other ( 117 ) ( 101 ) 205 other ( 117 ) ( 101 ) 205 Accumulated other comprehensive 117 ) ( 101 ) 205 Accumulated other comprehensive income $ Accumulated other comprehensive income $ 1,743 $ 1,422 $ 1,863 NOTE comprehensive income $ 1,743 $ 1,422 $ 1,863 NOTE 20 — $ 1,743 $ 1,422 $ 1,863 NOTE 20 — EMPLOYEE STOCK $ 1,422 $ 1,863 NOTE 20 — EMPLOYEE STOCK AND SAVINGS and employee . At June 30 , 2013 , an aggregate . At June 30 , 2013 , an aggregate of 425 2013 , an aggregate of 425 million share were authorized for million ) Year Ended June 30 , 2013 2012 2011 Stock-based Year Ended June 30 , 2013 2012 2011 Stock-based compensation expense Ended June 30 , 2013 2012 2011 Stock-based compensation expense $ June 30 , 2013 2012 2011 Stock-based compensation expense $ 2,406 2011 Stock-based compensation expense $ 2,406 $ 2,244 $ 2,166 Income compensation expense $ 2,406 $ 2,244 $ 2,166 Income tax benefit $ 2,406 $ 2,244 $ 2,166 Income tax benefit related to related to stock-based compensation $ 842 $ 785 $ 758 Stock stock-based compensation $ 842 $ 785 $ 758 Stock Plans ( $ 842 $ 785 $ 758 Stock Plans ( Excluding Stock ” ) in fiscal year 2013 . Shares previously issued under share can be increased by 25 % if certain performance metric income . For fiscal year 2013 , 2012 , and 2011 For fiscal year 2013 , 2012 , and 2011 , the 2013 , 2012 , and 2011 , the pool wa 0.35 2011 , the pool wa 0.35 % , 0.3 % , pool wa 0.35 % , 0.3 % , and 0.25 % , 0.3 % , and 0.25 % of operating income , individual and business performance . 83 Table of Contents PART II of Contents PART II Item 8 Activity for all stock plan assumption : Year Ended June 30 , 2013 2012 2011 Dividends Year Ended June 30 , 2013 2012 2011 Dividends per share Ended June 30 , 2013 2012 2011 Dividends per share ( June 30 , 2013 2012 2011 Dividends per share ( quarterly ( quarterly amount ) $ 0.20 - $ 0.23 $ 0.16 ) $ 0.20 - $ 0.23 $ 0.16 - $ 0.20 0.20 - $ 0.23 $ 0.16 - $ 0.20 $ 0.13 0.23 $ 0.16 - $ 0.20 $ 0.13 - $ 0.16 0.16 - $ 0.20 $ 0.13 - $ 0.16 Interest rate 0.20 $ 0.13 - $ 0.16 Interest rate range 0.6 % $ 0.16 Interest rate range 0.6 % - 1.1 % 0.7 rate range 0.6 % - 1.1 % 0.7 % - 1.7 0.6 % - 1.1 % 0.7 % - 1.7 % 1.1 1.1 % 0.7 % - 1.7 % 1.1 % - 2.4 0.7 % - 1.7 % 1.1 % - 2.4 % During 1.7 % 1.1 % - 2.4 % During fiscal year 2013 2.4 % During fiscal year 2013 , the following activity occurred balance , beginning of year 281 $ 23.91 Granted 104 $ beginning of year 281 $ 23.91 Granted 104 $ 28.37 Vested year 281 $ 23.91 Granted 104 $ 28.37 Vested ( 90 $ 23.91 Granted 104 $ 28.37 Vested ( 90 ) $ 104 $ 28.37 Vested ( 90 ) $ 24.49 Forfeited ( Vested ( 90 ) $ 24.49 Forfeited ( 22 ) $ ) $ 24.49 Forfeited ( 22 ) $ 25.10 Nonvested balance Forfeited ( 22 ) $ 25.10 Nonvested balance , end of balance , end of year 273 $ 25.50 As of June end of year 273 $ 25.50 As of June 30 , $ 25.50 As of June 30 , 2013 , there wa As of June 30 , 2013 , there wa approximately $ , there wa approximately $ 5.0 billion of total unrecognized compensation a weighted average period of 3 year . During fiscal year year . During fiscal year 2012 and 2011 , the following During fiscal year 2012 and 2011 , the following activity occurred , except fair value ) 2012 2011 Stock Awards Awards granted except fair value ) 2012 2011 Stock Awards Awards granted 110 2011 Stock Awards Awards granted 110 132 Weighted average grant-date fair Stock Awards Awards granted 110 132 Weighted average grant-date fair value average grant-date fair value $ 24.60 $ 22.22 Total vest-date fair fair value $ 24.60 $ 22.22 Total vest-date fair value of stock award vested wa $ 2.8 billion , $ 2.4 billion $ 2.8 billion , $ 2.4 billion , and $ 1.8 2.4 billion , and $ 1.8 billion , for fiscal year billion , for fiscal year 2013 , 2012 , and 2011 for fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Stock Options business acquisition during fiscal year 2013 , 2012 , and 2011 during fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively . Employee stock Employee stock option activity during 2013 wa a follows : Shares million ) Balance , July 1 , 2012 22 $ 18.69 Balance , July 1 , 2012 22 $ 18.69 Granted 2 , July 1 , 2012 22 $ 18.69 Granted 2 $ 1 , 2012 22 $ 18.69 Granted 2 $ 2.08 Exercised 2012 22 $ 18.69 Granted 2 $ 2.08 Exercised ( 19 $ 18.69 Granted 2 $ 2.08 Exercised ( 19 ) $ 2 $ 2.08 Exercised ( 19 ) $ 19.26 Canceled ( Exercised ( 19 ) $ 19.26 Canceled ( 1 ) $ ) $ 19.26 Canceled ( 1 ) $ 14.71 Balance , Canceled ( 1 ) $ 14.71 Balance , June 30 , $ 14.71 Balance , June 30 , 2013 4 $ 6.88 Balance , June 30 , 2013 4 $ 6.88 6.74 $ , June 30 , 2013 4 $ 6.88 6.74 $ 98 30 , 2013 4 $ 6.88 6.74 $ 98 Exercisable , , 2013 4 $ 6.88 6.74 $ 98 Exercisable , June 4 $ 6.88 6.74 $ 98 Exercisable , June 30 , $ 98 Exercisable , June 30 , 2013 2 $ 8.47 Exercisable , June 30 , 2013 2 $ 8.47 5.79 $ , June 30 , 2013 2 $ 8.47 5.79 $ 50 30 , 2013 2 $ 8.47 5.79 $ 50 84 Table , 2013 2 $ 8.47 5.79 $ 50 84 Table of 2 $ 8.47 5.79 $ 50 84 Table of Contents PART $ 8.47 5.79 $ 50 84 Table of Contents PART II of Contents PART II Item 8 As of June 30 , Item 8 As of June 30 , 2013 , approximately four As of June 30 , 2013 , approximately four million option exercise price range of $ 0.01 to $ 29.24 and a of $ 0.01 to $ 29.24 and a weighted average exercise average exercise price of $ 7.33 . During the period reported : ( In million ) 2013 2012 2011 Total intrinsic value ( In million ) 2013 2012 2011 Total intrinsic value of In million ) 2013 2012 2011 Total intrinsic value of stock of stock option exercised $ 197 $ 456 $ 222 Cash option exercised $ 197 $ 456 $ 222 Cash received from $ 197 $ 456 $ 222 Cash received from stock option from stock option exercise $ 382 $ 1,410 $ 1,954 Tax option exercise $ 382 $ 1,410 $ 1,954 Tax benefit realized $ 382 $ 1,410 $ 1,954 Tax benefit realized from stock from stock option exercise $ 69 $ 160 $ 77 Employee option exercise $ 69 $ 160 $ 77 Employee Stock Purchase $ 69 $ 160 $ 77 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2013 2012 2011 Shares Year Ended June 30 , 2013 2012 2011 Shares purchased 20 Ended June 30 , 2013 2012 2011 Shares purchased 20 20 June 30 , 2013 2012 2011 Shares purchased 20 20 20 2013 2012 2011 Shares purchased 20 20 20 Average price per 2012 2011 Shares purchased 20 20 20 Average price per share 2011 Shares purchased 20 20 20 Average price per share $ Average price per share $ 26.81 $ 25.03 $ 22.98 At per share $ 26.81 $ 25.03 $ 22.98 At June 30 $ 26.81 $ 25.03 $ 22.98 At June 30 , 2013 25.03 $ 22.98 At June 30 , 2013 , 191 million 22.98 At June 30 , 2013 , 191 million share of June 30 , 2013 , 191 million share of our common U.S. that qualifies under Section 401 ( k ) of the employee may contribute up to 75 % of their salary , with a maximum contribution of 3 % of a participant ’ for all plan were $ 393 million , $ 373 million $ 393 million , $ 373 million , and $ 282 373 million , and $ 282 million in fiscal year 2013 282 million in fiscal year 2013 , 2012 , and 2011 in fiscal year 2013 , 2012 , and 2011 , respectively 2013 , 2012 , and 2011 , respectively , and were Microsoft common stock . NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC the three month ended December 31 , 2012 , we changed month ended December 31 , 2012 , we changed the name the cost being allocated . 85 Table of Contents PART II of Contents PART II Item 8 In addition , certain cost cost allocation . In July 2013 , we announced a change business solution , and Office 365 . Entertainment and Devices Division Division offering include the Xbox 360 gaming and entertainment console , console , Kinect for Xbox 360 , Xbox 360 video game for Xbox 360 , Xbox 360 video game , Xbox 360 360 video game , Xbox 360 accessory , Xbox LIVE , million ) Year Ended June 30 , 2013 2012 2011 Revenue Year Ended June 30 , 2013 2012 2011 Revenue Windows Division Ended June 30 , 2013 2012 2011 Revenue Windows Division $ June 30 , 2013 2012 2011 Revenue Windows Division $ 18,680 2011 Revenue Windows Division $ 18,680 $ 18,844 $ 18,815 Server Windows Division $ 18,680 $ 18,844 $ 18,815 Server and Tools $ 18,680 $ 18,844 $ 18,815 Server and Tools 20,295 18,544 $ 18,815 Server and Tools 20,295 18,544 16,571 Online Services Division 18,815 Server and Tools 20,295 18,544 16,571 Online Services Division 3,284 Server and Tools 20,295 18,544 16,571 Online Services Division 3,284 2,935 18,544 16,571 Online Services Division 3,284 2,935 2,680 Microsoft Business Division 16,571 Online Services Division 3,284 2,935 2,680 Microsoft Business Division 24,738 Online Services Division 3,284 2,935 2,680 Microsoft Business Division 24,738 24,082 2,935 2,680 Microsoft Business Division 24,738 24,082 22,407 Entertainment and Devices 2,680 Microsoft Business Division 24,738 24,082 22,407 Entertainment and Devices Division Microsoft Business Division 24,738 24,082 22,407 Entertainment and Devices Division 10,213 22,407 Entertainment and Devices Division 10,213 9,590 8,896 Corporate and other Entertainment and Devices Division 10,213 9,590 8,896 Corporate and other 639 and Devices Division 10,213 9,590 8,896 Corporate and other 639 ( 9,590 8,896 Corporate and other 639 ( 272 ) 574 Consolidated Corporate and other 639 ( 272 ) 574 Consolidated $ 77,849 other 639 ( 272 ) 574 Consolidated $ 77,849 $ 73,723 272 ) 574 Consolidated $ 77,849 $ 73,723 $ 69,943 86 574 Consolidated $ 77,849 $ 73,723 $ 69,943 86 Table of $ 77,849 $ 73,723 $ 69,943 86 Table of Contents PART 77,849 $ 73,723 $ 69,943 86 Table of Contents PART II of Contents PART II Item 8 ( In million ) Year million ) Year Ended June 30 , 2013 2012 2011 Operating Year Ended June 30 , 2013 2012 2011 Operating Income ( Ended June 30 , 2013 2012 2011 Operating Income ( Loss June 30 , 2013 2012 2011 Operating Income ( Loss ) Loss ) Windows Division $ 8,943 $ 12,005 $ 12,040 Server Windows Division $ 8,943 $ 12,005 $ 12,040 Server and Tools $ 8,943 $ 12,005 $ 12,040 Server and Tools 8,152 7,256 $ 12,040 Server and Tools 8,152 7,256 6,132 Online Services Division 12,040 Server and Tools 8,152 7,256 6,132 Online Services Division ( Server and Tools 8,152 7,256 6,132 Online Services Division ( 1,298 6,132 Online Services Division ( 1,298 ) ( 8,117 ) ( Division ( 1,298 ) ( 8,117 ) ( 2,649 ) Microsoft ) ( 8,117 ) ( 2,649 ) Microsoft Business Division 16,189 2,649 ) Microsoft Business Division 16,189 15,803 14,467 Entertainment and Devices ) Microsoft Business Division 16,189 15,803 14,467 Entertainment and Devices Division Microsoft Business Division 16,189 15,803 14,467 Entertainment and Devices Division 888 14,467 Entertainment and Devices Division 888 381 1,299 Corporate and other Entertainment and Devices Division 888 381 1,299 Corporate and other ( and Devices Division 888 381 1,299 Corporate and other ( 6,110 1,299 Corporate and other ( 6,110 ) ( 5,565 ) ( other ( 6,110 ) ( 5,565 ) ( 4,128 ) Consolidated ) ( 5,565 ) ( 4,128 ) Consolidated $ 26,764 $ ( 4,128 ) Consolidated $ 26,764 $ 21,763 $ 27,161 Reconciling ) Consolidated $ 26,764 $ 21,763 $ 27,161 Reconciling amount in $ 26,764 $ 21,763 $ 27,161 Reconciling amount in the table million ) Year Ended June 30 , 2013 2012 2011 Corporate-level Year Ended June 30 , 2013 2012 2011 Corporate-level activity ( Ended June 30 , 2013 2012 2011 Corporate-level activity ( a June 30 , 2013 2012 2011 Corporate-level activity ( a ) ( a ) $ ( 6,665 ) $ ( 5,114 ) ( 6,665 ) $ ( 5,114 ) $ ( 4,506 ) ( 5,114 ) $ ( 4,506 ) Revenue reconciling amount ( reconciling amount ( b ) 400 ( 484 ) 380 Other ( b ) 400 ( 484 ) 380 Other 155 33 ) 400 ( 484 ) 380 Other 155 33 ( 2 ( 484 ) 380 Other 155 33 ( 2 ) Total 484 ) 380 Other 155 33 ( 2 ) Total $ 380 Other 155 33 ( 2 ) Total $ ( 6,110 2 ) Total $ ( 6,110 ) $ ( 5,565 ) ( 6,110 ) $ ( 5,565 ) $ ( 4,128 ) ( 5,565 ) $ ( 4,128 ) ( a ) Corporate-level reconciling amount for fiscal year 2012 and 2013 include the deferral for fiscal year 2012 and 2013 include the deferral and subsequent , respectively , of $ 540 million of revenue related to States accounted for more than 10 % of fiscal year 2013 10 % of fiscal year 2013 , 2012 , or 2011 of fiscal year 2013 , 2012 , or 2011 revenue . 2013 , 2012 , or 2011 revenue . Revenue , classified million ) Year Ended June 30 , 2013 2012 2011 United Year Ended June 30 , 2013 2012 2011 United States ( Ended June 30 , 2013 2012 2011 United States ( a June 30 , 2013 2012 2011 United States ( a ) States ( a ) $ 41,344 $ 38,846 $ 38,008 Other a ) $ 41,344 $ 38,846 $ 38,008 Other country 36,505 $ 41,344 $ 38,846 $ 38,008 Other country 36,505 34,877 31,935 38,846 $ 38,008 Other country 36,505 34,877 31,935 Total $ 77,849 $ 38,008 Other country 36,505 34,877 31,935 Total $ 77,849 $ 38,008 Other country 36,505 34,877 31,935 Total $ 77,849 $ 73,723 36,505 34,877 31,935 Total $ 77,849 $ 73,723 $ 69,943 ( 31,935 Total $ 77,849 $ 73,723 $ 69,943 ( a ) $ 77,849 $ 73,723 $ 69,943 ( a ) Includes billing million ) Year Ended June 30 , 2013 2012 2011 Microsoft Year Ended June 30 , 2013 2012 2011 Microsoft Office system Ended June 30 , 2013 2012 2011 Microsoft Office system $ June 30 , 2013 2012 2011 Microsoft Office system $ 22,995 2011 Microsoft Office system $ 22,995 $ 22,299 $ 20,730 Windows Office system $ 22,995 $ 22,299 $ 20,730 Windows operating system $ 22,995 $ 22,299 $ 20,730 Windows operating system for computing operating system for computing device 17,529 17,320 17,825 Server product and system for computing device 17,529 17,320 17,825 Server product and tool for computing device 17,529 17,320 17,825 Server product and tool 15,408 17,825 Server product and tool 15,408 14,232 13,251 Xbox 360 platform Server product and tool 15,408 14,232 13,251 Xbox 360 platform 7,100 product and tool 15,408 14,232 13,251 Xbox 360 platform 7,100 8,045 tool 15,408 14,232 13,251 Xbox 360 platform 7,100 8,045 8,103 Consulting 14,232 13,251 Xbox 360 platform 7,100 8,045 8,103 Consulting and product 13,251 Xbox 360 platform 7,100 8,045 8,103 Consulting and product support Xbox 360 platform 7,100 8,045 8,103 Consulting and product support service Consulting and product support service 4,372 3,976 3,372 Advertising 3,387 3,181 and product support service 4,372 3,976 3,372 Advertising 3,387 3,181 2,913 product support service 4,372 3,976 3,372 Advertising 3,387 3,181 2,913 Other service 4,372 3,976 3,372 Advertising 3,387 3,181 2,913 Other 7,058 4,670 4,372 3,976 3,372 Advertising 3,387 3,181 2,913 Other 7,058 4,670 3,749 3,976 3,372 Advertising 3,387 3,181 2,913 Other 7,058 4,670 3,749 Total Advertising 3,387 3,181 2,913 Other 7,058 4,670 3,749 Total $ 77,849 3,387 3,181 2,913 Other 7,058 4,670 3,749 Total $ 77,849 $ 3,181 2,913 Other 7,058 4,670 3,749 Total $ 77,849 $ 73,723 7,058 4,670 3,749 Total $ 77,849 $ 73,723 $ 69,943 87 3,749 Total $ 77,849 $ 73,723 $ 69,943 87 Table of $ 77,849 $ 73,723 $ 69,943 87 Table of Contents PART 77,849 $ 73,723 $ 69,943 87 Table of Contents PART II of Contents PART II Item 8 Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2013 2012 2011 United million ) June 30 , 2013 2012 2011 United States $ ) June 30 , 2013 2012 2011 United States $ 16,615 June 30 , 2013 2012 2011 United States $ 16,615 $ 2012 2011 United States $ 16,615 $ 14,081 $ 18,498 Luxembourg United States $ 16,615 $ 14,081 $ 18,498 Luxembourg 6,943 6,975 $ 16,615 $ 14,081 $ 18,498 Luxembourg 6,943 6,975 0 Other $ 14,081 $ 18,498 Luxembourg 6,943 6,975 0 Other country 4,171 14,081 $ 18,498 Luxembourg 6,943 6,975 0 Other country 4,171 3,835 $ 18,498 Luxembourg 6,943 6,975 0 Other country 4,171 3,835 2,989 6,943 6,975 0 Other country 4,171 3,835 2,989 Total $ 27,729 6,975 0 Other country 4,171 3,835 2,989 Total $ 27,729 $ 0 Other country 4,171 3,835 2,989 Total $ 27,729 $ 24,891 4,171 3,835 2,989 Total $ 27,729 $ 24,891 $ 21,487 NOTE 2,989 Total $ 27,729 $ 24,891 $ 21,487 NOTE 22 — $ 27,729 $ 24,891 $ 21,487 NOTE 22 — QUARTERLY INFORMATION $ 24,891 $ 21,487 NOTE 22 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2013 Revenue June 30 Total Fiscal Year 2013 Revenue $ 16,008 $ 21,456 Fiscal Year 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross profit 11,840 $ 20,489 $ 19,896 $ 77,849 Gross profit 11,840 15,764 15,702 19,896 $ 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net $ 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 77,849 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 Gross profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 profit 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 6,055 15,702 14,294 57,600 Net income 4,466 6,377 6,055 ( a ) 14,294 57,600 Net income 4,466 6,377 6,055 ( a ) 4,965 57,600 Net income 4,466 6,377 6,055 ( a ) 4,965 ( 6,377 6,055 ( a ) 4,965 ( b ) 21,863 ( ) 4,965 ( b ) 21,863 ( c ) Basic earnings ) Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share 0.53 2.61 Diluted earnings per share 0.53 0.76 0.72 ( a ) Diluted earnings per share 0.53 0.76 0.72 ( a ) 0.59 earnings per share 0.53 0.76 0.72 ( a ) 0.59 ( 0.76 0.72 ( a ) 0.59 ( b ) 2.58 ( ) 0.59 ( b ) 2.58 ( c ) Fiscal Year ( c ) Fiscal Year 2012 Revenue $ 17,372 $ 20,885 Fiscal Year 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 2012 Revenue $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ $ 17,372 $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross $ 20,885 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 $ 17,407 $ 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 18,059 $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net $ 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 73,723 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 Gross profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 profit 13,595 15,247 13,455 13,896 56,193 Net income 5,738 6,624 5,108 13,455 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) 13,896 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( 56,193 Net income 5,738 6,624 5,108 ( 492 ) ( d income 5,738 6,624 5,108 ( 492 ) ( d ) 16,978 492 ) ( d ) 16,978 ( d ) Basic earnings ( loss ) per share 0.68 0.79 0.61 ( 0.06 ) loss ) per share 0.68 0.79 0.61 ( 0.06 ) 2.02 ) per share 0.68 0.79 0.61 ( 0.06 ) 2.02 Diluted share 0.68 0.79 0.61 ( 0.06 ) 2.02 Diluted earnings ( 0.79 0.61 ( 0.06 ) 2.02 Diluted earnings ( loss ) ( loss ) per share 0.68 0.78 0.60 ( 0.06 ) loss ) per share 0.68 0.78 0.60 ( 0.06 ) ( ) per share 0.68 0.78 0.60 ( 0.06 ) ( d share 0.68 0.78 0.60 ( 0.06 ) ( d ) 2.00 0.06 ) ( d ) 2.00 ( d ) ( a the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( € 561 million $ 733 million ( € 561 million ) and diluted earnings earnings per share by $ 0.09 . ( b ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( c ) Includes the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( € 561 million $ 733 million ( € 561 million ) and diluted earnings earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( d ) Includes decreased net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . 88 Table of Contents share by $ 0.73 . 88 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , and the June 30 , 2013 and 2012 , and the related consolidated in the period ended June 30 , 2013 . These financial period ended June 30 , 2013 . These financial statement are and subsidiary a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , and the June 30 , 2013 and 2012 , and the result of in the period ended June 30 , 2013 , in conformity period ended June 30 , 2013 , in conformity with accounting financial reporting a of June 30 , 2013 , based on a of June 30 , 2013 , based on the criterion Control – Integrated Framework ( 1992 ) issued by the Committee and our report dated July 30 , 2013 , expressed an report dated July 30 , 2013 , expressed an unqualified opinion LLP Seattle , Washington July 30 , 2013 89 Table of , Washington July 30 , 2013 89 Table of Contents PART Washington July 30 , 2013 89 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 1992 ) issued by the Committee wa effective a of June 30 , 2013 . There were a of June 30 , 2013 . There were no change during the quarter ended June 30 , 2013 that have materially quarter ended June 30 , 2013 that have materially affected , financial reporting a of June 30 , 2013 ; their report a of June 30 , 2013 ; their report is included report is included in Item 9A . 90 Table of Contents included in Item 9A . 90 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2013 , based on a of June 30 , 2013 , based on criterion established Control – Integrated Framework ( 1992 ) issued by the Committee policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2013 , based on a of June 30 , 2013 , based on the criterion Control – Integrated Framework ( 1992 ) issued by the Committee for the year ended June 30 , 2013 , of the year ended June 30 , 2013 , of the Company and and our report dated July 30 , 2013 , expressed an report dated July 30 , 2013 , expressed an unqualified opinion LLP Seattle , Washington July 30 , 2013 91 Table of , Washington July 30 , 2013 91 Table of Contents PART Washington July 30 , 2013 91 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 19 , 2013 ( the “ be held November 19 , 2013 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial Ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 92 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 49 Comprehensive Income Statements 50 Balance Statements 49 Comprehensive Income Statements 50 Balance Sheets 51 Cash Flows Income Statements 50 Balance Sheets 51 Cash Flows Statements 52 Stockholders Sheets 51 Cash Flows Statements 52 Stockholders ’ Equity Statements 53 52 Stockholders ’ Equity Statements 53 Notes to Financial Statements 54 53 Notes to Financial Statements 54 Report of Independent Registered Public Independent Registered Public Accounting Firm 89 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 6/18/12 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 93 Table of . , a Trustee 8-K 4.5 9/27/10 93 Table of Contents , a Trustee 8-K 4.5 9/27/10 93 Table of Contents PART a Trustee 8-K 4.5 9/27/10 93 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.7 11/7/12 10.1 * Microsoft . , a Trustee 8-K 4.7 11/7/12 10.1 * Microsoft Corporation , a Trustee 8-K 4.7 11/7/12 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.7 11/7/12 10.1 * Microsoft Corporation 2001 Stock 11/7/12 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Stock 1/19/12 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.6 * Form of Stock Award Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 Microsoft Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form Corporation 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of 2001 Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Stock Plan 10-K 10.8 8/25/06 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 94 Table of Contents for Non-Employee Directors S-8 99.2 2/28/06 94 Table of Contents PART Non-Employee Directors S-8 99.2 2/28/06 94 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Executive Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form Officer Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Incentive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Plan 10-Q 9/30/08 10.17 10/23/08 10.18 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/12 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/12 10.18 10/18/12 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/12 10.18 10/18/12 10.19 * Resignation 2001 Stock Plan 10-Q 9/30/12 10.18 10/18/12 10.19 * Resignation Agreement Stock Plan 10-Q 9/30/12 10.18 10/18/12 10.19 * Resignation Agreement and Plan 10-Q 9/30/12 10.18 10/18/12 10.19 * Resignation Agreement and Full Corporation and Steven Sinofsky X 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase * Furnished , not filed 95 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 30 , 2013 . M ICROSOFT , on July 30 , 2013 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 30 , 2013 . Signature Title indicated on July 30 , 2013 . Signature Title / S ( Principal Accounting Officer ) 96 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-14-289961/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-14-289961/full-submission.txt new file mode 100644 index 0000000..470408a --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-14-289961/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2014 OR ¨ TRANSITION Year Ended June 30 , 2014 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. x Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2013 , the aggregate As of December 31 , 2013 , the aggregate market value of the registrant wa $ 284,539,953,282 based on the closing sale System . As of July 22 , 2014 , there were As of July 22 , 2014 , there were 8,239,848,789 share , 2014 , there were 8,239,848,789 share of common stock outstanding to be held on December 3 , 2014 are incorporated by held on December 3 , 2014 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2014 INDEX Page PART Year Ended June 30 , 2014 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 14 Item 1A . Risk Factors of the Registrant 14 Item 1A . Risk Factors 15 Item Item 1A . Risk Factors 15 Item 1B . Unresolved Staff . Risk Factors 15 Item 1B . Unresolved Staff Comments 24 1B . Unresolved Staff Comments 24 Item 2 . Properties 24 Unresolved Staff Comments 24 Item 2 . Properties 24 Item 3 24 Item 2 . Properties 24 Item 3 . Legal Proceedings 2 . Properties 24 Item 3 . Legal Proceedings 24 Item Item 3 . Legal Proceedings 24 Item 4 . Mine Safety . Legal Proceedings 24 Item 4 . Mine Safety Disclosures 24 4 . Mine Safety Disclosures 24 PART II Item 5 . Disclosures 24 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 25 Item 6 . Selected Financial of Equity Securities 25 Item 6 . Selected Financial Data 25 6 . Selected Financial Data 25 Item 7 . Management ’ Selected Financial Data 25 Item 7 . Management ’ s Discussion Condition and Results of Operations 26 Item 7A . Quantitative and Results of Operations 26 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 51 Item 8 . Financial Statements about Market Risk 51 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 53 Item 9 . Changes in and Supplementary Data 53 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 98 Item 9A . Controls and and Financial Disclosure 98 Item 9A . Controls and Procedures 98 9A . Controls and Procedures 98 Report of Management on Internal Internal Control over Financial Reporting 98 Report of Independent Registered Public Independent Registered Public Accounting Firm 99 Item 9B . Other Information Public Accounting Firm 99 Item 9B . Other Information 100 PART Item 9B . Other Information 100 PART III Item 10 . Information 100 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 100 Item 11 . Executive Compensation and Corporate Governance 100 Item 11 . Executive Compensation 100 Item Item 11 . Executive Compensation 100 Item 12 . Security Ownership . Executive Compensation 100 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 100 Item 13 . Certain Relationships Related Stockholder Matters 100 Item 13 . Certain Relationships and Related Transactions , and Director Independence 100 Item 14 . Principal Accounting and Director Independence 100 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 100 PART IV Item 15 . Services 100 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 101 Signatures 105 2 Table of Financial Statement Schedules 101 Signatures 105 2 Table of Contents PART Statement Schedules 101 Signatures 105 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , “ Quantitative and ( Part II , Item 7A ) , and “ Management ( Part II , Item 7 ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Microsoft wa founded GENERAL Microsoft wa founded in 1975 . Our mission is to have office in more than 100 country . We generate revenue CRM Online , Microsoft Office 365 , OneDrive , Skype , first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial , and Commercial Other . 3 Table of Contents PART I of Contents PART I Item 1 On April 25 , 2014 I Item 1 On April 25 , 2014 , we completed 1 On April 25 , 2014 , we completed the transaction fourth quarter of fiscal year 2014 . Our segment provide management information is contained in Note 21 – Segment Information and Geographic a the transition to Office 365 Consumer , our subscription-based cloud other productivity service . Office 365 Consumer revenue is included in & C Other segment . 4 Table of Contents PART I of Contents PART I Item 1 The Windows Phone operating system service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively . Surface device were first released in October 2012 . Our latest Surface device device , the Surface Pro 3 , wa released in June , wa released in June 2014 . Competition Our Xbox Platform latest generation console in November 2012 . Sony released their latest latest generation console in November 2013 . We believe the success other digital content offering . 5 Table of Contents PART I of Contents PART I Item 1 Surface device face competition from acquisition of NDS on April 25 , 2014 . Competition Our NDS on April 25 , 2014 . Competition Our phone face ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising planned international market . Office 365 Consumer is designed to increase recommendation . Competitors to Office 365 Consumer are the same a above for Office Consumer . 6 Table of Contents PART I of Contents PART I Item 1 Competitors to Studios are the Unix operating system preinstalled on 7 Table of Contents PART I of Contents PART I Item 1 server hardware . Nearly all Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office , and Microsoft Azure . 8 Table of Contents PART I of Contents PART I Item 1 Enterprise Services , including Premier various Microsoft product . Office 365 Commercial is an online service technology . Competitors to Office 365 Commercial are the same a production of certain device . 9 Table of Contents PART I of Contents PART I Item 1 RESEARCH AND DEVELOPMENT During fiscal AND DEVELOPMENT During fiscal year 2014 , 2013 , and 2012 During fiscal year 2014 , 2013 , and 2012 , research 2014 , 2013 , and 2012 , research and development expense and development expense wa $ 11.4 billion , $ 10.4 billion $ 11.4 billion , $ 10.4 billion , and $ 9.8 10.4 billion , and $ 9.8 billion , respectively . These respectively . These amount represented 13 % of revenue in each have a portfolio of over 55,000 U.S. and international patent issued international patent issued and over 40,000 pending . While we employ , we received an initial 10-year non-exclusive license to certain Nokia of emerging technology trend and 10 Table of Contents PART I of Contents PART I Item 1 breakthrough that we believe offer Bing or Windows with Office 365 subscription . There are two . Although each type of 11 Table of Contents PART I of Contents PART I Item 1 reselling partner reach organization of portal and channel , Office 365 , Windows Phone Store , Microsoft Azure , and Office 365 consisting of online version of volume licensing agreement . Office 365 is also available for purchase through the Open Program . 12 Table of Contents PART I of Contents PART I Item 1 Select Plus Licensing Designed primarily customer accounted for more than 10 % of fiscal year 2014 10 % of fiscal year 2014 , 2013 , or 2012 of fiscal year 2014 , 2013 , or 2012 revenue . 2014 , 2013 , or 2012 revenue . Our practice is backlog is not significant . 13 Table of Contents PART I of Contents PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 25 , 2014 were a follows a of July 25 , 2014 were a follows : Name with the Company Satya Nadella 46 Chief Executive Officer Lisa E. Executive Officer Lisa E. Brummel 54 Executive Vice President , Human Human Resources Christopher C. Capossela 44 Executive Vice President , Chief Marketing Officer Amy E. Hood 42 Executive Vice President , Chief Financial Officer Bradford L. Smith 55 Executive Vice President , General ; Secretary B. Kevin Turner 49 Chief Operating Officer Mr. Nadella Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise since July 2013 . From 2011 to 2013 since July 2013 . From 2011 to 2013 , Mr. Nadella 2013 . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s , Human Resources in July 2013 , after serving a Chief a Chief People Officer since 2011 and Senior Vice President , , Human Resources beginning in 2005 . Prior to that she , Human Resources since May 2005 . From 2000 to 2005 since May 2005 . From 2000 to 2005 , she had 2005 . From 2000 to 2005 , she had been Corporate . Since joining Microsoft in 1989 , Ms. Brummel ha held Chief Marketing Officer in March 2014 . Prior to that he . In his more than 20 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . Beginning in 2010 , May 2013 . Beginning in 2010 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha Counsel , and Secretary in 2011 . Prior to that he , and Secretary since November 2001 . Mr. Smith wa also named Chief Compliance Officer in 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Turner wa appointed Chief Operating Officer in September 2005 . Before joining Microsoft , s Club division . From 2001 to 2002 , he served division . From 2001 to 2002 , he served a Executive Information Systems Division . From 2000 to 2001 , he served Division . From 2000 to 2001 , he served a it Directors of Nordstrom , Inc. 14 Table of Contents PART I of Contents PART I Item 1 , 1A EMPLOYEES As of PART I Item 1 , 1A EMPLOYEES As of June 30 1A EMPLOYEES As of June 30 , 2014 , we employed As of June 30 , 2014 , we employed approximately 128,000 2014 , we employed approximately 128,000 people on a full-time basis on a full-time basis , 62,000 in the U.S. and 66,000 62,000 in the U.S. and 66,000 internationally , including approximately 25,000 66,000 internationally , including approximately 25,000 employee transferred a part of the NDS acquisition in April 2014 . Of the total employed the total employed people , 44,000 were in product research and product research and development , 30,000 in sale and marketing , in sale and marketing , 23,000 in product support and consulting support and consulting service , 20,000 in manufacturing and distribution , manufacturing and distribution , and 11,000 in general and administration . and administration . In July 2014 , we announced a restructuring which will eliminate up to 18,000 position in fiscal year 2015 18,000 position in fiscal year 2015 , including 12,500 professional and fiscal year 2015 , including 12,500 professional and factory position related our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to Investor Relations website . ITEM 1A . RISK FACTORS Our operation low and software product can 15 Table of Contents PART I of Contents PART I Item 1A be distributed broadly and quickly the launch of the Windows 8 operating system , Surface , consumer under this model . 16 Table of Contents PART I of Contents PART I Item 1A • Other competitor develop and computing device . In July 2014 , our leadership announced it Azure Services platform , Office 365 , other cloud-based service offering product , service , and 17 Table of Contents PART I of Contents PART I Item 1A distribution channel investment for several financial condition . In April 2014 , we acquired from Nokia restructuring we announced in July 2014 or otherwise integrating the NDS fourth quarter of fiscal year 2012 , we recorded a $ , we recorded a $ 6.2 billion charge for the impairment we educate consumer about the 18 Table of Contents PART I of Contents PART I Item 1A benefit of licensing genuine product of their data . Hackers 19 Table of Contents PART I of Contents PART I Item 1A tend to focus their effort , Exchange Online , Office 365 , SharePoint Online , OneDrive result and financial condition . 20 Table of Contents PART I of Contents PART I Item 1A Government litigation and regulatory activity to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a Sudan , and Syria . 21 Table of Contents PART I of Contents PART I Item 1A Other regulatory area that may NDS business acquired in April 2014 , our ability to develop product we may offer . 22 Table of Contents PART I of Contents PART I Item 1A Our software product also may . We operate in over 100 country and a significant part affect our financial result . 23 Table of Contents PART I of Contents PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2014 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office King County , Washington : 10 million square foot of owned owned space situated on approximately 500 acre of land we own Development ” section of Item 1 of this Form 10-K. Our Item 1 of this Form 10-K. Our facility are fully used we may currently develop approximately 1.6 million square foot of additional production of phone . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 24 Table of Contents PART II of Contents PART II Item 5 , 6 PART II ITEM PART II Item 5 , 6 PART II ITEM 5 . , 6 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 22 , 2014 , there were . On July 22 , 2014 , there were 113,923 registered , 2014 , there were 113,923 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2014 30 Fiscal Year Fiscal Year 2014 High $ 36.43 $ 38.98 Fiscal Year 2014 High $ 36.43 $ 38.98 $ 41.50 $ 2014 High $ 36.43 $ 38.98 $ 41.50 $ 42.29 $ $ 36.43 $ 38.98 $ 41.50 $ 42.29 $ 42.29 Low $ 38.98 $ 41.50 $ 42.29 $ 42.29 Low $ 30.84 $ 41.50 $ 42.29 $ 42.29 Low $ 30.84 $ 32.80 42.29 $ 42.29 Low $ 30.84 $ 32.80 $ 34.63 $ 42.29 Low $ 30.84 $ 32.80 $ 34.63 $ 38.51 $ $ 30.84 $ 32.80 $ 34.63 $ 38.51 $ 30.84 Fiscal $ 32.80 $ 34.63 $ 38.51 $ 30.84 Fiscal Year 2013 $ 34.63 $ 38.51 $ 30.84 Fiscal Year 2013 High $ 38.51 $ 30.84 Fiscal Year 2013 High $ 31.61 $ 30.25 Fiscal Year 2013 High $ 31.61 $ 30.25 $ 28.66 $ 2013 High $ 31.61 $ 30.25 $ 28.66 $ 35.78 $ $ 31.61 $ 30.25 $ 28.66 $ 35.78 $ 35.78 Low $ 30.25 $ 28.66 $ 35.78 $ 35.78 Low $ 28.54 $ 28.66 $ 35.78 $ 35.78 Low $ 28.54 $ 26.26 35.78 $ 35.78 Low $ 28.54 $ 26.26 $ 26.28 $ 35.78 Low $ 28.54 $ 26.26 $ 26.28 $ 28.11 $ $ 28.54 $ 26.26 $ 26.28 $ 28.11 $ 26.26 DIVIDENDS $ 26.26 $ 26.28 $ 28.11 $ 26.26 DIVIDENDS AND SHARE $ 26.28 $ 28.11 $ 26.26 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2014 , all of which were ( in million ) April 1 , 2014 – April 30 million ) April 1 , 2014 – April 30 , 2014 1 , 2014 – April 30 , 2014 756,720 $ 41.37 2014 – April 30 , 2014 756,720 $ 41.37 756,720 $ – April 30 , 2014 756,720 $ 41.37 756,720 $ 36,177 30 , 2014 756,720 $ 41.37 756,720 $ 36,177 May 1 , 2014 756,720 $ 41.37 756,720 $ 36,177 May 1 , 756,720 $ 41.37 756,720 $ 36,177 May 1 , 2014 – 41.37 756,720 $ 36,177 May 1 , 2014 – May 31 $ 36,177 May 1 , 2014 – May 31 , 2014 1 , 2014 – May 31 , 2014 27,395,976 $ 39.63 2014 – May 31 , 2014 27,395,976 $ 39.63 27,395,976 $ – May 31 , 2014 27,395,976 $ 39.63 27,395,976 $ 35,092 31 , 2014 27,395,976 $ 39.63 27,395,976 $ 35,092 June 1 , 2014 27,395,976 $ 39.63 27,395,976 $ 35,092 June 1 , 27,395,976 $ 39.63 27,395,976 $ 35,092 June 1 , 2014 – 39.63 27,395,976 $ 35,092 June 1 , 2014 – June 30 $ 35,092 June 1 , 2014 – June 30 , 2014 1 , 2014 – June 30 , 2014 0 $ 0.00 2014 – June 30 , 2014 0 $ 0.00 0 $ – June 30 , 2014 0 $ 0.00 0 $ 35,092 30 , 2014 0 $ 0.00 0 $ 35,092 28,152,696 28,152,696 , 2014 0 $ 0.00 0 $ 35,092 28,152,696 28,152,696 The 0 $ 0.00 0 $ 35,092 28,152,696 28,152,696 The repurchase were $ 0.00 0 $ 35,092 28,152,696 28,152,696 The repurchase were made 0.00 0 $ 35,092 28,152,696 28,152,696 The repurchase were made using the open market . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2014 ( a ) Year Ended June 30 , 2014 ( a ) 2013 2012 , 2014 ( a ) 2013 2012 2011 2010 Revenue $ 2014 ( a ) 2013 2012 2011 2010 Revenue $ 86,833 ( a ) 2013 2012 2011 2010 Revenue $ 86,833 $ a ) 2013 2012 2011 2010 Revenue $ 86,833 $ 77,849 2012 2011 2010 Revenue $ 86,833 $ 77,849 $ 73,723 $ 2010 Revenue $ 86,833 $ 77,849 $ 73,723 $ 69,943 $ $ 86,833 $ 77,849 $ 73,723 $ 69,943 $ 62,484 Operating $ 77,849 $ 73,723 $ 69,943 $ 62,484 Operating income $ $ 73,723 $ 69,943 $ 62,484 Operating income $ 27,759 $ $ 62,484 Operating income $ 27,759 $ 26,764 ( c ) Operating income $ 27,759 $ 26,764 ( c ) $ 21,763 26,764 ( c ) $ 21,763 ( d ) $ 27,161 21,763 ( d ) $ 27,161 $ 24,098 Net income $ d ) $ 27,161 $ 24,098 Net income $ 22,074 ( $ 24,098 Net income $ 22,074 ( b ) $ 21,863 22,074 ( b ) $ 21,863 ( c ) $ 16,978 21,863 ( c ) $ 16,978 ( d ) $ 23,150 16,978 ( d ) $ 23,150 $ 18,760 Diluted earnings per d ) $ 23,150 $ 18,760 Diluted earnings per share $ Diluted earnings per share $ 2.63 ( b ) $ 2.58 2.63 ( b ) $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 $ 2.10 Cash dividend declared d ) $ 2.69 $ 2.10 Cash dividend declared per share dividend declared per share $ 1.12 $ 0.92 $ 0.80 $ per share $ 1.12 $ 0.92 $ 0.80 $ 0.64 $ $ 1.12 $ 0.92 $ 0.80 $ 0.64 $ 0.52 Cash $ 0.92 $ 0.80 $ 0.64 $ 0.52 Cash , cash $ 0.80 $ 0.64 $ 0.52 Cash , cash equivalent , , and short-term investment $ 85,709 $ 77,022 $ 63,040 $ short-term investment $ 85,709 $ 77,022 $ 63,040 $ 52,772 $ $ 85,709 $ 77,022 $ 63,040 $ 52,772 $ 36,788 Total $ 77,022 $ 63,040 $ 52,772 $ 36,788 Total asset $ $ 63,040 $ 52,772 $ 36,788 Total asset $ 172,384 $ $ 36,788 Total asset $ 172,384 $ 142,431 $ 121,271 $ Total asset $ 172,384 $ 142,431 $ 121,271 $ 108,704 $ $ 172,384 $ 142,431 $ 121,271 $ 108,704 $ 86,113 Long-term $ 142,431 $ 121,271 $ 108,704 $ 86,113 Long-term obligation $ $ 121,271 $ 108,704 $ 86,113 Long-term obligation $ 36,975 $ $ 86,113 Long-term obligation $ 36,975 $ 26,070 $ 22,220 $ Long-term obligation $ 36,975 $ 26,070 $ 22,220 $ 22,847 $ $ 36,975 $ 26,070 $ 22,220 $ 22,847 $ 13,791 Stockholders $ 26,070 $ 22,220 $ 22,847 $ 13,791 Stockholders ’ equity $ 22,220 $ 22,847 $ 13,791 Stockholders ’ equity $ 89,784 13,791 Stockholders ’ equity $ 89,784 $ 78,944 $ 66,363 $ ’ equity $ 89,784 $ 78,944 $ 66,363 $ 57,083 $ $ 89,784 $ 78,944 $ 66,363 $ 57,083 $ 46,175 25 $ 78,944 $ 66,363 $ 57,083 $ 46,175 25 Table of $ 66,363 $ 57,083 $ 46,175 25 Table of Contents PART 66,363 $ 57,083 $ 46,175 25 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) On April ( a ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all fourth quarter of fiscal year 2014 related to adjustment to prior decreased net income by $ 458 million and diluted earnings per earnings per share by $ 0.05 . ( c ) Includes the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( €561 million ) earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted earnings earnings per share by $ 0.07 . ( d ) Includes and net income by $ 6.2 billion and diluted earnings per earnings per share by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT ’ S DISCUSSION device operating system and hardware 26 Table of Contents PART II of Contents PART II Item 7 With investment in these area ecosystem , our digital work 27 Table of Contents PART II of Contents PART II Item 7 and life experience will also NDS ” ) on April 25 , 2014 , phone . ) on April 25 , 2014 , phone . As consumer To support our strategy of 28 Table of Contents PART II of Contents PART II Item 7 reinventing productivity to empower every a restructuring plan in July 2014 . Through this restructuring , ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Unearned Revenue Quarterly deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Segment information appearing in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on first quarter of fiscal year 2014 , we changed our organizational segment performance during fiscal year 2014 . Our reportable segment are described below . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all for total consideration of $ 9.5 billion . This amount wa wa greater than the $ 7.2 billion disclosed previously , primarily , primarily due to $ 1.5 billion of cash acquired , foreign currency movement of $ 330 million , working capital adjustment working capital adjustment of $ 210 million , and other adjustment and other adjustment of $ 260 million . See Note 9 260 million . See Note 9 – Business Combinations of the fourth quarter of fiscal year 2014 . 29 Table of Contents of fiscal year 2014 . 29 Table of Contents PART II of Contents PART II Item 7 Devices and Consumer ( “ ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office and per share amount ) 2014 2013 2012 Percentage Change 2014 per share amount ) 2014 2013 2012 Percentage Change 2014 Versus share amount ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Revenue $ 86,833 2013 Percentage Change 2013 Versus 2012 Revenue $ 86,833 $ 77,849 2013 Versus 2012 Revenue $ 86,833 $ 77,849 $ 73,723 12 2012 Revenue $ 86,833 $ 77,849 $ 73,723 12 % 6 $ 86,833 $ 77,849 $ 73,723 12 % 6 % Gross 86,833 $ 77,849 $ 73,723 12 % 6 % Gross margin 77,849 $ 73,723 12 % 6 % Gross margin $ 59,899 6 % Gross margin $ 59,899 $ 57,600 $ 56,193 4 Gross margin $ 59,899 $ 57,600 $ 56,193 4 % 3 $ 59,899 $ 57,600 $ 56,193 4 % 3 % Operating 59,899 $ 57,600 $ 56,193 4 % 3 % Operating income 57,600 $ 56,193 4 % 3 % Operating income $ 27,759 3 % Operating income $ 27,759 $ 26,764 $ 21,763 4 Operating income $ 27,759 $ 26,764 $ 21,763 4 % 23 $ 27,759 $ 26,764 $ 21,763 4 % 23 % Diluted 27,759 $ 26,764 $ 21,763 4 % 23 % Diluted earnings 26,764 $ 21,763 4 % 23 % Diluted earnings per share Diluted earnings per share $ 2.63 $ 2.58 $ 2.00 2 per share $ 2.63 $ 2.58 $ 2.00 2 % 29 $ 2.63 $ 2.58 $ 2.00 2 % 29 % Fiscal 2.63 $ 2.58 $ 2.00 2 % 29 % Fiscal year 2.58 $ 2.00 2 % 29 % Fiscal year 2014 compared % 29 % Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Revenue increased $ 9.0 billion year 2013 Revenue increased $ 9.0 billion or 12 % , increased $ 9.0 billion or 12 % , demonstrating growth across from our cloud-based offering . 30 Table of Contents PART II of Contents PART II Item 7 Gross margin increased $ 2.3 7 Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million higher datacenter expense , . Operating income increased $ 995 million or 4 % , increased $ 995 million or 4 % , reflecting higher gross and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , due mainly to and marketing expense increased $ 535 million or 4 % , increased $ 535 million or 4 % , primarily due to advertising cost . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Revenue increased $ 4.1 billion year 2012 Revenue increased $ 4.1 billion or 6 % , increased $ 4.1 billion or 6 % , mainly due to . Operating income grew $ 5.0 billion or 23 % , grew $ 5.0 billion or 23 % , primarily due to primarily due to the $ 6.2 billion goodwill impairment charge recorded Cost of revenue increased $ 2.7 billion or 16 % , increased $ 2.7 billion or 16 % , reflecting increased product associated with Surface and Windows 8 , including an approximately $ , including an approximately $ 900 million charge for Surface RT with lower sale of Xbox 360 console and decreased traffic acquisition and marketing expense increased $ 1.4 billion or 10 % , increased $ 1.4 billion or 10 % , reflecting advertising of , reflecting advertising of Windows 8 and Surface . • Research and development expense increased $ 600 million or 6 % , increased $ 600 million or 6 % , due mainly to and administrative expense increased $ 580 million or 13 % , increased $ 580 million or 13 % , due to higher European Commission fine of € 561 million ( approximately $ 733 561 million ( approximately $ 733 million ) for failure to failure to comply with our 2009 agreement to display a “ EU fine ” ) . 31 Table of Contents PART II of Contents PART II Item 7 SEGMENT RESULTS OF OPERATIONS Devices million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 18,803 $ Versus 2012 Revenue Licensing $ 18,803 $ 19,021 $ 19,495 ( Revenue Licensing $ 18,803 $ 19,021 $ 19,495 ( 1 ) $ 18,803 $ 19,021 $ 19,495 ( 1 ) % ( $ 19,021 $ 19,495 ( 1 ) % ( 2 ) ( 1 ) % ( 2 ) % Hardware : Computing : Computing and Gaming Hardware 9,628 6,461 6,740 49 % ( Computing and Gaming Hardware 9,628 6,461 6,740 49 % ( 4 and Gaming Hardware 9,628 6,461 6,740 49 % ( 4 ) Gaming Hardware 9,628 6,461 6,740 49 % ( 4 ) % 6,461 6,740 49 % ( 4 ) % Phone Hardware 1,985 4 ) % Phone Hardware 1,985 0 0 * * Total ) % Phone Hardware 1,985 0 0 * * Total D % Phone Hardware 1,985 0 0 * * Total D & Total D & C Hardware 11,613 6,461 6,740 80 % ( D & C Hardware 11,613 6,461 6,740 80 % ( 4 & C Hardware 11,613 6,461 6,740 80 % ( 4 ) C Hardware 11,613 6,461 6,740 80 % ( 4 ) % 6,461 6,740 80 % ( 4 ) % Other 7,258 6,618 ( 4 ) % Other 7,258 6,618 6,203 10 % 7 4 ) % Other 7,258 6,618 6,203 10 % 7 % ) % Other 7,258 6,618 6,203 10 % 7 % Total % Other 7,258 6,618 6,203 10 % 7 % Total D 7,258 6,618 6,203 10 % 7 % Total D & C D & C revenue $ 37,674 $ 32,100 $ 32,438 17 C revenue $ 37,674 $ 32,100 $ 32,438 17 % ( $ 37,674 $ 32,100 $ 32,438 17 % ( 1 ) 37,674 $ 32,100 $ 32,438 17 % ( 1 ) % $ 32,438 17 % ( 1 ) % Gross Margin Licensing % Gross Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 Margin Licensing $ 17,216 $ 17,044 $ 17,240 1 % ( $ 17,216 $ 17,044 $ 17,240 1 % ( 1 ) 17,216 $ 17,044 $ 17,240 1 % ( 1 ) % $ 17,240 1 % ( 1 ) % Hardware : Computing : Computing and Gaming Hardware 893 956 2,495 ( 7 ) Computing and Gaming Hardware 893 956 2,495 ( 7 ) % and Gaming Hardware 893 956 2,495 ( 7 ) % ( Hardware 893 956 2,495 ( 7 ) % ( 62 ) ( 7 ) % ( 62 ) % Phone Hardware 54 62 ) % Phone Hardware 54 0 0 * * Total ) % Phone Hardware 54 0 0 * * Total D % Phone Hardware 54 0 0 * * Total D & Total D & C Hardware 947 956 2,495 ( 1 ) D & C Hardware 947 956 2,495 ( 1 ) % & C Hardware 947 956 2,495 ( 1 ) % ( Hardware 947 956 2,495 ( 1 ) % ( 62 ) ( 1 ) % ( 62 ) % Other 1,770 2,046 ( 62 ) % Other 1,770 2,046 1,998 ( 13 ) 62 ) % Other 1,770 2,046 1,998 ( 13 ) % ) % Other 1,770 2,046 1,998 ( 13 ) % 2 Other 1,770 2,046 1,998 ( 13 ) % 2 % Total 1,998 ( 13 ) % 2 % Total D & C & C gross margin $ 19,933 $ 20,046 $ 21,733 ( gross margin $ 19,933 $ 20,046 $ 21,733 ( 1 ) $ 19,933 $ 20,046 $ 21,733 ( 1 ) % ( $ 20,046 $ 21,733 ( 1 ) % ( 8 ) ( 1 ) % ( 8 ) % * Not meaningful * Not meaningful Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 D & C revenue increased & C revenue increased $ 5.6 billion or 17 % , increased $ 5.6 billion or 17 % , primarily due to . Revenue also increased $ 2.0 billion due to the acquisition Cost of revenue increased $ 5.7 billion or 47 % , increased $ 5.7 billion or 47 % , due mainly to of revenue also increased $ 1.9 billion due to NDS . C Licensing revenue decreased $ 218 million or 1 % , decreased $ 218 million or 1 % , due mainly to sale of Windows declined $ 304 million or 41 % , declined $ 304 million or 41 % , due mainly to to the launch of Windows 8 in the prior year . Windows OEM revenue declined $ 136 million or 1 % , declined $ 136 million or 1 % , due to continued offset in part by a 12 % increase in OEM Pro Office Consumer revenue declined $ 243 million or 8 % , declined $ 243 million or 8 % , reflecting the transition transition of customer to Office 365 Consumer a well a continued for Windows XP in April 2014 . Windows Phone revenue increased Windows Phone revenue increased $ 822 million or 48 % , increased $ 822 million or 48 % , due mainly to to the recognition of $ 382 million revenue under our joint Licensing gross margin increased $ 172 million or 1 % , increased $ 172 million or 1 % , primarily due to primarily due to a $ 390 million or 20 % decrease a $ 390 million or 20 % decrease in cost of due mainly to a $ 411 million or 23 % decline a $ 411 million or 23 % decline in traffic acquisition in traffic acquisition cost . 32 Table of Contents PART II of Contents PART II Item 7 Computing and Gaming Hardware Computing Gaming Hardware revenue increased $ 3.2 billion or 49 % , increased $ 3.2 billion or 49 % , primarily due to Xbox Platform revenue increased $ 1.7 billion or 34 % , increased $ 1.7 billion or 34 % , due mainly to which wa released in November 2013 , offset in part by decrease in sale of Xbox 360 . We sold 11.7 million Xbox 360 . We sold 11.7 million Xbox console during fiscal Xbox console during fiscal year 2014 compared with 9.8 million Xbox fiscal year 2014 compared with 9.8 million Xbox console during fiscal Xbox console during fiscal year 2013 . Surface revenue increased $ . Surface revenue increased $ 1.3 billion or 157 % , increased $ 1.3 billion or 157 % , due mainly to , due to a $ 3.2 billion or 59 % increase a $ 3.2 billion or 59 % increase in cost of cost of revenue increased $ 2.1 billion or 72 % , increased $ 2.1 billion or 72 % , due mainly to cost of revenue increased $ 970 million or 51 % , increased $ 970 million or 51 % , due mainly to inventory adjustment of approximately $ 900 million in fiscal year 2013 900 million in fiscal year 2013 . Phone Hardware Phone Hardware Phone Hardware revenue wa $ 2.0 billion , reflecting sale of acquisition of NDS on April 25 , 2014 . Since the NDS on April 25 , 2014 . Since the acquisition , the acquisition , we sold 5.8 million Lumia Smartphones and 30.3 5.8 million Lumia Smartphones and 30.3 million non-Lumia phone . Phone Hardware gross margin wa $ 54 million , reflecting revenue of , reflecting revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 640 million or 10 % , increased $ 640 million or 10 % , due mainly to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of second quarter of fiscal year 2013 . Online advertising revenue increased Online advertising revenue increased $ 497 million or 14 % . increased $ 497 million or 14 % . Search advertising revenue . Search advertising revenue increased 39 % , due primarily to offset in part by a 25 % reduction in display advertising display advertising revenue . Office 365 Consumer revenue grew $ 316 365 Consumer revenue grew $ 316 million , primarily reflecting subscriber . We ended fiscal year 2014 with over five million subscriber Other gross margin decreased $ 276 million or 13 % , decreased $ 276 million or 13 % , due to a , due to a $ 916 million or 20 % increase a $ 916 million or 20 % increase in cost of due mainly to a $ 541 million or 24 % increase a $ 541 million or 24 % increase in online advertising of revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher transaction cost . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 D & C revenue decreased & C revenue decreased $ 338 million or 1 % , decreased $ 338 million or 1 % , reflecting lower revenue C gross margin decreased $ 1.7 billion or 8 % , decreased $ 1.7 billion or 8 % , primarily due to Cost of revenue increased $ 1.3 billion or 13 % , increased $ 1.3 billion or 13 % , primarily due to C Licensing revenue decreased $ 474 million or 2 % , decreased $ 474 million or 2 % , due mainly to Office Consumer revenue declined $ 618 million or 15 % , declined $ 618 million or 15 % , while Windows OEM while Windows OEM revenue declined 10 % . These decrease resulted which we estimate declined approximately 9 % . Windows Phone revenue Windows Phone revenue increased $ 1.2 billion , including an increase of Windows Phone license . 33 Table of Contents PART II of Contents PART II Item 7 In May 2013 , we II Item 7 In May 2013 , we announced that we announced that we had surpassed 100 million license sold for Windows million license sold for Windows 8 . D & C Licensing Licensing gross margin decreased $ 196 million or 1 % , decreased $ 196 million or 1 % , due to decreased in part by a $ 278 million or 12 % decrease a $ 278 million or 12 % decrease in cost of in part by a $ 375 million increase in expense for Gaming Hardware revenue decreased $ 279 million or 4 % , decreased $ 279 million or 4 % , due primarily to Xbox Platform revenue decreased $ 1.3 billion or 22 % , decreased $ 1.3 billion or 22 % , due mainly to subscription revenue . We shipped 9.8 million Xbox 360 console during We shipped 9.8 million Xbox 360 console during fiscal year 2013 360 console during fiscal year 2013 , compared with 13.0 million year 2013 , compared with 13.0 million Xbox 360 console during compared with 13.0 million Xbox 360 console during fiscal year 2012 360 console during fiscal year 2012 . Surface revenue wa $ . Surface revenue wa $ 853 million . The general availability and Surface Pro started October 26 , 2012 and February 9 Pro started October 26 , 2012 and February 9 , 2013 26 , 2012 and February 9 , 2013 , respectively . 2012 and February 9 , 2013 , respectively . Computing and Hardware gross margin decreased $ 1.5 billion or 62 % , decreased $ 1.5 billion or 62 % , due to a , due to a $ 1.3 billion or 30 % increase a $ 1.3 billion or 30 % increase in cost of , primarily due to $ 1.9 billion in product cost associated inventory adjustment of approximately $ 900 million . These cost were in part by a $ 920 million or 24 % decrease a $ 920 million or 24 % decrease in Xbox Platform with lower volume of Xbox 360 console sold . D & C Other revenue increased $ 415 million or 7 % , increased $ 415 million or 7 % , due mainly to revenue , which increased $ 213 million or 7 % to increased $ 213 million or 7 % to $ 3.5 billion or 7 % to $ 3.5 billion . Search advertising revenue Other revenue also increased $ 202 million or 7 % , increased $ 202 million or 7 % , due mainly to Other gross margin increased $ 48 million or 2 % , increased $ 48 million or 2 % , due to increased in part by a $ 367 million or 9 % increase a $ 367 million or 9 % increase in cost of due mainly to a $ 327 million or 28 % increase a $ 327 million or 28 % increase in cost associated transaction , primarily a $ 257 million increase in royalty on million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 2013 Percentage Change 2013 Versus 2012 Revenue Licensing $ 42,027 $ Versus 2012 Revenue Licensing $ 42,027 $ 39,686 $ 37,126 6 Revenue Licensing $ 42,027 $ 39,686 $ 37,126 6 % 7 $ 42,027 $ 39,686 $ 37,126 6 % 7 % Other 42,027 $ 39,686 $ 37,126 6 % 7 % Other 7,547 39,686 $ 37,126 6 % 7 % Other 7,547 5,660 4,644 6 % 7 % Other 7,547 5,660 4,644 33 % 22 % 7 % Other 7,547 5,660 4,644 33 % 22 % 7 % Other 7,547 5,660 4,644 33 % 22 % Total % Other 7,547 5,660 4,644 33 % 22 % Total Commercial 7,547 5,660 4,644 33 % 22 % Total Commercial revenue $ % Total Commercial revenue $ 49,574 $ 45,346 $ 41,770 9 Commercial revenue $ 49,574 $ 45,346 $ 41,770 9 % 9 $ 49,574 $ 45,346 $ 41,770 9 % 9 % Gross 49,574 $ 45,346 $ 41,770 9 % 9 % Gross Margin 45,346 $ 41,770 9 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 Margin Licensing $ 38,604 $ 36,261 $ 34,463 6 % 5 $ 38,604 $ 36,261 $ 34,463 6 % 5 % Other 38,604 $ 36,261 $ 34,463 6 % 5 % Other 1,856 36,261 $ 34,463 6 % 5 % Other 1,856 921 579 6 % 5 % Other 1,856 921 579 102 % 59 % 5 % Other 1,856 921 579 102 % 59 % 5 % Other 1,856 921 579 102 % 59 % Total % Other 1,856 921 579 102 % 59 % Total Commercial 1,856 921 579 102 % 59 % Total Commercial gross margin Total Commercial gross margin $ 40,460 $ 37,182 $ 35,042 9 gross margin $ 40,460 $ 37,182 $ 35,042 9 % 6 $ 40,460 $ 37,182 $ 35,042 9 % 6 % 34 40,460 $ 37,182 $ 35,042 9 % 6 % 34 Table 37,182 $ 35,042 9 % 6 % 34 Table of Contents 35,042 9 % 6 % 34 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2014 compared with II Item 7 Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Commercial revenue increased $ 4.2 2013 Commercial revenue increased $ 4.2 billion or 9 % , increased $ 4.2 billion or 9 % , due mainly to , Office Commercial and Office 365 Commercial revenue grew 8 % Office 365 Commercial revenue grew 8 % . Collectively , our including Microsoft Azure , grew 13 % . Commercial gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with Commercial Licensing revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , due primarily to server product revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % , grew $ 334 million or 10 % , due mainly to Office Commercial revenue grew $ 253 million or 1 % , grew $ 253 million or 1 % , and wa impacted by customer transitioning to Office 365 Commercial . Commercial Licensing gross Licensing gross margin increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , in line with Commercial Other revenue increased $ 1.9 billion or 33 % , increased $ 1.9 billion or 33 % , due to higher Commercial Cloud revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , due mainly to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , due mainly to Other gross margin increased $ 935 million or 102 % , increased $ 935 million or 102 % , due to higher in part by a $ 952 million or 20 % increase a $ 952 million or 20 % increase in cost of Commercial Cloud . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Commercial revenue increased $ 3.6 2012 Commercial revenue increased $ 3.6 billion or 9 % , increased $ 3.6 billion or 9 % , due mainly to Commercial gross margin increased $ 2.1 billion or 6 % . increased $ 2.1 billion or 6 % . Commercial Licensing Commercial Commercial Licensing revenue increased $ 2.6 billion or 7 % , increased $ 2.6 billion or 7 % , due to increased Server product revenue increased $ 1.2 billion or 9 % , increased $ 1.2 billion or 9 % , driven primarily by Office Commercial revenue increased $ 622 million or 4 % , increased $ 622 million or 4 % , reflecting growth in Windows Commercial revenue increased $ 379 million or 13 % , increased $ 379 million or 13 % , reflecting continued support of result in fiscal year 2013 . Commercial Licensing gross margin Licensing gross margin increased $ 1.8 billion or 5 % , increased $ 1.8 billion or 5 % , due to higher in part by a $ 762 million or 29 % increase a $ 762 million or 29 % increase in cost of commercial offering , including $ 287 million higher intellectual property licensing Commercial Other revenue increased $ 1.0 billion or 22 % , increased $ 1.0 billion or 22 % , due to higher Commercial Cloud revenue grew $ 582 million or 82 % , grew $ 582 million or 82 % , due mainly to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 434 million or 11 % , grew $ 434 million or 11 % , due to growth support and consulting service . 35 Table of Contents PART II of Contents PART II Item 7 Commercial Other gross margin increased Other gross margin increased $ 342 million or 59 % , increased $ 342 million or 59 % , due to higher in part by a $ 674 million or 17 % increase a $ 674 million or 17 % increase in cost of million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Revenue $ ( 2013 Percentage Change 2013 Versus 2012 Revenue $ ( 415 ) Versus 2012 Revenue $ ( 415 ) $ 403 $ ( $ ( 415 ) $ 403 $ ( 485 ) ( ) $ 403 $ ( 485 ) ( 203 ) % $ ( 485 ) ( 203 ) % 183 % Gross ) ( 203 ) % 183 % Gross margin $ ( % Gross margin $ ( 494 ) $ 372 $ ( $ ( 494 ) $ 372 $ ( 582 ) ( ) $ 372 $ ( 582 ) ( 233 ) % $ ( 582 ) ( 233 ) % 164 % Corporate ) ( 233 ) % 164 % Corporate and Other revenue general availability . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Corporate and Other revenue decreased and Other revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerings . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of previously deferred revenue Other gross margin decreased $ 866 million , due mainly to decreased revenue . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Corporate and Other revenue increased and Other revenue increased $ 888 million or 183 % , increased $ 888 million or 183 % , primarily due to deferral . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of revenue that had been deferred in fiscal year 2012 related to the Windows Upgrade Other gross margin increased $ 954 million or 164 % , increased $ 954 million or 164 % , due mainly to million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Research and development 2013 Percentage Change 2013 Versus 2012 Research and development $ 11,381 2012 Research and development $ 11,381 $ 10,411 $ 9,811 9 and development $ 11,381 $ 10,411 $ 9,811 9 % 6 $ 11,381 $ 10,411 $ 9,811 9 % 6 % As 11,381 $ 10,411 $ 9,811 9 % 6 % As a 10,411 $ 9,811 9 % 6 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Research and development expense increased and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , due mainly to engineering group , including $ 275 million of NDS expense , and Services engineering group . 36 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2013 compared with II Item 7 Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Research and development expense increased increased , reflecting a $ 460 million or 6 % increase a $ 460 million or 6 % increase in headcount-related expense million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 Sales and marketing 2013 Percentage Change 2013 Versus 2012 Sales and marketing $ 15,811 2012 Sales and marketing $ 15,811 $ 15,276 $ 13,857 4 and marketing $ 15,811 $ 15,276 $ 13,857 4 % 10 $ 15,811 $ 15,276 $ 13,857 4 % 10 % As 15,811 $ 15,276 $ 13,857 4 % 10 % As a 15,276 $ 13,857 4 % 10 % As a percent of As a percent of revenue 18 % 20 % 19 % percent of revenue 18 % 20 % 19 % ( 2 revenue 18 % 20 % 19 % ( 2 ) ppt 20 % 19 % ( 2 ) ppt 1ppt Sales and % ( 2 ) ppt 1ppt Sales and marketing expense include other program . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Sales and marketing expense increased and marketing expense increased $ 535 million or 4 % , increased $ 535 million or 4 % , primarily due to and marketing expense were $ 394 million during fiscal year 2014 394 million during fiscal year 2014 . Average headcount , excluding , excluding NDS , grew 4 % . Advertising cost , excluding NDS , declined $ 403 million or 15 % , declined $ 403 million or 15 % , primarily due to , primarily due to Windows 8 and Surface cost in the prior year . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Sales and marketing expense grew grew , reflecting an $ 898 million increase in advertising cost cost associated primarily with Windows 8 and Surface , $ 181 8 and Surface , $ 181 million higher fee paid to advisor , and a $ 145 million or 2 % increase a $ 145 million or 2 % increase in headcount-related expense million , except percentage ) 2014 2013 2012 Percentage Change 2014 , except percentage ) 2014 2013 2012 Percentage Change 2014 Versus except percentage ) 2014 2013 2012 Percentage Change 2014 Versus 2013 2014 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 2012 Percentage Change 2014 Versus 2013 Percentage Change 2013 Versus 2012 2014 Versus 2013 Percentage Change 2013 Versus 2012 General and administrative 2013 Percentage Change 2013 Versus 2012 General and administrative $ 4,821 2012 General and administrative $ 4,821 $ 5,149 $ 4,569 ( and administrative $ 4,821 $ 5,149 $ 4,569 ( 6 ) $ 4,821 $ 5,149 $ 4,569 ( 6 ) % 13 $ 5,149 $ 4,569 ( 6 ) % 13 % As 4,569 ( 6 ) % 13 % As a percent of As a percent of revenue 6 % 7 % 6 % percent of revenue 6 % 7 % 6 % ( 1 revenue 6 % 7 % 6 % ( 1 ) ppt 7 % 6 % ( 1 ) ppt 1ppt General and % ( 1 ) ppt 1ppt General and administrative expense include administrative fee . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 General and administrative expense decreased and administrative expense decreased $ 328 million or 6 % , decreased $ 328 million or 6 % , due mainly to and administrative expense were $ 77 million during fiscal year 2014 77 million during fiscal year 2014 . Fiscal year 2013 compared year 2014 . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 General and administrative expense increased for the EU fine . 37 Table of Contents PART II of Contents PART II Item 7 Goodwill Impairment We test goodwill for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2014 or May 2013 a of May 1 , 2014 or May 2013 . Our 1 , 2014 or May 2013 . Our goodwill impairment test impairment test a of May 1 , 2012 , indicated that a of May 1 , 2012 , indicated that the carrying goodwill impairment charge of $ 6.2 billion during the three month the three month ended June 30 , 2012 , reducing the month ended June 30 , 2012 , reducing the unit ’ ’ s goodwill from $ 6.4 billion to $ 223 million $ 6.4 billion to $ 223 million . Integration and Restructuring and restructuring expense were $ 127 million for fiscal year 2014 127 million for fiscal year 2014 , reflecting expense associated with million ) Year Ended June 30 , 2014 2013 2012 Dividends Year Ended June 30 , 2014 2013 2012 Dividends and interest Ended June 30 , 2014 2013 2012 Dividends and interest income June 30 , 2014 2013 2012 Dividends and interest income $ Dividends and interest income $ 883 $ 677 $ 800 Interest interest income $ 883 $ 677 $ 800 Interest expense ( $ 883 $ 677 $ 800 Interest expense ( 597 ) $ 800 Interest expense ( 597 ) ( 429 ) ( expense ( 597 ) ( 429 ) ( 380 ) Net ) ( 429 ) ( 380 ) Net recognized gain on Net recognized gain on investment 437 116 564 Net loss on recognized gain on investment 437 116 564 Net loss on derivative gain on investment 437 116 564 Net loss on derivative ( Net loss on derivative ( 328 ) ( 196 ) ( derivative ( 328 ) ( 196 ) ( 364 ) Net ) ( 196 ) ( 364 ) Net loss on foreign on foreign currency remeasurements ( 165 ) ( 74 ) ( remeasurements ( 165 ) ( 74 ) ( 117 ) Other ) ( 74 ) ( 117 ) Other ( 169 ) ( 117 ) Other ( 169 ) 194 1 Total $ ) Other ( 169 ) 194 1 Total $ 61 $ Other ( 169 ) 194 1 Total $ 61 $ 288 ) 194 1 Total $ 61 $ 288 $ 504 We 1 Total $ 61 $ 288 $ 504 We use derivative $ 61 $ 288 $ 504 We use derivative instrument to expense ) . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Dividends and interest income increased . Other-than-temporary impairment were $ 106 million in fiscal year 2014 106 million in fiscal year 2014 , compared with $ 208 2014 , compared with $ 208 million in fiscal year 2013 208 million in fiscal year 2013 . Net loss on derivative period . For fiscal year 2014 , other reflects recognized loss divestiture . For fiscal year 2013 , other reflects recognized gain upon the divestiture of our 50 % share in the MSNBC the MSNBC joint venture . 38 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2013 compared with II Item 7 Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Dividends and interest income decreased . Other-than-temporary impairment were $ 208 million in fiscal year 2013 208 million in fiscal year 2013 , compared with $ 298 2013 , compared with $ 298 million in fiscal year 2012 298 million in fiscal year 2012 . Net loss on derivative upon the divestiture of our 50 % share in the MSNBC . INCOME TAXES Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Our effective tax rate for tax rate for fiscal year 2014 and 2013 wa approximately 21 for fiscal year 2014 and 2013 wa approximately 21 % and 2014 and 2013 wa approximately 21 % and 19 % , wa approximately 21 % and 19 % , respectively . Our Rico . Our fiscal year 2014 effective rate increased by 2 2014 effective rate increased by 2 % from fiscal year 2013 2 % from fiscal year 2013 mainly due to adjustment of due to adjustment of $ 458 million to prior year ’ operating system revenue decreased $ 655 million in fiscal year 2014 655 million in fiscal year 2014 , while Microsoft Office system and tool revenue increased $ 1.3 billion and $ 1.6 billion $ 1.3 billion and $ 1.6 billion , respectively , during period . In fiscal year 2014 and 2013 , our U.S. In fiscal year 2014 and 2013 , our U.S. income before before income tax wa $ 7.1 billion and $ 6.7 billion $ 7.1 billion and $ 6.7 billion , respectively , and , respectively , and comprised 26 % and 25 % , and comprised 26 % and 25 % , respectively , of tax . In fiscal year 2014 and 2013 , the foreign In fiscal year 2014 and 2013 , the foreign income before before income tax wa $ 20.7 billion and $ 20.4 billion $ 20.7 billion and $ 20.4 billion , respectively , and , respectively , and comprised 74 % and 75 % , and comprised 74 % and 75 % , respectively , of other tax liability were $ 10.4 billion and $ 9.4 billion $ 10.4 billion and $ 9.4 billion a of June 30 9.4 billion a of June 30 , 2014 and 2013 , a of June 30 , 2014 and 2013 , respectively , June 30 , 2014 and 2013 , respectively , and are . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit those year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2014 , the primary As of June 30 , 2014 , the primary unresolved issue these issue in the next 12 month . Based on the I.R.S . for tax year 2007 to 2013 . We are for tax year 2007 to 2013 . We are subject to to examination for tax year 1996 to 2013 , some of for tax year 1996 to 2013 , some of which are our consolidated financial statement . 39 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2013 compared with II Item 7 Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Our effective tax rate for tax rate for fiscal year 2013 and 2012 wa approximately 19 for fiscal year 2013 and 2012 wa approximately 19 % and 2013 and 2012 wa approximately 19 % and 24 % , wa approximately 19 % and 24 % , respectively . Our Rico . Our fiscal year 2013 effective rate decreased by 5 2013 effective rate decreased by 5 % from fiscal year 2012 5 % from fiscal year 2012 mainly due to a nonrecurring due to a nonrecurring $ 6.2 billion non-tax deductible goodwill impairment wa recorded in fiscal year 2012 . The goodwill impairment charge our effective tax rate by 10 % in fiscal year 2012 10 % in fiscal year 2012 . In addition , in addition , in fiscal year 2013 and 2012 , we recognized in fiscal year 2013 and 2012 , we recognized a reduction we recognized a reduction of 18 % and 21 % , reduction of 18 % and 21 % , respectively , to tax rate for fiscal year 2013 wa primarily offset by a wa primarily offset by a 1 % increase related to the operating system revenue increased $ 209 million in fiscal year 2013 209 million in fiscal year 2013 , while Microsoft Office system and tool revenue increased $ 696 million and $ 1.2 billion $ 696 million and $ 1.2 billion , respectively , during period . In fiscal year 2013 and 2012 , our U.S. In fiscal year 2013 and 2012 , our U.S. income before before income tax wa $ 6.7 billion and $ 1.6 billion $ 6.7 billion and $ 1.6 billion , respectively , and , respectively , and comprised 25 % and 7 % , and comprised 25 % and 7 % , respectively , of tax . In fiscal year 2013 and 2012 , the foreign In fiscal year 2013 and 2012 , the foreign income before before income tax wa $ 20.4 billion and $ 20.7 billion $ 20.4 billion and $ 20.7 billion , respectively , and , respectively , and comprised 75 % and 93 % , and comprised 75 % and 93 % , respectively , of income tax in fiscal year 2013 wa the goodwill impairment charge other tax liability were $ 9.4 billion and $ 7.6 billion $ 9.4 billion and $ 7.6 billion a of June 30 7.6 billion a of June 30 , 2013 and 2012 , a of June 30 , 2013 and 2012 , respectively , June 30 , 2013 and 2012 , respectively , and are . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit those year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2013 , the primary As of June 30 , 2013 , the primary unresolved issue or decrease within the next 12 month because we do not be resolved within the next 12 month . We also continue I.R.S . for tax year 2007 to 2012 . We are for tax year 2007 to 2012 . We are subject to to examination for tax year 1996 to 2012 , some of for tax year 1996 to 2012 , some of which are and short-term investment totaled $ 85.7 billion a of June 30 85.7 billion a of June 30 , 2014 , compared with a of June 30 , 2014 , compared with $ 77.0 2014 , compared with $ 77.0 billion a of June 30 77.0 billion a of June 30 , 2013 . Equity and a of June 30 , 2013 . Equity and other investment and other investment were $ 14.6 billion a of June 30 14.6 billion a of June 30 , 2014 , compared with a of June 30 , 2014 , compared with $ 10.8 2014 , compared with $ 10.8 billion a of June 30 10.8 billion a of June 30 , 2013 . Our short-term a of June 30 , 2013 . Our short-term investment are of our fixed-income portfolio are 40 Table of Contents PART II of Contents PART II Item 7 managed to achieve economic return and short-term investment at June 30 , 2014 , $ 77.1 investment at June 30 , 2014 , $ 77.1 billion wa 30 , 2014 , $ 77.1 billion wa held by our local regulatory ) wa $ 2.6 billion . As of June billion . As of June 30 , 2014 , approximately 84 As of June 30 , 2014 , approximately 84 % of 30 , 2014 , approximately 84 % of the cash equivalent and agency security , approximately 5 % were invested in corporate U.S. company , and approximately 1 % were invested in U.S. lending payable balance wa $ 558 million a of June 30 558 million a of June 30 , 2014 . Our average a of June 30 , 2014 . Our average and maximum the fiscal year were $ 619 million and $ 1.3 billion $ 619 million and $ 1.3 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note certificate of deposit . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price . Cash Flows Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Cash flow from operation increased flow from operation increased $ 3.4 billion during the current fiscal current fiscal year to $ 32.2 billion , due mainly to used in financing increased $ 246 million to $ 8.4 billion $ 246 million to $ 8.4 billion , due mainly to due mainly to a $ 2.0 billion increase in cash used stock repurchase , a $ 1.4 billion increase in dividend paid paid , and a $ 324 million decrease in proceeds from in part by a $ 3.4 billion increase in 41 Table $ 3.4 billion increase in 41 Table of Contents PART II of Contents PART II Item 7 proceeds from issuance of debt used in investing decreased $ 5.0 billion to $ 18.8 billion $ 5.0 billion to $ 18.8 billion , due mainly to due mainly to a $ 10.5 billion decrease in cash used in part by a $ 4.4 billion increase in cash used asset , and a $ 1.2 billion increase in capital expenditure and equipment . Fiscal year 2013 compared with fiscal year 2012 2013 compared with fiscal year 2012 Cash flow from operation decreased flow from operation decreased $ 2.8 billion during the current fiscal current fiscal year to $ 28.8 billion , due mainly to used for financing decreased $ 1.3 billion to $ 8.1 billion $ 1.3 billion to $ 8.1 billion , due mainly to due mainly to a $ 3.5 billion increase in proceeds from in part by a $ 1.1 billion increase in dividend paid dividend paid and a $ 982 million decrease in proceeds from used in investing decreased $ 975 million to $ 23.8 billion $ 975 million to $ 23.8 billion , due mainly to due mainly to an $ 8.5 billion decrease in cash used in part by a $ 5.8 billion increase in cash used sale , and a $ 2.0 billion increase in cash used debt . As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 22.6 2014 , we had $ 22.6 billion of issued and outstanding outstanding debt , comprising $ 2.0 billion of short-term debt and of short-term debt and $ 20.6 billion of long-term debt . Short-term debt As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 2.0 2014 , we had $ 2.0 billion of commercial paper issued a weighted-average interest rate of 0.12 % and maturity ranging from % and maturity ranging from 86 day to 91 day . ranging from 86 day to 91 day . The estimated fair . We have a $ 5.0 billion credit facility that expires facility that expires on November 14 , 2018 , which serf expires on November 14 , 2018 , which serf a a program . As of June 30 , 2014 , we were As of June 30 , 2014 , we were in compliance Long-term debt As of June 30 , 2014 , the total As of June 30 , 2014 , the total carrying value our long-term debt were $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively . These value are based on Level 2 input . 42 Table of on Level 2 input . 42 Table of Contents PART II of Contents PART II Item 7 The component of our long-term a follows a of June 30 , 2014 : Due Date a of June 30 , 2014 : Due Date Face Value In million ) Notes September 25 , 2015 $ 1,750 1.625 ) Notes September 25 , 2015 $ 1,750 1.625 % 1.795 September 25 , 2015 $ 1,750 1.625 % 1.795 % February 25 , 2015 $ 1,750 1.625 % 1.795 % February 8 2015 $ 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 750 2.500 % 1.795 % February 8 , 2016 750 2.500 % 2.642 % % February 8 , 2016 750 2.500 % 2.642 % November February 8 , 2016 750 2.500 % 2.642 % November 15 , 2016 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 600 0.875 % 2.642 % November 15 , 2017 600 0.875 % 1.084 % % November 15 , 2017 600 0.875 % 1.084 % May November 15 , 2017 600 0.875 % 1.084 % May 1 , 2017 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 450 1.000 % 1.084 % May 1 , 2018 450 1.000 % 1.106 % % May 1 , 2018 450 1.000 % 1.106 % December May 1 , 2018 450 1.000 % 1.106 % December 6 , 2018 450 1.000 % 1.106 % December 6 , 2018 1.000 % 1.106 % December 6 , 2018 ( a ) 1.106 % December 6 , 2018 ( a ) 1,250 1.625 , 2018 ( a ) 1,250 1.625 % 1.824 % June 2018 ( a ) 1,250 1.625 % 1.824 % June 1 a ) 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 4.200 % 1.824 % June 1 , 2019 1,000 4.200 % 4.379 % % June 1 , 2019 1,000 4.200 % 4.379 % October June 1 , 2019 1,000 4.200 % 4.379 % October 1 , 2019 1,000 4.200 % 4.379 % October 1 , 2020 4.200 % 4.379 % October 1 , 2020 1,000 3.000 % 4.379 % October 1 , 2020 1,000 3.000 % 3.137 % % October 1 , 2020 1,000 3.000 % 3.137 % February October 1 , 2020 1,000 3.000 % 3.137 % February 8 , 2020 1,000 3.000 % 3.137 % February 8 , 2021 3.000 % 3.137 % February 8 , 2021 500 4.000 % 3.137 % February 8 , 2021 500 4.000 % 4.082 % % February 8 , 2021 500 4.000 % 4.082 % December February 8 , 2021 500 4.000 % 4.082 % December 6 , 2021 500 4.000 % 4.082 % December 6 , 2021 4.000 % 4.082 % December 6 , 2021 ( b ) 4.082 % December 6 , 2021 ( b ) 2,396 2.125 , 2021 ( b ) 2,396 2.125 % 2.233 % November 2021 ( b ) 2,396 2.125 % 2.233 % November 15 b ) 2,396 2.125 % 2.233 % November 15 , 2022 2.125 % 2.233 % November 15 , 2022 750 2.125 % 2.233 % November 15 , 2022 750 2.125 % 2.239 % % November 15 , 2022 750 2.125 % 2.239 % May November 15 , 2022 750 2.125 % 2.239 % May 1 , 2022 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 2.375 % 2.239 % May 1 , 2023 1,000 2.375 % 2.465 % % May 1 , 2023 1,000 2.375 % 2.465 % December May 1 , 2023 1,000 2.375 % 2.465 % December 15 , 2023 1,000 2.375 % 2.465 % December 15 , 2023 2.375 % 2.465 % December 15 , 2023 ( a ) 2.465 % December 15 , 2023 ( a ) 1,500 3.625 , 2023 ( a ) 1,500 3.625 % 3.726 % December 2023 ( a ) 1,500 3.625 % 3.726 % December 6 a ) 1,500 3.625 % 3.726 % December 6 , 2028 3.625 % 3.726 % December 6 , 2028 ( b ) 3.726 % December 6 , 2028 ( b ) 2,396 3.125 , 2028 ( b ) 2,396 3.125 % 3.218 % May 2028 ( b ) 2,396 3.125 % 3.218 % May 2 b ) 2,396 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( c ) 3.218 % May 2 , 2033 ( c ) 753 2.625 , 2033 ( c ) 753 2.625 % 2.690 % June 2033 ( c ) 753 2.625 % 2.690 % June 1 c ) 753 2.625 % 2.690 % June 1 , 2039 2.625 % 2.690 % June 1 , 2039 750 5.200 % 2.690 % June 1 , 2039 750 5.200 % 5.240 % % June 1 , 2039 750 5.200 % 5.240 % October June 1 , 2039 750 5.200 % 5.240 % October 1 , 2039 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 4.500 % 5.240 % October 1 , 2040 1,000 4.500 % 4.567 % % October 1 , 2040 1,000 4.500 % 4.567 % February October 1 , 2040 1,000 4.500 % 4.567 % February 8 , 2040 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 5.300 % 4.567 % February 8 , 2041 1,000 5.300 % 5.361 % % February 8 , 2041 1,000 5.300 % 5.361 % November February 8 , 2041 1,000 5.300 % 5.361 % November 15 , 2041 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 3.500 % 5.361 % November 15 , 2042 900 3.500 % 3.571 % % November 15 , 2042 900 3.500 % 3.571 % May November 15 , 2042 900 3.500 % 3.571 % May 1 , 2042 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 3.750 % 3.571 % May 1 , 2043 500 3.750 % 3.829 % % May 1 , 2043 500 3.750 % 3.829 % December May 1 , 2043 500 3.750 % 3.829 % December 15 , 2043 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 ( a ) 3.829 % December 15 , 2043 ( a ) 500 4.875 , 2043 ( a ) 500 4.875 % 4.918 % Total 2043 ( a ) 500 4.875 % 4.918 % Total $ a ) 500 4.875 % 4.918 % Total $ 20,745 ( % 4.918 % Total $ 20,745 ( a ) In December ( a ) In December 2013 , we issued $ 3.3 2013 , we issued $ 3.3 billion of debt security . ( b ) In December 2013 , we issued €3.5 billion ( c ) In April 2013 , we issued €550 million annually . As of June 30 , 2014 , the aggregate As of June 30 , 2014 , the aggregate unamortized discount our long-term debt wa $ 100 million . Unearned Revenue Unearned Revenue Unearned revenue at June 30 , 2014 wa comprised mainly revenue at June 30 , 2014 wa comprised mainly of unearned . Unearned revenue at June 30 , 2014 also included payment revenue at June 30 , 2014 also included payment for : business solution product ; Office 365 subscription ; Bundled Offerings ; the revenue recognition criterion . 43 Table of Contents PART II of Contents PART II Item 7 The following table outline the unearned revenue a of June 30 , 2014 : ( In a of June 30 , 2014 : ( In million ) Three Months Ending , September 30 , 2014 $ 8,667 December Ending , September 30 , 2014 $ 8,667 December 31 , September 30 , 2014 $ 8,667 December 31 , 2014 7,380 , 2014 $ 8,667 December 31 , 2014 7,380 March 31 $ 8,667 December 31 , 2014 7,380 March 31 , 2015 8,667 December 31 , 2014 7,380 March 31 , 2015 4,812 31 , 2014 7,380 March 31 , 2015 4,812 June 30 2014 7,380 March 31 , 2015 4,812 June 30 , 2015 7,380 March 31 , 2015 4,812 June 30 , 2015 2,291 31 , 2015 4,812 June 30 , 2015 2,291 Thereafter 2,008 2015 4,812 June 30 , 2015 2,291 Thereafter 2,008 Total $ 4,812 June 30 , 2015 2,291 Thereafter 2,008 Total $ 25,158 30 , 2015 2,291 Thereafter 2,008 Total $ 25,158 Share Repurchases 2,291 Thereafter 2,008 Total $ 25,158 Share Repurchases On September 16 25,158 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date notice . As of June 30 , 2014 , $ 35.1 As of June 30 , 2014 , $ 35.1 billion remained 30 , 2014 , $ 35.1 billion remained of the $ billion remained of the $ 40.0 billion share repurchase program . program . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share of Microsoft common Microsoft common stock for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . During fiscal and expired September 30 , 2013 . During fiscal year 2013 2013 . During fiscal year 2013 and 2012 , we repurchased During fiscal year 2013 and 2012 , we repurchased 158 million and 2012 , we repurchased 158 million share for $ 4.6 158 million share for $ 4.6 billion and 142 million share for $ 4.6 billion and 142 million share for $ 4.0 142 million share for $ 4.0 billion , respectively , under repurchase program announced on September 22 , 2008 . All repurchase announced on September 22 , 2008 . All repurchase were made . Dividends During fiscal year 2014 and 2013 , our Board During fiscal year 2014 and 2013 , our Board of Directors In million ) Fiscal Year 2014 September 16 , 2013 $ ) Fiscal Year 2014 September 16 , 2013 $ 0.28 November Year 2014 September 16 , 2013 $ 0.28 November 21 , September 16 , 2013 $ 0.28 November 21 , 2013 $ , 2013 $ 0.28 November 21 , 2013 $ 2,332 December $ 0.28 November 21 , 2013 $ 2,332 December 12 , November 21 , 2013 $ 2,332 December 12 , 2013 November , 2013 $ 2,332 December 12 , 2013 November 19 , $ 2,332 December 12 , 2013 November 19 , 2013 $ December 12 , 2013 November 19 , 2013 $ 0.28 February , 2013 November 19 , 2013 $ 0.28 February 20 , November 19 , 2013 $ 0.28 February 20 , 2014 $ , 2013 $ 0.28 February 20 , 2014 $ 2,322 March $ 0.28 February 20 , 2014 $ 2,322 March 13 , February 20 , 2014 $ 2,322 March 13 , 2014 March , 2014 $ 2,322 March 13 , 2014 March 11 , $ 2,322 March 13 , 2014 March 11 , 2014 $ March 13 , 2014 March 11 , 2014 $ 0.28 May , 2014 March 11 , 2014 $ 0.28 May 15 , March 11 , 2014 $ 0.28 May 15 , 2014 $ , 2014 $ 0.28 May 15 , 2014 $ 2,309 June $ 0.28 May 15 , 2014 $ 2,309 June 12 , May 15 , 2014 $ 2,309 June 12 , 2014 June , 2014 $ 2,309 June 12 , 2014 June 10 , $ 2,309 June 12 , 2014 June 10 , 2014 $ June 12 , 2014 June 10 , 2014 $ 0.28 August , 2014 June 10 , 2014 $ 0.28 August 21 , June 10 , 2014 $ 0.28 August 21 , 2014 $ , 2014 $ 0.28 August 21 , 2014 $ 2,307 September $ 0.28 August 21 , 2014 $ 2,307 September 11 , August 21 , 2014 $ 2,307 September 11 , 2014 Fiscal , 2014 $ 2,307 September 11 , 2014 Fiscal Year 2013 $ 2,307 September 11 , 2014 Fiscal Year 2013 September 18 11 , 2014 Fiscal Year 2013 September 18 , 2012 $ 2014 Fiscal Year 2013 September 18 , 2012 $ 0.23 November Year 2013 September 18 , 2012 $ 0.23 November 15 , September 18 , 2012 $ 0.23 November 15 , 2012 $ , 2012 $ 0.23 November 15 , 2012 $ 1,933 December $ 0.23 November 15 , 2012 $ 1,933 December 13 , November 15 , 2012 $ 1,933 December 13 , 2012 November , 2012 $ 1,933 December 13 , 2012 November 28 , $ 1,933 December 13 , 2012 November 28 , 2012 $ December 13 , 2012 November 28 , 2012 $ 0.23 February , 2012 November 28 , 2012 $ 0.23 February 21 , November 28 , 2012 $ 0.23 February 21 , 2013 $ , 2012 $ 0.23 February 21 , 2013 $ 1,925 March $ 0.23 February 21 , 2013 $ 1,925 March 14 , February 21 , 2013 $ 1,925 March 14 , 2013 March , 2013 $ 1,925 March 14 , 2013 March 11 , $ 1,925 March 14 , 2013 March 11 , 2013 $ March 14 , 2013 March 11 , 2013 $ 0.23 May , 2013 March 11 , 2013 $ 0.23 May 16 , March 11 , 2013 $ 0.23 May 16 , 2013 $ , 2013 $ 0.23 May 16 , 2013 $ 1,921 June $ 0.23 May 16 , 2013 $ 1,921 June 13 , May 16 , 2013 $ 1,921 June 13 , 2013 June , 2013 $ 1,921 June 13 , 2013 June 12 , $ 1,921 June 13 , 2013 June 12 , 2013 $ June 13 , 2013 June 12 , 2013 $ 0.23 August , 2013 June 12 , 2013 $ 0.23 August 15 , June 12 , 2013 $ 0.23 August 15 , 2013 $ , 2013 $ 0.23 August 15 , 2013 $ 1,916 September $ 0.23 August 15 , 2013 $ 1,916 September 12 , August 15 , 2013 $ 1,916 September 12 , 2013 Off-Balance , 2013 $ 1,916 September 12 , 2013 Off-Balance Sheet Arrangements $ 1,916 September 12 , 2013 Off-Balance Sheet Arrangements We provide during the period presented . 44 Table of Contents PART II of Contents PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2014 : ( In a of June 30 , 2014 : ( In million ) : ( In million ) 2015 2016-2017 2018-2019 Thereafter Total Long-term ( In million ) 2015 2016-2017 2018-2019 Thereafter Total Long-term debt In million ) 2015 2016-2017 2018-2019 Thereafter Total Long-term debt : a ) Principal payment $ 0 $ 2,500 $ 3,300 $ Principal payment $ 0 $ 2,500 $ 3,300 $ 14,945 $ $ 0 $ 2,500 $ 3,300 $ 14,945 $ 20,745 Interest $ 2,500 $ 3,300 $ 14,945 $ 20,745 Interest payment 566 $ 3,300 $ 14,945 $ 20,745 Interest payment 566 1,069 1,015 14,945 $ 20,745 Interest payment 566 1,069 1,015 6,110 8,760 Construction $ 20,745 Interest payment 566 1,069 1,015 6,110 8,760 Construction commitment 20,745 Interest payment 566 1,069 1,015 6,110 8,760 Construction commitment ( Interest payment 566 1,069 1,015 6,110 8,760 Construction commitment ( b payment 566 1,069 1,015 6,110 8,760 Construction commitment ( b ) Construction commitment ( b ) 880 0 0 0 880 Operating commitment ( b ) 880 0 0 0 880 Operating lease ( b ) 880 0 0 0 880 Operating lease ( b ) 880 0 0 0 880 Operating lease ( c ) 880 0 0 0 880 Operating lease ( c ) Operating lease ( c ) 878 1,419 1,054 1,063 4,414 Purchase lease ( c ) 878 1,419 1,054 1,063 4,414 Purchase commitment ( c ) 878 1,419 1,054 1,063 4,414 Purchase commitment ( c ) 878 1,419 1,054 1,063 4,414 Purchase commitment ( d ) 878 1,419 1,054 1,063 4,414 Purchase commitment ( d ) Purchase commitment ( d ) 12,995 969 657 153 14,774 Other commitment ( d ) 12,995 969 657 153 14,774 Other long-term ( d ) 12,995 969 657 153 14,774 Other long-term liability d ) 12,995 969 657 153 14,774 Other long-term liability ( ) 12,995 969 657 153 14,774 Other long-term liability ( e long-term liability ( e ) 0 354 80 393 827 Total liability ( e ) 0 354 80 393 827 Total contractual ( e ) 0 354 80 393 827 Total contractual obligation e ) 0 354 80 393 827 Total contractual obligation $ ) 0 354 80 393 827 Total contractual obligation $ 15,319 827 Total contractual obligation $ 15,319 $ 6,311 $ 6,106 $ contractual obligation $ 15,319 $ 6,311 $ 6,106 $ 22,664 $ $ 15,319 $ 6,311 $ 6,106 $ 22,664 $ 50,400 ( $ 6,311 $ 6,106 $ 22,664 $ 50,400 ( a ) $ 6,106 $ 22,664 $ 50,400 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) deferred income tax of $ 13.3 billion from the amount presented for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the at reasonable interest rate . 45 Table of Contents PART II of Contents PART II Item 7 RECENT ACCOUNTING GUIDANCE Recently Adopted Adopted Accounting Guidance In December 2011 , the Financial Accounting Standards net exposure . In January 2013 , the FASB clarified that this new guidance beginning July 1 , 2013 . Adoption of guidance beginning July 1 , 2013 . Adoption of this new to the presentation of Note 5 – Derivatives of the Notes Financial Statements . In February 2013 , the FASB issued guidance this new guidance beginning July 1 , 2013 . Adoption of guidance beginning July 1 , 2013 . Adoption of this new to the presentation of Note 19 – Accumulated Other Comprehensive Income Not Yet Adopted In March 2013 , the FASB issued guidance effective for u beginning July 1 , 2014 . We do u beginning July 1 , 2014 . We do not anticipate upon adoption . In May 2014 , a part of it effective for u beginning July 1 , 2017 and early adoption u beginning July 1 , 2017 and early adoption is not include a perpetual license for 46 Table of Contents PART II of Contents PART II Item 7 current product combined with right to each deliverable . Windows 7 revenue wa subject to deferral Offer , which started June 2 , 2012 . The offer which started June 2 , 2012 . The offer provided significantly discounted right to purchase Windows 8 Pro to qualifying end-users that qualifying end-users that purchased Windows 7 PCs during the eligibility period wa responsible for delivering Windows 8 Pro to the end customer allocated discount for undelivered Windows 8 wa deferred until it wa an annual basis ( May 1 for u ) and between of a reporting unit . 47 Table of Contents PART II of Contents PART II Item 7 Application of the goodwill impairment that ha a greater than 50 % likelihood of being realized . We regularly review inventory 48 Table of Contents PART II of Contents PART II Item 7 quantity on hand , future analysis require significant judgment . 49 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 50 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 51 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2014 and 2013 and a of June 30 , 2014 and 2013 and for the June 30 , 2014 and 2013 and for the year ended for the year ended June 30 , 2014 : ( In year ended June 30 , 2014 : ( In million ) ( In million ) June 30 , 2014 June 30 , million ) June 30 , 2014 June 30 , 2013 Year June 30 , 2014 June 30 , 2013 Year Ended June , 2014 June 30 , 2013 Year Ended June 30 , , 2013 Year Ended June 30 , 2014 Risk Categories Average Year Ended June 30 , 2014 Risk Categories Average High Low High Low Foreign currency $ 179 $ 199 $ 215 $ Foreign currency $ 179 $ 199 $ 215 $ 287 $ $ 179 $ 199 $ 215 $ 287 $ 117 Interest $ 199 $ 215 $ 287 $ 117 Interest rate $ $ 215 $ 287 $ 117 Interest rate $ 73 $ $ 117 Interest rate $ 73 $ 85 $ 82 $ Interest rate $ 73 $ 85 $ 82 $ 91 $ $ 73 $ 85 $ 82 $ 91 $ 73 Equity $ 85 $ 82 $ 91 $ 73 Equity $ 176 $ 82 $ 91 $ 73 Equity $ 176 $ 181 91 $ 73 Equity $ 176 $ 181 $ 208 $ 73 Equity $ 176 $ 181 $ 208 $ 246 $ $ 176 $ 181 $ 208 $ 246 $ 173 Commodity $ 181 $ 208 $ 246 $ 173 Commodity $ 17 $ 208 $ 246 $ 173 Commodity $ 17 $ 19 246 $ 173 Commodity $ 17 $ 19 $ 18 $ 173 Commodity $ 17 $ 19 $ 18 $ 21 $ $ 17 $ 19 $ 18 $ 21 $ 16 Total $ 19 $ 18 $ 21 $ 16 Total one-day VaR $ 18 $ 21 $ 16 Total one-day VaR for the combined risk category wa $ 333 million at June 30 , $ 333 million at June 30 , 2014 and $ 350 million at June 30 , 2014 and $ 350 million at 30 , 2014 and $ 350 million at June 30 , $ 350 million at June 30 , 2013 . The total million at June 30 , 2013 . The total VaR is . The total VaR is 25 % le at June 30 25 % le at June 30 , 2014 , and 28 le at June 30 , 2014 , and 28 % le 30 , 2014 , and 28 % le at June 30 28 % le at June 30 , 2013 , than the le at June 30 , 2013 , than the sum of the combination of risk . 52 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2014 2013 2012 Revenue Year Ended June 30 , 2014 2013 2012 Revenue $ 86,833 Ended June 30 , 2014 2013 2012 Revenue $ 86,833 $ June 30 , 2014 2013 2012 Revenue $ 86,833 $ 77,849 2014 2013 2012 Revenue $ 86,833 $ 77,849 $ 73,723 Cost 2012 Revenue $ 86,833 $ 77,849 $ 73,723 Cost of revenue $ 86,833 $ 77,849 $ 73,723 Cost of revenue 26,934 20,249 $ 73,723 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 73,723 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 57,600 Cost of revenue 26,934 20,249 17,530 Gross margin 59,899 57,600 56,193 26,934 20,249 17,530 Gross margin 59,899 57,600 56,193 Research and development 20,249 17,530 Gross margin 59,899 57,600 56,193 Research and development 11,381 17,530 Gross margin 59,899 57,600 56,193 Research and development 11,381 10,411 57,600 56,193 Research and development 11,381 10,411 9,811 Sales and marketing 56,193 Research and development 11,381 10,411 9,811 Sales and marketing 15,811 Research and development 11,381 10,411 9,811 Sales and marketing 15,811 15,276 10,411 9,811 Sales and marketing 15,811 15,276 13,857 General and administrative 9,811 Sales and marketing 15,811 15,276 13,857 General and administrative 4,821 Sales and marketing 15,811 15,276 13,857 General and administrative 4,821 5,149 15,276 13,857 General and administrative 4,821 5,149 4,569 Goodwill impairment 0 13,857 General and administrative 4,821 5,149 4,569 Goodwill impairment 0 0 General and administrative 4,821 5,149 4,569 Goodwill impairment 0 0 6,193 4,821 5,149 4,569 Goodwill impairment 0 0 6,193 Integration and restructuring 5,149 4,569 Goodwill impairment 0 0 6,193 Integration and restructuring 127 4,569 Goodwill impairment 0 0 6,193 Integration and restructuring 127 0 0 6,193 Integration and restructuring 127 0 0 Operating income 27,759 6,193 Integration and restructuring 127 0 0 Operating income 27,759 26,764 Integration and restructuring 127 0 0 Operating income 27,759 26,764 21,763 127 0 0 Operating income 27,759 26,764 21,763 Other income , 0 0 Operating income 27,759 26,764 21,763 Other income , net 0 Operating income 27,759 26,764 21,763 Other income , net 61 21,763 Other income , net 61 288 504 Income before income Other income , net 61 288 504 Income before income tax income , net 61 288 504 Income before income tax 27,820 504 Income before income tax 27,820 27,052 22,267 Provision for income Income before income tax 27,820 27,052 22,267 Provision for income tax before income tax 27,820 27,052 22,267 Provision for income tax 5,746 22,267 Provision for income tax 5,746 5,189 5,289 Net income $ Provision for income tax 5,746 5,189 5,289 Net income $ 22,074 for income tax 5,746 5,189 5,289 Net income $ 22,074 $ 5,189 5,289 Net income $ 22,074 $ 21,863 $ 16,978 Earnings Net income $ 22,074 $ 21,863 $ 16,978 Earnings per share $ 22,074 $ 21,863 $ 16,978 Earnings per share : Basic per share : Basic $ 2.66 $ 2.61 $ 2.02 Diluted : Basic $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.66 $ 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 2.61 $ 2.02 Diluted $ 2.63 $ 2.58 $ 2.00 Weighted 2.02 Diluted $ 2.63 $ 2.58 $ 2.00 Weighted average share $ 2.63 $ 2.58 $ 2.00 Weighted average share outstanding : average share outstanding : Basic 8,299 8,375 8,396 Diluted 8,399 8,470 share outstanding : Basic 8,299 8,375 8,396 Diluted 8,399 8,470 8,506 outstanding : Basic 8,299 8,375 8,396 Diluted 8,399 8,470 8,506 Cash Basic 8,299 8,375 8,396 Diluted 8,399 8,470 8,506 Cash dividend declared 8,299 8,375 8,396 Diluted 8,399 8,470 8,506 Cash dividend declared per 8,375 8,396 Diluted 8,399 8,470 8,506 Cash dividend declared per common declared per common share $ 1.12 $ 0.92 $ 0.80 See common share $ 1.12 $ 0.92 $ 0.80 See accompanying note $ 1.12 $ 0.92 $ 0.80 See accompanying note . 53 0.80 See accompanying note . 53 Table of Contents PART II of Contents PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2014 2013 2012 Net Year Ended June 30 , 2014 2013 2012 Net income $ Ended June 30 , 2014 2013 2012 Net income $ 22,074 June 30 , 2014 2013 2012 Net income $ 22,074 $ 2013 2012 Net income $ 22,074 $ 21,863 $ 16,978 Other Net income $ 22,074 $ 21,863 $ 16,978 Other comprehensive income $ 22,074 $ 21,863 $ 16,978 Other comprehensive income ( loss tax effect of $ ( 4 ) , $ ( 14 4 ) , $ ( 14 ) , and $ 137 14 ) , and $ 137 ) ( 35 ) ( and $ 137 ) ( 35 ) ( 26 ) 255 ) ( 35 ) ( 26 ) 255 Net unrealized gain 35 ) ( 26 ) 255 Net unrealized gain ( loss of tax effect of $ 936 , $ 195 , and of $ 936 , $ 195 , and $ ( 210 195 , and $ ( 210 ) ) 1,737 363 ( $ ( 210 ) ) 1,737 363 ( 390 ) Translation ( 210 ) ) 1,737 363 ( 390 ) Translation adjustment ) ) 1,737 363 ( 390 ) Translation adjustment and other of tax effect of $ 12 , $ ( 8 ) $ 12 , $ ( 8 ) , and $ ( ) , and $ ( 165 ) ) 263 ( 16 $ ( 165 ) ) 263 ( 16 ) ( 306 165 ) ) 263 ( 16 ) ( 306 ) Other 263 ( 16 ) ( 306 ) Other comprehensive income ( comprehensive income ( loss ) 1,965 321 ( 441 ) Comprehensive income ( loss ) 1,965 321 ( 441 ) Comprehensive income loss ) 1,965 321 ( 441 ) Comprehensive income $ 24,039 441 ) Comprehensive income $ 24,039 $ 22,184 $ 16,537 See Comprehensive income $ 24,039 $ 22,184 $ 16,537 See accompanying note $ 24,039 $ 22,184 $ 16,537 See accompanying note . 54 16,537 See accompanying note . 54 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2014 2013 Assets Current million ) June 30 , 2014 2013 Assets Current asset : ) June 30 , 2014 2013 Assets Current asset : Cash Cash and cash equivalent $ 8,669 $ 3,804 Short-term investment ( cash equivalent $ 8,669 $ 3,804 Short-term investment ( including security including security loaned of $ 541 and $ 579 ) 77,040 of $ 541 and $ 579 ) 77,040 73,218 Total cash 541 and $ 579 ) 77,040 73,218 Total cash , cash and $ 579 ) 77,040 73,218 Total cash , cash equivalent equivalent , and short-term investment 85,709 77,022 Accounts receivable , net , and short-term investment 85,709 77,022 Accounts receivable , net of for doubtful account of $ 301 and $ 336 19,544 17,486 of $ 301 and $ 336 19,544 17,486 Inventories 2,660 1,938 $ 301 and $ 336 19,544 17,486 Inventories 2,660 1,938 Deferred 301 and $ 336 19,544 17,486 Inventories 2,660 1,938 Deferred income $ 336 19,544 17,486 Inventories 2,660 1,938 Deferred income tax 1,941 336 19,544 17,486 Inventories 2,660 1,938 Deferred income tax 1,941 1,632 2,660 1,938 Deferred income tax 1,941 1,632 Other 4,392 3,388 Total 1,938 Deferred income tax 1,941 1,632 Other 4,392 3,388 Total current income tax 1,941 1,632 Other 4,392 3,388 Total current asset 114,246 tax 1,941 1,632 Other 4,392 3,388 Total current asset 114,246 101,466 4,392 3,388 Total current asset 114,246 101,466 Property and equipment , 3,388 Total current asset 114,246 101,466 Property and equipment , net of accumulated depreciation of $ 14,793 and $ 12,513 13,011 9,991 of $ 14,793 and $ 12,513 13,011 9,991 Equity and other $ 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,793 and $ 12,513 13,011 9,991 Equity and other investment 14,597 9,991 Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible Equity and other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset other investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset , net investment 14,597 10,844 Goodwill 20,127 14,655 Intangible asset , net 6,981 14,655 Intangible asset , net 6,981 3,083 Other long-term asset 3,422 Intangible asset , net 6,981 3,083 Other long-term asset 3,422 2,392 6,981 3,083 Other long-term asset 3,422 2,392 Total asset $ 172,384 3,083 Other long-term asset 3,422 2,392 Total asset $ 172,384 $ 3,422 2,392 Total asset $ 172,384 $ 142,431 Liabilities and stockholder Total asset $ 172,384 $ 142,431 Liabilities and stockholder ’ equity liability : Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 Accounts payable $ 7,432 $ 4,828 Short-term debt 2,000 0 Current 7,432 $ 4,828 Short-term debt 2,000 0 Current portion of long-term $ 4,828 Short-term debt 2,000 0 Current portion of long-term debt Current portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 portion of long-term debt 0 2,999 Accrued compensation 4,797 4,117 Income debt 0 2,999 Accrued compensation 4,797 4,117 Income tax 782 592 0 2,999 Accrued compensation 4,797 4,117 Income tax 782 592 Short-term compensation 4,797 4,117 Income tax 782 592 Short-term unearned revenue 23,150 4,797 4,117 Income tax 782 592 Short-term unearned revenue 23,150 20,639 782 592 Short-term unearned revenue 23,150 20,639 Securities lending payable 558 592 Short-term unearned revenue 23,150 20,639 Securities lending payable 558 645 23,150 20,639 Securities lending payable 558 645 Other 6,906 3,597 Total 20,639 Securities lending payable 558 645 Other 6,906 3,597 Total current lending payable 558 645 Other 6,906 3,597 Total current liability 45,625 payable 558 645 Other 6,906 3,597 Total current liability 45,625 37,417 6,906 3,597 Total current liability 45,625 37,417 Long-term debt 20,645 12,601 3,597 Total current liability 45,625 37,417 Long-term debt 20,645 12,601 Long-term liability 45,625 37,417 Long-term debt 20,645 12,601 Long-term unearned revenue 2,008 45,625 37,417 Long-term debt 20,645 12,601 Long-term unearned revenue 2,008 1,760 20,645 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 12,601 Long-term unearned revenue 2,008 1,760 Deferred income tax 2,728 1,709 2,008 1,760 Deferred income tax 2,728 1,709 Other long-term liability 11,594 1,760 Deferred income tax 2,728 1,709 Other long-term liability 11,594 10,000 2,728 1,709 Other long-term liability 11,594 10,000 Total liability 82,600 63,487 1,709 Other long-term liability 11,594 10,000 Total liability 82,600 63,487 Commitments liability 11,594 10,000 Total liability 82,600 63,487 Commitments and contingency Stockholders 11,594 10,000 Total liability 82,600 63,487 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,239 and 8,328 share authorized 24,000 ; outstanding 8,239 and 8,328 68,366 67,306 Retained 24,000 ; outstanding 8,239 and 8,328 68,366 67,306 Retained earnings 17,710 ; outstanding 8,239 and 8,328 68,366 67,306 Retained earnings 17,710 9,895 outstanding 8,239 and 8,328 68,366 67,306 Retained earnings 17,710 9,895 Accumulated 8,328 68,366 67,306 Retained earnings 17,710 9,895 Accumulated other comprehensive income 68,366 67,306 Retained earnings 17,710 9,895 Accumulated other comprehensive income 3,708 9,895 Accumulated other comprehensive income 3,708 1,743 Total stockholder ’ equity Accumulated other comprehensive income 3,708 1,743 Total stockholder ’ equity 89,784 1,743 Total stockholder ’ equity 89,784 78,944 Total liability and stockholder Total stockholder ’ equity 89,784 78,944 Total liability and stockholder ’ and stockholder ’ equity $ 172,384 $ 142,431 See accompanying note ’ equity $ 172,384 $ 142,431 See accompanying note . 55 142,431 See accompanying note . 55 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2014 2013 2012 Operations Year Ended June 30 , 2014 2013 2012 Operations Net income Ended June 30 , 2014 2013 2012 Operations Net income $ June 30 , 2014 2013 2012 Operations Net income $ 22,074 2012 Operations Net income $ 22,074 $ 21,863 $ 16,978 Adjustments Net income $ 22,074 $ 21,863 $ 16,978 Adjustments to reconcile $ 22,074 $ 21,863 $ 16,978 Adjustments to reconcile net income from operation : Goodwill impairment 0 0 6,193 Depreciation , amortization operation : Goodwill impairment 0 0 6,193 Depreciation , amortization , : Goodwill impairment 0 0 6,193 Depreciation , amortization , and , amortization , and other 5,212 3,755 2,967 Stock-based compensation expense amortization , and other 5,212 3,755 2,967 Stock-based compensation expense 2,446 , and other 5,212 3,755 2,967 Stock-based compensation expense 2,446 2,406 3,755 2,967 Stock-based compensation expense 2,446 2,406 2,244 Net recognized loss 2,967 Stock-based compensation expense 2,446 2,406 2,244 Net recognized loss ( Stock-based compensation expense 2,446 2,406 2,244 Net recognized loss ( gain on investment and derivative ( 109 ) 80 ( 200 ) and derivative ( 109 ) 80 ( 200 ) Excess tax ( 109 ) 80 ( 200 ) Excess tax benefit from benefit from stock-based compensation ( 271 ) ( 209 ) ( compensation ( 271 ) ( 209 ) ( 93 ) Deferred ) ( 209 ) ( 93 ) Deferred income tax ( ) Deferred income tax ( 331 ) ( 19 ) 954 tax ( 331 ) ( 19 ) 954 Deferral of unearned 331 ) ( 19 ) 954 Deferral of unearned revenue 44,325 954 Deferral of unearned revenue 44,325 44,253 36,104 Recognition of unearned Deferral of unearned revenue 44,325 44,253 36,104 Recognition of unearned revenue of unearned revenue 44,325 44,253 36,104 Recognition of unearned revenue ( Recognition of unearned revenue ( 41,739 ) ( 41,921 ) ( revenue ( 41,739 ) ( 41,921 ) ( 33,347 ) Changes ) ( 41,921 ) ( 33,347 ) Changes in operating asset liability : Accounts receivable ( 1,120 ) ( 1,807 ) ( receivable ( 1,120 ) ( 1,807 ) ( 1,156 ) Inventories ) ( 1,807 ) ( 1,156 ) Inventories ( 161 ) ( 1,156 ) Inventories ( 161 ) ( 802 ) 184 Inventories ( 161 ) ( 802 ) 184 Other current asset 161 ) ( 802 ) 184 Other current asset ( 29 184 Other current asset ( 29 ) ( 129 ) 493 asset ( 29 ) ( 129 ) 493 Other long-term asset 29 ) ( 129 ) 493 Other long-term asset ( 628 493 Other long-term asset ( 628 ) ( 478 ) ( asset ( 628 ) ( 478 ) ( 248 ) Accounts ) ( 478 ) ( 248 ) Accounts payable 473 537 ( 248 ) Accounts payable 473 537 ( 31 ) Other 248 ) Accounts payable 473 537 ( 31 ) Other current Accounts payable 473 537 ( 31 ) Other current liability 1,075 31 ) Other current liability 1,075 146 410 Other long-term liability ) Other current liability 1,075 146 410 Other long-term liability 1,014 Other current liability 1,075 146 410 Other long-term liability 1,014 1,158 146 410 Other long-term liability 1,014 1,158 174 Net cash from 410 Other long-term liability 1,014 1,158 174 Net cash from operation Other long-term liability 1,014 1,158 174 Net cash from operation 32,231 174 Net cash from operation 32,231 28,833 31,626 Financing Proceeds from Net cash from operation 32,231 28,833 31,626 Financing Proceeds from issuance cash from operation 32,231 28,833 31,626 Financing Proceeds from issuance of short-term debt , maturity of 90 day or le , net day or le , net 500 0 0 Proceeds from issuance or le , net 500 0 0 Proceeds from issuance of le , net 500 0 0 Proceeds from issuance of debt Proceeds from issuance of debt 10,350 4,883 0 Repayments of debt from issuance of debt 10,350 4,883 0 Repayments of debt ( issuance of debt 10,350 4,883 0 Repayments of debt ( 3,888 0 Repayments of debt ( 3,888 ) ( 1,346 ) 0 debt ( 3,888 ) ( 1,346 ) 0 Common stock issued 3,888 ) ( 1,346 ) 0 Common stock issued 607 931 ) 0 Common stock issued 607 931 1,913 Common stock repurchased 0 Common stock issued 607 931 1,913 Common stock repurchased ( Common stock issued 607 931 1,913 Common stock repurchased ( 7,316 1,913 Common stock repurchased ( 7,316 ) ( 5,360 ) ( repurchased ( 7,316 ) ( 5,360 ) ( 5,029 ) Common ) ( 5,360 ) ( 5,029 ) Common stock cash dividend stock cash dividend paid ( 8,879 ) ( 7,455 ) ( paid ( 8,879 ) ( 7,455 ) ( 6,385 ) Excess ) ( 7,455 ) ( 6,385 ) Excess tax benefit from tax benefit from stock-based compensation 271 209 93 Other ( 39 benefit from stock-based compensation 271 209 93 Other ( 39 ) from stock-based compensation 271 209 93 Other ( 39 ) ( 271 209 93 Other ( 39 ) ( 10 ) 0 Other ( 39 ) ( 10 ) 0 Net cash used 39 ) ( 10 ) 0 Net cash used in financing cash used in financing ( 8,394 ) ( 8,148 ) ( financing ( 8,394 ) ( 8,148 ) ( 9,408 ) Investing ) ( 8,148 ) ( 9,408 ) Investing Additions to property to property and equipment ( 5,485 ) ( 4,257 ) ( equipment ( 5,485 ) ( 4,257 ) ( 2,305 ) Acquisition ) ( 4,257 ) ( 2,305 ) Acquisition of company , intangible and other asset ( 5,937 ) ( 1,584 ) ( asset ( 5,937 ) ( 1,584 ) ( 10,112 ) Purchases ) ( 1,584 ) ( 10,112 ) Purchases of investment ( ) Purchases of investment ( 72,690 ) ( 75,396 ) ( investment ( 72,690 ) ( 75,396 ) ( 57,250 ) Maturities ) ( 75,396 ) ( 57,250 ) Maturities of investment 5,272 57,250 ) Maturities of investment 5,272 5,130 15,575 Sales of investment ) Maturities of investment 5,272 5,130 15,575 Sales of investment 60,094 Maturities of investment 5,272 5,130 15,575 Sales of investment 60,094 52,464 5,130 15,575 Sales of investment 60,094 52,464 29,700 Securities lending payable 15,575 Sales of investment 60,094 52,464 29,700 Securities lending payable ( Sales of investment 60,094 52,464 29,700 Securities lending payable ( 87 29,700 Securities lending payable ( 87 ) ( 168 ) ( payable ( 87 ) ( 168 ) ( 394 ) Net ) ( 168 ) ( 394 ) Net cash used in cash used in investing ( 18,833 ) ( 23,811 ) ( investing ( 18,833 ) ( 23,811 ) ( 24,786 ) Effect ) ( 23,811 ) ( 24,786 ) Effect of exchange rate cash and cash equivalent ( 139 ) ( 8 ) ( equivalent ( 139 ) ( 8 ) ( 104 ) Net ) ( 8 ) ( 104 ) Net change in cash in cash and cash equivalent 4,865 ( 3,134 ) ( 2,672 and cash equivalent 4,865 ( 3,134 ) ( 2,672 ) Cash 4,865 ( 3,134 ) ( 2,672 ) Cash and cash equivalent equivalent , beginning of period 3,804 6,938 9,610 Cash and cash , beginning of period 3,804 6,938 9,610 Cash and cash equivalent beginning of period 3,804 6,938 9,610 Cash and cash equivalent , , end of period $ 8,669 $ 3,804 $ 6,938 See of period $ 8,669 $ 3,804 $ 6,938 See accompanying note $ 8,669 $ 3,804 $ 6,938 See accompanying note . 56 6,938 See accompanying note . 56 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2014 2013 2012 Common Year Ended June 30 , 2014 2013 2012 Common stock and Ended June 30 , 2014 2013 2012 Common stock and paid-in June 30 , 2014 2013 2012 Common stock and paid-in capital , beginning of period $ 67,306 $ 65,797 $ 63,415 Common of period $ 67,306 $ 65,797 $ 63,415 Common stock issued $ 67,306 $ 65,797 $ 63,415 Common stock issued 607 920 $ 63,415 Common stock issued 607 920 1,924 Common stock repurchased 63,415 Common stock issued 607 920 1,924 Common stock repurchased ( Common stock issued 607 920 1,924 Common stock repurchased ( 2,328 1,924 Common stock repurchased ( 2,328 ) ( 2,014 ) ( repurchased ( 2,328 ) ( 2,014 ) ( 1,714 ) Stock-based ) ( 2,014 ) ( 1,714 ) Stock-based compensation expense 2,446 1,714 ) Stock-based compensation expense 2,446 2,406 2,244 Stock-based compensation income ) Stock-based compensation expense 2,446 2,406 2,244 Stock-based compensation income tax Stock-based compensation expense 2,446 2,406 2,244 Stock-based compensation income tax benefit tax benefit ( deficiency ) 272 190 ( 75 ) Other benefit ( deficiency ) 272 190 ( 75 ) Other , deficiency ) 272 190 ( 75 ) Other , net 63 75 ) Other , net 63 7 3 Balance , end ) Other , net 63 7 3 Balance , end of Other , net 63 7 3 Balance , end of period Balance , end of period 68,366 67,306 65,797 Retained earnings ( , end of period 68,366 67,306 65,797 Retained earnings ( deficit end of period 68,366 67,306 65,797 Retained earnings ( deficit ) Balance , beginning of period 9,895 ( 856 ) ( 8,195 beginning of period 9,895 ( 856 ) ( 8,195 ) Net 9,895 ( 856 ) ( 8,195 ) Net income 22,074 21,863 ( 8,195 ) Net income 22,074 21,863 16,978 Common stock cash 8,195 ) Net income 22,074 21,863 16,978 Common stock cash dividend ) Net income 22,074 21,863 16,978 Common stock cash dividend ( Common stock cash dividend ( 9,271 ) ( 7,694 ) ( dividend ( 9,271 ) ( 7,694 ) ( 6,721 ) Common ) ( 7,694 ) ( 6,721 ) Common stock repurchased ( ) Common stock repurchased ( 4,988 ) ( 3,418 ) ( repurchased ( 4,988 ) ( 3,418 ) ( 2,918 ) Balance ) ( 3,418 ) ( 2,918 ) Balance , end of Balance , end of period 17,710 9,895 ( 856 ) Accumulated , end of period 17,710 9,895 ( 856 ) Accumulated other of period 17,710 9,895 ( 856 ) Accumulated other comprehensive income Balance , beginning of period 1,743 1,422 1,863 Other comprehensive income , beginning of period 1,743 1,422 1,863 Other comprehensive income ( beginning of period 1,743 1,422 1,863 Other comprehensive income ( loss comprehensive income ( loss ) 1,965 321 ( 441 ) Balance income ( loss ) 1,965 321 ( 441 ) Balance , loss ) 1,965 321 ( 441 ) Balance , end of Balance , end of period 3,708 1,743 1,422 Total stockholder ’ , end of period 3,708 1,743 1,422 Total stockholder ’ equity end of period 3,708 1,743 1,422 Total stockholder ’ equity $ Total stockholder ’ equity $ 89,784 $ 78,944 $ 66,363 See ’ equity $ 89,784 $ 78,944 $ 66,363 See accompanying note $ 89,784 $ 78,944 $ 66,363 See accompanying note . 57 66,363 See accompanying note . 57 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial new segment described in Note 21 – Segment Information and Geographic segment performance during fiscal year 2014 . This change impacted Note . This change impacted Note 10 – Goodwill , Note 14 10 – Goodwill , Note 14 – Unearned Revenue , and Unearned Revenue , and Note 21 – Segment Information and Geographic remitted to governmental authority . 58 Table of Contents PART II of Contents PART II Item 8 Revenue recognition for multiple-element arrangement same revenue recognition timing . 59 Table of Contents PART II of Contents PART II Item 8 Revenue related to phone , a period generally ranging from 90 day to three year . . Advertising expense wa $ 2.3 billion , $ 2.6 billion $ 2.3 billion , $ 2.6 billion , and $ 1.6 2.6 billion , and $ 1.6 billion in fiscal year 2014 1.6 billion in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . 60 Table and 2012 , respectively . 60 Table of Contents PART II of Contents PART II Item 8 Stock-Based Compensation We measure stock-based employee at three-month interval at 90 % of the fair market level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of government bond . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment of these investment are determined 61 Table of Contents PART II of Contents PART II Item 8 based on valuation technique using in earnings when the hedged 62 Table of Contents PART II of Contents PART II Item 8 exposure is recognized in earnings million ) Year Ended June 30 , 2014 2013 2012 Balance Year Ended June 30 , 2014 2013 2012 Balance , beginning Ended June 30 , 2014 2013 2012 Balance , beginning of June 30 , 2014 2013 2012 Balance , beginning of period , beginning of period $ 336 $ 389 $ 333 Charged of period $ 336 $ 389 $ 333 Charged to cost $ 336 $ 389 $ 333 Charged to cost and other Charged to cost and other 16 4 115 Write-offs ( 51 to cost and other 16 4 115 Write-offs ( 51 ) cost and other 16 4 115 Write-offs ( 51 ) ( 16 4 115 Write-offs ( 51 ) ( 57 ) ( Write-offs ( 51 ) ( 57 ) ( 59 ) Balance ) ( 57 ) ( 59 ) Balance , end of , end of period $ 301 $ 336 $ 389 Inventories of period $ 301 $ 336 $ 389 Inventories Inventories are $ 301 $ 336 $ 389 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , two to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between , ranging from one to 15 year . We evaluate the asset may be impaired . 63 Table of Contents PART II of Contents PART II Item 8 Recent Accounting Guidance Recently adopted adopted accounting guidance In December 2011 , the Financial Accounting Standards net exposure . In January 2013 , the FASB clarified that this new guidance beginning July 1 , 2013 . Adoption of guidance beginning July 1 , 2013 . Adoption of this new to the presentation of Note 5 – Derivatives . In February – Derivatives . In February 2013 , the FASB issued guidance this new guidance beginning July 1 , 2013 . Adoption of guidance beginning July 1 , 2013 . Adoption of this new to the presentation of Note 19 – Accumulated Other Comprehensive Income not yet adopted In March 2013 , the FASB issued guidance effective for u beginning July 1 , 2014 . We do u beginning July 1 , 2014 . We do not anticipate upon adoption . In May 2014 , a part of it effective for u beginning July 1 , 2017 and early adoption u beginning July 1 , 2017 and early adoption is not consolidated financial statement . NOTE 2 — EARNINGS PER SHARE Basic option and stock award . 64 Table of Contents PART II of Contents PART II Item 8 The component of basic and share ) Year Ended June 30 , 2014 2013 2012 Net Year Ended June 30 , 2014 2013 2012 Net income available Ended June 30 , 2014 2013 2012 Net income available for June 30 , 2014 2013 2012 Net income available for common shareholder ( A ) $ 22,074 $ 21,863 $ 16,978 Weighted A ) $ 22,074 $ 21,863 $ 16,978 Weighted average outstanding $ 22,074 $ 21,863 $ 16,978 Weighted average outstanding share of common stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based ( B ) 8,299 8,375 8,396 Dilutive effect of stock-based award Dilutive effect of stock-based award 100 95 110 Common stock and effect of stock-based award 100 95 110 Common stock and common of stock-based award 100 95 110 Common stock and common stock stock equivalent ( C ) 8,399 8,470 8,506 Earnings Per Share equivalent ( C ) 8,399 8,470 8,506 Earnings Per Share Basic ( C ) 8,399 8,470 8,506 Earnings Per Share Basic ( Basic ( A/B ) $ 2.66 $ 2.61 $ 2.02 Diluted A/B ) $ 2.66 $ 2.61 $ 2.02 Diluted ( A/C $ 2.66 $ 2.61 $ 2.02 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.63 $ 2.58 $ 2.00 Anti-dilutive A/C ) $ 2.63 $ 2.58 $ 2.00 Anti-dilutive stock-based award $ 2.63 $ 2.58 $ 2.00 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2014 2013 2012 Dividends Year Ended June 30 , 2014 2013 2012 Dividends and interest Ended June 30 , 2014 2013 2012 Dividends and interest income June 30 , 2014 2013 2012 Dividends and interest income $ Dividends and interest income $ 883 $ 677 $ 800 Interest interest income $ 883 $ 677 $ 800 Interest expense ( $ 883 $ 677 $ 800 Interest expense ( 597 ) $ 800 Interest expense ( 597 ) ( 429 ) ( expense ( 597 ) ( 429 ) ( 380 ) Net ) ( 429 ) ( 380 ) Net recognized gain on Net recognized gain on investment 437 116 564 Net loss on recognized gain on investment 437 116 564 Net loss on derivative gain on investment 437 116 564 Net loss on derivative ( Net loss on derivative ( 328 ) ( 196 ) ( derivative ( 328 ) ( 196 ) ( 364 ) Net ) ( 196 ) ( 364 ) Net loss on foreign on foreign currency remeasurements ( 165 ) ( 74 ) ( remeasurements ( 165 ) ( 74 ) ( 117 ) Other ) ( 74 ) ( 117 ) Other ( 169 ) ( 117 ) Other ( 169 ) 194 1 Total $ ) Other ( 169 ) 194 1 Total $ 61 $ Other ( 169 ) 194 1 Total $ 61 $ 288 ) 194 1 Total $ 61 $ 288 $ 504 Following 1 Total $ 61 $ 288 $ 504 Following are detail $ 61 $ 288 $ 504 Following are detail of net million ) Year Ended June 30 , 2014 2013 2012 Other-than-temporary Year Ended June 30 , 2014 2013 2012 Other-than-temporary impairment of Ended June 30 , 2014 2013 2012 Other-than-temporary impairment of investment June 30 , 2014 2013 2012 Other-than-temporary impairment of investment $ impairment of investment $ ( 106 ) $ ( 208 ) ( 106 ) $ ( 208 ) $ ( 298 ) ( 208 ) $ ( 298 ) Realized gain from sale from sale of available-for-sale security 776 489 1,418 Realized loss from sale of available-for-sale security 776 489 1,418 Realized loss from sale of available-for-sale security 776 489 1,418 Realized loss from sale of sale of available-for-sale security ( 233 ) ( 165 ) ( security ( 233 ) ( 165 ) ( 556 ) Total ) ( 165 ) ( 556 ) Total $ 437 $ ( 556 ) Total $ 437 $ 116 $ 564 65 ) Total $ 437 $ 116 $ 564 65 Table of $ 437 $ 116 $ 564 65 Table of Contents PART 437 $ 116 $ 564 65 Table of Contents PART II of Contents PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2014 Cash $ 4,980 Other Investments June 30 , 2014 Cash $ 4,980 $ 0 30 , 2014 Cash $ 4,980 $ 0 $ 0 $ 2014 Cash $ 4,980 $ 0 $ 0 $ 4,980 $ $ 4,980 $ 0 $ 0 $ 4,980 $ 4,980 $ $ 0 $ 0 $ 4,980 $ 4,980 $ 0 $ $ 0 $ 4,980 $ 4,980 $ 0 $ 0 Mutual $ 4,980 $ 4,980 $ 0 $ 0 Mutual fund 590 $ 4,980 $ 0 $ 0 Mutual fund 590 0 0 0 $ 0 Mutual fund 590 0 0 590 590 0 $ 0 Mutual fund 590 0 0 590 590 0 0 0 Mutual fund 590 0 0 590 590 0 0 Commercial Mutual fund 590 0 0 590 590 0 0 Commercial paper fund 590 0 0 590 590 0 0 Commercial paper 189 590 0 0 590 590 0 0 Commercial paper 189 0 0 0 590 590 0 0 Commercial paper 189 0 0 590 0 0 Commercial paper 189 0 0 189 89 100 0 0 Commercial paper 189 0 0 189 89 100 0 0 Commercial paper 189 0 0 189 89 100 0 Certificates Commercial paper 189 0 0 189 89 100 0 Certificates of paper 189 0 0 189 89 100 0 Certificates of deposit 189 0 0 189 89 100 0 Certificates of deposit 1,197 0 0 189 89 100 0 Certificates of deposit 1,197 0 100 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 U.S. of deposit 1,197 0 0 1,197 865 332 0 U.S. government deposit 1,197 0 0 1,197 865 332 0 U.S. government and 1,197 0 0 1,197 865 332 0 U.S. government and agency 0 0 1,197 865 332 0 U.S. government and agency security U.S. government and agency security 66,952 103 ( 29 ) 67,026 government and agency security 66,952 103 ( 29 ) 67,026 109 agency security 66,952 103 ( 29 ) 67,026 109 66,917 0 66,952 103 ( 29 ) 67,026 109 66,917 0 Foreign government 103 ( 29 ) 67,026 109 66,917 0 Foreign government bond ( 29 ) 67,026 109 66,917 0 Foreign government bond 3,328 29 ) 67,026 109 66,917 0 Foreign government bond 3,328 17 66,917 0 Foreign government bond 3,328 17 ( 10 ) 3,335 0 Foreign government bond 3,328 17 ( 10 ) 3,335 2,027 government bond 3,328 17 ( 10 ) 3,335 2,027 1,308 0 3,328 17 ( 10 ) 3,335 2,027 1,308 0 Mortgage-backed security 17 ( 10 ) 3,335 2,027 1,308 0 Mortgage-backed security 991 ( 10 ) 3,335 2,027 1,308 0 Mortgage-backed security 991 30 10 ) 3,335 2,027 1,308 0 Mortgage-backed security 991 30 ( 2,027 1,308 0 Mortgage-backed security 991 30 ( 2 ) 1,019 1,308 0 Mortgage-backed security 991 30 ( 2 ) 1,019 0 Mortgage-backed security 991 30 ( 2 ) 1,019 0 1,019 0 991 30 ( 2 ) 1,019 0 1,019 0 Corporate note 30 ( 2 ) 1,019 0 1,019 0 Corporate note and ( 2 ) 1,019 0 1,019 0 Corporate note and bond 2 ) 1,019 0 1,019 0 Corporate note and bond 6,845 0 Corporate note and bond 6,845 191 ( 9 ) 7,027 Corporate note and bond 6,845 191 ( 9 ) 7,027 9 and bond 6,845 191 ( 9 ) 7,027 9 7,018 0 6,845 191 ( 9 ) 7,027 9 7,018 0 Municipal security 191 ( 9 ) 7,027 9 7,018 0 Municipal security 287 ( 9 ) 7,027 9 7,018 0 Municipal security 287 45 9 ) 7,027 9 7,018 0 Municipal security 287 45 0 9 7,018 0 Municipal security 287 45 0 332 0 332 7,018 0 Municipal security 287 45 0 332 0 332 0 0 Municipal security 287 45 0 332 0 332 0 Common Municipal security 287 45 0 332 0 332 0 Common and security 287 45 0 332 0 332 0 Common and preferred 287 45 0 332 0 332 0 Common and preferred stock 45 0 332 0 332 0 Common and preferred stock 6,785 0 Common and preferred stock 6,785 5,207 ( 81 ) 11,911 Common and preferred stock 6,785 5,207 ( 81 ) 11,911 0 preferred stock 6,785 5,207 ( 81 ) 11,911 0 0 11,911 6,785 5,207 ( 81 ) 11,911 0 0 11,911 Other investment 5,207 ( 81 ) 11,911 0 0 11,911 Other investment 1,164 ( 81 ) 11,911 0 0 11,911 Other investment 1,164 0 81 ) 11,911 0 0 11,911 Other investment 1,164 0 0 0 0 11,911 Other investment 1,164 0 0 1,164 0 14 0 11,911 Other investment 1,164 0 0 1,164 0 14 1,150 11,911 Other investment 1,164 0 0 1,164 0 14 1,150 Total Other investment 1,164 0 0 1,164 0 14 1,150 Total $ investment 1,164 0 0 1,164 0 14 1,150 Total $ 93,308 1,164 0 0 1,164 0 14 1,150 Total $ 93,308 $ 0 0 1,164 0 14 1,150 Total $ 93,308 $ 5,593 0 14 1,150 Total $ 93,308 $ 5,593 $ ( 131 1,150 Total $ 93,308 $ 5,593 $ ( 131 ) $ 93,308 $ 5,593 $ ( 131 ) $ 98,770 $ 8,669 $ ( 131 ) $ 98,770 $ 8,669 $ 77,040 $ 131 ) $ 98,770 $ 8,669 $ 77,040 $ 13,061 ( $ 98,770 $ 8,669 $ 77,040 $ 13,061 ( In million $ 8,669 $ 77,040 $ 13,061 ( In million ) Cost Equity and Other Investments June 30 , 2013 Cash $ 1,967 Other Investments June 30 , 2013 Cash $ 1,967 $ 0 30 , 2013 Cash $ 1,967 $ 0 $ 0 $ 2013 Cash $ 1,967 $ 0 $ 0 $ 1,967 $ $ 1,967 $ 0 $ 0 $ 1,967 $ 1,967 $ $ 0 $ 0 $ 1,967 $ 1,967 $ 0 $ $ 0 $ 1,967 $ 1,967 $ 0 $ 0 Mutual $ 1,967 $ 1,967 $ 0 $ 0 Mutual fund 868 $ 1,967 $ 0 $ 0 Mutual fund 868 0 0 0 $ 0 Mutual fund 868 0 0 868 868 0 $ 0 Mutual fund 868 0 0 868 868 0 0 0 Mutual fund 868 0 0 868 868 0 0 Commercial Mutual fund 868 0 0 868 868 0 0 Commercial paper fund 868 0 0 868 868 0 0 Commercial paper 603 868 0 0 868 868 0 0 Commercial paper 603 0 0 0 868 868 0 0 Commercial paper 603 0 0 868 0 0 Commercial paper 603 0 0 603 214 389 0 0 Commercial paper 603 0 0 603 214 389 0 0 Commercial paper 603 0 0 603 214 389 0 Certificates Commercial paper 603 0 0 603 214 389 0 Certificates of paper 603 0 0 603 214 389 0 Certificates of deposit 603 0 0 603 214 389 0 Certificates of deposit 994 0 0 603 214 389 0 Certificates of deposit 994 0 389 0 Certificates of deposit 994 0 0 994 609 385 0 Certificates of deposit 994 0 0 994 609 385 0 Certificates of deposit 994 0 0 994 609 385 0 U.S. of deposit 994 0 0 994 609 385 0 U.S. government deposit 994 0 0 994 609 385 0 U.S. government and 994 0 0 994 609 385 0 U.S. government and agency 0 0 994 609 385 0 U.S. government and agency security U.S. government and agency security 64,934 47 ( 84 ) 64,897 government and agency security 64,934 47 ( 84 ) 64,897 146 agency security 64,934 47 ( 84 ) 64,897 146 64,751 0 64,934 47 ( 84 ) 64,897 146 64,751 0 Foreign government 47 ( 84 ) 64,897 146 64,751 0 Foreign government bond ( 84 ) 64,897 146 64,751 0 Foreign government bond 900 84 ) 64,897 146 64,751 0 Foreign government bond 900 16 64,751 0 Foreign government bond 900 16 ( 41 ) 875 0 Foreign government bond 900 16 ( 41 ) 875 0 government bond 900 16 ( 41 ) 875 0 875 0 900 16 ( 41 ) 875 0 875 0 Mortgage-backed security 16 ( 41 ) 875 0 875 0 Mortgage-backed security 1,258 ( 41 ) 875 0 875 0 Mortgage-backed security 1,258 43 41 ) 875 0 875 0 Mortgage-backed security 1,258 43 ( 0 875 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 875 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 0 Mortgage-backed security 1,258 43 ( 13 ) 1,288 0 1,288 0 1,258 43 ( 13 ) 1,288 0 1,288 0 Corporate note 43 ( 13 ) 1,288 0 1,288 0 Corporate note and ( 13 ) 1,288 0 1,288 0 Corporate note and bond 13 ) 1,288 0 1,288 0 Corporate note and bond 4,993 0 Corporate note and bond 4,993 169 ( 40 ) 5,122 Corporate note and bond 4,993 169 ( 40 ) 5,122 0 and bond 4,993 169 ( 40 ) 5,122 0 5,122 0 4,993 169 ( 40 ) 5,122 0 5,122 0 Municipal security 169 ( 40 ) 5,122 0 5,122 0 Municipal security 350 ( 40 ) 5,122 0 5,122 0 Municipal security 350 36 40 ) 5,122 0 5,122 0 Municipal security 350 36 ( 0 5,122 0 Municipal security 350 36 ( 1 ) 385 5,122 0 Municipal security 350 36 ( 1 ) 385 0 Municipal security 350 36 ( 1 ) 385 0 385 0 350 36 ( 1 ) 385 0 385 0 Common and 36 ( 1 ) 385 0 385 0 Common and preferred ( 1 ) 385 0 385 0 Common and preferred stock 1 ) 385 0 385 0 Common and preferred stock 6,931 0 Common and preferred stock 6,931 2,938 ( 281 ) 9,588 Common and preferred stock 6,931 2,938 ( 281 ) 9,588 0 preferred stock 6,931 2,938 ( 281 ) 9,588 0 0 9,588 6,931 2,938 ( 281 ) 9,588 0 0 9,588 Other investment 2,938 ( 281 ) 9,588 0 0 9,588 Other investment 1,279 ( 281 ) 9,588 0 0 9,588 Other investment 1,279 0 281 ) 9,588 0 0 9,588 Other investment 1,279 0 0 0 0 9,588 Other investment 1,279 0 0 1,279 0 23 0 9,588 Other investment 1,279 0 0 1,279 0 23 1,256 9,588 Other investment 1,279 0 0 1,279 0 23 1,256 Total Other investment 1,279 0 0 1,279 0 23 1,256 Total $ investment 1,279 0 0 1,279 0 23 1,256 Total $ 85,077 1,279 0 0 1,279 0 23 1,256 Total $ 85,077 $ 0 0 1,279 0 23 1,256 Total $ 85,077 $ 3,249 0 23 1,256 Total $ 85,077 $ 3,249 $ ( 460 1,256 Total $ 85,077 $ 3,249 $ ( 460 ) $ 85,077 $ 3,249 $ ( 460 ) $ 87,866 $ 3,804 $ ( 460 ) $ 87,866 $ 3,804 $ 73,218 $ 460 ) $ 87,866 $ 3,804 $ 73,218 $ 10,844 In $ 87,866 $ 3,804 $ 73,218 $ 10,844 In addition to $ 3,804 $ 73,218 $ 10,844 In addition to the investment our agreement to lend $ 2.0 billion to the group that acquisition of Dell on October 29 , 2013 . These corporate Dell on October 29 , 2013 . These corporate note are sheet . As of June 30 , 2014 , the amortized As of June 30 , 2014 , the amortized cost , these corporate note wa $ 1.5 billion , $ 1.5 billion $ 1.5 billion , $ 1.5 billion , and $ 1.7 1.5 billion , and $ 1.7 billion , respectively , while unrecognized holding gain were $ 164 million . As of June million . As of June 30 , 2014 and 2013 , As of June 30 , 2014 and 2013 , the recorded June 30 , 2014 and 2013 , the recorded base of not publicly traded were $ 520 million and $ 395 million $ 520 million and $ 395 million , respectively . These value of these investment . 66 Table of Contents PART II of Contents PART II Item 8 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2014 U.S. government and Fair Value June 30 , 2014 U.S. government and agency security government and agency security $ 4,161 $ ( 29 ) $ security $ 4,161 $ ( 29 ) $ 850 $ 0 $ ( 29 ) $ 850 $ 0 $ 5,011 $ 29 ) $ 850 $ 0 $ 5,011 $ ( 29 $ 850 $ 0 $ 5,011 $ ( 29 ) Foreign 0 $ 5,011 $ ( 29 ) Foreign government bond 566 29 ) Foreign government bond 566 ( 4 ) 21 ( Foreign government bond 566 ( 4 ) 21 ( 6 ) bond 566 ( 4 ) 21 ( 6 ) 587 ( ( 4 ) 21 ( 6 ) 587 ( 10 ) ) 21 ( 6 ) 587 ( 10 ) Mortgage-backed security ( 6 ) 587 ( 10 ) Mortgage-backed security 120 0 ( 10 ) Mortgage-backed security 120 0 61 ( 2 ) 10 ) Mortgage-backed security 120 0 61 ( 2 ) 181 ) Mortgage-backed security 120 0 61 ( 2 ) 181 ( security 120 0 61 ( 2 ) 181 ( 2 ) 0 61 ( 2 ) 181 ( 2 ) Corporate note ( 2 ) 181 ( 2 ) Corporate note and bond ) Corporate note and bond 1,154 ( 8 ) 34 ( note and bond 1,154 ( 8 ) 34 ( 1 ) bond 1,154 ( 8 ) 34 ( 1 ) 1,188 ( ( 8 ) 34 ( 1 ) 1,188 ( 9 ) ) 34 ( 1 ) 1,188 ( 9 ) Common and ( 1 ) 1,188 ( 9 ) Common and preferred stock ) Common and preferred stock 463 ( 48 ) 257 ( and preferred stock 463 ( 48 ) 257 ( 33 ) stock 463 ( 48 ) 257 ( 33 ) 720 ( ( 48 ) 257 ( 33 ) 720 ( 81 ) ) 257 ( 33 ) 720 ( 81 ) Total $ ( 33 ) 720 ( 81 ) Total $ 6,464 $ ( 81 ) Total $ 6,464 $ ( 89 ) $ Total $ 6,464 $ ( 89 ) $ 1,223 $ ( $ ( 89 ) $ 1,223 $ ( 42 ) $ ) $ 1,223 $ ( 42 ) $ 7,687 $ ( $ ( 42 ) $ 7,687 $ ( 131 ) Less ) $ 7,687 $ ( 131 ) Less than 12 Months ( 131 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2013 U.S. government and Fair Value June 30 , 2013 U.S. government and agency security government and agency security $ 2,208 $ ( 84 ) $ security $ 2,208 $ ( 84 ) $ 0 $ 0 $ ( 84 ) $ 0 $ 0 $ 2,208 $ 84 ) $ 0 $ 0 $ 2,208 $ ( 84 $ 0 $ 0 $ 2,208 $ ( 84 ) Foreign 0 $ 2,208 $ ( 84 ) Foreign government bond 589 84 ) Foreign government bond 589 ( 18 ) 69 ( Foreign government bond 589 ( 18 ) 69 ( 23 ) bond 589 ( 18 ) 69 ( 23 ) 658 ( ( 18 ) 69 ( 23 ) 658 ( 41 ) ) 69 ( 23 ) 658 ( 41 ) Mortgage-backed security ( 23 ) 658 ( 41 ) Mortgage-backed security 357 ( ( 41 ) Mortgage-backed security 357 ( 12 ) 39 ( ) Mortgage-backed security 357 ( 12 ) 39 ( 1 ) security 357 ( 12 ) 39 ( 1 ) 396 ( ( 12 ) 39 ( 1 ) 396 ( 13 ) ) 39 ( 1 ) 396 ( 13 ) Corporate note ( 1 ) 396 ( 13 ) Corporate note and bond ) Corporate note and bond 1,142 ( 38 ) 27 ( note and bond 1,142 ( 38 ) 27 ( 2 ) bond 1,142 ( 38 ) 27 ( 2 ) 1,169 ( ( 38 ) 27 ( 2 ) 1,169 ( 40 ) ) 27 ( 2 ) 1,169 ( 40 ) Municipal security ( 2 ) 1,169 ( 40 ) Municipal security 44 ( ( 40 ) Municipal security 44 ( 1 ) 0 0 ) Municipal security 44 ( 1 ) 0 0 44 ( security 44 ( 1 ) 0 0 44 ( 1 ) 44 ( 1 ) 0 0 44 ( 1 ) Common ( 1 ) 0 0 44 ( 1 ) Common and ) 0 0 44 ( 1 ) Common and preferred stock ) Common and preferred stock 1,166 ( 168 ) 409 ( and preferred stock 1,166 ( 168 ) 409 ( 113 ) stock 1,166 ( 168 ) 409 ( 113 ) 1,575 ( ( 168 ) 409 ( 113 ) 1,575 ( 281 ) ) 409 ( 113 ) 1,575 ( 281 ) Total $ ( 113 ) 1,575 ( 281 ) Total $ 5,506 $ ( 281 ) Total $ 5,506 $ ( 321 ) $ Total $ 5,506 $ ( 321 ) $ 544 $ ( $ ( 321 ) $ 544 $ ( 139 ) $ ) $ 544 $ ( 139 ) $ 6,050 $ ( $ ( 139 ) $ 6,050 $ ( 460 ) As ) $ 6,050 $ ( 460 ) As of June 30 460 ) As of June 30 , 2014 , we did As of June 30 , 2014 , we did not hold available evidence a of June 30 , 2014 . Debt Investment a of June 30 , 2014 . Debt Investment Maturities ( Basis Estimated Fair Value June 30 , 2014 Due in one Fair Value June 30 , 2014 Due in one year or one year or le $ 28,681 $ 28,719 Due after one or le $ 28,681 $ 28,719 Due after one year through one year through five year 46,734 46,881 Due after five year year through five year 46,734 46,881 Due after five year through Due after five year through 10 year 2,910 2,987 Due after five year through 10 year 2,910 2,987 Due after 10 year year through 10 year 2,910 2,987 Due after 10 year 1,464 year 2,910 2,987 Due after 10 year 1,464 1,538 Total ( 2,987 Due after 10 year 1,464 1,538 Total ( a ) Due after 10 year 1,464 1,538 Total ( a ) $ Total ( a ) $ 79,789 $ 80,125 ( a ) a ) $ 79,789 $ 80,125 ( a ) Excludes held-to-maturity Excludes held-to-maturity investment due October 31 , 2023 with a cost investment due October 31 , 2023 with a cost basis and estimated fair value at June 30 , 2014 of $ 1.5 value at June 30 , 2014 of $ 1.5 billion and 30 , 2014 of $ 1.5 billion and $ 1.7 billion $ 1.5 billion and $ 1.7 billion , respectively . 67 1.7 billion , respectively . 67 Table of Contents PART II of Contents PART II Item 8 NOTE 5 — DERIVATIVES We PART II Item 8 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2014 and June 30 As of June 30 , 2014 and June 30 , 2013 30 , 2014 and June 30 , 2013 , the total 2014 and June 30 , 2013 , the total notional amount exchange contract sold were $ 4.9 billion and $ 5.1 billion $ 4.9 billion and $ 5.1 billion , respectively . Foreign instrument . As of June 30 , 2014 and June 30 As of June 30 , 2014 and June 30 , 2013 30 , 2014 and June 30 , 2013 , the total 2014 and June 30 , 2013 , the total notional amount exchange contract sold were $ 3.1 billion and $ 407 million $ 3.1 billion and $ 407 million , respectively . Certain exposure . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 6.2 billion and $ 8.5 billion $ 6.2 billion and $ 8.5 billion , respectively . As respectively . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 5.0 billion and $ 7.9 billion $ 5.0 billion and $ 7.9 billion , respectively . Equity forward . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount market price risk were $ 3.1 billion and $ 2.1 billion $ 3.1 billion and $ 2.1 billion , respectively , of respectively , of which $ 362 million and $ 420 million $ 362 million and $ 420 million , respectively , were instrument . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount market price risk were $ 898 million and $ 1.0 billion $ 898 million and $ 1.0 billion , respectively , none instrument . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 503 million and $ 741 million $ 503 million and $ 741 million , respectively . As respectively . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 1.1 billion and $ 809 million $ 1.1 billion and $ 809 million , respectively . In date . As of June 30 , 2014 and 2013 , As of June 30 , 2014 and 2013 , the total June 30 , 2014 and 2013 , the total notional derivative mortgage contract purchased were $ 1.1 billion and $ 1.2 billion $ 1.1 billion and $ 1.2 billion , respectively . 68 1.2 billion , respectively . 68 Table of Contents PART II of Contents PART II Item 8 Credit Our fixed-income portfolio is risk . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 412 million and $ 440 million $ 412 million and $ 440 million , respectively . As respectively . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 377 million and $ 501 million $ 377 million and $ 501 million , respectively . Commodity grain . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 1.4 billion and $ 408 million $ 1.4 billion and $ 408 million , respectively . As respectively . As of June 30 , 2013 , the total As of June 30 , 2013 , the total notional amount purchased and sold were $ 1.2 billion and $ 249 million $ 1.2 billion and $ 249 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2014 , our long-term As of June 30 , 2014 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 69 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2014 June 30 , risk : June 30 , 2014 June 30 , 2013 Assets June 30 , 2014 June 30 , 2013 Assets Liabilities Assets , 2014 June 30 , 2013 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 10 $ 39 $ 0 $ exchange contract $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) $ 39 $ 0 $ ( 97 ) $ 41 $ 87 $ ( 97 ) $ 41 $ 87 $ ( 63 97 ) $ 41 $ 87 $ ( 63 ) Equity 41 $ 87 $ ( 63 ) Equity contract 177 0 ( 63 ) Equity contract 177 0 0 ( 21 ) 63 ) Equity contract 177 0 0 ( 21 ) 157 ) Equity contract 177 0 0 ( 21 ) 157 0 contract 177 0 0 ( 21 ) 157 0 ( 9 0 0 ( 21 ) 157 0 ( 9 ) Interest 0 ( 21 ) 157 0 ( 9 ) Interest rate 21 ) 157 0 ( 9 ) Interest rate contract 17 9 ) Interest rate contract 17 0 0 ( 12 ) ) Interest rate contract 17 0 0 ( 12 ) 18 Interest rate contract 17 0 0 ( 12 ) 18 0 contract 17 0 0 ( 12 ) 18 0 ( 45 0 0 ( 12 ) 18 0 ( 45 ) Credit 0 ( 12 ) 18 0 ( 45 ) Credit contract 12 ) 18 0 ( 45 ) Credit contract 24 0 ( 45 ) Credit contract 24 0 0 ( 13 ) 45 ) Credit contract 24 0 0 ( 13 ) 19 ) Credit contract 24 0 0 ( 13 ) 19 0 contract 24 0 0 ( 13 ) 19 0 ( 17 0 0 ( 13 ) 19 0 ( 17 ) Commodity 0 ( 13 ) 19 0 ( 17 ) Commodity contract 13 ) 19 0 ( 17 ) Commodity contract 15 0 ( 17 ) Commodity contract 15 0 0 ( 1 ) 17 ) Commodity contract 15 0 0 ( 1 ) 3 ) Commodity contract 15 0 0 ( 1 ) 3 0 contract 15 0 0 ( 1 ) 3 0 ( 1 0 0 ( 1 ) 3 0 ( 1 ) Total 0 ( 1 ) 3 0 ( 1 ) Total $ 1 ) 3 0 ( 1 ) Total $ 243 $ ( 1 ) Total $ 243 $ 39 $ 0 $ ) Total $ 243 $ 39 $ 0 $ ( 144 $ 243 $ 39 $ 0 $ ( 144 ) $ 39 $ 0 $ ( 144 ) $ 238 $ 87 $ ( 144 ) $ 238 $ 87 $ ( 135 144 ) $ 238 $ 87 $ ( 135 ) Designated 238 $ 87 $ ( 135 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 1 $ 70 $ 0 $ exchange contract $ 1 $ 70 $ 0 $ ( 15 $ 1 $ 70 $ 0 $ ( 15 ) $ 70 $ 0 $ ( 15 ) $ 9 $ 167 $ ( 15 ) $ 9 $ 167 $ 0 Equity 15 ) $ 9 $ 167 $ 0 Equity contract 0 $ 9 $ 167 $ 0 Equity contract 0 0 7 167 $ 0 Equity contract 0 0 7 ( 125 ) $ 0 Equity contract 0 0 7 ( 125 ) 0 0 Equity contract 0 0 7 ( 125 ) 0 0 contract 0 0 7 ( 125 ) 0 0 0 Total 0 7 ( 125 ) 0 0 0 Total $ 1 7 ( 125 ) 0 0 0 Total $ 1 $ ( 125 ) 0 0 0 Total $ 1 $ 70 0 0 0 Total $ 1 $ 70 $ 7 $ 0 Total $ 1 $ 70 $ 7 $ ( 140 $ 1 $ 70 $ 7 $ ( 140 ) $ 70 $ 7 $ ( 140 ) $ 9 $ 167 $ ( 140 ) $ 9 $ 167 $ 0 Total 140 ) $ 9 $ 167 $ 0 Total gross amount $ 9 $ 167 $ 0 Total gross amount of derivative gross amount of derivative $ 244 $ 109 $ 7 $ of derivative $ 244 $ 109 $ 7 $ ( 284 $ 244 $ 109 $ 7 $ ( 284 ) $ 109 $ 7 $ ( 284 ) $ 247 $ 254 $ ( 284 ) $ 247 $ 254 $ ( 135 284 ) $ 247 $ 254 $ ( 135 ) Gross 247 $ 254 $ ( 135 ) Gross derivative either offset enforceable master netting agreement $ 99 $ 109 $ 7 $ netting agreement $ 99 $ 109 $ 7 $ ( 284 $ 99 $ 109 $ 7 $ ( 284 ) $ 109 $ 7 $ ( 284 ) $ 105 $ 254 $ ( 284 ) $ 105 $ 254 $ ( 97 284 ) $ 105 $ 254 $ ( 97 ) Gross 105 $ 254 $ ( 97 ) Gross amount offset in in the balance sheet ( 77 ) ( 71 ) ( sheet ( 77 ) ( 71 ) ( 7 ) 155 ) ( 71 ) ( 7 ) 155 ( 72 ) 71 ) ( 7 ) 155 ( 72 ) ( 9 ( 7 ) 155 ( 72 ) ( 9 ) 80 155 ( 72 ) ( 9 ) 80 Net amount presented 72 ) ( 9 ) 80 Net amount presented in the in the balance sheet $ 22 $ 38 $ 0 $ balance sheet $ 22 $ 38 $ 0 $ ( 129 $ 22 $ 38 $ 0 $ ( 129 ) $ 38 $ 0 $ ( 129 ) $ 33 $ 245 $ ( 129 ) $ 33 $ 245 $ ( 17 129 ) $ 33 $ 245 $ ( 17 ) Gross 33 $ 245 $ ( 17 ) Gross amount not offset offset in the balance sheet 0 0 0 0 0 0 in the balance sheet 0 0 0 0 0 0 0 the balance sheet 0 0 0 0 0 0 0 Net balance sheet 0 0 0 0 0 0 0 Net amount sheet 0 0 0 0 0 0 0 Net amount $ 0 0 0 0 0 0 0 Net amount $ 22 0 0 0 0 0 0 Net amount $ 22 $ 0 0 Net amount $ 22 $ 38 $ 0 $ Net amount $ 22 $ 38 $ 0 $ ( 129 $ 22 $ 38 $ 0 $ ( 129 ) $ 38 $ 0 $ ( 129 ) $ 33 $ 245 $ ( 129 ) $ 33 $ 245 $ ( 17 129 ) $ 33 $ 245 $ ( 17 ) See 33 $ 245 $ ( 17 ) See also Note 4 17 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 70 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2014 2013 2012 Foreign Year Ended June 30 , 2014 2013 2012 Foreign Exchange Contracts Ended June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives June 30 , 2014 2013 2012 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 14 ) $ 70 $ 52 $ ( 14 ) $ 70 $ 52 Hedged item 6 14 ) $ 70 $ 52 Hedged item 6 ( 69 70 $ 52 Hedged item 6 ( 69 ) ( 50 52 Hedged item 6 ( 69 ) ( 50 ) Total 6 ( 69 ) ( 50 ) Total amount of ineffectiveness amount of ineffectiveness $ ( 8 ) $ 1 $ 2 $ ( 8 ) $ 1 $ 2 Equity Contracts Derivatives 8 ) $ 1 $ 2 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 110 ) $ 0 $ 0 $ ( 110 ) $ 0 $ 0 Hedged item 110 110 ) $ 0 $ 0 Hedged item 110 0 0 0 $ 0 Hedged item 110 0 0 Total amount of $ 0 Hedged item 110 0 0 Total amount of ineffectiveness 0 Hedged item 110 0 0 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded from effectiveness assessment $ ( 9 ) $ 0 $ 0 $ ( 9 ) $ 0 $ 0 Cash Flow Hedge 9 ) $ 0 $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2014 2013 2012 Effective Year Ended June 30 , 2014 2013 2012 Effective Portion Gains Ended June 30 , 2014 2013 2012 Effective Portion Gains recognized June 30 , 2014 2013 2012 Effective Portion Gains recognized in of tax effect of $ 2 , $ 54 and $ of $ 2 , $ 54 and $ 127 $ 63 , $ 54 and $ 127 $ 63 $ 101 $ 54 and $ 127 $ 63 $ 101 $ 236 Gains $ 127 $ 63 $ 101 $ 236 Gains ( loss $ 63 $ 101 $ 236 Gains ( loss ) reclassified from AOCI into revenue $ 104 $ 195 $ ( 27 into revenue $ 104 $ 195 $ ( 27 ) Amount 104 $ 195 $ ( 27 ) Amount Excluded from Effectiveness ( expense ) $ ( 239 ) $ ( 168 ) ( 239 ) $ ( 168 ) $ ( 231 ) ( 168 ) $ ( 231 ) We estimate that $ ) We estimate that $ 32 million of net derivative gain included in AOCI at June 30 , 2014 will be reclassified AOCI at June 30 , 2014 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2014 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2014 2013 2012 Foreign Year Ended June 30 , 2014 2013 2012 Foreign exchange contract Ended June 30 , 2014 2013 2012 Foreign exchange contract $ June 30 , 2014 2013 2012 Foreign exchange contract $ ( Foreign exchange contract $ ( 78 ) $ 18 $ ( $ ( 78 ) $ 18 $ ( 119 ) Equity ) $ 18 $ ( 119 ) Equity contract ( 64 119 ) Equity contract ( 64 ) 16 ( 85 ) Equity contract ( 64 ) 16 ( 85 ) Interest-rate contract ( 64 ) 16 ( 85 ) Interest-rate contract 24 ( ( 85 ) Interest-rate contract 24 ( 11 ) 93 Credit ) Interest-rate contract 24 ( 11 ) 93 Credit contract 13 contract 24 ( 11 ) 93 Credit contract 13 ( 3 11 ) 93 Credit contract 13 ( 3 ) ( 7 93 Credit contract 13 ( 3 ) ( 7 ) Commodity 13 ( 3 ) ( 7 ) Commodity contract 71 ( ( 7 ) Commodity contract 71 ( 42 ) ( 121 ) Commodity contract 71 ( 42 ) ( 121 ) Total 71 ( 42 ) ( 121 ) Total $ ( 34 121 ) Total $ ( 34 ) $ ( 22 ) ( 34 ) $ ( 22 ) $ ( 239 ) ( 22 ) $ ( 239 ) 71 Table of Contents ) $ ( 239 ) 71 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2014 Assets Mutual fund Fair Value June 30 , 2014 Assets Mutual fund $ 590 2014 Assets Mutual fund $ 590 $ 0 $ 0 $ Mutual fund $ 590 $ 0 $ 0 $ 590 $ $ 590 $ 0 $ 0 $ 590 $ 0 $ $ 0 $ 0 $ 590 $ 0 $ 590 Commercial $ 0 $ 590 $ 0 $ 590 Commercial paper 0 $ 590 $ 0 $ 590 Commercial paper 0 189 0 0 $ 590 Commercial paper 0 189 0 189 0 189 $ 590 Commercial paper 0 189 0 189 0 189 Certificates 590 Commercial paper 0 189 0 189 0 189 Certificates of Commercial paper 0 189 0 189 0 189 Certificates of deposit paper 0 189 0 189 0 189 Certificates of deposit 0 0 189 0 189 0 189 Certificates of deposit 0 1,197 0 189 Certificates of deposit 0 1,197 0 1,197 0 1,197 189 Certificates of deposit 0 1,197 0 1,197 0 1,197 U.S. Certificates of deposit 0 1,197 0 1,197 0 1,197 U.S. government of deposit 0 1,197 0 1,197 0 1,197 U.S. government and deposit 0 1,197 0 1,197 0 1,197 U.S. government and agency 0 1,197 0 1,197 0 1,197 U.S. government and agency security U.S. government and agency security 66,288 745 0 67,033 0 67,033 government and agency security 66,288 745 0 67,033 0 67,033 Foreign and agency security 66,288 745 0 67,033 0 67,033 Foreign government agency security 66,288 745 0 67,033 0 67,033 Foreign government bond security 66,288 745 0 67,033 0 67,033 Foreign government bond 139 66,288 745 0 67,033 0 67,033 Foreign government bond 139 3,210 0 67,033 Foreign government bond 139 3,210 0 3,349 0 3,349 67,033 Foreign government bond 139 3,210 0 3,349 0 3,349 Mortgage-backed Foreign government bond 139 3,210 0 3,349 0 3,349 Mortgage-backed security government bond 139 3,210 0 3,349 0 3,349 Mortgage-backed security 0 bond 139 3,210 0 3,349 0 3,349 Mortgage-backed security 0 1,015 139 3,210 0 3,349 0 3,349 Mortgage-backed security 0 1,015 0 3,349 0 3,349 Mortgage-backed security 0 1,015 0 1,015 0 1,015 0 3,349 Mortgage-backed security 0 1,015 0 1,015 0 1,015 Corporate 3,349 Mortgage-backed security 0 1,015 0 1,015 0 1,015 Corporate note Mortgage-backed security 0 1,015 0 1,015 0 1,015 Corporate note and security 0 1,015 0 1,015 0 1,015 Corporate note and bond 0 1,015 0 1,015 0 1,015 Corporate note and bond 0 1,015 Corporate note and bond 0 6,863 0 6,863 0 6,863 Corporate note and bond 0 6,863 0 6,863 0 6,863 Municipal note and bond 0 6,863 0 6,863 0 6,863 Municipal security and bond 0 6,863 0 6,863 0 6,863 Municipal security 0 bond 0 6,863 0 6,863 0 6,863 Municipal security 0 332 0 6,863 0 6,863 0 6,863 Municipal security 0 332 0 6,863 0 6,863 Municipal security 0 332 0 332 0 332 0 6,863 Municipal security 0 332 0 332 0 332 Common 6,863 Municipal security 0 332 0 332 0 332 Common and Municipal security 0 332 0 332 0 332 Common and preferred security 0 332 0 332 0 332 Common and preferred stock 0 332 0 332 0 332 Common and preferred stock 9,552 332 Common and preferred stock 9,552 1,825 14 11,391 0 11,391 Common and preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives and preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 7 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 7 360 14 11,391 0 11,391 Derivatives 5 348 7 360 ( 155 11,391 0 11,391 Derivatives 5 348 7 360 ( 155 ) 0 11,391 Derivatives 5 348 7 360 ( 155 ) 205 11,391 Derivatives 5 348 7 360 ( 155 ) 205 Total 5 348 7 360 ( 155 ) 205 Total $ 76,574 7 360 ( 155 ) 205 Total $ 76,574 $ 15,724 155 ) 205 Total $ 76,574 $ 15,724 $ 21 $ 205 Total $ 76,574 $ 15,724 $ 21 $ 92,319 $ $ 76,574 $ 15,724 $ 21 $ 92,319 $ ( 155 $ 15,724 $ 21 $ 92,319 $ ( 155 ) $ 21 $ 92,319 $ ( 155 ) $ 92,164 Liabilities Derivatives $ ( 155 ) $ 92,164 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 153 $ 126 $ and other $ 5 $ 153 $ 126 $ 284 $ $ 5 $ 153 $ 126 $ 284 $ ( 155 $ 153 $ 126 $ 284 $ ( 155 ) $ 126 $ 284 $ ( 155 ) $ 129 ( In $ ( 155 ) $ 129 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2013 Assets Mutual fund Fair Value June 30 , 2013 Assets Mutual fund $ 868 2013 Assets Mutual fund $ 868 $ 0 $ 0 $ Mutual fund $ 868 $ 0 $ 0 $ 868 $ $ 868 $ 0 $ 0 $ 868 $ 0 $ $ 0 $ 0 $ 868 $ 0 $ 868 Commercial $ 0 $ 868 $ 0 $ 868 Commercial paper 0 $ 868 $ 0 $ 868 Commercial paper 0 603 0 0 $ 868 Commercial paper 0 603 0 603 0 603 $ 868 Commercial paper 0 603 0 603 0 603 Certificates 868 Commercial paper 0 603 0 603 0 603 Certificates of Commercial paper 0 603 0 603 0 603 Certificates of deposit paper 0 603 0 603 0 603 Certificates of deposit 0 0 603 0 603 0 603 Certificates of deposit 0 994 0 603 Certificates of deposit 0 994 0 994 0 994 603 Certificates of deposit 0 994 0 994 0 994 U.S. Certificates of deposit 0 994 0 994 0 994 U.S. government of deposit 0 994 0 994 0 994 U.S. government and deposit 0 994 0 994 0 994 U.S. government and agency 0 994 0 994 0 994 U.S. government and agency security U.S. government and agency security 62,237 2,664 0 64,901 0 64,901 government and agency security 62,237 2,664 0 64,901 0 64,901 Foreign and agency security 62,237 2,664 0 64,901 0 64,901 Foreign government agency security 62,237 2,664 0 64,901 0 64,901 Foreign government bond security 62,237 2,664 0 64,901 0 64,901 Foreign government bond 9 62,237 2,664 0 64,901 0 64,901 Foreign government bond 9 851 0 64,901 Foreign government bond 9 851 0 860 0 860 64,901 Foreign government bond 9 851 0 860 0 860 Mortgage-backed Foreign government bond 9 851 0 860 0 860 Mortgage-backed security government bond 9 851 0 860 0 860 Mortgage-backed security 0 bond 9 851 0 860 0 860 Mortgage-backed security 0 1,311 9 851 0 860 0 860 Mortgage-backed security 0 1,311 0 860 0 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 0 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate 860 Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate note Mortgage-backed security 0 1,311 0 1,311 0 1,311 Corporate note and security 0 1,311 0 1,311 0 1,311 Corporate note and bond 0 1,311 0 1,311 0 1,311 Corporate note and bond 0 1,311 Corporate note and bond 0 4,915 19 4,934 0 4,934 Corporate note and bond 0 4,915 19 4,934 0 4,934 Municipal note and bond 0 4,915 19 4,934 0 4,934 Municipal security and bond 0 4,915 19 4,934 0 4,934 Municipal security 0 bond 0 4,915 19 4,934 0 4,934 Municipal security 0 385 0 4,915 19 4,934 0 4,934 Municipal security 0 385 0 4,934 0 4,934 Municipal security 0 385 0 385 0 385 0 4,934 Municipal security 0 385 0 385 0 385 Common 4,934 Municipal security 0 385 0 385 0 385 Common and Municipal security 0 385 0 385 0 385 Common and preferred security 0 385 0 385 0 385 Common and preferred stock 0 385 0 385 0 385 Common and preferred stock 8,470 385 Common and preferred stock 8,470 717 5 9,192 0 9,192 Common and preferred stock 8,470 717 5 9,192 0 9,192 Derivatives and preferred stock 8,470 717 5 9,192 0 9,192 Derivatives 12 preferred stock 8,470 717 5 9,192 0 9,192 Derivatives 12 489 stock 8,470 717 5 9,192 0 9,192 Derivatives 12 489 0 8,470 717 5 9,192 0 9,192 Derivatives 12 489 0 501 5 9,192 0 9,192 Derivatives 12 489 0 501 ( 81 9,192 0 9,192 Derivatives 12 489 0 501 ( 81 ) 0 9,192 Derivatives 12 489 0 501 ( 81 ) 420 9,192 Derivatives 12 489 0 501 ( 81 ) 420 Total 12 489 0 501 ( 81 ) 420 Total $ 71,596 0 501 ( 81 ) 420 Total $ 71,596 $ 12,929 81 ) 420 Total $ 71,596 $ 12,929 $ 24 $ 420 Total $ 71,596 $ 12,929 $ 24 $ 84,549 $ $ 71,596 $ 12,929 $ 24 $ 84,549 $ ( 81 $ 12,929 $ 24 $ 84,549 $ ( 81 ) $ 24 $ 84,549 $ ( 81 ) $ 84,468 Liabilities Derivatives $ ( 81 ) $ 84,468 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 14 $ 121 $ 0 $ and other $ 14 $ 121 $ 0 $ 135 $ $ 14 $ 121 $ 0 $ 135 $ ( 80 $ 121 $ 0 $ 135 $ ( 80 ) $ 0 $ 135 $ ( 80 ) $ 55 ( a $ ( 80 ) $ 55 ( a ) These amount ” ) , on September 23 , 2013 we provided Nokia , on September 23 , 2013 we provided Nokia € 1.5 2013 we provided Nokia € 1.5 billion ( $ 2.1 billion € 1.5 billion ( $ 2.1 billion ) principal of convertible convertible note classified a Level 3 financial instrument . Upon closing other change in our Level 3 financial instrument that are measured during the period presented . 72 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2014 2013 Net fair million ) June 30 , 2014 2013 Net fair value of ) June 30 , 2014 2013 Net fair value of asset on a recurring basis $ 92,164 $ 84,468 Cash 4,980 1,967 recurring basis $ 92,164 $ 84,468 Cash 4,980 1,967 Common and $ 92,164 $ 84,468 Cash 4,980 1,967 Common and preferred stock 92,164 $ 84,468 Cash 4,980 1,967 Common and preferred stock measured value on a nonrecurring basis 520 395 Other investment measured at on a nonrecurring basis 520 395 Other investment measured at fair value on a nonrecurring basis 1,150 1,256 Less derivative net asset on a nonrecurring basis 1,150 1,256 Less derivative net asset classified a other current asset ( 38 ) ( 213 ) Other asset ( 38 ) ( 213 ) Other ( 6 ) ( 213 ) Other ( 6 ) ( 7 ) Recorded Other ( 6 ) ( 7 ) Recorded basis of investment component ( a ) $ 98,770 $ 87,866 ( a ) a ) $ 98,770 $ 87,866 ( a ) Excludes held-to-maturity Nonrecurring Basis During fiscal year 2014 and 2013 , we did During fiscal year 2014 and 2013 , we did not record a nonrecurring basis . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2014 2013 Raw material million ) June 30 , 2014 2013 Raw material $ 944 ) June 30 , 2014 2013 Raw material $ 944 $ 2014 2013 Raw material $ 944 $ 328 Work in process Raw material $ 944 $ 328 Work in process 266 201 $ 328 Work in process 266 201 Finished good 1,450 1,409 328 Work in process 266 201 Finished good 1,450 1,409 Total process 266 201 Finished good 1,450 1,409 Total $ 2,660 $ 266 201 Finished good 1,450 1,409 Total $ 2,660 $ 1,938 good 1,450 1,409 Total $ 2,660 $ 1,938 NOTE 8 — 1,409 Total $ 2,660 $ 1,938 NOTE 8 — PROPERTY AND $ 2,660 $ 1,938 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2014 2013 Land $ million ) June 30 , 2014 2013 Land $ 541 $ ) June 30 , 2014 2013 Land $ 541 $ 525 , 2014 2013 Land $ 541 $ 525 Buildings and improvement 2013 Land $ 541 $ 525 Buildings and improvement 8,867 7,326 $ 525 Buildings and improvement 8,867 7,326 Leasehold improvement 3,560 2,946 525 Buildings and improvement 8,867 7,326 Leasehold improvement 3,560 2,946 Computer improvement 8,867 7,326 Leasehold improvement 3,560 2,946 Computer equipment and software 8,867 7,326 Leasehold improvement 3,560 2,946 Computer equipment and software 11,430 2,946 Computer equipment and software 11,430 9,242 Furniture and equipment 3,406 Computer equipment and software 11,430 9,242 Furniture and equipment 3,406 2,465 11,430 9,242 Furniture and equipment 3,406 2,465 Total , at cost 9,242 Furniture and equipment 3,406 2,465 Total , at cost 27,804 2,465 Total , at cost 27,804 22,504 Accumulated depreciation ( 14,793 Total , at cost 27,804 22,504 Accumulated depreciation ( 14,793 ) 27,804 22,504 Accumulated depreciation ( 14,793 ) ( 12,513 ) Total depreciation ( 14,793 ) ( 12,513 ) Total , net $ ) Total , net $ 13,011 $ 9,991 During fiscal year , net $ 13,011 $ 9,991 During fiscal year 2014 , $ 9,991 During fiscal year 2014 , 2013 , and 2012 During fiscal year 2014 , 2013 , and 2012 , depreciation 2014 , 2013 , and 2012 , depreciation expense wa $ , depreciation expense wa $ 3.4 billion , $ 2.6 billion $ 3.4 billion , $ 2.6 billion , and $ 2.2 2.6 billion , and $ 2.2 billion , respectively . 73 2.2 billion , respectively . 73 Table of Contents PART II of Contents PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS Nokia ’ and Services Business On April 25 , 2014 , we completed Business On April 25 , 2014 , we completed the transaction total purchase price of $ 9.5 billion , including cash acquired including cash acquired of $ 1.5 billion ( “ the Acquisition primarily of cash of $ 7.1 billion and Nokia ’ s of convertible note of $ 2.1 billion which wa a non-cash In million ) Cash $ 1,503 Accounts receivable ( a ) Accounts receivable ( a ) 754 Inventories 544 Other current asset ( a ) 754 Inventories 544 Other current asset 960 Property Inventories 544 Other current asset 960 Property and equipment 981 Intangible asset 960 Property and equipment 981 Intangible asset 4,509 Goodwill ( and equipment 981 Intangible asset 4,509 Goodwill ( b ) 5,458 4,509 Goodwill ( b ) 5,458 Other 249 Current liability ( ( b ) 5,458 Other 249 Current liability ( 4,576 ) Other 249 Current liability ( 4,576 ) Long-term liability ( 917 4,576 ) Long-term liability ( 917 ) Total purchase price $ ) Total purchase price $ 9,465 ( a ) Gross account Gross account receivable is $ 901 million , of which $ million , of which $ 147 million is expected to be NDS . Goodwill of $ 4.5 billion is expected to be Weighted Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 year $ 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 year Contract-based 1,500 9 year Customer-related 359 3 year Marketing-related ( trade 1,500 9 year Customer-related 359 3 year Marketing-related ( trade name Marketing-related ( trade name ) 157 2 year Fair value of ( trade name ) 157 2 year Fair value of intangible of intangible asset acquired $ 4,509 8 year Our consolidated income intangible asset acquired $ 4,509 8 year Our consolidated income statement income statement for fiscal year 2014 includes revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable NDS since the Acquisition . 74 Table of Contents PART II of Contents PART II Item 8 Following are the supplemental consolidated had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 2013 Revenue $ Year Ended June 30 , 2014 2013 Revenue $ 96,248 $ Ended June 30 , 2014 2013 Revenue $ 96,248 $ 93,243 , 2014 2013 Revenue $ 96,248 $ 93,243 Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net income $ 20,234 $ 20,153 Diluted earnings per Net income $ 20,234 $ 20,153 Diluted earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.1 billion in cash . Yammer price were goodwill of $ 937 million and identifiable intangible asset identifiable intangible asset of $ 178 million . We assigned the date . Skype On October 13 , 2011 , we acquired Skype On October 13 , 2011 , we acquired Skype Global in Luxembourg , for $ 8.6 billion , primarily in cash price were goodwill of $ 7.1 billion , identifiable intangible asset identifiable intangible asset of $ 1.6 billion , and unearned revenue and unearned revenue of $ 222 million . The goodwill recognized current segment structure : $ 5.6 billion to Commercial Licensing , to Commercial Licensing , $ 1.4 billion to Computing and Gaming Gaming Hardware , and $ 54 million to D & C on the acquisition date . 75 Table of Contents PART II of Contents PART II Item 8 Following are the detail of ( trade name ) $ 1,249 15 year Technology-based 275 5 trade name ) $ 1,249 15 year Technology-based 275 5 year $ 1,249 15 year Technology-based 275 5 year Customer-related 114 5 1,249 15 year Technology-based 275 5 year Customer-related 114 5 year Technology-based 275 5 year Customer-related 114 5 year Contract-based 10 4 275 5 year Customer-related 114 5 year Contract-based 10 4 year Customer-related 114 5 year Contract-based 10 4 year Total $ 1,648 114 5 year Contract-based 10 4 year Total $ 1,648 13 10 4 year Total $ 1,648 13 year Other During fiscal 4 year Total $ 1,648 13 year Other During fiscal year year Other During fiscal year 2014 , we completed five additional for total consideration of $ 140 million , all of which result of operation . NOTE 10 — GOODWILL Changes in the ( In million ) June 30 , 2012 Acquisitions Other June million ) June 30 , 2012 Acquisitions Other June 30 , , 2012 Acquisitions Other June 30 , 2013 Acquisitions Other June Acquisitions Other June 30 , 2013 Acquisitions Other June 30 , , 2013 Acquisitions Other June 30 , 2014 Devices and Consumer Acquisitions Other June 30 , 2014 Devices and Consumer Licensing $ Devices and Consumer Licensing $ 866 $ 0 $ 0 $ Consumer Licensing $ 866 $ 0 $ 0 $ 866 $ $ 866 $ 0 $ 0 $ 866 $ 0 $ $ 0 $ 0 $ 866 $ 0 $ 2 $ $ 0 $ 866 $ 0 $ 2 $ 868 Hardware $ 866 $ 0 $ 2 $ 868 Hardware : Computing $ 0 $ 2 $ 868 Hardware : Computing and Gaming : Computing and Gaming Hardware 1,641 75 ( 27 ) 1,689 Computing and Gaming Hardware 1,641 75 ( 27 ) 1,689 0 Gaming Hardware 1,641 75 ( 27 ) 1,689 0 9 1,698 1,641 75 ( 27 ) 1,689 0 9 1,698 Phone Hardware 75 ( 27 ) 1,689 0 9 1,698 Phone Hardware 0 ( 27 ) 1,689 0 9 1,698 Phone Hardware 0 0 27 ) 1,689 0 9 1,698 Phone Hardware 0 0 0 0 9 1,698 Phone Hardware 0 0 0 0 5,458 ( 9 1,698 Phone Hardware 0 0 0 0 5,458 ( a 1,698 Phone Hardware 0 0 0 0 5,458 ( a ) Phone Hardware 0 0 0 0 5,458 ( a ) ( Hardware 0 0 0 0 5,458 ( a ) ( 104 5,458 ( a ) ( 104 ) 5,354 Total D & a ) ( 104 ) 5,354 Total D & C Hardware Total D & C Hardware 1,641 75 ( 27 ) 1,689 D & C Hardware 1,641 75 ( 27 ) 1,689 5,458 C Hardware 1,641 75 ( 27 ) 1,689 5,458 ( 95 1,641 75 ( 27 ) 1,689 5,458 ( 95 ) 7,052 75 ( 27 ) 1,689 5,458 ( 95 ) 7,052 Other 27 ) 1,689 5,458 ( 95 ) 7,052 Other 742 0 1,689 5,458 ( 95 ) 7,052 Other 742 0 ( 4 ( 95 ) 7,052 Other 742 0 ( 4 ) 738 95 ) 7,052 Other 742 0 ( 4 ) 738 0 7,052 Other 742 0 ( 4 ) 738 0 0 738 742 0 ( 4 ) 738 0 0 738 Total Devices 0 ( 4 ) 738 0 0 738 Total Devices and ( 4 ) 738 0 0 738 Total Devices and Consumer 4 ) 738 0 0 738 Total Devices and Consumer 3,249 738 Total Devices and Consumer 3,249 75 ( 31 ) 3,293 Total Devices and Consumer 3,249 75 ( 31 ) 3,293 5,458 and Consumer 3,249 75 ( 31 ) 3,293 5,458 ( 93 3,249 75 ( 31 ) 3,293 5,458 ( 93 ) 8,658 75 ( 31 ) 3,293 5,458 ( 93 ) 8,658 Commercial 31 ) 3,293 5,458 ( 93 ) 8,658 Commercial Licensing 10,054 3,293 5,458 ( 93 ) 8,658 Commercial Licensing 10,054 4 ( 93 ) 8,658 Commercial Licensing 10,054 4 ( 7 ) 10,051 ) 8,658 Commercial Licensing 10,054 4 ( 7 ) 10,051 2 Commercial Licensing 10,054 4 ( 7 ) 10,051 2 5 10,058 10,054 4 ( 7 ) 10,051 2 5 10,058 Other 149 4 ( 7 ) 10,051 2 5 10,058 Other 149 1,164 ( 7 ) 10,051 2 5 10,058 Other 149 1,164 ( 7 ) 10,051 2 5 10,058 Other 149 1,164 ( 2 10,051 2 5 10,058 Other 149 1,164 ( 2 ) 1,311 2 5 10,058 Other 149 1,164 ( 2 ) 1,311 105 10,058 Other 149 1,164 ( 2 ) 1,311 105 ( 5 149 1,164 ( 2 ) 1,311 105 ( 5 ) 1,411 1,164 ( 2 ) 1,311 105 ( 5 ) 1,411 Total 2 ) 1,311 105 ( 5 ) 1,411 Total Commercial 10,203 1,311 105 ( 5 ) 1,411 Total Commercial 10,203 1,168 ( 5 ) 1,411 Total Commercial 10,203 1,168 ( 9 ) 11,362 ) 1,411 Total Commercial 10,203 1,168 ( 9 ) 11,362 107 Total Commercial 10,203 1,168 ( 9 ) 11,362 107 0 11,469 10,203 1,168 ( 9 ) 11,362 107 0 11,469 Total goodwill 1,168 ( 9 ) 11,362 107 0 11,469 Total goodwill $ ( 9 ) 11,362 107 0 11,469 Total goodwill $ 13,452 9 ) 11,362 107 0 11,469 Total goodwill $ 13,452 $ 0 11,469 Total goodwill $ 13,452 $ 1,243 $ ( 40 Total goodwill $ 13,452 $ 1,243 $ ( 40 ) $ 13,452 $ 1,243 $ ( 40 ) $ 14,655 $ 5,565 $ ( 40 ) $ 14,655 $ 5,565 $ ( 93 40 ) $ 14,655 $ 5,565 $ ( 93 ) $ 14,655 $ 5,565 $ ( 93 ) $ 20,127 ( a $ ( 93 ) $ 20,127 ( a ) Goodwill acquired Goodwill acquired during fiscal year 2014 related to the acquisition of of NDS . See Note 9 – Business Combinations for additional , but do not exceed 12 month . Adjustments in purchase which the acquisition occurred . 76 Table of Contents PART II of Contents PART II Item 8 Any change in the goodwill . As discussed in Note 21 – Segment Information and Geographic first quarter of fiscal year 2014 , we changed our organizational for impairment annually on May 1 at the reporting unit level wa identified a of May 1 , 2014 or May 1 a of May 1 , 2014 or May 1 , 2013 1 , 2014 or May 1 , 2013 . Upon completion 2014 or May 1 , 2013 . Upon completion of the completion of the fiscal year 2012 test , the goodwill of goodwill impairment charge of $ 6.2 billion also represented our accumulated goodwill impairment a of June 30 , 2014 and 2013 . a of June 30 , 2014 and 2013 . NOTE 11 June 30 , 2014 and 2013 . NOTE 11 — INTANGIBLE 2014 and 2013 . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2014 2013 Technology-based ( Year Ended June 30 , 2014 2013 Technology-based ( a ) Ended June 30 , 2014 2013 Technology-based ( a ) $ Technology-based ( a ) $ 6,440 $ ( 2,615 ) $ ) $ 6,440 $ ( 2,615 ) $ 3,825 $ 3,760 $ ( 2,615 ) $ 3,825 $ 3,760 $ ( 2,110 2,615 ) $ 3,825 $ 3,760 $ ( 2,110 ) $ 3,825 $ 3,760 $ ( 2,110 ) $ 1,650 Marketing-related 1,518 $ ( 2,110 ) $ 1,650 Marketing-related 1,518 ( 324 ) 2,110 ) $ 1,650 Marketing-related 1,518 ( 324 ) 1,194 1,348 $ 1,650 Marketing-related 1,518 ( 324 ) 1,194 1,348 ( 211 Marketing-related 1,518 ( 324 ) 1,194 1,348 ( 211 ) 1,137 1,518 ( 324 ) 1,194 1,348 ( 211 ) 1,137 Contract-based 324 ) 1,194 1,348 ( 211 ) 1,137 Contract-based 2,266 ( 1,194 1,348 ( 211 ) 1,137 Contract-based 2,266 ( 716 ) ( 211 ) 1,137 Contract-based 2,266 ( 716 ) 1,550 823 ) 1,137 Contract-based 2,266 ( 716 ) 1,550 823 ( 688 Contract-based 2,266 ( 716 ) 1,550 823 ( 688 ) 135 2,266 ( 716 ) 1,550 823 ( 688 ) 135 Customer-related 716 ) 1,550 823 ( 688 ) 135 Customer-related 732 ( 1,550 823 ( 688 ) 135 Customer-related 732 ( 320 ) ( 688 ) 135 Customer-related 732 ( 320 ) 412 380 ) 135 Customer-related 732 ( 320 ) 412 380 ( 219 Customer-related 732 ( 320 ) 412 380 ( 219 ) 161 732 ( 320 ) 412 380 ( 219 ) 161 Total 320 ) 412 380 ( 219 ) 161 Total $ 10,956 412 380 ( 219 ) 161 Total $ 10,956 $ ( 219 ) 161 Total $ 10,956 $ ( 3,975 ) $ Total $ 10,956 $ ( 3,975 ) $ 6,981 $ 6,311 $ ( 3,975 ) $ 6,981 $ 6,311 $ ( 3,228 3,975 ) $ 6,981 $ 6,311 $ ( 3,228 ) $ 6,981 $ 6,311 $ ( 3,228 ) $ 3,083 ( a $ ( 3,228 ) $ 3,083 ( a ) Technology-based intangible Technology-based intangible asset included $ 98 million and $ 218 million $ 98 million and $ 218 million a of June 30 218 million a of June 30 , 2014 and 2013 , a of June 30 , 2014 and 2013 , respectively , June 30 , 2014 and 2013 , respectively , of net Average Life Year Ended June 30 , 2014 2013 Technology-based $ Year Ended June 30 , 2014 2013 Technology-based $ 2,841 9 Ended June 30 , 2014 2013 Technology-based $ 2,841 9 year , 2014 2013 Technology-based $ 2,841 9 year $ 539 4 2014 2013 Technology-based $ 2,841 9 year $ 539 4 year $ 2,841 9 year $ 539 4 year Marketing-related 174 2 2,841 9 year $ 539 4 year Marketing-related 174 2 year $ 539 4 year Marketing-related 174 2 year 39 7 year 539 4 year Marketing-related 174 2 year 39 7 year Contract-based year Marketing-related 174 2 year 39 7 year Contract-based 1,500 9 Marketing-related 174 2 year 39 7 year Contract-based 1,500 9 year year 39 7 year Contract-based 1,500 9 year 0 * Customer-related 39 7 year Contract-based 1,500 9 year 0 * Customer-related 363 year Contract-based 1,500 9 year 0 * Customer-related 363 3 year 9 year 0 * Customer-related 363 3 year 89 6 year year 0 * Customer-related 363 3 year 89 6 year Total * Customer-related 363 3 year 89 6 year Total $ 4,878 Customer-related 363 3 year 89 6 year Total $ 4,878 8 89 6 year Total $ 4,878 8 year $ 667 5 6 year Total $ 4,878 8 year $ 667 5 year $ 4,878 8 year $ 667 5 year * Not applicable 4,878 8 year $ 667 5 year * Not applicable 77 5 year * Not applicable 77 Table of Contents PART II of Contents PART II Item 8 The table above includes $ The table above includes $ 4.5 billion related to the acquisition of NDS during fiscal year 2014 . See Note 9 – year 2014 . See Note 9 – Business Combination for additional asset amortization expense wa $ 845 million , $ 739 million $ 845 million , $ 739 million , and $ 558 739 million , and $ 558 million for fiscal year 2014 558 million for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . Amortization of of capitalized software wa $ 200 million , $ 210 million $ 200 million , $ 210 million , and $ 117 210 million , and $ 117 million for fiscal year 2014 117 million for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . The following intangible asset held at June 30 , 2014 : ( In held at June 30 , 2014 : ( In million ) million ) Year Ending June 30 , 2015 $ 1,237 2016 Year Ending June 30 , 2015 $ 1,237 2016 1,075 2017 June 30 , 2015 $ 1,237 2016 1,075 2017 804 2018 30 , 2015 $ 1,237 2016 1,075 2017 804 2018 661 , 2015 $ 1,237 2016 1,075 2017 804 2018 661 2019 2015 $ 1,237 2016 1,075 2017 804 2018 661 2019 637 $ 1,237 2016 1,075 2017 804 2018 661 2019 637 Thereafter 1,237 2016 1,075 2017 804 2018 661 2019 637 Thereafter 2,567 2016 1,075 2017 804 2018 661 2019 637 Thereafter 2,567 Total 1,075 2017 804 2018 661 2019 637 Thereafter 2,567 Total $ 2017 804 2018 661 2019 637 Thereafter 2,567 Total $ 6,981 2018 661 2019 637 Thereafter 2,567 Total $ 6,981 NOTE 12 637 Thereafter 2,567 Total $ 6,981 NOTE 12 — DEBT As 2,567 Total $ 6,981 NOTE 12 — DEBT As of June — DEBT As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 22.6 2014 , we had $ 22.6 billion of issued and outstanding outstanding debt , comprising $ 2.0 billion of short-term debt and of short-term debt and $ 20.6 billion of long-term debt . debt . As of June 30 , 2013 , we had As of June 30 , 2013 , we had $ 15.6 2013 , we had $ 15.6 billion of issued and outstanding Short-term Debt As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 2.0 2014 , we had $ 2.0 billion of commercial paper issued a weighted-average interest rate of 0.12 % and maturity ranging from % and maturity ranging from 86 day to 91 day . ranging from 86 day to 91 day . The estimated fair . We have a $ 5.0 billion credit facility that expires facility that expires on November 14 , 2018 , which serf expires on November 14 , 2018 , which serf a a program . As of June 30 , 2014 , we were As of June 30 , 2014 , we were in compliance Long-term Debt As of June 30 , 2014 , the total As of June 30 , 2014 , the total carrying value our long-term debt were $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively . This current portion , of $ 15.6 billion and $ 15.8 billion $ 15.6 billion and $ 15.8 billion , respectively , a respectively , a of June 30 , 2013 . These estimated a of June 30 , 2013 . These estimated fair value value are based on Level 2 input . 78 Table of on Level 2 input . 78 Table of Contents PART II of Contents PART II Item 8 The component of our long-term a follows a of June 30 , 2014 and 2013 : a of June 30 , 2014 and 2013 : Due Date June 30 , 2014 and 2013 : Due Date Face Value Due Date Face Value June 30 , 2014 Face Value June Face Value June 30 , 2014 Face Value June 30 , , 2014 Face Value June 30 , 2013 Stated Interest Rate Face Value June 30 , 2013 Stated Interest Rate Effective Interest In million ) Notes September 27 , 2013 $ * $ ) Notes September 27 , 2013 $ * $ 1,000 0.875 , 2013 $ * $ 1,000 0.875 % 1.000 % June 2013 $ * $ 1,000 0.875 % 1.000 % June 1 * $ 1,000 0.875 % 1.000 % June 1 , 2014 0.875 % 1.000 % June 1 , 2014 * 2,000 2.950 1.000 % June 1 , 2014 * 2,000 2.950 % 3.049 June 1 , 2014 * 2,000 2.950 % 3.049 % September 1 , 2014 * 2,000 2.950 % 3.049 % September 25 2014 * 2,000 2.950 % 3.049 % September 25 , 2015 2.950 % 3.049 % September 25 , 2015 1,750 1,750 1.625 3.049 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % September 25 , 2015 1,750 1,750 1.625 % 1.795 % February 25 , 2015 1,750 1,750 1.625 % 1.795 % February 8 2015 1,750 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 750 750 2.500 1.795 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % November 8 , 2016 750 750 2.500 % 2.642 % November 15 2016 750 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 600 600 0.875 2.642 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % May 15 , 2017 600 600 0.875 % 1.084 % May 1 2017 600 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 450 450 1.000 1.084 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % December 1 , 2018 450 450 1.000 % 1.106 % December 6 2018 450 450 1.000 % 1.106 % December 6 , 2018 1.000 % 1.106 % December 6 , 2018 ( a ) 1.106 % December 6 , 2018 ( a ) 1,250 * , 2018 ( a ) 1,250 * 1.625 % 1.824 % ( a ) 1,250 * 1.625 % 1.824 % June 1 ) 1,250 * 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 1,000 4.200 1.824 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % October 1 , 2019 1,000 1,000 4.200 % 4.379 % October 1 2019 1,000 1,000 4.200 % 4.379 % October 1 , 2020 4.200 % 4.379 % October 1 , 2020 1,000 1,000 3.000 4.379 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % February 1 , 2020 1,000 1,000 3.000 % 3.137 % February 8 2020 1,000 1,000 3.000 % 3.137 % February 8 , 2021 3.000 % 3.137 % February 8 , 2021 500 500 4.000 3.137 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % December 8 , 2021 500 500 4.000 % 4.082 % December 6 2021 500 500 4.000 % 4.082 % December 6 , 2021 4.000 % 4.082 % December 6 , 2021 ( b ) 4.082 % December 6 , 2021 ( b ) 2,396 * , 2021 ( b ) 2,396 * 2.125 % 2.233 % ( b ) 2,396 * 2.125 % 2.233 % November 15 ) 2,396 * 2.125 % 2.233 % November 15 , 2022 2.125 % 2.233 % November 15 , 2022 750 750 2.125 2.233 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % December 1 , 2023 1,000 1,000 2.375 % 2.465 % December 15 2023 1,000 1,000 2.375 % 2.465 % December 15 , 2023 2.375 % 2.465 % December 15 , 2023 ( a ) 2.465 % December 15 , 2023 ( a ) 1,500 * , 2023 ( a ) 1,500 * 3.625 % 3.726 % ( a ) 1,500 * 3.625 % 3.726 % December 6 ) 1,500 * 3.625 % 3.726 % December 6 , 2028 3.625 % 3.726 % December 6 , 2028 ( b ) 3.726 % December 6 , 2028 ( b ) 2,396 * , 2028 ( b ) 2,396 * 3.125 % 3.218 % ( b ) 2,396 * 3.125 % 3.218 % May 2 ) 2,396 * 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( c ) 3.218 % May 2 , 2033 ( c ) 753 715 , 2033 ( c ) 753 715 2.625 % 2.690 % 2033 ( c ) 753 715 2.625 % 2.690 % June ( c ) 753 715 2.625 % 2.690 % June 1 ) 753 715 2.625 % 2.690 % June 1 , 2039 2.625 % 2.690 % June 1 , 2039 750 750 5.200 2.690 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 ( a ) 3.829 % December 15 , 2043 ( a ) 500 * , 2043 ( a ) 500 * 4.875 % 4.918 % ( a ) 500 * 4.875 % 4.918 % Total $ ) 500 * 4.875 % 4.918 % Total $ 20,745 $ % 4.918 % Total $ 20,745 $ 15,665 ( a ) % Total $ 20,745 $ 15,665 ( a ) In December ( a ) In December 2013 , we issued $ 3.3 2013 , we issued $ 3.3 billion of debt security . ( b ) In December 2013 , we issued €3.5 billion ( c ) In April 2013 , we issued €550 million our debt for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 wa $ 2014 , 2013 , and 2012 wa $ 509 million , , and 2012 wa $ 509 million , $ 371 million $ 509 million , $ 371 million , and $ 344 371 million , and $ 344 million , respectively . As respectively . As of June 30 , 2014 and 2013 , As of June 30 , 2014 and 2013 , the aggregate June 30 , 2014 and 2013 , the aggregate unamortized discount current portion , wa $ 100 million and $ 65 million $ 100 million and $ 65 million , respectively . 79 65 million , respectively . 79 Table of Contents PART II of Contents PART II Item 8 Debt Service Maturities of our million ) Year Ending June 30 , 2015 $ 0 2016 Year Ending June 30 , 2015 $ 0 2016 2,500 2017 June 30 , 2015 $ 0 2016 2,500 2017 0 2018 30 , 2015 $ 0 2016 2,500 2017 0 2018 1,050 , 2015 $ 0 2016 2,500 2017 0 2018 1,050 2019 2015 $ 0 2016 2,500 2017 0 2018 1,050 2019 2,250 $ 0 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 0 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 2016 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 Total 2,500 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 Total $ 2017 0 2018 1,050 2019 2,250 Thereafter 14,945 Total $ 20,745 2018 1,050 2019 2,250 Thereafter 14,945 Total $ 20,745 NOTE 13 2,250 Thereafter 14,945 Total $ 20,745 NOTE 13 — INCOME TAXES 14,945 Total $ 20,745 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2014 2013 2012 Current Year Ended June 30 , 2014 2013 2012 Current Taxes U.S. Ended June 30 , 2014 2013 2012 Current Taxes U.S. federal June 30 , 2014 2013 2012 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,738 $ 3,131 $ 2,235 U.S. U.S. federal $ 3,738 $ 3,131 $ 2,235 U.S. state and $ 3,738 $ 3,131 $ 2,235 U.S. state and local 266 2,235 U.S. state and local 266 332 153 Foreign 2,073 1,745 U.S. state and local 266 332 153 Foreign 2,073 1,745 1,947 state and local 266 332 153 Foreign 2,073 1,745 1,947 Current local 266 332 153 Foreign 2,073 1,745 1,947 Current tax 6,077 266 332 153 Foreign 2,073 1,745 1,947 Current tax 6,077 5,208 332 153 Foreign 2,073 1,745 1,947 Current tax 6,077 5,208 4,335 2,073 1,745 1,947 Current tax 6,077 5,208 4,335 Deferred Taxes Deferred 1,745 1,947 Current tax 6,077 5,208 4,335 Deferred Taxes Deferred tax 1,947 Current tax 6,077 5,208 4,335 Deferred Taxes Deferred tax ( Deferred Taxes Deferred tax ( 331 ) ( 19 ) 954 tax ( 331 ) ( 19 ) 954 Provision for income 331 ) ( 19 ) 954 Provision for income tax $ Provision for income tax $ 5,746 $ 5,189 $ 5,289 U.S. income tax $ 5,746 $ 5,189 $ 5,289 U.S. and foreign $ 5,746 $ 5,189 $ 5,289 U.S. and foreign component of million ) Year Ended June 30 , 2014 2013 2012 U.S. Year Ended June 30 , 2014 2013 2012 U.S. $ 7,127 Ended June 30 , 2014 2013 2012 U.S. $ 7,127 $ June 30 , 2014 2013 2012 U.S. $ 7,127 $ 6,674 2014 2013 2012 U.S. $ 7,127 $ 6,674 $ 1,600 Foreign 2012 U.S. $ 7,127 $ 6,674 $ 1,600 Foreign 20,693 20,378 $ 7,127 $ 6,674 $ 1,600 Foreign 20,693 20,378 20,667 Income $ 6,674 $ 1,600 Foreign 20,693 20,378 20,667 Income before income 6,674 $ 1,600 Foreign 20,693 20,378 20,667 Income before income tax $ 1,600 Foreign 20,693 20,378 20,667 Income before income tax $ Income before income tax $ 27,820 $ 27,052 $ 22,267 The income tax $ 27,820 $ 27,052 $ 22,267 The item accounting $ 27,820 $ 27,052 $ 22,267 The item accounting for the follows : Year Ended June 30 , 2014 2013 2012 Federal Year Ended June 30 , 2014 2013 2012 Federal statutory rate Ended June 30 , 2014 2013 2012 Federal statutory rate 35.0 June 30 , 2014 2013 2012 Federal statutory rate 35.0 % 2013 2012 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 17.1 ) % ( 17.5 ) ( 17.1 ) % ( 17.5 ) % ( 21.1 ) ( 17.5 ) % ( 21.1 ) % Goodwill impairment 0 21.1 ) % Goodwill impairment 0 % 0 % 9.7 % % Goodwill impairment 0 % 0 % 9.7 % Other reconciling impairment 0 % 0 % 9.7 % Other reconciling item , Other reconciling item , net 2.8 % 1.7 % 0.2 % item , net 2.8 % 1.7 % 0.2 % Effective rate net 2.8 % 1.7 % 0.2 % Effective rate 20.7 % % 0.2 % Effective rate 20.7 % 19.2 % 23.8 % % Effective rate 20.7 % 19.2 % 23.8 % The reduction rate 20.7 % 19.2 % 23.8 % The reduction from the Ireland , Singapore , and 80 Table of Contents PART II of Contents PART II Item 8 Puerto Rico . Our foreign regional operating center , were 81 % , 79 % , , were 81 % , 79 % , and 79 % , 79 % , and 79 % of our foreign income before tax in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . In general credit . In fiscal year 2014 , 2013 , and 2012 In fiscal year 2014 , 2013 , and 2012 , there 2014 , 2013 , and 2012 , there were no individually ( In million ) June 30 , 2014 2013 Deferred Income million ) June 30 , 2014 2013 Deferred Income Tax Assets ) June 30 , 2014 2013 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 903 $ 888 Other expense item compensation expense $ 903 $ 888 Other expense item 1,112 917 $ 888 Other expense item 1,112 917 Unearned revenue 520 445 888 Other expense item 1,112 917 Unearned revenue 520 445 Impaired item 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 1,112 917 Unearned revenue 520 445 Impaired investment 209 246 Loss revenue 520 445 Impaired investment 209 246 Loss carryforwards 922 715 520 445 Impaired investment 209 246 Loss carryforwards 922 715 Other investment 209 246 Loss carryforwards 922 715 Other revenue item 64 209 246 Loss carryforwards 922 715 Other revenue item 64 55 922 715 Other revenue item 64 55 Deferred income tax asset 715 Other revenue item 64 55 Deferred income tax asset $ Deferred income tax asset $ 3,730 $ 3,266 Less valuation allowance tax asset $ 3,730 $ 3,266 Less valuation allowance ( 903 3,266 Less valuation allowance ( 903 ) ( 579 ) Deferred allowance ( 903 ) ( 579 ) Deferred income tax asset net of valuation allowance $ 2,827 $ 2,687 Deferred Income Tax valuation allowance $ 2,827 $ 2,687 Deferred Income Tax Liabilities Foreign Liabilities Foreign earnings $ ( 1,140 ) $ ( 1,146 ) ( 1,140 ) $ ( 1,146 ) Unrealized gain on investment Unrealized gain on investment ( 1,911 ) ( 1,012 ) Depreciation investment ( 1,911 ) ( 1,012 ) Depreciation and amortization ( ) Depreciation and amortization ( 470 ) ( 604 ) Other amortization ( 470 ) ( 604 ) Other ( 87 ) ( 604 ) Other ( 87 ) ( 2 ) Deferred Other ( 87 ) ( 2 ) Deferred income tax liability income tax liability $ ( 3,608 ) $ ( 2,764 ) ( 3,608 ) $ ( 2,764 ) Net deferred income tax ( liability ) $ ( 781 ) $ ( 77 ) ( 781 ) $ ( 77 ) Reported As Current deferred deferred income tax asset $ 1,941 $ 1,632 Other current liability tax asset $ 1,941 $ 1,632 Other current liability ( 125 1,632 Other current liability ( 125 ) 0 Other long-term asset current liability ( 125 ) 0 Other long-term asset 131 0 ) 0 Other long-term asset 131 0 Long-term deferred income tax 0 Other long-term asset 131 0 Long-term deferred income tax liability deferred income tax liability ( 2,728 ) ( 1,709 ) Net liability ( 2,728 ) ( 1,709 ) Net deferred income tax ( liability ) $ ( 781 ) $ ( 77 ) ( 781 ) $ ( 77 ) As of June 30 77 ) As of June 30 , 2014 , we had As of June 30 , 2014 , we had net operating operating loss carryforwards of $ 3.6 billion , including $ 2.2 3.6 billion , including $ 2.2 billion of foreign net operating of Skype , and $ 545 million through our acquisition of recovered . As of June 30 , 2014 , we have As of June 30 , 2014 , we have not provided temporary difference of approximately $ 92.9 billion resulting from earnings for temporary difference wa approximately $ 29.6 billion at June 30 , $ 29.6 billion at June 30 , 2014 . Income tax billion at June 30 , 2014 . Income tax paid were Income tax paid were $ 5.5 billion , $ 3.9 billion $ 5.5 billion , $ 3.9 billion , and $ 3.5 3.9 billion , and $ 3.5 billion in fiscal year 2014 3.5 billion in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . 81 Table and 2012 , respectively . 81 Table of Contents PART II of Contents PART II Item 8 Uncertain Tax Positions Unrecognized tax tax benefit a of June 30 , 2014 , 2013 , a of June 30 , 2014 , 2013 , and 2012 June 30 , 2014 , 2013 , and 2012 , were 2014 , 2013 , and 2012 , were $ 8.7 billion and 2012 , were $ 8.7 billion , $ 8.6 billion $ 8.7 billion , $ 8.6 billion , and $ 7.2 8.6 billion , and $ 7.2 billion , respectively . If tax rate for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 , by 2014 , 2013 , and 2012 , by $ 7.0 billion and 2012 , by $ 7.0 billion , $ 6.5 billion $ 7.0 billion , $ 6.5 billion , and $ 6.2 6.5 billion , and $ 6.2 billion , respectively . As respectively . As of June 30 , 2014 , 2013 , As of June 30 , 2014 , 2013 , and 2012 June 30 , 2014 , 2013 , and 2012 , we 2014 , 2013 , and 2012 , we had accrued interest uncertain tax position of $ 1.5 billion , $ 1.3 billion $ 1.5 billion , $ 1.3 billion , and $ 939 1.3 billion , and $ 939 million , respectively , net unrecognized tax benefit wa $ 235 million , $ 400 million $ 235 million , $ 400 million , and $ 154 400 million , and $ 154 million in fiscal year 2014 154 million in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . The aggregate million ) Year Ended June 30 , 2014 2013 2012 Balance Year Ended June 30 , 2014 2013 2012 Balance , beginning Ended June 30 , 2014 2013 2012 Balance , beginning of June 30 , 2014 2013 2012 Balance , beginning of year , beginning of year $ 8,648 $ 7,202 $ 6,935 Decreases of year $ 8,648 $ 7,202 $ 6,935 Decreases related to $ 8,648 $ 7,202 $ 6,935 Decreases related to settlement ( Decreases related to settlement ( 583 ) ( 30 ) ( settlement ( 583 ) ( 30 ) ( 16 ) Increases ) ( 30 ) ( 16 ) Increases for tax position related to the current year 566 612 481 Increases for tax to the current year 566 612 481 Increases for tax position the current year 566 612 481 Increases for tax position related position related to prior year 217 931 118 Decreases for tax related to prior year 217 931 118 Decreases for tax position to prior year 217 931 118 Decreases for tax position related related to prior year ( 95 ) ( 65 ) ( year ( 95 ) ( 65 ) ( 292 ) Decreases ) ( 65 ) ( 292 ) Decreases due to lapsed lapsed statute of limitation ( 39 ) ( 2 ) ( limitation ( 39 ) ( 2 ) ( 24 ) Balance ) ( 2 ) ( 24 ) Balance , end of , end of year $ 8,714 $ 8,648 $ 7,202 During of year $ 8,714 $ 8,648 $ 7,202 During the third $ 8,714 $ 8,648 $ 7,202 During the third quarter of third quarter of fiscal year 2011 , we reached a settlement . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income income tax expense by $ 461 million . While we settled these year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2014 , the primary As of June 30 , 2014 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2013 . We are for tax year 2007 to 2013 . We are subject to to examination for tax year 1996 to 2013 , some of for tax year 1996 to 2013 , some of which are consolidated financial statement . NOTE 14 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2014 2013 Commercial Licensing million ) June 30 , 2014 2013 Commercial Licensing $ 19,099 ) June 30 , 2014 2013 Commercial Licensing $ 19,099 $ 2014 2013 Commercial Licensing $ 19,099 $ 18,460 Commercial Other 3,934 Commercial Licensing $ 19,099 $ 18,460 Commercial Other 3,934 2,272 Rest 19,099 $ 18,460 Commercial Other 3,934 2,272 Rest of the segment $ 18,460 Commercial Other 3,934 2,272 Rest of the segment 2,125 2,272 Rest of the segment 2,125 1,667 Total $ 25,158 $ Rest of the segment 2,125 1,667 Total $ 25,158 $ 22,399 segment 2,125 1,667 Total $ 25,158 $ 22,399 82 Table of 1,667 Total $ 25,158 $ 22,399 82 Table of Contents PART Total $ 25,158 $ 22,399 82 Table of Contents PART II of Contents PART II Item 8 NOTE 15 — OTHER LONG-TERM PART II Item 8 NOTE 15 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2014 2013 Tax contingency million ) June 30 , 2014 2013 Tax contingency and other ) June 30 , 2014 2013 Tax contingency and other tax and other tax liability $ 10,510 $ 9,548 Other 1,084 452 tax liability $ 10,510 $ 9,548 Other 1,084 452 Total $ $ 10,510 $ 9,548 Other 1,084 452 Total $ 11,594 $ 10,510 $ 9,548 Other 1,084 452 Total $ 11,594 $ 10,000 Other 1,084 452 Total $ 11,594 $ 10,000 NOTE 16 — 452 Total $ 11,594 $ 10,000 NOTE 16 — COMMITMENTS AND $ 11,594 $ 10,000 NOTE 16 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 880 million for constructing new building leasehold improvement a of June 30 , 2014 . We have a of June 30 , 2014 . We have operating lease facility operating lease wa $ 874 million , $ 711 million $ 874 million , $ 711 million , and $ 639 711 million , and $ 639 million , in fiscal year million , in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . Future minimum in place a of June 30 , 2014 are a follows a of June 30 , 2014 are a follows : ( million ) Year Ending June 30 , 2015 $ 878 2016 Year Ending June 30 , 2015 $ 878 2016 748 2017 June 30 , 2015 $ 878 2016 748 2017 671 2018 30 , 2015 $ 878 2016 748 2017 671 2018 598 , 2015 $ 878 2016 748 2017 671 2018 598 2019 2015 $ 878 2016 748 2017 671 2018 598 2019 456 $ 878 2016 748 2017 671 2018 598 2019 456 Thereafter 878 2016 748 2017 671 2018 598 2019 456 Thereafter 1,063 2016 748 2017 671 2018 598 2019 456 Thereafter 1,063 Total 748 2017 671 2018 598 2019 456 Thereafter 1,063 Total $ 2017 671 2018 598 2019 456 Thereafter 1,063 Total $ 4,414 2018 598 2019 456 Thereafter 1,063 Total $ 4,414 Indemnifications We 456 Thereafter 1,063 Total $ 4,414 Indemnifications We provide indemnification of consolidated financial statement . NOTE 17 — CONTINGENCIES Antitrust , Unfair certain other software product between 1999 and 2005 . We obtained software product between 1999 and 2005 . We obtained dismissal or claimed ( one-half to two- 83 Table of Contents PART II of Contents PART II Item 8 third depending on the state the settlement is approximately $ 400 million , all of which been accrued a of June 30 , 2014 . Three similar a of June 30 , 2014 . Three similar case pending been settled . In March 2010 , the court in the the case . In October 2013 , the Canadian Supreme Court scheduled for trial in September 2015 . The other two case Claims Novell litigation In November 2004 , Novell , Inc. ( during the period between June 1994 and March 1996 . After between June 1994 and March 1996 . After the trial court claim took place in late 2011 and resulted in a mistrial a mistrial . In July 2012 , the trial court granted ’ s decision in September 2013 . The Supreme Court denied petition for review in April 2014 . Go Computer litigation In Go Computer litigation In June 2005 , GO Computer Inc. and GO Corporation in the early 1990s and it successor in interest Lucent Corporation in the early 2000s . All claim prior to All claim prior to June 2001 have been dismissed with prejudice trial is set for September 2015 . China State Administration for and Commerce investigation On July 28 , 2014 , Microsoft wa investigation On July 28 , 2014 , Microsoft wa informed that Claims Motorola litigation In October 2010 , Microsoft filed patent infringement International Trade Commission In May 2012 , the ITC issued a which became effective in July 2012 and wa affirmed on appeal affirmed on appeal in December 2013 . In July 2013 , December 2013 . In July 2013 , Microsoft filed an action the ITC ’ s May 2012 import ban against infringing Motorola fully enforce the order . 84 Table of Contents PART II of Contents PART II Item 8 In November 2010 , Motorola II Item 8 In November 2010 , Motorola filed an action Motorola patent . In March 2013 , the ITC affirmed there Court case filed in October 2010 by Microsoft a a companion ITC case . In November 2010 , Microsoft sued Motorola for H.264 video standard and the 802.11 Wi-Fi standard . In the in Germany . In February 2012 , the Seattle District Court of Microsoft ruling that ( 1 ) Motorola had committed to and condition ; and ( 2 ) Microsoft is a third-party Motorola ’ s H.264 and 802.11 patent , which resulted in Microsoft liability . In September 2013 , following trial of Microsoft , a jury awarded $ 14.5 million in damage to Microsoft transferred case , Motorola asserts 15 patent are infringed by a In counterclaim , Microsoft asserts 14 patent are infringed by Motorola recorder . Germany In July 2011 , Motorola filed patent infringement H.264 capable product including Xbox 360 , Windows 7 , Media including Xbox 360 , Windows 7 , Media Player , and those patent . In May 2012 , the court issued an protocol employed by Windows Phone 7 , Outlook Mobile , Hotmail Hotmail Server . In April 2013 , the court stayed the the patent . In November 2013 , the Federal Patent Court Microsoft appealed . In June 2014 , the court reopened infringement scheduled a hearing in November 2014 . • Microsoft may be determined in separate proceeding . 85 Table of Contents PART II of Contents PART II Item 8 In lawsuit Microsoft filed in Microsoft filed in Germany in 2011 and 2012 , Microsoft asserts in Germany in 2011 and 2012 , Microsoft asserts that Motorola damage and injunction . In 2012 , regional court in Germany the Federal Patent Court in 2013 and 2014 held the Microsoft Patent Court in 2013 and 2014 held the Microsoft patent invalid . United Kingdom In December 2011 , Microsoft filed an action ActiveSync protocol . In February 2012 , Motorola counterclaimed alleging infringement an injunction . In December 2012 , the court ruled that ’ s favor in November 2013 . Motorola ha exhausted all technology related patent spanning about 170 patent family and addressing a technology . IPCom ha asserted 19 of these patent in litigation the District of Delaware between 2007 and 2013 . We are of Delaware between 2007 and 2013 . We are being substituted at issue allegedly relate to 3G and 4G wireless communication standard allegedly relate to 3G and 4G wireless communication standard essential functionality an order excluding importation of 3G and 4G phone into the excluding importation of 3G and 4G phone into the U.S. and levy are based upon a 2001 EU Directive establishing a right case , there are approximately 90 other patent infringement case pending case pending against Microsoft . 86 Table of Contents PART II of Contents PART II Item 8 Product-Related Litigation U.S. cell phone , is a defendant in 19 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of emission guideline . In September 2013 , defendant in the consolidated motion wa heard in December 2013 and January 2014 . In in December 2013 and January 2014 . In March 2014 , January 2014 . In March 2014 , defendant filed a separate is a defendant in a 2013 class action lawsuit filed in cellular phone for at least 1600 hour , including a subclass with the complaint in June 2014 . The litigation is not future . As of June 30 , 2014 , we had As of June 30 , 2014 , we had accrued aggregate accrued aggregate liability of $ 780 million in other current liability other current liability and $ 81 million in other long-term liability estimate could reach approximately $ 2.0 billion in aggregate beyond recorded the NDS acquisition . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2014 2013 2012 Balance Year Ended June 30 , 2014 2013 2012 Balance , beginning Ended June 30 , 2014 2013 2012 Balance , beginning of June 30 , 2014 2013 2012 Balance , beginning of year Balance , beginning of year 8,328 8,381 8,376 Issued 86 105 , beginning of year 8,328 8,381 8,376 Issued 86 105 147 beginning of year 8,328 8,381 8,376 Issued 86 105 147 Repurchased year 8,328 8,381 8,376 Issued 86 105 147 Repurchased ( 175 8,328 8,381 8,376 Issued 86 105 147 Repurchased ( 175 ) 8,381 8,376 Issued 86 105 147 Repurchased ( 175 ) ( 86 105 147 Repurchased ( 175 ) ( 158 ) ( Repurchased ( 175 ) ( 158 ) ( 142 ) Balance ) ( 158 ) ( 142 ) Balance , end of Balance , end of year 8,239 8,328 8,381 87 Table of , end of year 8,239 8,328 8,381 87 Table of Contents end of year 8,239 8,328 8,381 87 Table of Contents PART of year 8,239 8,328 8,381 87 Table of Contents PART II of Contents PART II Item 8 Share Repurchases On September 16 8 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2014 , $ 35.1 As of June 30 , 2014 , $ 35.1 billion remained 30 , 2014 , $ 35.1 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2014 ( a ) Year Ended June 30 , 2014 ( a ) 2013 ( , 2014 ( a ) 2013 ( b ) 2012 ( ) 2013 ( b ) 2012 ( b ) First quarter ( b ) First quarter 47 $ 1,500 33 $ 1,000 ) First quarter 47 $ 1,500 33 $ 1,000 38 $ First quarter 47 $ 1,500 33 $ 1,000 38 $ 1,000 47 $ 1,500 33 $ 1,000 38 $ 1,000 Second quarter $ 1,500 33 $ 1,000 38 $ 1,000 Second quarter 53 33 $ 1,000 38 $ 1,000 Second quarter 53 2,000 58 38 $ 1,000 Second quarter 53 2,000 58 1,607 39 1,000 $ 1,000 Second quarter 53 2,000 58 1,607 39 1,000 Third 1,000 Second quarter 53 2,000 58 1,607 39 1,000 Third quarter Second quarter 53 2,000 58 1,607 39 1,000 Third quarter 47 quarter 53 2,000 58 1,607 39 1,000 Third quarter 47 1,791 53 2,000 58 1,607 39 1,000 Third quarter 47 1,791 36 1,607 39 1,000 Third quarter 47 1,791 36 1,000 31 1,000 39 1,000 Third quarter 47 1,791 36 1,000 31 1,000 Fourth 1,000 Third quarter 47 1,791 36 1,000 31 1,000 Fourth quarter Third quarter 47 1,791 36 1,000 31 1,000 Fourth quarter 28 quarter 47 1,791 36 1,000 31 1,000 Fourth quarter 28 1,118 47 1,791 36 1,000 31 1,000 Fourth quarter 28 1,118 31 1,000 31 1,000 Fourth quarter 28 1,118 31 1,000 34 1,000 31 1,000 Fourth quarter 28 1,118 31 1,000 34 1,000 Total 1,000 Fourth quarter 28 1,118 31 1,000 34 1,000 Total 175 Fourth quarter 28 1,118 31 1,000 34 1,000 Total 175 $ quarter 28 1,118 31 1,000 34 1,000 Total 175 $ 6,409 28 1,118 31 1,000 34 1,000 Total 175 $ 6,409 158 31 1,000 34 1,000 Total 175 $ 6,409 158 $ 4,607 34 1,000 Total 175 $ 6,409 158 $ 4,607 142 $ 1,000 Total 175 $ 6,409 158 $ 4,607 142 $ 4,000 175 $ 6,409 158 $ 4,607 142 $ 4,000 ( a $ 6,409 158 $ 4,607 142 $ 4,000 ( a ) 158 $ 4,607 142 $ 4,000 ( a ) Of the ( a ) Of the 175 million share repurchased in fiscal share repurchased in fiscal year 2014 , 128 million share were in fiscal year 2014 , 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . ( b expired on September 30 , 2013 . ( b ) All share repurchased in fiscal year 2013 and 2012 were repurchased under in fiscal year 2013 and 2012 were repurchased under the repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . The above expired on September 30 , 2013 . The above table excludes . Dividends In fiscal year 2014 , our Board of Directors ( In million ) September 16 , 2013 $ 0.28 November million ) September 16 , 2013 $ 0.28 November 21 , September 16 , 2013 $ 0.28 November 21 , 2013 $ , 2013 $ 0.28 November 21 , 2013 $ 2,332 December $ 0.28 November 21 , 2013 $ 2,332 December 12 , November 21 , 2013 $ 2,332 December 12 , 2013 November , 2013 $ 2,332 December 12 , 2013 November 19 , $ 2,332 December 12 , 2013 November 19 , 2013 $ December 12 , 2013 November 19 , 2013 $ 0.28 February , 2013 November 19 , 2013 $ 0.28 February 20 , November 19 , 2013 $ 0.28 February 20 , 2014 $ , 2013 $ 0.28 February 20 , 2014 $ 2,322 March $ 0.28 February 20 , 2014 $ 2,322 March 13 , February 20 , 2014 $ 2,322 March 13 , 2014 March , 2014 $ 2,322 March 13 , 2014 March 11 , $ 2,322 March 13 , 2014 March 11 , 2014 $ March 13 , 2014 March 11 , 2014 $ 0.28 May , 2014 March 11 , 2014 $ 0.28 May 15 , March 11 , 2014 $ 0.28 May 15 , 2014 $ , 2014 $ 0.28 May 15 , 2014 $ 2,309 June $ 0.28 May 15 , 2014 $ 2,309 June 12 , May 15 , 2014 $ 2,309 June 12 , 2014 June , 2014 $ 2,309 June 12 , 2014 June 10 , $ 2,309 June 12 , 2014 June 10 , 2014 $ June 12 , 2014 June 10 , 2014 $ 0.28 August , 2014 June 10 , 2014 $ 0.28 August 21 , June 10 , 2014 $ 0.28 August 21 , 2014 $ , 2014 $ 0.28 August 21 , 2014 $ 2,307 September $ 0.28 August 21 , 2014 $ 2,307 September 11 , August 21 , 2014 $ 2,307 September 11 , 2014 The , 2014 $ 2,307 September 11 , 2014 The dividend declared $ 2,307 September 11 , 2014 The dividend declared on June The dividend declared on June 10 , 2014 will be paid declared on June 10 , 2014 will be paid after the filing date of this Form 10-K and wa included in other current liability a of June 30 , 2014 . In fiscal a of June 30 , 2014 . In fiscal year 2013 2014 . In fiscal year 2013 , our Board of Directors ( In million ) September 18 , 2012 $ 0.23 November million ) September 18 , 2012 $ 0.23 November 15 , September 18 , 2012 $ 0.23 November 15 , 2012 $ , 2012 $ 0.23 November 15 , 2012 $ 1,933 December $ 0.23 November 15 , 2012 $ 1,933 December 13 , November 15 , 2012 $ 1,933 December 13 , 2012 November , 2012 $ 1,933 December 13 , 2012 November 28 , $ 1,933 December 13 , 2012 November 28 , 2012 $ December 13 , 2012 November 28 , 2012 $ 0.23 February , 2012 November 28 , 2012 $ 0.23 February 21 , November 28 , 2012 $ 0.23 February 21 , 2013 $ , 2012 $ 0.23 February 21 , 2013 $ 1,925 March $ 0.23 February 21 , 2013 $ 1,925 March 14 , February 21 , 2013 $ 1,925 March 14 , 2013 March , 2013 $ 1,925 March 14 , 2013 March 11 , $ 1,925 March 14 , 2013 March 11 , 2013 $ March 14 , 2013 March 11 , 2013 $ 0.23 May , 2013 March 11 , 2013 $ 0.23 May 16 , March 11 , 2013 $ 0.23 May 16 , 2013 $ , 2013 $ 0.23 May 16 , 2013 $ 1,921 June $ 0.23 May 16 , 2013 $ 1,921 June 13 , May 16 , 2013 $ 1,921 June 13 , 2013 June , 2013 $ 1,921 June 13 , 2013 June 12 , $ 1,921 June 13 , 2013 June 12 , 2013 $ June 13 , 2013 June 12 , 2013 $ 0.23 August , 2013 June 12 , 2013 $ 0.23 August 15 , June 12 , 2013 $ 0.23 August 15 , 2013 $ , 2013 $ 0.23 August 15 , 2013 $ 1,916 September $ 0.23 August 15 , 2013 $ 1,916 September 12 , August 15 , 2013 $ 1,916 September 12 , 2013 The , 2013 $ 1,916 September 12 , 2013 The dividend declared $ 1,916 September 12 , 2013 The dividend declared on June The dividend declared on June 12 , 2013 wa included in declared on June 12 , 2013 wa included in other current current liability a of June 30 , 2013 . 88 Table a of June 30 , 2013 . 88 Table of Contents June 30 , 2013 . 88 Table of Contents PART II of Contents PART II Item 8 NOTE 19 — ACCUMULATED OTHER PART II Item 8 NOTE 19 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2014 2013 2012 Derivatives Year Ended June 30 , 2014 2013 2012 Derivatives Accumulated other Ended June 30 , 2014 2013 2012 Derivatives Accumulated other comprehensive June 30 , 2014 2013 2012 Derivatives Accumulated other comprehensive income , beginning of period $ 66 $ 92 $ ( 163 of period $ 66 $ 92 $ ( 163 ) Unrealized 66 $ 92 $ ( 163 ) Unrealized gain ( loss of tax effect of $ 2 , $ 54 and $ of $ 2 , $ 54 and $ 127 63 101 , $ 54 and $ 127 63 101 236 Reclassification adjustment $ 54 and $ 127 63 101 236 Reclassification adjustment for 54 and $ 127 63 101 236 Reclassification adjustment for loss and $ 127 63 101 236 Reclassification adjustment for loss ( ) included in revenue ( 104 ) ( 195 ) 29 revenue ( 104 ) ( 195 ) 29 Tax expense ( 104 ) ( 195 ) 29 Tax expense ( benefit ) in provision for income tax 6 68 ( 10 ) Amounts provision for income tax 6 68 ( 10 ) Amounts reclassified income tax 6 68 ( 10 ) Amounts reclassified from accumulated accumulated other comprehensive income ( 98 ) ( 127 ) 19 income ( 98 ) ( 127 ) 19 Net current period 98 ) ( 127 ) 19 Net current period other comprehensive income ( loss ) ( 35 ) ( 26 ) 255 ) ( 35 ) ( 26 ) 255 Accumulated other comprehensive 35 ) ( 26 ) 255 Accumulated other comprehensive income balance , end of period $ 31 $ 66 $ 92 Investments of period $ 31 $ 66 $ 92 Investments Accumulated other $ 31 $ 66 $ 92 Investments Accumulated other comprehensive income , beginning of period $ 1,794 $ 1,431 $ 1,821 Unrealized of period $ 1,794 $ 1,431 $ 1,821 Unrealized gain ( $ 1,794 $ 1,431 $ 1,821 Unrealized gain ( loss ) of tax effect of $ 1,067 , $ 244 and $ of $ 1,067 , $ 244 and $ ( 93 ) $ 244 and $ ( 93 ) 2,053 453 ( 172 and $ ( 93 ) 2,053 453 ( 172 ) Reclassification $ ( 93 ) 2,053 453 ( 172 ) Reclassification adjustment 93 ) 2,053 453 ( 172 ) Reclassification adjustment for gain income ( expense ) ( 447 ) ( 139 ) ( ) ( 447 ) ( 139 ) ( 335 ) Tax ) ( 139 ) ( 335 ) Tax expense included in in provision for income tax 131 49 117 Amounts reclassified from provision for income tax 131 49 117 Amounts reclassified from accumulated for income tax 131 49 117 Amounts reclassified from accumulated other accumulated other comprehensive income ( 316 ) ( 90 ) ( income ( 316 ) ( 90 ) ( 218 ) Net ) ( 90 ) ( 218 ) Net current period other comprehensive income ( loss ) 1,737 363 ( 390 ) Accumulated income ( loss ) 1,737 363 ( 390 ) Accumulated other loss ) 1,737 363 ( 390 ) Accumulated other comprehensive income , end of period $ 3,531 $ 1,794 $ 1,431 Translation of period $ 3,531 $ 1,794 $ 1,431 Translation Adjustments and $ 3,531 $ 1,794 $ 1,431 Translation Adjustments and Other Accumulated beginning of period $ ( 117 ) $ ( 101 ) ( 117 ) $ ( 101 ) $ 205 Translation adjustment $ ( 101 ) $ 205 Translation adjustment and other , of tax effect of $ 12 , $ ( 8 ) $ 12 , $ ( 8 ) and $ ( 165 8 ) and $ ( 165 ) 263 ( 16 ) and $ ( 165 ) 263 ( 16 ) ( 306 ( 165 ) 263 ( 16 ) ( 306 ) Accumulated 263 ( 16 ) ( 306 ) Accumulated other comprehensive loss , end of period $ 146 $ ( 117 ) $ period $ 146 $ ( 117 ) $ ( 101 ) ( 117 ) $ ( 101 ) Accumulated other comprehensive income , end of period $ 3,708 $ 1,743 $ 1,422 NOTE of period $ 3,708 $ 1,743 $ 1,422 NOTE 20 — $ 3,708 $ 1,743 $ 1,422 NOTE 20 — EMPLOYEE STOCK $ 1,743 $ 1,422 NOTE 20 — EMPLOYEE STOCK AND SAVINGS and employee . At June 30 , 2014 , an aggregate . At June 30 , 2014 , an aggregate of 346 2014 , an aggregate of 346 million share were authorized for million ) Year Ended June 30 , 2014 2013 2012 Stock-based Year Ended June 30 , 2014 2013 2012 Stock-based compensation expense Ended June 30 , 2014 2013 2012 Stock-based compensation expense $ June 30 , 2014 2013 2012 Stock-based compensation expense $ 2,446 2012 Stock-based compensation expense $ 2,446 $ 2,406 $ 2,244 Income compensation expense $ 2,446 $ 2,406 $ 2,244 Income tax benefit $ 2,446 $ 2,406 $ 2,244 Income tax benefit related to related to stock-based compensation $ 830 $ 842 $ 785 Stock stock-based compensation $ 830 $ 842 $ 785 Stock Plans Stock $ 830 $ 842 $ 785 Stock Plans Stock award Stock four or five-year period . 89 Table of Contents PART II of Contents PART II Item 8 Executive incentive plan Under the income . For fiscal year 2014 , 2013 , and 2012 For fiscal year 2014 , 2013 , and 2012 , the 2014 , 2013 , and 2012 , the pool wa 0.44 2012 , the pool wa 0.44 % , 0.35 % , pool wa 0.44 % , 0.35 % , and 0.30 % , 0.35 % , and 0.30 % of operating income , assumption : Year Ended June 30 , 2014 2013 2012 Dividends Year Ended June 30 , 2014 2013 2012 Dividends per share Ended June 30 , 2014 2013 2012 Dividends per share ( June 30 , 2014 2013 2012 Dividends per share ( quarterly ( quarterly amount ) $ 0.23 - $ 0.28 $ 0.20 ) $ 0.23 - $ 0.28 $ 0.20 - $ 0.23 0.23 - $ 0.28 $ 0.20 - $ 0.23 $ 0.16 0.28 $ 0.20 - $ 0.23 $ 0.16 - $ 0.20 0.20 - $ 0.23 $ 0.16 - $ 0.20 Interest rate 0.23 $ 0.16 - $ 0.20 Interest rate range 1.3 % $ 0.20 Interest rate range 1.3 % - 1.8 % 0.6 rate range 1.3 % - 1.8 % 0.6 % - 1.1 1.3 % - 1.8 % 0.6 % - 1.1 % 0.7 1.8 % 0.6 % - 1.1 % 0.7 % - 1.7 0.6 % - 1.1 % 0.7 % - 1.7 % During 1.1 % 0.7 % - 1.7 % During fiscal year 2014 1.7 % During fiscal year 2014 , the following activity occurred balance , beginning of year 273 $ 25.50 Granted ( a beginning of year 273 $ 25.50 Granted ( a ) 103 25.50 Granted ( a ) 103 $ 31.50 Vested ( 93 ( a ) 103 $ 31.50 Vested ( 93 ) $ 103 $ 31.50 Vested ( 93 ) $ 25.12 Forfeited ( Vested ( 93 ) $ 25.12 Forfeited ( 24 ) $ ) $ 25.12 Forfeited ( 24 ) $ 27.01 Nonvested balance Forfeited ( 24 ) $ 27.01 Nonvested balance , end of balance , end of year 259 $ 27.88 ( a ) end of year 259 $ 27.88 ( a ) Includes four grant-date fair value wa $ 37.64 . As of June 30 37.64 . As of June 30 , 2014 , there wa As of June 30 , 2014 , there wa approximately $ , there wa approximately $ 5.2 billion of total unrecognized compensation a weighted average period of 3 year . During fiscal year year . During fiscal year 2013 and 2012 , the following During fiscal year 2013 and 2012 , the following activity occurred , except fair value ) 2013 2012 Stock Awards Awards granted except fair value ) 2013 2012 Stock Awards Awards granted 104 2012 Stock Awards Awards granted 104 110 Weighted average grant-date fair Stock Awards Awards granted 104 110 Weighted average grant-date fair value average grant-date fair value $ 28.37 $ 24.60 Total vest-date fair fair value $ 28.37 $ 24.60 Total vest-date fair value of stock award vested wa $ 3.2 billion , $ 2.8 billion $ 3.2 billion , $ 2.8 billion , and $ 2.4 2.8 billion , and $ 2.4 billion , for fiscal year billion , for fiscal year 2014 , 2013 , and 2012 for fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . 90 Table and 2012 , respectively . 90 Table of Contents PART II of Contents PART II Item 8 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2014 2013 2012 Shares Year Ended June 30 , 2014 2013 2012 Shares purchased 18 Ended June 30 , 2014 2013 2012 Shares purchased 18 20 June 30 , 2014 2013 2012 Shares purchased 18 20 20 2014 2013 2012 Shares purchased 18 20 20 Average price per 2013 2012 Shares purchased 18 20 20 Average price per share 2012 Shares purchased 18 20 20 Average price per share $ Average price per share $ 33.60 $ 26.81 $ 25.03 At per share $ 33.60 $ 26.81 $ 25.03 At June 30 $ 33.60 $ 26.81 $ 25.03 At June 30 , 2014 26.81 $ 25.03 At June 30 , 2014 , 173 million 25.03 At June 30 , 2014 , 173 million share of June 30 , 2014 , 173 million share of our common U.S. that qualifies under Section 401 ( k ) of the employee may contribute up to 75 % of their salary , each dollar of the first 6 % a participant contributes in contribution of the lesser of 3 % of a participant ’ participant ’ s earnings or 3 % of the IRS compensation for all plan were $ 420 million , $ 393 million $ 420 million , $ 393 million , and $ 373 393 million , and $ 373 million in fiscal year 2014 373 million in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively , and were Microsoft common stock . NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC first quarter of fiscal year 2014 , we changed our organizational , beginning in fiscal year 2014 , we reported our financial segment performance during fiscal year 2014 . On April 25 , year 2014 . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 – Business Combinations for additional fourth quarter of fiscal year 2014 . Our reportable segment are segment are described below . 91 Table of Contents PART II of Contents PART II Item 8 Devices and Consumer Our D ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office to that segment group . 92 Table of Contents PART II of Contents PART II Item 8 • General and administrative expense million ) Year Ended June 30 , 2014 2013 2012 Revenue Year Ended June 30 , 2014 2013 2012 Revenue Devices and Ended June 30 , 2014 2013 2012 Revenue Devices and Consumer June 30 , 2014 2013 2012 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 18,803 $ 19,021 $ 19,495 Hardware Consumer Licensing $ 18,803 $ 19,021 $ 19,495 Hardware : Computing $ 18,803 $ 19,021 $ 19,495 Hardware : Computing and Gaming : Computing and Gaming Hardware 9,628 6,461 6,740 Phone Hardware 1,985 Computing and Gaming Hardware 9,628 6,461 6,740 Phone Hardware 1,985 0 and Gaming Hardware 9,628 6,461 6,740 Phone Hardware 1,985 0 0 9,628 6,461 6,740 Phone Hardware 1,985 0 0 Total D & 6,461 6,740 Phone Hardware 1,985 0 0 Total D & C 6,740 Phone Hardware 1,985 0 0 Total D & C Hardware Total D & C Hardware 11,613 6,461 6,740 Other 7,258 6,618 D & C Hardware 11,613 6,461 6,740 Other 7,258 6,618 6,203 & C Hardware 11,613 6,461 6,740 Other 7,258 6,618 6,203 Total Hardware 11,613 6,461 6,740 Other 7,258 6,618 6,203 Total Devices and 11,613 6,461 6,740 Other 7,258 6,618 6,203 Total Devices and Consumer 6,461 6,740 Other 7,258 6,618 6,203 Total Devices and Consumer 37,674 6,203 Total Devices and Consumer 37,674 32,100 32,438 Commercial Licensing 42,027 Total Devices and Consumer 37,674 32,100 32,438 Commercial Licensing 42,027 39,686 Devices and Consumer 37,674 32,100 32,438 Commercial Licensing 42,027 39,686 37,126 37,674 32,100 32,438 Commercial Licensing 42,027 39,686 37,126 Other 7,547 5,660 32,100 32,438 Commercial Licensing 42,027 39,686 37,126 Other 7,547 5,660 4,644 32,438 Commercial Licensing 42,027 39,686 37,126 Other 7,547 5,660 4,644 Total Licensing 42,027 39,686 37,126 Other 7,547 5,660 4,644 Total Commercial 49,574 42,027 39,686 37,126 Other 7,547 5,660 4,644 Total Commercial 49,574 45,346 39,686 37,126 Other 7,547 5,660 4,644 Total Commercial 49,574 45,346 41,770 7,547 5,660 4,644 Total Commercial 49,574 45,346 41,770 Corporate and Other 5,660 4,644 Total Commercial 49,574 45,346 41,770 Corporate and Other ( 4,644 Total Commercial 49,574 45,346 41,770 Corporate and Other ( 415 41,770 Corporate and Other ( 415 ) 403 ( 485 ) and Other ( 415 ) 403 ( 485 ) Total revenue ( 415 ) 403 ( 485 ) Total revenue $ 86,833 485 ) Total revenue $ 86,833 $ 77,849 $ 73,723 ( Total revenue $ 86,833 $ 77,849 $ 73,723 ( In million $ 86,833 $ 77,849 $ 73,723 ( In million ) Year million ) Year Ended June 30 , 2014 2013 2012 Gross Year Ended June 30 , 2014 2013 2012 Gross margin Devices Ended June 30 , 2014 2013 2012 Gross margin Devices and June 30 , 2014 2013 2012 Gross margin Devices and Consumer Devices and Consumer Licensing $ 17,216 $ 17,044 $ 17,240 Hardware Consumer Licensing $ 17,216 $ 17,044 $ 17,240 Hardware : Computing $ 17,216 $ 17,044 $ 17,240 Hardware : Computing and Gaming : Computing and Gaming Hardware 893 956 2,495 Phone Hardware 54 Computing and Gaming Hardware 893 956 2,495 Phone Hardware 54 0 and Gaming Hardware 893 956 2,495 Phone Hardware 54 0 0 893 956 2,495 Phone Hardware 54 0 0 Total D & 956 2,495 Phone Hardware 54 0 0 Total D & C 2,495 Phone Hardware 54 0 0 Total D & C Hardware Total D & C Hardware 947 956 2,495 Other 1,770 2,046 D & C Hardware 947 956 2,495 Other 1,770 2,046 1,998 & C Hardware 947 956 2,495 Other 1,770 2,046 1,998 Total Hardware 947 956 2,495 Other 1,770 2,046 1,998 Total Devices and 947 956 2,495 Other 1,770 2,046 1,998 Total Devices and Consumer 956 2,495 Other 1,770 2,046 1,998 Total Devices and Consumer 19,933 1,998 Total Devices and Consumer 19,933 20,046 21,733 Commercial Licensing 38,604 Total Devices and Consumer 19,933 20,046 21,733 Commercial Licensing 38,604 36,261 Devices and Consumer 19,933 20,046 21,733 Commercial Licensing 38,604 36,261 34,463 19,933 20,046 21,733 Commercial Licensing 38,604 36,261 34,463 Other 1,856 921 20,046 21,733 Commercial Licensing 38,604 36,261 34,463 Other 1,856 921 579 21,733 Commercial Licensing 38,604 36,261 34,463 Other 1,856 921 579 Total Licensing 38,604 36,261 34,463 Other 1,856 921 579 Total Commercial 40,460 38,604 36,261 34,463 Other 1,856 921 579 Total Commercial 40,460 37,182 36,261 34,463 Other 1,856 921 579 Total Commercial 40,460 37,182 35,042 1,856 921 579 Total Commercial 40,460 37,182 35,042 Corporate and Other 921 579 Total Commercial 40,460 37,182 35,042 Corporate and Other ( 579 Total Commercial 40,460 37,182 35,042 Corporate and Other ( 494 35,042 Corporate and Other ( 494 ) 372 ( 582 ) and Other ( 494 ) 372 ( 582 ) Total gross ( 494 ) 372 ( 582 ) Total gross margin $ ) Total gross margin $ 59,899 $ 57,600 $ 56,193 Following gross margin $ 59,899 $ 57,600 $ 56,193 Following is operating $ 59,899 $ 57,600 $ 56,193 Following is operating expense by million ) Year Ended June 30 , 2014 2013 2012 Devices Year Ended June 30 , 2014 2013 2012 Devices and Consumer Ended June 30 , 2014 2013 2012 Devices and Consumer $ June 30 , 2014 2013 2012 Devices and Consumer $ 11,219 2012 Devices and Consumer $ 11,219 $ 10,625 $ 15,682 Commercial and Consumer $ 11,219 $ 10,625 $ 15,682 Commercial 16,993 16,050 $ 11,219 $ 10,625 $ 15,682 Commercial 16,993 16,050 15,064 Corporate $ 10,625 $ 15,682 Commercial 16,993 16,050 15,064 Corporate and Other 10,625 $ 15,682 Commercial 16,993 16,050 15,064 Corporate and Other 3,928 $ 15,682 Commercial 16,993 16,050 15,064 Corporate and Other 3,928 4,161 16,050 15,064 Corporate and Other 3,928 4,161 3,684 Total operating expense 15,064 Corporate and Other 3,928 4,161 3,684 Total operating expense $ Corporate and Other 3,928 4,161 3,684 Total operating expense $ 32,140 3,684 Total operating expense $ 32,140 $ 30,836 $ 34,430 93 operating expense $ 32,140 $ 30,836 $ 34,430 93 Table of $ 32,140 $ 30,836 $ 34,430 93 Table of Contents PART 32,140 $ 30,836 $ 34,430 93 Table of Contents PART II of Contents PART II Item 8 Following is operating income ( million ) Year Ended June 30 , 2014 2013 2012 Devices Year Ended June 30 , 2014 2013 2012 Devices and Consumer Ended June 30 , 2014 2013 2012 Devices and Consumer $ June 30 , 2014 2013 2012 Devices and Consumer $ 8,714 2012 Devices and Consumer $ 8,714 $ 9,421 $ 6,051 Commercial and Consumer $ 8,714 $ 9,421 $ 6,051 Commercial 23,467 21,132 $ 8,714 $ 9,421 $ 6,051 Commercial 23,467 21,132 19,978 Corporate $ 9,421 $ 6,051 Commercial 23,467 21,132 19,978 Corporate and Other 9,421 $ 6,051 Commercial 23,467 21,132 19,978 Corporate and Other ( $ 6,051 Commercial 23,467 21,132 19,978 Corporate and Other ( 4,422 19,978 Corporate and Other ( 4,422 ) ( 3,789 ) ( Other ( 4,422 ) ( 3,789 ) ( 4,266 ) Total ) ( 3,789 ) ( 4,266 ) Total operating income $ ) Total operating income $ 27,759 $ 26,764 $ 21,763 Corporate operating income $ 27,759 $ 26,764 $ 21,763 Corporate and Other $ 27,759 $ 26,764 $ 21,763 Corporate and Other operating income million ) Year Ended June 30 , 2014 2013 2012 Corporate Year Ended June 30 , 2014 2013 2012 Corporate ( a Ended June 30 , 2014 2013 2012 Corporate ( a ) June 30 , 2014 2013 2012 Corporate ( a ) $ ( a ) $ ( 3,888 ) $ ( 4,236 ) ( 3,888 ) $ ( 4,236 ) $ ( 3,671 ) ( 4,236 ) $ ( 3,671 ) Other ( adjustment to amount ( b ) ( 415 ) 403 ( 485 ) b ) ( 415 ) 403 ( 485 ) Cost of ( 415 ) 403 ( 485 ) Cost of revenue reconciling of revenue reconciling amount ( 79 ) ( 31 ) ( amount ( 79 ) ( 31 ) ( 97 ) Operating ) ( 31 ) ( 97 ) Operating expense reconciling amount Operating expense reconciling amount ( 40 ) 75 ( 13 ) reconciling amount ( 40 ) 75 ( 13 ) Total Corporate ( 40 ) 75 ( 13 ) Total Corporate and Other Corporate and Other $ ( 4,422 ) $ ( 3,789 ) ( 4,422 ) $ ( 3,789 ) $ ( 4,266 ) ( 3,789 ) $ ( 4,266 ) ( a ) Corporate reconciling amount for fiscal year 2014 included a net $ 349 2014 included a net $ 349 million of revenue deferral related reconciling amount for fiscal year 2012 and 2013 included the deferral for fiscal year 2012 and 2013 included the deferral and subsequent , respectively , of $ 540 million of revenue related to States accounted for more than 10 % of fiscal year 2014 10 % of fiscal year 2014 , 2013 , or 2012 of fiscal year 2014 , 2013 , or 2012 revenue . 2014 , 2013 , or 2012 revenue . Revenue , classified million ) Year Ended June 30 , 2014 2013 2012 United Year Ended June 30 , 2014 2013 2012 United States ( Ended June 30 , 2014 2013 2012 United States ( a June 30 , 2014 2013 2012 United States ( a ) States ( a ) $ 43,474 $ 41,344 $ 38,846 Other a ) $ 43,474 $ 41,344 $ 38,846 Other country 43,359 $ 43,474 $ 41,344 $ 38,846 Other country 43,359 36,505 34,877 41,344 $ 38,846 Other country 43,359 36,505 34,877 Total $ 86,833 $ 38,846 Other country 43,359 36,505 34,877 Total $ 86,833 $ 38,846 Other country 43,359 36,505 34,877 Total $ 86,833 $ 77,849 43,359 36,505 34,877 Total $ 86,833 $ 77,849 $ 73,723 ( 34,877 Total $ 86,833 $ 77,849 $ 73,723 ( a ) $ 86,833 $ 77,849 $ 73,723 ( a ) Includes billing source of the revenue . 94 Table of Contents PART II of Contents PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2014 2013 2012 Microsoft Year Ended June 30 , 2014 2013 2012 Microsoft Office system Ended June 30 , 2014 2013 2012 Microsoft Office system $ June 30 , 2014 2013 2012 Microsoft Office system $ 24,323 2012 Microsoft Office system $ 24,323 $ 22,995 $ 22,299 Windows Office system $ 24,323 $ 22,995 $ 22,299 Windows PC operating $ 24,323 $ 22,995 $ 22,299 Windows PC operating system 16,856 22,299 Windows PC operating system 16,856 17,529 17,320 Server product and Windows PC operating system 16,856 17,529 17,320 Server product and tool PC operating system 16,856 17,529 17,320 Server product and tool 17,055 17,320 Server product and tool 17,055 15,408 14,232 Xbox Platform 8,643 Server product and tool 17,055 15,408 14,232 Xbox Platform 8,643 7,100 product and tool 17,055 15,408 14,232 Xbox Platform 8,643 7,100 8,045 17,055 15,408 14,232 Xbox Platform 8,643 7,100 8,045 Consulting and product 15,408 14,232 Xbox Platform 8,643 7,100 8,045 Consulting and product support 14,232 Xbox Platform 8,643 7,100 8,045 Consulting and product support service Consulting and product support service 4,767 4,372 3,976 Advertising 4,016 3,387 and product support service 4,767 4,372 3,976 Advertising 4,016 3,387 3,181 product support service 4,767 4,372 3,976 Advertising 4,016 3,387 3,181 Phone service 4,767 4,372 3,976 Advertising 4,016 3,387 3,181 Phone 3,073 615 4,767 4,372 3,976 Advertising 4,016 3,387 3,181 Phone 3,073 615 162 4,372 3,976 Advertising 4,016 3,387 3,181 Phone 3,073 615 162 Surface Advertising 4,016 3,387 3,181 Phone 3,073 615 162 Surface 1,883 853 4,016 3,387 3,181 Phone 3,073 615 162 Surface 1,883 853 0 3,387 3,181 Phone 3,073 615 162 Surface 1,883 853 0 Other Phone 3,073 615 162 Surface 1,883 853 0 Other 6,217 5,590 3,073 615 162 Surface 1,883 853 0 Other 6,217 5,590 4,508 615 162 Surface 1,883 853 0 Other 6,217 5,590 4,508 Total Surface 1,883 853 0 Other 6,217 5,590 4,508 Total $ 86,833 1,883 853 0 Other 6,217 5,590 4,508 Total $ 86,833 $ 853 0 Other 6,217 5,590 4,508 Total $ 86,833 $ 77,849 6,217 5,590 4,508 Total $ 86,833 $ 77,849 $ 73,723 Our 4,508 Total $ 86,833 $ 77,849 $ 73,723 Our total Commercial $ 86,833 $ 77,849 $ 73,723 Our total Commercial Cloud revenue Commercial Cloud revenue wa $ 2.8 billion , $ 1.3 billion $ 2.8 billion , $ 1.3 billion , and $ 0.7 1.3 billion , and $ 0.7 billion in fiscal year 2014 0.7 billion in fiscal year 2014 , 2013 , and 2012 in fiscal year 2014 , 2013 , and 2012 , respectively 2014 , 2013 , and 2012 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2014 2013 2012 United million ) June 30 , 2014 2013 2012 United States $ ) June 30 , 2014 2013 2012 United States $ 17,653 June 30 , 2014 2013 2012 United States $ 17,653 $ 2013 2012 United States $ 17,653 $ 16,615 $ 14,081 Finland United States $ 17,653 $ 16,615 $ 14,081 Finland 9,840 12 $ 17,653 $ 16,615 $ 14,081 Finland 9,840 12 8 Luxembourg $ 16,615 $ 14,081 Finland 9,840 12 8 Luxembourg 6,913 6,943 16,615 $ 14,081 Finland 9,840 12 8 Luxembourg 6,913 6,943 6,975 $ 14,081 Finland 9,840 12 8 Luxembourg 6,913 6,943 6,975 Other Finland 9,840 12 8 Luxembourg 6,913 6,943 6,975 Other country 5,713 9,840 12 8 Luxembourg 6,913 6,943 6,975 Other country 5,713 4,159 12 8 Luxembourg 6,913 6,943 6,975 Other country 5,713 4,159 3,827 6,913 6,943 6,975 Other country 5,713 4,159 3,827 Total $ 40,119 6,943 6,975 Other country 5,713 4,159 3,827 Total $ 40,119 $ 6,975 Other country 5,713 4,159 3,827 Total $ 40,119 $ 27,729 5,713 4,159 3,827 Total $ 40,119 $ 27,729 $ 24,891 NOTE 3,827 Total $ 40,119 $ 27,729 $ 24,891 NOTE 22 — $ 40,119 $ 27,729 $ 24,891 NOTE 22 — QUARTERLY INFORMATION $ 27,729 $ 24,891 NOTE 22 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 ( September 30 December 31 March 31 June 30 ( a ) December 31 March 31 June 30 ( a ) Total ( ( a ) Fiscal Year 2014 Revenue $ 18,529 $ 24,519 Fiscal Year 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,415 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 23,382 $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net $ 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 86,833 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 Gross margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 margin 13,415 16,235 14,462 15,787 59,899 Net income 5,244 6,558 5,660 14,462 15,787 59,899 Net income 5,244 6,558 5,660 4,612 ( b 15,787 59,899 Net income 5,244 6,558 5,660 4,612 ( b ) 59,899 Net income 5,244 6,558 5,660 4,612 ( b ) 22,074 Net income 5,244 6,558 5,660 4,612 ( b ) 22,074 ( 5,660 4,612 ( b ) 22,074 ( b ) Basic earnings ) Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share 0.62 2.66 Diluted earnings per share 0.62 0.78 0.68 0.55 ( b Diluted earnings per share 0.62 0.78 0.68 0.55 ( b ) earnings per share 0.62 0.78 0.68 0.55 ( b ) 2.63 per share 0.62 0.78 0.68 0.55 ( b ) 2.63 ( 0.68 0.55 ( b ) 2.63 ( b ) Fiscal Year ( b ) Fiscal Year 2013 Revenue $ 16,008 $ 21,456 Fiscal Year 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 2013 Revenue $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ $ 16,008 $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross $ 21,456 $ 20,489 $ 19,896 $ 77,849 Gross margin 11,840 $ 20,489 $ 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 19,896 $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net $ 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 77,849 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 Gross margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 margin 11,840 15,764 15,702 14,294 57,600 Net income 4,466 6,377 6,055 15,702 14,294 57,600 Net income 4,466 6,377 6,055 ( c ) 14,294 57,600 Net income 4,466 6,377 6,055 ( c ) 4,965 57,600 Net income 4,466 6,377 6,055 ( c ) 4,965 ( 6,377 6,055 ( c ) 4,965 ( d ) 21,863 ( ) 4,965 ( d ) 21,863 ( e ) Basic earnings ) Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted Basic earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings earnings per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per per share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share share 0.53 0.76 0.72 0.59 2.61 Diluted earnings per share 0.53 2.61 Diluted earnings per share 0.53 0.76 0.72 ( c ) Diluted earnings per share 0.53 0.76 0.72 ( c ) 0.59 earnings per share 0.53 0.76 0.72 ( c ) 0.59 ( 0.76 0.72 ( c ) 0.59 ( d ) 2.58 ( ) 0.59 ( d ) 2.58 ( e ) ( a of operation starting on April 25 , 2014 , the date starting on April 25 , 2014 , the date of acquisition fourth quarter of fiscal year 2014 related to adjustment to prior decreased net income by $ 458 million and diluted earnings per earnings per share by $ 0.05 . 95 Table of Contents share by $ 0.05 . 95 Table of Contents PART II of Contents PART II Item 8 ( c ) Includes a the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( €561 million ) earnings per share by $ 0.09 . ( d ) Includes fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . ( e ) Includes the European Commission in March 2013 which decreased net income by decreased net income by $ 733 million ( €561 million ) earnings per share by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased net income decreased net income by $ 596 million and diluted earnings per earnings per share by $ 0.07 . NOTE 23 — SUBSEQUENT by $ 0.07 . NOTE 23 — SUBSEQUENT EVENT On July — SUBSEQUENT EVENT On July 17 , 2014 , we announced EVENT On July 17 , 2014 , we announced a restructuring We will eliminate up to 18,000 position over the next year the next year , including 12,500 professional and factory position related pre-tax charge of approximately $ 1.1 billion to $ 1.6 billion $ 1.1 billion to $ 1.6 billion in fiscal year 2015 1.6 billion in fiscal year 2015 . 96 Table of Contents in fiscal year 2015 . 96 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2014 and 2013 , a of June 30 , 2014 and 2013 , and the June 30 , 2014 and 2013 , and the related consolidated in the period ended June 30 , 2014 . These financial period ended June 30 , 2014 . These financial statement are and subsidiary a of June 30 , 2014 and 2013 , a of June 30 , 2014 and 2013 , and the June 30 , 2014 and 2013 , and the result of in the period ended June 30 , 2014 , in conformity period ended June 30 , 2014 , in conformity with accounting financial reporting a of June 30 , 2014 , based on a of June 30 , 2014 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee and our report dated July 31 , 2014 , expressed an report dated July 31 , 2014 , expressed an unqualified opinion LLP Seattle , Washington July 31 , 2014 97 Table of , Washington July 31 , 2014 97 Table of Contents PART Washington July 31 , 2014 97 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee business , acquired on April 25 , 2014 , which is acquired on April 25 , 2014 , which is included in which is included in our 2014 consolidated financial statement and represented financial statement and represented approximately 9 % of our total asset total asset a of June 30 , 2014 , and 2 a of June 30 , 2014 , and 2 % of 30 , 2014 , and 2 % of our total revenue for the year ended June 30 , 2014 . Based on year ended June 30 , 2014 . Based on this evaluation wa effective a of June 30 , 2014 . There were a of June 30 , 2014 . There were no change during the quarter ended June 30 , 2014 that have materially quarter ended June 30 , 2014 that have materially affected , financial reporting a of June 30 , 2014 ; their report a of June 30 , 2014 ; their report is included report is included in Item 9A . 98 Table of Contents included in Item 9A . 98 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2014 , based on a of June 30 , 2014 , based on criterion established Control – Integrated Framework ( 2013 ) issued by the Committee business , acquired on April 25 , 2014 and whose financial acquired on April 25 , 2014 and whose financial statement constitute and whose financial statement constitute 9 % of total asset a total asset a of June 30 , 2014 and 2 % a of June 30 , 2014 and 2 % of total June 30 , 2014 and 2 % of total revenue for for the year ended June 30 , 2014 . Accordingly , year ended June 30 , 2014 . Accordingly , our audit policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2014 , based on a of June 30 , 2014 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee for the year ended June 30 , 2014 , of the year ended June 30 , 2014 , of the Company and and our report dated July 31 , 2014 , expressed an report dated July 31 , 2014 , expressed an unqualified opinion LLP Seattle , Washington July 31 , 2014 99 Table of , Washington July 31 , 2014 99 Table of Contents PART Washington July 31 , 2014 99 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Effective July . OTHER INFORMATION Effective July 1 , 2014 , we amended INFORMATION Effective July 1 , 2014 , we amended our Bylaws Directors a a range of 5 to 14 member , and a range of 5 to 14 member , and to designate Bylaws are filed a Exhibit 3.2 to this Report . PART Report . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 3 , 2014 ( the “ be held December 3 , 2014 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 100 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 53 Comprehensive Income Statements 54 Balance Statements 53 Comprehensive Income Statements 54 Balance Sheets 55 Cash Flows Income Statements 54 Balance Sheets 55 Cash Flows Statements 56 Stockholders Sheets 55 Cash Flows Statements 56 Stockholders ’ Equity Statements 57 56 Stockholders ’ Equity Statements 57 Notes to Financial Statements 58 57 Notes to Financial Statements 58 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation X Bylaws of Microsoft Corporation X 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 101 Table of . , a Trustee 8-K 4.5 9/27/10 101 Table of Contents , a Trustee 8-K 4.5 9/27/10 101 Table of Contents PART a Trustee 8-K 4.5 9/27/10 101 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 between Microsoft Corporation a of May 2 , 2013 between Microsoft Corporation and The , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 102 Table of . , a Trustee 8-K 4.1 12/6/13 102 Table of Contents , a Trustee 8-K 4.1 12/6/13 102 Table of Contents PART a Trustee 8-K 4.1 12/6/13 102 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 10.1 * Microsoft . , a Trustee 8-K 4.2 12/6/13 10.1 * Microsoft Corporation , a Trustee 8-K 4.2 12/6/13 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.2 12/6/13 10.1 * Microsoft Corporation 2001 Stock 12/6/13 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Stock 1/19/12 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer for Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer Incentive Non-Employee Directors S-8 99.2 2/28/06 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 8-K 10.17 9/23/13 10.18 * Form Executive Officer Incentive Plan 8-K 10.17 9/23/13 10.18 * Form of Officer Incentive Plan 8-K 10.17 9/23/13 10.18 * Form of Executive Incentive Plan 8-K 10.17 9/23/13 10.18 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 8-K 10.20 9/23/13 Microsoft Corporation 2001 Stock Plan 8-K 10.20 9/23/13 10.19 * Resignation Corporation 2001 Stock Plan 8-K 10.20 9/23/13 10.19 * Resignation Agreement 2001 Stock Plan 8-K 10.20 9/23/13 10.19 * Resignation Agreement and Stock Plan 8-K 10.20 9/23/13 10.19 * Resignation Agreement and Full Microsoft Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 Stock Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 Stock Award and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 Stock Award Agreement Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 Stock Award Agreement under Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 Stock Award Agreement under the Agreement under the Microsoft Corporation 2001 Stock Plan ( Service-Based ) Stock Plan ( Service-Based ) 8-K 10.21 9/23/13 10.22 Senior Executive Plan ( Service-Based ) 8-K 10.21 9/23/13 10.22 Senior Executive Severance ( Service-Based ) 8-K 10.21 9/23/13 10.22 Senior Executive Severance Benefit Service-Based ) 8-K 10.21 9/23/13 10.22 Senior Executive Severance Benefit Plan Senior Executive Severance Benefit Plan 8-K 10.22 9/26/13 103 Table of Executive Severance Benefit Plan 8-K 10.22 9/26/13 103 Table of Contents Severance Benefit Plan 8-K 10.22 9/26/13 103 Table of Contents PART Benefit Plan 8-K 10.22 9/26/13 103 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase * Furnished , not filed 104 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 31 , 2014 . M ICROSOFT , on July 31 , 2014 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 31 , 2014 . Signature Title indicated on July 31 , 2014 . Signature Title / S ( Principal Accounting Officer ) 105 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-15-272806/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-15-272806/full-submission.txt new file mode 100644 index 0000000..5492e76 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-15-272806/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2015 OR ¨ TRANSITION Year Ended June 30 , 2015 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 0-14278 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2014 , the aggregate As of December 31 , 2014 , the aggregate market value of the registrant wa $ 365,312,377,595 based on the closing sale System . As of July 27 , 2015 , there were As of July 27 , 2015 , there were 7,997,980,969 share , 2015 , there were 7,997,980,969 share of common stock outstanding to be held on December 2 , 2015 are incorporated by held on December 2 , 2015 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2015 INDEX Page PART Year Ended June 30 , 2015 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 16 Item 1A . Risk Factors of the Registrant 16 Item 1A . Risk Factors 18 Item Item 1A . Risk Factors 18 Item 1B . Unresolved Staff . Risk Factors 18 Item 1B . Unresolved Staff Comments 26 1B . Unresolved Staff Comments 26 Item 2 . Properties 26 Unresolved Staff Comments 26 Item 2 . Properties 26 Item 3 26 Item 2 . Properties 26 Item 3 . Legal Proceedings 2 . Properties 26 Item 3 . Legal Proceedings 27 Item Item 3 . Legal Proceedings 27 Item 4 . Mine Safety . Legal Proceedings 27 Item 4 . Mine Safety Disclosures 27 4 . Mine Safety Disclosures 27 PART II Item 5 . Disclosures 27 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 28 Item 6 . Selected Financial of Equity Securities 28 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management ’ Selected Financial Data 28 Item 7 . Management ’ s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 51 Item 8 . Financial Statements about Market Risk 51 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 53 Item 9 . Changes in and Supplementary Data 53 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 99 Item 9A . Controls and and Financial Disclosure 99 Item 9A . Controls and Procedures 99 9A . Controls and Procedures 99 Report of Management on Internal Internal Control over Financial Reporting 99 Report of Independent Registered Public Independent Registered Public Accounting Firm 100 Item 9B . Other Information Public Accounting Firm 100 Item 9B . Other Information 101 PART Item 9B . Other Information 101 PART III Item 10 . Information 101 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 101 Item 11 . Executive Compensation and Corporate Governance 101 Item 11 . Executive Compensation 101 Item Item 11 . Executive Compensation 101 Item 12 . Security Ownership . Executive Compensation 101 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 101 Item 13 . Certain Relationships Related Stockholder Matters 101 Item 13 . Certain Relationships and Related Transactions , and Director Independence 101 Item 14 . Principal Accounting and Director Independence 101 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 101 PART IV Item 15 . Services 101 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 102 Signatures 106 2 Table of Financial Statement Schedules 102 Signatures 106 2 Table of Contents PART Statement Schedules 102 Signatures 106 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 and Section 21E of the Act of 1933 and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , “ Quantitative and ( Part II , Item 7A ) , and “ Management ( Part II , Item 7 ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our vision Microsoft What we offer Founded in 1975 , we operate worldwide and have office in more than 100 country . We develop , system integrator and developer . 3 Table of Contents PART I of Contents PART I Item 1 The ambition that drive u and Dynamics . With Office 365 , we provide these familiar backend service , and developer 4 Table of Contents PART I of Contents PART I Item 1 productivity service . To foster Create more personal computing Windows 10 is the cornerstone of our see the launch of Windows 10 in July 2015 a a of Windows 10 in July 2015 a a critical , transformative life . We developed Windows 10 not only to be familiar up-to-date . We believe Windows 10 is more personal and productive application . We designed Windows 10 to foster innovation – from . Our ambition for Windows 10 is to broaden our economic new hardware design for Windows 10 ; our own commitment to a they ready for Windows 10 . By December 2015 , Windows 10 . By December 2015 , we anticipate the widest With the launch of Windows 10 , we are realizing our the installed base to Windows 10 through upgrade and ongoing update personal computing experience with Windows 10 . Our future opportunity There differentiate ourselves from competitor . 5 Table of Contents PART I of Contents PART I Item 1 OPERATING SEGMENTS We operate our within business . In June 2015 , we announced a change may change . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all information is contained in Note 22 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Devices and Consumer licensed . • Piracy . 6 Table of Contents PART I of Contents PART I Item 1 The version of Office included a the transition to Office 365 Consumer , our subscription-based cloud other productivity service . Office 365 Consumer revenue is included in service . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively . Surface is device , the Surface Pro 3 and Surface 3 , were Surface Pro 3 and Surface 3 , were released in June , were released in June 2014 and May 2015 , respectively in June 2014 and May 2015 , respectively . Competition Our latest generation console in November 2012 . Sony released their latest latest generation console in November 2013 . 7 Table of Contents console in November 2013 . 7 Table of Contents PART I of Contents PART I Item 1 We believe the success of acquisition of NDS on April 25 , 2014 . Our Lumia NDS on April 25 , 2014 . Our Lumia phone run ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising website worldwide . In June 2015 , we entered into agreement display sale effort . Office 365 Consumer is designed to increase gaming franchise , in November 2014 . The addition of Minecraft Apple , and Google . 8 Table of Contents PART I of Contents PART I Item 1 Our search and display advertising service . Competitors to Office 365 Consumer are the same a of information worker licensed . 9 Table of Contents PART I of Contents PART I Item 1 Windows Embedded extends the power Dynamics CRM on-premises offering . 10 Table of Contents PART I of Contents PART I Item 1 Skype competes with a variety Commercial Cloud , comprising Office 365 Commercial , Microsoft Azure , Microsoft Consulting Services . Office 365 Commercial is an online service . Competition Competitors to Office 365 Commercial are the same a , and translating text . 11 Table of Contents PART I of Contents PART I Item 1 We operate manufacturing facility for AND DEVELOPMENT During fiscal year 2015 , 2014 , and 2013 During fiscal year 2015 , 2014 , and 2013 , research 2015 , 2014 , and 2013 , research and development expense and development expense wa $ 12.0 billion , $ 11.4 billion $ 12.0 billion , $ 11.4 billion , and $ 10.4 11.4 billion , and $ 10.4 billion , respectively . These respectively . These amount represented 13 % of revenue in each have a portfolio of over 57,000 U.S. and international patent issued international patent issued and over 35,000 pending . While we employ development of our product . 12 Table of Contents PART I of Contents PART I Item 1 Investing in the Future Microsoft Bing or Windows with Office 365 subscription . There are two “ EDAs ” ) . 13 Table of Contents PART I of Contents PART I Item 1 Organizations also license our product portal and channel , Office 365 , Windows Phone Store , Microsoft Azure , and Office 365 . Other service delivered online software assurance upon the expiration 14 Table of Contents PART I of Contents PART I Item 1 of other existing volume licensing three year . In July 2014 , we announced that we with commercial organization starting July 2015 , and encouraged customer who their own software program . 15 Table of Contents PART I of Contents PART I Item 1 CUSTOMERS Our customer include individual customer accounted for more than 10 % of fiscal year 2015 10 % of fiscal year 2015 , 2014 , or 2013 of fiscal year 2015 , 2014 , or 2013 revenue . 2015 , 2014 , or 2013 revenue . Our practice is executive officer a of July 30 , 2015 were a follows a of July 30 , 2015 were a follows : Name with the Company Satya Nadella 47 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 45 Executive Vice President , Chief Marketing Officer Kathleen T. Hogan 49 Executive Vice President , Human Human Resources Amy E. Hood 43 Executive Vice President , Chief Chief Financial Officer Margaret Johnson 53 Executive Vice President , Business Business Development Bradford L. Smith 56 Executive Vice President , General ; Secretary B. Kevin Turner 50 Chief Operating Officer Mr. Nadella Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise beginning July 2013 . From 2011 to 2013 beginning July 2013 . From 2011 to 2013 , Mr. Nadella 2013 . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in March 2014 . Previously , he served . In his more than 20 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms . Hood wa Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . Beginning in 2010 , May 2013 . Beginning in 2010 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha , Business Development in September 2014 . Prior to that Ms. to that Ms. Johnson spent 24 year at Qualcomm in various Counsel , and Secretary in 2011 . Prior to that he , and Secretary since November 2001 . Mr. Smith wa also named Chief Compliance Officer in 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Smith also serf Directors of Netflix , Inc. 16 Table of Contents PART I of Contents PART I Item 1 Mr. Turner wa appointed Chief Chief Operating Officer in September 2005 . Before joining Microsoft , s Club division . From 2001 to 2002 , he served division . From 2001 to 2002 , he served a Executive Information Systems Division . From 2000 to 2001 , he served Division . From 2000 to 2001 , he served a it Inc. EMPLOYEES As of June 30 , 2015 , we employed As of June 30 , 2015 , we employed approximately 118,000 2015 , we employed approximately 118,000 people on a full-time basis on a full-time basis , 60,000 in the U.S. and 58,000 60,000 in the U.S. and 58,000 internationally . Of the total the total employed people , 39,000 were in product research and product research and development , 29,000 in sale and marketing , in sale and marketing , 32,000 in product support and consulting support and consulting service , 8,000 in manufacturing and distribution , manufacturing and distribution , and 10,000 in general and administration . and administration . In June 2015 , management approved a restructuring that will eliminate up to 7,800 position in fiscal year 2016 7,800 position in fiscal year 2016 , primarily in our Phone Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 17 Table of Contents PART I of Contents PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation lower our operating margin . 18 Table of Contents PART I of Contents PART I Item 1A Business model competition Companies compete margin and operating income . 19 Table of Contents PART I of Contents PART I Item 1A We make significant investment in Azure Services platform , Office 365 , other cloud-based service offering . The launch of Windows 10 , with free upgrade available to existing user of Windows 7 and 8.1 , constitutes the user of Windows 7 and 8.1 , constitutes the most ambitious for our user installing Windows 10 . However , if user , the reception of Windows 10 in the marketplace may be , we anticipate that Windows 10 will enable new post-license monetization fourth quarter of fiscal year 2012 , we recorded a $ , we recorded a $ 6.2 billion charge for the impairment fourth quarter of fiscal year 2015 , we recorded a $ , we recorded a $ 5.1 billion charge for the impairment of goodwill and a $ 2.2 billion charge for the impairment our Phone Hardware segment . 20 Table of Contents PART I of Contents PART I Item 1A We may not earn the in the next paragraph . 21 Table of Contents PART I of Contents PART I Item 1A Cyber-attacks and security vulnerability could over personal data , our 22 Table of Contents PART I of Contents PART I Item 1A training of employee and vendor , Exchange Online , Office 365 , SharePoint Online , OneDrive to other company . In 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may enforcement activity are unpredictable . 23 Table of Contents PART I of Contents PART I Item 1A Government regulatory action and court ability to realize anticipated Windows 10 post-sale monetization opportunity may be litigation and other claim are 24 Table of Contents PART I of Contents PART I Item 1A subject to inherent uncertainty and customer are located in over 200 country and a significant part other business operation in the 25 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 Silicon PART I Item 1A , 1B , 2 Silicon Valley area Item 1A , 1B , 2 Silicon Valley area of California our financial result . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2015 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate office corporate office consist of approximately 15 million square foot of office King County , Washington : 10 million square foot of owned owned space situated on approximately 500 acre of land we own and data center space . 26 Table of Contents PART I of Contents PART I Item 2 , 3 , 4 We PART I Item 2 , 3 , 4 We occupy many Item 2 , 3 , 4 We occupy many site internationally Development ” section of Item 1 of this Form 10-K. Our Item 1 of this Form 10-K. Our facility are used for we may currently develop approximately 1.4 million square foot of additional Redmond , Washington . ITEM 3 . LEGAL PROCEEDINGS See Note . LEGAL PROCEEDINGS See Note 18 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 27 Table of Contents PART II of Contents PART II Item 5 , 6 PART II ITEM PART II Item 5 , 6 PART II ITEM 5 . , 6 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 27 , 2015 , there were . On July 27 , 2015 , there were 109,479 registered , 2015 , there were 109,479 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2015 30 Fiscal Year Fiscal Year 2015 High $ 47.57 $ 50.05 Fiscal Year 2015 High $ 47.57 $ 50.05 $ 47.91 $ 2015 High $ 47.57 $ 50.05 $ 47.91 $ 49.54 $ $ 47.57 $ 50.05 $ 47.91 $ 49.54 $ 50.05 Low $ 50.05 $ 47.91 $ 49.54 $ 50.05 Low $ 41.05 $ 47.91 $ 49.54 $ 50.05 Low $ 41.05 $ 42.10 49.54 $ 50.05 Low $ 41.05 $ 42.10 $ 40.23 $ 50.05 Low $ 41.05 $ 42.10 $ 40.23 $ 40.12 $ $ 41.05 $ 42.10 $ 40.23 $ 40.12 $ 40.12 Fiscal $ 42.10 $ 40.23 $ 40.12 $ 40.12 Fiscal Year 2014 $ 40.23 $ 40.12 $ 40.12 Fiscal Year 2014 High $ 40.12 $ 40.12 Fiscal Year 2014 High $ 36.43 $ 38.98 Fiscal Year 2014 High $ 36.43 $ 38.98 $ 41.50 $ 2014 High $ 36.43 $ 38.98 $ 41.50 $ 42.29 $ $ 36.43 $ 38.98 $ 41.50 $ 42.29 $ 42.29 Low $ 38.98 $ 41.50 $ 42.29 $ 42.29 Low $ 30.84 $ 41.50 $ 42.29 $ 42.29 Low $ 30.84 $ 32.80 42.29 $ 42.29 Low $ 30.84 $ 32.80 $ 34.63 $ 42.29 Low $ 30.84 $ 32.80 $ 34.63 $ 38.51 $ $ 30.84 $ 32.80 $ 34.63 $ 38.51 $ 30.84 DIVIDENDS $ 32.80 $ 34.63 $ 38.51 $ 30.84 DIVIDENDS AND SHARE $ 34.63 $ 38.51 $ 30.84 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 19 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2015 , all of which were ( in million ) April 1 , 2015 – April 30 million ) April 1 , 2015 – April 30 , 2015 1 , 2015 – April 30 , 2015 45,393,872 $ 42.92 2015 – April 30 , 2015 45,393,872 $ 42.92 45,393,872 $ – April 30 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,143 30 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,143 May 1 , 2015 45,393,872 $ 42.92 45,393,872 $ 24,143 May 1 , 45,393,872 $ 42.92 45,393,872 $ 24,143 May 1 , 2015 – 42.92 45,393,872 $ 24,143 May 1 , 2015 – May 31 $ 24,143 May 1 , 2015 – May 31 , 2015 1 , 2015 – May 31 , 2015 23,541,167 $ 47.58 2015 – May 31 , 2015 23,541,167 $ 47.58 23,541,167 $ – May 31 , 2015 23,541,167 $ 47.58 23,541,167 $ 23,023 31 , 2015 23,541,167 $ 47.58 23,541,167 $ 23,023 June 1 , 2015 23,541,167 $ 47.58 23,541,167 $ 23,023 June 1 , 23,541,167 $ 47.58 23,541,167 $ 23,023 June 1 , 2015 – 47.58 23,541,167 $ 23,023 June 1 , 2015 – June 30 $ 23,023 June 1 , 2015 – June 30 , 2015 1 , 2015 – June 30 , 2015 24,705,187 $ 46.15 2015 – June 30 , 2015 24,705,187 $ 46.15 24,705,187 $ – June 30 , 2015 24,705,187 $ 46.15 24,705,187 $ 21,883 30 , 2015 24,705,187 $ 46.15 24,705,187 $ 21,883 93,640,226 93,640,226 , 2015 24,705,187 $ 46.15 24,705,187 $ 21,883 93,640,226 93,640,226 The 24,705,187 $ 46.15 24,705,187 $ 21,883 93,640,226 93,640,226 The repurchase were $ 46.15 24,705,187 $ 21,883 93,640,226 93,640,226 The repurchase were made 46.15 24,705,187 $ 21,883 93,640,226 93,640,226 The repurchase were made using the open market . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2015 2014 ( b Year Ended June 30 , 2015 2014 ( b ) 2013 Ended June 30 , 2015 2014 ( b ) 2013 2012 2015 2014 ( b ) 2013 2012 2011 Revenue $ 93,580 2014 ( b ) 2013 2012 2011 Revenue $ 93,580 $ ( b ) 2013 2012 2011 Revenue $ 93,580 $ 86,833 2013 2012 2011 Revenue $ 93,580 $ 86,833 $ 77,849 $ 2011 Revenue $ 93,580 $ 86,833 $ 77,849 $ 73,723 $ $ 93,580 $ 86,833 $ 77,849 $ 73,723 $ 69,943 Gross $ 86,833 $ 77,849 $ 73,723 $ 69,943 Gross margin $ $ 77,849 $ 73,723 $ 69,943 Gross margin $ 60,542 $ $ 69,943 Gross margin $ 60,542 $ 59,755 $ 57,464 $ Gross margin $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ $ 60,542 $ 59,755 $ 57,464 $ 56,193 $ 54,366 Operating $ 59,755 $ 57,464 $ 56,193 $ 54,366 Operating income $ $ 57,464 $ 56,193 $ 54,366 Operating income $ 18,161 ( $ 54,366 Operating income $ 18,161 ( a ) $ 27,759 18,161 ( a ) $ 27,759 $ 26,764 ( c ) a ) $ 27,759 $ 26,764 ( c ) $ 21,763 26,764 ( c ) $ 21,763 ( d ) $ 27,161 21,763 ( d ) $ 27,161 Net income $ 12,193 ( $ 27,161 Net income $ 12,193 ( a ) $ 22,074 12,193 ( a ) $ 22,074 $ 21,863 ( c ) a ) $ 22,074 $ 21,863 ( c ) $ 16,978 21,863 ( c ) $ 16,978 ( d ) $ 23,150 16,978 ( d ) $ 23,150 Diluted earnings per share $ Diluted earnings per share $ 1.48 ( a ) $ 2.63 1.48 ( a ) $ 2.63 $ 2.58 ( c ) a ) $ 2.63 $ 2.58 ( c ) $ 2.00 2.58 ( c ) $ 2.00 ( d ) $ 2.69 2.00 ( d ) $ 2.69 Cash dividend declared per share dividend declared per share $ 1.24 $ 1.12 $ 0.92 $ per share $ 1.24 $ 1.12 $ 0.92 $ 0.80 $ $ 1.24 $ 1.12 $ 0.92 $ 0.80 $ 0.64 Cash $ 1.12 $ 0.92 $ 0.80 $ 0.64 Cash , cash $ 0.92 $ 0.80 $ 0.64 Cash , cash equivalent , , and short-term investment $ 96,526 $ 85,709 $ 77,022 $ short-term investment $ 96,526 $ 85,709 $ 77,022 $ 63,040 $ $ 96,526 $ 85,709 $ 77,022 $ 63,040 $ 52,772 Total $ 85,709 $ 77,022 $ 63,040 $ 52,772 Total asset $ $ 77,022 $ 63,040 $ 52,772 Total asset $ 176,223 $ $ 52,772 Total asset $ 176,223 $ 172,384 $ 142,431 $ Total asset $ 176,223 $ 172,384 $ 142,431 $ 121,271 $ $ 176,223 $ 172,384 $ 142,431 $ 121,271 $ 108,704 Long-term $ 172,384 $ 142,431 $ 121,271 $ 108,704 Long-term obligation $ $ 142,431 $ 121,271 $ 108,704 Long-term obligation $ 46,282 $ $ 108,704 Long-term obligation $ 46,282 $ 36,975 $ 26,070 $ Long-term obligation $ 46,282 $ 36,975 $ 26,070 $ 22,220 $ $ 46,282 $ 36,975 $ 26,070 $ 22,220 $ 22,847 Stockholders $ 36,975 $ 26,070 $ 22,220 $ 22,847 Stockholders ’ equity $ 26,070 $ 22,220 $ 22,847 Stockholders ’ equity $ 80,083 22,847 Stockholders ’ equity $ 80,083 $ 89,784 $ 78,944 $ ’ equity $ 80,083 $ 89,784 $ 78,944 $ 66,363 $ $ 80,083 $ 89,784 $ 78,944 $ 66,363 $ 57,083 28 $ 89,784 $ 78,944 $ 66,363 $ 57,083 28 Table of $ 78,944 $ 66,363 $ 57,083 28 Table of Contents PART 78,944 $ 66,363 $ 57,083 28 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) Includes $ ( a ) Includes $ 7.5 billion of goodwill and asset Phone Hardware , and $ 2.5 billion of integration and restructuring , which decreased fiscal year 2015 operating income and net income and net income by $ 10.0 billion and diluted earnings per EPS ” ) by $ 1.15 . ( b ) On ( b ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( €561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income decreased operating income by $ 900 million , net income by , net income by $ 596 million , and diluted EPS and diluted EPS by $ 0.07 . ( d ) Includes and net income by $ 6.2 billion and diluted EPS by and diluted EPS by $ 0.73 . ITEM 7 . MANAGEMENT by $ 0.73 . ITEM 7 . MANAGEMENT ’ S DISCUSSION our focus in fiscal year 2015 wa toward transforming our organization . Highlights from fiscal year 2015 included : • Momentum continued a we surpassed an $ 8 billion annualized run rate * the year . • Office 365 Commercial seat grew 74 % Office 365 Commercial seat grew 74 % , and Office 365 74 % , and Office 365 is now deployed in four four out of five Fortune 500 enterprise , with more than . We also added over 50,000 small- and medium-sized business customer product and service revenue increased 9 % , driven by growth and we ended fiscal year 2015 with more than 17,000 Enterprise year 2015 with more than 17,000 Enterprise Mobility Services customer . wa calculated by multiplying June 2015 revenue by twelve month . revenue by twelve month . 29 Table of Contents PART II of Contents PART II Item 7 • We reached over 8 7 • We reached over 8 million paid Dynamics seat and We currently have more than 15 million Office 365 consumer subscriber more than 15 million Office 365 consumer subscriber , with new month . We also surpassed 150 million downloads of Office mobile device . • Bing exceeded 20 % U.S. market share a on search . In June 2015 , we entered into agreement hardware , we released Surface 3 and expanded distribution of Surface console volume grew to over 12 million , and Xbox Live and Xbox Live user increased 22 % . • We shipped . • We shipped over 36 million Lumia unit , and term . • We completed 16 acquisition , including Mojang Synergies . • We advanced Windows 10 to the threshold of it of it launch in July 2015 with the help of the from our international operation . 30 Table of Contents PART II of Contents PART II Item 7 See a discussion of these ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue Hardware segment ha generated approximately 40-50 % of it yearly revenue deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price Segment information appearing in Note 22 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on cash flow . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all other patent licensing revenue . 31 Table of Contents PART II of Contents PART II Item 7 • Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office and per share amount ) 2015 2014 2013 Percentage Change 2015 per share amount ) 2015 2014 2013 Percentage Change 2015 Versus share amount ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Revenue $ 93,580 2014 Percentage Change 2014 Versus 2013 Revenue $ 93,580 $ 86,833 2014 Versus 2013 Revenue $ 93,580 $ 86,833 $ 77,849 8 2013 Revenue $ 93,580 $ 86,833 $ 77,849 8 % 12 $ 93,580 $ 86,833 $ 77,849 8 % 12 % Gross 93,580 $ 86,833 $ 77,849 8 % 12 % Gross margin 86,833 $ 77,849 8 % 12 % Gross margin $ 60,542 12 % Gross margin $ 60,542 $ 59,755 $ 57,464 1 Gross margin $ 60,542 $ 59,755 $ 57,464 1 % 4 $ 60,542 $ 59,755 $ 57,464 1 % 4 % Operating 60,542 $ 59,755 $ 57,464 1 % 4 % Operating income 59,755 $ 57,464 1 % 4 % Operating income $ 18,161 4 % Operating income $ 18,161 $ 27,759 $ 26,764 ( Operating income $ 18,161 $ 27,759 $ 26,764 ( 35 ) $ 18,161 $ 27,759 $ 26,764 ( 35 ) % 4 $ 27,759 $ 26,764 ( 35 ) % 4 % Diluted 26,764 ( 35 ) % 4 % Diluted earnings per share Diluted earnings per share $ 1.48 $ 2.63 $ 2.58 ( per share $ 1.48 $ 2.63 $ 2.58 ( 44 ) $ 1.48 $ 2.63 $ 2.58 ( 44 ) % 2 $ 2.63 $ 2.58 ( 44 ) % 2 % Fiscal 2.58 ( 44 ) % 2 % Fiscal year 2015 compared % 2 % Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Revenue increased $ 6.7 billion year 2014 Revenue increased $ 6.7 billion or 8 % , increased $ 6.7 billion or 8 % , reflecting a full foreign currency impact of approximately 2 % . Gross margin increased . Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , primarily due to in part by a $ 6.0 billion or 22 % increase a $ 6.0 billion or 22 % increase in cost of Commercial Cloud , including $ 396 million of higher datacenter expense of our reportable segment . 32 Table of Contents PART II of Contents PART II Item 7 Operating income decreased $ 9.6 7 Operating income decreased $ 9.6 billion or 35 % , decreased $ 9.6 billion or 35 % , primarily due to and restructuring expense were $ 10.0 billion in the current year asset impairment charge of $ 7.5 billion related to our Phone Hardware business , and $ 2.5 billion of integration and restructuring and development expense increased $ 665 million or 6 % , increased $ 665 million or 6 % , mainly due to decreased diluted EPS by $ 1.15 . Fiscal year 2014 compared $ 1.15 . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Revenue increased $ 9.0 billion year 2013 Revenue increased $ 9.0 billion or 12 % , increased $ 9.0 billion or 12 % , demonstrating growth across . Gross margin increased $ 2.3 billion or 4 % , increased $ 2.3 billion or 4 % , primarily due to in part by a $ 6.7 billion or 33 % increase a $ 6.7 billion or 33 % increase in cost of device sold , and $ 575 million of higher datacenter expense . Operating income increased $ 995 million or 4 % , increased $ 995 million or 4 % , reflecting higher gross and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , mainly due to and marketing expense increased $ 535 million or 4 % , increased $ 535 million or 4 % , primarily due to by lower advertising cost . 33 Table of Contents PART II of Contents PART II Item 7 SEGMENT RESULTS OF OPERATIONS Devices million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 14,969 $ Versus 2013 Revenue Licensing $ 14,969 $ 19,528 $ 19,427 ( Revenue Licensing $ 14,969 $ 19,528 $ 19,427 ( 23 ) $ 14,969 $ 19,528 $ 19,427 ( 23 ) % 1 $ 19,528 $ 19,427 ( 23 ) % 1 % Hardware 19,427 ( 23 ) % 1 % Hardware : Computing and : Computing and Gaming Hardware 10,183 9,093 6,149 12 % 48 Computing and Gaming Hardware 10,183 9,093 6,149 12 % 48 % and Gaming Hardware 10,183 9,093 6,149 12 % 48 % Phone Gaming Hardware 10,183 9,093 6,149 12 % 48 % Phone Hardware 10,183 9,093 6,149 12 % 48 % Phone Hardware 7,524 1,982 % 48 % Phone Hardware 7,524 1,982 0 * * Total 48 % Phone Hardware 7,524 1,982 0 * * Total Devices % Phone Hardware 7,524 1,982 0 * * Total Devices and Total Devices and Consumer Hardware 17,707 11,075 6,149 60 % 80 Devices and Consumer Hardware 17,707 11,075 6,149 60 % 80 % and Consumer Hardware 17,707 11,075 6,149 60 % 80 % Other Consumer Hardware 17,707 11,075 6,149 60 % 80 % Other 8,825 17,707 11,075 6,149 60 % 80 % Other 8,825 7,014 6,431 60 % 80 % Other 8,825 7,014 6,431 26 % 9 % 80 % Other 8,825 7,014 6,431 26 % 9 % 80 % Other 8,825 7,014 6,431 26 % 9 % Total % Other 8,825 7,014 6,431 26 % 9 % Total Devices 8,825 7,014 6,431 26 % 9 % Total Devices and Consumer Devices and Consumer revenue $ 41,501 $ 37,617 $ 32,007 10 Consumer revenue $ 41,501 $ 37,617 $ 32,007 10 % 18 $ 41,501 $ 37,617 $ 32,007 10 % 18 % Gross 41,501 $ 37,617 $ 32,007 10 % 18 % Gross Margin 37,617 $ 32,007 10 % 18 % Gross Margin Licensing $ % Gross Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( Margin Licensing $ 13,870 $ 17,439 $ 16,985 ( 20 ) $ 13,870 $ 17,439 $ 16,985 ( 20 ) % 3 $ 17,439 $ 16,985 ( 20 ) % 3 % Hardware 16,985 ( 20 ) % 3 % Hardware : Computing and : Computing and Gaming Hardware 1,788 892 956 100 % ( Computing and Gaming Hardware 1,788 892 956 100 % ( 7 and Gaming Hardware 1,788 892 956 100 % ( 7 ) Gaming Hardware 1,788 892 956 100 % ( 7 ) % 892 956 100 % ( 7 ) % Phone Hardware 701 7 ) % Phone Hardware 701 54 0 * * Total ) % Phone Hardware 701 54 0 * * Total Devices % Phone Hardware 701 54 0 * * Total Devices and Total Devices and Consumer Hardware 2,489 946 956 163 % ( Devices and Consumer Hardware 2,489 946 956 163 % ( 1 and Consumer Hardware 2,489 946 956 163 % ( 1 ) Consumer Hardware 2,489 946 956 163 % ( 1 ) % 946 956 163 % ( 1 ) % Other 2,022 1,393 ( 1 ) % Other 2,022 1,393 1,951 45 % ( 1 ) % Other 2,022 1,393 1,951 45 % ( 29 ) % Other 2,022 1,393 1,951 45 % ( 29 ) % Other 2,022 1,393 1,951 45 % ( 29 ) % 1,393 1,951 45 % ( 29 ) % Total Devices and and Consumer gross margin $ 18,381 $ 19,778 $ 19,892 ( gross margin $ 18,381 $ 19,778 $ 19,892 ( 7 ) $ 18,381 $ 19,778 $ 19,892 ( 7 ) % ( $ 19,778 $ 19,892 ( 7 ) % ( 1 ) ( 7 ) % ( 1 ) % * Not meaningful * Not meaningful Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 D & C revenue increased & C revenue increased $ 3.9 billion or 10 % , increased $ 3.9 billion or 10 % , primarily due to , Office Consumer and Office 365 Consumer revenue declined 17 % Office 365 Consumer revenue declined 17 % . D & C C gross margin decreased $ 1.4 billion or 7 % , decreased $ 1.4 billion or 7 % , reflecting higher cost cost of revenue increased $ 5.3 billion or 30 % , increased $ 5.3 billion or 30 % , mainly due to C Licensing revenue decreased $ 4.6 billion or 23 % , decreased $ 4.6 billion or 23 % , mainly due to Windows OEM revenue declined $ 1.9 billion or 15 % , declined $ 1.9 billion or 15 % , primarily due to primarily due to decline of 15 % in OEM Pro revenue in OEM Pro revenue and 16 % in OEM non-Pro revenue Phone operating system decreased $ 1.4 billion or 55 % , decreased $ 1.4 billion or 55 % , primarily due to Office Consumer revenue declined $ 946 million or 29 % , declined $ 946 million or 29 % , reflecting the transition transition of customer to Office 365 Consumer , where revenue is Licensing gross margin decreased $ 3.6 billion or 20 % , decreased $ 3.6 billion or 20 % , primarily due to in part by a $ 990 million or 47 % decrease a $ 990 million or 47 % decrease in cost of mainly due to a $ 788 million decline in traffic acquisition when we acquired NDS . 34 Table of Contents PART II of Contents PART II Item 7 Computing and Gaming Hardware Computing Gaming Hardware revenue increased $ 1.1 billion or 12 % , increased $ 1.1 billion or 12 % , primarily due to Platform . Surface revenue increased 65 % to $ 3.6 billion increased 65 % to $ 3.6 billion , primarily due to primarily due to Surface Pro 3 unit sold . Surface Pro unit sold . Surface Pro 3 wa released in June 2014 3 wa released in June 2014 . Xbox Platform revenue decreased Xbox Platform revenue decreased $ 385 million or 6 % , decreased $ 385 million or 6 % , driven by lower game revenue . We sold 12.1 million Xbox console in fiscal Xbox console in fiscal year 2015 compared with 11.7 million console fiscal year 2015 compared with 11.7 million console in fiscal year million console in fiscal year 2014 . Computing and Gaming Hardware Hardware gross margin increased $ 896 million or 100 % , increased $ 896 million or 100 % , mainly due to in part by a $ 194 million or 2 % increase a $ 194 million or 2 % increase in cost of mix shift to Surface Pro 3 . Xbox Platform cost of Phone Hardware revenue increased $ 5.5 billion , a we sold billion , a we sold 36.8 million Lumia phone and 126.8 36.8 million Lumia phone and 126.8 million other non-Lumia phone in non-Lumia phone in fiscal year 2015 , compared with 5.8 million year 2015 , compared with 5.8 million and 30.3 million sold compared with 5.8 million and 30.3 million sold , respectively , respectively , in fiscal year 2014 following the acquisition of NDS fourth quarter of fiscal year 2014 . Phone Hardware gross margin Hardware gross margin increased $ 647 million , primarily due to cost of revenue increased $ 4.9 billion , and included $ billion , and included $ 476 million of amortization of acquired intangible asset in fiscal year 2015 . We recorded goodwill and asset impairment charge of $ 7.5 billion related to our Phone fourth quarter of fiscal year 2015 . See further discussion under C Other revenue increased $ 1.8 billion or 26 % , increased $ 1.8 billion or 26 % , mainly due to including Minecraft , and Office 365 Consumer . D & C foreign currency impact of approximately 2 % . Search advertising revenue Search advertising revenue increased $ 651 million or 22 % , increased $ 651 million or 22 % , primarily driven by store transaction revenue increased $ 531 million , driven by increased video game revenue increased $ 367 million , mainly due to acquisition of Mojang in November 2014 , and new Xbox title the current year . Office 365 Consumer revenue increased $ 323 365 Consumer revenue increased $ 323 million , reflecting subscriber growth Other gross margin increased $ 629 million or 45 % , increased $ 629 million or 45 % , due to higher in part by a $ 1.2 billion or 21 % increase a $ 1.2 billion or 21 % increase in cost of , mainly due to $ 372 million higher Xbox Live and transaction cost , a $ 279 million increase in search infrastructure search infrastructure cost , $ 267 million higher retail store expense store expense , and $ 194 million higher first-party video game Minecraft cost . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 D & C revenue increased & C revenue increased $ 5.6 billion or 18 % , increased $ 5.6 billion or 18 % , primarily due to . Revenue also increased $ 2.0 billion due to the acquisition Cost of revenue increased $ 5.7 billion or 47 % , increased $ 5.7 billion or 47 % , mainly due to of revenue also increased $ 1.9 billion due to NDS . C Licensing revenue increased $ 101 million or 1 % , increased $ 101 million or 1 % , mainly due to Windows Phone revenue increased $ 822 million or 48 % , increased $ 822 million or 48 % , mainly due to to the recognition of $ 382 million revenue under our joint strategic initiative with Nokia , 35 Table of Contents PART II of Contents PART II Item 7 which concluded in conjunction with sale of Windows declined $ 274 million or 35 % , declined $ 274 million or 35 % , mainly due to to the launch of Windows 8 in the prior year . Windows OEM revenue declined $ 136 million or 1 % , declined $ 136 million or 1 % , due to continued offset in part by a 12 % increase in OEM Pro Office Consumer revenue declined $ 249 million or 7 % , declined $ 249 million or 7 % , reflecting the transition transition of customer to Office 365 Consumer a well a continued for Windows XP in April 2014 . D & C Licensing Licensing gross margin increased $ 454 million or 3 % , increased $ 454 million or 3 % , primarily due to primarily due to a $ 353 million or 14 % decrease a $ 353 million or 14 % decrease in cost of mainly due to a $ 411 million or 23 % decline a $ 411 million or 23 % decline in traffic acquisition Gaming Hardware revenue increased $ 2.9 billion or 48 % , increased $ 2.9 billion or 48 % , primarily due to Xbox Platform revenue increased $ 1.7 billion or 34 % , increased $ 1.7 billion or 34 % , mainly due to which wa released in November 2013 , offset in part by decrease in sale of Xbox 360 . We sold 11.7 million Xbox 360 . We sold 11.7 million Xbox console during fiscal Xbox console during fiscal year 2014 compared with 9.8 million Xbox fiscal year 2014 compared with 9.8 million Xbox console during fiscal Xbox console during fiscal year 2013 . Surface revenue increased $ . Surface revenue increased $ 1.3 billion or 157 % , increased $ 1.3 billion or 157 % , mainly due to , due to a $ 3.0 billion or 58 % increase a $ 3.0 billion or 58 % increase in cost of cost of revenue increased $ 2.1 billion or 72 % , increased $ 2.1 billion or 72 % , mainly due to cost of revenue increased $ 970 million or 51 % , increased $ 970 million or 51 % , mainly due to inventory adjustment of approximately $ 900 million in fiscal year 2013 900 million in fiscal year 2013 . Phone Hardware Phone Hardware Phone Hardware revenue wa $ 2.0 billion in fiscal year 2014 2.0 billion in fiscal year 2014 , reflecting sale of Lumia acquisition of NDS on April 25 , 2014 . Since the NDS on April 25 , 2014 . Since the acquisition , the acquisition , we sold 5.8 million Lumia phone and 30.3 5.8 million Lumia phone and 30.3 million other non-Lumia phone in non-Lumia phone in fiscal year 2014 . Phone Hardware gross margin Hardware gross margin wa $ 54 million in fiscal year 2014 54 million in fiscal year 2014 , reflecting revenue of $ , reflecting revenue of $ 2.0 billion , offset in part offset in part by $ 1.9 billion cost of revenue , C Other revenue increased $ 583 million or 9 % , increased $ 583 million or 9 % , mainly due to online advertising revenue and Office 365 Consumer revenue , offset in in part by a $ 213 million decrease in first-party video to the release of Halo 4 in the second quarter of second quarter of fiscal year 2013 . Online advertising revenue increased Online advertising revenue increased $ 497 million or 14 % . increased $ 497 million or 14 % . Search advertising revenue . Search advertising revenue increased 39 % , primarily due to offset in part by a 25 % reduction in display advertising display advertising revenue . Office 365 Consumer revenue grew $ 316 365 Consumer revenue grew $ 316 million , primarily reflecting subscriber . We ended fiscal year 2014 with over five million subscriber Other gross margin decreased $ 558 million or 29 % , decreased $ 558 million or 29 % , due to a , due to a $ 1.1 billion or 25 % increase a $ 1.1 billion or 25 % increase in cost of mainly due to a $ 541 million or 24 % increase a $ 541 million or 24 % increase in online advertising of revenue also increased $ 219 million or 15 % , increased $ 219 million or 15 % , due to higher higher resale transaction cost . 36 Table of Contents PART II of Contents PART II Item 7 Commercial ( In million , million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 2014 Percentage Change 2014 Versus 2013 Revenue Licensing $ 41,039 $ Versus 2013 Revenue Licensing $ 41,039 $ 42,085 $ 39,778 ( Revenue Licensing $ 41,039 $ 42,085 $ 39,778 ( 2 ) $ 41,039 $ 42,085 $ 39,778 ( 2 ) % 6 $ 42,085 $ 39,778 ( 2 ) % 6 % Other 39,778 ( 2 ) % 6 % Other 10,836 7,546 5,661 ) % 6 % Other 10,836 7,546 5,661 44 % 33 % 6 % Other 10,836 7,546 5,661 44 % 33 % 6 % Other 10,836 7,546 5,661 44 % 33 % Total % Other 10,836 7,546 5,661 44 % 33 % Total Commercial 10,836 7,546 5,661 44 % 33 % Total Commercial revenue $ % Total Commercial revenue $ 51,875 $ 49,631 $ 45,439 5 Commercial revenue $ 51,875 $ 49,631 $ 45,439 5 % 9 $ 51,875 $ 49,631 $ 45,439 5 % 9 % Gross 51,875 $ 49,631 $ 45,439 5 % 9 % Gross Margin 49,631 $ 45,439 5 % 9 % Gross Margin Licensing $ % Gross Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( Margin Licensing $ 37,830 $ 38,615 $ 36,280 ( 2 ) $ 37,830 $ 38,615 $ 36,280 ( 2 ) % 6 $ 38,615 $ 36,280 ( 2 ) % 6 % Other 36,280 ( 2 ) % 6 % Other 4,199 1,855 922 ) % 6 % Other 4,199 1,855 922 126 % 101 % 6 % Other 4,199 1,855 922 126 % 101 % 6 % Other 4,199 1,855 922 126 % 101 % Total % Other 4,199 1,855 922 126 % 101 % Total Commercial 4,199 1,855 922 126 % 101 % Total Commercial gross margin Total Commercial gross margin $ 42,029 $ 40,470 $ 37,202 4 gross margin $ 42,029 $ 40,470 $ 37,202 4 % 9 $ 42,029 $ 40,470 $ 37,202 4 % 9 % Fiscal 42,029 $ 40,470 $ 37,202 4 % 9 % Fiscal year 40,470 $ 37,202 4 % 9 % Fiscal year 2015 compared % 9 % Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Commercial revenue increased $ 2.2 2014 Commercial revenue increased $ 2.2 billion or 5 % , increased $ 2.2 billion or 5 % , mainly due to foreign currency impact of approximately 2 % . Our server product server product and service grew 9 % . Our Office Commercial Commercial product and service declined 1 % . Commercial gross margin Commercial gross margin increased $ 1.6 billion or 4 % . increased $ 1.6 billion or 4 % . Commercial Licensing Commercial Commercial Licensing revenue decreased $ 1.0 billion or 2 % , decreased $ 1.0 billion or 2 % , primarily due to foreign currency impact of approximately 2 % . Office Commercial revenue Office Commercial revenue declined $ 2.5 billion or 13 % , declined $ 2.5 billion or 13 % , due to lower , customer transitioning to Office 365 Commercial , and decline in server product revenue grew $ 1.1 billion or 7 % , grew $ 1.1 billion or 7 % , primarily driven by Licensing gross margin decreased $ 785 million or 2 % , decreased $ 785 million or 2 % , in line with Commercial Other revenue increased $ 3.3 billion or 44 % , increased $ 3.3 billion or 44 % , primarily due to foreign currency impact of approximately 3 % . Commercial Cloud revenue Commercial Cloud revenue grew $ 3.0 billion or 106 % , grew $ 3.0 billion or 106 % , mainly due to higher premium mix of Office 365 Commercial , a well a Other gross margin increased $ 2.3 billion or 126 % , increased $ 2.3 billion or 126 % , due to higher in part by a $ 946 million or 17 % increase a $ 946 million or 17 % increase in cost of Commercial Cloud . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Commercial revenue increased $ 4.2 2013 Commercial revenue increased $ 4.2 billion or 9 % , increased $ 4.2 billion or 9 % , mainly due to , Office Commercial and Office 365 Commercial revenue grew 7 % Office 365 Commercial revenue grew 7 % . Collectively , our including Microsoft Azure , grew 13 % . Commercial gross margin Commercial gross margin increased $ 3.3 billion or 9 % , increased $ 3.3 billion or 9 % , in line with in line with revenue . 37 Table of Contents PART II of Contents PART II Item 7 Commercial Licensing Commercial Licensing revenue Commercial Licensing revenue increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , primarily due to server product revenue grew $ 1.7 billion or 11 % , grew $ 1.7 billion or 11 % , driven primarily by Windows Commercial revenue grew $ 334 million or 10 % , grew $ 334 million or 10 % , mainly due to Office Commercial revenue grew $ 219 million or 1 % , grew $ 219 million or 1 % , and wa impacted by customer transitioning to Office 365 Commercial . Commercial Licensing gross Licensing gross margin increased $ 2.3 billion or 6 % , increased $ 2.3 billion or 6 % , in line with Commercial Other revenue increased $ 1.9 billion or 33 % , increased $ 1.9 billion or 33 % , due to higher Commercial Cloud revenue grew $ 1.5 billion or 116 % , grew $ 1.5 billion or 116 % , mainly due to to higher revenue from Office 365 Commercial . Enterprise Services revenue Enterprise Services revenue grew $ 380 million or 9 % , grew $ 380 million or 9 % , mainly due to Other gross margin increased $ 933 million or 101 % , increased $ 933 million or 101 % , due to higher in part by a $ 952 million or 20 % increase a $ 952 million or 20 % increase in cost of million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Revenue $ 204 2014 Percentage Change 2014 Versus 2013 Revenue $ 204 $ ( 2014 Versus 2013 Revenue $ 204 $ ( 415 ) $ Revenue $ 204 $ ( 415 ) $ 403 149 % $ ( 415 ) $ 403 149 % ( 203 ) ( 415 ) $ 403 149 % ( 203 ) % $ 403 149 % ( 203 ) % Gross margin $ ) % Gross margin $ 132 $ ( 493 ) $ margin $ 132 $ ( 493 ) $ 370 127 % $ ( 493 ) $ 370 127 % ( 233 ) ( 493 ) $ 370 127 % ( 233 ) % $ 370 127 % ( 233 ) % Corporate and Other general availability . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Corporate and Other revenue increased and Other revenue increased $ 619 million , primarily due to year . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Offerings . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Other gross margin increased $ 625 million , primarily due to increased revenue . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Corporate and Other revenue decreased and Other revenue decreased $ 818 million , primarily due to deferral . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Offerings . During fiscal year 2013 , we recognized $ 540 2013 , we recognized $ 540 million of previously deferred revenue Other gross margin decreased $ 863 million , mainly due to due to decreased revenue . 38 Table of Contents PART II of Contents PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Research and development 2014 Percentage Change 2014 Versus 2013 Research and development $ 12,046 2013 Research and development $ 12,046 $ 11,381 $ 10,411 6 and development $ 12,046 $ 11,381 $ 10,411 6 % 9 $ 12,046 $ 11,381 $ 10,411 6 % 9 % As 12,046 $ 11,381 $ 10,411 6 % 9 % As a 11,381 $ 10,411 6 % 9 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include software code . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Research and development expense increased and development expense increased $ 665 million or 6 % , increased $ 665 million or 6 % , mainly due to and service , including $ 739 million higher NDS expense , headcount-related expense . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Research and development expense increased and development expense increased $ 970 million or 9 % , increased $ 970 million or 9 % , mainly due to engineering group , including $ 275 million of NDS expense , million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 Sales and marketing 2014 Percentage Change 2014 Versus 2013 Sales and marketing $ 15,713 2013 Sales and marketing $ 15,713 $ 15,811 $ 15,276 ( and marketing $ 15,713 $ 15,811 $ 15,276 ( 1 ) $ 15,713 $ 15,811 $ 15,276 ( 1 ) % 4 $ 15,811 $ 15,276 ( 1 ) % 4 % As 15,276 ( 1 ) % 4 % As a percent of As a percent of revenue 17 % 18 % 20 % percent of revenue 17 % 18 % 20 % ( 1 revenue 17 % 18 % 20 % ( 1 ) ppt 18 % 20 % ( 1 ) ppt ( 2 ) ( 1 ) ppt ( 2 ) ppt Sales and marketing other program . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Sales and marketing expense decreased and marketing expense decreased $ 98 million or 1 % , decreased $ 98 million or 1 % , primarily due to foreign currency impact of approximately 4 % . Fiscal year 2014 4 % . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Sales and marketing expense increased and marketing expense increased $ 535 million or 4 % , increased $ 535 million or 4 % , primarily due to and marketing expense were $ 394 million during fiscal year 2014 394 million during fiscal year 2014 . Average headcount , excluding , excluding NDS , grew 4 % . Advertising cost , excluding NDS , declined $ 403 million or 15 % , declined $ 403 million or 15 % , primarily due to , primarily due to Windows 8 and Surface cost in the in the prior year . 39 Table of Contents PART II of Contents PART II Item 7 General and Administrative ( In million , except percentage ) 2015 2014 2013 Percentage Change 2015 , except percentage ) 2015 2014 2013 Percentage Change 2015 Versus except percentage ) 2015 2014 2013 Percentage Change 2015 Versus 2014 2015 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 2013 Percentage Change 2015 Versus 2014 Percentage Change 2014 Versus 2013 2015 Versus 2014 Percentage Change 2014 Versus 2013 General and administrative 2014 Percentage Change 2014 Versus 2013 General and administrative $ 4,611 2013 General and administrative $ 4,611 $ 4,677 $ 5,013 ( and administrative $ 4,611 $ 4,677 $ 5,013 ( 1 ) $ 4,611 $ 4,677 $ 5,013 ( 1 ) % ( $ 4,677 $ 5,013 ( 1 ) % ( 7 ) ( 1 ) % ( 7 ) % As a percent As a percent of revenue 5 % 5 % 6 % percent of revenue 5 % 5 % 6 % 0ppt ( revenue 5 % 5 % 6 % 0ppt ( 1 ) % 5 % 6 % 0ppt ( 1 ) ppt General % 6 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 General and administrative expense were prior year . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 General and administrative expense decreased and administrative expense decreased $ 336 million or 7 % , decreased $ 336 million or 7 % , mainly due to and administrative expense were $ 77 million during fiscal year 2014 77 million during fiscal year 2014 . IMPAIRMENT , INTEGRATION , of NDS . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Impairment , integration , and and restructuring expense were $ 10.0 billion for fiscal year 2015 10.0 billion for fiscal year 2015 , compared to $ 127 2015 , compared to $ 127 million for fiscal year 2014 127 million for fiscal year 2014 . The increase wa mainly to impairment charge of $ 7.5 billion related to our Phone fourth quarter of fiscal year 2015 . Our annual goodwill impairment impairment test a of May 1 , 2015 indicated that the a of May 1 , 2015 indicated that the carrying value goodwill impairment charge of $ 5.1 billion , reducing Phone Hardware ’ s goodwill from $ 5.4 billion to $ 116 million $ 5.4 billion to $ 116 million , net of foreign an impairment charge of $ 2.2 billion related to the write-down . Restructuring charge were $ 2.1 billion , including employee severance . Integration expense increased $ 308 million , due to a integration activity in fiscal year 2015 associated with the acquisition of of NDS . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Impairment , integration , and and restructuring expense were $ 127 million for fiscal year 2014 127 million for fiscal year 2014 , reflecting integration expense associated were recorded in fiscal year 2013 . 40 Table of Contents in fiscal year 2013 . 40 Table of Contents PART II of Contents PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2015 2014 2013 Dividends Year Ended June 30 , 2015 2014 2013 Dividends and interest Ended June 30 , 2015 2014 2013 Dividends and interest income June 30 , 2015 2014 2013 Dividends and interest income $ Dividends and interest income $ 766 $ 883 $ 677 Interest interest income $ 766 $ 883 $ 677 Interest expense ( $ 766 $ 883 $ 677 Interest expense ( 781 ) $ 677 Interest expense ( 781 ) ( 597 ) ( expense ( 781 ) ( 597 ) ( 429 ) Net ) ( 597 ) ( 429 ) Net recognized gain on Net recognized gain on investment 716 437 116 Net loss on recognized gain on investment 716 437 116 Net loss on derivative gain on investment 716 437 116 Net loss on derivative ( Net loss on derivative ( 423 ) ( 328 ) ( derivative ( 423 ) ( 328 ) ( 196 ) Net ) ( 328 ) ( 196 ) Net gain ( loss ) on foreign currency remeasurements 335 ( 165 ) ( 74 foreign currency remeasurements 335 ( 165 ) ( 74 ) Other 335 ( 165 ) ( 74 ) Other ( 267 ) ( 74 ) Other ( 267 ) ( 169 ) 194 Other ( 267 ) ( 169 ) 194 Total $ 346 267 ) ( 169 ) 194 Total $ 346 $ 61 169 ) 194 Total $ 346 $ 61 $ 288 We 194 Total $ 346 $ 61 $ 288 We use derivative $ 346 $ 61 $ 288 We use derivative instrument to rate change . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Dividends and interest income decreased . Other-than-temporary impairment were $ 183 million in fiscal year 2015 183 million in fiscal year 2015 , compared with $ 106 2015 , compared with $ 106 million in fiscal year 2014 106 million in fiscal year 2014 . Net loss on derivative contract . For fiscal year 2015 , other reflects recognized loss and divestiture . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Dividends and interest income increased . Other-than-temporary impairment were $ 106 million in fiscal year 2014 106 million in fiscal year 2014 , compared with $ 208 2014 , compared with $ 208 million in fiscal year 2013 208 million in fiscal year 2013 . Net loss on derivative period . For fiscal year 2014 , other reflects recognized loss divestiture . For fiscal year 2013 , other reflects recognized gain upon the divestiture of our 50 % share in the MSNBC . INCOME TAXES Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Our effective tax rate for tax rate for fiscal year 2015 and 2014 wa approximately 34 for fiscal year 2015 and 2014 wa approximately 34 % and 2015 and 2014 wa approximately 34 % and 21 % , wa approximately 34 % and 21 % , respectively . The respectively . The fiscal year 2015 effective rate increased by 13 2015 effective rate increased by 13 % , primarily due to charge recorded in fiscal year 2015 , most of which did Rico . In fiscal year 2015 , this reduction wa mostly impairment and restructuring charge . 41 Table of Contents PART II of Contents PART II Item 7 Changes in the mix of center . In fiscal year 2015 and 2014 , our U.S. In fiscal year 2015 and 2014 , our U.S. income before before income tax wa $ 7.4 billion and $ 7.1 billion $ 7.4 billion and $ 7.1 billion , respectively , and , respectively , and comprised 40 % and 26 % , and comprised 40 % and 26 % , respectively , of tax . In fiscal year 2015 and 2014 , our foreign In fiscal year 2015 and 2014 , our foreign income before before income tax wa $ 11.1 billion and $ 20.7 billion $ 11.1 billion and $ 20.7 billion , respectively , and , respectively , and comprised 60 % and 74 % , and comprised 60 % and 74 % , respectively , of income tax liability were $ 12.1 billion and $ 10.4 billion $ 12.1 billion and $ 10.4 billion a of June 30 10.4 billion a of June 30 , 2015 and 2014 , a of June 30 , 2015 and 2014 , respectively , June 30 , 2015 and 2014 , respectively , and are . audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , we remain under audit those year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2015 , the primary As of June 30 , 2015 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2015 . We are for tax year 2007 to 2015 . We are subject to to examination for tax year 1996 to 2015 , some of for tax year 1996 to 2015 , some of which are financial statement . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Our effective tax rate for tax rate for fiscal year 2014 and 2013 wa approximately 21 for fiscal year 2014 and 2013 wa approximately 21 % and 2014 and 2013 wa approximately 21 % and 19 % , wa approximately 21 % and 19 % , respectively . Our Rico . Our fiscal year 2014 effective rate increased by 2 2014 effective rate increased by 2 % from fiscal year 2013 2 % from fiscal year 2013 mainly due to adjustment of due to adjustment of $ 458 million to prior year ’ operating system revenue decreased $ 655 million in fiscal year 2014 655 million in fiscal year 2014 , while Microsoft Office system and tool revenue increased $ 1.3 billion and $ 1.6 billion $ 1.3 billion and $ 1.6 billion , respectively , during period . In fiscal year 2014 and 2013 , our U.S. In fiscal year 2014 and 2013 , our U.S. income before before income tax wa $ 7.1 billion and $ 6.7 billion $ 7.1 billion and $ 6.7 billion , respectively , and , respectively , and comprised 26 % and 25 % , and comprised 26 % and 25 % , respectively , of tax . In fiscal year 2014 and 2013 , the foreign In fiscal year 2014 and 2013 , the foreign income before before income tax wa $ 20.7 billion and $ 20.4 billion $ 20.7 billion and $ 20.4 billion , respectively , and , respectively , and comprised 74 % and 75 % , and comprised 74 % and 75 % , respectively , of and short-term investment totaled $ 96.5 billion a of June 30 96.5 billion a of June 30 , 2015 , compared with a of June 30 , 2015 , compared with $ 85.7 2015 , compared with $ 85.7 billion a of June 30 85.7 billion a of June 30 , 2014 . Equity and a of June 30 , 2014 . Equity and other investment and other investment were $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2015 , compared with a of June 30 , 2015 , compared with $ 14.6 2015 , compared with $ 14.6 billion a of June 30 14.6 billion a of June 30 , 2014 . Our short-term a of June 30 , 2014 . Our short-term investment are facilitate liquidity and for capital 42 Table of Contents PART II of Contents PART II Item 7 preservation . They consist predominantly and short-term investment at June 30 , 2015 , $ 94.4 investment at June 30 , 2015 , $ 94.4 billion wa 30 , 2015 , $ 94.4 billion wa held by our local regulatory ) wa $ 2.1 billion . As of June billion . As of June 30 , 2015 , approximately 79 As of June 30 , 2015 , approximately 79 % of 30 , 2015 , approximately 79 % of the cash equivalent and agency security , approximately 5 % were invested in corporate U.S. company , and approximately 5 % were invested in U.S. lending payable balance wa $ 92 million a of June 30 92 million a of June 30 , 2015 . Our average a of June 30 , 2015 . Our average and maximum the fiscal year were $ 287 million and $ 750 million $ 287 million and $ 750 million , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note certificate of deposit . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price of price where appropriate . 43 Table of Contents PART II of Contents PART II Item 7 Cash Flows Fiscal year 2015 7 Cash Flows Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Cash flow from operation decreased flow from operation decreased $ 3.2 billion during the fiscal year the fiscal year to $ 29.1 billion , mainly due to used in financing increased $ 686 million to $ 9.1 billion $ 686 million to $ 9.1 billion , mainly due to mainly due to a $ 7.1 billion increase in cash used in part by a $ 6.7 billion increase in proceeds from used in investing increased $ 4.2 billion to $ 23.0 billion $ 4.2 billion to $ 23.0 billion , mainly due to mainly due to a $ 5.5 billion increase in cash used partially offset by a $ 2.2 billion decrease in cash used other asset . Fiscal year 2014 compared with fiscal year 2013 2014 compared with fiscal year 2013 Cash flow from operation increased flow from operation increased $ 3.4 billion during fiscal year 2014 3.4 billion during fiscal year 2014 to $ 32.2 billion , fiscal year 2014 to $ 32.2 billion , mainly due to used in financing increased $ 246 million to $ 8.4 billion $ 246 million to $ 8.4 billion , mainly due to mainly due to a $ 2.0 billion increase in cash used stock repurchase , a $ 1.4 billion increase in dividend paid paid , and a $ 324 million decrease in proceeds from in part by a $ 3.4 billion increase in proceeds from used in investing decreased $ 5.0 billion to $ 18.8 billion $ 5.0 billion to $ 18.8 billion , mainly due to mainly due to a $ 10.5 billion decrease in cash used in part by a $ 4.4 billion increase in cash used asset , and a $ 1.2 billion increase in capital expenditure existing debt . See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K for Item 8 of this Form 10-K for further discussion . Unearned Revenue Unearned revenue at June 30 , 2015 wa comprised mainly revenue at June 30 , 2015 wa comprised mainly of unearned . Unearned revenue at June 30 , 2015 also included payment revenue at June 30 , 2015 also included payment for : business solution product ; Office 365 subscription ; Skype prepaid credit unearned revenue a of June 30 , 2015 : ( In a of June 30 , 2015 : ( In million ) Three Months Ending , September 30 , 2015 $ 8,889 December Ending , September 30 , 2015 $ 8,889 December 31 , September 30 , 2015 $ 8,889 December 31 , 2015 7,172 , 2015 $ 8,889 December 31 , 2015 7,172 March 31 $ 8,889 December 31 , 2015 7,172 March 31 , 2016 8,889 December 31 , 2015 7,172 March 31 , 2016 4,848 31 , 2015 7,172 March 31 , 2016 4,848 June 30 2015 7,172 March 31 , 2016 4,848 June 30 , 2016 7,172 March 31 , 2016 4,848 June 30 , 2016 2,314 31 , 2016 4,848 June 30 , 2016 2,314 Thereafter 2,095 2016 4,848 June 30 , 2016 2,314 Thereafter 2,095 Total $ 4,848 June 30 , 2016 2,314 Thereafter 2,095 Total $ 25,318 30 , 2016 2,314 Thereafter 2,095 Total $ 25,318 44 Table 2,314 Thereafter 2,095 Total $ 25,318 44 Table of Contents PART Thereafter 2,095 Total $ 25,318 44 Table of Contents PART II of Contents PART II Item 7 Share Repurchases On September 16 7 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date to complete it by December 31 , 2016 . As of it by December 31 , 2016 . As of June 30 2016 . As of June 30 , 2015 , $ 21.9 As of June 30 , 2015 , $ 21.9 billion remained 30 , 2015 , $ 21.9 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . program . During fiscal year 2015 , we repurchased 295 million year 2015 , we repurchased 295 million share of Microsoft common Microsoft common stock for $ 13.2 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share for $ 6.4 175 million share for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 , and 47 Directors on September 16 , 2013 , and 47 million share 16 , 2013 , and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . During fiscal and expired September 30 , 2013 . During fiscal year 2013 2013 . During fiscal year 2013 , we repurchased 158 million year 2013 , we repurchased 158 million share for $ 4.6 158 million share for $ 4.6 billion , under the share repurchase program announced on September 22 , 2008 . All repurchase announced on September 22 , 2008 . All repurchase were made resource . Dividends See Note 19 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2015 : ( In a of June 30 , 2015 : ( In million ) : ( In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term ( In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term debt In million ) 2016 2017-2018 2019-2020 Thereafter Total Long-term debt : a ) Principal payment $ 2,500 $ 1,050 $ 3,750 $ Principal payment $ 2,500 $ 1,050 $ 3,750 $ 23,163 $ $ 2,500 $ 1,050 $ 3,750 $ 23,163 $ 30,463 Interest $ 1,050 $ 3,750 $ 23,163 $ 30,463 Interest payment 855 $ 3,750 $ 23,163 $ 30,463 Interest payment 855 1,641 1,552 23,163 $ 30,463 Interest payment 855 1,641 1,552 11,412 15,460 Construction $ 30,463 Interest payment 855 1,641 1,552 11,412 15,460 Construction commitment 30,463 Interest payment 855 1,641 1,552 11,412 15,460 Construction commitment ( Interest payment 855 1,641 1,552 11,412 15,460 Construction commitment ( b payment 855 1,641 1,552 11,412 15,460 Construction commitment ( b ) Construction commitment ( b ) 681 0 0 0 681 Operating commitment ( b ) 681 0 0 0 681 Operating lease ( b ) 681 0 0 0 681 Operating lease ( b ) 681 0 0 0 681 Operating lease ( c ) 681 0 0 0 681 Operating lease ( c ) Operating lease ( c ) 863 1,538 1,135 1,617 5,153 Purchase lease ( c ) 863 1,538 1,135 1,617 5,153 Purchase commitment ( c ) 863 1,538 1,135 1,617 5,153 Purchase commitment ( c ) 863 1,538 1,135 1,617 5,153 Purchase commitment ( d ) 863 1,538 1,135 1,617 5,153 Purchase commitment ( d ) Purchase commitment ( d ) 13,018 989 164 261 14,432 Other commitment ( d ) 13,018 989 164 261 14,432 Other long-term ( d ) 13,018 989 164 261 14,432 Other long-term liability d ) 13,018 989 164 261 14,432 Other long-term liability ( ) 13,018 989 164 261 14,432 Other long-term liability ( e long-term liability ( e ) 0 237 75 639 951 Total liability ( e ) 0 237 75 639 951 Total contractual ( e ) 0 237 75 639 951 Total contractual obligation e ) 0 237 75 639 951 Total contractual obligation $ ) 0 237 75 639 951 Total contractual obligation $ 17,917 951 Total contractual obligation $ 17,917 $ 5,455 $ 6,676 $ contractual obligation $ 17,917 $ 5,455 $ 6,676 $ 37,092 $ $ 17,917 $ 5,455 $ 6,676 $ 37,092 $ 67,140 ( $ 5,455 $ 6,676 $ 37,092 $ 67,140 ( a ) $ 6,676 $ 37,092 $ 67,140 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) long-term pension liability of $ 15.2 billion from the amount presented revenue and non-cash item . 45 Table of Contents PART II of Contents PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCOUNTING GUIDANCE See Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . over the coverage period . 46 Table of Contents PART II of Contents PART II Item 7 Software update are evaluated on each deliverable . In January 2015 , we announced Windows 10 2015 , we announced Windows 10 will be free to all qualified existing user of Windows 7 and Windows 8.1 . This of Windows 7 and Windows 8.1 . This offer differs from accounting treatment of the Windows 10 offer and determined that it of new sale of Windows 8 will continue to be recognized an annual basis ( May 1 for u ) and between through the use of a 47 Table of Contents PART II of Contents PART II Item 7 discounted cash flow methodology . impairment testing a of May 1 , 2015 , we determined a of May 1 , 2015 , we determined that goodwill fourth quarter of fiscal year 2015 . As of June 30 2015 . As of June 30 , 2015 , none of As of June 30 , 2015 , none of our reporting that ha a greater than 50 % likelihood of being realized our consolidated financial statement . 48 Table of Contents PART II of Contents PART II Item 7 Inventories Inventories are stated at analysis require significant judgment . 49 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 50 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 51 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2015 and 2014 and a of June 30 , 2015 and 2014 and for the June 30 , 2015 and 2014 and for the year ended for the year ended June 30 , 2015 : ( In year ended June 30 , 2015 : ( In million ) ( In million ) June 30 , 2015 June 30 , million ) June 30 , 2015 June 30 , 2014 Year June 30 , 2015 June 30 , 2014 Year Ended June , 2015 June 30 , 2014 Year Ended June 30 , , 2014 Year Ended June 30 , 2015 Risk Categories Average Year Ended June 30 , 2015 Risk Categories Average High Low High Low Foreign currency $ 120 $ 179 $ 162 $ Foreign currency $ 120 $ 179 $ 162 $ 200 $ $ 120 $ 179 $ 162 $ 200 $ 107 Interest $ 179 $ 162 $ 200 $ 107 Interest rate $ $ 162 $ 200 $ 107 Interest rate $ 51 $ $ 107 Interest rate $ 51 $ 73 $ 57 $ Interest rate $ 51 $ 73 $ 57 $ 74 $ $ 51 $ 73 $ 57 $ 74 $ 48 Equity $ 73 $ 57 $ 74 $ 48 Equity $ 149 $ 57 $ 74 $ 48 Equity $ 149 $ 176 74 $ 48 Equity $ 149 $ 176 $ 161 $ 48 Equity $ 149 $ 176 $ 161 $ 178 $ $ 149 $ 176 $ 161 $ 178 $ 146 Commodity $ 176 $ 161 $ 178 $ 146 Commodity $ 13 $ 161 $ 178 $ 146 Commodity $ 13 $ 17 178 $ 146 Commodity $ 13 $ 17 $ 16 $ 146 Commodity $ 13 $ 17 $ 16 $ 20 $ $ 13 $ 17 $ 16 $ 20 $ 11 Total $ 17 $ 16 $ 20 $ 11 Total one-day VaR $ 16 $ 20 $ 11 Total one-day VaR for the combined risk category wa $ 237 million at June 30 , $ 237 million at June 30 , 2015 and $ 333 million at June 30 , 2015 and $ 333 million at 30 , 2015 and $ 333 million at June 30 , $ 333 million at June 30 , 2014 . The total million at June 30 , 2014 . The total VaR is . The total VaR is 29 % le at June 30 29 % le at June 30 , 2015 , and 25 le at June 30 , 2015 , and 25 % le 30 , 2015 , and 25 % le at June 30 25 % le at June 30 , 2014 , than the le at June 30 , 2014 , than the sum of the combination of risk . 52 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2015 2014 2013 Revenue Year Ended June 30 , 2015 2014 2013 Revenue $ 93,580 Ended June 30 , 2015 2014 2013 Revenue $ 93,580 $ June 30 , 2015 2014 2013 Revenue $ 93,580 $ 86,833 2015 2014 2013 Revenue $ 93,580 $ 86,833 $ 77,849 Cost 2013 Revenue $ 93,580 $ 86,833 $ 77,849 Cost of revenue $ 93,580 $ 86,833 $ 77,849 Cost of revenue 33,038 27,078 $ 77,849 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 77,849 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 59,755 Cost of revenue 33,038 27,078 20,385 Gross margin 60,542 59,755 57,464 33,038 27,078 20,385 Gross margin 60,542 59,755 57,464 Research and development 27,078 20,385 Gross margin 60,542 59,755 57,464 Research and development 12,046 20,385 Gross margin 60,542 59,755 57,464 Research and development 12,046 11,381 59,755 57,464 Research and development 12,046 11,381 10,411 Sales and marketing 57,464 Research and development 12,046 11,381 10,411 Sales and marketing 15,713 Research and development 12,046 11,381 10,411 Sales and marketing 15,713 15,811 11,381 10,411 Sales and marketing 15,713 15,811 15,276 General and administrative 10,411 Sales and marketing 15,713 15,811 15,276 General and administrative 4,611 Sales and marketing 15,713 15,811 15,276 General and administrative 4,611 4,677 15,811 15,276 General and administrative 4,611 4,677 5,013 Impairment , integration 15,276 General and administrative 4,611 4,677 5,013 Impairment , integration , General and administrative 4,611 4,677 5,013 Impairment , integration , and , integration , and restructuring 10,011 127 0 Operating income 18,161 integration , and restructuring 10,011 127 0 Operating income 18,161 27,759 , and restructuring 10,011 127 0 Operating income 18,161 27,759 26,764 10,011 127 0 Operating income 18,161 27,759 26,764 Other income , 127 0 Operating income 18,161 27,759 26,764 Other income , net 0 Operating income 18,161 27,759 26,764 Other income , net 346 26,764 Other income , net 346 61 288 Income before income Other income , net 346 61 288 Income before income tax income , net 346 61 288 Income before income tax 18,507 288 Income before income tax 18,507 27,820 27,052 Provision for income Income before income tax 18,507 27,820 27,052 Provision for income tax before income tax 18,507 27,820 27,052 Provision for income tax 6,314 27,052 Provision for income tax 6,314 5,746 5,189 Net income $ Provision for income tax 6,314 5,746 5,189 Net income $ 12,193 for income tax 6,314 5,746 5,189 Net income $ 12,193 $ 5,746 5,189 Net income $ 12,193 $ 22,074 $ 21,863 Earnings Net income $ 12,193 $ 22,074 $ 21,863 Earnings per share $ 12,193 $ 22,074 $ 21,863 Earnings per share : Basic per share : Basic $ 1.49 $ 2.66 $ 2.61 Diluted : Basic $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 1.49 $ 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 2.66 $ 2.61 Diluted $ 1.48 $ 2.63 $ 2.58 Weighted 2.61 Diluted $ 1.48 $ 2.63 $ 2.58 Weighted average share $ 1.48 $ 2.63 $ 2.58 Weighted average share outstanding : average share outstanding : Basic 8,177 8,299 8,375 Diluted 8,254 8,399 share outstanding : Basic 8,177 8,299 8,375 Diluted 8,254 8,399 8,470 outstanding : Basic 8,177 8,299 8,375 Diluted 8,254 8,399 8,470 Cash Basic 8,177 8,299 8,375 Diluted 8,254 8,399 8,470 Cash dividend declared 8,177 8,299 8,375 Diluted 8,254 8,399 8,470 Cash dividend declared per 8,299 8,375 Diluted 8,254 8,399 8,470 Cash dividend declared per common declared per common share $ 1.24 $ 1.12 $ 0.92 See common share $ 1.24 $ 1.12 $ 0.92 See accompanying note $ 1.24 $ 1.12 $ 0.92 See accompanying note . 53 0.92 See accompanying note . 53 Table of Contents PART II of Contents PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2015 2014 2013 Net Year Ended June 30 , 2015 2014 2013 Net income $ Ended June 30 , 2015 2014 2013 Net income $ 12,193 June 30 , 2015 2014 2013 Net income $ 12,193 $ 2014 2013 Net income $ 12,193 $ 22,074 $ 21,863 Other Net income $ 12,193 $ 22,074 $ 21,863 Other comprehensive income $ 12,193 $ 22,074 $ 21,863 Other comprehensive income ( loss of tax effect of $ 20 , $ ( 4 ) $ 20 , $ ( 4 ) , and $ ( ) , and $ ( 14 ) ) 559 ( 35 $ ( 14 ) ) 559 ( 35 ) ( 26 14 ) ) 559 ( 35 ) ( 26 ) Net 559 ( 35 ) ( 26 ) Net unrealized gain ( tax effect of $ ( 197 ) , $ 936 , ( 197 ) , $ 936 , and $ 195 ) $ 936 , and $ 195 ) ( 362 ) 1,737 and $ 195 ) ( 362 ) 1,737 363 Translation adjustment 195 ) ( 362 ) 1,737 363 Translation adjustment and other ) ( 362 ) 1,737 363 Translation adjustment and other ( of tax effect of $ 16 , $ 12 , and of $ 16 , $ 12 , and $ ( 8 12 , and $ ( 8 ) ) ( 1,383 ) ( 8 ) ) ( 1,383 ) 263 ( 16 ) ) ) ( 1,383 ) 263 ( 16 ) Other comprehensive ( 1,383 ) 263 ( 16 ) Other comprehensive income ( income ( loss ) ( 1,186 ) 1,965 321 Comprehensive income loss ) ( 1,186 ) 1,965 321 Comprehensive income $ 11,007 ) ( 1,186 ) 1,965 321 Comprehensive income $ 11,007 $ 1,965 321 Comprehensive income $ 11,007 $ 24,039 $ 22,184 See Comprehensive income $ 11,007 $ 24,039 $ 22,184 See accompanying note $ 11,007 $ 24,039 $ 22,184 See accompanying note . 54 22,184 See accompanying note . 54 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2015 2014 Assets Current million ) June 30 , 2015 2014 Assets Current asset : ) June 30 , 2015 2014 Assets Current asset : Cash Cash and cash equivalent $ 5,595 $ 8,669 Short-term investment ( cash equivalent $ 5,595 $ 8,669 Short-term investment ( including security including security loaned of $ 75 and $ 541 ) 90,931 of $ 75 and $ 541 ) 90,931 77,040 Total cash 75 and $ 541 ) 90,931 77,040 Total cash , cash and $ 541 ) 90,931 77,040 Total cash , cash equivalent equivalent , and short-term investment 96,526 85,709 Accounts receivable , net , and short-term investment 96,526 85,709 Accounts receivable , net of for doubtful account of $ 335 and $ 301 17,908 19,544 of $ 335 and $ 301 17,908 19,544 Inventories 2,902 2,660 $ 335 and $ 301 17,908 19,544 Inventories 2,902 2,660 Deferred 335 and $ 301 17,908 19,544 Inventories 2,902 2,660 Deferred income $ 301 17,908 19,544 Inventories 2,902 2,660 Deferred income tax 1,915 301 17,908 19,544 Inventories 2,902 2,660 Deferred income tax 1,915 1,941 2,902 2,660 Deferred income tax 1,915 1,941 Other 5,461 4,392 Total 2,660 Deferred income tax 1,915 1,941 Other 5,461 4,392 Total current income tax 1,915 1,941 Other 5,461 4,392 Total current asset 124,712 tax 1,915 1,941 Other 5,461 4,392 Total current asset 124,712 114,246 5,461 4,392 Total current asset 124,712 114,246 Property and equipment , 4,392 Total current asset 124,712 114,246 Property and equipment , net of accumulated depreciation of $ 17,606 and $ 14,793 14,731 13,011 of $ 17,606 and $ 14,793 14,731 13,011 Equity and other $ 17,606 and $ 14,793 14,731 13,011 Equity and other investment 17,606 and $ 14,793 14,731 13,011 Equity and other investment 12,053 13,011 Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible Equity and other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset other investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset , net investment 12,053 14,597 Goodwill 16,939 20,127 Intangible asset , net 4,835 20,127 Intangible asset , net 4,835 6,981 Other long-term asset 2,953 Intangible asset , net 4,835 6,981 Other long-term asset 2,953 3,422 4,835 6,981 Other long-term asset 2,953 3,422 Total asset $ 176,223 6,981 Other long-term asset 2,953 3,422 Total asset $ 176,223 $ 2,953 3,422 Total asset $ 176,223 $ 172,384 Liabilities and stockholder Total asset $ 176,223 $ 172,384 Liabilities and stockholder ’ equity liability : Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 Accounts payable $ 6,591 $ 7,432 Short-term debt 4,985 2,000 Current 6,591 $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term $ 7,432 Short-term debt 4,985 2,000 Current portion of long-term debt Current portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 portion of long-term debt 2,499 0 Accrued compensation 5,096 4,797 Income debt 2,499 0 Accrued compensation 5,096 4,797 Income tax 606 782 2,499 0 Accrued compensation 5,096 4,797 Income tax 606 782 Short-term compensation 5,096 4,797 Income tax 606 782 Short-term unearned revenue 23,223 5,096 4,797 Income tax 606 782 Short-term unearned revenue 23,223 23,150 606 782 Short-term unearned revenue 23,223 23,150 Securities lending payable 92 782 Short-term unearned revenue 23,223 23,150 Securities lending payable 92 558 23,223 23,150 Securities lending payable 92 558 Other 6,766 6,906 Total 23,150 Securities lending payable 92 558 Other 6,766 6,906 Total current lending payable 92 558 Other 6,766 6,906 Total current liability 49,858 payable 92 558 Other 6,766 6,906 Total current liability 49,858 45,625 6,766 6,906 Total current liability 49,858 45,625 Long-term debt 27,808 20,645 6,906 Total current liability 49,858 45,625 Long-term debt 27,808 20,645 Long-term liability 49,858 45,625 Long-term debt 27,808 20,645 Long-term unearned revenue 2,095 49,858 45,625 Long-term debt 27,808 20,645 Long-term unearned revenue 2,095 2,008 27,808 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 20,645 Long-term unearned revenue 2,095 2,008 Deferred income tax 2,835 2,728 2,095 2,008 Deferred income tax 2,835 2,728 Other long-term liability 13,544 2,008 Deferred income tax 2,835 2,728 Other long-term liability 13,544 11,594 2,835 2,728 Other long-term liability 13,544 11,594 Total liability 96,140 82,600 2,728 Other long-term liability 13,544 11,594 Total liability 96,140 82,600 Commitments liability 13,544 11,594 Total liability 96,140 82,600 Commitments and contingency Stockholders 13,544 11,594 Total liability 96,140 82,600 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 8,027 and 8,239 share authorized 24,000 ; outstanding 8,027 and 8,239 68,465 68,366 Retained 24,000 ; outstanding 8,027 and 8,239 68,465 68,366 Retained earnings 9,096 ; outstanding 8,027 and 8,239 68,465 68,366 Retained earnings 9,096 17,710 outstanding 8,027 and 8,239 68,465 68,366 Retained earnings 9,096 17,710 Accumulated 8,239 68,465 68,366 Retained earnings 9,096 17,710 Accumulated other comprehensive income 68,465 68,366 Retained earnings 9,096 17,710 Accumulated other comprehensive income 2,522 17,710 Accumulated other comprehensive income 2,522 3,708 Total stockholder ’ equity Accumulated other comprehensive income 2,522 3,708 Total stockholder ’ equity 80,083 3,708 Total stockholder ’ equity 80,083 89,784 Total liability and stockholder Total stockholder ’ equity 80,083 89,784 Total liability and stockholder ’ and stockholder ’ equity $ 176,223 $ 172,384 See accompanying note ’ equity $ 176,223 $ 172,384 See accompanying note . 55 172,384 See accompanying note . 55 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2015 2014 2013 Operations Year Ended June 30 , 2015 2014 2013 Operations Net income Ended June 30 , 2015 2014 2013 Operations Net income $ June 30 , 2015 2014 2013 Operations Net income $ 12,193 2013 Operations Net income $ 12,193 $ 22,074 $ 21,863 Adjustments Net income $ 12,193 $ 22,074 $ 21,863 Adjustments to reconcile $ 12,193 $ 22,074 $ 21,863 Adjustments to reconcile net income : Goodwill and asset impairment 7,498 0 0 Depreciation , amortization Goodwill and asset impairment 7,498 0 0 Depreciation , amortization , and asset impairment 7,498 0 0 Depreciation , amortization , and , amortization , and other 5,957 5,212 3,755 Stock-based compensation expense amortization , and other 5,957 5,212 3,755 Stock-based compensation expense 2,574 , and other 5,957 5,212 3,755 Stock-based compensation expense 2,574 2,446 5,212 3,755 Stock-based compensation expense 2,574 2,446 2,406 Net recognized loss 3,755 Stock-based compensation expense 2,574 2,446 2,406 Net recognized loss ( Stock-based compensation expense 2,574 2,446 2,406 Net recognized loss ( gain on investment and derivative ( 443 ) ( 109 ) 80 derivative ( 443 ) ( 109 ) 80 Excess tax benefit 443 ) ( 109 ) 80 Excess tax benefit from stock-based benefit from stock-based compensation ( 588 ) ( 271 ) ( compensation ( 588 ) ( 271 ) ( 209 ) Deferred ) ( 271 ) ( 209 ) Deferred income tax 224 209 ) Deferred income tax 224 ( 331 ) ( 19 Deferred income tax 224 ( 331 ) ( 19 ) Deferral 224 ( 331 ) ( 19 ) Deferral of unearned revenue ) Deferral of unearned revenue 45,072 44,325 44,253 Recognition of unearned Deferral of unearned revenue 45,072 44,325 44,253 Recognition of unearned revenue of unearned revenue 45,072 44,325 44,253 Recognition of unearned revenue ( Recognition of unearned revenue ( 44,920 ) ( 41,739 ) ( revenue ( 44,920 ) ( 41,739 ) ( 41,921 ) Changes ) ( 41,739 ) ( 41,921 ) Changes in operating asset and liability : Accounts receivable 1,456 ( 1,120 ) ( 1,807 : Accounts receivable 1,456 ( 1,120 ) ( 1,807 ) Inventories 1,456 ( 1,120 ) ( 1,807 ) Inventories ( 272 ) ( 1,807 ) Inventories ( 272 ) ( 161 ) ( Inventories ( 272 ) ( 161 ) ( 802 ) Other ) ( 161 ) ( 802 ) Other current asset 62 802 ) Other current asset 62 ( 29 ) ( 129 Other current asset 62 ( 29 ) ( 129 ) Other 62 ( 29 ) ( 129 ) Other long-term asset 346 129 ) Other long-term asset 346 ( 628 ) ( 478 Other long-term asset 346 ( 628 ) ( 478 ) Accounts 346 ( 628 ) ( 478 ) Accounts payable ( 1,054 478 ) Accounts payable ( 1,054 ) 473 537 Other current Accounts payable ( 1,054 ) 473 537 Other current liability ( payable ( 1,054 ) 473 537 Other current liability ( 624 537 Other current liability ( 624 ) 1,075 146 Other long-term current liability ( 624 ) 1,075 146 Other long-term liability 1,599 liability ( 624 ) 1,075 146 Other long-term liability 1,599 1,014 1,075 146 Other long-term liability 1,599 1,014 1,158 Net cash from 146 Other long-term liability 1,599 1,014 1,158 Net cash from operation Other long-term liability 1,599 1,014 1,158 Net cash from operation 29,080 1,158 Net cash from operation 29,080 32,231 28,833 Financing Proceeds from Net cash from operation 29,080 32,231 28,833 Financing Proceeds from issuance cash from operation 29,080 32,231 28,833 Financing Proceeds from issuance of short-term debt , maturity of 90 day or le , net day or le , net 4,481 500 0 Proceeds from issuance or le , net 4,481 500 0 Proceeds from issuance of le , net 4,481 500 0 Proceeds from issuance of debt Proceeds from issuance of debt 10,680 10,350 4,883 Repayments of debt from issuance of debt 10,680 10,350 4,883 Repayments of debt ( issuance of debt 10,680 10,350 4,883 Repayments of debt ( 1,500 4,883 Repayments of debt ( 1,500 ) ( 3,888 ) ( debt ( 1,500 ) ( 3,888 ) ( 1,346 ) Common ) ( 3,888 ) ( 1,346 ) Common stock issued 634 1,346 ) Common stock issued 634 607 931 Common stock repurchased ) Common stock issued 634 607 931 Common stock repurchased ( Common stock issued 634 607 931 Common stock repurchased ( 14,443 931 Common stock repurchased ( 14,443 ) ( 7,316 ) ( repurchased ( 14,443 ) ( 7,316 ) ( 5,360 ) Common ) ( 7,316 ) ( 5,360 ) Common stock cash dividend stock cash dividend paid ( 9,882 ) ( 8,879 ) ( paid ( 9,882 ) ( 8,879 ) ( 7,455 ) Excess ) ( 8,879 ) ( 7,455 ) Excess tax benefit from tax benefit from stock-based compensation 588 271 209 Other 362 ( benefit from stock-based compensation 588 271 209 Other 362 ( 39 from stock-based compensation 588 271 209 Other 362 ( 39 ) compensation 588 271 209 Other 362 ( 39 ) ( 10 271 209 Other 362 ( 39 ) ( 10 ) Net 362 ( 39 ) ( 10 ) Net cash used in cash used in financing ( 9,080 ) ( 8,394 ) ( financing ( 9,080 ) ( 8,394 ) ( 8,148 ) Investing ) ( 8,394 ) ( 8,148 ) Investing Additions to property to property and equipment ( 5,944 ) ( 5,485 ) ( equipment ( 5,944 ) ( 5,485 ) ( 4,257 ) Acquisition ) ( 5,485 ) ( 4,257 ) Acquisition of company , intangible and other asset ( 3,723 ) ( 5,937 ) ( asset ( 3,723 ) ( 5,937 ) ( 1,584 ) Purchases ) ( 5,937 ) ( 1,584 ) Purchases of investment ( ) Purchases of investment ( 98,729 ) ( 72,690 ) ( investment ( 98,729 ) ( 72,690 ) ( 75,396 ) Maturities ) ( 72,690 ) ( 75,396 ) Maturities of investment 15,013 75,396 ) Maturities of investment 15,013 5,272 5,130 Sales of investment ) Maturities of investment 15,013 5,272 5,130 Sales of investment 70,848 Maturities of investment 15,013 5,272 5,130 Sales of investment 70,848 60,094 5,272 5,130 Sales of investment 70,848 60,094 52,464 Securities lending payable 5,130 Sales of investment 70,848 60,094 52,464 Securities lending payable ( Sales of investment 70,848 60,094 52,464 Securities lending payable ( 466 52,464 Securities lending payable ( 466 ) ( 87 ) ( payable ( 466 ) ( 87 ) ( 168 ) Net ) ( 87 ) ( 168 ) Net cash used in cash used in investing ( 23,001 ) ( 18,833 ) ( investing ( 23,001 ) ( 18,833 ) ( 23,811 ) Effect ) ( 18,833 ) ( 23,811 ) Effect of exchange rate cash and cash equivalent ( 73 ) ( 139 ) ( equivalent ( 73 ) ( 139 ) ( 8 ) Net ) ( 139 ) ( 8 ) Net change in cash cash and cash equivalent ( 3,074 ) 4,865 ( 3,134 ) cash equivalent ( 3,074 ) 4,865 ( 3,134 ) Cash and ( 3,074 ) 4,865 ( 3,134 ) Cash and cash equivalent equivalent , beginning of period 8,669 3,804 6,938 Cash and cash , beginning of period 8,669 3,804 6,938 Cash and cash equivalent beginning of period 8,669 3,804 6,938 Cash and cash equivalent , , end of period $ 5,595 $ 8,669 $ 3,804 See of period $ 5,595 $ 8,669 $ 3,804 See accompanying note $ 5,595 $ 8,669 $ 3,804 See accompanying note . 56 3,804 See accompanying note . 56 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2015 2014 2013 Common Year Ended June 30 , 2015 2014 2013 Common stock and Ended June 30 , 2015 2014 2013 Common stock and paid-in June 30 , 2015 2014 2013 Common stock and paid-in capital , beginning of period $ 68,366 $ 67,306 $ 65,797 Common of period $ 68,366 $ 67,306 $ 65,797 Common stock issued $ 68,366 $ 67,306 $ 65,797 Common stock issued 634 607 $ 65,797 Common stock issued 634 607 920 Common stock repurchased 65,797 Common stock issued 634 607 920 Common stock repurchased ( Common stock issued 634 607 920 Common stock repurchased ( 3,700 920 Common stock repurchased ( 3,700 ) ( 2,328 ) ( repurchased ( 3,700 ) ( 2,328 ) ( 2,014 ) Stock-based ) ( 2,328 ) ( 2,014 ) Stock-based compensation expense 2,574 2,014 ) Stock-based compensation expense 2,574 2,446 2,406 Stock-based compensation income ) Stock-based compensation expense 2,574 2,446 2,406 Stock-based compensation income tax Stock-based compensation expense 2,574 2,446 2,406 Stock-based compensation income tax benefit Stock-based compensation income tax benefit 588 272 190 Other , net compensation income tax benefit 588 272 190 Other , net 3 income tax benefit 588 272 190 Other , net 3 63 272 190 Other , net 3 63 7 Balance , end 190 Other , net 3 63 7 Balance , end of Other , net 3 63 7 Balance , end of period Balance , end of period 68,465 68,366 67,306 Retained earnings Balance , end of period 68,465 68,366 67,306 Retained earnings Balance , end of period 68,465 68,366 67,306 Retained earnings Balance , beginning Balance , beginning of period 17,710 9,895 ( 856 ) Net , beginning of period 17,710 9,895 ( 856 ) Net income of period 17,710 9,895 ( 856 ) Net income 12,193 22,074 ( 856 ) Net income 12,193 22,074 21,863 Common stock cash 856 ) Net income 12,193 22,074 21,863 Common stock cash dividend ) Net income 12,193 22,074 21,863 Common stock cash dividend ( Common stock cash dividend ( 10,063 ) ( 9,271 ) ( dividend ( 10,063 ) ( 9,271 ) ( 7,694 ) Common ) ( 9,271 ) ( 7,694 ) Common stock repurchased ( ) Common stock repurchased ( 10,744 ) ( 4,988 ) ( repurchased ( 10,744 ) ( 4,988 ) ( 3,418 ) Balance ) ( 4,988 ) ( 3,418 ) Balance , end of Balance , end of period 9,096 17,710 9,895 Accumulated other comprehensive , end of period 9,096 17,710 9,895 Accumulated other comprehensive income end of period 9,096 17,710 9,895 Accumulated other comprehensive income Balance Balance , beginning of period 3,708 1,743 1,422 Other comprehensive income , beginning of period 3,708 1,743 1,422 Other comprehensive income ( beginning of period 3,708 1,743 1,422 Other comprehensive income ( loss income ( loss ) ( 1,186 ) 1,965 321 Balance , loss ) ( 1,186 ) 1,965 321 Balance , end of ) ( 1,186 ) 1,965 321 Balance , end of period Balance , end of period 2,522 3,708 1,743 Total stockholder ’ , end of period 2,522 3,708 1,743 Total stockholder ’ equity end of period 2,522 3,708 1,743 Total stockholder ’ equity $ Total stockholder ’ equity $ 80,083 $ 89,784 $ 78,944 See ’ equity $ 80,083 $ 89,784 $ 78,944 See accompanying note $ 80,083 $ 89,784 $ 78,944 See accompanying note . 57 78,944 See accompanying note . 57 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles ii ) third-party evidence , 58 Table of Contents PART II of Contents PART II Item 8 and ( iii ) best earn the revenue ha been 59 Table of Contents PART II of Contents PART II Item 8 completed . Consulting service revenue a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.9 billion , $ 2.3 billion $ 1.9 billion , $ 2.3 billion , and $ 2.6 2.3 billion , and $ 2.6 billion in fiscal year 2015 2.6 billion in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . Stock-Based Compensation using the straight-line method . 60 Table of Contents PART II of Contents PART II Item 8 Employee Stock Purchase Plan Shares employee at three-month interval at 90 % of the fair market level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of government bond . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment and liability . Our Level 3 derivative asset and liability primarily approximate their carrying value . 61 Table of Contents PART II of Contents PART II Item 8 Financial Instruments We consider all derivative entered into for investment 62 Table of Contents PART II of Contents PART II Item 8 purpose , such a commodity million ) Year Ended June 30 , 2015 2014 2013 Balance Year Ended June 30 , 2015 2014 2013 Balance , beginning Ended June 30 , 2015 2014 2013 Balance , beginning of June 30 , 2015 2014 2013 Balance , beginning of period , beginning of period $ 301 $ 336 $ 389 Charged of period $ 301 $ 336 $ 389 Charged to cost $ 301 $ 336 $ 389 Charged to cost and other Charged to cost and other 77 16 4 Write-offs ( 43 to cost and other 77 16 4 Write-offs ( 43 ) cost and other 77 16 4 Write-offs ( 43 ) ( 77 16 4 Write-offs ( 43 ) ( 51 ) ( Write-offs ( 43 ) ( 51 ) ( 57 ) Balance ) ( 51 ) ( 57 ) Balance , end of , end of period $ 335 $ 301 $ 336 Inventories of period $ 335 $ 301 $ 336 Inventories Inventories are $ 335 $ 301 $ 336 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between , ranging from one to 15 year . We evaluate the asset may be impaired . 63 Table of Contents PART II of Contents PART II Item 8 Recent Accounting Guidance Not Yet Not Yet Adopted In May 2014 , a part of it effective for u beginning July 1 , 2018 , and adoption u beginning July 1 , 2018 , and adoption a of original effective date of July 1 , 2017 is permitted . date of July 1 , 2017 is permitted . We anticipate evaluating it impact . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2015 2014 2013 Net Year Ended June 30 , 2015 2014 2013 Net income available Ended June 30 , 2015 2014 2013 Net income available for June 30 , 2015 2014 2013 Net income available for common shareholder ( A ) $ 12,193 $ 22,074 $ 21,863 Weighted A ) $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding $ 12,193 $ 22,074 $ 21,863 Weighted average outstanding share of common stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based ( B ) 8,177 8,299 8,375 Dilutive effect of stock-based award Dilutive effect of stock-based award 77 100 95 Common stock and effect of stock-based award 77 100 95 Common stock and common of stock-based award 77 100 95 Common stock and common stock stock equivalent ( C ) 8,254 8,399 8,470 Earnings Per Share equivalent ( C ) 8,254 8,399 8,470 Earnings Per Share Basic ( C ) 8,254 8,399 8,470 Earnings Per Share Basic ( Basic ( A/B ) $ 1.49 $ 2.66 $ 2.61 Diluted A/B ) $ 1.49 $ 2.66 $ 2.61 Diluted ( A/C $ 1.49 $ 2.66 $ 2.61 Diluted ( A/C ) $ Diluted ( A/C ) $ 1.48 $ 2.63 $ 2.58 Anti-dilutive A/C ) $ 1.48 $ 2.63 $ 2.58 Anti-dilutive stock-based award $ 1.48 $ 2.63 $ 2.58 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2015 2014 2013 Dividends Year Ended June 30 , 2015 2014 2013 Dividends and interest Ended June 30 , 2015 2014 2013 Dividends and interest income June 30 , 2015 2014 2013 Dividends and interest income $ Dividends and interest income $ 766 $ 883 $ 677 Interest interest income $ 766 $ 883 $ 677 Interest expense ( $ 766 $ 883 $ 677 Interest expense ( 781 ) $ 677 Interest expense ( 781 ) ( 597 ) ( expense ( 781 ) ( 597 ) ( 429 ) Net ) ( 597 ) ( 429 ) Net recognized gain on Net recognized gain on investment 716 437 116 Net loss on recognized gain on investment 716 437 116 Net loss on derivative gain on investment 716 437 116 Net loss on derivative ( Net loss on derivative ( 423 ) ( 328 ) ( derivative ( 423 ) ( 328 ) ( 196 ) Net ) ( 328 ) ( 196 ) Net gain ( loss ) on foreign currency remeasurements 335 ( 165 ) ( 74 foreign currency remeasurements 335 ( 165 ) ( 74 ) Other 335 ( 165 ) ( 74 ) Other ( 267 ) ( 74 ) Other ( 267 ) ( 169 ) 194 Other ( 267 ) ( 169 ) 194 Total $ 346 267 ) ( 169 ) 194 Total $ 346 $ 61 169 ) 194 Total $ 346 $ 61 $ 288 64 194 Total $ 346 $ 61 $ 288 64 Table of $ 346 $ 61 $ 288 64 Table of Contents PART 346 $ 61 $ 288 64 Table of Contents PART II of Contents PART II Item 8 Following are detail of net million ) Year Ended June 30 , 2015 2014 2013 Other-than-temporary Year Ended June 30 , 2015 2014 2013 Other-than-temporary impairment of Ended June 30 , 2015 2014 2013 Other-than-temporary impairment of investment June 30 , 2015 2014 2013 Other-than-temporary impairment of investment $ impairment of investment $ ( 183 ) $ ( 106 ) ( 183 ) $ ( 106 ) $ ( 208 ) ( 106 ) $ ( 208 ) Realized gain from sale from sale of available-for-sale security 1,176 776 489 Realized loss from sale of available-for-sale security 1,176 776 489 Realized loss from sale of available-for-sale security 1,176 776 489 Realized loss from sale of sale of available-for-sale security ( 277 ) ( 233 ) ( security ( 277 ) ( 233 ) ( 165 ) Total ) ( 233 ) ( 165 ) Total $ 716 $ ( 165 ) Total $ 716 $ 437 $ 116 NOTE ) Total $ 716 $ 437 $ 116 NOTE 4 — $ 716 $ 437 $ 116 NOTE 4 — INVESTMENTS Investment $ 437 $ 116 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2015 Cash $ 3,679 Other Investments June 30 , 2015 Cash $ 3,679 $ 0 30 , 2015 Cash $ 3,679 $ 0 $ 0 $ 2015 Cash $ 3,679 $ 0 $ 0 $ 3,679 $ $ 3,679 $ 0 $ 0 $ 3,679 $ 3,679 $ $ 0 $ 0 $ 3,679 $ 3,679 $ 0 $ $ 0 $ 3,679 $ 3,679 $ 0 $ 0 Mutual $ 3,679 $ 3,679 $ 0 $ 0 Mutual fund 1,100 $ 3,679 $ 0 $ 0 Mutual fund 1,100 0 0 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial paper fund 1,100 0 0 1,100 1,100 0 0 Commercial paper 1 1,100 0 0 1,100 1,100 0 0 Commercial paper 1 0 0 0 1,100 1,100 0 0 Commercial paper 1 0 0 1,100 0 0 Commercial paper 1 0 0 1 1 0 0 0 Commercial paper 1 0 0 1 1 0 0 0 Commercial paper 1 0 0 1 1 0 0 Certificates Commercial paper 1 0 0 1 1 0 0 Certificates of paper 1 0 0 1 1 0 0 Certificates of deposit 1 0 0 1 1 0 0 Certificates of deposit 906 0 0 1 1 0 0 Certificates of deposit 906 0 0 0 Certificates of deposit 906 0 0 906 776 130 0 Certificates of deposit 906 0 0 906 776 130 0 Certificates of deposit 906 0 0 906 776 130 0 U.S. of deposit 906 0 0 906 776 130 0 U.S. government deposit 906 0 0 906 776 130 0 U.S. government and 906 0 0 906 776 130 0 U.S. government and agency 0 0 906 776 130 0 U.S. government and agency security U.S. government and agency security 72,843 76 ( 30 ) 72,889 government and agency security 72,843 76 ( 30 ) 72,889 39 agency security 72,843 76 ( 30 ) 72,889 39 72,850 0 72,843 76 ( 30 ) 72,889 39 72,850 0 Foreign government 76 ( 30 ) 72,889 39 72,850 0 Foreign government bond ( 30 ) 72,889 39 72,850 0 Foreign government bond 5,477 30 ) 72,889 39 72,850 0 Foreign government bond 5,477 3 72,850 0 Foreign government bond 5,477 3 ( 24 ) 5,456 0 Foreign government bond 5,477 3 ( 24 ) 5,456 0 government bond 5,477 3 ( 24 ) 5,456 0 5,456 0 5,477 3 ( 24 ) 5,456 0 5,456 0 Mortgage- and 3 ( 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed ( 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed security 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed security 4,899 0 Mortgage- and asset-backed security 4,899 23 ( 6 ) 4,916 Mortgage- and asset-backed security 4,899 23 ( 6 ) 4,916 0 asset-backed security 4,899 23 ( 6 ) 4,916 0 4,916 0 4,899 23 ( 6 ) 4,916 0 4,916 0 Corporate note 23 ( 6 ) 4,916 0 4,916 0 Corporate note and ( 6 ) 4,916 0 4,916 0 Corporate note and bond 6 ) 4,916 0 4,916 0 Corporate note and bond 7,192 0 Corporate note and bond 7,192 97 ( 37 ) 7,252 Corporate note and bond 7,192 97 ( 37 ) 7,252 0 and bond 7,192 97 ( 37 ) 7,252 0 7,252 0 7,192 97 ( 37 ) 7,252 0 7,252 0 Municipal security 97 ( 37 ) 7,252 0 7,252 0 Municipal security 285 ( 37 ) 7,252 0 7,252 0 Municipal security 285 35 37 ) 7,252 0 7,252 0 Municipal security 285 35 ( 0 7,252 0 Municipal security 285 35 ( 1 ) 319 7,252 0 Municipal security 285 35 ( 1 ) 319 0 Municipal security 285 35 ( 1 ) 319 0 319 0 285 35 ( 1 ) 319 0 319 0 Common and 35 ( 1 ) 319 0 319 0 Common and preferred ( 1 ) 319 0 319 0 Common and preferred stock 1 ) 319 0 319 0 Common and preferred stock 6,668 0 Common and preferred stock 6,668 4,986 ( 215 ) 11,439 Common and preferred stock 6,668 4,986 ( 215 ) 11,439 0 preferred stock 6,668 4,986 ( 215 ) 11,439 0 0 11,439 6,668 4,986 ( 215 ) 11,439 0 0 11,439 Other investment 4,986 ( 215 ) 11,439 0 0 11,439 Other investment 597 ( 215 ) 11,439 0 0 11,439 Other investment 597 0 215 ) 11,439 0 0 11,439 Other investment 597 0 0 0 0 11,439 Other investment 597 0 0 597 0 8 0 11,439 Other investment 597 0 0 597 0 8 589 11,439 Other investment 597 0 0 597 0 8 589 Total Other investment 597 0 0 597 0 8 589 Total $ investment 597 0 0 597 0 8 589 Total $ 103,647 597 0 0 597 0 8 589 Total $ 103,647 $ 0 0 597 0 8 589 Total $ 103,647 $ 5,220 0 8 589 Total $ 103,647 $ 5,220 $ ( 313 589 Total $ 103,647 $ 5,220 $ ( 313 ) $ 103,647 $ 5,220 $ ( 313 ) $ 108,554 $ 5,595 $ ( 313 ) $ 108,554 $ 5,595 $ 90,931 $ 313 ) $ 108,554 $ 5,595 $ 90,931 $ 12,028 65 $ 108,554 $ 5,595 $ 90,931 $ 12,028 65 Table of $ 5,595 $ 90,931 $ 12,028 65 Table of Contents PART 5,595 $ 90,931 $ 12,028 65 Table of Contents PART II of Contents PART II Item 8 ( In million ) Cost Equity and Other Investments June 30 , 2014 Cash $ 4,980 Other Investments June 30 , 2014 Cash $ 4,980 $ 0 30 , 2014 Cash $ 4,980 $ 0 $ 0 $ 2014 Cash $ 4,980 $ 0 $ 0 $ 4,980 $ $ 4,980 $ 0 $ 0 $ 4,980 $ 4,980 $ $ 0 $ 0 $ 4,980 $ 4,980 $ 0 $ $ 0 $ 4,980 $ 4,980 $ 0 $ 0 Mutual $ 4,980 $ 4,980 $ 0 $ 0 Mutual fund 590 $ 4,980 $ 0 $ 0 Mutual fund 590 0 0 0 $ 0 Mutual fund 590 0 0 590 590 0 $ 0 Mutual fund 590 0 0 590 590 0 0 0 Mutual fund 590 0 0 590 590 0 0 Commercial Mutual fund 590 0 0 590 590 0 0 Commercial paper fund 590 0 0 590 590 0 0 Commercial paper 189 590 0 0 590 590 0 0 Commercial paper 189 0 0 0 590 590 0 0 Commercial paper 189 0 0 590 0 0 Commercial paper 189 0 0 189 89 100 0 0 Commercial paper 189 0 0 189 89 100 0 0 Commercial paper 189 0 0 189 89 100 0 Certificates Commercial paper 189 0 0 189 89 100 0 Certificates of paper 189 0 0 189 89 100 0 Certificates of deposit 189 0 0 189 89 100 0 Certificates of deposit 1,197 0 0 189 89 100 0 Certificates of deposit 1,197 0 100 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 Certificates of deposit 1,197 0 0 1,197 865 332 0 U.S. of deposit 1,197 0 0 1,197 865 332 0 U.S. government deposit 1,197 0 0 1,197 865 332 0 U.S. government and 1,197 0 0 1,197 865 332 0 U.S. government and agency 0 0 1,197 865 332 0 U.S. government and agency security U.S. government and agency security 66,952 103 ( 29 ) 67,026 government and agency security 66,952 103 ( 29 ) 67,026 109 agency security 66,952 103 ( 29 ) 67,026 109 66,917 0 66,952 103 ( 29 ) 67,026 109 66,917 0 Foreign government 103 ( 29 ) 67,026 109 66,917 0 Foreign government bond ( 29 ) 67,026 109 66,917 0 Foreign government bond 3,328 29 ) 67,026 109 66,917 0 Foreign government bond 3,328 17 66,917 0 Foreign government bond 3,328 17 ( 10 ) 3,335 0 Foreign government bond 3,328 17 ( 10 ) 3,335 2,027 government bond 3,328 17 ( 10 ) 3,335 2,027 1,308 0 3,328 17 ( 10 ) 3,335 2,027 1,308 0 Mortgage- and 17 ( 10 ) 3,335 2,027 1,308 0 Mortgage- and asset-backed ( 10 ) 3,335 2,027 1,308 0 Mortgage- and asset-backed security 10 ) 3,335 2,027 1,308 0 Mortgage- and asset-backed security 991 0 Mortgage- and asset-backed security 991 30 ( 2 ) 1,019 Mortgage- and asset-backed security 991 30 ( 2 ) 1,019 0 asset-backed security 991 30 ( 2 ) 1,019 0 1,019 0 991 30 ( 2 ) 1,019 0 1,019 0 Corporate note 30 ( 2 ) 1,019 0 1,019 0 Corporate note and ( 2 ) 1,019 0 1,019 0 Corporate note and bond 2 ) 1,019 0 1,019 0 Corporate note and bond 6,845 0 Corporate note and bond 6,845 191 ( 9 ) 7,027 Corporate note and bond 6,845 191 ( 9 ) 7,027 9 and bond 6,845 191 ( 9 ) 7,027 9 7,018 0 6,845 191 ( 9 ) 7,027 9 7,018 0 Municipal security 191 ( 9 ) 7,027 9 7,018 0 Municipal security 287 ( 9 ) 7,027 9 7,018 0 Municipal security 287 45 9 ) 7,027 9 7,018 0 Municipal security 287 45 0 9 7,018 0 Municipal security 287 45 0 332 0 332 7,018 0 Municipal security 287 45 0 332 0 332 0 0 Municipal security 287 45 0 332 0 332 0 Common Municipal security 287 45 0 332 0 332 0 Common and security 287 45 0 332 0 332 0 Common and preferred 287 45 0 332 0 332 0 Common and preferred stock 45 0 332 0 332 0 Common and preferred stock 6,785 0 Common and preferred stock 6,785 5,207 ( 81 ) 11,911 Common and preferred stock 6,785 5,207 ( 81 ) 11,911 0 preferred stock 6,785 5,207 ( 81 ) 11,911 0 0 11,911 6,785 5,207 ( 81 ) 11,911 0 0 11,911 Other investment 5,207 ( 81 ) 11,911 0 0 11,911 Other investment 1,164 ( 81 ) 11,911 0 0 11,911 Other investment 1,164 0 81 ) 11,911 0 0 11,911 Other investment 1,164 0 0 0 0 11,911 Other investment 1,164 0 0 1,164 0 14 0 11,911 Other investment 1,164 0 0 1,164 0 14 1,150 11,911 Other investment 1,164 0 0 1,164 0 14 1,150 Total Other investment 1,164 0 0 1,164 0 14 1,150 Total $ investment 1,164 0 0 1,164 0 14 1,150 Total $ 93,308 1,164 0 0 1,164 0 14 1,150 Total $ 93,308 $ 0 0 1,164 0 14 1,150 Total $ 93,308 $ 5,593 0 14 1,150 Total $ 93,308 $ 5,593 $ ( 131 1,150 Total $ 93,308 $ 5,593 $ ( 131 ) $ 93,308 $ 5,593 $ ( 131 ) $ 98,770 $ 8,669 $ ( 131 ) $ 98,770 $ 8,669 $ 77,040 $ 131 ) $ 98,770 $ 8,669 $ 77,040 $ 13,061 In $ 98,770 $ 8,669 $ 77,040 $ 13,061 In addition to $ 8,669 $ 77,040 $ 13,061 In addition to the investment corporate note are due October 31 , 2023 and are measured are due October 31 , 2023 and are measured at fair basis . As of June 30 , 2015 , the amortized As of June 30 , 2015 , the amortized cost and corporate note were both $ 25 million with an estimated fair value . As of June 30 , 2014 , the amortized As of June 30 , 2014 , the amortized cost , these corporate note wa $ 1.5 billion , $ 1.5 billion $ 1.5 billion , $ 1.5 billion , and $ 1.7 1.5 billion , and $ 1.7 billion , respectively , while unrealized holding gain were $ 164 million . As of June million . As of June 30 , 2015 and 2014 , As of June 30 , 2015 and 2014 , the recorded June 30 , 2015 and 2014 , the recorded base of not publicly traded were $ 561 million and $ 520 million $ 561 million and $ 520 million , respectively . These borrower . As of June 30 , 2015 , collateral received As of June 30 , 2015 , collateral received under these under these agreement totaled $ 92 million which is comprised of which is comprised of $ 79 million of certificate of deposit certificate of deposit and $ 13 million of U.S. government and continuous and overnight basis . 66 Table of Contents PART II of Contents PART II Item 8 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2015 U.S. government and Fair Value June 30 , 2015 U.S. government and agency security government and agency security $ 6,636 $ ( 9 ) $ security $ 6,636 $ ( 9 ) $ 421 $ ( $ ( 9 ) $ 421 $ ( 21 ) $ ) $ 421 $ ( 21 ) $ 7,057 $ ( $ ( 21 ) $ 7,057 $ ( 30 ) Foreign ) $ 7,057 $ ( 30 ) Foreign government bond 4,611 30 ) Foreign government bond 4,611 ( 12 ) 18 ( Foreign government bond 4,611 ( 12 ) 18 ( 12 ) bond 4,611 ( 12 ) 18 ( 12 ) 4,629 ( ( 12 ) 18 ( 12 ) 4,629 ( 24 ) ) 18 ( 12 ) 4,629 ( 24 ) Mortgage- and ( 12 ) 4,629 ( 24 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 3,171 $ ( 5 ) 28 asset-backed security 3,171 $ ( 5 ) 28 ( 1 ) 3,171 $ ( 5 ) 28 ( 1 ) 3,199 ( ( 5 ) 28 ( 1 ) 3,199 ( 6 ) ) 28 ( 1 ) 3,199 ( 6 ) Corporate note ( 1 ) 3,199 ( 6 ) Corporate note and bond ) Corporate note and bond 2,946 ( 29 ) 104 ( note and bond 2,946 ( 29 ) 104 ( 8 ) bond 2,946 ( 29 ) 104 ( 8 ) 3,050 ( ( 29 ) 104 ( 8 ) 3,050 ( 37 ) ) 104 ( 8 ) 3,050 ( 37 ) Municipal security ( 8 ) 3,050 ( 37 ) Municipal security 36 ( ( 37 ) Municipal security 36 ( 1 ) 0 0 ) Municipal security 36 ( 1 ) 0 0 36 ( security 36 ( 1 ) 0 0 36 ( 1 ) 36 ( 1 ) 0 0 36 ( 1 ) Common ( 1 ) 0 0 36 ( 1 ) Common and ) 0 0 36 ( 1 ) Common and preferred stock ) Common and preferred stock 1,389 ( 180 ) 148 ( and preferred stock 1,389 ( 180 ) 148 ( 35 ) stock 1,389 ( 180 ) 148 ( 35 ) 1,537 ( ( 180 ) 148 ( 35 ) 1,537 ( 215 ) ) 148 ( 35 ) 1,537 ( 215 ) Total $ ( 35 ) 1,537 ( 215 ) Total $ 18,789 $ ( 215 ) Total $ 18,789 $ ( 236 ) $ Total $ 18,789 $ ( 236 ) $ 719 $ ( $ ( 236 ) $ 719 $ ( 77 ) $ ) $ 719 $ ( 77 ) $ 19,508 $ ( $ ( 77 ) $ 19,508 $ ( 313 ) Less ) $ 19,508 $ ( 313 ) Less than 12 Months ( 313 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2014 U.S. government and Fair Value June 30 , 2014 U.S. government and agency security government and agency security $ 4,161 $ ( 29 ) $ security $ 4,161 $ ( 29 ) $ 850 $ 0 $ ( 29 ) $ 850 $ 0 $ 5,011 $ 29 ) $ 850 $ 0 $ 5,011 $ ( 29 $ 850 $ 0 $ 5,011 $ ( 29 ) Foreign 0 $ 5,011 $ ( 29 ) Foreign government bond 566 29 ) Foreign government bond 566 ( 4 ) 21 ( Foreign government bond 566 ( 4 ) 21 ( 6 ) bond 566 ( 4 ) 21 ( 6 ) 587 ( ( 4 ) 21 ( 6 ) 587 ( 10 ) ) 21 ( 6 ) 587 ( 10 ) Mortgage- and ( 6 ) 587 ( 10 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 120 0 61 ( 2 ) Mortgage- and asset-backed security 120 0 61 ( 2 ) 181 and asset-backed security 120 0 61 ( 2 ) 181 ( security 120 0 61 ( 2 ) 181 ( 2 ) 0 61 ( 2 ) 181 ( 2 ) Corporate note ( 2 ) 181 ( 2 ) Corporate note and bond ) Corporate note and bond 1,154 ( 8 ) 34 ( note and bond 1,154 ( 8 ) 34 ( 1 ) bond 1,154 ( 8 ) 34 ( 1 ) 1,188 ( ( 8 ) 34 ( 1 ) 1,188 ( 9 ) ) 34 ( 1 ) 1,188 ( 9 ) Common and ( 1 ) 1,188 ( 9 ) Common and preferred stock ) Common and preferred stock 463 ( 48 ) 257 ( and preferred stock 463 ( 48 ) 257 ( 33 ) stock 463 ( 48 ) 257 ( 33 ) 720 ( ( 48 ) 257 ( 33 ) 720 ( 81 ) ) 257 ( 33 ) 720 ( 81 ) Total $ ( 33 ) 720 ( 81 ) Total $ 6,464 $ ( 81 ) Total $ 6,464 $ ( 89 ) $ Total $ 6,464 $ ( 89 ) $ 1,223 $ ( $ ( 89 ) $ 1,223 $ ( 42 ) $ ) $ 1,223 $ ( 42 ) $ 7,687 $ ( $ ( 42 ) $ 7,687 $ ( 131 ) Unrealized ) $ 7,687 $ ( 131 ) Unrealized loss from fixed-income available evidence a of June 30 , 2015 . Debt Investment a of June 30 , 2015 . Debt Investment Maturities ( Basis Estimated Fair Value June 30 , 2015 Due in one Fair Value June 30 , 2015 Due in one year or one year or le $ 53,616 $ 53,645 Due after one or le $ 53,616 $ 53,645 Due after one year through one year through five year 33,260 33,336 Due after five year year through five year 33,260 33,336 Due after five year through Due after five year through 10 year 3,180 3,161 Due after five year through 10 year 3,180 3,161 Due after 10 year year through 10 year 3,180 3,161 Due after 10 year 1,547 year 3,180 3,161 Due after 10 year 1,547 1,597 Total $ 3,161 Due after 10 year 1,547 1,597 Total $ 91,603 $ Due after 10 year 1,547 1,597 Total $ 91,603 $ 91,739 year 1,547 1,597 Total $ 91,603 $ 91,739 NOTE 5 — 1,597 Total $ 91,603 $ 91,739 NOTE 5 — DERIVATIVES We $ 91,603 $ 91,739 NOTE 5 — DERIVATIVES We use derivative in U.S. dollar equivalent . 67 Table of Contents PART II of Contents PART II Item 8 Foreign Currency Certain forecasted transaction dollar . As of June 30 , 2015 and June 30 As of June 30 , 2015 and June 30 , 2014 30 , 2015 and June 30 , 2014 , the total 2015 and June 30 , 2014 , the total notional amount exchange contract sold were $ 9.8 billion and $ 4.9 billion $ 9.8 billion and $ 4.9 billion , respectively . Foreign instrument . As of June 30 , 2015 and June 30 As of June 30 , 2015 and June 30 , 2014 30 , 2015 and June 30 , 2014 , the total 2015 and June 30 , 2014 , the total notional amount exchange contract sold were $ 5.3 billion and $ 3.1 billion $ 5.3 billion and $ 3.1 billion , respectively . Certain exposure . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 9.7 billion and $ 11.0 billion $ 9.7 billion and $ 11.0 billion , respectively . As respectively . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 6.2 billion and $ 8.5 billion $ 6.2 billion and $ 8.5 billion , respectively . Equity forward . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount market price risk were $ 2.2 billion and $ 2.6 billion $ 2.2 billion and $ 2.6 billion , respectively , of respectively , of which $ 1.1 billion and $ 1.4 billion $ 1.1 billion and $ 1.4 billion , respectively , were instrument . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount market price risk were $ 1.9 billion and $ 1.9 billion $ 1.9 billion and $ 1.9 billion , respectively , of respectively , of which $ 362 million and $ 420 million $ 362 million and $ 420 million , respectively , were instrument . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 1.0 billion and $ 3.2 billion $ 1.0 billion and $ 3.2 billion , respectively . As respectively . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 1.7 billion and $ 936 million $ 1.7 billion and $ 936 million , respectively . In date . As of June 30 , 2015 and 2014 , As of June 30 , 2015 and 2014 , the total June 30 , 2015 and 2014 , the total notional derivative mortgage contract purchased were $ 812 million and $ 1.1 billion $ 812 million and $ 1.1 billion , respectively . Credit risk . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 618 million and $ 430 million $ 618 million and $ 430 million , respectively . As respectively . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 550 million and $ 440 million $ 550 million and $ 440 million , respectively . 68 440 million , respectively . 68 Table of Contents PART II of Contents PART II Item 8 Commodity We use broad-based commodity grain . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 882 million and $ 316 million $ 882 million and $ 316 million , respectively . As respectively . As of June 30 , 2014 , the total As of June 30 , 2014 , the total notional amount purchased and sold were $ 1.4 billion and $ 408 million $ 1.4 billion and $ 408 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2015 , our long-term As of June 30 , 2015 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 69 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2015 June 30 , risk : June 30 , 2015 June 30 , 2014 Assets June 30 , 2015 June 30 , 2014 Assets Liabilities Assets , 2015 June 30 , 2014 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 17 $ 167 $ 0 $ exchange contract $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) $ 167 $ 0 $ ( 79 ) $ 10 $ 39 $ ( 79 ) $ 10 $ 39 $ 0 $ 79 ) $ 10 $ 39 $ 0 $ ( 97 $ 10 $ 39 $ 0 $ ( 97 ) Equity 39 $ 0 $ ( 97 ) Equity contract 148 0 ( 97 ) Equity contract 148 0 0 ( 18 ) 97 ) Equity contract 148 0 0 ( 18 ) 177 ) Equity contract 148 0 0 ( 18 ) 177 0 contract 148 0 0 ( 18 ) 177 0 0 ( 0 0 ( 18 ) 177 0 0 ( 21 ) 0 ( 18 ) 177 0 0 ( 21 ) Interest ( 18 ) 177 0 0 ( 21 ) Interest rate ) 177 0 0 ( 21 ) Interest rate contract 7 21 ) Interest rate contract 7 0 0 ( 12 ) ) Interest rate contract 7 0 0 ( 12 ) 17 Interest rate contract 7 0 0 ( 12 ) 17 0 contract 7 0 0 ( 12 ) 17 0 0 ( 0 0 ( 12 ) 17 0 0 ( 12 ) 0 ( 12 ) 17 0 0 ( 12 ) Credit ( 12 ) 17 0 0 ( 12 ) Credit contract ) 17 0 0 ( 12 ) Credit contract 16 0 ( 12 ) Credit contract 16 0 0 ( 9 ) 12 ) Credit contract 16 0 0 ( 9 ) 24 ) Credit contract 16 0 0 ( 9 ) 24 0 contract 16 0 0 ( 9 ) 24 0 0 ( 0 0 ( 9 ) 24 0 0 ( 13 ) 0 ( 9 ) 24 0 0 ( 13 ) Commodity ( 9 ) 24 0 0 ( 13 ) Commodity contract ) 24 0 0 ( 13 ) Commodity contract 0 0 ( 13 ) Commodity contract 0 0 0 0 15 0 13 ) Commodity contract 0 0 0 0 15 0 0 ) Commodity contract 0 0 0 0 15 0 0 ( Commodity contract 0 0 0 0 15 0 0 ( 1 contract 0 0 0 0 15 0 0 ( 1 ) 0 0 0 0 15 0 0 ( 1 ) Total 0 0 0 15 0 0 ( 1 ) Total $ 0 15 0 0 ( 1 ) Total $ 188 $ ( 1 ) Total $ 188 $ 167 $ 0 $ ) Total $ 188 $ 167 $ 0 $ ( 118 $ 188 $ 167 $ 0 $ ( 118 ) $ 167 $ 0 $ ( 118 ) $ 243 $ 39 $ ( 118 ) $ 243 $ 39 $ 0 $ 118 ) $ 243 $ 39 $ 0 $ ( 144 $ 243 $ 39 $ 0 $ ( 144 ) Designated 39 $ 0 $ ( 144 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 56 $ 552 $ 0 $ exchange contract $ 56 $ 552 $ 0 $ ( 31 $ 56 $ 552 $ 0 $ ( 31 ) $ 552 $ 0 $ ( 31 ) $ 1 $ 70 $ ( 31 ) $ 1 $ 70 $ 0 $ 31 ) $ 1 $ 70 $ 0 $ ( 15 $ 1 $ 70 $ 0 $ ( 15 ) Equity 70 $ 0 $ ( 15 ) Equity contract 0 0 ( 15 ) Equity contract 0 0 25 ( 69 ) 15 ) Equity contract 0 0 25 ( 69 ) 0 ) Equity contract 0 0 25 ( 69 ) 0 0 contract 0 0 25 ( 69 ) 0 0 7 ( 0 25 ( 69 ) 0 0 7 ( 125 ) 25 ( 69 ) 0 0 7 ( 125 ) Total ( 69 ) 0 0 7 ( 125 ) Total $ ) 0 0 7 ( 125 ) Total $ 56 $ ( 125 ) Total $ 56 $ 552 $ 25 $ ) Total $ 56 $ 552 $ 25 $ ( 100 $ 56 $ 552 $ 25 $ ( 100 ) $ 552 $ 25 $ ( 100 ) $ 1 $ 70 $ ( 100 ) $ 1 $ 70 $ 7 $ 100 ) $ 1 $ 70 $ 7 $ ( 140 $ 1 $ 70 $ 7 $ ( 140 ) Total 70 $ 7 $ ( 140 ) Total gross amount of gross amount of derivative $ 244 $ 719 $ 25 $ of derivative $ 244 $ 719 $ 25 $ ( 218 $ 244 $ 719 $ 25 $ ( 218 ) $ 719 $ 25 $ ( 218 ) $ 244 $ 109 $ ( 218 ) $ 244 $ 109 $ 7 $ 218 ) $ 244 $ 109 $ 7 $ ( 284 $ 244 $ 109 $ 7 $ ( 284 ) Gross 109 $ 7 $ ( 284 ) Gross derivative either offset enforceable master netting agreement $ 126 $ 719 $ 25 $ netting agreement $ 126 $ 719 $ 25 $ ( 218 $ 126 $ 719 $ 25 $ ( 218 ) $ 719 $ 25 $ ( 218 ) $ 99 $ 109 $ ( 218 ) $ 99 $ 109 $ 7 $ 218 ) $ 99 $ 109 $ 7 $ ( 284 $ 99 $ 109 $ 7 $ ( 284 ) Gross 109 $ 7 $ ( 284 ) Gross amount of derivative in the balance sheet ( 66 ) ( 71 ) ( sheet ( 66 ) ( 71 ) ( 25 ) 161 ) ( 71 ) ( 25 ) 161 ( 77 ) 71 ) ( 25 ) 161 ( 77 ) ( 71 ( 25 ) 161 ( 77 ) ( 71 ) ( 161 ( 77 ) ( 71 ) ( 7 ) 155 ) ( 71 ) ( 7 ) 155 Net amount presented 71 ) ( 7 ) 155 Net amount presented in the presented in the balance sheet 60 648 0 ( 57 ) in the balance sheet 60 648 0 ( 57 ) 22 the balance sheet 60 648 0 ( 57 ) 22 38 sheet 60 648 0 ( 57 ) 22 38 0 ( 648 0 ( 57 ) 22 38 0 ( 129 ) 0 ( 57 ) 22 38 0 ( 129 ) Gross ( 57 ) 22 38 0 ( 129 ) Gross amount ) 22 38 0 ( 129 ) Gross amount of derivative offset in the balance sheet 0 0 0 0 0 0 in the balance sheet 0 0 0 0 0 0 0 the balance sheet 0 0 0 0 0 0 0 0 balance sheet 0 0 0 0 0 0 0 0 Cash sheet 0 0 0 0 0 0 0 0 Cash collateral 0 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 Cash collateral received 0 0 0 ( 456 ) 0 Cash collateral received 0 0 0 ( 456 ) 0 Cash collateral received 0 0 0 ( 456 ) 0 0 received 0 0 0 ( 456 ) 0 0 0 0 0 0 ( 456 ) 0 0 0 0 Net amount 0 ( 456 ) 0 0 0 0 Net amount $ ( 456 ) 0 0 0 0 Net amount $ 60 456 ) 0 0 0 0 Net amount $ 60 $ 0 0 Net amount $ 60 $ 648 $ 0 $ Net amount $ 60 $ 648 $ 0 $ ( 513 $ 60 $ 648 $ 0 $ ( 513 ) $ 648 $ 0 $ ( 513 ) $ 22 $ 38 $ ( 513 ) $ 22 $ 38 $ 0 $ 513 ) $ 22 $ 38 $ 0 $ ( 129 $ 22 $ 38 $ 0 $ ( 129 ) See 38 $ 0 $ ( 129 ) See also Note 4 129 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 70 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2015 2014 2013 Foreign Year Ended June 30 , 2015 2014 2013 Foreign Exchange Contracts Ended June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives June 30 , 2015 2014 2013 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 741 $ ( 14 ) $ Derivatives $ 741 $ ( 14 ) $ 70 Hedged item $ ( 14 ) $ 70 Hedged item $ ( 725 70 Hedged item $ ( 725 ) 6 ( 69 ) item $ ( 725 ) 6 ( 69 ) Total amount ( 725 ) 6 ( 69 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 16 $ ( 8 ) $ ineffectiveness $ 16 $ ( 8 ) $ 1 Equity Contracts $ ( 8 ) $ 1 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 107 ) $ ( 110 ) ( 107 ) $ ( 110 ) $ 0 Hedged item $ ( 110 ) $ 0 Hedged item 107 110 0 ) $ 0 Hedged item 107 110 0 Total amount of $ 0 Hedged item 107 110 0 Total amount of ineffectiveness 0 Hedged item 107 110 0 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded excluded from effectiveness assessment $ 0 $ ( 9 ) $ assessment $ 0 $ ( 9 ) $ 0 Cash Flow $ ( 9 ) $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2015 2014 2013 Effective Year Ended June 30 , 2015 2014 2013 Effective Portion Gains Ended June 30 , 2015 2014 2013 Effective Portion Gains recognized June 30 , 2015 2014 2013 Effective Portion Gains recognized in of tax effect of $ 35 , $ 2 and $ of $ 35 , $ 2 and $ 54 ) $ , $ 2 and $ 54 ) $ 1,152 $ 63 and $ 54 ) $ 1,152 $ 63 $ 101 Gains 54 ) $ 1,152 $ 63 $ 101 Gains reclassified from $ 1,152 $ 63 $ 101 Gains reclassified from AOCI into from AOCI into revenue $ 608 $ 104 $ 195 Amount into revenue $ 608 $ 104 $ 195 Amount Excluded from $ 608 $ 104 $ 195 Amount Excluded from Effectiveness Assessment ) , net $ ( 346 ) $ ( 239 ) ( 346 ) $ ( 239 ) $ ( 168 ) ( 239 ) $ ( 168 ) We estimate that $ ) We estimate that $ 492 million of net derivative gain included in AOCI at June 30 , 2015 will be reclassified AOCI at June 30 , 2015 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2015 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2015 2014 2013 Foreign Year Ended June 30 , 2015 2014 2013 Foreign exchange contract Ended June 30 , 2015 2014 2013 Foreign exchange contract $ June 30 , 2015 2014 2013 Foreign exchange contract $ ( Foreign exchange contract $ ( 483 ) $ ( 78 ) ( 483 ) $ ( 78 ) $ 18 Equity contract $ ( 78 ) $ 18 Equity contract ( 19 ) $ 18 Equity contract ( 19 ) ( 64 ) 16 contract ( 19 ) ( 64 ) 16 Interest-rate contract 23 19 ) ( 64 ) 16 Interest-rate contract 23 24 ( 64 ) 16 Interest-rate contract 23 24 ( 11 ) Credit ) 16 Interest-rate contract 23 24 ( 11 ) Credit contract Interest-rate contract 23 24 ( 11 ) Credit contract ( 1 11 ) Credit contract ( 1 ) 13 ( 3 ) Credit contract ( 1 ) 13 ( 3 ) Commodity contract ( 1 ) 13 ( 3 ) Commodity contract ( 223 3 ) Commodity contract ( 223 ) 71 ( 42 ) Commodity contract ( 223 ) 71 ( 42 ) Total $ ( 223 ) 71 ( 42 ) Total $ ( 703 42 ) Total $ ( 703 ) $ ( 34 ) ( 703 ) $ ( 34 ) $ ( 22 ) ( 34 ) $ ( 22 ) 71 Table of Contents ) $ ( 22 ) 71 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2015 Assets Mutual fund Fair Value June 30 , 2015 Assets Mutual fund $ 1,100 2015 Assets Mutual fund $ 1,100 $ 0 $ 0 $ Mutual fund $ 1,100 $ 0 $ 0 $ 1,100 $ $ 1,100 $ 0 $ 0 $ 1,100 $ 0 $ $ 0 $ 0 $ 1,100 $ 0 $ 1,100 Commercial $ 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 1 0 0 $ 1,100 Commercial paper 0 1 0 1 0 1 $ 1,100 Commercial paper 0 1 0 1 0 1 Certificates 1,100 Commercial paper 0 1 0 1 0 1 Certificates of Commercial paper 0 1 0 1 0 1 Certificates of deposit paper 0 1 0 1 0 1 Certificates of deposit 0 0 1 0 1 0 1 Certificates of deposit 0 906 0 1 Certificates of deposit 0 906 0 906 0 906 1 Certificates of deposit 0 906 0 906 0 906 U.S. Certificates of deposit 0 906 0 906 0 906 U.S. government of deposit 0 906 0 906 0 906 U.S. government and deposit 0 906 0 906 0 906 U.S. government and agency 0 906 0 906 0 906 U.S. government and agency security U.S. government and agency security 71,930 955 0 72,885 0 72,885 government and agency security 71,930 955 0 72,885 0 72,885 Foreign and agency security 71,930 955 0 72,885 0 72,885 Foreign government agency security 71,930 955 0 72,885 0 72,885 Foreign government bond security 71,930 955 0 72,885 0 72,885 Foreign government bond 131 71,930 955 0 72,885 0 72,885 Foreign government bond 131 5,299 0 72,885 Foreign government bond 131 5,299 0 5,430 0 5,430 72,885 Foreign government bond 131 5,299 0 5,430 0 5,430 Mortgage- Foreign government bond 131 5,299 0 5,430 0 5,430 Mortgage- and government bond 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed bond 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed security 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed security 0 5,430 Mortgage- and asset-backed security 0 4,917 0 4,917 0 4,917 Mortgage- and asset-backed security 0 4,917 0 4,917 0 4,917 Corporate and asset-backed security 0 4,917 0 4,917 0 4,917 Corporate note asset-backed security 0 4,917 0 4,917 0 4,917 Corporate note and security 0 4,917 0 4,917 0 4,917 Corporate note and bond 0 4,917 0 4,917 0 4,917 Corporate note and bond 0 4,917 Corporate note and bond 0 7,108 1 7,109 0 7,109 Corporate note and bond 0 7,108 1 7,109 0 7,109 Municipal note and bond 0 7,108 1 7,109 0 7,109 Municipal security and bond 0 7,108 1 7,109 0 7,109 Municipal security 0 bond 0 7,108 1 7,109 0 7,109 Municipal security 0 319 0 7,108 1 7,109 0 7,109 Municipal security 0 319 0 7,109 0 7,109 Municipal security 0 319 0 319 0 319 0 7,109 Municipal security 0 319 0 319 0 319 Common 7,109 Municipal security 0 319 0 319 0 319 Common and Municipal security 0 319 0 319 0 319 Common and preferred security 0 319 0 319 0 319 Common and preferred stock 0 319 0 319 0 319 Common and preferred stock 8,585 319 Common and preferred stock 8,585 2,277 14 10,876 0 10,876 Common and preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives and preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 5 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 5 988 14 10,876 0 10,876 Derivatives 4 979 5 988 ( 162 10,876 0 10,876 Derivatives 4 979 5 988 ( 162 ) 0 10,876 Derivatives 4 979 5 988 ( 162 ) 826 10,876 Derivatives 4 979 5 988 ( 162 ) 826 Total 4 979 5 988 ( 162 ) 826 Total $ 81,750 5 988 ( 162 ) 826 Total $ 81,750 $ 22,761 162 ) 826 Total $ 81,750 $ 22,761 $ 20 $ 826 Total $ 81,750 $ 22,761 $ 20 $ 104,531 $ $ 81,750 $ 22,761 $ 20 $ 104,531 $ ( 162 $ 22,761 $ 20 $ 104,531 $ ( 162 ) $ 20 $ 104,531 $ ( 162 ) $ 104,369 Liabilities Derivatives $ ( 162 ) $ 104,369 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 159 $ 54 $ and other $ 5 $ 159 $ 54 $ 218 $ $ 5 $ 159 $ 54 $ 218 $ ( 161 $ 159 $ 54 $ 218 $ ( 161 ) $ 54 $ 218 $ ( 161 ) $ 57 ( In $ ( 161 ) $ 57 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2014 Assets Mutual fund Fair Value June 30 , 2014 Assets Mutual fund $ 590 2014 Assets Mutual fund $ 590 $ 0 $ 0 $ Mutual fund $ 590 $ 0 $ 0 $ 590 $ $ 590 $ 0 $ 0 $ 590 $ 0 $ $ 0 $ 0 $ 590 $ 0 $ 590 Commercial $ 0 $ 590 $ 0 $ 590 Commercial paper 0 $ 590 $ 0 $ 590 Commercial paper 0 189 0 0 $ 590 Commercial paper 0 189 0 189 0 189 $ 590 Commercial paper 0 189 0 189 0 189 Certificates 590 Commercial paper 0 189 0 189 0 189 Certificates of Commercial paper 0 189 0 189 0 189 Certificates of deposit paper 0 189 0 189 0 189 Certificates of deposit 0 0 189 0 189 0 189 Certificates of deposit 0 1,197 0 189 Certificates of deposit 0 1,197 0 1,197 0 1,197 189 Certificates of deposit 0 1,197 0 1,197 0 1,197 U.S. Certificates of deposit 0 1,197 0 1,197 0 1,197 U.S. government of deposit 0 1,197 0 1,197 0 1,197 U.S. government and deposit 0 1,197 0 1,197 0 1,197 U.S. government and agency 0 1,197 0 1,197 0 1,197 U.S. government and agency security U.S. government and agency security 66,288 745 0 67,033 0 67,033 government and agency security 66,288 745 0 67,033 0 67,033 Foreign and agency security 66,288 745 0 67,033 0 67,033 Foreign government agency security 66,288 745 0 67,033 0 67,033 Foreign government bond security 66,288 745 0 67,033 0 67,033 Foreign government bond 139 66,288 745 0 67,033 0 67,033 Foreign government bond 139 3,210 0 67,033 Foreign government bond 139 3,210 0 3,349 0 3,349 67,033 Foreign government bond 139 3,210 0 3,349 0 3,349 Mortgage- Foreign government bond 139 3,210 0 3,349 0 3,349 Mortgage- and government bond 139 3,210 0 3,349 0 3,349 Mortgage- and asset-backed bond 139 3,210 0 3,349 0 3,349 Mortgage- and asset-backed security 139 3,210 0 3,349 0 3,349 Mortgage- and asset-backed security 0 3,349 Mortgage- and asset-backed security 0 1,015 0 1,015 0 1,015 Mortgage- and asset-backed security 0 1,015 0 1,015 0 1,015 Corporate and asset-backed security 0 1,015 0 1,015 0 1,015 Corporate note asset-backed security 0 1,015 0 1,015 0 1,015 Corporate note and security 0 1,015 0 1,015 0 1,015 Corporate note and bond 0 1,015 0 1,015 0 1,015 Corporate note and bond 0 1,015 Corporate note and bond 0 6,863 0 6,863 0 6,863 Corporate note and bond 0 6,863 0 6,863 0 6,863 Municipal note and bond 0 6,863 0 6,863 0 6,863 Municipal security and bond 0 6,863 0 6,863 0 6,863 Municipal security 0 bond 0 6,863 0 6,863 0 6,863 Municipal security 0 332 0 6,863 0 6,863 0 6,863 Municipal security 0 332 0 6,863 0 6,863 Municipal security 0 332 0 332 0 332 0 6,863 Municipal security 0 332 0 332 0 332 Common 6,863 Municipal security 0 332 0 332 0 332 Common and Municipal security 0 332 0 332 0 332 Common and preferred security 0 332 0 332 0 332 Common and preferred stock 0 332 0 332 0 332 Common and preferred stock 9,552 332 Common and preferred stock 9,552 1,825 14 11,391 0 11,391 Common and preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives and preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 preferred stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 stock 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 7 9,552 1,825 14 11,391 0 11,391 Derivatives 5 348 7 360 14 11,391 0 11,391 Derivatives 5 348 7 360 ( 155 11,391 0 11,391 Derivatives 5 348 7 360 ( 155 ) 0 11,391 Derivatives 5 348 7 360 ( 155 ) 205 11,391 Derivatives 5 348 7 360 ( 155 ) 205 Total 5 348 7 360 ( 155 ) 205 Total $ 76,574 7 360 ( 155 ) 205 Total $ 76,574 $ 15,724 155 ) 205 Total $ 76,574 $ 15,724 $ 21 $ 205 Total $ 76,574 $ 15,724 $ 21 $ 92,319 $ $ 76,574 $ 15,724 $ 21 $ 92,319 $ ( 155 $ 15,724 $ 21 $ 92,319 $ ( 155 ) $ 21 $ 92,319 $ ( 155 ) $ 92,164 Liabilities Derivatives $ ( 155 ) $ 92,164 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 153 $ 126 $ and other $ 5 $ 153 $ 126 $ 284 $ $ 5 $ 153 $ 126 $ 284 $ ( 155 $ 153 $ 126 $ 284 $ ( 155 ) $ 126 $ 284 $ ( 155 ) $ 129 ( a $ ( 155 ) $ 129 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 72 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2015 2014 Net fair million ) June 30 , 2015 2014 Net fair value of ) June 30 , 2015 2014 Net fair value of asset on a recurring basis $ 104,369 $ 92,164 Cash 3,679 4,980 recurring basis $ 104,369 $ 92,164 Cash 3,679 4,980 Common and $ 104,369 $ 92,164 Cash 3,679 4,980 Common and preferred stock 104,369 $ 92,164 Cash 3,679 4,980 Common and preferred stock measured value on a nonrecurring basis 561 520 Other investment measured at on a nonrecurring basis 561 520 Other investment measured at fair value on a nonrecurring basis 589 1,150 Less derivative net asset on a nonrecurring basis 589 1,150 Less derivative net asset classified a other current asset ( 648 ) ( 38 ) Other asset ( 648 ) ( 38 ) Other 4 ( 6 ) ( 38 ) Other 4 ( 6 ) Recorded basis 38 ) Other 4 ( 6 ) Recorded basis of investment basis of investment component $ 108,554 $ 98,770 Financial Assets and investment component $ 108,554 $ 98,770 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2015 and 2014 , we did During fiscal year 2015 and 2014 , we did not record a nonrecurring basis . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2015 2014 Raw material million ) June 30 , 2015 2014 Raw material $ 1,100 ) June 30 , 2015 2014 Raw material $ 1,100 $ 2015 2014 Raw material $ 1,100 $ 944 Work in process Raw material $ 1,100 $ 944 Work in process 202 266 $ 944 Work in process 202 266 Finished good 1,600 1,450 944 Work in process 202 266 Finished good 1,600 1,450 Total process 202 266 Finished good 1,600 1,450 Total $ 2,902 $ 202 266 Finished good 1,600 1,450 Total $ 2,902 $ 2,660 good 1,600 1,450 Total $ 2,902 $ 2,660 NOTE 8 — 1,450 Total $ 2,902 $ 2,660 NOTE 8 — PROPERTY AND $ 2,902 $ 2,660 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2015 2014 Land $ million ) June 30 , 2015 2014 Land $ 769 $ ) June 30 , 2015 2014 Land $ 769 $ 541 , 2015 2014 Land $ 769 $ 541 Buildings and improvement 2014 Land $ 769 $ 541 Buildings and improvement 10,800 8,867 $ 541 Buildings and improvement 10,800 8,867 Leasehold improvement 3,577 3,560 541 Buildings and improvement 10,800 8,867 Leasehold improvement 3,577 3,560 Computer improvement 10,800 8,867 Leasehold improvement 3,577 3,560 Computer equipment and software 10,800 8,867 Leasehold improvement 3,577 3,560 Computer equipment and software 13,612 3,560 Computer equipment and software 13,612 11,430 Furniture and equipment 3,579 Computer equipment and software 13,612 11,430 Furniture and equipment 3,579 3,406 13,612 11,430 Furniture and equipment 3,579 3,406 Total , at cost 11,430 Furniture and equipment 3,579 3,406 Total , at cost 32,337 3,406 Total , at cost 32,337 27,804 Accumulated depreciation ( 17,606 Total , at cost 32,337 27,804 Accumulated depreciation ( 17,606 ) 32,337 27,804 Accumulated depreciation ( 17,606 ) ( 14,793 ) Total depreciation ( 17,606 ) ( 14,793 ) Total , net $ ) Total , net $ 14,731 $ 13,011 During fiscal year , net $ 14,731 $ 13,011 During fiscal year 2015 , $ 13,011 During fiscal year 2015 , 2014 , and 2013 During fiscal year 2015 , 2014 , and 2013 , depreciation 2015 , 2014 , and 2013 , depreciation expense wa $ , depreciation expense wa $ 4.1 billion , $ 3.4 billion $ 4.1 billion , $ 3.4 billion , and $ 2.6 3.4 billion , and $ 2.6 billion , respectively . 73 2.6 billion , respectively . 73 Table of Contents PART II of Contents PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS Mojang Synergies Mojang Synergies AB On November 6 , 2014 , we acquired AB On November 6 , 2014 , we acquired Mojang Synergies gaming franchise , for $ 2.5 billion in cash , net price were goodwill of $ 1.8 billion and identifiable intangible asset identifiable intangible asset of $ 928 million , primarily marketing-related ( total weighted-average amortization period of 6.3 year . Mojang ha been and Services Business On April 25 , 2014 , we acquired Business On April 25 , 2014 , we acquired substantially all total purchase price of $ 9.4 billion , including cash acquired including cash acquired of $ 1.5 billion ( the “ Acquisition primarily of cash of $ 7.1 billion and Nokia ’ s of convertible note of $ 2.1 billion , which wa a and liability assumed of $ 0.2 billion . The Acquisition wa wa completed a of March 31 , 2015 . The major a of March 31 , 2015 . The major class of In million ) Cash $ 1,506 Accounts receivable ( a ) Accounts receivable ( a ) 754 Inventories 544 Other current asset ( a ) 754 Inventories 544 Other current asset 936 Property Inventories 544 Other current asset 936 Property and equipment 981 Intangible asset 936 Property and equipment 981 Intangible asset 4,509 Goodwill ( and equipment 981 Intangible asset 4,509 Goodwill ( b ) 5,456 4,509 Goodwill ( b ) 5,456 Other 221 Current liability ( ( b ) 5,456 Other 221 Current liability ( 4,575 ) Other 221 Current liability ( 4,575 ) Long-term liability ( 890 4,575 ) Long-term liability ( 890 ) Total purchase price $ ) Total purchase price $ 9,442 ( a ) Gross account Gross account receivable wa $ 901 million , of which $ million , of which $ 147 million wa expected to be the integration of NDS . 74 Table of Contents PART II of Contents PART II Item 8 Following are the detail of Weighted Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 year $ 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 year Contract-based 1,500 9 year Customer-related 359 3 year Marketing-related ( trade 1,500 9 year Customer-related 359 3 year Marketing-related ( trade name Marketing-related ( trade name ) 157 2 year Fair value of ( trade name ) 157 2 year Fair value of intangible of intangible asset acquired $ 4,509 8 year During the fourth intangible asset acquired $ 4,509 8 year During the fourth quarter fourth quarter of fiscal year 2015 , we recorded $ 7.5 2015 , we recorded $ 7.5 billion of goodwill and asset income statement . See Note 10 – Goodwill and Note 11 10 – Goodwill and Note 11 – Intangible Assets for additional income statement for fiscal year 2014 included revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 2013 Revenue $ Year Ended June 30 , 2014 2013 Revenue $ 96,248 $ Ended June 30 , 2014 2013 Revenue $ 96,248 $ 93,243 , 2014 2013 Revenue $ 96,248 $ 93,243 Net income $ 2013 Revenue $ 96,248 $ 93,243 Net income $ 20,234 $ $ 93,243 Net income $ 20,234 $ 20,153 Diluted earnings per Net income $ 20,234 $ 20,153 Diluted earnings per share $ Diluted earnings per share $ 2.41 $ 2.38 These pro forma per share $ 2.41 $ 2.38 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were rendered . Yammer On July 18 , 2012 , we acquired Yammer On July 18 , 2012 , we acquired Yammer , social network , for $ 1.1 billion in cash . Yammer price were goodwill of $ 937 million and identifiable intangible asset identifiable intangible asset of $ 178 million . We assigned the on the acquisition date . 75 Table of Contents PART II of Contents PART II Item 8 Other During fiscal year 2015 8 Other During fiscal year 2015 , we completed 15 additional year 2015 , we completed 15 additional acquisition for total cash total cash consideration of $ 892 million . These entity have result of operation . NOTE 10 — GOODWILL Changes in the ( In million ) June 30 , 2013 Acquisitions Other June million ) June 30 , 2013 Acquisitions Other June 30 , , 2013 Acquisitions Other June 30 , 2014 Acquisitions Other June Acquisitions Other June 30 , 2014 Acquisitions Other June 30 , , 2014 Acquisitions Other June 30 , 2015 Devices and Consumer Acquisitions Other June 30 , 2015 Devices and Consumer Licensing $ Devices and Consumer Licensing $ 866 $ 0 $ 2 $ Consumer Licensing $ 866 $ 0 $ 2 $ 868 $ $ 866 $ 0 $ 2 $ 868 $ 4 $ $ 0 $ 2 $ 868 $ 4 $ 0 $ $ 2 $ 868 $ 4 $ 0 $ 872 Hardware $ 868 $ 4 $ 0 $ 872 Hardware : Computing $ 4 $ 0 $ 872 Hardware : Computing and Gaming : Computing and Gaming Hardware 1,689 0 9 1,698 13 ( Computing and Gaming Hardware 1,689 0 9 1,698 13 ( 36 and Gaming Hardware 1,689 0 9 1,698 13 ( 36 ) Gaming Hardware 1,689 0 9 1,698 13 ( 36 ) 1,675 Hardware 1,689 0 9 1,698 13 ( 36 ) 1,675 Phone 0 9 1,698 13 ( 36 ) 1,675 Phone Hardware 0 1,698 13 ( 36 ) 1,675 Phone Hardware 0 5,458 ( 36 ) 1,675 Phone Hardware 0 5,458 ( a ) ( ) 1,675 Phone Hardware 0 5,458 ( a ) ( 104 5,458 ( a ) ( 104 ) 5,354 0 ( 5,238 a ) ( 104 ) 5,354 0 ( 5,238 ) 116 ) ( 104 ) 5,354 0 ( 5,238 ) 116 Total 104 ) 5,354 0 ( 5,238 ) 116 Total Devices and 5,354 0 ( 5,238 ) 116 Total Devices and Consumer Hardware Total Devices and Consumer Hardware 1,689 5,458 ( 95 ) 7,052 Devices and Consumer Hardware 1,689 5,458 ( 95 ) 7,052 13 Consumer Hardware 1,689 5,458 ( 95 ) 7,052 13 ( 5,274 1,689 5,458 ( 95 ) 7,052 13 ( 5,274 ) 1,791 5,458 ( 95 ) 7,052 13 ( 5,274 ) 1,791 Other 95 ) 7,052 13 ( 5,274 ) 1,791 Other 738 0 7,052 13 ( 5,274 ) 1,791 Other 738 0 0 738 ( 5,274 ) 1,791 Other 738 0 0 738 1,772 ( 5,274 ) 1,791 Other 738 0 0 738 1,772 ( 195 ) 1,791 Other 738 0 0 738 1,772 ( 195 ) 1,791 Other 738 0 0 738 1,772 ( 195 ) 2,315 Other 738 0 0 738 1,772 ( 195 ) 2,315 Total 0 0 738 1,772 ( 195 ) 2,315 Total Devices and 738 1,772 ( 195 ) 2,315 Total Devices and Consumer 3,293 2,315 Total Devices and Consumer 3,293 5,458 ( 93 ) 8,658 Total Devices and Consumer 3,293 5,458 ( 93 ) 8,658 1,789 and Consumer 3,293 5,458 ( 93 ) 8,658 1,789 ( 5,469 3,293 5,458 ( 93 ) 8,658 1,789 ( 5,469 ) 4,978 5,458 ( 93 ) 8,658 1,789 ( 5,469 ) 4,978 Commercial 93 ) 8,658 1,789 ( 5,469 ) 4,978 Commercial Licensing 10,051 8,658 1,789 ( 5,469 ) 4,978 Commercial Licensing 10,051 2 5 5,469 ) 4,978 Commercial Licensing 10,051 2 5 10,058 77 ( ) 4,978 Commercial Licensing 10,051 2 5 10,058 77 ( 170 4,978 Commercial Licensing 10,051 2 5 10,058 77 ( 170 ) Commercial Licensing 10,051 2 5 10,058 77 ( 170 ) 9,965 Licensing 10,051 2 5 10,058 77 ( 170 ) 9,965 Other 2 5 10,058 77 ( 170 ) 9,965 Other 1,311 105 10,058 77 ( 170 ) 9,965 Other 1,311 105 ( 5 ( 170 ) 9,965 Other 1,311 105 ( 5 ) 1,411 170 ) 9,965 Other 1,311 105 ( 5 ) 1,411 589 9,965 Other 1,311 105 ( 5 ) 1,411 589 ( 4 1,311 105 ( 5 ) 1,411 589 ( 4 ) 1,996 105 ( 5 ) 1,411 589 ( 4 ) 1,996 Total 5 ) 1,411 589 ( 4 ) 1,996 Total Commercial 11,362 1,411 589 ( 4 ) 1,996 Total Commercial 11,362 107 0 4 ) 1,996 Total Commercial 11,362 107 0 11,469 666 ( ) 1,996 Total Commercial 11,362 107 0 11,469 666 ( 174 1,996 Total Commercial 11,362 107 0 11,469 666 ( 174 ) Total Commercial 11,362 107 0 11,469 666 ( 174 ) 11,961 Commercial 11,362 107 0 11,469 666 ( 174 ) 11,961 Total 107 0 11,469 666 ( 174 ) 11,961 Total goodwill $ 11,469 666 ( 174 ) 11,961 Total goodwill $ 14,655 $ ) 11,961 Total goodwill $ 14,655 $ 5,565 $ ( 93 Total goodwill $ 14,655 $ 5,565 $ ( 93 ) $ 14,655 $ 5,565 $ ( 93 ) $ 20,127 $ 2,455 $ ( 93 ) $ 20,127 $ 2,455 $ ( 5,643 93 ) $ 20,127 $ 2,455 $ ( 5,643 ) $ 20,127 $ 2,455 $ ( 5,643 ) $ 16,939 ( a $ ( 5,643 ) $ 16,939 ( a ) Goodwill acquired Goodwill acquired during fiscal year 2014 related to the acquisition of of NDS . See Note 9 – Business Combinations for additional , but do not exceed 12 month . Adjustments in purchase applicable . For fiscal year 2015 , a $ 5.1 billion year 2015 , a $ 5.1 billion goodwill impairment charge wa by segment group in Note 22 – Segment Information and Geographic goodwill impairment a of June 30 , 2015 and 2014 wa a of June 30 , 2015 and 2014 wa $ 11.3 June 30 , 2015 and 2014 wa $ 11.3 billion and 2015 and 2014 wa $ 11.3 billion and $ 6.2 billion $ 11.3 billion and $ 6.2 billion , respectively . 76 6.2 billion , respectively . 76 Table of Contents PART II of Contents PART II Item 8 Goodwill Impairment We test goodwill for impairment annually on May 1 at the reporting unit level annual testing a of May 1 , 2015 , Phone Hardware a of May 1 , 2015 , Phone Hardware goodwill wa second half of fiscal year 2015 , Phone Hardware did not impairment test ( “ Step 2 ” ) wa performed specific Phone Hardware . Under Step 2 , the fair value of were identified in our May 1 , 2015 test . No in our May 1 , 2015 test . No impairment of wa identified a of May 1 , 2014 . NOTE 11 a of May 1 , 2014 . NOTE 11 — INTANGIBLE 1 , 2014 . NOTE 11 — INTANGIBLE ASSETS The component Carrying Amount Year Ended June 30 , 2015 2014 Technology-based ( Year Ended June 30 , 2015 2014 Technology-based ( a ) Ended June 30 , 2015 2014 Technology-based ( a ) $ Technology-based ( a ) $ 6,187 $ ( 3,410 ) $ ) $ 6,187 $ ( 3,410 ) $ 2,777 $ 6,440 $ ( 3,410 ) $ 2,777 $ 6,440 $ ( 2,615 3,410 ) $ 2,777 $ 6,440 $ ( 2,615 ) $ 2,777 $ 6,440 $ ( 2,615 ) $ 3,825 Marketing-related 1,974 $ ( 2,615 ) $ 3,825 Marketing-related 1,974 ( 540 ) 2,615 ) $ 3,825 Marketing-related 1,974 ( 540 ) 1,434 1,518 $ 3,825 Marketing-related 1,974 ( 540 ) 1,434 1,518 ( 324 Marketing-related 1,974 ( 540 ) 1,434 1,518 ( 324 ) 1,194 1,974 ( 540 ) 1,434 1,518 ( 324 ) 1,194 Contract-based 540 ) 1,434 1,518 ( 324 ) 1,194 Contract-based 1,344 ( 1,434 1,518 ( 324 ) 1,194 Contract-based 1,344 ( 862 ) ( 324 ) 1,194 Contract-based 1,344 ( 862 ) 482 2,266 ) 1,194 Contract-based 1,344 ( 862 ) 482 2,266 ( 716 Contract-based 1,344 ( 862 ) 482 2,266 ( 716 ) 1,550 1,344 ( 862 ) 482 2,266 ( 716 ) 1,550 Customer-related 862 ) 482 2,266 ( 716 ) 1,550 Customer-related 632 ( 482 2,266 ( 716 ) 1,550 Customer-related 632 ( 490 ) ( 716 ) 1,550 Customer-related 632 ( 490 ) 142 732 ) 1,550 Customer-related 632 ( 490 ) 142 732 ( 320 Customer-related 632 ( 490 ) 142 732 ( 320 ) 412 632 ( 490 ) 142 732 ( 320 ) 412 Total 490 ) 142 732 ( 320 ) 412 Total $ 10,137 142 732 ( 320 ) 412 Total $ 10,137 $ ( 320 ) 412 Total $ 10,137 $ ( 5,302 ) $ Total $ 10,137 $ ( 5,302 ) $ 4,835 $ 10,956 $ ( 5,302 ) $ 4,835 $ 10,956 $ ( 3,975 5,302 ) $ 4,835 $ 10,956 $ ( 3,975 ) $ 4,835 $ 10,956 $ ( 3,975 ) $ 6,981 ( a $ ( 3,975 ) $ 6,981 ( a ) Technology-based intangible Technology-based intangible asset included $ 116 million and $ 98 million $ 116 million and $ 98 million a of June 30 98 million a of June 30 , 2015 and 2014 , a of June 30 , 2015 and 2014 , respectively , June 30 , 2015 and 2014 , respectively , of net asset . During fiscal year 2015 , we recorded impairment charge recorded impairment charge of $ 2.2 billion related to our Phone fourth quarter of fiscal year 2015 , we tested the intangible by segment group in Note 22 – Segment Information and Geographic were identified during fiscal year 2014 . 77 Table of Contents during fiscal year 2014 . 77 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2015 2014 Technology-based $ Year Ended June 30 , 2015 2014 Technology-based $ 874 5 Ended June 30 , 2015 2014 Technology-based $ 874 5 year , 2015 2014 Technology-based $ 874 5 year $ 2,841 9 2015 2014 Technology-based $ 874 5 year $ 2,841 9 year $ 874 5 year $ 2,841 9 year Marketing-related 543 8 874 5 year $ 2,841 9 year Marketing-related 543 8 year $ 2,841 9 year Marketing-related 543 8 year 174 2 year 2,841 9 year Marketing-related 543 8 year 174 2 year Contract-based year Marketing-related 543 8 year 174 2 year Contract-based 0 1,500 Marketing-related 543 8 year 174 2 year Contract-based 0 1,500 9 year 174 2 year Contract-based 0 1,500 9 year Customer-related 37 174 2 year Contract-based 0 1,500 9 year Customer-related 37 4 2 year Contract-based 0 1,500 9 year Customer-related 37 4 year 0 1,500 9 year Customer-related 37 4 year 363 3 year 1,500 9 year Customer-related 37 4 year 363 3 year Total year Customer-related 37 4 year 363 3 year Total $ 1,454 Customer-related 37 4 year 363 3 year Total $ 1,454 6 363 3 year Total $ 1,454 6 year $ 4,878 8 3 year Total $ 1,454 6 year $ 4,878 8 year $ 1,454 6 year $ 4,878 8 year The table above 1,454 6 year $ 4,878 8 year The table above includes The table above includes $ 4.5 billion related to the acquisition of NDS during fiscal year 2014 , of which $ 2.2 2014 , of which $ 2.2 billion wa impaired in fiscal wa impaired in fiscal year 2015 . See Note 9 – year 2015 . See Note 9 – Business Combination for additional asset amortization expense wa $ 1.3 billion , $ 845 million $ 1.3 billion , $ 845 million , and $ 739 845 million , and $ 739 million for fiscal year 2015 739 million for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . Amortization of of capitalized software wa $ 79 million , $ 200 million $ 79 million , $ 200 million , and $ 210 200 million , and $ 210 million for fiscal year 2015 210 million for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . The following intangible asset held at June 30 , 2015 : ( In held at June 30 , 2015 : ( In million ) million ) Year Ending June 30 , 2016 $ 910 2017 Year Ending June 30 , 2016 $ 910 2017 755 2018 June 30 , 2016 $ 910 2017 755 2018 670 2019 30 , 2016 $ 910 2017 755 2018 670 2019 554 , 2016 $ 910 2017 755 2018 670 2019 554 2020 2016 $ 910 2017 755 2018 670 2019 554 2020 495 $ 910 2017 755 2018 670 2019 554 2020 495 Thereafter 910 2017 755 2018 670 2019 554 2020 495 Thereafter 1,451 2017 755 2018 670 2019 554 2020 495 Thereafter 1,451 Total 755 2018 670 2019 554 2020 495 Thereafter 1,451 Total $ 2018 670 2019 554 2020 495 Thereafter 1,451 Total $ 4,835 2019 554 2020 495 Thereafter 1,451 Total $ 4,835 NOTE 12 495 Thereafter 1,451 Total $ 4,835 NOTE 12 — DEBT Short-term 1,451 Total $ 4,835 NOTE 12 — DEBT Short-term Debt As Short-term Debt As of June 30 , 2015 , we had As of June 30 , 2015 , we had $ 5.0 2015 , we had $ 5.0 billion of commercial paper issued a weighted-average interest rate of 0.11 % and maturity ranging from % and maturity ranging from 8 day to 63 day . ranging from 8 day to 63 day . As of June day . As of June 30 , 2014 , we had As of June 30 , 2014 , we had $ 2.0 2014 , we had $ 2.0 billion of commercial paper issued a weighted-average interest rate of 0.12 % and maturity ranging from % and maturity ranging from 86 to 91 day . The maturity ranging from 86 to 91 day . The estimated fair . We have two $ 5.0 billion credit facility that expire facility that expire on November 4 , 2015 and November 14 expire on November 4 , 2015 and November 14 , 2018 4 , 2015 and November 14 , 2018 , respectively . 2015 and November 14 , 2018 , respectively . These credit program . As of June 30 , 2015 , we were As of June 30 , 2015 , we were in compliance Long-term Debt As of June 30 , 2015 , the total As of June 30 , 2015 , the total carrying value current portion , were $ 30.3 billion and $ 30.5 billion $ 30.3 billion and $ 30.5 billion , respectively . This our long-term debt of $ 20.6 billion and $ 21.5 billion $ 20.6 billion and $ 21.5 billion , respectively , a respectively , a of June 30 , 2014 . These estimated a of June 30 , 2014 . These estimated fair value value are based on Level 2 input . 78 Table of on Level 2 input . 78 Table of Contents PART II of Contents PART II Item 8 The component of our long-term a follows a of June 30 , 2015 and 2014 : a of June 30 , 2015 and 2014 : Due Date June 30 , 2015 and 2014 : Due Date Face Value Due Date Face Value June 30 , 2015 Face Value June Face Value June 30 , 2015 Face Value June 30 , , 2015 Face Value June 30 , 2014 Stated Interest Rate Face Value June 30 , 2014 Stated Interest Rate Effective Interest In million ) Notes September 25 , 2015 $ 1,750 $ ) Notes September 25 , 2015 $ 1,750 $ 1,750 1.625 September 25 , 2015 $ 1,750 $ 1,750 1.625 % 1.795 , 2015 $ 1,750 $ 1,750 1.625 % 1.795 % February 2015 $ 1,750 $ 1,750 1.625 % 1.795 % February 8 1,750 $ 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 750 750 2.500 1.795 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % February 8 , 2016 750 750 2.500 % 2.642 % November 8 , 2016 750 750 2.500 % 2.642 % November 15 2016 750 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 600 600 0.875 2.642 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % May 15 , 2017 600 600 0.875 % 1.084 % May 1 2017 600 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 450 450 1.000 1.084 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % December 1 , 2018 450 450 1.000 % 1.106 % December 6 2018 450 450 1.000 % 1.106 % December 6 , 2018 1.000 % 1.106 % December 6 , 2018 1,250 1,250 1.625 1.106 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % June 6 , 2018 1,250 1,250 1.625 % 1.824 % June 1 2018 1,250 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 1,000 4.200 1.824 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % February 1 , 2019 1,000 1,000 4.200 % 4.379 % February 12 2019 1,000 1,000 4.200 % 4.379 % February 12 , 2020 4.200 % 4.379 % February 12 , 2020 ( a ) 4.379 % February 12 , 2020 ( a ) 1,500 0 , 2020 ( a ) 1,500 0 1.850 % 1.935 % 2020 ( a ) 1,500 0 1.850 % 1.935 % October ( a ) 1,500 0 1.850 % 1.935 % October 1 ) 1,500 0 1.850 % 1.935 % October 1 , 2020 1.850 % 1.935 % October 1 , 2020 1,000 1,000 3.000 1.935 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % February 1 , 2020 1,000 1,000 3.000 % 3.137 % February 8 2020 1,000 1,000 3.000 % 3.137 % February 8 , 2021 3.000 % 3.137 % February 8 , 2021 500 500 4.000 3.137 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % December 8 , 2021 500 500 4.000 % 4.082 % December 6 2021 500 500 4.000 % 4.082 % December 6 , 2021 4.000 % 4.082 % December 6 , 2021 ( b ) 4.082 % December 6 , 2021 ( b ) 1,950 2,396 , 2021 ( b ) 1,950 2,396 2.125 % 2.233 % 2021 ( b ) 1,950 2,396 2.125 % 2.233 % February ( b ) 1,950 2,396 2.125 % 2.233 % February 12 ) 1,950 2,396 2.125 % 2.233 % February 12 , 2022 2.125 % 2.233 % February 12 , 2022 ( a ) 2.233 % February 12 , 2022 ( a ) 1,500 0 , 2022 ( a ) 1,500 0 2.375 % 2.466 % 2022 ( a ) 1,500 0 2.375 % 2.466 % November ( a ) 1,500 0 2.375 % 2.466 % November 15 ) 1,500 0 2.375 % 2.466 % November 15 , 2022 2.375 % 2.466 % November 15 , 2022 750 750 2.125 2.466 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % December 1 , 2023 1,000 1,000 2.375 % 2.465 % December 15 2023 1,000 1,000 2.375 % 2.465 % December 15 , 2023 2.375 % 2.465 % December 15 , 2023 1,500 1,500 3.625 2.465 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % February 15 , 2023 1,500 1,500 3.625 % 3.726 % February 12 2023 1,500 1,500 3.625 % 3.726 % February 12 , 2025 3.625 % 3.726 % February 12 , 2025 ( a ) 3.726 % February 12 , 2025 ( a ) 2,250 0 , 2025 ( a ) 2,250 0 2.700 % 2.772 % 2025 ( a ) 2,250 0 2.700 % 2.772 % December ( a ) 2,250 0 2.700 % 2.772 % December 6 ) 2,250 0 2.700 % 2.772 % December 6 , 2028 2.700 % 2.772 % December 6 , 2028 ( b ) 2.772 % December 6 , 2028 ( b ) 1,950 2,396 , 2028 ( b ) 1,950 2,396 3.125 % 3.218 % 2028 ( b ) 1,950 2,396 3.125 % 3.218 % May ( b ) 1,950 2,396 3.125 % 3.218 % May 2 ) 1,950 2,396 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( b ) 3.218 % May 2 , 2033 ( b ) 613 753 , 2033 ( b ) 613 753 2.625 % 2.690 % 2033 ( b ) 613 753 2.625 % 2.690 % February ( b ) 613 753 2.625 % 2.690 % February 12 ) 613 753 2.625 % 2.690 % February 12 , 2035 2.625 % 2.690 % February 12 , 2035 ( a ) 2.690 % February 12 , 2035 ( a ) 1,500 0 , 2035 ( a ) 1,500 0 3.500 % 3.604 % 2035 ( a ) 1,500 0 3.500 % 3.604 % June ( a ) 1,500 0 3.500 % 3.604 % June 1 ) 1,500 0 3.500 % 3.604 % June 1 , 2039 3.500 % 3.604 % June 1 , 2039 750 750 5.200 3.604 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 500 500 4.875 3.829 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % February 15 , 2043 500 500 4.875 % 4.918 % February 12 2043 500 500 4.875 % 4.918 % February 12 , 2045 4.875 % 4.918 % February 12 , 2045 ( a ) 4.918 % February 12 , 2045 ( a ) 1,750 0 , 2045 ( a ) 1,750 0 3.750 % 3.800 % 2045 ( a ) 1,750 0 3.750 % 3.800 % February ( a ) 1,750 0 3.750 % 3.800 % February 12 ) 1,750 0 3.750 % 3.800 % February 12 , 2055 3.750 % 3.800 % February 12 , 2055 ( a ) 3.800 % February 12 , 2055 ( a ) 2,250 0 , 2055 ( a ) 2,250 0 4.000 % 4.063 % 2055 ( a ) 2,250 0 4.000 % 4.063 % Total ( a ) 2,250 0 4.000 % 4.063 % Total $ ) 2,250 0 4.000 % 4.063 % Total $ 30,463 $ % 4.063 % Total $ 30,463 $ 20,745 ( a ) % Total $ 30,463 $ 20,745 ( a ) In February ( a ) In February 2015 , we issued $ 10.8 2015 , we issued $ 10.8 billion of debt security . our debt for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 wa $ 2015 , 2014 , and 2013 wa $ 620 million , , and 2013 wa $ 620 million , $ 509 million $ 620 million , $ 509 million , and $ 371 509 million , and $ 371 million , respectively . As respectively . As of June 30 , 2015 and 2014 , As of June 30 , 2015 and 2014 , the aggregate June 30 , 2015 and 2014 , the aggregate unamortized discount current portion , wa $ 156 million and $ 100 million $ 156 million and $ 100 million , respectively . 79 100 million , respectively . 79 Table of Contents PART II of Contents PART II Item 8 Debt Service Maturities of our million ) Year Ending June 30 , 2016 $ 2,500 2017 Year Ending June 30 , 2016 $ 2,500 2017 0 2018 June 30 , 2016 $ 2,500 2017 0 2018 1,050 2019 30 , 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 , 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 2016 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 $ 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 2,500 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 2017 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 Total 0 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 Total $ 2018 1,050 2019 2.250 2020 1,500 Thereafter 23,163 Total $ 30,463 2019 2.250 2020 1,500 Thereafter 23,163 Total $ 30,463 NOTE 13 1,500 Thereafter 23,163 Total $ 30,463 NOTE 13 — INCOME TAXES 23,163 Total $ 30,463 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2015 2014 2013 Current Year Ended June 30 , 2015 2014 2013 Current Taxes U.S. Ended June 30 , 2015 2014 2013 Current Taxes U.S. federal June 30 , 2015 2014 2013 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,661 $ 3,738 $ 3,131 U.S. U.S. federal $ 3,661 $ 3,738 $ 3,131 U.S. state and $ 3,661 $ 3,738 $ 3,131 U.S. state and local 364 3,131 U.S. state and local 364 266 332 Foreign 2,065 2,073 U.S. state and local 364 266 332 Foreign 2,065 2,073 1,745 state and local 364 266 332 Foreign 2,065 2,073 1,745 Current local 364 266 332 Foreign 2,065 2,073 1,745 Current tax 6,090 364 266 332 Foreign 2,065 2,073 1,745 Current tax 6,090 6,077 266 332 Foreign 2,065 2,073 1,745 Current tax 6,090 6,077 5,208 2,065 2,073 1,745 Current tax 6,090 6,077 5,208 Deferred Taxes Deferred 2,073 1,745 Current tax 6,090 6,077 5,208 Deferred Taxes Deferred tax 1,745 Current tax 6,090 6,077 5,208 Deferred Taxes Deferred tax 224 5,208 Deferred Taxes Deferred tax 224 ( 331 ) ( 19 Taxes Deferred tax 224 ( 331 ) ( 19 ) Provision 224 ( 331 ) ( 19 ) Provision for income tax Provision for income tax $ 6,314 $ 5,746 $ 5,189 U.S. income tax $ 6,314 $ 5,746 $ 5,189 U.S. and foreign $ 6,314 $ 5,746 $ 5,189 U.S. and foreign component of million ) Year Ended June 30 , 2015 2014 2013 U.S. Year Ended June 30 , 2015 2014 2013 U.S. $ 7,363 Ended June 30 , 2015 2014 2013 U.S. $ 7,363 $ June 30 , 2015 2014 2013 U.S. $ 7,363 $ 7,127 2015 2014 2013 U.S. $ 7,363 $ 7,127 $ 6,674 Foreign 2013 U.S. $ 7,363 $ 7,127 $ 6,674 Foreign 11,144 20,693 $ 7,363 $ 7,127 $ 6,674 Foreign 11,144 20,693 20,378 Income $ 7,127 $ 6,674 Foreign 11,144 20,693 20,378 Income before income 7,127 $ 6,674 Foreign 11,144 20,693 20,378 Income before income tax $ 6,674 Foreign 11,144 20,693 20,378 Income before income tax $ Income before income tax $ 18,507 $ 27,820 $ 27,052 The income tax $ 18,507 $ 27,820 $ 27,052 The item accounting $ 18,507 $ 27,820 $ 27,052 The item accounting for the follows : Year Ended June 30 , 2015 2014 2013 Federal Year Ended June 30 , 2015 2014 2013 Federal statutory rate Ended June 30 , 2015 2014 2013 Federal statutory rate 35.0 June 30 , 2015 2014 2013 Federal statutory rate 35.0 % 2014 2013 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 20.9 ) % ( 17.1 ) ( 20.9 ) % ( 17.1 ) % ( 17.5 ) ( 17.1 ) % ( 17.5 ) % Phone Hardware nondeductible nondeductible charge and valuation allowance 19.1 % 0.9 % 0 % and valuation allowance 19.1 % 0.9 % 0 % Domestic production allowance 19.1 % 0.9 % 0 % Domestic production activity deduction Domestic production activity deduction ( 2.4 ) % ( 1.0 ) ( 2.4 ) % ( 1.0 ) % ( 1.2 ) ( 1.0 ) % ( 1.2 ) % Other reconciling item Other reconciling item , net 3.3 % 2.9 % 2.9 % item , net 3.3 % 2.9 % 2.9 % Effective rate net 3.3 % 2.9 % 2.9 % Effective rate 34.1 % % 2.9 % Effective rate 34.1 % 20.7 % 19.2 % % Effective rate 34.1 % 20.7 % 19.2 % 80 Table rate 34.1 % 20.7 % 19.2 % 80 Table of Contents % 20.7 % 19.2 % 80 Table of Contents PART II of Contents PART II Item 8 The reduction from the federal Rico . In fiscal year 2015 , this reduction wa mostly regional operating center , were 73 % , 81 % , , were 73 % , 81 % , and 79 % , 81 % , and 79 % of our foreign income before tax in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . In general credit . In fiscal year 2015 , 2014 , and 2013 In fiscal year 2015 , 2014 , and 2013 , there 2015 , 2014 , and 2013 , there were no individually ( In million ) June 30 , 2015 2014 Deferred Income million ) June 30 , 2015 2014 Deferred Income Tax Assets ) June 30 , 2015 2014 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 884 $ 903 Other expense item compensation expense $ 884 $ 903 Other expense item 1,531 1,112 $ 903 Other expense item 1,531 1,112 Restructuring charge 211 0 903 Other expense item 1,531 1,112 Restructuring charge 211 0 Unearned item 1,531 1,112 Restructuring charge 211 0 Unearned revenue 520 520 1,531 1,112 Restructuring charge 211 0 Unearned revenue 520 520 Impaired charge 211 0 Unearned revenue 520 520 Impaired investment 257 272 211 0 Unearned revenue 520 520 Impaired investment 257 272 Loss revenue 520 520 Impaired investment 257 272 Loss carryforwards 1,158 922 520 520 Impaired investment 257 272 Loss carryforwards 1,158 922 Depreciation investment 257 272 Loss carryforwards 1,158 922 Depreciation and amortization 798 257 272 Loss carryforwards 1,158 922 Depreciation and amortization 798 0 1,158 922 Depreciation and amortization 798 0 Other revenue item 56 922 Depreciation and amortization 798 0 Other revenue item 56 64 798 0 Other revenue item 56 64 Deferred income tax asset 0 Other revenue item 56 64 Deferred income tax asset 5,415 64 Deferred income tax asset 5,415 3,793 Less valuation allowance ( Deferred income tax asset 5,415 3,793 Less valuation allowance ( 2,265 3,793 Less valuation allowance ( 2,265 ) ( 903 ) Deferred allowance ( 2,265 ) ( 903 ) Deferred income tax asset net of valuation allowance $ 3,150 $ 2,890 Deferred Income Tax valuation allowance $ 3,150 $ 2,890 Deferred Income Tax Liabilities Foreign Liabilities Foreign earnings $ ( 1,280 ) $ ( 1,140 ) ( 1,280 ) $ ( 1,140 ) Unrealized gain on investment on investment and debt ( 2,223 ) ( 1,974 ) Depreciation debt ( 2,223 ) ( 1,974 ) Depreciation and amortization ( ) Depreciation and amortization ( 685 ) ( 470 ) Other amortization ( 685 ) ( 470 ) Other ( 29 ) ( 470 ) Other ( 29 ) ( 87 ) Deferred Other ( 29 ) ( 87 ) Deferred income tax liability Deferred income tax liability ( 4,217 ) ( 3,671 ) Net liability ( 4,217 ) ( 3,671 ) Net deferred income tax ( liability ) $ ( 1,067 ) $ ( 781 ) ( 1,067 ) $ ( 781 ) Reported As Current deferred deferred income tax asset $ 1,915 $ 1,941 Other current liability tax asset $ 1,915 $ 1,941 Other current liability ( 211 1,941 Other current liability ( 211 ) ( 125 ) Other liability ( 211 ) ( 125 ) Other long-term asset 64 125 ) Other long-term asset 64 131 Long-term deferred income tax ) Other long-term asset 64 131 Long-term deferred income tax liability deferred income tax liability ( 2,835 ) ( 2,728 ) Net liability ( 2,835 ) ( 2,728 ) Net deferred income tax ( liability ) $ ( 1,067 ) $ ( 781 ) ( 1,067 ) $ ( 781 ) As of June 30 781 ) As of June 30 , 2015 , we had As of June 30 , 2015 , we had net operating operating loss carryforwards of $ 4.6 billion , including $ 1.8 4.6 billion , including $ 1.8 billion of foreign net operating of Skype , and $ 545 million through our acquisition of recovered . As of June 30 , 2015 , we have As of June 30 , 2015 , we have not provided temporary difference of approximately $ 108.3 billion resulting from earnings for certain non-U.S. subsidiary which are 81 Table of Contents PART II of Contents PART II Item 8 permanently reinvested outside the U.S temporary difference wa approximately $ 34.5 billion at June 30 , $ 34.5 billion at June 30 , 2015 . Income tax billion at June 30 , 2015 . Income tax paid were Income tax paid were $ 4.4 billion , $ 5.5 billion $ 4.4 billion , $ 5.5 billion , and $ 3.9 5.5 billion , and $ 3.9 billion in fiscal year 2015 3.9 billion in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . Uncertain Tax tax benefit a of June 30 , 2015 , 2014 , a of June 30 , 2015 , 2014 , and 2013 June 30 , 2015 , 2014 , and 2013 , were 2015 , 2014 , and 2013 , were $ 9.6 billion and 2013 , were $ 9.6 billion , $ 8.7 billion $ 9.6 billion , $ 8.7 billion , and $ 8.6 8.7 billion , and $ 8.6 billion , respectively . If tax rate for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 , by 2015 , 2014 , and 2013 , by $ 7.9 billion and 2013 , by $ 7.9 billion , $ 7.0 billion $ 7.9 billion , $ 7.0 billion , and $ 6.5 7.0 billion , and $ 6.5 billion , respectively . As respectively . As of June 30 , 2015 , 2014 , As of June 30 , 2015 , 2014 , and 2013 June 30 , 2015 , 2014 , and 2013 , we 2015 , 2014 , and 2013 , we had accrued interest uncertain tax position of $ 1.7 billion , $ 1.5 billion $ 1.7 billion , $ 1.5 billion , and $ 1.3 1.5 billion , and $ 1.3 billion , respectively , net unrecognized tax benefit wa $ 237 million , $ 235 million $ 237 million , $ 235 million , and $ 400 235 million , and $ 400 million in fiscal year 2015 400 million in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively , and wa million ) Year Ended June 30 , 2015 2014 2013 Balance Year Ended June 30 , 2015 2014 2013 Balance , beginning Ended June 30 , 2015 2014 2013 Balance , beginning of June 30 , 2015 2014 2013 Balance , beginning of year , beginning of year $ 8,714 $ 8,648 $ 7,202 Decreases of year $ 8,714 $ 8,648 $ 7,202 Decreases related to $ 8,714 $ 8,648 $ 7,202 Decreases related to settlement ( Decreases related to settlement ( 50 ) ( 583 ) ( settlement ( 50 ) ( 583 ) ( 30 ) Increases ) ( 583 ) ( 30 ) Increases for tax position related to the current year 1,091 566 612 Increases for tax to the current year 1,091 566 612 Increases for tax position the current year 1,091 566 612 Increases for tax position related position related to prior year 94 217 931 Decreases for tax related to prior year 94 217 931 Decreases for tax position to prior year 94 217 931 Decreases for tax position related related to prior year ( 144 ) ( 95 ) ( year ( 144 ) ( 95 ) ( 65 ) Decreases ) ( 95 ) ( 65 ) Decreases due to lapsed lapsed statute of limitation ( 106 ) ( 39 ) ( limitation ( 106 ) ( 39 ) ( 2 ) Balance ) ( 39 ) ( 2 ) Balance , end of , end of year $ 9,599 $ 8,714 $ 8,648 During of year $ 9,599 $ 8,714 $ 8,648 During the third $ 9,599 $ 8,714 $ 8,648 During the third quarter of third quarter of fiscal year 2011 , we reached a settlement . audit of tax year 2004 to 2006 , which reduced of tax year 2004 to 2006 , which reduced our income income tax expense by $ 461 million . While we settled these year . In February 2012 , the I.R.S . withdrew the I.R.S . withdrew it 2011 Revenue Agents Report and reopened examination . As of June 30 , 2015 , the primary As of June 30 , 2015 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue I.R.S . for tax year 2007 to 2015 . We are for tax year 2007 to 2015 . We are subject to to examination for tax year 1996 to 2015 , some of for tax year 1996 to 2015 , some of which are consolidated financial statement . NOTE 14 — RESTRUCTURING CHARGES Phone Hardware Phone Hardware Integration In July 2014 , we announced a restructuring Plan , we eliminated approximately 19,000 position in fiscal year 2015 19,000 position in fiscal year 2015 , including approximately 13,000 professional year 2015 , including approximately 13,000 professional and factory position related were completed a of June 30 , 2015 . 82 Table a of June 30 , 2015 . 82 Table of Contents June 30 , 2015 . 82 Table of Contents PART II of Contents PART II Item 8 In connection with the Phone incurred restructuring charge of $ 1.3 billion during fiscal year 2015 1.3 billion during fiscal year 2015 , including severance expense and Phone Hardware Restructuring In June 2015 , management approved a plan we will eliminate up to 7,800 position in fiscal year 2016 7,800 position in fiscal year 2016 . In connection with the recorded restructuring charge of $ 780 million during fiscal year 2015 780 million during fiscal year 2015 , including severance expense and be completed a of June 30 , 2016 . Restructuring charge a of June 30 , 2016 . Restructuring charge associated with by segment group in Note 22 — Segment Information and Geographic Restructuring liability a of June 30 , 2014 $ 0 $ a of June 30 , 2014 $ 0 $ 0 $ June 30 , 2014 $ 0 $ 0 $ 0 Restructuring , 2014 $ 0 $ 0 $ 0 Restructuring charge 1,308 $ 0 $ 0 $ 0 Restructuring charge 1,308 770 2,078 0 $ 0 Restructuring charge 1,308 770 2,078 Cash paid ( $ 0 Restructuring charge 1,308 770 2,078 Cash paid ( 701 0 Restructuring charge 1,308 770 2,078 Cash paid ( 701 ) 770 2,078 Cash paid ( 701 ) ( 134 ) ( paid ( 701 ) ( 134 ) ( 835 ) Other ) ( 134 ) ( 835 ) Other ( 19 ) ( 835 ) Other ( 19 ) ( 387 ) ( Other ( 19 ) ( 387 ) ( 406 ) Restructuring ) ( 387 ) ( 406 ) Restructuring liability a of Restructuring liability a of June 30 , 2015 $ 588 $ a of June 30 , 2015 $ 588 $ 249 $ June 30 , 2015 $ 588 $ 249 $ 837 ( , 2015 $ 588 $ 249 $ 837 ( a ) $ 588 $ 249 $ 837 ( a ) “ Asset including asset write-down of $ 372 million during fiscal year 2015 372 million during fiscal year 2015 , a well a contract contract termination cost . NOTE 15 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2015 2014 Commercial Licensing million ) June 30 , 2015 2014 Commercial Licensing $ 17,672 ) June 30 , 2015 2014 Commercial Licensing $ 17,672 $ 2015 2014 Commercial Licensing $ 17,672 $ 19,099 Commercial Other 5,641 Commercial Licensing $ 17,672 $ 19,099 Commercial Other 5,641 3,934 Rest 17,672 $ 19,099 Commercial Other 5,641 3,934 Rest of the segment $ 19,099 Commercial Other 5,641 3,934 Rest of the segment 2,005 3,934 Rest of the segment 2,005 2,125 Total $ 25,318 $ Rest of the segment 2,005 2,125 Total $ 25,318 $ 25,158 segment 2,005 2,125 Total $ 25,318 $ 25,158 NOTE 16 — 2,125 Total $ 25,318 $ 25,158 NOTE 16 — OTHER LONG-TERM $ 25,318 $ 25,158 NOTE 16 — OTHER LONG-TERM LIABILITIES ( ( In million ) June 30 , 2015 2014 Tax contingency million ) June 30 , 2015 2014 Tax contingency and other ) June 30 , 2015 2014 Tax contingency and other tax and other tax liability $ 12,290 $ 10,510 Other 1,254 1,084 tax liability $ 12,290 $ 10,510 Other 1,254 1,084 Total $ $ 12,290 $ 10,510 Other 1,254 1,084 Total $ 13,544 $ 12,290 $ 10,510 Other 1,254 1,084 Total $ 13,544 $ 11,594 Other 1,254 1,084 Total $ 13,544 $ 11,594 83 Table of 1,084 Total $ 13,544 $ 11,594 83 Table of Contents PART Total $ 13,544 $ 11,594 83 Table of Contents PART II of Contents PART II Item 8 NOTE 17 — COMMITMENTS AND PART II Item 8 NOTE 17 — COMMITMENTS AND GUARANTEES Construction Leases We have committed $ 681 million for constructing new building leasehold improvement a of June 30 , 2015 . We have a of June 30 , 2015 . We have operating lease facility operating lease wa $ 989 million , $ 874 million $ 989 million , $ 874 million , and $ 711 874 million , and $ 711 million , in fiscal year million , in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . Future minimum in place a of June 30 , 2015 are a follows a of June 30 , 2015 are a follows : ( million ) Year Ending June 30 , 2016 $ 863 2017 Year Ending June 30 , 2016 $ 863 2017 803 2018 June 30 , 2016 $ 863 2017 803 2018 735 2019 30 , 2016 $ 863 2017 803 2018 735 2019 611 , 2016 $ 863 2017 803 2018 735 2019 611 2020 2016 $ 863 2017 803 2018 735 2019 611 2020 524 $ 863 2017 803 2018 735 2019 611 2020 524 Thereafter 863 2017 803 2018 735 2019 611 2020 524 Thereafter 1,617 2017 803 2018 735 2019 611 2020 524 Thereafter 1,617 Total 803 2018 735 2019 611 2020 524 Thereafter 1,617 Total $ 2018 735 2019 611 2020 524 Thereafter 1,617 Total $ 5,153 2019 611 2020 524 Thereafter 1,617 Total $ 5,153 Indemnifications We 524 Thereafter 1,617 Total $ 5,153 Indemnifications We provide indemnification of consolidated financial statement . NOTE 18 — CONTINGENCIES Patent and Intellectual Claims Motorola litigation In October 2010 , Microsoft filed patent infringement . International Trade Commission In 2012 , the ITC issued a affirmed on appeal . In 2013 , Microsoft filed an action of the ITC ’ s 2012 import ban against infringing Motorola enforce the order . In 2010 , Motorola filed an action importation of the allegedly infringing 84 Table of Contents PART II of Contents PART II Item 8 Xbox product . At Motorola four Motorola patent . In 2013 , the ITC affirmed there Court case filed in October 2010 by Microsoft a a companion ITC case . In November 2010 , Microsoft sued Motorola for H.264 video standard and the 802.11 Wi-Fi standard . In the and in Germany . In 2012 , the Seattle District Court of Microsoft ruling that ( 1 ) Motorola had committed to and condition ; and ( 2 ) Microsoft is a third-party Motorola ’ s H.264 and 802.11 patent , which resulted in immaterial Microsoft liability . In 2013 , following trial of Microsoft , a jury awarded $ 14.5 million in damage to Microsoft against Motorola ; in July 2015 the U.S. Court of Appeals transferred case , Motorola asserts 15 patent are infringed by a In counterclaim , Microsoft asserts 14 patent are infringed by Motorola video recorder . Germany In 2011 , Motorola filed patent infringement H.264 capable product including Xbox 360 , Windows 7 , Media including Xbox 360 , Windows 7 , Media Player , and infringe those patent . In 2012 , the court issued an protocol employed by Windows Phone 7 , Outlook Mobile , Hotmail and Hotmail Server . In 2013 , the court stayed the invalidate the patent . In 2013 , the Federal Patent Court Microsoft appealed . In June 2014 , the court reopened infringement determined in separate proceeding . 85 Table of Contents PART II of Contents PART II Item 8 In lawsuit Microsoft filed in Microsoft filed in Germany in 2011 and 2012 , Microsoft asserts in Germany in 2011 and 2012 , Microsoft asserts that Motorola damage and injunction . In 2012 , regional court in Germany the Federal Patent Court in 2013 and 2014 held the Microsoft Patent Court in 2013 and 2014 held the Microsoft patent invalid mobile technology-related patent spanning about 170 patent family and addressing a technology . IPCom ha asserted 19 of these patent in litigation and operator . In November 2014 , Microsoft and IPCom entered the District of Delaware between 2007 and 2013 . We have of Delaware between 2007 and 2013 . We have been added at issue allegedly relate to 3G and 4G wireless communication standard allegedly relate to 3G and 4G wireless communication standard essential functionality an order excluding importation of 3G and 4G phone into the excluding importation of 3G and 4G phone into the U.S. and IDT appealed . In February 2015 , the U.S. Court of a determination finding : ( 1 ) infringement ; ( 2 1 ) infringement ; ( 2 ) evidence of “ reverse hold-up ; ” and ( 3 ) the public interest doe case is scheduled for November 2015 . European copyright levy We levy are based upon a 2001 European Union ( “ EU these country . Since April 2015 , we and other major of concluding negotiation by October 2015 . Other patent and intellectual case , there are approximately 70 other patent infringement case pending case pending against Microsoft . 86 Table of Contents PART II of Contents PART II Item 8 Antitrust , Unfair Competition , certain other software product between 1999 and 2005 . We obtained software product between 1999 and 2005 . We obtained dismissal or the settlement is approximately $ 200 million , all of which been accrued a of June 30 , 2015 . Three similar a of June 30 , 2015 . Three similar case pending not been settled . In 2010 , the court in the dismissed the case , in 2013 the Canadian Supreme Court reversed now scheduled for trial in 2016 . The other two case GO Computer litigation In June 2005 , GO Computer Inc. and GO Corporation in the early 1990s and it successor in interest Lucent Corporation in the early 2000s . All claim prior to All claim prior to June 2001 have been dismissed with prejudice trial is set for September 2015 . China State Administration for Commerce investigatio n In July 2014 , Microsoft wa informed that , is a defendant in 19 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain pre-trial proceeding ; the remaining 10 case are stayed . In stayed . In a separate 2009 decision , the Court of emission guideline . In September 2013 , defendant in the consolidated scientific methodology . In March 2014 , defendant filed a separate filed a separate motion to 87 Table of Contents PART II of Contents PART II Item 8 preclude plaintiff ’ general causation causation testimony . In August 2014 , the court granted in interlocutory appeal . In December 2014 , the District of Columbia is a defendant in a 2013 class action lawsuit filed in cellular phone for at least 1,600 hour , including a subclass with the complaint in June 2014 and ha been substituted for future . As of June 30 , 2015 , we accrued As of June 30 , 2015 , we accrued aggregate legal aggregate legal liability of $ 614 million in other current liability other current liability and $ 20 million in other long-term liability estimate could reach approximately $ 1.6 billion in aggregate beyond recorded become reasonably estimable . NOTE 19 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2015 2014 2013 Balance Year Ended June 30 , 2015 2014 2013 Balance , beginning Ended June 30 , 2015 2014 2013 Balance , beginning of June 30 , 2015 2014 2013 Balance , beginning of year Balance , beginning of year 8,239 8,328 8,381 Issued 83 86 , beginning of year 8,239 8,328 8,381 Issued 83 86 105 beginning of year 8,239 8,328 8,381 Issued 83 86 105 Repurchased year 8,239 8,328 8,381 Issued 83 86 105 Repurchased ( 295 8,239 8,328 8,381 Issued 83 86 105 Repurchased ( 295 ) 8,328 8,381 Issued 83 86 105 Repurchased ( 295 ) ( 83 86 105 Repurchased ( 295 ) ( 175 ) ( Repurchased ( 295 ) ( 175 ) ( 158 ) Balance ) ( 175 ) ( 158 ) Balance , end of Balance , end of year 8,027 8,239 8,328 Share Repurchases On , end of year 8,027 8,239 8,328 Share Repurchases On September end of year 8,027 8,239 8,328 Share Repurchases On September 16 8,328 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2015 , $ 21.9 As of June 30 , 2015 , $ 21.9 billion remained 30 , 2015 , $ 21.9 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . made using cash resource . 88 Table of Contents PART II of Contents PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2015 2014 ( a Year Ended June 30 , 2015 2014 ( a ) 2013 Ended June 30 , 2015 2014 ( a ) 2013 First 2015 2014 ( a ) 2013 First quarter 43 $ 2,000 a ) 2013 First quarter 43 $ 2,000 47 $ 1,500 2013 First quarter 43 $ 2,000 47 $ 1,500 33 $ First quarter 43 $ 2,000 47 $ 1,500 33 $ 1,000 43 $ 2,000 47 $ 1,500 33 $ 1,000 Second quarter $ 2,000 47 $ 1,500 33 $ 1,000 Second quarter 43 47 $ 1,500 33 $ 1,000 Second quarter 43 2,000 53 33 $ 1,000 Second quarter 43 2,000 53 2,000 58 1,607 $ 1,000 Second quarter 43 2,000 53 2,000 58 1,607 Third 1,000 Second quarter 43 2,000 53 2,000 58 1,607 Third quarter Second quarter 43 2,000 53 2,000 58 1,607 Third quarter 116 quarter 43 2,000 53 2,000 58 1,607 Third quarter 116 5,000 43 2,000 53 2,000 58 1,607 Third quarter 116 5,000 47 2,000 58 1,607 Third quarter 116 5,000 47 1,791 36 1,000 58 1,607 Third quarter 116 5,000 47 1,791 36 1,000 Fourth 1,607 Third quarter 116 5,000 47 1,791 36 1,000 Fourth quarter Third quarter 116 5,000 47 1,791 36 1,000 Fourth quarter 93 quarter 116 5,000 47 1,791 36 1,000 Fourth quarter 93 4,209 116 5,000 47 1,791 36 1,000 Fourth quarter 93 4,209 28 1,791 36 1,000 Fourth quarter 93 4,209 28 1,118 31 1,000 36 1,000 Fourth quarter 93 4,209 28 1,118 31 1,000 Total 1,000 Fourth quarter 93 4,209 28 1,118 31 1,000 Total 295 Fourth quarter 93 4,209 28 1,118 31 1,000 Total 295 $ quarter 93 4,209 28 1,118 31 1,000 Total 295 $ 13,209 93 4,209 28 1,118 31 1,000 Total 295 $ 13,209 175 28 1,118 31 1,000 Total 295 $ 13,209 175 $ 6,409 31 1,000 Total 295 $ 13,209 175 $ 6,409 158 $ 1,000 Total 295 $ 13,209 175 $ 6,409 158 $ 4,607 295 $ 13,209 175 $ 6,409 158 $ 4,607 ( a $ 13,209 175 $ 6,409 158 $ 4,607 ( a ) 175 $ 6,409 158 $ 4,607 ( a ) Of the ( a ) Of the 175 million share repurchased in fiscal share repurchased in fiscal year 2014 , 128 million share were in fiscal year 2014 , 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . The above expired on September 30 , 2013 . The above table excludes . Dividends In fiscal year 2015 , our Board of Directors ( In million ) September 16 , 2014 $ 0.31 November million ) September 16 , 2014 $ 0.31 November 20 , September 16 , 2014 $ 0.31 November 20 , 2014 $ , 2014 $ 0.31 November 20 , 2014 $ 2,547 December $ 0.31 November 20 , 2014 $ 2,547 December 11 , November 20 , 2014 $ 2,547 December 11 , 2014 December , 2014 $ 2,547 December 11 , 2014 December 3 , $ 2,547 December 11 , 2014 December 3 , 2014 $ December 11 , 2014 December 3 , 2014 $ 0.31 February , 2014 December 3 , 2014 $ 0.31 February 19 , December 3 , 2014 $ 0.31 February 19 , 2015 $ , 2014 $ 0.31 February 19 , 2015 $ 2,532 March $ 0.31 February 19 , 2015 $ 2,532 March 12 , February 19 , 2015 $ 2,532 March 12 , 2015 March , 2015 $ 2,532 March 12 , 2015 March 10 , $ 2,532 March 12 , 2015 March 10 , 2015 $ March 12 , 2015 March 10 , 2015 $ 0.31 May , 2015 March 10 , 2015 $ 0.31 May 21 , March 10 , 2015 $ 0.31 May 21 , 2015 $ , 2015 $ 0.31 May 21 , 2015 $ 2,496 June $ 0.31 May 21 , 2015 $ 2,496 June 11 , May 21 , 2015 $ 2,496 June 11 , 2015 June , 2015 $ 2,496 June 11 , 2015 June 9 , $ 2,496 June 11 , 2015 June 9 , 2015 $ June 11 , 2015 June 9 , 2015 $ 0.31 August , 2015 June 9 , 2015 $ 0.31 August 20 , June 9 , 2015 $ 0.31 August 20 , 2015 $ , 2015 $ 0.31 August 20 , 2015 $ 2,488 September $ 0.31 August 20 , 2015 $ 2,488 September 10 , August 20 , 2015 $ 2,488 September 10 , 2015 The , 2015 $ 2,488 September 10 , 2015 The dividend declared $ 2,488 September 10 , 2015 The dividend declared on June The dividend declared on June 9 , 2015 will be paid declared on June 9 , 2015 will be paid after the filing date of this Form 10-K and wa included in other current liability a of June 30 , 2015 . In fiscal a of June 30 , 2015 . In fiscal year 2014 2015 . In fiscal year 2014 , our Board of Directors ( In million ) September 16 , 2013 $ 0.28 November million ) September 16 , 2013 $ 0.28 November 21 , September 16 , 2013 $ 0.28 November 21 , 2013 $ , 2013 $ 0.28 November 21 , 2013 $ 2,332 December $ 0.28 November 21 , 2013 $ 2,332 December 12 , November 21 , 2013 $ 2,332 December 12 , 2013 November , 2013 $ 2,332 December 12 , 2013 November 19 , $ 2,332 December 12 , 2013 November 19 , 2013 $ December 12 , 2013 November 19 , 2013 $ 0.28 February , 2013 November 19 , 2013 $ 0.28 February 20 , November 19 , 2013 $ 0.28 February 20 , 2014 $ , 2013 $ 0.28 February 20 , 2014 $ 2,322 March $ 0.28 February 20 , 2014 $ 2,322 March 13 , February 20 , 2014 $ 2,322 March 13 , 2014 March , 2014 $ 2,322 March 13 , 2014 March 11 , $ 2,322 March 13 , 2014 March 11 , 2014 $ March 13 , 2014 March 11 , 2014 $ 0.28 May , 2014 March 11 , 2014 $ 0.28 May 15 , March 11 , 2014 $ 0.28 May 15 , 2014 $ , 2014 $ 0.28 May 15 , 2014 $ 2,309 June $ 0.28 May 15 , 2014 $ 2,309 June 12 , May 15 , 2014 $ 2,309 June 12 , 2014 June , 2014 $ 2,309 June 12 , 2014 June 10 , $ 2,309 June 12 , 2014 June 10 , 2014 $ June 12 , 2014 June 10 , 2014 $ 0.28 August , 2014 June 10 , 2014 $ 0.28 August 21 , June 10 , 2014 $ 0.28 August 21 , 2014 $ , 2014 $ 0.28 August 21 , 2014 $ 2,307 September $ 0.28 August 21 , 2014 $ 2,307 September 11 , August 21 , 2014 $ 2,307 September 11 , 2014 The , 2014 $ 2,307 September 11 , 2014 The dividend declared $ 2,307 September 11 , 2014 The dividend declared on June The dividend declared on June 10 , 2014 wa included in declared on June 10 , 2014 wa included in other current current liability a of June 30 , 2014 . 89 Table a of June 30 , 2014 . 89 Table of Contents June 30 , 2014 . 89 Table of Contents PART II of Contents PART II Item 8 NOTE 20 — ACCUMULATED OTHER PART II Item 8 NOTE 20 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2015 2014 2013 Derivatives Year Ended June 30 , 2015 2014 2013 Derivatives Accumulated other Ended June 30 , 2015 2014 2013 Derivatives Accumulated other comprehensive June 30 , 2015 2014 2013 Derivatives Accumulated other comprehensive income , beginning of period $ 31 $ 66 $ 92 Unrealized of period $ 31 $ 66 $ 92 Unrealized gain , $ 31 $ 66 $ 92 Unrealized gain , net of of tax effect of $ 35 , $ 2 and $ of $ 35 , $ 2 and $ 54 1,152 63 , $ 2 and $ 54 1,152 63 101 Reclassification adjustment $ 2 and $ 54 1,152 63 101 Reclassification adjustment for 2 and $ 54 1,152 63 101 Reclassification adjustment for gain and $ 54 1,152 63 101 Reclassification adjustment for gain included gain included in revenue ( 608 ) ( 104 ) ( revenue ( 608 ) ( 104 ) ( 195 ) Tax ) ( 104 ) ( 195 ) Tax expense included in in provision for income tax 15 6 68 Amounts reclassified from provision for income tax 15 6 68 Amounts reclassified from accumulated for income tax 15 6 68 Amounts reclassified from accumulated other accumulated other comprehensive income ( 593 ) ( 98 ) ( income ( 593 ) ( 98 ) ( 127 ) Net ) ( 98 ) ( 127 ) Net current period other comprehensive income ( loss ) 559 ( 35 ) ( 26 ( loss ) 559 ( 35 ) ( 26 ) Accumulated 559 ( 35 ) ( 26 ) Accumulated other comprehensive income , end of period $ 590 $ 31 $ 66 Investments of period $ 590 $ 31 $ 66 Investments Accumulated other $ 590 $ 31 $ 66 Investments Accumulated other comprehensive income , beginning of period $ 3,531 $ 1,794 $ 1,431 Unrealized of period $ 3,531 $ 1,794 $ 1,431 Unrealized gain , $ 3,531 $ 1,794 $ 1,431 Unrealized gain , net of of tax effect of $ 59 , $ 1,067 and $ of $ 59 , $ 1,067 and $ 244 110 2,053 , $ 1,067 and $ 244 110 2,053 453 Reclassification adjustment $ 1,067 and $ 244 110 2,053 453 Reclassification adjustment for 1,067 and $ 244 110 2,053 453 Reclassification adjustment for gain and $ 244 110 2,053 453 Reclassification adjustment for gain included expense ) , net ( 728 ) ( 447 ) ( net ( 728 ) ( 447 ) ( 139 ) Tax ) ( 447 ) ( 139 ) Tax expense included in in provision for income tax 256 131 49 Amounts reclassified from provision for income tax 256 131 49 Amounts reclassified from accumulated for income tax 256 131 49 Amounts reclassified from accumulated other accumulated other comprehensive income ( 472 ) ( 316 ) ( income ( 472 ) ( 316 ) ( 90 ) Net ) ( 316 ) ( 90 ) Net current period other income ( loss ) ( 362 ) 1,737 363 Accumulated other loss ) ( 362 ) 1,737 363 Accumulated other comprehensive income ) ( 362 ) 1,737 363 Accumulated other comprehensive income balance , end of period $ 3,169 $ 3,531 $ 1,794 Translation of period $ 3,169 $ 3,531 $ 1,794 Translation Adjustments and $ 3,169 $ 3,531 $ 1,794 Translation Adjustments and Other Accumulated , beginning of period $ 146 $ ( 117 ) $ period $ 146 $ ( 117 ) $ ( 101 ) ( 117 ) $ ( 101 ) Translation adjustment and other of tax effect of $ 16 , $ 12 and $ of $ 16 , $ 12 and $ ( 8 ) $ 12 and $ ( 8 ) ( 1,383 ) 263 $ ( 8 ) ( 1,383 ) 263 ( 16 ) 8 ) ( 1,383 ) 263 ( 16 ) Accumulated other ( 1,383 ) 263 ( 16 ) Accumulated other comprehensive income end of period $ ( 1,237 ) $ 146 $ ( $ ( 1,237 ) $ 146 $ ( 117 ) Accumulated ) $ 146 $ ( 117 ) Accumulated other comprehensive income , end of period $ 2,522 $ 3,708 $ 1,743 NOTE of period $ 2,522 $ 3,708 $ 1,743 NOTE 21 — $ 2,522 $ 3,708 $ 1,743 NOTE 21 — EMPLOYEE STOCK $ 3,708 $ 1,743 NOTE 21 — EMPLOYEE STOCK AND SAVINGS and employee . At June 30 , 2015 , an aggregate . At June 30 , 2015 , an aggregate of 294 2015 , an aggregate of 294 million share were authorized for million ) Year Ended June 30 , 2015 2014 2013 Stock-based Year Ended June 30 , 2015 2014 2013 Stock-based compensation expense Ended June 30 , 2015 2014 2013 Stock-based compensation expense $ June 30 , 2015 2014 2013 Stock-based compensation expense $ 2,574 2013 Stock-based compensation expense $ 2,574 $ 2,446 $ 2,406 Income compensation expense $ 2,574 $ 2,446 $ 2,406 Income tax benefit $ 2,574 $ 2,446 $ 2,406 Income tax benefit related to related to stock-based compensation $ 868 $ 830 $ 842 Stock stock-based compensation $ 868 $ 830 $ 842 Stock Plans Stock $ 868 $ 830 $ 842 Stock Plans Stock award Stock four or five-year period . 90 Table of Contents PART II of Contents PART II Item 8 Executive incentive plan Under the assumption : Year Ended June 30 , 2015 2014 2013 Dividends Year Ended June 30 , 2015 2014 2013 Dividends per share Ended June 30 , 2015 2014 2013 Dividends per share ( June 30 , 2015 2014 2013 Dividends per share ( quarterly ( quarterly amount ) $ 0.28 - $ 0.31 $ 0.23 ) $ 0.28 - $ 0.31 $ 0.23 - $ 0.28 0.28 - $ 0.31 $ 0.23 - $ 0.28 $ 0.20 0.31 $ 0.23 - $ 0.28 $ 0.20 - $ 0.23 0.23 - $ 0.28 $ 0.20 - $ 0.23 Interest rate 0.28 $ 0.20 - $ 0.23 Interest rate range 1.2 % $ 0.23 Interest rate range 1.2 % - 1.9 % 1.3 rate range 1.2 % - 1.9 % 1.3 % - 1.8 1.2 % - 1.9 % 1.3 % - 1.8 % 0.6 1.9 % 1.3 % - 1.8 % 0.6 % - 1.1 1.3 % - 1.8 % 0.6 % - 1.1 % During 1.8 % 0.6 % - 1.1 % During fiscal year 2015 1.1 % During fiscal year 2015 , the following activity occurred balance , beginning of year 259 $ 27.88 Granted 75 $ beginning of year 259 $ 27.88 Granted 75 $ 42.36 Vested year 259 $ 27.88 Granted 75 $ 42.36 Vested ( 94 $ 27.88 Granted 75 $ 42.36 Vested ( 94 ) $ 75 $ 42.36 Vested ( 94 ) $ 27.47 Forfeited ( Vested ( 94 ) $ 27.47 Forfeited ( 24 ) $ ) $ 27.47 Forfeited ( 24 ) $ 31.81 Nonvested balance Forfeited ( 24 ) $ 31.81 Nonvested balance , end of balance , end of year 216 $ 32.72 As of June end of year 216 $ 32.72 As of June 30 , $ 32.72 As of June 30 , 2015 , there wa As of June 30 , 2015 , there wa approximately $ , there wa approximately $ 4.7 billion of total unrecognized compensation a weighted average period of 3 year . During fiscal year year . During fiscal year 2014 and 2013 , the following During fiscal year 2014 and 2013 , the following activity occurred , except fair value ) 2014 2013 Stock Awards Awards granted except fair value ) 2014 2013 Stock Awards Awards granted ( Awards granted ( a ) 103 104 Weighted average grant-date fair granted ( a ) 103 104 Weighted average grant-date fair value average grant-date fair value $ 31.50 $ 28.37 ( a ) fair value $ 31.50 $ 28.37 ( a ) Awards granted Awards granted during fiscal year 2014 included four million share in grant-date fair value wa $ 37.64 . Total vest-date fair value stock award vested wa $ 4.2 billion , $ 3.2 billion $ 4.2 billion , $ 3.2 billion , and $ 2.8 3.2 billion , and $ 2.8 billion , for fiscal year billion , for fiscal year 2015 , 2014 , and 2013 for fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . 91 Table and 2013 , respectively . 91 Table of Contents PART II of Contents PART II Item 8 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2015 2014 2013 Shares Year Ended June 30 , 2015 2014 2013 Shares purchased 16 Ended June 30 , 2015 2014 2013 Shares purchased 16 18 June 30 , 2015 2014 2013 Shares purchased 16 18 20 2015 2014 2013 Shares purchased 16 18 20 Average price per 2014 2013 Shares purchased 16 18 20 Average price per share 2013 Shares purchased 16 18 20 Average price per share $ Average price per share $ 39.87 $ 33.60 $ 26.81 At per share $ 39.87 $ 33.60 $ 26.81 At June 30 $ 39.87 $ 33.60 $ 26.81 At June 30 , 2015 33.60 $ 26.81 At June 30 , 2015 , 157 million 26.81 At June 30 , 2015 , 157 million share of June 30 , 2015 , 157 million share of our common U.S. that qualifies under Section 401 ( k ) of the employee may contribute up to 75 % of their salary , each dollar of the first 6 % a participant contributes in contribution of the lesser of 3 % of a participant ’ participant ’ s earnings or 3 % of the IRS compensation for all plan were $ 454 million , $ 420 million $ 454 million , $ 420 million , and $ 393 420 million , and $ 393 million in fiscal year 2015 393 million in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively , and were Microsoft common stock . NOTE 22 — SEGMENT INFORMATION AND GEOGRAPHIC Commercial Other . On April 25 , 2014 , we acquired . On April 25 , 2014 , we acquired substantially all of NDS . See Note 9 – Business Combinations for additional other patent licensing revenue . 92 Table of Contents PART II of Contents PART II Item 8 • Computing and Gaming Hardware ; display advertising ; Office 365 Consumer , comprising Office 365 365 Consumer , comprising Office 365 Home and Office 365 Personal Office 365 Home and Office 365 Personal ; Studios , comprising Commercial Cloud , comprising Office 365 Commercial , other Microsoft Office , and restructuring expense . 93 Table of Contents PART II of Contents PART II Item 8 Segment revenue and gross margin million ) Year Ended June 30 , 2015 2014 2013 Revenue Year Ended June 30 , 2015 2014 2013 Revenue Devices and Ended June 30 , 2015 2014 2013 Revenue Devices and Consumer June 30 , 2015 2014 2013 Revenue Devices and Consumer Licensing Devices and Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware Consumer Licensing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing $ 14,969 $ 19,528 $ 19,427 Hardware : Computing and Gaming : Computing and Gaming Hardware 10,183 9,093 6,149 Phone Hardware 7,524 Computing and Gaming Hardware 10,183 9,093 6,149 Phone Hardware 7,524 1,982 and Gaming Hardware 10,183 9,093 6,149 Phone Hardware 7,524 1,982 0 10,183 9,093 6,149 Phone Hardware 7,524 1,982 0 Total Devices and 9,093 6,149 Phone Hardware 7,524 1,982 0 Total Devices and Consumer 6,149 Phone Hardware 7,524 1,982 0 Total Devices and Consumer Hardware Total Devices and Consumer Hardware 17,707 11,075 6,149 Other 8,825 7,014 Devices and Consumer Hardware 17,707 11,075 6,149 Other 8,825 7,014 6,431 and Consumer Hardware 17,707 11,075 6,149 Other 8,825 7,014 6,431 Total Hardware 17,707 11,075 6,149 Other 8,825 7,014 6,431 Total Devices and 17,707 11,075 6,149 Other 8,825 7,014 6,431 Total Devices and Consumer 11,075 6,149 Other 8,825 7,014 6,431 Total Devices and Consumer 41,501 6,431 Total Devices and Consumer 41,501 37,617 32,007 Commercial Licensing 41,039 Total Devices and Consumer 41,501 37,617 32,007 Commercial Licensing 41,039 42,085 Devices and Consumer 41,501 37,617 32,007 Commercial Licensing 41,039 42,085 39,778 41,501 37,617 32,007 Commercial Licensing 41,039 42,085 39,778 Other 10,836 7,546 37,617 32,007 Commercial Licensing 41,039 42,085 39,778 Other 10,836 7,546 5,661 32,007 Commercial Licensing 41,039 42,085 39,778 Other 10,836 7,546 5,661 Total Licensing 41,039 42,085 39,778 Other 10,836 7,546 5,661 Total Commercial 51,875 41,039 42,085 39,778 Other 10,836 7,546 5,661 Total Commercial 51,875 49,631 42,085 39,778 Other 10,836 7,546 5,661 Total Commercial 51,875 49,631 45,439 10,836 7,546 5,661 Total Commercial 51,875 49,631 45,439 Corporate and Other 7,546 5,661 Total Commercial 51,875 49,631 45,439 Corporate and Other 204 5,661 Total Commercial 51,875 49,631 45,439 Corporate and Other 204 ( 49,631 45,439 Corporate and Other 204 ( 415 ) 403 Total Corporate and Other 204 ( 415 ) 403 Total revenue $ Other 204 ( 415 ) 403 Total revenue $ 93,580 $ ) 403 Total revenue $ 93,580 $ 86,833 $ 77,849 ( Total revenue $ 93,580 $ 86,833 $ 77,849 ( In million $ 93,580 $ 86,833 $ 77,849 ( In million ) Year million ) Year Ended June 30 , 2015 2014 2013 Gross Year Ended June 30 , 2015 2014 2013 Gross margin Devices Ended June 30 , 2015 2014 2013 Gross margin Devices and June 30 , 2015 2014 2013 Gross margin Devices and Consumer Devices and Consumer Licensing $ 13,870 $ 17,439 $ 16,985 Hardware Consumer Licensing $ 13,870 $ 17,439 $ 16,985 Hardware : Computing $ 13,870 $ 17,439 $ 16,985 Hardware : Computing and Gaming : Computing and Gaming Hardware 1,788 892 956 Phone Hardware 701 Computing and Gaming Hardware 1,788 892 956 Phone Hardware 701 54 and Gaming Hardware 1,788 892 956 Phone Hardware 701 54 0 1,788 892 956 Phone Hardware 701 54 0 Total Devices and 892 956 Phone Hardware 701 54 0 Total Devices and Consumer 956 Phone Hardware 701 54 0 Total Devices and Consumer Hardware Total Devices and Consumer Hardware 2,489 946 956 Other 2,022 1,393 Devices and Consumer Hardware 2,489 946 956 Other 2,022 1,393 1,951 and Consumer Hardware 2,489 946 956 Other 2,022 1,393 1,951 Total Hardware 2,489 946 956 Other 2,022 1,393 1,951 Total Devices and 2,489 946 956 Other 2,022 1,393 1,951 Total Devices and Consumer 946 956 Other 2,022 1,393 1,951 Total Devices and Consumer 18,381 1,951 Total Devices and Consumer 18,381 19,778 19,892 Commercial Licensing 37,830 Total Devices and Consumer 18,381 19,778 19,892 Commercial Licensing 37,830 38,615 Devices and Consumer 18,381 19,778 19,892 Commercial Licensing 37,830 38,615 36,280 18,381 19,778 19,892 Commercial Licensing 37,830 38,615 36,280 Other 4,199 1,855 19,778 19,892 Commercial Licensing 37,830 38,615 36,280 Other 4,199 1,855 922 19,892 Commercial Licensing 37,830 38,615 36,280 Other 4,199 1,855 922 Total Licensing 37,830 38,615 36,280 Other 4,199 1,855 922 Total Commercial 42,029 37,830 38,615 36,280 Other 4,199 1,855 922 Total Commercial 42,029 40,470 38,615 36,280 Other 4,199 1,855 922 Total Commercial 42,029 40,470 37,202 4,199 1,855 922 Total Commercial 42,029 40,470 37,202 Corporate and Other 1,855 922 Total Commercial 42,029 40,470 37,202 Corporate and Other 132 922 Total Commercial 42,029 40,470 37,202 Corporate and Other 132 ( 40,470 37,202 Corporate and Other 132 ( 493 ) 370 Total Corporate and Other 132 ( 493 ) 370 Total gross margin Other 132 ( 493 ) 370 Total gross margin $ 60,542 370 Total gross margin $ 60,542 $ 59,755 $ 57,464 Below gross margin $ 60,542 $ 59,755 $ 57,464 Below are operating $ 60,542 $ 59,755 $ 57,464 Below are operating expense by million ) Year Ended June 30 , 2015 2014 2013 Devices Year Ended June 30 , 2015 2014 2013 Devices and Consumer Ended June 30 , 2015 2014 2013 Devices and Consumer $ June 30 , 2015 2014 2013 Devices and Consumer $ 11,505 2013 Devices and Consumer $ 11,505 $ 11,219 $ 10,625 Commercial and Consumer $ 11,505 $ 11,219 $ 10,625 Commercial 17,177 16,993 $ 11,505 $ 11,219 $ 10,625 Commercial 17,177 16,993 16,050 Corporate $ 11,219 $ 10,625 Commercial 17,177 16,993 16,050 Corporate and Other 11,219 $ 10,625 Commercial 17,177 16,993 16,050 Corporate and Other 3,688 $ 10,625 Commercial 17,177 16,993 16,050 Corporate and Other 3,688 3,657 16,993 16,050 Corporate and Other 3,688 3,657 4,025 Total segment operating 16,050 Corporate and Other 3,688 3,657 4,025 Total segment operating expense Corporate and Other 3,688 3,657 4,025 Total segment operating expense 32,370 4,025 Total segment operating expense 32,370 31,869 30,700 Impairment , integration Total segment operating expense 32,370 31,869 30,700 Impairment , integration , segment operating expense 32,370 31,869 30,700 Impairment , integration , and , integration , and restructuring 10,011 127 0 Total operating expense integration , and restructuring 10,011 127 0 Total operating expense $ , and restructuring 10,011 127 0 Total operating expense $ 42,381 0 Total operating expense $ 42,381 $ 31,996 $ 30,700 94 operating expense $ 42,381 $ 31,996 $ 30,700 94 Table of $ 42,381 $ 31,996 $ 30,700 94 Table of Contents PART 42,381 $ 31,996 $ 30,700 94 Table of Contents PART II of Contents PART II Item 8 Below is operating income ( million ) Year Ended June 30 , 2015 2014 2013 Devices Year Ended June 30 , 2015 2014 2013 Devices and Consumer Ended June 30 , 2015 2014 2013 Devices and Consumer $ June 30 , 2015 2014 2013 Devices and Consumer $ 6,876 2013 Devices and Consumer $ 6,876 $ 8,559 $ 9,267 Commercial and Consumer $ 6,876 $ 8,559 $ 9,267 Commercial 24,852 23,477 $ 6,876 $ 8,559 $ 9,267 Commercial 24,852 23,477 21,152 Corporate $ 8,559 $ 9,267 Commercial 24,852 23,477 21,152 Corporate and Other 8,559 $ 9,267 Commercial 24,852 23,477 21,152 Corporate and Other ( $ 9,267 Commercial 24,852 23,477 21,152 Corporate and Other ( 13,567 21,152 Corporate and Other ( 13,567 ) ( 4,277 ) ( Other ( 13,567 ) ( 4,277 ) ( 3,655 ) Total ) ( 4,277 ) ( 3,655 ) Total operating income $ ) Total operating income $ 18,161 $ 27,759 $ 26,764 Corporate operating income $ 18,161 $ 27,759 $ 26,764 Corporate and Other $ 18,161 $ 27,759 $ 26,764 Corporate and Other operating income million ) Year Ended June 30 , 2015 2014 2013 Corporate Year Ended June 30 , 2015 2014 2013 Corporate ( a Ended June 30 , 2015 2014 2013 Corporate ( a ) June 30 , 2015 2014 2013 Corporate ( a ) ( ( b ) $ ( 13,575 ) $ ( 3,744 ) ( 13,575 ) $ ( 3,744 ) $ ( 4,102 ) ( 3,744 ) $ ( 4,102 ) Other ( adjustment to reconciling amount ( c ) 204 ( 415 ) 403 Cost ( c ) 204 ( 415 ) 403 Cost of revenue ) 204 ( 415 ) 403 Cost of revenue reconciling amount of revenue reconciling amount ( 72 ) ( 78 ) ( amount ( 72 ) ( 78 ) ( 31 ) Operating ) ( 78 ) ( 31 ) Operating expense reconciling amount Operating expense reconciling amount ( 124 ) ( 40 ) 75 amount ( 124 ) ( 40 ) 75 Total Corporate and 124 ) ( 40 ) 75 Total Corporate and Other $ Corporate and Other $ ( 13,567 ) $ ( 4,277 ) ( 13,567 ) $ ( 4,277 ) $ ( 3,655 ) ( 4,277 ) $ ( 3,655 ) ( a ) Corporate ) Corporate for fiscal year 2015 included impairment , integration , and restructuring expense of $ 10.0 billion . ( c ) reconciling amount for fiscal year 2015 included a net $ 303 2015 included a net $ 303 million of previously deferred net reconciling amount for fiscal year 2014 included a net $ 349 2014 included a net $ 349 million of revenue deferral related reconciling amount for fiscal year 2013 included the recognition of $ included the recognition of $ 540 million of revenue previously deferred deferred on sale of Windows 7 with an option to upgrade option to upgrade to Windows 8 Pro at a discounted price States accounted for more than 10 % of fiscal year 2015 10 % of fiscal year 2015 , 2014 , or 2013 of fiscal year 2015 , 2014 , or 2013 revenue . 2015 , 2014 , or 2013 revenue . Revenue , classified million ) Year Ended June 30 , 2015 2014 2013 United Year Ended June 30 , 2015 2014 2013 United States ( Ended June 30 , 2015 2014 2013 United States ( a June 30 , 2015 2014 2013 United States ( a ) States ( a ) $ 42,941 $ 43,474 $ 41,344 Other a ) $ 42,941 $ 43,474 $ 41,344 Other country 50,639 $ 42,941 $ 43,474 $ 41,344 Other country 50,639 43,359 36,505 43,474 $ 41,344 Other country 50,639 43,359 36,505 Total $ 93,580 $ 41,344 Other country 50,639 43,359 36,505 Total $ 93,580 $ 41,344 Other country 50,639 43,359 36,505 Total $ 93,580 $ 86,833 50,639 43,359 36,505 Total $ 93,580 $ 86,833 $ 77,849 ( 36,505 Total $ 93,580 $ 86,833 $ 77,849 ( a ) $ 93,580 $ 86,833 $ 77,849 ( a ) Includes billing source of the revenue . 95 Table of Contents PART II of Contents PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2015 2014 2013 Microsoft Year Ended June 30 , 2015 2014 2013 Microsoft Office system Ended June 30 , 2015 2014 2013 Microsoft Office system $ June 30 , 2015 2014 2013 Microsoft Office system $ 23,538 2013 Microsoft Office system $ 23,538 $ 24,323 $ 22,995 Server Office system $ 23,538 $ 24,323 $ 22,995 Server product and $ 23,538 $ 24,323 $ 22,995 Server product and tool 18,612 22,995 Server product and tool 18,612 17,055 15,408 Windows PC operating Server product and tool 18,612 17,055 15,408 Windows PC operating system product and tool 18,612 17,055 15,408 Windows PC operating system 14,826 15,408 Windows PC operating system 14,826 16,856 17,529 Xbox 9,121 8,643 Windows PC operating system 14,826 16,856 17,529 Xbox 9,121 8,643 7,100 PC operating system 14,826 16,856 17,529 Xbox 9,121 8,643 7,100 Phone system 14,826 16,856 17,529 Xbox 9,121 8,643 7,100 Phone 7,702 3,073 14,826 16,856 17,529 Xbox 9,121 8,643 7,100 Phone 7,702 3,073 615 16,856 17,529 Xbox 9,121 8,643 7,100 Phone 7,702 3,073 615 Consulting Xbox 9,121 8,643 7,100 Phone 7,702 3,073 615 Consulting and product 9,121 8,643 7,100 Phone 7,702 3,073 615 Consulting and product support 8,643 7,100 Phone 7,702 3,073 615 Consulting and product support service Consulting and product support service 5,090 4,767 4,372 Advertising 4,557 4,016 and product support service 5,090 4,767 4,372 Advertising 4,557 4,016 3,387 product support service 5,090 4,767 4,372 Advertising 4,557 4,016 3,387 Surface service 5,090 4,767 4,372 Advertising 4,557 4,016 3,387 Surface 3,900 1,883 5,090 4,767 4,372 Advertising 4,557 4,016 3,387 Surface 3,900 1,883 853 4,767 4,372 Advertising 4,557 4,016 3,387 Surface 3,900 1,883 853 Other Advertising 4,557 4,016 3,387 Surface 3,900 1,883 853 Other 6,234 6,217 4,557 4,016 3,387 Surface 3,900 1,883 853 Other 6,234 6,217 5,590 4,016 3,387 Surface 3,900 1,883 853 Other 6,234 6,217 5,590 Total Surface 3,900 1,883 853 Other 6,234 6,217 5,590 Total $ 93,580 3,900 1,883 853 Other 6,234 6,217 5,590 Total $ 93,580 $ 1,883 853 Other 6,234 6,217 5,590 Total $ 93,580 $ 86,833 6,234 6,217 5,590 Total $ 93,580 $ 86,833 $ 77,849 Our 5,590 Total $ 93,580 $ 86,833 $ 77,849 Our total Commercial $ 93,580 $ 86,833 $ 77,849 Our total Commercial Cloud revenue Commercial Cloud revenue wa $ 5.8 billion , $ 2.8 billion $ 5.8 billion , $ 2.8 billion , and $ 1.3 2.8 billion , and $ 1.3 billion in fiscal year 2015 1.3 billion in fiscal year 2015 , 2014 , and 2013 in fiscal year 2015 , 2014 , and 2013 , respectively 2015 , 2014 , and 2013 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2015 2014 2013 United million ) June 30 , 2015 2014 2013 United States $ ) June 30 , 2015 2014 2013 United States $ 19,562 June 30 , 2015 2014 2013 United States $ 19,562 $ 2014 2013 United States $ 19,562 $ 17,653 $ 16,615 Luxembourg United States $ 19,562 $ 17,653 $ 16,615 Luxembourg 6,879 6,913 $ 19,562 $ 17,653 $ 16,615 Luxembourg 6,879 6,913 6,943 Finland $ 17,653 $ 16,615 Luxembourg 6,879 6,913 6,943 Finland 1,757 9,840 17,653 $ 16,615 Luxembourg 6,879 6,913 6,943 Finland 1,757 9,840 12 $ 16,615 Luxembourg 6,879 6,913 6,943 Finland 1,757 9,840 12 Other Luxembourg 6,879 6,913 6,943 Finland 1,757 9,840 12 Other country 8,307 6,879 6,913 6,943 Finland 1,757 9,840 12 Other country 8,307 5,713 6,913 6,943 Finland 1,757 9,840 12 Other country 8,307 5,713 4,159 1,757 9,840 12 Other country 8,307 5,713 4,159 Total $ 36,505 9,840 12 Other country 8,307 5,713 4,159 Total $ 36,505 $ 12 Other country 8,307 5,713 4,159 Total $ 36,505 $ 40,119 8,307 5,713 4,159 Total $ 36,505 $ 40,119 $ 27,729 96 4,159 Total $ 36,505 $ 40,119 $ 27,729 96 Table of $ 36,505 $ 40,119 $ 27,729 96 Table of Contents PART 36,505 $ 40,119 $ 27,729 96 Table of Contents PART II of Contents PART II Item 8 NOTE 23 — QUARTERLY INFORMATION PART II Item 8 NOTE 23 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2015 Revenue June 30 Total Fiscal Year 2015 Revenue $ 23,201 $ 26,470 Fiscal Year 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( Gross margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss margin 14,928 16,334 14,568 14,712 60,542 Net income ( loss ) Net income ( loss ) 4,540 5,863 4,985 ( 3,195 ) income ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( a ) 4,540 5,863 4,985 ( 3,195 ) ( a ) 12,193 3,195 ) ( a ) 12,193 ( b ) Basic earnings ( loss ) per share 0.55 0.71 0.61 ( 0.40 ) loss ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted earnings ( 0.71 0.61 ( 0.40 ) 1.49 Diluted earnings ( loss ) ( loss ) per share 0.54 0.71 0.61 ( 0.40 ) loss ) per share 0.54 0.71 0.61 ( 0.40 ) ( ) per share 0.54 0.71 0.61 ( 0.40 ) ( a share 0.54 0.71 0.61 ( 0.40 ) ( a ) 1.48 0.40 ) ( a ) 1.48 ( b ) Fiscal Year ( b ) Fiscal Year 2014 Revenue $ 18,529 $ 24,519 Fiscal Year 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 2014 Revenue $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ $ 18,529 $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross $ 24,519 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,384 $ 20,403 $ 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 23,382 $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net $ 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 86,833 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 Gross margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 margin 13,384 16,197 14,425 15,749 59,755 Net income 5,244 6,558 5,660 14,425 15,749 59,755 Net income 5,244 6,558 5,660 4,612 ( c 15,749 59,755 Net income 5,244 6,558 5,660 4,612 ( c ) 59,755 Net income 5,244 6,558 5,660 4,612 ( c ) 22,074 Net income 5,244 6,558 5,660 4,612 ( c ) 22,074 ( 5,660 4,612 ( c ) 22,074 ( c ) Basic earnings ) Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted Basic earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings earnings per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per per share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share share 0.63 0.79 0.68 0.56 2.66 Diluted earnings per share 0.62 2.66 Diluted earnings per share 0.62 0.78 0.68 0.55 ( c Diluted earnings per share 0.62 0.78 0.68 0.55 ( c ) earnings per share 0.62 0.78 0.68 0.55 ( c ) 2.63 per share 0.62 0.78 0.68 0.55 ( c ) 2.63 ( 0.68 0.55 ( c ) 2.63 ( c ) ( a ( a ) Includes $ 7.5 billion of goodwill and asset , a well a $ 940 million of integration and restructuring decreased fourth quarter fiscal year 2015 net income by $ 8.4 2015 net income by $ 8.4 billion and diluted EPS by and diluted EPS by $ 1.02 . ( b ) Includes ( b ) Includes $ 7.5 billion of goodwill and asset , a well a $ 2.5 billion of integration and restructuring , which decreased fiscal year 2015 net income by $ 10.0 2015 net income by $ 10.0 billion and diluted EPS by and diluted EPS by $ 1.15 . ( c ) Includes fourth quarter of fiscal year 2014 related to adjustment to prior decreased net income by $ 458 million and diluted EPS by and diluted EPS by $ 0.05 . 97 Table of Contents EPS by $ 0.05 . 97 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2015 and 2014 , a of June 30 , 2015 and 2014 , and the June 30 , 2015 and 2014 , and the related consolidated in the period ended June 30 , 2015 . These financial period ended June 30 , 2015 . These financial statement are and subsidiary a of June 30 , 2015 and 2014 , a of June 30 , 2015 and 2014 , and the June 30 , 2015 and 2014 , and the result of in the period ended June 30 , 2015 , in conformity period ended June 30 , 2015 , in conformity with accounting financial reporting a of June 30 , 2015 , based on a of June 30 , 2015 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee and our report dated July 31 , 2015 , expressed an report dated July 31 , 2015 , expressed an unqualified opinion LLP Seattle , Washington July 31 , 2015 98 Table of , Washington July 31 , 2015 98 Table of Contents PART Washington July 31 , 2015 98 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2015 . There were a of June 30 , 2015 . There were no change during the quarter ended June 30 , 2015 that have materially quarter ended June 30 , 2015 that have materially affected , financial reporting a of June 30 , 2015 ; their report a of June 30 , 2015 ; their report is included report is included in Item 9A . 99 Table of Contents included in Item 9A . 99 Table of Contents PART II of Contents PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2015 , based on a of June 30 , 2015 , based on criterion established Control – Integrated Framework ( 2013 ) issued by the Committee policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2015 , based on a of June 30 , 2015 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee for the year ended June 30 , 2015 , of the year ended June 30 , 2015 , of the Company and and our report dated July 31 , 2015 , expressed an report dated July 31 , 2015 , expressed an unqualified opinion LLP Seattle , Washington July 31 , 2015 100 Table of , Washington July 31 , 2015 100 Table of Contents PART Washington July 31 , 2015 100 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 2 , 2015 ( the “ be held December 2 , 2015 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 101 Table of Contents PART IV of Contents PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 53 Comprehensive Income Statements 54 Balance Statements 53 Comprehensive Income Statements 54 Balance Sheets 55 Cash Flows Income Statements 54 Balance Sheets 55 Cash Flows Statements 56 Stockholders Sheets 55 Cash Flows Statements 56 Stockholders ’ Equity Statements 57 56 Stockholders ’ Equity Statements 57 Notes to Financial Statements 58 57 Notes to Financial Statements 58 Report of Independent Registered Public Independent Registered Public Accounting Firm 98 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws Incorporation of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of of Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Microsoft Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation Corporation 10-Q 12/31/09 3.1 1/28/10 3.2 Bylaws of Microsoft Corporation 10-K 3.2 Bylaws of Microsoft Corporation 10-K 6/30/14 3.2 7/31/14 4.1 Form Bylaws of Microsoft Corporation 10-K 6/30/14 3.2 7/31/14 4.1 Form of of Microsoft Corporation 10-K 6/30/14 3.2 7/31/14 4.1 Form of Indenture Microsoft Corporation 10-K 6/30/14 3.2 7/31/14 4.1 Form of Indenture between Corporation 10-K 6/30/14 3.2 7/31/14 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 102 Table of . , a Trustee 8-K 4.5 9/27/10 102 Table of Contents , a Trustee 8-K 4.5 9/27/10 102 Table of Contents PART a Trustee 8-K 4.5 9/27/10 102 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 between Microsoft Corporation a of May 2 , 2013 between Microsoft Corporation and The , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 103 Table of . , a Trustee 8-K 4.1 12/6/13 103 Table of Contents , a Trustee 8-K 4.1 12/6/13 103 Table of Contents PART a Trustee 8-K 4.1 12/6/13 103 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 2/12/15 10.1 * Microsoft . , a Trustee 8-K 4.1 2/12/15 10.1 * Microsoft Corporation , a Trustee 8-K 4.1 2/12/15 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.1 2/12/15 10.1 * Microsoft Corporation 2001 Stock 2/12/15 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Corporation 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft 2001 Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation Stock Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Plan 10-Q 12/31/11 10.1 1/19/12 10.3 * Microsoft Corporation 1999 Stock 1/19/12 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Plan for Non-Employee Directors X 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 8-K 10.17 9/23/13 104 Table of Executive Officer Incentive Plan 8-K 10.17 9/23/13 104 Table of Contents Officer Incentive Plan 8-K 10.17 9/23/13 104 Table of Contents PART Incentive Plan 8-K 10.17 9/23/13 104 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.18 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan X 10.19 * Corporation 2001 Stock Plan X 10.19 * Resignation Agreement and Full Microsoft Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Agreement Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Agreement under Agreement under the Microsoft Corporation 2001 Stock Plan ( Service-Based ) Stock Plan ( Service-Based ) 8-K 10.21 9/23/13 10.22 * Senior Plan ( Service-Based ) 8-K 10.21 9/23/13 10.22 * Senior Executive ( Service-Based ) 8-K 10.21 9/23/13 10.22 * Senior Executive Severance Service-Based ) 8-K 10.21 9/23/13 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 8-K 10.22 9/26/13 10.23 * Offer Executive Severance Benefit Plan 8-K 10.22 9/26/13 10.23 * Offer Letter Severance Benefit Plan 8-K 10.22 9/26/13 10.23 * Offer Letter , Benefit Plan 8-K 10.22 9/26/13 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan X 12 Computation Corporation 2001 Stock Plan X 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase * Furnished , not filed 105 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 31 , 2015 . M ICROSOFT , on July 31 , 2015 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 31 , 2015 . Signature Title indicated on July 31 , 2015 . Signature Title / S ( Principal Accounting Officer ) 106 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-16-662209/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-16-662209/full-submission.txt new file mode 100644 index 0000000..cc97d5d --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001193125-16-662209/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT Washington , D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2016 OR ¨ TRANSITION Year Ended June 30 , 2016 OR ¨ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes x No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ¨ Indicate by check mark reporting company ” in Rule 12b-2 of the Exchange Act . ( a defined in Rule 12b-2 of the Exchange Act ) No x As of December 31 , 2015 , the aggregate As of December 31 , 2015 , the aggregate market value of the registrant wa $ 424.5 billion based on the closing System . As of July 25 , 2016 , there were As of July 25 , 2016 , there were 7,792,515,573 share , 2016 , there were 7,792,515,573 share of common stock outstanding to be held on November 30 , 2016 are incorporated by held on November 30 , 2016 are incorporated by reference into of Contents MICROSOFT CORPORATION FORM 10-K For The Fiscal Year Ended The Fiscal Year Ended June 30 , 2016 INDEX Page PART Year Ended June 30 , 2016 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 Item 1A . Risk Factors 17 Item Item 1A . Risk Factors 17 Item 1B . Unresolved Staff . Risk Factors 17 Item 1B . Unresolved Staff Comments 26 1B . Unresolved Staff Comments 26 Item 2 . Properties 26 Unresolved Staff Comments 26 Item 2 . Properties 26 Item 3 26 Item 2 . Properties 26 Item 3 . Legal Proceedings 2 . Properties 26 Item 3 . Legal Proceedings 27 Item Item 3 . Legal Proceedings 27 Item 4 . Mine Safety . Legal Proceedings 27 Item 4 . Mine Safety Disclosures 27 4 . Mine Safety Disclosures 27 PART II Item 5 . Disclosures 27 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 28 Item 6 . Selected Financial of Equity Securities 28 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management ’ Selected Financial Data 28 Item 7 . Management ’ s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 52 Item 9 . Changes in and Supplementary Data 52 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 96 Item 9A . Controls and and Financial Disclosure 96 Item 9A . Controls and Procedures 96 9A . Controls and Procedures 96 Report of Management on Internal Internal Control over Financial Reporting 96 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 Item 9B . Other Information Public Accounting Firm 97 Item 9B . Other Information 98 PART Item 9B . Other Information 98 PART III Item 10 . Information 98 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 98 Item 11 . Executive Compensation and Corporate Governance 98 Item 11 . Executive Compensation 98 Item Item 11 . Executive Compensation 98 Item 12 . Security Ownership . Executive Compensation 98 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 98 Item 13 . Certain Relationships Related Stockholder Matters 98 Item 13 . Certain Relationships and Related Transactions , and Director Independence 98 Item 14 . Principal Accounting and Director Independence 98 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 98 PART IV Item 15 . Services 98 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 99 Signatures 103 2 Table of Financial Statement Schedules 99 Signatures 103 2 Table of Contents PART Statement Schedules 99 Signatures 103 2 Table of Contents PART I of Contents PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , “ Quantitative and ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our vision Microsoft What we offer Founded in 1975 , we operate worldwide in we operate worldwide in over 190 country . We develop , productivity and business process . 3 Table of Contents PART I of Contents PART I Item 1 • Build the intelligent cloud ” ) . With Office 365 , we provide these familiar to support our service . 4 Table of Contents PART I of Contents PART I Item 1 Create more personal computing We but a partner . Windows 10 is the cornerstone of our consider the launch of Windows 10 in July 2015 to be of Windows 10 in July 2015 to be a transformative moment device . We developed Windows 10 not only to be familiar and always up-to-date . Windows 10 is more personal and productive and universal application . Windows 10 is designed to foster innovation . Our ambition for Windows 10 is to broaden our economic new hardware design for Windows 10 ; our own commitment to design and configuration for Windows 10 . We now have the the installed base to Windows 10 through upgrade and ongoing update new input/output method within Windows 10 , including speech , pen differentiate ourselves from competitor . 5 Table of Contents PART I of Contents PART I Item 1 OPERATING SEGMENTS Our segment provide within business . In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment licensing and subscription to Office 365 commercial for product and service retail or through an Office 365 consumer subscription , and Office the continued shift to Office 365 . Office 365 is our to Office 365 . Office 365 is our cloud-based service that the continued shift to Office 365 . Office Consumer Services revenue a variety of device . 6 Table of Contents PART I of Contents PART I Item 1 Dynamics Dynamics provides business solution on-premises hardware and software . 7 Table of Contents PART I of Contents PART I Item 1 Enterprise Services Enterprise Services , , and PC accessory . 8 Table of Contents PART I of Contents PART I Item 1 • Gaming , including Xbox consider the launch of Windows 10 in July 2015 to be of Windows 10 in July 2015 to be a transformative moment MSN ad . In June 2015 , we entered into agreement NDS ” ) in April 2014 , Microsoft and Nokia jointly device , the Surface Pro 4 and Surface Book , were , were released in October 2015 . We began manufacturing and acquisition of NDS in April 2014 . In July 2015 , April 2014 . In July 2015 , we announced a plan align resource . In May 2016 , we announced plan to feature phone business in May 2016 . The transaction is expected in the second half of 2016 , subject to regulatory approval and other closing condition . 9 Table of Contents PART I of Contents PART I Item 1 Gaming Our gaming platform is content . We released Xbox 360 and Xbox One in November and Xbox One in November 2005 and November 2013 , respectively in November 2005 and November 2013 , respectively , and recently will be released in August 2016 . We also launched our We also launched our Windows 10 Xbox app in July 2015 10 Xbox app in July 2015 . Xbox Live enables people gaming franchise , in November 2014 . The addition of Minecraft latest generation console in November 2012 . Sony released their latest latest generation console in November 2013 . In addition to Sony offering to end user . 10 Table of Contents PART I of Contents PART I Item 1 OPERATIONS We have operation center feature phone business in May 2016 , which includes the sale AND DEVELOPMENT During fiscal year 2016 , 2015 , and 2014 During fiscal year 2016 , 2015 , and 2014 , research 2016 , 2015 , and 2014 , research and development expense and development expense wa $ 12.0 billion , $ 12.0 billion $ 12.0 billion , $ 12.0 billion , and $ 11.4 12.0 billion , and $ 11.4 billion , respectively . These respectively . These amount represented 14 % , 13 % , amount represented 14 % , 13 % , and 13 % , 13 % , and 13 % of revenue in fiscal of revenue in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . We plan have a portfolio of over 61,000 U.S. and international patent issued international patent issued and over 35,000 11 Table of Contents PART patent issued and over 35,000 11 Table of Contents PART I of Contents PART I Item 1 pending . While we employ Bing or Windows with Office 365 subscription . 12 Table of with Office 365 subscription . 12 Table of Contents PART I of Contents PART I Item 1 There are two broad category cloud-based solution such a Office 365 , Azure , and Dynamics portal and channel , Office 365 , Xbox Live , Outlook.com include those discussed below . 13 Table of Contents PART I of Contents PART I Item 1 Customer Licensing Programs Enterprise Agreement the MPSA in fiscal year 2017 to better enable organization to three year . In July 2014 , we announced the retirement licensing option . Beginning July 2015 , no new Select Plus MPSA . Starting in July 2016 , we will no longer subscription for cloud-based service . 14 Table of Contents PART I of Contents PART I Item 1 Partner Programs The Microsoft Cloud customer accounted for more than 10 % of revenue in fiscal of revenue in fiscal year 2016 , 2015 , or 2014 in fiscal year 2016 , 2015 , or 2014 . Our 2016 , 2015 , or 2014 . Our practice is to executive officer a of July 28 , 2016 were a follows a of July 28 , 2016 were a follows : Name with the Company Satya Nadella 48 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 46 Executive Vice President , Chief Chief Marketing Officer Jean-Philippe Courtois 55 Executive Vice President and President and Operations Kathleen T. Hogan 50 Executive Vice President , Human Human Resources Amy E. Hood 44 Executive Vice President , Chief Financial Officer Margaret L. Johnson 54 Executive Vice President , Business Business Development Bradford L. Smith 57 President and Chief Legal Officer Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise since July 2013 . From 2011 to 2013 since July 2013 . From 2011 to 2013 , Mr. Nadella 2013 . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in March 2014 . Previously , he served . In his more than 20 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Marketing and Operations in July 2016 . Before that he wa of Microsoft International since June 2005 . He had been Chief , and Africa since March 2003 . Previous to that , he had been Senior Vice 15 Table of Contents PART I of Contents PART I Item 1 President and President , Microsoft , and Africa since July 2000 . Before holding that position Worldwide Customer Marketing since July 1998 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . He also serf on , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms . Hood wa Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . Beginning in 2010 , May 2013 . Beginning in 2010 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha , Business Development in September 2014 . Prior to that Ms. to that Ms. Johnson spent 24 year at Qualcomm in various Chief Legal Officer in September 2015 . Prior to that he Counsel , and Secretary since 2011 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . He had been Deputy Mr. Smith joined Microsoft in 1993 . Mr. Smith also serf Inc. EMPLOYEES As of June 30 , 2016 , we employed As of June 30 , 2016 , we employed approximately 114,000 2016 , we employed approximately 114,000 people on a full-time basis on a full-time basis , 63,000 in the U.S. and 51,000 63,000 in the U.S. and 51,000 internationally . Of the total the total employed people , 38,000 were in operation , including , and consulting service ; 37,000 in product research and development product research and development ; 29,000 in sale and marketing ; sale and marketing ; and 10,000 in general and administration . bargaining agreement . In June 2015 , management approved a restructuring restructuring plan that eliminated approximately 7,400 position in fiscal year 2016 7,400 position in fiscal year 2016 , primarily in our phone In the fourth quarter of 2016 , management approved restructuring plan addition to the elimination of 1,850 position that were announced in that were announced in May 2016 , approximately 2,850 role globally in May 2016 , approximately 2,850 role globally will be reduced the end of fiscal year 2017 . AVAILABLE INFORMATION Our Internet Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to , and international news . 16 Table of Contents PART I of Contents PART I Item 1 , 1A • Corporate governance PART I Item 1 , 1A • Corporate governance information including Investor Relations website . ITEM 1A . RISK FACTORS Our operation make it more difficult to 17 Table of Contents PART I of Contents PART I Item 1A attract application developer to our platform to third-party developer . 18 Table of Contents PART I of Contents PART I Item 1A • Ensuring our cloud-based service Azure Services platform , Office 365 , other cloud-based offering , . The launch of Windows 10 , with free upgrade available to existing user of Windows 7 and 8.1 , constitutes the user of Windows 7 and 8.1 , constitutes the most ambitious for our user installing Windows 10 . However , if user , the reception of Windows 10 in the marketplace may be , we anticipate that Windows 10 will enable new post-license monetization , and management in Windows 10 could result in regulatory review business strategy . In June 2016 , we announced our acquisition of LinkedIn for approximately $ 26.2 billion . The LinkedIn acquisition result or financial condition . 19 Table of Contents PART I of Contents PART I Item 1A If our goodwill or amortizable fourth quarter of fiscal year 2015 , we recorded a $ , we recorded a $ 5.1 billion charge for the impairment of goodwill and a $ 2.2 billion charge for the impairment fourth quarter of fiscal year 2016 we recorded a $ 480 2016 we recorded a $ 480 million charge for the impairment continue to do so . 20 Table of Contents PART I of Contents PART I Item 1A We may not be able could delay adoption of additional 21 Table of Contents PART I of Contents PART I Item 1A product or service . Customers , Exchange Online , Office 365 , SharePoint Online , OneDrive product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u technology and to provide our 22 Table of Contents PART I of Contents PART I Item 1A competitor with specification for how their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may ability to realize anticipated Windows 10 post-sale monetization opportunity may be and sometimes may conflict from 23 Table of Contents PART I of Contents PART I Item 1A jurisdiction to jurisdiction . Additionally For example , in October 2015 the European Court of Justice framework , in place since 2000 , that enabled company to product release such a Windows 10 , significant business transaction , expense and cash flow . 24 Table of Contents PART I of Contents PART I Item 1A Our hardware and software product customer are located in over 200 country and a significant part and provide cloud-based service . 25 Table of Contents PART I of Contents PART I Item 1A , 1B , 2 Adverse PART I Item 1A , 1B , 2 Adverse economic or Item 1A , 1B , 2 Adverse economic or market condition our financial result . ITEM 1B . UNRESOLVED STAFF COMMENTS We the SEC that were issued 180 day or more preceding the end of our fiscal year 2016 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 500 acre of land we own Development ” section of Item 1 of this Form 10-K . Item 1 of this Form 10-K . The table below show and internationally a of June 30 , 2016 : ( Square a of June 30 , 2016 : ( Square foot in Location Owned Leased Total U.S. 16.4 9.7 26.1 International 9.0 10.8 Owned Leased Total U.S. 16.4 9.7 26.1 International 9.0 10.8 19.8 Leased Total U.S. 16.4 9.7 26.1 International 9.0 10.8 19.8 Total U.S. 16.4 9.7 26.1 International 9.0 10.8 19.8 Total 25.4 20.5 16.4 9.7 26.1 International 9.0 10.8 19.8 Total 25.4 20.5 45.9 9.7 26.1 International 9.0 10.8 19.8 Total 25.4 20.5 45.9 26 International 9.0 10.8 19.8 Total 25.4 20.5 45.9 26 Table of 9.0 10.8 19.8 Total 25.4 20.5 45.9 26 Table of Contents 10.8 19.8 Total 25.4 20.5 45.9 26 Table of Contents PART 19.8 Total 25.4 20.5 45.9 26 Table of Contents PART I of Contents PART I Item 3 , 4 I TEM 3 PART I Item 3 , 4 I TEM 3 . LEGAL 3 , 4 I TEM 3 . LEGAL PROCEEDINGS While not annual report will continue through 2020 . During fiscal year 2016 2020 . During fiscal year 2016 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU Board annually . See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 27 Table of Contents PART II of Contents PART II Item 5 , 6 PART II ITEM PART II Item 5 , 6 PART II ITEM 5 . , 6 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 25 , 2016 , there were . On July 25 , 2016 , there were 106,534 registered , 2016 , there were 106,534 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2016 30 Fiscal Year Fiscal Year 2016 High $ 48.41 $ 56.85 Fiscal Year 2016 High $ 48.41 $ 56.85 $ 55.64 $ 2016 High $ 48.41 $ 56.85 $ 55.64 $ 56.77 $ $ 48.41 $ 56.85 $ 55.64 $ 56.77 $ 56.85 Low $ 56.85 $ 55.64 $ 56.77 $ 56.85 Low $ 39.72 $ 55.64 $ 56.77 $ 56.85 Low $ 39.72 $ 43.75 56.77 $ 56.85 Low $ 39.72 $ 43.75 $ 48.19 $ 56.85 Low $ 39.72 $ 43.75 $ 48.19 $ 48.04 $ $ 39.72 $ 43.75 $ 48.19 $ 48.04 $ 39.72 Fiscal $ 43.75 $ 48.19 $ 48.04 $ 39.72 Fiscal Year 2015 $ 48.19 $ 48.04 $ 39.72 Fiscal Year 2015 High $ 48.04 $ 39.72 Fiscal Year 2015 High $ 47.57 $ 50.05 Fiscal Year 2015 High $ 47.57 $ 50.05 $ 47.91 $ 2015 High $ 47.57 $ 50.05 $ 47.91 $ 49.54 $ $ 47.57 $ 50.05 $ 47.91 $ 49.54 $ 50.05 Low $ 50.05 $ 47.91 $ 49.54 $ 50.05 Low $ 41.05 $ 47.91 $ 49.54 $ 50.05 Low $ 41.05 $ 42.10 49.54 $ 50.05 Low $ 41.05 $ 42.10 $ 40.23 $ 50.05 Low $ 41.05 $ 42.10 $ 40.23 $ 40.12 $ $ 41.05 $ 42.10 $ 40.23 $ 40.12 $ 40.12 DIVIDENDS $ 42.10 $ 40.23 $ 40.12 $ 40.12 DIVIDENDS AND SHARE $ 40.23 $ 40.12 $ 40.12 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding dividend fourth quarter of fiscal year 2016 , all of which were ( in million ) April 1 , 2016 – April 30 million ) April 1 , 2016 – April 30 , 2016 1 , 2016 – April 30 , 2016 23,687,526 $ 53.72 2016 – April 30 , 2016 23,687,526 $ 53.72 23,687,526 $ – April 30 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 30 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 May 1 , 2016 23,687,526 $ 53.72 23,687,526 $ 9,410 May 1 , 23,687,526 $ 53.72 23,687,526 $ 9,410 May 1 , 2016 – 53.72 23,687,526 $ 9,410 May 1 , 2016 – May 31 $ 9,410 May 1 , 2016 – May 31 , 2016 1 , 2016 – May 31 , 2016 11,691,472 $ 50.51 2016 – May 31 , 2016 11,691,472 $ 50.51 11,691,472 $ – May 31 , 2016 11,691,472 $ 50.51 11,691,472 $ 8,820 31 , 2016 11,691,472 $ 50.51 11,691,472 $ 8,820 June 1 , 2016 11,691,472 $ 50.51 11,691,472 $ 8,820 June 1 , 11,691,472 $ 50.51 11,691,472 $ 8,820 June 1 , 2016 – 50.51 11,691,472 $ 8,820 June 1 , 2016 – June 30 $ 8,820 June 1 , 2016 – June 30 , 2016 1 , 2016 – June 30 , 2016 34,576,695 $ 50.23 2016 – June 30 , 2016 34,576,695 $ 50.23 34,576,695 $ – June 30 , 2016 34,576,695 $ 50.23 34,576,695 $ 7,083 30 , 2016 34,576,695 $ 50.23 34,576,695 $ 7,083 69,955,693 69,955,693 , 2016 34,576,695 $ 50.23 34,576,695 $ 7,083 69,955,693 69,955,693 All 34,576,695 $ 50.23 34,576,695 $ 7,083 69,955,693 69,955,693 All repurchase were $ 50.23 34,576,695 $ 7,083 69,955,693 69,955,693 All repurchase were made 50.23 34,576,695 $ 7,083 69,955,693 69,955,693 All repurchase were made using or pursuant to a Rule 10b5-1 trading plan . ITEM 6 10b5-1 trading plan . ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2016 2015 2014 ( Year Ended June 30 , 2016 2015 2014 ( d ) Ended June 30 , 2016 2015 2014 ( d ) 2013 June 30 , 2016 2015 2014 ( d ) 2013 2012 2015 2014 ( d ) 2013 2012 Revenue $ 85,320 ( 2014 ( d ) 2013 2012 Revenue $ 85,320 ( a ) 2013 2012 Revenue $ 85,320 ( a ) $ 93,580 85,320 ( a ) $ 93,580 $ 86,833 $ 77,849 $ a ) $ 93,580 $ 86,833 $ 77,849 $ 73,723 Gross $ 93,580 $ 86,833 $ 77,849 $ 73,723 Gross margin $ $ 86,833 $ 77,849 $ 73,723 Gross margin $ 52,540 ( $ 73,723 Gross margin $ 52,540 ( a ) $ 60,542 52,540 ( a ) $ 60,542 $ 59,755 $ 57,464 $ a ) $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating $ 60,542 $ 59,755 $ 57,464 $ 56,193 Operating income $ $ 59,755 $ 57,464 $ 56,193 Operating income $ 20,182 ( $ 56,193 Operating income $ 20,182 ( a ) ( b ) ( b ) $ 18,161 ( c ) $ 27,759 18,161 ( c ) $ 27,759 $ 26,764 ( e ) c ) $ 27,759 $ 26,764 ( e ) $ 21,763 26,764 ( e ) $ 21,763 ( f ) Net income f ) Net income $ 16,798 ( a ) ( b ) ( b ) $ 12,193 ( c ) $ 22,074 12,193 ( c ) $ 22,074 $ 21,863 ( e ) c ) $ 22,074 $ 21,863 ( e ) $ 16,978 21,863 ( e ) $ 16,978 ( f ) Diluted earnings Diluted earnings per share $ 2.10 ( a ) ( b ) ( b ) $ 1.48 ( c ) $ 2.63 1.48 ( c ) $ 2.63 $ 2.58 ( e ) c ) $ 2.63 $ 2.58 ( e ) $ 2.00 2.58 ( e ) $ 2.00 ( f ) Cash dividend dividend declared per share $ 1.44 $ 1.24 $ 1.12 $ per share $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ $ 1.44 $ 1.24 $ 1.12 $ 0.92 $ 0.80 Cash $ 1.24 $ 1.12 $ 0.92 $ 0.80 Cash , cash $ 1.12 $ 0.92 $ 0.80 Cash , cash equivalent , , and short-term investment $ 113,240 $ 96,526 $ 85,709 $ short-term investment $ 113,240 $ 96,526 $ 85,709 $ 77,022 $ $ 113,240 $ 96,526 $ 85,709 $ 77,022 $ 63,040 Total $ 96,526 $ 85,709 $ 77,022 $ 63,040 Total asset $ $ 85,709 $ 77,022 $ 63,040 Total asset $ 193,694 $ $ 63,040 Total asset $ 193,694 $ 174,472 ( g ) Total asset $ 193,694 $ 174,472 ( g ) $ 170,675 174,472 ( g ) $ 170,675 ( g ) $ 140,962 170,675 ( g ) $ 140,962 ( g ) $ 119,388 140,962 ( g ) $ 119,388 ( g ) Long-term obligation g ) Long-term obligation $ 62,340 $ 44,742 ( g ) Long-term obligation $ 62,340 $ 44,742 ( g ) $ 35,391 44,742 ( g ) $ 35,391 ( g ) $ 24,601 35,391 ( g ) $ 24,601 ( g ) $ 20,337 24,601 ( g ) $ 20,337 ( g ) Stockholders ’ ) Stockholders ’ equity $ 71,977 $ 80,083 $ 89,784 $ ’ equity $ 71,977 $ 80,083 $ 89,784 $ 78,944 $ $ 71,977 $ 80,083 $ 89,784 $ 78,944 $ 66,363 28 $ 80,083 $ 89,784 $ 78,944 $ 66,363 28 Table of $ 89,784 $ 78,944 $ 66,363 28 Table of Contents PART 89,784 $ 78,944 $ 66,363 28 Table of Contents PART II of Contents PART II Item 6 , 7 ( a ) PART II Item 6 , 7 ( a ) Reflects the net revenue deferral from Windows 10 of $ 6.6 billion , from Windows 10 of $ 6.6 billion , which decreased operating EPS ” ) by $ 6.6 billion , $ 4.6 billion $ 6.6 billion , $ 4.6 billion , and $ 0.58 4.6 billion , and $ 0.58 , respectively . ( b ( b ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . ( c ( c ) Includes $ 7.5 billion of goodwill and asset phone business , and $ 2.5 billion of integration and restructuring and diluted EPS by $ 10.0 billion , $ 9.5 billion $ 10.0 billion , $ 9.5 billion , and $ 1.15 9.5 billion , and $ 1.15 , respectively . ( d ( d ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( €561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income and diluted EPS by $ 900 million , $ 596 million $ 900 million , $ 596 million , and $ 0.07 596 million , and $ 0.07 , respectively . ( f and net income by $ 6.2 billion and diluted EPS by and diluted EPS by $ 0.73 . ( g ) Reflects accounting standard in fiscal year 2016 related to balance sheet classification deferred tax . See Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . further discussion . I TEM 7 . MANAGEMENT ’ S DISCUSSION our focus in fiscal year 2016 wa toward transforming our organization . Highlights from fiscal year 2016 included : • Commercial cloud run rate * exceeded $ 12.1 billion . • Office 365 12.1 billion . • Office 365 Consumer subscriber increased to 23.1 365 Consumer subscriber increased to 23.1 million . 29 Table of increased to 23.1 million . 29 Table of Contents PART II of Contents PART II Item 7 • Microsoft Dynamics ( “ Azure ” ) revenue grew 113 % , with usage of nearly doubled year-over-year to over 33,000 . • Windows 10 is over 33,000 . • Windows 10 is now active on more now active on more than 350 million device around the world Live monthly active user grew 33 % year-over-year to 49 million grew 33 % year-over-year to 49 million . * Commercial cloud quarter by twelve for Office 365 commercial , Azure , Dynamics cloud property . In June 2016 , we entered into a to acquire LinkedIn for $ 196 per share in an all-cash all-cash transaction valued at $ 26.2 billion , inclusive of LinkedIn will close in calendar year 2016 , subject to approval by , a well a Office 365 and Dynamics . In May and Dynamics . In May 2016 , we announced the sale feature phone business for $ 350 million . The transaction is in the second half of 2016 , subject to regulatory approval closing condition . In July 2015 , we announced a plan align resource . In May 2016 , we announced plan to associated expense in fiscal year 2016 , and this trend is to continue in fiscal year 2017 . Industry Trends Our industry , which remain dynamic . 30 Table of Contents PART II of Contents PART II Item 7 Our international operation provide a foreign currency throughout fiscal year 2015 , and continuing into fiscal and continuing into fiscal year 2016 , negatively impacted reported revenue ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue • Revenue deferred on Windows 10 license to reflect ratable recognition solution , service revenue exceeded 10 % of total revenue for first time in fiscal year 2016 . As a result , and content such a Office 365 , Azure , Dynamics CRM Segment information appearing in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) is also presented on and Other . In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial and monitor segment performance . 31 Table of Contents PART II of Contents PART II Item 7 We expect to report the segment is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . SUMMARY RESULTS OF and per share amount ) 2016 2015 2014 Percentage Change 2016 per share amount ) 2016 2015 2014 Percentage Change 2016 Versus share amount ) 2016 2015 2014 Percentage Change 2016 Versus 2015 2016 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 Versus 2014 2016 Versus 2015 Percentage Change 2015 Versus 2014 Revenue $ 85,320 2015 Percentage Change 2015 Versus 2014 Revenue $ 85,320 $ 93,580 2015 Versus 2014 Revenue $ 85,320 $ 93,580 $ 86,833 ( 2014 Revenue $ 85,320 $ 93,580 $ 86,833 ( 9 ) $ 85,320 $ 93,580 $ 86,833 ( 9 ) % 8 $ 93,580 $ 86,833 ( 9 ) % 8 % Gross 86,833 ( 9 ) % 8 % Gross margin $ 52,540 8 % Gross margin $ 52,540 $ 60,542 $ 59,755 ( Gross margin $ 52,540 $ 60,542 $ 59,755 ( 13 ) $ 52,540 $ 60,542 $ 59,755 ( 13 ) % 1 $ 60,542 $ 59,755 ( 13 ) % 1 % Operating 59,755 ( 13 ) % 1 % Operating income $ 20,182 1 % Operating income $ 20,182 $ 18,161 $ 27,759 11 Operating income $ 20,182 $ 18,161 $ 27,759 11 % ( $ 20,182 $ 18,161 $ 27,759 11 % ( 35 ) 20,182 $ 18,161 $ 27,759 11 % ( 35 ) % $ 27,759 11 % ( 35 ) % Diluted earnings per Diluted earnings per share $ 2.10 $ 1.48 $ 2.63 42 per share $ 2.10 $ 1.48 $ 2.63 42 % ( $ 2.10 $ 1.48 $ 2.63 42 % ( 44 ) 2.10 $ 1.48 $ 2.63 42 % ( 44 ) % $ 2.63 42 % ( 44 ) % Fiscal year 2016 44 ) % Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Revenue decreased $ 8.3 billion year 2015 Revenue decreased $ 8.3 billion or 9 % , decreased $ 8.3 billion or 9 % , primarily due to net revenue deferral from Windows 10 of $ 6.6 billion and from Windows 10 of $ 6.6 billion and an unfavorable foreign currency impact of approximately $ 3.8 billion or 4 % . approximately $ 3.8 billion or 4 % . Windows 10 revenue or 4 % . Windows 10 revenue is primarily recognized at . Operating income increased $ 2.0 billion or 11 % , increased $ 2.0 billion or 11 % , primarily due to . Gross margin decreased $ 8.0 billion or 13 % , decreased $ 8.0 billion or 13 % , driven by the currency impact of approximately $ 3.3 billion or 5 % . approximately $ 3.3 billion or 5 % . Productivity and Business Cost of revenue decreased $ 258 million or 1 % , decreased $ 258 million or 1 % , mainly due to and restructuring expense decreased $ 8.9 billion , primarily driven by and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , driven by a foreign currency impact of approximately 2 % . Diluted earnings per EPS ” ) wa $ 2.10 for fiscal year 2016 . $ 2.10 for fiscal year 2016 . Current year diluted EPS net revenue deferral from Windows 10 and impairment , integration , to diluted EPS of $ 0.69 , and favorably impacted by to diluted EPS of $ 0.05 . Diluted EPS wa $ . Diluted EPS wa $ 1.48 for fiscal year 2015 . $ 1.48 for fiscal year 2015 . Prior year diluted EPS to diluted EPS of $ 1.15 . 32 Table of Contents EPS of $ 1.15 . 32 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2015 compared with II Item 7 Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Revenue increased $ 6.7 billion year 2014 Revenue increased $ 6.7 billion or 8 % , increased $ 6.7 billion or 8 % , primarily due to foreign currency impact of approximately 2 % . Operating income decreased . Operating income decreased $ 9.6 billion or 35 % , decreased $ 9.6 billion or 35 % , primarily due to restructuring expense in fiscal year 2015 , a well a increased . Gross margin increased $ 787 million or 1 % , increased $ 787 million or 1 % , driven by our Cost of revenue increased $ 6.0 billion or 22 % , increased $ 6.0 billion or 22 % , mainly due to commercial cloud , including $ 396 million of higher datacenter expense and restructuring expense were $ 10.0 billion in fiscal year 2015 10.0 billion in fiscal year 2015 , reflecting goodwill and asset asset impairment charge of $ 7.5 billion related to our phone phone business , and $ 2.5 billion of integration and restructuring and development expense increased $ 665 million or 6 % , increased $ 665 million or 6 % , mainly due to . Diluted EPS wa $ 1.48 for fiscal year 2015 . $ 1.48 for fiscal year 2015 . Diluted EPS wa negatively decreased diluted EPS by $ 1.15 . SEGMENT RESULTS OF OPERATIONS million , except percentage ) 2016 2015 2014 Percentage Change 2016 , except percentage ) 2016 2015 2014 Percentage Change 2016 Versus except percentage ) 2016 2015 2014 Percentage Change 2016 Versus 2015 2016 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 Versus 2014 2016 Versus 2015 Percentage Change 2015 Versus 2014 Revenue Productivity and 2015 Percentage Change 2015 Versus 2014 Revenue Productivity and Business Processes Productivity and Business Processes $ 26,487 $ 26,430 $ 26,976 0 Business Processes $ 26,487 $ 26,430 $ 26,976 0 % ( $ 26,487 $ 26,430 $ 26,976 0 % ( 2 ) 26,487 $ 26,430 $ 26,976 0 % ( 2 ) % $ 26,976 0 % ( 2 ) % Intelligent Cloud 25,042 2 ) % Intelligent Cloud 25,042 23,715 21,735 6 % 9 ) % Intelligent Cloud 25,042 23,715 21,735 6 % 9 % % Intelligent Cloud 25,042 23,715 21,735 6 % 9 % More Intelligent Cloud 25,042 23,715 21,735 6 % 9 % More Personal 25,042 23,715 21,735 6 % 9 % More Personal Computing 40,460 9 % More Personal Computing 40,460 43,160 38,460 ( 6 ) % More Personal Computing 40,460 43,160 38,460 ( 6 ) % More Personal Computing 40,460 43,160 38,460 ( 6 ) % 12 Computing 40,460 43,160 38,460 ( 6 ) % 12 % Corporate 38,460 ( 6 ) % 12 % Corporate and Other ( % Corporate and Other ( 6,669 ) 275 ( 338 ) and Other ( 6,669 ) 275 ( 338 ) * * ( 6,669 ) 275 ( 338 ) * * Total revenue * * Total revenue $ 85,320 $ 93,580 $ 86,833 ( Total revenue $ 85,320 $ 93,580 $ 86,833 ( 9 ) $ 85,320 $ 93,580 $ 86,833 ( 9 ) % 8 $ 93,580 $ 86,833 ( 9 ) % 8 % Operating 86,833 ( 9 ) % 8 % Operating income ( loss Productivity and Business Processes $ 12,461 $ 13,359 $ 14,173 ( Business Processes $ 12,461 $ 13,359 $ 14,173 ( 7 ) $ 12,461 $ 13,359 $ 14,173 ( 7 ) % ( $ 13,359 $ 14,173 ( 7 ) % ( 6 ) ( 7 ) % ( 6 ) % Intelligent Cloud 9,358 6 ) % Intelligent Cloud 9,358 9,871 8,446 ( 5 ) ) % Intelligent Cloud 9,358 9,871 8,446 ( 5 ) % % Intelligent Cloud 9,358 9,871 8,446 ( 5 ) % 17 Cloud 9,358 9,871 8,446 ( 5 ) % 17 % More 8,446 ( 5 ) % 17 % More Personal Computing 6,142 17 % More Personal Computing 6,142 4,667 5,605 32 % ( % More Personal Computing 6,142 4,667 5,605 32 % ( 17 More Personal Computing 6,142 4,667 5,605 32 % ( 17 ) Personal Computing 6,142 4,667 5,605 32 % ( 17 ) % 4,667 5,605 32 % ( 17 ) % Corporate and Other % Corporate and Other ( 7,779 ) ( 9,736 ) ( Other ( 7,779 ) ( 9,736 ) ( 465 ) * ) ( 9,736 ) ( 465 ) * * Total operating * Total operating income $ 20,182 $ 18,161 $ 27,759 11 operating income $ 20,182 $ 18,161 $ 27,759 11 % ( $ 20,182 $ 18,161 $ 27,759 11 % ( 35 ) 20,182 $ 18,161 $ 27,759 11 % ( 35 ) % $ 27,759 11 % ( 35 ) % * Not meaningful ) % * Not meaningful 33 Table of Contents PART II of Contents PART II Item 7 Reportable Segments Fiscal year 2016 7 Reportable Segments Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Productivity and Business Processes Productivity foreign currency impact of approximately 6 % . • Office Commercial Office Commercial revenue increased $ 135 million or 1 % , increased $ 135 million or 1 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial and a decline in foreign currency impact of approximately 6 % . • Office Consumer Office Consumer revenue decreased $ 69 million or 2 % , decreased $ 69 million or 2 % , driven by a by higher revenue from Office 365 consumer , mainly due to foreign currency impact of approximately 4 % . • Dynamics revenue . • Dynamics revenue increased 4 % , mainly due to foreign currency impact of approximately 6 % . Productivity and Business Processes operating income decreased $ 898 million or 7 % , decreased $ 898 million or 7 % , driven by lower . Gross margin decreased $ 970 million or 4 % , decreased $ 970 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 1.0 billion or 26 % , increased $ 1.0 billion or 26 % , primarily due to . Operating expense decreased $ 72 million or 1 % , decreased $ 72 million or 1 % , driven by lower and marketing expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , mainly due to Intelligent Cloud revenue increased $ 1.3 billion or 6 % , increased $ 1.3 billion or 6 % , primarily due to foreign currency impact of approximately 5 % . • Server product cloud service revenue grew $ 686 million or 4 % , grew $ 686 million or 4 % , driven by revenue revenue growth from Azure of 113 % , offset in part foreign currency impact of approximately 5 % . • Enterprise Services Enterprise Services revenue grew $ 536 million or 11 % , grew $ 536 million or 11 % , mainly due to foreign currency impact of approximately 5 % . Intelligent Cloud operating Cloud operating income decreased $ 513 million or 5 % , decreased $ 513 million or 5 % , primarily due to . Operating expense increased $ 989 million or 12 % , increased $ 989 million or 12 % , mainly due to and development expense increased $ 567 million or 21 % and increased $ 567 million or 21 % and sale and marketing and marketing expense increased $ 347 million or 9 % , increased $ 347 million or 9 % , driven by increased . Gross margin increased $ 476 million or 3 % , increased $ 476 million or 3 % , driven by revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 851 million or 15 % , increased $ 851 million or 15 % , primarily driven by Personal Computing revenue decreased $ 2.7 billion or 6 % , decreased $ 2.7 billion or 6 % , mainly due to foreign currency impact of approximately 2 % . • Devices revenue • Devices revenue decreased $ 3.7 billion or 32 % , decreased $ 3.7 billion or 32 % , mainly due to Surface ” ) revenue . 34 Table of Contents PART II of Contents PART II Item 7 Phone revenue decreased $ 4.2 7 Phone revenue decreased $ 4.2 billion or 56 % , decreased $ 4.2 billion or 56 % , a we sold % , a we sold 13.8 million Microsoft Lumia ( “ Lumia ” ) phone and 75.5 million other phone in fiscal other phone in fiscal year 2016 , compared with 36.8 million year 2016 , compared with 36.8 million and 126.8 million sold compared with 36.8 million and 126.8 million sold , respectively , respectively , in fiscal year 2015 . Surface revenue increased $ . Surface revenue increased $ 486 million or 13 % , increased $ 486 million or 13 % , primarily driven by the release of Surface Pro 4 and Surface Book in the second quarter of fiscal year 2016 , a well a the a the release of Surface 3 in the fourth quarter of fourth quarter of fiscal year 2015 , offset in part by in revenue from Surface Pro 3 . Devices revenue included an foreign currency impact of approximately 3 % . • Windows revenue • Windows revenue decreased $ 871 million or 5 % , decreased $ 871 million or 5 % , mainly due to . Patent licensing revenue decreased 27 % , due to a . Windows OEM revenue decreased 1 % . Windows OEM Pro Windows OEM Pro revenue declined 6 % , driven by a Windows OEM non-Pro revenue increased 7 % , outperforming the consumer Windows Phone licensing revenue decreased 64 % , driven by the deferred revenue in fiscal year 2015 from Windows Phone 8 . year 2015 from Windows Phone 8 . Windows revenue included an foreign currency impact of approximately 2 % . • Search advertising Search advertising revenue increased $ 1.7 billion or 46 % . increased $ 1.7 billion or 46 % . Search advertising revenue traffic acquisition cost , increased 17 % , primarily driven by foreign currency impact of approximately 2 % . • Gaming revenue • Gaming revenue increased $ 132 million or 1 % , increased $ 132 million or 1 % , primarily due to . Xbox Live revenue increased 17 % , driven by higher . Video game revenue grew 34 % , driven by the by the launch of Halo 5 and sale of Minecraft . gaming franchise , in November 2014 . Xbox hardware revenue decreased . Xbox hardware revenue decreased 16 % , mainly due to and a decline in Xbox 360 console volume , offset in foreign currency impact of approximately 4 % . More Personal Computing Computing operating income increased $ 1.5 billion or 32 % , increased $ 1.5 billion or 32 % , primarily due to . Operating expense decreased $ 2.0 billion or 13 % , decreased $ 2.0 billion or 13 % , mainly due to and marketing expense decreased $ 1.3 billion or 19 % and decreased $ 1.3 billion or 19 % and research and development and development expense decreased $ 676 million or 10 % , decreased $ 676 million or 10 % , driven by a . Gross margin decreased $ 564 million or 3 % , decreased $ 564 million or 3 % , reflecting lower revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by of revenue . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Productivity and Business Processes Productivity Business Processes revenue decreased $ 546 million or 2 % , decreased $ 546 million or 2 % , mainly due to foreign currency impact of approximately 2 % . • Office Consumer Office Consumer revenue decreased $ 624 million or 17 % , decreased $ 624 million or 17 % , driven by decline by subscriber growth of Office 365 consumer . • Office Commercial Office Commercial revenue decreased $ 152 million or 1 % , decreased $ 152 million or 1 % , driven by lower higher premium mix of Office 365 commercial . • Dynamics revenue . • Dynamics revenue grew 12 % , mainly due to Dynamics user increased , with 30 % growth in number of and we ended fiscal year 2015 with over eight million paid eight million paid seat . 35 Table of Contents PART II of Contents PART II Item 7 Productivity and Business Processes operating Processes operating income decreased $ 814 million or 6 % , decreased $ 814 million or 6 % , driven by lower . Gross margin decreased $ 1.0 billion or 4 % , decreased $ 1.0 billion or 4 % , primarily due to foreign currency impact of approximately 2 % . Cost of revenue Cost of revenue increased $ 492 million or 15 % , increased $ 492 million or 15 % , primarily due to capacity to serve our Office 365 offering . Operating expense decreased . Operating expense decreased $ 224 million or 2 % . decreased $ 224 million or 2 % . Sales and marketing and administrative expense decreased $ 258 million and $ 125 million $ 258 million and $ 125 million , respectively , mainly and development expense increased $ 159 million or 6 % , increased $ 159 million or 6 % , mainly due to Intelligent Cloud revenue increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , mainly due to foreign currency impact of approximately 2 % . • Server product cloud service revenue grew $ 1.6 billion or 9 % , grew $ 1.6 billion or 9 % , primarily driven by Enterprise Services revenue grew $ 325 million or 7 % , grew $ 325 million or 7 % , mainly due to Cloud operating income increased $ 1.4 billion or 17 % , increased $ 1.4 billion or 17 % , primarily due to . Gross margin increased $ 1.6 billion or 10 % , increased $ 1.6 billion or 10 % , driven by revenue foreign currency impact of approximately 2 % . Cost of revenue Cost of revenue increased $ 404 million or 7 % , increased $ 404 million or 7 % , mainly due to . Operating expense increased $ 151 million or 2 % , increased $ 151 million or 2 % , driven by higher and development expense increased $ 160 million or 6 % , increased $ 160 million or 6 % , mainly due to Personal Computing revenue increased $ 4.7 billion or 12 % , increased $ 4.7 billion or 12 % , mainly due to • Devices revenue increased $ 7.0 billion or 152 % , increased $ 7.0 billion or 152 % , mainly due to foreign currency impact of approximately 5 % . Phones revenue increased . Phones revenue increased $ 5.5 billion , a we sold billion , a we sold 36.8 million Lumia phone and 126.8 36.8 million Lumia phone and 126.8 million other phone in fiscal other phone in fiscal year 2015 , compared with 5.8 million year 2015 , compared with 5.8 million and 30.3 million sold compared with 5.8 million and 30.3 million sold , respectively , respectively , in fiscal year 2014 following the acquisition of Nokia fourth quarter of fiscal year 2014 . Surface revenue increased 65 2014 . Surface revenue increased 65 % to $ 3.6 billion increased 65 % to $ 3.6 billion , primarily due to primarily due to Surface Pro 3 unit sold . Surface Pro unit sold . Surface Pro 3 wa released in June 2014 3 wa released in June 2014 . • Search advertising revenue Search advertising revenue increased $ 651 million or 22 % , increased $ 651 million or 22 % , primarily driven by • Gaming revenue increased $ 463 million or 5 % , increased $ 463 million or 5 % , mainly due to game royalty . We sold 12.1 million Xbox console in fiscal Xbox console in fiscal year 2015 compared with 11.7 million console fiscal year 2015 compared with 11.7 million console in fiscal year million console in fiscal year 2014 . Xbox Live revenue increased Xbox Live revenue increased $ 500 million , driven by increased Video game revenue increased $ 265 million , mainly due to acquisition of Mojang in November 2014 , and new Xbox title • Windows revenue decreased $ 3.6 billion or 16 % , decreased $ 3.6 billion or 16 % , mainly due to Windows OEM revenue decreased $ 1.9 billion or 15 % , decreased $ 1.9 billion or 15 % , primarily due to primarily due to decline of 15 % in OEM Pro revenue in OEM Pro revenue and 16 % in OEM non-Pro revenue , and decline in the 36 Table of Contents PART II of Contents PART II Item 7 business PC market . Windows patent licensing , decreased $ 1.4 billion or 55 % , decreased $ 1.4 billion or 55 % , primarily due to Computing operating income decreased $ 938 million or 17 % , decreased $ 938 million or 17 % , primarily due to . Gross margin decreased $ 364 million or 2 % , decreased $ 364 million or 2 % , reflecting a reduction Cost of revenue increased $ 5.1 billion or 28 % , increased $ 5.1 billion or 28 % , driven by higher cost of revenue increased $ 4.8 billion , reflecting a full phone sale in fiscal year 2015 . Windows Phone cost of cost of revenue decreased $ 897 million , driven by prior . Operating expense increased $ 574 million or 4 % , increased $ 574 million or 4 % , driven by a and development expense increased $ 346 million or 5 % , increased $ 346 million or 5 % , mainly due to and marketing expense increased $ 211 million or 3 % , increased $ 211 million or 3 % , primarily due to including those related to Windows 10 , Bundled Offerings , and restructuring expense . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Corporate and Other revenue decreased and Other revenue decreased $ 6.9 billion , primarily due to net revenue deferral from Windows 10 . During fiscal year 2016 10 . During fiscal year 2016 , we deferred net revenue deferred net revenue from Windows 10 of $ 6.6 billion . from Windows 10 of $ 6.6 billion . During fiscal year billion . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Other operating loss decreased $ 2.0 billion , primarily due to primarily due to an $ 8.9 billion reduction in impairment , lower revenue . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Corporate and Other revenue increased and Other revenue increased $ 613 million , primarily due to year . During fiscal year 2015 , we recognized a net we recognized a net $ 303 million of previously deferred revenue Offerings . During fiscal year 2014 , we deferred a net we deferred a net $ 349 million of revenue related to Other operating loss increased $ 9.3 billion , primarily due to million , except percentage ) 2016 2015 2014 Percentage Change 2016 , except percentage ) 2016 2015 2014 Percentage Change 2016 Versus except percentage ) 2016 2015 2014 Percentage Change 2016 Versus 2015 2016 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 Versus 2014 2016 Versus 2015 Percentage Change 2015 Versus 2014 Research and development 2015 Percentage Change 2015 Versus 2014 Research and development $ 11,988 2014 Research and development $ 11,988 $ 12,046 $ 11,381 0 and development $ 11,988 $ 12,046 $ 11,381 0 % 6 $ 11,988 $ 12,046 $ 11,381 0 % 6 % As 11,988 $ 12,046 $ 11,381 0 % 6 % As a 12,046 $ 11,381 0 % 6 % As a percent of As a percent of revenue 14 % 13 % 13 % percent of revenue 14 % 13 % 13 % 1ppt 0ppt revenue 14 % 13 % 13 % 1ppt 0ppt 37 Table % 13 % 13 % 1ppt 0ppt 37 Table of Contents 13 % 13 % 1ppt 0ppt 37 Table of Contents PART % 13 % 1ppt 0ppt 37 Table of Contents PART II of Contents PART II Item 7 Research and development expense include software code . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Research and development expense decreased and development expense decreased $ 58 million , primarily due to cloud innovation . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Research and development expense increased and development expense increased $ 665 million or 6 % , increased $ 665 million or 6 % , mainly due to and service , including $ 739 million higher phone expense , million , except percentage ) 2016 2015 2014 Percentage Change 2016 , except percentage ) 2016 2015 2014 Percentage Change 2016 Versus except percentage ) 2016 2015 2014 Percentage Change 2016 Versus 2015 2016 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 Versus 2014 2016 Versus 2015 Percentage Change 2015 Versus 2014 Sales and marketing 2015 Percentage Change 2015 Versus 2014 Sales and marketing $ 14,697 2014 Sales and marketing $ 14,697 $ 15,713 $ 15,811 ( and marketing $ 14,697 $ 15,713 $ 15,811 ( 6 ) $ 14,697 $ 15,713 $ 15,811 ( 6 ) % ( $ 15,713 $ 15,811 ( 6 ) % ( 1 ) ( 6 ) % ( 1 ) % As a percent As a percent of revenue 17 % 17 % 18 % percent of revenue 17 % 17 % 18 % 0ppt ( revenue 17 % 17 % 18 % 0ppt ( 1 ) % 17 % 18 % 0ppt ( 1 ) ppt Sales % 18 % 0ppt ( 1 ) ppt Sales and marketing other program . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Sales and marketing expense decreased and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , primarily due to foreign currency impact of approximately 2 % . Fiscal year 2015 2 % . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Sales and marketing expense decreased and marketing expense decreased $ 98 million or 1 % , decreased $ 98 million or 1 % , primarily due to foreign currency impact of approximately 4 % . General and Administrative million , except percentage ) 2016 2015 2014 Percentage Change 2016 , except percentage ) 2016 2015 2014 Percentage Change 2016 Versus except percentage ) 2016 2015 2014 Percentage Change 2016 Versus 2015 2016 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 2014 Percentage Change 2016 Versus 2015 Percentage Change 2015 Versus 2014 2016 Versus 2015 Percentage Change 2015 Versus 2014 General and administrative 2015 Percentage Change 2015 Versus 2014 General and administrative $ 4,563 2014 General and administrative $ 4,563 $ 4,611 $ 4,677 ( and administrative $ 4,563 $ 4,611 $ 4,677 ( 1 ) $ 4,563 $ 4,611 $ 4,677 ( 1 ) % ( $ 4,611 $ 4,677 ( 1 ) % ( 1 ) ( 1 ) % ( 1 ) % As a percent As a percent of revenue 5 % 5 % 5 % percent of revenue 5 % 5 % 5 % 0ppt 0ppt revenue 5 % 5 % 5 % 0ppt 0ppt General and % 5 % 5 % 0ppt 0ppt General and administrative expense 5 % 5 % 0ppt 0ppt General and administrative expense include and other administrative fee . 38 Table of Contents PART II of Contents PART II Item 7 Fiscal year 2016 compared with II Item 7 Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 General and administrative expense decreased and administrative expense decreased $ 48 million or 1 % , decreased $ 48 million or 1 % , primarily due to foreign currency impact of approximately 2 % . Fiscal year 2015 2 % . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 General and administrative expense were of NDS . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Impairment , integration , and and restructuring expense were $ 1.1 billion for fiscal year 2016 1.1 billion for fiscal year 2016 , compared to $ 10.0 2016 , compared to $ 10.0 billion for fiscal year 2015 10.0 billion for fiscal year 2015 . During fiscal year 2016 2015 . During fiscal year 2016 , we recorded $ 630 2016 , we recorded $ 630 million of asset impairment charge . We also recorded $ 480 million of restructuring charge , plan . During fiscal year 2015 , we recognized impairment charge recognized impairment charge of $ 7.5 billion related to our phone impairment test a of May 1 , 2015 indicated that the a of May 1 , 2015 indicated that the carrying value goodwill impairment charge of $ 5.1 billion , reducing our Phone reporting unit goodwill from $ 5.4 billion to $ 116 million $ 5.4 billion to $ 116 million , net of foreign an impairment charge of $ 2.2 billion related to the write-down . Restructuring charge were $ 2.1 billion , including employee severance acquisition of NDS were $ 435 million in fiscal year 2015 435 million in fiscal year 2015 . Fiscal year 2015 compared year 2015 . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Impairment , integration , and and restructuring expense were $ 10.0 billion for fiscal year 2015 10.0 billion for fiscal year 2015 , compared to $ 127 2015 , compared to $ 127 million for fiscal year 2014 127 million for fiscal year 2014 . Impairment , integration , restructuring expense for fiscal year 2015 are comprised mainly of impairment and restructuring charge of $ 7.5 billion and $ 2.1 billion $ 7.5 billion and $ 2.1 billion , respectively , related . Integration expense increased $ 308 million , due to a integration activity in fiscal year 2015 associated with the acquisition of the acquisition of NDS . 39 Table of Contents PART II of Contents PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2016 2015 2014 Dividends Year Ended June 30 , 2016 2015 2014 Dividends and interest Ended June 30 , 2016 2015 2014 Dividends and interest income June 30 , 2016 2015 2014 Dividends and interest income $ Dividends and interest income $ 903 $ 766 $ 883 Interest interest income $ 903 $ 766 $ 883 Interest expense ( $ 903 $ 766 $ 883 Interest expense ( 1,243 ) $ 883 Interest expense ( 1,243 ) ( 781 ) ( expense ( 1,243 ) ( 781 ) ( 597 ) Net ) ( 781 ) ( 597 ) Net recognized gain on Net recognized gain on investment 668 716 437 Net loss on recognized gain on investment 668 716 437 Net loss on derivative gain on investment 668 716 437 Net loss on derivative ( Net loss on derivative ( 443 ) ( 423 ) ( derivative ( 443 ) ( 423 ) ( 328 ) Net ) ( 423 ) ( 328 ) Net gain ( loss on foreign currency remeasurements ( 121 ) 335 ( 165 ) currency remeasurements ( 121 ) 335 ( 165 ) Other ( ( 121 ) 335 ( 165 ) Other ( 195 ) ( 165 ) Other ( 195 ) ( 267 ) ( Other ( 195 ) ( 267 ) ( 169 ) Total ) ( 267 ) ( 169 ) Total $ ( 431 169 ) Total $ ( 431 ) $ 346 $ 61 $ ( 431 ) $ 346 $ 61 We use derivative 431 ) $ 346 $ 61 We use derivative instrument to rate change . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Dividends and interest income increased . Other-than-temporary impairment were $ 322 million in fiscal year 2016 322 million in fiscal year 2016 , compared with $ 183 2016 , compared with $ 183 million in fiscal year 2015 183 million in fiscal year 2015 . Net loss on derivative contract . For fiscal year 2016 , other reflects recognized loss joint venture . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Dividends and interest income decreased . Other-than-temporary impairment were $ 183 million in fiscal year 2015 183 million in fiscal year 2015 , compared with $ 106 2015 , compared with $ 106 million in fiscal year 2014 106 million in fiscal year 2014 . Net loss on derivative commodity contract in fiscal year 2015 a compared to gain in to gain in fiscal year 2014 , offset in part by contract . For fiscal year 2015 , other reflects recognized loss . INCOME TAXES Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Our effective tax rate for tax rate for fiscal year 2016 and 2015 wa 15 % for fiscal year 2016 and 2015 wa 15 % and 34 year 2016 and 2015 wa 15 % and 34 % , 2015 wa 15 % and 34 % , respectively . Our tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change including the impact of net 40 Table of Contents PART II of Contents PART II Item 7 revenue deferral related to sale related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the center . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss before income tax before income tax by $ 6.0 billion and foreign income before before income tax by $ 588 million . In fiscal year million . In fiscal year 2015 , our U.S. income before before income tax wa $ 7.4 billion and our foreign income before income tax wa $ 11.1 billion . Impairment , integration business decreased our fiscal year 2015 U.S income before income tax before income tax by $ 1.1 billion and foreign income before before income tax by $ 8.9 billion . On July 27 8.9 billion . On July 27 , 2015 , the U.S. . On July 27 , 2015 , the U.S. Tax Court decision to appeal on February 19 , 2016 prolongs the uncertainty appeal on February 19 , 2016 prolongs the uncertainty regarding the income tax liability were $ 11.8 billion and $ 12.1 billion $ 11.8 billion and $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2016 and 2015 , a of June 30 , 2016 and 2015 , respectively , June 30 , 2016 and 2015 , respectively , and are IRS audit for tax year 2007 to 2009 , offset by for tax year 2007 to 2009 , offset by increase relating IRS audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and settled a portion IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit those year . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2016 , the primary As of June 30 , 2016 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue the IRS for tax year 2010 to 2016 . We are for tax year 2010 to 2016 . We are subject to to examination for tax year 1996 to 2016 , some of for tax year 1996 to 2016 , some of which are financial statement . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Our effective tax rate for tax rate for fiscal year 2015 and 2014 wa 34 % for fiscal year 2015 and 2014 wa 34 % and 21 year 2015 and 2014 wa 34 % and 21 % , 2014 wa 34 % and 21 % , respectively . The respectively . The fiscal year 2015 effective rate increased by 13 2015 effective rate increased by 13 % , primarily due to charge recorded in fiscal year 2015 , most of which did Rico . In fiscal year 2015 , this reduction wa mostly center , while we supply 41 Table of Contents PART II of Contents PART II Item 7 the Microsoft Office system and center . In fiscal year 2015 and 2014 , our U.S. In fiscal year 2015 and 2014 , our U.S. income before before income tax wa $ 7.4 billion and $ 7.1 billion $ 7.4 billion and $ 7.1 billion , respectively , and , respectively , and comprised 40 % and 26 % , and comprised 40 % and 26 % , respectively , of tax . In fiscal year 2015 and 2014 , our foreign In fiscal year 2015 and 2014 , our foreign income before before income tax wa $ 11.1 billion and $ 20.7 billion $ 11.1 billion and $ 20.7 billion , respectively , and , respectively , and comprised 60 % and 74 % , and comprised 60 % and 74 % , respectively , of and short-term investment totaled $ 113.2 billion a of June 30 113.2 billion a of June 30 , 2016 , compared with a of June 30 , 2016 , compared with $ 96.5 2016 , compared with $ 96.5 billion a of June 30 96.5 billion a of June 30 , 2015 . Equity and a of June 30 , 2015 . Equity and other investment and other investment were $ 10.4 billion a of June 30 10.4 billion a of June 30 , 2016 , compared with a of June 30 , 2016 , compared with $ 12.1 2016 , compared with $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2015 . Our short-term a of June 30 , 2015 . Our short-term investment are short-term investment a of June 30 , 2016 , $ 108.9 a of June 30 , 2016 , $ 108.9 billion wa 30 , 2016 , $ 108.9 billion wa held by our local regulatory ) wa $ 2.4 billion . As of June billion . As of June 30 , 2016 , approximately 83 As of June 30 , 2016 , approximately 83 % of 30 , 2016 , approximately 83 % of the cash equivalent and agency security , approximately 4 % were invested in corporate U.S. company , and approximately 5 % were invested in U.S. lending payable balance wa $ 294 million a of June 30 294 million a of June 30 , 2016 . Our average a of June 30 , 2016 . Our average and maximum payable balance for fiscal year 2016 were $ 361 million and fiscal year 2016 were $ 361 million and $ 1.2 billion $ 361 million and $ 1.2 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a exchange-traded methodology applies to our Level 2 investment such a corporate note certificate of deposit . Level 3 investment are valued using internally portion of our portfolio . 42 Table of Contents PART II of Contents PART II Item 7 A majority of our investment vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price . Cash Flows Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Cash flow from operation increased flow from operation increased $ 3.7 billion to $ 33.3 billion $ 3.7 billion to $ 33.3 billion during the fiscal year used in financing decreased $ 1.3 billion to $ 8.4 billion $ 1.3 billion to $ 8.4 billion , mainly due to mainly due to a $ 4.6 billion increase in proceeds from in part by a $ 1.5 billion increase in cash used stock repurchase and a $ 1.1 billion increase in dividend paid used in investing increased $ 949 million to $ 24.0 billion $ 949 million to $ 24.0 billion , mainly due to mainly due to a $ 2.4 billion increase in cash used and equipment and a $ 1.5 billion increase in cash used in part by a $ 2.3 billion decrease in cash used other asset . Fiscal year 2015 compared with fiscal year 2014 2015 compared with fiscal year 2014 Cash flow from operation decreased flow from operation decreased $ 2.8 billion to $ 29.7 billion $ 2.8 billion to $ 29.7 billion , mainly due to used in financing increased $ 1.0 billion to $ 9.7 billion $ 1.0 billion to $ 9.7 billion , mainly due to mainly due to a $ 7.1 billion increase in cash used in part by a $ 6.7 billion increase in proceeds from used in investing increased $ 4.2 billion to $ 23.0 billion $ 4.2 billion to $ 23.0 billion , mainly due to mainly due to a $ 5.5 billion increase in cash used partially offset by a $ 2.2 billion decrease in cash used existing debt . See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . Unearned revenue a of June 30 , 2016 wa comprised mainly a of June 30 , 2016 wa comprised mainly of unearned Unearned revenue a of June 30 , 2016 also included payment a of June 30 , 2016 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; Xbox Live subscription the revenue recognition criterion . 43 Table of Contents PART II of Contents PART II Item 7 The following table outline the unearned revenue a of June 30 , 2016 : ( In a of June 30 , 2016 : ( In million ) Three Months Ending , September 30 , 2016 $ 10,194 December Ending , September 30 , 2016 $ 10,194 December 31 , September 30 , 2016 $ 10,194 December 31 , 2016 8,348 , 2016 $ 10,194 December 31 , 2016 8,348 March 31 $ 10,194 December 31 , 2016 8,348 March 31 , 2017 10,194 December 31 , 2016 8,348 March 31 , 2017 5,868 31 , 2016 8,348 March 31 , 2017 5,868 June 30 2016 8,348 March 31 , 2017 5,868 June 30 , 2017 8,348 March 31 , 2017 5,868 June 30 , 2017 3,058 31 , 2017 5,868 June 30 , 2017 3,058 Thereafter 6,441 2017 5,868 June 30 , 2017 3,058 Thereafter 6,441 Total $ 5,868 June 30 , 2017 3,058 Thereafter 6,441 Total $ 33,909 30 , 2017 3,058 Thereafter 6,441 Total $ 33,909 Share Repurchases 3,058 Thereafter 6,441 Total $ 33,909 Share Repurchases On September 16 33,909 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2016 , $ 7.1 As of June 30 , 2016 , $ 7.1 billion remained 30 , 2016 , $ 7.1 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . to complete it by December 31 , 2016 . All repurchase it by December 31 , 2016 . All repurchase were made resource . During fiscal year 2016 , we repurchased 294 million year 2016 , we repurchased 294 million share of Microsoft common Microsoft common stock for $ 14.8 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2015 2013 . During fiscal year 2015 , we repurchased 295 million year 2015 , we repurchased 295 million share of Microsoft common Microsoft common stock for $ 13.2 billion under the share repurchase Board of Directors on September 16 , 2013 . During fiscal Directors on September 16 , 2013 . During fiscal year 2014 2013 . During fiscal year 2014 , we repurchased 175 million year 2014 , we repurchased 175 million share for $ 6.4 175 million share for $ 6.4 billion ; 128 million share for $ 6.4 billion ; 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 , and 47 Directors on September 16 , 2013 , and 47 million share 16 , 2013 , and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired September announced on September 22 , 2008 and expired September 30 , , 2008 and expired September 30 , 2013 . Dividends See and expired September 30 , 2013 . Dividends See Note 18 2013 . Dividends See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . during the period presented . 44 Table of Contents PART II of Contents PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2016 : ( In a of June 30 , 2016 : ( In million ) : ( In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term ( In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term debt In million ) 2017 2018-2019 2020-2021 Thereafter Total Long-term debt : a ) Principal payment $ 0 $ 5,050 $ 5,250 $ Principal payment $ 0 $ 5,050 $ 5,250 $ 30,649 $ $ 0 $ 5,050 $ 5,250 $ 30,649 $ 40,949 Interest $ 5,050 $ 5,250 $ 30,649 $ 40,949 Interest payment 1,289 $ 5,250 $ 30,649 $ 40,949 Interest payment 1,289 2,547 2,324 30,649 $ 40,949 Interest payment 1,289 2,547 2,324 16,836 22,996 Construction $ 40,949 Interest payment 1,289 2,547 2,324 16,836 22,996 Construction commitment 40,949 Interest payment 1,289 2,547 2,324 16,836 22,996 Construction commitment ( Interest payment 1,289 2,547 2,324 16,836 22,996 Construction commitment ( b payment 1,289 2,547 2,324 16,836 22,996 Construction commitment ( b ) Construction commitment ( b ) 1,809 162 0 0 1,971 Operating commitment ( b ) 1,809 162 0 0 1,971 Operating lease ( b ) 1,809 162 0 0 1,971 Operating lease ( b ) 1,809 162 0 0 1,971 Operating lease ( c ) 1,809 162 0 0 1,971 Operating lease ( c ) Operating lease ( c ) 961 1,918 1,467 2,118 6,464 Purchase lease ( c ) 961 1,918 1,467 2,118 6,464 Purchase commitment ( c ) 961 1,918 1,467 2,118 6,464 Purchase commitment ( c ) 961 1,918 1,467 2,118 6,464 Purchase commitment ( d ) 961 1,918 1,467 2,118 6,464 Purchase commitment ( d ) Purchase commitment ( d ) 13,214 1,102 758 4,004 19,078 Other commitment ( d ) 13,214 1,102 758 4,004 19,078 Other long-term ( d ) 13,214 1,102 758 4,004 19,078 Other long-term liability d ) 13,214 1,102 758 4,004 19,078 Other long-term liability ( ) 13,214 1,102 758 4,004 19,078 Other long-term liability ( e long-term liability ( e ) 0 87 23 275 385 Total liability ( e ) 0 87 23 275 385 Total contractual ( e ) 0 87 23 275 385 Total contractual obligation e ) 0 87 23 275 385 Total contractual obligation $ ) 0 87 23 275 385 Total contractual obligation $ 17,273 385 Total contractual obligation $ 17,273 $ 10,866 $ 9,822 $ contractual obligation $ 17,273 $ 10,866 $ 9,822 $ 53,882 $ $ 17,273 $ 10,866 $ 9,822 $ 53,882 $ 91,843 ( $ 10,866 $ 9,822 $ 53,882 $ 91,843 ( a ) $ 9,822 $ 53,882 $ 91,843 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) long-term pension liability of $ 13.0 billion from the amount presented Uses of Capital In June 2016 , we entered into a all-cash transaction valued at $ 26.2 billion , inclusive of LinkedIn will close in calendar year 2016 , and we will finance for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the for the foreseeable future . 45 Table of Contents PART II of Contents PART II Item 7 Should we require more capital RECENT ACCOUNTING GUIDANCE See Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . each deliverable . In January 2015 , we announced Windows 10 2015 , we announced Windows 10 would be free to all qualified existing user of Windows 7 and Windows 8.1 . This of Windows 7 and Windows 8.1 . This offer differs from a it is being made 46 Table of Contents PART II of Contents PART II Item 7 available for free to existing accounting treatment of the Windows 10 offer and determined that it of new sale of Windows 8 will continue to be recognized . Customers purchasing a Windows 10 license will receive unspecified update the life of their Windows 10 device at no additional cost revenue from license of Windows 10 is recognized ratably over the financial statement . See Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between for each reporting unit . 47 Table of Contents PART II of Contents PART II Item 7 Research and Development Costs Costs that ha a greater than 50 % likelihood of being realized to cost of revenue . 48 Table of Contents PART II of Contents PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 49 Table of Contents PART II of Contents PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 50 Table of Contents PART II of Contents PART II Item 7A The following table set forth our position a of June 30 , 2016 and 2015 and a of June 30 , 2016 and 2015 and for the June 30 , 2016 and 2015 and for the year ended for the year ended June 30 , 2016 : ( In year ended June 30 , 2016 : ( In million ) ( In million ) June 30 , 2016 June 30 , million ) June 30 , 2016 June 30 , 2015 Year June 30 , 2016 June 30 , 2015 Year Ended June , 2016 June 30 , 2015 Year Ended June 30 , , 2015 Year Ended June 30 , 2016 Risk Categories Average Year Ended June 30 , 2016 Risk Categories Average High Low High Low Foreign currency $ 92 $ 120 $ 171 $ Foreign currency $ 92 $ 120 $ 171 $ 258 $ $ 92 $ 120 $ 171 $ 258 $ 83 Interest $ 120 $ 171 $ 258 $ 83 Interest rate $ $ 171 $ 258 $ 83 Interest rate $ 58 $ $ 83 Interest rate $ 58 $ 51 $ 56 $ Interest rate $ 58 $ 51 $ 56 $ 63 $ $ 58 $ 51 $ 56 $ 63 $ 50 Equity $ 51 $ 56 $ 63 $ 50 Equity $ 157 $ 56 $ 63 $ 50 Equity $ 157 $ 149 63 $ 50 Equity $ 157 $ 149 $ 163 $ 50 Equity $ 157 $ 149 $ 163 $ 178 $ $ 157 $ 149 $ 163 $ 178 $ 137 Commodity $ 149 $ 163 $ 178 $ 137 Commodity $ 12 $ 163 $ 178 $ 137 Commodity $ 12 $ 13 178 $ 137 Commodity $ 12 $ 13 $ 10 $ 137 Commodity $ 12 $ 13 $ 10 $ 14 $ $ 12 $ 13 $ 10 $ 14 $ 6 Total $ 13 $ 10 $ 14 $ 6 Total one-day VaR $ 10 $ 14 $ 6 Total one-day VaR for the combined risk category wa $ 225 million a of June 30 225 million a of June 30 , 2016 and $ 237 a of June 30 , 2016 and $ 237 million a 30 , 2016 and $ 237 million a of June 30 237 million a of June 30 , 2015 . The total a of June 30 , 2015 . The total VaR is . The total VaR is 29 % le a of June % le a of June 30 , 2016 and June 30 a of June 30 , 2016 and June 30 , 2015 30 , 2016 and June 30 , 2015 , respectively , 2016 and June 30 , 2015 , respectively , than the the combination of risk . 51 Table of Contents PART II of Contents PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2016 2015 2014 Revenue Year Ended June 30 , 2016 2015 2014 Revenue : Product Ended June 30 , 2016 2015 2014 Revenue : Product $ June 30 , 2016 2015 2014 Revenue : Product $ 61,502 2014 Revenue : Product $ 61,502 $ 75,956 $ 72,948 Service : Product $ 61,502 $ 75,956 $ 72,948 Service and other $ 61,502 $ 75,956 $ 72,948 Service and other 23,818 17,624 $ 72,948 Service and other 23,818 17,624 13,885 Total revenue 85,320 72,948 Service and other 23,818 17,624 13,885 Total revenue 85,320 93,580 Service and other 23,818 17,624 13,885 Total revenue 85,320 93,580 86,833 23,818 17,624 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue 17,624 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue : 13,885 Total revenue 85,320 93,580 86,833 Cost of revenue : Product Cost of revenue : Product 17,880 21,410 16,681 Service and other of revenue : Product 17,880 21,410 16,681 Service and other 14,900 revenue : Product 17,880 21,410 16,681 Service and other 14,900 11,628 21,410 16,681 Service and other 14,900 11,628 10,397 Total cost of 16,681 Service and other 14,900 11,628 10,397 Total cost of revenue Service and other 14,900 11,628 10,397 Total cost of revenue 32,780 10,397 Total cost of revenue 32,780 33,038 27,078 Gross margin 52,540 Total cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 cost of revenue 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 32,780 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 33,038 27,078 Gross margin 52,540 60,542 59,755 Research and development 11,988 27,078 Gross margin 52,540 60,542 59,755 Research and development 11,988 12,046 60,542 59,755 Research and development 11,988 12,046 11,381 Sales and marketing 59,755 Research and development 11,988 12,046 11,381 Sales and marketing 14,697 Research and development 11,988 12,046 11,381 Sales and marketing 14,697 15,713 12,046 11,381 Sales and marketing 14,697 15,713 15,811 General and administrative 11,381 Sales and marketing 14,697 15,713 15,811 General and administrative 4,563 Sales and marketing 14,697 15,713 15,811 General and administrative 4,563 4,611 15,713 15,811 General and administrative 4,563 4,611 4,677 Impairment , integration 15,811 General and administrative 4,563 4,611 4,677 Impairment , integration , General and administrative 4,563 4,611 4,677 Impairment , integration , and , integration , and restructuring 1,110 10,011 127 Operating income 20,182 integration , and restructuring 1,110 10,011 127 Operating income 20,182 18,161 , and restructuring 1,110 10,011 127 Operating income 20,182 18,161 27,759 1,110 10,011 127 Operating income 20,182 18,161 27,759 Other income ( 10,011 127 Operating income 20,182 18,161 27,759 Other income ( expense 127 Operating income 20,182 18,161 27,759 Other income ( expense ) expense ) , net ( 431 ) 346 61 Income before , net ( 431 ) 346 61 Income before income tax net ( 431 ) 346 61 Income before income tax 19,751 61 Income before income tax 19,751 18,507 27,820 Provision for income Income before income tax 19,751 18,507 27,820 Provision for income tax before income tax 19,751 18,507 27,820 Provision for income tax 2,953 27,820 Provision for income tax 2,953 6,314 5,746 Net income $ Provision for income tax 2,953 6,314 5,746 Net income $ 16,798 for income tax 2,953 6,314 5,746 Net income $ 16,798 $ 6,314 5,746 Net income $ 16,798 $ 12,193 $ 22,074 Earnings Net income $ 16,798 $ 12,193 $ 22,074 Earnings per share $ 16,798 $ 12,193 $ 22,074 Earnings per share : Basic per share : Basic $ 2.12 $ 1.49 $ 2.66 Diluted : Basic $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 2.12 $ 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 1.49 $ 2.66 Diluted $ 2.10 $ 1.48 $ 2.63 Weighted 2.66 Diluted $ 2.10 $ 1.48 $ 2.63 Weighted average share $ 2.10 $ 1.48 $ 2.63 Weighted average share outstanding : average share outstanding : Basic 7,925 8,177 8,299 Diluted 8,013 8,254 share outstanding : Basic 7,925 8,177 8,299 Diluted 8,013 8,254 8,399 outstanding : Basic 7,925 8,177 8,299 Diluted 8,013 8,254 8,399 Cash Basic 7,925 8,177 8,299 Diluted 8,013 8,254 8,399 Cash dividend declared 7,925 8,177 8,299 Diluted 8,013 8,254 8,399 Cash dividend declared per 8,177 8,299 Diluted 8,013 8,254 8,399 Cash dividend declared per common declared per common share $ 1.44 $ 1.24 $ 1.12 See common share $ 1.44 $ 1.24 $ 1.12 See accompanying note $ 1.44 $ 1.24 $ 1.12 See accompanying note . 52 1.12 See accompanying note . 52 Table of Contents PART II of Contents PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2016 2015 2014 Net Year Ended June 30 , 2016 2015 2014 Net income $ Ended June 30 , 2016 2015 2014 Net income $ 16,798 June 30 , 2016 2015 2014 Net income $ 16,798 $ 2015 2014 Net income $ 16,798 $ 12,193 $ 22,074 Other Net income $ 16,798 $ 12,193 $ 22,074 Other comprehensive income $ 16,798 $ 12,193 $ 22,074 Other comprehensive income ( loss tax effect of $ ( 12 ) , $ 20 , ( 12 ) , $ 20 , and $ ( 4 20 , and $ ( 4 ) ) ( 238 ) ( 4 ) ) ( 238 ) 559 ( 35 ) ) ) ( 238 ) 559 ( 35 ) Net unrealized ( 238 ) 559 ( 35 ) Net unrealized gain ( tax effect of $ ( 121 ) , $ ( 197 121 ) , $ ( 197 ) , and $ 936 197 ) , and $ 936 ) ( 228 ) ( and $ 936 ) ( 228 ) ( 362 ) 1,737 ) ( 228 ) ( 362 ) 1,737 Translation adjustment and 228 ) ( 362 ) 1,737 Translation adjustment and other ( tax effect of $ ( 33 ) , $ 16 , ( 33 ) , $ 16 , and $ 12 ) $ 16 , and $ 12 ) ( 519 ) ( and $ 12 ) ( 519 ) ( 1,383 ) 263 ) ( 519 ) ( 1,383 ) 263 Other comprehensive income 519 ) ( 1,383 ) 263 Other comprehensive income ( loss income ( loss ) ( 985 ) ( 1,186 ) 1,965 ) ( 985 ) ( 1,186 ) 1,965 Comprehensive income $ 985 ) ( 1,186 ) 1,965 Comprehensive income $ 15,813 $ ) 1,965 Comprehensive income $ 15,813 $ 11,007 $ 24,039 See Comprehensive income $ 15,813 $ 11,007 $ 24,039 See accompanying note $ 15,813 $ 11,007 $ 24,039 See accompanying note . 53 24,039 See accompanying note . 53 Table of Contents PART II of Contents PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2016 2015 Assets Current million ) June 30 , 2016 2015 Assets Current asset : ) June 30 , 2016 2015 Assets Current asset : Cash Cash and cash equivalent $ 6,510 $ 5,595 Short-term investment ( cash equivalent $ 6,510 $ 5,595 Short-term investment ( including security including security loaned of $ 204 and $ 75 ) 106,730 of $ 204 and $ 75 ) 106,730 90,931 Total cash 204 and $ 75 ) 106,730 90,931 Total cash , cash and $ 75 ) 106,730 90,931 Total cash , cash equivalent equivalent , and short-term investment 113,240 96,526 Accounts receivable , net , and short-term investment 113,240 96,526 Accounts receivable , net of for doubtful account of $ 426 and $ 335 18,277 17,908 of $ 426 and $ 335 18,277 17,908 Inventories 2,251 2,902 $ 426 and $ 335 18,277 17,908 Inventories 2,251 2,902 Other 426 and $ 335 18,277 17,908 Inventories 2,251 2,902 Other 5,892 $ 335 18,277 17,908 Inventories 2,251 2,902 Other 5,892 5,461 Total 335 18,277 17,908 Inventories 2,251 2,902 Other 5,892 5,461 Total current 17,908 Inventories 2,251 2,902 Other 5,892 5,461 Total current asset 139,660 Inventories 2,251 2,902 Other 5,892 5,461 Total current asset 139,660 122,797 5,892 5,461 Total current asset 139,660 122,797 Property and equipment , 5,461 Total current asset 139,660 122,797 Property and equipment , net of accumulated depreciation of $ 19,800 and $ 17,606 18,356 14,731 of $ 19,800 and $ 17,606 18,356 14,731 Equity and other $ 19,800 and $ 17,606 18,356 14,731 Equity and other investment 19,800 and $ 17,606 18,356 14,731 Equity and other investment 10,431 14,731 Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible Equity and other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset other investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset , net investment 10,431 12,053 Goodwill 17,872 16,939 Intangible asset , net 3,733 16,939 Intangible asset , net 3,733 4,835 Other long-term asset 3,642 Intangible asset , net 3,733 4,835 Other long-term asset 3,642 3,117 3,733 4,835 Other long-term asset 3,642 3,117 Total asset $ 193,694 4,835 Other long-term asset 3,642 3,117 Total asset $ 193,694 $ 3,642 3,117 Total asset $ 193,694 $ 174,472 Liabilities and stockholder Total asset $ 193,694 $ 174,472 Liabilities and stockholder ’ equity liability : Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 Accounts payable $ 6,898 $ 6,591 Short-term debt 12,904 4,985 Current 6,898 $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term $ 6,591 Short-term debt 12,904 4,985 Current portion of long-term debt Current portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 portion of long-term debt 0 2,499 Accrued compensation 5,264 5,096 Income debt 0 2,499 Accrued compensation 5,264 5,096 Income tax 580 606 0 2,499 Accrued compensation 5,264 5,096 Income tax 580 606 Short-term compensation 5,264 5,096 Income tax 580 606 Short-term unearned revenue 27,468 5,264 5,096 Income tax 580 606 Short-term unearned revenue 27,468 23,223 580 606 Short-term unearned revenue 27,468 23,223 Securities lending payable 294 606 Short-term unearned revenue 27,468 23,223 Securities lending payable 294 92 27,468 23,223 Securities lending payable 294 92 Other 5,949 6,555 Total 23,223 Securities lending payable 294 92 Other 5,949 6,555 Total current lending payable 294 92 Other 5,949 6,555 Total current liability 59,357 payable 294 92 Other 5,949 6,555 Total current liability 59,357 49,647 5,949 6,555 Total current liability 59,357 49,647 Long-term debt 40,783 27,808 6,555 Total current liability 59,357 49,647 Long-term debt 40,783 27,808 Long-term liability 59,357 49,647 Long-term debt 40,783 27,808 Long-term unearned revenue 6,441 59,357 49,647 Long-term debt 40,783 27,808 Long-term unearned revenue 6,441 2,095 40,783 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 27,808 Long-term unearned revenue 6,441 2,095 Deferred income tax 1,476 1,295 6,441 2,095 Deferred income tax 1,476 1,295 Other long-term liability 13,640 2,095 Deferred income tax 1,476 1,295 Other long-term liability 13,640 13,544 1,476 1,295 Other long-term liability 13,640 13,544 Total liability 121,697 94,389 1,295 Other long-term liability 13,640 13,544 Total liability 121,697 94,389 Commitments liability 13,640 13,544 Total liability 121,697 94,389 Commitments and contingency Stockholders 13,640 13,544 Total liability 121,697 94,389 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,808 and 8,027 share authorized 24,000 ; outstanding 7,808 and 8,027 68,178 68,465 Retained 24,000 ; outstanding 7,808 and 8,027 68,178 68,465 Retained earnings 2,282 ; outstanding 7,808 and 8,027 68,178 68,465 Retained earnings 2,282 9,096 outstanding 7,808 and 8,027 68,178 68,465 Retained earnings 2,282 9,096 Accumulated 8,027 68,178 68,465 Retained earnings 2,282 9,096 Accumulated other comprehensive income 68,178 68,465 Retained earnings 2,282 9,096 Accumulated other comprehensive income 1,537 9,096 Accumulated other comprehensive income 1,537 2,522 Total stockholder ’ equity Accumulated other comprehensive income 1,537 2,522 Total stockholder ’ equity 71,997 2,522 Total stockholder ’ equity 71,997 80,083 Total liability and stockholder Total stockholder ’ equity 71,997 80,083 Total liability and stockholder ’ and stockholder ’ equity $ 193,694 $ 174,472 See accompanying note ’ equity $ 193,694 $ 174,472 See accompanying note . 54 174,472 See accompanying note . 54 Table of Contents PART II of Contents PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2016 2015 2014 Operations Year Ended June 30 , 2016 2015 2014 Operations Net income Ended June 30 , 2016 2015 2014 Operations Net income $ June 30 , 2016 2015 2014 Operations Net income $ 16,798 2014 Operations Net income $ 16,798 $ 12,193 $ 22,074 Adjustments Net income $ 16,798 $ 12,193 $ 22,074 Adjustments to reconcile $ 16,798 $ 12,193 $ 22,074 Adjustments to reconcile net income : Goodwill and asset impairment 630 7,498 0 Depreciation , amortization Goodwill and asset impairment 630 7,498 0 Depreciation , amortization , and asset impairment 630 7,498 0 Depreciation , amortization , and , amortization , and other 6,622 5,957 5,212 Stock-based compensation expense amortization , and other 6,622 5,957 5,212 Stock-based compensation expense 2,668 , and other 6,622 5,957 5,212 Stock-based compensation expense 2,668 2,574 5,957 5,212 Stock-based compensation expense 2,668 2,574 2,446 Net recognized gain 5,212 Stock-based compensation expense 2,668 2,574 2,446 Net recognized gain on Stock-based compensation expense 2,668 2,574 2,446 Net recognized gain on investment on investment and derivative ( 223 ) ( 443 ) ( derivative ( 223 ) ( 443 ) ( 109 ) Deferred ) ( 443 ) ( 109 ) Deferred income tax 332 109 ) Deferred income tax 332 224 ( 331 ) Deferral ) Deferred income tax 332 224 ( 331 ) Deferral of income tax 332 224 ( 331 ) Deferral of unearned revenue ) Deferral of unearned revenue 57,072 45,072 44,325 Recognition of unearned Deferral of unearned revenue 57,072 45,072 44,325 Recognition of unearned revenue of unearned revenue 57,072 45,072 44,325 Recognition of unearned revenue ( Recognition of unearned revenue ( 48,498 ) ( 44,920 ) ( revenue ( 48,498 ) ( 44,920 ) ( 41,739 ) Changes ) ( 44,920 ) ( 41,739 ) Changes in operating asset liability : Accounts receivable ( 530 ) 1,456 ( 1,120 ) Accounts receivable ( 530 ) 1,456 ( 1,120 ) Inventories 600 ( 530 ) 1,456 ( 1,120 ) Inventories 600 ( 272 1,456 ( 1,120 ) Inventories 600 ( 272 ) ( 161 1,120 ) Inventories 600 ( 272 ) ( 161 ) Other 600 ( 272 ) ( 161 ) Other current asset ( ) Other current asset ( 1,167 ) 62 ( 29 ) current asset ( 1,167 ) 62 ( 29 ) Other long-term ( 1,167 ) 62 ( 29 ) Other long-term asset ( ) Other long-term asset ( 41 ) 346 ( 628 ) long-term asset ( 41 ) 346 ( 628 ) Accounts payable ( 41 ) 346 ( 628 ) Accounts payable 88 ( ( 628 ) Accounts payable 88 ( 1,054 ) 473 Other ) Accounts payable 88 ( 1,054 ) 473 Other current liability payable 88 ( 1,054 ) 473 Other current liability ( 260 473 Other current liability ( 260 ) ( 624 ) 1,075 liability ( 260 ) ( 624 ) 1,075 Other long-term liability 260 ) ( 624 ) 1,075 Other long-term liability ( 766 1,075 Other long-term liability ( 766 ) 1,599 1,014 Net cash long-term liability ( 766 ) 1,599 1,014 Net cash from operation liability ( 766 ) 1,599 1,014 Net cash from operation 33,325 1,014 Net cash from operation 33,325 29,668 32,502 Financing Proceeds from Net cash from operation 33,325 29,668 32,502 Financing Proceeds from issuance cash from operation 33,325 29,668 32,502 Financing Proceeds from issuance of short-term debt , maturity of 90 day or le , net day or le , net 7,195 4,481 500 Proceeds from issuance or le , net 7,195 4,481 500 Proceeds from issuance of le , net 7,195 4,481 500 Proceeds from issuance of debt Proceeds from issuance of debt 13,884 10,680 10,350 Repayments of debt from issuance of debt 13,884 10,680 10,350 Repayments of debt ( issuance of debt 13,884 10,680 10,350 Repayments of debt ( 2,796 10,350 Repayments of debt ( 2,796 ) ( 1,500 ) ( debt ( 2,796 ) ( 1,500 ) ( 3,888 ) Common ) ( 1,500 ) ( 3,888 ) Common stock issued 668 3,888 ) Common stock issued 668 634 607 Common stock repurchased ) Common stock issued 668 634 607 Common stock repurchased ( Common stock issued 668 634 607 Common stock repurchased ( 15,969 607 Common stock repurchased ( 15,969 ) ( 14,443 ) ( repurchased ( 15,969 ) ( 14,443 ) ( 7,316 ) Common ) ( 14,443 ) ( 7,316 ) Common stock cash dividend stock cash dividend paid ( 11,006 ) ( 9,882 ) ( paid ( 11,006 ) ( 9,882 ) ( 8,879 ) Other ) ( 9,882 ) ( 8,879 ) Other ( 369 ) ( 8,879 ) Other ( 369 ) 362 ( 39 ) ) Other ( 369 ) 362 ( 39 ) Net cash ( 369 ) 362 ( 39 ) Net cash used in cash used in financing ( 8,393 ) ( 9,668 ) ( financing ( 8,393 ) ( 9,668 ) ( 8,665 ) Investing ) ( 9,668 ) ( 8,665 ) Investing Additions to property to property and equipment ( 8,343 ) ( 5,944 ) ( equipment ( 8,343 ) ( 5,944 ) ( 5,485 ) Acquisition ) ( 5,944 ) ( 5,485 ) Acquisition of company , intangible and other asset ( 1,393 ) ( 3,723 ) ( asset ( 1,393 ) ( 3,723 ) ( 5,937 ) Purchases ) ( 3,723 ) ( 5,937 ) Purchases of investment ( ) Purchases of investment ( 129,758 ) ( 98,729 ) ( investment ( 129,758 ) ( 98,729 ) ( 72,690 ) Maturities ) ( 98,729 ) ( 72,690 ) Maturities of investment 22,054 72,690 ) Maturities of investment 22,054 15,013 5,272 Sales of investment ) Maturities of investment 22,054 15,013 5,272 Sales of investment 93,287 Maturities of investment 22,054 15,013 5,272 Sales of investment 93,287 70,848 15,013 5,272 Sales of investment 93,287 70,848 60,094 Securities lending payable 5,272 Sales of investment 93,287 70,848 60,094 Securities lending payable 203 Sales of investment 93,287 70,848 60,094 Securities lending payable 203 ( 70,848 60,094 Securities lending payable 203 ( 466 ) ( 87 Securities lending payable 203 ( 466 ) ( 87 ) Net 203 ( 466 ) ( 87 ) Net cash used in cash used in investing ( 23,950 ) ( 23,001 ) ( investing ( 23,950 ) ( 23,001 ) ( 18,833 ) Effect ) ( 23,001 ) ( 18,833 ) Effect of foreign exchange cash and cash equivalent ( 67 ) ( 73 ) ( equivalent ( 67 ) ( 73 ) ( 139 ) Net ) ( 73 ) ( 139 ) Net change in cash in cash and cash equivalent 915 ( 3,074 ) 4,865 Cash and cash equivalent 915 ( 3,074 ) 4,865 Cash and cash equivalent 915 ( 3,074 ) 4,865 Cash and cash equivalent , equivalent , beginning of period 5,595 8,669 3,804 Cash and cash , beginning of period 5,595 8,669 3,804 Cash and cash equivalent beginning of period 5,595 8,669 3,804 Cash and cash equivalent , , end of period $ 6,510 $ 5,595 $ 8,669 See of period $ 6,510 $ 5,595 $ 8,669 See accompanying note $ 6,510 $ 5,595 $ 8,669 See accompanying note . 55 8,669 See accompanying note . 55 Table of Contents PART II of Contents PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2016 2015 2014 Common Year Ended June 30 , 2016 2015 2014 Common stock and Ended June 30 , 2016 2015 2014 Common stock and paid-in June 30 , 2016 2015 2014 Common stock and paid-in capital , beginning of period $ 68,465 $ 68,366 $ 67,306 Common of period $ 68,465 $ 68,366 $ 67,306 Common stock issued $ 68,465 $ 68,366 $ 67,306 Common stock issued 668 634 $ 67,306 Common stock issued 668 634 607 Common stock repurchased 67,306 Common stock issued 668 634 607 Common stock repurchased ( Common stock issued 668 634 607 Common stock repurchased ( 3,689 607 Common stock repurchased ( 3,689 ) ( 3,700 ) ( repurchased ( 3,689 ) ( 3,700 ) ( 2,328 ) Stock-based ) ( 3,700 ) ( 2,328 ) Stock-based compensation expense 2,668 2,328 ) Stock-based compensation expense 2,668 2,574 2,446 Stock-based compensation income ) Stock-based compensation expense 2,668 2,574 2,446 Stock-based compensation income tax Stock-based compensation expense 2,668 2,574 2,446 Stock-based compensation income tax benefit Stock-based compensation income tax benefit 0 588 272 Other , net compensation income tax benefit 0 588 272 Other , net 66 income tax benefit 0 588 272 Other , net 66 3 588 272 Other , net 66 3 63 Balance , end 272 Other , net 66 3 63 Balance , end of Other , net 66 3 63 Balance , end of period Balance , end of period 68,178 68,465 68,366 Retained earnings Balance , end of period 68,178 68,465 68,366 Retained earnings Balance , end of period 68,178 68,465 68,366 Retained earnings Balance , beginning Balance , beginning of period 9,096 17,710 9,895 Net income 16,798 , beginning of period 9,096 17,710 9,895 Net income 16,798 12,193 beginning of period 9,096 17,710 9,895 Net income 16,798 12,193 22,074 9,096 17,710 9,895 Net income 16,798 12,193 22,074 Common stock cash 17,710 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend 9,895 Net income 16,798 12,193 22,074 Common stock cash dividend ( Common stock cash dividend ( 11,329 ) ( 10,063 ) ( dividend ( 11,329 ) ( 10,063 ) ( 9,271 ) Common ) ( 10,063 ) ( 9,271 ) Common stock repurchased ( ) Common stock repurchased ( 12,283 ) ( 10,744 ) ( repurchased ( 12,283 ) ( 10,744 ) ( 4,988 ) Balance ) ( 10,744 ) ( 4,988 ) Balance , end of Balance , end of period 2,282 9,096 17,710 Accumulated other comprehensive , end of period 2,282 9,096 17,710 Accumulated other comprehensive income end of period 2,282 9,096 17,710 Accumulated other comprehensive income Balance Balance , beginning of period 2,522 3,708 1,743 Other comprehensive income , beginning of period 2,522 3,708 1,743 Other comprehensive income ( beginning of period 2,522 3,708 1,743 Other comprehensive income ( loss income ( loss ) ( 985 ) ( 1,186 ) 1,965 ) ( 985 ) ( 1,186 ) 1,965 Balance , end 985 ) ( 1,186 ) 1,965 Balance , end of period Balance , end of period 1,537 2,522 3,708 Total stockholder ’ , end of period 1,537 2,522 3,708 Total stockholder ’ equity end of period 1,537 2,522 3,708 Total stockholder ’ equity $ Total stockholder ’ equity $ 71,997 $ 80,083 $ 89,784 See ’ equity $ 71,997 $ 80,083 $ 89,784 See accompanying note $ 71,997 $ 80,083 $ 89,784 See accompanying note . 56 89,784 See accompanying note . 56 Table of Contents PART II of Contents PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles . Segment Information In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial new segment described in Note 21 – Segment Information and Geographic segment performance during fiscal year 2016 . This change primarily impacted This change primarily impacted Note 10 – Goodwill , Note 15 10 – Goodwill , Note 15 – Unearned Revenue , and Unearned Revenue , and Note 21 – Segment Information and Geographic “ OCI ” ) . 57 Table of Contents PART II of Contents PART II Item 8 Product Revenue and Service and Other Revenue Service revenue exceeded 10 % of total revenue for first time in fiscal year 2016 . As a result , and content such a Office 365 , Microsoft Azure ( “ a multiple-element arrangement and all 58 Table of Contents PART II of Contents PART II Item 8 revenue from the arrangement is . Customers purchasing a Windows 10 license will receive unspecified update the life of their Windows 10 device at no additional cost revenue from license of Windows 10 is recognized ratably over the based on historical and projected 59 Table of Contents PART II of Contents PART II Item 8 product failure rate , historical a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.6 billion , $ 1.9 billion $ 1.6 billion , $ 1.9 billion , and $ 2.3 1.9 billion , and $ 2.3 billion in fiscal year 2016 2.3 billion in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . Stock-Based Compensation level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include actively traded on exchange . 60 Table of Contents PART II of Contents PART II Item 8 • Level 2 – input II Item 8 • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of government bond . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset primarily comprise investment considers available quantitative and qualitative 61 Table of Contents PART II of Contents PART II Item 8 evidence in evaluating potential impairment million ) Year Ended June 30 , 2016 2015 2014 Balance Year Ended June 30 , 2016 2015 2014 Balance , beginning Ended June 30 , 2016 2015 2014 Balance , beginning of June 30 , 2016 2015 2014 Balance , beginning of period , beginning of period $ 335 $ 301 $ 336 Charged of period $ 335 $ 301 $ 336 Charged to cost $ 335 $ 301 $ 336 Charged to cost and other Charged to cost and other 146 77 16 Write-offs ( 55 to cost and other 146 77 16 Write-offs ( 55 ) cost and other 146 77 16 Write-offs ( 55 ) ( 146 77 16 Write-offs ( 55 ) ( 43 ) ( Write-offs ( 55 ) ( 43 ) ( 51 ) Balance ) ( 43 ) ( 51 ) Balance , end of , end of period $ 426 $ 335 $ 301 Inventories of period $ 426 $ 335 $ 301 Inventories Inventories are $ 426 $ 335 $ 301 Inventories Inventories are stated at . We regularly review inventory 62 Table of Contents PART II of Contents PART II Item 8 quantity on hand , future and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between , ranging from one to 15 year . We evaluate the Share-Based Payment Accounting In March 2016 , the Financial Accounting Standards effective for u beginning July 1 , 2017 , with early u beginning July 1 , 2017 , with early adoption permitted third quarter of fiscal year 2016 which requires u to reflect any adjustment a of July 1 , 2015 , the beginning a of July 1 , 2015 , the beginning of the all period in fiscal year 2016 . Additional amendment to the retained earnings a of July 1 , 2015 , where the a of July 1 , 2015 , where the cumulative effect used in financing of $ 588 million and $ 271 million $ 588 million and $ 271 million for the year ended for the year ended June 30 , 2015 and 2014 , year ended June 30 , 2015 and 2014 , respectively . June 30 , 2015 and 2014 , respectively . The presentation a a financing activity . 63 Table of Contents PART II of Contents PART II Item 8 Adoption of the new standard than paid-in capital of $ 402 million for the year ended for the year ended June 30 , 2016 . Balance Sheet year ended June 30 , 2016 . Balance Sheet Classification of of Deferred Taxes In November 2015 , the FASB issued guidance effective for u beginning July 1 , 2017 , and can u beginning July 1 , 2017 , and can be early fourth quarter of fiscal year 2016 on a retrospective basis . ( In million ) June 30 , 2015 As adjusted As million ) June 30 , 2015 As adjusted As reported Balance deferred income tax asset $ 0 $ 1,915 Other long-term asset tax asset $ 0 $ 1,915 Other long-term asset $ 3,117 1,915 Other long-term asset $ 3,117 $ 2,953 Other current liability long-term asset $ 3,117 $ 2,953 Other current liability $ 6,555 2,953 Other current liability $ 6,555 $ 6,766 Long-term deferred income current liability $ 6,555 $ 6,766 Long-term deferred income tax liability deferred income tax liability $ 1,295 $ 2,835 Recent accounting guidance tax liability $ 1,295 $ 2,835 Recent accounting guidance not yet – Credit Losses In June 2016 , the FASB issued a effective for u beginning July 1 , 2020 , with early u beginning July 1 , 2020 , with early adoption permitted early adoption permitted beginning July 1 , 2019 . Application of permitted beginning July 1 , 2019 . Application of the amendment statement . Leases In February 2016 , the FASB issued a effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted the new standard effective July 1 , 2017 in conjunction with standard effective July 1 , 2017 in conjunction with our adoption prior period financial statement . 64 Table of Contents PART II of Contents PART II Item 8 We anticipate this standard will , and Disclosure In January 2016 , the FASB issued a effective for u beginning July 1 , 2018 . The application u beginning July 1 , 2018 . The application of the Contracts with Customers In May 2014 , the FASB issued a effective for u beginning July 1 , 2018 , and adoption u beginning July 1 , 2018 , and adoption a of original effective date of July 1 , 2017 is permitted . date of July 1 , 2017 is permitted . We currently the new standard effective July 1 , 2017 . Our ability standard effective July 1 , 2017 . Our ability to early we expect to recognize Windows 10 revenue predominantly at the time the net change in Windows 10 revenue from period to period the new standard . NOTE 2 — EARNINGS PER SHARE Basic option and stock award . 65 Table of Contents PART II of Contents PART II Item 8 The component of basic and share ) Year Ended June 30 , 2016 2015 2014 Net Year Ended June 30 , 2016 2015 2014 Net income available Ended June 30 , 2016 2015 2014 Net income available for June 30 , 2016 2015 2014 Net income available for common shareholder ( A ) $ 16,798 $ 12,193 $ 22,074 Weighted A ) $ 16,798 $ 12,193 $ 22,074 Weighted average outstanding $ 16,798 $ 12,193 $ 22,074 Weighted average outstanding share of common stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based ( B ) 7,925 8,177 8,299 Dilutive effect of stock-based award Dilutive effect of stock-based award 88 77 100 Common stock and effect of stock-based award 88 77 100 Common stock and common of stock-based award 88 77 100 Common stock and common stock stock equivalent ( C ) 8,013 8,254 8,399 Earnings Per Share equivalent ( C ) 8,013 8,254 8,399 Earnings Per Share Basic ( C ) 8,013 8,254 8,399 Earnings Per Share Basic ( Basic ( A/B ) $ 2.12 $ 1.49 $ 2.66 Diluted A/B ) $ 2.12 $ 1.49 $ 2.66 Diluted ( A/C $ 2.12 $ 1.49 $ 2.66 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.10 $ 1.48 $ 2.63 Anti-dilutive A/C ) $ 2.10 $ 1.48 $ 2.63 Anti-dilutive stock-based award $ 2.10 $ 1.48 $ 2.63 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2016 2015 2014 Dividends Year Ended June 30 , 2016 2015 2014 Dividends and interest Ended June 30 , 2016 2015 2014 Dividends and interest income June 30 , 2016 2015 2014 Dividends and interest income $ Dividends and interest income $ 903 $ 766 $ 883 Interest interest income $ 903 $ 766 $ 883 Interest expense ( $ 903 $ 766 $ 883 Interest expense ( 1,243 ) $ 883 Interest expense ( 1,243 ) ( 781 ) ( expense ( 1,243 ) ( 781 ) ( 597 ) Net ) ( 781 ) ( 597 ) Net recognized gain on Net recognized gain on investment 668 716 437 Net loss on recognized gain on investment 668 716 437 Net loss on derivative gain on investment 668 716 437 Net loss on derivative ( Net loss on derivative ( 443 ) ( 423 ) ( derivative ( 443 ) ( 423 ) ( 328 ) Net ) ( 423 ) ( 328 ) Net gain ( loss on foreign currency remeasurements ( 121 ) 335 ( 165 ) currency remeasurements ( 121 ) 335 ( 165 ) Other ( ( 121 ) 335 ( 165 ) Other ( 195 ) ( 165 ) Other ( 195 ) ( 267 ) ( Other ( 195 ) ( 267 ) ( 169 ) Total ) ( 267 ) ( 169 ) Total $ ( 431 169 ) Total $ ( 431 ) $ 346 $ 61 $ ( 431 ) $ 346 $ 61 Following are detail 431 ) $ 346 $ 61 Following are detail of net million ) Year Ended June 30 , 2016 2015 2014 Other-than-temporary Year Ended June 30 , 2016 2015 2014 Other-than-temporary impairment of Ended June 30 , 2016 2015 2014 Other-than-temporary impairment of investment June 30 , 2016 2015 2014 Other-than-temporary impairment of investment $ impairment of investment $ ( 322 ) $ ( 183 ) ( 322 ) $ ( 183 ) $ ( 106 ) ( 183 ) $ ( 106 ) Realized gain from sale from sale of available-for-sale security 1,376 1,176 776 Realized loss from sale of available-for-sale security 1,376 1,176 776 Realized loss from sale of available-for-sale security 1,376 1,176 776 Realized loss from sale of sale of available-for-sale security ( 386 ) ( 277 ) ( security ( 386 ) ( 277 ) ( 233 ) Total ) ( 277 ) ( 233 ) Total $ 668 $ ( 233 ) Total $ 668 $ 716 $ 437 66 ) Total $ 668 $ 716 $ 437 66 Table of $ 668 $ 716 $ 437 66 Table of Contents PART 668 $ 716 $ 437 66 Table of Contents PART II of Contents PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2016 Cash $ 3,501 Other Investments June 30 , 2016 Cash $ 3,501 $ 0 30 , 2016 Cash $ 3,501 $ 0 $ 0 $ 2016 Cash $ 3,501 $ 0 $ 0 $ 3,501 $ $ 3,501 $ 0 $ 0 $ 3,501 $ 3,501 $ $ 0 $ 0 $ 3,501 $ 3,501 $ 0 $ $ 0 $ 3,501 $ 3,501 $ 0 $ 0 Mutual $ 3,501 $ 3,501 $ 0 $ 0 Mutual fund 1,012 $ 3,501 $ 0 $ 0 Mutual fund 1,012 0 0 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial paper fund 1,012 0 0 1,012 1,012 0 0 Commercial paper 298 1,012 0 0 1,012 1,012 0 0 Commercial paper 298 0 0 0 1,012 1,012 0 0 Commercial paper 298 0 0 1,012 0 0 Commercial paper 298 0 0 298 298 0 0 0 Commercial paper 298 0 0 298 298 0 0 0 Commercial paper 298 0 0 298 298 0 0 Certificates Commercial paper 298 0 0 298 298 0 0 Certificates of paper 298 0 0 298 298 0 0 Certificates of deposit 298 0 0 298 298 0 0 Certificates of deposit 1,000 0 0 298 298 0 0 Certificates of deposit 1,000 0 0 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 U.S. of deposit 1,000 0 0 1,000 868 132 0 U.S. government deposit 1,000 0 0 1,000 868 132 0 U.S. government and 1,000 0 0 1,000 868 132 0 U.S. government and agency 0 0 1,000 868 132 0 U.S. government and agency security U.S. government and agency security 89,970 245 ( 11 ) 90,204 government and agency security 89,970 245 ( 11 ) 90,204 100 agency security 89,970 245 ( 11 ) 90,204 100 90,104 0 89,970 245 ( 11 ) 90,204 100 90,104 0 Foreign government 245 ( 11 ) 90,204 100 90,104 0 Foreign government bond ( 11 ) 90,204 100 90,104 0 Foreign government bond 5,502 11 ) 90,204 100 90,104 0 Foreign government bond 5,502 10 90,104 0 Foreign government bond 5,502 10 ( 18 ) 5,494 0 Foreign government bond 5,502 10 ( 18 ) 5,494 731 government bond 5,502 10 ( 18 ) 5,494 731 4,763 0 5,502 10 ( 18 ) 5,494 731 4,763 0 Mortgage- and 10 ( 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed ( 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed security 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed security 4,789 0 Mortgage- and asset-backed security 4,789 21 ( 2 ) 4,808 Mortgage- and asset-backed security 4,789 21 ( 2 ) 4,808 0 asset-backed security 4,789 21 ( 2 ) 4,808 0 4,808 0 4,789 21 ( 2 ) 4,808 0 4,808 0 Corporate note 21 ( 2 ) 4,808 0 4,808 0 Corporate note and ( 2 ) 4,808 0 4,808 0 Corporate note and bond 2 ) 4,808 0 4,808 0 Corporate note and bond 6,509 0 Corporate note and bond 6,509 110 ( 35 ) 6,584 Corporate note and bond 6,509 110 ( 35 ) 6,584 0 and bond 6,509 110 ( 35 ) 6,584 0 6,584 0 6,509 110 ( 35 ) 6,584 0 6,584 0 Municipal security 110 ( 35 ) 6,584 0 6,584 0 Municipal security 285 ( 35 ) 6,584 0 6,584 0 Municipal security 285 57 35 ) 6,584 0 6,584 0 Municipal security 285 57 0 0 6,584 0 Municipal security 285 57 0 342 0 342 6,584 0 Municipal security 285 57 0 342 0 342 0 0 Municipal security 285 57 0 342 0 342 0 Common Municipal security 285 57 0 342 0 342 0 Common and security 285 57 0 342 0 342 0 Common and preferred 285 57 0 342 0 342 0 Common and preferred stock 57 0 342 0 342 0 Common and preferred stock 5,597 0 Common and preferred stock 5,597 4,452 ( 236 ) 9,813 Common and preferred stock 5,597 4,452 ( 236 ) 9,813 0 preferred stock 5,597 4,452 ( 236 ) 9,813 0 0 9,813 5,597 4,452 ( 236 ) 9,813 0 0 9,813 Other investment 4,452 ( 236 ) 9,813 0 0 9,813 Other investment 590 ( 236 ) 9,813 0 0 9,813 Other investment 590 0 236 ) 9,813 0 0 9,813 Other investment 590 0 0 0 0 9,813 Other investment 590 0 0 590 0 ( 0 9,813 Other investment 590 0 0 590 0 ( 3 9,813 Other investment 590 0 0 590 0 ( 3 ) Other investment 590 0 0 590 0 ( 3 ) 593 investment 590 0 0 590 0 ( 3 ) 593 Total 0 0 590 0 ( 3 ) 593 Total $ 119,053 590 0 ( 3 ) 593 Total $ 119,053 $ 4,895 3 ) 593 Total $ 119,053 $ 4,895 $ ( 302 593 Total $ 119,053 $ 4,895 $ ( 302 ) $ 119,053 $ 4,895 $ ( 302 ) $ 123,646 $ 6,510 $ ( 302 ) $ 123,646 $ 6,510 $ 106,730 $ 302 ) $ 123,646 $ 6,510 $ 106,730 $ 10,406 ( $ 123,646 $ 6,510 $ 106,730 $ 10,406 ( In million $ 6,510 $ 106,730 $ 10,406 ( In million ) Cost Equity and Other Investments June 30 , 2015 Cash $ 3,679 Other Investments June 30 , 2015 Cash $ 3,679 $ 0 30 , 2015 Cash $ 3,679 $ 0 $ 0 $ 2015 Cash $ 3,679 $ 0 $ 0 $ 3,679 $ $ 3,679 $ 0 $ 0 $ 3,679 $ 3,679 $ $ 0 $ 0 $ 3,679 $ 3,679 $ 0 $ $ 0 $ 3,679 $ 3,679 $ 0 $ 0 Mutual $ 3,679 $ 3,679 $ 0 $ 0 Mutual fund 1,100 $ 3,679 $ 0 $ 0 Mutual fund 1,100 0 0 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 $ 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 0 Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial Mutual fund 1,100 0 0 1,100 1,100 0 0 Commercial paper fund 1,100 0 0 1,100 1,100 0 0 Commercial paper 1 1,100 0 0 1,100 1,100 0 0 Commercial paper 1 0 0 0 1,100 1,100 0 0 Commercial paper 1 0 0 1,100 0 0 Commercial paper 1 0 0 1 1 0 0 0 Commercial paper 1 0 0 1 1 0 0 0 Commercial paper 1 0 0 1 1 0 0 Certificates Commercial paper 1 0 0 1 1 0 0 Certificates of paper 1 0 0 1 1 0 0 Certificates of deposit 1 0 0 1 1 0 0 Certificates of deposit 906 0 0 1 1 0 0 Certificates of deposit 906 0 0 0 Certificates of deposit 906 0 0 906 776 130 0 Certificates of deposit 906 0 0 906 776 130 0 Certificates of deposit 906 0 0 906 776 130 0 U.S. of deposit 906 0 0 906 776 130 0 U.S. government deposit 906 0 0 906 776 130 0 U.S. government and 906 0 0 906 776 130 0 U.S. government and agency 0 0 906 776 130 0 U.S. government and agency security U.S. government and agency security 72,843 76 ( 30 ) 72,889 government and agency security 72,843 76 ( 30 ) 72,889 39 agency security 72,843 76 ( 30 ) 72,889 39 72,850 0 72,843 76 ( 30 ) 72,889 39 72,850 0 Foreign government 76 ( 30 ) 72,889 39 72,850 0 Foreign government bond ( 30 ) 72,889 39 72,850 0 Foreign government bond 5,477 30 ) 72,889 39 72,850 0 Foreign government bond 5,477 3 72,850 0 Foreign government bond 5,477 3 ( 24 ) 5,456 0 Foreign government bond 5,477 3 ( 24 ) 5,456 0 government bond 5,477 3 ( 24 ) 5,456 0 5,456 0 5,477 3 ( 24 ) 5,456 0 5,456 0 Mortgage- and 3 ( 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed ( 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed security 24 ) 5,456 0 5,456 0 Mortgage- and asset-backed security 4,899 0 Mortgage- and asset-backed security 4,899 23 ( 6 ) 4,916 Mortgage- and asset-backed security 4,899 23 ( 6 ) 4,916 0 asset-backed security 4,899 23 ( 6 ) 4,916 0 4,916 0 4,899 23 ( 6 ) 4,916 0 4,916 0 Corporate note 23 ( 6 ) 4,916 0 4,916 0 Corporate note and ( 6 ) 4,916 0 4,916 0 Corporate note and bond 6 ) 4,916 0 4,916 0 Corporate note and bond 7,192 0 Corporate note and bond 7,192 97 ( 37 ) 7,252 Corporate note and bond 7,192 97 ( 37 ) 7,252 0 and bond 7,192 97 ( 37 ) 7,252 0 7,252 0 7,192 97 ( 37 ) 7,252 0 7,252 0 Municipal security 97 ( 37 ) 7,252 0 7,252 0 Municipal security 285 ( 37 ) 7,252 0 7,252 0 Municipal security 285 35 37 ) 7,252 0 7,252 0 Municipal security 285 35 ( 0 7,252 0 Municipal security 285 35 ( 1 ) 319 7,252 0 Municipal security 285 35 ( 1 ) 319 0 Municipal security 285 35 ( 1 ) 319 0 319 0 285 35 ( 1 ) 319 0 319 0 Common and 35 ( 1 ) 319 0 319 0 Common and preferred ( 1 ) 319 0 319 0 Common and preferred stock 1 ) 319 0 319 0 Common and preferred stock 6,668 0 Common and preferred stock 6,668 4,986 ( 215 ) 11,439 Common and preferred stock 6,668 4,986 ( 215 ) 11,439 0 preferred stock 6,668 4,986 ( 215 ) 11,439 0 0 11,439 6,668 4,986 ( 215 ) 11,439 0 0 11,439 Other investment 4,986 ( 215 ) 11,439 0 0 11,439 Other investment 597 ( 215 ) 11,439 0 0 11,439 Other investment 597 0 215 ) 11,439 0 0 11,439 Other investment 597 0 0 0 0 11,439 Other investment 597 0 0 597 0 8 0 11,439 Other investment 597 0 0 597 0 8 589 11,439 Other investment 597 0 0 597 0 8 589 Total Other investment 597 0 0 597 0 8 589 Total $ investment 597 0 0 597 0 8 589 Total $ 103,647 597 0 0 597 0 8 589 Total $ 103,647 $ 0 0 597 0 8 589 Total $ 103,647 $ 5,220 0 8 589 Total $ 103,647 $ 5,220 $ ( 313 589 Total $ 103,647 $ 5,220 $ ( 313 ) $ 103,647 $ 5,220 $ ( 313 ) $ 108,554 $ 5,595 $ ( 313 ) $ 108,554 $ 5,595 $ 90,931 $ 313 ) $ 108,554 $ 5,595 $ 90,931 $ 12,028 As $ 108,554 $ 5,595 $ 90,931 $ 12,028 As of June $ 5,595 $ 90,931 $ 12,028 As of June 30 , $ 12,028 As of June 30 , 2016 and 2015 , As of June 30 , 2016 and 2015 , the recorded June 30 , 2016 and 2015 , the recorded base of not publicly traded were $ 767 million and $ 561 million $ 767 million and $ 561 million , respectively . These investment . As of June 30 , 2016 and 2015 , As of June 30 , 2016 and 2015 , the collateral June 30 , 2016 and 2015 , the collateral received under for loaned security totaled $ 294 million and $ 92 million $ 294 million and $ 92 million , which is primarily government and agency security . 67 Table of Contents PART II of Contents PART II Item 8 Unrealized Losses on Investments Investments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2016 U.S. government and Fair Value June 30 , 2016 U.S. government and agency security government and agency security $ 5,816 $ ( 3 ) $ security $ 5,816 $ ( 3 ) $ 432 $ ( $ ( 3 ) $ 432 $ ( 8 ) $ ) $ 432 $ ( 8 ) $ 6,248 $ ( $ ( 8 ) $ 6,248 $ ( 11 ) Foreign ) $ 6,248 $ ( 11 ) Foreign government bond 3,452 11 ) Foreign government bond 3,452 ( 3 ) 35 ( Foreign government bond 3,452 ( 3 ) 35 ( 15 ) bond 3,452 ( 3 ) 35 ( 15 ) 3,487 ( ( 3 ) 35 ( 15 ) 3,487 ( 18 ) ) 35 ( 15 ) 3,487 ( 18 ) Mortgage- and ( 15 ) 3,487 ( 18 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 844 ( 1 ) 322 ( and asset-backed security 844 ( 1 ) 322 ( 1 ) security 844 ( 1 ) 322 ( 1 ) 1,166 ( ( 1 ) 322 ( 1 ) 1,166 ( 2 ) ) 322 ( 1 ) 1,166 ( 2 ) Corporate note ( 1 ) 1,166 ( 2 ) Corporate note and bond ) Corporate note and bond 1,180 ( 11 ) 788 ( note and bond 1,180 ( 11 ) 788 ( 24 ) bond 1,180 ( 11 ) 788 ( 24 ) 1,968 ( ( 11 ) 788 ( 24 ) 1,968 ( 35 ) ) 788 ( 24 ) 1,968 ( 35 ) Common and ( 24 ) 1,968 ( 35 ) Common and preferred stock ) Common and preferred stock 896 ( 147 ) 390 ( and preferred stock 896 ( 147 ) 390 ( 89 ) stock 896 ( 147 ) 390 ( 89 ) 1,286 ( ( 147 ) 390 ( 89 ) 1,286 ( 236 ) ) 390 ( 89 ) 1,286 ( 236 ) Total $ ( 89 ) 1,286 ( 236 ) Total $ 12,188 $ ( 236 ) Total $ 12,188 $ ( 165 ) $ Total $ 12,188 $ ( 165 ) $ 1,967 $ ( $ ( 165 ) $ 1,967 $ ( 137 ) $ ) $ 1,967 $ ( 137 ) $ 14,155 $ ( $ ( 137 ) $ 14,155 $ ( 302 ) Less ) $ 14,155 $ ( 302 ) Less than 12 Months ( 302 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2015 U.S. government and Fair Value June 30 , 2015 U.S. government and agency security government and agency security $ 6,636 $ ( 9 ) $ security $ 6,636 $ ( 9 ) $ 421 $ ( $ ( 9 ) $ 421 $ ( 21 ) $ ) $ 421 $ ( 21 ) $ 7,057 $ ( $ ( 21 ) $ 7,057 $ ( 30 ) Foreign ) $ 7,057 $ ( 30 ) Foreign government bond 4,611 30 ) Foreign government bond 4,611 ( 12 ) 18 ( Foreign government bond 4,611 ( 12 ) 18 ( 12 ) bond 4,611 ( 12 ) 18 ( 12 ) 4,629 ( ( 12 ) 18 ( 12 ) 4,629 ( 24 ) ) 18 ( 12 ) 4,629 ( 24 ) Mortgage- and ( 12 ) 4,629 ( 24 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 3,171 ( 5 ) 28 ( and asset-backed security 3,171 ( 5 ) 28 ( 1 ) security 3,171 ( 5 ) 28 ( 1 ) 3,199 ( ( 5 ) 28 ( 1 ) 3,199 ( 6 ) ) 28 ( 1 ) 3,199 ( 6 ) Corporate note ( 1 ) 3,199 ( 6 ) Corporate note and bond ) Corporate note and bond 2,946 ( 29 ) 104 ( note and bond 2,946 ( 29 ) 104 ( 8 ) bond 2,946 ( 29 ) 104 ( 8 ) 3,050 ( ( 29 ) 104 ( 8 ) 3,050 ( 37 ) ) 104 ( 8 ) 3,050 ( 37 ) Municipal security ( 8 ) 3,050 ( 37 ) Municipal security 36 ( ( 37 ) Municipal security 36 ( 1 ) 0 0 ) Municipal security 36 ( 1 ) 0 0 36 ( security 36 ( 1 ) 0 0 36 ( 1 ) 36 ( 1 ) 0 0 36 ( 1 ) Common ( 1 ) 0 0 36 ( 1 ) Common and ) 0 0 36 ( 1 ) Common and preferred stock ) Common and preferred stock 1,389 ( 180 ) 148 ( and preferred stock 1,389 ( 180 ) 148 ( 35 ) stock 1,389 ( 180 ) 148 ( 35 ) 1,537 ( ( 180 ) 148 ( 35 ) 1,537 ( 215 ) ) 148 ( 35 ) 1,537 ( 215 ) Total $ ( 35 ) 1,537 ( 215 ) Total $ 18,789 $ ( 215 ) Total $ 18,789 $ ( 236 ) $ Total $ 18,789 $ ( 236 ) $ 719 $ ( $ ( 236 ) $ 719 $ ( 77 ) $ ) $ 719 $ ( 77 ) $ 19,508 $ ( $ ( 77 ) $ 19,508 $ ( 313 ) Unrealized ) $ 19,508 $ ( 313 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2016 Due in one Fair Value June 30 , 2016 Due in one year or one year or le $ 54,503 $ 54,544 Due after one or le $ 54,503 $ 54,544 Due after one year through one year through five year 50,683 50,896 Due after five year year through five year 50,683 50,896 Due after five year through Due after five year through 10 year 1,914 1,954 Due after five year through 10 year 1,914 1,954 Due after 10 year year through 10 year 1,914 1,954 Due after 10 year 1,253 year 1,914 1,954 Due after 10 year 1,253 1,336 Total $ 1,954 Due after 10 year 1,253 1,336 Total $ 108,353 $ Due after 10 year 1,253 1,336 Total $ 108,353 $ 108,730 year 1,253 1,336 Total $ 108,353 $ 108,730 NOTE 5 — 1,336 Total $ 108,353 $ 108,730 NOTE 5 — DERIVATIVES We $ 108,353 $ 108,730 NOTE 5 — DERIVATIVES We use derivative in U.S. dollar equivalent . 68 Table of Contents PART II of Contents PART II Item 8 Foreign Currency Certain forecasted transaction dollar . As of June 30 , 2016 and June 30 As of June 30 , 2016 and June 30 , 2015 30 , 2016 and June 30 , 2015 , the total 2016 and June 30 , 2015 , the total notional amount exchange contract sold were $ 8.4 billion and $ 9.8 billion $ 8.4 billion and $ 9.8 billion , respectively . Foreign instrument . As of June 30 , 2016 and June 30 As of June 30 , 2016 and June 30 , 2015 30 , 2016 and June 30 , 2015 , the total 2016 and June 30 , 2015 , the total notional amount exchange contract sold were $ 5.3 billion for both period . exposure . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 12.0 billion and $ 11.7 billion $ 12.0 billion and $ 11.7 billion , respectively . As respectively . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 9.7 billion and $ 11.0 billion $ 9.7 billion and $ 11.0 billion , respectively . Equity forward . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount market price risk were $ 1.3 billion and $ 2.2 billion $ 1.3 billion and $ 2.2 billion , respectively , of respectively , of which $ 737 million and $ 986 million $ 737 million and $ 986 million , respectively , were instrument . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount market price risk were $ 2.2 billion and $ 2.6 billion $ 2.2 billion and $ 2.6 billion , respectively , of respectively , of which $ 1.1 billion and $ 1.4 billion $ 1.1 billion and $ 1.4 billion , respectively , were instrument . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 328 million and $ 2.4 billion $ 328 million and $ 2.4 billion , respectively . As respectively . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 1.0 billion and $ 3.2 billion $ 1.0 billion and $ 3.2 billion , respectively . In date . As of June 30 , 2016 and 2015 , As of June 30 , 2016 and 2015 , the total June 30 , 2016 and 2015 , the total notional derivative mortgage contract purchased were $ 548 million and $ 812 million $ 548 million and $ 812 million , respectively . Credit risk . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 440 million and $ 273 million $ 440 million and $ 273 million , respectively . As respectively . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 618 million and $ 430 million $ 618 million and $ 430 million , respectively . 69 430 million , respectively . 69 Table of Contents PART II of Contents PART II Item 8 Commodity We use broad-based commodity grain . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 631 million and $ 162 million $ 631 million and $ 162 million , respectively . As respectively . As of June 30 , 2015 , the total As of June 30 , 2015 , the total notional amount purchased and sold were $ 882 million and $ 316 million $ 882 million and $ 316 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2016 , our long-term As of June 30 , 2016 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 70 Table of Contents PART II of Contents PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2016 June 30 , risk : June 30 , 2016 June 30 , 2015 Assets June 30 , 2016 June 30 , 2015 Assets Liabilities Assets , 2016 June 30 , 2015 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 33 $ 156 $ 0 $ exchange contract $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) $ 156 $ 0 $ ( 296 ) $ 17 $ 167 $ ( 296 ) $ 17 $ 167 $ 0 $ 296 ) $ 17 $ 167 $ 0 $ ( 79 $ 17 $ 167 $ 0 $ ( 79 ) Equity 167 $ 0 $ ( 79 ) Equity contract 23 0 ( 79 ) Equity contract 23 0 0 ( 16 ) 79 ) Equity contract 23 0 0 ( 16 ) 148 ) Equity contract 23 0 0 ( 16 ) 148 0 contract 23 0 0 ( 16 ) 148 0 0 ( 0 0 ( 16 ) 148 0 0 ( 18 ) 0 ( 16 ) 148 0 0 ( 18 ) Interest ( 16 ) 148 0 0 ( 18 ) Interest rate ) 148 0 0 ( 18 ) Interest rate contract 10 18 ) Interest rate contract 10 0 0 ( 25 ) ) Interest rate contract 10 0 0 ( 25 ) 7 Interest rate contract 10 0 0 ( 25 ) 7 0 contract 10 0 0 ( 25 ) 7 0 0 ( 0 0 ( 25 ) 7 0 0 ( 12 ) 0 ( 25 ) 7 0 0 ( 12 ) Credit ( 25 ) 7 0 0 ( 12 ) Credit contract ) 7 0 0 ( 12 ) Credit contract 6 0 ( 12 ) Credit contract 6 0 0 ( 5 ) 12 ) Credit contract 6 0 0 ( 5 ) 16 ) Credit contract 6 0 0 ( 5 ) 16 0 contract 6 0 0 ( 5 ) 16 0 0 ( 0 0 ( 5 ) 16 0 0 ( 9 ) 0 ( 5 ) 16 0 0 ( 9 ) Commodity ( 5 ) 16 0 0 ( 9 ) Commodity contract ) 16 0 0 ( 9 ) Commodity contract 0 0 ( 9 ) Commodity contract 0 0 0 0 0 0 9 ) Commodity contract 0 0 0 0 0 0 0 ) Commodity contract 0 0 0 0 0 0 0 0 Commodity contract 0 0 0 0 0 0 0 0 Total contract 0 0 0 0 0 0 0 0 Total $ 0 0 0 0 0 0 0 0 Total $ 72 0 0 0 0 0 0 0 Total $ 72 $ 0 0 0 0 0 0 Total $ 72 $ 156 0 0 0 Total $ 72 $ 156 $ 0 $ 0 Total $ 72 $ 156 $ 0 $ ( 342 $ 72 $ 156 $ 0 $ ( 342 ) $ 156 $ 0 $ ( 342 ) $ 188 $ 167 $ ( 342 ) $ 188 $ 167 $ 0 $ 342 ) $ 188 $ 167 $ 0 $ ( 118 $ 188 $ 167 $ 0 $ ( 118 ) Designated 167 $ 0 $ ( 118 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 1 $ 392 $ 0 $ exchange contract $ 1 $ 392 $ 0 $ ( 263 $ 1 $ 392 $ 0 $ ( 263 ) $ 392 $ 0 $ ( 263 ) $ 56 $ 552 $ ( 263 ) $ 56 $ 552 $ 0 $ 263 ) $ 56 $ 552 $ 0 $ ( 31 $ 56 $ 552 $ 0 $ ( 31 ) Equity 552 $ 0 $ ( 31 ) Equity contract 0 0 ( 31 ) Equity contract 0 0 18 ( 25 ) 31 ) Equity contract 0 0 18 ( 25 ) 0 ) Equity contract 0 0 18 ( 25 ) 0 0 contract 0 0 18 ( 25 ) 0 0 25 ( 0 18 ( 25 ) 0 0 25 ( 69 ) 18 ( 25 ) 0 0 25 ( 69 ) Total ( 25 ) 0 0 25 ( 69 ) Total $ ) 0 0 25 ( 69 ) Total $ 1 $ ( 69 ) Total $ 1 $ 392 $ 18 $ ) Total $ 1 $ 392 $ 18 $ ( 288 $ 1 $ 392 $ 18 $ ( 288 ) $ 392 $ 18 $ ( 288 ) $ 56 $ 552 $ ( 288 ) $ 56 $ 552 $ 25 $ 288 ) $ 56 $ 552 $ 25 $ ( 100 $ 56 $ 552 $ 25 $ ( 100 ) Total 552 $ 25 $ ( 100 ) Total gross amount of gross amount of derivative $ 73 $ 548 $ 18 $ of derivative $ 73 $ 548 $ 18 $ ( 630 $ 73 $ 548 $ 18 $ ( 630 ) $ 548 $ 18 $ ( 630 ) $ 244 $ 719 $ ( 630 ) $ 244 $ 719 $ 25 $ 630 ) $ 244 $ 719 $ 25 $ ( 218 $ 244 $ 719 $ 25 $ ( 218 ) Gross 719 $ 25 $ ( 218 ) Gross derivative either offset enforceable master netting agreement $ 69 $ 548 $ 18 $ netting agreement $ 69 $ 548 $ 18 $ ( 630 $ 69 $ 548 $ 18 $ ( 630 ) $ 548 $ 18 $ ( 630 ) $ 126 $ 719 $ ( 630 ) $ 126 $ 719 $ 25 $ 630 ) $ 126 $ 719 $ 25 $ ( 218 $ 126 $ 719 $ 25 $ ( 218 ) Gross 719 $ 25 $ ( 218 ) Gross amount of derivative in the balance sheet ( 74 ) ( 302 ) ( sheet ( 74 ) ( 302 ) ( 25 ) 398 ) ( 302 ) ( 25 ) 398 ( 66 ) 302 ) ( 25 ) 398 ( 66 ) ( 71 ( 25 ) 398 ( 66 ) ( 71 ) ( 398 ( 66 ) ( 71 ) ( 25 ) 161 ) ( 71 ) ( 25 ) 161 Net amount presented 71 ) ( 25 ) 161 Net amount presented in the in the balance sheet ( 5 ) 246 ( 7 ) balance sheet ( 5 ) 246 ( 7 ) ( 232 ( 5 ) 246 ( 7 ) ( 232 ) 60 246 ( 7 ) ( 232 ) 60 648 0 ( 7 ) ( 232 ) 60 648 0 ( 57 ) ) ( 232 ) 60 648 0 ( 57 ) Gross ( 232 ) 60 648 0 ( 57 ) Gross amount ) 60 648 0 ( 57 ) Gross amount of derivative offset in the balance sheet 0 0 0 0 0 0 in the balance sheet 0 0 0 0 0 0 0 the balance sheet 0 0 0 0 0 0 0 0 balance sheet 0 0 0 0 0 0 0 0 Cash sheet 0 0 0 0 0 0 0 0 Cash collateral 0 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 Cash collateral received 0 0 0 ( 250 ) 0 Cash collateral received 0 0 0 ( 250 ) 0 Cash collateral received 0 0 0 ( 250 ) 0 0 received 0 0 0 ( 250 ) 0 0 0 ( 0 0 ( 250 ) 0 0 0 ( 456 ) 0 ( 250 ) 0 0 0 ( 456 ) Net ( 250 ) 0 0 0 ( 456 ) Net amount ) 0 0 0 ( 456 ) Net amount $ ( ) Net amount $ ( 5 ) $ 246 $ ( $ ( 5 ) $ 246 $ ( 7 ) $ ) $ 246 $ ( 7 ) $ ( 482 ) ( 7 ) $ ( 482 ) $ 60 $ 648 $ ( 482 ) $ 60 $ 648 $ 0 $ 482 ) $ 60 $ 648 $ 0 $ ( 513 $ 60 $ 648 $ 0 $ ( 513 ) See 648 $ 0 $ ( 513 ) See also Note 4 513 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 71 Table of Contents PART II of Contents PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2016 2015 2014 Foreign Year Ended June 30 , 2016 2015 2014 Foreign Exchange Contracts Ended June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives June 30 , 2016 2015 2014 Foreign Exchange Contracts Derivatives $ Exchange Contracts Derivatives $ ( 797 ) $ 741 $ ( $ ( 797 ) $ 741 $ ( 14 ) Hedged ) $ 741 $ ( 14 ) Hedged item 838 ( ( 14 ) Hedged item 838 ( 725 ) 6 Total ) Hedged item 838 ( 725 ) 6 Total amount of item 838 ( 725 ) 6 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 41 $ 16 $ ( 8 of ineffectiveness $ 41 $ 16 $ ( 8 ) Equity 41 $ 16 $ ( 8 ) Equity Contracts Derivatives $ Equity Contracts Derivatives $ ( 76 ) $ ( 107 ) ( 76 ) $ ( 107 ) $ ( 110 ) ( 107 ) $ ( 110 ) Hedged item 76 107 ( 110 ) Hedged item 76 107 110 Total amount of 110 ) Hedged item 76 107 110 Total amount of ineffectiveness ) Hedged item 76 107 110 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded from effectiveness assessment $ ( 10 ) $ 0 $ ( $ ( 10 ) $ 0 $ ( 9 ) Cash ) $ 0 $ ( 9 ) Cash Flow Hedge Gains million ) Year Ended June 30 , 2016 2015 2014 Effective Year Ended June 30 , 2016 2015 2014 Effective Portion Gains Ended June 30 , 2016 2015 2014 Effective Portion Gains recognized June 30 , 2016 2015 2014 Effective Portion Gains recognized in of tax effect of $ 24 , $ 35 and $ of $ 24 , $ 35 and $ 2 ) $ , $ 35 and $ 2 ) $ 351 $ 1,152 and $ 2 ) $ 351 $ 1,152 $ 63 Gains 2 ) $ 351 $ 1,152 $ 63 Gains reclassified from $ 351 $ 1,152 $ 63 Gains reclassified from AOCI into from AOCI into revenue $ 625 $ 608 $ 104 Amount into revenue $ 625 $ 608 $ 104 Amount Excluded from $ 625 $ 608 $ 104 Amount Excluded from Effectiveness Assessment ) , net $ ( 354 ) $ ( 346 ) ( 354 ) $ ( 346 ) $ ( 239 ) ( 346 ) $ ( 239 ) We estimate that $ ) We estimate that $ 319 million of net derivative gain in AOCI a of June 30 , 2016 will be reclassified a of June 30 , 2016 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2016 . Non-Designated Derivative Gains ( million ) Year Ended June 30 , 2016 2015 2014 Foreign Year Ended June 30 , 2016 2015 2014 Foreign exchange contract Ended June 30 , 2016 2015 2014 Foreign exchange contract $ June 30 , 2016 2015 2014 Foreign exchange contract $ ( Foreign exchange contract $ ( 55 ) $ ( 483 ) ( 55 ) $ ( 483 ) $ ( 78 ) ( 483 ) $ ( 78 ) Equity contract ( 21 78 ) Equity contract ( 21 ) ( 19 ) ( contract ( 21 ) ( 19 ) ( 64 ) Interest-rate ) ( 19 ) ( 64 ) Interest-rate contract 10 23 ( 64 ) Interest-rate contract 10 23 24 Credit contract ( 64 ) Interest-rate contract 10 23 24 Credit contract ( 1 ) Interest-rate contract 10 23 24 Credit contract ( 1 ) 23 24 Credit contract ( 1 ) ( 1 ) 13 contract ( 1 ) ( 1 ) 13 Commodity contract ( 1 ) ( 1 ) 13 Commodity contract ( 87 ) ) 13 Commodity contract ( 87 ) ( 223 ) 71 contract ( 87 ) ( 223 ) 71 Total $ ( 87 ) ( 223 ) 71 Total $ ( 154 ) ) 71 Total $ ( 154 ) $ ( 703 ) ( 154 ) $ ( 703 ) $ ( 34 ) ( 703 ) $ ( 34 ) 72 Table of Contents ) $ ( 34 ) 72 Table of Contents PART II of Contents PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Assets ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2016 Assets Mutual fund Fair Value June 30 , 2016 Assets Mutual fund $ 1,012 2016 Assets Mutual fund $ 1,012 $ 0 $ 0 $ Mutual fund $ 1,012 $ 0 $ 0 $ 1,012 $ $ 1,012 $ 0 $ 0 $ 1,012 $ 0 $ $ 0 $ 0 $ 1,012 $ 0 $ 1,012 Commercial $ 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 298 0 0 $ 1,012 Commercial paper 0 298 0 298 0 298 $ 1,012 Commercial paper 0 298 0 298 0 298 Certificates 1,012 Commercial paper 0 298 0 298 0 298 Certificates of Commercial paper 0 298 0 298 0 298 Certificates of deposit paper 0 298 0 298 0 298 Certificates of deposit 0 0 298 0 298 0 298 Certificates of deposit 0 1,000 0 298 Certificates of deposit 0 1,000 0 1,000 0 1,000 298 Certificates of deposit 0 1,000 0 1,000 0 1,000 U.S. Certificates of deposit 0 1,000 0 1,000 0 1,000 U.S. government of deposit 0 1,000 0 1,000 0 1,000 U.S. government and deposit 0 1,000 0 1,000 0 1,000 U.S. government and agency 0 1,000 0 1,000 0 1,000 U.S. government and agency security U.S. government and agency security 86,492 3,707 0 90,199 0 90,199 government and agency security 86,492 3,707 0 90,199 0 90,199 Foreign and agency security 86,492 3,707 0 90,199 0 90,199 Foreign government agency security 86,492 3,707 0 90,199 0 90,199 Foreign government bond security 86,492 3,707 0 90,199 0 90,199 Foreign government bond 10 86,492 3,707 0 90,199 0 90,199 Foreign government bond 10 5,705 0 90,199 Foreign government bond 10 5,705 0 5,715 0 5,715 90,199 Foreign government bond 10 5,705 0 5,715 0 5,715 Mortgage- Foreign government bond 10 5,705 0 5,715 0 5,715 Mortgage- and government bond 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed bond 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed security 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed security 0 5,715 Mortgage- and asset-backed security 0 4,803 0 4,803 0 4,803 Mortgage- and asset-backed security 0 4,803 0 4,803 0 4,803 Corporate and asset-backed security 0 4,803 0 4,803 0 4,803 Corporate note asset-backed security 0 4,803 0 4,803 0 4,803 Corporate note and security 0 4,803 0 4,803 0 4,803 Corporate note and bond 0 4,803 0 4,803 0 4,803 Corporate note and bond 0 4,803 Corporate note and bond 0 6,361 1 6,362 0 6,362 Corporate note and bond 0 6,361 1 6,362 0 6,362 Municipal note and bond 0 6,361 1 6,362 0 6,362 Municipal security and bond 0 6,361 1 6,362 0 6,362 Municipal security 0 bond 0 6,361 1 6,362 0 6,362 Municipal security 0 342 0 6,361 1 6,362 0 6,362 Municipal security 0 342 0 6,362 0 6,362 Municipal security 0 342 0 342 0 342 0 6,362 Municipal security 0 342 0 342 0 342 Common 6,362 Municipal security 0 342 0 342 0 342 Common and Municipal security 0 342 0 342 0 342 Common and preferred security 0 342 0 342 0 342 Common and preferred stock 0 342 0 342 0 342 Common and preferred stock 6,918 342 Common and preferred stock 6,918 2,114 18 9,050 0 9,050 Common and preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives and preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 0 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 0 639 18 9,050 0 9,050 Derivatives 6 633 0 639 ( 401 9,050 0 9,050 Derivatives 6 633 0 639 ( 401 ) 0 9,050 Derivatives 6 633 0 639 ( 401 ) 238 9,050 Derivatives 6 633 0 639 ( 401 ) 238 Total 6 633 0 639 ( 401 ) 238 Total $ 94,438 0 639 ( 401 ) 238 Total $ 94,438 $ 24,963 401 ) 238 Total $ 94,438 $ 24,963 $ 19 $ 238 Total $ 94,438 $ 24,963 $ 19 $ 119,420 $ $ 94,438 $ 24,963 $ 19 $ 119,420 $ ( 401 $ 24,963 $ 19 $ 119,420 $ ( 401 ) $ 19 $ 119,420 $ ( 401 ) $ 119,019 Liabilities Derivatives $ ( 401 ) $ 119,019 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 17 $ 613 $ 0 $ and other $ 17 $ 613 $ 0 $ 630 $ $ 17 $ 613 $ 0 $ 630 $ ( 398 $ 613 $ 0 $ 630 $ ( 398 ) $ 0 $ 630 $ ( 398 ) $ 232 ( In $ ( 398 ) $ 232 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2015 Assets Mutual fund Fair Value June 30 , 2015 Assets Mutual fund $ 1,100 2015 Assets Mutual fund $ 1,100 $ 0 $ 0 $ Mutual fund $ 1,100 $ 0 $ 0 $ 1,100 $ $ 1,100 $ 0 $ 0 $ 1,100 $ 0 $ $ 0 $ 0 $ 1,100 $ 0 $ 1,100 Commercial $ 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 $ 1,100 $ 0 $ 1,100 Commercial paper 0 1 0 0 $ 1,100 Commercial paper 0 1 0 1 0 1 $ 1,100 Commercial paper 0 1 0 1 0 1 Certificates 1,100 Commercial paper 0 1 0 1 0 1 Certificates of Commercial paper 0 1 0 1 0 1 Certificates of deposit paper 0 1 0 1 0 1 Certificates of deposit 0 0 1 0 1 0 1 Certificates of deposit 0 906 0 1 Certificates of deposit 0 906 0 906 0 906 1 Certificates of deposit 0 906 0 906 0 906 U.S. Certificates of deposit 0 906 0 906 0 906 U.S. government of deposit 0 906 0 906 0 906 U.S. government and deposit 0 906 0 906 0 906 U.S. government and agency 0 906 0 906 0 906 U.S. government and agency security U.S. government and agency security 71,930 955 0 72,885 0 72,885 government and agency security 71,930 955 0 72,885 0 72,885 Foreign and agency security 71,930 955 0 72,885 0 72,885 Foreign government agency security 71,930 955 0 72,885 0 72,885 Foreign government bond security 71,930 955 0 72,885 0 72,885 Foreign government bond 131 71,930 955 0 72,885 0 72,885 Foreign government bond 131 5,299 0 72,885 Foreign government bond 131 5,299 0 5,430 0 5,430 72,885 Foreign government bond 131 5,299 0 5,430 0 5,430 Mortgage- Foreign government bond 131 5,299 0 5,430 0 5,430 Mortgage- and government bond 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed bond 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed security 131 5,299 0 5,430 0 5,430 Mortgage- and asset-backed security 0 5,430 Mortgage- and asset-backed security 0 4,917 0 4,917 0 4,917 Mortgage- and asset-backed security 0 4,917 0 4,917 0 4,917 Corporate and asset-backed security 0 4,917 0 4,917 0 4,917 Corporate note asset-backed security 0 4,917 0 4,917 0 4,917 Corporate note and security 0 4,917 0 4,917 0 4,917 Corporate note and bond 0 4,917 0 4,917 0 4,917 Corporate note and bond 0 4,917 Corporate note and bond 0 7,108 1 7,109 0 7,109 Corporate note and bond 0 7,108 1 7,109 0 7,109 Municipal note and bond 0 7,108 1 7,109 0 7,109 Municipal security and bond 0 7,108 1 7,109 0 7,109 Municipal security 0 bond 0 7,108 1 7,109 0 7,109 Municipal security 0 319 0 7,108 1 7,109 0 7,109 Municipal security 0 319 0 7,109 0 7,109 Municipal security 0 319 0 319 0 319 0 7,109 Municipal security 0 319 0 319 0 319 Common 7,109 Municipal security 0 319 0 319 0 319 Common and Municipal security 0 319 0 319 0 319 Common and preferred security 0 319 0 319 0 319 Common and preferred stock 0 319 0 319 0 319 Common and preferred stock 8,585 319 Common and preferred stock 8,585 2,277 14 10,876 0 10,876 Common and preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives and preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 preferred stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 stock 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 5 8,585 2,277 14 10,876 0 10,876 Derivatives 4 979 5 988 14 10,876 0 10,876 Derivatives 4 979 5 988 ( 162 10,876 0 10,876 Derivatives 4 979 5 988 ( 162 ) 0 10,876 Derivatives 4 979 5 988 ( 162 ) 826 10,876 Derivatives 4 979 5 988 ( 162 ) 826 Total 4 979 5 988 ( 162 ) 826 Total $ 81,750 5 988 ( 162 ) 826 Total $ 81,750 $ 22,761 162 ) 826 Total $ 81,750 $ 22,761 $ 20 $ 826 Total $ 81,750 $ 22,761 $ 20 $ 104,531 $ $ 81,750 $ 22,761 $ 20 $ 104,531 $ ( 162 $ 22,761 $ 20 $ 104,531 $ ( 162 ) $ 20 $ 104,531 $ ( 162 ) $ 104,369 Liabilities Derivatives $ ( 162 ) $ 104,369 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 5 $ 159 $ 54 $ and other $ 5 $ 159 $ 54 $ 218 $ $ 5 $ 159 $ 54 $ 218 $ ( 161 $ 159 $ 54 $ 218 $ ( 161 ) $ 54 $ 218 $ ( 161 ) $ 57 ( a $ ( 161 ) $ 57 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 73 Table of Contents PART II of Contents PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2016 2015 Net fair million ) June 30 , 2016 2015 Net fair value of ) June 30 , 2016 2015 Net fair value of asset on a recurring basis $ 119,019 $ 104,369 Cash 3,501 3,679 recurring basis $ 119,019 $ 104,369 Cash 3,501 3,679 Common and $ 119,019 $ 104,369 Cash 3,501 3,679 Common and preferred stock 119,019 $ 104,369 Cash 3,501 3,679 Common and preferred stock measured value on a nonrecurring basis 767 561 Other investment measured at on a nonrecurring basis 767 561 Other investment measured at fair value on a nonrecurring basis 593 589 Less derivative net asset on a nonrecurring basis 593 589 Less derivative net asset classified a other current asset ( 246 ) ( 648 ) Other asset ( 246 ) ( 648 ) Other 12 4 Recorded ) ( 648 ) Other 12 4 Recorded basis of investment ( 648 ) Other 12 4 Recorded basis of investment component basis of investment component $ 123,646 $ 108,554 Financial Assets and investment component $ 123,646 $ 108,554 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2016 and 2015 , we did During fiscal year 2016 and 2015 , we did not record a nonrecurring basis . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2016 2015 Raw material million ) June 30 , 2016 2015 Raw material $ 612 ) June 30 , 2016 2015 Raw material $ 612 $ 2016 2015 Raw material $ 612 $ 1,100 Work in process Raw material $ 612 $ 1,100 Work in process 158 202 $ 1,100 Work in process 158 202 Finished good 1,481 1,600 1,100 Work in process 158 202 Finished good 1,481 1,600 Total process 158 202 Finished good 1,481 1,600 Total $ 2,251 $ 158 202 Finished good 1,481 1,600 Total $ 2,251 $ 2,902 good 1,481 1,600 Total $ 2,251 $ 2,902 NOTE 8 — 1,600 Total $ 2,251 $ 2,902 NOTE 8 — PROPERTY AND $ 2,251 $ 2,902 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2016 2015 Land $ million ) June 30 , 2016 2015 Land $ 824 $ ) June 30 , 2016 2015 Land $ 824 $ 769 , 2016 2015 Land $ 824 $ 769 Buildings and improvement 2015 Land $ 824 $ 769 Buildings and improvement 12,393 10,800 $ 769 Buildings and improvement 12,393 10,800 Leasehold improvement 3,659 3,577 769 Buildings and improvement 12,393 10,800 Leasehold improvement 3,659 3,577 Computer improvement 12,393 10,800 Leasehold improvement 3,659 3,577 Computer equipment and software 12,393 10,800 Leasehold improvement 3,659 3,577 Computer equipment and software 17,391 3,577 Computer equipment and software 17,391 13,612 Furniture and equipment 3,889 Computer equipment and software 17,391 13,612 Furniture and equipment 3,889 3,579 17,391 13,612 Furniture and equipment 3,889 3,579 Total , at cost 13,612 Furniture and equipment 3,889 3,579 Total , at cost 38,156 3,579 Total , at cost 38,156 32,337 Accumulated depreciation ( 19,800 Total , at cost 38,156 32,337 Accumulated depreciation ( 19,800 ) 38,156 32,337 Accumulated depreciation ( 19,800 ) ( 17,606 ) Total depreciation ( 19,800 ) ( 17,606 ) Total , net $ ) Total , net $ 18,356 $ 14,731 During fiscal year , net $ 18,356 $ 14,731 During fiscal year 2016 , $ 14,731 During fiscal year 2016 , 2015 , and 2014 During fiscal year 2016 , 2015 , and 2014 , depreciation 2016 , 2015 , and 2014 , depreciation expense wa $ , depreciation expense wa $ 4.9 billion , $ 4.1 billion $ 4.9 billion , $ 4.1 billion , and $ 3.4 4.1 billion , and $ 3.4 billion , respectively . 74 3.4 billion , respectively . 74 Table of Contents PART II of Contents PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS Mojang Synergies Mojang Synergies AB On November 6 , 2014 , we acquired AB On November 6 , 2014 , we acquired Mojang Synergies gaming franchise , for $ 2.5 billion in cash , net price were goodwill of $ 1.8 billion and identifiable intangible asset identifiable intangible asset of $ 928 million , primarily marketing-related ( total weighted-average amortization period of 6.3 year . Mojang ha been and Services Business On April 25 , 2014 , we acquired Business On April 25 , 2014 , we acquired substantially all total purchase price of $ 9.4 billion , including cash acquired including cash acquired of $ 1.5 billion ( the “ Acquisition primarily of cash of $ 7.1 billion and Nokia ’ s of convertible note of $ 2.1 billion , which wa a and liability assumed of $ 0.2 billion . The Acquisition wa wa completed a of March 31 , 2015 . The major a of March 31 , 2015 . The major class of In million ) Cash $ 1,506 Accounts receivable ( a ) Accounts receivable ( a ) 754 Inventories 544 Other current asset ( a ) 754 Inventories 544 Other current asset 936 Property Inventories 544 Other current asset 936 Property and equipment 981 Intangible asset 936 Property and equipment 981 Intangible asset 4,509 Goodwill ( and equipment 981 Intangible asset 4,509 Goodwill ( b ) 5,456 4,509 Goodwill ( b ) 5,456 Other 221 Current liability ( ( b ) 5,456 Other 221 Current liability ( 4,575 ) Other 221 Current liability ( 4,575 ) Long-term liability ( 890 4,575 ) Long-term liability ( 890 ) Total purchase price $ ) Total purchase price $ 9,442 ( a ) Gross account Gross account receivable wa $ 901 million , of which $ million , of which $ 147 million wa expected to be Weighted Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 Average Life Technology-based $ 2,493 9 year Contract-based 1,500 9 year $ 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 2,493 9 year Contract-based 1,500 9 year Customer-related 359 3 year Contract-based 1,500 9 year Customer-related 359 3 year Marketing-related ( trade 1,500 9 year Customer-related 359 3 year Marketing-related ( trade name Marketing-related ( trade name ) 157 2 year Fair value of ( trade name ) 157 2 year Fair value of intangible of intangible asset acquired $ 4,509 8 year 75 Table of intangible asset acquired $ 4,509 8 year 75 Table of Contents acquired $ 4,509 8 year 75 Table of Contents PART II of Contents PART II Item 8 During the fourth quarter of fourth quarter of fiscal year 2016 , we recorded $ 630 2016 , we recorded $ 630 million of intangible and fixed fourth quarter of fiscal year 2015 , we recorded $ 7.5 2015 , we recorded $ 7.5 billion of goodwill and asset income statement . See Note 10 – Goodwill and Note 11 10 – Goodwill and Note 11 – Intangible Assets for additional additional detail . In May 2016 , we announced an agreement feature phone asset for $ 350 million . The transaction is second half of calendar year 2016 , subject to regulatory approval income statement for fiscal year 2014 included revenue and operating loss and operating loss of $ 2.0 billion and $ 692 million $ 2.0 billion and $ 692 million , respectively , attributable had been consummated on July 1 , 2012 : ( In consummated on July 1 , 2012 : ( In million , amount ) Year Ended June 30 , 2014 Revenue $ 96,248 Year Ended June 30 , 2014 Revenue $ 96,248 Net income 30 , 2014 Revenue $ 96,248 Net income $ 20,234 Diluted $ 96,248 Net income $ 20,234 Diluted earnings per share $ Diluted earnings per share $ 2.41 These pro forma result were fourth quarter of fiscal year 2014 , we incurred $ 21 2014 , we incurred $ 21 million of acquisition cost associated income statement for fiscal year 2014 . Certain concurrent transaction were . Other During fiscal year 2016 , we completed 17 acquisition year 2016 , we completed 17 acquisition for total cash consideration total cash consideration of $ 1.4 billion . These entity have consolidated result of operation . 76 Table of Contents PART II of Contents PART II Item 8 NOTE 10 — GOODWILL Changes PART II Item 8 NOTE 10 — GOODWILL Changes in the ( In million ) June 30 , 2014 Acquisitions Other June million ) June 30 , 2014 Acquisitions Other June 30 , , 2014 Acquisitions Other June 30 , 2015 Acquisitions Other June Acquisitions Other June 30 , 2015 Acquisitions Other June 30 , , 2015 Acquisitions Other June 30 , 2016 Productivity and Business Acquisitions Other June 30 , 2016 Productivity and Business Processes $ Productivity and Business Processes $ 6,116 $ 376 $ ( 183 Business Processes $ 6,116 $ 376 $ ( 183 ) $ 6,116 $ 376 $ ( 183 ) $ 6,309 $ 443 $ ( 183 ) $ 6,309 $ 443 $ ( 74 183 ) $ 6,309 $ 443 $ ( 74 ) $ 6,309 $ 443 $ ( 74 ) $ 6,678 Intelligent Cloud $ ( 74 ) $ 6,678 Intelligent Cloud 4,631 291 ( ) $ 6,678 Intelligent Cloud 4,631 291 ( 5 ) 4,917 $ 6,678 Intelligent Cloud 4,631 291 ( 5 ) 4,917 549 Intelligent Cloud 4,631 291 ( 5 ) 4,917 549 1 5,467 4,631 291 ( 5 ) 4,917 549 1 5,467 More Personal 291 ( 5 ) 4,917 549 1 5,467 More Personal Computing ( 5 ) 4,917 549 1 5,467 More Personal Computing 9,380 5 ) 4,917 549 1 5,467 More Personal Computing 9,380 1,788 1 5,467 More Personal Computing 9,380 1,788 ( 5,455 ) 5,713 5,467 More Personal Computing 9,380 1,788 ( 5,455 ) 5,713 100 Personal Computing 9,380 1,788 ( 5,455 ) 5,713 100 ( 86 9,380 1,788 ( 5,455 ) 5,713 100 ( 86 ) 5,727 1,788 ( 5,455 ) 5,713 100 ( 86 ) 5,727 Total 5,455 ) 5,713 100 ( 86 ) 5,727 Total goodwill $ 5,713 100 ( 86 ) 5,727 Total goodwill $ 20,127 $ ) 5,727 Total goodwill $ 20,127 $ 2,455 $ ( 5,643 Total goodwill $ 20,127 $ 2,455 $ ( 5,643 ) $ 20,127 $ 2,455 $ ( 5,643 ) $ 16,939 $ 1,092 $ ( 5,643 ) $ 16,939 $ 1,092 $ ( 159 5,643 ) $ 16,939 $ 1,092 $ ( 159 ) $ 16,939 $ 1,092 $ ( 159 ) $ 17,872 The measurement $ ( 159 ) $ 17,872 The measurement period for the , but do not exceed 12 month . Adjustments in purchase applicable . For fiscal year 2015 , a $ 5.1 billion year 2015 , a $ 5.1 billion goodwill impairment charge wa ) by segment in Note 21 – Segment Information and Geographic impairment a of both June 30 , 2016 and 2015 wa of both June 30 , 2016 and 2015 wa $ 11.3 June 30 , 2016 and 2015 wa $ 11.3 billion . 2016 and 2015 wa $ 11.3 billion . As discussed in . As discussed in Note 21 – Segment Information and Geographic first quarter of fiscal year 2016 our chief operating decision maker for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2016 test . Upon in our May 1 , 2016 test . Upon completion of annual testing a of May 1 , 2015 , our previous a of May 1 , 2015 , our previous Phone Hardware second half of fiscal year 2015 , Phone Hardware did not impairment test ( “ Step 2 ” ) wa performed specific Phone Hardware . Under Step 2 , the fair value of asset , existing technology , 77 Table of Contents PART II of Contents PART II Item 8 patent agreement , and contractual were identified in our May 1 , 2015 test . NOTE in our May 1 , 2015 test . NOTE 11 — , 2015 test . NOTE 11 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2016 2015 Technology-based ( Carrying Amount June 30 , 2016 2015 Technology-based ( a ) Amount June 30 , 2016 2015 Technology-based ( a ) $ Technology-based ( a ) $ 5,970 $ ( 3,648 ) $ ) $ 5,970 $ ( 3,648 ) $ 2,322 $ 5,926 $ ( 3,648 ) $ 2,322 $ 5,926 $ ( 3,149 3,648 ) $ 2,322 $ 5,926 $ ( 3,149 ) $ 2,322 $ 5,926 $ ( 3,149 ) $ 2,777 Marketing-related 1,869 $ ( 3,149 ) $ 2,777 Marketing-related 1,869 ( 616 ) 3,149 ) $ 2,777 Marketing-related 1,869 ( 616 ) 1,253 1,942 $ 2,777 Marketing-related 1,869 ( 616 ) 1,253 1,942 ( 508 Marketing-related 1,869 ( 616 ) 1,253 1,942 ( 508 ) 1,434 1,869 ( 616 ) 1,253 1,942 ( 508 ) 1,434 Contract-based 616 ) 1,253 1,942 ( 508 ) 1,434 Contract-based 796 ( 1,253 1,942 ( 508 ) 1,434 Contract-based 796 ( 718 ) ( 508 ) 1,434 Contract-based 796 ( 718 ) 78 1,192 ) 1,434 Contract-based 796 ( 718 ) 78 1,192 ( 710 Contract-based 796 ( 718 ) 78 1,192 ( 710 ) 482 796 ( 718 ) 78 1,192 ( 710 ) 482 Customer-related 718 ) 78 1,192 ( 710 ) 482 Customer-related 465 ( 78 1,192 ( 710 ) 482 Customer-related 465 ( 385 ) ( 710 ) 482 Customer-related 465 ( 385 ) 80 492 ) 482 Customer-related 465 ( 385 ) 80 492 ( 350 Customer-related 465 ( 385 ) 80 492 ( 350 ) 142 465 ( 385 ) 80 492 ( 350 ) 142 Total 385 ) 80 492 ( 350 ) 142 Total $ 9,100 80 492 ( 350 ) 142 Total $ 9,100 $ ( 350 ) 142 Total $ 9,100 $ ( 5,367 ) $ Total $ 9,100 $ ( 5,367 ) $ 3,733 $ 9,552 $ ( 5,367 ) $ 3,733 $ 9,552 $ ( 4,717 5,367 ) $ 3,733 $ 9,552 $ ( 4,717 ) $ 3,733 $ 9,552 $ ( 4,717 ) $ 4,835 ( a $ ( 4,717 ) $ 4,835 ( a ) Technology-based intangible Technology-based intangible asset included $ 115 million and $ 116 million $ 115 million and $ 116 million a of June 30 116 million a of June 30 , 2016 and 2015 , a of June 30 , 2016 and 2015 , respectively , June 30 , 2016 and 2015 , respectively , of net third quarter of fiscal year 2016 , we corrected our intangible table above for a $ 585 million misstatement between gross carrying accumulated amortization a of June 30 , 2015 . We do a of June 30 , 2015 . We do not consider statement . During fiscal year 2016 , we recorded impairment charge recorded impairment charge of $ 480 million related to intangible asset fourth quarter of fiscal year 2016 , we tested these intangible impairment . During fiscal year 2015 , we recorded impairment charge recorded impairment charge of $ 2.2 billion related to intangible asset fourth quarter of fiscal year 2015 , we tested these intangible ) by segment in Note 21 – Segment Information and Geographic to our intangible asset . 78 Table of Contents PART II of Contents PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2016 2015 Technology-based $ Year Ended June 30 , 2016 2015 Technology-based $ 361 4 Ended June 30 , 2016 2015 Technology-based $ 361 4 year , 2016 2015 Technology-based $ 361 4 year $ 874 5 2016 2015 Technology-based $ 361 4 year $ 874 5 year $ 361 4 year $ 874 5 year Marketing-related 2 1 361 4 year $ 874 5 year Marketing-related 2 1 year $ 874 5 year Marketing-related 2 1 year 543 8 year 874 5 year Marketing-related 2 1 year 543 8 year Customer-related year Marketing-related 2 1 year 543 8 year Customer-related 30 3 Marketing-related 2 1 year 543 8 year Customer-related 30 3 year year 543 8 year Customer-related 30 3 year 37 4 year 543 8 year Customer-related 30 3 year 37 4 year Total year Customer-related 30 3 year 37 4 year Total $ 393 Customer-related 30 3 year 37 4 year Total $ 393 4 37 4 year Total $ 393 4 year $ 1,454 6 4 year Total $ 393 4 year $ 1,454 6 year $ 393 4 year $ 1,454 6 year Intangible asset amortization 393 4 year $ 1,454 6 year Intangible asset amortization expense asset amortization expense wa $ 978 million , $ 1.3 billion $ 978 million , $ 1.3 billion , and $ 845 1.3 billion , and $ 845 million for fiscal year 2016 845 million for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . Amortization of of capitalized software wa $ 69 million , $ 79 million $ 69 million , $ 79 million , and $ 200 79 million , and $ 200 million for fiscal year 2016 200 million for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . The following asset held a of June 30 , 2016 : ( In a of June 30 , 2016 : ( In million ) million ) Year Ending June 30 , 2017 $ 787 2018 Year Ending June 30 , 2017 $ 787 2018 677 2019 June 30 , 2017 $ 787 2018 677 2019 526 2020 30 , 2017 $ 787 2018 677 2019 526 2020 448 , 2017 $ 787 2018 677 2019 526 2020 448 2021 2017 $ 787 2018 677 2019 526 2020 448 2021 379 $ 787 2018 677 2019 526 2020 448 2021 379 Thereafter 787 2018 677 2019 526 2020 448 2021 379 Thereafter 916 2018 677 2019 526 2020 448 2021 379 Thereafter 916 Total 677 2019 526 2020 448 2021 379 Thereafter 916 Total $ 2019 526 2020 448 2021 379 Thereafter 916 Total $ 3,733 2020 448 2021 379 Thereafter 916 Total $ 3,733 NOTE 12 379 Thereafter 916 Total $ 3,733 NOTE 12 — DEBT Short-term 916 Total $ 3,733 NOTE 12 — DEBT Short-term Debt As Short-term Debt As of June 30 , 2016 , we had As of June 30 , 2016 , we had $ 12.9 2016 , we had $ 12.9 billion of commercial paper issued a weighted-average interest rate of 0.43 % and maturity ranging from % and maturity ranging from 1 day to 99 day . ranging from 1 day to 99 day . As of June day . As of June 30 , 2015 , we had As of June 30 , 2015 , we had $ 5.0 2015 , we had $ 5.0 billion of commercial paper issued a weighted-average interest rate of 0.11 % and maturity ranging from % and maturity ranging from 8 day to 63 day . ranging from 8 day to 63 day . The estimated fair . We have two $ 5.0 billion credit facility that expire facility that expire on November 1 , 2016 and November 14 expire on November 1 , 2016 and November 14 , 2018 1 , 2016 and November 14 , 2018 , respectively . 2016 and November 14 , 2018 , respectively . These credit program . As of June 30 , 2016 , we were As of June 30 , 2016 , we were in compliance Long-term Debt As of June 30 , 2016 , the total As of June 30 , 2016 , the total carrying value our long-term debt were $ 40.8 billion and $ 44.0 billion $ 40.8 billion and $ 44.0 billion , respectively . This current portion , of $ 30.3 billion and $ 30.5 billion $ 30.3 billion and $ 30.5 billion , respectively , a respectively , a of June 30 , 2015 . These estimated a of June 30 , 2015 . These estimated fair value value are based on Level 2 input . 79 Table of on Level 2 input . 79 Table of Contents PART II of Contents PART II Item 8 The component of our long-term a follows a of June 30 , 2016 and 2015 : a of June 30 , 2016 and 2015 : Due Date June 30 , 2016 and 2015 : Due Date Face Value Due Date Face Value June 30 , 2016 Face Value June Face Value June 30 , 2016 Face Value June 30 , , 2016 Face Value June 30 , 2015 Stated Interest Rate Face Value June 30 , 2015 Stated Interest Rate Effective Interest In million ) Notes September 25 , 2015 $ * $ ) Notes September 25 , 2015 $ * $ 1,750 1.625 , 2015 $ * $ 1,750 1.625 % 1.795 % February 2015 $ * $ 1,750 1.625 % 1.795 % February 8 * $ 1,750 1.625 % 1.795 % February 8 , 2016 1.625 % 1.795 % February 8 , 2016 * 750 2.500 1.795 % February 8 , 2016 * 750 2.500 % 2.642 February 8 , 2016 * 750 2.500 % 2.642 % November 8 , 2016 * 750 2.500 % 2.642 % November 15 2016 * 750 2.500 % 2.642 % November 15 , 2017 2.500 % 2.642 % November 15 , 2017 600 600 0.875 2.642 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % November 15 , 2017 600 600 0.875 % 1.084 % May 15 , 2017 600 600 0.875 % 1.084 % May 1 2017 600 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 450 450 1.000 1.084 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % November 1 , 2018 450 450 1.000 % 1.106 % November 3 2018 450 450 1.000 % 1.106 % November 3 , 2018 1.000 % 1.106 % November 3 , 2018 ( a ) 1.106 % November 3 , 2018 ( a ) 1,750 * , 2018 ( a ) 1,750 * 1.300 % 1.396 % ( a ) 1,750 * 1.300 % 1.396 % December 6 ) 1,750 * 1.300 % 1.396 % December 6 , 2018 1.300 % 1.396 % December 6 , 2018 1,250 1,250 1.625 1.396 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % June 6 , 2018 1,250 1,250 1.625 % 1.824 % June 1 2018 1,250 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 1,000 4.200 1.824 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % February 1 , 2019 1,000 1,000 4.200 % 4.379 % February 12 2019 1,000 1,000 4.200 % 4.379 % February 12 , 2020 4.200 % 4.379 % February 12 , 2020 1,500 1,500 1.850 4.379 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % October 12 , 2020 1,500 1,500 1.850 % 1.935 % October 1 2020 1,500 1,500 1.850 % 1.935 % October 1 , 2020 1.850 % 1.935 % October 1 , 2020 1,000 1,000 3.000 1.935 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % November 1 , 2020 1,000 1,000 3.000 % 3.137 % November 3 2020 1,000 1,000 3.000 % 3.137 % November 3 , 2020 3.000 % 3.137 % November 3 , 2020 ( a ) 3.137 % November 3 , 2020 ( a ) 2,250 * , 2020 ( a ) 2,250 * 2.000 % 2.093 % ( a ) 2,250 * 2.000 % 2.093 % February 8 ) 2,250 * 2.000 % 2.093 % February 8 , 2021 2.000 % 2.093 % February 8 , 2021 500 500 4.000 2.093 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % December 8 , 2021 500 500 4.000 % 4.082 % December 6 2021 500 500 4.000 % 4.082 % December 6 , 2021 4.000 % 4.082 % December 6 , 2021 ( b ) 4.082 % December 6 , 2021 ( b ) 1,944 1,950 , 2021 ( b ) 1,944 1,950 2.125 % 2.233 % 2021 ( b ) 1,944 1,950 2.125 % 2.233 % February ( b ) 1,944 1,950 2.125 % 2.233 % February 12 ) 1,944 1,950 2.125 % 2.233 % February 12 , 2022 2.125 % 2.233 % February 12 , 2022 1,500 1,500 2.375 2.233 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % November 12 , 2022 1,500 1,500 2.375 % 2.466 % November 3 2022 1,500 1,500 2.375 % 2.466 % November 3 , 2022 2.375 % 2.466 % November 3 , 2022 ( a ) 2.466 % November 3 , 2022 ( a ) 1,000 * , 2022 ( a ) 1,000 * 2.650 % 2.717 % ( a ) 1,000 * 2.650 % 2.717 % November 15 ) 1,000 * 2.650 % 2.717 % November 15 , 2022 2.650 % 2.717 % November 15 , 2022 750 750 2.125 2.717 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % December 1 , 2023 1,000 1,000 2.375 % 2.465 % December 15 2023 1,000 1,000 2.375 % 2.465 % December 15 , 2023 2.375 % 2.465 % December 15 , 2023 1,500 1,500 3.625 2.465 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % February 15 , 2023 1,500 1,500 3.625 % 3.726 % February 12 2023 1,500 1,500 3.625 % 3.726 % February 12 , 2025 3.625 % 3.726 % February 12 , 2025 2,250 2,250 2.700 3.726 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % November 12 , 2025 2,250 2,250 2.700 % 2.772 % November 3 2025 2,250 2,250 2.700 % 2.772 % November 3 , 2025 2.700 % 2.772 % November 3 , 2025 ( a ) 2.772 % November 3 , 2025 ( a ) 3,000 * , 2025 ( a ) 3,000 * 3.125 % 3.176 % ( a ) 3,000 * 3.125 % 3.176 % December 6 ) 3,000 * 3.125 % 3.176 % December 6 , 2028 3.125 % 3.176 % December 6 , 2028 ( b ) 3.176 % December 6 , 2028 ( b ) 1,944 1,950 , 2028 ( b ) 1,944 1,950 3.125 % 3.218 % 2028 ( b ) 1,944 1,950 3.125 % 3.218 % May ( b ) 1,944 1,950 3.125 % 3.218 % May 2 ) 1,944 1,950 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( b ) 3.218 % May 2 , 2033 ( b ) 611 613 , 2033 ( b ) 611 613 2.625 % 2.690 % 2033 ( b ) 611 613 2.625 % 2.690 % February ( b ) 611 613 2.625 % 2.690 % February 12 ) 611 613 2.625 % 2.690 % February 12 , 2035 2.625 % 2.690 % February 12 , 2035 1,500 1,500 3.500 2.690 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % November 12 , 2035 1,500 1,500 3.500 % 3.604 % November 3 2035 1,500 1,500 3.500 % 3.604 % November 3 , 2035 3.500 % 3.604 % November 3 , 2035 ( a ) 3.604 % November 3 , 2035 ( a ) 1,000 * , 2035 ( a ) 1,000 * 4.200 % 4.260 % ( a ) 1,000 * 4.200 % 4.260 % June 1 ) 1,000 * 4.200 % 4.260 % June 1 , 2039 4.200 % 4.260 % June 1 , 2039 750 750 5.200 4.260 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 500 500 4.875 3.829 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % February 15 , 2043 500 500 4.875 % 4.918 % February 12 2043 500 500 4.875 % 4.918 % February 12 , 2045 4.875 % 4.918 % February 12 , 2045 1,750 1,750 3.750 4.918 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % November 12 , 2045 1,750 1,750 3.750 % 3.800 % November 3 2045 1,750 1,750 3.750 % 3.800 % November 3 , 2045 3.750 % 3.800 % November 3 , 2045 ( a ) 3.800 % November 3 , 2045 ( a ) 3,000 * , 2045 ( a ) 3,000 * 4.450 % 4.492 % ( a ) 3,000 * 4.450 % 4.492 % February 12 ) 3,000 * 4.450 % 4.492 % February 12 , 2055 4.450 % 4.492 % February 12 , 2055 2,250 2,250 4.000 4.492 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % November 12 , 2055 2,250 2,250 4.000 % 4.063 % November 3 2055 2,250 2,250 4.000 % 4.063 % November 3 , 2055 4.000 % 4.063 % November 3 , 2055 ( a ) 4.063 % November 3 , 2055 ( a ) 1,000 * , 2055 ( a ) 1,000 * 4.750 % 4.782 % ( a ) 1,000 * 4.750 % 4.782 % Total $ ) 1,000 * 4.750 % 4.782 % Total $ 40,949 $ % 4.782 % Total $ 40,949 $ 30,463 ( a ) % Total $ 40,949 $ 30,463 ( a ) In November ( a ) In November 2015 , we issued $ 13.0 2015 , we issued $ 13.0 billion of debt security . our debt for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 wa $ 2016 , 2015 , and 2014 wa $ 1.1 billion , , and 2014 wa $ 1.1 billion , $ 620 million $ 1.1 billion , $ 620 million , and $ 509 620 million , and $ 509 million , respectively . As respectively . As of June 30 , 2016 and 2015 , As of June 30 , 2016 and 2015 , the aggregate June 30 , 2016 and 2015 , the aggregate unamortized discount current portion , wa $ 166 million and $ 156 million $ 166 million and $ 156 million , respectively . 80 156 million , respectively . 80 Table of Contents PART II of Contents PART II Item 8 Maturities of our long-term debt million ) Year Ending June 30 , 2017 $ 0 2018 Year Ending June 30 , 2017 $ 0 2018 1,050 2019 June 30 , 2017 $ 0 2018 1,050 2019 4,000 2020 30 , 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 , 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 2017 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 $ 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 0 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 2018 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 Total 1,050 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 Total $ 2019 4,000 2020 1,500 2021 3,750 Thereafter 30,649 Total $ 40,949 2020 1,500 2021 3,750 Thereafter 30,649 Total $ 40,949 NOTE 13 3,750 Thereafter 30,649 Total $ 40,949 NOTE 13 — INCOME TAXES 30,649 Total $ 40,949 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2016 2015 2014 Current Year Ended June 30 , 2016 2015 2014 Current Taxes U.S. Ended June 30 , 2016 2015 2014 Current Taxes U.S. federal June 30 , 2016 2015 2014 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 545 $ 3,661 $ 3,738 U.S. U.S. federal $ 545 $ 3,661 $ 3,738 U.S. state and $ 545 $ 3,661 $ 3,738 U.S. state and local 136 3,738 U.S. state and local 136 364 266 Foreign 1,940 2,065 U.S. state and local 136 364 266 Foreign 1,940 2,065 2,073 state and local 136 364 266 Foreign 1,940 2,065 2,073 Current local 136 364 266 Foreign 1,940 2,065 2,073 Current tax 2,621 136 364 266 Foreign 1,940 2,065 2,073 Current tax 2,621 6,090 364 266 Foreign 1,940 2,065 2,073 Current tax 2,621 6,090 6,077 1,940 2,065 2,073 Current tax 2,621 6,090 6,077 Deferred Taxes Deferred 2,065 2,073 Current tax 2,621 6,090 6,077 Deferred Taxes Deferred tax 2,073 Current tax 2,621 6,090 6,077 Deferred Taxes Deferred tax 332 6,077 Deferred Taxes Deferred tax 332 224 ( 331 ) Provision Deferred Taxes Deferred tax 332 224 ( 331 ) Provision for Deferred tax 332 224 ( 331 ) Provision for income tax Provision for income tax $ 2,953 $ 6,314 $ 5,746 U.S. income tax $ 2,953 $ 6,314 $ 5,746 U.S. and foreign $ 2,953 $ 6,314 $ 5,746 U.S. and foreign component of million ) Year Ended June 30 , 2016 2015 2014 U.S. Year Ended June 30 , 2016 2015 2014 U.S. $ ( Ended June 30 , 2016 2015 2014 U.S. $ ( 325 June 30 , 2016 2015 2014 U.S. $ ( 325 ) 2015 2014 U.S. $ ( 325 ) $ 7,363 $ 7,127 $ ( 325 ) $ 7,363 $ 7,127 Foreign 20,076 11,144 325 ) $ 7,363 $ 7,127 Foreign 20,076 11,144 20,693 Income $ 7,363 $ 7,127 Foreign 20,076 11,144 20,693 Income before income 7,363 $ 7,127 Foreign 20,076 11,144 20,693 Income before income tax $ 7,127 Foreign 20,076 11,144 20,693 Income before income tax $ Income before income tax $ 19,751 $ 18,507 $ 27,820 In income tax $ 19,751 $ 18,507 $ 27,820 In fiscal year $ 19,751 $ 18,507 $ 27,820 In fiscal year 2016 , $ 27,820 In fiscal year 2016 , income before income tax to the sale of Windows 10 of $ 6.0 billion and of Windows 10 of $ 6.0 billion and $ 588 million $ 6.0 billion and $ 588 million , respectively . In respectively . In fiscal year 2015 , income before income tax our phone business of $ 1.1 billion and $ 8.9 billion $ 1.1 billion and $ 8.9 billion , respectively . The follows : Year Ended June 30 , 2016 2015 2014 Federal Year Ended June 30 , 2016 2015 2014 Federal statutory rate Ended June 30 , 2016 2015 2014 Federal statutory rate 35.0 June 30 , 2016 2015 2014 Federal statutory rate 35.0 % 2015 2014 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 19.4 ) % ( 20.9 ) ( 19.4 ) % ( 20.9 ) % ( 17.1 ) ( 20.9 ) % ( 17.1 ) % Phone nondeductible charge nondeductible charge and valuation allowance 1.3 % 19.1 % 0.9 % and valuation allowance 1.3 % 19.1 % 0.9 % Domestic production allowance 1.3 % 19.1 % 0.9 % Domestic production activity deduction Domestic production activity deduction ( 0.6 ) % ( 2.4 ) ( 0.6 ) % ( 2.4 ) % ( 1.0 ) ( 2.4 ) % ( 1.0 ) % Excess tax benefit relating to stock-based compensation ( 2.0 ) % 0 % 0 compensation ( 2.0 ) % 0 % 0 % Other reconciling 2.0 ) % 0 % 0 % Other reconciling item , Other reconciling item , net 0.7 % 3.3 % 2.9 % item , net 0.7 % 3.3 % 2.9 % Effective rate net 0.7 % 3.3 % 2.9 % Effective rate 15.0 % % 2.9 % Effective rate 15.0 % 34.1 % 20.7 % % Effective rate 15.0 % 34.1 % 20.7 % 81 Table rate 15.0 % 34.1 % 20.7 % 81 Table of Contents % 34.1 % 20.7 % 81 Table of Contents PART II of Contents PART II Item 8 The reduction from the federal the U.S. rate , generated 69 % , 73 % , , generated 69 % , 73 % , and 81 % , 73 % , and 81 % of our foreign income before tax in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . In general credit . In fiscal year 2016 , 2015 , and 2014 In fiscal year 2016 , 2015 , and 2014 , there 2016 , 2015 , and 2014 , there were no individually tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the ( In million ) June 30 , 2016 2015 Deferred Income million ) June 30 , 2016 2015 Deferred Income Tax Assets ) June 30 , 2016 2015 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 809 $ 884 Other expense item compensation expense $ 809 $ 884 Other expense item 1,609 1,531 $ 884 Other expense item 1,609 1,531 Restructuring charge 284 211 884 Other expense item 1,609 1,531 Restructuring charge 284 211 Unearned item 1,609 1,531 Restructuring charge 284 211 Unearned revenue 494 520 1,609 1,531 Restructuring charge 284 211 Unearned revenue 494 520 Impaired charge 284 211 Unearned revenue 494 520 Impaired investment 226 257 284 211 Unearned revenue 494 520 Impaired investment 226 257 Loss revenue 494 520 Impaired investment 226 257 Loss carryforwards 1,703 1,158 494 520 Impaired investment 226 257 Loss carryforwards 1,703 1,158 Depreciation investment 226 257 Loss carryforwards 1,703 1,158 Depreciation and amortization 115 226 257 Loss carryforwards 1,703 1,158 Depreciation and amortization 115 798 1,703 1,158 Depreciation and amortization 115 798 Other revenue item 89 1,158 Depreciation and amortization 115 798 Other revenue item 89 56 115 798 Other revenue item 89 56 Deferred income tax asset 798 Other revenue item 89 56 Deferred income tax asset 5,329 56 Deferred income tax asset 5,329 5,415 Less valuation allowance ( Deferred income tax asset 5,329 5,415 Less valuation allowance ( 2,180 5,415 Less valuation allowance ( 2,180 ) ( 2,265 ) Deferred allowance ( 2,180 ) ( 2,265 ) Deferred income tax asset net of valuation allowance $ 3,149 $ 3,150 Deferred Income Tax valuation allowance $ 3,149 $ 3,150 Deferred Income Tax Liabilities Foreign Liabilities Foreign earnings $ ( 1,242 ) $ ( 1,280 ) ( 1,242 ) $ ( 1,280 ) Unrealized gain on investment on investment and debt ( 2,102 ) ( 2,223 ) Depreciation debt ( 2,102 ) ( 2,223 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,008 ) ( 685 ) Other amortization ( 1,008 ) ( 685 ) Other ( 54 ) ( 685 ) Other ( 54 ) ( 29 ) Deferred Other ( 54 ) ( 29 ) Deferred income tax liability Deferred income tax liability ( 4,406 ) ( 4,217 ) Net liability ( 4,406 ) ( 4,217 ) Net deferred income tax ( liability ) $ ( 1,257 ) $ ( 1,067 ) ( 1,257 ) $ ( 1,067 ) Reported As Other long-term asset ( a ) $ 219 $ 228 Long-term deferred income a ) $ 219 $ 228 Long-term deferred income tax liability liability ( a ) ( 1,476 ) ( 1,295 ) Net ) ( 1,476 ) ( 1,295 ) Net deferred income tax ( a ) $ ( 1,257 ) $ ( 1,067 ) ( 1,257 ) $ ( 1,067 ) ( a ) Balances ) Balances a of June 30 , 2015 reflect the impact a of June 30 , 2015 reflect the impact of the accounting standard in fiscal year 2016 related to balance sheet classification deferred tax . See Note 1 – Accounting Policies for additional detail . As of June 30 , 2016 , we had As of June 30 , 2016 , we had net operating operating loss carryforwards of $ 8.0 billion , including $ 6.3 8.0 billion , including $ 6.3 billion of foreign net operating may not be realized . 82 Table of Contents PART II of Contents PART II Item 8 Deferred income tax balance reflect recovered . As of June 30 , 2016 , we have As of June 30 , 2016 , we have not provided temporary difference of approximately $ 124.0 billion resulting from earnings for temporary difference wa approximately $ 39.3 billion a of June 30 39.3 billion a of June 30 , 2016 . Income tax a of June 30 , 2016 . Income tax paid were Income tax paid were $ 3.9 billion , $ 4.4 billion $ 3.9 billion , $ 4.4 billion , and $ 5.5 4.4 billion , and $ 5.5 billion in fiscal year 2016 5.5 billion in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . Tax contingency income tax liability were $ 11.8 billion and $ 12.1 billion $ 11.8 billion and $ 12.1 billion a of June 30 12.1 billion a of June 30 , 2016 and 2015 , a of June 30 , 2016 and 2015 , respectively , June 30 , 2016 and 2015 , respectively , and are IRS audit for tax year 2007 to 2009 , offset by for tax year 2007 to 2009 , offset by increase relating tax benefit a of June 30 , 2016 , 2015 , a of June 30 , 2016 , 2015 , and 2014 June 30 , 2016 , 2015 , and 2014 , were 2016 , 2015 , and 2014 , were $ 10.2 billion and 2014 , were $ 10.2 billion , $ 9.6 billion $ 10.2 billion , $ 9.6 billion , and $ 8.7 9.6 billion , and $ 8.7 billion , respectively . If tax rate for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , by 2016 , 2015 , and 2014 , by $ 8.8 billion and 2014 , by $ 8.8 billion , $ 7.9 billion $ 8.8 billion , $ 7.9 billion , and $ 7.0 7.9 billion , and $ 7.0 billion , respectively . As respectively . As of June 30 , 2016 , 2015 , As of June 30 , 2016 , 2015 , and 2014 June 30 , 2016 , 2015 , and 2014 , we 2016 , 2015 , and 2014 , we had accrued interest uncertain tax position of $ 1.9 billion , $ 1.7 billion $ 1.9 billion , $ 1.7 billion , and $ 1.5 1.7 billion , and $ 1.5 billion , respectively , net unrecognized tax benefit wa $ 163 million , $ 237 million $ 163 million , $ 237 million , and $ 235 237 million , and $ 235 million in fiscal year 2016 235 million in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively , and wa million ) Year Ended June 30 , 2016 2015 2014 Balance Year Ended June 30 , 2016 2015 2014 Balance , beginning Ended June 30 , 2016 2015 2014 Balance , beginning of June 30 , 2016 2015 2014 Balance , beginning of year , beginning of year $ 9,599 $ 8,714 $ 8,648 Decreases of year $ 9,599 $ 8,714 $ 8,648 Decreases related to $ 9,599 $ 8,714 $ 8,648 Decreases related to settlement ( Decreases related to settlement ( 201 ) ( 50 ) ( settlement ( 201 ) ( 50 ) ( 583 ) Increases ) ( 50 ) ( 583 ) Increases for tax position related to the current year 1,086 1,091 566 Increases for tax to the current year 1,086 1,091 566 Increases for tax position the current year 1,086 1,091 566 Increases for tax position related position related to prior year 115 94 217 Decreases for tax related to prior year 115 94 217 Decreases for tax position to prior year 115 94 217 Decreases for tax position related related to prior year ( 317 ) ( 144 ) ( year ( 317 ) ( 144 ) ( 95 ) Decreases ) ( 144 ) ( 95 ) Decreases due to lapsed lapsed statute of limitation ( 118 ) ( 106 ) ( limitation ( 118 ) ( 106 ) ( 39 ) Balance ) ( 106 ) ( 39 ) Balance , end of , end of year $ 10,164 $ 9,599 $ 8,714 While of year $ 10,164 $ 9,599 $ 8,714 While we settled $ 10,164 $ 9,599 $ 8,714 While we settled a portion IRS audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and settled a portion IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit those year . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2016 , the primary As of June 30 , 2016 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We also continue the IRS for tax year 2010 to 2016 . We are for tax year 2010 to 2016 . We are subject to to examination for tax year 1996 to 2016 , some of for tax year 1996 to 2016 , some of which are our consolidated financial statement . 83 Table of Contents PART II of Contents PART II Item 8 NOTE 14 — RESTRUCTURING CHARGES PART II Item 8 NOTE 14 — RESTRUCTURING CHARGES Phone Hardware Phone Hardware Integration In July 2014 , we announced a restructuring Plan , we eliminated approximately 19,000 position in fiscal year 2015 19,000 position in fiscal year 2015 , including approximately 13,000 professional year 2015 , including approximately 13,000 professional and factory position related were completed a of June 30 , 2015 . In connection a of June 30 , 2015 . In connection with the total restructuring charge of $ 1.3 billion , including severance expense were recognized in fiscal year 2015 . Phone Hardware Restructuring In Phone Hardware Restructuring In June 2015 , management approved a plan under which we eliminated approximately 7,400 position in fiscal year 2016 7,400 position in fiscal year 2016 . In fiscal year 2015 2016 . In fiscal year 2015 , we incurred restructuring charge incurred restructuring charge of $ 780 million under the Phone Hardware cost . In fiscal year 2016 , we reversed $ 21 2016 , we reversed $ 21 million of previously estimated restructuring substantially complete a of June 30 , 2016 , and are a of June 30 , 2016 , and are expected to the end of calendar year 2016 . 2016 Restructuring We periodically of calendar year 2016 . 2016 Restructuring We periodically evaluate how In the fourth quarter of 2016 , management approved restructuring plan addition to the elimination of 1,850 position that were announced in that were announced in May 2016 , approximately 2,850 role globally in May 2016 , approximately 2,850 role globally will be reduced the end of fiscal year 2017 . In connection with the incurred restructuring charge of $ 501 million in fiscal year 2016 501 million in fiscal year 2016 , including severance expense and ) by segment in Note 21– Segment Information and Geographic Data Restructuring liability a of June 30 , 2015 $ 588 $ a of June 30 , 2015 $ 588 $ 249 $ June 30 , 2015 $ 588 $ 249 $ 837 Restructuring , 2015 $ 588 $ 249 $ 837 Restructuring charge 372 $ 588 $ 249 $ 837 Restructuring charge 372 129 501 249 $ 837 Restructuring charge 372 129 501 Reversal of prior $ 837 Restructuring charge 372 129 501 Reversal of prior year 837 Restructuring charge 372 129 501 Reversal of prior year restructuring of prior year restructuring charge 0 ( 21 ) ( 21 year restructuring charge 0 ( 21 ) ( 21 ) Cash 0 ( 21 ) ( 21 ) Cash paid ( 466 21 ) Cash paid ( 466 ) ( 112 ) ( paid ( 466 ) ( 112 ) ( 578 ) Other ) ( 112 ) ( 578 ) Other ( 24 ) ( 578 ) Other ( 24 ) ( 6 ) ( Other ( 24 ) ( 6 ) ( 30 ) Restructuring ) ( 6 ) ( 30 ) Restructuring liability a of Restructuring liability a of June 30 , 2016 $ 470 $ a of June 30 , 2016 $ 470 $ 239 $ June 30 , 2016 $ 470 $ 239 $ 709 ( , 2016 $ 470 $ 239 $ 709 ( a ) $ 470 $ 239 $ 709 ( a ) “ Other cost and asset write-down . 84 Table of Contents PART II of Contents PART II Item 8 NOTE 15 — UNEARNED REVENUE PART II Item 8 NOTE 15 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2016 2015 Productivity and million ) June 30 , 2016 2015 Productivity and Business Processes ) June 30 , 2016 2015 Productivity and Business Processes $ Productivity and Business Processes $ 12,482 $ 11,643 Intelligent Cloud 11,472 Business Processes $ 12,482 $ 11,643 Intelligent Cloud 11,472 10,346 More 12,482 $ 11,643 Intelligent Cloud 11,472 10,346 More Personal Computing 3,246 $ 11,643 Intelligent Cloud 11,472 10,346 More Personal Computing 3,246 3,246 11,472 10,346 More Personal Computing 3,246 3,246 Corporate and Other 6,709 10,346 More Personal Computing 3,246 3,246 Corporate and Other 6,709 83 3,246 3,246 Corporate and Other 6,709 83 Total $ 33,909 $ 3,246 Corporate and Other 6,709 83 Total $ 33,909 $ 25,318 Other 6,709 83 Total $ 33,909 $ 25,318 Revenue from Windows 83 Total $ 33,909 $ 25,318 Revenue from Windows 10 is $ 25,318 Revenue from Windows 10 is primarily recognized at the above . As of June 30 , 2016 , we deferred As of June 30 , 2016 , we deferred a net we deferred a net $ 6.6 billion in revenue related to in revenue related to Windows 10 . NOTE 16 — COMMITMENTS to Windows 10 . NOTE 16 — COMMITMENTS Construction and Operating Commitments We have committed $ 2.0 billion for constructing new building leasehold improvement a of June 30 , 2016 . We have a of June 30 , 2016 . We have operating lease facility operating lease wa $ 1.0 billion , $ 989 million $ 1.0 billion , $ 989 million , and $ 874 989 million , and $ 874 million , in fiscal year million , in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . Future minimum in place a of June 30 , 2016 are a follows a of June 30 , 2016 are a follows : ( million ) Year Ending June 30 , 2017 $ 961 2018 Year Ending June 30 , 2017 $ 961 2018 996 2019 June 30 , 2017 $ 961 2018 996 2019 922 2020 30 , 2017 $ 961 2018 996 2019 922 2020 833 , 2017 $ 961 2018 996 2019 922 2020 833 2021 2017 $ 961 2018 996 2019 922 2020 833 2021 634 $ 961 2018 996 2019 922 2020 833 2021 634 Thereafter 961 2018 996 2019 922 2020 833 2021 634 Thereafter 2,118 2018 996 2019 922 2020 833 2021 634 Thereafter 2,118 Total 996 2019 922 2020 833 2021 634 Thereafter 2,118 Total $ 2019 922 2020 833 2021 634 Thereafter 2,118 Total $ 6,464 2020 833 2021 634 Thereafter 2,118 Total $ 6,464 Other Commitments 634 Thereafter 2,118 Total $ 6,464 Other Commitments On June 11 6,464 Other Commitments On June 11 , 2016 , we entered Commitments On June 11 , 2016 , we entered into a LinkedIn ” ) for $ 196 per share in an all-cash all-cash transaction valued at $ 26.2 billion , inclusive of LinkedIn acquisition will close in the 2016 calendar year , subject to , a well a Office 365 and Dynamics . 85 Table Office 365 and Dynamics . 85 Table of Contents PART II of Contents PART II Item 8 NOTE 17 — CONTINGENCIES Patent PART II Item 8 NOTE 17 — CONTINGENCIES Patent and Intellectual mobile technology-related patent spanning about 170 patent family and addressing a technology . IPCom ha asserted 19 of these patent in litigation and operator . In November 2014 , Microsoft and IPCom entered the District of Delaware between 2007 and 2013 . We have of Delaware between 2007 and 2013 . We have been added at issue allegedly relate to 3G and 4G wireless communication standard allegedly relate to 3G and 4G wireless communication standard essential functionality an order excluding importation of 3G and 4G phone into the excluding importation of 3G and 4G phone into the U.S. and our favor . In September 2015 , in an inter partes District of Delaware in August 2015 asserting violation of Section 2 2015 asserting violation of Section 2 of the Sherman Act , levy are based upon a 2001 European Union ( “ EU these country . In December 2015 , the industry group BITKOM society for all claim from 2008 forward , leaving litigation only litigation only for the period 2004-2007 pending in Germany . In these case , there were 54 other patent infringement case pending against Microsoft a of June 30 , 2016 . Antitrust , a of June 30 , 2016 . Antitrust , Unfair Competition and/or productivity application software between 1998 and 2010 . 86 Table application software between 1998 and 2010 . 86 Table of Contents between 1998 and 2010 . 86 Table of Contents PART II of Contents PART II Item 8 The trial of the British Columbia action commenced in May 2016 . The plaintiff are expected case in chief in August 2016 , setting out claim made scheduled to commence in September 2017 , consisting of cross examination and Commerce investigatio n In 2014 , Microsoft wa informed that , is a defendant in 19 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain pre-trial proceeding ; the remaining 10 case are stayed . In stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , defendant in the consolidated flawed scientific methodology . In 2014 , the court granted in is a defendant in a 2013 class action lawsuit filed in cellular phone for at least 1,600 hour , including a subclass with the complaint in June 2014 and ha been substituted for future . As of June 30 , 2016 , we accrued As of June 30 , 2016 , we accrued aggregate legal aggregate legal liability of $ 521 million in other current liability estimate could reach approximately $ 1.6 billion in aggregate beyond recorded effect become reasonably estimable . 87 Table of Contents PART II of Contents PART II Item 8 Indemnifications We provide indemnification of consolidated financial statement . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2016 2015 2014 Balance Year Ended June 30 , 2016 2015 2014 Balance , beginning Ended June 30 , 2016 2015 2014 Balance , beginning of June 30 , 2016 2015 2014 Balance , beginning of year Balance , beginning of year 8,027 8,239 8,328 Issued 75 83 , beginning of year 8,027 8,239 8,328 Issued 75 83 86 beginning of year 8,027 8,239 8,328 Issued 75 83 86 Repurchased year 8,027 8,239 8,328 Issued 75 83 86 Repurchased ( 294 8,027 8,239 8,328 Issued 75 83 86 Repurchased ( 294 ) 8,239 8,328 Issued 75 83 86 Repurchased ( 294 ) ( 75 83 86 Repurchased ( 294 ) ( 295 ) ( Repurchased ( 294 ) ( 295 ) ( 175 ) Balance ) ( 295 ) ( 175 ) Balance , end of Balance , end of year 7,808 8,027 8,239 Share Repurchases On , end of year 7,808 8,027 8,239 Share Repurchases On September end of year 7,808 8,027 8,239 Share Repurchases On September 16 8,239 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , ha no effective on October 1 , 2013 , ha no expiration date that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . As of expired on September 30 , 2013 . As of June 30 2013 . As of June 30 , 2016 , $ 7.1 As of June 30 , 2016 , $ 7.1 billion remained 30 , 2016 , $ 7.1 billion remained of our $ billion remained of our $ 40.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2016 2015 2014 ( Year Ended June 30 , 2016 2015 2014 ( a ) Ended June 30 , 2016 2015 2014 ( a ) First June 30 , 2016 2015 2014 ( a ) First quarter ( a ) First quarter 89 $ 4,000 43 $ 2,000 ) First quarter 89 $ 4,000 43 $ 2,000 47 $ First quarter 89 $ 4,000 43 $ 2,000 47 $ 1,500 89 $ 4,000 43 $ 2,000 47 $ 1,500 Second quarter $ 4,000 43 $ 2,000 47 $ 1,500 Second quarter 66 43 $ 2,000 47 $ 1,500 Second quarter 66 3,600 43 47 $ 1,500 Second quarter 66 3,600 43 2,000 53 2,000 $ 1,500 Second quarter 66 3,600 43 2,000 53 2,000 Third 1,500 Second quarter 66 3,600 43 2,000 53 2,000 Third quarter Second quarter 66 3,600 43 2,000 53 2,000 Third quarter 69 quarter 66 3,600 43 2,000 53 2,000 Third quarter 69 3,600 66 3,600 43 2,000 53 2,000 Third quarter 69 3,600 116 2,000 53 2,000 Third quarter 69 3,600 116 5,000 47 1,791 53 2,000 Third quarter 69 3,600 116 5,000 47 1,791 Fourth 2,000 Third quarter 69 3,600 116 5,000 47 1,791 Fourth quarter Third quarter 69 3,600 116 5,000 47 1,791 Fourth quarter 70 quarter 69 3,600 116 5,000 47 1,791 Fourth quarter 70 3,600 69 3,600 116 5,000 47 1,791 Fourth quarter 70 3,600 93 5,000 47 1,791 Fourth quarter 70 3,600 93 4,209 28 1,118 47 1,791 Fourth quarter 70 3,600 93 4,209 28 1,118 Total 1,791 Fourth quarter 70 3,600 93 4,209 28 1,118 Total 294 Fourth quarter 70 3,600 93 4,209 28 1,118 Total 294 $ quarter 70 3,600 93 4,209 28 1,118 Total 294 $ 14,800 70 3,600 93 4,209 28 1,118 Total 294 $ 14,800 295 93 4,209 28 1,118 Total 294 $ 14,800 295 $ 13,209 28 1,118 Total 294 $ 14,800 295 $ 13,209 175 $ 1,118 Total 294 $ 14,800 295 $ 13,209 175 $ 6,409 294 $ 14,800 295 $ 13,209 175 $ 6,409 ( a $ 14,800 295 $ 13,209 175 $ 6,409 ( a ) 295 $ 13,209 175 $ 6,409 ( a ) Of the ( a ) Of the 175 million share repurchased in fiscal share repurchased in fiscal year 2014 , 128 million share were in fiscal year 2014 , 128 million share were repurchased for share were repurchased for $ 4.9 billion under the share repurchase Board of Directors on September 16 , 2013 and 47 million Directors on September 16 , 2013 and 47 million share were September 16 , 2013 and 47 million share were repurchased for share were repurchased for $ 1.5 billion under the share repurchase that wa announced on September 22 , 2008 and expired on announced on September 22 , 2008 and expired on September 30 2008 and expired on September 30 , 2013 . The above expired on September 30 , 2013 . The above table excludes vesting of stock award . 88 Table of Contents PART II of Contents PART II Item 8 Dividends In fiscal year 2016 8 Dividends In fiscal year 2016 , our Board of Directors ( In million ) September 15 , 2015 $ 0.36 November million ) September 15 , 2015 $ 0.36 November 19 , September 15 , 2015 $ 0.36 November 19 , 2015 $ , 2015 $ 0.36 November 19 , 2015 $ 2,868 December $ 0.36 November 19 , 2015 $ 2,868 December 10 , November 19 , 2015 $ 2,868 December 10 , 2015 December , 2015 $ 2,868 December 10 , 2015 December 2 , $ 2,868 December 10 , 2015 December 2 , 2015 $ December 10 , 2015 December 2 , 2015 $ 0.36 February , 2015 December 2 , 2015 $ 0.36 February 18 , December 2 , 2015 $ 0.36 February 18 , 2016 $ , 2015 $ 0.36 February 18 , 2016 $ 2,842 March $ 0.36 February 18 , 2016 $ 2,842 March 10 , February 18 , 2016 $ 2,842 March 10 , 2016 March , 2016 $ 2,842 March 10 , 2016 March 15 , $ 2,842 March 10 , 2016 March 15 , 2016 $ March 10 , 2016 March 15 , 2016 $ 0.36 May , 2016 March 15 , 2016 $ 0.36 May 19 , March 15 , 2016 $ 0.36 May 19 , 2016 $ , 2016 $ 0.36 May 19 , 2016 $ 2,821 June $ 0.36 May 19 , 2016 $ 2,821 June 9 , May 19 , 2016 $ 2,821 June 9 , 2016 June , 2016 $ 2,821 June 9 , 2016 June 14 , $ 2,821 June 9 , 2016 June 14 , 2016 $ June 9 , 2016 June 14 , 2016 $ 0.36 August , 2016 June 14 , 2016 $ 0.36 August 18 , June 14 , 2016 $ 0.36 August 18 , 2016 $ , 2016 $ 0.36 August 18 , 2016 $ 2,811 September $ 0.36 August 18 , 2016 $ 2,811 September 8 , August 18 , 2016 $ 2,811 September 8 , 2016 The , 2016 $ 2,811 September 8 , 2016 The dividend declared $ 2,811 September 8 , 2016 The dividend declared on June The dividend declared on June 14 , 2016 will be paid declared on June 14 , 2016 will be paid after the the filing date of the 2016 Form 10-K and wa included date of the 2016 Form 10-K and wa included in other current liability a of June 30 , 2016 . In fiscal a of June 30 , 2016 . In fiscal year 2015 2016 . In fiscal year 2015 , our Board of Directors ( In million ) September 16 , 2014 $ 0.31 November million ) September 16 , 2014 $ 0.31 November 20 , September 16 , 2014 $ 0.31 November 20 , 2014 $ , 2014 $ 0.31 November 20 , 2014 $ 2,547 December $ 0.31 November 20 , 2014 $ 2,547 December 11 , November 20 , 2014 $ 2,547 December 11 , 2014 December , 2014 $ 2,547 December 11 , 2014 December 3 , $ 2,547 December 11 , 2014 December 3 , 2014 $ December 11 , 2014 December 3 , 2014 $ 0.31 February , 2014 December 3 , 2014 $ 0.31 February 19 , December 3 , 2014 $ 0.31 February 19 , 2015 $ , 2014 $ 0.31 February 19 , 2015 $ 2,532 March $ 0.31 February 19 , 2015 $ 2,532 March 12 , February 19 , 2015 $ 2,532 March 12 , 2015 March , 2015 $ 2,532 March 12 , 2015 March 10 , $ 2,532 March 12 , 2015 March 10 , 2015 $ March 12 , 2015 March 10 , 2015 $ 0.31 May , 2015 March 10 , 2015 $ 0.31 May 21 , March 10 , 2015 $ 0.31 May 21 , 2015 $ , 2015 $ 0.31 May 21 , 2015 $ 2,496 June $ 0.31 May 21 , 2015 $ 2,496 June 11 , May 21 , 2015 $ 2,496 June 11 , 2015 June , 2015 $ 2,496 June 11 , 2015 June 9 , $ 2,496 June 11 , 2015 June 9 , 2015 $ June 11 , 2015 June 9 , 2015 $ 0.31 August , 2015 June 9 , 2015 $ 0.31 August 20 , June 9 , 2015 $ 0.31 August 20 , 2015 $ , 2015 $ 0.31 August 20 , 2015 $ 2,475 September $ 0.31 August 20 , 2015 $ 2,475 September 10 , August 20 , 2015 $ 2,475 September 10 , 2015 The , 2015 $ 2,475 September 10 , 2015 The dividend declared $ 2,475 September 10 , 2015 The dividend declared on June The dividend declared on June 9 , 2015 wa included in declared on June 9 , 2015 wa included in other current current liability a of June 30 , 2015 . NOTE 19 a of June 30 , 2015 . NOTE 19 — ACCUMULATED 30 , 2015 . NOTE 19 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2016 2015 2014 Derivatives Year Ended June 30 , 2016 2015 2014 Derivatives Accumulated other Ended June 30 , 2016 2015 2014 Derivatives Accumulated other comprehensive June 30 , 2016 2015 2014 Derivatives Accumulated other comprehensive income , beginning of period $ 590 $ 31 $ 66 Unrealized of period $ 590 $ 31 $ 66 Unrealized gain , $ 590 $ 31 $ 66 Unrealized gain , net of of tax effect of $ 24 , $ 35 and $ of $ 24 , $ 35 and $ 2 351 1,152 , $ 35 and $ 2 351 1,152 63 Reclassification adjustment $ 35 and $ 2 351 1,152 63 Reclassification adjustment for 35 and $ 2 351 1,152 63 Reclassification adjustment for gain and $ 2 351 1,152 63 Reclassification adjustment for gain included gain included in revenue ( 625 ) ( 608 ) ( revenue ( 625 ) ( 608 ) ( 104 ) Tax ) ( 608 ) ( 104 ) Tax expense included in in provision for income tax 36 15 6 Amounts reclassified from provision for income tax 36 15 6 Amounts reclassified from accumulated for income tax 36 15 6 Amounts reclassified from accumulated other accumulated other comprehensive income ( 589 ) ( 593 ) ( income ( 589 ) ( 593 ) ( 98 ) Net ) ( 593 ) ( 98 ) Net current period other income ( loss ) ( 238 ) 559 ( 35 ) loss ) ( 238 ) 559 ( 35 ) Accumulated other ( 238 ) 559 ( 35 ) Accumulated other comprehensive income , end of period $ 352 $ 590 $ 31 Investments of period $ 352 $ 590 $ 31 Investments Accumulated other $ 352 $ 590 $ 31 Investments Accumulated other comprehensive income , beginning of period $ 3,169 $ 3,531 $ 1,794 Unrealized of period $ 3,169 $ 3,531 $ 1,794 Unrealized gain , $ 3,169 $ 3,531 $ 1,794 Unrealized gain , net of of tax effect of $ 120 , $ 59 and $ of $ 120 , $ 59 and $ 1,067 219 110 , $ 59 and $ 1,067 219 110 2,053 Reclassification adjustment $ 59 and $ 1,067 219 110 2,053 Reclassification adjustment for 59 and $ 1,067 219 110 2,053 Reclassification adjustment for gain and $ 1,067 219 110 2,053 Reclassification adjustment for gain included expense ) , net ( 688 ) ( 728 ) ( net ( 688 ) ( 728 ) ( 447 ) Tax ) ( 728 ) ( 447 ) Tax expense included in in provision for income tax 241 256 131 Amounts reclassified from provision for income tax 241 256 131 Amounts reclassified from accumulated for income tax 241 256 131 Amounts reclassified from accumulated other accumulated other comprehensive income ( 447 ) ( 472 ) ( income ( 447 ) ( 472 ) ( 316 ) Net ) ( 472 ) ( 316 ) Net current period other income ( loss ) ( 228 ) ( 362 ) 1,737 ) ( 228 ) ( 362 ) 1,737 Accumulated other comprehensive 228 ) ( 362 ) 1,737 Accumulated other comprehensive income balance , end of period $ 2,941 $ 3,169 $ 3,531 Translation of period $ 2,941 $ 3,169 $ 3,531 Translation Adjustments and $ 2,941 $ 3,169 $ 3,531 Translation Adjustments and Other Accumulated beginning of period $ ( 1,237 ) $ 146 $ ( $ ( 1,237 ) $ 146 $ ( 117 ) Translation ) $ 146 $ ( 117 ) Translation adjustment and other tax effect of $ ( 33 ) , $ 16 and ( 33 ) , $ 16 and $ 12 ( 519 , $ 16 and $ 12 ( 519 ) ( 1,383 16 and $ 12 ( 519 ) ( 1,383 ) 263 12 ( 519 ) ( 1,383 ) 263 Accumulated other comprehensive 519 ) ( 1,383 ) 263 Accumulated other comprehensive income ( end of period $ ( 1,756 ) $ ( 1,237 ) ( 1,756 ) $ ( 1,237 ) $ 146 Accumulated other $ ( 1,237 ) $ 146 Accumulated other comprehensive income , , end of period $ 1,537 $ 2,522 $ 3,708 89 of period $ 1,537 $ 2,522 $ 3,708 89 Table of $ 1,537 $ 2,522 $ 3,708 89 Table of Contents PART 1,537 $ 2,522 $ 3,708 89 Table of Contents PART II of Contents PART II Item 8 NOTE 20 — EMPLOYEE STOCK PART II Item 8 NOTE 20 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2016 an aggregate of As of June 30 , 2016 an aggregate of 214 million , 2016 an aggregate of 214 million share were authorized for million ) Year Ended June 30 , 2016 2015 2014 Stock-based Year Ended June 30 , 2016 2015 2014 Stock-based compensation expense Ended June 30 , 2016 2015 2014 Stock-based compensation expense $ June 30 , 2016 2015 2014 Stock-based compensation expense $ 2,668 2014 Stock-based compensation expense $ 2,668 $ 2,574 $ 2,446 Income compensation expense $ 2,668 $ 2,574 $ 2,446 Income tax benefit $ 2,668 $ 2,574 $ 2,446 Income tax benefit related to benefit related to stock-based compensation 882 868 830 Stock Plans Stock related to stock-based compensation 882 868 830 Stock Plans Stock award to stock-based compensation 882 868 830 Stock Plans Stock award entitle assumption : Year Ended June 30 , 2016 2015 2014 Dividends Year Ended June 30 , 2016 2015 2014 Dividends per share Ended June 30 , 2016 2015 2014 Dividends per share ( June 30 , 2016 2015 2014 Dividends per share ( quarterly ( quarterly amount ) $ 0.31 - $ 0.36 $ 0.28 ) $ 0.31 - $ 0.36 $ 0.28 - $ 0.31 0.31 - $ 0.36 $ 0.28 - $ 0.31 $ 0.23 0.36 $ 0.28 - $ 0.31 $ 0.23 - $ 0.28 0.28 - $ 0.31 $ 0.23 - $ 0.28 Interest rate 0.31 $ 0.23 - $ 0.28 Interest rate 1.1 % -1.8 - $ 0.28 Interest rate 1.1 % -1.8 % 1.2 % rate 1.1 % -1.8 % 1.2 % - 1.9 % 1.3 -1.8 % 1.2 % - 1.9 % 1.3 % - 1.8 1.2 % - 1.9 % 1.3 % - 1.8 % During 1.9 % 1.3 % - 1.8 % During fiscal year 2016 1.8 % During fiscal year 2016 , the following activity occurred balance , beginning of year 216 $ 32.72 Granted 83 $ beginning of year 216 $ 32.72 Granted 83 $ 41.51 Vested year 216 $ 32.72 Granted 83 $ 41.51 Vested ( 85 $ 32.72 Granted 83 $ 41.51 Vested ( 85 ) $ 83 $ 41.51 Vested ( 85 ) $ 30.98 Forfeited ( Vested ( 85 ) $ 30.98 Forfeited ( 20 ) $ ) $ 30.98 Forfeited ( 20 ) $ 35.93 Nonvested balance Forfeited ( 20 ) $ 35.93 Nonvested balance , end of balance , end of year 194 $ 36.92 As of June end of year 194 $ 36.92 As of June 30 , $ 36.92 As of June 30 , 2016 , there wa As of June 30 , 2016 , there wa approximately $ , there wa approximately $ 4.8 billion of total unrecognized compensation a weighted average period of 3 year . The weighted average stock award granted wa $ 41.51 , $ 42.36 , and wa $ 41.51 , $ 42.36 , and $ 31.50 for $ 42.36 , and $ 31.50 for fiscal year 2016 , $ 31.50 for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . The fair stock award vested wa $ 3.9 billion , $ 4.2 billion $ 3.9 billion , $ 4.2 billion , and $ 3.2 4.2 billion , and $ 3.2 billion , for fiscal year billion , for fiscal year 2016 , 2015 , and 2014 for fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . 90 Table and 2014 , respectively . 90 Table of Contents PART II of Contents PART II Item 8 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2016 2015 2014 Shares Year Ended June 30 , 2016 2015 2014 Shares purchased 15 Ended June 30 , 2016 2015 2014 Shares purchased 15 16 June 30 , 2016 2015 2014 Shares purchased 15 16 18 2016 2015 2014 Shares purchased 15 16 18 Average price per 2015 2014 Shares purchased 15 16 18 Average price per share 2014 Shares purchased 15 16 18 Average price per share $ Average price per share $ 44.83 $ 39.87 $ 33.60 As per share $ 44.83 $ 39.87 $ 33.60 As of June $ 44.83 $ 39.87 $ 33.60 As of June 30 , $ 33.60 As of June 30 , 2016 , 142 million As of June 30 , 2016 , 142 million share of June 30 , 2016 , 142 million share of our common U.S. that qualifies under Section 401 ( k ) of the certain limitation . Beginning January 2016 , we contribute fifty cent a maximum employer contribution of 50 % of the IRS contribution year . Prior to January 2016 , we contributed fifty cent each dollar of the first 6 % a participant contributed in contribution of the lesser of 3 % of a participant ’ participant ’ s earnings or 3 % of the IRS compensation for all plan were $ 549 million , $ 454 million $ 549 million , $ 454 million , and $ 420 454 million , and $ 420 million in fiscal year 2016 420 million in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively , and were expensed a contributed . NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC U.S. GAAP . In June 2015 , we announced a change first quarter of fiscal year 2016 , our chief operating decision , beginning in fiscal year 2016 , we report our financial licensing and subscription to Office 365 commercial for product and service retail or through an Office 365 consumer subscription , and Office and Dynamics CRM Online . 91 Table of Contents PART II of Contents PART II Item 8 Intelligent Cloud Our Intelligent Cloud million ) Year Ended June 30 , 2016 2015 2014 Revenue Year Ended June 30 , 2016 2015 2014 Revenue Productivity and Ended June 30 , 2016 2015 2014 Revenue Productivity and Business June 30 , 2016 2015 2014 Revenue Productivity and Business Processes Productivity and Business Processes $ 26,487 $ 26,430 $ 26,976 Intelligent Business Processes $ 26,487 $ 26,430 $ 26,976 Intelligent Cloud 25,042 $ 26,487 $ 26,430 $ 26,976 Intelligent Cloud 25,042 23,715 21,735 26,430 $ 26,976 Intelligent Cloud 25,042 23,715 21,735 More Personal Computing $ 26,976 Intelligent Cloud 25,042 23,715 21,735 More Personal Computing 40,460 26,976 Intelligent Cloud 25,042 23,715 21,735 More Personal Computing 40,460 43,160 23,715 21,735 More Personal Computing 40,460 43,160 38,460 Corporate and Other 21,735 More Personal Computing 40,460 43,160 38,460 Corporate and Other ( More Personal Computing 40,460 43,160 38,460 Corporate and Other ( 6,669 38,460 Corporate and Other ( 6,669 ) 275 ( 338 ) and Other ( 6,669 ) 275 ( 338 ) Total revenue ( 6,669 ) 275 ( 338 ) Total revenue $ 85,320 338 ) Total revenue $ 85,320 $ 93,580 $ 86,833 92 Total revenue $ 85,320 $ 93,580 $ 86,833 92 Table of $ 85,320 $ 93,580 $ 86,833 92 Table of Contents PART 85,320 $ 93,580 $ 86,833 92 Table of Contents PART II of Contents PART II Item 8 ( In million ) Year million ) Year Ended June 30 , 2016 2015 2014 Operating Year Ended June 30 , 2016 2015 2014 Operating income ( Ended June 30 , 2016 2015 2014 Operating income ( loss June 30 , 2016 2015 2014 Operating income ( loss ) Productivity and Business Processes $ 12,461 $ 13,359 $ 14,173 Intelligent Business Processes $ 12,461 $ 13,359 $ 14,173 Intelligent Cloud 9,358 $ 12,461 $ 13,359 $ 14,173 Intelligent Cloud 9,358 9,871 8,446 13,359 $ 14,173 Intelligent Cloud 9,358 9,871 8,446 More Personal Computing $ 14,173 Intelligent Cloud 9,358 9,871 8,446 More Personal Computing 6,142 14,173 Intelligent Cloud 9,358 9,871 8,446 More Personal Computing 6,142 4,667 9,871 8,446 More Personal Computing 6,142 4,667 5,605 Corporate and Other 8,446 More Personal Computing 6,142 4,667 5,605 Corporate and Other ( More Personal Computing 6,142 4,667 5,605 Corporate and Other ( 7,779 5,605 Corporate and Other ( 7,779 ) ( 9,736 ) ( Other ( 7,779 ) ( 9,736 ) ( 465 ) Total ) ( 9,736 ) ( 465 ) Total operating income $ ) Total operating income $ 20,182 $ 18,161 $ 27,759 Corporate operating income $ 20,182 $ 18,161 $ 27,759 Corporate and Other $ 20,182 $ 18,161 $ 27,759 Corporate and Other operating income million ) Year Ended June 30 , 2016 2015 2014 Impairment Year Ended June 30 , 2016 2015 2014 Impairment , integration Ended June 30 , 2016 2015 2014 Impairment , integration and June 30 , 2016 2015 2014 Impairment , integration and restructuring and restructuring expense $ ( 1,110 ) $ ( 10,011 ) ( 1,110 ) $ ( 10,011 ) $ ( 127 ) ( 10,011 ) $ ( 127 ) Revenue reconciling amount and other ( a ) ( 6,669 ) 275 ( 338 ) a ) ( 6,669 ) 275 ( 338 ) Total Corporate ( 6,669 ) 275 ( 338 ) Total Corporate and Other Corporate and Other $ ( 7,779 ) $ ( 9,736 ) ( 7,779 ) $ ( 9,736 ) $ ( 465 ) ( 9,736 ) $ ( 465 ) ( a ) Revenue and other for fiscal year 2016 primarily consisted of a net consisted of a net $ 6.6 billion of revenue deferral related related to sale of Windows 10 . Revenue reconciling amount for reconciling amount for fiscal year 2015 included a net $ 303 2015 included a net $ 303 million of previously deferred net reconciling amount for fiscal year 2014 included a net $ 349 2014 included a net $ 349 million of revenue deferral related States accounted for more than 10 % of fiscal year 2016 10 % of fiscal year 2016 , 2015 , or 2014 of fiscal year 2016 , 2015 , or 2014 revenue . 2016 , 2015 , or 2014 revenue . Revenue , classified million ) Year Ended June 30 , 2016 2015 2014 United Year Ended June 30 , 2016 2015 2014 United States ( Ended June 30 , 2016 2015 2014 United States ( a June 30 , 2016 2015 2014 United States ( a ) States ( a ) $ 40,578 $ 42,941 $ 43,474 Other a ) $ 40,578 $ 42,941 $ 43,474 Other country 44,742 $ 40,578 $ 42,941 $ 43,474 Other country 44,742 50,639 43,359 42,941 $ 43,474 Other country 44,742 50,639 43,359 Total $ 85,320 $ 43,474 Other country 44,742 50,639 43,359 Total $ 85,320 $ 43,474 Other country 44,742 50,639 43,359 Total $ 85,320 $ 93,580 44,742 50,639 43,359 Total $ 85,320 $ 93,580 $ 86,833 ( 43,359 Total $ 85,320 $ 93,580 $ 86,833 ( a ) $ 85,320 $ 93,580 $ 86,833 ( a ) Includes billing million ) Year Ended June 30 , 2016 2015 2014 Microsoft Year Ended June 30 , 2016 2015 2014 Microsoft Office system Ended June 30 , 2016 2015 2014 Microsoft Office system $ June 30 , 2016 2015 2014 Microsoft Office system $ 23,588 2014 Microsoft Office system $ 23,588 $ 23,538 $ 24,323 Server Office system $ 23,588 $ 23,538 $ 24,323 Server product and $ 23,588 $ 23,538 $ 24,323 Server product and tool 19,177 24,323 Server product and tool 19,177 18,612 17,055 Xbox 9,395 9,121 Server product and tool 19,177 18,612 17,055 Xbox 9,395 9,121 8,643 product and tool 19,177 18,612 17,055 Xbox 9,395 9,121 8,643 Windows tool 19,177 18,612 17,055 Xbox 9,395 9,121 8,643 Windows PC operating 19,177 18,612 17,055 Xbox 9,395 9,121 8,643 Windows PC operating system 18,612 17,055 Xbox 9,395 9,121 8,643 Windows PC operating system 8,104 8,643 Windows PC operating system 8,104 ( a ) 14,826 16,856 system 8,104 ( a ) 14,826 16,856 Advertising 6,098 4,557 4,016 8,104 ( a ) 14,826 16,856 Advertising 6,098 4,557 4,016 Consulting a ) 14,826 16,856 Advertising 6,098 4,557 4,016 Consulting and product ) 14,826 16,856 Advertising 6,098 4,557 4,016 Consulting and product support 14,826 16,856 Advertising 6,098 4,557 4,016 Consulting and product support service Consulting and product support service 5,641 5,090 4,767 Surface 4,108 3,900 and product support service 5,641 5,090 4,767 Surface 4,108 3,900 1,883 product support service 5,641 5,090 4,767 Surface 4,108 3,900 1,883 Phone service 5,641 5,090 4,767 Surface 4,108 3,900 1,883 Phone 3,358 7,702 5,641 5,090 4,767 Surface 4,108 3,900 1,883 Phone 3,358 7,702 3,073 5,090 4,767 Surface 4,108 3,900 1,883 Phone 3,358 7,702 3,073 Other Surface 4,108 3,900 1,883 Phone 3,358 7,702 3,073 Other 5,851 6,234 4,108 3,900 1,883 Phone 3,358 7,702 3,073 Other 5,851 6,234 6,217 3,900 1,883 Phone 3,358 7,702 3,073 Other 5,851 6,234 6,217 Total Phone 3,358 7,702 3,073 Other 5,851 6,234 6,217 Total $ 85,320 3,358 7,702 3,073 Other 5,851 6,234 6,217 Total $ 85,320 $ 7,702 3,073 Other 5,851 6,234 6,217 Total $ 85,320 $ 93,580 5,851 6,234 6,217 Total $ 85,320 $ 93,580 $ 86,833 ( 6,217 Total $ 85,320 $ 93,580 $ 86,833 ( a ) $ 85,320 $ 93,580 $ 86,833 ( a ) Includes a ) Includes a net $ 6.6 billion of revenue deferral related related to sale of Windows 10 . 93 Table of Contents sale of Windows 10 . 93 Table of Contents PART II of Contents PART II Item 8 Our total commercial cloud revenue , which primarily comprises Office 365 commercial , Azure , Dynamics cloud property , wa $ 9.5 billion , $ 5.8 billion $ 9.5 billion , $ 5.8 billion , and $ 2.8 5.8 billion , and $ 2.8 billion in fiscal year 2016 2.8 billion in fiscal year 2016 , 2015 , and 2014 in fiscal year 2016 , 2015 , and 2014 , respectively 2016 , 2015 , and 2014 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2016 2015 2014 United million ) June 30 , 2016 2015 2014 United States $ ) June 30 , 2016 2015 2014 United States $ 22,819 June 30 , 2016 2015 2014 United States $ 22,819 $ 2015 2014 United States $ 22,819 $ 19,562 $ 17,653 Luxembourg United States $ 22,819 $ 19,562 $ 17,653 Luxembourg 6,854 6,879 $ 22,819 $ 19,562 $ 17,653 Luxembourg 6,854 6,879 6,913 Finland $ 19,562 $ 17,653 Luxembourg 6,854 6,879 6,913 Finland 389 1,757 19,562 $ 17,653 Luxembourg 6,854 6,879 6,913 Finland 389 1,757 9,840 $ 17,653 Luxembourg 6,854 6,879 6,913 Finland 389 1,757 9,840 Other Luxembourg 6,854 6,879 6,913 Finland 389 1,757 9,840 Other country 9,899 6,854 6,879 6,913 Finland 389 1,757 9,840 Other country 9,899 8,307 6,879 6,913 Finland 389 1,757 9,840 Other country 9,899 8,307 5,713 389 1,757 9,840 Other country 9,899 8,307 5,713 Total $ 39,961 1,757 9,840 Other country 9,899 8,307 5,713 Total $ 39,961 $ 9,840 Other country 9,899 8,307 5,713 Total $ 39,961 $ 36,505 9,899 8,307 5,713 Total $ 39,961 $ 36,505 $ 40,119 NOTE 5,713 Total $ 39,961 $ 36,505 $ 40,119 NOTE 22 — $ 39,961 $ 36,505 $ 40,119 NOTE 22 — QUARTERLY INFORMATION $ 36,505 $ 40,119 NOTE 22 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2016 Revenue June 30 Total Fiscal Year 2016 Revenue ( a ) $ Revenue ( a ) $ 20,379 $ 23,796 $ 20,531 $ a ) $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net 12,635 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 3,756 5,283 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( b 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( b ) 20,182 Net income 4,902 5,018 3,756 3,122 ( b ) 16,798 Net income 4,902 5,018 3,756 3,122 ( b ) 16,798 ( 3,756 3,122 ( b ) 16,798 ( b ) Basic earnings ) Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share 0.61 2.12 Diluted earnings per share 0.61 0.62 0.47 0.39 ( b Diluted earnings per share 0.61 0.62 0.47 0.39 ( b ) earnings per share 0.61 0.62 0.47 0.39 ( b ) 2.10 per share 0.61 0.62 0.47 0.39 ( b ) 2.10 ( 0.47 0.39 ( b ) 2.10 ( b ) Fiscal Year ( b ) Fiscal Year 2015 Revenue $ 23,201 $ 26,470 Fiscal Year 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 2015 Revenue $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ $ 23,201 $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross $ 26,470 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 $ 21,729 $ 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 22,180 $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating $ 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income 93,580 Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income ( Gross margin 14,928 16,334 14,568 14,712 60,542 Operating income ( loss margin 14,928 16,334 14,568 14,712 60,542 Operating income ( loss ) Operating income ( loss ) 5,844 7,776 6,594 ( 2,053 ) income ( loss ) 5,844 7,776 6,594 ( 2,053 ) 18,161 ( loss ) 5,844 7,776 6,594 ( 2,053 ) 18,161 Net ) 5,844 7,776 6,594 ( 2,053 ) 18,161 Net income ( 7,776 6,594 ( 2,053 ) 18,161 Net income ( loss ) Net income ( loss ) 4,540 5,863 4,985 ( 3,195 ) income ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( ( loss ) 4,540 5,863 4,985 ( 3,195 ) ( c ) 4,540 5,863 4,985 ( 3,195 ) ( c ) 12,193 3,195 ) ( c ) 12,193 ( d ) Basic earnings ( loss ) per share 0.55 0.71 0.61 ( 0.40 ) loss ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 ) per share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted share 0.55 0.71 0.61 ( 0.40 ) 1.49 Diluted earnings ( 0.71 0.61 ( 0.40 ) 1.49 Diluted earnings ( loss ) ( loss ) per share 0.54 0.71 0.61 ( 0.40 ) loss ) per share 0.54 0.71 0.61 ( 0.40 ) ( ) per share 0.54 0.71 0.61 ( 0.40 ) ( c share 0.54 0.71 0.61 ( 0.40 ) ( c ) 1.48 0.40 ) ( c ) 1.48 ( d ) ( a net revenue deferral from Windows 10 of $ 1.3 billion , from Windows 10 of $ 1.3 billion , $ 1.7 billion $ 1.3 billion , $ 1.7 billion , $ 1.6 billion $ 1.7 billion , $ 1.6 billion , and $ 2.0 1.6 billion , and $ 2.0 billion , for the first fourth quarter of fiscal year 2016 , respectively , and $ , respectively , and $ 6.6 billion for fiscal year 2016 6.6 billion for fiscal year 2016 . ( b ) Includes ( b ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructuring charge associated restructuring charge associated with our 2016 restructuring plan , which together and diluted EPS by $ 895 million and $ 0.11 , $ 895 million and $ 0.11 , respectively . ( c ( c ) Includes $ 7.5 billion of goodwill and asset phone business , and $ 940 million of integration and restructuring and diluted EPS by $ 8.3 billion and $ 1.02 , $ 8.3 billion and $ 1.02 , respectively . ( d ( d ) Includes $ 7.5 billion of goodwill and asset phone business , and $ 2.5 billion of integration and restructuring and diluted EPS by $ 9.5 billion and $ 1.15 , $ 9.5 billion and $ 1.15 , respectively . 94 Table $ 1.15 , respectively . 94 Table of Contents PART II of Contents PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC ” ) a of June 30 , 2016 and 2015 , a of June 30 , 2016 and 2015 , and the June 30 , 2016 and 2015 , and the related consolidated in the period ended June 30 , 2016 . These financial period ended June 30 , 2016 . These financial statement are and subsidiary a of June 30 , 2016 and 2015 , a of June 30 , 2016 and 2015 , and the June 30 , 2016 and 2015 , and the result of in the period ended June 30 , 2016 , in conformity period ended June 30 , 2016 , in conformity with accounting financial reporting a of June 30 , 2016 , based on a of June 30 , 2016 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee and our report dated July 28 , 2016 expressed an unqualified report dated July 28 , 2016 expressed an unqualified opinion on LLP Seattle , Washington July 28 , 2016 95 Table of , Washington July 28 , 2016 95 Table of Contents PART Washington July 28 , 2016 95 Table of Contents PART II of Contents PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2016 . There were a of June 30 , 2016 . There were no change during the quarter ended June 30 , 2016 that have materially quarter ended June 30 , 2016 that have materially affected , financial reporting a of June 30 , 2016 ; their report a of June 30 , 2016 ; their report is included report is included in Item 9A . 96 Table of Contents included in Item 9A . 96 Table of Contents PART II of Contents PART II Item 9A R EPORT OF INDEPENDENT REGISTERED ” ) a of June 30 , 2016 , based on a of June 30 , 2016 , based on criterion established Control – Integrated Framework ( 2013 ) issued by the Committee policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2016 , based on a of June 30 , 2016 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee for the year ended June 30 , 2016 of the Company year ended June 30 , 2016 of the Company and our and our report dated July 28 , 2016 expressed an unqualified report dated July 28 , 2016 expressed an unqualified opinion on LLP Seattle , Washington July 28 , 2016 97 Table of , Washington July 28 , 2016 97 Table of Contents PART Washington July 28 , 2016 97 Table of Contents PART II PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 I , 11 , 12 , 13 , 14 I TEM 9B , 12 , 13 , 14 I TEM 9B . OTHER 13 , 14 I TEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 30 , 2016 ( the “ be held November 30 , 2016 ( the “ Proxy Statement under the caption “ Section 16 ( a ) Beneficial ownership in a report on Form 8-K . I TEM 11 . Form 8-K . I TEM 11 . EXECUTIVE COMPENSATION The information by reference . I TEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED by reference . ITE M 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 98 Table of Contents PART IV of Contents PART IV Item 15 PART IV I TEM 15 15 PART IV I TEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 52 Comprehensive Income Statements 53 Balance Statements 52 Comprehensive Income Statements 53 Balance Sheets 54 Cash Flows Income Statements 53 Balance Sheets 54 Cash Flows Statements 55 Stockholders Sheets 54 Cash Flows Statements 55 Stockholders ’ Equity Statements 56 55 Stockholders ’ Equity Statements 56 Notes to Financial Statements 57 56 Notes to Financial Statements 57 Report of Independent Registered Public Independent Registered Public Accounting Firm 95 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 2.1 Agreement and Plan of Merger , dated a of June 11 , 2016 , by and a of June 11 , 2016 , by and among Microsoft Inc. , and LinkedIn Corporation 8-K * * * 2.1 6/13/16 Corporation 8-K * * * 2.1 6/13/16 3.1 Amended and Restated 8-K * * * 2.1 6/13/16 3.1 Amended and Restated Articles * * * 2.1 6/13/16 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 3/17/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 3/17/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 3/17/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 3/17/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 7/5/16 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 7/5/16 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 7/5/16 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 7/5/16 4.1 Form of Indenture between Microsoft “ Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of Base Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) 3-ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.5 9/27/10 99 Table of . , a Trustee 8-K 4.5 9/27/10 99 Table of Contents , a Trustee 8-K 4.5 9/27/10 99 Table of Contents PART a Trustee 8-K 4.5 9/27/10 99 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.6 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.7 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 between Microsoft Corporation a of May 2 , 2013 between Microsoft Corporation and The , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 4.11 Eighth Supplemental . , a Trustee 8-K 4.1 12/6/13 4.11 Eighth Supplemental Indenture , a Trustee 8-K 4.1 12/6/13 4.11 Eighth Supplemental Indenture for a Trustee 8-K 4.1 12/6/13 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 100 Table of . , a Trustee 8-K 4.2 12/6/13 100 Table of Contents , a Trustee 8-K 4.2 12/6/13 100 Table of Contents PART a Trustee 8-K 4.2 12/6/13 100 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/3/15 10.1 * Microsoft . , a Trustee 8-K 4.1 11/3/15 10.1 * Microsoft Corporation , a Trustee 8-K 4.1 11/3/15 10.1 * Microsoft Corporation 2001 a Trustee 8-K 4.1 11/3/15 10.1 * Microsoft Corporation 2001 Stock 11/3/15 10.1 * Microsoft Corporation 2001 Stock Plan X 10.3 * Corporation 2001 Stock Plan X 10.3 * Microsoft Corporation 1999 Stock X 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Plan for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation for Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Non-Employee Directors 8-K 10.3 11/15/04 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Directors 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust 10-K 6/30/04 10.13 9/1/04 10.12 2009 Officers ’ Indemnification Trust Agreement Trust Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended Company , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and , a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated a trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 trustee 10-K 6/30/10 10.12 7/30/10 10.13 Amended and Restated 2003 Indemnification 7/30/10 10.13 Amended and Restated 2003 Indemnification Trust Agreement between Microsoft Trust Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Company , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft , a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation a trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred trustee 10-K 6/30/10 10.13 7/30/10 10.14 * Microsoft Corporation Deferred Compensation Compensation Plan for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Plan for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Incentive Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 101 Table Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 101 Table of Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 101 Table of Contents Incentive Plan 10-Q 9/30/15 10.17 10/22/15 101 Table of Contents PART Plan 10-Q 9/30/15 10.17 10/22/15 101 Table of Contents PART IV of Contents PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Resignation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Resignation Agreement Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Resignation Agreement and Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Resignation Agreement and Full Microsoft Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Corporation and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock and Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Steven Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Agreement Sinofsky 10-K 6/30/13 10.19 7/30/13 10.21 * Stock Award Agreement under Agreement under the Microsoft Corporation 2001 Stock Plan ( Service-Based ) Stock Plan ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Plan ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Severance ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Executive Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter , Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratio Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratio of Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratio of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase filed * * * Form 8-K of LinkedIn Corporation 102 Table Form 8-K of LinkedIn Corporation 102 Table of Contents SIGNATURES Pursuant to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 28 , 2016 . M ICROSOFT , on July 28 , 2016 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 28 , 2016 . Signature Title indicated on July 28 , 2016 . Signature Title / S ( Principal Accounting Officer ) 103 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-17-014900/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-17-014900/full-submission.txt new file mode 100644 index 0000000..d92734e --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-17-014900/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2017 OR ☐ TRANSITION Year Ended June 30 , 2017 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ☒ Indicate by check mark growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of December 31 , 2016 , the aggregate As of December 31 , 2016 , the aggregate market value of the registrant wa $ 466.5 billion based on the closing System . As of July 31 , 2017 , there were As of July 31 , 2017 , there were 7,702,243,979 share , 2017 , there were 7,702,243,979 share of common stock outstanding to be held on November 29 , 2017 are incorporated by held on November 29 , 2017 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2017 INDEX Page PART Year Ended June 30 , 2017 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 Item 1A . Risk Factors 17 Item Item 1A . Risk Factors 17 Item 1B . Unresolved Staff . Risk Factors 17 Item 1B . Unresolved Staff Comments 26 1B . Unresolved Staff Comments 26 Item 2 . Properties 26 Unresolved Staff Comments 26 Item 2 . Properties 26 Item 3 26 Item 2 . Properties 26 Item 3 . Legal Proceedings 2 . Properties 26 Item 3 . Legal Proceedings 26 Item Item 3 . Legal Proceedings 26 Item 4 . Mine Safety . Legal Proceedings 26 Item 4 . Mine Safety Disclosures 26 4 . Mine Safety Disclosures 26 PART II Item 5 . Disclosures 26 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 27 Item 6 . Selected Financial of Equity Securities 27 Item 6 . Selected Financial Data 28 6 . Selected Financial Data 28 Item 7 . Management ’ Selected Financial Data 28 Item 7 . Management ’ s Discussion Condition and Results of Operations 29 Item 7A . Quantitative and Results of Operations 29 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 47 Item 8 . Financial Statements about Market Risk 47 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 49 Item 9 . Changes in and Supplementary Data 49 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 95 Item 9A . Controls and and Financial Disclosure 95 Item 9A . Controls and Procedures 95 9A . Controls and Procedures 95 Report of Management on Internal Internal Control over Financial Reporting 95 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 Item 9B . Other Information Public Accounting Firm 96 Item 9B . Other Information 97 PART Item 9B . Other Information 97 PART III Item 10 . Information 97 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 97 Item 11 . Executive Compensation and Corporate Governance 97 Item 11 . Executive Compensation 97 Item Item 11 . Executive Compensation 97 Item 12 . Security Ownership . Executive Compensation 97 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 97 Item 13 . Certain Relationships Related Stockholder Matters 97 Item 13 . Certain Relationships and Related Transactions , and Director Independence 97 Item 14 . Principal Accounting and Director Independence 97 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 97 PART IV Item 15 . Services 97 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 98 Item 16 . Form 10-K Financial Statement Schedules 98 Item 16 . Form 10-K Summary 103 98 Item 16 . Form 10-K Summary 103 Signatures 104 2 16 . Form 10-K Summary 103 Signatures 104 2 PART I Form 10-K Summary 103 Signatures 104 2 PART I Item 1 10-K Summary 103 Signatures 104 2 PART I Item 1 Note 104 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . We undertake no otherwise . PART I ITEM 1. BUSINESS GENERAL Our vision Microsoft What we offer Founded in 1975 , we operate worldwide in we operate worldwide in over 190 country . We develop , to a global audience . 3 PART I Item 1 The . 3 PART I Item 1 The ambition that drive u and LinkedIn . With Office 365 , we provide familiar industry-leading friction-free way . On December 8 , 2016 , we completed . On December 8 , 2016 , we completed our acquisition accelerate the growth of Office 365 , Dynamics 365 , and of Office 365 , Dynamics 365 , and LinkedIn . Build machine learning at scale . 4 PART I Item 1 We . 4 PART I Item 1 We enable organization to securely and dynamic way . Windows 10 is the cornerstone of our spectrum of device . Windows 10 is more personal and productive and universal application . Windows 10 offer a foundation for the , modern workplace . Windows 10 is designed to foster innovation . Our ambition for Windows 10 is to broaden our economic new hardware design for Windows 10 ; our own commitment to design and configuration for Windows 10 . We now have the Windows installed base on Windows 10 , and by enabling universal and output method within Windows 10 , including speech , pen like the recently introduced Microsoft 365 which brings together Office 365 365 which brings together Office 365 , Windows 10 , and together Office 365 , Windows 10 , and Enterprise Mobility and and augmented reality hologram . 5 PART I Item 1 • . 5 PART I Item 1 • Inventing new gaming experience information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based the continued shift to Office 365 . CALs provide certain Office the continued shift to Office 365 . Office Consumer Services revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world the continued shift to Dynamics 365 , a unified set of Dynamics CRM on-premises and Dynamics 365 offering . Intelligent Cloud Our and Microsoft Consulting Services . 7 PART I Item 1 Server . 7 PART I Item 1 Server Products and Cloud Services all size and complexity . 8 PART I Item 1 Our . 8 PART I Item 1 Our Enterprise Services business competes MSN ad . In June 2015 , we entered into agreement our display sale responsibility . 9 PART I Item 1 Devices . 9 PART I Item 1 Devices We design , manufacture the Surface Studio in December 2016 and our latest Surface device Surface Pro , in June 2017 . In July 2015 , June 2017 . In July 2015 , we announced a plan align resource . In May 2016 , we announced plan to hardware business . In November 2016 , we completed the sale Xbox One S in November 2013 and August 2016 , respectively in November 2013 and August 2016 , respectively , and announced Xbox One X in June 2017 . With the launch of the launch of the Windows 10 Xbox app in July 2015 10 Xbox app in July 2015 , and the launch of the Mixer service in May 2017 , we continue to open latest generation console in March 2017 and Sony released it latest latest generation console in November 2013 . We also compete with offering to end user . 10 PART I Item 1 OPERATIONS . 10 PART I Item 1 OPERATIONS We have operation center feature phone business in November 2016 , which included the sale AND DEVELOPMENT During fiscal year 2017 , 2016 , and 2015 During fiscal year 2017 , 2016 , and 2015 , research 2017 , 2016 , and 2015 , research and development expense and development expense wa $ 13.0 billion , $ 12.0 billion $ 13.0 billion , $ 12.0 billion , and $ 12.0 12.0 billion , and $ 12.0 billion , respectively . These respectively . These amount represented 14 % , 14 % , amount represented 14 % , 14 % , and 13 % , 14 % , and 13 % of revenue in fiscal of revenue in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . We plan have a portfolio of over 66,000 U.S. and international patent issued international patent issued and over 35,000 pending . While we employ our external development community . 11 PART I Item 1 W . 11 PART I Item 1 W hile it may be capability to subscribe to Office 365 . There are two broad many of these sale . 12 PART I Item 1 We . 12 PART I Item 1 We also provide commercial and Software Assurance is included . 13 PART I Item 1 Select . 13 PART I Item 1 Select Plus Select Plus agreement is optional . In July 2014 , we announced the retirement commercial organization . Beginning July 2015 , no new Select Plus organization . Starting in July 2016 , we no longer accept customer accounted for more than 10 % of revenue in fiscal of revenue in fiscal year 2017 , 2016 , or 2015 in fiscal year 2017 , 2016 , or 2015 . Our 2017 , 2016 , or 2015 . Our practice is to backlog is not significant . 14 PART I Item 1 EXECUTIVE . 14 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 2 , 2017 were a follows a of August 2 , 2017 were a follows : Name with the Company Satya Nadella 49 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 47 Executive Vice President , Marketing Chief Marketing Officer Jean-Philippe Courtois 56 Executive Vice President and President and Operations Kathleen T. Hogan 51 Executive Vice President , Human Human Resources Amy E. Hood 45 Executive Vice President , Chief Financial Officer Margaret L. Johnson 55 Executive Vice President , Business Business Development Bradford L. Smith 58 President and Chief Legal Officer Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 25 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Marketing and Operations in July 2016 . Before that he wa President of Microsoft International since 2005 . He wa Chief Executive East , and Africa from 2003 to 2005.He wa Senior Vice and Africa from 2003 to 2005.He wa Senior Vice President and East , and Africa from 2000 to 2003 . He wa and Africa from 2000 to 2003 . He wa Corporate Vice , Worldwide Customer Marketing from 1998 to 2000 . Mr. Courtois Customer Marketing from 1998 to 2000 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Ms. Hogan wa appointed , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms . Hood wa Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha , Business Development in September 2014 . Prior to that Ms. to that Ms. Johnson spent 24 year at Qualcomm in various Chief Legal Officer in September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General Directors of Netflix , Inc. 15 PART I Item 1 EMPLOYEES Inc. 15 PART I Item 1 EMPLOYEES As of June 30 1 EMPLOYEES As of June 30 , 2017 , we employed As of June 30 , 2017 , we employed approximately 124,000 2017 , we employed approximately 124,000 people on a full-time basis on a full-time basis , 73,000 in the U.S. and 51,000 73,000 in the U.S. and 51,000 internationally . Of the total the total employed people , 39,000 were in operation , including , and consulting service ; 40,000 were in product research and product research and development ; 34,000 were in sale and marketing sale and marketing ; and 11,000 were in general and administration in the addition of approximately 11,000 people in fiscal year 2017 11,000 people in fiscal year 2017 . Certain of our employee Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 16 PART I Item 1A ITEM . 16 PART I Item 1A ITEM 1A . RIS K PART I Item 1A ITEM 1A . RIS K FACTORS Our consumer under this model . 17 PART I Item 1A • . 17 PART I Item 1A • Other competitor develop and Azure Services platform , Office 365 , other cloud-based offering , product , service , and 18 PART I Item 1A distr and 18 PART I Item 1A distr ibution channel investment for for our user installing Windows 10 . However , negative upgrade affect the reception of Windows 10 in the marketplace and could , we anticipate that Windows 10 will enable new post-license monetization , and management in Windows 10 are subject to regulatory review business strategy . In December 2016 , we completed our acquisition acquisition of LinkedIn for $ 27.0 billion . The LinkedIn acquisition fourth quarter of fiscal year 2015 , we recorded a $ , we recorded a $ 5.1 billion charge for the impairment of goodwill and a $ 2.2 billion charge for the impairment fourth quarter of fiscal year 2016 we recorded a $ 480 2016 we recorded a $ 480 million charge for the impairment could adversely affect revenue . 19 PART I Item 1A We . 19 PART I Item 1A We may not receive expected a new threat emerge . 20 PART I Item 1A Security . 20 PART I Item 1A Security of our product , Microsoft Account service , Office 365 , OneDrive , SharePoint Online result and financial condition . 21 PART I Item 1A Government . 21 PART I Item 1A Government litigation and regulatory activity product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may ability to realize anticipated Windows 10 post-sale monetization opportunity may be Sudan , and Syria . 22 PART I Item 1A Other . 22 PART I Item 1A Other regulatory area that may a new framework in July 2016 that provides a mechanism for across the Atlantic . In 2016 , the EU adopted a which becomes effective in May 2018 . The law requires firm monetary penalty of up to 4 % of worldwide revenue . product release such a Windows 10 , significant business transaction , that determination is made . 23 PART I Item 1A We . 23 PART I Item 1A We earn a significant amount customer are located in over 200 country and a significant part on our operating result . 24 PART I Item 1A Abrupt . 24 PART I Item 1A Abrupt political change , terrorist impact revenue . In July 2017 , we announced plan to could be adversely impacted . 25 PART I Item 1B , . 25 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS the SEC that were issued 180 day or more preceding the end of our fiscal year 2017 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 500 acre of land we own ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . In fiscal year ) . In fiscal year 2017 , the acquisition of LinkedIn and internationally a of June 30 , 2017 : ( Square a of June 30 , 2017 : ( Square foot in Location Owned Leased Total U.S. 17 13 30 International 6 12 Owned Leased Total U.S. 17 13 30 International 6 12 18 Leased Total U.S. 17 13 30 International 6 12 18 Total U.S. 17 13 30 International 6 12 18 Total 23 25 17 13 30 International 6 12 18 Total 23 25 48 13 30 International 6 12 18 Total 23 25 48 ITEM International 6 12 18 Total 23 25 48 ITEM 3 . 6 12 18 Total 23 25 48 ITEM 3 . LEGAL 12 18 Total 23 25 48 ITEM 3 . LEGAL PROCEEDINGS Total 23 25 48 ITEM 3 . LEGAL PROCEEDINGS While not annual report will continue through 2020 . During fiscal year 2017 2020 . During fiscal year 2017 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU Board annually . See Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SA FETY DISCLOSURES FETY DISCLOSURES Not applicable . 26 PART II Item 5 PAR . 26 PART II Item 5 PAR T II ITEM 5 5 PAR T II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 31 , 2017 , there were . On July 31 , 2017 , there were 101,825 registered , 2017 , there were 101,825 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2017 30 Fiscal Year Fiscal Year 2017 High $ 58.70 $ 64.10 Fiscal Year 2017 High $ 58.70 $ 64.10 $ 66.19 $ 2017 High $ 58.70 $ 64.10 $ 66.19 $ 72.89 $ $ 58.70 $ 64.10 $ 66.19 $ 72.89 $ 72.89 Low $ 64.10 $ 66.19 $ 72.89 $ 72.89 Low 50.39 56.32 $ 66.19 $ 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 $ 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 Fiscal 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 Fiscal Year $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 Fiscal Year 2016 72.89 Low 50.39 56.32 61.95 64.85 50.39 Fiscal Year 2016 High Low 50.39 56.32 61.95 64.85 50.39 Fiscal Year 2016 High $ 61.95 64.85 50.39 Fiscal Year 2016 High $ 48.41 $ 56.85 Fiscal Year 2016 High $ 48.41 $ 56.85 $ 55.64 $ 2016 High $ 48.41 $ 56.85 $ 55.64 $ 56.77 $ $ 48.41 $ 56.85 $ 55.64 $ 56.77 $ 56.85 Low $ 56.85 $ 55.64 $ 56.77 $ 56.85 Low 39.72 43.75 $ 55.64 $ 56.77 $ 56.85 Low 39.72 43.75 48.19 48.04 $ 56.77 $ 56.85 Low 39.72 43.75 48.19 48.04 39.72 DIVIDENDS 56.77 $ 56.85 Low 39.72 43.75 48.19 48.04 39.72 DIVIDENDS AND $ 56.85 Low 39.72 43.75 48.19 48.04 39.72 DIVIDENDS AND SHARE 56.85 Low 39.72 43.75 48.19 48.04 39.72 DIVIDENDS AND SHARE REPURCHASES Low 39.72 43.75 48.19 48.04 39.72 DIVIDENDS AND SHARE REPURCHASES See AND SHARE REPURCHASES See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding fourth quarter of fiscal year 2017 : Period Total Number of ( in million ) April 1 , 2017 – April 30 million ) April 1 , 2017 – April 30 , 2017 1 , 2017 – April 30 , 2017 5,241,413 $ 66.17 2017 – April 30 , 2017 5,241,413 $ 66.17 5,241,413 $ – April 30 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 30 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 May 1 , 2017 5,241,413 $ 66.17 5,241,413 $ 38,053 May 1 , 5,241,413 $ 66.17 5,241,413 $ 38,053 May 1 , 2017 – 66.17 5,241,413 $ 38,053 May 1 , 2017 – May 31 $ 38,053 May 1 , 2017 – May 31 , 2017 1 , 2017 – May 31 , 2017 9,635,700 $ 68.77 2017 – May 31 , 2017 9,635,700 $ 68.77 9,635,700 $ – May 31 , 2017 9,635,700 $ 68.77 9,635,700 $ 37,391 31 , 2017 9,635,700 $ 68.77 9,635,700 $ 37,391 June 1 , 2017 9,635,700 $ 68.77 9,635,700 $ 37,391 June 1 , 9,635,700 $ 68.77 9,635,700 $ 37,391 June 1 , 2017 – 68.77 9,635,700 $ 37,391 June 1 , 2017 – June 30 $ 37,391 June 1 , 2017 – June 30 , 2017 1 , 2017 – June 30 , 2017 8,369,066 $ 70.56 2017 – June 30 , 2017 8,369,066 $ 70.56 8,369,066 $ – June 30 , 2017 8,369,066 $ 70.56 8,369,066 $ 36,800 30 , 2017 8,369,066 $ 70.56 8,369,066 $ 36,800 23,246,179 23,246,179 , 2017 8,369,066 $ 70.56 8,369,066 $ 36,800 23,246,179 23,246,179 All 8,369,066 $ 70.56 8,369,066 $ 36,800 23,246,179 23,246,179 All repurchase were $ 70.56 8,369,066 $ 36,800 23,246,179 23,246,179 All repurchase were made 70.56 8,369,066 $ 36,800 23,246,179 23,246,179 All repurchase were made using or pursuant to a Rule 10b5-1 trading plan . The above vesting of stock award . 27 PART II Item 6 ITEM . 27 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2017 ( a ) Year Ended June 30 , 2017 ( a ) 2016 2015 , 2017 ( a ) 2016 2015 2014 ( h ) 2017 ( a ) 2016 2015 2014 ( h ) 2013 ( a ) 2016 2015 2014 ( h ) 2013 Revenue 2015 2014 ( h ) 2013 Revenue $ 89,950 ( b h ) 2013 Revenue $ 89,950 ( b ) $ 85,320 89,950 ( b ) $ 85,320 ( d ) $ 93,580 85,320 ( d ) $ 93,580 $ 86,833 $ 77,849 Gross d ) $ 93,580 $ 86,833 $ 77,849 Gross margin 55,689 $ 93,580 $ 86,833 $ 77,849 Gross margin 55,689 ( b 86,833 $ 77,849 Gross margin 55,689 ( b ) 52,540 ( margin 55,689 ( b ) 52,540 ( d ) 60,542 59,755 ) 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 52,540 ( d ) 60,542 59,755 57,464 Operating income 22,326 ( ( d ) 60,542 59,755 57,464 Operating income 22,326 ( b 60,542 59,755 57,464 Operating income 22,326 ( b ) ( c b ) ( c ) 20,182 ( d ) ( e d ) ( e ) 18,161 ( g ) 27,759 26,764 ) 18,161 ( g ) 27,759 26,764 ( i ) Net 18,161 ( g ) 27,759 26,764 ( i ) Net income ( i ) Net income 21,204 ( b ) ( c b ) ( c ) 16,798 ( d ) ( e d ) ( e ) 12,193 ( g ) 22,074 21,863 ) 12,193 ( g ) 22,074 21,863 ( i ) Diluted 12,193 ( g ) 22,074 21,863 ( i ) Diluted earnings ) Diluted earnings per share 2.71 ( b ) ( c b ) ( c ) 2.10 ( d ) ( e d ) ( e ) 1.48 ( g ) 2.63 2.58 ) 1.48 ( g ) 2.63 2.58 ( i ) Cash 1.48 ( g ) 2.63 2.58 ( i ) Cash dividend Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash dividend declared per share 1.56 1.44 1.24 1.12 0.92 Cash , declared per share 1.56 1.44 1.24 1.12 0.92 Cash , cash per share 1.56 1.44 1.24 1.12 0.92 Cash , cash equivalent share 1.56 1.44 1.24 1.12 0.92 Cash , cash equivalent , equivalent , and short-term investment 132,981 113,240 96,526 85,709 77,022 Total , and short-term investment 132,981 113,240 96,526 85,709 77,022 Total asset and short-term investment 132,981 113,240 96,526 85,709 77,022 Total asset 241,086 short-term investment 132,981 113,240 96,526 85,709 77,022 Total asset 241,086 193,468 investment 132,981 113,240 96,526 85,709 77,022 Total asset 241,086 193,468 ( 96,526 85,709 77,022 Total asset 241,086 193,468 ( f ) 174,303 85,709 77,022 Total asset 241,086 193,468 ( f ) 174,303 ( 241,086 193,468 ( f ) 174,303 ( f ) 170,569 ( ) 174,303 ( f ) 170,569 ( f ) 140,890 ( ) 170,569 ( f ) 140,890 ( f ) Long-term obligation ( f ) Long-term obligation 104,165 62,114 ( f ) 44,574 f ) Long-term obligation 104,165 62,114 ( f ) 44,574 ( 104,165 62,114 ( f ) 44,574 ( f ) 35,285 ( ) 44,574 ( f ) 35,285 ( f ) 24,531 ( ) 35,285 ( f ) 24,531 ( f ) Stockholders ’ f ) Stockholders ’ equity 72,394 71,997 80,083 89,784 78,944 ( ) Stockholders ’ equity 72,394 71,997 80,083 89,784 78,944 ( a Stockholders ’ equity 72,394 71,997 80,083 89,784 78,944 ( a ) ’ equity 72,394 71,997 80,083 89,784 78,944 ( a ) On equity 72,394 71,997 80,083 89,784 78,944 ( a ) On December ( a ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation net revenue deferral from Windows 10 of $ 6.7 billion , from Windows 10 of $ 6.7 billion , which decreased operating EPS ” ) by $ 6.7 billion , $ 4.4 billion $ 6.7 billion , $ 4.4 billion , and $ 0.57 4.4 billion , and $ 0.57 , respectively . ( c ( c ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.03 243 million , and $ 0.03 , respectively . ( d net revenue deferral from Windows 10 of $ 6.6 billion , from Windows 10 of $ 6.6 billion , which decreased operating and diluted EPS by $ 6.6 billion , $ 4.6 billion $ 6.6 billion , $ 4.6 billion , and $ 0.58 4.6 billion , and $ 0.58 , respectively . ( e ( e ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . ( f accounting standard in fiscal year 2017 related to balance sheet classification issuance cost . See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ( g ) Includes $ 7.5 billion of goodwill and asset phone business , and $ 2.5 billion of integration and restructuring and diluted EPS by $ 10.0 billion , $ 9.5 billion $ 10.0 billion , $ 9.5 billion , and $ 1.15 9.5 billion , and $ 1.15 , respectively . ( h ( h ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all the European Commission in March 2013 which decreased operating income and and net income by $ 733 million ( €561 million ) and diluted EPS by $ 0.09 . Also includes a charge fourth quarter of fiscal year 2013 , which decreased operating income and diluted EPS by $ 900 million , $ 596 million $ 900 million , $ 596 million , and $ 0.07 596 million , and $ 0.07 , respectively . 28 PART $ 0.07 , respectively . 28 PART II Item 7 ITEM . 28 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . OVERVIEW Microsoft is Highlights * from fiscal year 2017 included : • Commercial cloud rate * * exceeded $ 18.9 billion . • Office Commercial • Office Commercial revenue grew 6 % , driven by Office % , driven by Office 365 commercial revenue growth of 46 365 commercial revenue growth of 46 % . • Office Consumer • Office Consumer revenue grew 14 % , and Office 365 14 % , and Office 365 consumer subscriber increased to 27.0 365 consumer subscriber increased to 27.0 million . • Microsoft Dynamics • Microsoft Dynamics revenue grew 9 % , driven by Dynamics % , driven by Dynamics 365 revenue growth of 78 % Dynamics 365 revenue growth of 78 % . • LinkedIn contributed LinkedIn contributed revenue of $ 2.3 billion . • Server product and cloud service revenue grew 13 % , driven by Microsoft Microsoft Azure revenue growth of 99 % . • Enterprise Services • Enterprise Services revenue decreased 2 % , driven by a OEM ” ) revenue increased 3 % . • Windows Commercial • Windows Commercial revenue grew 5 % , driven by multi-year • Microsoft Surface revenue decreased 2 % , driven by a traffic acquisition cost , grew 9 % . • Gaming revenue quarter by twelve for Office 365 commercial , Azure , Dynamics commercial , Azure , Dynamics 365 , and other cloud property cloud property . On December 8 , 2016 , we completed . On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . LinkedIn ha been of acquisition . See Note 9 – Business Combinations in the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . further discussion . In November 2016 , we completed the sale feature phone business for $ 350 million . 29 PART II for $ 350 million . 29 PART II Item 7 In . 29 PART II Item 7 In July 2015 , we II Item 7 In July 2015 , we announced a plan align resource . In May 2016 , we announced pl an associated expense in fiscal year 2016 and 2017 . Industry Trends in fiscal year 2016 and 2017 . Industry Trends Our industry foreign currency throughout fiscal year 2015 , 2016 , and 2017 throughout fiscal year 2015 , 2016 , and 2017 , negatively 2015 , 2016 , and 2017 , negatively impacted reported revenue ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) . Seasonality Our revenue segment is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 30 PART II this Form 10-K ) . 30 PART II Item 7 SUMMARY . 30 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2017 2016 2015 Percentage Change 2017 per share amount ) 2017 2016 2015 Percentage Change 2017 Versus share amount ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 Versus 2015 2017 Versus 2016 Percentage Change 2016 Versus 2015 Revenue $ 89,950 2016 Percentage Change 2016 Versus 2015 Revenue $ 89,950 $ 85,320 2016 Versus 2015 Revenue $ 89,950 $ 85,320 $ 93,580 5 2015 Revenue $ 89,950 $ 85,320 $ 93,580 5 % ( $ 89,950 $ 85,320 $ 93,580 5 % ( 9 ) 89,950 $ 85,320 $ 93,580 5 % ( 9 ) % $ 93,580 5 % ( 9 ) % Gross margin 55,689 9 ) % Gross margin 55,689 52,540 60,542 6 % ( ) % Gross margin 55,689 52,540 60,542 6 % ( 13 % Gross margin 55,689 52,540 60,542 6 % ( 13 ) Gross margin 55,689 52,540 60,542 6 % ( 13 ) % 52,540 60,542 6 % ( 13 ) % Operating income 22,326 13 ) % Operating income 22,326 20,182 18,161 11 % 11 ) % Operating income 22,326 20,182 18,161 11 % 11 % % Operating income 22,326 20,182 18,161 11 % 11 % Diluted Operating income 22,326 20,182 18,161 11 % 11 % Diluted earnings 22,326 20,182 18,161 11 % 11 % Diluted earnings per share % Diluted earnings per share 2.71 2.10 1.48 29 % 42 Diluted earnings per share 2.71 2.10 1.48 29 % 42 % earnings per share 2.71 2.10 1.48 29 % 42 % Fiscal per share 2.71 2.10 1.48 29 % 42 % Fiscal year 2.71 2.10 1.48 29 % 42 % Fiscal year 2017 compared % 42 % Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Revenue increased $ 4.6 billion year 2016 Revenue increased $ 4.6 billion or 5 % , increased $ 4.6 billion or 5 % , driven by growth unfavorable foreign currency impact of 2 % . Gross margin increased . Gross margin increased $ 3.1 billion or 6 % , increased $ 3.1 billion or 6 % , due to growth unfavorable foreign currency impact of 2 % . Gross margin percentage Gross margin percentage includes a 5-point improvement in commercial cloud gross primarily across Azure and Office 365 . Operating income increased $ . Operating income increased $ 2.1 billion or 11 % , increased $ 2.1 billion or 11 % , primarily due to an operating loss of $ 948 million related to the acquisition of LinkedIn , including $ 866 million of amortization of intangible unfavorable foreign currency impact of 4 % . Key change in Cost of revenue increased $ 1.5 billion or 5 % , increased $ 1.5 billion or 5 % , mainly due to and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to and marketing expense increased $ 842 million or 6 % , increased $ 842 million or 6 % , primarily due to and restructuring expense decreased $ 804 million , driven by prior EPS ” ) wa $ 2.71 for fiscal year 2017 . $ 2.71 for fiscal year 2017 . Current year diluted EPS net revenue deferral from Windows 10 and restructuring expense , which in diluted EPS of $ 0.60 . Diluted EPS wa $ . Diluted EPS wa $ 2.10 for fiscal year 2016 . $ 2.10 for fiscal year 2016 . Prior year diluted EPS net revenue deferral from Windows 10 and impairment and restructuring expense in diluted EPS of $ 0.69 . Fiscal year 2016 compared $ 0.69 . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Revenue decreased $ 8.3 billion year 2015 Revenue decreased $ 8.3 billion or 9 % , decreased $ 8.3 billion or 9 % , primarily due to net revenue deferral from Windows 10 of $ 6.6 billion and from Windows 10 of $ 6.6 billion and an unfavorable foreign currency impact of approximately $ 3.8 billion or 4 % . approximately $ 3.8 billion or 4 % . Windows 10 revenue or 4 % . Windows 10 revenue is primarily recognized at Office and Dynamics revenue . 31 PART II Item 7 Operating . 31 PART II Item 7 Operating income increased $ 2.0 7 Operating income increased $ 2.0 billion or 11 % , increased $ 2.0 billion or 11 % , primarily due to . Gross margin decreased $ 8.0 billion or 13 % , decreased $ 8.0 billion or 13 % , driven by the currency impact of approximately $ 3.3 billion or 5 % . approximately $ 3.3 billion or 5 % . Productivity and Business Cost of revenue decreased $ 258 million or 1 % , decreased $ 258 million or 1 % , mainly due to and restructuring expense decreased $ 8.9 billion , primarily driven by and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , driven by a foreign currency impact of approximately 2 % . Diluted EPS wa . Diluted EPS wa $ 2.10 for fiscal year 2016 . $ 2.10 for fiscal year 2016 . Diluted EPS wa negatively net revenue deferral from Windows 10 and impairment , integration , to diluted EPS of $ 0.69 . Diluted EPS wa $ . Diluted EPS wa $ 1.48 for fiscal year 2015 . $ 1.48 for fiscal year 2015 . Diluted EPS wa negatively to diluted EPS of $ 1.15 . SEGMENT RESULTS OF OPERATIONS million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 Versus 2015 2017 Versus 2016 Percentage Change 2016 Versus 2015 Revenue Productivity and 2016 Percentage Change 2016 Versus 2015 Revenue Productivity and Business Processes Productivity and Business Processes $ 30,444 $ 26,487 $ 26,430 15 Business Processes $ 30,444 $ 26,487 $ 26,430 15 % 0 $ 30,444 $ 26,487 $ 26,430 15 % 0 % Intelligent 30,444 $ 26,487 $ 26,430 15 % 0 % Intelligent Cloud 26,487 $ 26,430 15 % 0 % Intelligent Cloud 27,440 25,042 % 0 % Intelligent Cloud 27,440 25,042 23,715 10 % 6 0 % Intelligent Cloud 27,440 25,042 23,715 10 % 6 % % Intelligent Cloud 27,440 25,042 23,715 10 % 6 % More Intelligent Cloud 27,440 25,042 23,715 10 % 6 % More Personal 27,440 25,042 23,715 10 % 6 % More Personal Computing 38,773 6 % More Personal Computing 38,773 40,434 43,435 ( 4 ) % More Personal Computing 38,773 40,434 43,435 ( 4 ) % More Personal Computing 38,773 40,434 43,435 ( 4 ) % ( Computing 38,773 40,434 43,435 ( 4 ) % ( 7 ) ( 4 ) % ( 7 ) % Corporate and Other % Corporate and Other ( 6,707 ) ( 6,643 ) 0 Other ( 6,707 ) ( 6,643 ) 0 ( 1 ) 6,707 ) ( 6,643 ) 0 ( 1 ) % * ( 6,643 ) 0 ( 1 ) % * Total $ ) % * Total $ 89,950 $ 85,320 $ 93,580 5 * Total $ 89,950 $ 85,320 $ 93,580 5 % ( $ 89,950 $ 85,320 $ 93,580 5 % ( 9 ) 89,950 $ 85,320 $ 93,580 5 % ( 9 ) % $ 93,580 5 % ( 9 ) % Operating income ( Productivity and Business Processes $ 11,913 $ 12,418 $ 13,274 ( Business Processes $ 11,913 $ 12,418 $ 13,274 ( 4 ) $ 11,913 $ 12,418 $ 13,274 ( 4 ) % ( $ 12,418 $ 13,274 ( 4 ) % ( 6 ) ( 4 ) % ( 6 ) % Intelligent Cloud 9,138 6 ) % Intelligent Cloud 9,138 9,315 9,803 ( 2 ) ) % Intelligent Cloud 9,138 9,315 9,803 ( 2 ) % % Intelligent Cloud 9,138 9,315 9,803 ( 2 ) % ( Cloud 9,138 9,315 9,803 ( 2 ) % ( 5 ) ( 2 ) % ( 5 ) % More Personal Computing ) % More Personal Computing 8,288 6,202 5,095 34 % 22 % More Personal Computing 8,288 6,202 5,095 34 % 22 % More Personal Computing 8,288 6,202 5,095 34 % 22 % Corporate Personal Computing 8,288 6,202 5,095 34 % 22 % Corporate and 8,288 6,202 5,095 34 % 22 % Corporate and Other ( % Corporate and Other ( 7,013 ) ( 7,753 ) ( Other ( 7,013 ) ( 7,753 ) ( 10,011 ) * ) ( 7,753 ) ( 10,011 ) * * Total $ ) * * Total $ 22,326 $ 20,182 $ 18,161 11 * Total $ 22,326 $ 20,182 $ 18,161 11 % 11 $ 22,326 $ 20,182 $ 18,161 11 % 11 % * 22,326 $ 20,182 $ 18,161 11 % 11 % * Not 20,182 $ 18,161 11 % 11 % * Not meaningful Reportable meaningful Reportable Segments Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Productivity and Business Processes Revenue Business Processes Revenue increased $ 4.0 billion or 15 % , increased $ 4.0 billion or 15 % , driven by the • LinkedIn revenue wa $ 2.3 billion , primarily comprised of Office Commercial revenue increased $ 1.2 billion or 6 % , increased $ 1.2 billion or 6 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial . 32 PART II to Office 365 commercial . 32 PART II Item 7 • . 32 PART II Item 7 • Office Consumer revenue increased Office Consumer revenue increased $ 425 million or 14 % , increased $ 425 million or 14 % , driven by higher by higher revenue from Office 365 consumer , mainly due to . • Dynamics revenue increased 9 % , primarily due to to higher revenue from Dynamics 365 . Operating income decreased $ . Operating income decreased $ 505 million or 4 % , decreased $ 505 million or 4 % , primarily due to unfavorable foreign currency impact of 3 % . • Operating expense • Operating expense increased $ 2.4 billion or 26 % , increased $ 2.4 billion or 26 % , mainly due to . Operating expense included $ 2.3 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired and marketing expense increased $ 1.2 billion or 24 % , increased $ 1.2 billion or 24 % , research and development and development expense increased $ 955 million or 35 % , increased $ 955 million or 35 % , and general and and administrative expense increased $ 212 million or 14 % . increased $ 212 million or 14 % . • Gross margin • Gross margin increased $ 1.8 billion or 9 % , increased $ 1.8 billion or 9 % , primarily due to Cost of revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.4 billion or 10 % , increased $ 2.4 billion or 10 % , primarily due to cloud service revenue grew $ 2.5 billion or 13 % , grew $ 2.5 billion or 13 % , driven by Azure by Azure revenue growth of 99 % and server product licensed licensed on-premises revenue growth of 4 % . • Enterprise Services • Enterprise Services revenue decreased 2 % , driven by a . Operating income decreased $ 177 million or 2 % , decreased $ 177 million or 2 % , primarily due to unfavorable foreign currency impact of 3 % . • Operating expense • Operating expense increased $ 973 million or 11 % , increased $ 973 million or 11 % , driven by investment and marketing expense increased $ 547 million or 13 % , increased $ 547 million or 13 % , research and development and development expense increased $ 468 million or 14 % , increased $ 468 million or 14 % , and general and and administrative expense decreased $ 42 million or 3 % . decreased $ 42 million or 3 % . • Gross margin • Gross margin increased $ 796 million or 4 % , increased $ 796 million or 4 % , driven by growth unfavorable foreign currency impact of 2 % . Gross margin percentage Personal Computing Revenue decreased $ 1.7 billion or 4 % , decreased $ 1.7 billion or 4 % , mainly due to • Windows revenue increased $ 442 million or 3 % , increased $ 442 million or 3 % , mainly due to . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 5 % , outperforming the commercial Windows OEM non-Pro revenue grew 1 % , outperforming the consumer . Windows Commercial revenue grew 5 % , driven by multi-year Search advertising revenue increased $ 791 million or 15 % . increased $ 791 million or 15 % . Search advertising revenue traffic acquisition cost , increased 9 % , primarily driven by . Xbox hardware revenue decreased 21 % , mainly due to software and service revenue increased 11 % , driven by a and revenue per transaction . 33 PART II Item 7 • . 33 PART II Item 7 • Surface revenue decreased $ • Surface revenue decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to • Phone revenue decreased $ 2.8 billion . Operating income increased . Operating income increased $ 2.1 billion or 34 % , increased $ 2.1 billion or 34 % , due to lower unfavorable foreign currency impact of 4 % . • Operating expense • Operating expense decreased $ 1.5 billion or 12 % , decreased $ 1.5 billion or 12 % , driven by a and marketing expense decreased $ 892 million or 16 % , decreased $ 892 million or 16 % , research and development and development expense decreased $ 374 milli on or 6 % $ 374 milli on or 6 % , and general and and administrative expense decreased $ 252 million or 16 % . decreased $ 252 million or 16 % . • Gross margin • Gross margin increased $ 568 million or 3 % , increased $ 568 million or 3 % , driven by growth unfavorable foreign currency impact of 2 % . Fiscal year 2016 2 % . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Productivity and Business Processes Productivity foreign currency impact of approximately 6 % . • Office Commercial Office Commercial revenue increased $ 135 million or 1 % , increased $ 135 million or 1 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial and a decline in foreign currency impact of approximately 6 % . • Office Consumer Office Consumer revenue decreased $ 69 million or 2 % , decreased $ 69 million or 2 % , driven by a by higher revenue from Office 365 consumer , mainly due to foreign currency impact of approximately 4 % . • Dynamics revenue . • Dynamics revenue increased 4 % , mainly due to foreign currency impact of approximately 6 % . Productivity and Business Processes operating income decreased $ 856 million or 6 % , decreased $ 856 million or 6 % , driven by lower . Gross margin decreased $ 928 million or 4 % , decreased $ 928 million or 4 % , primarily due to foreign currency impact of approximately 6 % . Cost of revenue Cost of revenue increased $ 985 million or 25 % , increased $ 985 million or 25 % , primarily due to . Operating expense decreased $ 72 million or 1 % , decreased $ 72 million or 1 % , driven by lower and marketing expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , mainly due to Intelligent Cloud revenue increased $ 1.3 billion or 6 % , increased $ 1.3 billion or 6 % , primarily due to foreign currency impact of approximately 5 % . • Server product cloud service revenue grew $ 686 million or 4 % , grew $ 686 million or 4 % , driven by revenue revenue growth from Azure of 113 % , offset in part foreign currency impact of approximately 5 % . • Enterprise Services Enterprise Services revenue grew $ 536 million or 11 % , grew $ 536 million or 11 % , mainly due to foreign currency impact of approximately 5 % . Intelligent Cloud operating Cloud operating income decreased $ 488 million or 5 % , decreased $ 488 million or 5 % , primarily due to . Operating expense increased $ 989 million or 12 % , increased $ 989 million or 12 % , mainly due to and development expense increased $ 567 million or 21 % and increased $ 567 million or 21 % and sale and marketing and marketing expense increased $ 347 million or 9 % , increased $ 347 million or 9 % , driven by increased . Gross margin increased $ 501 million or 3 % , increased $ 501 million or 3 % , driven by revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue increased $ 826 million or 14 % , increased $ 826 million or 14 % , primarily driven by mix of cloud service . 34 PART II Item 7 More . 34 PART II Item 7 More Personal Computing More Personal Personal Computing revenue decreased $ 3.0 billion or 7 % , decreased $ 3.0 billion or 7 % , mainly due to foreign currency impact of approximately 2 % . • Devices revenue • Devices revenue decreased $ 4.0 billion or 33 % , decreased $ 4.0 billion or 33 % , mainly due to . Phone revenue decreased $ 4.2 billion or 56 % , decreased $ 4.2 billion or 56 % , a we sold % , a we sold 13.8 million Microsoft Lumia phone and million Microsoft Lumia phone and 75.5 million other phone in fiscal other phone in fiscal year 2016 , compared with 36.8 million year 2016 , compared with 36.8 million and 126.8 million sold compared with 36.8 million and 126.8 million sold , respectively , respectively , in fiscal year 2015 . Surface revenue increased $ . Surface revenue increased $ 207 million or 5 % , increased $ 207 million or 5 % , primarily driven by the release of Surface Pro 4 and Surface Book in the second quarter of fiscal year 2016 , a well a the a the release of Surface 3 in the fourth quarter of fourth quarter of fiscal year 2015 , offset in part by in revenue from Surface Pro 3 . Devices revenue included an foreign currency impact of approximately 3 % . • Windows revenue • Windows revenue decreased $ 958 million or 5 % , decreased $ 958 million or 5 % , mainly due to . Patent licensing revenue decreased 27 % , due to a . Windows OEM revenue decreased 1 % . Windows OEM Pro Windows OEM Pro revenue declined 6 % , driven by a Windows OEM non-Pro revenue increased 7 % , outperforming the consumer Windows Phone licensing revenue decreased 64 % , driven by the deferred revenue in fiscal year 2015 from Windows Phone 8 . year 2015 from Windows Phone 8 . Windows revenue included an foreign currency impact of approximately 2 % . • Search advertising Search advertising revenue increased $ 1.7 billion or 46 % . increased $ 1.7 billion or 46 % . Search advertising revenue traffic acquisition cost , increased 17 % , primarily driven by foreign currency impact of approximately 2 % . • Gaming revenue • Gaming revenue increased $ 75 million or 1 % , increased $ 75 million or 1 % , primarily due to . Xbox Live revenue increased 17 % , driven by higher . Video game revenue grew 28 % , driven by the by the launch of Halo 5 and sale of Minecraft . gaming franchise , in November 2014 . Xbox hardware revenue decreased . Xbox hardware revenue decreased 16 % , mainly due to and a decline in Xbox 360 console volume , offset in foreign currency impact of approximately 4 % . More Personal Computing Computing operating income increased $ 1.1 billion or 22 % , increased $ 1.1 billion or 22 % , primarily due to . Operating expense decreased $ 2.0 billion or 13 % , decreased $ 2.0 billion or 13 % , mainly due to and marketing expense decreased $ 1.3 billion or 19 % and decreased $ 1.3 billion or 19 % and research and development and development expense decreased $ 676 million or 10 % , decreased $ 676 million or 10 % , driven by a . Gross margin decreased $ 932 million or 5 % , decreased $ 932 million or 5 % , reflecting lower revenue foreign currency impact of approximately 5 % . Cost of revenue Cost of revenue decreased $ 2.1 billion or 9 % , decreased $ 2.1 billion or 9 % , primarily driven by revenue deferral related to Windows 10 . Corporate and Other operating revenue deferral related to Windows 10 and corporate-level activity not specifically restructuring expense . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Revenue decreased $ 64 million year 2016 Revenue decreased $ 64 million , due to an net revenue deferral from Windows 10 . During fiscal year 2017 10 . During fiscal year 2017 and 2016 , we deferred During fiscal year 2017 and 2016 , we deferred net revenue deferred net revenue from Windows 10 of $ 6.7 billion and from Windows 10 of $ 6.7 billion and $ 6.6 billion $ 6.7 billion and $ 6.6 billion , respectively . Corporate Other operating loss decreased $ 740 million , primarily due to primarily due to an $ 804 million reduction in impairment , and marketing restructuring plan . 35 PART II Item 7 Fiscal . 35 PART II Item 7 Fiscal year 2016 compared with II Item 7 Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Corporate and Other revenue decreased and Other revenue decreased $ 6.6 billion , due to the net revenue deferral from Windows 10 . Corporate and Other operating Other operating loss decreased $ 2.3 billion , primarily due to primarily due to an $ 8.9 billion reduction in impairment , million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 Versus 2015 2017 Versus 2016 Percentage Change 2016 Versus 2015 Research and development 2016 Percentage Change 2016 Versus 2015 Research and development $ 13,037 2015 Research and development $ 13,037 $ 11,988 $ 12,046 9 and development $ 13,037 $ 11,988 $ 12,046 9 % 0 $ 13,037 $ 11,988 $ 12,046 9 % 0 % As 13,037 $ 11,988 $ 12,046 9 % 0 % As a 11,988 $ 12,046 9 % 0 % As a percent of As a percent of revenue 14 % 14 % 13 % percent of revenue 14 % 14 % 13 % 0ppt 1ppt revenue 14 % 14 % 13 % 0ppt 1ppt Research and % 14 % 13 % 0ppt 1ppt Research and development expense 14 % 13 % 0ppt 1ppt Research and development expense include service content . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Research and development expense increased and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to expense . Expenses included $ 745 million related to our acquisition of LinkedIn . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Research and development expense decreased and development expense decreased $ 58 million , primarily due to million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 Versus 2015 2017 Versus 2016 Percentage Change 2016 Versus 2015 Sales and marketing 2016 Percentage Change 2016 Versus 2015 Sales and marketing $ 15,539 2015 Sales and marketing $ 15,539 $ 14,697 $ 15,713 6 and marketing $ 15,539 $ 14,697 $ 15,713 6 % ( $ 15,539 $ 14,697 $ 15,713 6 % ( 6 ) 15,539 $ 14,697 $ 15,713 6 % ( 6 ) % $ 15,713 6 % ( 6 ) % As a percent As a percent of revenue 17 % 17 % 17 % percent of revenue 17 % 17 % 17 % 0ppt 0ppt revenue 17 % 17 % 17 % 0ppt 0ppt Sales and % 17 % 17 % 0ppt 0ppt Sales and marketing expense 17 % 17 % 0ppt 0ppt Sales and marketing expense include other program . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Sales and marketing expense increased and marketing expense increased $ 842 million or 6 % , increased $ 842 million or 6 % , primarily due to , commercial , and Windows 10 . Expenses included $ 1.3 10 . Expenses included $ 1.3 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired of acquired intangible asset . 36 PART II Item 7 Fiscal . 36 PART II Item 7 Fiscal year 2016 compared with II Item 7 Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Sales and marketing expense decreased and marketing expense decreased $ 1.0 billion or 6 % , decreased $ 1.0 billion or 6 % , primarily due to foreign currency impact of approximately 2 % . General and Administrative million , except percentage ) 2017 2016 2015 Percentage Change 2017 , except percentage ) 2017 2016 2015 Percentage Change 2017 Versus except percentage ) 2017 2016 2015 Percentage Change 2017 Versus 2016 2017 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 2015 Percentage Change 2017 Versus 2016 Percentage Change 2016 Versus 2015 2017 Versus 2016 Percentage Change 2016 Versus 2015 General and administrative 2016 Percentage Change 2016 Versus 2015 General and administrative $ 4,481 2015 General and administrative $ 4,481 $ 4,563 $ 4,611 ( and administrative $ 4,481 $ 4,563 $ 4,611 ( 2 ) $ 4,481 $ 4,563 $ 4,611 ( 2 ) % ( $ 4,563 $ 4,611 ( 2 ) % ( 1 ) ( 2 ) % ( 1 ) % As a percent As a percent of revenue 5 % 5 % 5 % percent of revenue 5 % 5 % 5 % 0ppt 0ppt revenue 5 % 5 % 5 % 0ppt 0ppt General and % 5 % 5 % 0ppt 0ppt General and administrative expense 5 % 5 % 0ppt 0ppt General and administrative expense include administrative fee . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 General and administrative expense decreased and administrative expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to expense . Expenses included $ 294 million related to our acquisition of LinkedIn . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 General and administrative expense decreased and administrative expense decreased $ 48 million or 1 % , decreased $ 48 million or 1 % , primarily due to foreign currency impact of approximately 2 % . IMPAIRMENT , INTEGRATION ” ) . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Impairment , integration , and and restructuring expense were $ 306 million for fiscal year 2017 306 million for fiscal year 2017 , compared to $ 1.1 2017 , compared to $ 1.1 billion for fiscal year 2016 1.1 billion for fiscal year 2016 . During fiscal year 2017 2016 . During fiscal year 2017 , we recorded $ 306 2017 , we recorded $ 306 million of employee severance expense plan . During fiscal year 2016 , we recorded $ 630 2016 , we recorded $ 630 million of asset impairment charge . We also recorded $ 480 million of restructuring charge , restructuring plan . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Impairment , integration , and and restructuring expense were $ 1.1 billion for fiscal year 2016 1.1 billion for fiscal year 2016 , compared to $ 10.0 2016 , compared to $ 10.0 billion for fiscal year 2015 10.0 billion for fiscal year 2015 . 37 PART II Item for fiscal year 2015 . 37 PART II Item 7 During . 37 PART II Item 7 During fiscal year 2015 , Item 7 During fiscal year 2015 , we recognized impairment charge recognized impairment charge of $ 7.5 billion related to our phone impairment test a of May 1 , 2015 indicated that the a of May 1 , 2015 indicated that the carrying value goodwill impairment charge of $ 5.1 billion , reducing our Phone reporting unit goodwill from $ 5.4 billion to $ 116 million $ 5.4 billion to $ 116 million , net of foreign an impairment charge of $ 2.2 billion related to the write-down . Restructuring charge were $ 2.1 billion , including employee severance acquisition of NDS were $ 435 million in fiscal year 2015 435 million in fiscal year 2015 . OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2017 2016 2015 Dividends Year Ended June 30 , 2017 2016 2015 Dividends and interest Ended June 30 , 2017 2016 2015 Dividends and interest income June 30 , 2017 2016 2015 Dividends and interest income $ Dividends and interest income $ 1,387 $ 903 $ 766 Interest interest income $ 1,387 $ 903 $ 766 Interest expense ( $ 1,387 $ 903 $ 766 Interest expense ( 2,222 ) $ 766 Interest expense ( 2,222 ) ( 1,243 ) ( expense ( 2,222 ) ( 1,243 ) ( 781 ) Net ) ( 1,243 ) ( 781 ) Net recognized gain on Net recognized gain on investment 2,583 668 716 Net loss on recognized gain on investment 2,583 668 716 Net loss on derivative gain on investment 2,583 668 716 Net loss on derivative ( Net loss on derivative ( 510 ) ( 443 ) ( derivative ( 510 ) ( 443 ) ( 423 ) Net ) ( 443 ) ( 423 ) Net gain ( loss on foreign currency remeasurements ( 164 ) ( 121 ) 335 remeasurements ( 164 ) ( 121 ) 335 Other ( 251 164 ) ( 121 ) 335 Other ( 251 ) ( 121 ) 335 Other ( 251 ) ( 195 ) ( Other ( 251 ) ( 195 ) ( 267 ) Total ) ( 195 ) ( 267 ) Total $ 823 $ ( 267 ) Total $ 823 $ ( 431 ) $ Total $ 823 $ ( 431 ) $ 346 We use $ ( 431 ) $ 346 We use derivative instrument to rate change . Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Dividends and interest income increased and divestiture . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Dividends and interest income increased contract . For fiscal year 2016 , other reflects recognized loss . INCOME TAXES Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Our effective tax rate for tax rate for fiscal year 2017 and 2016 wa 8 % for fiscal year 2017 and 2016 wa 8 % and 15 year 2017 and 2016 wa 8 % and 15 % , 2016 wa 8 % and 15 % , respectively . The tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the of our income before income 38 PART II Item 7 tax income 38 PART II Item 7 tax between the U. S. country . The fiscal year 2016 effective tax rate included the tax rate in fiscal year 2017 reflects the r ealization of center . In fiscal year 2017 , our U.S. income before before income tax wa $ 453 million and our foreign income before income tax wa $ 22.7 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2017 U.S. income before income tax before income tax by $ 6.4 billion and foreign income before before income tax by $ 317 million . In fiscal year million . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss by $ 6.0 2016 U.S. loss by $ 6.0 billion and foreign income before before income tax by $ 588 million . Tax contingency and income tax liability were $ 13.5 billion and $ 11.8 billion $ 13.5 billion and $ 11.8 billion a of June 30 11.8 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , and are ) audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and settled a portion IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit the IRS for tax year 2010 to 2016 . In February for tax year 2010 to 2016 . In February 2012 , to 2016 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2017 , the primary As of June 30 , 2017 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are financial statement . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Our effective tax rate for tax rate for fiscal year 2016 and 2015 wa 15 % for fiscal year 2016 and 2015 wa 15 % and 34 year 2016 and 2015 wa 15 % and 34 % , 2015 wa 15 % and 34 % , respectively . Our tax rate for fiscal year 2016 compared to fiscal year 2015 2016 compared to fiscal year 2015 wa primarily due to change related to sale of Windows 10 , tax benefit from the affiliate . The fiscal year 2015 effective tax rate included the center . In fiscal year 2016 , our U.S. loss before before income tax wa $ 325 million and our foreign income before income tax wa $ 20.1 billion . Net revenue deferral related to sale of Windows 10 negatively impacted our fiscal year negatively impacted our fiscal year 2016 U.S. loss before income tax before income tax by $ 6.0 billion and foreign income before before income tax by $ 588 million . In fiscal year million . In fiscal year 2015 , our U.S. income before before income tax wa $ 7.4 billion and our foreign income before income tax wa $ 11.1 billion . Impairment , integration business decreased our fiscal year 2015 U.S income before income tax before income tax by $ 1.1 billion and foreign income before before income tax by $ 8.9 billion . 39 PART II by $ 8.9 billion . 39 PART II Item 7 FINANCIAL . 39 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 133.0 billion a of June 30 133.0 billion a of June 30 , 2017 , compared with a of June 30 , 2017 , compared with $ 113.2 2017 , compared with $ 113.2 billion a of June 30 113.2 billion a of June 30 , 2016 . Equity and a of June 30 , 2016 . Equity and other investment and other investment were $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2017 , compared with a of June 30 , 2017 , compared with $ 10.4 2017 , compared with $ 10.4 billion a of June 30 10.4 billion a of June 30 , 2016 . Our short-term a of June 30 , 2016 . Our short-term investment are short-term investment a of June 30 , 2017 , $ 127.9 a of June 30 , 2017 , $ 127.9 billion wa 30 , 2017 , $ 127.9 billion wa held by our local regulatory ) wa $ 2.4 billion . As of June billion . As of June 30 , 2017 , approximately 87 As of June 30 , 2017 , approximately 87 % of 30 , 2017 , approximately 87 % of the cash equivalent and agency security , approximately 3 % were invested in U.S. asset-backed security , and approximately 2 % were invested in corporate lending payable balance wa $ 97 million a of June 30 97 million a of June 30 , 2017 . Our average a of June 30 , 2017 . Our average and maximum payable balance for fiscal year 2017 were $ 484 million and fiscal year 2017 were $ 484 million and $ 1.5 billion $ 484 million and $ 1.5 billion , respectively . Intra-year methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment such a foreign government certificate of deposit . Level 3 investment are valued using internally vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price of price where appropriate . 40 PART II Item 7 Cash . 40 PART II Item 7 Cash Flows Fiscal year 2017 7 Cash Flows Fiscal year 2017 compared with fiscal year 2016 2017 compared with fiscal year 2016 Cash from operation increased $ Cash from operation increased $ 6.2 billion to $ 39.5 billion $ 6.2 billion to $ 39.5 billion during the fiscal year Cash from financing increased $ 16.8 billion to $ 8.4 billion $ 16.8 billion to $ 8.4 billion , mainly due to mainly due to a $ 13.2 billion increase in proceeds from repayment , and a $ 4.2 billion decrease in cash used in part by an $ 839 million increase in dividend paid used in investing increased $ 22.8 billion to $ 46.8 billion $ 22.8 billion to $ 46.8 billion , mainly due to mainly due to a $ 24.6 billion increase in cash used in part by a $ 1.9 billion decrease in cash used and maturity . Fiscal year 2016 compared with fiscal year 2015 2016 compared with fiscal year 2015 Cash from operation increased $ Cash from operation increased $ 3.7 billion to $ 33.3 billion $ 3.7 billion to $ 33.3 billion during the fiscal year used in financing decreased $ 1.3 billion to $ 8.4 billion $ 1.3 billion to $ 8.4 billion , mainly due to mainly due to a $ 4.6 billion increase in proceeds from in part by a $ 1.5 billion increase in cash used stock repurchase and a $ 1.1 billion increase in dividend paid used in investing increased $ 949 million to $ 24.0 billion $ 949 million to $ 24.0 billion , mainly due to mainly due to a $ 2.4 billion increase in cash used and equipment and a $ 1.5 billion increase in cash used in part by a $ 2.3 billion decrease in cash used existing debt . See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . Unearned revenue a of June 30 , 2017 wa comprised mainly a of June 30 , 2017 wa comprised mainly of unearned Unearned revenue a of June 30 , 2017 also included payment a of June 30 , 2017 also included payment for : included payment for : Windows 10 license ; post-delivery support and in the future ; Office 365 subscription ; LinkedIn ; Xbox unearned revenue a of June 30 , 2017 : ( In a of June 30 , 2017 : ( In million ) Three Months Ending , September 30 , 2017 $ 12,544 December Ending , September 30 , 2017 $ 12,544 December 31 , September 30 , 2017 $ 12,544 December 31 , 2017 9,993 , 2017 $ 12,544 December 31 , 2017 9,993 March 31 $ 12,544 December 31 , 2017 9,993 March 31 , 2018 12,544 December 31 , 2017 9,993 March 31 , 2018 7,307 31 , 2017 9,993 March 31 , 2018 7,307 June 30 2017 9,993 March 31 , 2018 7,307 June 30 , 2018 9,993 March 31 , 2018 7,307 June 30 , 2018 4,258 31 , 2018 7,307 June 30 , 2018 4,258 Thereafter 10,377 2018 7,307 June 30 , 2018 4,258 Thereafter 10,377 Total $ 7,307 June 30 , 2018 4,258 Thereafter 10,377 Total $ 44,479 30 , 2018 4,258 Thereafter 10,377 Total $ 44,479 41 PART 4,258 Thereafter 10,377 Total $ 44,479 41 PART II Item 7 Thereafter 10,377 Total $ 44,479 41 PART II Item 7 If 44,479 41 PART II Item 7 If our customer choose to Share Repurchases During fiscal year 2017 , 2016 , and 2015 During fiscal year 2017 , 2016 , and 2015 , we 2017 , 2016 , and 2015 , we repurchased 170 million and 2015 , we repurchased 170 million share , 294 million repurchased 170 million share , 294 million share , and 295 294 million share , and 295 million share of our common our common stock for $ 10.3 billion , $ 14.8 billion $ 10.3 billion , $ 14.8 billion , and $ 13.2 14.8 billion , and $ 13.2 billion , respectively , through cash resource . See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . discussion . Dividends See Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2017 : ( In a of June 30 , 2017 : ( In million ) : ( In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term ( In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term debt In million ) 2018 2019-2020 2021-2022 Thereafter Total Long-term debt : a ) Principal payment $ 1,050 $ 9,518 $ 11,746 $ Principal payment $ 1,050 $ 9,518 $ 11,746 $ 55,523 $ $ 1,050 $ 9,518 $ 11,746 $ 55,523 $ 77,837 Interest $ 9,518 $ 11,746 $ 55,523 $ 77,837 Interest payment 2,402 $ 11,746 $ 55,523 $ 77,837 Interest payment 2,402 4,672 4,301 55,523 $ 77,837 Interest payment 2,402 4,672 4,301 33,179 44,554 Construction $ 77,837 Interest payment 2,402 4,672 4,301 33,179 44,554 Construction commitment 77,837 Interest payment 2,402 4,672 4,301 33,179 44,554 Construction commitment ( Interest payment 2,402 4,672 4,301 33,179 44,554 Construction commitment ( b payment 2,402 4,672 4,301 33,179 44,554 Construction commitment ( b ) Construction commitment ( b ) 1,067 0 0 0 1,067 Operating commitment ( b ) 1,067 0 0 0 1,067 Operating lease ( b ) 1,067 0 0 0 1,067 Operating lease ( b ) 1,067 0 0 0 1,067 Operating lease ( b ) 1,067 0 0 0 1,067 Operating lease ( b ) Operating lease ( b ) 1,292 2,335 1,657 2,588 7,872 Capital lease ( b ) 1,292 2,335 1,657 2,588 7,872 Capital lease ( b ) 1,292 2,335 1,657 2,588 7,872 Capital lease , b ) 1,292 2,335 1,657 2,588 7,872 Capital lease , including ) 1,292 2,335 1,657 2,588 7,872 Capital lease , including imputed imputed interest ( b ) 334 835 866 4,612 6,647 Purchase interest ( b ) 334 835 866 4,612 6,647 Purchase commitment ( b ) 334 835 866 4,612 6,647 Purchase commitment ( b ) 334 835 866 4,612 6,647 Purchase commitment ( c ) 334 835 866 4,612 6,647 Purchase commitment ( c ) Purchase commitment ( c ) 16,002 628 176 397 17,203 Other commitment ( c ) 16,002 628 176 397 17,203 Other long-term ( c ) 16,002 628 176 397 17,203 Other long-term liability c ) 16,002 628 176 397 17,203 Other long-term liability ( ) 16,002 628 176 397 17,203 Other long-term liability ( d long-term liability ( d ) 0 120 26 319 465 Total liability ( d ) 0 120 26 319 465 Total contractual ( d ) 0 120 26 319 465 Total contractual obligation d ) 0 120 26 319 465 Total contractual obligation $ ) 0 120 26 319 465 Total contractual obligation $ 22,147 465 Total contractual obligation $ 22,147 $ 18,108 $ 18,772 $ contractual obligation $ 22,147 $ 18,108 $ 18,772 $ 96,618 $ $ 22,147 $ 18,108 $ 18,772 $ 96,618 $ 155,645 ( $ 18,108 $ 18,772 $ 96,618 $ 155,645 ( a ) $ 18,772 $ 96,618 $ 155,645 ( a ) See Note ( a ) See Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) ( b ) See Note 16 – Commitments of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) long-term pension liability of $ 14.4 billion from the amount presented revenue and non-cash item . 42 PART II Item 7 Other . 42 PART II Item 7 Other Planned Uses of Capital for at least the next 12 month and thereafter for the for at least the next 12 month and thereafter for the RECENT ACCOUNTING GUIDANCE See Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . over the coverage period . 43 PART II Item 7 Software . 43 PART II Item 7 Software update are evaluated on . Customers purchasing a Windows 10 license will receive unspecified update the life of their Windows 10 device at no additional cost revenue from license of Windows 10 is recognized ratably over the financial statement . See Note 1 – Accounting Policies in the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between average cost of capital . 44 PART II Item 7 The . 44 PART II Item 7 The estimate used to calculate that ha a greater than 50 % likelihood of being realized to cost of revenue . 45 PART II Item 7 STATEMENT . 45 PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 46 PART II Item 7A ITEM Officer 46 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE not be exceeded at the 97.5 percentile confidence level or , could exceed the VaR in 25 out of 1,000 case . VaR in 25 out of 1,000 case . Several risk factor , and legal risk . 47 PART II Item 7A The . 47 PART II Item 7A The following table set forth our position a of June 30 , 2017 and 2016 and a of June 30 , 2017 and 2016 and for the June 30 , 2017 and 2016 and for the year ended for the year ended June 30 , 2017 : ( In year ended June 30 , 2017 : ( In million ) ( In million ) June 30 , 2017 June 30 , million ) June 30 , 2017 June 30 , 2016 Year June 30 , 2017 June 30 , 2016 Year Ended June , 2017 June 30 , 2016 Year Ended June 30 , , 2016 Year Ended June 30 , 2017 Risk Categories Average Year Ended June 30 , 2017 Risk Categories Average High Low High Low Foreign currency $ 114 $ 92 $ 169 $ Foreign currency $ 114 $ 92 $ 169 $ 303 $ $ 114 $ 92 $ 169 $ 303 $ 88 Interest $ 92 $ 169 $ 303 $ 88 Interest rate 152 $ 169 $ 303 $ 88 Interest rate 152 58 113 303 $ 88 Interest rate 152 58 113 155 57 Equity $ 88 Interest rate 152 58 113 155 57 Equity 54 88 Interest rate 152 58 113 155 57 Equity 54 157 Interest rate 152 58 113 155 57 Equity 54 157 121 rate 152 58 113 155 57 Equity 54 157 121 165 58 113 155 57 Equity 54 157 121 165 54 Commodity 113 155 57 Equity 54 157 121 165 54 Commodity 0 155 57 Equity 54 157 121 165 54 Commodity 0 12 57 Equity 54 157 121 165 54 Commodity 0 12 8 Equity 54 157 121 165 54 Commodity 0 12 8 12 157 121 165 54 Commodity 0 12 8 12 0 Total 121 165 54 Commodity 0 12 8 12 0 Total one-day 165 54 Commodity 0 12 8 12 0 Total one-day VaR 54 Commodity 0 12 8 12 0 Total one-day VaR for Commodity 0 12 8 12 0 Total one-day VaR for the combined risk category wa $ 207 million and $ 225 million $ 207 million and $ 225 million a of June 30 225 million a of June 30 , 2017 and 2016 . a of June 30 , 2017 and 2016 . The total June 30 , 2017 and 2016 . The total VaR is . The total VaR is 35 % and 29 % le VaR is 35 % and 29 % le a of June % le a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , than the the combination of risk . 48 PART II Item 8 ITEM . 48 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2017 2016 2015 Revenue Year Ended June 30 , 2017 2016 2015 Revenue : Product Ended June 30 , 2017 2016 2015 Revenue : Product $ June 30 , 2017 2016 2015 Revenue : Product $ 57,190 2015 Revenue : Product $ 57,190 $ 61,502 $ 75,956 Service : Product $ 57,190 $ 61,502 $ 75,956 Service and other $ 57,190 $ 61,502 $ 75,956 Service and other 32,760 23,818 $ 75,956 Service and other 32,760 23,818 17,624 Total revenue 89,950 75,956 Service and other 32,760 23,818 17,624 Total revenue 89,950 85,320 Service and other 32,760 23,818 17,624 Total revenue 89,950 85,320 93,580 32,760 23,818 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue 23,818 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue : 17,624 Total revenue 89,950 85,320 93,580 Cost of revenue : Product Cost of revenue : Product 15,175 17,880 21,410 Service and other of revenue : Product 15,175 17,880 21,410 Service and other 19,086 revenue : Product 15,175 17,880 21,410 Service and other 19,086 14,900 17,880 21,410 Service and other 19,086 14,900 11,628 Total cost of 21,410 Service and other 19,086 14,900 11,628 Total cost of revenue Service and other 19,086 14,900 11,628 Total cost of revenue 34,261 11,628 Total cost of revenue 34,261 32,780 33,038 Gross margin 55,689 Total cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 cost of revenue 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 34,261 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 32,780 33,038 Gross margin 55,689 52,540 60,542 Research and development 13,037 33,038 Gross margin 55,689 52,540 60,542 Research and development 13,037 11,988 52,540 60,542 Research and development 13,037 11,988 12,046 Sales and marketing 60,542 Research and development 13,037 11,988 12,046 Sales and marketing 15,539 Research and development 13,037 11,988 12,046 Sales and marketing 15,539 14,697 11,988 12,046 Sales and marketing 15,539 14,697 15,713 General and administrative 12,046 Sales and marketing 15,539 14,697 15,713 General and administrative 4,481 Sales and marketing 15,539 14,697 15,713 General and administrative 4,481 4,563 14,697 15,713 General and administrative 4,481 4,563 4,611 Impairment , integration 15,713 General and administrative 4,481 4,563 4,611 Impairment , integration , General and administrative 4,481 4,563 4,611 Impairment , integration , and , integration , and restructuring 306 1,110 10,011 Operating income 22,326 integration , and restructuring 306 1,110 10,011 Operating income 22,326 20,182 , and restructuring 306 1,110 10,011 Operating income 22,326 20,182 18,161 306 1,110 10,011 Operating income 22,326 20,182 18,161 Other income ( 1,110 10,011 Operating income 22,326 20,182 18,161 Other income ( expense 10,011 Operating income 22,326 20,182 18,161 Other income ( expense ) ( expense ) , net 823 ( 431 ) 346 Income ) , net 823 ( 431 ) 346 Income before income net 823 ( 431 ) 346 Income before income tax 23,149 346 Income before income tax 23,149 19,751 18,507 Provision for income Income before income tax 23,149 19,751 18,507 Provision for income tax before income tax 23,149 19,751 18,507 Provision for income tax 1,945 18,507 Provision for income tax 1,945 2,953 6,314 Net income $ Provision for income tax 1,945 2,953 6,314 Net income $ 21,204 for income tax 1,945 2,953 6,314 Net income $ 21,204 $ 2,953 6,314 Net income $ 21,204 $ 16,798 $ 12,193 Earnings Net income $ 21,204 $ 16,798 $ 12,193 Earnings per share $ 21,204 $ 16,798 $ 12,193 Earnings per share : Basic per share : Basic $ 2.74 $ 2.12 $ 1.49 Diluted : Basic $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.74 $ 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 2.12 $ 1.49 Diluted $ 2.71 $ 2.10 $ 1.48 Weighted 1.49 Diluted $ 2.71 $ 2.10 $ 1.48 Weighted average share $ 2.71 $ 2.10 $ 1.48 Weighted average share outstanding : average share outstanding : Basic 7,746 7,925 8,177 Diluted 7,832 8,013 share outstanding : Basic 7,746 7,925 8,177 Diluted 7,832 8,013 8,254 outstanding : Basic 7,746 7,925 8,177 Diluted 7,832 8,013 8,254 Cash Basic 7,746 7,925 8,177 Diluted 7,832 8,013 8,254 Cash dividend declared 7,746 7,925 8,177 Diluted 7,832 8,013 8,254 Cash dividend declared per 7,925 8,177 Diluted 7,832 8,013 8,254 Cash dividend declared per common declared per common share $ 1.56 $ 1.44 $ 1.24 See common share $ 1.56 $ 1.44 $ 1.24 See accompanying note $ 1.56 $ 1.44 $ 1.24 See accompanying note . 49 1.24 See accompanying note . 49 PART II Item 8 COMPREHENSIVE . 49 PART II Item 8 COMPREHENSIVE IN COME STATEMENTS ( million ) Year Ended June 30 , 2017 2016 2015 Net Year Ended June 30 , 2017 2016 2015 Net income $ Ended June 30 , 2017 2016 2015 Net income $ 21,204 June 30 , 2017 2016 2015 Net income $ 21,204 $ 2016 2015 Net income $ 21,204 $ 16,798 $ 12,193 Other Net income $ 21,204 $ 16,798 $ 12,193 Other comprehensive income $ 21,204 $ 16,798 $ 12,193 Other comprehensive income ( loss tax effect of $ ( 5 ) , $ ( 12 5 ) , $ ( 12 ) , and $ 20 12 ) , and $ 20 ) ( 218 ) ( and $ 20 ) ( 218 ) ( 238 ) 559 ) ( 218 ) ( 238 ) 559 Net unrealized loss 218 ) ( 238 ) 559 Net unrealized loss on investment tax effect of $ ( 613 ) , $ ( 121 613 ) , $ ( 121 ) , and $ ( ) , and $ ( 197 ) ) ( 1,116 ) ( 197 ) ) ( 1,116 ) ( 228 ) ( ) ( 1,116 ) ( 228 ) ( 362 ) Translation ) ( 228 ) ( 362 ) Translation adjustment and other of tax effect of $ 9 , $ ( 33 ) $ 9 , $ ( 33 ) , and $ 16 33 ) , and $ 16 ) 228 ( 519 ) , and $ 16 ) 228 ( 519 ) ( 1,383 $ 16 ) 228 ( 519 ) ( 1,383 ) Other 228 ( 519 ) ( 1,383 ) Other comprehensive loss ( ) Other comprehensive loss ( 1,106 ) ( 985 ) ( loss ( 1,106 ) ( 985 ) ( 1,186 ) Comprehensive ) ( 985 ) ( 1,186 ) Comprehensive income $ 20,098 1,186 ) Comprehensive income $ 20,098 $ 15,813 $ 11,007 See Comprehensive income $ 20,098 $ 15,813 $ 11,007 See accompanying note $ 20,098 $ 15,813 $ 11,007 See accompanying note . Refer note . Refer to Note 19 — Accumulated Other Comprehensive Income Income for further information . 50 PART II Item 8 BALANCE . 50 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2017 2016 Assets Current million ) June 30 , 2017 2016 Assets Current asset : ) June 30 , 2017 2016 Assets Current asset : Cash Cash and cash equivalent $ 7,663 $ 6,510 Short-term investment ( cash equivalent $ 7,663 $ 6,510 Short-term investment ( including security including security loaned of $ 3,694 and $ 204 ) 125,318 of $ 3,694 and $ 204 ) 125,318 106,730 Total cash 3,694 and $ 204 ) 125,318 106,730 Total cash , cash and $ 204 ) 125,318 106,730 Total cash , cash equivalent equivalent , and short-term investment 132,981 113,240 Accounts receivable , net , and short-term investment 132,981 113,240 Accounts receivable , net of for doubtful account of $ 405 and $ 426 19,792 18,277 of $ 405 and $ 426 19,792 18,277 Inventories 2,181 2,251 $ 405 and $ 426 19,792 18,277 Inventories 2,181 2,251 Other 405 and $ 426 19,792 18,277 Inventories 2,181 2,251 Other 4,897 $ 426 19,792 18,277 Inventories 2,181 2,251 Other 4,897 5,892 Total 426 19,792 18,277 Inventories 2,181 2,251 Other 4,897 5,892 Total current 18,277 Inventories 2,181 2,251 Other 4,897 5,892 Total current asset 159,851 Inventories 2,181 2,251 Other 4,897 5,892 Total current asset 159,851 139,660 4,897 5,892 Total current asset 159,851 139,660 Property and equipment , 5,892 Total current asset 159,851 139,660 Property and equipment , net of accumulated depreciation of $ 24,179 and $ 19,800 23,734 18,356 of $ 24,179 and $ 19,800 23,734 18,356 Equity and other $ 24,179 and $ 19,800 23,734 18,356 Equity and other investment 24,179 and $ 19,800 23,734 18,356 Equity and other investment 6,023 18,356 Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible Equity and other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset other investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset , net investment 6,023 10,431 Goodwill 35,122 17,872 Intangible asset , net 10,106 17,872 Intangible asset , net 10,106 3,733 Other long-term asset 6,250 Intangible asset , net 10,106 3,733 Other long-term asset 6,250 3,416 10,106 3,733 Other long-term asset 6,250 3,416 Total asset $ 241,086 3,733 Other long-term asset 6,250 3,416 Total asset $ 241,086 $ 6,250 3,416 Total asset $ 241,086 $ 193,468 Liabilities and stockholder Total asset $ 241,086 $ 193,468 Liabilities and stockholder ’ equity liability : Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 Accounts payable $ 7,390 $ 6,898 Short-term debt 9,072 12,904 Current 7,390 $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term $ 6,898 Short-term debt 9,072 12,904 Current portion of long-term debt Current portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 portion of long-term debt 1,049 0 Accrued compensation 5,819 5,264 Income debt 1,049 0 Accrued compensation 5,819 5,264 Income tax 718 580 1,049 0 Accrued compensation 5,819 5,264 Income tax 718 580 Short-term compensation 5,819 5,264 Income tax 718 580 Short-term unearned revenue 34,102 5,819 5,264 Income tax 718 580 Short-term unearned revenue 34,102 27,468 718 580 Short-term unearned revenue 34,102 27,468 Securities lending payable 97 580 Short-term unearned revenue 34,102 27,468 Securities lending payable 97 294 34,102 27,468 Securities lending payable 97 294 Other 6,280 5,949 Total 27,468 Securities lending payable 97 294 Other 6,280 5,949 Total current lending payable 97 294 Other 6,280 5,949 Total current liability 64,527 payable 97 294 Other 6,280 5,949 Total current liability 64,527 59,357 6,280 5,949 Total current liability 64,527 59,357 Long-term debt 76,073 40,557 5,949 Total current liability 64,527 59,357 Long-term debt 76,073 40,557 Long-term liability 64,527 59,357 Long-term debt 76,073 40,557 Long-term unearned revenue 10,377 64,527 59,357 Long-term debt 76,073 40,557 Long-term unearned revenue 10,377 6,441 76,073 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 40,557 Long-term unearned revenue 10,377 6,441 Deferred income tax 531 1,476 10,377 6,441 Deferred income tax 531 1,476 Other long-term liability 17,184 6,441 Deferred income tax 531 1,476 Other long-term liability 17,184 13,640 531 1,476 Other long-term liability 17,184 13,640 Total liability 168,692 121,471 1,476 Other long-term liability 17,184 13,640 Total liability 168,692 121,471 Commitments liability 17,184 13,640 Total liability 168,692 121,471 Commitments and contingency Stockholders 17,184 13,640 Total liability 168,692 121,471 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,708 and 7,808 share authorized 24,000 ; outstanding 7,708 and 7,808 69,315 68,178 Retained 24,000 ; outstanding 7,708 and 7,808 69,315 68,178 Retained earnings 2,648 ; outstanding 7,708 and 7,808 69,315 68,178 Retained earnings 2,648 2,282 outstanding 7,708 and 7,808 69,315 68,178 Retained earnings 2,648 2,282 Accumulated 7,808 69,315 68,178 Retained earnings 2,648 2,282 Accumulated other comprehensive income 69,315 68,178 Retained earnings 2,648 2,282 Accumulated other comprehensive income 431 2,282 Accumulated other comprehensive income 431 1,537 Total stockholder ’ equity Accumulated other comprehensive income 431 1,537 Total stockholder ’ equity 72,394 1,537 Total stockholder ’ equity 72,394 71,997 Total liability and stockholder Total stockholder ’ equity 72,394 71,997 Total liability and stockholder ’ and stockholder ’ equity $ 241,086 $ 193,468 See accompanying note ’ equity $ 241,086 $ 193,468 See accompanying note . 51 193,468 See accompanying note . 51 PART II Item 8 CASH . 51 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2017 2016 2015 Operations Year Ended June 30 , 2017 2016 2015 Operations Net income Ended June 30 , 2017 2016 2015 Operations Net income $ June 30 , 2017 2016 2015 Operations Net income $ 21,204 2015 Operations Net income $ 21,204 $ 16,798 $ 12,193 Adjustments Net income $ 21,204 $ 16,798 $ 12,193 Adjustments to reconcile $ 21,204 $ 16,798 $ 12,193 Adjustments to reconcile net income : Goodwill and asset impairment 0 630 7,498 Depreciation , amortization Goodwill and asset impairment 0 630 7,498 Depreciation , amortization , and asset impairment 0 630 7,498 Depreciation , amortization , and , amortization , and other 8,778 6,622 5,957 Stock-based compensation expense amortization , and other 8,778 6,622 5,957 Stock-based compensation expense 3,266 , and other 8,778 6,622 5,957 Stock-based compensation expense 3,266 2,668 6,622 5,957 Stock-based compensation expense 3,266 2,668 2,574 Net recognized gain 5,957 Stock-based compensation expense 3,266 2,668 2,574 Net recognized gain on Stock-based compensation expense 3,266 2,668 2,574 Net recognized gain on investment on investment and derivative ( 2,073 ) ( 223 ) ( derivative ( 2,073 ) ( 223 ) ( 443 ) Deferred ) ( 223 ) ( 443 ) Deferred income tax ( ) Deferred income tax ( 3,296 ) 332 224 Deferral of income tax ( 3,296 ) 332 224 Deferral of unearned revenue tax ( 3,296 ) 332 224 Deferral of unearned revenue 67,711 224 Deferral of unearned revenue 67,711 57,072 45,072 Recognition of unearned Deferral of unearned revenue 67,711 57,072 45,072 Recognition of unearned revenue of unearned revenue 67,711 57,072 45,072 Recognition of unearned revenue ( Recognition of unearned revenue ( 57,735 ) ( 48,498 ) ( revenue ( 57,735 ) ( 48,498 ) ( 44,920 ) Changes ) ( 48,498 ) ( 44,920 ) Changes in operating asset liability : Accounts receivable ( 925 ) ( 530 ) 1,456 receivable ( 925 ) ( 530 ) 1,456 Inventories 50 600 925 ) ( 530 ) 1,456 Inventories 50 600 ( 272 ( 530 ) 1,456 Inventories 50 600 ( 272 ) Other 530 ) 1,456 Inventories 50 600 ( 272 ) Other current 1,456 Inventories 50 600 ( 272 ) Other current asset 1,066 272 ) Other current asset 1,066 ( 1,167 ) 62 Other Other current asset 1,066 ( 1,167 ) 62 Other long-term asset asset 1,066 ( 1,167 ) 62 Other long-term asset ( 539 62 Other long-term asset ( 539 ) ( 41 ) 346 asset ( 539 ) ( 41 ) 346 Accounts payable 81 539 ) ( 41 ) 346 Accounts payable 81 88 ( 41 ) 346 Accounts payable 81 88 ( 1,054 ) Other ) 346 Accounts payable 81 88 ( 1,054 ) Other current Accounts payable 81 88 ( 1,054 ) Other current liability 386 1,054 ) Other current liability 386 ( 260 ) ( 624 Other current liability 386 ( 260 ) ( 624 ) Other 386 ( 260 ) ( 624 ) Other long-term liability 1,533 624 ) Other long-term liability 1,533 ( 766 ) 1,599 Net Other long-term liability 1,533 ( 766 ) 1,599 Net cash from liability 1,533 ( 766 ) 1,599 Net cash from operation 39,507 1,599 Net cash from operation 39,507 33,325 29,668 Financing Proceeds from Net cash from operation 39,507 33,325 29,668 Financing Proceeds from issuance cash from operation 39,507 33,325 29,668 Financing Proceeds from issuance ( short-term debt , maturity of 90 day or le , net or le , net ( 4,963 ) 7,195 4,481 Proceeds from , net ( 4,963 ) 7,195 4,481 Proceeds from issuance of net ( 4,963 ) 7,195 4,481 Proceeds from issuance of debt Proceeds from issuance of debt 44,344 13,884 10,680 Repayments of debt from issuance of debt 44,344 13,884 10,680 Repayments of debt ( issuance of debt 44,344 13,884 10,680 Repayments of debt ( 7,922 10,680 Repayments of debt ( 7,922 ) ( 2,796 ) ( debt ( 7,922 ) ( 2,796 ) ( 1,500 ) Common ) ( 2,796 ) ( 1,500 ) Common stock issued 772 1,500 ) Common stock issued 772 668 634 Common stock repurchased ) Common stock issued 772 668 634 Common stock repurchased ( Common stock issued 772 668 634 Common stock repurchased ( 11,788 634 Common stock repurchased ( 11,788 ) ( 15,969 ) ( repurchased ( 11,788 ) ( 15,969 ) ( 14,443 ) Common ) ( 15,969 ) ( 14,443 ) Common stock cash dividend stock cash dividend paid ( 11,845 ) ( 11,006 ) ( paid ( 11,845 ) ( 11,006 ) ( 9,882 ) Other ) ( 11,006 ) ( 9,882 ) Other , net ( ) Other , net ( 190 ) ( 369 ) 362 net ( 190 ) ( 369 ) 362 Net cash from 190 ) ( 369 ) 362 Net cash from ( used ( used in ) financing 8,408 ( 8,393 ) ( 9,668 in ) financing 8,408 ( 8,393 ) ( 9,668 ) Investing 8,408 ( 8,393 ) ( 9,668 ) Investing Additions to property to property and equipment ( 8,129 ) ( 8,343 ) ( equipment ( 8,129 ) ( 8,343 ) ( 5,944 ) Acquisition ) ( 8,343 ) ( 5,944 ) Acquisition of company , intangible and other asset ( 25,944 ) ( 1,393 ) ( asset ( 25,944 ) ( 1,393 ) ( 3,723 ) Purchases ) ( 1,393 ) ( 3,723 ) Purchases of investment ( ) Purchases of investment ( 176,905 ) ( 129,758 ) ( investment ( 176,905 ) ( 129,758 ) ( 98,729 ) Maturities ) ( 129,758 ) ( 98,729 ) Maturities of investment 28,044 98,729 ) Maturities of investment 28,044 22,054 15,013 Sales of investment ) Maturities of investment 28,044 22,054 15,013 Sales of investment 136,350 Maturities of investment 28,044 22,054 15,013 Sales of investment 136,350 93,287 22,054 15,013 Sales of investment 136,350 93,287 70,848 Securities lending payable 15,013 Sales of investment 136,350 93,287 70,848 Securities lending payable ( Sales of investment 136,350 93,287 70,848 Securities lending payable ( 197 70,848 Securities lending payable ( 197 ) 203 ( 466 ) lending payable ( 197 ) 203 ( 466 ) Net cash ( 197 ) 203 ( 466 ) Net cash used in cash used in investing ( 46,781 ) ( 23,950 ) ( investing ( 46,781 ) ( 23,950 ) ( 23,001 ) Effect ) ( 23,950 ) ( 23,001 ) Effect of foreign exchange on cash and cash equivalent 19 ( 67 ) ( 73 and cash equivalent 19 ( 67 ) ( 73 ) Net 19 ( 67 ) ( 73 ) Net change in cash in cash and cash equivalent 1,153 915 ( 3,074 ) Cash cash and cash equivalent 1,153 915 ( 3,074 ) Cash and cash equivalent 1,153 915 ( 3,074 ) Cash and cash equivalent equivalent , beginning of period 6,510 5,595 8,669 Cash and cash , beginning of period 6,510 5,595 8,669 Cash and cash equivalent beginning of period 6,510 5,595 8,669 Cash and cash equivalent , , end of period $ 7,663 $ 6,510 $ 5,595 See of period $ 7,663 $ 6,510 $ 5,595 See accompanying note $ 7,663 $ 6,510 $ 5,595 See accompanying note . 52 5,595 See accompanying note . 52 PART II Item 8 STOCKHOLDERS . 52 PART II Item 8 STOCKHOLDERS ’ EQ UITY STATEMENTS million ) Year Ended June 30 , 2017 2016 2015 Common Year Ended June 30 , 2017 2016 2015 Common stock and Ended June 30 , 2017 2016 2015 Common stock and paid-in June 30 , 2017 2016 2015 Common stock and paid-in capital , beginning of period $ 68,178 $ 68,465 $ 68,366 Common of period $ 68,178 $ 68,465 $ 68,366 Common stock issued $ 68,178 $ 68,465 $ 68,366 Common stock issued 772 668 $ 68,366 Common stock issued 772 668 634 Common stock repurchased 68,366 Common stock issued 772 668 634 Common stock repurchased ( Common stock issued 772 668 634 Common stock repurchased ( 2,987 634 Common stock repurchased ( 2,987 ) ( 3,689 ) ( repurchased ( 2,987 ) ( 3,689 ) ( 3,700 ) Stock-based ) ( 3,689 ) ( 3,700 ) Stock-based compensation expense 3,266 3,700 ) Stock-based compensation expense 3,266 2,668 2,574 Stock-based compensation income ) Stock-based compensation expense 3,266 2,668 2,574 Stock-based compensation income tax Stock-based compensation expense 3,266 2,668 2,574 Stock-based compensation income tax benefit Stock-based compensation income tax benefit 0 0 588 Other , net compensation income tax benefit 0 0 588 Other , net 86 income tax benefit 0 0 588 Other , net 86 66 0 588 Other , net 86 66 3 Balance , end 588 Other , net 86 66 3 Balance , end of Other , net 86 66 3 Balance , end of period Balance , end of period 69,315 68,178 68,465 Retained earnings Balance , end of period 69,315 68,178 68,465 Retained earnings Balance , end of period 69,315 68,178 68,465 Retained earnings Balance , beginning Balance , beginning of period 2,282 9,096 17,710 Net income 21,204 , beginning of period 2,282 9,096 17,710 Net income 21,204 16,798 beginning of period 2,282 9,096 17,710 Net income 21,204 16,798 12,193 2,282 9,096 17,710 Net income 21,204 16,798 12,193 Common stock cash 9,096 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend 17,710 Net income 21,204 16,798 12,193 Common stock cash dividend ( Common stock cash dividend ( 12,040 ) ( 11,329 ) ( dividend ( 12,040 ) ( 11,329 ) ( 10,063 ) Common ) ( 11,329 ) ( 10,063 ) Common stock repurchased ( ) Common stock repurchased ( 8,798 ) ( 12,283 ) ( repurchased ( 8,798 ) ( 12,283 ) ( 10,744 ) Balance ) ( 12,283 ) ( 10,744 ) Balance , end of Balance , end of period 2,648 2,282 9,096 Accumulated other comprehensive , end of period 2,648 2,282 9,096 Accumulated other comprehensive income end of period 2,648 2,282 9,096 Accumulated other comprehensive income Balance Balance , beginning of period 1,537 2,522 3,708 Other comprehensive loss , beginning of period 1,537 2,522 3,708 Other comprehensive loss ( beginning of period 1,537 2,522 3,708 Other comprehensive loss ( 1,106 3,708 Other comprehensive loss ( 1,106 ) ( 985 ) ( loss ( 1,106 ) ( 985 ) ( 1,186 ) Balance ) ( 985 ) ( 1,186 ) Balance , end of Balance , end of period 431 1,537 2,522 Total stockholder ’ , end of period 431 1,537 2,522 Total stockholder ’ equity end of period 431 1,537 2,522 Total stockholder ’ equity $ Total stockholder ’ equity $ 72,394 $ 71,997 $ 80,083 See ’ equity $ 72,394 $ 71,997 $ 80,083 See accompanying note $ 72,394 $ 71,997 $ 80,083 See accompanying note . 53 80,083 See accompanying note . 53 PART II Item 8 NOTES . 53 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles content such a Microsoft Office 365 , Microsoft Azure , Microsoft Microsoft Azure , Microsoft Dynamics 365 , and Xbox Live ; remitted to governmental authority . 54 PART II Item 8 Revenue . 54 PART II Item 8 Revenue recognition for multiple-element arrangement . Customers purchasing a Windows 10 license will receive unspecified update the life of their Windows 10 device at no additional cost revenue from license of Windows 10 is recognized ratably over the same revenue recognition timing . 55 PART II Item 8 Revenue . 55 PART II Item 8 Revenue related to Surface device a period generally ranging from 90 day to three year . . Advertising expense wa $ 1.5 billion , $ 1.6 billion $ 1.5 billion , $ 1.6 billion , and $ 1.9 1.6 billion , and $ 1.9 billion in fiscal year 2017 1.9 billion in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . Stock-Based Compensation using the accelerated method . 56 PART II Item 8 Compensation . 56 PART II Item 8 Compensation expense for the employee level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon and commodity . Our Level 2 non-derivative investment consist primarily of of deposit . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset and liability primarily may be classified a short-term 57 PART II Item 8 based short-term 57 PART II Item 8 based on their highly liquid expense ) , net . 58 PART II Item 8 Allowance . 58 PART II Item 8 Allowance for Doubtful Accounts The million ) Year Ended June 30 , 2017 2016 2015 Balance Year Ended June 30 , 2017 2016 2015 Balance , beginning Ended June 30 , 2017 2016 2015 Balance , beginning of June 30 , 2017 2016 2015 Balance , beginning of period , beginning of period $ 426 $ 335 $ 301 Charged of period $ 426 $ 335 $ 301 Charged to cost $ 426 $ 335 $ 301 Charged to cost and other Charged to cost and other 85 146 77 Write-offs ( 106 to cost and other 85 146 77 Write-offs ( 106 ) cost and other 85 146 77 Write-offs ( 106 ) ( 85 146 77 Write-offs ( 106 ) ( 55 ) ( Write-offs ( 106 ) ( 55 ) ( 43 ) Balance ) ( 55 ) ( 43 ) Balance , end of , end of period $ 405 $ 426 $ 335 Inventories of period $ 405 $ 426 $ 335 Inventories Inventories are $ 405 $ 426 $ 335 Inventories Inventories are stated at and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between , ranging from one to 15 year . We evaluate the Intra-Entity Asset Transfers In October 2016 , the Financial Accounting Standards effective for u beginning July 1 , 2018 , with early u beginning July 1 , 2018 , with early adoption permitted early adoption permitted beginning July 1 , 2017 . We plan permitted beginning July 1 , 2017 . We plan to adopt adopt the guidance effective July 1 , 2018 . Adoption of guidance effective July 1 , 2018 . Adoption of the guidance process , and system . 59 PART II Item 8 Financial . 59 PART II Item 8 Financial Instruments – Credit Losses – Credit Losses In June 2016 , the FASB issued a effective for u beginning July 1 , 2020 , with early u beginning July 1 , 2020 , with early adoption permitted early adoption permitted beginning July 1 , 2019 . Adoption of permitted beginning July 1 , 2019 . Adoption of the standard system . Leases In February 2016 , the FASB issued a effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted adopt the standard effective July 1 , 2017 concurrent with our standard effective July 1 , 2017 concurrent with our adoption of for operating lease of $ 6.6 billion and $ 5.2 billion $ 6.6 billion and $ 5.2 billion a of June 30 5.2 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively . June 30 , 2017 and 2016 , respectively . See Expected , and Disclosure In January 2016 , the FASB issued a effective for u beginning July 1 , 2018 . Adoption of u beginning July 1 , 2018 . Adoption of the standard Contracts with Customers In May 2014 , the FASB issued a prior reporting period presented . 60 PART II Item 8 The . 60 PART II Item 8 The standard will be effective effective for u beginning July 1 , 2018 , with early u beginning July 1 , 2018 , with early adoption permitted the s tandard effective July 1 , 2017 . In preparation tandard effective July 1 , 2017 . In preparation for adoption . Specifically , for Windows 10 , we will recognize revenue cloud offering such a Office 365 , LinkedIn , and professional of additional revenue of $ 6.6 billion and $ 5.8 billion $ 6.6 billion and $ 5.8 billion for fiscal year 2017 5.8 billion for fiscal year 2017 and 2016 , respectively , for fiscal year 2017 and 2016 , respectively , and an for income tax of $ 2.5 billion and $ 2.1 billion $ 2.5 billion and $ 2.1 billion , respectively , primarily the net change in Windows 10 revenue recognition . In addition and long-term asset of $ 2.7 billion and $ 4.2 billion $ 2.7 billion and $ 4.2 billion , a of June billion , a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , driven by of unearned revenue of $ 17.8 billion and $ 11.7 billion $ 17.8 billion and $ 11.7 billion a of June 30 11.7 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , driven by of license revenue from Windows 10 and certain multi-year commercial software deferred income tax of $ 5.2 billion and $ 4.8 billion $ 5.2 billion and $ 4.8 billion a of June 30 4.8 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , driven by share ) Year Ended June 30 , 2017 As Reported New Year Ended June 30 , 2017 As Reported New Revenue Standard Income statement : Revenue $ 89,950 $ 6,621 $ 0 $ : Revenue $ 89,950 $ 6,621 $ 0 $ 96,571 Provision $ 89,950 $ 6,621 $ 0 $ 96,571 Provision for income $ 6,621 $ 0 $ 96,571 Provision for income tax 1,945 96,571 Provision for income tax 1,945 2,467 0 4,412 Net income Provision for income tax 1,945 2,467 0 4,412 Net income 21,204 for income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 income tax 1,945 2,467 0 4,412 Net income 21,204 4,285 0 2,467 0 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings 0 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings per 4,412 Net income 21,204 4,285 0 25,489 Diluted earnings per share Net income 21,204 4,285 0 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 0 3.25 ( In Diluted earnings per share 2.71 0.54 0 3.25 ( In million earnings per share 2.71 0.54 0 3.25 ( In million , per share 2.71 0.54 0 3.25 ( In million , except share ) Year Ended June 30 , 2016 As Reported New Year Ended June 30 , 2016 As Reported New Revenue Standard Income statement : Revenue $ 85,320 $ 5,834 $ 0 $ : Revenue $ 85,320 $ 5,834 $ 0 $ 91,154 Provision $ 85,320 $ 5,834 $ 0 $ 91,154 Provision for income $ 5,834 $ 0 $ 91,154 Provision for income tax 2,953 91,154 Provision for income tax 2,953 2,147 0 5,100 Net income Provision for income tax 2,953 2,147 0 5,100 Net income 16,798 for income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 income tax 2,953 2,147 0 5,100 Net income 16,798 3,741 0 2,147 0 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings 0 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings per 5,100 Net income 16,798 3,741 0 20,539 Diluted earnings per share Net income 16,798 3,741 0 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 0 2.56 61 PART Diluted earnings per share 2.10 0.46 0 2.56 61 PART II earnings per share 2.10 0.46 0 2.56 61 PART II Item per share 2.10 0.46 0 2.56 61 PART II Item 8 share 2.10 0.46 0 2.56 61 PART II Item 8 ( 2.56 61 PART II Item 8 ( In million ) June ( In million ) June 30 , 2017 As Reported New million ) June 30 , 2017 As Reported New Revenue Standard Accounts receivable , net $ 19,792 $ 2,639 $ 0 $ , net $ 19,792 $ 2,639 $ 0 $ 22,431 Operating $ 19,792 $ 2,639 $ 0 $ 22,431 Operating lease right-of-use $ 2,639 $ 0 $ 22,431 Operating lease right-of-use asset 0 22,431 Operating lease right-of-use asset 0 0 6,555 6,555 Other current Operating lease right-of-use asset 0 0 6,555 6,555 Other current and lease right-of-use asset 0 0 6,555 6,555 Other current and long-term right-of-use asset 0 0 6,555 6,555 Other current and long-term asset Other current and long-term asset 11,147 32 0 11,179 Unearned revenue current and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( 17,823 32 0 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 Deferred income revenue 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 5,203 0 26,656 Deferred income tax 531 5,203 0 5,734 Operating lease 26,656 Deferred income tax 531 5,203 0 5,734 Operating lease liability Deferred income tax 531 5,203 0 5,734 Operating lease liability 0 income tax 531 5,203 0 5,734 Operating lease liability 0 0 0 5,734 Operating lease liability 0 0 5,372 5,372 Other current 5,734 Operating lease liability 0 0 5,372 5,372 Other current and Operating lease liability 0 0 5,372 5,372 Other current and long-term lease liability 0 0 5,372 5,372 Other current and long-term liability Other current and long-term liability 23,464 ( 26 ) 1,183 24,621 and long-term liability 23,464 ( 26 ) 1,183 24,621 Stockholders ' liability 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 15,317 1,183 24,621 Stockholders ' equity 72,394 15,317 0 87,711 ( In 24,621 Stockholders ' equity 72,394 15,317 0 87,711 ( In million Stockholders ' equity 72,394 15,317 0 87,711 ( In million ) ' equity 72,394 15,317 0 87,711 ( In million ) June ( In million ) June 30 , 2016 As Reported New million ) June 30 , 2016 As Reported New Revenue Standard Accounts receivable , net $ 18,277 $ 2,359 $ 0 $ , net $ 18,277 $ 2,359 $ 0 $ 20,636 Operating $ 18,277 $ 2,359 $ 0 $ 20,636 Operating lease right-of-use $ 2,359 $ 0 $ 20,636 Operating lease right-of-use asset 0 20,636 Operating lease right-of-use asset 0 0 5,198 5,198 Other current Operating lease right-of-use asset 0 0 5,198 5,198 Other current and lease right-of-use asset 0 0 5,198 5,198 Other current and long-term right-of-use asset 0 0 5,198 5,198 Other current and long-term asset Other current and long-term asset 9,308 1,872 0 11,180 Unearned revenue current and long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 and long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 ( long-term asset 9,308 1,872 0 11,180 Unearned revenue 33,909 ( 11,716 1,872 0 11,180 Unearned revenue 33,909 ( 11,716 ) 0 22,193 11,180 Unearned revenue 33,909 ( 11,716 ) 0 22,193 Deferred income revenue 33,909 ( 11,716 ) 0 22,193 Deferred income tax 1,476 33,909 ( 11,716 ) 0 22,193 Deferred income tax 1,476 4,837 0 22,193 Deferred income tax 1,476 4,837 0 6,313 Operating lease 22,193 Deferred income tax 1,476 4,837 0 6,313 Operating lease liability Deferred income tax 1,476 4,837 0 6,313 Operating lease liability 0 income tax 1,476 4,837 0 6,313 Operating lease liability 0 0 0 6,313 Operating lease liability 0 0 4,257 4,257 Other current 6,313 Operating lease liability 0 0 4,257 4,257 Other current and Operating lease liability 0 0 4,257 4,257 Other current and long-term lease liability 0 0 4,257 4,257 Other current and long-term liability Other current and long-term liability 19,589 17 941 20,547 Stockholders ' current and long-term liability 19,589 17 941 20,547 Stockholders ' equity and long-term liability 19,589 17 941 20,547 Stockholders ' equity 71,997 long-term liability 19,589 17 941 20,547 Stockholders ' equity 71,997 11,093 941 20,547 Stockholders ' equity 71,997 11,093 0 83,090 Adoption of 20,547 Stockholders ' equity 71,997 11,093 0 83,090 Adoption of the Stockholders ' equity 71,997 11,093 0 83,090 Adoption of the standard ' equity 71,997 11,093 0 83,090 Adoption of the standard related cash flow statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2017 2016 2015 Net Year Ended June 30 , 2017 2016 2015 Net income available Ended June 30 , 2017 2016 2015 Net income available for June 30 , 2017 2016 2015 Net income available for common shareholder ( A ) $ 21,204 $ 16,798 $ 12,193 Weighted A ) $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding $ 21,204 $ 16,798 $ 12,193 Weighted average outstanding share of common stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based ( B ) 7,746 7,925 8,177 Dilutive effect of stock-based award Dilutive effect of stock-based award 86 88 77 Common stock and effect of stock-based award 86 88 77 Common stock and common of stock-based award 86 88 77 Common stock and common stock stock equivalent ( C ) 7,832 8,013 8,254 Earnings Per Share equivalent ( C ) 7,832 8,013 8,254 Earnings Per Share Basic ( C ) 7,832 8,013 8,254 Earnings Per Share Basic ( Basic ( A/B ) $ 2.74 $ 2.12 $ 1.49 Diluted A/B ) $ 2.74 $ 2.12 $ 1.49 Diluted ( A/C $ 2.74 $ 2.12 $ 1.49 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.71 $ 2.10 $ 1.48 62 A/C ) $ 2.71 $ 2.10 $ 1.48 62 PART II $ 2.71 $ 2.10 $ 1.48 62 PART II Item 8 2.71 $ 2.10 $ 1.48 62 PART II Item 8 Anti-dilutive 1.48 62 PART II Item 8 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2017 2016 2015 Dividends Year Ended June 30 , 2017 2016 2015 Dividends and interest Ended June 30 , 2017 2016 2015 Dividends and interest income June 30 , 2017 2016 2015 Dividends and interest income $ Dividends and interest income $ 1,387 $ 903 $ 766 Interest interest income $ 1,387 $ 903 $ 766 Interest expense ( $ 1,387 $ 903 $ 766 Interest expense ( 2,222 ) $ 766 Interest expense ( 2,222 ) ( 1,243 ) ( expense ( 2,222 ) ( 1,243 ) ( 781 ) Net ) ( 1,243 ) ( 781 ) Net recognized gain on Net recognized gain on investment 2,583 668 716 Net loss on recognized gain on investment 2,583 668 716 Net loss on derivative gain on investment 2,583 668 716 Net loss on derivative ( Net loss on derivative ( 510 ) ( 443 ) ( derivative ( 510 ) ( 443 ) ( 423 ) Net ) ( 443 ) ( 423 ) Net gain ( loss on foreign currency remeasurements ( 164 ) ( 121 ) 335 remeasurements ( 164 ) ( 121 ) 335 Other , net 164 ) ( 121 ) 335 Other , net ( 251 335 Other , net ( 251 ) ( 195 ) ( net ( 251 ) ( 195 ) ( 267 ) Total ) ( 195 ) ( 267 ) Total $ 823 $ ( 267 ) Total $ 823 $ ( 431 ) $ Total $ 823 $ ( 431 ) $ 346 Following are $ ( 431 ) $ 346 Following are detail of net million ) Year Ended June 30 , 2017 2016 2015 Other-than-temporary Year Ended June 30 , 2017 2016 2015 Other-than-temporary impairment of Ended June 30 , 2017 2016 2015 Other-than-temporary impairment of investment June 30 , 2017 2016 2015 Other-than-temporary impairment of investment $ impairment of investment $ ( 55 ) $ ( 322 ) ( 55 ) $ ( 322 ) $ ( 183 ) ( 322 ) $ ( 183 ) Realized gain from sale from sale of available-for-sale security 3,064 1,376 1,176 Realized loss from sale of available-for-sale security 3,064 1,376 1,176 Realized loss from sale of available-for-sale security 3,064 1,376 1,176 Realized loss from sale of sale of available-for-sale security ( 426 ) ( 386 ) ( security ( 426 ) ( 386 ) ( 277 ) Total ) ( 386 ) ( 277 ) Total $ 2,583 $ ( 277 ) Total $ 2,583 $ 668 $ 716 63 ) Total $ 2,583 $ 668 $ 716 63 PART II $ 2,583 $ 668 $ 716 63 PART II Item 8 2,583 $ 668 $ 716 63 PART II Item 8 NOTE 716 63 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2017 Cash $ 3,624 Other Investments June 30 , 2017 Cash $ 3,624 $ 0 30 , 2017 Cash $ 3,624 $ 0 $ 0 $ 2017 Cash $ 3,624 $ 0 $ 0 $ 3,624 $ $ 3,624 $ 0 $ 0 $ 3,624 $ 3,624 $ $ 0 $ 0 $ 3,624 $ 3,624 $ 0 $ $ 0 $ 3,624 $ 3,624 $ 0 $ 0 Mutual $ 3,624 $ 3,624 $ 0 $ 0 Mutual fund 1,478 $ 3,624 $ 0 $ 0 Mutual fund 1,478 0 0 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial paper fund 1,478 0 0 1,478 1,478 0 0 Commercial paper 319 1,478 0 0 1,478 1,478 0 0 Commercial paper 319 0 0 0 1,478 1,478 0 0 Commercial paper 319 0 0 1,478 0 0 Commercial paper 319 0 0 319 69 250 0 0 Commercial paper 319 0 0 319 69 250 0 0 Commercial paper 319 0 0 319 69 250 0 Certificates Commercial paper 319 0 0 319 69 250 0 Certificates of paper 319 0 0 319 69 250 0 Certificates of deposit 319 0 0 319 69 250 0 Certificates of deposit 1,358 0 0 319 69 250 0 Certificates of deposit 1,358 0 250 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 U.S. of deposit 1,358 0 0 1,358 972 386 0 U.S. government deposit 1,358 0 0 1,358 972 386 0 U.S. government and 1,358 0 0 1,358 972 386 0 U.S. government and agency 0 0 1,358 972 386 0 U.S. government and agency security U.S. government and agency security 112,119 85 ( 360 ) 111,844 government and agency security 112,119 85 ( 360 ) 111,844 16 agency security 112,119 85 ( 360 ) 111,844 16 111,828 0 112,119 85 ( 360 ) 111,844 16 111,828 0 Foreign government 85 ( 360 ) 111,844 16 111,828 0 Foreign government bond ( 360 ) 111,844 16 111,828 0 Foreign government bond 5,276 360 ) 111,844 16 111,828 0 Foreign government bond 5,276 2 111,828 0 Foreign government bond 5,276 2 ( 13 ) 5,265 0 Foreign government bond 5,276 2 ( 13 ) 5,265 1,504 government bond 5,276 2 ( 13 ) 5,265 1,504 3,761 0 5,276 2 ( 13 ) 5,265 1,504 3,761 0 Mortgage- and 2 ( 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed ( 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed security 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed security 3,921 0 Mortgage- and asset-backed security 3,921 14 ( 4 ) 3,931 Mortgage- and asset-backed security 3,921 14 ( 4 ) 3,931 0 asset-backed security 3,921 14 ( 4 ) 3,931 0 3,931 0 3,921 14 ( 4 ) 3,931 0 3,931 0 Corporate note 14 ( 4 ) 3,931 0 3,931 0 Corporate note and ( 4 ) 3,931 0 3,931 0 Corporate note and bond 4 ) 3,931 0 3,931 0 Corporate note and bond 4,786 0 Corporate note and bond 4,786 61 ( 12 ) 4,835 Corporate note and bond 4,786 61 ( 12 ) 4,835 0 and bond 4,786 61 ( 12 ) 4,835 0 4,835 0 4,786 61 ( 12 ) 4,835 0 4,835 0 Municipal security 61 ( 12 ) 4,835 0 4,835 0 Municipal security 284 ( 12 ) 4,835 0 4,835 0 Municipal security 284 43 12 ) 4,835 0 4,835 0 Municipal security 284 43 0 0 4,835 0 Municipal security 284 43 0 327 0 327 4,835 0 Municipal security 284 43 0 327 0 327 0 0 Municipal security 284 43 0 327 0 327 0 Common Municipal security 284 43 0 327 0 327 0 Common and security 284 43 0 327 0 327 0 Common and preferred 284 43 0 327 0 327 0 Common and preferred stock 43 0 327 0 327 0 Common and preferred stock 2,472 0 Common and preferred stock 2,472 3,062 ( 34 ) 5,500 Common and preferred stock 2,472 3,062 ( 34 ) 5,500 0 preferred stock 2,472 3,062 ( 34 ) 5,500 0 0 5,500 2,472 3,062 ( 34 ) 5,500 0 0 5,500 Other investment 3,062 ( 34 ) 5,500 0 0 5,500 Other investment 523 ( 34 ) 5,500 0 0 5,500 Other investment 523 0 34 ) 5,500 0 0 5,500 Other investment 523 0 0 0 0 5,500 Other investment 523 0 0 523 0 0 0 5,500 Other investment 523 0 0 523 0 0 523 5,500 Other investment 523 0 0 523 0 0 523 Total Other investment 523 0 0 523 0 0 523 Total $ investment 523 0 0 523 0 0 523 Total $ 136,160 523 0 0 523 0 0 523 Total $ 136,160 $ 0 0 523 0 0 523 Total $ 136,160 $ 3,267 0 0 523 Total $ 136,160 $ 3,267 $ ( 423 523 Total $ 136,160 $ 3,267 $ ( 423 ) $ 136,160 $ 3,267 $ ( 423 ) $ 139,004 $ 7,663 $ ( 423 ) $ 139,004 $ 7,663 $ 125,318 $ 423 ) $ 139,004 $ 7,663 $ 125,318 $ 6,023 ( $ 139,004 $ 7,663 $ 125,318 $ 6,023 ( In million $ 7,663 $ 125,318 $ 6,023 ( In million ) Cost Equity and Other Investments June 30 , 2016 Cash $ 3,501 Other Investments June 30 , 2016 Cash $ 3,501 $ 0 30 , 2016 Cash $ 3,501 $ 0 $ 0 $ 2016 Cash $ 3,501 $ 0 $ 0 $ 3,501 $ $ 3,501 $ 0 $ 0 $ 3,501 $ 3,501 $ $ 0 $ 0 $ 3,501 $ 3,501 $ 0 $ $ 0 $ 3,501 $ 3,501 $ 0 $ 0 Mutual $ 3,501 $ 3,501 $ 0 $ 0 Mutual fund 1,012 $ 3,501 $ 0 $ 0 Mutual fund 1,012 0 0 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 $ 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 0 Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial Mutual fund 1,012 0 0 1,012 1,012 0 0 Commercial paper fund 1,012 0 0 1,012 1,012 0 0 Commercial paper 298 1,012 0 0 1,012 1,012 0 0 Commercial paper 298 0 0 0 1,012 1,012 0 0 Commercial paper 298 0 0 1,012 0 0 Commercial paper 298 0 0 298 298 0 0 0 Commercial paper 298 0 0 298 298 0 0 0 Commercial paper 298 0 0 298 298 0 0 Certificates Commercial paper 298 0 0 298 298 0 0 Certificates of paper 298 0 0 298 298 0 0 Certificates of deposit 298 0 0 298 298 0 0 Certificates of deposit 1,000 0 0 298 298 0 0 Certificates of deposit 1,000 0 0 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 Certificates of deposit 1,000 0 0 1,000 868 132 0 U.S. of deposit 1,000 0 0 1,000 868 132 0 U.S. government deposit 1,000 0 0 1,000 868 132 0 U.S. government and 1,000 0 0 1,000 868 132 0 U.S. government and agency 0 0 1,000 868 132 0 U.S. government and agency security U.S. government and agency security 89,970 245 ( 11 ) 90,204 government and agency security 89,970 245 ( 11 ) 90,204 100 agency security 89,970 245 ( 11 ) 90,204 100 90,104 0 89,970 245 ( 11 ) 90,204 100 90,104 0 Foreign government 245 ( 11 ) 90,204 100 90,104 0 Foreign government bond ( 11 ) 90,204 100 90,104 0 Foreign government bond 5,502 11 ) 90,204 100 90,104 0 Foreign government bond 5,502 10 90,104 0 Foreign government bond 5,502 10 ( 18 ) 5,494 0 Foreign government bond 5,502 10 ( 18 ) 5,494 731 government bond 5,502 10 ( 18 ) 5,494 731 4,763 0 5,502 10 ( 18 ) 5,494 731 4,763 0 Mortgage- and 10 ( 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed ( 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed security 18 ) 5,494 731 4,763 0 Mortgage- and asset-backed security 4,789 0 Mortgage- and asset-backed security 4,789 21 ( 2 ) 4,808 Mortgage- and asset-backed security 4,789 21 ( 2 ) 4,808 0 asset-backed security 4,789 21 ( 2 ) 4,808 0 4,808 0 4,789 21 ( 2 ) 4,808 0 4,808 0 Corporate note 21 ( 2 ) 4,808 0 4,808 0 Corporate note and ( 2 ) 4,808 0 4,808 0 Corporate note and bond 2 ) 4,808 0 4,808 0 Corporate note and bond 6,509 0 Corporate note and bond 6,509 110 ( 35 ) 6,584 Corporate note and bond 6,509 110 ( 35 ) 6,584 0 and bond 6,509 110 ( 35 ) 6,584 0 6,584 0 6,509 110 ( 35 ) 6,584 0 6,584 0 Municipal security 110 ( 35 ) 6,584 0 6,584 0 Municipal security 285 ( 35 ) 6,584 0 6,584 0 Municipal security 285 57 35 ) 6,584 0 6,584 0 Municipal security 285 57 0 0 6,584 0 Municipal security 285 57 0 342 0 342 6,584 0 Municipal security 285 57 0 342 0 342 0 0 Municipal security 285 57 0 342 0 342 0 Common Municipal security 285 57 0 342 0 342 0 Common and security 285 57 0 342 0 342 0 Common and preferred 285 57 0 342 0 342 0 Common and preferred stock 57 0 342 0 342 0 Common and preferred stock 5,597 0 Common and preferred stock 5,597 4,452 ( 236 ) 9,813 Common and preferred stock 5,597 4,452 ( 236 ) 9,813 0 preferred stock 5,597 4,452 ( 236 ) 9,813 0 0 9,813 5,597 4,452 ( 236 ) 9,813 0 0 9,813 Other investment 4,452 ( 236 ) 9,813 0 0 9,813 Other investment 615 ( 236 ) 9,813 0 0 9,813 Other investment 615 0 236 ) 9,813 0 0 9,813 Other investment 615 0 0 0 0 9,813 Other investment 615 0 0 615 0 ( 0 9,813 Other investment 615 0 0 615 0 ( 3 9,813 Other investment 615 0 0 615 0 ( 3 ) Other investment 615 0 0 615 0 ( 3 ) 618 investment 615 0 0 615 0 ( 3 ) 618 Total 0 0 615 0 ( 3 ) 618 Total $ 119,078 615 0 ( 3 ) 618 Total $ 119,078 $ 4,895 3 ) 618 Total $ 119,078 $ 4,895 $ ( 302 618 Total $ 119,078 $ 4,895 $ ( 302 ) $ 119,078 $ 4,895 $ ( 302 ) $ 123,671 $ 6,510 $ ( 302 ) $ 123,671 $ 6,510 $ 106,730 $ 302 ) $ 123,671 $ 6,510 $ 106,730 $ 10,431 As $ 123,671 $ 6,510 $ 106,730 $ 10,431 As of June $ 6,510 $ 106,730 $ 10,431 As of June 30 , $ 10,431 As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , the recorded June 30 , 2017 and 2016 , the recorded base of not publicly traded were $ 1.1 billion and $ 767 million $ 1.1 billion and $ 767 million , respectively . These investment . As of June 30 , 2017 , collateral received As of June 30 , 2017 , collateral received under agreement for loaned security wa $ 3.7 billion , which wa primarily security . As of June 30 , 2016 , collateral received As of June 30 , 2016 , collateral received under agreement for loaned security wa $ 294 million , which wa primarily primarily comprised of cash . 64 PART II Item 8 Unrealized . 64 PART II Item 8 Unrealized Losses on Inve stments unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2017 U.S. government and Fair Value June 30 , 2017 U.S. government and agency security government and agency security $ 87,558 $ ( 348 ) $ security $ 87,558 $ ( 348 ) $ 371 $ ( $ ( 348 ) $ 371 $ ( 12 ) $ ) $ 371 $ ( 12 ) $ 87,929 $ ( $ ( 12 ) $ 87,929 $ ( 360 ) Foreign ) $ 87,929 $ ( 360 ) Foreign government bond 4,006 360 ) Foreign government bond 4,006 ( 2 ) 23 ( Foreign government bond 4,006 ( 2 ) 23 ( 11 ) bond 4,006 ( 2 ) 23 ( 11 ) 4,029 ( ( 2 ) 23 ( 11 ) 4,029 ( 13 ) ) 23 ( 11 ) 4,029 ( 13 ) Mortgage- and ( 11 ) 4,029 ( 13 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,068 ( 3 ) 198 ( and asset-backed security 1,068 ( 3 ) 198 ( 1 ) security 1,068 ( 3 ) 198 ( 1 ) 1,266 ( ( 3 ) 198 ( 1 ) 1,266 ( 4 ) ) 198 ( 1 ) 1,266 ( 4 ) Corporate note ( 1 ) 1,266 ( 4 ) Corporate note and bond ) Corporate note and bond 669 ( 8 ) 177 ( note and bond 669 ( 8 ) 177 ( 4 ) bond 669 ( 8 ) 177 ( 4 ) 846 ( ( 8 ) 177 ( 4 ) 846 ( 12 ) ) 177 ( 4 ) 846 ( 12 ) Common and ( 4 ) 846 ( 12 ) Common and preferred stock ) Common and preferred stock 69 ( 6 ) 148 ( and preferred stock 69 ( 6 ) 148 ( 28 ) stock 69 ( 6 ) 148 ( 28 ) 217 ( ( 6 ) 148 ( 28 ) 217 ( 34 ) ) 148 ( 28 ) 217 ( 34 ) Total $ ( 28 ) 217 ( 34 ) Total $ 93,370 $ ( 34 ) Total $ 93,370 $ ( 367 ) $ Total $ 93,370 $ ( 367 ) $ 917 $ ( $ ( 367 ) $ 917 $ ( 56 ) $ ) $ 917 $ ( 56 ) $ 94,287 $ ( $ ( 56 ) $ 94,287 $ ( 423 ) Less ) $ 94,287 $ ( 423 ) Less than 12 Months ( 423 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2016 U.S. government and Fair Value June 30 , 2016 U.S. government and agency security government and agency security $ 5,816 $ ( 3 ) $ security $ 5,816 $ ( 3 ) $ 432 $ ( $ ( 3 ) $ 432 $ ( 8 ) $ ) $ 432 $ ( 8 ) $ 6,248 $ ( $ ( 8 ) $ 6,248 $ ( 11 ) Foreign ) $ 6,248 $ ( 11 ) Foreign government bond 3,452 11 ) Foreign government bond 3,452 ( 3 ) 35 ( Foreign government bond 3,452 ( 3 ) 35 ( 15 ) bond 3,452 ( 3 ) 35 ( 15 ) 3,487 ( ( 3 ) 35 ( 15 ) 3,487 ( 18 ) ) 35 ( 15 ) 3,487 ( 18 ) Mortgage- and ( 15 ) 3,487 ( 18 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 844 ( 1 ) 322 ( and asset-backed security 844 ( 1 ) 322 ( 1 ) security 844 ( 1 ) 322 ( 1 ) 1,166 ( ( 1 ) 322 ( 1 ) 1,166 ( 2 ) ) 322 ( 1 ) 1,166 ( 2 ) Corporate note ( 1 ) 1,166 ( 2 ) Corporate note and bond ) Corporate note and bond 1,180 ( 11 ) 788 ( note and bond 1,180 ( 11 ) 788 ( 24 ) bond 1,180 ( 11 ) 788 ( 24 ) 1,968 ( ( 11 ) 788 ( 24 ) 1,968 ( 35 ) ) 788 ( 24 ) 1,968 ( 35 ) Common and ( 24 ) 1,968 ( 35 ) Common and preferred stock ) Common and preferred stock 896 ( 147 ) 390 ( and preferred stock 896 ( 147 ) 390 ( 89 ) stock 896 ( 147 ) 390 ( 89 ) 1,286 ( ( 147 ) 390 ( 89 ) 1,286 ( 236 ) ) 390 ( 89 ) 1,286 ( 236 ) Total $ ( 89 ) 1,286 ( 236 ) Total $ 12,188 $ ( 236 ) Total $ 12,188 $ ( 165 ) $ Total $ 12,188 $ ( 165 ) $ 1,967 $ ( $ ( 165 ) $ 1,967 $ ( 137 ) $ ) $ 1,967 $ ( 137 ) $ 14,155 $ ( $ ( 137 ) $ 14,155 $ ( 302 ) Unrealized ) $ 14,155 $ ( 302 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2017 Due in one Fair Value June 30 , 2017 Due in one year or one year or le $ 18,212 $ 18,188 Due after one or le $ 18,212 $ 18,188 Due after one year through one year through five year 102,374 102,168 Due after five year year through five year 102,374 102,168 Due after five year through Due after five year through 10 year 6,478 6,504 Due after five year through 10 year 6,478 6,504 Due after 10 year year through 10 year 6,478 6,504 Due after 10 year 999 year 6,478 6,504 Due after 10 year 999 1,019 Total $ 6,504 Due after 10 year 999 1,019 Total $ 128,063 $ Due after 10 year 999 1,019 Total $ 128,063 $ 127,879 year 999 1,019 Total $ 128,063 $ 127,879 NOTE 5 — 1,019 Total $ 128,063 $ 127,879 NOTE 5 — DERIVATIVES We $ 128,063 $ 127,879 NOTE 5 — DERIVATIVES We use derivative in U.S. dollar equivalent . 65 PART II Item 8 Foreign . 65 PART II Item 8 Foreign Currency Certain forecasted transaction dollar . As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , the total June 30 , 2017 and 2016 , the total notional amount exchange contract sold were $ 8.9 billion and $ 8.4 billion $ 8.9 billion and $ 8.4 billion , respectively . Foreign instrument . As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , the total June 30 , 2017 and 2016 , the total notional amount exchange contract sold were $ 5.1 billion and $ 5.3 billion $ 5.1 billion and $ 5.3 billion , respectively . Certain exposure . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 8.8 billion and $ 10.6 billion $ 8.8 billion and $ 10.6 billion , respectively . As respectively . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 12.0 billion and $ 11.7 billion $ 12.0 billion and $ 11.7 billion , respectively . Equity forward . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount market price risk were $ 1.9 billion and $ 2.4 billion $ 1.9 billion and $ 2.4 billion , respectively , of respectively , of which $ 1.6 billion and $ 1.8 billion $ 1.6 billion and $ 1.8 billion , respectively , were instrument . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount market price risk were $ 1.3 billion and $ 2.2 billion $ 1.3 billion and $ 2.2 billion , respectively , of respectively , of which $ 737 million and $ 986 million $ 737 million and $ 986 million , respectively , were instrument . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 233 million and $ 352 million $ 233 million and $ 352 million , respectively . As respectively . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 328 million and $ 2.4 billion $ 328 million and $ 2.4 billion , respectively . In date . As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , the total June 30 , 2017 and 2016 , the total notional derivative mortgage contract purchased were $ 567 million and $ 548 million $ 567 million and $ 548 million , respectively . Credit risk . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 267 million and $ 63 million $ 267 million and $ 63 million , respectively . As respectively . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 440 million and $ 273 million $ 440 million and $ 273 million , respectively . 66 273 million , respectively . 66 PART II Item 8 Commodity . 66 PART II Item 8 Commodity We use broad-based commodity grain . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount commodity contract purchased were $ 19 million . As of June million . As of June 30 , 2016 , the total As of June 30 , 2016 , the total notional amount purchased and sold were $ 631 million and $ 162 million $ 631 million and $ 162 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2017 , our long-term As of June 30 , 2017 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result required to be posted . 67 PART II Item 8 Fair . 67 PART II Item 8 Fair Values of Derivative Instruments counterparty credit risk : June 30 , 2017 June 30 , risk : June 30 , 2017 June 30 , 2016 Assets June 30 , 2017 June 30 , 2016 Assets Liabilities Assets , 2017 June 30 , 2016 Assets Liabilities Assets Liabilities ( Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) $ 33 $ 156 $ ( 8 ) $ 33 $ 156 $ 0 $ 8 ) $ 33 $ 156 $ 0 $ ( 296 $ 33 $ 156 $ 0 $ ( 296 ) Equity 156 $ 0 $ ( 296 ) Equity contract 3 0 ( 296 ) Equity contract 3 0 0 0 ( 6 296 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equity contract 3 0 0 0 ( 6 ) 0 23 3 0 0 0 ( 6 ) 0 23 0 0 0 0 ( 6 ) 0 23 0 0 ( 16 0 ( 6 ) 0 23 0 0 ( 16 ) ( 6 ) 0 23 0 0 ( 16 ) Interest 6 ) 0 23 0 0 ( 16 ) Interest rate 0 23 0 0 ( 16 ) Interest rate contract 3 16 ) Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) 0 rate contract 3 0 0 0 ( 7 ) 0 10 3 0 0 0 ( 7 ) 0 10 0 0 0 0 ( 7 ) 0 10 0 0 ( 25 0 ( 7 ) 0 10 0 0 ( 25 ) ( 7 ) 0 10 0 0 ( 25 ) Credit 7 ) 0 10 0 0 ( 25 ) Credit contract 0 10 0 0 ( 25 ) Credit contract 5 0 ( 25 ) Credit contract 5 0 0 0 ( 1 25 ) Credit contract 5 0 0 0 ( 1 ) ) Credit contract 5 0 0 0 ( 1 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 6 5 0 0 0 ( 1 ) 0 6 0 0 0 0 ( 1 ) 0 6 0 0 ( 5 0 ( 1 ) 0 6 0 0 ( 5 ) ( 1 ) 0 6 0 0 ( 5 ) Total 1 ) 0 6 0 0 ( 5 ) Total $ 0 6 0 0 ( 5 ) Total $ 20 $ ( 5 ) Total $ 20 $ 203 $ 0 $ ) Total $ 20 $ 203 $ 0 $ 6 $ $ 20 $ 203 $ 0 $ 6 $ ( 148 $ 203 $ 0 $ 6 $ ( 148 ) $ 0 $ 6 $ ( 148 ) $ ( 8 ) ( 148 ) $ ( 8 ) $ 72 $ 156 $ ( 8 ) $ 72 $ 156 $ 0 $ 8 ) $ 72 $ 156 $ 0 $ ( 342 $ 72 $ 156 $ 0 $ ( 342 ) Designated 156 $ 0 $ ( 342 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 80 $ 133 $ 0 $ exchange contract $ 80 $ 133 $ 0 $ 0 $ $ 80 $ 133 $ 0 $ 0 $ ( 3 $ 133 $ 0 $ 0 $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 $ 1 $ ( 3 ) $ 0 $ 1 $ 392 $ 3 ) $ 0 $ 1 $ 392 $ 0 $ $ 0 $ 1 $ 392 $ 0 $ ( 263 $ 1 $ 392 $ 0 $ ( 263 ) Equity 392 $ 0 $ ( 263 ) Equity contract 0 0 ( 263 ) Equity contract 0 0 67 0 ( 186 263 ) Equity contract 0 0 67 0 ( 186 ) ) Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 0 0 0 67 0 ( 186 ) 0 0 0 18 67 0 ( 186 ) 0 0 0 18 ( 25 0 ( 186 ) 0 0 0 18 ( 25 ) ( 186 ) 0 0 0 18 ( 25 ) Total 186 ) 0 0 0 18 ( 25 ) Total $ 0 0 0 18 ( 25 ) Total $ 80 $ ( 25 ) Total $ 80 $ 133 $ 67 $ ) Total $ 80 $ 133 $ 67 $ 0 $ $ 80 $ 133 $ 67 $ 0 $ ( 189 $ 133 $ 67 $ 0 $ ( 189 ) $ 67 $ 0 $ ( 189 ) $ 0 $ 1 $ ( 189 ) $ 0 $ 1 $ 392 $ 189 ) $ 0 $ 1 $ 392 $ 18 $ $ 0 $ 1 $ 392 $ 18 $ ( 288 $ 1 $ 392 $ 18 $ ( 288 ) Total 392 $ 18 $ ( 288 ) Total gross amount of gross amount of derivative $ 100 $ 336 $ 67 $ of derivative $ 100 $ 336 $ 67 $ 6 $ $ 100 $ 336 $ 67 $ 6 $ ( 337 $ 336 $ 67 $ 6 $ ( 337 ) $ 67 $ 6 $ ( 337 ) $ ( 8 ) ( 337 ) $ ( 8 ) $ 73 $ 548 $ ( 8 ) $ 73 $ 548 $ 18 $ 8 ) $ 73 $ 548 $ 18 $ ( 630 $ 73 $ 548 $ 18 $ ( 630 ) Gross 548 $ 18 $ ( 630 ) Gross derivative either offset enforceable master netting agreement $ 100 $ 336 $ 67 $ netting agreement $ 100 $ 336 $ 67 $ 6 $ $ 100 $ 336 $ 67 $ 6 $ ( 334 $ 336 $ 67 $ 6 $ ( 334 ) $ 67 $ 6 $ ( 334 ) $ ( 8 ) ( 334 ) $ ( 8 ) $ 69 $ 548 $ ( 8 ) $ 69 $ 548 $ 18 $ 8 ) $ 69 $ 548 $ 18 $ ( 630 $ 69 $ 548 $ 18 $ ( 630 ) Gross 548 $ 18 $ ( 630 ) Gross amount of derivative on the balance sheet ( 20 ) ( 132 ) ( sheet ( 20 ) ( 132 ) ( 67 ) ( ) ( 132 ) ( 67 ) ( 8 ) 221 ) ( 67 ) ( 8 ) 221 7 ( 74 67 ) ( 8 ) 221 7 ( 74 ) ( ) ( 8 ) 221 7 ( 74 ) ( 302 8 ) 221 7 ( 74 ) ( 302 ) ( 7 ( 74 ) ( 302 ) ( 25 ) 398 ) ( 302 ) ( 25 ) 398 Net amount presented 302 ) ( 25 ) 398 Net amount presented on the presented on the balance sheet 80 204 0 ( 2 ) on the balance sheet 80 204 0 ( 2 ) ( the balance sheet 80 204 0 ( 2 ) ( 113 sheet 80 204 0 ( 2 ) ( 113 ) ( 0 ( 2 ) ( 113 ) ( 1 ) ( ) ( 113 ) ( 1 ) ( 5 ) 246 ) ( 1 ) ( 5 ) 246 ( 7 ) 1 ) ( 5 ) 246 ( 7 ) ( 232 ( 5 ) 246 ( 7 ) ( 232 ) Gross 246 ( 7 ) ( 232 ) Gross amount of derivative offset on the balance sheet 0 0 0 0 0 0 on the balance sheet 0 0 0 0 0 0 0 the balance sheet 0 0 0 0 0 0 0 0 balance sheet 0 0 0 0 0 0 0 0 0 sheet 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash 0 0 0 0 0 0 0 0 0 Cash collateral 0 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 Cash collateral received 0 0 0 0 ( 228 0 Cash collateral received 0 0 0 0 ( 228 ) Cash collateral received 0 0 0 0 ( 228 ) 0 collateral received 0 0 0 0 ( 228 ) 0 0 0 0 0 0 ( 228 ) 0 0 0 0 0 0 ( 228 ) 0 0 0 0 ( 250 0 ( 228 ) 0 0 0 0 ( 250 ) ( 228 ) 0 0 0 0 ( 250 ) Net 228 ) 0 0 0 0 ( 250 ) Net amount 0 0 0 0 ( 250 ) Net amount $ 80 250 ) Net amount $ 80 $ 204 $ 0 $ Net amount $ 80 $ 204 $ 0 $ ( 2 $ 80 $ 204 $ 0 $ ( 2 ) $ 204 $ 0 $ ( 2 ) $ ( 341 ) ( 2 ) $ ( 341 ) $ ( 1 ) ( 341 ) $ ( 1 ) $ ( 5 ) ( 1 ) $ ( 5 ) $ 246 $ ( $ ( 5 ) $ 246 $ ( 7 ) $ ) $ 246 $ ( 7 ) $ ( 482 ) ( 7 ) $ ( 482 ) See also Note 4 482 ) See also Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements . – Fair Value Measurements . 68 PART II Item 8 Fair . 68 PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2017 2016 2015 Foreign Year Ended June 30 , 2017 2016 2015 Foreign Exchange Contracts Ended June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives June 30 , 2017 2016 2015 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 441 $ ( 797 ) $ Derivatives $ 441 $ ( 797 ) $ 741 Hedged item $ ( 797 ) $ 741 Hedged item ( 386 ) $ 741 Hedged item ( 386 ) 838 ( 725 ) Hedged item ( 386 ) 838 ( 725 ) Total amount ( 386 ) 838 ( 725 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 55 $ 41 $ 16 Equity of ineffectiveness $ 55 $ 41 $ 16 Equity Contracts Derivatives $ 55 $ 41 $ 16 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 74 ) $ ( 76 ) ( 74 ) $ ( 76 ) $ ( 107 ) ( 76 ) $ ( 107 ) Hedged item 74 76 ( 107 ) Hedged item 74 76 107 Total amount of 107 ) Hedged item 74 76 107 Total amount of ineffectiveness ) Hedged item 74 76 107 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded from effectiveness assessment $ ( 80 ) $ ( 10 ) ( 80 ) $ ( 10 ) $ 0 Cash Flow $ ( 10 ) $ 0 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2017 2016 2015 Effective Year Ended June 30 , 2017 2016 2015 Effective Portion Gains Ended June 30 , 2017 2016 2015 Effective Portion Gains recognized June 30 , 2017 2016 2015 Effective Portion Gains recognized in of tax effect of $ 4 , $ 24 and $ of $ 4 , $ 24 and $ 35 ) $ , $ 24 and $ 35 ) $ 328 $ 351 and $ 35 ) $ 328 $ 351 $ 1,152 Gains 35 ) $ 328 $ 351 $ 1,152 Gains reclassified from $ 328 $ 351 $ 1,152 Gains reclassified from accumulated other other comprehensive income into revenue 555 625 608 Amount Excluded from comprehensive income into revenue 555 625 608 Amount Excluded from Effectiveness income into revenue 555 625 608 Amount Excluded from Effectiveness Assessment expense ) , net ( 389 ) ( 354 ) ( net ( 389 ) ( 354 ) ( 346 ) We ) ( 354 ) ( 346 ) We estimate that $ ) We estimate that $ 130 million of net derivative gain in AOCI a of June 30 , 2017 will be reclassified a of June 30 , 2017 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2017 . 69 PART II Item during fiscal year 2017 . 69 PART II Item 8 Non-Designated . 69 PART II Item 8 Non-Designated Derivative Gains ( Losses million ) Year Ended June 30 , 2017 2016 2015 Foreign Year Ended June 30 , 2017 2016 2015 Foreign exchange contract Ended June 30 , 2017 2016 2015 Foreign exchange contract $ June 30 , 2017 2016 2015 Foreign exchange contract $ ( Foreign exchange contract $ ( 117 ) $ ( 55 ) ( 117 ) $ ( 55 ) $ ( 483 ) ( 55 ) $ ( 483 ) Equity contract ( 114 483 ) Equity contract ( 114 ) ( 21 ) ( contract ( 114 ) ( 21 ) ( 19 ) Interest-rate ) ( 21 ) ( 19 ) Interest-rate contract 14 10 ( 19 ) Interest-rate contract 14 10 23 Credit contract 5 19 ) Interest-rate contract 14 10 23 Credit contract 5 ( ) Interest-rate contract 14 10 23 Credit contract 5 ( 1 14 10 23 Credit contract 5 ( 1 ) ( 1 23 Credit contract 5 ( 1 ) ( 1 ) Commodity 5 ( 1 ) ( 1 ) Commodity contract ( 22 1 ) Commodity contract ( 22 ) ( 87 ) ( contract ( 22 ) ( 87 ) ( 223 ) Total ) ( 87 ) ( 223 ) Total $ ( 234 223 ) Total $ ( 234 ) $ ( 154 ) ( 234 ) $ ( 154 ) $ ( 703 ) ( 154 ) $ ( 703 ) NOTE 6 — FAIR $ ( 703 ) NOTE 6 — FAIR VALUE MEASUREMENTS Financial ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2017 Assets Mutual fund Fair Value June 30 , 2017 Assets Mutual fund $ 1,478 2017 Assets Mutual fund $ 1,478 $ 0 $ 0 $ Mutual fund $ 1,478 $ 0 $ 0 $ 1,478 $ $ 1,478 $ 0 $ 0 $ 1,478 $ 0 $ $ 0 $ 0 $ 1,478 $ 0 $ 1,478 Commercial $ 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 319 0 0 $ 1,478 Commercial paper 0 319 0 319 0 319 $ 1,478 Commercial paper 0 319 0 319 0 319 Certificates 1,478 Commercial paper 0 319 0 319 0 319 Certificates of Commercial paper 0 319 0 319 0 319 Certificates of deposit paper 0 319 0 319 0 319 Certificates of deposit 0 0 319 0 319 0 319 Certificates of deposit 0 1,358 0 319 Certificates of deposit 0 1,358 0 1,358 0 1,358 319 Certificates of deposit 0 1,358 0 1,358 0 1,358 U.S. Certificates of deposit 0 1,358 0 1,358 0 1,358 U.S. government of deposit 0 1,358 0 1,358 0 1,358 U.S. government and deposit 0 1,358 0 1,358 0 1,358 U.S. government and agency 0 1,358 0 1,358 0 1,358 U.S. government and agency security U.S. government and agency security 109,228 2,616 0 111,844 0 111,844 government and agency security 109,228 2,616 0 111,844 0 111,844 Foreign and agency security 109,228 2,616 0 111,844 0 111,844 Foreign government agency security 109,228 2,616 0 111,844 0 111,844 Foreign government bond security 109,228 2,616 0 111,844 0 111,844 Foreign government bond 0 109,228 2,616 0 111,844 0 111,844 Foreign government bond 0 5,187 0 111,844 Foreign government bond 0 5,187 0 5,187 0 5,187 111,844 Foreign government bond 0 5,187 0 5,187 0 5,187 Mortgage- Foreign government bond 0 5,187 0 5,187 0 5,187 Mortgage- and government bond 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed bond 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed security 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed security 0 5,187 Mortgage- and asset-backed security 0 3,934 0 3,934 0 3,934 Mortgage- and asset-backed security 0 3,934 0 3,934 0 3,934 Corporate and asset-backed security 0 3,934 0 3,934 0 3,934 Corporate note asset-backed security 0 3,934 0 3,934 0 3,934 Corporate note and security 0 3,934 0 3,934 0 3,934 Corporate note and bond 0 3,934 0 3,934 0 3,934 Corporate note and bond 0 3,934 Corporate note and bond 0 4,829 1 4,830 0 4,830 Corporate note and bond 0 4,829 1 4,830 0 4,830 Municipal note and bond 0 4,829 1 4,830 0 4,830 Municipal security and bond 0 4,829 1 4,830 0 4,830 Municipal security 0 bond 0 4,829 1 4,830 0 4,830 Municipal security 0 327 0 4,829 1 4,830 0 4,830 Municipal security 0 327 0 4,830 0 4,830 Municipal security 0 327 0 327 0 327 0 4,830 Municipal security 0 327 0 327 0 327 Common 4,830 Municipal security 0 327 0 327 0 327 Common and Municipal security 0 327 0 327 0 327 Common and preferred security 0 327 0 327 0 327 Common and preferred stock 0 327 0 327 0 327 Common and preferred stock 2,414 327 Common and preferred stock 2,414 1,994 18 4,426 0 4,426 Common and preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives and preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 0 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 0 509 18 4,426 0 4,426 Derivatives 1 508 0 509 ( 227 4,426 0 4,426 Derivatives 1 508 0 509 ( 227 ) 0 4,426 Derivatives 1 508 0 509 ( 227 ) 282 4,426 Derivatives 1 508 0 509 ( 227 ) 282 Total 1 508 0 509 ( 227 ) 282 Total $ 113,121 0 509 ( 227 ) 282 Total $ 113,121 $ 21,072 227 ) 282 Total $ 113,121 $ 21,072 $ 19 $ 282 Total $ 113,121 $ 21,072 $ 19 $ 134,212 $ $ 113,121 $ 21,072 $ 19 $ 134,212 $ ( 227 $ 21,072 $ 19 $ 134,212 $ ( 227 ) $ 19 $ 134,212 $ ( 227 ) $ 133,985 Liabilities Derivatives $ ( 227 ) $ 133,985 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 0 $ 345 $ 39 $ and other $ 0 $ 345 $ 39 $ 384 $ $ 0 $ 345 $ 39 $ 384 $ ( 228 $ 345 $ 39 $ 384 $ ( 228 ) $ 39 $ 384 $ ( 228 ) $ 156 70 PART $ ( 228 ) $ 156 70 PART II Item 8 ( 228 ) $ 156 70 PART II Item 8 ( 156 70 PART II Item 8 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2016 Assets Mutual fund Fair Value June 30 , 2016 Assets Mutual fund $ 1,012 2016 Assets Mutual fund $ 1,012 $ 0 $ 0 $ Mutual fund $ 1,012 $ 0 $ 0 $ 1,012 $ $ 1,012 $ 0 $ 0 $ 1,012 $ 0 $ $ 0 $ 0 $ 1,012 $ 0 $ 1,012 Commercial $ 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 $ 1,012 $ 0 $ 1,012 Commercial paper 0 298 0 0 $ 1,012 Commercial paper 0 298 0 298 0 298 $ 1,012 Commercial paper 0 298 0 298 0 298 Certificates 1,012 Commercial paper 0 298 0 298 0 298 Certificates of Commercial paper 0 298 0 298 0 298 Certificates of deposit paper 0 298 0 298 0 298 Certificates of deposit 0 0 298 0 298 0 298 Certificates of deposit 0 1,000 0 298 Certificates of deposit 0 1,000 0 1,000 0 1,000 298 Certificates of deposit 0 1,000 0 1,000 0 1,000 U.S. Certificates of deposit 0 1,000 0 1,000 0 1,000 U.S. government of deposit 0 1,000 0 1,000 0 1,000 U.S. government and deposit 0 1,000 0 1,000 0 1,000 U.S. government and agency 0 1,000 0 1,000 0 1,000 U.S. government and agency security U.S. government and agency security 86,492 3,707 0 90,199 0 90,199 government and agency security 86,492 3,707 0 90,199 0 90,199 Foreign and agency security 86,492 3,707 0 90,199 0 90,199 Foreign government agency security 86,492 3,707 0 90,199 0 90,199 Foreign government bond security 86,492 3,707 0 90,199 0 90,199 Foreign government bond 10 86,492 3,707 0 90,199 0 90,199 Foreign government bond 10 5,705 0 90,199 Foreign government bond 10 5,705 0 5,715 0 5,715 90,199 Foreign government bond 10 5,705 0 5,715 0 5,715 Mortgage- Foreign government bond 10 5,705 0 5,715 0 5,715 Mortgage- and government bond 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed bond 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed security 10 5,705 0 5,715 0 5,715 Mortgage- and asset-backed security 0 5,715 Mortgage- and asset-backed security 0 4,803 0 4,803 0 4,803 Mortgage- and asset-backed security 0 4,803 0 4,803 0 4,803 Corporate and asset-backed security 0 4,803 0 4,803 0 4,803 Corporate note asset-backed security 0 4,803 0 4,803 0 4,803 Corporate note and security 0 4,803 0 4,803 0 4,803 Corporate note and bond 0 4,803 0 4,803 0 4,803 Corporate note and bond 0 4,803 Corporate note and bond 0 6,361 1 6,362 0 6,362 Corporate note and bond 0 6,361 1 6,362 0 6,362 Municipal note and bond 0 6,361 1 6,362 0 6,362 Municipal security and bond 0 6,361 1 6,362 0 6,362 Municipal security 0 bond 0 6,361 1 6,362 0 6,362 Municipal security 0 342 0 6,361 1 6,362 0 6,362 Municipal security 0 342 0 6,362 0 6,362 Municipal security 0 342 0 342 0 342 0 6,362 Municipal security 0 342 0 342 0 342 Common 6,362 Municipal security 0 342 0 342 0 342 Common and Municipal security 0 342 0 342 0 342 Common and preferred security 0 342 0 342 0 342 Common and preferred stock 0 342 0 342 0 342 Common and preferred stock 6,918 342 Common and preferred stock 6,918 2,114 18 9,050 0 9,050 Common and preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives and preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 preferred stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 stock 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 0 6,918 2,114 18 9,050 0 9,050 Derivatives 6 633 0 639 18 9,050 0 9,050 Derivatives 6 633 0 639 ( 401 9,050 0 9,050 Derivatives 6 633 0 639 ( 401 ) 0 9,050 Derivatives 6 633 0 639 ( 401 ) 238 9,050 Derivatives 6 633 0 639 ( 401 ) 238 Total 6 633 0 639 ( 401 ) 238 Total $ 94,438 0 639 ( 401 ) 238 Total $ 94,438 $ 24,963 401 ) 238 Total $ 94,438 $ 24,963 $ 19 $ 238 Total $ 94,438 $ 24,963 $ 19 $ 119,420 $ $ 94,438 $ 24,963 $ 19 $ 119,420 $ ( 401 $ 24,963 $ 19 $ 119,420 $ ( 401 ) $ 19 $ 119,420 $ ( 401 ) $ 119,019 Liabilities Derivatives $ ( 401 ) $ 119,019 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 17 $ 613 $ 0 $ and other $ 17 $ 613 $ 0 $ 630 $ $ 17 $ 613 $ 0 $ 630 $ ( 398 $ 613 $ 0 $ 630 $ ( 398 ) $ 0 $ 630 $ ( 398 ) $ 232 ( a $ ( 398 ) $ 232 ( a ) These amount The change in our Level 3 financial instrument that are measured these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2017 2016 Net fair million ) June 30 , 2017 2016 Net fair value of ) June 30 , 2017 2016 Net fair value of asset on a recurring basis $ 133,985 $ 119,019 Cash 3,624 3,501 recurring basis $ 133,985 $ 119,019 Cash 3,624 3,501 Common and $ 133,985 $ 119,019 Cash 3,624 3,501 Common and preferred stock 133,985 $ 119,019 Cash 3,624 3,501 Common and preferred stock measured value on a nonrecurring basis 1,073 767 Other investment measured at on a nonrecurring basis 1,073 767 Other investment measured at fair value on a nonrecurring basis 523 618 Less derivative net asset on a nonrecurring basis 523 618 Less derivative net asset classified current and long-term asset ( 202 ) ( 246 ) Other asset ( 202 ) ( 246 ) Other 1 12 Recorded ) ( 246 ) Other 1 12 Recorded basis of investment ( 246 ) Other 1 12 Recorded basis of investment component basis of investment component $ 139,004 $ 123,671 Financial Assets and investment component $ 139,004 $ 123,671 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2017 and 2016 , we did During fiscal year 2017 and 2016 , we did not record on a nonrecurring basis . 71 PART II Item 8 NOTE . 71 PART II Item 8 NOTE 7 — INVENTORIES The PART II Item 8 NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2017 2016 Raw material million ) June 30 , 2017 2016 Raw material $ 797 ) June 30 , 2017 2016 Raw material $ 797 $ 2017 2016 Raw material $ 797 $ 612 Work in process Raw material $ 797 $ 612 Work in process 145 158 $ 612 Work in process 145 158 Finished good 1,239 1,481 612 Work in process 145 158 Finished good 1,239 1,481 Total process 145 158 Finished good 1,239 1,481 Total $ 2,181 $ 145 158 Finished good 1,239 1,481 Total $ 2,181 $ 2,251 good 1,239 1,481 Total $ 2,181 $ 2,251 NOTE 8 — 1,481 Total $ 2,181 $ 2,251 NOTE 8 — PROPERTY AND $ 2,181 $ 2,251 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2017 2016 Land $ million ) June 30 , 2017 2016 Land $ 1,107 $ ) June 30 , 2017 2016 Land $ 1,107 $ 824 , 2017 2016 Land $ 1,107 $ 824 Buildings and improvement 2016 Land $ 1,107 $ 824 Buildings and improvement 16,284 12,393 $ 824 Buildings and improvement 16,284 12,393 Leasehold improvement 5,064 3,659 824 Buildings and improvement 16,284 12,393 Leasehold improvement 5,064 3,659 Computer improvement 16,284 12,393 Leasehold improvement 5,064 3,659 Computer equipment and software 16,284 12,393 Leasehold improvement 5,064 3,659 Computer equipment and software 21,414 3,659 Computer equipment and software 21,414 17,391 Furniture and equipment 4,044 Computer equipment and software 21,414 17,391 Furniture and equipment 4,044 3,889 21,414 17,391 Furniture and equipment 4,044 3,889 Total , at cost 17,391 Furniture and equipment 4,044 3,889 Total , at cost 47,913 3,889 Total , at cost 47,913 38,156 Accumulated depreciation ( 24,179 Total , at cost 47,913 38,156 Accumulated depreciation ( 24,179 ) 47,913 38,156 Accumulated depreciation ( 24,179 ) ( 19,800 ) Total depreciation ( 24,179 ) ( 19,800 ) Total , net $ ) Total , net $ 23,734 $ 18,356 As of June , net $ 23,734 $ 18,356 As of June 30 , $ 18,356 As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , asset recorded June 30 , 2017 and 2016 , asset recorded under capital under capital lease were $ 2.7 billion and $ 865 million $ 2.7 billion and $ 865 million , respectively , and with capital lease wa $ 161 million and $ 57 million $ 161 million and $ 57 million , respectively . During respectively . During fiscal year 2017 and 2016 , property and During fiscal year 2017 and 2016 , property and equipment acquired under capital lease wa $ 1.8 billion and $ 413 million $ 1.8 billion and $ 413 million , respectively . During respectively . During fiscal year 2017 , 2016 , and 2015 During fiscal year 2017 , 2016 , and 2015 , depreciation 2017 , 2016 , and 2015 , depreciation expense wa $ , depreciation expense wa $ 6.1 billion , $ 4.9 billion $ 6.1 billion , $ 4.9 billion , and $ 4.1 4.9 billion , and $ 4.1 billion , respectively . NOTE billion , respectively . NOTE 9 — BUSINESS COMBINATIONS On December — BUSINESS COMBINATIONS On December 8 , 2016 , we completed COMBINATIONS On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . The purchase price primarily of cash of $ 26.9 billion . The acquisition is growth of LinkedIn , Office 365 , and Dynamics 365 . Office 365 , and Dynamics 365 . The financial result of date of the acquisition . 72 PART II Item 8 The . 72 PART II Item 8 The allocation of the purc wa completed a of June 30 , 2017 . The major a of June 30 , 2017 . The major class of Cash and cash equivalent $ 1,328 Short-term investment 2,110 Other current equivalent $ 1,328 Short-term investment 2,110 Other current asset 697 Property investment 2,110 Other current asset 697 Property and equipment 1,529 Intangible asset 697 Property and equipment 1,529 Intangible asset 7,887 Goodwill ( and equipment 1,529 Intangible asset 7,887 Goodwill ( a ) 16,803 7,887 Goodwill ( a ) 16,803 Short-term debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not balance sheet . See Note 12 – Debt for further information Weighted Average Life Customer-related $ 3,607 7 year Marketing-related ( trade Average Life Customer-related $ 3,607 7 year Marketing-related ( trade name Marketing-related ( trade name ) 2,148 20 year Technology-based 2,109 3 ( trade name ) 2,148 20 year Technology-based 2,109 3 year ) 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 year Technology-based 2,109 3 year Contract-based 23 5 year Fair value of 2,109 3 year Contract-based 23 5 year Fair value of intangible of intangible asset acquired $ 7,887 9 year Our consolidated income intangible asset acquired $ 7,887 9 year Our consolidated income statement million ) Year Ended June 30 , 2017 Revenue $ 2,268 Year Ended June 30 , 2017 Revenue $ 2,268 Operating loss 30 , 2017 Revenue $ 2,268 Operating loss $ ( 948 2,268 Operating loss $ ( 948 ) Following are the supplemental had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , share ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 91,668 $ Ended June 30 , 2017 2016 Revenue $ 91,668 $ 88,652 , 2017 2016 Revenue $ 91,668 $ 88,652 Net income 20,894 2016 Revenue $ 91,668 $ 88,652 Net income 20,894 15,383 Diluted 91,668 $ 88,652 Net income 20,894 15,383 Diluted earnings per share $ 88,652 Net income 20,894 15,383 Diluted earnings per share 2.67 15,383 Diluted earnings per share 2.67 1.92 73 PART II Item Diluted earnings per share 2.67 1.92 73 PART II Item 8 earnings per share 2.67 1.92 73 PART II Item 8 These 1.92 73 PART II Item 8 These pro forma result were earliest period presented . NOTE 10 — GOODWILL Changes in the ( In million ) June 30 , 2015 Acquisitions Other June million ) June 30 , 2015 Acquisitions Other June 30 , , 2015 Acquisitions Other June 30 , 2016 Acquisitions Other June Acquisitions Other June 30 , 2016 Acquisitions Other June 30 , , 2016 Acquisitions Other June 30 , 2017 Productivity and Business Acquisitions Other June 30 , 2017 Productivity and Business Processes $ Productivity and Business Processes $ 6,309 $ 443 $ ( 74 Business Processes $ 6,309 $ 443 $ ( 74 ) $ 6,309 $ 443 $ ( 74 ) $ 6,678 $ 17,072 $ ( 74 ) $ 6,678 $ 17,072 ( a ) 74 ) $ 6,678 $ 17,072 ( a ) $ ( ( a ) $ ( 11 ) $ 23,739 Intelligent Cloud $ ( 11 ) $ 23,739 Intelligent Cloud 4,917 549 1 ) $ 23,739 Intelligent Cloud 4,917 549 1 5,467 49 39 $ 23,739 Intelligent Cloud 4,917 549 1 5,467 49 39 5,555 23,739 Intelligent Cloud 4,917 549 1 5,467 49 39 5,555 More Intelligent Cloud 4,917 549 1 5,467 49 39 5,555 More Personal Cloud 4,917 549 1 5,467 49 39 5,555 More Personal Computing 4,917 549 1 5,467 49 39 5,555 More Personal Computing 5,713 549 1 5,467 49 39 5,555 More Personal Computing 5,713 100 39 5,555 More Personal Computing 5,713 100 ( 86 ) 5,727 5,555 More Personal Computing 5,713 100 ( 86 ) 5,727 115 Personal Computing 5,713 100 ( 86 ) 5,727 115 ( 14 5,713 100 ( 86 ) 5,727 115 ( 14 ) 5,828 100 ( 86 ) 5,727 115 ( 14 ) 5,828 Total 86 ) 5,727 115 ( 14 ) 5,828 Total $ 16,939 5,727 115 ( 14 ) 5,828 Total $ 16,939 $ 1,092 14 ) 5,828 Total $ 16,939 $ 1,092 $ ( 159 5,828 Total $ 16,939 $ 1,092 $ ( 159 ) $ 16,939 $ 1,092 $ ( 159 ) $ 17,872 $ 17,236 $ ( 159 ) $ 17,872 $ 17,236 $ 14 $ 159 ) $ 17,872 $ 17,236 $ 14 $ 35,122 ( $ 17,872 $ 17,236 $ 14 $ 35,122 ( a ) $ 17,236 $ 14 $ 35,122 ( a ) Includes goodwill other acquisition . See Note 9 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase impairment a of both June 30 , 2017 and 2016 wa of both June 30 , 2017 and 2016 wa $ 11.3 June 30 , 2017 and 2016 wa $ 11.3 billion . 2017 and 2016 wa $ 11.3 billion . Goodwill Impairment We for impairment annually on May 1 at the reporting unit level the business . Effective May 1 , 2017 , we prospectively . Effective May 1 , 2017 , we prospectively adopted accounting goodwill ( formerly “ Step 2 ” ) in the event were identified in our May 1 , 2017 or May 1 in our May 1 , 2017 or May 1 , 2016 1 , 2017 or May 1 , 2016 test . During 2017 or May 1 , 2016 test . During fiscal year test . During fiscal year 2015 , we recorded impairment charge recorded impairment charge of $ 5.1 billion related to goodwill in annual testing a of May 1 , 2015 , our previous a of May 1 , 2015 , our previous Phone Hardware second half of fiscal year 2015 , Phone Hardware did not impairment adjustment wa required . 74 PART II Item 8 Because . 74 PART II Item 8 Because our annual test indicated estimated fair value , Step 2 of the goodwill impairment test Phone Hardware . Under Step 2 , the fair value of the tangible asset . NOTE 11 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2017 2016 Technology-based ( Carrying Amount June 30 , 2017 2016 Technology-based ( a ) Amount June 30 , 2017 2016 Technology-based ( a ) $ Technology-based ( a ) $ 7,765 $ ( 4,318 ) $ ) $ 7,765 $ ( 4,318 ) $ 3,447 $ 5,970 $ ( 4,318 ) $ 3,447 $ 5,970 $ ( 3,648 4,318 ) $ 3,447 $ 5,970 $ ( 3,648 ) $ 3,447 $ 5,970 $ ( 3,648 ) $ 2,322 Marketing-related 4,016 $ ( 3,648 ) $ 2,322 Marketing-related 4,016 ( 829 ) 3,648 ) $ 2,322 Marketing-related 4,016 ( 829 ) 3,187 1,869 $ 2,322 Marketing-related 4,016 ( 829 ) 3,187 1,869 ( 616 Marketing-related 4,016 ( 829 ) 3,187 1,869 ( 616 ) 1,253 4,016 ( 829 ) 3,187 1,869 ( 616 ) 1,253 Contract-based 829 ) 3,187 1,869 ( 616 ) 1,253 Contract-based 841 ( 3,187 1,869 ( 616 ) 1,253 Contract-based 841 ( 722 ) ( 616 ) 1,253 Contract-based 841 ( 722 ) 119 796 ) 1,253 Contract-based 841 ( 722 ) 119 796 ( 718 Contract-based 841 ( 722 ) 119 796 ( 718 ) 78 841 ( 722 ) 119 796 ( 718 ) 78 Customer-related 722 ) 119 796 ( 718 ) 78 Customer-related 4,045 ( 119 796 ( 718 ) 78 Customer-related 4,045 ( 692 ) ( 718 ) 78 Customer-related 4,045 ( 692 ) 3,353 465 ) 78 Customer-related 4,045 ( 692 ) 3,353 465 ( 385 Customer-related 4,045 ( 692 ) 3,353 465 ( 385 ) 80 4,045 ( 692 ) 3,353 465 ( 385 ) 80 Total 692 ) 3,353 465 ( 385 ) 80 Total $ 16,667 3,353 465 ( 385 ) 80 Total $ 16,667 ( b 385 ) 80 Total $ 16,667 ( b ) $ ( ( b ) $ ( 6,561 ) $ 10,106 $ 9,100 $ ( 6,561 ) $ 10,106 $ 9,100 $ ( 5,367 6,561 ) $ 10,106 $ 9,100 $ ( 5,367 ) $ 10,106 $ 9,100 $ ( 5,367 ) $ 3,733 ( a $ ( 5,367 ) $ 3,733 ( a ) Technology-based intangible Technology-based intangible asset included $ 59 million and $ 115 million $ 59 million and $ 115 million of net carrying amount otherwise marketed a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively . June 30 , 2017 and 2016 , respectively . ( b other addition . See Note 9 – Business Combinations for further were identified during fiscal year 2017 . During fiscal year 2016 2017 . During fiscal year 2016 , we recorded impairment charge recorded impairment charge of $ 480 million related to intangible asset fourth quarter of fiscal year 2016 , we tested these intangible impairment . During fiscal year 2015 , we recorded impairment charge recorded impairment charge of $ 2.2 billion related to intangible asset fourth quarter of fiscal year 2015 , we tested these intangible ) by segment in Note 21 – Segment Information and Geographic to our intangible asset . 75 PART II Item 8 The . 75 PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2017 2016 Customer-related $ Year Ended June 30 , 2017 2016 Customer-related $ 3,607 7 Ended June 30 , 2017 2016 Customer-related $ 3,607 7 year , 2017 2016 Customer-related $ 3,607 7 year $ 30 3 2017 2016 Customer-related $ 3,607 7 year $ 30 3 year $ 3,607 7 year $ 30 3 year Technology-based 2,265 2 3,607 7 year $ 30 3 year Technology-based 2,265 2 year $ 30 3 year Technology-based 2,265 2 year 361 4 year 30 3 year Technology-based 2,265 2 year 361 4 year Marketing-related year Technology-based 2,265 2 year 361 4 year Marketing-related 2,148 19 Technology-based 2,265 2 year 361 4 year Marketing-related 2,148 19 year year 361 4 year Marketing-related 2,148 19 year 2 1 year 361 4 year Marketing-related 2,148 19 year 2 1 year Contract-based year Marketing-related 2,148 19 year 2 1 year Contract-based 63 6 Marketing-related 2,148 19 year 2 1 year Contract-based 63 6 year year 2 1 year Contract-based 63 6 year 0 n/a Total 2 1 year Contract-based 63 6 year 0 n/a Total $ year Contract-based 63 6 year 0 n/a Total $ 8,083 9 year 0 n/a Total $ 8,083 9 year $ 393 4 0 n/a Total $ 8,083 9 year $ 393 4 year $ 8,083 9 year $ 393 4 year Intangible asset amortization 8,083 9 year $ 393 4 year Intangible asset amortization expense asset amortization expense wa $ 1.7 billion , $ 978 million $ 1.7 billion , $ 978 million , and $ 1.3 978 million , and $ 1.3 billion for fiscal year 2017 1.3 billion for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . Amortization of of capitalized software wa $ 55 million , $ 69 million $ 55 million , $ 69 million , and $ 79 69 million , and $ 79 million for fiscal year 2017 79 million for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . The following asset held a of June 30 , 2017 : ( In a of June 30 , 2017 : ( In million ) million ) Year Ending June 30 , 2018 $ 2,190 2019 Year Ending June 30 , 2018 $ 2,190 2019 1,698 2020 June 30 , 2018 $ 2,190 2019 1,698 2020 1,180 2021 30 , 2018 $ 2,190 2019 1,698 2020 1,180 2021 1,006 , 2018 $ 2,190 2019 1,698 2020 1,180 2021 1,006 2022 2018 $ 2,190 2019 1,698 2020 1,180 2021 1,006 2022 932 $ 2,190 2019 1,698 2020 1,180 2021 1,006 2022 932 Thereafter 2,190 2019 1,698 2020 1,180 2021 1,006 2022 932 Thereafter 3,100 2019 1,698 2020 1,180 2021 1,006 2022 932 Thereafter 3,100 Total 1,698 2020 1,180 2021 1,006 2022 932 Thereafter 3,100 Total $ 2020 1,180 2021 1,006 2022 932 Thereafter 3,100 Total $ 10,106 2021 1,006 2022 932 Thereafter 3,100 Total $ 10,106 NOTE 12 932 Thereafter 3,100 Total $ 10,106 NOTE 12 — DEBT Short-term 3,100 Total $ 10,106 NOTE 12 — DEBT Short-term Debt As Short-term Debt As of June 30 , 2017 , we had As of June 30 , 2017 , we had $ 9.1 2017 , we had $ 9.1 billion of commercial paper issued a weighted-average interest rate of 1.01 % and maturity ranging from % and maturity ranging from 25 day to 264 day . ranging from 25 day to 264 day . As of June day . As of June 30 , 2016 , we had As of June 30 , 2016 , we had $ 12.9 2016 , we had $ 12.9 billion of commercial paper issued a weighted-average interest rate of 0.43 % and maturity ranging from % and maturity ranging from 1 day to 99 day . ranging from 1 day to 99 day . The estimated fair . We have two $ 5.0 billion credit facility that expire facility that expire on October 31 , 2017 and November 14 expire on October 31 , 2017 and November 14 , 2018 31 , 2017 and November 14 , 2018 , respectively . 2017 and November 14 , 2018 , respectively . These credit program . As of June 30 , 2017 , we were As of June 30 , 2017 , we were in compliance Long-term Debt As of June 30 , 2017 , the total As of June 30 , 2017 , the total carrying value current portion , were $ 77.1 billion and $ 80.3 billion $ 77.1 billion and $ 80.3 billion , respectively . As respectively . As of June 30 , 2016 , the total As of June 30 , 2016 , the total carrying value our long-term debt were $ 40.6 billion and $ 44.0 billion $ 40.6 billion and $ 44.0 billion , respectively . These value are based on Level 2 input . 76 PART II on Level 2 input . 76 PART II Item 8 The . 76 PART II Item 8 The component of our long-term Rate Effective Interest Rate June 30 , 2017 2016 Notes November Interest Rate June 30 , 2017 2016 Notes November 15 , Rate June 30 , 2017 2016 Notes November 15 , 2017 , 2017 2016 Notes November 15 , 2017 $ 600 $ 2016 Notes November 15 , 2017 $ 600 $ 600 0.875 November 15 , 2017 $ 600 $ 600 0.875 % 1.084 , 2017 $ 600 $ 600 0.875 % 1.084 % May 2017 $ 600 $ 600 0.875 % 1.084 % May 1 600 $ 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 450 450 1.000 1.084 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % May 1 , 2018 450 450 1.000 % 1.106 % November 1 , 2018 450 450 1.000 % 1.106 % November 3 2018 450 450 1.000 % 1.106 % November 3 , 2018 1.000 % 1.106 % November 3 , 2018 1,750 1,750 1.300 1.106 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % December 3 , 2018 1,750 1,750 1.300 % 1.396 % December 6 2018 1,750 1,750 1.300 % 1.396 % December 6 , 2018 1.300 % 1.396 % December 6 , 2018 1,250 1,250 1.625 1.396 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % June 6 , 2018 1,250 1,250 1.625 % 1.824 % June 1 2018 1,250 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 1,000 4.200 1.824 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % August 1 , 2019 1,000 1,000 4.200 % 4.379 % August 8 2019 1,000 1,000 4.200 % 4.379 % August 8 , 2019 4.200 % 4.379 % August 8 , 2019 ( a ) 4.379 % August 8 , 2019 ( a ) 2,500 * , 2019 ( a ) 2,500 * 1.100 % 1.203 % ( a ) 2,500 * 1.100 % 1.203 % November 1 ) 2,500 * 1.100 % 1.203 % November 1 , 2019 1.100 % 1.203 % November 1 , 2019 ( b ) 1.203 % November 1 , 2019 ( b ) 18 * , 2019 ( b ) 18 * 0.500 % 0.500 % ( b ) 18 * 0.500 % 0.500 % February 6 ) 18 * 0.500 % 0.500 % February 6 , 2020 0.500 % 0.500 % February 6 , 2020 ( c ) 0.500 % February 6 , 2020 ( c ) 1,500 * , 2020 ( c ) 1,500 * 1.850 % 1.952 % ( c ) 1,500 * 1.850 % 1.952 % February 12 ) 1,500 * 1.850 % 1.952 % February 12 , 2020 1.850 % 1.952 % February 12 , 2020 1,500 1,500 1.850 1.952 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % October 12 , 2020 1,500 1,500 1.850 % 1.935 % October 1 2020 1,500 1,500 1.850 % 1.935 % October 1 , 2020 1.850 % 1.935 % October 1 , 2020 1,000 1,000 3.000 1.935 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % November 1 , 2020 1,000 1,000 3.000 % 3.137 % November 3 2020 1,000 1,000 3.000 % 3.137 % November 3 , 2020 3.000 % 3.137 % November 3 , 2020 2,250 2,250 2.000 3.137 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % February 3 , 2020 2,250 2,250 2.000 % 2.093 % February 8 2020 2,250 2,250 2.000 % 2.093 % February 8 , 2021 2.000 % 2.093 % February 8 , 2021 500 500 4.000 2.093 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % August 8 , 2021 500 500 4.000 % 4.082 % August 8 2021 500 500 4.000 % 4.082 % August 8 , 2021 4.000 % 4.082 % August 8 , 2021 ( a ) 4.082 % August 8 , 2021 ( a ) 2,750 * , 2021 ( a ) 2,750 * 1.550 % 1.642 % ( a ) 2,750 * 1.550 % 1.642 % December 6 ) 2,750 * 1.550 % 1.642 % December 6 , 2021 1.550 % 1.642 % December 6 , 2021 ( d ) 1.642 % December 6 , 2021 ( d ) 1,996 1,944 , 2021 ( d ) 1,996 1,944 2.125 % 2.233 % 2021 ( d ) 1,996 1,944 2.125 % 2.233 % February ( d ) 1,996 1,944 2.125 % 2.233 % February 6 ) 1,996 1,944 2.125 % 2.233 % February 6 , 2022 2.125 % 2.233 % February 6 , 2022 ( c ) 2.233 % February 6 , 2022 ( c ) 1,750 * , 2022 ( c ) 1,750 * 2.400 % 2.520 % ( c ) 1,750 * 2.400 % 2.520 % February 12 ) 1,750 * 2.400 % 2.520 % February 12 , 2022 2.400 % 2.520 % February 12 , 2022 1,500 1,500 2.375 2.520 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % November 12 , 2022 1,500 1,500 2.375 % 2.466 % November 3 2022 1,500 1,500 2.375 % 2.466 % November 3 , 2022 2.375 % 2.466 % November 3 , 2022 1,000 1,000 2.650 2.466 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 15 2022 1,000 1,000 2.650 % 2.717 % November 15 , 2022 2.650 % 2.717 % November 15 , 2022 750 750 2.125 2.717 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % August 1 , 2023 1,000 1,000 2.375 % 2.465 % August 8 2023 1,000 1,000 2.375 % 2.465 % August 8 , 2023 2.375 % 2.465 % August 8 , 2023 ( a ) 2.465 % August 8 , 2023 ( a ) 1,500 * , 2023 ( a ) 1,500 * 2.000 % 2.101 % ( a ) 1,500 * 2.000 % 2.101 % December 15 ) 1,500 * 2.000 % 2.101 % December 15 , 2023 2.000 % 2.101 % December 15 , 2023 1,500 1,500 3.625 2.101 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % February 15 , 2023 1,500 1,500 3.625 % 3.726 % February 6 2023 1,500 1,500 3.625 % 3.726 % February 6 , 2024 3.625 % 3.726 % February 6 , 2024 ( c ) 3.726 % February 6 , 2024 ( c ) 2,250 * , 2024 ( c ) 2,250 * 2.875 % 3.041 % ( c ) 2,250 * 2.875 % 3.041 % February 12 ) 2,250 * 2.875 % 3.041 % February 12 , 2025 2.875 % 3.041 % February 12 , 2025 2,250 2,250 2.700 3.041 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % November 12 , 2025 2,250 2,250 2.700 % 2.772 % November 3 2025 2,250 2,250 2.700 % 2.772 % November 3 , 2025 2.700 % 2.772 % November 3 , 2025 3,000 3,000 3.125 2.772 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % August 3 , 2025 3,000 3,000 3.125 % 3.176 % August 8 2025 3,000 3,000 3.125 % 3.176 % August 8 , 2026 3.125 % 3.176 % August 8 , 2026 ( a ) 3.176 % August 8 , 2026 ( a ) 4,000 * , 2026 ( a ) 4,000 * 2.400 % 2.464 % ( a ) 4,000 * 2.400 % 2.464 % February 6 ) 4,000 * 2.400 % 2.464 % February 6 , 2027 2.400 % 2.464 % February 6 , 2027 ( c ) 2.464 % February 6 , 2027 ( c ) 4,000 * , 2027 ( c ) 4,000 * 3.300 % 3.383 % ( c ) 4,000 * 3.300 % 3.383 % December 6 ) 4,000 * 3.300 % 3.383 % December 6 , 2028 3.300 % 3.383 % December 6 , 2028 ( d ) 3.383 % December 6 , 2028 ( d ) 1,996 1,944 , 2028 ( d ) 1,996 1,944 3.125 % 3.218 % 2028 ( d ) 1,996 1,944 3.125 % 3.218 % May ( d ) 1,996 1,944 3.125 % 3.218 % May 2 ) 1,996 1,944 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( d ) 3.218 % May 2 , 2033 ( d ) 627 611 , 2033 ( d ) 627 611 2.625 % 2.690 % 2033 ( d ) 627 611 2.625 % 2.690 % February ( d ) 627 611 2.625 % 2.690 % February 12 ) 627 611 2.625 % 2.690 % February 12 , 2035 2.625 % 2.690 % February 12 , 2035 1,500 1,500 3.500 2.690 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % November 12 , 2035 1,500 1,500 3.500 % 3.604 % November 3 2035 1,500 1,500 3.500 % 3.604 % November 3 , 2035 3.500 % 3.604 % November 3 , 2035 1,000 1,000 4.200 3.604 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % August 3 , 2035 1,000 1,000 4.200 % 4.260 % August 8 2035 1,000 1,000 4.200 % 4.260 % August 8 , 2036 4.200 % 4.260 % August 8 , 2036 ( a ) 4.260 % August 8 , 2036 ( a ) 2,250 * , 2036 ( a ) 2,250 * 3.450 % 3.510 % ( a ) 2,250 * 3.450 % 3.510 % February 6 ) 2,250 * 3.450 % 3.510 % February 6 , 2037 3.450 % 3.510 % February 6 , 2037 ( c ) 3.510 % February 6 , 2037 ( c ) 2,500 * , 2037 ( c ) 2,500 * 4.100 % 4.152 % ( c ) 2,500 * 4.100 % 4.152 % June 1 ) 2,500 * 4.100 % 4.152 % June 1 , 2039 4.100 % 4.152 % June 1 , 2039 750 750 5.200 4.152 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 500 500 4.875 3.829 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % February 15 , 2043 500 500 4.875 % 4.918 % February 12 2043 500 500 4.875 % 4.918 % February 12 , 2045 4.875 % 4.918 % February 12 , 2045 1,750 1,750 3.750 4.918 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % November 12 , 2045 1,750 1,750 3.750 % 3.800 % November 3 2045 1,750 1,750 3.750 % 3.800 % November 3 , 2045 3.750 % 3.800 % November 3 , 2045 3,000 3,000 4.450 3.800 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % August 3 , 2045 3,000 3,000 4.450 % 4.492 % August 8 2045 3,000 3,000 4.450 % 4.492 % August 8 , 2046 4.450 % 4.492 % August 8 , 2046 ( a ) 4.492 % August 8 , 2046 ( a ) 4,500 * , 2046 ( a ) 4,500 * 3.700 % 3.743 % ( a ) 4,500 * 3.700 % 3.743 % February 6 ) 4,500 * 3.700 % 3.743 % February 6 , 2047 3.700 % 3.743 % February 6 , 2047 ( c ) 3.743 % February 6 , 2047 ( c ) 3,000 * , 2047 ( c ) 3,000 * 4.250 % 4.287 % ( c ) 3,000 * 4.250 % 4.287 % February 12 ) 3,000 * 4.250 % 4.287 % February 12 , 2055 4.250 % 4.287 % February 12 , 2055 2,250 2,250 4.000 4.287 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % November 12 , 2055 2,250 2,250 4.000 % 4.063 % November 3 2055 2,250 2,250 4.000 % 4.063 % November 3 , 2055 4.000 % 4.063 % November 3 , 2055 1,000 1,000 4.750 4.063 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % August 3 , 2055 1,000 1,000 4.750 % 4.782 % August 8 2055 1,000 1,000 4.750 % 4.782 % August 8 , 2056 4.750 % 4.782 % August 8 , 2056 ( a ) 4.782 % August 8 , 2056 ( a ) 2,250 * , 2056 ( a ) 2,250 * 3.950 % 4.033 % ( a ) 2,250 * 3.950 % 4.033 % February 6 ) 2,250 * 3.950 % 4.033 % February 6 , 2057 3.950 % 4.033 % February 6 , 2057 ( c ) 4.033 % February 6 , 2057 ( c ) 2,000 * , 2057 ( c ) 2,000 * 4.500 % 4.528 % ( c ) 2,000 * 4.500 % 4.528 % Total $ ) 2,000 * 4.500 % 4.528 % Total $ 77,837 $ % 4.528 % Total $ 77,837 $ 40,949 ( a ) % Total $ 77,837 $ 40,949 ( a ) In August ( a ) In August 2016 , we issued $ 19.8 2016 , we issued $ 19.8 billion of debt security . billion of debt security . 77 PART II Item 8 ( . 77 PART II Item 8 ( b ) Remaining note LinkedIn acquisition . See Note 9 – Business Combinations for further ( c ) In February 2017 , we issued $ 17.0 2017 , we issued $ 17.0 billion of debt security . our debt for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 wa $ 2017 , 2016 , and 2015 wa $ 1.6 billion , , and 2015 wa $ 1.6 billion , $ 1.1 billion $ 1.6 billion , $ 1.1 billion , and $ 620 1.1 billion , and $ 620 million , respectively . Effective , respectively . Effective July 1 , 2016 , we retrospectively . Effective July 1 , 2016 , we retrospectively adopted accounting discount . As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , the aggregate June 30 , 2017 and 2016 , the aggregate unamortized discount current portion , were $ 715 million and $ 392 million $ 715 million and $ 392 million , respectively . Maturities million ) Year Ending June 30 , 2018 $ 1,050 2019 Year Ending June 30 , 2018 $ 1,050 2019 4,000 2020 June 30 , 2018 $ 1,050 2019 4,000 2020 5,518 2021 30 , 2018 $ 1,050 2019 4,000 2020 5,518 2021 3,750 , 2018 $ 1,050 2019 4,000 2020 5,518 2021 3,750 2022 2018 $ 1,050 2019 4,000 2020 5,518 2021 3,750 2022 7,996 $ 1,050 2019 4,000 2020 5,518 2021 3,750 2022 7,996 Thereafter 1,050 2019 4,000 2020 5,518 2021 3,750 2022 7,996 Thereafter 55,523 2019 4,000 2020 5,518 2021 3,750 2022 7,996 Thereafter 55,523 Total 4,000 2020 5,518 2021 3,750 2022 7,996 Thereafter 55,523 Total $ 2020 5,518 2021 3,750 2022 7,996 Thereafter 55,523 Total $ 77,837 2021 3,750 2022 7,996 Thereafter 55,523 Total $ 77,837 NOTE 13 7,996 Thereafter 55,523 Total $ 77,837 NOTE 13 — INCOME TAXES 55,523 Total $ 77,837 NOTE 13 — INCOME TAXES The component million ) Year Ended June 30 , 2017 2016 2015 Current Year Ended June 30 , 2017 2016 2015 Current Taxes U.S. Ended June 30 , 2017 2016 2015 Current Taxes U.S. federal June 30 , 2017 2016 2015 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 2,739 $ 545 $ 3,661 U.S. U.S. federal $ 2,739 $ 545 $ 3,661 U.S. state and $ 2,739 $ 545 $ 3,661 U.S. state and local 30 3,661 U.S. state and local 30 136 364 Foreign 2,472 1,940 U.S. state and local 30 136 364 Foreign 2,472 1,940 2,065 state and local 30 136 364 Foreign 2,472 1,940 2,065 Current local 30 136 364 Foreign 2,472 1,940 2,065 Current tax 5,241 30 136 364 Foreign 2,472 1,940 2,065 Current tax 5,241 2,621 136 364 Foreign 2,472 1,940 2,065 Current tax 5,241 2,621 6,090 2,472 1,940 2,065 Current tax 5,241 2,621 6,090 Deferred Taxes Deferred 1,940 2,065 Current tax 5,241 2,621 6,090 Deferred Taxes Deferred tax 2,065 Current tax 5,241 2,621 6,090 Deferred Taxes Deferred tax ( Deferred Taxes Deferred tax ( 3,296 ) 332 224 Provision for Deferred tax ( 3,296 ) 332 224 Provision for income tax tax ( 3,296 ) 332 224 Provision for income tax $ Provision for income tax $ 1,945 $ 2,953 $ 6,314 78 income tax $ 1,945 $ 2,953 $ 6,314 78 PART II $ 1,945 $ 2,953 $ 6,314 78 PART II Item 8 1,945 $ 2,953 $ 6,314 78 PART II Item 8 In 6,314 78 PART II Item 8 In fiscal year 2017 , Item 8 In fiscal year 2017 , deferred tax included U.S. deferred tax benefit of $ 2.7 billion and $ 617 million $ 2.7 billion and $ 617 million , respectively . U.S. million ) Year Ended June 30 , 2017 2016 2015 U.S. Year Ended June 30 , 2017 2016 2015 U.S. $ 453 Ended June 30 , 2017 2016 2015 U.S. $ 453 $ June 30 , 2017 2016 2015 U.S. $ 453 $ ( 2017 2016 2015 U.S. $ 453 $ ( 325 ) $ U.S. $ 453 $ ( 325 ) $ 7,363 Foreign 22,696 $ ( 325 ) $ 7,363 Foreign 22,696 20,076 11,144 Income 325 ) $ 7,363 Foreign 22,696 20,076 11,144 Income before income ) $ 7,363 Foreign 22,696 20,076 11,144 Income before income tax $ 7,363 Foreign 22,696 20,076 11,144 Income before income tax $ Income before income tax $ 23,149 $ 19,751 $ 18,507 In income tax $ 23,149 $ 19,751 $ 18,507 In fiscal year $ 23,149 $ 19,751 $ 18,507 In fiscal year 2017 , $ 18,507 In fiscal year 2017 , income before income tax to the sale of Windows 10 of $ 6.4 billion and of Windows 10 of $ 6.4 billion and $ 317 million $ 6.4 billion and $ 317 million , respectively . In respectively . In fiscal year 2016 , income before income tax to the sale of Windows 10 of $ 6.0 billion and of Windows 10 of $ 6.0 billion and $ 588 million $ 6.0 billion and $ 588 million , respectively . In respectively . In fiscal year 2015 , income before income tax our phone business of $ 1.1 billion and $ 8.9 billion $ 1.1 billion and $ 8.9 billion , respectively . The follows : Year Ended June 30 , 2017 2016 2015 Federal Year Ended June 30 , 2017 2016 2015 Federal statutory rate Ended June 30 , 2017 2016 2015 Federal statutory rate 35.0 June 30 , 2017 2016 2015 Federal statutory rate 35.0 % 2016 2015 Federal statutory rate 35.0 % 35.0 % 35.0 % Federal statutory rate 35.0 % 35.0 % 35.0 % Effect of rate 35.0 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 15.7 ) % ( 19.4 ) ( 15.7 ) % ( 19.4 ) % ( 20.9 ) ( 19.4 ) % ( 20.9 ) % Phone business loss % Phone business loss ( 7.3 ) % 1.3 % 19.1 loss ( 7.3 ) % 1.3 % 19.1 % Excess tax 7.3 ) % 1.3 % 19.1 % Excess tax benefit relating relating to stock-based compensation ( 2.7 ) % ( 2.0 ) ( 2.7 ) % ( 2.0 ) % 0 % Domestic % ( 2.0 ) % 0 % Domestic production activity deduction Domestic production activity deduction ( 1.4 ) % ( 0.6 ) ( 1.4 ) % ( 0.6 ) % ( 2.4 ) ( 0.6 ) % ( 2.4 ) % Interest , net ) % Interest , net 1.8 % 1.2 % 1.5 % Interest , net 1.8 % 1.2 % 1.5 % Other reconciling net 1.8 % 1.2 % 1.5 % Other reconciling item , reconciling item , net ( 1.3 ) % ( 0.5 ) ( 1.3 ) % ( 0.5 ) % 1.8 % Effective % ( 0.5 ) % 1.8 % Effective rate 8.4 % % 1.8 % Effective rate 8.4 % 15.0 % 34.1 % % Effective rate 8.4 % 15.0 % 34.1 % The reduction rate 8.4 % 15.0 % 34.1 % The reduction from the the U.S. rate , generated 64 % , 69 % , , generated 64 % , 69 % , and 73 % , 69 % , and 73 % of our foreign income before tax in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . Additionally , tax rate in fiscal year 2017 reflects the realization of tax credit . In fiscal year 2017 , 2016 , and 2015 In fiscal year 2017 , 2016 , and 2015 , there 2017 , 2016 , and 2015 , there were no individually tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the country . The fiscal year 2016 effective tax rate included the charge and valuation allowance . 79 PART II Item 8 The . 79 PART II Item 8 The component of the deferred ( In million ) June 30 , 2017 2016 Deferred Income million ) June 30 , 2017 2016 Deferred Income Tax Assets ) June 30 , 2017 2016 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 777 $ 809 Other expense item compensation expense $ 777 $ 809 Other expense item 1,550 1,609 $ 809 Other expense item 1,550 1,609 Restructuring charge 66 284 809 Other expense item 1,550 1,609 Restructuring charge 66 284 Unearned item 1,550 1,609 Restructuring charge 66 284 Unearned revenue 1,889 494 1,550 1,609 Restructuring charge 66 284 Unearned revenue 1,889 494 Impaired charge 66 284 Unearned revenue 1,889 494 Impaired investment 59 226 66 284 Unearned revenue 1,889 494 Impaired investment 59 226 Loss revenue 1,889 494 Impaired investment 59 226 Loss carryforwards 4,809 4,252 1,889 494 Impaired investment 59 226 Loss carryforwards 4,809 4,252 Depreciation investment 59 226 Loss carryforwards 4,809 4,252 Depreciation and amortization 53 59 226 Loss carryforwards 4,809 4,252 Depreciation and amortization 53 115 4,809 4,252 Depreciation and amortization 53 115 Other revenue item 130 4,252 Depreciation and amortization 53 115 Other revenue item 130 89 53 115 Other revenue item 130 89 Deferred income tax asset 115 Other revenue item 130 89 Deferred income tax asset 9,333 89 Deferred income tax asset 9,333 7,878 Less valuation allowance ( Deferred income tax asset 9,333 7,878 Less valuation allowance ( 3,310 7,878 Less valuation allowance ( 3,310 ) ( 4,729 ) Deferred allowance ( 3,310 ) ( 4,729 ) Deferred income tax asset net of valuation allowance $ 6,023 $ 3,149 Deferred Income Tax valuation allowance $ 6,023 $ 3,149 Deferred Income Tax Liabilities Foreign Liabilities Foreign earnings $ ( 1,107 ) $ ( 1,242 ) ( 1,107 ) $ ( 1,242 ) Unrealized gain on investment on investment and debt ( 1,384 ) ( 2,102 ) Depreciation debt ( 1,384 ) ( 2,102 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,630 ) ( 1,008 ) Other amortization ( 1,630 ) ( 1,008 ) Other ( 21 ) ( 1,008 ) Other ( 21 ) ( 54 ) Deferred Other ( 21 ) ( 54 ) Deferred income tax liability Deferred income tax liability ( 4,142 ) ( 4,406 ) Net liability ( 4,142 ) ( 4,406 ) Net deferred income tax asset ( liability ) $ 1,881 $ ( 1,257 ) Reported ) $ 1,881 $ ( 1,257 ) Reported As Other long-term As Other long-term asset $ 2,412 $ 219 Long-term deferred income long-term asset $ 2,412 $ 219 Long-term deferred income tax liability deferred income tax liability ( 531 ) ( 1,476 ) Net liability ( 531 ) ( 1,476 ) Net deferred income tax asset ( liability ) $ 1,881 $ ( 1,257 ) In ) $ 1,881 $ ( 1,257 ) In fiscal year 2017 1,257 ) In fiscal year 2017 , we corrected the table above to include a $ 2.5 billion loss carryforward and valuation valuation allowance a of June 30 , 2016 . We do a of June 30 , 2016 . We do not consider statement . As of June 30 , 2017 , we had As of June 30 , 2017 , we had net operating operating loss carryforwards of $ 13.7 billion , including $ 11.1 13.7 billion , including $ 11.1 billion of foreign net operating recovered . As of June 30 , 2017 , we have As of June 30 , 2017 , we have not provided temporary difference of approximately $ 142 billion resulting from earnings for temporary difference wa approximately $ 45 billion a of June 30 45 billion a of June 30 , 2017 . Income tax a of June 30 , 2017 . Income tax paid , of refund , were $ 2.4 billion , $ 3.9 billion $ 2.4 billion , $ 3.9 billion , and $ 4.4 3.9 billion , and $ 4.4 billion in fiscal year 2017 4.4 billion in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . 80 PART and 2015 , respectively . 80 PART II Item 8 T . 80 PART II Item 8 T ax contingency and other income tax liability were $ 13.5 billion and $ 11.8 billion $ 13.5 billion and $ 11.8 billion a of June 30 11.8 billion a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , respectively , June 30 , 2017 and 2016 , respectively , and are tax benefit a of June 30 , 2017 , 2016 , a of June 30 , 2017 , 2016 , and 2015 June 30 , 2017 , 2016 , and 2015 , were 2017 , 2016 , and 2015 , were $ 11.7 billion and 2015 , were $ 11.7 billion , $ 10.2 billion $ 11.7 billion , $ 10.2 billion , and $ 9.6 10.2 billion , and $ 9.6 billion , respectively . If tax rate for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , by 2017 , 2016 , and 2015 , by $ 10.2 billion and 2015 , by $ 10.2 billion , $ 8.8 billion $ 10.2 billion , $ 8.8 billion , and $ 7.9 8.8 billion , and $ 7.9 billion , respectively . As respectively . As of June 30 , 2017 , 2016 , As of June 30 , 2017 , 2016 , and 2015 June 30 , 2017 , 2016 , and 2015 , we 2017 , 2016 , and 2015 , we had accrued interest uncertain tax position of $ 2.3 billion , $ 1.9 billion $ 2.3 billion , $ 1.9 billion , and $ 1.7 1.9 billion , and $ 1.7 billion , respectively , net unrecognized tax benefit wa $ 399 million , $ 163 million $ 399 million , $ 163 million , and $ 237 163 million , and $ 237 million in fiscal year 2017 237 million in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively , and wa million ) Year Ended June 30 , 2017 2016 2015 Balance Year Ended June 30 , 2017 2016 2015 Balance , beginning Ended June 30 , 2017 2016 2015 Balance , beginning of June 30 , 2017 2016 2015 Balance , beginning of year , beginning of year $ 10,164 $ 9,599 $ 8,714 Decreases of year $ 10,164 $ 9,599 $ 8,714 Decreases related to $ 10,164 $ 9,599 $ 8,714 Decreases related to settlement ( Decreases related to settlement ( 4 ) ( 201 ) ( settlement ( 4 ) ( 201 ) ( 50 ) Increases ) ( 201 ) ( 50 ) Increases for tax position related to the current year 1,277 1,086 1,091 Increases for tax to the current year 1,277 1,086 1,091 Increases for tax position the current year 1,277 1,086 1,091 Increases for tax position related position related to prior year 397 115 94 Decreases for tax related to prior year 397 115 94 Decreases for tax position to prior year 397 115 94 Decreases for tax position related related to prior year ( 49 ) ( 317 ) ( year ( 49 ) ( 317 ) ( 144 ) Decreases ) ( 317 ) ( 144 ) Decreases due to lapsed lapsed statute of limitation ( 48 ) ( 118 ) ( limitation ( 48 ) ( 118 ) ( 106 ) Balance ) ( 118 ) ( 106 ) Balance , end of , end of year $ 11,737 $ 10,164 $ 9,599 While of year $ 11,737 $ 10,164 $ 9,599 While we settled $ 11,737 $ 10,164 $ 9,599 While we settled a portion ) audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and settled a portion IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit the IRS for tax year 2010 to 2016 . In February for tax year 2010 to 2016 . In February 2012 , to 2016 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2017 , the primary As of June 30 , 2017 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are consolidated financial statement . NOTE 14 — RESTRUCTURING CHARGES Phone Hardware Phone Hardware Restructuring In June 2015 , management approved a plan under which we eliminated approximately 7,400 position in fiscal year 2016 7,400 position in fiscal year 2016 . In fiscal year 2015 2016 . In fiscal year 2015 , we incurred restructuring charge incurred restructuring charge of $ 780 million under the Phone Hardware cost . In fiscal year 2016 , we reversed $ 21 2016 , we reversed $ 21 million of previously estimated restructuring were completed a of June 30 , 2017 . 81 PART a of June 30 , 2017 . 81 PART II Item June 30 , 2017 . 81 PART II Item 8 2016 . 81 PART II Item 8 2016 Restructuring In the fourth 81 PART II Item 8 2016 Restructuring In the fourth quarter fourth quarter of fiscal year 2016 , management approved restructuring plan plan that resulted in approximately 4,700 job elimination in fiscal year job elimination in fiscal year 2017 , primarily across our smartphone sale . In fiscal year 2016 , we incurred restructuring charge incurred restructuring charge of $ 501 million in connection with the million in connection with the 2016 restructuring plan , including severance were completed a of June 30 , 2017 . 2017 Restructuring a of June 30 , 2017 . 2017 Restructuring In June June 30 , 2017 . 2017 Restructuring In June 2017 , . 2017 Restructuring In June 2017 , management approved a sale plan . In fiscal year 2017 , we recorded employee severance employee severance expense of $ 306 million primarily related to this the end of fiscal year 2018 . Restructuring Summary Restructuring charge Balance , a of June 30 , 2016 $ 470 $ a of June 30 , 2016 $ 470 $ 239 $ June 30 , 2016 $ 470 $ 239 $ 709 Restructuring , 2016 $ 470 $ 239 $ 709 Restructuring charge 306 $ 470 $ 239 $ 709 Restructuring charge 306 0 306 239 $ 709 Restructuring charge 306 0 306 Cash paid ( $ 709 Restructuring charge 306 0 306 Cash paid ( 367 709 Restructuring charge 306 0 306 Cash paid ( 367 ) 0 306 Cash paid ( 367 ) ( 101 ) ( paid ( 367 ) ( 101 ) ( 468 ) Other ) ( 101 ) ( 468 ) Other ( 36 ) ( 468 ) Other ( 36 ) ( 79 ) ( Other ( 36 ) ( 79 ) ( 115 ) Balance ) ( 79 ) ( 115 ) Balance , a of Balance , a of June 30 , 2017 $ 373 $ a of June 30 , 2017 $ 373 $ 59 $ June 30 , 2017 $ 373 $ 59 $ 432 ( , 2017 $ 373 $ 59 $ 432 ( a ) $ 373 $ 59 $ 432 ( a ) Primarily reflects and asset write-down . NOTE 15 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2017 2016 Productivity and million ) June 30 , 2017 2016 Productivity and Business Processes ) June 30 , 2017 2016 Productivity and Business Processes $ Productivity and Business Processes $ 14,291 $ 12,497 Intelligent Cloud 13,464 Business Processes $ 14,291 $ 12,497 Intelligent Cloud 13,464 11,472 More 14,291 $ 12,497 Intelligent Cloud 13,464 11,472 More Personal Computing 3 $ 12,497 Intelligent Cloud 13,464 11,472 More Personal Computing 3 , 13,464 11,472 More Personal Computing 3 , 420 3,334 Corporate and More Personal Computing 3 , 420 3,334 Corporate and Other 13,304 Personal Computing 3 , 420 3,334 Corporate and Other 13,304 6,606 420 3,334 Corporate and Other 13,304 6,606 Total $ 44,479 $ 3,334 Corporate and Other 13,304 6,606 Total $ 44,479 $ 33,909 Other 13,304 6,606 Total $ 44,479 $ 33,909 Corporate and Other 6,606 Total $ 44,479 $ 33,909 Corporate and Other consists of net revenue deferral from Windows 10 . Revenue from Windows 10 10 . Revenue from Windows 10 is primarily recognized at the in Corporate and Other . 82 PART II Item 8 NOTE . 82 PART II Item 8 NOTE 16 — COMMITMENTS Construction PART II Item 8 NOTE 16 — COMMITMENTS Construction and Operating Leases We have committed $ 1.1 billion for constructing new building leasehold improvement a of June 30 , 2017 . We have a of June 30 , 2017 . We have operating lease facility operating lease wa $ 1.3 billion , $ 1.0 billion $ 1.3 billion , $ 1.0 billion , and $ 989 1.0 billion , and $ 989 million , in fiscal year million , in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . Future minimum in place a of June 30 , 2017 are a follows a of June 30 , 2017 are a follows : ( million ) Year Ending June 30 , 2018 $ 1,292 2019 Year Ending June 30 , 2018 $ 1,292 2019 1,220 2020 June 30 , 2018 $ 1,292 2019 1,220 2020 1,115 2021 30 , 2018 $ 1,292 2019 1,220 2020 1,115 2021 908 , 2018 $ 1,292 2019 1,220 2020 1,115 2021 908 2022 2018 $ 1,292 2019 1,220 2020 1,115 2021 908 2022 749 $ 1,292 2019 1,220 2020 1,115 2021 908 2022 749 Thereafter 1,292 2019 1,220 2020 1,115 2021 908 2022 749 Thereafter 2,588 2019 1,220 2020 1,115 2021 908 2022 749 Thereafter 2,588 Total 1,220 2020 1,115 2021 908 2022 749 Thereafter 2,588 Total $ 2020 1,115 2021 908 2022 749 Thereafter 2,588 Total $ 7,872 2021 908 2022 749 Thereafter 2,588 Total $ 7,872 Capital Leases 749 Thereafter 2,588 Total $ 7,872 Capital Leases We have capital office . As of June 30 , 2017 and 2016 , As of June 30 , 2017 and 2016 , capital lease June 30 , 2017 and 2016 , capital lease obligation included other current liability were $ 113 million and $ 25 million $ 113 million and $ 25 million , respectively , and other long-term liability were $ 2.4 billion and $ 761 million $ 2.4 billion and $ 761 million , respectively . Future capital lease a of June 30 , 2017 were a follows a of June 30 , 2017 were a follows : ( million ) Year Ending June 30 , 2018 $ 209 2019 Year Ending June 30 , 2018 $ 209 2019 217 2020 June 30 , 2018 $ 209 2019 217 2020 222 2021 30 , 2018 $ 209 2019 217 2020 222 2021 227 , 2018 $ 209 2019 217 2020 222 2021 227 2022 2018 $ 209 2019 217 2020 222 2021 227 2022 232 $ 209 2019 217 2020 222 2021 227 2022 232 Thereafter 209 2019 217 2020 222 2021 227 2022 232 Thereafter 2,353 2019 217 2020 222 2021 227 2022 232 Thereafter 2,353 Total 217 2020 222 2021 227 2022 232 Thereafter 2,353 Total ( 2020 222 2021 227 2022 232 Thereafter 2,353 Total ( a 2021 227 2022 232 Thereafter 2,353 Total ( a ) $ Total ( a ) $ 3,460 ( a ) Includes imputed Includes imputed interest of $ 922 million . As of June million . As of June 30 , 2017 , we had As of June 30 , 2017 , we had additional purchase not yet recorded of $ 3.2 billion . 83 PART II of $ 3.2 billion . 83 PART II Item 8 NOTE . 83 PART II Item 8 NOTE 17 — CONTINGENCIES Patent PART II Item 8 NOTE 17 — CONTINGENCIES Patent and Intellectual mobile technology-related patent spanning about 170 patent family and addressing a technology . IPCom ha asserted 19 of these patent in litigation and operator . In November 2014 , Microsoft and IPCom entered the District of Delaware between 2007 and 2013 . We were of Delaware between 2007 and 2013 . We were added to our favor . In September 2015 , in an inter partes the Federal Circuit on April 7 , 2017 and the Delaware Circuit on April 7 , 2017 and the Delaware case wa District of Delaware in August 2015 asserting violation of Section 2 2015 asserting violation of Section 2 of the Sherman Act , settled these case in May 2017 and they have been dismissed levy are based upon a 2001 European Union ( “ EU the Austrian case in August 2016 . In Germany , the ha not been reached is 2004 through 2007 . In July been reached is 2004 through 2007 . In July 2016 , through 2007 . In July 2016 , the German Supreme Court issued a ruling in December 2016 , finding that the levy IPCom case , there were 41 other patent infringement case pending against Microsoft a of June 30 , 2017 . Antitrust , a of June 30 , 2017 . Antitrust , Unfair Competition and/or productivity application software between 1998 and 2010 . The trial application software between 1998 and 2010 . The trial of the Columbia action commenced in May 2016 . The plaintiff filed their case in chief in August 2016 , setting out claim made scheduled to commence in September 2017 , consisting of cross examination Quebec case are inactive . 84 PART II Item 8 Other . 84 PART II Item 8 Other Antitrust Litigation and Claims and Commerce investigatio n In 2014 , Microsoft wa informed that , is a defendant in 19 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain pre-trial proceeding ; the remaining 10 case are stayed . In stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , defendant in the consolidated flawed scientific methodology . In 2014 , the trial court granted en banc . In October 2016 , the Court of Appeals is a defendant in a 2013 class action lawsuit filed in cellular phone for at least 1,600 hour , including a subclass with the complaint in June 2014 and ha been substituted for future . As of June 30 , 2017 , we accrued As of June 30 , 2017 , we accrued aggregate legal aggregate legal liability of $ 352 million . While we intend estimate could reach approximately $ 1.0 billion in aggregate beyond recorded effect become reasonably estimable . 85 PART II Item 8 Indemnifications . 85 PART II Item 8 Indemnifications We provide indemnification of consolidated financial statement . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2017 2016 2015 Balance Year Ended June 30 , 2017 2016 2015 Balance , beginning Ended June 30 , 2017 2016 2015 Balance , beginning of June 30 , 2017 2016 2015 Balance , beginning of year Balance , beginning of year 7,808 8,027 8,239 Issued 70 75 , beginning of year 7,808 8,027 8,239 Issued 70 75 83 beginning of year 7,808 8,027 8,239 Issued 70 75 83 Repurchased year 7,808 8,027 8,239 Issued 70 75 83 Repurchased ( 170 7,808 8,027 8,239 Issued 70 75 83 Repurchased ( 170 ) 8,027 8,239 Issued 70 75 83 Repurchased ( 170 ) ( 70 75 83 Repurchased ( 170 ) ( 294 ) ( Repurchased ( 170 ) ( 294 ) ( 295 ) Balance ) ( 294 ) ( 295 ) Balance , end of Balance , end of year 7,708 7,808 8,027 Share Repurchases On , end of year 7,708 7,808 8,027 Share Repurchases On September end of year 7,708 7,808 8,027 Share Repurchases On September 16 8,027 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an additional $ 40.0 billion in share repurchase . repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the prior prior program approved on September 16 , 2013 , ha no approved on September 16 , 2013 , ha no expiration date notice . As of June 30 , 2017 , $ 36.8 As of June 30 , 2017 , $ 36.8 billion remained 30 , 2017 , $ 36.8 billion remained of this $ billion remained of this $ 40.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2017 2016 2015 First Year Ended June 30 , 2017 2016 2015 First Quarter 63 Ended June 30 , 2017 2016 2015 First Quarter 63 $ June 30 , 2017 2016 2015 First Quarter 63 $ 3,550 2017 2016 2015 First Quarter 63 $ 3,550 89 $ 4,000 2015 First Quarter 63 $ 3,550 89 $ 4,000 43 $ First Quarter 63 $ 3,550 89 $ 4,000 43 $ 2,000 63 $ 3,550 89 $ 4,000 43 $ 2,000 Second Quarter $ 3,550 89 $ 4,000 43 $ 2,000 Second Quarter 59 89 $ 4,000 43 $ 2,000 Second Quarter 59 3,533 66 43 $ 2,000 Second Quarter 59 3,533 66 3,600 43 2,000 $ 2,000 Second Quarter 59 3,533 66 3,600 43 2,000 Third 2,000 Second Quarter 59 3,533 66 3,600 43 2,000 Third Quarter Second Quarter 59 3,533 66 3,600 43 2,000 Third Quarter 25 Quarter 59 3,533 66 3,600 43 2,000 Third Quarter 25 1,600 59 3,533 66 3,600 43 2,000 Third Quarter 25 1,600 69 3,600 43 2,000 Third Quarter 25 1,600 69 3,600 116 5,000 43 2,000 Third Quarter 25 1,600 69 3,600 116 5,000 Fourth 2,000 Third Quarter 25 1,600 69 3,600 116 5,000 Fourth Quarter Third Quarter 25 1,600 69 3,600 116 5,000 Fourth Quarter 23 Quarter 25 1,600 69 3,600 116 5,000 Fourth Quarter 23 1,600 25 1,600 69 3,600 116 5,000 Fourth Quarter 23 1,600 70 3,600 116 5,000 Fourth Quarter 23 1,600 70 3,600 93 4,209 116 5,000 Fourth Quarter 23 1,600 70 3,600 93 4,209 Total 5,000 Fourth Quarter 23 1,600 70 3,600 93 4,209 Total 170 Fourth Quarter 23 1,600 70 3,600 93 4,209 Total 170 $ Quarter 23 1,600 70 3,600 93 4,209 Total 170 $ 10,283 23 1,600 70 3,600 93 4,209 Total 170 $ 10,283 294 70 3,600 93 4,209 Total 170 $ 10,283 294 $ 14,800 93 4,209 Total 170 $ 10,283 294 $ 14,800 295 $ 4,209 Total 170 $ 10,283 294 $ 14,800 295 $ 13,209 170 $ 10,283 294 $ 14,800 295 $ 13,209 Shares repurchased $ 10,283 294 $ 14,800 295 $ 13,209 Shares repurchased during 294 $ 14,800 295 $ 13,209 Shares repurchased during the third fourth quarter of fiscal year 2017 were under the share repurchase share repurchase program approved September 20 , 2016 . All other program approved September 20 , 2016 . All other share repurchased share repurchase program approved September 16 , 2013 . The above program approved September 16 , 2013 . The above table excludes made using cash resource . 86 PART II Item 8 Dividends . 86 PART II Item 8 Dividends In fiscal year 2017 8 Dividends In fiscal year 2017 , our Board of Directors ( In million ) September 20 , 2016 $ 0.39 November million ) September 20 , 2016 $ 0.39 November 17 , September 20 , 2016 $ 0.39 November 17 , 2016 $ , 2016 $ 0.39 November 17 , 2016 $ 3,024 December $ 0.39 November 17 , 2016 $ 3,024 December 8 , November 17 , 2016 $ 3,024 December 8 , 2016 November , 2016 $ 3,024 December 8 , 2016 November 30 , $ 3,024 December 8 , 2016 November 30 , 2016 0.39 December 8 , 2016 November 30 , 2016 0.39 February 16 , 2016 November 30 , 2016 0.39 February 16 , 2017 2016 November 30 , 2016 0.39 February 16 , 2017 3,012 30 , 2016 0.39 February 16 , 2017 3,012 March 9 2016 0.39 February 16 , 2017 3,012 March 9 , 2017 0.39 February 16 , 2017 3,012 March 9 , 2017 March 16 , 2017 3,012 March 9 , 2017 March 14 , 2017 3,012 March 9 , 2017 March 14 , 2017 0.39 March 9 , 2017 March 14 , 2017 0.39 May 18 , 2017 March 14 , 2017 0.39 May 18 , 2017 2017 March 14 , 2017 0.39 May 18 , 2017 3,009 14 , 2017 0.39 May 18 , 2017 3,009 June 8 2017 0.39 May 18 , 2017 3,009 June 8 , 2017 0.39 May 18 , 2017 3,009 June 8 , 2017 June 18 , 2017 3,009 June 8 , 2017 June 13 , 2017 3,009 June 8 , 2017 June 13 , 2017 0.39 June 8 , 2017 June 13 , 2017 0.39 August 17 , 2017 June 13 , 2017 0.39 August 17 , 2017 2017 June 13 , 2017 0.39 August 17 , 2017 3,006 13 , 2017 0.39 August 17 , 2017 3,006 September 14 2017 0.39 August 17 , 2017 3,006 September 14 , 2017 0.39 August 17 , 2017 3,006 September 14 , 2017 The 17 , 2017 3,006 September 14 , 2017 The dividend declared 2017 3,006 September 14 , 2017 The dividend declared on June The dividend declared on June 13 , 2017 will be paid declared on June 13 , 2017 will be paid after the the filing date of the 2017 Form 10-K and wa included date of the 2017 Form 10-K and wa included in other current liability a of June 30 , 2017 . In fiscal a of June 30 , 2017 . In fiscal year 2016 2017 . In fiscal year 2016 , our Board of Directors ( In million ) September 15 , 2015 $ 0.36 November million ) September 15 , 2015 $ 0.36 November 19 , September 15 , 2015 $ 0.36 November 19 , 2015 $ , 2015 $ 0.36 November 19 , 2015 $ 2,868 December $ 0.36 November 19 , 2015 $ 2,868 December 10 , November 19 , 2015 $ 2,868 December 10 , 2015 December , 2015 $ 2,868 December 10 , 2015 December 2 , $ 2,868 December 10 , 2015 December 2 , 2015 0.36 December 10 , 2015 December 2 , 2015 0.36 February 18 , 2015 December 2 , 2015 0.36 February 18 , 2016 2015 December 2 , 2015 0.36 February 18 , 2016 2,842 2 , 2015 0.36 February 18 , 2016 2,842 March 10 2015 0.36 February 18 , 2016 2,842 March 10 , 2016 0.36 February 18 , 2016 2,842 March 10 , 2016 March 18 , 2016 2,842 March 10 , 2016 March 15 , 2016 2,842 March 10 , 2016 March 15 , 2016 0.36 March 10 , 2016 March 15 , 2016 0.36 May 19 , 2016 March 15 , 2016 0.36 May 19 , 2016 2016 March 15 , 2016 0.36 May 19 , 2016 2,821 15 , 2016 0.36 May 19 , 2016 2,821 June 9 2016 0.36 May 19 , 2016 2,821 June 9 , 2016 0.36 May 19 , 2016 2,821 June 9 , 2016 June 19 , 2016 2,821 June 9 , 2016 June 14 , 2016 2,821 June 9 , 2016 June 14 , 2016 0.36 June 9 , 2016 June 14 , 2016 0.36 August 18 , 2016 June 14 , 2016 0.36 August 18 , 2016 2016 June 14 , 2016 0.36 August 18 , 2016 2,800 14 , 2016 0.36 August 18 , 2016 2,800 September 8 2016 0.36 August 18 , 2016 2,800 September 8 , 2016 0.36 August 18 , 2016 2,800 September 8 , 2016 The 18 , 2016 2,800 September 8 , 2016 The dividend declared 2016 2,800 September 8 , 2016 The dividend declared on June The dividend declared on June 14 , 2016 wa included in declared on June 14 , 2016 wa included in other current current liability a of June 30 , 2016 . 87 PART a of June 30 , 2016 . 87 PART II Item June 30 , 2016 . 87 PART II Item 8 NOTE . 87 PART II Item 8 NOTE 19 — ACCUMULATED OTHER PART II Item 8 NOTE 19 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2017 2016 2015 Derivatives Year Ended June 30 , 2017 2016 2015 Derivatives Balance , Ended June 30 , 2017 2016 2015 Derivatives Balance , beginning June 30 , 2017 2016 2015 Derivatives Balance , beginning of , beginning of period $ 352 $ 590 $ 31 Unrealized of period $ 352 $ 590 $ 31 Unrealized gain , $ 352 $ 590 $ 31 Unrealized gain , net of of tax effect of $ 4 , $ 24 and $ of $ 4 , $ 24 and $ 35 328 351 , $ 24 and $ 35 328 351 1,152 Reclassification adjustment $ 24 and $ 35 328 351 1,152 Reclassification adjustment for 24 and $ 35 328 351 1,152 Reclassification adjustment for gain and $ 35 328 351 1,152 Reclassification adjustment for gain included gain included in revenue ( 555 ) ( 625 ) ( revenue ( 555 ) ( 625 ) ( 608 ) Tax ) ( 625 ) ( 608 ) Tax expense included in in provision for income tax 9 36 15 Amounts reclassified from provision for income tax 9 36 15 Amounts reclassified from accumulated for income tax 9 36 15 Amounts reclassified from accumulated other accumulated other comprehensive income ( 546 ) ( 589 ) ( income ( 546 ) ( 589 ) ( 593 ) Net ) ( 589 ) ( 593 ) Net current period other income ( loss ) ( 218 ) ( 238 ) 559 ) ( 218 ) ( 238 ) 559 Balance , end 218 ) ( 238 ) 559 Balance , end of period , end of period $ 134 $ 352 $ 590 Investments of period $ 134 $ 352 $ 590 Investments Balance , $ 134 $ 352 $ 590 Investments Balance , beginning of , beginning of period $ 2,941 $ 3,169 $ 3,531 Unrealized of period $ 2,941 $ 3,169 $ 3,531 Unrealized gain , $ 2,941 $ 3,169 $ 3,531 Unrealized gain , net of of tax effect of $ 267 , $ 120 and $ of $ 267 , $ 120 and $ 59 517 219 , $ 120 and $ 59 517 219 110 Reclassification adjustment $ 120 and $ 59 517 219 110 Reclassification adjustment for 120 and $ 59 517 219 110 Reclassification adjustment for gain and $ 59 517 219 110 Reclassification adjustment for gain included expense ) , net ( 2,513 ) ( 688 ) ( net ( 2,513 ) ( 688 ) ( 728 ) Tax ) ( 688 ) ( 728 ) Tax expense included in in provision for income tax 880 241 256 Amounts reclassified from provision for income tax 880 241 256 Amounts reclassified from accumulated for income tax 880 241 256 Amounts reclassified from accumulated other accumulated other comprehensive income ( 1,633 ) ( 447 ) ( income ( 1,633 ) ( 447 ) ( 472 ) Net ) ( 447 ) ( 472 ) Net current period other period other comprehensive loss ( 1,116 ) ( 228 ) ( loss ( 1,116 ) ( 228 ) ( 362 ) Balance ) ( 228 ) ( 362 ) Balance , end of , end of period $ 1,825 $ 2,941 $ 3,169 Translation of period $ 1,825 $ 2,941 $ 3,169 Translation Adjustments and $ 1,825 $ 2,941 $ 3,169 Translation Adjustments and Other Balance beginning of period $ ( 1,756 ) $ ( 1,237 ) ( 1,756 ) $ ( 1,237 ) $ 146 Translation adjustment $ ( 1,237 ) $ 146 Translation adjustment and other , of tax effect of $ 9 , $ ( 33 ) $ 9 , $ ( 33 ) and $ 16 228 ( 33 ) and $ 16 228 ( 519 ) ( 33 ) and $ 16 228 ( 519 ) ( 1,383 and $ 16 228 ( 519 ) ( 1,383 ) Balance 228 ( 519 ) ( 1,383 ) Balance , end of end of period $ ( 1,528 ) $ ( 1,756 ) ( 1,528 ) $ ( 1,756 ) $ ( 1,237 ) ( 1,756 ) $ ( 1,237 ) Accumulated other comprehensive income , end of period $ 431 $ 1,537 $ 2,522 NOTE of period $ 431 $ 1,537 $ 2,522 NOTE 20 — $ 431 $ 1,537 $ 2,522 NOTE 20 — EMPLOYEE STOCK $ 1,537 $ 2,522 NOTE 20 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2017 , an aggregate As of June 30 , 2017 , an aggregate of 127 2017 , an aggregate of 127 million share were authorized for million ) Year Ended June 30 , 2017 2016 2015 Stock-based Year Ended June 30 , 2017 2016 2015 Stock-based compensation expense Ended June 30 , 2017 2016 2015 Stock-based compensation expense $ June 30 , 2017 2016 2015 Stock-based compensation expense $ 3,266 2015 Stock-based compensation expense $ 3,266 $ 2,668 $ 2,574 Income compensation expense $ 3,266 $ 2,668 $ 2,574 Income tax benefit $ 3,266 $ 2,668 $ 2,574 Income tax benefit related to benefit related to stock-based compensation 1,066 882 868 88 PART II related to stock-based compensation 1,066 882 868 88 PART II Item to stock-based compensation 1,066 882 868 88 PART II Item 8 stock-based compensation 1,066 882 868 88 PART II Item 8 Stock 868 88 PART II Item 8 Stock Plans Stock award entitle assumption : Year Ended June 30 , 2017 2016 2015 Dividends Year Ended June 30 , 2017 2016 2015 Dividends per share Ended June 30 , 2017 2016 2015 Dividends per share ( June 30 , 2017 2016 2015 Dividends per share ( quarterly ( quarterly amount ) $ 0.36 - $ 0.39 $ 0.31 ) $ 0.36 - $ 0.39 $ 0.31 - $ 0.36 0.36 - $ 0.39 $ 0.31 - $ 0.36 $ 0.28 0.39 $ 0.31 - $ 0.36 $ 0.28 - $ 0.31 0.31 - $ 0.36 $ 0.28 - $ 0.31 Interest rate 0.36 $ 0.28 - $ 0.31 Interest rate 1.2 % - - $ 0.31 Interest rate 1.2 % - 2.2 % 1.1 Interest rate 1.2 % - 2.2 % 1.1 % - 1.8 1.2 % - 2.2 % 1.1 % - 1.8 % 1.2 2.2 % 1.1 % - 1.8 % 1.2 % - 1.9 1.1 % - 1.8 % 1.2 % - 1.9 % During 1.8 % 1.2 % - 1.9 % During fiscal year 2017 1.9 % During fiscal year 2017 , the following activity occurred balance , beginning of year 194 $ 36.92 Granted ( a beginning of year 194 $ 36.92 Granted ( a ) 84 36.92 Granted ( a ) 84 55.64 Assumed in acquisition ( Granted ( a ) 84 55.64 Assumed in acquisition ( b in acquisition ( b ) 23 59.09 Vested ( 80 ) acquisition ( b ) 23 59.09 Vested ( 80 ) 37.36 ) 23 59.09 Vested ( 80 ) 37.36 Forfeited ( 20 59.09 Vested ( 80 ) 37.36 Forfeited ( 20 ) 43.71 80 ) 37.36 Forfeited ( 20 ) 43.71 Nonvested balance , 37.36 Forfeited ( 20 ) 43.71 Nonvested balance , end of balance , end of year 201 46.32 ( a ) Includes , end of year 201 46.32 ( a ) Includes 2 46.32 ( a ) Includes 2 million PSUs granted during fiscal PSUs granted during fiscal year 2017 . During both fiscal year . During both fiscal year 2016 and 2015 we granted 1 both fiscal year 2016 and 2015 we granted 1 million PSUs 2016 and 2015 we granted 1 million PSUs . ( b to LinkedIn . See Note 9 – Business Combinations for further information . As of June 30 , 2017 , there wa As of June 30 , 2017 , there wa approximately $ , there wa approximately $ 6.5 billion of total unrecognized compensation a weighted average period of 3 year . The weighted average stock award granted wa $ 55.64 , $ 41.51 , and wa $ 55.64 , $ 41.51 , and $ 42.36 for $ 41.51 , and $ 42.36 for fiscal year 2017 , $ 42.36 for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . The fair stock award vested wa $ 4.8 billion , $ 3.9 billion $ 4.8 billion , $ 3.9 billion , and $ 4.2 3.9 billion , and $ 4.2 billion , for fiscal year billion , for fiscal year 2017 , 2016 , and 2015 for fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . 89 PART and 2015 , respectively . 89 PART II Item 8 Employee . 89 PART II Item 8 Employee Stock Purchase Plan We employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2017 2016 2015 Shares Year Ended June 30 , 2017 2016 2015 Shares purchased 13 Ended June 30 , 2017 2016 2015 Shares purchased 13 15 June 30 , 2017 2016 2015 Shares purchased 13 15 16 2017 2016 2015 Shares purchased 13 15 16 Average price per 2016 2015 Shares purchased 13 15 16 Average price per share 2015 Shares purchased 13 15 16 Average price per share $ Average price per share $ 56.36 $ 44.83 $ 39.87 As per share $ 56.36 $ 44.83 $ 39.87 As of June $ 56.36 $ 44.83 $ 39.87 As of June 30 , $ 39.87 As of June 30 , 2017 , 129 million As of June 30 , 2017 , 129 million share of June 30 , 2017 , 129 million share of our common U.S. that qualifies under Section 401 ( k ) of the certain limitation . Beginning January 2016 , we contribute fifty cent a maximum employer contribution of 50 % of the IRS contribution year . Prior to January 2016 , we contributed fifty cent each dollar of the first 6 % a participant contributed in contribution of the lesser of 3 % of a participant ’ participant ’ s earnings or 3 % of the IRS compensation for all plan were $ 734 million , $ 549 million $ 734 million , $ 549 million , and $ 454 549 million , and $ 454 million in fiscal year 2017 454 million in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively , and were expensed a contributed . NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC Personal Computing . In December 2016 , we completed our acquisition Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based across ERP and CRM . 90 PART II Item 8 Intelligent . 90 PART II Item 8 Intelligent Cloud Our Intelligent Cloud U.S. GAAP relate to Windows 10 revenue recognition . Revenue and million ) Year Ended June 30 , 2017 2016 2015 Revenue Year Ended June 30 , 2017 2016 2015 Revenue Productivity and Ended June 30 , 2017 2016 2015 Revenue Productivity and Business June 30 , 2017 2016 2015 Revenue Productivity and Business Processes Productivity and Business Processes $ 30,444 $ 26,487 $ 26,430 Intelligent Business Processes $ 30,444 $ 26,487 $ 26,430 Intelligent Cloud 27,440 $ 30,444 $ 26,487 $ 26,430 Intelligent Cloud 27,440 25,042 23,715 26,487 $ 26,430 Intelligent Cloud 27,440 25,042 23,715 More Personal Computing $ 26,430 Intelligent Cloud 27,440 25,042 23,715 More Personal Computing 38,773 26,430 Intelligent Cloud 27,440 25,042 23,715 More Personal Computing 38,773 40,434 25,042 23,715 More Personal Computing 38,773 40,434 43,435 Corporate and Other 23,715 More Personal Computing 38,773 40,434 43,435 Corporate and Other ( More Personal Computing 38,773 40,434 43,435 Corporate and Other ( 6,707 43,435 Corporate and Other ( 6,707 ) ( 6,643 ) 0 Other ( 6,707 ) ( 6,643 ) 0 Total $ 89,950 6,707 ) ( 6,643 ) 0 Total $ 89,950 $ 85,320 6,643 ) 0 Total $ 89,950 $ 85,320 $ 93,580 91 0 Total $ 89,950 $ 85,320 $ 93,580 91 PART II $ 89,950 $ 85,320 $ 93,580 91 PART II Item 8 89,950 $ 85,320 $ 93,580 91 PART II Item 8 ( 93,580 91 PART II Item 8 ( In million ) Year million ) Year Ended June 30 , 2017 2016 2015 Operating Year Ended June 30 , 2017 2016 2015 Operating income ( Ended June 30 , 2017 2016 2015 Operating income ( loss June 30 , 2017 2016 2015 Operating income ( loss ) Productivity and Business Processes $ 11,913 $ 12,418 $ 13,274 Intelligent Business Processes $ 11,913 $ 12,418 $ 13,274 Intelligent Cloud 9,138 $ 11,913 $ 12,418 $ 13,274 Intelligent Cloud 9,138 9,315 9,803 12,418 $ 13,274 Intelligent Cloud 9,138 9,315 9,803 More Personal Computing $ 13,274 Intelligent Cloud 9,138 9,315 9,803 More Personal Computing 8,288 13,274 Intelligent Cloud 9,138 9,315 9,803 More Personal Computing 8,288 6,202 9,315 9,803 More Personal Computing 8,288 6,202 5,095 Corporate and Other 9,803 More Personal Computing 8,288 6,202 5,095 Corporate and Other ( More Personal Computing 8,288 6,202 5,095 Corporate and Other ( 7,013 5,095 Corporate and Other ( 7,013 ) ( 7,753 ) ( Other ( 7,013 ) ( 7,753 ) ( 10,011 ) Total ) ( 7,753 ) ( 10,011 ) Total $ 22,326 $ ( 10,011 ) Total $ 22,326 $ 20,182 $ 18,161 Corporate ) Total $ 22,326 $ 20,182 $ 18,161 Corporate and Other $ 22,326 $ 20,182 $ 18,161 Corporate and Other operating loss million ) Year Ended June 30 , 2017 2016 2015 Net Year Ended June 30 , 2017 2016 2015 Net revenue deferral Ended June 30 , 2017 2016 2015 Net revenue deferral from June 30 , 2017 2016 2015 Net revenue deferral from Windows Net revenue deferral from Windows 10 $ ( 6,707 ) $ from Windows 10 $ ( 6,707 ) $ ( 6,643 ) ( 6,707 ) $ ( 6,643 ) $ 0 Impairment , $ ( 6,643 ) $ 0 Impairment , integration , and , and restructuring expense ( 306 ) ( 1,110 ) ( expense ( 306 ) ( 1,110 ) ( 10,011 ) Total ) ( 1,110 ) ( 10,011 ) Total Corporate and Other Corporate and Other $ ( 7,013 ) $ ( 7,753 ) ( 7,013 ) $ ( 7,753 ) $ ( 10,011 ) ( 7,753 ) $ ( 10,011 ) No sale to an States accounted for more than 10 % of fiscal year 2017 10 % of fiscal year 2017 , 2016 , or 2015 of fiscal year 2017 , 2016 , or 2015 revenue . 2017 , 2016 , or 2015 revenue . Revenue , classified million ) Year Ended June 30 , 2017 2016 2015 United Year Ended June 30 , 2017 2016 2015 United States ( Ended June 30 , 2017 2016 2015 United States ( a June 30 , 2017 2016 2015 United States ( a ) States ( a ) $ 45,248 $ 40,578 $ 42,941 Other a ) $ 45,248 $ 40,578 $ 42,941 Other country 44,702 $ 45,248 $ 40,578 $ 42,941 Other country 44,702 44,742 50,639 40,578 $ 42,941 Other country 44,702 44,742 50,639 Total $ 89,950 $ 42,941 Other country 44,702 44,742 50,639 Total $ 89,950 $ 42,941 Other country 44,702 44,742 50,639 Total $ 89,950 $ 85,320 44,702 44,742 50,639 Total $ 89,950 $ 85,320 $ 93,580 ( 50,639 Total $ 89,950 $ 85,320 $ 93,580 ( a ) $ 89,950 $ 85,320 $ 93,580 ( a ) Includes billing million ) Year Ended June 30 , 2017 2016 2015 Microsoft Year Ended June 30 , 2017 2016 2015 Microsoft Office system Ended June 30 , 2017 2016 2015 Microsoft Office system $ June 30 , 2017 2016 2015 Microsoft Office system $ 25,389 2015 Microsoft Office system $ 25,389 $ 23,588 $ 23,538 Server Office system $ 25,389 $ 23,588 $ 23,538 Server product and $ 25,389 $ 23,588 $ 23,538 Server product and tool 21,758 23,538 Server product and tool 21,758 19,177 18,612 Xbox 9,256 9,395 Server product and tool 21,758 19,177 18,612 Xbox 9,256 9,395 9,121 product and tool 21,758 19,177 18,612 Xbox 9,256 9,395 9,121 Windows tool 21,758 19,177 18,612 Xbox 9,256 9,395 9,121 Windows PC operating 21,758 19,177 18,612 Xbox 9,256 9,395 9,121 Windows PC operating system 19,177 18,612 Xbox 9,256 9,395 9,121 Windows PC operating system 8,625 9,121 Windows PC operating system 8,625 ( a ) 8,104 ( system 8,625 ( a ) 8,104 ( a ) 14,826 Advertising ) 8,104 ( a ) 14,826 Advertising 6,971 6,098 4,557 Consulting ( a ) 14,826 Advertising 6,971 6,098 4,557 Consulting and product a ) 14,826 Advertising 6,971 6,098 4,557 Consulting and product support ) 14,826 Advertising 6,971 6,098 4,557 Consulting and product support service Consulting and product support service 5,588 5,641 5,090 Devices 4,557 7,466 and product support service 5,588 5,641 5,090 Devices 4,557 7,466 11,602 product support service 5,588 5,641 5,090 Devices 4,557 7,466 11,602 LinkedIn service 5,588 5,641 5,090 Devices 4,557 7,466 11,602 LinkedIn 2,268 ( 5,588 5,641 5,090 Devices 4,557 7,466 11,602 LinkedIn 2,268 ( b 5,641 5,090 Devices 4,557 7,466 11,602 LinkedIn 2,268 ( b ) Devices 4,557 7,466 11,602 LinkedIn 2,268 ( b ) 0 0 LinkedIn 2,268 ( b ) 0 0 Other 5,538 5,851 6,234 2,268 ( b ) 0 0 Other 5,538 5,851 6,234 Total b ) 0 0 Other 5,538 5,851 6,234 Total $ 89,950 ) 0 0 Other 5,538 5,851 6,234 Total $ 89,950 $ 0 0 Other 5,538 5,851 6,234 Total $ 89,950 $ 85,320 5,538 5,851 6,234 Total $ 89,950 $ 85,320 $ 93,580 ( 6,234 Total $ 89,950 $ 85,320 $ 93,580 ( a ) $ 89,950 $ 85,320 $ 93,580 ( a ) Includes the net revenue deferral from Windows 10 . ( b ) Includes , which primarily comprises Office 365 commercial , Azure , Dynamics commercial , Azure , Dynamics 365 , and other cloud property cloud property , wa $ 14.9 billion , $ 9.5 billion $ 14.9 billion , $ 9.5 billion , and $ 5.8 9.5 billion , and $ 5.8 billion in fiscal year 2017 5.8 billion in fiscal year 2017 , 2016 , and 2015 in fiscal year 2017 , 2016 , and 2015 , respectively 2017 , 2016 , and 2015 , respectively . These amount in the table above . 92 PART II Item 8 Assets . 92 PART II Item 8 Assets are not allocated to company and with country over 10 % of the total shown ( In million ) June 30 , 2017 2016 2015 United million ) June 30 , 2017 2016 2015 United States $ ) June 30 , 2017 2016 2015 United States $ 39,118 June 30 , 2017 2016 2015 United States $ 39,118 $ 2016 2015 United States $ 39,118 $ 22,819 $ 19,562 Ireland United States $ 39,118 $ 22,819 $ 19,562 Ireland 12,876 2,078 $ 39,118 $ 22,819 $ 19,562 Ireland 12,876 2,078 1,595 Luxembourg $ 22,819 $ 19,562 Ireland 12,876 2,078 1,595 Luxembourg 6,845 6,854 22,819 $ 19,562 Ireland 12,876 2,078 1,595 Luxembourg 6,845 6,854 6,879 $ 19,562 Ireland 12,876 2,078 1,595 Luxembourg 6,845 6,854 6,879 Other Ireland 12,876 2,078 1,595 Luxembourg 6,845 6,854 6,879 Other country 10,123 12,876 2,078 1,595 Luxembourg 6,845 6,854 6,879 Other country 10,123 8,210 2,078 1,595 Luxembourg 6,845 6,854 6,879 Other country 10,123 8,210 8,469 6,845 6,854 6,879 Other country 10,123 8,210 8,469 Total $ 68,962 6,854 6,879 Other country 10,123 8,210 8,469 Total $ 68,962 $ 6,879 Other country 10,123 8,210 8,469 Total $ 68,962 $ 39,961 10,123 8,210 8,469 Total $ 68,962 $ 39,961 $ 36,505 NOTE 8,469 Total $ 68,962 $ 39,961 $ 36,505 NOTE 22 — $ 68,962 $ 39,961 $ 36,505 NOTE 22 — QUARTERLY INFORMATION $ 39,961 $ 36,505 NOTE 22 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2017 ( June 30 Total Fiscal Year 2017 ( a ) Revenue ( Revenue ( b ) $ 20,453 $ 24,090 $ 22,090 $ b ) $ 20,453 $ 24,090 $ 22,090 $ 23,317 $ $ 20,453 $ 24,090 $ 22,090 $ 23,317 $ 89,950 Gross $ 24,090 $ 22,090 $ 23,317 $ 89,950 Gross margin 12,609 $ 22,090 $ 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 23,317 $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating $ 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 89,950 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 Gross margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 6,177 margin 12,609 14,189 14,030 14,861 55,689 Operating income 5,225 6,177 5,594 14,030 14,861 55,689 Operating income 5,225 6,177 5,594 5,330 22,326 Net 14,861 55,689 Operating income 5,225 6,177 5,594 5,330 22,326 Net income 55,689 Operating income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 Operating income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 5,200 income 5,225 6,177 5,594 5,330 22,326 Net income 4,690 5,200 4,801 5,594 5,330 22,326 Net income 4,690 5,200 4,801 6,513 ( c 5,330 22,326 Net income 4,690 5,200 4,801 6,513 ( c ) 22,326 Net income 4,690 5,200 4,801 6,513 ( c ) 21,204 Net income 4,690 5,200 4,801 6,513 ( c ) 21,204 ( 4,801 6,513 ( c ) 21,204 ( c ) Basic earnings ) Basic earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted Basic earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings earnings per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per per share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per share share 0.60 0.67 0.62 0.84 2.74 Diluted earnings per share 0.60 2.74 Diluted earnings per share 0.60 0.66 0.61 0.83 ( c Diluted earnings per share 0.60 0.66 0.61 0.83 ( c ) earnings per share 0.60 0.66 0.61 0.83 ( c ) 2.71 per share 0.60 0.66 0.61 0.83 ( c ) 2.71 ( 0.61 0.83 ( c ) 2.71 ( c ) Fiscal Year ( c ) Fiscal Year 2016 Revenue ( d ) $ Revenue ( d ) $ 20,379 $ 23,796 $ 20,531 $ d ) $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ $ 20,379 $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross $ 23,796 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 $ 20,531 $ 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 20,614 $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating $ 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 85,320 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 Gross margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 margin 13,172 13,924 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 12,809 12,635 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net 12,635 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 52,540 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 Operating income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 income 5,793 6,026 5,283 3,080 20,182 Net income 4,902 5,018 3,756 5,283 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( e 3,080 20,182 Net income 4,902 5,018 3,756 3,122 ( e ) 20,182 Net income 4,902 5,018 3,756 3,122 ( e ) 16,798 Net income 4,902 5,018 3,756 3,122 ( e ) 16,798 ( 3,756 3,122 ( e ) 16,798 ( e ) Basic earnings ) Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted Basic earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings earnings per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per per share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share share 0.61 0.63 0.48 0.40 2.12 Diluted earnings per share 0.61 2.12 Diluted earnings per share 0.61 0.62 0.47 0.39 ( e Diluted earnings per share 0.61 0.62 0.47 0.39 ( e ) earnings per share 0.61 0.62 0.47 0.39 ( e ) 2.10 per share 0.61 0.62 0.47 0.39 ( e ) 2.10 ( 0.47 0.39 ( e ) 2.10 ( e ) ( a ( a ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation net revenue deferral from Windows 10 of $ 1.9 billion , from Windows 10 of $ 1.9 billion , $ 2.0 billion $ 1.9 billion , $ 2.0 billion , $ 1.5 billion $ 2.0 billion , $ 1.5 billion , and $ 1.4 1.5 billion , and $ 1.4 billion , for the first fourth quarter of fiscal year 2017 , respectively , and $ , respectively , and $ 6.7 billion for fiscal year 2017 6.7 billion for fiscal year 2017 . ( c ) Includes ( c ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.03 243 million , and $ 0.03 , respectively . ( d net revenue deferral from Windows 10 of $ 1.3 billion , from Windows 10 of $ 1.3 billion , $ 1.7 billion $ 1.3 billion , $ 1.7 billion , $ 1.6 billion $ 1.7 billion , $ 1.6 billion , and $ 2.0 1.6 billion , and $ 2.0 billion , for the first fourth quarter of fiscal year 2016 , respectively , and $ , respectively , and $ 6.6 billion for fiscal year 2016 6.6 billion for fiscal year 2016 . ( e ) Includes ( e ) Includes $ 630 million of asset impairment charge phone business , and $ 480 million of restructuring charge associated restructuring charge associated with our 2016 restructuring plan , which together and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . 93 PART $ 0.11 , respectively . 93 PART II Item 8 REPORT . 93 PART II Item 8 REPORT OF INDEPENDENT REGIST ERED ” ) a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , and the June 30 , 2017 and 2016 , and the related consolidated in the period ended June 30 , 2017 . These financial period ended June 30 , 2017 . These financial statement are and subsidiary a of June 30 , 2017 and 2016 , a of June 30 , 2017 and 2016 , and the June 30 , 2017 and 2016 , and the result of in the period ended June 30 , 2017 , in conformity period ended June 30 , 2017 , in conformity with accounting financial reporting a of June 30 , 2017 , based on a of June 30 , 2017 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee and our report dated August 2 , 2017 expressed an unqualified report dated August 2 , 2017 expressed an unqualified opinion on LLP Seattle , Washington August 2 , 2017 94 PART II , Washington August 2 , 2017 94 PART II Item 9 Washington August 2 , 2017 94 PART II Item 9 , 2017 94 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2017 . Deloitte & a of June 30 , 2017 . Deloitte & Touche LLP financial reporting a of June 30 , 2017 ; their report a of June 30 , 2017 ; their report is included report is included in Item 9A . There were no change during the quarter ended June 30 , 2017 that have materially quarter ended June 30 , 2017 that have materially affected , reporting . During fiscal year 2017 , we implemented internal control facilitate the adoption on July 1 , 2017 . We do adoption on July 1 , 2017 . We do not expect of the new standard . 95 PART II Item 9A REPORT . 95 PART II Item 9A REPORT OF INDEPENDENT REGIST ERED ” ) a of June 30 , 2017 , based on a of June 30 , 2017 , based on criterion established Control – Integrated Framework ( 2013 ) issued by the Committee policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding financial reporting a of June 30 , 2017 , based on a of June 30 , 2017 , based on the criterion Control – Integrated Framework ( 2013 ) issued by the Committee for the year ended June 30 , 2017 of the Company year ended June 30 , 2017 of the Company and our and our report dated August 2 , 2017 expressed an unqualified report dated August 2 , 2017 expressed an unqualified opinion on LLP Seattle , Washington August 2 , 2017 96 PART II , Washington August 2 , 2017 96 PART II , III Washington August 2 , 2017 96 PART II , III Item PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 29 , 2017 ( the “ be held November 29 , 2017 ( the “ Proxy Statement under the caption “ Section 16 ( a ) beneficial ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 97 PART IV Item 15 PART . 97 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 49 Comprehensive Income Statements 50 Balance Statements 49 Comprehensive Income Statements 50 Balance Sheets 51 Cash Flows Income Statements 50 Balance Sheets 51 Cash Flows Statements 52 Stockholders Sheets 51 Cash Flows Statements 52 Stockholders ’ Equity Statements 53 52 Stockholders ’ Equity Statements 53 Notes to Financial Statements 54 53 Notes to Financial Statements 54 Report of Independent Registered Public Independent Registered Public Accounting Firm 94 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 2.1 Agreement and Plan of Merger , dated a of June 11 , 2016 , by and a of June 11 , 2016 , by and among Microsoft Inc. , and LinkedIn Corporation 8-K * * * 2.1 6/13/16 Corporation 8-K * * * 2.1 6/13/16 3.1 Amended and Restated 8-K * * * 2.1 6/13/16 3.1 Amended and Restated Articles * * * 2.1 6/13/16 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Base Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 98 PART IV . , a Trustee 8-K 4.2 9/27/10 98 PART IV Item , a Trustee 8-K 4.2 9/27/10 98 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 98 PART IV Item 15 Incorporated 9/27/10 98 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 99 PART IV . , a Trustee 8-K 4.1 12/6/13 99 PART IV Item , a Trustee 8-K 4.1 12/6/13 99 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 99 PART IV Item 15 Incorporated 12/6/13 99 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 8/5/16 100 PART IV . , a Trustee 8-K 4.1 8/5/16 100 PART IV Item , a Trustee 8-K 4.1 8/5/16 100 PART IV Item 15 a Trustee 8-K 4.1 8/5/16 100 PART IV Item 15 Incorporated 8/5/16 100 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft . , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation 2001 a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation 2001 Stock 2/3/17 10.1 * Microsoft Corporation 2001 Stock Plan 10-K 6/30/16 10.1 Microsoft Corporation 2001 Stock Plan 10-K 6/30/16 10.1 7/28/16 10.3 * Corporation 2001 Stock Plan 10-K 6/30/16 10.1 7/28/16 10.3 * Microsoft 2001 Stock Plan 10-K 6/30/16 10.1 7/28/16 10.3 * Microsoft Corporation Stock Plan 10-K 6/30/16 10.1 7/28/16 10.3 * Microsoft Corporation 1999 Plan 10-K 6/30/16 10.1 7/28/16 10.3 * Microsoft Corporation 1999 Stock 7/28/16 10.3 * Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Plan for Non-Employee Directors X 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Corporation Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form Deferred Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Compensation Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Plan 10-Q 3/31/12 10.5 4/19/12 10.7 * Form of Stock Award Directors under the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Plan for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form for Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Non-Employee Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Directors 10-K 6/30/04 10.9 9/1/04 10.10 * Form of Stock Option Agreement under the Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 Microsoft Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Corporation 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form 2001 Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Plan 10-K 6/30/04 10.12 9/1/04 10.11 * Form of Stock Option for Non-Employee Directors under the 1999 Stock Plan for Non-Employee Directors Stock Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Amended Plan for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Amended and for Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Amended and Restated Non-Employee Directors 10-K 6/30/04 10.13 9/1/04 10.12 Amended and Restated Officers Directors 10-K 6/30/04 10.13 9/1/04 10.12 Amended and Restated Officers ’ N.A . , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended . , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated Directors trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated Directors ’ N.A . , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * . , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation Deferred trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation Deferred Compensation Compensation Plan for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Plan for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive for Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Non-Employee Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Incentive Directors 10-K 6/30/15 10.14 7/31/15 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Executive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 101 PART Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 101 PART IV 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 101 PART IV Item Stock Plan 10-Q 9/30/15 10.18 10/22/15 101 PART IV Item 15 Plan 10-Q 9/30/15 10.18 10/22/15 101 PART IV Item 15 Incorporated 10/22/15 101 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.21 * Stock Award Agreement under Agreement under the Microsoft Corporation 2001 Stock Plan ( Service-Based ) Stock Plan ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Plan ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior ( Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Service-Based ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Severance ) 10-Q 9/30/15 10.21 10/22/15 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Executive Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Severance Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter Benefit Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter , Plan 10-Q 9/30/15 10.22 10/22/15 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios of Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 102 PART IV Item Sarbanes-Oxley Act of 2002 X 102 PART IV Item 15 , X 102 PART IV Item 15 , 16 Incorporated by Reference PART IV Item 15 , 16 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase filed * * * Form 8-K of LinkedIn Corporation ITEM 16 8-K of LinkedIn Corporation ITEM 16 . FORM 10-K SUMMARY None Corporation ITEM 16 . FORM 10-K SUMMARY None . 103 SIGNAT FORM 10-K SUMMARY None . 103 SIGNAT URES Pursuant to the to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 2 , 2017 . M ICROSOFT , on August 2 , 2017 . M ICROSOFT C ORPORATION the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 2 , 2017 . Signature Title indicated on August 2 , 2017 . Signature Title /s/ J ( Principal Accounting Officer ) 104 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-18-019062/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-18-019062/full-submission.txt new file mode 100644 index 0000000..d7b265c --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-18-019062/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2018 OR ☐ TRANSITION Year Ended June 30 , 2018 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the : COMMON STOCK , $ 0.00000625 par value per share NASDAQ Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No and posted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such delinquent filer pursuant to Item 405 of Regulation S-K ( §229.405 Part III of this Form 10-K or any amendment to this any amendment to this Form 10-K. ☐ Indicate by check mark growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of December 31 , 2017 , the aggregate As of December 31 , 2017 , the aggregate market value of the registrant wa $ 650.1 billion based on the closing System . As of July 31 , 2018 , there were As of July 31 , 2018 , there were 7,668,217,316 share , 2018 , there were 7,668,217,316 share of common stock outstanding to be held on November 28 , 2018 are incorporated by held on November 28 , 2018 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2018 INDEX Page PART Year Ended June 30 , 2018 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 Item 1A . Risk Factors 17 Item Item 1A . Risk Factors 17 Item 1B . Unresolved Staff . Risk Factors 17 Item 1B . Unresolved Staff Comments 29 1B . Unresolved Staff Comments 29 Item 2 . Properties 29 Unresolved Staff Comments 29 Item 2 . Properties 29 Item 3 29 Item 2 . Properties 29 Item 3 . Legal Proceedings 2 . Properties 29 Item 3 . Legal Proceedings 29 Item Item 3 . Legal Proceedings 29 Item 4 . Mine Safety . Legal Proceedings 29 Item 4 . Mine Safety Disclosures 29 4 . Mine Safety Disclosures 29 PART II Item 5 . Disclosures 29 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 30 Item 6 . Selected Financial of Equity Securities 30 Item 6 . Selected Financial Data 31 6 . Selected Financial Data 31 Item 7 . Management ’ Selected Financial Data 31 Item 7 . Management ’ s Discussion Condition and Results of Operations 32 Item 7A . Quantitative and Results of Operations 32 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 51 Item 9 . Changes in and Supplementary Data 51 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 98 Item 9A . Controls and and Financial Disclosure 98 Item 9A . Controls and Procedures 98 9A . Controls and Procedures 98 Report of Management on Internal Internal Control over Financial Reporting 98 Report of Independent Registered Public Independent Registered Public Accounting Firm 99 Item 9B . Other Information Public Accounting Firm 99 Item 9B . Other Information 100 PART Item 9B . Other Information 100 PART III Item 10 . Information 100 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 100 Item 11 . Executive Compensation and Corporate Governance 100 Item 11 . Executive Compensation 100 Item Item 11 . Executive Compensation 100 Item 12 . Security Ownership . Executive Compensation 100 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 100 Item 13 . Certain Relationships Related Stockholder Matters 100 Item 13 . Certain Relationships and Related Transactions , and Director Independence 100 Item 14 . Principal Accounting and Director Independence 100 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 100 PART IV Item 15 . Services 100 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 101 Item 16 . Form 10-K Financial Statement Schedules 101 Item 16 . Form 10-K Summary 105 101 Item 16 . Form 10-K Summary 105 Signatures 106 2 16 . Form 10-K Summary 105 Signatures 106 2 PART I Form 10-K Summary 105 Signatures 106 2 PART I Item 1 10-K Summary 105 Signatures 106 2 PART I Item 1 Note 106 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned otherwise . PART I ITEM 1. BUSINESS GENERAL Embracing Our Future What We Offer Founded in 1975 , we develop and support to a global audience . 3 PART I Item 1 The . 3 PART I Item 1 The A mbitions T hat u to bring Microsoft Office 365 , Windows platform , device into a more cohesive Microsoft 365 experience . Our growth depends , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows 10 , and together Office 365 , Windows 10 , and Enterprise Mobility + through social selling . Dynamics 365 for Talent with LinkedIn Recruiter modeling and data science . 4 PART I Item 1 On . 4 PART I Item 1 On June 4 , 2018 I Item 1 On June 4 , 2018 , Microsoft announced 1 On June 4 , 2018 , Microsoft announced plan to and dynamic way . Windows 10 is the cornerstone of our new device category . Windows 10 empowers people with AI-first interface Cortana , inking , immersive 3D content storytelling , and mixed file on demand . Windows 10 is more accessible for everyone . Our ambition for Windows 10 is to broaden our economic new hardware design for Windows 10 ; our commitment to our Windows installed base on Windows 10 and enabling universal Windows application Surface Laptop , Surface Book 2 , and Surface Pro to Live , and with Windows 10 , the most popular operating the best of Microsoft . 5 PART I Item 1 OPERATING . 5 PART I Item 1 OPERATING SEGMENTS We operate our information is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based Office licensed on-premises to Office 365 . CALs provide certain Office Office licensed on-premises to Office 365 . Office Consumer Services revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world the continued shift to Dynamics 365 , a unified set of and Microsoft Consulting Services . 7 PART I Item 1 Server . 7 PART I Item 1 Server Products and Cloud Services all size and complexity . 8 PART I Item 1 Our . 8 PART I Item 1 Our Enterprise Services business comp more productive . In May 2016 , we announced plan to hardware business . In November 2016 , we completed the sale our feature Phone business . 9 PART I Item 1 Gaming . 9 PART I Item 1 Gaming Our gaming platform is Xbox One X in August 2016 and November 2017 , respectively in August 2016 and November 2017 , respectively . With the the Mixer service in May 2017 , offering interactive live game Xbox Game Pass in June 2017 , providing unlimited access to providing unlimited access to over 100 Xbox title , we continue latest generation console in March 2017 and Sony released it latest latest generation console in November 2013 . We also compete with Europe , and Asia . 10 PART I Item 1 To . 10 PART I Item 1 To serve the need of AND DEVELOPMENT During fiscal year 2018 , 2017 , and 2016 During fiscal year 2018 , 2017 , and 2016 , research 2018 , 2017 , and 2016 , research and development expense and development expense wa $ 14.7 billion , $ 13.0 billion $ 14.7 billion , $ 13.0 billion , and $ 12.0 13.0 billion , and $ 12.0 billion , respectively . These respectively . These amount represented 13 % of revenue in fiscal of revenue in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 . We 2018 , 2017 , and 2016 . We plan to continue have a portfolio of over 53,000 U.S. and international patent issued international patent issued and over 29,000 pending . While we employ development of our product . 11 PART I Item 1 Investing . 11 PART I Item 1 Investing in the Future Our capability to subscribe to Office 365 . There are two broad , and retail store . 12 PART I Item 1 Distributors . 12 PART I Item 1 Distributors and Resellers Organizations also is optional . In July 2014 , we announced the retirement commercial organization . Beginning July 2015 , no new Select Plus signed with commercial organization . 13 PART I Item 1 Microsoft . 13 PART I Item 1 Microsoft Online Subscription Agreement Microsoft customer accounted for more than 10 % of revenue in fiscal of revenue in fiscal year 2018 , 2017 , or 2016 in fiscal year 2018 , 2017 , or 2016 . Our 2018 , 2017 , or 2016 . Our practice is to backlog is not significant . 14 PART I Item 1 EXECUTIVE . 14 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of August 3 , 2018 were a follows a of August 3 , 2018 were a follows : Name with the Company Satya Nadella 50 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 48 Executive Vice President , Marketing Chief Marketing Officer Jean-Philippe Courtois 57 Executive Vice President and President and Operations Kathleen T. Hogan 52 Executive Vice President , Human Human Resources Amy E. Hood 46 Executive Vice President , Chief Financial Officer Margaret L. Johnson 56 Executive Vice President , Business Business Development Bradford L. Smith 59 President and Chief Legal Officer Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 25 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Marketing and Operations in July 2016 . Before that he wa President of Microsoft International since 2005 . He wa Chief Executive East , and Africa from 2003 to 2005.He wa Senior Vice and Africa from 2003 to 2005.He wa Senior Vice President and East , and Africa from 2000 to 2003 . He wa and Africa from 2000 to 2003 . He wa Corporate Vice , Worldwide Customer Marketing from 1998 to 2000 . Mr. Courtois Customer Marketing from 1998 to 2000 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Ms. Hogan wa appointed , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms . Hood wa Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Ms. Johnson wa , Business Development in September 2014 . Prior to that Ms. to that Ms. Johnson spent 24 year at Qualcomm in various Chief Legal Officer in September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General Directors of Netflix , Inc. 15 PART I Item 1 EMPLOYEES Inc. 15 PART I Item 1 EMPLOYEES As of June 30 1 EMPLOYEES As of June 30 , 2018 , we employed As of June 30 , 2018 , we employed approximately 131,000 2018 , we employed approximately 131,000 people on a full-time basis on a full-time basis , 78,000 in the U.S. and 53,000 78,000 in the U.S. and 53,000 internationally . Of the total the total employed people , 42,000 were in operation , including , and consulting service ; 42,000 were in product research and product research and development ; 36,000 were in sale and marketing sale and marketing ; and 11,000 were in general and administration Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 16 PART I Item 1A ITEM . 16 PART I Item 1A ITEM 1A . RIS K PART I Item 1A ITEM 1A . RIS K FACTORS Our lower our operating margin . 17 PART I Item 1A Business . 17 PART I Item 1A Business model competition Companies compete margin and operating income . 18 PART I Item 1A We . 18 PART I Item 1A We make significant investment s operating system , Micros oft 365 , Office , Bing , Store , Azure , Office 365 , Xbox Live , Mixer business strategy . In December 2016 , we completed our acquisition of LinkedIn Corporation for $ 27.0 billion . In June 2018 27.0 billion . In June 2018 , we announced an agreement GitHub , Inc. for $ 7.5 billion . These acquisition and could adversely affect revenue . 19 PART I Item 1A We . 19 PART I Item 1A We may not receive expected or reveal confidential information . 20 PART I Item 1A Cyberthreats . 20 PART I Item 1A Cyberthreats are constantly evolving , reputation or competitive position . 21 PART I Item 1A Disclosure . 21 PART I Item 1A Disclosure and misuse of personal Microsoft account service , Office 365 , OneDrive , SharePoint Online result and financial condition . 22 PART I Item 1A Government . 22 PART I Item 1A Government litigation and regulatory activity product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may ability to realize anticipated Windows 10 post-sale monetization opportunity may be opportunity may be limited . 23 PART I Item 1A Our . 23 PART I Item 1A Our global operation subje ct a new framework in July 2016 that provides a mechanism for some market . In May 2018 , a new EU law monetary penalty of up to 4 % of worldwide revenue , , or reputational damage . 24 PART I Item 1A The . 24 PART I Item 1A The Company ’ s investment product release such a Windows 10 , significant business transaction , example , compliance with the 2017 United States Tax Cut and expense and cash flow . 25 PART I Item 1A We . 25 PART I Item 1A We may experience quality or customer are located in over 200 country and a significant part on our operating result . 26 PART I Item 1A Abrupt . 26 PART I Item 1A Abrupt political c hange , impact revenue . In July 2017 , we announced plan to our revenue or margin . 27 PART I Item 1A Issues . 27 PART I Item 1A Issues in the use of most highly qualified employee . 28 PART I Item 1B , . 28 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2018 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 540 acre of land we own ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . The table below and internationally a of June 30 , 2018 : ( Square a of June 30 , 2018 : ( Square foot in Location Owned Leased Total U.S. 18 13 31 International 6 13 Owned Leased Total U.S. 18 13 31 International 6 13 19 Leased Total U.S. 18 13 31 International 6 13 19 Total U.S. 18 13 31 International 6 13 19 Total 24 26 18 13 31 International 6 13 19 Total 24 26 50 13 31 International 6 13 19 Total 24 26 50 ITEM International 6 13 19 Total 24 26 50 ITEM 3 . 6 13 19 Total 24 26 50 ITEM 3 . LEGAL 13 19 Total 24 26 50 ITEM 3 . LEGAL PROCEEDINGS Total 24 26 50 ITEM 3 . LEGAL PROCEEDINGS While not annual report will continue through 2020 . During fiscal year 2018 2020 . During fiscal year 2018 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU annually . Refer to Note 17 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 29 PART II Item 5 PAR . 29 PART II Item 5 PAR T II ITEM 5 5 PAR T II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 31 , 2018 , there were . On July 31 , 2018 , there were 97,535 registered , 2018 , there were 97,535 registered holder of record of follows : Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Fiscal September 30 December 31 March 31 June 30 Fiscal Year Fiscal December 31 March 31 June 30 Fiscal Year Fiscal Year 2018 30 Fiscal Year Fiscal Year 2018 High $ 75.97 $ 87.50 Fiscal Year 2018 High $ 75.97 $ 87.50 $ 97.24 $ 2018 High $ 75.97 $ 87.50 $ 97.24 $ 102.69 $ $ 75.97 $ 87.50 $ 97.24 $ 102.69 $ 102.69 Low $ 87.50 $ 97.24 $ 102.69 $ 102.69 Low 68.02 73.71 $ 97.24 $ 102.69 $ 102.69 Low 68.02 73.71 83.83 87.51 $ 102.69 $ 102.69 Low 68.02 73.71 83.83 87.51 68.02 Fiscal 102.69 $ 102.69 Low 68.02 73.71 83.83 87.51 68.02 Fiscal Year $ 102.69 Low 68.02 73.71 83.83 87.51 68.02 Fiscal Year 2017 102.69 Low 68.02 73.71 83.83 87.51 68.02 Fiscal Year 2017 High Low 68.02 73.71 83.83 87.51 68.02 Fiscal Year 2017 High $ 83.83 87.51 68.02 Fiscal Year 2017 High $ 58.70 $ 64.10 Fiscal Year 2017 High $ 58.70 $ 64.10 $ 66.19 $ 2017 High $ 58.70 $ 64.10 $ 66.19 $ 72.89 $ $ 58.70 $ 64.10 $ 66.19 $ 72.89 $ 72.89 Low $ 64.10 $ 66.19 $ 72.89 $ 72.89 Low 50.39 56.32 $ 66.19 $ 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 $ 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 DIVIDENDS 72.89 $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 DIVIDENDS AND $ 72.89 Low 50.39 56.32 61.95 64.85 50.39 DIVIDENDS AND SHARE 72.89 Low 50.39 56.32 61.95 64.85 50.39 DIVIDENDS AND SHARE REPURCHASES Low 50.39 56.32 61.95 64.85 50.39 DIVIDENDS AND SHARE REPURCHASES Refer SHARE REPURCHASES Refer to Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding fourth quarter of fiscal year 2018 : Period Total Number of ( in million ) April 1 , 2018 – April 30 million ) April 1 , 2018 – April 30 , 2018 1 , 2018 – April 30 , 2018 10,320,190 $ 93.11 2018 – April 30 , 2018 10,320,190 $ 93.11 10,320,190 $ – April 30 , 2018 10,320,190 $ 93.11 10,320,190 $ 29,339 30 , 2018 10,320,190 $ 93.11 10,320,190 $ 29,339 May 1 , 2018 10,320,190 $ 93.11 10,320,190 $ 29,339 May 1 , 10,320,190 $ 93.11 10,320,190 $ 29,339 May 1 , 2018 – 93.11 10,320,190 $ 29,339 May 1 , 2018 – May 31 $ 29,339 May 1 , 2018 – May 31 , 2018 1 , 2018 – May 31 , 2018 0 0 0 2018 – May 31 , 2018 0 0 0 29,339 June – May 31 , 2018 0 0 0 29,339 June 1 May 31 , 2018 0 0 0 29,339 June 1 , 31 , 2018 0 0 0 29,339 June 1 , 2018 , 2018 0 0 0 29,339 June 1 , 2018 – 0 0 0 29,339 June 1 , 2018 – June 30 0 29,339 June 1 , 2018 – June 30 , 2018 1 , 2018 – June 30 , 2018 11,335,224 100.49 11,335,224 2018 – June 30 , 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 – June 30 , 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 June 30 , 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 All 30 , 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 All repurchase , 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 All repurchase were 2018 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 All repurchase were made 11,335,224 100.49 11,335,224 28,200 21,655,414 21,655,414 All repurchase were made using or pursuant to a Rule 10b5-1 trading plan . The above vesting of stock award . 30 PART II Item 6 ITEM . 30 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL data ) Year Ended June 30 , 2018 2017 ( b Year Ended June 30 , 2018 2017 ( b ) ( Ended June 30 , 2018 2017 ( b ) ( c b ) ( c ) 2016 ( b ) 2015 2014 ) 2016 ( b ) 2015 2014 ( h ) Revenue 2016 ( b ) 2015 2014 ( h ) Revenue $ ( h ) Revenue $ 110,360 $ 96,571 $ 91,154 $ ) Revenue $ 110,360 $ 96,571 $ 91,154 $ 93,580 $ $ 110,360 $ 96,571 $ 91,154 $ 93,580 $ 86,833 Gross $ 96,571 $ 91,154 $ 93,580 $ 86,833 Gross margin 72,007 $ 91,154 $ 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 93,580 $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating $ 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 86,833 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 Gross margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 29,025 margin 72,007 62,310 58,374 60,542 59,755 Operating income 35,058 29,025 ( 58,374 60,542 59,755 Operating income 35,058 29,025 ( d ) 26,078 60,542 59,755 Operating income 35,058 29,025 ( d ) 26,078 ( 35,058 29,025 ( d ) 26,078 ( e ) 18,161 ( ) 26,078 ( e ) 18,161 ( g ) 27,759 Net ) 18,161 ( g ) 27,759 Net income 16,571 ( a g ) 27,759 Net income 16,571 ( a ) 25,489 ( income 16,571 ( a ) 25,489 ( d ) 20,539 ( ) 25,489 ( d ) 20,539 ( e ) 12,193 ( ) 20,539 ( e ) 12,193 ( g ) 22,074 Diluted ) 12,193 ( g ) 22,074 Diluted earnings per share 2.13 22,074 Diluted earnings per share 2.13 ( a ) 3.25 ( share 2.13 ( a ) 3.25 ( d ) 2.56 ( ) 3.25 ( d ) 2.56 ( e ) 1.48 ( ) 2.56 ( e ) 1.48 ( g ) 2.63 Cash ) 1.48 ( g ) 2.63 Cash dividend declared per share Cash dividend declared per share 1.68 1.56 1.44 1.24 1.12 Cash dividend declared per share 1.68 1.56 1.44 1.24 1.12 Cash , declared per share 1.68 1.56 1.44 1.24 1.12 Cash , cash per share 1.68 1.56 1.44 1.24 1.12 Cash , cash equivalent share 1.68 1.56 1.44 1.24 1.12 Cash , cash equivalent , equivalent , and short-term investment 133,768 132,981 113,240 96,526 85,709 Total , and short-term investment 133,768 132,981 113,240 96,526 85,709 Total asset and short-term investment 133,768 132,981 113,240 96,526 85,709 Total asset 258,848 short-term investment 133,768 132,981 113,240 96,526 85,709 Total asset 258,848 250,312 investment 133,768 132,981 113,240 96,526 85,709 Total asset 258,848 250,312 202,897 113,240 96,526 85,709 Total asset 258,848 250,312 202,897 ( f ) 96,526 85,709 Total asset 258,848 250,312 202,897 ( f ) 174,303 85,709 Total asset 258,848 250,312 202,897 ( f ) 174,303 ( 250,312 202,897 ( f ) 174,303 ( f ) 170,569 ( ) 174,303 ( f ) 170,569 ( f ) Long-term obligation ( f ) Long-term obligation 117,642 106,856 66,705 ( f ) f ) Long-term obligation 117,642 106,856 66,705 ( f ) 44,574 ) Long-term obligation 117,642 106,856 66,705 ( f ) 44,574 ( 106,856 66,705 ( f ) 44,574 ( f ) 35,285 ( ) 44,574 ( f ) 35,285 ( f ) Stockholders ’ f ) Stockholders ’ equity 82,718 87,711 83,090 80,083 89,784 ( ) Stockholders ’ equity 82,718 87,711 83,090 80,083 89,784 ( a Stockholders ’ equity 82,718 87,711 83,090 80,083 89,784 ( a ) ’ equity 82,718 87,711 83,090 80,083 89,784 ( a ) Includes equity 82,718 87,711 83,090 80,083 89,784 ( a ) Includes a a ) Includes a $ 13.7 billion net charge related to EPS ” ) by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 13 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . accounting standard in fiscal year 2018 related to revenue recognition and lease . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ( c ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation ( d ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( e ( e ) Includes $ 630 million of asset impairment charge Phone business , and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . ( f accounting standard in fiscal year 2017 related to balance sheet classification ( g ) Includes $ 7.5 billion of goodwill and asset Phone business , and $ 2.5 billion of integration and restructuring and diluted EPS by $ 10.0 billion , $ 9.5 billion $ 10.0 billion , $ 9.5 billion , and $ 1.15 9.5 billion , and $ 1.15 , respectively . ( h ( h ) On April 25 , 2014 , we acquired ) On April 25 , 2014 , we acquired substantially all on the acquisition date . 31 PART II Item 7 ITEM . 31 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . OVERVIEW Microsoft is . Highlights from fiscal year 2018 compared with fiscal year 2017 2018 compared with fiscal year 2017 included : • Commercial cloud which primarily comprises Microsoft Office 365 commercial , Microsoft Azure , Microsoft Azure , Microsoft Dynamics 365 , and other cloud property other cloud property , increased 56 % to $ 23.2 billion increased 56 % to $ 23.2 billion . • Office Commercial • Office Commercial revenue increased 11 % , driven by Office % , driven by Office 365 commercial revenue growth of 41 365 commercial revenue growth of 41 % . • Office Consumer • Office Consumer revenue increased 11 % and Office 365 consumer increased 11 % and Office 365 consumer subscriber increased to 31.4 365 consumer subscriber increased to 31.4 million . • LinkedIn contributed LinkedIn contributed revenue of $ 5.3 billion , driven by strong . • Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynamics 365 revenue growth of 65 % Dynamics 365 revenue growth of 65 % . • Server product and cloud service revenue increased 21 % , driven by Azure by Azure revenue growth of 91 % . • Enterprise Services • Enterprise Services revenue increased 5 % . • Windows original OEM ” ) revenue increased 5 % , driven by OEM OEM Pro revenue growth of 11 % . • Windows Commercial • Windows Commercial revenue increased 12 % , driven by an . • Gaming revenue increased 14 % , driven by Xbox and service revenue growth of 20 % , mainly from third-party • Microsoft Surface revenue increased 16 % , driven by a traffic acquisition cost , increased 16 % , driven by higher search volume . On June 4 , 2018 , we entered . On June 4 , 2018 , we entered into a GitHub , Inc. for $ 7.5 billion in an all-stock transaction calendar year . On December 8 , 2016 , we completed . On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . LinkedIn ha been acquisition . Refer to Note 9 – Business Combinations of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . further discussion . On December 22 , 2017 , the Tax . On December 22 , 2017 , the Tax Cuts and business . During fiscal year 2018 , we recorded a net a net charge of $ 13.7 billion related to the TCJA TCJA . Refer to Note 13 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . recognition and lease effective July 1 , 2017 . These new lease effective July 1 , 2017 . These new standard had . Beginning in fiscal year 2018 , our financial result reflect accordingly . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 32 PART II Item 7 Industry . 32 PART II Item 7 Industry Trends Our industry is foreign currency throughout fiscal year 2017 negatively impacted reported revenue and trend reversed in fiscal year 2018 . Strengthening of foreign currency ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 21 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2018 2017 2016 Percentage Change 2018 per share amount ) 2018 2017 2016 Percentage Change 2018 Versus share amount ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Revenue $ 110,360 2017 Percentage Change 2017 Versus 2016 Revenue $ 110,360 $ 96,571 2017 Versus 2016 Revenue $ 110,360 $ 96,571 $ 91,154 14 2016 Revenue $ 110,360 $ 96,571 $ 91,154 14 % 6 $ 110,360 $ 96,571 $ 91,154 14 % 6 % Gross 110,360 $ 96,571 $ 91,154 14 % 6 % Gross margin 96,571 $ 91,154 14 % 6 % Gross margin 72,007 62,310 % 6 % Gross margin 72,007 62,310 58,374 16 % 7 6 % Gross margin 72,007 62,310 58,374 16 % 7 % % Gross margin 72,007 62,310 58,374 16 % 7 % Operating Gross margin 72,007 62,310 58,374 16 % 7 % Operating income 72,007 62,310 58,374 16 % 7 % Operating income 35,058 29,025 % 7 % Operating income 35,058 29,025 26,078 21 % 11 7 % Operating income 35,058 29,025 26,078 21 % 11 % % Operating income 35,058 29,025 26,078 21 % 11 % Net Operating income 35,058 29,025 26,078 21 % 11 % Net Income 35,058 29,025 26,078 21 % 11 % Net Income 16,571 25,489 % 11 % Net Income 16,571 25,489 20,539 ( 35 ) 11 % Net Income 16,571 25,489 20,539 ( 35 ) % % Net Income 16,571 25,489 20,539 ( 35 ) % 24 Income 16,571 25,489 20,539 ( 35 ) % 24 % Diluted 20,539 ( 35 ) % 24 % Diluted earnings per share % Diluted earnings per share 2.13 3.25 2.56 ( 34 ) Diluted earnings per share 2.13 3.25 2.56 ( 34 ) % earnings per share 2.13 3.25 2.56 ( 34 ) % 27 share 2.13 3.25 2.56 ( 34 ) % 27 % Adjusted 2.56 ( 34 ) % 27 % Adjusted operating income 35,058 27 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted operating income 35,058 29,331 27,188 20 % 8 % Adjusted net 35,058 29,331 27,188 20 % 8 % Adjusted net income 30,267 8 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted net income 30,267 25,732 21,434 18 % 20 % Adjusted diluted 30,267 25,732 21,434 18 % 20 % Adjusted diluted earnings per Adjusted diluted earnings per share 3.88 3.29 2.67 18 % 23 diluted earnings per share 3.88 3.29 2.67 18 % 23 % earnings per share 3.88 3.29 2.67 18 % 23 % Consolidated per share 3.88 3.29 2.67 18 % 23 % Consolidated result 3.88 3.29 2.67 18 % 23 % Consolidated result of operation date of acquisition on December 8 , 2016 . Fiscal year acquisition on December 8 , 2016 . Fiscal year 2018 includes , 2016 . Fiscal year 2018 includes a full period of result , whereas fiscal year 2017 only includes result from the financial result . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Revenue increased $ 13.8 billion Year 2017 Revenue increased $ 13.8 billion or 14 % , increased $ 13.8 billion or 14 % , driven by growth . Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by growth LinkedIn operating loss increased $ 63 million to $ 987 million $ 63 million to $ 987 million , including $ 1.5 987 million , including $ 1.5 billion of amortization of intangible favorable foreign currency impact of 2 % . Key change in Cost of revenue increased $ 4.1 billion or 12 % , increased $ 4.1 billion or 12 % , mainly due to and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Prior year and diluted EPS of $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . 34 PART $ 0.04 , respectively . 34 PART II Item 7 Fiscal . 34 PART II Item 7 Fiscal Year 2017 Compared with II Item 7 Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Revenue increased $ 5.4 billion Year 2016 Revenue increased $ 5.4 billion or 6 % , increased $ 5.4 billion or 6 % , driven by growth . Gross margin increased $ 3.9 billion or 7 % , increased $ 3.9 billion or 7 % , due to growth Gross margin percentage includes a 5 percentage point improvement in commercial primarily across Azure and Office 365 . Operating income increased $ . Operating income increased $ 2.9 billion or 11 % , increased $ 2.9 billion or 11 % , primarily due to an operating loss of $ 924 million related to the acquisition of LinkedIn , including $ 866 million of amortization of intangible unfavorable foreign currency impact of 3 % . Key change in Cost of revenue increased $ 1.5 billion or 5 % , increased $ 1.5 billion or 5 % , mainly due to and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to and marketing expense increased $ 826 million or 6 % , increased $ 826 million or 6 % , primarily due to and restructuring expense decreased $ 804 million , driven by asset Phone business in fiscal year 2016 , offset in part by restructuring plan in fiscal year 2017 . Diluted EPS wa $ . Diluted EPS wa $ 3.25 for fiscal year 2017 , $ 3.25 for fiscal year 2017 , and wa negatively impacted in a decrease of $ 0.04 . Diluted EPS wa $ . Diluted EPS wa $ 2.56 for fiscal year 2016 , $ 2.56 for fiscal year 2016 , and wa negatively impacted in a decrease of $ 0.11 . SEGMENT RESULTS OF OPERATIONS million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Revenue Productivity and 2017 Percentage Change 2017 Versus 2016 Revenue Productivity and Business Processes Productivity and Business Processes $ 35,865 $ 29,870 $ 25,792 20 Business Processes $ 35,865 $ 29,870 $ 25,792 20 % 16 $ 35,865 $ 29,870 $ 25,792 20 % 16 % Intelligent 35,865 $ 29,870 $ 25,792 20 % 16 % Intelligent Cloud 29,870 $ 25,792 20 % 16 % Intelligent Cloud 32,219 27,407 % 16 % Intelligent Cloud 32,219 27,407 24,952 18 % 10 16 % Intelligent Cloud 32,219 27,407 24,952 18 % 10 % % Intelligent Cloud 32,219 27,407 24,952 18 % 10 % More Intelligent Cloud 32,219 27,407 24,952 18 % 10 % More Personal 32,219 27,407 24,952 18 % 10 % More Personal Computing 42,276 10 % More Personal Computing 42,276 39,294 40,410 8 % ( % More Personal Computing 42,276 39,294 40,410 8 % ( 3 More Personal Computing 42,276 39,294 40,410 8 % ( 3 ) Personal Computing 42,276 39,294 40,410 8 % ( 3 ) % 39,294 40,410 8 % ( 3 ) % Total $ 110,360 3 ) % Total $ 110,360 $ 96,571 $ 91,154 14 % Total $ 110,360 $ 96,571 $ 91,154 14 % 6 $ 110,360 $ 96,571 $ 91,154 14 % 6 % Operating 110,360 $ 96,571 $ 91,154 14 % 6 % Operating Income 96,571 $ 91,154 14 % 6 % Operating Income ( Loss Productivity and Business Processes $ 12,924 $ 11,389 $ 11,756 13 Business Processes $ 12,924 $ 11,389 $ 11,756 13 % ( $ 12,924 $ 11,389 $ 11,756 13 % ( 3 ) 12,924 $ 11,389 $ 11,756 13 % ( 3 ) % $ 11,756 13 % ( 3 ) % Intelligent Cloud 11,524 3 ) % Intelligent Cloud 11,524 9,127 9,249 26 % ( ) % Intelligent Cloud 11,524 9,127 9,249 26 % ( 1 % Intelligent Cloud 11,524 9,127 9,249 26 % ( 1 ) Intelligent Cloud 11,524 9,127 9,249 26 % ( 1 ) % 9,127 9,249 26 % ( 1 ) % More Personal Computing ) % More Personal Computing 10,610 8,815 6,183 20 % 43 % More Personal Computing 10,610 8,815 6,183 20 % 43 % More Personal Computing 10,610 8,815 6,183 20 % 43 % Corporate Personal Computing 10,610 8,815 6,183 20 % 43 % Corporate and 10,610 8,815 6,183 20 % 43 % Corporate and Other 0 43 % Corporate and Other 0 ( 306 ) ( 1,110 Corporate and Other 0 ( 306 ) ( 1,110 ) * 0 ( 306 ) ( 1,110 ) * * Total $ ) * * Total $ 35,058 $ 29,025 $ 26,078 21 * Total $ 35,058 $ 29,025 $ 26,078 21 % 11 $ 35,058 $ 29,025 $ 26,078 21 % 11 % * 35,058 $ 29,025 $ 26,078 21 % 11 % * Not 29,025 $ 26,078 21 % 11 % * Not meaningful 35 11 % * Not meaningful 35 PART II Item 7 Reportable meaningful 35 PART II Item 7 Reportable Segments Fiscal Year 2018 7 Reportable Segments Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Productivity and Business Processes Revenue Business Processes Revenue increased $ 6.0 billion or 20 % . increased $ 6.0 billion or 20 % . • LinkedIn revenue • LinkedIn revenue increased $ 3.0 billion to $ 5.3 billion $ 3.0 billion to $ 5.3 billion . Fiscal year 2018 5.3 billion . Fiscal year 2018 includes a full period of result , whereas fiscal year 2017 only includes result from the date of acquisition on December 8 , 2016 . LinkedIn revenue acquisition on December 8 , 2016 . LinkedIn revenue primarily consisted Office Commercial revenue increased $ 2.4 billion or 11 % , increased $ 2.4 billion or 11 % , driven by Office % , driven by Office 365 commercial revenue growth , mainly a continued shift to Office 365 commercial . • Office Consumer Office Consumer revenue increased $ 382 million or 11 % , increased $ 382 million or 11 % , driven by Office % , driven by Office 365 consumer revenue growth , mainly . • Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynamics 365 revenue growth . Operating income . Operating income increased $ 1.5 billion or 13 % , increased $ 1.5 billion or 13 % , including a favorable favorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 4.4 billion or 19 % , increased $ 4.4 billion or 19 % , driven by LinkedIn margin percentage improvement in Office 365 commercial and LinkedIn . LinkedIn cost of revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired • Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ 2.2 billion to $ 4.5 billion $ 2.2 billion to $ 4.5 billion , including $ 617 4.5 billion , including $ 617 million of amortization of acquired Intelligent Cloud Revenue increased $ 4.8 billion or 18 % . increased $ 4.8 billion or 18 % . • Server product cloud service revenue increased $ 4.5 billion or 21 % , increased $ 4.5 billion or 21 % , driven by Azure . Azure revenue growth of 91 % , due to higher product licensed on-premises revenue increased 5 % , mainly due to Enterprise Services revenue increased $ 304 million or 5 % , increased $ 304 million or 5 % , driven by higher . Operating income increased $ 2.4 billion or 26 % . increased $ 2.4 billion or 26 % . • Gross margin • Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , driven by growth • Operating expense increased $ 683 million or 7 % , increased $ 683 million or 7 % , driven by investment Personal Computing Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . • Windows revenue • Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM revenue increased 5 % . Windows OEM Pro Windows OEM Pro revenue grew 11 % , ahead of a Windows OEM non-Pro revenue declined 4 % , below the consumer the entry-level price category . 36 PART II Item 7 • . 36 PART II Item 7 • Gaming revenue increased $ • Gaming revenue increased $ 1.3 b illion or 14 % $ 1.3 b illion or 14 % , driven by Xbox and service revenue growth of 20 % , mainly from third-party Search advertising revenue increased $ 793 million or 13 % . increased $ 793 million or 13 % . Search advertising revenue traffic acquisition cost , increased 16 % , driven by growth • Surface revenue increased $ 625 million or 16 % , increased $ 625 million or 16 % , driven by a • Phone revenue decreased $ 525 million . Operating income increased . Operating income increased $ 1.8 billion or 20 % , increased $ 1.8 billion or 20 % , including a favorable favorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 2.2 billion or 11 % , increased $ 2.2 billion or 11 % , driven by growth • Operating expense increased $ 391 million or 3 % , increased $ 391 million or 3 % , driven by investment marketing expense . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Productivity and Business Processes Revenue Business Processes Revenue increased $ 4.1 billion or 16 % . increased $ 4.1 billion or 16 % . • LinkedIn revenue • LinkedIn revenue wa $ 2.3 billion , primarily comprised of Office Commercial revenue increased $ 1.4 billion or 7 % , increased $ 1.4 billion or 7 % , driven by higher by higher revenue from Office 365 commercial , mainly due to a continued shift to Office 365 commercial . • Office Consumer Office Consumer revenue increased $ 351 million or 11 % , increased $ 351 million or 11 % , driven by higher by higher revenue from Office 365 consumer , mainly due to . • Dynamics revenue increased 5 % , primarily due to to higher revenue from Dynamics 365 . Operating income decreased $ . Operating income decreased $ 367 million or 3 % , decreased $ 367 million or 3 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Operating expense • Operating expense increased $ 2.3 billion or 26 % , increased $ 2.3 billion or 26 % , mainly due to . Operating expense included $ 2.3 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired and marketing expense increased $ 1.2 billion or 24 % , increased $ 1.2 billion or 24 % , research and development and development expense increased $ 955 million or 35 % , increased $ 955 million or 35 % , and general and and administrative expense increased $ 212 million or 14 % . increased $ 212 million or 14 % . • Gross margin • Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , primarily due to Cost of revenue included $ 918 million related to our acquisition of LinkedIn , including $ 507 million of amortization of acquired Intelligent Cloud Revenue increased $ 2.5 billion or 10 % . increased $ 2.5 billion or 10 % . • Server product cloud service revenue grew $ 2.6 billion or 14 % , grew $ 2.6 billion or 14 % , driven by Azure by Azure revenue growth of 98 % and server product licensed licensed on-premises revenue growth of 5 % . • Enterprise Services • Enterprise Services revenue decreased 2 % , driven by a and Microsoft Consulting Services . 37 PART II Item 7 Operating . 37 PART II Item 7 Operating income decreased $ 122 7 Operating income decreased $ 122 million or 1 % , decreased $ 122 million or 1 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Operating expense • Operating expense increased $ 975 million or 11 % , increased $ 975 million or 11 % , driven by investment and marketing expense increased $ 549 million or 13 % , increased $ 549 million or 13 % , research and development and development expense increased $ 468 million or 14 % , increased $ 468 million or 14 % , and general and and administrative expense decreased $ 42 million or 3 % . decreased $ 42 million or 3 % . • Gross margin • Gross margin increased $ 853 million or 5 % , increased $ 853 million or 5 % , driven by growth Personal Computing Revenue decreased $ 1.1 billion or 3 % . decreased $ 1.1 billion or 3 % . • Windows revenue • Windows revenue increased $ 1.0 billion or 6 % , increased $ 1.0 billion or 6 % , mainly due to . Windows Commercial revenue grew 14 % , driven by multi-year . Windows OEM revenue increased 3 % . Windows OEM Pro Windows OEM Pro revenue grew 4 % , outperforming the commercial Windows OEM non-Pro revenue grew 3 % , outperforming the consumer Search advertising revenue increased $ 791 million or 15 % . increased $ 791 million or 15 % . Search advertising revenue traffic acquisition cost , increased 9 % , primarily driven by . Xbox hardware revenue decreased 21 % , mainly due to software and service revenue increased 11 % , driven by a • Surface revenue decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to • Phone revenue decreased $ 2.8 billion . Operating income increased . Operating income increased $ 2.6 billion or 43 % , increased $ 2.6 billion or 43 % , including an unfavorable unfavorable foreign currency impact of 3 % . • Operating expense • Operating expense decreased $ 1.5 billion or 12 % , decreased $ 1.5 billion or 12 % , driven by a and marketing expense decreased $ 893 million or 16 % , decreased $ 893 million or 16 % , research and development and development expense decreased $ 374 million or 6 % , decreased $ 374 million or 6 % , and general and and administrative expense decreased $ 252 million or 16 % . decreased $ 252 million or 16 % . • Gross margin • Gross margin increased $ 1.1 billion or 6 % , increased $ 1.1 billion or 6 % , driven by growth restructuring expense . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Corporate and Other operating loss Other operating loss decreased $ 306 million , due to a restructuring plan in fiscal year 2017 . 38 PART II Item in fiscal year 2017 . 38 PART II Item 7 Fiscal . 38 PART II Item 7 Fiscal Y ear 2017 Compared Item 7 Fiscal Y ear 2017 Compared with F iscal Y with F iscal Y ear 2016 Corporate and Other operating loss Other operating loss decreased $ 804 million , primarily due to Phone business in fiscal year 2016 , offset in part by restructuring plan in fiscal year 2017 . OPERATING EXPENSES Research and million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Research and development 2017 Percentage Change 2017 Versus 2016 Research and development $ 14,726 2016 Research and development $ 14,726 $ 13,037 $ 11,988 13 and development $ 14,726 $ 13,037 $ 11,988 13 % 9 $ 14,726 $ 13,037 $ 11,988 13 % 9 % As 14,726 $ 13,037 $ 11,988 13 % 9 % As a 13,037 $ 11,988 13 % 9 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Research and development expense increased and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to . LinkedIn expense increased $ 762 million to $ 1.5 billion $ 762 million to $ 1.5 billion . Fiscal Year 2017 1.5 billion . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Research and development expense increased and development expense increased $ 1.0 billion or 9 % , increased $ 1.0 billion or 9 % , primarily due to expense . Expenses included $ 745 million related to our acquisition million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Sales and marketing 2017 Percentage Change 2017 Versus 2016 Sales and marketing $ 17,469 2016 Sales and marketing $ 17,469 $ 15,461 $ 14,635 13 and marketing $ 17,469 $ 15,461 $ 14,635 13 % 6 $ 17,469 $ 15,461 $ 14,635 13 % 6 % As 17,469 $ 15,461 $ 14,635 13 % 6 % As a 15,461 $ 14,635 13 % 6 % As a percent of As a percent of revenue 16 % 16 % 16 % percent of revenue 16 % 16 % 16 % 0ppt 0ppt revenue 16 % 16 % 16 % 0ppt 0ppt Sales and % 16 % 16 % 0ppt 0ppt Sales and marketing expense 16 % 16 % 0ppt 0ppt Sales and marketing expense include other program . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Sales and marketing expense increased and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to . LinkedIn expense increased $ 1.2 billion to $ 2.5 billion $ 1.2 billion to $ 2.5 billion , including $ 617 2.5 billion , including $ 617 million of amortization of acquired intangible asset . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Sales and marketing expense increased and marketing expense increased $ 826 million or 6 % , increased $ 826 million or 6 % , primarily due to , commercial , and Windows 10 . Expenses included $ 1.2 10 . Expenses included $ 1.2 billion related to our acquisition of LinkedIn , including $ 359 million of amortization of acquired of acquired intangible asset . 39 PART II Item 7 General . 39 PART II Item 7 General and Administrative ( In million , except percentage ) 2018 2017 2016 Percentage Change 2018 , except percentage ) 2018 2017 2016 Percentage Change 2018 Versus except percentage ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 General and administrative 2017 Percentage Change 2017 Versus 2016 General and administrative $ 4,754 2016 General and administrative $ 4,754 $ 4,481 $ 4,563 6 and administrative $ 4,754 $ 4,481 $ 4,563 6 % ( $ 4,754 $ 4,481 $ 4,563 6 % ( 2 ) 4,754 $ 4,481 $ 4,563 6 % ( 2 ) % $ 4,563 6 % ( 2 ) % As a percent As a percent of revenue 4 % 5 % 5 % percent of revenue 4 % 5 % 5 % ( 1 revenue 4 % 5 % 5 % ( 1 ) ppt 5 % 5 % ( 1 ) ppt 0ppt General and % ( 1 ) ppt 0ppt General and administrative expense include administrative fee . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 General and administrative expense increased and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to . LinkedIn expense increased $ 234 million to $ 528 million $ 234 million to $ 528 million . Fiscal Year 2017 528 million . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 General and administrative expense decreased and administrative expense decreased $ 82 million or 2 % , decreased $ 82 million or 2 % , primarily due to expense . Expenses included $ 294 million related to our acquisition restructuring activity . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 During fiscal year 2017 , Year 2017 During fiscal year 2017 , we recorded $ 306 2017 , we recorded $ 306 million of employee severance expense restructuring plan . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Impairment and restructuring expense were and restructuring expense were $ 306 million for fiscal year 2017 306 million for fiscal year 2017 , compared to $ 1.1 2017 , compared to $ 1.1 billion for fiscal year 2016 1.1 billion for fiscal year 2016 . During fiscal year 2016 2016 . During fiscal year 2016 , we recorded $ 630 2016 , we recorded $ 630 million of asset impairment charge . We also recorded $ 480 million of restructuring charge , million ) Year Ended June 30 , 2018 2017 2016 Dividends Year Ended June 30 , 2018 2017 2016 Dividends and interest Ended June 30 , 2018 2017 2016 Dividends and interest income June 30 , 2018 2017 2016 Dividends and interest income $ Dividends and interest income $ 2,214 $ 1,387 $ 903 Interest interest income $ 2,214 $ 1,387 $ 903 Interest expense ( $ 2,214 $ 1,387 $ 903 Interest expense ( 2,733 ) $ 903 Interest expense ( 2,733 ) ( 2,222 ) ( expense ( 2,733 ) ( 2,222 ) ( 1,243 ) Net ) ( 2,222 ) ( 1,243 ) Net recognized gain on Net recognized gain on investment 2,399 2,583 668 Net loss on recognized gain on investment 2,399 2,583 668 Net loss on derivative gain on investment 2,399 2,583 668 Net loss on derivative ( Net loss on derivative ( 187 ) ( 510 ) ( derivative ( 187 ) ( 510 ) ( 443 ) Net ) ( 510 ) ( 443 ) Net loss on foreign on foreign currency remeasurements ( 218 ) ( 111 ) ( remeasurements ( 218 ) ( 111 ) ( 129 ) Other ) ( 111 ) ( 129 ) Other , net ( ) Other , net ( 59 ) ( 251 ) ( net ( 59 ) ( 251 ) ( 195 ) Total ) ( 251 ) ( 195 ) Total $ 1,416 $ ( 195 ) Total $ 1,416 $ 876 $ ( 439 ) Total $ 1,416 $ 876 $ ( 439 ) 40 1,416 $ 876 $ ( 439 ) 40 PART II Item 876 $ ( 439 ) 40 PART II Item 7 We ) 40 PART II Item 7 We use derivative instrument to , net . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Dividends and interest income increased prior period . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Dividends and interest income increased Effective Tax Rate Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Our effective tax rate for tax rate for fiscal year 2018 and 2017 wa 55 % for fiscal year 2018 and 2017 wa 55 % and 15 year 2018 and 2017 wa 55 % and 15 % , 2017 wa 55 % and 15 % , respectively . The tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the the TCJA in fiscal year 2018 and the realization of tax business loss in fiscal year 2017 . Our effective tax rate service . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . In fiscal year billion . In fiscal year 2017 , our U.S. income before before income tax wa $ 6.8 billion and our foreign income before income tax wa $ 23.1 billion . Fiscal Year 2017 23.1 billion . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Our effective tax rate for tax rate for fiscal year 2017 and 2016 wa 15 % for fiscal year 2017 and 2016 wa 15 % and 20 year 2017 and 2016 wa 15 % and 20 % , 2016 wa 15 % and 20 % , respectively . The tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the service . In fiscal year 2017 , our U.S. income before before income tax wa $ 6.8 billion and our foreign income before income tax wa $ 23.1 billion . In fiscal year billion . In fiscal year 2016 , our U.S. income before before income tax wa $ 5.1 billion and our foreign income before income tax wa $ 20.5 billion . 41 PART II wa $ 20.5 billion . 41 PART II Item 7 Recent . 41 PART II Item 7 Recent Tax Legislation On December Recent Tax Legislation On December 22 , 2017 , the TCJA Legislation On December 22 , 2017 , the TCJA wa enacted tax at a rate of 15.5 % for foreign cash and net current asset , and 8 % on the remaining income federal statutory tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . For fiscal % effective January 1 , 2018 . For fiscal year 2018 2018 . For fiscal year 2018 , our blended U.S. federal federal statutory tax rate is 28.1 % . This is the using the tax rate of 35 % for the first and second quarter of fiscal year 2018 and the reduced tax rate the reduced tax rate of 21 % for the third and fourth quarter of fiscal year 2018 . The TCJA includes a effective for u beginning July 1 , 2018 . The TCJA u beginning July 1 , 2018 . The TCJA wa effective second quarter of fiscal year 2018 . As of June 30 2018 . As of June 30 , 2018 , we have As of June 30 , 2018 , we have not completed TCJA . During fiscal year 2018 , we recorded a provisional provisional net charge of $ 13.7 billion related to the TCJA date . During fiscal year 2018 , we recorded an estimated estimated net charge of $ 13.7 billion related to the TCJA deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred IRS audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and a portion of IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit second quarter of fiscal year 2018 , we settled a portion IRS audit for tax year 2010 to 2013 . We continue for tax year 2010 to 2013 . We continue to be the IRS for tax year 2010 to 2017 . In February for tax year 2010 to 2017 . In February 2012 , to 2017 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2018 , the primary As of June 30 , 2018 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are in accordance with GAAP . 42 PART II Item 7 The . 42 PART II Item 7 The following table reconciles our and per share amount ) 2018 2017 2016 Percentage Change 2018 per share amount ) 2018 2017 2016 Percentage Change 2018 Versus share amount ) 2018 2017 2016 Percentage Change 2018 Versus 2017 2018 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 2016 Percentage Change 2018 Versus 2017 Percentage Change 2017 Versus 2016 2018 Versus 2017 Percentage Change 2017 Versus 2016 Operating income $ 2017 Percentage Change 2017 Versus 2016 Operating income $ 35,058 $ Versus 2016 Operating income $ 35,058 $ 29,025 $ 26,078 21 Operating income $ 35,058 $ 29,025 $ 26,078 21 % 11 $ 35,058 $ 29,025 $ 26,078 21 % 11 % Net 35,058 $ 29,025 $ 26,078 21 % 11 % Net charge 29,025 $ 26,078 21 % 11 % Net charge related to charge related to the TCJA 0 0 0 Impairment and restructuring related to the TCJA 0 0 0 Impairment and restructuring expense to the TCJA 0 0 0 Impairment and restructuring expense 0 0 Impairment and restructuring expense 0 306 1,110 Adjusted operating income Impairment and restructuring expense 0 306 1,110 Adjusted operating income $ and restructuring expense 0 306 1,110 Adjusted operating income $ 35,058 1,110 Adjusted operating income $ 35,058 $ 29,331 $ 27,188 20 operating income $ 35,058 $ 29,331 $ 27,188 20 % 8 $ 35,058 $ 29,331 $ 27,188 20 % 8 % Net 35,058 $ 29,331 $ 27,188 20 % 8 % Net income 29,331 $ 27,188 20 % 8 % Net income $ 16,571 8 % Net income $ 16,571 $ 25,489 $ 20,539 ( Net income $ 16,571 $ 25,489 $ 20,539 ( 35 ) $ 16,571 $ 25,489 $ 20,539 ( 35 ) % 24 $ 25,489 $ 20,539 ( 35 ) % 24 % Net 20,539 ( 35 ) % 24 % Net charge related to charge related to the TCJA 13,696 0 0 Impairment and restructuring related to the TCJA 13,696 0 0 Impairment and restructuring expense to the TCJA 13,696 0 0 Impairment and restructuring expense 0 0 Impairment and restructuring expense 0 243 895 Adjusted net income Impairment and restructuring expense 0 243 895 Adjusted net income $ and restructuring expense 0 243 895 Adjusted net income $ 30,267 895 Adjusted net income $ 30,267 $ 25,732 $ 21,434 18 net income $ 30,267 $ 25,732 $ 21,434 18 % 20 $ 30,267 $ 25,732 $ 21,434 18 % 20 % Diluted 30,267 $ 25,732 $ 21,434 18 % 20 % Diluted earnings 25,732 $ 21,434 18 % 20 % Diluted earnings per share Diluted earnings per share $ 2.13 $ 3.25 $ 2.56 ( per share $ 2.13 $ 3.25 $ 2.56 ( 34 ) $ 2.13 $ 3.25 $ 2.56 ( 34 ) % 27 $ 3.25 $ 2.56 ( 34 ) % 27 % Net 2.56 ( 34 ) % 27 % Net charge related to charge related to the TCJA 1.75 0 0 Impairment and restructuring related to the TCJA 1.75 0 0 Impairment and restructuring expense to the TCJA 1.75 0 0 Impairment and restructuring expense 0 0 Impairment and restructuring expense 0 0.04 0.11 Adjusted diluted earnings Impairment and restructuring expense 0 0.04 0.11 Adjusted diluted earnings per and restructuring expense 0 0.04 0.11 Adjusted diluted earnings per share diluted earnings per share $ 3.88 $ 3.29 $ 2.67 18 per share $ 3.88 $ 3.29 $ 2.67 18 % 23 $ 3.88 $ 3.29 $ 2.67 18 % 23 % FINANCIAL 3.88 $ 3.29 $ 2.67 18 % 23 % FINANCIAL CONDITION 3.29 $ 2.67 18 % 23 % FINANCIAL CONDITION Cash , and short-term investment totaled $ 133.8 billion and $ 133.0 billion $ 133.8 billion and $ 133.0 billion a of June 30 133.0 billion a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , respectively . June 30 , 2018 and 2017 , respectively . Equity and and other investment were $ 1.9 billion and $ 6.0 billion $ 1.9 billion and $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , respectively . June 30 , 2018 and 2017 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment such a corporate note U.S. agency security . Level 3 investment are valued using internally portion of our portfolio . 43 PART II Item 7 A . 43 PART II Item 7 A majority of our investment vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either generally clas sified a Level 2 investment because the broker price . Cash Flows Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Cash from operation increased $ Cash from operation increased $ 4.4 billion to $ 43.9 billion $ 4.4 billion to $ 43.9 billion for the fiscal year the fiscal year ended June 30 , 2018 , mainly due year ended June 30 , 2018 , mainly due to an used in financing wa $ 33.6 billion for the fiscal year the fiscal year ended June 30 , 2018 , compared to year ended June 30 , 2018 , compared to cash from cash from financing of $ 8.4 billion for the fiscal year the fiscal year ended June 30 , 2017 . The change year ended June 30 , 2017 . The change wa mainly mainly due to a $ 41.7 billion decrease in proceeds from in part by a $ 1.1 billion decrease in cash used used in investing decreased $ 40.7 billion to $ 6.1 billion $ 40.7 billion to $ 6.1 billion for the fiscal year the fiscal year ended June 30 , 2018 , mainly due year ended June 30 , 2018 , mainly due to a mainly due to a $ 25 . 1 billion decrease in to a $ 25 . 1 billion decrease in cash used asset , and a $ 19.1 billion increase in cash from and maturity . Fiscal Year 2017 Compared with Fiscal Year 2016 2017 Compared with Fiscal Year 2016 Cash from operation increased $ Cash from operation increased $ 6.2 billion to $ 39.5 billion $ 6.2 billion to $ 39.5 billion during the fiscal year Cash from financing increased $ 16.8 billion to $ 8.4 billion $ 16.8 billion to $ 8.4 billion , mainly due to mainly due to a $ 13.2 billion increase in proceeds from repayment , and a $ 4.2 billion decrease in cash used in part by an $ 839 million increase in dividend paid used in investing increased $ 22.8 billion to $ 46.8 billion $ 22.8 billion to $ 46.8 billion , mainly due to mainly due to a $ 24.6 billion increase in cash used in part by a $ 1.9 billion decrease in cash used debt . Refer to Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 44 PART II Item 7 The . 44 PART II Item 7 The following table outline the unearned revenue a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) Three Months Ending , September 30 , 2018 $ 11,081 December Ending , September 30 , 2018 $ 11,081 December 31 , September 30 , 2018 $ 11,081 December 31 , 2018 8,688 , 2018 $ 11,081 December 31 , 2018 8,688 March 31 $ 11,081 December 31 , 2018 8,688 March 31 , 2019 11,081 December 31 , 2018 8,688 March 31 , 2019 5,995 31 , 2018 8,688 March 31 , 2019 5,995 June 30 2018 8,688 March 31 , 2019 5,995 June 30 , 2019 8,688 March 31 , 2019 5,995 June 30 , 2019 3,141 31 , 2019 5,995 June 30 , 2019 3,141 Thereafter 3,815 2019 5,995 June 30 , 2019 3,141 Thereafter 3,815 Total $ 5,995 June 30 , 2019 3,141 Thereafter 3,815 Total $ 32,720 30 , 2019 3,141 Thereafter 3,815 Total $ 32,720 If our 3,141 Thereafter 3,815 Total $ 32,720 If our customer choose to the fiscal year ended June 30 , 2018 , 2017 , year ended June 30 , 2018 , 2017 , and 2016 June 30 , 2018 , 2017 , and 2016 , we 2018 , 2017 , and 2016 , we repurchased 99 million and 2016 , we repurchased 99 million share , 170 million repurchased 99 million share , 170 million share , and 294 170 million share , and 294 million share of our common our common stock for $ 8.6 billion , $ 10.3 billion $ 8.6 billion , $ 10.3 billion , and $ 14.8 10.3 billion , and $ 14.8 billion , respectively , through resource . Refer to Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 18 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . contractual obligation a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) : ( In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term ( In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term debt In million ) 2019 2020-2021 2022-2023 Thereafter Total Long-term debt : a ) Principal payment $ 4,000 $ 9,268 $ 10,794 $ Principal payment $ 4,000 $ 9,268 $ 10,794 $ 52,836 $ $ 4,000 $ 9,268 $ 10,794 $ 52,836 $ 76,898 Interest $ 9,268 $ 10,794 $ 52,836 $ 76,898 Interest payment 2,377 $ 10,794 $ 52,836 $ 76,898 Interest payment 2,377 4,495 4,066 52,836 $ 76,898 Interest payment 2,377 4,495 4,066 31,247 42,185 Construction $ 76,898 Interest payment 2,377 4,495 4,066 31,247 42,185 Construction commitment 76,898 Interest payment 2,377 4,495 4,066 31,247 42,185 Construction commitment ( Interest payment 2,377 4,495 4,066 31,247 42,185 Construction commitment ( b payment 2,377 4,495 4,066 31,247 42,185 Construction commitment ( b ) Construction commitment ( b ) 1,793 107 0 0 1,900 Operating commitment ( b ) 1,793 107 0 0 1,900 Operating lease ( b ) 1,793 107 0 0 1,900 Operating lease , b ) 1,793 107 0 0 1,900 Operating lease , including ) 1,793 107 0 0 1,900 Operating lease , including imputed imputed interest ( c ) 1,538 2,567 1,778 2,416 8,299 Finance interest ( c ) 1,538 2,567 1,778 2,416 8,299 Finance lease ( c ) 1,538 2,567 1,778 2,416 8,299 Finance lease , c ) 1,538 2,567 1,778 2,416 8,299 Finance lease , including ) 1,538 2,567 1,778 2,416 8,299 Finance lease , including imputed imputed interest ( c ) 470 1,101 1,142 5,751 8,464 Transition interest ( c ) 470 1,101 1,142 5,751 8,464 Transition tax ( c ) 470 1,101 1,142 5,751 8,464 Transition tax ( c ) 470 1,101 1,142 5,751 8,464 Transition tax ( d ) 470 1,101 1,142 5,751 8,464 Transition tax ( d ) Transition tax ( d ) 1,495 2,808 2,808 10,530 17,641 Purchase tax ( d ) 1,495 2,808 2,808 10,530 17,641 Purchase commitment ( d ) 1,495 2,808 2,808 10,530 17,641 Purchase commitment ( d ) 1,495 2,808 2,808 10,530 17,641 Purchase commitment ( e ) 1,495 2,808 2,808 10,530 17,641 Purchase commitment ( e ) Purchase commitment ( e ) 19,321 874 255 408 20,858 Other commitment ( e ) 19,321 874 255 408 20,858 Other long-term ( e ) 19,321 874 255 408 20,858 Other long-term liability e ) 19,321 874 255 408 20,858 Other long-term liability ( ) 19,321 874 255 408 20,858 Other long-term liability ( f long-term liability ( f ) 0 76 19 313 408 Total liability ( f ) 0 76 19 313 408 Total contractual ( f ) 0 76 19 313 408 Total contractual obligation f ) 0 76 19 313 408 Total contractual obligation $ ) 0 76 19 313 408 Total contractual obligation $ 30,994 408 Total contractual obligation $ 30,994 $ 21,296 $ 20,862 $ contractual obligation $ 30,994 $ 21,296 $ 20,862 $ 103,501 $ $ 30,994 $ 21,296 $ 20,862 $ 103,501 $ 176,653 ( $ 21,296 $ 20,862 $ 103,501 $ 176,653 ( a ) $ 20,862 $ 103,501 $ 176,653 ( a ) Refer to a ) Refer to Note 12 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 8 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 45 PART II this Form 10-K ) . 45 PART II Item 7 ( . 45 PART II Item 7 ( c ) Refer to c ) Refer to Note 16 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 13 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 13.6 billion from the amount presented one-time transition tax of $ 17.9 billion on deferred foreign income tax . In fiscal year 2018 , we paid transition tax paid transition tax of $ 228 million . Under the TCJA remaining transition tax of $ 17.6 billion is payable interest-free over over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . for at least the next 12 month and thereafter for the ACCOUNTING GUIDANCE Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 46 PART II Item 7 Judgment . 46 PART II Item 7 Judgment is required to determine statement . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . an annual basis ( May 1 for u ) and between average cost of capital . 47 PART II Item 7 The . 47 PART II Item 7 The estimate used to calculate that ha a greater than 50 % likelihood of being realized business . Refer to Note 13 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . to cost of revenue . 48 PART II Item 7 STATEMENT . 48 PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 49 PART II Item 7A ITEM Officer 49 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2018 June 30 , Hypothetical Change June 30 , 2018 June 30 , 2017 Impact June 30 , 2018 June 30 , 2017 Impact Foreign currency , 2018 June 30 , 2017 Impact Foreign currency - Revenue Impact Foreign currency - Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 2,187 ) $ ( 1,785 ) ( 2,187 ) $ ( 1,785 ) Earnings Foreign currency - Earnings Foreign currency - Investments 10 % decrease in foreign exchange in foreign exchange rate ( 70 ) ( 92 ) Fair rate ( 70 ) ( 92 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 2,705 ) ( 2,394 ) Fair rate ( 2,705 ) ( 2,394 ) Fair Value Credit 100 2,394 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 232 ) ( 167 ) Fair spread ( 232 ) ( 167 ) Fair Value Equity 10 167 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 140 ) ( 323 ) Fair price ( 140 ) ( 323 ) Fair Value 50 PART ( 323 ) Fair Value 50 PART II Item 8 ITEM Value 50 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2018 2017 2016 Revenue Year Ended June 30 , 2018 2017 2016 Revenue : Product Ended June 30 , 2018 2017 2016 Revenue : Product $ June 30 , 2018 2017 2016 Revenue : Product $ 64,497 2016 Revenue : Product $ 64,497 $ 63,811 $ 67,336 Service : Product $ 64,497 $ 63,811 $ 67,336 Service and other $ 64,497 $ 63,811 $ 67,336 Service and other 45,863 32,760 $ 67,336 Service and other 45,863 32,760 23,818 Total revenue 110,360 67,336 Service and other 45,863 32,760 23,818 Total revenue 110,360 96,571 Service and other 45,863 32,760 23,818 Total revenue 110,360 96,571 91,154 45,863 32,760 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue 32,760 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue : 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue : Product Cost of revenue : Product 15,420 15,175 17,880 Service and other of revenue : Product 15,420 15,175 17,880 Service and other 22,933 revenue : Product 15,420 15,175 17,880 Service and other 22,933 19,086 15,175 17,880 Service and other 22,933 19,086 14,900 Total cost of 17,880 Service and other 22,933 19,086 14,900 Total cost of revenue Service and other 22,933 19,086 14,900 Total cost of revenue 38,353 14,900 Total cost of revenue 38,353 34,261 32,780 Gross margin 72,007 Total cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 cost of revenue 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 38,353 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 34,261 32,780 Gross margin 72,007 62,310 58,374 Research and development 14,726 32,780 Gross margin 72,007 62,310 58,374 Research and development 14,726 13,037 62,310 58,374 Research and development 14,726 13,037 11,988 Sales and marketing 58,374 Research and development 14,726 13,037 11,988 Sales and marketing 17,469 Research and development 14,726 13,037 11,988 Sales and marketing 17,469 15,461 13,037 11,988 Sales and marketing 17,469 15,461 14,635 General and administrative 11,988 Sales and marketing 17,469 15,461 14,635 General and administrative 4,754 Sales and marketing 17,469 15,461 14,635 General and administrative 4,754 4,481 15,461 14,635 General and administrative 4,754 4,481 4,563 Impairment and restructuring 14,635 General and administrative 4,754 4,481 4,563 Impairment and restructuring 0 General and administrative 4,754 4,481 4,563 Impairment and restructuring 0 306 4,481 4,563 Impairment and restructuring 0 306 1,110 Operating income 35,058 4,563 Impairment and restructuring 0 306 1,110 Operating income 35,058 29,025 Impairment and restructuring 0 306 1,110 Operating income 35,058 29,025 26,078 0 306 1,110 Operating income 35,058 29,025 26,078 Other income ( 306 1,110 Operating income 35,058 29,025 26,078 Other income ( expense 1,110 Operating income 35,058 29,025 26,078 Other income ( expense ) ( expense ) , net 1,416 876 ( 439 ) Income expense ) , net 1,416 876 ( 439 ) Income before , net 1,416 876 ( 439 ) Income before income tax ) Income before income tax 36,474 29,901 25,639 Provision for income Income before income tax 36,474 29,901 25,639 Provision for income tax before income tax 36,474 29,901 25,639 Provision for income tax 19,903 25,639 Provision for income tax 19,903 4,412 5,100 Net income $ Provision for income tax 19,903 4,412 5,100 Net income $ 16,571 for income tax 19,903 4,412 5,100 Net income $ 16,571 $ 4,412 5,100 Net income $ 16,571 $ 25,489 $ 20,539 Earnings Net income $ 16,571 $ 25,489 $ 20,539 Earnings per share $ 16,571 $ 25,489 $ 20,539 Earnings per share : Basic per share : Basic $ 2.15 $ 3.29 $ 2.59 Diluted : Basic $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 2.15 $ 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 3.29 $ 2.59 Diluted $ 2.13 $ 3.25 $ 2.56 Weighted 2.59 Diluted $ 2.13 $ 3.25 $ 2.56 Weighted average share $ 2.13 $ 3.25 $ 2.56 Weighted average share outstanding : average share outstanding : Basic 7,700 7,746 7,925 Diluted 7,794 7,832 share outstanding : Basic 7,700 7,746 7,925 Diluted 7,794 7,832 8,013 outstanding : Basic 7,700 7,746 7,925 Diluted 7,794 7,832 8,013 Cash Basic 7,700 7,746 7,925 Diluted 7,794 7,832 8,013 Cash dividend declared 7,700 7,746 7,925 Diluted 7,794 7,832 8,013 Cash dividend declared per 7,746 7,925 Diluted 7,794 7,832 8,013 Cash dividend declared per common declared per common share $ 1.68 $ 1.56 $ 1.44 Refer common share $ 1.68 $ 1.56 $ 1.44 Refer to accompanying $ 1.68 $ 1.56 $ 1.44 Refer to accompanying note . Refer to accompanying note . 51 PART II Item 8 COMPREHENSIVE . 51 PART II Item 8 COMPREHENSIVE IN COME STATEMENTS ( million ) Year Ended June 30 , 2018 2017 2016 Net Year Ended June 30 , 2018 2017 2016 Net income $ Ended June 30 , 2018 2017 2016 Net income $ 16,571 June 30 , 2018 2017 2016 Net income $ 16,571 $ 2017 2016 Net income $ 16,571 $ 25,489 $ 20,539 Other Net income $ 16,571 $ 25,489 $ 20,539 Other comprehensive income $ 16,571 $ 25,489 $ 20,539 Other comprehensive income ( loss Net change related to derivative 39 ( 218 ) ( 238 related to derivative 39 ( 218 ) ( 238 ) Net 39 ( 218 ) ( 238 ) Net change related to change related to investment ( 2,717 ) ( 1,116 ) ( investment ( 2,717 ) ( 1,116 ) ( 228 ) Translation ) ( 1,116 ) ( 228 ) Translation adjustment and other Translation adjustment and other ( 178 ) 167 ( 262 ) and other ( 178 ) 167 ( 262 ) Other comprehensive ( 178 ) 167 ( 262 ) Other comprehensive loss ( ) Other comprehensive loss ( 2,856 ) ( 1,167 ) ( loss ( 2,856 ) ( 1,167 ) ( 728 ) Comprehensive ) ( 1,167 ) ( 728 ) Comprehensive income $ 13,715 728 ) Comprehensive income $ 13,715 $ 24,322 $ 19,811 Refer Comprehensive income $ 13,715 $ 24,322 $ 19,811 Refer to accompanying $ 13,715 $ 24,322 $ 19,811 Refer to accompanying note . note . Refer to Note 19 – Accumulated Other Comprehensive Income ) for further information . 52 PART II Item 8 BALANCE . 52 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2018 2017 Assets Current million ) June 30 , 2018 2017 Assets Current asset : ) June 30 , 2018 2017 Assets Current asset : Cash Cash and cash equivalent $ 11,946 $ 7,663 Short-term investment 121,822 cash equivalent $ 11,946 $ 7,663 Short-term investment 121,822 125,318 Total 11,946 $ 7,663 Short-term investment 121,822 125,318 Total cash , cash $ 7,663 Short-term investment 121,822 125,318 Total cash , cash equivalent equivalent , and short-term investment 133,768 132,981 Accounts receivable , net , and short-term investment 133,768 132,981 Accounts receivable , net of for doubtful account of $ 377 and $ 345 26,481 22,431 of $ 377 and $ 345 26,481 22,431 Inventories 2,662 2,181 $ 377 and $ 345 26,481 22,431 Inventories 2,662 2,181 Other 377 and $ 345 26,481 22,431 Inventories 2,662 2,181 Other 6,751 $ 345 26,481 22,431 Inventories 2,662 2,181 Other 6,751 5,103 Total 345 26,481 22,431 Inventories 2,662 2,181 Other 6,751 5,103 Total current 22,431 Inventories 2,662 2,181 Other 6,751 5,103 Total current asset 169,662 Inventories 2,662 2,181 Other 6,751 5,103 Total current asset 169,662 162,696 6,751 5,103 Total current asset 169,662 162,696 Property and equipment , 5,103 Total current asset 169,662 162,696 Property and equipment , net of accumulated depreciation of $ 29,223 and $ 24,179 29,460 23,734 of $ 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use $ 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use asset 29,223 and $ 24,179 29,460 23,734 Operating lease right-of-use asset 6,686 23,734 Operating lease right-of-use asset 6,686 6,555 Equity and other investment Operating lease right-of-use asset 6,686 6,555 Equity and other investment 1,862 6,555 Equity and other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible Equity and other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset other investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset , net investment 1,862 6,023 Goodwill 35,683 35,122 Intangible asset , net 8,053 35,122 Intangible asset , net 8,053 10,106 Other long-term asset 7,442 Intangible asset , net 8,053 10,106 Other long-term asset 7,442 6,076 8,053 10,106 Other long-term asset 7,442 6,076 Total asset $ 258,848 10,106 Other long-term asset 7,442 6,076 Total asset $ 258,848 $ 7,442 6,076 Total asset $ 258,848 $ 250,312 Liabilities and stockholder Total asset $ 258,848 $ 250,312 Liabilities and stockholder ’ equity liability : Accounts payable $ 8,617 $ 7,390 Short-term debt 0 Accounts payable $ 8,617 $ 7,390 Short-term debt 0 9,072 Current 8,617 $ 7,390 Short-term debt 0 9,072 Current portion of long-term $ 7,390 Short-term debt 0 9,072 Current portion of long-term debt Current portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 portion of long-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term debt 3,998 1,049 Accrued compensation 6,103 5,819 Short-term income tax 2,121 3,998 1,049 Accrued compensation 6,103 5,819 Short-term income tax 2,121 718 6,103 5,819 Short-term income tax 2,121 718 Short-term unearned revenue 28,905 5,819 Short-term income tax 2,121 718 Short-term unearned revenue 28,905 24,013 2,121 718 Short-term unearned revenue 28,905 24,013 Other 8,744 7,684 Total 718 Short-term unearned revenue 28,905 24,013 Other 8,744 7,684 Total current unearned revenue 28,905 24,013 Other 8,744 7,684 Total current liability 58,488 revenue 28,905 24,013 Other 8,744 7,684 Total current liability 58,488 55,745 8,744 7,684 Total current liability 58,488 55,745 Long-term debt 72,242 76,073 7,684 Total current liability 58,488 55,745 Long-term debt 72,242 76,073 Long-term liability 58,488 55,745 Long-term debt 72,242 76,073 Long-term income tax 30,265 58,488 55,745 Long-term debt 72,242 76,073 Long-term income tax 30,265 13,485 72,242 76,073 Long-term income tax 30,265 13,485 Long-term unearned revenue 3,815 76,073 Long-term income tax 30,265 13,485 Long-term unearned revenue 3,815 2,643 30,265 13,485 Long-term unearned revenue 3,815 2,643 Deferred income tax 541 13,485 Long-term unearned revenue 3,815 2,643 Deferred income tax 541 5,734 3,815 2,643 Deferred income tax 541 5,734 Operating lease liability 5,568 2,643 Deferred income tax 541 5,734 Operating lease liability 5,568 5,372 541 5,734 Operating lease liability 5,568 5,372 Other long-term liability 5,211 5,734 Operating lease liability 5,568 5,372 Other long-term liability 5,211 3,549 5,568 5,372 Other long-term liability 5,211 3,549 Total liability 176,130 162,601 5,372 Other long-term liability 5,211 3,549 Total liability 176,130 162,601 Commitments liability 5,211 3,549 Total liability 176,130 162,601 Commitments and contingency Stockholders 5,211 3,549 Total liability 176,130 162,601 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,677 and 7,708 share authorized 24,000 ; outstanding 7,677 and 7,708 71,223 69,315 Retained 24,000 ; outstanding 7,677 and 7,708 71,223 69,315 Retained earnings 13,682 ; outstanding 7,677 and 7,708 71,223 69,315 Retained earnings 13,682 17,769 outstanding 7,677 and 7,708 71,223 69,315 Retained earnings 13,682 17,769 Accumulated 7,708 71,223 69,315 Retained earnings 13,682 17,769 Accumulated other comprehensive income 71,223 69,315 Retained earnings 13,682 17,769 Accumulated other comprehensive income ( income ( loss ) ( 2,187 ) 627 Total stockholder ’ loss ) ( 2,187 ) 627 Total stockholder ’ equity 82,718 627 Total stockholder ’ equity 82,718 87,711 Total liability and stockholder Total stockholder ’ equity 82,718 87,711 Total liability and stockholder ’ and stockholder ’ equity $ 258,848 $ 250,312 Refer to accompanying ’ equity $ 258,848 $ 250,312 Refer to accompanying note . Refer to accompanying note . 53 PART II Item 8 CASH . 53 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2018 2017 2016 Operations Year Ended June 30 , 2018 2017 2016 Operations Net income Ended June 30 , 2018 2017 2016 Operations Net income $ June 30 , 2018 2017 2016 Operations Net income $ 16,571 2016 Operations Net income $ 16,571 $ 25,489 $ 20,539 Adjustments Net income $ 16,571 $ 25,489 $ 20,539 Adjustments to reconcile $ 16,571 $ 25,489 $ 20,539 Adjustments to reconcile net income from operation : Asset impairment 0 0 630 Depreciation , amortization operation : Asset impairment 0 0 630 Depreciation , amortization , : Asset impairment 0 0 630 Depreciation , amortization , and , amortization , and other 10,261 8,778 6,622 Stock-based compensation expense amortization , and other 10,261 8,778 6,622 Stock-based compensation expense 3,940 , and other 10,261 8,778 6,622 Stock-based compensation expense 3,940 3,266 8,778 6,622 Stock-based compensation expense 3,940 3,266 2,668 Net recognized gain 6,622 Stock-based compensation expense 3,940 3,266 2,668 Net recognized gain on Stock-based compensation expense 3,940 3,266 2,668 Net recognized gain on investment on investment and derivative ( 2,212 ) ( 2,073 ) ( derivative ( 2,212 ) ( 2,073 ) ( 223 ) Deferred ) ( 2,073 ) ( 223 ) Deferred income tax ( ) Deferred income tax ( 5,143 ) ( 829 ) 2,479 tax ( 5,143 ) ( 829 ) 2,479 Changes in operating 5,143 ) ( 829 ) 2,479 Changes in operating asset and liability : Accounts receivable ( 3,862 ) ( 1,216 ) 562 receivable ( 3,862 ) ( 1,216 ) 562 Inventories ( 465 3,862 ) ( 1,216 ) 562 Inventories ( 465 ) 50 1,216 ) 562 Inventories ( 465 ) 50 600 Other current 562 Inventories ( 465 ) 50 600 Other current asset ( Inventories ( 465 ) 50 600 Other current asset ( 952 600 Other current asset ( 952 ) 1,028 ( 1,212 ) current asset ( 952 ) 1,028 ( 1,212 ) Other long-term ( 952 ) 1,028 ( 1,212 ) Other long-term asset ( ) Other long-term asset ( 285 ) ( 917 ) ( asset ( 285 ) ( 917 ) ( 1,110 ) Accounts ) ( 917 ) ( 1,110 ) Accounts payable 1,148 81 ( 1,110 ) Accounts payable 1,148 81 88 Unearned revenue 5,922 1,110 ) Accounts payable 1,148 81 88 Unearned revenue 5,922 3,820 ) Accounts payable 1,148 81 88 Unearned revenue 5,922 3,820 2,565 1,148 81 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 81 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 1,792 88 Unearned revenue 5,922 3,820 2,565 Income tax 18,183 1,792 ( 5,922 3,820 2,565 Income tax 18,183 1,792 ( 298 ) Other 3,820 2,565 Income tax 18,183 1,792 ( 298 ) Other current Income tax 18,183 1,792 ( 298 ) Other current liability 798 298 ) Other current liability 798 356 ( 179 ) Other ) Other current liability 798 356 ( 179 ) Other long-term current liability 798 356 ( 179 ) Other long-term liability ( ) Other long-term liability ( 20 ) ( 118 ) ( liability ( 20 ) ( 118 ) ( 406 ) Net ) ( 118 ) ( 406 ) Net cash from operation ) Net cash from operation 43,884 39,507 33,325 Financing Proceeds from Net cash from operation 43,884 39,507 33,325 Financing Proceeds from issuance cash from operation 43,884 39,507 33,325 Financing Proceeds from issuance ( short-term debt , maturity of 90 day or le , net or le , net ( 7,324 ) ( 4,963 ) 7,195 net ( 7,324 ) ( 4,963 ) 7,195 Proceeds from issuance 7,324 ) ( 4,963 ) 7,195 Proceeds from issuance of debt Proceeds from issuance of debt 7,183 44,344 13,884 Repayments of debt from issuance of debt 7,183 44,344 13,884 Repayments of debt ( issuance of debt 7,183 44,344 13,884 Repayments of debt ( 10,060 13,884 Repayments of debt ( 10,060 ) ( 7,922 ) ( debt ( 10,060 ) ( 7,922 ) ( 2,796 ) Common ) ( 7,922 ) ( 2,796 ) Common stock issued 1,002 2,796 ) Common stock issued 1,002 772 668 Common stock repurchased ) Common stock issued 1,002 772 668 Common stock repurchased ( Common stock issued 1,002 772 668 Common stock repurchased ( 10,721 668 Common stock repurchased ( 10,721 ) ( 11,788 ) ( repurchased ( 10,721 ) ( 11,788 ) ( 15,969 ) Common ) ( 11,788 ) ( 15,969 ) Common stock cash dividend stock cash dividend paid ( 12,699 ) ( 11,845 ) ( paid ( 12,699 ) ( 11,845 ) ( 11,006 ) Other ) ( 11,845 ) ( 11,006 ) Other , net ( ) Other , net ( 971 ) ( 190 ) ( net ( 971 ) ( 190 ) ( 369 ) Net ) ( 190 ) ( 369 ) Net cash from ( used in ) financing ( 33,590 ) 8,408 ( 8,393 ) ) financing ( 33,590 ) 8,408 ( 8,393 ) Investing Additions ( 33,590 ) 8,408 ( 8,393 ) Investing Additions to property to property and equipment ( 11,632 ) ( 8,129 ) ( equipment ( 11,632 ) ( 8,129 ) ( 8,343 ) Acquisition ) ( 8,129 ) ( 8,343 ) Acquisition of company , intangible and other asset ( 888 ) ( 25,944 ) ( asset ( 888 ) ( 25,944 ) ( 1,393 ) Purchases ) ( 25,944 ) ( 1,393 ) Purchases of investment ( ) Purchases of investment ( 137,380 ) ( 176,905 ) ( investment ( 137,380 ) ( 176,905 ) ( 129,758 ) Maturities ) ( 176,905 ) ( 129,758 ) Maturities of investment 26,360 129,758 ) Maturities of investment 26,360 28,044 22,054 Sales of investment ) Maturities of investment 26,360 28,044 22,054 Sales of investment 117,577 Maturities of investment 26,360 28,044 22,054 Sales of investment 117,577 136,350 28,044 22,054 Sales of investment 117,577 136,350 93,287 Securities lending payable 22,054 Sales of investment 117,577 136,350 93,287 Securities lending payable ( Sales of investment 117,577 136,350 93,287 Securities lending payable ( 98 93,287 Securities lending payable ( 98 ) ( 197 ) 203 payable ( 98 ) ( 197 ) 203 Net cash used 98 ) ( 197 ) 203 Net cash used in investing cash used in investing ( 6,061 ) ( 46,781 ) ( investing ( 6,061 ) ( 46,781 ) ( 23,950 ) Effect ) ( 46,781 ) ( 23,950 ) Effect of foreign exchange on cash and cash equivalent 50 19 ( 67 ) Net cash and cash equivalent 50 19 ( 67 ) Net change cash equivalent 50 19 ( 67 ) Net change in cash in cash and cash equivalent 4,283 1,153 915 Cash and cash cash and cash equivalent 4,283 1,153 915 Cash and cash equivalent and cash equivalent 4,283 1,153 915 Cash and cash equivalent , equivalent , beginning of period 7,663 6,510 5,595 Cash and cash , beginning of period 7,663 6,510 5,595 Cash and cash equivalent beginning of period 7,663 6,510 5,595 Cash and cash equivalent , , end of period $ 11,946 $ 7,663 $ 6,510 Refer of period $ 11,946 $ 7,663 $ 6,510 Refer to accompanying $ 11,946 $ 7,663 $ 6,510 Refer to accompanying note . Refer to accompanying note . 54 PART II Item 8 STOCKHOLDERS . 54 PART II Item 8 STOCKHOLDERS ’ EQ UITY STATEMENTS million ) Year Ended June 30 , 2018 2017 2016 Common Year Ended June 30 , 2018 2017 2016 Common stock and Ended June 30 , 2018 2017 2016 Common stock and paid-in June 30 , 2018 2017 2016 Common stock and paid-in capital , beginning of period $ 69,315 $ 68,178 $ 68,465 Common of period $ 69,315 $ 68,178 $ 68,465 Common stock issued $ 69,315 $ 68,178 $ 68,465 Common stock issued 1,002 772 $ 68,465 Common stock issued 1,002 772 668 Common stock repurchased 68,465 Common stock issued 1,002 772 668 Common stock repurchased ( Common stock issued 1,002 772 668 Common stock repurchased ( 3,033 668 Common stock repurchased ( 3,033 ) ( 2,987 ) ( repurchased ( 3,033 ) ( 2,987 ) ( 3,689 ) Stock-based ) ( 2,987 ) ( 3,689 ) Stock-based compensation expense 3,940 3,689 ) Stock-based compensation expense 3,940 3,266 2,668 Other , net ) Stock-based compensation expense 3,940 3,266 2,668 Other , net ( Stock-based compensation expense 3,940 3,266 2,668 Other , net ( 1 2,668 Other , net ( 1 ) 86 66 Balance , , net ( 1 ) 86 66 Balance , end of net ( 1 ) 86 66 Balance , end of period Balance , end of period 71,223 69,315 68,178 Retained earnings Balance , end of period 71,223 69,315 68,178 Retained earnings Balance , end of period 71,223 69,315 68,178 Retained earnings Balance , beginning Balance , beginning of period 17,769 13,118 16,191 Net income 16,571 , beginning of period 17,769 13,118 16,191 Net income 16,571 25,489 beginning of period 17,769 13,118 16,191 Net income 16,571 25,489 20,539 17,769 13,118 16,191 Net income 16,571 25,489 20,539 Common stock cash 13,118 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend 16,191 Net income 16,571 25,489 20,539 Common stock cash dividend ( Common stock cash dividend ( 12,917 ) ( 12,040 ) ( dividend ( 12,917 ) ( 12,040 ) ( 11,329 ) Common ) ( 12,040 ) ( 11,329 ) Common stock repurchased ( ) Common stock repurchased ( 7,699 ) ( 8,798 ) ( repurchased ( 7,699 ) ( 8,798 ) ( 12,283 ) Cumulative ) ( 8,798 ) ( 12,283 ) Cumulative effect of accounting effect of accounting change ( 42 ) 0 0 Balance , accounting change ( 42 ) 0 0 Balance , end of change ( 42 ) 0 0 Balance , end of period Balance , end of period 13,682 17,769 13,118 Accumulated other comprehensive , end of period 13,682 17,769 13,118 Accumulated other comprehensive income end of period 13,682 17,769 13,118 Accumulated other comprehensive income ( Balance , beginning of period 627 1,794 2,522 Other comprehensive loss , beginning of period 627 1,794 2,522 Other comprehensive loss ( beginning of period 627 1,794 2,522 Other comprehensive loss ( 2,856 2,522 Other comprehensive loss ( 2,856 ) ( 1,167 ) ( loss ( 2,856 ) ( 1,167 ) ( 728 ) Cumulative ) ( 1,167 ) ( 728 ) Cumulative effect of accounting Cumulative effect of accounting change 42 0 0 Balance , end effect of accounting change 42 0 0 Balance , end of of accounting change 42 0 0 Balance , end of period , end of period ( 2,187 ) 627 1,794 Total stockholder of period ( 2,187 ) 627 1,794 Total stockholder ’ equity period ( 2,187 ) 627 1,794 Total stockholder ’ equity $ Total stockholder ’ equity $ 82,718 $ 87,711 $ 83,090 Refer ’ equity $ 82,718 $ 87,711 $ 83,090 Refer to accompanying $ 82,718 $ 87,711 $ 83,090 Refer to accompanying note . Refer to accompanying note . 55 PART II Item 8 NOTES . 55 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles content such a Microsoft Office 365 , Microsoft Azure , Microsoft Microsoft Azure , Microsoft Dynamics 365 , and Xbox Live ; online advertising and LinkedIn . 56 PART II Item 8 Revenue . 56 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 21 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine doubtful account , wa $ 22.3 billion a of July 1 22.3 billion a of July 1 , 2016 . As of a of July 1 , 2016 . As of June 30 2016 . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , long-term account June 30 , 2018 and 2017 , long-term account receivable , doubtful account , were $ 1.8 billion and $ 1.7 billion $ 1.8 billion and $ 1.7 billion , respectively , and million ) Year Ended June 30 , 2018 2017 2016 Balance Year Ended June 30 , 2018 2017 2016 Balance , beginning Ended June 30 , 2018 2017 2016 Balance , beginning of June 30 , 2018 2017 2016 Balance , beginning of period , beginning of period $ 361 $ 409 $ 289 Charged of period $ 361 $ 409 $ 289 Charged to cost $ 361 $ 409 $ 289 Charged to cost and other Charged to cost and other 134 58 175 Write-offs ( 98 to cost and other 134 58 175 Write-offs ( 98 ) cost and other 134 58 175 Write-offs ( 98 ) ( 134 58 175 Write-offs ( 98 ) ( 106 ) ( Write-offs ( 98 ) ( 106 ) ( 55 ) Balance ) ( 106 ) ( 55 ) Balance , end of , end of period $ 397 $ 361 $ 409 Allowance of period $ 397 $ 361 $ 409 Allowance for doubtful $ 397 $ 361 $ 409 Allowance for doubtful account included consolidated balance sheet : June 30 , 2018 2017 2016 Accounts sheet : June 30 , 2018 2017 2016 Accounts receivable , : June 30 , 2018 2017 2016 Accounts receivable , net June 30 , 2018 2017 2016 Accounts receivable , net of allowance for doubtful account $ 377 $ 345 $ 392 Other doubtful account $ 377 $ 345 $ 392 Other long-term asset $ 377 $ 345 $ 392 Other long-term asset 20 16 $ 392 Other long-term asset 20 16 17 Total $ 397 392 Other long-term asset 20 16 17 Total $ 397 $ Other long-term asset 20 16 17 Total $ 397 $ 361 20 16 17 Total $ 397 $ 361 $ 409 58 17 Total $ 397 $ 361 $ 409 58 PART II $ 397 $ 361 $ 409 58 PART II Item 8 397 $ 361 $ 409 58 PART II Item 8 Unearned 409 58 PART II Item 8 Unearned revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics business service . Refer to Note 15 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where a period generally ranging from 90 day to three year . the amount a necessary . 59 PART II Item 8 Research . 59 PART II Item 8 Research and Development Research and . Advertising expense wa $ 1.6 billion , $ 1.5 billion $ 1.6 billion , $ 1.5 billion , and $ 1.6 1.5 billion , and $ 1.6 billion in fiscal year 2018 1.6 billion in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . Stock-Based Compensation our consolidated balance sheet . 60 PART II Item 8 Fair . 60 PART II Item 8 Fair Value Measurements We account level are : • Level 1 – input are based upon active market . Our Level 1 non-derivative investment primarily include U.S. mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon for currency . Our Level 2 non-derivative investment consist primarily of agency security . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 non-derivative asset and liability primarily using the equity method . 61 PART II Item 8 We . 61 PART II Item 8 We lend certain fixed-income and and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not Land is not depreciated . 62 PART II Item 8 Leases . 62 PART II Item 8 Leases We determine if an an annual basis ( May 1 for u ) and between , ranging from one to 20 year . We evaluate the Recent Tax Legislation On December 22 , 2017 , the Tax Legislation On December 22 , 2017 , the Tax Cuts and business . Refer to Note 13 – Income Taxes for further Taxes for further discussion . 63 PART II Item 8 As . 63 PART II Item 8 As a result of the As Adjusted Balance Sheets June 30 , 2017 Long-term income tax Balance Sheets June 30 , 2017 Long-term income tax $ 0 2017 Long-term income tax $ 0 $ 13,485 Other long-term liability income tax $ 0 $ 13,485 Other long-term liability 17,034 3,549 $ 13,485 Other long-term liability 17,034 3,549 These adjustment had no 13,485 Other long-term liability 17,034 3,549 These adjustment had no impact Certain Tax Effects In February 2018 , the Financial Accounting Standards second quarter of fiscal year 2018 , we remeasured our deferred adopt the standard effective April 1 , 2018 and reclassified a standard effective April 1 , 2018 and reclassified a $ 42 2018 and reclassified a $ 42 million net tax benefit from statement . Leases In February 2016 , the FASB issued a adopt the standard effective July 1 , 2017 concurrent with our standard effective July 1 , 2017 concurrent with our adoption of Contracts with Customers In May 2014 , the FASB issued a from contract with customer . 64 PART II Item 8 We . 64 PART II Item 8 We elected to early adopt adopt the standard effective July 1 , 2017 , using the standard effective July 1 , 2017 , using the full retrospective . Specifically , for Windows 10 , we recognize revenue predominantly offering ( such a Office 365 ) , LinkedIn , and the net change in Windows 10 revenue recognition . In addition of license revenue from Windows 10 and certain multi-year commercial software Income Statements Year Ended June 30 , 2017 Revenue $ 89,950 Year Ended June 30 , 2017 Revenue $ 89,950 $ 6,621 30 , 2017 Revenue $ 89,950 $ 6,621 $ 96,571 Provision 2017 Revenue $ 89,950 $ 6,621 $ 96,571 Provision for income $ 89,950 $ 6,621 $ 96,571 Provision for income tax 1,945 96,571 Provision for income tax 1,945 2,467 4,412 Net income 21,204 Provision for income tax 1,945 2,467 4,412 Net income 21,204 4,285 for income tax 1,945 2,467 4,412 Net income 21,204 4,285 25,489 1,945 2,467 4,412 Net income 21,204 4,285 25,489 Diluted earnings per 2,467 4,412 Net income 21,204 4,285 25,489 Diluted earnings per share 4,412 Net income 21,204 4,285 25,489 Diluted earnings per share 2.71 25,489 Diluted earnings per share 2.71 0.54 3.25 Year Ended June Diluted earnings per share 2.71 0.54 3.25 Year Ended June 30 earnings per share 2.71 0.54 3.25 Year Ended June 30 , 0.54 3.25 Year Ended June 30 , 2016 Revenue $ 85,320 Year Ended June 30 , 2016 Revenue $ 85,320 $ 5,834 30 , 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision 2016 Revenue $ 85,320 $ 5,834 $ 91,154 Provision for income $ 85,320 $ 5,834 $ 91,154 Provision for income tax 2,953 91,154 Provision for income tax 2,953 2,147 5,100 Net income 16,798 Provision for income tax 2,953 2,147 5,100 Net income 16,798 3,741 for income tax 2,953 2,147 5,100 Net income 16,798 3,741 20,539 2,953 2,147 5,100 Net income 16,798 3,741 20,539 Diluted earnings per 2,147 5,100 Net income 16,798 3,741 20,539 Diluted earnings per share 5,100 Net income 16,798 3,741 20,539 Diluted earnings per share 2.10 20,539 Diluted earnings per share 2.10 0.46 2.56 65 PART II Diluted earnings per share 2.10 0.46 2.56 65 PART II Item earnings per share 2.10 0.46 2.56 65 PART II Item 8 per share 2.10 0.46 2.56 65 PART II Item 8 ( 2.56 65 PART II Item 8 ( In million ) As As Restated Balance Sheets June 30 , 2017 Accounts receivable , Balance Sheets June 30 , 2017 Accounts receivable , net of allowance for doubtful account $ 19,792 $ 2,639 $ 0 $ doubtful account $ 19,792 $ 2,639 $ 0 $ 22,431 Operating $ 19,792 $ 2,639 $ 0 $ 22,431 Operating lease right-of-use $ 2,639 $ 0 $ 22,431 Operating lease right-of-use asset 0 22,431 Operating lease right-of-use asset 0 0 6,555 6,555 Other current Operating lease right-of-use asset 0 0 6,555 6,555 Other current and lease right-of-use asset 0 0 6,555 6,555 Other current and long-term right-of-use asset 0 0 6,555 6,555 Other current and long-term asset Other current and long-term asset 11,147 32 0 11,179 Unearned revenue current and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 and long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( long-term asset 11,147 32 0 11,179 Unearned revenue 44,479 ( 17,823 32 0 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 11,179 Unearned revenue 44,479 ( 17,823 ) 0 26,656 Deferred income revenue 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 44,479 ( 17,823 ) 0 26,656 Deferred income tax 531 5,203 0 26,656 Deferred income tax 531 5,203 0 5,734 Operating lease 26,656 Deferred income tax 531 5,203 0 5,734 Operating lease liability Deferred income tax 531 5,203 0 5,734 Operating lease liability 0 income tax 531 5,203 0 5,734 Operating lease liability 0 0 0 5,734 Operating lease liability 0 0 5,372 5,372 Other current 5,734 Operating lease liability 0 0 5,372 5,372 Other current and Operating lease liability 0 0 5,372 5,372 Other current and long-term lease liability 0 0 5,372 5,372 Other current and long-term liability Other current and long-term liability 23,464 ( 26 ) 1,183 24,621 and long-term liability 23,464 ( 26 ) 1,183 24,621 Stockholders ' liability 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 23,464 ( 26 ) 1,183 24,621 Stockholders ' equity 72,394 15,317 1,183 24,621 Stockholders ' equity 72,394 15,317 0 87,711 Adoption of 24,621 Stockholders ' equity 72,394 15,317 0 87,711 Adoption of the Stockholders ' equity 72,394 15,317 0 87,711 Adoption of the standard ' equity 72,394 15,317 0 87,711 Adoption of the standard related for Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted Intra-Entity Asset Transfers In October 2016 , the FASB issued new effective for u beginning July 1 , 2018 , with early u beginning July 1 , 2018 , with early adoption permitted early adoption permitted beginning July 1 , 2017 . We plan permitted beginning July 1 , 2017 . We plan to adopt adopt the guidance effective July 1 , 2018 . Adoption of guidance effective July 1 , 2018 . Adoption of the guidance cumulative-effect adjustment of approximately $ 550 million , which will reverse deferred tax asset of $ 2.8 billion , an increase in deferred tax liability of $ 2.1 billion , and a reduction other current asset of $ 150 million . As a result – Credit Losses In June 2016 , the FASB issued a effective for u beginning July 1 , 2020 , with early u beginning July 1 , 2020 , with early adoption permitted early adoption permitted beginning July 1 , 2019 . Adoption of permitted beginning July 1 , 2019 . Adoption of the standard process , and system . 66 PART II Item 8 Financial . 66 PART II Item 8 Financial Instruments – Recognition , , and Disclosure In January 2016 , the FASB issued a effective for u beginning July 1 , 2018 . Adoption of u beginning July 1 , 2018 . Adoption of the standard cash flow statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2018 2017 2016 Net Year Ended June 30 , 2018 2017 2016 Net income available Ended June 30 , 2018 2017 2016 Net income available for June 30 , 2018 2017 2016 Net income available for common shareholder ( A ) $ 16,571 $ 25,489 $ 20,539 Weighted A ) $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding $ 16,571 $ 25,489 $ 20,539 Weighted average outstanding share of common stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based ( B ) 7,700 7,746 7,925 Dilutive effect of stock-based award Dilutive effect of stock-based award 94 86 88 Common stock and effect of stock-based award 94 86 88 Common stock and common of stock-based award 94 86 88 Common stock and common stock stock equivalent ( C ) 7,794 7,832 8,013 Earnings Per Share equivalent ( C ) 7,794 7,832 8,013 Earnings Per Share Basic ( C ) 7,794 7,832 8,013 Earnings Per Share Basic ( Basic ( A/B ) $ 2.15 $ 3.29 $ 2.59 Diluted A/B ) $ 2.15 $ 3.29 $ 2.59 Diluted ( A/C $ 2.15 $ 3.29 $ 2.59 Diluted ( A/C ) $ Diluted ( A/C ) $ 2.13 $ 3.25 $ 2.56 Anti-dilutive A/C ) $ 2.13 $ 3.25 $ 2.56 Anti-dilutive stock-based award $ 2.13 $ 3.25 $ 2.56 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2018 2017 2016 Dividends Year Ended June 30 , 2018 2017 2016 Dividends and interest Ended June 30 , 2018 2017 2016 Dividends and interest income June 30 , 2018 2017 2016 Dividends and interest income $ Dividends and interest income $ 2,214 $ 1,387 $ 903 Interest interest income $ 2,214 $ 1,387 $ 903 Interest expense ( $ 2,214 $ 1,387 $ 903 Interest expense ( 2,733 ) $ 903 Interest expense ( 2,733 ) ( 2,222 ) ( expense ( 2,733 ) ( 2,222 ) ( 1,243 ) Net ) ( 2,222 ) ( 1,243 ) Net recognized gain on Net recognized gain on investment 2,399 2,583 668 Net loss on recognized gain on investment 2,399 2,583 668 Net loss on derivative gain on investment 2,399 2,583 668 Net loss on derivative ( Net loss on derivative ( 187 ) ( 510 ) ( derivative ( 187 ) ( 510 ) ( 443 ) Net ) ( 510 ) ( 443 ) Net loss on foreign on foreign currency remeasurements ( 218 ) ( 111 ) ( remeasurements ( 218 ) ( 111 ) ( 129 ) Other ) ( 111 ) ( 129 ) Other , net ( ) Other , net ( 59 ) ( 251 ) ( net ( 59 ) ( 251 ) ( 195 ) Total ) ( 251 ) ( 195 ) Total $ 1,416 $ ( 195 ) Total $ 1,416 $ 876 $ ( 439 ) Total $ 1,416 $ 876 $ ( 439 ) 67 1,416 $ 876 $ ( 439 ) 67 PART II Item 876 $ ( 439 ) 67 PART II Item 8 Following ) 67 PART II Item 8 Following are detail of net million ) Year Ended June 30 , 2018 2017 2016 Other-than-temporary Year Ended June 30 , 2018 2017 2016 Other-than-temporary impairment of Ended June 30 , 2018 2017 2016 Other-than-temporary impairment of investment June 30 , 2018 2017 2016 Other-than-temporary impairment of investment $ impairment of investment $ ( 47 ) $ ( 55 ) ( 47 ) $ ( 55 ) $ ( 322 ) ( 55 ) $ ( 322 ) Realized gain from sale from sale of available-for-sale security 3,478 3,064 1,376 Realized loss from sale of available-for-sale security 3,478 3,064 1,376 Realized loss from sale of available-for-sale security 3,478 3,064 1,376 Realized loss from sale of sale of available-for-sale security ( 1,032 ) ( 426 ) ( security ( 1,032 ) ( 426 ) ( 386 ) Total ) ( 426 ) ( 386 ) Total $ 2,399 $ ( 386 ) Total $ 2,399 $ 2,583 $ 668 NOTE ) Total $ 2,399 $ 2,583 $ 668 NOTE 4 — $ 2,399 $ 2,583 $ 668 NOTE 4 — INVESTMENTS Investment $ 2,583 $ 668 NOTE 4 — INVESTMENTS Investment Components The Equity and Other Investments June 30 , 2018 Cash $ 3,942 Other Investments June 30 , 2018 Cash $ 3,942 $ 0 30 , 2018 Cash $ 3,942 $ 0 $ 0 $ 2018 Cash $ 3,942 $ 0 $ 0 $ 3,942 $ $ 3,942 $ 0 $ 0 $ 3,942 $ 3,942 $ $ 0 $ 0 $ 3,942 $ 3,942 $ 0 $ $ 0 $ 3,942 $ 3,942 $ 0 $ 0 Mutual $ 3,942 $ 3,942 $ 0 $ 0 Mutual fund 246 $ 3,942 $ 0 $ 0 Mutual fund 246 0 0 0 $ 0 Mutual fund 246 0 0 246 246 0 $ 0 Mutual fund 246 0 0 246 246 0 0 0 Mutual fund 246 0 0 246 246 0 0 Commercial Mutual fund 246 0 0 246 246 0 0 Commercial paper fund 246 0 0 246 246 0 0 Commercial paper 2,513 246 0 0 246 246 0 0 Commercial paper 2,513 0 0 0 246 246 0 0 Commercial paper 2,513 0 0 246 0 0 Commercial paper 2,513 0 0 2,513 2,215 298 0 0 Commercial paper 2,513 0 0 2,513 2,215 298 0 0 Commercial paper 2,513 0 0 2,513 2,215 298 0 Certificates Commercial paper 2,513 0 0 2,513 2,215 298 0 Certificates of paper 2,513 0 0 2,513 2,215 298 0 Certificates of deposit 2,513 0 0 2,513 2,215 298 0 Certificates of deposit 2,058 0 0 2,513 2,215 298 0 Certificates of deposit 2,058 0 298 0 Certificates of deposit 2,058 0 0 2,058 1,865 193 0 Certificates of deposit 2,058 0 0 2,058 1,865 193 0 Certificates of deposit 2,058 0 0 2,058 1,865 193 0 U.S. of deposit 2,058 0 0 2,058 1,865 193 0 U.S. government deposit 2,058 0 0 2,058 1,865 193 0 U.S. government and 2,058 0 0 2,058 1,865 193 0 U.S. government and agency 0 0 2,058 1,865 193 0 U.S. government and agency security U.S. government and agency security 109,862 62 ( 1,167 ) 108,757 government and agency security 109,862 62 ( 1,167 ) 108,757 3,678 agency security 109,862 62 ( 1,167 ) 108,757 3,678 105,079 0 109,862 62 ( 1,167 ) 108,757 3,678 105,079 0 Foreign government 62 ( 1,167 ) 108,757 3,678 105,079 0 Foreign government bond ( 1,167 ) 108,757 3,678 105,079 0 Foreign government bond 5,182 1,167 ) 108,757 3,678 105,079 0 Foreign government bond 5,182 1 105,079 0 Foreign government bond 5,182 1 ( 10 ) 5,173 0 Foreign government bond 5,182 1 ( 10 ) 5,173 0 government bond 5,182 1 ( 10 ) 5,173 0 5,173 0 5,182 1 ( 10 ) 5,173 0 5,173 0 Mortgage- and 1 ( 10 ) 5,173 0 5,173 0 Mortgage- and asset-backed ( 10 ) 5,173 0 5,173 0 Mortgage- and asset-backed security 10 ) 5,173 0 5,173 0 Mortgage- and asset-backed security 3,868 0 Mortgage- and asset-backed security 3,868 4 ( 13 ) 3,859 Mortgage- and asset-backed security 3,868 4 ( 13 ) 3,859 0 asset-backed security 3,868 4 ( 13 ) 3,859 0 3,859 0 3,868 4 ( 13 ) 3,859 0 3,859 0 Corporate note 4 ( 13 ) 3,859 0 3,859 0 Corporate note and ( 13 ) 3,859 0 3,859 0 Corporate note and bond 13 ) 3,859 0 3,859 0 Corporate note and bond 6,947 0 Corporate note and bond 6,947 21 ( 56 ) 6,912 Corporate note and bond 6,947 21 ( 56 ) 6,912 0 and bond 6,947 21 ( 56 ) 6,912 0 6,912 0 6,947 21 ( 56 ) 6,912 0 6,912 0 Municipal security 21 ( 56 ) 6,912 0 6,912 0 Municipal security 271 ( 56 ) 6,912 0 6,912 0 Municipal security 271 37 56 ) 6,912 0 6,912 0 Municipal security 271 37 ( 0 6,912 0 Municipal security 271 37 ( 1 ) 307 6,912 0 Municipal security 271 37 ( 1 ) 307 0 Municipal security 271 37 ( 1 ) 307 0 307 0 271 37 ( 1 ) 307 0 307 0 Common and 37 ( 1 ) 307 0 307 0 Common and preferred ( 1 ) 307 0 307 0 Common and preferred stock 1 ) 307 0 307 0 Common and preferred stock 1,220 0 Common and preferred stock 1,220 95 ( 10 ) 1,305 Common and preferred stock 1,220 95 ( 10 ) 1,305 0 preferred stock 1,220 95 ( 10 ) 1,305 0 0 1,305 1,220 95 ( 10 ) 1,305 0 0 1,305 Other investment 95 ( 10 ) 1,305 0 0 1,305 Other investment 558 ( 10 ) 1,305 0 0 1,305 Other investment 558 0 10 ) 1,305 0 0 1,305 Other investment 558 0 0 0 0 1,305 Other investment 558 0 0 558 0 1 0 1,305 Other investment 558 0 0 558 0 1 557 1,305 Other investment 558 0 0 558 0 1 557 Total Other investment 558 0 0 558 0 1 557 Total $ investment 558 0 0 558 0 1 557 Total $ 136,667 558 0 0 558 0 1 557 Total $ 136,667 $ 0 0 558 0 1 557 Total $ 136,667 $ 220 0 1 557 Total $ 136,667 $ 220 $ ( 1,257 557 Total $ 136,667 $ 220 $ ( 1,257 ) $ 136,667 $ 220 $ ( 1,257 ) $ 135,630 $ 11,946 $ ( 1,257 ) $ 135,630 $ 11,946 $ 121,822 $ 1,257 ) $ 135,630 $ 11,946 $ 121,822 $ 1,862 ( $ 135,630 $ 11,946 $ 121,822 $ 1,862 ( In million $ 11,946 $ 121,822 $ 1,862 ( In million ) Cost Equity and Other Investments June 30 , 2017 Cash $ 3,624 Other Investments June 30 , 2017 Cash $ 3,624 $ 0 30 , 2017 Cash $ 3,624 $ 0 $ 0 $ 2017 Cash $ 3,624 $ 0 $ 0 $ 3,624 $ $ 3,624 $ 0 $ 0 $ 3,624 $ 3,624 $ $ 0 $ 0 $ 3,624 $ 3,624 $ 0 $ $ 0 $ 3,624 $ 3,624 $ 0 $ 0 Mutual $ 3,624 $ 3,624 $ 0 $ 0 Mutual fund 1,478 $ 3,624 $ 0 $ 0 Mutual fund 1,478 0 0 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 $ 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 0 Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial Mutual fund 1,478 0 0 1,478 1,478 0 0 Commercial paper fund 1,478 0 0 1,478 1,478 0 0 Commercial paper 319 1,478 0 0 1,478 1,478 0 0 Commercial paper 319 0 0 0 1,478 1,478 0 0 Commercial paper 319 0 0 1,478 0 0 Commercial paper 319 0 0 319 69 250 0 0 Commercial paper 319 0 0 319 69 250 0 0 Commercial paper 319 0 0 319 69 250 0 Certificates Commercial paper 319 0 0 319 69 250 0 Certificates of paper 319 0 0 319 69 250 0 Certificates of deposit 319 0 0 319 69 250 0 Certificates of deposit 1,358 0 0 319 69 250 0 Certificates of deposit 1,358 0 250 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 Certificates of deposit 1,358 0 0 1,358 972 386 0 U.S. of deposit 1,358 0 0 1,358 972 386 0 U.S. government deposit 1,358 0 0 1,358 972 386 0 U.S. government and 1,358 0 0 1,358 972 386 0 U.S. government and agency 0 0 1,358 972 386 0 U.S. government and agency security U.S. government and agency security 112,119 85 ( 360 ) 111,844 government and agency security 112,119 85 ( 360 ) 111,844 16 agency security 112,119 85 ( 360 ) 111,844 16 111,828 0 112,119 85 ( 360 ) 111,844 16 111,828 0 Foreign government 85 ( 360 ) 111,844 16 111,828 0 Foreign government bond ( 360 ) 111,844 16 111,828 0 Foreign government bond 5,276 360 ) 111,844 16 111,828 0 Foreign government bond 5,276 2 111,828 0 Foreign government bond 5,276 2 ( 13 ) 5,265 0 Foreign government bond 5,276 2 ( 13 ) 5,265 1,504 government bond 5,276 2 ( 13 ) 5,265 1,504 3,761 0 5,276 2 ( 13 ) 5,265 1,504 3,761 0 Mortgage- and 2 ( 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed ( 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed security 13 ) 5,265 1,504 3,761 0 Mortgage- and asset-backed security 3,921 0 Mortgage- and asset-backed security 3,921 14 ( 4 ) 3,931 Mortgage- and asset-backed security 3,921 14 ( 4 ) 3,931 0 asset-backed security 3,921 14 ( 4 ) 3,931 0 3,931 0 3,921 14 ( 4 ) 3,931 0 3,931 0 Corporate note 14 ( 4 ) 3,931 0 3,931 0 Corporate note and ( 4 ) 3,931 0 3,931 0 Corporate note and bond 4 ) 3,931 0 3,931 0 Corporate note and bond 4,786 0 Corporate note and bond 4,786 61 ( 12 ) 4,835 Corporate note and bond 4,786 61 ( 12 ) 4,835 0 and bond 4,786 61 ( 12 ) 4,835 0 4,835 0 4,786 61 ( 12 ) 4,835 0 4,835 0 Municipal security 61 ( 12 ) 4,835 0 4,835 0 Municipal security 284 ( 12 ) 4,835 0 4,835 0 Municipal security 284 43 12 ) 4,835 0 4,835 0 Municipal security 284 43 0 0 4,835 0 Municipal security 284 43 0 327 0 327 4,835 0 Municipal security 284 43 0 327 0 327 0 0 Municipal security 284 43 0 327 0 327 0 Common Municipal security 284 43 0 327 0 327 0 Common and security 284 43 0 327 0 327 0 Common and preferred 284 43 0 327 0 327 0 Common and preferred stock 43 0 327 0 327 0 Common and preferred stock 2,472 0 Common and preferred stock 2,472 3,062 ( 34 ) 5,500 Common and preferred stock 2,472 3,062 ( 34 ) 5,500 0 preferred stock 2,472 3,062 ( 34 ) 5,500 0 0 5,500 2,472 3,062 ( 34 ) 5,500 0 0 5,500 Other investment 3,062 ( 34 ) 5,500 0 0 5,500 Other investment 523 ( 34 ) 5,500 0 0 5,500 Other investment 523 0 34 ) 5,500 0 0 5,500 Other investment 523 0 0 0 0 5,500 Other investment 523 0 0 523 0 0 0 5,500 Other investment 523 0 0 523 0 0 523 5,500 Other investment 523 0 0 523 0 0 523 Total Other investment 523 0 0 523 0 0 523 Total $ investment 523 0 0 523 0 0 523 Total $ 136,160 523 0 0 523 0 0 523 Total $ 136,160 $ 0 0 523 0 0 523 Total $ 136,160 $ 3,267 0 0 523 Total $ 136,160 $ 3,267 $ ( 423 523 Total $ 136,160 $ 3,267 $ ( 423 ) $ 136,160 $ 3,267 $ ( 423 ) $ 139,004 $ 7,663 $ ( 423 ) $ 139,004 $ 7,663 $ 125,318 $ 423 ) $ 139,004 $ 7,663 $ 125,318 $ 6,023 68 $ 139,004 $ 7,663 $ 125,318 $ 6,023 68 PART II $ 7,663 $ 125,318 $ 6,023 68 PART II Item 8 7,663 $ 125,318 $ 6,023 68 PART II Item 8 As 6,023 68 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the recorded June 30 , 2018 and 2017 , the recorded base of not publicly traded were $ 999 m illion and $ 1.1 999 m illion and $ 1.1 billion , respectively . These investment . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , collateral received June 30 , 2018 and 2017 , collateral received under agreement for loaned security wa $ 1.8 billion and $ 3.7 billion $ 1.8 billion and $ 3.7 billion , respectively , and unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2018 U.S. government and Fair Value June 30 , 2018 U.S. government and agency security government and agency security $ 82,352 $ ( 1,064 ) $ security $ 82,352 $ ( 1,064 ) $ 4,459 $ ( $ ( 1,064 ) $ 4,459 $ ( 103 ) $ ) $ 4,459 $ ( 103 ) $ 86,811 $ ( $ ( 103 ) $ 86,811 $ ( 1,167 ) Foreign ) $ 86,811 $ ( 1,167 ) Foreign government bond 3,457 1,167 ) Foreign government bond 3,457 ( 7 ) 13 ( Foreign government bond 3,457 ( 7 ) 13 ( 3 ) bond 3,457 ( 7 ) 13 ( 3 ) 3,470 ( ( 7 ) 13 ( 3 ) 3,470 ( 10 ) ) 13 ( 3 ) 3,470 ( 10 ) Mortgage- and ( 3 ) 3,470 ( 10 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 2,072 ( 9 ) 96 ( and asset-backed security 2,072 ( 9 ) 96 ( 4 ) security 2,072 ( 9 ) 96 ( 4 ) 2,168 ( ( 9 ) 96 ( 4 ) 2,168 ( 13 ) ) 96 ( 4 ) 2,168 ( 13 ) Corporate note ( 4 ) 2,168 ( 13 ) Corporate note and bond ) Corporate note and bond 3,111 ( 43 ) 301 ( note and bond 3,111 ( 43 ) 301 ( 13 ) bond 3,111 ( 43 ) 301 ( 13 ) 3,412 ( ( 43 ) 301 ( 13 ) 3,412 ( 56 ) ) 301 ( 13 ) 3,412 ( 56 ) Municipal security ( 13 ) 3,412 ( 56 ) Municipal security 45 ( ( 56 ) Municipal security 45 ( 1 ) 0 0 ) Municipal security 45 ( 1 ) 0 0 45 ( security 45 ( 1 ) 0 0 45 ( 1 ) 45 ( 1 ) 0 0 45 ( 1 ) Common ( 1 ) 0 0 45 ( 1 ) Common and ) 0 0 45 ( 1 ) Common and preferred stock ) Common and preferred stock 75 ( 6 ) 8 ( and preferred stock 75 ( 6 ) 8 ( 4 ) stock 75 ( 6 ) 8 ( 4 ) 83 ( ( 6 ) 8 ( 4 ) 83 ( 10 ) ) 8 ( 4 ) 83 ( 10 ) Total $ ( 4 ) 83 ( 10 ) Total $ 91,112 $ ( 10 ) Total $ 91,112 $ ( 1,130 ) $ Total $ 91,112 $ ( 1,130 ) $ 4,877 $ ( $ ( 1,130 ) $ 4,877 $ ( 127 ) $ ) $ 4,877 $ ( 127 ) $ 95,989 $ ( $ ( 127 ) $ 95,989 $ ( 1,257 ) Less ) $ 95,989 $ ( 1,257 ) Less than 12 Months ( 1,257 ) Less than 12 Months 12 Months or Greater ) Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2017 U.S. government and Fair Value June 30 , 2017 U.S. government and agency security government and agency security $ 87,558 $ ( 348 ) $ security $ 87,558 $ ( 348 ) $ 371 $ ( $ ( 348 ) $ 371 $ ( 12 ) $ ) $ 371 $ ( 12 ) $ 87,929 $ ( $ ( 12 ) $ 87,929 $ ( 360 ) Foreign ) $ 87,929 $ ( 360 ) Foreign government bond 4,006 360 ) Foreign government bond 4,006 ( 2 ) 23 ( Foreign government bond 4,006 ( 2 ) 23 ( 11 ) bond 4,006 ( 2 ) 23 ( 11 ) 4,029 ( ( 2 ) 23 ( 11 ) 4,029 ( 13 ) ) 23 ( 11 ) 4,029 ( 13 ) Mortgage- and ( 11 ) 4,029 ( 13 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,068 ( 3 ) 198 ( and asset-backed security 1,068 ( 3 ) 198 ( 1 ) security 1,068 ( 3 ) 198 ( 1 ) 1,266 ( ( 3 ) 198 ( 1 ) 1,266 ( 4 ) ) 198 ( 1 ) 1,266 ( 4 ) Corporate note ( 1 ) 1,266 ( 4 ) Corporate note and bond ) Corporate note and bond 669 ( 8 ) 177 ( note and bond 669 ( 8 ) 177 ( 4 ) bond 669 ( 8 ) 177 ( 4 ) 846 ( ( 8 ) 177 ( 4 ) 846 ( 12 ) ) 177 ( 4 ) 846 ( 12 ) Common and ( 4 ) 846 ( 12 ) Common and preferred stock ) Common and preferred stock 69 ( 6 ) 148 ( and preferred stock 69 ( 6 ) 148 ( 28 ) stock 69 ( 6 ) 148 ( 28 ) 217 ( ( 6 ) 148 ( 28 ) 217 ( 34 ) ) 148 ( 28 ) 217 ( 34 ) Total $ ( 28 ) 217 ( 34 ) Total $ 93,370 $ ( 34 ) Total $ 93,370 $ ( 367 ) $ Total $ 93,370 $ ( 367 ) $ 917 $ ( $ ( 367 ) $ 917 $ ( 56 ) $ ) $ 917 $ ( 56 ) $ 94,287 $ ( $ ( 56 ) $ 94,287 $ ( 423 ) Unrealized ) $ 94,287 $ ( 423 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2018 Due in one Fair Value June 30 , 2018 Due in one year or one year or le $ 31,590 $ 31,451 Due after one or le $ 31,590 $ 31,451 Due after one year through one year through five year 76,422 75,810 Due after five year year through five year 76,422 75,810 Due after five year through Due after five year through 10 year 21,765 21,396 Due after five year through 10 year 21,765 21,396 Due after 10 year year through 10 year 21,765 21,396 Due after 10 year 924 year 21,765 21,396 Due after 10 year 924 922 Total $ 21,396 Due after 10 year 924 922 Total $ 130,701 $ Due after 10 year 924 922 Total $ 130,701 $ 129,579 year 924 922 Total $ 130,701 $ 129,579 69 PART II 922 Total $ 130,701 $ 129,579 69 PART II Item 8 Total $ 130,701 $ 129,579 69 PART II Item 8 NOTE 129,579 69 PART II Item 8 NOTE 5 — DERIVATIVES We PART II Item 8 NOTE 5 — DERIVATIVES We use derivative dollar . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the total June 30 , 2018 and 2017 , the total notional amount exchange contract sold were $ 6.1 billion and $ 8.9 billion $ 6.1 billion and $ 8.9 billion , respectively . Foreign instrument . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the total June 30 , 2018 and 2017 , the total notional amount exchange contract sold were $ 5.0 billion and $ 5.1 billion $ 5.0 billion and $ 5.1 billion , respectively . Certain exposure . As of June 30 , 2018 , the total As of June 30 , 2018 , the total notional amount purchased and sold were $ 9.4 billion and $ 13.4 billion $ 9.4 billion and $ 13.4 billion , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 8.8 billion and $ 10.6 billion $ 8.8 billion and $ 10.6 billion , respectively . Equity forward . As of June 30 , 2018 , the total As of June 30 , 2018 , the total notional amount market price risk were $ 49 million and $ 5 million $ 49 million and $ 5 million , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount market price risk were $ 1.9 billion and $ 2.4 billion $ 1.9 billion and $ 2.4 billion , respectively , of respectively , of which $ 1.6 billion and $ 1.8 billion $ 1.6 billion and $ 1.8 billion , respectively , were instrument . As of June 30 , 2018 , the total As of June 30 , 2018 , the total notional amount purchased and sold were $ 306 million and $ 390 million $ 306 million and $ 390 million , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 233 million and $ 352 million $ 233 million and $ 352 million , respectively . In date . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the total June 30 , 2018 and 2017 , the total notional derivative mortgage contract purchased were $ 568 million and $ 567 million $ 568 million and $ 567 million , respectively . 70 567 million , respectively . 70 PART II Item 8 Credit . 70 PART II Item 8 Credit Our fixed-income portfolio is risk . As of June 30 , 2018 , the total As of June 30 , 2018 , the total notional amount purchased and sold were $ 4 million and $ 82 million $ 4 million and $ 82 million , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total notional amount purchased and sold were $ 267 million and $ 63 million $ 267 million and $ 63 million , respectively . Credit-Risk-Related maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2018 , our long-term As of June 30 , 2018 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result Liabilities Other Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2018 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 10 $ 221 $ 0 $ exchange contract $ 10 $ 221 $ 0 $ 25 $ $ 10 $ 221 $ 0 $ 25 $ ( 193 $ 221 $ 0 $ 25 $ ( 193 ) $ 0 $ 25 $ ( 193 ) $ ( 4 ) ( 193 ) $ ( 4 ) Equity contract 2 0 ( 4 ) Equity contract 2 0 0 0 ( 7 4 ) Equity contract 2 0 0 0 ( 7 ) ) Equity contract 2 0 0 0 ( 7 ) 0 Equity contract 2 0 0 0 ( 7 ) 0 Interest 2 0 0 0 ( 7 ) 0 Interest rate contract 0 0 ( 7 ) 0 Interest rate contract 11 0 ) 0 Interest rate contract 11 0 0 0 ( 2 0 Interest rate contract 11 0 0 0 ( 2 ) Interest rate contract 11 0 0 0 ( 2 ) 0 rate contract 11 0 0 0 ( 2 ) 0 Credit 11 0 0 0 ( 2 ) 0 Credit contract 0 0 0 ( 2 ) 0 Credit contract 0 0 0 2 ) 0 Credit contract 0 0 0 0 ( 1 ) 0 Credit contract 0 0 0 0 ( 1 ) 0 Credit contract 0 0 0 0 ( 1 ) 0 Credit contract 0 0 0 0 ( 1 ) 0 Total 0 0 0 0 ( 1 ) 0 Total $ 23 0 0 ( 1 ) 0 Total $ 23 $ 221 1 ) 0 Total $ 23 $ 221 $ 0 $ 0 Total $ 23 $ 221 $ 0 $ 25 $ $ 23 $ 221 $ 0 $ 25 $ ( 203 $ 221 $ 0 $ 25 $ ( 203 ) $ 0 $ 25 $ ( 203 ) $ ( 4 ) ( 203 ) $ ( 4 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 95 $ 174 $ 0 $ exchange contract $ 95 $ 174 $ 0 $ 0 $ $ 95 $ 174 $ 0 $ 0 $ 0 $ $ 174 $ 0 $ 0 $ 0 $ 0 Equity $ 0 $ 0 $ 0 $ 0 Equity contract 0 $ 0 $ 0 $ 0 Equity contract 0 0 0 0 $ 0 Equity contract 0 0 0 0 0 0 $ 0 Equity contract 0 0 0 0 0 0 Total 0 Equity contract 0 0 0 0 0 0 Total $ Equity contract 0 0 0 0 0 0 Total $ 95 contract 0 0 0 0 0 0 Total $ 95 $ 0 0 0 0 0 0 Total $ 95 $ 174 0 0 0 Total $ 95 $ 174 $ 0 $ 0 Total $ 95 $ 174 $ 0 $ 0 $ $ 95 $ 174 $ 0 $ 0 $ 0 $ $ 174 $ 0 $ 0 $ 0 $ 0 Total $ 0 $ 0 $ 0 $ 0 Total gross amount $ 0 $ 0 $ 0 Total gross amount of derivative gross amount of derivative $ 118 $ 395 $ 0 $ of derivative $ 118 $ 395 $ 0 $ 25 $ $ 118 $ 395 $ 0 $ 25 $ ( 203 $ 395 $ 0 $ 25 $ ( 203 ) $ 0 $ 25 $ ( 203 ) $ ( 4 ) ( 203 ) $ ( 4 ) Gross derivative either offset enforceable master netting agreement $ 113 $ 395 $ 0 $ netting agreement $ 113 $ 395 $ 0 $ 25 $ $ 113 $ 395 $ 0 $ 25 $ ( 203 $ 395 $ 0 $ 25 $ ( 203 ) $ 0 $ 25 $ ( 203 ) $ ( 4 ) ( 203 ) $ ( 4 ) Gross amount of derivative on the balance sheet ( 14 ) ( 135 ) 0 sheet ( 14 ) ( 135 ) 0 ( 3 ) 14 ) ( 135 ) 0 ( 3 ) 150 3 ( 135 ) 0 ( 3 ) 150 3 Net amount ) 0 ( 3 ) 150 3 Net amount presented on 0 ( 3 ) 150 3 Net amount presented on the presented on the balance sheet 99 260 0 22 ( 53 on the balance sheet 99 260 0 22 ( 53 ) the balance sheet 99 260 0 22 ( 53 ) ( balance sheet 99 260 0 22 ( 53 ) ( 1 99 260 0 22 ( 53 ) ( 1 ) Gross 22 ( 53 ) ( 1 ) Gross amount of derivative offset on the balance sheet 0 0 0 0 0 0 on the balance sheet 0 0 0 0 0 0 Cash the balance sheet 0 0 0 0 0 0 Cash collateral balance sheet 0 0 0 0 0 0 Cash collateral received sheet 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 Cash collateral received 0 0 0 0 ( 235 0 Cash collateral received 0 0 0 0 ( 235 ) Cash collateral received 0 0 0 0 ( 235 ) 0 collateral received 0 0 0 0 ( 235 ) 0 Net 0 0 0 0 ( 235 ) 0 Net amount $ 0 0 ( 235 ) 0 Net amount $ 99 $ ) 0 Net amount $ 99 $ 260 $ 0 $ Net amount $ 99 $ 260 $ 0 $ 22 $ $ 99 $ 260 $ 0 $ 22 $ ( 288 $ 260 $ 0 $ 22 $ ( 288 ) $ 0 $ 22 $ ( 288 ) $ ( 1 ) ( 288 ) $ ( 1 ) 71 PART II Item ) $ ( 1 ) 71 PART II Item 8 Assets ) 71 PART II Item 8 Assets Liabilities ( In million Liabilities Other Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Long-term Liabilities June 30 , 2017 Non-designated Hedge Derivatives Foreign exchange Derivatives Foreign exchange contract $ 9 $ 203 $ 0 $ exchange contract $ 9 $ 203 $ 0 $ 6 $ $ 9 $ 203 $ 0 $ 6 $ ( 134 $ 203 $ 0 $ 6 $ ( 134 ) $ 0 $ 6 $ ( 134 ) $ ( 8 ) ( 134 ) $ ( 8 ) Equity contract 3 0 ( 8 ) Equity contract 3 0 0 0 ( 6 8 ) Equity contract 3 0 0 0 ( 6 ) ) Equity contract 3 0 0 0 ( 6 ) 0 Equity contract 3 0 0 0 ( 6 ) 0 Interest 3 0 0 0 ( 6 ) 0 Interest rate contract 0 0 ( 6 ) 0 Interest rate contract 3 0 ) 0 Interest rate contract 3 0 0 0 ( 7 0 Interest rate contract 3 0 0 0 ( 7 ) Interest rate contract 3 0 0 0 ( 7 ) 0 rate contract 3 0 0 0 ( 7 ) 0 Credit 3 0 0 0 ( 7 ) 0 Credit contract 5 0 0 ( 7 ) 0 Credit contract 5 0 0 7 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 Credit contract 5 0 0 0 ( 1 ) 0 Total 5 0 0 0 ( 1 ) 0 Total $ 20 0 0 ( 1 ) 0 Total $ 20 $ 203 1 ) 0 Total $ 20 $ 203 $ 0 $ 0 Total $ 20 $ 203 $ 0 $ 6 $ $ 20 $ 203 $ 0 $ 6 $ ( 148 $ 203 $ 0 $ 6 $ ( 148 ) $ 0 $ 6 $ ( 148 ) $ ( 8 ) ( 148 ) $ ( 8 ) Designated Hedge Derivatives Foreign Derivatives Foreign exchange contract $ 80 $ 133 $ 0 $ exchange contract $ 80 $ 133 $ 0 $ 0 $ $ 80 $ 133 $ 0 $ 0 $ ( 3 $ 133 $ 0 $ 0 $ ( 3 ) $ 0 $ 0 $ ( 3 ) $ 0 Equity contract $ ( 3 ) $ 0 Equity contract 0 0 67 ) $ 0 Equity contract 0 0 67 0 ( 186 $ 0 Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 Equity contract 0 0 67 0 ( 186 ) 0 Total 0 0 67 0 ( 186 ) 0 Total $ 80 67 0 ( 186 ) 0 Total $ 80 $ 133 186 ) 0 Total $ 80 $ 133 $ 67 $ 0 Total $ 80 $ 133 $ 67 $ 0 $ $ 80 $ 133 $ 67 $ 0 $ ( 189 $ 133 $ 67 $ 0 $ ( 189 ) $ 67 $ 0 $ ( 189 ) $ 0 Total gross $ ( 189 ) $ 0 Total gross amount of derivative gross amount of derivative $ 100 $ 336 $ 67 $ of derivative $ 100 $ 336 $ 67 $ 6 $ $ 100 $ 336 $ 67 $ 6 $ ( 337 $ 336 $ 67 $ 6 $ ( 337 ) $ 67 $ 6 $ ( 337 ) $ ( 8 ) ( 337 ) $ ( 8 ) Gross derivative either offset enforceable master netting agreement $ 100 $ 336 $ 67 $ netting agreement $ 100 $ 336 $ 67 $ 6 $ $ 100 $ 336 $ 67 $ 6 $ ( 334 $ 336 $ 67 $ 6 $ ( 334 ) $ 67 $ 6 $ ( 334 ) $ ( 8 ) ( 334 ) $ ( 8 ) Gross amount of derivative on the balance sheet ( 20 ) ( 132 ) ( sheet ( 20 ) ( 132 ) ( 67 ) ( ) ( 132 ) ( 67 ) ( 8 ) 221 ) ( 67 ) ( 8 ) 221 7 Net amount 67 ) ( 8 ) 221 7 Net amount presented on ) ( 8 ) 221 7 Net amount presented on the presented on the balance sheet 80 204 0 ( 2 ) on the balance sheet 80 204 0 ( 2 ) ( the balance sheet 80 204 0 ( 2 ) ( 113 sheet 80 204 0 ( 2 ) ( 113 ) ( 0 ( 2 ) ( 113 ) ( 1 ) Gross ) ( 113 ) ( 1 ) Gross amount of derivative offset on the balance sheet 0 0 0 0 0 0 on the balance sheet 0 0 0 0 0 0 Cash the balance sheet 0 0 0 0 0 0 Cash collateral balance sheet 0 0 0 0 0 0 Cash collateral received sheet 0 0 0 0 0 0 Cash collateral received 0 0 0 0 0 0 0 Cash collateral received 0 0 0 0 Cash collateral received 0 0 0 0 ( 228 0 Cash collateral received 0 0 0 0 ( 228 ) Cash collateral received 0 0 0 0 ( 228 ) 0 collateral received 0 0 0 0 ( 228 ) 0 Net 0 0 0 0 ( 228 ) 0 Net amount $ 0 0 ( 228 ) 0 Net amount $ 80 $ ) 0 Net amount $ 80 $ 204 $ 0 $ Net amount $ 80 $ 204 $ 0 $ ( 2 $ 80 $ 204 $ 0 $ ( 2 ) $ 204 $ 0 $ ( 2 ) $ ( 341 ) ( 2 ) $ ( 341 ) $ ( 1 ) ( 341 ) $ ( 1 ) Refer to Note 4 1 ) Refer to Note 4 – Investments and Note 6 4 – Investments and Note 6 – Fair Value Measurements for million ) Year Ended June 30 , 2018 2017 2016 Foreign Year Ended June 30 , 2018 2017 2016 Foreign Exchange Contracts Ended June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives June 30 , 2018 2017 2016 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 25 $ 441 $ ( 797 Contracts Derivatives $ 25 $ 441 $ ( 797 ) Hedged 25 $ 441 $ ( 797 ) Hedged item 78 ( ( 797 ) Hedged item 78 ( 386 ) 838 Total ) Hedged item 78 ( 386 ) 838 Total amount of item 78 ( 386 ) 838 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 103 $ 55 $ 41 Equity of ineffectiveness $ 103 $ 55 $ 41 Equity Contracts Derivatives $ 103 $ 55 $ 41 Equity Contracts Derivatives $ ( Equity Contracts Derivatives $ ( 324 ) $ ( 74 ) ( 324 ) $ ( 74 ) $ ( 76 ) ( 74 ) $ ( 76 ) Hedged item 324 74 ( 76 ) Hedged item 324 74 76 Total amount of 76 ) Hedged item 324 74 76 Total amount of ineffectiveness ) Hedged item 324 74 76 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded excluded from effectiveness assessment $ 80 $ ( 80 ) $ assessment $ 80 $ ( 80 ) $ ( 10 ) ( 80 ) $ ( 10 ) 72 PART II Item ) $ ( 10 ) 72 PART II Item 8 Cash ) 72 PART II Item 8 Cash Flow Hedge Gains ( million ) Year Ended June 30 , 2018 2017 2016 Effective Year Ended June 30 , 2018 2017 2016 Effective Portion Gains Ended June 30 , 2018 2017 2016 Effective Portion Gains recognized June 30 , 2018 2017 2016 Effective Portion Gains recognized in net of tax of $ 11 , $ 4 , and of $ 11 , $ 4 , and $ 24 ) $ 4 , and $ 24 ) $ 219 $ 328 and $ 24 ) $ 219 $ 328 $ 351 Gains 24 ) $ 219 $ 328 $ 351 Gains reclassified from $ 219 $ 328 $ 351 Gains reclassified from accumulated other ( loss ) into revenue 185 555 625 Amount Excluded from loss ) into revenue 185 555 625 Amount Excluded from Effectiveness ) into revenue 185 555 625 Amount Excluded from Effectiveness Assessment expense ) , net ( 255 ) ( 389 ) ( net ( 255 ) ( 389 ) ( 354 ) We ) ( 389 ) ( 354 ) We estimate that $ ) We estimate that $ 179 million of net derivative gain in AOCI a of June 30 , 2018 will be reclassified a of June 30 , 2018 will be reclassified into earnings into earnings within the following 12 month . No significant amount to occur during fiscal year 2018 . Non-designated Derivative Gains ( million ) Year Ended June 30 , 2018 2017 2016 Foreign Year Ended June 30 , 2018 2017 2016 Foreign exchange contract Ended June 30 , 2018 2017 2016 Foreign exchange contract $ June 30 , 2018 2017 2016 Foreign exchange contract $ ( Foreign exchange contract $ ( 33 ) $ ( 117 ) ( 33 ) $ ( 117 ) $ ( 55 ) ( 117 ) $ ( 55 ) Equity contract ( 87 55 ) Equity contract ( 87 ) ( 114 ) ( contract ( 87 ) ( 114 ) ( 21 ) Interest ) ( 114 ) ( 21 ) Interest rate contract ( ) Interest rate contract ( 15 ) 14 10 Credit contract rate contract ( 15 ) 14 10 Credit contract ( 2 contract ( 15 ) 14 10 Credit contract ( 2 ) 14 10 Credit contract ( 2 ) 5 ( 1 ) Credit contract ( 2 ) 5 ( 1 ) Other contract ( 2 ) 5 ( 1 ) Other contract 0 ( ( 1 ) Other contract 0 ( 22 ) ( 87 ) Other contract 0 ( 22 ) ( 87 ) Total 0 ( 22 ) ( 87 ) Total $ ( 137 87 ) Total $ ( 137 ) $ ( 234 ) ( 137 ) $ ( 234 ) $ ( 154 ) ( 234 ) $ ( 154 ) 73 PART II Item ) $ ( 154 ) 73 PART II Item 8 NOTE ) 73 PART II Item 8 NOTE 6 — FAIR VALUE PART II Item 8 NOTE 6 — FAIR VALUE MEASUREMENTS Financial ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2018 Assets Mutual fund Fair Value June 30 , 2018 Assets Mutual fund $ 246 2018 Assets Mutual fund $ 246 $ 0 $ 0 $ Mutual fund $ 246 $ 0 $ 0 $ 246 $ $ 246 $ 0 $ 0 $ 246 $ 0 $ $ 0 $ 0 $ 246 $ 0 $ 246 Commercial $ 0 $ 246 $ 0 $ 246 Commercial paper 0 $ 246 $ 0 $ 246 Commercial paper 0 2,513 0 0 $ 246 Commercial paper 0 2,513 0 2,513 0 2,513 $ 246 Commercial paper 0 2,513 0 2,513 0 2,513 Certificates 246 Commercial paper 0 2,513 0 2,513 0 2,513 Certificates of Commercial paper 0 2,513 0 2,513 0 2,513 Certificates of deposit paper 0 2,513 0 2,513 0 2,513 Certificates of deposit 0 0 2,513 0 2,513 0 2,513 Certificates of deposit 0 2,058 0 2,513 Certificates of deposit 0 2,058 0 2,058 0 2,058 2,513 Certificates of deposit 0 2,058 0 2,058 0 2,058 U.S. Certificates of deposit 0 2,058 0 2,058 0 2,058 U.S. government of deposit 0 2,058 0 2,058 0 2,058 U.S. government and deposit 0 2,058 0 2,058 0 2,058 U.S. government and agency 0 2,058 0 2,058 0 2,058 U.S. government and agency security U.S. government and agency security 107,015 1,742 0 108,757 0 108,757 government and agency security 107,015 1,742 0 108,757 0 108,757 Foreign and agency security 107,015 1,742 0 108,757 0 108,757 Foreign government agency security 107,015 1,742 0 108,757 0 108,757 Foreign government bond security 107,015 1,742 0 108,757 0 108,757 Foreign government bond 22 107,015 1,742 0 108,757 0 108,757 Foreign government bond 22 5,054 0 108,757 Foreign government bond 22 5,054 0 5,076 0 5,076 108,757 Foreign government bond 22 5,054 0 5,076 0 5,076 Mortgage- Foreign government bond 22 5,054 0 5,076 0 5,076 Mortgage- and government bond 22 5,054 0 5,076 0 5,076 Mortgage- and asset-backed bond 22 5,054 0 5,076 0 5,076 Mortgage- and asset-backed security 22 5,054 0 5,076 0 5,076 Mortgage- and asset-backed security 0 5,076 Mortgage- and asset-backed security 0 3,855 0 3,855 0 3,855 Mortgage- and asset-backed security 0 3,855 0 3,855 0 3,855 Corporate and asset-backed security 0 3,855 0 3,855 0 3,855 Corporate note asset-backed security 0 3,855 0 3,855 0 3,855 Corporate note and security 0 3,855 0 3,855 0 3,855 Corporate note and bond 0 3,855 0 3,855 0 3,855 Corporate note and bond 0 3,855 Corporate note and bond 0 6,894 15 6,909 0 6,909 Corporate note and bond 0 6,894 15 6,909 0 6,909 Municipal note and bond 0 6,894 15 6,909 0 6,909 Municipal security and bond 0 6,894 15 6,909 0 6,909 Municipal security 0 bond 0 6,894 15 6,909 0 6,909 Municipal security 0 307 0 6,894 15 6,909 0 6,909 Municipal security 0 307 0 6,909 0 6,909 Municipal security 0 307 0 307 0 307 0 6,909 Municipal security 0 307 0 307 0 307 Common 6,909 Municipal security 0 307 0 307 0 307 Common and Municipal security 0 307 0 307 0 307 Common and preferred security 0 307 0 307 0 307 Common and preferred stock 0 307 0 307 0 307 Common and preferred stock 287 307 Common and preferred stock 287 0 18 305 0 305 Common and preferred stock 287 0 18 305 0 305 Derivatives and preferred stock 287 0 18 305 0 305 Derivatives 1 preferred stock 287 0 18 305 0 305 Derivatives 1 535 stock 287 0 18 305 0 305 Derivatives 1 535 2 287 0 18 305 0 305 Derivatives 1 535 2 538 18 305 0 305 Derivatives 1 535 2 538 ( 152 305 0 305 Derivatives 1 535 2 538 ( 152 ) 0 305 Derivatives 1 535 2 538 ( 152 ) 386 305 Derivatives 1 535 2 538 ( 152 ) 386 Total 1 535 2 538 ( 152 ) 386 Total $ 107,571 2 538 ( 152 ) 386 Total $ 107,571 $ 22,958 152 ) 386 Total $ 107,571 $ 22,958 $ 35 $ 386 Total $ 107,571 $ 22,958 $ 35 $ 130,564 $ $ 107,571 $ 22,958 $ 35 $ 130,564 $ ( 152 $ 22,958 $ 35 $ 130,564 $ ( 152 ) $ 35 $ 130,564 $ ( 152 ) $ 130,412 Liabilities Derivatives $ ( 152 ) $ 130,412 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 1 $ 206 $ 0 $ and other $ 1 $ 206 $ 0 $ 207 $ $ 1 $ 206 $ 0 $ 207 $ ( 153 $ 206 $ 0 $ 207 $ ( 153 ) $ 0 $ 207 $ ( 153 ) $ 54 ( In $ ( 153 ) $ 54 ( In million ) Level ( In million ) Level 1 Level 2 Level 3 Gross million ) Level 1 Level 2 Level 3 Gross Fair Value Level 1 Level 2 Level 3 Gross Fair Value Netting ( ) Net Fair Value June 30 , 2017 Assets Mutual fund Fair Value June 30 , 2017 Assets Mutual fund $ 1,478 2017 Assets Mutual fund $ 1,478 $ 0 $ 0 $ Mutual fund $ 1,478 $ 0 $ 0 $ 1,478 $ $ 1,478 $ 0 $ 0 $ 1,478 $ 0 $ $ 0 $ 0 $ 1,478 $ 0 $ 1,478 Commercial $ 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 $ 1,478 $ 0 $ 1,478 Commercial paper 0 319 0 0 $ 1,478 Commercial paper 0 319 0 319 0 319 $ 1,478 Commercial paper 0 319 0 319 0 319 Certificates 1,478 Commercial paper 0 319 0 319 0 319 Certificates of Commercial paper 0 319 0 319 0 319 Certificates of deposit paper 0 319 0 319 0 319 Certificates of deposit 0 0 319 0 319 0 319 Certificates of deposit 0 1,358 0 319 Certificates of deposit 0 1,358 0 1,358 0 1,358 319 Certificates of deposit 0 1,358 0 1,358 0 1,358 U.S. Certificates of deposit 0 1,358 0 1,358 0 1,358 U.S. government of deposit 0 1,358 0 1,358 0 1,358 U.S. government and deposit 0 1,358 0 1,358 0 1,358 U.S. government and agency 0 1,358 0 1,358 0 1,358 U.S. government and agency security U.S. government and agency security 109,228 2,616 0 111,844 0 111,844 government and agency security 109,228 2,616 0 111,844 0 111,844 Foreign and agency security 109,228 2,616 0 111,844 0 111,844 Foreign government agency security 109,228 2,616 0 111,844 0 111,844 Foreign government bond security 109,228 2,616 0 111,844 0 111,844 Foreign government bond 0 109,228 2,616 0 111,844 0 111,844 Foreign government bond 0 5,187 0 111,844 Foreign government bond 0 5,187 0 5,187 0 5,187 111,844 Foreign government bond 0 5,187 0 5,187 0 5,187 Mortgage- Foreign government bond 0 5,187 0 5,187 0 5,187 Mortgage- and government bond 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed bond 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed security 0 5,187 0 5,187 0 5,187 Mortgage- and asset-backed security 0 5,187 Mortgage- and asset-backed security 0 3,934 0 3,934 0 3,934 Mortgage- and asset-backed security 0 3,934 0 3,934 0 3,934 Corporate and asset-backed security 0 3,934 0 3,934 0 3,934 Corporate note asset-backed security 0 3,934 0 3,934 0 3,934 Corporate note and security 0 3,934 0 3,934 0 3,934 Corporate note and bond 0 3,934 0 3,934 0 3,934 Corporate note and bond 0 3,934 Corporate note and bond 0 4,829 1 4,830 0 4,830 Corporate note and bond 0 4,829 1 4,830 0 4,830 Municipal note and bond 0 4,829 1 4,830 0 4,830 Municipal security and bond 0 4,829 1 4,830 0 4,830 Municipal security 0 bond 0 4,829 1 4,830 0 4,830 Municipal security 0 327 0 4,829 1 4,830 0 4,830 Municipal security 0 327 0 4,830 0 4,830 Municipal security 0 327 0 327 0 327 0 4,830 Municipal security 0 327 0 327 0 327 Common 4,830 Municipal security 0 327 0 327 0 327 Common and Municipal security 0 327 0 327 0 327 Common and preferred security 0 327 0 327 0 327 Common and preferred stock 0 327 0 327 0 327 Common and preferred stock 2,414 327 Common and preferred stock 2,414 1,994 18 4,426 0 4,426 Common and preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives and preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 preferred stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 stock 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 0 2,414 1,994 18 4,426 0 4,426 Derivatives 1 508 0 509 18 4,426 0 4,426 Derivatives 1 508 0 509 ( 227 4,426 0 4,426 Derivatives 1 508 0 509 ( 227 ) 0 4,426 Derivatives 1 508 0 509 ( 227 ) 282 4,426 Derivatives 1 508 0 509 ( 227 ) 282 Total 1 508 0 509 ( 227 ) 282 Total $ 113,121 0 509 ( 227 ) 282 Total $ 113,121 $ 21,072 227 ) 282 Total $ 113,121 $ 21,072 $ 19 $ 282 Total $ 113,121 $ 21,072 $ 19 $ 134,212 $ $ 113,121 $ 21,072 $ 19 $ 134,212 $ ( 227 $ 21,072 $ 19 $ 134,212 $ ( 227 ) $ 19 $ 134,212 $ ( 227 ) $ 133,985 Liabilities Derivatives $ ( 227 ) $ 133,985 Liabilities Derivatives and other $ Liabilities Derivatives and other $ 0 $ 345 $ 39 $ and other $ 0 $ 345 $ 39 $ 384 $ $ 0 $ 345 $ 39 $ 384 $ ( 228 $ 345 $ 39 $ 384 $ ( 228 ) $ 39 $ 384 $ ( 228 ) $ 156 ( a $ ( 228 ) $ 156 ( a ) These amount The change in our Level 3 financial instrument that are measured during the period presented . 74 PART II Item 8 The . 74 PART II Item 8 The following table reconciles the these same asset in Note 4 – Investments . ( In ( In million ) June 30 , 2018 2017 Net fair million ) June 30 , 2018 2017 Net fair value of ) June 30 , 2018 2017 Net fair value of asset on a recurring basis $ 130,412 $ 133,985 Cash 3,942 3,624 recurring basis $ 130,412 $ 133,985 Cash 3,942 3,624 Common and $ 130,412 $ 133,985 Cash 3,942 3,624 Common and preferred stock 130,412 $ 133,985 Cash 3,942 3,624 Common and preferred stock measured value on a nonrecurring basis 999 1,073 Other investment measured at on a nonrecurring basis 999 1,073 Other investment measured at fair value on a nonrecurring basis 557 523 Less derivative net asset on a nonrecurring basis 557 523 Less derivative net asset classified current and long-term asset ( 282 ) ( 202 ) Other asset ( 282 ) ( 202 ) Other 2 1 Recorded ) ( 202 ) Other 2 1 Recorded basis of investment ( 202 ) Other 2 1 Recorded basis of investment component basis of investment component $ 135,630 $ 139,004 Financial Assets and investment component $ 135,630 $ 139,004 Financial Assets and Liabilities Measured Nonrecurring Basis During fiscal year 2018 and 2017 , we did During fiscal year 2018 and 2017 , we did not record a nonrecurring basis . NOTE 7 — INVENTORIES The component of ( In million ) June 30 , 2018 2017 Raw material million ) June 30 , 2018 2017 Raw material $ 655 ) June 30 , 2018 2017 Raw material $ 655 $ 2018 2017 Raw material $ 655 $ 797 Work in process Raw material $ 655 $ 797 Work in process 54 145 $ 797 Work in process 54 145 Finished good 1,953 1,239 797 Work in process 54 145 Finished good 1,953 1,239 Total process 54 145 Finished good 1,953 1,239 Total $ 2,662 $ 54 145 Finished good 1,953 1,239 Total $ 2,662 $ 2,181 good 1,953 1,239 Total $ 2,662 $ 2,181 NOTE 8 — 1,239 Total $ 2,662 $ 2,181 NOTE 8 — PROPERTY AND $ 2,662 $ 2,181 NOTE 8 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2018 2017 Land $ million ) June 30 , 2018 2017 Land $ 1,254 $ ) June 30 , 2018 2017 Land $ 1,254 $ 1,107 , 2018 2017 Land $ 1,254 $ 1,107 Buildings and improvement 2017 Land $ 1,254 $ 1,107 Buildings and improvement 20,604 16,284 $ 1,107 Buildings and improvement 20,604 16,284 Leasehold improvement 4,735 5,064 1,107 Buildings and improvement 20,604 16,284 Leasehold improvement 4,735 5,064 Computer improvement 20,604 16,284 Leasehold improvement 4,735 5,064 Computer equipment and software 20,604 16,284 Leasehold improvement 4,735 5,064 Computer equipment and software 27,633 5,064 Computer equipment and software 27,633 21,414 Furniture and equipment 4,457 Computer equipment and software 27,633 21,414 Furniture and equipment 4,457 4,044 27,633 21,414 Furniture and equipment 4,457 4,044 Total , at cost 21,414 Furniture and equipment 4,457 4,044 Total , at cost 58,683 4,044 Total , at cost 58,683 47,913 Accumulated depreciation ( 29,223 Total , at cost 58,683 47,913 Accumulated depreciation ( 29,223 ) 58,683 47,913 Accumulated depreciation ( 29,223 ) ( 24,179 ) Total depreciation ( 29,223 ) ( 24,179 ) Total , net $ ) Total , net $ 29,460 $ 23,734 During fiscal year , net $ 29,460 $ 23,734 During fiscal year 2018 , $ 23,734 During fiscal year 2018 , 2017 , and 2016 During fiscal year 2018 , 2017 , and 2016 , depreciation 2018 , 2017 , and 2016 , depreciation expense wa $ , depreciation expense wa $ 7.7 billion , $ 6.1 billion $ 7.7 billion , $ 6.1 billion , and $ 4.9 6.1 billion , and $ 4.9 billion , respectively . We . We have committed $ 1.9 billion for the construction of leasehold improvement a of June 30 , 2018 . 75 PART a of June 30 , 2018 . 75 PART II Item June 30 , 2018 . 75 PART II Item 8 NOTE . 75 PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS PART II Item 8 NOTE 9 — BUSINESS COMBINATIONS LinkedIn Corporation COMBINATIONS LinkedIn Corporation On December 8 , 2016 , we completed Corporation On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . The purchase price primarily of cash of $ 26.9 billion . The acquisition is growth of LinkedIn , Office 365 , and Dynamics 365 . Office 365 , and Dynamics 365 . The financial result of wa completed a of June 30 , 2017 . The major a of June 30 , 2017 . The major class of Cash and cash equivalent $ 1,328 Short-term investment 2,110 Other current equivalent $ 1,328 Short-term investment 2,110 Other current asset 697 Property investment 2,110 Other current asset 697 Property and equipment 1,529 Intangible asset 697 Property and equipment 1,529 Intangible asset 7,887 Goodwill ( and equipment 1,529 Intangible asset 7,887 Goodwill ( a ) 16,803 7,887 Goodwill ( a ) 16,803 Short-term debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not sheet . Refer to Note 12 – Debt for further information Weighted Average Life Customer-related $ 3,607 7 year Marketing-related ( trade Average Life Customer-related $ 3,607 7 year Marketing-related ( trade name Marketing-related ( trade name ) 2,148 20 year Technology-based 2,109 3 ( trade name ) 2,148 20 year Technology-based 2,109 3 year ) 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 year Technology-based 2,109 3 year Contract-based 23 5 year Fair value of 2,109 3 year Contract-based 23 5 year Fair value of intangible of intangible asset acquired $ 7,887 9 year Our consolidated income intangible asset acquired $ 7,887 9 year Our consolidated income statement million ) Year Ended June 30 , 2017 Revenue $ 2,271 Year Ended June 30 , 2017 Revenue $ 2,271 Operating loss 30 , 2017 Revenue $ 2,271 Operating loss ( 924 ) $ 2,271 Operating loss ( 924 ) 76 PART II Item Operating loss ( 924 ) 76 PART II Item 8 Following ) 76 PART II Item 8 Following are the supplemental consolidated had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , share ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 98,291 $ Ended June 30 , 2017 2016 Revenue $ 98,291 $ 94,490 , 2017 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 19,128 Diluted 98,291 $ 94,490 Net income 25,179 19,128 Diluted earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were . GitHub Inc. On June 4 , 2018 , we entered Inc. On June 4 , 2018 , we entered into a GitHub ” ) for $ 7.5 billion in an all-stock transaction . Other During fiscal year 2018 , we completed nine acquisition for total consideration of $ 948 million , substantially all of result of operation . NOTE 10 — GOODWILL Changes in the ( In million ) June 30 , 2016 Acquisitions Other June million ) June 30 , 2016 Acquisitions Other June 30 , , 2016 Acquisitions Other June 30 , 2017 Acquisitions Other June Acquisitions Other June 30 , 2017 Acquisitions Other June 30 , , 2017 Acquisitions Other June 30 , 2018 Productivity and Business Acquisitions Other June 30 , 2018 Productivity and Business Processes $ Productivity and Business Processes $ 6,678 $ 17,072 ( a ) Business Processes $ 6,678 $ 17,072 ( a ) $ ( ( a ) $ ( 11 ) $ 23,739 $ 72 $ ( 11 ) $ 23,739 $ 72 $ 12 $ 11 ) $ 23,739 $ 72 $ 12 $ 23,823 Intelligent $ 23,739 $ 72 $ 12 $ 23,823 Intelligent Cloud 5,467 $ 72 $ 12 $ 23,823 Intelligent Cloud 5,467 49 39 12 $ 23,823 Intelligent Cloud 5,467 49 39 5,555 164 ( $ 23,823 Intelligent Cloud 5,467 49 39 5,555 164 ( 16 23,823 Intelligent Cloud 5,467 49 39 5,555 164 ( 16 ) Intelligent Cloud 5,467 49 39 5,555 164 ( 16 ) 5,703 Cloud 5,467 49 39 5,555 164 ( 16 ) 5,703 More 49 39 5,555 164 ( 16 ) 5,703 More Personal Computing 5,555 164 ( 16 ) 5,703 More Personal Computing 5,727 115 ) 5,703 More Personal Computing 5,727 115 ( 14 ) 5,828 5,703 More Personal Computing 5,727 115 ( 14 ) 5,828 394 Personal Computing 5,727 115 ( 14 ) 5,828 394 ( 65 5,727 115 ( 14 ) 5,828 394 ( 65 ) 6,157 115 ( 14 ) 5,828 394 ( 65 ) 6,157 Total 14 ) 5,828 394 ( 65 ) 6,157 Total $ 17,872 5,828 394 ( 65 ) 6,157 Total $ 17,872 $ 17,236 65 ) 6,157 Total $ 17,872 $ 17,236 $ 14 $ 6,157 Total $ 17,872 $ 17,236 $ 14 $ 35,122 $ $ 17,872 $ 17,236 $ 14 $ 35,122 $ 630 $ $ 17,236 $ 14 $ 35,122 $ 630 $ ( 69 $ 14 $ 35,122 $ 630 $ ( 69 ) $ 35,122 $ 630 $ ( 69 ) $ 35,683 ( a $ ( 69 ) $ 35,683 ( a ) Includes goodwill acquisition . Refer to Note 9 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase applicable . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , accumulated goodwill June 30 , 2018 and 2017 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . 77 PART II wa $ 11.3 billion . 77 PART II Item 8 Goodwill . 77 PART II Item 8 Goodwill Impairment We test goodwill for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2018 , May 1 in our May 1 , 2018 , May 1 , 2017 1 , 2018 , May 1 , 2017 , or May 2018 , May 1 , 2017 , or May 1 , , 2017 , or May 1 , 2016 test . NOTE , or May 1 , 2016 test . NOTE 11 — , 2016 test . NOTE 11 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2018 2017 Technology-based $ Carrying Amount June 30 , 2018 2017 Technology-based $ 7,220 $ Amount June 30 , 2018 2017 Technology-based $ 7,220 $ ( , 2018 2017 Technology-based $ 7,220 $ ( 5,018 ) $ Technology-based $ 7,220 $ ( 5,018 ) $ 2,202 $ 7,765 $ ( 5,018 ) $ 2,202 $ 7,765 $ ( 4,318 5,018 ) $ 2,202 $ 7,765 $ ( 4,318 ) $ 2,202 $ 7,765 $ ( 4,318 ) $ 3,447 Customer-related 4,031 $ ( 4,318 ) $ 3,447 Customer-related 4,031 ( 1,205 ) 4,318 ) $ 3,447 Customer-related 4,031 ( 1,205 ) 2,826 4,045 $ 3,447 Customer-related 4,031 ( 1,205 ) 2,826 4,045 ( 692 Customer-related 4,031 ( 1,205 ) 2,826 4,045 ( 692 ) 3,353 4,031 ( 1,205 ) 2,826 4,045 ( 692 ) 3,353 Marketing-related 1,205 ) 2,826 4,045 ( 692 ) 3,353 Marketing-related 4,006 ( 2,826 4,045 ( 692 ) 3,353 Marketing-related 4,006 ( 1,071 ) ( 692 ) 3,353 Marketing-related 4,006 ( 1,071 ) 2,935 4,016 ) 3,353 Marketing-related 4,006 ( 1,071 ) 2,935 4,016 ( 829 Marketing-related 4,006 ( 1,071 ) 2,935 4,016 ( 829 ) 3,187 4,006 ( 1,071 ) 2,935 4,016 ( 829 ) 3,187 Contract-based 1,071 ) 2,935 4,016 ( 829 ) 3,187 Contract-based 679 ( 2,935 4,016 ( 829 ) 3,187 Contract-based 679 ( 589 ) ( 829 ) 3,187 Contract-based 679 ( 589 ) 90 841 ) 3,187 Contract-based 679 ( 589 ) 90 841 ( 722 Contract-based 679 ( 589 ) 90 841 ( 722 ) 119 679 ( 589 ) 90 841 ( 722 ) 119 Total 589 ) 90 841 ( 722 ) 119 Total $ 15,936 90 841 ( 722 ) 119 Total $ 15,936 $ ( 722 ) 119 Total $ 15,936 $ ( 7,883 ) $ Total $ 15,936 $ ( 7,883 ) $ 8,053 $ 16,667 $ ( 7,883 ) $ 8,053 $ 16,667 $ ( 6,561 7,883 ) $ 8,053 $ 16,667 $ ( 6,561 ) $ 8,053 $ 16,667 $ ( 6,561 ) $ 10,106 No material $ ( 6,561 ) $ 10,106 No material impairment of intangible were identified during fiscal year 2018 or 2017 . During fiscal during fiscal year 2018 or 2017 . During fiscal year 2016 2017 . During fiscal year 2016 , we recorded impairment charge recorded impairment charge of $ 480 million related to intangible asset fourth quarter of fiscal year 2016 , we tested these intangible ) by segment in Note 21 – Segment Information and Geographic Average Life Year Ended June 30 , 2018 2017 Technology-based $ Year Ended June 30 , 2018 2017 Technology-based $ 178 4 Ended June 30 , 2018 2017 Technology-based $ 178 4 year , 2018 2017 Technology-based $ 178 4 year $ 2,265 2 2018 2017 Technology-based $ 178 4 year $ 2,265 2 year $ 178 4 year $ 2,265 2 year Marketing-related 14 5 178 4 year $ 2,265 2 year Marketing-related 14 5 year $ 2,265 2 year Marketing-related 14 5 year 2,148 19 year 2,265 2 year Marketing-related 14 5 year 2,148 19 year Contract-based year Marketing-related 14 5 year 2,148 19 year Contract-based 14 4 Marketing-related 14 5 year 2,148 19 year Contract-based 14 4 year year 2,148 19 year Contract-based 14 4 year 63 6 year 2,148 19 year Contract-based 14 4 year 63 6 year Customer-related year Contract-based 14 4 year 63 6 year Customer-related 13 5 Contract-based 14 4 year 63 6 year Customer-related 13 5 year year 63 6 year Customer-related 13 5 year 3,607 7 year 63 6 year Customer-related 13 5 year 3,607 7 year Total year Customer-related 13 5 year 3,607 7 year Total $ 219 Customer-related 13 5 year 3,607 7 year Total $ 219 5 3,607 7 year Total $ 219 5 year $ 8,083 9 7 year Total $ 219 5 year $ 8,083 9 year $ 219 5 year $ 8,083 9 year Intangible asset amortization 219 5 year $ 8,083 9 year Intangible asset amortization expense asset amortization expense wa $ 2.2 billion , $ 1.7 billion $ 2.2 billion , $ 1.7 billion , and $ 978 1.7 billion , and $ 978 million for fiscal year 2018 978 million for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . Amortization of of capitalized software wa $ 54 million , $ 55 million $ 54 million , $ 55 million , and $ 69 55 million , and $ 69 million for fiscal year 2018 69 million for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . 78 PART and 2016 , respectively . 78 PART II Item 8 The . 78 PART II Item 8 The following table outline the asset held a of June 30 , 2018 : ( In a of June 30 , 2018 : ( In million ) million ) Year Ending June 30 , 2019 $ 1,785 2020 Year Ending June 30 , 2019 $ 1,785 2020 1,260 2021 June 30 , 2019 $ 1,785 2020 1,260 2021 1,043 2022 30 , 2019 $ 1,785 2020 1,260 2021 1,043 2022 949 , 2019 $ 1,785 2020 1,260 2021 1,043 2022 949 2023 2019 $ 1,785 2020 1,260 2021 1,043 2022 949 2023 806 $ 1,785 2020 1,260 2021 1,043 2022 949 2023 806 Thereafter 1,785 2020 1,260 2021 1,043 2022 949 2023 806 Thereafter 2,210 2020 1,260 2021 1,043 2022 949 2023 806 Thereafter 2,210 Total 1,260 2021 1,043 2022 949 2023 806 Thereafter 2,210 Total $ 2021 1,043 2022 949 2023 806 Thereafter 2,210 Total $ 8,053 2022 949 2023 806 Thereafter 2,210 Total $ 8,053 NOTE 12 806 Thereafter 2,210 Total $ 8,053 NOTE 12 — DEBT Short-term 2,210 Total $ 8,053 NOTE 12 — DEBT Short-term Debt As Short-term Debt As of June 30 , 2018 , we had As of June 30 , 2018 , we had no commercial outstanding . As of June 30 , 2017 , we had As of June 30 , 2017 , we had $ 9.1 2017 , we had $ 9.1 billion of commercial paper issued weighted average interest rate of 1.01 % and maturity ranging from % and maturity ranging from 25 day to 264 day . ranging from 25 day to 264 day . The estimated fair . We have two $ 5.0 billion credit facility that expire facility that expire on October 30 , 2018 and October 31 expire on October 30 , 2018 and October 31 , 2022 30 , 2018 and October 31 , 2022 , respectively . 2018 and October 31 , 2022 , respectively . These credit program . As of June 30 , 2018 , we were As of June 30 , 2018 , we were in compliance Long-term Debt As of June 30 , 2018 , the total As of June 30 , 2018 , the total carrying value current portion , were $ 76.2 billion and $ 77.5 billion $ 76.2 billion and $ 77.5 billion , respectively . As respectively . As of June 30 , 2017 , the total As of June 30 , 2017 , the total carrying value current portion , were $ 77.1 billion and $ 80.3 billion $ 77.1 billion and $ 80.3 billion , respectively . These value are based on Level 2 input . 79 PART II on Level 2 input . 79 PART II Item 8 The . 79 PART II Item 8 The component of our long-term rate ) Face Value June 30 , 2018 Face Value June Face Value June 30 , 2018 Face Value June 30 , , 2018 Face Value June 30 , 2017 Stated Interest Rate Face Value June 30 , 2017 Stated Interest Rate Effective Interest Effective Interest Rate Notes November 15 , 2017 $ 0 $ Rate Notes November 15 , 2017 $ 0 $ 600 0.875 November 15 , 2017 $ 0 $ 600 0.875 % 1.084 , 2017 $ 0 $ 600 0.875 % 1.084 % May 2017 $ 0 $ 600 0.875 % 1.084 % May 1 0 $ 600 0.875 % 1.084 % May 1 , 2018 0.875 % 1.084 % May 1 , 2018 0 450 1.000 1.084 % May 1 , 2018 0 450 1.000 % 1.106 % May 1 , 2018 0 450 1.000 % 1.106 % May 1 , 2018 0 450 1.000 % 1.106 % November 1 , 2018 0 450 1.000 % 1.106 % November 3 2018 0 450 1.000 % 1.106 % November 3 , 2018 1.000 % 1.106 % November 3 , 2018 1,750 1,750 1.300 1.106 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % November 3 , 2018 1,750 1,750 1.300 % 1.396 % December 3 , 2018 1,750 1,750 1.300 % 1.396 % December 6 2018 1,750 1,750 1.300 % 1.396 % December 6 , 2018 1.300 % 1.396 % December 6 , 2018 1,250 1,250 1.625 1.396 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % December 6 , 2018 1,250 1,250 1.625 % 1.824 % June 6 , 2018 1,250 1,250 1.625 % 1.824 % June 1 2018 1,250 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 1,000 1,000 4.200 1.824 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % June 1 , 2019 1,000 1,000 4.200 % 4.379 % August 1 , 2019 1,000 1,000 4.200 % 4.379 % August 8 2019 1,000 1,000 4.200 % 4.379 % August 8 , 2019 4.200 % 4.379 % August 8 , 2019 2,500 2,500 1.100 4.379 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % November 8 , 2019 2,500 2,500 1.100 % 1.203 % November 1 2019 2,500 2,500 1.100 % 1.203 % November 1 , 2019 1.100 % 1.203 % November 1 , 2019 18 18 0.500 1.203 % November 1 , 2019 18 18 0.500 % 0.500 % November 1 , 2019 18 18 0.500 % 0.500 % November 1 , 2019 18 18 0.500 % 0.500 % February 1 , 2019 18 18 0.500 % 0.500 % February 6 2019 18 18 0.500 % 0.500 % February 6 , 2020 0.500 % 0.500 % February 6 , 2020 1,500 1,500 1.850 0.500 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 12 2020 1,500 1,500 1.850 % 1.952 % February 12 , 2020 1.850 % 1.952 % February 12 , 2020 1,500 1,500 1.850 1.952 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % October 12 , 2020 1,500 1,500 1.850 % 1.935 % October 1 2020 1,500 1,500 1.850 % 1.935 % October 1 , 2020 1.850 % 1.935 % October 1 , 2020 1,000 1,000 3.000 1.935 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % November 1 , 2020 1,000 1,000 3.000 % 3.137 % November 3 2020 1,000 1,000 3.000 % 3.137 % November 3 , 2020 3.000 % 3.137 % November 3 , 2020 2,250 2,250 2.000 3.137 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % February 3 , 2020 2,250 2,250 2.000 % 2.093 % February 8 2020 2,250 2,250 2.000 % 2.093 % February 8 , 2021 2.000 % 2.093 % February 8 , 2021 500 500 4.000 2.093 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % August 8 , 2021 500 500 4.000 % 4.082 % August 8 2021 500 500 4.000 % 4.082 % August 8 , 2021 4.000 % 4.082 % August 8 , 2021 2,750 2,750 1.550 4.082 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % December 8 , 2021 2,750 2,750 1.550 % 1.642 % December 6 2021 2,750 2,750 1.550 % 1.642 % December 6 , 2021 1.550 % 1.642 % December 6 , 2021 ( a ) 1.642 % December 6 , 2021 ( a ) 2,044 1,996 , 2021 ( a ) 2,044 1,996 2.125 % 2.233 % 2021 ( a ) 2,044 1,996 2.125 % 2.233 % February ( a ) 2,044 1,996 2.125 % 2.233 % February 6 ) 2,044 1,996 2.125 % 2.233 % February 6 , 2022 2.125 % 2.233 % February 6 , 2022 1,750 1,750 2.400 2.233 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 12 2022 1,750 1,750 2.400 % 2.520 % February 12 , 2022 2.400 % 2.520 % February 12 , 2022 1,500 1,500 2.375 2.520 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % November 12 , 2022 1,500 1,500 2.375 % 2.466 % November 3 2022 1,500 1,500 2.375 % 2.466 % November 3 , 2022 2.375 % 2.466 % November 3 , 2022 1,000 1,000 2.650 2.466 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 15 2022 1,000 1,000 2.650 % 2.717 % November 15 , 2022 2.650 % 2.717 % November 15 , 2022 750 750 2.125 2.717 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % August 1 , 2023 1,000 1,000 2.375 % 2.465 % August 8 2023 1,000 1,000 2.375 % 2.465 % August 8 , 2023 2.375 % 2.465 % August 8 , 2023 1,500 1,500 2.000 2.465 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % December 8 , 2023 1,500 1,500 2.000 % 2.101 % December 15 2023 1,500 1,500 2.000 % 2.101 % December 15 , 2023 2.000 % 2.101 % December 15 , 2023 1,500 1,500 3.625 2.101 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % February 15 , 2023 1,500 1,500 3.625 % 3.726 % February 6 2023 1,500 1,500 3.625 % 3.726 % February 6 , 2024 3.625 % 3.726 % February 6 , 2024 2,250 2,250 2.875 3.726 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 12 2024 2,250 2,250 2.875 % 3.041 % February 12 , 2025 2.875 % 3.041 % February 12 , 2025 2,250 2,250 2.700 3.041 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % November 12 , 2025 2,250 2,250 2.700 % 2.772 % November 3 2025 2,250 2,250 2.700 % 2.772 % November 3 , 2025 2.700 % 2.772 % November 3 , 2025 3,000 3,000 3.125 2.772 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % August 3 , 2025 3,000 3,000 3.125 % 3.176 % August 8 2025 3,000 3,000 3.125 % 3.176 % August 8 , 2026 3.125 % 3.176 % August 8 , 2026 4,000 4,000 2.400 3.176 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % February 8 , 2026 4,000 4,000 2.400 % 2.464 % February 6 2026 4,000 4,000 2.400 % 2.464 % February 6 , 2027 2.400 % 2.464 % February 6 , 2027 4,000 4,000 3.300 2.464 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % December 6 , 2027 4,000 4,000 3.300 % 3.383 % December 6 2027 4,000 4,000 3.300 % 3.383 % December 6 , 2028 3.300 % 3.383 % December 6 , 2028 ( a ) 3.383 % December 6 , 2028 ( a ) 2,044 1,996 , 2028 ( a ) 2,044 1,996 3.125 % 3.218 % 2028 ( a ) 2,044 1,996 3.125 % 3.218 % May ( a ) 2,044 1,996 3.125 % 3.218 % May 2 ) 2,044 1,996 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( a ) 3.218 % May 2 , 2033 ( a ) 642 627 , 2033 ( a ) 642 627 2.625 % 2.690 % 2033 ( a ) 642 627 2.625 % 2.690 % February ( a ) 642 627 2.625 % 2.690 % February 12 ) 642 627 2.625 % 2.690 % February 12 , 2035 2.625 % 2.690 % February 12 , 2035 1,500 1,500 3.500 2.690 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % November 12 , 2035 1,500 1,500 3.500 % 3.604 % November 3 2035 1,500 1,500 3.500 % 3.604 % November 3 , 2035 3.500 % 3.604 % November 3 , 2035 1,000 1,000 4.200 3.604 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % August 3 , 2035 1,000 1,000 4.200 % 4.260 % August 8 2035 1,000 1,000 4.200 % 4.260 % August 8 , 2036 4.200 % 4.260 % August 8 , 2036 2,250 2,250 3.450 4.260 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % February 8 , 2036 2,250 2,250 3.450 % 3.510 % February 6 2036 2,250 2,250 3.450 % 3.510 % February 6 , 2037 3.450 % 3.510 % February 6 , 2037 2,500 2,500 4.100 3.510 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % June 6 , 2037 2,500 2,500 4.100 % 4.152 % June 1 2037 2,500 2,500 4.100 % 4.152 % June 1 , 2039 4.100 % 4.152 % June 1 , 2039 750 750 5.200 4.152 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 500 500 4.875 3.829 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % February 15 , 2043 500 500 4.875 % 4.918 % February 12 2043 500 500 4.875 % 4.918 % February 12 , 2045 4.875 % 4.918 % February 12 , 2045 1,750 1,750 3.750 4.918 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % November 12 , 2045 1,750 1,750 3.750 % 3.800 % November 3 2045 1,750 1,750 3.750 % 3.800 % November 3 , 2045 3.750 % 3.800 % November 3 , 2045 3,000 3,000 4.450 3.800 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % August 3 , 2045 3,000 3,000 4.450 % 4.492 % August 8 2045 3,000 3,000 4.450 % 4.492 % August 8 , 2046 4.450 % 4.492 % August 8 , 2046 4,500 4,500 3.700 4.492 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % February 8 , 2046 4,500 4,500 3.700 % 3.743 % February 6 2046 4,500 4,500 3.700 % 3.743 % February 6 , 2047 3.700 % 3.743 % February 6 , 2047 3,000 3,000 4.250 3.743 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 12 2047 3,000 3,000 4.250 % 4.287 % February 12 , 2055 4.250 % 4.287 % February 12 , 2055 2,250 2,250 4.000 4.287 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % November 12 , 2055 2,250 2,250 4.000 % 4.063 % November 3 2055 2,250 2,250 4.000 % 4.063 % November 3 , 2055 4.000 % 4.063 % November 3 , 2055 1,000 1,000 4.750 4.063 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % August 3 , 2055 1,000 1,000 4.750 % 4.782 % August 8 2055 1,000 1,000 4.750 % 4.782 % August 8 , 2056 4.750 % 4.782 % August 8 , 2056 2,250 2,250 3.950 4.782 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % February 8 , 2056 2,250 2,250 3.950 % 4.033 % February 6 2056 2,250 2,250 3.950 % 4.033 % February 6 , 2057 3.950 % 4.033 % February 6 , 2057 2,000 2,000 4.500 4.033 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % Total 6 , 2057 2,000 2,000 4.500 % 4.528 % Total $ 2057 2,000 2,000 4.500 % 4.528 % Total $ 76,898 $ % 4.528 % Total $ 76,898 $ 77,837 ( a ) % Total $ 76,898 $ 77,837 ( a ) Euro-denominated debt ) Euro-denominated debt security . 80 PART II Item 8 The . 80 PART II Item 8 The note in the table our debt for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 wa $ 2018 , 2017 , and 2016 wa $ 2 . 4 , and 2016 wa $ 2 . 4 billion , $ 2016 wa $ 2 . 4 billion , $ 1 . . 4 billion , $ 1 . 6 billion , and billion , $ 1 . 6 billion , and $ 1.1 6 billion , and $ 1.1 b illion , respectively . respectively . As of June 30 , 2018 and 2017 , As of June 30 , 2018 and 2017 , the aggregate June 30 , 2018 and 2017 , the aggregate debt issuance current portion , were $ 6 58 million and $ 715 portion , were $ 6 58 million and $ 715 million 6 58 million and $ 715 million , respectively . Maturities million ) Year Ending June 30 , 2019 $ 4,000 2020 Year Ending June 30 , 2019 $ 4,000 2020 5,518 2021 June 30 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 30 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 , 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2019 $ 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2,750 $ 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2,750 Thereafter 4,000 2020 5,518 2021 3,750 2022 8,044 2023 2,750 Thereafter 52,836 2020 5,518 2021 3,750 2022 8,044 2023 2,750 Thereafter 52,836 Total 5,518 2021 3,750 2022 8,044 2023 2,750 Thereafter 52,836 Total $ 2021 3,750 2022 8,044 2023 2,750 Thereafter 52,836 Total $ 76,898 2022 8,044 2023 2,750 Thereafter 52,836 Total $ 76,898 NOTE 13 2,750 Thereafter 52,836 Total $ 76,898 NOTE 13 — INCOME TAXES 52,836 Total $ 76,898 NOTE 13 — INCOME TAXES Recent Tax Recent Tax Legislation On December 22 , 2017 , the TCJA Legislation On December 22 , 2017 , the TCJA wa enacted tax at a rate of 15.5 % for foreign cash and net current asset , and 8 % on the remaining income federal statutory tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . For fiscal % effective January 1 , 2018 . For fiscal year 2018 2018 . For fiscal year 2018 , our blended U.S. federal federal statutory tax rate is 28.1 % . This is the using the tax rate of 35 % for the first and second quarter of fiscal year 2018 and the reduced tax rate the reduced tax rate of 21 % for the third and fourth quarter of fiscal year 2018 . The TCJA includes a effective for u beginning July 1 , 2018 . The TCJA u beginning July 1 , 2018 . The TCJA wa effective second quarter of fiscal year 2018 . As of June 30 2018 . As of June 30 , 2018 , we have As of June 30 , 2018 , we have not completed TCJA . During fiscal year 2018 , we recorded a provisional provisional net charge of $ 13.7 billion related to the TCJA below . During fiscal year 2018 , we recorded an estimated estimated net charge of $ 13.7 billion related to the TCJA deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred We recorded an estimated $ 17.9 billion charge in fiscal year billion charge in fiscal year 2018 related to the transition tax foreign income for fiscal year 2018 because these tax return are or due . Fiscal year 2018 taxable income will be known the audit are concluded . 81 PART II Item 8 In . 81 PART II Item 8 In addition , we recorded we recorded an estimated $ 4 . 2 billio n benefit an estimated $ 4 . 2 billio n benefit in fiscal n benefit in fiscal year 2018 from the impact of change liability below . On August 1 , 2018 , the Internal . On August 1 , 2018 , the Internal Revenue Service regulation are subject to a 60-day comment period . Final regulation million ) Year Ended June 30 , 2018 2017 2016 Current Year Ended June 30 , 2018 2017 2016 Current Taxes U.S. Ended June 30 , 2018 2017 2016 Current Taxes U.S. federal June 30 , 2018 2017 2016 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 19,764 $ 2,739 $ 545 U.S. U.S. federal $ 19,764 $ 2,739 $ 545 U.S. state and $ 19,764 $ 2,739 $ 545 U.S. state and local 934 545 U.S. state and local 934 30 136 Foreign 4,348 2,472 U.S. state and local 934 30 136 Foreign 4,348 2,472 1,940 state and local 934 30 136 Foreign 4,348 2,472 1,940 Current local 934 30 136 Foreign 4,348 2,472 1,940 Current tax $ 934 30 136 Foreign 4,348 2,472 1,940 Current tax $ 25,046 30 136 Foreign 4,348 2,472 1,940 Current tax $ 25,046 $ 2,472 1,940 Current tax $ 25,046 $ 5,241 $ 2,621 Deferred Current tax $ 25,046 $ 5,241 $ 2,621 Deferred Taxes U.S. $ 25,046 $ 5,241 $ 2,621 Deferred Taxes U.S. federal $ Taxes U.S. federal $ ( 4,292 ) $ ( 554 ) ( 4,292 ) $ ( 554 ) $ 1,919 U.S. state $ ( 554 ) $ 1,919 U.S. state and local ( U.S. state and local ( 458 ) 269 111 Foreign ( and local ( 458 ) 269 111 Foreign ( 393 ) local ( 458 ) 269 111 Foreign ( 393 ) ( ) 269 111 Foreign ( 393 ) ( 544 ) 449 Foreign ( 393 ) ( 544 ) 449 Deferred tax $ 393 ) ( 544 ) 449 Deferred tax $ ( 5,143 449 Deferred tax $ ( 5,143 ) $ ( 829 ) ( 5,143 ) $ ( 829 ) $ 2,479 Provision for $ ( 829 ) $ 2,479 Provision for income tax $ Provision for income tax $ 19,903 $ 4,412 $ 5,100 U.S. income tax $ 19,903 $ 4,412 $ 5,100 U.S. and foreign $ 19,903 $ 4,412 $ 5,100 U.S. and foreign component of million ) Year Ended June 30 , 2018 2017 2016 U.S. Year Ended June 30 , 2018 2017 2016 U.S. $ 11,527 Ended June 30 , 2018 2017 2016 U.S. $ 11,527 $ June 30 , 2018 2017 2016 U.S. $ 11,527 $ 6,843 2018 2017 2016 U.S. $ 11,527 $ 6,843 $ 5,125 Foreign 2016 U.S. $ 11,527 $ 6,843 $ 5,125 Foreign 24,947 23,058 $ 11,527 $ 6,843 $ 5,125 Foreign 24,947 23,058 20,514 Income $ 6,843 $ 5,125 Foreign 24,947 23,058 20,514 Income before income 6,843 $ 5,125 Foreign 24,947 23,058 20,514 Income before income tax $ 5,125 Foreign 24,947 23,058 20,514 Income before income tax $ Income before income tax $ 36,474 $ 29,901 $ 25,639 82 income tax $ 36,474 $ 29,901 $ 25,639 82 PART II $ 36,474 $ 29,901 $ 25,639 82 PART II Item 8 36,474 $ 29,901 $ 25,639 82 PART II Item 8 Effective 25,639 82 PART II Item 8 Effective Tax Rate The item follows : Year Ended June 30 , 2018 2017 2016 Federal Year Ended June 30 , 2018 2017 2016 Federal statutory rate Ended June 30 , 2018 2017 2016 Federal statutory rate 28.1 June 30 , 2018 2017 2016 Federal statutory rate 28.1 % 2017 2016 Federal statutory rate 28.1 % 35.0 % 35.0 % Federal statutory rate 28.1 % 35.0 % 35.0 % Effect of rate 28.1 % 35.0 % 35.0 % Effect of : Foreign taxed at lower rate ( 7.8 ) % ( 11.6 ) ( 7.8 ) % ( 11.6 ) % ( 14.5 ) ( 11.6 ) % ( 14.5 ) % Impacts of TCJA ) % Impacts of TCJA 37.7 % 0 % 0 % Impacts of TCJA 37.7 % 0 % 0 % Phone business TCJA 37.7 % 0 % 0 % Phone business loss 0 0 % Phone business loss 0 % ( 5.7 ) % business loss 0 % ( 5.7 ) % 1.0 % Excess % ( 5.7 ) % 1.0 % Excess tax benefit relating relating to stock-based compensation ( 2.5 ) % ( 2.1 ) ( 2.5 ) % ( 2.1 ) % ( 1.6 ) ( 2.1 ) % ( 1.6 ) % Interest , net ) % Interest , net 1.2 % 1.4 % 0.9 % Interest , net 1.2 % 1.4 % 0.9 % Other reconciling net 1.2 % 1.4 % 0.9 % Other reconciling item , reconciling item , net ( 2.1 ) % ( 2.2 ) ( 2.1 ) % ( 2.2 ) % ( 0.9 ) ( 2.2 ) % ( 0.9 ) % Effective rate 54.6 0.9 ) % Effective rate 54.6 % 14.8 % 19.9 % % Effective rate 54.6 % 14.8 % 19.9 % The increase rate 54.6 % 14.8 % 19.9 % The increase from the statutory rate in fiscal year 2018 is primarily due to the second quarter of fiscal year 2018 , offset in part by statutory rate in fiscal year 2017 and 2016 is primarily due in fiscal year 2017 and 2016 is primarily due to earnings the U.S. rate , generated 87 % , 76 % , , generated 87 % , 76 % , and 91 % , 76 % , and 91 % of our foreign income before tax in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . Other reconciling deduction . In fiscal year 2018 , 2017 , and 2016 In fiscal year 2018 , 2017 , and 2016 , there 2018 , 2017 , and 2016 , there were no individually tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the business loss in fiscal year 2017 . The decrease in our tax rate for fiscal year 2017 compared to fiscal year 2016 2017 compared to fiscal year 2016 wa primarily due to the U.S. and foreign country . 83 PART II Item 8 The . 83 PART II Item 8 The component of the deferred ( In million ) June 30 , 2018 2017 Deferred Income million ) June 30 , 2018 2017 Deferred Income Tax Assets ) June 30 , 2018 2017 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 460 $ 777 Accruals , reserve compensation expense $ 460 $ 777 Accruals , reserve , and reserve , and other expense 1,832 1,859 Loss and credit carryforwards , and other expense 1,832 1,859 Loss and credit carryforwards 3,369 1,859 Loss and credit carryforwards 3,369 4,809 Depreciation and amortization 351 Loss and credit carryforwards 3,369 4,809 Depreciation and amortization 351 53 3,369 4,809 Depreciation and amortization 351 53 Other 56 255 Deferred 4,809 Depreciation and amortization 351 53 Other 56 255 Deferred income and amortization 351 53 Other 56 255 Deferred income tax asset amortization 351 53 Other 56 255 Deferred income tax asset 6,068 255 Deferred income tax asset 6,068 7,753 Less valuation allowance ( Deferred income tax asset 6,068 7,753 Less valuation allowance ( 3,186 7,753 Less valuation allowance ( 3,186 ) ( 3,310 ) Deferred allowance ( 3,186 ) ( 3,310 ) Deferred income tax asset net of valuation allowance $ 2,882 $ 4,443 Deferred Income Tax valuation allowance $ 2,882 $ 4,443 Deferred Income Tax Liabilities Foreign Tax Liabilities Foreign earnings $ 0 $ ( 1,134 ) Unrealized earnings $ 0 $ ( 1,134 ) Unrealized gain on investment gain on investment and debt 0 ( 1,384 ) Unearned revenue investment and debt 0 ( 1,384 ) Unearned revenue ( 639 1,384 ) Unearned revenue ( 639 ) ( 5,760 ) Depreciation revenue ( 639 ) ( 5,760 ) Depreciation and amortization ( ) Depreciation and amortization ( 1,103 ) ( 1,630 ) Other amortization ( 1,103 ) ( 1,630 ) Other ( 312 ) ( 1,630 ) Other ( 312 ) ( 21 ) Deferred Other ( 312 ) ( 21 ) Deferred income tax liability income tax liability $ ( 2,054 ) $ ( 9,929 ) ( 2,054 ) $ ( 9,929 ) Net deferred income tax asset ( liability ) $ 828 $ ( 5,486 ) Reported ) $ 828 $ ( 5,486 ) Reported As Other long-term As Other long-term asset $ 1,369 $ 248 Long-term deferred income long-term asset $ 1,369 $ 248 Long-term deferred income tax liability deferred income tax liability ( 541 ) ( 5,734 ) Net liability ( 541 ) ( 5,734 ) Net deferred income tax asset ( liability ) $ 828 $ ( 5,486 ) We ) $ 828 $ ( 5,486 ) We recorded a deferred deferred tax liability of $ 7.4 billion related to the recognition standard . As of June 30 , 2018 , we had As of June 30 , 2018 , we had federal , operating loss carryforwards of $ 257 million , $ 1.4 billion $ 257 million , $ 1.4 billion and $ 11.4 billion $ 1.4 billion and $ 11.4 billion , respectively . The in various year from fiscal 2019 through 2038 , if not year from fiscal 2019 through 2038 , if not utilized . of refund , were $ 5.5 billion , $ 2.4 billion $ 5.5 billion , $ 2.4 billion , and $ 3.9 2.4 billion , and $ 3.9 billion in fiscal year 2018 3.9 billion in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . Uncertain Tax tax benefit a of June 30 , 2018 , 2017 , a of June 30 , 2018 , 2017 , and 2016 June 30 , 2018 , 2017 , and 2016 , were 2018 , 2017 , and 2016 , were $ 12.0 billion and 2016 , were $ 12.0 billion , $ 11.7 billion $ 12.0 billion , $ 11.7 billion , and $ 10.2 11.7 billion , and $ 10.2 billion , respectively , and tax rate for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , by 2018 , 2017 , and 2016 , by $ 11.3 billion and 2016 , by $ 11.3 billion , $ 10.2 billion $ 11.3 billion , $ 10.2 billion , and $ 8.8 10.2 billion , and $ 8.8 billion , respectively . 84 8.8 billion , respectively . 84 PART II Item 8 As . 84 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2018 , 2017 , As of June 30 , 2018 , 2017 , and 2016 June 30 , 2018 , 2017 , and 2016 , we 2018 , 2017 , and 2016 , we had accrued interest uncertain tax position of $ 3 .0 billion , $ 2.3 3 .0 billion , $ 2.3 billion , and $ 1.9 2.3 billion , and $ 1.9 billion , respectively , net tax effect , wa $ 688 million , $ 399 million $ 688 million , $ 399 million , and $ 163 399 million , and $ 163 million in fiscal year 2018 163 million in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively , and wa million ) Year Ended June 30 , 2018 2017 2016 Balance Year Ended June 30 , 2018 2017 2016 Balance , beginning Ended June 30 , 2018 2017 2016 Balance , beginning of June 30 , 2018 2017 2016 Balance , beginning of year , beginning of year $ 11,737 $ 10,164 $ 9,599 Decreases of year $ 11,737 $ 10,164 $ 9,599 Decreases related to $ 11,737 $ 10,164 $ 9,599 Decreases related to settlement ( Decreases related to settlement ( 193 ) ( 4 ) ( settlement ( 193 ) ( 4 ) ( 201 ) Increases ) ( 4 ) ( 201 ) Increases for tax position related to the current year 1,445 1,277 1,086 Increases for tax to the current year 1,445 1,277 1,086 Increases for tax position the current year 1,445 1,277 1,086 Increases for tax position related position related to prior year 151 397 115 Decreases for tax related to prior year 151 397 115 Decreases for tax position to prior year 151 397 115 Decreases for tax position related related to prior year ( 1,176 ) ( 49 ) ( year ( 1,176 ) ( 49 ) ( 317 ) Decreases ) ( 49 ) ( 317 ) Decreases due to lapsed lapsed statute of limitation ( 3 ) ( 48 ) ( limitation ( 3 ) ( 48 ) ( 118 ) Balance ) ( 48 ) ( 118 ) Balance , end of , end of year $ 11,961 $ 11,737 $ 10,164 While of year $ 11,961 $ 11,737 $ 10,164 While we settled $ 11,961 $ 11,737 $ 10,164 While we settled a portion IRS audit for tax year 2004 to 2006 during the third for tax year 2004 to 2006 during the third quarter of third quarter of fiscal year 2011 , and a portion of IRS audit for tax year 2007 to 2009 during the first for tax year 2007 to 2009 during the first quarter of first quarter of fiscal year 2016 , we remain under audit second quarter of fiscal year 2018 , we settled a portion IRS audit for tax year 2010 to 2013 . We continue for tax year 2010 to 2013 . We continue to be the IRS for tax year 2010 to 2017 . In February for tax year 2010 to 2017 . In February 2012 , to 2017 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report for tax Agents Report for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase examination . As of June 30 , 2018 , the primary As of June 30 , 2018 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2017 , some of for tax year 1996 to 2017 , some of which are consolidated financial statement . NOTE 14 — RESTRUCTURING CHARGES 2016 Restructuring NOTE 14 — RESTRUCTURING CHARGES 2016 Restructuring In the fourth quarter fourth quarter of fiscal year 2016 , management approved restructuring plan plan that resulted in approximately 4,700 job elimination in fiscal year job elimination in fiscal year 2017 , primarily across our smartphone sale . In fiscal year 2016 , we incurred restructuring charge incurred restructuring charge of $ 501 million in connection with the million in connection with the 2016 restructuring plan , including severance were completed a of June 30 , 2017 . 2017 Restructuring a of June 30 , 2017 . 2017 Restructuring In June June 30 , 2017 . 2017 Restructuring In June 2017 , . 2017 Restructuring In June 2017 , management approved a sale plan . In fiscal year 2017 , we recorded employee severance employee severance expense of $ 306 million primarily related to this were completed a of June 30 , 2018 . 85 PART a of June 30 , 2018 . 85 PART II Item June 30 , 2018 . 85 PART II Item 8 NOTE . 85 PART II Item 8 NOTE 15 — UNEARNED REVENUE PART II Item 8 NOTE 15 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2018 2017 Productivity and million ) June 30 , 2018 2017 Productivity and Business Processes ) June 30 , 2018 2017 Productivity and Business Processes $ Productivity and Business Processes $ 14,864 $ 12,692 Intelligent Cloud 14,706 Business Processes $ 14,864 $ 12,692 Intelligent Cloud 14,706 11,152 More 14,864 $ 12,692 Intelligent Cloud 14,706 11,152 More Personal Computing 3,150 $ 12,692 Intelligent Cloud 14,706 11,152 More Personal Computing 3,150 2,812 14,706 11,152 More Personal Computing 3,150 2,812 Total $ 32,720 $ 11,152 More Personal Computing 3,150 2,812 Total $ 32,720 $ 26,656 Computing 3,150 2,812 Total $ 32,720 $ 26,656 The opening balance 2,812 Total $ 32,720 $ 26,656 The opening balance of unearned of unearned revenue wa $ 22.2 billion a of July 1 22.2 billion a of July 1 , 2016 . Changes in a of July 1 , 2016 . Changes in unearned revenue million ) Year Ended June 30 , 2018 Balance , beginning Year Ended June 30 , 2018 Balance , beginning of period , beginning of period $ 26,656 Deferral of revenue 61,142 Recognition $ 26,656 Deferral of revenue 61,142 Recognition of unearned revenue ( Recognition of unearned revenue ( 55,078 ) Balance , end of , end of period $ 32,720 Revenue allocated to remaining performance not recognized revenue wa $ 73 billion a of June 30 73 billion a of June 30 , 2018 , of which a of June 30 , 2018 , of which we expect we expect to recognize approximately 60 % of the revenue over the revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 16 — LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2018 2017 2016 Operating Year Ended June 30 , 2018 2017 2016 Operating lease cost Ended June 30 , 2018 2017 2016 Operating lease cost $ June 30 , 2018 2017 2016 Operating lease cost $ 1,585 2016 Operating lease cost $ 1,585 $ 1,412 $ 936 Finance lease cost $ 1,585 $ 1,412 $ 936 Finance lease cost $ 1,585 $ 1,412 $ 936 Finance lease cost : Amortization Amortization of right-of-use asset $ 243 $ 104 $ 28 Interest right-of-use asset $ 243 $ 104 $ 28 Interest on lease $ 243 $ 104 $ 28 Interest on lease liability 175 28 Interest on lease liability 175 68 28 Total finance lease Interest on lease liability 175 68 28 Total finance lease cost on lease liability 175 68 28 Total finance lease cost $ Total finance lease cost $ 418 $ 172 $ 56 86 lease cost $ 418 $ 172 $ 56 86 PART II $ 418 $ 172 $ 56 86 PART II Item 8 418 $ 172 $ 56 86 PART II Item 8 Supplemental 56 86 PART II Item 8 Supplemental cash flow information related million ) Year Ended June 30 , 2018 2017 2016 Cash Year Ended June 30 , 2018 2017 2016 Cash paid for Ended June 30 , 2018 2017 2016 Cash paid for amount June 30 , 2018 2017 2016 Cash paid for amount included flow from operating lease $ 1,522 $ 1,157 $ 936 Operating operating lease $ 1,522 $ 1,157 $ 936 Operating cash flow $ 1,522 $ 1,157 $ 936 Operating cash flow from finance cash flow from finance lease 175 68 28 Financing cash flow flow from finance lease 175 68 28 Financing cash flow from from finance lease 175 68 28 Financing cash flow from finance cash flow from finance lease 144 46 6 Right-of-use asset obtained flow from finance lease 144 46 6 Right-of-use asset obtained in from finance lease 144 46 6 Right-of-use asset obtained in exchange lease obligation : Operating lease 1,571 1,270 1,062 Finance lease 1,933 obligation : Operating lease 1,571 1,270 1,062 Finance lease 1,933 1,773 : Operating lease 1,571 1,270 1,062 Finance lease 1,933 1,773 413 1,571 1,270 1,062 Finance lease 1,933 1,773 413 Supplemental balance sheet 1,270 1,062 Finance lease 1,933 1,773 413 Supplemental balance sheet information 1,062 Finance lease 1,933 1,773 413 Supplemental balance sheet information related and discount rate ) June 30 , 2018 2017 Operating Leases rate ) June 30 , 2018 2017 Operating Leases Operating lease ) June 30 , 2018 2017 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 6,686 $ 6,555 Other current liability right-of-use asset $ 6,686 $ 6,555 Other current liability $ 1,399 6,555 Other current liability $ 1,399 $ 1,423 Operating lease liability current liability $ 1,399 $ 1,423 Operating lease liability 5,568 5,372 $ 1,423 Operating lease liability 5,568 5,372 Total operating lease liability 1,423 Operating lease liability 5,568 5,372 Total operating lease liability $ Total operating lease liability $ 6,967 $ 6,795 Finance Leases Property lease liability $ 6,967 $ 6,795 Finance Leases Property and equipment and equipment , gross $ 4,543 $ 2,658 Accumulated depreciation ( , gross $ 4,543 $ 2,658 Accumulated depreciation ( 404 ) $ 2,658 Accumulated depreciation ( 404 ) ( 161 ) Property depreciation ( 404 ) ( 161 ) Property and equipment , and equipment , net $ 4,139 $ 2,497 Other current liability , net $ 4,139 $ 2,497 Other current liability $ 176 2,497 Other current liability $ 176 $ 113 Other long-term liability current liability $ 176 $ 113 Other long-term liability 4,125 2,425 $ 113 Other long-term liability 4,125 2,425 Total finance lease liability 113 Other long-term liability 4,125 2,425 Total finance lease liability $ Total finance lease liability $ 4,301 $ 2,538 Weighted Average Remaining lease liability $ 4,301 $ 2,538 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 7 year 7 year Finance lease Term Operating lease 7 year 7 year Finance lease 13 year year 7 year Finance lease 13 year 13 year Weighted Average year Finance lease 13 year 13 year Weighted Average Discount Rate Average Discount Rate Operating lease 2.7 % 2.5 % Finance lease Rate Operating lease 2.7 % 2.5 % Finance lease 5.2 % % 2.5 % Finance lease 5.2 % 4.7 % Maturities of % Finance lease 5.2 % 4.7 % Maturities of lease liability million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2019 $ 1,492 $ 386 2020 Leases Finance Leases 2019 $ 1,492 $ 386 2020 1,347 393 Leases 2019 $ 1,492 $ 386 2020 1,347 393 2021 1,086 2019 $ 1,492 $ 386 2020 1,347 393 2021 1,086 401 $ 1,492 $ 386 2020 1,347 393 2021 1,086 401 2022 1,492 $ 386 2020 1,347 393 2021 1,086 401 2022 902 $ 386 2020 1,347 393 2021 1,086 401 2022 902 408 386 2020 1,347 393 2021 1,086 401 2022 902 408 2023 2020 1,347 393 2021 1,086 401 2022 902 408 2023 721 1,347 393 2021 1,086 401 2022 902 408 2023 721 410 393 2021 1,086 401 2022 902 408 2023 721 410 Thereafter 2021 1,086 401 2022 902 408 2023 721 410 Thereafter 2,157 1,086 401 2022 902 408 2023 721 410 Thereafter 2,157 4,036 401 2022 902 408 2023 721 410 Thereafter 2,157 4,036 Total 2022 902 408 2023 721 410 Thereafter 2,157 4,036 Total lease 408 2023 721 410 Thereafter 2,157 4,036 Total lease payment 7,705 2023 721 410 Thereafter 2,157 4,036 Total lease payment 7,705 6,034 2,157 4,036 Total lease payment 7,705 6,034 Less imputed interest ( 4,036 Total lease payment 7,705 6,034 Less imputed interest ( 738 6,034 Less imputed interest ( 738 ) ( 1,733 ) Total interest ( 738 ) ( 1,733 ) Total $ 6,967 $ ( 1,733 ) Total $ 6,967 $ 4,301 87 PART II ) Total $ 6,967 $ 4,301 87 PART II Item 8 Total $ 6,967 $ 4,301 87 PART II Item 8 As 4,301 87 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2018 , we have As of June 30 , 2018 , we have additional operating not yet commenced of $ 594 million and $ 2.4 billion $ 594 million and $ 2.4 billion , respectively . These will commence between fiscal year 201 9 and fiscal year 2020 commence between fiscal year 201 9 and fiscal year 2020 with 201 9 and fiscal year 2020 with lease term of 1 2020 with lease term of 1 year to 20 year . term of 1 year to 20 year . NOTE 17 — to 20 year . NOTE 17 — CONTINGENCIES Patent and Intellectual Intellectual Property Claims There were 34 patent infringement case pending against against Microsoft a of June 30 , 2018 , none of a of June 30 , 2018 , none of which are and/or productivity application software between 1998 and 2010 . The trial application software between 1998 and 2010 . The trial of the Columbia action commenced in May 2016 . Following a mediation , decision on approval in September 2018 . Other Antitrust Litigation and and Commerce Investigatio n In 2014 , Microsoft wa informed that , is a defendant in 35 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted en banc . In October 2016 , the Court of Appeals have moved to strike . 88 PART II Item 8 Canadian . 88 PART II Item 8 Canadian Cell P hone Class is a defendant in a 2013 class action lawsuit filed in cellular phone for at least 1,600 hour , including a subclass with the complaint in June 2014 and ha been substituted for federal court in Seattle in 2015 , alleging systemic gender discrimination certify the class in October 2017 . Microsoft filed an opposition filed an opposition in January 2018 , attaching an expert report and woman . In June 2018 , the court denied the future . As of June 30 , 2018 , we accrued As of June 30 , 2018 , we accrued aggregate legal aggregate legal liability of $ 323 million . While we intend estimate could reach approximately $ 1.1 billion in aggregate beyond recorded the period presented . NOTE 18 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2018 2017 2016 Balance Year Ended June 30 , 2018 2017 2016 Balance , beginning Ended June 30 , 2018 2017 2016 Balance , beginning of June 30 , 2018 2017 2016 Balance , beginning of year Balance , beginning of year 7,708 7,808 8,027 Issued 68 70 , beginning of year 7,708 7,808 8,027 Issued 68 70 75 beginning of year 7,708 7,808 8,027 Issued 68 70 75 Repurchased year 7,708 7,808 8,027 Issued 68 70 75 Repurchased ( 99 7,708 7,808 8,027 Issued 68 70 75 Repurchased ( 99 ) 7,808 8,027 Issued 68 70 75 Repurchased ( 99 ) ( 68 70 75 Repurchased ( 99 ) ( 170 ) ( Repurchased ( 99 ) ( 170 ) ( 294 ) Balance ) ( 170 ) ( 294 ) Balance , end of Balance , end of year 7,677 7,708 7,808 89 PART II , end of year 7,677 7,708 7,808 89 PART II Item end of year 7,677 7,708 7,808 89 PART II Item 8 of year 7,677 7,708 7,808 89 PART II Item 8 Share 7,808 89 PART II Item 8 Share Repurchases On September 16 8 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an additional $ 40.0 billion in share repurchase . repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the prior prior program approved on September 16 , 2013 , ha no approved on September 16 , 2013 , ha no expiration date notice . As of June 30 , 2018 , $ 28.2 As of June 30 , 2018 , $ 28.2 billion remained 30 , 2018 , $ 28.2 billion remained of this $ billion remained of this $ 40.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2018 2017 2016 First Year Ended June 30 , 2018 2017 2016 First Quarter 22 Ended June 30 , 2018 2017 2016 First Quarter 22 $ June 30 , 2018 2017 2016 First Quarter 22 $ 1,600 2018 2017 2016 First Quarter 22 $ 1,600 63 $ 3,550 2016 First Quarter 22 $ 1,600 63 $ 3,550 89 $ First Quarter 22 $ 1,600 63 $ 3,550 89 $ 4,000 22 $ 1,600 63 $ 3,550 89 $ 4,000 Second Quarter $ 1,600 63 $ 3,550 89 $ 4,000 Second Quarter 22 63 $ 3,550 89 $ 4,000 Second Quarter 22 1,800 59 89 $ 4,000 Second Quarter 22 1,800 59 3,533 66 3,600 $ 4,000 Second Quarter 22 1,800 59 3,533 66 3,600 Third 4,000 Second Quarter 22 1,800 59 3,533 66 3,600 Third Quarter Second Quarter 22 1,800 59 3,533 66 3,600 Third Quarter 34 Quarter 22 1,800 59 3,533 66 3,600 Third Quarter 34 3,100 22 1,800 59 3,533 66 3,600 Third Quarter 34 3,100 25 3,533 66 3,600 Third Quarter 34 3,100 25 1,600 69 3,600 66 3,600 Third Quarter 34 3,100 25 1,600 69 3,600 Fourth 3,600 Third Quarter 34 3,100 25 1,600 69 3,600 Fourth Quarter Third Quarter 34 3,100 25 1,600 69 3,600 Fourth Quarter 21 Quarter 34 3,100 25 1,600 69 3,600 Fourth Quarter 21 2,100 34 3,100 25 1,600 69 3,600 Fourth Quarter 21 2,100 23 1,600 69 3,600 Fourth Quarter 21 2,100 23 1,600 70 3,600 69 3,600 Fourth Quarter 21 2,100 23 1,600 70 3,600 Total 3,600 Fourth Quarter 21 2,100 23 1,600 70 3,600 Total 99 Fourth Quarter 21 2,100 23 1,600 70 3,600 Total 99 $ Quarter 21 2,100 23 1,600 70 3,600 Total 99 $ 8,600 21 2,100 23 1,600 70 3,600 Total 99 $ 8,600 170 23 1,600 70 3,600 Total 99 $ 8,600 170 $ 10,283 70 3,600 Total 99 $ 8,600 170 $ 10,283 294 $ 3,600 Total 99 $ 8,600 170 $ 10,283 294 $ 14,800 99 $ 8,600 170 $ 10,283 294 $ 14,800 Shares repurchased $ 8,600 170 $ 10,283 294 $ 14,800 Shares repurchased beginning 170 $ 10,283 294 $ 14,800 Shares repurchased beginning in the third quarter of fiscal year 2017 were under the share repurchase share repurchase program approved September 20 , 2016 . All other program approved September 20 , 2016 . All other share repurchased share repurchase program approved September 16 , 2013 . The above program approved September 16 , 2013 . The above table excludes Amount Payment Date Fiscal Year 2018 ( in million ) September ( in million ) September 19 , 2017 $ 0.42 November million ) September 19 , 2017 $ 0.42 November 16 , September 19 , 2017 $ 0.42 November 16 , 2017 $ , 2017 $ 0.42 November 16 , 2017 $ 3,238 December $ 0.42 November 16 , 2017 $ 3,238 December 14 , November 16 , 2017 $ 3,238 December 14 , 2017 November , 2017 $ 3,238 December 14 , 2017 November 29 , $ 3,238 December 14 , 2017 November 29 , 2017 0.42 December 14 , 2017 November 29 , 2017 0.42 February 15 , 2017 November 29 , 2017 0.42 February 15 , 2018 2017 November 29 , 2017 0.42 February 15 , 2018 3,232 29 , 2017 0.42 February 15 , 2018 3,232 March 8 2017 0.42 February 15 , 2018 3,232 March 8 , 2018 0.42 February 15 , 2018 3,232 March 8 , 2018 March 15 , 2018 3,232 March 8 , 2018 March 12 , 2018 3,232 March 8 , 2018 March 12 , 2018 0.42 March 8 , 2018 March 12 , 2018 0.42 May 17 , 2018 March 12 , 2018 0.42 May 17 , 2018 2018 March 12 , 2018 0.42 May 17 , 2018 3,226 12 , 2018 0.42 May 17 , 2018 3,226 June 14 2018 0.42 May 17 , 2018 3,226 June 14 , 2018 0.42 May 17 , 2018 3,226 June 14 , 2018 June 17 , 2018 3,226 June 14 , 2018 June 13 , 2018 3,226 June 14 , 2018 June 13 , 2018 0.42 June 14 , 2018 June 13 , 2018 0.42 August 16 , 2018 June 13 , 2018 0.42 August 16 , 2018 2018 June 13 , 2018 0.42 August 16 , 2018 3,224 13 , 2018 0.42 August 16 , 2018 3,224 September 13 2018 0.42 August 16 , 2018 3,224 September 13 , 2018 0.42 August 16 , 2018 3,224 September 13 , 2018 Fiscal 16 , 2018 3,224 September 13 , 2018 Fiscal Year 2017 2018 3,224 September 13 , 2018 Fiscal Year 2017 September 20 13 , 2018 Fiscal Year 2017 September 20 , 2016 $ 2018 Fiscal Year 2017 September 20 , 2016 $ 0.39 November Year 2017 September 20 , 2016 $ 0.39 November 17 , September 20 , 2016 $ 0.39 November 17 , 2016 $ , 2016 $ 0.39 November 17 , 2016 $ 3,024 December $ 0.39 November 17 , 2016 $ 3,024 December 8 , November 17 , 2016 $ 3,024 December 8 , 2016 November , 2016 $ 3,024 December 8 , 2016 November 30 , $ 3,024 December 8 , 2016 November 30 , 2016 0.39 December 8 , 2016 November 30 , 2016 0.39 February 16 , 2016 November 30 , 2016 0.39 February 16 , 2017 2016 November 30 , 2016 0.39 February 16 , 2017 3,012 30 , 2016 0.39 February 16 , 2017 3,012 March 9 2016 0.39 February 16 , 2017 3,012 March 9 , 2017 0.39 February 16 , 2017 3,012 March 9 , 2017 March 16 , 2017 3,012 March 9 , 2017 March 14 , 2017 3,012 March 9 , 2017 March 14 , 2017 0.39 March 9 , 2017 March 14 , 2017 0.39 May 18 , 2017 March 14 , 2017 0.39 May 18 , 2017 2017 March 14 , 2017 0.39 May 18 , 2017 3,009 14 , 2017 0.39 May 18 , 2017 3,009 June 8 2017 0.39 May 18 , 2017 3,009 June 8 , 2017 0.39 May 18 , 2017 3,009 June 8 , 2017 June 18 , 2017 3,009 June 8 , 2017 June 13 , 2017 3,009 June 8 , 2017 June 13 , 2017 0.39 June 8 , 2017 June 13 , 2017 0.39 August 17 , 2017 June 13 , 2017 0.39 August 17 , 2017 2017 June 13 , 2017 0.39 August 17 , 2017 3,003 13 , 2017 0.39 August 17 , 2017 3,003 September 14 2017 0.39 August 17 , 2017 3,003 September 14 , 2017 0.39 August 17 , 2017 3,003 September 14 , 2017 The 17 , 2017 3,003 September 14 , 2017 The dividend declared 2017 3,003 September 14 , 2017 The dividend declared on June The dividend declared on June 13 , 2018 wa included in declared on June 13 , 2018 wa included in other current current liability a of June 30 , 2018 . 90 PART a of June 30 , 2018 . 90 PART II Item June 30 , 2018 . 90 PART II Item 8 NOTE . 90 PART II Item 8 NOTE 19 — ACCUMULATED OTHER PART II Item 8 NOTE 19 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2018 2017 2016 Derivatives Year Ended June 30 , 2018 2017 2016 Derivatives Balance , Ended June 30 , 2018 2017 2016 Derivatives Balance , beginning June 30 , 2018 2017 2016 Derivatives Balance , beginning of , beginning of period $ 134 $ 352 $ 590 Unrealized of period $ 134 $ 352 $ 590 Unrealized gain , $ 134 $ 352 $ 590 Unrealized gain , net of net of tax of $ 11 , $ 4 , and of $ 11 , $ 4 , and $ 24 218 $ 4 , and $ 24 218 328 351 Reclassification adjustment 4 , and $ 24 218 328 351 Reclassification adjustment for , and $ 24 218 328 351 Reclassification adjustment for gain and $ 24 218 328 351 Reclassification adjustment for gain included gain included in revenue ( 185 ) ( 555 ) ( revenue ( 185 ) ( 555 ) ( 625 ) Tax ) ( 555 ) ( 625 ) Tax expense included in in provision for income tax 6 9 36 Amounts reclassified from provision for income tax 6 9 36 Amounts reclassified from accumulated for income tax 6 9 36 Amounts reclassified from accumulated other accumulated other comprehensive income ( 179 ) ( 546 ) ( income ( 179 ) ( 546 ) ( 589 ) Net ) ( 546 ) ( 589 ) Net change related to net of tax of $ 5 , $ ( 5 ) $ 5 , $ ( 5 ) , and $ ( ) , and $ ( 12 ) 39 ( 218 ) and $ ( 12 ) 39 ( 218 ) ( 238 ( 12 ) 39 ( 218 ) ( 238 ) Balance 39 ( 218 ) ( 238 ) Balance , end of , end of period $ 173 $ 134 $ 352 Investments of period $ 173 $ 134 $ 352 Investments Balance , $ 173 $ 134 $ 352 Investments Balance , beginning of , beginning of period $ 1,825 $ 2,941 $ 3,169 Unrealized of period $ 1,825 $ 2,941 $ 3,169 Unrealized gain ( $ 1,825 $ 2,941 $ 3,169 Unrealized gain ( loss ) of tax of $ ( 427 ) , $ 267 , ( 427 ) , $ 267 , and $ 120 ( $ 267 , and $ 120 ( 1,146 ) 517 219 , and $ 120 ( 1,146 ) 517 219 Reclassification adjustment $ 120 ( 1,146 ) 517 219 Reclassification adjustment for gain 120 ( 1,146 ) 517 219 Reclassification adjustment for gain included expense ) , net ( 2,309 ) ( 2,513 ) ( net ( 2,309 ) ( 2,513 ) ( 688 ) Tax ) ( 2,513 ) ( 688 ) Tax expense included in in provision for income tax 738 880 241 Amounts reclassified from provision for income tax 738 880 241 Amounts reclassified from accumulated for income tax 738 880 241 Amounts reclassified from accumulated other accumulated other comprehensive income ( 1,571 ) ( 1,633 ) ( income ( 1,571 ) ( 1,633 ) ( 447 ) Net ) ( 1,633 ) ( 447 ) Net change related to of tax of $ ( 1,165 ) , $ ( 613 1,165 ) , $ ( 613 ) , and $ ( ) , and $ ( 121 ) ( 2,717 ) ( $ ( 121 ) ( 2,717 ) ( 1,116 ) ( ) ( 2,717 ) ( 1,116 ) ( 228 ) Balance ) ( 1,116 ) ( 228 ) Balance , end of end of period $ ( 892 ) $ 1,825 $ 2,941 $ ( 892 ) $ 1,825 $ 2,941 Translation Adjustments and 892 ) $ 1,825 $ 2,941 Translation Adjustments and Other Balance beginning of period $ ( 1,332 ) $ ( 1,499 ) ( 1,332 ) $ ( 1,499 ) $ ( 1,237 ) ( 1,499 ) $ ( 1,237 ) Translation adjustment and other of tax effect of $ 0 , $ 9 , and of $ 0 , $ 9 , and $ ( 33 9 , and $ ( 33 ) ( 178 ) 167 $ ( 33 ) ( 178 ) 167 ( 262 ) 33 ) ( 178 ) 167 ( 262 ) Balance , ( 178 ) 167 ( 262 ) Balance , end of end of period $ ( 1,510 ) $ ( 1,332 ) ( 1,510 ) $ ( 1,332 ) $ ( 1,499 ) ( 1,332 ) $ ( 1,499 ) Cumulative effect of accounting Cumulative effect of accounting change 42 0 0 Accumulated other comprehensive effect of accounting change 42 0 0 Accumulated other comprehensive income of accounting change 42 0 0 Accumulated other comprehensive income ( end of period $ ( 2,187 ) $ 627 $ 1,794 $ ( 2,187 ) $ 627 $ 1,794 NOTE 20 — 2,187 ) $ 627 $ 1,794 NOTE 20 — EMPLOYEE STOCK $ 627 $ 1,794 NOTE 20 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2018 , an aggregate As of June 30 , 2018 , an aggregate of 381 2018 , an aggregate of 381 million share were authorized for plan . In fiscal year 2018 , our Board of Directors Board of Directors approved the 2017 Stock Plan , which authorized , which authorized an additional 308 million share for future grant million ) Year Ended June 30 , 2018 2017 2016 Stock-based Year Ended June 30 , 2018 2017 2016 Stock-based compensation expense Ended June 30 , 2018 2017 2016 Stock-based compensation expense $ June 30 , 2018 2017 2016 Stock-based compensation expense $ 3,940 2016 Stock-based compensation expense $ 3,940 $ 3,266 $ 2,668 Income compensation expense $ 3,940 $ 3,266 $ 2,668 Income tax benefit $ 3,940 $ 3,266 $ 2,668 Income tax benefit related to benefit related to stock-based compensation 823 1,066 882 91 PART II related to stock-based compensation 823 1,066 882 91 PART II Item to stock-based compensation 823 1,066 882 91 PART II Item 8 stock-based compensation 823 1,066 882 91 PART II Item 8 Stock 882 91 PART II Item 8 Stock Plans Stock award entitle assumption : Year Ended June 30 , 2018 2017 2016 Dividends Year Ended June 30 , 2018 2017 2016 Dividends per share Ended June 30 , 2018 2017 2016 Dividends per share ( June 30 , 2018 2017 2016 Dividends per share ( quarterly ( quarterly amount ) $ 0.39 - $ 0.42 $ 0.36 ) $ 0.39 - $ 0.42 $ 0.36 - $ 0.39 0.39 - $ 0.42 $ 0.36 - $ 0.39 $ 0.31 0.42 $ 0.36 - $ 0.39 $ 0.31 - $ 0.36 0.36 - $ 0.39 $ 0.31 - $ 0.36 Interest rate 0.39 $ 0.31 - $ 0.36 Interest rate 1.7 % - - $ 0.36 Interest rate 1.7 % - 2.9 % 1.2 Interest rate 1.7 % - 2.9 % 1.2 % - 2.2 1.7 % - 2.9 % 1.2 % - 2.2 % 1.1 2.9 % 1.2 % - 2.2 % 1.1 % - 1.8 1.2 % - 2.2 % 1.1 % - 1.8 % During 2.2 % 1.1 % - 1.8 % During fiscal year 2018 1.8 % During fiscal year 2018 , the following activity occurred balance , beginning of year 201 $ 46.32 Granted ( a beginning of year 201 $ 46.32 Granted ( a ) 70 46.32 Granted ( a ) 70 75.88 Vested ( 80 ) Granted ( a ) 70 75.88 Vested ( 80 ) 45.74 ) 70 75.88 Vested ( 80 ) 45.74 Forfeited ( 17 75.88 Vested ( 80 ) 45.74 Forfeited ( 17 ) 53.41 80 ) 45.74 Forfeited ( 17 ) 53.41 Nonvested balance , 45.74 Forfeited ( 17 ) 53.41 Nonvested balance , end of balance , end of year 174 57.85 ( a ) Includes , end of year 174 57.85 ( a ) Includes 3 57.85 ( a ) Includes 3 million , 2 million , ) Includes 3 million , 2 million , and 1 million , 2 million , and 1 million of PSUs granted at target level for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . As of respectively . As of June 30 , 2018 , there wa As of June 30 , 2018 , there wa approximately $ , there wa approximately $ 7.0 billion of total unrecognized compensation a weighted average period of 3 year . The weighted average stock award granted wa $ 75.88 , $ 55.64 , and wa $ 75.88 , $ 55.64 , and $ 41.51 for $ 55.64 , and $ 41.51 for fiscal year 2018 , $ 41.51 for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . The fair stock award vested wa $ 6.6 billion , $ 4.8 billion $ 6.6 billion , $ 4.8 billion , and $ 3.9 4.8 billion , and $ 3.9 billion , for fiscal year billion , for fiscal year 2018 , 2017 , and 2016 for fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . Employee Stock employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2018 2017 2016 Shares Year Ended June 30 , 2018 2017 2016 Shares purchased 13 Ended June 30 , 2018 2017 2016 Shares purchased 13 13 June 30 , 2018 2017 2016 Shares purchased 13 13 15 2018 2017 2016 Shares purchased 13 13 15 Average price per 2017 2016 Shares purchased 13 13 15 Average price per share 2016 Shares purchased 13 13 15 Average price per share $ Average price per share $ 76.40 $ 56.36 $ 44.83 As per share $ 76.40 $ 56.36 $ 44.83 As of June $ 76.40 $ 56.36 $ 44.83 As of June 30 , $ 44.83 As of June 30 , 2018 , 116 million As of June 30 , 2018 , 116 million share of June 30 , 2018 , 116 million share of our common issuance through the ESPP . 92 PART II Item 8 Savings . 92 PART II Item 8 Savings Plan We have a U.S. that qualifies under Section 401 ( k ) of the a maximum employer contribution of 50 % of the IRS contribution for all plan were $ 807 million , $ 734 million $ 807 million , $ 734 million , and $ 549 734 million , and $ 549 million in fiscal year 2018 549 million in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively , and were expensed a contributed . NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC Office Commercial , including Office 365 subscription and Office licensed on-premises Office Consumer , including Office 365 subscription and Office licensed on-premises CRM on-premises , and Dynamics 365 , a set of cloud-based royalty . • Search . 93 PART II Item 8 Revenue . 93 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2018 2017 2016 Revenue Year Ended June 30 , 2018 2017 2016 Revenue Productivity and Ended June 30 , 2018 2017 2016 Revenue Productivity and Business June 30 , 2018 2017 2016 Revenue Productivity and Business Processes Productivity and Business Processes $ 35,865 $ 29,870 $ 25,792 Intelligent Business Processes $ 35,865 $ 29,870 $ 25,792 Intelligent Cloud 32,219 $ 35,865 $ 29,870 $ 25,792 Intelligent Cloud 32,219 27,407 24,952 29,870 $ 25,792 Intelligent Cloud 32,219 27,407 24,952 More Personal Computing $ 25,792 Intelligent Cloud 32,219 27,407 24,952 More Personal Computing 42,276 25,792 Intelligent Cloud 32,219 27,407 24,952 More Personal Computing 42,276 39,294 27,407 24,952 More Personal Computing 42,276 39,294 40,410 Total $ 110,360 24,952 More Personal Computing 42,276 39,294 40,410 Total $ 110,360 $ More Personal Computing 42,276 39,294 40,410 Total $ 110,360 $ 96,571 42,276 39,294 40,410 Total $ 110,360 $ 96,571 $ 91,154 Operating 40,410 Total $ 110,360 $ 96,571 $ 91,154 Operating Income ( $ 110,360 $ 96,571 $ 91,154 Operating Income ( Loss ) Productivity and Business Processes $ 12,924 $ 11,389 $ 11,756 Intelligent Business Processes $ 12,924 $ 11,389 $ 11,756 Intelligent Cloud 11,524 $ 12,924 $ 11,389 $ 11,756 Intelligent Cloud 11,524 9,127 9,249 11,389 $ 11,756 Intelligent Cloud 11,524 9,127 9,249 More Personal Computing $ 11,756 Intelligent Cloud 11,524 9,127 9,249 More Personal Computing 10,610 11,756 Intelligent Cloud 11,524 9,127 9,249 More Personal Computing 10,610 8,815 9,127 9,249 More Personal Computing 10,610 8,815 6,183 Corporate and Other 9,249 More Personal Computing 10,610 8,815 6,183 Corporate and Other 0 More Personal Computing 10,610 8,815 6,183 Corporate and Other 0 ( 8,815 6,183 Corporate and Other 0 ( 306 ) ( 1,110 Corporate and Other 0 ( 306 ) ( 1,110 ) Total 0 ( 306 ) ( 1,110 ) Total $ 35,058 $ ( 1,110 ) Total $ 35,058 $ 29,025 $ 26,078 Corporate ) Total $ 35,058 $ 29,025 $ 26,078 Corporate and Other $ 35,058 $ 29,025 $ 26,078 Corporate and Other operating loss States accounted for more than 10 % of revenue for the revenue for the fiscal year 2018 , 2017 , or 2016 the fiscal year 2018 , 2017 , or 2016 . Revenue 2018 , 2017 , or 2016 . Revenue , classified by million ) Year Ended June 30 , 2018 2017 2016 United Year Ended June 30 , 2018 2017 2016 United States ( Ended June 30 , 2018 2017 2016 United States ( a June 30 , 2018 2017 2016 United States ( a ) States ( a ) $ 55,926 $ 51,078 $ 46,416 Other a ) $ 55,926 $ 51,078 $ 46,416 Other country 54,434 $ 55,926 $ 51,078 $ 46,416 Other country 54,434 45,493 44,738 51,078 $ 46,416 Other country 54,434 45,493 44,738 Total $ 110,360 $ 46,416 Other country 54,434 45,493 44,738 Total $ 110,360 $ 46,416 Other country 54,434 45,493 44,738 Total $ 110,360 $ 96,571 54,434 45,493 44,738 Total $ 110,360 $ 96,571 $ 91,154 ( 44,738 Total $ 110,360 $ 96,571 $ 91,154 ( a ) $ 110,360 $ 96,571 $ 91,154 ( a ) Includes billing source of the revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2018 2017 2016 Office Year Ended June 30 , 2018 2017 2016 Office product and Ended June 30 , 2018 2017 2016 Office product and cloud June 30 , 2018 2017 2016 Office product and cloud service product and cloud service $ 28,316 $ 25,573 $ 23,868 Server cloud service $ 28,316 $ 25,573 $ 23,868 Server product and $ 28,316 $ 25,573 $ 23,868 Server product and cloud service Server product and cloud service 26,129 21,649 19,062 Windows 19,518 18,593 product and cloud service 26,129 21,649 19,062 Windows 19,518 18,593 17,548 and cloud service 26,129 21,649 19,062 Windows 19,518 18,593 17,548 Gaming service 26,129 21,649 19,062 Windows 19,518 18,593 17,548 Gaming 10,353 9,051 26,129 21,649 19,062 Windows 19,518 18,593 17,548 Gaming 10,353 9,051 9,202 21,649 19,062 Windows 19,518 18,593 17,548 Gaming 10,353 9,051 9,202 Search Windows 19,518 18,593 17,548 Gaming 10,353 9,051 9,202 Search advertising 7,012 19,518 18,593 17,548 Gaming 10,353 9,051 9,202 Search advertising 7,012 6,219 18,593 17,548 Gaming 10,353 9,051 9,202 Search advertising 7,012 6,219 5,428 10,353 9,051 9,202 Search advertising 7,012 6,219 5,428 Enterprise Services 5,846 9,051 9,202 Search advertising 7,012 6,219 5,428 Enterprise Services 5,846 5,542 9,202 Search advertising 7,012 6,219 5,428 Enterprise Services 5,846 5,542 5,659 7,012 6,219 5,428 Enterprise Services 5,846 5,542 5,659 Devices 5,134 5,062 6,219 5,428 Enterprise Services 5,846 5,542 5,659 Devices 5,134 5,062 7,888 5,428 Enterprise Services 5,846 5,542 5,659 Devices 5,134 5,062 7,888 LinkedIn Services 5,846 5,542 5,659 Devices 5,134 5,062 7,888 LinkedIn 5,259 2,271 5,846 5,542 5,659 Devices 5,134 5,062 7,888 LinkedIn 5,259 2,271 0 5,542 5,659 Devices 5,134 5,062 7,888 LinkedIn 5,259 2,271 0 Other Devices 5,134 5,062 7,888 LinkedIn 5,259 2,271 0 Other 2,793 2,611 5,134 5,062 7,888 LinkedIn 5,259 2,271 0 Other 2,793 2,611 2,499 5,062 7,888 LinkedIn 5,259 2,271 0 Other 2,793 2,611 2,499 Total LinkedIn 5,259 2,271 0 Other 2,793 2,611 2,499 Total $ 110,360 5,259 2,271 0 Other 2,793 2,611 2,499 Total $ 110,360 $ 2,271 0 Other 2,793 2,611 2,499 Total $ 110,360 $ 96,571 2,793 2,611 2,499 Total $ 110,360 $ 96,571 $ 91,154 Our 2,499 Total $ 110,360 $ 96,571 $ 91,154 Our commercial cloud $ 110,360 $ 96,571 $ 91,154 Our commercial cloud revenue , , which primarily comprises Office 365 commercial , Azure , Dynamics commercial , Azure , Dynamics 365 , and other cloud property cloud property , wa $ 23.2 billion , $ 14.9 billion $ 23.2 billion , $ 14.9 billion , and $ 9.5 14.9 billion , and $ 9.5 billion in fiscal year 2018 9.5 billion in fiscal year 2018 , 2017 , and 2016 in fiscal year 2018 , 2017 , and 2016 , respectively 2018 , 2017 , and 2016 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2018 2017 2016 United million ) June 30 , 2018 2017 2016 United States $ ) June 30 , 2018 2017 2016 United States $ 44,501 June 30 , 2018 2017 2016 United States $ 44,501 $ 2017 2016 United States $ 44,501 $ 42,730 $ 25,145 Ireland United States $ 44,501 $ 42,730 $ 25,145 Ireland 12,843 12,889 $ 44,501 $ 42,730 $ 25,145 Ireland 12,843 12,889 2,099 Luxembourg $ 42,730 $ 25,145 Ireland 12,843 12,889 2,099 Luxembourg 6,856 6,854 42,730 $ 25,145 Ireland 12,843 12,889 2,099 Luxembourg 6,856 6,854 6,868 $ 25,145 Ireland 12,843 12,889 2,099 Luxembourg 6,856 6,854 6,868 Other Ireland 12,843 12,889 2,099 Luxembourg 6,856 6,854 6,868 Other country 15,682 12,843 12,889 2,099 Luxembourg 6,856 6,854 6,868 Other country 15,682 13,044 12,889 2,099 Luxembourg 6,856 6,854 6,868 Other country 15,682 13,044 11,047 6,856 6,854 6,868 Other country 15,682 13,044 11,047 Total $ 79,882 6,854 6,868 Other country 15,682 13,044 11,047 Total $ 79,882 $ 6,868 Other country 15,682 13,044 11,047 Total $ 79,882 $ 75,517 15,682 13,044 11,047 Total $ 79,882 $ 75,517 $ 45,159 95 11,047 Total $ 79,882 $ 75,517 $ 45,159 95 PART II $ 79,882 $ 75,517 $ 45,159 95 PART II Item 8 79,882 $ 75,517 $ 45,159 95 PART II Item 8 NOTE 45,159 95 PART II Item 8 NOTE 22 — QUARTERLY INFORMATION PART II Item 8 NOTE 22 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2018 Revenue June 30 Total Fiscal Year 2018 Revenue $ 24,538 $ 28,918 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net 20,343 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( loss income 7,708 8,679 8,292 10,379 35,058 Net income ( loss ) loss ) ( a ) 6,576 ( 6,302 ) 7,424 8,873 ( a ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ) ( loss ) per share 0.85 ( 0.82 ) 0.96 1.15 ) per share 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted share 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( loss ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( loss ) per share ( b ) 0.84 ( 0.82 ) 0.95 1.14 ( b ) 0.84 ( 0.82 ) 0.95 1.14 2.13 Fiscal ) 0.84 ( 0.82 ) 0.95 1.14 2.13 Fiscal Year 2017 0.84 ( 0.82 ) 0.95 1.14 2.13 Fiscal Year 2017 ( ( 0.82 ) 0.95 1.14 2.13 Fiscal Year 2017 ( c 0.95 1.14 2.13 Fiscal Year 2017 ( c ) Revenue $ ( c ) Revenue $ 21,928 $ 25,826 $ 23,212 $ ) Revenue $ 21,928 $ 25,826 $ 23,212 $ 25,605 $ $ 21,928 $ 25,826 $ 23,212 $ 25,605 $ 96,571 Gross $ 25,826 $ 23,212 $ 25,605 $ 96,571 Gross margin 14,084 $ 23,212 $ 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 25,605 $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating $ 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 96,571 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 Gross margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 7,905 margin 14,084 15,925 15,152 17,149 62,310 Operating income 6,715 7,905 6,723 15,152 17,149 62,310 Operating income 6,715 7,905 6,723 7,682 ( d 17,149 62,310 Operating income 6,715 7,905 6,723 7,682 ( d ) 62,310 Operating income 6,715 7,905 6,723 7,682 ( d ) 29,025 Operating income 6,715 7,905 6,723 7,682 ( d ) 29,025 ( 6,723 7,682 ( d ) 29,025 ( d ) Net income ( d ) Net income 5,667 6,267 5,486 8,069 ( d d ) Net income 5,667 6,267 5,486 8,069 ( d ) ) Net income 5,667 6,267 5,486 8,069 ( d ) 25,489 Net income 5,667 6,267 5,486 8,069 ( d ) 25,489 ( 5,486 8,069 ( d ) 25,489 ( d ) Basic earnings ) Basic earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted Basic earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings earnings per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per per share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per share share 0.73 0.81 0.71 1.05 3.29 Diluted earnings per share 0.72 3.29 Diluted earnings per share 0.72 0.80 0.70 1.03 ( d Diluted earnings per share 0.72 0.80 0.70 1.03 ( d ) earnings per share 0.72 0.80 0.70 1.03 ( d ) 3.25 per share 0.72 0.80 0.70 1.03 ( d ) 3.25 ( 0.70 1.03 ( d ) 3.25 ( d ) ( a to the TCJA of $ 13.8 billion for the second quarter second quarter , $ ( 104 ) million for the fourth fourth quarter , and $ 13.7 billion for fiscal year 2018 13.7 billion for fiscal year 2018 . ( b ) Reflects increased ) diluted EPS $ 1.78 for the second quarter , second quarter , $ ( 0.01 ) for the fourth quarter fourth quarter , and $ 1.75 for fiscal year 2018 . $ 1.75 for fiscal year 2018 . ( c ) On ( c ) On December 8 , 2016 , we acquired ) On December 8 , 2016 , we acquired LinkedIn Corporation ( d ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . 96 PART $ 0.04 , respectively . 96 PART II Item 8 REPORT . 96 PART II Item 8 REPORT OF INDEPENDENT REGIST ERED ” ) a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , the related June 30 , 2018 and 2017 , the related consolidated statement in the period ended June 30 , 2018 , and the period ended June 30 , 2018 , and the related note the Company a of June 30 , 2018 and 2017 , a of June 30 , 2018 and 2017 , and the June 30 , 2018 and 2017 , and the result of in the period ended June 30 , 2018 , in conformity period ended June 30 , 2018 , in conformity with accounting financial reporting a of June 30 , 2018 , based on a of June 30 , 2018 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated August 3 , 2018 , expressed an report dated August 3 , 2018 , expressed an unqualified opinion Principles As discussed in Note 1 to the financial statement , for lease in fiscal year 2018 due to the adoption of LLP Seattle , Washington August 3 , 2018 We have served , Washington August 3 , 2018 We have served a the Company ’ s auditor since 1983 . 97 PART II Item s auditor since 1983 . 97 PART II Item 9 , . 97 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2018 . Deloitte & a of June 30 , 2018 . Deloitte & Touche LLP financial reporting a of June 30 , 2018 ; their report a of June 30 , 2018 ; their report is included report is included in Item 9A . There were no change during the quarter ended June 30 , 2018 that have materially quarter ended June 30 , 2018 that have materially affected , facilitate their adoption on July 1 , 2017 . There were adoption on July 1 , 2017 . There were no significant of the new standard . 98 PART II Item 9A REPORT . 98 PART II Item 9A REPORT OF INDEPENDENT REGIST ERED `` ) a of June 30 , 2018 , based on a of June 30 , 2018 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2018 , based on a of June 30 , 2018 , based on the criterion Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2018 , of the year ended June 30 , 2018 , of the Company and and our report dated August 3 , 2018 , expressed an report dated August 3 , 2018 , expressed an unqualified opinion for lease in fiscal year 2018 due to the adoption of policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington August 3 , 2018 99 PART II , Washington August 3 , 2018 99 PART II , III Washington August 3 , 2018 99 PART II , III Item PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION During the During the quarter ended December 31 , 2017 , Microsoft provided quarter ended December 31 , 2017 , Microsoft provided software service or entity identified under section 560.304 of title 31 , Code under section 560.304 of title 31 , Code of Federal Regulations the cloud-based provision of Office 365 software service provided to two service fee equivalent to $ 600 wa charged for a one-year one-year period beginning in February 2017 , and for the latter price equivalent to approximately $ 55 per month from September 2016 55 per month from September 2016 through November 2017 , totaling from September 2016 through November 2017 , totaling $ 770 . November 2017 , totaling $ 770 . It is not possible future . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 28 , 2018 ( the “ be held November 28 , 2018 ( the “ Proxy Statement under the caption “ Section 16 ( a ) beneficial ownership in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 100 PART IV Item 15 PART . 100 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 51 Comprehensive Income Statements 52 Balance Statements 51 Comprehensive Income Statements 52 Balance Sheets 53 Cash Flows Income Statements 52 Balance Sheets 53 Cash Flows Statements 54 Stockholders Sheets 53 Cash Flows Statements 54 Stockholders ’ Equity Statements 55 54 Stockholders ’ Equity Statements 55 Notes to Financial Statements 56 55 Notes to Financial Statements 56 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Base Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 101 PART IV . , a Trustee 8-K 4.2 9/27/10 101 PART IV Item , a Trustee 8-K 4.2 9/27/10 101 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 101 PART IV Item 15 Incorporated 9/27/10 101 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 102 PART IV . , a Trustee 8-K 4.1 12/6/13 102 PART IV Item , a Trustee 8-K 4.1 12/6/13 102 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 102 PART IV Item 15 Incorporated 12/6/13 102 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 8/5/16 103 PART IV . , a Trustee 8-K 4.1 8/5/16 103 PART IV Item , a Trustee 8-K 4.1 8/5/16 103 PART IV Item 15 a Trustee 8-K 4.1 8/5/16 103 PART IV Item 15 Incorporated 8/5/16 103 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft . , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation , a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation 2001 a trustee 8-K 4.1 2/3/17 10.1 * Microsoft Corporation 2001 Stock 2/3/17 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Corporation Deferred Compensation Plan X 10.6 * Microsoft Corporation 2017 Stock X 10.6 * Microsoft Corporation 2017 Stock Plan DEF14A Annex C Stock Plan DEF14A Annex C 10/16/17 10.7 * Form of Stock Plan DEF14A Annex C 10/16/17 10.7 * Form of Stock Award Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Performance Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Performance Stock Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.12 Amended Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.12 Amended and 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.12 Amended and Restated Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.12 Amended and Restated Officers Plan 10-Q 3/31/2018 10.27 4/26/18 10.12 Amended and Restated Officers ’ N.A . , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended . , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and , a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated a trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated Directors trustee 10-Q 9/30/16 10.12 10/20/16 10.13 Amended and Restated Directors ’ N.A . , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * . , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft , a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation a trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation Deferred trustee 10-Q 9/30/16 10.13 10/20/16 10.14 * Microsoft Corporation Deferred Compensation Compensation Plan for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.17 * Plan for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.17 * Executive for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.17 * Executive Officer Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.17 * Executive Officer Incentive Directors 10-Q 12/31/17 10.14 1/31/18 10.17 * Executive Officer Incentive Plan * Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Executive Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form Officer Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Incentive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Executive Plan 10-Q 9/30/15 10.17 10/22/15 10.18 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Corporation 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Microsoft 2001 Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Microsoft Corporation Stock Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Microsoft Corporation Executive Plan 10-Q 9/30/15 10.18 10/22/15 10.19 * Microsoft Corporation Executive Incentive Microsoft Corporation Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Corporation Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Executive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 104 PART Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 104 PART IV 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 104 PART IV Item Stock Plan 10-Q 9/30/16 10.18 10/20/16 104 PART IV Item 15 Plan 10-Q 9/30/16 10.18 10/20/16 104 PART IV Item 15 , 10/20/16 104 PART IV Item 15 , 16 Incorporated by Reference PART IV Item 15 , 16 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.21 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Severance Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Executive Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter , Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Satya Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Nadella 10-Q 12/31/14 10.24 1/26/15 10.25 * Form of Executive Officer Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation Corporation 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of 2001 Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios Stock Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios of Plan 10-Q 9/30/15 10.25 10/22/15 12 Computation of Ratios of Earnings Earnings to Fixed Charges X 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certifications of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certifications of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications Sarbanes-Oxley Act of 2002 X 32.1 * * Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications Sarbanes-Oxley Act of 2002 X 32.2 * * Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema X XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Furnished , not filed ITEM 16 . FORM 10-K SUMMARY None filed ITEM 16 . FORM 10-K SUMMARY None . 105 SIGNAT FORM 10-K SUMMARY None . 105 SIGNAT URES Pursuant to the to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 3 , 2018 . M ICROSOFT , on August 3 , 2018 . M ICROSOFT C ORPORATION ( Principal Accounting Officer ) 106 Pursuant to the requirement of the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 3 , 20 18 . Signature indicated on August 3 , 20 18 . Signature Title /s/ on August 3 , 20 18 . Signature Title /s/ J ( Principal Accounting Officer ) 107 \ No newline at end of file diff --git a/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-19-027952/full-submission.txt b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-19-027952/full-submission.txt new file mode 100644 index 0000000..e303e83 --- /dev/null +++ b/src/data/processed-numeric-contexts/MSFT/10-K/0001564590-19-027952/full-submission.txt @@ -0,0 +1 @@ +EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2019 OR ☐ TRANSITION Year Ended June 30 , 2019 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered WASHINGTON 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the registered COMMON STOCK , $ 0.00000625 par value per share MSFT value per share MSFT NASDAQ 2.125 % Notes due 2021 MSFT NASDAQ 2.125 % Notes due 2021 MSFT New York Stock Exchange MSFT New York Stock Exchange 3.125 % Notes due 2028 MSFT Exchange 3.125 % Notes due 2028 MSFT New York Stock Exchange MSFT New York Stock Exchange 2.625 % Notes due 2033 MSFT Exchange 2.625 % Notes due 2033 MSFT New York Stock Exchange Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of December 31 , 2018 , the aggregate As of December 31 , 2018 , the aggregate market value of the registrant wa $ 769.6 billion based on the closing System . As of July 29 , 2019 , there were As of July 29 , 2019 , there were 7,635,409,400 share , 2019 , there were 7,635,409,400 share of common stock outstanding to be held on December 4 , 2019 are incorporated by held on December 4 , 2019 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2019 INDEX Page PART Year Ended June 30 , 2019 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 15 Item 1A . Risk Factors of the Registrant 15 Item 1A . Risk Factors 17 Item Item 1A . Risk Factors 17 Item 1B . Unresolved Staff . Risk Factors 17 Item 1B . Unresolved Staff Comments 29 1B . Unresolved Staff Comments 29 Item 2 . Properties 29 Unresolved Staff Comments 29 Item 2 . Properties 29 Item 3 29 Item 2 . Properties 29 Item 3 . Legal Proceedings 2 . Properties 29 Item 3 . Legal Proceedings 29 Item Item 3 . Legal Proceedings 29 Item 4 . Mine Safety . Legal Proceedings 29 Item 4 . Mine Safety Disclosures 29 4 . Mine Safety Disclosures 29 PART II Item 5 . Disclosures 29 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 30 Item 6 . Selected Financial of Equity Securities 30 Item 6 . Selected Financial Data 31 6 . Selected Financial Data 31 Item 7 . Management ’ Selected Financial Data 31 Item 7 . Management ’ s Discussion Condition and Results of Operations 32 Item 7A . Quantitative and Results of Operations 32 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 50 Item 8 . Financial Statements about Market Risk 50 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 51 Item 9 . Changes in and Supplementary Data 51 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 96 Item 9A . Controls and and Financial Disclosure 96 Item 9A . Controls and Procedures 96 9A . Controls and Procedures 96 Report of Management on Internal Internal Control over Financial Reporting 96 Report of Independent Registered Public Independent Registered Public Accounting Firm 97 Item 9B . Other Information Public Accounting Firm 97 Item 9B . Other Information 98 PART Item 9B . Other Information 98 PART III Item 10 . Information 98 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 98 Item 11 . Executive Compensation and Corporate Governance 98 Item 11 . Executive Compensation 98 Item Item 11 . Executive Compensation 98 Item 12 . Security Ownership . Executive Compensation 98 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 98 Item 13 . Certain Relationships Related Stockholder Matters 98 Item 13 . Certain Relationships and Related Transactions , and Director Independence 98 Item 14 . Principal Accounting and Director Independence 98 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 98 PART IV Item 15 . Services 98 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 99 Item 16 . Form 10-K Financial Statement Schedules 99 Item 16 . Form 10-K Summary 104 99 Item 16 . Form 10-K Summary 104 Signatures 105 2 16 . Form 10-K Summary 104 Signatures 105 2 PART I Form 10-K Summary 104 Signatures 105 2 PART I Item 1 10-K Summary 104 Signatures 105 2 PART I Item 1 Note 105 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned otherwise . PART I ITEM 1. BUSINESS GENERAL Embracing Our Future What We Offer Founded in 1975 , we develop and support , and related accessory . 3 PART I Item 1 The . 3 PART I Item 1 The A mbitions T hat u to bring Microsoft Office 365 , Windows platform , device into a more cohesive Microsoft 365 experience . Our growth depends , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows 10 , and together Office 365 , Windows 10 , and Enterprise Mobility + through social selling . Dynamics 365 for Talent with LinkedIn Recruiter and device such a HoloLens 2 . The opportunity to merge next era of computing . 4 PART I Item 1 The . 4 PART I Item 1 The ability to convert data data science . On October 25 , 2018 , we completed . On October 25 , 2018 , we completed our acquisition cohesive customer experience . Windows 10 continues to gain traction in Cortana , inking , immersive 3D content storytelling , and mixed our cloud business and Microsoft 365 strategy , and it power ” Our ambition for Windows 10 monetization opportunity includes gaming , device with the Surface Hub 2S , which brings together Microsoft Live , and with Windows 10 , the most popular operating our cloud business and Microsoft 365 strategy , and to develop next wave of entertainment . 5 PART I Item 1 Our . 5 PART I Item 1 Our future growth depends on information is contained in Note 20 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription and Office licensed on-premises , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Office 365 subscription and Office licensed on-premises business solution , including Dynamics 365 , a set of cloud-based Office licensed on-premises to Office 365 . CALs provide certain Office Office licensed on-premises to Office 365 . Office Consumer Services revenue the sale of minute . 6 PART I Item 1 LinkedIn . 6 PART I Item 1 LinkedIn LinkedIn connects the world Marketing Solutions . On November 16 , 2018 , LinkedIn acquired . On November 16 , 2018 , LinkedIn acquired Glint , the continued shift to Dynamics 365 , a unified set of , and large organization . 7 PART I Item 1 Intelligent . 7 PART I Item 1 Intelligent Cloud Our Intelligent Cloud and Ruby on Rails . 8 PART I Item 1 We . 8 PART I Item 1 We believe our server product in a given year . 9 PART I Item 1 Patent . 9 PART I Item 1 Patent licensing includes our program Xbox One X in August 2016 and November 2017 , respectively in August 2016 and November 2017 , respectively . With the the Mixer service in May 2017 , offering interactive live streaming Xbox Game Pass in June 2017 , providing unlimited access to providing unlimited access to over 100 Xbox title , we continue acquisition of PlayFab in January 2018 , we enable worldwide game and our Windows OEMs . 10 PART I Item 1 Our . 10 PART I Item 1 Our gaming platform competes with latest generation console in March 2017 and Sony released it latest latest generation console in November 2013 . We also compete with create product documentation internally . 11 PART I Item 1 We . 11 PART I Item 1 We protect our intellectual property have a portfolio of over 61,000 U.S. and international patent issued international patent issued and over 26,000 pending . While we employ capability to subscribe to Office 365 . 12 PART I Item subscribe to Office 365 . 12 PART I Item 1 There . 12 PART I Item 1 There are two broad category . SA is included . 13 PART I Item 1 Microsoft . 13 PART I Item 1 Microsoft Product and Services Agreement backlog is not significant . 14 PART I Item 1 EXECUTIVE . 14 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 31 , 2019 were a follows a of July 31 , 2019 were a follows : Name with the Company Satya Nadella 51 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 49 Executive Vice President , Marketing Chief Marketing Officer Jean-Philippe Courtois 58 Executive Vice President and President and Operations Kathleen T. Hogan 53 Executive Vice President , Human Human Resources Amy E. Hood 47 Executive Vice President , Chief Financial Officer Margaret L. Johnson 57 Executive Vice President , Business Business Development Bradford L. Smith 60 President and Chief Legal Officer Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 25 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Marketing and Operations in July 2016 . Before that he wa President of Microsoft International since 2005 . He wa Chief Executive East , and Africa from 2003 to 2005 . He wa and Africa from 2003 to 2005 . He wa Senior Vice East , and Africa from 2000 to 2003 . He wa and Africa from 2000 to 2003 . He wa Corporate Vice , Worldwide Customer Marketing from 1998 to 2000 . Mr. Courtois Customer Marketing from 1998 to 2000 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Ms. Hogan wa appointed , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms . Hood wa Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Ms. Johnson wa , Business Development in September 2014 . Prior to that Ms. to that Ms. Johnson spent 24 year at Qualcomm in various Chief Legal Officer in September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General Directors of Netflix , Inc. 15 PART I Item 1 EMPLOYEES Inc. 15 PART I Item 1 EMPLOYEES As of June 30 1 EMPLOYEES As of June 30 , 2019 , we employed As of June 30 , 2019 , we employed approximately 144,000 2019 , we employed approximately 144,000 people on a full-time basis on a full-time basis , 85,000 in the U.S. and 59,000 85,000 in the U.S. and 59,000 internationally . Of the total the total employed people , 47,000 were in operation , including , and consulting service ; 47,000 were in product research and product research and development ; 38,000 were in sale and marketing sale and marketing ; and 12,000 were in general and administration Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 16 PART I Item 1A ITEM . 16 PART I Item 1A ITEM 1A . RIS K PART I Item 1A ITEM 1A . RIS K FACTORS Our lower our operating margin . 17 PART I Item 1A Business . 17 PART I Item 1A Business model competition Companies compete margin and operating income . 18 PART I Item 1A We . 18 PART I Item 1A We make significant investment in Windows operating system , Microsoft 365 , Office , Bing , Server , Azure , Office 365 , Xbox Live , Mixer business strategy . In December 2016 , we completed our acquisition LinkedIn ” ) for $ 27.0 billion , and in October billion , and in October 2018 , we completed our acquisition GitHub , Inc. for $ 7.5 billion . These acquisition and and intangible asset balance . 19 PART I Item 1A Cyberattacks . 19 PART I Item 1A Cyberattacks and security vulnerability could impact of doing so . 20 PART I Item 1A The . 20 PART I Item 1A The cost of these step and consolidated financial statement . 21 PART I Item 1A Harmful . 21 PART I Item 1A Harmful content online Our hosted Microsoft Account service , Office 365 , Microsoft Teams , Dynamics , Microsoft Teams , Dynamics 365 , OneDrive , SharePoint Online , or warranty repair . 22 PART I Item 1A Our . 22 PART I Item 1A Our software product and service may negatively impact revenue . 23 PART I Item 1A Third . 23 PART I Item 1A Third party may claim we product release such a Windows 10 , significant business transaction , product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may on which developer rely . 24 PART I Item 1A • . 24 PART I Item 1A • We may be required ability to realize anticipated Windows 10 post-sale monetization opportunity may be investigate them . On July 22 , 2019 , our Hungarian . On July 22 , 2019 , our Hungarian subsidiary entered required u to pay $ 25.3 million in monetary penalty , opportunity or face regulatory action 25 PART I Item 1A Laws action 25 PART I Item 1A Laws and regulation relating to a new framework in July 2016 that provides a mechanism for some market . In May 2018 , a new EU law monetary penalty of up to 4 % of worldwide revenue , example , compliance with the 2017 United States Tax Cuts and that determination is made . 26 PART I Item 1A We . 26 PART I Item 1A We earn a significant amount account receivable may increase . 27 PART I Item 1A We . 27 PART I Item 1A We maintain an investment portfolio meet our workforce need . 28 PART I Item 1B , . 28 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVE D , 3 , 4 ITEM 1B . UNRESOLVE D STAFF COMMENTS Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2019 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 520 acre of land we own ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . The table below and internationally a of June 30 , 2019 : ( Square a of June 30 , 2019 : ( Square foot in Location Owned Leased Total U.S. 18 14 32 International 6 14 Owned Leased Total U.S. 18 14 32 International 6 14 20 Leased Total U.S. 18 14 32 International 6 14 20 Total U.S. 18 14 32 International 6 14 20 Total 24 28 18 14 32 International 6 14 20 Total 24 28 52 14 32 International 6 14 20 Total 24 28 52 ITEM International 6 14 20 Total 24 28 52 ITEM 3 . 6 14 20 Total 24 28 52 ITEM 3 . LEGAL 14 20 Total 24 28 52 ITEM 3 . LEGAL PROCEEDINGS Total 24 28 52 ITEM 3 . LEGAL PROCEEDINGS While not annual report will continue through 2020 . During fiscal year 2019 2020 . During fiscal year 2019 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU annually . Refer to Note 16 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 29 PART II Item 5 PAR . 29 PART II Item 5 PAR T II ITEM 5 5 PAR T II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 29 , 2019 , there were . On July 29 , 2019 , there were 94,069 registered , 2019 , there were 94,069 registered holder of record of fourth quarter of fiscal year 2019 : Period Total Number of ( In million ) April 1 , 2019 – April 30 million ) April 1 , 2019 – April 30 , 2019 1 , 2019 – April 30 , 2019 8,547,612 $ 122.85 2019 – April 30 , 2019 8,547,612 $ 122.85 8,547,612 $ – April 30 , 2019 8,547,612 $ 122.85 8,547,612 $ 14,551 30 , 2019 8,547,612 $ 122.85 8,547,612 $ 14,551 May 1 , 2019 8,547,612 $ 122.85 8,547,612 $ 14,551 May 1 , 8,547,612 $ 122.85 8,547,612 $ 14,551 May 1 , 2019 – 122.85 8,547,612 $ 14,551 May 1 , 2019 – May 31 $ 14,551 May 1 , 2019 – May 31 , 2019 1 , 2019 – May 31 , 2019 14,029,339 126.32 14,029,339 2019 – May 31 , 2019 14,029,339 126.32 14,029,339 12,778 June – May 31 , 2019 14,029,339 126.32 14,029,339 12,778 June 1 May 31 , 2019 14,029,339 126.32 14,029,339 12,778 June 1 , 31 , 2019 14,029,339 126.32 14,029,339 12,778 June 1 , 2019 , 2019 14,029,339 126.32 14,029,339 12,778 June 1 , 2019 – 14,029,339 126.32 14,029,339 12,778 June 1 , 2019 – June 30 14,029,339 12,778 June 1 , 2019 – June 30 , 2019 1 , 2019 – June 30 , 2019 10,469,682 131.59 10,469,682 2019 – June 30 , 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 – June 30 , 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 June 30 , 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All 30 , 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share , 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share repurchase 2019 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share repurchase were 10,469,682 131.59 10,469,682 11,401 33,046,633 33,046,633 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2019 : Declaration Date Record Date ( In million ) June 12 , 2019 August 15 , million ) June 12 , 2019 August 15 , 2019 September June 12 , 2019 August 15 , 2019 September 12 , , 2019 August 15 , 2019 September 12 , 2019 $ August 15 , 2019 September 12 , 2019 $ 0.46 $ , 2019 September 12 , 2019 $ 0.46 $ 3,516 We September 12 , 2019 $ 0.46 $ 3,516 We returned $ , 2019 $ 0.46 $ 3,516 We returned $ 7.7 billion $ 3,516 We returned $ 7.7 billion to shareholder in the fourth quarter of fiscal year 2019 . Refer to Note 17 2019 . Refer to Note 17 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 30 PART II Item 6 ITEM . 30 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2019 ( a ) Year Ended June 30 , 2019 ( a ) 2018 2017 , 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) 2015 Revenue ) 2016 ( d ) 2015 Revenue $ 125,843 $ 110,360 d ) 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 2015 Revenue $ 125,843 $ 110,360 $ 96,571 $ 91,154 $ $ 125,843 $ 110,360 $ 96,571 $ 91,154 $ 93,580 Gross $ 110,360 $ 96,571 $ 91,154 $ 93,580 Gross margin 82,933 $ 96,571 $ 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 91,154 $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating $ 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 93,580 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 Gross margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 35,058 margin 82,933 72,007 62,310 58,374 60,542 Operating income 42,959 35,058 29,025 62,310 58,374 60,542 Operating income 42,959 35,058 29,025 ( f ) 58,374 60,542 Operating income 42,959 35,058 29,025 ( f ) 26,078 60,542 Operating income 42,959 35,058 29,025 ( f ) 26,078 ( 35,058 29,025 ( f ) 26,078 ( g ) 18,161 ( ) 26,078 ( g ) 18,161 ( h ) Net income ( h ) Net income 39,240 ( b ) 16,571 ( income 39,240 ( b ) 16,571 ( c ) 25,489 ( ) 16,571 ( c ) 25,489 ( f ) 20,539 ( ) 25,489 ( f ) 20,539 ( g ) 12,193 ( ) 20,539 ( g ) 12,193 ( h ) Diluted earnings ) Diluted earnings per share 5.06 ( b ) 2.13 ( share 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) 1.48 ( ) 2.56 ( g ) 1.48 ( h ) Cash dividend Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 Cash dividend declared per share 1.84 1.68 1.56 1.44 1.24 Cash , declared per share 1.84 1.68 1.56 1.44 1.24 Cash , cash per share 1.84 1.68 1.56 1.44 1.24 Cash , cash equivalent share 1.84 1.68 1.56 1.44 1.24 Cash , cash equivalent , equivalent , and short-term investment 133,819 133,768 132,981 113,240 96,526 Total , and short-term investment 133,819 133,768 132,981 113,240 96,526 Total asset and short-term investment 133,819 133,768 132,981 113,240 96,526 Total asset 286,556 short-term investment 133,819 133,768 132,981 113,240 96,526 Total asset 286,556 258,848 investment 133,819 133,768 132,981 113,240 96,526 Total asset 286,556 258,848 250,312 132,981 113,240 96,526 Total asset 286,556 258,848 250,312 202,897 174,303 Long-term 113,240 96,526 Total asset 286,556 258,848 250,312 202,897 174,303 Long-term obligation 96,526 Total asset 286,556 258,848 250,312 202,897 174,303 Long-term obligation 114,806 Total asset 286,556 258,848 250,312 202,897 174,303 Long-term obligation 114,806 117,642 asset 286,556 258,848 250,312 202,897 174,303 Long-term obligation 114,806 117,642 106,856 250,312 202,897 174,303 Long-term obligation 114,806 117,642 106,856 66,705 44,574 Stockholders 202,897 174,303 Long-term obligation 114,806 117,642 106,856 66,705 44,574 Stockholders ’ 174,303 Long-term obligation 114,806 117,642 106,856 66,705 44,574 Stockholders ’ equity Long-term obligation 114,806 117,642 106,856 66,705 44,574 Stockholders ’ equity 102,330 obligation 114,806 117,642 106,856 66,705 44,574 Stockholders ’ equity 102,330 82,718 66,705 44,574 Stockholders ’ equity 102,330 82,718 87,711 83,090 80,083 ( 44,574 Stockholders ’ equity 102,330 82,718 87,711 83,090 80,083 ( a Stockholders ’ equity 102,330 82,718 87,711 83,090 80,083 ( a ) ’ equity 102,330 82,718 87,711 83,090 80,083 ( a ) GitHub equity 102,330 82,718 87,711 83,090 80,083 ( a ) GitHub ha operation starting on the October 25 , 2018 acquisition date . on the October 25 , 2018 acquisition date . ( b b ) Includes a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to EPS ” ) by $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Refer to respectively . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . c ) Includes a $ 13.7 billion net charge related to and diluted EPS by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . accounting standard in fiscal year 2018 related to revenue recognition and operation starting on the December 8 , 2016 acquisition date . on the December 8 , 2016 acquisition date . ( f ( f ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( g ( g ) Includes $ 630 million of asset impairment charge our Phone business and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . ( h ( h ) Includes $ 7.5 billion of goodwill and asset our Phone business and $ 2.5 billion of integration and restructuring and diluted EPS by $ 10.0 billion , $ 9.5 billion $ 10.0 billion , $ 9.5 billion , and $ 1.15 9.5 billion , and $ 1.15 , respectively . 31 PART $ 1.15 , respectively . 31 PART II Item 7 ITEM . 31 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . OVERVIEW Microsoft is . Highlights from fiscal year 2019 compared with fiscal year 2018 2019 compared with fiscal year 2018 included : • Commercial cloud , which includes Microsoft Office 365 Commercial , Microsoft Azure , of LinkedIn , Microsoft Dynamics 365 , and other commercial cloud commercial cloud property , increased 43 % to $ 38.1 billion increased 43 % to $ 38.1 billion . • Office Commercial • Office Commercial revenue increased 13 % , driven by Office % , driven by Office 365 Commercial growth of 33 % Office 365 Commercial growth of 33 % . • Office Consumer • Office Consumer revenue increased 7 % , and Office 365 7 % , and Office 365 Consumer subscriber increased to 34.8 365 Consumer subscriber increased to 34.8 million . • LinkedIn revenue . • LinkedIn revenue increased 28 % , with record level by LinkedIn session growth of 27 % . • Dynamics revenue . • Dynamics revenue increased 15 % , driven by Dynamics % , driven by Dynamics 365 growth of 47 % . by Dynamics 365 growth of 47 % . • Server product , including GitHub , increased 25 % , driven by Azure driven by Azure growth of 72 % . • Enterprise Services • Enterprise Services revenue increased 5 % . • Windows original OEM ” ) revenue increased 4 % . • Windows Commercial • Windows Commercial revenue increased 14 % . • Microsoft Surface • Microsoft Surface revenue increased 23 % . • Gaming revenue . • Gaming revenue increased 10 % , driven by Xbox software and service growth of 19 % . • Search advertising traffic acquisition cost , increased 13 % . We have recast for organization . On October 25 , 2018 , we acquired . On October 25 , 2018 , we acquired GitHub , ” ) in a $ 7.5 billion stock transaction ( inclusive total cash payment of $ 1.3 billion in respect of vested segment . Refer to Note 8 – Business Combinations of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 32 PART II Item 7 On . 32 PART II Item 7 On December 22 , 2017 II Item 7 On December 22 , 2017 , the Tax 7 On December 22 , 2017 , the Tax Cuts and of the TCJA of $ 13 . 7 billion in fiscal TCJA of $ 13 . 7 billion in fiscal year 2018 7 billion in fiscal year 2018 , and adjusted our provisional additional tax expense of $ 157 million in the second quarter second quarter of fiscal year 2019 . In the fourth quarter fourth quarter of fiscal year 2019 , in response to the which resulted in a $ 2.6 billion net income tax benef it . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . U.S. dollar throughout fiscal year 2018 positively impacted reported revenue and second quarter of fiscal year 2019 , and reduced reported revenue fourth quarter of fiscal year 2019 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 20 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . 33 PART II this Form 10-K ) . 33 PART II Item 7 SUMMARY . 33 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2019 2018 2017 Percentage Change 2019 per share amount ) 2019 2018 2017 Percentage Change 2019 Versus share amount ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Revenue $ 125,843 2018 Percentage Change 2018 Versus 2017 Revenue $ 125,843 $ 110,360 2018 Versus 2017 Revenue $ 125,843 $ 110,360 $ 96,571 14 2017 Revenue $ 125,843 $ 110,360 $ 96,571 14 % 14 $ 125,843 $ 110,360 $ 96,571 14 % 14 % Gross 125,843 $ 110,360 $ 96,571 14 % 14 % Gross margin 110,360 $ 96,571 14 % 14 % Gross margin 82,933 72,007 % 14 % Gross margin 82,933 72,007 62,310 15 % 16 14 % Gross margin 82,933 72,007 62,310 15 % 16 % % Gross margin 82,933 72,007 62,310 15 % 16 % Operating Gross margin 82,933 72,007 62,310 15 % 16 % Operating income 82,933 72,007 62,310 15 % 16 % Operating income 42,959 35,058 % 16 % Operating income 42,959 35,058 29,025 23 % 21 16 % Operating income 42,959 35,058 29,025 23 % 21 % % Operating income 42,959 35,058 29,025 23 % 21 % Net Operating income 42,959 35,058 29,025 23 % 21 % Net income 42,959 35,058 29,025 23 % 21 % Net income 39,240 16,571 % 21 % Net income 39,240 16,571 25,489 137 % ( 21 % Net income 39,240 16,571 25,489 137 % ( 35 % Net income 39,240 16,571 25,489 137 % ( 35 ) Net income 39,240 16,571 25,489 137 % ( 35 ) % 16,571 25,489 137 % ( 35 ) % Diluted earnings per % Diluted earnings per share 5.06 2.13 3.25 138 % ( Diluted earnings per share 5.06 2.13 3.25 138 % ( 34 earnings per share 5.06 2.13 3.25 138 % ( 34 ) per share 5.06 2.13 3.25 138 % ( 34 ) % 2.13 3.25 138 % ( 34 ) % Non-GAAP operating income ) % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP operating income 42,959 35,058 29,331 23 % 20 % Non-GAAP net 42,959 35,058 29,331 23 % 20 % Non-GAAP net income 36,830 20 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP net income 36,830 30,267 25,732 22 % 18 % Non-GAAP diluted 36,830 30,267 25,732 22 % 18 % Non-GAAP diluted earnings per Non-GAAP diluted earnings per share 4.75 3.88 3.29 22 % 18 diluted earnings per share 4.75 3.88 3.29 22 % 18 % earnings per share 4.75 3.88 3.29 22 % 18 % Non-GAAP per share 4.75 3.88 3.29 22 % 18 % Non-GAAP operating 4.75 3.88 3.29 22 % 18 % Non-GAAP operating income , financial result . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial . Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , driven by growth Cost of revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven by growth and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . Current year net net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Prior year and diluted EPS of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Fiscal Year , respectively . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Revenue increased $ 13.8 billion Year 2017 Revenue increased $ 13.8 billion or 14 % , increased $ 13.8 billion or 14 % , driven by growth lower revenue from Phone . 34 PART II Item 7 Gross . 34 PART II Item 7 Gross margin increased $ 9.7 7 Gross margin increased $ 9.7 billion or 16 % , increased $ 9.7 billion or 16 % , due to growth . Gross margin included a 7 percentage point improvement in commercial . Operating income increased $ 6.0 billion or 21 % , increased $ 6.0 billion or 21 % , driven by growth LinkedIn operating loss increased $ 63 million to $ 987 million $ 63 million to $ 987 million , including $ 1.5 987 million , including $ 1.5 billion of amortization of intangible favorable foreign currency impact of 2 % . Key change in Cost of revenue increased $ 4.1 billion or 12 % , increased $ 4.1 billion or 12 % , mainly due to and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to LinkedIn expense . Fiscal year 2018 net income and diluted EPS earnings per share of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Fiscal year , respectively . Fiscal year 2017 operating income , net income and diluted EPS of $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . SEGMENT RESULTS million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Revenue Productivity and 2018 Percentage Change 2018 Versus 2017 Revenue Productivity and Business Processes Productivity and Business Processes $ 41,160 $ 35,865 $ 29,870 15 Business Processes $ 41,160 $ 35,865 $ 29,870 15 % 20 $ 41,160 $ 35,865 $ 29,870 15 % 20 % Intelligent 41,160 $ 35,865 $ 29,870 15 % 20 % Intelligent Cloud 35,865 $ 29,870 15 % 20 % Intelligent Cloud 38,985 32,219 % 20 % Intelligent Cloud 38,985 32,219 27,407 21 % 18 20 % Intelligent Cloud 38,985 32,219 27,407 21 % 18 % % Intelligent Cloud 38,985 32,219 27,407 21 % 18 % More Intelligent Cloud 38,985 32,219 27,407 21 % 18 % More Personal 38,985 32,219 27,407 21 % 18 % More Personal Computing 45,698 18 % More Personal Computing 45,698 42,276 39,294 8 % 8 % More Personal Computing 45,698 42,276 39,294 8 % 8 % More Personal Computing 45,698 42,276 39,294 8 % 8 % Total Personal Computing 45,698 42,276 39,294 8 % 8 % Total $ 45,698 42,276 39,294 8 % 8 % Total $ 125,843 $ % 8 % Total $ 125,843 $ 110,360 $ 96,571 14 % Total $ 125,843 $ 110,360 $ 96,571 14 % 14 $ 125,843 $ 110,360 $ 96,571 14 % 14 % Operating 125,843 $ 110,360 $ 96,571 14 % 14 % Operating Income 110,360 $ 96,571 14 % 14 % Operating Income ( Loss Productivity and Business Processes $ 16,219 $ 12,924 $ 11,389 25 Business Processes $ 16,219 $ 12,924 $ 11,389 25 % 13 $ 16,219 $ 12,924 $ 11,389 25 % 13 % Intelligent 16,219 $ 12,924 $ 11,389 25 % 13 % Intelligent Cloud 12,924 $ 11,389 25 % 13 % Intelligent Cloud 13,920 11,524 % 13 % Intelligent Cloud 13,920 11,524 9,127 21 % 26 13 % Intelligent Cloud 13,920 11,524 9,127 21 % 26 % % Intelligent Cloud 13,920 11,524 9,127 21 % 26 % More Intelligent Cloud 13,920 11,524 9,127 21 % 26 % More Personal 13,920 11,524 9,127 21 % 26 % More Personal Computing 12,820 26 % More Personal Computing 12,820 10,610 8,815 21 % 20 % More Personal Computing 12,820 10,610 8,815 21 % 20 % More Personal Computing 12,820 10,610 8,815 21 % 20 % Corporate Personal Computing 12,820 10,610 8,815 21 % 20 % Corporate and 12,820 10,610 8,815 21 % 20 % Corporate and Other 0 20 % Corporate and Other 0 0 ( 306 ) * % Corporate and Other 0 0 ( 306 ) * * and Other 0 0 ( 306 ) * * Total $ ) * * Total $ 42,959 $ 35,058 $ 29,025 23 * Total $ 42,959 $ 35,058 $ 29,025 23 % 21 $ 42,959 $ 35,058 $ 29,025 23 % 21 % * 42,959 $ 35,058 $ 29,025 23 % 21 % * Not 35,058 $ 29,025 23 % 21 % * Not meaningful . . Reportable Segments Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Productivity and Business Processes Revenue Business Processes Revenue increased $ 5.3 billion or 15 % . increased $ 5.3 billion or 15 % . • Office Commercial Office Commercial revenue increased $ 3.2 billion or 13 % , increased $ 3.2 billion or 13 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial grew 33 % , . Office 365 Commercial grew 33 % , due to growth average revenue per user . 35 PART II Item 7 • . 35 PART II Item 7 • Office Consumer revenue increased Office Consumer revenue increased $ 286 million or 7 % , increased $ 286 million or 7 % , driven by Office % , driven by Office 365 Consumer , due to recurring • LinkedIn revenue increased $ 1.5 billion or 28 % , increased $ 1.5 billion or 28 % , driven by growth . • Dynamics revenue increased 15 % , driven by Dynamics % , driven by Dynamics 365 growth . Operating income increased . Operating income increased $ 3.3 billion or 25 % , increased $ 3.3 billion or 25 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 4.1 billion or 15 % , increased $ 4.1 billion or 15 % , driven by growth improvement in LinkedIn and Office 365 Commercial , offset in part • Operating expense increased $ 806 million or 6 % , increased $ 806 million or 6 % , driven by investment Intelligent Cloud Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . • Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure revenue growth wa 72 % , due to higher . Server product revenue increased 6 % , due to continued of end-of-support for SQL Server 2008 and Windows Server 2008 . Server 2008 and Windows Server 2008 . • Enterprise Services revenue Enterprise Services revenue increased $ 278 million or 5 % , increased $ 278 million or 5 % , driven by growth . Operating income increased $ 2.4 billion or 21 % . increased $ 2.4 billion or 21 % . • Gross margin • Gross margin increased $ 4.8 billion or 22 % , increased $ 4.8 billion or 22 % , driven by growth • Operating expense increased $ 2.4 billion or 22 % , increased $ 2.4 billion or 22 % , driven by investment Personal Computing Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . • Windows revenue • Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth . Windows Commercial revenue increased 14 % , driven by an . Windows OEM revenue increased 4 % . Windows OEM Pro Windows OEM Pro revenue grew 10 % , ahead of the , driven by healthy Windows 10 demand . Windows OEM non-Pro Windows OEM non-Pro revenue declined 7 % , below the consumer • Surface revenue increased $ 1.1 billion or 23 % , increased $ 1.1 billion or 23 % , with strong growth • Gaming revenue increased $ 1.0 billion or 10 % , increased $ 1.0 billion or 10 % , driven by Xbox software and service growth of 19 % , primarily due to decline in Xbox hardware of 13 % primarily due to a Search advertising revenue increased $ 616 million or 9 % . increased $ 616 million or 9 % . Search advertising revenue traffic acquisition cost , increased 13 % , driven by higher . Operating income increased $ 2.2 billion or 21 % , increased $ 2.2 billion or 21 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , driven by growth • Operating expense decreased $ 172 million or 1 % . decreased $ 172 million or 1 % . 36 PART II million or 1 % . 36 PART II Item 7 Fiscal . 36 PART II Item 7 Fiscal Year 2018 Compared with II Item 7 Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Productivity and Business Processes Revenue Business Processes Revenue increased $ 6.0 billion or 20 % . increased $ 6.0 billion or 20 % . • LinkedIn revenue • LinkedIn revenue increased $ 3.0 billion to $ 5.3 billion $ 3.0 billion to $ 5.3 billion . Fiscal year 2018 5.3 billion . Fiscal year 2018 included a full period of result , whereas fiscal year 2017 only included result from the date of acquisition on December 8 , 2016 . LinkedIn revenue acquisition on December 8 , 2016 . LinkedIn revenue primarily consisted Office Commercial revenue increased $ 2.4 billion or 11 % , increased $ 2.4 billion or 11 % , driven by Office % , driven by Office 365 Commercial revenue growth , mainly a continued shift to Office 365 Commercial . • Office Consumer Office Consumer revenue increased $ 382 million or 11 % , increased $ 382 million or 11 % , driven by Office % , driven by Office 365 Consumer revenue growth , mainly . • Dynamics revenue increased 13 % , driven by Dynamics % , driven by Dynamics 365 revenue growth . Operating income . Operating income increased $ 1.5 billion or 13 % , increased $ 1.5 billion or 13 % , including a favorable favorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 4.4 billion or 19 % , increased $ 4.4 billion or 19 % , driven by LinkedIn margin percentage improvement in Office 365 Commercial and LinkedIn . LinkedIn cost of revenue increased $ 818 million to $ 1.7 billion $ 818 million to $ 1.7 billion , including $ 888 1.7 billion , including $ 888 million of amortization for acquired • Operating expense increased $ 2.9 billion or 25 % , increased $ 2.9 billion or 25 % , driven by LinkedIn LinkedIn operating expense increased $ 2.2 billion to $ 4.5 billion $ 2.2 billion to $ 4.5 billion , including $ 617 4.5 billion , including $ 617 million of amortization of acquired Intelligent Cloud Revenue increased $ 4.8 billion or 18 % . increased $ 4.8 billion or 18 % . • Server product cloud service revenue increased $ 4.5 billion or 21 % , increased $ 4.5 billion or 21 % , driven by Azure growth . Azure revenue grew 91 % , due to higher product licensed on-premises revenue increased 5 % , mainly due to Enterprise Services revenue increased $ 304 million or 5 % , increased $ 304 million or 5 % , driven by higher . Operating income increased $ 2.4 billion or 26 % . increased $ 2.4 billion or 26 % . • Gross margin • Gross margin increased $ 3.1 billion or 16 % , increased $ 3.1 billion or 16 % , driven by growth • Operating expense increased $ 683 million or 7 % , increased $ 683 million or 7 % , driven by investment Personal Computing Revenue increased $ 3.0 billion or 8 % . increased $ 3.0 billion or 8 % . • Windows revenue • Windows revenue increased $ 925 million or 5 % , increased $ 925 million or 5 % , driven by growth . Windows Commercial revenue increased 12 % , driven by multi-year . Windows OEM revenue increased 5 % . Windows OEM Pro Windows OEM Pro revenue grew 11 % , ahead of a Windows OEM non-Pro revenue declined 4 % , below the consumer • Gaming revenue increased $ 1.3 billion or 14 % , increased $ 1.3 billion or 14 % , driven by Xbox and service revenue growth of 20 % , mainly from third-party from third-party title strength . 37 PART II Item 7 • . 37 PART II Item 7 • Search advertising revenue increased Search advertising revenue increased $ 793 million or 13 % . increased $ 793 million or 13 % . Search advertising revenue traffic acquisition cost , increased 16 % , driven by growth • Surface revenue increased $ 625 million or 16 % , increased $ 625 million or 16 % , driven by a • Phone revenue decreased $ 525 million . Operating income increased . Operating income increased $ 1.8 billion or 20 % , increased $ 1.8 billion or 20 % , including a favorable favorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 2.2 billion or 11 % , increased $ 2.2 billion or 11 % , driven by growth • Operating expense increased $ 391 million or 3 % , increased $ 391 million or 3 % , driven by investment restructuring expense . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 We did not incur Corporate Other activity in fiscal year 2019 or 2018 . Fiscal Year in fiscal year 2019 or 2018 . Fiscal Year 2018 Compared or 2018 . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Corporate and Other operating loss Other operating loss decreased $ 306 million , due to a restructuring plan in fiscal year 2017 . OPERATING EXPENSES Research and million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Research and development 2018 Percentage Change 2018 Versus 2017 Research and development $ 16,876 2017 Research and development $ 16,876 $ 14,726 $ 13,037 15 and development $ 16,876 $ 14,726 $ 13,037 15 % 13 $ 16,876 $ 14,726 $ 13,037 15 % 13 % As 16,876 $ 14,726 $ 13,037 15 % 13 % As a 14,726 $ 13,037 15 % 13 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Research and development expense increased and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and GitHub . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Research and development expense increased and development expense increased $ 1.7 billion or 13 % , increased $ 1.7 billion or 13 % , primarily due to . LinkedIn expense increased $ 762 million to $ 1.5 billion $ 762 million to $ 1.5 billion . 38 PART II to $ 1.5 billion . 38 PART II Item 7 Sales . 38 PART II Item 7 Sales and Marketing ( In million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Sales and marketing 2018 Percentage Change 2018 Versus 2017 Sales and marketing $ 18,213 2017 Sales and marketing $ 18,213 $ 17,469 $ 15,461 4 and marketing $ 18,213 $ 17,469 $ 15,461 4 % 13 $ 18,213 $ 17,469 $ 15,461 4 % 13 % As 18,213 $ 17,469 $ 15,461 4 % 13 % As a 17,469 $ 15,461 4 % 13 % As a percent of As a percent of revenue 14 % 16 % 16 % percent of revenue 14 % 16 % 16 % ( 2 revenue 14 % 16 % 16 % ( 2 ) ppt 16 % 16 % ( 2 ) ppt 0ppt Sales and % ( 2 ) ppt 0ppt Sales and marketing expense include other program . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Sales and marketing expense increased and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . Fiscal Year 2018 2 % . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Sales and marketing expense increased and marketing expense increased $ 2.0 billion or 13 % , increased $ 2.0 billion or 13 % , primarily due to . LinkedIn expense increased $ 1.2 billion to $ 2.5 billion $ 1.2 billion to $ 2.5 billion , including $ 617 2.5 billion , including $ 617 million of amortization of acquired million , except percentage ) 2019 2018 2017 Percentage Change 2019 , except percentage ) 2019 2018 2017 Percentage Change 2019 Versus except percentage ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 General and administrative 2018 Percentage Change 2018 Versus 2017 General and administrative $ 4,885 2017 General and administrative $ 4,885 $ 4,754 $ 4,481 3 and administrative $ 4,885 $ 4,754 $ 4,481 3 % 6 $ 4,885 $ 4,754 $ 4,481 3 % 6 % As 4,885 $ 4,754 $ 4,481 3 % 6 % As a 4,754 $ 4,481 3 % 6 % As a percent of As a percent of revenue 4 % 4 % 5 % percent of revenue 4 % 4 % 5 % 0ppt ( revenue 4 % 4 % 5 % 0ppt ( 1 ) % 4 % 5 % 0ppt ( 1 ) ppt General % 5 % 0ppt ( 1 ) ppt General and administrative administrative fee . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 General and administrative expense increased and administrative expense increased $ 131 million or 3 % . increased $ 131 million or 3 % . Fiscal Year 2018 3 % . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 General and administrative expense increased and administrative expense increased $ 273 million or 6 % , increased $ 273 million or 6 % , primarily due to . LinkedIn expense increased $ 234 million to $ 528 million $ 234 million to $ 528 million . RESTRUCTURING EXPENSES Restructuring restructuring activity . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 We did not incur restructuring restructuring expense in fiscal year 2019 or 2018 . Fiscal Year in fiscal year 2019 or 2018 . Fiscal Year 2018 Compared or 2018 . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 During fiscal year 2017 , Year 2017 During fiscal year 2017 , we recorded $ 306 2017 , we recorded $ 306 million of employee severance expense and marketing restructuring plan . 39 PART II Item 7 OTHER . 39 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2019 2018 2017 Interest Year Ended June 30 , 2019 2018 2017 Interest and dividend Ended June 30 , 2019 2018 2017 Interest and dividend income June 30 , 2019 2018 2017 Interest and dividend income $ Interest and dividend income $ 2,762 $ 2,214 $ 1,387 Interest dividend income $ 2,762 $ 2,214 $ 1,387 Interest expense ( $ 2,762 $ 2,214 $ 1,387 Interest expense ( 2,686 ) $ 1,387 Interest expense ( 2,686 ) ( 2,733 ) ( expense ( 2,686 ) ( 2,733 ) ( 2,222 ) Net ) ( 2,733 ) ( 2,222 ) Net recognized gain on Net recognized gain on investment 648 2,399 2,583 Net gain ( recognized gain on investment 648 2,399 2,583 Net gain ( loss gain on investment 648 2,399 2,583 Net gain ( loss ) ( loss ) on derivative 144 ( 187 ) ( 510 ) on derivative 144 ( 187 ) ( 510 ) Net 144 ( 187 ) ( 510 ) Net loss on foreign on foreign currency remeasurements ( 82 ) ( 218 ) ( remeasurements ( 82 ) ( 218 ) ( 111 ) Other ) ( 218 ) ( 111 ) Other , net ( ) Other , net ( 57 ) ( 59 ) ( net ( 57 ) ( 59 ) ( 251 ) Total ) ( 59 ) ( 251 ) Total $ 729 $ ( 251 ) Total $ 729 $ 1,416 $ 876 We ) Total $ 729 $ 1,416 $ 876 We use derivative $ 729 $ 1,416 $ 876 We use derivative instrument to , net . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Interest and dividend income increased prior period . Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Dividends and interest income increased Effective Tax Rate Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Our effective tax rate for tax rate for fiscal year 2019 and 2018 wa 10 % for fiscal year 2019 and 2018 wa 10 % and 55 year 2019 and 2018 wa 10 % and 55 % , 2018 wa 10 % and 55 % , respectively . The tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 and a $ 2.6 billion year 2018 and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . In fiscal year billion . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . 40 PART II wa $ 24.9 billion . 40 PART II Item 7 Fiscal . 40 PART II Item 7 Fiscal Year 2018 Compared with II Item 7 Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Our effective tax rate for tax rate for fiscal year 2018 and 2017 wa 55 % for fiscal year 2018 and 2017 wa 55 % and 15 year 2018 and 2017 wa 55 % and 15 % , 2017 wa 55 % and 15 % , respectively . The tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the the TCJA in fiscal year 2018 and the realization of tax business loss in fiscal year 2017 . Our effective tax rate service . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . In fiscal year billion . In fiscal year 2017 , our U.S. income before before income tax wa $ 6.8 billion and our foreign income before income tax wa $ 23.1 billion . Tax Cuts and and Jobs Act On December 22 , 2017 , the TCJA Act On December 22 , 2017 , the TCJA wa enacted system . In fiscal year 2018 , the TCJA required u tax at a rate of 15.5 % for foreign cash and net current asset , and 8 % on the remaining income federal statutory tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . In addition % effective January 1 , 2018 . In addition , the GILTI ” ) effective July 1 , 2018 . Under GAAP ) effective July 1 , 2018 . Under GAAP , we sheet . During fiscal year 2018 , we recorded a net a net charge of $ 13.7 billion related to the enactment deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred second quarter of fiscal year 2019 , we recorded additional tax additional tax expense of $ 157 million , which related to Staff Accounting Bulletin No . 118 . In the fourth quarter fourth quarter of fiscal year 2019 , in response to the property resulted in a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 , a the value of tax . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 41 PART II Item 7 Uncertain . 41 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . We expect for tax year 2004 to 2013 . We expect the IRS an examination of tax year 2014 to 2017 within the next of tax year 2014 to 2017 within the next 12 month to 2017 within the next 12 month . As of June month . As of June 30 , 2019 , the primary As of June 30 , 2019 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2018 , some of for tax year 1996 to 2018 , some of which are and per share amount ) 2019 2018 2017 Percentage Change 2019 per share amount ) 2019 2018 2017 Percentage Change 2019 Versus share amount ) 2019 2018 2017 Percentage Change 2019 Versus 2018 2019 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 2017 Percentage Change 2019 Versus 2018 Percentage Change 2018 Versus 2017 2019 Versus 2018 Percentage Change 2018 Versus 2017 Operating income $ 2018 Percentage Change 2018 Versus 2017 Operating income $ 42,959 $ Versus 2017 Operating income $ 42,959 $ 35,058 $ 29,025 23 Operating income $ 42,959 $ 35,058 $ 29,025 23 % 21 $ 42,959 $ 35,058 $ 29,025 23 % 21 % Net 42,959 $ 35,058 $ 29,025 23 % 21 % Net tax 35,058 $ 29,025 23 % 21 % Net tax impact of of transfer of intangible property 0 0 0 * * Net transfer of intangible property 0 0 0 * * Net tax of intangible property 0 0 0 * * Net tax impact tax impact of the TCJA 0 0 0 * * Restructuring impact of the TCJA 0 0 0 * * Restructuring expense of the TCJA 0 0 0 * * Restructuring expense 0 0 * * Restructuring expense 0 0 306 * * Non-GAAP * * Restructuring expense 0 0 306 * * Non-GAAP operating * Restructuring expense 0 0 306 * * Non-GAAP operating income * Non-GAAP operating income $ 42,959 $ 35,058 $ 29,331 23 operating income $ 42,959 $ 35,058 $ 29,331 23 % 20 $ 42,959 $ 35,058 $ 29,331 23 % 20 % Net 42,959 $ 35,058 $ 29,331 23 % 20 % Net income 35,058 $ 29,331 23 % 20 % Net income $ 39,240 20 % Net income $ 39,240 $ 16,571 $ 25,489 137 Net income $ 39,240 $ 16,571 $ 25,489 137 % ( $ 39,240 $ 16,571 $ 25,489 137 % ( 35 ) 39,240 $ 16,571 $ 25,489 137 % ( 35 ) % $ 25,489 137 % ( 35 ) % Net tax impact transfer of intangible property ( 2,567 ) 0 0 * * intangible property ( 2,567 ) 0 0 * * Net tax property ( 2,567 ) 0 0 * * Net tax impact tax impact of the TCJA 157 13,696 0 * * Restructuring impact of the TCJA 157 13,696 0 * * Restructuring expense of the TCJA 157 13,696 0 * * Restructuring expense 0 0 * * Restructuring expense 0 0 243 * * Non-GAAP * * Restructuring expense 0 0 243 * * Non-GAAP net * Restructuring expense 0 0 243 * * Non-GAAP net income * Non-GAAP net income $ 36,830 $ 30,267 $ 25,732 22 net income $ 36,830 $ 30,267 $ 25,732 22 % 18 $ 36,830 $ 30,267 $ 25,732 22 % 18 % Diluted 36,830 $ 30,267 $ 25,732 22 % 18 % Diluted earnings 30,267 $ 25,732 22 % 18 % Diluted earnings per share Diluted earnings per share $ 5.06 $ 2.13 $ 3.25 138 per share $ 5.06 $ 2.13 $ 3.25 138 % ( $ 5.06 $ 2.13 $ 3.25 138 % ( 34 ) 5.06 $ 2.13 $ 3.25 138 % ( 34 ) % $ 3.25 138 % ( 34 ) % Net tax impact transfer of intangible property ( 0.33 ) 0 0 * * intangible property ( 0.33 ) 0 0 * * Net tax property ( 0.33 ) 0 0 * * Net tax impact tax impact of the TCJA 0.02 1.75 0 * * Restructuring impact of the TCJA 0.02 1.75 0 * * Restructuring expense of the TCJA 0.02 1.75 0 * * Restructuring expense 0 0 * * Restructuring expense 0 0 0.04 * * Non-GAAP * * Restructuring expense 0 0 0.04 * * Non-GAAP diluted * Restructuring expense 0 0 0.04 * * Non-GAAP diluted earnings diluted earnings per share $ 4.75 $ 3.88 $ 3.29 22 per share $ 4.75 $ 3.88 $ 3.29 22 % 18 $ 4.75 $ 3.88 $ 3.29 22 % 18 % * 4.75 $ 3.88 $ 3.29 22 % 18 % * Not 3.88 $ 3.29 22 % 18 % * Not meaningful . % * Not meaningful . 42 PART II Item 7 FINANCIAL . 42 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 133.8 billion a of both June billion a of both June 30 , 2019 and 2018 . of both June 30 , 2019 and 2018 . Equity investment June 30 , 2019 and 2018 . Equity investment were $ . Equity investment were $ 2.6 billion and $ 1.9 billion $ 2.6 billion and $ 1.9 billion a of June 30 1.9 billion a of June 30 , 2019 and 2018 , a of June 30 , 2019 and 2018 , respectively . June 30 , 2019 and 2018 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price . Cash Flows Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Cash from operation increased $ Cash from operation increased $ 8.3 billion to $ 52.2 billion $ 8.3 billion to $ 52.2 billion for fiscal year 2019 52.2 billion for fiscal year 2019 , mainly due to an used in financing increased $ 3.3 billion to $ 36.9 billion $ 3.3 billion to $ 36.9 billion for fiscal year 2019 36.9 billion for fiscal year 2019 , mainly due to an mainly due to an $ 8.8 billion increase in common stock stock repurchase and a $ 1.1 billion increase in dividend paid in part by a $ 6.2 billion decrease in repayment of used in investing increased $ 9.7 billion to $ 15.8 billion $ 9.7 billion to $ 15.8 billion for fiscal year 2019 15.8 billion for fiscal year 2019 , mainly due to a mainly due to a $ 6.0 billion decrease in cash from and maturity , a $ 2.3 billion increase in addition to equipment , and a $ 1.5 billion increase in cash used intangible and other asset . 43 PART II Item 7 Fiscal . 43 PART II Item 7 Fiscal Year 2018 Compared with II Item 7 Fiscal Year 2018 Compared with Fiscal Year 2017 2018 Compared with Fiscal Year 2017 Cash from operation increased $ Cash from operation increased $ 4.4 billion to $ 43.9 billion $ 4.4 billion to $ 43.9 billion for fiscal year 2018 43.9 billion for fiscal year 2018 , mainly due to an used in financing wa $ 33.6 billion for fiscal year 2018 33.6 billion for fiscal year 2018 , compared to cash from cash from financing of $ 8.4 billion for fiscal year 2017 8.4 billion for fiscal year 2017 . The change wa mainly mainly due to a $ 41.7 billion decrease in proceeds from in part by a $ 1.1 billion decrease in cash used used in investing decreased $ 40.7 billion to $ 6.1 billion $ 40.7 billion to $ 6.1 billion for fiscal year 2018 6.1 billion for fiscal year 2018 , mainly due to a mainly due to a $ 25.1 billion decrease in cash used asset , and a $ 19.1 billion increase in cash from debt . Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) Three Months Ending , September 30 , 2019 $ 12,353 December Ending , September 30 , 2019 $ 12,353 December 31 , September 30 , 2019 $ 12,353 December 31 , 2019 9,807 , 2019 $ 12,353 December 31 , 2019 9,807 March 31 $ 12,353 December 31 , 2019 9,807 March 31 , 2020 12,353 December 31 , 2019 9,807 March 31 , 2020 6,887 31 , 2019 9,807 March 31 , 2020 6,887 June 30 2019 9,807 March 31 , 2020 6,887 June 30 , 2020 9,807 March 31 , 2020 6,887 June 30 , 2020 3,629 31 , 2020 6,887 June 30 , 2020 3,629 Thereafter 4,530 2020 6,887 June 30 , 2020 3,629 Thereafter 4,530 Total $ 6,887 June 30 , 2020 3,629 Thereafter 4,530 Total $ 37,206 30 , 2020 3,629 Thereafter 4,530 Total $ 37,206 If our 3,629 Thereafter 4,530 Total $ 37,206 If our customer choose to Share Repurchases For fiscal year 2019 , 2018 , and 2017 For fiscal year 2019 , 2018 , and 2017 , we 2019 , 2018 , and 2017 , we repurchased 150 million and 2017 , we repurchased 150 million share , 99 million repurchased 150 million share , 99 million share , and 170 99 million share , and 170 million share of our common our common stock for $ 16.8 billion , $ 8.6 billion $ 16.8 billion , $ 8.6 billion , and $ 10.3 8.6 billion , and $ 10.3 billion , respectively , through resource . Refer to Note 17 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 17 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 44 PART II Item 7 Off-Balance . 44 PART II Item 7 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) : ( In million ) 2020 2021-2022 2023-2024 Thereafter Total Long-term ( In million ) 2020 2021-2022 2023-2024 Thereafter Total Long-term debt In million ) 2020 2021-2022 2023-2024 Thereafter Total Long-term debt : a ) Principal payment $ 5,518 $ 11,744 $ 8,000 $ Principal payment $ 5,518 $ 11,744 $ 8,000 $ 47,519 $ $ 5,518 $ 11,744 $ 8,000 $ 47,519 $ 72,781 Interest $ 11,744 $ 8,000 $ 47,519 $ 72,781 Interest payment 2,299 $ 8,000 $ 47,519 $ 72,781 Interest payment 2,299 4,309 3,818 47,519 $ 72,781 Interest payment 2,299 4,309 3,818 29,383 39,809 Construction $ 72,781 Interest payment 2,299 4,309 3,818 29,383 39,809 Construction commitment 72,781 Interest payment 2,299 4,309 3,818 29,383 39,809 Construction commitment ( Interest payment 2,299 4,309 3,818 29,383 39,809 Construction commitment ( b payment 2,299 4,309 3,818 29,383 39,809 Construction commitment ( b ) Construction commitment ( b ) 3,443 515 0 0 3,958 Operating commitment ( b ) 3,443 515 0 0 3,958 Operating lease ( b ) 3,443 515 0 0 3,958 Operating lease , b ) 3,443 515 0 0 3,958 Operating lease , including ) 3,443 515 0 0 3,958 Operating lease , including imputed imputed interest ( c ) 1,790 3,144 2,413 3,645 10,992 Finance interest ( c ) 1,790 3,144 2,413 3,645 10,992 Finance lease ( c ) 1,790 3,144 2,413 3,645 10,992 Finance lease , c ) 1,790 3,144 2,413 3,645 10,992 Finance lease , including ) 1,790 3,144 2,413 3,645 10,992 Finance lease , including imputed imputed interest ( c ) 797 2,008 2,165 9,872 14,842 Transition interest ( c ) 797 2,008 2,165 9,872 14,842 Transition tax ( c ) 797 2,008 2,165 9,872 14,842 Transition tax ( c ) 797 2,008 2,165 9,872 14,842 Transition tax ( d ) 797 2,008 2,165 9,872 14,842 Transition tax ( d ) Transition tax ( d ) 1,180 2,900 4,168 8,155 16,403 Purchase tax ( d ) 1,180 2,900 4,168 8,155 16,403 Purchase commitment ( d ) 1,180 2,900 4,168 8,155 16,403 Purchase commitment ( d ) 1,180 2,900 4,168 8,155 16,403 Purchase commitment ( e ) 1,180 2,900 4,168 8,155 16,403 Purchase commitment ( e ) Purchase commitment ( e ) 17,478 1,185 159 339 19,161 Other commitment ( e ) 17,478 1,185 159 339 19,161 Other long-term ( e ) 17,478 1,185 159 339 19,161 Other long-term liability e ) 17,478 1,185 159 339 19,161 Other long-term liability ( ) 17,478 1,185 159 339 19,161 Other long-term liability ( f long-term liability ( f ) 0 72 29 324 425 Total liability ( f ) 0 72 29 324 425 Total $ ( f ) 0 72 29 324 425 Total $ 32,505 f ) 0 72 29 324 425 Total $ 32,505 $ ) 0 72 29 324 425 Total $ 32,505 $ 25,877 29 324 425 Total $ 32,505 $ 25,877 $ 20,752 $ 425 Total $ 32,505 $ 25,877 $ 20,752 $ 99,237 $ $ 32,505 $ 25,877 $ 20,752 $ 99,237 $ 178,371 ( $ 25,877 $ 20,752 $ 99,237 $ 178,371 ( a ) $ 20,752 $ 99,237 $ 178,371 ( a ) Refer to a ) Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 15 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 14.2 billion from the amount presented over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . transition tax of approximately $ 2.0 billion , which included $ billion , which included $ 1.5 billion for fiscal year 2019 1.5 billion for fiscal year 2019 . The first installment of wa paid in fiscal year 2019 , and the remaining transition remaining transition tax of $ 16.4 billion is payable over the final payment in fiscal year 2026 . During the first quarter first quarter of fiscal year 2020 , we expect to pay we expect to pay $ 1.2 billion related to the second transition tax , and $ 3.5 billion related to the transfer fourth quarter of fiscal year 2019 . 45 PART II Item of fiscal year 2019 . 45 PART II Item 7 We . 45 PART II Item 7 We expect existing cash , for at least the next 12 month and thereafter for the ACCOUNTING GUIDANCE Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the for the period presented . 46 PART II Item 7 Impairment . 46 PART II Item 7 Impairment of Investment Securities We an annual basis ( May 1 for u ) and between our consolidated financial statement . 47 PART II Item 7 Income . 47 PART II Item 7 Income Taxes The objective of that ha a greater than 50 % likelihood of being realized business . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . to cost of revenue . 48 PART II Item 7 STATEMENT . 48 PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 49 PART II Item 7A ITEM Officer 49 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2019 Impact Foreign currency Hypothetical Change June 30 , 2019 Impact Foreign currency - Revenue Impact Foreign currency - Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 3,402 ) Earnings Foreign currency - Earnings Foreign currency - Investments 10 % decrease in foreign exchange in foreign exchange rate ( 120 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 2,909 ) Fair Value Credit 100 2,909 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 224 ) Fair Value Equity 10 224 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 244 ) Earnings 50 PART II price ( 244 ) Earnings 50 PART II Item 8 ITEM Earnings 50 PART II Item 8 ITEM 8 . FINANCIAL STATE PART II Item 8 ITEM 8 . FINANCIAL STATE MENTS AND amount ) Year Ended June 30 , 2019 2018 2017 Revenue Year Ended June 30 , 2019 2018 2017 Revenue : Product Ended June 30 , 2019 2018 2017 Revenue : Product $ June 30 , 2019 2018 2017 Revenue : Product $ 66,069 2017 Revenue : Product $ 66,069 $ 64,497 $ 63,811 Service : Product $ 66,069 $ 64,497 $ 63,811 Service and other $ 66,069 $ 64,497 $ 63,811 Service and other 59,774 45,863 $ 63,811 Service and other 59,774 45,863 32,760 Total revenue 125,843 63,811 Service and other 59,774 45,863 32,760 Total revenue 125,843 110,360 Service and other 59,774 45,863 32,760 Total revenue 125,843 110,360 96,571 59,774 45,863 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue 45,863 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue : 32,760 Total revenue 125,843 110,360 96,571 Cost of revenue : Product Cost of revenue : Product 16,273 15,420 15,175 Service and other of revenue : Product 16,273 15,420 15,175 Service and other 26,637 revenue : Product 16,273 15,420 15,175 Service and other 26,637 22,933 15,420 15,175 Service and other 26,637 22,933 19,086 Total cost of 15,175 Service and other 26,637 22,933 19,086 Total cost of revenue Service and other 26,637 22,933 19,086 Total cost of revenue 42,910 19,086 Total cost of revenue 42,910 38,353 34,261 Gross margin 82,933 Total cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 cost of revenue 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 42,910 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 38,353 34,261 Gross margin 82,933 72,007 62,310 Research and development 16,876 34,261 Gross margin 82,933 72,007 62,310 Research and development 16,876 14,726 72,007 62,310 Research and development 16,876 14,726 13,037 Sales and marketing 62,310 Research and development 16,876 14,726 13,037 Sales and marketing 18,213 Research and development 16,876 14,726 13,037 Sales and marketing 18,213 17,469 14,726 13,037 Sales and marketing 18,213 17,469 15,461 General and administrative 13,037 Sales and marketing 18,213 17,469 15,461 General and administrative 4,885 Sales and marketing 18,213 17,469 15,461 General and administrative 4,885 4,754 17,469 15,461 General and administrative 4,885 4,754 4,481 Restructuring 0 0 15,461 General and administrative 4,885 4,754 4,481 Restructuring 0 0 306 General and administrative 4,885 4,754 4,481 Restructuring 0 0 306 Operating administrative 4,885 4,754 4,481 Restructuring 0 0 306 Operating income 42,959 4,885 4,754 4,481 Restructuring 0 0 306 Operating income 42,959 35,058 4,754 4,481 Restructuring 0 0 306 Operating income 42,959 35,058 29,025 0 0 306 Operating income 42,959 35,058 29,025 Other income , 0 306 Operating income 42,959 35,058 29,025 Other income , net 306 Operating income 42,959 35,058 29,025 Other income , net 729 29,025 Other income , net 729 1,416 876 Income before income Other income , net 729 1,416 876 Income before income tax income , net 729 1,416 876 Income before income tax 43,688 876 Income before income tax 43,688 36,474 29,901 Provision for income Income before income tax 43,688 36,474 29,901 Provision for income tax before income tax 43,688 36,474 29,901 Provision for income tax 4,448 29,901 Provision for income tax 4,448 19,903 4,412 Net income $ Provision for income tax 4,448 19,903 4,412 Net income $ 39,240 for income tax 4,448 19,903 4,412 Net income $ 39,240 $ 19,903 4,412 Net income $ 39,240 $ 16,571 $ 25,489 Earnings Net income $ 39,240 $ 16,571 $ 25,489 Earnings per share $ 39,240 $ 16,571 $ 25,489 Earnings per share : Basic per share : Basic $ 5.11 $ 2.15 $ 3.29 Diluted : Basic $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 5.11 $ 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 2.15 $ 3.29 Diluted $ 5.06 $ 2.13 $ 3.25 Weighted 3.29 Diluted $ 5.06 $ 2.13 $ 3.25 Weighted average share $ 5.06 $ 2.13 $ 3.25 Weighted average share outstanding : average share outstanding : Basic 7,673 7,700 7,746 Diluted 7,753 7,794 share outstanding : Basic 7,673 7,700 7,746 Diluted 7,753 7,794 7,832 outstanding : Basic 7,673 7,700 7,746 Diluted 7,753 7,794 7,832 Refer Basic 7,673 7,700 7,746 Diluted 7,753 7,794 7,832 Refer to accompanying 7,673 7,700 7,746 Diluted 7,753 7,794 7,832 Refer to accompanying note 7,700 7,746 Diluted 7,753 7,794 7,832 Refer to accompanying note . Refer to accompanying note . 51 PART II Item 8 COMPREHENSIVE . 51 PART II Item 8 COMPREHENSIVE IN COME STATEMENTS ( million ) Year Ended June 30 , 2019 2018 2017 Net Year Ended June 30 , 2019 2018 2017 Net income $ Ended June 30 , 2019 2018 2017 Net income $ 39,240 June 30 , 2019 2018 2017 Net income $ 39,240 $ 2018 2017 Net income $ 39,240 $ 16,571 $ 25,489 Other Net income $ 39,240 $ 16,571 $ 25,489 Other comprehensive income $ 39,240 $ 16,571 $ 25,489 Other comprehensive income ( loss change related to derivative ( 173 ) 39 ( 218 ) to derivative ( 173 ) 39 ( 218 ) Net change ( 173 ) 39 ( 218 ) Net change related to Net change related to investment 2,405 ( 2,717 ) ( 1,116 related to investment 2,405 ( 2,717 ) ( 1,116 ) Translation 2,405 ( 2,717 ) ( 1,116 ) Translation adjustment and other Translation adjustment and other ( 318 ) ( 178 ) 167 other ( 318 ) ( 178 ) 167 Other comprehensive income 318 ) ( 178 ) 167 Other comprehensive income ( loss comprehensive income ( loss ) 1,914 ( 2,856 ) ( 1,167 ( loss ) 1,914 ( 2,856 ) ( 1,167 ) Comprehensive 1,914 ( 2,856 ) ( 1,167 ) Comprehensive income $ 41,154 1,167 ) Comprehensive income $ 41,154 $ 13,715 $ 24,322 Refer Comprehensive income $ 41,154 $ 13,715 $ 24,322 Refer to accompanying $ 41,154 $ 13,715 $ 24,322 Refer to accompanying note . note . Refer to Note 18 – Accumulated Other Comprehensive Income ) for further information . 52 PART II Item 8 BALANCE . 52 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2019 2018 Assets Current million ) June 30 , 2019 2018 Assets Current asset : ) June 30 , 2019 2018 Assets Current asset : Cash Cash and cash equivalent $ 11,356 $ 11,946 Short-term investment 122,463 cash equivalent $ 11,356 $ 11,946 Short-term investment 122,463 121,822 Total 11,356 $ 11,946 Short-term investment 122,463 121,822 Total cash , cash $ 11,946 Short-term investment 122,463 121,822 Total cash , cash equivalent equivalent , and short-term investment 133,819 133,768 Accounts receivable , net , and short-term investment 133,819 133,768 Accounts receivable , net of for doubtful account of $ 411 and $ 377 29,524 26,481 of $ 411 and $ 377 29,524 26,481 Inventories 2,063 2,662 $ 411 and $ 377 29,524 26,481 Inventories 2,063 2,662 Other 411 and $ 377 29,524 26,481 Inventories 2,063 2,662 Other 10,146 $ 377 29,524 26,481 Inventories 2,063 2,662 Other 10,146 6,751 Total 377 29,524 26,481 Inventories 2,063 2,662 Other 10,146 6,751 Total current 26,481 Inventories 2,063 2,662 Other 10,146 6,751 Total current asset 175,552 Inventories 2,063 2,662 Other 10,146 6,751 Total current asset 175,552 169,662 10,146 6,751 Total current asset 175,552 169,662 Property and equipment , 6,751 Total current asset 175,552 169,662 Property and equipment , net of accumulated depreciation of $ 35,330 and $ 29,223 36,477 29,460 of $ 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use $ 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use asset 35,330 and $ 29,223 36,477 29,460 Operating lease right-of-use asset 7,379 29,460 Operating lease right-of-use asset 7,379 6,686 Equity investment 2,649 1,862 Operating lease right-of-use asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill asset 7,379 6,686 Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible 7,379 6,686 Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset Equity investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset , net investment 2,649 1,862 Goodwill 42,026 35,683 Intangible asset , net 7,750 35,683 Intangible asset , net 7,750 8,053 Other long-term asset 14,723 Intangible asset , net 7,750 8,053 Other long-term asset 14,723 7,442 7,750 8,053 Other long-term asset 14,723 7,442 Total asset $ 286,556 8,053 Other long-term asset 14,723 7,442 Total asset $ 286,556 $ 14,723 7,442 Total asset $ 286,556 $ 258,848 Liabilities and stockholder Total asset $ 286,556 $ 258,848 Liabilities and stockholder ’ equity liability : Accounts payable $ 9,382 $ 8,617 Current portion of Accounts payable $ 9,382 $ 8,617 Current portion of long-term debt Current portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 portion of long-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term debt 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 5,516 3,998 Accrued compensation 6,830 6,103 Short-term income tax 5,665 2,121 6,830 6,103 Short-term income tax 5,665 2,121 Short-term unearned revenue 32,676 6,103 Short-term income tax 5,665 2,121 Short-term unearned revenue 32,676 28,905 5,665 2,121 Short-term unearned revenue 32,676 28,905 Other 9,351 8,744 Total 2,121 Short-term unearned revenue 32,676 28,905 Other 9,351 8,744 Total current unearned revenue 32,676 28,905 Other 9,351 8,744 Total current liability 69,420 revenue 32,676 28,905 Other 9,351 8,744 Total current liability 69,420 58,488 9,351 8,744 Total current liability 69,420 58,488 Long-term debt 66,662 72,242 8,744 Total current liability 69,420 58,488 Long-term debt 66,662 72,242 Long-term liability 69,420 58,488 Long-term debt 66,662 72,242 Long-term income tax 29,612 69,420 58,488 Long-term debt 66,662 72,242 Long-term income tax 29,612 30,265 66,662 72,242 Long-term income tax 29,612 30,265 Long-term unearned revenue 4,530 72,242 Long-term income tax 29,612 30,265 Long-term unearned revenue 4,530 3,815 29,612 30,265 Long-term unearned revenue 4,530 3,815 Deferred income tax 233 30,265 Long-term unearned revenue 4,530 3,815 Deferred income tax 233 541 4,530 3,815 Deferred income tax 233 541 Operating lease liability 6,188 3,815 Deferred income tax 233 541 Operating lease liability 6,188 5,568 233 541 Operating lease liability 6,188 5,568 Other long-term liability 7,581 541 Operating lease liability 6,188 5,568 Other long-term liability 7,581 5,211 6,188 5,568 Other long-term liability 7,581 5,211 Total liability 184,226 176,130 5,568 Other long-term liability 7,581 5,211 Total liability 184,226 176,130 Commitments liability 7,581 5,211 Total liability 184,226 176,130 Commitments and contingency Stockholders 7,581 5,211 Total liability 184,226 176,130 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,643 and 7,677 share authorized 24,000 ; outstanding 7,643 and 7,677 78,520 71,223 Retained 24,000 ; outstanding 7,643 and 7,677 78,520 71,223 Retained earnings 24,150 ; outstanding 7,643 and 7,677 78,520 71,223 Retained earnings 24,150 13,682 outstanding 7,643 and 7,677 78,520 71,223 Retained earnings 24,150 13,682 Accumulated 7,677 78,520 71,223 Retained earnings 24,150 13,682 Accumulated other comprehensive loss 78,520 71,223 Retained earnings 24,150 13,682 Accumulated other comprehensive loss ( Accumulated other comprehensive loss ( 340 ) ( 2,187 ) Total loss ( 340 ) ( 2,187 ) Total stockholder ’ equity ) Total stockholder ’ equity 102,330 82,718 Total liability and stockholder Total stockholder ’ equity 102,330 82,718 Total liability and stockholder ’ and stockholder ’ equity $ 286,556 $ 258,848 Refer to accompanying ’ equity $ 286,556 $ 258,848 Refer to accompanying note . Refer to accompanying note . 53 PART II Item 8 CASH . 53 PART II Item 8 CASH FLOWS S TATEMENTS ( million ) Year Ended June 30 , 2019 2018 2017 Operations Year Ended June 30 , 2019 2018 2017 Operations Net income Ended June 30 , 2019 2018 2017 Operations Net income $ June 30 , 2019 2018 2017 Operations Net income $ 39,240 2017 Operations Net income $ 39,240 $ 16,571 $ 25,489 Adjustments Net income $ 39,240 $ 16,571 $ 25,489 Adjustments to reconcile $ 39,240 $ 16,571 $ 25,489 Adjustments to reconcile net income , amortization , and other 11,682 10,261 8,778 Stock-based compensation expense amortization , and other 11,682 10,261 8,778 Stock-based compensation expense 4,652 , and other 11,682 10,261 8,778 Stock-based compensation expense 4,652 3,940 10,261 8,778 Stock-based compensation expense 4,652 3,940 3,266 Net recognized gain 8,778 Stock-based compensation expense 4,652 3,940 3,266 Net recognized gain on Stock-based compensation expense 4,652 3,940 3,266 Net recognized gain on investment on investment and derivative ( 792 ) ( 2,212 ) ( derivative ( 792 ) ( 2,212 ) ( 2,073 ) Deferred ) ( 2,212 ) ( 2,073 ) Deferred income tax ( ) Deferred income tax ( 6,463 ) ( 5,143 ) ( tax ( 6,463 ) ( 5,143 ) ( 829 ) Changes ) ( 5,143 ) ( 829 ) Changes in operating asset liability : Accounts receivable ( 2,812 ) ( 3,862 ) ( receivable ( 2,812 ) ( 3,862 ) ( 1,216 ) Inventories ) ( 3,862 ) ( 1,216 ) Inventories 597 ( 465 ) ( 1,216 ) Inventories 597 ( 465 ) 50 Other 1,216 ) Inventories 597 ( 465 ) 50 Other current asset Inventories 597 ( 465 ) 50 Other current asset ( 1,718 50 Other current asset ( 1,718 ) ( 952 ) 1,028 asset ( 1,718 ) ( 952 ) 1,028 Other long-term asset 1,718 ) ( 952 ) 1,028 Other long-term asset ( 1,834 1,028 Other long-term asset ( 1,834 ) ( 285 ) ( asset ( 1,834 ) ( 285 ) ( 917 ) Accounts ) ( 285 ) ( 917 ) Accounts payable 232 1,148 ( 917 ) Accounts payable 232 1,148 81 Unearned revenue 4,462 917 ) Accounts payable 232 1,148 81 Unearned revenue 4,462 5,922 ) Accounts payable 232 1,148 81 Unearned revenue 4,462 5,922 3,820 232 1,148 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 1,148 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 18,183 81 Unearned revenue 4,462 5,922 3,820 Income tax 2,929 18,183 1,792 4,462 5,922 3,820 Income tax 2,929 18,183 1,792 Other current liability 5,922 3,820 Income tax 2,929 18,183 1,792 Other current liability 1,419 3,820 Income tax 2,929 18,183 1,792 Other current liability 1,419 798 18,183 1,792 Other current liability 1,419 798 356 Other long-term liability 1,792 Other current liability 1,419 798 356 Other long-term liability 591 Other current liability 1,419 798 356 Other long-term liability 591 ( 798 356 Other long-term liability 591 ( 20 ) ( 118 Other long-term liability 591 ( 20 ) ( 118 ) Net 591 ( 20 ) ( 118 ) Net cash from operation ) Net cash from operation 52,185 43,884 39,507 Financing Repayments of Net cash from operation 52,185 43,884 39,507 Financing Repayments of short-term cash from operation 52,185 43,884 39,507 Financing Repayments of short-term debt short-term debt , maturity of 90 day or le , net day or le , net 0 ( 7,324 ) ( 4,963 le , net 0 ( 7,324 ) ( 4,963 ) Proceeds 0 ( 7,324 ) ( 4,963 ) Proceeds from issuance of Proceeds from issuance of debt 0 7,183 44,344 Repayments of debt from issuance of debt 0 7,183 44,344 Repayments of debt ( issuance of debt 0 7,183 44,344 Repayments of debt ( 4,000 44,344 Repayments of debt ( 4,000 ) ( 10,060 ) ( debt ( 4,000 ) ( 10,060 ) ( 7,922 ) Common ) ( 10,060 ) ( 7,922 ) Common stock issued 1,142 7,922 ) Common stock issued 1,142 1,002 772 Common stock repurchased ) Common stock issued 1,142 1,002 772 Common stock repurchased ( Common stock issued 1,142 1,002 772 Common stock repurchased ( 19,543 772 Common stock repurchased ( 19,543 ) ( 10,721 ) ( repurchased ( 19,543 ) ( 10,721 ) ( 11,788 ) Common ) ( 10,721 ) ( 11,788 ) Common stock cash dividend stock cash dividend paid ( 13,811 ) ( 12,699 ) ( paid ( 13,811 ) ( 12,699 ) ( 11,845 ) Other ) ( 12,699 ) ( 11,845 ) Other , net ( ) Other , net ( 675 ) ( 971 ) ( net ( 675 ) ( 971 ) ( 190 ) Net ) ( 971 ) ( 190 ) Net cash from ( used in ) financing ( 36,887 ) ( 33,590 ) 8,408 financing ( 36,887 ) ( 33,590 ) 8,408 Investing Additions to 36,887 ) ( 33,590 ) 8,408 Investing Additions to property and to property and equipment ( 13,925 ) ( 11,632 ) ( equipment ( 13,925 ) ( 11,632 ) ( 8,129 ) Acquisition ) ( 11,632 ) ( 8,129 ) Acquisition of company , intangible and other asset ( 2,388 ) ( 888 ) ( asset ( 2,388 ) ( 888 ) ( 25,944 ) Purchases ) ( 888 ) ( 25,944 ) Purchases of investment ( ) Purchases of investment ( 57,697 ) ( 137,380 ) ( investment ( 57,697 ) ( 137,380 ) ( 176,905 ) Maturities ) ( 137,380 ) ( 176,905 ) Maturities of investment 20,043 176,905 ) Maturities of investment 20,043 26,360 28,044 Sales of investment ) Maturities of investment 20,043 26,360 28,044 Sales of investment 38,194 Maturities of investment 20,043 26,360 28,044 Sales of investment 38,194 117,577 26,360 28,044 Sales of investment 38,194 117,577 136,350 Securities lending payable 28,044 Sales of investment 38,194 117,577 136,350 Securities lending payable 0 Sales of investment 38,194 117,577 136,350 Securities lending payable 0 ( 117,577 136,350 Securities lending payable 0 ( 98 ) ( 197 Securities lending payable 0 ( 98 ) ( 197 ) Net 0 ( 98 ) ( 197 ) Net cash used in cash used in investing ( 15,773 ) ( 6,061 ) ( investing ( 15,773 ) ( 6,061 ) ( 46,781 ) Effect ) ( 6,061 ) ( 46,781 ) Effect of foreign exchange cash and cash equivalent ( 115 ) 50 19 Net change cash equivalent ( 115 ) 50 19 Net change in cash equivalent ( 115 ) 50 19 Net change in cash and cash and cash equivalent ( 590 ) 4,283 1,153 Cash and cash equivalent ( 590 ) 4,283 1,153 Cash and cash equivalent equivalent ( 590 ) 4,283 1,153 Cash and cash equivalent , equivalent , beginning of period 11,946 7,663 6,510 Cash and cash , beginning of period 11,946 7,663 6,510 Cash and cash equivalent beginning of period 11,946 7,663 6,510 Cash and cash equivalent , , end of period $ 11,356 $ 11,946 $ 7,663 Refer of period $ 11,356 $ 11,946 $ 7,663 Refer to accompanying $ 11,356 $ 11,946 $ 7,663 Refer to accompanying note . Refer to accompanying note . 54 PART II Item 8 STOCKHOLDERS . 54 PART II Item 8 STOCKHOLDERS ’ EQ UITY STATEMENTS million ) Year Ended June 30 , 2019 2018 2017 Common Year Ended June 30 , 2019 2018 2017 Common stock and Ended June 30 , 2019 2018 2017 Common stock and paid-in June 30 , 2019 2018 2017 Common stock and paid-in capital , beginning of period $ 71,223 $ 69,315 $ 68,178 Common of period $ 71,223 $ 69,315 $ 68,178 Common stock issued $ 71,223 $ 69,315 $ 68,178 Common stock issued 6,829 1,002 $ 68,178 Common stock issued 6,829 1,002 772 Common stock repurchased 68,178 Common stock issued 6,829 1,002 772 Common stock repurchased ( Common stock issued 6,829 1,002 772 Common stock repurchased ( 4,195 772 Common stock repurchased ( 4,195 ) ( 3,033 ) ( repurchased ( 4,195 ) ( 3,033 ) ( 2,987 ) Stock-based ) ( 3,033 ) ( 2,987 ) Stock-based compensation expense 4,652 2,987 ) Stock-based compensation expense 4,652 3,940 3,266 Other , net ) Stock-based compensation expense 4,652 3,940 3,266 Other , net 11 Stock-based compensation expense 4,652 3,940 3,266 Other , net 11 ( 3,940 3,266 Other , net 11 ( 1 ) 86 Balance Other , net 11 ( 1 ) 86 Balance , end net 11 ( 1 ) 86 Balance , end of period Balance , end of period 78,520 71,223 69,315 Retained earnings Balance , end of period 78,520 71,223 69,315 Retained earnings Balance , end of period 78,520 71,223 69,315 Retained earnings Balance , beginning Balance , beginning of period 13,682 17,769 13,118 Net income 39,240 , beginning of period 13,682 17,769 13,118 Net income 39,240 16,571 beginning of period 13,682 17,769 13,118 Net income 39,240 16,571 25,489 13,682 17,769 13,118 Net income 39,240 16,571 25,489 Common stock cash 17,769 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend 13,118 Net income 39,240 16,571 25,489 Common stock cash dividend ( Common stock cash dividend ( 14,103 ) ( 12,917 ) ( dividend ( 14,103 ) ( 12,917 ) ( 12,040 ) Common ) ( 12,917 ) ( 12,040 ) Common stock repurchased ( ) Common stock repurchased ( 15,346 ) ( 7,699 ) ( repurchased ( 15,346 ) ( 7,699 ) ( 8,798 ) Cumulative ) ( 7,699 ) ( 8,798 ) Cumulative effect of accounting Cumulative effect of accounting change 677 ( 42 ) 0 Balance of accounting change 677 ( 42 ) 0 Balance , end change 677 ( 42 ) 0 Balance , end of period Balance , end of period 24,150 13,682 17,769 Accumulated other comprehensive , end of period 24,150 13,682 17,769 Accumulated other comprehensive income end of period 24,150 13,682 17,769 Accumulated other comprehensive income ( , beginning of period ( 2,187 ) 627 1,794 Other comprehensive of period ( 2,187 ) 627 1,794 Other comprehensive income ( period ( 2,187 ) 627 1,794 Other comprehensive income ( loss comprehensive income ( loss ) 1,914 ( 2,856 ) ( 1,167 ( loss ) 1,914 ( 2,856 ) ( 1,167 ) Cumulative 1,914 ( 2,856 ) ( 1,167 ) Cumulative effect of accounting effect of accounting change ( 67 ) 42 0 Balance , accounting change ( 67 ) 42 0 Balance , end of change ( 67 ) 42 0 Balance , end of period , end of period ( 340 ) ( 2,187 ) 627 period ( 340 ) ( 2,187 ) 627 Total stockholder ’ 340 ) ( 2,187 ) 627 Total stockholder ’ equity $ Total stockholder ’ equity $ 102,330 $ 82,718 $ 87,711 Cash ’ equity $ 102,330 $ 82,718 $ 87,711 Cash dividend declared $ 102,330 $ 82,718 $ 87,711 Cash dividend declared per common declared per common share $ 1.84 $ 1.68 $ 1.56 Refer common share $ 1.84 $ 1.68 $ 1.56 Refer to accompanying $ 1.84 $ 1.68 $ 1.56 Refer to accompanying note . Refer to accompanying note . 55 PART II Item 8 NOTES . 55 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles content such a Microsoft Office 365 , Microsoft Azure , Microsoft Microsoft Azure , Microsoft Dynamics 365 , and Xbox Live ; online advertising and LinkedIn . 56 PART II Item 8 Revenue . 56 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 20 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 57 PART II Item 8 Judgment . 57 PART II Item 8 Judgment is required to determine license . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , long-term account June 30 , 2019 and 2018 , long-term account receivable , doubtful account , wa $ 2.2 billion and $ 1.8 billion $ 2.2 billion and $ 1.8 billion , respectively , and million ) Year Ended June 30 , 2019 2018 2017 Balance Year Ended June 30 , 2019 2018 2017 Balance , beginning Ended June 30 , 2019 2018 2017 Balance , beginning of June 30 , 2019 2018 2017 Balance , beginning of period , beginning of period $ 397 $ 361 $ 409 Charged of period $ 397 $ 361 $ 409 Charged to cost $ 397 $ 361 $ 409 Charged to cost and other Charged to cost and other 153 134 58 Write-offs ( 116 to cost and other 153 134 58 Write-offs ( 116 ) cost and other 153 134 58 Write-offs ( 116 ) ( 153 134 58 Write-offs ( 116 ) ( 98 ) ( Write-offs ( 116 ) ( 98 ) ( 106 ) Balance ) ( 98 ) ( 106 ) Balance , end of , end of period $ 434 $ 397 $ 361 Allowance of period $ 434 $ 397 $ 361 Allowance for doubtful $ 434 $ 397 $ 361 Allowance for doubtful account included ( In million ) June 30 , 2019 2018 2017 Accounts million ) June 30 , 2019 2018 2017 Accounts receivable , ) June 30 , 2019 2018 2017 Accounts receivable , net June 30 , 2019 2018 2017 Accounts receivable , net of allowance for doubtful account $ 411 $ 377 $ 345 Other doubtful account $ 411 $ 377 $ 345 Other long-term asset $ 411 $ 377 $ 345 Other long-term asset 23 20 $ 345 Other long-term asset 23 20 16 Total $ 434 345 Other long-term asset 23 20 16 Total $ 434 $ Other long-term asset 23 20 16 Total $ 434 $ 397 23 20 16 Total $ 434 $ 397 $ 361 58 16 Total $ 434 $ 397 $ 361 58 PART II $ 434 $ 397 $ 361 58 PART II Item 8 434 $ 397 $ 361 58 PART II Item 8 Unearned 361 58 PART II Item 8 Unearned revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics busin service . Refer to Note 14 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where a period generally ranging from 90 day to three year . the amount a necessary . 59 PART II Item 8 Research . 59 PART II Item 8 Research and Development Research and . Advertising expense wa $ 1.6 billion , $ 1.6 billion $ 1.6 billion , $ 1.6 billion , and $ 1.5 1.6 billion , and $ 1.5 billion in fiscal year 2019 1.5 billion in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . Stock-Based Compensation available for current operation . 60 PART II Item 8 Debt . 60 PART II Item 8 Debt investment are classified a level are : • Level 1 – input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include actively traded on exchange . 61 PART II Item 8 • . 61 PART II Item 8 • Level 2 – input II Item 8 • Level 2 – input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability primarily swap contract . • Level 3 – input are generally unobservable flow model . Our Level 3 asset and liability include investment and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not over the lease term . 62 PART II Item 8 We . 62 PART II Item 8 We have lease agreem ents an annual basis ( May 1 for u ) and between , ranging from one to 20 year . We evaluate the Intra-Entity Asset Transfers In October 2016 , the Financial Accounting Standards adopted the guidance effective July 1 , 2018 . Adoption of guidance effective July 1 , 2018 . Adoption of the guidance in retained earnings of $ 557 million , which reversed the deferred tax asset of $ 2.8 billion , an increase in deferred tax liability of $ 2.1 billion , and a reduction other current asset of $ 152 million . Adoption of the , and Disclosure In January 2016 , the FASB issued a adopted the standard effective July 1 , 2018 . Adoption of standard effective July 1 , 2018 . Adoption of the standard consolidated cash flow statement . 63 PART II Item 8 Recent . 63 PART II Item 8 Recent Accounting Guid ance Not for Hedging Activities In August 2017 , the FASB issued new effective for u beginning July 1 , 2019 , with early u beginning July 1 , 2019 , with early adoption permitted – Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard , and system . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2019 2018 2017 Net Year Ended June 30 , 2019 2018 2017 Net income available Ended June 30 , 2019 2018 2017 Net income available for June 30 , 2019 2018 2017 Net income available for common shareholder ( A ) $ 39,240 $ 16,571 $ 25,489 Weighted A ) $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding $ 39,240 $ 16,571 $ 25,489 Weighted average outstanding share of common stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based ( B ) 7,673 7,700 7,746 Dilutive effect of stock-based award Dilutive effect of stock-based award 80 94 86 Common stock and effect of stock-based award 80 94 86 Common stock and common of stock-based award 80 94 86 Common stock and common stock stock equivalent ( C ) 7,753 7,794 7,832 Earnings Per Share equivalent ( C ) 7,753 7,794 7,832 Earnings Per Share Basic ( C ) 7,753 7,794 7,832 Earnings Per Share Basic ( Basic ( A/B ) $ 5.11 $ 2.15 $ 3.29 Diluted A/B ) $ 5.11 $ 2.15 $ 3.29 Diluted ( A/C $ 5.11 $ 2.15 $ 3.29 Diluted ( A/C ) $ Diluted ( A/C ) $ 5.06 $ 2.13 $ 3.25 Anti-dilutive A/C ) $ 5.06 $ 2.13 $ 3.25 Anti-dilutive stock-based award $ 5.06 $ 2.13 $ 3.25 Anti-dilutive stock-based award excluded from during the period presented . 64 PART II Item 8 NOTE . 64 PART II Item 8 NOTE 3 — OTHER INCOME PART II Item 8 NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2019 2018 2017 Interest Year Ended June 30 , 2019 2018 2017 Interest and dividend Ended June 30 , 2019 2018 2017 Interest and dividend income June 30 , 2019 2018 2017 Interest and dividend income $ Interest and dividend income $ 2,762 $ 2,214 $ 1,387 Interest dividend income $ 2,762 $ 2,214 $ 1,387 Interest expense ( $ 2,762 $ 2,214 $ 1,387 Interest expense ( 2,686 ) $ 1,387 Interest expense ( 2,686 ) ( 2,733 ) ( expense ( 2,686 ) ( 2,733 ) ( 2,222 ) Net ) ( 2,733 ) ( 2,222 ) Net recognized gain on Net recognized gain on investment 648 2,399 2,583 Net gain ( recognized gain on investment 648 2,399 2,583 Net gain ( loss gain on investment 648 2,399 2,583 Net gain ( loss ) ( loss ) on derivative 144 ( 187 ) ( 510 ) on derivative 144 ( 187 ) ( 510 ) Net 144 ( 187 ) ( 510 ) Net loss on foreign on foreign currency remeasurements ( 82 ) ( 218 ) ( remeasurements ( 82 ) ( 218 ) ( 111 ) Other ) ( 218 ) ( 111 ) Other , net ( ) Other , net ( 57 ) ( 59 ) ( net ( 57 ) ( 59 ) ( 251 ) Total ) ( 59 ) ( 251 ) Total $ 729 $ ( 251 ) Total $ 729 $ 1,416 $ 876 Net ) Total $ 729 $ 1,416 $ 876 Net Recognized Gains $ 729 $ 1,416 $ 876 Net Recognized Gains ( Losses million ) Year Ended June 30 , 2019 2018 2017 Realized Year Ended June 30 , 2019 2018 2017 Realized gain from Ended June 30 , 2019 2018 2017 Realized gain from sale June 30 , 2019 2018 2017 Realized gain from sale of sale of available-for-sale security $ 12 $ 27 $ 108 Realized available-for-sale security $ 12 $ 27 $ 108 Realized loss from $ 12 $ 27 $ 108 Realized loss from sale of sale of available-for-sale security ( 93 ) ( 987 ) ( security ( 93 ) ( 987 ) ( 162 ) Other-than-temporary ) ( 987 ) ( 162 ) Other-than-temporary impairment of investment Other-than-temporary impairment of investment ( 16 ) ( 6 ) ( investment ( 16 ) ( 6 ) ( 14 ) Total ) ( 6 ) ( 14 ) Total $ ( 97 14 ) Total $ ( 97 ) $ ( 966 ) ( 97 ) $ ( 966 ) $ ( 68 ) ( 966 ) $ ( 68 ) Net recognized gain ( million ) Year Ended June 30 , 2019 2018 2017 Net Year Ended June 30 , 2019 2018 2017 Net realized gain Ended June 30 , 2019 2018 2017 Net realized gain on June 30 , 2019 2018 2017 Net realized gain on investment gain on investment sold $ 276 $ 3,406 $ 2,692 Net investment sold $ 276 $ 3,406 $ 2,692 Net unrealized gain $ 276 $ 3,406 $ 2,692 Net unrealized gain on investment gain on investment still held 479 0 0 Impairments of investment on investment still held 479 0 0 Impairments of investment ( investment still held 479 0 0 Impairments of investment ( 10 0 Impairments of investment ( 10 ) ( 41 ) ( investment ( 10 ) ( 41 ) ( 41 ) Total ) ( 41 ) ( 41 ) Total $ 745 $ ( 41 ) Total $ 745 $ 3,365 $ 2,651 65 ) Total $ 745 $ 3,365 $ 2,651 65 PART II $ 745 $ 3,365 $ 2,651 65 PART II Item 8 745 $ 3,365 $ 2,651 65 PART II Item 8 NOTE 2,651 65 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Short-term Investments Equity Investments June 30 , 2019 Changes in Fair Equity Investments June 30 , 2019 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,211 $ 0 $ Commercial paper Level 2 $ 2,211 $ 0 $ 0 $ Level 2 $ 2,211 $ 0 $ 0 $ 2,211 $ $ 2,211 $ 0 $ 0 $ 2,211 $ 1,773 $ $ 0 $ 0 $ 2,211 $ 1,773 $ 438 $ $ 0 $ 2,211 $ 1,773 $ 438 $ 0 Certificates $ 2,211 $ 1,773 $ 438 $ 0 Certificates of deposit $ 1,773 $ 438 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,018 0 0 2,018 1,430 Certificates of deposit Level 2 2,018 0 0 2,018 1,430 588 of deposit Level 2 2,018 0 0 2,018 1,430 588 0 deposit Level 2 2,018 0 0 2,018 1,430 588 0 U.S. Level 2 2,018 0 0 2,018 1,430 588 0 U.S. government 2 2,018 0 0 2,018 1,430 588 0 U.S. government security 2,018 0 0 2,018 1,430 588 0 U.S. government security Level 0 0 2,018 1,430 588 0 U.S. government security Level 1 0 U.S. government security Level 1 104,925 1,854 ( 104 ) U.S. government security Level 1 104,925 1,854 ( 104 ) 106,675 government security Level 1 104,925 1,854 ( 104 ) 106,675 769 Level 1 104,925 1,854 ( 104 ) 106,675 769 105,906 0 104,925 1,854 ( 104 ) 106,675 769 105,906 0 U.S. agency 1,854 ( 104 ) 106,675 769 105,906 0 U.S. agency security ( 104 ) 106,675 769 105,906 0 U.S. agency security Level 104 ) 106,675 769 105,906 0 U.S. agency security Level 2 0 U.S. agency security Level 2 988 0 0 988 698 U.S. agency security Level 2 988 0 0 988 698 290 agency security Level 2 988 0 0 988 698 290 0 security Level 2 988 0 0 988 698 290 0 Foreign Level 2 988 0 0 988 698 290 0 Foreign government 2 988 0 0 988 698 290 0 Foreign government bond 988 0 0 988 698 290 0 Foreign government bond Level 0 0 988 698 290 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,350 4 ( 8 ) Foreign government bond Level 2 6,350 4 ( 8 ) 6,346 government bond Level 2 6,350 4 ( 8 ) 6,346 2,506 Level 2 6,350 4 ( 8 ) 6,346 2,506 3,840 0 6,350 4 ( 8 ) 6,346 2,506 3,840 0 Mortgage- and 4 ( 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed ( 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed security 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 3,554 10 ( 3 ) and asset-backed security Level 2 3,554 10 ( 3 ) 3,561 asset-backed security Level 2 3,554 10 ( 3 ) 3,561 0 Level 2 3,554 10 ( 3 ) 3,561 0 3,561 0 3,554 10 ( 3 ) 3,561 0 3,561 0 Corporate note 10 ( 3 ) 3,561 0 3,561 0 Corporate note and ( 3 ) 3,561 0 3,561 0 Corporate note and bond 3 ) 3,561 0 3,561 0 Corporate note and bond Level Corporate note and bond Level 2 7,437 111 ( 7 ) note and bond Level 2 7,437 111 ( 7 ) 7,541 and bond Level 2 7,437 111 ( 7 ) 7,541 0 Level 2 7,437 111 ( 7 ) 7,541 0 7,541 0 7,437 111 ( 7 ) 7,541 0 7,541 0 Corporate note 111 ( 7 ) 7,541 0 7,541 0 Corporate note and ( 7 ) 7,541 0 7,541 0 Corporate note and bond 7 ) 7,541 0 7,541 0 Corporate note and bond Level Corporate note and bond Level 3 15 0 0 15 0 note and bond Level 3 15 0 0 15 0 15 and bond Level 3 15 0 0 15 0 15 0 bond Level 3 15 0 0 15 0 15 0 Municipal Level 3 15 0 0 15 0 15 0 Municipal security 3 15 0 0 15 0 15 0 Municipal security Level 15 0 0 15 0 15 0 Municipal security Level 2 0 0 15 0 15 0 Municipal security Level 2 242 15 0 Municipal security Level 2 242 48 0 290 0 0 Municipal security Level 2 242 48 0 290 0 290 Municipal security Level 2 242 48 0 290 0 290 0 security Level 2 242 48 0 290 0 290 0 Municipal Level 2 242 48 0 290 0 290 0 Municipal security 2 242 48 0 290 0 290 0 Municipal security Level 242 48 0 290 0 290 0 Municipal security Level 3 48 0 290 0 290 0 Municipal security Level 3 7 290 0 Municipal security Level 3 7 0 0 7 0 0 Municipal security Level 3 7 0 0 7 0 7 Municipal security Level 3 7 0 0 7 0 7 0 security Level 3 7 0 0 7 0 7 0 Total Level 3 7 0 0 7 0 7 0 Total debt 3 7 0 0 7 0 7 0 Total debt investment 7 0 0 7 0 7 0 Total debt investment $ 0 0 7 0 7 0 Total debt investment $ 127,747 0 Total debt investment $ 127,747 $ 2,027 $ ( 122 debt investment $ 127,747 $ 2,027 $ ( 122 ) $ 127,747 $ 2,027 $ ( 122 ) $ 129,652 $ 7,176 $ ( 122 ) $ 129,652 $ 7,176 $ 122,476 $ 122 ) $ 129,652 $ 7,176 $ 122,476 $ 0 Changes $ 129,652 $ 7,176 $ 122,476 $ 0 Changes in Fair $ 7,176 $ 122,476 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investment $ 3,058 $ 409 $ 0 $ equity investment $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 0 Derivatives $ 3,771 $ 3,771 $ 0 $ 0 Derivatives , net $ 3,771 $ 0 $ 0 Derivatives , net ( a net ( a ) ( 13 ) 0 ( 13 ) a ) ( 13 ) 0 ( 13 ) 0 Total ( 13 ) 0 ( 13 ) 0 Total $ 136,468 ) 0 ( 13 ) 0 Total $ 136,468 $ 11,356 13 ) 0 Total $ 136,468 $ 11,356 $ 122,463 $ 0 Total $ 136,468 $ 11,356 $ 122,463 $ 2,649 66 $ 136,468 $ 11,356 $ 122,463 $ 2,649 66 PART II $ 11,356 $ 122,463 $ 2,649 66 PART II Item 8 11,356 $ 122,463 $ 2,649 66 PART II Item 8 ( 2,649 66 PART II Item 8 ( In million ) Fair Short-term Investments Equity Investments June 30 , 2018 Changes in Fair Equity Investments June 30 , 2018 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,513 $ 0 $ Commercial paper Level 2 $ 2,513 $ 0 $ 0 $ Level 2 $ 2,513 $ 0 $ 0 $ 2,513 $ $ 2,513 $ 0 $ 0 $ 2,513 $ 2,215 $ $ 0 $ 0 $ 2,513 $ 2,215 $ 298 $ $ 0 $ 2,513 $ 2,215 $ 298 $ 0 Certificates $ 2,513 $ 2,215 $ 298 $ 0 Certificates of deposit $ 2,215 $ 298 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,058 0 0 2,058 1,865 Certificates of deposit Level 2 2,058 0 0 2,058 1,865 193 of deposit Level 2 2,058 0 0 2,058 1,865 193 0 deposit Level 2 2,058 0 0 2,058 1,865 193 0 U.S. Level 2 2,058 0 0 2,058 1,865 193 0 U.S. government 2 2,058 0 0 2,058 1,865 193 0 U.S. government security 2,058 0 0 2,058 1,865 193 0 U.S. government security Level 0 0 2,058 1,865 193 0 U.S. government security Level 1 0 U.S. government security Level 1 108,120 62 ( 1,167 ) U.S. government security Level 1 108,120 62 ( 1,167 ) 107,015 government security Level 1 108,120 62 ( 1,167 ) 107,015 2,280 Level 1 108,120 62 ( 1,167 ) 107,015 2,280 104,735 0 108,120 62 ( 1,167 ) 107,015 2,280 104,735 0 U.S. agency 62 ( 1,167 ) 107,015 2,280 104,735 0 U.S. agency security ( 1,167 ) 107,015 2,280 104,735 0 U.S. agency security Level 1,167 ) 107,015 2,280 104,735 0 U.S. agency security Level 2 0 U.S. agency security Level 2 1,742 0 0 1,742 1,398 U.S. agency security Level 2 1,742 0 0 1,742 1,398 344 agency security Level 2 1,742 0 0 1,742 1,398 344 0 security Level 2 1,742 0 0 1,742 1,398 344 0 Foreign Level 2 1,742 0 0 1,742 1,398 344 0 Foreign government 2 1,742 0 0 1,742 1,398 344 0 Foreign government bond 1,742 0 0 1,742 1,398 344 0 Foreign government bond Level 0 0 1,742 1,398 344 0 Foreign government bond Level 1 0 Foreign government bond Level 1 22 0 0 22 0 Foreign government bond Level 1 22 0 0 22 0 22 government bond Level 1 22 0 0 22 0 22 0 bond Level 1 22 0 0 22 0 22 0 Foreign Level 1 22 0 0 22 0 22 0 Foreign government 1 22 0 0 22 0 22 0 Foreign government bond 22 0 0 22 0 22 0 Foreign government bond Level 0 0 22 0 22 0 Foreign government bond Level 2 0 Foreign government bond Level 2 5,063 1 ( 10 ) Foreign government bond Level 2 5,063 1 ( 10 ) 5,054 government bond Level 2 5,063 1 ( 10 ) 5,054 0 Level 2 5,063 1 ( 10 ) 5,054 0 5,054 0 5,063 1 ( 10 ) 5,054 0 5,054 0 Mortgage- and 1 ( 10 ) 5,054 0 5,054 0 Mortgage- and asset-backed ( 10 ) 5,054 0 5,054 0 Mortgage- and asset-backed security 10 ) 5,054 0 5,054 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 3,864 4 ( 13 ) and asset-backed security Level 2 3,864 4 ( 13 ) 3,855 asset-backed security Level 2 3,864 4 ( 13 ) 3,855 0 Level 2 3,864 4 ( 13 ) 3,855 0 3,855 0 3,864 4 ( 13 ) 3,855 0 3,855 0 Corporate note 4 ( 13 ) 3,855 0 3,855 0 Corporate note and ( 13 ) 3,855 0 3,855 0 Corporate note and bond 13 ) 3,855 0 3,855 0 Corporate note and bond Level Corporate note and bond Level 2 6,929 21 ( 56 ) note and bond Level 2 6,929 21 ( 56 ) 6,894 and bond Level 2 6,929 21 ( 56 ) 6,894 0 Level 2 6,929 21 ( 56 ) 6,894 0 6,894 0 6,929 21 ( 56 ) 6,894 0 6,894 0 Corporate note 21 ( 56 ) 6,894 0 6,894 0 Corporate note and ( 56 ) 6,894 0 6,894 0 Corporate note and bond 56 ) 6,894 0 6,894 0 Corporate note and bond Level Corporate note and bond Level 3 15 0 0 15 0 note and bond Level 3 15 0 0 15 0 15 and bond Level 3 15 0 0 15 0 15 0 bond Level 3 15 0 0 15 0 15 0 Municipal Level 3 15 0 0 15 0 15 0 Municipal security 3 15 0 0 15 0 15 0 Municipal security Level 15 0 0 15 0 15 0 Municipal security Level 2 0 0 15 0 15 0 Municipal security Level 2 271 15 0 Municipal security Level 2 271 37 ( 1 ) 0 Municipal security Level 2 271 37 ( 1 ) 307 Municipal security Level 2 271 37 ( 1 ) 307 0 Level 2 271 37 ( 1 ) 307 0 307 0 271 37 ( 1 ) 307 0 307 0 Total debt 37 ( 1 ) 307 0 307 0 Total debt investment ( 1 ) 307 0 307 0 Total debt investment $ 1 ) 307 0 307 0 Total debt investment $ 130,597 0 Total debt investment $ 130,597 $ 125 $ ( 1,247 debt investment $ 130,597 $ 125 $ ( 1,247 ) $ 130,597 $ 125 $ ( 1,247 ) $ 129,475 $ 7,758 $ ( 1,247 ) $ 129,475 $ 7,758 $ 121,717 $ 1,247 ) $ 129,475 $ 7,758 $ 121,717 $ 0 Equity $ 129,475 $ 7,758 $ 121,717 $ 0 Equity investment Level $ 7,758 $ 121,717 $ 0 Equity investment Level 1 $ $ 0 Equity investment Level 1 $ 533 $ 246 $ Equity investment Level 1 $ 533 $ 246 $ 0 $ Level 1 $ 533 $ 246 $ 0 $ 287 Equity $ 533 $ 246 $ 0 $ 287 Equity investment Level $ 246 $ 0 $ 287 Equity investment Level 3 18 $ 287 Equity investment Level 3 18 0 0 18 Equity 287 Equity investment Level 3 18 0 0 18 Equity investment Equity investment Level 3 18 0 0 18 Equity investment Other investment Level 3 18 0 0 18 Equity investment Other 1,558 Level 3 18 0 0 18 Equity investment Other 1,558 0 0 18 Equity investment Other 1,558 0 1 1,557 Total equity 18 Equity investment Other 1,558 0 1 1,557 Total equity investment Equity investment Other 1,558 0 1 1,557 Total equity investment $ investment Other 1,558 0 1 1,557 Total equity investment $ 2,109 1,557 Total equity investment $ 2,109 $ 246 $ 1 $ equity investment $ 2,109 $ 246 $ 1 $ 1,862 Cash $ 2,109 $ 246 $ 1 $ 1,862 Cash $ 3,942 $ 246 $ 1 $ 1,862 Cash $ 3,942 $ 3,942 1 $ 1,862 Cash $ 3,942 $ 3,942 $ 0 $ 1,862 Cash $ 3,942 $ 3,942 $ 0 $ 0 Derivatives $ 3,942 $ 3,942 $ 0 $ 0 Derivatives , net $ 3,942 $ 0 $ 0 Derivatives , net ( a , net ( a ) 104 0 104 0 Total $ net ( a ) 104 0 104 0 Total $ 135,630 ( a ) 104 0 104 0 Total $ 135,630 $ a ) 104 0 104 0 Total $ 135,630 $ 11,946 0 104 0 Total $ 135,630 $ 11,946 $ 121,822 $ 0 Total $ 135,630 $ 11,946 $ 121,822 $ 1,862 ( $ 135,630 $ 11,946 $ 121,822 $ 1,862 ( a ) $ 11,946 $ 121,822 $ 1,862 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information hierarchy . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , equity investment June 30 , 2019 and 2018 , equity investment without readily price or impairment were $ 1.2 billion and $ 697 million $ 1.2 billion and $ 697 million , respectively . As respectively . As of June 30 , 2019 , we had As of June 30 , 2019 , we had no collateral security . As of June 30 , 2018 , collateral received As of June 30 , 2018 , collateral received under agreement for loaned security wa $ 1.8 billion and primarily comprised U.S. unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2019 U.S. government and Fair Value June 30 , 2019 U.S. government and agency security government and agency security $ 1,491 $ ( 1 ) $ security $ 1,491 $ ( 1 ) $ 39,158 $ ( $ ( 1 ) $ 39,158 $ ( 103 ) $ ) $ 39,158 $ ( 103 ) $ 40,649 $ ( $ ( 103 ) $ 40,649 $ ( 104 ) Foreign ) $ 40,649 $ ( 104 ) Foreign government bond 25 104 ) Foreign government bond 25 0 77 ( 8 ) ) Foreign government bond 25 0 77 ( 8 ) 102 Foreign government bond 25 0 77 ( 8 ) 102 ( bond 25 0 77 ( 8 ) 102 ( 8 ) 0 77 ( 8 ) 102 ( 8 ) Mortgage- and ( 8 ) 102 ( 8 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 664 ( 1 ) 378 ( and asset-backed security 664 ( 1 ) 378 ( 2 ) security 664 ( 1 ) 378 ( 2 ) 1,042 ( ( 1 ) 378 ( 2 ) 1,042 ( 3 ) ) 378 ( 2 ) 1,042 ( 3 ) Corporate note ( 2 ) 1,042 ( 3 ) Corporate note and bond ) Corporate note and bond 498 ( 3 ) 376 ( note and bond 498 ( 3 ) 376 ( 4 ) bond 498 ( 3 ) 376 ( 4 ) 874 ( ( 3 ) 376 ( 4 ) 874 ( 7 ) ) 376 ( 4 ) 874 ( 7 ) Total $ ( 4 ) 874 ( 7 ) Total $ 2,678 $ ( 7 ) Total $ 2,678 $ ( 5 ) $ Total $ 2,678 $ ( 5 ) $ 39,989 $ ( $ ( 5 ) $ 39,989 $ ( 117 ) $ ) $ 39,989 $ ( 117 ) $ 42,667 $ ( $ ( 117 ) $ 42,667 $ ( 122 ) 67 ) $ 42,667 $ ( 122 ) 67 PART II Item 42,667 $ ( 122 ) 67 PART II Item 8 Less ) 67 PART II Item 8 Less than 12 Months 12 II Item 8 Less than 12 Months 12 Months or Greater 8 Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2018 U.S. government and Fair Value June 30 , 2018 U.S. government and agency security government and agency security $ 82,352 $ ( 1,064 ) $ security $ 82,352 $ ( 1,064 ) $ 4,459 $ ( $ ( 1,064 ) $ 4,459 $ ( 103 ) $ ) $ 4,459 $ ( 103 ) $ 86,811 $ ( $ ( 103 ) $ 86,811 $ ( 1,167 ) Foreign ) $ 86,811 $ ( 1,167 ) Foreign government bond 3,457 1,167 ) Foreign government bond 3,457 ( 7 ) 13 ( Foreign government bond 3,457 ( 7 ) 13 ( 3 ) bond 3,457 ( 7 ) 13 ( 3 ) 3,470 ( ( 7 ) 13 ( 3 ) 3,470 ( 10 ) ) 13 ( 3 ) 3,470 ( 10 ) Mortgage- and ( 3 ) 3,470 ( 10 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 2,072 ( 9 ) 96 ( and asset-backed security 2,072 ( 9 ) 96 ( 4 ) security 2,072 ( 9 ) 96 ( 4 ) 2,168 ( ( 9 ) 96 ( 4 ) 2,168 ( 13 ) ) 96 ( 4 ) 2,168 ( 13 ) Corporate note ( 4 ) 2,168 ( 13 ) Corporate note and bond ) Corporate note and bond 3,111 ( 43 ) 301 ( note and bond 3,111 ( 43 ) 301 ( 13 ) bond 3,111 ( 43 ) 301 ( 13 ) 3,412 ( ( 43 ) 301 ( 13 ) 3,412 ( 56 ) ) 301 ( 13 ) 3,412 ( 56 ) Municipal security ( 13 ) 3,412 ( 56 ) Municipal security 45 ( ( 56 ) Municipal security 45 ( 1 ) 0 0 ) Municipal security 45 ( 1 ) 0 0 45 ( security 45 ( 1 ) 0 0 45 ( 1 ) 45 ( 1 ) 0 0 45 ( 1 ) Total ( 1 ) 0 0 45 ( 1 ) Total $ ) 0 0 45 ( 1 ) Total $ 91,037 $ ( 1 ) Total $ 91,037 $ ( 1,124 ) $ Total $ 91,037 $ ( 1,124 ) $ 4,869 $ ( $ ( 1,124 ) $ 4,869 $ ( 123 ) $ ) $ 4,869 $ ( 123 ) $ 95,906 $ ( $ ( 123 ) $ 95,906 $ ( 1,247 ) Unrealized ) $ 95,906 $ ( 1,247 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2019 Due in one Fair Value June 30 , 2019 Due in one year or one year or le $ 53,200 $ 53,124 Due after one or le $ 53,200 $ 53,124 Due after one year through one year through five year 47,016 47,783 Due after five year year through five year 47,016 47,783 Due after five year through Due after five year through 10 year 26,658 27,824 Due after five year through 10 year 26,658 27,824 Due after 10 year year through 10 year 26,658 27,824 Due after 10 year 873 year 26,658 27,824 Due after 10 year 873 921 Total $ 27,824 Due after 10 year 873 921 Total $ 127,747 $ Due after 10 year 873 921 Total $ 127,747 $ 129,652 year 873 921 Total $ 127,747 $ 129,652 NOTE 5 — 921 Total $ 127,747 $ 129,652 NOTE 5 — DERIVATIVES We $ 127,747 $ 129,652 NOTE 5 — DERIVATIVES We use derivative swap , and forward . 68 PART II Item 8 Other . 68 PART II Item 8 Other Interest Rate Securities held maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2019 , our long-term As of June 30 , 2019 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2019 June 30 , million ) June 30 , 2019 June 30 , 2018 Designated June 30 , 2019 June 30 , 2018 Designated a Hedging , 2019 June 30 , 2018 Designated a Hedging Instruments Foreign Foreign exchange contract sold $ 6,034 $ 11,101 Not Designated a contract sold $ 6,034 $ 11,101 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 14,889 9,425 Foreign exchange contract sold Foreign exchange contract purchased 14,889 9,425 Foreign exchange contract sold 15,614 9,425 Foreign exchange contract sold 15,614 13,374 Equity contract purchased 680 Foreign exchange contract sold 15,614 13,374 Equity contract purchased 680 49 15,614 13,374 Equity contract purchased 680 49 Equity contract sold 5 13,374 Equity contract purchased 680 49 Equity contract sold 5 5 680 49 Equity contract sold 5 5 Other contract purchased 1,327 49 Equity contract sold 5 5 Other contract purchased 1,327 878 5 5 Other contract purchased 1,327 878 Other contract sold 451 5 Other contract purchased 1,327 878 Other contract sold 451 472 1,327 878 Other contract sold 451 472 69 PART II Item 878 Other contract sold 451 472 69 PART II Item 8 Other contract sold 451 472 69 PART II Item 8 Fair 472 69 PART II Item 8 Fair Values of Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2019 June 30 , Assets Liabilities June 30 , 2019 June 30 , 2018 Changes June 30 , 2019 June 30 , 2018 Changes in Fair , 2019 June 30 , 2018 Changes in Fair Value Recorded Instruments Foreign exchange contract $ 0 $ 0 $ 174 $ exchange contract $ 0 $ 0 $ 174 $ 0 Changes $ 0 $ 0 $ 174 $ 0 Changes in Fair $ 0 $ 174 $ 0 Changes in Fair Value Recorded Hedging Instruments Foreign exchange contract 0 ( 93 ) 95 0 Foreign exchange contract 0 ( 93 ) 95 0 Not Designated contract 0 ( 93 ) 95 0 Not Designated a Hedging 0 ( 93 ) 95 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 204 ( 172 ) 256 ( Foreign exchange contract 204 ( 172 ) 256 ( 197 ) contract 204 ( 172 ) 256 ( 197 ) Equity contract ( 172 ) 256 ( 197 ) Equity contract 38 0 ( 197 ) Equity contract 38 0 2 ( 7 ) 197 ) Equity contract 38 0 2 ( 7 ) Other ) Equity contract 38 0 2 ( 7 ) Other contract contract 38 0 2 ( 7 ) Other contract 8 ( ( 7 ) Other contract 8 ( 7 ) 11 ( ) Other contract 8 ( 7 ) 11 ( 3 ) contract 8 ( 7 ) 11 ( 3 ) Gross amount ( 7 ) 11 ( 3 ) Gross amount of derivative ) Gross amount of derivative 250 ( 272 ) 538 ( amount of derivative 250 ( 272 ) 538 ( 207 ) derivative 250 ( 272 ) 538 ( 207 ) Gross amount ( 272 ) 538 ( 207 ) Gross amount of derivative in the balance sheet ( 113 ) 114 ( 152 ) balance sheet ( 113 ) 114 ( 152 ) 153 Cash ( 113 ) 114 ( 152 ) 153 Cash collateral received ) 114 ( 152 ) 153 Cash collateral received 0 ( ) 153 Cash collateral received 0 ( 78 ) 0 ( Cash collateral received 0 ( 78 ) 0 ( 235 ) received 0 ( 78 ) 0 ( 235 ) Net amount ( 78 ) 0 ( 235 ) Net amount of derivative Net amount of derivative $ 137 $ ( 236 ) $ derivative $ 137 $ ( 236 ) $ 386 $ ( $ ( 236 ) $ 386 $ ( 289 ) Reported ) $ 386 $ ( 289 ) Reported a Short-term investment a Short-term investment $ ( 13 ) $ 0 $ 104 $ ( 13 ) $ 0 $ 104 $ 0 Other 13 ) $ 0 $ 104 $ 0 Other current asset $ 0 $ 104 $ 0 Other current asset 146 0 $ 0 Other current asset 146 0 260 0 Other long-term 0 Other current asset 146 0 260 0 Other long-term asset Other current asset 146 0 260 0 Other long-term asset 4 current asset 146 0 260 0 Other long-term asset 4 0 260 0 Other long-term asset 4 0 22 0 Other current 0 Other long-term asset 4 0 22 0 Other current liability Other long-term asset 4 0 22 0 Other current liability 0 long-term asset 4 0 22 0 Other current liability 0 ( 22 0 Other current liability 0 ( 221 ) 0 ( Other current liability 0 ( 221 ) 0 ( 288 ) liability 0 ( 221 ) 0 ( 288 ) Other long-term ( 221 ) 0 ( 288 ) Other long-term liability 0 288 ) Other long-term liability 0 ( 15 ) 0 ( Other long-term liability 0 ( 15 ) 0 ( 1 ) liability 0 ( 15 ) 0 ( 1 ) Total $ ( 15 ) 0 ( 1 ) Total $ 137 $ ( 1 ) Total $ 137 $ ( 236 ) $ Total $ 137 $ ( 236 ) $ 386 $ ( $ ( 236 ) $ 386 $ ( 289 ) Gross ) $ 386 $ ( 289 ) Gross derivative asset and elected to offset were $ 247 million and $ 272 million $ 247 million and $ 272 million , respectively , a respectively , a of June 30 , 2019 , and $ a of June 30 , 2019 , and $ 533 million , 2019 , and $ 533 million and $ 207 million $ 533 million and $ 207 million , respectively , a respectively , a of June 30 , 2018 . The following a of June 30 , 2018 . The following table present ( In million ) Level 1 Level 2 Level 3 Total million ) Level 1 Level 2 Level 3 Total June 30 Level 1 Level 2 Level 3 Total June 30 , 2019 2 Level 3 Total June 30 , 2019 Derivative asset $ 3 Total June 30 , 2019 Derivative asset $ 0 $ , 2019 Derivative asset $ 0 $ 247 $ 3 $ Derivative asset $ 0 $ 247 $ 3 $ 250 Derivative $ 0 $ 247 $ 3 $ 250 Derivative liability 0 $ 247 $ 3 $ 250 Derivative liability 0 ( 272 3 $ 250 Derivative liability 0 ( 272 ) 0 ( 250 Derivative liability 0 ( 272 ) 0 ( 272 ) liability 0 ( 272 ) 0 ( 272 ) June 30 ( 272 ) 0 ( 272 ) June 30 , 2018 0 ( 272 ) June 30 , 2018 Derivative asset 1 272 ) June 30 , 2018 Derivative asset 1 535 2 30 , 2018 Derivative asset 1 535 2 538 Derivative liability , 2018 Derivative asset 1 535 2 538 Derivative liability ( 2018 Derivative asset 1 535 2 538 Derivative liability ( 1 Derivative asset 1 535 2 538 Derivative liability ( 1 ) 2 538 Derivative liability ( 1 ) ( 206 ) 0 liability ( 1 ) ( 206 ) 0 ( 207 ) 1 ) ( 206 ) 0 ( 207 ) 70 PART ( 206 ) 0 ( 207 ) 70 PART II Item ) 0 ( 207 ) 70 PART II Item 8 Fair ) 70 PART II Item 8 Fair Value Hedge Gains ( million ) Year Ended June 30 , 2019 2018 2017 Foreign Year Ended June 30 , 2019 2018 2017 Foreign Exchange Contracts Ended June 30 , 2019 2018 2017 Foreign Exchange Contracts Derivatives June 30 , 2019 2018 2017 Foreign Exchange Contracts Derivatives $ Foreign Exchange Contracts Derivatives $ 38 $ 25 $ 441 Hedged Contracts Derivatives $ 38 $ 25 $ 441 Hedged item 130 $ 38 $ 25 $ 441 Hedged item 130 78 ( 25 $ 441 Hedged item 130 78 ( 386 ) Total $ 441 Hedged item 130 78 ( 386 ) Total amount Hedged item 130 78 ( 386 ) Total amount of ineffectiveness Total amount of ineffectiveness $ 168 $ 103 $ 55 Equity of ineffectiveness $ 168 $ 103 $ 55 Equity Contracts Derivatives $ 168 $ 103 $ 55 Equity Contracts Derivatives $ 0 55 Equity Contracts Derivatives $ 0 $ ( 324 ) $ Derivatives $ 0 $ ( 324 ) $ ( 74 ) ( 324 ) $ ( 74 ) Hedged item 0 324 ( 74 ) Hedged item 0 324 74 Total amount of 74 ) Hedged item 0 324 74 Total amount of ineffectiveness ) Hedged item 0 324 74 Total amount of ineffectiveness $ Total amount of ineffectiveness $ 0 $ 0 $ 0 Amount of ineffectiveness $ 0 $ 0 $ 0 Amount of equity $ 0 $ 0 $ 0 Amount of equity contract excluded excluded from effectiveness assessment $ 0 $ 80 $ ( 80 effectiveness assessment $ 0 $ 80 $ ( 80 ) Cash 0 $ 80 $ ( 80 ) Cash Flow Hedge Gains million ) Year Ended June 30 , 2019 2018 2017 Effective Year Ended June 30 , 2019 2018 2017 Effective Portion Gains Ended June 30 , 2019 2018 2017 Effective Portion Gains recognized June 30 , 2019 2018 2017 Effective Portion Gains recognized in net of tax of $ 1 , $ 11 , and of $ 1 , $ 11 , and $ 4 $ $ 11 , and $ 4 $ 159 $ 219 $ , and $ 4 $ 159 $ 219 $ 328 Gains $ 4 $ 159 $ 219 $ 328 Gains reclassified from $ 159 $ 219 $ 328 Gains reclassified from accumulated other ( loss ) into revenue 341 185 555 Amount Excluded from loss ) into revenue 341 185 555 Amount Excluded from Effectiveness ) into revenue 341 185 555 Amount Excluded from Effectiveness Assessment expense ) , net ( 64 ) ( 255 ) ( net ( 64 ) ( 255 ) ( 389 ) We ) ( 255 ) ( 389 ) We do not have in AOCI a of June 30 , 2019 that will be a of June 30 , 2019 that will be reclassified into into earnings within the following 12 month . No significant amount to occur during fiscal year 2019 . Non-designated Derivative Gains ( million ) Year Ended June 30 , 2019 2018 2017 Foreign Year Ended June 30 , 2019 2018 2017 Foreign exchange contract Ended June 30 , 2019 2018 2017 Foreign exchange contract $ June 30 , 2019 2018 2017 Foreign exchange contract $ ( Foreign exchange contract $ ( 97 ) $ ( 33 ) ( 97 ) $ ( 33 ) $ ( 117 ) ( 33 ) $ ( 117 ) Equity contract 3 ( ( 117 ) Equity contract 3 ( 87 ) ( 114 ) Equity contract 3 ( 87 ) ( 114 ) Other 3 ( 87 ) ( 114 ) Other contract 35 ( ( 114 ) Other contract 35 ( 17 ) ( 3 ) Other contract 35 ( 17 ) ( 3 ) Total 35 ( 17 ) ( 3 ) Total $ ( 59 3 ) Total $ ( 59 ) $ ( 137 ) ( 59 ) $ ( 137 ) $ ( 234 ) ( 137 ) $ ( 234 ) 71 PART II Item ) $ ( 234 ) 71 PART II Item 8 NOTE ) 71 PART II Item 8 NOTE 6 — INVENTORIES The PART II Item 8 NOTE 6 — INVENTORIES The component of ( In million ) June 30 , 2019 2018 Raw material million ) June 30 , 2019 2018 Raw material $ 399 ) June 30 , 2019 2018 Raw material $ 399 $ 2019 2018 Raw material $ 399 $ 655 Work in process Raw material $ 399 $ 655 Work in process 53 54 $ 655 Work in process 53 54 Finished good 1,611 1,953 655 Work in process 53 54 Finished good 1,611 1,953 Total process 53 54 Finished good 1,611 1,953 Total $ 2,063 $ 53 54 Finished good 1,611 1,953 Total $ 2,063 $ 2,662 good 1,611 1,953 Total $ 2,063 $ 2,662 NOTE 7 — 1,953 Total $ 2,063 $ 2,662 NOTE 7 — PROPERTY AND $ 2,063 $ 2,662 NOTE 7 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2019 2018 Land $ million ) June 30 , 2019 2018 Land $ 1,540 $ ) June 30 , 2019 2018 Land $ 1,540 $ 1,254 , 2019 2018 Land $ 1,540 $ 1,254 Buildings and improvement 2018 Land $ 1,540 $ 1,254 Buildings and improvement 26,288 20,604 $ 1,254 Buildings and improvement 26,288 20,604 Leasehold improvement 5,316 4,735 1,254 Buildings and improvement 26,288 20,604 Leasehold improvement 5,316 4,735 Computer improvement 26,288 20,604 Leasehold improvement 5,316 4,735 Computer equipment and software 26,288 20,604 Leasehold improvement 5,316 4,735 Computer equipment and software 33,823 4,735 Computer equipment and software 33,823 27,633 Furniture and equipment 4,840 Computer equipment and software 33,823 27,633 Furniture and equipment 4,840 4,457 33,823 27,633 Furniture and equipment 4,840 4,457 Total , at cost 27,633 Furniture and equipment 4,840 4,457 Total , at cost 71,807 4,457 Total , at cost 71,807 58,683 Accumulated depreciation ( 35,330 Total , at cost 71,807 58,683 Accumulated depreciation ( 35,330 ) 71,807 58,683 Accumulated depreciation ( 35,330 ) ( 29,223 ) Total depreciation ( 35,330 ) ( 29,223 ) Total , net $ ) Total , net $ 36,477 $ 29,460 During fiscal year , net $ 36,477 $ 29,460 During fiscal year 2019 , $ 29,460 During fiscal year 2019 , 2018 , and 2017 During fiscal year 2019 , 2018 , and 2017 , depreciation 2019 , 2018 , and 2017 , depreciation expense wa $ , depreciation expense wa $ 9.7 billion , $ 7.7 billion $ 9.7 billion , $ 7.7 billion , and $ 6.1 7.7 billion , and $ 6.1 billion , respectively . We . We have committed $ 4.0 billion for the construction of leasehold improvement a of June 30 , 2019 . NOTE 8 a of June 30 , 2019 . NOTE 8 — BUSINESS 30 , 2019 . NOTE 8 — BUSINESS COMBINATIONS GitHub , GitHub , Inc. On October 25 , 2018 , we acquired Inc. On October 25 , 2018 , we acquired GitHub , platform , in a $ 7.5 billion stock transaction ( inclusive total cash payment of $ 1.3 billion in respect of vested our Intelligent Cloud segment . 72 PART II Item 8 The . 72 PART II Item 8 The allocation of the purchase wa completed a of June 30 , 2019 . The major a of June 30 , 2019 . The major class of , and short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 Other asset 234 Goodwill 5,497 Intangible asset 1,267 Other asset 143 Other liability Intangible asset 1,267 Other asset 143 Other liability ( 217 ) asset 143 Other liability ( 217 ) Total $ 6,924 The ( 217 ) Total $ 6,924 The goodwill recognized in connection Weighted Average Life Customer-related $ 648 8 year Technology-based 447 5 Average Life Customer-related $ 648 8 year Technology-based 447 5 year $ 648 8 year Technology-based 447 5 year Marketing-related 170 10 648 8 year Technology-based 447 5 year Marketing-related 170 10 year Technology-based 447 5 year Marketing-related 170 10 year Contract-based 2 2 447 5 year Marketing-related 170 10 year Contract-based 2 2 year Marketing-related 170 10 year Contract-based 2 2 year Total $ 1,267 170 10 year Contract-based 2 2 year Total $ 1,267 7 2 2 year Total $ 1,267 7 year Transactions recognized separately 2 year Total $ 1,267 7 year Transactions recognized separately from price allocation were approximately $ 600 million , primarily related to . LinkedIn Corporation On December 8 , 2016 , we completed Corporation On December 8 , 2016 , we completed our acquisition total purchase price of $ 27.0 billion . The purchase price primarily of cash of $ 26.9 billion . The acquisition is growth of LinkedIn , Office 365 , and Dynamics 365 . Office 365 , and Dynamics 365 . The financial result of date of the acquisition . 73 PART II Item 8 The . 73 PART II Item 8 The allocation of the purchase wa completed a of June 30 , 2017 . The major a of June 30 , 2017 . The major class of Cash and cash equivalent $ 1,328 Short-term investment 2,110 Other current equivalent $ 1,328 Short-term investment 2,110 Other current asset 697 Property investment 2,110 Other current asset 697 Property and equipment 1,529 Intangible asset 697 Property and equipment 1,529 Intangible asset 7,887 Goodwill ( and equipment 1,529 Intangible asset 7,887 Goodwill ( a ) 16,803 7,887 Goodwill ( a ) 16,803 Short-term debt ( b ) debt ( b ) ( 1,323 ) Other current liability ( ) Other current liability ( 1,117 ) Deferred income tax ( ) Deferred income tax ( 774 ) Other ( 131 ) ( 774 ) Other ( 131 ) Total purchase price $ ) Total purchase price $ 27,009 ( a ) Goodwill wa issued by LinkedIn on November 12 , 2014 , substantially all LinkedIn on November 12 , 2014 , substantially all of which LinkedIn . The remaining $ 18 million of note are not sheet . Refer to Note 11 – Debt for further information Weighted Average Life Customer-related $ 3,607 7 year Marketing-related ( trade Average Life Customer-related $ 3,607 7 year Marketing-related ( trade name Marketing-related ( trade name ) 2,148 20 year Technology-based 2,109 3 ( trade name ) 2,148 20 year Technology-based 2,109 3 year ) 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 2,148 20 year Technology-based 2,109 3 year Contract-based 23 5 year Technology-based 2,109 3 year Contract-based 23 5 year Fair value of 2,109 3 year Contract-based 23 5 year Fair value of intangible of intangible asset acquired $ 7,887 9 year Our consolidated income intangible asset acquired $ 7,887 9 year Our consolidated income statement million ) Year Ended June 30 , 2017 Revenue $ 2,271 Year Ended June 30 , 2017 Revenue $ 2,271 Operating loss 30 , 2017 Revenue $ 2,271 Operating loss ( 924 ) $ 2,271 Operating loss ( 924 ) Following are the supplemental had been consummated on July 1 , 2015 : ( In consummated on July 1 , 2015 : ( In million , amount ) Year Ended June 30 , 2017 2016 Revenue $ Year Ended June 30 , 2017 2016 Revenue $ 98,291 $ Ended June 30 , 2017 2016 Revenue $ 98,291 $ 94,490 , 2017 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 2016 Revenue $ 98,291 $ 94,490 Net income 25,179 19,128 Diluted 98,291 $ 94,490 Net income 25,179 19,128 Diluted earnings per share $ 94,490 Net income 25,179 19,128 Diluted earnings per share 3.21 19,128 Diluted earnings per share 3.21 2.38 These pro forma result Diluted earnings per share 3.21 2.38 These pro forma result were the earliest period presented . 74 PART II Item 8 Other . 74 PART II Item 8 Other During fiscal year 2019 8 Other During fiscal year 2019 , we completed 19 additional year 2019 , we completed 19 additional acquisition for $ 1.6 19 additional acquisition for $ 1.6 billion , substantially all of respective acquisition date . NOTE 9 — GOODWILL Changes in the ( In million ) June 30 , 2017 Acquisitions Other June million ) June 30 , 2017 Acquisitions Other June 30 , , 2017 Acquisitions Other June 30 , 2018 Acquisitions Other June Acquisitions Other June 30 , 2018 Acquisitions Other June 30 , , 2018 Acquisitions Other June 30 , 2019 Productivity and Business Acquisitions Other June 30 , 2019 Productivity and Business Processes $ Productivity and Business Processes $ 23,739 $ 72 $ 12 $ Business Processes $ 23,739 $ 72 $ 12 $ 23,823 $ $ 23,739 $ 72 $ 12 $ 23,823 $ 514 $ $ 72 $ 12 $ 23,823 $ 514 $ ( 60 $ 12 $ 23,823 $ 514 $ ( 60 ) $ 23,823 $ 514 $ ( 60 ) $ 24,277 Intelligent Cloud $ ( 60 ) $ 24,277 Intelligent Cloud 5,555 164 ( ) $ 24,277 Intelligent Cloud 5,555 164 ( 16 ) 5,703 $ 24,277 Intelligent Cloud 5,555 164 ( 16 ) 5,703 5,605 Intelligent Cloud 5,555 164 ( 16 ) 5,703 5,605 ( a 5,555 164 ( 16 ) 5,703 5,605 ( a ) 43 164 ( 16 ) 5,703 5,605 ( a ) 43 ( 5,703 5,605 ( a ) 43 ( a ) 11,351 More ) 43 ( a ) 11,351 More Personal Computing 5,828 394 ) 11,351 More Personal Computing 5,828 394 ( 65 ) 6,157 11,351 More Personal Computing 5,828 394 ( 65 ) 6,157 289 Personal Computing 5,828 394 ( 65 ) 6,157 289 ( 48 5,828 394 ( 65 ) 6,157 289 ( 48 ) 6,398 394 ( 65 ) 6,157 289 ( 48 ) 6,398 Total 65 ) 6,157 289 ( 48 ) 6,398 Total $ 35,122 6,157 289 ( 48 ) 6,398 Total $ 35,122 $ 630 48 ) 6,398 Total $ 35,122 $ 630 $ ( 69 6,398 Total $ 35,122 $ 630 $ ( 69 ) $ 35,122 $ 630 $ ( 69 ) $ 35,683 $ 6,408 $ ( 69 ) $ 35,683 $ 6,408 $ ( 65 69 ) $ 35,683 $ 6,408 $ ( 65 ) $ 35,683 $ 6,408 $ ( 65 ) $ 42,026 ( a $ ( 65 ) $ 42,026 ( a ) Includes goodwill ) Includes goodwill of $ 5.5 billion related to GitHub . to GitHub . See Note 8 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2019 , May 1 in our May 1 , 2019 , May 1 , 2018 1 , 2019 , May 1 , 2018 , or May 2019 , May 1 , 2018 , or May 1 , , 2018 , or May 1 , 2017 test . As , or May 1 , 2017 test . As of June test . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , accumulated goodwill June 30 , 2019 and 2018 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . NOTE 10 — $ 11.3 billion . NOTE 10 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2019 2018 Technology-based $ Carrying Amount June 30 , 2019 2018 Technology-based $ 7,691 $ Amount June 30 , 2019 2018 Technology-based $ 7,691 $ ( , 2019 2018 Technology-based $ 7,691 $ ( 5,771 ) $ Technology-based $ 7,691 $ ( 5,771 ) $ 1,920 $ 7,220 $ ( 5,771 ) $ 1,920 $ 7,220 $ ( 5,018 5,771 ) $ 1,920 $ 7,220 $ ( 5,018 ) $ 1,920 $ 7,220 $ ( 5,018 ) $ 2,202 Customer-related 4,709 $ ( 5,018 ) $ 2,202 Customer-related 4,709 ( 1,785 ) 5,018 ) $ 2,202 Customer-related 4,709 ( 1,785 ) 2,924 4,031 $ 2,202 Customer-related 4,709 ( 1,785 ) 2,924 4,031 ( 1,205 Customer-related 4,709 ( 1,785 ) 2,924 4,031 ( 1,205 ) 2,826 4,709 ( 1,785 ) 2,924 4,031 ( 1,205 ) 2,826 Marketing-related 1,785 ) 2,924 4,031 ( 1,205 ) 2,826 Marketing-related 4,165 ( 2,924 4,031 ( 1,205 ) 2,826 Marketing-related 4,165 ( 1,327 ) ( 1,205 ) 2,826 Marketing-related 4,165 ( 1,327 ) 2,838 4,006 ) 2,826 Marketing-related 4,165 ( 1,327 ) 2,838 4,006 ( 1,071 Marketing-related 4,165 ( 1,327 ) 2,838 4,006 ( 1,071 ) 2,935 4,165 ( 1,327 ) 2,838 4,006 ( 1,071 ) 2,935 Contract-based 1,327 ) 2,838 4,006 ( 1,071 ) 2,935 Contract-based 574 ( 2,838 4,006 ( 1,071 ) 2,935 Contract-based 574 ( 506 ) ( 1,071 ) 2,935 Contract-based 574 ( 506 ) 68 679 ) 2,935 Contract-based 574 ( 506 ) 68 679 ( 589 Contract-based 574 ( 506 ) 68 679 ( 589 ) 90 574 ( 506 ) 68 679 ( 589 ) 90 Total 506 ) 68 679 ( 589 ) 90 Total $ 17,139 68 679 ( 589 ) 90 Total $ 17,139 ( a 589 ) 90 Total $ 17,139 ( a ) $ ( ( a ) $ ( 9,389 ) $ 7,750 $ 15,936 $ ( 9,389 ) $ 7,750 $ 15,936 $ ( 7,883 9,389 ) $ 7,750 $ 15,936 $ ( 7,883 ) $ 7,750 $ 15,936 $ ( 7,883 ) $ 8,053 ( a $ ( 7,883 ) $ 8,053 ( a ) Includes intangible Includes intangible asset of $ 1.3 billion related to GitHub . to GitHub . See Note 8 – Business Combinations for further were identified during fiscal year 2019 , 2018 , or 2017 during fiscal year 2019 , 2018 , or 2017 . We 2019 , 2018 , or 2017 . We estimate that we to our intangible asset . 75 PART II Item 8 The . 75 PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2019 2018 Technology-based $ Year Ended June 30 , 2019 2018 Technology-based $ 814 5 Ended June 30 , 2019 2018 Technology-based $ 814 5 year , 2019 2018 Technology-based $ 814 5 year $ 178 4 2019 2018 Technology-based $ 814 5 year $ 178 4 year $ 814 5 year $ 178 4 year Marketing-related 177 10 814 5 year $ 178 4 year Marketing-related 177 10 year $ 178 4 year Marketing-related 177 10 year 14 5 year 178 4 year Marketing-related 177 10 year 14 5 year Contract-based year Marketing-related 177 10 year 14 5 year Contract-based 7 3 Marketing-related 177 10 year 14 5 year Contract-based 7 3 year year 14 5 year Contract-based 7 3 year 14 4 year 14 5 year Contract-based 7 3 year 14 4 year Customer-related year Contract-based 7 3 year 14 4 year Customer-related 710 8 Contract-based 7 3 year 14 4 year Customer-related 710 8 year year 14 4 year Customer-related 710 8 year 13 5 year 14 4 year Customer-related 710 8 year 13 5 year Total year Customer-related 710 8 year 13 5 year Total $ 1,708 Customer-related 710 8 year 13 5 year Total $ 1,708 7 13 5 year Total $ 1,708 7 year $ 219 5 5 year Total $ 1,708 7 year $ 219 5 year $ 1,708 7 year $ 219 5 year Intangible asset amortization 1,708 7 year $ 219 5 year Intangible asset amortization expense asset amortization expense wa $ 1.9 billion , $ 2.2 billion $ 1.9 billion , $ 2.2 billion , and $ 1.7 2.2 billion , and $ 1.7 billion for fiscal year 2019 1.7 billion for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . The following asset held a of June 30 , 2019 : ( In a of June 30 , 2019 : ( In million ) million ) Year Ending June 30 , 2020 $ 1,488 2021 Year Ending June 30 , 2020 $ 1,488 2021 1,282 2022 June 30 , 2020 $ 1,488 2021 1,282 2022 1,187 2023 30 , 2020 $ 1,488 2021 1,282 2022 1,187 2023 1,053 , 2020 $ 1,488 2021 1,282 2022 1,187 2023 1,053 2024 2020 $ 1,488 2021 1,282 2022 1,187 2023 1,053 2024 737 $ 1,488 2021 1,282 2022 1,187 2023 1,053 2024 737 Thereafter 1,488 2021 1,282 2022 1,187 2023 1,053 2024 737 Thereafter 2,003 2021 1,282 2022 1,187 2023 1,053 2024 737 Thereafter 2,003 Total 1,282 2022 1,187 2023 1,053 2024 737 Thereafter 2,003 Total $ 2022 1,187 2023 1,053 2024 737 Thereafter 2,003 Total $ 7,750 2023 1,053 2024 737 Thereafter 2,003 Total $ 7,750 NOTE 11 737 Thereafter 2,003 Total $ 7,750 NOTE 11 — DEBT Short-term 2,003 Total $ 7,750 NOTE 11 — DEBT Short-term Debt As Short-term Debt As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , we had June 30 , 2019 and 2018 , we had no commercial or outstanding . Effective August 31 , 2018 , we terminated . Effective August 31 , 2018 , we terminated our credit Long-term Debt As of June 30 , 2019 , the total As of June 30 , 2019 , the total carrying value current portion , were $ 72.2 billion and $ 78.9 billion $ 72.2 billion and $ 78.9 billion , respectively . As respectively . As of June 30 , 2018 , the total As of June 30 , 2018 , the total carrying value current portion , were $ 76.2 billion and $ 77.5 billion $ 76.2 billion and $ 77.5 billion , respectively . These value are based on Level 2 input . 76 PART II on Level 2 input . 76 PART II Item 8 The . 76 PART II Item 8 The component of our long-term rate ) Face Value June 30 , 2019 Face Value June Face Value June 30 , 2019 Face Value June 30 , , 2019 Face Value June 30 , 2018 Stated Interest Rate Face Value June 30 , 2018 Stated Interest Rate Effective Interest Effective Interest Rate Notes November 3 , 2018 $ 0 $ Rate Notes November 3 , 2018 $ 0 $ 1,750 1.300 November 3 , 2018 $ 0 $ 1,750 1.300 % 1.396 , 2018 $ 0 $ 1,750 1.300 % 1.396 % December 2018 $ 0 $ 1,750 1.300 % 1.396 % December 6 0 $ 1,750 1.300 % 1.396 % December 6 , 2018 1.300 % 1.396 % December 6 , 2018 0 1,250 1.625 1.396 % December 6 , 2018 0 1,250 1.625 % 1.824 % December 6 , 2018 0 1,250 1.625 % 1.824 % December 6 , 2018 0 1,250 1.625 % 1.824 % June 6 , 2018 0 1,250 1.625 % 1.824 % June 1 2018 0 1,250 1.625 % 1.824 % June 1 , 2019 1.625 % 1.824 % June 1 , 2019 0 1,000 4.200 1.824 % June 1 , 2019 0 1,000 4.200 % 4.379 % June 1 , 2019 0 1,000 4.200 % 4.379 % June 1 , 2019 0 1,000 4.200 % 4.379 % August 1 , 2019 0 1,000 4.200 % 4.379 % August 8 2019 0 1,000 4.200 % 4.379 % August 8 , 2019 4.200 % 4.379 % August 8 , 2019 2,500 2,500 1.100 4.379 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % August 8 , 2019 2,500 2,500 1.100 % 1.203 % November 8 , 2019 2,500 2,500 1.100 % 1.203 % November 1 2019 2,500 2,500 1.100 % 1.203 % November 1 , 2019 1.100 % 1.203 % November 1 , 2019 18 18 0.500 1.203 % November 1 , 2019 18 18 0.500 % 0.500 % November 1 , 2019 18 18 0.500 % 0.500 % November 1 , 2019 18 18 0.500 % 0.500 % February 1 , 2019 18 18 0.500 % 0.500 % February 6 2019 18 18 0.500 % 0.500 % February 6 , 2020 0.500 % 0.500 % February 6 , 2020 1,500 1,500 1.850 0.500 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 6 , 2020 1,500 1,500 1.850 % 1.952 % February 12 2020 1,500 1,500 1.850 % 1.952 % February 12 , 2020 1.850 % 1.952 % February 12 , 2020 1,500 1,500 1.850 1.952 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % February 12 , 2020 1,500 1,500 1.850 % 1.935 % October 12 , 2020 1,500 1,500 1.850 % 1.935 % October 1 2020 1,500 1,500 1.850 % 1.935 % October 1 , 2020 1.850 % 1.935 % October 1 , 2020 1,000 1,000 3.000 1.935 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % October 1 , 2020 1,000 1,000 3.000 % 3.137 % November 1 , 2020 1,000 1,000 3.000 % 3.137 % November 3 2020 1,000 1,000 3.000 % 3.137 % November 3 , 2020 3.000 % 3.137 % November 3 , 2020 2,250 2,250 2.000 3.137 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % November 3 , 2020 2,250 2,250 2.000 % 2.093 % February 3 , 2020 2,250 2,250 2.000 % 2.093 % February 8 2020 2,250 2,250 2.000 % 2.093 % February 8 , 2021 2.000 % 2.093 % February 8 , 2021 500 500 4.000 2.093 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % February 8 , 2021 500 500 4.000 % 4.082 % August 8 , 2021 500 500 4.000 % 4.082 % August 8 2021 500 500 4.000 % 4.082 % August 8 , 2021 4.000 % 4.082 % August 8 , 2021 2,750 2,750 1.550 4.082 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % August 8 , 2021 2,750 2,750 1.550 % 1.642 % December 8 , 2021 2,750 2,750 1.550 % 1.642 % December 6 2021 2,750 2,750 1.550 % 1.642 % December 6 , 2021 1.550 % 1.642 % December 6 , 2021 ( a ) 1.642 % December 6 , 2021 ( a ) 1,994 2,044 , 2021 ( a ) 1,994 2,044 2.125 % 2.233 % 2021 ( a ) 1,994 2,044 2.125 % 2.233 % February ( a ) 1,994 2,044 2.125 % 2.233 % February 6 ) 1,994 2,044 2.125 % 2.233 % February 6 , 2022 2.125 % 2.233 % February 6 , 2022 1,750 1,750 2.400 2.233 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 6 , 2022 1,750 1,750 2.400 % 2.520 % February 12 2022 1,750 1,750 2.400 % 2.520 % February 12 , 2022 2.400 % 2.520 % February 12 , 2022 1,500 1,500 2.375 2.520 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % February 12 , 2022 1,500 1,500 2.375 % 2.466 % November 12 , 2022 1,500 1,500 2.375 % 2.466 % November 3 2022 1,500 1,500 2.375 % 2.466 % November 3 , 2022 2.375 % 2.466 % November 3 , 2022 1,000 1,000 2.650 2.466 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 3 , 2022 1,000 1,000 2.650 % 2.717 % November 15 2022 1,000 1,000 2.650 % 2.717 % November 15 , 2022 2.650 % 2.717 % November 15 , 2022 750 750 2.125 2.717 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % November 15 , 2022 750 750 2.125 % 2.239 % May 15 , 2022 750 750 2.125 % 2.239 % May 1 2022 750 750 2.125 % 2.239 % May 1 , 2023 2.125 % 2.239 % May 1 , 2023 1,000 1,000 2.375 2.239 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % May 1 , 2023 1,000 1,000 2.375 % 2.465 % August 1 , 2023 1,000 1,000 2.375 % 2.465 % August 8 2023 1,000 1,000 2.375 % 2.465 % August 8 , 2023 2.375 % 2.465 % August 8 , 2023 1,500 1,500 2.000 2.465 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % August 8 , 2023 1,500 1,500 2.000 % 2.101 % December 8 , 2023 1,500 1,500 2.000 % 2.101 % December 15 2023 1,500 1,500 2.000 % 2.101 % December 15 , 2023 2.000 % 2.101 % December 15 , 2023 1,500 1,500 3.625 2.101 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % December 15 , 2023 1,500 1,500 3.625 % 3.726 % February 15 , 2023 1,500 1,500 3.625 % 3.726 % February 6 2023 1,500 1,500 3.625 % 3.726 % February 6 , 2024 3.625 % 3.726 % February 6 , 2024 2,250 2,250 2.875 3.726 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 6 , 2024 2,250 2,250 2.875 % 3.041 % February 12 2024 2,250 2,250 2.875 % 3.041 % February 12 , 2025 2.875 % 3.041 % February 12 , 2025 2,250 2,250 2.700 3.041 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % February 12 , 2025 2,250 2,250 2.700 % 2.772 % November 12 , 2025 2,250 2,250 2.700 % 2.772 % November 3 2025 2,250 2,250 2.700 % 2.772 % November 3 , 2025 2.700 % 2.772 % November 3 , 2025 3,000 3,000 3.125 2.772 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % November 3 , 2025 3,000 3,000 3.125 % 3.176 % August 3 , 2025 3,000 3,000 3.125 % 3.176 % August 8 2025 3,000 3,000 3.125 % 3.176 % August 8 , 2026 3.125 % 3.176 % August 8 , 2026 4,000 4,000 2.400 3.176 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % August 8 , 2026 4,000 4,000 2.400 % 2.464 % February 8 , 2026 4,000 4,000 2.400 % 2.464 % February 6 2026 4,000 4,000 2.400 % 2.464 % February 6 , 2027 2.400 % 2.464 % February 6 , 2027 4,000 4,000 3.300 2.464 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % February 6 , 2027 4,000 4,000 3.300 % 3.383 % December 6 , 2027 4,000 4,000 3.300 % 3.383 % December 6 2027 4,000 4,000 3.300 % 3.383 % December 6 , 2028 3.300 % 3.383 % December 6 , 2028 ( a ) 3.383 % December 6 , 2028 ( a ) 1,993 2,044 , 2028 ( a ) 1,993 2,044 3.125 % 3.218 % 2028 ( a ) 1,993 2,044 3.125 % 3.218 % May ( a ) 1,993 2,044 3.125 % 3.218 % May 2 ) 1,993 2,044 3.125 % 3.218 % May 2 , 2033 3.125 % 3.218 % May 2 , 2033 ( a ) 3.218 % May 2 , 2033 ( a ) 626 642 , 2033 ( a ) 626 642 2.625 % 2.690 % 2033 ( a ) 626 642 2.625 % 2.690 % February ( a ) 626 642 2.625 % 2.690 % February 12 ) 626 642 2.625 % 2.690 % February 12 , 2035 2.625 % 2.690 % February 12 , 2035 1,500 1,500 3.500 2.690 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % February 12 , 2035 1,500 1,500 3.500 % 3.604 % November 12 , 2035 1,500 1,500 3.500 % 3.604 % November 3 2035 1,500 1,500 3.500 % 3.604 % November 3 , 2035 3.500 % 3.604 % November 3 , 2035 1,000 1,000 4.200 3.604 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % November 3 , 2035 1,000 1,000 4.200 % 4.260 % August 3 , 2035 1,000 1,000 4.200 % 4.260 % August 8 2035 1,000 1,000 4.200 % 4.260 % August 8 , 2036 4.200 % 4.260 % August 8 , 2036 2,250 2,250 3.450 4.260 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % August 8 , 2036 2,250 2,250 3.450 % 3.510 % February 8 , 2036 2,250 2,250 3.450 % 3.510 % February 6 2036 2,250 2,250 3.450 % 3.510 % February 6 , 2037 3.450 % 3.510 % February 6 , 2037 2,500 2,500 4.100 3.510 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % February 6 , 2037 2,500 2,500 4.100 % 4.152 % June 6 , 2037 2,500 2,500 4.100 % 4.152 % June 1 2037 2,500 2,500 4.100 % 4.152 % June 1 , 2039 4.100 % 4.152 % June 1 , 2039 750 750 5.200 4.152 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % June 1 , 2039 750 750 5.200 % 5.240 % October 1 , 2039 750 750 5.200 % 5.240 % October 1 2039 750 750 5.200 % 5.240 % October 1 , 2040 5.200 % 5.240 % October 1 , 2040 1,000 1,000 4.500 5.240 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % October 1 , 2040 1,000 1,000 4.500 % 4.567 % February 1 , 2040 1,000 1,000 4.500 % 4.567 % February 8 2040 1,000 1,000 4.500 % 4.567 % February 8 , 2041 4.500 % 4.567 % February 8 , 2041 1,000 1,000 5.300 4.567 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % February 8 , 2041 1,000 1,000 5.300 % 5.361 % November 8 , 2041 1,000 1,000 5.300 % 5.361 % November 15 2041 1,000 1,000 5.300 % 5.361 % November 15 , 2042 5.300 % 5.361 % November 15 , 2042 900 900 3.500 5.361 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % November 15 , 2042 900 900 3.500 % 3.571 % May 15 , 2042 900 900 3.500 % 3.571 % May 1 2042 900 900 3.500 % 3.571 % May 1 , 2043 3.500 % 3.571 % May 1 , 2043 500 500 3.750 3.571 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % May 1 , 2043 500 500 3.750 % 3.829 % December 1 , 2043 500 500 3.750 % 3.829 % December 15 2043 500 500 3.750 % 3.829 % December 15 , 2043 3.750 % 3.829 % December 15 , 2043 500 500 4.875 3.829 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % December 15 , 2043 500 500 4.875 % 4.918 % February 15 , 2043 500 500 4.875 % 4.918 % February 12 2043 500 500 4.875 % 4.918 % February 12 , 2045 4.875 % 4.918 % February 12 , 2045 1,750 1,750 3.750 4.918 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % February 12 , 2045 1,750 1,750 3.750 % 3.800 % November 12 , 2045 1,750 1,750 3.750 % 3.800 % November 3 2045 1,750 1,750 3.750 % 3.800 % November 3 , 2045 3.750 % 3.800 % November 3 , 2045 3,000 3,000 4.450 3.800 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % November 3 , 2045 3,000 3,000 4.450 % 4.492 % August 3 , 2045 3,000 3,000 4.450 % 4.492 % August 8 2045 3,000 3,000 4.450 % 4.492 % August 8 , 2046 4.450 % 4.492 % August 8 , 2046 4,500 4,500 3.700 4.492 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % August 8 , 2046 4,500 4,500 3.700 % 3.743 % February 8 , 2046 4,500 4,500 3.700 % 3.743 % February 6 2046 4,500 4,500 3.700 % 3.743 % February 6 , 2047 3.700 % 3.743 % February 6 , 2047 3,000 3,000 4.250 3.743 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 6 , 2047 3,000 3,000 4.250 % 4.287 % February 12 2047 3,000 3,000 4.250 % 4.287 % February 12 , 2055 4.250 % 4.287 % February 12 , 2055 2,250 2,250 4.000 4.287 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % February 12 , 2055 2,250 2,250 4.000 % 4.063 % November 12 , 2055 2,250 2,250 4.000 % 4.063 % November 3 2055 2,250 2,250 4.000 % 4.063 % November 3 , 2055 4.000 % 4.063 % November 3 , 2055 1,000 1,000 4.750 4.063 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % November 3 , 2055 1,000 1,000 4.750 % 4.782 % August 3 , 2055 1,000 1,000 4.750 % 4.782 % August 8 2055 1,000 1,000 4.750 % 4.782 % August 8 , 2056 4.750 % 4.782 % August 8 , 2056 2,250 2,250 3.950 4.782 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % August 8 , 2056 2,250 2,250 3.950 % 4.033 % February 8 , 2056 2,250 2,250 3.950 % 4.033 % February 6 2056 2,250 2,250 3.950 % 4.033 % February 6 , 2057 3.950 % 4.033 % February 6 , 2057 2,000 2,000 4.500 4.033 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % February 6 , 2057 2,000 2,000 4.500 % 4.528 % Total 6 , 2057 2,000 2,000 4.500 % 4.528 % Total $ 2057 2,000 2,000 4.500 % 4.528 % Total $ 72,781 $ % 4.528 % Total $ 72,781 $ 76,898 ( a ) % Total $ 72,781 $ 76,898 ( a ) Euro-denominated debt our debt for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 wa $ 2019 , 2018 , and 2017 wa $ 2.4 billion , , and 2017 wa $ 2.4 billion , $ 2.4 billion $ 2.4 billion , $ 2.4 billion , and $ 1.6 2.4 billion , and $ 1.6 billion , respectively . As respectively . As of June 30 , 2019 and 2018 , As of June 30 , 2019 and 2018 , the aggregate June 30 , 2019 and 2018 , the aggregate debt issuance current portion , were $ 603 million and $ 658 million $ 603 million and $ 658 million , respectively . 77 658 million , respectively . 77 PART II Item 8 Maturities . 77 PART II Item 8 Maturities of our long-term debt million ) Year Ending June 30 , 2020 $ 5,518 2021 Year Ending June 30 , 2020 $ 5,518 2021 3,750 2022 June 30 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 30 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 , 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 2020 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 $ 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 5,518 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 47,519 2021 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 47,519 Total 3,750 2022 7,994 2023 2,750 2024 5,250 Thereafter 47,519 Total $ 2022 7,994 2023 2,750 2024 5,250 Thereafter 47,519 Total $ 72,781 2023 2,750 2024 5,250 Thereafter 47,519 Total $ 72,781 NOTE 12 5,250 Thereafter 47,519 Total $ 72,781 NOTE 12 — INCOME TAXES 47,519 Total $ 72,781 NOTE 12 — INCOME TAXES Tax Cuts and Jobs Act On December 22 , 2017 , the Tax Act On December 22 , 2017 , the Tax Cuts and system . In fiscal year 2018 , the TCJA required u tax at a rate of 15.5 % for foreign cash and net current asset , and 8 % on the remaining income federal statutory tax rate from 35 % to 21 % effective rate from 35 % to 21 % effective January 1 , to 21 % effective January 1 , 2018 . In addition % effective January 1 , 2018 . In addition , the on our GILTI effective July 1 , 2018 . Under GAAP GILTI effective July 1 , 2018 . Under GAAP , we sheet . During fiscal year 2018 , we recorded a net a net charge of $ 13.7 billion related to the enactment deferred foreign income of $ 17.9 billion , offset in part the tax rate of $ 4.2 billion , primarily on deferred second quarter of fiscal year 2019 , we recorded additional tax additional tax expense of $ 157 million , which related to Staff Accounting Bulletin No . 118 . In the fourth quarter fourth quarter of fiscal year 2019 , in response to the property resulted in a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 , a the value of and U.S. GILTI tax . 78 PART II Item 8 Provision . 78 PART II Item 8 Provision for Income Taxes The million ) Year Ended June 30 , 2019 2018 2017 Current Year Ended June 30 , 2019 2018 2017 Current Taxes U.S. Ended June 30 , 2019 2018 2017 Current Taxes U.S. federal June 30 , 2019 2018 2017 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 4,718 $ 19,764 $ 2,739 U.S. U.S. federal $ 4,718 $ 19,764 $ 2,739 U.S. state and $ 4,718 $ 19,764 $ 2,739 U.S. state and local 662 2,739 U.S. state and local 662 934 30 Foreign 5,531 4,348 U.S. state and local 662 934 30 Foreign 5,531 4,348 2,472 state and local 662 934 30 Foreign 5,531 4,348 2,472 Current local 662 934 30 Foreign 5,531 4,348 2,472 Current tax $ 662 934 30 Foreign 5,531 4,348 2,472 Current tax $ 10,911 934 30 Foreign 5,531 4,348 2,472 Current tax $ 10,911 $ 4,348 2,472 Current tax $ 10,911 $ 25,046 $ 5,241 Deferred Current tax $ 10,911 $ 25,046 $ 5,241 Deferred Taxes U.S. $ 10,911 $ 25,046 $ 5,241 Deferred Taxes U.S. federal $ Taxes U.S. federal $ ( 5,647 ) $ ( 4,292 ) ( 5,647 ) $ ( 4,292 ) $ ( 554 ) ( 4,292 ) $ ( 554 ) U.S. state and local U.S. state and local ( 1,010 ) ( 458 ) 269 local ( 1,010 ) ( 458 ) 269 Foreign 194 ( 1,010 ) ( 458 ) 269 Foreign 194 ( 393 ) ( 458 ) 269 Foreign 194 ( 393 ) ( 544 ) 269 Foreign 194 ( 393 ) ( 544 ) Deferred 194 ( 393 ) ( 544 ) Deferred tax $ ( ) Deferred tax $ ( 6,463 ) $ ( 5,143 ) ( 6,463 ) $ ( 5,143 ) $ ( 829 ) ( 5,143 ) $ ( 829 ) Provision for income tax Provision for income tax $ 4,448 $ 19,903 $ 4,412 U.S. income tax $ 4,448 $ 19,903 $ 4,412 U.S. and foreign $ 4,448 $ 19,903 $ 4,412 U.S. and foreign component of million ) Year Ended June 30 , 2019 2018 2017 U.S. Year Ended June 30 , 2019 2018 2017 U.S. $ 15,799 Ended June 30 , 2019 2018 2017 U.S. $ 15,799 $ June 30 , 2019 2018 2017 U.S. $ 15,799 $ 11,527 2019 2018 2017 U.S. $ 15,799 $ 11,527 $ 6,843 Foreign 2017 U.S. $ 15,799 $ 11,527 $ 6,843 Foreign 27,889 24,947 $ 15,799 $ 11,527 $ 6,843 Foreign 27,889 24,947 23,058 Income $ 11,527 $ 6,843 Foreign 27,889 24,947 23,058 Income before income 11,527 $ 6,843 Foreign 27,889 24,947 23,058 Income before income tax $ 6,843 Foreign 27,889 24,947 23,058 Income before income tax $ Income before income tax $ 43,688 $ 36,474 $ 29,901 Effective income tax $ 43,688 $ 36,474 $ 29,901 Effective Tax Rate $ 43,688 $ 36,474 $ 29,901 Effective Tax Rate The item follows : Year Ended June 30 , 2019 2018 2017 Federal Year Ended June 30 , 2019 2018 2017 Federal statutory rate Ended June 30 , 2019 2018 2017 Federal statutory rate 21.0 June 30 , 2019 2018 2017 Federal statutory rate 21.0 % 2018 2017 Federal statutory rate 21.0 % 28.1 % 35.0 % Federal statutory rate 21.0 % 28.1 % 35.0 % Effect of rate 21.0 % 28.1 % 35.0 % Effect of : Foreign taxed at lower rate ( 4.1 ) % ( 7.8 ) ( 4.1 ) % ( 7.8 ) % ( 11.6 ) ( 7.8 ) % ( 11.6 ) % Impact of the the enactment of the TCJA 0.4 % 37.7 % 0 % of the TCJA 0.4 % 37.7 % 0 % Phone business TCJA 0.4 % 37.7 % 0 % Phone business loss 0 0 % Phone business loss 0 % 0 % ( 5.7 Phone business loss 0 % 0 % ( 5.7 ) % 0 % 0 % ( 5.7 ) % Impact of intangible of intangible property transfer ( 5.9 ) % 0 % 0 transfer ( 5.9 ) % 0 % 0 % Foreign-derived intangible 5.9 ) % 0 % 0 % Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 1.4 ) % 0 % 0 deduction ( 1.4 ) % 0 % 0 % Research and 1.4 ) % 0 % 0 % Research and development credit Research and development credit ( 1.1 ) % ( 1.3 ) ( 1.1 ) % ( 1.3 ) % ( 0.9 ) ( 1.3 ) % ( 0.9 ) % Excess tax benefit relating to stock-based compensation ( 2.2 ) % ( 2.5 ) ( 2.2 ) % ( 2.5 ) % ( 2.1 ) ( 2.5 ) % ( 2.1 ) % Interest , net ) % Interest , net 1.0 % 1.2 % 1.4 % Interest , net 1.0 % 1.2 % 1.4 % Other reconciling net 1.0 % 1.2 % 1.4 % Other reconciling item , Other reconciling item , net 2.5 % ( 0.8 ) % , net 2.5 % ( 0.8 ) % ( 1.3 ) ( 0.8 ) % ( 1.3 ) % Effective rate 10.2 1.3 ) % Effective rate 10.2 % 54.6 % 14.8 % % Effective rate 10.2 % 54.6 % 14.8 % 79 PART rate 10.2 % 54.6 % 14.8 % 79 PART II Item % 54.6 % 14.8 % 79 PART II Item 8 The % 79 PART II Item 8 The decrease from the federal statutory rate in fiscal year 2019 is primarily due to a primarily due to a $ 2.6 billion net income tax benefit statutory rate in fiscal year 2018 is primarily due to the second quarter of fiscal year 2018 , offset in part by statutory rate in fiscal year 2017 is primarily due to earnings the U.S. rate , generated 82 % , 8 7 % , generated 82 % , 8 7 % , and 76 generated 82 % , 8 7 % , and 76 % 8 7 % , and 76 % of our foreign income efore tax in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . Other reconciling tax . In fiscal year 2019 , 2018 , and 2017 In fiscal year 2019 , 2018 , and 2017 , there 2019 , 2018 , and 2017 , there were no individually tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 , and a $ 2.6 2018 , and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2018 compared to fiscal year 2017 2018 compared to fiscal year 2017 wa primarily due to the business loss in fiscal year 2017 . The component of the ( In million ) June 30 , 2019 2018 Deferred Income million ) June 30 , 2019 2018 Deferred Income Tax Assets ) June 30 , 2019 2018 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 406 $ 460 Accruals , reserve compensation expense $ 406 $ 460 Accruals , reserve , and reserve , and other expense 2,287 1,832 Loss and credit carryforwards , and other expense 2,287 1,832 Loss and credit carryforwards 3,518 1,832 Loss and credit carryforwards 3,518 3,369 Depreciation and amortization 7,046 Loss and credit carryforwards 3,518 3,369 Depreciation and amortization 7,046 351 3,518 3,369 Depreciation and amortization 7,046 351 Leasing liability 1,594 1,427 3,369 Depreciation and amortization 7,046 351 Leasing liability 1,594 1,427 Unearned amortization 7,046 351 Leasing liability 1,594 1,427 Unearned revenue 475 0 7,046 351 Leasing liability 1,594 1,427 Unearned revenue 475 0 Other liability 1,594 1,427 Unearned revenue 475 0 Other 367 56 Deferred 1,594 1,427 Unearned revenue 475 0 Other 367 56 Deferred income Unearned revenue 475 0 Other 367 56 Deferred income tax asset revenue 475 0 Other 367 56 Deferred income tax asset 15,693 56 Deferred income tax asset 15,693 7,495 Less valuation allowance ( Deferred income tax asset 15,693 7,495 Less valuation allowance ( 3,214 7,495 Less valuation allowance ( 3,214 ) ( 3,186 ) Deferred allowance ( 3,214 ) ( 3,186 ) Deferred income tax asset net of valuation allowance $ 12,479 $ 4,309 Deferred Income Tax valuation allowance $ 12,479 $ 4,309 Deferred Income Tax Liabilities Unrealized investment and debt $ ( 738 ) $ 0 Unearned revenue $ ( 738 ) $ 0 Unearned revenue ( 30 ) $ 0 Unearned revenue ( 30 ) ( 639 ) Depreciation revenue ( 30 ) ( 639 ) Depreciation and amortization 0 639 ) Depreciation and amortization 0 ( 1,164 ) Leasing asset Depreciation and amortization 0 ( 1,164 ) Leasing asset ( 1,510 1,164 ) Leasing asset ( 1,510 ) ( 1,366 ) Deferred asset ( 1,510 ) ( 1,366 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,607 ) ( 61 ) Other liability ( 2,607 ) ( 61 ) Other ( 291 ) ( 61 ) Other ( 291 ) ( 251 ) Deferred Other ( 291 ) ( 251 ) Deferred income tax liability income tax liability $ ( 5,176 ) $ ( 3,481 ) ( 5,176 ) $ ( 3,481 ) Net deferred income tax asset ( liability ) $ 7,303 $ 828 Reported As Other liability ) $ 7,303 $ 828 Reported As Other long-term asset As Other long-term asset $ 7,536 $ 1,369 Long-term deferred income long-term asset $ 7,536 $ 1,369 Long-term deferred income tax liability deferred income tax liability ( 233 ) ( 541 ) Net liability ( 233 ) ( 541 ) Net deferred income tax asset ( liability ) $ 7,303 $ 828 Deferred income tax liability ) $ 7,303 $ 828 Deferred income tax balance reflect are paid or recovered . 80 PART II Item 8 As . 80 PART II Item 8 As of J une 30 8 As of J une 30 , 2019 , we had of J une 30 , 2019 , we had federal , operating loss carryforwards of $ 978 million , $ 770 million $ 978 million , $ 770 million , and $ 11 770 million , and $ 11 . 6 billion , respectively , and $ 11 . 6 billion , respectively . The in various year from fiscal 20 20 through 203 9 , various year from fiscal 20 20 through 203 9 , if from fiscal 20 20 through 203 9 , if not utilized fiscal 20 20 through 203 9 , if not utilized . of refund , were $ 8.4 billion , $ 5.5 billion $ 8.4 billion , $ 5.5 billion , and $ 2.4 5.5 billion , and $ 2.4 billion in fiscal year 2019 2.4 billion in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . Uncertain Tax tax position a of June 30 , 2019 , 2018 , a of June 30 , 2019 , 2018 , and 2017 June 30 , 2019 , 2018 , and 2017 , were 2019 , 2018 , and 2017 , were $ 13.1 billion and 2017 , were $ 13.1 billion , $ 12.0 billion $ 13.1 billion , $ 12.0 billion , and $ 11.7 12.0 billion , and $ 11.7 billion , respectively , which tax rate for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 by $ 2019 , 2018 , and 2017 by $ 12.0 billion , , and 2017 by $ 12.0 billion , $ 11.3 billion $ 12.0 billion , $ 11.3 billion , and $ 10.2 11.3 billion , and $ 10.2 billion , respectively . As respectively . As of June 30 , 2019 , 2018 , As of June 30 , 2019 , 2018 , and 2017 June 30 , 2019 , 2018 , and 2017 , we 2019 , 2018 , and 2017 , we had accrued interest uncertain tax position of $ 3.4 billion , $ 3.0 billion $ 3.4 billion , $ 3.0 billion , and $ 2.3 3.0 billion , and $ 2.3 billion , respectively , net income tax for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 included interest 2019 , 2018 , and 2017 included interest expense related to uncertain tax position of $ 515 million , $ 688 million $ 515 million , $ 688 million , and $ 399 688 million , and $ 399 million , respectively , net million ) Year Ended June 30 , 2019 2018 2017 Beginning Year Ended June 30 , 2019 2018 2017 Beginning unrecognized tax Ended June 30 , 2019 2018 2017 Beginning unrecognized tax benefit June 30 , 2019 2018 2017 Beginning unrecognized tax benefit $ Beginning unrecognized tax benefit $ 11,961 $ 11,737 $ 10,164 Decreases tax benefit $ 11,961 $ 11,737 $ 10,164 Decreases related to $ 11,961 $ 11,737 $ 10,164 Decreases related to settlement ( Decreases related to settlement ( 316 ) ( 193 ) ( settlement ( 316 ) ( 193 ) ( 4 ) Increases ) ( 193 ) ( 4 ) Increases for tax position related to the current year 2,106 1,445 1,277 Increases for tax to the current year 2,106 1,445 1,277 Increases for tax position the current year 2,106 1,445 1,277 Increases for tax position related position related to prior year 508 151 397 Decreases for tax related to prior year 508 151 397 Decreases for tax position to prior year 508 151 397 Decreases for tax position related related to prior year ( 1,113 ) ( 1,176 ) ( year ( 1,113 ) ( 1,176 ) ( 49 ) Decreases ) ( 1,176 ) ( 49 ) Decreases due to lapsed to lapsed statute of limitation 0 ( 3 ) ( 48 statute of limitation 0 ( 3 ) ( 48 ) Ending 0 ( 3 ) ( 48 ) Ending unrecognized tax benefit Ending unrecognized tax benefit $ 13,146 $ 11,961 $ 11,737 We tax benefit $ 13,146 $ 11,961 $ 11,737 We settled a $ 13,146 $ 11,961 $ 11,737 We settled a portion of ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . We expect for tax year 2004 to 2013 . We expect the IRS an examination of tax year 2014 to 2017 within the next of tax year 2014 to 2017 within the next 12 month to 2017 within the next 12 month . As of June month . As of June 30 , 2019 , the primary As of June 30 , 2019 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2018 , some of for tax year 1996 to 2018 , some of which are consolidated financial statement . NOTE 13 — RESTRUCTURING CHARGES In June — RESTRUCTURING CHARGES In June 2017 , management approved a sale plan . In fiscal year 2017 , we recorded employee severance employee severance expense of $ 306 million primarily related to this were completed a of June 30 , 2018 . 81 PART a of June 30 , 2018 . 81 PART II Item June 30 , 2018 . 81 PART II Item 8 NOTE . 81 PART II Item 8 NOTE 14 — UNEARNED REVENUE PART II Item 8 NOTE 14 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2019 2018 Productivity and million ) June 30 , 2019 2018 Productivity and Business Processes ) June 30 , 2019 2018 Productivity and Business Processes $ Productivity and Business Processes $ 16,831 $ 14,864 Intelligent Cloud 16,988 Business Processes $ 16,831 $ 14,864 Intelligent Cloud 16,988 14,706 More 16,831 $ 14,864 Intelligent Cloud 16,988 14,706 More Personal Computing 3,387 $ 14,864 Intelligent Cloud 16,988 14,706 More Personal Computing 3,387 3,150 16,988 14,706 More Personal Computing 3,387 3,150 Total $ 37,206 $ 14,706 More Personal Computing 3,387 3,150 Total $ 37,206 $ 32,720 Computing 3,387 3,150 Total $ 37,206 $ 32,720 Changes in unearned 3,150 Total $ 37,206 $ 32,720 Changes in unearned revenue were million ) Year Ended June 30 , 2019 Balance , beginning Year Ended June 30 , 2019 Balance , beginning of period , beginning of period $ 32,720 Deferral of revenue 69,493 Recognition $ 32,720 Deferral of revenue 69,493 Recognition of unearned revenue ( Recognition of unearned revenue ( 65,007 ) Balance , end of , end of period $ 37,206 Revenue allocated to remaining performance not recognized revenue wa $ 91 billion a of June 30 91 billion a of June 30 , 2019 , of which a of June 30 , 2019 , of which we expect we expect to recognize approximately 50 % of the revenue over the revenue over the next 12 month and the remainder thereafter be recognized beyond the next 12 month . NOTE 15 — next 12 month . NOTE 15 — LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2019 2018 2017 Operating Year Ended June 30 , 2019 2018 2017 Operating lease cost Ended June 30 , 2019 2018 2017 Operating lease cost $ June 30 , 2019 2018 2017 Operating lease cost $ 1,707 2017 Operating lease cost $ 1,707 $ 1,585 $ 1,412 Finance lease cost $ 1,707 $ 1,585 $ 1,412 Finance lease cost $ 1,707 $ 1,585 $ 1,412 Finance lease cost : Amortization Amortization of right-of-use asset $ 370 $ 243 $ 104 Interest right-of-use asset $ 370 $ 243 $ 104 Interest on lease $ 370 $ 243 $ 104 Interest on lease liability 247 104 Interest on lease liability 247 175 68 Total finance lease Interest on lease liability 247 175 68 Total finance lease cost on lease liability 247 175 68 Total finance lease cost $ Total finance lease cost $ 617 $ 418 $ 172 82 lease cost $ 617 $ 418 $ 172 82 PART II $ 617 $ 418 $ 172 82 PART II Item 8 617 $ 418 $ 172 82 PART II Item 8 Supplemental 172 82 PART II Item 8 Supplemental cash flow information related million ) Year Ended June 30 , 2019 2018 2017 Cash Year Ended June 30 , 2019 2018 2017 Cash paid for Ended June 30 , 2019 2018 2017 Cash paid for amount June 30 , 2019 2018 2017 Cash paid for amount included flow from operating lease $ 1,670 $ 1,522 $ 1,157 Operating operating lease $ 1,670 $ 1,522 $ 1,157 Operating cash flow $ 1,670 $ 1,522 $ 1,157 Operating cash flow from finance cash flow from finance lease 247 175 68 Financing cash flow flow from finance lease 247 175 68 Financing cash flow from from finance lease 247 175 68 Financing cash flow from finance cash flow from finance lease 221 144 46 Right-of-use asset obtained flow from finance lease 221 144 46 Right-of-use asset obtained in from finance lease 221 144 46 Right-of-use asset obtained in exchange lease obligation : Operating lease 2,303 1,571 1,270 Finance lease 2,532 obligation : Operating lease 2,303 1,571 1,270 Finance lease 2,532 1,933 : Operating lease 2,303 1,571 1,270 Finance lease 2,532 1,933 1,773 2,303 1,571 1,270 Finance lease 2,532 1,933 1,773 Supplemental balance sheet 1,571 1,270 Finance lease 2,532 1,933 1,773 Supplemental balance sheet information 1,270 Finance lease 2,532 1,933 1,773 Supplemental balance sheet information related and discount rate ) June 30 , 2019 2018 Operating Leases rate ) June 30 , 2019 2018 Operating Leases Operating lease ) June 30 , 2019 2018 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 7,379 $ 6,686 Other current liability right-of-use asset $ 7,379 $ 6,686 Other current liability $ 1,515 6,686 Other current liability $ 1,515 $ 1,399 Operating lease liability current liability $ 1,515 $ 1,399 Operating lease liability 6,188 5,568 $ 1,399 Operating lease liability 6,188 5,568 Total operating lease liability 1,399 Operating lease liability 6,188 5,568 Total operating lease liability $ Total operating lease liability $ 7,703 $ 6,967 Finance Leases Property lease liability $ 7,703 $ 6,967 Finance Leases Property and equipment equipment , at cost $ 7,041 $ 4,543 Accumulated depreciation ( at cost $ 7,041 $ 4,543 Accumulated depreciation ( 774 ) $ 4,543 Accumulated depreciation ( 774 ) ( 404 ) Property depreciation ( 774 ) ( 404 ) Property and equipment , and equipment , net $ 6,267 $ 4,139 Other current liability , net $ 6,267 $ 4,139 Other current liability $ 317 4,139 Other current liability $ 317 $ 176 Other long-term liability current liability $ 317 $ 176 Other long-term liability 6,257 4,125 $ 176 Other long-term liability 6,257 4,125 Total finance lease liability 176 Other long-term liability 6,257 4,125 Total finance lease liability $ Total finance lease liability $ 6,574 $ 4,301 Weighted Average Remaining lease liability $ 6,574 $ 4,301 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 7 year 7 year Finance lease Term Operating lease 7 year 7 year Finance lease 13 year year 7 year Finance lease 13 year 13 year Weighted Average year Finance lease 13 year 13 year Weighted Average Discount Rate Average Discount Rate Operating lease 3.0 % 2.7 % Finance lease Rate Operating lease 3.0 % 2.7 % Finance lease 4.6 % % 2.7 % Finance lease 4.6 % 5.2 % Maturities of % Finance lease 4.6 % 5.2 % Maturities of lease liability million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2020 $ 1,678 $ 591 2021 Leases Finance Leases 2020 $ 1,678 $ 591 2021 1,438 616 Leases 2020 $ 1,678 $ 591 2021 1,438 616 2022 1,235 2020 $ 1,678 $ 591 2021 1,438 616 2022 1,235 626 $ 1,678 $ 591 2021 1,438 616 2022 1,235 626 2023 1,678 $ 591 2021 1,438 616 2022 1,235 626 2023 1,036 $ 591 2021 1,438 616 2022 1,235 626 2023 1,036 631 591 2021 1,438 616 2022 1,235 626 2023 1,036 631 2024 2021 1,438 616 2022 1,235 626 2023 1,036 631 2024 839 1,438 616 2022 1,235 626 2023 1,036 631 2024 839 641 616 2022 1,235 626 2023 1,036 631 2024 839 641 Thereafter 2022 1,235 626 2023 1,036 631 2024 839 641 Thereafter 2,438 1,235 626 2023 1,036 631 2024 839 641 Thereafter 2,438 5,671 626 2023 1,036 631 2024 839 641 Thereafter 2,438 5,671 Total 2023 1,036 631 2024 839 641 Thereafter 2,438 5,671 Total lease 631 2024 839 641 Thereafter 2,438 5,671 Total lease payment 8,664 2024 839 641 Thereafter 2,438 5,671 Total lease payment 8,664 8,776 2,438 5,671 Total lease payment 8,664 8,776 Less imputed interest ( 5,671 Total lease payment 8,664 8,776 Less imputed interest ( 961 8,776 Less imputed interest ( 961 ) ( 2,202 ) Total interest ( 961 ) ( 2,202 ) Total $ 7,703 $ ( 2,202 ) Total $ 7,703 $ 6,574 83 PART II ) Total $ 7,703 $ 6,574 83 PART II Item 8 Total $ 7,703 $ 6,574 83 PART II Item 8 As 6,574 83 PART II Item 8 As of June 30 , Item 8 As of June 30 , 201 9 , we As of June 30 , 201 9 , we have additional of June 30 , 201 9 , we have additional operating not yet commenced of $ 2.3 billion and $ 6.1 billion $ 2.3 billion and $ 6.1 billion , respectively . These will commence between fiscal year 20 20 and fiscal year 202 commence between fiscal year 20 20 and fiscal year 202 2 20 20 and fiscal year 202 2 with lease term of 20 and fiscal year 202 2 with lease term of 1 2 with lease term of 1 year to 15 year . term of 1 year to 15 year . NOTE 16 — to 15 year . NOTE 16 — CONTINGENCIES Patent and Intellectual Intellectual Property Claims There were 44 patent infringement case pending against against Microsoft a of June 30 , 2019 , none of a of June 30 , 2019 , none of which are and/or productivity application software between 1998 and 2010 . The trial application software between 1998 and 2010 . The trial of the Columbia action commenced in May 2016 . Following a mediation , and Commerce Investigatio n In 2014 , Microsoft wa informed that , is a defendant in 40 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted scientific evidence . In October 2016 , the Court of Appeals to strike . In August 2018 , the trial court issued second half of calendar year 2019 . 84 PART II Item of calendar year 2019 . 84 PART II Item 8 Employment-Related . 84 PART II Item 8 Employment-Related Lit igation Moussouris v. federal court in Seattle in 2015 , alleging systemic gender discrimination certify the class in October 2017 . Microsoft filed an opposition filed an opposition in January 2018 , attaching an expert report and woman . In June 2018 , the court denied the which wa granted in September 2018 . Oral argument is scheduled argument is scheduled for October 2019 . Other Contingencies We also future . As of June 30 , 2019 , we accrued As of June 30 , 2019 , we accrued aggregate legal aggregate legal liability of $ 386 million . While we intend estimate could reach approximately $ 1.0 billion in aggregate beyond recorded become reasonably estimable . NOTE 17 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2019 2018 2017 Balance Year Ended June 30 , 2019 2018 2017 Balance , beginning Ended June 30 , 2019 2018 2017 Balance , beginning of June 30 , 2019 2018 2017 Balance , beginning of year Balance , beginning of year 7,677 7,708 7,808 Issued 116 68 , beginning of year 7,677 7,708 7,808 Issued 116 68 70 beginning of year 7,677 7,708 7,808 Issued 116 68 70 Repurchased year 7,677 7,708 7,808 Issued 116 68 70 Repurchased ( 150 7,677 7,708 7,808 Issued 116 68 70 Repurchased ( 150 ) 7,708 7,808 Issued 116 68 70 Repurchased ( 150 ) ( 116 68 70 Repurchased ( 150 ) ( 99 ) ( Repurchased ( 150 ) ( 99 ) ( 170 ) Balance ) ( 99 ) ( 170 ) Balance , end of Balance , end of year 7,643 7,677 7,708 Share Repurchases On , end of year 7,643 7,677 7,708 Share Repurchases On September end of year 7,643 7,677 7,708 Share Repurchases On September 16 7,708 Share Repurchases On September 16 , 2013 , our Board Repurchases On September 16 , 2013 , our Board of Directors share repurchase program ( “ 2013 Share Repurchase Program ” ) ) authorizing up to $ 40.0 billion in share repurchase . in share repurchase . The 2013 Share Repurchase Program became effective Program became effective on October 1 , 2013 , and wa effective on October 1 , 2013 , and wa completed on and wa completed on December 22 , 2016 . On September completed on December 22 , 2016 . On September 20 , , 2016 . On September 20 , 2016 , our Board . On September 20 , 2016 , our Board of Directors up to an additional $ 40.0 billion in share repurchase ( in share repurchase ( “ 2016 Share Repurchase Program ” ) repurchase program commenced on December 22 , 2016 following completion of commenced on December 22 , 2016 following completion of the 2013 2016 following completion of the 2013 Share Repurchase Program , ha notice . As of June 30 , 2019 , $ 11.4 As of June 30 , 2019 , $ 11.4 billion remained 30 , 2019 , $ 11.4 billion remained of the 2016 11.4 billion remained of the 2016 Share Repurchase Program . 85 2016 Share Repurchase Program . 85 PART II Item 8 We . 85 PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2019 2018 2017 First Year Ended June 30 , 2019 2018 2017 First Quarter 24 Ended June 30 , 2019 2018 2017 First Quarter 24 $ June 30 , 2019 2018 2017 First Quarter 24 $ 2,600 2019 2018 2017 First Quarter 24 $ 2,600 22 $ 1,600 2017 First Quarter 24 $ 2,600 22 $ 1,600 63 $ First Quarter 24 $ 2,600 22 $ 1,600 63 $ 3,550 24 $ 2,600 22 $ 1,600 63 $ 3,550 Second Quarter $ 2,600 22 $ 1,600 63 $ 3,550 Second Quarter 57 22 $ 1,600 63 $ 3,550 Second Quarter 57 6,100 22 63 $ 3,550 Second Quarter 57 6,100 22 1,800 59 3,533 $ 3,550 Second Quarter 57 6,100 22 1,800 59 3,533 Third 3,550 Second Quarter 57 6,100 22 1,800 59 3,533 Third Quarter Second Quarter 57 6,100 22 1,800 59 3,533 Third Quarter 36 Quarter 57 6,100 22 1,800 59 3,533 Third Quarter 36 3,899 57 6,100 22 1,800 59 3,533 Third Quarter 36 3,899 34 1,800 59 3,533 Third Quarter 36 3,899 34 3,100 25 1,600 59 3,533 Third Quarter 36 3,899 34 3,100 25 1,600 Fourth 3,533 Third Quarter 36 3,899 34 3,100 25 1,600 Fourth Quarter Third Quarter 36 3,899 34 3,100 25 1,600 Fourth Quarter 33 Quarter 36 3,899 34 3,100 25 1,600 Fourth Quarter 33 4,200 36 3,899 34 3,100 25 1,600 Fourth Quarter 33 4,200 21 3,100 25 1,600 Fourth Quarter 33 4,200 21 2,100 23 1,600 25 1,600 Fourth Quarter 33 4,200 21 2,100 23 1,600 Total 1,600 Fourth Quarter 33 4,200 21 2,100 23 1,600 Total 150 Fourth Quarter 33 4,200 21 2,100 23 1,600 Total 150 $ Quarter 33 4,200 21 2,100 23 1,600 Total 150 $ 16,799 33 4,200 21 2,100 23 1,600 Total 150 $ 16,799 99 21 2,100 23 1,600 Total 150 $ 16,799 99 $ 8,600 23 1,600 Total 150 $ 16,799 99 $ 8,600 170 $ 1,600 Total 150 $ 16,799 99 $ 8,600 170 $ 10,283 150 $ 16,799 99 $ 8,600 170 $ 10,283 Shares repurchased $ 16,799 99 $ 8,600 170 $ 10,283 Shares repurchased in 99 $ 8,600 170 $ 10,283 Shares repurchased in the first second quarter of fiscal year 2017 were under the 2013 Share year 2017 were under the 2013 Share Repurchase Program . All share repurchased were under the 2016 Share Repurchase Program . The of stock award of $ 2.7 billion , $ 2.1 billion $ 2.7 billion , $ 2.1 billion , and $ 1.5 2.1 billion , and $ 1.5 billion for fiscal year 2019 1.5 billion for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . All share Per Share Amount Fiscal Year 2019 ( In million ) September ( In million ) September 18 , 2018 November 15 , million ) September 18 , 2018 November 15 , 2018 December September 18 , 2018 November 15 , 2018 December 13 , , 2018 November 15 , 2018 December 13 , 2018 $ November 15 , 2018 December 13 , 2018 $ 0.46 $ , 2018 December 13 , 2018 $ 0.46 $ 3,544 November December 13 , 2018 $ 0.46 $ 3,544 November 28 , , 2018 $ 0.46 $ 3,544 November 28 , 2018 February $ 0.46 $ 3,544 November 28 , 2018 February 21 , $ 3,544 November 28 , 2018 February 21 , 2019 March November 28 , 2018 February 21 , 2019 March 14 , , 2018 February 21 , 2019 March 14 , 2019 0.46 February 21 , 2019 March 14 , 2019 0.46 3,526 March , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 May , 2019 0.46 3,526 March 11 , 2019 May 16 , 0.46 3,526 March 11 , 2019 May 16 , 2019 June March 11 , 2019 May 16 , 2019 June 13 , , 2019 May 16 , 2019 June 13 , 2019 0.46 May 16 , 2019 June 13 , 2019 0.46 3,521 June , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 August , 2019 0.46 3,521 June 12 , 2019 August 15 , 0.46 3,521 June 12 , 2019 August 15 , 2019 September June 12 , 2019 August 15 , 2019 September 12 , , 2019 August 15 , 2019 September 12 , 2019 0.46 August 15 , 2019 September 12 , 2019 0.46 3,516 Total , 2019 September 12 , 2019 0.46 3,516 Total $ 1.84 2019 September 12 , 2019 0.46 3,516 Total $ 1.84 $ September 12 , 2019 0.46 3,516 Total $ 1.84 $ 14,107 2019 0.46 3,516 Total $ 1.84 $ 14,107 Fiscal Year 2018 3,516 Total $ 1.84 $ 14,107 Fiscal Year 2018 September 19 1.84 $ 14,107 Fiscal Year 2018 September 19 , 2017 November 14,107 Fiscal Year 2018 September 19 , 2017 November 16 , Year 2018 September 19 , 2017 November 16 , 2017 December September 19 , 2017 November 16 , 2017 December 14 , , 2017 November 16 , 2017 December 14 , 2017 $ November 16 , 2017 December 14 , 2017 $ 0.42 $ , 2017 December 14 , 2017 $ 0.42 $ 3,238 November December 14 , 2017 $ 0.42 $ 3,238 November 29 , , 2017 $ 0.42 $ 3,238 November 29 , 2017 February $ 0.42 $ 3,238 November 29 , 2017 February 15 , $ 3,238 November 29 , 2017 February 15 , 2018 March November 29 , 2017 February 15 , 2018 March 8 , , 2017 February 15 , 2018 March 8 , 2018 0.42 February 15 , 2018 March 8 , 2018 0.42 3,232 March , 2018 March 8 , 2018 0.42 3,232 March 12 , 2018 March 8 , 2018 0.42 3,232 March 12 , 2018 March 8 , 2018 0.42 3,232 March 12 , 2018 May , 2018 0.42 3,232 March 12 , 2018 May 17 , 0.42 3,232 March 12 , 2018 May 17 , 2018 June March 12 , 2018 May 17 , 2018 June 14 , , 2018 May 17 , 2018 June 14 , 2018 0.42 May 17 , 2018 June 14 , 2018 0.42 3,226 June , 2018 June 14 , 2018 0.42 3,226 June 13 , 2018 June 14 , 2018 0.42 3,226 June 13 , 2018 June 14 , 2018 0.42 3,226 June 13 , 2018 August , 2018 0.42 3,226 June 13 , 2018 August 16 , 0.42 3,226 June 13 , 2018 August 16 , 2018 September June 13 , 2018 August 16 , 2018 September 13 , , 2018 August 16 , 2018 September 13 , 2018 0.42 August 16 , 2018 September 13 , 2018 0.42 3,220 Total , 2018 September 13 , 2018 0.42 3,220 Total $ 1.68 2018 September 13 , 2018 0.42 3,220 Total $ 1.68 $ September 13 , 2018 0.42 3,220 Total $ 1.68 $ 12,916 2018 0.42 3,220 Total $ 1.68 $ 12,916 The dividend declared 3,220 Total $ 1.68 $ 12,916 The dividend declared on June The dividend declared on June 12 , 2019 wa included in declared on June 12 , 2019 wa included in other current current liability a of June 30 , 2019 . 86 PART a of June 30 , 2019 . 86 PART II Item June 30 , 2019 . 86 PART II Item 8 NOTE . 86 PART II Item 8 NOTE 1 8 — ACCUMULATED PART II Item 8 NOTE 1 8 — ACCUMULATED OTHER COMPREHENSIVE II Item 8 NOTE 1 8 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2019 2018 2017 Derivatives Year Ended June 30 , 2019 2018 2017 Derivatives Balance , Ended June 30 , 2019 2018 2017 Derivatives Balance , beginning June 30 , 2019 2018 2017 Derivatives Balance , beginning of , beginning of period $ 173 $ 134 $ 352 Unrealized of period $ 173 $ 134 $ 352 Unrealized gain , $ 173 $ 134 $ 352 Unrealized gain , net of net of tax of $ 2 , $ 11 , and of $ 2 , $ 11 , and $ 4 160 $ 11 , and $ 4 160 218 328 Reclassification adjustment 11 , and $ 4 160 218 328 Reclassification adjustment for , and $ 4 160 218 328 Reclassification adjustment for gain and $ 4 160 218 328 Reclassification adjustment for gain included gain included in revenue ( 341 ) ( 185 ) ( revenue ( 341 ) ( 185 ) ( 555 ) Tax ) ( 185 ) ( 555 ) Tax expense included in in provision for income tax 8 6 9 Amounts reclassified from provision for income tax 8 6 9 Amounts reclassified from accumulated for income tax 8 6 9 Amounts reclassified from accumulated other income ( loss ) ( 333 ) ( 179 ) ( ) ( 333 ) ( 179 ) ( 546 ) Net ) ( 179 ) ( 546 ) Net change related to of tax of $ ( 6 ) , $ 5 , ( 6 ) , $ 5 , and $ ( 5 5 , and $ ( 5 ) ( 173 ) 39 $ ( 5 ) ( 173 ) 39 ( 218 ) 5 ) ( 173 ) 39 ( 218 ) Balance , ( 173 ) 39 ( 218 ) Balance , end of , end of period $ 0 $ 173 $ 134 Investments of period $ 0 $ 173 $ 134 Investments Balance , $ 0 $ 173 $ 134 Investments Balance , beginning of beginning of period $ ( 850 ) $ 1,825 $ 2,941 $ ( 850 ) $ 1,825 $ 2,941 Unrealized gain ( 850 ) $ 1,825 $ 2,941 Unrealized gain ( loss ) net of tax of $ 616 , $ ( 427 ) $ 616 , $ ( 427 ) , and $ 267 427 ) , and $ 267 2,331 ( 1,146 ) 517 ) , and $ 267 2,331 ( 1,146 ) 517 Reclassification and $ 267 2,331 ( 1,146 ) 517 Reclassification adjustment for 267 2,331 ( 1,146 ) 517 Reclassification adjustment for ( gain ( expense ) , net 93 ( 2,309 ) ( 2,513 ) , net 93 ( 2,309 ) ( 2,513 ) Tax 93 ( 2,309 ) ( 2,513 ) Tax expense ( benefit provision for income tax ( 19 ) 738 880 Amounts reclassified income tax ( 19 ) 738 880 Amounts reclassified from accumulated tax ( 19 ) 738 880 Amounts reclassified from accumulated other comprehensive income ( loss ) 74 ( 1,571 ) ( 1,633 ( loss ) 74 ( 1,571 ) ( 1,633 ) Net 74 ( 1,571 ) ( 1,633 ) Net change related to net of tax of $ 635 , $ ( 1,165 ) $ 635 , $ ( 1,165 ) , and $ ( ) , and $ ( 613 ) 2,405 ( 2,717 ) and $ ( 613 ) 2,405 ( 2,717 ) ( 1,116 ( 613 ) 2,405 ( 2,717 ) ( 1,116 ) Cumulative 2,405 ( 2,717 ) ( 1,116 ) Cumulative effect of accounting effect of accounting change ( 67 ) 42 0 Balance , accounting change ( 67 ) 42 0 Balance , end of change ( 67 ) 42 0 Balance , end of period , end of period $ 1,488 $ ( 850 ) $ period $ 1,488 $ ( 850 ) $ 1,825 Translation Adjustments $ ( 850 ) $ 1,825 Translation Adjustments and Other Balance beginning of period $ ( 1,510 ) $ ( 1,332 ) ( 1,510 ) $ ( 1,332 ) $ ( 1,499 ) ( 1,332 ) $ ( 1,499 ) Translation adjustment and other tax effect of $ ( 1 ) , $ 0 , ( 1 ) , $ 0 , and $ 9 ( $ 0 , and $ 9 ( 318 ) ( 178 , and $ 9 ( 318 ) ( 178 ) 167 9 ( 318 ) ( 178 ) 167 Balance , end 318 ) ( 178 ) 167 Balance , end of period end of period $ ( 1,828 ) $ ( 1,510 ) ( 1,828 ) $ ( 1,510 ) $ ( 1,332 ) ( 1,510 ) $ ( 1,332 ) Accumulated other comprehensive income end of period $ ( 340 ) $ ( 2,187 ) ( 340 ) $ ( 2,187 ) $ 627 NOTE 19 $ ( 2,187 ) $ 627 NOTE 19 — EMPLOYEE STOCK 2,187 ) $ 627 NOTE 19 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2019 , an aggregate As of June 30 , 2019 , an aggregate of 327 2019 , an aggregate of 327 million share were authorized for million ) Year Ended June 30 , 2019 2018 2017 Stock-based Year Ended June 30 , 2019 2018 2017 Stock-based compensation expense Ended June 30 , 2019 2018 2017 Stock-based compensation expense $ June 30 , 2019 2018 2017 Stock-based compensation expense $ 4,652 2017 Stock-based compensation expense $ 4,652 $ 3,940 $ 3,266 Income compensation expense $ 4,652 $ 3,940 $ 3,266 Income tax benefit $ 4,652 $ 3,940 $ 3,266 Income tax benefit related to benefit related to stock-based compensation 816 823 1,066 87 PART II related to stock-based compensation 816 823 1,066 87 PART II Item to stock-based compensation 816 823 1,066 87 PART II Item 8 stock-based compensation 816 823 1,066 87 PART II Item 8 Stock 1,066 87 PART II Item 8 Stock Plans Stock award entitle assumption : Year Ended June 30 , 2019 2018 2017 Dividends Year Ended June 30 , 2019 2018 2017 Dividends per share Ended June 30 , 2019 2018 2017 Dividends per share ( June 30 , 2019 2018 2017 Dividends per share ( quarterly ( quarterly amount ) $ 0.42 - $ 0.46 $ 0.39 ) $ 0.42 - $ 0.46 $ 0.39 - $ 0.42 0.42 - $ 0.46 $ 0.39 - $ 0.42 $ 0.36 0.46 $ 0.39 - $ 0.42 $ 0.36 - $ 0.39 0.39 - $ 0.42 $ 0.36 - $ 0.39 Interest rate 0.42 $ 0.36 - $ 0.39 Interest rate 1.8 % - - $ 0.39 Interest rate 1.8 % - 3.1 % 1.7 Interest rate 1.8 % - 3.1 % 1.7 % - 2.9 1.8 % - 3.1 % 1.7 % - 2.9 % 1.2 3.1 % 1.7 % - 2.9 % 1.2 % - 2.2 1.7 % - 2.9 % 1.2 % - 2.2 % During 2.9 % 1.2 % - 2.2 % During fiscal year 2019 2.2 % During fiscal year 2019 , the following activity occurred balance , beginning of year 174 $ 57.85 Granted ( a beginning of year 174 $ 57.85 Granted ( a ) 63 57.85 Granted ( a ) 63 107.02 Vested ( 77 ) Granted ( a ) 63 107.02 Vested ( 77 ) 57.08 ) 63 107.02 Vested ( 77 ) 57.08 Forfeited ( 13 107.02 Vested ( 77 ) 57.08 Forfeited ( 13 ) 69.35 77 ) 57.08 Forfeited ( 13 ) 69.35 Nonvested balance , 57.08 Forfeited ( 13 ) 69.35 Nonvested balance , end of balance , end of year 147 $ 78.49 ( a ) end of year 147 $ 78.49 ( a ) Includes 2 78.49 ( a ) Includes 2 million , 3 million , ) Includes 2 million , 3 million , and 2 million , 3 million , and 2 million of PSUs granted at target level for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . As of respectively . As of June 30 , 2019 , there wa As of June 30 , 2019 , there wa approximately $ , there wa approximately $ 8.6 billion of total unrecognized compensation a weighted average period of 3 year . The weighted average stock award granted wa $ 107.02 , $ 75.88 , and wa $ 107.02 , $ 75.88 , and $ 55.64 for $ 75.88 , and $ 55.64 for fiscal year 2019 , $ 55.64 for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . The fair stock award vested wa $ 8.7 billion , $ 6.6 billion $ 8.7 billion , $ 6.6 billion , and $ 4.8 6.6 billion , and $ 4.8 billion , for fiscal year billion , for fiscal year 2019 , 2018 , and 2017 for fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . Employee Stock employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2019 2018 2017 Shares Year Ended June 30 , 2019 2018 2017 Shares purchased 11 Ended June 30 , 2019 2018 2017 Shares purchased 11 13 June 30 , 2019 2018 2017 Shares purchased 11 13 13 2019 2018 2017 Shares purchased 11 13 13 Average price per 2018 2017 Shares purchased 11 13 13 Average price per share 2017 Shares purchased 11 13 13 Average price per share $ Average price per share $ 104.85 $ 76.40 $ 56.36 As per share $ 104.85 $ 76.40 $ 56.36 As of June $ 104.85 $ 76.40 $ 56.36 As of June 30 , $ 56.36 As of June 30 , 2019 , 105 million As of June 30 , 2019 , 105 million share of June 30 , 2019 , 105 million share of our common issuance through the ESPP . 88 PART II Item 8 Savings . 88 PART II Item 8 Savings Plan We have saving U.S. that qualify under Section 401 ( k ) of the a maximum employer contribution of 50 % of the IRS contribution for all plan were $ 877 million , $ 807 million $ 877 million , $ 807 million , and $ 734 807 million , and $ 734 million in fiscal year 2019 734 million in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively , and were expensed a contributed . NOTE 20 — SEGMENT INFORMATION AND GEOGRAPHIC Office Commercial , including Office 365 subscription and Office licensed on-premises , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Office 365 subscription and Office licensed on-premises business solution , including Dynamics 365 , a set of cloud-based royalty . • Search . 89 PART II Item 8 Revenue . 89 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2019 2018 2017 Revenue Year Ended June 30 , 2019 2018 2017 Revenue Productivity and Ended June 30 , 2019 2018 2017 Revenue Productivity and Business June 30 , 2019 2018 2017 Revenue Productivity and Business Processes Productivity and Business Processes $ 41,160 $ 35,865 $ 29,870 Intelligent Business Processes $ 41,160 $ 35,865 $ 29,870 Intelligent Cloud 38,985 $ 41,160 $ 35,865 $ 29,870 Intelligent Cloud 38,985 32,219 27,407 35,865 $ 29,870 Intelligent Cloud 38,985 32,219 27,407 More Personal Computing $ 29,870 Intelligent Cloud 38,985 32,219 27,407 More Personal Computing 45,698 29,870 Intelligent Cloud 38,985 32,219 27,407 More Personal Computing 45,698 42,276 32,219 27,407 More Personal Computing 45,698 42,276 39,294 Total $ 125,843 27,407 More Personal Computing 45,698 42,276 39,294 Total $ 125,843 $ More Personal Computing 45,698 42,276 39,294 Total $ 125,843 $ 110,360 45,698 42,276 39,294 Total $ 125,843 $ 110,360 $ 96,571 Operating 39,294 Total $ 125,843 $ 110,360 $ 96,571 Operating Income ( $ 125,843 $ 110,360 $ 96,571 Operating Income ( Loss ) Productivity and Business Processes $ 16,219 $ 12,924 $ 11,389 Intelligent Business Processes $ 16,219 $ 12,924 $ 11,389 Intelligent Cloud 13,920 $ 16,219 $ 12,924 $ 11,389 Intelligent Cloud 13,920 11,524 9,127 12,924 $ 11,389 Intelligent Cloud 13,920 11,524 9,127 More Personal Computing $ 11,389 Intelligent Cloud 13,920 11,524 9,127 More Personal Computing 12,820 11,389 Intelligent Cloud 13,920 11,524 9,127 More Personal Computing 12,820 10,610 11,524 9,127 More Personal Computing 12,820 10,610 8,815 Corporate and Other 9,127 More Personal Computing 12,820 10,610 8,815 Corporate and Other 0 More Personal Computing 12,820 10,610 8,815 Corporate and Other 0 0 10,610 8,815 Corporate and Other 0 0 ( 306 ) Total 8,815 Corporate and Other 0 0 ( 306 ) Total $ and Other 0 0 ( 306 ) Total $ 42,959 $ ( 306 ) Total $ 42,959 $ 35,058 $ 29,025 Corporate ) Total $ 42,959 $ 35,058 $ 29,025 Corporate and Other $ 42,959 $ 35,058 $ 29,025 Corporate and Other operating loss States accounted for more than 10 % of revenue for fiscal of revenue for fiscal year 2019 , 2018 , or 2017 for fiscal year 2019 , 2018 , or 2017 . Revenue 2019 , 2018 , or 2017 . Revenue , classified by million ) Year Ended June 30 , 2019 2018 2017 United Year Ended June 30 , 2019 2018 2017 United States ( Ended June 30 , 2019 2018 2017 United States ( a June 30 , 2019 2018 2017 United States ( a ) States ( a ) $ 64,199 $ 55,926 $ 51,078 Other a ) $ 64,199 $ 55,926 $ 51,078 Other country 61,644 $ 64,199 $ 55,926 $ 51,078 Other country 61,644 54,434 45,493 55,926 $ 51,078 Other country 61,644 54,434 45,493 Total $ 125,843 $ 51,078 Other country 61,644 54,434 45,493 Total $ 125,843 $ 51,078 Other country 61,644 54,434 45,493 Total $ 125,843 $ 110,360 61,644 54,434 45,493 Total $ 125,843 $ 110,360 $ 96,571 ( 45,493 Total $ 125,843 $ 110,360 $ 96,571 ( a ) $ 125,843 $ 110,360 $ 96,571 ( a ) Includes billing source of the revenue . 90 PART II Item 8 Revenue . 90 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2019 2018 2017 Server Year Ended June 30 , 2019 2018 2017 Server product and Ended June 30 , 2019 2018 2017 Server product and cloud June 30 , 2019 2018 2017 Server product and cloud service product and cloud service $ 32,622 $ 26,129 $ 21,649 Office cloud service $ 32,622 $ 26,129 $ 21,649 Office product and $ 32,622 $ 26,129 $ 21,649 Office product and cloud service Office product and cloud service 31,769 28,316 25,573 Windows 20,395 19,518 product and cloud service 31,769 28,316 25,573 Windows 20,395 19,518 18,593 and cloud service 31,769 28,316 25,573 Windows 20,395 19,518 18,593 Gaming service 31,769 28,316 25,573 Windows 20,395 19,518 18,593 Gaming 11,386 10,353 31,769 28,316 25,573 Windows 20,395 19,518 18,593 Gaming 11,386 10,353 9,051 28,316 25,573 Windows 20,395 19,518 18,593 Gaming 11,386 10,353 9,051 Search Windows 20,395 19,518 18,593 Gaming 11,386 10,353 9,051 Search advertising 7,628 20,395 19,518 18,593 Gaming 11,386 10,353 9,051 Search advertising 7,628 7,012 19,518 18,593 Gaming 11,386 10,353 9,051 Search advertising 7,628 7,012 6,219 11,386 10,353 9,051 Search advertising 7,628 7,012 6,219 LinkedIn 6,754 5,259 10,353 9,051 Search advertising 7,628 7,012 6,219 LinkedIn 6,754 5,259 2,271 9,051 Search advertising 7,628 7,012 6,219 LinkedIn 6,754 5,259 2,271 Enterprise advertising 7,628 7,012 6,219 LinkedIn 6,754 5,259 2,271 Enterprise Services 6,124 7,628 7,012 6,219 LinkedIn 6,754 5,259 2,271 Enterprise Services 6,124 5,846 7,012 6,219 LinkedIn 6,754 5,259 2,271 Enterprise Services 6,124 5,846 5,542 6,754 5,259 2,271 Enterprise Services 6,124 5,846 5,542 Devices 6,095 5,134 5,259 2,271 Enterprise Services 6,124 5,846 5,542 Devices 6,095 5,134 5,062 2,271 Enterprise Services 6,124 5,846 5,542 Devices 6,095 5,134 5,062 Other Services 6,124 5,846 5,542 Devices 6,095 5,134 5,062 Other 3,070 2,793 6,124 5,846 5,542 Devices 6,095 5,134 5,062 Other 3,070 2,793 2,611 5,846 5,542 Devices 6,095 5,134 5,062 Other 3,070 2,793 2,611 Total Devices 6,095 5,134 5,062 Other 3,070 2,793 2,611 Total $ 125,843 6,095 5,134 5,062 Other 3,070 2,793 2,611 Total $ 125,843 $ 5,134 5,062 Other 3,070 2,793 2,611 Total $ 125,843 $ 110,360 3,070 2,793 2,611 Total $ 125,843 $ 110,360 $ 96,571 Our 2,611 Total $ 125,843 $ 110,360 $ 96,571 Our commercial cloud $ 125,843 $ 110,360 $ 96,571 Our commercial cloud revenue , revenue , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 38.1 billion , $ 26.6 billion $ 38.1 billion , $ 26.6 billion and $ 16.2 billion $ 26.6 billion and $ 16.2 billion in fiscal year 2019 16.2 billion in fiscal year 2019 , 2018 , and 2017 in fiscal year 2019 , 2018 , and 2017 , respectively 2019 , 2018 , and 2017 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2019 2018 2017 United million ) June 30 , 2019 2018 2017 United States $ ) June 30 , 2019 2018 2017 United States $ 55,252 June 30 , 2019 2018 2017 United States $ 55,252 $ 2018 2017 United States $ 55,252 $ 44,501 $ 42,730 Ireland United States $ 55,252 $ 44,501 $ 42,730 Ireland 12,958 12,843 $ 55,252 $ 44,501 $ 42,730 Ireland 12,958 12,843 12,889 Other $ 44,501 $ 42,730 Ireland 12,958 12,843 12,889 Other country 25,422 44,501 $ 42,730 Ireland 12,958 12,843 12,889 Other country 25,422 22,538 $ 42,730 Ireland 12,958 12,843 12,889 Other country 25,422 22,538 19,898 12,958 12,843 12,889 Other country 25,422 22,538 19,898 Total $ 93,632 12,843 12,889 Other country 25,422 22,538 19,898 Total $ 93,632 $ 12,889 Other country 25,422 22,538 19,898 Total $ 93,632 $ 79,882 25,422 22,538 19,898 Total $ 93,632 $ 79,882 $ 75,517 91 19,898 Total $ 93,632 $ 79,882 $ 75,517 91 PART II $ 93,632 $ 79,882 $ 75,517 91 PART II Item 8 93,632 $ 79,882 $ 75,517 91 PART II Item 8 NOTE 75,517 91 PART II Item 8 NOTE 2 1 — QUARTERLY PART II Item 8 NOTE 2 1 — QUARTERLY INFORMATION ( II Item 8 NOTE 2 1 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2019 Revenue June 30 Total Fiscal Year 2019 Revenue $ 29,084 $ 32,471 Fiscal Year 2019 Revenue $ 29,084 $ 32,471 $ 30,571 $ 2019 Revenue $ 29,084 $ 32,471 $ 30,571 $ 33,717 $ $ 29,084 $ 32,471 $ 30,571 $ 33,717 $ 125,843 Gross $ 32,471 $ 30,571 $ 33,717 $ 125,843 Gross margin 19,179 $ 30,571 $ 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 33,717 $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating $ 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 10,341 20,401 23,305 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net 23,305 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( a income 9,955 10,258 10,341 12,405 42,959 Net income ( a ) Net income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share ( per share ( b ) 1.14 1.08 1.14 1.71 5.06 Fiscal share ( b ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year ( b ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year 2018 b ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year 2018 Revenue ) 1.14 1.08 1.14 1.71 5.06 Fiscal Year 2018 Revenue $ 1.14 1.71 5.06 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 Fiscal Year 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 2018 Revenue $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ $ 24,538 $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross $ 28,918 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 $ 26,819 $ 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 30,085 $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating $ 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 110,360 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 Gross margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 margin 16,260 17,854 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 17,550 20,343 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net 20,343 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income 72,007 Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( Operating income 7,708 8,679 8,292 10,379 35,058 Net income ( loss income 7,708 8,679 8,292 10,379 35,058 Net income ( loss ) loss ) ( c ) 6,576 ( 6,302 ) 7,424 8,873 ( c ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic ) 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( 6,576 ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ( 6,302 ) 7,424 8,873 16,571 Basic earnings ( loss ) ( loss ) per share 0.85 ( 0.82 ) 0.96 1.15 ) per share 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted share 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( 0.85 ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( loss ( 0.82 ) 0.96 1.15 2.15 Diluted earnings ( loss ) per share ( d ) 0.84 ( 0.82 ) 0.95 1.14 ( d ) 0.84 ( 0.82 ) 0.95 1.14 2.13 ( ) 0.84 ( 0.82 ) 0.95 1.14 2.13 ( a ) 0.84 ( 0.82 ) 0.95 1.14 2.13 ( a ) Reflects ( 0.82 ) 0.95 1.14 2.13 ( a ) Reflects the a ) Reflects the $ 157 million net charge related to second quarter and the $ 2.6 billion net income tax benefit increased net income by $ 2.4 billion for fiscal year 2019 2.4 billion for fiscal year 2019 . See Note 12 – year 2019 . See Note 12 – Income Taxes for further increased ) diluted EPS $ 0.02 for the second quarter , second quarter , $ ( 0.34 ) for the fourth quarter quarter , and $ ( 0.31 ) for fiscal year 2019 0.31 ) for fiscal year 2019 . ( c ) Reflects of the TCJA of $ 13.8 billion for the second quarter second quarter , $ ( 104 ) million for the fourth fourth quarter , and $ 13.7 billion for fiscal year 2018 13.7 billion for fiscal year 2018 . ( d ) Reflects increased ) diluted EPS $ 1.78 for the second quarter , second quarter , $ ( 0.01 ) for the fourth quarter fourth quarter , and $ 1.75 for fiscal year 2018 . $ 1.75 for fiscal year 2018 . 92 PART II Item for fiscal year 2018 . 92 PART II Item 8 REPORT . 92 PART II Item 8 REPORT OF INDEPENDENT REGIST ERED ” ) a of June 30 , 2019 and 2018 , a of June 30 , 2019 and 2018 , the related June 30 , 2019 and 2018 , the related consolidated statement in the period ended June 30 , 2019 , and the period ended June 30 , 2019 , and the related note the Company a of June 30 , 2019 and 2018 , a of June 30 , 2019 and 2018 , and the June 30 , 2019 and 2018 , and the result of in the period ended June 30 , 2019 , in conformity period ended June 30 , 2019 , in conformity with accounting financial reporting a of June 30 , 2019 , based on a of June 30 , 2019 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated August 1 , 2019 , expressed an report dated August 1 , 2019 , expressed an unqualified opinion Committee and that : ( 1 ) relate to account or the financial statement and ( 2 ) involved our especially challenging to which they relate . 93 PART II Item 8 Revenue . 93 PART II Item 8 Revenue Recognition — Refer to Recognition — Refer to Note 1 to the F inancial S in the financial statement . 94 PART II Item 8 Income . 94 PART II Item 8 Income Taxes — Uncertain Tax Positions — Refer to Note 1 2 to the F inancial — Refer to Note 1 2 to the F inancial S for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington August 1 , 2019 We have served , Washington August 1 , 2019 We have served a the Company ’ s auditor since 1983 . 95 PART II Item s auditor since 1983 . 95 PART II Item 9 , . 95 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2019 . There were a of June 30 , 2019 . There were no change during the quarter ended June 30 , 2019 that have materially quarter ended June 30 , 2019 that have materially affected , financial reporting a of June 30 , 2019 ; their report a of June 30 , 2019 ; their report is included report is included in Item 9A . 96 PART II Item included in Item 9A . 96 PART II Item 9A REPORT . 96 PART II Item 9A REPORT OF INDEPENDENT REGIST ERED `` ) a of June 30 , 2019 , based on a of June 30 , 2019 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2019 , based on a of June 30 , 2019 , based on the criterion Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2019 , of the year ended June 30 , 2019 , of the Company and and our report dated August 1 , 2019 , expressed an report dated August 1 , 2019 , expressed an unqualified opinion policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington August 1 , 2019 97 PART II , Washington August 1 , 2019 97 PART II , III Washington August 1 , 2019 97 PART II , III Item PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 4 , 2019 ( the “ be held December 4 , 2019 ( the “ Proxy Statement in a report on Form 8-K. ITE M 11 . EXECUTIVE on Form 8-K. ITE M 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 98 PART IV Item 15 ITEM . 98 PART IV Item 15 ITEM 1 5 . EXHIBITS PART IV Item 15 ITEM 1 5 . EXHIBITS , FINANC IV Item 15 ITEM 1 5 . EXHIBITS , FINANC IAL are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 51 Comprehensive Income Statements 52 Balance Statements 51 Comprehensive Income Statements 52 Balance Sheets 53 Cash Flows Income Statements 52 Balance Sheets 53 Cash Flows Statements 54 Stockholders Sheets 53 Cash Flows Statements 54 Stockholders ’ Equity Statements 55 54 Stockholders ’ Equity Statements 55 Notes to Financial Statements 56 55 Notes to Financial Statements 56 Report of Independent Registered Public Independent Registered Public Accounting Firm 93 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Corporation 8-K 3.2 6/14/17 4.1 Form of Indenture between Microsoft Base Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Indenture ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental ” ) S-3ASR 4.1 11/20/08 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 99 PART IV . , a Trustee 8-K 4.2 9/27/10 99 PART IV Item , a Trustee 8-K 4.2 9/27/10 99 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 99 PART IV Item 15 Incorporated 9/27/10 99 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of 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dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 100 PART IV . , a Trustee 8-K 4.1 12/6/13 100 PART IV Item , a Trustee 8-K 4.1 12/6/13 100 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 100 PART IV Item 15 Incorporated 12/6/13 100 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between 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FORM PART IV Item 15 ITEM 1 6 . FORM 10-K SUMMARY IV Item 15 ITEM 1 6 . FORM 10-K SUMMARY None ITEM 1 6 . FORM 10-K SUMMARY None . 104 SIGNAT FORM 10-K SUMMARY None . 104 SIGNAT URES Pursuant to the to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on August 1 , 2019 . M ICROSOFT , on August 1 , 2019 . M ICROSOFT C ORPORATION ( Principal Accounting Officer ) 105 Pursuant to the requirement of the Securities Exchange Act of 1934 , this report ha been the capacity indicated on August 1 , 201 9 . Signature indicated on August 1 , 201 9 . Signature Title /s/ on August 1 , 201 9 . 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OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the registered Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 3.125 % Notes Notes due 2021 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Exchange Act ) No ☒ As of December 31 , 2019 , the aggregate As of December 31 , 2019 , the aggregate market value of the registrant wa $ 1.2 trillion based on the closing System . As of July 27 , 2020 , there were As of July 27 , 2020 , there were 7,567,652,935 share , 2020 , there were 7,567,652,935 share of common stock outstanding to be held on December 2 , 2020 are incorporated by held on December 2 , 2020 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2020 INDEX Page PART Year Ended June 30 , 2020 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Executive Officers of PART I Item 1. Business 3 Executive Officers of the Registrant Executive Officers of the Registrant 17 Item 1A . Risk Factors of the Registrant 17 Item 1A . Risk Factors 19 Item Item 1A . Risk Factors 19 Item 1B . Unresolved Staff . Risk Factors 19 Item 1B . Unresolved Staff Comments 32 1B . Unresolved Staff Comments 32 Item 2 . Properties 32 Unresolved Staff Comments 32 Item 2 . Properties 32 Item 3 32 Item 2 . Properties 32 Item 3 . Legal Proceedings 2 . Properties 32 Item 3 . Legal Proceedings 32 Item Item 3 . Legal Proceedings 32 Item 4 . Mine Safety . Legal Proceedings 32 Item 4 . Mine Safety Disclosures 32 4 . Mine Safety Disclosures 32 PART II Item 5 . Disclosures 32 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 33 Item 6 . Selected Financial of Equity Securities 33 Item 6 . Selected Financial Data 34 6 . Selected Financial Data 34 Item 7 . Management ’ Selected Financial Data 34 Item 7 . Management ’ s Discussion Condition and Results of Operations 35 Item 7A . Quantitative and Results of Operations 35 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 54 Item 8 . Financial Statements about Market Risk 54 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 55 Item 9 . Changes in and Supplementary Data 55 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 97 Item 9A . Controls and and Financial Disclosure 97 Item 9A . Controls and Procedures 97 9A . Controls and Procedures 97 Report of Management on Internal Internal Control over Financial Reporting 97 Report of Independent Registered Public Independent Registered Public Accounting Firm 98 Item 9B . Other Information Public Accounting Firm 98 Item 9B . Other Information 99 PART Item 9B . Other Information 99 PART III Item 10 . Information 99 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 99 Item 11 . Executive Compensation and Corporate Governance 99 Item 11 . Executive Compensation 99 Item Item 11 . Executive Compensation 99 Item 12 . Security Ownership . Executive Compensation 99 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 99 Item 13 . Certain Relationships Related Stockholder Matters 99 Item 13 . Certain Relationships and Related Transactions , and Director Independence 99 Item 14 . Principal Accounting and Director Independence 99 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 99 PART IV Item 15 . Services 99 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 100 Item 16 . Form 10-K Financial Statement Schedules 100 Item 16 . Form 10-K Summary 106 100 Item 16 . Form 10-K Summary 106 Signatures 107 2 16 . Form 10-K Summary 106 Signatures 107 2 PART I Form 10-K Summary 106 Signatures 107 2 PART I Item 1 10-K Summary 106 Signatures 107 2 PART I Item 1 Note 107 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned otherwise . PART I ITEM 1. BUSINESS GENERAL Embracing Our Future What We Offer Founded in 1975 , we develop and support , and related accessory . 3 PART I Item 1 The . 3 PART I Item 1 The Ambitions That Drive Us , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows 10 , and together Office 365 , Windows 10 , and Enterprise Mobility + through social selling . Dynamics 365 for Talent with LinkedIn Recruiter next era of computing . 4 PART I Item 1 The . 4 PART I Item 1 The ability to convert data cohesive customer experience . Windows 10 serf the enterprise a the Cortana , inking , immersive 3D content storytelling , and mixed . Our ambition for Windows 10 monetization opportunity includes gaming , our cloud business and Microsoft 365 strategy , and it power family , including Surface Book 3 and Surface Go 2 . Book 3 and Surface Go 2 . These new Surface product Surface product join Surface Pro 7 , Surface Laptop 3 , Pro 7 , Surface Laptop 3 , and Surface Pro X Game Pass , with over 10 million member from 41 country over 10 million member from 41 country , is a community a curated library of over 100 first- and third-party console and our cloud business and Microsoft 365 strategy , and to develop the best of Microsoft . 5 PART I Item 1 COVID-19 . 5 PART I Item 1 COVID-19 In March 2020 , Item 1 COVID-19 In March 2020 , the World Health Organization to virtual-only through fiscal year 2021 . The COVID-19 pandemic ha ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) for further discussion regarding COVID-19 on our fiscal year 2020 financial result . The extent ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of for sustainability . In January 2020 , we announced a bold , we are investing $ 1 billion over the next four s carbon footprint . By 2030 Microsoft will be carbon negative carbon negative , and by 2050 Microsoft will remove from the since it wa founded in 1975 . We also launched a We also pledged a $ 50 million investment in AI for in the United States by 2025 ; engaging our ecosystem by across the United States . 6 PART I Item 1 Investing . 6 PART I Item 1 Investing in Digital Skills With This is combined with $ 20 million we are investing in information is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment Office Commercial , including Office 365 subscription , the Office portion the Office portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscription and Office business solution , including Dynamics 365 , a set of cloud-based Office licensed on-premises to Office 365 . CALs provide certain Office Office product and service . 7 PART I Item 1 Office . 7 PART I Item 1 Office Consumer Office Consumer is Office licensed on-premises to Microsoft 365 Consumer subscription . Office Consumer search . LinkedIn ha over 700 million member and ha office the continued shift to Dynamics 365 , a unified set of customer intelligence and insight . 8 PART I Item 1 Dynamics . 8 PART I Item 1 Dynamics competes with vendor such supply version of Linux . 9 PART I Item 1 We . 9 PART I Item 1 We compete to provide enterprise-wide component . • Piracy . 10 PART I Item 1 Windows . 10 PART I Item 1 Windows Commercial revenue , which a curated library of over 100 first- and third-party console and those that enable productivity . 11 PART I Item 1 Devices . 11 PART I Item 1 Devices face competition from various experience and social interaction . 12 PART I Item 1 Internal . 12 PART I Item 1 Internal development allows u to have a portfolio of over 63,000 U.S. and international patent issued international patent issued and over 24,500 pending worldwide . While we research and development effort . 13 PART I Item 1 DISTRIBUTION . 13 PART I Item 1 DISTRIBUTION , SALES , AND capability to subscribe to Office 365 . There are two broad online store . In June 2020 , we announced a strategic solution and specialized service . 14 PART I Item 1 LICENSING . 14 PART I Item 1 LICENSING OPTIONS We offer option monthly based on consumption . 15 PART I Item 1 The . 15 PART I Item 1 The Independent Software Vendor Royalty backlog is not significant . 16 PART I Item 1 EXECUTIVE . 16 PART I Item 1 EXECUTIVE OFFICERS OF THE REGISTRANT executive officer a of July 30 , 2020 were a follows a of July 30 , 2020 were a follows : Name with the Company Satya Nadella 52 Chief Executive Officer Christopher C. Executive Officer Christopher C. Capossela 50 Executive Vice President , Marketing Chief Marketing Officer Jean-Philippe Courtois 59 Executive Vice President and President and Operations Kathleen T. Hogan 54 Executive Vice President , Human Human Resources Amy E. Hood 48 Executive Vice President , Chief Financial Officer Bradford L. Smith 61 President and Chief Legal Officer Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 26 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , Marketing and Operations in July 2016 . Before that he wa President of Microsoft International since 2005 . He wa Chief Executive East , and Africa from 2003 to 2005 . He wa and Africa from 2003 to 2005 . He wa Senior Vice East , and Africa from 2000 to 2003 . He wa and Africa from 2000 to 2003 . He wa Corporate Vice , Worldwide Customer Marketing from 1998 to 2000 . Mr. Courtois Customer Marketing from 1998 to 2000 . Mr. Courtois joined Microsoft Mr. Courtois joined Microsoft in 1984 . Ms. Hogan wa appointed , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms. Hogan also serf Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Mr. Smith wa Chief Legal Officer in September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General Directors of Netflix , Inc. 17 PART I Item 1 EMPLOYEES Inc. 17 PART I Item 1 EMPLOYEES As of June 30 1 EMPLOYEES As of June 30 , 2020 , we employed As of June 30 , 2020 , we employed approximately 163,000 2020 , we employed approximately 163,000 people on a full-time basis on a full-time basis , 96,000 in the U.S. and 67,000 96,000 in the U.S. and 67,000 internationally . Of the total the total employed people , 56,000 were in operation , including , and consulting service ; 55,000 were in product research and product research and development ; 40,000 were in sale and marketing sale and marketing ; and 12,000 were in general and administration Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 18 PART I Item 1A ITEM . 18 PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation and business model objective . 19 PART I Item 1A Business . 19 PART I Item 1A Business model competition Companies compete margin and operating income . 20 PART I Item 1A We . 20 PART I Item 1A We make significant investment in Windows operating system , Microsoft 365 , Office , Bing , Server , Azure , Office 365 , Xbox Live , LinkedIn For example , in October 2018 , we completed our acquisition GitHub ” ) for $ 7.5 billion . These acquisition and our result of operation . 21 PART I Item 1A Cyberattacks . 21 PART I Item 1A Cyberattacks and security vulnerability could our product and service . 22 PART I Item 1A The . 22 PART I Item 1A The cost of these step and consolidated financial statement . 23 PART I Item 1A Digital . 23 PART I Item 1A Digital safety and service misuse Microsoft Account service , Office 365 , Microsoft Teams , Dynamics , Microsoft Teams , Dynamics 365 , OneDrive , SharePoint Online , or warranty repair . 24 PART I Item 1A Our . 24 PART I Item 1A Our software product and service may negatively impact revenue . 25 PART I Item 1A Third . 25 PART I Item 1A Third party may claim we product release such a Windows 10 , significant business transaction , product release such a Windows 10 can receive significant scrutiny under . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may on which developer rely . 26 PART I Item 1A • . 26 PART I Item 1A • We may be required ability to realize anticipated Windows 10 post-sale monetization opportunity may be investigate them . On July 22 , 2019 , our Hungarian . On July 22 , 2019 , our Hungarian subsidiary entered required u to pay $ 25.3 million in monetary penalty , opportunity or face regulatory action 27 PART I Item 1A Laws action 27 PART I Item 1A Laws and regulation relating to For example , in July 2020 the Court of Justice of some market . In May 2018 , the EU General Data monetary penalty of up to 4 % of worldwide revenue , example , compliance with the 2017 United States Tax Cuts and that determination is made . 28 PART I Item 1A We . 28 PART I Item 1A We earn a significant amount cause sale channel disruption . 29 PART I Item 1A Challenging . 29 PART I Item 1A Challenging economic condition also may to virtual-only through fiscal year 2021 . The COVID-19 pandemic ha fourth quarter of fiscal year 2020 , we have experienced adverse , and forward-looking guidance . 30 PART I Item 1A Measures . 30 PART I Item 1A Measures to contain the virus meet our workforce need . 31 PART I Item 1B , . 31 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2020 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 520 acre of land we own ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . The table below and internationally a of June 30 , 2020 : ( Square a of June 30 , 2020 : ( Square foot in Location Owned Leased Total U.S. 20 14 34 International 7 16 Owned Leased Total U.S. 20 14 34 International 7 16 23 Leased Total U.S. 20 14 34 International 7 16 23 Total U.S. 20 14 34 International 7 16 23 Total 27 30 20 14 34 International 7 16 23 Total 27 30 57 14 34 International 7 16 23 Total 27 30 57 ITEM International 7 16 23 Total 27 30 57 ITEM 3 . 7 16 23 Total 27 30 57 ITEM 3 . LEGAL 16 23 Total 27 30 57 ITEM 3 . LEGAL PROCEEDINGS Total 27 30 57 ITEM 3 . LEGAL PROCEEDINGS While not Order . During fiscal year 2020 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU annually . Refer to Note 15 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 32 PART II Item 5 PART . 32 PART II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 27 , 2020 , there were . On July 27 , 2020 , there were 91,674 registered , 2020 , there were 91,674 registered holder of record of fourth quarter of fiscal year 2020 : Period Total Number of ( In million ) April 1 , 2020 – April 30 million ) April 1 , 2020 – April 30 , 2020 1 , 2020 – April 30 , 2020 8,906,563 $ 165.90 2020 – April 30 , 2020 8,906,563 $ 165.90 8,906,563 $ – April 30 , 2020 8,906,563 $ 165.90 8,906,563 $ 35,323 30 , 2020 8,906,563 $ 165.90 8,906,563 $ 35,323 May 1 , 2020 8,906,563 $ 165.90 8,906,563 $ 35,323 May 1 , 8,906,563 $ 165.90 8,906,563 $ 35,323 May 1 , 2020 – 165.90 8,906,563 $ 35,323 May 1 , 2020 – May 31 $ 35,323 May 1 , 2020 – May 31 , 2020 1 , 2020 – May 31 , 2020 9,655,700 182.31 9,655,700 2020 – May 31 , 2020 9,655,700 182.31 9,655,700 33,563 June – May 31 , 2020 9,655,700 182.31 9,655,700 33,563 June 1 May 31 , 2020 9,655,700 182.31 9,655,700 33,563 June 1 , 31 , 2020 9,655,700 182.31 9,655,700 33,563 June 1 , 2020 , 2020 9,655,700 182.31 9,655,700 33,563 June 1 , 2020 – 9,655,700 182.31 9,655,700 33,563 June 1 , 2020 – June 30 9,655,700 33,563 June 1 , 2020 – June 30 , 2020 1 , 2020 – June 30 , 2020 9,648,400 191.80 9,648,400 2020 – June 30 , 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 – June 30 , 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 June 30 , 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All 30 , 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share , 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share repurchase 2020 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share repurchase were 9,648,400 191.80 9,648,400 31,712 28,210,663 28,210,663 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2020 : Declaration Date Record Date ( In million ) June 17 , 2020 August 20 , million ) June 17 , 2020 August 20 , 2020 September June 17 , 2020 August 20 , 2020 September 10 , , 2020 August 20 , 2020 September 10 , 2020 $ August 20 , 2020 September 10 , 2020 $ 0.51 $ , 2020 September 10 , 2020 $ 0.51 $ 3,861 We September 10 , 2020 $ 0.51 $ 3,861 We returned $ , 2020 $ 0.51 $ 3,861 We returned $ 8.9 billion $ 3,861 We returned $ 8.9 billion to shareholder in the fourth quarter of fiscal year 2020 . Refer to Note 16 2020 . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 33 PART II Item 6 ITEM . 33 PART II Item 6 ITEM 6 . SELECTED FINANCIAL PART II Item 6 ITEM 6 . SELECTED FINANCIAL DATA FINANCIAL amount ) Year Ended June 30 , 2020 2019 ( a Year Ended June 30 , 2020 2019 ( a ) 2018 Ended June 30 , 2020 2019 ( a ) 2018 2017 2020 2019 ( a ) 2018 2017 ( d ) ( 2019 ( a ) 2018 2017 ( d ) ( e d ) ( e ) 2016 ( d ) Revenue $ ( d ) Revenue $ 143,015 $ 125,843 $ 110,360 $ ) Revenue $ 143,015 $ 125,843 $ 110,360 $ 96,571 $ $ 143,015 $ 125,843 $ 110,360 $ 96,571 $ 91,154 Gross $ 125,843 $ 110,360 $ 96,571 $ 91,154 Gross margin 96,937 $ 110,360 $ 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 96,571 $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating $ 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 91,154 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 Gross margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 42,959 margin 96,937 82,933 72,007 62,310 58,374 Operating income 52,959 42,959 35,058 72,007 62,310 58,374 Operating income 52,959 42,959 35,058 29,025 ( f 62,310 58,374 Operating income 52,959 42,959 35,058 29,025 ( f ) 58,374 Operating income 52,959 42,959 35,058 29,025 ( f ) 26,078 Operating income 52,959 42,959 35,058 29,025 ( f ) 26,078 ( 35,058 29,025 ( f ) 26,078 ( g ) Net income ( g ) Net income 44,281 39,240 ( b ) 16,571 g ) Net income 44,281 39,240 ( b ) 16,571 ( 44,281 39,240 ( b ) 16,571 ( c ) 25,489 ( ) 16,571 ( c ) 25,489 ( f ) 20,539 ( ) 25,489 ( f ) 20,539 ( g ) Diluted earnings ) Diluted earnings per share 5.76 5.06 ( b ) 2.13 Diluted earnings per share 5.76 5.06 ( b ) 2.13 ( 5.76 5.06 ( b ) 2.13 ( c ) 3.25 ( ) 2.13 ( c ) 3.25 ( f ) 2.56 ( ) 3.25 ( f ) 2.56 ( g ) Cash dividend dividend declared per common share 2.04 1.84 1.68 1.56 1.44 Cash declared per common share 2.04 1.84 1.68 1.56 1.44 Cash , per common share 2.04 1.84 1.68 1.56 1.44 Cash , cash common share 2.04 1.84 1.68 1.56 1.44 Cash , cash equivalent share 2.04 1.84 1.68 1.56 1.44 Cash , cash equivalent , equivalent , and short-term investment 136,527 133,819 133,768 132,981 113,240 Total , and short-term investment 136,527 133,819 133,768 132,981 113,240 Total asset and short-term investment 136,527 133,819 133,768 132,981 113,240 Total asset 301,311 short-term investment 136,527 133,819 133,768 132,981 113,240 Total asset 301,311 286,556 investment 136,527 133,819 133,768 132,981 113,240 Total asset 301,311 286,556 258,848 133,768 132,981 113,240 Total asset 301,311 286,556 258,848 250,312 202,897 Long-term 132,981 113,240 Total asset 301,311 286,556 258,848 250,312 202,897 Long-term obligation 113,240 Total asset 301,311 286,556 258,848 250,312 202,897 Long-term obligation 110,697 Total asset 301,311 286,556 258,848 250,312 202,897 Long-term obligation 110,697 114,806 asset 301,311 286,556 258,848 250,312 202,897 Long-term obligation 110,697 114,806 117,642 258,848 250,312 202,897 Long-term obligation 110,697 114,806 117,642 106,856 66,705 Stockholders 250,312 202,897 Long-term obligation 110,697 114,806 117,642 106,856 66,705 Stockholders ’ 202,897 Long-term obligation 110,697 114,806 117,642 106,856 66,705 Stockholders ’ equity Long-term obligation 110,697 114,806 117,642 106,856 66,705 Stockholders ’ equity 118,304 obligation 110,697 114,806 117,642 106,856 66,705 Stockholders ’ equity 118,304 102,330 106,856 66,705 Stockholders ’ equity 118,304 102,330 82,718 87,711 83,090 ( 66,705 Stockholders ’ equity 118,304 102,330 82,718 87,711 83,090 ( a Stockholders ’ equity 118,304 102,330 82,718 87,711 83,090 ( a ) ’ equity 118,304 102,330 82,718 87,711 83,090 ( a ) GitHub equity 118,304 102,330 82,718 87,711 83,090 ( a ) GitHub ha operation starting on the October 25 , 2018 acquisition date . on the October 25 , 2018 acquisition date . ( b b ) Includes a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to EPS ” ) by $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Refer to respectively . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . c ) Includes a $ 13.7 billion net charge related to and diluted EPS by $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . Refer to respectively . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . accounting standard in fiscal year 2018 related to revenue recognition and operation starting on the December 8 , 2016 acquisition date . on the December 8 , 2016 acquisition date . ( f ( f ) Includes $ 306 million of employee severance expense and diluted EPS by $ 306 million , $ 243 million $ 306 million , $ 243 million , and $ 0.04 243 million , and $ 0.04 , respectively . ( g ( g ) Includes $ 630 million of asset impairment charge our Phone business and $ 480 million of restructuring charge associated and diluted EPS by $ 1.1 billion , $ 895 million $ 1.1 billion , $ 895 million , and $ 0.11 895 million , and $ 0.11 , respectively . 34 PART $ 0.11 , respectively . 34 PART II Item 7 ITEM . 34 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . OVERVIEW Microsoft is . Highlights from fiscal year 2020 compared with fiscal year 2019 2020 compared with fiscal year 2019 included : • Commercial cloud • Commercial cloud revenue increased 36 % to $ 51.7 billion increased 36 % to $ 51.7 billion . • Office Commercial and cloud service revenue increased 12 % , driven by Office % , driven by Office 365 Commercial growth of 24 % Office 365 Commercial growth of 24 % . • Office Consumer and cloud service revenue increased 11 % , with continued growth with continued growth in Office 365 Consumer subscriber to 42.7 million Office 365 Consumer subscriber to 42.7 million . • LinkedIn revenue . • LinkedIn revenue increased 20 % . • Dynamics product and cloud service revenue increased 14 % , driven by Dynamics % , driven by Dynamics 365 growth of 42 % . by Dynamics 365 growth of 42 % . • Server product and cloud service revenue increased 27 % , driven by Azure driven by Azure growth of 56 % . • Enterprise Services • Enterprise Services revenue increased 5 % . • Windows Commercial and cloud service revenue increased 18 % . • Windows original OEM ” ) revenue increased 9 % . • Surface revenue . • Surface revenue increased 8 % . • Xbox content content and service revenue increased 11 % . • Search advertising , and competitive force . 35 PART II Item 7 Economic . 35 PART II Item 7 Economic Conditions , Challenges , second quarter of fiscal year 2019 , and reduced reported revenue fourth quarter of fiscal year 2019 . Strengthening of the U.S. international operation in fiscal year 2020 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of . COVID-19 In fiscal year 2020 , the COVID-19 pandemic impacted ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of executed during the period . 36 PART II Item 7 Reportable . 36 PART II Item 7 Reportable Segments We report our segment is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are business , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud for our commercial cloud business 37 PART II Item 7 Productivity business 37 PART II Item 7 Productivity and Business Processes and cloud service , including Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and cloud service , including Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscription and Office and Office licensed on-premises Office 365 Commercial seat growth The number growth The number of Office 365 Commercial seat at end of user covered by an Office 365 Commercial subscription Office 365 Consumer Office 365 Commercial subscription Office 365 Consumer subscriber The number of subscriber The number of Office 365 Consumer subscriber at end of cloud service , including Dynamics 365 , a set of cloud-based to Bing Ads network publisher 38 PART II Item 7 SUMMARY publisher 38 PART II Item 7 SUMMARY RESULTS OF OPERATIONS ( and per share amount ) 2020 2019 2018 Percentage Change 2020 per share amount ) 2020 2019 2018 Percentage Change 2020 Versus share amount ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Revenue $ 143,015 2019 Percentage Change 2019 Versus 2018 Revenue $ 143,015 $ 125,843 2019 Versus 2018 Revenue $ 143,015 $ 125,843 $ 110,360 14 2018 Revenue $ 143,015 $ 125,843 $ 110,360 14 % 14 $ 143,015 $ 125,843 $ 110,360 14 % 14 % Gross 143,015 $ 125,843 $ 110,360 14 % 14 % Gross margin 125,843 $ 110,360 14 % 14 % Gross margin 96,937 82,933 % 14 % Gross margin 96,937 82,933 72,007 17 % 15 14 % Gross margin 96,937 82,933 72,007 17 % 15 % % Gross margin 96,937 82,933 72,007 17 % 15 % Operating Gross margin 96,937 82,933 72,007 17 % 15 % Operating income 96,937 82,933 72,007 17 % 15 % Operating income 52,959 42,959 % 15 % Operating income 52,959 42,959 35,058 23 % 23 15 % Operating income 52,959 42,959 35,058 23 % 23 % % Operating income 52,959 42,959 35,058 23 % 23 % Net Operating income 52,959 42,959 35,058 23 % 23 % Net income 52,959 42,959 35,058 23 % 23 % Net income 44,281 39,240 % 23 % Net income 44,281 39,240 16,571 13 % 137 23 % Net income 44,281 39,240 16,571 13 % 137 % % Net income 44,281 39,240 16,571 13 % 137 % Diluted Net income 44,281 39,240 16,571 13 % 137 % Diluted earnings 44,281 39,240 16,571 13 % 137 % Diluted earnings per share % Diluted earnings per share 5.76 5.06 2.13 14 % 138 Diluted earnings per share 5.76 5.06 2.13 14 % 138 % earnings per share 5.76 5.06 2.13 14 % 138 % Non-GAAP per share 5.76 5.06 2.13 14 % 138 % Non-GAAP net 5.76 5.06 2.13 14 % 138 % Non-GAAP net income 44,281 138 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP net income 44,281 36,830 30,267 20 % 22 % Non-GAAP diluted 44,281 36,830 30,267 20 % 22 % Non-GAAP diluted earnings per Non-GAAP diluted earnings per share 5.76 4.75 3.88 21 % 22 diluted earnings per share 5.76 4.75 3.88 21 % 22 % earnings per share 5.76 4.75 3.88 21 % 22 % Non-GAAP per share 5.76 4.75 3.88 21 % 22 % Non-GAAP net 5.76 4.75 3.88 21 % 22 % Non-GAAP net income and intangible property in fiscal year 2019 and the net tax impact ” ) in fiscal year 2019 and 2018 . Refer to in fiscal year 2019 and 2018 . Refer to the Non-GAAP financial result . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Revenue increased $ 17.2 billion Year 2019 Revenue increased $ 17.2 billion or 14 % , increased $ 17.2 billion or 14 % , driven by growth . Gross margin increased $ 14.0 billion or 17 % , increased $ 14.0 billion or 17 % , driven by growth cloud gross margin percentage increased 4 point to 67 % , percentage increased 4 point to 67 % , primarily driven by . Operating income increased $ 10.0 billion or 23 % , increased $ 10.0 billion or 23 % , driven by growth Cost of revenue increased $ 3.2 billion or 7 % , increased $ 3.2 billion or 7 % , driven by growth and development expense increased $ 2.4 billion or 14 % , increased $ 2.4 billion or 14 % , driven by investment and marketing expense increased $ 1.4 billion or 8 % , increased $ 1.4 billion or 8 % , driven by investment and administrative expense increased $ 226 million or 5 % , increased $ 226 million or 5 % , driven by charge unfavorable foreign currency impact of 2 % and 4 % , impact of 2 % and 4 % , respectively . Prior net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Fiscal Year , respectively . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Revenue increased $ 15.5 billion Year 2018 Revenue increased $ 15.5 billion or 14 % , increased $ 15.5 billion or 14 % , driven by growth . Gross margin increased $ 10.9 billion or 15 % , increased $ 10.9 billion or 15 % , driven by growth . Gross margin included a 5 percentage point improvement in commercial , primarily from Azure . 39 PART II Item 7 Operating . 39 PART II Item 7 Operating income increased $ 7.9 7 Operating income increased $ 7.9 billion or 23 % , increased $ 7.9 billion or 23 % , driven by growth Cost of revenue increased $ 4.6 billion or 12 % , increased $ 4.6 billion or 12 % , driven by growth and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . Fiscal year 2019 2 % . Fiscal year 2019 net income included a $ net income included a $ 2.6 billion net income tax benefit property transfer and a $ 157 million net charge related to and diluted EPS of $ 2.4 billion and $ 0.31 , $ 2.4 billion and $ 0.31 , respectively . Fiscal year , respectively . Fiscal year 2018 net income and diluted EPS and diluted EPS of $ 13.7 billion and $ 1.75 , $ 13.7 billion and $ 1.75 , respectively . SEGMENT RESULTS million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Revenue Productivity and 2019 Percentage Change 2019 Versus 2018 Revenue Productivity and Business Processes Productivity and Business Processes $ 46,398 $ 41,160 $ 35,865 13 Business Processes $ 46,398 $ 41,160 $ 35,865 13 % 15 $ 46,398 $ 41,160 $ 35,865 13 % 15 % Intelligent 46,398 $ 41,160 $ 35,865 13 % 15 % Intelligent Cloud 41,160 $ 35,865 13 % 15 % Intelligent Cloud 48,366 38,985 % 15 % Intelligent Cloud 48,366 38,985 32,219 24 % 21 15 % Intelligent Cloud 48,366 38,985 32,219 24 % 21 % % Intelligent Cloud 48,366 38,985 32,219 24 % 21 % More Intelligent Cloud 48,366 38,985 32,219 24 % 21 % More Personal 48,366 38,985 32,219 24 % 21 % More Personal Computing 48,251 21 % More Personal Computing 48,251 45,698 42,276 6 % 8 % More Personal Computing 48,251 45,698 42,276 6 % 8 % More Personal Computing 48,251 45,698 42,276 6 % 8 % Total Personal Computing 48,251 45,698 42,276 6 % 8 % Total $ 48,251 45,698 42,276 6 % 8 % Total $ 143,015 $ % 8 % Total $ 143,015 $ 125,843 $ 110,360 14 % Total $ 143,015 $ 125,843 $ 110,360 14 % 14 $ 143,015 $ 125,843 $ 110,360 14 % 14 % Operating 143,015 $ 125,843 $ 110,360 14 % 14 % Operating Income 125,843 $ 110,360 14 % 14 % Operating Income Productivity and Productivity and Business Processes $ 18,724 $ 16,219 $ 12,924 15 Business Processes $ 18,724 $ 16,219 $ 12,924 15 % 25 $ 18,724 $ 16,219 $ 12,924 15 % 25 % Intelligent 18,724 $ 16,219 $ 12,924 15 % 25 % Intelligent Cloud 16,219 $ 12,924 15 % 25 % Intelligent Cloud 18,324 13,920 % 25 % Intelligent Cloud 18,324 13,920 11,524 32 % 21 25 % Intelligent Cloud 18,324 13,920 11,524 32 % 21 % % Intelligent Cloud 18,324 13,920 11,524 32 % 21 % More Intelligent Cloud 18,324 13,920 11,524 32 % 21 % More Personal 18,324 13,920 11,524 32 % 21 % More Personal Computing 15,911 21 % More Personal Computing 15,911 12,820 10,610 24 % 21 % More Personal Computing 15,911 12,820 10,610 24 % 21 % More Personal Computing 15,911 12,820 10,610 24 % 21 % Total Personal Computing 15,911 12,820 10,610 24 % 21 % Total $ 15,911 12,820 10,610 24 % 21 % Total $ 52,959 $ % 21 % Total $ 52,959 $ 42,959 $ 35,058 23 % Total $ 52,959 $ 42,959 $ 35,058 23 % 23 $ 52,959 $ 42,959 $ 35,058 23 % 23 % Reportable 52,959 $ 42,959 $ 35,058 23 % 23 % Reportable Segments 42,959 $ 35,058 23 % 23 % Reportable Segments Fiscal Year % Reportable Segments Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Productivity and Business Processes Revenue Business Processes Revenue increased $ 5.2 billion or 13 % . increased $ 5.2 billion or 13 % . • Office Commercial cloud service revenue increased $ 3.1 billion or 12 % , increased $ 3.1 billion or 12 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial revenue grew 24 % Office 365 Commercial revenue grew 24 % , due to seat cloud service revenue increased $ 458 million or 11 % , increased $ 458 million or 11 % , driven by Microsoft % , driven by Microsoft 365 Consumer subscription revenue and transactional strength in Japan . Office 365 Consumer subscriber increased 23 % Office 365 Consumer subscriber increased 23 % to 42.7 million with subscriber increased 23 % to 42.7 million with increased demand from • LinkedIn revenue increased $ 1.3 billion or 20 % , increased $ 1.3 billion or 20 % , driven by growth and cloud service revenue increased 14 % , driven by Dynamics % , driven by Dynamics 365 growth of 42 % . by Dynamics 365 growth of 42 % . 40 PART II growth of 42 % . 40 PART II Item 7 Operating . 40 PART II Item 7 Operating income increased $ 2 7 Operating income increased $ 2 .5 billion or 15 % $ 2 .5 billion or 15 % . • Gross margin • Gross margin increased $ 4.1 billion or 13 % , increased $ 4.1 billion or 13 % , driven by growth • Operating expense increased $ 1.6 billion or 11 % , increased $ 1.6 billion or 11 % , driven by investment unfavorable foreign currency impact of 2 % , 2 % , impact of 2 % , 2 % , and 4 % , 2 % , and 4 % , respectively . Intelligent Intelligent Cloud Revenue increased $ 9.4 billion or 24 % . increased $ 9.4 billion or 24 % . • Server product cloud service revenue increased $ 8.8 billion or 27 % , increased $ 8.8 billion or 27 % , driven by Azure Azure . Azure revenue grew 56 % , due to growth . Server product revenue increased 8 % , due to hybrid demand related to SQL Server 2008 and Windows Server 2008 end Server 2008 and Windows Server 2008 end of support . • Enterprise Services revenue increased $ 285 million or 5 % , increased $ 285 million or 5 % , driven by growth . Operating income increased $ 4.4 billion or 32 % . increased $ 4.4 billion or 32 % . • Gross margin • Gross margin increased $ 6.9 billion or 26 % , increased $ 6.9 billion or 26 % , driven by growth • Operating expense increased $ 2.5 billion or 19 % , increased $ 2.5 billion or 19 % , driven by investment unfavorable foreign currency impact of 2 % , 2 % , impact of 2 % , 2 % , and 4 % , 2 % , and 4 % , respectively . More Personal Computing Revenue increased $ 2.6 billion or 6 % . increased $ 2.6 billion or 6 % . • Windows revenue • Windows revenue increased $ 1.9 billion or 9 % , increased $ 1.9 billion or 9 % , driven by growth and cloud service revenue increased 18 % , driven by increased by increased demand for Microsoft 365 . Windows OEM revenue increased . Windows OEM revenue increased 9 % , ahead of PC Windows OEM Pro revenue grew 11 % , driven by Windows % , driven by Windows 7 end of support and healthy of support and healthy Windows 10 demand , offset in part Windows OEM non-Pro revenue grew 5 % , driven by consumer • Surface revenue increased $ 457 million or 8 % , increased $ 457 million or 8 % , driven by increased • Gaming revenue increased $ 189 million or 2 % , increased $ 189 million or 2 % , driven by an and service revenue increased $ 943 million or 11 % on increased $ 943 million or 11 % on a strong prior . Xbox hardware revenue declined 31 % , primarily due to Search advertising revenue increased $ 112 million or 1 % . increased $ 112 million or 1 % . Search advertising revenue . Operating income increased $ 3.1 billion or 24 % . increased $ 3.1 billion or 24 % . • Gross margin • Gross margin increased $ 3.0 billion or 12 % , increased $ 3.0 billion or 12 % , driven by growth • Operating expense decreased $ 119 million or 1 % , decreased $ 119 million or 1 % , driven by the and investment in Gaming . 41 PART II Item 7 Gross . 41 PART II Item 7 Gross margin and operating income unfavorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . Fiscal , respectively . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Productivity and Business Processes Revenue Business Processes Revenue increased $ 5.3 billion or 15 % . increased $ 5.3 billion or 15 % . • Office Commercial cloud service revenue increased $ 3.2 billion or 13 % , increased $ 3.2 billion or 13 % , driven by Office % , driven by Office 365 Commercial , offset in part to cloud offering . Office 365 Commercial grew 33 % , . Office 365 Commercial grew 33 % , due to growth cloud service revenue increased $ 286 million or 7 % , increased $ 286 million or 7 % , driven by Microsoft % , driven by Microsoft 365 Consumer , due to recurring • LinkedIn revenue increased $ 1.5 billion or 28 % , increased $ 1.5 billion or 28 % , driven by growth and cloud service revenue increased 15 % , driven by Dynamics % , driven by Dynamics 365 growth . Operating income increased . Operating income increased $ 3.3 billion or 25 % , increased $ 3.3 billion or 25 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 4.1 billion or 15 % , increased $ 4.1 billion or 15 % , driven by growth improvement in LinkedIn and Office 365 Commercial , offset in part • Operating expense increased $ 806 million or 6 % , increased $ 806 million or 6 % , driven by investment Intelligent Cloud Revenue increased $ 6.8 billion or 21 % . increased $ 6.8 billion or 21 % . • Server product including GitHub , increased $ 6.5 billion or 25 % , increased $ 6.5 billion or 25 % , driven by Azure . Azure revenue growth wa 72 % , due to higher . Server product revenue increased 6 % , due to continued of end-of-support for SQL Server 2008 and Windows Server 2008 . Server 2008 and Windows Server 2008 . • Enterprise Services revenue Enterprise Services revenue increased $ 278 million or 5 % , increased $ 278 million or 5 % , driven by growth . Operating income increased $ 2.4 billion or 21 % . increased $ 2.4 billion or 21 % . • Gross margin • Gross margin increased $ 4.8 billion or 22 % , increased $ 4.8 billion or 22 % , driven by growth • Operating expense increased $ 2.4 billion or 22 % , increased $ 2.4 billion or 22 % , driven by investment Personal Computing Revenue increased $ 3.4 billion or 8 % . increased $ 3.4 billion or 8 % . • Windows revenue • Windows revenue increased $ 877 million or 4 % , increased $ 877 million or 4 % , driven by growth and cloud service revenue increased 14 % , driven by an . Windows OEM revenue increased 4 % . Windows OEM Pro Windows OEM Pro revenue grew 10 % , ahead of the , driven by healthy Windows 10 demand . Windows OEM non-Pro Windows OEM non-Pro revenue declined 7 % , below the consumer • Surface revenue increased $ 1.1 billion or 23 % , increased $ 1.1 billion or 23 % , with strong growth across commercial and consumer . 42 PART II Item 7 • . 42 PART II Item 7 • Gaming revenue increased $ • Gaming revenue increased $ 1.0 billion or 10 % , increased $ 1.0 billion or 10 % , driven by Xbox software and service growth of 19 % , primarily due to decline in Xbox hardware of 13 % primarily due to a Search advertising revenue increased $ 616 million or 9 % . increased $ 616 million or 9 % . Search advertising revenue traffic acquisition cost , increased 13 % , driven by higher . Operating income increased $ 2.2 billion or 21 % , increased $ 2.2 billion or 21 % , including an unfavorable unfavorable foreign currency impact of 2 % . • Gross margin • Gross margin increased $ 2.0 billion or 9 % , increased $ 2.0 billion or 9 % , driven by growth • Operating expense decreased $ 172 million or 1 % . decreased $ 172 million or 1 % . OPERATING EXPENSES Research million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Research and development 2019 Percentage Change 2019 Versus 2018 Research and development $ 19,269 2018 Research and development $ 19,269 $ 16,876 $ 14,726 14 and development $ 19,269 $ 16,876 $ 14,726 14 % 15 $ 19,269 $ 16,876 $ 14,726 14 % 15 % As 19,269 $ 16,876 $ 14,726 14 % 15 % As a 16,876 $ 14,726 14 % 15 % As a percent of As a percent of revenue 13 % 13 % 13 % percent of revenue 13 % 13 % 13 % 0ppt 0ppt revenue 13 % 13 % 13 % 0ppt 0ppt Research and % 13 % 13 % 0ppt 0ppt Research and development expense 13 % 13 % 0ppt 0ppt Research and development expense include service content . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Research and development expense increased and development expense increased $ 2.4 billion or 14 % , increased $ 2.4 billion or 14 % , driven by investment and Gaming . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Research and development expense increased and development expense increased $ 2.2 billion or 15 % , increased $ 2.2 billion or 15 % , driven by investment million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Sales and marketing 2019 Percentage Change 2019 Versus 2018 Sales and marketing $ 19,598 2018 Sales and marketing $ 19,598 $ 18,213 $ 17,469 8 and marketing $ 19,598 $ 18,213 $ 17,469 8 % 4 $ 19,598 $ 18,213 $ 17,469 8 % 4 % As 19,598 $ 18,213 $ 17,469 8 % 4 % As a 18,213 $ 17,469 8 % 4 % As a percent of As a percent of revenue 14 % 14 % 16 % percent of revenue 14 % 14 % 16 % 0ppt ( revenue 14 % 14 % 16 % 0ppt ( 2 ) % 14 % 16 % 0ppt ( 2 ) ppt Sales % 16 % 0ppt ( 2 ) ppt Sales and marketing other program . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Sales and marketing expense increased and marketing expense increased $ 1.4 billion or 8 % , increased $ 1.4 billion or 8 % , driven by investment in bad debt expense . 43 PART II Item 7 Fiscal . 43 PART II Item 7 Fiscal Year 2019 Compared with II Item 7 Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Sales and marketing expense increased and marketing expense increased $ 744 million or 4 % , increased $ 744 million or 4 % , driven by investment favorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2020 2019 2018 Percentage Change 2020 , except percentage ) 2020 2019 2018 Percentage Change 2020 Versus except percentage ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 General and administrative 2019 Percentage Change 2019 Versus 2018 General and administrative $ 5,111 2018 General and administrative $ 5,111 $ 4,885 $ 4,754 5 and administrative $ 5,111 $ 4,885 $ 4,754 5 % 3 $ 5,111 $ 4,885 $ 4,754 5 % 3 % As 5,111 $ 4,885 $ 4,754 5 % 3 % As a 4,885 $ 4,754 5 % 3 % As a percent of As a percent of revenue 4 % 4 % 4 % percent of revenue 4 % 4 % 4 % 0ppt 0ppt revenue 4 % 4 % 4 % 0ppt 0ppt General and % 4 % 4 % 0ppt 0ppt General and administrative expense 4 % 4 % 0ppt 0ppt General and administrative expense include administrative fee . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 General and administrative expense increased and administrative expense increased $ 226 million or 5 % , increased $ 226 million or 5 % , driven by charge legal expense . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 General and administrative expense increased and administrative expense increased $ 131 million or 3 % . increased $ 131 million or 3 % . OTHER INCOME ( million ) Year Ended June 30 , 2020 2019 2018 Interest Year Ended June 30 , 2020 2019 2018 Interest and dividend Ended June 30 , 2020 2019 2018 Interest and dividend income June 30 , 2020 2019 2018 Interest and dividend income $ Interest and dividend income $ 2,680 $ 2,762 $ 2,214 Interest dividend income $ 2,680 $ 2,762 $ 2,214 Interest expense ( $ 2,680 $ 2,762 $ 2,214 Interest expense ( 2,591 ) $ 2,214 Interest expense ( 2,591 ) ( 2,686 ) ( expense ( 2,591 ) ( 2,686 ) ( 2,733 ) Net ) ( 2,686 ) ( 2,733 ) Net recognized gain on Net recognized gain on investment 32 648 2,399 Net gain ( recognized gain on investment 32 648 2,399 Net gain ( loss gain on investment 32 648 2,399 Net gain ( loss ) ( loss ) on derivative 187 144 ( 187 ) Net loss ) on derivative 187 144 ( 187 ) Net loss on derivative 187 144 ( 187 ) Net loss on foreign on foreign currency remeasurements ( 191 ) ( 82 ) ( remeasurements ( 191 ) ( 82 ) ( 218 ) Other ) ( 82 ) ( 218 ) Other , net ( ) Other , net ( 40 ) ( 57 ) ( net ( 40 ) ( 57 ) ( 59 ) Total ) ( 57 ) ( 59 ) Total $ 77 $ ( 59 ) Total $ 77 $ 729 $ 1,416 We ) Total $ 77 $ 729 $ 1,416 We use derivative $ 77 $ 729 $ 1,416 We use derivative instrument to , net . Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Interest and dividend income decreased exchange and equity derivative . 44 PART II Item 7 Fiscal . 44 PART II Item 7 Fiscal Year 2019 Compared with II Item 7 Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Interest and dividend income increased Effective Tax Rate Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Our effective tax rate for tax rate for fiscal year 2020 and 2019 wa 17 % for fiscal year 2020 and 2019 wa 17 % and 10 year 2020 and 2019 wa 17 % and 10 % , 2019 wa 17 % and 10 % , respectively . The tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2020 , our U.S. income before before income tax wa $ 24.1 billion and our foreign income before income tax wa $ 28.9 billion . In fiscal year billion . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . Fiscal Year 2019 27.9 billion . Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Our effective tax rate for tax rate for fiscal year 2019 and 2018 wa 10 % for fiscal year 2019 and 2018 wa 10 % and 55 year 2019 and 2018 wa 10 % and 55 % , 2018 wa 10 % and 55 % , respectively . The tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 and a $ 2.6 billion year 2018 and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer service . In fiscal year 2019 , our U.S. income before before income tax wa $ 15.8 billion and our foreign income before income tax wa $ 27.9 billion . In fiscal year billion . In fiscal year 2018 , our U.S. income before before income tax wa $ 11.5 billion and our foreign income before income tax wa $ 24.9 billion . Tax Cuts and and Jobs Act On December 22 , 2017 , the TCJA Act On December 22 , 2017 , the TCJA wa enacted provisional net charge of $ 13.7 billion related to the enactment the TCJA in fiscal year 2018 , and adjusted the provisional additional tax expense of $ 157 million in fiscal year 2019 157 million in fiscal year 2019 pursuant to Securities and Exchange Staff Accounting Bulletin No . 118 . In fiscal year 2019 118 . In fiscal year 2019 , in response to the property resulted in a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 , a the value of tax . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 45 PART II Item 7 Uncertain . 45 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . In April for tax year 2004 to 2013 . In April 2020 , to 2013 . In April 2020 , the IRS commenced the the audit for tax year 2014 to 2017 . As of for tax year 2014 to 2017 . As of June 30 2017 . As of June 30 , 2020 , the primary As of June 30 , 2020 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2019 , some of for tax year 1996 to 2019 , some of which are intangible property in fiscal year 2019 and the net tax impact the TCJA in fiscal year 2019 and 2018 . We believe in fiscal year 2019 and 2018 . We believe these non-GAAP and per share amount ) 2020 2019 2018 Percentage Change 2020 per share amount ) 2020 2019 2018 Percentage Change 2020 Versus share amount ) 2020 2019 2018 Percentage Change 2020 Versus 2019 2020 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 2018 Percentage Change 2020 Versus 2019 Percentage Change 2019 Versus 2018 2020 Versus 2019 Percentage Change 2019 Versus 2018 Net income $ 2019 Percentage Change 2019 Versus 2018 Net income $ 44,281 $ Versus 2018 Net income $ 44,281 $ 39,240 $ 16,571 13 Net income $ 44,281 $ 39,240 $ 16,571 13 % 137 $ 44,281 $ 39,240 $ 16,571 13 % 137 % Net 44,281 $ 39,240 $ 16,571 13 % 137 % Net tax 39,240 $ 16,571 13 % 137 % Net tax impact of of transfer of intangible property 0 ( 2,567 ) 0 * of intangible property 0 ( 2,567 ) 0 * * Net property 0 ( 2,567 ) 0 * * Net tax impact tax impact of the TCJA 0 157 13,696 * * Non-GAAP impact of the TCJA 0 157 13,696 * * Non-GAAP net of the TCJA 0 157 13,696 * * Non-GAAP net income * Non-GAAP net income $ 44,281 $ 36,830 $ 30,267 20 net income $ 44,281 $ 36,830 $ 30,267 20 % 22 $ 44,281 $ 36,830 $ 30,267 20 % 22 % Diluted 44,281 $ 36,830 $ 30,267 20 % 22 % Diluted earnings 36,830 $ 30,267 20 % 22 % Diluted earnings per share Diluted earnings per share $ 5.76 $ 5.06 $ 2.13 14 per share $ 5.76 $ 5.06 $ 2.13 14 % 138 $ 5.76 $ 5.06 $ 2.13 14 % 138 % Net 5.76 $ 5.06 $ 2.13 14 % 138 % Net tax 5.06 $ 2.13 14 % 138 % Net tax impact of of transfer of intangible property 0 ( 0.33 ) 0 * of intangible property 0 ( 0.33 ) 0 * * Net property 0 ( 0.33 ) 0 * * Net tax impact tax impact of the TCJA 0 0.02 1.75 * * Non-GAAP impact of the TCJA 0 0.02 1.75 * * Non-GAAP diluted of the TCJA 0 0.02 1.75 * * Non-GAAP diluted earnings diluted earnings per share $ 5.76 $ 4.75 $ 3.88 21 per share $ 5.76 $ 4.75 $ 3.88 21 % 22 $ 5.76 $ 4.75 $ 3.88 21 % 22 % * 5.76 $ 4.75 $ 3.88 21 % 22 % * Not 4.75 $ 3.88 21 % 22 % * Not meaningful . % * Not meaningful . 46 PART II Item 7 FINANCIAL . 46 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 136.5 billion and $ 133.8 billion $ 136.5 billion and $ 133.8 billion a of June 30 133.8 billion a of June 30 , 2020 and 2019 . a of June 30 , 2020 and 2019 . Equity investment June 30 , 2020 and 2019 . Equity investment were $ . Equity investment were $ 3.0 billion and $ 2.6 billion $ 3.0 billion and $ 2.6 billion a of June 30 2.6 billion a of June 30 , 2020 and 2019 , a of June 30 , 2020 and 2019 , respectively . June 30 , 2020 and 2019 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price . Cash Flows Fiscal Year 2020 Compared with Fiscal Year 2019 2020 Compared with Fiscal Year 2019 Cash from operation increased $ Cash from operation increased $ 8.5 billion to $ 60.7 billion $ 8.5 billion to $ 60.7 billion for fiscal year 2020 60.7 billion for fiscal year 2020 , mainly due to an used in financing increased $ 9.1 billion to $ 46.0 billion $ 9.1 billion to $ 46.0 billion for fiscal year 2020 46.0 billion for fiscal year 2020 , mainly due to a mainly due to a $ 3.4 billion cash premium on our debt exchange , a $ 3.4 billion increase in common stock stock repurchase , a $ 1.5 billion increase in repayment of debt , and a $ 1.3 billion increase in dividend paid used in investing decreased $ 3.6 billion to $ 12.2 billion $ 3.6 billion to $ 12.2 billion for fiscal year 2020 12.2 billion for fiscal year 2020 , mainly due to a mainly due to a $ 6.4 billion increase in cash from in part by a $ 1.5 billion increase in addition to property and equipment and $ 1.2 billion in other investing to the purchase of component . 47 PART II Item 7 Fiscal . 47 PART II Item 7 Fiscal Year 2019 Compared with II Item 7 Fiscal Year 2019 Compared with Fiscal Year 2018 2019 Compared with Fiscal Year 2018 Cash from operation increased $ Cash from operation increased $ 8.3 billion to $ 52.2 billion $ 8.3 billion to $ 52.2 billion for fiscal year 2019 52.2 billion for fiscal year 2019 , mainly due to an used in financing increased $ 3.3 billion to $ 36.9 billion $ 3.3 billion to $ 36.9 billion for fiscal year 2019 36.9 billion for fiscal year 2019 , mainly due to an mainly due to an $ 8.8 billion increase in common stock stock repurchase and a $ 1.1 billion increase in dividend paid in part by a $ 6.2 billion decrease in repayment of used in investing increased $ 9.7 billion to $ 15.8 billion $ 9.7 billion to $ 15.8 billion for fiscal year 2019 15.8 billion for fiscal year 2019 , mainly due to a mainly due to a $ 6.0 billion decrease in cash from and maturity , a $ 2.3 billion increase in addition to equipment , and a $ 1.5 billion increase in cash used existing debt . In June 2020 , we exchanged a portion environment . Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) ) Three Months Ending September 30 , 2020 $ 13,884 December Months Ending September 30 , 2020 $ 13,884 December 31 , September 30 , 2020 $ 13,884 December 31 , 2020 10,950 , 2020 $ 13,884 December 31 , 2020 10,950 March 31 $ 13,884 December 31 , 2020 10,950 March 31 , 2021 13,884 December 31 , 2020 10,950 March 31 , 2021 7,476 31 , 2020 10,950 March 31 , 2021 7,476 June 30 2020 10,950 March 31 , 2021 7,476 June 30 , 2021 10,950 March 31 , 2021 7,476 June 30 , 2021 3,690 31 , 2021 7,476 June 30 , 2021 3,690 Thereafter 3,180 2021 7,476 June 30 , 2021 3,690 Thereafter 3,180 Total $ 7,476 June 30 , 2021 3,690 Thereafter 3,180 Total $ 39,180 30 , 2021 3,690 Thereafter 3,180 Total $ 39,180 If our 3,690 Thereafter 3,180 Total $ 39,180 If our customer choose to Share Repurchases For fiscal year 2020 , 2019 , and 2018 For fiscal year 2020 , 2019 , and 2018 , we 2020 , 2019 , and 2018 , we repurchased 126 million and 2018 , we repurchased 126 million share , 150 million repurchased 126 million share , 150 million share , and 99 150 million share , and 99 million share of our common our common stock for $ 19.7 billion , $ 16.8 billion $ 19.7 billion , $ 16.8 billion , and $ 8.6 16.8 billion , and $ 8.6 billion , respectively , through resource . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 48 PART II Item 7 Off-Balance . 48 PART II Item 7 Off-Balance Sheet Arrangements We provide contractual obligation a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) : ( In million ) 2021 2022-2023 2024-2025 Thereafter Total Long-term ( In million ) 2021 2022-2023 2024-2025 Thereafter Total Long-term debt In million ) 2021 2022-2023 2024-2025 Thereafter Total Long-term debt : a ) Principal payment $ 3,750 $ 10,716 $ 7,500 $ Principal payment $ 3,750 $ 10,716 $ 7,500 $ 45,441 $ $ 3,750 $ 10,716 $ 7,500 $ 45,441 $ 67,407 Interest $ 10,716 $ 7,500 $ 45,441 $ 67,407 Interest payment 2,028 $ 7,500 $ 45,441 $ 67,407 Interest payment 2,028 3,736 3,293 45,441 $ 67,407 Interest payment 2,028 3,736 3,293 25,265 34,322 Construction $ 67,407 Interest payment 2,028 3,736 3,293 25,265 34,322 Construction commitment 67,407 Interest payment 2,028 3,736 3,293 25,265 34,322 Construction commitment ( Interest payment 2,028 3,736 3,293 25,265 34,322 Construction commitment ( b payment 2,028 3,736 3,293 25,265 34,322 Construction commitment ( b ) Construction commitment ( b ) 4,761 280 0 0 5,041 Operating commitment ( b ) 4,761 280 0 0 5,041 Operating lease ( b ) 4,761 280 0 0 5,041 Operating lease , b ) 4,761 280 0 0 5,041 Operating lease , including ) 4,761 280 0 0 5,041 Operating lease , including imputed imputed interest ( c ) 2,420 3,986 2,929 4,409 13,744 Finance interest ( c ) 2,420 3,986 2,929 4,409 13,744 Finance lease ( c ) 2,420 3,986 2,929 4,409 13,744 Finance lease , c ) 2,420 3,986 2,929 4,409 13,744 Finance lease , including ) 2,420 3,986 2,929 4,409 13,744 Finance lease , including imputed imputed interest ( c ) 992 2,243 2,676 9,611 15,522 Transition interest ( c ) 992 2,243 2,676 9,611 15,522 Transition tax ( c ) 992 2,243 2,676 9,611 15,522 Transition tax ( c ) 992 2,243 2,676 9,611 15,522 Transition tax ( d ) 992 2,243 2,676 9,611 15,522 Transition tax ( d ) Transition tax ( d ) 1,450 2,899 6,343 4,531 15,223 Purchase tax ( d ) 1,450 2,899 6,343 4,531 15,223 Purchase commitment ( d ) 1,450 2,899 6,343 4,531 15,223 Purchase commitment ( d ) 1,450 2,899 6,343 4,531 15,223 Purchase commitment ( e ) 1,450 2,899 6,343 4,531 15,223 Purchase commitment ( e ) Purchase commitment ( e ) 25,059 1,324 369 272 27,024 Other commitment ( e ) 25,059 1,324 369 272 27,024 Other long-term ( e ) 25,059 1,324 369 272 27,024 Other long-term liability e ) 25,059 1,324 369 272 27,024 Other long-term liability ( ) 25,059 1,324 369 272 27,024 Other long-term liability ( f long-term liability ( f ) 0 294 32 356 682 Total liability ( f ) 0 294 32 356 682 Total $ ( f ) 0 294 32 356 682 Total $ 40,460 f ) 0 294 32 356 682 Total $ 40,460 $ ) 0 294 32 356 682 Total $ 40,460 $ 25,478 32 356 682 Total $ 40,460 $ 25,478 $ 23,142 $ 682 Total $ 40,460 $ 25,478 $ 23,142 $ 89,885 $ $ 40,460 $ 25,478 $ 23,142 $ 89,885 $ 178,965 ( $ 25,478 $ 23,142 $ 89,885 $ 178,965 ( a ) $ 23,142 $ 89,885 $ 178,965 ( a ) Refer to a ) Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 15.2 billion from the amount presented over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . paid transition tax of $ 3.2 billion , which included $ billion , which included $ 1.2 billion for fiscal year 2020 1.2 billion for fiscal year 2020 . The remaining transition tax remaining transition tax of $ 15.2 billion is payable over the final payment in fiscal year 2026 . During fiscal year 2020 2026 . During fiscal year 2020 , we also paid $ , we also paid $ 3.7 billion related to the transfer fourth quarter of fiscal year 2019 . 49 PART II Item of fiscal year 2019 . 49 PART II Item 7 We . 49 PART II Item 7 We expect existing cash , for at least the next 12 month and thereafter for the ACCOUNTING GUIDANCE Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the for the period presented . 50 PART II Item 7 Impairment . 50 PART II Item 7 Impairment of Investment Securities We an annual basis ( May 1 for u ) and between life of the product . 51 PART II Item 7 Legal . 51 PART II Item 7 Legal and Other Contingencies The that ha a greater than 50 % likelihood of being realized business . Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . IN ACCOUNTING ESTIMATE In July 2020 , we completed an assessment be effective beginning fiscal year 2021 . Based on the carrying net ” a of June 30 , 2020 , it is a of June 30 , 2020 , it is estimated this will increase our fiscal year 2021 operating income by $ 2.7 2021 operating income by $ 2.7 billion . 52 PART II by $ 2.7 billion . 52 PART II Item 7 STATEMENT . 52 PART II Item 7 STATEMENT OF MANAGEMENT ’ S Administration ; Chief Accounting Officer 53 PART II Item 7A ITEM Officer 53 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2020 Impact Foreign currency–Revenue Hypothetical Change June 30 , 2020 Impact Foreign currency–Revenue 10 % , 2020 Impact Foreign currency–Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 4,142 ) Earnings Foreign currency–Investments 10 4,142 ) Earnings Foreign currency–Investments 10 % decrease in foreign exchange in foreign exchange rate ( 119 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 3,951 ) Fair Value Credit 100 3,951 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 301 ) Fair Value Equity 10 301 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 239 ) Earnings 54 PART II price ( 239 ) Earnings 54 PART II Item 8 ITEM Earnings 54 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2020 2019 2018 Revenue Year Ended June 30 , 2020 2019 2018 Revenue : Product Ended June 30 , 2020 2019 2018 Revenue : Product $ June 30 , 2020 2019 2018 Revenue : Product $ 68,041 2018 Revenue : Product $ 68,041 $ 66,069 $ 64,497 Service : Product $ 68,041 $ 66,069 $ 64,497 Service and other $ 68,041 $ 66,069 $ 64,497 Service and other 74,974 59,774 $ 64,497 Service and other 74,974 59,774 45,863 Total revenue 143,015 64,497 Service and other 74,974 59,774 45,863 Total revenue 143,015 125,843 Service and other 74,974 59,774 45,863 Total revenue 143,015 125,843 110,360 74,974 59,774 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue 59,774 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue : 45,863 Total revenue 143,015 125,843 110,360 Cost of revenue : Product Cost of revenue : Product 16,017 16,273 15,420 Service and other of revenue : Product 16,017 16,273 15,420 Service and other 30,061 revenue : Product 16,017 16,273 15,420 Service and other 30,061 26,637 16,273 15,420 Service and other 30,061 26,637 22,933 Total cost of 15,420 Service and other 30,061 26,637 22,933 Total cost of revenue Service and other 30,061 26,637 22,933 Total cost of revenue 46,078 22,933 Total cost of revenue 46,078 42,910 38,353 Gross margin 96,937 Total cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 cost of revenue 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 46,078 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 42,910 38,353 Gross margin 96,937 82,933 72,007 Research and development 19,269 38,353 Gross margin 96,937 82,933 72,007 Research and development 19,269 16,876 82,933 72,007 Research and development 19,269 16,876 14,726 Sales and marketing 72,007 Research and development 19,269 16,876 14,726 Sales and marketing 19,598 Research and development 19,269 16,876 14,726 Sales and marketing 19,598 18,213 16,876 14,726 Sales and marketing 19,598 18,213 17,469 General and administrative 14,726 Sales and marketing 19,598 18,213 17,469 General and administrative 5,111 Sales and marketing 19,598 18,213 17,469 General and administrative 5,111 4,885 18,213 17,469 General and administrative 5,111 4,885 4,754 Operating income 52,959 17,469 General and administrative 5,111 4,885 4,754 Operating income 52,959 42,959 General and administrative 5,111 4,885 4,754 Operating income 52,959 42,959 35,058 5,111 4,885 4,754 Operating income 52,959 42,959 35,058 Other income , 4,885 4,754 Operating income 52,959 42,959 35,058 Other income , net 4,754 Operating income 52,959 42,959 35,058 Other income , net 77 35,058 Other income , net 77 729 1,416 Income before income Other income , net 77 729 1,416 Income before income tax income , net 77 729 1,416 Income before income tax 53,036 1,416 Income before income tax 53,036 43,688 36,474 Provision for income Income before income tax 53,036 43,688 36,474 Provision for income tax before income tax 53,036 43,688 36,474 Provision for income tax 8,755 36,474 Provision for income tax 8,755 4,448 19,903 Net income $ Provision for income tax 8,755 4,448 19,903 Net income $ 44,281 for income tax 8,755 4,448 19,903 Net income $ 44,281 $ 4,448 19,903 Net income $ 44,281 $ 39,240 $ 16,571 Earnings Net income $ 44,281 $ 39,240 $ 16,571 Earnings per share $ 44,281 $ 39,240 $ 16,571 Earnings per share : Basic per share : Basic $ 5.82 $ 5.11 $ 2.15 Diluted : Basic $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.82 $ 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 5.11 $ 2.15 Diluted $ 5.76 $ 5.06 $ 2.13 Weighted 2.15 Diluted $ 5.76 $ 5.06 $ 2.13 Weighted average share $ 5.76 $ 5.06 $ 2.13 Weighted average share outstanding : average share outstanding : Basic 7,610 7,673 7,700 Diluted 7,683 7,753 share outstanding : Basic 7,610 7,673 7,700 Diluted 7,683 7,753 7,794 outstanding : Basic 7,610 7,673 7,700 Diluted 7,683 7,753 7,794 Refer Basic 7,610 7,673 7,700 Diluted 7,683 7,753 7,794 Refer to accompanying 7,610 7,673 7,700 Diluted 7,683 7,753 7,794 Refer to accompanying note 7,673 7,700 Diluted 7,683 7,753 7,794 Refer to accompanying note . Refer to accompanying note . 55 PART II Item 8 COMPREHENSIVE . 55 PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2020 2019 2018 Net Year Ended June 30 , 2020 2019 2018 Net income $ Ended June 30 , 2020 2019 2018 Net income $ 44,281 June 30 , 2020 2019 2018 Net income $ 44,281 $ 2019 2018 Net income $ 44,281 $ 39,240 $ 16,571 Other Net income $ 44,281 $ 39,240 $ 16,571 Other comprehensive income $ 44,281 $ 39,240 $ 16,571 Other comprehensive income ( loss change related to derivative ( 38 ) ( 173 ) 39 derivative ( 38 ) ( 173 ) 39 Net change related 38 ) ( 173 ) 39 Net change related to investment Net change related to investment 3,990 2,405 ( 2,717 ) Translation change related to investment 3,990 2,405 ( 2,717 ) Translation adjustment to investment 3,990 2,405 ( 2,717 ) Translation adjustment and other Translation adjustment and other ( 426 ) ( 318 ) ( other ( 426 ) ( 318 ) ( 178 ) Other ) ( 318 ) ( 178 ) Other comprehensive income ( comprehensive income ( loss ) 3,526 1,914 ( 2,856 ) Comprehensive income ( loss ) 3,526 1,914 ( 2,856 ) Comprehensive income loss ) 3,526 1,914 ( 2,856 ) Comprehensive income $ 47,807 2,856 ) Comprehensive income $ 47,807 $ 41,154 $ 13,715 Refer Comprehensive income $ 47,807 $ 41,154 $ 13,715 Refer to accompanying $ 47,807 $ 41,154 $ 13,715 Refer to accompanying note . Refer to accompanying note . 56 PART II Item 8 BALANCE . 56 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2020 2019 Assets Current million ) June 30 , 2020 2019 Assets Current asset : ) June 30 , 2020 2019 Assets Current asset : Cash Cash and cash equivalent $ 13,576 $ 11,356 Short-term investment 122,951 cash equivalent $ 13,576 $ 11,356 Short-term investment 122,951 122,463 Total 13,576 $ 11,356 Short-term investment 122,951 122,463 Total cash , cash $ 11,356 Short-term investment 122,951 122,463 Total cash , cash equivalent equivalent , and short-term investment 136,527 133,819 Accounts receivable , net , and short-term investment 136,527 133,819 Accounts receivable , net of for doubtful account of $ 788 and $ 411 32,011 29,524 of $ 788 and $ 411 32,011 29,524 Inventories 1,895 2,063 $ 788 and $ 411 32,011 29,524 Inventories 1,895 2,063 Other 788 and $ 411 32,011 29,524 Inventories 1,895 2,063 Other current $ 411 32,011 29,524 Inventories 1,895 2,063 Other current asset 11,482 411 32,011 29,524 Inventories 1,895 2,063 Other current asset 11,482 10,146 1,895 2,063 Other current asset 11,482 10,146 Total current asset 181,915 2,063 Other current asset 11,482 10,146 Total current asset 181,915 175,552 11,482 10,146 Total current asset 181,915 175,552 Property and equipment , 10,146 Total current asset 181,915 175,552 Property and equipment , net of accumulated depreciation of $ 43,197 and $ 35,330 44,151 36,477 of $ 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use $ 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use asset 43,197 and $ 35,330 44,151 36,477 Operating lease right-of-use asset 8,753 36,477 Operating lease right-of-use asset 8,753 7,379 Equity investment 2,965 2,649 Operating lease right-of-use asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill asset 8,753 7,379 Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible 8,753 7,379 Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset Equity investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset , net investment 2,965 2,649 Goodwill 43,351 42,026 Intangible asset , net 7,038 42,026 Intangible asset , net 7,038 7,750 Other long-term asset 13,138 Intangible asset , net 7,038 7,750 Other long-term asset 13,138 14,723 7,038 7,750 Other long-term asset 13,138 14,723 Total asset $ 301,311 7,750 Other long-term asset 13,138 14,723 Total asset $ 301,311 $ 13,138 14,723 Total asset $ 301,311 $ 286,556 Liabilities and stockholder Total asset $ 301,311 $ 286,556 Liabilities and stockholder ’ equity liability : Accounts payable $ 12,530 $ 9,382 Current portion of Accounts payable $ 12,530 $ 9,382 Current portion of long-term debt Current portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 portion of long-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term debt 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 3,749 5,516 Accrued compensation 7,874 6,830 Short-term income tax 2,130 5,665 7,874 6,830 Short-term income tax 2,130 5,665 Short-term unearned revenue 36,000 6,830 Short-term income tax 2,130 5,665 Short-term unearned revenue 36,000 32,676 2,130 5,665 Short-term unearned revenue 36,000 32,676 Other current liability 10,027 5,665 Short-term unearned revenue 36,000 32,676 Other current liability 10,027 9,351 36,000 32,676 Other current liability 10,027 9,351 Total current liability 72,310 32,676 Other current liability 10,027 9,351 Total current liability 72,310 69,420 10,027 9,351 Total current liability 72,310 69,420 Long-term debt 59,578 66,662 9,351 Total current liability 72,310 69,420 Long-term debt 59,578 66,662 Long-term liability 72,310 69,420 Long-term debt 59,578 66,662 Long-term income tax 29,432 72,310 69,420 Long-term debt 59,578 66,662 Long-term income tax 29,432 29,612 59,578 66,662 Long-term income tax 29,432 29,612 Long-term unearned revenue 3,180 66,662 Long-term income tax 29,432 29,612 Long-term unearned revenue 3,180 4,530 29,432 29,612 Long-term unearned revenue 3,180 4,530 Deferred income tax 204 29,612 Long-term unearned revenue 3,180 4,530 Deferred income tax 204 233 3,180 4,530 Deferred income tax 204 233 Operating lease liability 7,671 4,530 Deferred income tax 204 233 Operating lease liability 7,671 6,188 204 233 Operating lease liability 7,671 6,188 Other long-term liability 10,632 233 Operating lease liability 7,671 6,188 Other long-term liability 10,632 7,581 7,671 6,188 Other long-term liability 10,632 7,581 Total liability 183,007 184,226 6,188 Other long-term liability 10,632 7,581 Total liability 183,007 184,226 Commitments liability 10,632 7,581 Total liability 183,007 184,226 Commitments and contingency Stockholders 10,632 7,581 Total liability 183,007 184,226 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,571 and 7,643 share authorized 24,000 ; outstanding 7,571 and 7,643 80,552 78,520 Retained 24,000 ; outstanding 7,571 and 7,643 80,552 78,520 Retained earnings 34,566 ; outstanding 7,571 and 7,643 80,552 78,520 Retained earnings 34,566 24,150 outstanding 7,571 and 7,643 80,552 78,520 Retained earnings 34,566 24,150 Accumulated 7,643 80,552 78,520 Retained earnings 34,566 24,150 Accumulated other comprehensive income 80,552 78,520 Retained earnings 34,566 24,150 Accumulated other comprehensive income ( comprehensive income ( loss ) 3,186 ( 340 ) Total stockholder ( loss ) 3,186 ( 340 ) Total stockholder ’ equity ) Total stockholder ’ equity 118,304 102,330 Total liability and stockholder Total stockholder ’ equity 118,304 102,330 Total liability and stockholder ’ and stockholder ’ equity $ 301,311 $ 286,556 Refer to accompanying ’ equity $ 301,311 $ 286,556 Refer to accompanying note . Refer to accompanying note . 57 PART II Item 8 CASH . 57 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2020 2019 2018 Operations Year Ended June 30 , 2020 2019 2018 Operations Net income Ended June 30 , 2020 2019 2018 Operations Net income $ June 30 , 2020 2019 2018 Operations Net income $ 44,281 2018 Operations Net income $ 44,281 $ 39,240 $ 16,571 Adjustments Net income $ 44,281 $ 39,240 $ 16,571 Adjustments to reconcile $ 44,281 $ 39,240 $ 16,571 Adjustments to reconcile net income , amortization , and other 12,796 11,682 10,261 Stock-based compensation expense amortization , and other 12,796 11,682 10,261 Stock-based compensation expense 5,289 , and other 12,796 11,682 10,261 Stock-based compensation expense 5,289 4,652 11,682 10,261 Stock-based compensation expense 5,289 4,652 3,940 Net recognized gain 10,261 Stock-based compensation expense 5,289 4,652 3,940 Net recognized gain on Stock-based compensation expense 5,289 4,652 3,940 Net recognized gain on investment on investment and derivative ( 219 ) ( 792 ) ( derivative ( 219 ) ( 792 ) ( 2,212 ) Deferred ) ( 792 ) ( 2,212 ) Deferred income tax 11 2,212 ) Deferred income tax 11 ( 6,463 ) ( 5,143 Deferred income tax 11 ( 6,463 ) ( 5,143 ) Changes 11 ( 6,463 ) ( 5,143 ) Changes in operating asset liability : Accounts receivable ( 2,577 ) ( 2,812 ) ( receivable ( 2,577 ) ( 2,812 ) ( 3,862 ) Inventories ) ( 2,812 ) ( 3,862 ) Inventories 168 597 ( ) ( 3,862 ) Inventories 168 597 ( 465 ) Other ( 3,862 ) Inventories 168 597 ( 465 ) Other current ) Inventories 168 597 ( 465 ) Other current asset ( ) Other current asset ( 2,330 ) ( 1,718 ) ( asset ( 2,330 ) ( 1,718 ) ( 952 ) Other ) ( 1,718 ) ( 952 ) Other long-term asset ( ) Other long-term asset ( 1,037 ) ( 1,834 ) ( asset ( 1,037 ) ( 1,834 ) ( 285 ) Accounts ) ( 1,834 ) ( 285 ) Accounts payable 3,018 232 ( 285 ) Accounts payable 3,018 232 1,148 Unearned revenue 2,212 285 ) Accounts payable 3,018 232 1,148 Unearned revenue 2,212 4,462 ) Accounts payable 3,018 232 1,148 Unearned revenue 2,212 4,462 5,922 3,018 232 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 232 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 3,631 1,148 Unearned revenue 2,212 4,462 5,922 Income tax ( 3,631 ) 4,462 5,922 Income tax ( 3,631 ) 2,929 18,183 Other current Income tax ( 3,631 ) 2,929 18,183 Other current liability 1,346 tax ( 3,631 ) 2,929 18,183 Other current liability 1,346 1,419 2,929 18,183 Other current liability 1,346 1,419 798 Other long-term liability 18,183 Other current liability 1,346 1,419 798 Other long-term liability 1,348 Other current liability 1,346 1,419 798 Other long-term liability 1,348 591 1,419 798 Other long-term liability 1,348 591 ( 20 ) Net 798 Other long-term liability 1,348 591 ( 20 ) Net cash long-term liability 1,348 591 ( 20 ) Net cash from operation ) Net cash from operation 60,675 52,185 43,884 Financing Repayments of Net cash from operation 60,675 52,185 43,884 Financing Repayments of short-term cash from operation 60,675 52,185 43,884 Financing Repayments of short-term debt short-term debt , maturity of 90 day or le , net day or le , net 0 0 ( 7,324 ) Proceeds or le , net 0 0 ( 7,324 ) Proceeds from , net 0 0 ( 7,324 ) Proceeds from issuance of Proceeds from issuance of debt 0 0 7,183 Cash premium on from issuance of debt 0 0 7,183 Cash premium on debt issuance of debt 0 0 7,183 Cash premium on debt exchange premium on debt exchange ( 3,417 ) 0 0 Repayments of debt exchange ( 3,417 ) 0 0 Repayments of debt ( exchange ( 3,417 ) 0 0 Repayments of debt ( 5,518 0 Repayments of debt ( 5,518 ) ( 4,000 ) ( debt ( 5,518 ) ( 4,000 ) ( 10,060 ) Common ) ( 4,000 ) ( 10,060 ) Common stock issued 1,343 10,060 ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ) Common stock issued 1,343 1,142 1,002 Common stock repurchased ( Common stock issued 1,343 1,142 1,002 Common stock repurchased ( 22,968 1,002 Common stock repurchased ( 22,968 ) ( 19,543 ) ( repurchased ( 22,968 ) ( 19,543 ) ( 10,721 ) Common ) ( 19,543 ) ( 10,721 ) Common stock cash dividend stock cash dividend paid ( 15,137 ) ( 13,811 ) ( paid ( 15,137 ) ( 13,811 ) ( 12,699 ) Other ) ( 13,811 ) ( 12,699 ) Other , net ( ) Other , net ( 334 ) ( 675 ) ( net ( 334 ) ( 675 ) ( 971 ) Net ) ( 675 ) ( 971 ) Net cash used in cash used in financing ( 46,031 ) ( 36,887 ) ( financing ( 46,031 ) ( 36,887 ) ( 33,590 ) Investing ) ( 36,887 ) ( 33,590 ) Investing Additions to property to property and equipment ( 15,441 ) ( 13,925 ) ( equipment ( 15,441 ) ( 13,925 ) ( 11,632 ) Acquisition ) ( 13,925 ) ( 11,632 ) Acquisition of company , intangible and other asset ( 2,521 ) ( 2,388 ) ( asset ( 2,521 ) ( 2,388 ) ( 888 ) Purchases ) ( 2,388 ) ( 888 ) Purchases of investment ( ) Purchases of investment ( 77,190 ) ( 57,697 ) ( investment ( 77,190 ) ( 57,697 ) ( 137,380 ) Maturities ) ( 57,697 ) ( 137,380 ) Maturities of investment 66,449 137,380 ) Maturities of investment 66,449 20,043 26,360 Sales of investment ) Maturities of investment 66,449 20,043 26,360 Sales of investment 17,721 Maturities of investment 66,449 20,043 26,360 Sales of investment 17,721 38,194 20,043 26,360 Sales of investment 17,721 38,194 117,577 Other , net 26,360 Sales of investment 17,721 38,194 117,577 Other , net ( Sales of investment 17,721 38,194 117,577 Other , net ( 1,241 117,577 Other , net ( 1,241 ) 0 ( 98 ) , net ( 1,241 ) 0 ( 98 ) Net cash ( 1,241 ) 0 ( 98 ) Net cash used in cash used in investing ( 12,223 ) ( 15,773 ) ( investing ( 12,223 ) ( 15,773 ) ( 6,061 ) Effect ) ( 15,773 ) ( 6,061 ) Effect of foreign exchange cash and cash equivalent ( 201 ) ( 115 ) 50 equivalent ( 201 ) ( 115 ) 50 Net change in 201 ) ( 115 ) 50 Net change in cash and in cash and cash equivalent 2,220 ( 590 ) 4,283 Cash and cash equivalent 2,220 ( 590 ) 4,283 Cash and cash equivalent 2,220 ( 590 ) 4,283 Cash and cash equivalent , equivalent , beginning of period 11,356 11,946 7,663 Cash and cash , beginning of period 11,356 11,946 7,663 Cash and cash equivalent beginning of period 11,356 11,946 7,663 Cash and cash equivalent , , end of period $ 13,576 $ 11,356 $ 11,946 Refer of period $ 13,576 $ 11,356 $ 11,946 Refer to accompanying $ 13,576 $ 11,356 $ 11,946 Refer to accompanying note . Refer to accompanying note . 58 PART II Item 8 STOCKHOLDERS . 58 PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( million ) Year Ended June 30 , 2020 2019 2018 Common Year Ended June 30 , 2020 2019 2018 Common stock and Ended June 30 , 2020 2019 2018 Common stock and paid-in June 30 , 2020 2019 2018 Common stock and paid-in capital , beginning of period $ 78,520 $ 71,223 $ 69,315 Common of period $ 78,520 $ 71,223 $ 69,315 Common stock issued $ 78,520 $ 71,223 $ 69,315 Common stock issued 1,343 6,829 $ 69,315 Common stock issued 1,343 6,829 1,002 Common stock repurchased 69,315 Common stock issued 1,343 6,829 1,002 Common stock repurchased ( Common stock issued 1,343 6,829 1,002 Common stock repurchased ( 4,599 1,002 Common stock repurchased ( 4,599 ) ( 4,195 ) ( repurchased ( 4,599 ) ( 4,195 ) ( 3,033 ) Stock-based ) ( 4,195 ) ( 3,033 ) Stock-based compensation expense 5,289 3,033 ) Stock-based compensation expense 5,289 4,652 3,940 Other , net ) Stock-based compensation expense 5,289 4,652 3,940 Other , net ( Stock-based compensation expense 5,289 4,652 3,940 Other , net ( 1 3,940 Other , net ( 1 ) 11 ( 1 ) , net ( 1 ) 11 ( 1 ) Balance , ( 1 ) 11 ( 1 ) Balance , end of Balance , end of period 80,552 78,520 71,223 Retained earnings Balance , end of period 80,552 78,520 71,223 Retained earnings Balance , end of period 80,552 78,520 71,223 Retained earnings Balance , beginning Balance , beginning of period 24,150 13,682 17,769 Net income 44,281 , beginning of period 24,150 13,682 17,769 Net income 44,281 39,240 beginning of period 24,150 13,682 17,769 Net income 44,281 39,240 16,571 24,150 13,682 17,769 Net income 44,281 39,240 16,571 Common stock cash 13,682 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend 17,769 Net income 44,281 39,240 16,571 Common stock cash dividend ( Common stock cash dividend ( 15,483 ) ( 14,103 ) ( dividend ( 15,483 ) ( 14,103 ) ( 12,917 ) Common ) ( 14,103 ) ( 12,917 ) Common stock repurchased ( ) Common stock repurchased ( 18,382 ) ( 15,346 ) ( repurchased ( 18,382 ) ( 15,346 ) ( 7,699 ) Cumulative ) ( 15,346 ) ( 7,699 ) Cumulative effect of accounting Cumulative effect of accounting change 0 677 ( 42 ) Balance effect of accounting change 0 677 ( 42 ) Balance , accounting change 0 677 ( 42 ) Balance , end of Balance , end of period 34,566 24,150 13,682 Accumulated other comprehensive , end of period 34,566 24,150 13,682 Accumulated other comprehensive income end of period 34,566 24,150 13,682 Accumulated other comprehensive income ( , beginning of period ( 340 ) ( 2,187 ) 627 period ( 340 ) ( 2,187 ) 627 Other comprehensive income 340 ) ( 2,187 ) 627 Other comprehensive income ( loss comprehensive income ( loss ) 3,526 1,914 ( 2,856 ) Cumulative income ( loss ) 3,526 1,914 ( 2,856 ) Cumulative effect loss ) 3,526 1,914 ( 2,856 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 67 ) 42 Balance of accounting change 0 ( 67 ) 42 Balance , end change 0 ( 67 ) 42 Balance , end of period Balance , end of period 3,186 ( 340 ) ( 2,187 end of period 3,186 ( 340 ) ( 2,187 ) Total 3,186 ( 340 ) ( 2,187 ) Total stockholder ’ equity Total stockholder ’ equity $ 118,304 $ 102,330 $ 82,718 Cash ’ equity $ 118,304 $ 102,330 $ 82,718 Cash dividend declared $ 118,304 $ 102,330 $ 82,718 Cash dividend declared per common declared per common share $ 2.04 $ 1.84 $ 1.68 Refer common share $ 2.04 $ 1.84 $ 1.68 Refer to accompanying $ 2.04 $ 1.84 $ 1.68 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 NOTES . 59 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles ” ) . In July 2020 , we completed an assessment be effective beginning fiscal year 2021 . Foreign Currencies Assets and and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox Live ; online advertising and LinkedIn . 60 PART II Item 8 Revenue . 60 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 61 PART II Item 8 Judgment . 61 PART II Item 8 Judgment is required to determine license . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , long-term account June 30 , 2020 and 2019 , long-term account receivable , doubtful account , wa $ 2.7 billion and $ 2.2 billion $ 2.7 billion and $ 2.2 billion , respectively , and million ) Year Ended June 30 , 2020 2019 2018 Balance Year Ended June 30 , 2020 2019 2018 Balance , beginning Ended June 30 , 2020 2019 2018 Balance , beginning of June 30 , 2020 2019 2018 Balance , beginning of period , beginning of period $ 434 $ 397 $ 361 Charged of period $ 434 $ 397 $ 361 Charged to cost $ 434 $ 397 $ 361 Charged to cost and other Charged to cost and other 560 153 134 Write-offs ( 178 to cost and other 560 153 134 Write-offs ( 178 ) cost and other 560 153 134 Write-offs ( 178 ) ( 560 153 134 Write-offs ( 178 ) ( 116 ) ( Write-offs ( 178 ) ( 116 ) ( 98 ) Balance ) ( 116 ) ( 98 ) Balance , end of , end of period $ 816 $ 434 $ 397 Allowance of period $ 816 $ 434 $ 397 Allowance for doubtful $ 816 $ 434 $ 397 Allowance for doubtful account included ( In million ) June 30 , 2020 2019 2018 Accounts million ) June 30 , 2020 2019 2018 Accounts receivable , ) June 30 , 2020 2019 2018 Accounts receivable , net June 30 , 2020 2019 2018 Accounts receivable , net of allowance for doubtful account $ 788 $ 411 $ 377 Other doubtful account $ 788 $ 411 $ 377 Other long-term asset $ 788 $ 411 $ 377 Other long-term asset 28 23 $ 377 Other long-term asset 28 23 20 Total $ 816 377 Other long-term asset 28 23 20 Total $ 816 $ Other long-term asset 28 23 20 Total $ 816 $ 434 28 23 20 Total $ 816 $ 434 $ 397 62 20 Total $ 816 $ 434 $ 397 62 PART II $ 816 $ 434 $ 397 62 PART II Item 8 816 $ 434 $ 397 62 PART II Item 8 Unearned 397 62 PART II Item 8 Unearned revenue comprises mainly unearned ; LinkedIn subscription ; Office 365 subscription ; Xbox Live subscription Xbox Live subscription ; Windows 10 post-delivery support ; Dynamics business service . Refer to Note 13 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where country . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , our financing June 30 , 2020 and 2019 , our financing receivables , receivables , net were $ 5.2 billion and $ 4.3 billion $ 5.2 billion and $ 4.3 billion , respectively , for a period generally ranging from 90 day to three year . the amount a necessary . 63 PART II Item 8 Research . 63 PART II Item 8 Research and Development Research and . Advertising expense wa $ 1.6 billion in fiscal year 2020 1.6 billion in fiscal year 2020 , 2019 , and 2018 in fiscal year 2020 , 2019 , and 2018 . Stock-Based 2020 , 2019 , and 2018 . Stock-Based Compensation Compensation cost available for current operation . 64 PART II Item 8 Debt . 64 PART II Item 8 Debt investment are classified a level are : • Level 1 – input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability primarily option and swap contract . 65 PART II Item 8 • . 65 PART II Item 8 • Level 3 – input II Item 8 • Level 3 – input are generally unobservable flow model . Our Level 3 asset and liability include investment and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between below it carrying value . 66 PART II Item 8 Intangible . 66 PART II Item 8 Intangible Assets Our intangible asset , ranging from one to 20 year . We evaluate the for Hedging Activities In August 2017 , the Financial Accounting Standards adopted the standard effective July 1 , 2019 . As we standard effective July 1 , 2019 . As we did not – Credit Losses In June 2016 , the FASB issued a date for u beginning July 1 , 2020 . Adoption of u beginning July 1 , 2020 . Adoption of the standard for Income Taxes In December 2019 , the FASB issued a effective for u beginning July 1 , 2021 , with early u beginning July 1 , 2021 , with early adoption permitted , and system . NOTE 2 — EARNINGS PER SHARE Basic option and stock award . 67 PART II Item 8 The . 67 PART II Item 8 The component of basic and share ) Year Ended June 30 , 2020 2019 2018 Net Year Ended June 30 , 2020 2019 2018 Net income available Ended June 30 , 2020 2019 2018 Net income available for June 30 , 2020 2019 2018 Net income available for common shareholder ( A ) $ 44,281 $ 39,240 $ 16,571 Weighted A ) $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding $ 44,281 $ 39,240 $ 16,571 Weighted average outstanding share of common stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based ( B ) 7,610 7,673 7,700 Dilutive effect of stock-based award Dilutive effect of stock-based award 73 80 94 Common stock and effect of stock-based award 73 80 94 Common stock and common of stock-based award 73 80 94 Common stock and common stock stock equivalent ( C ) 7,683 7,753 7,794 Earnings Per Share equivalent ( C ) 7,683 7,753 7,794 Earnings Per Share Basic ( C ) 7,683 7,753 7,794 Earnings Per Share Basic ( Basic ( A/B ) $ 5.82 $ 5.11 $ 2.15 Diluted A/B ) $ 5.82 $ 5.11 $ 2.15 Diluted ( A/C $ 5.82 $ 5.11 $ 2.15 Diluted ( A/C ) $ Diluted ( A/C ) $ 5.76 $ 5.06 $ 2.13 Anti-dilutive A/C ) $ 5.76 $ 5.06 $ 2.13 Anti-dilutive stock-based award $ 5.76 $ 5.06 $ 2.13 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2020 2019 2018 Interest Year Ended June 30 , 2020 2019 2018 Interest and dividend Ended June 30 , 2020 2019 2018 Interest and dividend income June 30 , 2020 2019 2018 Interest and dividend income $ Interest and dividend income $ 2,680 $ 2,762 $ 2,214 Interest dividend income $ 2,680 $ 2,762 $ 2,214 Interest expense ( $ 2,680 $ 2,762 $ 2,214 Interest expense ( 2,591 ) $ 2,214 Interest expense ( 2,591 ) ( 2,686 ) ( expense ( 2,591 ) ( 2,686 ) ( 2,733 ) Net ) ( 2,686 ) ( 2,733 ) Net recognized gain on Net recognized gain on investment 32 648 2,399 Net gain ( recognized gain on investment 32 648 2,399 Net gain ( loss gain on investment 32 648 2,399 Net gain ( loss ) ( loss ) on derivative 187 144 ( 187 ) Net loss ) on derivative 187 144 ( 187 ) Net loss on derivative 187 144 ( 187 ) Net loss on foreign on foreign currency remeasurements ( 191 ) ( 82 ) ( remeasurements ( 191 ) ( 82 ) ( 218 ) Other ) ( 82 ) ( 218 ) Other , net ( ) Other , net ( 40 ) ( 57 ) ( net ( 40 ) ( 57 ) ( 59 ) Total ) ( 57 ) ( 59 ) Total $ 77 $ ( 59 ) Total $ 77 $ 729 $ 1,416 Net ) Total $ 77 $ 729 $ 1,416 Net Recognized Gains $ 77 $ 729 $ 1,416 Net Recognized Gains ( Losses million ) Year Ended June 30 , 2020 2019 2018 Realized Year Ended June 30 , 2020 2019 2018 Realized gain from Ended June 30 , 2020 2019 2018 Realized gain from sale June 30 , 2020 2019 2018 Realized gain from sale of sale of available-for-sale security $ 50 $ 12 $ 27 Realized available-for-sale security $ 50 $ 12 $ 27 Realized loss from $ 50 $ 12 $ 27 Realized loss from sale of sale of available-for-sale security ( 37 ) ( 93 ) ( security ( 37 ) ( 93 ) ( 987 ) Other-than-temporary ) ( 93 ) ( 987 ) Other-than-temporary impairment of investment Other-than-temporary impairment of investment ( 17 ) ( 16 ) ( investment ( 17 ) ( 16 ) ( 6 ) Total ) ( 16 ) ( 6 ) Total $ ( 4 6 ) Total $ ( 4 ) $ ( 97 ) ( 4 ) $ ( 97 ) $ ( 966 ) ( 97 ) $ ( 966 ) Net recognized gain ( million ) Year Ended June 30 , 2020 2019 2018 Net Year Ended June 30 , 2020 2019 2018 Net realized gain Ended June 30 , 2020 2019 2018 Net realized gain on June 30 , 2020 2019 2018 Net realized gain on investment gain on investment sold $ 83 $ 276 $ 3,406 Net investment sold $ 83 $ 276 $ 3,406 Net unrealized gain $ 83 $ 276 $ 3,406 Net unrealized gain on investment gain on investment still held 69 479 0 Impairments of investment on investment still held 69 479 0 Impairments of investment ( investment still held 69 479 0 Impairments of investment ( 116 0 Impairments of investment ( 116 ) ( 10 ) ( investment ( 116 ) ( 10 ) ( 41 ) Total ) ( 10 ) ( 41 ) Total $ 36 $ ( 41 ) Total $ 36 $ 745 $ 3,365 68 ) Total $ 36 $ 745 $ 3,365 68 PART II $ 36 $ 745 $ 3,365 68 PART II Item 8 36 $ 745 $ 3,365 68 PART II Item 8 NOTE 3,365 68 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Short-term Investments Equity Investments June 30 , 2020 Changes in Fair Equity Investments June 30 , 2020 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,687 $ 1 $ Commercial paper Level 2 $ 4,687 $ 1 $ 0 $ Level 2 $ 4,687 $ 1 $ 0 $ 4,688 $ $ 4,687 $ 1 $ 0 $ 4,688 $ 1,618 $ $ 1 $ 0 $ 4,688 $ 1,618 $ 3,070 $ $ 0 $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates of deposit $ 1,618 $ 3,070 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,898 0 0 2,898 1,646 Certificates of deposit Level 2 2,898 0 0 2,898 1,646 1,252 of deposit Level 2 2,898 0 0 2,898 1,646 1,252 0 deposit Level 2 2,898 0 0 2,898 1,646 1,252 0 U.S. Level 2 2,898 0 0 2,898 1,646 1,252 0 U.S. government 2 2,898 0 0 2,898 1,646 1,252 0 U.S. government security 2,898 0 0 2,898 1,646 1,252 0 U.S. government security Level 0 0 2,898 1,646 1,252 0 U.S. government security Level 1 0 U.S. government security Level 1 92,067 6,495 ( 1 ) U.S. government security Level 1 92,067 6,495 ( 1 ) 98,561 government security Level 1 92,067 6,495 ( 1 ) 98,561 3,168 Level 1 92,067 6,495 ( 1 ) 98,561 3,168 95,393 0 92,067 6,495 ( 1 ) 98,561 3,168 95,393 0 U.S. agency 6,495 ( 1 ) 98,561 3,168 95,393 0 U.S. agency security ( 1 ) 98,561 3,168 95,393 0 U.S. agency security Level 1 ) 98,561 3,168 95,393 0 U.S. agency security Level 2 0 U.S. agency security Level 2 2,439 2 0 2,441 449 U.S. agency security Level 2 2,439 2 0 2,441 449 1,992 agency security Level 2 2,439 2 0 2,441 449 1,992 0 security Level 2 2,439 2 0 2,441 449 1,992 0 Foreign Level 2 2,439 2 0 2,441 449 1,992 0 Foreign government 2 2,439 2 0 2,441 449 1,992 0 Foreign government bond 2,439 2 0 2,441 449 1,992 0 Foreign government bond Level 2 0 2,441 449 1,992 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,982 6 ( 3 ) Foreign government bond Level 2 6,982 6 ( 3 ) 6,985 government bond Level 2 6,982 6 ( 3 ) 6,985 1 Level 2 6,982 6 ( 3 ) 6,985 1 6,984 0 6,982 6 ( 3 ) 6,985 1 6,984 0 Mortgage- and 6 ( 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed ( 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed security 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 4,865 41 ( 6 ) and asset-backed security Level 2 4,865 41 ( 6 ) 4,900 asset-backed security Level 2 4,865 41 ( 6 ) 4,900 0 Level 2 4,865 41 ( 6 ) 4,900 0 4,900 0 4,865 41 ( 6 ) 4,900 0 4,900 0 Corporate note 41 ( 6 ) 4,900 0 4,900 0 Corporate note and ( 6 ) 4,900 0 4,900 0 Corporate note and bond 6 ) 4,900 0 4,900 0 Corporate note and bond Level Corporate note and bond Level 2 8,500 327 ( 17 ) note and bond Level 2 8,500 327 ( 17 ) 8,810 and bond Level 2 8,500 327 ( 17 ) 8,810 0 Level 2 8,500 327 ( 17 ) 8,810 0 8,810 0 8,500 327 ( 17 ) 8,810 0 8,810 0 Corporate note 327 ( 17 ) 8,810 0 8,810 0 Corporate note and ( 17 ) 8,810 0 8,810 0 Corporate note and bond 17 ) 8,810 0 8,810 0 Corporate note and bond Level Corporate note and bond Level 3 58 0 0 58 0 note and bond Level 3 58 0 0 58 0 58 and bond Level 3 58 0 0 58 0 58 0 bond Level 3 58 0 0 58 0 58 0 Municipal Level 3 58 0 0 58 0 58 0 Municipal security 3 58 0 0 58 0 58 0 Municipal security Level 58 0 0 58 0 58 0 Municipal security Level 2 0 0 58 0 58 0 Municipal security Level 2 313 58 0 Municipal security Level 2 313 57 ( 4 ) 0 Municipal security Level 2 313 57 ( 4 ) 366 Municipal security Level 2 313 57 ( 4 ) 366 0 Level 2 313 57 ( 4 ) 366 0 366 0 313 57 ( 4 ) 366 0 366 0 Municipal security 57 ( 4 ) 366 0 366 0 Municipal security Level ( 4 ) 366 0 366 0 Municipal security Level 3 4 ) 366 0 366 0 Municipal security Level 3 91 366 0 Municipal security Level 3 91 0 0 91 0 0 Municipal security Level 3 91 0 0 91 0 91 Municipal security Level 3 91 0 0 91 0 91 0 security Level 3 91 0 0 91 0 91 0 Total Level 3 91 0 0 91 0 91 0 Total debt 3 91 0 0 91 0 91 0 Total debt investment 91 0 0 91 0 91 0 Total debt investment $ 0 0 91 0 91 0 Total debt investment $ 122,900 0 Total debt investment $ 122,900 $ 6,929 $ ( 31 debt investment $ 122,900 $ 6,929 $ ( 31 ) $ 122,900 $ 6,929 $ ( 31 ) $ 129,798 $ 6,882 $ ( 31 ) $ 129,798 $ 6,882 $ 122,916 $ 31 ) $ 129,798 $ 6,882 $ 122,916 $ 0 Changes $ 129,798 $ 6,882 $ 122,916 $ 0 Changes in Fair $ 6,882 $ 122,916 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity investment $ 3,749 $ 784 $ 0 $ equity investment $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 0 Derivatives $ 5,910 $ 5,910 $ 0 $ 0 Derivatives , net $ 5,910 $ 0 $ 0 Derivatives , net ( a , net ( a ) 35 0 35 0 Total $ net ( a ) 35 0 35 0 Total $ 139,492 ( a ) 35 0 35 0 Total $ 139,492 $ a ) 35 0 35 0 Total $ 139,492 $ 13,576 0 35 0 Total $ 139,492 $ 13,576 $ 122,951 $ 0 Total $ 139,492 $ 13,576 $ 122,951 $ 2,965 69 $ 139,492 $ 13,576 $ 122,951 $ 2,965 69 PART II $ 13,576 $ 122,951 $ 2,965 69 PART II Item 8 13,576 $ 122,951 $ 2,965 69 PART II Item 8 ( 2,965 69 PART II Item 8 ( In million ) Fair Short-term Investments Equity Investments June 30 , 2019 Changes in Fair Equity Investments June 30 , 2019 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,211 $ 0 $ Commercial paper Level 2 $ 2,211 $ 0 $ 0 $ Level 2 $ 2,211 $ 0 $ 0 $ 2,211 $ $ 2,211 $ 0 $ 0 $ 2,211 $ 1,773 $ $ 0 $ 0 $ 2,211 $ 1,773 $ 438 $ $ 0 $ 2,211 $ 1,773 $ 438 $ 0 Certificates $ 2,211 $ 1,773 $ 438 $ 0 Certificates of deposit $ 1,773 $ 438 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,018 0 0 2,018 1,430 Certificates of deposit Level 2 2,018 0 0 2,018 1,430 588 of deposit Level 2 2,018 0 0 2,018 1,430 588 0 deposit Level 2 2,018 0 0 2,018 1,430 588 0 U.S. Level 2 2,018 0 0 2,018 1,430 588 0 U.S. government 2 2,018 0 0 2,018 1,430 588 0 U.S. government security 2,018 0 0 2,018 1,430 588 0 U.S. government security Level 0 0 2,018 1,430 588 0 U.S. government security Level 1 0 U.S. government security Level 1 104,925 1,854 ( 104 ) U.S. government security Level 1 104,925 1,854 ( 104 ) 106,675 government security Level 1 104,925 1,854 ( 104 ) 106,675 769 Level 1 104,925 1,854 ( 104 ) 106,675 769 105,906 0 104,925 1,854 ( 104 ) 106,675 769 105,906 0 U.S. agency 1,854 ( 104 ) 106,675 769 105,906 0 U.S. agency security ( 104 ) 106,675 769 105,906 0 U.S. agency security Level 104 ) 106,675 769 105,906 0 U.S. agency security Level 2 0 U.S. agency security Level 2 988 0 0 988 698 U.S. agency security Level 2 988 0 0 988 698 290 agency security Level 2 988 0 0 988 698 290 0 security Level 2 988 0 0 988 698 290 0 Foreign Level 2 988 0 0 988 698 290 0 Foreign government 2 988 0 0 988 698 290 0 Foreign government bond 988 0 0 988 698 290 0 Foreign government bond Level 0 0 988 698 290 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,350 4 ( 8 ) Foreign government bond Level 2 6,350 4 ( 8 ) 6,346 government bond Level 2 6,350 4 ( 8 ) 6,346 2,506 Level 2 6,350 4 ( 8 ) 6,346 2,506 3,840 0 6,350 4 ( 8 ) 6,346 2,506 3,840 0 Mortgage- and 4 ( 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed ( 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed security 8 ) 6,346 2,506 3,840 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 3,554 10 ( 3 ) and asset-backed security Level 2 3,554 10 ( 3 ) 3,561 asset-backed security Level 2 3,554 10 ( 3 ) 3,561 0 Level 2 3,554 10 ( 3 ) 3,561 0 3,561 0 3,554 10 ( 3 ) 3,561 0 3,561 0 Corporate note 10 ( 3 ) 3,561 0 3,561 0 Corporate note and ( 3 ) 3,561 0 3,561 0 Corporate note and bond 3 ) 3,561 0 3,561 0 Corporate note and bond Level Corporate note and bond Level 2 7,437 111 ( 7 ) note and bond Level 2 7,437 111 ( 7 ) 7,541 and bond Level 2 7,437 111 ( 7 ) 7,541 0 Level 2 7,437 111 ( 7 ) 7,541 0 7,541 0 7,437 111 ( 7 ) 7,541 0 7,541 0 Corporate note 111 ( 7 ) 7,541 0 7,541 0 Corporate note and ( 7 ) 7,541 0 7,541 0 Corporate note and bond 7 ) 7,541 0 7,541 0 Corporate note and bond Level Corporate note and bond Level 3 15 0 0 15 0 note and bond Level 3 15 0 0 15 0 15 and bond Level 3 15 0 0 15 0 15 0 bond Level 3 15 0 0 15 0 15 0 Municipal Level 3 15 0 0 15 0 15 0 Municipal security 3 15 0 0 15 0 15 0 Municipal security Level 15 0 0 15 0 15 0 Municipal security Level 2 0 0 15 0 15 0 Municipal security Level 2 242 15 0 Municipal security Level 2 242 48 0 290 0 0 Municipal security Level 2 242 48 0 290 0 290 Municipal security Level 2 242 48 0 290 0 290 0 security Level 2 242 48 0 290 0 290 0 Municipal Level 2 242 48 0 290 0 290 0 Municipal security 2 242 48 0 290 0 290 0 Municipal security Level 242 48 0 290 0 290 0 Municipal security Level 3 48 0 290 0 290 0 Municipal security Level 3 7 290 0 Municipal security Level 3 7 0 0 7 0 0 Municipal security Level 3 7 0 0 7 0 7 Municipal security Level 3 7 0 0 7 0 7 0 security Level 3 7 0 0 7 0 7 0 Total Level 3 7 0 0 7 0 7 0 Total debt 3 7 0 0 7 0 7 0 Total debt investment 7 0 0 7 0 7 0 Total debt investment $ 0 0 7 0 7 0 Total debt investment $ 127,747 0 Total debt investment $ 127,747 $ 2,027 $ ( 122 debt investment $ 127,747 $ 2,027 $ ( 122 ) $ 127,747 $ 2,027 $ ( 122 ) $ 129,652 $ 7,176 $ ( 122 ) $ 129,652 $ 7,176 $ 122,476 $ 122 ) $ 129,652 $ 7,176 $ 122,476 $ 0 Changes $ 129,652 $ 7,176 $ 122,476 $ 0 Changes in Fair $ 7,176 $ 122,476 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 973 $ 409 $ Equity investment Level 1 $ 973 $ 409 $ 0 $ Level 1 $ 973 $ 409 $ 0 $ 564 Equity $ 973 $ 409 $ 0 $ 564 Equity investment Other $ 409 $ 0 $ 564 Equity investment Other 2,085 0 $ 564 Equity investment Other 2,085 0 0 2,085 Total equity 564 Equity investment Other 2,085 0 0 2,085 Total equity investment Equity investment Other 2,085 0 0 2,085 Total equity investment $ investment Other 2,085 0 0 2,085 Total equity investment $ 3,058 2,085 Total equity investment $ 3,058 $ 409 $ 0 $ equity investment $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,058 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 409 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 2,649 Cash $ 3,771 $ 3,771 $ 0 $ 0 Derivatives $ 3,771 $ 3,771 $ 0 $ 0 Derivatives , net $ 3,771 $ 0 $ 0 Derivatives , net ( a net ( a ) ( 13 ) 0 ( 13 ) a ) ( 13 ) 0 ( 13 ) 0 Total ( 13 ) 0 ( 13 ) 0 Total $ 136,468 ) 0 ( 13 ) 0 Total $ 136,468 $ 11,356 13 ) 0 Total $ 136,468 $ 11,356 $ 122,463 $ 0 Total $ 136,468 $ 11,356 $ 122,463 $ 2,649 ( $ 136,468 $ 11,356 $ 122,463 $ 2,649 ( a ) $ 11,356 $ 122,463 $ 2,649 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information hierarchy . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , equity investment June 30 , 2020 and 2019 , equity investment without readily price or impairment were $ 1.4 billion and $ 1.2 billion $ 1.4 billion and $ 1.2 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2020 U.S. government and Fair Value June 30 , 2020 U.S. government and agency security government and agency security $ 2,323 $ ( 1 ) $ security $ 2,323 $ ( 1 ) $ 0 $ 0 $ ( 1 ) $ 0 $ 0 $ 2,323 $ 1 ) $ 0 $ 0 $ 2,323 $ ( 1 $ 0 $ 0 $ 2,323 $ ( 1 ) Foreign 0 $ 2,323 $ ( 1 ) Foreign government bond 500 1 ) Foreign government bond 500 ( 3 ) 0 0 Foreign government bond 500 ( 3 ) 0 0 500 ( bond 500 ( 3 ) 0 0 500 ( 3 ) 500 ( 3 ) 0 0 500 ( 3 ) Mortgage- ( 3 ) 0 0 500 ( 3 ) Mortgage- and ) 0 0 500 ( 3 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,014 ( 6 ) 0 0 and asset-backed security 1,014 ( 6 ) 0 0 1,014 ( security 1,014 ( 6 ) 0 0 1,014 ( 6 ) 1,014 ( 6 ) 0 0 1,014 ( 6 ) Corporate ( 6 ) 0 0 1,014 ( 6 ) Corporate note ) 0 0 1,014 ( 6 ) Corporate note and bond ) Corporate note and bond 649 ( 17 ) 0 0 note and bond 649 ( 17 ) 0 0 649 ( bond 649 ( 17 ) 0 0 649 ( 17 ) 649 ( 17 ) 0 0 649 ( 17 ) Municipal ( 17 ) 0 0 649 ( 17 ) Municipal security ) 0 0 649 ( 17 ) Municipal security 66 ( ( 17 ) Municipal security 66 ( 4 ) 0 0 ) Municipal security 66 ( 4 ) 0 0 66 ( security 66 ( 4 ) 0 0 66 ( 4 ) 66 ( 4 ) 0 0 66 ( 4 ) Total ( 4 ) 0 0 66 ( 4 ) Total $ ) 0 0 66 ( 4 ) Total $ 4,552 $ ( 4 ) Total $ 4,552 $ ( 31 ) $ Total $ 4,552 $ ( 31 ) $ 0 $ 0 $ ( 31 ) $ 0 $ 0 $ 4,552 $ 31 ) $ 0 $ 0 $ 4,552 $ ( 31 $ 0 $ 0 $ 4,552 $ ( 31 ) 70 0 $ 4,552 $ ( 31 ) 70 PART II Item 4,552 $ ( 31 ) 70 PART II Item 8 Less ) 70 PART II Item 8 Less than 12 Months 12 II Item 8 Less than 12 Months 12 Months or Greater 8 Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2019 U.S. government and Fair Value June 30 , 2019 U.S. government and agency security government and agency security $ 1,491 $ ( 1 ) $ security $ 1,491 $ ( 1 ) $ 39,158 $ ( $ ( 1 ) $ 39,158 $ ( 103 ) $ ) $ 39,158 $ ( 103 ) $ 40,649 $ ( $ ( 103 ) $ 40,649 $ ( 104 ) Foreign ) $ 40,649 $ ( 104 ) Foreign government bond 25 104 ) Foreign government bond 25 0 77 ( 8 ) ) Foreign government bond 25 0 77 ( 8 ) 102 Foreign government bond 25 0 77 ( 8 ) 102 ( bond 25 0 77 ( 8 ) 102 ( 8 ) 0 77 ( 8 ) 102 ( 8 ) Mortgage- and ( 8 ) 102 ( 8 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 664 ( 1 ) 378 ( and asset-backed security 664 ( 1 ) 378 ( 2 ) security 664 ( 1 ) 378 ( 2 ) 1,042 ( ( 1 ) 378 ( 2 ) 1,042 ( 3 ) ) 378 ( 2 ) 1,042 ( 3 ) Corporate note ( 2 ) 1,042 ( 3 ) Corporate note and bond ) Corporate note and bond 498 ( 3 ) 376 ( note and bond 498 ( 3 ) 376 ( 4 ) bond 498 ( 3 ) 376 ( 4 ) 874 ( ( 3 ) 376 ( 4 ) 874 ( 7 ) ) 376 ( 4 ) 874 ( 7 ) Total $ ( 4 ) 874 ( 7 ) Total $ 2,678 $ ( 7 ) Total $ 2,678 $ ( 5 ) $ Total $ 2,678 $ ( 5 ) $ 39,989 $ ( $ ( 5 ) $ 39,989 $ ( 117 ) $ ) $ 39,989 $ ( 117 ) $ 42,667 $ ( $ ( 117 ) $ 42,667 $ ( 122 ) Unrealized ) $ 42,667 $ ( 122 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2020 Due in one Fair Value June 30 , 2020 Due in one year or one year or le $ 36,169 $ 36,276 Due after one or le $ 36,169 $ 36,276 Due after one year through one year through five year 51,465 54,700 Due after five year year through five year 51,465 54,700 Due after five year through Due after five year through 10 year 32,299 35,674 Due after five year through 10 year 32,299 35,674 Due after 10 year year through 10 year 32,299 35,674 Due after 10 year 2,967 year 32,299 35,674 Due after 10 year 2,967 3,148 Total $ 35,674 Due after 10 year 2,967 3,148 Total $ 122,900 $ Due after 10 year 2,967 3,148 Total $ 122,900 $ 129,798 year 2,967 3,148 Total $ 122,900 $ 129,798 NOTE 5 — 3,148 Total $ 122,900 $ 129,798 NOTE 5 — DERIVATIVES We $ 122,900 $ 129,798 NOTE 5 — DERIVATIVES We use derivative other foreign currency exposure . 71 PART II Item 8 Interest . 71 PART II Item 8 Interest Rate Interest rate risk maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2020 , our long-term As of June 30 , 2020 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2020 June 30 , million ) June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 0 Foreign exchange contract contract purchased $ 635 $ 0 Foreign exchange contract sold 6,754 0 Foreign exchange contract sold 6,754 6,034 Interest rate contract purchased Foreign exchange contract sold 6,754 6,034 Interest rate contract purchased 1,295 6,034 Interest rate contract purchased 1,295 0 Not Designated a Hedging Interest rate contract purchased 1,295 0 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 11,896 14,889 Foreign exchange contract sold Foreign exchange contract purchased 11,896 14,889 Foreign exchange contract sold 15,595 14,889 Foreign exchange contract sold 15,595 15,614 Other contract purchased 1,844 Foreign exchange contract sold 15,595 15,614 Other contract purchased 1,844 2,007 15,595 15,614 Other contract purchased 1,844 2,007 Other contract sold 757 15,614 Other contract purchased 1,844 2,007 Other contract sold 757 456 1,844 2,007 Other contract sold 757 456 72 PART II Item 2,007 Other contract sold 757 456 72 PART II Item 8 Other contract sold 757 456 72 PART II Item 8 Fair 456 72 PART II Item 8 Fair Values of Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2020 June 30 , Assets Liabilities June 30 , 2020 June 30 , 2019 Designated June 30 , 2020 June 30 , 2019 Designated a Hedging , 2020 June 30 , 2019 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 44 $ ( 54 ) $ contract $ 44 $ ( 54 ) $ 0 $ ( $ ( 54 ) $ 0 $ ( 93 ) Interest ) $ 0 $ ( 93 ) Interest rate contract 93 93 ) Interest rate contract 93 0 0 0 Not Designated ) Interest rate contract 93 0 0 0 Not Designated a Interest rate contract 93 0 0 0 Not Designated a Hedging rate contract 93 0 0 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 245 ( 334 ) 204 ( Foreign exchange contract 245 ( 334 ) 204 ( 172 ) contract 245 ( 334 ) 204 ( 172 ) Other contract ( 334 ) 204 ( 172 ) Other contract 18 ( ( 172 ) Other contract 18 ( 11 ) 46 ( ) Other contract 18 ( 11 ) 46 ( 7 ) contract 18 ( 11 ) 46 ( 7 ) Gross amount ( 11 ) 46 ( 7 ) Gross amount of derivative ) Gross amount of derivative 400 ( 399 ) 250 ( amount of derivative 400 ( 399 ) 250 ( 272 ) derivative 400 ( 399 ) 250 ( 272 ) Gross amount ( 399 ) 250 ( 272 ) Gross amount of derivative in the balance sheet ( 154 ) 158 ( 113 ) balance sheet ( 154 ) 158 ( 113 ) 114 Cash ( 154 ) 158 ( 113 ) 114 Cash collateral received ) 158 ( 113 ) 114 Cash collateral received 0 ( ) 114 Cash collateral received 0 ( 154 ) 0 ( Cash collateral received 0 ( 154 ) 0 ( 78 ) received 0 ( 154 ) 0 ( 78 ) Net amount ( 154 ) 0 ( 78 ) Net amount of derivative Net amount of derivative $ 246 $ ( 395 ) $ derivative $ 246 $ ( 395 ) $ 137 $ ( $ ( 395 ) $ 137 $ ( 236 ) Reported ) $ 137 $ ( 236 ) Reported a Short-term investment Reported a Short-term investment $ 35 $ 0 $ ( 13 Short-term investment $ 35 $ 0 $ ( 13 ) $ 35 $ 0 $ ( 13 ) $ 0 Other current $ ( 13 ) $ 0 Other current asset 199 0 $ 0 Other current asset 199 0 146 0 Other long-term 0 Other current asset 199 0 146 0 Other long-term asset Other current asset 199 0 146 0 Other long-term asset 12 current asset 199 0 146 0 Other long-term asset 12 0 146 0 Other long-term asset 12 0 4 0 Other current 0 Other long-term asset 12 0 4 0 Other current liability Other long-term asset 12 0 4 0 Other current liability 0 long-term asset 12 0 4 0 Other current liability 0 ( 4 0 Other current liability 0 ( 334 ) 0 ( Other current liability 0 ( 334 ) 0 ( 221 ) liability 0 ( 334 ) 0 ( 221 ) Other long-term ( 334 ) 0 ( 221 ) Other long-term liability 0 221 ) Other long-term liability 0 ( 61 ) 0 ( Other long-term liability 0 ( 61 ) 0 ( 15 ) liability 0 ( 61 ) 0 ( 15 ) Total $ ( 61 ) 0 ( 15 ) Total $ 246 $ ( 15 ) Total $ 246 $ ( 395 ) $ Total $ 246 $ ( 395 ) $ 137 $ ( $ ( 395 ) $ 137 $ ( 236 ) Gross ) $ 137 $ ( 236 ) Gross derivative asset and elected to offset were $ 399 million and $ 399 million $ 399 million and $ 399 million , respectively , a respectively , a of June 30 , 2020 , and $ a of June 30 , 2020 , and $ 247 million , 2020 , and $ 247 million and $ 272 million $ 247 million and $ 272 million , respectively , a respectively , a of June 30 , 2019 . The following a of June 30 , 2019 . The following table present ( In million ) Level 1 Level 2 Level 3 Total million ) Level 1 Level 2 Level 3 Total June 30 Level 1 Level 2 Level 3 Total June 30 , 2020 2 Level 3 Total June 30 , 2020 Derivative asset $ 3 Total June 30 , 2020 Derivative asset $ 1 $ , 2020 Derivative asset $ 1 $ 398 $ 1 $ Derivative asset $ 1 $ 398 $ 1 $ 400 Derivative $ 1 $ 398 $ 1 $ 400 Derivative liability 0 $ 398 $ 1 $ 400 Derivative liability 0 ( 399 1 $ 400 Derivative liability 0 ( 399 ) 0 ( 400 Derivative liability 0 ( 399 ) 0 ( 399 ) liability 0 ( 399 ) 0 ( 399 ) June 30 ( 399 ) 0 ( 399 ) June 30 , 2019 0 ( 399 ) June 30 , 2019 Derivative asset 0 399 ) June 30 , 2019 Derivative asset 0 247 3 30 , 2019 Derivative asset 0 247 3 250 Derivative liability , 2019 Derivative asset 0 247 3 250 Derivative liability 0 2019 Derivative asset 0 247 3 250 Derivative liability 0 ( Derivative asset 0 247 3 250 Derivative liability 0 ( 272 247 3 250 Derivative liability 0 ( 272 ) 0 ( 250 Derivative liability 0 ( 272 ) 0 ( 272 ) liability 0 ( 272 ) 0 ( 272 ) 73 PART ( 272 ) 0 ( 272 ) 73 PART II Item ) 0 ( 272 ) 73 PART II Item 8 Gains ) 73 PART II Item 8 Gains ( loss ) on million ) Year Ended June 30 , 2020 2019 2018 Revenue Year Ended June 30 , 2020 2019 2018 Revenue Other Income Ended June 30 , 2020 2019 2018 Revenue Other Income ( June 30 , 2020 2019 2018 Revenue Other Income ( Expense Foreign exchange contract Derivatives $ 0 $ 1 $ 0 $ contract Derivatives $ 0 $ 1 $ 0 $ ( 130 $ 0 $ 1 $ 0 $ ( 130 ) $ 1 $ 0 $ ( 130 ) $ 0 $ ( $ ( 130 ) $ 0 $ ( 78 ) Hedged ) $ 0 $ ( 78 ) Hedged item 0 3 ( 78 ) Hedged item 0 3 0 130 0 78 78 ) Hedged item 0 3 0 130 0 78 Excluded ) Hedged item 0 3 0 130 0 78 Excluded from Hedged item 0 3 0 130 0 78 Excluded from effectiveness item 0 3 0 130 0 78 Excluded from effectiveness assessment 0 3 0 130 0 78 Excluded from effectiveness assessment 0 78 Excluded from effectiveness assessment 0 139 0 168 0 103 Excluded from effectiveness assessment 0 139 0 168 0 103 Interest from effectiveness assessment 0 139 0 168 0 103 Interest rate effectiveness assessment 0 139 0 168 0 103 Interest rate contract assessment 0 139 0 168 0 103 Interest rate contract Derivatives 0 139 0 168 0 103 Interest rate contract Derivatives 0 103 Interest rate contract Derivatives 0 93 0 0 0 0 Interest rate contract Derivatives 0 93 0 0 0 0 Hedged rate contract Derivatives 0 93 0 0 0 0 Hedged item contract Derivatives 0 93 0 0 0 0 Hedged item 0 Derivatives 0 93 0 0 0 0 Hedged item 0 ( 0 93 0 0 0 0 Hedged item 0 ( 93 0 0 0 Hedged item 0 ( 93 ) 0 0 0 Hedged item 0 ( 93 ) 0 0 0 0 item 0 ( 93 ) 0 0 0 0 Equity contract 0 ( 93 ) 0 0 0 0 Equity contract Derivatives ( 93 ) 0 0 0 0 Equity contract Derivatives 0 93 ) 0 0 0 0 Equity contract Derivatives 0 0 0 0 Equity contract Derivatives 0 0 0 0 0 ( 0 Equity contract Derivatives 0 0 0 0 0 ( 324 Equity contract Derivatives 0 0 0 0 0 ( 324 ) contract Derivatives 0 0 0 0 0 ( 324 ) Hedged Derivatives 0 0 0 0 0 ( 324 ) Hedged item 0 0 0 0 ( 324 ) Hedged item 0 0 ( 324 ) Hedged item 0 0 0 0 0 324 324 ) Hedged item 0 0 0 0 0 324 Excluded ) Hedged item 0 0 0 0 0 324 Excluded from Hedged item 0 0 0 0 0 324 Excluded from effectiveness item 0 0 0 0 0 324 Excluded from effectiveness assessment 0 0 0 0 0 324 Excluded from effectiveness assessment 0 324 Excluded from effectiveness assessment 0 0 0 0 0 80 Excluded from effectiveness assessment 0 0 0 0 0 80 Designated from effectiveness assessment 0 0 0 0 0 80 Designated a effectiveness assessment 0 0 0 0 0 80 Designated a Cash assessment 0 0 0 0 0 80 Designated a Cash Flow 0 0 0 0 0 80 Designated a Cash Flow Hedging from accumulated other comprehensive income 0 0 341 0 185 0 accumulated other comprehensive income 0 0 341 0 185 0 Excluded other comprehensive income 0 0 341 0 185 0 Excluded from comprehensive income 0 0 341 0 185 0 Excluded from effectiveness income 0 0 341 0 185 0 Excluded from effectiveness assessment 0 0 341 0 185 0 Excluded from effectiveness assessment 0 0 Excluded from effectiveness assessment 0 0 ( 64 ) 0 Excluded from effectiveness assessment 0 0 ( 64 ) 0 ( effectiveness assessment 0 0 ( 64 ) 0 ( 255 ) 0 0 ( 64 ) 0 ( 255 ) 0 Not ( 64 ) 0 ( 255 ) 0 Not Designated a ) 0 ( 255 ) 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 0 ( 123 ) 0 ( Foreign exchange contract 0 ( 123 ) 0 ( 97 ) contract 0 ( 123 ) 0 ( 97 ) 0 ( ( 123 ) 0 ( 97 ) 0 ( 33 ) ) 0 ( 97 ) 0 ( 33 ) Other contract ( 97 ) 0 ( 33 ) Other contract 0 50 ( 33 ) Other contract 0 50 0 38 0 ( 33 ) Other contract 0 50 0 38 0 ( 104 ) Other contract 0 50 0 38 0 ( 104 ) Other contract 0 50 0 38 0 ( 104 ) Gains contract 0 50 0 38 0 ( 104 ) Gains ( 50 0 38 0 ( 104 ) Gains ( loss ) million ) Year Ended June 30 , 2020 2019 2018 Designated Year Ended June 30 , 2020 2019 2018 Designated a Cash Ended June 30 , 2020 2019 2018 Designated a Cash Flow June 30 , 2020 2019 2018 Designated a Cash Flow Hedging in effectiveness assessment $ ( 38 ) $ 159 $ 219 $ ( 38 ) $ 159 $ 219 NOTE 6 — 38 ) $ 159 $ 219 NOTE 6 — INVENTORIES The $ 159 $ 219 NOTE 6 — INVENTORIES The component of ( In million ) June 30 , 2020 2019 Raw material million ) June 30 , 2020 2019 Raw material $ 700 ) June 30 , 2020 2019 Raw material $ 700 $ 2020 2019 Raw material $ 700 $ 399 Work in process Raw material $ 700 $ 399 Work in process 83 53 $ 399 Work in process 83 53 Finished good 1,112 1,611 399 Work in process 83 53 Finished good 1,112 1,611 Total process 83 53 Finished good 1,112 1,611 Total $ 1,895 $ 83 53 Finished good 1,112 1,611 Total $ 1,895 $ 2,063 good 1,112 1,611 Total $ 1,895 $ 2,063 74 PART II 1,611 Total $ 1,895 $ 2,063 74 PART II Item 8 Total $ 1,895 $ 2,063 74 PART II Item 8 NOTE 2,063 74 PART II Item 8 NOTE 7 — PROPERTY AND PART II Item 8 NOTE 7 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2020 2019 Land $ million ) June 30 , 2020 2019 Land $ 1,823 $ ) June 30 , 2020 2019 Land $ 1,823 $ 1,540 , 2020 2019 Land $ 1,823 $ 1,540 Buildings and improvement 2019 Land $ 1,823 $ 1,540 Buildings and improvement 33,995 26,288 $ 1,540 Buildings and improvement 33,995 26,288 Leasehold improvement 5,487 5,316 1,540 Buildings and improvement 33,995 26,288 Leasehold improvement 5,487 5,316 Computer improvement 33,995 26,288 Leasehold improvement 5,487 5,316 Computer equipment and software 33,995 26,288 Leasehold improvement 5,487 5,316 Computer equipment and software 41,261 5,316 Computer equipment and software 41,261 33,823 Furniture and equipment 4,782 Computer equipment and software 41,261 33,823 Furniture and equipment 4,782 4,840 41,261 33,823 Furniture and equipment 4,782 4,840 Total , at cost 33,823 Furniture and equipment 4,782 4,840 Total , at cost 87,348 4,840 Total , at cost 87,348 71,807 Accumulated depreciation ( 43,197 Total , at cost 87,348 71,807 Accumulated depreciation ( 43,197 ) 87,348 71,807 Accumulated depreciation ( 43,197 ) ( 35,330 ) Total depreciation ( 43,197 ) ( 35,330 ) Total , net $ ) Total , net $ 44,151 $ 36,477 During fiscal year , net $ 44,151 $ 36,477 During fiscal year 2020 , $ 36,477 During fiscal year 2020 , 2019 , and 2018 During fiscal year 2020 , 2019 , and 2018 , depreciation 2020 , 2019 , and 2018 , depreciation expense wa $ , depreciation expense wa $ 10.7 billion , $ 9.7 billion $ 10.7 billion , $ 9.7 billion , and $ 7.7 9.7 billion , and $ 7.7 billion , respectively . We . We have committed $ 5.0 billion for the construction of leasehold improvement a of June 30 , 2020 . During fiscal a of June 30 , 2020 . During fiscal year 2020 2020 . During fiscal year 2020 , we recorded an impairment an impairment charge of $ 186 million to Property and Equipment Store physical location . NOTE 8 — BUSINESS COMBINATIONS GitHub , GitHub , Inc. On October 25 , 2018 , we acquired Inc. On October 25 , 2018 , we acquired GitHub , platform , in a $ 7.5 billion stock transaction ( inclusive total cash payment of $ 1.3 billion in respect of vested wa completed a of June 30 , 2019 . The major a of June 30 , 2019 . The major class of , and short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 Other asset 234 Goodwill 5,497 Intangible asset 1,267 Other asset 143 Other liability Intangible asset 1,267 Other asset 143 Other liability ( 217 ) asset 143 Other liability ( 217 ) Total $ 6,924 The ( 217 ) Total $ 6,924 The goodwill recognized in connection our Intelligent Cloud segment . 75 PART II Item 8 Following . 75 PART II Item 8 Following are the detail of Weighted Average Life Customer-related $ 648 8 year Technology-based 447 5 Average Life Customer-related $ 648 8 year Technology-based 447 5 year $ 648 8 year Technology-based 447 5 year Marketing-related 170 10 648 8 year Technology-based 447 5 year Marketing-related 170 10 year Technology-based 447 5 year Marketing-related 170 10 year Contract-based 2 2 447 5 year Marketing-related 170 10 year Contract-based 2 2 year Marketing-related 170 10 year Contract-based 2 2 year Total $ 1,267 170 10 year Contract-based 2 2 year Total $ 1,267 7 2 2 year Total $ 1,267 7 year Transactions recognized separately 2 year Total $ 1,267 7 year Transactions recognized separately from price allocation were approximately $ 600 million , primarily related to . Other During fiscal year 2020 , we completed 15 acquisition year 2020 , we completed 15 acquisition for $ 2.4 billion completed 15 acquisition for $ 2.4 billion , substantially all of result of operation . NOTE 9 — GOODWILL Changes in the ( In million ) June 30 , 2018 Acquisitions Other June million ) June 30 , 2018 Acquisitions Other June 30 , , 2018 Acquisitions Other June 30 , 2019 Acquisitions Other June Acquisitions Other June 30 , 2019 Acquisitions Other June 30 , , 2019 Acquisitions Other June 30 , 2020 Productivity and Business Acquisitions Other June 30 , 2020 Productivity and Business Processes $ Productivity and Business Processes $ 23,823 $ 514 $ ( 60 Business Processes $ 23,823 $ 514 $ ( 60 ) $ 23,823 $ 514 $ ( 60 ) $ 24,277 $ 7 $ ( 60 ) $ 24,277 $ 7 $ ( 94 60 ) $ 24,277 $ 7 $ ( 94 ) $ 24,277 $ 7 $ ( 94 ) $ 24,190 Intelligent Cloud $ ( 94 ) $ 24,190 Intelligent Cloud 5,703 5,605 ( ) $ 24,190 Intelligent Cloud 5,703 5,605 ( a ) 43 $ 24,190 Intelligent Cloud 5,703 5,605 ( a ) 43 ( 5,703 5,605 ( a ) 43 ( a ) 11,351 1,351 ) 43 ( a ) 11,351 1,351 ( 5 ) 12,697 43 ( a ) 11,351 1,351 ( 5 ) 12,697 More a ) 11,351 1,351 ( 5 ) 12,697 More Personal Computing 11,351 1,351 ( 5 ) 12,697 More Personal Computing 6,157 289 ) 12,697 More Personal Computing 6,157 289 ( 48 ) 6,398 12,697 More Personal Computing 6,157 289 ( 48 ) 6,398 96 Personal Computing 6,157 289 ( 48 ) 6,398 96 ( 30 6,157 289 ( 48 ) 6,398 96 ( 30 ) 6,464 289 ( 48 ) 6,398 96 ( 30 ) 6,464 Total 48 ) 6,398 96 ( 30 ) 6,464 Total $ 35,683 6,398 96 ( 30 ) 6,464 Total $ 35,683 $ 6,408 30 ) 6,464 Total $ 35,683 $ 6,408 $ ( 65 6,464 Total $ 35,683 $ 6,408 $ ( 65 ) $ 35,683 $ 6,408 $ ( 65 ) $ 42,026 $ 1,454 $ ( 65 ) $ 42,026 $ 1,454 $ ( 129 65 ) $ 42,026 $ 1,454 $ ( 129 ) $ 42,026 $ 1,454 $ ( 129 ) $ 43,351 ( a $ ( 129 ) $ 43,351 ( a ) Includes goodwill ) Includes goodwill of $ 5.5 billion related to GitHub . to GitHub . See Note 8 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2020 , May 1 in our May 1 , 2020 , May 1 , 2019 1 , 2020 , May 1 , 2019 , or May 2020 , May 1 , 2019 , or May 1 , , 2019 , or May 1 , 2018 test . As , or May 1 , 2018 test . As of June test . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , accumulated goodwill June 30 , 2020 and 2019 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . 76 PART II wa $ 11.3 billion . 76 PART II Item 8 NOTE . 76 PART II Item 8 NOTE 10 — INTANGIBLE ASSETS PART II Item 8 NOTE 10 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2020 2019 Technology-based $ Carrying Amount June 30 , 2020 2019 Technology-based $ 8,160 $ Amount June 30 , 2020 2019 Technology-based $ 8,160 $ ( , 2020 2019 Technology-based $ 8,160 $ ( 6,381 ) $ Technology-based $ 8,160 $ ( 6,381 ) $ 1,779 $ 7,691 $ ( 6,381 ) $ 1,779 $ 7,691 $ ( 5,771 6,381 ) $ 1,779 $ 7,691 $ ( 5,771 ) $ 1,779 $ 7,691 $ ( 5,771 ) $ 1,920 Customer-related 4,967 $ ( 5,771 ) $ 1,920 Customer-related 4,967 ( 2,320 ) 5,771 ) $ 1,920 Customer-related 4,967 ( 2,320 ) 2,647 4,709 $ 1,920 Customer-related 4,967 ( 2,320 ) 2,647 4,709 ( 1,785 Customer-related 4,967 ( 2,320 ) 2,647 4,709 ( 1,785 ) 2,924 4,967 ( 2,320 ) 2,647 4,709 ( 1,785 ) 2,924 Marketing-related 2,320 ) 2,647 4,709 ( 1,785 ) 2,924 Marketing-related 4,158 ( 2,647 4,709 ( 1,785 ) 2,924 Marketing-related 4,158 ( 1,588 ) ( 1,785 ) 2,924 Marketing-related 4,158 ( 1,588 ) 2,570 4,165 ) 2,924 Marketing-related 4,158 ( 1,588 ) 2,570 4,165 ( 1,327 Marketing-related 4,158 ( 1,588 ) 2,570 4,165 ( 1,327 ) 2,838 4,158 ( 1,588 ) 2,570 4,165 ( 1,327 ) 2,838 Contract-based 1,588 ) 2,570 4,165 ( 1,327 ) 2,838 Contract-based 474 ( 2,570 4,165 ( 1,327 ) 2,838 Contract-based 474 ( 432 ) ( 1,327 ) 2,838 Contract-based 474 ( 432 ) 42 574 ) 2,838 Contract-based 474 ( 432 ) 42 574 ( 506 Contract-based 474 ( 432 ) 42 574 ( 506 ) 68 474 ( 432 ) 42 574 ( 506 ) 68 Total 432 ) 42 574 ( 506 ) 68 Total $ 17,759 42 574 ( 506 ) 68 Total $ 17,759 $ ( 506 ) 68 Total $ 17,759 $ ( 10,721 ) $ Total $ 17,759 $ ( 10,721 ) $ 7,038 $ 17,139 $ ( 10,721 ) $ 7,038 $ 17,139 ( a ) 10,721 ) $ 7,038 $ 17,139 ( a ) $ ( ( a ) $ ( 9,389 ) $ 7,750 ( a $ ( 9,389 ) $ 7,750 ( a ) Includes intangible Includes intangible asset of $ 1.3 billion related to GitHub . to GitHub . See Note 8 – Business Combinations for further were identified during fiscal year 2020 , 2019 , or 2018 during fiscal year 2020 , 2019 , or 2018 . We 2020 , 2019 , or 2018 . We estimate that we Average Life Year Ended June 30 , 2020 2019 Technology-based $ Year Ended June 30 , 2020 2019 Technology-based $ 531 6 Ended June 30 , 2020 2019 Technology-based $ 531 6 year , 2020 2019 Technology-based $ 531 6 year $ 814 5 2020 2019 Technology-based $ 531 6 year $ 814 5 year $ 531 6 year $ 814 5 year Customer-related 303 5 531 6 year $ 814 5 year Customer-related 303 5 year $ 814 5 year Customer-related 303 5 year 710 8 year 814 5 year Customer-related 303 5 year 710 8 year Marketing-related year Customer-related 303 5 year 710 8 year Marketing-related 2 2 Customer-related 303 5 year 710 8 year Marketing-related 2 2 year year 710 8 year Marketing-related 2 2 year 177 10 year 710 8 year Marketing-related 2 2 year 177 10 year Contract-based year Marketing-related 2 2 year 177 10 year Contract-based 0 0 Marketing-related 2 2 year 177 10 year Contract-based 0 0 year year 177 10 year Contract-based 0 0 year 7 3 year 177 10 year Contract-based 0 0 year 7 3 year Total year Contract-based 0 0 year 7 3 year Total $ 836 Contract-based 0 0 year 7 3 year Total $ 836 5 7 3 year Total $ 836 5 year $ 1,708 7 3 year Total $ 836 5 year $ 1,708 7 year $ 836 5 year $ 1,708 7 year Intangible asset amortization 836 5 year $ 1,708 7 year Intangible asset amortization expense asset amortization expense wa $ 1.6 billion , $ 1.9 billion $ 1.6 billion , $ 1.9 billion , and $ 2.2 1.9 billion , and $ 2.2 billion for fiscal year 2020 2.2 billion for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . The following asset held a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) million ) Year Ending June 30 , 2021 $ 1,483 2022 Year Ending June 30 , 2021 $ 1,483 2022 1,399 2023 June 30 , 2021 $ 1,483 2022 1,399 2023 1,219 2024 30 , 2021 $ 1,483 2022 1,399 2023 1,219 2024 851 , 2021 $ 1,483 2022 1,399 2023 1,219 2024 851 2025 2021 $ 1,483 2022 1,399 2023 1,219 2024 851 2025 447 $ 1,483 2022 1,399 2023 1,219 2024 851 2025 447 Thereafter 1,483 2022 1,399 2023 1,219 2024 851 2025 447 Thereafter 1,639 2022 1,399 2023 1,219 2024 851 2025 447 Thereafter 1,639 Total 1,399 2023 1,219 2024 851 2025 447 Thereafter 1,639 Total $ 2023 1,219 2024 851 2025 447 Thereafter 1,639 Total $ 7,038 2024 851 2025 447 Thereafter 1,639 Total $ 7,038 77 PART 447 Thereafter 1,639 Total $ 7,038 77 PART II Item 8 Thereafter 1,639 Total $ 7,038 77 PART II Item 8 NOTE 7,038 77 PART II Item 8 NOTE 11 — DEBT The PART II Item 8 NOTE 11 — DEBT The component of Rate Effective Interest Rate June 30 , 2020 June 30 , Interest Rate June 30 , 2020 June 30 , 2019 2009 June 30 , 2020 June 30 , 2019 2009 issuance of , 2020 June 30 , 2019 2009 issuance of $ 3.8 2020 June 30 , 2019 2009 issuance of $ 3.8 billion 2019 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 559 a ) 2039 5.20 % 5.24 % $ 559 $ 750 5.20 % 5.24 % $ 559 $ 750 2010 issuance of 5.24 % $ 559 $ 750 2010 issuance of $ 4.8 % $ 559 $ 750 2010 issuance of $ 4.8 billion 750 2010 issuance of $ 4.8 billion ( a ) 2020 4.8 billion ( a ) 2020 – 2040 3.00 % – ( a ) 2020 – 2040 3.00 % – 4.50 % a ) 2020 – 2040 3.00 % – 4.50 % 3.14 – 2040 3.00 % – 4.50 % 3.14 % – 4.57 3.00 % – 4.50 % 3.14 % – 4.57 % 1,571 4.50 % 3.14 % – 4.57 % 1,571 2,000 2011 issuance 3.14 % – 4.57 % 1,571 2,000 2011 issuance of $ % – 4.57 % 1,571 2,000 2011 issuance of $ 2.3 – 4.57 % 1,571 2,000 2011 issuance of $ 2.3 billion 2,000 2011 issuance of $ 2.3 billion ( a ) 2021 2.3 billion ( a ) 2021 – 2041 4.00 % – ( a ) 2021 – 2041 4.00 % – 5.30 % a ) 2021 – 2041 4.00 % – 5.30 % 4.08 – 2041 4.00 % – 5.30 % 4.08 % – 5.36 4.00 % – 5.30 % 4.08 % – 5.36 % 1,270 5.30 % 4.08 % – 5.36 % 1,270 1,500 2012 issuance 4.08 % – 5.36 % 1,270 1,500 2012 issuance of $ % – 5.36 % 1,270 1,500 2012 issuance of $ 2.3 – 5.36 % 1,270 1,500 2012 issuance of $ 2.3 billion 1,500 2012 issuance of $ 2.3 billion 2022 – 2042 2.13 issuance of $ 2.3 billion 2022 – 2042 2.13 % – $ 2.3 billion 2022 – 2042 2.13 % – 3.50 % 2.3 billion 2022 – 2042 2.13 % – 3.50 % 2.24 – 2042 2.13 % – 3.50 % 2.24 % – 3.57 2.13 % – 3.50 % 2.24 % – 3.57 % 1,650 3.50 % 2.24 % – 3.57 % 1,650 1,650 2013 issuance 2.24 % – 3.57 % 1,650 1,650 2013 issuance of $ % – 3.57 % 1,650 1,650 2013 issuance of $ 5.2 – 3.57 % 1,650 1,650 2013 issuance of $ 5.2 billion 1,650 2013 issuance of $ 5.2 billion ( a ) 2023 5.2 billion ( a ) 2023 – 2043 2.38 % – ( a ) 2023 – 2043 2.38 % – 4.88 % a ) 2023 – 2043 2.38 % – 4.88 % 2.47 – 2043 2.38 % – 4.88 % 2.47 % – 4.92 2.38 % – 4.88 % 2.47 % – 4.92 % 2,919 4.88 % 2.47 % – 4.92 % 2,919 3,500 2013 issuance 2.47 % – 4.92 % 2,919 3,500 2013 issuance of € % – 4.92 % 2,919 3,500 2013 issuance of € 4.1 – 4.92 % 2,919 3,500 2013 issuance of € 4.1 billion 3,500 2013 issuance of € 4.1 billion 2021 – 2033 2.13 issuance of € 4.1 billion 2021 – 2033 2.13 % – € 4.1 billion 2021 – 2033 2.13 % – 3.13 % 4.1 billion 2021 – 2033 2.13 % – 3.13 % 2.23 – 2033 2.13 % – 3.13 % 2.23 % – 3.22 2.13 % – 3.13 % 2.23 % – 3.22 % 4,549 3.13 % 2.23 % – 3.22 % 4,549 4,613 2014 issuance 2.23 % – 3.22 % 4,549 4,613 2014 issuance 0 18 % – 3.22 % 4,549 4,613 2014 issuance 0 18 2015 – 3.22 % 4,549 4,613 2014 issuance 0 18 2015 issuance % 4,549 4,613 2014 issuance 0 18 2015 issuance of $ 4,549 4,613 2014 issuance 0 18 2015 issuance of $ 23.8 4,613 2014 issuance 0 18 2015 issuance of $ 23.8 billion 18 2015 issuance of $ 23.8 billion ( a ) 2020 23.8 billion ( a ) 2020 – 2055 2.00 % – ( a ) 2020 – 2055 2.00 % – 4.75 % a ) 2020 – 2055 2.00 % – 4.75 % 2.09 – 2055 2.00 % – 4.75 % 2.09 % – 4.78 2.00 % – 4.75 % 2.09 % – 4.78 % 15,549 4.75 % 2.09 % – 4.78 % 15,549 22,000 2016 issuance 2.09 % – 4.78 % 15,549 22,000 2016 issuance of $ % – 4.78 % 15,549 22,000 2016 issuance of $ 19.8 – 4.78 % 15,549 22,000 2016 issuance of $ 19.8 billion 22,000 2016 issuance of $ 19.8 billion ( a ) 2021 19.8 billion ( a ) 2021 – 2056 1.55 % – ( a ) 2021 – 2056 1.55 % – 3.95 % a ) 2021 – 2056 1.55 % – 3.95 % 1.64 – 2056 1.55 % – 3.95 % 1.64 % – 4.03 1.55 % – 3.95 % 1.64 % – 4.03 % 16,955 3.95 % 1.64 % – 4.03 % 16,955 19,750 2017 issuance 1.64 % – 4.03 % 16,955 19,750 2017 issuance of $ % – 4.03 % 16,955 19,750 2017 issuance of $ 17.0 – 4.03 % 16,955 19,750 2017 issuance of $ 17.0 billion 19,750 2017 issuance of $ 17.0 billion ( a ) 2022 17.0 billion ( a ) 2022 – 2057 2.40 % – ( a ) 2022 – 2057 2.40 % – 4.50 % a ) 2022 – 2057 2.40 % – 4.50 % 2.52 – 2057 2.40 % – 4.50 % 2.52 % – 4.53 2.40 % – 4.50 % 2.52 % – 4.53 % 12,385 4.50 % 2.52 % – 4.53 % 12,385 17,000 2020 issuance 2.52 % – 4.53 % 12,385 17,000 2020 issuance of $ % – 4.53 % 12,385 17,000 2020 issuance of $ 10.0 – 4.53 % 12,385 17,000 2020 issuance of $ 10.0 billion 17,000 2020 issuance of $ 10.0 billion ( a ) 2050 10.0 billion ( a ) 2050 – 2060 2.53 % – ( a ) 2050 – 2060 2.53 % – 2.68 % a ) 2050 – 2060 2.53 % – 2.68 % 2.53 – 2060 2.53 % – 2.68 % 2.53 % – 2.68 2.53 % – 2.68 % 2.53 % – 2.68 % 10,000 2.68 % 2.53 % – 2.68 % 10,000 0 Total face 2.53 % – 2.68 % 10,000 0 Total face value 67,407 % – 2.68 % 10,000 0 Total face value 67,407 72,781 10,000 0 Total face value 67,407 72,781 Unamortized discount and issuance 0 Total face value 67,407 72,781 Unamortized discount and issuance cost discount and issuance cost ( 554 ) ( 603 ) Hedge cost ( 554 ) ( 603 ) Hedge fair value adjustment value adjustment ( b ) 93 0 Premium on debt exchange adjustment ( b ) 93 0 Premium on debt exchange ( exchange ( a ) ( 3,619 ) 0 Total debt 63,327 a ) ( 3,619 ) 0 Total debt 63,327 72,178 Current 3,619 ) 0 Total debt 63,327 72,178 Current portion of long-term ) 0 Total debt 63,327 72,178 Current portion of long-term debt portion of long-term debt ( 3,749 ) ( 5,516 ) Long-term debt ( 3,749 ) ( 5,516 ) Long-term debt $ 59,578 5,516 ) Long-term debt $ 59,578 $ 66,662 ( a ) Long-term debt $ 59,578 $ 66,662 ( a ) In June ( a ) In June 2020 , we exchanged a portion b ) Refer to Note 5 – Derivatives for further information debt . As of June 30 , 2020 and 2019 , As of June 30 , 2020 and 2019 , the estimated June 30 , 2020 and 2019 , the estimated fair value current portion , wa $ 77.1 billion and $ 78.9 billion $ 77.1 billion and $ 78.9 billion , respectively . The value are based on Level 2 input . Debt in the portion , a of June 30 , 2020 : ( In a of June 30 , 2020 : ( In million ) million ) Year Ending June 30 , 2021 $ 3,750 2022 Year Ending June 30 , 2021 $ 3,750 2022 7,966 2023 June 30 , 2021 $ 3,750 2022 7,966 2023 2,750 2024 30 , 2021 $ 3,750 2022 7,966 2023 2,750 2024 5,250 , 2021 $ 3,750 2022 7,966 2023 2,750 2024 5,250 2025 2021 $ 3,750 2022 7,966 2023 2,750 2024 5,250 2025 2,250 $ 3,750 2022 7,966 2023 2,750 2024 5,250 2025 2,250 Thereafter 3,750 2022 7,966 2023 2,750 2024 5,250 2025 2,250 Thereafter 45,441 2022 7,966 2023 2,750 2024 5,250 2025 2,250 Thereafter 45,441 Total 7,966 2023 2,750 2024 5,250 2025 2,250 Thereafter 45,441 Total $ 2023 2,750 2024 5,250 2025 2,250 Thereafter 45,441 Total $ 67,407 2024 5,250 2025 2,250 Thereafter 45,441 Total $ 67,407 78 PART 2,250 Thereafter 45,441 Total $ 67,407 78 PART II Item 8 Thereafter 45,441 Total $ 67,407 78 PART II Item 8 NOTE 67,407 78 PART II Item 8 NOTE 12 — INCOME TAXES PART II Item 8 NOTE 12 — INCOME TAXES Tax Cuts and Jobs Act On December 22 , 2017 , the Tax Act On December 22 , 2017 , the Tax Cuts and provisional net charge of $ 13.7 billion related to the enactment the TCJA in fiscal year 2018 , and adjusted the provisional additional tax expense of $ 157 million in fiscal year 2019 157 million in fiscal year 2019 pursuant to Securities and Exchange Staff Accounting Bulletin No . 118 . In fiscal year 2019 118 . In fiscal year 2019 , in response to the property resulted in a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 , a the value of million ) Year Ended June 30 , 2020 2019 2018 Current Year Ended June 30 , 2020 2019 2018 Current Taxes U.S. Ended June 30 , 2020 2019 2018 Current Taxes U.S. federal June 30 , 2020 2019 2018 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,537 $ 4,718 $ 19,764 U.S. U.S. federal $ 3,537 $ 4,718 $ 19,764 U.S. state and $ 3,537 $ 4,718 $ 19,764 U.S. state and local 763 19,764 U.S. state and local 763 662 934 Foreign 4,444 5,531 U.S. state and local 763 662 934 Foreign 4,444 5,531 4,348 state and local 763 662 934 Foreign 4,444 5,531 4,348 Current local 763 662 934 Foreign 4,444 5,531 4,348 Current tax $ 763 662 934 Foreign 4,444 5,531 4,348 Current tax $ 8,744 662 934 Foreign 4,444 5,531 4,348 Current tax $ 8,744 $ 5,531 4,348 Current tax $ 8,744 $ 10,911 $ 25,046 Deferred Current tax $ 8,744 $ 10,911 $ 25,046 Deferred Taxes U.S. $ 8,744 $ 10,911 $ 25,046 Deferred Taxes U.S. federal $ Deferred Taxes U.S. federal $ 58 $ ( 5,647 ) $ federal $ 58 $ ( 5,647 ) $ ( 4,292 ) ( 5,647 ) $ ( 4,292 ) U.S. state and local U.S. state and local ( 6 ) ( 1,010 ) ( local ( 6 ) ( 1,010 ) ( 458 ) Foreign ) ( 1,010 ) ( 458 ) Foreign ( 41 ) ( 458 ) Foreign ( 41 ) 194 ( 393 ) ) Foreign ( 41 ) 194 ( 393 ) Deferred tax ( 41 ) 194 ( 393 ) Deferred tax $ 11 393 ) Deferred tax $ 11 $ ( 6,463 ) $ tax $ 11 $ ( 6,463 ) $ ( 5,143 ) ( 6,463 ) $ ( 5,143 ) Provision for income tax Provision for income tax $ 8,755 $ 4,448 $ 19,903 U.S. income tax $ 8,755 $ 4,448 $ 19,903 U.S. and foreign $ 8,755 $ 4,448 $ 19,903 U.S. and foreign component of million ) Year Ended June 30 , 2020 2019 2018 U.S. Year Ended June 30 , 2020 2019 2018 U.S. $ 24,116 Ended June 30 , 2020 2019 2018 U.S. $ 24,116 $ June 30 , 2020 2019 2018 U.S. $ 24,116 $ 15,799 2020 2019 2018 U.S. $ 24,116 $ 15,799 $ 11,527 Foreign 2018 U.S. $ 24,116 $ 15,799 $ 11,527 Foreign 28,920 27,889 $ 24,116 $ 15,799 $ 11,527 Foreign 28,920 27,889 24,947 Income $ 15,799 $ 11,527 Foreign 28,920 27,889 24,947 Income before income 15,799 $ 11,527 Foreign 28,920 27,889 24,947 Income before income tax $ 11,527 Foreign 28,920 27,889 24,947 Income before income tax $ Income before income tax $ 53,036 $ 43,688 $ 36,474 79 income tax $ 53,036 $ 43,688 $ 36,474 79 PART II $ 53,036 $ 43,688 $ 36,474 79 PART II Item 8 53,036 $ 43,688 $ 36,474 79 PART II Item 8 Effective 36,474 79 PART II Item 8 Effective Tax Rate The item follows : Year Ended June 30 , 2020 2019 2018 Federal Year Ended June 30 , 2020 2019 2018 Federal statutory rate Ended June 30 , 2020 2019 2018 Federal statutory rate 21.0 June 30 , 2020 2019 2018 Federal statutory rate 21.0 % 2019 2018 Federal statutory rate 21.0 % 21.0 % 28.1 % Federal statutory rate 21.0 % 21.0 % 28.1 % Effect of rate 21.0 % 21.0 % 28.1 % Effect of : Foreign taxed at lower rate ( 3.7 ) % ( 4.1 ) ( 3.7 ) % ( 4.1 ) % ( 7.8 ) ( 4.1 ) % ( 7.8 ) % Impact of the the enactment of the TCJA 0 % 0.4 % 37.7 % of the TCJA 0 % 0.4 % 37.7 % Impact of TCJA 0 % 0.4 % 37.7 % Impact of intangible property Impact of intangible property transfer 0 % ( 5.9 ) % property transfer 0 % ( 5.9 ) % 0 % Foreign-derived % ( 5.9 ) % 0 % Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 1.1 ) % ( 1.4 ) ( 1.1 ) % ( 1.4 ) % 0 % State % ( 1.4 ) % 0 % State income tax , , net of federal benefit 1.3 % 0.7 % 1.3 % of federal benefit 1.3 % 0.7 % 1.3 % Research and benefit 1.3 % 0.7 % 1.3 % Research and development credit Research and development credit ( 1.1 ) % ( 1.1 ) ( 1.1 ) % ( 1.1 ) % ( 1.3 ) ( 1.1 ) % ( 1.3 ) % Excess tax benefit relating to stock-based compensation ( 2.2 ) % ( 2.2 ) ( 2.2 ) % ( 2.2 ) % ( 2.5 ) ( 2.2 ) % ( 2.5 ) % Interest , net ) % Interest , net 1.0 % 1.0 % 1.2 % Interest , net 1.0 % 1.0 % 1.2 % Other reconciling net 1.0 % 1.0 % 1.2 % Other reconciling item , Other reconciling item , net 1.3 % 1.8 % ( 2.1 item , net 1.3 % 1.8 % ( 2.1 ) % 1.3 % 1.8 % ( 2.1 ) % Effective rate 16.5 2.1 ) % Effective rate 16.5 % 10.2 % 54.6 % % Effective rate 16.5 % 10.2 % 54.6 % The decrease rate 16.5 % 10.2 % 54.6 % The decrease from the statutory rate in fiscal year 2020 is primarily due to earnings statutory rate in fiscal year 2019 is primarily due to a primarily due to a $ 2.6 billion net income tax benefit statutory rate in fiscal year 2018 is primarily due to the second quarter of fiscal year 2018 , offset in part by jurisdiction . In fiscal year 2020 , our foreign regional operating the U.S. rate , generated 86 % of our foreign income tax . In fiscal year 2019 and 2018 , our foreign In fiscal year 2019 and 2018 , our foreign regional operating the U.S. rate , generated 82 % and 87 % of , generated 82 % and 87 % of our foreign income tax . In fiscal year 2020 , 2019 , and 2018 In fiscal year 2020 , 2019 , and 2018 , there 2020 , 2019 , and 2018 , there were no individually tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer tax rate for fiscal year 2019 compared to fiscal year 2018 2019 compared to fiscal year 2018 wa primarily due to the second quarter of fiscal year 2018 , and a $ 2.6 2018 , and a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer to intangible property transfer . 80 PART II Item 8 The . 80 PART II Item 8 The component of the deferred ( In million ) June 30 , 2020 2019 Deferred Income million ) June 30 , 2020 2019 Deferred Income Tax Assets ) June 30 , 2020 2019 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 461 $ 406 Accruals , reserve compensation expense $ 461 $ 406 Accruals , reserve , and reserve , and other expense 2,721 2,287 Loss and credit carryforwards , and other expense 2,721 2,287 Loss and credit carryforwards 865 2,287 Loss and credit carryforwards 865 3,518 Depreciation and amortization 6,361 Loss and credit carryforwards 865 3,518 Depreciation and amortization 6,361 7,046 865 3,518 Depreciation and amortization 6,361 7,046 Leasing liability 3,025 1,594 3,518 Depreciation and amortization 6,361 7,046 Leasing liability 3,025 1,594 Unearned amortization 6,361 7,046 Leasing liability 3,025 1,594 Unearned revenue 1,553 475 6,361 7,046 Leasing liability 3,025 1,594 Unearned revenue 1,553 475 Other liability 3,025 1,594 Unearned revenue 1,553 475 Other 354 367 Deferred 3,025 1,594 Unearned revenue 1,553 475 Other 354 367 Deferred income Unearned revenue 1,553 475 Other 354 367 Deferred income tax asset revenue 1,553 475 Other 354 367 Deferred income tax asset 15,340 367 Deferred income tax asset 15,340 15,693 Less valuation allowance ( Deferred income tax asset 15,340 15,693 Less valuation allowance ( 755 15,693 Less valuation allowance ( 755 ) ( 3,214 ) Deferred allowance ( 755 ) ( 3,214 ) Deferred income tax asset net of valuation allowance $ 14,585 $ 12,479 Deferred Income Tax valuation allowance $ 14,585 $ 12,479 Deferred Income Tax Liabilities Book/tax investment and debt $ ( 2,642 ) $ ( 738 ) ( 2,642 ) $ ( 738 ) Unearned revenue 0 ( ( 738 ) Unearned revenue 0 ( 30 ) Leasing asset ) Unearned revenue 0 ( 30 ) Leasing asset ( 2,817 30 ) Leasing asset ( 2,817 ) ( 1,510 ) Deferred asset ( 2,817 ) ( 1,510 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,581 ) ( 2,607 ) Other liability ( 2,581 ) ( 2,607 ) Other ( 344 ) ( 2,607 ) Other ( 344 ) ( 291 ) Deferred Other ( 344 ) ( 291 ) Deferred income tax liability income tax liability $ ( 8,384 ) $ ( 5,176 ) ( 8,384 ) $ ( 5,176 ) Net deferred income tax deferred income tax asset $ 6,201 $ 7,303 Reported As Other tax asset $ 6,201 $ 7,303 Reported As Other long-term asset As Other long-term asset $ 6,405 $ 7,536 Long-term deferred income long-term asset $ 6,405 $ 7,536 Long-term deferred income tax liability deferred income tax liability ( 204 ) ( 233 ) Net liability ( 204 ) ( 233 ) Net deferred income tax deferred income tax asset $ 6,201 $ 7,303 Deferred income tax tax asset $ 6,201 $ 7,303 Deferred income tax balance reflect recovered . As of June 30 , 2020 , we had As of June 30 , 2020 , we had federal , operating loss carryforwards of $ 547 million , $ 975 million $ 547 million , $ 975 million , and $ 2.0 975 million , and $ 2.0 billion , respectively . The in various year from fiscal 2021 through 2040 , if not year from fiscal 2021 through 2040 , if not utilized . realized . In fiscal year 2020 , we removed $ 2.0 2020 , we removed $ 2.0 billion of foreign net operating of refund , were $ 12.5 billion , $ 8.4 billion $ 12.5 billion , $ 8.4 billion , and $ 5.5 8.4 billion , and $ 5.5 billion in fiscal year 2020 5.5 billion in fiscal year 2020 , 2019 , and 2018 in fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . Uncertain Tax tax position a of June 30 , 2020 , 2019 , a of June 30 , 2020 , 2019 , and 2018 June 30 , 2020 , 2019 , and 2018 , were 2020 , 2019 , and 2018 , were $ 13.8 billion and 2018 , were $ 13.8 billion , $ 13.1 billion $ 13.8 billion , $ 13.1 billion , and $ 12.0 13.1 billion , and $ 12.0 billion , respectively , which tax rate for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 by $ 2020 , 2019 , and 2018 by $ 12.1 billion , , and 2018 by $ 12.1 billion , $ 12.0 billion $ 12.1 billion , $ 12.0 billion , and $ 11.3 12.0 billion , and $ 11.3 billion , respectively . 81 11.3 billion , respectively . 81 PART II Item 8 As . 81 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2020 , 2019 , As of June 30 , 2020 , 2019 , and 2018 June 30 , 2020 , 2019 , and 2018 , we 2020 , 2019 , and 2018 , we had accrued interest uncertain tax position of $ 4.0 billion , $ 3.4 billion $ 4.0 billion , $ 3.4 billion , and $ 3.0 3.4 billion , and $ 3.0 billion , respectively , net income tax for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 included interest 2020 , 2019 , and 2018 included interest expense related to uncertain tax position of $ 579 million , $ 515 million $ 579 million , $ 515 million , and $ 688 515 million , and $ 688 million , respectively , net million ) Year Ended June 30 , 2020 2019 2018 Beginning Year Ended June 30 , 2020 2019 2018 Beginning unrecognized tax Ended June 30 , 2020 2019 2018 Beginning unrecognized tax benefit June 30 , 2020 2019 2018 Beginning unrecognized tax benefit $ Beginning unrecognized tax benefit $ 13,146 $ 11,961 $ 11,737 Decreases tax benefit $ 13,146 $ 11,961 $ 11,737 Decreases related to $ 13,146 $ 11,961 $ 11,737 Decreases related to settlement ( Decreases related to settlement ( 31 ) ( 316 ) ( settlement ( 31 ) ( 316 ) ( 193 ) Increases ) ( 316 ) ( 193 ) Increases for tax position related to the current year 647 2,106 1,445 Increases for tax to the current year 647 2,106 1,445 Increases for tax position the current year 647 2,106 1,445 Increases for tax position related position related to prior year 366 508 151 Decreases for tax related to prior year 366 508 151 Decreases for tax position to prior year 366 508 151 Decreases for tax position related related to prior year ( 331 ) ( 1,113 ) ( year ( 331 ) ( 1,113 ) ( 1,176 ) Decreases ) ( 1,113 ) ( 1,176 ) Decreases due to lapsed lapsed statute of limitation ( 5 ) 0 ( 3 ) of limitation ( 5 ) 0 ( 3 ) Ending unrecognized ( 5 ) 0 ( 3 ) Ending unrecognized tax benefit Ending unrecognized tax benefit $ 13,792 $ 13,146 $ 11,961 We tax benefit $ 13,792 $ 13,146 $ 11,961 We settled a $ 13,792 $ 13,146 $ 11,961 We settled a portion of ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . We remain under audit under audit for tax year 2004 to 2013 . In April for tax year 2004 to 2013 . In April 2020 , to 2013 . In April 2020 , the IRS commenced the the audit for tax year 2014 to 2017 . As of for tax year 2014 to 2017 . As of June 30 2017 . As of June 30 , 2020 , the primary As of June 30 , 2020 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2019 , some of for tax year 1996 to 2019 , some of which are consolidated financial statement . NOTE 13 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2020 2019 Productivity and million ) June 30 , 2020 2019 Productivity and Business Processes ) June 30 , 2020 2019 Productivity and Business Processes $ Productivity and Business Processes $ 18,643 $ 16,831 Intelligent Cloud 16,620 Business Processes $ 18,643 $ 16,831 Intelligent Cloud 16,620 16,988 More 18,643 $ 16,831 Intelligent Cloud 16,620 16,988 More Personal Computing 3,917 $ 16,831 Intelligent Cloud 16,620 16,988 More Personal Computing 3,917 3,387 16,620 16,988 More Personal Computing 3,917 3,387 Total $ 39,180 $ 16,988 More Personal Computing 3,917 3,387 Total $ 39,180 $ 37,206 Computing 3,917 3,387 Total $ 39,180 $ 37,206 Changes in unearned 3,387 Total $ 39,180 $ 37,206 Changes in unearned revenue were million ) Year Ended June 30 , 2020 Balance , beginning Year Ended June 30 , 2020 Balance , beginning of period , beginning of period $ 37,206 Deferral of revenue 78,922 Recognition $ 37,206 Deferral of revenue 78,922 Recognition of unearned revenue ( Recognition of unearned revenue ( 76,948 ) Balance , end of , end of period $ 39,180 82 PART II Item 8 end of period $ 39,180 82 PART II Item 8 Revenue 39,180 82 PART II Item 8 Revenue allocated to remaining performance future period , wa $ 111 billion a of June 30 111 billion a of June 30 , 2020 , of which a of June 30 , 2020 , of which $ 107 2020 , of which $ 107 billion is related to the We expect to recognize approximately 50 % of this revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 — LEASES We have operating have remaining lease term of 1 year to 20 year , term of 1 year to 20 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2020 2019 2018 Operating Year Ended June 30 , 2020 2019 2018 Operating lease cost Ended June 30 , 2020 2019 2018 Operating lease cost $ June 30 , 2020 2019 2018 Operating lease cost $ 2,043 2018 Operating lease cost $ 2,043 $ 1,707 $ 1,585 Finance lease cost $ 2,043 $ 1,707 $ 1,585 Finance lease cost $ 2,043 $ 1,707 $ 1,585 Finance lease cost : Amortization Amortization of right-of-use asset $ 611 $ 370 $ 243 Interest right-of-use asset $ 611 $ 370 $ 243 Interest on lease $ 611 $ 370 $ 243 Interest on lease liability 336 243 Interest on lease liability 336 247 175 Total finance lease Interest on lease liability 336 247 175 Total finance lease cost on lease liability 336 247 175 Total finance lease cost $ Total finance lease cost $ 947 $ 617 $ 418 Supplemental lease cost $ 947 $ 617 $ 418 Supplemental cash flow $ 947 $ 617 $ 418 Supplemental cash flow information related million ) Year Ended June 30 , 2020 2019 2018 Cash Year Ended June 30 , 2020 2019 2018 Cash paid for Ended June 30 , 2020 2019 2018 Cash paid for amount June 30 , 2020 2019 2018 Cash paid for amount included flow from operating lease $ 1,829 $ 1,670 $ 1,522 Operating operating lease $ 1,829 $ 1,670 $ 1,522 Operating cash flow $ 1,829 $ 1,670 $ 1,522 Operating cash flow from finance cash flow from finance lease 336 247 175 Financing cash flow flow from finance lease 336 247 175 Financing cash flow from from finance lease 336 247 175 Financing cash flow from finance cash flow from finance lease 409 221 144 Right-of-use asset obtained flow from finance lease 409 221 144 Right-of-use asset obtained in from finance lease 409 221 144 Right-of-use asset obtained in exchange lease obligation : Operating lease 3,677 2,303 1,571 Finance lease 3,467 obligation : Operating lease 3,677 2,303 1,571 Finance lease 3,467 2,532 : Operating lease 3,677 2,303 1,571 Finance lease 3,467 2,532 1,933 3,677 2,303 1,571 Finance lease 3,467 2,532 1,933 83 PART II 2,303 1,571 Finance lease 3,467 2,532 1,933 83 PART II Item 1,571 Finance lease 3,467 2,532 1,933 83 PART II Item 8 Finance lease 3,467 2,532 1,933 83 PART II Item 8 Supplemental 1,933 83 PART II Item 8 Supplemental balance sheet information related and discount rate ) June 30 , 2020 2019 Operating Leases rate ) June 30 , 2020 2019 Operating Leases Operating lease ) June 30 , 2020 2019 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 8,753 $ 7,379 Other current liability right-of-use asset $ 8,753 $ 7,379 Other current liability $ 1,616 7,379 Other current liability $ 1,616 $ 1,515 Operating lease liability current liability $ 1,616 $ 1,515 Operating lease liability 7,671 6,188 $ 1,515 Operating lease liability 7,671 6,188 Total operating lease liability 1,515 Operating lease liability 7,671 6,188 Total operating lease liability $ Total operating lease liability $ 9,287 $ 7,703 Finance Leases Property lease liability $ 9,287 $ 7,703 Finance Leases Property and equipment equipment , at cost $ 10,371 $ 7,041 Accumulated depreciation ( at cost $ 10,371 $ 7,041 Accumulated depreciation ( 1,385 ) $ 7,041 Accumulated depreciation ( 1,385 ) ( 774 ) Property depreciation ( 1,385 ) ( 774 ) Property and equipment , and equipment , net $ 8,986 $ 6,267 Other current liability , net $ 8,986 $ 6,267 Other current liability $ 540 6,267 Other current liability $ 540 $ 317 Other long-term liability current liability $ 540 $ 317 Other long-term liability 8,956 6,257 $ 317 Other long-term liability 8,956 6,257 Total finance lease liability 317 Other long-term liability 8,956 6,257 Total finance lease liability $ Total finance lease liability $ 9,496 $ 6,574 Weighted Average Remaining lease liability $ 9,496 $ 6,574 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 8 year 7 year Finance lease Term Operating lease 8 year 7 year Finance lease 13 year year 7 year Finance lease 13 year 13 year Weighted Average year Finance lease 13 year 13 year Weighted Average Discount Rate Average Discount Rate Operating lease 2.7 % 3.0 % Finance lease Rate Operating lease 2.7 % 3.0 % Finance lease 3.9 % % 3.0 % Finance lease 3.9 % 4.6 % Maturities of % Finance lease 3.9 % 4.6 % Maturities of lease liability million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2021 $ 1,807 $ 880 2022 Leases Finance Leases 2021 $ 1,807 $ 880 2022 1,652 894 Leases 2021 $ 1,807 $ 880 2022 1,652 894 2023 1,474 2021 $ 1,807 $ 880 2022 1,652 894 2023 1,474 903 $ 1,807 $ 880 2022 1,652 894 2023 1,474 903 2024 1,807 $ 880 2022 1,652 894 2023 1,474 903 2024 1,262 $ 880 2022 1,652 894 2023 1,474 903 2024 1,262 916 880 2022 1,652 894 2023 1,474 903 2024 1,262 916 2025 2022 1,652 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,652 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total lease 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total lease payment 10,317 2025 1,000 1,236 Thereafter 3,122 7,194 Total lease payment 10,317 12,023 3,122 7,194 Total lease payment 10,317 12,023 Less imputed interest ( 7,194 Total lease payment 10,317 12,023 Less imputed interest ( 1,030 12,023 Less imputed interest ( 1,030 ) ( 2,527 ) Total interest ( 1,030 ) ( 2,527 ) Total $ 9,287 $ ( 2,527 ) Total $ 9,287 $ 9,496 As of June ) Total $ 9,287 $ 9,496 As of June 30 , $ 9,496 As of June 30 , 2020 , we have As of June 30 , 2020 , we have additional operating not yet commenced of $ 3.4 billion and $ 3.5 billion $ 3.4 billion and $ 3.5 billion , respectively . These will commence between fiscal year 2021 and fiscal year 2023 with year 2021 and fiscal year 2023 with lease term of 1 2023 with lease term of 1 year to 16 year . term of 1 year to 16 year . During fiscal year year . During fiscal year 2020 , we recorded an impairment an impairment charge of $ 161 million to operating lease right-of-use Microsoft Store physical location . 84 PART II Item 8 NOTE . 84 PART II Item 8 NOTE 15 — CONTINGENCIES Patent PART II Item 8 NOTE 15 — CONTINGENCIES Patent and Intellectual Intellectual Property Claims There were 64 patent infringement case pending against against Microsoft a of June 30 , 2020 , none of a of June 30 , 2020 , none of which are and/or productivity application software between 1998 and 2010 . The trial application software between 1998 and 2010 . The trial of the Columbia action commenced in May 2016 . Following a mediation , and Commerce Investigatio n In 2014 , Microsoft wa informed that , is a defendant in 40 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted scientific evidence . In October 2016 , the Court of Appeals to strike . In August 2018 , the trial court issued second quarter of fiscal year 2021 . 85 PART II Item of fiscal year 2021 . 85 PART II Item 8 Other . 85 PART II Item 8 Other Contingencies We also are future . As of June 30 , 2020 , we accrued As of June 30 , 2020 , we accrued aggregate legal aggregate legal liability of $ 306 million . While we intend estimate could reach approximately $ 500 million in aggregate beyond recorded become reasonably estimable . NOTE 16 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2020 2019 2018 Balance Year Ended June 30 , 2020 2019 2018 Balance , beginning Ended June 30 , 2020 2019 2018 Balance , beginning of June 30 , 2020 2019 2018 Balance , beginning of year Balance , beginning of year 7,643 7,677 7,708 Issued 54 116 , beginning of year 7,643 7,677 7,708 Issued 54 116 68 beginning of year 7,643 7,677 7,708 Issued 54 116 68 Repurchased year 7,643 7,677 7,708 Issued 54 116 68 Repurchased ( 126 7,643 7,677 7,708 Issued 54 116 68 Repurchased ( 126 ) 7,677 7,708 Issued 54 116 68 Repurchased ( 126 ) ( 54 116 68 Repurchased ( 126 ) ( 150 ) ( Repurchased ( 126 ) ( 150 ) ( 99 ) Balance ) ( 150 ) ( 99 ) Balance , end of Balance , end of year 7,571 7,643 7,677 Share Repurchases On , end of year 7,571 7,643 7,677 Share Repurchases On September end of year 7,571 7,643 7,677 Share Repurchases On September 20 7,677 Share Repurchases On September 20 , 2016 , our Board Repurchases On September 20 , 2016 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 , following completion of the the program approved on September 20 , 2016 , ha no approved on September 20 , 2016 , ha no expiration date time . As of June 30 , 2020 , $ 31.7 As of June 30 , 2020 , $ 31.7 billion remained 30 , 2020 , $ 31.7 billion remained of this $ billion remained of this $ 40.0 billion share repurchase program . billion share repurchase program . 86 PART II Item 8 We . 86 PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2020 2019 2018 First Year Ended June 30 , 2020 2019 2018 First Quarter 29 Ended June 30 , 2020 2019 2018 First Quarter 29 $ June 30 , 2020 2019 2018 First Quarter 29 $ 4,000 2020 2019 2018 First Quarter 29 $ 4,000 24 $ 2,600 2018 First Quarter 29 $ 4,000 24 $ 2,600 22 $ First Quarter 29 $ 4,000 24 $ 2,600 22 $ 1,600 29 $ 4,000 24 $ 2,600 22 $ 1,600 Second Quarter $ 4,000 24 $ 2,600 22 $ 1,600 Second Quarter 32 24 $ 2,600 22 $ 1,600 Second Quarter 32 4,600 57 22 $ 1,600 Second Quarter 32 4,600 57 6,100 22 1,800 $ 1,600 Second Quarter 32 4,600 57 6,100 22 1,800 Third 1,600 Second Quarter 32 4,600 57 6,100 22 1,800 Third Quarter Second Quarter 32 4,600 57 6,100 22 1,800 Third Quarter 37 Quarter 32 4,600 57 6,100 22 1,800 Third Quarter 37 6,000 32 4,600 57 6,100 22 1,800 Third Quarter 37 6,000 36 6,100 22 1,800 Third Quarter 37 6,000 36 3,899 34 3,100 22 1,800 Third Quarter 37 6,000 36 3,899 34 3,100 Fourth 1,800 Third Quarter 37 6,000 36 3,899 34 3,100 Fourth Quarter Third Quarter 37 6,000 36 3,899 34 3,100 Fourth Quarter 28 Quarter 37 6,000 36 3,899 34 3,100 Fourth Quarter 28 5,088 37 6,000 36 3,899 34 3,100 Fourth Quarter 28 5,088 33 3,899 34 3,100 Fourth Quarter 28 5,088 33 4,200 21 2,100 34 3,100 Fourth Quarter 28 5,088 33 4,200 21 2,100 Total 3,100 Fourth Quarter 28 5,088 33 4,200 21 2,100 Total 126 Fourth Quarter 28 5,088 33 4,200 21 2,100 Total 126 $ Quarter 28 5,088 33 4,200 21 2,100 Total 126 $ 19,688 28 5,088 33 4,200 21 2,100 Total 126 $ 19,688 150 33 4,200 21 2,100 Total 126 $ 19,688 150 $ 16,799 21 2,100 Total 126 $ 19,688 150 $ 16,799 99 $ 2,100 Total 126 $ 19,688 150 $ 16,799 99 $ 8,600 126 $ 19,688 150 $ 16,799 99 $ 8,600 Shares repurchased $ 19,688 150 $ 16,799 99 $ 8,600 Shares repurchased during 150 $ 16,799 99 $ 8,600 Shares repurchased during the fourth fourth quarter of fiscal year 2020 were under the share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on September 20 , 2016 . The above table excludes of stock award of $ 3.3 billion , $ 2.7 billion $ 3.3 billion , $ 2.7 billion , and $ 2.1 2.7 billion , and $ 2.1 billion for fiscal year 2020 2.1 billion for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . All share Per Share Amount Fiscal Year 2020 ( In million ) September ( In million ) September 18 , 2019 November 21 , million ) September 18 , 2019 November 21 , 2019 December September 18 , 2019 November 21 , 2019 December 12 , , 2019 November 21 , 2019 December 12 , 2019 $ November 21 , 2019 December 12 , 2019 $ 0.51 $ , 2019 December 12 , 2019 $ 0.51 $ 3,886 December December 12 , 2019 $ 0.51 $ 3,886 December 4 , , 2019 $ 0.51 $ 3,886 December 4 , 2019 February $ 0.51 $ 3,886 December 4 , 2019 February 20 , $ 3,886 December 4 , 2019 February 20 , 2020 March December 4 , 2019 February 20 , 2020 March 12 , , 2019 February 20 , 2020 March 12 , 2020 0.51 February 20 , 2020 March 12 , 2020 0.51 3,876 March , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 May , 2020 0.51 3,876 March 9 , 2020 May 21 , 0.51 3,876 March 9 , 2020 May 21 , 2020 June March 9 , 2020 May 21 , 2020 June 11 , , 2020 May 21 , 2020 June 11 , 2020 0.51 May 21 , 2020 June 11 , 2020 0.51 3,865 June , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 August , 2020 0.51 3,865 June 17 , 2020 August 20 , 0.51 3,865 June 17 , 2020 August 20 , 2020 September June 17 , 2020 August 20 , 2020 September 10 , , 2020 August 20 , 2020 September 10 , 2020 0.51 August 20 , 2020 September 10 , 2020 0.51 3,861 Total , 2020 September 10 , 2020 0.51 3,861 Total $ 2.04 2020 September 10 , 2020 0.51 3,861 Total $ 2.04 $ September 10 , 2020 0.51 3,861 Total $ 2.04 $ 15,488 2020 0.51 3,861 Total $ 2.04 $ 15,488 Fiscal Year 2019 3,861 Total $ 2.04 $ 15,488 Fiscal Year 2019 September 18 2.04 $ 15,488 Fiscal Year 2019 September 18 , 2018 November 15,488 Fiscal Year 2019 September 18 , 2018 November 15 , Year 2019 September 18 , 2018 November 15 , 2018 December September 18 , 2018 November 15 , 2018 December 13 , , 2018 November 15 , 2018 December 13 , 2018 $ November 15 , 2018 December 13 , 2018 $ 0.46 $ , 2018 December 13 , 2018 $ 0.46 $ 3,544 November December 13 , 2018 $ 0.46 $ 3,544 November 28 , , 2018 $ 0.46 $ 3,544 November 28 , 2018 February $ 0.46 $ 3,544 November 28 , 2018 February 21 , $ 3,544 November 28 , 2018 February 21 , 2019 March November 28 , 2018 February 21 , 2019 March 14 , , 2018 February 21 , 2019 March 14 , 2019 0.46 February 21 , 2019 March 14 , 2019 0.46 3,526 March , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 March 14 , 2019 0.46 3,526 March 11 , 2019 May , 2019 0.46 3,526 March 11 , 2019 May 16 , 0.46 3,526 March 11 , 2019 May 16 , 2019 June March 11 , 2019 May 16 , 2019 June 13 , , 2019 May 16 , 2019 June 13 , 2019 0.46 May 16 , 2019 June 13 , 2019 0.46 3,521 June , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 June 13 , 2019 0.46 3,521 June 12 , 2019 August , 2019 0.46 3,521 June 12 , 2019 August 15 , 0.46 3,521 June 12 , 2019 August 15 , 2019 September June 12 , 2019 August 15 , 2019 September 12 , , 2019 August 15 , 2019 September 12 , 2019 0.46 August 15 , 2019 September 12 , 2019 0.46 3,510 Total , 2019 September 12 , 2019 0.46 3,510 Total $ 1.84 2019 September 12 , 2019 0.46 3,510 Total $ 1.84 $ September 12 , 2019 0.46 3,510 Total $ 1.84 $ 14,101 2019 0.46 3,510 Total $ 1.84 $ 14,101 The dividend declared 3,510 Total $ 1.84 $ 14,101 The dividend declared on June The dividend declared on June 17 , 2020 wa included in declared on June 17 , 2020 wa included in other current current liability a of June 30 , 2020 . 87 PART a of June 30 , 2020 . 87 PART II Item June 30 , 2020 . 87 PART II Item 8 NOTE . 87 PART II Item 8 NOTE 17 — ACCUMULATED OTHER PART II Item 8 NOTE 17 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2020 2019 2018 Derivatives Year Ended June 30 , 2020 2019 2018 Derivatives Balance , Ended June 30 , 2020 2019 2018 Derivatives Balance , beginning June 30 , 2020 2019 2018 Derivatives Balance , beginning of , beginning of period $ 0 $ 173 $ 134 Unrealized of period $ 0 $ 173 $ 134 Unrealized gain ( $ 0 $ 173 $ 134 Unrealized gain ( loss ) of tax of $ ( 10 ) , $ 2 , ( 10 ) , $ 2 , and $ 11 ( $ 2 , and $ 11 ( 38 ) 160 218 , and $ 11 ( 38 ) 160 218 Reclassification adjustment $ 11 ( 38 ) 160 218 Reclassification adjustment for gain 11 ( 38 ) 160 218 Reclassification adjustment for gain included for gain included in revenue 0 ( 341 ) ( 185 included in revenue 0 ( 341 ) ( 185 ) Tax 0 ( 341 ) ( 185 ) Tax expense included in in provision for income tax 0 8 6 Amounts reclassified from provision for income tax 0 8 6 Amounts reclassified from accumulated for income tax 0 8 6 Amounts reclassified from accumulated other comprehensive income ( loss ) 0 ( 333 ) ( 179 ( loss ) 0 ( 333 ) ( 179 ) Net 0 ( 333 ) ( 179 ) Net change related to of tax of $ ( 10 ) , $ ( 6 10 ) , $ ( 6 ) , and $ 5 6 ) , and $ 5 ( 38 ) ( 173 , and $ 5 ( 38 ) ( 173 ) 39 5 ( 38 ) ( 173 ) 39 Balance , end 38 ) ( 173 ) 39 Balance , end of period end of period $ ( 38 ) $ 0 $ 173 $ ( 38 ) $ 0 $ 173 Investments Balance , 38 ) $ 0 $ 173 Investments Balance , beginning of , beginning of period $ 1,488 $ ( 850 ) $ period $ 1,488 $ ( 850 ) $ 1,825 Unrealized gain $ ( 850 ) $ 1,825 Unrealized gain ( loss ) net of tax of $ 1,057 , $ 616 , and of $ 1,057 , $ 616 , and $ ( 427 616 , and $ ( 427 ) 3,987 2,331 ( 1,146 and $ ( 427 ) 3,987 2,331 ( 1,146 ) Reclassification $ ( 427 ) 3,987 2,331 ( 1,146 ) Reclassification adjustment 427 ) 3,987 2,331 ( 1,146 ) Reclassification adjustment for ( ( expense ) , net 4 93 ( 2,309 ) Tax expense ) , net 4 93 ( 2,309 ) Tax expense , net 4 93 ( 2,309 ) Tax expense ( benefit provision for income tax ( 1 ) ( 19 ) 738 tax ( 1 ) ( 19 ) 738 Amounts reclassified from 1 ) ( 19 ) 738 Amounts reclassified from accumulated other comprehensive income ( loss ) 3 74 ( 1,571 ) Net income ( loss ) 3 74 ( 1,571 ) Net change loss ) 3 74 ( 1,571 ) Net change related to net of tax of $ 1,058 , $ 635 , and of $ 1,058 , $ 635 , and $ ( 1,165 635 , and $ ( 1,165 ) 3,990 2,405 ( 2,717 and $ ( 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative $ ( 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative effect 1,165 ) 3,990 2,405 ( 2,717 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 67 ) 42 Balance of accounting change 0 ( 67 ) 42 Balance , end change 0 ( 67 ) 42 Balance , end of period , end of period $ 5,478 $ 1,488 $ ( 850 of period $ 5,478 $ 1,488 $ ( 850 ) Translation 5,478 $ 1,488 $ ( 850 ) Translation Adjustments and Other beginning of period $ ( 1,828 ) $ ( 1,510 ) ( 1,828 ) $ ( 1,510 ) $ ( 1,332 ) ( 1,510 ) $ ( 1,332 ) Translation adjustment and other of tax effect of $ 1 , $ ( 1 ) $ 1 , $ ( 1 ) , and $ 0 1 ) , and $ 0 ( 426 ) ( 318 , and $ 0 ( 426 ) ( 318 ) ( 0 ( 426 ) ( 318 ) ( 178 ) Balance ) ( 318 ) ( 178 ) Balance , end of end of period $ ( 2,254 ) $ ( 1,828 ) ( 2,254 ) $ ( 1,828 ) $ ( 1,510 ) ( 1,828 ) $ ( 1,510 ) Accumulated other comprehensive income , end of period $ 3,186 $ ( 340 ) $ period $ 3,186 $ ( 340 ) $ ( 2,187 ) ( 340 ) $ ( 2,187 ) NOTE 18 — EMPLOYEE $ ( 2,187 ) NOTE 18 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2020 , an aggregate As of June 30 , 2020 , an aggregate of 283 2020 , an aggregate of 283 million share were authorized for million ) Year Ended June 30 , 2020 2019 2018 Stock-based Year Ended June 30 , 2020 2019 2018 Stock-based compensation expense Ended June 30 , 2020 2019 2018 Stock-based compensation expense $ June 30 , 2020 2019 2018 Stock-based compensation expense $ 5,289 2018 Stock-based compensation expense $ 5,289 $ 4,652 $ 3,940 Income compensation expense $ 5,289 $ 4,652 $ 3,940 Income tax benefit $ 5,289 $ 4,652 $ 3,940 Income tax benefit related to benefit related to stock-based compensation 938 816 823 Stock Plans Stock related to stock-based compensation 938 816 823 Stock Plans Stock award to stock-based compensation 938 816 823 Stock Plans Stock award entitle year or five year . 88 PART II Item 8 Executive . 88 PART II Item 8 Executive Incentive Plan Under the assumption : Year ended June 30 , 2020 2019 2018 Dividends Year ended June 30 , 2020 2019 2018 Dividends per share ended June 30 , 2020 2019 2018 Dividends per share ( June 30 , 2020 2019 2018 Dividends per share ( quarterly ( quarterly amount ) $ 0.46 – 0.51 $ 0.42 – amount ) $ 0.46 – 0.51 $ 0.42 – 0.46 $ $ 0.46 – 0.51 $ 0.42 – 0.46 $ 0.39 – – 0.51 $ 0.42 – 0.46 $ 0.39 – 0.42 Interest $ 0.42 – 0.46 $ 0.39 – 0.42 Interest rate 0.1 – 0.46 $ 0.39 – 0.42 Interest rate 0.1 % – 0.39 – 0.42 Interest rate 0.1 % – 2.2 % 1.8 Interest rate 0.1 % – 2.2 % 1.8 % – 3.1 0.1 % – 2.2 % 1.8 % – 3.1 % 1.7 2.2 % 1.8 % – 3.1 % 1.7 % – 2.9 1.8 % – 3.1 % 1.7 % – 2.9 % During 3.1 % 1.7 % – 2.9 % During fiscal year 2020 2.9 % During fiscal year 2020 , the following activity occurred balance , beginning of year 147 $ 78.49 Granted ( a beginning of year 147 $ 78.49 Granted ( a ) 53 78.49 Granted ( a ) 53 140.49 Vested ( 65 ) Granted ( a ) 53 140.49 Vested ( 65 ) 75.35 ) 53 140.49 Vested ( 65 ) 75.35 Forfeited ( 9 140.49 Vested ( 65 ) 75.35 Forfeited ( 9 ) 90.30 65 ) 75.35 Forfeited ( 9 ) 90.30 Nonvested balance , 75.35 Forfeited ( 9 ) 90.30 Nonvested balance , end of balance , end of year 126 $ 105.23 ( a ) end of year 126 $ 105.23 ( a ) Includes 2 105.23 ( a ) Includes 2 million , 2 million , ) Includes 2 million , 2 million , and 3 million , 2 million , and 3 million of PSUs granted at target level for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . As of respectively . As of June 30 , 2020 , there wa As of June 30 , 2020 , there wa approximately $ , there wa approximately $ 10.2 billion of total unrecognized compensation stock award granted wa $ 140.49 , $ 107.02 , and wa $ 140.49 , $ 107.02 , and $ 75.88 for $ 107.02 , and $ 75.88 for fiscal year 2020 , $ 75.88 for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . The fair stock award vested wa $ 10.1 billion , $ 8.7 billion $ 10.1 billion , $ 8.7 billion , and $ 6.6 8.7 billion , and $ 6.6 billion , for fiscal year billion , for fiscal year 2020 , 2019 , and 2018 for fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . Employee Stock employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation million ) Year Ended June 30 , 2020 2019 2018 Shares Year Ended June 30 , 2020 2019 2018 Shares purchased 9 Ended June 30 , 2020 2019 2018 Shares purchased 9 11 June 30 , 2020 2019 2018 Shares purchased 9 11 13 2020 2019 2018 Shares purchased 9 11 13 Average price per 2019 2018 Shares purchased 9 11 13 Average price per share 2018 Shares purchased 9 11 13 Average price per share $ Average price per share $ 142.22 $ 104.85 $ 76.40 As per share $ 142.22 $ 104.85 $ 76.40 As of June $ 142.22 $ 104.85 $ 76.40 As of June 30 , $ 76.40 As of June 30 , 2020 , 96 million As of June 30 , 2020 , 96 million share of June 30 , 2020 , 96 million share of our common issuance through the ESPP . 89 PART II Item 8 Savings . 89 PART II Item 8 Savings Plan We have saving U.S. that qualify under Section 401 ( k ) of the a maximum employer contribution of 50 % of the IRS contribution for all plan were $ 1.0 billion , $ 877 million $ 1.0 billion , $ 877 million , and $ 807 877 million , and $ 807 million in fiscal year 2020 807 million in fiscal year 2020 , 2019 , and 2018 in fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively , and were expensed a contributed . NOTE 19 — SEGMENT INFORMATION AND GEOGRAPHIC Office Commercial , including Office 365 subscription , the Office portion the Office portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscription and Office business solution , including Dynamics 365 , a set of cloud-based Surface and PC accessory . 90 PART II Item 8 • . 90 PART II Item 8 • Gaming , including Xbox million ) Year Ended June 30 , 2020 2019 2018 Revenue Year Ended June 30 , 2020 2019 2018 Revenue Productivity and Ended June 30 , 2020 2019 2018 Revenue Productivity and Business June 30 , 2020 2019 2018 Revenue Productivity and Business Processes Productivity and Business Processes $ 46,398 $ 41,160 $ 35,865 Intelligent Business Processes $ 46,398 $ 41,160 $ 35,865 Intelligent Cloud 48,366 $ 46,398 $ 41,160 $ 35,865 Intelligent Cloud 48,366 38,985 32,219 41,160 $ 35,865 Intelligent Cloud 48,366 38,985 32,219 More Personal Computing $ 35,865 Intelligent Cloud 48,366 38,985 32,219 More Personal Computing 48,251 35,865 Intelligent Cloud 48,366 38,985 32,219 More Personal Computing 48,251 45,698 38,985 32,219 More Personal Computing 48,251 45,698 42,276 Total $ 143,015 32,219 More Personal Computing 48,251 45,698 42,276 Total $ 143,015 $ More Personal Computing 48,251 45,698 42,276 Total $ 143,015 $ 125,843 48,251 45,698 42,276 Total $ 143,015 $ 125,843 $ 110,360 Operating 42,276 Total $ 143,015 $ 125,843 $ 110,360 Operating Income Productivity $ 143,015 $ 125,843 $ 110,360 Operating Income Productivity and Business Productivity and Business Processes $ 18,724 $ 16,219 $ 12,924 Intelligent Business Processes $ 18,724 $ 16,219 $ 12,924 Intelligent Cloud 18,324 $ 18,724 $ 16,219 $ 12,924 Intelligent Cloud 18,324 13,920 11,524 16,219 $ 12,924 Intelligent Cloud 18,324 13,920 11,524 More Personal Computing $ 12,924 Intelligent Cloud 18,324 13,920 11,524 More Personal Computing 15,911 12,924 Intelligent Cloud 18,324 13,920 11,524 More Personal Computing 15,911 12,820 13,920 11,524 More Personal Computing 15,911 12,820 10,610 Total $ 52,959 11,524 More Personal Computing 15,911 12,820 10,610 Total $ 52,959 $ More Personal Computing 15,911 12,820 10,610 Total $ 52,959 $ 42,959 15,911 12,820 10,610 Total $ 52,959 $ 42,959 $ 35,058 No 10,610 Total $ 52,959 $ 42,959 $ 35,058 No sale to $ 52,959 $ 42,959 $ 35,058 No sale to an individual States accounted for more than 10 % of revenue for fiscal of revenue for fiscal year 2020 , 2019 , or 2018 for fiscal year 2020 , 2019 , or 2018 . Revenue 2020 , 2019 , or 2018 . Revenue , classified by million ) Year Ended June 30 , 2020 2019 2018 United Year Ended June 30 , 2020 2019 2018 United States ( Ended June 30 , 2020 2019 2018 United States ( a June 30 , 2020 2019 2018 United States ( a ) States ( a ) $ 73,160 $ 64,199 $ 55,926 Other a ) $ 73,160 $ 64,199 $ 55,926 Other country 69,855 $ 73,160 $ 64,199 $ 55,926 Other country 69,855 61,644 54,434 64,199 $ 55,926 Other country 69,855 61,644 54,434 Total $ 143,015 $ 55,926 Other country 69,855 61,644 54,434 Total $ 143,015 $ 55,926 Other country 69,855 61,644 54,434 Total $ 143,015 $ 125,843 69,855 61,644 54,434 Total $ 143,015 $ 125,843 $ 110,360 ( 54,434 Total $ 143,015 $ 125,843 $ 110,360 ( a ) $ 143,015 $ 125,843 $ 110,360 ( a ) Includes billing source of the revenue . 91 PART II Item 8 Revenue . 91 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2020 2019 2018 Server Year Ended June 30 , 2020 2019 2018 Server product and Ended June 30 , 2020 2019 2018 Server product and cloud June 30 , 2020 2019 2018 Server product and cloud service product and cloud service $ 41,379 $ 32,622 $ 26,129 Office cloud service $ 41,379 $ 32,622 $ 26,129 Office product and $ 41,379 $ 32,622 $ 26,129 Office product and cloud service Office product and cloud service 35,316 31,769 28,316 Windows 22,294 20,395 product and cloud service 35,316 31,769 28,316 Windows 22,294 20,395 19,518 and cloud service 35,316 31,769 28,316 Windows 22,294 20,395 19,518 Gaming service 35,316 31,769 28,316 Windows 22,294 20,395 19,518 Gaming 11,575 11,386 35,316 31,769 28,316 Windows 22,294 20,395 19,518 Gaming 11,575 11,386 10,353 31,769 28,316 Windows 22,294 20,395 19,518 Gaming 11,575 11,386 10,353 LinkedIn Windows 22,294 20,395 19,518 Gaming 11,575 11,386 10,353 LinkedIn 8,077 6,754 22,294 20,395 19,518 Gaming 11,575 11,386 10,353 LinkedIn 8,077 6,754 5,259 20,395 19,518 Gaming 11,575 11,386 10,353 LinkedIn 8,077 6,754 5,259 Search Gaming 11,575 11,386 10,353 LinkedIn 8,077 6,754 5,259 Search advertising 7,740 11,575 11,386 10,353 LinkedIn 8,077 6,754 5,259 Search advertising 7,740 7,628 11,386 10,353 LinkedIn 8,077 6,754 5,259 Search advertising 7,740 7,628 7,012 8,077 6,754 5,259 Search advertising 7,740 7,628 7,012 Devices 6,457 6,095 6,754 5,259 Search advertising 7,740 7,628 7,012 Devices 6,457 6,095 5,134 5,259 Search advertising 7,740 7,628 7,012 Devices 6,457 6,095 5,134 Enterprise advertising 7,740 7,628 7,012 Devices 6,457 6,095 5,134 Enterprise Services 6,409 7,740 7,628 7,012 Devices 6,457 6,095 5,134 Enterprise Services 6,409 6,124 7,628 7,012 Devices 6,457 6,095 5,134 Enterprise Services 6,409 6,124 5,846 6,457 6,095 5,134 Enterprise Services 6,409 6,124 5,846 Other 3,768 3,070 6,095 5,134 Enterprise Services 6,409 6,124 5,846 Other 3,768 3,070 2,793 5,134 Enterprise Services 6,409 6,124 5,846 Other 3,768 3,070 2,793 Total Services 6,409 6,124 5,846 Other 3,768 3,070 2,793 Total $ 143,015 6,409 6,124 5,846 Other 3,768 3,070 2,793 Total $ 143,015 $ 6,124 5,846 Other 3,768 3,070 2,793 Total $ 143,015 $ 125,843 3,768 3,070 2,793 Total $ 143,015 $ 125,843 $ 110,360 Our 2,793 Total $ 143,015 $ 125,843 $ 110,360 Our commercial cloud $ 143,015 $ 125,843 $ 110,360 Our commercial cloud revenue , revenue , which includes Office 365 Commercial , Azure , the portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 51.7 billion , $ 38.1 billion $ 51.7 billion , $ 38.1 billion and $ 26.6 billion $ 38.1 billion and $ 26.6 billion in fiscal year 2020 26.6 billion in fiscal year 2020 , 2019 , and 2018 in fiscal year 2020 , 2019 , and 2018 , respectively 2020 , 2019 , and 2018 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2020 2019 2018 United million ) June 30 , 2020 2019 2018 United States $ ) June 30 , 2020 2019 2018 United States $ 60,789 June 30 , 2020 2019 2018 United States $ 60,789 $ 2019 2018 United States $ 60,789 $ 55,252 $ 44,501 Ireland United States $ 60,789 $ 55,252 $ 44,501 Ireland 12,734 12,958 $ 60,789 $ 55,252 $ 44,501 Ireland 12,734 12,958 12,843 Other $ 55,252 $ 44,501 Ireland 12,734 12,958 12,843 Other country 29,770 55,252 $ 44,501 Ireland 12,734 12,958 12,843 Other country 29,770 25,422 $ 44,501 Ireland 12,734 12,958 12,843 Other country 29,770 25,422 22,538 12,734 12,958 12,843 Other country 29,770 25,422 22,538 Total $ 103,293 12,958 12,843 Other country 29,770 25,422 22,538 Total $ 103,293 $ 12,843 Other country 29,770 25,422 22,538 Total $ 103,293 $ 93,632 29,770 25,422 22,538 Total $ 103,293 $ 93,632 $ 79,882 92 22,538 Total $ 103,293 $ 93,632 $ 79,882 92 PART II $ 103,293 $ 93,632 $ 79,882 92 PART II Item 8 103,293 $ 93,632 $ 79,882 92 PART II Item 8 NOTE 79,882 92 PART II Item 8 NOTE 20 — QUARTERLY INFORMATION PART II Item 8 NOTE 20 — QUARTERLY INFORMATION ( UNAUDITED amount ) Quarter Ended September 30 December 31 March 31 June Quarter Ended September 30 December 31 March 31 June 30 Total September 30 December 31 March 31 June 30 Total Fiscal Year December 31 March 31 June 30 Total Fiscal Year 2020 Revenue June 30 Total Fiscal Year 2020 Revenue $ 33,055 $ 36,906 Fiscal Year 2020 Revenue $ 33,055 $ 36,906 $ 35,021 $ 2020 Revenue $ 33,055 $ 36,906 $ 35,021 $ 38,033 $ $ 33,055 $ 36,906 $ 35,021 $ 38,033 $ 143,015 Gross $ 36,906 $ 35,021 $ 38,033 $ 143,015 Gross margin 22,649 $ 35,021 $ 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 38,033 $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating $ 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 143,015 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 Gross margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 13,891 margin 22,649 24,548 24,046 25,694 96,937 Operating income 12,686 13,891 12,975 24,046 25,694 96,937 Operating income 12,686 13,891 12,975 13,407 52,959 Net 25,694 96,937 Operating income 12,686 13,891 12,975 13,407 52,959 Net income 96,937 Operating income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 Operating income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 11,649 income 12,686 13,891 12,975 13,407 52,959 Net income 10,678 11,649 10,752 12,975 13,407 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic 13,407 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic earnings 52,959 Net income 10,678 11,649 10,752 11,202 44,281 Basic earnings per Net income 10,678 11,649 10,752 11,202 44,281 Basic earnings per share income 10,678 11,649 10,752 11,202 44,281 Basic earnings per share 1.40 44,281 Basic earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted Basic earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings earnings per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per per share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per share share 1.40 1.53 1.41 1.48 5.82 Diluted earnings per share 1.38 5.82 Diluted earnings per share 1.38 1.51 1.40 1.46 5.76 Fiscal Diluted earnings per share 1.38 1.51 1.40 1.46 5.76 Fiscal Year earnings per share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 per share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 Revenue share 1.38 1.51 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 1.40 1.46 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 5.76 Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross Fiscal Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin Year 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 2019 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 Revenue 29,084 32,471 30,571 33,717 125,843 Gross margin 19,179 20,048 20,401 30,571 33,717 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating 33,717 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 125,843 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 Gross margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 margin 19,179 20,048 20,401 23,305 82,933 Operating income 9,955 10,258 10,341 20,401 23,305 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net 23,305 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income 82,933 Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( Operating income 9,955 10,258 10,341 12,405 42,959 Net income ( a income 9,955 10,258 10,341 12,405 42,959 Net income ( a ) Net income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic income ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings ( a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per a ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share ) 8,824 8,420 8,809 13,187 39,240 Basic earnings per share 1.15 39,240 Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted Basic earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings earnings per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per per share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share share 1.15 1.09 1.15 1.72 5.11 Diluted earnings per share ( per share ( b ) 1.14 1.08 1.14 1.71 5.06 ( share ( b ) 1.14 1.08 1.14 1.71 5.06 ( a ( b ) 1.14 1.08 1.14 1.71 5.06 ( a ) b ) 1.14 1.08 1.14 1.71 5.06 ( a ) Reflects ) 1.14 1.08 1.14 1.71 5.06 ( a ) Reflects the a ) Reflects the $ 157 million net charge related to second quarter and the $ 2.6 billion net income tax benefit increased net income by $ 2.4 billion for fiscal year 2019 2.4 billion for fiscal year 2019 . See Note 12 – year 2019 . See Note 12 – Income Taxes for further increased ) diluted EPS $ 0.02 for the second quarter , second quarter , $ ( 0.34 ) for the fourth quarter quarter , and $ ( 0.31 ) for fiscal year 2019 0.31 ) for fiscal year 2019 . 93 PART II Item for fiscal year 2019 . 93 PART II Item 8 REPORT . 93 PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2020 and 2019 , a of June 30 , 2020 and 2019 , the related June 30 , 2020 and 2019 , the related consolidated statement in the period ended June 30 , 2020 , and the period ended June 30 , 2020 , and the related note the Company a of June 30 , 2020 and 2019 , a of June 30 , 2020 and 2019 , and the June 30 , 2020 and 2019 , and the result of in the period ended June 30 , 2020 , in conformity period ended June 30 , 2020 , in conformity with accounting financial reporting a of June 30 , 2020 , based on a of June 30 , 2020 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated July 30 , 2020 , expressed an report dated July 30 , 2020 , expressed an unqualified opinion audit committee and that ( 1 ) relate to account or the financial statement and ( 2 ) involved our especially challenging to which they relate . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue Recognition – Refer to Recognition – Refer to Note 1 to the financial statement Critical in the financial statement . 95 PART II Item 8 Income . 95 PART II Item 8 Income Taxes – Uncertain Tax Positions – Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 30 , 2020 We have served , Washington July 30 , 2020 We have served a the the Company 's auditor since 1983 . 96 PART II Item 's auditor since 1983 . 96 PART II Item 9 , . 96 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2020 . There were a of June 30 , 2020 . There were no change during the quarter ended June 30 , 2020 that have materially quarter ended June 30 , 2020 that have materially affected , financial reporting a of June 30 , 2020 ; their report a of June 30 , 2020 ; their report is included report is included in Item 9A . 97 PART II Item included in Item 9A . 97 PART II Item 9A REPORT . 97 PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2020 , based on a of June 30 , 2020 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2020 , based on a of June 30 , 2020 , based on the criterion Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2020 , of the year ended June 30 , 2020 , of the Company and and our report dated July 30 , 2020 , expressed an report dated July 30 , 2020 , expressed an unqualified opinion policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington July 30 , 2020 98 PART II , Washington July 30 , 2020 98 PART II , III Washington July 30 , 2020 98 PART II , III Item PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 2 , 2020 ( the “ be held December 2 , 2020 ( the “ Proxy Statement in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 99 PART IV Item 15 PART . 99 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 55 Comprehensive Income Statements 56 Balance Statements 55 Comprehensive Income Statements 56 Balance Sheets 57 Cash Flows Income Statements 56 Balance Sheets 57 Cash Flows Statements 58 Stockholders Sheets 57 Cash Flows Statements 58 Stockholders ’ Equity Statements 59 58 Stockholders ’ Equity Statements 59 Notes to Financial Statements 60 59 Notes to Financial Statements 60 Report of Independent Registered Public Independent Registered Public Accounting Firm 94 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a of , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and Base Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 100 PART IV . , a Trustee 8-K 4.2 9/27/10 100 PART IV Item , a Trustee 8-K 4.2 9/27/10 100 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 100 PART IV Item 15 Incorporated 9/27/10 100 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 101 PART IV . , a Trustee 8-K 4.1 12/6/13 101 PART IV Item , a Trustee 8-K 4.1 12/6/13 101 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 101 PART IV Item 15 Incorporated 12/6/13 101 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a Trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental . , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture , a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for a Trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 8/5/16 102 PART IV . , a Trustee 8-K 4.1 8/5/16 102 PART IV Item , a Trustee 8-K 4.1 8/5/16 102 PART IV Item 15 a Trustee 8-K 4.1 8/5/16 102 PART IV Item 15 Incorporated 8/5/16 102 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for 2.525 4.16 Thirteenth Supplemental Indenture for 2.525 % Notes due 2050 and for 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msft : OtherCountriesMember 2021-06-30 0000789019 2019-06-30 0000789019 msft : OtherCountriesMember 2021-06-30 0000789019 msft : OtherCountriesMember 2020-06-30 0000789019 msft : OtherCountriesMember 2021-06-30 0000789019 msft : OtherCountriesMember 2020-06-30 0000789019 2021-06-30 0000789019 msft : OtherCountriesMember 2020-06-30 0000789019 msft : OtherCountriesMember 2019-06-30 0000789019 msft : OtherCountriesMember 2020-06-30 0000789019 msft : OtherCountriesMember 2019-06-30 UNITED 2020-06-30 0000789019 msft : OtherCountriesMember 2019-06-30 UNITED STATES SECURITIES AND EXCHANGE EXCHANGE COMMISSION Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT Washington , D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2021 OR ☐ TRANSITION Year Ended June 30 , 2021 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the registered Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 2.125 % Notes due 2021 MSFT Nasdaq 3.125 % Notes Notes due 2021 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Act ) . No ☒ As of December 31 , 2020 , the aggregate As of December 31 , 2020 , the aggregate market value of the registrant wa $ 1.7 trillion based on the closing System . As of July 26 , 2021 , there were As of July 26 , 2021 , there were 7,514,891,248 share , 2021 , there were 7,514,891,248 share of common stock outstanding to be held on November 30 , 2021 are incorporated by held on November 30 , 2021 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2021 INDEX Page PART Year Ended June 30 , 2021 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Information about our PART I Item 1. Business 3 Information about our Executive Officers Information about our Executive Officers 20 Item 1A . Risk Factors our Executive Officers 20 Item 1A . Risk Factors 22 Item Item 1A . Risk Factors 22 Item 1B . Unresolved Staff . Risk Factors 22 Item 1B . Unresolved Staff Comments 36 1B . Unresolved Staff Comments 36 Item 2 . Properties 36 Unresolved Staff Comments 36 Item 2 . Properties 36 Item 3 36 Item 2 . Properties 36 Item 3 . Legal Proceedings 2 . Properties 36 Item 3 . Legal Proceedings 36 Item Item 3 . Legal Proceedings 36 Item 4 . Mine Safety . Legal Proceedings 36 Item 4 . Mine Safety Disclosures 36 4 . Mine Safety Disclosures 36 PART II Item 5 . Disclosures 36 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 37 Item 6 . [ Reserved of Equity Securities 37 Item 6 . [ Reserved ] 38 6 . [ Reserved ] 38 Item 7 . Management ’ [ Reserved ] 38 Item 7 . Management ’ s Discussion Condition and Results of Operations 39 Item 7A . Quantitative and Results of Operations 39 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 56 Item 8 . Financial Statements about Market Risk 56 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 57 Item 9 . Changes in and Supplementary Data 57 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 99 Item 9A . Controls and and Financial Disclosure 99 Item 9A . Controls and Procedures 99 9A . Controls and Procedures 99 Report of Management on Internal Internal Control over Financial Reporting 99 Report of Independent Registered Public Independent Registered Public Accounting Firm 100 Item 9B . Other Information Public Accounting Firm 100 Item 9B . Other Information 101 PART Item 9B . Other Information 101 PART III Item 10 . Information 101 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 101 Item 11 . Executive Compensation and Corporate Governance 101 Item 11 . Executive Compensation 101 Item Item 11 . Executive Compensation 101 Item 12 . Security Ownership . Executive Compensation 101 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 101 Item 13 . Certain Relationships Related Stockholder Matters 101 Item 13 . Certain Relationships and Related Transactions , and Director Independence 101 Item 14 . Principal Accounting and Director Independence 101 Item 14 . Principal Accounting Fees and Principal Accounting Fees and Services 101 PART IV Item 15 . Services 101 PART IV Item 15 . Exhibits , Financial Statement Exhibits , Financial Statement Schedules 102 Item 16 . Form 10-K Financial Statement Schedules 102 Item 16 . Form 10-K Summary 108 102 Item 16 . Form 10-K Summary 108 Signatures 109 2 16 . Form 10-K Summary 108 Signatures 109 2 PART I Form 10-K Summary 108 Signatures 109 2 PART I Item 1 10-K Summary 108 Signatures 109 2 PART I Item 1 Note 109 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned otherwise . PART I ITEM 1. BUSINESS GENERAL Embracing Our Future What We Offer Founded in 1975 , we develop and support , and related accessory . 3 PART I Item 1 The . 3 PART I Item 1 The Ambitions That Drive Us , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows , and Enterprise and insight powered by Microsoft 365 . Microsoft Relationship Sales solution through social selling . Dynamics 365 for Talent with LinkedIn Recruiter and organization . In April 2021 , we entered into a our industry-specific cloud offering . 4 PART I Item 1 We . 4 PART I Item 1 We are accelerating our development and dynamic way . Microsoft 365 is empowering people and organization remote everything world . Windows 10 serf the enterprise a the Cortana , inking , immersive 3D content storytelling , and mixed . Our ambition for Windows 10 monetization opportunity includes gaming , search advertising . In June 2021 , Microsoft announced the next generation of Windows – Windows 11 . Windows 11 build on – Windows 11 . Windows 11 build on the strength of , and security on Windows 10 today and add in new our cloud business and Microsoft 365 strategy , and it power Surface family includes Surface Book 3 , Surface Laptop Go , Laptop Go , Surface Go 2 , Surface Pro 7 , Go 2 , Surface Pro 7 , Surface Laptop 4 , Pro 7 , Surface Laptop 4 , Surface Pro X , Pro X , Surface Studio 2 , and Surface Duo . gamers , including the March 2021 acquisition of ZeniMax Media Inc. a curated library of over 100 first- and third-party console and the device they want . 5 PART I Item 1 Our . 5 PART I Item 1 Our Future Opportunity In a with our service like Microsoft 365 Consumer , Teams , Edge Microsoft . COVID-19 In March 2020 , the World Health Organization ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) for further discussion regarding COVID-19 on our fiscal year 2021 financial result . The extent ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of the environment . In January 2020 , we announced a bold to be carbon negative by 2030 , and to remove from remove from the environment by 2050 all the carbon we have emitted since our founding in 1975 . This included a commitment a commitment to invest $ 1 billion over four year in to be water positive by 2030 , zero waste by 2030 2030 , zero waste by 2030 , and to protect ecosystem carbon footprint . In January 2021 , we announced that in announced that in fiscal year 2020 we reduced Microsoft ’ s ’ s carbon emission by 586,683 metric ton . We purchased We purchased the removal of 1.3 million metric ton of carbon metric ton of carbon from 26 project around the world . in determining executive pay . 6 PART I Item 1 The . 6 PART I Item 1 The investment we make in We also pledged a $ 50 million investment in AI for of director announced in June 2020 that we had developed a in the United States by 2025 ; evolving our ecosystem with with a five-year , $ 50 million sustained effort , expanding . We announced in June 2020 that we are expanding access . We also invested $ 20 million in key non-profit partnership the digital economy . Over 42 million people across every continent find in traditional network . 7 PART I Item 1 HUMAN . 7 PART I Item 1 HUMAN CAPITAL RESOURCES Overview Microsoft more . As of June 30 , 2021 , we employed As of June 30 , 2021 , we employed approximately 181,000 2021 , we employed approximately 181,000 people on a full-time basis on a full-time basis , 103,000 in the U.S. and 78,000 103,000 in the U.S. and 78,000 internationally . Of the total the total employed people , 67,000 were in operation , including , and consulting service ; 60,000 were in product research and product research and development ; 40,000 were in sale and marketing sale and marketing ; and 14,000 were in general and administration and employee need globally . 88 % of employee globally participated participated in our fiscal year 2021 MS Poll engagement survey , , we also collect nearly 75,000 Daily Pulse employee survey response response . During fiscal year 2021 , our Daily Pulse survey . As described in our 2020 Proxy Statement , annual performance . • Disability representation . 8 PART I Item 1 Total . 8 PART I Item 1 Total Rewards We develop dynamic . Pay Equity In our 2020 Diversity and Inclusion Report , the U.S. combined earn $ 1.006 for every $ 1.000 earned $ 1.006 for every $ 1.000 earned by their white counterpart in the U.S. earn $ 1.001 for every $ 1.000 earned $ 1.001 for every $ 1.000 earned by their counterpart in Kingdom ) combined earn $ 1.000 for every $ 1.000 by $ 1.000 for every $ 1.000 by men in these country differentiated leadership development program . 9 PART I Item 1 • . 9 PART I Item 1 • New employee orientation covering solution , in fiscal year 2021 our employee completed over 5 2021 our employee completed over 5 million course , averaging over million course , averaging over 18 hour per employee . Given corporate learning portal ha over 100,000 average monthly active user . . All of our approximately 23,000 people manager must complete between people manager must complete between 25-30 hour of required manager capability information is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription and Office licensed business solution , including Dynamics 365 , comprising a set of ERP and CRM application . 10 PART I Item 1 Office . 10 PART I Item 1 Office Commercial Office Commercial is Office licensed on-premises to Office 365 . Office Consumer Office Consumer Office licensed on-premises to Microsoft 365 Consumer subscription . Office Consumer talent . LinkedIn ha over 750 million member and ha office the continued shift to Dynamics 365 , a unified set of Apps and Power Automate . 11 PART I Item 1 Competition . 11 PART I Item 1 Competition Competitors to Office include on various Microsoft product . 12 PART I Item 1 Competition . 12 PART I Item 1 Competition Azure face diverse competition . • Search advertising . 13 PART I Item 1 Windows . 13 PART I Item 1 Windows The Windows operating system a curated library of over 100 first- and third-party console and most convenient to them . 14 PART I Item 1 Xbox . 14 PART I Item 1 Xbox enables people to connect to meet consumer demand . 15 PART I Item 1 RESEARCH . 15 PART I Item 1 RESEARCH AND DEVELOPMENT Product and have a portfolio of over 65,000 U.S. and international patent issued international patent issued and over 21,000 pending worldwide . While we from across the world . 16 PART I Item 1 In . 16 PART I Item 1 In addition to our main capability to subscribe to Office 365 . There are two broad store . In fiscal year 2021 , we closed our Microsoft for reselling cloud service . 17 PART I Item 1 We . 17 PART I Item 1 We distribute our retail packaged and SA is included . 18 PART I Item 1 Select . 18 PART I Item 1 Select Plus Select Plus agreement backlog is not significant . 19 PART I Item 1 INFORMATION . 19 PART I Item 1 INFORMATION ABOUT OUR EXECUTIV E executive officer a of July 29 , 2021 were a follows a of July 29 , 2021 were a follows : Name with the Company Satya Nadella 53 Chairman of the Board and Chief Executive Officer Judson Althoff 48 Executive Vice President and Chief Commercial Officer Christopher C. Capossela 51 Executive Vice President , Marketing Marketing Officer Kathleen T. Hogan 55 Executive Vice President , Human Human Resources Amy E. Hood 49 Executive Vice President , Chief Financial Officer Bradford L. Smith 62 President and Chief Legal Officer Legal Officer Christopher D. Young 49 Executive Vice President , Business of the Board in June 2021 and Chief Executive Officer in Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Commercial Officer in July 2021 . He served a Executive Worldwide Commercial Business from July 2017 until that time . Prior Althoff joined Microsoft in March 2013 a President of Microsoft North Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 28 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms. Hogan also serf Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Mr. Smith wa Chief Legal Officer in September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General Young joined Microsoft in November 2020 a Executive Vice President , of McAfee , LLC from 2017 to 2020 , and served , LLC from 2017 to 2020 , and served a a of Intel Security Group from 2014 until 2017 , when he Security Group from 2014 until 2017 , when he led the of American Express Company . 20 PART I Item 1 AVAILABLE . 20 PART I Item 1 AVAILABLE INFORMATION Our Internet address Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 21 PART I Item 1A ITEM . 21 PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation and business model objective . 22 PART I Item 1A Business . 22 PART I Item 1A Business model competition Companies compete margin and operating income . 23 PART I Item 1A RISKS . 23 PART I Item 1A RISKS RELATING TO THE EVOLUTION Windows operating system , Microsoft 365 , Office , Bing , Server , Azure , Office 365 , Xbox , LinkedIn , For example , in October 2018 we completed our acquisition of GitHub ” ) for $ 7.5 billion , in March 2021 7.5 billion , in March 2021 we completed our acquisition of ZeniMax Media Inc. for $ 8.1 billion , and in April billion , and in April 2021 we announced a definitive agreement Communications , Inc. for $ 19.7 billion . These acquisition and our result of operation . 24 PART I Item 1A CYBERSECURITY . 24 PART I Item 1A CYBERSECURITY , DATA PRIVACY , The cyberattacks uncovered in late 2020 known a “ Solorigate ” a new threat emerge . 25 PART I Item 1A Security . 25 PART I Item 1A Security of our product , occurred in early calendar year 2021 with several of our Exchange our product and service . 26 PART I Item 1A The . 26 PART I Item 1A The cost of measure to and consolidated financial statement . 27 PART I Item 1A Digital . 27 PART I Item 1A Digital safety and service misuse Microsoft Account service , Microsoft 365 , Microsoft Teams , Dynamics , Microsoft Teams , Dynamics 365 , OneDrive , SharePoint Online , or warranty repair . 28 PART I Item 1A Our . 28 PART I Item 1A Our software product and service . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may on which developer rely . 29 PART I Item 1A • . 29 PART I Item 1A • We may be required investigate them . On July 22 , 2019 , our Hungarian . On July 22 , 2019 , our Hungarian subsidiary entered required u to pay $ 25.3 million in monetary penalty , regulatory or legal action . 30 PART I Item 1A Laws . 30 PART I Item 1A Laws and regulation relating to For example , in July 2020 the Court of Justice of some market . In May 2018 , the EU General Data monetary penalty of up to 4 % of worldwide revenue , condition , and reputation . 31 PART I Item 1A We . 31 PART I Item 1A We may have additional tax example , compliance with the 2017 United States Tax Cuts and may negatively impact revenue . 32 PART I Item 1A Third . 32 PART I Item 1A Third party may claim we our consolidated financial statement . 33 PART I Item 1A Catastrophic . 33 PART I Item 1A Catastrophic event or geopolitical condition growth , and reputation . 34 PART I Item 1A The . 34 PART I Item 1A The long-term effect of climate meet our workforce need . 35 PART I Item 1B , . 35 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2021 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 520 acre of land we own corporate headquarters , and approximately 5 million square foot of space ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . The table below and internationally a of June 30 , 2021 : ( Square a of June 30 , 2021 : ( Square foot in Location Owned Leased Total U.S. 22 17 39 International 9 19 Owned Leased Total U.S. 22 17 39 International 9 19 28 Leased Total U.S. 22 17 39 International 9 19 28 Total U.S. 22 17 39 International 9 19 28 Total 31 36 22 17 39 International 9 19 28 Total 31 36 67 17 39 International 9 19 28 Total 31 36 67 ITEM International 9 19 28 Total 31 36 67 ITEM 3 . 9 19 28 Total 31 36 67 ITEM 3 . LEGAL 19 28 Total 31 36 67 ITEM 3 . LEGAL PROCEEDINGS Total 31 36 67 ITEM 3 . LEGAL PROCEEDINGS While not Order expired in April of 2021 . During fiscal year 2021 2021 . During fiscal year 2021 , the Antitrust Compliance Office European Commission Decision of March 24 , 2004 , ( “ Decision of March 24 , 2004 , ( “ 2004 Decision , 2004 , ( “ 2004 Decision ” ) and with the European Commission dated December 16 , 2009 ( “ 2009 Commission dated December 16 , 2009 ( “ 2009 Undertaking ” 16 , 2009 ( “ 2009 Undertaking ” ) ; ( complaint regarding compliance with the 2004 Decision , the 2009 Undertaking the 2004 Decision , the 2009 Undertaking , or other EU meeting . Refer to Note 15 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 36 PART II Item 5 PART . 36 PART II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 26 , 2021 , there were . On July 26 , 2021 , there were 89,291 registered , 2021 , there were 89,291 registered holder of record of fourth quarter of fiscal year 2021 : Period Total Number of ( In million ) April 1 , 2021 – April 30 million ) April 1 , 2021 – April 30 , 2021 1 , 2021 – April 30 , 2021 7,493,732 $ 255.23 2021 – April 30 , 2021 7,493,732 $ 255.23 7,493,732 $ – April 30 , 2021 7,493,732 $ 255.23 7,493,732 $ 13,030 30 , 2021 7,493,732 $ 255.23 7,493,732 $ 13,030 May 1 , 2021 7,493,732 $ 255.23 7,493,732 $ 13,030 May 1 , 7,493,732 $ 255.23 7,493,732 $ 13,030 May 1 , 2021 – 255.23 7,493,732 $ 13,030 May 1 , 2021 – May 31 $ 13,030 May 1 , 2021 – May 31 , 2021 1 , 2021 – May 31 , 2021 8,823,524 247.36 8,823,524 2021 – May 31 , 2021 8,823,524 247.36 8,823,524 10,847 June – May 31 , 2021 8,823,524 247.36 8,823,524 10,847 June 1 May 31 , 2021 8,823,524 247.36 8,823,524 10,847 June 1 , 31 , 2021 8,823,524 247.36 8,823,524 10,847 June 1 , 2021 , 2021 8,823,524 247.36 8,823,524 10,847 June 1 , 2021 – 8,823,524 247.36 8,823,524 10,847 June 1 , 2021 – June 30 8,823,524 10,847 June 1 , 2021 – June 30 , 2021 1 , 2021 – June 30 , 2021 8,155,857 258.07 8,155,857 2021 – June 30 , 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 – June 30 , 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 June 30 , 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All 30 , 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share , 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share repurchase 2021 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share repurchase were 8,155,857 258.07 8,155,857 8,742 24,473,113 24,473,113 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2021 : Declaration Date Record Date ( In million ) June 16 , 2021 August 19 , million ) June 16 , 2021 August 19 , 2021 September June 16 , 2021 August 19 , 2021 September 9 , , 2021 August 19 , 2021 September 9 , 2021 $ August 19 , 2021 September 9 , 2021 $ 0.56 $ , 2021 September 9 , 2021 $ 0.56 $ 4,211 We September 9 , 2021 $ 0.56 $ 4,211 We returned $ , 2021 $ 0.56 $ 4,211 We returned $ 10.4 billion $ 4,211 We returned $ 10.4 billion to shareholder in the fourth quarter of fiscal year 2021 . Refer to Note 16 2021 . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 37 PART II Item 6 ITEM . 37 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 38 6 . [ RESERVED ] 38 PART II Item 7 ITEM ] 38 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2021 compared to the year ended June 30 , 2021 compared to the year ended to the year ended June 30 , 2020 . For a year ended June 30 , 2020 . For a discussion of of the year ended June 30 , 2020 compared to the year ended June 30 , 2020 compared to the year ended to the year ended June 30 , 2019 , please refer year ended June 30 , 2019 , please refer to Part to Part II , Item 7 , “ Management ’ s our Annual Report on Form 10-K for the year ended June for the year ended June 30 , 2020 . OVERVIEW Microsoft year ended June 30 , 2020 . OVERVIEW Microsoft is a . Highlights from fiscal year 2021 compared with fiscal year 2020 2021 compared with fiscal year 2020 included : • Commercial cloud • Commercial cloud revenue increased 34 % to $ 69.1 billion increased 34 % to $ 69.1 billion . • Office Commercial and cloud service revenue increased 13 % driven by Office 365 13 % driven by Office 365 Commercial growth of 22 % Office 365 Commercial growth of 22 % . • Office Consumer and cloud service revenue increased 10 % and Microsoft 365 Consumer increased 10 % and Microsoft 365 Consumer subscriber increased to 51.9 365 Consumer subscriber increased to 51.9 million . • LinkedIn revenue . • LinkedIn revenue increased 27 % . • Dynamics product and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 43 % . by Dynamics 365 growth of 43 % . • Server product and cloud service revenue increased 27 % driven by Azure growth driven by Azure growth of 50 % . • Windows original and cloud service revenue increased 14 % . • Xbox content content and service revenue increased 23 % . • Search advertising traffic acquisition cost , increased 13 % . • Surface revenue . • Surface revenue increased 5 % . On March 9 5 % . On March 9 , 2021 , we completed . On March 9 , 2021 , we completed our acquisition total purchase price of $ 8.1 billion , consisting primarily of The purchase price included $ 768 million of cash and cash segment . Refer to Note 8 – Business Combinations of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 39 PART II Item 7 Industry . 39 PART II Item 7 Industry Trends Our industry is international operation in fiscal year 2021 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of . COVID-19 In fiscal year 2021 , the COVID-19 pandemic continued ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of executed during the period . 40 PART II Item 7 Change . 40 PART II Item 7 Change in Accounting Estimate In in Accounting Estimate In July 2020 , we completed an assessment wa effective beginning fiscal year 2021 . Based on the carrying , net a of June 30 , 2020 , the effect a of June 30 , 2020 , the effect of this in estimate for fiscal year 2021 wa an increase in operating in operating income of $ 2.7 billion and net income of and net income of $ 2.3 billion , or $ 0.30 2.3 billion , or $ 0.30 per both basic and diluted segment is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are which includes Azure , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud for our commercial cloud business 41 PART II Item 7 Productivity business 41 PART II Item 7 Productivity and Business Processes and and cloud service ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and cloud service , including Microsoft 365 Consumer subscription and Office licensed and Office licensed on-premises Office 365 Commercial seat growth The number growth The number of Office 365 Commercial seat at end of user covered by an Office 365 Commercial subscription Microsoft 365 Consumer Office 365 Commercial subscription Microsoft 365 Consumer subscriber The number of subscriber The number of Microsoft 365 Consumer ( formerly Office 365 365 Consumer ( formerly Office 365 Consumer ) subscriber at end cloud service , including Dynamics 365 , comprising a set of demand in the consumer market 42 PART II Item 7 Windows market 42 PART II Item 7 Windows Commercial product and cloud and per share amount ) 2021 2020 Percentage Change Revenue $ per share amount ) 2021 2020 Percentage Change Revenue $ 168,088 2020 Percentage Change Revenue $ 168,088 $ 143,015 18 % Gross Change Revenue $ 168,088 $ 143,015 18 % Gross margin 115,856 Revenue $ 168,088 $ 143,015 18 % Gross margin 115,856 96,937 143,015 18 % Gross margin 115,856 96,937 20 % Operating income 18 % Gross margin 115,856 96,937 20 % Operating income 69,916 % Gross margin 115,856 96,937 20 % Operating income 69,916 52,959 96,937 20 % Operating income 69,916 52,959 32 % Net income 20 % Operating income 69,916 52,959 32 % Net income 61,271 % Operating income 69,916 52,959 32 % Net income 61,271 44,281 52,959 32 % Net income 61,271 44,281 38 % Diluted earnings 32 % Net income 61,271 44,281 38 % Diluted earnings per % Net income 61,271 44,281 38 % Diluted earnings per share % Diluted earnings per share 8.05 5.76 40 % Adjusted net Diluted earnings per share 8.05 5.76 40 % Adjusted net income earnings per share 8.05 5.76 40 % Adjusted net income ( net income ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted income ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted earnings ( non-GAAP ) 60,651 44,281 37 % Adjusted diluted earnings per per share ( non-GAAP ) 7.97 5.76 38 % Adjusted net share ( non-GAAP ) 7.97 5.76 38 % Adjusted net income ( non-GAAP ) 7.97 5.76 38 % Adjusted net income and withholding tax in fiscal year 2021 . Refer to the Non-GAAP financial result . See Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . discussion . Revenue increased $ 25.1 billion or 18 % driven increased $ 25.1 billion or 18 % driven by growth across revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 6.2 billion or 13 % driven increased $ 6.2 billion or 13 % driven by growth in . Gross margin increased $ 18.9 billion or 20 % driven increased $ 18.9 billion or 20 % driven by growth across cloud gross margin percentage increased 4 point to 71 % driven percentage increased 4 point to 71 % driven by gross margin . Operating expense increased $ 2.0 billion or 4 % driven increased $ 2.0 billion or 4 % driven by investment in and development expense increased $ 1.4 billion or 8 % driven increased $ 1.4 billion or 8 % driven by investment in and marketing expense increased $ 519 million or 3 % driven increased $ 519 million or 3 % driven by investment in unfavorable foreign currency impact of 2 % . • General and expense and business tax . 43 PART II Item 7 Operating . 43 PART II Item 7 Operating income increased $ 17.0 7 Operating income increased $ 17.0 billion or 32 % driven increased $ 17.0 billion or 32 % driven by growth across and diluted EPS of $ 620 million and $ 0.08 , $ 620 million and $ 0.08 , respectively . Revenue , favorable foreign currency impact of 3 % , 3 % , impact of 3 % , 3 % , and 4 % , 3 % , and 4 % , respectively . SEGMENT million , except percentage ) 2021 2020 Percentage Change Revenue Productivity , except percentage ) 2021 2020 Percentage Change Revenue Productivity and Productivity and Business Processes $ 53,915 $ 46,398 16 % Intelligent Business Processes $ 53,915 $ 46,398 16 % Intelligent Cloud 60,080 Processes $ 53,915 $ 46,398 16 % Intelligent Cloud 60,080 48,366 46,398 16 % Intelligent Cloud 60,080 48,366 24 % More Personal 16 % Intelligent Cloud 60,080 48,366 24 % More Personal Computing % Intelligent Cloud 60,080 48,366 24 % More Personal Computing 54,093 24 % More Personal Computing 54,093 48,251 12 % Total $ % More Personal Computing 54,093 48,251 12 % Total $ 168,088 More Personal Computing 54,093 48,251 12 % Total $ 168,088 $ 48,251 12 % Total $ 168,088 $ 143,015 18 % Operating % Total $ 168,088 $ 143,015 18 % Operating Income Productivity Total $ 168,088 $ 143,015 18 % Operating Income Productivity and Productivity and Business Processes $ 24,351 $ 18,724 30 % Intelligent Business Processes $ 24,351 $ 18,724 30 % Intelligent Cloud 26,126 Processes $ 24,351 $ 18,724 30 % Intelligent Cloud 26,126 18,324 18,724 30 % Intelligent Cloud 26,126 18,324 43 % More Personal 30 % Intelligent Cloud 26,126 18,324 43 % More Personal Computing % Intelligent Cloud 26,126 18,324 43 % More Personal Computing 19,439 43 % More Personal Computing 19,439 15,911 22 % Total $ % More Personal Computing 19,439 15,911 22 % Total $ 69,916 More Personal Computing 19,439 15,911 22 % Total $ 69,916 $ 15,911 22 % Total $ 69,916 $ 52,959 32 % Reportable % Total $ 69,916 $ 52,959 32 % Reportable Segments Productivity Total $ 69,916 $ 52,959 32 % Reportable Segments Productivity and Business Processes Revenue increased $ 7.5 billion or 16 % . increased $ 7.5 billion or 16 % . • Office Commercial cloud service revenue increased $ 4.0 billion or 13 % . increased $ 4.0 billion or 13 % . Office 365 Commercial or 13 % . Office 365 Commercial revenue grew 22 % Office 365 Commercial revenue grew 22 % driven by seat growth driven by seat growth of 17 % and higher revenue per Office Commercial product revenue declined 23 % driven by continued customer cloud service revenue increased $ 474 million or 10 % driven increased $ 474 million or 10 % driven by Microsoft 365 10 % driven by Microsoft 365 Consumer subscription revenue , on strength in Japan . Microsoft 365 Consumer subscriber increased 22 % Microsoft 365 Consumer subscriber increased 22 % to 51.9 million . subscriber increased 22 % to 51.9 million . • LinkedIn revenue • LinkedIn revenue increased $ 2.2 billion or 27 % driven increased $ 2.2 billion or 27 % driven by advertising demand and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 43 % . by Dynamics 365 growth of 43 % . Operating income increased . Operating income increased $ 5.6 billion or 30 % . increased $ 5.6 billion or 30 % . • Gross margin • Gross margin increased $ 6.5 billion or 18 % driven increased $ 6.5 billion or 18 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn , and • Operating expense increased $ 839 million or 5 % driven increased $ 839 million or 5 % driven by investment in favorable foreign currency impact of 2 % , 3 % , impact of 2 % , 3 % , and 4 % , 3 % , and 4 % , respectively . 44 4 % , respectively . 44 PART II Item 7 Intelligent . 44 PART II Item 7 Intelligent Cloud Revenue increased $ Intelligent Cloud Revenue increased $ 11.7 billion or 24 % . increased $ 11.7 billion or 24 % . • Server product cloud service revenue increased $ 11.2 billion or 27 % driven increased $ 11.2 billion or 27 % driven by Azure . Azure . Azure revenue grew 50 % due to growth in . Server product revenue increased 6 % driven by hybrid and demand related to SQL Server 2008 and Windows Server 2008 end Server 2008 and Windows Server 2008 end of support . • Enterprise Services revenue increased $ 534 million or 8 % driven increased $ 534 million or 8 % driven by growth in . Operating income increased $ 7.8 billion or 43 % . increased $ 7.8 billion or 43 % . • Gross margin • Gross margin increased $ 9.7 billion or 29 % driven increased $ 9.7 billion or 29 % driven by growth in • Operating expense increased $ 1.9 billion or 12 % driven increased $ 1.9 billion or 12 % driven by investment in favorable foreign currency impact of 2 % , 3 % , impact of 2 % , 3 % , and 4 % , 3 % , and 4 % , respectively . More Personal Computing Revenue increased $ 5.8 billion or 12 % . increased $ 5.8 billion or 12 % . • Windows revenue • Windows revenue increased $ 933 million or 4 % driven increased $ 933 million or 4 % driven by growth in and cloud service revenue increased 14 % driven by demand for driven by demand for Microsoft 365 . Windows OEM revenue increased comparable that benefited from Windows 7 end of support . Windows Windows OEM Pro revenue decreased 9 % and Windows OEM non-Pro Windows OEM non-Pro revenue grew 21 % . • Gaming revenue • Gaming revenue increased $ 3.8 billion or 33 % driven increased $ 3.8 billion or 33 % driven by growth in and service revenue increased $ 2.3 billion or 23 % driven increased $ 2.3 billion or 23 % driven by growth in . Xbox hardware revenue increased 92 % driven by higher price Search advertising revenue increased $ 788 million or 10 % . increased $ 788 million or 10 % . Search advertising revenue excluding traffic acquisition cost increased 13 % driven by higher revenue • Surface revenue increased $ 302 million or 5 % . increased $ 302 million or 5 % . Operating income increased . Operating income increased $ 3.5 billion or 22 % . increased $ 3.5 billion or 22 % . • Gross margin • Gross margin increased $ 2.8 billion or 10 % driven increased $ 2.8 billion or 10 % driven by growth in • Operating expense decreased $ 752 million or 6 % driven decreased $ 752 million or 6 % driven by prior year favorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . 45 3 % , respectively . 45 PART II Item 7 OPERATING . 45 PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2021 2020 Percentage Change Research and , except percentage ) 2021 2020 Percentage Change Research and development Change Research and development $ 20,716 $ 19,269 8 % As and development $ 20,716 $ 19,269 8 % As a percent development $ 20,716 $ 19,269 8 % As a percent of As a percent of revenue 12 % 13 % ( 1 percent of revenue 12 % 13 % ( 1 ) ppt 12 % 13 % ( 1 ) ppt Research and development and development expense increased $ 1.4 billion or 8 % driven increased $ 1.4 billion or 8 % driven by investment in million , except percentage ) 2021 2020 Percentage Change Sales and , except percentage ) 2021 2020 Percentage Change Sales and marketing Change Sales and marketing $ 20,117 $ 19,598 3 % As and marketing $ 20,117 $ 19,598 3 % As a percent marketing $ 20,117 $ 19,598 3 % As a percent of As a percent of revenue 12 % 14 % ( 2 percent of revenue 12 % 14 % ( 2 ) ppt 12 % 14 % ( 2 ) ppt Sales and marketing and marketing expense increased $ 519 million or 3 % driven increased $ 519 million or 3 % driven by investment in unfavorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2021 2020 Percentage Change General and , except percentage ) 2021 2020 Percentage Change General and administrative Change General and administrative $ 5,107 $ 5,111 0 % As and administrative $ 5,107 $ 5,111 0 % As a percent administrative $ 5,107 $ 5,111 0 % As a percent of As a percent of revenue 3 % 4 % ( 1 percent of revenue 3 % 4 % ( 1 ) ppt 3 % 4 % ( 1 ) ppt General and administrative expense and business tax . 46 PART II Item 7 OTHER . 46 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2021 2020 Interest and Year Ended June 30 , 2021 2020 Interest and dividend income Ended June 30 , 2021 2020 Interest and dividend income $ Interest and dividend income $ 2,131 $ 2,680 Interest expense ( dividend income $ 2,131 $ 2,680 Interest expense ( 2,346 ) $ 2,680 Interest expense ( 2,346 ) ( 2,591 ) Net expense ( 2,346 ) ( 2,591 ) Net recognized gain on Net recognized gain on investment 1,232 32 Net gain on derivative recognized gain on investment 1,232 32 Net gain on derivative 17 32 Net gain on derivative 17 187 Net gain ( loss Net gain on derivative 17 187 Net gain ( loss ) ) on foreign currency remeasurements 54 ( 191 ) Other , foreign currency remeasurements 54 ( 191 ) Other , net 98 191 ) Other , net 98 ( 40 ) Total $ Other , net 98 ( 40 ) Total $ 1,186 $ ( 40 ) Total $ 1,186 $ 77 We use derivative ) Total $ 1,186 $ 77 We use derivative instrument to tax rate for fiscal year 2021 and 2020 wa 14 % for fiscal year 2021 and 2020 wa 14 % and 17 year 2021 and 2020 wa 14 % and 17 % , 2020 wa 14 % and 17 % , respectively . The in India . In March 2021 , the India Supreme Court ruled favorably for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . Our effective tax rate service . In fiscal year 2021 , our U.S. income before before income tax wa $ 35.0 billion and our foreign income before income tax wa $ 36.1 billion . In fiscal year billion . In fiscal year 2020 , our U.S. income before before income tax wa $ 24.1 billion and our foreign income before income tax wa $ 28.9 billion . Uncertain Tax Positions ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . 47 PART for tax year 2004 to 2017 . 47 PART II Item year 2004 to 2017 . 47 PART II Item 7 As . 47 PART II Item 7 As of June 30 , Item 7 As of June 30 , 202 1 , the As of June 30 , 202 1 , the primary unresolved of June 30 , 202 1 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2020 , some of for tax year 1996 to 2020 , some of which are withholding tax in fiscal year 2021 . We believe these non-GAAP and per share amount ) 2021 2020 Percentage Change Net income per share amount ) 2021 2020 Percentage Change Net income $ Percentage Change Net income $ 61,271 $ 44,281 38 % Net Net income $ 61,271 $ 44,281 38 % Net income tax income $ 61,271 $ 44,281 38 % Net income tax benefit decision on withholding tax ( 620 ) 0 * Adjusted net withholding tax ( 620 ) 0 * Adjusted net income ( income ( non-GAAP ) $ 60,651 $ 44,281 37 % Diluted non-GAAP ) $ 60,651 $ 44,281 37 % Diluted earnings per ) $ 60,651 $ 44,281 37 % Diluted earnings per share Diluted earnings per share $ 8.05 $ 5.76 40 % Net per share $ 8.05 $ 5.76 40 % Net income tax share $ 8.05 $ 5.76 40 % Net income tax benefit decision on withholding tax ( 0.08 ) 0 * Adjusted diluted withholding tax ( 0.08 ) 0 * Adjusted diluted earnings per share ( non-GAAP ) $ 7.97 $ 5.76 38 % * non-GAAP ) $ 7.97 $ 5.76 38 % * Not meaningful ) $ 7.97 $ 5.76 38 % * Not meaningful . % * Not meaningful . 48 PART II Item 7 FINANCIAL . 48 PART II Item 7 FINANCIAL CONDITION Cash , Cash and short-term investment totaled $ 130.3 billion and $ 136.5 billion $ 130.3 billion and $ 136.5 billion a of June 30 136.5 billion a of June 30 , 2021 and 2020 . a of June 30 , 2021 and 2020 . Equity investment June 30 , 2021 and 2020 . Equity investment were $ . Equity investment were $ 6.0 billion and $ 3.0 billion $ 6.0 billion and $ 3.0 billion a of June 30 3.0 billion a of June 30 , 2021 and 2020 , a of June 30 , 2021 and 2020 , respectively . June 30 , 2021 and 2020 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price Cash from operation increased $ 16.1 billion to $ 76.7 billion $ 16.1 billion to $ 76.7 billion for fiscal year 2021 76.7 billion for fiscal year 2021 , mainly due to an used in financing increased $ 2.5 billion to $ 48.5 billion $ 2.5 billion to $ 48.5 billion for fiscal year 2021 48.5 billion for fiscal year 2021 , mainly due to a mainly due to a $ 4.4 billion increase in common stock stock repurchase and a $ 1.4 billion increase in dividend paid in part by a $ 1.8 billion decrease in repayment of of debt and a $ 1.7 billion decrease in cash premium used in investing increased $ 15.4 billion to $ 27.6 billion $ 15.4 billion to $ 27.6 billion for fiscal year 2021 27.6 billion for fiscal year 2021 , mainly due to a mainly due to a $ 6.4 billion increase in cash used other asset , a $ 5.2 billion increase in addition to equipment , and a $ 4.1 billion decrease in cash from existing debt . In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion environment . Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 49 PART II Item 7 Unearned . 49 PART II Item 7 Unearned Revenue Unearned revenue comprises service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) ) Three Months Ending September 30 , 2021 $ 15,922 December Months Ending September 30 , 2021 $ 15,922 December 31 , September 30 , 2021 $ 15,922 December 31 , 2021 12,646 , 2021 $ 15,922 December 31 , 2021 12,646 March 31 $ 15,922 December 31 , 2021 12,646 March 31 , 2022 15,922 December 31 , 2021 12,646 March 31 , 2022 8,786 31 , 2021 12,646 March 31 , 2022 8,786 June 30 2021 12,646 March 31 , 2022 8,786 June 30 , 2022 12,646 March 31 , 2022 8,786 June 30 , 2022 4,171 31 , 2022 8,786 June 30 , 2022 4,171 Thereafter 2,616 2022 8,786 June 30 , 2022 4,171 Thereafter 2,616 Total $ 8,786 June 30 , 2022 4,171 Thereafter 2,616 Total $ 44,141 30 , 2022 4,171 Thereafter 2,616 Total $ 44,141 If our 4,171 Thereafter 2,616 Total $ 44,141 If our customer choose to Share Repurchases During fiscal year 2021 and 2020 , we repurchased During fiscal year 2021 and 2020 , we repurchased 101 million and 2020 , we repurchased 101 million share and 126 million repurchased 101 million share and 126 million share of our common our common stock for $ 23.0 billion and $ 19.7 billion $ 23.0 billion and $ 19.7 billion , respectively , through resource . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . during the period presented . 50 PART II Item 7 Contractual . 50 PART II Item 7 Contractual Obligations The following table contractual obligation a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) : ( In million ) 2022 2023-2024 2025-2026 Thereafter Total Long-term ( In million ) 2022 2023-2024 2025-2026 Thereafter Total Long-term debt In million ) 2022 2023-2024 2025-2026 Thereafter Total Long-term debt : a ) Principal payment $ 8,075 $ 8,000 $ 5,250 $ Principal payment $ 8,075 $ 8,000 $ 5,250 $ 42,585 $ $ 8,075 $ 8,000 $ 5,250 $ 42,585 $ 63,910 Interest $ 8,000 $ 5,250 $ 42,585 $ 63,910 Interest payment 1,628 $ 5,250 $ 42,585 $ 63,910 Interest payment 1,628 2,847 2,438 42,585 $ 63,910 Interest payment 1,628 2,847 2,438 17,320 24,233 Construction $ 63,910 Interest payment 1,628 2,847 2,438 17,320 24,233 Construction commitment 63,910 Interest payment 1,628 2,847 2,438 17,320 24,233 Construction commitment ( Interest payment 1,628 2,847 2,438 17,320 24,233 Construction commitment ( b payment 1,628 2,847 2,438 17,320 24,233 Construction commitment ( b ) Construction commitment ( b ) 8,927 529 0 0 9,456 Operating commitment ( b ) 8,927 529 0 0 9,456 Operating lease ( b ) 8,927 529 0 0 9,456 Operating lease , b ) 8,927 529 0 0 9,456 Operating lease , including ) 8,927 529 0 0 9,456 Operating lease , including imputed imputed interest ( c ) 2,801 4,956 3,469 6,747 17,973 Finance interest ( c ) 2,801 4,956 3,469 6,747 17,973 Finance lease ( c ) 2,801 4,956 3,469 6,747 17,973 Finance lease , c ) 2,801 4,956 3,469 6,747 17,973 Finance lease , including ) 2,801 4,956 3,469 6,747 17,973 Finance lease , including imputed imputed interest ( c ) 1,341 3,256 3,774 14,096 22,467 Transition interest ( c ) 1,341 3,256 3,774 14,096 22,467 Transition tax ( c ) 1,341 3,256 3,774 14,096 22,467 Transition tax ( c ) 1,341 3,256 3,774 14,096 22,467 Transition tax ( d ) 1,341 3,256 3,774 14,096 22,467 Transition tax ( d ) Transition tax ( d ) 1,427 4,105 8,030 0 13,562 Purchase tax ( d ) 1,427 4,105 8,030 0 13,562 Purchase commitment ( d ) 1,427 4,105 8,030 0 13,562 Purchase commitment ( d ) 1,427 4,105 8,030 0 13,562 Purchase commitment ( e ) 1,427 4,105 8,030 0 13,562 Purchase commitment ( e ) Purchase commitment ( e ) 29,129 1,708 446 270 31,553 Other commitment ( e ) 29,129 1,708 446 270 31,553 Other long-term ( e ) 29,129 1,708 446 270 31,553 Other long-term liability e ) 29,129 1,708 446 270 31,553 Other long-term liability ( ) 29,129 1,708 446 270 31,553 Other long-term liability ( f long-term liability ( f ) 0 365 68 263 696 Total liability ( f ) 0 365 68 263 696 Total $ ( f ) 0 365 68 263 696 Total $ 53,328 f ) 0 365 68 263 696 Total $ 53,328 $ ) 0 365 68 263 696 Total $ 53,328 $ 25,766 68 263 696 Total $ 53,328 $ 25,766 $ 23,475 $ 696 Total $ 53,328 $ 25,766 $ 23,475 $ 81,281 $ $ 53,328 $ 25,766 $ 23,475 $ 81,281 $ 183,850 ( $ 25,766 $ 23,475 $ 81,281 $ 183,850 ( a ) $ 23,475 $ 81,281 $ 183,850 ( a ) Refer to a ) Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) d ) Refer to Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( e ) deferred income tax of $ 14.6 billion from the amount presented Uses of Capital On April 11 , 2021 , we entered Capital On April 11 , 2021 , we entered into a Nuance ” ) for $ 56.00 per share in an all-cash all-cash transaction valued at $ 19.7 billion , inclusive of Nuance the end of calendar year 2021 , subject to the satisfaction over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . paid transition tax of $ 4.7 billion , which included $ billion , which included $ 1.5 billion for fiscal year 2021 1.5 billion for fiscal year 2021 . The remaining transition tax remaining transition tax of $ 13.6 billion is payable over the final payment in fiscal year 2026 . We expect existing cash for at least the next 12 month and thereafter for the for the foreseeable future . 51 PART II Item 7 RECENT . 51 PART II Item 7 RECENT ACCOUNTING GUIDANCE Refer to ACCOUNTING GUIDANCE Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the may incur future impairment . 52 PART II Item 7 Equity . 52 PART II Item 7 Equity investment without readily determinable an annual basis ( May 1 for u ) and between that ha a greater than 50 % likelihood of being realized our consolidated financial statement . 53 PART II Item 7 The . 53 PART II Item 7 The TCJA significantly change existing business . Refer to Note 12 – Income Taxes of the Part I I , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . to cost of revenue . 54 PART II Item 7 STATEMENT . 54 PART II Item 7 STATEMENT OF MANAGEMENT ’ S President and Chief Accounting Officer 55 PART II Item 7A ITEM Officer 55 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITAT IVE Risk Categories Hypothetical Change June 30 , 2021 Impact Foreign currency–Revenue Hypothetical Change June 30 , 2021 Impact Foreign currency–Revenue 10 % , 2021 Impact Foreign currency–Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 6,756 ) Earnings Foreign currency–Investments 10 6,756 ) Earnings Foreign currency–Investments 10 % decrease in foreign exchange in foreign exchange rate ( 136 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 3,511 ) Fair Value Credit 100 3,511 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 309 ) Fair Value Equity 10 309 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 602 ) Earnings 56 PART II price ( 602 ) Earnings 56 PART II Item 8 ITEM Earnings 56 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2021 2020 2019 Revenue Year Ended June 30 , 2021 2020 2019 Revenue : Product Ended June 30 , 2021 2020 2019 Revenue : Product $ June 30 , 2021 2020 2019 Revenue : Product $ 71,074 2019 Revenue : Product $ 71,074 $ 68,041 $ 66,069 Service : Product $ 71,074 $ 68,041 $ 66,069 Service and other $ 71,074 $ 68,041 $ 66,069 Service and other 97,014 74,974 $ 66,069 Service and other 97,014 74,974 59,774 Total revenue 168,088 66,069 Service and other 97,014 74,974 59,774 Total revenue 168,088 143,015 Service and other 97,014 74,974 59,774 Total revenue 168,088 143,015 125,843 97,014 74,974 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue 74,974 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue : 59,774 Total revenue 168,088 143,015 125,843 Cost of revenue : Product Cost of revenue : Product 18,219 16,017 16,273 Service and other of revenue : Product 18,219 16,017 16,273 Service and other 34,013 revenue : Product 18,219 16,017 16,273 Service and other 34,013 30,061 16,017 16,273 Service and other 34,013 30,061 26,637 Total cost of 16,273 Service and other 34,013 30,061 26,637 Total cost of revenue Service and other 34,013 30,061 26,637 Total cost of revenue 52,232 26,637 Total cost of revenue 52,232 46,078 42,910 Gross margin 115,856 Total cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 cost of revenue 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 52,232 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 46,078 42,910 Gross margin 115,856 96,937 82,933 Research and development 20,716 42,910 Gross margin 115,856 96,937 82,933 Research and development 20,716 19,269 96,937 82,933 Research and development 20,716 19,269 16,876 Sales and marketing 82,933 Research and development 20,716 19,269 16,876 Sales and marketing 20,117 Research and development 20,716 19,269 16,876 Sales and marketing 20,117 19,598 19,269 16,876 Sales and marketing 20,117 19,598 18,213 General and administrative 16,876 Sales and marketing 20,117 19,598 18,213 General and administrative 5,107 Sales and marketing 20,117 19,598 18,213 General and administrative 5,107 5,111 19,598 18,213 General and administrative 5,107 5,111 4,885 Operating income 69,916 18,213 General and administrative 5,107 5,111 4,885 Operating income 69,916 52,959 General and administrative 5,107 5,111 4,885 Operating income 69,916 52,959 42,959 5,107 5,111 4,885 Operating income 69,916 52,959 42,959 Other income , 5,111 4,885 Operating income 69,916 52,959 42,959 Other income , net 4,885 Operating income 69,916 52,959 42,959 Other income , net 1,186 42,959 Other income , net 1,186 77 729 Income before income Other income , net 1,186 77 729 Income before income tax income , net 1,186 77 729 Income before income tax 71,102 729 Income before income tax 71,102 53,036 43,688 Provision for income Income before income tax 71,102 53,036 43,688 Provision for income tax before income tax 71,102 53,036 43,688 Provision for income tax 9,831 43,688 Provision for income tax 9,831 8,755 4,448 Net income $ Provision for income tax 9,831 8,755 4,448 Net income $ 61,271 for income tax 9,831 8,755 4,448 Net income $ 61,271 $ 8,755 4,448 Net income $ 61,271 $ 44,281 $ 39,240 Earnings Net income $ 61,271 $ 44,281 $ 39,240 Earnings per share $ 61,271 $ 44,281 $ 39,240 Earnings per share : Basic per share : Basic $ 8.12 $ 5.82 $ 5.11 Diluted : Basic $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 8.12 $ 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 5.82 $ 5.11 Diluted $ 8.05 $ 5.76 $ 5.06 Weighted 5.11 Diluted $ 8.05 $ 5.76 $ 5.06 Weighted average share $ 8.05 $ 5.76 $ 5.06 Weighted average share outstanding : average share outstanding : Basic 7,547 7,610 7,673 Diluted 7,608 7,683 share outstanding : Basic 7,547 7,610 7,673 Diluted 7,608 7,683 7,753 outstanding : Basic 7,547 7,610 7,673 Diluted 7,608 7,683 7,753 Refer Basic 7,547 7,610 7,673 Diluted 7,608 7,683 7,753 Refer to accompanying 7,547 7,610 7,673 Diluted 7,608 7,683 7,753 Refer to accompanying note 7,610 7,673 Diluted 7,608 7,683 7,753 Refer to accompanying note . Refer to accompanying note . 57 PART II Item 8 COMPREHENSIVE . 57 PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2021 2020 2019 Net Year Ended June 30 , 2021 2020 2019 Net income $ Ended June 30 , 2021 2020 2019 Net income $ 61,271 June 30 , 2021 2020 2019 Net income $ 61,271 $ 2020 2019 Net income $ 61,271 $ 44,281 $ 39,240 Other Net income $ 61,271 $ 44,281 $ 39,240 Other comprehensive income $ 61,271 $ 44,281 $ 39,240 Other comprehensive income ( loss Net change related to derivative 19 ( 38 ) ( 173 related to derivative 19 ( 38 ) ( 173 ) Net 19 ( 38 ) ( 173 ) Net change related to change related to investment ( 2,266 ) 3,990 2,405 Translation adjustment to investment ( 2,266 ) 3,990 2,405 Translation adjustment and other investment ( 2,266 ) 3,990 2,405 Translation adjustment and other 873 2,405 Translation adjustment and other 873 ( 426 ) ( 318 adjustment and other 873 ( 426 ) ( 318 ) Other 873 ( 426 ) ( 318 ) Other comprehensive income ( income ( loss ) ( 1,374 ) 3,526 1,914 Comprehensive income loss ) ( 1,374 ) 3,526 1,914 Comprehensive income $ 59,897 ) ( 1,374 ) 3,526 1,914 Comprehensive income $ 59,897 $ 3,526 1,914 Comprehensive income $ 59,897 $ 47,807 $ 41,154 Refer Comprehensive income $ 59,897 $ 47,807 $ 41,154 Refer to accompanying $ 59,897 $ 47,807 $ 41,154 Refer to accompanying note . Refer to accompanying note . 58 PART II Item 8 BALANCE . 58 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2021 2020 Assets Current million ) June 30 , 2021 2020 Assets Current asset : ) June 30 , 2021 2020 Assets Current asset : Cash Cash and cash equivalent $ 14,224 $ 13,576 Short-term investment 116,110 cash equivalent $ 14,224 $ 13,576 Short-term investment 116,110 122,951 Total 14,224 $ 13,576 Short-term investment 116,110 122,951 Total cash , cash $ 13,576 Short-term investment 116,110 122,951 Total cash , cash equivalent equivalent , and short-term investment 130,334 136,527 Accounts receivable , net , and short-term investment 130,334 136,527 Accounts receivable , net of for doubtful account of $ 751 and $ 788 38,043 32,011 of $ 751 and $ 788 38,043 32,011 Inventories 2,636 1,895 $ 751 and $ 788 38,043 32,011 Inventories 2,636 1,895 Other 751 and $ 788 38,043 32,011 Inventories 2,636 1,895 Other current $ 788 38,043 32,011 Inventories 2,636 1,895 Other current asset 13,393 788 38,043 32,011 Inventories 2,636 1,895 Other current asset 13,393 11,482 2,636 1,895 Other current asset 13,393 11,482 Total current asset 184,406 1,895 Other current asset 13,393 11,482 Total current asset 184,406 181,915 13,393 11,482 Total current asset 184,406 181,915 Property and equipment , 11,482 Total current asset 184,406 181,915 Property and equipment , net of accumulated depreciation of $ 51,351 and $ 43,197 59,715 44,151 of $ 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use $ 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use asset 51,351 and $ 43,197 59,715 44,151 Operating lease right-of-use asset 11,088 44,151 Operating lease right-of-use asset 11,088 8,753 Equity investment 5,984 2,965 Operating lease right-of-use asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill asset 11,088 8,753 Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible 11,088 8,753 Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset Equity investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset , net investment 5,984 2,965 Goodwill 49,711 43,351 Intangible asset , net 7,800 43,351 Intangible asset , net 7,800 7,038 Other long-term asset 15,075 Intangible asset , net 7,800 7,038 Other long-term asset 15,075 13,138 7,800 7,038 Other long-term asset 15,075 13,138 Total asset $ 333,779 7,038 Other long-term asset 15,075 13,138 Total asset $ 333,779 $ 15,075 13,138 Total asset $ 333,779 $ 301,311 Liabilities and stockholder Total asset $ 333,779 $ 301,311 Liabilities and stockholder ’ equity liability : Accounts payable $ 15,163 $ 12,530 Current portion of Accounts payable $ 15,163 $ 12,530 Current portion of long-term debt Current portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 portion of long-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term debt 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 8,072 3,749 Accrued compensation 10,057 7,874 Short-term income tax 2,174 2,130 10,057 7,874 Short-term income tax 2,174 2,130 Short-term unearned revenue 41,525 7,874 Short-term income tax 2,174 2,130 Short-term unearned revenue 41,525 36,000 2,174 2,130 Short-term unearned revenue 41,525 36,000 Other current liability 11,666 2,130 Short-term unearned revenue 41,525 36,000 Other current liability 11,666 10,027 41,525 36,000 Other current liability 11,666 10,027 Total current liability 88,657 36,000 Other current liability 11,666 10,027 Total current liability 88,657 72,310 11,666 10,027 Total current liability 88,657 72,310 Long-term debt 50,074 59,578 10,027 Total current liability 88,657 72,310 Long-term debt 50,074 59,578 Long-term liability 88,657 72,310 Long-term debt 50,074 59,578 Long-term income tax 27,190 88,657 72,310 Long-term debt 50,074 59,578 Long-term income tax 27,190 29,432 50,074 59,578 Long-term income tax 27,190 29,432 Long-term unearned revenue 2,616 59,578 Long-term income tax 27,190 29,432 Long-term unearned revenue 2,616 3,180 27,190 29,432 Long-term unearned revenue 2,616 3,180 Deferred income tax 198 29,432 Long-term unearned revenue 2,616 3,180 Deferred income tax 198 204 2,616 3,180 Deferred income tax 198 204 Operating lease liability 9,629 3,180 Deferred income tax 198 204 Operating lease liability 9,629 7,671 198 204 Operating lease liability 9,629 7,671 Other long-term liability 13,427 204 Operating lease liability 9,629 7,671 Other long-term liability 13,427 10,632 9,629 7,671 Other long-term liability 13,427 10,632 Total liability 191,791 183,007 7,671 Other long-term liability 13,427 10,632 Total liability 191,791 183,007 Commitments liability 13,427 10,632 Total liability 191,791 183,007 Commitments and contingency Stockholders 13,427 10,632 Total liability 191,791 183,007 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,519 and 7,571 share authorized 24,000 ; outstanding 7,519 and 7,571 83,111 80,552 Retained 24,000 ; outstanding 7,519 and 7,571 83,111 80,552 Retained earnings 57,055 ; outstanding 7,519 and 7,571 83,111 80,552 Retained earnings 57,055 34,566 outstanding 7,519 and 7,571 83,111 80,552 Retained earnings 57,055 34,566 Accumulated 7,571 83,111 80,552 Retained earnings 57,055 34,566 Accumulated other comprehensive income 83,111 80,552 Retained earnings 57,055 34,566 Accumulated other comprehensive income 1,822 34,566 Accumulated other comprehensive income 1,822 3,186 Total stockholder ’ equity Accumulated other comprehensive income 1,822 3,186 Total stockholder ’ equity 141,988 3,186 Total stockholder ’ equity 141,988 118,304 Total liability and stockholder Total stockholder ’ equity 141,988 118,304 Total liability and stockholder ’ and stockholder ’ equity $ 333,779 $ 301,311 Refer to accompanying ’ equity $ 333,779 $ 301,311 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 CASH . 59 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2021 2020 2019 Operations Year Ended June 30 , 2021 2020 2019 Operations Net income Ended June 30 , 2021 2020 2019 Operations Net income $ June 30 , 2021 2020 2019 Operations Net income $ 61,271 2019 Operations Net income $ 61,271 $ 44,281 $ 39,240 Adjustments Net income $ 61,271 $ 44,281 $ 39,240 Adjustments to reconcile $ 61,271 $ 44,281 $ 39,240 Adjustments to reconcile net income , amortization , and other 11,686 12,796 11,682 Stock-based compensation expense amortization , and other 11,686 12,796 11,682 Stock-based compensation expense 6,118 , and other 11,686 12,796 11,682 Stock-based compensation expense 6,118 5,289 12,796 11,682 Stock-based compensation expense 6,118 5,289 4,652 Net recognized gain 11,682 Stock-based compensation expense 6,118 5,289 4,652 Net recognized gain on Stock-based compensation expense 6,118 5,289 4,652 Net recognized gain on investment on investment and derivative ( 1,249 ) ( 219 ) ( derivative ( 1,249 ) ( 219 ) ( 792 ) Deferred ) ( 219 ) ( 792 ) Deferred income tax ( ) Deferred income tax ( 150 ) 11 ( 6,463 ) income tax ( 150 ) 11 ( 6,463 ) Changes in ( 150 ) 11 ( 6,463 ) Changes in operating asset liability : Accounts receivable ( 6,481 ) ( 2,577 ) ( receivable ( 6,481 ) ( 2,577 ) ( 2,812 ) Inventories ) ( 2,577 ) ( 2,812 ) Inventories ( 737 ) ( 2,812 ) Inventories ( 737 ) 168 597 Other current ) Inventories ( 737 ) 168 597 Other current asset ( Inventories ( 737 ) 168 597 Other current asset ( 932 597 Other current asset ( 932 ) ( 2,330 ) ( asset ( 932 ) ( 2,330 ) ( 1,718 ) Other ) ( 2,330 ) ( 1,718 ) Other long-term asset ( ) Other long-term asset ( 3,459 ) ( 1,037 ) ( asset ( 3,459 ) ( 1,037 ) ( 1,834 ) Accounts ) ( 1,037 ) ( 1,834 ) Accounts payable 2,798 3,018 ( 1,834 ) Accounts payable 2,798 3,018 232 Unearned revenue 4,633 1,834 ) Accounts payable 2,798 3,018 232 Unearned revenue 4,633 2,212 ) Accounts payable 2,798 3,018 232 Unearned revenue 4,633 2,212 4,462 2,798 3,018 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 3,018 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 2,309 232 Unearned revenue 4,633 2,212 4,462 Income tax ( 2,309 ) 2,212 4,462 Income tax ( 2,309 ) ( 3,631 ) 2,929 tax ( 2,309 ) ( 3,631 ) 2,929 Other current liability 2,309 ) ( 3,631 ) 2,929 Other current liability 4,149 1,346 ) 2,929 Other current liability 4,149 1,346 1,419 Other long-term liability 2,929 Other current liability 4,149 1,346 1,419 Other long-term liability 1,402 Other current liability 4,149 1,346 1,419 Other long-term liability 1,402 1,348 1,346 1,419 Other long-term liability 1,402 1,348 591 Net cash from 1,419 Other long-term liability 1,402 1,348 591 Net cash from operation Other long-term liability 1,402 1,348 591 Net cash from operation 76,740 591 Net cash from operation 76,740 60,675 52,185 Financing Cash premium Net cash from operation 76,740 60,675 52,185 Financing Cash premium on cash from operation 76,740 60,675 52,185 Financing Cash premium on debt premium on debt exchange ( 1,754 ) ( 3,417 ) 0 exchange ( 1,754 ) ( 3,417 ) 0 Repayments of debt 1,754 ) ( 3,417 ) 0 Repayments of debt ( 3,750 0 Repayments of debt ( 3,750 ) ( 5,518 ) ( debt ( 3,750 ) ( 5,518 ) ( 4,000 ) Common ) ( 5,518 ) ( 4,000 ) Common stock issued 1,693 4,000 ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ) Common stock issued 1,693 1,343 1,142 Common stock repurchased ( Common stock issued 1,693 1,343 1,142 Common stock repurchased ( 27,385 1,142 Common stock repurchased ( 27,385 ) ( 22,968 ) ( repurchased ( 27,385 ) ( 22,968 ) ( 19,543 ) Common ) ( 22,968 ) ( 19,543 ) Common stock cash dividend stock cash dividend paid ( 16,521 ) ( 15,137 ) ( paid ( 16,521 ) ( 15,137 ) ( 13,811 ) Other ) ( 15,137 ) ( 13,811 ) Other , net ( ) Other , net ( 769 ) ( 334 ) ( net ( 769 ) ( 334 ) ( 675 ) Net ) ( 334 ) ( 675 ) Net cash used in cash used in financing ( 48,486 ) ( 46,031 ) ( financing ( 48,486 ) ( 46,031 ) ( 36,887 ) Investing ) ( 46,031 ) ( 36,887 ) Investing Additions to property to property and equipment ( 20,622 ) ( 15,441 ) ( equipment ( 20,622 ) ( 15,441 ) ( 13,925 ) Acquisition ) ( 15,441 ) ( 13,925 ) Acquisition of company , intangible and other asset ( 8,909 ) ( 2,521 ) ( asset ( 8,909 ) ( 2,521 ) ( 2,388 ) Purchases ) ( 2,521 ) ( 2,388 ) Purchases of investment ( ) Purchases of investment ( 62,924 ) ( 77,190 ) ( investment ( 62,924 ) ( 77,190 ) ( 57,697 ) Maturities ) ( 77,190 ) ( 57,697 ) Maturities of investment 51,792 57,697 ) Maturities of investment 51,792 66,449 20,043 Sales of investment ) Maturities of investment 51,792 66,449 20,043 Sales of investment 14,008 Maturities of investment 51,792 66,449 20,043 Sales of investment 14,008 17,721 66,449 20,043 Sales of investment 14,008 17,721 38,194 Other , net 20,043 Sales of investment 14,008 17,721 38,194 Other , net ( Sales of investment 14,008 17,721 38,194 Other , net ( 922 38,194 Other , net ( 922 ) ( 1,241 ) 0 net ( 922 ) ( 1,241 ) 0 Net cash used 922 ) ( 1,241 ) 0 Net cash used in investing cash used in investing ( 27,577 ) ( 12,223 ) ( investing ( 27,577 ) ( 12,223 ) ( 15,773 ) Effect ) ( 12,223 ) ( 15,773 ) Effect of foreign exchange cash and cash equivalent ( 29 ) ( 201 ) ( equivalent ( 29 ) ( 201 ) ( 115 ) Net ) ( 201 ) ( 115 ) Net change in cash in cash and cash equivalent 648 2,220 ( 590 ) Cash cash and cash equivalent 648 2,220 ( 590 ) Cash and cash equivalent 648 2,220 ( 590 ) Cash and cash equivalent equivalent , beginning of period 13,576 11,356 11,946 Cash and cash , beginning of period 13,576 11,356 11,946 Cash and cash equivalent beginning of period 13,576 11,356 11,946 Cash and cash equivalent , , end of period $ 14,224 $ 13,576 $ 11,356 Refer of period $ 14,224 $ 13,576 $ 11,356 Refer to accompanying $ 14,224 $ 13,576 $ 11,356 Refer to accompanying note . Refer to accompanying note . 60 PART II Item 8 STOCKHOLDERS . 60 PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( amount ) Year Ended June 30 , 2021 2020 2019 Common Year Ended June 30 , 2021 2020 2019 Common stock and Ended June 30 , 2021 2020 2019 Common stock and paid-in June 30 , 2021 2020 2019 Common stock and paid-in capital , beginning of period $ 80,552 $ 78,520 $ 71,223 Common of period $ 80,552 $ 78,520 $ 71,223 Common stock issued $ 80,552 $ 78,520 $ 71,223 Common stock issued 1,963 1,343 $ 71,223 Common stock issued 1,963 1,343 6,829 Common stock repurchased 71,223 Common stock issued 1,963 1,343 6,829 Common stock repurchased ( Common stock issued 1,963 1,343 6,829 Common stock repurchased ( 5,539 6,829 Common stock repurchased ( 5,539 ) ( 4,599 ) ( repurchased ( 5,539 ) ( 4,599 ) ( 4,195 ) Stock-based ) ( 4,599 ) ( 4,195 ) Stock-based compensation expense 6,118 4,195 ) Stock-based compensation expense 6,118 5,289 4,652 Other , net ) Stock-based compensation expense 6,118 5,289 4,652 Other , net 17 Stock-based compensation expense 6,118 5,289 4,652 Other , net 17 ( 5,289 4,652 Other , net 17 ( 1 ) 11 Balance Other , net 17 ( 1 ) 11 Balance , end net 17 ( 1 ) 11 Balance , end of period Balance , end of period 83,111 80,552 78,520 Retained earnings Balance , end of period 83,111 80,552 78,520 Retained earnings Balance , end of period 83,111 80,552 78,520 Retained earnings Balance , beginning Balance , beginning of period 34,566 24,150 13,682 Net income 61,271 , beginning of period 34,566 24,150 13,682 Net income 61,271 44,281 beginning of period 34,566 24,150 13,682 Net income 61,271 44,281 39,240 34,566 24,150 13,682 Net income 61,271 44,281 39,240 Common stock cash 24,150 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend 13,682 Net income 61,271 44,281 39,240 Common stock cash dividend ( Common stock cash dividend ( 16,871 ) ( 15,483 ) ( dividend ( 16,871 ) ( 15,483 ) ( 14,103 ) Common ) ( 15,483 ) ( 14,103 ) Common stock repurchased ( ) Common stock repurchased ( 21,879 ) ( 18,382 ) ( repurchased ( 21,879 ) ( 18,382 ) ( 15,346 ) Cumulative ) ( 18,382 ) ( 15,346 ) Cumulative effect of accounting effect of accounting change ( 32 ) 0 677 Balance , accounting change ( 32 ) 0 677 Balance , end of change ( 32 ) 0 677 Balance , end of period Balance , end of period 57,055 34,566 24,150 Accumulated other comprehensive , end of period 57,055 34,566 24,150 Accumulated other comprehensive income end of period 57,055 34,566 24,150 Accumulated other comprehensive income ( Balance , beginning of period 3,186 ( 340 ) ( 2,187 beginning of period 3,186 ( 340 ) ( 2,187 ) Other 3,186 ( 340 ) ( 2,187 ) Other comprehensive income ( income ( loss ) ( 1,374 ) 3,526 1,914 Cumulative effect loss ) ( 1,374 ) 3,526 1,914 Cumulative effect of accounting ) ( 1,374 ) 3,526 1,914 Cumulative effect of accounting change Cumulative effect of accounting change 10 0 ( 67 ) Balance effect of accounting change 10 0 ( 67 ) Balance , accounting change 10 0 ( 67 ) Balance , end of Balance , end of period 1,822 3,186 ( 340 ) Total , end of period 1,822 3,186 ( 340 ) Total stockholder of period 1,822 3,186 ( 340 ) Total stockholder ’ equity Total stockholder ’ equity $ 141,988 $ 118,304 $ 102,330 Cash ’ equity $ 141,988 $ 118,304 $ 102,330 Cash dividend declared $ 141,988 $ 118,304 $ 102,330 Cash dividend declared per common declared per common share $ 2.24 $ 2.04 $ 1.84 Refer common share $ 2.24 $ 2.04 $ 1.84 Refer to accompanying $ 2.24 $ 2.04 $ 1.84 Refer to accompanying note . Refer to accompanying note . 61 PART II Item 8 NOTES . 61 PART II Item 8 NOTES TO FINANCI AL STATEMENTS TO FINANCI AL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles to COVID-19 . In July 2020 , we completed an assessment wa effective beginning fiscal year 2021 . Based on the carrying , net a of June 30 , 2020 , the effect a of June 30 , 2020 , the effect of this in estimate for fiscal year 2021 wa an increase in operating in operating income of $ 2.7 billion and net income of and net income of $ 2.3 billion , or $ 0.30 2.3 billion , or $ 0.30 per both basic and diluted and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 62 PART II Item 8 Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , , Xbox subscription , Windows 10 post-delivery support , Dynamics business service . Refer to Note 13 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , other receivables June 30 , 2021 and 2020 , other receivables due from due from supplier were $ 965 million and $ 442 million $ 965 million and $ 442 million , respectively , and sheet . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , long-term account June 30 , 2021 and 2020 , long-term account receivable , doubtful account , wa $ 3.4 billion and $ 2.7 billion $ 3.4 billion and $ 2.7 billion , respectively , and other currently available evidence . 64 PART II Item 8 Activity . 64 PART II Item 8 Activity in the allowance for million ) Year Ended June 30 , 2021 2020 2019 Balance Year Ended June 30 , 2021 2020 2019 Balance , beginning Ended June 30 , 2021 2020 2019 Balance , beginning of June 30 , 2021 2020 2019 Balance , beginning of period , beginning of period $ 816 $ 434 $ 397 Charged of period $ 816 $ 434 $ 397 Charged to cost $ 816 $ 434 $ 397 Charged to cost and other Charged to cost and other 234 560 153 Write-offs ( 252 to cost and other 234 560 153 Write-offs ( 252 ) cost and other 234 560 153 Write-offs ( 252 ) ( 234 560 153 Write-offs ( 252 ) ( 178 ) ( Write-offs ( 252 ) ( 178 ) ( 116 ) Balance ) ( 178 ) ( 116 ) Balance , end of , end of period $ 798 $ 816 $ 434 Allowance of period $ 798 $ 816 $ 434 Allowance for doubtful $ 798 $ 816 $ 434 Allowance for doubtful account included ( In million ) June 30 , 2021 2020 2019 Accounts million ) June 30 , 2021 2020 2019 Accounts receivable , ) June 30 , 2021 2020 2019 Accounts receivable , net June 30 , 2021 2020 2019 Accounts receivable , net of allowance for doubtful account $ 751 $ 788 $ 411 Other doubtful account $ 751 $ 788 $ 411 Other long-term asset $ 751 $ 788 $ 411 Other long-term asset 47 28 $ 411 Other long-term asset 47 28 23 Total $ 798 411 Other long-term asset 47 28 23 Total $ 798 $ Other long-term asset 47 28 23 Total $ 798 $ 816 47 28 23 Total $ 798 $ 816 $ 434 We 23 Total $ 798 $ 816 $ 434 We record financing $ 798 $ 816 $ 434 We record financing receivables when country . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , our financing June 30 , 2021 and 2020 , our financing receivables , receivables , net were $ 4.4 billion and $ 5.2 billion $ 4.4 billion and $ 5.2 billion , respectively , for a period generally ranging from 90 day to three year . the amount a necessary . 65 PART II Item 8 Research . 65 PART II Item 8 Research and Development Research and . Advertising expense wa $ 1.5 billion , $ 1.6 billion $ 1.5 billion , $ 1.6 billion , and $ 1.6 1.6 billion , and $ 1.6 billion in fiscal year 2021 1.6 billion in fiscal year 2021 , 2020 , and 2019 in fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . Stock-Based Compensation available for current operation . 66 PART II Item 8 Debt . 66 PART II Item 8 Debt investment are classified a level are : • Level 1 – input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability primarily option and swap contract . 67 PART II Item 8 • . 67 PART II Item 8 • Level 3 – input II Item 8 • Level 3 – input are generally unobservable flow model . Our Level 3 asset and liability include investment and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between below it carrying value . 68 PART II Item 8 Intangible . 68 PART II Item 8 Intangible Assets Our intangible asset , ranging from one to 20 year . We evaluate the – Credit Losses In June 2016 , the FASB issued a adopted the standard effective July 1 , 2020 . We use standard effective July 1 , 2020 . We use a forward-looking for Income Taxes In December 2019 , the FASB issued a effective for u beginning July 1 , 2021 . We have u beginning July 1 , 2021 . We have completed our consolidated financial statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2021 2020 2019 Net Year Ended June 30 , 2021 2020 2019 Net income available Ended June 30 , 2021 2020 2019 Net income available for June 30 , 2021 2020 2019 Net income available for common shareholder ( A ) $ 61,271 $ 44,281 $ 39,240 Weighted A ) $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding $ 61,271 $ 44,281 $ 39,240 Weighted average outstanding share of common stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based ( B ) 7,547 7,610 7,673 Dilutive effect of stock-based award Dilutive effect of stock-based award 61 73 80 Common stock and effect of stock-based award 61 73 80 Common stock and common of stock-based award 61 73 80 Common stock and common stock stock equivalent ( C ) 7,608 7,683 7,753 Earnings Per Share equivalent ( C ) 7,608 7,683 7,753 Earnings Per Share Basic ( C ) 7,608 7,683 7,753 Earnings Per Share Basic ( Basic ( A/B ) $ 8.12 $ 5.82 $ 5.11 Diluted A/B ) $ 8.12 $ 5.82 $ 5.11 Diluted ( A/C $ 8.12 $ 5.82 $ 5.11 Diluted ( A/C ) $ Diluted ( A/C ) $ 8.05 $ 5.76 $ 5.06 Anti-dilutive A/C ) $ 8.05 $ 5.76 $ 5.06 Anti-dilutive stock-based award $ 8.05 $ 5.76 $ 5.06 Anti-dilutive stock-based award excluded from during the period presented . 69 PART II Item 8 NOTE . 69 PART II Item 8 NOTE 3 — OTHER INCOME PART II Item 8 NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2021 2020 2019 Interest Year Ended June 30 , 2021 2020 2019 Interest and dividend Ended June 30 , 2021 2020 2019 Interest and dividend income June 30 , 2021 2020 2019 Interest and dividend income $ Interest and dividend income $ 2,131 $ 2,680 $ 2,762 Interest dividend income $ 2,131 $ 2,680 $ 2,762 Interest expense ( $ 2,131 $ 2,680 $ 2,762 Interest expense ( 2,346 ) $ 2,762 Interest expense ( 2,346 ) ( 2,591 ) ( expense ( 2,346 ) ( 2,591 ) ( 2,686 ) Net ) ( 2,591 ) ( 2,686 ) Net recognized gain on Net recognized gain on investment 1,232 32 648 Net gain on recognized gain on investment 1,232 32 648 Net gain on derivative gain on investment 1,232 32 648 Net gain on derivative 17 648 Net gain on derivative 17 187 144 Net gain ( Net gain on derivative 17 187 144 Net gain ( loss gain on derivative 17 187 144 Net gain ( loss ) ) on foreign currency remeasurements 54 ( 191 ) ( 82 foreign currency remeasurements 54 ( 191 ) ( 82 ) Other 54 ( 191 ) ( 82 ) Other , net 98 82 ) Other , net 98 ( 40 ) ( 57 Other , net 98 ( 40 ) ( 57 ) Total 98 ( 40 ) ( 57 ) Total $ 1,186 $ ( 57 ) Total $ 1,186 $ 77 $ 729 Net ) Total $ 1,186 $ 77 $ 729 Net Recognized Gains $ 1,186 $ 77 $ 729 Net Recognized Gains ( Losses million ) Year Ended June 30 , 2021 2020 2019 Realized Year Ended June 30 , 2021 2020 2019 Realized gain from Ended June 30 , 2021 2020 2019 Realized gain from sale June 30 , 2021 2020 2019 Realized gain from sale of sale of available-for-sale security $ 105 $ 50 $ 12 Realized available-for-sale security $ 105 $ 50 $ 12 Realized loss from $ 105 $ 50 $ 12 Realized loss from sale of sale of available-for-sale security ( 40 ) ( 37 ) ( security ( 40 ) ( 37 ) ( 93 ) Impairments ) ( 37 ) ( 93 ) Impairments and allowance for allowance for credit loss ( 2 ) ( 17 ) ( loss ( 2 ) ( 17 ) ( 16 ) Total ) ( 17 ) ( 16 ) Total $ 63 $ ( 16 ) Total $ 63 $ ( 4 ) $ Total $ 63 $ ( 4 ) $ ( 97 ) ( 4 ) $ ( 97 ) Net recognized gain ( million ) Year Ended June 30 , 2021 2020 2019 Net Year Ended June 30 , 2021 2020 2019 Net realized gain Ended June 30 , 2021 2020 2019 Net realized gain on June 30 , 2021 2020 2019 Net realized gain on investment gain on investment sold $ 123 $ 83 $ 276 Net investment sold $ 123 $ 83 $ 276 Net unrealized gain $ 123 $ 83 $ 276 Net unrealized gain on investment gain on investment still held 1,057 69 479 Impairments of investment on investment still held 1,057 69 479 Impairments of investment ( investment still held 1,057 69 479 Impairments of investment ( 11 479 Impairments of investment ( 11 ) ( 116 ) ( investment ( 11 ) ( 116 ) ( 10 ) Total ) ( 116 ) ( 10 ) Total $ 1,169 $ ( 10 ) Total $ 1,169 $ 36 $ 745 70 ) Total $ 1,169 $ 36 $ 745 70 PART II $ 1,169 $ 36 $ 745 70 PART II Item 8 1,169 $ 36 $ 745 70 PART II Item 8 NOTE 745 70 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Short-term Investments Equity Investments June 30 , 2021 Changes in Fair Equity Investments June 30 , 2021 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,316 $ 0 $ Commercial paper Level 2 $ 4,316 $ 0 $ 0 $ Level 2 $ 4,316 $ 0 $ 0 $ 4,316 $ $ 4,316 $ 0 $ 0 $ 4,316 $ 1,331 $ $ 0 $ 0 $ 4,316 $ 1,331 $ 2,985 $ $ 0 $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates of deposit $ 1,331 $ 2,985 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 3,615 0 0 3,615 2,920 Certificates of deposit Level 2 3,615 0 0 3,615 2,920 695 of deposit Level 2 3,615 0 0 3,615 2,920 695 0 deposit Level 2 3,615 0 0 3,615 2,920 695 0 U.S. Level 2 3,615 0 0 3,615 2,920 695 0 U.S. government 2 3,615 0 0 3,615 2,920 695 0 U.S. government security 3,615 0 0 3,615 2,920 695 0 U.S. government security Level 0 0 3,615 2,920 695 0 U.S. government security Level 1 0 U.S. government security Level 1 90,664 3,832 ( 111 ) U.S. government security Level 1 90,664 3,832 ( 111 ) 94,385 government security Level 1 90,664 3,832 ( 111 ) 94,385 1,500 Level 1 90,664 3,832 ( 111 ) 94,385 1,500 92,885 0 90,664 3,832 ( 111 ) 94,385 1,500 92,885 0 U.S. agency 3,832 ( 111 ) 94,385 1,500 92,885 0 U.S. agency security ( 111 ) 94,385 1,500 92,885 0 U.S. agency security Level 111 ) 94,385 1,500 92,885 0 U.S. agency security Level 2 0 U.S. agency security Level 2 807 2 0 809 0 U.S. agency security Level 2 807 2 0 809 0 809 agency security Level 2 807 2 0 809 0 809 0 security Level 2 807 2 0 809 0 809 0 Foreign Level 2 807 2 0 809 0 809 0 Foreign government 2 807 2 0 809 0 809 0 Foreign government bond 807 2 0 809 0 809 0 Foreign government bond Level 2 0 809 0 809 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,213 9 ( 2 ) Foreign government bond Level 2 6,213 9 ( 2 ) 6,220 government bond Level 2 6,213 9 ( 2 ) 6,220 225 Level 2 6,213 9 ( 2 ) 6,220 225 5,995 0 6,213 9 ( 2 ) 6,220 225 5,995 0 Mortgage- and 9 ( 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed ( 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed security 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 3,442 22 ( 6 ) and asset-backed security Level 2 3,442 22 ( 6 ) 3,458 asset-backed security Level 2 3,442 22 ( 6 ) 3,458 0 Level 2 3,442 22 ( 6 ) 3,458 0 3,458 0 3,442 22 ( 6 ) 3,458 0 3,458 0 Corporate note 22 ( 6 ) 3,458 0 3,458 0 Corporate note and ( 6 ) 3,458 0 3,458 0 Corporate note and bond 6 ) 3,458 0 3,458 0 Corporate note and bond Level Corporate note and bond Level 2 8,443 249 ( 9 ) note and bond Level 2 8,443 249 ( 9 ) 8,683 and bond Level 2 8,443 249 ( 9 ) 8,683 0 Level 2 8,443 249 ( 9 ) 8,683 0 8,683 0 8,443 249 ( 9 ) 8,683 0 8,683 0 Corporate note 249 ( 9 ) 8,683 0 8,683 0 Corporate note and ( 9 ) 8,683 0 8,683 0 Corporate note and bond 9 ) 8,683 0 8,683 0 Corporate note and bond Level Corporate note and bond Level 3 63 0 0 63 0 note and bond Level 3 63 0 0 63 0 63 and bond Level 3 63 0 0 63 0 63 0 bond Level 3 63 0 0 63 0 63 0 Municipal Level 3 63 0 0 63 0 63 0 Municipal security 3 63 0 0 63 0 63 0 Municipal security Level 63 0 0 63 0 63 0 Municipal security Level 2 0 0 63 0 63 0 Municipal security Level 2 308 63 0 Municipal security Level 2 308 63 0 371 0 0 Municipal security Level 2 308 63 0 371 0 371 Municipal security Level 2 308 63 0 371 0 371 0 security Level 2 308 63 0 371 0 371 0 Municipal Level 2 308 63 0 371 0 371 0 Municipal security 2 308 63 0 371 0 371 0 Municipal security Level 308 63 0 371 0 371 0 Municipal security Level 3 63 0 371 0 371 0 Municipal security Level 3 95 371 0 Municipal security Level 3 95 0 ( 7 ) 0 Municipal security Level 3 95 0 ( 7 ) 88 Municipal security Level 3 95 0 ( 7 ) 88 0 Level 3 95 0 ( 7 ) 88 0 88 0 95 0 ( 7 ) 88 0 88 0 Total debt 0 ( 7 ) 88 0 88 0 Total debt investment ( 7 ) 88 0 88 0 Total debt investment $ 7 ) 88 0 88 0 Total debt investment $ 117,966 0 Total debt investment $ 117,966 $ 4,177 $ ( 135 debt investment $ 117,966 $ 4,177 $ ( 135 ) $ 117,966 $ 4,177 $ ( 135 ) $ 122,008 $ 5,976 $ ( 135 ) $ 122,008 $ 5,976 $ 116,032 $ 135 ) $ 122,008 $ 5,976 $ 116,032 $ 0 Changes $ 122,008 $ 5,976 $ 116,032 $ 0 Changes in Fair $ 5,976 $ 116,032 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity investment $ 6,960 $ 976 $ 0 $ equity investment $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 0 Derivatives $ 7,272 $ 7,272 $ 0 $ 0 Derivatives , net $ 7,272 $ 0 $ 0 Derivatives , net ( a , net ( a ) 78 0 78 0 Total $ net ( a ) 78 0 78 0 Total $ 136,318 ( a ) 78 0 78 0 Total $ 136,318 $ a ) 78 0 78 0 Total $ 136,318 $ 14,224 0 78 0 Total $ 136,318 $ 14,224 $ 116,110 $ 0 Total $ 136,318 $ 14,224 $ 116,110 $ 5,984 71 $ 136,318 $ 14,224 $ 116,110 $ 5,984 71 PART II $ 14,224 $ 116,110 $ 5,984 71 PART II Item 8 14,224 $ 116,110 $ 5,984 71 PART II Item 8 ( 5,984 71 PART II Item 8 ( In million ) Fair Short-term Investments Equity Investments June 30 , 2020 Changes in Fair Equity Investments June 30 , 2020 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,687 $ 1 $ Commercial paper Level 2 $ 4,687 $ 1 $ 0 $ Level 2 $ 4,687 $ 1 $ 0 $ 4,688 $ $ 4,687 $ 1 $ 0 $ 4,688 $ 1,618 $ $ 1 $ 0 $ 4,688 $ 1,618 $ 3,070 $ $ 0 $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates $ 4,688 $ 1,618 $ 3,070 $ 0 Certificates of deposit $ 1,618 $ 3,070 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,898 0 0 2,898 1,646 Certificates of deposit Level 2 2,898 0 0 2,898 1,646 1,252 of deposit Level 2 2,898 0 0 2,898 1,646 1,252 0 deposit Level 2 2,898 0 0 2,898 1,646 1,252 0 U.S. Level 2 2,898 0 0 2,898 1,646 1,252 0 U.S. government 2 2,898 0 0 2,898 1,646 1,252 0 U.S. government security 2,898 0 0 2,898 1,646 1,252 0 U.S. government security Level 0 0 2,898 1,646 1,252 0 U.S. government security Level 1 0 U.S. government security Level 1 92,067 6,495 ( 1 ) U.S. government security Level 1 92,067 6,495 ( 1 ) 98,561 government security Level 1 92,067 6,495 ( 1 ) 98,561 3,168 Level 1 92,067 6,495 ( 1 ) 98,561 3,168 95,393 0 92,067 6,495 ( 1 ) 98,561 3,168 95,393 0 U.S. agency 6,495 ( 1 ) 98,561 3,168 95,393 0 U.S. agency security ( 1 ) 98,561 3,168 95,393 0 U.S. agency security Level 1 ) 98,561 3,168 95,393 0 U.S. agency security Level 2 0 U.S. agency security Level 2 2,439 2 0 2,441 449 U.S. agency security Level 2 2,439 2 0 2,441 449 1,992 agency security Level 2 2,439 2 0 2,441 449 1,992 0 security Level 2 2,439 2 0 2,441 449 1,992 0 Foreign Level 2 2,439 2 0 2,441 449 1,992 0 Foreign government 2 2,439 2 0 2,441 449 1,992 0 Foreign government bond 2,439 2 0 2,441 449 1,992 0 Foreign government bond Level 2 0 2,441 449 1,992 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,982 6 ( 3 ) Foreign government bond Level 2 6,982 6 ( 3 ) 6,985 government bond Level 2 6,982 6 ( 3 ) 6,985 1 Level 2 6,982 6 ( 3 ) 6,985 1 6,984 0 6,982 6 ( 3 ) 6,985 1 6,984 0 Mortgage- and 6 ( 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed ( 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed security 3 ) 6,985 1 6,984 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 4,865 41 ( 6 ) and asset-backed security Level 2 4,865 41 ( 6 ) 4,900 asset-backed security Level 2 4,865 41 ( 6 ) 4,900 0 Level 2 4,865 41 ( 6 ) 4,900 0 4,900 0 4,865 41 ( 6 ) 4,900 0 4,900 0 Corporate note 41 ( 6 ) 4,900 0 4,900 0 Corporate note and ( 6 ) 4,900 0 4,900 0 Corporate note and bond 6 ) 4,900 0 4,900 0 Corporate note and bond Level Corporate note and bond Level 2 8,500 327 ( 17 ) note and bond Level 2 8,500 327 ( 17 ) 8,810 and bond Level 2 8,500 327 ( 17 ) 8,810 0 Level 2 8,500 327 ( 17 ) 8,810 0 8,810 0 8,500 327 ( 17 ) 8,810 0 8,810 0 Corporate note 327 ( 17 ) 8,810 0 8,810 0 Corporate note and ( 17 ) 8,810 0 8,810 0 Corporate note and bond 17 ) 8,810 0 8,810 0 Corporate note and bond Level Corporate note and bond Level 3 58 0 0 58 0 note and bond Level 3 58 0 0 58 0 58 and bond Level 3 58 0 0 58 0 58 0 bond Level 3 58 0 0 58 0 58 0 Municipal Level 3 58 0 0 58 0 58 0 Municipal security 3 58 0 0 58 0 58 0 Municipal security Level 58 0 0 58 0 58 0 Municipal security Level 2 0 0 58 0 58 0 Municipal security Level 2 313 58 0 Municipal security Level 2 313 57 ( 4 ) 0 Municipal security Level 2 313 57 ( 4 ) 366 Municipal security Level 2 313 57 ( 4 ) 366 0 Level 2 313 57 ( 4 ) 366 0 366 0 313 57 ( 4 ) 366 0 366 0 Municipal security 57 ( 4 ) 366 0 366 0 Municipal security Level ( 4 ) 366 0 366 0 Municipal security Level 3 4 ) 366 0 366 0 Municipal security Level 3 91 366 0 Municipal security Level 3 91 0 0 91 0 0 Municipal security Level 3 91 0 0 91 0 91 Municipal security Level 3 91 0 0 91 0 91 0 security Level 3 91 0 0 91 0 91 0 Total Level 3 91 0 0 91 0 91 0 Total debt 3 91 0 0 91 0 91 0 Total debt investment 91 0 0 91 0 91 0 Total debt investment $ 0 0 91 0 91 0 Total debt investment $ 122,900 0 Total debt investment $ 122,900 $ 6,929 $ ( 31 debt investment $ 122,900 $ 6,929 $ ( 31 ) $ 122,900 $ 6,929 $ ( 31 ) $ 129,798 $ 6,882 $ ( 31 ) $ 129,798 $ 6,882 $ 122,916 $ 31 ) $ 129,798 $ 6,882 $ 122,916 $ 0 Changes $ 129,798 $ 6,882 $ 122,916 $ 0 Changes in Fair $ 6,882 $ 122,916 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,198 $ 784 $ Equity investment Level 1 $ 1,198 $ 784 $ 0 $ Level 1 $ 1,198 $ 784 $ 0 $ 414 Equity $ 1,198 $ 784 $ 0 $ 414 Equity investment Other $ 784 $ 0 $ 414 Equity investment Other 2,551 0 $ 414 Equity investment Other 2,551 0 0 2,551 Total equity 414 Equity investment Other 2,551 0 0 2,551 Total equity investment Equity investment Other 2,551 0 0 2,551 Total equity investment $ investment Other 2,551 0 0 2,551 Total equity investment $ 3,749 2,551 Total equity investment $ 3,749 $ 784 $ 0 $ equity investment $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 3,749 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 784 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 2,965 Cash $ 5,910 $ 5,910 $ 0 $ 0 Derivatives $ 5,910 $ 5,910 $ 0 $ 0 Derivatives , net $ 5,910 $ 0 $ 0 Derivatives , net ( a , net ( a ) 35 0 35 0 Total $ net ( a ) 35 0 35 0 Total $ 139,492 ( a ) 35 0 35 0 Total $ 139,492 $ a ) 35 0 35 0 Total $ 139,492 $ 13,576 0 35 0 Total $ 139,492 $ 13,576 $ 122,951 $ 0 Total $ 139,492 $ 13,576 $ 122,951 $ 2,965 ( $ 139,492 $ 13,576 $ 122,951 $ 2,965 ( a ) $ 13,576 $ 122,951 $ 2,965 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information hierarchy . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , equity investment June 30 , 2021 and 2020 , equity investment without readily price or impairment were $ 3.3 billion and $ 1.4 billion $ 3.3 billion and $ 1.4 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2021 U.S. government and Fair Value June 30 , 2021 U.S. government and agency security government and agency security $ 5,294 $ ( 111 ) $ security $ 5,294 $ ( 111 ) $ 0 $ 0 $ ( 111 ) $ 0 $ 0 $ 5,294 $ 111 ) $ 0 $ 0 $ 5,294 $ ( 111 $ 0 $ 0 $ 5,294 $ ( 111 ) Foreign 0 $ 5,294 $ ( 111 ) Foreign government bond 3,148 111 ) Foreign government bond 3,148 ( 1 ) 5 ( Foreign government bond 3,148 ( 1 ) 5 ( 1 ) bond 3,148 ( 1 ) 5 ( 1 ) 3,153 ( ( 1 ) 5 ( 1 ) 3,153 ( 2 ) ) 5 ( 1 ) 3,153 ( 2 ) Mortgage- and ( 1 ) 3,153 ( 2 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,211 ( 5 ) 87 ( and asset-backed security 1,211 ( 5 ) 87 ( 1 ) security 1,211 ( 5 ) 87 ( 1 ) 1,298 ( ( 5 ) 87 ( 1 ) 1,298 ( 6 ) ) 87 ( 1 ) 1,298 ( 6 ) Corporate note ( 1 ) 1,298 ( 6 ) Corporate note and bond ) Corporate note and bond 1,678 ( 8 ) 34 ( note and bond 1,678 ( 8 ) 34 ( 1 ) bond 1,678 ( 8 ) 34 ( 1 ) 1,712 ( ( 8 ) 34 ( 1 ) 1,712 ( 9 ) ) 34 ( 1 ) 1,712 ( 9 ) Municipal security ( 1 ) 1,712 ( 9 ) Municipal security 58 ( ( 9 ) Municipal security 58 ( 7 ) 1 0 ) Municipal security 58 ( 7 ) 1 0 59 ( security 58 ( 7 ) 1 0 59 ( 7 ) 58 ( 7 ) 1 0 59 ( 7 ) Total ( 7 ) 1 0 59 ( 7 ) Total $ ) 1 0 59 ( 7 ) Total $ 11,389 $ ( 7 ) Total $ 11,389 $ ( 132 ) $ Total $ 11,389 $ ( 132 ) $ 127 $ ( $ ( 132 ) $ 127 $ ( 3 ) $ ) $ 127 $ ( 3 ) $ 11,516 $ ( $ ( 3 ) $ 11,516 $ ( 135 ) 72 ) $ 11,516 $ ( 135 ) 72 PART II Item 11,516 $ ( 135 ) 72 PART II Item 8 Less ) 72 PART II Item 8 Less than 12 Months 12 II Item 8 Less than 12 Months 12 Months or Greater 8 Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2020 U.S. government and Fair Value June 30 , 2020 U.S. government and agency security government and agency security $ 2,323 $ ( 1 ) $ security $ 2,323 $ ( 1 ) $ 0 $ 0 $ ( 1 ) $ 0 $ 0 $ 2,323 $ 1 ) $ 0 $ 0 $ 2,323 $ ( 1 $ 0 $ 0 $ 2,323 $ ( 1 ) Foreign 0 $ 2,323 $ ( 1 ) Foreign government bond 500 1 ) Foreign government bond 500 ( 3 ) 0 0 Foreign government bond 500 ( 3 ) 0 0 500 ( bond 500 ( 3 ) 0 0 500 ( 3 ) 500 ( 3 ) 0 0 500 ( 3 ) Mortgage- ( 3 ) 0 0 500 ( 3 ) Mortgage- and ) 0 0 500 ( 3 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,014 ( 6 ) 0 0 and asset-backed security 1,014 ( 6 ) 0 0 1,014 ( security 1,014 ( 6 ) 0 0 1,014 ( 6 ) 1,014 ( 6 ) 0 0 1,014 ( 6 ) Corporate ( 6 ) 0 0 1,014 ( 6 ) Corporate note ) 0 0 1,014 ( 6 ) Corporate note and bond ) Corporate note and bond 649 ( 17 ) 0 0 note and bond 649 ( 17 ) 0 0 649 ( bond 649 ( 17 ) 0 0 649 ( 17 ) 649 ( 17 ) 0 0 649 ( 17 ) Municipal ( 17 ) 0 0 649 ( 17 ) Municipal security ) 0 0 649 ( 17 ) Municipal security 66 ( ( 17 ) Municipal security 66 ( 4 ) 0 0 ) Municipal security 66 ( 4 ) 0 0 66 ( security 66 ( 4 ) 0 0 66 ( 4 ) 66 ( 4 ) 0 0 66 ( 4 ) Total ( 4 ) 0 0 66 ( 4 ) Total $ ) 0 0 66 ( 4 ) Total $ 4,552 $ ( 4 ) Total $ 4,552 $ ( 31 ) $ Total $ 4,552 $ ( 31 ) $ 0 $ 0 $ ( 31 ) $ 0 $ 0 $ 4,552 $ 31 ) $ 0 $ 0 $ 4,552 $ ( 31 $ 0 $ 0 $ 4,552 $ ( 31 ) Unrealized 0 $ 4,552 $ ( 31 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2021 Due in one Fair Value June 30 , 2021 Due in one year or one year or le $ 22,612 $ 22,676 Due after one or le $ 22,612 $ 22,676 Due after one year through one year through five year 67,541 70,315 Due after five year year through five year 67,541 70,315 Due after five year through Due after five year through 10 year 25,212 26,327 Due after five year through 10 year 25,212 26,327 Due after 10 year year through 10 year 25,212 26,327 Due after 10 year 2,601 year 25,212 26,327 Due after 10 year 2,601 2,690 Total $ 26,327 Due after 10 year 2,601 2,690 Total $ 117,966 $ Due after 10 year 2,601 2,690 Total $ 117,966 $ 122,008 year 2,601 2,690 Total $ 117,966 $ 122,008 NOTE 5 — 2,690 Total $ 117,966 $ 122,008 NOTE 5 — DERIVATIVES We $ 117,966 $ 122,008 NOTE 5 — DERIVATIVES We use derivative to floating interest rate . 73 PART II Item 8 Securities . 73 PART II Item 8 Securities held in our fixed-income maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2021 , our long-term As of June 30 , 2021 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2021 June 30 , million ) June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 635 Foreign exchange contract contract purchased $ 635 $ 635 Foreign exchange contract sold 6,081 635 Foreign exchange contract sold 6,081 6,754 Interest rate contract purchased Foreign exchange contract sold 6,081 6,754 Interest rate contract purchased 1,247 6,754 Interest rate contract purchased 1,247 1,295 Not Designated a Hedging Interest rate contract purchased 1,247 1,295 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 14,223 11,896 Foreign exchange contract sold Foreign exchange contract purchased 14,223 11,896 Foreign exchange contract sold 23,391 11,896 Foreign exchange contract sold 23,391 15,595 Other contract purchased 2,456 Foreign exchange contract sold 23,391 15,595 Other contract purchased 2,456 1,844 23,391 15,595 Other contract purchased 2,456 1,844 Other contract sold 763 15,595 Other contract purchased 2,456 1,844 Other contract sold 763 757 2,456 1,844 Other contract sold 763 757 74 PART II Item 1,844 Other contract sold 763 757 74 PART II Item 8 Other contract sold 763 757 74 PART II Item 8 Fair 757 74 PART II Item 8 Fair Values of Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2021 June 30 , Assets Liabilities June 30 , 2021 June 30 , 2020 Designated June 30 , 2021 June 30 , 2020 Designated a Hedging , 2021 June 30 , 2020 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 76 $ ( 8 ) $ contract $ 76 $ ( 8 ) $ 44 $ ( $ ( 8 ) $ 44 $ ( 54 ) Interest ) $ 44 $ ( 54 ) Interest rate contract 40 54 ) Interest rate contract 40 0 93 0 Not Designated ) Interest rate contract 40 0 93 0 Not Designated a Interest rate contract 40 0 93 0 Not Designated a Hedging rate contract 40 0 93 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 227 ( 291 ) 245 ( Foreign exchange contract 227 ( 291 ) 245 ( 334 ) contract 227 ( 291 ) 245 ( 334 ) Other contract ( 291 ) 245 ( 334 ) Other contract 56 ( ( 334 ) Other contract 56 ( 36 ) 18 ( ) Other contract 56 ( 36 ) 18 ( 11 ) contract 56 ( 36 ) 18 ( 11 ) Gross amount ( 36 ) 18 ( 11 ) Gross amount of derivative ) Gross amount of derivative 399 ( 335 ) 400 ( amount of derivative 399 ( 335 ) 400 ( 399 ) derivative 399 ( 335 ) 400 ( 399 ) Gross amount ( 335 ) 400 ( 399 ) Gross amount of derivative in the balance sheet ( 141 ) 142 ( 154 ) balance sheet ( 141 ) 142 ( 154 ) 158 Cash ( 141 ) 142 ( 154 ) 158 Cash collateral received ) 142 ( 154 ) 158 Cash collateral received 0 ( ) 158 Cash collateral received 0 ( 42 ) 0 ( Cash collateral received 0 ( 42 ) 0 ( 154 ) received 0 ( 42 ) 0 ( 154 ) Net amount ( 42 ) 0 ( 154 ) Net amount of derivative Net amount of derivative $ 258 $ ( 235 ) $ derivative $ 258 $ ( 235 ) $ 246 $ ( $ ( 235 ) $ 246 $ ( 395 ) Reported ) $ 246 $ ( 395 ) Reported a Short-term investment Reported a Short-term investment $ 78 $ 0 $ 35 $ Short-term investment $ 78 $ 0 $ 35 $ 0 Other $ 78 $ 0 $ 35 $ 0 Other current asset $ 0 $ 35 $ 0 Other current asset 137 0 $ 0 Other current asset 137 0 199 0 Other long-term 0 Other current asset 137 0 199 0 Other long-term asset Other current asset 137 0 199 0 Other long-term asset 43 current asset 137 0 199 0 Other long-term asset 43 0 199 0 Other long-term asset 43 0 12 0 Other current 0 Other long-term asset 43 0 12 0 Other current liability Other long-term asset 43 0 12 0 Other current liability 0 long-term asset 43 0 12 0 Other current liability 0 ( 12 0 Other current liability 0 ( 182 ) 0 ( Other current liability 0 ( 182 ) 0 ( 334 ) liability 0 ( 182 ) 0 ( 334 ) Other long-term ( 182 ) 0 ( 334 ) Other long-term liability 0 334 ) Other long-term liability 0 ( 53 ) 0 ( Other long-term liability 0 ( 53 ) 0 ( 61 ) liability 0 ( 53 ) 0 ( 61 ) Total $ ( 53 ) 0 ( 61 ) Total $ 258 $ ( 61 ) Total $ 258 $ ( 235 ) $ Total $ 258 $ ( 235 ) $ 246 $ ( $ ( 235 ) $ 246 $ ( 395 ) Gross ) $ 246 $ ( 395 ) Gross derivative asset and elected to offset were $ 395 million and $ 335 million $ 395 million and $ 335 million , respectively , a respectively , a of June 30 , 2021 , and $ a of June 30 , 2021 , and $ 399 million , 2021 , and $ 399 million and $ 399 million $ 399 million and $ 399 million , respectively , a respectively , a of June 30 , 2020 . The following a of June 30 , 2020 . The following table present ( In million ) Level 1 Level 2 Level 3 Total million ) Level 1 Level 2 Level 3 Total June 30 Level 1 Level 2 Level 3 Total June 30 , 2021 2 Level 3 Total June 30 , 2021 Derivative asset $ 3 Total June 30 , 2021 Derivative asset $ 0 $ , 2021 Derivative asset $ 0 $ 396 $ 3 $ Derivative asset $ 0 $ 396 $ 3 $ 399 Derivative $ 0 $ 396 $ 3 $ 399 Derivative liability 0 $ 396 $ 3 $ 399 Derivative liability 0 ( 335 3 $ 399 Derivative liability 0 ( 335 ) 0 ( 399 Derivative liability 0 ( 335 ) 0 ( 335 ) liability 0 ( 335 ) 0 ( 335 ) June 30 ( 335 ) 0 ( 335 ) June 30 , 2020 0 ( 335 ) June 30 , 2020 Derivative asset 1 335 ) June 30 , 2020 Derivative asset 1 398 1 30 , 2020 Derivative asset 1 398 1 400 Derivative liability , 2020 Derivative asset 1 398 1 400 Derivative liability 0 2020 Derivative asset 1 398 1 400 Derivative liability 0 ( Derivative asset 1 398 1 400 Derivative liability 0 ( 399 398 1 400 Derivative liability 0 ( 399 ) 0 ( 400 Derivative liability 0 ( 399 ) 0 ( 399 ) liability 0 ( 399 ) 0 ( 399 ) 75 PART ( 399 ) 0 ( 399 ) 75 PART II Item ) 0 ( 399 ) 75 PART II Item 8 Gains ) 75 PART II Item 8 Gains ( loss ) on million ) Year Ended June 30 , 2021 2020 2019 Revenue Year Ended June 30 , 2021 2020 2019 Revenue Other Income Ended June 30 , 2021 2020 2019 Revenue Other Income ( June 30 , 2021 2020 2019 Revenue Other Income ( Expense Foreign exchange contract Derivatives $ 0 $ 193 $ 0 $ contract Derivatives $ 0 $ 193 $ 0 $ 1 $ $ 0 $ 193 $ 0 $ 1 $ 0 $ $ 193 $ 0 $ 1 $ 0 $ ( 130 $ 0 $ 1 $ 0 $ ( 130 ) Hedged 1 $ 0 $ ( 130 ) Hedged item 0 ( ( 130 ) Hedged item 0 ( 188 ) 0 3 ) Hedged item 0 ( 188 ) 0 3 0 130 item 0 ( 188 ) 0 3 0 130 Excluded from 0 ( 188 ) 0 3 0 130 Excluded from effectiveness ( 188 ) 0 3 0 130 Excluded from effectiveness assessment 188 ) 0 3 0 130 Excluded from effectiveness assessment 0 130 Excluded from effectiveness assessment 0 30 0 139 0 168 Excluded from effectiveness assessment 0 30 0 139 0 168 Interest from effectiveness assessment 0 30 0 139 0 168 Interest rate effectiveness assessment 0 30 0 139 0 168 Interest rate contract assessment 0 30 0 139 0 168 Interest rate contract Derivatives 0 30 0 139 0 168 Interest rate contract Derivatives 0 168 Interest rate contract Derivatives 0 ( 37 ) 0 93 rate contract Derivatives 0 ( 37 ) 0 93 0 0 Derivatives 0 ( 37 ) 0 93 0 0 Hedged item 0 ( 37 ) 0 93 0 0 Hedged item 0 ( 37 ) 0 93 0 0 Hedged item 0 53 37 ) 0 93 0 0 Hedged item 0 53 0 93 0 0 Hedged item 0 53 0 ( 93 ) 0 0 Hedged item 0 53 0 ( 93 ) 0 0 Hedged item 0 53 0 ( 93 ) 0 0 item 0 53 0 ( 93 ) 0 0 Designated a 53 0 ( 93 ) 0 0 Designated a Cash Flow 0 ( 93 ) 0 0 Designated a Cash Flow Hedging from accumulated other comprehensive income 0 17 0 0 341 0 accumulated other comprehensive income 0 17 0 0 341 0 Excluded other comprehensive income 0 17 0 0 341 0 Excluded from comprehensive income 0 17 0 0 341 0 Excluded from effectiveness income 0 17 0 0 341 0 Excluded from effectiveness assessment 0 17 0 0 341 0 Excluded from effectiveness assessment 0 0 Excluded from effectiveness assessment 0 0 0 0 ( 64 Excluded from effectiveness assessment 0 0 0 0 ( 64 ) from effectiveness assessment 0 0 0 0 ( 64 ) 0 effectiveness assessment 0 0 0 0 ( 64 ) 0 Not 0 0 0 0 ( 64 ) 0 Not Designated a 0 0 ( 64 ) 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 0 27 0 ( 123 ) Instruments Foreign exchange contract 0 27 0 ( 123 ) 0 Foreign exchange contract 0 27 0 ( 123 ) 0 ( contract 0 27 0 ( 123 ) 0 ( 97 ) 27 0 ( 123 ) 0 ( 97 ) Other contract ( 123 ) 0 ( 97 ) Other contract 0 9 ( 97 ) Other contract 0 9 0 50 0 38 97 ) Other contract 0 9 0 50 0 38 Gains ) Other contract 0 9 0 50 0 38 Gains ( Other contract 0 9 0 50 0 38 Gains ( loss contract 0 9 0 50 0 38 Gains ( loss ) 0 9 0 50 0 38 Gains ( loss ) , million ) Year Ended June 30 , 2021 2020 2019 Designated Year Ended June 30 , 2021 2020 2019 Designated a Cash Ended June 30 , 2021 2020 2019 Designated a Cash Flow June 30 , 2021 2020 2019 Designated a Cash Flow Hedging Included in effectiveness assessment $ 34 $ ( 38 ) $ assessment $ 34 $ ( 38 ) $ 159 NOTE 6 $ ( 38 ) $ 159 NOTE 6 — INVENTORIES The 38 ) $ 159 NOTE 6 — INVENTORIES The component of ( In million ) June 30 , 2021 2020 Raw material million ) June 30 , 2021 2020 Raw material $ 1,190 ) June 30 , 2021 2020 Raw material $ 1,190 $ 2021 2020 Raw material $ 1,190 $ 700 Work in process Raw material $ 1,190 $ 700 Work in process 79 83 $ 700 Work in process 79 83 Finished good 1,367 1,112 700 Work in process 79 83 Finished good 1,367 1,112 Total process 79 83 Finished good 1,367 1,112 Total $ 2,636 $ 79 83 Finished good 1,367 1,112 Total $ 2,636 $ 1,895 good 1,367 1,112 Total $ 2,636 $ 1,895 76 PART II 1,112 Total $ 2,636 $ 1,895 76 PART II Item 8 Total $ 2,636 $ 1,895 76 PART II Item 8 NOTE 1,895 76 PART II Item 8 NOTE 7 — PROPERTY AND PART II Item 8 NOTE 7 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2021 2020 Land $ million ) June 30 , 2021 2020 Land $ 3,660 $ ) June 30 , 2021 2020 Land $ 3,660 $ 1,823 , 2021 2020 Land $ 3,660 $ 1,823 Buildings and improvement 2020 Land $ 3,660 $ 1,823 Buildings and improvement 43,928 33,995 $ 1,823 Buildings and improvement 43,928 33,995 Leasehold improvement 6,884 5,487 1,823 Buildings and improvement 43,928 33,995 Leasehold improvement 6,884 5,487 Computer improvement 43,928 33,995 Leasehold improvement 6,884 5,487 Computer equipment and software 43,928 33,995 Leasehold improvement 6,884 5,487 Computer equipment and software 51,250 5,487 Computer equipment and software 51,250 41,261 Furniture and equipment 5,344 Computer equipment and software 51,250 41,261 Furniture and equipment 5,344 4,782 51,250 41,261 Furniture and equipment 5,344 4,782 Total , at cost 41,261 Furniture and equipment 5,344 4,782 Total , at cost 111,066 4,782 Total , at cost 111,066 87,348 Accumulated depreciation ( 51,351 Total , at cost 111,066 87,348 Accumulated depreciation ( 51,351 ) 111,066 87,348 Accumulated depreciation ( 51,351 ) ( 43,197 ) Total depreciation ( 51,351 ) ( 43,197 ) Total , net $ ) Total , net $ 59,715 $ 44,151 During fiscal year , net $ 59,715 $ 44,151 During fiscal year 2021 , $ 44,151 During fiscal year 2021 , 2020 , and 2019 During fiscal year 2021 , 2020 , and 2019 , depreciation 2021 , 2020 , and 2019 , depreciation expense wa $ , depreciation expense wa $ 9.3 billion , $ 10.7 billion $ 9.3 billion , $ 10.7 billion , and $ 9.7 10.7 billion , and $ 9.7 billion , respectively . Depreciation expense declined in fiscal year 2021 due to the change in . We have committed $ 9.5 billion for the construction of leasehold improvement a of June 30 , 2021 . During fiscal a of June 30 , 2021 . During fiscal year 2020 2021 . During fiscal year 2020 , we recorded an impairment an impairment charge of $ 186 million to Property and Equipment Store physical location . NOTE 8 — BUSINESS COMBINATIONS ZeniMax Media ZeniMax Media Inc. On March 9 , 2021 , we completed Inc. On March 9 , 2021 , we completed our acquisition total purchase price of $ 8.1 billion , consisting primarily of The purchase price included $ 768 million of cash and cash Cash and cash equivalent $ 768 Goodwill 5,469 Intangible asset 1,968 cash equivalent $ 768 Goodwill 5,469 Intangible asset 1,968 Other asset 768 Goodwill 5,469 Intangible asset 1,968 Other asset 139 Other liability Intangible asset 1,968 Other asset 139 Other liability ( 223 ) asset 139 Other liability ( 223 ) Total $ 8,121 Goodwill ( 223 ) Total $ 8,121 Goodwill wa assigned to our for income tax purpose . 77 PART II Item 8 Following . 77 PART II Item 8 Following are detail of the Weighted Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 year $ 1,341 4 year Marketing-related 627 11 year Total $ 1,968 1,341 4 year Marketing-related 627 11 year Total $ 1,968 6 627 11 year Total $ 1,968 6 year GitHub , Inc. 11 year Total $ 1,968 6 year GitHub , Inc. On GitHub , Inc. On October 25 , 2018 , we acquired Inc. On October 25 , 2018 , we acquired GitHub , platform , in a $ 7.5 billion stock transaction ( inclusive total cash payment of $ 1.3 billion in respect of vested wa completed a of June 30 , 2019 . The major a of June 30 , 2019 . The major class of , and short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 short-term investment $ 234 Goodwill 5,497 Intangible asset 1,267 Other asset 234 Goodwill 5,497 Intangible asset 1,267 Other asset 143 Other liability Intangible asset 1,267 Other asset 143 Other liability ( 217 ) asset 143 Other liability ( 217 ) Total $ 6,924 The ( 217 ) Total $ 6,924 The goodwill recognized in connection Weighted Average Life Customer-related $ 648 8 year Technology-based 447 5 Average Life Customer-related $ 648 8 year Technology-based 447 5 year $ 648 8 year Technology-based 447 5 year Marketing-related 170 10 648 8 year Technology-based 447 5 year Marketing-related 170 10 year Technology-based 447 5 year Marketing-related 170 10 year Contract-based 2 2 447 5 year Marketing-related 170 10 year Contract-based 2 2 year Marketing-related 170 10 year Contract-based 2 2 year Total $ 1,267 170 10 year Contract-based 2 2 year Total $ 1,267 7 2 2 year Total $ 1,267 7 year Transactions recognized separately 2 year Total $ 1,267 7 year Transactions recognized separately from price allocation were approximately $ 600 million , primarily related to Communications , Inc. On April 11 , 2021 , we entered Inc. On April 11 , 2021 , we entered into a Nuance ” ) for $ 56.00 per share in an all-cash all-cash transaction valued at $ 19.7 billion , inclusive of Nuance the end of calendar year 2021 , subject to the satisfaction other customary closing condition . 78 PART II Item 8 NOTE . 78 PART II Item 8 NOTE 9 — GOODWILL Changes PART II Item 8 NOTE 9 — GOODWILL Changes in the ( In million ) June 30 , 2019 Acquisitions Other June million ) June 30 , 2019 Acquisitions Other June 30 , , 2019 Acquisitions Other June 30 , 2020 Acquisitions Other June Acquisitions Other June 30 , 2020 Acquisitions Other June 30 , , 2020 Acquisitions Other June 30 , 2021 Productivity and Business Acquisitions Other June 30 , 2021 Productivity and Business Processes $ Productivity and Business Processes $ 24,277 $ 7 $ ( 94 Business Processes $ 24,277 $ 7 $ ( 94 ) $ 24,277 $ 7 $ ( 94 ) $ 24,190 $ 0 $ ( 94 ) $ 24,190 $ 0 $ 127 $ 94 ) $ 24,190 $ 0 $ 127 $ 24,317 Intelligent $ 24,190 $ 0 $ 127 $ 24,317 Intelligent Cloud 11,351 $ 0 $ 127 $ 24,317 Intelligent Cloud 11,351 1,351 ( 127 $ 24,317 Intelligent Cloud 11,351 1,351 ( 5 ) 12,697 $ 24,317 Intelligent Cloud 11,351 1,351 ( 5 ) 12,697 505 Intelligent Cloud 11,351 1,351 ( 5 ) 12,697 505 54 13,256 11,351 1,351 ( 5 ) 12,697 505 54 13,256 More Personal 1,351 ( 5 ) 12,697 505 54 13,256 More Personal Computing ( 5 ) 12,697 505 54 13,256 More Personal Computing 6,398 5 ) 12,697 505 54 13,256 More Personal Computing 6,398 96 54 13,256 More Personal Computing 6,398 96 ( 30 ) 6,464 13,256 More Personal Computing 6,398 96 ( 30 ) 6,464 5,556 Personal Computing 6,398 96 ( 30 ) 6,464 5,556 ( a 6,398 96 ( 30 ) 6,464 5,556 ( a ) 118 96 ( 30 ) 6,464 5,556 ( a ) 118 ( 6,464 5,556 ( a ) 118 ( a ) 12,138 Total ) 118 ( a ) 12,138 Total $ 42,026 $ 1,454 a ) 12,138 Total $ 42,026 $ 1,454 $ ( 129 12,138 Total $ 42,026 $ 1,454 $ ( 129 ) $ 42,026 $ 1,454 $ ( 129 ) $ 43,351 $ 6,061 $ ( 129 ) $ 43,351 $ 6,061 $ 299 $ 129 ) $ 43,351 $ 6,061 $ 299 $ 49,711 ( $ 43,351 $ 6,061 $ 299 $ 49,711 ( a ) $ 6,061 $ 299 $ 49,711 ( a ) Includes goodwill ) Includes goodwill of $ 5.5 billion related to ZeniMax . to ZeniMax . See Note 8 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2021 , May 1 in our May 1 , 2021 , May 1 , 2020 1 , 2021 , May 1 , 2020 , or May 2021 , May 1 , 2020 , or May 1 , , 2020 , or May 1 , 2019 test . As , or May 1 , 2019 test . As of June test . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , accumulated goodwill June 30 , 2021 and 2020 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . NOTE 10 — $ 11.3 billion . NOTE 10 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2021 2020 Technology-based $ Carrying Amount June 30 , 2021 2020 Technology-based $ 9,779 $ Amount June 30 , 2021 2020 Technology-based $ 9,779 $ ( , 2021 2020 Technology-based $ 9,779 $ ( 7,007 ) $ Technology-based $ 9,779 $ ( 7,007 ) $ 2,772 $ 8,160 $ ( 7,007 ) $ 2,772 $ 8,160 $ ( 6,381 7,007 ) $ 2,772 $ 8,160 $ ( 6,381 ) $ 2,772 $ 8,160 $ ( 6,381 ) $ 1,779 Customer-related 4,958 $ ( 6,381 ) $ 1,779 Customer-related 4,958 ( 2,859 ) 6,381 ) $ 1,779 Customer-related 4,958 ( 2,859 ) 2,099 4,967 $ 1,779 Customer-related 4,958 ( 2,859 ) 2,099 4,967 ( 2,320 Customer-related 4,958 ( 2,859 ) 2,099 4,967 ( 2,320 ) 2,647 4,958 ( 2,859 ) 2,099 4,967 ( 2,320 ) 2,647 Marketing-related 2,859 ) 2,099 4,967 ( 2,320 ) 2,647 Marketing-related 4,792 ( 2,099 4,967 ( 2,320 ) 2,647 Marketing-related 4,792 ( 1,878 ) ( 2,320 ) 2,647 Marketing-related 4,792 ( 1,878 ) 2,914 4,158 ) 2,647 Marketing-related 4,792 ( 1,878 ) 2,914 4,158 ( 1,588 Marketing-related 4,792 ( 1,878 ) 2,914 4,158 ( 1,588 ) 2,570 4,792 ( 1,878 ) 2,914 4,158 ( 1,588 ) 2,570 Contract-based 1,878 ) 2,914 4,158 ( 1,588 ) 2,570 Contract-based 446 ( 2,914 4,158 ( 1,588 ) 2,570 Contract-based 446 ( 431 ) ( 1,588 ) 2,570 Contract-based 446 ( 431 ) 15 474 ) 2,570 Contract-based 446 ( 431 ) 15 474 ( 432 Contract-based 446 ( 431 ) 15 474 ( 432 ) 42 446 ( 431 ) 15 474 ( 432 ) 42 Total 431 ) 15 474 ( 432 ) 42 Total $ 19,975 15 474 ( 432 ) 42 Total $ 19,975 ( a 432 ) 42 Total $ 19,975 ( a ) $ ( ( a ) $ ( 12,175 ) $ 7,800 $ 17,759 $ ( 12,175 ) $ 7,800 $ 17,759 $ ( 10,721 12,175 ) $ 7,800 $ 17,759 $ ( 10,721 ) $ 7,800 $ 17,759 $ ( 10,721 ) $ 7,038 ( a $ ( 10,721 ) $ 7,038 ( a ) Includes intangible Includes intangible asset of $ 2.0 billion related to ZeniMax . to ZeniMax . See Note 8 – Business Combinations for further were identified during fiscal year 2021 , 2020 , or 2019 during fiscal year 2021 , 2020 , or 2019 . We 2021 , 2020 , or 2019 . We estimate that we to our intangible asset . 79 PART II Item 8 The . 79 PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2021 2020 Technology-based $ Year Ended June 30 , 2021 2020 Technology-based $ 1,628 4 Ended June 30 , 2021 2020 Technology-based $ 1,628 4 year , 2021 2020 Technology-based $ 1,628 4 year $ 531 6 2021 2020 Technology-based $ 1,628 4 year $ 531 6 year $ 1,628 4 year $ 531 6 year Customer-related 96 4 1,628 4 year $ 531 6 year Customer-related 96 4 year $ 531 6 year Customer-related 96 4 year 303 5 year 531 6 year Customer-related 96 4 year 303 5 year Marketing-related year Customer-related 96 4 year 303 5 year Marketing-related 625 6 Customer-related 96 4 year 303 5 year Marketing-related 625 6 year year 303 5 year Marketing-related 625 6 year 2 2 year 303 5 year Marketing-related 625 6 year 2 2 year Contract-based year Marketing-related 625 6 year 2 2 year Contract-based 10 3 Marketing-related 625 6 year 2 2 year Contract-based 10 3 year year 2 2 year Contract-based 10 3 year 0 0 year 2 2 year Contract-based 10 3 year 0 0 year Total year Contract-based 10 3 year 0 0 year Total $ 2,359 Contract-based 10 3 year 0 0 year Total $ 2,359 5 0 0 year Total $ 2,359 5 year $ 836 5 0 year Total $ 2,359 5 year $ 836 5 year $ 2,359 5 year $ 836 5 year Intangible asset amortization 2,359 5 year $ 836 5 year Intangible asset amortization expense asset amortization expense wa $ 1.6 billion , $ 1.6 billion $ 1.6 billion , $ 1.6 billion , and $ 1.9 1.6 billion , and $ 1.9 billion for fiscal year 2021 1.9 billion for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . The following asset held a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) million ) Year Ending June 30 , 2022 $ 1,683 2023 Year Ending June 30 , 2022 $ 1,683 2023 1,722 2024 June 30 , 2022 $ 1,683 2023 1,722 2024 1,415 2025 30 , 2022 $ 1,683 2023 1,722 2024 1,415 2025 755 , 2022 $ 1,683 2023 1,722 2024 1,415 2025 755 2026 2022 $ 1,683 2023 1,722 2024 1,415 2025 755 2026 498 $ 1,683 2023 1,722 2024 1,415 2025 755 2026 498 Thereafter 1,683 2023 1,722 2024 1,415 2025 755 2026 498 Thereafter 1,727 2023 1,722 2024 1,415 2025 755 2026 498 Thereafter 1,727 Total 1,722 2024 1,415 2025 755 2026 498 Thereafter 1,727 Total $ 2024 1,415 2025 755 2026 498 Thereafter 1,727 Total $ 7,800 2025 755 2026 498 Thereafter 1,727 Total $ 7,800 80 PART 498 Thereafter 1,727 Total $ 7,800 80 PART II Item 8 Thereafter 1,727 Total $ 7,800 80 PART II Item 8 NOTE 7,800 80 PART II Item 8 NOTE 11 — DEBT The PART II Item 8 NOTE 11 — DEBT The component of Rate Effective Interest Rate June 30 , 2021 June 30 , Interest Rate June 30 , 2021 June 30 , 2020 2009 June 30 , 2021 June 30 , 2020 2009 issuance of , 2021 June 30 , 2020 2009 issuance of $ 3.8 2021 June 30 , 2020 2009 issuance of $ 3.8 billion 2020 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 520 a ) 2039 5.20 % 5.24 % $ 520 $ 559 5.20 % 5.24 % $ 520 $ 559 2010 issuance of 5.24 % $ 520 $ 559 2010 issuance of $ 4.8 % $ 520 $ 559 2010 issuance of $ 4.8 billion 559 2010 issuance of $ 4.8 billion ( a ) 2040 4.8 billion ( a ) 2040 4.50 % 4.57 % 486 billion ( a ) 2040 4.50 % 4.57 % 486 1,571 a ) 2040 4.50 % 4.57 % 486 1,571 2011 issuance 2040 4.50 % 4.57 % 486 1,571 2011 issuance of $ 4.50 % 4.57 % 486 1,571 2011 issuance of $ 2.3 % 4.57 % 486 1,571 2011 issuance of $ 2.3 billion 1,571 2011 issuance of $ 2.3 billion ( a ) 2041 2.3 billion ( a ) 2041 5.30 % 5.36 % 718 billion ( a ) 2041 5.30 % 5.36 % 718 1,270 a ) 2041 5.30 % 5.36 % 718 1,270 2012 issuance 2041 5.30 % 5.36 % 718 1,270 2012 issuance of $ 5.30 % 5.36 % 718 1,270 2012 issuance of $ 2.3 % 5.36 % 718 1,270 2012 issuance of $ 2.3 billion 1,270 2012 issuance of $ 2.3 billion ( a ) 2022 2.3 billion ( a ) 2022 – 2042 2.13 % – ( a ) 2022 – 2042 2.13 % – 3.50 % a ) 2022 – 2042 2.13 % – 3.50 % 2.24 – 2042 2.13 % – 3.50 % 2.24 % – 3.57 2.13 % – 3.50 % 2.24 % – 3.57 % 1,204 3.50 % 2.24 % – 3.57 % 1,204 1,650 2013 issuance 2.24 % – 3.57 % 1,204 1,650 2013 issuance of $ % – 3.57 % 1,204 1,650 2013 issuance of $ 5.2 – 3.57 % 1,204 1,650 2013 issuance of $ 5.2 billion 1,650 2013 issuance of $ 5.2 billion ( a ) 2023 5.2 billion ( a ) 2023 – 2043 2.38 % – ( a ) 2023 – 2043 2.38 % – 4.88 % a ) 2023 – 2043 2.38 % – 4.88 % 2.47 – 2043 2.38 % – 4.88 % 2.47 % – 4.92 2.38 % – 4.88 % 2.47 % – 4.92 % 2,814 4.88 % 2.47 % – 4.92 % 2,814 2,919 2013 issuance 2.47 % – 4.92 % 2,814 2,919 2013 issuance of € % – 4.92 % 2,814 2,919 2013 issuance of € 4.1 – 4.92 % 2,814 2,919 2013 issuance of € 4.1 billion 2,919 2013 issuance of € 4.1 billion 2021 – 2033 2.13 issuance of € 4.1 billion 2021 – 2033 2.13 % – € 4.1 billion 2021 – 2033 2.13 % – 3.13 % 4.1 billion 2021 – 2033 2.13 % – 3.13 % 2.23 – 2033 2.13 % – 3.13 % 2.23 % – 3.22 2.13 % – 3.13 % 2.23 % – 3.22 % 4,803 3.13 % 2.23 % – 3.22 % 4,803 4,549 2015 issuance 2.23 % – 3.22 % 4,803 4,549 2015 issuance of $ % – 3.22 % 4,803 4,549 2015 issuance of $ 23.8 – 3.22 % 4,803 4,549 2015 issuance of $ 23.8 billion 4,549 2015 issuance of $ 23.8 billion ( a ) 2022 23.8 billion ( a ) 2022 – 2055 2.38 % – ( a ) 2022 – 2055 2.38 % – 4.75 % a ) 2022 – 2055 2.38 % – 4.75 % 2.47 – 2055 2.38 % – 4.75 % 2.47 % – 4.78 2.38 % – 4.75 % 2.47 % – 4.78 % 12,305 4.75 % 2.47 % – 4.78 % 12,305 15,549 2016 issuance 2.47 % – 4.78 % 12,305 15,549 2016 issuance of $ % – 4.78 % 12,305 15,549 2016 issuance of $ 19.8 – 4.78 % 12,305 15,549 2016 issuance of $ 19.8 billion 15,549 2016 issuance of $ 19.8 billion ( a ) 2021 19.8 billion ( a ) 2021 – 2056 1.55 % – ( a ) 2021 – 2056 1.55 % – 3.95 % a ) 2021 – 2056 1.55 % – 3.95 % 1.64 – 2056 1.55 % – 3.95 % 1.64 % – 4.03 1.55 % – 3.95 % 1.64 % – 4.03 % 12,180 3.95 % 1.64 % – 4.03 % 12,180 16,955 2017 issuance 1.64 % – 4.03 % 12,180 16,955 2017 issuance of $ % – 4.03 % 12,180 16,955 2017 issuance of $ 17.0 – 4.03 % 12,180 16,955 2017 issuance of $ 17.0 billion 16,955 2017 issuance of $ 17.0 billion ( a ) 2022 17.0 billion ( a ) 2022 – 2057 2.40 % – ( a ) 2022 – 2057 2.40 % – 4.50 % a ) 2022 – 2057 2.40 % – 4.50 % 2.52 – 2057 2.40 % – 4.50 % 2.52 % – 4.53 2.40 % – 4.50 % 2.52 % – 4.53 % 10,695 4.50 % 2.52 % – 4.53 % 10,695 12,385 2020 issuance 2.52 % – 4.53 % 10,695 12,385 2020 issuance of $ % – 4.53 % 10,695 12,385 2020 issuance of $ 10.0 – 4.53 % 10,695 12,385 2020 issuance of $ 10.0 billion 12,385 2020 issuance of $ 10.0 billion ( a ) 2050 10.0 billion ( a ) 2050 – 2060 2.53 % – ( a ) 2050 – 2060 2.53 % – 2.68 % a ) 2050 – 2060 2.53 % – 2.68 % 2.53 – 2060 2.53 % – 2.68 % 2.53 % – 2.68 2.53 % – 2.68 % 2.53 % – 2.68 % 10,000 2.68 % 2.53 % – 2.68 % 10,000 10,000 2021 issuance 2.53 % – 2.68 % 10,000 10,000 2021 issuance of $ % – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 billion 10,000 2021 issuance of $ 8.2 billion ( a ) 2052 8.2 billion ( a ) 2052 – 2062 2.92 % – ( a ) 2052 – 2062 2.92 % – 3.04 % a ) 2052 – 2062 2.92 % – 3.04 % 2.92 – 2062 2.92 % – 3.04 % 2.92 % – 3.04 2.92 % – 3.04 % 2.92 % – 3.04 % 8,185 3.04 % 2.92 % – 3.04 % 8,185 0 Total face 2.92 % – 3.04 % 8,185 0 Total face value 63,910 % – 3.04 % 8,185 0 Total face value 63,910 67,407 8,185 0 Total face value 63,910 67,407 Unamortized discount and issuance 0 Total face value 63,910 67,407 Unamortized discount and issuance cost discount and issuance cost ( 511 ) ( 554 ) Hedge cost ( 511 ) ( 554 ) Hedge fair value adjustment value adjustment ( b ) 40 93 Premium on debt exchange adjustment ( b ) 40 93 Premium on debt exchange ( exchange ( a ) ( 5,293 ) ( 3,619 ) Total ) ( 5,293 ) ( 3,619 ) Total debt 58,146 63,327 ( 3,619 ) Total debt 58,146 63,327 Current portion of long-term 3,619 ) Total debt 58,146 63,327 Current portion of long-term debt portion of long-term debt ( 8,072 ) ( 3,749 ) Long-term debt ( 8,072 ) ( 3,749 ) Long-term debt $ 50,074 3,749 ) Long-term debt $ 50,074 $ 59,578 ( a ) Long-term debt $ 50,074 $ 59,578 ( a ) In March ( a ) In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion b ) Refer to Note 5 – Derivatives for further information debt . As of June 30 , 2021 and 2020 , As of June 30 , 2021 and 2020 , the estimated June 30 , 2021 and 2020 , the estimated fair value current portion , wa $ 70.0 billion and $ 77.1 billion $ 70.0 billion and $ 77.1 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 wa $ 2021 , 2020 , and 2019 wa $ 2.0 billion , , and 2019 wa $ 2.0 billion , $ 2.4 billion $ 2.0 billion , $ 2.4 billion , and $ 2.4 2.4 billion , and $ 2.4 billion , respectively . The portion , a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) million ) Year Ending June 30 , 2022 $ 8,075 2023 Year Ending June 30 , 2022 $ 8,075 2023 2,750 2024 June 30 , 2022 $ 8,075 2023 2,750 2024 5,250 2025 30 , 2022 $ 8,075 2023 2,750 2024 5,250 2025 2,250 , 2022 $ 8,075 2023 2,750 2024 5,250 2025 2,250 2026 2022 $ 8,075 2023 2,750 2024 5,250 2025 2,250 2026 3,000 $ 8,075 2023 2,750 2024 5,250 2025 2,250 2026 3,000 Thereafter 8,075 2023 2,750 2024 5,250 2025 2,250 2026 3,000 Thereafter 42,585 2023 2,750 2024 5,250 2025 2,250 2026 3,000 Thereafter 42,585 Total 2,750 2024 5,250 2025 2,250 2026 3,000 Thereafter 42,585 Total $ 2024 5,250 2025 2,250 2026 3,000 Thereafter 42,585 Total $ 63,910 2025 2,250 2026 3,000 Thereafter 42,585 Total $ 63,910 81 PART 3,000 Thereafter 42,585 Total $ 63,910 81 PART II Item 8 Thereafter 42,585 Total $ 63,910 81 PART II Item 8 NOTE 63,910 81 PART II Item 8 NOTE 12 — INCOME TAXES PART II Item 8 NOTE 12 — INCOME TAXES Tax Cuts and Jobs Act On December 22 , 2017 , the Tax Act On December 22 , 2017 , the Tax Cuts and provisional net charge of $ 13.7 billion related to the enactment the TCJA in fiscal year 2018 and adjusted the provisional net additional tax expense of $ 157 million in fiscal year 2019 157 million in fiscal year 2019 pursuant to Securities and Exchange Staff Accounting Bulletin No . 118 . In fiscal year 2019 118 . In fiscal year 2019 , in response to the property resulted in a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 , a the value of million ) Year Ended June 30 , 2021 2020 2019 Current Year Ended June 30 , 2021 2020 2019 Current Taxes U.S. Ended June 30 , 2021 2020 2019 Current Taxes U.S. federal June 30 , 2021 2020 2019 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 3,285 $ 3,537 $ 4,718 U.S. U.S. federal $ 3,285 $ 3,537 $ 4,718 U.S. state and $ 3,285 $ 3,537 $ 4,718 U.S. state and local 1,229 4,718 U.S. state and local 1,229 763 662 Foreign 5,467 4,444 U.S. state and local 1,229 763 662 Foreign 5,467 4,444 5,531 state and local 1,229 763 662 Foreign 5,467 4,444 5,531 Current local 1,229 763 662 Foreign 5,467 4,444 5,531 Current tax $ 1,229 763 662 Foreign 5,467 4,444 5,531 Current tax $ 9,981 763 662 Foreign 5,467 4,444 5,531 Current tax $ 9,981 $ 4,444 5,531 Current tax $ 9,981 $ 8,744 $ 10,911 Deferred Current tax $ 9,981 $ 8,744 $ 10,911 Deferred Taxes U.S. $ 9,981 $ 8,744 $ 10,911 Deferred Taxes U.S. federal $ Deferred Taxes U.S. federal $ 25 $ 58 $ ( 5,647 U.S. federal $ 25 $ 58 $ ( 5,647 ) U.S. 25 $ 58 $ ( 5,647 ) U.S. state and local U.S. state and local ( 204 ) ( 6 ) ( local ( 204 ) ( 6 ) ( 1,010 ) Foreign ) ( 6 ) ( 1,010 ) Foreign 29 ( 41 ) ( 1,010 ) Foreign 29 ( 41 ) 194 Deferred 1,010 ) Foreign 29 ( 41 ) 194 Deferred tax $ Foreign 29 ( 41 ) 194 Deferred tax $ ( 150 194 Deferred tax $ ( 150 ) $ 11 $ ( $ ( 150 ) $ 11 $ ( 6,463 ) Provision ) $ 11 $ ( 6,463 ) Provision for income tax Provision for income tax $ 9,831 $ 8,755 $ 4,448 U.S. income tax $ 9,831 $ 8,755 $ 4,448 U.S. and foreign $ 9,831 $ 8,755 $ 4,448 U.S. and foreign component of million ) Year Ended June 30 , 2021 2020 2019 U.S. Year Ended June 30 , 2021 2020 2019 U.S. $ 34,972 Ended June 30 , 2021 2020 2019 U.S. $ 34,972 $ June 30 , 2021 2020 2019 U.S. $ 34,972 $ 24,116 2021 2020 2019 U.S. $ 34,972 $ 24,116 $ 15,799 Foreign 2019 U.S. $ 34,972 $ 24,116 $ 15,799 Foreign 36,130 28,920 $ 34,972 $ 24,116 $ 15,799 Foreign 36,130 28,920 27,889 Income $ 24,116 $ 15,799 Foreign 36,130 28,920 27,889 Income before income 24,116 $ 15,799 Foreign 36,130 28,920 27,889 Income before income tax $ 15,799 Foreign 36,130 28,920 27,889 Income before income tax $ Income before income tax $ 71,102 $ 53,036 $ 43,688 82 income tax $ 71,102 $ 53,036 $ 43,688 82 PART II $ 71,102 $ 53,036 $ 43,688 82 PART II Item 8 71,102 $ 53,036 $ 43,688 82 PART II Item 8 Effective 43,688 82 PART II Item 8 Effective Tax Rate The item follows : Year Ended June 30 , 2021 2020 2019 Federal Year Ended June 30 , 2021 2020 2019 Federal statutory rate Ended June 30 , 2021 2020 2019 Federal statutory rate 21.0 June 30 , 2021 2020 2019 Federal statutory rate 21.0 % 2020 2019 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 2.7 ) % ( 3.7 ) ( 2.7 ) % ( 3.7 ) % ( 4.1 ) ( 3.7 ) % ( 4.1 ) % Impact of the the enactment of the TCJA 0 % 0 % 0.4 % of the TCJA 0 % 0 % 0.4 % Impact of TCJA 0 % 0 % 0.4 % Impact of intangible property Impact of intangible property transfer 0 % 0 % ( 5.9 intangible property transfer 0 % 0 % ( 5.9 ) % 0 % 0 % ( 5.9 ) % Foreign-derived intangible income Foreign-derived intangible income deduction ( 1.3 ) % ( 1.1 ) ( 1.3 ) % ( 1.1 ) % ( 1.4 ) ( 1.1 ) % ( 1.4 ) % State income tax , net of federal benefit 1.4 % 1.3 % 0.7 % of federal benefit 1.4 % 1.3 % 0.7 % Research and benefit 1.4 % 1.3 % 0.7 % Research and development credit Research and development credit ( 0.9 ) % ( 1.1 ) ( 0.9 ) % ( 1.1 ) % ( 1.1 ) ( 1.1 ) % ( 1.1 ) % Excess tax benefit relating to stock-based compensation ( 2.4 ) % ( 2.2 ) ( 2.4 ) % ( 2.2 ) % ( 2.2 ) ( 2.2 ) % ( 2.2 ) % Interest , net ) % Interest , net 0.5 % 1.0 % 1.0 % Interest , net 0.5 % 1.0 % 1.0 % Other reconciling net 0.5 % 1.0 % 1.0 % Other reconciling item , reconciling item , net ( 1.8 ) % 1.3 % 1.8 net ( 1.8 ) % 1.3 % 1.8 % Effective rate 1.8 ) % 1.3 % 1.8 % Effective rate 13.8 % % 1.8 % Effective rate 13.8 % 16.5 % 10.2 % % Effective rate 13.8 % 16.5 % 10.2 % We have rate 13.8 % 16.5 % 10.2 % We have historically paid in India . In March 2021 , the India Supreme Court Income Tax for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . The decrease from the statutory rate in fiscal year 2021 is primarily due to earnings statutory rate in fiscal year 2020 is primarily due to earnings statutory rate in fiscal year 2019 is primarily due to a primarily due to a $ 2.6 billion net income tax benefit Rico . In fiscal year 2021 and 2020 , our foreign In fiscal year 2021 and 2020 , our foreign regional operating the U.S. rate , generated 82 % and 86 % of , generated 82 % and 86 % of our foreign income tax . In fiscal year 2019 , our foreign regional operating the U.S. rate , generated 82 % of our foreign income , and in fiscal year 2021 , includes tax benefit from tax . In fiscal year 2021 , 2020 , and 2019 In fiscal year 2021 , 2020 , and 2019 , there 2021 , 2020 , and 2019 , there were no individually significant other reconciling item . 83 PART II Item 8 The . 83 PART II Item 8 The decrease in our effective tax rate for fiscal year 2021 compared to fiscal year 2020 2021 compared to fiscal year 2020 wa primarily due to tax tax rate for fiscal year 2020 compared to fiscal year 2019 2020 compared to fiscal year 2019 wa primarily due to a primarily due to a $ 2.6 billion net income tax benefit fourth quarter of fiscal year 2019 related to intangible property transfer ( In million ) June 30 , 2021 2020 Deferred Income million ) June 30 , 2021 2020 Deferred Income Tax Assets ) June 30 , 2021 2020 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 502 $ 461 Accruals , reserve compensation expense $ 502 $ 461 Accruals , reserve , and reserve , and other expense 2,960 2,721 Loss and credit carryforwards , and other expense 2,960 2,721 Loss and credit carryforwards 1,090 2,721 Loss and credit carryforwards 1,090 865 Amortization 6,346 6,737 Leasing Loss and credit carryforwards 1,090 865 Amortization 6,346 6,737 Leasing liability credit carryforwards 1,090 865 Amortization 6,346 6,737 Leasing liability 4,060 3,025 carryforwards 1,090 865 Amortization 6,346 6,737 Leasing liability 4,060 3,025 Unearned Amortization 6,346 6,737 Leasing liability 4,060 3,025 Unearned revenue 2,659 1,553 6,346 6,737 Leasing liability 4,060 3,025 Unearned revenue 2,659 1,553 Other liability 4,060 3,025 Unearned revenue 2,659 1,553 Other 543 354 Deferred 4,060 3,025 Unearned revenue 2,659 1,553 Other 543 354 Deferred income Unearned revenue 2,659 1,553 Other 543 354 Deferred income tax asset revenue 2,659 1,553 Other 543 354 Deferred income tax asset 18,160 354 Deferred income tax asset 18,160 15,716 Less valuation allowance ( Deferred income tax asset 18,160 15,716 Less valuation allowance ( 769 15,716 Less valuation allowance ( 769 ) ( 755 ) Deferred allowance ( 769 ) ( 755 ) Deferred income tax asset net of valuation allowance $ 17,391 $ 14,961 Deferred Income Tax valuation allowance $ 17,391 $ 14,961 Deferred Income Tax Liabilities Book/tax investment and debt $ ( 2,605 ) $ ( 2,642 ) ( 2,605 ) $ ( 2,642 ) Leasing asset ( 3,834 2,642 ) Leasing asset ( 3,834 ) ( 2,817 ) Depreciation asset ( 3,834 ) ( 2,817 ) Depreciation ( 1,010 ) ( 2,817 ) Depreciation ( 1,010 ) ( 376 ) Deferred Depreciation ( 1,010 ) ( 376 ) Deferred GILTI tax liability Deferred GILTI tax liability ( 2,815 ) ( 2,581 ) Other liability ( 2,815 ) ( 2,581 ) Other ( 144 ) ( 2,581 ) Other ( 144 ) ( 344 ) Deferred Other ( 144 ) ( 344 ) Deferred income tax liability income tax liability $ ( 10,408 ) $ ( 8,760 ) ( 10,408 ) $ ( 8,760 ) Net deferred income tax deferred income tax asset $ 6,983 $ 6,201 Reported As Other tax asset $ 6,983 $ 6,201 Reported As Other long-term asset As Other long-term asset $ 7,181 $ 6,405 Long-term deferred income long-term asset $ 7,181 $ 6,405 Long-term deferred income tax liability deferred income tax liability ( 198 ) ( 204 ) Net liability ( 198 ) ( 204 ) Net deferred income tax deferred income tax asset $ 6,983 $ 6,201 Deferred income tax tax asset $ 6,983 $ 6,201 Deferred income tax balance reflect recovered . As of June 30 , 2021 , we had As of June 30 , 2021 , we had federal , operating loss carryforwards of $ 304 million , $ 1.3 billion $ 304 million , $ 1.3 billion , and $ 2.0 1.3 billion , and $ 2.0 billion , respectively . The in various year from fiscal 2022 through 2041 , if not year from fiscal 2022 through 2041 , if not utilized . realized . In fiscal year 2020 , we removed $ 2.0 2020 , we removed $ 2.0 billion of foreign net operating of refund , were $ 13.4 billion , $ 12.5 billion $ 13.4 billion , $ 12.5 billion , and $ 8.4 12.5 billion , and $ 8.4 billion in fiscal year 2021 8.4 billion in fiscal year 2021 , 2020 , and 2019 in fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . 84 PART and 2019 , respectively . 84 PART II Item 8 Uncertain . 84 PART II Item 8 Uncertain Tax Positions Gross unrecognized tax position a of June 30 , 2021 , 2020 , a of June 30 , 2021 , 2020 , and 2019 June 30 , 2021 , 2020 , and 2019 , were 2021 , 2020 , and 2019 , were $ 14.6 billion and 2019 , were $ 14.6 billion , $ 13.8 billion $ 14.6 billion , $ 13.8 billion , and $ 13.1 13.8 billion , and $ 13.1 billion , respectively , which tax rate for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 by $ 2021 , 2020 , and 2019 by $ 12.5 billion , , and 2019 by $ 12.5 billion , $ 12.1 billion $ 12.5 billion , $ 12.1 billion , and $ 12.0 12.1 billion , and $ 12.0 billion , respectively . As respectively . As of June 30 , 2021 , 2020 , As of June 30 , 2021 , 2020 , and 2019 June 30 , 2021 , 2020 , and 2019 , we 2021 , 2020 , and 2019 , we had accrued interest uncertain tax position of $ 4.3 billion , $ 4.0 billion $ 4.3 billion , $ 4.0 billion , and $ 3.4 4.0 billion , and $ 3.4 billion , respectively , net income tax for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 included interest 2021 , 2020 , and 2019 included interest expense related to uncertain tax position of $ 274 million , $ 579 million $ 274 million , $ 579 million , and $ 515 579 million , and $ 515 million , respectively , net million ) Year Ended June 30 , 2021 2020 2019 Beginning Year Ended June 30 , 2021 2020 2019 Beginning unrecognized tax Ended June 30 , 2021 2020 2019 Beginning unrecognized tax benefit June 30 , 2021 2020 2019 Beginning unrecognized tax benefit $ Beginning unrecognized tax benefit $ 13,792 $ 13,146 $ 11,961 Decreases tax benefit $ 13,792 $ 13,146 $ 11,961 Decreases related to $ 13,792 $ 13,146 $ 11,961 Decreases related to settlement ( Decreases related to settlement ( 195 ) ( 31 ) ( settlement ( 195 ) ( 31 ) ( 316 ) Increases ) ( 31 ) ( 316 ) Increases for tax position related to the current year 790 647 2,106 Increases for tax to the current year 790 647 2,106 Increases for tax position the current year 790 647 2,106 Increases for tax position related position related to prior year 461 366 508 Decreases for tax related to prior year 461 366 508 Decreases for tax position to prior year 461 366 508 Decreases for tax position related related to prior year ( 297 ) ( 331 ) ( year ( 297 ) ( 331 ) ( 1,113 ) Decreases ) ( 331 ) ( 1,113 ) Decreases due to lapsed lapsed statute of limitation ( 1 ) ( 5 ) 0 limitation ( 1 ) ( 5 ) 0 Ending unrecognized tax 1 ) ( 5 ) 0 Ending unrecognized tax benefit $ Ending unrecognized tax benefit $ 14,550 $ 13,792 $ 13,146 We tax benefit $ 14,550 $ 13,792 $ 13,146 We settled a $ 14,550 $ 13,792 $ 13,146 We settled a portion of ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . As of for tax year 2004 to 2017 . As of June 30 2017 . As of June 30 , 2021 , the primary As of June 30 , 2021 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2020 , some of for tax year 1996 to 2020 , some of which are consolidated financial statement . NOTE 13 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2021 2020 Productivity and million ) June 30 , 2021 2020 Productivity and Business Processes ) June 30 , 2021 2020 Productivity and Business Processes $ Productivity and Business Processes $ 22,120 $ 18,643 Intelligent Cloud 17,710 Business Processes $ 22,120 $ 18,643 Intelligent Cloud 17,710 16,620 More 22,120 $ 18,643 Intelligent Cloud 17,710 16,620 More Personal Computing 4,311 $ 18,643 Intelligent Cloud 17,710 16,620 More Personal Computing 4,311 3,917 17,710 16,620 More Personal Computing 4,311 3,917 Total $ 44,141 $ 16,620 More Personal Computing 4,311 3,917 Total $ 44,141 $ 39,180 Computing 4,311 3,917 Total $ 44,141 $ 39,180 85 PART II 3,917 Total $ 44,141 $ 39,180 85 PART II Item 8 Total $ 44,141 $ 39,180 85 PART II Item 8 Changes 39,180 85 PART II Item 8 Changes in unearned revenue were million ) Year Ended June 30 , 2021 Balance , beginning Year Ended June 30 , 2021 Balance , beginning of period , beginning of period $ 39,180 Deferral of revenue 94,565 Recognition $ 39,180 Deferral of revenue 94,565 Recognition of unearned revenue ( Recognition of unearned revenue ( 89,604 ) Balance , end of , end of period $ 44,141 Revenue allocated to remaining performance future period , wa $ 146 billion a of June 30 146 billion a of June 30 , 2021 , of which a of June 30 , 2021 , of which $ 141 2021 , of which $ 141 billion is related to the We expect to recognize approximately 50 % of this revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 — LEASES We have operating have remaining lease term of 1 year to 15 year , term of 1 year to 15 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2021 2020 2019 Operating Year Ended June 30 , 2021 2020 2019 Operating lease cost Ended June 30 , 2021 2020 2019 Operating lease cost $ June 30 , 2021 2020 2019 Operating lease cost $ 2,127 2019 Operating lease cost $ 2,127 $ 2,043 $ 1,707 Finance lease cost $ 2,127 $ 2,043 $ 1,707 Finance lease cost $ 2,127 $ 2,043 $ 1,707 Finance lease cost : Amortization Amortization of right-of-use asset $ 921 $ 611 $ 370 Interest right-of-use asset $ 921 $ 611 $ 370 Interest on lease $ 921 $ 611 $ 370 Interest on lease liability 386 370 Interest on lease liability 386 336 247 Total finance lease Interest on lease liability 386 336 247 Total finance lease cost on lease liability 386 336 247 Total finance lease cost $ Total finance lease cost $ 1,307 $ 947 $ 617 Supplemental lease cost $ 1,307 $ 947 $ 617 Supplemental cash flow $ 1,307 $ 947 $ 617 Supplemental cash flow information related million ) Year Ended June 30 , 2021 2020 2019 Cash Year Ended June 30 , 2021 2020 2019 Cash paid for Ended June 30 , 2021 2020 2019 Cash paid for amount June 30 , 2021 2020 2019 Cash paid for amount included flow from operating lease $ 2,052 $ 1,829 $ 1,670 Operating operating lease $ 2,052 $ 1,829 $ 1,670 Operating cash flow $ 2,052 $ 1,829 $ 1,670 Operating cash flow from finance cash flow from finance lease 386 336 247 Financing cash flow flow from finance lease 386 336 247 Financing cash flow from from finance lease 386 336 247 Financing cash flow from finance cash flow from finance lease 648 409 221 Right-of-use asset obtained flow from finance lease 648 409 221 Right-of-use asset obtained in from finance lease 648 409 221 Right-of-use asset obtained in exchange lease obligation : Operating lease 4,380 3,677 2,303 Finance lease 3,290 obligation : Operating lease 4,380 3,677 2,303 Finance lease 3,290 3,467 : Operating lease 4,380 3,677 2,303 Finance lease 3,290 3,467 2,532 4,380 3,677 2,303 Finance lease 3,290 3,467 2,532 86 PART II 3,677 2,303 Finance lease 3,290 3,467 2,532 86 PART II Item 2,303 Finance lease 3,290 3,467 2,532 86 PART II Item 8 Finance lease 3,290 3,467 2,532 86 PART II Item 8 Supplemental 2,532 86 PART II Item 8 Supplemental balance sheet information related and discount rate ) June 30 , 2021 2020 Operating Leases rate ) June 30 , 2021 2020 Operating Leases Operating lease ) June 30 , 2021 2020 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 11,088 $ 8,753 Other current liability right-of-use asset $ 11,088 $ 8,753 Other current liability $ 1,962 8,753 Other current liability $ 1,962 $ 1,616 Operating lease liability current liability $ 1,962 $ 1,616 Operating lease liability 9,629 7,671 $ 1,616 Operating lease liability 9,629 7,671 Total operating lease liability 1,616 Operating lease liability 9,629 7,671 Total operating lease liability $ Total operating lease liability $ 11,591 $ 9,287 Finance Leases Property lease liability $ 11,591 $ 9,287 Finance Leases Property and equipment equipment , at cost $ 14,107 $ 10,371 Accumulated depreciation ( at cost $ 14,107 $ 10,371 Accumulated depreciation ( 2,306 ) $ 10,371 Accumulated depreciation ( 2,306 ) ( 1,385 ) Property depreciation ( 2,306 ) ( 1,385 ) Property and equipment , and equipment , net $ 11,801 $ 8,986 Other current liability , net $ 11,801 $ 8,986 Other current liability $ 791 8,986 Other current liability $ 791 $ 540 Other long-term liability current liability $ 791 $ 540 Other long-term liability 11,750 8,956 $ 540 Other long-term liability 11,750 8,956 Total finance lease liability 540 Other long-term liability 11,750 8,956 Total finance lease liability $ Total finance lease liability $ 12,541 $ 9,496 Weighted Average Remaining lease liability $ 12,541 $ 9,496 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 8 year 8 year Finance lease Term Operating lease 8 year 8 year Finance lease 12 year year 8 year Finance lease 12 year 13 year Weighted Average year Finance lease 12 year 13 year Weighted Average Discount Rate Average Discount Rate Operating lease 2.2 % 2.7 % Finance lease Rate Operating lease 2.2 % 2.7 % Finance lease 3.4 % % 2.7 % Finance lease 3.4 % 3.9 % The following % Finance lease 3.4 % 3.9 % The following table outline lease liability a of June 30 , 2021 : ( In a of June 30 , 2021 : ( In million ) million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2022 $ 2,125 $ 1,179 2023 Leases Finance Leases 2022 $ 2,125 $ 1,179 2023 1,954 1,198 Leases 2022 $ 2,125 $ 1,179 2023 1,954 1,198 2024 1,751 2022 $ 2,125 $ 1,179 2023 1,954 1,198 2024 1,751 1,211 $ 2,125 $ 1,179 2023 1,954 1,198 2024 1,751 1,211 2025 2,125 $ 1,179 2023 1,954 1,198 2024 1,751 1,211 2025 1,463 $ 1,179 2023 1,954 1,198 2024 1,751 1,211 2025 1,463 1,537 1,179 2023 1,954 1,198 2024 1,751 1,211 2025 1,463 1,537 2026 2023 1,954 1,198 2024 1,751 1,211 2025 1,463 1,537 2026 1,133 1,954 1,198 2024 1,751 1,211 2025 1,463 1,537 2026 1,133 1,220 1,198 2024 1,751 1,211 2025 1,463 1,537 2026 1,133 1,220 Thereafter 2024 1,751 1,211 2025 1,463 1,537 2026 1,133 1,220 Thereafter 4,111 1,751 1,211 2025 1,463 1,537 2026 1,133 1,220 Thereafter 4,111 8,856 1,211 2025 1,463 1,537 2026 1,133 1,220 Thereafter 4,111 8,856 Total 2025 1,463 1,537 2026 1,133 1,220 Thereafter 4,111 8,856 Total lease 1,537 2026 1,133 1,220 Thereafter 4,111 8,856 Total lease payment 12,537 2026 1,133 1,220 Thereafter 4,111 8,856 Total lease payment 12,537 15,201 4,111 8,856 Total lease payment 12,537 15,201 Less imputed interest ( 8,856 Total lease payment 12,537 15,201 Less imputed interest ( 946 15,201 Less imputed interest ( 946 ) ( 2,660 ) Total interest ( 946 ) ( 2,660 ) Total $ 11,591 $ ( 2,660 ) Total $ 11,591 $ 12,541 As of June ) Total $ 11,591 $ 12,541 As of June 30 , $ 12,541 As of June 30 , 2021 , we have As of June 30 , 2021 , we have additional operating not yet commenced of $ 5.4 billion and $ 7.3 billion $ 5.4 billion and $ 7.3 billion , respectively . These will commence between fiscal year 2022 and fiscal year 2026 with year 2022 and fiscal year 2026 with lease term of 1 2026 with lease term of 1 year to 15 year . term of 1 year to 15 year . During fiscal year year . During fiscal year 2020 , we recorded an impairment an impairment charge of $ 161 million to operating lease right-of-use Microsoft Store physical location . 87 PART II Item 8 NOTE . 87 PART II Item 8 NOTE 15 — CONTINGENCIES Patent PART II Item 8 NOTE 15 — CONTINGENCIES Patent and Intellectual Intellectual Property Claims There were 63 patent infringement case pending against against Microsoft a of June 30 , 2021 , none of a of June 30 , 2021 , none of which are and/or productivity application software between 1998 and 2010 . The trial application software between 1998 and 2010 . The trial of the Columbia action commenced in May 2016 . Following a mediation , claim period commenced on November 23 , 2020 and will close commenced on November 23 , 2020 and will close on September and will close on September 23 , 2021 . Other Antitrust close on September 23 , 2021 . Other Antitrust Litigation and Market Regulation Investigatio n In 2014 , Microsoft wa informed that , and Chengdu . In 2019 , the SAMR presented preliminary , is a defendant in 46 lawsuit , including 45 lawsuit in 46 lawsuit , including 45 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted scientific evidence . In October 2016 , the Court of Appeals to strike . In August 2018 , the trial court issued for January and February of 2022 . 88 PART II Item and February of 2022 . 88 PART II Item 8 Other . 88 PART II Item 8 Other Contingencies We also are future . As of June 30 , 2021 , we accrued As of June 30 , 2021 , we accrued aggregate legal aggregate legal liability of $ 339 million . While we intend estimate could reach approximately $ 500 million in aggregate beyond recorded become reasonably estimable . NOTE 16 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2021 2020 2019 Balance Year Ended June 30 , 2021 2020 2019 Balance , beginning Ended June 30 , 2021 2020 2019 Balance , beginning of June 30 , 2021 2020 2019 Balance , beginning of year Balance , beginning of year 7,571 7,643 7,677 Issued 49 54 , beginning of year 7,571 7,643 7,677 Issued 49 54 116 beginning of year 7,571 7,643 7,677 Issued 49 54 116 Repurchased year 7,571 7,643 7,677 Issued 49 54 116 Repurchased ( 101 7,571 7,643 7,677 Issued 49 54 116 Repurchased ( 101 ) 7,643 7,677 Issued 49 54 116 Repurchased ( 101 ) ( 49 54 116 Repurchased ( 101 ) ( 126 ) ( Repurchased ( 101 ) ( 126 ) ( 150 ) Balance ) ( 126 ) ( 150 ) Balance , end of Balance , end of year 7,519 7,571 7,643 Share Repurchases On , end of year 7,519 7,571 7,643 Share Repurchases On September end of year 7,519 7,571 7,643 Share Repurchases On September 20 7,643 Share Repurchases On September 20 , 2016 , our Board Repurchases On September 20 , 2016 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 , following completion of the the program approved on September 20 , 2016 , ha no approved on September 20 , 2016 , ha no expiration date time . As of June 30 , 2021 , $ 8.7 As of June 30 , 2021 , $ 8.7 billion remained 30 , 2021 , $ 8.7 billion remained of this $ billion remained of this $ 40.0 billion share repurchase program . billion share repurchase program . 89 PART II Item 8 We . 89 PART II Item 8 We repurchased the following share Shares Amount Year Ended June 30 , 2021 2020 2019 First Year Ended June 30 , 2021 2020 2019 First Quarter 25 Ended June 30 , 2021 2020 2019 First Quarter 25 $ June 30 , 2021 2020 2019 First Quarter 25 $ 5,270 2021 2020 2019 First Quarter 25 $ 5,270 29 $ 4,000 2019 First Quarter 25 $ 5,270 29 $ 4,000 24 $ First Quarter 25 $ 5,270 29 $ 4,000 24 $ 2,600 25 $ 5,270 29 $ 4,000 24 $ 2,600 Second Quarter $ 5,270 29 $ 4,000 24 $ 2,600 Second Quarter 27 29 $ 4,000 24 $ 2,600 Second Quarter 27 5,750 32 24 $ 2,600 Second Quarter 27 5,750 32 4,600 57 6,100 $ 2,600 Second Quarter 27 5,750 32 4,600 57 6,100 Third 2,600 Second Quarter 27 5,750 32 4,600 57 6,100 Third Quarter Second Quarter 27 5,750 32 4,600 57 6,100 Third Quarter 25 Quarter 27 5,750 32 4,600 57 6,100 Third Quarter 25 5,750 27 5,750 32 4,600 57 6,100 Third Quarter 25 5,750 37 4,600 57 6,100 Third Quarter 25 5,750 37 6,000 36 3,899 57 6,100 Third Quarter 25 5,750 37 6,000 36 3,899 Fourth 6,100 Third Quarter 25 5,750 37 6,000 36 3,899 Fourth Quarter Third Quarter 25 5,750 37 6,000 36 3,899 Fourth Quarter 24 Quarter 25 5,750 37 6,000 36 3,899 Fourth Quarter 24 6,200 25 5,750 37 6,000 36 3,899 Fourth Quarter 24 6,200 28 6,000 36 3,899 Fourth Quarter 24 6,200 28 5,088 33 4,200 36 3,899 Fourth Quarter 24 6,200 28 5,088 33 4,200 Total 3,899 Fourth Quarter 24 6,200 28 5,088 33 4,200 Total 101 Fourth Quarter 24 6,200 28 5,088 33 4,200 Total 101 $ Quarter 24 6,200 28 5,088 33 4,200 Total 101 $ 22,970 24 6,200 28 5,088 33 4,200 Total 101 $ 22,970 126 28 5,088 33 4,200 Total 101 $ 22,970 126 $ 19,688 33 4,200 Total 101 $ 22,970 126 $ 19,688 150 $ 4,200 Total 101 $ 22,970 126 $ 19,688 150 $ 16,799 101 $ 22,970 126 $ 19,688 150 $ 16,799 Shares repurchased $ 22,970 126 $ 19,688 150 $ 16,799 Shares repurchased during 126 $ 19,688 150 $ 16,799 Shares repurchased during fiscal year Shares repurchased during fiscal year 2021 and the fourth quarter of fourth quarter of fiscal year 2020 were under the share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on September 20 , 2016 . The above table excludes of stock award of $ 4.4 billion , $ 3.3 billion $ 4.4 billion , $ 3.3 billion , and $ 2.7 3.3 billion , and $ 2.7 billion for fiscal year 2021 2.7 billion for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . All share Per Share Amount Fiscal Year 2021 ( In million ) September ( In million ) September 15 , 2020 November 19 , million ) September 15 , 2020 November 19 , 2020 December September 15 , 2020 November 19 , 2020 December 10 , , 2020 November 19 , 2020 December 10 , 2020 $ November 19 , 2020 December 10 , 2020 $ 0.56 $ , 2020 December 10 , 2020 $ 0.56 $ 4,230 December December 10 , 2020 $ 0.56 $ 4,230 December 2 , , 2020 $ 0.56 $ 4,230 December 2 , 2020 February $ 0.56 $ 4,230 December 2 , 2020 February 18 , $ 4,230 December 2 , 2020 February 18 , 2021 March December 2 , 2020 February 18 , 2021 March 11 , , 2020 February 18 , 2021 March 11 , 2021 0.56 February 18 , 2021 March 11 , 2021 0.56 4,221 March , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 May , 2021 0.56 4,221 March 16 , 2021 May 20 , 0.56 4,221 March 16 , 2021 May 20 , 2021 June March 16 , 2021 May 20 , 2021 June 10 , , 2021 May 20 , 2021 June 10 , 2021 0.56 May 20 , 2021 June 10 , 2021 0.56 4,214 June , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 August , 2021 0.56 4,214 June 16 , 2021 August 19 , 0.56 4,214 June 16 , 2021 August 19 , 2021 September June 16 , 2021 August 19 , 2021 September 9 , , 2021 August 19 , 2021 September 9 , 2021 0.56 August 19 , 2021 September 9 , 2021 0.56 4,211 Total , 2021 September 9 , 2021 0.56 4,211 Total $ 2.24 2021 September 9 , 2021 0.56 4,211 Total $ 2.24 $ September 9 , 2021 0.56 4,211 Total $ 2.24 $ 16,876 2021 0.56 4,211 Total $ 2.24 $ 16,876 Fiscal Year 2020 4,211 Total $ 2.24 $ 16,876 Fiscal Year 2020 September 18 2.24 $ 16,876 Fiscal Year 2020 September 18 , 2019 November 16,876 Fiscal Year 2020 September 18 , 2019 November 21 , Year 2020 September 18 , 2019 November 21 , 2019 December September 18 , 2019 November 21 , 2019 December 12 , , 2019 November 21 , 2019 December 12 , 2019 $ November 21 , 2019 December 12 , 2019 $ 0.51 $ , 2019 December 12 , 2019 $ 0.51 $ 3,886 December December 12 , 2019 $ 0.51 $ 3,886 December 4 , , 2019 $ 0.51 $ 3,886 December 4 , 2019 February $ 0.51 $ 3,886 December 4 , 2019 February 20 , $ 3,886 December 4 , 2019 February 20 , 2020 March December 4 , 2019 February 20 , 2020 March 12 , , 2019 February 20 , 2020 March 12 , 2020 0.51 February 20 , 2020 March 12 , 2020 0.51 3,876 March , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 March 12 , 2020 0.51 3,876 March 9 , 2020 May , 2020 0.51 3,876 March 9 , 2020 May 21 , 0.51 3,876 March 9 , 2020 May 21 , 2020 June March 9 , 2020 May 21 , 2020 June 11 , , 2020 May 21 , 2020 June 11 , 2020 0.51 May 21 , 2020 June 11 , 2020 0.51 3,865 June , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 June 11 , 2020 0.51 3,865 June 17 , 2020 August , 2020 0.51 3,865 June 17 , 2020 August 20 , 0.51 3,865 June 17 , 2020 August 20 , 2020 September June 17 , 2020 August 20 , 2020 September 10 , , 2020 August 20 , 2020 September 10 , 2020 0.51 August 20 , 2020 September 10 , 2020 0.51 3,856 Total , 2020 September 10 , 2020 0.51 3,856 Total $ 2.04 2020 September 10 , 2020 0.51 3,856 Total $ 2.04 $ September 10 , 2020 0.51 3,856 Total $ 2.04 $ 15,483 2020 0.51 3,856 Total $ 2.04 $ 15,483 The dividend declared 3,856 Total $ 2.04 $ 15,483 The dividend declared on June The dividend declared on June 16 , 2021 wa included in declared on June 16 , 2021 wa included in other current current liability a of June 30 , 2021 . 90 PART a of June 30 , 2021 . 90 PART II Item June 30 , 2021 . 90 PART II Item 8 NOTE . 90 PART II Item 8 NOTE 17 — ACCUMULATED OTHER PART II Item 8 NOTE 17 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2021 2020 2019 Derivatives Year Ended June 30 , 2021 2020 2019 Derivatives Balance , Ended June 30 , 2021 2020 2019 Derivatives Balance , beginning June 30 , 2021 2020 2019 Derivatives Balance , beginning of beginning of period $ ( 38 ) $ 0 $ 173 $ ( 38 ) $ 0 $ 173 Unrealized gain ( 38 ) $ 0 $ 173 Unrealized gain ( loss ) net of tax of $ 9 , $ ( 10 ) $ 9 , $ ( 10 ) , and $ 2 10 ) , and $ 2 34 ( 38 ) 160 ) , and $ 2 34 ( 38 ) 160 Reclassification and $ 2 34 ( 38 ) 160 Reclassification adjustment for 2 34 ( 38 ) 160 Reclassification adjustment for gain included gain included in earnings ( 17 ) 0 ( 341 ) in earnings ( 17 ) 0 ( 341 ) Tax expense ( 17 ) 0 ( 341 ) Tax expense included in in provision for income tax 2 0 8 Amounts reclassified from provision for income tax 2 0 8 Amounts reclassified from accumulated for income tax 2 0 8 Amounts reclassified from accumulated other income ( loss ) ( 15 ) 0 ( 333 ) loss ) ( 15 ) 0 ( 333 ) Net change ( 15 ) 0 ( 333 ) Net change related to net of tax of $ 7 , $ ( 10 ) $ 7 , $ ( 10 ) , and $ ( ) , and $ ( 6 ) 19 ( 38 ) and $ ( 6 ) 19 ( 38 ) ( 173 ( 6 ) 19 ( 38 ) ( 173 ) Balance 19 ( 38 ) ( 173 ) Balance , end of end of period $ ( 19 ) $ ( 38 ) ( 19 ) $ ( 38 ) $ 0 Investments Balance $ ( 38 ) $ 0 Investments Balance , beginning of , beginning of period $ 5,478 $ 1,488 $ ( 850 of period $ 5,478 $ 1,488 $ ( 850 ) Unrealized 5,478 $ 1,488 $ ( 850 ) Unrealized gain ( loss of tax of $ ( 589 ) , $ 1,057 , ( 589 ) , $ 1,057 , and $ 616 ( $ 1,057 , and $ 616 ( 2,216 ) 3,987 2,331 , and $ 616 ( 2,216 ) 3,987 2,331 Reclassification adjustment $ 616 ( 2,216 ) 3,987 2,331 Reclassification adjustment for ( 616 ( 2,216 ) 3,987 2,331 Reclassification adjustment for ( gain expense ) , net ( 63 ) 4 93 Tax expense , net ( 63 ) 4 93 Tax expense ( benefit net ( 63 ) 4 93 Tax expense ( benefit ) in provision for income tax 13 ( 1 ) ( 19 for income tax 13 ( 1 ) ( 19 ) Amounts 13 ( 1 ) ( 19 ) Amounts reclassified from accumulated income ( loss ) ( 50 ) 3 74 Net change loss ) ( 50 ) 3 74 Net change related to ) ( 50 ) 3 74 Net change related to investment of tax of $ ( 602 ) , $ 1,058 , ( 602 ) , $ 1,058 , and $ 635 ( $ 1,058 , and $ 635 ( 2,266 ) 3,990 2,405 , and $ 635 ( 2,266 ) 3,990 2,405 Cumulative effect $ 635 ( 2,266 ) 3,990 2,405 Cumulative effect of accounting 635 ( 2,266 ) 3,990 2,405 Cumulative effect of accounting change Cumulative effect of accounting change 10 0 ( 67 ) Balance effect of accounting change 10 0 ( 67 ) Balance , accounting change 10 0 ( 67 ) Balance , end of , end of period $ 3,222 $ 5,478 $ 1,488 Translation of period $ 3,222 $ 5,478 $ 1,488 Translation Adjustments and $ 3,222 $ 5,478 $ 1,488 Translation Adjustments and Other Balance beginning of period $ ( 2,254 ) $ ( 1,828 ) ( 2,254 ) $ ( 1,828 ) $ ( 1,510 ) ( 1,828 ) $ ( 1,510 ) Translation adjustment and other tax effect of $ ( 9 ) , $ 1 , ( 9 ) , $ 1 , and $ ( 1 1 , and $ ( 1 ) 873 ( 426 ) and $ ( 1 ) 873 ( 426 ) ( 318 ( 1 ) 873 ( 426 ) ( 318 ) Balance 873 ( 426 ) ( 318 ) Balance , end of end of period $ ( 1,381 ) $ ( 2,254 ) ( 1,381 ) $ ( 2,254 ) $ ( 1,828 ) ( 2,254 ) $ ( 1,828 ) Accumulated other comprehensive income , end of period $ 1,822 $ 3,186 $ ( 340 of period $ 1,822 $ 3,186 $ ( 340 ) NOTE 1,822 $ 3,186 $ ( 340 ) NOTE 18 — EMPLOYEE $ ( 340 ) NOTE 18 — EMPLOYEE STOCK AND SAVINGS director . As of June 30 , 2021 , an aggregate As of June 30 , 2021 , an aggregate of 251 2021 , an aggregate of 251 million share were authorized for million ) Year Ended June 30 , 2021 2020 2019 Stock-based Year Ended June 30 , 2021 2020 2019 Stock-based compensation expense Ended June 30 , 2021 2020 2019 Stock-based compensation expense $ June 30 , 2021 2020 2019 Stock-based compensation expense $ 6,118 2019 Stock-based compensation expense $ 6,118 $ 5,289 $ 4,652 Income compensation expense $ 6,118 $ 5,289 $ 4,652 Income tax benefit $ 6,118 $ 5,289 $ 4,652 Income tax benefit related to benefit related to stock-based compensation 1,065 938 816 Stock Plans Stock related to stock-based compensation 1,065 938 816 Stock Plans Stock award to stock-based compensation 1,065 938 816 Stock Plans Stock award entitle year or five year . 91 PART II Item 8 Executive . 91 PART II Item 8 Executive Incentive Plan Under the assumption : Year ended June 30 , 2021 2020 2019 Dividends Year ended June 30 , 2021 2020 2019 Dividends per share ended June 30 , 2021 2020 2019 Dividends per share ( June 30 , 2021 2020 2019 Dividends per share ( quarterly ( quarterly amount ) $ 0.51 – 0.56 $ 0.46 – amount ) $ 0.51 – 0.56 $ 0.46 – 0.51 $ $ 0.51 – 0.56 $ 0.46 – 0.51 $ 0.42 – – 0.56 $ 0.46 – 0.51 $ 0.42 – 0.46 Interest $ 0.46 – 0.51 $ 0.42 – 0.46 Interest rate 0.01 – 0.51 $ 0.42 – 0.46 Interest rate 0.01 % – 0.42 – 0.46 Interest rate 0.01 % – 1.5 % 0.1 Interest rate 0.01 % – 1.5 % 0.1 % – 2.2 0.01 % – 1.5 % 0.1 % – 2.2 % 1.8 1.5 % 0.1 % – 2.2 % 1.8 % – 3.1 0.1 % – 2.2 % 1.8 % – 3.1 % During 2.2 % 1.8 % – 3.1 % During fiscal year 2021 3.1 % During fiscal year 2021 , the following activity occurred balance , beginning of year 126 $ 105.23 Granted ( a beginning of year 126 $ 105.23 Granted ( a ) 40 105.23 Granted ( a ) 40 221.13 Vested ( 58 ) Granted ( a ) 40 221.13 Vested ( 58 ) 99.41 ) 40 221.13 Vested ( 58 ) 99.41 Forfeited ( 8 221.13 Vested ( 58 ) 99.41 Forfeited ( 8 ) 129.92 58 ) 99.41 Forfeited ( 8 ) 129.92 Nonvested balance , 99.41 Forfeited ( 8 ) 129.92 Nonvested balance , end of balance , end of year 100 $ 152.51 ( a ) end of year 100 $ 152.51 ( a ) Includes 2 152.51 ( a ) Includes 2 million of PSUs granted at target level for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 . As 2021 , 2020 , and 2019 . As of June 30 2019 . As of June 30 , 2021 , there wa As of June 30 , 2021 , there wa approximately $ , there wa approximately $ 12.0 billion of total unrecognized compensation stock award granted wa $ 221.13 , $ 140.49 , and wa $ 221.13 , $ 140.49 , and $ 107.02 for $ 140.49 , and $ 107.02 for fiscal year 2021 , $ 107.02 for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . The fair stock award vested wa $ 13.4 billion , $ 10.1 billion $ 13.4 billion , $ 10.1 billion , and $ 8.7 10.1 billion , and $ 8.7 billion , for fiscal year billion , for fiscal year 2021 , 2020 , and 2019 for fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . Employee Stock employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation ESPP that were approved in 2012 , the plan will terminate plan will terminate on December 31 , 2022 . We intend terminate on December 31 , 2022 . We intend to request successor ESPP with a January 1 , 2022 effective date and with a January 1 , 2022 effective date and ten-year expiration and ten-year expiration of December 31 , 2031 at our 2021 expiration of December 31 , 2031 at our 2021 Annual Shareholders 31 , 2031 at our 2021 Annual Shareholders Meeting . No million ) Year Ended June 30 , 2021 2020 2019 Shares Year Ended June 30 , 2021 2020 2019 Shares purchased 8 Ended June 30 , 2021 2020 2019 Shares purchased 8 9 June 30 , 2021 2020 2019 Shares purchased 8 9 11 2021 2020 2019 Shares purchased 8 9 11 Average price per 2020 2019 Shares purchased 8 9 11 Average price per share 2019 Shares purchased 8 9 11 Average price per share $ Average price per share $ 207.88 $ 142.22 $ 104.85 As per share $ 207.88 $ 142.22 $ 104.85 As of June $ 207.88 $ 142.22 $ 104.85 As of June 30 , $ 104.85 As of June 30 , 2021 , 88 million As of June 30 , 2021 , 88 million share of June 30 , 2021 , 88 million share of our common issuance through the ESPP . 92 PART II Item 8 Savings . 92 PART II Item 8 Savings Plan We have saving U.S. that qualify under Section 401 ( k ) of the a maximum employer contribution of 50 % of the IRS contribution for all plan were $ 1.2 billion , $ 1.0 billion $ 1.2 billion , $ 1.0 billion , and $ 877 1.0 billion , and $ 877 million in fiscal year 2021 877 million in fiscal year 2021 , 2020 , and 2019 in fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively , and were expensed a contributed . NOTE 19 — SEGMENT INFORMATION AND GEOGRAPHIC • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription and Office licensed business solution , including Dynamics 365 , comprising a set of Surface and PC accessory . 93 PART II Item 8 • . 93 PART II Item 8 • Gaming , including Xbox million ) Year Ended June 30 , 2021 2020 2019 Revenue Year Ended June 30 , 2021 2020 2019 Revenue Productivity and Ended June 30 , 2021 2020 2019 Revenue Productivity and Business June 30 , 2021 2020 2019 Revenue Productivity and Business Processes Productivity and Business Processes $ 53,915 $ 46,398 $ 41,160 Intelligent Business Processes $ 53,915 $ 46,398 $ 41,160 Intelligent Cloud 60,080 $ 53,915 $ 46,398 $ 41,160 Intelligent Cloud 60,080 48,366 38,985 46,398 $ 41,160 Intelligent Cloud 60,080 48,366 38,985 More Personal Computing $ 41,160 Intelligent Cloud 60,080 48,366 38,985 More Personal Computing 54,093 41,160 Intelligent Cloud 60,080 48,366 38,985 More Personal Computing 54,093 48,251 48,366 38,985 More Personal Computing 54,093 48,251 45,698 Total $ 168,088 38,985 More Personal Computing 54,093 48,251 45,698 Total $ 168,088 $ More Personal Computing 54,093 48,251 45,698 Total $ 168,088 $ 143,015 54,093 48,251 45,698 Total $ 168,088 $ 143,015 $ 125,843 Operating 45,698 Total $ 168,088 $ 143,015 $ 125,843 Operating Income Productivity $ 168,088 $ 143,015 $ 125,843 Operating Income Productivity and Business Productivity and Business Processes $ 24,351 $ 18,724 $ 16,219 Intelligent Business Processes $ 24,351 $ 18,724 $ 16,219 Intelligent Cloud 26,126 $ 24,351 $ 18,724 $ 16,219 Intelligent Cloud 26,126 18,324 13,920 18,724 $ 16,219 Intelligent Cloud 26,126 18,324 13,920 More Personal Computing $ 16,219 Intelligent Cloud 26,126 18,324 13,920 More Personal Computing 19,439 16,219 Intelligent Cloud 26,126 18,324 13,920 More Personal Computing 19,439 15,911 18,324 13,920 More Personal Computing 19,439 15,911 12,820 Total $ 69,916 13,920 More Personal Computing 19,439 15,911 12,820 Total $ 69,916 $ More Personal Computing 19,439 15,911 12,820 Total $ 69,916 $ 52,959 19,439 15,911 12,820 Total $ 69,916 $ 52,959 $ 42,959 No 12,820 Total $ 69,916 $ 52,959 $ 42,959 No sale to $ 69,916 $ 52,959 $ 42,959 No sale to an individual States accounted for more than 10 % of revenue for fiscal of revenue for fiscal year 2021 , 2020 , or 2019 for fiscal year 2021 , 2020 , or 2019 . Revenue 2021 , 2020 , or 2019 . Revenue , classified by million ) Year Ended June 30 , 2021 2020 2019 United Year Ended June 30 , 2021 2020 2019 United States ( Ended June 30 , 2021 2020 2019 United States ( a June 30 , 2021 2020 2019 United States ( a ) States ( a ) $ 83,953 $ 73,160 $ 64,199 Other a ) $ 83,953 $ 73,160 $ 64,199 Other country 84,135 $ 83,953 $ 73,160 $ 64,199 Other country 84,135 69,855 61,644 73,160 $ 64,199 Other country 84,135 69,855 61,644 Total $ 168,088 $ 64,199 Other country 84,135 69,855 61,644 Total $ 168,088 $ 64,199 Other country 84,135 69,855 61,644 Total $ 168,088 $ 143,015 84,135 69,855 61,644 Total $ 168,088 $ 143,015 $ 125,843 ( 61,644 Total $ 168,088 $ 143,015 $ 125,843 ( a ) $ 168,088 $ 143,015 $ 125,843 ( a ) Includes billing source of the revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue from external customer , million ) Year Ended June 30 , 2021 2020 2019 Server Year Ended June 30 , 2021 2020 2019 Server product and Ended June 30 , 2021 2020 2019 Server product and cloud June 30 , 2021 2020 2019 Server product and cloud service product and cloud service $ 52,589 $ 41,379 $ 32,622 Office cloud service $ 52,589 $ 41,379 $ 32,622 Office product and $ 52,589 $ 41,379 $ 32,622 Office product and cloud service Office product and cloud service 39,872 35,316 31,769 Windows 23,227 22,294 product and cloud service 39,872 35,316 31,769 Windows 23,227 22,294 20,395 and cloud service 39,872 35,316 31,769 Windows 23,227 22,294 20,395 Gaming service 39,872 35,316 31,769 Windows 23,227 22,294 20,395 Gaming 15,370 11,575 39,872 35,316 31,769 Windows 23,227 22,294 20,395 Gaming 15,370 11,575 11,386 35,316 31,769 Windows 23,227 22,294 20,395 Gaming 15,370 11,575 11,386 LinkedIn Windows 23,227 22,294 20,395 Gaming 15,370 11,575 11,386 LinkedIn 10,289 8,077 23,227 22,294 20,395 Gaming 15,370 11,575 11,386 LinkedIn 10,289 8,077 6,754 22,294 20,395 Gaming 15,370 11,575 11,386 LinkedIn 10,289 8,077 6,754 Search Gaming 15,370 11,575 11,386 LinkedIn 10,289 8,077 6,754 Search advertising 8,528 15,370 11,575 11,386 LinkedIn 10,289 8,077 6,754 Search advertising 8,528 7,740 11,575 11,386 LinkedIn 10,289 8,077 6,754 Search advertising 8,528 7,740 7,628 10,289 8,077 6,754 Search advertising 8,528 7,740 7,628 Enterprise Services 6,943 8,077 6,754 Search advertising 8,528 7,740 7,628 Enterprise Services 6,943 6,409 6,754 Search advertising 8,528 7,740 7,628 Enterprise Services 6,943 6,409 6,124 8,528 7,740 7,628 Enterprise Services 6,943 6,409 6,124 Devices 6,791 6,457 7,740 7,628 Enterprise Services 6,943 6,409 6,124 Devices 6,791 6,457 6,095 7,628 Enterprise Services 6,943 6,409 6,124 Devices 6,791 6,457 6,095 Other Services 6,943 6,409 6,124 Devices 6,791 6,457 6,095 Other 4,479 3,768 6,943 6,409 6,124 Devices 6,791 6,457 6,095 Other 4,479 3,768 3,070 6,409 6,124 Devices 6,791 6,457 6,095 Other 4,479 3,768 3,070 Total Devices 6,791 6,457 6,095 Other 4,479 3,768 3,070 Total $ 168,088 6,791 6,457 6,095 Other 4,479 3,768 3,070 Total $ 168,088 $ 6,457 6,095 Other 4,479 3,768 3,070 Total $ 168,088 $ 143,015 4,479 3,768 3,070 Total $ 168,088 $ 143,015 $ 125,843 Our 3,070 Total $ 168,088 $ 143,015 $ 125,843 Our commercial cloud $ 168,088 $ 143,015 $ 125,843 Our commercial cloud revenue , which includes Azure , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 69.1 billion , $ 51.7 billion $ 69.1 billion , $ 51.7 billion and $ 38.1 billion $ 51.7 billion and $ 38.1 billion in fiscal year 2021 38.1 billion in fiscal year 2021 , 2020 , and 2019 in fiscal year 2021 , 2020 , and 2019 , respectively 2021 , 2020 , and 2019 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2021 2020 2019 United million ) June 30 , 2021 2020 2019 United States $ ) June 30 , 2021 2020 2019 United States $ 76,153 June 30 , 2021 2020 2019 United States $ 76,153 $ 2020 2019 United States $ 76,153 $ 60,789 $ 55,252 Ireland United States $ 76,153 $ 60,789 $ 55,252 Ireland 13,303 12,734 $ 76,153 $ 60,789 $ 55,252 Ireland 13,303 12,734 12,958 Other $ 60,789 $ 55,252 Ireland 13,303 12,734 12,958 Other country 38,858 60,789 $ 55,252 Ireland 13,303 12,734 12,958 Other country 38,858 29,770 $ 55,252 Ireland 13,303 12,734 12,958 Other country 38,858 29,770 25,422 13,303 12,734 12,958 Other country 38,858 29,770 25,422 Total $ 128,314 12,734 12,958 Other country 38,858 29,770 25,422 Total $ 128,314 $ 12,958 Other country 38,858 29,770 25,422 Total $ 128,314 $ 103,293 38,858 29,770 25,422 Total $ 128,314 $ 103,293 $ 93,632 95 25,422 Total $ 128,314 $ 103,293 $ 93,632 95 PART II $ 128,314 $ 103,293 $ 93,632 95 PART II Item 8 128,314 $ 103,293 $ 93,632 95 PART II Item 8 REPORT 93,632 95 PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2021 and 2020 , a of June 30 , 2021 and 2020 , the related June 30 , 2021 and 2020 , the related consolidated statement in the period ended June 30 , 2021 , and the period ended June 30 , 2021 , and the related note the Company a of June 30 , 2021 and 2020 , a of June 30 , 2021 and 2020 , and the June 30 , 2021 and 2020 , and the result of in the period ended June 30 , 2021 , in conformity period ended June 30 , 2021 , in conformity with accounting financial reporting a of June 30 , 2021 , based on a of June 30 , 2021 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated July 29 , 2021 , expressed an report dated July 29 , 2021 , expressed an unqualified opinion audit committee and that ( 1 ) relate to account or the financial statement and ( 2 ) involved our especially challenging to which they relate . 96 PART II Item 8 Revenue . 96 PART II Item 8 Revenue Recognition – Refer to Recognition – Refer to Note 1 to the financial statement Critical in the financial statement . 97 PART II Item 8 Income . 97 PART II Item 8 Income Taxes – Uncertain Tax Positions – Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 29 , 2021 We have served , Washington July 29 , 2021 We have served a the the Company 's auditor since 1983 . 98 PART II Item 's auditor since 1983 . 98 PART II Item 9 , . 98 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2021 . There were a of June 30 , 2021 . There were no change during the quarter ended June 30 , 2021 that have materially quarter ended June 30 , 2021 that have materially affected , financial reporting a of June 30 , 2021 ; their report a of June 30 , 2021 ; their report is included report is included in Item 9A . 99 PART II Item included in Item 9A . 99 PART II Item 9A REPORT . 99 PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2021 , based on a of June 30 , 2021 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2021 , based on a of June 30 , 2021 , based on the criterion Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2021 , of the year ended June 30 , 2021 , of the Company and and our report dated July 29 , 2021 , expressed an report dated July 29 , 2021 , expressed an unqualified opinion policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington July 29 , 2021 100 PART II , Washington July 29 , 2021 100 PART II , III Washington July 29 , 2021 100 PART II , III Item PART II , III Item 9B , 10 , 11 , , III Item 9B , 10 , 11 , 12 , Item 9B , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held November 30 , 2021 ( the “ be held November 30 , 2021 ( the “ Proxy Statement in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTING FEES AND incorporated herein by reference . 101 PART IV Item 15 PART . 101 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBITS , FINANCIAL STATEMENT are set forth under Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 57 Comprehensive Income Statements 58 Balance Statements 57 Comprehensive Income Statements 58 Balance Sheets 59 Cash Flows Income Statements 58 Balance Sheets 59 Cash Flows Statements 60 Stockholders Sheets 59 Cash Flows Statements 60 Stockholders ’ Equity Statements 61 60 Stockholders ’ Equity Statements 61 Notes to Financial Statements 62 61 Notes to Financial Statements 62 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a of , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and Base Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 102 PART IV . , a Trustee 8-K 4.2 9/27/10 102 PART IV Item , a Trustee 8-K 4.2 9/27/10 102 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 102 PART IV Item 15 Incorporated 9/27/10 102 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 103 PART IV . , a Trustee 8-K 4.1 12/6/13 103 PART IV Item , a Trustee 8-K 4.1 12/6/13 103 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 103 PART IV Item 15 Incorporated 12/6/13 103 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental . , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 8/5/16 104 PART IV . , a trustee 8-K 4.1 8/5/16 104 PART IV Item , a trustee 8-K 4.1 8/5/16 104 PART IV Item 15 a trustee 8-K 4.1 8/5/16 104 PART IV Item 15 Incorporated 8/5/16 104 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for 2.525 4.16 Thirteenth Supplemental Indenture for 2.525 % Notes due 2050 and for 2.525 % Notes due 2050 and 2.675 % Notes due % Notes due 2050 and 2.675 % Notes due 2060 , and 2.675 % Notes due 2060 , dated a of June , dated a of June 1 , 2020 , between Microsoft a of June 1 , 2020 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental . , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture for a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture for 2.921 4.17 Fourteenth Supplemental Indenture for 2.921 % Notes due 2052 and for 2.921 % Notes due 2052 and 3.041 % Notes due % Notes due 2052 and 3.041 % Notes due 2062 , and 3.041 % Notes due 2062 , dated a of March , dated a of March 17 , 2021 , between Microsoft a of March 17 , 2021 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 3/17/21 4.18 Description of . , a trustee 8-K 4.1 3/17/21 4.18 Description of Securities , a trustee 8-K 4.1 3/17/21 4.18 Description of Securities 10-K a trustee 8-K 4.1 3/17/21 4.18 Description of Securities 10-K 6/30/19 3/17/21 4.18 Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * 4.18 Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation 2001 Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation 2001 Stock 8/1/19 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Corporation Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation 2017 Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation 2017 Stock 8/3/18 10.6 * Microsoft Corporation 2017 Stock Plan DEF14A Annex C Stock Plan DEF14A Annex C 10/16/17 10.7 * Form of Stock Plan 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D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2022 OR ☐ TRANSITION Year Ended June 30 , 2022 OR ☐ TRANSITION REPORT PURSUANT TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) PURSUANT TO SECTION 13 OR 15 ( d ) OF THE THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From From to Commission File Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( Number 001-37845 MICROSOFT CORPORATION Washington 91-1144442 ( STATE OF INCORPORATION ) WAY , REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor REDMOND , Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered Washington 98052-6399 ( 425 ) 882-8080 www.microsoft.com/investor Securities registered pursuant to Securities registered pursuant to Section 12 ( b ) of the registered Common stock , $ 0.00000625 par value per share MSFT value per share MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 3.125 % Notes due 2028 MSFT Nasdaq 2.625 % Notes Notes due 2028 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq 2.625 % Notes due 2033 MSFT Nasdaq Securities registered pursuant Securities registered pursuant to Section 12 ( g ) of the , a defined in Rule 405 of the Securities Act . file report pursuant to Section 13 or Section 15 ( d to Section 13 or Section 15 ( d ) of the mark whether the registrant ( 1 ) ha filed all report to be filed by Section 13 or 15 ( d ) filed by Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 during the preceding 12 month of 1934 during the preceding 12 month ( or for such report ) , and ( 2 ) ha been subject to filing requirement for the past 90 day . Yes ☒ No be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 chapter ) during the preceding 12 month ( or for such growth company ” in Rule 12b-2 of the Exchange Act . standard provided pursuant to Section 13 ( a ) of the over financial reporting under Section 404 ( b ) of the of the Sarbanes-Oxley Act ( 15 U.S.C . 7262 ( b Act ( 15 U.S.C . 7262 ( b ) ) by ( a defined in Rule 12b-2 of the Act ) . No ☒ As of December 31 , 2021 , the aggregate As of December 31 , 2021 , the aggregate market value of the registrant wa $ 2.5 trillion based on the closing System . As of July 25 , 2022 , there were As of July 25 , 2022 , there were 7,457,891,872 share , 2022 , there were 7,457,891,872 share of common stock outstanding to be held on December 13 , 2022 are incorporated by held on December 13 , 2022 are incorporated by reference into III . MICROSOFT CORPORATION FORM 10-K For the Fiscal Year Ended the Fiscal Year Ended June 30 , 2022 INDEX Page PART Year Ended June 30 , 2022 INDEX Page PART I Item INDEX Page PART I Item 1. Business 3 Information about our PART I Item 1. Business 3 Information about our Executive Officers Information about our Executive Officers 21 Item 1A . Risk Factors our Executive Officers 21 Item 1A . Risk Factors 23 Item Item 1A . Risk Factors 23 Item 1B . Unresolved Staff . Risk Factors 23 Item 1B . Unresolved Staff Comments 37 1B . Unresolved Staff Comments 37 Item 2 . Properties 37 Unresolved Staff Comments 37 Item 2 . Properties 37 Item 3 37 Item 2 . Properties 37 Item 3 . Legal Proceedings 2 . Properties 37 Item 3 . Legal Proceedings 37 Item Item 3 . Legal Proceedings 37 Item 4 . Mine Safety . Legal Proceedings 37 Item 4 . Mine Safety Disclosures 37 4 . Mine Safety Disclosures 37 PART II Item 5 . Disclosures 37 PART II Item 5 . Market for Registrant ’ Issuer Purchases of Equity Securities 38 Item 6 . [ Reserved of Equity Securities 38 Item 6 . [ Reserved ] 39 6 . [ Reserved ] 39 Item 7 . Management ’ [ Reserved ] 39 Item 7 . Management ’ s Discussion Condition and Results of Operations 40 Item 7A . Quantitative and Results of Operations 40 Item 7A . Quantitative and Qualitative Disclosures Qualitative Disclosures about Market Risk 56 Item 8 . Financial Statements about Market Risk 56 Item 8 . Financial Statements and Supplementary Financial Statements and Supplementary Data 57 Item 9 . Changes in and Supplementary Data 57 Item 9 . Changes in and Disagreements on Accounting and Financial Disclosure 99 Item 9A . Controls and and Financial Disclosure 99 Item 9A . Controls and Procedures 99 9A . Controls and Procedures 99 Report of Management on Internal Internal Control over Financial Reporting 99 Report of Independent Registered Public Independent Registered Public Accounting Firm 100 Item 9B . Other Information Public Accounting Firm 100 Item 9B . Other Information 101 Item Item 9B . Other Information 101 Item 9C . Disclosure Regarding . Other Information 101 Item 9C . Disclosure Regarding Foreign Jurisdictions Foreign Jurisdictions that Prevent Inspections 101 PART III Item 10 . Inspections 101 PART III Item 10 . Directors , Executive Officers Executive Officers and Corporate Governance 101 Item 11 . Executive Compensation and Corporate Governance 101 Item 11 . Executive Compensation 101 Item Item 11 . Executive Compensation 101 Item 12 . Security Ownership . Executive Compensation 101 Item 12 . Security Ownership of Certain Management and Related Stockholder Matters 101 Item 13 . Certain Relationships Related Stockholder Matters 101 Item 13 . Certain Relationships and Related Transactions , and Director Independence 101 Item 14 . Principal Accountant and Director Independence 101 Item 14 . Principal Accountant Fees and Principal Accountant Fees and Services 101 PART IV Item 15 . Services 101 PART IV Item 15 . Exhibit and Financial Statement Exhibit and Financial Statement Schedules 102 Item 16 . Form 10-K Financial Statement Schedules 102 Item 16 . Form 10-K Summary 108 102 Item 16 . Form 10-K Summary 108 Signatures 109 2 16 . Form 10-K Summary 108 Signatures 109 2 PART I Form 10-K Summary 108 Signatures 109 2 PART I Item 1 10-K Summary 108 Signatures 109 2 PART I Item 1 Note 109 2 PART I Item 1 Note About Forward-Looking Statements This Securities Litigation Reform Act of 1995 , Section 27A of the Act of 1995 , Section 27A of the Securities Act of of the Securities Act of 1933 , and Section 21E of of 1933 , and Section 21E of the Securities Exchange Act the Securities Exchange Act of 1934 . Forward-looking statement may appear ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) , “ Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) , and “ Management ( Part II , Item 7 of this Form 10-K ) Item 7 of this Form 10-K ) . These forward-looking statement ( Part II , Item 7A of this Form 10-K ) Item 7A of this Form 10-K ) . Readers are cautioned otherwise . PART I ITEM 1. BUSINESS GENERAL Embracing Our Future What We Offer Founded in 1975 , we develop and support to a global audience . 3 PART I Item 1 Our . 3 PART I Item 1 Our product include operating system and service , including Office 365 , Dynamics 365 , and including Office 365 , Dynamics 365 , and LinkedIn . Microsoft , and LinkedIn . Microsoft 365 brings together Office 365 , Microsoft 365 brings together Office 365 , Windows , and Enterprise and insight powered by Microsoft 365 . Together with the Microsoft the Microsoft Cloud , Dynamics 365 , Microsoft Teams , and and the intelligent edge . 4 PART I Item 1 Our . 4 PART I Item 1 Our hybrid infrastructure consistency span and organization . In March 2022 , we completed our acquisition and dynamic way . Microsoft 365 is empowering people and organization our cloud business with Windows 365 , a desktop operating system , you can run Windows 365 , just like a virtual virtual machine . With Windows 11 , we have simplified the and inspire creativity . Windows 11 offer innovation focused on enhancing ; and more . Windows 11 security and privacy feature include Laptop Studio , Surface Laptop 4 , Surface Laptop Go 2 4 , Surface Laptop Go 2 , Surface Laptop Pro 8 2 , Surface Laptop Pro 8 , Surface Pro X , Pro X , Surface Go 3 , Surface Studio 2 , Go 3 , Surface Studio 2 , and Surface Duo 2 2 , and Surface Duo 2 . 5 PART I Item and Surface Duo 2 . 5 PART I Item 1 With . 5 PART I Item 1 With three billion people actively Softworks LLC . In January 2022 , we announced plan to a curated library of over 100 first- and third-party console and with our service like Microsoft 365 Consumer , Teams , Edge the environment . In January 2020 , we announced a bold to be carbon negative by 2030 , and to remove from remove from the environment by 2050 all the carbon we have emitted since our founding in 1975 . This included a commitment a commitment to invest $ 1 billion over four year in to be water positive by 2030 , zero waste by 2030 2030 , zero waste by 2030 , and to protect ecosystem carbon footprint . Fiscal year 2021 wa a year of both reduction in our combined Scope 1 and Scope 2 emission , combined Scope 1 and Scope 2 emission , our Scope 3 2 emission , our Scope 3 emission increased , due in pandemic . Despite these Scope 3 increase , we will continue t always be linear . 6 PART I Item 1 While . 6 PART I Item 1 While fiscal year 2021 presented Item 1 While fiscal year 2021 presented u with some new We purchased the removal of 1.4 million metric ton of carbon . • We granted $ 100 million to Breakthrough Energy Catalyst with a commitment of $ 200 million toward carbon removal by million toward carbon removal by 2030 . Sustainability is an existential to make or exceed by 2025 . • Strengthening our community momentum , adding a $ 150 million investment to strengthen inclusion in the United States by 2025 . Over the last year , including : working with 70 organization in 145 community on working with 70 organization in 145 community on the Justice Reform at Microsoft . We are 90 percent of the way to of the way to our 2025 commitment to double the number in the U.S. , and 50 percent of the way for pipeline , reaching more than 90 percent of our goal to our goal to spend $ 500 million with double the number Microsoft , and beyond . 7 PART I Item 1 Investing . 7 PART I Item 1 Investing in Digital Skills The world . After helping over 30 million people in 249 country over 30 million people in 249 country and territory with our . We previously invested $ 20 million in key non-profit partnership recruit into the cybersecurity workforce 250,000 people by 2025 , representing cybersecurity workforce 250,000 people by 2025 , representing half of the new and existing faculty at 150 community college , and providing scholarship and supplemental resource to 25,000 student . HUMAN CAPITAL RESOURCES more . As of June 30 , 2022 , we employed As of June 30 , 2022 , we employed approximately 221,000 2022 , we employed approximately 221,000 people on a full-time basis on a full-time basis , 122,000 in the U.S. and 99,000 122,000 in the U.S. and 99,000 internationally . Of the total the total employed people , 85,000 were in operation , including , and consulting service ; 73,000 were in product research and product research and development ; 47,000 were in sale and marketing sale and marketing ; and 16,000 were in general and administration participated in our fiscal year 2022 Employee Signals survey , which year , we collect over 75,000 Daily Pulse employee survey response response . During fiscal year 2022 , our Daily Pulse survey and AskHR Service support . 8 PART I Item 1 Diversity . 8 PART I Item 1 Diversity and Inclusion At Microsoft . As described in our 2021 Proxy Statement , annual performance culture , in fiscal year 2021 we expanded stock eligibility to Reshuffle , in fiscal year 2022 we announced a sizable investment . Pay Equity In our 2021 Diversity and Inclusion Report , the U.S. combined earn $ 1.006 for every $ 1.000 earned $ 1.006 for every $ 1.000 earned by their white counterpart in the U.S. earn $ 1.002 for every $ 1.000 earned $ 1.002 for every $ 1.000 earned by their counterpart in other largest employee geography representing 86.6 % of our global population Kingdom ) combined earn $ 1.001 for every $ 1.000 by $ 1.001 for every $ 1.000 by men in these country our employee listening system . 9 PART I Item 1 We . 9 PART I Item 1 We have invested significantly in solution , in fiscal year 2022 our employee completed over 4.7 2022 our employee completed over 4.7 million course , averaging over million course , averaging over 14 hour per employee . Given corporate learning portal ha over 100,000 average monthly active user . user . We have over 27,000 people manager , all of of whom must complete between 20-33 hour of required manager capability business can deliver success . 10 PART I Item 1 OPERATING . 10 PART I Item 1 OPERATING SEGMENTS We operate our information is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Our reportable segment • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of Office licensed on-premises to Office 365 . Office Consumer Office Consumer Office licensed on-premises to Microsoft 365 Consumer subscription . Office Consumer the sale of minute . 11 PART I Item 1 LinkedIn . 11 PART I Item 1 LinkedIn LinkedIn connects the world opportunity . LinkedIn ha over 850 million member and ha office the continued shift to Dynamics 365 , a unified set of Salesforce , and SAP . 12 PART I Item 1 Intelligent . 12 PART I Item 1 Intelligent Cloud Our Intelligent Cloud supply version of Linux . 13 PART I Item 1 We . 13 PART I Item 1 We compete to provide enterprise-wide component . • Piracy . 14 PART I Item 1 Windows . 14 PART I Item 1 Windows Commercial revenue , which a curated library of over 100 first- and third-party console and advertiser offering . On June 6 , 2022 , we acquired . On June 6 , 2022 , we acquired Xandr , those that enable productivity . 15 PART I Item 1 Devices . 15 PART I Item 1 Devices face competition from various experience and social interaction . 16 PART I Item 1 Internal . 16 PART I Item 1 Internal development allows u to have a portfolio of over 69,000 U.S. and international patent issued international patent issued and over 19,000 pending worldwide . While we our product and service . 17 PART I Item 1 OEMs . 17 PART I Item 1 OEMs We distribute our product capability to subscribe to Office 365 . There are two broad store . In fiscal year 2021 , we closed our Microsoft optional purchase with others . 18 PART I Item 1 Volume . 18 PART I Item 1 Volume Licensing Programs Enterprise Agreement to their end user . 19 PART I Item 1 CUSTOMERS . 19 PART I Item 1 CUSTOMERS Our customer include individual backlog is not significant . 20 PART I Item 1 INFORMATION . 20 PART I Item 1 INFORMATION ABOUT OUR EXECUTIV E executive officer a of July 28 , 2022 were a follows a of July 28 , 2022 were a follows : Name with the Company Satya Nadella 54 Chairman of the Board and Chief Executive Officer Judson Althoff 49 Executive Vice President and Chief Commercial Officer Christopher C. Capossela 52 Executive Vice President , Marketing Marketing Officer Kathleen T. Hogan 56 Executive Vice President , Human Human Resources Amy E. Hood 50 Executive Vice President , Chief Financial Officer Bradford L. Smith 63 President and Vice Chair Christopher Vice Chair Christopher D. Young 50 Executive Vice President , Business of the Board in June 2021 and Chief Executive Officer in Chief Executive Officer in February 2014 . He served a Executive Cloud and Enterprise from July 2013 until that time . From until that time . From 2011 to 2013 , Mr. Nadella time . From 2011 to 2013 , Mr. Nadella served a Server and Tools . From 2009 to 2011 , he wa Tools . From 2009 to 2011 , he wa Senior Vice Online Services Division . From 2008 to 2009 , he wa Division . From 2008 to 2009 , he wa Senior Vice . Since joining Microsoft in 1992 , Mr. Nadella ’ s Chief Commercial Officer in July 2021 . He served a Executive Worldwide Commercial Business from July 2017 until that time . Prior Althoff joined Microsoft in March 2013 a President of Microsoft North Chief Marketing Officer in July 2016 . He had served a Chief Marketing Officer since March 2014 . Previously , he served . In his more than 25 year at Microsoft , Mr. including Microsoft Office , Office 365 , SharePoint , Exchange , , Human Resources in November 2014 . Prior to that Ms. Ms. Hogan joined Microsoft in 2003 . Ms. Hogan also serf Chief Financial Officer in July 2013 , subsequent to her appointment Chief Financial Officer in May 2013 . From 2010 to 2013 in May 2013 . From 2010 to 2013 , Ms . 2013 . From 2010 to 2013 , Ms . Hood wa Microsoft Business Division . From 2006 through 2009 , Ms . Division . From 2006 through 2009 , Ms . Hood wa . Since joining Microsoft in 2002 , Ms . Hood ha the Board of Directors of 3M Corporation . Mr. Smith wa and Vice Chair in September 2021 . Prior to that , Chief Legal Officer since September 2015 . He served a Executive Counsel , and Secretary from 2011 to 2015 , and served and Secretary from 2011 to 2015 , and served a Senior Counsel , and Secretary from 2001 to 2011 . Mr. Smith and Secretary from 2001 to 2011 . Mr. Smith wa also named Chief Compliance Officer in 2002 . Since joining Microsoft in . Since joining Microsoft in 1993 , he wa Deputy General since joining Microsoft in November 2020 . Prior to Microsoft , of McAfee , LLC from 2017 to 2020 , and served , LLC from 2017 to 2020 , and served a a of Intel Security Group from 2014 until 2017 , when he Security Group from 2014 until 2017 , when he led the of American Express Company . 21 PART I Item 1 AVAILABLE . 21 PART I Item 1 AVAILABLE INFORMATION Our Internet address Our annual report on Form 10-K , quarterly report on Form , quarterly report on Form 10-Q , current report on Form , current report on Form 8-K , and any amendment to our Investor Relations website . 22 PART I Item 1A ITEM . 22 PART I Item 1A ITEM 1A . RISK FACTORS PART I Item 1A ITEM 1A . RISK FACTORS Our operation and business model objective . 23 PART I Item 1A Business . 23 PART I Item 1A Business model competition Companies compete margin and operating income . 24 PART I Item 1A RISKS . 24 PART I Item 1A RISKS RELATING TO THE EVOLUTION Windows operating system , Microsoft 365 , Office , Bing , Server , Azure , Office 365 , Xbox , LinkedIn , For example , in March 2021 we completed our acquisition of ZeniMax Media Inc. for $ 8.1 billion , and in March billion , and in March 2022 we completed our acquisition of Communications , Inc. for $ 18.8 billion . In January 2022 18.8 billion . In January 2022 we announced a definitive agreement Blizzard , Inc. for $ 68.7 billion . These acquisition and our result of operation . 25 PART I Item 1A CYBERSECURITY . 25 PART I Item 1A CYBERSECURITY , DATA PRIVACY , The cyberattacks uncovered in late 2020 known a “ Solorigate ” regulation in jurisdiction worldwide . 26 PART I Item 1A Security . 26 PART I Item 1A Security of our product , occurred in early calendar year 2021 with several of our Exchange our product and service . 27 PART I Item 1A The . 27 PART I Item 1A The cost of measure to and consolidated financial statement . 28 PART I Item 1A Other . 28 PART I Item 1A Other digital safety abuse Our Microsoft Account service , Microsoft 365 , Microsoft Teams , Dynamics , Microsoft Teams , Dynamics 365 , OneDrive , SharePoint Online our consolidated financial statement . 29 PART I Item 1A We . 29 PART I Item 1A We may experience quality or . For example , in 2004 , the Commission ordered u their own product . In 2009 , the Commission accepted a web browsing commitment expired in 2014 . The remaining obligation may for our intellectual property . 30 PART I Item 1A Government . 30 PART I Item 1A Government regulatory action and court Whistleblower Directive , initiated in 2021 , which may present compliance , may result in ( 1 ) new and rapidly evolving and country , and ( 2 ) negative impact to regional , or criminal sanction . 31 PART I Item 1A Other . 31 PART I Item 1A Other regulatory area that may For example , in July 2020 the Court of Justice of and the EU in March 2022 agreed in principle on a penalty ( of up to 4 % of worldwide revenue in transfer of personal data . 32 PART I Item 1A The . 32 PART I Item 1A The Company ’ s investment example , compliance with the 2017 United States Tax Cuts and our consolidated financial statement . 33 PART I Item 1A INTELLECTUAL . 33 PART I Item 1A INTELLECTUAL PROPERTY RISKS We may partner do not like . 34 PART I Item 1A • . 34 PART I Item 1A • Public scrutiny of our or financial market instability . 35 PART I Item 1A Measures . 35 PART I Item 1A Measures to contain a global relationship with worker representative . 36 PART I Item 1B , . 36 PART I Item 1B , 2 , 3 , PART I Item 1B , 2 , 3 , 4 ITEM Item 1B , 2 , 3 , 4 ITEM 1B . , 2 , 3 , 4 ITEM 1B . UNRESOLVED STAFF , 3 , 4 ITEM 1B . UNRESOLVED STAFF COMMENTS We Exchange Commission that were issued 180 day or more preceding the end of our fiscal year 2022 that remain unresolved . ITEM that remain unresolved . ITEM 2 . PROPERTIES Our corporate headquarters Washington . We have approximately 15 million square foot of space . These facility include approximately 10 million square foot of owned owned space situated on approximately 520 acre of land we own corporate headquarters , and approximately 5 million square foot of space ( Part I , Item 1 of this Form 10-K ) Item 1 of this Form 10-K ) . The table below and internationally a of June 30 , 2022 : ( Square a of June 30 , 2022 : ( Square foot in Location Owned Leased Total U.S. 25 19 44 International 8 21 Owned Leased Total U.S. 25 19 44 International 8 21 29 Leased Total U.S. 25 19 44 International 8 21 29 Total U.S. 25 19 44 International 8 21 29 Total 33 40 25 19 44 International 8 21 29 Total 33 40 73 19 44 International 8 21 29 Total 33 40 73 ITEM International 8 21 29 Total 33 40 73 ITEM 3 . 8 21 29 Total 33 40 73 ITEM 3 . LEGAL 21 29 Total 33 40 73 ITEM 3 . LEGAL PROCEEDINGS Total 33 40 73 ITEM 3 . LEGAL PROCEEDINGS Refer to LEGAL PROCEEDINGS Refer to Note 15 – Contingencies of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for information regarding legal we are involved . ITEM 4 . MINE SAFETY DISCLOSURES Not SAFETY DISCLOSURES Not applicable . 37 PART II Item 5 PART . 37 PART II Item 5 PART II ITEM 5 . Item 5 PART II ITEM 5 . MARKET FOR REGISTRANT ’ symbol MSFT . On July 25 , 2022 , there were . On July 25 , 2022 , there were 86,465 registered , 2022 , there were 86,465 registered holder of record of fourth quarter of fiscal year 2022 : Period Total Number of ( In million ) April 1 , 2022 – April 30 million ) April 1 , 2022 – April 30 , 2022 1 , 2022 – April 30 , 2022 9,124,963 $ 289.34 2022 – April 30 , 2022 9,124,963 $ 289.34 9,124,963 $ – April 30 , 2022 9,124,963 $ 289.34 9,124,963 $ 45,869 30 , 2022 9,124,963 $ 289.34 9,124,963 $ 45,869 May 1 , 2022 9,124,963 $ 289.34 9,124,963 $ 45,869 May 1 , 9,124,963 $ 289.34 9,124,963 $ 45,869 May 1 , 2022 – 289.34 9,124,963 $ 45,869 May 1 , 2022 – May 31 $ 45,869 May 1 , 2022 – May 31 , 2022 1 , 2022 – May 31 , 2022 9,809,727 265.95 9,809,727 2022 – May 31 , 2022 9,809,727 265.95 9,809,727 43,260 June – May 31 , 2022 9,809,727 265.95 9,809,727 43,260 June 1 May 31 , 2022 9,809,727 265.95 9,809,727 43,260 June 1 , 31 , 2022 9,809,727 265.95 9,809,727 43,260 June 1 , 2022 , 2022 9,809,727 265.95 9,809,727 43,260 June 1 , 2022 – 9,809,727 265.95 9,809,727 43,260 June 1 , 2022 – June 30 9,809,727 43,260 June 1 , 2022 – June 30 , 2022 1 , 2022 – June 30 , 2022 9,832,841 259.42 9,832,841 2022 – June 30 , 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 – June 30 , 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 June 30 , 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All 30 , 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share , 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share repurchase 2022 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share repurchase were 9,832,841 259.42 9,832,841 40,709 28,767,531 28,767,531 All share repurchase were made or pursuant to a Rule 10b5-1 trading plan . The above fourth quarter of fiscal year 2022 : Declaration Date Record Date ( In million ) June 14 , 2022 August 18 , million ) June 14 , 2022 August 18 , 2022 September June 14 , 2022 August 18 , 2022 September 8 , , 2022 August 18 , 2022 September 8 , 2022 $ August 18 , 2022 September 8 , 2022 $ 0.62 $ , 2022 September 8 , 2022 $ 0.62 $ 4,627 We September 8 , 2022 $ 0.62 $ 4,627 We returned $ , 2022 $ 0.62 $ 4,627 We returned $ 12.4 billion $ 4,627 We returned $ 12.4 billion to shareholder in the fourth quarter of fiscal year 2022 . Refer to Note 16 2022 . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion regarding share repurchase and dividend . 38 PART II Item 6 ITEM . 38 PART II Item 6 ITEM 6 . [ RESERVED PART II Item 6 ITEM 6 . [ RESERVED ] 39 6 . [ RESERVED ] 39 PART II Item 7 ITEM ] 39 PART II Item 7 ITEM 7 . MANAGEMENT ’ PART II Item 7 ITEM 7 . MANAGEMENT ’ S DISCUSSION ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . This section generally for the year ended June 30 , 2022 compared to the year ended June 30 , 2022 compared to the year ended to the year ended June 30 , 2021 . For a year ended June 30 , 2021 . For a discussion of of the year ended June 30 , 2021 compared to the year ended June 30 , 2021 compared to the year ended to the year ended June 30 , 2020 , please refer year ended June 30 , 2020 , please refer to Part to Part II , Item 7 , “ Management ’ s our Annual Report on Form 10-K for the year ended June for the year ended June 30 , 2021 . OVERVIEW Microsoft year ended June 30 , 2021 . OVERVIEW Microsoft is a . Highlights from fiscal year 2022 compared with fiscal year 2021 2022 compared with fiscal year 2021 included : • Microsoft Cloud commercial cloud ) revenue increased 32 % to $ 91.2 billion increased 32 % to $ 91.2 billion . • Office Commercial and cloud service revenue increased 13 % driven by Office 365 13 % driven by Office 365 Commercial growth of 18 % Office 365 Commercial growth of 18 % . • Office Consumer and cloud service revenue increased 11 % and Microsoft 365 Consumer increased 11 % and Microsoft 365 Consumer subscriber grew to 59.7 365 Consumer subscriber grew to 59.7 million . • LinkedIn revenue . • LinkedIn revenue increased 34 % . • Dynamics product and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 39 % . by Dynamics 365 growth of 39 % . • Server product and cloud service revenue increased 28 % driven by Azure and other cloud service growth of 45 % . • Windows original OEM ” ) revenue increased 11 % . • Windows Commercial and cloud service revenue increased 11 % . • Xbox content content and service revenue increased 3 % . • Search and excluding traffic acquisition cost increased 27 % . • Surface revenue . • Surface revenue increased 3 % . On March 4 3 % . On March 4 , 2022 , we completed . On March 4 , 2022 , we completed our acquisition total purchase price of $ 18.8 billion , consisting primarily of segment . Refer to Note 8 – Business Combinations of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . , and competitive force . 40 PART II Item 7 Economic . 40 PART II Item 7 Economic Conditions , Challenges , international operation in fiscal year 2022 . Refer to Risk Factors ( Part I , Item 1A of this Form 10-K ) Item 1A of this Form 10-K ) for a discussion of segment is contained in Note 19 – Segment Information and Geographic ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Metrics We use ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . Financial metric are first quarter of fiscal year 2022 , we made update to our MD & A . 41 PART II Item 7 In . 41 PART II Item 7 In the third quarter of third quarter of fiscal year 2022 , we completed our acquisition other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud and cloud service ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and cloud service , including Microsoft 365 Consumer subscription , Office licensed and other Office service Office 365 Commercial seat growth The number growth The number of Office 365 Commercial seat at end of user covered by an Office 365 Commercial subscription Microsoft 365 Consumer Office 365 Commercial subscription Microsoft 365 Consumer subscriber The number of subscriber The number of Microsoft 365 Consumer subscriber at end of cloud service , including Dynamics 365 , comprising a set of ; and Nuance and GitHub 42 PART II Item 7 More GitHub 42 PART II Item 7 More Personal Computing Metrics related and per share amount ) 2022 2021 Percentage Change Revenue $ per share amount ) 2022 2021 Percentage Change Revenue $ 198,270 2021 Percentage Change Revenue $ 198,270 $ 168,088 18 % Gross Change Revenue $ 198,270 $ 168,088 18 % Gross margin 135,620 Revenue $ 198,270 $ 168,088 18 % Gross margin 135,620 115,856 168,088 18 % Gross margin 135,620 115,856 17 % Operating income 18 % Gross margin 135,620 115,856 17 % Operating income 83,383 % Gross margin 135,620 115,856 17 % Operating income 83,383 69,916 115,856 17 % Operating income 83,383 69,916 19 % Net income 17 % Operating income 83,383 69,916 19 % Net income 72,738 % Operating income 83,383 69,916 19 % Net income 72,738 61,271 69,916 19 % Net income 72,738 61,271 19 % Diluted earnings 19 % Net income 72,738 61,271 19 % Diluted earnings per % Net income 72,738 61,271 19 % Diluted earnings per share % Diluted earnings per share 9.65 8.05 20 % Adjusted net Diluted earnings per share 9.65 8.05 20 % Adjusted net income earnings per share 9.65 8.05 20 % Adjusted net income ( net income ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted income ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted earnings ( non-GAAP ) 69,447 60,651 15 % Adjusted diluted earnings per per share ( non-GAAP ) 9.21 7.97 16 % Adjusted net share ( non-GAAP ) 9.21 7.97 16 % Adjusted net income ( non-GAAP ) 9.21 7.97 16 % Adjusted net income and first quarter of fiscal year 2022 and the net income tax third quarter of fiscal year 2021 . Refer to the Non-GAAP financial result . See Note 12 – Income Taxes of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . further discussion . Fiscal Year 2022 Compared with Fiscal Year 2021 2022 Compared with Fiscal Year 2021 Revenue increased $ 30.2 billion Year 2021 Revenue increased $ 30.2 billion or 18 % driven increased $ 30.2 billion or 18 % driven by growth across revenue increased driven by Office 365 Commercial and LinkedIn . More Cost of revenue increased $ 10.4 billion or 20 % driven increased $ 10.4 billion or 20 % driven by growth in . Gross margin increased $ 19.8 billion or 17 % driven increased $ 19.8 billion or 17 % driven by growth across impact of the fiscal year 2021 change in accounting estimate for , gross margin percentage increased 1 point driven by improvement in margin percentage decreased slightly to 70 % . Excluding the impact Cloud gross margin percentage increased 3 point driven by improvement across and other cloud service . 43 PART II Item 7 Operating . 43 PART II Item 7 Operating expense increased $ 6 7 Operating expense increased $ 6 .3 billion or 14 % $ 6 .3 billion or 14 % driven by investment in and development expense increased $ 3.8 billion or 18 % driven increased $ 3.8 billion or 18 % driven by investment in and marketing expense increased $ 1.7 billion or 8 % driven increased $ 1.7 billion or 8 % driven by investment in favorable foreign currency impact of 2 % . • General and and administrative expense increased $ 793 million or 16 % driven increased $ 793 million or 16 % driven by investment in . Operating income increased $ 13.5 billion or 19 % driven increased $ 13.5 billion or 19 % driven by growth across and diluted EPS of $ 3.3 billion and $ 0.44 , $ 3.3 billion and $ 0.44 , respectively . Prior year and diluted EPS of $ 620 million and $ 0.08 , $ 620 million and $ 0.08 , respectively . Gross margin unfavorable foreign currency impact of 2 % . SEGMENT RESULTS OF million , except percentage ) 2022 2021 Percentage Change Revenue Productivity , except percentage ) 2022 2021 Percentage Change Revenue Productivity and Productivity and Business Processes $ 63,364 $ 53,915 18 % Intelligent Business Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 Processes $ 63,364 $ 53,915 18 % Intelligent Cloud 75,251 60,080 53,915 18 % Intelligent Cloud 75,251 60,080 25 % More Personal 18 % Intelligent Cloud 75,251 60,080 25 % More Personal Computing % Intelligent Cloud 75,251 60,080 25 % More Personal Computing 59,655 25 % More Personal Computing 59,655 54,093 10 % Total $ % More Personal Computing 59,655 54,093 10 % Total $ 198,270 More Personal Computing 59,655 54,093 10 % Total $ 198,270 $ 54,093 10 % Total $ 198,270 $ 168,088 18 % Operating % Total $ 198,270 $ 168,088 18 % Operating Income Productivity Total $ 198,270 $ 168,088 18 % Operating Income Productivity and Productivity and Business Processes $ 29,687 $ 24,351 22 % Intelligent Business Processes $ 29,687 $ 24,351 22 % Intelligent Cloud 32,721 Processes $ 29,687 $ 24,351 22 % Intelligent Cloud 32,721 26,126 24,351 22 % Intelligent Cloud 32,721 26,126 25 % More Personal 22 % Intelligent Cloud 32,721 26,126 25 % More Personal Computing % Intelligent Cloud 32,721 26,126 25 % More Personal Computing 20,975 25 % More Personal Computing 20,975 19,439 8 % Total $ % More Personal Computing 20,975 19,439 8 % Total $ 83,383 More Personal Computing 20,975 19,439 8 % Total $ 83,383 $ 19,439 8 % Total $ 83,383 $ 69,916 19 % Reportable % Total $ 83,383 $ 69,916 19 % Reportable Segments Fiscal Total $ 83,383 $ 69,916 19 % Reportable Segments Fiscal Year % Reportable Segments Fiscal Year 2022 Compared with Fiscal Year 2021 2022 Compared with Fiscal Year 2021 Productivity and Business Processes Revenue Business Processes Revenue increased $ 9.4 billion or 18 % . increased $ 9.4 billion or 18 % . • Office Commercial cloud service revenue increased $ 4.4 billion or 13 % . increased $ 4.4 billion or 13 % . Office 365 Commercial or 13 % . Office 365 Commercial revenue grew 18 % Office 365 Commercial revenue grew 18 % driven by seat growth driven by seat growth of 14 % , with continued momentum Office Commercial product revenue declined 22 % driven by continued customer cloud service revenue increased $ 641 million or 11 % driven increased $ 641 million or 11 % driven by Microsoft 365 11 % driven by Microsoft 365 Consumer subscription revenue . Microsoft Consumer subscription revenue . Microsoft 365 Consumer subscriber grew 15 % Microsoft 365 Consumer subscriber grew 15 % to 59.7 million . subscriber grew 15 % to 59.7 million . • LinkedIn revenue • LinkedIn revenue increased $ 3.5 billion or 34 % driven increased $ 3.5 billion or 34 % driven by a strong and cloud service revenue increased 25 % driven by Dynamics 365 25 % driven by Dynamics 365 growth of 39 % . by Dynamics 365 growth of 39 % . 44 PART II growth of 39 % . 44 PART II Item 7 Operating . 44 PART II Item 7 Operating income increased $ 5.3 7 Operating income increased $ 5.3 billion or 22 % . increased $ 5.3 billion or 22 % . • Gross margin • Gross margin increased $ 7.3 billion or 17 % driven increased $ 7.3 billion or 17 % driven by growth in driven by growth in Office 365 Commercial and LinkedIn . Gross , gross margin percentage increased 2 point driven by improvement across • Operating expense increased $ 2.0 billion or 11 % driven increased $ 2.0 billion or 11 % driven by investment in unfavorable foreign currency impact of 2 % . Intelligent Cloud Revenue Intelligent Cloud Revenue increased $ 15.2 billion or 25 % . increased $ 15.2 billion or 25 % . • Server product cloud service revenue increased $ 14.7 billion or 28 % driven increased $ 14.7 billion or 28 % driven by Azure and other cloud service revenue grew 45 % driven by growth in . Server product revenue increased 5 % driven by hybrid solution Enterprise Services revenue increased $ 464 million or 7 % driven increased $ 464 million or 7 % driven by growth in . Operating income increased $ 6.6 billion or 25 % . increased $ 6.6 billion or 25 % . • Gross margin • Gross margin increased $ 9.4 billion or 22 % driven increased $ 9.4 billion or 22 % driven by growth in • Operating expense increased $ 2.8 billion or 16 % driven increased $ 2.8 billion or 16 % driven by investment in unfavorable foreign currency impact of 2 % and 3 % , impact of 2 % and 3 % , respectively . More Personal Computing Revenue increased $ 5.6 billion or 10 % . increased $ 5.6 billion or 10 % . • Windows revenue • Windows revenue increased $ 2.3 billion or 10 % driven increased $ 2.3 billion or 10 % driven by growth in . Windows OEM revenue increased 11 % driven by continued strength and cloud service revenue increased 11 % driven by demand for driven by demand for Microsoft 365 . • Search and news news advertising revenue increased $ 2.3 billion or 25 % . increased $ 2.3 billion or 25 % . Search and news excluding traffic acquisition cost increased 27 % driven by higher revenue • Gaming revenue increased $ 860 million or 6 % on increased $ 860 million or 6 % on a strong prior . Xbox hardware revenue increased 16 % due to continued demand content and service revenue increased 3 % driven by growth in • Surface revenue increased $ 226 million or 3 % . increased $ 226 million or 3 % . Operating income increased . Operating income increased $ 1.5 billion or 8 % . increased $ 1.5 billion or 8 % . • Gross margin • Gross margin increased $ 3.1 billion or 10 % driven increased $ 3.1 billion or 10 % driven by growth in • Operating expense increased $ 1.5 billion or 14 % driven increased $ 1.5 billion or 14 % driven by investment in , and Windows marketing . 45 PART II Item 7 OPERATING . 45 PART II Item 7 OPERATING EXPENSES Research and Development million , except percentage ) 2022 2021 Percentage Change Research and , except percentage ) 2022 2021 Percentage Change Research and development Change Research and development $ 24,512 $ 20,716 18 % As and development $ 24,512 $ 20,716 18 % As a percent development $ 24,512 $ 20,716 18 % As a percent of As a percent of revenue 12 % 12 % 0ppt Research percent of revenue 12 % 12 % 0ppt Research and development revenue 12 % 12 % 0ppt Research and development expense include and development expense increased $ 3.8 billion or 18 % driven increased $ 3.8 billion or 18 % driven by investment in million , except percentage ) 2022 2021 Percentage Change Sales and , except percentage ) 2022 2021 Percentage Change Sales and marketing Change Sales and marketing $ 21,825 $ 20,117 8 % As and marketing $ 21,825 $ 20,117 8 % As a percent marketing $ 21,825 $ 20,117 8 % As a percent of As a percent of revenue 11 % 12 % ( 1 percent of revenue 11 % 12 % ( 1 ) ppt 11 % 12 % ( 1 ) ppt Sales and marketing and marketing expense increased $ 1.7 billion or 8 % driven increased $ 1.7 billion or 8 % driven by investment in favorable foreign currency impact of 2 % . General and Administrative million , except percentage ) 2022 2021 Percentage Change General and , except percentage ) 2022 2021 Percentage Change General and administrative Change General and administrative $ 5,900 $ 5,107 16 % As and administrative $ 5,900 $ 5,107 16 % As a percent administrative $ 5,900 $ 5,107 16 % As a percent of As a percent of revenue 3 % 3 % 0ppt General percent of revenue 3 % 3 % 0ppt General and administrative revenue 3 % 3 % 0ppt General and administrative expense include and administrative expense increased $ 793 million or 16 % driven increased $ 793 million or 16 % driven by investment in investment in corporate function . 46 PART II Item 7 OTHER . 46 PART II Item 7 OTHER INCOME ( EXPENSE ) million ) Year Ended June 30 , 2022 2021 Interest and Year Ended June 30 , 2022 2021 Interest and dividend income Ended June 30 , 2022 2021 Interest and dividend income $ Interest and dividend income $ 2,094 $ 2,131 Interest expense ( dividend income $ 2,094 $ 2,131 Interest expense ( 2,063 ) $ 2,131 Interest expense ( 2,063 ) ( 2,346 ) Net expense ( 2,063 ) ( 2,346 ) Net recognized gain on Net recognized gain on investment 461 1,232 Net gain ( loss recognized gain on investment 461 1,232 Net gain ( loss ) loss ) on derivative ( 52 ) 17 Net gain ( on derivative ( 52 ) 17 Net gain ( loss ) on foreign currency remeasurements ( 75 ) 54 Other , net currency remeasurements ( 75 ) 54 Other , net ( 32 54 Other , net ( 32 ) 98 Total $ 333 , net ( 32 ) 98 Total $ 333 $ 1,186 32 ) 98 Total $ 333 $ 1,186 We use derivative 98 Total $ 333 $ 1,186 We use derivative instrument to tax rate for fiscal year 2022 and 2021 wa 13 % for fiscal year 2022 and 2021 wa 13 % and 14 year 2022 and 2021 wa 13 % and 14 % , 2021 wa 13 % and 14 % , respectively . The primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of in India . In March 2021 , the India Supreme Court ruled favorably for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . Our effective tax rate service . In fiscal year 2022 , our U.S. income before before income tax wa $ 47.8 billion and our foreign income before income tax wa $ 35.9 billion . In fiscal year billion . In fiscal year 2021 , our U.S. income before before income tax wa $ 35.0 billion and our foreign income before income tax wa $ 36.1 billion . 47 PART II wa $ 36.1 billion . 47 PART II Item 7 Uncertain . 47 PART II Item 7 Uncertain Tax Positions We settled ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . As of for tax year 2004 to 2017 . As of June 30 2017 . As of June 30 , 2022 , the primary As of June 30 , 2022 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2021 , some of for tax year 1996 to 2021 , some of which are first quarter of fiscal year 2022 and the net income tax third quarter of fiscal year 2021 . We believe these non-GAAP and per share amount ) 2022 2021 Percentage Change Net income per share amount ) 2022 2021 Percentage Change Net income $ Percentage Change Net income $ 72,738 $ 61,271 19 % Net Net income $ 72,738 $ 61,271 19 % Net income tax income $ 72,738 $ 61,271 19 % Net income tax benefit transfer of intangible property ( 3,291 ) 0 * Net income intangible property ( 3,291 ) 0 * Net income tax benefit Court decision on withholding tax 0 ( 620 ) * Adjusted on withholding tax 0 ( 620 ) * Adjusted net income income ( non-GAAP ) $ 69,447 $ 60,651 15 % Diluted non-GAAP ) $ 69,447 $ 60,651 15 % Diluted earnings per ) $ 69,447 $ 60,651 15 % Diluted earnings per share Diluted earnings per share $ 9.65 $ 8.05 20 % Net per share $ 9.65 $ 8.05 20 % Net income tax share $ 9.65 $ 8.05 20 % Net income tax benefit transfer of intangible property ( 0.44 ) 0 * Net income intangible property ( 0.44 ) 0 * Net income tax benefit Court decision on withholding tax 0 ( 0.08 ) * Adjusted on withholding tax 0 ( 0.08 ) * Adjusted diluted earnings share ( non-GAAP ) $ 9.21 $ 7.97 16 % * non-GAAP ) $ 9.21 $ 7.97 16 % * Not meaningful ) $ 9.21 $ 7.97 16 % * Not meaningful . % * Not meaningful . 48 PART II Item 7 LIQUIDITY . 48 PART II Item 7 LIQUIDITY AND CAPITAL RESOURCES We for at least the next 12 month and thereafter for the and short-term investment totaled $ 104.8 billion and $ 130.3 billion $ 104.8 billion and $ 130.3 billion a of June 30 130.3 billion a of June 30 , 2022 and 2021 , a of June 30 , 2022 and 2021 , respectively . June 30 , 2022 and 2021 , respectively . Equity investment . Equity investment were $ 6.9 billion and $ 6.0 billion $ 6.9 billion and $ 6.0 billion a of June 30 6.0 billion a of June 30 , 2022 and 2021 , a of June 30 , 2022 and 2021 , respectively . June 30 , 2022 and 2021 , respectively . Our short-term methodology applies to our Level 1 investment , such a U.S. methodology applies to our Level 2 investment , such a commercial and municipal security . Level 3 investment are valued using internally-developed vendor and are generally Level 1 or Level 2 investment a generally Level 1 or Level 2 investment a these vendor either are generally classified a Level 2 investment because the broker price Cash from operation increased $ 12.3 billion to $ 89.0 billion $ 12.3 billion to $ 89.0 billion for fiscal year 2022 89.0 billion for fiscal year 2022 , mainly due to an used in financing increased $ 10.4 billion to $ 58.9 billion $ 10.4 billion to $ 58.9 billion for fiscal year 2022 58.9 billion for fiscal year 2022 , mainly due to a mainly due to a $ 5.3 billion increase in common stock stock repurchase and a $ 5.3 billion increase in repayment of used in investing increased $ 2.7 billion to $ 30.3 billion $ 2.7 billion to $ 30.3 billion for fiscal year 2022 30.3 billion for fiscal year 2022 , mainly due to a mainly due to a $ 13.1 billion increase in cash used asset , and a $ 3.3 billion increase in addition to in part by a $ 15.6 billion increase in cash from sale , and maturity . 49 PART II Item 7 Debt . 49 PART II Item 7 Debt Proceeds We issue debt existing debt . In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion environment . Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . service . Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . unearned revenue a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) ) Three Months Ending September 30 , 2022 $ 17,691 December Months Ending September 30 , 2022 $ 17,691 December 31 , September 30 , 2022 $ 17,691 December 31 , 2022 13,923 , 2022 $ 17,691 December 31 , 2022 13,923 March 31 $ 17,691 December 31 , 2022 13,923 March 31 , 2023 17,691 December 31 , 2022 13,923 March 31 , 2023 9,491 31 , 2022 13,923 March 31 , 2023 9,491 June 30 2022 13,923 March 31 , 2023 9,491 June 30 , 2023 13,923 March 31 , 2023 9,491 June 30 , 2023 4,433 31 , 2023 9,491 June 30 , 2023 4,433 Thereafter 2,870 2023 9,491 June 30 , 2023 4,433 Thereafter 2,870 Total $ 9,491 June 30 , 2023 4,433 Thereafter 2,870 Total $ 48,408 30 , 2023 4,433 Thereafter 2,870 Total $ 48,408 If our 4,433 Thereafter 2,870 Total $ 48,408 If our customer choose to consumption , a applicable . 50 PART II Item 7 Material . 50 PART II Item 7 Material Cash Requirements and Other contractual obligation a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) : ( In million ) 2023 Thereafter Total Long-term debt : a ) Principal payment $ 2,750 $ 52,761 $ 55,511 Interest Principal payment $ 2,750 $ 52,761 $ 55,511 Interest payment 1,468 $ 2,750 $ 52,761 $ 55,511 Interest payment 1,468 21,139 22,607 52,761 $ 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( $ 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( b 55,511 Interest payment 1,468 21,139 22,607 Construction commitment ( b ) Construction commitment ( b ) 7,942 576 8,518 Operating and finance commitment ( b ) 7,942 576 8,518 Operating and finance lease ( b ) 7,942 576 8,518 Operating and finance lease , imputed interest ( c ) 4,609 44,045 48,654 Purchase commitment ( interest ( c ) 4,609 44,045 48,654 Purchase commitment ( d ( c ) 4,609 44,045 48,654 Purchase commitment ( d ) Purchase commitment ( d ) 42,669 2,985 45,654 Total $ 59,438 commitment ( d ) 42,669 2,985 45,654 Total $ 59,438 $ ( d ) 42,669 2,985 45,654 Total $ 59,438 $ 121,506 42,669 2,985 45,654 Total $ 59,438 $ 121,506 $ 180,944 ( 45,654 Total $ 59,438 $ 121,506 $ 180,944 ( a ) $ 59,438 $ 121,506 $ 180,944 ( a ) Refer to a ) Refer to Note 11 – Debt of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( b ) b ) Refer to Note 7 – Property and Equipment of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( c ) c ) Refer to Note 14 – Leases of the Notes ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) . ( d ) over eight year , with 8 % due in each of the first five year , 15 % in year six , % in year six , 20 % in year seven , in year seven , and 25 % in year eight . paid transition tax of $ 6.2 billion , which included $ billion , which included $ 1.5 billion for fiscal year 2022 1.5 billion for fiscal year 2022 . The remaining transition tax remaining transition tax of $ 12.0 billion is payable over the four year , with $ 1.3 billion payable within 12 month $ 1.3 billion payable within 12 month . Provisions enacted in expenditure became effective on July 1 , 2022 . These provision effective on July 1 , 2022 . These provision require u , also effective on July 1 , 2022 , introduced significant effective on July 1 , 2022 , introduced significant change to impact on our fiscal year 2023 effective tax rate on a Share Repurchases During fiscal year 2022 and 2021 , we repurchased During fiscal year 2022 and 2021 , we repurchased 95 million and 2021 , we repurchased 95 million share and 101 million repurchased 95 million share and 101 million share of our common our common stock for $ 28.0 billion and $ 23.0 billion $ 28.0 billion and $ 23.0 billion , respectively , through resource . As of June 30 , 2022 , $ 40.7 As of June 30 , 2022 , $ 40.7 billion remained 30 , 2022 , $ 40.7 billion remained of our $ billion remained of our $ 60 billion share repurchase program . program . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . . Dividends During fiscal year 2022 , our Board of Directors declared quarterly dividend of $ 0.62 per share . We intend Directors . Refer to Note 16 – Stockholders ’ Equity of ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . ) for further discussion . 51 PART II Item 7 Other . 51 PART II Item 7 Other Planned Uses of Capital Uses of Capital On January 18 , 2022 , we entered Capital On January 18 , 2022 , we entered into a Blizzard ” ) for $ 95 .00 per share in an all-cash transaction valued at $ 68 .7 billion , inclusive of to close in fiscal year 2023 , subject to the satisfaction ACCOUNTING GUIDANCE Refer to Note 1 – Accounting Policies of the ( Part II , Item 8 of this Form 10-K ) Item 8 of this Form 10-K ) for further discussion . cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the our portfolio of customer . 52 PART II Item 7 Our . 52 PART II Item 7 Our product are generally sold an annual basis ( May 1 for u ) and between life of the product . 53 PART II Item 7 Legal . 53 PART II Item 7 Legal and Other Contingencies The that ha a greater than 50 % likelihood of being realized IN ACCOUNTING ESTIMATE In July 2022 , we completed an assessment be effective beginning fiscal year 2023 . Based on the carrying , net a of June 30 , 2022 , it is a of June 30 , 2022 , it is estimated this will increase our fiscal year 2023 operating income by $ 3.7 2023 operating income by $ 3.7 billion . We had previously and network equipment in July 2020 . 54 PART II Item equipment in July 2020 . 54 PART II Item 7 STATEMENT . 54 PART II Item 7 STATEMENT OF MANAGEMENT ’ S President and Chief Accounting Officer 55 PART II Item 7A ITEM Officer 55 PART II Item 7A ITEM 7A . QUANTITATIVE AND PART II Item 7A ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES Risk Categories Hypothetical Change June 30 , 2022 Impact Foreign currency Hypothetical Change June 30 , 2022 Impact Foreign currency – Revenue Impact Foreign currency – Revenue 10 % decrease in foreign exchange foreign exchange rate $ ( 6,822 ) Earnings Foreign currency – Earnings Foreign currency – Investments 10 % decrease in foreign exchange in foreign exchange rate ( 94 ) Fair Value Interest rate ) Fair Value Interest rate 100 basis point increase in U.S. U.S. treasury interest rate ( 2,536 ) Fair Value Credit 100 2,536 ) Fair Value Credit 100 basis point increase in credit increase in credit spread ( 350 ) Fair Value Equity 10 350 ) Fair Value Equity 10 % decrease in equity market in equity market price ( 637 ) Earnings 56 PART II price ( 637 ) Earnings 56 PART II Item 8 ITEM Earnings 56 PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS PART II Item 8 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY amount ) Year Ended June 30 , 2022 2021 2020 Revenue Year Ended June 30 , 2022 2021 2020 Revenue : Product Ended June 30 , 2022 2021 2020 Revenue : Product $ June 30 , 2022 2021 2020 Revenue : Product $ 72,732 2020 Revenue : Product $ 72,732 $ 71,074 $ 68,041 Service : Product $ 72,732 $ 71,074 $ 68,041 Service and other $ 72,732 $ 71,074 $ 68,041 Service and other 125,538 97,014 $ 68,041 Service and other 125,538 97,014 74,974 Total revenue 198,270 68,041 Service and other 125,538 97,014 74,974 Total revenue 198,270 168,088 Service and other 125,538 97,014 74,974 Total revenue 198,270 168,088 143,015 125,538 97,014 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue 97,014 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue : 74,974 Total revenue 198,270 168,088 143,015 Cost of revenue : Product Cost of revenue : Product 19,064 18,219 16,017 Service and other of revenue : Product 19,064 18,219 16,017 Service and other 43,586 revenue : Product 19,064 18,219 16,017 Service and other 43,586 34,013 18,219 16,017 Service and other 43,586 34,013 30,061 Total cost of 16,017 Service and other 43,586 34,013 30,061 Total cost of revenue Service and other 43,586 34,013 30,061 Total cost of revenue 62,650 30,061 Total cost of revenue 62,650 52,232 46,078 Gross margin 135,620 Total cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 cost of revenue 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 62,650 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 52,232 46,078 Gross margin 135,620 115,856 96,937 Research and development 24,512 46,078 Gross margin 135,620 115,856 96,937 Research and development 24,512 20,716 115,856 96,937 Research and development 24,512 20,716 19,269 Sales and marketing 96,937 Research and development 24,512 20,716 19,269 Sales and marketing 21,825 Research and development 24,512 20,716 19,269 Sales and marketing 21,825 20,117 20,716 19,269 Sales and marketing 21,825 20,117 19,598 General and administrative 19,269 Sales and marketing 21,825 20,117 19,598 General and administrative 5,900 Sales and marketing 21,825 20,117 19,598 General and administrative 5,900 5,107 20,117 19,598 General and administrative 5,900 5,107 5,111 Operating income 83,383 19,598 General and administrative 5,900 5,107 5,111 Operating income 83,383 69,916 General and administrative 5,900 5,107 5,111 Operating income 83,383 69,916 52,959 5,900 5,107 5,111 Operating income 83,383 69,916 52,959 Other income , 5,107 5,111 Operating income 83,383 69,916 52,959 Other income , net 5,111 Operating income 83,383 69,916 52,959 Other income , net 333 52,959 Other income , net 333 1,186 77 Income before income Other income , net 333 1,186 77 Income before income tax income , net 333 1,186 77 Income before income tax 83,716 77 Income before income tax 83,716 71,102 53,036 Provision for income Income before income tax 83,716 71,102 53,036 Provision for income tax before income tax 83,716 71,102 53,036 Provision for income tax 10,978 53,036 Provision for income tax 10,978 9,831 8,755 Net income $ Provision for income tax 10,978 9,831 8,755 Net income $ 72,738 for income tax 10,978 9,831 8,755 Net income $ 72,738 $ 9,831 8,755 Net income $ 72,738 $ 61,271 $ 44,281 Earnings Net income $ 72,738 $ 61,271 $ 44,281 Earnings per share $ 72,738 $ 61,271 $ 44,281 Earnings per share : Basic per share : Basic $ 9.70 $ 8.12 $ 5.82 Diluted : Basic $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 9.70 $ 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 8.12 $ 5.82 Diluted $ 9.65 $ 8.05 $ 5.76 Weighted 5.82 Diluted $ 9.65 $ 8.05 $ 5.76 Weighted average share $ 9.65 $ 8.05 $ 5.76 Weighted average share outstanding : average share outstanding : Basic 7,496 7,547 7,610 Diluted 7,540 7,608 share outstanding : Basic 7,496 7,547 7,610 Diluted 7,540 7,608 7,683 outstanding : Basic 7,496 7,547 7,610 Diluted 7,540 7,608 7,683 Refer Basic 7,496 7,547 7,610 Diluted 7,540 7,608 7,683 Refer to accompanying 7,496 7,547 7,610 Diluted 7,540 7,608 7,683 Refer to accompanying note 7,547 7,610 Diluted 7,540 7,608 7,683 Refer to accompanying note . Refer to accompanying note . 57 PART II Item 8 COMPREHENSIVE . 57 PART II Item 8 COMPREHENSIVE INCOME STATEMENTS ( In million ) Year Ended June 30 , 2022 2021 2020 Net Year Ended June 30 , 2022 2021 2020 Net income $ Ended June 30 , 2022 2021 2020 Net income $ 72,738 June 30 , 2022 2021 2020 Net income $ 72,738 $ 2021 2020 Net income $ 72,738 $ 61,271 $ 44,281 Other Net income $ 72,738 $ 61,271 $ 44,281 Other comprehensive income $ 72,738 $ 61,271 $ 44,281 Other comprehensive income ( loss Net change related to derivative 6 19 ( 38 ) Net change related to derivative 6 19 ( 38 ) Net change to derivative 6 19 ( 38 ) Net change related to change related to investment ( 5,360 ) ( 2,266 ) 3,990 investment ( 5,360 ) ( 2,266 ) 3,990 Translation adjustment and 5,360 ) ( 2,266 ) 3,990 Translation adjustment and other ( Translation adjustment and other ( 1,146 ) 873 ( 426 ) and other ( 1,146 ) 873 ( 426 ) Other comprehensive ( 1,146 ) 873 ( 426 ) Other comprehensive income ( income ( loss ) ( 6,500 ) ( 1,374 ) 3,526 ) ( 6,500 ) ( 1,374 ) 3,526 Comprehensive income $ 6,500 ) ( 1,374 ) 3,526 Comprehensive income $ 66,238 $ ) 3,526 Comprehensive income $ 66,238 $ 59,897 $ 47,807 Refer Comprehensive income $ 66,238 $ 59,897 $ 47,807 Refer to accompanying $ 66,238 $ 59,897 $ 47,807 Refer to accompanying note . Refer to accompanying note . 58 PART II Item 8 BALANCE . 58 PART II Item 8 BALANCE SHEETS ( In million ( In million ) June 30 , 2022 2021 Assets Current million ) June 30 , 2022 2021 Assets Current asset : ) June 30 , 2022 2021 Assets Current asset : Cash Cash and cash equivalent $ 13,931 $ 14,224 Short-term investment 90,826 cash equivalent $ 13,931 $ 14,224 Short-term investment 90,826 116,110 Total 13,931 $ 14,224 Short-term investment 90,826 116,110 Total cash , cash $ 14,224 Short-term investment 90,826 116,110 Total cash , cash equivalent equivalent , and short-term investment 104,757 130,334 Accounts receivable , net , and short-term investment 104,757 130,334 Accounts receivable , net of for doubtful account of $ 633 and $ 751 44,261 38,043 of $ 633 and $ 751 44,261 38,043 Inventories 3,742 2,636 $ 633 and $ 751 44,261 38,043 Inventories 3,742 2,636 Other 633 and $ 751 44,261 38,043 Inventories 3,742 2,636 Other current $ 751 44,261 38,043 Inventories 3,742 2,636 Other current asset 16,924 751 44,261 38,043 Inventories 3,742 2,636 Other current asset 16,924 13,393 3,742 2,636 Other current asset 16,924 13,393 Total current asset 169,684 2,636 Other current asset 16,924 13,393 Total current asset 169,684 184,406 16,924 13,393 Total current asset 169,684 184,406 Property and equipment , 13,393 Total current asset 169,684 184,406 Property and equipment , net of accumulated depreciation of $ 59,660 and $ 51,351 74,398 59,715 of $ 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use $ 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use asset 59,660 and $ 51,351 74,398 59,715 Operating lease right-of-use asset 13,148 59,715 Operating lease right-of-use asset 13,148 11,088 Equity investment 6,891 5,984 Operating lease right-of-use asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill asset 13,148 11,088 Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible 13,148 11,088 Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset Equity investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset , net investment 6,891 5,984 Goodwill 67,524 49,711 Intangible asset , net 11,298 49,711 Intangible asset , net 11,298 7,800 Other long-term asset 21,897 Intangible asset , net 11,298 7,800 Other long-term asset 21,897 15,075 11,298 7,800 Other long-term asset 21,897 15,075 Total asset $ 364,840 7,800 Other long-term asset 21,897 15,075 Total asset $ 364,840 $ 21,897 15,075 Total asset $ 364,840 $ 333,779 Liabilities and stockholder Total asset $ 364,840 $ 333,779 Liabilities and stockholder ’ equity liability : Accounts payable $ 19,000 $ 15,163 Current portion of Accounts payable $ 19,000 $ 15,163 Current portion of long-term debt Current portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 portion of long-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term debt 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,749 8,072 Accrued compensation 10,661 10,057 Short-term income tax 4,067 2,174 10,661 10,057 Short-term income tax 4,067 2,174 Short-term unearned revenue 45,538 10,057 Short-term income tax 4,067 2,174 Short-term unearned revenue 45,538 41,525 4,067 2,174 Short-term unearned revenue 45,538 41,525 Other current liability 13,067 2,174 Short-term unearned revenue 45,538 41,525 Other current liability 13,067 11,666 45,538 41,525 Other current liability 13,067 11,666 Total current liability 95,082 41,525 Other current liability 13,067 11,666 Total current liability 95,082 88,657 13,067 11,666 Total current liability 95,082 88,657 Long-term debt 47,032 50,074 11,666 Total current liability 95,082 88,657 Long-term debt 47,032 50,074 Long-term liability 95,082 88,657 Long-term debt 47,032 50,074 Long-term income tax 26,069 95,082 88,657 Long-term debt 47,032 50,074 Long-term income tax 26,069 27,190 47,032 50,074 Long-term income tax 26,069 27,190 Long-term unearned revenue 2,870 50,074 Long-term income tax 26,069 27,190 Long-term unearned revenue 2,870 2,616 26,069 27,190 Long-term unearned revenue 2,870 2,616 Deferred income tax 230 27,190 Long-term unearned revenue 2,870 2,616 Deferred income tax 230 198 2,870 2,616 Deferred income tax 230 198 Operating lease liability 11,489 2,616 Deferred income tax 230 198 Operating lease liability 11,489 9,629 230 198 Operating lease liability 11,489 9,629 Other long-term liability 15,526 198 Operating lease liability 11,489 9,629 Other long-term liability 15,526 13,427 11,489 9,629 Other long-term liability 15,526 13,427 Total liability 198,298 191,791 9,629 Other long-term liability 15,526 13,427 Total liability 198,298 191,791 Commitments liability 15,526 13,427 Total liability 198,298 191,791 Commitments and contingency Stockholders 15,526 13,427 Total liability 198,298 191,791 Commitments and contingency Stockholders ’ paid-in capital – share authorized 24,000 ; outstanding 7,464 and 7,519 share authorized 24,000 ; outstanding 7,464 and 7,519 86,939 83,111 Retained 24,000 ; outstanding 7,464 and 7,519 86,939 83,111 Retained earnings 84,281 ; outstanding 7,464 and 7,519 86,939 83,111 Retained earnings 84,281 57,055 outstanding 7,464 and 7,519 86,939 83,111 Retained earnings 84,281 57,055 Accumulated 7,519 86,939 83,111 Retained earnings 84,281 57,055 Accumulated other comprehensive income 86,939 83,111 Retained earnings 84,281 57,055 Accumulated other comprehensive income ( income ( loss ) ( 4,678 ) 1,822 Total stockholder ’ loss ) ( 4,678 ) 1,822 Total stockholder ’ equity 166,542 1,822 Total stockholder ’ equity 166,542 141,988 Total liability and stockholder Total stockholder ’ equity 166,542 141,988 Total liability and stockholder ’ and stockholder ’ equity $ 364,840 $ 333,779 Refer to accompanying ’ equity $ 364,840 $ 333,779 Refer to accompanying note . Refer to accompanying note . 59 PART II Item 8 CASH . 59 PART II Item 8 CASH FLOWS STATEMENTS ( In million ) Year Ended June 30 , 2022 2021 2020 Operations Year Ended June 30 , 2022 2021 2020 Operations Net income Ended June 30 , 2022 2021 2020 Operations Net income $ June 30 , 2022 2021 2020 Operations Net income $ 72,738 2020 Operations Net income $ 72,738 $ 61,271 $ 44,281 Adjustments Net income $ 72,738 $ 61,271 $ 44,281 Adjustments to reconcile $ 72,738 $ 61,271 $ 44,281 Adjustments to reconcile net income , amortization , and other 14,460 11,686 12,796 Stock-based compensation expense amortization , and other 14,460 11,686 12,796 Stock-based compensation expense 7,502 , and other 14,460 11,686 12,796 Stock-based compensation expense 7,502 6,118 11,686 12,796 Stock-based compensation expense 7,502 6,118 5,289 Net recognized gain 12,796 Stock-based compensation expense 7,502 6,118 5,289 Net recognized gain on Stock-based compensation expense 7,502 6,118 5,289 Net recognized gain on investment on investment and derivative ( 409 ) ( 1,249 ) ( derivative ( 409 ) ( 1,249 ) ( 219 ) Deferred ) ( 1,249 ) ( 219 ) Deferred income tax ( ) Deferred income tax ( 5,702 ) ( 150 ) 11 tax ( 5,702 ) ( 150 ) 11 Changes in operating 5,702 ) ( 150 ) 11 Changes in operating asset and liability : Accounts receivable ( 6,834 ) ( 6,481 ) ( receivable ( 6,834 ) ( 6,481 ) ( 2,577 ) Inventories ) ( 6,481 ) ( 2,577 ) Inventories ( 1,123 ) ( 2,577 ) Inventories ( 1,123 ) ( 737 ) 168 Inventories ( 1,123 ) ( 737 ) 168 Other current asset 1,123 ) ( 737 ) 168 Other current asset ( 709 168 Other current asset ( 709 ) ( 932 ) ( asset ( 709 ) ( 932 ) ( 2,330 ) Other ) ( 932 ) ( 2,330 ) Other long-term asset ( ) Other long-term asset ( 2,805 ) ( 3,459 ) ( asset ( 2,805 ) ( 3,459 ) ( 1,037 ) Accounts ) ( 3,459 ) ( 1,037 ) Accounts payable 2,943 2,798 ( 1,037 ) Accounts payable 2,943 2,798 3,018 Unearned revenue 5,109 1,037 ) Accounts payable 2,943 2,798 3,018 Unearned revenue 5,109 4,633 ) Accounts payable 2,943 2,798 3,018 Unearned revenue 5,109 4,633 2,212 2,943 2,798 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 2,798 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 ( 3,018 Unearned revenue 5,109 4,633 2,212 Income tax 696 ( 2,309 5,109 4,633 2,212 Income tax 696 ( 2,309 ) ( 3,631 2,212 Income tax 696 ( 2,309 ) ( 3,631 ) Other 696 ( 2,309 ) ( 3,631 ) Other current liability 2,344 3,631 ) Other current liability 2,344 4,149 1,346 Other long-term liability ) Other current liability 2,344 4,149 1,346 Other long-term liability 825 Other current liability 2,344 4,149 1,346 Other long-term liability 825 1,402 4,149 1,346 Other long-term liability 825 1,402 1,348 Net cash from 1,346 Other long-term liability 825 1,402 1,348 Net cash from operation Other long-term liability 825 1,402 1,348 Net cash from operation 89,035 1,348 Net cash from operation 89,035 76,740 60,675 Financing Cash premium Net cash from operation 89,035 76,740 60,675 Financing Cash premium on cash from operation 89,035 76,740 60,675 Financing Cash premium on debt Cash premium on debt exchange 0 ( 1,754 ) ( 3,417 on debt exchange 0 ( 1,754 ) ( 3,417 ) Repayments 0 ( 1,754 ) ( 3,417 ) Repayments of debt ( ) Repayments of debt ( 9,023 ) ( 3,750 ) ( debt ( 9,023 ) ( 3,750 ) ( 5,518 ) Common ) ( 3,750 ) ( 5,518 ) Common stock issued 1,841 5,518 ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ) Common stock issued 1,841 1,693 1,343 Common stock repurchased ( Common stock issued 1,841 1,693 1,343 Common stock repurchased ( 32,696 1,343 Common stock repurchased ( 32,696 ) ( 27,385 ) ( repurchased ( 32,696 ) ( 27,385 ) ( 22,968 ) Common ) ( 27,385 ) ( 22,968 ) Common stock cash dividend stock cash dividend paid ( 18,135 ) ( 16,521 ) ( paid ( 18,135 ) ( 16,521 ) ( 15,137 ) Other ) ( 16,521 ) ( 15,137 ) Other , net ( ) Other , net ( 863 ) ( 769 ) ( net ( 863 ) ( 769 ) ( 334 ) Net ) ( 769 ) ( 334 ) Net cash used in cash used in financing ( 58,876 ) ( 48,486 ) ( financing ( 58,876 ) ( 48,486 ) ( 46,031 ) Investing ) ( 48,486 ) ( 46,031 ) Investing Additions to property to property and equipment ( 23,886 ) ( 20,622 ) ( equipment ( 23,886 ) ( 20,622 ) ( 15,441 ) Acquisition ) ( 20,622 ) ( 15,441 ) Acquisition of company , intangible and other asset ( 22,038 ) ( 8,909 ) ( asset ( 22,038 ) ( 8,909 ) ( 2,521 ) Purchases ) ( 8,909 ) ( 2,521 ) Purchases of investment ( ) Purchases of investment ( 26,456 ) ( 62,924 ) ( investment ( 26,456 ) ( 62,924 ) ( 77,190 ) Maturities ) ( 62,924 ) ( 77,190 ) Maturities of investment 16,451 77,190 ) Maturities of investment 16,451 51,792 66,449 Sales of investment ) Maturities of investment 16,451 51,792 66,449 Sales of investment 28,443 Maturities of investment 16,451 51,792 66,449 Sales of investment 28,443 14,008 51,792 66,449 Sales of investment 28,443 14,008 17,721 Other , net 66,449 Sales of investment 28,443 14,008 17,721 Other , net ( Sales of investment 28,443 14,008 17,721 Other , net ( 2,825 17,721 Other , net ( 2,825 ) ( 922 ) ( net ( 2,825 ) ( 922 ) ( 1,241 ) Net ) ( 922 ) ( 1,241 ) Net cash used in cash used in investing ( 30,311 ) ( 27,577 ) ( investing ( 30,311 ) ( 27,577 ) ( 12,223 ) Effect ) ( 27,577 ) ( 12,223 ) Effect of foreign exchange cash and cash equivalent ( 141 ) ( 29 ) ( equivalent ( 141 ) ( 29 ) ( 201 ) Net ) ( 29 ) ( 201 ) Net change in cash cash and cash equivalent ( 293 ) 648 2,220 Cash and cash equivalent ( 293 ) 648 2,220 Cash and cash equivalent equivalent ( 293 ) 648 2,220 Cash and cash equivalent , equivalent , beginning of period 14,224 13,576 11,356 Cash and cash , beginning of period 14,224 13,576 11,356 Cash and cash equivalent beginning of period 14,224 13,576 11,356 Cash and cash equivalent , , end of period $ 13,931 $ 14,224 $ 13,576 Refer of period $ 13,931 $ 14,224 $ 13,576 Refer to accompanying $ 13,931 $ 14,224 $ 13,576 Refer to accompanying note . Refer to accompanying note . 60 PART II Item 8 STOCKHOLDERS . 60 PART II Item 8 STOCKHOLDERS ’ EQUITY STATEMENTS ( amount ) Year Ended June 30 , 2022 2021 2020 Common Year Ended June 30 , 2022 2021 2020 Common stock and Ended June 30 , 2022 2021 2020 Common stock and paid-in June 30 , 2022 2021 2020 Common stock and paid-in capital , beginning of period $ 83,111 $ 80,552 $ 78,520 Common of period $ 83,111 $ 80,552 $ 78,520 Common stock issued $ 83,111 $ 80,552 $ 78,520 Common stock issued 1,841 1,963 $ 78,520 Common stock issued 1,841 1,963 1,343 Common stock repurchased 78,520 Common stock issued 1,841 1,963 1,343 Common stock repurchased ( Common stock issued 1,841 1,963 1,343 Common stock repurchased ( 5,688 1,343 Common stock repurchased ( 5,688 ) ( 5,539 ) ( repurchased ( 5,688 ) ( 5,539 ) ( 4,599 ) Stock-based ) ( 5,539 ) ( 4,599 ) Stock-based compensation expense 7,502 4,599 ) Stock-based compensation expense 7,502 6,118 5,289 Other , net ) Stock-based compensation expense 7,502 6,118 5,289 Other , net 173 Stock-based compensation expense 7,502 6,118 5,289 Other , net 173 17 6,118 5,289 Other , net 173 17 ( 1 ) Balance 5,289 Other , net 173 17 ( 1 ) Balance , , net 173 17 ( 1 ) Balance , end of Balance , end of period 86,939 83,111 80,552 Retained earnings Balance , end of period 86,939 83,111 80,552 Retained earnings Balance , end of period 86,939 83,111 80,552 Retained earnings Balance , beginning Balance , beginning of period 57,055 34,566 24,150 Net income 72,738 , beginning of period 57,055 34,566 24,150 Net income 72,738 61,271 beginning of period 57,055 34,566 24,150 Net income 72,738 61,271 44,281 57,055 34,566 24,150 Net income 72,738 61,271 44,281 Common stock cash 34,566 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend 24,150 Net income 72,738 61,271 44,281 Common stock cash dividend ( Common stock cash dividend ( 18,552 ) ( 16,871 ) ( dividend ( 18,552 ) ( 16,871 ) ( 15,483 ) Common ) ( 16,871 ) ( 15,483 ) Common stock repurchased ( ) Common stock repurchased ( 26,960 ) ( 21,879 ) ( repurchased ( 26,960 ) ( 21,879 ) ( 18,382 ) Cumulative ) ( 21,879 ) ( 18,382 ) Cumulative effect of accounting Cumulative effect of accounting change 0 ( 32 ) 0 Balance of accounting change 0 ( 32 ) 0 Balance , end change 0 ( 32 ) 0 Balance , end of period Balance , end of period 84,281 57,055 34,566 Accumulated other comprehensive , end of period 84,281 57,055 34,566 Accumulated other comprehensive income end of period 84,281 57,055 34,566 Accumulated other comprehensive income ( Balance , beginning of period 1,822 3,186 ( 340 ) Other , beginning of period 1,822 3,186 ( 340 ) Other comprehensive of period 1,822 3,186 ( 340 ) Other comprehensive income ( income ( loss ) ( 6,500 ) ( 1,374 ) 3,526 ) ( 6,500 ) ( 1,374 ) 3,526 Cumulative effect of 6,500 ) ( 1,374 ) 3,526 Cumulative effect of accounting change Cumulative effect of accounting change 0 10 0 Balance , end effect of accounting change 0 10 0 Balance , end of of accounting change 0 10 0 Balance , end of period , end of period ( 4,678 ) 1,822 3,186 Total stockholder of period ( 4,678 ) 1,822 3,186 Total stockholder ’ equity period ( 4,678 ) 1,822 3,186 Total stockholder ’ equity $ Total stockholder ’ equity $ 166,542 $ 141,988 $ 118,304 Cash ’ equity $ 166,542 $ 141,988 $ 118,304 Cash dividend declared $ 166,542 $ 141,988 $ 118,304 Cash dividend declared per common declared per common share $ 2.48 $ 2.24 $ 2.04 Refer common share $ 2.48 $ 2.24 $ 2.04 Refer to accompanying $ 2.48 $ 2.24 $ 2.04 Refer to accompanying note . Refer to accompanying note . 61 PART II Item 8 NOTES . 61 PART II Item 8 NOTES TO FINANCIAL STATEMENTS NOTE NOTES TO FINANCIAL STATEMENTS NOTE 1 — ACCOUNTING POLICIES Accounting Principles and uncertainty . In July 2022 , we completed an assessment be effective beginning fiscal year 2023 . We had previously increased and network equipment in July 2020 . Foreign Currencies Assets and and content such a Office 365 , Azure , Dynamics 365 365 , Azure , Dynamics 365 , and Xbox ; solution online advertising and LinkedIn . 62 PART II Item 8 Revenue . 62 PART II Item 8 Revenue Recognition Revenue is recognized marketplace . Refer to Note 19 – Segment Information and Geographic cloud service , primarily Office 365 , depend on a significant obligation . Revenue from Office 365 is recognized ratably over the cloud service are provided . 63 PART II Item 8 Judgment . 63 PART II Item 8 Judgment is required to determine , LinkedIn subscription , Office 365 subscription , Xbox subscription , service . Refer to Note 13 – Unearned Revenue for further a requirement of payment within 30 to 60 day . In of payment within 30 to 60 day . In instance where upfront . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , other receivables June 30 , 2022 and 2021 , other receivables due from due from supplier were $ 1.0 billion and $ 965 million $ 1.0 billion and $ 965 million , respectively , and sheet . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , long-term account June 30 , 2022 and 2021 , long-term account receivable , doubtful account , wa $ 3.8 billion and $ 3.4 billion $ 3.8 billion and $ 3.4 billion , respectively , and other currently available evidence . 64 PART II Item 8 Activity . 64 PART II Item 8 Activity in the allowance for million ) Year Ended June 30 , 2022 2021 2020 Balance Year Ended June 30 , 2022 2021 2020 Balance , beginning Ended June 30 , 2022 2021 2020 Balance , beginning of June 30 , 2022 2021 2020 Balance , beginning of period , beginning of period $ 798 $ 816 $ 434 Charged of period $ 798 $ 816 $ 434 Charged to cost $ 798 $ 816 $ 434 Charged to cost and other Charged to cost and other 157 234 560 Write-offs ( 245 to cost and other 157 234 560 Write-offs ( 245 ) cost and other 157 234 560 Write-offs ( 245 ) ( 157 234 560 Write-offs ( 245 ) ( 252 ) ( Write-offs ( 245 ) ( 252 ) ( 178 ) Balance ) ( 252 ) ( 178 ) Balance , end of , end of period $ 710 $ 798 $ 816 Allowance of period $ 710 $ 798 $ 816 Allowance for doubtful $ 710 $ 798 $ 816 Allowance for doubtful account included ( In million ) June 30 , 2022 2021 2020 Accounts million ) June 30 , 2022 2021 2020 Accounts receivable , ) June 30 , 2022 2021 2020 Accounts receivable , net June 30 , 2022 2021 2020 Accounts receivable , net of allowance for doubtful account $ 633 $ 751 $ 788 Other doubtful account $ 633 $ 751 $ 788 Other long-term asset $ 633 $ 751 $ 788 Other long-term asset 77 47 $ 788 Other long-term asset 77 47 28 Total $ 710 788 Other long-term asset 77 47 28 Total $ 710 $ Other long-term asset 77 47 28 Total $ 710 $ 798 77 47 28 Total $ 710 $ 798 $ 816 We 28 Total $ 710 $ 798 $ 816 We record financing $ 710 $ 798 $ 816 We record financing receivables when country . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , our financing June 30 , 2022 and 2021 , our financing receivables , receivables , net were $ 4.1 billion and $ 4.4 billion $ 4.1 billion and $ 4.4 billion , respectively , for a period generally ranging from 90 day to three year . the amount a necessary . 65 PART II Item 8 Research . 65 PART II Item 8 Research and Development Research and . Advertising expense wa $ 1.5 billion , $ 1.5 billion $ 1.5 billion , $ 1.5 billion , and $ 1.6 1.5 billion , and $ 1.6 billion in fiscal year 2022 1.6 billion in fiscal year 2022 , 2021 , and 2020 in fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . Stock-Based Compensation available for current operation . 66 PART II Item 8 Debt . 66 PART II Item 8 Debt investment are classified a level are : • Level 1 – input are based upon active market . Our Level 1 investment include U.S. government security mutual fund . Our Level 1 derivative asset and liability include on exchange . • Level 2 – input are based upon for currency . Our Level 2 investment include commercial paper , municipal security . Our Level 2 derivative asset and liability include , and swap contract . 67 PART II Item 8 • . 67 PART II Item 8 • Level 3 – input II Item 8 • Level 3 – input are generally unobservable flow model . Our Level 3 asset and liability include investment and improvement , five to 15 year ; leasehold improvement , leasehold improvement , three to 20 year ; and furniture and and equipment , one to 10 year . Land is not an annual basis ( May 1 for u ) and between below it carrying value . 68 PART II Item 8 Intangible . 68 PART II Item 8 Intangible Assets Our intangible asset , ranging from one to 20 year . We evaluate the for Income Taxes In December 2019 , the Financial Accounting Standards adopted the standard effective July 1 , 2021 . Adoption of standard effective July 1 , 2021 . Adoption of the standard consolidated financial statement . NOTE 2 — EARNINGS PER SHARE Basic share ) Year Ended June 30 , 2022 2021 2020 Net Year Ended June 30 , 2022 2021 2020 Net income available Ended June 30 , 2022 2021 2020 Net income available for June 30 , 2022 2021 2020 Net income available for common shareholder ( A ) $ 72,738 $ 61,271 $ 44,281 Weighted A ) $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding $ 72,738 $ 61,271 $ 44,281 Weighted average outstanding share of common stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based ( B ) 7,496 7,547 7,610 Dilutive effect of stock-based award Dilutive effect of stock-based award 44 61 73 Common stock and effect of stock-based award 44 61 73 Common stock and common of stock-based award 44 61 73 Common stock and common stock stock equivalent ( C ) 7,540 7,608 7,683 Earnings Per Share equivalent ( C ) 7,540 7,608 7,683 Earnings Per Share Basic ( C ) 7,540 7,608 7,683 Earnings Per Share Basic ( Basic ( A/B ) $ 9.70 $ 8.12 $ 5.82 Diluted A/B ) $ 9.70 $ 8.12 $ 5.82 Diluted ( A/C $ 9.70 $ 8.12 $ 5.82 Diluted ( A/C ) $ Diluted ( A/C ) $ 9.65 $ 8.05 $ 5.76 Anti-dilutive A/C ) $ 9.65 $ 8.05 $ 5.76 Anti-dilutive stock-based award $ 9.65 $ 8.05 $ 5.76 Anti-dilutive stock-based award excluded from the period presented . NOTE 3 — OTHER INCOME ( EXPENSE million ) Year Ended June 30 , 2022 2021 2020 Interest Year Ended June 30 , 2022 2021 2020 Interest and dividend Ended June 30 , 2022 2021 2020 Interest and dividend income June 30 , 2022 2021 2020 Interest and dividend income $ Interest and dividend income $ 2,094 $ 2,131 $ 2,680 Interest dividend income $ 2,094 $ 2,131 $ 2,680 Interest expense ( $ 2,094 $ 2,131 $ 2,680 Interest expense ( 2,063 ) $ 2,680 Interest expense ( 2,063 ) ( 2,346 ) ( expense ( 2,063 ) ( 2,346 ) ( 2,591 ) Net ) ( 2,346 ) ( 2,591 ) Net recognized gain on Net recognized gain on investment 461 1,232 32 Net gain ( recognized gain on investment 461 1,232 32 Net gain ( loss gain on investment 461 1,232 32 Net gain ( loss ) loss ) on derivative ( 52 ) 17 187 Net gain on derivative ( 52 ) 17 187 Net gain ( loss derivative ( 52 ) 17 187 Net gain ( loss ) on foreign currency remeasurements ( 75 ) 54 ( 191 ) currency remeasurements ( 75 ) 54 ( 191 ) Other , ( 75 ) 54 ( 191 ) Other , net ( ) Other , net ( 32 ) 98 ( 40 ) , net ( 32 ) 98 ( 40 ) Total $ ( 32 ) 98 ( 40 ) Total $ 333 $ ( 40 ) Total $ 333 $ 1,186 $ 77 69 ) Total $ 333 $ 1,186 $ 77 69 PART II $ 333 $ 1,186 $ 77 69 PART II Item 8 333 $ 1,186 $ 77 69 PART II Item 8 Net 77 69 PART II Item 8 Net Recognized Gains ( Losses million ) Year Ended June 30 , 2022 2021 2020 Realized Year Ended June 30 , 2022 2021 2020 Realized gain from Ended June 30 , 2022 2021 2020 Realized gain from sale June 30 , 2022 2021 2020 Realized gain from sale of sale of available-for-sale security $ 162 $ 105 $ 50 Realized available-for-sale security $ 162 $ 105 $ 50 Realized loss from $ 162 $ 105 $ 50 Realized loss from sale of sale of available-for-sale security ( 138 ) ( 40 ) ( security ( 138 ) ( 40 ) ( 37 ) Impairments ) ( 40 ) ( 37 ) Impairments and allowance for allowance for credit loss ( 81 ) ( 2 ) ( loss ( 81 ) ( 2 ) ( 17 ) Total ) ( 2 ) ( 17 ) Total $ ( 57 17 ) Total $ ( 57 ) $ 63 $ ( $ ( 57 ) $ 63 $ ( 4 ) Net ) $ 63 $ ( 4 ) Net recognized gain ( million ) Year Ended June 30 , 2022 2021 2020 Net Year Ended June 30 , 2022 2021 2020 Net realized gain Ended June 30 , 2022 2021 2020 Net realized gain on June 30 , 2022 2021 2020 Net realized gain on investment gain on investment sold $ 29 $ 123 $ 83 Net investment sold $ 29 $ 123 $ 83 Net unrealized gain $ 29 $ 123 $ 83 Net unrealized gain on investment gain on investment still held 509 1,057 69 Impairments of investment on investment still held 509 1,057 69 Impairments of investment ( investment still held 509 1,057 69 Impairments of investment ( 20 69 Impairments of investment ( 20 ) ( 11 ) ( investment ( 20 ) ( 11 ) ( 116 ) Total ) ( 11 ) ( 116 ) Total $ 518 $ ( 116 ) Total $ 518 $ 1,169 $ 36 70 ) Total $ 518 $ 1,169 $ 36 70 PART II $ 518 $ 1,169 $ 36 70 PART II Item 8 518 $ 1,169 $ 36 70 PART II Item 8 NOTE 36 70 PART II Item 8 NOTE 4 — INVESTMENTS Investment PART II Item 8 NOTE 4 — INVESTMENTS Investment Components The Short-term Investments Equity Investments June 30 , 2022 Changes in Fair Equity Investments June 30 , 2022 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 2,500 $ 0 $ Commercial paper Level 2 $ 2,500 $ 0 $ 0 $ Level 2 $ 2,500 $ 0 $ 0 $ 2,500 $ $ 2,500 $ 0 $ 0 $ 2,500 $ 2,498 $ $ 0 $ 0 $ 2,500 $ 2,498 $ 2 $ $ 0 $ 2,500 $ 2,498 $ 2 $ 0 Certificates $ 2,500 $ 2,498 $ 2 $ 0 Certificates of deposit $ 2,498 $ 2 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 2,071 0 0 2,071 2,032 Certificates of deposit Level 2 2,071 0 0 2,071 2,032 39 of deposit Level 2 2,071 0 0 2,071 2,032 39 0 deposit Level 2 2,071 0 0 2,071 2,032 39 0 U.S. Level 2 2,071 0 0 2,071 2,032 39 0 U.S. government 2 2,071 0 0 2,071 2,032 39 0 U.S. government security 2,071 0 0 2,071 2,032 39 0 U.S. government security Level 0 0 2,071 2,032 39 0 U.S. government security Level 1 0 U.S. government security Level 1 79,696 29 ( 2,178 ) U.S. government security Level 1 79,696 29 ( 2,178 ) 77,547 government security Level 1 79,696 29 ( 2,178 ) 77,547 9 Level 1 79,696 29 ( 2,178 ) 77,547 9 77,538 0 79,696 29 ( 2,178 ) 77,547 9 77,538 0 U.S. agency 29 ( 2,178 ) 77,547 9 77,538 0 U.S. agency security ( 2,178 ) 77,547 9 77,538 0 U.S. agency security Level 2,178 ) 77,547 9 77,538 0 U.S. agency security Level 2 0 U.S. agency security Level 2 419 0 ( 9 ) U.S. agency security Level 2 419 0 ( 9 ) 410 agency security Level 2 419 0 ( 9 ) 410 0 Level 2 419 0 ( 9 ) 410 0 410 0 419 0 ( 9 ) 410 0 410 0 Foreign government 0 ( 9 ) 410 0 410 0 Foreign government bond ( 9 ) 410 0 410 0 Foreign government bond Level 9 ) 410 0 410 0 Foreign government bond Level 2 0 Foreign government bond Level 2 506 0 ( 24 ) Foreign government bond Level 2 506 0 ( 24 ) 482 government bond Level 2 506 0 ( 24 ) 482 0 Level 2 506 0 ( 24 ) 482 0 482 0 506 0 ( 24 ) 482 0 482 0 Mortgage- and 0 ( 24 ) 482 0 482 0 Mortgage- and asset-backed ( 24 ) 482 0 482 0 Mortgage- and asset-backed security 24 ) 482 0 482 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 727 1 ( 30 ) and asset-backed security Level 2 727 1 ( 30 ) 698 asset-backed security Level 2 727 1 ( 30 ) 698 0 Level 2 727 1 ( 30 ) 698 0 698 0 727 1 ( 30 ) 698 0 698 0 Corporate note 1 ( 30 ) 698 0 698 0 Corporate note and ( 30 ) 698 0 698 0 Corporate note and bond 30 ) 698 0 698 0 Corporate note and bond Level Corporate note and bond Level 2 11,661 4 ( 554 ) note and bond Level 2 11,661 4 ( 554 ) 11,111 and bond Level 2 11,661 4 ( 554 ) 11,111 0 Level 2 11,661 4 ( 554 ) 11,111 0 11,111 0 11,661 4 ( 554 ) 11,111 0 11,111 0 Corporate note 4 ( 554 ) 11,111 0 11,111 0 Corporate note and ( 554 ) 11,111 0 11,111 0 Corporate note and bond 554 ) 11,111 0 11,111 0 Corporate note and bond Level Corporate note and bond Level 3 67 0 0 67 0 note and bond Level 3 67 0 0 67 0 67 and bond Level 3 67 0 0 67 0 67 0 bond Level 3 67 0 0 67 0 67 0 Municipal Level 3 67 0 0 67 0 67 0 Municipal security 3 67 0 0 67 0 67 0 Municipal security Level 67 0 0 67 0 67 0 Municipal security Level 2 0 0 67 0 67 0 Municipal security Level 2 368 67 0 Municipal security Level 2 368 19 ( 13 ) 0 Municipal security Level 2 368 19 ( 13 ) 374 Municipal security Level 2 368 19 ( 13 ) 374 0 Level 2 368 19 ( 13 ) 374 0 374 0 368 19 ( 13 ) 374 0 374 0 Municipal security 19 ( 13 ) 374 0 374 0 Municipal security Level ( 13 ) 374 0 374 0 Municipal security Level 3 13 ) 374 0 374 0 Municipal security Level 3 103 374 0 Municipal security Level 3 103 0 ( 6 ) 0 Municipal security Level 3 103 0 ( 6 ) 97 Municipal security Level 3 103 0 ( 6 ) 97 0 Level 3 103 0 ( 6 ) 97 0 97 0 103 0 ( 6 ) 97 0 97 0 Total debt 0 ( 6 ) 97 0 97 0 Total debt investment ( 6 ) 97 0 97 0 Total debt investment $ 6 ) 97 0 97 0 Total debt investment $ 98,118 0 Total debt investment $ 98,118 $ 53 $ ( 2,814 debt investment $ 98,118 $ 53 $ ( 2,814 ) $ 98,118 $ 53 $ ( 2,814 ) $ 95,357 $ 4,539 $ ( 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 2,814 ) $ 95,357 $ 4,539 $ 90,818 $ 0 Changes $ 95,357 $ 4,539 $ 90,818 $ 0 Changes in Fair $ 4,539 $ 90,818 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,590 $ 1,134 $ Equity investment Level 1 $ 1,590 $ 1,134 $ 0 $ Level 1 $ 1,590 $ 1,134 $ 0 $ 456 Equity $ 1,590 $ 1,134 $ 0 $ 456 Equity investment Other $ 1,134 $ 0 $ 456 Equity investment Other 6,435 0 $ 456 Equity investment Other 6,435 0 0 6,435 Total equity 456 Equity investment Other 6,435 0 0 6,435 Total equity investment Equity investment Other 6,435 0 0 6,435 Total equity investment $ investment Other 6,435 0 0 6,435 Total equity investment $ 8,025 6,435 Total equity investment $ 8,025 $ 1,134 $ 0 $ equity investment $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,025 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 1,134 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 6,891 Cash $ 8,258 $ 8,258 $ 0 $ 0 Derivatives $ 8,258 $ 8,258 $ 0 $ 0 Derivatives , net $ 8,258 $ 0 $ 0 Derivatives , net ( a , net ( a ) 8 0 8 0 Total $ net ( a ) 8 0 8 0 Total $ 111,648 ( a ) 8 0 8 0 Total $ 111,648 $ a ) 8 0 8 0 Total $ 111,648 $ 13,931 0 8 0 Total $ 111,648 $ 13,931 $ 90,826 $ 0 Total $ 111,648 $ 13,931 $ 90,826 $ 6,891 71 $ 111,648 $ 13,931 $ 90,826 $ 6,891 71 PART II $ 13,931 $ 90,826 $ 6,891 71 PART II Item 8 13,931 $ 90,826 $ 6,891 71 PART II Item 8 ( 6,891 71 PART II Item 8 ( In million ) Fair Short-term Investments Equity Investments June 30 , 2021 Changes in Fair Equity Investments June 30 , 2021 Changes in Fair Value Recorded Comprehensive Income Commercial paper Level 2 $ 4,316 $ 0 $ Commercial paper Level 2 $ 4,316 $ 0 $ 0 $ Level 2 $ 4,316 $ 0 $ 0 $ 4,316 $ $ 4,316 $ 0 $ 0 $ 4,316 $ 1,331 $ $ 0 $ 0 $ 4,316 $ 1,331 $ 2,985 $ $ 0 $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates $ 4,316 $ 1,331 $ 2,985 $ 0 Certificates of deposit $ 1,331 $ 2,985 $ 0 Certificates of deposit Level 2 0 Certificates of deposit Level 2 3,615 0 0 3,615 2,920 Certificates of deposit Level 2 3,615 0 0 3,615 2,920 695 of deposit Level 2 3,615 0 0 3,615 2,920 695 0 deposit Level 2 3,615 0 0 3,615 2,920 695 0 U.S. Level 2 3,615 0 0 3,615 2,920 695 0 U.S. government 2 3,615 0 0 3,615 2,920 695 0 U.S. government security 3,615 0 0 3,615 2,920 695 0 U.S. government security Level 0 0 3,615 2,920 695 0 U.S. government security Level 1 0 U.S. government security Level 1 90,664 3,832 ( 111 ) U.S. government security Level 1 90,664 3,832 ( 111 ) 94,385 government security Level 1 90,664 3,832 ( 111 ) 94,385 1,500 Level 1 90,664 3,832 ( 111 ) 94,385 1,500 92,885 0 90,664 3,832 ( 111 ) 94,385 1,500 92,885 0 U.S. agency 3,832 ( 111 ) 94,385 1,500 92,885 0 U.S. agency security ( 111 ) 94,385 1,500 92,885 0 U.S. agency security Level 111 ) 94,385 1,500 92,885 0 U.S. agency security Level 2 0 U.S. agency security Level 2 807 2 0 809 0 U.S. agency security Level 2 807 2 0 809 0 809 agency security Level 2 807 2 0 809 0 809 0 security Level 2 807 2 0 809 0 809 0 Foreign Level 2 807 2 0 809 0 809 0 Foreign government 2 807 2 0 809 0 809 0 Foreign government bond 807 2 0 809 0 809 0 Foreign government bond Level 2 0 809 0 809 0 Foreign government bond Level 2 0 Foreign government bond Level 2 6,213 9 ( 2 ) Foreign government bond Level 2 6,213 9 ( 2 ) 6,220 government bond Level 2 6,213 9 ( 2 ) 6,220 225 Level 2 6,213 9 ( 2 ) 6,220 225 5,995 0 6,213 9 ( 2 ) 6,220 225 5,995 0 Mortgage- and 9 ( 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed ( 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed security 2 ) 6,220 225 5,995 0 Mortgage- and asset-backed security Level Mortgage- and asset-backed security Level 2 3,442 22 ( 6 ) and asset-backed security Level 2 3,442 22 ( 6 ) 3,458 asset-backed security Level 2 3,442 22 ( 6 ) 3,458 0 Level 2 3,442 22 ( 6 ) 3,458 0 3,458 0 3,442 22 ( 6 ) 3,458 0 3,458 0 Corporate note 22 ( 6 ) 3,458 0 3,458 0 Corporate note and ( 6 ) 3,458 0 3,458 0 Corporate note and bond 6 ) 3,458 0 3,458 0 Corporate note and bond Level Corporate note and bond Level 2 8,443 249 ( 9 ) note and bond Level 2 8,443 249 ( 9 ) 8,683 and bond Level 2 8,443 249 ( 9 ) 8,683 0 Level 2 8,443 249 ( 9 ) 8,683 0 8,683 0 8,443 249 ( 9 ) 8,683 0 8,683 0 Corporate note 249 ( 9 ) 8,683 0 8,683 0 Corporate note and ( 9 ) 8,683 0 8,683 0 Corporate note and bond 9 ) 8,683 0 8,683 0 Corporate note and bond Level Corporate note and bond Level 3 63 0 0 63 0 note and bond Level 3 63 0 0 63 0 63 and bond Level 3 63 0 0 63 0 63 0 bond Level 3 63 0 0 63 0 63 0 Municipal Level 3 63 0 0 63 0 63 0 Municipal security 3 63 0 0 63 0 63 0 Municipal security Level 63 0 0 63 0 63 0 Municipal security Level 2 0 0 63 0 63 0 Municipal security Level 2 308 63 0 Municipal security Level 2 308 63 0 371 0 0 Municipal security Level 2 308 63 0 371 0 371 Municipal security Level 2 308 63 0 371 0 371 0 security Level 2 308 63 0 371 0 371 0 Municipal Level 2 308 63 0 371 0 371 0 Municipal security 2 308 63 0 371 0 371 0 Municipal security Level 308 63 0 371 0 371 0 Municipal security Level 3 63 0 371 0 371 0 Municipal security Level 3 95 371 0 Municipal security Level 3 95 0 ( 7 ) 0 Municipal security Level 3 95 0 ( 7 ) 88 Municipal security Level 3 95 0 ( 7 ) 88 0 Level 3 95 0 ( 7 ) 88 0 88 0 95 0 ( 7 ) 88 0 88 0 Total debt 0 ( 7 ) 88 0 88 0 Total debt investment ( 7 ) 88 0 88 0 Total debt investment $ 7 ) 88 0 88 0 Total debt investment $ 117,966 0 Total debt investment $ 117,966 $ 4,177 $ ( 135 debt investment $ 117,966 $ 4,177 $ ( 135 ) $ 117,966 $ 4,177 $ ( 135 ) $ 122,008 $ 5,976 $ ( 135 ) $ 122,008 $ 5,976 $ 116,032 $ 135 ) $ 122,008 $ 5,976 $ 116,032 $ 0 Changes $ 122,008 $ 5,976 $ 116,032 $ 0 Changes in Fair $ 5,976 $ 116,032 $ 0 Changes in Fair Value Recorded Net Income Equity investment Level 1 $ 1,582 $ 976 $ Equity investment Level 1 $ 1,582 $ 976 $ 0 $ Level 1 $ 1,582 $ 976 $ 0 $ 606 Equity $ 1,582 $ 976 $ 0 $ 606 Equity investment Other $ 976 $ 0 $ 606 Equity investment Other 5,378 0 $ 606 Equity investment Other 5,378 0 0 5,378 Total equity 606 Equity investment Other 5,378 0 0 5,378 Total equity investment Equity investment Other 5,378 0 0 5,378 Total equity investment $ investment Other 5,378 0 0 5,378 Total equity investment $ 6,960 5,378 Total equity investment $ 6,960 $ 976 $ 0 $ equity investment $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 6,960 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 976 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 5,984 Cash $ 7,272 $ 7,272 $ 0 $ 0 Derivatives $ 7,272 $ 7,272 $ 0 $ 0 Derivatives , net $ 7,272 $ 0 $ 0 Derivatives , net ( a , net ( a ) 78 0 78 0 Total $ net ( a ) 78 0 78 0 Total $ 136,318 ( a ) 78 0 78 0 Total $ 136,318 $ a ) 78 0 78 0 Total $ 136,318 $ 14,224 0 78 0 Total $ 136,318 $ 14,224 $ 116,110 $ 0 Total $ 136,318 $ 14,224 $ 116,110 $ 5,984 ( $ 136,318 $ 14,224 $ 116,110 $ 5,984 ( a ) $ 14,224 $ 116,110 $ 5,984 ( a ) Refer to a ) Refer to Note 5 – Derivatives for further information hierarchy . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , equity investment June 30 , 2022 and 2021 , equity investment without readily price or impairment were $ 3.8 billion and $ 3.3 billion $ 3.8 billion and $ 3.3 billion , respectively . Unrealized unrealized loss for le than 12 month and 12 month or le than 12 month and 12 month or greater and their a follows : Less than 12 Months 12 Months or Greater : Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2022 U.S. government and Fair Value June 30 , 2022 U.S. government and agency security government and agency security $ 59,092 $ ( 1,835 ) $ security $ 59,092 $ ( 1,835 ) $ 2,210 $ ( $ ( 1,835 ) $ 2,210 $ ( 352 ) $ ) $ 2,210 $ ( 352 ) $ 61,302 $ ( $ ( 352 ) $ 61,302 $ ( 2,187 ) Foreign ) $ 61,302 $ ( 2,187 ) Foreign government bond 418 2,187 ) Foreign government bond 418 ( 18 ) 27 ( Foreign government bond 418 ( 18 ) 27 ( 6 ) bond 418 ( 18 ) 27 ( 6 ) 445 ( ( 18 ) 27 ( 6 ) 445 ( 24 ) ) 27 ( 6 ) 445 ( 24 ) Mortgage- and ( 6 ) 445 ( 24 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 510 ( 26 ) 41 ( and asset-backed security 510 ( 26 ) 41 ( 4 ) security 510 ( 26 ) 41 ( 4 ) 551 ( ( 26 ) 41 ( 4 ) 551 ( 30 ) ) 41 ( 4 ) 551 ( 30 ) Corporate note ( 4 ) 551 ( 30 ) Corporate note and bond ) Corporate note and bond 9,443 ( 477 ) 786 ( note and bond 9,443 ( 477 ) 786 ( 77 ) bond 9,443 ( 477 ) 786 ( 77 ) 10,229 ( ( 477 ) 786 ( 77 ) 10,229 ( 554 ) ) 786 ( 77 ) 10,229 ( 554 ) Municipal security ( 77 ) 10,229 ( 554 ) Municipal security 178 ( ( 554 ) Municipal security 178 ( 12 ) 74 ( ) Municipal security 178 ( 12 ) 74 ( 7 ) security 178 ( 12 ) 74 ( 7 ) 252 ( ( 12 ) 74 ( 7 ) 252 ( 19 ) ) 74 ( 7 ) 252 ( 19 ) Total $ ( 7 ) 252 ( 19 ) Total $ 69,641 $ ( 19 ) Total $ 69,641 $ ( 2,368 ) $ Total $ 69,641 $ ( 2,368 ) $ 3,138 $ ( $ ( 2,368 ) $ 3,138 $ ( 446 ) $ ) $ 3,138 $ ( 446 ) $ 72,779 $ ( $ ( 446 ) $ 72,779 $ ( 2,814 ) 72 ) $ 72,779 $ ( 2,814 ) 72 PART II Item 72,779 $ ( 2,814 ) 72 PART II Item 8 Less ) 72 PART II Item 8 Less than 12 Months 12 II Item 8 Less than 12 Months 12 Months or Greater 8 Less than 12 Months 12 Months or Greater Total Unrealized Losses Total Fair Value June 30 , 2021 U.S. government and Fair Value June 30 , 2021 U.S. government and agency security government and agency security $ 5,294 $ ( 111 ) $ security $ 5,294 $ ( 111 ) $ 0 $ 0 $ ( 111 ) $ 0 $ 0 $ 5,294 $ 111 ) $ 0 $ 0 $ 5,294 $ ( 111 $ 0 $ 0 $ 5,294 $ ( 111 ) Foreign 0 $ 5,294 $ ( 111 ) Foreign government bond 3,148 111 ) Foreign government bond 3,148 ( 1 ) 5 ( Foreign government bond 3,148 ( 1 ) 5 ( 1 ) bond 3,148 ( 1 ) 5 ( 1 ) 3,153 ( ( 1 ) 5 ( 1 ) 3,153 ( 2 ) ) 5 ( 1 ) 3,153 ( 2 ) Mortgage- and ( 1 ) 3,153 ( 2 ) Mortgage- and asset-backed security ) Mortgage- and asset-backed security 1,211 ( 5 ) 87 ( and asset-backed security 1,211 ( 5 ) 87 ( 1 ) security 1,211 ( 5 ) 87 ( 1 ) 1,298 ( ( 5 ) 87 ( 1 ) 1,298 ( 6 ) ) 87 ( 1 ) 1,298 ( 6 ) Corporate note ( 1 ) 1,298 ( 6 ) Corporate note and bond ) Corporate note and bond 1,678 ( 8 ) 34 ( note and bond 1,678 ( 8 ) 34 ( 1 ) bond 1,678 ( 8 ) 34 ( 1 ) 1,712 ( ( 8 ) 34 ( 1 ) 1,712 ( 9 ) ) 34 ( 1 ) 1,712 ( 9 ) Municipal security ( 1 ) 1,712 ( 9 ) Municipal security 58 ( ( 9 ) Municipal security 58 ( 7 ) 1 0 ) Municipal security 58 ( 7 ) 1 0 59 ( security 58 ( 7 ) 1 0 59 ( 7 ) 58 ( 7 ) 1 0 59 ( 7 ) Total ( 7 ) 1 0 59 ( 7 ) Total $ ) 1 0 59 ( 7 ) Total $ 11,389 $ ( 7 ) Total $ 11,389 $ ( 132 ) $ Total $ 11,389 $ ( 132 ) $ 127 $ ( $ ( 132 ) $ 127 $ ( 3 ) $ ) $ 127 $ ( 3 ) $ 11,516 $ ( $ ( 3 ) $ 11,516 $ ( 135 ) Unrealized ) $ 11,516 $ ( 135 ) Unrealized loss from fixed-income Basis Estimated Fair Value June 30 , 2022 Due in one Fair Value June 30 , 2022 Due in one year or one year or le $ 26,480 $ 26,470 Due after one or le $ 26,480 $ 26,470 Due after one year through one year through five year 52,006 50,748 Due after five year year through five year 52,006 50,748 Due after five year through Due after five year through 10 year 18,274 16,880 Due after five year through 10 year 18,274 16,880 Due after 10 year year through 10 year 18,274 16,880 Due after 10 year 1,358 year 18,274 16,880 Due after 10 year 1,358 1,259 Total $ 16,880 Due after 10 year 1,358 1,259 Total $ 98,118 $ Due after 10 year 1,358 1,259 Total $ 98,118 $ 95,357 year 1,358 1,259 Total $ 98,118 $ 95,357 NOTE 5 — 1,259 Total $ 98,118 $ 95,357 NOTE 5 — DERIVATIVES We $ 98,118 $ 95,357 NOTE 5 — DERIVATIVES We use derivative to floating interest rate . 73 PART II Item 8 Securities . 73 PART II Item 8 Securities held in our fixed-income maintain minimum liquidity of $ 1.0 billion . To the extent derivative . As of June 30 , 2022 , our long-term As of June 30 , 2022 , our long-term unsecured debt were in excess of $ 1.0 billion . As a result ( In million ) June 30 , 2022 June 30 , million ) June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Foreign exchange contract purchased $ 635 $ 635 Foreign exchange contract contract purchased $ 635 $ 635 Foreign exchange contract sold 0 635 Foreign exchange contract sold 0 6,081 Interest rate contract purchased Foreign exchange contract sold 0 6,081 Interest rate contract purchased 1,139 6,081 Interest rate contract purchased 1,139 1,247 Not Designated a Hedging Interest rate contract purchased 1,139 1,247 Not Designated a Hedging Instruments Instruments Foreign exchange contract purchased 10,322 14,223 Foreign exchange contract sold Foreign exchange contract purchased 10,322 14,223 Foreign exchange contract sold 21,606 14,223 Foreign exchange contract sold 21,606 23,391 Other contract purchased 2,773 Foreign exchange contract sold 21,606 23,391 Other contract purchased 2,773 2,456 21,606 23,391 Other contract purchased 2,773 2,456 Other contract sold 544 23,391 Other contract purchased 2,773 2,456 Other contract sold 544 763 2,773 2,456 Other contract sold 544 763 74 PART II Item 2,456 Other contract sold 544 763 74 PART II Item 8 Other contract sold 544 763 74 PART II Item 8 Fair 763 74 PART II Item 8 Fair Values of Derivative Instruments Assets Liabilities Assets Liabilities June 30 , 2022 June 30 , Assets Liabilities June 30 , 2022 June 30 , 2021 Designated June 30 , 2022 June 30 , 2021 Designated a Hedging , 2022 June 30 , 2021 Designated a Hedging Instruments Foreign Instruments Foreign exchange contract $ 0 $ ( 77 ) $ contract $ 0 $ ( 77 ) $ 76 $ ( $ ( 77 ) $ 76 $ ( 8 ) Interest ) $ 76 $ ( 8 ) Interest rate contract 3 8 ) Interest rate contract 3 0 40 0 Not Designated ) Interest rate contract 3 0 40 0 Not Designated a Interest rate contract 3 0 40 0 Not Designated a Hedging rate contract 3 0 40 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 333 ( 362 ) 227 ( Foreign exchange contract 333 ( 362 ) 227 ( 291 ) contract 333 ( 362 ) 227 ( 291 ) Other contract ( 362 ) 227 ( 291 ) Other contract 20 ( ( 291 ) Other contract 20 ( 112 ) 56 ( ) Other contract 20 ( 112 ) 56 ( 36 ) contract 20 ( 112 ) 56 ( 36 ) Gross amount ( 112 ) 56 ( 36 ) Gross amount of derivative ) Gross amount of derivative 356 ( 551 ) 399 ( amount of derivative 356 ( 551 ) 399 ( 335 ) derivative 356 ( 551 ) 399 ( 335 ) Gross amount ( 551 ) 399 ( 335 ) Gross amount of derivative in the balance sheet ( 130 ) 133 ( 141 ) balance sheet ( 130 ) 133 ( 141 ) 142 Cash ( 130 ) 133 ( 141 ) 142 Cash collateral received ) 133 ( 141 ) 142 Cash collateral received 0 ( ) 142 Cash collateral received 0 ( 75 ) 0 ( Cash collateral received 0 ( 75 ) 0 ( 42 ) received 0 ( 75 ) 0 ( 42 ) Net amount ( 75 ) 0 ( 42 ) Net amount of derivative Net amount of derivative $ 226 $ ( 493 ) $ derivative $ 226 $ ( 493 ) $ 258 $ ( $ ( 493 ) $ 258 $ ( 235 ) Reported ) $ 258 $ ( 235 ) Reported a Short-term investment Reported a Short-term investment $ 8 $ 0 $ 78 $ Short-term investment $ 8 $ 0 $ 78 $ 0 Other $ 8 $ 0 $ 78 $ 0 Other current asset $ 0 $ 78 $ 0 Other current asset 218 0 $ 0 Other current asset 218 0 137 0 Other long-term 0 Other current asset 218 0 137 0 Other long-term asset Other current asset 218 0 137 0 Other long-term asset 0 current asset 218 0 137 0 Other long-term asset 0 0 137 0 Other long-term asset 0 0 43 0 Other current 0 Other long-term asset 0 0 43 0 Other current liability Other long-term asset 0 0 43 0 Other current liability 0 long-term asset 0 0 43 0 Other current liability 0 ( 43 0 Other current liability 0 ( 298 ) 0 ( Other current liability 0 ( 298 ) 0 ( 182 ) liability 0 ( 298 ) 0 ( 182 ) Other long-term ( 298 ) 0 ( 182 ) Other long-term liability 0 182 ) Other long-term liability 0 ( 195 ) 0 ( Other long-term liability 0 ( 195 ) 0 ( 53 ) liability 0 ( 195 ) 0 ( 53 ) Total $ ( 195 ) 0 ( 53 ) Total $ 226 $ ( 53 ) Total $ 226 $ ( 493 ) $ Total $ 226 $ ( 493 ) $ 258 $ ( $ ( 493 ) $ 258 $ ( 235 ) Gross ) $ 258 $ ( 235 ) Gross derivative asset and elected to offset were $ 343 million and $ 550 million $ 343 million and $ 550 million , respectively , a respectively , a of June 30 , 2022 , and $ a of June 30 , 2022 , and $ 395 million , 2022 , and $ 395 million and $ 335 million $ 395 million and $ 335 million , respectively , a respectively , a of June 30 , 2021 . The following a of June 30 , 2021 . The following table present ( In million ) Level 1 Level 2 Level 3 Total million ) Level 1 Level 2 Level 3 Total June 30 Level 1 Level 2 Level 3 Total June 30 , 2022 2 Level 3 Total June 30 , 2022 Derivative asset $ 3 Total June 30 , 2022 Derivative asset $ 1 $ , 2022 Derivative asset $ 1 $ 349 $ 6 $ Derivative asset $ 1 $ 349 $ 6 $ 356 Derivative $ 1 $ 349 $ 6 $ 356 Derivative liability 0 $ 349 $ 6 $ 356 Derivative liability 0 ( 551 6 $ 356 Derivative liability 0 ( 551 ) 0 ( 356 Derivative liability 0 ( 551 ) 0 ( 551 ) liability 0 ( 551 ) 0 ( 551 ) June 30 ( 551 ) 0 ( 551 ) June 30 , 2021 0 ( 551 ) June 30 , 2021 Derivative asset 0 551 ) June 30 , 2021 Derivative asset 0 396 3 30 , 2021 Derivative asset 0 396 3 399 Derivative liability , 2021 Derivative asset 0 396 3 399 Derivative liability 0 2021 Derivative asset 0 396 3 399 Derivative liability 0 ( Derivative asset 0 396 3 399 Derivative liability 0 ( 335 396 3 399 Derivative liability 0 ( 335 ) 0 ( 399 Derivative liability 0 ( 335 ) 0 ( 335 ) liability 0 ( 335 ) 0 ( 335 ) 75 PART ( 335 ) 0 ( 335 ) 75 PART II Item ) 0 ( 335 ) 75 PART II Item 8 Gains ) 75 PART II Item 8 Gains ( loss ) on million ) Year Ended June 30 , 2022 2021 2020 Designated Year Ended June 30 , 2022 2021 2020 Designated a Fair Ended June 30 , 2022 2021 2020 Designated a Fair Value June 30 , 2022 2021 2020 Designated a Fair Value Hedging Foreign exchange contract Derivatives $ 49 $ 193 $ 1 Hedged contract Derivatives $ 49 $ 193 $ 1 Hedged item ( $ 49 $ 193 $ 1 Hedged item ( 50 ) $ 1 Hedged item ( 50 ) ( 188 ) 3 item ( 50 ) ( 188 ) 3 Excluded from effectiveness 50 ) ( 188 ) 3 Excluded from effectiveness assessment 4 3 Excluded from effectiveness assessment 4 30 139 Interest rate contract Excluded from effectiveness assessment 4 30 139 Interest rate contract Derivatives from effectiveness assessment 4 30 139 Interest rate contract Derivatives ( Interest rate contract Derivatives ( 92 ) ( 37 ) 93 Derivatives ( 92 ) ( 37 ) 93 Hedged item 108 92 ) ( 37 ) 93 Hedged item 108 53 ( 37 ) 93 Hedged item 108 53 ( 93 ) Designated ) 93 Hedged item 108 53 ( 93 ) Designated a Hedged item 108 53 ( 93 ) Designated a Cash Flow accumulated other comprehensive income ( 79 ) 17 0 Not Designated comprehensive income ( 79 ) 17 0 Not Designated a Hedging income ( 79 ) 17 0 Not Designated a Hedging Instruments Hedging Instruments Foreign exchange contract 383 27 ( 123 ) Other Instruments Foreign exchange contract 383 27 ( 123 ) Other contract exchange contract 383 27 ( 123 ) Other contract ( 72 123 ) Other contract ( 72 ) 9 50 Gains ( Other contract ( 72 ) 9 50 Gains ( loss ) contract ( 72 ) 9 50 Gains ( loss ) , million ) Year Ended June 30 , 2022 2021 2020 Designated Year Ended June 30 , 2022 2021 2020 Designated a Cash Ended June 30 , 2022 2021 2020 Designated a Cash Flow June 30 , 2022 2021 2020 Designated a Cash Flow Hedging in effectiveness assessment $ ( 57 ) $ 34 $ ( $ ( 57 ) $ 34 $ ( 38 ) NOTE ) $ 34 $ ( 38 ) NOTE 6 — INVENTORIES $ ( 38 ) NOTE 6 — INVENTORIES The component of ( In million ) June 30 , 2022 2021 Raw material million ) June 30 , 2022 2021 Raw material $ 1,144 ) June 30 , 2022 2021 Raw material $ 1,144 $ 2022 2021 Raw material $ 1,144 $ 1,190 Work in process Raw material $ 1,144 $ 1,190 Work in process 82 79 $ 1,190 Work in process 82 79 Finished good 2,516 1,367 1,190 Work in process 82 79 Finished good 2,516 1,367 Total process 82 79 Finished good 2,516 1,367 Total $ 3,742 $ 82 79 Finished good 2,516 1,367 Total $ 3,742 $ 2,636 good 2,516 1,367 Total $ 3,742 $ 2,636 76 PART II 1,367 Total $ 3,742 $ 2,636 76 PART II Item 8 Total $ 3,742 $ 2,636 76 PART II Item 8 NOTE 2,636 76 PART II Item 8 NOTE 7 — PROPERTY AND PART II Item 8 NOTE 7 — PROPERTY AND EQUIPMENT The ( In million ) June 30 , 2022 2021 Land $ million ) June 30 , 2022 2021 Land $ 4,734 $ ) June 30 , 2022 2021 Land $ 4,734 $ 3,660 , 2022 2021 Land $ 4,734 $ 3,660 Buildings and improvement 2021 Land $ 4,734 $ 3,660 Buildings and improvement 55,014 43,928 $ 3,660 Buildings and improvement 55,014 43,928 Leasehold improvement 7,819 6,884 3,660 Buildings and improvement 55,014 43,928 Leasehold improvement 7,819 6,884 Computer improvement 55,014 43,928 Leasehold improvement 7,819 6,884 Computer equipment and software 55,014 43,928 Leasehold improvement 7,819 6,884 Computer equipment and software 60,631 6,884 Computer equipment and software 60,631 51,250 Furniture and equipment 5,860 Computer equipment and software 60,631 51,250 Furniture and equipment 5,860 5,344 60,631 51,250 Furniture and equipment 5,860 5,344 Total , at cost 51,250 Furniture and equipment 5,860 5,344 Total , at cost 134,058 5,344 Total , at cost 134,058 111,066 Accumulated depreciation ( 59,660 Total , at cost 134,058 111,066 Accumulated depreciation ( 59,660 ) 134,058 111,066 Accumulated depreciation ( 59,660 ) ( 51,351 ) Total depreciation ( 59,660 ) ( 51,351 ) Total , net $ ) Total , net $ 74,398 $ 59,715 During fiscal year , net $ 74,398 $ 59,715 During fiscal year 2022 , $ 59,715 During fiscal year 2022 , 2021 , and 2020 During fiscal year 2022 , 2021 , and 2020 , depreciation 2022 , 2021 , and 2020 , depreciation expense wa $ , depreciation expense wa $ 12.6 billion , $ 9.3 billion $ 12.6 billion , $ 9.3 billion , and $ 10.7 9.3 billion , and $ 10.7 billion , respectively . We . We have committed $ 8.5 billion , primarily related to leasehold improvement a of June 30 , 2022 . NOTE 8 a of June 30 , 2022 . NOTE 8 — BUSINESS 30 , 2022 . NOTE 8 — BUSINESS COMBINATIONS Nuance Communications Communications , Inc. On March 4 , 2022 , we completed Inc. On March 4 , 2022 , we completed our acquisition total purchase price of $ 18.8 billion , consisting primarily of Goodwill ( a ) $ 16,308 Intangible asset 4,365 Other asset ) $ 16,308 Intangible asset 4,365 Other asset 59 Other liability Intangible asset 4,365 Other asset 59 Other liability ( b ) liability ( b ) ( 1,971 ) Total $ 18,761 ( ( 1,971 ) Total $ 18,761 ( a ) Goodwill wa ( b ) Includes $ 986 million of convertible senior note note issued by Nuance in 2015 and 2017 , of which by Nuance in 2015 and 2017 , of which $ 985 2017 , of which $ 985 million wa redeemed prior to wa redeemed prior to June 30 , 2022 . The remaining prior to June 30 , 2022 . The remaining $ 1 2022 . The remaining $ 1 million of note are redeemable balance sheet a of June 30 , 2022 . 77 PART a of June 30 , 2022 . 77 PART II Item June 30 , 2022 . 77 PART II Item 8 Following . 77 PART II Item 8 Following are the detail of Weighted Average Life Customer-related $ 2,610 9 year Technology-based 1,540 5 Average Life Customer-related $ 2,610 9 year Technology-based 1,540 5 year $ 2,610 9 year Technology-based 1,540 5 year Marketing-related 215 4 2,610 9 year Technology-based 1,540 5 year Marketing-related 215 4 year Technology-based 1,540 5 year Marketing-related 215 4 year Total $ 4,365 1,540 5 year Marketing-related 215 4 year Total $ 4,365 7 215 4 year Total $ 4,365 7 year ZeniMax Media Inc. 4 year Total $ 4,365 7 year ZeniMax Media Inc. On ZeniMax Media Inc. On March 9 , 2021 , we completed Inc. On March 9 , 2021 , we completed our acquisition total purchase price of $ 8.1 billion , consisting primarily of The purchase price included $ 766 million of cash and cash wa completed a of December 31 , 2021 . The major a of December 31 , 2021 . The major class of Cash and cash equivalent $ 766 Goodwill 5,510 Intangible asset 1,968 cash equivalent $ 766 Goodwill 5,510 Intangible asset 1,968 Other asset 766 Goodwill 5,510 Intangible asset 1,968 Other asset 121 Other liability Intangible asset 1,968 Other asset 121 Other liability ( 244 ) asset 121 Other liability ( 244 ) Total $ 8,121 Goodwill ( 244 ) Total $ 8,121 Goodwill wa assigned to our Weighted Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 Average Life Technology-based $ 1,341 4 year Marketing-related 627 11 year $ 1,341 4 year Marketing-related 627 11 year Total $ 1,968 1,341 4 year Marketing-related 627 11 year Total $ 1,968 6 627 11 year Total $ 1,968 6 year Activision Blizzard , 11 year Total $ 1,968 6 year Activision Blizzard , Inc. Blizzard , Inc. On January 18 , 2022 , we entered Inc. On January 18 , 2022 , we entered into a Blizzard ” ) for $ 95.00 per share in an all-cash all-cash transaction valued at $ 68.7 billion , inclusive of Activision to close in fiscal year 202 3 , subject to the close in fiscal year 202 3 , subject to the satisfaction other customary closing condition . 78 PART II Item 8 NOTE . 78 PART II Item 8 NOTE 9 — GOODWILL Changes PART II Item 8 NOTE 9 — GOODWILL Changes in the ( In million ) June 30 , 2020 Acquisitions Other June million ) June 30 , 2020 Acquisitions Other June 30 , , 2020 Acquisitions Other June 30 , 2021 Acquisitions Other June Acquisitions Other June 30 , 2021 Acquisitions Other June 30 , , 2021 Acquisitions Other June 30 , 2022 Productivity and Business Acquisitions Other June 30 , 2022 Productivity and Business Processes $ Productivity and Business Processes $ 24,190 $ 0 $ 127 $ Business Processes $ 24,190 $ 0 $ 127 $ 24,317 $ $ 24,190 $ 0 $ 127 $ 24,317 $ 599 $ $ 0 $ 127 $ 24,317 $ 599 $ ( 105 $ 127 $ 24,317 $ 599 $ ( 105 ) $ 24,317 $ 599 $ ( 105 ) $ 24,811 Intelligent Cloud $ ( 105 ) $ 24,811 Intelligent Cloud 12,697 505 54 ) $ 24,811 Intelligent Cloud 12,697 505 54 13,256 16,879 ( $ 24,811 Intelligent Cloud 12,697 505 54 13,256 16,879 ( b 24,811 Intelligent Cloud 12,697 505 54 13,256 16,879 ( b ) Intelligent Cloud 12,697 505 54 13,256 16,879 ( b ) 47 Cloud 12,697 505 54 13,256 16,879 ( b ) 47 ( 13,256 16,879 ( b ) 47 ( b ) 30,182 More ) 47 ( b ) 30,182 More Personal Computing 6,464 5,556 ) 30,182 More Personal Computing 6,464 5,556 ( a ) 118 30,182 More Personal Computing 6,464 5,556 ( a ) 118 ( 6,464 5,556 ( a ) 118 ( a ) 12,138 648 ) 118 ( a ) 12,138 648 ( 255 ) 12,531 118 ( a ) 12,138 648 ( 255 ) 12,531 Total a ) 12,138 648 ( 255 ) 12,531 Total $ 43,351 12,138 648 ( 255 ) 12,531 Total $ 43,351 $ 6,061 255 ) 12,531 Total $ 43,351 $ 6,061 $ 299 $ 12,531 Total $ 43,351 $ 6,061 $ 299 $ 49,711 $ $ 43,351 $ 6,061 $ 299 $ 49,711 $ 18,126 $ $ 6,061 $ 299 $ 49,711 $ 18,126 $ ( 313 $ 299 $ 49,711 $ 18,126 $ ( 313 ) $ 49,711 $ 18,126 $ ( 313 ) $ 67,524 ( a $ ( 313 ) $ 67,524 ( a ) Includes goodwill ) Includes goodwill of $ 5.5 billion related to ZeniMax . to ZeniMax . See Note 8 – Business Combinations for further ) Includes goodwill of $ 16.3 billion related to Nuance . to Nuance . See Note 8 – Business Combinations for further , but do not exceed 12 month . Adjustments in purchase for impairment annually on May 1 at the reporting unit level were identified in our May 1 , 2022 , May 1 in our May 1 , 2022 , May 1 , 2021 1 , 2022 , May 1 , 2021 , or May 2022 , May 1 , 2021 , or May 1 , , 2021 , or May 1 , 2020 test . As , or May 1 , 2020 test . As of June test . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , accumulated goodwill June 30 , 2022 and 2021 , accumulated goodwill impairment wa accumulated goodwill impairment wa $ 11.3 billion . NOTE 10 — $ 11.3 billion . NOTE 10 — INTANGIBLE ASSETS The component Amortization Net Carrying Amount June 30 , 2022 2021 Technology-based $ Carrying Amount June 30 , 2022 2021 Technology-based $ 11,277 $ Amount June 30 , 2022 2021 Technology-based $ 11,277 $ ( , 2022 2021 Technology-based $ 11,277 $ ( 6,958 ) $ Technology-based $ 11,277 $ ( 6,958 ) $ 4,319 $ 9,779 $ ( 6,958 ) $ 4,319 $ 9,779 $ ( 7,007 6,958 ) $ 4,319 $ 9,779 $ ( 7,007 ) $ 4,319 $ 9,779 $ ( 7,007 ) $ 2,772 Customer-related 7,342 $ ( 7,007 ) $ 2,772 Customer-related 7,342 ( 3,171 ) 7,007 ) $ 2,772 Customer-related 7,342 ( 3,171 ) 4,171 4,958 $ 2,772 Customer-related 7,342 ( 3,171 ) 4,171 4,958 ( 2,859 Customer-related 7,342 ( 3,171 ) 4,171 4,958 ( 2,859 ) 2,099 7,342 ( 3,171 ) 4,171 4,958 ( 2,859 ) 2,099 Marketing-related 3,171 ) 4,171 4,958 ( 2,859 ) 2,099 Marketing-related 4,942 ( 4,171 4,958 ( 2,859 ) 2,099 Marketing-related 4,942 ( 2,143 ) ( 2,859 ) 2,099 Marketing-related 4,942 ( 2,143 ) 2,799 4,792 ) 2,099 Marketing-related 4,942 ( 2,143 ) 2,799 4,792 ( 1,878 Marketing-related 4,942 ( 2,143 ) 2,799 4,792 ( 1,878 ) 2,914 4,942 ( 2,143 ) 2,799 4,792 ( 1,878 ) 2,914 Contract-based 2,143 ) 2,799 4,792 ( 1,878 ) 2,914 Contract-based 16 ( 2,799 4,792 ( 1,878 ) 2,914 Contract-based 16 ( 7 ) ( 1,878 ) 2,914 Contract-based 16 ( 7 ) 9 446 ) 2,914 Contract-based 16 ( 7 ) 9 446 ( 431 Contract-based 16 ( 7 ) 9 446 ( 431 ) 15 16 ( 7 ) 9 446 ( 431 ) 15 Total 7 ) 9 446 ( 431 ) 15 Total $ 23,577 9 446 ( 431 ) 15 Total $ 23,577 ( a 431 ) 15 Total $ 23,577 ( a ) $ ( ( a ) $ ( 12,279 ) $ 11,298 $ 19,975 $ ( 12,279 ) $ 11,298 $ 19,975 ( b ) 12,279 ) $ 11,298 $ 19,975 ( b ) $ ( ( b ) $ ( 12,175 ) $ 7,800 ( a $ ( 12,175 ) $ 7,800 ( a ) Includes intangible Includes intangible asset of $ 4.4 billion related to Nuance . to Nuance . See Note 8 – Business Combinations for further Includes intangible asset of $ 2.0 billion related to ZeniMax . to ZeniMax . See Note 8 – Business Combinations for further were identified during fiscal year 2022 , 2021 , or 2020 during fiscal year 2022 , 2021 , or 2020 . We 2022 , 2021 , or 2020 . We estimate that we to our intangible asset . 79 PART II Item 8 The . 79 PART II Item 8 The component of intangible asset Average Life Year Ended June 30 , 2022 2021 Technology-based $ Year Ended June 30 , 2022 2021 Technology-based $ 2,611 4 Ended June 30 , 2022 2021 Technology-based $ 2,611 4 year , 2022 2021 Technology-based $ 2,611 4 year $ 1,628 4 2022 2021 Technology-based $ 2,611 4 year $ 1,628 4 year $ 2,611 4 year $ 1,628 4 year Customer-related 2,837 9 2,611 4 year $ 1,628 4 year Customer-related 2,837 9 year $ 1,628 4 year Customer-related 2,837 9 year 96 4 year 1,628 4 year Customer-related 2,837 9 year 96 4 year Marketing-related year Customer-related 2,837 9 year 96 4 year Marketing-related 233 4 Customer-related 2,837 9 year 96 4 year Marketing-related 233 4 year year 96 4 year Marketing-related 233 4 year 625 6 year 96 4 year Marketing-related 233 4 year 625 6 year Contract-based year Marketing-related 233 4 year 625 6 year Contract-based 0 0 Marketing-related 233 4 year 625 6 year Contract-based 0 0 year year 625 6 year Contract-based 0 0 year 10 3 year 625 6 year Contract-based 0 0 year 10 3 year Total year Contract-based 0 0 year 10 3 year Total $ 5,681 Contract-based 0 0 year 10 3 year Total $ 5,681 7 10 3 year Total $ 5,681 7 year $ 2,359 5 3 year Total $ 5,681 7 year $ 2,359 5 year $ 5,681 7 year $ 2,359 5 year Intangible asset amortization 5,681 7 year $ 2,359 5 year Intangible asset amortization expense asset amortization expense wa $ 2.0 billion , $ 1.6 billion $ 2.0 billion , $ 1.6 billion , and $ 1.6 1.6 billion , and $ 1.6 billion for fiscal year 2022 1.6 billion for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . The following asset held a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) million ) Year Ending June 30 , 2023 $ 2,654 2024 Year Ending June 30 , 2023 $ 2,654 2024 2,385 2025 June 30 , 2023 $ 2,654 2024 2,385 2025 1,631 2026 30 , 2023 $ 2,654 2024 2,385 2025 1,631 2026 1,227 , 2023 $ 2,654 2024 2,385 2025 1,631 2026 1,227 2027 2023 $ 2,654 2024 2,385 2025 1,631 2026 1,227 2027 809 $ 2,654 2024 2,385 2025 1,631 2026 1,227 2027 809 Thereafter 2,654 2024 2,385 2025 1,631 2026 1,227 2027 809 Thereafter 2,592 2024 2,385 2025 1,631 2026 1,227 2027 809 Thereafter 2,592 Total 2,385 2025 1,631 2026 1,227 2027 809 Thereafter 2,592 Total $ 2025 1,631 2026 1,227 2027 809 Thereafter 2,592 Total $ 11,298 2026 1,227 2027 809 Thereafter 2,592 Total $ 11,298 80 PART 809 Thereafter 2,592 Total $ 11,298 80 PART II Item 8 Thereafter 2,592 Total $ 11,298 80 PART II Item 8 NOTE 11,298 80 PART II Item 8 NOTE 11 — DEBT The PART II Item 8 NOTE 11 — DEBT The component of Rate Effective Interest Rate June 30 , 2022 June 30 , Interest Rate June 30 , 2022 June 30 , 2021 2009 June 30 , 2022 June 30 , 2021 2009 issuance of , 2022 June 30 , 2021 2009 issuance of $ 3.8 2022 June 30 , 2021 2009 issuance of $ 3.8 billion 2021 2009 issuance of $ 3.8 billion ( a ) 2039 3.8 billion ( a ) 2039 5.20 % 5.24 % $ billion ( a ) 2039 5.20 % 5.24 % $ 520 a ) 2039 5.20 % 5.24 % $ 520 $ 520 5.20 % 5.24 % $ 520 $ 520 2010 issuance of 5.24 % $ 520 $ 520 2010 issuance of $ 4.8 % $ 520 $ 520 2010 issuance of $ 4.8 billion 520 2010 issuance of $ 4.8 billion ( a ) 2040 4.8 billion ( a ) 2040 4.50 % 4.57 % 486 billion ( a ) 2040 4.50 % 4.57 % 486 486 a ) 2040 4.50 % 4.57 % 486 486 2011 issuance 2040 4.50 % 4.57 % 486 486 2011 issuance of $ 4.50 % 4.57 % 486 486 2011 issuance of $ 2.3 % 4.57 % 486 486 2011 issuance of $ 2.3 billion 486 2011 issuance of $ 2.3 billion ( a ) 2041 2.3 billion ( a ) 2041 5.30 % 5.36 % 718 billion ( a ) 2041 5.30 % 5.36 % 718 718 a ) 2041 5.30 % 5.36 % 718 718 2012 issuance 2041 5.30 % 5.36 % 718 718 2012 issuance of $ 5.30 % 5.36 % 718 718 2012 issuance of $ 2.3 % 5.36 % 718 718 2012 issuance of $ 2.3 billion 718 2012 issuance of $ 2.3 billion ( a ) 2022 2.3 billion ( a ) 2022 – 2042 2.13 % – ( a ) 2022 – 2042 2.13 % – 3.50 % a ) 2022 – 2042 2.13 % – 3.50 % 2.24 – 2042 2.13 % – 3.50 % 2.24 % – 3.57 2.13 % – 3.50 % 2.24 % – 3.57 % 1,204 3.50 % 2.24 % – 3.57 % 1,204 1,204 2013 issuance 2.24 % – 3.57 % 1,204 1,204 2013 issuance of $ % – 3.57 % 1,204 1,204 2013 issuance of $ 5.2 – 3.57 % 1,204 1,204 2013 issuance of $ 5.2 billion 1,204 2013 issuance of $ 5.2 billion ( a ) 2023 5.2 billion ( a ) 2023 – 2043 2.38 % – ( a ) 2023 – 2043 2.38 % – 4.88 % a ) 2023 – 2043 2.38 % – 4.88 % 2.47 – 2043 2.38 % – 4.88 % 2.47 % – 4.92 2.38 % – 4.88 % 2.47 % – 4.92 % 2,814 4.88 % 2.47 % – 4.92 % 2,814 2,814 2013 issuance 2.47 % – 4.92 % 2,814 2,814 2013 issuance of € % – 4.92 % 2,814 2,814 2013 issuance of € 4.1 – 4.92 % 2,814 2,814 2013 issuance of € 4.1 billion 2,814 2013 issuance of € 4.1 billion 2028 – 2033 2.63 issuance of € 4.1 billion 2028 – 2033 2.63 % – € 4.1 billion 2028 – 2033 2.63 % – 3.13 % 4.1 billion 2028 – 2033 2.63 % – 3.13 % 2.69 – 2033 2.63 % – 3.13 % 2.69 % – 3.22 2.63 % – 3.13 % 2.69 % – 3.22 % 2,404 3.13 % 2.69 % – 3.22 % 2,404 4,803 2015 issuance 2.69 % – 3.22 % 2,404 4,803 2015 issuance of $ % – 3.22 % 2,404 4,803 2015 issuance of $ 23.8 – 3.22 % 2,404 4,803 2015 issuance of $ 23.8 billion 4,803 2015 issuance of $ 23.8 billion ( a ) 2022 23.8 billion ( a ) 2022 – 2055 2.65 % – ( a ) 2022 – 2055 2.65 % – 4.75 % a ) 2022 – 2055 2.65 % – 4.75 % 2.72 – 2055 2.65 % – 4.75 % 2.72 % – 4.78 2.65 % – 4.75 % 2.72 % – 4.78 % 10,805 4.75 % 2.72 % – 4.78 % 10,805 12,305 2016 issuance 2.72 % – 4.78 % 10,805 12,305 2016 issuance of $ % – 4.78 % 10,805 12,305 2016 issuance of $ 19.8 – 4.78 % 10,805 12,305 2016 issuance of $ 19.8 billion 12,305 2016 issuance of $ 19.8 billion ( a ) 2023 19.8 billion ( a ) 2023 – 2056 2.00 % – ( a ) 2023 – 2056 2.00 % – 3.95 % a ) 2023 – 2056 2.00 % – 3.95 % 2.10 – 2056 2.00 % – 3.95 % 2.10 % – 4.03 2.00 % – 3.95 % 2.10 % – 4.03 % 9,430 3.95 % 2.10 % – 4.03 % 9,430 12,180 2017 issuance 2.10 % – 4.03 % 9,430 12,180 2017 issuance of $ % – 4.03 % 9,430 12,180 2017 issuance of $ 17.0 – 4.03 % 9,430 12,180 2017 issuance of $ 17.0 billion 12,180 2017 issuance of $ 17.0 billion ( a ) 2024 17.0 billion ( a ) 2024 – 2057 2.88 % – ( a ) 2024 – 2057 2.88 % – 4.50 % a ) 2024 – 2057 2.88 % – 4.50 % 3.04 – 2057 2.88 % – 4.50 % 3.04 % – 4.53 2.88 % – 4.50 % 3.04 % – 4.53 % 8,945 4.50 % 3.04 % – 4.53 % 8,945 10,695 2020 issuance 3.04 % – 4.53 % 8,945 10,695 2020 issuance of $ % – 4.53 % 8,945 10,695 2020 issuance of $ 10.0 – 4.53 % 8,945 10,695 2020 issuance of $ 10.0 billion 10,695 2020 issuance of $ 10.0 billion ( a ) 2050 10.0 billion ( a ) 2050 – 2060 2.53 % – ( a ) 2050 – 2060 2.53 % – 2.68 % a ) 2050 – 2060 2.53 % – 2.68 % 2.53 – 2060 2.53 % – 2.68 % 2.53 % – 2.68 2.53 % – 2.68 % 2.53 % – 2.68 % 10,000 2.68 % 2.53 % – 2.68 % 10,000 10,000 2021 issuance 2.53 % – 2.68 % 10,000 10,000 2021 issuance of $ % – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 – 2.68 % 10,000 10,000 2021 issuance of $ 8.2 billion 10,000 2021 issuance of $ 8.2 billion ( a ) 2052 8.2 billion ( a ) 2052 – 2062 2.92 % – ( a ) 2052 – 2062 2.92 % – 3.04 % a ) 2052 – 2062 2.92 % – 3.04 % 2.92 – 2062 2.92 % – 3.04 % 2.92 % – 3.04 2.92 % – 3.04 % 2.92 % – 3.04 % 8,185 3.04 % 2.92 % – 3.04 % 8,185 8,185 Total face 2.92 % – 3.04 % 8,185 8,185 Total face value 55,511 % – 3.04 % 8,185 8,185 Total face value 55,511 63,910 8,185 8,185 Total face value 55,511 63,910 Unamortized discount and issuance 8,185 Total face value 55,511 63,910 Unamortized discount and issuance cost discount and issuance cost ( 471 ) ( 511 ) Hedge cost ( 471 ) ( 511 ) Hedge fair value adjustment adjustment ( b ) ( 68 ) 40 Premium on debt b ) ( 68 ) 40 Premium on debt exchange ( exchange ( a ) ( 5,191 ) ( 5,293 ) Total ) ( 5,191 ) ( 5,293 ) Total debt 49,781 58,146 ( 5,293 ) Total debt 49,781 58,146 Current portion of long-term 5,293 ) Total debt 49,781 58,146 Current portion of long-term debt portion of long-term debt ( 2,749 ) ( 8,072 ) Long-term debt ( 2,749 ) ( 8,072 ) Long-term debt $ 47,032 8,072 ) Long-term debt $ 47,032 $ 50,074 ( a ) Long-term debt $ 47,032 $ 50,074 ( a ) In March ( a ) In March 2021 and June 2020 , we In March 2021 and June 2020 , we exchanged a portion b ) Refer to Note 5 – Derivatives for further information debt . As of June 30 , 2022 and 2021 , As of June 30 , 2022 and 2021 , the estimated June 30 , 2022 and 2021 , the estimated fair value current portion , wa $ 50.9 billion and $ 70.0 billion $ 50.9 billion and $ 70.0 billion , respectively . The value are based on Level 2 input . Debt in the our debt for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 wa $ 2022 , 2021 , and 2020 wa $ 1.9 billion , , and 2020 wa $ 1.9 billion , $ 2.0 billion $ 1.9 billion , $ 2.0 billion , and $ 2.4 2.0 billion , and $ 2.4 billion , respectively . The portion , a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) million ) Year Ending June 30 , 2023 $ 2,750 2024 Year Ending June 30 , 2023 $ 2,750 2024 5,250 2025 June 30 , 2023 $ 2,750 2024 5,250 2025 2,250 2026 30 , 2023 $ 2,750 2024 5,250 2025 2,250 2026 3,000 , 2023 $ 2,750 2024 5,250 2025 2,250 2026 3,000 2027 2023 $ 2,750 2024 5,250 2025 2,250 2026 3,000 2027 8,000 $ 2,750 2024 5,250 2025 2,250 2026 3,000 2027 8,000 Thereafter 2,750 2024 5,250 2025 2,250 2026 3,000 2027 8,000 Thereafter 34,261 2024 5,250 2025 2,250 2026 3,000 2027 8,000 Thereafter 34,261 Total 5,250 2025 2,250 2026 3,000 2027 8,000 Thereafter 34,261 Total $ 2025 2,250 2026 3,000 2027 8,000 Thereafter 34,261 Total $ 55,511 2026 3,000 2027 8,000 Thereafter 34,261 Total $ 55,511 81 PART 8,000 Thereafter 34,261 Total $ 55,511 81 PART II Item 8 Thereafter 34,261 Total $ 55,511 81 PART II Item 8 NOTE 55,511 81 PART II Item 8 NOTE 12 — INCOME TAXES PART II Item 8 NOTE 12 — INCOME TAXES Provision for million ) Year Ended June 30 , 2022 2021 2020 Current Year Ended June 30 , 2022 2021 2020 Current Taxes U.S. Ended June 30 , 2022 2021 2020 Current Taxes U.S. federal June 30 , 2022 2021 2020 Current Taxes U.S. federal $ Current Taxes U.S. federal $ 8,329 $ 3,285 $ 3,537 U.S. U.S. federal $ 8,329 $ 3,285 $ 3,537 U.S. state and $ 8,329 $ 3,285 $ 3,537 U.S. state and local 1,679 3,537 U.S. state and local 1,679 1,229 763 Foreign 6,672 5,467 U.S. state and local 1,679 1,229 763 Foreign 6,672 5,467 4,444 state and local 1,679 1,229 763 Foreign 6,672 5,467 4,444 Current local 1,679 1,229 763 Foreign 6,672 5,467 4,444 Current tax $ 1,679 1,229 763 Foreign 6,672 5,467 4,444 Current tax $ 16,680 1,229 763 Foreign 6,672 5,467 4,444 Current tax $ 16,680 $ 5,467 4,444 Current tax $ 16,680 $ 9,981 $ 8,744 Deferred Current tax $ 16,680 $ 9,981 $ 8,744 Deferred Taxes U.S. $ 16,680 $ 9,981 $ 8,744 Deferred Taxes U.S. federal $ Taxes U.S. federal $ ( 4,815 ) $ 25 $ 58 $ ( 4,815 ) $ 25 $ 58 U.S. state and 4,815 ) $ 25 $ 58 U.S. state and local ( U.S. state and local ( 1,062 ) ( 204 ) ( local ( 1,062 ) ( 204 ) ( 6 ) Foreign ) ( 204 ) ( 6 ) Foreign 175 29 ( ) ( 6 ) Foreign 175 29 ( 41 ) Deferred ( 6 ) Foreign 175 29 ( 41 ) Deferred tax ) Foreign 175 29 ( 41 ) Deferred tax $ ( ) Deferred tax $ ( 5,702 ) $ ( 150 ) ( 5,702 ) $ ( 150 ) $ 11 Provision for $ ( 150 ) $ 11 Provision for income tax $ Provision for income tax $ 10,978 $ 9,831 $ 8,755 U.S. income tax $ 10,978 $ 9,831 $ 8,755 U.S. and foreign $ 10,978 $ 9,831 $ 8,755 U.S. and foreign component of million ) Year Ended June 30 , 2022 2021 2020 U.S. Year Ended June 30 , 2022 2021 2020 U.S. $ 47,837 Ended June 30 , 2022 2021 2020 U.S. $ 47,837 $ June 30 , 2022 2021 2020 U.S. $ 47,837 $ 34,972 2022 2021 2020 U.S. $ 47,837 $ 34,972 $ 24,116 Foreign 2020 U.S. $ 47,837 $ 34,972 $ 24,116 Foreign 35,879 36,130 $ 47,837 $ 34,972 $ 24,116 Foreign 35,879 36,130 28,920 Income $ 34,972 $ 24,116 Foreign 35,879 36,130 28,920 Income before income 34,972 $ 24,116 Foreign 35,879 36,130 28,920 Income before income tax $ 24,116 Foreign 35,879 36,130 28,920 Income before income tax $ Income before income tax $ 83,716 $ 71,102 $ 53,036 Effective income tax $ 83,716 $ 71,102 $ 53,036 Effective Tax Rate $ 83,716 $ 71,102 $ 53,036 Effective Tax Rate The item follows : Year Ended June 30 , 2022 2021 2020 Federal Year Ended June 30 , 2022 2021 2020 Federal statutory rate Ended June 30 , 2022 2021 2020 Federal statutory rate 21.0 June 30 , 2022 2021 2020 Federal statutory rate 21.0 % 2021 2020 Federal statutory rate 21.0 % 21.0 % 21.0 % Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of rate 21.0 % 21.0 % 21.0 % Effect of : Foreign taxed at lower rate ( 1.3 ) % ( 2.7 ) ( 1.3 ) % ( 2.7 ) % ( 3.7 ) ( 2.7 ) % ( 3.7 ) % Impact of intangible of intangible property transfer ( 3.9 ) % 0 % 0 transfer ( 3.9 ) % 0 % 0 % Foreign-derived intangible 3.9 ) % 0 % 0 % Foreign-derived intangible income deduction Foreign-derived intangible income deduction ( 1.1 ) % ( 1.3 ) ( 1.1 ) % ( 1.3 ) % ( 1.1 ) ( 1.3 ) % ( 1.1 ) % State income tax , net of federal benefit 1.4 % 1.4 % 1.3 % of federal benefit 1.4 % 1.4 % 1.3 % Research and benefit 1.4 % 1.4 % 1.3 % Research and development credit Research and development credit ( 0.9 ) % ( 0.9 ) ( 0.9 ) % ( 0.9 ) % ( 1.1 ) ( 0.9 ) % ( 1.1 ) % Excess tax benefit relating to stock-based compensation ( 1.9 ) % ( 2.4 ) ( 1.9 ) % ( 2.4 ) % ( 2.2 ) ( 2.4 ) % ( 2.2 ) % Interest , net ) % Interest , net 0.5 % 0.5 % 1.0 % Interest , net 0.5 % 0.5 % 1.0 % Other reconciling net 0.5 % 0.5 % 1.0 % Other reconciling item , reconciling item , net ( 0.7 ) % ( 1.8 ) ( 0.7 ) % ( 1.8 ) % 1.3 % Effective % ( 1.8 ) % 1.3 % Effective rate 13.1 % % 1.3 % Effective rate 13.1 % 13.8 % 16.5 % % Effective rate 13.1 % 13.8 % 16.5 % In the rate 13.1 % 13.8 % 16.5 % In the first quarter first quarter of fiscal year 2022 , we transferred certain intangible property resulted in a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 , a the value of GILTI ” ) tax . 82 PART II Item 8 We . 82 PART II Item 8 We have historically paid India in India . In March 2021 , the India Supreme Court Income Tax for company in 86 separate appeal , some dating , some dating back to 2012 , holding that software sale income tax benefit of $ 620 million in the third quarter third quarter of fiscal year 2021 to reflect the result of Court decision impacting fiscal year 1996 through fiscal year 2016 . year 1996 through fiscal year 2016 . The decrease from the statutory rate in fiscal year 2022 is primarily due to the statutory rate in fiscal year 2021 is primarily due to earnings statutory rate in fiscal year 2020 is primarily due to earnings compensation . In fiscal year 2022 , 2021 , and 2020 In fiscal year 2022 , 2021 , and 2020 , our 2022 , 2021 , and 2020 , our foreign regional operating the U.S. rate , generated 71 % , 82 % , , generated 71 % , 82 % , and 86 % , 82 % , and 86 % of our foreign income , and in fiscal year 2021 , includes tax benefit from tax . In fiscal year 2022 , 2021 , and 2020 In fiscal year 2022 , 2021 , and 2020 , there 2022 , 2021 , and 2020 , there were no individually tax rate for fiscal year 2022 compared to fiscal year 2021 2022 compared to fiscal year 2021 wa primarily due to a primarily due to a $ 3.3 billion net income tax benefit first quarter of fiscal year 2022 related to the transfer of tax rate for fiscal year 2021 compared to fiscal year 2020 2021 compared to fiscal year 2020 wa primarily due to tax relating to stock-based compensation . 83 PART II Item 8 The . 83 PART II Item 8 The component of the deferred ( In million ) June 30 , 2022 2021 Deferred Income million ) June 30 , 2022 2021 Deferred Income Tax Assets ) June 30 , 2022 2021 Deferred Income Tax Assets Stock-based Assets Stock-based compensation expense $ 601 $ 502 Accruals , reserve compensation expense $ 601 $ 502 Accruals , reserve , and reserve , and other expense 2,874 2,960 Loss and credit carryforwards , and other expense 2,874 2,960 Loss and credit carryforwards 1,546 2,960 Loss and credit carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing Loss and credit carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing liability credit carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing liability 4,557 4,060 carryforwards 1,546 1,090 Amortization 10,656 6,346 Leasing liability 4,557 4,060 Unearned Amortization 10,656 6,346 Leasing liability 4,557 4,060 Unearned revenue 2,876 2,659 10,656 6,346 Leasing liability 4,557 4,060 Unearned revenue 2,876 2,659 Other liability 4,557 4,060 Unearned revenue 2,876 2,659 Other 461 319 Deferred 4,557 4,060 Unearned revenue 2,876 2,659 Other 461 319 Deferred income Unearned revenue 2,876 2,659 Other 461 319 Deferred income tax asset revenue 2,876 2,659 Other 461 319 Deferred income tax asset 23,571 319 Deferred income tax asset 23,571 17,936 Less valuation allowance ( Deferred income tax asset 23,571 17,936 Less valuation allowance ( 1,012 17,936 Less valuation allowance ( 1,012 ) ( 769 ) Deferred allowance ( 1,012 ) ( 769 ) Deferred income tax asset net of valuation allowance $ 22,559 $ 17,167 Deferred Income Tax valuation allowance $ 22,559 $ 17,167 Deferred Income Tax Liabilities Book/tax investment and debt $ ( 174 ) $ ( 2,381 ) ( 174 ) $ ( 2,381 ) Leasing asset ( 4,291 2,381 ) Leasing asset ( 4,291 ) ( 3,834 ) Depreciation asset ( 4,291 ) ( 3,834 ) Depreciation ( 1,602 ) ( 3,834 ) Depreciation ( 1,602 ) ( 1,010 ) Deferred Depreciation ( 1,602 ) ( 1,010 ) Deferred tax on foreign tax on foreign earnings ( 3,104 ) ( 2,815 ) Other earnings ( 3,104 ) ( 2,815 ) Other ( 103 ) ( 2,815 ) Other ( 103 ) ( 144 ) Deferred Other ( 103 ) ( 144 ) Deferred income tax liability income tax liability $ ( 9,274 ) $ ( 10,184 ) ( 9,274 ) $ ( 10,184 ) Net deferred income tax deferred income tax asset $ 13,285 $ 6,983 Reported As Other tax asset $ 13,285 $ 6,983 Reported As Other long-term asset As Other long-term asset $ 13,515 $ 7,181 Long-term deferred income long-term asset $ 13,515 $ 7,181 Long-term deferred income tax liability deferred income tax liability ( 230 ) ( 198 ) Net liability ( 230 ) ( 198 ) Net deferred income tax deferred income tax asset $ 13,285 $ 6,983 Deferred income tax tax asset $ 13,285 $ 6,983 Deferred income tax balance reflect recovered . As of June 30 , 2022 , we had As of June 30 , 2022 , we had federal , operating loss carryforwards of $ 318 million , $ 1.3 billion $ 318 million , $ 1.3 billion , and $ 2.1 1.3 billion , and $ 2.1 billion , respectively . The in various year from fiscal 2023 through 2042 , if not year from fiscal 2023 through 2042 , if not utilized . allowance . As of June 30 , 2022 , we had As of June 30 , 2022 , we had $ 1.3 2022 , we had $ 1.3 billion federal capital loss carryforwards in various year from fiscal 2023 through 2025 . The valuation year from fiscal 2023 through 2025 . The valuation allowance disclosed of refund , were $ 16.0 billion , $ 13.4 billion $ 16.0 billion , $ 13.4 billion , and $ 12.5 13.4 billion , and $ 12.5 billion in fiscal year 2022 12.5 billion in fiscal year 2022 , 2021 , and 2020 in fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . Uncertain Tax tax position a of June 30 , 2022 , 2021 , a of June 30 , 2022 , 2021 , and 2020 June 30 , 2022 , 2021 , and 2020 , were 2022 , 2021 , and 2020 , were $ 15.6 billion and 2020 , were $ 15.6 billion , $ 14.6 billion $ 15.6 billion , $ 14.6 billion , and $ 13.8 14.6 billion , and $ 13.8 billion , respectively , which tax rate for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 by $ 2022 , 2021 , and 2020 by $ 13.3 billion , , and 2020 by $ 13.3 billion , $ 12.5 billion $ 13.3 billion , $ 12.5 billion , and $ 12.1 12.5 billion , and $ 12.1 billion , respectively . 84 12.1 billion , respectively . 84 PART II Item 8 As . 84 PART II Item 8 As of June 30 , Item 8 As of June 30 , 2022 , 2021 , As of June 30 , 2022 , 2021 , and 2020 June 30 , 2022 , 2021 , and 2020 , we 2022 , 2021 , and 2020 , we had accrued interest uncertain tax position of $ 4.3 billion , $ 4.3 billion $ 4.3 billion , $ 4.3 billion , and $ 4.0 4.3 billion , and $ 4.0 billion , respectively , net income tax for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 included interest 2022 , 2021 , and 2020 included interest expense related to uncertain tax position of $ 36 million , $ 274 million $ 36 million , $ 274 million , and $ 579 274 million , and $ 579 million , respectively , net million ) Year Ended June 30 , 2022 2021 2020 Beginning Year Ended June 30 , 2022 2021 2020 Beginning unrecognized tax Ended June 30 , 2022 2021 2020 Beginning unrecognized tax benefit June 30 , 2022 2021 2020 Beginning unrecognized tax benefit $ Beginning unrecognized tax benefit $ 14,550 $ 13,792 $ 13,146 Decreases tax benefit $ 14,550 $ 13,792 $ 13,146 Decreases related to $ 14,550 $ 13,792 $ 13,146 Decreases related to settlement ( Decreases related to settlement ( 317 ) ( 195 ) ( settlement ( 317 ) ( 195 ) ( 31 ) Increases ) ( 195 ) ( 31 ) Increases for tax position related to the current year 1,145 790 647 Increases for tax to the current year 1,145 790 647 Increases for tax position the current year 1,145 790 647 Increases for tax position related position related to prior year 461 461 366 Decreases for tax related to prior year 461 461 366 Decreases for tax position to prior year 461 461 366 Decreases for tax position related related to prior year ( 246 ) ( 297 ) ( year ( 246 ) ( 297 ) ( 331 ) Decreases ) ( 297 ) ( 331 ) Decreases due to lapsed to lapsed statute of limitation 0 ( 1 ) ( 5 statute of limitation 0 ( 1 ) ( 5 ) Ending 0 ( 1 ) ( 5 ) Ending unrecognized tax benefit Ending unrecognized tax benefit $ 15,593 $ 14,550 $ 13,792 We tax benefit $ 15,593 $ 14,550 $ 13,792 We settled a $ 15,593 $ 14,550 $ 13,792 We settled a portion of ) audit for tax year 2004 to 2006 in fiscal year for tax year 2004 to 2006 in fiscal year 2011 . to 2006 in fiscal year 2011 . In February 2012 , year 2011 . In February 2012 , the IRS withdrew it , the IRS withdrew it 2011 Revenue Agents Report related to unresolved issue for tax year 2004 to 2006 and reopened the for tax year 2004 to 2006 and reopened the audit phase IRS audit for tax year 2007 to 2009 in fiscal year for tax year 2007 to 2009 in fiscal year 2016 , to 2009 in fiscal year 2016 , and a portion of IRS audit for tax year 2010 to 2013 in fiscal year for tax year 2010 to 2013 in fiscal year 2018 . to 2013 in fiscal year 2018 . In the second quarter second quarter of fiscal year 2021 , we settled an additional IRS audit for tax year 2004 to 2013 and made a for tax year 2004 to 2013 and made a payment of made a payment of $ 1.7 billion , including tax and under audit for tax year 2004 to 2017 . As of for tax year 2004 to 2017 . As of June 30 2017 . As of June 30 , 2022 , the primary As of June 30 , 2022 , the primary unresolved issue these issue in the next 12 month . Based on the these issue within the next 12 month . We are subject to examination for tax year 1996 to 2021 , some of for tax year 1996 to 2021 , some of which are consolidated financial statement . NOTE 13 — UNEARNED REVENUE Unearned revenue ( In million ) June 30 , 2022 2021 Productivity and million ) June 30 , 2022 2021 Productivity and Business Processes ) June 30 , 2022 2021 Productivity and Business Processes $ Productivity and Business Processes $ 24,558 $ 22,120 Intelligent Cloud 19,371 Business Processes $ 24,558 $ 22,120 Intelligent Cloud 19,371 17,710 More 24,558 $ 22,120 Intelligent Cloud 19,371 17,710 More Personal Computing 4,479 $ 22,120 Intelligent Cloud 19,371 17,710 More Personal Computing 4,479 4,311 19,371 17,710 More Personal Computing 4,479 4,311 Total $ 48,408 $ 17,710 More Personal Computing 4,479 4,311 Total $ 48,408 $ 44,141 Computing 4,479 4,311 Total $ 48,408 $ 44,141 Changes in unearned 4,311 Total $ 48,408 $ 44,141 Changes in unearned revenue were million ) Year Ended June 30 , 2022 Balance , beginning Year Ended June 30 , 2022 Balance , beginning of period , beginning of period $ 44,141 Deferral of revenue 110,455 Recognition $ 44,141 Deferral of revenue 110,455 Recognition of unearned revenue ( Recognition of unearned revenue ( 106,188 ) Balance , end of , end of period $ 48,408 85 PART II Item 8 end of period $ 48,408 85 PART II Item 8 Revenue 48,408 85 PART II Item 8 Revenue allocated to remaining performance future period , wa $ 193 billion a of June 30 193 billion a of June 30 , 2022 , of which a of June 30 , 2022 , of which $ 189 2022 , of which $ 189 billion is related to the We expect to recognize approximately 45 % of this revenue over this revenue over the next 12 month and the remainder thereafter the remainder thereafter . NOTE 14 — LEASES We have operating have remaining lease term of 1 year to 19 year , term of 1 year to 19 year , some of which the lease for up to 5 year , and some of to terminate the lease within 1 year . The component of million ) Year Ended June 30 , 2022 2021 2020 Operating Year Ended June 30 , 2022 2021 2020 Operating lease cost Ended June 30 , 2022 2021 2020 Operating lease cost $ June 30 , 2022 2021 2020 Operating lease cost $ 2,461 2020 Operating lease cost $ 2,461 $ 2,127 $ 2,043 Finance lease cost $ 2,461 $ 2,127 $ 2,043 Finance lease cost $ 2,461 $ 2,127 $ 2,043 Finance lease cost : Amortization Amortization of right-of-use asset $ 980 $ 921 $ 611 Interest right-of-use asset $ 980 $ 921 $ 611 Interest on lease $ 980 $ 921 $ 611 Interest on lease liability 429 611 Interest on lease liability 429 386 336 Total finance lease Interest on lease liability 429 386 336 Total finance lease cost on lease liability 429 386 336 Total finance lease cost $ Total finance lease cost $ 1,409 $ 1,307 $ 947 Supplemental lease cost $ 1,409 $ 1,307 $ 947 Supplemental cash flow $ 1,409 $ 1,307 $ 947 Supplemental cash flow information related million ) Year Ended June 30 , 2022 2021 2020 Cash Year Ended June 30 , 2022 2021 2020 Cash paid for Ended June 30 , 2022 2021 2020 Cash paid for amount June 30 , 2022 2021 2020 Cash paid for amount included flow from operating lease $ 2,368 $ 2,052 $ 1,829 Operating operating lease $ 2,368 $ 2,052 $ 1,829 Operating cash flow $ 2,368 $ 2,052 $ 1,829 Operating cash flow from finance cash flow from finance lease 429 386 336 Financing cash flow flow from finance lease 429 386 336 Financing cash flow from from finance lease 429 386 336 Financing cash flow from finance cash flow from finance lease 896 648 409 Right-of-use asset obtained flow from finance lease 896 648 409 Right-of-use asset obtained in from finance lease 896 648 409 Right-of-use asset obtained in exchange lease obligation : Operating lease 5,268 4,380 3,677 Finance lease 4,234 obligation : Operating lease 5,268 4,380 3,677 Finance lease 4,234 3,290 : Operating lease 5,268 4,380 3,677 Finance lease 4,234 3,290 3,467 5,268 4,380 3,677 Finance lease 4,234 3,290 3,467 86 PART II 4,380 3,677 Finance lease 4,234 3,290 3,467 86 PART II Item 3,677 Finance lease 4,234 3,290 3,467 86 PART II Item 8 Finance lease 4,234 3,290 3,467 86 PART II Item 8 Supplemental 3,467 86 PART II Item 8 Supplemental balance sheet information related and discount rate ) June 30 , 2022 2021 Operating Leases rate ) June 30 , 2022 2021 Operating Leases Operating lease ) June 30 , 2022 2021 Operating Leases Operating lease right-of-use Operating lease right-of-use asset $ 13,148 $ 11,088 Other current liability right-of-use asset $ 13,148 $ 11,088 Other current liability $ 2,228 11,088 Other current liability $ 2,228 $ 1,962 Operating lease liability current liability $ 2,228 $ 1,962 Operating lease liability 11,489 9,629 $ 1,962 Operating lease liability 11,489 9,629 Total operating lease liability 1,962 Operating lease liability 11,489 9,629 Total operating lease liability $ Total operating lease liability $ 13,717 $ 11,591 Finance Leases Property lease liability $ 13,717 $ 11,591 Finance Leases Property and equipment equipment , at cost $ 17,388 $ 14,107 Accumulated depreciation ( at cost $ 17,388 $ 14,107 Accumulated depreciation ( 3,285 ) $ 14,107 Accumulated depreciation ( 3,285 ) ( 2,306 ) Property depreciation ( 3,285 ) ( 2,306 ) Property and equipment , and equipment , net $ 14,103 $ 11,801 Other current liability , net $ 14,103 $ 11,801 Other current liability $ 1,060 11,801 Other current liability $ 1,060 $ 791 Other long-term liability current liability $ 1,060 $ 791 Other long-term liability 13,842 11,750 $ 791 Other long-term liability 13,842 11,750 Total finance lease liability 791 Other long-term liability 13,842 11,750 Total finance lease liability $ Total finance lease liability $ 14,902 $ 12,541 Weighted Average Remaining lease liability $ 14,902 $ 12,541 Weighted Average Remaining Lease Term Remaining Lease Term Operating lease 8 year 8 year Finance lease Term Operating lease 8 year 8 year Finance lease 12 year year 8 year Finance lease 12 year 12 year Weighted Average year Finance lease 12 year 12 year Weighted Average Discount Rate Average Discount Rate Operating lease 2.1 % 2.2 % Finance lease Rate Operating lease 2.1 % 2.2 % Finance lease 3.1 % % 2.2 % Finance lease 3.1 % 3.4 % The following % Finance lease 3.1 % 3.4 % The following table outline lease liability a of June 30 , 2022 : ( In a of June 30 , 2022 : ( In million ) million ) Year Ending June 30 , Operating Leases Finance Leases , Operating Leases Finance Leases 2023 $ 2,456 $ 1,477 2024 Leases Finance Leases 2023 $ 2,456 $ 1,477 2024 2,278 1,487 Leases 2023 $ 2,456 $ 1,477 2024 2,278 1,487 2025 1,985 2023 $ 2,456 $ 1,477 2024 2,278 1,487 2025 1,985 1,801 $ 2,456 $ 1,477 2024 2,278 1,487 2025 1,985 1,801 2026 2,456 $ 1,477 2024 2,278 1,487 2025 1,985 1,801 2026 1,625 $ 1,477 2024 2,278 1,487 2025 1,985 1,801 2026 1,625 1,483 1,477 2024 2,278 1,487 2025 1,985 1,801 2026 1,625 1,483 2027 2024 2,278 1,487 2025 1,985 1,801 2026 1,625 1,483 2027 1,328 2,278 1,487 2025 1,985 1,801 2026 1,625 1,483 2027 1,328 1,489 1,487 2025 1,985 1,801 2026 1,625 1,483 2027 1,328 1,489 Thereafter 2025 1,985 1,801 2026 1,625 1,483 2027 1,328 1,489 Thereafter 5,332 1,985 1,801 2026 1,625 1,483 2027 1,328 1,489 Thereafter 5,332 9,931 1,801 2026 1,625 1,483 2027 1,328 1,489 Thereafter 5,332 9,931 Total 2026 1,625 1,483 2027 1,328 1,489 Thereafter 5,332 9,931 Total lease 1,483 2027 1,328 1,489 Thereafter 5,332 9,931 Total lease payment 15,004 2027 1,328 1,489 Thereafter 5,332 9,931 Total lease payment 15,004 17,668 5,332 9,931 Total lease payment 15,004 17,668 Less imputed interest ( 9,931 Total lease payment 15,004 17,668 Less imputed interest ( 1,287 17,668 Less imputed interest ( 1,287 ) ( 2,766 ) Total interest ( 1,287 ) ( 2,766 ) Total $ 13,717 $ ( 2,766 ) Total $ 13,717 $ 14,902 As of June ) Total $ 13,717 $ 14,902 As of June 30 , $ 14,902 As of June 30 , 2022 , we have As of June 30 , 2022 , we have additional operating not yet commenced of $ 7.2 billion and $ 8.8 billion $ 7.2 billion and $ 8.8 billion , respectively . These will commence between fiscal year 2023 and fiscal year 2028 with year 2023 and fiscal year 2028 with lease term of 1 2028 with lease term of 1 year to 18 year . term of 1 year to 18 year . 87 PART II year to 18 year . 87 PART II Item 8 NOTE . 87 PART II Item 8 NOTE 15 — CONTINGENCIES Antitrust PART II Item 8 NOTE 15 — CONTINGENCIES Antitrust Litigation and Market Regulation Investigatio n In 2014 , Microsoft wa informed that , and Chengdu . In 2019 , the SAMR presented preliminary , is a defendant in 46 lawsuit , including 45 lawsuit in 46 lawsuit , including 45 lawsuit filed in the Superior these case were filed in 2002 and are consolidated for certain stayed . In a separate 2009 decision , the Court of around emission guideline . In 2013 , the defendant in the flawed scientific methodology . In 2014 , the trial court granted scientific evidence . In October 2016 , the Court of Appeals to strike . In August 2018 , the trial court issued is scheduled for September of 2022 . Other Contingencies We also future . As of June 30 , 2022 , we accrued As of June 30 , 2022 , we accrued aggregate legal aggregate legal liability of $ 364 million . While we intend estimate could reach approximately $ 600 million in aggregate beyond recorded effect become reasonably estimable . 88 PART II Item 8 NOTE . 88 PART II Item 8 NOTE 16 — STOCKHOLDERS ’ PART II Item 8 NOTE 16 — STOCKHOLDERS ’ EQUITY Shares million ) Year Ended June 30 , 2022 2021 2020 Balance Year Ended June 30 , 2022 2021 2020 Balance , beginning Ended June 30 , 2022 2021 2020 Balance , beginning of June 30 , 2022 2021 2020 Balance , beginning of year Balance , beginning of year 7,519 7,571 7,643 Issued 40 49 , beginning of year 7,519 7,571 7,643 Issued 40 49 54 beginning of year 7,519 7,571 7,643 Issued 40 49 54 Repurchased year 7,519 7,571 7,643 Issued 40 49 54 Repurchased ( 95 7,519 7,571 7,643 Issued 40 49 54 Repurchased ( 95 ) 7,571 7,643 Issued 40 49 54 Repurchased ( 95 ) ( 40 49 54 Repurchased ( 95 ) ( 101 ) ( Repurchased ( 95 ) ( 101 ) ( 126 ) Balance ) ( 101 ) ( 126 ) Balance , end of Balance , end of year 7,464 7,519 7,571 Share Repurchases On , end of year 7,464 7,519 7,571 Share Repurchases On September end of year 7,464 7,519 7,571 Share Repurchases On September 20 7,571 Share Repurchases On September 20 , 2016 , our Board Repurchases On September 20 , 2016 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in December 2016 and wa completed in February and wa completed in February 2020 . On September 18 , February 2020 . On September 18 , 2019 , our Board . On September 18 , 2019 , our Board of Directors program authorizing up to $ 40.0 billion in share repurchase . repurchase program commenced in February 2020 and wa completed in November and wa completed in November 2021 . On September 14 , November 2021 . On September 14 , 2021 , our Board . On September 14 , 2021 , our Board of Directors program authorizing up to $ 60.0 billion in share repurchase . repurchase program commenced in November 2021 , following completion of the the program approved on September 18 , 2019 , ha no approved on September 18 , 2019 , ha no expiration date time . As of June 30 , 2022 , $ 40.7 As of June 30 , 2022 , $ 40.7 billion remained 30 , 2022 , $ 40.7 billion remained of this $ billion remained of this $ 60.0 billion share repurchase program . Shares Amount Year Ended June 30 , 2022 2021 2020 First Year Ended June 30 , 2022 2021 2020 First Quarter 21 Ended June 30 , 2022 2021 2020 First Quarter 21 $ June 30 , 2022 2021 2020 First Quarter 21 $ 6,200 2022 2021 2020 First Quarter 21 $ 6,200 25 $ 5,270 2020 First Quarter 21 $ 6,200 25 $ 5,270 29 $ First Quarter 21 $ 6,200 25 $ 5,270 29 $ 4,000 21 $ 6,200 25 $ 5,270 29 $ 4,000 Second Quarter $ 6,200 25 $ 5,270 29 $ 4,000 Second Quarter 20 25 $ 5,270 29 $ 4,000 Second Quarter 20 6,233 27 29 $ 4,000 Second Quarter 20 6,233 27 5,750 32 4,600 $ 4,000 Second Quarter 20 6,233 27 5,750 32 4,600 Third 4,000 Second Quarter 20 6,233 27 5,750 32 4,600 Third Quarter Second Quarter 20 6,233 27 5,750 32 4,600 Third Quarter 26 Quarter 20 6,233 27 5,750 32 4,600 Third Quarter 26 7,800 20 6,233 27 5,750 32 4,600 Third Quarter 26 7,800 25 5,750 32 4,600 Third Quarter 26 7,800 25 5,750 37 6,000 32 4,600 Third Quarter 26 7,800 25 5,750 37 6,000 Fourth 4,600 Third Quarter 26 7,800 25 5,750 37 6,000 Fourth Quarter Third Quarter 26 7,800 25 5,750 37 6,000 Fourth Quarter 28 Quarter 26 7,800 25 5,750 37 6,000 Fourth Quarter 28 7,800 26 7,800 25 5,750 37 6,000 Fourth Quarter 28 7,800 24 5,750 37 6,000 Fourth Quarter 28 7,800 24 6,200 28 5,088 37 6,000 Fourth Quarter 28 7,800 24 6,200 28 5,088 Total 6,000 Fourth Quarter 28 7,800 24 6,200 28 5,088 Total 95 Fourth Quarter 28 7,800 24 6,200 28 5,088 Total 95 $ Quarter 28 7,800 24 6,200 28 5,088 Total 95 $ 28,033 28 7,800 24 6,200 28 5,088 Total 95 $ 28,033 101 24 6,200 28 5,088 Total 95 $ 28,033 101 $ 22,970 28 5,088 Total 95 $ 28,033 101 $ 22,970 126 $ 5,088 Total 95 $ 28,033 101 $ 22,970 126 $ 19,688 95 $ 28,033 101 $ 22,970 126 $ 19,688 All repurchase $ 28,033 101 $ 22,970 126 $ 19,688 All repurchase were 101 $ 22,970 126 $ 19,688 All repurchase were made using third quarter of fiscal year 2022 were under the share repurchase repurchase program approved on September 14 , 2021 . Shares repurchased approved on September 14 , 2021 . Shares repurchased during the second quarter of fiscal year 2022 were under the share repurchase program approved on both September 14 , 2021 and September 18 on both September 14 , 2021 and September 18 , 2019 14 , 2021 and September 18 , 2019 . Shares repurchased 2021 and September 18 , 2019 . Shares repurchased during the first quarter of fiscal year 2022 , fiscal year 2021 , year 2022 , fiscal year 2021 , and the fourth quarter fourth quarter of fiscal year 2020 were under the share repurchase repurchase program approved on September 18 , 2019 . Shares repurchased approved on September 18 , 2019 . Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase program approved on both September 20 , 2016 and September 18 on both September 20 , 2016 and September 18 , 2019 20 , 2016 and September 18 , 2019 . All other 2016 and September 18 , 2019 . All other share repurchased repurchase program approved on September 20 , 2016 . The above approved on September 20 , 2016 . The above table excludes of stock award of $ 4.7 billion , $ 4.4 billion $ 4.7 billion , $ 4.4 billion , and $ 3.3 4.4 billion , and $ 3.3 billion for fiscal year 2022 3.3 billion for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . 89 PART and 2020 , respectively . 89 PART II Item 8 Dividends . 89 PART II Item 8 Dividends Our Board of Directors Per Share Amount Fiscal Year 2022 ( In million ) September ( In million ) September 14 , 2021 November 18 , million ) September 14 , 2021 November 18 , 2021 December September 14 , 2021 November 18 , 2021 December 9 , , 2021 November 18 , 2021 December 9 , 2021 $ November 18 , 2021 December 9 , 2021 $ 0.62 $ , 2021 December 9 , 2021 $ 0.62 $ 4,652 December December 9 , 2021 $ 0.62 $ 4,652 December 7 , , 2021 $ 0.62 $ 4,652 December 7 , 2021 February $ 0.62 $ 4,652 December 7 , 2021 February 17 , $ 4,652 December 7 , 2021 February 17 , 2022 March December 7 , 2021 February 17 , 2022 March 10 , , 2021 February 17 , 2022 March 10 , 2022 0.62 February 17 , 2022 March 10 , 2022 0.62 4,645 March , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 March 10 , 2022 0.62 4,645 March 14 , 2022 May , 2022 0.62 4,645 March 14 , 2022 May 19 , 0.62 4,645 March 14 , 2022 May 19 , 2022 June March 14 , 2022 May 19 , 2022 June 9 , , 2022 May 19 , 2022 June 9 , 2022 0.62 May 19 , 2022 June 9 , 2022 0.62 4,632 June , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 June 9 , 2022 0.62 4,632 June 14 , 2022 August , 2022 0.62 4,632 June 14 , 2022 August 18 , 0.62 4,632 June 14 , 2022 August 18 , 2022 September June 14 , 2022 August 18 , 2022 September 8 , , 2022 August 18 , 2022 September 8 , 2022 0.62 August 18 , 2022 September 8 , 2022 0.62 4,627 Total , 2022 September 8 , 2022 0.62 4,627 Total $ 2.48 2022 September 8 , 2022 0.62 4,627 Total $ 2.48 $ September 8 , 2022 0.62 4,627 Total $ 2.48 $ 18,556 2022 0.62 4,627 Total $ 2.48 $ 18,556 Fiscal Year 2021 4,627 Total $ 2.48 $ 18,556 Fiscal Year 2021 September 15 2.48 $ 18,556 Fiscal Year 2021 September 15 , 2020 November 18,556 Fiscal Year 2021 September 15 , 2020 November 19 , Year 2021 September 15 , 2020 November 19 , 2020 December September 15 , 2020 November 19 , 2020 December 10 , , 2020 November 19 , 2020 December 10 , 2020 $ November 19 , 2020 December 10 , 2020 $ 0.56 $ , 2020 December 10 , 2020 $ 0.56 $ 4,230 December December 10 , 2020 $ 0.56 $ 4,230 December 2 , , 2020 $ 0.56 $ 4,230 December 2 , 2020 February $ 0.56 $ 4,230 December 2 , 2020 February 18 , $ 4,230 December 2 , 2020 February 18 , 2021 March December 2 , 2020 February 18 , 2021 March 11 , , 2020 February 18 , 2021 March 11 , 2021 0.56 February 18 , 2021 March 11 , 2021 0.56 4,221 March , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 March 11 , 2021 0.56 4,221 March 16 , 2021 May , 2021 0.56 4,221 March 16 , 2021 May 20 , 0.56 4,221 March 16 , 2021 May 20 , 2021 June March 16 , 2021 May 20 , 2021 June 10 , , 2021 May 20 , 2021 June 10 , 2021 0.56 May 20 , 2021 June 10 , 2021 0.56 4,214 June , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 June 10 , 2021 0.56 4,214 June 16 , 2021 August , 2021 0.56 4,214 June 16 , 2021 August 19 , 0.56 4,214 June 16 , 2021 August 19 , 2021 September June 16 , 2021 August 19 , 2021 September 9 , , 2021 August 19 , 2021 September 9 , 2021 0.56 August 19 , 2021 September 9 , 2021 0.56 4,206 Total , 2021 September 9 , 2021 0.56 4,206 Total $ 2.24 2021 September 9 , 2021 0.56 4,206 Total $ 2.24 $ September 9 , 2021 0.56 4,206 Total $ 2.24 $ 16,871 2021 0.56 4,206 Total $ 2.24 $ 16,871 The dividend declared 4,206 Total $ 2.24 $ 16,871 The dividend declared on June The dividend declared on June 14 , 2022 wa included in declared on June 14 , 2022 wa included in other current current liability a of June 30 , 2022 . 90 PART a of June 30 , 2022 . 90 PART II Item June 30 , 2022 . 90 PART II Item 8 NOTE . 90 PART II Item 8 NOTE 17 — ACCUMULATED OTHER PART II Item 8 NOTE 17 — ACCUMULATED OTHER COMPREHENSIVE INCOME million ) Year Ended June 30 , 2022 2021 2020 Derivatives Year Ended June 30 , 2022 2021 2020 Derivatives Balance , Ended June 30 , 2022 2021 2020 Derivatives Balance , beginning June 30 , 2022 2021 2020 Derivatives Balance , beginning of beginning of period $ ( 19 ) $ ( 38 ) ( 19 ) $ ( 38 ) $ 0 Unrealized gain $ ( 38 ) $ 0 Unrealized gain ( loss ) of tax of $ ( 15 ) , $ 9 , ( 15 ) , $ 9 , and $ ( 10 9 , and $ ( 10 ) ( 57 ) 34 $ ( 10 ) ( 57 ) 34 ( 38 ) 10 ) ( 57 ) 34 ( 38 ) Reclassification adjustment ( 57 ) 34 ( 38 ) Reclassification adjustment for ( ( expense ) , net 79 ( 17 ) 0 Tax ) , net 79 ( 17 ) 0 Tax expense ( net 79 ( 17 ) 0 Tax expense ( benefit ) provision for income tax ( 16 ) 2 0 Amounts reclassified income tax ( 16 ) 2 0 Amounts reclassified from accumulated tax ( 16 ) 2 0 Amounts reclassified from accumulated other comprehensive income ( loss ) 63 ( 15 ) 0 Net ( loss ) 63 ( 15 ) 0 Net change related ) 63 ( 15 ) 0 Net change related to derivative net of tax of $ 1 , $ 7 , and of $ 1 , $ 7 , and $ ( 10 7 , and $ ( 10 ) 6 19 ( 38 and $ ( 10 ) 6 19 ( 38 ) Balance $ ( 10 ) 6 19 ( 38 ) Balance , 10 ) 6 19 ( 38 ) Balance , end of end of period $ ( 13 ) $ ( 19 ) ( 13 ) $ ( 19 ) $ ( 38 ) ( 19 ) $ ( 38 ) Investments Balance , beginning , beginning of period $ 3,222 $ 5,478 $ 1,488 Unrealized of period $ 3,222 $ 5,478 $ 1,488 Unrealized gain ( $ 3,222 $ 5,478 $ 1,488 Unrealized gain ( loss ) of tax of $ ( 1,440 ) , $ ( 589 1,440 ) , $ ( 589 ) , and $ 1,057 589 ) , and $ 1,057 ( 5,405 ) ( 2,216 , and $ 1,057 ( 5,405 ) ( 2,216 ) 3,987 1,057 ( 5,405 ) ( 2,216 ) 3,987 Reclassification adjustment for 5,405 ) ( 2,216 ) 3,987 Reclassification adjustment for ( gain ( expense ) , net 57 ( 63 ) 4 Tax ) , net 57 ( 63 ) 4 Tax expense ( net 57 ( 63 ) 4 Tax expense ( benefit ) provision for income tax ( 12 ) 13 ( 1 ) income tax ( 12 ) 13 ( 1 ) Amounts reclassified ( 12 ) 13 ( 1 ) Amounts reclassified from accumulated comprehensive income ( loss ) 45 ( 50 ) 3 Net ( loss ) 45 ( 50 ) 3 Net change related ) 45 ( 50 ) 3 Net change related to investment of tax of $ ( 1,428 ) , $ ( 602 1,428 ) , $ ( 602 ) , and $ 1,058 602 ) , and $ 1,058 ( 5,360 ) ( 2,266 , and $ 1,058 ( 5,360 ) ( 2,266 ) 3,990 1,058 ( 5,360 ) ( 2,266 ) 3,990 Cumulative effect of 5,360 ) ( 2,266 ) 3,990 Cumulative effect of accounting change Cumulative effect of accounting change 0 10 0 Balance , end effect of accounting change 0 10 0 Balance , end of of accounting change 0 10 0 Balance , end of period end of period $ ( 2,138 ) $ 3,222 $ 5,478 $ ( 2,138 ) $ 3,222 $ 5,478 Translation Adjustments and 2,138 ) $ 3,222 $ 5,478 Translation Adjustments and Other Balance beginning of period $ ( 1,381 ) $ ( 2,254 ) ( 1,381 ) $ ( 2,254 ) $ ( 1,828 ) ( 2,254 ) $ ( 1,828 ) Translation adjustment and other net of tax of $ 0 , $ ( 9 ) $ 0 , $ ( 9 ) , and $ 1 9 ) , and $ 1 ( 1,146 ) 873 ( , and $ 1 ( 1,146 ) 873 ( 426 ) $ 1 ( 1,146 ) 873 ( 426 ) Balance , ( 1,146 ) 873 ( 426 ) Balance , end of end of period $ ( 2,527 ) $ ( 1,381 ) ( 2,527 ) $ ( 1,381 ) $ ( 2,254 ) ( 1,381 ) $ ( 2,254 ) Accumulated other comprehensive income end of period $ ( 4,678 ) $ 1,822 $ 3,186 $ ( 4,678 ) $ 1,822 $ 3,186 NOTE 18 — 4,678 ) $ 1,822 $ 3,186 NOTE 18 — EMPLOYEE STOCK $ 1,822 $ 3,186 NOTE 18 — EMPLOYEE STOCK AND SAVINGS million ) Year Ended June 30 , 2022 2021 2020 Stock-based Year Ended June 30 , 2022 2021 2020 Stock-based compensation expense Ended June 30 , 2022 2021 2020 Stock-based compensation expense $ June 30 , 2022 2021 2020 Stock-based compensation expense $ 7,502 2020 Stock-based compensation expense $ 7,502 $ 6,118 $ 5,289 Income compensation expense $ 7,502 $ 6,118 $ 5,289 Income tax benefit $ 7,502 $ 6,118 $ 5,289 Income tax benefit related to benefit related to stock-based compensation 1,293 1,065 938 Stock Plans Stock related to stock-based compensation 1,293 1,065 938 Stock Plans Stock award to stock-based compensation 1,293 1,065 938 Stock Plans Stock award entitle year or five year . 91 PART II Item 8 Executive . 91 PART II Item 8 Executive Incentive Plan Under the assumption : Year ended June 30 , 2022 2021 2020 Dividends Year ended June 30 , 2022 2021 2020 Dividends per share ended June 30 , 2022 2021 2020 Dividends per share ( June 30 , 2022 2021 2020 Dividends per share ( quarterly ( quarterly amount ) $ 0.56 – 0.62 $ 0.51 – amount ) $ 0.56 – 0.62 $ 0.51 – 0.56 $ $ 0.56 – 0.62 $ 0.51 – 0.56 $ 0.46 – – 0.62 $ 0.51 – 0.56 $ 0.46 – 0.51 Interest $ 0.51 – 0.56 $ 0.46 – 0.51 Interest rate 0.03 – 0.56 $ 0.46 – 0.51 Interest rate 0.03 % – 0.46 – 0.51 Interest rate 0.03 % – 3.6 % 0.01 Interest rate 0.03 % – 3.6 % 0.01 % – 1.5 0.03 % – 3.6 % 0.01 % – 1.5 % 0.1 3.6 % 0.01 % – 1.5 % 0.1 % – 2.2 0.01 % – 1.5 % 0.1 % – 2.2 % During 1.5 % 0.1 % – 2.2 % During fiscal year 2022 2.2 % During fiscal year 2022 , the following activity occurred balance , beginning of year 100 $ 152.51 Granted ( a beginning of year 100 $ 152.51 Granted ( a ) 50 152.51 Granted ( a ) 50 291.22 Vested ( 47 ) Granted ( a ) 50 291.22 Vested ( 47 ) 143.10 ) 50 291.22 Vested ( 47 ) 143.10 Forfeited ( 10 291.22 Vested ( 47 ) 143.10 Forfeited ( 10 ) 189.88 47 ) 143.10 Forfeited ( 10 ) 189.88 Nonvested balance , 143.10 Forfeited ( 10 ) 189.88 Nonvested balance , end of balance , end of year 93 $ 227.59 ( a ) end of year 93 $ 227.59 ( a ) Includes 1 227.59 ( a ) Includes 1 million , 2 million , ) Includes 1 million , 2 million , and 2 million , 2 million , and 2 million of PSUs granted at target level for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . As of respectively . As of June 30 , 2022 , there wa As of June 30 , 2022 , there wa approximately $ , there wa approximately $ 16.7 billion of total unrecognized compensation stock award granted wa $ 291.22 , $ 221.13 , and wa $ 291.22 , $ 221.13 , and $ 140.49 for $ 221.13 , and $ 140.49 for fiscal year 2022 , $ 140.49 for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . The fair stock award vested wa $ 14.1 billion , $ 13.4 billion $ 14.1 billion , $ 13.4 billion , and $ 10.1 13.4 billion , and $ 10.1 billion , for fiscal year billion , for fiscal year 2022 , 2021 , and 2020 for fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . As of respectively . As of June 30 , 2022 , an aggregate As of June 30 , 2022 , an aggregate of 211 2022 , an aggregate of 211 million share were authorized for employee at three-month interval at 90 % of the fair market having a value not exceeding 15 % of their gross compensation ESPP that were approved in 2012 , the plan wa set set to terminate on December 31 , 2022 . At our terminate on December 31 , 2022 . At our 2021 Annual , 2022 . At our 2021 Annual Shareholders Meeting , our successor ESPP with a January 1 , 2022 effective date and with a January 1 , 2022 effective date and ten-year expiration and ten-year expiration of December 31 , 2031 . No additional expiration of December 31 , 2031 . No additional share were million ) Year Ended June 30 , 2022 2021 2020 Shares Year Ended June 30 , 2022 2021 2020 Shares purchased 7 Ended June 30 , 2022 2021 2020 Shares purchased 7 8 June 30 , 2022 2021 2020 Shares purchased 7 8 9 2022 2021 2020 Shares purchased 7 8 9 Average price per 2021 2020 Shares purchased 7 8 9 Average price per share 2020 Shares purchased 7 8 9 Average price per share $ Average price per share $ 259.55 $ 207.88 $ 142.22 As per share $ 259.55 $ 207.88 $ 142.22 As of June $ 259.55 $ 207.88 $ 142.22 As of June 30 , $ 142.22 As of June 30 , 2022 , 81 million As of June 30 , 2022 , 81 million share of June 30 , 2022 , 81 million share of our common issuance through the ESPP . 92 PART II Item 8 Savings . 92 PART II Item 8 Savings Plans We have saving U.S. that qualify under Section 401 ( k ) of the for all plan were $ 1.4 billion , $ 1.2 billion $ 1.4 billion , $ 1.2 billion , and $ 1.0 1.2 billion , and $ 1.0 billion in fiscal year 2022 1.0 billion in fiscal year 2022 , 2021 , and 2020 in fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively , and were expensed a contributed . NOTE 19 — SEGMENT INFORMATION AND GEOGRAPHIC • Office Commercial ( Office 365 subscription , the Office 365 365 subscription , the Office 365 portion of Microsoft 365 Commercial Office 365 portion of Microsoft 365 Commercial subscription , and Office , Microsoft Teams , Office 365 Security and Compliance , and Office Consumer , including Microsoft 365 Consumer subscription , Office licensed business solution , including Dynamics 365 , comprising a set of Search and news advertising . 93 PART II Item 8 Revenue . 93 PART II Item 8 Revenue and cost are generally million ) Year Ended June 30 , 2022 2021 2020 Revenue Year Ended June 30 , 2022 2021 2020 Revenue Productivity and Ended June 30 , 2022 2021 2020 Revenue Productivity and Business June 30 , 2022 2021 2020 Revenue Productivity and Business Processes Productivity and Business Processes $ 63,364 $ 53,915 $ 46,398 Intelligent Business Processes $ 63,364 $ 53,915 $ 46,398 Intelligent Cloud 75,251 $ 63,364 $ 53,915 $ 46,398 Intelligent Cloud 75,251 60,080 48,366 53,915 $ 46,398 Intelligent Cloud 75,251 60,080 48,366 More Personal Computing $ 46,398 Intelligent Cloud 75,251 60,080 48,366 More Personal Computing 59,655 46,398 Intelligent Cloud 75,251 60,080 48,366 More Personal Computing 59,655 54,093 60,080 48,366 More Personal Computing 59,655 54,093 48,251 Total $ 198,270 48,366 More Personal Computing 59,655 54,093 48,251 Total $ 198,270 $ More Personal Computing 59,655 54,093 48,251 Total $ 198,270 $ 168,088 59,655 54,093 48,251 Total $ 198,270 $ 168,088 $ 143,015 Operating 48,251 Total $ 198,270 $ 168,088 $ 143,015 Operating Income Productivity $ 198,270 $ 168,088 $ 143,015 Operating Income Productivity and Business Productivity and Business Processes $ 29,687 $ 24,351 $ 18,724 Intelligent Business Processes $ 29,687 $ 24,351 $ 18,724 Intelligent Cloud 32,721 $ 29,687 $ 24,351 $ 18,724 Intelligent Cloud 32,721 26,126 18,324 24,351 $ 18,724 Intelligent Cloud 32,721 26,126 18,324 More Personal Computing $ 18,724 Intelligent Cloud 32,721 26,126 18,324 More Personal Computing 20,975 18,724 Intelligent Cloud 32,721 26,126 18,324 More Personal Computing 20,975 19,439 26,126 18,324 More Personal Computing 20,975 19,439 15,911 Total $ 83,383 18,324 More Personal Computing 20,975 19,439 15,911 Total $ 83,383 $ More Personal Computing 20,975 19,439 15,911 Total $ 83,383 $ 69,916 20,975 19,439 15,911 Total $ 83,383 $ 69,916 $ 52,959 No 15,911 Total $ 83,383 $ 69,916 $ 52,959 No sale to $ 83,383 $ 69,916 $ 52,959 No sale to an individual States accounted for more than 10 % of revenue for fiscal of revenue for fiscal year 2022 , 2021 , or 2020 for fiscal year 2022 , 2021 , or 2020 . Revenue 2022 , 2021 , or 2020 . Revenue , classified by million ) Year Ended June 30 , 2022 2021 2020 United Year Ended June 30 , 2022 2021 2020 United States ( Ended June 30 , 2022 2021 2020 United States ( a June 30 , 2022 2021 2020 United States ( a ) States ( a ) $ 100,218 $ 83,953 $ 73,160 Other a ) $ 100,218 $ 83,953 $ 73,160 Other country 98,052 $ 100,218 $ 83,953 $ 73,160 Other country 98,052 84,135 69,855 83,953 $ 73,160 Other country 98,052 84,135 69,855 Total $ 198,270 $ 73,160 Other country 98,052 84,135 69,855 Total $ 198,270 $ 73,160 Other country 98,052 84,135 69,855 Total $ 198,270 $ 168,088 98,052 84,135 69,855 Total $ 198,270 $ 168,088 $ 143,015 ( 69,855 Total $ 198,270 $ 168,088 $ 143,015 ( a ) $ 198,270 $ 168,088 $ 143,015 ( a ) Includes billing source of the revenue . 94 PART II Item 8 Revenue . 94 PART II Item 8 Revenue , classified by significant million ) Year Ended June 30 , 2022 2021 2020 Server Year Ended June 30 , 2022 2021 2020 Server product and Ended June 30 , 2022 2021 2020 Server product and cloud June 30 , 2022 2021 2020 Server product and cloud service product and cloud service $ 67,321 $ 52,589 $ 41,379 Office cloud service $ 67,321 $ 52,589 $ 41,379 Office product and $ 67,321 $ 52,589 $ 41,379 Office product and cloud service Office product and cloud service 44,862 39,872 35,316 Windows 24,761 22,488 product and cloud service 44,862 39,872 35,316 Windows 24,761 22,488 21,510 and cloud service 44,862 39,872 35,316 Windows 24,761 22,488 21,510 Gaming service 44,862 39,872 35,316 Windows 24,761 22,488 21,510 Gaming 16,230 15,370 44,862 39,872 35,316 Windows 24,761 22,488 21,510 Gaming 16,230 15,370 11,575 39,872 35,316 Windows 24,761 22,488 21,510 Gaming 16,230 15,370 11,575 LinkedIn Windows 24,761 22,488 21,510 Gaming 16,230 15,370 11,575 LinkedIn 13,816 10,289 24,761 22,488 21,510 Gaming 16,230 15,370 11,575 LinkedIn 13,816 10,289 8,077 22,488 21,510 Gaming 16,230 15,370 11,575 LinkedIn 13,816 10,289 8,077 Search Gaming 16,230 15,370 11,575 LinkedIn 13,816 10,289 8,077 Search and news 16,230 15,370 11,575 LinkedIn 13,816 10,289 8,077 Search and news advertising 15,370 11,575 LinkedIn 13,816 10,289 8,077 Search and news advertising 11,591 8,077 Search and news advertising 11,591 9,267 8,524 Enterprise Services 7,407 Search and news advertising 11,591 9,267 8,524 Enterprise Services 7,407 6,943 and news advertising 11,591 9,267 8,524 Enterprise Services 7,407 6,943 6,409 11,591 9,267 8,524 Enterprise Services 7,407 6,943 6,409 Devices 6,991 6,791 9,267 8,524 Enterprise Services 7,407 6,943 6,409 Devices 6,991 6,791 6,457 8,524 Enterprise Services 7,407 6,943 6,409 Devices 6,991 6,791 6,457 Other Services 7,407 6,943 6,409 Devices 6,991 6,791 6,457 Other 5,291 4,479 7,407 6,943 6,409 Devices 6,991 6,791 6,457 Other 5,291 4,479 3,768 6,943 6,409 Devices 6,991 6,791 6,457 Other 5,291 4,479 3,768 Total Devices 6,991 6,791 6,457 Other 5,291 4,479 3,768 Total $ 198,270 6,991 6,791 6,457 Other 5,291 4,479 3,768 Total $ 198,270 $ 6,791 6,457 Other 5,291 4,479 3,768 Total $ 198,270 $ 168,088 5,291 4,479 3,768 Total $ 198,270 $ 168,088 $ 143,015 We 3,768 Total $ 198,270 $ 168,088 $ 143,015 We have recast $ 198,270 $ 168,088 $ 143,015 We have recast certain previously other cloud service , Office 365 Commercial , the commercial portion portion of LinkedIn , Dynamics 365 , and other commercial cloud cloud property , wa $ 91.2 billion , $ 69.1 billion $ 91.2 billion , $ 69.1 billion and $ 51.7 billion $ 69.1 billion and $ 51.7 billion in fiscal year 2022 51.7 billion in fiscal year 2022 , 2021 , and 2020 in fiscal year 2022 , 2021 , and 2020 , respectively 2022 , 2021 , and 2020 , respectively . These amount company and with country over 10 % of the total shown ( In million ) June 30 , 2022 2021 2020 United million ) June 30 , 2022 2021 2020 United States $ ) June 30 , 2022 2021 2020 United States $ 106,430 June 30 , 2022 2021 2020 United States $ 106,430 $ 2021 2020 United States $ 106,430 $ 76,153 $ 60,789 Ireland United States $ 106,430 $ 76,153 $ 60,789 Ireland 15,505 13,303 $ 106,430 $ 76,153 $ 60,789 Ireland 15,505 13,303 12,734 Other $ 76,153 $ 60,789 Ireland 15,505 13,303 12,734 Other country 44,433 76,153 $ 60,789 Ireland 15,505 13,303 12,734 Other country 44,433 38,858 $ 60,789 Ireland 15,505 13,303 12,734 Other country 44,433 38,858 29,770 15,505 13,303 12,734 Other country 44,433 38,858 29,770 Total $ 166,368 13,303 12,734 Other country 44,433 38,858 29,770 Total $ 166,368 $ 12,734 Other country 44,433 38,858 29,770 Total $ 166,368 $ 128,314 44,433 38,858 29,770 Total $ 166,368 $ 128,314 $ 103,293 95 29,770 Total $ 166,368 $ 128,314 $ 103,293 95 PART II $ 166,368 $ 128,314 $ 103,293 95 PART II Item 8 166,368 $ 128,314 $ 103,293 95 PART II Item 8 REPORT 103,293 95 PART II Item 8 REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2022 and 2021 , a of June 30 , 2022 and 2021 , the related June 30 , 2022 and 2021 , the related consolidated statement in the period ended June 30 , 2022 , and the period ended June 30 , 2022 , and the related note the Company a of June 30 , 2022 and 2021 , a of June 30 , 2022 and 2021 , and the June 30 , 2022 and 2021 , and the result of in the period ended June 30 , 2022 , in conformity period ended June 30 , 2022 , in conformity with accounting financial reporting a of June 30 , 2022 , based on a of June 30 , 2022 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee and our report dated July 28 , 2022 , expressed an report dated July 28 , 2022 , expressed an unqualified opinion audit committee and that ( 1 ) relate to account or the financial statement and ( 2 ) involved our especially challenging to which they relate . 96 PART II Item 8 Revenue . 96 PART II Item 8 Revenue Recognition – Refer to Recognition – Refer to Note 1 to the financial statement Critical in the financial statement . 97 PART II Item 8 Income . 97 PART II Item 8 Income Taxes – Uncertain Tax Positions – Refer to Note 12 to the financial statement Critical for tax year subsequent to 2003 . While the Company ha LLP Seattle , Washington July 28 , 2022 We have served , Washington July 28 , 2022 We have served a the the Company 's auditor since 1983 . 98 PART II Item 's auditor since 1983 . 98 PART II Item 9 , . 98 PART II Item 9 , 9A ITEM 9 . PART II Item 9 , 9A ITEM 9 . CHANGES IN Item 9 , 9A ITEM 9 . CHANGES IN AND DISAGREEMENTS DISCLOSURE Not applicable . ITEM 9A . CONTROLS AND PROCEDURES Under required by Exchange Act Rule 13a-15 ( b ) a of Control – Integrated Framework ( 2013 ) issued by the Committee wa effective a of June 30 , 2022 . There were a of June 30 , 2022 . There were no change during the quarter ended June 30 , 2022 that have materially quarter ended June 30 , 2022 that have materially affected , financial reporting a of June 30 , 2022 ; their report a of June 30 , 2022 ; their report is included report is included in Item 9A . 99 PART II Item included in Item 9A . 99 PART II Item 9A REPORT . 99 PART II Item 9A REPORT OF INDEPENDENT REGISTERED PUBLIC `` ) a of June 30 , 2022 , based on a of June 30 , 2022 , based on criterion established Control — Integrated Framework ( 2013 ) issued by the Committee financial reporting a of June 30 , 2022 , based on a of June 30 , 2022 , based on criterion established Control — Integrated Framework ( 2013 ) issued by COSO . for the year ended June 30 , 2022 , of the year ended June 30 , 2022 , of the Company and and our report dated July 28 , 2022 , expressed an report dated July 28 , 2022 , expressed an unqualified opinion policy and procedure that ( 1 ) pertain to the maintenance of the company ; ( 2 ) provide reasonable assurance that the company ; and ( 3 ) provide reasonable assurance regarding LLP Seattle , Washington July 28 , 2022 100 PART II , Washington July 28 , 2022 100 PART II , III Washington July 28 , 2022 100 PART II , III Item PART II , III Item 9B , 9C , 10 , , III Item 9B , 9C , 10 , 11 , Item 9B , 9C , 10 , 11 , 12 , , 9C , 10 , 11 , 12 , 13 , , 10 , 11 , 12 , 13 , 14 ITEM , 11 , 12 , 13 , 14 ITEM 9B . , 12 , 13 , 14 ITEM 9B . OTHER INFORMATION , 13 , 14 ITEM 9B . OTHER INFORMATION Not applicable INFORMATION Not applicable . ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS applicable . PART III ITEM 10 . DIRECTORS , EXECUTIVE OFFICERS in Part I , Item 1 of this Form 10-K. Information Item 1 of this Form 10-K. Information about our director may Shareholders to be held December 13 , 2022 ( the “ be held December 13 , 2022 ( the “ Proxy Statement in a report on Form 8-K . ITEM 11 . EXECUTIVE on Form 8-K . ITEM 11 . EXECUTIVE COMPENSATION The information herein by reference . ITEM 12 . SECURITY OWNERSHIP OF CERTAIN herein by reference . ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED herein by reference . ITEM 14 . PRINCIPAL ACCOUNTANT FEES AND ( PCAOB ID No . 34 ) , appears in the incorporated herein by reference . 101 PART IV Item 15 PART . 101 PART IV Item 15 PART IV ITEM 15 . Item 15 PART IV ITEM 15 . EXHIBIT AND FINANCIAL STATEMENT under Part II , Item 8 of this Form 10-K , Item 8 of this Form 10-K , a indexed below . Financial Statements Page Income Statements 57 Comprehensive Income Statements 58 Balance Statements 57 Comprehensive Income Statements 58 Balance Sheets 59 Cash Flows Income Statements 58 Balance Sheets 59 Cash Flows Statements 60 Stockholders Sheets 59 Cash Flows Statements 60 Stockholders ’ Equity Statements 61 60 Stockholders ’ Equity Statements 61 Notes to Financial Statements 62 61 Notes to Financial Statements 62 Report of Independent Registered Public Independent Registered Public Accounting Firm 96 ( b ) Exhibit Listing Period Ending Exhibit Filing Date 3.1 Amended and Restated Articles of of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Incorporation of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft of Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation Microsoft Corporation 8-K 3.1 12/1/16 3.2 Bylaws of Microsoft Corporation 8-K 3.2 Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , Bylaws of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated of Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a Microsoft Corporation 8-K 3.2 6/14/17 4.1 Indenture , dated a of , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and Base Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Indenture ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental ” ) S-3ASR 4.1 10/29/15 4.2 Form of First Supplemental Indenture of First Supplemental Indenture for 2.95 % Notes due 2014 , for 2.95 % Notes due 2014 , 4.20 % Notes due % Notes due 2014 , 4.20 % Notes due 2019 , , 4.20 % Notes due 2019 , and 5.20 % Notes Notes due 2019 , and 5.20 % Notes due 2039 , and 5.20 % Notes due 2039 , dated a of May , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and , to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of to the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second the Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Base Indenture 8-K 4.2 5/15/09 4.5 Form of Second Supplemental Indenture of Second Supplemental Indenture for 0.875 % Notes due 2013 , for 0.875 % Notes due 2013 , 1.625 % Notes due % Notes due 2013 , 1.625 % Notes due 2015 , , 1.625 % Notes due 2015 , 3.00 % Notes due % Notes due 2015 , 3.00 % Notes due 2020 , , 3.00 % Notes due 2020 , and 4.50 % Notes Notes due 2020 , and 4.50 % Notes due 2040 , and 4.50 % Notes due 2040 , dated a of September , dated a of September 27 , 2010 , between Microsoft a of September 27 , 2010 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 9/27/10 102 PART IV . , a Trustee 8-K 4.2 9/27/10 102 PART IV Item , a Trustee 8-K 4.2 9/27/10 102 PART IV Item 15 a Trustee 8-K 4.2 9/27/10 102 PART IV Item 15 Incorporated 9/27/10 102 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.6 Third Supplemental Indenture for 2.500 4.6 Third Supplemental Indenture for 2.500 % Notes due 2016 , for 2.500 % Notes due 2016 , 4.000 % Notes due % Notes due 2016 , 4.000 % Notes due 2021 , , 4.000 % Notes due 2021 , and 5.300 % Notes Notes due 2021 , and 5.300 % Notes due 2041 , and 5.300 % Notes due 2041 , dated a of February , dated a of February 8 , 2011 , between Microsoft a of February 8 , 2011 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental . , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture , a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for a Trustee 8-K 4.2 2/8/11 4.7 Fourth Supplemental Indenture for 0.875 4.7 Fourth Supplemental Indenture for 0.875 % Notes due 2017 , for 0.875 % Notes due 2017 , 2.125 % Notes due % Notes due 2017 , 2.125 % Notes due 2022 , , 2.125 % Notes due 2022 , and 3.500 % Notes Notes due 2022 , and 3.500 % Notes due 2042 , and 3.500 % Notes due 2042 , dated a of November , dated a of November 7 , 2012 , between Microsoft a of November 7 , 2012 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental . , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture , a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for a Trustee 8-K 4.1 11/7/12 4.8 Fifth Supplemental Indenture for 2.625 4.8 Fifth Supplemental Indenture for 2.625 % Notes due 2033 , for 2.625 % Notes due 2033 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental . , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture , a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for a Trustee 8-K 4.1 5/1/13 4.9 Sixth Supplemental Indenture for 1.000 4.9 Sixth Supplemental Indenture for 1.000 % Notes due 2018 , for 1.000 % Notes due 2018 , 2.375 % Notes due % Notes due 2018 , 2.375 % Notes due 2023 , , 2.375 % Notes due 2023 , and 3.750 % Notes Notes due 2023 , and 3.750 % Notes due 2043 , and 3.750 % Notes due 2043 , dated a of May , dated a of May 2 , 2013 , between Microsoft a of May 2 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental . , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture , a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for a Trustee 8-K 4.2 5/1/13 4.10 Seventh Supplemental Indenture for 2.125 4.10 Seventh Supplemental Indenture for 2.125 % Notes due 2021 and for 2.125 % Notes due 2021 and 3.125 % Notes due % Notes due 2021 and 3.125 % Notes due 2028 , and 3.125 % Notes due 2028 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.1 12/6/13 103 PART IV . , a Trustee 8-K 4.1 12/6/13 103 PART IV Item , a Trustee 8-K 4.1 12/6/13 103 PART IV Item 15 a Trustee 8-K 4.1 12/6/13 103 PART IV Item 15 Incorporated 12/6/13 103 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.11 Eighth Supplemental Indenture for 1.625 4.11 Eighth Supplemental Indenture for 1.625 % Notes due 2018 , for 1.625 % Notes due 2018 , 3.625 % Notes due % Notes due 2018 , 3.625 % Notes due 2023 , , 3.625 % Notes due 2023 , and 4.875 % Notes Notes due 2023 , and 4.875 % Notes due 2043 , and 4.875 % Notes due 2043 , dated a of December , dated a of December 6 , 2013 , between Microsoft a of December 6 , 2013 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental . , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture , a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for a Trustee 8-K 4.2 12/6/13 4.12 Ninth Supplemental Indenture for 1.850 4.12 Ninth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.375 % Notes due % Notes due 2020 , 2.375 % Notes due 2022 , , 2.375 % Notes due 2022 , 2.700 % Notes due % Notes due 2022 , 2.700 % Notes due 2025 , , 2.700 % Notes due 2025 , 3.500 % Notes due % Notes due 2025 , 3.500 % Notes due 2035 , , 3.500 % Notes due 2035 , 3.750 % Notes due % Notes due 2035 , 3.750 % Notes due 2045 , , 3.750 % Notes due 2045 , and 4.000 % Notes Notes due 2045 , and 4.000 % Notes due 2055 , and 4.000 % Notes due 2055 , dated a of February , dated a of February 12 , 2015 , between Microsoft a of February 12 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental . , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture , a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for a trustee 8-K 4.1 2/12/15 4.13 Tenth Supplemental Indenture for 1.300 4.13 Tenth Supplemental Indenture for 1.300 % Notes due 2018 , for 1.300 % Notes due 2018 , 2.000 % Notes due % Notes due 2018 , 2.000 % Notes due 2020 , , 2.000 % Notes due 2020 , 2.650 % Notes due % Notes due 2020 , 2.650 % Notes due 2022 , , 2.650 % Notes due 2022 , 3.125 % Notes due % Notes due 2022 , 3.125 % Notes due 2025 , , 3.125 % Notes due 2025 , 4.200 % Notes due % Notes due 2025 , 4.200 % Notes due 2035 , , 4.200 % Notes due 2035 , 4.450 % Notes due % Notes due 2035 , 4.450 % Notes due 2045 , , 4.450 % Notes due 2045 , and 4.750 % Notes Notes due 2045 , and 4.750 % Notes due 2055 , and 4.750 % Notes due 2055 , dated a of November , dated a of November 3 , 2015 , between Microsoft a of November 3 , 2015 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental . , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture , a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for a trustee 8-K 4.1 11/3/15 4.14 Eleventh Supplemental Indenture for 1.100 4.14 Eleventh Supplemental Indenture for 1.100 % Notes due 2019 , for 1.100 % Notes due 2019 , 1.550 % Notes due % Notes due 2019 , 1.550 % Notes due 2021 , , 1.550 % Notes due 2021 , 2.000 % Notes due % Notes due 2021 , 2.000 % Notes due 2023 , , 2.000 % Notes due 2023 , 2.400 % Notes due % Notes due 2023 , 2.400 % Notes due 2026 , , 2.400 % Notes due 2026 , 3.450 % Notes due % Notes due 2026 , 3.450 % Notes due 2036 , , 3.450 % Notes due 2036 , 3.700 % Notes due % Notes due 2036 , 3.700 % Notes due 2046 , , 3.700 % Notes due 2046 , and 3.950 % Notes Notes due 2046 , and 3.950 % Notes due 2056 , and 3.950 % Notes due 2056 , dated a of August , dated a of August 8 , 2016 , between Microsoft a of August 8 , 2016 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 8/5/16 104 PART IV . , a trustee 8-K 4.1 8/5/16 104 PART IV Item , a trustee 8-K 4.1 8/5/16 104 PART IV Item 15 a trustee 8-K 4.1 8/5/16 104 PART IV Item 15 Incorporated 8/5/16 104 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 4.15 Twelfth Supplemental Indenture for 1.850 4.15 Twelfth Supplemental Indenture for 1.850 % Notes due 2020 , for 1.850 % Notes due 2020 , 2.400 % Notes due % Notes due 2020 , 2.400 % Notes due 2022 , , 2.400 % Notes due 2022 , 2.875 % Notes due % Notes due 2022 , 2.875 % Notes due 2024 , , 2.875 % Notes due 2024 , 3.300 % Notes due % Notes due 2024 , 3.300 % Notes due 2027 , , 3.300 % Notes due 2027 , 4.100 % Notes due % Notes due 2027 , 4.100 % Notes due 2037 , , 4.100 % Notes due 2037 , 4.250 % Notes due % Notes due 2037 , 4.250 % Notes due 2047 , , 4.250 % Notes due 2047 , and 4.500 % Notes Notes due 2047 , and 4.500 % Notes due 2057 , and 4.500 % Notes due 2057 , dated a of February , dated a of February 6 , 2017 , between Microsoft a of February 6 , 2017 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental . , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture , a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for a trustee 8-K 4.1 2/3/17 4.16 Thirteenth Supplemental Indenture for 2.525 4.16 Thirteenth Supplemental Indenture for 2.525 % Notes due 2050 and for 2.525 % Notes due 2050 and 2.675 % Notes due % Notes due 2050 and 2.675 % Notes due 2060 , and 2.675 % Notes due 2060 , dated a of June , dated a of June 1 , 2020 , between Microsoft a of June 1 , 2020 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental . , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture , a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture for a trustee 8-K 4.1 6/1/20 4.17 Fourteenth Supplemental Indenture for 2.921 4.17 Fourteenth Supplemental Indenture for 2.921 % Notes due 2052 and for 2.921 % Notes due 2052 and 3.041 % Notes due % Notes due 2052 and 3.041 % Notes due 2062 , and 3.041 % Notes due 2062 , dated a of March , dated a of March 17 , 2021 , between Microsoft a of March 17 , 2021 , between Microsoft Corporation and , dated a of May 18 , 2009 , between Microsoft a of May 18 , 2009 , between Microsoft Corporation and N.A . , a trustee 8-K 4.1 3/17/21 4.18 Description of . , a trustee 8-K 4.1 3/17/21 4.18 Description of Securities , a trustee 8-K 4.1 3/17/21 4.18 Description of Securities 10-K a trustee 8-K 4.1 3/17/21 4.18 Description of Securities 10-K 6/30/19 3/17/21 4.18 Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * 4.18 Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Description of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation of Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation 2001 Securities 10-K 6/30/19 4.16 8/1/19 10.1 * Microsoft Corporation 2001 Stock 8/1/19 10.1 * Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft 2001 Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Stock Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Plan 10-Q 9/30/16 10.1 10/20/16 10.4 * Microsoft Corporation Employee Stock Corporation Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Employee Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Stock Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Purchase Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Plan 10-K 6/30/12 10.4 7/26/12 10.5 * Microsoft Corporation Deferred Compensation Microsoft Corporation Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Corporation Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Deferred Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation Compensation Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation 2017 Plan 10-K 6/30/18 10.5 8/3/18 10.6 * Microsoft Corporation 2017 Stock 8/3/18 10.6 * Microsoft Corporation 2017 Stock Plan DEF14A Annex C Stock Plan DEF14A Annex C 10/16/17 10.7 * Form of Stock Plan DEF14A Annex C 10/16/17 10.7 * Form of Stock Award Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Corporation 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form 2017 Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Stock Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Performance Plan 10-Q 3/31/2018 10.26 4/26/18 10.8 * Form of Performance Stock Agreement Under the Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 Microsoft Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.9 Amended Corporation 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.9 Amended and 2017 Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.9 Amended and Restated Stock Plan 10-Q 3/31/2018 10.27 4/26/18 10.9 Amended and Restated Officers Plan 10-Q 3/31/2018 10.27 4/26/18 10.9 Amended and Restated Officers ’ N.A . , a trustee 10-Q 9/30/16 10.12 10/20/16 105 PART . , a trustee 10-Q 9/30/16 10.12 10/20/16 105 PART IV , a trustee 10-Q 9/30/16 10.12 10/20/16 105 PART IV Item a trustee 10-Q 9/30/16 10.12 10/20/16 105 PART IV Item 15 trustee 10-Q 9/30/16 10.12 10/20/16 105 PART IV Item 15 Incorporated 10/20/16 105 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 10.10 Assumption of Beneficiaries ’ Representative Officers ’ Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form ’ Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Trust Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Agreement Agreement 10-K 6/30/2020 10.25 7/30/2020 10.11 Form of Indemnification Agreement and N.A . , a trustee 10-K 6/30/19 10.13 8/1/19 10.12 Assumption . , a trustee 10-K 6/30/19 10.13 8/1/19 10.12 Assumption of , a trustee 10-K 6/30/19 10.13 8/1/19 10.12 Assumption of Beneficiaries a trustee 10-K 6/30/19 10.13 8/1/19 10.12 Assumption of Beneficiaries ’ trustee 10-K 6/30/19 10.13 8/1/19 10.12 Assumption of Beneficiaries ’ Representative Directors ’ Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * ’ Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Indemnification Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Trust Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Deferred Agreement 10-K 6/30/2020 10.26 7/30/2020 10.14 * Microsoft Corporation Deferred Compensation Compensation Plan for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.15 * Plan for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.15 * Microsoft for Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.15 * Microsoft Corporation Non-Employee Directors 10-Q 12/31/17 10.14 1/31/18 10.15 * Microsoft Corporation Executive Directors 10-Q 12/31/17 10.14 1/31/18 10.15 * Microsoft Corporation Executive Incentive Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/18 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/18 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/18 10.19 * Microsoft Corporation Executive Incentive Plan 8-K 10.1 9/19/18 10.19 * Microsoft Corporation Executive Incentive Microsoft Corporation Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Corporation Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form Executive Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Incentive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Executive Plan 10-Q 9/30/16 10.17 10/20/16 10.20 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 10.21 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 10.21 * Form 2001 Stock Plan 10-Q 9/30/16 10.18 10/20/16 10.21 * Form of Stock Plan 10-Q 9/30/16 10.18 10/20/16 10.21 * Form of Executive Plan 10-Q 9/30/16 10.18 10/20/16 10.21 * Form of Executive Incentive Agreement under the Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 Microsoft Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Corporation 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior 2001 Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Stock Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Severance Plan 10-Q 9/30/16 10.25 10/20/16 10.22 * Senior Executive Severance Benefit Senior Executive Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Executive Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Severance Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter Benefit Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter , Plan 10-Q 9/30/16 10.22 10/20/16 10.23 * Offer Letter , dated Offer Letter , dated February 3 , 2014 , between Microsoft , dated February 3 , 2014 , between Microsoft Corporation and Microsoft Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Corporation and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance and Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Satya Nadella 8-K 10.1 2/4/14 10.24 * Long-Term Performance Stock Award Microsoft Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 21 Subsidiaries Corporation and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 21 Subsidiaries of and Satya Nadella 10-Q 12/31/14 10.24 1/26/15 21 Subsidiaries of Registrant Satya Nadella 10-Q 12/31/14 10.24 1/26/15 21 Subsidiaries of Registrant X Nadella 10-Q 12/31/14 10.24 1/26/15 21 Subsidiaries of Registrant X 23.1 21 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Registered Public Accounting Firm X 31.1 Certification of Chief Executive Officer Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 32.1 * * Certification Sarbanes-Oxley Act of 2002 X 32.1 * * Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 106 PART IV Item Sarbanes-Oxley Act of 2002 X 106 PART IV Item 15 Incorporated X 106 PART IV Item 15 Incorporated by Reference Exhibit Number Period Ending Exhibit Filing Date 32.2 * * Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of of the Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Document —the the Inline XBRL document X 101.SCH Inline XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Schema X 101.CAL Inline XBRL Taxonomy Extension Calculation Taxonomy Extension Calculation Linkbase X 101.DEF Inline XBRL Taxonomy Extension Definition Taxonomy Extension Definition Linkbase X 101.LAB Inline XBRL Taxonomy Extension Label Taxonomy Extension Label Linkbase X 101.PRE Inline XBRL Taxonomy Extension Presentation Taxonomy Extension Presentation Linkbase X 104 Cover page formatted a Inline XBRL and contained in Exhibit 101 X * Indicates a management Furnished , not filed . 107 PART IV Item 16 ITEM . 107 PART IV Item 16 ITEM 16 . FORM 10-K PART IV Item 16 ITEM 16 . FORM 10-K SUMMARY None 16 ITEM 16 . FORM 10-K SUMMARY None . 108 SIGNATURES FORM 10-K SUMMARY None . 108 SIGNATURES Pursuant to the requirement to the requirement of Section 13 or 15 ( d ) requirement of Section 13 or 15 ( d ) of the the Securities Exchange Act of 1934 , the Registrant ha duly of Washington , on July 28 , 2022 . M ICROSOFT , on July 28 , 2022 . M ICROSOFT C ORPORATION ( Principal Accounting Officer ) 109 Pursuant to the requirement of the Securities Exchange Act of 1934 , this report ha been the capacity indicated on July 28 , 2022 . Signature Title indicated on July 28 , 2022 . Signature Title /s/ S ( Principal Accounting Officer ) 110 \ No newline at end of file diff --git a/src/data/sec-edgar-filings/GOOGL/10-K/0001652044-16-000012/full-submission.txt b/src/data/sec-edgar-filings/GOOGL/10-K/0001652044-16-000012/full-submission.txt index 78a20c7..57a9ff6 100644 --- a/src/data/sec-edgar-filings/GOOGL/10-K/0001652044-16-000012/full-submission.txt +++ b/src/data/sec-edgar-filings/GOOGL/10-K/0001652044-16-000012/full-submission.txt @@ -1,4 +1,4 @@ -0001652044-16-000012.txt : 20160211 +g0001652044-16-000012.txt : 20160211 0001652044-16-000012.hdr.sgml : 20160211 20160211163835 ACCESSION NUMBER: 0001652044-16-000012 diff --git a/src/output/AAPL_visualization.py b/src/output/AAPL_visualization.py new file mode 100644 index 0000000..befe1f2 --- /dev/null +++ b/src/output/AAPL_visualization.py @@ -0,0 +1,76 @@ +# Here's the Python code with visualizations based on the financial data provided: + +import pandas as pd +import matplotlib.pyplot as plt +import numpy as np + +# Read the data (assuming it's a csv file) +data = pd.read_csv('financial_data.csv') + +# Set index to year +data = data.set_index('Year') + +# Function to create line graphs +def create_line_graph(data, y_label, title): + # Get data for specific year + year_data = data.loc[2016] + year_data[y_label] = year_data[y_label] / 1e9 # Convert revenue to billions + + # Create line graph + plt.plot(year_data.index, year_data[y_label], marker='o', markersize=10) + plt.xlabel('Year') + plt.ylabel(y_label) + plt.title(title) + plt.show() + +# Function to create bar graphs +def create_bar_graph(data, x_label, y_label, title): + # Get data for specific year + year_data = data.loc[2016] + + # Normalize revenue data to percentages + year_data[y_label] = (year_data[y_label] / data[y_label]).mul(100).round(2) + + # Create bar graph + year_data.plot.bar(x_label, y_label) + plt.xlabel(x_label) + plt.ylabel(y_label) + plt.title(title) + plt.show() + +# Function to create animated time-series visualization +def create_animated_graph(data, x_label, y_label, title, labels): + # Convert data into dataframes + data = pd.DataFrame(data) + year_labels = pd.Index(range(2015, 2016 + 1), name='Year') + + # Loop through dataframes + for i, dataframe in enumerate(data): + # Create subplot + plt.subplot(i+1, 1, 1) + plt.plot(year_labels, dataframe[y_label], marker='o', markersize=10) + plt.xlabel('Year') + plt.ylabel(y_label) + plt.title(title) + + # Add label to subplot + if i == 0: + plt.legend(labels, loc='best') + + plt.show() + +# Call functions to create visualizations +# Line graph for revenue over years +create_line_graph(data, 'Revenue', 'Revenue Over Years') + +# Bar graph for gross margin over years +create_bar_graph(data, 'Year', 'Gross Margin', 'Gross Margin Over Years') + +# Bar graph for operating margin over years +create_bar_graph(data, 'Year', 'Operating Margin', 'Operating Margin Over Years') + +# Animated time-series visualization for revenue, gross margin, and operating margin +labels = ['Revenue', 'Gross Margin', 'Operating Margin'] +create_animated_graph(data, 'Year', ' ', 'Financial Metrics Over Years', labels) + +# This code creates several visualizations showing the trends in the company's financial performance. The line graph shows the total revenue over the years, while the bar graphs compare the gross margin and operating margin over the years. The animated time-series visualization shows the progression of these financial metrics over the years. \ No newline at end of file diff --git a/src/output/GOOGL_visualization.py b/src/output/GOOGL_visualization.py new file mode 100644 index 0000000..7bb4bf2 --- /dev/null +++ b/src/output/GOOGL_visualization.py @@ -0,0 +1,54 @@ + Here is the Python code to generate the required visualizations: + +```python +import pandas as pd +import matplotlib.pyplot as plt +import numpy as np +from matplotlib.animation import FuncAnimation + +# Load the data (replace this with your actual data source) +data = pd.read_csv('financial_data.csv') + +# Function to update the graph_1 +def update(val): + graph_1.set_data(data.iloc[:val, 1].tolist(), data.iloc[:val, 3].tolist()) + return graph_1 + +# Function to update the graph_2 +def update2(val): + graph_2.set_data(data.iloc[:val, 10].tolist(), data.iloc[:val, 14].tolist()) + return graph_2 + +# Create the figure and axes +fig, ax = plt.subplots(2, 1, constrained_layout=True) + +# Line graph showing trends over the years +graph_1 = ax[0].plot(data['Year'], data['Total Revenue'], color='blue', label='Total Revenue') +ax[0].set_ylabel('Total Revenue (in millions)') +ax[0].set_title('Total Revenue Trends') +ax[0].legend(loc='upper right') + +# Bar graph comparing different financial metrics +graph_2 = ax[1].bar(data['Year'], data['Net Income'], color='green', label='Net Profit') +graph_2_2 = ax[1].bar(data['Year'], data['Gross Margin'], color='red', label='Gross Margin') +graph_2_3 = ax[1].bar(data['Year'], data['Operating Margin'], color='orange', label='Operating Profit Margin') +ax[1].set_xticklabels(data['Year']) +ax[1].set_ylabel('Financial Metrics (in millions)') + +anim = FuncAnimation(fig, update, frames=len(data), interval=100, repeat=True) +anim2 = FuncAnimation(fig, update2, frames=len(data), interval=100, repeat=True) + +plt.show() +``` + +This code will generate the following visualizations: + +1. A line graph showing the trend of total revenue over the years: + +![line_graph](line_graph.png) + +2. A bar graph comparing different financial metrics (Net Income, Gross Margin, and Operating Margin) over the years: + +![bar_graph](bar_graph.png) + +Please note that this is a simplified example. In real-world scenarios, you would need to replace the data source, adjust the axes labels and titles, and possibly customize the colors and styles to make the visualizations more informative. \ No newline at end of file diff --git a/src/output/MSFT_visualization.py b/src/output/MSFT_visualization.py new file mode 100644 index 0000000..4962ab2 --- /dev/null +++ b/src/output/MSFT_visualization.py @@ -0,0 +1,36 @@ + To visualize the historical financial data, I'll use the plotly library in Python, which offers a wide range of chart types and customization options. I'll also use pandas, a popular data analysis library, to handle the data and the python-financial library to calculate financial metrics. + +Here is the Python code: +```python +import numpy as np +import pandas as pd +import plotly.graph_objects as go +from python_future import future_builtins + +def get_data(): + revenue_data = { + '2000': np.array([35317960, 33885121, 31653882, 29621563, 27789647, 26067735]), + '2001': np.array([27546868, 24269286, 21092403, 18018720, 15553746, 13098789]), + '2002': np.array([19267857, 16517689, 14197822, 12171340, 10428282, 8999241]), + '2003': np.array([8614135, 7661573, 6719084, 5786616, 4905332, 4079667]), + '2004': np.array([4328775, 3798488, 3322362, 2878304, 2471226, 2115053]), + '2005': np.array([1948933, 1691541, 1464618, 1269434, 1094980, 931985]), + '2006': np.array([1311644, 1153961, 999763, 851654, 708479, 569372]), + '2007': np.array([850787, 717415, 609213, 513938, 422684, 334838]), + '2008': np.array([488657, 409641, 336816, 272639, 217735, 168092]), + '2009': np.array([168092, 140690, 115134, 90740, 66900, 43733]), + '2010': np.array([191905, 164660, 139225, 115874, 93623, 72713]), + '2011': np.array([181994, 156499, 132970, 112061, 90154, 68515]), + '2012': np.array([170073, 147913, 125328, 107784, 89179, 70570]), + '2013': np.array([131043, 109729, 93534, 78286, 63890, 49521]), + '2014': np.array([78286, 63890, 49521, 72619, 66900, 53424]), + '2015': np.array([66900, 53424, 43733, 336816, 272639, 217735], dtype='int'), + } + ## Replace the dictionary with your actual revenue data + midcap_rev = pd.DataFrame(revenue_data, index=[2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015]) + midcap_rev = midcap_rev.astype(float) / 1e6 ## Convert to millions + return midcap_rev + +def get_retrieve_data(type_data, years): + if (type_data == 'dynamics' or type_data == 'Azure'): + if (years == '1-year'): \ No newline at end of file